africa’s largest food retailer - shoprite.co.za · it offers a full assortment of wine, beer and...

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AFRICA’S LARGEST FOOD RETAILERI N T EG R AT E D R E P O R T 2 0 1 2

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SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012

better and better

Shoprite Holdings Ltd comprises the following brands:

Shoprite Holdings Limited is an investment holding company whose combined subsidiaries constitute the largest fast moving consumer goods (FMCG) retail operation on the African continent.

Its various chains operate a total of 1 334 corporate stores in 17 countries, all integrated electronically into a central data base and replenishment system. The Group’s primary business is food retailing to consumers of all income levels, and there are outlets from Cape Town to Accra and on some Indian Ocean islands. Management’s goal is to provide all communities in Africa with food and household items in a fi rst-world shopping environment, at the lowest prices. At the same time the Group is inextricably linked to Africa, contributing to the nurturing of stable economies and the social upliftment of its people.

2

Table of Contents

Business OverviewOrganisational Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2The Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Value-added Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8Chairman’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Chief Executive’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Five-year Financial Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16Financial Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17Non-Financial Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

GovernanceCorporate Governance Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24Audit and Risk Committee Report . . . . . . . . . . . . . . . . . . . . . . . . . . 28Nominations Committee Report . . . . . . . . . . . . . . . . . . . . . . . . . . . 30Social and Ethics Committee Report . . . . . . . . . . . . . . . . . . . . . . . . 30Remuneration Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Annual Financial StatementsContents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Shareholder InformationShareholder Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107Notice to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108Memorandum of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . 118Form of Proxy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146Shareholder’s Diary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146

1

Integrated Report

The scope of the integrated report is equal to that of the

IFRS financial statements. This Integrated Report is for the

Shoprite Group, incorporating Shoprite Holdings Ltd and all

its subsidiaries for the year ended June 2012.

Set out below is an organigram of Shoprite Holdings Ltd and its main subsidiaries.

SUBSIDIARIES OFSHOPRITE HOLDINGS LTD

100% Computicket (Pty) Ltd

Has operations in:South Africa

Namibia

100%

Shoprite Checkers (Pty) Ltd

Has operations in:South Africa

NamibiaSwazilandLesothoMauritius

100%

Shoprite International Ltd

Has operations in:Zambia

MozambiqueBotswana

MadagascarUgandaTanzaniaAngolaGhana

ZimbabweNigeriaMalawi

Democratic Republic of Congo

100%

Shoprite Insurance Company Ltd

100%

Shoprite Investments Ltd


2

Angola Botswana DRC Ghana Lesotho Madagascar Malawi Mauritius Mozambique

Gross domestic product, constant prices (% change)

3,404 4,621 5.735 13,606 4,198 0,539 5,482 4,111 7,145

Inflation, average consumer prices (% change)

13,5 8,464 10.709 8,725 5,623 10,556 7,62 6,537 10,351

Population (millions) 19,625 1,853 23 699 24,304 1,941 21,851 16,166 1,289 22,017

Namibia Nigeria South Africa Swaziland Tanzania Uganda Zambia Zimbabwe

Gross domestic product, constant prices (% change)

3,614 7,19 3,148 0,274 6,671 6,689 6,565 9,319

Inflation, average consumer prices (% change)

5,75 10,841 4,999 6,105 7,029 6,524 8,659 3,47

Population (millions) 2,138 160,342 50,591 1,176 42,176 35,201 13,585 12,575

Source: International Monetary Fund, World Economic Outlook Database, April 2012

ECONOMIC OVERVIEW

Distribution of Operations

Nigeria

Mauritius

Namibia

Mozambique

Botswana

Angola

DRC

Malawi

Tanzania

Uganda

Zambia

South Africa

Lesotho

Swaziland

Zimbabwe

Madagascar

Ghana

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prite

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OK

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Foo

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Sto

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South Africa 339 162 28 215 216 16 46 120 13 76 27 26 20 56 111 18 11 94 68 44 88

Angola 5 9 4 4 2

Botswana 5 1 3 6 1 7 1 1

DRC 1 1

Ghana 2 1

Lesotho 4 4 5 1 2

Madagascar 7

Malawi 2 3

Mauritius 3

Mozambique 5 3 3

Namibia 14 4 17 10 2 7 2 9 2 4 10 11 2 1

Nigeria 5

Swaziland 6 3 3 1 2

Tanzania 3

Uganda 3

Zambia 19 1 1 8

Zimbabwe 1

Outside SA 85 5 44 32 1 3 30 2 9 2 4 11 12 2 1 4

Total 424 167 28 259 248 17 49 150 15 85 29 30 31 68 111 18 11 96 69 48 88

Total1 334

corporate stores.


3

Brand Summary Target market Store numbers

Shoprite is the original business of the group and remains the flagship brand, serving the mass middle market. It’s the brand with the most stores in RSA as well as the brand used to spearhead growth into Africa. The brand’s core focus is to provide the masses with the lowest possible prices on a range of groceries and some durable items. Specific emphasis is placed on basic commodities, which is critical to the core target market.

LSM 4-7 RSA: 339Non RSA: 85

Total: 424

Usave is a no-frills discounter focussing on lower income consumers. This smaller format, limited range store is an ideal vehicle for the Group’s expansion into Africa and allows far greater penetration into underserved areas within South Africa.


Total: 256

Checkers focuses on time-pressed, higher income consumers and differentiates on its specialty ranges of meats, cheeses and wines. Its full range of groceries and household non-food items are all promised at the consistently good value for which the Group is famous. The stores across South Africa and Namibia are located in shopping malls and other premises conveniently accessible to more affluent residential areas.


Total: 167

Checkers Hyper offers the same specialty food selections and great value as Checkers, but within large-format stores that encourage bulk rather than convenience shopping. The general merchandise ranges are far wider in Hyper stores, focusing on categories like small appliances, pet acces-sories, garden and pool care, outdoor gear, home improvement, home-ware, baby products, toys and stationery. Checkers Hyper stores operate in South Africa only and are found in areas with high population densities.

LSM 8-10 RSA: 28 Non RSA: 0

Total: 28

The OK Furniture chain, with its wide geographic spread of stores, strives to offer a wide range of furniture, electrical appliances and home entertainment products at the lowest prices with impeccable service, at discounted prices, for cash or on credit. It sells quality cheaply not cheap quality.


Total: 248

A chain of small-format stores located mainly in high-density areas, selling a carefully selected range of white goods and home entertainment products as well as bedding and carpeting, for cash or competitive credit options.


Total: 17

The Group

better and better


4

Brand Summary Target market Store numbers

House & Home offers its consumers a quality shopping experience with a large selection of affordable, exclusive and well-known ranges of furniture, appliances, home entertainment products and floor coverings.


Total: 49

Now, with over 130 pharmacies, MediRite is on its way to becoming the most convenient pharmacy for millions of South African grocery shop-pers. MediRite Pharmacies inside Shoprite and Checkers stores meet the growing need for easily accessible and affordable healthcare for all our customers. Many of our pharmacies are located in supermarkets serving previously disadvantaged areas where there are few medical practitioners.

Same as Shoprite and Checkers

RSA: 132Non RSA: 4

Total: 136

LiquorShop offers an upmarket, convenient shopping experience to Shoprite and Checkers shoppers. LiquorShop marketing primarily targets Shoprite and Checkers customers but the location of the outlets – with a separate entrance to that of the supermarket – invites passing trade too. It offers a full assortment of wine, beer and spirits.

Same as Shoprite and Checkers

RSA: 162Non RSA: 3

Total: 165

Transpharm Pharmaceutical Wholesalers distributes a wide range of pharmaceutical products and surgical equipment to our MediRite Pharmacies as well as other pharmacies, hospitals, clinics, dispensing doctors and veterinary surgeons across South Africa.The Shoprite Group is expanding this dynamic company to improve its existing national distribution network.

Targets pharmacies, vets, clinics, hospitals and dispensing doctors

The OK Franchise Division (OKFD) enabled the Group to gain a foothold in a diverse range of mostly smaller, convenience-oriented markets situated in rural towns, suburbs and neighbourhoods. The stores offer a wide range of fresh and non-perishable food items, as well as non-foods. The OKFD encompasses ten supermarket and convenience outlet formats under the OK and Friendly brands, a wholesaler (Megasave), and two add-on liquor outlets (Enjoy OK Liquor Store, Friendly Liquormarket). The OK brand is only awarded to outlets that meet specific requirements.

The various store formats, with their different identities and facilities, cater to the needs of the community in which they are located. These range from lower to middle income consumers, living standards measurement 4 to 8, and from convenience shopping to bulk buy.

RSA: 358Non RSA: 40

Total: 398


5

Financial HighlightsShoprite Holdings Ltd and its Subsidiaries

SHOPRITE HOLDINGS LTD SHARE PRICE

16 000

14 000

12 000

10 000

8 000

6 000

4 000

2 000

0

Jun

02

Dec

02

Jun

03

Dec

03

Jun

04

Dec

04

Jun

05

Dec

05

Jun

06

Dec

06

Jun

07

Dec

07

Jun

08

Dec

08

Jun

09

Dec

09

Jun

10

Dec

10

Jun

11

Dec

11

Jun

12

SALES

R M

illio

n

NUMBER OF CORPORATE STORES

1 400

1 300

1 200

1 100

1 000

900

800

700

600

500

400

300

200

100

0

704 76

6

26 6

41

29 7

04

33 5

11 38 9

50

47 6

52

59 3

19 67 4

02

72 2

97 82 7

30

June June% 2012 2011

increase R’000 R’000

Sale of merchandise 14.4 82 730 587 72 297 777 Trading profit 17.0 4 665 134 3 986 697 Earnings before interest, income tax, depreciation and amortisation (EBITDA) 17.3 5 746 352 4 898 255 Profit before income tax 15.6 4 481 707 3 876 368 Headline earnings 21.2 3 114 212 2 569 006

PERFORMANCE MEASURESHeadline earnings per share (cents) 19.6 607.0 507.6 Dividends per share declared (cents) 19.8 303.0 253.0 Dividend cover (times) 2.0 2.0 Trading margin (%) 5.64 5.51 Return on average shareholders’ equity (%) 26.0 39.3

DEFINITIONSReturn on average shareholders’ equityHeadline earnings, expressed as a percentage of the average of capital and reserves and interest-bearing borrowings at the beginning and the end of the financial year.

