UCS Group LimitedReg. No.: 1993/002253/06

PO Box 31266 Braamfontein

South Africa 2017

Tel: (011) 712-1300 Fax: (011) 339-3421

Home page: www.ucs.co.za

Annual Report 2003

1

Board of directors 2

Administration 2

Basic tenets 2

Financial highlights 3

Group structure 4

Chairman’s report 6

Chief Executive Officer’s report 7

Chief Operating Officer’s report 9

Chief Financial Officer’s report 12

Five year financial review 13

Analysis of key ratios 14

Corporate governance 15

Certificate of compliance by company secretary 17

Statement of directors’ responsibilities and

approval of the annual financial statements 17

Report of the independent auditors 17

Directors’ report 18

Income statement 20

Balance sheet 21

Statement of changes in equity 22

Cash flow statement 23

Notes to financial statements 24

Schedule of interest in subsidiary companies 42

Value added statement 43

Shareholding analysis 44

Notice to shareholders 45

Shareholders’ diary 47

Group directory 48

Contents

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Group chairman (non-executive)

Adv Richard Goodman (46), SC (BA, LLB, LLM)

Executive directors

John Bright (56)

Chief Executive Officer, UCS Group Limited

Chief Executive Officer, Universal Computer Services (Pty) Ltd

Neil Michelson (45) CA (SA)

Chief Operating Officer, UCS Group Limited

Member of the audit committee

Dean Sparrow (28) CA (SA)

Chief Financial Officer, UCS Group Limited

Duncan Coles (55) MCSSA

Chief Information Officer, UCS Group Limited

Chairman of Universal Computer Services (Pty) Ltd

Patrick Fitzgerald (55)

Managing director, EasiRun Software (Pty) Ltd

Non-executive directors

Rebecca Eliot (33)*

Joseph Claassen (44)

Member of the UCS remuneration committee

Bryan Hattingh (47)

Chairman of the UCS remuneration committee

E.B. (Bert) Levenstein (90) BA, LLB

Member of the UCS audit committee and of the remuneration committee

Peter Terblanche (59) MCSSA

Chairman of the UCS audit committee

* British

Basic tenets The group's basic tenets are to:

• Conduct business with integrity and in a way that contributes to the continued development

of a democratic and prosperous South Africa;

• Respect individual dignity and diversity;

• Practice financial prudence;

• Maintain fair employment practices;

• Invest in the development of competent and committed employees;

• Strive to provide shareholders and all stakeholders with above-average financial rewards.

Administration Board of directors

UCS Group Limited

Incorporated in the Republic of

South Africa

Reg No: 1993/002253/06

ISIN: ZAE00016150

Share Code: UCS

Registered office

20th Floor

209 Smit Street

Braamfontein 2001

P.O. Box 31266

Braamfontein 2017

www.ucs.co.za

Company secretary

Verity Mary-Ann Broadrick

Auditors

Kaplan & Kaplan

Chartered Accountants (SA)

155 8th Avenue

Highlands North 2192

P.O. Box 64188

Highlands North 2037

Transfer secretaries

Computershare Limited

70 Marshall Street

Marshalltown

Johannesburg 2001

P.O. Box 61051

Marshalltown 2107

Bankers

Nedbank

Commercial Wits Central

Johannesburg

Sponsor

Barnard Jacobs Mellett

2nd Floor

Barnard Jacobs Mellett House

5 Sturdee Avenue

Rosebank 2196

P.O. Box 62200

Marshalltown 2107

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3

Revenue +42%Annuity revenue +40%Cash generated from operations +35%Earnings per share +32%Headline earnings per share +13%

Group income statement2003 2002

R’000 R’000 % ChangeRevenue 306,218 216,271 41.6%

Profit from operations before interest, depreciation, research and development and impairment 66,190 47,284 40.0%

Research and development 24,239 16,826 44.1%Depreciation and amortisation 20,461 12,937 58.2%Impairment of loan to staff share trust 1,204 8,115 -85.2%Provision for deficit on defined benefit fund to be terminated 1,910 - 100.0%Profit before interest and investment income 18,376 9,406 95.4%Net interest received and investment income 5,630 7,632 -26.2%Profit before taxation 24,006 17,038 40.9%Taxation 4,380 600 630.0%Profit after taxation 19,626 16,438 19.4%Attributable (to) from minority shareholders (294) 132 322.7%Net profit for the year 19,332 16,570 16.7%

Ordinary share performance

Earnings per share (cents) 8.7 6.6 31.8%Headline earnings per share (cents) 10.3 9.1 13.2%Weighted average number of ordinary

shares in issue (‘000) 223,366 251,478 -11.2%Ordinary shares in issue net of treasury shares 221,973 240,093 -7.6%Net asset value per share (cents) 77.5 72.3 7.2%Share price (cents) at 30 September 84 63 33.3%

Financial highlights

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Group structure

Universal Computer Services (Pty) Ltd

Universal Computer Services provides

customised application solutions and

associated services, including total and

partial outsourcing, for large-scale retail

enterprises. Dedicated software develop-

ment teams provide ongoing support for

each customer.

VST is strongly positioned in the Western

Cape and is a leading provider of

software solutions and services to the

fashion retail industry as well as large

and medium speciality retailers.

Acquired effective 1 October 2002

CCS provides fully integrated point-of-

sale (POS) and back-office software

solutions to customers in the fast food,

FMCG and speciality (serialised goods)

niche markets in the retail industry. All

solutions are supported by an experienced

team of developers who have built up

in-depth knowledge and an enviable

record of accomplishments in the retail

IT environment.

*100% effective 1 October 2003

(previously 62.76%)

GAAP specialises in the provision of

point-of-sale solutions in the restaurant

and bar sectors of the South African

hospitality industry. The company, which

dominates its market sector in the

KwaZulu-Natal region, also supplies

retail solutions to stand-alone stores and

a property management solution to the

hotel industry.

Fernridge Consulting is in the business of

sales optimisation with a specific

site/property focus. Based on practical

analysis of exclusive data and high-end

technology, the company delivers a

unique service to retailers through under-

standing their business, marketplace and

customer needs. Services range from

Trend Analysis Point-of-Sale,

Branch/Store Network Proliferation,

Gap Analysis and Site Evaluation.

Customers include large national

networks, franchise systems and small

groups looking to expand.

Acquired effective 1 February 2003

CKS specialises in the provision of hard-

ware, software and support services to the

retail pharmacy industry. The company’s

wide area network connects its customer

base of more than 900 pharmacies to

almost every medical scheme in the

country for the processing of real-time

medical scheme and electronic funds

transfer (EFT) transactions.

(Formerly Ultimate Connection)

UCS Software is an internationally

acclaimed developer of Microsoft-based

software applications for use in small,

medium and large enterprises within

the general merchandise and speciality

store sectors of the retail industry. The

company’s award-winning ActiveRetail

solutions suite is sold by a network of

certified business partners throughout

South Africa and in 21 countries

throughout Europe, the Middle East and

Africa (EMEA).

*100% effective 1 October 2003

(previously 93%)

100%

100% 51% 51%100%*

100%

Affinity Logic is a leading business and

IT solutions provider with extensive

experience in working closely with clients

in the retail and manufacturing industries.

The company offers end-to-end services

across the full range of IT operations.

Acquired effective 1 September 2003

100% 100%*

Retail

H O L D I N G S ( P R O P R I E T A R Y ) L I M I T E D

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UCS Group Limited is an investment holding

company for a group of information

technology businesses focused on the

provision of software solutions and

outsourcing services in chosen markets.

A member of the UCS Group A member of the UCS GroupUniversal Knowledge Software (Pty) Ltd

Accsys markets and supports South

Africa’s most comprehensive suite of

integrated personnel and human resource

management solutions. High-level

training, professional consultancy and

technical support back industry-leading

software applications, including Accsys

Payroll Manager, Accsys Time Manager

and Accsys-HR.

EasiRun provides complete ERP (enter-

prise resource planning) solutions to the

mid-range market across a wide spread

of industry sectors. Solutions are all

based on latest technology products from

the Microsoft Business Solutions

Division and supported with a variety of

consulting, customisation and other value

added services.

UKS is a leading supplier of integrated

library management systems and

associated technical and support services

to the library industry of South Africa and

the neighbouring states.

100% 100% 100%

Non-retail

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Pleasing overall improvements in the UCSGroup’s financial performance as well assignificant progress in implementing a dedicated and clearly-defined businessstrategy were the hallmarks of yet anotheryear - the third of the new millennium - in which the Group had to contend withdifficult trading conditions.

Progress, albeit cautious, on these two fronts and under circumstances justifiably described as extremely harshand turbulent, is a fitting tribute to theskills, professionalism and dedication of executive management and staffthroughout the Group.

At a strategic level the Group continues to turn daunting market conditions intoexciting business opportunities that aredesigned to build a foundation of unrivalled depth and breadth for futuregrowth in chosen markets throughoutsouthern Africa and certain international markets.

Prudent financial management and careful adherence to the principles and recommendations contained in the KingReports on corporate governance continueto characterise the Group as an organisa-tion of unquestionable integrity that iscommitted to serving the interests of shareholders, customers and staff.

Reports by executive colleagues elsewherein this document provide in-depth insightsinto the Group’s financial and strategicpath of the past year.

Extending beyond corporate governance in the narrow perspective of stakeholderswith a direct interest in the Group’s financial well being, UCS has embarked on an extensive “Corporate Citizenship”programme.

This programme is directed at underscoringthe Group’s commitment to the process of helping previously disadvantaged people and communities to benefit fromactive participation in the South Africaneconomy and from Group investments inupliftment projects.

The programme incorporates a multi-faceted, integrated approach in which theskills and vision of executive managementteams at both Group and subsidiary levelare utilised to identify and implement blackeconomic empowerment initiatives thatsupport transformation.

Within the strategy that seeks to establishtwo specialised businesses in the softwareand services arenas, the Group will actively pursue possible acquisitions inassociation with suitably qualified BEE investors.

At an operational level Group companiesare committed to appointing BEE organisations as business partners andresellers and to assisting these partnersboth financially and with skills development through the transfer of knowledge.

The company has embarked on an aggressive centralised procurement programme to maximise, measure andensure that the provision of goods andservices required by the Group are securedfrom suppliers committed to transformationand SMME development.

Based on the success of the bursary andtertiary education scheme launched in 1999 in association with St BarnabasCollege, the board has initiated a project to realign the Group’s corporate socialinvestment (CSI) programmes throughwhat is likely to become a public benefitorganisation. The CSI initiatives will bedriven from a division called “The UCSFoundation” which management will consider registering as a Section 21 (not-for-profit) entity.

In principle the UCS Foundation will direct 75 percent of CSI funding towardsskills development based on learnershipsand educational bursaries. The balance of CSI funding will be allocated to community development projects.

It is the Group’s intention to increase its information and communications technology (ICT) skills base with the new strategy timed to enhance skills development and employment equity overthe next two to three years.

The foundation’s CSI programmes will beaimed at job creation through the provisionof relevant and practical working relation-ship between CSI initiatives and thoseinternally across the Group.

Community projects underway within theGroup include active employee support forTswelopele, a community-based initiativethat promotes the sale of handmade bagsand other home industry and handicraftitems by people who would otherwise notbe economically active. The Group is alsoa proud sponsor of Reach For A Dream(RFAD) and the Johannesburg Associationfor the Aged (JAFTA).

The Group continues to encourage member companies to create their own initiatives that lie beyond the scope of theUCS Foundation.

I would like to take this opportunity tothank the board and every member of management and staff throughout theGroup for their commitment to the valuesand culture of UCS as an organisation.

Innovation, loyalty and a single-mindeddedication to customer satisfaction by allmembers of the UCS team are qualitiesthat extend beyond the scope of a document of this nature and with which I am extremely proud to be associated.

Chairman’s reportfor the year ended 30 September 2003

6

‘Prudent financial management and careful adherence to the principles and recommendations contained in the King Reports on corporate governancecontinue to characterise the Group as anorganisation of unquestionable integritythat is committed to serving the interests of shareholders, customers and staff.’

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OverviewThe year to September 2003 was both challenging and rewarding for the Group.Financial results for the period with regardto overall revenue growth and the increasein annuity revenue are considered to begood, with earnings per share performanceat an acceptable level. Solid progress inexecuting against the Group’s strategicobjectives was also achieved.

As expected, the continuation of harshtrading conditions hampered organicgrowth and kept trading margins underpressure. For the third successive yearprices for IT products and services weregoverned by a buyer’s market, with intense competition for the limited business available. With the same conditions applicable to all players in the market, it was hardly surprising to note several high-profile casualties duringthis period.

However, the historic commitment by theGroup to the generation of sustainableannuity revenue streams has enabled it to aggressively grow its market sharewhile certain other players have had tofocus on survival.

Difficult market conditions enabled theGroup to continue its progress in growingits footprint in Southern Africa throughstrategic acquisitions at realistic prices,details of which are provided below.

On the international front the Group’saward-winning Active Retail product, marketed through distributors in variousregions, made good progress. This includeda large installation of 160 stores in Dubaiand the first sale and installation inVietnam. In the United Kingdom the partnership with Compass Software,reported at the interim stage, was terminated following the acquisition ofCompass by the Alphameric Group, a UCS Group competitor.

We are, however, delighted to announcethat we have secured our first order for our Java-based retail solutions in the UKwith the deployment of some 160 clothingoutlets scheduled for the second half of ournew financial year. All costs associatedwith international business developmentcontinue to be expensed as incurred.

Overview of financial resultsRevenues grew by 42 percent to R306-million, with organic growth at 12 percent and the balance through currentand prior year acquisitions.

Annuity revenues grew by 40 percent to R175-million, representing 57 percent oftotal turnover. Operating income (beforeinterest, research and development, depreciation, amortisation and exceptionalitems) grew by 40 percent to R66-million.Earnings per share were up by 32 percentto 8.7 cents while headline earnings pershare were up 13 percent to 10.3 cents. The quality of these earnings is highlightedby the 35% growth in cash generated from operations.

Following the predominantly cash-basedacquisition of Affinity Logic with effectfrom September 2003, the balance sheetfor the first time reflects material borrowings of some R28-million, representing 16% of equity. Although ourcash position has improved by R21-millionsince the interim stage, to close at R74-million, we have acquired some R24-million in short term debt which willbe repaid at the end of Q1 in 2004. Our current ratio of 1.4:1 is below ourminimum target of 1.5:1 and we will payclose attention to this going forward. Net asset value per share increased by 7 percent from 72.3c to 77.5c, while tangible net asset value per share decreasedsharply from 52.6c to 36.8c, mainly due to the goodwill involved in the AffinityLogic acquisition.

During the year, the Group purchased and cancelled 28.888-million shares ofwhich 25.155-million were acquiredthrough the specific repurchase from theUCS Group Limited Staff Share Trust. The specific repurchase was authorised bythe special resolution passed at the generalmeeting of shareholders on 26 March2003. On 14 February 2003 the

26.529-million shares held by UniversalComputer Services (Pty) Ltd, a 100% heldsubsidiary company in the Group, weretransferred to UCS Group and cancelled.Thus the Group at present holds no treasury shares. The board has authority to buy back up to 20 percent of the sharesin issue, representing a further 44,285,288 shares.

