integrated annual report 2013...systems. secure remote access, user identity management, security...

INTEGRATED ANNUAL REPORT 2013

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Contents

Financial highlights .....................................................................................................................................................................................................................- 1 -

Scope and boundary of the integrated report of ISA..................................................................................................................................................................- 2 -

Understanding the business of ISA ............................................................................................................................................................................................- 3 -

Executive review .........................................................................................................................................................................................................................- 4 -

Directors and management ........................................................................................................................................................................................................- 5 -

Sustainability Report ........................................................................................................................................................................................................... - 6 to 8 -

Stakeholder engagement ...........................................................................................................................................................................................................- 9 -

Shareholders’ diary .....................................................................................................................................................................................................................- 9 -

Corporate governance .................................................................................................................................................................................................... - 10 to 13 -

Directors’ responsibilities and approval ....................................................................................................................................................................................- 14 -

Declaration by Company Secretary .........................................................................................................................................................................................- 14 -

Independent Auditors’ Report ...................................................................................................................................................................................................- 15 -

Audit Committee Report ...........................................................................................................................................................................................................- 16 -

Directors’ Report ............................................................................................................................................................................................................. - 17 to 19 -

Statements of comprehensive income .....................................................................................................................................................................................- 20 -

Statements of financial position ................................................................................................................................................................................................- 21 -

Statements of changes in equity ..............................................................................................................................................................................................- 22 -

Statements of cash flow ...........................................................................................................................................................................................................- 23 -

Notes to Annual Financial Statements ........................................................................................................................................................................... - 24 to 42 -

Shareholders’ analysis .............................................................................................................................................................................................................- 43 -

Corporate information ...............................................................................................................................................................................................................- 44 -

Notice of Annual General Meeting ................................................................................................................................................................................. - 45 to 50 -

Form of proxy............................................................................................................................................................................................................................- 51 -

Notes to proxy...........................................................................................................................................................................................................................- 52 -

Operating results of the group 2013 2012 Turnover (R’000) R 50,925 R 62,946

EBITDA (earnings before interest, tax, depreciation and amortisation) (R’000) R 13,908 R 19,348 Earnings (R’000) R 9,455 R 12,860 Headline earnings (R’000) R 9,454 R 12,856

Financial position of the group

Total shareholders' equity (R’000) R 43,634 R 47,020

Cash and cash equivalents (R’000) R 24,250 R 42,733 Total assets (R’000) R 50,663 R 52,443

Ordinary share performance

Earnings and diluted earnings per share (cents) 5.2 7.0 Headline and diluted headline earnings per share (cents) 5.2 7.0

Dividends and distributions

Ordinary dividends per share (cents) paid during the period 7.0 6.2 Capital distribution per share (cents) paid during the period - 1.0

Ordinary dividend per share (cents) declared 5.2 7.0

Financial highlights

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Integrated Reporting

The King Report on Corporate Governance in South Africa (“King III’’) defines an integrated report as “a holistic and integrated representation of the company’s performance in terms of both its finances and its stability”. In line with King III recommendations, ISA has presented the usual content of an

integrated report across numerous documents, which can be found within the Annual Report in the locations mentioned below.

Scope and Boundary This integrated annual report covers the activities of ISA Holdings Limited (‘’ISA’’ or ‘’the company’’ or ‘’the group’’), including all subsidiaries, for the 12-month financial year ended 28 February 2013. This is the company’s first integrated report and follows the annual report published in 2012.

In addition to the International Financial Reporting Standards (‘’IFRS’’) and King III, ISA uses the Global Reporting Initiative (G3.1) as the framework for reporting, in conjunction with the discussion paper released by the Integrated Reporting Committee of South Africa.

The integrated annual report for the 2013 financial year consists of three sections; the summarised integrated annual report, the consolidated group and company annual financial statements for the year ended 28 February 2013 and the corporate governance report. All these reports are available for

download on the website www.isaholdings.co.za.

The consolidated financial information and results incorporate the company and all subsidiaries controlled by ISA as a single economic entity. Boundaries for all data collection are consistent with our financial reporting, thus aligning financial, environmental and social reporting, and does not extend to cover the group’s supply chain network. Data is collected at operational level and consolidated at divisional and group levels. Comparable performance data and

information are provided on all material aspects of the group and its value-creation activities without specific limitations. Where required, historical financial data has been restated and explained.

While the precise nature of an integrated report is evolving, this report covers the material economic, social and environmental risks and opportunities currently facing the group’s ability to create and sustain value creation in the long term. It also addresses the governance context within which the group

operates, its risks and strategic framework for creating value. In addition to the group’s material risks and opportunities, this report addresses aspects that are of interest or concern to select groupings of stakeholders and which provide a balanced and reasonable perspective of its activities. These aspects are integrated into the on-going management of our business and reported to stakeholders annually.

Our progress to date is augmented by a forward-looking perspective on goals and value-creation strategies. This integrated presentation reflects

operational responsibility and accountability for sustainable value-creation and highlights stakeholder interdependence. The financial statements have been audited by the external auditors Mazars, whose unqualified audit report can be found on www.isaholdings.co.za and at

the registered office and is included in the annual financial statements, which forms part of this integrated annual report. We would welcome your feedback on our reporting and any suggestions that you might have in terms of what you would like to see incorporated in our

reports in future. Such feedback can be directed to the group company secretary, whose details can be found on the corporate information page.

An integrated report typically contains: – Annual financial statements page 20 to 42 – Directors’ report page 17 to 19

– Directors’ statement of responsibility page 14 – Directors’ commentary page 4

– Ethics statement page 11 – Report of the audit committee page 16 – Remuneration reporting page 8, 11, 19

– Risk disclosures page 7, 40 to 42 – Sustainability report page 6 to 8 – Statement by the company secretary page 14

– Terms of reference of committees page 7 to 8, 11 to 12

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Understanding ISA

ISA was established in 1998 and was positioned as a value-added reseller of firewall and antivirus technologies, which was generally regarded at that time as being adequate security to protect an organisation’s fledgling internetworked environments. Through the years, ISA has broadened its offerings to cater

for the need to securely leverage the benefits presented by the rapidly changing Information and Communication Technology sector; and is today recognised as being one of the leading Managed Security Solution providers on the African continent.

ISA’s core competencies revolve around designing, supplying, implementing, supporting, monitoring and managing IT security solutions for their clients, which are based on the wide range of specialised technologies and brands available in the global arena.

Offering matrix

Key drivers for the IT security industry

Information and device protection (“keeping the bad guys out”) The principle driver for the IT security industry relates to the continuously evolving threats facing companies, as hackers use increasingly sophisticated

methods to tamper with or acquire sensitive information from corporate networks, or disrupt their operations. The level of persistence, deception and skill used by these perpetrators cannot be underestimated and are often the cause of severe damage to their targets.

In response, the IT security industry is continuously involved in the process of improving their offerings to mitigate these threats. The manufacturers clearly focus on developing suitable products, whilst the solution providers specialise in designing, implementing and monitoring solutions based on an array of those products best suited to their client’s specific requirements. The culmination of these efforts is to create a safe, reliable, effective and efficient

environment for companies and economies to transact and interact.

Advances in governmental regulation around the world is also driving the IT security industry as organisations need to employ sufficient IT security resources, processes and technologies in order to avoid violating applicable privacy and protection laws. Other than facing legal sanction if not implemented correctly, corporate stakeholders are also becoming acutely aware of the risks that they need to protect themselves, their organisations and

their clients by embracing a meaningful IT security programme. With this new found focus on the need for IT security, executive resistance to allocating specific budget to this process seems to be a thing of the past.

Business enablement (“letting the good guys in”) One only needs to consider how online banking has revolutionised the banking sector to appreciate the immense value of using the Internet as a business

enablement platform. The IT security industry is at the epicentre of this commercial revolution as it is fundamentally involved with the process of assuring business that their online initiatives do not circumvent their implicit need for confidentiality, integrity and operational availability of their internetworked systems.

Secure remote access, user identity management, security infrastructure virtualisation and data protection are but a few areas of the IT security industry

that are benefiting directly from the industry trends in distributed workforce mobility, cloud computing, technology convergence and the increased access to reliable and affordable broadband.

Security administration and management (“keeping it all together”) Another key driver of the IT security market is the trend by larger organisations to delegate the highly technical aspects of security infrastructure administration, monitoring and maintenance to specialised Managed Security Solutions providers. Whilst the ownership of the corporate security practise

cannot be outsourced, due to governance and legislative accountability requirements on corporate stakeholders, they readily acknowledge that they are not well positioned to attract, grow and retain the skills required to manage their security systems, on a sustainable basis. Managed Security Solution providers

on the other hand have the appropriate technical environment and scale to manage this process for their clients and to deliver a consistent level of service governed by purpose built Service Level and Confidentiality Agreements.

Service offering

Firewalls

Virtual Private Networking

Intrusion protection

Messaging and data protection

Anti-virus

Content security

Vulnerability assessment

Authentication

Remote access

Identity and access management

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Executive review

The reporting period ended 28 February 2013 is now behind us and will likely be thought of by our team in the years ahead as being one of our most challenging. Despite performing well in many areas, such as those relating to cash flow management and growth in recurring revenue and subscription

based sales, the consequence of lower New Solution Sales could not be countered, culminating in disappointing results for the year.

Financial Overall turnover declined by 19% to R 51 million. As referred previously, this negative result can largely be attributed to the slowdown in New Solution Sales, which represent a mere 22% of total sales for the period, as opposed to the historic measure being closer to the 40% level. Although dramatic at

face value, it is important to note that New Solution Sales tend to be bulky in value and if the recognition of only one or two are missed in a specific reporting cycle, the impact on the overall result would be severe on both turnover and gross profit levels, as is the current case. This revenue mix dynamic is a reality for most small businesses, especially those in the ICT industry and is likely to remain with us into the future.

On a more encouraging note, recurring revenue derived income increased by a healthy 16% in real terms, now representing 78% of overall turnover for the year. This is a credible performance, be it substantially concentrated in percentage terms due to the falloff of New Solution Sales, and further enhances the

quality of earnings. Most pleasing is the 26% growth from our subscription based Managed Security Services, which is underpinned by our internally developed MSS Pulse security infrastructure management and monitoring platform.

The modest decline in gross profit, from 48% to 46% of turnover during this cycle, is largely a result of the shortfall in New Solution Sales, which traditionally attracts higher margins than the more predictable recurring revenues. If one extracted historic profits from these New Solution Sales for comparative

purposes and only reviewed profits derived from our recurring revenue lines, one would appreciate the commendable effort by management to contain the decline in gross profit levels in this systemic margin pressure industry. Whilst management have limited control over margin pressure affecting the resale of products, it was the increase in service based sales that couched the overall effect on profit levels during this period. With this said, management are

concerned by the pace of product margin erosion and revenue deflation and continue to enlist new and emerging technology lines that are in their earlier lifecycle stages, which tend to retain their value and margins far better than those technologies reaching commoditisation.

Operational expenditure increased by a nominal 3% before applying the gains from our foreign cash revaluation of R 2.3 million, but decreased by 11% in real terms due to these fortuitous gains. As fortuitously, taxation levels in this reporting period normalised to an effective rate of 28% from the previous lofty

level of 34%. This decrease is as a result of the change in dividend tax legislation, which included an STC charge of R 1.2 million in the previous results. Earnings before interest, tax, depreciation and amortisation (EBITDA) declined by 28% to R 13.9 million and profits declined by 26% to R 9.4 million.

During the period under review, we moved into our newly acquired premises in Woodmead. Not only does this transfer of low-yielding cash into higher-yielding property enhance our investment structure, but it also gives us the headroom to grow the breadth and depth of our service offerings for the market. Cash reserves were further impacted by the abnormally high level of trade receivables, but management are satisfied with their collection processes and

controls ascribing this anomalous level purely to the yearend cut off, as the majority of these receivables were collected in the weeks following the yearend.

Distribution ISA will be able to sustain its strategic business objectives with little impact to its capital structures. In this light and in support of the directors’ opinion that surplus cash should be distributed to shareholders, the board declared an ordinary dividend distribution to shareholders of 5.2 cents per share for the year

ended 28 February 2013. This dividend would be subject to the new dividend tax legislation. During the period under review, distributions totalling 7.0 cents per share were declared and paid to all shareholders on the 23rd of July 2012.

Market and prospects We continue to be optimistic about our long term prospects as the key drivers of the IT security market remains robust. With the continued evolution of

threats and attacks against organisations, together with the increased regulatory and legislative compliance requirements, stakeholders continue to elevate the importance of IT security within their organisations. However, we do anticipate further erratic performance due to the heavy weighting of our New Solution Sales on our overall results. Whilst our pipeline is stronger than it was a year ago, one cannot anticipate the timing of these larger deals and as

such, we are unfortunately unable to offer better guidance for shorter term reporting cycles.

Strategically, management remains determined to build a trusted information security brand. Vigilant cost controls, cash management disciplines,

innovative offerings and a persistent focus on service delivery remain our priority.

Conclusion On behalf of the board, I would like to take this opportunity to thank the ISA team for their continued dedication and hard work. My appreciation is also extended to my colleagues on the board for their wise counsel and valuable input. Finally, I thank all stakeholders, customers and vendors for their support

and I look forward to meeting shareholders at the Annual General Meeting to be held on Wednesday 26th of June 2013.

Clifford Katz Chief Executive Officer

24 May 2013

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Directors and management

Andrew Maren (37) – Non-executive director – South African Andrew Maren is currently the Chairman and co-founder of EmpowerGroup Holdings, a wholly black-owned diversified investment holding company and an

Executive Director of EmpowerProp. He has extensive experience in the Corporate Banking, Retail and Private Banking sectors. He is also currently a non-executive Director of Insure Group Limited, one of the largest independent collector and manager of short-term insurance premiums in the country. He was

appointed to the board of ISA Holdings Limited as a non-executive director on 29 September 2006. Alan Naidoo (36) – Non-executive director – South African (Chairperson of the Social and Ethics Committee) BCom Alan Naidoo is currently the Managing Director at EmpowerGroup Holdings, which is a wholly black-owned diversified investment holding company with interests within the ICT, financial services and property sectors. Prior to joining EmpowerGroup, Alan gained extensive experience working within the

banking sector. Alan also sits on the board of the Insure Group Limited, one of the largest independent collector and manager of short-term insurance premiums in the country. He was appointed to the board of ISA Holdings Limited as a non–executive director on 29 September 2006.

Clifford Katz (43) – Executive director – Chief Executive Officer – South African IMM

Clifford Katz has been involved in the information technology sector since the early 1990’s. Pursuing a career in marketing of enterprise solutions, he joined the Datatec Group to assist with their newly formed Internet Service Provider, Pipex South Africa. Shortly thereafter, Clifford co-founded DataSecure within

the Datatec stable, which was one of the first South African information security solution providers. During 2001, he joined Information Security Architects as Chief Executive Officer and was instrumental in merging this business with Y3K Group Limited in March 2004. He was appointed to the board of ISA Holdings Limited as an executive director on 15 April 2004.

Denzil Perreira (56) – Independent non-executive director – South African (Chairperson of the board) Denzil Perreira is an experienced businessman who has founded and managed several companies over the last 22 years of his career. Denzil has been a

director of numerous organisations, including several in the information technology sector, and is currently also the managing director of Riverview Trading. He was appointed to the board of ISA Holdings Limited as a non-executive director on 25 February 2003.

Desmond Seaton (53) – Independent non-executive director – South African (Chairperson of the Audit Committee) BCom, LLB, Dip Tax

Desmond Seaton is a founding member of THOTH Consulting, a tax and legal consultancy. He specialises in corporate tax and legal advice as well as the drafting of agreements relating to corporate transactions. He has been responsible for advising on regulatory matters with regards to a number of listings since 1997, including the listing of Y3K Group Limited during 1998. He currently serves as a non-executive director on the boards of Sethold Limited and

Primeserv Group Limited. Desmond was appointed to the board of ISA Holdings Limited as a non-executive director on 1 September 1998.

Johan du Toit (40) – Executive director – Financial director – South African CA (SA) Johan du Toit qualified as a Chartered Accountant and has close to 20 years of experience in finance, including the past 16 years in management, 15 years

of which were within the IT industry. Johan has been the Financial Director for SecureData Europe Limited, an IT Managed Security reseller in the United Kingdom from November 2000 to July 2012 and the Financial Director of SecureData Holdings Limited, an IT Security provider listed on the Johannesburg

Stock Exchange from June 2008 to October 2012. He was appointed to the board of ISA Holdings Limited as an executive director on 9 February 2013. Philip Green (48) – Executive director – Technical director – South African MSc Philip Green graduated with an MSc (with distinction) from the Department of Computer Science at the University of Witwatersrand. On completing his studies, Philip co-founded Internet Solutions, now South Africa’s leading Internet Service Provider. In the 1990’s, he joined the Datatec Group and assisted

with the formation of both Pipex South Africa and DataSecure. During 2001 he formed and headed iSecure, a focused IT security solutions provider, and was instrumental in merging this business with Y3K Group Limited in March 2004. He was appointed to the board of ISA Holdings Limited as an executive

director on 15 April 2004. Thapeli Matsabu (40) – Independent non-executive director – South African BSc Thapeli Matsabu is an experienced businessman, consultant and information security specialist. In 2003, he co-founded TIISA, which was one of the first

independent black owned information security service organisations in the country. In 2005, Thapeli was instrumental in merging the business with another consulting firm to form Kwesthuba and assumed the position of managing director of the combined entity. Today, Kwesthuba is recognised as a formidable contender in the ICT risk, governance and information security consulting arena. He was appointed to the board of ISA Holdings Limited as a non-executive

director on 23 May 2012.