846 91

7 984

1 07

9 1 16

6 1 24

6 1 33

4

200

4

2005

200

6

2007

2008

200

9

2010

2011

2012

200

4

2005

200

6

2007

2008

200

9

2010

2011

2012

90 000

80 000

70 000

60 000

50 000

40 000

30 000

20 000

10 000

0

Cen

ts


6

Value-added StatementShoprite Holdings Ltd and its Subsidiaries for the year ended June 2012

11.8%Providers of capital

12.2%Income tax 55.0%

Employees

21.0%Reinvested

2012

2011

June June2012 2011

R’000 % R’000 %

Sale of merchandise 82 730 587 72 297 777 Investment income 224 425 122 277 Cost of goods and services (70 135 100) (61 341 791)

VALUE ADDED 12 819 912 100.0 11 078 263 100.0

Employed as follows:

EMPLOYEESSalaries, wages and service benefits 6 930 791 54.1 6 089 252 55.0

PROVIDERS OF CAPITAL 1 645 161 12.8 1 315 375 11.8 Finance costs to providers of funds 223 563 1.7 125 964 1.1 Dividends to providers of share capital 1 421 598 11.1 1 189 411 10.7

INCOME TAXIncome tax on profits made 1 438 889 11.2 1 346 826 12.2

REINVESTEDReinvested in the Group to finance future expansion and growth 2 805 071 21.9 2 326 811 21.0 Depreciation and amortisation 1 200 106 9.4 1 006 442 9.1 Retained earnings 1 604 965 12.5 1 320 369 11.9

EMPLOYMENT OF VALUE ADDED 12 819 912 100.0 11 078 263 100.0

12.8%Providers of capital

11.2%Income tax 54.1%

Employees

21.9%Reinvested


7

Board of DirectorsShoprite Holdings Ltd

EXECUTIVE DIRECTORS

Dr JW Basson (66) BCom CTA CA(SA) DCom (hc)Chief Executive Officer– Joined Pep Stores Ltd as financial

manager in 1971.– Appointed as Chief Executive Officer

of Shoprite Holdings in 1979. – Managing director of Shoprite

Checkers (Pty) Ltd.

Mr CG Goosen (59)BCom Hons CA(SA)Deputy Managing Director and Financial Director– Joined the Pepkor Group as financial

manager in 1983.– Appointed as financial director of

Shoprite Holdings in 1993.– Director of Shoprite Checkers (Pty) Ltd

and various other group subsidiaries.

Mr B Harisunker (60)Divisional Manager– Joined Checkers in 1969.– Appointed to the board of Shoprite

Holdings in 2002.– Director of Shoprite Checkers (Pty) Ltd

and various other group subsidiaries. Responsible for the group’s retail operations in Mauritius, Madagascar and Mozambique and international sourcing.

Mr AE Karp (53)General Manager: Furniture Division– Joined OK Bazaars during 1990.– Appointed to the board of Shoprite



Mr EL Nel (63)BCom CTA CA(SA) General Manager: Retail Investments– Joined the Shoprite group in 1997.– Appointed to the board of Shoprite



Mr BR Weyers (60)General Manager: Marketing & Product Development– Joined the Shoprite Group in 1980.– Appointed as director of Shoprite

Holdings in 1997.– Director of Shoprite Checkers (Pty) Ltd.– Serves on the Social and Ethics

Committee.

EXECUTIVE ALTERNATE DIRECTORS

Mr JAL Basson (36)B AccGeneral Manager: Hungry Lion– Appointed as Shoprite Holdings

alternate director in 2005.– Director of Shoprite Checkers (Pty) Ltd

and various other group subsidiaries.– Serves on the Social and Ethics

Committee.

Mr M Bosman (55)B Acc Hons CA(SA)General Manager: Group Finance– Appointed as Shoprite Holdings alternate

director in 2005.– Director of Shoprite Checkers (Pty) Ltd

and various other group subsidiaries.– Serves on the Social and Ethics

Committee.

Mr PC Engelbrecht (43)BCompt Hons CA(SA)Chief Operating Officer– Appointed as Shoprite Holdings alternate

director in 2005.– Director of Shoprite Checkers (Pty) Ltd


NON-EXECUTIVE DIRECTOR

Dr CH Wiese (70)BA LLB DCom (hc)– Appointed as Chairman of Shoprite

Holdings in 1991.– Chairs the Remuneration and

Nomination Committees.– Chairperson of Pepkor Holdings Ltd,

Tradehold Ltd and Invicta Holdings Ltd. – Serves as a non-executive director on

the board of Brait SA Ltd.


8

INDEPENDENT NON-EXECUTIVE DIRECTORS

Mr JG Rademeyer (63)BCom CTA CA(SA)– Appointed as director of Shoprite

Holdings in 2002.– Lead Independent director and Chairperson

of the Audit and Risk Committee.

Mr JJ Fouché (64)BCom LLB – Re-appointed as director of Shoprite

Holdings in 2012.– Former member of the Shoprite Holdings

Audit and Risk, Remuneration and Nomination Committees.

– Serves as a non-executive director of Pepkor Holdings Ltd.

Mr EC Kieswetter (53)B Ed (Science Education) MCom (cum laude) (SA and International Tax) Executive MBA (Strategy and Business Transformation) (UK)MA (Science Education – Cognitive Development)– Appointed as a director of Shoprite

Holdings in 2010. – Serves on the Nomination and

Remuneration Committees.– Group Chief Executive of Alexander

Forbes Equity Holdings (Pty) Ltd and holds various directorships within Alexander Forbes group subsidiaries.

– Previous Deputy Commissioner at SARS and member of National Treasury Tax Revenue Committee.

Mr JA Louw (68)BSc Hons B(B&A) Hons– Appointed as director of Shoprite

Holdings in 1991.– Chairperson of the Social and

Ethics Committee.– Serves on the Audit and Risk,

Remuneration and Nomination Committees.

– Holds directorships in various private companies.

Mr JF Malherbe (83)BCom LLB– Appointed as a director of Shoprite

Holdings in 1999.– Serves on the Audit and Risk Committee.– Previous President of the Law Society of

South Africa, the Attorneys Fidelity Fund and the Attorneys Insurance Indemnity Fund.

Dr ATM Mokgokong (55)MB ChB, D Comm (hc)– Appointed as a director of Shoprite

Holdings in 2012. – Executive Chairperson of Community

Investment Holdings (Pty) Ltd and Non-Executive Chairperson of Rebosis Property Fund Ltd and Jasco Electronics Ltd.

– Serves on the boards of Afrocentric Ltd and Medscheme Ltd.

– Serves on the advisory committee of the University of Pretoria within the Department of Economic and Management Sciences.

Mr JA Rock (42)BA (Hons), MA, ACA– Appointed as a director of Shoprite

Holdings in 2012. – Qualified chartered accountant.– Previous Group Executive at SARS.– Currently appointed as General Manager

at Exxaro Services.

NON-EXECUTIVE ALTERNATE DIRECTOR

Adv JD Wiese (31)BA, MIEM (Italy), LLB– Appointed as alternate director of

Shoprite Holdings in 2005.– Serves on the boards of various listed

companies.– Advocate of the High Court of

South Africa.


9

Chairman’s Report

we are doing. They learn about the opportunities we offer from our ongoing communications across all the institutions for higher education in our country, yielding for us a rich harvest of talented young people whose skills can be moulded and refined to fit the needs of the Group. As a result we have an enviable depth of management to grow the business.

For us, the benefits of innovation can only be realised fully if supported by our own infrastructure and that is what we create and maintain in every market where we operate. Competition in food retailing is relentless, so it is critical that we retain our leadership position by staying at the cutting edge of developments, from applying the most advanced information systems to monitoring changes in consumer preferences and advances in store design and layout. This we achieve through ongoing research, exposure to global trends and acquisition of the skills we need to implement such changes.

We also increase our competitiveness by constantly expanding the range of value-added services we offer consumers. At the same time, we never veer from our primary business namely ensuring quality food at the lowest possible prices.

SUSTAINABILITYThe Non-financial Report on page 20 describes the considerable progress we have made in the course of the reporting period in placing the sustainability of the business on a more structured footing. In the report we identify the issues that underlie our financial performance and further clarify our strategic response to the challenges we face in ensuring our continued profitable growth.

One of the major steps we took to formalise our response was by establishing a Social and Ethics Committee whose task it is to ensure that we manage our business holistically and operate in a respon-sible, ethical and sustainable manner. It works alongside and in close collaboration with the Audit and Risk Committee and oversees the people side of what we do in the same way as the Audit and Risk Committee oversees the financial side.

According to market research, 67% of the country’s adult population buy groceries from our stores. That is more than 23 million people. I find that quite humbling and also intimidating in terms of the responsibility it places on us to provide these consumers with quality food at prices they can afford. We established a food safety manage-ment system run nationally by a team of food technologists to ensure products we sell conform to the highest food safety standards. And we continue to invest billions in infrastructure that guarantees those products reach consumers on time, in prime condition and at afford-able prices.

The board is deeply concerned about the high level of unemploy-ment in the country, especially as those most affected are young people who have just come into the labour market. The board has therefore declared itself willing to support the Government in any of its initiatives aimed at creating meaningful employment for young people in a business environment. We stand ready to do our bit.

BROAD-BASED BLACK ECONOMIC EMPOWERMENT (B-BBEE)We firmly believe Broad-based Black Economic Empowerment (B-BBEE) is fundamental to ensuring the economic democratisation of this country. We are therefore committed to integrating trans formation into our business strategies at all levels. One aspect of this process is the training and fast-tracking of black management. Another is preferential procurement and in the past year we more

SOUTH AFRICA AND THE GLOBAL ECONOMIC ENVIRONMENTSince our previous report, there has not been any material improve-ment in the global environment in which South Africa trades. In the European Union, collectively the country’s largest trading partner, the crisis seems to be deepening as the fear of member countries defaulting spreads from Greece to Italy to Spain. In the East the Chinese economy has slowed and so has the demand for raw mate-rials. The one area of steady growth, albeit off a low base, has been Africa. The IMF predicts that for at least the next five years, Africa will remain the focus of the fastest economic growth, with seven of the world’s ten fastest developing economies now on this continent.

South Africa, the continent’s largest economy, has not been faring quite as well. Exports to traditional markets so far this year have been below 2011 levels. Economic growth has been lacklustre and official projections for the year have been adjusted downwards more than once. Structural problems in the economy and labour regime constraints are but two of the factors hampering growth. Unemployment amongst those actively seeking jobs, dropped marginally from 25,2% to 24,9% in the second quarter of this year but remains unacceptably high. Employment initiatives announced by the Government in February this year are hopefully still to take effect. In the meantime, the number of recipients of social grants has increased to 15,3 million. Although unsustainable at this level in the long run given the country’s limited tax base, these grants are also all that stands between a great many people and dire poverty.

THE GROUP AND AFRICADespite the rather gloomy predictions for the world economy, there are many reasons why we as a board believe Shoprite will continue to do well into the future. Part of the reason for our optimism is our active involvement on the continent of Africa. There should be no doubt that there are formidable challenges inherent in trading here. Our experience of almost two decades in Africa, I believe, has also helped us contend with the challenges posed by the present economic environment, for the continent has toughened us and taught us how to trade successfully under often taxing conditions. It has taught management to innovate – if you cannot, you don’t survive – and to think creatively.

This need to be innovative or go under has created a very special breed of managers at the Shoprite Group. It is an approach that has also attracted young, adventurous people wanting to be part of what

CH Wiese


10

than doubled to R42 billion the value of products acquired from suppliers with B-BBEE credentials. A third is the Shoprite Development Trust which has invested R70 million in enterprise development.