Acquisitions during the yearDuring the year the Group successfullyconcluded two strategic acquisitions withboth designed to broaden and enhanceservice capabilities.

The Affinity Logic acquisition, the largestacquisition yet undertaken by the Group,provides significant critical mass as a platform on which to base an increasedrange of services to all software customers.

The acquisition of 100% of the equity ofAffinity Logic Holdings (Pty) Ltd for atotal consideration of R41.7-million, effective 1 September 2003, was settledthrough the issue of 10,768,000 UCS ordinary shares at 60 cents per share andthe payment of R35.2-million in cash.Affinity Logic’s core business is the provision of consulting and outsourcingservices for the delivery of computinginfrastructure and application solutions to the retail and consumer goods manufacturing sector.

Effective 1 February 2003 the Groupacquired 51% of the equity and shareholderloan accounts in Fernridge Consulting(Pty) Ltd for R1-million. This purchaseprice could be adjusted based on performance over the next two years with a maximum additional payment of R1.5-million.

Chief Executive Officer’s reportfor the year ended 30 September 2003

7

‘Difficult market conditions enabled the

Group to continue its progress in growing

its footprint in Southern Africa through

strategic acquisitions at realistic prices.’

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Fernridge Consulting provides sophisti-cated sales optimisation services using aerial photography, special modelling techniques and high-level database integration, predominantly in the retail environment.

Post balance sheet eventEffective 1 October 2003 the Groupacquired the minority shareholders’interests in CCS Software (Pty) Ltd and

UCS Software (Pty) Ltd. The 37.24%minority shareholding in CCS wasacquired for R6-million settled through theissue of 8,524,954 shares at 60 cents pershare and the payment of R800,000 incash. The 7% minority shareholder in UCS Software and the related shareholderloan account was acquired for R1.2-millionthrough the issue of 1,999,238 shares at 60 cents per share. The ownership of 100% of both UCS Software as well asCCS Software was the first stage in merging the retail software focused portion of the Group, which is discussed in more detail in the Chief OperatingOfficer’s report.

In addition to the purchase considerationfor 100% of the equity of Affinity LogicHoldings (Pty) Ltd and in terms of theauthorisation obtained from shareholders in the general meeting held on 19 September 2003, 5,000,000 ordinaryshares were issued at 60 cents per share to certain previous as well as current members of the Affinity Logic Holdings(Pty) Ltd management team on 6 October2003. The cash supporting the subscriptionfor these shares was, however, received on29 September 2003 and is included in theyear end cash balance.

Dividend policyThe directors have decided to maintain apolicy to pay dividends twice a year.Dividend cover may vary dependant on theGroup’s projected cash requirements fromtime to time. This policy will be reviewedregularly and may be changed at the discretion of the directors.

Research & developmentThe Group’s ongoing commitment toresearch and development continues to provide a strong and differentiated platform for future growth. R&D spend for the year amounted to over R24-million(2002 - R17-million), an increase of over44%. All R&D costs continue to beexpensed as incurred.

ProspectsThe strengthening of the Rand against mostmajor currencies over the past year willmake our export initiatives less profitablethan previously projected. However, weremain convinced that our products arecompetitively positioned in our choseninternational markets.

The extremely challenging and turbulent IT market conditions experienced over the past three years are expected to startimproving during the coming year. In particular, the prolonged effects of the pre-Y2K IT spending spree and subsequentpost-Y2K IT spending trough are expectedto start easing. While this is evidenced inour healthiest order book since 1999, it isnot expected that IT spend will “normalise” in our traditional markets foranother year or two.

Given this scenario, management has againadopted a conservative view for new salesprospects in the year to September 2004,although our current order books andrecent acquisition of Affinity Logic shouldensure turnover growth in excess of thatachieved this year. The pressure on margins is forecast to continue and weexpect the first half of our new financialyear to be very challenging in this regardas our overhead structure increases inadvance of the annuity revenue streamscontained in our order books.

Appreciation On behalf of the Group I extend my sincere thanks and appreciation to our loyalcustomers for their continued support andwelcome our new customers. I also recordmy gratitude to the board and my management colleagues for their valuedguidance and great team spirit.

Last, but certainly not least, I salute ourvery talented and energetic staff throughoutthe Group for their continued loyalty,enthusiasm and commitment, particularlythrough the tough times of the past three years.

8

‘The strengthening of the Rand against

most major currencies over the past year

will make our export initiatives less profitable than previously projected.However, we remain convinced that ourproducts are competitively positioned inour chosen international markets.’

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IntroductionOperations throughout the Group are driven by the high-level business strategythat has been approved by the board. This strategy is:

• To create a South African-based, internationally listed proprietary application software business specialising in the provision of “best-of-breed” solutions for selected vertical retail markets through a global network of partners and distributors.

• To create a South African-based, JSE listed services business specialising in the provision of IT solutions and related services for selected vertical retail markets as well as associated supply chain manufacturing and logisticsbusinesses through a national network of branches and a direct sales force augmented by dealers for selected products and services in certain territories.

Market positioningStrategic market segmentation sinceSeptember 2001 has been defined as“Retail Solutions” and “Non RetailSolutions”. This segmentation has beenconsistently applied for the current financial year.

In order to align businesses within the UCS Group with the high level businessstrategy, a reorganisation project is underway which will ultimately see theGroup positioned in two clearly definedoperational businesses - software, and services & solutions.

The first phase of this project was initiatedin financial year 2003 and has involvedfour of the Group’s retail focused businessunits - Universal Computer Services (Pty) Ltd, Virtual Systems Technology(Pty) Ltd, UCS Software (Pty) Limited and CCS Software (Pty) Ltd. These fourcompanies are being combined into a single entity that will be known as UCS Software (Pty) Ltd which will comprise three business divisions - UCS Manufacturing, UCS Operations andUCS Sales and Marketing.

This project is scheduled for completion by September 2004.

The second phase of reorganisation, which will get underway after the formation of UCS Software (Pty) Ltd, willfocus in the integration of the remainingtwo retail software companies,Computerkit Holdings (Pty) Ltd and GaapPoint-of-Sale (Pty) Ltd. This phase is expected to be completed within approximately six months of the completion of phase I .

The third and final phase of the reorganisation of Group businesses willinvolve moving “generic services” withinthe Software businesses into Affinity Logic (Pty) Ltd. It is planned to run thisphase concurrently with the second phase.

In order to achieve its restructuring objectives, the Group has successfullynegotiated the buy-out of the minorityshareholders of CCS Software (Pty) Ltd(37%) and UCS Software (Pty) Ltd (7%) effective 1 October 2003. The minority

shareholders have converted their equityinto UCS Group Ltd shares and have thusshown their commitment to the successfulimplementation of the strategy.

Retail SolutionsLast year it was stated in this report thatprevailing market conditions presented theGroup with an ideal opportunity to expandits investments in the retail solutions market throughout Southern Africa.

This view, backed by the Group’s strongbalance sheet, led to the Group continuingto seek out strategic acquisitions.

Early in the financial year the business ofVirtual Systems Technology was acquiredfrom Softline Holdings (Pty) Ltd. Thisacquisition was strategic for many reasons.

In the first instance it introduced additionalexpertise in the development of clothingand fashion solutions into the Group.Secondly the company had developed an exciting and new-technology merchandising solution marketed under the brand name “Dolphin” that holds significant opportunity for the future. The company also commands a strongpresence in Cape Town, that furtherstrengthens the Groups skills and resourcesin the Western Cape as a region.

A second acquisition was carried out during the year with the Group acquiring51% of a services based business calledFernridge Consulting (Pty) Ltd.

Chief Operating Officer’s reportfor the year ended 30 September 2003

9

‘Market conditionspresented the Groupwith an ideal opportu-nity to expand its investments in theretail solutions market throughoutSouthern Africa’

‘In order to align businesses within the UCS Group with the high level businessstrategy, a reorganisation project is underway which will ultimately see theGroup positioned in two clearly definedoperational businesses - software, and services & solutions.’

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This company’s services are centered onusing custom developed demographicinformation, coupled with more generallyavailable demographic data sources. Thisdata is then integrated with the latest highresolution satellite photography and thecombined product is used to enable property and retail focused companies tomake informed decisions as regards store openings, store closures and storerelocations. The success of these services is measured in the optimisation of sales.

The final acquisition during the year was Affinity Logic Holdings (Pty) Ltd.This acquisition is key to the Group delivering on the second aspect of its high-level business strategy - the creation of a services business.

At the time of the acquisition, AffinityLogic management held a minority shareholding in Affinity Logic Holdings(Pty) Ltd. This minority interest has been converted into UCS Group Ltd equitywith management fully committed to the successful implementation of theGroup strategy.

Skills-based developmentThe retail market is arguably one of themost challenging industry sectors in anynational economy. Each industry segmenthas its own nuances and business drivers.Store owners and managers demand systems that optimise in-store operationalefficiency to drive down costs and improvereturns on assets and investments.

A discernable trend is underway towardssmaller retailers being replaced by consortiums that invest in multiple storesand then employ managers to run theseoutlets. This trend introduces demands for increased levels of sophistication in the solutions as there are requirements that incorporate remote control and effective management over multiple stores as critical success factors for theinvesting consortium.

In order to harness the retail software skillswithin the Group one of the key businessunits that has been established in UCSSoftware is that of a SoftwareManufacturing division. This division willultimately be measured and incentivised by its ability to re-use IP assets that it generates, its ability to reduce the time-to-market of new products and itsfocus on innovation on which to base sustained growth.

In future the majority of, if not all, software research and development undertaken by the Group will be carriedout by the Software Manufacturing division. This will have the added benefitof improved control and quantifiable measurement of the Group’s significantannual R&D investments.

Led by a team that has already obtainedinternational awards for the UCS Group’sActive Retail brand of products, theSoftware Manufacturing division is working towards obtaining an internationally recognised quality assurance certification during next year.This will confirm the division’s status as a world class supplier of software and software components. This division will become the cornerstone for the continued strategic drive into the international markets.

Successful development, customisation,implementation and support of profitenhancing retail solutions demand a depthand breadth of specialist skills that areacknowledged as the key differentiator inthe market.

Within UCS Operations, the Group hasarguably the top retail development andservices skills base in Southern Africa.With over 300 software developers providing solutions to more than 12,000retail outlets, the Group has built an enviable client base that spans almostevery discipline in retailing. Capabilitiesincluding furniture, clothing and fashion,FMCG, pharmacies, cellular, hardware andbuilding suppliers, fast food, restaurant,specialty and general merchandising, petrol and forecourt solutions.

Business alliances and international marketsOn the local front the Group remains committed to working through the dealercommunity established by UCS Software.This policy will be fine tuned during the2004 financial year with committed dealersbeing awarded either territories or sectorsof the market in which to provide solutions. Packaged solutions will be tailored to meet the demands of the singleretailer and the dealers will be responsiblefor growing UCS’s share of these markets.

The Group’s vision for developing the international market is based on establishing strong business alliances with professional partners.

10

‘Successful develop-ment, customisation,implementation andsupport of profitenhancing retail solutions demand adepth and breadth ofspecialist skills thatare acknowledged asthe key differentiatorin the market.’

‘The Group’s vision for

developing the interna-

tional market is based on establishing strongbusiness alliances withprofessional partners.Implementation of thisvision requires a substan-tial financial investmentand high degree ofpatience to ensure thatthe right partners areselected and developed.’

AR2003 10/12/03 4:47 pm Page 10

Implementation of this vision requires asubstantial financial investment and highdegree of patience to ensure that the rightpartners are selected and developed.

The rewards to UCS Group shareholdersonce this vision is fulfilled, will be significant. As mentioned in the CEO’sreport, the development of internationalmarkets has met with some success duringthe year. UCS Group has completed installations with Active Retail partners inVietnam, Dubai and Kuwait and hassecured its first order for its Java basedretail solution in the United Kingdom.

The Group is strongly positioned to workwith and support international businesspartners based on the ability to provideaward-winning Microsoft and Java-basedretail solutions.

While a strong Rand will impact exportmargins, the Group’s extensive retail skillsbase will always provide an extremelycompetitive positioning.

Sustainable business modelThe Group regards its commitment to building sustainable revenue streamsthat ensure that current software solutions remain at the forefront of technology and continue to meet the future business requirements of customers,as non-negotiable.

While the customer will always have theoption to acquire the software up-front and outright, the Group believes that itsbusiness model is totally aligned with thecustomer’s best interests. Most customersshare this belief as they continue to elect to enter into an annuity based, long-termbusiness relationship. The focus on building annuity revenues income during

the past financial year continued and wastranslated into significant growth in annuity revenues when compared to theprevious financial year.

As anticipated in the 2002 COO report therationalisation and consolidation of theretail software solutions industry in SouthAfrica is almost complete.

The consolidation of the four major subsidiaries sales teams into the UCS Salesand Marketing division should provide theGroup with a more focused “go-to-market”strategy. Customers will benefit from ahighly skilled professional sales force thatwill position the correct solutions for thespecific market being addressed.

Customers that have invested in moredated solutions and have not yet upgradedto the latest technologies supplied by UCSSoftware will be afforded the opportunityto upgrade to the latest technology via aplanned migration path.

Non Retail SolutionsThe integrated HR and payroll and ERPbusinesses that currently form part of theNon Retail Solutions market segmentationare to be re-positioned within the futureServices and Solutions business focus.

ERP SolutionsThe Group maintains the view that thedevelopment of ERP solutions in competition with major international vendors is not a desirable strategy and hastherefore chosen to work with leadinginternational suppliers that provide worldclass solutions on which to build Groupdominance in its chosen markets.

In line with this view, the Group’s Easirunsubsidiary provides ERP solutions

11

‘The Group is strongly positioned to work

with and support international business

partners based on the ability to provide

award-winning Microsoft and Java-based

retail solutions.’

distributed by Microsoft BusinessSolutions under the brand names Navision,and Axapta with Affinity certified as a SAPhosting and implementation partner.

The Group successfully integrates some ofits Retail Software into these major ERPsolutions thus providing additional value tocustomers requiring an end-to-end solution.

Major international ERP vendors are positioning themselves to support and workclosely with certified value-added resellers(VARs) that choose to focus on chosenmarkets. In certain industry sectors thevendor/VAR relationship may be based on an exclusive agreement while in particularly large industry sectors marketsegmentation will be implemented throughalternate arrangements.

The Group’s standing as an extremelystrong and well-established specialist in the retail solutions and services sector positions it as an ideal partner in the ERP arena.

Integrated HR and payroll solutionsThe Accsys subsidiary remains one of theleading suppliers of HR and payroll solutions in South Africa. Significantinvestments have continued in this company which will ensure that in thefuture it becomes recognised as the premierprovider of these solutions.

Specialising in “people management” solutions including time and attendanceand access control, Accsys continues tooperate in a highly competitive and fragmented market. Consolidation in thismarket sector is anticipated to continueover the next few years with this trendbeing driven by the significant level ofcapital required to migrate dated technology offerings to state-of-the-art HR and payroll solutions. Accsys is well positioned to take advantage of consolidation pressures that are underwayin its sector and that are expected to gather momentum.

