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RECM AND CALIBRE LIMITED - Abridged Annual Financial Report for the year ended 31 March 2015

Release Date: 01/06/2015 08:24
Code(s): RACP     PDF:  
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Abridged Annual Financial Report for the year ended 31 March 2015

RECM AND CALIBRE LIMITED
Incorporated in the Republic of South Africa
(Registration number 2009/012403/06)
Preference share code: RACP
ISIN: ZAE000145041
(“RAC” or “the Company”)

ABRIDGED ANNUAL FINANCIAL REPORT
for the year ended
31 March 2015
                                                                        

Shareholders’ letter

To our fellow shareholders

RECM and Calibre (“RAC”) is a long-term investment vehicle that was set up in a very specific way in order to achieve the best
possible outcome for its shareholders – both ordinary and preferred – over time.

Control of the Company vests with three partners – Piet Viljoen, Theunis de Bruyn and Jan van Niekerk. Our investment
landscape is broad, our capital is patient and we do not plan to pay any dividend any time soon. Our main objective is to
increase the Net Asset Value (“NAV”) per share at a high rate over a long period of time.

We understand that some of our fellow shareholders might have time horizons or liquidity preferences that differ from ours.
We have therefore listed the Participating Preference shares of RAC on the JSE to facilitate choice and opportunity for
shareholders to make their own investment decisions. We will provide you with the appropriate information so that you can
make informed decisions around the value of your shares. The price at which you transact is up to you.

During the past financial year, our NAV, for both the ordinary and the Participating Preference shares, grew by 50,5% on a per
share basis. By comparison, the total return generated by the JSE All Share Index (“ALSI”), with dividends included, was
13,8%. Since listing in June 2010, our NAV per share has grown by 85,4%, while the ALSI total return index has grown by
121,8% over that same period. As such, we find ourselves a bit behind our primary goal of outperforming the average listed
company, but we have caught up somewhat after our slow start.

The following chart shows our progression against our benchmark (the JSE All Share Index, including dividends):

Date          RAC Index      FTSE/JSE ALL SHARE - TOT RETURN IND                  CPI
30-Jun-10       100.00                                  100.00                  100.00
30-Sep-10       100.00                                  106.41                  100.80
31-Mar-11       102.63                                  118.18                  103.75
30-Sep-11       105.92                                  114.56                  106.59
31-Mar-12       111.20                                  129.40                  110.00
30-Sep-12       112.56                                  141.84                  112.39
31-Mar-13       118.34                                  159.64                  116.48
30-Sep-13       118.52                                  180.35                  119.09
31-Mar-14       123.20                                  194.97                  123.52
30-Sep-14       125.90                                  206.90                  126.14
31-Mar-15       185.40                                  221.79                  128.52
         
The NAV per share growth of 50,5% over the last year implies an increase of R311 million. The composition of this increase
is as follows:

                                                                                                   2015                 2014
                                                                                                      R                    R

Interest and dividends                                                                      30 720 051            19 234 657
Realised profits on sale of assets                                                          17 149 208            24 818 928
Adjustments to fair value of assets                                                        296 264 098            (4 712 301)

Less: Operating expenses                                                                    10 140 930             8 943 652
Less: Tax paid and provided for                                                             22 967 057             6 082 040

Net increase in NAV                                                                        311 025 370            24 315 592

There are a number of factors that have held back our NAV growth relative to the market. Some of them are moderating
somewhat, while others remain. These factors are:

•     Our valuation policy whilst at fair value tends to be conservative.

      Appraising the value of a business is not a straight-forward operation, and does not deliver indisputable single point
      solutions. When one values a business, you are expressing an opinion, and in our experience, one should hold such
      opinions lightly.

      Being an investment entity, our valuation rules are simple: if a company we own is listed, we use the market price. If it
      is unlisted, but there is an active secondary market, we will use that price. We might not always agree with valuations
      derived from observable transactions, but it is an objective, arm’s length appraisal. Anything we might come up with is
      at best an educated guess, and at worst a subjective, emotional stab in the dark.

      For the shares in some of our businesses, there is no secondary market, yet accounting rules now force us to come up
      with exactly such a stab. At RAC, we will account for our activities as accurately and conservatively as we can. In some
      instances, our estimate of fair value does not deviate much from the price we were willing to pay to initially acquire the
      business. However, some of our investments have shown such strong earnings growth over time, that we have had no
      choice but to reflect an increased value.

