Mercedes - Benz South Africa Limited

Mercedes - Benz South Africa Limited

Mercedes – Benz South Africa Limited Audited Consolidated Annual Financial Statements for the year ended 31 December 2013 Audited The financial statements of Mercedes – Benz South Africa Limited have been audited in compliance with S30 of The Companies Act of 2008. H Werner, Chief Financial Officer, was responsible for the supervision of the preparation of the financial statements. These financial statements, for the year ended 31 December 2013, were published on XXX.

Mercedes – Benz South Africa Limited (Reg. No. 1962/000271/07) 1 Annual Financial Statements for the year ended 31 December 2013 Contents Page Directorate and administration 2 Directors’ responsibility for the annual financial statements 3 Directors’ report 4 – 6 Audit Committee report 7 Independent auditor’s report 8 Statements of comprehensive income 9 Statements of financial position 10 Statements of changes in equity 11 Statements of cash flows 12 Notes to the annual financial statements 13 – 74

Mercedes – Benz South Africa Limited (Reg. No. 1962/000271/07) 2 Directorate and administration for the year ended 31 December 2013 Independent and non-executive Directors Prof J E Schrempp (German) Resigned 05 December 2013 Ms C A Carolus Ms N Moola Mr J Nel Appointed 01 May 2013 Mr Nmaharajh Appointed 01 May 2013 Executive Directors Mr J F Evertse Dr M Zimmermann (German) Mr H Werner (German) Mrs S Naidoo Resigned 31 December 2013 Non-Executive Directors Mr W Bernhard (German) Resigned 28 February 2013 Mr M Lührs (German) Resigned 31 December 2013 Mr R Howard (British) Resigned 31 December 2013 Mr M Gründler (German) Dr JW Schmidt (German) Appointed 01 March 2013 Secretary Ms ZN Motloba Resigned 01 June 2013 Mr HFD Strasheim Appointed 01 June 2013 Registered office Postal address Wierda Road P O Box 1717 R576/M10 West Pretoria Zwartkop 0001 Pretoria 0002 Country of incorporation South Africa Auditors KPMG Inc.

Preparation of the financial statements: The financial statements have been prepared under the supervision of Mr H Werner (Executive Director).

Mercedes – Benz South Africa Limited (Reg. No. 1962/000271/07) 3 Directors’ responsibility for the annual financial statements The directors are responsible for the preparation and fair presentation of the consolidated and separate annual financial statements of Mercedes – Benz South Africa Limited, comprising the statements of financial position at 31 December 2013 and the statements of comprehensive income, changes in equity and cash flows for the year ended, and the notes to the annual financial statements, which include a summary of significant accounting policies and other explanatory notes in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa.

In addition, the directors are responsible for preparing the directors’ report.

The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and for maintaining adequate accounting records and an effective system of risk management. The directors have made an assessment of the ability of the company and its subsidiaries to continue as going concerns and have no reason to believe that the businesses will not be going concerns in the year ahead. The auditor is responsible for reporting on whether the consolidated and separate financial statements are fairly presented in accordance with International Financial Reporting Standards.

Approval of the annual financial statements The consolidated and separate annual financial statements of Mercedes – Benz South Africa Limited, as identified in the first paragraph, were approved by the board of directors on xxx and are signed by: A van der Merwe Dr J Schmidt CHAIRMAN DIRECTOR Company Secretary certificate I, HFD Strasheim, the Company Secretary of Mercedes – Benz South Africa Limited, certify that to the best of my knowledge and belief, all returns required of a public company have, in respect of the year under review, been lodged with the Registrar of Companies and that all such returns are true, correct and up to date.

HFD Strasheim COMPNY SERETARY

Mercedes – Benz South Africa Limited (Reg. No. 1962/000271/07) 4 Directors’ report for the year ended 31 December 2013 The Directors have pleasure in presenting our report and the audited Group annual financial statements and Company annual financial statements for the year ended 31 December 2013. Nature of business The Group holds the franchise for the importation, assembly and distribution of Mercedes – Benz and Smart Product Ranges as well as Freightliner, Fuso and Western Star commercial vehicles for South Africa, Botswana, Lesotho and Swaziland. During the current financial year the Group disposed of the Mitsubishi Product Range.