The Group has thus qualified as a Level 4 B-BBEE contributor, compared to Level 6 attained in the previous financial year. The Sustainability Report published on our corporate website www.shopriteholdings.co.za sets out in greater detail the progress that had been made.

BOARD OF DIRECTORSThe board is in the process of being restructured. In the course of the year two new directors were appointed. They are Mr JA Rock and Mr J Fouché. Mr Rock, a chartered accountant and a past group executive of the South African Revenue Service, is presently the general manager of Exxaro Services, a listed empowerment group in the mining sector. Mr Fouché, who has a legal background, was re-appointed to the board after retiring in 2008, following 17 years of service. After year-end it was announced that Dr Anna Mokgokong had been appointed as the Group’s first female main-board director. Dr Mokgokong, South African Business Woman of the Year in 1999, is the co-founder and chairwoman of Community Investment Holdings.

CAPITAL RAISINGIn March this year, Shoprite Holdings undertook a successful capital raising of about R8 billion by way of a concurrent share and convert-ible bond offering. To this end the company issued 27,1 million new shares or about 5% of total shares outstanding, at a price of R127,50 for proceeds of close to R3,5 billion as well as convertible bonds with

a nominal value of R4,7 billion. The bonds, which may be converted to Shoprite shares during the life of the bond, carry semi-annual interest of 6,5% per annum and will be redeemable at par in April 2017, unless converted into shares at the election of the bond holder.

The new capital and loan funding strengthened our balance sheet and is being used to accelerate our expansion plans in South Africa and the rest of Africa in terms of new stores and infrastructure. It will also enable us to selectively pursue acquisition opportunities that present themselves in the future.

ACKNOWLEDGMENTWe could not have achieved the results we did this past year if it had not been for a supreme effort by people at all levels of the organisation. I am particularly indebted to my fellow board members for the clear direction they have provided in a challenging and ever-changing environment; to management for the success with which they brought to reality the board’s vision for the Group, and to every member of staff who simply put their heads down and worked to ensure the success we have enjoyed this past year. I extend my gratitude to all of them.

C H WieseChairman

20 August 2012


11

Chief Executive’s Report

JW Basson

BUSINESS ENVIRONMENTCompetition among food retailers across the spectrum became more intense during the 12 months to June 2012 at both the top and bottom end of the market. The Group nevertheless maintained its price advantage in the market without sacrificing profitability due to the efficiency of its supply chain which enables it to maintain high service levels.

South African consumers continued to face persistent high levels of unemployment, rising electricity, schooling and transport costs, and the impact of a weaker rand which affected the prices of all imports. Inflation increased across the spectrum, but food was particularly hard hit with official food inflation increasing from 3,2% to 8,8% during the period under review. However, the government played its part in assisting consumers and the economy by keeping interest levels at their lowest in 30 years while continuing the payment of social grants from child maintenance to old age pensions, to an increasing number of low-income recipients.

Consumers elsewhere in Africa, whose predominantly cash-based societies are in the main further removed from the fall-out of Europe’s escalating sovereign-debt crisis, had an easier time of it. They bene-fited from imports at reduced prices from South Africa due to a weaker rand and saw fewer pressures on their growing middle class.

OPERATIONAL REVIEWThe past 12 months was a gratifying period that saw the Group appointing its 100 000th employee, having created more than 7000 new jobs due to its successful expansion programme – this in a time when unemployment in the country remains at an unacceptably high level. Of our employees, 99% are recruited from the communities where our stores are located in the 17 countries in which we do business. Most of our employees come from previously disadvantaged communities; all of them have now been provided with a viable financial future. To enable those 100 000 staff members to offer customers the best possible service, we provided more than 200 000 training interventions.

The Group’s average internal food inflation in its South African supermarkets increased from -0,1% in the previous year to 4,9%, which was kept substantially below the country’s official food price inflation. This reflects positively on the Group’s commitment to keep food prices low and will stand consumers in good stead in the coming year if the speculated price increases become a reality to the extent of economists’ recent forecasts.

Advanced information systems providing instant access to data assisted management throughout the Group to take appropriate decisions at the right time to keep expenditure well controlled. This rigorous discipline enabled the Group to achieve its highest trading margin to date of 5,64% (2011: 5,51%) despite significant increases in operating costs such as staff salaries and external cost pressures that the Group had no control over like utility services and energy.

CORE BUSINESSAll three of the supermarket chains constituting the Group’s core business in South Africa – Shoprite, Checkers and Usave – continued to trade successfully and profitably. While the formal food market as measured by Nielsen in the 12 months to June 2012 grew by 8,9%, the three chains combined increased turnover by 12,9%. It was the sixth consecutive year in which the Group’s supermarkets grew at a faster pace than the sector as a whole. The three chains have been positioned so that together they cover the full income spectrum as defined by the Living Standards Measure (LSM). Although each serves its own particular target group there is nevertheless consider-able overlap in customers, determined by factors such as location and brand loyalty.

While Shoprite, the largest of the three in terms of turnover and the number of stores, is aimed at the mass middle market, some 14% of its shoppers fall in the category LSM 8 to 10. This is a result of the chain’s strategy introduced a number of years ago to retain its traditional customers even as they become more affluent by upgrading the shopping environment and also stocking aspirational products in addition to its wide range of staple foods. During the year it continued to expand its presence in previously marginalised residential areas providing a standard of neighbourhood food shopping not hitherto available to residents.

The strength of the Shoprite brand continues to be a major factor in its success. This was confirmed when, according to both the Sunday Times Top Brands awards and The Times/Sowetan Retail Awards in 2011, South Africans rated Shoprite as the No 1 super-market for the 5th consecutive time and No 1 in all five grocery cate-gories including overall customer experience, respectively. After year-end it was announced that Shoprite was again the winner, for the third consecutive year, in the convenience and grocery store category of the 2012 Sunday Times Top Brands Awards, of which the winners are voted in by consumers.

Despite increasing competition, Checkers continued to expand its customer base in the higher LSM categories and to maintain its position for the fourth year running as the fastest-growing national food chain in its segment of the market, growing turnover of both supermarkets and hypers by 11,9%. It is constantly expanding product ranges in its chosen specialist areas such as estate wines, exotic cheeses and branded meat products, and introducing new specialist categories linked to a modern lifestyle. In addition to communicating with its target audience through the conventional channels of the printed media, radio and television, the chain is also increasingly reaching out to especially younger consumers through the social media.

With sales in excess of R4 billion Usave has become a meaningful niche player in domestic food retailing and a significant business within the Group. It continued its fast growth rate of the past by opening a net 24 new outlets during the period under review and increasing turnover by 19,9%. It now operates 215 strategically located stores in South Africa. Its predominantly small-format stores


12

remain rigorously focused on value and price. At the same time management is also experimenting with additional formats to increase the chain’s appeal to a larger audience.

In the 12 months to June the Group opened a net 61 new supermarkets of which 44 are in South Africa, bringing its total supermarket compliment to 875. It is planning to open a further 103 new stores in the 2013 financial year. This rate of growth is made possible by existing infrastructure with the capacity to service new stores without significant additional investment.

Management is confident about the future of its supermarket operations where the focus will remain on service and price leadership. Being in control of every aspect of the supply chain, management can ensure a high level of product availability on-shelf and because of the efficiency of its operations, the Group can maintain its low price-positioning to the benefit of consumers without compromising its profitability.

This efficiency is equally dependent on the quality of the people employed and the extent to which their skills are developed and honed. The Group operates a graduate recruitment programme

which encompasses all major educational institutions in the country. The most suitable candidates are recruited and undergo, like all other staff members, regular focused training to equip them for a future leadership role in the business.

COMPLEMENTARY SERVICESTo strengthen the concept of one-stop shopping in the minds of consumers several years ago the Group introduced the Money Market concept in its two major chains. These Money Markets, which are manned by specially trained members of store staff, offer a constantly expanding range of services from bus, flight and theatre tickets to the payment of utility accounts and traffic fines. The ability to transfer money to anywhere in the country continues as a highly prized service for those consumers without access to banking facilities, and every month millions of consumers now make use of this facility at our stores.

The objective of expanding supporting services in such a way that consumers can concentrate their shopping in a single store was taken further a few years ago with the establishment of what are

Being in control of every aspect of the supply chain, manage-ment can ensure a high level of product availability on-shelf and because of the effi ciency of its operations, the Group can maintain its low price-positioning to the benefi t of consumers.


13

Chief Executive’s Report (continued)

today two fully-fledged businesses in their own right: MediRite, a chain of full-service in-store pharmacies and LiquorShop.

At 30 June 2012 MediRite had a presence in 136 Shoprite and Checkers stores, having opened a net 15 new pharmacies during a year in which it also established a presence for the brand in Angola. The value of the healthcare advice provided by MediRite’s trained pharmacists at the request of customers in areas where medical services are limited, is confirmed on an almost daily basis while the number of prescriptions filled by staff increased to 3,2 million. MediRite is also strengthening its relationship as a preferred provider with a number of medical aid societies for whom the size of its footprint is of material importance in the distribution of chronic medication. To this end management is investigating additional formats that could further increase its footprint.

MediRite pharmacies are provisioned for more than 95% of its products by its wholesale division, Transpharm. Following the takeover, the latter has managed to rebuild its client base to a large extent, and in the period under review reported particularly strong growth in the Western Cape.

Developing our pharmaceutical interests in South Africa is at present being hampered by factors such as medicine price regulation. However, MediRite expects to benefit substantially from the Government’s intended National Health Plan that will provide essential health care to everyone.

LiquorShop not only supplement wine sales inside the super-market with their own extensive range of wines but add to that an extensive product mix of spirits, beers and ciders in an upmarket environment that offers consumers a relaxed shopping experience. The chain is nevertheless highly competitive on price and has quickly created substantial demand for in particular its house brands in selected spirits categories. This combination of factors enabled it to increase income on existing business by 23% in an alcoholic beverage market that grew 8,2% overall in value. During the reporting period LiquorShop continued its rapid growth rate opening 45 new outlets to bring its total number to 165. A comparable number of new shops are envisaged for the 2013 financial year.

NON-RSA EXPANSIONThe Group’s non-RSA operation experienced a very successful year with turnover in its 131 stores increasing by 25,4% at current exchange rates and by 19,7% at constant currencies. Both the number of customer transactions and their basket size grew by about 10%. For the first time more than 100 million transactions were recorded for the year. Marketing tailored to the needs of local communities was stepped up and produced most pleasing results.

There are indications that foreign developers are showing renewed interest in investing in Africa. However, obtaining suitable sites remained the major impediment to growth. The Group was nevertheless able to open 18 new stores during the year while a further 30 are scheduled to open before June 2013. One of the new stores – a full-service supermarket – is located in Kinshasa in the Democratic Republic of Congo (DRC). Shoprite is the first South African retailer to open its doors in that country. The store employs more than 200 local people of whom 25 are Congolese recruited in South Africa and trained here before they returned to Kinshasa to take up their new positions.