      As a result, the first point to remember when judging the growth of RAC’s NAV against that of the stock market is that
      well over half of our NAV (i.e. the unlisted investments) are held within a valuation range that tends to be consistently
      conservative.

•     Valuations for listed companies are arguably less conservative.

      Valuations in the stock market are arguably less conservative, and have become even less so over the past year. As we
      pointed out last year, market valuations today are influenced by two stories. One goes that you can’t pay a high enough
      price for a good quality business that has a growing dividend stream, mainly on account of the low level of interest
      rates. The second story goes that in a world where growth is scarce, you can’t pay enough for it.

      In our opinion, story stocks have driven market valuations significantly above levels which could be considered
      conservative, to levels where the margin of safety is unsatisfactory.

      Therefore, when judging our NAV growth against the growth of the market, it is important to bear in mind that the market
      has possibly outstripped its underlying fundamentals. We have no doubt this will be, in due course, corrected – a
      correction which will have significantly less effect on the NAV of RAC. And possibly present us with some compelling
      investment opportunities.


•     Our NAV is calculated after all taxes have been accounted for.

      When an investment is successful that means it is worth – hopefully a lot – more than you paid for it. But it also means
      that you owe capital gains tax to the government. Like death, taxes are inevitable – unless you are a really poor investor!
      Any valuation exercise worth more than the paper it is written on should include this very real liability. Our valuations for
      the purpose of calculating NAV very definitely includes the amount we have set aside for deferred tax liabilities. The
      returns from investing in the index are also taxable, but not included in the calculation, as different investors have different
      tax rates.

Last year we said we found investing in unlisted companies increasingly appealing. The reasons are simple – when dealing
with like-minded partners in the underlying businesses, we have better access to information, transactions are conducted at
more realistic valuations, and the management teams are not unduly influenced by day-to-day share price movements. We
have thus followed our own advice and over the last year have been actively moving away from investing in listed companies.
Today, 70% of our balance sheet is invested in private business, where there is no secondary market activity, either over the
counter or on formal exchanges.

As a public company, we comply with IFRS accounting standards. The abridged accounts for RAC are set out on pages 8 to
14 of this report. We understand the need for uniformity in financial reporting. But despite the best intentions of those that
compiled these standards, we find that sometimes the picture is less clear once it has been IFRS’ed. As they say – the road
to hell is paved with good intentions! The following describes some of the difficulties we have encountered!

RAC was originally set up as a single company that housed all of our investments. Some were held directly and others –
mostly our listed investments – were held through a dedicated Unit Trust. As the underlying investments have changed from
being primarily listed shares to primarily unlisted assets, the Unit Trust has been removed.

During the past year, we established a 100% subsidiary called RAC Investment Holdings (Pty) Ltd (“RIH”). All of our current
investments will be transferred to this company, leaving RAC, the listed entity as a holding company. At year-end, though, this
process had not been completed. The only investment that was held by RIH at year-end was Goldrush. RIH was funded
through a loan account, which confuses some of the financial results for RAC.

In order to sensibly address this issue, we include additional information to elaborate on the accounts and activities of RAC.
This information is presented in a slightly different way and should shed further light on our activities and the way we think.


OUR BUSINESS AND INTRINSIC NET ASSET VALUE
                                                                         %           Book         Directors’         % of
                                                                     Owner-          value          value(1)     net asset
 Investment                                              Note          ship            Rm              Rm           value

 Goldrush                                                    2          34,5         114,1             313            30,3

 Mining and Engineering                                      3                       150,5           239,1            23,1
 Transhex                                                               25,0          94,2            84,2             8,1
 West Coast Resources                                                   27,2          38,4           122,2            11,8
 ELB Group                                                               2,2          17,9            32,7             3,2

 Retail                                                      4                       103,4             190            18,4
 Fledge Holdings
 Safari & Outdoor                                                       27,0

 Food and Beverage                                           5                        74,6           102,8            10,6
 Sovereign Food                                                         11,3          38,7            71,4             7,4
 KWV                                                                     4,9          31,1            21,7             2,2
 KLK Landbou                                                             5,6           4,8             9,7             1,0

 Other long-term investments                                 6                        55,7           107,8            11,2
 The American Homes                                                      1,3          28,6            41,2             4,3
 Conduit Capital                                                         7,0          12,4            40,1             4,2
 Excellerate Holdings                                                    5,5          14,7            26,5             2,7