There were no changes in the nature of the business conducted by the Company or its subsidiaries. Mercedes – Benz South Africa Limited’s (the “Company”) subsidiaries are involved in the following business activities:  Atlantis Foundries Proprietary Limited – manufacture and distribution of diesel engine components and castings for the automotive market;  Mercedes – Benz Financial Services South Africa Proprietary Limited – financing and leasing of vehicles;  Daimler Fleet Management Proprietary Limited – fleet management;  Koppieview Property Proprietary Limited – property rental;  Sandown Motor Holdings Proprietary Limited – retail motor vehicle dealer;  Clidet No.

1048 Proprietary Limited – specialised financing. Dormant subsidiaries:  Mercedes – Benz Manufacturing South Africa Proprietary Limited;  Mercedes – Benz Risk Management Solutions South Africa Proprietary Limited;  Daimler Aviation Proprietary Limited.

Material matters to the entity subsequent to year end There have been no material matters subsequent to year end that affected the entity that would have impacted the financial performance. General review of operations During the accounting period ended 31 December 2013, the Group achieved a consolidated revenue of Rxx million (2012 – R33 255 million). The profit after taxation and non–controlling interest of the Group amounted to Rxx million (2012 – R1 439million). Dividends A dividend of Rxx million (2012 – R604 million) was declared during the year. Holding Company The Company’s holding and ultimate holding Company is Daimler AG (“DAG”), registered in Germany, which holds 100 percent of the issued share capital.

Empowerment and employment equity The Group continues along its proven path of employment equity and empowerment of previously disadvantaged communities in job opportunities, skills transfer and training in the work place. Social development and upliftment is further advanced through the well–established social funds.

Mercedes – Benz South Africa Limited (Reg. No. 1962/000271/07) 5 Directors’ report for the year ended 31 December 2013 (continued) Subsidiary companies* Issued Share capital cost Indebtedness Capital Held 2013 2012 2013 2012 R’000 % R’000 R’000 R’000 R’000 Directly held Atlantis Foundries Proprietary Limited 400 000 100 690 000 690 000 349 469 354 862 Mercedes – Benz Manufacturing South Africa Proprietary Limited –** 100 – Sandown Motor Holdings Proprietary Limited 384 50,1 50 902 50 902 259 000 200 000 Mercedes – Benz Financial Services South Africa Proprietary Limited 590 100 413 750 413 750 20 169 302 17 406 571 Mercedes – Benz Risk Management Solutions South Africa Proprietary Limited 1 100 676 676 – Daimler Aviation Proprietary Limited 28 476 100 250 250 * * 8 541 Koppieview Property Proprietary Limited –** 100 * 500 000 500 009 Indirectly held Daimler Fleet Management Proprietary Limited –** 65 – Clidet No.

1048 Proprietary Limited –** 100 – Preference share investment Sandown Motor Holdings Proprietary Limited 476 088 - 1 631 416 1 155 578 21 277 771 18 469 983 * All subsidiary companies have the same financial year end as the holding Company. ** Issued share capital less than R 1 000.

*** An impairment of R9 million (2012 – R9 million) was raised against the loan to Daimler Aviation Proprietary Limited. The loan to Daimler Aviation Proprietary Limited was impaired due to the fact that the Company is dormant and the loan balance can no longer be recovered through ongoing operations.

Mercedes – Benz South Africa Limited (Reg. No. 1962/000271/07) 6 Directors’ report for the year ended 31 December 2013 (continued) Corporate governance The directors endorse the Code of Corporate Practices and Conduct as suggested in the King III Report on Corporate Governance and continue to be mindful of compliance with its principles.

The Company is not required to comply with the requirements of King III and therefore applied the principles as far as practicably possible. The audit committee of Daimler AG continues to assist the directors in meeting their responsibilities regarding the monitoring and effectiveness of internal control systems, financial reporting and an on–going risk analysis programme.

Code of ethics The high standards of business integrity and ethical behaviour encompassed in a formal code of ethics adopted by the world–wide Daimler Group of companies are upheld by the Group’s employees. Share capital There were no changes to the Company’s authorised and issued share capital during the year. Directorate Details of the directorate and changes therein during the period are set out on page 2 of the Group financial statements.

Mercedes – Benz South Africa Limited (Reg. No. 1962/000271/07) 7 Audit Committee report for the year ended 31 December 2013 The Audit and Risk Committee met XXX during the financial year ended 31 December 2013 and the External Auditors presented formal reports to the Committee and attended these meetings by invitation.

In response to the requirements of the Companies Act, King III and in terms of its charter, the Committee can report as follows: 1. The scope, independence and objectivity of the External Auditors was reviewed; 2. The audit firm KPMG Inc., and audit partner Riaan Kok are, in the Committee’s opinion, independent of the Company and have been proposed to the shareholders for approval to be the Group’s auditor for the 2014 financial year; 3. On an on-going basis, the Committee reviews and approves the fees proposed by the External Auditors; 4. The appointment of the External Auditor complies with the Companies Act, as amended, and with all other legislation relating to the appointment of External Auditors; 5.