Opportunities are being explored to moreclosely align the HR and payroll solutionswith main focus areas within the Group.This initiative is designed to provideAccsys with expanded market opportuni-ties and additional differentiation.Competitive advantage will also be createdby the company being able to leverageother sales and marketing resourcesthroughout the Group to take up a market-leading position.

AR2003 10/12/03 4:47 pm Page 11

The UCS Group continued to grow duringthe financial year under review with revenue up 42% to R306-million (2002:R216-million). Organic growth contributed12% to the top line increase with the balance being attributable to acquisitions.It is once again pleasing to note thatgrowth in revenue has not been to thedetriment of annuity revenue, which grew40% to R175-million and comprises 57%(2002: 58%) of the Group’s total revenue.

Revenue recognition in certain of the subsidiary companies was not in line withthe Group revenue recognition policy.Management therefore decided that itwould be appropriate to account for anadjustment to ensure that the subsidiarycompanies are aligned with the Group policy going forward. Adjustments to prior year comparatives and a change in accounting policy are noted in theaccompanying financial statements (refer note 34).

The Group’s growth in earnings beforeinterest, tax, depreciation, amortisation andexceptional items also reflected top linerevenue growth with an increase of 40% to R66-million (2002: R47-million).

Profit before tax showed a 41% increaseafter taking into account the following:

• An increase in depreciation and amortisation to R20-million (2002: R13-million).

• An increase in research and development costs to R24-million (2002: R17-million). The Group continues to expense these costs as incurred, and

• A provision for the deficit on the defined benefit fund was raised of R1.9-million (2002: Nil).

The increase in the depreciation and amortisation charge is once again largelyrelated to the increase in computer software and intangible assets arising from acquisitions while the increase in theresearch and development costs supportsour strategic objective to be recognised as a world class supplier of software technology in our chosen markets.

We have investigated and are in theprocess of closing the defined benefit fund based on the mutual consensus of thefund’s current beneficiaries.

The beneficiaries have agreed to convert toa defined contribution fund on the basis

The Group realised a 32% increase in earnings per share to 8.7 cents (2002: 6.6 cents) and a 13% increase inheadline earnings per share to 10.3 cents(2002: 9.1 cents).

The balance sheet for the first time reflectsmaterial borrowings of R24-million whichhave arisen as a result of the acquisition of Affinity Logic Holdings (Proprietary)Limited and which are due to be settledwithin the first half of the 2004 financialyear. This has had a negative impact on the current ratio of the Group to 1.4:1(2002: 3.7:1) which is anticipated toimprove following the settlement of the loans.

Revenue received in advance of R40.3-million (2002: R 1.8-million) comprising R30.1-million long term andR10.2-million short term, has also beenseparated out on the face of the balancesheet for the first time. This is due to thefact that through the acquisition of Affinity Logic this liability has become asignificant component of the Group’s balance sheet. Affinity Logic received anamount upfront for services to be deliveredover a long-term contract and this amountis released to income as the services inrespect of the contract are delivered.

The net asset value per share of the Group has increased by 7% to 77.5 cents(2002: 72.3 cents) while the net tangibleasset value per share has decreased sharplyto 36.8 cents (2002: 52.6 cents) mainly dueto the goodwill that has arisen on theAffinity Logic acquisition.

Cash generated from operations has grown by 35% to R41.3-million (2002: R30.7-million) and this supports the quality of the earnings achieved by theGroup. The cash and cash equivalents atyear end amount to R73.9-million (2002: R63.1-million).

A final dividend of 1.8 cents per share inrespect of the year ended 30 September2002, amounting to R4.8-million was paidin January 2003 while an interim dividendof 2 cents (2002: 1.8 cents) per shareamounting to R4.2-million was paid inJune 2003.

A final dividend for the financial yearunder review of 2 cents per share has been declared and is due to be paid inJanuary 2004.

Chief Financial Officer’s reportfor the year ended 30 September 2003

12

‘Cash generated from

operations has grown

by 35% to R41.3-million

(2002: R30.7-million)

and this supports

the quality of the

earnings achieved by

the Group.’that the present value of the actuarial valued deficit will be settled through aonce off payment to be made directly intothe defined contribution fund on behalf ofthe beneficiary. Due to the closing of thefund the full deficit has been raised in thecurrent financial year.

The Group’s staff costs have increased toR152-million (2002: R103-million) andthis is in line with the significant increasein head count from 653 to 979, which islargely related to the Group’s acquisitionsover the past financial year.

The net investment income after financecharges has decreased by 26% to R5.6-million (2002: R7.6-million) mainlydue to the use of cash resources to fundstrategic acquisitions and the repurchase of UCS Group shares.

The increase in the net taxation charge to R4.4-million (2002: R0.6-million) isessentially due to the increase in the normal corporate taxation charge to R8.1-million (2002: R5.9 million) and thedecrease in the deferred tax asset raised of R4.1-million (2002: R5.6-million).

Tax losses available for set off in subsidiaries against future taxable incomeis estimated at R42.6-million (2002: R28.5-million). This estimated tax loss excludes any tax losses that havearisen in Affinity Logic (Proprietary)Limited, a wholly owned subsidiary company of Affinity Logic Holdings(Proprietary) Limited whose taxableincome for the period 1999 to 2001 hasbeen re-assessed and given rise to a contingent tax liability of R15-million(refer note 31.3). Affinity Logic haslodged an objection against this re-assessment and is awaiting a reply.

AR2003 10/12/03 4:47 pm Page 12

Group income statement

2003 2002 2001 2000 1999

R’000 R’000 R’000 R’000 R’000

Revenue 306,218 216,271 177,420 133,599 105,814

Profit before interest

and investment income 18,376 9,406 26,198 24,768 31,978

Net interest and investment

income received 5,630 7,632 9,262 16,414 15,320

Profit before tax 24,006 17,038 35,460 41,182 47,298

Taxation 4,380 600 6,523 9,654 14,320

Profit after taxation 19,626 16,438 28,937 31,528 32,978

Attributable (to) from

minority shareholders (294) 132 (174) - -

Net profit for the year 19,332 16,570 28,763 31,528 32,978

Ordinary shares in issue

net of treasury shares (‘000) 221,973 240,093 263,255 272,700 272,700

Earnings per share (cents) 8.7 6.6 10.7 11.6 12.1

Headline earnings per share (cents) 10.3 9.1 10.8 11.6 12.1

Dividends per share (cents) 3.8 1.8 - - -

Share price (cents) 84 63 85 135 250

Group balance sheet

2003 2002 2001 2000 1999

R’000 R’000 R’000 R’000 R’000

Non current assets

Property, plant and equipment 53,570 19,357 17,729 11,946 10,327

Intangible assets 90,305 47,294 28,166 24,350 24,001

Investments and loans receivable 9,576 24,108 29,353 23,073 16,352

Deferred taxation 12,201 8,125 1,019 1,375 451

Current assets

Inventory 5,325 4,711 3,505 2,698 734

Trade and other receivables 64,426 37,450 38,995 29,579 17,243

Cash and cash equivalents 73,907 63,081 88,196 99,510 81,605

Taxation 3,071 2,562 - - -

Total assets 312,381 206,688 206,963 192,531 150,713

Equity and liabilities

Shareholders’ interest 171,939 173,670 182,201 158,543 115,578

Minority interests 352 - 174 - -

Non current liabilities

Long and medium-term loans 33,914 3,713 280 390 12,332

Deferred taxation - - - - 54

Current liabilities

Trade and other payables 103,922 28,584 22,654 26,140 11,704

Taxation 2,254 721 1,654 7,458 11,045

Total equity and liabilities 312,381 206,688 206,963 192,531 150,713

Five year financial review for the year ended 30 September 2003

13

0

50

100

150

200

250

300

350

‘99 ‘00 ‘01 ‘02 ‘03

Total revenue

Annuity revenue

Rmil

Yrs

‘99 ‘00 ‘01 ‘02 ‘03

Once off revenue

Annuity revenue

0

20

40

60

80

100

120

140

160

180

Yrs

Rmil

Revenue

Revenue

AR2003 10/12/03 4:47 pm Page 13

2003 2002 2001

Ordinary share performanceWeighted average number of shares in issue (‘000) 223,366 251,478 267,626

Earnings per share (cents) 8.7 6.6 10.7

Headline earnings per share (cents) 10.3 9.1 10.8

Net asset value per share (cents) 77.5 72.3 69.2

Cash flow from operating activities per share (cents) 18.1 9.9 7.2

Dividends per share (cents)

Interim declared and paid 2.0 1.8 -

Final declared 2.0 1.8 -

Dividend cover 4.4 3.7 -

Profitability and asset managementOperating income to revenue 21.6% 21.9% 26.3%

Return on total equity 13.3% 12.9% 17.0%

Asset turnover ratio (times) 1.9 2.2 2.4

Debtors days 60.7 64.5 59.2

Inventory turnover (times) 32.1 33.8 32.7

Current ratio (times) 1.4 3.7 5.4

EmployeesNumber of employees at year end 979 653 523

Revenue per employee (R’000) 312.8 331.2 339.2

Operating profit per employee (R’000) 67.6 72.4 89.1

DefinitionsThe summary set out below incorporates definitions of terms used in this annual report.

• Net asset value per share - total equity divided by the number of ordinary shares in issue at year end.

• Cash flow from operating activities per share - cash flow from operating activities divided by the weighted average number of ordinary shares in issue.

• Return on total equity - the percentage of headline earnings to total equity.

• Asset turnover ratio - current year’s revenue divided by average operating assets.

• Operating assets - total assets less investments and bank balances.

• Debtors days - the average debtors divided by current year’s revenue multiplied by 365.

• Inventory turnover - average inventory divided by current year’s cost of sales multiplied by 365.

• Current ratio - The ratio of current assets to current liabilities.

• Operating profit - The profit before interest received and/or paid, investment income, depreciation and amortisation, research and development, and exceptional items.

Analysis of key ratios for the year ended 30 September 2003

14

‘99 ‘00 ‘01

0

10

20

30

40

50

60

70

80

‘02 ‘03

Cents

Yrs ‘99 ‘00 ‘01 ‘02 ‘030

2

4

6

8

10

12

14

16

18

Cents

Yrs

Net asset value per share Cash flow from operating activities per share

AR2003 10/12/03 4:47 pm Page 14

The board of directors of UCS GroupLimited confirms its commitment to theprinciples of openness, integrity andaccountability as advocated in the KingCode on Corporate Governance.

Board of directorsThe board of directors as set out on page 2of this report comprises a non-executivechairman, five executive directors and fivenon-executive directors.

The board meets at least four times a year.Non-executive directors have access tomanagement, including the company secretary, and to the information that isrequired to carry out their duties andresponsibilities fully and effectively.

The directors are entitled and authorised, at the company’s expense, to seek independent professional advice about the affairs of the Group.

Executive directors do not have long-termservice contracts with the company. In terms of the company’s articles of association directors are subject to retirement by rotation and stand for re-election by shareholders at least everythree years.

Internal control and risk managementIt is the directors’ responsibility to ensurethe maintenance of adequate accountingrecords and to prepare annual financialstatements that present the state of affairsand results of the company and the Group.The external auditors are responsible forindependently auditing and reporting onthe fair presentation of these annual financial statements.

The annual financial statements referred to in this report have been prepared bymanagement in accordance with SouthAfrican Statements of Generally AcceptedAccounting Practice. They are based onappropriate accounting policies, whichhave been consistently applied and are supported by reasonable and prudent judgment and estimates. The annual financial statements have been prepared ona going concern basis and the directors aresatisfied that the company will remain agoing concern for the foreseeable future.

The directors are responsible for theprocess of risk management and the system of internal controls. Internal control systems are designed to providereasonable, but not absolute, assurance asto the reliability of the annual financial

statements and to adequately safeguard,verify and maintain accountability forassets. These controls are monitoredthroughout the Group by management andemployees. Close management supervisionmitigates the risks that arise where certainduties are not separated due to limitedadministration staff within the subsidiarycompanies. Processes are in place to monitor internal controls, to identify material breakdowns and implement timelycorrective action.

As part of the monitoring process, theGroup has adopted a policy whereby the external auditors of the respective subsidiary companies are required to report at half year and year end to the audit committee on the system of internal controls and whether there has been any significant breakdown in the controls.We are pleased to report that no significantbreakdown has been reported at the year-end.

Based on the audit procedures performedto express an opinion on the fair presenta-tion of the annual financial statements, the auditors concur with the directors’statements on going concern and financialinternal controls.

Health and HIV/AIDS reportingThe Group recognises the potential negative impact that the continuing spreadof HIV/AIDS could have on its own and its clients’ workforces as well as the profitability of its clients. Consequently the board has taken the view that it willsupport any meaningful and logical actionsinitiated by the South African Governmentin conjunction with those companies comprising the Medical Aid sector of theSouth African economy.

Various companies within the Group havedocumented HIV/AIDS policies and theboard has undertaken before its nextreporting period to align these policiestowards a common goal. It is anticipatedthat as an initial action the Group will:

• Review all Group companies’ respective human resource policies and practices from an HIV/AIDS perspective.

• Embark on a basic education and aware-ness campaign that should promote a more informed attitude to both STD and HIV/AIDS which, in turn, should ensure a higher level of buy-in into voluntary counselling and testing programmes should these be deemed necessary.

Corporate social investmentThe UCS board has initiated a project torefocus the Group’s corporate social investment (CSI) programmes. The CSIinitiatives will now fall under the scope,objectives and control of a division called,“The UCS Foundation” which managementwill consider registering as a Section 21(not-for-profit) entity in the future.

In principle the UCS Foundation will beexternally focused and will direct 75 percent of CSI funding towards skillsdevelopment and job creation, includinglearnerships and educational bursaries. Thebalance of CSI funding will be allocated tocommunity development projects.

It is the Group’s intention to contributetowards an increase in the country’s ICT skills base among historically disadvantaged individuals with the newstrategy timed to positively impact skillsdevelopment and employment equity overthe next two to three years.

Projects include:• The creation of 30-40 learnerships

during 2004 with workplace experience offered across the majority of UCS group companies. The learnerships are focused primarily on IT technical and software development qualifications and have been approved in principle by both the ISETT SETA and the selected core training provider.

• The continuation of tertiary level bursaries for historically disadvantaged students. Ten bursary beneficiaries are studying a range of business degrees at the University of the Witwatersrand (WITS), with majors in information systems, marketing, accounting and finance. The majority of bursary students are placed into UCS Group companies for vacation work experience and, where feasible, full-time employment on graduation.

Community projects underway within thegroup include active employee support forTswelopele, a community-based initiativethat promotes the sale of handmade bagsand other home industry and handicraftitems by people who would otherwise haveno income. The Group is also a proudsponsor of Reach For A Dream (RFAD)and the Johannesburg Association for theAged (JAFTA).

Corporate governance for the year ended 30 September 2003

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AR2003 10/12/03 4:47 pm Page 15

The Group continues to encourage membercompanies to create their own initiativesthat lie beyond the scope of the UCS Foundation.

Audit committeeThe audit committee is comprised of two non-executive directors and one executive director.