 Held-for-sale investments                                   7                        27,1            12,7             1,2

 Total investments                                                                   525,4           965,4            93,4

 Cash                                                                                                 71,3             6,6

 Net asset value                                                                                   1 036,7

 Liabilities                                                                                         109,8

 Intrinsic net asset value                                                                           926,9

 Intrinsic net asset value per
 ordinary and preference share                                                                       18,54

Notes:
1. As mentioned above, IFRS requires RAC, as an investment entity, to place a fair value on all its assets. Where possible,
   we used market prices, either listed or over the counter. Where these were not available, we used our own estimate of fair
   value. Due to the uncertainty around valuation, our best estimates of fair value generally tend to be conservative.

2. During the past year, RAC concluded transactions that increased our ownership to an effective 34,5% of Goldrush, the
   second largest operator of Limited Payout Machines (LPMs) and Bingo games in the country. Goldrush is still very early
   in its growth phase. Over the past year, revenue grew by over 30% and operating profits more than doubled. The company
   is expanding into wider areas of gaming and has now also expanded into Africa, having been awarded a casino license
   and is developing an online sports betting business. Its retail sports betting outlets are already operating both in South
   Africa and in other African countries with LPMs. The group has been awarded further Bingo, LPM and sports betting
   licenses during the year that are in the process of being rolled out. We have agreements in place which will allow us to
   increase our shareholding to around 50% over time. Jan van Niekerk serves on the board.

   The valuation of Goldrush is based on an earnings multiple for the existing operating business, plus an acknowledgement
   of the market value of the non-operational licenses and an adjustment for the balance sheet structure.

3. Over the past twelve months we have increased our ownership of Transhex to just over 25%. We know Transhex well, as
   Theunis has served on the board for a number of years. We have a high regard for the management team, as they have
   produced commendable results over the past five years. Make no mistake, Transhex operates in a tough industry, and its
   own situation is not easy – but in Llewellyn Delport they operate under the stewardship of one of the best diamond miners
   in town, and will no doubt continue to make progress.
   
   The Transhex acquisition of Namakwa Diamonds was finalised during the period under review. Subsequent to the
   acquisition, it was renamed West Coast Resources (“WCR”). RAC owns 27,2% of WCR while Transhex owns 40%, while
   the latter has a management contract to manage the mine. We believe the mine has strong prospects. The area was
   comprehensively surveyed by its previous owner De Beers, and its diamond reserves are well documented. Processing
   of tailings dumps has started and mining will commence later this year. Positive cash flows are expected within 12 months.
   Transhex has published its valuation of WCR on its website, while we have valued WCR at a combination of the capital
   we provided, plus RAC’s share of the net assets owned by WCR on the date of acquisition.
   
   RAC owns 2,2% in ELB Group, a well-managed engineering business. During the past 12 months we (marginally) increased
   our stake by tendering our holding of B&W Instrumentation shares into the scheme of arrangement whereby ELB acquired
   the entire shareholding of B&W. The ELB group has a fortress balance sheet and conservative accounting, both necessary
   but not sufficient for success in a cyclical industry. To increase the chance of success you also need a good management
   team, which ELB has in spades. Theunis de Bruyn serves on their board.

4. RAC owns 27% of Safari and Outdoor (“S&O”). This business consists of three stores, in Stellenbosch, Pretoria and
   Rivonia. S&O is the premier retailer of hunting and outdoor equipment in South Africa. Revenue and EBIT have grown by
   over 50% for the financial year ended February 2015. The growth was driven primarily by the opening of the new store in
   Rivonia, but same store sales were also up. Theunis de Bruyn serves on their board.
   
   S&O has been valued at the same earnings multiple at which the business was purchased. The increase in value indicates
   the growth in underlying profitability.
   
   We own an effective indirect 2,5% shareholding in Dischem. This is held through a leveraged structure, Fledge Holdings.
   Dischem is privately owned and is a leading South African pharmaceutical retailer. The business has experienced solid
   growth, through an expanding footprint and market share gains. The change in value for the year reflects the increase in
   the underlying profitability of Dischem, plus the benefit of judicial leverage in the structure. No change was applied to the
   valuation multiples.