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Sustainability report

In recognition of the growing importance of responsible and sustainable business behaviour, the board of ISA remains committed to considering the impact of the company’s operations on the community and the environment in which it operates. ISA’s long term objective is to deliver sustainable and

considerable returns to their stakeholders (investors, customers, suppliers and employees), which is achieved by adhering to the fundamental principles that sustainability encompasses: social and environmental responsibility, as well as corporate governance and ethics.

To this end, the group remains committed to:

– In the most effective manner, striving to be considered as a responsible corporate business by all its stakeholders. – Continuing to provide returns to its stakeholders, which are sustainable and not achieved at the expense of future generations. – Using the existing principles and ethics of the company to achieve its long term sustainable development objectives.

– Ensuring that the company provides an equal opportunity for all employees and enables them to achieve their individual as well as company goals. – Taking into consideration its customers own sustainable development objectives when developing solutions for a mutually beneficial outcome.

In addition to the above mentioned objectives, ISA is aware that the need to care for the environment exists outside of the group’s immediate stakeholders and endeavours to support, where possible, the sustainable development of communities across the world. Ultimately, every employee is responsible for

the sustainability of the organisation through a dedicated fulfilment of their respective roles in the context of the group’s values and ethics. Environmental sustainability in the ICT sector In recent years, the usage of energy and the overall carbon footprint from the technology sector has increased significantly, due largely to the use of information technology as a tool in both business and in the homes of consumers. Throughout South Africa, and the world, there has been a trend within the ICT industry, whereby companies are striving to maximise utilisation and efficiency of their IT systems and networks, in order to address their overall

responsibility in minimising energy usage.

The group is committed to adopting and assisting its clients to utilise some of the following strategies to become more “green” and thereby supporting the

global carbon footprint reduction objective:

– Server virtualisation: consolidation of servers to better utilise their processing capacity. This maximises the floor space and cooling capacity, as well as enables a single user controller for multiple servers, whilst minimising energy usage as no additional power is needed for this functionality.

– Storage virtualisation: the traditional underutilisation as seen in servers, applies equally to servers used for storage and thus virtualisation in storage

offers scope for greater efficiency. – Information lifecycle management: involves improving the control and management of the huge amounts of information being stored. Reducing

duplication of data and deleting obsolete data through appropriate management will reduce the ‘information landfill’.

– Desktop power management and thin client technology: it is estimated that there are 1.2 billion active personal computers (“PCs”) across the globe, all using electricity and contributing an estimated 60% of the ambient temperature in offices which then require more energy to cool. Thin client

technology means transferring the processing power, which is the energy-intensive part, from the desktop to central servers that already have the processing power built in. The typical thin client desktop terminal uses only 10% of the energy of the equivalent PC.

– Unified communications and video conferencing: these have huge potential to reduce the time executives spend travelling, increasing their efficiency

and reducing the cost and environmental impact of road and air travel for businesses. Environmental sustainability in ISA’s own business environment In order to minimise the group’s carbon footprint, ISA commits to more efficient power use through the implementation of the following best practice objectives in environmental management:

– Minimisation of waste and energy through techniques such as: – Recycling paper and other recyclable products, including plastics.

– Encouraging a paperless environment. – Purchasing environmentally sensitive products, where possible.

– Turning off all unused equipment and lights. – Using low energy light bulbs, where possible. – Reusing paper and refilling ink cartridges.

– Minimisation of transport impact on the environment by: – Encouraging the use of public transport and car pooling.

– Encouraging our clients to make use of remote services, including but not limited to video conferencing and telephonic conference calls, to minimise unnecessary travel.

Empowerment and employment equity The employees of ISA are important contributors to the development and success of the group, with their training and development being a significant

aspect of the overall sustainability. The group strives to afford all staff members opportunities to realise their full potential and advance their careers. ISA is committed to a working environment that is free from any discrimination and bias and encourages the development of increased skills and talents within its employees. ISA is committed to transformation and strives to break down the barriers of employment equity.

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Sustainability report (continued)

Corporate governance, organisational integrity and ethics The group’s corporate governance structures and procedures are described in detail in the corporate governance report on pages 10 to 13. The board

recognises that good corporate governance is vital to the sustainable growth of ISA.

Social and ethics committee The Companies Act (Act 71 of 2008) requires that companies establish a social and ethics committee. The board established the social and ethics committee during the 2013 financial year.

Management reporting ISA has established management reporting disciplines, which include the preparation of annual budgets and monthly management reports. These are

consistently reviewed by the board and discussed at board meetings. All risks and issues identified through these reviews are addressed by the board in order to ensure long-term business continuity.

Operating environment The group’s operating environment encompasses many sectors within the information security supply chain. ISA provides information security and network

solutions by supplying hardware and software products, as well as managed services to its customers. The group operates as a complete business unit and has no separate branches. The board recognises that risk management needs to be an integrated approach and the group’s risk management policies and

procedures are summarised in this report.

The risk management process has identified certain key risks faced by the group, some of which are summarised in the key risks section of this report. The

risks identified do not necessarily comprise all those affecting the group and the risks listed are not set out in any particular order of priority. Additional risks and uncertainties not presently known to the group or the directors or that the group or the directors currently consider to be insignificant, may also adversely affect the group’s business or operations.

Key risks Financial risk related to financial instruments This risk includes market risk (currency risk and interest rate risk), credit risk and liquidity risk. The group seeks to minimise the effects of currency risk by holding foreign currency (cash) to hedge this risk exposure. Whilst the group utilises these foreign cash reserves where appropriate, the board cannot

predict the effect of exchange rate fluctuations upon future operating results and there can be no assurance that exchange rate fluctuations will not have a material adverse effect on its business, operating results or financial condition. For more detail regarding financial risk management refer to note 29.

Dependence on key vendors If any one of the group’s principal vendors terminates, fails to renew or adversely changes its agreement or arrangements with the group, it could materially reduce the group’s revenue and operating profit, thereby seriously harming the group’s business, financial condition and results of operations. The group is

continually monitoring key vendors and looking to add new vendors to the group’s offerings to lessen dependence on key vendors.

Dependence on key personnel The group’s future success depends largely upon the continued employment of its executive directors, senior management and key sales, technical, finance and admin personnel. Certain of its key employees have personal relationships with principal vendors and customers which are particularly

important to the business of the group. The executive directors, senior management team and key technical personnel would be very difficult to replace and the loss of any of these key employees could harm the business and prospects of the group.

Other risks Other risks faced by the group, which are being monitored by management, include:

– Intellectual property protection – Intense competition

– Restrictions on access to capital in future – Reduction in demand – Pressure on gross margins

– Failure of supply arrangements – Dependence on key information systems

Business strategy and objectives ISA’s strategy is to grow the group’s profits through organic as well as new revenue streams so as to deliver consistent, long-term, sustainable returns to all

stakeholders.

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Sustainability report (continued)

The key elements of the group’s strategy include: Investment in higher margin products and services The development of existing hardware and software sales at greater margins, whilst offering value-added services to our customers will be an essential focus going forward. The services supplied by the group, which yield the highest margin business, will need to be increased in the years to come to support

this strategy. Focus on organic growth in the rapidly developing, high return information security sectors These areas include: information security, cloud computing, managed services and consultancy services; some of which ISA already has a large presence within the corporate arena. Specific focus on end-user satisfaction through existing services offered would yield strong organic growth potential.

Key performance indicators (KPIs) that the board has selected to monitor progress of the group: – Earnings per share: comprise earnings divided by weighted average number of shares for the period under review.

– Headline earnings per share: comprise earnings adjusted for items of a capital nature (and other extraordinary items) divided by weighted average number of shares for the period under review.

In addition to the above mentioned, the board monitors many other performance metrics of the business including gross margins, operating margins, working capital metrics, cash generation and non-financial metrics to ensure that a holistic view of the business is considered when decisions are made.

Remuneration Remuneration policy ISA has no separate remuneration committee and all remuneration is decided on by the board as a whole. The objective of the board with regards to

remuneration is to ensure that executive directors and key staff receive remuneration that is appropriate to their individual scale of responsibility and performance as well as ensuring that such remuneration will attract, motivate and retain the necessary individuals.

Independent non-executive directors’ remuneration The board as a whole determines the fee structure for the independent non-executive directors, subject to shareholder approval at the annual general

meeting. Independent non-executive directors are not eligible to participate in the annual bonus plan or any incentive plans.

Directors’ service contracts The executive directors have services contracts with the company that contain a three month notice period from either party.

Corporate social development The group currently sponsors goods and services to several social and environmental organisations as part their commitment to the community and environment in which it operates. The group wishes to expand its sponsorship in the near future and is looking into alternative community programs and

charities. Wealth creation

Value added statement for the year ended 28 February 2013

2013

2012

R'000

R'000

Revenue

51,541

64,226

Less: Paid to suppliers for materials and services

(27,208)

(34,390)

Total value-added

24,333

29,836

Distributed as follows: Employees - salaries, wages and benefits

9,811

9,237

Providers of capital - financing costs

2

127

Government - current taxation

3,683

6,520

Shareholders - dividends

12,852

11,252

Total value distributed

26,348

27,136

Portion of value reinvested to sustain and expand the business:

Depreciation and amortisation

1,446

1,046

Deferred taxation

(64)

46

Owners of the parent

(3,397)

1,608

Total value reinvested and distributed

24,333

29,836

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Stakeholder engagement

ISA recognise that on-going and meaningful stakeholder engagement is a critical aspect of sustainability. ISA has identified its stakeholders and

established on-going engagement programmes with each. The table below provides a summary of the group’s stakeholder engagement programme.

May 2013 Announcement of audited results for the year ended 28 February 2013 May 2013 Publication of annual report for the year ended 28 February 2013

June 2013 Annual General Meeting

July 2013 Payment of ordinary dividend to shareholders

October 2013 Announcement of interim results February 2014 Financial year end

Stakeholder Why engage? What we’ve done

Shareholders Make the investment case of the company. Share goals and

communicate the achievements against those goals. Issued integrated annual reports and interim financial reports.

Funders ISA requires access to capital from time to time to fund its

growth and operations. Issued integrated annual reports and held meetings.

Financial Analysts Provide analysts with an understanding of the business model

and strategy as well as a clear view of the company’s goals.

Provided financial analysts with SENS announcements, Annual

Financial Statements and Integrated Report.

Communities

Understanding the communities within which ISA operates and

helping them understand ISA, creating a mutually beneficial

relationship.

Support selected charities with pricing and ICT education.

Employees

Employees are the drivers of the implementation of the

company’s strategy and are the face of the business from a

customer perspective.

Regular employee meetings and employee intranet.

Regulators

Providing the regulators with regular and transparent

information is important to ensure positive and beneficial

engagement.

Abiding by the JSE Listings Requirements and releasing requisite announcements on SENS.

Shareholders’ diary

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Corporate governance report

Introduction Good corporate governance encompasses the group systems, structures and a culture of acting responsibly. It ensures that the group treats all its

stakeholders and the environment in which the group operates with respect.

Statement of endorsement The directors endeavour to apply the recommendations of King III on corporate governance and the group applied this code of corporate practices and conduct, throughout the reporting period and at year-end, unless otherwise noted. The board is committed to the principles of discipline, transparency,

independence, social responsibility and accountability in their dealings with all stakeholders, as well as complying with the JSE Limited’s Listings Requirements. The board is of the view that, except as stated below, the group applies, insofar as is applicable, with the provisions contained in the Code of Corporate Practices and Conduct as defined in King III and specifically wishes to report on the following:

The board of directors The board of directors of ISA Holdings Limited currently comprises of three executive and five non-executive directors, who provide independent judgments on issues of strategy, performance, resources and standards of conduct. The board reviewed the independence of the non-executive directors and is satisfied about their independence. The board retains full and effective control over the group and is responsible for strategic and fiscal policy as well as

being involved in all decisions affecting ISA, which are considered to be material. The directors bring a wide range of diverse experience, insight and independence of judgment on issues of strategy, performance, resources and standards of conduct to the board. The non-executive directors are

independent of management to ensure that no one individual has unfettered powers of decision making authority, ensuring that stakeholder interests are protected. The roles of chairman and chief executive officer are separated. The board is responsible for appointing the chief executive officer and financial director and ensuring that appropriate succession planning is in place. The chief executive officer acted as interim financial director for part of the financial

period. The non-executive directors take responsibility for ensuring that the chairman encourages proper deliberation of all matters requiring the board’s attention.

The board’s main responsibilities include strategy, dividend policies, acquisition and disinvestment policies, risk management, financing and corporate governance. In addition, the board is accountable for relations with stakeholders and is responsible for creating, protecting and enhancing ISA’s wealth and resources, timely and transparent reporting and for acting at all times in the best interests of the group and its shareholders. Full details of the board of

directors are set out on page 5.

The board has a formal schedule of matters reserved to it. The board ensures that the group has a comprehensive system of control ensuring that risks are mitigated and the group’s objectives are attained. This control environment sets the tone of the group and covers ethical values, management’s philosophy and the competence of employees.

The board ensures that the group complies with all relevant laws, regulations and codes of business practice and that it

communicates with its shareholders and relevant internal and external stakeholders openly, promptly and with substance prevailing over form. The board and its committees are supplied with full and timely information which enables them to discharge their responsibilities and have unrestricted access to all company information, records, documents and property. Non-executive directors have access to management and may even meet separately with

management, without the attendance of executive directors. All directors have access to the advice and services of the company secretary and there is an agreed procedure by which directors may obtain independent professional advice at the group’s expense, should they consider this necessary.

The group has a formal policy, established by the board and implemented by the company secretary, prohibiting dealing in securities by directors, officers and other selected employees for a designated period preceding the announcement of its financial results or in any other period considered sensitive.

The board defines levels of materiality, reserving specific power to it and delegating other matters with the necessary written authority to management. These matters are monitored and evaluated on a regular basis. The board identifies the key risk areas and key performance indicators for the group. These

are regularly updated and particular attention is given to technology and systems.

Directors, both executive and non-executive, are appointed for their skill and experience. The procedure for the nomination and appointment of directors is

a matter for the board as a whole and the board will consider whether a potential director is a fit and proper person to be appointed as a director. The appointment of new directors requires the unanimous approval of the board in line with the formal and transparent policy of the group. To fulfil their

responsibilities adequately, directors have unrestricted access to timely financial and other information, records and documents relating to the group.

The attendance at the board meetings held during the period under review is set out below:

Director 24 May 2012 27 June 2012 5 October 2012 7 February 2013

Andrew Maren Yes Yes Yes Yes

Alan Naidoo Yes Yes Yes Yes

Clifford Katz Yes Yes Yes Yes

Denzil Perreira Yes Yes Yes No

Desmond Seaton Yes No Yes Yes

Philip Green Yes Yes Yes Yes

Tarryn Marks Yes n/a n/a n/a

Thapeli Matsabu Yes Yes Yes Yes

Johan du Toit n/a n/a n/a Yes

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Corporate governance report (continued)

Rotation and appointment of directors At each Annual General Meeting of the company, one third of the non-executive directors shall retire from office. The directors retiring at each Annual

General Meeting shall be the directors whom have been longest in office. The length of time a director has been in office shall be computed from the date of their last election or appointment. The retiring director shall hold office until the conclusion of the meeting at which they retire. Retiring directors shall be

eligible for re-election at any Annual General Meeting provided they, or some member intending to propose them, has submitted at least 7 calendar days before the meeting at ISA’s registered office, a notice in writing, duly signed, signifying their candidature for office or the intention of such member to propose the party.

If at any General Meeting at which an election of directors ought to take place, the place of any retiring director is not filled, they shall continue in office until the dissolution of the Annual General Meeting in the next year, and so on from year to year until their place is filled, unless it shall be determined at a

General Meeting to reduce the number of directors, subject to the JSE Limited’s Listings Requirements.

Appointments to the board are transparent and are approved by the board as a whole, subject to confirmation by shareholders at the next Annual General

Meeting or General Meeting, whichever is the earlier. A director is not obliged to hold any qualification shares in the company.

In the current year, Johan du Toit was appointed to the board as an executive director and shareholder approval for such appointment will be sought at the Annual General Meeting. In addition, Andrew Maren and Alan Naidoo, who retire by rotation at the Annual General Meeting but, being eligible to do so, will both offer themselves for re-election.

Board evaluation and performance The directors undertake an annual board evaluation process, as recommended by King III, which includes an evaluation of the board as a whole, of each

board member, of the chairperson and all board committees. This is done through self-assessment and a peer review. The board is satisfied that the directors have the performed their necessary functions and added valuable contributions throughout the reporting period.

