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.

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 22 Notes to the annual financial statements for the year ended 31 December 2013 1.6 Summary of significant accounting policies (continued) 1.6.4 Property, plant and equipment (continued) Depreciation Depreciation is recognised in profit or loss on a straight–line basis over the estimated useful lives of each significant part of an item of property, plant and equipment. Depreciation decreases the carrying amount of the asset to its residual value at the end of its useful life. Depreciation of an asset begins when it is available for use, i.e.

when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale (or included in a disposal Group that is classified as held for sale) in accordance with IFRS 5 and the date that the asset is derecognised.

The residual value of Property, plant and equipment is the estimated amount that the Group would currently obtain from the disposal of the asset, after deducting the estimated cost of disposal, if the asset were already of the age and in the condition expected at the end of its useful life. Land is not depreciated and assets under construction are only depreciated once they are available for use. The estimated useful lives for the current and prior period are as follows: Buildings 25 years Motor vehicles 5 – 10 years Plant and equipment 4 – 12 years Software, furniture and equipment 3 – 10 years Assets leased under operating lease 4 – 5 years The useful lives, depreciation methods and residual values are reassessed annually and adjusted, if appropriate.

Derecognition An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is recognised in profit or loss in the year the asset is derecognised. 1.6.5 Intangible assets Intangible assets (other than Goodwill) Intangible assets, such as patents and trademarks, that are acquired by the Group are measured at cost less accumulated amortisation (see below) and accumulated impairment losses.

Expenditure on internally generated goodwill and brands is recognised in profit or loss as an expense as incurred. Amortisation Amortisation is recognised in profit or loss on a straight–line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Goodwill and intangible assets with an indefinite useful life are systematically tested for impairment at each reporting date. Other intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows: Patents and trademarks 10 – 20 years Amortisation methods and useful lives are reviewed at each reporting date, and adjusted, if appropriate.

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 23 Notes to the annual financial statements for the year ended 31 December 2013 1.6 Summary of significant accounting policies (continued) 1.6.5 Intangible assets (continued) The residual value of intangible assets is the estimated amount that the Group would currently obtain from the disposal of the asset, after deducting the estimated cost of disposal, if the asset were already of the age and in the condition expected at the end of its useful life.

Derecognition Intangible assets are derecognised upon disposal or when no future economic benefits are expected from its use or disposal.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is derecognised. 1.6.6 Financial assets Financial assets are classified as financial assets at fair value through profit or loss, or loans and receivables. When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. All regular way purchases and sales of financial assets are recognised on the trade date, which is the date that the Group commits to purchase the asset.

Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss includes financial assets held for trading and financial assets designated upon initial recognition as at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Derivatives, including separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments or a financial guarantee contract. After initial recognition financial assets are measured at fair value with gains or losses on financial assets held for trading recognised in profit or loss.

The Group assesses whether embedded derivatives are required to be separated from host contracts when the Group first becomes party to the contract. Reassessment only occurs if there is a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required. Embedded derivatives are separated from the host contract, and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related. A separate instrument with the same terms as the embedded derivative will meet the definition of a derivative, and the instrument is not measured at fair value through profit or loss.

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 24 Notes to the annual financial statements for the year ended 31 December 2013 1.6 Summary of significant accounting policies (continued) 1.6.6 Financial assets (continued) Loans and receivables Loans and receivables are non–derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement loans and receivables are carried at amortised cost using the effective interest method less any allowance for impairment. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired as well as through the amortisation process.

Loans and receivables comprise trade and other receivables and cash and cash equivalents. Fair value The fair value of investments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business on the reporting date. For investments where there is no active market, fair value is determined using valuation techniques. Such techniques include using recent arm’s length market transactions; reference to the current market value of another instrument which is substantially the same; discounted cash flow analysis or other valuation models.

An analysis of the fair value of financial instruments and further details on how these are measured are included in Note 26.

Amortised cost Loans and receivables are measured at amortised cost. This is computed using the effective interest method less any allowance for impairment. The calculation takes into account any premium or discount on acquisition and includes transaction costs and fees that are an integral part of the effective interest rate. 1.6.7 Impairment of financial assets The Group assesses at each reporting date whether there is any objective evidence that a financial asset or a Group of financial assets is impaired. A financial asset or a Group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset or the Group of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the debtors or a Group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Objective evidence that financial assets are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group entities on terms that the Group entities would not consider otherwise, indications that a debtor or issuer will enter bankruptcy or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment. Assets carried at amortised cost For financial assets carried at amortised cost the Group first assesses individually whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant.

If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a Group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 25 Notes to the annual financial statements for the year ended 31 December 2013 1.6 Summary of significant accounting policies (continued) 1.6.7 Impairment of financial assets (continued) If there is objective evidence that an impairment loss on assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e.

the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced through use of an allowance account. The amount of the loss is recognised in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. Any subsequent reversal of an impairment loss is recognised in profit or loss.

In relation to trade receivables, a provision for impairment is made when there is objective evidence (such as the probability of insolvency or significant financial difficulties of the debtor) that the Group will not be able to collect all of the amounts due under the original terms of the invoice. Impaired debts are derecognised when they are assessed as uncollectible, that is when there is no realistic prospect of future recovery and all collateral has been received. 1.6.8 Financial liabilities Financial liabilities are interest bearing loans and borrowings, trade and other payables and financial guarantee contracts.

When financial liabilities are recognised initially, they are measured at fair value, plus, in the case of financial liabilities not at fair value through profit or loss, directly attributable transaction costs.

Interest bearing loans and borrowings After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the amortisation process. Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss includes financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term.

Derivatives, including separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognised in profit or loss.

Trade and other payables Trade and other payables are initially recognised at fair value, plus transaction costs that are directly attributable to the acquisition or issue. Subsequent to initial recognition, the Group measures trade and other payables at amortised cost using the effective interest method. Financial guarantee contracts Financial guarantee contracts issued by the Group are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument.

Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the best estimate of the expenditure required to settle the present obligation at the reporting date and the amount recognised less cumulative amortisation.

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 26 Notes to the annual financial statements for the year ended 31 December 2013 1.6 Summary of significant accounting policies (continued) 1.6.9 Derecognition of financial assets and liabilities Financial assets A financial asset (or, where applicable a part of a financial asset or part of a Group of similar financial assets) is derecognised when:  the rights to receive cash flows from the asset have expired;  the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass through’ arrangement; or  the Group has transferred its rights to receive cash flows from the asset and either o has transferred substantially all the risks and rewards of the asset, or o has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

Financial liabilities A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.

1.6.10Inventories Inventories are measured at the lower of cost and net realisable value.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. In the case of manufactured inventories and work in progress, cost includes an appropriate share of overheads based on normal operating capacity. Write–down of inventories arises when, for example, goods are damaged or when net realisable value is lower than carrying value.

Raw materials and component parts are valued on a first–in first–out basis. Fully–built up vehicles and spare parts are valued on a first–in first–out basis. 1.6.11Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. Cash and cash equivalents are recognised initially at fair value plus transaction costs and subsequently measured at amortised cost using the effective interest method.

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 27 Notes to the annual financial statements for the year ended 31 December 2013 1.6 Summary of significant accounting policies (continued) 1.6.12Impairment of non–financial assets The carrying amounts of the Group’s non– financial assets, other than inventories and deferred taxation assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. For goodwill, assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each reporting date.

An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognised in profit or loss.

Impairment losses recognised in respect of cash–generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash–generating units (Group of units) and then, to reduce the carrying amount of the other assets in the unit (Group of units) on a pro–rata basis. Calculation of recoverable amount The recoverable amount of assets is the greater of their fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre– taxation discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash–generating unit to which the asset belongs. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.

Reversals of impairment For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or cash–generating unit’s recoverable amount. An impairment loss in respect of goodwill is not reversed. In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Goodwill Goodwill is tested for impairment annually (as at 31 December) and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each cash–generating unit (or Group of cash–generating units) to which the goodwill relates. Where the recoverable amount of the cash generating unit is less than their carrying amount the impairment loss is first used to reduce the carrying amount of any goodwill allocated to the unit, and then to reduce the carrying amounts of other assets in the unit (Group of units) on a pro–rata basis.

1.6.13Dividends Dividends are recognised as a deduction from equity in the period in which they are declared. 1.6.14Employee benefits Defined contribution plans A defined contribution plan is a post–employment plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an expense in profit or loss as incurred in the periods during which services are rendered by employees.

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 28 Notes to the annual financial statements for the year ended 31 December 2013 1.6 Summary of significant accounting policies (continued) 1.6.14 Employee benefits (continued) Defined benefit plans The Group’s net liability in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan assets is deducted.

The discount rate used is based on the yield of the R186 government bond at a date near the valuation date, which is considered to be applicable to the period over which the obligation is expected to be settled. The calculation is performed by a qualified actuary using the projected unit credit method.

When the benefits of a plan are improved, the portion of the increased benefit relating to past service (past services costs) by employees is recognised as an expense in profit or loss on a straight–line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognised immediately in profit or loss. Actuarial gains and losses are recognised as income or expense when the net cumulative unrecognised actuarial gains and losses for each individual plan at the end of the previous reporting period exceed 10% of the higher of the defined benefit obligation and the fair value of plan assets at that date.

These gains or losses are recognised over the expected average remaining working lives of the employees participating in the plans.

Otherwise, the actuarial gain or loss is not recognised. Actuarial gains and losses arising in calculating the Group's obligation in respect of the post–retirement medical aid liability are recognised immediately. The defined benefit asset or liability comprises the present value of the defined benefit obligation (using a discount rate based on high quality corporate bonds), less past service costs and actuarial gains and losses not yet recognised and less the fair value of plan assets out of which the obligations are to be settled. Plan assets are assets that are held by a long–term employee benefit fund or qualifying insurance policies.

Plan assets are not available to the creditors of the Group, nor can they be paid directly to the Group. Fair value is based on market price information and in the case of quoted securities it is the published bid price. The value of any defined benefit asset recognised is restricted to the sum of any past service costs and actuarial gains and losses not yet recognised and the present value of any economic benefits available in the form of refunds from the plan or reductions in the future contributions to the plan.