5. RAC owns 11,3% of Sovereign Foods, a listed poultry producer in the Eastern Cape area. Management is doing a good
   job in running the business efficiently and growing its product range. Earnings have been under pressure, but we think
   that Sovereign will be a major beneficiary of the tough times the industry endured over the past few years. The weaker
   competitors have gone out of business or have been acquired; the irrational and continuous industry capacity expansion
   has been stymied and the weak rand is making imports less competitive. We expect strong earnings from Sovereign over
   the next few years; earnings for which one is not paying very much at all at the current valuation. We have used the current
   market price to value this investment.
   
   RAC owns 4,9% of KWV, an unlisted wine and spirits producer. KWV is priced at around a third of its book value – a book
   value which is slowly growing. Last year, KWV returned to marginal profitability, and if management can successfully add
   product and improve sales execution both locally and globally, it can earn substantially more. We don’t know if this will
   happen, but we have a high regard for the management team – and if the prizes their products are winning are any
   indication, the odds favour success. KWV has been named as one of the World’s Top 50 Most Admired Wine Brands for
   four years running – and is the only South African wine brand to attain this global accolade. Their brandies are regularly
   voted best in the world. Over the past year, we have continued to add to our holding. We have valued this investment at
   its over-the-counter trading price.

   We have a 5,6% investment in KLK Landbou, an unlisted farming co-op headquartered in Upington. Their main lines of
   business include meat processing, fuel sales and motor dealerships. It is a well-run business, and profitability has grown
   over the past few years. Two years ago RAC tendered an offer to purchase an influential stake in the business.
   Unfortunately, we only ended up with our current holding, and were not able to progress further. However, we are very
   happy with this passive minority investment, and look forward to further supporting the management team in their
   endeavours. We have valued this investment at its over-the-counter trading price.


6. Our other long-term investments are a diverse group.
   RAC owns 7% of Conduit Capital, a specialist insurance business. There have been some recent developments on the
   shareholder front, with the net result that the CEO, Jason Druian left the group. His position has been filled – in an acting
   capacity – by the previous CFO, Lourens Louw. Sean Riskowitz, a large shareholder, who led the changes backed by a
   majority of shareholders, has taken the position of Chief Investment Officer. Although Jason had done a good job of
   developing Conduit from a small investment company 6 years ago, Sean has more ambitious plans for the business. In
   short, he intends to place more emphasis on growing the insurance side of the business, and also on simplifying the
   investment operations. Sean has reconstituted the board, and filled many of the seats with people who have insurance
   expertise. We support him and his team in these endeavours.
   
   We own 5,5% of Excellerate Holdings, an unlisted industrial services company. Despite the tough economic environment,
   revenue grew by 16%, and net profits by almost 50%. This management team punches way above their weight, and we
   can’t wait to see what they come up with over the next few years. Over the past year, our interest in the business has
   increased due to the company buying back 10% of its shares in issue.
   
   At year-end we also owned 1,3% of The American Home (TAH), a single family residential Real Estate Investment Trust
   (“REIT”), based in Atlanta, Georgia. Subsequent to year-end, TAH was sold to a listed REIT for an amount slightly in excess
   of our cost price. Given the travails of this business (well documented in last year’s report) we are happy with this outcome.
   The one thing that our investment in TAH proved – as if it still needs proving – is that even if a business does less well than
   you anticipate, you can still earn a decent return if you pay a low enough price, and it is run by honest people. And those
   two we got right here.
   
   Just before year-end, RAC acquired 32,4m shares in Sentula on the open market, and added to this by buying another
   76,6m just after year-end.

7. Our held-for-sale investments have reduced even further over the past year.
   We completely exited from some holdings where our investment was too small to make a difference, or for various reasons,
   we couldn’t see an avenue open to acquire a meaningful stake. We prefer to focus our resources in places where we can
   make a difference. In some other cases we made mistakes in evaluating the economics of the business or the quality of
   management.
   
   As reported last year, when one exits from unwanted positions, it generally happens that the good ones go first, and the
   bad ones tend to linger for much longer than you would want them to. Much like those boring dinner guests you should
   never have invited – and never will again. We are still part owner of three companies in this category and, as is always the
   case, we ended up keeping the worst for last. Their valuations relative to cost show this clearly.

8. During the year, RAC invested a net amount of R44m as some of our newer investments were funded from realisations of
   other assets. This left us with cash of R71m at year-end. Some of this cash is held to fund further investments in our
   existing assets, which means that we have now fully invested the original capital raised for RAC.