The nature and extent of non-audit services provided by the External Auditors has been reviewed to ensure that the fees for such services do not become so significant as to call into question their independence; 6. The nature and extent of future non-audit services have been defined and pre-approved; 7. No reportable irregularities were identified and reported by the External Auditors to the Committee; 8. The Committee is satisfied that the internal financial controls of the Group operated effectively throughout the year ended 31 December 2012 and can be relied upon. In addition, the Committee is satisfied with the Group’s accounting policies and that these have been appropriately and consistently applied throughout the year ended 23 December 2012; 9.

The Committee reviewed these financial statements and recommended it to the Board for approval; and 10. As at the date of this report, no complaints have been received relating to accounting practices and internal audit of the Company or to the content or auditing of the Company’s financial statements, or to any related matter.

XXXX CHAIRPERSON OF THE AUDIT AND RISK COMMITTEE XX April 2014

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 8 Independent auditor’s report To the shareholder of Mercedes – Benz South Africa Limited We have audited the consolidated and separate financial statements of Mercedes – Benz South Africa Limited, which comprise the statements of financial position at 31 December 2013, and the statements of comprehensive income, changes in equity and cash flows for the year then ended, and the notes to the financial statements, which includes a summary of significant accounting policies and other explanatory notes, as set out on pages 8 to 74.

Directors’ Responsibility for the Financial Statements The company’s directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.

An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, these financial statements present fairly, in all material respects, the consolidated and separate financial position of Mercedes – Benz South Africa Limited at 31 December 2013, and its consolidated and separate financial performance and consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards, and the requirements of the Companies Act of South Africa. Other reports required by the Companies Act As part of our audit of the financial statements for the year ended 31 December 2013, we have read the Directors Report for the purpose of identifying whether there are material inconsistencies between this report and the audited financial statements.

This report is the responsibility of the directors. Based on reading this report we have not identified material inconsistencies between this report and the audited financial statements. However, we have not audited this report and accordingly do not express an opinion on this report. KPMG Inc.

Per RD Kok Chartered Accountant (SA) Registered Auditor Director xx

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 9 Statements of comprehensive income for the year ended 31 December Group Company Note 2013 2012 2013 2012 R’000 R’000 R’000 R’000 Total revenue 2 42 947 215 33 261 335 35 236 476 26 552 854 Operating revenue 3 42 943 668 33 255 428 34 719 903 26 501 714 Cost of sales (36 401 561) (27 702 188) (31 099 544) (23 678 250) Gross profit 6 542 107 5 553 240 3 620 359 2 823 464 Other income 756 634 434 688 116 638 87 144 Distribution costs (1 141 278) (847 763) (1 132 589) (839 099) Operating expenses (2 344 265) (2 033 335) (642 999) (549 084) Operating profit 3 813 198 3 106 830 1 961 409 1 522 425 Dividend income 4 3 547 5 907 516 576 51 140 Finance income 122 645 29 067 1 328 378 1 170 111 Finance costs 5 (1 512 555) (1 031 070) (1 462 211) (1 187 185) Profit before taxation 6 2 426 835 2 110 734 2 344 152 1 556 491 Income taxation expense 7 (675 961) (567 635) (505 014) (405 271) Profit for the period 1 750 874 1 543 099 1 839 138 1 151 220 Profit for the period Owners of the Company 1 690 714 1 439 116 1 839 138 1 151 220 Non–controlling interest 60 160 103 983 – – 1 750 874 1 543 099 1 839 138 1 151 220 Other comprehensive income 32 298 (127 887) 32 298 Cash flow hedges 28 528 (9 432) 28 528 Actuarial gains and losses – (164 655) – Taxation effects 3 770 42 200 3 770 Total comprehensive income 1 575 397 1 711 251 1 183 518 Total comprehensive income Owners of the Company 1 471 414 1 839 138 1 183 518 Non–controlling interest 103 983 – – 1 575 397 1 839 138 1 183 518