Where the calculation results in a benefit to the Group, the recognised asset is limited to the net total of any unrecognised actuarial losses and past service costs and the present value of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Group. Long–term service benefits The Group’s net obligation in respect of long–term service benefits, other than pension plans, is the amount of future benefit that employees have earned in return for their service in the current and prior periods.

The obligation is calculated using the projected unit credit method and is discounted to its present value and the fair value of any related assets is deducted. The discount rate used is based upon the R186 government bonds at the valuation date.

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 29 Notes to the annual financial statements for the year ended 31 December 2013 1.6 Summary of significant accounting policies (continued) 1.6.15Provisions A provision is recognised in the statement of financial position when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre–tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

The unwinding of the discount is recognised as finance cost.

Warranties A provision for warranties is recognised when the underlying products or services are sold. The provision is based on historical warranty data and a weighting of all possible outcomes against their associated probabilities. In respect of warranty costs expected reimbursements are taken into account in the determination of the amount of the liability recognised. 1.6.16 Revenue Revenue is recognised only when it is probable that the economic benefits associated with a transaction will flow to the Group and the amount of revenue can be measured reliably. Revenue excludes value added taxation.

Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, and sales taxes or duty. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods or continuing management involvement with the goods.

The Group assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. The Group has concluded that it is acting as a principal in all of its revenue arrangements. The following specific recognition criteria must also be met before revenue is recognised. Goods sold and services rendered Revenue from the sale of goods is recognised in profit or loss when the significant risks and rewards of ownership have been transferred to the buyer. Revenue from services rendered is recognised in profit or loss in proportion to the stage of completion of the transaction at the reporting date.

The stage of completion is assessed by reference to surveys of work performed (i.e. costs incurred to date as a percentage of total expected costs).

Interest income For all financial instruments measured at amortised cost interest income is recorded using the effective interest rate (EIR), which is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Dividends Revenue is recognised when the Group’s right to receive the payment is established. Operating revenue Operating revenue includes all types of revenue listed above but excluded dividend income. 1.6.17 Motor Industry Development Programme incentives utilised The redemption value of import rebate credit certificates which have been utilised to off–set import duties payable on fully–built up vehicles and component parts are deferred and only recognised in profit or loss on the sale of the vehicles to which the certificates were applied.

Excess import rebate certificates and claims Import rebate credit certificates and qualifying rebate claims which will be utilised to off–set import duties payable on future imports, are valued at the redemption value of the certificates or expected redemption value of the qualifying rebate claims and are recognised in cost of sales.

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 30 Notes to the annual financial statements for the year ended 31 December 2013 1.6 Summary of significant accounting policies (continued) 1.6.17 Motor Industry Development Programme incentives utilised (continued) Provision is made for the non–receipt of import rebate credit certificates, principally due to late submission of claims.

The redemption value of the certificates and qualifying claims is discounted over the expected periods of utilisation.

1.6.18 Expenses Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. 1.6.19 Income taxation Income taxation on the profit or loss for the year comprises current and deferred taxation. Income taxation is recognised in profit or loss except to the extent that it relates to items recognised directly in equity or in other comprehensive income, in which case it is recognised in equity or in other comprehensive income.

Current taxation Current income taxation assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. Current taxation is the expected taxation payable on the taxable income for the year, using taxation rates enacted or substantially enacted at the reporting date, and any adjustment to taxation payable in respect of previous years. Deferred taxation Deferred taxation is provided for temporary differences between the carrying amount of assets and liabilities for financial reporting purposes, and the amounts used for taxation purposes.

Deferred taxation liabilities are recognised for all taxable temporary differences, except: Where the deferred taxation liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred taxation assets are recognised for all deductible temporary differences, carry forward of unused taxation credits and unused taxation losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused taxation credits and unused taxation losses can be utilised except: Where the deferred taxation asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 31 Notes to the annual financial statements for the year ended 31 December 2013 1.6 Summary of significant accounting policies (continued) 1.6.19 Income taxation (continued) In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred taxation assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred taxation assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred taxation asset to be utilised. Unrecognised deferred taxation assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred taxation asset to be recovered. Deferred taxation assets and liabilities are measured at the taxation rates that are expected to apply in the year when the asset is realised or the liability is settled, based on taxation rates (and taxation laws) that have been enacted or substantively enacted at the reporting date.

Deferred taxation relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred taxation items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity. Deferred taxation assets and deferred taxation liabilities are offset, if a legally enforceable right exists to set off current taxation assets against current income taxation liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

1.6.20 Non–current assets held for sale and discontinued operations Non–current assets and disposal Groups classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.

Non–current assets and disposal Groups are classified as held for sale if their carrying amounts will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset or disposal Group is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Immediately before classification as held for sale, the measurement of the assets (and all assets and liabilities in a disposal Group) is brought up–to–date in accordance with applicable IFRSs. Then, on initial classification as held for sale, non–current assets and disposal Groups are recognised at the lower of carrying amount and fair value less costs to sell. Impairment losses on initial classification as held for sale are included in profit or loss. The same applies to gains and losses on subsequent remeasurement. A discontinued operation is a component of the Group’s business that represents a separate major line of business or geographical area of operations or is a subsidiary acquired exclusively with a view to resale.

Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. A disposal Group that is to be abandoned may also qualify.

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 32 Notes to the annual financial statements for the year ended 31 December 2013 1.6 Summary of significant accounting policies (continued) 1.6.21 Leases The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset. Group as a lessee Finance leases Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments.

Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are reflected in profit or loss. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term. Operating leases Operating lease payments are recognised as an expense in profit or loss on a straight–line basis over the lease term. Contingent rentals are expensed as incurred.

Group as a lessor Operating leases Leases where the Group does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same bases as rental income. Contingent rents are recognised as revenue in the period in which they are earned. Finance leases Where the Group does transfer substantially all the risks and rewards of ownership of the asset the leases are classified as finance leases.

On initial recognition a receivable is recognised at an amount equal to the net investment in the lease. Finance income is recognised in revenue over the lease term using the effective interest method.

1.6.22 Share–based payment arrangements Employees (including senior executives) of the Group receive remuneration in the form of share–based payment transactions, whereby employees render services as consideration for equity instruments (‘equity–settled transactions’). In situations where equity instruments are issued and some or all of the goods or services received by the entity as consideration cannot be specifically identified, the unidentified goods or services received (or to be received) are measured as the difference between the fair value of the share–based payment transaction and the fair value of any identifiable goods or services received at the grant date.

This is then capitalised or expensed as appropriate.

Equity–settled transactions The cost of equity–settled transactions with employees for awards granted after 7 November 2002 is measured by reference to the fair value at the date on which they are granted. The fair value is determined by using an appropriate pricing model.

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 33 Notes to the annual financial statements for the year ended 31 December 2013 1.6 Summary of significant accounting policies (continued) 1.6.22 Share–based payment arrangements (continued) The cost of equity–settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled.

The cumulative expense recognised for equity–settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest.

The expense or credit recognised in profit or loss for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. No expense is recognised for awards that do not ultimately vest, except for equity–settled transactions where vesting is conditional upon a market or non–vesting condition, which are treated as vesting irrespective of whether or not the market or non–vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.

Where the terms of an equity–settled transaction award are modified, the minimum expense recognised is the expense as if the terms had not been modified, if the original terms of the award are met.

An additional expense is recognised for any modification that increases the total fair value of the share–based payment transaction, or is otherwise beneficial to the employee as measured at the date of modification. Where an equity–settled award is cancelled, it is treated as if it vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately in profit or loss. This includes any award where non–vesting conditions within the control of either the entity or the employee are not met. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.

All cancellations of equity–settled transaction awards are treated equally.

1.6.23 Deferred initial direct cost Initial direct costs include dealer commissions directly incurred in arranging financing transactions. These costs are expensed.

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 34 Notes to the annual financial statements for the year ended 31 December 2013 1.6 Summary of significant accounting policies (continued) 1.6.24 New standards, interpretations and amendments not yet adopted IAS 27 SEPARATE FINANCIAL STATEMENTS (AS AMENDED IN 2011) / IFRS 10 CONSOLIDATED FINANCIAL STATEMENTS / IFRS 12 DISCLOSURE OF INTERESTS IN OTHER ENTITIES The amendment is effective for annual periods beginning on or after 1 January 2014.

The investment entities amendments apply to investments in subsidiaries, joint ventures and associates held by a reporting entity that meets the definition of an investment entity. The exception to consolidation requires investment entities to account for subsidiaries at fair value through profit or loss in accordance with IFRS 9 (or IAS 39, as applicable), except for investments in subsidiaries, associates and joint ventures that provide services that relate only to the investment entity, which must be consolidated (investments in subsidiaries) or accounted for using the equity method (investments in associates or joint ventures).

This amendment is expected not to have any impact on the Group. IAS 32 FINANCIAL INSTRUMENTS: PRESENTATION Offsetting financial assets and financial liabilities. The amendment clarifies the meaning of the entity currently having a legally enforceable right to set off financial assets and financial liabilities as well as the application of IAS 32 offsetting criteria to settlement systems. This standard becomes effective for year-ends beginning on or after 1 January 2014 which is the Group's December 2014 year-end. This standard is no expected to have any financial or disclosure impact on the Group's results.

IAS 36 IMPAIRMENT OF ASSETS The amendments relate to the disclosure in respect of fair value less costs of disposal. The amendments are intended to clarify the IASB’s original intentions when amendments were made to IAS 36 as a result of the issuance of IFRS 13 Fair Value Measurement. The amendments also require additional information about the fair value measurement of impaired assets when the recoverable amount is based on fair value less costs of disposal and the discount rates that have been used when the recoverable amount.

IAS 39 FINANCIAL INSTRUMENTS: RECOGNITION AND MEASUREMENT The IASB amended IAS 39 to provide relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria.

