FIRST SOUTH AFRICA CORP LTD - 10-K Annual Report

Back to GetFilings.com

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended June 30, 1998

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from _______________ to ______________________

Commission file number 0-27494

FIRST SOUTH AFRICA CORP., LTD.
(Exact name of Registrant as specified in its charter)

Bermuda N/A
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

Clarendon House, Church Street, Hamilton HM CX, Bermuda
(Address of Principal Executive Offices with Zip Code)

Registrant's telephone number, including area code (441) 295-1422)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on which registered

None None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.01 par value
("Common Stock")

Class A Redeemable Warrants
("Class A Warrants")

Class B Redeemable Warrants
("Class B Warrants")

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. [ ]

State the aggregate market value of the voting stock held by non-affiliates of
the Registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and asked prices of such
stock, as of a specified date within 60 days prior to the date of filing. (See
definition of affiliate in Rule 405, 17 CFR 230.405).

The aggregate market value of the Registrants Common Stock held by
non-affiliates of the Registrant as of September 23, 1998, was $5,079,846.

Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date.

As of September 23, 1998 there were 5,776,382 shares of the Registrant's Common
Stock outstanding and 1,822,500 shares of the Registrant's Class B Common Stock.

-2-

Part 1

Item 1. Description of Business

The Company was organized to acquire, own and operate seasoned, closely
held companies in South Africa with annual sales in the range of approximately
$5 to $50 million. The Company has acquired through FSAH, seventeen businesses
based in South Africa that are as a group engaged in the following industry
segments:

1. Value added specialty foods.
2. Lifestyle Products
3. Packaging equipment and materials.
4. Air conditioning and refrigeration machinery components
5. Metal washers used in the fastener industry.

Strategy

The Company intends to continue to focus its efforts on businesses
related to consumer goods that the Company believes are well situated to benefit
from South Africa's on-going transformation into an active participant in the
global market place as well as the anticipated increase in the number of middle
class consumers. The Company's strategy is to focus its current operations in
consumer related industry sectors, with particular emphasis on its processed
food and lifestyle product segments. It is seeking to divest itself of
operations in the infrastructure and other non core sectors and will then seek
to expand and improve in the remaining areas of focus through efficient
management, organic growth and through the acquisition of mid-size, closely held
companies that operate efficiently, profitably and have seasoned management. The
Company will seek to acquire businesses that are among the top three or four
businesses in their markets, that have the ability to generate above average
margins on a consistent basis and whose management teams are held in high regard
by competitors, suppliers and customers.

The Company believes that it can acquire these types of companies at
lower multiples of earnings than comparable companies would command in the
United States. The Company seeks to benefit from the combination of business
factors that South Africa has to offer, which includes a skilled work force,
effective and expanding infrastructure and increasing access to foreign markets.
The Company may also consider investments in businesses that are located in
other countries, or are engaged in other industries, and in South African
companies, the securities of which are publicly traded, that meet the Company's
price and quality requirements. The Company has and will continue to identify
potential acquisition candidates through the industry contacts of management and
the managements of its subsidiaries, as well as through other general business
sources. To date, the Company has financed its acquisitions through a
combination of cash, issuance of shares of stock of FSAH, other subsidiaries or
the Company and debt financing. The Company anticipates that it will continue to
follow similar financing strategies in its future acquisitions.

The Company's operations in its current industry segments are a result
of a conscious move into the food and lifestyle sectors, where management
believes the emerging new South African middle class will readily expend its new
discretionary income. The focus on the packaging, and fastener industries is
based on the areas in which the Company's predecessor operated and the air
conditioning/refrigeration businesses were an attempt to capitalize on the
growth in infrastructure investment in South Africa.

-3-

History

The Company was founded in September 1995 in response to management's
belief of a growing global interest in South Africa as an emerging market. The
Company believes that the recent relaxation of trade and financial sanctions and
the reintegration of South Africa into the world economic community may increase
the opportunity for improved growth in the South African economy in general and
more particularly in the industry segments in which the Company is engaged. See
Note 19 of the Notes to the Consolidated Financial Statements with respect to
certain financial information relating to industry segments of the Company.

The following chart sets forth the corporate structure of the Company
and its subsidiaries:

FIRST SOUTH AFRICA CORPORATION, LTD.
Bermuda
Listed on NASDAQ
- --------------------------------------------------------------------------------
First South Africa
Management Corp. First South African Holdings
Delaware South Africa
- --------------------------------------------------------------------------------

First SA Food Holdings
Listed on Johannesburg
Stock Exchange
- --------------------------------------------------------------------------------

Lifestyle Industrial Specialty Food Packaging
Products Manufacturing
- ------------------------------------------------------------------------------------------------------------------

Republic Umbrellas L.S. Pressings Piemans Pantry* Starpak
Acquired October 1997 Acquired January Acquired June 1996 Acquired January 1996
Purchase price: 1996 Purchase price: $9,200,000 Purchase price: $838,545
$6,512,598 Purchase price:
$1,900,905

Galactex Outdoor Paper & Metal Astoria Bakery* Alfapak
Acquired October 1997 Acquired April 1996 Acquired July 1996 Acquired November
Purchase price: Purchase price: Purchase price: $4,400,000 1996
$3.656,666 $380,000 Purchase price: $300,000

SA Leisure Europair Seemanns Meat Products* Pakmatic
Acquired October 1997 Acquired January Acquired November 1996 Acquired April 1997
Purchase price: 1996 Purchase price: $5,300,000 Purchase price:
$8,650,968 Purchase price: $1,228,000
$1,029,206

Tradewinds Europair Gull Foods* Pacforce
Acquired March 1998 Refrigeration Acquired January 1997 Acquired October 1997
Purchase price: Acquired April 1996 Purchase price: $9,000,000 Purchase price:
$1,229,857 Purchase price: less $426,000
than $100,000

First Strut Fifers Bakery
Acquired July 1996 Acquired July 1997
Purchase price: Purchase price: $2,100,000
$600,000
- ------------------------------------------------------------------------------------------------------------------

-4-

Description of the Company's Core Industry Segments

Value Added Specialty Foods

The Company's value added specialty food manufacturing operations
consist of five companies - Piemans Pantry, Gull Foods, Seemanns Meat Supplies,
Astoria Bakery and Fifers bakery. Piemans Pantry manufactures, sells and
distributes quality meat, vegetarian and fruit pies, both in the baked and
frozen, unbaked form. Gull Foods manufactures and sells a wide range of prepared
food products. Gull's product line includes over 150 products ranging from
hamburger patties, prepared sandwiches, salads, prepared pastas, pizzas, and
flavored breads. Seemanns manufactures, sells, and distributes a wide range of
processed meat products including products typically found in retail butcheries,
as well as high margin processed and smoked meat products. Astoria Bakery
manufactures, sells and distributes high margin specialty breads such as special
rye breads in the Republic of South Africa from its bakery in Randburg and in
addition, Astoria Bakers Lesotho manufactures, sells and distributes staple
bread to the Lesotho market, from its bakers in Maseru, the capital of Lesotho.
Fifers Bakery manufactures and distributes high quality long life baked
confectionary products and filo pastry.

These companies operate as wholly owned subsidiaries of First SA Food
Holdings which is publicly traded on the Johannesburg Stock Exchange. The
Company owns approximately 67% of First SA Food Holdings.

The food companies are characterized by a focus on providing products
to the upper end of the market, with a significant emphasis on quality. The
companies sell to South Africa's leading supermarkets and retail chains, a
number of fast food franchises as well as independent bakeries and convenience
stores. In the last two fiscal years Woolworths accounted for approximately 22%
of the group's sales.

The group sources its raw materials from both local and foreign
suppliers, has adequate alternative suppliers and to date has had no difficulty
obtaining adequate supplies of all its ingredients. The food businesses are
slightly stronger in the months of July through October as well as in December.
However, these increases are not significant to make this a seasonal business.

The food group accounted for 53% of sales in fiscal 1998, down from 63%
in 1997.

Lifestyle Products

The Company's lifestyle products group consists of four companies - SA
Leisure, Republic Umbrella, Galactex and Tradewinds Parasol. SA Leisure
manufactures a wide range of injection molded consumer items. Its product line
includes over 100 products ranging from injection molded household products such
as containers, waste and laundry baskets, garden chairs and tables,
do-it-yourself tool kits, and luggage, as well as a range of office shelving and
filing systems. Republic Umbrella specializes in the assembly and distribution
of a wide variety of umbrellas and other related outdoor products. Republic
Umbrella is the largest distributor of SA Leisure products. Galactex Outdoor is
the largest broad range distributor of barbecues and barbecue accessories in
South Africa, it is the exclusive Southern Africa distributor of Weber-Stephen
barbeque products. The distribution agreement with Weber has been in place since
1984 and has been renewed until December 1999. Tradewinds Parasol is South
Africa's leading manufacturer of large outdoor wooden parasols. The company is
an export oriented producer and has established an international reputation as a
leading manufacturer of high-quality canvas and wooden parasols.

-5-

These companies operate as wholly owned subsidiaries of First SA
Lifestyle Holdings, a private company. The Company owns approximately 84% of
First SA Lifestyle Holdings.

The lifestyle companies are characterized by a focus on providing a
broad spectrum of outdoors products to the South African retail market, with an
increasing emphasis on exports as well. The companies sell to South Africa's
leading retail chains. In the last two fiscal years only Dions accounted for
approximately 10% of the group's sales.

The group sources its raw materials and products from both local and
foreign suppliers, has adequate alternative suppliers and to date has had no
difficulty obtaining adequate supplies of all its requirements. The lifestyle
businesses are seasonal, with business increasing significantly from September
to January paralleling the South African summer. These lifestyle companies
accounted for 20 % of sales in fiscal 1998.

Packaging Equipment and Materials

The Company's packaging group consists of three wholly owned
subsidiaries - Starpak, Pakmatic and Pacforce. Starpak manufactures high quality
plastic packaging machinery and does business under the name of Levy and Smith.
Machinery manufactured by Starpak is generally used by manufacturers to provide
low cost and high quality packaging for a broad spectrum of consumer goods.
Pakmatic is the exclusive South African agent for a broad range of leading
international machinery manufacturers with an emphasis on packaging machines to
the confectionary and tobacco industries. Pacforce manufactures, sells and
distributes flexible plastic packaging materials. Its products include clear and
printed polyethylene shrink film as well as printed plastic bags. And are sold
to a broad range of end users in the bottling, pharmaceutical, milling,
confectionary, agriculture, building, chemical and industrial markets.

The packaging group companies were assembled as the basis for a group
providing a "one stop" solution to a broad range of packaging need from the
machinery and consumable material sides. The companies sell to a broad range of
customers and over the past two fiscal years no customer has accounted for more
than 10% of the group's sales.

The group sources its raw materials and products from both local and
foreign suppliers, has adequate alternative suppliers and to date has had no
difficulty obtaining adequate supplies of all its requirements. The packaging
businesses experience a seasonal decline from December to February coinciding
with the Christmas season.

The packaging group accounted for 12 % of sales in fiscal 1998, and 12%
in 1997. At present the Company does not view this group as a core holding and
is seeking ways to restructure its holdings in this area.

Industrial Products

The companies falling under the broad industrial category are Europair
and LS Pressings. Europair manufactures and supplies products, parts and
accessories to the refrigeration, heating, ventilation and air conditioning
industry ("HVAC") in South Africa. Its products include grilles, flexible
ducting, flanging, insulation, humidifiers, fire dampers and other accessory
products for the air conditioning industry. L.S. Pressings manufactures washers
for supply to distributors of nuts and bolts who in turn distribute L. S.
Pressing products to end users in various industries and markets.

-6-

These two industrial companies were assembled to take advantage of a
perceived increase in infrastructure spending in South Africa after the 1994
elections.

The companies sell to a broad range of customers and over the past two
fiscal years no customer has accounted for more than 10% of the group's sales.

The group sources its raw materials and products from both local and
foreign suppliers, has adequate alternative suppliers and to date has had no
difficulty obtaining adequate supplies of all its ingredients. Europair is a
seasonal business with operations being stronger in the months from September to
January, paralleling the South African summer. L.S. Pressings experiences a
seasonal decline from December to February coinciding with the Christmas season.

These industrial companies accounted for 15% of sales in fiscal 1998,
down from 25% in 1997. At present the Company does not view this group as a core
holding and is seeking ways to restructure its holdings in this area.

Regulation

The Company's South African business operation is subject to a number
of laws and regulations governing the use and disposition of hazardous
substances, air and water pollution and other activities that effect the
environment. The Company's management believes that each of its subsidiaries is
in substantial compliance with applicable South African law and the regulations
promulgated under such law and that no violation of any such law or regulation
by any such company has occurred which would have a material adverse effect on
the financial condition of the Company.

Employees

As of September 29, 1998, in addition to its President who devotes
substantially all of his business time to the Company, the Company had only one
full-time salaried employee. "See Management - Employment Agreements". As of
such date, FSAH had only four full-time salaried employees. The Company intends
to add employees as necessary to meet management and other requirements from
time to time. On July 1, 1996, FSAH entered into an employment agreement with
Cornelius J. Roodt to act as its Managing Director. See "Management- Employment
Agreements". As of September 29, 1998, the Company's operating subsidiaries
employed approximately 3,800 people.

Item 2. Properties

The Company's principal executive offices are located at Clarendon
House, Church Street, Hamilton, HM 11, Bermuda, which space is made available to
the Company pursuant to a corporate services agreement entered into with a
corporate services company in Bermuda.. The Company's U.S. subsidiary, First
South African Management Corp. (FSAM) has its principal executive offices at
2665 South Bayshore Drive, Suite 702, Coconut Grove, Florida 33133. FSAM's
offices consist of approximately 2,000 square feet of office space in an office
section of Coconut Grove, Florida, which FSAM occupies pursuant to a three-year
lease agreement (expiring in 1999) with a monthly rental of $2,600. FSAH's
principal executive offices are located in the facilities of Europair in South
Africa.

-7-

Starpak and L.S. Pressings operate out of a facility made up of
adjacent buildings owned by Levy & Smith Properties (Proprietary) Limited, a
wholly-owned subsidiary of Starpak. The facility has a total lot size of
approximately 30,000 square feet. The facility has three floors at 85% coverage
equal to a total of 76,500 square feet. The Company anticipates that it will
require additional space and is considering the rental of additional space at a
nearby location. Starpak also has branches in Durban and Cape Town, South
Africa.

Europair operates from premises and facilities that it owns in Gauteng
and from leased premises in KwaZulu-Natal, Western Cape and the Eastern Cape.
Pursuant to an option granted by the Company, Mr. Bruce Thomas (the Chief
Executive Officer of Europair) has acquired Europair's premises for $890,868 and
entered into a ten year lease (expiring in 2006) with Europair with respect to
such premises for an initial rental rate of $110,111 per annum. Europair
believes this property is well suited to Europair's operations and can
accommodate relatively large increases in manufacturing and storage. Europair's
other leased properties are located in Durban, Cape Town and Port Elizabeth.

Piemans Pantry operates from premises and facilities that it owns in
Krugersdorp. The facility has two floors with a total size of 38,000 square
feet. In addition, Piemans Pantry rents a retail facility in Krugersdorp, as
well as an office space in KwaZulu-Natal.

Astoria leases approximately 20,000 square feet of space in Randburg
for which it pays an annual rental amount of approximately $100,000 (pursuant to
a lease expiring in 2006). Astoria also leases approximately 6,000 square feet
in Lesotho for which it pays an annual rental amount of approximately $7,000
(pursuant to a lease expiring in 2006).

Gull operates from premises and facilities that it rents in
Bronkhorstspruit. Such premises include approximately 52,000 square feet of
space. Rental cost is approximately $44,000 per annum with a lease term of five
years. In addition, Gull rents a small manufacturing and retail facility of
approximately 4,000 square feet in downtown Johannesburg. Rental cost of these
premises is approximately $8,000 per annum with a lease term of five years.

Seemanns operates from premises and facilities that it owns in
Randburg. These premises include the retail outlet and comprises approximately
44,000 square feet.

Fifers Bakery leases approximately 18,840 square feet for which it pays
an annual rental amount of approximately $223,000 pursuant to a lease expiring
in June 2006.

Republic Umbrella leases approximately 16,000 square feet in
Springfield Park, Kwa Zulu Natal for which it pays an annual rental amount of
approximately $284,000 pursuant to a lease expiring in November 2003.

Tradewinds Parasol leases approximately 10,000 square feet at 43
Induland crescent, Landsdowne, Cape Town, western cape for which it pays an
annual rental amount of approximately $30,000 pursuant to a lease expiring in
February 2000.

Galactex Outdoor leases approximately 10,000 square feet in Route 24,
Meadowdale, Gauteng for which it pays an annual rental amount of approximately
$117,000 pursuant to a lease expiring in September 2008.

-8-

S.A. (Pty) Ltd. operate out of an administration building in Gardens,
Gauteng which it owns and which includes approximately 2,100 square feet and a
30,000 square foot leased facility in Isithebe, KwaZulu Natal for which it pays
an annual rental amount of approximately $361,000 pursuant to a lease expiring
in October 2000.

Item 3. Legal Proceedings

Neither the Company nor any of its subsidiaries are subject to any
material legal proceedings.

Part II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

On January 24, 1996 , the Company's Common stock and Units were listed
for quotation on the SmallCap Market on the Nasdaq System under the symbols
FSACF and FSAUF, respectively. The following table sets forth, for the periods
indicated the high and low bid prices for the Common Stock and Unites as
reported by Nasdaq. Quotation reflect prices between dealers, without retail
mark-up, mark down or commissions and may not necessarily represent actual
transactions.

High Bid Low Bid
-------- -------
Common Stock
- ------------

1996
3rd Quarter $ 4.75 $ 2.88
4th Quarter $ 6.00 $ 3.00

1997
1st Quarter $ 6.50 $ 4.50
2nd Quarter $ 5.75 $ 4.00
3rd Quarter $ 7.38 $ 3.50
4th Quarter $ 8.75 $ 4.63

1998
1st Quarter $ 8.69 $ 7.13
2nd Quarter $ 8.75 $ 6.125

3rd Quarter $7.69 $5.50
4th Quarter $8.00 $4.00

1999
1st Quarter (through September 23, 1998) $4.75 $1.00

Units

1997
1st Quarter $ 9.72 $ 6.75
2nd Quarter $11.00 $ 8.25
3rd Quarter $ 9.75 $ 6.75
4th Quarter $14.13 $ 6.38

1998
1st Quarter $13.75 $10.00
2nd Quarter $13.50 $ 8.63

-9-

High Bid Low Bid
-------- -------

3rd Quarter $12.50 $8.50
4th Quarter $12.50 $7.00

1999
1st Quarter (through September 23, 1998) $8.00 $1.50

Class A Warrants
- ----------------

1997
1st Quarter $3.00 $2.25
2nd Quarter $5.00 $2.75
3rd Quarter $2.38 $1.25
4th Quarter $3.88 $1.06

1998
1st Quarter $3.875 $2.00
2nd Quarter $3.75 $1.9375
3rd Quarter $3.40 $1.75
4th Quarter $3.69 $1.03

1999

1st Quarter (through September 27, 1998) $1.38 $.50

Class B Warrants
- ----------------

1997
1st Quarter $1.25 $ .25
2nd Quarter $1.50 $ .63
3rd Quarter $1.50 $ .59
4th Quarter $1.94 $ .39

1998
1st Quarter $1.875 $1.00
2nd Quarter $1.75 $1.25
3rd Quarter $1.63 $1.25
4th Quarter $1.75 $1.00

1999
1st Quarter (through September 23, 1998) $1.13 $.50

The Company has not declared or paid any dividends on the Common Stock
and does not intend to declare or pay any dividends on the Common Stock in the
foreseeable future. The Company currently intends to reinvest earnings in the
development and expansion of its business. The declaration of dividends in the
future will be at the election of the Board of Directors and will depend upon
earnings, capital requirements and the financial position of the Company,
general economic conditions and other relevant factors.

As of September 23, 1998, there were approximately 1,750 shareholders,
both of record and beneficial, of the Company's Common Stock.

-10-

In January 1997, the Company entered into a stock option agreement with
Barretto Pacific Corporation ("BPC") pursuant to which the Company granted BPC
an option to purchase 25,000 shares of Common Stock at an exercise private of
$3.75 per share. Such option shall expire 180 days after the effectiveness of
the Registration Statement on Form S-1 with respect to the registration of the
Company's Debentures (as defined in the following paragraph) and certain other
securities of the Company as filed on August 13, 1997. Such option was granted
in consideration of certain services rendered by BPC for the Company. The
Company believes that such transaction is exempt from the registration
provisions of the Act in reliance on Section 4(2) of the Securities Act of 1933,
as amended (the "Act").

In April 1997 through August 1997 the Registrant completed a private
placement of 10,000 senior Subordinated Convertible Debentures due June 15,
2004. The Registrant believes that such private placement is exempt from the
registration provisions of the Act in reliance upon Regulation D and Regulation
S promulgated under the Act. Value Investing Partners, Inc. earned a commission
equal to $700,000, a non-accountable expense allowance equal to $100,000 and
will receive 10 year warrants to purchase 135,000 shares of Common Stock at an
exercise price of $6.00 per share with respect to such private placement. (See
Item 12 "Certain Relationships and Related Transactions-FSAC Escrow Agreements,"
for a description of the issuance of additional shares of Common Stock in May
1997. The Company believes that such transaction is exempt from the registration
provisions of the Act in reliance on Section 4(2) of the Act.)

On October 31, 1997, the Company consummated the private placement and
sale of 15,000 Increasing Rate Debentures of the Company due October 31, 2001,
at a purchase price of $1,000 per Increasing Rate Debenture, to two offshore
investors including BT Global Credit Limited as the lead investor (the
"Offering") pursuant to an exemption from the registration requirements of the
Securities Act of 1933, as amended (the "Act"), under Regulation S promulgated
thereunder. The Increasing Rate Debentures are subject to the terms of an
Indenture dated October 29, 1997 by and between the Company and the American
Stock Transfer & Trust Company, as Trustee (the "Increasing Rate Indenture").
Interest payable on the Increasing Rate Debentures is 4% per annum for the year
ending October 31, 1998, 4.5% per annum for the two years ending October 31,
2000, and 5% per annum for the year ending October 31, 2001, payable on a
quarterly basis. In the event the Increasing Rate Debentures shall not have been
redeemed or converted pursuant to the terms thereof and the Increasing Rate
Indenture prior to the due date, the Company shall pay each registered holder of
the Increasing Rate Debentures an additional amount equal to 22.25% of the
principal amount of Increasing Rate Debentures held by each such registered
holder. The Increasing Rate Debentures are convertible at any time (subject to
prior redemption) into shares of Common Stock at the initial conversion price of
$9.50 per share of Common Stock, subject to adjustment in certain events. The
Increasing Rate Debentures are redeemable after one year if the Company's Common
Stock trades at more than $14.25 per share, subject to adjustment in certain
events, during an agreed upon period of time (30 consecutive market days ending
on the market day prior to the date on which the notice of redemption is first
given). The redemption value of the Increasing Rate Debenture is 122.25% of the
principal amount. The Company has paid Bankers Trust Company ("BTC") a fee equal
to 4.5% of the total offering amount and has agreed to reimburse BTC for its
reasonable legal expenses with respect to such transaction up to an amount of
$50,000.

Item 6. Selected Financial Data

SELECTED CONDENSED COMBINED FINANCIAL DATA

The following selected financial data for Starpak and L.S. Pressings,
the Company's predecessor, as of and for the periods presented have been derived
from the combined audited financial statements of Starpak and

-11-

L.S. Pressings. The unaudited financial data, in the opinion of management,
contain all adjustments (consisting only of normal and recurring adjustments)
necessary for a fair presentation of such data. The results of the interim
periods are not necessarily indicative of the results of a full year. All of the
financial data set forth below should be read in conjunction with the
information appearing under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

Statement of Operations Data Predecessor Company(1) The Company
- -----------------------------------------------------------------------------------------------------------------------------
March 1 to
Years ended February 28, June 30, Years ended June 30,
------------------------ ---------- ------------------------------------
1994 1995 1995 1996 1997 1998
$ $ $ $ $ $
- ------------------------------------------------------------------------------------------------------------------------------

Net Sales 6,851,457 8,826,856 3,297,507 14,911,097 66,575,931 113,408,350

Total operating expenses 6,414,144 8,179,083 2,962,806 19,833,942(3) 61,134,362 107,349,335

Operating income/(loss) 437,313 647,773 334,701 (4,922,845) 5,441,569 6,059,015

Interest paid 180,960 152,163 18,801 865,733(4) 858,067 464,165

Net income/(loss) before tax and
minority interests 321,319 536,440 359,045 (5,248,942) 8,379,511 8,990,577

Net Income/(loss) after tax 207,916 313,882 213,829 (5,737,560) 6,683,165(5) 4,406,912(6)

Predecessor Company(1) The Company
Balance Sheet Data February 28, June 30,
- --------------------------------------------------------------------------------------------------------------------------------
1994 1995 1996 1997 1998
$ $ $ $ $
----------------------- ------------------------------------------------

Total assets 3,976,974 5,161,709 23,604,994 64,197,149 89,183,721
Long term liabilities 1,112,391 1,123,665 2,361,372 13,341,758 28,945,426
Net working capital 1,194,931 1,366,602 4,624,417 25,357,584 25,270,946
Stockholders equity(7) 1,580,826 1,828,656 12,792,376 25,748,210 35,573,635

(1) Represents the combined results for Starpak and L.S. Pressings, which
are deemed to be the predecessor of the Company due to the Common
ownership and control of such entities. The Company's fiscal year end
is June 30.

(2) No dividends were declared or paid during the periods presented.

(3) Includes a one time non cash escrow shares charge of $6,314,000 related
to the release of 1.1 million shares under the terms of an Earnout
Escrow Agreement between the Company, certain shareholders and the
Underwriter of the Company's Initial Public Offering.

(4) Includes a non cash charge of $396,000 relating to costs incurred in
connection with a November 1995 Bridge Note Financing.

(5) Includes a net gain of $3,327,478 on the sale of investment in First SA
Food Holdings, Ltd., L.C. as well as a minority interest of $135,224.

(6) Includes a net gain of $2,608,834 on the sale of investment in First SA
Food Holdings, Ltd. as well as a minority interest of $2,016,791.

(7) Stockholders equity is disclosed before translation differences which
pertain to minorities as well as ordinary stockholders.

-12-

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

BACKGROUND AND HISTORY

The Company was incorporated in September 1995 with the intention to
actively pursue acquisitions fitting a pre defined investment strategy, The
broad strategy followed in all investment decisions is as follows:

o Turnover is to be within the range of $5 - $50 million

o Net income must yield a sustainable above average return on investment.

o Growth in turnover must be above average growth rates and must be
sustainable over the medium term.

o The industry in which the target operates must meet the pre defined
industry sectors identified by management as sectors meeting our broad
investment strategy.

First South Africa Corp. has, through its South African subsidiary,
First South African Holdings (Pty) Ltd, acquired seventeen South
African subsidiaries which have met the acquisition criteria identified
above.

These acquisitions are listed below and are engaged in the following
industry segments:

Processed Foods

o Piemans Pantry
o Astoria Bakery
o Seemann's Quality Meat Products
o Gull Foods
o Fifers Bakery
o Cocam Foods

Lifestyle Products

o SA Leisure
o Galactex
o Republic Umbrella
o Tradewinds
o Parasol

Packaging Equipment and Materials

o Starpak
o Pakmatic
o Pacforce

-13-

Industrial Manufacturing

o L.S. Pressings

Involved in the manufacture of metal washers used in the
fastener industry

o Europair

Involved in the manufacture and distribution of air condit-
ioning and refrigeration components.

-14-

SOUTH AFRICAN OPERATIONS

As the Company's results are reported in US Dollars, but revenues are
primarily generated in South African Rand, the South African inflation rate and
the depreciation of the South African Rand against the US Dollar are important
to the understanding of the Company's results.

In broad terms, if the deterioration of the rand is in excess of the
South African inflation rate, then the Company would need to generate South
African revenue in excess of the South African inflation rate to maintain Dollar
parity.

The average rate for the South African Rand against the US Dollar for
the periods presented in this report are as follows:

Year ended Year ended Year ended
June 30, 1998 June 30, 1997 June 30, 1996
-----------------------------------------------------

Rate of exchange vs $1 4.97 4.53 3.85
Depreciation 9.7% 17.7%

Year ended Year ended Year ended
June 30, 1998 June 30, 1997 June 30, 1996
-----------------------------------------------------

Annual rate of inflation 7.2% 8.8% 6.9%

The result reflected below is therefore greater than inflation adjusted
South African Rand for both revenue and earnings growth.

COMPARISON TO PRIOR YEAR

o SALES

Sales have increased by 70% to $113,408,350 from $66,575,931.

This is better interpreted as a net, after inflation increase
in South African Rand of 72.5%.

This increase is primarily attributable to acquisitions that
the company had completed since the prior year.

The results for the year ended June 30, 1997 do not include
the following operations:

o Fifers Bakery
o Cocam Foods
o Galactex
o SA Leisure

-15-

o Republic Umbrella
o Tradewinds Parasol
o Pacforce

The sales from these companies for the year ended June 30,
1998 total $30,777,531.

The contribution by the individual business segments towards
total sales for the year ended June 30, is as follows:

1998 1997
% %
- --------------------------------------------------------------------------------
Processed foods 53.4 62.9
Lifestyle products 19.7 -
Packaging equipment and materials 11.6 11.8
Industrial manufacturing 15.3 25.3
100.0 100.0
===== =====

The Dollar value of sales in each business segment have
increased over the prior period. The overall increase can be
explained by:

o Additional acquisitions in the Packaging equipment
and materials and Processed foods business segments,
the addition of the Lifestyle products business
segment.

o Organic growth within all operating sectors,
increasing turnover by gaining market share from
competitors.

o Increase in demand for the Company's products as the
middle class base of consumers continues to grow as
South Africa's transition to more broad based
economic participation moves forward.

o Additional capital expenditure on increasing
manufacturing capacity has been made to exploit the
additional demand being experienced.

COST OF SALES

Cost of goods sold of $68,504,965 (representing 60.4% of sales) has
increased from $37,869,755 (representing 56.9% of sales) for the
comparative period in the prior year.

-16-

The cost of goods sold by the individual business segments as a
percentage of sales for the year ended June 30, is as follows:

1998 1997
% %
- --------------------------------------------------------------------------------
Processed foods 56.1 53.2
Lifestyle products 59.1 -
Packaging equipment and materials 71.6 57.4
Industrial manufacturing 71.0 64.9

The overall increase in the percentage of cost of goods sold can be
explained by the following:

o Processed foods

The cost of goods sold in this segment is in line with the
expected cost of goods sold percentage reflected in the full
pro - forma fiscal 1997 ratio.

o Packaging equipment and materials

The poor performance of one subsidiary and the acquisition of
a company that generates lower gross margins than those owned
by the Company in the prior period.

o Industrial manufacturing

Competitive activity in this market sector and the current
economic downturn has adversely impacted on the margins
achieved.

SELLING, GENERAL AND ADMINISTRATIVE COSTS

Selling, General and Administrative costs of $38,844,370 (representing
34.3% of sales) has increased from $23,264,607 (representing 34.9% of
sales) for the comparative period in the prior year.

Included in Selling, General and administrative costs are the following
non cash charges:

1998 1997
- --------------------------------------------------------------------------------

Depreciation 2,485,838 1,481,824
Amortization of intangibles and other assets 1,152,831 529,530
Foreign currency loss 415,221 -
4,053,890 2,011,354
========= =========
Percentage of total sales 3.57% 3.02%

-17-

Intangibles are principally Goodwill, Trademarks, Intellectual property
and Restraint of Trade agreements.

The foreign currency loss arose primarily in the last month of the last
quarter due to the sudden deterioration of the South African Rand
against the United States Dollar, in line with the depreciation of
other emerging market currencies against the United States Dollar.
First South African Holdings (Pty) Ltd, the South African operating
entity of First South Africa Corp., Ltd. remits management fees and
interest on foreign currency loans to First South Africa Corp., Ltd on
a regular basis, these fees and interest charges are denominated in
United States Dollars, which gives rise to the loss on foreign
currencies, whenever the South African Rand deteriorates against the
United States Dollar.

The selling, general and administrative costs of the individual
business segments as a percentage of sales for the nine months ended
March 31, is as follows:

1998 1997
% %
- --------------------------------------------------------------------------------
Processed foods 33.6 35.2
Lifestyle products 27.6 -
Packaging equipment and materials 36.7 34.7
Industrial manufacturing 29.9 28.5
Corporate (Percentage of total sales) 1.1 1.1

The overall decrease in the percentage of Selling, general and
administrative costs can be explained by the following:

o Processed foods

Lower overall Selling, General and Administrative expenses due
to cost containment and more efficient operations.

o Lifestyle products

Low Selling, general and administrative costs in the Lifestyle
sector as compared to the other business segments has resulted
in an overall decrease in the Company's total Selling, General
and Administrative costs as a percentage of sales.

INTEREST RECEIVED/EXPENSE

Interest expense of $464,165 has decreased from $858,067 for the
comparative period in the prior year.

Interest for year ended June 30, 1998 consists of:

-18-

o Interest income earned on First South Africa Corp's cash
balances and surplus funds in the processed foods business.

o Interest expense incurred in the other operating business
segments and interest expense of approximately $1,340,000 on
the 9% and floating rate convertible debenture issuances that
were completed in May and October 1997.

GAIN ON DISPOSAL OF SUBSIDIARY STOCK

Gain on disposal of subsidiary stock has decreased to $2,608,834 from
$3,327,478. During the current period 3.2% of the Company's effective
investment in First SA Food Holdings shares were sold to minorities
realising a profit of $2,608,834. In the prior year the profit was
realised on the disposal of an effective 30% interest in First SA Food
Holdings Limited.

AMORTIZATION OF INTANGIBLES

Amortization of intangibles has increased from $529, 530 to $1,152,831
due primarily to additional intangible values arising on the
acquisition of the Lifestyle Group and the additional purchase price
payments made to vendors of First SA Food Holdings Limited. These
intangibles are amortized over a period of twenty five years.

DEPRECIATION

Depreciation has increased from $1,481,824 to $2,485,838 due primarily
to the acquisition of the Lifestyle group, which has a substantial
asset base.

FOREIGN CURRENCY LOSS

The foreign currency loss in the current year has been disclosed
separately to disclose the effect of the depreciation of the South
African Rand against the United States Dollar, a global trend of all
emerging market currencies. The major portion of the currency loss was
realised in June 1998 when the South African currency depreciated by
14.5% against the United States Dollar. In the prior years a net
currency gain was realised.

First South African Holdings (Pty) Ltd, the South African operating
entity of First South Africa Corp., Ltd. remits management fees and
interest on foreign currency loans to First South Africa Corp., Ltd on
a regular basis. These fees and interest charges are denominated in
United States Dollars, which gives rise to the loss on foreign
currencies, whenever the South African Rand deteriorates against the
Uinted States Dollar.

-19-

OTHER INCOME

Other income of $786,893 has increased from $468,531 for the
comparative period in the prior year.

Other income consists primarily of rebates, commissions and government
incentives earned by the operating subsidiaries.

The significant increase is due to government incentives earned by the
Lifestyle products segment.

NET INCOME

Net income from consolidated subsidiaries of $6,408,046 has decreased
from $6,807,462, a decrease of 5,9% over the comparative period in the
prior year.

The decrease can be attributable to a general depreciation of the South
African Rand against the United States Dollar during the current year,
An increase in the effective corporate tax rate from 18,8% to 28,7% due
to taxable losses arising in marginal industries, which could not be
utilised by profitable operations in terms of South African taxation
laws.

Net income of $4,406,912 represents $0.69 per share as compared to
$6,683,165 representing $1.30 per share in the comparative period in
the prior year.

Net income for the year ended June 30, 1998 included a provision of
$2,016,791 for:

o A 32.08% minority interest in the Company's publicly traded
subsidiary, First SA Food Holdings limited
o A 15.7% minority interest in the Company's subsidiary First SA
Lifestyle Holdings Limited.

The current market value of the Company's 68% stake in First SA Food
Holdings Limited is approximately $60 million at June 30, 1998. The
Company intends to spin off minority interests in other subsidiary
groups which will result in the provision for minority interests
increasing in future periods.
This will continue to effect comparative earnings per share data.

For purposes of the company's earnings per share calculation the
Company had a weighted average number of shares outstanding of
6,424,981 shares outstanding as opposed to 5,139,856 for the
comparative period in the prior year.

The 6,424,981 shares includes an additional weighted average 697,608
shares issued on the conversion of certain A warrants and B warrants
that were outstanding in terms of a warrant swap out exercise performed
during the current fiscal year. This has had an negative impact on the
basic earnings per share calculation.

-20-

PRO FORMA TWELVE MONTHS JUNE 30, 1997 COMPARED TO TWELVE MONTHS ENDED
JUNE 30, 1996

Due to the lack of comparative financial periods, and in order to
provide a meaningful reference point in the Management's Discussion and
Analysis, the Company presented twelve month proforma results for the years
ended June 30, 1996 and 1997. The following analysis is based on this proforma
presentation.

SALES

Sales have increased by 10.1% to $78,596,647 from $71,374,856.

This is better interpreted as a net, after inflation increase in South
African Rand of 19%.

This increase is primarily attributable to increasing demand for the
Company's products.

The contribution by the individual business segments towards total
sales for the year ended June 30, is as follows:

1997 1996
-------------------- -----------------

Processed foods 65.7% 67.7%
Lifestyle products - -
Packaging equipment and materials 12.9 12.8
Industrial manufacturing 21.4 19.5
-------------------- -----------------
100.0 100.0

The Dollar value of sales in each business segment increased over the
prior period. The overall increase can be explained by:

Organic growth within all operating sectors, increasing turnover by
gaining market share from competitors.

Increase in demand for the Company's products as the middle class base
of consumers continues to grow as South Africa's transition to more broad based
economic participation moves forward.

Additional capital expenditure on increasing manufacturing capacity has
been made to exploit the additional demand being experienced.

COST OF SALES

Pro forma cost of goods sold of $46,006,407, (representing 58.5% of
sales) has increased from $42,259,573 (representing 59.2% of sales) for the
comparative period in the prior year.

-21-

The cost of goods sold by the individual business segments as a
percentage of sales for the year ended June 30, is as follows:

1997 1996
------------ ------------

Processed foods 56% 58%
Lifestyle products - -
Packaging equipment and materials 59 56
Industrial manufacturing 64 60
------------ ------------
100.0 100.0

The overall increase in the percentage of cost of goods sold can be
explained by the following:

PROCESSED FOODS

Increased productivity in the segment due to increase automation.

PACKAGING EQUIPMENT AND MATERIALS

New product mix

INDUSTRIAL MANUFACTURING

Entry into lower margin product sectors such as refrigeration products.

SELLING, GENERAL AND ADMINISTRATIVE COSTS

Pro forma Selling, General and Administrative costs of $26,575,103,
(representing 33.8% of sales) has increased from $23,636,005 (representing 33.1%
of sales) for the comparative period in the prior year.

The selling, general and administrative costs of the individual
business segments as a percentage of sales for the twelve months ended June 30,
is as follows:

1997 1996
----------- -----------

Processed foods 34.5% 34.4%
Lifestyle products - -
Packaging equipment and materials 29.2 31.6
Industrial manufacturing 27 28.4
Corporate (Percentage of total sales) 1.1 -

INTEREST EXPENSE

Pro forma Interest expense of $823,912 had decreased from $1,524,827
for the comparative period in the prior year.

-22-

Most of this decrease can be attributed to a non cash charge of
$396,000 that the Company took in connection with its November, 1995 placement
of Bridge Notes. In addition some of the Company's operating subsidiaries
generated interest on net cash balances which reduced the Company's consolidated
net interest.

PRO FORMA OTHER INCOME

Pro forma other income increased to $904,884 from $872,766 for the
twelve months ended June 30, 1997 and 1996 respectively. The increase is
primarily due to a net gain of $3,327,478 on the disposal of an effective 30%
interest in First SA Food Holdings Limited in June, 1997.

FINANCING

o Stockholders' funding

The Company has funded itself primarily through stockholders loans and
capital contributions.

In January 1996, the Company raised approximately $9 million in net
proceeds after all fees and expenses from its Initial Public Offering.

In June 1997, the Company's subsidiary, First SA Food Holdings, raised
approximately $16.5 million in cash through the placement of its shares
in South Africa. Of this amount, approximately $5.5 million was
retained by First South African Holdings, while the remainder was
retained by FSA Foods. Proceeds from these offerings have been and will
continue to be primarily utilized to fund the Company's acquisitions as
well as to provide a certain amount of working capital to its South
African subsidiaries.

o Debentures

In May 1997, the Company raised approximately $9.2 million in net
proceeds from the issuance of 10,000 9% convertible debentures. Such
debentures mature on June 15, 2004 and are convertible any time prior
to maturity at a price of $6.00 per share.

In October 1997 the Company raised an additional $14.3 million in net
proceeds from the issuance of 15,000 Increasing rate convertible
debentures. Such debentures mature on October 31, 2001 and are
convertible at any time subsequent to October 31, 1998 at a price of
$9.50 per share.

o Internally Generated funding

As of June 30, 1998, the Company had net cash of $15,161,026 with
working capital of $25,270,946. As of June 30, 1998, the Company had a
total of $31,201,701 in debt, of which amount $24,153 million related
to the Company's 9% and increasing rate subordinated convertible
debentures with the remainder being bank debt. Of the bank debt,
$2,256,275 was classified as current.

Cash flows provided by operating activities for the period ended June
30,1998 totalled $7,929,294. Cash flows used in investing activities
for the period ended June 30, 1998 totaled $24,965,398 of which the
Company realized $4,358,027 on the disposal of its investment in First
SA Food Holdings Ltd. The Company expended $19,568,406 on the
acquisition of subsidiaries, $5,410,629 on additional purchase price
payments and purchased $4,320,996 in net additions to property, plant
and equipment of its subsidiaries. Net cash provided by financing
activities generated $19,040,391.

-23-

o Future commitments

Under the various acquisition agreements, the Company anticipates
having to spend approximately $1.33 million in cash for its contingent
payments over the next 12 months as well as approximately $1.02 million
in stock. The Company anticipates that this cash and operating cash
flows will be sufficient to fully fund these payments as well as fund
the capital expenditures for its various operations. Excess cash will
also be utilized to fund additional acquisitions. The Company
anticipates that any longer term contingent acquisition payments will
be funded out of operating cash flows of the acquired entities.

The Company's operating subsidiaries generally collect their
receivables within 65 - 90 days and reserve approximately 5% for
doubtful accounts. Historically, the companies' operating and capital
needs have been met by internal cash flow and outside bank borrowing.
It is management's belief that capital expenditures for the foreseeable
future can continue to be met by internal cash flow and bank borrowing.
The Company's operating subsidiaries engage in certain hedging
transactions with respect to certain overseas purchases in order to
lock in a specified exchange rate.

The Company intends to continue to pursue an aggressive acquisition
strategy in South Africa and anticipates utilizing a substantial
portion of its cash balances and operating earnings to fund this
strategy to the extent that suitable acquisition candidates can be
identified.

The Company may be required to incur additional indebtedness or equity
financing in connection with future acquisitions. There is no assurance
that the Company will be able to incur additional indebtedness or raise
additional equity to finance future acquisitions on terms acceptable to
management, if at all.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company has used derivative financial instruments primarily to
reduce exposure to adverse fluctuations in foreign exchange rates with respect
to certain overseas purchases in order to lock in a specified exchange rate. The
Company does not enter into derivative financial instruments for trading
purposes. As a matter of policy all derivative positions are used to reduce risk
by hedging underlying economic exposure. The derivatives the Company has used in
the past were straightforward instruments with liquid markets.

-24-

FIRST SOUTH AFRICA CORP., LTD

INDEX TO FINANCIAL STATEMENTS

First South Africa Corp., Ltd.

Report of the independent auditors

Consolidated Balance Sheets at June 30, 1998 and 1997

Consolidated Statements of Income for the years ended June 30, 1998,
1997 and 1996

Consolidated Statements of Cash Flows for the years ended June 30, 1998,
1997 and 1996

Consolidated Statement of Changes in Stockholders' Investment
for the period June 30, 1995 to June 30, 1998

Notes to the Consolidated Financial Statements for the years ended
June 30, 1998, 1997 and 1996

-25-

FIRST SOUTH AFRICA CORP., LTD.

REPORT OF THE INDEPENDENT AUDITORS

To the Board of Directors
of First South Africa Corp., Ltd.

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statement of income, of cash flow and of changes in stockholders'
investment present fairly, in all material respects, the financial position of
First South Africa Corp., Ltd. and its subsidiaries at June 30, 1998 and 1997,
and the results of their operations and their cash flows for the years ended
June 30, 1998, 1997 and 1996 in conformity with generally accepted accounting
principles in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards in the United States which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

/s/ PriceWaterhouseCoopers Inc.

PricewaterhouseCoopers Inc
Sandton, South Africa
September 25, 1998

-26-

FIRST SOUTH AFRICA CORP., LTD.

CONSOLIDATED BALANCE SHEETS

ASSETS
June 30, June 30,
1998 1997
$ $
-------- --------

Current assets
Cash on hand 17,948,991 19,889,111
Trade accounts receivable 16,871,292 12,000,224
Less: Allowances for bad debts (833,785) (696,279)
------------ ------------
16,037,507 11,303,945
Inventories (net) 11,742,613 7,219,960
Prepaid expenses and other current assets 1,711,428 934,263
----------- ----------
Total current assets 47,440,539 39,347,279
Property, plant and equipment 31,410,837 16,197,605
Less: Accumulated depreciation (11,423,572) (4,849,396)
------------ -----------
19,987,265 11,348,209
Intangible assets (net) 20,045,983 12,620,822
Deferred charges (net) 1,448,199 838,439
Other assets 261,735 42,730
------------ ------------
89,183,721 64,197,479
============ ============

-27-

FIRST SOUTH AFRICA CORP., LTD.

CONSOLIDATED STATEMENTS OF INCOME

LIABILITIES AND STOCKHOLDERS' INVESTMENT
June 30, June 30,
1998 1997
$ $
-------- ---------

Current liabilities
Bank overdraft payable 2,787,965 -
Current portion of long term debt 2,256,275 1,673,712
Trade accounts payable 9,205,092 6,755,823
Other provisions and accruals 4,506,770 3,184,428
Dividend payable 558,185 -
Other taxes payable 1,064,432 654,653
Income tax payable 1,790,874 1,721,079
--------- ---------
Total current liabilities 22,169,593 13,989,695
Long term debt 28,945,426 13,341,758
Deferred income taxes 529,405 358,446
------------ ------------
51,644,424 27,689,899
---------- ----------
Stockholders' investment

Capital stock:

A class common stock, $0.01 par value - authorized 23,000,000 shares,
issued and outstanding 5,649,224 shares 56,492 35,361

B class common stock, $0.01 par value - authorized 2,000,000 shares,
issued and outstanding 1,822,500 shares 18,762 18,691

Preferred stock, $0.01 par value, - authorized 5,000,000 shares, issued and
outstanding nil shares - -

Capital in excess of par 28,288,404 22,891,093
Retained earnings 7,209,977 2,803,065
----------- -----------
35,573,635 25,748,210
Minority stockholders' investment 19,677,124 13,287,566
---------- ----------
55,250,759 39,035,776
---------- ----------
Foreign currency translation adjustments (17,711,462) (2,528,196)
------------ -----------
89,183,721 64,197,479
============ ===========

-28-

Year ended Year ended Year ended
June 30, June 30, June 30,
1998 1997 1996
$ $ $
---------- ---------- -----------

Revenues 113,408,350 66,575,931 14,911,097
----------- ---------- ----------
Operating expenses
Cost of sales 68,504,965 37,869,755 8,385,511
Selling, general and administrative costs 34,790,480 21,253,253 4,664,154
Amortization of intangibles 1,152,831 529,530 49,873
Depreciation 2,485,838 1,481,824 345,884
Foreign currency loss 415,221 - 74,520
Non cash compensation charge - - 6,314,000
----------- ---------- ----------
107,349,335 61,134,362 19,833,942
----------- ---------- ----------
Operating income/(loss) 6,059,015 5,441,569 (4,922,845)
Gain on disposal of subsidiary stock 2,608,834 3,327,478 -
Other income 786,893 468,531 539,636
Interest expense (464,165) (858,067) (865,733)
----------- ----------- ---------
Income/(loss) from consolidated companies before income
taxes and minority interests 8,990,577 8,379,511 (5,248,942)
Provision for taxes on income (2,582,531) (1,572,049) (488,618)
----------- ----------- ---------
6,408,046 6,807,462 (5,737,560)
Minority interest in consolidated subsidiary companies (2,016,791) (135,224) -
----------- ----------- -----------
Net income/(loss) from consolidated companies 4,391,255 6,672,238 (5,737,560)
Equity in net earnings of affiliated companies 15,657 10,927 -
----------- ----------- -----------
Net income/(loss) 4,406,912 6,683,165 (5,737,560)
========= ========= ===========
Basic earnings/(loss) per share $0,69 $1,30 ($3,03)

Fully diluted earnings per share $0,63 1,22 (3,03)

-29-

FIRST SOUTH AFRICA CORP., LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended Year ended Year ended
June 30, June 30, June 30,
1998 1997 1996
$ $ $
----------- ----------- ----------

Cash flows from operating activities:

Net income/(loss) 4,406,912 6,683,165 (5,737,560)
Adjustments to reconcile net income/(loss) to net cash
provided by operating activities:
Non cash compensation charge - - 6,314,000
Depreciation and amortization 3,638,669 2,011,354 395,757
Deferred income taxes 255,637 349,543 (90,559)
Net (gain)/loss on sale of assets (200,408) (198,473) (22,523)
Net gain on sale of shares in First SA Food
Holdings Limited (2,608,834) (3,327,478) -
Net gain on minority shares issued in First SA
Food Holdings Limited (557) - -
Effect of changes in current assets and current
liabilities 421,084 (2,922,764) 10,185
Minority interest in consolidated subsidiary
companies 2,016,791 135,224 -
Assets acquired at a discount - - 7,307
------------ ------------ ----------
Net cash provided by operating activities 7,929,294 2,730,571 876,607
------------ ------------ -----------
Cash flows from investing activities:

Proceeds on disposal of investment in First SA Food
Holdings Limited 4,358,027 16,479,827 -
Proceeds on minority shares issued in First SA Food
Holdings Limited 6,054 - -
Additions to property, plant and equipment (5,346,671) (3,325,153) (453,768)
Proceeds on disposal of property, plant and equipment 1,226,083 1,182,199 -
Additional purchase price payments (5,410,629) (2,023,835) -
Other assets acquired (229,856) (42,676) (704,117)
Decrease in loans to related companies - 80,969 145,823
Acquisitions of subsidiaries (net of cash of $347,052) (19,568,406) (11,431,059) (4,498,043)
------------ ------------ -----------
Net cash used in investing activities (24,965,398) 920,272 (5,510,105)
------------ ------------ -----------

-30-

FIRST SOUTH AFRICA CORP., LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended Year ended Year ended
June 30, June 30, June 30,
1998 1997 1996
$ $ $
----------- ---------- -----------

Cash flows from financing activities:

Net (repayments)/borrowings in bank overdrafts 881,244 (1,155,094) 135,941
Borrowings of long term debt 12,559,148 10,601,298 -
Repayments of long term debt - (985,630) (1,525,613)
Increase in deferred debt issue costs (875,910) (853,683) -
Repayments in loans from related parties - - (880,034)
Borrowings in loans from stockholders - - 137,656
Borrowings in short term debt 1,065,271 689,682 1,954,673
Repayments in short term debt - (921,810) -
Minority shareholders share of issue expenses (7,871) - -
Proceeds on stock issues 5,418,509 4,384,458 9,197,446
--------- --------- ---------
Net cash provided in financing activities 19,040,391 11,759,221 9,020,069
---------- ---------- ---------
Effect of exchange rate changes on cash (3,944,407) (202,988) (448,787)
----------- ------------ ------------
Cash generated by operations (1,940,120) 15,207,076 3,937,784
Cash on hand at beginning of period 19,889,111 4,682,035 744,251
---------- ----------- -----------
Cash on hand at end of period 17,948,991 19,889,111 4,682,035
========== ========== =========

-31-

FIRST SOUTH AFRICA CORP., LTD.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' INVESTMENT

FSA FSA Capital Capital Capital Capital in
LTD. LTD. in stock stock excess of Foriegn
A class B class excess LS Pressings Starpak par Starpak currency
common common of (Pty) (Pty) (Pty) Retained translation
stock stock par Ltd. Ltd. Ltd. earnings adjustments Total
$ $ $ $ $ $ $ $ $
-------- ------- ------ ---------- ------- ----------- -------- ------------- ----------

Balance at June 30, 1995 - - - 460,978 1,010 746,790 1,850,153 (1,040,934) 2,017,997
Issuance of stock to acquire pre-
decessor Starpak and LS Pressings - 150 1,208,628 (460,978) 1,010) (746,790) - - -
Issuance of stock to acquire
subsidiary companies - 98 1,840,365 - - - - - 1,840,463
Other stock issues - 28 260,024 - - - - - 260,052
Proceeds on First South Africa
Corp., Ltd., stock issues 22,000 19,425 9,896,646 - - - - - 9,938,071
Share issue expenses written off - - (1,000,677) - - - - - (1,000,677)
Escrow stock released - - 6,314,000 - - - - - 6,314,000
Subsidiary assets acquired
at a discount - - - - - - 7,307 - 7,307
Net loss - - - - - - (5,737,560) - (5,737,560)
Translation adjustment - - - - - - - (847,277) (847,277)
------ --------- ---------- --------- ------ -------- ---------- ----------- ----------
Balance at June 30, 1996 22,000 19,701 18,518,986 - - - (3,880,100) (1,888,211) 12,792,376
Issuance of stock to FSAH
escrow agent 11,915 - - - - - - - 11,915
Conversion of B class common
stock to class A common stock 1,010 (1,010) - - - - - -
Issuance of stock to
acquire subsidiaries 190 - 4,357,228 - - - - - 4,357,418
Proceeds on warrants exercised 246 - 159,879 - - - - - 160,125
Stock issue expenses written off - - (145,000) - - - - - (145,000)
Net income for the year - - - - - - 6,683,165 - 6,683,165
Translation adjustment - - - - - - - (639,985) (639,985)
------ -------- ---------- --------- ------ --------- ----------- ----------- -----------
Balance at June 30, 1997 35,361 18,691 22,891,093 - - - 2,803,065 (2,528,196) 23,220,014
====== ====== ========== ========= ====== ========= =========== =========== ===========
Issuance of stock to FSAC
escrow agent 3,863 - - - - - - - 3,863
Issuance of stock to
acquire subsidiaries 1,429 19 1,685,282 - - - - - 1,686,730
Issuance of stock on additional
purchase price payments - 52 1,223,274 - - - - - 1,223,326
Proceeds on warrants exercised 2,339 - 1,517,765 - - - - - 1,520,104
Proceeds on options exercised 350 - 137,150 - - - - - 137,500
Warrant swap out at par value 11,738 - (11,738) - - - `- - -
Debenture conversion 1,412 - 845,578 - - - - - 846,990
Net income - - - - - - 4,406,912 - 4,406,912
Translation adjustment - - - - - - - (15,183,266)(15,183,266)
------ -------- ---------- ----------- ------ -------- --------- ----------- -----------
56,492 18,762 28,288,404 - - - 7,209,977 (17,711,462) 17,862,173
====== ======== ========== ========== ====== ======== --------- ----------- ------------

-32-

FIRST SOUTH AFRICA CORP., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996

1. ORGANISATION AND PRINCIPLE ACTIVITIES OF THE GROUP

First South Africa Corp., Ltd. (the "Company") was founded on September
6, 1995. The purpose of the Company is to acquire and operate South
African companies.

The principle activities of the group include the following:

Food interests
The manufacture, sale and distribution of both ready to eat and ready
for bake off pastry related food products, the manufacture, sale and
distribution of high margin speciality breads and staple breads, the
manufacture and sale of a wide range of prepared food products and the
manufacture, sale and distribution of a wide range of processed meat
products.

Lifestyle interests
The manufacture, sale and distribution of plastic, wooden and steel
outdoor products aimed at the leisure market.

Packaging interests
The business of manufacturing, servicing and selling packaging
machines, receiving commission income and receiving rental income.

Industrial interests
Manufacture of washers for use in the fastener industry and the
manufacture and supply of air-conditioning and refrigeration products.

2. ACQUISITIONS

First South Africa Corp., Ltd. (the "Company") was founded on September
6, 1995. The purpose of the Company is to acquire and operate South
African companies.

The following subsidiaries/businesses acquired were accounted for using
the purchase method of accounting. The assets and liabilities were
recorded at fair market value as determined by management:

Purchase
Percentage price
acquired consideration
Subsidiary/business Date acquired % $
- ------------------- ------------- ---------- -------------

Fifers Bakery (Proprietary) Limited July 1, 1997 67 2,294,851
Pacforce (Proprietary) Limited October 1, 1997 100 618,507
Galactex Outdoor (Proprietary) Limited October 1, 1997 84 3,656,646
Republic Umbrella (Proprietary) Limited October 1, 1997 84 6,512,598
S.A. Leisure (Proprietary) Limited October 1, 1997 84 8,650,968
Tradewinds Parasol (Proprietary) Limited March 1, 1998 84 1,229,857
Cocam Foods (Proprietary) Limited June 1, 1998 67 615,133
-------------
23,578,560
=============

-33-

FIRST SOUTH AFRICA CORP., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996

The purchase consideration has been decreased to give effect to the
debt ceded to the holding company in the acquisitions.

$
----

Acquisition costs
Stock issued in lieu of cash 1,686,730
Cash consideration (net of debt ceded to holding company) 21,891,830
----------
Purchase price to be allocated 23,578,560
==========
Summary allocation of purchase price
Current assets 18,399,605
Property, plant and equipment 11,979,546
Other assets 5,171,794
Goodwill 3,088,954
Total assets acquired 38,639,899
Current liabilities 10,514,165
Long term debt 4,494,195
Deferred income taxes 52,979
Total liabilities assumed 15,061,339
23,578,560
==========

The Company is required to make additional payments to the former
owners based on a multiple of pre tax earnings. These payments are to
be made by the issue of stock and cash over the next three years.

Additional purchase price payments made during the current year total
$5,410,628. This amount was allocated as follows:

Goodwill 2,169,332
Recipes 1,900,935
Trademarks 1,340,361
5,410,628
=========

These additional purchase price payments were made as follows:

Cash 4,187,302
Shares issued in lieu of cash 1,223,326
---------
5,410,628
=========

3. SUMMARY OF ACCOUNTING POLICIES

The consolidated financial statements have been prepared in accordance
with US generally accepted accounting principles and incorporate the
following significant accounting policies:

-34-

FIRST SOUTH AFRICA CORP., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996

Consolidation
First South Africa Corp., Ltd., consolidates its majority owned
subsidiaries. The consolidated financial statements include the
accounts of the Company, First South Africa Corp., Ltd. and its
subsidiaries. Minority interests have been taken into account when
determining the net income due to the Company. Material intercompany
transactions have been eliminated on consolidation.

Accounting estimates
Preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements, disclosure of
contingent liabilities at the financial statement date and reported
amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.

Earnings per share
Earnings per share on common shares is based on net income and reflects
dilutive effects of any stock options and warrants which exist at year
end.

Intangible assets
Goodwill, recipes and other intellectual property, and trademarks are
being amortized on a straight line basis over a period of twenty to
twenty five years. If facts and circumstances were to indicate that the
carrying amount of goodwill, recipes and other intellectual property is
impaired, the carrying amount would be reduced to an amount
representing the discounted future cash flows to be generated by the
operation.

Also included in intangible assets are non competition agreements
relating to the Europair acquisition which are being amortized on a
straight line basis over the six year term of the agreements.

The company has adopted Statement of Financial Accounting Standards No.
121 ("SFAS 121") "Accounting for the impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of". No impairments in
long-lived assets has taken place.

Foreign currency translation
The functional currency of the underlying companies is that of South
African Rands. Accordingly, the following rates of exchange have been
used for translation purposes:

o Assets and liabilities are translated into United States
Dollars using the exchange rates at the balance sheet date.

o Common stock and capital in excess of par are translated into
United States Dollars using historical rates at date of
issuance.

o Revenue, expenses, gains and losses are translated into United
States Dollars using the weighted average exchange rates for
each year.

The resultant translation adjustments are reported in the component of
stockholders' investment designated as "Foreign currency translation
adjustment".

Foreign assets and liabilities
Transactions in foreign currencies arise as a result of inventory
purchases from foreign countries and intercompany funding transactions
between the subsidiaries and First South Africa Corp., Ltd.
Transactions in foreign currencies are accounted for at the rates
ruling on transaction dates. Exchange gains and losses are charged to
the income statement during the period in which they are incurred.
Foreign assets and liabilities of the group which are not denominated
in

-35-

FIRST SOUTH AFRICA CORP., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996

United States Dollars are converted into United States Dollars at the
exchange rates ruling at the financial year end or at the rates of
forward cover purchased. Forward cover is purchased to hedge the
currency exposure on foreign liabilities.

Inventories
Inventories are valued at the lower of cost and net realizable value,
using both the first-in, first-out and the weighted average methods.
The value of work-in-progress and finished goods includes an
appropriate portion of manufacturing overheads. A valuation reserve has
been established to reduce the values of certain identified inventories
(determined to be obsolete or otherwise impaired) to their estimated
net realizable values (market or selling price less costs to dispose).

Property, plant and equipment
Land is stated at cost and is not depreciated. Buildings are
depreciated on the straight line basis over estimated useful lives of
20 years.

Plant and equipment, and motor vehicles are written off over their
estimated useful lives of 5 to 10 years.

Income taxes
Income tax expense is based on reported earnings before income taxes.
Deferred income taxes represent the impact of temporary differences
between the amounts of assets and liabilities recognised for financial
reporting purposes and such amounts recognised for tax purposes.
Deferred taxes are measured by applying currently enacted tax laws.

Fair value of financial instruments
As at June 30 1998, the carrying value of accounts receivable, accounts
payable and investments approximate their fair value. The carrying
value of long term debt approximates fair value, as the debt, other
than convertible debentures, interest rates are keyed to the prime
lending rate. The convertible debentures are believed to approximate
fair market value.

Revenues
Revenues comprise net invoiced sales of washers, manufactured packaging
machines, spares and service charges, food products, lifestyle
products, air conditioning systems, fans and related accessories, and
rental income. Combined revenues exclude sales to group companies.

Revenues are stated net of allowances granted to customers and trade
discounts. Returns of defective product are offset against revenues.
Due to the low incidence of warranty returns, where warranties are
provided to customers, the warranty costs are charged to cost of sales
as and when incurred.

Gain on disposal of subsidiary stock
Subsidiary stock disposed of during the period is recognized as a gain
in the statement of income and is separately disclosed as a non
operating gain.

-36-

FIRST SOUTH AFRICA CORP., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996

4. INVENTORIES

Inventories consist of the following:

June 30, June 30,
1998 1997
$ $
--------- ---------

Finished goods 7,156,784 4,032,523
Work in progress 649,465 532,144
Raw materials and ingredients 3,220,748 2,365,213
Supplies 959,396 716,081
----------- ----------
Inventories (Gross) 11,986,393 7,645,961
Less: Valuation allowances (243,780) (426,001)
----------- ----------
Inventories (Net) 11,742,613 7,219,960
========== =========

5. DEFERRED CHARGES

Represents the debt issue costs of the 9% convertible debentures and
the increasing rate debentures amounting to $1,729,593. This charge is
being amortized over the tenure of the debenture issue (See note 10).
The charge for the current year is $266,150.

6. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following:

June 30, June 30,
1998 1997
$ $
-------- -------

Land and buildings 2,408,367 2,650,410
Leasehold improvements 893,245 -
Plant and equipment 24,314,263 10,376,002
Vehicles 3,382,781 3,153,985
Capital work in progress 412,181 17,208
----------- ----------
Total cost 31,410,837 16,197,605
Accumulated depreciation (11,423,572) (4,849,396)
------------ ----------
Net book value 19,987,265 11,348,209
========== ==========
Depreciation charge 2,485,838 1,481,824
========= =========

Certain assets of the company are encumbered as security for the
liabilities of the group (See note 10).

-37-

FIRST SOUTH AFRICA CORP., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996

7. INTANGIBLE ASSETS

Intangible assets consist of the following:

June 30, June 30,
1998 1997
$ $
-------- -------

Recipes and other intellectual property 10,223,662 11,264,035
Trademarks 5,442,802 359,521
Goodwill arising on acquisitions 5,072,082 1,099,475
Patents 102,379 -
Development costs 23,505 -
Non competition agreements 252,101 331,575
------- ------------
Total cost 21,116,531 13,054,606
Accumulated amortization (1,070,548) (433,784)
----------- ------------
20,045,983 12,620,822
========== ==========

8. BANKING FACILITIES

The group has general short term banking facilities of $840,336
available. These facilities bear interest at the prime lending rate,
which is currently 24%, and are repayable on demand. The terms of these
facilities are generally less than twelve months, the facilities are
secured by a cession over book debts, and have no covenants, renewable
annually.

9. OTHER TAXES PAYABLE

June 30, June 30,
1998 1997
$ $
-------- --------

Value added taxation 752,804 630,207
Payroll taxes 297,114 15,655
Other taxes 14,514 8,791
---------- --------
Patents 1,064,432 654,653
========== ========

-38-

FIRST SOUTH AFRICA CORP., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996

10. SHORT AND LONG TERM DEBT

Long term debt
9% Convertible debentures 9,153,010 10,000,000
Increasing rate debentures 15,000,000 -
Mortgage loans 1,009,204 1,025,406
Equipment notes 5,341,740 3,990,064
Accrued purchase consideration 385,434 -
Unsecured notes 312,313 -
--------- ----------
31,201,701 15,015,470
Less: Current portion (2,256,275) (1,673,712)
---------- ----------
Total long term debt 28,945,426 13,341,758
========== ==========
Short term debt
Current portion of long term debt 2,256,275 1,673,712
========= =========

9% Convertible debentures
10,000 9% Convertible debentures of $1,000 were issued in June 1997.
These debentures are unsecured, senior, and subordinated, bearing
interest at 9% per annum, payable quarterly . The debentures are
convertible into shares common stock at any time prior to maturity at a
price of $6,00 per share (fair market value at debenture issue date).
The debentures may be redeemed at the option of the Company from June
15, 1999 through June 14, 2003 at a redemption premium ranging from
109% to 102,5% of face value, depending on the redemption date.

The debentures have a mandatory sinking fund payments due in two equal
instalments totalling 67% of the outstanding fair value on June 15,
2002 and June 15, 2003, with the balance of the issue due at maturity
on June 15, 2004.

The Company has filed an S - 1 Registration Statement for the shares
issuable upon conversion.

The following covenants are in existence:

o A restriction has been placed on the ability of the Company to
pay any dividends and to repurchase stock.

o A restriction has been placed on transactions with affiliates,
whereby all transactions must be no less favorable than those
on normal commercial terms.

o The Company may not adopt any plan of liquidation (Bankruptcy).

During the current financial year 847 9% convertible debentures of
$1,000 were converted to shares of common stock.

Subsequent to year end a further 3,470 debentures were redeemed at a
discount of approximately 5% to face value.

Increasing rate convertible debentures
15,000 Increasing rate convertible debentures of $1,000 were issued on
31 October 1997.

-39-

FIRST SOUTH AFRICA CORP., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996

These debentures bear interest at the following rates which is payable
quarterly:

o 4% per annum for the year ending October 31,1998
o 4.5% per annum for the two years ending October 31, 2000
o 5% per annum for the year ending October 31, 2001

The debentures are convertible into shares of common stock at any time
prior to maturity at a price of $9.50 per share. The debentures may be
redeemed at the option of the Company from October 31, 1998 if the
Company's common stock trades at more than $14,25 per share for 30
consecutive market days. Should the debentures not be converted into
shares of common stock prior to October 31, 2001, the maturity date,
the redemption value of the debentures will be 122,5% of the principal
amount.

The following covenants are in existence:

o A restriction has been placed on the ability of the Company to
pay any dividends and to repurchase stock.

o A restriction has been placed on transactions with affiliates,
whereby all transactions must be no less favorable than those
on normal commercial terms.

o The Company may not adopt any plan of liquidation (Bankruptcy).

Mortgage loans
Mortgage loans are collateralized by first and second mortgage bonds
over property with a net book value of $2,200,925. These loans are
repayable in equal monthly installments and equal annual instalments
over periods ranging from five to twenty years and bear interest at
rates ranging from 14,5% to 24%. Generally these interest rates are
linked to the prime lending rate which is currently at 24%.

Equipment notes
Equipment notes are collateralized over movable assets with a net book
value of $14,831,437. These loans are generally repayable in equal
monthly instalments over a maximum period of five years. These loans
bear interest at rates ranging from 7% to 1,75% above the prime lending
rate, which is currently 24%.

The following is a schedule of repayments of long term debt by year of
repayment:

Year ended June 30, $
------------------- ---------
1999 2,256,275
2000 1,769,973
2001 1,192,225
2002 18,766,250
Thereafter 7,216,978

11. OPERATING LEASES

The group has several operating leases over land and buildings. These
leases generally expire within the next five years. These leases
generally contain renewal options at the fair market value at the date
of renewal.

-40-

FIRST SOUTH AFRICA CORP., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996

In most cases, management expects that in the normal course of
business, leases will be renewed or replaced by other leases.

The following is a schedule of future minimum rental payments required
under operating leases that have initial or remaining non-cancellable
lease terms in excess of one year as of June 30, 1998:

Year ended June 30, $
-------------------- --------

1999 1,955,287
2000 2,000,940
2001 1,880,370
2002 1,572,823
Thereafter 2,822,546

The following schedule shows the composition of total rental expense
for all operating leases except those with terms of a month or less:

Year ended Year ended Year ended
June 30, June 30, June 30,
1998 1997 1996
$ $ $
---------- ---------- ----------

Minimum rentals 1,615,875 614,450 415,815
========= ======= =======

12. GAIN ON DISPOSAL OF SUBSIDIARY STOCK

The company sold an effective 3,2% of its interest in First SA Food
Holdings Limited on May 29, 1998.

The gain on disposal recognized in the Statement of Income is made up
as follows:

Year ended Year ended
June 30, June 30,
1998 1997
$ $
---------- ----------

Proceeds received 4,358,027 16,479,827
Less: Net carrying value of shares of FSAFood (1,749,193) (13,152,349)
---------- ----------
Net gain on sale of investment in subsidiary company 2,608,834 3,327,478
========= ==========

Included in the statement of cash flows are proceeds on the disposal of
a minority interest in First SA Lifestyle Holdings Limited. These
proceeds represent the net carrying value of the investment in First SA
Lifestyle Holdings Limited which was disposed of to previous vendors of
the underlying Lifestyle companies. Therefore no gain or loss on
disposal was realised.

-41-

FIRST SOUTH AFRICA CORP., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996

13. OTHER INCOME

Other income includes profit on disposal of assets, proceeds from
insurance claims and commissions received.

Year ended Year ended Year ended
June 30, June 30, June 30,
1998 1997 1996
$ $ $
---------- ----------- -----------

Profit on disposal of assets 200,408 198,473 -
Profit on sale of currency hedge 81,000 - -
Decentralisation benefits 164,992 - -
Other 340,493 270,058 539,696
------- ------- -------
786,893 468,531 539,696
======= ======= =======

14. INCOME TAXES

Income taxes are accounted for under Statement of Financial Standards
No. 109 "Accounting for Income Tax" ("SFAS 109"), an asset and
liability method. SFAS 109 requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of
temporary differences between the tax bases and financial reporting
bases of the company's assets and liabilities. In addition, SFAS 109
requires the recognition of future tax benefits such as net operating
loss carryforwards, to the extent realization of such benefit is more
likely than not.

The provision for income taxes charged to continuing operations was as
follows:

Year ended Year ended Year ended
June 30, June 30, June 30,
1998 1997 1996
$ $ $
---------- ----------- -----------
Current:
South African normal taxation 2,312,926 1,161,998 848,006
Foreign normal taxation - 62,345 -
Total current taxes 2,312,926 1,224,343 848,006
Deferred:
South African normal taxation 244,465 347,706 (359,388)
Total deferred taxes 244,465 347,706 (359,388)
Secondary tax on companies:
South African normal taxation 25,140 - -
25,140 - -
Provision for taxes on income 2,582,531 1,572,049 488,618
========= ========= =======

-42-

Deferred tax liability at June 30, is comprised of the following:

June 30, June 30,
1998 1997
$ $
-------- ---------

Property, plant and equipment 907,143 765,624
Prepaid expenditure 52,390 7,036
-------- ---------
Gross deferred tax liabilities 959,533 772,660
------- -------
Accruals (133,185) (371,148)
Deposits received on equipment sales - (42,813)
Assessable losses (296,943) (253)
--------- ---------
Gross deferred tax assets (430,128) (414,214)
--------- ---------
Net deferred tax liability 529,405 358,446
========= =========

-43-

FIRST SOUTH AFRICA CORP., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996

15. EARNINGS PER SHARE

Earnings per share data is calculated as follows:

Basic earnings per share for the year ended June 30,
1998

Net income available to common stockholders 4,406,912
=========

Shares Fraction of Weighted
Dates outstanding outstanding period average
shares
- -------------------------------------------------------------------------------------------------------------------------------

July 1, 1997 5,359,615 100.00 5,359,615
July 1, 1997 to June 30, 1998
Additional purchase price payments 290,394 14.77 42,884
Acquisition of subsidiaries 238,848 45.73 109,220
Warrants converted to shares during the year 233,826 83.20 194,549
Options converted to shares during the year 35,000 38.90 13,616
Warrants swapped into shares during the year 1,173,476 59.45 697,608
Debentures converted into shares during the year 141,165 5.31 7,489
----------
Weighted average shares 7,472,324 6,424,981
========= =========

Basic earnings per share for the year ended June 30,
1997

Net income available to common stockholders 6,683,165
=========

Shares Fraction of Weighted
Dates outstanding outstanding period average
shares
- ------------------------------------------------------------------------------------------------------------------------------------
July 1, 1996 4,475,079 100.00 4,475,079
July 1, 1996 to June 30, 1997
Acquisition of subsidiaries 702,006 70.75 496,653
Additional purchase price payments 157,895 25.00 39,474
Warrants not exercised at year end 124,544 100.00 124,544
Warrants converted to shares during the year 24,635 16.67 4,106
---------- -----------
Weighted average shares 5,484,159 5,139,856
========= =========

-44-

FIRST SOUTH AFRICA CORP., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996

Diluted earnings per share for the year ended June 30,
1998

Net income available to common stockholders 4,406,912
Add impact of assumed conversions 1,646,170
---------
Adjusted net income available to common 6,053,082
=========
stockholders
Weighted average shares 6,424,986
Warrants and options not yet exercised 502,279
9% convertible debentures 1,659,178
Increasing rate debentures 1,046,865
----------
Adjusted weighted average shares 9,633,303
=========

Diluted earnings per share for the year ended June 30,
1997

Net income available to common stockholders 6,683,165
Add impact of assumed conversions 124,761
----------
Adjusted net income available to common
stockholders 6,807,926
=========
Weighted average shares 5,139,856
Warrants and options not yet exercised 176,518
9% convertible debentures 278,539
---------
Adjusted weighted average shares 5,594,913
=========

16. CASH FLOWS

The changes in assets and liabilities consist of the following:

Year ended Year ended Year ended
June 30, June 30, June 30,
1998 1997 1996
$ $ $
----------- ------------ -----------

Decrease/(increase) in trade accounts receivable 1,251,842 (2,788,051) (756,684)
(Increase)/decrease in inventories (956,318) (3,158,181) 146,179
Increase in prepaid expenses and other current assets (169,887) (368,252) (134,650)
Decrease/(increase) in income taxes prepaid 17,037 (9,990) -
(Decrease)/increase in trade accounts payable (1,550,592) 1,872,035 360,265
Increase/(decrease) in other provisions and accruals 656,147 1,096,189 (38,785)
Increase in other taxes payable 676,319 656,088 -
Increase/(decrease) in income taxes payable 496,536 (222,602) 433,860
------- --------- ---------

-45-

FIRST SOUTH AFRICA CORP., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996

Year ended Year ended Year ended
June 30, June 30, June 30,
1998 1997 1996
$ $ $
---------- ---------- ----------

421,084 (2,922,764) 10,185
======= =========== =======
Supplemental disclosure of cash flow information:

Acquisition of subsidiaries is reconciled to the purchase
consideration of the
subsidiaries/businesses as follow:

Purchase consideration of subsidiaries/businesses (23,578,560) (11,722,044) (4,502,789)
Add: Debts assumed - (694,425) -
Less: Minority shareholders interest in companies
acquired 3,663,102 - -
Less: Cash acquired 347,052 985,410 4,746
------------- ------------ ------------
(19,568,406) (11,431,059) (4,498,043)
============ ============ ===========

Interest paid (464,165) 858,067 865,733
========= ======= =======

Taxes paid/(refunded) 1,532,677 1,513,166 (239,962)
========= ========= =========

17. EMPLOYMENT BENEFITS

The group participates in various retirement benefit funding plans and
health plans for the benefit of its employees.

All of the retirement benefit funds are defined contribution plans and
by nature of the funds there can be no unfunded obligations or
responsibility on the employer. The only obligation of the group is the
contribution to these plans which generally ranges from 6% to 9% of the
employees' annual earnings.

Amounts charged to pension costs and contributed by the Company to the
funds were as follows:

Year ended Year ended Year ended
June 30, June 30, June 30,
1998 1997 1996
$ $ $
----------- ----------- ----------

Pension costs 629,216 497,788 99,028
======= ======= ======

The group and employees participate in various health plans which
provide medical cover for employees on an annual basis. Neither the
health plan nor the group are liable for post retirement medical costs.
The contributions to the health plan are borne equally by the employee
and the group except for a few salaried employees where the Company is
responsible for 100% of the contribution. The Company has no liability
for employees' medical costs in excess of the contributions to the
health plan.

-46-

FIRST SOUTH AFRICA CORP., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996

Amounts charged to health plan costs and contributed by the Company
were as follows:

Year ended Year ended Year ended
June 30, June 30, June 30,
1998 1997 1996
$ $ $
---------- ---------- ----------

Health plan costs 391,460 336,706 242,186
======= ======= =======

18. PROFIT SHARE

Management receive an annual bonus, determined at the discretion of the
board of directors. The amounts paid to management were as follows:

Year ended Year ended Year ended
June 30, June 30, June 30,
1998 1997 1996
$ $ $
---------- ---------- ----------

Profit share bonus 341,018 390,284 140,828
======= ======= =======

19. BUSINESS SEGMENT INFORMATION

The Company's operations have been classified into four business
segments: packaging machinery and consumables, industrial products,
processed foods and lifestyle products. The packaging machinery and
consumables segment includes the manufacture, import and distribution
of packaging machinery and the manufacture of consumables. The
industrial products segment includes the manufacture and distribution
of fasteners and the import and distribution of air conditioning and
refrigeration related products. The processed foods segment includes
the manufacture, processing and distribution of food related products
for resale to wholesalers and retailers. The lifestyle products segment
includes the manufacture, import and distribution of lifestyle
enhancing products.

Summarized financial information by business segment for the years
ending June 30, 1998, 1997 and 1996 is presented.

Year ended Year ended Year ended
June 30, June 30, June 30,
1998 1997 1996
$ $ $
----------- ---------- -----------

Net sales:
Packaging machinery and consumables 13,129,889 7,838,872 5,102,597
Industrial products 17,337,743 16,808,995 8,237,612
Lifestyle products 22,366,651 - -
Processed foods 60,574,067 41,928,064 1,570,888
---------- ---------- ---------
113,408,350 66,575,931 14,911,097
----------- ---------- ----------

-47-

FIRST SOUTH AFRICA CORP., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996

Year ended Year ended Year ended
June 30, June 30, June 30,
1998 1997 1996
$ $ $
---------- ---------- -----------

Operating income/(loss):
Packaging machinery and consumables 162,927 605,948 364,695
Industrial products (593,600) 1,041,281 1,123,135
Lifestyle products 1,625,966 - -
Processed foods 6,440,312 4,782,675 137,483
Corporate (1,576,590) (988,335) (6,548,158)
----------- ----------- -----------
6,059,015 5,441,569 (4,922,845)
--------- --------- -----------
Total assets:
Packaging machinery and consumables 3,922,394 4,979,316 2,660,370
Industrial products 4,097,020 6,887,640 6,140,871
Lifestyle products 8,578,330 - -
Processed foods 42,053,819 41,037,271 6,085,800
Corporate 30,532,158 11,293,252 8,717,953
---------- ---------- ---------
89,183,721 64,197,479 23,604,994
---------- ---------- ----------
Depreciation and amortization:
Packaging machinery and consumables 424,426 183,676 150,797
Industrial products 432,028 358,499 160,811
Lifestyle products 704,227 - -
Processed foods 1,791,141 1,311,369 56,693
Corporate 286,847 157,810 27,456
---------- ---------- ------
3,638,669 2,011,354 395,757
--------- --------- -------
Capital expenditure:
Packaging machinery and consumables 1,098,953 1,103,386 96,617
Industrial products 328,429 551,380 302,554
Lifestyle products 1,599,000 - -
Processed foods 2,303,544 1,652,677 45,201
Corporate 16,745 17,710 9,395
----------- ---------- --------
5,346,671 3,325,153 453,768
--------- --------- -------

20. EMPLOYMENT AGREEMENTS

The Company has entered into employment agreements with two key
employees. In terms of the agreements the two employees will devote
substantially all of their business time to the group and receive
salaries of $180,000 and $150,000 per annum. The Company intends to pay
the key employees an annual incentive bonus based on pre-tax profits.

-48-

FIRST SOUTH AFRICA CORP., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996

21. STOCK OPTION PLAN

The board of directors have adopted the Company's 1995 Stock Option
Plan. The Stock Option Plan provides for the grant of i) options that
are intended to qualify as incentive stock options ("Incentive Stock
Options") within the meaning of Section 422 of the code to key
employees and ii) options not so intended to qualify ("Nonqualified
Stock Options") to key employees (including directors and officers who
are employees of the Company, and to directors and consultants who are
not employees). The total number of shares of common stock for which
options may be granted under the Stock Option Plan is 350 000 shares.

The Stock Option Plan is to be administered by the Compensation
Committee of the board of directors. The committee shall determine the
terms of the options exercised, including the exercise price, the
number of shares subject to the option and the terms and conditions of
exercise. No options granted under the Stock Option Plan are
transferable by the optionee other than by the will or the laws of
descent and distribution and each option is exercisable during the
lifetime of the optionee only by such optionee or his legal
representatives.

The exercise price of Incentive Stock Options granted under the plan
must be at least equal to the fair market value of such shares on the
date of the grant (110% of fair market value in the case of an optionee
who owns or is deemed to own more than 10% of the voting rights of the
outstanding capital stock of the Company or any of its subsidiaries).
The maximum term for each Incentive Stock Option granted is ten years
(five years in the case of an optionee who owns or is deemed to own
more than 10% of the voting rights of the outstanding capital stock of
the Company or any of its subsidiaries). Options shall be exercisable
at such times and in such instalments as the committee shall provide in
the terms of each individual option. The maximum number of shares for
which options may be granted to any individual in any fiscal year is
210,000.

The Stock Option Plan also contains an automatic option grant program
for the employee and non-employee directors. Each person who is an
employee director of the Company following an annual meeting of
shareholders will automatically be granted an option for an additional
5,000 shares of common stock, non-employee directors will receive an
option for an additional 10,000 shares of common stock. Each grant will
have an exercise price per share equal to the fair market value of the
common stock on the grant date and will have a term of five years
measured from the grant date, subject to earlier termination if an
optionee's service as a board member is terminated for cause.

The Company has granted options to purchase 965,000 shares of common
stock under the Plan, of which 35,000 options have been exercised. The
options still outstanding are reflected in the table below.

Options Per share
granted exercise price Expiration date Exercisable
-------- -------------- --------------- -------------

Stock options granted during 1996 70,000 $5.00 January 24, 2001 Immediately

150,000 $5.00 On the seventh
anniversary subject
to earlier vesting.

150,000 $3.00 On the seventh
anniversary subject
to earlier vesting.

Stock options granted during 1997 20,000 $3.75 January 1, 2002 Immediately

500,000 $4.75 Immediately

-49-

FIRST SOUTH AFRICA CORP., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996

Options Per share
granted exercise price Expiration date Exercisable
------- -------------- --------------- -----------

Stock options granted during 1998 40,000 $6.00 January 1, 2003 Immediately
-------
930,000
=======

Options exercisable at June 30, 1998 totalled 630,000

22. WARRANTS OUTSTANDING

In connection with the initial public offering consummated in January
1996 the Company issued 2,300,000 units. Each unit issued consisted of
one share of common stock, one redeemable Class A warrant and one
redeemable Class B warrant. In addition, an additional 100,000 warrants
were issued to the underwriter pursuant to the underwriting agreement.
Concurrently with the initial public offering the selling security
holder offered 650,000 selling security holder warrants, 650,000
selling security holder Class B warrants issuable upon exercise of the
selling security holder warrants and 1,300,000 shares of common stock
issuable upon exercise of these selling security holder warrants and
selling security holder Class B warrants. These selling security holder
warrants are identical to the Class A warrants, except that there are
certain restrictions imposed upon the transferability of these
warrants.

In consideration for the 9% debenture offering in the prior year the
Company issued warrants over 135,000 shares of common stock at an
exercise price of $6.00 per share, the fair market price at date of
issuance.

The Company filed a Schedule 13E-4 in connection with a tender offer
first published on October 10, 1997 as amended through December 13,
1997 to permit the Company to redeem all Class A warrants and Class B
warrants under the following terms and conditions.

o Two shares of common stock for three Class A and Class B warrants
surrendered.
o One share of common stock in exchange for three Class A warrants.
o One share of common stock in exchange for six Class B warrants.

A total of 1,817,891 A Warrants, 3,548,352 B Warrants were converted to
1,173,476 A Class in terms of the Schedule 13E-4 as amended.

A Warrants over 233,725 shares and B Warrants over 101 shares were
exercised during the year.

Warrants outstanding at June 30, 1998 were as follows:

Number of Exercise
Warrant warrants price Expiry date Entitlement
- ------- ---------- -------- ----------- ------------

Class A Redeemable
warrants 1,073,749 $6.50 January 24, 2001 One share of common stock and
one Class B warrant
Class B Redeemable
warrants 2,101,547 $8.75 January 24, 2001 One share of common stock
Debenture warrants 135,000 $6.00 July 31, 2007 One share of common stock

-50-

FIRST SOUTH AFRICA CORP., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996

The Class A warrants are redeemable beginning January 24, 1997, or
earlier at the option of the Company with the underwriters consent, at
a redemption price of $0.05 per Class A warrant, if the "closing price"
of the Company's common stock trades at an average price in excess of
$9.10 per share for any consecutive 30 trading day period, ending
within 15 days of the notice of redemption. All Class A warrants are to
be redeemed if any are to be redeemed.

The Class B warrants are redeemable beginning January 24, 1997, or
earlier at the option of the Company with the underwriters consent, at
a redemption price of $0.05 per Class A warrant, if the "closing price"
of the Company's common stock trades at an average price in excess of
$12.25 per share for any consecutive 30 trading day period, ending
within 15 days of the notice of redemption. All Class B warrants are to
be redeemed if any are to be redeemed.

23. FIRST SOUTH AFRICAN HOLDINGS ESCROW AGREEMENT

The FSAH Escrow Agreement was executed prior to the closing of the
offering and provided for the concurrent issuance and delivery of 729,
979 shares of Class B common stock to the FSAH escrow agent. The FSAH
escrow agreement is intended to provide security for the holders of
FSAH Class B common stock, who are residents in South Africa and are
prohibited in terms of South African law from holding shares in a
foreign company. The FSAH Escrow Agreement provides that the parties to
this agreement that are holders of FSAH Class B common stock will not
sell such shares of stock, but may tender the shares to the FSAH escrow
agent against payment therefore by the escrow agent, which payment may
consist of the proceeds obtained from the sale of an equal number of
Class B common stock of the Company, provided that the proceeds of the
sale will be delivered to the holder of the Class B common stock in
exchange for the shares in FSAH. These shares will be tendered to the
Company and they will be immediately converted to FSAH Class A common
stock.

Since the consummation of the Company's initial public offering in
January 1996, the Company has entered into FSAC Escrow Agreements with
the FSAH escrow agent, FSAH and certain principal shareholders of the
Company's subsidiaries which were acquired since January 1996. The
terms of the FSAC Escrow Agreement are substantially similar to the
terms of the FSAH Escrow Agreement, except that only the FSAH Escrow
Agreement provided for the issue of shares of Class B common stock to
the FSAH escrow agent while the FSAC Escrow Agreements provide for the
issue of shares of common stock to the FSAH escrow agent which
correspond to the issuances of FSAH Class B common stock by FSAH.

In 1997 a further 1,192,480 shares of common stock were issued to the
FSAH escrow agent in terms of FSAC Escrow Agreements entered into
during the fiscal year in connection with the acquisitions of Piemans
Pantry, Astoria Bakery, Seemanns' Quality Meat Products, Gull Foods and
First Strut.

In 1998 a further 386,324 shares of common stock were issued to the
FSAH escrow agent in terms of the FSAC Escrow agreements entered into
during the fiscal year in connection with the acquisitions of Piemans
Pantry, Pacforce, Seemann's, Quality Meat Products and Fifers Bakery.

24. CONTINGENT LIABILITIES

South African Secondary Tax on Companies at 12,5 percent is payable on
all future dividends declared out of distributable reserves.

The Company is liable to pay to the previous vendors an estimated
$9,709,244 based on the attainment of profit warranties which form an
integral part of all acquisition agreements concluded with previous
vendors of acquired companies. The payment of this amount is dependent
upon the achievement of pre defined profit targets. The estimated
amount is arrived at after considering budgets prepared by management
and reviewed by the board of directors.

-51-

FIRST SOUTH AFRICA CORP., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996

Subsequent to year end $2,259,750 has become due and payable based on
the profits achieved in the underlying operating subsidiaries of the
Company.

The Company has guaranteed the share price at which shares in First
South Africa Corp., Ltd. were issued to certain of the previous vendors
of the Company. 406,984 shares have been warranted at a share price of
$4,56 per share and a further 723,741 shares have been warranted at
$3,19 per share at the year end South African Exchange rate to the
United States Dollar.

25. EVENTS SUBSEQUENT TO BALANCE SHEET DATE.

Subsequent to year end the Company redeemed a further 3,470 9% $1,000
Convertible debentures at a discount averaging 5% of the face value of
the debentures outstanding.

-52-

Part III

Item. 10. Directors and Executive Officers

The officers and directors of the Company, their ages and present
positions held with the Company are as follows:

Name Age Positions with the Company
---- --- --------------------------

Michael Levy 52 Chairman of the Board of Directors
Clive Kabatznik 41 Chief Executive Officer, President, Chief Financial Officer,
Controller and Director
Tucker Hall 42 Secretary
Charles S. Goodwin 59 Director
Mfundiso J. Njeke 39 Director
Cornelius J. Roodt 39 Director

The following is a brief summary of the background of each director and
executive officer of the Company:

Michael Levy is a co-founder of the Company and has served as Chairman
of the Board of Directors since the Company's inception. Since 1987, Mr. Levy
has been the Chief Executive Officer and Chairman of the Board of Arpac L.P., a
Chicago-based manufacturer of plastic packaging machinery.

Clive Kabatznik is a co-founder of the Company and has served as a
director and its President since its inception and as its Vice Chairman, Chief
Executive Officer and Chief Financial Officer since October 1995. Since June
1992, Mr. Kabatznik has served as President of Colonial Capital, Inc. a
Miami-based investment banking Company that specializes in advising middle
market companies in areas concerning mergers, acquisitions, private and public
agency funding and debt placements. From 1989 to 1992, Mr. Kabatznik was the
President of Biltmore Capital Group, a financial holding Company that he
co-founded that controlled a registered NASD broker-dealer. From 1981 to 1986,
Mr. Kabatznik was the Chief Financial Officer of the Learning Annex, Inc., which
he co-founded. Mr. Kabatznik was born in South Africa.

Tucker Hall has been the Secretary of the Company since its inception
and is an employee of Codan Services Limited, an affiliated company of Conyers,
Dill & Pearman, Bermuda counsel to the Company, and has been employed by such
Company as a manager since 1989.

Charles S. Goodwin has been a director for the Company since its
inception and has been Managing Director and Chief Executive Officer of
Tessellar Investment, Ltd., a money management firm operating from Cape Cod,
Massachusetts since 1985. Mr. Goodwin was Senior Vice President and Director of
International Research of Arnhold & S. Bleichroeder, Inc., an institutional
brokerage firm from 1983 to 1984. During the period 1971 to 1983, Mr. Goodwin
was a Director and Vice President of Warburg Pincus Capital Corp., EMW Ventures;
Senior Vice President and Director of Research for Warburg Pincus Counsellors,
and a Partner and Managing Director of E.M. Warburg Pincus & Co., an investment
counseling and venture capital firm. Mr. Goodwin is the author of "The Third
World Century" and "A Resurrection of the Republican Ideal" published by
University Press of America, Lanham, Md. in 1994 and 1995 respectively. Mr.
Goodwin received his Bachelor of Arts in Russian History from Harvard College in
1961 and his Master of Business Administration International Finance from the
Columbia University Graduate School of Business in 1965.

-53-

Mfundiso J. Njeke has been a director of the Company since December
1997. Mr. Njeke was appointed director of First South Africa Holdings, Ltd. in
March 1997. Since June 1997, Mr. Njeke has served as Managing Director of the
Kagiso Trust Investment Company (Proprietary) Limited. Prior to such time and
since March 1988, he was a partner at Price Waterhouse. Mr. Njeke is also a
director of Kagiso Publishers (Proprietary) Limited, Kagiso Khulani Supervision
Food Services (Proprietary) Limited, Kagiso Motors (Proprietary) Limited and the
Credit Guarantee Insurance Corporation of Africa Limited.

Cornelius J. Roodt has been a director of the Company since December
1996. Mr. Roodt was appointed Managing Director and Chief Financial Officer of
FSAH, on July 1, 1996. Mr. Roodt is responsible for overseeing all the
activities of FSAH's operations in South Africa. From 1994 to 1996 Mr. Roodt was
a senior partner at Price Waterhouse Corporate Finance, South Africa. From 1991
to 1994 he was an audit partner at Price Waterhouse, South Africa. Prior to that
he was a partner at the accounting firm of Wichahn Meyernel in South Africa.

Other Key Employees

John V. Welch, 50. Mr. Welch is the founder and Managing Director of
Piemans Pantry, a company he established in 1982. His responsibilities include
overall supervision of all aspects of the business.

Gerald S. Grossman, 55. Mr. Grossman is the Group Finance Director of
First SA Food Holdings Limited, a position he has held since 1997. From 1983 to
1996, Mr. Grossman has served on the board and was responsible for group finance
at Hunt Leuchars and Hepburn Holdings Limited.

Mark J. Korb, 31. Mr. Korb has been the Group Finance Director of First
SA Lifestyle Holdings Limited since 1997. Prior to such time, from 1996 to 1997,
Mr. Korb was a Senior Audit Manager at Price Waterhouse Coopers Inc.

John Welch has entered into a three year employment agreement with
First SA Food Holdings, Limited commencing March 1, 1998.

All directors of the Company hold office until the next annual meeting
of shareholders or until their successors are elected and qualified. The
officers of the Company are elected by the Board of Directors at the first
meeting after each annual meeting of the Company's shareholders, and hold office
until their death, until they resign or until they have been removed from
office. The Company has no executive committee. Pursuant to the Underwriting
Agreement (with respect to the Company's initial public offering), dated January
24, 1996 by and among the Company, FSA Stock Trust and D.H. Blair and executed
with respect to certain provisions thereof by Messrs Clive Kabatznik and Michael
Levy, the Company is required to nominate a designee of D.H. Blair to the Board
of Directors for a period of five years from the date of the completion of such
offering. D.H. Blair has not yet selected such a designee.

Committees of the Board

The Board has an Audit Committee (the "Audit Committee") and a
Compensation Committee (the "Compensation Committee"). The Audit Committee is
composed of, Charles Goodwin and Cornelius Roodt and Mfundiso Njeke. The Audit
Committee is responsible for recommending annually to the Board of Directors the

-54-

independent auditors to be retained by the Company, reviewing with the
independent auditors the scope and results of the audit engagement and
establishing and monitoring the Company's financial policies and control
procedures. The Compensation Committee is composed of Charles Goodwin and
Michael Levy and Mfundiso Njeke. These persons are intended to be Non-Employee
Directors within the meaning of Rule 16b-3(b)(3)(i) promulgated under the
Securities Exchange Act of 1934 (the Securities Exchange Act). The
responsibilities of the Compensation Committee are described below under the
heading Stock Option Plan.

Executive Compensation

Except for Mr. Levy, directors of the Company do not receive fixed
compensation for their services as directors other than options to purchase
5,000 shares under the Company's stock option plan [(10,000 Shares for
non-employee directors)]. Mr. Levy receives an annual service fee of $30,000 and
options to purchase 5,000 shares of the Company's Common Stock for every year of
service as a director of the Company. However, directors will be reimbursed for
their reasonable out-of-pocket expenses incurred in connection with their duties
to the Company.

The following summary compensation table sets forth the aggregate
compensation paid or accrued by the Company to its Chief Executive Officer
during the Period from July 1, 1997 through June 30, 1998. Apart from Mr.
Kabatznik, whose annual salary is $180,000, no executive officer of the Company
received compensation in excess of $100,000 during such period.

Summary Compensation Table

Long-Term
Compensation
Year Annual Compensation Stock Options
---- ------------------- -------------
Salary Bonus
$ $ $

Clive Kabatznik,
President and Chief
Executive Officer 1998 180,000 170,509 465,000(1)(2)(3)
1997 180,000 195,142 460,000(1)(2)
1996 135,000 - 205,000(1)
Cornelius J. Roodt 1998 150,000 170,509 410,000(3)(4)
1997 150,000 195,142 405,000(4)
- -----------------------

(1) Includes (i) options granted under the stock option plan to purchase
5,000 shares of common stock at an exercise price of $5.00 per share,
and (ii) options granted in terms of a management contract entered into
with the Company.

-55-

(2) Includes (i) options granted under the stock option price to purchase
5,000 shares of common stock at an exercise price of $3.75 per share,
and (ii) options granted by the Board of Directors to purchase 250,000
shares of common stock at an exercise price of $4.75 per share (of
which 125,000 are immediately exercisable and 125,000 would become
exercisable on June 24, 1999, if still employed by the Company on such
date).
(3) Includes options granted under the stock option plan to purchase 5,000
shares of common stock at an exercise price of $5.00 per share.
(4) Includes (i) options granted under the stock option plan to purchase
5,000 shares of common stock at an exercise price of $3.75 per share,
and options granted in terms of a management contract entered into with
the Company and (iii) options granted by the Board of Directors to
purchase 250,000 shares of common stock at an exercise price of $4.75
per share (of which 125,000 are immediately exercisable and 125,000
would become exercisable on June 24, 1999, if still employed by the
Company on such date).

Employment Agreements

FSAM has entered into an Employment Agreement with Clive Kabatznik, the
Vice Chairman, President and Chief Executive Officer of the Company and of FSAM.
Under the terms of such agreement, Mr. Kabatznik shall devote substantially all
of his business time, energies and abilities to the Company and its subsidiaries
and receives an annual salary of $180,000 and options to purchase 55,000 shares
of Common Stock at an exercise price of $5.00 per share. In addition, Mr.
Kabatznik has been granted additional options to purchase 150,000 shares of
Common Stock of the Company at the exercise price of $5.00 per share,
exercisable after the seventh anniversary following the grant date, provided
that vesting of such options will be accelerated as follows: (i) 50,000 options
will be exercisable on such earlier date that the Company realizes earnings per
share of $.75 or more on a fiscal year basis, (ii) an additional 50,000 options
will be exercisable on such earlier date that the Company realizes earnings per
share of $1.00 or more on a fiscal year basis, and (iii) an additional 50,000
options will be exercisable on such earlier date that the Company realizes
earnings per share of $1.50 or more on a fiscal year basis. The options referred
to in (i) and (ii) above have vested as a result of the Company's realization of
the applicable earnings per share requirements. The Company intends, during the
term of Mr. Kabatznik's employment agreement, to pay Mr. Kabatznik an annual
incentive bonus of five percent of the Minimum Pretax Income (as provided in Mr.
Kabatznik's employment agreement) above $4,000,000, as shall be reported in the
Company's audited financial statements for each fiscal year in which Mr.
Kabatznik is employed, exclusive of any extraordinary earnings or charges which
would result from the release of the Earnout Escrow Shares.

FSAM has entered into a consulting agreement with Michael Levy,
pursuant to which Mr. Levy serves as a consultant to FSAM. The term of the
agreement is for a period of three years until January 31, 1999. Mr.
Levy's compensation for such consulting services is $60,000 per annum.

FSAH has entered into an Employment Agreement with Cornelius J. Roodt,
the Managing Director and Chairman of the Board of FSAH. Under the terms of such
agreement, Mr. Roodt shall devote substantially all of his business time,
energies and abilities to the Company and its subsidiaries and shall receive an
annual salary of $150,000 and options to purchase 150,000 shares of FSAH Class B
Stock at an exercise price of Rand 13.05 per share. Mr. Roodt's salary under his
Employment Agreement shall be reviewed on an annual basis. In addition, the
150,000 shares of FSAH Class B Stock are exercisable after the fifth anniversary
following the grant date, provided that vesting of such options will be
accelerated as follows: (i) 50,000 options will be exercisable on such earlier
date that the Company realizes earnings per share of $.75 or more on a fiscal
year basis, (ii) an additional 50,000 options will be exercisable on such
earlier date that the Company realizes earnings per share of $1.00 or

-56-

more on a fiscal year basis, and (iii) an additional 50,000 options will be
exercisable on such earlier date that the Company realizes earnings per share of
$1.50 or more on a fiscal year basis. The options referred to in (i) and (ii)
above have vested as a result of the Company's realization of the applicable
earnings per share requirements. The Company intends, during the term of Mr.
Roodt's employment agreement, to pay Mr. Roodt an annual incentive bonus of four
percent of the Minimum Pretax Income (as provided in Mr. Roodt's employment
agreement) above $5,000,000, as shall be reported in the Company's audited
financial statements for each fiscal year in which Mr. Roodt is employed,
exclusive of any extraordinary earnings or charges which would result from the
release of the Earnout Escrow Shares.

Stock Option Plan

The Board of Directors of the Company has adopted and the shareholders
(prior to the Company's initial public offering) approved the Company's 1995
Stock Option Plan (the "Stock Option Plan"). The Stock Option Plan provides for
the grant of (i) options that are intended to qualify as incentive stock options
(Incentive Stock Options) within the meaning of Section 422 of the Code to key
employees and (ii) options not intended to so qualify (Nonqualified Stock
Options) to key employees (including directors and officers who are employees of
the Company), and to directors and consultants who are not employees. The total
number of shares of Common Stock for which options may be granted under the
Stock Option Plan is 800,000 shares.

The Stock Option Plan is to be administered by the Compensation
Committee of the Board of Directors. The Committee shall determine the terms of
options exercised, including the exercise price, the number of shares subject to
the option and the terms and conditions of exercise. No option granted under the
Stock Option Plan is transferable by the optionee other than by will or the laws
of descent and distribution and each option is exercisable during the lifetime
of the optionee only by such optionee or his legal representatives.

The exercise price of Incentive Stock Options granted under the Stock
Option Plan must be at least equal to the fair market value of such shares on
the date of grant (110% of fair market value in the case of an optionee who owns
or is deemed to own stock possessing more than 10% of the voting rights of the
outstanding capital stock of the Company (or any of its subsidiaries). The term
of each option granted pursuant to the Stock Option Plan shall be established by
the Committee, in its sole discretion; provided, however, that the maximum term
for each Incentive Stock Option granted pursuant to the Stock Option Plan is ten
years (five years in the case of an optionee who owns or is deemed to own stock
possessing more than 10% of the total combined voting power of the outstanding
capital stock of the Company (or any of its subsidiaries). Options shall become
exercisable at such times and in such installments as the Committee shall
provide in the terms of each individual option. The maximum number of shares for
which options may be granted to any individual in any fiscal year is 210,000.

The Stock Option Plan also contains an automatic option grant program
for the non-employee directors. Each non-employee director of the Company is
automatically granted an option for 10,000 shares of Common Stock. Thereafter,
each person who is a non-employee director of the Company following an annual
meeting of shareholders will be automatically granted an option for an
additional 10,000 shares of Common Stock. Each grant will have an exercise price
per share equal to the fair market value of the Common Stock on the grant date
and will have a term of five years measured from the grant date, subject to
earlier termination if an optionee's service as a Board member is terminated for
cause.

-57-

The Company has granted options to purchase 965,000 shares of Common
Stock including the following options granted to directors of the Company:

Options Granted

Percent of Potential Realizable Value
Total Options at Assumed Annual
Granted to Per Share Rate of Stock Price
Options Employees in Exercise Expiration Appreciation For
Granted Fiscal Year (1) Price Date Option Term
------- --------------- ----- ----
5% 10%
-- ---

Michael Levy................ 5,000 *.66% $5.00 (2) $ 6,900 $ 15,273
5,000 *.66% 3.75 (2) 5,200 11,500
10,000 **25.00% 6.00 (2) 16,575 36,630
Clive Kabatznik............. 205,000 *27.33% 5.00 (3) 1,547,571 1,363,332
5,000 *.66% 3.75 (2) 5,200 11,500
5,000 **12.50% 6.00 (2) 8,285 18,315
250,000 *33.33% 4.75 (4) 328,084 724,981
Laurence M. Nestadt......... 5,000 *.66% 5.00 (2) 6,900 15,273
Charles S. Goodwin.......... 5,000 *.66% 5.00 (2) 6,900 15,273
5,000 *.66% 3.75 (2) 5,200 11,500
10,000 **25.00% 6.00 (2) 16,575 36,630
John Mackey................. 5,000 *.66% 5.00 (2) 6,900 15,273
5,000 *.66% 3.75 (2) 5,200 11,500
Cornelius J. Roodt.......... 5,000 *.66% 3.75 (2) 5,200 11,500
5,000 **12.50% 6.00 (2) 8,285 18,315
250,000 *33.33% 4.75 (4) 328,084 724,981
Mfundiso J. Njeke 10,000 **25.00% 6.00 (2) 16,575 36,630
- ---------------

(1) The numbers have been rounded for the purpose of this table.
(2) Options granted will expire five years from the date granted and are
immediately exercisable.
(3) 55,000 options granted will expire five years from the date granted; 50,000
additional options will be exercisable following the seventh anniversary of
the grant date and until the tenth anniversary of such date, subject to
accelerated vesting upon the Company's realization of certain earnings per
share targets; 100,000 additional options are currently exercisable until
the tenth anniversary of the date of grant.
(4) Non-plan options to purchase 250,000 shares of Common Stock at an exercise
price of $4.75 granted by the Board of Directors to each of Mr. Kabatznik
and Mr. Roodt in the fourth quarter of fiscal year 1997 (of which 125,000
were immediately exercisable and 125,000 will become exercisable on June
24, 1999, if the optionee is still employed by the Company on such date).

* Options granted in Fiscal Year 1997.

** Options granted in Fiscal Year 1998 (through June 30, 1998).

Item 12. Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information as to the stock
ownership of (i) each person known by the Company to be the beneficial owner of
more than five percent of the Company's Common Stock or Class B Common Stock,
(ii) each director of the Company, (iii) each named executive officer and (iv)
all executive officers and directors as a group.

-58-

Amount and Nature of
Beneficial Ownership(1)

Name and Address of Class BCommon Percentage of Percentage of
Beneficial Shareholder Common Stock Stock (2)(3) Ownership (3) Voting Power(3)
- ---------------------- ------------ ------------ ------------- ---------------

Michael Levy..................... 1,296,588(4) 1,300,116(5)(6) 34.2% 55.1%
9511 West River Street
Schiller Park, IL 60176

Clive Kabatznik.................. 290,000(7) 190,000 6.3% 6.8%
2665 S. Bayshore
Suite 702
Coconut Grove, FL 37137

FSA Stock Trust.................. 0 383,523(5)(8) 5.0% 13.5%
9511 West River Street
Schiller Park, IL 60176

Charles S. Goodwin............... 20,000(4) 0 * *
801 Old Post Road
Cotuit, MA 02635

Mfundiso Njeke................... 10,000(4) 0 * *

Cornelius J. Roodt 135,000(9) 0 1.8%
P.O. Box 4001
Kempton Park, South Africa

BT Global Credit Limited 1,949,754(10) 0 26.6% 12.3%
c/o Bankers Trust Luxembourg
S.A.
PO Box 807
14 Boulevard FDRoosevelt
L-2540 Luxembourg
Luxembourg

All executive officers and directors 1,761,588(11) 1,490,116 43.5% 62.4%
as a group (5 persons)
- ---------------

* Less than 1%

(1) Beneficial ownership is calculated in accordance with Rule 13d-3
under the 1934 Act.
(2) Except as otherwise indicated, each of the parties listed has sole
voting and investment power with respect to all shares of Class B
Common Stock indicated below.
(3) For the purposes of this calculation, the Common Stock and the Class B
Common Stock are treated as a single class of Common Stock. The Class B
Common Stock is entitled to five votes per share, whereas the Common
Stock is entitled to one vote per share.
(4) With respect to Messrs. Goodwin and Levy, includes 20,000 shares of
Common Stock issuable upon exercise of options that are immediately
exercisable; with respect to Mr. Njeke, includes 10,000 shares of
Common Stock issuable upon exercise of options that are immediately
exercisable, and with respect

-59-

to Mr. Levy, includes 1,276,588 shares of Common Stock issued to the
American Stock Transfer & Trust Company (the "FSAH Escrow Agent") for
which Mr. Levy has been granted a voting proxy.
(5) For purposes of Rule 13d-3 under the Exchange Act, such individual or
entity is deemed to be the beneficial owner of the shares held pursuant
to the terms of an escrow agreement entered into by and among certain
holders of FSAH Class B Stock, the FSAH Escrow Agent, FSAH and the
Company prior to the closing of the Initial Public Offering ("IPO")
consummated in January, 1996 (the "FSAH Escrow Agreement"), although
such individual or entity disclaims ownership of such shares under
South African law.
(6) Includes (i) 383,523 shares of Class B Common Stock issued to the FSAH
Escrow Agent pursuant to the terms of the FSAH Escrow Agreement, for
which the FSA Stock Trust may be deemed the beneficial owner and for
which Mr. Levy has been granted a voting proxy and, (ii) 36,452 shares
of Class B Common Stock issued to the FSAH Escrow Agent pursuant to the
terms of the FSAH Escrow Agreement, which shares correspond to a like
number of shares of FSAH Class B Stock purchased by Mr. Levy upon the
closing of the Europair acquisition. Also includes 310,004 additional
shares of Class B Common Stock issued to the FSAH Escrow Agent, for
which Mr. Levy has been granted a voting proxy. Mr. Levy disclaims
beneficial ownership of all shares held by the FSAH Escrow Agent for
which he has been given a voting proxy. Mr. Levy's wife is the trustee,
and his wife and their children are the beneficiaries, of the FSA Stock
Trust. Mr. Levy disclaims ownership of all shares held by the FSA Stock
Trust, as well as the additional shares held by the FSAH Escrow Agent
for which he has been given a voting proxy.
(7) Includes 290,000 shares of Common Stock issuable upon exercise of
options that are immediately exercisable.
(8) Includes 383,523 shares of Class B Common Stock issued to the FSAH
Escrow Agent pursuant to the terms of the FSAH Escrow Agreement.
(9) Includes 135,000 shares of Common Stock issuable upon exercise of
options that are immediately exercisable.
(10) Includes (i) 1,368,421 shraes of Common Stock issuable upon conversion
of certain Increasing Rate Debentures, (ii) 258,333 shares of Common
Stock issuable upon conversion of certain 9% Senior Subordinated
Convertible Debentures, and (iii) 163,000 shares of Common Stock owned
by a fund that is managed by an affiliate of BT Global Credit Limited.
(11) Represents shares issuable upon exercise of options that are
immediately exercisable. Does not include 300,000 shares issuable upon
exercise of options not exercisable within 60 days.

Item 13. Certain Relationships and Related Transactions

In connection with the Company's organization in September 1995, the
Company sold 1,212,521 shares of Class B Common Stock to Clive Kabatznik, the
President and Chief Executive Officer of the Company for a purchase price of
$.01 per share, which amount was paid by Mr. Kabatznik in the form of advances
made by him to pay for certain expenditures of the Company. In October 1995, Mr.
Kabatznik transferred 1,002,521 of such shares, which included 670,137 shares to
Mrs. Stephanie Levy as Trustee of the FSA Stock Trust, 97,210 shares to the
Stopia Trust, 97,210 shares to the 2 RAS Trust, 93,307 to the Presspack Trust,
24,657 shares to the Two Year Trust and 20,000 shares to Henry Rothman. The
transferees have paid Mr. Kabatznik $.01 per share for each of such shares.

FSAM Management Agreement

-60-

The Company and FSAM have entered into a Management Agreement pursuant
to which FSAM will provide certain management and administrative services to the
Company for an annual fee of $48,000, and reimbursement of FSAM's costs, other
than out-of pocket expenses, at an amount equal to cost plus 10% (including the
costs of employees) incurred in providing such management and administrative
services to the Company. The costs of such services that may be requested from
time to time by the Company pursuant to the Management Agreement are at a rate
that could reasonably be expected to be charged by an unaffiliated third party.
The services to be provided by FSAM to the company under the FSAM management
Agreement include general business management and administrative services,
shareholder relation services, financial services and accounting services. The
Management Agreement will expire on December 31, 2005, unless sooner terminated
on 90 days advance notice by either party.

Starpak Acquisition

In January 1996, pursuant to the terms of an agreement executed by the
FSA Stock Trust, Raymond Shaftoe, Steven Smith and FSAH, as amended (the
"Starpak Agreement"), the previous shareholders of Starpak sold 100% of the
equity shares of Starpak (the "Starpak Stock") to FSAH in exchange for 167,709
shares of FSAH Class B Stock.

The 167,709 shares of FSAH Class B Stock delivered to the previous
Starpak shareholders may be tendered to the FSAH Escrow Agent against payment
therefor by the FSAH Escrow Agent, which payment may be made through the sale by
the FSAH Escrow Agent of an equal number of shares of Class B Common Stock of
the Company (which shares will automatically convert to Common Stock upon such
sale) and delivery of the net proceeds thereof pursuant to the terms of the FSAH
Escrow Agreement. See "Certain Transactions - FSAH Escrow Agreement."

L.S. Pressings Acquisition

In January 1996, pursuant to the terms of an agreement executed by the
FSA Stock Trust, Rhona Kabatznik, Raymond Shaftoe, Samuel Smith and FSAH, as
amended, (the "L.S. Pressings Agreement"), the previous shareholders of L.S.
Pressings sold 100% of the equity shares of such company (the "L.S. Pressings
Stock") to FSAH in exchange for 380,181 shares of FSAH Class B Stock.

The 380,181 shares of FSAH Class B Stock delivered to the previous L.S.
Pressings' shareholders may be tendered to the FSAH Escrow Agent against payment
therefor by the FSAH Escrow Agent, which payment may be made through sale by the
FSAH Escrow Agent of an equal number of shares of Class B Common Stock of the
Company (which shares will be automatically converted to Common Stock upon such
sale) and delivery of the net proceeds thereof pursuant to the terms of the FSAH
Escrow Agreement.

In September 1995, prior to the execution of the Starpak Agreement and
the L.S. Pressings Agreement, Michael Levy transferred all of his shares in
Starpak and L.S. Pressings to the FSA Stock Trust, which shares constitute all
of the shares of Starpak and L.S. Pressings sold to the Company by the FSA Stock
Trust.

FSAH Escrow Agreement

The FSAH Escrow Agreement, executed in January 1996, provided for the
concurrent issuance and delivery by the Company of 729,979 shares of Class B
Common Stock to the FSAH Escrow Agent. The FSAH Escrow Agreement is intended to
provide security for certain holders of FSAH Class B Stock, who are residents

-61-

of South Africa and are prohibited by South African law from holding shares in a
foreign company. The FSAH Escrow Agreement provides that the parties to such
Agreement that are holders of FSAH Class B Stock will not sell such shares of
stock except as provided in such Agreement. Specifically, the FSAH Escrow
Agreement provides that the FSAH Class B Stock may be tendered to the FSAH
Escrow Agent against payment therefor by the FSAH Escrow Agent, which payment
may consist of the proceeds obtained from the sale by the FSAH Escrow Agent of
an equal number of shares of Class B Common Stock of the Company, provided that
the proceeds of such sale shall be delivered to the holder in exchange for his
or her shares of FSAH Class B Stock. Upon the sale by the FSAH Escrow Agent of
any shares of Class B Common Stock of the Company pursuant to the FSAH Escrow
Agreement, the FSAH Escrow Agent will deliver to the Company the equivalent
number of shares of FSAH Class B Stock tendered in connection therewith. Such
shares of FSAH Class B Stock will then automatically convert into shares of FSAH
Class A Stock and will be held by the Company together with the other shares of
FSAH Class A Stock owned by the Company. The Company has granted certain
piggyback registration rights to the FSAH Escrow Agent on behalf of the holders
of the shares of FSAH Class B Stock held pursuant to the FSAH Escrow Agreement.
Such shares of Class B Common Stock will be automatically converted to Common
Stock of the Company upon the sale of such shares by the FSAH Escrow Agent
pursuant to the terms of the FSAH Escrow Agreement. Such shares of Class B
Common Stock will be controlled by the terms of the FSAH Escrow Agreement.
Michael Levy has paid the purchase price of $.01 per share for each of the
shares of Class B Common Stock held pursuant to the FSAH Escrow Agreement and
the FSAH Escrow Agent has granted to Michael Levy an irrevocable proxy to vote
each of such shares of Class B Common Stock prior to the sale or forfeiture of
such shares, as the case may be. The Company owns 25,000,000 shares of FSAH
Class A Stock, or approximately 97% of the total outstanding shares of FSAH, and
the remaining shares are held by the following persons in the amounts set forth
below:

FSAH Class B Stock

FSA Stock Trust..................................... 383,523 shares
Global Capital...................................... 50,000 shares
Bruce Thomas........................................ 80,000 shares
Samuel Smith........................................ 58,766 shares
Raymond Shaftoe..................................... 58,766 shares
Rhona Kabatznik..................................... 62,472 shares
Michael Levy........................................ 36,452 shares

Total......................................... 729,979 shares
==============

FSAC Escrow Agreements

Since the consummation of the Company's IPO in January 1996, the
Company has entered into the FSAC Escrow Agreements which are comprised of a
number of additional agreements with the FSAH Escrow Agent, FSAH and certain
principal shareholders of the Company's subsidiaries which were acquired since
January 1996. The terms of the FSAC Escrow Agreements are substantially similar
to the terms of the FSAH Escrow Agreement, except that only the FSAH Escrow
Agreement provided for the issuance of shares of Class B Common stock to the
FSAH Escrow Agent while each of the FSAC Escrow Agreements provided for the
issuance of shares of Common stock to the FSAH Escrow Agent which correspond to
the following issuances of FSAH Class B Stock by FSAH:

-62-

Additional Shares Issued In Connection with the Pieman's Pantry Acquisition 1

Heinz Andreas....................................... 325,232 shares
John Welch.......................................... 325,232 shares
Michael Morgan...................................... 72,277 shares
Total ......................... 722,741 shares
==============

Additional shares issued in connection with the Astoria Acquisition 2

Wolfgang Burre...................................... 186,407 shares

Additional shares issued in connection with the Seemann's Acquisition 3

Mark Jericevich..................................... 157,596 shares
Matthew Jericevich.................................. 157,597 shares
Total ......................... 315,193 shares
==============

Additional shares issued in connection with Gull Foods Acquisition 4

Trek Biltong........................................ 238,660 shares

Additional Shares issued in connection with the Acquisition of First Strut
(Pty) Ltd.5

The Coch Family Trust............................... 19,230 shares

1 The Company has issued an additional 722,741 shares of Common Stock to
the FSAH Escrow Agent pursuant to the terms of certain FSAC Escrow
Agreements by and among the Company, the FSAH Escrow Agent, and each of
Mr. Andreas, Mr. Morgan and Mr. Welch in connection with the Pieman's
acquisition.
2 The Company has issued an additional 186,407 shares of Common Stock to
the FSAH Escrow Agent in connection with the Astoria Acquisition
pursuant to the terms of a certain FSAC Escrow Agreement by and among
the Company, the FSAH Escrow Agent and Mr. Burre.
3 The Company has issued an additional 238,660 shares of Common Stock to
the FSAH Escrow Agent pursuant to the terms of a certain FSAC Escrow
Agreement by and among the Company, the FSAH Escrow Agent, and Trek
Biltong in connection with the Gull Foods Acquisition.
4 The Company has issued an additional 283,066 shares of Common Stock to
the FSAH Escrow Agent pursuant to the terms of a certain FSAC Escrow
Agreement by and among the Company, the FSAH Escrow Agent and each of
Mr. Mark Jericevich and Mr. Matthew Jericevich, respectively, in
connection with the Seemanns Acquisition.
5 The Company has issued an additional 19,230 shares of Common Stock to
the FSAH Escrow Agent pursuant to the terms of a certain FSAH Escrow
Agreement by and among the Company the FSAH Escrow Agent, First Strut
(Pty) Ltd. and Michael Levy in connection with the acquisition of First
Strut (Pty) Ltd.
-63-

The rights and preferences accruing to holders of FSAH Class A Stock
and holders of FSAH Class B Stock are substantially identical except that (i)
FSAH is required to pay dividends to holders of FSAH Class B Stock equivalent,
on a pro rata basis, to the dividends paid by the Company to holders of its
Common Stock, (ii) payment of the above dividends on FSAH Class B Stock must be
made no later than three business days subsequent to payment of dividends by the
Company on its Common Stock, (iii) accrued dividends on FSAH Class B Stock must
be paid prior to payment of any declared dividends on FSAH Class A Stock and
(iv) any shares of FSAH Class B Stock acquired by the Company will be
automatically converted to shares of FSAH Class A Stock upon such acquisition.

Part IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(A) 1. Financial Statements

The following financial statements of the Company are included as
required to be filed by Item 8:

First South Africa Corp., Ltd.

Report of the independent auditors
Consolidated Balance Sheets at June 30, 1998 and 1997
Consolidated Statements of Income for the years ended June 30, 1998,
1997 and 1996 Consolidated Statements of Cash Flows for the years ended
June 30, 1998, 1997 and 1996 Consolidated Statement of Changes in
Stockholders' Investment for the period June 30, 1995 to June 30, 1998
Notes to the Consolidated Financial Statements for the years ended June
30, 1998, 1997 and 1996

2. Financial Statement Schedules:

All schedules have been omitted since the required information is
included in the consolidated financial statements or notes thereto.

3. Exhibits:

Exhibit Number

3.1 Memorandum of Association of the Registrant
3.2 Bye-Laws of the Registrant
4.1 Form of Bridge Note
4.2 Form of Warrant Agreement
4.3 Form of Unit Purchase Option
4.4(1) Indenture dated April 25, 1997 between the Company and American
Stock Transfer & Trust Company (as Indenture Trustee)
4.5(2) Form of Debenture
4.6(2) Form of Placement Warrant
4.7(2) Stock Option Agreement
- -------

-64-

4.8(3) Indenture dated October 29, 1997, between the Company and American
Stock Transfer and Trust Company
10.1 Starpak Acquisition Agreements
10.2 Starpak Escrow Agreement
10.3 L.S. Pressings Acquisition Agreements
10.4 L.S. Pressings Escrow Agreement
10.5 Europair Acquisition Agreements
10.6 Europair Escrow Agreement
10.7 Form of Escrow Agreement regarding the Earnout Escrow Shares
10.8 Form of FSAH Escrow Agreement
10.9 Form of Employment Agreement of Clive Kabatznik
10.10 Form of FSAM Management Agreement
10.11 Form of Consulting Agreement with Michael Levy
10.12 Form of Consulting Agreement with Global Capital Limited
10.13 1995 Stock Option Plan
10.14 Form of Addendum to Starpak Acquisition Agreement
10.15 Form of Addendum to L.S. Pressings Acquisition Agreement
10.16 Form of Addendum to Europair Acquisition Agreement
10.17(4) Pieman's Pantry Acquisition Agreements
10.18(5) Form of Astoria Sale of Business Agreement
10.19(6) Form of Gull Foods Sale of Business Agreement
10.20(7) Form of Employment Agreement of Cornelius Roodt
11.1(8) Calculations of Earnings Per Share
21.1 Subsidiaries of the Registrant
23.1(8) Consent of Price Waterhouse
27.1(8) Financial Data Schedule
- -------------

(1) Incorporated by reference is the Company's Current Report on Form 8-K
filed on September 10, 1997 (Exhibit 4.1)
(2) Incorporated by reference is the Company's Registration Statement on
Form S-1 (No. 333-33561)
(3) Incorporated by reference in the Registrant's Current Report on Form
8-K, Exhibit 4.1 (filed on October 31, 1997).
(4) Incorporated by reference is the Company's Current Report on Form 8-K
(Exhibit 1) (filed on June 14, 1996) as amended on Form 8-K/A (filed on
August 16, 1996).
(5) Incorporated by reference is the Company's Current Report on Form 8-K
(Exhibit 1) (filed on November 7, 1996) as amended on Form 8-K/A ( filed
on March 14, 1997).
(6) Incorporated by reference is the Company's Current Report on Form
(Exhibit 1) (filed on May 8, 1997) as amended on Form 8-K/A (filed on
July 3, 1997).
(7) Incorporated by reference in the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1997.
(8) Filed herewith.

All other Exhibits have been previously filed with the Company's
Registration statement on Form S-1, as amended (No. 33-99180), which is
incorporated by reference.

(B) Reports on Form 8-K

Not applicable.

-65-

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized in the City of
Jerusalem, State of Israel, on the 2nd day of October, 1998.

FIRST SOUTH AFRICA CORP., LTD.

BY: /s/Clive Kabatznik
-------------------------------
Clive Kabatznik
President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant in
the capacities and on the date indicated.

Signature Title Date

/s/Michael Levy Chairman of the Board of October 2, 1998
- --------------------------- Directors
Michael Levy

/s/Clive Kabatznik President, Vice Chairman, October 2, 1998
- ---------------------------
Clive Kabatznik Chief Executive Officer, Chief
Financial Officer, Director and
Controller

/s/Charles S. Goodwin Director October 2, 1998
- ---------------------------
Charles S. Goodwin

/s/Cornelius Roodt Director October 2, 1998
- ---------------------------
Cornelius Roodt

/s/Nfundiso Njeke Director October 2, 1998
- ---------------------------
Nfundiso Njeke

EXHIBIT INDEX
-------------

Exhibit No. Description
- ---------- ------------

3.1 Memorandum of Association of the Registrant
3.2 Bye-Laws of the Registrant
4.1 Form of Bridge Note
4.2 Form of Warrant Agreement
4.3 Form of Unit Purchase Option
4.4(1) Indenture dated April 25, 1997 between the Company and American
Stock Transfer & Trust Company (as Indenture Trustee)
4.5(2) Form of Debenture
4.6(2) Form of Placement Warrant
4.7(2) Stock Option Agreement
4.8(3) Indenture dated October 29, 1997, between the Company and American
Stock Transfer and Trust Company
10.1 Starpak Acquisition Agreements
10.2 Starpak Escrow Agreement
10.3 L.S. Pressings Acquisition Agreements
10.4 L.S. Pressings Escrow Agreement
10.5 Europair Acquisition Agreements
10.6 Europair Escrow Agreement
10.7 Form of Escrow Agreement regarding the Earnout Escrow Shares
10.8 Form of FSAH Escrow Agreement
10.9 Form of Employment Agreement of Clive Kabatznik
10.10 Form of FSAM Management Agreement
10.11 Form of Consulting Agreement with Michael Levy
10.12 Form of Consulting Agreement with Global Capital Limited
10.13 1995 Stock Option Plan
10.14 Form of Addendum to Starpak Acquisition Agreement
10.15 Form of Addendum to L.S. Pressings Acquisition Agreement
10.16 Form of Addendum to Europair Acquisition Agreement
10.17(4) Pieman's Pantry Acquisition Agreements
10.18(5) Form of Astoria Sale of Business Agreement
10.19(6) Form of Gull Foods Sale of Business Agreement
10.20(7) Form of Employment Agreement of Cornelius Roodt
11.1(8) Calculations of Earnings Per Share
21.1 Subsidiaries of the Registrant
23.1(8) Consent of Price Waterhouse
27.1(8) Financial Data Schedule
- -------------

(1) Incorporated by reference is the Company's Current Report on Form 8-K
filed on September 10, 1997 (Exhibit 4.1)
(2) Incorporated by reference is the Company's Registration Statement on
Form S-1 (No. 333-33561)
(3) Incorporated by reference in the Registrant's Current Report on Form
8-K, Exhibit 4.1 (filed on October 31, 1997).
(4) Incorporated by reference is the Company's Current Report on Form 8-K
(Exhibit 1) (filed on June 14, 1996) as amended on Form 8-K/A (filed on
August 16, 1996).
(5) Incorporated by reference is the Company's Current Report on Form 8-K
(Exhibit 1) (filed on November 7, 1996) as amended on Form 8-K/A ( filed
on March 14, 1997).
(6) Incorporated by reference is the Company's Current Report on Form
(Exhibit 1) (filed on May 8, 1997) as amended on Form 8-K/A (filed on
July 3, 1997).
(7) Incorporated by reference in the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1997.
(8) Filed herewith.

All other Exhibits have been previously filed with the Company's
Registration statement on Form S-1, as amended (No. 33-99180), which is
incorporated by reference.