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 10 Statements of financial position at 31 December Group Company Note 2013 2012 2013 2012 R’000 R’000 R’000 R’000 Assets Non–current assets 18 377 473 15 401 408 2 4100 969 18 935 425 Property, plant and equipment 8 6 261 264 4 756 484 4 451 330 2 914 200 Investment in subsidiaries 9 – – 18 854 885 15 450 449 Investments and loans 10 33 260 63 771 33 260 63 771 Deferred taxation 11 821 952 471 141 688 500 266 031 Goodwill 12 59 894 59 894 – – Investment in lease receivables 13 11 124 767 9 769 108 – – Retirement benefit asset 20 76 336 281 010 72 994 240 974 Current assets 17 154 734 15 909 537 10 832 808 11 615 239 Inventories 14 6 403 028 6 025 561 4 732 199 4 680 504 Trade and other receivables 15 5 782 364 4 805 422 1 265 235 1 644 377 Derivative asset 42 175 74 711 42 175 74 711 Trade receivables from Group companies 16 305 435 596 027 441 114 767 321 Current portion of investment in lease receivables 13 4 281 338 4 085 187 – – Prepaid taxation 28.2 5 389 1 872 – – Cash and cash equivalents 28.3 4 281 338 320 757 297 783 281 755 Current portion of investment in subsidiaries 9 – – 4 054 302 4 166 571 Total assets 35 532 207 31 310 945 34 933 777 30 550 664 Equity and liabilities Equity attributable to equity holders of the Company 8 697 132 7 584 814 8 707 881 6 998 277 Share capital 17 1 416 690 1 416 690 1 416 690 1 416 690 Non–distributable reserve (648 773) 45 094 (95 589) 32 298 Reserve for share based payments 18 9 804 11 695 9 028 10 675 Retained earnings 7 802 049 6 111 335 7 377 752 5 538 614 Non–controlling interest 117 460 92 231 – – Total Equity 8 814 592 7 677 045 8 707 881 6 998 277 Non–current liabilities 22 527 407 11 502 620 12 080 968 11 269 884 Interest–bearing borrowings 19 21 959 824 10 956 880 11 742 528 10 937 004 Deferred revenue 38 582 27 823 – – Deferred taxation 11 69 979 101 777 – – Retirement benefit obligation 20 459 022 416 140 338 440 332 880 Current liabilities 4 307 668 12 131 280 14 144 928 12 282 503 Provisions 21 191 704 210 449 177 765 184 694 Employee benefits 22 34 370 30 952 22 519 20 068 Trade and other payables 24 2 194 557 2 252 432 1 916 828 1 653 453 Derivative liability 53 812 22 297 53 812 22 297 Trade payables to Group companies 16 1 737 479 1 414 196 1 766 657 2 260 544 Deferred revenue 40 655 28 040 – Taxation liability 28.2 54 820 11 591 16 554 11 066 Bank overdrafts 28.3 271 3 506 271 95 Shareholders for dividends 28.4 – Current portion of interest–bearing borrowings 19 – 8 157 817 10 190 522 8 130 286 Total equity and liabilities 35 532 207 31 310 945 34 933 777 30 550 664

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 10 Statements of changes in equity for the year ended 31 December Attributable to the equity holders of the parent Share Capital Share Premium Non– distributable reserve Reserve for share based Payments Retained earnings Total Non–controlling Interest Total Equity Group R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 Balance at 01 January 2012 46 810 1 369 880 12 796 12 428 5 172 618 6 614 532 92 101 6 706 633 Total comprehensive income for the period – 1 439 116 1 439 116 103 983 1 543 099 Profit for the period – – 32 298 – – 32 298 – 32 298 Transactions with owners recorded directly in equity Dividend declared ( 500 399) (500 399) (103 853) (604 252) Share based payments to Group executives ( 733) – (733) – (733) Balance at 31 December 2012 46 810 1 369 880 45 094 11 695 6 111 335 7 584 814 92 231 7 677 045 Total comprehensive income for the period Profit for the period OCI Transactions with owners recorded directly in equity Dividend declared Share based payments to Group executives Balance at 31 December 2013 Company Balance at 01 January 2012 46 810 1 369 880 – 11 793 4 887 793 6 315 894 – 6 315 894 Total comprehensive income for the period Profit for the period – 1 151 220 1 151 220 – 1 151 220 OCI – – 32 298 – – 32 298 – 32 298 Transactions with owners recorded directly in equity Dividend declared ( 500 399) (500 399) – (500 399) Share based payments to Group executives ( 736) – (736) – (736) Balance at 31 December 2012 46 810 1 369 880 32 298 10 675 5 538 614 6 998 277 – 6 998 277 Total comprehensive income for the period – – 1 839 138 1 839 138 – 1 839 138 Profit for the period ( 127 887 ( 127 887) (127 887) OCI – Transactions with owners recorded directly in equity – Dividend declared – Share based payments to Group executives ( 1 647) – (1 647) – (1 647) Balance at 31 December 2013 46 810 1 369 880 (95 589) 9 028 7 377 752 8 707 881 – 8 707 881