Novation indicates that parties to a contract agree to replace their original counterparty with a new one. This standard is no expected to have any financial or disclosure impact on the Group's results. IFRS 7 FINANCIAL INSTRUMENTS: DISCLOSURES The IASB has published an amendment to IFRS 9, ‘Financial instruments’, which delays the effective date to annual periods beginning on or after 1 January 2015. The original effective date was for annual periods beginning on or after from 1 January 2013. This amendment is a result of the board extending its timeline for completing the remaining phases of its project to replace IAS 39 (for example, impairment and hedge accounting) beyond June 2011, as well as the delay in the insurance project.

The amendment confirms the importance of allowing entities to apply the requirements of all the phases of the project to replace IAS 39 at the same time. The requirement to restate comparatives and the disclosures required on transition have also been modified.

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 35 Notes to the annual financial statements for the year ended 31 December 2013 1.6 Summary of significant accounting policies (continued) 1.6.24 New standards, interpretations and amendments not yet adopted (continued) IFRS 9 FINANCIAL INSTRUMENTS Deferral of mandatory effective date of IFRS 9 and amendments to transition disclosures Mandatory effective date for IFRS 9 is 1 January 2015. The amendments to IFRS 7 depend on when IFRS 9 is adopted and affect the extent of comparative information required to be disclosed.

Original issue (Classification and measurement of financial assets) This, the first phase of the IASB’s project to replace IAS 39 in its entirety, addresses the classification and measurement of financial instruments.

Financial assets All financial assets are initially measured at fair value. Subsequent measurement of debt instruments is only at amortised cost if the instrument meets the requirements of the ‘business model test’ and the ‘characteristics of financial asset test’. All other debt instruments are subsequently measured at fair value. All equity investments are subsequently measured at fair value either through other comprehensive income (OCI) or profit and loss. Entity also has the option to designate at fair value through profit or loss in certain circumstances. Embedded derivatives contained in non-derivative host contracts are not separately recognised.

Unless the hybrid contract qualifies for amortised cost accounting, the entire instrument is subsequently recognised at fair value through profit and loss.

Phase one is effective for year-ends beginning on or after 1 January 2015, which is applicable to the Group's December 2015 financial year-end. There is no financial impact on the Group's results expected as a result of Phase one, however there will be disclosure changes. The second and third phases of the project will deal with the impairment of financial instruments and hedge accounting, respectively. Reissue to include requirements for the classification and measurement of financial liabilities and incorporate existing derecognition requirements Amendments published in October 2010 incorporate the existing derecognition principles of IAS 39 directly into IFRS 9 and guidance for Financial liabilities.

Financial Liabilities- For liabilities designated at fair value through profit and loss, the change in the fair value of the liability attributable to changes in credit risk is presented in OCI. The remainder of the change in fair value is presented in profit and loss.- All other classification and measurement requirements in IAS 39 have been carried forward into IFRS 9.

Phase one is effective for year-ends beginning on or after 1 January 2015, which is applicable to the Group's December 2015 financial year-end. There is no financial impact on the Group's results expected as a result of Phase one, however there will be disclosure changes. The second and third phases of the project will deal with the impairment of financial instruments and hedge accounting, respectively. IFRIC 21LEVIES IFRIC 21 provides guidance on when to recognise a liability for a levy imposed by a government, both for levies that are accounted for in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and those where the timing and amount of the levy is certain.

The Interpretation covers the accounting for outflows imposed on entities by governments (including government agencies and similar bodies) in accordance with laws and/or regulations. However, it does not include income taxes (see IAS 12 Income Taxes), fines and other penalties, liabilities arising from emissions trading schemes and outflows within the scope of other Standards. The Interpretation does not supersede IFRIC 6 Liabilities arising from Participating in a Specific Market — Waste Electrical and Electronic Equipment, which remains in force and is consistent with IFRIC 21. This interpretation is expected not to have any impact on the Group.

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 36 Notes to the annual financial statements for the year ended 31 December 2013 Group Company 2013 2012 2013 2012 R’000 R’000 R’000 R’000 2. Total revenue Operating revenue (note 3) 33 255 428 34 719 903 26 501 714 Dividend income (note 4) 5 907 516 576 51 140 33 261 335 35 236 479 26 552 854 3. Operating revenue Sales of: – Vehicles 22 207 129 26 543 843 19 459 860 – Spare parts and services 3 594 565 3 040 279 2 857 563 – Exported components 4 703 431 5 135 781 4 184 291 – Financial services 2 750 303 – – 33 255 428 34 719 903 26 501 714 4.

Dividend income Dividends from subsidiaries – 501 491 45 233 Preference share dividend SMH – 11 538 – Preference share dividends 5 907 3 547 5 907 5 907 516 576 51 140 5. Finance costs Interest paid (1 031 070) (1 462 211) (1 187 185) (1 031 070) (1 462 211) (1 187 185) 6. Profit before taxation Profit before taxation is arrived at after taking into account the following: Income Income from subsidiaries* – 103 717 88 722 Net foreign exchange gains 148 527 297 152 148 527 Profit on disposal of property, plant and equipment 17 067 522 810 * Income from subsidiaries relates to administration fees charged

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 37 Notes to the annual financial statements for the year ended 31 December 2013 (continued) Group Company 2013 2012 2013 2012 R’000 R’000 R’000 R’000 6. Profit before taxation (continued) Expenses Auditors’ remuneration 20 148 11 007 11 581 – Audit fees 15 631 3 770 7 335 – MIDP certificates 3 934 7 236 3 934 – Other services 581 – 312 – Prior year under–provision 2 – – Consulting fees 93 730 82 520 84 187 Depreciation 658 470 325 128 360 877 – Motor vehicles 3 443 1 646 2 363 – Assets leased under operating leases 383 754 133 763 172 906 – Buildings 45 640 25 369 23 206 – Plant and equipment 204 322 150 481 153 042 – Software, furniture and equipment 21 311 13 869 9 360 Loss on disposal and scrapping of property, plant and equipment 3 678 22 226 3 158 Warranty provision utilised 82 919 55 633 72 546 Rentals in respect of operating leases 82 051 23 226 29 297 – Property 73 693 13 894 20 939 – IT infrastructure – 494 – – Other 8 358 8 838 8 358 Staff costs 2 152 942 1 431 376 1 142 496 Included in staff costs are – Retirement benefit costs 117 104 90 207 – Pension Schemes (see note 20) 35 379 22 433 – Post retirement medical costs (see note 20) 81 725 67 774 Defined contribution expenses 81 111 46 102 41 478 Net foreign exchange losses 216 372 62 252 212 249

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 38 Notes to the annual financial statements for the year ended 31 December 2013 (continued) Group Company 2013 2012 2013 2012 R’000 R’000 R’000 R’000 7. Income taxation expense South African normal tax Current tax (541 644) (881 284) (436 786) – Current year (604 093) (851 674) (486 035) – Prior year adjustment 62 449 (29 610) 49 249 Deferred taxation (21 462) 376 270 31 515 – Current year 3 731 346 660 51 870 – Prior year adjustment (25 193) 29 610 (20 355) Secondary tax on companies – Current year (4 529) – – (567 635) (505 014) (405 271) Reconciliation of taxation rate % % Effective taxation rate 26.9 21.5 26.0 Adjusted for: Dividend income – 6.2 0.9 Secondary tax on companies (0.2) – – Non–deductible expenses 1.0 (0.3) (0.7) Non–taxable income (1.3) 0.6 – Assessed loss not raised (0.2) – – STC credit ( 0.1) Prior year adjustment 1.8 1.9 Standard taxation rate 28.0 28.0 28.0

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 39 Notes to the annual financial statements for the year ended 31 December 2013 (continued) 8. Property, plant and equipment Group Land and buildings Motor vehicles Software, furniture and equipment Plant and equipment Assets under construction Assets leased under operating leases Total 2013 R’000 R’000 R’000 R’000 R’000 R’000 R’000 Cost Balance at beginning of year Additions Disposals Transfers from assets under construction Balance at end of year Accumulated depreciation and accumulated impairment losses Balance at beginning of year Depreciation charge Disposals Balance at end of year Carrying amount 2012 Cost Balance at beginning of year 1 249 766 22 181 343 744 3 376 906 354 913 2 801 265 8 148 775 Additions 57 507 1 038 17 356 145 092 1 465 593 390 915 2 077 501 Disposals (5 393) (1 932) (21 796) (130 925) (6 785) (384 241) (551 072) Transfers from assets under construction 7 962 – – 92 419 (101 003) 622 – Balance at end of year 1 309 842 21 287 339 304 3 483 492 1 712 718 2 808 561 9 675 204 Accumulated depreciation and accumulated impairment losses Balance at beginning of year 403 446 14 599 274 739 2 643 823 – 1 213 530 4 550 137 Depreciation charge 45 640 3 443 21 311 204 322 – 383 754 658 470 Disposals (3 297) (1 933) (21 647) (74 051) – (188 959) (289 887) Balance at end of year 445 789 16 109 274 403 2 774 094 – 1 408 325 4 918 720 Carrying amount 2012 864 053 5 178 64 901 709 398 1 712 718 1 400 236 4 756 484 Carrying amount 2011 846 320 7 582 69 005 733 083 354 913 1 587 735 3 598 638