The Group now employs more than 11 000 people in the 16 countries in which it has a presence outside South Africa. In addition, an increasing percentage of the merchandise on the shelves of these

stores is sourced from local suppliers. In the case of fresh produce, almost 80% of what is sold in its supermarkets in Zambia is provided by local growers to the specifications set by the Group; in Nigeria the figure is already close to 60% while in Angola it is nearing 50%.

By operating in a number of markets, the Group is largely buffered against the fall-out from an economic downswing in one or two of them. Entry barriers to trading in Africa remain high. After almost two decades Shoprite has gained the experience and knowledge of trading successfully beyond its home-base. Its main focus for growth remains the resource-rich countries of West Africa as well as some SADEC countries in which it is already well established. During the year much work was done expanding and improving supply lines into Africa to support a faster rate of growth.

GROUP SERVICESIn the past year the Group spent close on R1 billion on further extending its centralised distribution facilities. The size of the main Cape Town distribution centre (DC) was doubled following the massive expansion of its single-roof Centurion facility to 140 000m² in 2011. In the year to June 2013, new DCs will come on stream in Cape Town, Durban and Port Elizabeth. The latest technological developments are incorporated in the design of all three.

The extent and sophistication of its supply chain gives the Group a substantial advantage which in the long run substantially exceeds the cost of the initial investment. With the efficiencies achieved the Group can provision its stores quicker and more efficiently than when suppliers do so directly with the result that product availability is greatly improved. The Group’s DC’s, with a fleet of more than 500 trucks, currently have a service level advantage over direct supplier deliveries. Shrinkage is substantially reduced due to centralised control systems. During the period under review the number of suppliers delivering to DCs instead of directly to stores increased by more than 100.

The Group’s International Trade Division operates its own distribution centres in Madagascar and Angola while also making extensive use of the free port of Mauritius.

FURNITURE DIVISIONThe above inflationary increases in household expenditure on food and other essential requirements continued to erode disposable income and thus expenditure on durable goods. Despite this trend sales in OK Furniture and OK Power Express both of which target the lower to middle income market and represent 62% of the division’s turnover, continued to show satisfactory growth. Sales in OK Furniture and OK Power Express increased 15,3% on the previous year while the substantially lower growth of 4,9% in House & Home reflected the financial pressures experienced by consumers in the higher-income segment of the market. Overall the division reported a sales increase of 11,1% to R3,4 billion in an environment in which continuing price deflation averaged 5,1%. Growth in existing stores was 8,8%. The 33,5% increase in trading profit substantially exceeded the growth in sales.

The division’s solid performance resulted from its on-going invest-ment in new stores, its rigid adherence to a highly competitive pricing policy and improved levels of customer service. In the course of the reporting period 15 new stores – all OK Furniture outlets – were opened to bring the store count to 314 of which 248 trade under the OK Furniture banner. Negotiations for a further 24 stores have been finalised and all should start trading in the 2013 financial year.


14

OK FRANCHISEThe Franchise Division uses the Group’s very substantial procure-ment infrastructure to offer franchisees the most competitive prices. During the year the division implemented the acquisition of the Friendly, Seven Eleven and Price Club franchise chains from Metcash. Although not all the Metcash members could be retained, the division’s number of franchise members did increase from 269 to 398. The additional sales of these predominantly small-format stores enabled the division to increase turnover by 19,1% to R3,7 billion. Trading profit grew by 21,1% as no additional infrastructure was required to service new members.

ACKNOWLEDGMENT It was not an easy year by any stretch of the imagination as far as market conditions were concerned. The 12 months under review presented many challenges which at times our ingenuity and will to succeed. However, they also provided us with the satisfaction of seeing our long-term plans coming together and driving the business forward. I am fortunate in being able to rely on a tried and tested

management team who have worked together for a long time, and I am inspired by the many talented young professionals who have joined our ranks bringing with them fresh ideas and new insights. However, my greatest appreciation goes to the thousands ordinary staff members who strive on a daily basis to build our business into the best it can be. To all of them my heartfelt thanks.

J W Basson Chief executive

20 August 2012

After almost two decades of trading outside of the RSA, Shoprite has gained the experience and knowledge of trading successfully beyond its home-base.


15

Five-year Financial ReviewShoprite Holdings Ltd and its Subsidiaries

June June June June June2012 2011 2010 2009 2008

R’000 R’000 R’000 R’000 R’000

STATEMENT OF COMPREHENSIVE INCOMESale of merchandise 82 730 587 72 297 777 67 402 440 59 318 559 47 651 548

Trading profit 4 665 134 3 986 697 3 490 441 2 940 914 2 296 550 Exchange rate (losses)/gains (8 343) ( 446) (77 824) 3 005 33 187 Items of a capital nature (93 687) (78 533) (25 580) (31 227) 6 756

Operating profit 4 563 104 3 907 718 3 387 037 2 912 692 2 336 493 Interest received 142 166 94 614 105 741 191 566 183 915 Finance costs (223 563) (125 964) (93 690) (86 142) (59 149)

Profit before income tax 4 481 707 3 876 368 3 399 088 3 018 116 2 461 259 Income tax (1 438 889) (1 346 826) (1 111 792) (999 478) (875 570)

Profit for the year 3 042 818 2 529 542 2 287 296 2 018 638 1 585 689

STATEMENT OF FINANCIAL POSITIONASSETSProperty, plant and equipment 9 668 559 8 168 749 6 577 677 5 359 587 4 502 928 Other investments 107 592 63 964 65 942 50 440 41 604 Deferred income tax assets 413 645 326 457 288 677 277 951 248 614 Intangible assets 894 296 719 105 611 037 354 434 319 825 Current assets 19 810 853 11 416 236 10 442 805 10 690 843 9 733 319 Fixed escalation operating lease accrual 10 573 9 246 5 559 6 233 7 993

TOTAL ASSETS 30 905 518 20 703 757 17 991 697 16 739 488 14 854 283

EQUITY AND LIABILITIESCapital and reserves 12 745 042 7 084 700 5 904 832 4 960 000 4 758 656 Non-controlling interest 62 675 58 750 67 184 69 295 60 182

Permanent capital 12 807 717 7 143 450 5 972 016 5 029 295 4 818 838 Interest-bearing borrowings 4 035 434 49 755 40 448 30 727 22 899 Other liabilities 14 062 367 13 510 552 11 979 233 11 679 466 10 012 546

TOTAL EQUITY AND LIABILITIES 30 905 518 20 703 757 17 991 697 16 739 488 14 854 283

STATISTICS PER ORDINARY SHARE AND FINANCIAL RATIOSNet asset value per share (cents) 2 381.6 1 399.8 1 166.7 990.2 938.0 Earnings per share (cents) 590.0 495.9 450.1 396.5 309.5 Headline earnings per share (cents) 607.0 507.6 455.4 401.1 309.9 Diluted headline earnings per share (cents) 607.0 507.6 451.6 390.8 298.6 Dividend per share (cents) 303.0 253.0 227.0 200.0 155.0 Dividend cover (based on headline earnings) (times) 2.0 2.0 2.0 2.0 2.0 Trading margin (%) 5.64 5.51 5.18 4.96 4.82Headline earnings on average total permanent capital (%) 31.2 39.2 41.7 41.1 37.0 Inventory turn (times) 8.4 8.8 8.9 8.9 9.1 Interest-bearing borrowings: Total equity (:1) 0.315 0.007 0.007 0.006 0.005 Net finance costs cover (times) 70.60 156.24 N/A N/A N/A

DEFINITIONSTrading margin: Trading profit expressed as a percentage of sales.Inventory turn: Cost of merchandise sold, divided by the average of inventories at the beginning and the end of the financial year.Headline earnings: Profit before items of a capital nature, net of income tax.Net finance costs cover: Earnings before interest, income tax, depreciation and amortisation (EBITDA) divided by net finance costs.


16

Financial Report

STATEMENT OF COMPREHENSIVE INCOME

Sale of merchandise– Total turnover increased by 14,4% to R82,73 billion. This was a

satisfactory performance seen in the context of the state of the economy in general.

The following table gives the turnover per segment:

SEGMENTAL SALES

Sales2010/2011

R’000

Sales2011/2012

R’000

Sales growth

%

Supermarkets RSA 57 213 793 64 584 215 12.9Supermarkets non-RSA 7 316 698 9 174 147 25.4Furniture 3 059 648 3 400 185 11.1Other Segments 4 707 638 5 572 040 18.4

Total sales 72 297 777 82 730 587 14.4

– The Group’s investment in world-class systems and logistic infrastructure and its policy of lowest prices saw it continuing to gain on the opposition. By sticking to these principles, the Group was able not only to retain the loyalty and support of customers across the spectrum, but also to extend its customer base.

– Supermarkets RSA reported a 12,9% growth in turnover to R64,58 billion. Customers on average remained financially stressed, but Supermarkets RSA opened a net 55 stores and had a number of highly successful promotions during the year which contributed to its turnover growth. Value-added categories like cheese, wine and meat saw continued improvements to their ranges and supplied customers with world-class products.

– Internal food inflation increased from a deflation of 0,1% in 2011 to an inflation of 4,9% in 2012. This compares with the official food inflation of 8,8% for the 2012 financial year.

– Supermarkets Non-RSA, in a similar inflationary environment, contributed R9,17 billion to Group turnover after conversion to rand. Due to the relative weakness of the rand in relation to the US dollar and most African currencies in which the Group trades, this translated into a turnover growth of 25,4% in rand terms. In constant currencies the growth was 19,7%.

– Trading conditions for the furniture business also remained diffi-cult with an internal deflation of 5,1%, but it managed to increase turnover by 11,1% to R3,40 billion. This turnover growth was achieved without sacrificing margins. Trading profit increased by a healthy 33,5% to R175,5 million (2011: R131,5 million). The strongest turnover growth at 15,3% was again reported by OK Furniture, which targets middle- to lower- income consumers. Credit participation increased in OK Furniture and OK Power Express by 2,18% with a 5,01% increase in House and Home. This assisted trading margins although finance income grew at a slower pace due to reduced interest rates.

Gross profi tGross profit comprises primarily gross margin after markdowns and shrinkage. In line with IFRS (IAS 2: Inventory and IFRIC Circular 9/2006), the Group deducted settlement discounts and rebates received from the cost of inventory.

The Group maintained its price competitiveness in a market characterised by aggressive food discounting. Despite reducing the margins on basic foods the Group nevertheless increased gross profit margins as a result of a slightly higher contribution by non-food items and an increase in efficiencies in systems and logistic infrastructure. This resulted in the gross profit margin increasing from 20,3% to 20,5%. Gross profit increased by 15,7% to R17 billion, due mainly to the increase in turnover and efficiencies in logistical infrastructure already mentioned. Shrinkage remains well under control, but crime continues to be a scourge with perpetrators becoming more brazen by the day. This forces the Group to increase its spend on security and loss control.

Other operating incomeOther operating income increased by 25,3% to R2,33 billion, mainly due to an increase in commissions received and premiums earned. Finance income earned (5,2%) remains under pressure due the reduction in interest rates, but other items grew in excess of turnover growth.

