Blue Label Telecoms Integrated Annual Report 2019

Blue Label integrated annual report 2019 95 ABOUT US 1 – 21 LEADERSHIP 22 – 29 PERFORMANCE 30 – 73 GOVERNANCE 74 – 120 SHAREHOLDERS’ INFORMATION AND ADMINISTRATION 121 – IBC In terms of an agreement entered into between TPC and Glocell Proprietary Limited (Glocell), Glocell has pledged its 40% shareholding in Glocell Distribution to TPC in the event of Glocell defaulting on amounts owing of R343 million to TPC as at 31 May 2019. The right to enforce this pledge is currently not exercisable. This right only becomes exercisable once Glocell has settled its outstanding debt of R121 million to Investec Bank Limited. Glocell’s ability to repay TPC the amounts owing to it is dependent on the extent of dividends receivable from Glocell Distribution on a piecemeal basis. TPC is therefore exposed to the value of Glocell Distribution and accordingly has reclassified the amount due by Glocell to it from trade receivables to financial assets at fair value through profit or loss. A discounted cash flow valuation of Glocell Distribution has been used to determine the value of Glocell’s 40% shareholding in Glocell Distribution. This is used to determine the fair value of the loan. This valuation has been performed by the finance department of the Group using cash flow projections based on forecasts for up to five years which are based on assumptions of the business, industry and economic growth. A fair value downward adjustment of R141 million of the R343 million owing to TPC was required due to unfavourable wholesale trading conditions impacting on Glocell Distribution’s financial performance. The derivatives are level 3 instruments in the fair value hierarchy. Integrated annual report The committee considered the integrated annual report, incorporating the annual financial statements for the year ended 31 May 2019. The committee considered the sustainability information as disclosed in the integrated annual report and assessed its consistency with operational and other information known to its members. The committee recommended the approval of the integrated annual report to the Board. The ARCC is satisfied that it has complied with its legal, regulatory and other responsibilities as per its terms of reference and that it has executed its responsibilities in terms of paragraph 3.84(g)(iii) of the Listings Requirements in its assessment of the suitability of the auditor. The contents of the ARCC report was discussed at the committee meeting and were approved by the committee members on 29 October 2019. The ARCC is satisfied that it has complied with its legal, regulatory and other responsibilities as per its terms of reference. On behalf of the Audit, Risk and Compliance Committee JS Mthimunye Chairman 29 October 2019