Delegation of authority The power and authority to lead, control, manage and conduct the business of the group, including the power and authority to delegate, is vested with the

board to ensure that the group remains a sustainable and viable business. Management reporting The performance of the group is monitored by quarterly management reports as well as having management reporting disciplines, which include preparation of annual budgets and business reviews where performance against budgets is reviewed, opportunities are identified, and corrective action is

taken as necessary. Asset management, working and capital management are monitored on an ongoing basis. Ethics All directors and employees are required to maintain the highest levels of professionalism and integrity in conducting ISA’s business and in dealing with all stakeholders. ISA's policies ensure “open door” management, compliance with generally accepted principles regarding ethical behaviour and ensuring that

all business is conducted in a manner, which in all reasonable circumstances, is beyond reproach. Remuneration committee and director’s remuneration ISA is a small company in terms of its staffing and does not believe it to be viable to have a separate remuneration committee. In the spirit of good corporate governance, the non-executive directors’ remuneration is to be approved by shareholders at the Annual General Meeting. Non-executive directors receive a fee for their contribution to the board and for the committees on which they serve. For information on directors’ emoluments please refer

to page 19. Directors are excluded from discussions relating to the review of their own remuneration.

The board’s overall remuneration strategy is to ensure that employees are rewarded for their contribution to the group’s operating and financial performance at levels which take account of industry, market and country benchmarks, as well as the requirements of collective bargaining. In order to promote an identity of interest with shareholders, share incentives are considered to be critical elements of executive incentive pay.

Share dealings and closed periods In line with the JSE Listings Requirements, ISA enforces a restricted period for dealing in shares, in terms of which any dealings in shares by all directors

and employees are not allowed during the time from which the financial reporting period ends, to the time that results are released. This period includes any period that the company is trading under a cautionary announcement. No employee or director may deal directly or indirectly in ISA’s ordinary shares on the

basis of unpublished price-sensitive information regarding its business or affairs. A procedure for directors and employees to deal in shares has been implemented and ISA’s Designated Advisor is available to give guidance on these matters, if required.

Communication with stakeholders A policy of effective communication and engagement with all stakeholders in the affairs of the company will be adhered to and ISA will continue to seek to provide a secure, healthy and participative social and working environment for its staff and associates. The board is in the process updating the 75

principles in the King III Corporate Governance Register and will load the information to the company website in due course. The board is committed to improving communication with employees and encourages employees to participate at all levels in the decision-making process.

- 12 -


Orientation and development New directors are expected to complete the AltX induction programme as required by the JSE for directors of AltX companies, which is designed to

enhance their understanding of the legislative framework in which the group operates. The group is also committed to ongoing director development to assist directors in building on their expertise and developing and maintaining an understanding of the business and markets in which the group operates.

Business continuity Disaster recovery plans are in place to provide reasonable assurance of business continuity in the event of unforeseen circumstances and disasters.

Conflicts of interest The group has a policy that deals with the management of potential conflicts of interest to ensure that candidates and existing directors are free of any

conflicts of interest between the obligations they have to the group and their private interests.

Audit committee The audit committee comprises of three independent non-executive directors, Desmond Seaton (chairperson of the audit committee), Denzil Perreira and Thapeli Matsabu. The audit committee aims to govern the functions and responsibilities that are necessary for them to ensure their responsibilities. Two

audit committee meetings were held during the year under review, both of which were attended in full by the members of the committee. The external auditors have unrestricted access to the chairman of the audit committee.

The audit committee is responsible for reviewing the functioning of the internal control system, risk areas of the group’s operations, the reliability and accuracy of the financial information provided to management and other users of financial information, whether the group should continue to use the

services of the current external auditors, any accounting or auditing concerns identified as a result of the external audit, and the group’s compliance with legal and regulatory provisions, its Memorandum of Incorporation, code of conduct, bylaws and the rules established by the board.

The duties of the audit committee include reviewing the scope and results of the external audit and its cost effectiveness, as well as the independence and objectivity of the external auditors. Where the auditors supply non-audit services to the group, the audit committee reviews the nature and extent of such services, seeking to balance the maintenance of objectivity and value for money.

The audit committee considers whether or not the interim report should be subject to an independent review by the auditors. It also reviews the annual financial statements and the appropriateness of the accounting policies adopted by the group.

The audit committee has written terms of reference that deal with the membership, authority and duties of the audit and risk committee.

The audit committee has met with the executive Financial Director and has satisfied itself as to the appropriateness and expertise of the Finance Director.

Social and Ethics Committee The Companies Act (Act 71 of 2008) requires companies to establish a social and ethics committee. This committee comprises Alan Naidoo (non-executive director and chairperson), Thapeli Matsabu (independent non-executive director), and Johan du Toit (executive director). It held its inaugural meeting on 7

February 2013 at which all members were present.

The committee will review its performance annually by means of questionnaires completed by individual committee members and attendees which are then

discussed at board and committee meetings. These appraisals enable the committee to evaluate its effectiveness objectively and to conclude that it is operating effectively under the terms of reference set down in its Charter. The committee’s role includes monitoring the ethical aspects of the Company’s

employment activities and social and economic development.

Particular attention is given to recommendations regarding corruption. The committee’s role also includes the promotion of equality and prevention of unfair

discrimination under the terms of the Employment Equity Act in South Africa and similar legislation relating to the group’s other operations throughout the world. The committee will also monitor compliance with the Broad-Based Black Economic Empowerment Act in the group’s South African subsidiaries. In summary, the committee’s role can perhaps best be described as overseeing the good corporate citizenship of the group on behalf of the board.

Risk management The board acknowledges that it is accountable for risk management within the group. No separate risk committee has been established at this point due to the nature, size and complexity of the group. The board manages risk through the reviewing of internal control procedures and management reporting. The external auditors provide an opinion to the shareholders of the company, as to whether reported financial information may be relied upon.

- 13 -


Internal controls and internal audit The board is responsible for the group’s systems of financial and operational control and for the safeguarding of assets against unauthorised use or

disposition. These controls are designed to provide reasonable, but not absolute, assurance as to the integrity and reliability of the annual financial statements and the risks to which the group is exposed. All employees are required to maintain the highest ethical standards and to conduct themselves in

a manner that is, in all reasonable circumstances, above reproach. The board has reviewed and concluded that the effectiveness of the systems of internal control, which may prevent misstatement or loss or uncertainty that would require disclosure in the financial statements remains adequate.

The board also has the ultimate responsibility for establishing a framework for internal controls. The board has established operational, financial and internal control systems to ensure the integrity and reliability of the group’s processes and financial information, to safeguard assets, verify and maintain accounting records, to detect fraud, potential liability, loss and material misstatement, whilst complying with applicable laws and regulations. These controls

are designed to provide a reasonable, but not absolute assurance as to the integrity and reliability of the annual financial statements. The audit committee reviews these systems in consultation with the external auditors. Due to size and nature of the group, no internal audit department exists as the directors

are of the opinion that the costs associated with maintaining such a department would be greater than the benefit received. Life threatening disease policy, occupational health and safety ISA, as far as possible, accommodates the needs of employees with life threatening diseases to ensure productive and fulfilled employment for as long as the employee is able to continue working. ISA will not unfairly discriminate, directly or indirectly, against an employee suffering from a dreaded disease. Due to the nature of the group’s operations and office environment, there is very little risk to the health and safety of employees.

Company secretarial function The company secretary statement of compliance is set out on page 14 of the annual financial statements. The directors have access to the advice and services of the company secretary, who is responsible for the board ensuring compliance with procedures and regulations of a statutory nature. The company secretary is also responsible for alerting directors of any relevant changes to the Companies Act (Act 71 of 2008), the Security Services Act, the

JSE Listings Requirements, as well as any other statutory regulations or laws affecting them in their capacities as directors. The company secretary also monitors the director’s dealings in securities and ensures adherence to closed periods when trading in ISA shares. Details of the company secretary, Acorim Proprietary Limited, appear on page 44.

The board of directors has considered and is satisfied with the competence, qualifications and experience of the company secretary, as well as its senior

members, due to the following:

– periodic reviews by the board to assess the performance of the company secretary

– the company secretary ensures that all secretarial and administrative procedures are followed promptly and efficiently – the timely preparation and distribution meeting minutes and meeting packs – advising the board on governance and statutory matters

– guides the board in their duties and responsibilities – ensures that all directors have declared in writing any conflicts of interests at every meeting

The board is satisfied that its relationship with the board is at an arm’s length relationship, due to the following:

– the company secretary is a separate independent entity – the company secretary is not a director of the group – open lines of communication are maintained at all times

– the company secretary attends all directors and committee meetings BEE and procurement The group has an effective BEE ownership of at least 32.5% and a strong representation of black directors. Having addressed a key component of black ownership and black representation on the board, the group has heightened its focus on other empowerment areas.

- 14 -

Directors’ responsibilities and approval

The directors are required by the Companies Act (Act 71 of 2008) of South Africa to maintain adequate accounting records and are responsible for the content and integrity of the annual financial statements and related financial information included in this report. It is their responsibility to ensure that the

annual financial statements fairly present the state of affairs of the company and of the group as at the end of the financial year and the results of its operations and cash flows for the period then ended, in conformity with International Financial Reporting Standards. The external auditors are engaged to

express an independent opinion on the annual financial statements. The annual financial statements are prepared in accordance with International Financial Reporting Standards, the SAICA Financial Reporting Guides, as

issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by Financial Reporting Standards Council, the Companies Act (Act 71 of 2008) and the JSE Listings Requirements. The annual financial statements 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 the system of internal financial control established by the company and the group and

place considerable importance on maintaining a strong control environment. To enable the directors to meet these responsibilities, the board sets standards for internal control aimed at reducing the risk of error or loss in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These

controls are monitored throughout the company and the group and all employees are required to maintain the highest ethical standards in ensuring the company’s and the group’s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the

company and in the group is on identifying, assessing, managing and monitoring all known forms of risk across the company and the group. While operating risk cannot be fully eliminated, the directors of the company and of the group endeavour to minimise risk by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints.

The directors are of the opinion, based on the information and explanations given by management, that the system of internal control provide reasonable assurance that the financial records may be relied on for the preparation of the annual financial statements. However, any system of internal control can

provide only reasonable and not absolute assurance against material misstatement and loss.

The directors have reviewed the company’s and the group’s cash flow forecasts for the year to 28 February 2014 and, in the light of this review and the current financial position, they are satisfied that the company and the group has or has access to adequate resources to continue in operational existence for the foreseeable future. The annual financial statements of the company and the group have therefore been prepared on the going concern basis.

The external auditors are responsible for independently reviewing and reporting on the company’s and the group’s annual financial statements. The annual financial statements have been examined by the company’s and the group’s external auditors and their report are presented on page 15.

The directors, whose names appear on page 5, collectively and individually accept full responsibility for the accuracy of the information given in the annual

financial statements and certify that to the best of their knowledge and belief there are no facts that have been omitted, which would make any statement false or misleading, and that all reasonable enquiries to ascertain such facts have been made, and that the annual financial statements contains all information required by law and the JSE Listings Requirements.

The annual financial statements were approved by the board of directors on 24 May 2013 and signed on their behalf by:

Clifford Katz Johan du Toit Chief Executive Officer Financial Director

In my capacity as Company Secretary, I certify that, to the best of my knowledge and belief, ISA Holdings Limited has lodged with the Companies and

Intellectual Property Commission, for the year ended 28 February 2013, all such returns as are required by a public company, in terms of the Companies Act (Act 71 of 2008) and that all applicable returns are true, correct and up to date.

Acorim Proprietary Limited Company Secretary

24 May 2013

Declaration by Company Secretary

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Independent auditors’ report

To the shareholders of ISA Holdings Limited We have audited the consolidated and separate financial statements of ISA Holdings Limited set out on pages 17 to 42, which comprise the statements of

financial position as at 28 February 2013, and the statements of comprehensive income, changes in equity and cash flows for the year then ended, and the notes, comprising a summary of significant accounting policies and other explanatory information.

Directors’ responsibility for the financial statements The company’s directors are responsible for the preparation and fair presentation of these consolidated and separate financial statements in accordance

with International Financial Reporting Standards and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatements, whether due to fraud or error.

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

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 policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

Opinion In our opinion, the consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of ISA Holdings Limited at 28 February 2013, and its consolidated and separate financial performance and cash flows for the year then ended in accordance

with International Financial Reporting Standards, and the requirements of the Companies Act of South Africa. Other reports required by the Companies Act As part of our audit of the consolidated and separate financial statements for the year ended 28 February 2013, we have read the Directors’ Report, the Audit Committee’s Report and the Company Secretary’s Certificate for the purpose of identifying whether there are material inconsistencies between these

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

Mazars Munesh Patel Registered Auditor Johannesburg

24 May 2013

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Audit Committee report

Background The Companies Act (Act 71 of 2008) is now effective and the committee has, during the period under review, commenced with the implementation of its

requirements. The committee’s operation is guided by this Act. Purpose The purpose of the audit committee is:

– To assist the board in discharging its duties relating to safeguarding of assets, the operations of adequate internal systems, internal controls and reporting processes, and the preparation of accurate reporting and financial statements in compliance with the applicable legal requirements and accounting standards;

– To provide a forum for discussing business risk and control issues for developing recommendations for consideration by the board; – To oversee the activities of the external audit; and

– To perform the duties that is attributable to it by the Act. Membership The membership of the committee comprises of three independent non-executive directors, namely Desmond Seaton (chairman of the audit committee), Denzil Perreira and Thapeli Matsabu. External audit The committee has established for itself, through enquiry, that the external auditor of ISA Holdings Limited is independent as defined by the Act. The

committee, in consultation with executive management, agreed to a provisional audit fee of R 250,000 for the 2013 financial year, for the entire group. The fee is considered appropriate for the work that could have been reasonably foreseen at the time. The final adjustment fee will be agreed upon after completion of these annual financial statements. There are formal procedures that govern the process whereby the auditor is considered for non-audit

services and each engagement letter for such work is reviewed by the committee. During the period under review there were no non-audit related services carried out. During the audit committee meeting, which was held with the external auditor present and when management were not present, no matters of concern were raised. The committee has nominated, for approval at the Annual General Meeting, Mazars as the external auditor for the 2014 financial year,

with Munesh Patel as the designated audit partner. Financial Director The committee has established for itself through enquiry, observation, discussions and reviews that the expertise and experience of the group’s Financial Director, being Johan du Toit, is appropriate in relation to the operations and financial complexities relevant to the group.

Annual financial statements The audit committee has recommended the financial statements for approval to the board. The board has subsequently approved the financial statements, which will be open for discussion at the forthcoming Annual General Meeting to be held on Wednesday 26 of June 2013.

Desmond Seaton Chairman of the Audit Committee 24 May 2013

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Directors’ report

The directors have pleasure in submitting their report as part of the annual financial statements of ISA Holdings Limited and its subsidiaries for the year ended 28 February 2013.

Nature of business ISA Holdings Limited (“the company”) is a South African incorporated limited liability investment holding company listed on the AltX, a division of the JSE Limited. ISA Holdings Limited, through its main operating subsidiary Information Security Architects Proprietary Limited, together referred to as “ISA” or “the group” is a prominent provider of network, Internet and information security solutions to the sub-Saharan African market.

Share capital There were no changes in the authorised or issued share capital of the company during the year under review. Details of share capital are contained in note

20 to the annual financial statements.

Financial results The operating results and state of affairs of the company and the group are fully set out on pages 17 to 42 of these annual financial statements. Profit attributable to shareholders amounted to R 9,455,000 (2012: R 12,860,000) or 5.2 cents per share (2012: 7.0 cents per share). Headline earnings

amounted to R 9,454,000 (2012: R 12,856,000) or 5.2 cents per share (2012: 7.0 cents per share). Net asset value is 23.8 cents per share (2012: 25.6 cents per share) and tangible net asset value is 21.6 cents per share (2012: 23.1 cents per share).

Dividends The dividends already declared and paid to shareholders during the year are reflected in the statements of changes in equity on page 22. Dividend number

9, comprising of an ordinary dividend of 7.0 cents per share, was declared and paid during the period under review. Ordinary dividend number 10, of 5.2 cents per share for the year ended 28 February 2013 is declared, to all shareholders recorded in the shareholders register on 26 July 2013 and payable on 29 July 2013. In terms of the dividend tax, effective 1 April 2012, the following additional information is disclosed:

– This is a dividend as defined in the Income Tax Act, 1962, and is payable from income reserves. – The South African dividend tax (“DT”) rate is 15%.

– No credits in terms of secondary tax on companies have been utilised. Accordingly, the dividend to utilise in determining the DT is 5.2 cents per share.

– The DT to be withheld by the company amounts to 0.78 cents per share. – Therefore, the net dividend payable to shareholders who are not exempt from DT is 4.42 cents per share, while the gross dividend of 5.2 cents per

share is payable to those shareholders who are exempt from DT.

– The issued share capital of the company at the declaration date comprises 192 592 593 ordinary shares. – The company’s income tax reference number is 9340/150/71/4.

Material changes and subsequent events The directors are not aware of any reportable matter or circumstance arising or material changes in the affairs or financial position of the company or the

group since the financial year-end and the date of this report. Going concern, liquidity and capital resources The annual financial statements have been prepared on the basis of accounting policies applicable to a going-concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in

the ordinary course of business. ISA’s working capital after payment of the proposed ordinary dividend of 5.2 cents per share will be adequate for the group’s cash requirements. The directors of ISA have no reason to believe that the group will not continue as a going concern.

Investments in subsidiary companies The aggregate net profits and losses after taxation of the subsidiaries, attributable to the group, for the year ended 28 February 2013 amounted to profits of

R 8,771,000 (2012: R 15,116,000) and losses of R 18,000 (2012: R Nil).