• Mr P Terblanche (Chairman)• Mr EB Levenstein• Mr NA Michelson

The committee meets at least twice a year,at half year and year end, with additionalmeetings convened as necessary. The auditcommittee is entitled to invite one or moreexecutives to attend the meeting with therequirement however that the Group chief financial officer and external audit representative attend all audit committee meetings.

The overall objective of the committee is to assist the directors to discharge their duties related to safeguarding assets,the operation of adequate systems and controls and the review of financial information including interim and annualfinancial statements.

The committee met on four occasions during the year. Each meeting was attendedby the external auditors and by the Groupchief financial officer.

The audit committee has satisfied itself that the annual financial statements as published in this report presents a balancedassessment of the company’s position, performance and prospects.

Remuneration committee The UCS Group Limited RemunerationCommittee is comprised of three non-executive directors.

• Mr BP Hattingh (Chairman)• Mr EB Levenstein• Mr JR Claassen

The terms of reference of the remunerationcommittee are to:

• Determine on behalf of the Board and the shareholders of the company the broad policy for executive remuneration, and approve the entire individual remuneration packages for each executive director and other senior executives of both the holding company and its respective subsidiary companies.

• Encourage enhanced company and Group performance through the remuneration policy.

• Recommend to the board what it considers to be fair reward for individual contribution and contribution to the achievement of corporate goals.

• Provide a mechanism for assurance to all stakeholders in the organisation that all aspects of executive remuneration are decided upon by the remuneration committee constituted of non-executive directors.

The committee is required to meet at least twice a year to review and approveremuneration practices and invites anysuch executive directors to attend meetingsas deemed necessary to discuss perform-ance of the executive directors. Where necessary the remuneration committee will draw on outside advice with regards to remuneration comparisons, philosophiesand trends.

UCS Group Limited directors’ emolumentsfor the financial year ended 30 September2003 have been disclosed in note 3.4 to theannual financial statements.

Employee participationThe Group and its operating subsidiariesand divisions are committed to creating aworkplace in which individuals of abilityand application can develop rewardingcareers, regardless of their background,race or gender.

Employee participation is part of the culture of the Group and employees areinvolved in developing and refining ofGroup values and participating in taskforces to investigate employee and related benefits.

TransformationThe Group remains committed to supporting social and workplace transformation in a free and democraticSouth Africa. Attention is focused on training and development with particularemphasis on people from previously disadvantaged communities.

The Group requires all its subsidiaries tocomply with employment equity legislationand submit and implement their respectiveplans at individual company level.

Code of ethics The Group has published its basic tenets,which are set out on page 2 of this report.All employees are required to maintainhigh ethical standards in ensuring that the company’s business practices are conducted in a manner which in all reasonable circumstances complies withthese tenets.

Relations with shareholdersThe Group is represented by SouthgroInvestor Relations, an independent professional consultancy, and the investorrelation programme includes communica-tions with shareholders through interim andannual reports, meetings and presentations.

Insider tradingDirectors and other senior managementofficials of the Group who have access tounpublished price-sensitive information inrespect of any of the Group’s companiesmay not trade in UCS Group Limited’sshares during defined closed periods. At a minimum these periods run betweenthe end of the interim and annual reportingperiods and the announcement of resultsfor such period.

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AR2003 10/12/03 4:47 pm Page 16

Certificate of compliance

In terms of Section 268 G(d) of theCompanies Act 1973, as amended, I certifythat the Company has lodged with theRegistrar of Companies all such returns asare required by the Companies Act and all such returns are true, correct and up to date.

V M A Broadrick

The directors of the company are responsible for the maintenance of adequate accounting records and the preparation and integrity of the annualfinancial statements, group annual financialstatements and related financial information included in this report.The annual financial statements are prepared in accordance with South AfricanStatements of Generally AcceptedAccounting Practice.

The directors are also responsible for the Group’s system of internal controls and believe that these controls provide reasonable, but not absolute, assurance asto the reliability of the financial statementsand to adequately safeguard, verify andmaintain accountability of assets and toprevent and detect material misstatementand loss. The directors are satisfied that the

We have audited the annual financial statements and group annual financialstatements of UCS Group Limited set out on pages 18 to 42 for the year ended 30 September 2003. These financial statements are the responsibility of thecompany’s directors. Our responsibility is to express an opinion on these financialstatements based on our audit.

ScopeWe conducted our audit in accordance with statements of South African AuditingStandards. Those standards require that we plan and perform the audit to obtainreasonable assurance that the financialstatements are free of material misstate-ment. An audit includes:

• examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,

• assessing the accounting principles used and significant estimates made by management, and

• evaluating the overall financial statement presentation.

Company will be a going concern for theforeseeable future and have adopted the going concern basis in preparing thefinancial statements. The annual financialstatements and group annual financialstatements set out on pages 18 to 42 wereapproved by the Board of Directors on 21 November 2003 and are signed on itsbehalf by:

R G Goodman

J D Bright

We believe that our audit provides a reasonable basis for our opinion.

Audit opinionIn our opinion, the annual financial statements fairly present, in all materialrespects, the financial position of the company and of the Group at 30 September 2003, and the results of their operations and cash flows for the year then ended in accordance with SouthAfrican Statements of Generally AcceptedAccounting Practice and in the mannerrequired by the Companies Act in South Africa.

Chartered Accountants (SA)Registered Accountants and AuditorsJohannesburg21 November 2003

UCS Group Limitedand its subsidiaries

Annual financial statementsfor the year ended 30 September 2003

Report of the Independent Auditors to the Members of UCS Group Limited

Directors responsibilities and approval of the annual financial statements

17

AR2003 10/12/03 4:47 pm Page 17

ordinary share that they previously held. This is discussed in more detail under theUCS Group Ltd Staff Share Trust below.

The company also acquired and cancelled4,070,000 preference shares which were not listed on the JSE SecuritiesExchange SA.

In part payment for the acquisition of100% of the equity of Affinity LogicHoldings (Proprietary) Limited, 10,768,000ordinary shares were issued at 60c pershare to certain members of the management of Affinity Logic Holdings(Proprietary) Limited. These managementmembers are restricted from trading inthese shares for a period of 4 years with an entitlement to trade a maximum of 25% per year commencing on the anniversary of the effective date of thetransaction being 1 September 2003.

In addition to the shares that were issued as part payment of the purchase price forAffinity Logic Holdings (Proprietary)Limited, the directors agreed to allow certain members of the current as well as previous Affinity Logic Holdings(Proprietary) Limited management to subscribe for a maximum of 5,000,000ordinary shares for 60c each. This offerwas fully subscribed for and the cashreceived on 29 September 2003. Theseshares were issued under the authority provided by the shareholders at the general meeting held on 19 September2003 and the JSE Securities Exchange SAapproved the listing effective on 6 October 2003.

The authorised and issued capital isdetailed in note 16 to the financial statements.

Tangible and intangible assetsCapital expenditure incurred during theyear was made up as follows:

2003 2002

R’000 R’000

Tangible assets (note 8.2) 49,230 11,017

Intangible assets (note 9.2) 49,931 23,455

99,161 34,472

There have been no major changes in thenature of the above assets during theaccounting period or any changes in thepolicy relating to their use.

The directors have pleasure in submittingtheir report together with the annual financial statements of the company and of the Group for the year ended 30 September 2003.

Nature of businessUCS Group Ltd is an investment holdingcompany for a group of information technology businesses focused on the provision of software solutions and outsourcing services in selected niche markets.

Your Company and its subsidiaries operateas an information technology (IT) servicesgroup listed on the JSE SecuritiesExchange SA.

Financial performanceGroup net profit for the year ended 30 September 2003 was R19,332,155(2002 - R16,570,860) representing headlineearnings per ordinary share of 10.3 cents(2002 - 9.1 cents) based on the weightedaverage number of shares as set out in note7 to the financial statements.

Full details of the financial position andresults of the company and its subsidiariesare set out in the accompanying financial statements.

Share capitalDuring the year the company repurchased3,733,270 (2002 - 5,199,500) ordinaryshares for R2,128,466 (2002 - R3,448,086)and cancelled these shares after they were de-listed by the JSE SecuritiesExchange SA.

The repurchase was concluded in accordance with the general authority thatwas granted to the directors at the annualgeneral meeting held on 24 January 2003.

The shares that had previously been repurchased by a wholly owned subsidiarycompany of the Group, 26,529,310 sharesand held as treasury shares, were acquiredby the company, delisted and cancelled.

In re-structuring the Group’s Staff ShareIncentive Scheme, the company repurchased 25,155,000 ordinary sharesfrom the UCS Group Ltd Staff Share Trust.

In terms of the approval that was obtainedfrom shareholders at the general meetingheld on 26 March 2003. These shares werealso delisted and cancelled and the individual beneficiaries of the Staff ShareTrust were granted a share option per

Share incentive schemesThe company has adopted Staff ShareTrusts in order to enable employees of the company and its subsidiaries to havethe opportunity of acquiring an interest in the equity of the company, thereby providing such employees with furtherincentive to advance the Group’s interestsand to promote an identity of purposebetween the employees and the shareholders of the company.

1. UCS Group Ltd Staff Share TrustThis trust was established during July 1998. The total number of ordinary shares originally taken up by the trust amounted to 27,270,000 shares. During the year 25,155,000 shares were repurchased from employees at a total cost of R15,148,151. There were no ordinary shares(2002- 4,494,000 shares) held by the trust, for future issue to employees. Options in respect of the 25,155,000 ordinary shares repurchased above, were issued to the previous beneficiaries of the trust in the ratio of 1 option to 1 share previously held, at a strike price of 60 cents per share, exercisable in tranches of 25% per annum, commencing 1 April 2004.

2. UCS Group Ltd Staff Share Scheme IIThis trust was established during February 2002. A total of 4,070,000 redeemable preference shares originally allotted were bought back and cancelled. The terms relating to this trust are detailed in note 16 to the financial statements.

DividendsA final dividend of 1,8c per share inrespect of the year ended 30 September2002 totalling R4,815,009 was paid on 14 January 2003.

An interim dividend of 2c (2002 - 1,8c) per share totalling R4,224,090 (2002-R4,908,600 ) was paid on 17 June 2003.

SecretaryVerity Mary-Ann Broadrick served as secretary throughout the year.

Business address: Postal address:20th Floor P O Box 31266209 Smit Street BraamfonteinBraamfontein 20172001

Directors’ report

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AR2003 10/12/03 4:47 pm Page 18

DirectorateThe names of the directors of the Companyin office at the year end are set out on page 2.

In accordance with the Company’s articlesof association Adv R G Goodman, SC (Chairman) and Messrs D C Sparrowand P Terblanche retire by rotation, but being eligible, offer themselves for re-election.

The aggregate interest of the directors inthe issued share capital of the company isset out in note 3.4.

SubsidiariesThe company acquired the total issuedshare capital of Affinity Logic Holdings(Proprietary) Limited as well as 51% of the issued share capital of FernridgeConsulting (Proprietary) Limited.

A wholly owned subsidiary, VirtualSystems Technology (Proprietary) Limited (formerly Electable Trading(Proprietary) Limited) (previously dormant), acquired the business of Virtual Systems Technology.

Details of all the subsidiaries are set out on page 42 of the financial statements.

The holding company’s interest in theaggregate profits after tax of the subsidiaries amounted to R13,359,823(2002 - R10,286,108) and losses amountedto R23,528,341(2002 - R22,114,445).

Subsidiaries under warrantiesComputerkit Holdings (Proprietary) LimitedDuring a previous accounting period, the company acquired the total issued sharecapital of this company. The acquisition is the subject of a profit warranty in order to determine the finalpurchase price. A payment was made on 5 November 2003 which represents fulland final settlement of the purchase pricein terms of the acquisition agreement.

GAAP Point of Sale (Proprietary) LimitedDuring a previous accounting period, thecompany acquired 51% of the issued sharecapital of this company. The acquisition issubject to a profit warranty in order todetermine the final purchase price.

Fernridge Consulting (Proprietary) LimitedOn 1 February 2003, the company acquired51% of the issued share capital of thiscompany. The acquisition is subject to aprofit warranty in order to determine thefinal purchase price.

Details of all profit warranties are set outin note 31 to the financial statements.

Major shareholdersBesides the directors’ holdings (direct andindirect), the directors have not beeninformed of any shareholdings other thanthose detailed, which are in excess of 5% of the issued share capital of the company at 30 September 2003.

Shareholder No. of shares % of issued

capital

Old Mutual Group 21,875,572 9,86%

Oasis Asset

Management Group 11,177,176 5,04%

Post balance sheet eventsA final amount of R9,250,000 was paid tothe vendors of Computerkit Holdings(Proprietary) Limited as the companyachieved its profit warranty in terms of theacquisition agreement for the current year.

A payment of R5,914,972 was made to thevendors of CCS Software (Proprietary)Limited for the remaining 37,24% of theissued share capital that was not previouslyheld by the company. This amount was settled by the issue of 8,524,954 ordinaryshares for R5,119,972 and the payment of R800,000 in cash.

The remaining 7% of the issued share capital of UCS Software (Proprietary)Limited not held by the company, wasacquired for R1,199,543 by the issue of1,999,238 ordinary shares in the company.

The acquisition of the shares in CCSSoftware (Proprietary) Limited and UCSSoftware (Proprietary) Limited not ownedby the company was the first stage ofimplementation of the merging of the retailsoftware focused position of the Group.

The final dividend for the year of 2c (2002- 1,8c) per share was declared on 21 November 2003.

No other material events occurred between the accounting date and the dateof this report.

Change in accounting policyCertain subsidiaries within the Group differed in their recognition of revenue incomparison to the Group’s policy.

A change in accounting policy in the relevant subsidiaries has been adopted retrospectively and comparative figureshave been restated. The effect of thischange in accounting policy is more fully set out in note 34 to the financial statements.