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 40 Notes to the annual financial statements for the year ended 31 December 2013 (continued) 8. Property, plant and equipment (continued) Company Land and buildings Motor vehicles Software, furniture and equipment Plant and equipment Assets under construction Assets leased under operating leases Total 2013 R’000 R’000 R’000 R’000 R’000 R’000 R’000 Cost Balance at beginning of year 645 222 20 889 112 143 2 584 613 1 633 451 813 847 5 810 165 Additions 48 416 921 18 792 349 097 1 490 962 120 817 2 029 006 Disposals (2 254) (11 470) (1 022 607) – (286 701) (1 323 031) Transfers 113 278 25 165 138 185 (276 628) – – Balance at end of year 806 916 19 557 144 630 2 049 287 2 847 785 647 964 6 516 139 Accumulated depreciation and accumulated impairment losses Balance at beginning of year 260 199 15 711 98 600 2 234 891 – 286 564 2 895 965 Depreciation charge 25 369 1 646 13 869 150 481 – 133 763 325 129 Disposals (2 188) (11 468) (999 816) – (142 813) (1 156 285) Balance at end of year 285 568 15 169 101 000 1 385 557 – 277 514 2 064 809 Carrying amount 521 348 4 387 43 630 663 731 2 847 785 370 450 4 451 331 2012 Cost Balance at beginning of year 609 220 21 769 123 856 2 591 556 300 658 729 200 4 376 259 Additions 37 154 1 052 8 488 74 747 1 368 415 225 462 1 715 318 Disposals (5 287) (1 932) (18 443) (114 935) – (140 815) (281 412) Transfers 4 135 – (1 758) 33 245 (35 622) – – Balance at end of year 645 222 20 889 112 143 2 584 613 1 633 451 813 847 5 810 165 Accumulated depreciation and accumulated impairment losses Balance at beginning of year 240 186 15 281 107 658 2 143 711 – 178 916 2 685 752 Depreciation charge 23 206 2 363 9 360 153 042 – 172 906 360 877 Disposals (3 193) (1 933) (18 418) (61 862) – (65 258) (150 664) Balance at end of year 260 199 15 711 98 600 2 234 891 – 286 564 2 895 965 Carrying amount 2012 385 023 5 178 13 543 349 722 1 633 451 527 283 2 914 200 Carrying amount 2011 369 034 6 488 16 198 447 845 300 658 550 284 1 690 507 There are no restrictions on the title of assets and no loss events have occurred for which third party compensation was received.

Please refer to Note 23 for commitments in respect of property, plant equipments.

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 41 Notes to the annual financial statements for the year ended 31 December 2013 (continued) Company 2013 2012 R’000 R’000 9. Investment in subsidiaries Shares at cost 1 631 416 1 155 578 Long–term loans 21 277 771 18 469 983 22 909 187 19 625 561 Provision for impairment on loan* – (8 541) 22 909 187 19 617 020 Less receivable before 31 December included in current portion of investment in subsidiaries 4 054 302 4 166 571 Total long–term investment in subsidiaries 18 854 885 15 450 449 * No reconciliation is provided in respect of the provision for impairment as only one of the loans has been impaired and that impairment provision was recognised in previous years.

Subsidiary Currency Terms Interest rate 2013 R’000 Atlantis Foundries Proprietary Limited ZAR The loan is unsecured and repayment can be deferred by more than 12 months 0.5% above the average of 3 overnight call rates. 349 469 Sandown Motor Holdings Proprietary Limited ZAR Repayable on demand Prime less 2% 259 000 Mercedes – Benz Financial Services South Africa Proprietary Limited ZAR The terms range from 30 January 2013 to 7 October 2014 Average rate of 8.80 % 20 169 302 Daimler Aviation Proprietary Limited ZAR The loan is unsecured and has no fixed terms of repayment The loan is Interest free 500 000 Koppieview Property Proprietary Limited ZAR The loan is unsecured and has no fixed terms of repayment A portion of the loan bears interest at a fixed rate of 10% while the other portion bears interest at 0.5% above the average money market borrowing rate.

21 277 771

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 42 Notes to the annual financial statements for the year ended 31 December 2013 (continued) 9. Investment in subsidiaries (continued) 2012 Subsidiary Currency Terms Interest rate R’000 Atlantis Foundries Proprietary Limited ZAR The loan is unsecured and repayment can be deferred by more than 12 months 0.5% above the average of 3 overnight call rates. 354 862 Sandown Motor Holdings Proprietary Limited ZAR The loan is unsecured and is repayable on demand Prime less 2% 200 000 Mercedes – Benz Financial Services South Africa Proprietary Limited ZAR The loan is unsecured and the terms range from 30 January 2013 to 7 October 2014 Average rate of 8.80 % 17 406 571 Daimler Aviation Proprietary Limited ZAR The loan is unsecured and has no fixed terms of repayment The loan is Interest free 8 541 Koppieview Property Proprietary Limited ZAR The loan is unsecured and has no fixed terms of repayment A portion of the loan bears interest at a fixed rate of 10% while the other portion bears interest at 0.5% above the average money market borrowing rate.

500 009 18 469 983 Group Company 2013 2012 2013 2012 10. Investments and loans R’000 R’000 R’000 R’000 Long–term loans 5 755 7 298 5 755 Investment – Other – Investment in post–retirement fund asset 18 724 25 962 18 724 Investment in preference shares 39 292 – 39 292 63 771 33 260 63 771

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 43 Notes to the annual financial statements for the year ended 31 December 2013 (continued) Group Company 11. Deferred taxation 2013 2012 2013 2012 R’000 R’000 R’000 R’000 Deferred taxation liabilities Deferred taxation comprises: Capital allowances (193 214) 8 773 (13 459) MIDP incentives (127 789) (83 136) (127 789) Derivative expenses (2 523) 7 457 (2 523) Prepayments (6 010) 55 (59) Section 24C allowance – Deferred employee expenditure (3 952) – – 333 488 (66 851) (143 830) Deferred taxation assets Deferred taxation comprises: Provisions 445 900 484 089 378 756 Derivative expenses – Advance payments 40 545 – – Inventory adjustments – consolidation 8 599 – – Assessed losses 119 069 – – Deferred income – 272 262 31 105 STC credit – Operating leases 88 739 – – 702 852 755 351 409 861 Net deferred taxation asset/(liability) 369 364 688 500 266 031 Comprising Deferred taxation assets 471 141 688 500 266 031 Deferred taxation liability (101 777) – – At 31 December 2013, a deferred taxation asset of R Nil (2012: R16 million) relating to Mercedes – Benz Aviation Proprietary Limited and deferred taxation asset of R85.8 million (2012: R90.7 million) relating to Atlantis Foundries Proprietary Limited arising from taxation losses has not been recognised.

These deferred taxation assets have not been recognised as it is not probable that future taxable profits will be available against which the Company can utilise the benefits. A deferred taxation asset has been raised with regards to assessed losses of R41.9 million (2012: R336 million) in respect of Mercedes Benz Financial Services Proprietary Limited. The entity has taxable temporary differences that can be offset against the assessed loss.

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 44 Notes to the annual financial statements for the year ended 31 December 2013 (continued) 11. Deferred taxation (continued) Movement in deferred taxation Group 2013 Balance at beginning of year Movement Balance at end of year R’000 R’000 R’000 Deferred taxation comprises: Capital allowances Provisions MIDP incentives Advance payments Prepayments Section 24C allowance Inventory adjustments – consolidation Assessed losses Derivative expenses Deferred employment expenses STC credit Operating leases Net deferred taxation asset

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 45 Notes to the annual financial statements for the year ended 31 December 2013 (continued) 11. Deferred taxation (continued) Movement in deferred taxation (continued) Group 2012 Balance at beginning of year Movement Balance at end of year R’000 R’000 R’000 Deferred taxation comprises: Capital allowances (193 968) 754 (193 214) Provisions 428 502 17 398 445 900 MIDP incentives (124 071) (3 718) (127 789) Advance payments 9 064 31 481 40 545 Prepayments (3 641) (2 369) (6 010) Section 24C allowance ( 4 132) 4 132 – Inventory adjustments – consolidation 10 601 (2 002) 8 599 Assessed losses 168 007 (48 938) 119 069 Derivative expenses 7 592 (10 115) (2 523) Deferred employment expenses – (3 952) (3 952) STC credit 2 255 (2 255) – Operating leases 86 847 1 892 88 739 Net deferred taxation asset 387 056 (17 692) 369 364 Company 2013 Deferred taxation comprises: Capital allowances (13 459) 22 232 8 773 Deferred income 31 105 240 157 271 262 Provisions 378 756 105 333 484 089 MIDP incentives (127 789) 44 653 (83 136) Derivative income (2 523) 9 980 7 457 Prepayments (59) 114 55 STC credits – Net deferred taxation asset 266 031 422 469 688 500

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 46 Notes to the annual financial statements for the year ended 31 December 2013 (continued) 11. Deferred taxation (continued) Movement in deferred taxation (continued) Company 2012 Balance at beginning of year Movement Balance at end of year R’000 R’000 R’000 Deferred taxation comprises: Capital allowances (14 500) 1 041 (13 459) Deferred income 31 105 31 105 Provisions 359 519 19 237 378 756 MIDP incentives (124 071) (3 718) (127 789) Derivative income 7 592 (10 115) (2 523) Prepayments (48) (11) (59) STC credit 2 255 (2 255) – Net deferred taxation asset 230 747 35 284 266 031 Group Company 2013 2012 2013 2012 R’000 R’000 R’000 R’000 12.

Goodwill Carrying amount 59 894 59 894 – – Goodwill has been tested for impairment at year end and no impairment loss was recognised (2012: R Nil). The remaining goodwill relates to Sandown Motor Holdings, a retail motor dealership and the recoverable amount was determined with reference to the value in use.

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 47 Notes to the annual financial statements for the year ended 31 December 2013 (continued) Group Company 2013 2012 2013 2012 R’000 R’000 R’000 R’000 13. Investment in lease receivables Instalment sale receivables – Gross investment 12 964 450 – – – Less: Unearned finance income (1 993 866) – – 10 970 584 – – – Less: Short–term portion due within one year (3 214 398) – – – Gross investment (4 052 672) – – – Less: Unearned finance income 838 274 – – 7 756 186 – – Finance lease receivables – Gross investment 3 377 094 – – – Less: Unearned finance income (537 195) – – 2 839 899 – – – Less: Short–term portion due within one year (848 152) – – – Gross investment (1 092 500) – – – Less: Unearned finance income 244 348 – – 1 991 747 – – Insurance premium financing – Gross investment 46 712 – – – Less: Short–term portion due within one year (25 537) – – 21 175 – – Total Long–term portion of lease receivables 9 769 108 – – Current portion of lease receivables 4 088 087 – – Less: Allowance for uncollectable lease receivables (2 900) – – 13 854 295 – –

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 48 Notes to the annual financial statements for the year ended 31 December 2013 (continued) 13. Investment in lease receivables (continued) The unguaranteed residual value represented by the gross investment in finance leases are R1 151 million (2012: R1 171 million). Due within 1 year Due within 2 – 5 years Total R’000 R’000 R’000 Reconciliation between the total gross investment in the leases and the present value of the minimum lease payments.