Issued share capital

Held by holding company

Book value of shares Owing to holding

company

2013 2012 2013 2012 2013 2012 2013 2012 Company name R R % % R R R 000’s R 000’s

Information Security Architects Pty Ltdª 1,000 1,000 100 100 1,000 1,000 19,148 18,386

Information Security Architects MSS Pty Ltd* 100 100 100 100 100 100 10,306 (38) iSecure Pty Ltd* 196 196 100 100 196 196 3,855 4,496

296 296 14,161 4,458

ª = owned by ISA Holdings Limited

* = owned by Information Security Architects Pty Ltd

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Directors’ report (continued)

Non-current assets During the year the group purchased land and buildings to house the operations of the group for an amount of R 10,492,000.

Special resolutions During the period under review three special resolutions (resolutions 1, 2 and 3 from Annual Report 2012) as described below were passed:

The reason for and effect of special resolution 1 is to grant the directors of the company a general authority, up to and including the date of the next Annual

General Meeting of the company or the expiration of 15 months from the date of the passing of this special resolution, whichever is the earlier date, for the acquisition by the company, or any of its subsidiaries, of shares issued by the company. A repurchase of shares is not contemplated at the date of this notice, however, the directors believe it to be in the interests of the company that shareholders grant general authority to provide the board with the

flexibility to facilitate the repurchase of company shares as and when the board considers it appropriate.


General Meeting of the company or the expiration of 15 months from the date of the passing of this special resolution, whichever is the earlier date, to remunerate the directors of the company, or any of its subsidiaries, for services rendered as directors of the company as per the company’s remuneration

policy.


General Meeting of the company or the expiration of 15 months from the date of the passing of this special resolution, whichever is the earlier date, to provide financial assistance to all its subsidiaries and associated companies.

Litigation The directors of the company and the group are not aware of any legal or arbitration proceedings, including proceedings that are pending or threatened of

which the group is aware, that may have, or have in the previous 12 months had a material effect on the group’s or company’s financial position. Directorate and company secretary The following were the directors of the company as at the date of this report:

Executive directors: Clifford Katz, Philip Green, Johan du Toit

Non-executive directors: Denzil Perreira (independent), Desmond Seaton (independent), Thapeli Matsabu (independent), Alan Naidoo, Andrew Maren

Company secretary: Acorim Proprietary Limited (business and postal address of the company secretary appears on page 44) Auditors Mazars will continue in office as the group’s auditors in accordance with section 90 of the Companies Act (Act 71 of 2008), until the next Annual General Meeting. Directors’ interests in securities As at the date of this report, the interests of the executive directors in the shares of the company were as follows:

Directors’ shareholding Philip Green

Qty Clifford Katz

Qty Johan du Toit

Qty Total Qty

Direct and beneficial: 2013 21,898,435 14,037,798 - 35,936,233 Indirect and beneficial: 2013 - 23,766,385 - 23,766,385

Total shareholding: 2013 21,898,435 37,804,183 - 59,702,618

Direct and beneficial: 2012 21,898,435 14,037,798 - 35,936,233

Indirect and beneficial: 2012 - 23,766,385 - 23,766,385

Total shareholding: 2012 21,898,435 37,804,183 - 59,702,618

As at the date of this report, the interests of the non-executive directors in the shares of the company were as follows:

Directors’ shareholding Andrew Maren

Qty

Alan Naidoo

Qty

Denzil Perreira

Qty

Desmond Seaton

Qty

Thapeli Matsabu

Qty

Total

Qty

Direct and beneficial: 2013 Indirect and beneficial: 2013

200,000 24,098,149

- 24,098,149

- 150,000 - 350,000 - 591,812 - 48,788,110

Total shareholding: 2013 24,298,149 24,098,149 - 741,812 - 49,138,110

Direct and beneficial: 2012 200,000 - - 150,000 - 350,000

Indirect and beneficial: 2012 24,098,149 24,098,149 - 591,812 - 48,788,110

Total shareholding: 2012 24,298,149 24,098,149 - 741,812 - 49,138,110

There has been no movement in directors’ interests from year end date to the date of this report.

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Directors’ report (continued)

Executive directors’ remuneration This remuneration was paid by ISA’s wholly owned subsidiary - Information Security Architects Pty Ltd. Total remuneration paid was as follows:

Directors’ emoluments Philip Green

R Clifford Katz

R Tarryn Marks

R Johan du Toit

R Total

R

Basic salary: 2013 1,111,692 1,378,364 90,750 96,000 2,676,806 Allowances*: 2013 37,942 32,772 702 - 71,746 Bonuses : 2013 - - - - -

Total emoluments 2013 1,149,634 1,411,136 91,452 96,000 2,748,222

Basic salary: 2012 1,008,685 1,365,161 330,000 - 2,703,846 Allowances*: 2012 64,979 53,276 - - 118,255

Bonuses : 2012 - - - - -

Total emoluments 2012 1,073,664 1,418,437 330,000 - 2,822,101

* = Allowances include medical aid and travel. Non-executive directors’ remuneration This remuneration was paid by ISA. Total remuneration paid was as follows:

Directors’ emoluments Andrew Maren

R

Alan Naidoo

R

Denzil Perreira

R

Desmond Seaton

R

Thapeli Matsabu

R

Total R

Services as directors: 2013 - - 56,250 56,250 37,500 150,000

Services as directors: 2012 5,000 5,000 36,000 66,000 - 112,000

Appointments and resignations of directors

Director’s name Change Date of appointment Date of resignation

Tarryn Marks Resignation 19 April 2010 with effect from 1 June 2012

Johan du Toit Appointment 7 February 2013 -

Borrowings The group is not limited to borrowing levels by the Memorandum of Incorporation of the holding company and the group had no long-term borrowings at

year-end.

- 20 -

Statements of comprehensive income

For the year ended 28/29 February

Group Company

Note

2013 2012 2013 2012 R 000’s R 000’s R 000’s R 000’s

Revenue 4 51,541 64,226 14,625 13,636

Turnover 4 50,925 62,946 - - Cost of sales (27,526) (32,498) - -

Profit before other income and expenses 23,399 30,448 - -

Other income 5 1 29 13,500 12,320 Selling and marketing costs (7,666) (7,113) - - Administrative expenses 6 (3,273) (5,062) (150) (112) Finance income 8 615 1,251 1,125 1,316 Finance costs 9 (2) (127) - (87)

Profit before taxation 13,074 19,426 14,475 13,437 Taxation 10 (3,619) (6,566) (273) (1,496)

Profit attributable to equity shareholders for the year 9,455 12,860 14,202 11,941

Total comprehensive income attributable to equity shareholders

9,455 12,860 14,202 11,941

Earnings per share

Earnings per share (cents) 11 5.2 7.0 Diluted earnings per share (cents) 11 5.2 7.0

- 21 -

Statements of financial position

As at 28/29 February

Group Company

Note

2013 2012 2013 2012 R 000’s R 000’s R 000’s R 000’s

Assets Non-current assets 15,645 5,202 1 1

Property, plant and equipment 12 11,454 471 - - Intangible assets 13 3,945 4,549 - - Investment in subsidiaries 14 - - 1 1 Deferred tax 15 246 182 - -

Current assets 35,018 47,240 19,148 18,400

Cash and cash equivalents 16 24,250 42,733 - - Inventories 17 80 - - - Loans to subsidiaries 18 - - 19,148 18,386 Trade and other receivables 19 10,549 4,493 - - Current tax receivable 25 139 14 - 14

Total assets 50,663 52,442 19,149 18,401

Equity Equity capital and reserves 43,623 47,020 18,692 17,972

Share capital and share premium 20 13,442 13,442 17,972 17,972 Reserves 30,181 33,578 720 -

Liabilities Current liabilities 7,040 5,422 457 429

Interest bearing liabilities 21 - - - - Trade and other payables 22 6,864 4,903 457 429 Provisions 23 176 270 - - Current tax payable 25 - 249 - -

Total equity and liabilities 50,663 52,442 19,149 18,401

- 22 -

Statements of changes in equity


Group Company

Note

2013 2012 2013 2012 R 000’s R 000’s R 000’s R 000’s

Share Capital Ordinary shares Balance at beginning of the year 20 1,836 1,836 1,926 1,926 Balance at end of the year 20 1,836 1,836 1,926 1,926

Share premium Balance at beginning of the year 20 11,606 9,658 16,046 14,076 Reduction in share premium – capital

reduction 20 - (1,948) - (1,926)

EmpowerGroup transaction maturation 21 - 3,896 - 3,896 Balance at end of the year 20 11,606 11,606 16,046 16,046

Total share capital and share premium 20 13,442 13,442 17,972 17,972

Reserves Retained earnings Balance at beginning of the year 33,578 31,970 - - Total comprehensive income - profit 9,455 12,860 14,202 11,941 Dividends paid during the year (12,852) (11,252) (13,482) (11,941)

Balance at end of the year 30,181 33,578 720 -

Total reserves 30,181 33,578 720 -

Total equity capital and reserves 43,623 47,020 18,692 17,972

- 23 -

Statements of cash flow


Group Company

Note

2013 2012 2013 2012 R 000’s R 000’s R 000’s R 000’s

Cash flows from operating activities 3,283 13,456 (381) (1,315)

Cash receipts from customers 44,903 65,873 - - Cash paid to suppliers and employees (37,563) (46,342) 122 87 Cash generated from operations 24 7,340 19,531 (122) 87 Taxation paid 25 (4,057) (6,075) (259) (1,402)

Cash flows from investing activities (11,210) 751 13,863 15,182

Purchase of property, plant and equipment 12 (11,556) (126) - - Proceeds from sale of property, plant and equipment 55 15 - - Purchase of intangible assets 13 (324) (389) - - Dividends received 5 - - 13,500 12,320 Interest received 8 615 1,251 1,125 1,316 (Increase)/decrease in subsidiary loan accounts - - (762) 1,546

Cash flows from financing activities (12,854) (13,241) (13,482) (13,866)

Capital reduction paid to ordinary shareholders 20 - (1,948) - (1,926) Finance costs 9 (2) (41) - - Dividends paid to ordinary shareholders 26 (12,852) (11,252) (13,482) (11,941)

Net (decrease)/increase in cash and cash equivalents

(20,781)

966

-

-

Revaluation of foreign cash balances 2,298 524 - - Cash and cash equivalents at beginning of the year 42,733 41,243 - -

Cash and cash equivalents at end of the year 16 24,250 42,733 - -

- 24 -

Notes to Annual Financial Statements f or t h e ye a r e n d e d 2 8 F e br u ar y 2 0 1 3

Corporate information The annual financial statements of ISA Holdings Limited for the year ended 28 February 2013 were authorised for issue in accordance with a resolution of the board of directors on 24 May 2013. ISA Holdings Limited is a company incorporated in the Republic of South Africa. The company’s shares are publically traded.

Accounting policies The principal accounting policies applied in the preparation of these annual financial statements are set out below.

Basis of preparation The annual financial statements of the group and the company have been prepared in accordance with the Framework concepts and the measurement and recognition requirements of the International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides, as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by Financial Reporting Standards Council, the Listings Requirements of the JSE

Limited and the Companies Act (Act 71 of 2008). The annual financial statements have been prepared on the historical cost basis, except as indicated below, and incorporate the principal accounting policies set out below. The policies set out below have been consistently applied to all years presented. The annual financial statements have been prepared on a going-concern basis, presented in thousands of South African Rand (R'000s) and are rounded to the

nearest thousand.

Three new amendments became applicable to ISA in the current year. IAS 1: Presentation of Financial statements, which resulted in a change in disclosure of total comprehensive income found in the Statement of Comprehensive Income, IAS 24: Related Party Disclosures, which resulted in a more detailed description of Related Parties, but did not alter the disclosures of ISA and IFRS 7: Financial Instrument Disclosures, which resulted in a more detailed

description of financial instruments, but did not alter the disclosures of ISA. Neither of these changes resulted in a change in policy nor had any effect on the financial position or results reported in the current or prior years.

1. Significant judgements The preparation of annual financial statements in conformity with IFRS requires management to make estimates and assumptions that effect the reported

amounts represented in the annual financial statements and related disclosures. Use of available information and the application of judgement are inherent in the formation of estimates. These estimates are based on management’s best knowledge of current events and actions that the group or company may undertake in the future. Actual results in the future could ultimately differ from these estimates which may be material to these annual financial statements.

The presentation of the results of operations, financial position and cash flows in the financial statements of the group and company is dependent upon and sensitive to the accounting policies, assumptions and estimates that are used as a basis for the preparation of these annual financial statements.

Management has made certain judgements in the process of applying the group’s accounting policies. These, together with the key assumptions concerning the future, and other key sources of the estimation uncertainty at the statement of financial position date are discussed below:

1.1 Taxation Management’s judgement is exercised when determining the provision for income taxes due to the complexity of legislation. The group recognises liabilities for anticipated tax 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 year in which such determination is made.

1.2 Fair value estimation

The quoted market price used for financial assets held by the group is the current closing prices. The fair value of financial instruments not traded in an

active market is determined by using valuation techniques. The company uses a variety of methods and makes assumptions that are based on market conditions existing at each statement of financial position date. The fair value of financial instruments held at amortised cost for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available for similar financial instruments.

1.3 Impairment of assets

Management is required to make judgements concerning the cause, timing and amount of impairment. In the identification of impairment indicators, management considers the impact of changes in current competitive conditions, cost of capital, availability of funding, technological obsolescence, discontinuance of services and other circumstances that could indicate that impairment exists. Management’s judgement is also required when assessing

whether previously recognised impairment losses should be reversed. The future cash flows expected to be generated by the assets are projected taking into account market conditions and the expected useful lives of the assets. The present value of these cash flows, determined using an appropriate

discount rate, is the asset’s value in use. Motor vehicles, computer equipment, software, office furniture and equipment are considered for impairment at each year-end. The recoverable amount is determined if there is a reason to believe that impairment may be necessary.

1.4 Asset lives and residual values Property, plant and equipment are depreciated over their useful lives taking into account residual values, where applicable. The useful lives of assets are based on management’s estimation. The actual lives of the assets and residual values are assessed at year-end and may vary based on a number of

factors. In reassessing assets’ lives, factors such as technological innovation and maintenance programmes are taken into account. The residual value of an asset is the estimated amount that ISA would currently obtain from disposal of the asset if it were already in the condition it would be at the end of its

useful life.

- 25 -

Notes to Annual Financial Statements f or t h e ye a r e n d e d 2 8 F e br u ar y 2 01 3

1.5 Deferred tax assets The group recognises the net future tax benefit related to deferred 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 tax assets requires the group to make significant estimates related to expectations of future taxable income, based on forecast cash flows from operations and the application of existing tax laws. When deciding whether to

recognise unutilised taxation credits, management needs to determine the extent to which future payments are likely to be available for set off. In the event that the assessment of future payments and future utilisation changes, the change in the recognised deferred taxation is recognised in profit or loss. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the group to realise the net deferred tax assets recorded at

the statement of financial position date could be impacted.

1.6 Trade receivables, loans receivable and other receivables The group assesses its trade receivables, loans receivable and other receivables for impairment at each reporting date. In determining whether an impairment loss should be recorded in profit or loss, the group makes judgements as to whether there is observable data indicating a measurable decrease

in the estimated future cash flows from a financial asset. The impairment for trade receivables, loans and other receivables are calculated on an individual as well as portfolio basis, based on historical loss ratios, adjusted for indicators present at the reporting date.

2. Significant accounting policies

2.1 Basis of consolidation The consolidated annual financial statements comprise the financial position, the results and cash flows of the company and its subsidiaries. Subsidiaries are all entities over which the group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one

half of the voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to the group; to the date control is lost.

2.2 Revenue Revenue comprises the fair value of the sale of goods and services, interest received, dividends received, profit and loss on revaluation of shares and other income, net of value-added tax, rebates and after eliminating sales within the group.

Revenue from sale of goods is recognised when all the following conditions have been satisfied:

– the group has transferred to the buyer the significant risks and rewards of ownership of the goods; – the group retains neither continuing managerial involvement to the degree usually associated with ownership nor 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 statement of financial position date. The outcome of a transaction can be estimated reliably

when all of the following conditions are satisfied:

– the amount of revenue can be measured reliably;

– it is probable that the economic benefits associated with the transaction will flow to the group; – the stage of completion of the transaction at the statement of financial position can be measured reliably; and – the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.

The services sold, but which are to be provided in a subsequent accounting period are classified as revenue received in advance. When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue shall be recognised only to the extent of the expenses recognised that

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

Sales of goods and services are inextricably linked due to the nature of the group and have thus not been disclosed separately in the annual financial statements.

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

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

2.3 Turnover Turnover comprises the sale of goods and services to customers. Turnover is stated at the invoice amount and is exclusive of value added taxation.

2.4 Cost of sales When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down

or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs. The related cost of providing services recognised as revenue in the current period is included in cost of sales.

- 26 -


2.5 Leases The group leases premises under operating leases. The lease charges are expensed in the statement of comprehensive income on a straight-line basis over the period of the lease.

2.6 Translation of foreign currencies

Foreign currency transactions The functional currency of the company and its subsidiaries is the South African Rand. 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 statement of financial position 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.

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 is in the period in which they arise. 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.