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Notes Group Company

2003 2002 2003 2002

R’000 R’000 R’000 R’000

Revenue 2.1 306,218 216,271 3,672 4,465

Cost of sales 57,012 44,297 - -

Gross profit 249,206 171,974 3,672 4,465

Operating expenses (230,830) (162,568) (10,413) (12,710)

Amortisation of trademark, goodwill and intellectual property 3.2 6,920 4,327 20 20

Depreciation of fixed assets 3.3 13,541 8,610 186 -

Impairment of loan to staff share trust 1,204 8,115 1,204 8,115

Provision for deficit on defined benefit fund to be terminated 3.9 1,910 - - -

Research and development costs 24,239 16,826 - -

Selling, general and administration 183,016 124,690 9,003 4,575

Profit (loss) before finance and investment income 3 18,376 9,406 (6,741) (8,245)

Investment income 4 8,700 9,146 24,200 8,700

Finance (charges) income 5 (3,070) (1,514) 15,043 17,688

Profit before taxation

24,006 17,038 32,502 18,143

Taxation 6 4,380 600 2,697 2,003

Profit after taxation 19,626 16,438 29,805 16,140

Attributable (to) from minority shareholders 18 (294) 132 - -

Net profit for the year 19,332 16,570 29,805 16,140

Earnings (cents)

Per share 7 8.7 6.6

Fully diluted 7 7.3 6.5

Headline earnings (cents)

Per share 7 10.3 9.1

Fully diluted 7 8.7 9.0

Reconciliation per circular 7/2002

Headline earnings as previously reported 12.5 10.9

Adjusted for intangible asset amortisation (2.2) (1.2)

Adjusted for change in accounting policy - (0.6)

Headline earnings (per circular 7/2002) 10.3 9.1

Dividends per share (cents) 3.8 1.8

Income statementfor the year ended 30 September 2003

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Notes Group Company

2003 2002 2003 2002

R’000 R’000 R’000 R’000

Non current assets

Property, plant and equipment 8 53,570 19,357 624 58

Intangible assets 9 90,305 47,294 59 79

Investments in subsidiaries 10 - - 207,440 155,662

Investments 11 5,000 22,200 65,000 65,000

Staff share trusts 12 2,558 1,624 1,808 1,624

Loans receivable 13 2,018 284 - -

Deferred taxation 14 12,201 8,125 26 24

165,652 98,884 274,957 222,447

Current assets

Inventory 15 5,325 4,711 - -

Trade and other receivables 64,426 37,450 4,169 2,926

Cash and cash equivalents 73,907 63,081 6,918 34,076

Taxation 3,071 2,562 - 107

146,729 107,804 11,087 37,109

Total assets 312,381 206,688 286,044 259,556

Equity and liabilities

Issued capital 16 1,110 1,221 1,110 1,353

Share premium 17 50,256 62,685 54,516 82,730

Accumulated profits 120,573 109,764 175,324 154,557

Total equity 171,939 173,670 230,950 238,640

Minority interest 18 352 - - -

Non current liabilities

Long term loans 19 3,800 3,713 - -

Revenue in advance 30,114 - - -

Loans from subsidiaries 20 - - 49,750 19,037

33,914 3,713 49,750 19,037

Current liabilities

Trade and other payables 49,767 21,782 4,369 1,798

Taxation 2,254 721 889 -

Provisions 21 19,727 5,037 86 81

Current portion of long-term liabilities 19 24,237 17 - -

Revenue in advance 10,191 1,748 - -

106,176 29,305 5,344 1,879

Total equity and liabilities 312,381 206,688 286,044 259,556

Balance sheetat 30 September 2003

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Ordinary Preference

share share Share Distributable

capital capital premium reserve Total

R’000 R’000 R’000 R’000 R’000

Group

Balance at 30 September 2001 1,317 20 79,158 101,113 181,608

Change in accounting policy (refer note 34) - - - (3,441) (3,441)

Restated balance 1,317 20 79,158 97,672 178,167

Shares cancelled (26) - (3,422) - (3,448)

Treasury shares purchased (90) - (13,051) - (13,141)

Cash dividend paid - - - (4,478) (4,478)

Net profit for the year - - - 16,570 16,570

Balance at 30 September 2002 1,201 20 62,685 109,764 173,670

Shares issued at a premium 54 - 6,407 - 6,461

Shares cancelled (19) - (2,110) - (2,129)

Staff share trust shares purchased and cancelled (126) - (15,022) - (15,148)

Preference shares redeemed - (20) (1,600) - (1,620)

Share issue expenses - - (104) - (104)

Cash dividends paid - - - (8,523) (8,523)

Net profit for the year - - - 19,332 19,332

Balance at 30 September 2003 1,110 - 50,256 120,573 171,939

Company

Balance at 30 September 2001 1,363 20 86,701 143,326 231,410

Shares cancelled (30) - (3,971) - (4,001)

Cash dividend paid - - - (4,909) (4,909)

Net profit for the year - - - 16,140 16,140

Balance at 30 September 2002 1,333 20 82,730 154,557 238,640

Shares issued at a premium 54 - 6,407 - 6,461

Shares cancelled (19) - (2,110) - (2,129)

Staff share trust shares purchased and cancelled (125) - (15,022) - (15,147)

Treasury shares cancelled (133) - (15,785) - (15,918)

Preference shares redeemed - (20) (1,600) - (1,620)

Share issue expenses - - (104) - (104)

Cash dividends paid - - - (9,038) (9,038)

Net profit for the year - - - 29,805 29,805

Balance at 30 September 2003 1,110 - 54,516 175,324 230,950

Statement of changes in equityfor the year ended 30 September 2003

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Notes Group Company

2003 2002 2003 2002

R’000 R’000 R’000 R’000

Cash flow from operating activities 40,395 24,863 21,504 20,148

Cash generated from (utilised by) operations 22 41,259 30,675 (5,332) (95)

Investment income 8,700 9,146 24,200 8,700

Working capital changes 23 9,996 718 (1,666) 2,229

Cash generated from operating activities 59,955 40,539 17,202 10,834

Finance (charge) income (3,070) (1,514) 15,043 17,687

Taxation paid 24 (7,967) (9,684) (1,702) (3,464)

Dividends paid (8,523) (4,478) (9,039) (4,909)

Cash flow from investing activities 11,510 (36,647) (60,457) (37,661)

Acquisition of intangible assets 25 (3,939) (23,455) - -

Acquisition of property, plant and equipment 26 (13,333) (11,017) (753) (58)

Acquisition of businesses/subsidiaries 27 (50,781) - (54,681) -

Cash acquired on acquisition of businesses/subsidiaries 27 63,570 - - -

Investment in subsidiaries - - - (4,400)

Loans advanced (3,082) (2,902) (5,023) (33,221)

Proceeds on disposal of property, plant and equipment 1,875 709 - -

Proceeds on disposal of investment 17,200 18 - 18

Cash flow from financing activities (41,079) (13,331) 11,795 (10,744)

Ordinary shares cancelled (2,128) (3,448) - (3,448)

Preference shares cancelled (1,620) - (1,621) -

Amount received on account of shares to be issued 3,000 - 3,000 -

Loans raised - 3,432 30,714 -

Change in minority shareholders interest 335 (174) - -

Staff share trust shares acquired and cancelled (15,148) (13,141) (33,194) (553)

Payment of share issue expenses (104) - (104) -

Loans repaid (25,414) - 13,000 (6,743)

Cash and cash equivalents

- Net increase (decrease) 10,826 (25,115) (27,158) (28,257)

- At beginning of year 63,081 88,196 34,076 62,333

- At end of year 73,907 63,081 6,918 34,076

Cash flow statementfor the year ended 30 September 2003

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1. Accounting policiesThe annual financial statements and group annual

financial statements are prepared on the historical cost

basis and incorporate the following principal accounting

policies which have been consistently applied in all

material respects. These policies comply with South

African Statements of Generally Accepted Accounting

Practice. The financial statements are prepared on a

going concern basis.

1.1 Basis of consolidation

The group annual financial statements incorporate the

annual financial statements of the company and its

subsidiaries. The operating results of the subsidiaries are

included from the date on which control of the assets and

operations of the acquiree have actually passed.

All inter-company transactions and balances have

been eliminated. Premiums arising on the acquisition

of subsidiaries and any excess of the net assets of

a subsidiary over the cost of acquisition are treated

in terms of the group’s accounting policy for

intangible assets.

1.2 Property, plant and equipment

Property, plant and equipment is stated at cost to the

group less accumulated depreciation.

Depreciation is calculated on cost using the straight line

method over the estimated useful lives of the assets to

estimated residual values, as follows:

- Computer equipment 3 years

- Computer software 3 years

- Furniture, fixtures and fittings 6 years

- Motor vehicles 5 years

- Office equipment 5 years

- Rental equipment 3 years

- Improvements to

leased premises Remaining period of the lease

1.3 Intangible assets

Intangible assets are included at cost less amounts

written off.

Amortisation is calculated by a charge to income

computed on a straight line basis so as to write off the

cost over the following periods:

- Trademarks 10 years

- Intellectual property 10 years

- Goodwill 20 years

Goodwill arising on consolidation represents the excess

of the cost of acquisition over the Group’s interest in the

fair value of the identifiable assets and liabilities of a

subsidiary at the date of acquisition. Goodwill is

recognised as an asset and amortised on a straight line

basis following an assessment of its foreseeable life.

Current estimates of goodwill’s useful life do not exceed

20 years.

On disposal of a subsidiary, the attributable amount of

unamortised goodwill is included in the determination of

the profit or loss on disposal.

1.4 Impairment

At each balance sheet date, the Group reviews the

carrying amounts of its tangible and intangible assets

to determine whether there is any indication that those

assets may be impaired. If any such indication exists, the

recoverable amount of the asset is estimated in order to

determine the extent of the impairment (if any). Where it

is not possible to estimate the recoverable amount for an

individual asset, the recoverable amount is determined

for the cash-generating unit to which the asset belongs.

If the recoverable amount of an asset is estimated to be

less than its carrying amount, the carrying amount of the

asset is reduced to its recoverable amount. Impairment

losses are recognised as an expense immediately, unless

the relevant asset is carried at a revalued amount under

another Standard, in which case the impairment loss is

treated as a revaluation decrease under the Standard.

Where an impairment loss subsequently reverses, the

carrying amount of the asset is increased to the

revised estimate of its recoverable amount, so that the

increased carrying amount does not exceed the carrying

amount that would have been determined had no

impairment loss been recognised for the asset in prior

years. A reversal of an impairment loss is recognised as

income immediately, unless the relevant asset is carried

at a revalued amount under another Standard, in which

case the reversal of the impairment loss is treated as a

revaluation increase under that other Standard.

1.5 Financial instruments

Financial instruments are initially measured at cost,

which includes transaction costs. Subsequent to initial

recognition these instruments are measured as set

out below.

Investments:

Unlisted investments are shown at fair value, unless

their fair value cannot be reliably determined, in

which case they are shown at cost less accumulated

impairment losses.

Trade and other receivables:

Trade and other receivables originated by the Group are

stated at cost less provision for doubtful debts.

Cash and cash equivalents:

Cash and cash equivalents are measured at fair value

based, where appropriate, on the relevant exchange

rates at balance sheet date.

Trade and other payables:

Non-derivative financial liabilities are recognised at

amortised cost, comprising original debt less principal

payments and amortisations.

Derivative instruments:

Derivative instruments are measured at fair value.

1.6 Inventory

Inventory is stated at the lower of actual cost or net

realisable value. Cost has been determined on the first-in

first-out basis.

1.7 Leasing

Leases are classified as finance leases whenever the

terms of the lease transfer substantially all the risks

and rewards of ownership to the lessee. All other leases

are classified as operating leases.

Where assets are being held under finance leases, the

cash cost of the asset is capitalised with the equivalent

amount being shown as a liability to the lessor. Lease

payments are apportioned between a reduction in liability

to the lessor and interest charged to income.

Rentals payable under operating leases are charged to

income on a straight line basis that reflects the pattern of

usage of the economic benefits from the leased asset

over the term of the relevant lease.

1.8 Deferred taxation

Deferred taxation is accounted for using the balance

sheet liability method in respect of temporary differences

arising from differences between the carrying amount of

assets and liabilities in the financial statements and the

corresponding tax bases used in the computation of

taxable profit. In principle, deferred tax liabilities are

recognised for all taxable temporary differences and

deferred tax assets are recognised to the extent that it is

probable that taxable profits will be available against

which deductible temporary differences can be utilised.

Such assets and liabilities are not recognised if the

temporary difference arises from goodwill (or negative

goodwill) or from the initial recognition (other than in a

business combination) of other assets and liabilities in

a transaction, which affects neither the tax profit nor the

accounting profit.

Deferred tax liabilities are recognised for taxable

temporary differences arising on investments in

subsidiaries and associates, and interests in joint

ventures, except where the Group is able to control the

reversal of the temporary difference and it is probable

that the temporary difference will not reverse in the

foreseeable future.

Deferred tax is calculated at current tax rates. Deferred

tax is charged or credited in the income statement,

except when it relates to items credited or charged

directly to equity, in which case the deferred tax is also

dealt with in equity.

Deferred tax assets and liabilities are offset when they

relate to income taxes levied by the same taxation

authority and the Group intends to settle its current tax

assets and liabilities on a net basis.

Notes to financial statementsfor the year ended 30 September 2003

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1.9 Foreign currency

Assets and liabilities denominated in foreign currency are

accounted for at the rates of exchange ruling at the

balance sheet date, or at the forward rate determined in

forward exchange contracts. Gains and losses arising on

translation are dealt with in the income statement.

1.10 Investments

Investments are stated at cost less provision for any

permanent diminution in value.

1.11 Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and

deposits with banks and other financial institutions

and investments in money market instruments.

1.12 Retirement benefits

Payments to defined contribution retirement benefit plans

are charged as an expense as they fall due.

For defined benefit retirement benefit plans, the cost of

providing benefits is determined using the projected unit

credit method, with actuarial valuations being carried out

on a regular annual basis. Actuarial gains and losses

which exceed 10 per cent of the greater of the present

value of the Group’s pension obligations and the fair

value of the plan assets are amortised over the expected

average remaining working lives of the participating

employees. Past service cost is recognised immediately

to the extent that the benefits are already vested,

and otherwise amortised on a straight line basis over

the average period until the amended benefits

become vested.

The amount recognised in the balance sheet represents

the present value of the defined benefit obligation as

adjusted for unrecognised actuarial gains and losses and

unrecognised past service cost, and reduced by the fair

value of the plan assets. Any asset resulting from this

calculation is limited to unrecognised actuarial losses and

past service cost, plus the present value of available

refunds and reductions in future contributions to the plan.

1.13 Revenue recognition

Revenue from the sale of goods

Revenue from the sale of goods is recognised when

significant risks and rewards of ownership are transferred

to the buyer.

Revenue arising from the rendering of services

Revenue arising from the rendering of services,

which include computer processing services, software

development charges, license fees, installation and

maintenance charges and training, is recognised on

the accrual basis in accordance with the substance of

the agreement.

Finance income

Interest is recognised when it accrues to the group on a

time proportion basis, taking account of the principal

outstanding and the effective yield of the asset.

Investment income

Cash dividends and the full cash equivalent of

capitalisation share awards received, where applicable,

are recognised when the right to receive payment or

transfer is established.

1.14 Research and development expenditure

Research and development expenditure is written off in

the period in which it is incurred.

1.15 Provisions

A provision is recognised in the balance sheet when the

Group has a legal or constructive obligation as a result of

a past event and it is probable that it will be required to

settle the obligation.

2. Revenue2.1 Revenue, which represents turnover, comprises

sales of hardware, software, processing services,

development charges, license fees, installation and

maintenance charges, training charges and commission

received, exclusive of value added tax.