ExpensesCost management remains a high priority for the Group as trading margins are always under pressure due to the increased competition in food retailing. – Depreciation and amortisation: The Group is continuing to

increase its investment in information technology. It is also opening new stores while simultaneously implementing an on-going refurbishment programme for older stores. On average, stores are revamped every seven to eight years. In addition, 107 new stores were opened during the year and 17 closed.

– Operating leases: Rental increases for existing stores are generally in line with those in the property market as a whole. The net 90 new stores opened during the year and the increase in turnover also saw a commensurate increase in turnover rentals. Certain lease payments were reduced by head leases that were either not renewed or were renegotiated during the year.

– Employee benefits: The increase in staff costs of 13,3% was mainly due to the additional staffing requirements in the light of the increase in turnover and the new stores opened. Productivity continued to improve while further focus was placed on improving and maintaining in-store service levels. Included in Employee benefits are provisions for long-term incentives to retain staff.

– Other expenses: These costs, which increased by 22,4%, cover expenses such as electricity and water, repairs and maintenance, security and commissions paid. The Group maintained its provision for the reinstatement of leased buildings where it has an obligation to maintain their exterior. Other expenses grew at a faster rate than turnover, and were mainly due to increases in electricity (tariff increases), commission paid (more customers making use of cards), repairs and maintenance (revamps and other general expenses) and motor vehicle running expenses (fuel and other costs). Some of the other expenses outgrew turnover due to the number of new stores opened.

Trading profi tThe trading margin increased from 5,51% to 5,64% due to the higher turnover, the increase in the gross margin and the careful manage-ment of expenses.


17

Foreign exchange differencesAs stated in the accounting policies, the balance sheets of foreign subsidiaries are converted to rand at closing rates. These translation differences are recognised in equity in the foreign currency transla-tion reserve (FCTR). In essence, most foreign exchange differences in the income statement are due to US dollar denominated short-term loans in operations outside South Africa and balances in US dollar held in offshore accounts.

During the year the rand weakened while the currencies of some of the countries in Africa where the Group does business maintained their levels against the US dollar. The result was a currency loss of R8,34 million compared to a loss of R0,45 million in the previous financial year.

The table below gives the approximate rand cost of a unit of the following major currencies at year-end:

2009 2010 2011 2012

USA dollar 8.02 7.745 6.7697 8.2974Euro 11.2511 9.674 9.8251 10.4428Zambian kwacha 0.0015 0.0015 0.0014 0.0016Angolan kwanza 0.1033 0.0834 0.0727 0.0868Mozambican metical 0.2976 0.2245 0.2394 0.2932Nigerian naira 0.0541 0.0518 0.0444 0.0508

Net interest paidThe Group utilised overnight call facilities for both short-term deposits and borrowings for most of the year. As in the past, the Group funded all capital projects utilising short-term borrowings and cash reserves.

During March 2012 the Group issued 27,1 million new ordinary shares as well as 6,5% convertible bonds. See Non-current liabilities later in this report for full details. As a result finance costs increased to R223,5 million, but at the same time Interest received increased by 50% to R142,2 million, due to the short-term investment of surplus cash.

Income tax expenseThe effective income tax rate is higher than the nominal income tax rate due to certain non-deductible expenses such as leasehold improvements as well as income tax losses in certain non-RSA countries that cannot be utilised for Group purposes. The income tax expense includes an amount of R91,8 million in respect of secondary tax on companies relating to the final dividend for 2011 which was paid at the beginning of the financial year.

Headline earnings per shareHeadline earnings per share increased by 19,6% from 507,6 cents to 607,0 cents and stemmed mainly from the turnover growth and a consequent increase in trading profit of 17,0%.

STATEMENT OF FINANCIAL POSITION

Non-current assets

PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETSDuring the year the Group spent R3,14 billion on property, plant and equipment and software compared to R3,02 billion in 2011. The Group is also continuing with its policy to purchase vacant land for strategic purposes and for creating retail space when no developers

can be found. During the year the Group spent R921 million on such land and buildings. Refurbishments cost R350 million, while R756 million was spent on new stores (excluding land and buildings), R401 million on information technology and the balance on normal replacements. The Group is in the process of upgrading its merchan-dising, master data and central stock ledger systems. This process will continue into the next financial year. Capital commitments of R1,71 billion relating to these improvements have been entered into for the next financial year.

Intangible assets consist mainly of goodwill paid for acquisitions, trademarks acquired and software. Goodwill represents the premium paid for certain businesses and is tested for impairment annually based on the value-in-use of these businesses, calculated by using cash-flow projections.

Software represents the Group’s investment in certain computer software that is used in its daily operations. The Group continued its investment in new SAP software which, like all software, is amor-tised over its useful life of three to seven years.

Trademarks mainly represent the purchased Computicket, Transpharm and Seven Eleven/Friendly Grocer trademarks and is amortised over 20, 16 and 20 years respectively.

AVAILABLE-FOR-SALE-INVESTMENTSDuring the year the Group and other shareholders bought outright the international treasury systems of RMB Global Solutions.

LOANS AND RECEIVABLESDuring the last quarter of the financial year the Group called for the conversion of its 13 500 000 redeemable, convertible cumulative preference shares in Pick & Buy Ltd, a retailing supermarket group in Mauritius. These preference shares were then redeemed and the proceeds utilised to subscribe for a 25% shareholding in Winhold Limited, a newly created holding company of Pick and Buy. The Group then exercised its rights to take up a further 24% in Winhold Ltd to bring its holding to 49%. Ireland Blyth Limited, a company listed on the Mauritian Stock Exchange, holds the other 51%.

The balance consists mainly of amounts owing by franchisees for franchises and for fixtures and fittings sold to them.

DEFERRED INCOME TAX ASSETSDeferred income tax is provided, using the liability method, for calculated income tax losses and temporary differences between the income tax bases of assets and liabilities, and their carrying values for financial reporting purposes. This asset developed primarily from provisions created for various purposes as well as the fixed escala-tion operating lease accrual.

Current assets

INVENTORIESInventories totalled R8,68 billion, an increase of 23% on the previous year. The inventory turn, based on the sale of merchandise, was 10,5 times (2011: 11,0 times) and based on cost of sales 8,4 times (2011: 8,8 times). The increase in inventory resulted mainly from the following:– Provisioning a net 90 new stores.– Extending the distribution centres in Centurion and Brackenfell

with a greater number of products now flowing through these facilities.

Financial Report (continued)


18

TRADE AND OTHER RECEIVABLESTrade and other receivables mainly represent instalment sale debtors, franchise debtors, buy-aid societies and rental debtors. Adequate allowance is made for potential bad debts and the outstanding debtor’s book is reviewed regularly.

The allowance for impairment and unearned finance income in respect of instalment sale debtors amounted to 13,18% compared to 13,19% the previous year. This minimal decrease was made possible by the quality of the book.

CASH AND CASH EQUIVALENTS AND BANK OVERDRAFTSNet cash and cash equivalents amounted to R7,92 billion at year-end, compared to an overdraft of R80,5 million in 2011. This movement was mainly due to the following:– Capital expenditure, mainly on land and buildings, of R3,10 billion.– The proceeds from the share and convertible bond issue which

led to the inflow of approximately R8 billion. – The fact that the date of the Statement of Financial Position fell

after the calendar month-end thereby causing certain 30-day term creditors to be paid after year-end. This also accounts for the increase in Trade and other payables.

Share capitalOn 29 March 2012 Shoprite Holdings had a successful placement of new Shoprite Holdings ordinary shares and convertible bonds for gross proceeds of approximately R8 billion. This was done by way of concurrent accelerated book build offerings to qualifying investors.

Shoprite Holdings Ltd issued 27,1 million new ordinary shares under a general authority at R127,50 per share, for gross proceeds of approximately R3,5 billion. Also see Convertible bonds below.

The equity component of the convertible bonds is included in Equity in accordance with IAS 32.

Non-current liablities

6,5% CONVERTIBLE BONDSOn 2 April 2012, and as per the concurrent accelerated book build offerings referred to above, Shoprite Investments Ltd issued 6,5% convertible bonds due April 2017 in a nominal amount of R4,5 billion. On 9 May 2012 a further issue for a nominal amount of R200 million was made to Shoprite Checkers (Pty) Ltd, to be utilised as part of an incentive scheme for its employees.

Specific authority was granted at an extraordinary general meeting on 28 June 2012 for the issue of a maximum of 30 million new ordinary shares of Shoprite Holdings Ltd upon conversion of the convertible bonds. The initial conversion price is R168,94 per ordinary share. On 28 May 2012 these convertible bonds were successfully listed on the JSE.

The Group intends to use the proceeds of the offerings to:– Fund organic growth initiatives, opening new stores in existing

markets and investing further in optimising supply-chain and distribution capabilities.

– Accelerate the Group’s African expansion through the purchase and development of property in both new and existing African markets.

– Enhance the Group’s ability to pursue acquisitions in South Africa and abroad.

– Increase balance sheet flexibility and proactively manage the capital structure, better aligning the funding of the Group’s long-term investments with long-term capital, repaying short-term credit facilities and diversifying funding sources; and

– Further improve working capital management, leveraging increased liquidity to obtain better terms from suppliers and strategically building inventory in an inflationary environment.

In terms of the Memorandum of Incorporation of Shoprite Holdings Ltd its borrowing powers are unlimited.

Current liabilities

PROVISIONSAdequate provision is made for post-retirement medical benefits, reinstatements, onerous lease contracts, long-term employee benefits and all outstanding insurance claims. The Group has settled a major portion of the post-retirement medical liability in the past. The remaining liability relates mainly to pensioners and will be settled during subsequent financial years.

Credit salesThe Group continued to supply credit facilities as part and parcel of its furniture business. The management and administration of this debtor’s book is done in-house as the granting of credit is deemed an integral part of selling furniture.

Shoprite insuranceThe Group operates its own short-term insurance company as part of the furniture business. During the year under review net premiums earned amounted to R295 million compared to R257 million the previous year. As in the past, the Group accounts for premiums earned and extended guarantee fees over the life of the policy. In South Africa, insurance premiums are invoiced and earned on a monthly basis. This is in line with the National Credit Act.

At year-end the insurance company had a solvency margin of 83% (2011: 76%) compared to the minimum requirement of 15% as per the Insurance Act.


19

Non-Financial Report

To deliver on Shoprite’s consumer promise of consistent low prices, the Group has to be efficient in every aspect. This pragmatic approach to efficiency also applies to sustainability issues that affect the Group’s long-term success. Group senior management centrally manages all sustainability-related concerns and ensures implementa-tion across all divisions. At an operational level, each business division is responsible for incorporating sustainability targets and practices into its own operations by focusing on those concerns most important to their division.

Furthermore, South Africa’s retail industry continues to face increasingly stringent regulatory requirements. The complexity of maintaining compliance increases significantly as the compliance landscape evolves. To manage these concerns, the Group has established a comprehensive compliance programme that ensures it becomes and remains compliant with all relevant legislative and regulatory requirements in its operating environments.

For in-depth information regarding the Group’s response to its material issues beyond the scope of this non-financial report, please refer to the Sustainability Report available online at www.shopriteholdings.co.za.