2.7 Employee benefits

Short-term employee benefits The cost of all short term employee benefits is recognised during the period in which the employee renders the related service. The provisions for employee

entitlements to salaries and annual leave represent the amount that the group has a present obligation to pay as a result employees’ services provided up to the statement of financial position date. The provisions for leave pay have been calculated at amounts based on current salary rates. The expected cost

of profit sharing or bonus payments is recognised as an expense when there is a legal or constructive obligation to make such payments as a result of past performances.

2.8 Earnings per share Basic earnings per share is calculated by dividing the profit attributable to equity shareholders of the group by the weighted average number of ordinary shares in issue during the year, net of treasury shares.

2.9 Headline earnings per share

Headline earnings per share is calculated by dividing the headline earnings attributable to equity shareholders of the group by the weighted average number of ordinary shares in issue during the year, net of treasury shares.

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

measured at the amount expected to be recovered from or paid to tax authorities, using the tax rates and tax law that have been enacted or substantively enacted at the statement of financial position date. Current taxes are recognised as an income or an expense and included in profit or loss for the period.

2.11 Taxation

Management’s judgement is exercised when determining the provision for income taxes due to the complexity of legislation. The company recognises

liabilities for anticipated tax issues based on estimates of whether additional taxes will be due. Where the final 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 year in which such determination is

made.

2.12 Deferred tax assets and liabilities Deferred taxation is provided, using the statement of financial position liability method, on all temporary differences at the statement of financial position date between the carrying amounts for financial reporting purposes and their tax bases, except for those that arise on initial recognition of goodwill or initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting profit nor

tax profit. Deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable that future taxable profits will be available against which the associated unused tax losses and deductible temporary differences can be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates and tax law that have been enacted or substantively enacted at the statement of financial position date. Deferred taxes are recognised

as an income or an expense and included in profit or loss for the period except if they relate to a transaction or event which is recognised in either other comprehensive income or directly in equity; or if the deferred tax arises from a business combination transaction.

- 27 -


2.13 Property, plant and equipment The cost of an item of property, plant and equipment is recognised as an asset when:

– It is probable that future economic benefits associated with the item will flow to the group.

– The cost of the item can be measured reliably.

Land is initially recorded at cost. Property, plant and equipment are initially recorded at cost and are subsequently carried at cost less accumulated

depreciation and any accumulated impairment losses. Depreciation is calculated on the straight-line method using rates which are considered appropriate to reduce the carrying values to estimated residual values over the average expected useful lives of the assets as follows:

– Computer equipment: 3 years – Buildings: 50 years

– Motor vehicles: 4 years – Office furniture and equipment: 6 years –

The residual value and the useful life of each asset are reviewed at each financial period-end. The depreciation charge for each period is recognised in

profit and loss. An item of property, plant or equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. The gain or losses arising from derecognition of an item of property, plant and equipment is included in profit or loss when the item is derecognised. The gain or loss arising from derecognition of an item of property, plant and equipment is determined as the difference between the net

disposal proceeds, if any, and the carrying amount of the item. None of the assets has a part or item that is significant in relation to the total cost of the item. Therefore, all items are depreciated in terms of their respective categories and components are not separately depreciated. Repairs and maintenance on property, plant and equipment are charged to profit and loss during the financial period in which they are incurred. When a decision is made to sell an item

of property, plant and equipment during the year, and it meets the requirements of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, the asset is carried at the lower of its carrying amount or fair value less costs to sell, and depreciation on that asset ceases until it is sold. Any impairment is

recognised directly in profit and loss.

2.14 Intangible assets An intangible asset is recognised when:

– It is probable that the expected future economic benefits that are attributable to the asset will flow to the entity.

– The cost of the asset can be measured reliably.

Intangible assets are initially recognised at cost. Expenditure on research is recognised as an expense when it is incurred. Intangible assets are carried at cost less any accumulated amortisation and any impairment losses. For all intangible assets amortisation is provided on a straight-line basis over their useful life. The amortisation period and the amortisation method for intangible assets are reviewed every period-end. The carrying values of intangible

assets are reviewed annually for impairment indicators. If any such indication of impairment exists or where the carrying values exceed the estimated recoverable amount, the intangible asset is written down to its recoverable amount. Internally generated brands, customer lists and items similar in substance are not recognised as intangible assets.

The following are disclosed as intangible assets:

Trademarks All trademarks have an estimated useful life of 10 years and are therefore amortised over this period.

Computer software All computer software has an estimated useful life of 3 years and is therefore amortised over this period.

Intangible assets under development Intangible assets under development are only 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.

– It is expected to generate probable future economic benefits. – There are available technical, financial and other resources to complete the development and to use or sell the asset.

– The expenditure attributable to the asset during its development can be measured reliably.

Intangible assets under development are tested annually and at the same time each year for impairment, unless indicators exist that it should be tested

more frequently. Once the development phase is completed, the capitalised amounts are transferred to another asset class where it is amortised according to that class’s policy. Intangible assets under development result in computer software which has an estimated useful life of 3 years.

2.15 Financial instruments Initial recognition The group classifies financial instruments on initial recognition as a financial asset, a financial liability or an equity instrument, in accordance with the

substance of the contractual arrangement. Financial assets and financial liabilities are recognised on the group’s statement of financial position when the group becomes party to the contractual provisions of the instrument. Regular way purchases and sale of financial assets are accounted for at trade date.

Financial assets and liabilities are recognised initially at fair value plus transaction costs, unless categorised at fair value to profit or loss, in which case transaction costs are expensed immediately.

- 28 -

Notes to Annual Financial Statements f or t h e ye a r e n d e d 2 8 F e br u ar y 2 0 1 3

Fair value determination The company applies the amended IFRS 7 Financial Instruments: Disclosures, which requires additional disclosures about fair value measurement and liquidity risk. Fair value measurements relate to items recorded at fair value that are to be disclosed by source input using a three level hierarchy, by class, for all financial instruments recognised at fair value. In addition, reconciliation between the beginning and the ending balance for level 3 fair value

measurements is now required, as well as significant transfers between levels in the fair value hierarchy. Subsequent measurement After initial recognition financial assets are measured as follows:

– Loans and receivables are measured at amortised cost using the effective interest rate method based on prevailing market rates, or with the relevant

adjustments being recognised in profit or loss.

After initial recognition financial liabilities are measured at amortised cost using the effective interest rate method based on prevailing market rates with the relevant adjustments recognised in profit or loss. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial instrument to the net carrying amount of the financial asset or financial liability.

Trade and other receivables Trade and other receivables are classified as loans and receivables. Appropriate allowances for estimated irrecoverable amounts are recognised in profit

and loss when there is objective evidence that the asset is impaired. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered objective indicators that the

trade receivable is impaired. The allowance recognised is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. The carrying amount of an asset is reduced through the use of an allowance account, and the amount of the loss is recognised in profit or loss within expenses. When a trade receivable is uncollected, it is written

off against the allowance account for trade receivables. Cash and cash equivalents Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and are subject to insignificant risk of change in value. Cash and cash equivalents are classified as loans and receivables. For the purposes of the statements of cash flows, cash and cash

equivalents consist of cash and cash equivalents only. Loans receivable These financial assets are classified as loans and receivables. On loans receivable, an impairment loss is recognised in profit and loss when there is objective evidence that it is impaired. The impairment is measured as the difference between the loan’s carrying amount and the present value of estimated

future cash flows discounted at the effective interest rate computed at initial recognition. Impairment losses are reversed in subsequent periods when an increase in the loan’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the loan at the date the impairment is reversed shall not exceed the amortised cost that would have been had the impairment

not been recognised. Trade and other payables Trade and other payables are classified as other financial liabilities at amortised cost. Financial instruments at fair value through profit and loss Financial assets at fair value through profit and 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. Investments are recognised and derecognised on a trade date basis where the purchase or sale of an

investment is under a contract which terms require delivery of the investment within the timeframe established by the market concerned. Gains or losses arising from changes in the market value are included in profit or loss for the period. Listed investments are classified as held for trading. The fair value

thereof is determined by reference to the JSE Limited’s quoted ruling price at the close of business on the statement of financial position date. Revaluation surpluses or losses on equity investments are taken through to profit or loss. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term. Dividend income is recognised in profit or loss as part of revenue on the date when the right to receive payment is

established. Derecognition The derecognition of a financial instrument occurs when the group no longer controls the contractual rights or the obligation has been extinguished, which is normally the case when the instrument is sold, or all the cash flows attributable to the instrument are passed through an independent third party. Any profit

or loss on derecognition is recognised in the statement of comprehensive income.

2.16 Share capital and equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds and are taken off the share premium account.

- 29 -


2.17 Treasury shares Shares in ISA Holdings Limited are held by iSecure Pty Ltd. Shares that are not allocated to employees, are classified in shareholders’ funds as treasury shares. These shares are treated as a deduction from the issued and weighted number of shares in issue and the cost price of the shares is deducted from share capital and share premium in the statement of financial position. Dividends and capital distributions on treasury shares are eliminated on

consolidation.

2.18 Inventories Inventories consist of merchandise for resale and are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out method. When inventories are sold, the carrying values of those inventories are recognised as an expense in the period in which the related revenue is

recognised.

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

or loss occurs. The total inventories expensed during the year equate to the total cost of sales recorded in the statement of comprehensive income.

2.19 Impairment of assets The group assesses at each statement of financial position date whether there is an indication that an asset may be impaired. If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset. The recoverable amount of an asset is the higher of its fair value

less costs to sell the asset and its value in use. If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss.

An impairment loss of assets carried at cost less accumulated depreciation or amortisation is recognised immediately in profit or loss. Any impairment loss or re-valued assets are treated as a revaluation decrease. Any increase in carrying amount of an asset attributable to a reversal of an impairment loss cannot exceed the carrying amount that would have been determined had no impairment loss been previously recognised for the asset in prior periods. A

reversal of impairment loss of assets carried at cost less accumulated depreciation or amortisation is recognised immediately in profit or loss. Any reversal of an impairment loss of a re-valued asset is treated as a revaluation increase.

2.20 Provisions and contingencies

Provisions are recognised when:

– the group has a present obligation as a result of a past event; – it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and

– a reliable estimate can be made of the obligation.

Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at each statement

of financial position date.

Provisions are not recognised for any future operating losses.

Contingent assets and contingent liabilities are not recognised as a provision.

2.21 Segmental reporting

An operating segment is a distinguishable component of the group that is engaged in business activities from which it may earn revenues and incur

expenses; whose operating results are regularly reviewed by the chief decision maker and for which discrete financial information is available. The group has no separately identifiable segments that offer different products or services to that of the main business unit. All components of the group are managed jointly as they have the same technology and business strategy requirements.

3. Related party transactions

Parties are considered to be related if one party has the ability to control or exercise significant influence over the other party, in making financial or operating decisions.

Key management personnel are also regarded as related parties and relate to those persons having authority and responsibility for planning, directing, and controlling the activities of the group, directly or indirectly, including all executive and non-executive directors. Any transactions between key management personnel and the group are disclosed in these the annual financial statements.

Arms length trading transactions occur between subsidiaries and the divisions of the group.

- 30 -

Notes to Annual Financial Statements

f or t h e ye a r e n d e d 2 8 F e br u ar y 2 0 1 3

Group Company

2013 2012 2013 2012 R 000’s R 000’s R 000’s R 000’s

4. Revenue

Major classes of revenue comprise: – Turnover 50,925

62,946

-

-

– Other income (note 5) 1 29 13,500 12,320 – Finance income (note 8) 615 1,251 1,125 1,316

51,541 64,226 14,625 13,636

5. Other income

Dividends received - - 13,500 12,320 Sundry income 1 29 - -

1 29 13,500 12,320

6. Administrative expenses

Administration expenses includes: Audit fees 259 230 - - Amortisation of intangible assets 928 800 - - Depreciation on property, plant and equipment 518 246 - - Directors’ emoluments for services as directors (short term

benefits)

– directors fees (non-executive directors) 150 112 150 112 – other services are services in connection with carrying on

the affairs of the company or any company within the group (executive directors)

2,748

2,822

-

-

Profit on foreign exchange (2,298) (524) - - Profit on sale of property, plant and equipment (1) (7) Operating lease charges – rental premises 405 771

7. Employee costs

Short-term

Non-executive directors 150 112 150 112 Executive directors 2,748 2,822 - - Other staff 6,913 6,303 - - 9,811 9,237 150 112

8. Finance income

Bank interest 615 1,251 - - Amounts owing by subsidiaries - - 1,125 1,316 615 1,251 1,125 1,316

9. Finance costs

Shareholder loan - 86 - 86 Bank - 2 - 1 SARS interest 2 39 - - 2 127 - 87

- 31 -



Group Company

2013 2012 2013 2012 R 000’s R 000’s R 000’s R 000’s

10. Taxation

South African normal tax Current tax (3,683) (5,337) (273) (313)

– Current year charge (3,739) (5,337) (273) (313) – Prior year overprovision 56 - - -

- Deferred tax (note 15) 64 (46) - -

– Relating to utilisation 64 (46) - -

Total normal tax (3,619) (5,383) (273) (313) Secondary Tax on Companies (STC) - (1,183) - (1,183)

Total taxation (3,619) (6,566) (273) (1,496)

Tax reconciliation: Reconciliation between accounting profit and tax expense Accounting profit 13,074 19,426 14,475 13,437 Tax at the applicable tax rate of 28% (3,661) (5,439) (4,053) (3,762) Tax effect of adjustments on taxable income Non-tax deductable items (14) (131) - - Prior year overprovision 56 - - - Exempt income - 187 3,780 3,449 Secondary Tax on Companies (STC) - (1,183) - (1,183)

(3,619) (6,566) (273) (1,496)

Group

2013 2012

R 000’s R 000’s R 000’s R 000’s

Gross Net Gross Net

11. Earnings and headline earnings per share Reconciliation of earnings and headline earnings: Earnings attributable to ordinary shareholders 9,455 12,860

Profit on sale of property, plant and equipment 1 (1) 7 (4)

Headline earnings 9,454 12,856

Weighted average number of shares in issue (000's) 183,600 183,600 Number of shares in issue at year-end (000's) 183,600 183,600

Treasury shares held at year-end (000's) 8,993 8,993 Earnings per share (cents) 5.2 7.0 Diluted earnings per share (cents) 5.2 7.0

Headline earnings per share (cents) 5.2 7.0 Diluted headline earnings per share (cents) 5.2 7.0

- 32 -



Group Company

2013 2012 2013 2012 R 000’s R 000’s R 000’s R 000’s

12. Property, plant and equipment Land and building

Freehold land and buildings, portion 5 of erf 879 Woodmead Extension 33 Township IR Gauteng

Current year - additions at cost 10,492 - - - Current year - depreciation (137) - - -

End of year 10,355 - - -

Motor vehicles Beginning of the year - at cost 181 181 - - - accumulated depreciation (61) (41) - - - net book value 120 140 - - Current year - change in estimate - 22 - - - disposals (54) - - - - depreciation (34) (42) - - End of year 32 120 - -

Made up as follows - at cost 62 181 - - - accumulated depreciation (30) (61) - - - net book value 32 120 - -

Computer equipment Beginning of the year - at cost 1,313 1,223 - - - accumulated depreciation (1,051) (876) - - - net book value 262 347 - - Current year - additions 210 98 - - - depreciation (204) (175) - - - disposals - (8) - - End of year 268 262 - -

Made up as follows - at cost 1,507 1,313 - - - accumulated depreciation (1,239) (1051) - - - net book value 268 262 - -

Office furniture and equipment Beginning of the year - at cost 337 309 - - - accumulated depreciation (248) (219) - - - net book value 89 90 - - Current year - additions 853 28 - - - depreciation (143) (29) - -

End of year 799 89 - -

Made up as follows - at cost 1,190 337 - - - accumulated depreciation (391) (248) - - - net book value 799 89 - -

Total property, plant and equipment Beginning of the year - at cost 1,813 1,713 - - - accumulated depreciation (1,360) (1,136) - -

- net book value 471 577 - - Current year - disposals (54) (8) - - - additions 11,555 126 - - - depreciation (518) (246) - - - change in estimate - 22 - -

End of year 11,454 471 - -

Made up as follows - at cost 13,250 1,831 - - - accumulated depreciation (1,796) (1,360) - -

- net book value 11,454 471 - -

- 33 -



Group Company

2013 2012 2013 2012 R 000’s R 000’s R 000’s R 000’s

13. Intangible assets

Trademarks Beginning of the year - at cost 6,394 6,394 - - - accumulated amortisation (2,553) (1,913) - - - net book value 3,841 4,481 - - Current year - amortisation (640) (640) - - End of year 3,201 3,841 - -

Made up as follows - at cost 6,394 6,394 - - - accumulated amortisation (3,193) (2,553) - - - net book value 3,201 3,841 - -

Intangible assets under development Beginning of the year - at cost - - - - - net book value - - - - Current year - additions 324 389 - - - transferred to computer

software internally generated (324) (389) - -

End of year - - - -

Computer software internally generated Beginning of the year - at cost 1,505 1,116 - - - accumulated amortisation (797) (637) - - - net book value 708 479 Current year - transferred 324 389 - - - amortisation (288) (160) - - End of year 744 708 - -

Made up as follows - at cost 1,829 1,505 - - - accumulated amortisation (1,085) (797) - - - net book value 744 708 - -

Total intangible assets Beginning of the year - at cost

- accumulated amortisation 7,899

(3,350)

7,510 ( 2 ,550)

- -

- -

- net book value 4,549 4,960 - - Current year - additions 324 389 - - - amortisation (928) (800) - -

End of year 3,945 4,549 - -

Made up as follows - at cost 8,223 7,899 - - - accumulated amortisation (4,278) (3,350) - -

- net book value 3,945 4,549 - -

Trademarks relate to the registered ISA trademark. There is no apparent legal or other restrictive use of the

trademarks or risk of technical or other obsolescence. Given the strategic importance of the trademarks to the future sustainability of the group, the group’s intention is

to continue to use the trademarks.