Group Company

2003 2002 2003 2002

R’000 R’000 R’000 R’000

2.2 Gross revenue comprises the

following major classes:

Turnover 306,218 216,271 - -

Dividends 8,700 9,146 24,200 8,700

Interest and finance income 5,966 6,856 17,930 20,146

Administration fees - - 3,672 4,465

320,884 232,273 45,802 33,311

Notes to financial statementsfor the year ended 30 September 2003

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AR2003 10/12/03 4:47 pm Page 25

Group Company

2003 2002 2003 2002

R’000 R’000 R’000 R’000

3. Profit (loss) before finance and investment incomeis stated after taking into account the items detailed below:

3.1 Auditors’ remuneration

Fee for audit - current 954 674 190 149

Under provision prior years 32 13 - -

Fee for other services 80 71 - -

1,066 758 190 149

3.2 Amortisation of intangible assets

Trademark 3,570 2,593 20 20

Goodwill 1,304 555 - -

Intellectual property 2,046 1,179 - -

6,920 4,327 20 20

3.3 Depreciation of property, plant and equipment

Rental equipment 2,695 1,209 - -

Computer software 3,028 2,372 186 -

Computer equipment 5,043 3,037 - -

Furniture, fixtures and fittings 1,014 485 - -

Motor vehicles 217 316 - -

Office equipment 570 489 - -

Improvements to leased premises 940 646 - -

Land and buildings 34 56 - -

13,541 8,610 186 -

3.4 Directors’ remuneration and interests

3.4.1 Non-executive directors

Services as directors 142 117 142 117

Consulting fees 267 493 267 493

Executive directors

Salaries and bonuses 3,510 2,583 3,510 2,583

Retirement, medical and other benefits 955 667 955 667

Total directors’ remuneration 4,874 3,860 4,874 3,860

Paid by subsidiaries 2,803 2,390

Remuneration paid by company 2,071 1,470

Executive Other Total Total

Directors Salary Bonus benefits 2003 2002

J D Bright 796 58 308 1,162 1,020

D F Coles 763 55 244 1,062 948

N A Michelson 699 57 213 969 785

D C Sparrow 448 100 145 693 75

P Fitzgerald 494 40 45 579 422

3,200 310 955 4,465 3,250

Notes to financial statementsfor the year ended 30 September 2003

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3.4.1 Directors’ remuneration and interests (continued)

Fees Consulting Fees 2003 2002

Non-Executive Directors R’000 R’000 R’000 R’000

R G Goodman 30 - 30 52

J R Claassen 30 - 30 20

R J Eliot 22 - 22 20

B P Hattingh (refer note 33.2) 30 - 30 25

P Terblanche 30 267 297 493

142 267 409 610

Total paid 4,874 3,860

3.4.2 Directors interests in share capital

The aggregate interests of the directors in the issued ordinary share capital of the company are as detailed:

Non-executive Direct Indirect

‘000 ‘000

R J Eliot 9 -

R G Goodman 5 -

E B Levenstein 24,000 -

24,014 -

Executive

J D Bright 5,945 31,400

D F Coles 7,595 29,760

P Fitzgerald - 5,119

N A Michelson 600 34

14,140 66,313

September 2003 38,154 66,313

September 2002 31,165 72,659

3.4.3 Future entitlements under share option schemes No of shares

‘000

N A Michelson 1,000

D C Sparrow 500

1,500

3.4.4 Directors’ interests in contracts

The directors have declared at the approval date of this report that they are not materially interested in any transaction of significance with the company or any of its subsidiaries.

Group Company

2003 2002 2003 2002

R’000 R’000 R’000 R’000

3.5 Gain (loss) on disposal of property, plant and equipment 398 (70) - -

3.6 Loss on disposal of listed Investments - 15 - 15

3.7 Operating lease charges

Premises 7,402 5,711 - -

Office equipment 333 104 - -

7,735 5,815 - -

3.8 Staff costs 151,736 102,631 5,187 1,596

3.9 Provision for deficit on defined benefit fund to be terminated 1,910 - - -

Notes to financial statementsfor the year ended 30 September 2003

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4. Investment incomeGroup Company

2003 2002 2003 2002

R’000 R’000 R’000 R’000

Dividends received

Unlisted 8,700 9,146 24,200 8,700

5. Finance (charges) incomeNet finance (charges) income is made up as follows:

Interest paid 9,036 8,370 2,887 2,459

Interest received: 4,739 2,946 16,703 16,237

Subsidiary companies - - 15,761 14,904

Other sources 4,739 2,946 942 1,333

Net interest (paid) received (4,297) (5,424) 13,816 13,778

Capital appreciation on endowment investments 1,227 3,910 1,227 3,910

(3,070) (1,514) 15,043 17,688

6. Taxation6.1 South African normal taxation

- Current 8,048 5,882 2,515 1,702

- Prior year 224 61 - 61

Capital gains taxation 184 247 184 247

Deferred taxation (4,076) (5,590) ( 2) (7)

4,380 600 2,697 2,003

6.2 Reconciliation of the rate of taxation % % % %

South African normal tax rate 30,00 30,00 30,00 30,00

Adjusted for:

Exempt income (35,47) (20,78) (23,47) (20,85)

Non-deductible items 21,78 16,53 1,20 0,24

Capital gains taxation 0,79 1,27 0,57 1,36

Assessed losses utilised 3,47 (20,70) - -

Prior year adjustment 0,02 (4,07) - -

Other (2,34) 1,27 - 0,29

Effective rate 18,25 3,52 8,30 11,04

6.3 Estimated tax losses available for set off in subsidiaries against future taxable income 42,617 28,500 - -

6.4 Unutilised STC Tax credits (tax value) 2,156 2,198

Notes to financial statementsfor the year ended 30 September 2003

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Group

2003 2002

R’000 R’000

7. Earnings per shareEarnings per share is based on earnings attributable to shareholders of the company and the weighted average number of shares in issue during the year.

Earnings attributable to ordinary shareholders as previously reported 19,332 18,118

Adjustment for change in accounting policy - (1,548)

Earnings attributable to ordinary shareholders (restated) 19,332 16,570

Earnings per share (cents) as previously reported 8.7 7.2

Adjusted for change in accounting policy - (0.6)

Earnings per share (cents) restated 8.7 6.6

Adjusted for: (net of taxation) 3.8 3.7

Amortisation of intangible assets 2.8 1.4

Impairment of loan to staff share trust 0.5 2.3

Deficit on defined benefit fund 0.6 -

(Gain) loss on disposal of fixed assets (0.1) -

Headline earnings per share (cents) as previously reported 12.5 10.3

Adjustment required by circular 7/2002

Amortisation of intangible assets excluding goodwill (2.2) (1.2)

Headline earnings per share Circular 7/2002 10.3 9.1

Weighted average number of shares in issue (‘000) 223,366 251,478

Actual number of ordinary shares in issue (‘000) 221,973 240,093

Weighted average number of shares in issue - fully diluted (‘000) 264,045 255,548

Earnings (fully diluted) (cents) 7.3 6.5

Headline earnings (fully diluted) (cents)-circular 7/2002 (restated) 8.7 9.0

Notes to financial statementsfor the year ended 30 September 2003

29

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8. Property, plant & equipmentAccumulated Carrying

Cost Depreciation value

R’000 R’000 R’000

8.1 2003 Group

Computer software 38,622 30,285 8,337

Computer equipment 87,600 56,482 31,118

Furniture, fixtures and fittings 10,785 5,718 5,067

Motor vehicles 1,067 709 358

Office equipment 3,304 1,909 1,395

Improvements to leased premises 4,272 2,906 1,366

Rental equipment 9,706 3,777 5,929

Total assets 155,356 101,786 53,570

2002 Group

Immovable property 593 108 485

Computer software 10,362 6,059 4,303

Computer equipment 13,998 8,513 5,485

Furniture, fixtures and fittings 3,295 1,419 1,876

Motor vehicles 1,520 741 779

Rental equipment 5,628 1,482 4,146

Office equipment 2,553 1,478 1,075

Improvements to leased premises 2,810 1,602 1,208

Total assets 40,759 21,402 19,357

Accumulated Carrying

Cost Depreciation value

R’000 R’000 R’000

2003 Company

Computer software 808 186 622

Office equipment 2 - 2

810 186 624

2002 Company

Computer software 58 - 58

8.2 Movement summary Carrying

Carrying value Current value

beginning of year Additions Disposals depreciation end of year

R’000 R’000 R’000 R’000 R’000

2003 Group

Immovable property 485 - (451) (34) -

Computer software 4,303 7,062 - (3,028) 8,337

Computer equipment 5,485 31,008 (332) (5,043) 31,118

Furniture, fixtures and fittings 1,876 4,235 (30) (1,014) 5,067

Motor vehicles 779 27 (231) (217) 358

Improvements to leased premises 1,208 1,098 - (940) 1,366

Office equipment 1,075 893 (3) (570) 1,395

Rental equipment 4,146 4,907 (429) (2,695) 5,929

19,357 49,230 (1,476) (13,541) 53,570

2002 Group

Immovable property 473 68 - (56) 485

Computer software 5,661 1,140 (125) (2,373) 4,303

Computer equipment 4,405 4,336 (219) (3,037) 5,485

Furniture, fixtures and fittings 1,893 480 (12) (485) 1,876

Motor vehicles 1,100 234 (240) (315) 779

Improvements to leased premises 1,692 162 - (646) 1,208

Office equipment 1,325 252 (12) (490) 1,075

Rental equipment 1,181 4,345 (172) (1,208) 4,146

17,730 11,017 (780) (8,610) 19,357

Notes to financial statementsfor the year ended 30 September 2003

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8.2 Movement summary

Carrying

Carrying value Current value

beginning of year Additions Disposals depreciation end of year

R’000 R’000 R’000 R’000 R’000

2003 Company

Software 58 750 - (186) 622

Office equipment - 2 - - 2

58 752 - (186) 624

2002 Company

Software - 58 - - 58

9. Intangible assetsAmounts Carrying

Cost written off value

R’000 R’000 R’000

9.1 2003 Group

Trademarks 30,594 13,191 17,403

Intellectual property 20,460 3,698 16,762

Goodwill 58,435 2,295 56,140

109,489 19,184 90,305

2002 Group R’000 R’000 R’000

Trademarks 30,594 9,621 20,973

Intellectual property 13,460 1,652 11,808

Goodwill 15,504 991 14,513

59,558 12,264 47,294

2003 Company

Trademark 250 191 59

2002 Company

Trademark 250 171 79

9.2 Movement summary

Carrying

Carrying value Current value

beginning of year Additions Disposals depreciation end of year

R’000 R’000 R’000 R’000 R’000

2003 Group

Trademarks 20,973 - - (3,570) 17,403

Intellectual property 11,808 7,000 - (2,046) 16,762

Goodwill 14,513 42,931 - (1,304) 56,140

47,294 49,931 - (6,920) 90,305

2002 Group

Trademarks 14,768 8,799 - (2,594) 20,973

Intellectual property 8,987 4,000 - (1,179) 11,808

Goodwill 4,411 10,656 - (554) 14,513

28,166 23,455 - (4,327) 47,294

2003 Company

Trademark 79 - - (20) 59

2002 Company

Trademark 99 - - (20) 79

Notes to financial statementsfor the year ended 30 September 2003

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10. Investments in subsidiariesCompany

2003 2002

R’000 R’000

Shares at cost 55,398 7,256

Indebtedness by subsidiary companies 152,042 148,406

207,440 155,662

Details of subsidiaries are reflected on page 30.

11. InvestmentsGroup Company

2003 2002 2003 2002

R’000 R’000 R’000 R’000

11.1 Unlisted investments 5,000 22,200 65,000 65,000

11.2 Unlisted investments comprise

650 13,38% redeemable cumulative participating preference

shares in Darrenfield Investments (Pty) Ltd 65,000 65,000 65,000 65,000

Less loan payable Quarryfield Investments (Proprietary) Limited (60,000) (42,800) - -

5,000 22,200 65,000 65,000

Directors valuation of unlisted investments 5,000 22,200 65,000 65,000

The coupon rate of 13,38% is linked to the interest rate payable in respect of the R153 Government gilt. These shares have been pledged as security for loans granted by

Quarryfield Investments (Pty) Ltd (per note 32.2).

The loans from Quarryfield Investments (Pty) Ltd currently bear interest at the rate of 16,67% p.a. which is compounded semi-annually in arrears and which is payable six-monthly.

The interest rate is linked to the interest rate payable in respect of the R153 Government Stock.

The capital amount of the loans is repayable no later than 31 March 2010. The loans are unsecured in the subsidiary companies but have been guaranteed by this company.

As security for the performance of Darrenfield Investments (Pty) Ltd, Quarryfield Investments (Pty) Ltd has re-ceded to the company all rights, title and interest to the loans granted to the

subsidiaries and the staff share trust.

The company has entered into an option agreement with Peregrine Finance (Pty) Ltd to place any preference shares issued to the company in Darrenfield Investments (Pty) Ltd to Peregrine

Finance (Pty) Ltd for R100,000 per share. The option period will extend for 3 years and 1 day after the issue of the first share and ending 3 years and 1 day after the issue of the last share.

12. Staff share trustsGroup Company

2003 2002 2003 2002

R’000 R’000 R’000 R’000

UCS Group Limited Staff Share Scheme II 16 1,624 16 1,624

UCS Group Limited Staff Share Trust 1,792 - 1,792 -

Loan 11,110 8,115 11,110 8,115

Impairment of loan 9,318 8,115 9,318 8,115

Affinity Logic Holdings (Proprietary) Limited

Executive share purchase trust 750 - - -

2,558 1,624 1,808 1,624

These loans bear interest at mutually agreeable rates and have no fixed date for repayment.

13. Loans receivableThese loans bear interest at the prime bank overdraft rate and have no fixed date for repayment.

Notes to financial statementsfor the year ended 30 September 2003

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14. Deferred taxationGroup Company

2003 2002 2003 2002

R’000 R’000 R’000 R’000

The movement is reconciled as follows:

Balance - beginning of year 8,125 2,534 24 17

Income statement credit 4,076 5,591 2 7

Balance - end of year 12,201 8,125 26 24

Comprising:

Deferred taxation asset 12,295 8,206 26 24

- Revenue received in advance 2,320 2,138 - -

- Provisions 2,393 1,460 26 24

- Assessed tax losses 6,946 3,975 - -

- Capital allowances (6) (78) - -

- Other 642 711 - -

Deferred taxation liability (94) (81) - -

- Capital allowances (180) (189) - -

- Provisions 86 108 - -

12,201 8,125 26 24

15. InventoryConsumables 36 24

Merchandise for resale 5,289 4,687

5,325 4,711

16. Share capitalGroup Company

2003 2002 2003 2002

R’000 R’000 R’000 R’000

16.1 Authorised

480,000,000 ordinary shares of 0.5c each 2,400 2,400 2,400 2,400

20,000,000 redeemable preference shares of 0.5c each 100 100 100 100

400,000 A class shares 2 2 2 2

600,000 B class shares 3 3 3 3

800,000 C class shares 4 4 4 4

1,000,000 D class shares 5 5 5 5

1,200,000 E class shares 6 6 6 6

1,600,000 F class shares 8 8 8 8

2,400,000 G class shares 12 12 12 12

3,200,000 H class shares 16 16 16 16

4,000,000 I class shares 20 20 20 20

4,800,000 J class shares 24 24 24 24

Total authorised share capital 2,500 2,500 2,500 2,500

Notes to financial statementsfor the year ended 30 September 2003

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Group Company

2003 2002 2003 2002

R’000 R’000 R’000 R’000

Issued

221,972,519 (266,622,000) ordinary shares of 0.5c each 1,110 1,333 1,110 1,333

Nil (4,070,000) redeemable preference shares of 0.5c each - 20 - 20

81,400 A class shares - - - -

122,100 B class shares - 1 - 1

162,800 C class shares - 1 - 1

203,500 D class shares - 1 - 1

244,200 E class shares - 1 - 1

325,600 F class shares - 2 - 2

488,400 G class shares - 2 - 2

651,200 H class shares - 3 - 3

814,000 I class shares - 4 - 4

976,800 J class shares - 5 - 5

1,110 1,353 1,110 1,353

Treasury shares acquired by subsidiary

Nil (26,529,311) ordinary shares of 0.5c each - 132 - -

Total issued share capital 1,110 1,221 1,110 1,353

16.2 Rights and limitations attaching to the redeemable preference shares (incentive shares).

A total of 20,000,000 (2002 - 15,930,000) incentive shares remain unissued for the benefit of the UCS Group Limited Share Scheme II.