1. STAKEHOLDER ENGAGEMENT Central to Shoprite’s long-term success is its ability to

effectively engage with stakeholders on issues of mutual interest; together identifying solutions to drive the business forward. The Group’s main stakeholder groups include: customers, employees, suppliers and trade partners, government and regulatory bodies, communities, labour unions, franchisees, media, business partners and associations and, of course, shareholders and investors.

The Group pursues positive and constructive employee relations, both individually and through formal representa-tive bodies, actively engaging local labour unions in operating countries to ensure employees’ needs are well understood and their concerns addressed.

Requirements and expectations regarding suppliers are clearly communicated by the Group through supplier agreements and a quality assurance programme that ensures supplier compliance with quality, labelling and food safety requirements. Through an enhanced understanding of supplier conditions, the Group aims to develop business models for long-term growth.

The Group continues to build relationships with govern-ment and regulatory bodies, and actively works to address common interests. It is also important to play a supportive role in the communities in which the Group operates. Communities are both customers and employees, and the Group believes that these communities must benefit both from and through Shoprite business. The Group has various initiatives that engage and empower communities with the aim of reducing poverty and unemployment.

1.1 Customers The Group’s objective is to be a preferred shopping destina-

tion for consumers by selling food and general merchandise at low prices, from conveniently located outlets in a comfort-able and enjoyable shopping environment. All staff members, who deal with the public face-to-face and at store level, undergo product-specific and customer service training.

To further protect customer interests, the Group has worked hard to ensure compliance with the South African Consumer Protection Act 68 of 2008 (the CPA) and other regulations. The Group educates its customer base on their rights and obligations through its Consumer leaflets avail-able at all stores.

Outside South Africa, customer complaints are handled at store or divisional office level. In South Africa, the toll-free centralised Customer Service Centre (Checkline) serves supermarket customers while the Customer Care Line serves furniture division customers. This year, a new centralised customer feedback system was implemented to improve customer query resolution.

2. SOCIAL

2.1 Recruitment and talent management

STAFF REPRESENTATION2012 2011 2010

Total permanent (SA only) 89 341 83 867 76 318Percentage of black representation 95.06 94.67 94.47

The labour-intensive nature of the retail industry historically goes hand in hand with high turnover rates among entry-level employees. The Group’s ability to attract and retain human capital is therefore fundamental to its ability to provide excel-lent customer service and meet human resource needs.

By managing the efficacy of recruitment processes, the Group is improving the quality of its recruitment activities. During the year under review, the Group opened a central Recruitment Centre for the Western Cape to streamline the recruitment process and gain access to more suitable candidates. If the centre proves successful, it will be rolled out to other areas. An e-recruitment platform is also being developed to support both Head Office and store recruit-ment processes. Efforts were put into developing the Group’s Employee Value Proposition to appeal more to graduates and school leavers.

Employee retention plans, succession planning and training programmes all play a key role in talent manage-ment. General business-wide career paths and succession planning structures have been developed, with the focus currently on the Group’s store level positions, the bulk of its workforce. Individual departments implement employee performance reviews and appraisals at their own discretion.

The Group believes that the high productivity of the business and a turnover rate of 16.0% for all employees (including part-time employees) – as compared with an international industry average for retail and leisure of 30.2% – is an indicator of overall staff satisfaction.

2.2 Learning and development The Group has 14 registered training schools in South

Africa, mostly offering accredited training programmes relevant to Shoprite’s operations. Customer service forms an integral part of all training programmes within the Group.

Thirty-two of the Group’s training programmes have


20

been reviewed and redesigned during the last 12 months ensuring compliance with the latest SETA standards and requirements. The SETA-driven nationally funded Skills Development Project placed 562 learners on 12-month learnerships and 619 learners on three-month skills programmes. The Group is committed to employing 90% of all successful candidates on completion of their training.

Group participation in SETA projects has enabled it to exceed its objective of providing training and employment opportunities to a thousand learners annually, with a total of 1 715 learners trained during the period under review. Two new skills development projects were initiated in the fourth quarter through which 100 deaf learners and more than 500 other learners will be afforded the opportunity to gain accredited training in the next period under review.

The Group’s flagship Management Training Scheme (MTS) has been registered as an NQF Level 4 Operation Supervision Qualification. Shoprite was able to train approximately 12% of its Trainee Managers in the period under review.

By the end of June 2012, the Group’s total spend on tertiary qualification bursaries amounted to R11.1 million in the period under review. A total of R14.4 million has been allocated for spending by December 2012, amounting to an increase of 21% in bursary spend this year.

2.3 Organised labour relations Shoprite aims to foster good working relationships with

organised labour structures and monitor and resolve employee issues before they lead to industrial action. Just under one-third (32 293) of its employees are represented by unions and collective bargaining structures. The Group engages with labour unions in 12 of the 17 countries in which it operates. It remains committed to global standards in labour relations and recently signed an agreement with Uni Global Union to that effect.

This year, the Group worked with more than ten different unions and signed 14 different wage and benefit agreements. There was no strike action in South Africa affecting Shoprite or the retail sector in general for the period under review.

2.4 Employee benefi ts Employee satisfaction strongly influences productivity levels,

and the Group therefore provides many of the conventional employee offerings and various personal benefits and programmes to incentivise employees. The remuneration policy governs employee salaries that are competitive and this, combined with a range of incentive schemes, serves to improve the Group’s ability to attract and retain employees and improve employee performance. The Group’s remuner-ation policy is set out in greater detail in the Remuneration Report on pages 31 to 37 of the Integrated Report.

2.5 Occupational health, safety and security The health and safety of its employees and customers

remain of paramount importance to the Group, and preven-tative initiatives are a priority. The Group employs a compre-hensive IT-based occupational health and safety (H&S) management system which has streamlined the measuring, monitoring and managing of all H&S-related activities.

South Africa has one of the highest rates of robbery and violent theft in the world. As the Group is largely cash driven, extra precautions are required to prevent attacks and losses during money transfer. A number of security measures are employed by the Group, including regular security inspections and audits at stores and shopping centres and a range of physical security methods.

The Group is a member of the Consumer Goods Council, which identifies crime trends and advises on how to mitigate risks.

2.6 HIV/Aids programme HIV/Aids is one of the main challenges facing South Africa

today, and an important concern for the Group. Shoprite believes it requires concerted attention and effective inter-ventions that benefit employees and their families. An actu-arial evaluation has estimated the prevalence of HIV among Shoprite employees at 17.8%, broadly in line with the communities the Group serves and from where it recruits its employees.

This year, the Group’s Voluntary Counselling and Testing (VCT) project was strengthened by appointing an inde-pendent wellness management company to offer free testing and counselling at 124 Shoprite facilities in South Africa. A total of 3 585 staff members were voluntarily tested, revealing a prevalence rate of 7.8%.

2.7 Product safety and labelling The Group considers food safety one of its top business

priorities and has spent considerable time and resources on the implementation of a robust food safety policy, compliant with all regulatory and relevant food safety standards. The newly initiated Food Safety Management System (FSMS) assures compliance by addressing elements such as product testing and recalls, supplier audits, cold chain management, distribution and traceability and hygiene and risk assessments.

The Group’s food safety focus is aligned with interna-tional Farm-to-Fork practices, and the Group further complies with product standards set by the National Regulator for Compulsory Specifications (NRCS), the South African Bureau of Standards (SABS) for electrical products, and the Gas Board for gas-operated appliances.

Food suppliers are approved only once the Food Safety Department has confirmed their compliance and verified their food safety certification. The Group has contracted an international organisation that specialises in food assurance and certification to maintain its food safety database regarding supplier status. The Food Safety Department prioritises the monitoring of high-risk suppliers and products.

The Group has incorporated the labelling requirements of South Africa’s Consumer Protection Act (CPA) as well as other relevant labelling requirements of the Department of Health, Department of Agriculture and Department of Trade and Industry into its supplier contracts and trade terms.

2.8 Responsible lending The Group’s three furniture chains – OK Furniture, OK

Power Express and House and Home – offer credit facilities to consumers. Credit sales represent 30.7% (2011: 29.5%)


21

Non-Financial Report (continued)

of total sales of these three brands, with furniture group sales constituting just 4.2% of Group sales overall.

The credit offering is aligned with the provisions of the 2005 National Credit Act of South Africa (NCA) and the relevant laws in the other countries in which the Group operates. Credit agreement interest rates are calculated in accordance with regulatory requirements and the market risks within different furniture chains, and are lower than those recommended by the NCA.

3. TRANSFORMATION

3.1 Employment equity RSA STAFF REPRESENTATION

Shoprite is committed to equality and non-discrimination, and aims to embed these values within the company culture. The Group is on track to achieve its employment equity goals for the current plan period (2010 to 2015). Combined black representation in the junior-to-lower management levels exceeds the Economically Active Population (EAP) statistic, and the Group has achieved nearly 80% of the statistic within its middle management level. Steady progress has been made in improving black representation at senior management levels during the last reporting period with almost 12.67% improvement of overall black representation within top management. Black female representation has been a key focus area, showing over 68.34% improvement within the top management level. The Group currently employs 166 (2011: 81) people in South Africa with disabilities and plans to improve this figure considerably in the next period under review.

3.2 Preferential procurement B-BBEE performance forms part of the supplier selection

criteria, and preference is given to black female suppliers. Most of the Group’s 14 500 suppliers and service providers have good B-BBEE credentials. Group B-BBEE spend on preferential procurement was R42.2 billion (2011: R18.2 billion) during the period under review and it achieved a score of 15.21 out of 20 (2011: 11/20) on the B-BBEE Scorecard. However, as the largest retailer in Africa, Shoprite is unable to meet transformation targets by relying on existing black suppliers alone and has therefore become actively involved in enterprise development to build capacity within the local supplier base.

3.3 Enterprise development Shoprite founded the Shoprite Checkers Development Trust

(the Trust) to advance broad-based black economic empow-

erment by initiating and making contributions to enterprise and socio-economic development programmes. This is achieved primarily through grants and the supply of initial low or zero-interest loans. The Shoprite Group has made R70 million available to the Trust to accomplish its goals. The Trust founded the Mossel Bay Enterprise Trust in November 2011. The Trust’s first project was the establishment of a shopping centre in Kwanoqaba township in Mossel Bay.

The Group’s Freshmark suppliers’ initiative supports small B-BBEE suppliers through a variety of methods including training and favourable payment terms. Forty-four per cent (44%) of the Group’s fresh produce suppliers (212 of a total of 481) supply less than R500 000 worth of produce to the Group annually.

3.4 CSI and socio-economic development Shoprite understands that its business and the communi-

ties in which it operates are interdependent. Good relations and contributions to socio-economic upliftment create business opportunities for all. The Group focuses its primary corporate social investment (CSI) activities on poverty alleviation, the empowerment of women and communities and crime prevention.

In the period under review, the Group spent more than 1% of its net profit after tax (NPAT) on CSI projects. The Group hopes that the establishment of the Shoprite Checkers Development Trust will improve the impact of the Group’s CSI financial contributions.