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 12 Statements of cash flows for the year ended 31 December Group Company Note 2013 2012 2013 2012 R’000 R’000 R’000 R’000 Net cash flows from operating activities (475 597) 2 296 318 (581 273) Cash generated from operations 28.1 2 271 999 2 789 371 909 089 Dividend income 5 907 516 576 51 140 Finance income 29 067 1 328 378 1 170 111 Finance costs (1 031 070) (1 462 211) (1 187 185) Dividends paid 28.4 (1 104 651) – (1 000 798) – to owners of the Company (1 000 798) – (1 000 798) – to non controlling interest (103 853) – – Taxation paid 28.2 (646 849) (875 796) (523 630) Net cash flows from investing activities (2 858 322) ( 5146 227) (2 789 487) Additions and replacements to property, plant and equipment (2 077 501) (2 029 005) (1 715 318) Loans to subsidiaries – (3 292 167) (1 294 725) Investments and loans 92 156 30 511 92 156 Investment in lease receivables (1 147 551) – – Proceeds from disposal of property, plant and equipment 274 574 144 434 128 400 Net cash flows from financing activities 2 914 443 2 865 761 2 955 519 Interest bearing borrowings raised 8 961 672 (6 015 349) 8 961 672 Interest bearing borrowings repaid (6 047 229) 8 881 110 (6 006 153) Net (decrease)/increase in cash and cash equivalents (419 476) 15 852 (415 241) Cash and cash equivalents at beginning of the year 28.3 736 727 281 660 696 901 Cash and cash equivalents at end of the year 28.3 317 251 297 512 281 660

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 13 Notes to the annual financial statements for the year ended 31 December 2013 1.1 Reporting entity Mercedes – Benz South Africa Limited is a Company domiciled in South Africa. The Group annual financial statements and Company annual financial statements for the year ended 31 December 2013 comprise the Company and its subsidiaries (together referred to as the “Group”). The financial statements were authorised for issue by the directors on xx.

1.2 Statement of compliance The Group and Company annual financial statements have been prepared in accordance with International Financial Reporting Standards (‘IFRS’) and the South African Companies Act 2008.

1.3 Basis of measurement The functional currency of Mercedes – Benz South Africa Proprietary and the presentation currency of the Group is South African Rand. The financial statements are presented in Rand, rounded to the nearest thousand. They are prepared on the historical cost basis except for the following assets and liabilities which are stated at their fair value: derivative financial instruments and financial instruments classified as held for trading.

1.4 Basis of preparation The preparation of financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods.

Judgements made by management in the application of IFRSs that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in note 29. 1.5 Adoptions of new standards and interpretations The accounting policies have been applied consistently by Group entities, except for the adoption of new standards and interpretations that are outlined below.

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 14 Notes to the annual financial statements for the year ended 31 December 2013 1.5 Adoptions of new standards and interpretations (continued) The following revised standards and interpretations have been adopted for the year under review: IAS 1 PRESENTATION OF FINANCIAL STATEMENTS Amendments resulting from Annual Improvements 2009-2011 Cycle (comparative information) The amendment clarifies that: Comparative information in respect of the previous period (the required comparative information) forms part of a complete set of financial statements.

The required comparative information includes comparatives for all amounts presented in the current period. An entity may present additional comparative information for periods before the required comparative period, as long as it is prepared in accordance with IFRS. All accompanying notes and disclosures must be provided.

Amendments to revise the way other comprehensive income is presented This amendment clarifies presentation of items of OCI in statement of comprehensive income. The main change resulting from these amendments is a requirement for entities to group items presented in other comprehensive income (OCI) on the basis of whether or not they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). The amendments do not address which items are presented in OCI. IAS 16 PROPERTY, PLANT AND EQUIPMENT Amendments resulting from Annual Improvements 2009-2011 Cycle (servicing equipment) The amendment clarifies that: Servicing equipment is Property, Plant and Equipment (PP&E) when used for more than one period; it should otherwise be classified as inventory.