- 34 -



Group Company

2013 2012 2013 2012 R 000’s R 000’s R 000’s R 000’s

Intangible assets (continued) Impairment The directors believe that no impairment is necessary for

the current reporting period.

14. Investments in subsidiaries

Shares at cost - - 1 1

Directors’ valuation of investments at fair value This valuation is based on group market value less net tangible assets. - - 83,000 101,000

Investments in subsidiaries relate to the 100% shareholding in Information Security Architects Pty Ltd, which was held during the entire 2012 and 2013 financial

years. The significant change in the directors’ valuation is as a result of ISA Holdings Limited’s share price being

78c at the close of business on 29 February 2012, compared to 67c on 28 February 2013.

15. Deferred Tax Beginning of the year 182 228 - - Created/(Utilised) during the year 64 (46) - - End of the year 246 182 - -

Deferred tax asset 246 182 - - Net deferred tax asset 246 182 - -

Made up as follows: - payment receipts in advance 429 341 - - - relating to assets (242) (232) - - - provisions 59 73 - -

246 182 - -

16. Cash and cash equivalents

Cash and cash equivalents consist of: 24,250 42,733 - -

– Cash on hand 1 1 - - – Bank balances 12,244 22,104 - -

– Short-term deposits 12,005 20,628 - -

Cash and cash equivalents earn interest at floating rates based on daily bank deposit rates. The fair value of the cash and cash equivalents for the group is equal to the

amount stated above.

Foreign bank balances included within cash and cash equivalents

– USD ($’000) 1,134 1,656 - - – GBP (£’000) 133 80 - - – Euro (€’000) 7 7 - - The group only deposits cash with major banks with high

quality credit standing.

- 35 -


Group Company

2013 2012 2013 2012

R 000’s R 000’s R 000’s R 000’s

17. Inventories

Goods held for resale Inventories 80 - - -

18. Loans to subsidiaries Opening balance - - 18,386 19,932 Net movement for the year - - 762 (1,546)

Closing balance - - 19,148 18,386

These loans to subsidiaries are unsecured, bear interest at market related rates and have no fixed repayment terms.

Credit quality of loans The credit quality of loans receivable can be assessed by

reference to historical information about counterparty default rates. There have been no defaults in the past, the loans are not past due .

The maximum exposure to credit risk is the fair value of the

loans shown above. All loans receivable are classified as loans and receivables. As these loans have no fixed term of repayment, and interest is levied at market related rates, the

carrying amount approximates the fair value.

- 36 -



Group Company

2013 2012 2013 2012 R 000’s R 000’s R 000’s R 000’s

19. Trade and other receivables

Trade debtors 10,177 4,043 - -

- Trade receivables 10,211 4,043 - - - Allowance for impairment (34) - - -

Loans to employees 299 450 - -

Financial instruments 10,476 4,493 - - Prepayments 73 - - -

10,549 4,493 - -

The credit period allowed on sales is 30 days from statement. No interest is charged on overdue debtors. One customer exceeded more than 15% of the total balance of trade debtors

at year-end and paid the balance due after year end.

Trade and other receivables analysis Neither past due nor impaired 6,941 3,590 - - Past due but not impaired 3,236 453 - -

60 days 2,975 421 - - 90 days 106 32 - - 120 days and over 155 - - -

Past due and impaired 34 - - -

120 days and over 34 - - -

The group has provided for a small portion of these debtors as

there has not been a significant change in the credit quality and the amounts are still considered recoverable. All accounts over 60 days with no activity on the account were assessed on an

account by account basis for possible impairment. Amounts that would be charged to a debtors allowance for doubtful debts

account are generally written-off when there is no expectation of recovering additional cash. Trade receivables terms range between 30 and 60 days. The trade receivables that extend

beyond these terms are due to numerous reasons, however they are monitored closely. The credit terms of receivables

neither past due nor impaired have not been renegotiated during the year.

Credit quality of trade and other receivables The credit quality of trade and other receivables that are neither impaired nor past due date can be assessed by reference to

historical debtors payments and terms. Due to the short-term nature of trade receivables, their carrying amounts are

considered to approximate their fair value.

The movement in the allowance for impairment in respect of trade receivables during the year was as follows:

Impairment loss recognised 34 - - -

Balance at end of the year 34 - - -

- 37 -


Group Company

2013 2012 2013 2012 R 000’s R 000’s R 000’s R 000’s

20. Share capital and share premium

Authorised share capital at a par value of one cent each 500,000,000 ordinary shares 5,000 5,000 5,000 5,000

Issued share capital at a par value of one cent each Balance at beginning of year: 183,600,001 (2012: 183,600,000) ordinary shares 1,836 1,836 1,926 1,926

Movement in current year: Nil (2012: 1) treasury share - - - - Balance at end of year: 183,600,001 (2012: 183,600,001)

ordinary shares 1,836 1,836 1,926 1,926

Total treasury shares held by group: 8,992,592 (2012: 8,992,592)

Share premium Balance at beginning of year 11,606 9,658 17,972 14,076 Capital reduction by way of a distribution to shareholders of nil

(2012: 1.0) cents per ordinary share. -

(1,948)

-

(1,926)

EmpowerGroup transaction (refer to note 21) - 3,896 - 3,896 Balance at end of year 11,606 11,606 17,972 16,046

Total share capital and share premium 13,442 13,442 17,972 17,972

No treasury shares were purchased during the current financial year and therefore there was no effect on the weighted average number of shares in issue during the period.

Dividends and capital distributions on treasury shares are eliminated on consolidation. No ordinary shares were issued

during the current period. Any treasury shares that are purchased are bought and held by a subsidiary of the group.

21. Interest bearing liabilities Shareholder’s loan Opening balance - 3,810 - 3,810

Movement for the year – interest accrued - 86 - 86 Transfer to share premium - (3,896) - (3,896)

Closing balance - - - -

EmpowerGroup Technology Pty Ltd was obliged, on 30 June

2011, to subscribe for one additional ordinary share in ISA Holdings Limited for an amount of R 2.5 million plus interest, if

the weighted average traded price per ISA Holdings Limited share was in excess of 39.234 cents per share, less any dividends paid by ISA in the preceding 5 years, as at 30 June

2011. This obligation was subject to various terms per the Notice to Shareholders dated 5 September 2006. EmpowerGroup Technology Pty Ltd has already paid the

company for this obligation. This shareholder’s loan attracted interest at market related rates. This transaction was concluded

during the previous financial year and the balance of the loan account was transferred to share premium.

- 38 -


Group Company

2013 2012 2013 2012 R 000’s R 000’s R 000’s R 000’s

22. Trade and other payables

Trade payables 4,146 2,754 - - Other payables 468 429 457 429

Financial instruments 4,614 3,183 457 429 VAT

449

233

-

-

Employee costs due 270 269 - -

Revenue received in advance 1,531 1,218 - -

6,864 4,903 457 429

Trade and other payables are measured at amortised cost. Trade and other payables are non-interest bearing and are

normally settled on 30 to 90 day terms. Due to the short-term nature of trade payables, their carrying amounts are

considered to approximate their fair value.

23. Provisions

Leave pay Beginning of the year 270 379 - - Arising during the year 176 270 - -

Utilised during the year (270) (379) - -

End of year 176 270 - -

These provisions are recognised at year end for the best estimate of the costs associated with leave to be settled within

12 months.

- 39 -


Group Company

2013 2012 2013 2012 R 000’s R 000’s R 000’s R 000’s

24. Cash generated from operations

Reconciliation of profit before taxation to cash generated from operations

Profit from ordinary activities before taxation 13,074 19,426 14,475 13,437 Adjustment for: (1,525) (740) (14,625) (13,549)

– Interest received (615) (1,251) (1,125) (1,316) – Finance charges 2 127 - 87 – Dividends received - - (13,500) (12,320) – Profit on exchange rate changes on cash (2,298) (524) - - – Profit on sale of property, plant and equipment (1) (7) - - – Decrease in provisions (59) (109) - - – Depreciation and amortisation 1,446 1,024 - -

11,549 18,686 (150) (112) Working capital changes (4,209) 845 28 199

– Increase in inventories (80) - - - – (Increase)/decrease in trade and other receivables (6,090) 2,916 - - – Increase/(decrease) in trade and other payables 1,961 (2,071) 28 199

Cash generated from operations 7,340 19,531 (122) 87

25. Tax paid

Net tax payable at beginning of the year (235) 210 14 108 Amounts charged per profit/loss (excluding deferred tax) (3,683) (6,520) (273) (1,496)

Taxation receivable at end of the year (139) (14) - (14) Taxation payable at end of the year - 249 - -

(4,057) (6,075) (259) (1,402)

26. Dividends paid

Dividend number 9, comprising of an ordinary dividend of 7.0 cents per ordinary share, was declared to all shareholders recorded in the shareholders register on 20 July 2012 and paid

on 23 July 2012.

Total dividends 12,852 11,252 13,482 11,941

Final dividends declared per ordinary shares 5.2 7.0 5.2 7.0

Total dividends relating to income for the year 9,547 12,852 10,015 13,481

27. Contingent Liabilities

The group currently has no contingent liabilities or any financial guarantees that have been made on behalf of the group.

28. Commitments The following operating lease rental commitment has been entered into by the group in relation to premises:

Payable within one year - 130 - -

Operating lease payments represent rentals payable by the

group for office properties.

- 40 -



29. Risk management The group’s activities expose it to a variety of risks: capital risk, personnel risk, liquidity risk, market risk (including currency risk and interest rate risk) and credit risk. The group’s risk management policies are established to identify and analyse the risks faced by the group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly by the board to reflect changes in

market conditions and the group’s financial activities. The group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects of the group’s financial performance. Risk management is carried out by the financial department under policies approved by the board. The financial department identifies, evaluates and manages financial risk. There have been no major changes in the

group’s risk to which the group has been exposed from the prior year, or in management’s strategies in managing these risks. Management do not consider there to be any significant concentration of any of the above risks in the business.

Capital risk The board’s policy is to retain sufficient capital to provide for the future development of the business and to maintain investor, creditor and market

confidence. The board monitors both the demographic spread of shareholders as well as, the return on capital, which the group defines as shareholders equity and the level of distributions to shareholders. The methods of distribution include dividends and a return of share premium. The levels of distribution takes into account the prevailing market conditions and future cash requirements of the business.

From time to time the group purchases its own shares on the market; the timing of these purchases depends on market prices. Buy and sell decisions are made on a specific transaction basis. The group does not have a defined buy-back plan.

There were no changes in the group’s approach to capital management during the year.

Neither the company nor any of its subsidiaries are exposed to externally imposed capital requirements.

2013 R’000

2012

R’000

Total equity 43,634 47,020

Cash and cash equivalents 24,250 42,733

Capital 67,884 89,753

Capital 67,884 89,753

Borrowings - -

Overall Financing 67,884 89,753

Capital-to-overall financing ratio 1,00 1,00

Personnel risk The group’s future performance depends in large part on the continued service of their key personnel, including particularly the long standing executive directors who are involved in strategic and daily activities. None of the long standing executive directors are bound by an employment agreement requiring

service for any defined period of time.

Liquidity risk The group’s liquidity risk relates to ensuring that there are sufficient funds available to cover future commitments. The group manages liquidity risk through an ongoing review of such commitments and credit facilities. The group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows.

The table below analyses the group’s financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal

their carrying balances as the impact of discounting is not significant.

As at 28 February 2013

Less than 1 year R’000

1-5 years R’000

5+ years R’000

Total R’000

Trade and other payables 4,603 - - 4,603

4,603 - - 4,603

As at 29 February 2012 Less than 1 year

R’000 1-5 years

R’000 5+ years

R’000 Total

R’000

Trade and other payables 3,183 - - 3,183

3,183 - - 3,183

Market risk Market risk is the risk that changes in market prices, which include risks associated with currency risk as well as interest rate risks, detailed below. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.

- 41 -



Currency risk The group incurs currency risk as a result of transactions which are denominated in a currency other than the individual group companies’ functional currency for purchases and sales. The currencies giving rise to currency risks, in which the companies’ primarily deal, are EUR, GBP and USD. The group reviews its foreign currency exposure on a regular basis.

Group Group 2013 2013 2012 2012

USD EUR USD EUR

’000 ’000 ’000 ’000

Trade and other payables 229 118 132 67 Trade and other receivables (46) - (93) -

Net exposure 183 118 39 67

The following exchange rates were applied during the year: Average rate Reporting Date Spot Rate 2013 2012 2013 2012

EUR 10.90 10,20 11.80 10,28

USD 8.43 7,38 9.02 7,70 GBP 13.37 11,79 13.70 11,90

At year end foreign currency based bank balances were as follows: Group 2013 2012

‘000 ‘000

EUR 7 7 USD 1,134 1,656

GBP 133 80

Sensitivity analysis At 28 February 2013, if the Rand had strengthened or weakened by 15% (2012: 15%) against the USD with all variables held constant, post-tax profit for the year would have increased or decreased by R 927,000(2012: R 80,000). Similarly, if the Rand had strengthened or weakened by 15% (2012: 15%)

against the EUR with all variables held constant, post-tax profit for the year would have increased or decreased by R 142,000 (2012: R 103,000). Lastly, if the Rand had strengthened or weakened by 15% (2012: 15%) against the GBP with all variables held constant, post-tax profit for the year would have increased or decreased by R 196,000 (2012: R 145,000).

Interest rate risk The sensitivity analysis below presents the interest rate risks in accordance with IFRS 7. It has been determined based on the exposure to interest rates for financial instruments at the statement of financial position date and shows the effects of changes in market interest rates on interest payments, interest income and expenses and if appropriate, shareholders’ equity. For variable rate liabilities, the analysis is prepared assuming the average liability was

outstanding for the whole year. A 200 basis point increase or decrease represents management’s assessment of the reasonable possible change in interest rate.

During the year ended 28 February 2013, if interest rates on Rand-denominated balances had increased/decreased by 200 basis points with all other variables held constant, the interest income for the year would have been affected by R266,000 (2012: R250,000) on group interest higher/lower, mainly as

a result of higher/lower interest income on floating rate balances.

Credit risk Credit risk relates mainly to cash deposits, cash equivalents and trade debtors. The group only deposits cash with major banks with high quality credit standing and limits exposure to any counter-party. Management evaluates credit risk relating to customers on an ongoing basis. If customers are independently rated, these ratings are considered. Otherwise, if there is no independent rating, management assesses the credit quality of the customer,

taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board. The utilisation of credit limits is regularly monitored.

At year-end, there were no significant concentrations of credit risk.

The maximum exposure of credit risk is represented by the carrying amount of each financial asset in the statement of financial position.

Financial assets exposed to credit risk were as follows: 2013 2012

R‘000 R‘000

Trade receivables 10,211 4,043

Other receivables 299 450 Cash and cash equivalents 24,250 42,733

- 42 -



Risk management (continued) Group Company

Analysis of financial instruments by category

2013 R’000

2012 R’000

2013 R’000

2012 R’000

Loans and receivables 34,760 47,226 19,148 18,386

- Trade and other receivables 10,510 4,493 - - - Cash and cash equivalents 24,250 42,733 - - - Loans to subsidiaries - - 19,148 18,386

Financial liabilities measured at amortised cost (6,853) (3,183) (457) (429)

- Trade and other payables (6,853) (3,183) (457) (429)

30. Related parties

Subsidiaries During the year the company and its subsidiaries, in the ordinary course of business, entered into transactions with related parties. These transactions occurred under terms that were no less favourable than those arranged with third parties. None of these transactions were with companies outside the

group. Intergroup transactions have been eliminated on consolidation. Details of the group’s subsidiaries are as follows:

– Information Security Architects Pty Ltd – Information Security Architects MSS Pty Ltd

– iSecure Pty Ltd

Key management personnel Key management personnel are those having the responsibility for planning, directing and controlling activities directly or indirectly, including any director of that entity. Only the directors are considered to be key management personnel for the group. Details relating to directors’ emoluments are disclosed on page 19 as well as note 7 to the annual financial statements.

Related party balances Outstanding balances are detailed in note 18 and at year end were unsecured and bear interest at market related rates.

Other entities in which directors have a significant interest Alan Naidoo and Andrew Maren have a significant interest in EmpowerGroup Technology Pty Ltd.

Statements and interpretations issued and not yet effective relevant to the Group

Standard or interpretation

Number Name

Description Effect on

Group

Effective for accounting periods

beginning on or after

IFRS 7 Financial Instruments:

Disclosures

Amendment for offsetting financial assets and financial

liabilities disclosure

Effect being

investigated 1 January 2013

IFRS 9 Financial Instruments Addresses the initial measurement and classification of financial assets and it replaces the entire IAS 39.

Effect being investigated

1 January 2015

IFRS 10 Consolidated Financial

Statements

It introduces a new, principle-based definition of control which will apply to all invites to determine the scope of

consolidation.