2013 Gross investment Less: Unearned finance income Less: Accumulated allowance for uncollectible minimum lease payments receivable Present value of minimum lease payments Due within 1 year Due within 2 – 5 years Total R’000 R’000 R’000 2012 Gross investment 5 145 172 11 243 084 16 388 256 Less: Unearned finance income (1 057 085) (1 473 976) (2 531 061) Less: Accumulated allowance for uncollectible minimum lease payments receivable (2 900) – (2 900) Present value of minimum lease payments 4 085 187 9 769 108 13 854 295 The instalment sales agreements and the finance leases relate to the financing of motor vehicles depending on the customers’ requirements.

The period of the leases do not extend over 5 years.

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 49 Notes to the annual financial statements for the year ended 31 December 2013 (continued) Group Company 2013 2012 2013 2012 R’000 R’000 R’000 R’000 14. Inventories Raw materials and component parts 594 220 612 650 557 998 Completed and fully built–up vehicles 3 932 800 2 706 280 2 713 634 Spare parts and consumables 1 452 251 1 413 170 1 393 462 Work in progress 46 290 99 15 410 6 025 561 4 732 199 4 680 504 There have been no reversals of write downs in the period and no inventory has been pledged as security. 15.

Trade and other receivables Trade receivables 3 482 570 554 970 418 459 Export incentives 852 590 590 621 852 591 Other receivables 470 262 119 644 373 327 4 805 422 1 265 235 1 644 377 Trade and other receivables are non–interest bearing and generally on 30–90 days’ terms.

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 50 Notes to the annual financial statements for the year ended 31 December 2013 (continued) 15. Trade and other receivables (continued) As at 31 December 2013, some trade receivables were impaired and fully provided for. Movements in the provision for impairment of receivables were as follows: Group Company 2013 2012 2013 2012 R’000 R’000 R’000 R’000 At 1 January 407 475 86 784 84 318 Charge for the year 240 795 (6 952) 15 022 Amounts written off (209 396) (10 387) (1 575) Unused amounts reversed (10 981) 9 436 (10 981) At 31 December 427 893 78 880 86 784 As at 31 December, the analysis of trade receivables that were past due but not impaired is as follows: Past due but not impaired Total Neither past due nor impaired

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 51 Notes to the annual financial statements for the year ended 31 December 2013 (continued) Group Company 2013 2012 2013 2012 R’000 R’000 R’000 R’000 16. Trade receivables from/trade payables to Group companies Trade receivables owing by: Subsidiaries – 72 891 171 294 Holding Company and fellow subsidiaries 596 027 368 223 596 027 596 027 441 114 767 321 Trade payables owing to: Subsidiaries – 579 232 920 907 Holding Company and fellow subsidiaries 1 414 196 1 187 425 1 339 637 1 414 196 1 766 657 2 260 544 Terms and conditions of the above financial liabilities/assets: Trade and other payables as well as trade and other receivables are non–interest bearing and are normally settled on 30–day terms.

No debtors included in past due have been renegotiated. The credit quality of debtors neither past due nor impaired is assessed on a regular basis taking historical evidence into account and credit ratings are applied to each customer and thereafter credit limits are set. The Group is of the opinion that amounts owing by Group companies are fully recoverable. Group Company 2013 2012 2013 2012 R’000 R’000 R’000 R’000 17. Share capital Authorised 46 840 000 ordinary shares of R1 each 46 840 46 840 46 840 Issued and fully paid 46 810 000 ordinary shares of R1 each 46 810 46 810 46 810 Share premium 1 369 880 1 369 880 1 369 880 Total issued capital 1 416 690 1 416 690 1 416 690 The directors do not have general authority to issue unissued shares.

18. Reserve for share based payments Equity–settled incentives granted to executives of the Group, based on the movement in the holding Company share price 11 695 9 028 10 675

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 52 Notes to the annual financial statements for the year ended 31 December 2013 (continued) Group Company 2013 2012 2013 2012 R’000 R’000 R’000 R’000 19. Interest–bearing borrowings MBC Long Term 17 492 602 492 602 MBC Long Term 18 492 572 492 572 MBPF Long Term 07U 119 988 119 988 MBF Long Term 17 – – MBF Long Term 18 624 935 624 935 MBF Long Term 19 274 843 274 843 MBF Long Term 24 999 696 999 696 MBF Long Term 25 999 285 999 285 MBF Long Term 26 – – MBF Long Term 27 999 100 999 100 MBF Long Term 28 1 598 114 1 598 114 MBF Long Term 29 1 497 907 1 497 907 MBF Long Term 30 499 254 499 254 MBF Long Term 31 749 636 749 636 MBP Long Term 07 – – MBP Long Term 08 – – MBP Long Term 09 – – MBP Long Term 11 – – MBP Long Term 12 169 995 169 995 MBP Long Term 13 149 953 149 953 MBP Long Term 14 – – MBP Long Term 15 999 996 999 996 MBP Long Term 16 – – MBP Long Term 17 – – MBP Long Term 18 649 990 649 990 MBP Long Term 19 499 904 499 904 MBP Long Term 20 499 429 499 429 MBP Long Term 21 999 564 999 564 MBP Long Term 22 749 579 749 579 MBP Long Term 23 500 000 500 000 MBP Long Term 24 500 000 500 000 MBP Long Term 25 300 000 300 000 Unsecured Rand loan 17 670 000 670 000 Unsecured Rand loan 18 37 000 37 000 Unsecured Rand loan 19 750 000 750 000 Unsecured Rand loan 20 47 407 – Unsecured Rand loan 21 469 000 469 000 Unsecured Rand loan 22 500 000 500 000 Unsecured Rand loan 23 500 000 500 000 Unsecured Rand loan 24 600 000 600 000 Interest accrual 174 948 174 948 19 114 697 19 067 290

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 53 Notes to the annual financial statements for the year ended 31 December 2013 (continued) Group Company 2013 2012 2013 2012 R’000 R’000 R’000 R’000 19. Interest–bearing borrowings (continued) Less payable before 31 December included in current portion of interest–bearing borrowings 8 157 817 8 130 286 Total long–term borrowings 10 956 880 10 937 004 Additional information Fixed or variable rate Repayable Repayment instalments Interest rate % MBC Long Term 17 Variable 06–Feb–13 On Maturity 5.23% MBC Long Term 18 Variable 21–Feb–13 On Maturity 5.24% MBPF Long Term 07U Variable 26–Jun–14 On Maturity 7.76% MBF Long Term 17 Variable 16–Apr–12 On Maturity 7.51% MBF Long Term 18 Variable 15–Apr–13 On Maturity 6.81% MBF Long Term 19 Variable 15–Apr–14 On Maturity 6.91% MBF Long Term 24 Variable 27–May–13 On Maturity 6.01% MBF Long Term 25 Variable 26–May–14 On Maturity 6.19% MBF Long Term 26 Variable 05–Oct–12 On Maturity 8.55% MBF Long Term 27 Variable 07–Oct–14 On Maturity 7.90% MBF Long Term 28 Variable 16–Apr–15 On Maturity 6.26% MBF Long Term 29 Variable 01–Oct–15 On Maturity 6.28% MBF Long Term 30 Variable 01–Oct–17 On Maturity 6.51% MBF Long Term 31 Variable 06–Dec–13 On Maturity 5.74% MBP Long Term 07 Variable 26–Jun–14 Quarterly 9.57% MBP Long Term 08 Variable 23–Jul–12 On Maturity 10.17% MBP Long Term 09 Variable 30–Jul–12 On Maturity 10.17% MBP Long Term 11 Variable 30–Jan–12 On Maturity 7.20% MBP Long Term 12 Variable 29–Jan–13 On Maturity 7.06% MBP Long Term 13 Variable 29–Jan–14 On Maturity 7.16% MBP Long Term 14 Variable 11–Feb–12 On Maturity 6.65% MBP Long Term 15 Variable 27–May–13 On Maturity 7.01% MBP Long Term 16 Variable 13–Oct–12 On Maturity 7.85% MBP Long Term 17 Variable 23–Nov–12 On Maturity 7.90% MBP Long Term 18 Variable 28–Jan–14 On Maturity 6.56% MBP Long Term 19 Variable 18–Feb–13 On Maturity 6.26% MBP Long Term 20 Variable 17–Feb–14 On Maturity 6.41% MBP Long Term 21 Variable 11–Apr–14 On Maturity 6.26% MBP Long Term 22 Variable 09–Sep–14 On Maturity 6.51% MBP Long Term 23 Variable 13–Feb–15 On Maturity 6.51% MBP Long Term 24 Variable 22–Mar–16 On Maturity 6.56% MBP Long Term 25 Variable 22–Mar–15 On Maturity 6.41% Unsecured Rand loan 17 Variable On call On Maturity 5.85% Unsecured Rand loan 18 Variable On call On Maturity 6.00% Unsecured Rand loan 19 Variable On call On Maturity 5.50% Unsecured Rand loan 20 Variable On call On Maturity 5.40% Unsecured Rand loan 21 Variable On call On Maturity 5.35% Unsecured Rand loan 22 Variable On call None 5.35% Unsecured Rand loan 23 Variable 16–Apr–19 On Maturity 9.12% Unsecured Rand loan 24 Variable 28–Sep–15 On Maturity 6.45% There have not been any defaults or breaches on these loans disclosed above and no security has been provided in respect of the loans.

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 54 Notes to the annual financial statements for the year ended 31 December 2013 (continued) 20. Retirement benefit obligation Pension and provident schemes The policy of the Group is to provide retirement benefits for its employees. All Employees are either members of the Mercedes – Benz Pension Fund or the Mercedes – Benz Retirement Fund which are defined benefit schemes, or of the Mercedes – Benz Provident Fund which is a defined contribution scheme. The schemes are governed by the Pension Funds Act.