The amendment deletes the requirement that spare parts and servicing equipment used only in connection with an item of PP&E should be classified as PP&E. IAS 19 EMPLOYEE BENEFITS Amended standard resulting from the post-employment benefits and termination benefits projects This revised standard was amended in June 2011 resulting from the post-employment benefits and termination benefits projects. A significant amendment is the removal of the corridor approach for recognising actuarial gains and losses, requiring full recognition of surpluses and deficits in other comprehensive income. The Group currently accounts for the full amount regarding its Post-Retirement Healthcare in profit or loss, therefore this amendment has an impact on the Group's financial results and disclosure.

An additional amendment relates to the distinction between short-term and other long term benefits. This distinction will be based on the expected timing of settlement rather than the employee's entitlement to the benefits. This is had an impact on the manner in which leave pay and similar liabilities are currently classified and accounted for. IAS 27 SEPARATE FINANCIAL STATEMENTS (AS AMENDED IN 2011) This standard was amended to take into account the changes required due to the introduction of IFRS 10 Consolidated Financial Statements. IAS 27, as revised, is limited to the accounting for investments in subsidiaries, joint ventures and associates in the separate financial statements of the investor.

This standard did not have a financial impact on the Group's results.

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 15 Notes to the annual financial statements for the year ended 31 December 2013 1.5 Adoptions of new standards and interpretations (continued) IAS 28 INVESTMENTS IN ASSOCIATES AND JOINT VENTURES This is a consequential revision due to the issue of IFRS 10 and 11. The revised standard caters for joint ventures (now accounted for by applying the equity accounting method) in addition to prescribing the accounting for investments in associates. This standard had no financial impact on the Group's results. IAS 32 FINANCIAL INSTRUMENTS: PRESENTATION Amendments resulting from Annual Improvements 2009-2011 Cycle (tax effect of equity distributions) The amendment clarifies the treatment of income tax relating to distributions and transaction costs.

The amendment clarifies that the treatment is in accordance with IAS 12. So, income tax related to distributions is recognised in the income statement, and income tax related to the costs of equity transactions is recognised in equity. IAS 34 INTERIM FINANCIAL REPORTING Amendments resulting from Annual Improvements 2009-2011 Cycle (interim reporting of segment assets) The amendment aligns the disclosure requirements in IAS 34 with those of IFRS 8 Operating Segments. The amendment clarifies that total assets for a particular reportable segment need only be disclosed when both:  The amounts are regularly provided to the chief operating decision maker; and  There has been a material change in the total assets for that segment from the amount disclosed in the last annual financial statements.

IFRS 1 FIRST-TIME ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS Amendments for government loans with a below-market rate of interest when transitioning to IFRSs The amendments dealing with loans received from governments at a below market rate of interest, give first-time adopters of IFRSs relief from full retrospective application of IFRSs when accounting for these loans on transition. This is the same relief as was given to existing preparers of IFRS financial statements. No impact on the Group. Amendments resulting from Annual Improvements 2009-2011 Cycle (repeat application, borrowing costs) The amendment clarifies that an entity may apply IFRS 1 more than once under certain circumstances.

The amendment clarifies that an entity can choose to adopt IAS 23, ‘Borrowing costs’, either from its date of transition or from an earlier date. The consequential amendment (as a result of the amendment to IAS 1 discussed below) clarifies that a first-time adopter should provide the supporting notes for all statements presented. No impact on the Group.

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 16 Notes to the annual financial statements for the year ended 31 December 2013 1.5 Adoptions of new standards and interpretations (continued) IFRS 10 CONSOLIDATED FINANCIAL STATEMENTS Amendments to transitional guidance The amendment clarifies that the date of initial application is the first day of the annual period in which IFRS 10 is adopted − for example, 1 January 2013 for a calendar-year entity that adopts IFRS 10 in 2013. Entities adopting IFRS 10 should assess control at the date of initial application; the treatment of comparative figures depends on this assessment.

The amendment also requires certain comparative disclosures under IFRS 12 upon transition. Original issue This standard replaces the consolidation requirements in SIC12 Consolidation – Special Purpose Entities and IAS 27 Consolidated and Separate Financial Statements. This standard builds on the existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company and provides additional guidance to assist in the determination of control where this is difficult to assess.

IFRS 10 does not change the consolidation process; rather it changes whether an entity is consolidated by revising the definition of control. The revised definition of control require consideration of aspects such as de-facto control, substantive vs. protective rights, agency relationships, silo accounting and structured entities when evaluating whether or not an entity is controlled by the investor. IFRS 11 JOINT ARRANGEMENTS Amendments to transitional guidance The amendment clarifies that the date of initial application is the first day of the annual period in which IFRS 11 is adopted − for example, 1 January 2013 for a calendar-year entity that adopts IFRS 11 in 2013.