The incentive shares have limited rights relative to the ordinary shares.

The incentive shares will compulsorily automatically convert, at staggered intervals, into ordinary shares, if certain objectively determinable criteria based on the performance of the company,

are met. The incentive shares will not be listed on the JSE Securities Exchange SA.

Holders of the incentive shares will have the right to receive a dividend equal to 10% of any dividend declared and paid to ordinary shareholders.

16.3 Detailed conditions and rights relating to the various classes of the par value redeemable preference shares may be inspected at the company’s registered office.

16.4 The directors issued 5,000,000 ordinary shares for a total of R3,000,000 to the vendors of Affinity Logic Holdings (Pty) Ltd. Such shares had been paid for at 30 September 2003.

16.5 The unissued shares are under the control of the directors until the forthcoming annual general meeting.

17. Share premiumGroup Company

2003 2002 2003 2002

R’000 R’000 R’000 R’000

Balance at beginning of year 62,685 79,158 82,730 86,701

Premium on shares (cancelled) issued during year 4,297 (3,971) 4,297 (3,971)

Share issue expenses (104) - (104) -

Premium on treasury shares (15,022) (12,309) (30,807) -

Loss on treasury shares cancelled - (193) - -

Preference shares cancelled (1,600) - (1,600) -

50,256 62,685 54,516 82,730

18. Minority interestAt beginning of year - 174

Acquisition of shares by (from) minority 58 (42)

Share of net income (loss) 294 (132)

At end of year 352 -

Notes to financial statementsfor the year ended 30 September 2003

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19. Long term loansGroup Company

2003 2002 2003 2002

R’000 R’000 R’000 R’000

19.1

Loans from shareholders of subsidiaries 2,325 3,165

Unsecured loan 1,475 264

Installment sale agreement - 2

Mortgage bond - 282

3,800 3,713

19.2 The long term loans are unsecured with no date specified for repayment. An amount of R250,000 bears interest at prime overdraft rate while the balance of the loans are interest free.

(2002 -R283,417 loans secured over assets and interest bearing.)

19.3 Included under current liabilities are the following:

Former shareholders of subsidiary 1,474 -

Interest bearing liability 22,763 17

24,237 17

The interest bearing liability carries interest at 20,35% p.a and is repayable in 2004.Promissory notes amounting to R23,589,633 have been furnished to the loan creditor in respect of all interest

payments due in terms of the loan agreement. (2002 - installment sale agreement).

20. Loans from subsidiaries

Accsys (Pty) Ltd 1,852 1,121

Affinity Logic Holdings (Pty) Ltd 25 -

Computerkit Holdings (Pty) Ltd 3,069 -

Easirun Software (Pty) Ltd 4,524 2,501

Universal Computer Services (Pty) Ltd 30,924 13,032

Universal Knowledge Software (Pty) Ltd 5,989 2,383

Virtual Systems Technology (Pty) Ltd 3,367 -

49,750 19,037

These loans are unsecured and bear interest at the call account rate from time to time. No date has been specified for repayment of these loans.

Notes to financial statementsfor the year ended 30 September 2003

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21. ProvisionsProvision Provision Provision Provision

for for for for

leave pay incentive programmers onerous

bonus commission contracts Other Total

2003 Group

Balance - beginning of year 4,441 373 198 - 26 5,038

Additional amount provided (net) 5,532 1,780 170 2,271 4,936 14,689

Balance - end of year 9,973 2,153 368 2,271 4,962 19,727

2002 Group

Balance - beginning of year 3,095 - - - - 3,095

Additional amount provided (net) 1,346 373 197 - 26 1,942

Balance - end of year 4,441 373 197 - 26 5,037

2003 Company

Balance - beginning of year 80 - - - - 80

Additional amount provided (net) 6 - - - - 6

Balance - end of year 86 - - - - 86

2002 Company

Balance - beginning of year 57 - - - - 57

Additional amount provided (net) 24 - - - - 24

Balance - end of year 81 - - - - 81

22. Cash generated from (utilised by) operationsGroup Company

2003 2002 2003 2002

R’000 R’000 R’000 R’000

Net profit before taxation 24,006 17,038 32,502 18,143

Adjustments for:

(Gain) loss on disposal of assets (398) 86 - 15

Depreciation and amortisation 20,461 12,936 206 20

Impairment of loan 1,204 8,115 1,204 8,115

Investment income (8,700) (9,146) (24,200) (8,700)

Net interest paid (received) 4,297 5,424 (13,817) (13,778)

Capital appreciation on endowment investments (1,227) (3,910) (1,227) (3,910)

Minority shareholders share of (profit) loss (294) 132 - -

for deficit on defined benefit fund 1,910 - - -

41,259 30,675 (5,332) (95)

23. Working capital changes

Decrease (increase) in inventory 1,879 (1,206) - -

(Increase) decrease in accounts receivable (1,773) (19,756) (1,243) 541

Increase (decrease) in accounts payable 9,890 21,680 (423) 1,688

Net decrease(increase) 9,996 718 (1,666) 2,229

24. Taxation paid

Amount prepaid (unpaid) - beginning of year 1,840 (1,654) 107 (1,346)

Taxation charge for year (8,456) (6,190) (2,698) (2,011)

Acquisition of businesses/subsidiaries ( note 27) ( 534) - - -

Amount unpaid - end of year (817) (1,840) 889 (107)

Amount paid (7,967) (9,684) (1,702) (3,464)

Notes to financial statementsfor the year ended 30 September 2003

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25. Acquisitions of intangible assetsGroup Company

2003 2002 2003 2002

R’000 R’000 R’000 R’000

Trademarks - 8,799

Intellectual property 7,000 4,000

Goodwill 42,931 10,656

49,931 23,455

Less shown under acquisition of businesses/subsidiaries (note 27) 45,992 -

3,939 23,455

26. Acquisitions of property, plant and equipment

Immovable property - 68

Computer software 7,061 1,140 750 58

Motor vehicles 27 234 - -

Computer equipment 31,008 4,336 - -

Furniture, fixtures and fittings 4,235 480 - -

Office equipment 893 252 3 -

Improvements to leased premises 1,098 162 - -

Rental equipment 4,908 4,345 - -

49,230 11,017 753 58

Less shown under acquisition of businesses/subsidiaries (note 27) 35,897 - - -

13,333 11,017 753 58

27. Acquisitions of businesses/subsidiariesAffinity Virtual

Logic Fernridge Systems

Holdings Consulting Technology Total

R’000 R’000 R’000 R’000

Property, plant and equipment ( note 26) (34,343) (88) (1,466) (35,897)

Inventories (2,493) - - (2,493)

Trade receivables (17,776) (220) (5,878) (23,874)

Cash and cash equivalents (61,622) (71) (1,877) (63,570)

Taxation (receivable) payable (55) 15 575 535

Loans receivable (1,329) - - (1,329)

Short term investments (790) - - (790)

Short term provisions 10,508 - - 10,508

Long term debt 2,104 152 - 2,256

Trade payables 12,821 177 5,123 18,121

Short term portion of long term liability 47,465 - - 47,465

Revenue in advance 37,801 - - 37,801

(7,709) (35) (3,523) (11,267)

Minority interest - 18 - 18

(7,709) (17) (3,523) (11,249)

Intellectual property & goodwill ( note25) (35,611) (905) (9,477) (45,993)

Total purchase price (43,320) (922) (13,000) (57,242)

Less: Settled by issue of shares 6,461 - - 6,461

Group acquisitions (36,859) (922) (13,000) (50,781)

Goodwill acquired (3,900)

CCS Software (Proprietary) Limited (400)

Computerkit Holdings (Proprietary) Limited (3,500)

Shares in subsidiaries acquired -

UCS Software (Proprietary) Limited -

UCS Technology Services (Proprietary) Limited -

Virtual Systems Technology (Proprietary) Limited -

Company acquisitions (54,681)

Notes to financial statementsfor the year ended 30 September 2003

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28. Retirement benefits

The Group provides retirement benefits for all its permanent employees. A number of defined contribution funds and a defined benefit fund exists which are governed by the Pension Funds Act

of 1956. In respect of the defined contribution funds, the employer contributes at a fixed rate and for the defined benefit fund, the employer contributes at a rate which is adequate to fully fund

the benefits.

The defined benefit plan was actuarially valued at 28 February 2003. Provision has been made for all benefit obligations, taking into account the accounting policy, and no events have taken place

which could have materially affected the fund. Full provision has been made for the deficit in the defined benefit fund which is in the process of being terminated.

The company has no company equity securities included in any of the benefit plan assets nor are there any properties owned by the plan and by the company or any of its subsidiaries.

Group

2003 2002

R’000 R’000

Present value of funded obligations 13,148 10,670

Less fair value of plan assets 11,238 10,051

Actuarial losses (1,910) (619)

Unrecognised actuarial losses - (619)

Recognised actuarial losses (1,910) -

(1,910) (619)

There are no unrecognised past service costs nor any unrecognised assets.

29. Commitments

29.1 Operating lease commitments

Due within one year 8,077 8,572

Due within two to five years 20,556 18,107

Total operating lease commitments 28,633 26,679

29.2 Capital commitments

Commitments in respect of capital expenditure approved by the directors of a subsidiary, not yet contracted for. 2,275 -

30. Financial instruments

Credit risk

Financial assets which potentially subject the Group to concentrations of credit risk consist principally of cash, short-term deposits and trade receivables. The Group’s cash equivalents and

short-term deposits are placed with high credit quality financial institutions. Trade receivables are presented net of the allowance for doubtful receivables. Credit risk with respect to trade

receivables is limited due to the large overall customer base of the Group. Accordingly, the Group has no significant concentration of credit risk.

The carrying amounts of financial assets included in the consolidated balance sheet represent the Group’s exposure to credit risk in relation to these assets.

Foreign exchange risk

A subsidiary company with trade receivables denominated in US Dollars amounting to $219,021, equivalent to SA R1,523,863 did not enter into forward exchange contracts to hedge its exposure

to foreign exchange fluctuations (2002 - R NIL).

Fair values

At 30 September 2003 and 2002, the carrying amounts of cash and short-term deposits, receivables, payables and accrued expenses, and short-term borrowings approximated their fair values

due to the short-term maturities of these assets and liabilities.

The fair values of long-term borrowings are not materially different from the carrying amounts.

Notes to financial statementsfor the year ended 30 September 2003

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Interest rate risk

The group’s exposure to interest rate risk and the effective interest rates on financial instruments at balance sheet date are:

Weighted

average Non-

effective Floating interest

interest rate interest rate bearing Total

% R’000 R’000 R’000

30 September 2003

Assets

Cash 5,92 73,907 - 73,907

Receivables 12,50 2,018 64,426 66,444

Total financial assets 75,925 64,426 140,351

Liabilities

Payables - 109,798 109,798

Loans 12,63 23,013 5,024 28,037

Total financial liabilities 23,013 114,822 137,835

Net financial assets 52,912 (50,396) 2,516

30 September 2002

Total financial assets 63,365 44,656 108,021

Total financial liabilities 565 38,938 39,503

Total financial assets 62,800 5,718 68,518

31. Contingent liabilities

Contingent liabilities exist in respect of the following:

31.1 GAAP Point of Sale (Proprietary) Limited

An adjustment to the purchase price for this company may become payable should certain profit warranties be met. The Company may acquire additional equity (up to 10%) at no cost should the

profit warranties not be achieved. The warranty commenced on 1 February 2003 and terminates on 31 January 2005.

31.2 Fernridge Consulting (Proprietary) Limited

An amount limited to a maximum of R1,500,000 may become payable in respect of the purchase price should certain profit warranties be met for the years ended 31 January 2005.

31.3 Affinity Logic Holdings (Proprietary) Limited

A subsidiary company has been re-assessed on the 1999 to 2001 tax years. At present, a contingent liability of R15,027,061 exists in terms of this re-assessment. The company has lodged an

objection against this re-assessment and is awaiting a reply.

Notes to financial statementsfor the year ended 30 September 2003

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32. Guarantees

32.1 Guarantees amounting to R427,600 (2002 - R286,900) for the rental of premises by subsidiary companies have been issued by the bankers of those subsidiaries in favour of

their landlords.

32.2 A guarantee has been issued in favour of Quarryfield Investments (Pty) Ltd on behalf of subsidiary companies and the UCS Group Ltd Staff Share Trust to secure their indebtedness to it.

The amounts owing to Quarryfield Investments (Pty) Ltd by the various borrowers amount to R60,000,000. As additional security, the company has pledged its unlisted investment in Darrenfield

Investments (Pty) Ltd to the loan creditor.

33. Related party transactions

33.1 The holding company and subsidiaries are considered to be related parties. During the year, group companies, in the ordinary course of business, entered into various sale and purchase

transactions under terms that are no less favourable than those arranged with third parties on an arm’s length basis.

33.2 The company entered into a consulting arrangement with a company associated with Mr B P Hattingh, a non-executive director of the company, for executive placements and human

resource due diligence investigations on the acquisition of new subsidiaries. A total of R615,000 (2002 - R400,900) was paid for these services which are considered to be done at arm’s length

taking cognisance of market related circumstances.

34. Change in accounting policy

Certain subsidiaries within the Group differed in their recognition of revenue in comparison to the Group’s policy. A change in accounting policy in the relevant subsidiaries has been adopted

retrospectively and comparative figures have been restated.

2003 2002

R’000 R’000

The effects of this change are as follows:

Increase (decrease ) in revenue 893 (2,476)

Decrease in cost of sales 144 51

(Increase) decrease in tax charge (311) 877

Increase (decrease) in net profit 726 (1,548)

The cumulative decrease in opening Group retained earnings at 30 September 2001 amounts to R3,441,322 as a result of the change in accounting policy.