Effect being


IFRS 12 Disclosure of Interests in Other Entities

It combines the disclosure requirements for subsidiaries, joint arrangements, associates and structured entities within a comprehensive disclosing standard.


1 January 2013

IFRS 13 Fair Value Measurement It specifies how an entity should measure fair value and

disclose fair value information.

Effect being


IAS 19 Employee Benefits The main changes improve the comparability and understand ability of changes arising from defined benefit plans.


1 January 2013

IAS 27 Separate Financial

Statements

Consequential amendments resulting from the issue of

IFRS 10,11 and 12. Consolidation requirements now contained in IFRS 10.

Effect being


IAS 27 Financial Instruments presentation

Requirement to account for interests in investment entities at fair value in accordance with IAS 39 or IFRS 9.


1 January 2015

- 43 -

Shareholders’ analysis

As at 22 February 2013

Size of shareholding # of shares % of shares # of shareholders % of shareholders

1 to 100,000 20,432,451 10.6% 1,071 90.0%

100,001 to 1,000,000 23,963,443 12.4% 108 9.1% 1,000,001 and over 148,196,699 77.0% 11 0.9%

Total* 192,592,593 100.0% 1,190 100.0%

Category of shareholding Companies or trusts 103,363,130 53.7% 108 9.1%

Nominee companies or banks 7,226,531 3.8% 17 1.4% Private individuals 81,795,020 42.4% 1,055 89.2% Other corporate bodies 207,912 0.1% 4 0.3%

Total* 192,592,593 100.0% 1,190 100.0%

Type of shareholder

Non-public shareholders 133,529,617 69.3% 9 0.7% Public shareholders 59,062,976 30.7% 1,174 99.3%

Total* 192,592,593 100.0% 1,190 100.0%

Breakdown of non-public shareholders

Directors 36,286,233 18.8% Directors’ associates 88,250,791 45.9% Employees and treasury shares 9,142,593 4.6%

Total non-public shareholders 133,529,617 69.3%

Major shareholders (greater than 5%)

EmpowerGroup Technology Pty Ltd 62,592,594 32.5% Interactive Trading 750 Pty Ltd 23,766,385 12.3% Philip Green 21,898,435 11.4%

Clifford Katz 14,037,798 7.3%

Total greater than 5% 122,295,212 63.5%

*= These shares include the treasury shares amounting to 8,992,592 shares.

- 44 -

Corporate information

Registered Office Physical address Block 9, Pinewood Office Park, 33 Riley Road, Woodmead, Sandton, South Africa

Postal address P O Box 781667, Sandton, 2146, South Africa Telephone +27 (0) 11 032-7799

Facsimile +27 (0) 11 032-7788 Registration 1998/009608/06 Share code ISA

ISIN ZAE000067344 E-mail [email protected] Website www.isaholdings.co.za

Company Secretary Name Acorim Proprietary Limited Physical address 2nd Floor, North Block, Hyde Park Office Tower, Corner 6th Road and Jan Smuts Avenue, Hyde Park, 2196,

South Africa

Postal address P O Box 41480, Craighall, 2024, South Africa Telephone +27 (0) 11 325-6363

Facsimile +27 (0) 11 325-6362 Transfer Secretary Name Link Market Services South Africa Proprietary Limited Physical address 13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein, 2004, South Africa Postal address P O Box 4844, Johannesburg, 2000, South Africa

Telephone +27 (0) 11 713-0800

Auditors Name Mazars, Registered Auditors Physical address 2nd Floor, Mazars House, 5 St David’s Place Parktown, 2193, South Africa

Postal address P O Box 6697, Johannesburg, 2000, South Africa Bankers Name Absa Private Bank Limited Physical address Private Bank Family Office Sandton, 1st Floor, Morningside Building, Sandton, South Africa

Postal address P O Box 786000, Sandton, 2146, South Africa Name Investec Bank Limited

Physical address 100 Grayston Drive, Sandown, Sandton, 2196, South Africa Postal address P O Box 785700, Sandton, 2146, South Africa

Designated Adviser Name Merchantec Capital

Physical address 2nd Floor, North Block, Hyde Park Office Tower, Corner 6th Road and Jan Smuts Avenue, Hyde Park, 2196, South Africa

Postal address P O Box 41480, Craighall, 2024, South Africa

Directors (executive) Clifford Katz (Chief Executive Officer)

Johan du Toit (Financial Director) Philip Green (Chief Technical Officer)

Directors (non-executive) Denzil Perreira (Independent Board chairperson) Desmond Seaton (Independent Audit Committee chairperson)

Thapeli Matsabu (Independent) Alan Naidoo (Social and Ethics Committee chairperson) Andrew Maren

Level of assurance The group annual financial statements of ISA Holdings Limited have been audited and prepared in accordance with the requirements of the Companies Act (Act 71 of 2008).

Preparer of Annual Report Johan du Toit (CA) SA Date issued 24 May 2013

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Notice of Annual General Meeting

Incorporated in the Republic of South Africa, Registration number: 1998/009608/06; Share code: ISA; ISIN number: ZAE 000067344

(“ISA” or “the Company” or “the Group”)

If you are in any doubt as to what action you should take in respect of the following resolutions, please consult your Central Securities Depository

Participant ("CSDP"), broker, banker, attorney, accountant or other professional adviser immediately.

Notice is hereby given that the Annual General Meeting of shareholders of ISA Holdings Limited will be held at 10:00 on Wednesday, 26 June 2013 at the

Company’s registered office situated at Block 9, Pinewood Office Park, 33 Riley Road, Woodmead, Sandton, for the purpose of considering, and, if deemed

fit, passing, with or without modification, the resolutions set out hereafter.

The board of directors of the Company (“the Board”) has determined that, in terms of section 62(3)(a), as read with section 59 of the Companies Act, 2008

(Act 71 of 2008), as amended, the record date for the purposes of determining which shareholders of the Company are entitled to participate in and vote at

the Annual General Meeting is Friday, 21 June 2013. Accordingly, the last day to trade ISA Holdings Limited shares in order to be recorded in the Register

to be entitled to vote will be Friday, 14 June 2013.

ORDINARY BUSINESS Percentage voting rights – ordinary resolutions Ordinary resolutions numbers 1 to 12 (with the exception of ordinary resolution number 11), contained in this notice of Annual General Meeting require the

approval of a minimum of 50% of the votes exercised on the resolutions by shareholders present or represented by proxy at the Annual General Meeting in order for the resolutions to be adopted. . Ordinary resolution number 11 requires the approval of a minimum of 75% of the votes exercised on the resolutions by shareholders present or represented by proxy at the Annual General Meeting in order for the resolutions to be adopted.

1 ORDINARY RESOLUTION 1: ADOPTION OF THE ANNUAL FINANCIAL STATEMENTS “RESOLVED that the annual financial statements of the company for the year ended 28 February 2013, including the reports of the directors, audit

committee and auditors, be and are hereby received and adopted.”

2 ORDINARY RESOLUTION 2: RE-ELECTION OF RETIRING DIRECTOR – ANDREW MAREN “RESOLVED that Andrew Maren, in terms of Article 26.6 of the Company’s Memorandum of Incorporation, retires by rotation at this Annual General Meeting but, being eligible to do so, offers himself for re-election be and is hereby re-elected as a non-executive director of the company.”

A brief curriculum vitae of Andrew Maren is set out on page 5 of the annual report of which this notice forms part.

3 ORDINARY RESOLUTION 3: RE-ELECTION OF RETIRING DIRECTOR – ALAN NAIDOO “RESOLVED that Alan Naidoo, in terms of Article 26.6 of the Company’s Memorandum of Incorporation, retires by rotation at this Annual General Meeting but, being eligible to do so, offers himself for re-election be and is hereby re-elected as a non-executive director of the company.” A brief curriculum vitae of Alan Naidoo is set out on page 5 of the annual report of which this notice forms part.

4 ORDINARY RESOLUTION 4: APPOINTMENT OF DIRECTOR – JOHAN DU TOIT “RESOLVED that the appointment by the board of directors of Johan du Toit as an executive director and financial director of the company with effect from 7 February 2013 be and is hereby confirmed.” A brief curriculum vitae of Johan du Toit is set out on page 5 of the annual report of which this notice forms part.

5 ORDINARY RESOLUTION 5: APPOINTMENT AS A MEMBER AND CHAIRMAN OF THE AUDIT COMMITTEE – DESMOND SEATON “RESOLVED that Desmond Seaton is hereby appointed as a member and chairman of the audit committee until the next Annual General Meeting of

the company.” A brief curriculum vitae Desmond Seaton is set out on page 5 of the annual report of which this notice forms part.

6 ORDINARY RESOLUTION 6: APPOINTMENT AS A MEMBER OF THE AUDIT COMMITTEE – DENZIL PERREIRA “RESOLVED that Denzil Perreira is hereby appointed as a member of the audit committee until the next Annual General Meeting of the company.” A brief curriculum vitae of Denzil Perreira is set out on page 5 of the annual report of which this notice forms part.

7 ORDINARY RESOLUTION 7: APPOINTMENT AS A MEMBER OF THE AUDIT COMMITTEE – THAPELI MATSABU “RESOLVED that Thapeli Matsabu is hereby appointed as a member of the audit committee until the next Annual General Meeting of the company.”

A brief curriculum vitae of Thapeli Matsabu is set out on page 5 of the annual report of which this notice forms part.

8 ORDINARY RESOLUTION 8: RE-APPOINTMENT OF AUDITORS AND FIXING OF REMUNERATION “RESOLVED that the audit committee be and is hereby authorised to reappoint Mazars as the auditors of the company and its subsidiaries in accordance the Act, with Munesh Patel, being the individual registered auditor who has undertaken the audit of the Company for the ensuing financial year, which auditors shall hold their office until the conclusion of the company’s next Annual General Meeting and, in addition, the audit committee be

and is hereby authorised to determine and pay the auditors’ remuneration.”

9 ORDINARY RESOLUTION 9: NON-EXECUTIVE DIRECTORS’ REMUNERATION FOR THE YEAR ENDED 28 FEBRUARY 2013 “RESOLVED that the remuneration of the non-executive directors for the year ended 28 February 2013 as set out in the Directors’ Report on page 19 of the annual report, of which this notice forms part, be and is hereby confirmed.”

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10 ORDINARY RESOLUTION NUMBER 10: CONTROL OF AUTHORISED BUT UNISSUED ORDINARY SHARES “RESOLVED that the authorised but unissued ordinary shares in the capital of the Company be and are hereby placed under the control and authority

of the directors of the Company and that the directors be and are hereby authorised and empowered to allot and issue all or any of such ordinary shares, or to issue any options in respect of all or any of such ordinary shares, to such person/s on such terms and conditions and at such times as

the directors may from time to time and in their discretion deem fit, subject to the provisions of sections 38 and 41 of the Companies Act, 2008 (Act 71 of 2008), as amended, the Memorandum of Incorporation of the Company and the Listings Requirements of JSE Limited, as amended from time to time.”

11 ORDINARY RESOLUTION NUMBER 11: APPROVAL TO ISSUE ORDINARY SHARES, AND TO SELL TREASURY SHARES, FOR CASH “RESOLVED that the directors the company and/or any of its subsidiaries from time to time be and are hereby authorised, by way of a general

authority, to

– allot and issue, or to issue any options in respect of, all or any of the authorised but unissued ordinary shares in the capital of the company;

and/or – sell or otherwise dispose of or transfer, or issue any options in respect of, ordinary shares in the capital of the company purchased by

subsidiaries of the company,

for cash, to such person/s on such terms and conditions and at such times as the directors may from time to time in their discretion deem fit, subject

to the Companies Act, 2008 (Act 71 of 2008), the Memorandum of Incorporation of the Company and its subsidiaries and the Listings Requirements of JSE Limited from time to time.

The JSE Listings Requirements currently provide, inter alia, that:

– the securities which are the subject of the issue for cash must be of a class already in issue, or where this is not the case, must be limited to

such securities or rights that are convertible into a class already in issue; – any such issue may only be made to "public shareholders" as defined in the JSE Listings Requirements and not to related parties;

– the number of ordinary shares issued for cash shall not in any one financial year in the aggregate exceed 50% (fifty percent) of the number of issued ordinary shares. The number of ordinary shares which may be issued shall be based, inter alia, on the number of ordinary shares in issue, added to those that may be issued in future (arising from the conversion of options/convertibles) at the date of such application, less any

ordinary shares issued, or to be issued in future arising from options/convertible ordinary shares issued during the current financial year; plus any ordinary shares to be issued pursuant to a rights issue which has been announced, is irrevocable and is fully underwritten, or an acquisition which has had final terms announced;

– this general authority will be valid until the earlier of the company's next Annual General Meeting or the expiry of a period of 15 (fifteen) months from the date that this authority is given;

– an announcement giving full details, including the impact on net asset value per share, net tangible asset value per share, earnings per share and headline earnings per share and, if applicable, diluted earnings and headline earnings per share, will be published when the company has issued ordinary shares representing, on a cumulative basis within 1 (one) financial year, 5% (five percent) or more of the number of ordinary

shares in issue prior to the issue; – in determining the price at which an issue of ordinary shares may be made in terms of this authority, the maximum discount permitted will be

10% (ten percent) of the weighted average traded price on the JSE Limited of the ordinary shares over the 30 (thirty) business days prior to the date that the price of the issue is agreed between the issuer and the party subscribing for the securities; and

– whenever the company wishes to use ordinary shares, held as treasury stock by a subsidiary of the company, such use must comply with the

JSE Listings Requirements as if such use was a fresh issue of ordinary shares."

Under the JSE Listings Requirements, ordinary resolution number 11 must be passed by a 75% (seventy five percent) majority of the votes cast in

favour of the resolution by all members present or represented by proxy at the Annual General Meeting.

12 ORDINARY RESOLUTION NUMBER 12: SIGNATURE OF DOCUMENTS “RESOLVED that each director the company be and is hereby individually authorised to sign all such documents and do all such things as may be necessary for or incidental to the implementation of those resolutions to be proposed at the Annual General Meeting convened to consider the

resolutions which are passed, in the case of ordinary resolutions, or are passed and registered by the Companies and Intellectual Property Commission, in the case of special resolutions.”

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SPECIAL BUSINESS Percentage voting rights – special resolutions Special resolutions numbers 1 to 4, contained in this notice of Annual General Meeting require the approval of a minimum of 75% of the votes exercised on the resolutions by shareholders present or represented by proxy at the Annual General Meeting in order for the resolutions to be adopted. Shareholders will

be requested to consider and, if deemed fit, to pass, with or without modification, the following resolutions:

13 SPECIAL RESOLUTION 1: NON-EXECUTIVE DIRECTORS’ REMUNERATION “RESOLVED that, in terms of the provisions of sections 66(9) of the Companies Act, 2008 (Act 71 of 2008), as amended, the annual remuneration payable to the non-executive directors of the company for their services as directors of the company for the financial year ending 28 February 2014, be and is hereby approved as follows:

Type of fee Proposed fee in ZAR for the year ending 28 February 2014

Board Chairperson – D Perreira R 56,250

Audit Committee Chairperson and board member – D Seaton R 56,250

Board member – T Matsabu R 37,500

Explanatory note

In terms of section 66(9) of the Companies Act, a company is required to pre-approve the payment of remuneration to non-executive directors for their services as directors for the ensuing financial year by means of a special resolution passed by shareholders of the Company within the previous two years.

14 SPECIAL RESOLUTION 2: GENERAL APPROVAL TO ACQUIRE SHARES “RESOLVED, by way of a general approval that the company and/or any of its subsidiaries from time to time be and are hereby authorised to acquire ordinary shares in the company in terms of sections 46 and 48 of the Companies Act, 2008 (Act 71 of 2008), as amended, the Memorandum of Incorporation of the company and its subsidiaries and the Listings Requirements of JSE Limited, as amended from time to time.

The JSE Listings Requirements currently provide, inter alia, that:

– the acquisition of the ordinary shares must be effected through the order book operated by the JSE trading system and done without any prior understanding or arrangement between the company and the counter party;

– this general authority shall only be valid until the earlier of the company's next Annual General Meeting or the expiry of a period of 15 (fifteen)

months from the date of passing of this special resolution; – in determining the price at which the company's ordinary shares are acquired in terms of this general authority, the maximum premium at which

such ordinary shares may be acquired will be 10% (ten percent) of the weighted average of the market value at which such ordinary shares are traded on the JSE, as determined over the 5 (five) business days immediately preceding the date on which the transaction is effected;

– at any point in time, the company may only appoint one agent to effect any acquisition/s on its behalf;

– the acquisitions of ordinary shares in the aggregate in any one financial year may not exceed 20% (twenty percent) of the company's issued ordinary share capital;

– the company may only effect the repurchase once a resolution has been passed by the board of directors of the company confirming that the

board has authorised the repurchase, that the company has passed the solvency and liquidity test and that since the test was done there have been no material changes to the financial position of the Group;

– an announcement will be published once the company has cumulatively repurchased 3% (three percent) of the number of the ordinary shares in issue at the time this general authority is granted ("initial number"), and for each 3% (three percent) in aggregate of the initial number acquired thereafter.”

Explanatory note

The purpose of this special resolution number 2 is to obtain an authority for, and to authorise, the company and the company's subsidiaries, by way

of a general authority, to acquire the company's issued ordinary shares.

It is the intention of the directors of the company to use such authority should prevailing circumstances (including tax dispensations and market

conditions) in their opinion warrant it.

