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Reunert has adopted certain Statements of Generally Accepted Accounting Practice (GAAP) during the current financial year. This has resulted in changes to accounting policies which are detailed below:

During the year the International Financial Reporting Standard IFRS 2 (AC 139) on Share-based payments was early adopted. In terms of this standard all share-options granted after 7 November 2002 must be recognised as an expense over the vesting period of the share-option. This resulted in a R6,7 million expense which was recognised in the current year.

GAAP requires the reversal of the sale of the black economic empowerment (BEE) transaction relating to African Cables, where the purchase consideration has not been fully paid for by the BEE partner and conditions are attached to the unpaid portion, notwithstanding that the legal effect of this transaction is in fact a sale. The earnings attributable to the BEE partner are included in arriving at the earnings attributable to shareholders in Reunert Limited and an equity instrument of R24,1 million, which values the BEE deal in terms of IFRS 2, has been expensed in arriving at operating profit in the current year. When dividends are paid to these BEE partners they are treated as an appropriation of profit.

During the year the International Financial Reporting Standard IFRS 3 (AC 140) on Business Combinations was adopted. In terms of this standard all existing negative goodwill at 1 October 2004 (R3,0 million) was transferred to opening accumulated profit. Thereafter negative goodwill must be reflected in income in the year in which it arises. In addition, goodwill is no longer amortised, but is subjected to an annual impairment test.

The group’s accounting policies are in accordance with South African GAAP and, except for the above changes, are consistent with those of the prior year. This report has been prepared in terms of AC 127 on Interim Financial Reporting.

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