   RAC adjusted Statement of Cash Flows

                                                                                                     2015                  2014
                                                                                                        R                     R

    Aggregate cash and cash equivalents at beginning of the year                                98 733 652           152 150 888

    Plus interest and dividends received                                                        34 149 015            16 980 798
    Less: Cash operating expenses                                                               (9 637 731)           (8 841 721)
    Less: Cash tax paid                                                                         (7 650 927)           (4 205 398)
    Less: Cash applied to investments                                                          (44 273 050)          (57 350 915)

    Aggregate cash and cash equivalents at end of the year                                      71 320 959            98 733 652

    We are raising further capital for investment through a R150 million funding arrangement from ABSA, which is in the
    process of being concluded subsequent to year-end.


Due to the competitive environment in which our private businesses operate, the management teams of the businesses
consider it unwise to disclose much financial information. We share their view. Over time, this situation should resolve itself,
and we look forward to sharing more detailed financial information with you in future.

RAC is now fully invested for the first time since listing. A year ago, we pointed out that we were in a position where the heavy
lifting would be done by our investee companies, which would be reflected in a higher growth rate of our NAV per share. This
has turned out to be the case. We have no current plans to sell any of our existing businesses, except for the few remaining
ones in our held-for-sale category. We look forward to doing everything we can to assist these businesses in compounding
their success in the years to come.

In line with this, we firmly believe that the intrinsic value of RAC is increasing at a much faster pace than the accounting NAV,
and have again added significantly to our personal holding of preference shares. In total, we acquired 800 000 preference
shares, for a consideration of R10m. The three of us continue to own all the outstanding ordinary shares which represent a
10% economic interest in the business. We now own 6,2% of the preference shares. None of us have ever received free or
discounted shares, and we have no share option scheme in place. Every share we own has been bought with our own money.
We believe this is true skin in the game, and aligns us properly with our fellow shareholders

During the course of the year, we said good-bye to two of our non-executive directors, Gerrit “Boel” Pretorius and Vernon
Davis. They contributed much to our Board discussions, and had some very good investment insights and ideas. For this we
thank them. Given the unique structure of RAC, our non-executive directors really have to like what they do to take on the
responsibility. In this regard we have no doubt our incoming non-executive directors, Trent Rossini and Zanele Matlala, are
exceptionally well qualified.

Today, RAC finds itself in a good position, with a portfolio of attractive assets and available capital for further investments. As
our first five years of existence has shown – finding good companies with good management at good prices is a patient but
worthwhile endeavour.

In this regard, please bear in mind our investment strategy. If you are involved in any business that meets these criteria and
that needs capital or a responsible owner with a long-term orientation, please give one of us a call. We can’t promise you a
deal, but we can promise you a quick answer.

SHAREHOLDERS’ MEETING
We will hold our annual meeting for all shareholders, immediately following the conclusion of the annual general meeting. This
meeting is scheduled to take place on 20 August 2015 at the Southern Sun hotel in Newlands, Cape Town, at 11:00. At this
meeting, all three of us will be available to discuss our investment operations, and also to answer as many questions as you
like. There is an invitation enclosed with this annual report, and we would appreciate it if you would let us know if you will be
attending.




Piet Viljoen                                         Theunis de Bruyn                                       Jan van Niekerk
Chairman

Cape Town
1 June 2015


                                                                                                                                 
Statement of financial position at 31 March 2015


                                                                                         2015          2014
                                                                           Notes            R             R

ASSETS
Non-current assets                                                                 883 595 786   525 909 430

Investments                                                                   4    714 253 898   505 987 018
Loans and other receivables                                                        169 341 888    19 922 412

Current assets                                                                      74 418 456   105 919 966

Investments                                                                   4     67 971 006    98 631 775
Loans and other receivables                                                          3 097 497     7 186 314
Cash and cash equivalents                                                            3 349 953       101 877

Total assets                                                                       958 014 242   631 829 396

EQUITY AND LIABILITIES
Equity                                                                             926 973 445   615 948 075

Share capital – ordinary shareholders                                               50 000 000    50 000 000
Share capital – preference shareholders                                            450 000 000   450 000 000
Reserves                                                                            79 950 251    55 334 324
Retained income                                                                    347 023 194    60 613 751