The fund was last actuarially valued in September 2013.

The overall expected rate of return on assets is determined based on the market expectations prevailing on that date, applicable to the period over which the obligation is to be settled. These are reflected in the principal assumptions below: 2013 2012 Long–term annual rate of return on investments net of taxation 10.45% Average annual increase in pensionable salaries 7.45% Average annual increase in pensions 5.19% Discount rate net of taxation 8.49% At 31 December 2013 the fair value of the combined assets of the defined benefit schemes was R xx million (2012: R1 530 million) and the actuarial present value of the benefits that had accrued to members allowing for expected future increases in pensionable pay amounted to Rxx million (2012: R1 439 million).

The next actuarial valuation of the schemes will be during September 2013.

The expected contributions to its defined benefit pension plans for the next financial year approximate: Group Company 2013 2012 2013 2012 R’000 R’000 R’000 R’000 Contributions within 12 months after the year end 33 156 28 463

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 55 Notes to the annual financial statements for the year ended 31 December 2013 (continued) Group Company 2013 2012 2013 2012 R’000 R’000 R’000 R’000 20. Retirement benefit obligation (continued) Pension schemes Present value of obligation 1 439 359 1 353 882 Fair value of plan assets (1 530 211) (1 439 286) Net asset (90 852) (85 404) Less: Unrecognised actuarial loss (190 158) (155 570) Net closing asset (281 010) (240 974) Comprising: Pension fund (246 076) (201 972) Retirement fund (34 934) (39 002) Benefit obligation Opening balance 1 255 620 1 184 403 Current service cost 42 343 37 278 Interest cost 108 788 102 522 Actuarial loss 108 107 100 413 Benefits paid (75 499) (70 734) Closing balance 1 439 359 1 353 882 Fair value of plan assets Opening balance 1 288 533 1 215 473 Contributions received 41 816 35 613 Expected return on plan assets 129 320 121 914 Actuarial gain/(loss) 146 041 137 020 Benefits paid (75 499) (70 734) Closing balance 1 530 211 1 439 286 Actual return on plan assets Expected return on plan assets 129 320 121 914 Actuarial gain/(loss) 146 041 137 020 Actual return on plan assets 275 361 258 934

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 56 Notes to the annual financial statements for the year ended 31 December 2013 (continued) Group Company 2013 2012 2013 2012 R’000 R’000 R’000 R’000 20. Retirement benefit obligation (continued) Unrecognised gains and losses Opening balance (233 710) (196 723) Current year actuarial losses 38 149 36 606 Actuarial gain recognised – retirement fund 5 403 4 547 Closing balance (190 158) (155 570) Net periodic pension cost recognised in profit or loss Current service cost 42 343 37 278 Interest cost 108 788 102 522 Expected return on plan assets (129 320) (121 914) Actuarial gain recognised – retirement fund 13 568 4 547 Total expense (including employee contributions) 35 379 22 433 Employer contributions 30 859 26 491 The fund portfolio consists of the following: Property (%) 0% 0% Equities (%) 56% 56% Bonds (%) 26% 26% Cash and money market investments (%) 18% 18% Foreign investments (%) 0% 0% Fair value of plan assets Property – – Equities 864 260 812 906 Bonds 398 134 374 477 Cash and money market investments 267 817 251 903 Foreign investments – – 1 530 211 1 439 286 The plan assets do not carry investments in the entities own equity instruments nor in any of the property that the entity occupies.

2013 2012 2011 2010 2009 Present value of the obligation (1 439 359) (1 255 620) (1 166 248) (1 079 069) Fair value of plan asset 1 530 211 1 288 533 1 223 209 1 077 247 Fund surplus / (deficit) 90 852 32 913 56 961 (1 822)

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 57 Notes to the annual financial statements for the year ended 31 December 2013 (continued) 20. Retirement benefit obligation (continued) Post–retirement medical benefits The Group has funded its obligations to provide certain post–retirement medical aid benefits to its pensioners via the Group’s medical aid fund.

The entitlement to these benefits is dependent upon the employee remaining in service until retirement age and completing a minimum service period, and is subject to periodic review. The Group funds the estimated liability over the working life of the eligible employees. The accumulated post–retirement medical aid obligation and the annual cost of those benefits were determined by independent actuaries. The actuarially determined liability is allocated to provisions. The assumptions used are consistent with those adopted by the actuaries in determining pension costs and in addition include long–term estimates of the increases in medical costs and appropriate discount rates.

The level of claims is based on the individual Groups’ experiences. The assets set aside to fund the medical liability do not meet the definition of fund assets. For this reason they are not offset against the medical liability. In arriving at their conclusion the actuaries took into account the following assumptions: 2013 2012  Discount rate 9.3% 8.5%  Average annual increase in medical costs 8.7% 8.0%  Average salary increase expected 6.9% 6.5%  Normal retirement age 65 65  Fully eligible age 55 55  Expected average retirement age 59 59  Expected salaried member continuance after retirement 100% 100%  Expected waged member continuance after retirement 10% 10% At 31 December 2013 the fair value of the combined assets of the post retirement fund asset funding the scheme was Rxx million (2012: R18.7 million) and the actuarial present value of medical aid benefits that had accrued to members allowing for expected future increases in medical costs was Rxx million (2012: R416 million).

The Group has no significant exposure to any other post–retirement benefit obligations. Group Company 2013 2012 2013 2012 R’000 R’000 R’000 R’000 Post–retirement medical costs Present value of obligation 416 140 338 440 332 880 Movements in present value of obligation Opening liability 344 479 332 880 274 772 Contribution payment (10 064) (11 231) (9 666) Expense 81 725 16 791 67 774 – Service cost 14 063 11 854 9 966 – Interest cost 31 957 29 096 24 992 – Actuarial loss/(gain) 35 705 (24 159) 32 816 Closing liability 416 140 338 440 332 880

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 58 Notes to the annual financial statements for the year ended 31 December 2013 (continued) 20. Retirement benefit obligation (continued) The valuation results are sensitive to changes in the underlying assumptions. The following table provides an indication of the impact of changing a significant valuation assumption: Current assumption Decrease Increase R’000 R’000 R’000 Medical cost inflation rate 8.7% -1% -1% Benefit obligation for active members 255 805 215 899 306 454 Percentage change (15.6%) 19.8% Benefit obligation for continuation members 173 978 198 335 204 598 Percentage change 14.0% 17.6% Group Company 2013 2012 2013 2012 R’000 R’000 R’000 R’000 The expected contributions to its medical plans for the next financial year approximate: Contributions within 12 months after the year end 12 854 14 274 12 456 21.

Provisions Warranty claims Balance at beginning of year 276 455 184 694 240 327 Additional provisions 16 913 48 704 16 913 Amounts utilised (82 919) (55 633) (72 546) Balance at end of year 210 449 177 765 184 694 Warranty claims The provision for warranty claims represents the amount that is not recovered from Daimler AG that is paid locally. The provision is calculated monthly for the warranty period based on estimates made from historical warranty data associated with the products and services. The majority of the warranty expense will be recognised within one to three months, few warranty claims are expected once the vehicles are in use for longer periods but amounts are provided for a two year period.

22. Employee benefits Long–service awards Balance at beginning of year 22 969 20 068 14 628 Additional provisions 26 527 2 451 5 440 Amounts utilised (18 544) – – Balance at end of year 30 952 22 519 20 068 Long–service awards The provision for long–service awards is calculated quarterly based on an estimate of number of employees who will be paid out for long service over the next 5 years. The amount is proportionately raised over the employees past period of service. The amounts do not become vested until the required period of service is completed.

Mercedes – Benz South Africa Proprietary Limited (Reg.

No. 1962/000271/07) 59 Notes to the annual financial statements for the year ended 31 December 2013 (continued) Group Company 2013 2012 2013 2012 R’000 R’000 R’000 R’000 23. Commitments Capital expenditure Property, plant and equipment Authorised by the directors – Committed and not contracted for – – Contracted 718 312 425 773 697 850 718 312 425 773 697 850 This capital expenditure will be financed from internally generated funds.

Operating leases Group as lessee Non–cancellable operating lease rentals are payable as follows: – Less than one year 72 677 7 543 12 747 – Between one and five years 159 700 454 11 100 – More than five years – – 232 377 7 997 23 847 24. Trade and other payables Trade payables 1 417 364 1 087 176 1 165 070 Other payables 835 068 829 650 488 383 2 252 432 1 916 826 1 653 453

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 60 Notes to the annual financial statements for the year ended 31 December 2013 (continued) 25. Financial risk management objectives and policies The Group’s principal financial instruments, other than derivatives, comprise bank loans, finance leases and hire purchase contracts, cash and short–term deposits.

The main purpose of these financial instruments is to raise finance for the Group’s operations. The Group has various other financial instruments such as trade debtors and trade creditors, which arise directly from its operations.

The Group also enters into derivative transactions, principally interest rate swaps. The purpose is to manage the interest rate and currency risks arising from the Group’s operations and its sources of finance. The main risks arising from the Group’s financial instruments are interest rate risk, liquidity risk, foreign currency risk and credit risk. The board reviews and agrees policies for managing each of these risks and they are summarised below. The Group’s accounting policies in relation to derivatives are set out in Note 1. Interest rate risk The Group’s exposure to changes in interest rates relates primarily to the Group’s long–term debt obligations.

The Group’s policy is to manage its interest cost using a mix of fixed and variable rate debt. To manage this mix in a cost–efficient manner, the Group enters into interest rate swaps, in which the Group agrees to exchange, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to an agreed–upon notional principal amount. These swaps are designated to hedge underlying debt obligations. At 31 December 2013, after taking into account the effect of interest rate swaps, the Group does not have any fixed rate borrowings.

Interest rate risk table The following table demonstrates the sensitivity to a reasonable possible change in interest rates, with all other variables held constant, of the Group’s profit before taxation (through the impact on floating rate borrowings). Group Company Increase/ decrease in basis points Effect on profit before tax Increase/ decrease in basis points Effect on profit before tax 2013 R’000 R’000 Rand + 100 + 100 (6 552) Rand –100 –100 6 552 2012 Rand + 100 (52 604) + 100 (5 973) Rand –100 52 604 –100 5 973

Mercedes – Benz South Africa Proprietary Limited (Reg.

No. 1962/000271/07) 61 Notes to the annual financial statements for the year ended 31 December 2013 (continued) 25. Financial risk management objectives and policies (continued) Foreign currency risk The Group transacts with entities in Europe, the United Sates of America and Japan and therefore is exposed to foreign currency risk. The Group is exposed to foreign exchange rate risks between the date of order and the ultimate payment of the foreign invoices. The Group enters into forward exchange contracts when the net exposure is significant. The Group manages its foreign currency exchange rate risk by economically hedging all identifiable exposures via various financial instruments suitable to the Group’s risk exposure.

The following significant exchange rates applied during the year: Reporting date spot rate 2013 2012 Euros 14.57 11,17 US Dollars 10.56 10,17 Japanese Yen 9.94 8,47 The following table demonstrates the sensitivity to a reasonable possible change in the above mentioned exchange rates, with all other variables held constant, of the Group’s profit before taxation (due to a change in the fair value of monetary assets and liabilities) and the Group’s equity (due to changes in the fair value of forward exchange contracts).

Group Company Increase/ decrease in exchange rate Effect on profit before tax Increase/ decrease in exchange rate Effect on profit before tax R’000 R’000 2013 Euros: +10% +10% (80 073) –10% –10% 80 073 US Dollars: +10% +10% 7 924 –10% –10% (7 924) Japanese Yen: +10% +10% 24 503 –10% –10% (24 503 2012 Euros: +10% (32 817) +10% (33 248) –10% 32 817 –10% 33 248 US Dollars: +10% (2 381) +10% 548 –10% 2 381 –10% (548) Japanese Yen: +10% (4 365) +10% (4 402) –10% 4 365 –10% 4 402

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 62 Notes to the annual financial statements for the year ended 31 December 2013 (continued) 25.

Financial risk management objectives and policies (continued) Commodity price risk The Group’s exposure to price risk is minimal. Credit risk The Group trades only with recognised, creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant.

With respect to credit risk arising from the other financial assets of the Group, which comprise cash and cash equivalents and certain derivative instruments, the Group’s exposure to credit risk arises from default of the counter party, with a maximum exposure equal to the carrying amount of these instruments. The maximum exposure to credit risk for financial assets at the reporting date by type of instrument and counterparty was: Group Company 2013 2012 2013 2012 R’000 R’000 R’000 R’000 Investment in subsidiaries – 1 631 416 1 155 578 Investments and loans 63 771 21 277 771 18 469 983 Investment in lease receivables 9 769 108 – – Trade and other receivables 4 805 422 1 265 235 1 644 377 Derivative asset 74 711 42 175 74 711 Trade receivables from group companies 596 027 441 114 767 321 Current portion of investment in lease receivables 4 085 187 – – Cash and cash equivalents 320 757 297 512 281 660 19 714 983 24 955 233 22 393 630 Liquidity risk The Group monitors its risk to a shortage of funds using a recurring liquidity planning tool.

This tool considers the maturity of both its financial investments and financial assets (e.g. accounts receivables, other financial assets) and projected cash flows from operations.

The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts and bank loans. The table below summarises the maturity profile of the Group’s financial liabilities as at 31 December 2013 based on contractual undiscounted payments. 31 December 2013 Within 1 year 1 – 5 years >5 years Total R’000 R’000 R’000 R’000 Interest bearing loans and borrowings Derivative liability Bank overdraft Trade and other payables

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 63 Notes to the annual financial statements for the year ended 31 December 2013 (continued) 25.

Financial risk management objectives and policies (continued) 31 December 2012 Within 1 year 1 – 5 years >5 years Total R’000 R’000 R’000 R’000 Interest bearing loans and borrowings 8 157 817 10 956 880 – 19 114 697 Derivative liability 22 297 – – 22 297 Bank overdraft 3 506 – – 3 506 Trade and other payables 3 666 628 – – 3 666 628 11 850 248 10 956 880 – 22 807 128 The table below summarises the maturity profile of the Group’s financial assets as at 31 December 2013 based on contractual undiscounted receivables.

31 December 2013 Within 1 year 1 – 5 years >5 years Total R’000 R’000 R’000 R’000 Investments and loans Investments in lease receivables Trade and other receivables Derivative asset Other assets 31 December 2012 Within 1 year 1 – 5 years >5 years Total R’000 R’000 R’000 R’000 Investments and loans 63 771 – – 63 771 Investments in lease receivables 4 085 187 9 769 108 – 13 854 295 Trade and other receivables 5 401 449 – – 5 401 449 Derivative asset 74 711 – – 74 711 Other assets 320 757 – – 320 757 9 945 875 9 769 108 – 19 714 983 The table below summarises the maturity profile of the Company’s financial liabilities as at 31 December 2013 based on contractual undiscounted payments.

31 December 2013 Within 1 year 1 – 5 years >5 years Total R’000 R’000 R’000 R’000 Interest bearing loans and borrowings 10 190 522 11 742 528 – 21 933 050 Derivative financial liability 53 812 – – 53 812 Bank overdraft 271 – – 271 Trade and other payables 3 683 483 – – 3 683 483 13 928 088 11 742 528 – 25 670 616

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 64 Notes to the annual financial statements for the year ended 31 December 2013 (continued) 25. Financial risk management objectives and policies (continued) 31 December 2012 Within 1 year 1 – 5 years >5 years Total R’000 R’000 R’000 R’000 Interest bearing loans and borrowings 8 130 286 10 937 004 19 067 290 Derivative financial liability 22 297 – – 22 297 Bank overdraft 95 – – 95 Trade and other payables 3 913 997 – – 3 913 997 12 066 675 10 937 004 – 23 003 679 The table below summarises the maturity profile of the Company’s financial assets as at 31 December 2013 based on contractual undiscounted receivables.

31 December 2013 Within 1 year 1 – 5 years >5 years Total R’000 R’000 R’000 R’000 Investments and loans 4 054 302 17 256 729 – 21 311 030 Trade and other receivables 1 706 349 – – 1 706 349 Derivative asset 42 175 – – 42 175 Other assets 297 783 – – 297 783 6 100 609 17 256 729 – 23 357 338 31 December 2012 Within 1 year 1 – 5 years >5 years Total R’000 R’000 R’000 R’000 Investments and loans 4 166 571 14 367 183 – 18 533 754 Trade and other receivables 2 411 698 – – 2 411 698 Derivative asset 74 711 – – 74 711 Other assets 281 755 – – 281 755 6 934 735 14 367 183 21 301 918 General The carrying amounts of financial assets included in the statement of financial position represent the Group’s exposure to credit risk in relation to these assets.

The credit exposure of forward foreign exchange contracts is represented by the net market value of the contracts, as disclosed.

All financial assets are unsecured and the Group does not have any significant exposure to any individual customer or counterparty.

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 65 Notes to the annual financial statements for the year ended 31 December 2013 (continued) 25. Financial risk management objectives and policies (continued) Capital management The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value.

The Group manages its structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to share holders or issue new shares. No changes were made in the objectives, policies or processes during the years ended 31 December 2013 and 31 December 2012.

The Group monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Group’s policy is to keep the gearing ratio between 40% and 80%. The Group includes within net debt, interest bearing loans and borrowings, trade and other payables less cash and cash equivalents. Capital includes equity attributable to the equity holders of the parent less the net unrealised gains reserve. 2013 2012 R’000 R’000 Interest bearing loans and borrowings 19 114 697 Trade and other payables 3 666 628 Shareholders for dividends – Less cash and short term deposits (317 251) Net debt 22 464 074 Equity 7 584 814 Capital and net debt 30 048 888 Gearing ratio 0.75

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 66 Notes to the annual financial statements for the year ended 31 December 2013 (continued) 26. Financial instruments Fair value Set out below is a comparison by class of carrying amounts and fair values of all the Group’s financial instruments, that are carried in the financial statement: Carrying amount Fair value 2013 R’000 2012 R’000 2013 R’000 2012 R’000 Financial assets Trade and other receivables 5 401 449 5 401 449 Loans and other receivables 13 878 774 14 093 355 Investment in preference shares 39 292 39 292 Derivative financial assets 74 711 74 711 Cash and short term deposits 320 757 320 757 Total 19 714 983 19 929 564 Financial liabilities Interest bearing borrowings 19 114 697 19 329 278 Trade and other payables 3 666 628 3 666 628 Bank overdrafts 3 506 3 506 Derivative financial liabilities 22 297 22 297 Total 22 807 128 23 021 709 Set out below is a comparison by class of carrying amounts and fair values of all the Company’s financial instruments, that are carried in the financial statement: Carrying amount Fair value 2013 R’000 2012 R’000 2013 R’000 2012 R’000 Financial assets Trade and other receivables 1 706 349 2 411 698 1 706 349 2 411 698 Loans and other receivables 21 311 034 18 494 462 22 114 487 18 709 043 Investment in preference shares – 39 292 – 39 292 Derivative financial assets 42 175 74 711 42 175 74 711 Cash and short term deposits 297 783 281 755 297 783 281 755 Total 23 357 783 21 301 918 24 160 795 21 516 499 Financial liabilities Interest bearing borrowings 21 933 050 19 067 290 22 736 507 19 281 871 Derivative financial liability 53 812 22 297 53 812 22 297 Trade and other payables 3 683 483 3 913 997 3 683 483 3 913 997 Bank overdrafts 271 95 271 95 Total 25 670 626 23 003 679 26 474 073 23 218 260

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 67 Notes to the annual financial statements for the year ended 31 December 2013 (continued) 26. Financial instruments (continued) The fair value of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:  Cash and short–term deposits, trade receivables, trade payables, and other current liabilities approximate their carrying amounts largely due to the short–term maturities of these instruments.