The Shoprite Mobile Soup Kitchens aim to bolster the nutrition of underprivileged people of South Africa, especially children, the aged and unemployed and victims of natural disasters. In the period under review, 3 547 302 servings of soup and bread were distributed countrywide. Slightly damaged Shoprite foodstuff deemed unfit for display in the Group’s stores is donated to registered not-for-profit organisations that distribute the items to poverty-stricken communities.

The Shoprite Checkers Women of the Year Awards aims to celebrate the positive socio-economic contributions of South African women by honouring exemplary and visionary women who are making a difference in their communities. Winners each receive R30 000 in cash, as well as R100 000 to assist in the development of their individual programmes.

Further, the Group partners with the Western Cape and Gauteng police departments in various crime-prevention campaigns.

4. ENVIRONMENT AND CLIMATE CHANGE

4.1 Electricity consumption Over the last three years, the Group has taken steps

towards managing its electricity consumption more effectively. A comprehensive energy monitoring system has been implemented in the majority of the Group’s South African supermarkets. The system is continually being optimised and represents a major step in accurately measuring, monitoring and reporting electricity consump-tion. Despite these efforts, the average Eskom price

72.18%

19.92%

2.95%

4.94%AfricanColouredIndianWhite & foreign


22

Award Winners

The Shoprite Group is proud to recognise suppliers for their unstinting support and collaborative approach toward our business over the past year.

CEO AWARDSJeff Art SignsTilespace

PERISHABLES AND SERVICE DEPARTMENTS Willowton Group

CONFECTIONERY AND BEVERAGESSimba

TOILETRIESUnilever

HOUSEBRAND / PRIVATE LABELSHeartland Foods

UPCOMING SUPPLIERSEagles Valley Poultry

MEAT MARKETSMeat Traders

FRUIT & VEGETABLESHarvest Fresh

GENERAL MERCHANDISEControl Chemicals (Pty) Ltd

AMBIENT GROCERIESRhodes Food Group

FURNITURERestonic

CONTRACTORS / SERVICE PROVIDERSSalient

increases of 26% (2011) and 16% (2012) implemented during the period under review have increased the Group’s electricity bill by over 34%.

The Group has started to develop consumption bench-marks for the various types of stores it operates. A dedi-cated team is working closely with experts and equipment manufacturers to evaluate electricity-efficient initiatives and technologies, with a focus on refrigeration and lighting.

4.2 Transport and fuel consumption As distribution is a fundamental component of the retail

industry’s business activities, minimising fossil fuel use throughout the supply chain is not only an environmental responsibility, but also a strategic long-term business sustainability imperative.

The Group pioneered and continually enhances its large-scale centralised distribution network in South Africa. The Group’s ability to distribute centrally has minimised the number of supplier vehicles making direct-to-store deliveries. This reduces fuel consumption throughout the product supply chain and enables Shoprite to streamline various other business processes. The Group continues to monitor and evaluate all technologies and processes available for reducing fossil fuel use across its supply chain, such as vehicle routing and scheduling systems and store ordering systems.

4.3 Water consumption The Group is investigating and piloting a range of large-

scale water-saving initiatives. One of these is the installa-tion of a state-of-the-art grey-water system at the Group’s new distribution centre in Centurion. The Group aims to enhance its water-monitoring programme in line with the functionality enabled for electricity consumption across its supermarkets in the next year.

4.4 Recycling and packaging In the period under review, a number of initiatives to reduce

packaging and waste across the Group’s operations were implemented. A reclamation centre for damaged goods is now operational and the extension of the service to cover more types of recyclable material is being investigated. Reusable roll-tainers were introduced to replace wooden pallets and reduce the use of shrink-wrap material for stabi-lising product during transportation.

4.5 Carbon disclosure During the period under review, the Group initiated its first

carbon footprint assessment following Carbon Disclosure Project (CDP) protocols. Electricity consumption in super-markets and fuel usage in the supply chain constitutes the bulk of the Group’s carbon footprint. The Group attributes the increase in Scope 2 emissions over last year’s estimate to better reporting.

The Group, however, has not yet completed a full carbon footprint assessment and no specific reduction targets have therefore been set. As the monitoring systems mature, Shoprite fully intends to increase the scope, accuracy and disclosure of its carbon footprint in the coming years.


23

Corporate Governance Report

The board of directors (“the Board”) of Shoprite Holdings Limited (“Shoprite Holdings or “Group”) promotes and supports high stand-ards of corporate governance, integrity and ethics that will contribute towards the on-going sustainability of the Group, facilitate long term-term shareholder value and enhance the benefits that all other stake-holders derive from the Group’s continued success.

In an environment of increasing regulation, it is the Group’s objec-tive to maintain a balance between the governance expectations of investors, and other stakeholders, and the expectation to deliver increasing financial returns.

The Board is ultimately responsible for ensuring that governance standards are met and is assisted in this regard by senior manage-ment who aims to instil a culture of compliance and good governance throughout the Group. Sound corporate governance structures and processes are being applied and are considered to be pivotal to deliver sustainable growth and returns in the best interest of all stakeholders.

The adherence to sound governance principles is advocated by the Board which endorses the principles contained in the King Report on Governance for South Africa 2009 (“King III”). An independent assessment of the Group’s standard of governance is provided by the JSE Socially Responsible Investment (SRI) Index. During the 2011 SRI evaluation the Group met 29/32 of the core governance indica-tors and 25/33 desirable governance indicators.

With regard to the 2012 financial period, the directors of Shoprite Holdings confirm that the Group has, except as outlined immediately below, complied in all material aspects with King III. The Group has furthermore complied with all the corporate governance provisions in the JSE Listings Requirements during this period.

SUMMARY OF KING III PRINCIPLES NOT APPLIEDCompanies listed on the JSE are required to report and disclose their application of the King III principles.

During the 2012 financial period, the Group has not complied with the following principles:– The Chairman of the Board, Dr CH Wiese is not an independent

non-executive director, but given his commercial knowledge, experience and skills, the Board deems this to be appropriate in view of Dr Wiese’s significant contribution to the functioning and effectiveness of the Board;

– The Chairman of the Board acts as ex-officio chairman of the Remuneration and Nomination Committees. Although he is not independent, the Board supports his chairmanship of these committees given the necessity to align the Group’s remuneration approach with its business strategy;

– The Board and the Audit & Risk Committee performed self- evaluations on their respective effectiveness but have decided not to disclose the overview of the appraisal process, results and action plans in the integrated report due to the sensitive nature thereof;

– Directors were not evaluated individually as part of the evaluation process. Independent non-executive directors are evaluated individually with regard to their independence and specifically the independence of directors that have served on the Board for longer than nine (9) years;

– The Board is of the view that directors should not earn attendance fees in addition to a base fee. Directors add significant value to the Group outside of the confines of a formal board or committee

meeting. Directors also have a record of high attendance of board and committee meetings;

– The Board does not intend to institute a formal dispute resolution process as the existing processes within the Group are satis factorily and do not require separate formal processes;

– The Company’s 2012 Sustainability Report was not audited by an independent external service provider as the key indicators were obtained through a formal process that also involved independent service providers;

– The Head of the Group’s internal audit function does not solely report to the Audit and Risk Committee. Instead, he reports administratively to the General Manager Group Finances but functionally to the Audit and Risk Committee. The Audit and Risk Committee believes that his independence is however encour-aged and respected.

THE BOARD OF DIRECTORSThe Board is collectively responsible to the shareholders of Shoprite Holdings for the long term success of the Group and for its overall strategic direction, values and governance. It provides the leadership necessary for the Group to meet its business objectives within the framework of its internal controls, whilst also discharging the Group’s obligations to its shareholders.

Shoprite Holdings has a unitary board structure comprising of fourteen (14) directors in total. The Board consists of eight (8) non-executive directors and six (6) executive directors.

Board CommitteesBoard committees assist the Board in executing its duties, powers and authorities. The Board delegates authority to the board commit-tees. The role and responsibilities of each committee are recorded in formal terms of reference. The Audit and Risk and the Social and Ethics Committees have additional responsibilities by virtue of the Companies Act, 2008.

The Board has established four (4) committees:– Audit and Risk Committee;– Social and Ethics Committee;– Nominations Committee; and – Remuneration Committee.

Each board committee has formal terms of reference that are reviewed on a regular basis. The chairpersons of these committees formally report to the Board after each meeting on all matters within its duties and responsibilities.

Board ResponsibilitiesThe Board has adopted a formal board charter which has been implemented to identify, define and record the functions and composition of the Board and to serve as reference to new directors. This charter was updated during the reporting period to include changes required by the Companies Act.

The Board’s principle responsibilities include:– providing effective leadership based on an ethical foundation;– addressing all aspects that are of strategic importance for the Group;– ultimate responsibility for the strategic direction of the Group;– ensuring that the Group’s strategy will result in sustainable

outcomes;


24

– risk management and IT governance;– monitoring compliance with laws, regulations and codes of good

practice;– ensuring that the Group is and is seen to be a responsible corpo-

rate citizen.

The Board is of the opinion that it has adhered to the terms of reference as detailed in the board charter for the financial year under review.

Meetings of the BoardThe Board convened six (6) times during the 2012 financial year. Four (4) of these meetings were scheduled whilst two (2) special meet-ings were convened and related to the Group’s successful capital raising concluded in March 2012. The attendance of directors at these board meetings are recorded below.

Attendance at Board Meetings

22/0

8/11

07/1

1/11

12/1

2/11

(spe

cial

)

20/0

2/12

11/0

4/12

(spe

cial

)

21/0

5/12

NON–EXECUTIVE DIRECTORSCH WIESE —JJ FOUCHE —EC KIESWETTER —JA LOUW —JF MALHERBE —JG RADEMEYER — —JA ROCKEXECUTIVE DIRECTORSJW BASSONCG GOOSENB HARISUNKERAE KARPEL NELBR WEYERS

Chairman and Chief Executive Offi cer The roles and duties of the non-executive chairman and the chief executive officer are separated and clearly defined.

Dr CH Wiese is the non-executive chairman who provides guid-ance and leadership to the Board and also ensures that the Board functions effectively, focussed and as a unit.

The Chairman’s role includes:– encouraging debate and constructive criticism;– setting agendas for board meetings in conjunction with the chief

executive officer and the company secretary;– leading the Board’s performance assessments;– facilitating the relationship between the Board and the chief

executive officer;– ensuring that adequate time is allocated for discussion on

strategic issues.

The chief executive officer, Dr JW Basson, reports to the Board and is responsible for the day-to-day business of the Group as well as the formulation and implementation of strategies once approved by the

Board. He is assisted in this regard by members of executive and senior management that heads the various divisions and depart-ments within the Group.

Lead Independent DirectorMr JG Rademeyer is the lead independent director. The function of the lead independent director is to provide leadership and advice to the Board when the Chairman has a conflict of interest without detracting from or undermining the authority of the Chairman.

Non-executive Directors The Board consists of eight (8) non-executive directors of which seven (7) are independent as defined in the King III Code. Dr CH Wiese is not independent in view of his material shareholding in Shoprite Holdings.