Entities adopting IFRS 11 should assess joints control at the date of initial application; the treatment of comparative figures depends on this assessment. The amendment also requires certain comparative disclosures under IFRS 12 upon transition. Original issue IFRS 11 replaces IAS 31 and SIC 13 and refers to IFRS 10's revised definition of 'control' when referring to 'joint control'. Under IFRS 11 a joint arrangement (previously a 'joint venture' under IAS 31) is accounted for as either a:  joint operation – by showing the investor's interest/ relative interest in the assets, liabilities, revenues and expenses of the joint arrangement; or  joint venture – by applying the equity accounting method.

Proportionate consolidation is no longer permitted.

Under IFRS 11 the structure of the joint arrangement is not the only factor considered when classifying the joint arrangement as either a joint operation or joint venture. This standard did not have a financial impact on the Group. IFRS 12 DISCLOSURE OF INTERESTS IN OTHER ENTITIES Amendments to transitional guidance The amendment clarifies that the date of initial application is the first day of the annual period in which IFRS 10 is adopted − for example, 1 January 2013 for a calendar-year entity that adopts IFRS 10 in 2013. Entities adopting IFRS 10 should assess control at the date of initial application; the treatment of comparative figures depends on this assessment.

The amendment also requires certain comparative disclosures under IFRS 12 upon transition. Original issue IFRS 12 is a comprehensive standard on disclosure requirements for all forms of interests in other entities, including subsidiaries, joint arrangements, associates and special purpose vehicles. IFRS 12 requires sufficient transparency to enable users of financial statements to evaluate the nature of, and risks associated with its interests in other entities and the effects of those interests on its financial position, financial performance and cash flows. The standard resulted in additional disclosure for the Group.

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 17 Notes to the annual financial statements for the year ended 31 December 2013 1.5 Adoptions of new standards and interpretations (continued) IFRS 13 FAIR VALUE MEASUREMENT This standard provides guidance on fair value measurement and provides additional disclosure requirements. This standard had a limited financial impact on the Group's results. Currently the Group has extensive financial instrument disclosure and anticipates this standard to have a limited impact on disclosure as well. IFRS 7 FINANCIAL INSTRUMENTS: DISCLOSURES Disclosures – Asset and Liability offsetting The IASB has published an amendment to IFRS 7, ‘Financial instruments: Disclosures’, reflecting the joint requirements with the FASB to enhance current offsetting disclosures.

These new disclosures are intended to facilitate comparison between those entities that prepare IFRS financial statements to those that prepare financial statements in accordance with US GAAP.

1.6 Summary of significant accounting policies 1.6.1 Basis of consolidation Subsidiaries Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible, are taken into account. The financial statements of subsidiaries are included in the Group financial statements from the date that control commences until the date that control ceases.

The financial statements of the subsidiaries are prepared for the same reporting period as the parent Company, using consistent accounting policies.

A change in the ownership interest of a subsidiary, without a change of control, is accounted for as an equity transaction. Losses are attributed to the non–controlling interest even if that results in a deficit balance.

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 18 Notes to the annual financial statements for the year ended 31 December 2013 1.6 Summary of significant accounting policies (continued) 1.6.1 Basis of consolidation (continued) If the Group loses control over a subsidiary, it: - Derecognises the assets (including goodwill) and liabilities of the subsidiary - Derecognises the carrying amount of any non–controlling interest - Derecognises the cumulative translation differences, recorded in equity - Recognises the fair value of the consideration received - Recognises the fair value of any investment retained - Recognises any surplus or deficit in profit or loss - Reclassifies the parent’s share of components previously recognised in other comprehensive income to profit or loss.

Transactions eliminated on consolidation IntraGroup balances and any unrealised gains and losses or income and expenses arising from intraGroup transactions, are eliminated in preparing the Group financial statements. Business combinations involving entities under common control The difference between the purchase price and the historical net asset value of the subsidiaries acquired from Group companies is recognised in equity. Investments in subsidiaries are carried at cost in the separate Company financial statements and adjusted for any impairment losses.

Business combinations and goodwill Business combinations are accounted for using the acquisition method.

The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non–controlling interest in the acquiree. For each business combination, the acquirer measures the non–controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date.

This includes the separation of embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is re–measured to fair value as at the acquisition date through profit or loss. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not re–measured and settlement is accounted for in equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss.

Mercedes – Benz South Africa Proprietary Limited (Reg.