14.1 Other disclosure in terms of Section 11.26 of the JSE Listings Requirements The JSE Listings Requirements require the following disclosure, which are contained in the annual report of which this notice forms part:

directors and management – page 5; major shareholders of the company – page 43; directors' interests in securities – page 18; share capital of the company – note 20 on page 37; and litigation statement – page 18 .

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14.2 Material change There have been no material changes in the affairs or financial position of the company and its subsidiaries since the company’s financial year end

and the date of this notice.

14.3 Directors' responsibility statement The directors, whose names are given on page 5 of the annual report of which this notice forms part, collectively and individually accept full

responsibility for the accuracy of the information pertaining to special resolution number 2 and certify that to the best of their knowledge and belief

there are no facts in relation to special resolution number 2 that have been omitted which would make any statement in relation to special resolution

number 2 false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that special resolution number 2

together with this notice contains all information required by law and the JSE Listings Requirements in relation to special resolution number 2.

14.4 Adequacy of working capital At the time that the contemplated repurchase is to take place, the directors of the Company will ensure that, after considering the effect of the

maximum repurchase and for a period of twelve months thereafter:

– the Company and its subsidiaries will be able to pay their debts as they become due in the ordinary course of business;

– the consolidated assets of the Company and its subsidiaries, fairly valued in accordance with International Financial Reporting Standards, will be in excess of the consolidated liabilities of the Company and its subsidiaries;

– the issued share capital and reserves of the Company and its subsidiaries will be adequate for the purpose of the ordinary business of the

Company and its subsidiaries; and – the working capital available to the Company and its subsidiaries will be sufficient for the Group’s requirements.

The Company may not enter the market to proceed with the repurchase until its Designated Adviser, Merchantec Capital, has discharged of all of its

responsibilities in terms of the JSE Listings Requirements insofar as they apply to working capital statements for the purposes of undertaking an

acquisition of its issued ordinary shares.

15 SPECIAL RESOLUTION 3: FINANCIAL ASSISTANCE FOR SUBSCRIPTION OF SECURITIES

“RESOLVED that, as a special resolution, in terms of section 44 of the Companies Act, 2008 (Act 71 of 2008) (“Companies Act”), the shareholders of the company”) hereby approve of the company providing, at any time and from time to time during the period of two years commencing on the date of this special resolution number 3, financial assistance by way of a loan, guarantee, the provision of security or otherwise, as contemplated in section

44 of the Companies Act, to any person for the purpose of, or in connection with, the subscription for any option, or any securities, issued or to be issued by the company or a related or inter-related company, or for the purchase of any securities of the company or a related or inter-related company, provided that –

– the board of directors of the Company (“the Board”), from time to time, determines (i) the specific recipient, or general category of potential recipients of such financial assistance; (ii) the form, nature and extent of such financial assistance; (iii) the terms and conditions under which

such financial assistance is provided; and – the Board may not authorise the Company to provide any financial assistance pursuant to this special resolution number 3 unless the Board

meets all those requirements of section 44 of the Companies Act which it is required to meet in order to authorise the Company to provide such

financial assistance.”

Explanatory note

The purpose of this special resolution number 3 is to grant the Board the authority to authorise the Company to provide financial assistance to any person for the purpose of, or in connection with, the subscription for any option or securities issued or to be issued by the Company or a related or

inter-related company.

16 SPECIAL RESOLUTION 4: LOANS AND OTHER FINANCIAL ASSISTANCE TO DIRECTORS “RESOLVED that, as a special resolution, in terms of section 45 of the Companies Act, 2008 (Act 71 of 2008) (“Companies Act”), the shareholders the company hereby approve of the company providing, at any time and from time to time during the period of two years commencing on the date of

this special resolution number 4, any direct or indirect financial assistance (which includes lending money, guaranteeing a loan or other obligation, and securing any debt or obligation) as contemplated in section 45 of the Companies Act to a director or prescribed officer of the company, or to a related or inter-related company or corporation or to a member of any such related or inter-related corporation or to a person related to any such

company, corporation, director, prescribed officer or member provided that –

– the board of directors of the company, from time to time, determines (i) the specific recipient or general category of potential recipients of such

financial assistance; (ii) the form, nature and extent of such financial assistance; (iii) the terms and conditions under which such financial assistance is provided, and

– the board may not authorise the company to provide any financial assistance pursuant to this special resolution number 4 unless the board

meets all those requirements of section 45 of the Companies Act which it is required to meet in order to authorise the company to provide such financial assistance.”

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Explanatory note

The purpose of this special resolution number 4 is to grant the board the authority to authorise the company to provide financial assistance as contemplated in section 45 of the Companies Act to a director or prescribed officer of the company, or to a related or inter-related company or corporation, or to a member of a related or inter-related corporation, or to a person related to any such company, corporation, director, prescribed

officer or member.

Notice given to shareholders of the Company in terms of section 45(5) of the Companies Act of a resolution adopted by the board authorising the company to provide such direct or indirect financial assistance in respect of special resolution number 4:

– By the time that this notice of Annual General Meeting is delivered to shareholders of the company, the board will have adopted a resolution

("Section 45 Board Resolution") authorising the company to provide, at any time and from time to time during the period of two years commencing on the date on which special resolution number 4 is adopted, any direct or indirect financial assistance as contemplated in section 45 of the Companies Act (which includes lending money, guaranteeing a loan or other obligation, and securing any debt or obligation) to a

director or prescribed officer of the company or of a related or inter-related company, or to a related or inter-related company or corporation, or to a member of any such related or inter-related corporation, or to a person related to any such company, corporation, director, prescribed

officer or a member; – the Section 45 Board Resolution will be effective only if and to the extent that special resolution number 4 is adopted by the shareholders of the

company, and the provision of any such direct or indirect financial assistance by the company, pursuant to such resolution, will always be

subject to the Board being satisfied that (i) immediately after providing such financial assistance, the Company will satisfy the solvency and liquidity test as referred to in section 45(3)(b)(i) of the Companies Act, and (ii) the terms under which such financial assistance is to be given are fair and reasonable to the Company as referred to in section 45(3)(b)(ii) of the Companies Act; and

– in as much as the Section 45 Board Resolution contemplates that such financial assistance will in the aggregate exceed one-tenth of one percent of the Company's net worth at the date of adoption of such resolution, the company hereby provides notice of the Section 45 Board

Resolution to shareholders of the company. Such notice will also be provided to any trade union representing any employees of the Company.

17 To transact such other business as may be transacted at the Annual General Meeting of the Company.

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Voting and proxies Special resolutions to be adopted at this Annual General Meeting require approval from at least 75% (seventy five percent) of the votes exercised on such

resolutions by shareholders present or represented by proxy at the meeting. Ordinary resolutions to be adopted at this Annual General Meeting require

approval from a simple majority, which is more than 50% of the votes exercised on such resolutions by shareholders present or represented by proxy at the

meeting.

A shareholder entitled to attend and vote at the Annual General Meeting is entitled to appoint a proxy or proxies to attend and act in his/her stead. A proxy

need not be a member of the Company. For the convenience of registered members of the Company, a form of proxy is attached hereto.

The attached form of proxy is only to be completed by those ordinary shareholders who:

– hold ordinary shares in certificated form; or – are recorded on the sub-register in “own name” dematerialised form.

Ordinary shareholders who have dematerialised their ordinary shares through a CSDP or broker without "own name" registration and who wish to attend

the Annual General Meeting, must instruct their CSDP or broker to provide them with the relevant Letter of Representation to attend the meeting in person

or by proxy and vote. If they do not wish to attend in person or by proxy, they must provide the CSDP or broker with their voting instructions in terms of the

relevant custody agreement entered into between them and the CSDP or broker.

Proxy forms should be forwarded to reach the transfer secretaries, Link Market Services South Africa Proprietary Limited, at least 48 hours, excluding

Saturdays, Sundays and public holidays, before the time of the meeting.

Kindly note that meeting participants, which includes proxies, are required to provide reasonably satisfactory identification before being entitled to attend or

participate in a shareholders' meeting. Forms of identification include valid identity documents, driver's licenses and passports.

By order of the board

Acorim Proprietary Limited

Company Secretary

24 May 2013

Johannesburg

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Form of proxy

Incorporated in the Republic of South Africa, Registration number: 1998/009608/06; Share code: ISA; ISIN number: ZAE 000067344

(“ISA” or “the Company” or “the Group”)

For use only by ordinary shareholders who hold ordinary shares in certificated form (“certificated ordinary shareholders”); or have dematerialised their

ordinary shares (“dematerialised ordinary shareholders”) and are registered with "own-name" registration, at the Annual General Meeting of shareholders of the Company to be held at Block 9, Pinewood Office Park, 33 Riley Road, Woodmead, Sandton, at 10:00 on Wednesday, 26 June 2013 and any

adjournment thereof.

Dematerialised ordinary shareholders holding ordinary shares other than with "own-name" registration who wish to attend the Annual General Meeting must

inform their Central Securities Depository Participant (“CSDP”) or broker of their intention to attend the Annual General Meeting and request their CSDP or broker to issue them with the relevant Letter of Representation to attend the Annual General Meeting in person or by proxy and vote. If they do not wish to attend the Annual General Meeting in person or by proxy, they must provide their CSDP or broker with their voting instructions in terms of the relevant

custody agreement entered into between them and the CSDP or broker. These ordinary shareholders must not use this form of proxy.

Name of beneficial shareholder Name of registered shareholder

Address

Telephone work ( ) Telephone home ( ) Cell:

being the holder/custodian of ordinary shares in the Company, hereby appoint (see note):

1. ___________________________________________________________________________________________________________ or failing him / her,

2. ____________________________________________________________________________________________________________ or failing him / her,

3. the Chairperson of the meeting,

as my/our proxy to attend and act for me/us on my/our behalf at the Annual General Meeting of the company convened for purpose of considering and, if deemed fit, passing, with or without modification, the special and ordinary resolutions to be proposed thereat ("resolutions") and at each postponement or

adjournment thereof and to vote for and/or against such resolutions, and/or abstain from voting, in respect of the ordinary shares in the issued share capital of the Company registered in my/our name/s in accordance with the following instructions:

Number of ordinary shares

For

Against

Abstain

1

To receive, consider and adopt the annual financial statements of the company and group for the financial year ended 28 February 2013

2

To approve the re-election as director of Andrew Maren who retires by rotation

3

To approve the re-election as director of Alan Naidoo who retires by rotation

4

To confirm the appointment of Johan Du Toit as the Financial Director

5

To approve the appointment of Desmond Seaton as member and Chairman of the Audit Committee

6

To approve the appointment of Denzil Perreira as member of the Audit Committee

7

To approve the appointment of Thapeli Matsabu as member of the Audit Committee

8

To confirm the re-appointment of Mazars as auditors of the Company together with Munesh Patel as the individual registered auditor for the ensuing financial year

9

To ratify the non-executive directors remuneration for the financial year ended 28 February 2013

10

Control of authorised but unissued ordinary shares

11

Approval to issue ordinary shares, and to sell treasury shares, for cash

12

Signature of documents

13

Special resolution number 1 - Approval of the non-executive directors’ remuneration for the ensuing financial year

14

Special resolution number 2 - General approval to acquire shares

15

Special resolution number 3 - Financial assistance for subscription of securities

16

Special resolution number 4 - Loans or other financial assistance to directors

Please indicate instructions to proxy in the space provided above by the insertion therein of the relevant number of votes exercisable. A member entitled to attend and vote at the Annual General Meeting may appoint one or more proxies to attend and act in his stead. A proxy so appointed

need not be a member of the Company.

Signed at on 2013

Signature

Assisted by (if applicable)

Attention is also drawn to the “Notes to proxy”.

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Notes to proxy

1 The form of proxy must only be completed by shareholders who hold shares in certificated form or who are recorded on the sub-register in electronic form in "own name".

2 All other beneficial owners who have dematerialised their shares through a CSDP or broker and wish to attend the Annual General Meeting must provide the CSDP or broker with their voting instructions in terms of the relevant custody agreement entered into between them and the CSDP or broker.

3 A shareholder entitled to attend and vote at the Annual General Meeting may insert the name of a proxy or the names of two alternate proxies (none of whom need be a shareholder of the company) of the shareholder’s choice in the space provided, with or without deleting “the Chairperson of the meeting”. The person whose name stands first on this form of proxy and who is present at the Annual General Meeting will be entitled to act as proxy to the exclusion of those proxy(ies) whose names follow. Should this space be left blank, the proxy will be exercised by the Chairperson of the meeting.

4 A shareholder is entitled to one vote on a show of hands and, on a poll, one vote in respect of each ordinary share held. A shareholder’s instructions to the proxy must be indicated by the insertion of the relevant number of votes exercisable by that shareholder in the appropriate space provided. If an “X” has been inserted in one of the blocks to a particular resolution, it will indicate the voting of all the shares held by the shareholder concerned. Failure to comply with this 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 all the shareholder's votes exercisable thereat. A shareholder or the proxy is not obliged to use all the votes exercisable by the shareholders or by the proxy, but the total of the votes cast and in respect of which abstention is recorded may not exceed the total of the votes exercisable by the shareholder or the proxy.

5 A vote given in terms of an instrument of proxy shall be valid in relation to the Annual General Meeting notwithstanding the death, insanity or other legal disability of the person granting it, or the revocation of the proxy, or the transfer of the ordinary shares in respect of which the proxy is given, unless notice as to any of the aforementioned matters shall have been received by the transfer secretaries not less than forty-eight hours before the commencement of the Annual General Meeting.

6 If a shareholder does not indicate on this form that his/her proxy is to vote in favour of or against any resolution or to abstain from voting, or gives contradictory instructions, or should any further resolution(s) or any amendment(s) which may properly be put before the Annual General Meeting be proposed, such proxy shall be entitled to vote as he/she thinks fit.

7 The Chairperson of the Annual General Meeting may reject or accept any form of proxy which is completed and/or received other than in compliance with these notes.

8 A shareholder’s authorisation to the proxy including the Chairperson of the Annual General Meeting, to vote on such shareholder’s behalf, shall be deemed to include the authority to vote on procedural matters at the Annual General Meeting.

9 The completion and lodging of this form of proxy will not preclude the relevant shareholder from attending the Annual General Meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof.

10 Documentary evidence establishing the authority of a person signing the 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 Chairperson of the Annual General Meeting.

11 A minor or any other person under legal incapacity must be assisted by his/her parent or guardian, as applicable, unless the relevant documents establishing his/her capacity are produced or have been registered by the transfer secretaries of the Company.

Where there are joint holders of ordinary shares:

– any one holder may sign the form of proxy;

– the vote(s) of the senior ordinary shareholders (for that purpose seniority will be determined by the order in which the names of ordinary shareholders appear in the Company’s register of ordinary shareholders) who tenders a vote (whether in person or by proxy) will be accepted to the exclusion of the vote(s) of the other joint shareholder(s).

12 Forms of proxy should be lodged with or mailed to Link Market Services South Africa Proprietary Limited:

Hand deliveries to: Postal deliveries to:

Link Market Services South Africa Proprietary Limited Link Market Services South Africa Proprietary Limited 13th Floor, Rennie House, PO Box 4844 19 Ameshoff Street, Braamfontein, 2004 Johannesburg, 2000

to be received by no later than 10:00 on Monday, 24 June 2013 (or 48 hours before any adjournment of the Annual General Meeting which date, if necessary, will be notified on SENS).

13 A deletion of any printed matter and the completion of any blank space need not be signed or initialled. Any alteration or correction must be signed and not merely initialled.

Summary of the rights of a shareholder to be represented by proxy, as set out in section 58 of the Companies Act:

– A proxy appointment must be in writing, dated and signed by the shareholder appointing a proxy, and, subject to the rights of a shareholder to revoke such appointment (as set out below), remains valid only until the end of the relevant shareholders’ meeting.

– A proxy may delegate the proxy’s authority to act on behalf of a shareholder to another person, subject to any restrictions set out in the instrument appointing the proxy and the Company’s Memorandum of Incorporation.

– The appointment of a proxy is suspended at any time and to the extent that the shareholder who appointed such proxy chooses to act directly and in person in the exercise of any rights as a shareholder.

– The appointment of a proxy is revocable by the shareholder in question cancelling it in writing, or making a later inconsistent appointment of a proxy, and delivering a copy of the revocation instrument to the proxy and to the Company. The revocation of a proxy appointment constitutes a complete and final cancellation of the proxy’s authority to act on behalf of the shareholder as of the later of (a) the date stated in the revocation instrument, if any; and (b) the date on which the revocation instrument is delivered to the Company as required in the first sentence of this paragraph.

– If the instrument appointing the proxy or proxies has been delivered to the Company, as long as that appointment remains in effect, any notice that is required by the Companies Act or the Company’s Memorandum of Incorporation to be delivered by the Company to the shareholder, must be delivered by the Company to (a) the shareholder, or (b) the proxy or proxies, if the shareholder has (i) directed the Company to do so in writing; and (ii) paid any reasonable fee charged by the Company for doing so.

– The completion of a form of proxy does not preclude any shareholder from attending the Annual General Meeting.

www.isaholdings.co.za

Tel: +27 (0) 11 032 7799Block 9, Pinewood Offi ce Park33 Riley Road, Woodmead, Sandton, South AfricaPO Box 781667, Sandton, 2146, South Africa

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