Notes to financial statementsfor the year ended 30 September 2003

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35. Segmental informationGroup

2003 2002

R’000 R’000

Business segment

Revenue 306,218 216,271

Retail solutions 238,610 155,577

Non-retail solutions 67,608 60,694

Corporate and eliminations - -

Profit (loss) from operations 64,279 47,283

Retail solutions 48,408 21,261

Non-retail solutions 16,151 12,006

Corporate and eliminations (280) 14,016

Amortisation and depreciation 20,461 12,937

Retail solutions 17,113 9,010

Non-retail solutions 3,142 3,462

Corporate and eliminations 206 465

Research and development 24,239 16,826

Retail solutions 19,412 10,781

Non-retail solutions 4,827 6,045

Corporate and eliminations - -

Assets 312,381 206,688

Retail solutions 246,296 113,545

Non-retail solutions 47,480 54,440

Corporate and eliminations 18,605 38,703

Liabilities 140,442 33,018

Retail solutions 121,853 39,825

Non-retail solutions 13,244 38,959

Corporate and eliminations 5,345 (45,766)

Notes to financial statementsfor the year ended 30 September 2003

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Issued

share Effective holding Shares at cost

capital 2003 2002 2003 2002

R’000 % % R’000 R’000

Accsys (Pty) Ltd 100 100 100 - -

Affinity Logic Holdings (Pty) Ltd 100,176 100 - 43,320 -

CCS Software (Pty) Ltd 100 62,76* 62,76 1,800 1,400

Computerkit Holdings (Pty) Ltd 1,000 100 100 9,356 5,856

Easirun Software (Pty) Ltd 100 100 100 - -

Fernridge Consulting (Pty) Ltd 1,000 51 - 922 -

GAAP Point of Sale (Pty) Ltd 100 51 51 - -

UCS Brands (Pty) Ltd 1 100 100 - -

UCS Technology Services (Pty) Ltd 100 100 - - -

Universal Computer Services (Pty) Ltd 100 100 100 - -

UCS Software (Pty) Ltd 300 93* 93 - -

Universal Knowledge Software (Pty) Ltd 100 100 100 - -

Virtual Systems Technology (Pty) Ltd 100 100 - - -

55,398 7,256

Amounts due by subsidiary companies 152,042 148,406

CCS Software (Pty) Ltd 23,123 18,472

Computerkit Holdings (Pty) Ltd - 5,489

Fernridge Consulting (Pty) Ltd 78 -

GAAP Point of Sale (Pty) Ltd 2,784 2,346

UCS Brands (Pty) Ltd 103,798 100,922

UCS Software (Pty) Ltd 22,259 21,177

Amount due 33,998 32,916

Less : Impairment 11,739 11,739

207,440 155,662

* 100% holding effective 1 October 2003

All subsidiary companies are incorporated in South Africa.

Schedule of interest in subsidiary companiesfor the year ended 30 September 2003

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2003 2002

R’000 % R’000 %

Revenue 306,218 216,271

Cost of goods, overheads and other expenses (114,742) (90,798)

Value added 191,476 125,473

Income from investments 14,666 16,000

Wealth created 206,142 100 141,473 100

Distribution of wealth

Employees 151,736 73,6 102,631 72,6

Salaries, wages and benefits

Providers of capital 9,036 4,3 8,369 5,9

Interest on loans

Government 9,359 4,5 6,690 4,7

Taxation 8,456 4,1 6,190 4,4

Local taxes 903 0,4 500 0,3

Reinvested in group activities 36,011 17,6 23,783 16,8

Deferred tax (4,076) (1,9) (5,591) (3,9)

Depreciation and amortisation 20,462 9,9 12,936 9,1

Attributable earnings 19,625 9,6 16,438 11,6

Wealth distributed 206,142 100 141,473 100

Value added statementfor the year ended 30 September 2003

43

Employees 73.6%

Providers of capital 4.3%

Government 4.5%

Reinvestment in group activities 17.6%

Distribution of wealth

AR2003 10/12/03 4:47 pm Page 43

Shareholder spread

No. of shareholders % No. of Shares %

1 - 10,000 shares 413 59.86 1,583,196 0.71

10,001 - 100,00 shares 165 23.91 5,975,597 2.69

100,001 - 500,000 shares 53 7.68 12,718,961 5.73

500,001 - 1,000,000 shares 19 2.75 13,356,609 6.02

1 000 001 shares and over 40 5.80 188,338,156 84.85

690 100.00 221,972,519 100.00

Distribution of shareholdersNo. of shareholders % No. of Shares %

Banks 5 0.72 325,450 0.15

Close Corporations 8 1.16 204,050 0.09

Directors 22 3.19 113,123,600 50.96

Individuals 552 80.00 32,765,717 14.76

Investment Company 2 0.29 21,875,572 9.86

Limited Company 5 0.72 65,300 0.03

Mutual Fund 7 1.01 16,288,679 7.34

Nominees and Trusts 57 8.28 28,345,002 12.77

Other Corporations 10 1.45 252,835 0.11

Pension Fund 3 0.43 989,937 0.45

Private Companies 15 2.17 5,072,327 2.29

Share Trust 4 0.58 2,664,050 1.20

690 100.00 221,972,519 100.00

Public / non - public shareholdersNo. of shareholders % No. of Shares %

Non - Public Shareholders 26 3.77 115,238,600 51.92

Directors and management of the company and its subsidiaries 15 2.18 113,123,600 50.97

UCS Group Ltd Staff Share Trust 11 1.59 2,115,000 0.95

Public Shareholders 664 96.23 106,733,919 48.08

690 100.00 221,972,519 100.00

Shareholders with an interest of 5% or more in shares No. of Shares %

J D Bright 37,345,000 16.82

D F Coles 37,345,000 16.82

E B Levenstein 24,000,000 10.81

Old Mutual Group 21,875,572 9.86

Oasis Asset Management Group 11,177,176 5.04

Shareholding analysisat 30 September 2003

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UCS Group Limited(Incorporated in the Republic of South Africa)(Registration number: 1993/002253/06)ISIN: ZAE00016150Share code: UCS(“UCS” or “the company”)

Notice is hereby given that the annual general meeting of shareholders of UCSwill be held on the 20th Floor, 209 SmitStreet, Braamfontein on Friday, 30 January2004 at 9.00am for the following purposes:

1. To receive and adopt the annual financial statements of the Group and company for the year ended 30 September 2003.

2. To elect as directors Adv RG Goodman,Messrs DC Sparrow and P Terblanche who retire by rotation in accordance with the articles of association and, being eligible, offer themselves for re-election.

• Adv Richard G Goodman, SCAn eminent practising advocate of the Cape Bar and of the High Court of South Africa. A graduate of the University of Stellenbosh (B.A. Law, 1978 and LL.B, 1980), Mr Goodman went on to study at the University of Cambridge where he completed his LLM in 1982.

• Dean Sparrow, CA (SA) Graduated from UNISA with a B. Compt degree in 1995 and a CTAin 1997. He passed the FQE in 1998. Completed articles with Deloitte and Touche in 1999. After a three-month secondment to New York, he was appointed as a manager in the firm’s assurance and advisory services division. He joined the UCS Group as Group financial manager in April 2002 and was appointed Group chief financial officer in August 2002.

• Peter Terblanche, MCSSAHas 37 years experience in the ITindustry and was one of the pioneers of the software value added services market. He has been a non-executive director of UCS Group Limited since 2000 and is currently chairman of the audit committee. In addition to other board appointments, he is on the committee of the Western Cape branch of the Institute of Directors.

3. To re-appoint, Kaplan and Kaplan, as the Group’s auditors for the ensuing year.

4. To consider and, if deemed fit, to pass, with or without modification, the following resolutions:

Special resolution number 1 “Resolved, as a special resolution, that themandate given to the company (or one ofits wholly owned subsidiaries) providingauthorisation, by way of a generalapproval, to acquire the company’s ownsecurities, upon such terms and conditionsand in such amounts as the directors mayfrom time to time decide, but subject to theprovisions of the Companies Act, 1973(Act 61 of 1973), as amended, (“the Act”)and the Listings Requirements of the JSESecurities Exchange South Africa (“JSE”),be extended, subject to the following termsand conditions:

• Any repurchase of securities 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;

• At any point in time, the company mayonly appoint one agent to effect any repurchase ;

• This general authority be valid until the company’s next annual general meeting, provided that it shall not extend beyond fifteen months from date of passing of this special resolution (whichever period is shorter);

• An announcement be published as soon as the company has cumulatively repurchased 3% of the initial number (the number of that class of share in issue at the time that the general authority is granted) of the relevant class of securities and for each 3% in aggregate of the initial number of that class acquired thereafter, containing full details of such repurchases;

• Repurchases by the company in aggregate in any one financial year may not exceed 20% of the company’s issued share capital as at the date of passing of this special resolution or 10% of the company’s issued share capital in the case of an acquisition of shares in the company by a subsidiary of the company; and

• Repurchases may not be made at a price greater than 10% above the weighted average of the market value of the securities for the five business days immediately preceding the date on which the transaction was effected;

• Repurchases may not be undertaken by the company or one of its wholly owned subsidiaries during a prohibited period and may also not be undertaken if they will impact negatively on shareholder spread as required by the JSE; and

• The company may not enter the market to proceed with the repurchase of its ordinary shares until the company’s sponsor has confirmed the adequacy of the company’s working capital for the purpose of undertaking a repurchase of shares in writing to the JSE.

The effect of the special resolution and thereason therefor is to extend the generalauthority given to the directors in terms ofthe Act and the Listings Requirements forthe acquisition by the company of its ownsecurities, which authority shall be used atthe directors’ discretion during the courseof the period so authorised.

Ordinary resolution number 1“Resolved that subject to the provisions ofthe Companies Act, 1973 (Act 61 of 1973),as amended, the authority given to thedirectors to allot and issue, at their discretion, the unissued share capital of thecompany for such purposes as they maydetermine, be extended until the company’snext annual general meeting.”

Ordinary resolution number 2“Resolved that in terms of the ListingRequirements of the JSE SecuritiesExchange South Africa, the mandate givento the directors of the company in terms of a general authority to issue securities for cash, as and when suitable opportunities arise, be renewed subject to the following conditions:

• That this general authority be valid until the company’s next annual general meeting provided that it shall not extend beyond fifteen months from the date of the passing of this ordinary resolution (whichever period is the shorter);

• That the securities be of a class already in issue;

Notice to shareholders

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rectly through the company’s staff shareincentive scheme.

Ordinary resolution number 3“Resolved that, subject to the passing andregistration of special resolution number 2,the draft First Addendum to the UCSGroup Limited Staff Share Trust, a copy of which has been tabled at the meetingand initialled by the chairperson for identification purposes, be approved.”

The First Addendum amends the UCSGroup Limited Staff Share Trust deed toprovide for the making of offers and thegranting of options to the non-executivedirectors of the company. The FirstAddendum will be available for inspectionat the company’s registered offices as from2 January 2004.

Ordinary resolution number 4“Resolved that any director of theCompany be and is hereby authorised to doall such things and sign all such documentsas may be necessary for and incidental tothe implementation of the resolutions proposed at the meeting convened to consider the above-mentioned resolutions.”

DisclosureIn terms of the Listing Requirements of theJSE Securities Exchange South Africa, the following disclosures are required withreference to the general authority set out inspecial resolution number 1 above, some ofwhich are set out elsewhere in the AnnualReport of which this notice forms part(“this Annual Report”):

Directors and management - refer page 2;Major shareholders of the company -refer page 44;Directors’ interest in the company’ssecurities - refer page 27;Share capital -refer pages 33 and 34;Director’s responsibility statement -refer page 17.

Litigation statementThe director’s of the company, whosenames are given on page 2 of this AnnualReport, are not aware of any legal or arbitration proceedings, pending or threatened against the group, other than asdisclosed under contingent liabilities refernote 31 page 39, which may have or havehad, in the 12 months preceding the date ofthis notice, a material effect on the group’sfinancial position.

• That securities be issued to public shareholders and not to related parties;

• That an announcement giving full details, including the impact on net asset value and earnings per share, be published at the time of any issue representing, on a cumulative basis within a financial year, 5% or more of the number of securities in issue prior to the issue/s;

• That issues in the aggregate in any one financial year shall not exceed 15% of the company’s issued share capital of that class; and

• That, in determining the price at which an issue of securities will be made in terms of this authority, the maximum discount permitted shall be 10% of the weighted average traded price of those securities over the 30 business days prior to the date that the price of the issue is determined or agreed by the directors.

VotingIn terms of the Listings Requirements of the JSE, the approval of a 75% majorityof the votes of all shareholders, present orrepresented by proxy, is required toapprove ordinary resolution number 2.

Special resolution number 2“Resolved that, subject to the provisions ofthe Companies Act, 1973 and the ListingsRequirements of the JSE SecuritiesExchange South Africa, the board of directors of the company be authorised to grant directly or indirectly to any non-executive director or future non-executive director of the company,options or rights to subscribe for shares ofthe company, provided that the maximumnumber of shares of the company inrespect whereof any one such director maybe given options or rights shall not exceedsuch percentage of the issued share capitalof the company as may at the relevant timebe the maximum number of shares in thecompany in respect whereof a participantin the company’s staff share incentivescheme is entitled to accept an offer and/or exercise an option pursuant to such scheme.”

The reason for and effect of special resolution number 2 is to grant the board of directors of the company the authority togive options or rights to subscribe forshares in the company to the non-executivedirectors of the company, directly or indi-

Material changeOther than the facts and developmentsreported on in this Annual Report, therehave been no material changes in theaffairs, financial or trading position of theGroup since signature date of this AnnualReport and the posting date hereof.

Voting and proxiesAll shareholders will be entitled to attend the annual general meeting and tovote thereat.

A form of proxy for use by certified shareholders and dematerialised shareholders with own name registrationwho are unable to attend the annual generalmeeting, is attached. Duly completed formsof proxy must be received by the company’s transfer secretaries at least 72 hours before the meeting.

Dematerialised shareholders must informtheir CSDP or broker of their intention toattend the annual general meeting andobtain the necessary authorisation fromtheir CSDP or broker to attend the annualgeneral meeting, or provide their CSDP orbroker with their voting instruction shouldthey not be able to attend the annual general meeting in person.

By order of the board

VMA BroadrickSecretary

Johannesburg12 December 2003

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Financial year end 30 September 2003

Annual general meeting 30 January 2004

Reports Published

Reports and profit statements 25 November 2003

Interim statements for half year May 2004

Annual financial statements 19 December 2003

Dividends paid on ordinary shares

Declaration of final dividend 21 November 2003

Payment of final dividend 12 January 2004

Shareholders’ diary

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Universal Computer Services (Pty) Ltd

Tel: +27 11 712-1300 • Fax: +27 11 339-3421

Affinity Logic Holdings (Pty) Ltd

Tel: +27 11 797-0100 • Fax: +27 11 797-0132

Computerkit Systems (Pty) Ltd

Tel: +27 11 517-1000 • Fax: +27 11 802-4069

UCS Software (Pty) Ltd

Tel: +27 12 643-8300 • Fax: +27 12 643-8333

Virtual Systems Technology (Pty) Ltd

Tel: +27 21 410-6000 • Fax:+27 21 410-6100

CCS Software (Pty) Ltd

Tel: +27 12 665-5132 • Fax: +27 12 665-5131

GAAP Point-of-Sale (Pty) Ltd

Tel: +27 31 562-8361 • Fax: +27 31 572-4411

Fernridge Consulting (Pty) Ltd

Tel: +27 11 789-3669 • Fax: +27 11 789-3657

EasiRun Software (Pty) Ltd

Tel: +27 11 421-4800 • Fax:+27 11 421-4999

Accsys (Pty) Ltd

Tel: +27 11 452-3456 • Fax: +27 11 609-4207

Universal Knowledge Software (Pty) Ltd

Tel: +27 11 712-1750 • Fax: +27 11 403 9463

Group directory

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Universal Computer Services (Pty) Ltd

Retail Non-retail

A member of the UCS Group

A member of the UCS Group

Universal Knowledge Software (Pty) Ltd

H O L D I N G S ( P R O P R I E T A R Y ) L I M I T E D

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