No. 1962/000271/07) 19 Notes to the annual financial statements for the year ended 31 December 2013 1.6 Summary of significant accounting policies (continued) 1.6.1 Basis of consolidation (continued) Goodwill is initially measured at cost being the excess of the consideration transferred over the Group’s net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss. After initial recognition, goodwill is measured at cost less any accumulated impairment losses.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill forms part of a cash–generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation.

Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash–generating unit retained.

1.6.2 Foreign currency Foreign currency transactions Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to Rand at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in operating expenses. Non–monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

Non–monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to Rand at foreign exchange rates ruling at the dates the fair value was determined. 1.6.3 Derivative financial instruments The Group uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from operational, financing and investment activities. In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for trading purposes. Derivative financial instruments are recognised initially at fair value.

Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. Subsequent to initial recognition, derivative financial instruments are measured at fair value. The gain or loss on re–measurement to fair value is recognised immediately in profit or loss. The fair value of interest rate swaps is the estimated amount that the Group would receive or pay to terminate the swap at the reporting date, taking into account current interest rates and the current creditworthiness of the swap counterparties. The fair value of forward exchange contracts is their quoted market price at the reporting date, being the present value of the quoted forward price.

For the purpose of hedge accounting, hedges are classified as: Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment.

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 20 Notes to the annual financial statements for the year ended 31 December 2013 1.6 Summary of significant accounting policies (continued) 1.6.3 Derivative financial instruments (continued) At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the Group wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge.

The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the effectiveness of changes in the hedging instrument’s fair value in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.

Hedges which meet the strict criteria for hedge accounting are accounted for as follows: Fair value hedges The change in the fair value of an interest rate hedging derivative is recognised in profit or loss in finance costs. The change in the fair value of the hedged item attributable to the risk hedged is recorded as a part of the carrying value of the hedged item and is also recognised in profit or loss in finance costs. For fair value hedges relating to items carried at amortised cost, the adjustment to carrying value is amortised to profit or loss over the remaining term to maturity. Effective interest rate amortisation may begin as soon as an adjustment exists and shall begin no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged.

If the hedge item is derecognised, the unamortised fair value is recognised immediately in profit or loss. When an unrecognised firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognised as an asset or liability with a corresponding gain or loss recognised in profit or loss. Amounts recognised as other comprehensive income are transferred to profit or loss when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is recognised or when a forecast sale occurs.

If the forecast transaction or firm commitment is no longer expected to occur, the cumulative gain or loss previously recognised in other comprehensive income are transferred to profit or loss. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, any cumulative gain or loss previously recognised in other comprehensive income remains in other comprehensive income until the forecast transaction or firm commitment affects profit or loss.

Mercedes – Benz South Africa Proprietary Limited (Reg.

No. 1962/000271/07) 21 Notes to the annual financial statements for the year ended 31 December 2013 1.6 Summary of significant accounting policies (continued) 1.6.3 Derivative financial instruments (continued) The Group uses forward currency contracts as hedges of its exposure to foreign currency risk in forecasted transactions and firm commitments. Refer to Note 26 for more details. Current versus non–current classification Derivative instruments that are not designated as effective hedging instruments are classified as current or non–current or separated into a current and non–current portion based on an assessment of the facts and circumstances (i.e., the underlying contracted cash flows).

Where the Group will hold a derivative as an economic hedge (and does not apply hedge accounting) for a period beyond 12 months after the reporting date, the derivative is classified as non–current (or separated into current and non–current portions) consistent with the classification of the underlying item. Embedded derivates that are not closely related to the host contract are classified consistent with the cash flows of the host contract. Derivative instruments that are designated as, and are effective hedging instruments, are classified consistent with the classification of the underlying hedged item.

The derivative instrument is separated into a current portion and non–current portion only if a reliable allocation can be made. 1.6.4 Property, plant and equipment Owned assets Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses (see accounting policy 1.6.12). The cost of self constructed assets includes the cost of materials, direct labour, the initial estimate, where relevant, of the costs of dismantling and removing the items and restoring the site on which they are located, and an appropriate proportion of production overheads and capitalised borrowing costs on qualifying assets.

Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

Leased assets Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Subsequent costs The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item or acquiring new items when that cost is incurred if it is probable that future economic benefits embodied with the item will flow to the Group and the cost of the item can be measured reliably. All other costs are recognised in profit or loss as an expense as incurred. When significant parts of property, plant and equipment are required to be replaced in intervals, the Group recognises such parts as individual assets with specific useful lives and depreciation, respectively.

Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred.