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

<PAGE>


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-

<PAGE>



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-

<PAGE>



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:

<TABLE>
<CAPTION>


                      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
------------------------------------------------------------------------------------------------------------------

<S>                       <C>                     <C>                        <C>  
   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
------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       -4-

<PAGE>



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-

<PAGE>



         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-

<PAGE>



         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-

<PAGE>



         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-

<PAGE>


         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-

<PAGE>


                                             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-

<PAGE>



         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-

<PAGE>



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."
<TABLE>
<CAPTION>


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
                                      $              $              $              $                $              $
------------------------------------------------------------------------------------------------------------------------------

<S>                                <C>           <C>             <C>           <C>              <C>           <C>        
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)

</TABLE>
<TABLE>
<CAPTION>

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

<S>                                            <C>            <C>           <C>              <C>             <C>       
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
</TABLE>

(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-

<PAGE>



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-

<PAGE>



         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-

<PAGE>



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-

<PAGE>



                  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-

<PAGE>

         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-
<PAGE>

         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-

<PAGE>



         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-

<PAGE>



         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-

<PAGE>



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-
<PAGE>



         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-
<PAGE>



         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-

<PAGE>



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-

<PAGE>


                          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-

<PAGE>


                         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-

<PAGE>


                         FIRST SOUTH AFRICA CORP., LTD.

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>



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

<S>                                                    <C>                  <C>       
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
                                                        ============          ============
</TABLE>


                                      -27-
<PAGE>


                         FIRST SOUTH AFRICA CORP., LTD.

                        CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>


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

<S> 
Current liabilities                                                            <C>                 <C>             
     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
                                                                                  ============          ===========
</TABLE>


                                      -28-
<PAGE>

<TABLE>
<CAPTION>


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

<S>                                                       <C>                   <C>                  <C>       
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)

</TABLE>

                                      -29-
<PAGE>


                         FIRST SOUTH AFRICA CORP., LTD.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>



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

<S>                                                                        <C>                  <C>                 <C>        
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)
                                                                           ------------         ------------          -----------

</TABLE>
                                      -30-

<PAGE>


                         FIRST SOUTH AFRICA CORP., LTD.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>


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

<S>                                                        <C>                      <C>                   <C>    
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
                                                                    ==========           ==========            =========
</TABLE>

                                      -31-
<PAGE>


                         FIRST SOUTH AFRICA CORP., LTD.

          CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' INVESTMENT
<TABLE>
<CAPTION>


                                 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
                                   $          $         $          $            $        $          $            $          $
                                --------    -------   ------   ----------   -------  ----------- --------   ------------- ----------

<S>                                 <C>        <C>    <C>        <C>      <C>       <C>        <C>         <C>         <C>
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
                                   ====== ========    ==========   ==========  ======  ========  --------- ----------- ------------

</TABLE>

                                     -32-
<PAGE>


                         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:

<TABLE>
<CAPTION>

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

<S>                                                <C>                  <C>          <C>      
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
                                                                                          =============

</TABLE>

                                      -33-

<PAGE>


                         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.

<TABLE>
<CAPTION>

                                                                                                        $
                                                                                                        ----  

<S>                                                                                            <C>      
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
                                                                                                      =========
</TABLE>

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-
<PAGE>


                         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-

<PAGE>


                         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-

<PAGE>


                         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-

<PAGE>


                         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-

<PAGE>


                         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-

<PAGE>


                         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-
<PAGE>



                         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-
<PAGE>


                         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-
<PAGE>


         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-

<PAGE>
<TABLE>
<CAPTION>


                         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
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                      <C>             <C>      
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
                                                                           =========                                =========
</TABLE>

                                      -44-
<PAGE>


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

<S>                                                                      <C>                   <C>             <C>                  
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
                                                                            -------            ---------             ---------
</TABLE>

                                    -45-

<PAGE>


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


                                                            Year ended      Year ended          Year ended
                                                             June 30,         June 30,            June 30,
                                                              1998             1997                1996
                                                               $                 $                    $
                                                            ----------      ----------          ----------
<S>                                                     <C>              <C>                   <C>   
                                                            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)
                                                           =========            =========           =========
</TABLE>


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-

                                     
<PAGE>


                         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.

<TABLE>
<CAPTION>


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

<S>                                           <C>                   <C>                 <C>      
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
                                                 -----------           ----------          ----------
</TABLE>


                                      -47-
<PAGE>

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

                                                          Year ended           Year ended          Year ended
                                                           June 30,             June 30,            June 30,
                                                            1998                 1997                1996
                                                              $                    $                    $
                                                          ----------           ----------          -----------
<S>                                                <C>                    <C>                <C>               
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
                                                          ---------            ---------             -------
</TABLE>

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-

<PAGE>


                         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.
<TABLE>
<CAPTION>


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

<S>                               <C>              <C>                   <C>                <C>                
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

</TABLE>

                                      -49-
<PAGE>


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

<TABLE>
<CAPTION>

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

<S>                             <C>            <C>             <C>                <C>   
Stock options granted during 1998    40,000         $6.00         January 1, 2003    Immediately
                                    -------
                                    930,000
                                    =======
</TABLE>

         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:

<TABLE>
<CAPTION>
                        Number of      Exercise
Warrant                 warrants        price       Expiry date        Entitlement
-------                 ----------     --------     -----------        ------------           
<S>                   <C>           <C>         <C>              <C>
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

</TABLE>

                                      -50-

<PAGE>


                         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-

<PAGE>


                         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-

<PAGE>



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:
<TABLE>
<CAPTION>


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

<S>                         <C>     <C>                                   
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
</TABLE>


         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-
<PAGE>


         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-

<PAGE>



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-
<PAGE>



(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-

<PAGE>


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-
<PAGE>



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

<TABLE>

                                                  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%
                                                                                                  --              ---

<S>                               <C>              <C>       <C>        <C>          <C>              <C>        
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
---------------
</TABLE>

(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-

<PAGE>
<TABLE>
<CAPTION>

                                                       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)
----------------------                ------------         ------------         -------------         ---------------

<S>                               <C>                    <C>                     <C>                    <C>  
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)
---------------
</TABLE>

*        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-
<PAGE>



         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-

<PAGE>



         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-

<PAGE>



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-
<PAGE>


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-

<PAGE>

         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-
<PAGE>


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-

<PAGE>

                                   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.
<TABLE>
<CAPTION>

Signature                           Title                              Date

<S>                              <C>                                <C>    
/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
</TABLE>

<PAGE>
                                 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.