Liabilities

Non-current liabilities                                                             29 196 620    12 424 971

Deferred tax                                                                        29 196 620    12 424 971

Current liabilities                                                                  1 844 177     3 456 350

Trade and other payables                                                             1 704 985     1 861 639
Current tax payable                                                                    139 192     1 594 711

Total equity and liabilities                                                       958 014 242   631 829 396

Net asset value
Net asset value attributable to ordinary shareholders                               92 697 345    61 594 807
Net asset value attributable to preference shareholders                            834 276 101   554 353 268

Net asset value per ordinary share (cents)                                               1 854         1 232
Net asset value per preference share (cents)                                             1 854         1 232




                                                                                                               
Statement of comprehensive income for the year ended 31 March 2015


                                                                                             2015           2014
                                                                           Notes                R              R

Revenue                                                                                30 720 051      19 234 657
Operating expenses                                                                    (10 140 930)     (8 943 652)

Operating profit                                                                       20 579 121       10 291 005
Other income                                                                           17 149 208       24 818 928
Fair value gains on subsidiaries and associates                                       287 223 959              –
Impairments recycled through profit and loss                                          (21 225 692)      (6 143 738)

Profit before taxation                                                                303 726 596       28 966 195
Taxation                                                                              (17 317 153)      (5 814 995)

Profit for the year                                                                   286 409 443       23 151 200

Other comprehensive income:

Items that may be reclassified subsequently to profit or loss:
Net gain on available-for-sale financial instruments                                   26 189 347        20 106 627
Realised gain on sale of available-for-sale investments recycled
 to profit or loss                                                                    (17 149 208)      (24 818 928)
Impairment loss reclassified                                                           21 225 692         6 143 738
Taxation related to components of other comprehensive income                           (5 649 904)         (267 045)

Other comprehensive income for the year net of taxation                                24 615 927         1 164 392

Total comprehensive income                                                            311 025 370        24 315 592

Earnings and headline earnings per share
Per share information (ordinary and preference)                                                          Restated
Basic and diluted earnings per share (cents)                                      5           573              46
Basic and diluted headline earnings per share (cents)                             5           579              16




                                                                                                                     
Statement of changes in equity for the year ended 31 March 2015

                                                              Fair value
                                                             adjustment
                                                                   assets                        Total
                               Preference       Ordinary      available-                        share-
                                    share          share          for-sale     Retained       holders’
                                  capital         capital         reserve        income         equity
                                        R              R                R             R             R

Balance at 31 March 2013      450 000 000     50 000 000     54 169 932       37 462 551   591 632 483
Profit for the year                     –              –                –     23 151 200    23 151 200
Other comprehensive income              –              –      1 164 392                –     1 164 392

Balance at 31 March 2014      450 000 000     50 000 000     55 334 324       60 613 751   615 948 075

Balance at 31 March 2014      450 000 000     50 000 000     55 334 324       60 613 751   615 948 075
Profit for the year                     –              –                –    286 409 443   286 409 443
Other comprehensive income              –              –     24 615 927                –    24 615 927

Balance at 31 March 2015      450 000 000     50 000 000     79 950 251      347 023 194   926 973 445


                                                                                                        
Statement of cash flows for the year ended 31 March 2015
                                                                                       2015            2014
                                                                                          R               R

Cash flows from operating activities
Cash utilised in operations                                                       (9 637 731)     (8 841 721)
Interest income                                                                   13 125 860      13 691 554
Dividends received                                                                21 023 155       3 289 244
Tax paid                                                                          (7 650 927)     (4 205 398)

Net cash inflow from operating activities                                         16 860 357       3 933 679

Cash flows from investing activities
Loans to investees                                                              (149 419 476)    (19 922 412)
Purchase of other financial investments                                          (81 758 828)   (161 150 403)
Proceeds on disposal of financial investments                                    217 566 023     177 020 472

Net cash outflow from investing activities                                       (13 612 281)     (4 052 343)

Net movement in cash and cash equivalents                                          3 248 076        (118 664)
Cash and cash equivalents at beginning of the year                                   101 877         220 541

Cash and cash equivalents at the end of year                                       3 349 953         101 877


                                                                                                                
Selected notes to the annual financial statements


1. BASIS OF PREPARATION
  The summary financial statements are prepared in accordance with the requirements of the JSE Limited Listings
  Requirements for abridged reports, and the requirements of the Companies Act applicable to summary financial
  statements. The Listings Requirements require abridged reports to be prepared in accordance with the framework
  concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS), the
  SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as
  issued by the Financial Reporting Standards Council, and to also, as a minimum, contain the information required by IAS
  34 Interim Financial Reporting. The accounting policies applied in the preparation of the financial statements, from which
  the summary financial statements were derived, are in terms of International Financial Reporting Standards and are
  consistent with the accounting policies applied in the preparation of the previous annual financial statements, other than
  as more fully set out below.

  IFRS 8 – Operating Segments has not been applied. Operating decisions of the Company are not made based on
  Segments, but rather by looking at each investment individually.

  The summary financial statements do not contain all the disclosures required by International Financial Reporting Standards
  and the requirements of the Companies Act of South Africa as applicable to annual financial statements.

  Reading the summary financial statements, therefore, is not a substitute for reading the audited financial statements of
  RECM and Calibre Limited.

2. SIGNIFICANT ACCOUNTING POLICIES
  Assessment as investment entity

  Entities that meet the definition of an investment entity within IFRS 10 are required to measure their subsidiaries at fair
  value rather than consolidate them. The criteria which define an investment entity are, as follows:

  •    An entity that obtains funds from one or more investors for the purpose of providing those investors with investment
       services;

  •    An entity that commits to its investors that its business purpose is to invest funds solely for returns from capital
       appreciation, investment income or both;

  •     An entity that measures and evaluates the performance of substantially all of its investments on a fair value basis

  Based on the above, the Company is considered to meet all three conditions of the definition and, hence, qualifies as an
  investment entity.

  Investment entities with interests in associates and joint ventures may elect to account for those investments at fair value
  provided they meet the criteria of IAS 28 and IAS 39. Such election must be applied consistently as a matter of accounting
  policy choice. The Company reports to its investors via annual and semi-annual results and to its management, via internal
  management reports, on a fair value basis. All investments are reported at fair value to the extent allowed by IFRS in the
  Company’s annual reports.

  The Board has also concluded that the Company meets the additional characteristics of an investment entity, in that it
  has more than one investment; the investments are predominantly in the form of equities and similar securities; and its
  investors are not related parties. The Board has concluded that the Company meets the definition of an investment entity.
  These conclusions will be reassessed on an annual basis, if any of these criteria or characteristics change.

3. AUDIT OPINION
  This abridged report is extracted from audited information, but is not itself audited. The annual financial statements were
  audited by Ernst & Young Inc., who expressed an unmodified opinion thereon. The audited annual financial statements
  and the auditor’s report thereon are available for inspection at the company’s registered office. The directors take full
  responsibility for the preparation of the abridged report and that the financial information has been correctly extracted
  from the underlying annual financial statements.

  The audited financial statements, which were prepared under the supervision of the FD, Jan van Niekerk, are available for
  inspection at the company’s registered office and will be included in the Integrated Annual Report 2015 to be posted to
  stakeholders on or about 1 June 2015.


                                                                                                2015                 2014
                                                                                                   R                    R

4.   INVESTMENTS
     Fair value hierarchy of financial assets
     Level 1
     Class 1 – Listed shares – Quoted – available-for-sale                                241 132 347          139 546 424
     Class 2 – Unlisted shares – Quoted – available-for-sale                               31 390 404           33 393 135
                                                                                          272 522 751          172 939 559
     Level 2
     Class 3 – Unit trusts                                                                 34 956 206          275 624 310
       Listed investments held by unit trust – available-for-sale                                   –           72 062 485
       Cash held by unit trust – available-for-sale                                        34 956 206          203 561 825
     Class 4 – Call accounts – available-for-sale                                          33 014 800           25 360 823
                                                                                           67 971 006          300 985 133
     Level 3
     Class 5 – Unlisted shares – Unquoted – available-for-sale                             70 999 261           50 818 664
     Class 5 – Unlisted shares – Unquoted – fair value through profit or loss             370 731 886           79 875 437
                                                                                          441 731 147          130 694 101
     Total financial assets at fair value                                                 782 224 904          604 618 793
     Non-current assets                                                                   714 253 898          505 987 018
     Financial assets – available-for-sale                                                343 522 012          426 111 581
     Financial assets – fair value through profit or loss                                 370 731 886           79 875 437
     Current assets
     Financial assets – available-for-sale                                                 67 971 006           98 631 775
     Total investments                                                                    782 224 904          604 618 793
     Management classifies cash as current and other investments
     as non-current.
     Level 3 reconciliation
     Opening balance                                                                      130 694 101           46 238 454
     Purchases                                                                              6 632 549           79 875 437
     Sales                                                                                          –                    –
     Gains on investments recognised in other comprehensive income                         17 180 537            4 580 210
     Gains on investments recognised in profit and loss                                   287 223 960                    –
     Closing balance                                                                      441 731 147          130 694 101
     