 Long–term fixed–rate and variable–rate receivables are evaluated by the Group and Company based on parameters such as interest rates, specific country risk factors, individual creditworthiness of the customer and the risk characteristics of the financed project. Based on this evaluation, allowances are taken to account for the expected losses of these receivables. As at 31 December 2013, the carrying amounts of such receivables, net of allowances, are not materially different from their calculated fair values.

 Fair value of quoted notes and bonds is based on price quotations at the reporting date. The fair value of unquoted instruments, loans from banks and other financial liabilities, obligations under finance leases as well as other non–current financial liabilities is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities.  The Group and Company enters into derivative financial instruments with various counterparties, principally financial institutions with investment grade credit ratings. Derivatives valued using valuation techniques with market observable inputs are mainly interest rate swaps and foreign exchange forward contracts.

The most frequently applied valuation techniques include forward pricing and swap models, using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates and interest rate curves. Fair value hierarchy The Group and Company use the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.

2013 Level 1 Level 2 Level 3 Assets measured at fair value R’000 R’000 R’000 R’000 Financial assets at fair value through profit or loss – Derivatives financial assets 42 175 – 42 175 – Liabilities measured at fair value Financial liabilities measured at fair value through profit or loss – Forward exchange contracts 53 812 – 53 812 –

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 68 Notes to the annual financial statements for the year ended 31 December 2013 (continued) 26. Financial instruments (continued) 2012 Level 1 Level 2 Level 3 Assets measured at fair value R’000 R’000 R’000 R’000 Financial assets at fair value through profit or loss – Derivatives financial assets 74 711 – 74 711 – Liabilities measured at fair value Financial liabilities measured at fair value through profit or loss – Derivatives financial liabilities 22 297 – 22 297 – 27.

Related party transactions Controlling entities The ultimate holding Company is Daimler AG, incorporated in Germany. Transactions with entities in the Group Daimler AG is the ultimate holding entity in the Group comprising of Mercedes – Benz South Africa Limited and its controlled entities. The Company received loans, purchased goods and services, sold goods and services and received management and administrative assistance from other entities in the Group. The aggregate amounts brought to account in respect of the following types of transactions and each class of related party involved were: Company disclosure 2013 R’000 2012 R’000 Statement of Financial Position Loans owing by subsidiaries 21 277 771 18 469 983 Receivables due by subsidiaries 72 891 171 294 Payables due by subsidiaries 579231 920 907 Receivables due by other group companies 368 223 596 027 Payables due by other group companies 1 187 425 1 339 637 Statement of Comprehensive Income Intercompany revenue with subsidiaries 4 236 041 Intercompany purchases from subsidiaries 4 836 605 Interest received from subsidiaries 1 143 227 Dividend received from subsidiaries 501 491 45 233 Administration fees paid to subsidiaries 36 898 Administration fees received from subsidiaries 102 819

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 69 Notes to the annual financial statements for the year ended 31 December 2013 (continued) 27. Related party transactions (continued) Group disclosure 2013 R’000 2012 R’000 Statement of Financial Position Receivables due by other group companies 596 027 Payables due by other group companies 1 414 196 Statement of Comprehensive Income Intercompany revenue with other group companies 7 913 353 Other income with other group companies 44 597 Intercompany cost of sales with other group companies 13 112 989 Selling costs with other group companies 40 036 Administration costs with other group companies 120 644 Other costs with other group companies 17 359 Related parties The Group has a related party relationship with its subsidiaries (see Directors’ Report on page 5), common controlled entities, directors (see Directorate on page 2).

Directors and key management disbursements, including salaries, are subject to review by Daimler AG. Mercedes – Benz South Africa Limited is a 100% held subsidiary of Daimler AG.

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 70 Notes to the annual financial statements for the year ended 31 December 2013 (continued) Group Company 2013 2012 2013 2012 R’000 R’000 R’000 R’000 28. Notes to the cash flow statement 28.1 Reconciliation of net income before taxation to cash generated from operations Profit before taxation 2 110 734 2 344 152 1 556 491 Adjusted for: – Depreciation 658 470 325 128 360 877 – Loss on disposal and scrapping of property, plant and equipment (13 389) (1 647) 2 348 – Decrease in reserve for share based payments (733) (127 887) (736) – Increase in retirement benefit obligation 71 661 43 093 58 108 – Decrease in deferred revenue (50 818) 5 560 – – (Decrease)/increase in other provisions (66 006) – (55 633) – Increase/(decrease) in employee benefits 7 983 (6 929) 5 440 – (Increase)/decrease in derivative asset (43 215) 64 051 (43 215) – Dividend income (5 907) (516 576) (51 140) – Net financing costs/(income) 1 002 003 133 833 17 074 3 670 783 2 287 542 1 849 614 Changes in working capital: – Decrease /(increase) in inventories 370 169 (51 695) 386 577 – Increase in trade and other receivables (922 103) 379 142 (372 882) – Increase in retirement benefit asset (14 387) 167 142 (13 181) – (Increase)/decrease in trade receivables from Group companies (262 594) 326 207 (320 544) – (Increase)/decrease in trade and other payables (111 448) 174 082 (147 450) – (Decrease)/increase in trade payables to Group companies (458 421) (493 887) (473 045) Cash generated from operations 2 271 999 2 789371 909 089 28.2 Taxation paid Amount outstanding at beginning of the year (110 395) (11 066) (97 910) Current charge (excluding deferred taxation) (546 173) (881 284) (436 786) Amount outstanding at end of the year 9 719 16 554 11 066 (646 849) (875 796) (523 630)

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 71 Notes to the annual financial statements for the year ended 31 December 2013 (continued) 28.4 Dividend paid Amount outstanding at beginning of the year (500 399) – (500 399) Dividend declared (604 252) – (500 399) Amount outstanding at end of the year – (1 104 651) – (1 000 798) 29. Accounting estimates and judgements Retirement benefits In arriving at the value of the retirement benefit obligations the Group’s actuaries used various estimates and judgements. These estimates and judgements have been disclosed in Note 20.

Provisions In arriving at the values for the provision for long service awards and the provision for warranty claims the Group has used various estimates and judgements. These estimates and judgements have been disclosed in Note 21 and Note 22. 28. Notes to the cash flow statement (continued) Group Company 2013 2012 2013 2012 R’000 R’000 R’000 R’000 28.3 Cash and cash equivalents Cash on hand and bank balances 320 757 297 783 281 755 Bank overdrafts (3 506) (271) (95) 317 251 297 512 281 660 Cash on hand earns interest on floating rates based on daily bank deposit rates.

For the purpose of the Group cash flow statement, cash and cash equivalents comprise the following at 31 December: Cash on hand and bank balances 317 251 297 512 281 660 317 251 297 512 281 660

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 72 29. 30. Notes to the annual financial statements for the year ended 31 December 2013 (continued) Accounting estimates and judgements (continued) Derivative financial instruments The valuations of treasury financial instruments at 31 December 2013 were performed by Daimler AG. The Company has used the valuations performed by Daimler AG in respect of seven derivatives and used the valuation performed by a local bank in respect of one derivative. The Group enters into derivative financial instruments with various counterparties, principally financial institutions with investment grade credit ratings.

Derivatives valued using valuation techniques with market observable inputs are mainly interest rate swaps, foreign exchange forward contracts and commodity forward contracts. The most frequently applied valuation techniques include forward pricing and swap models, using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates, interest rate curves and forward rate curves of the underlying commodity.

Segment report 2013 R'000 R'000 R'000 R'000 R'000 Income statement disclosure Consolidated Wholesale and retail vehicles business Manufacturing and component exports Financial Services and Fleet management Other Revenues from external customers Revenues from transactions with other operating segments of the same entity Net revenues Interest revenue Interest expense Interest from transactions with other operating segments of the same entity Net interest expense Depreciation and amortisation Income tax expense or income Profit and loss Balance sheet disclosure Segment assets Additions to non-current assets

Mercedes – Benz South Africa Proprietary Limited (Reg. No. 1962/000271/07) 73 Notes to the annual financial statements for the year ended 31 December 2013 (continued) 2012 R'000 R'000 R'000 R'000 R'000 Income statement disclosure Consolidated Wholesale and retail vehicles business Manufacturing and component exports Financial Services and Fleet management Other Revenues from external customers 33 261 335 20 231 731 9 869 139 2 907 026 1 130 678 Revenues from transactions with other operating segments of the same entity -2 494 - -269 675 -605 070 Net revenues 33 261 335 20 229 237 9 869 139 2 637 351 525 608 Interest revenue 29 067 1 156 493 47 137 1 634 Interest expense -1 031 070 -1 187 129 -56 -89 439 -43 729 Interest from transactions with other operating segments of the same entity -943 380 - 59 690 43 729 Net interest expense -1 002 003 -974 016 -9 -29 612 1 634 Depreciation and amortisation -658 470 -155 952 -225 468 -211 622 -65 428 Income tax expense or income -567 635 Profit and loss 2 110 734 164 473 1 368 609 558 656 18 996 Balance sheet disclosure Segment assets 30 180 006 6 541 825 4 802 496 17 696 719 1 138 966 Additions to non-current assets 2 018 312 238 047 1 489 856 166 276 124 133 Business segments The Group is organised into four divisions for operational and management purposes, being Wholesale and retail vehicles business, Manufacturing and component exports, Financial Services and Fleet management and Other, being the residual.

Mercedes Bens South Africa reports its primary business segment information on this basis. The principal offering for each division is as follows: 1. Wholesale and retail vehicles business – passenger Vehicles and commercial vehicle wholesale business including the retail business.

2. Manufacturing and component exports 3. Financial Services and Fleet management – variety of leasing and specialised leasing products and fleet management 4. Other – represents the residual of the operations, which does not constitute its own separate segment. This includes the Property Company and truck engine manufacturing. Additional information 1. All intercompany transactions have been eliminated in the above results. 2. Net capital expenditure is defined as capital expenditure less disposal proceeds. 3. Segment assets excludes financial instruments and deferred taxation. 28. Segment report (continued)