     In the prior year, investments to the value of R79 875 437 were incorrectly disclosed as part of available-for-sale
     investments. The prior period disclosure has been amended to correctly disclose the investments as at fair value through
     profit or loss. This had no effect on the statement of financial position or statement of comprehensive income as no fair
     value movements had been recognised due to the fact that the investments were purchased close to the end of the
     prior year.
     Level 1
     Class 1 available-for-sale financial assets are valued at the listed price per the exchange on which they trade.
     Class 2 available-for-sale financial assets are valued at the quoted price based on the latest over the counter trades.
     Level 2
     Class 3 available-for-sale financial assets are valued at the net asset value of the unit trust.
     Class 4 available-for-sale financial assets are valued by taking the following market observable data into account and
     applying them to the holdings:
     • credit spread of the institution at which the funds are held
     • any difference in the interest rate earned and what is available in the market
     Level 3
     Class 5 unlisted unquoted shares are valued using a number of valuation techniques based on the following unobservable
     market data as relevant to each investment:
     • Net profit of investee                                    • Price/Earnings ratio
     • Equity and net debt of investee                           • Expected cash flows
     • Return on capital                                         • Earnings multiple
                                   

     Management uses the above information in multiple valuation techniques as well as profitability valuation techniques by
     comparing the investee information to similar type entities in the listed market. The nature of the fair value calculations
     means that the calculated fair values could potentially range greatly and are sensitive to indirect and direct quantifiable
     and unquantifiable inputs. Factors that we took into account in all valuations include the current market conditions, the
     invested market segment and interest rate certainty. The market for these instruments often has significant barriers to
     entry, making the comparison pool of similar entities very shallow. Specifically, the retail pharmaceutical industry and
     hunting equipment industry have few market entrants with little reliable comparative data. Like all our investments, we
     plan on seeing the value of the business grow over a number of years to realize their true potential. Where we have influence
     over our investee companies we plan to play an active role in the long term strategy of the company, ensuring that our
     interests are aligned.

                                                                                                   2015                 2014
                                                                                                      R                    R
5.    EARNINGS AND HEADLINE EARNINGS PER SHARE

      Earnings and headline earnings per shares are based on the profit
      attributable to ordinary and preference shareholders in issue during
      the year.

      Number of shares in issue
      Ordinary shares                                                                          5 000 000             5 000 000
      Preference shares                                                                       45 000 000            45 000 000

      Earnings
      Net profit after tax                                                                   286 409 443            23 151 200
      Adjusted to headline earnings as follows:
      Profit on asset disposal                                                               (17 149 208)          (24 818 928)
      Impairment                                                                              21 225 692             6 143 738
      Tax adjustment                                                                            (760 944)            3 486 210

      Headline earnings                                                                      289 724 983             7 962 220

                                                                                                                       Restated
      Basic and diluted earnings per ordinary and preference shares (cents)                           573                    46
      Headline earnings per ordinary and preference shares (cents)                                    579                    16

      The prior year earnings per share figures were amended to include both preference and ordinary shares. In the prior
      year, earnings per share was calculated based on the number of ordinary shares of 5 000 000. Earnings per share should
      have been calculated on the total number of ordinary and preference shares (i.e. 50 000 000 million shares) as both
      classes of share have an equal right to participate in the residual interest and profits of the Company. As a result, the
      earnings per share for the year ended 31 March 2014 changed from 463 cents per share to 46 cents per share for basic
      and diluted earnings per share and from 159 cents per share to 16 cents per share for headline earnings per share.

6. SUBSEQUENT EVENTS

     The directors are not aware of any matter or circumstance arising since the end of the financial year.


1 June 2015
Cape Town

Sponsor
Questco (Pty) Ltd





                                                                                                                               

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