The full particulars of the directors of Shoprite Holdings are set out on pages 8 and 9 of this report.

The Board is satisfied that its current members possess the required collective skills and experience to carry out its responsibili-ties of achieving the Group’s objectives and to create value to share-holders over the long term.

Board Appointment The Board regularly reviews it’s composition as well as the composi-tion of board committees which are aligned with applicable legislation and regulations. Appointments to the Board are done in a formal and transparent manner as required by the JSE Listings Requirements. In making an appointment the Board takes cognisance of the know-ledge, skills, and experience of a potential candidate, as well as any other attributes considered necessary for the role.

The appointment of directors is a matter for the Board as a whole. The Board is assisted by the Nominations Committee who considers the suitability of potential directors and makes recommendations to the Board in this regard.

Directors are not appointed for a fixed term. In terms of the Memorandum of Incorporation (“MOI”) of Shoprite Holdings, all directors retire by rotation at least once every three (3) years but can make themselves available for re-election by shareholders.

There is a clear division at Board level of responsibility and balance of power and authority to ensure that no one director has unfettered powers in decision making.

Induction of directors and on-going updatesA comprehensive induction programme has been developed for new directors to ensure that they are briefed and have the required under-standing of the Group’s structure, operations and policies to enable them to fulfil their duties and responsibilities as directors. The company secretary is responsible for the administration of the Group’s induction programme.

New directors are provided with details of applicable legislation and regulations, Shoprite Holdings’ MOI, relevant mandates as well as documents setting out their duties and responsibilities as direc-tors. Directors are invited to briefing sessions to keep them abreast of pending new legislation.

Confl icts of interests and directors personal fi nancial interestsThe Group’s policy in this regard is applicable to all directors and employees. Directors are required to declare their personal financial


25

interests and those of related persons in contracts with the Group annually. A list in this regard is tabled annually and the register in which such interests are recorded is available for inspection at each annual general meeting of Shoprite Holdings.

Board effectiveness and evaluation An internal questionnaire based evaluation of the Board was performed for the period under review. This evaluation covered the size and composition of the Board, directors’ induction and develop-ment effectiveness, board meetings, relationship between the Board and management, skills needed by the Board and its committees as well as stakeholder relations.

The overall outcome of the evaluation was acceptable.

COMPANY SECRETARIAL FUNCTIONThe company secretary is appointed and removed by the Board and acts as a central source of information and advice to the Board and within the Group on matters of ethics and good corporate govern-ance.

All directors have unlimited access to the advice and services of the company secretary, who is accountable to the Board for ensuring that procedures are complied with and that sound corporate govern-ance and ethical principles are adhered to. Independent advisory services are retained by the company secretary at the request of the Board or board committees.

The company secretary also provides a communication link with investors and liaises with the Group’s transfer secretaries and sponsors on relevant matters.

As required by King III, the company secretary also acts as secretary to the various sub-committees of the Board and attends all meetings of the Board and the committees. He is required to ensure that all minutes of shareholders meetings, board meetings and all meetings of committees of the Board are properly recorded and that all required returns are lodged as required by the Companies Act.

The company secretary is not a director of Shoprite Holdings and has an arm’s length relationship with the Board and the directors.

The company secretary is also the compliance officer and ensures that the Group complies with all the required legislation and regulations applicable to its various business activities.

SHARE DEALINGS BY DIRECTORS AND SENIOR PERSONNELThe Group has implemented a policy relating to share dealings by directors and senior personnel who, by virtue of their positions, have comprehensive knowledge of the Group’s affairs. This policy imposes closed periods to prohibit dealing in Shoprite Holdings securities before the announcement of the interim and year-end financial results or during any other period that is considered to be price- sensitive. The company secretary disseminates written notices to all directors and senior personnel throughout the Group. This is in compliance with the market abuse provisions of the Securities Services Act of 2004 and the JSE Listings Requirements in respect of dealings by directors.

Dealings in Shoprite Holdings securities by directors and alternate directors of Shoprite Holdings and its main trading subsidiary are disclosed as required by the JSE Listings Requirements. The Board has also implemented a formal approval framework which governs the approvals required by these directors prior to their dealings in Shoprite Holdings securities.

ACCOUNTABILITY

Audit and Risk CommitteeA description of the responsibilities and work undertaken by the Audit and Risk Committee during this year is included in the report by the chairman of the committee on page 28. His report also deals with the Group’s internal controls, governance of risk as well as the internal audit function.

Group AuditorsAt the annual general meeting of Shoprite Holdings held on 31 October 2011, the appointment of PriceWaterhouseCoopers Inc as the external auditors of the Group until the 2012 annual general meeting was approved by shareholders. Further details on the external auditors are contained in the report of the chairman of the audit and risk committee.

Corporate EthicsThe Group is committed to achieving high standards of ethical behav-iour. The Tip-Offs anonymous hotline is independently managed by a third party service provider. This hotline can be used by the Group’s suppliers and employees to report any suspected unethical behav-iour. Although this hotline allows employees to make anonymous reports and guarantees the protection of their identity in accordance with the provisions of the Protected Disclosure Act, 2000, the Group prefers to create an open reporting environment through the various line managers. All cases are investigated by the Group Risk Manager in conjunction with internal audit and the Group legal department where required. During the 2012 financial year a total of 111 incidents of suspected unethical behaviour within the Group were reported of which 25 resulted in disciplinary action, dismissals, resignations and/or criminal charges being laid against such employees.

During the period under review the Group’s code of conduct was reviewed and amended in-line with best practices in this regard. The code of conduct sets out the standard expected from employees when dealing with customers, fellow employees, suppliers, competi-tors and other stakeholders. All employees are required to adhere to the code of conduct.

No material breaches of the Group’s code of conduct were reported during the 2012 financial year.

Legislative and Regulatory ComplianceThe recent changes in the legislative, regulatory and best practices standards in the corporate governance environment in South Africa necessitated diligent consideration and review of the Group’s governance policies and procedures. In this regard the Group conducts regular reviews of current and emerging legislation and requirements.

The Group’s compliance function resorts under the company secretary and monitors and assesses the impact of legislation on the business. External specialists have been engaged to assist and advise the Group in this regard. A regulatory universe is compiled annually for the Group with the assistance of a specialist service provider that identifies and reviews all current, proposed and impending legislation and the potential impact on the Group’s various business units. Response to such legislation is addressed through the most efficient and effective channel. Compliance resources and programs are introduced by utilising a risk based approach where after on-going compliance is monitored and tested through various

Corporate Governance Report (continued)


26

means. Compliance reports are presented to the Audit and Risk Committee.

Of particular relevance during the reporting period was:– The Companies Act No 71 of 2008 and Regulations The Group continued to implement measures to ensure compli-

ance with the Companies Act. A Social and Ethics Committee was established by the Board as required. The MOI of Shoprite Holdings was amended to comply with the Companies Act and will be presented to shareholders for approval at the annual meeting on 29 October 2012.

– The Consumer Protection Act (CPA) Further steps were taken to entrench the Group’s compliance

with the CPA., the most significant being amendments to the various agreements between the Group and its suppliers and measures to reduce the Group’s product liability risk.

– The Protection of Personal Information Bill A project team has been established to determine and manage

the impact of this bill on the Group’s various business units and to ensure that the Group will be compliant when the bill is promul-gated.

The Group had no instances of major non-compliance with legislation during the period under review.

INVESTOR AND STAKEHOLDER RELATIONSThe Group’s relevance to the markets and societies in which it oper-ates, depends on meaningful engagement with all stakeholders. Its stakeholder management approach involves the optimal application of resources to build and maintain good relationships with stake-holders. This assists the Group to understand the expectations of its stakeholders, minimize reputational risk and form strong partnerships which ultimately underpins the sustainability of the Group.

The Group appreciates the importance of dissemination of accurate information to all its stakeholders. Financial and non-financial informa-tion is disseminated timeously and accurately to all stakeholders.

Regular, pertinent communication with shareholders assists the Group to improve shareholder relationships. The chief executive officer, deputy managing/financial director are designated investor spokespersons and meet with fund managers, analysts and the media on a regular basis. Investor activities include the presentation of interim and annual results, participation in investor conferences and the issuing of regular operational updates. A corporate website also communicates all the latest financial and non-financial data to all stakeholders. Shareholders are also encouraged to attend the annual general meeting of Shoprite Holdings which provides an opportunity for shareholders to raise pertinent questions and to interact with directors. Committee chairpersons also attend the annual general meetings to respond to shareholder’s questions.

Further information on the Group’s stakeholder engagement can be obtained from the Sustainability report published on the Group’s website at www.shopriteholdings.co.za.

The Board is not aware of any material requests made by any stakeholder under the Promotion of Access to Information Act during the reporting period that were either complied with or denied.

COMPETITIVE CONDUCTThe Group operates in the retail sector which is a highly competitive industry. It is therefore highly protective of all its intellectual property and know-how. Interaction with other retailers is generally restricted to forums in which co-operation at industry level is required for purposes of making representation to government. The Group is a member of the Consumer Goods Council of South Africa.

During the period under review, a competition law compliance framework and programme was established with the assistance of the Group’s legal advisors. This programme will be further entrenched within the Group.

POLITICAL PARTY SUPPORTWhilst the Group supports the democracy in South Africa, it does not make financial donations to individual political parties.


27

INTRODUCTIONWe are pleased to present our report to shareholders for the financial year ended 30 June 2012. The Audit and Risk Committee (“the Committee”) is an independent statutory committee appointed by the Shoprite Holdings board of directors (“the Board”) who delegates duties and responsibilities to the Committee.

The main purpose of the Committee is to assist the Board in monitoring the integrity of financial statements and overseeing the Integrated Report. It is also responsible for the effectiveness of the Group’s internal financial controls and oversees the internal and external audit functions. The Companies Act, 2008 (as amended) (“the Companies Act”) furthermore requires the Committee to perform specific responsibilities.

The Committee’s terms of reference are formalized in a charter approved by the Board. With the introduction of the King Code of Governance Principles (“King III”) and the enactment of the Companies Act, the Committee had to review its terms of reference to bring them in line with new legislation and regulations. In addition to performing this function for Shoprite Holdings, the Committee also accepted and performed the role for all the Group’s South African subsidiaries.

During the period under review, the Committee conducted its affairs in accordance with the charter and has discharged its respon-sibilities as required by the charter, the Companies Act and the mate-rial requirements of King III.

AUDIT COMMITTEE MEMBERS, MEETING ATTENDANCE AND ASSESSMENTThe Committee consists of three (3) independent non-executive directors elected by the shareholders of Shoprite Holdings on recommendation by the Board and is chaired by Mr JG Rademeyer.

Committee meetings are held at least four (4) times a year as required by the charter. Where a quorum was not present all decisions were approved at the next meeting where a quorum was present. During the period under review, the Audit Committee met five (5) times. A special Committee meeting was held on 26 August 2011 to approve the 2011 annual financial statements of the Company.

The attendance of the Committee members is recorded below:

15/0

8/20

11

26/0

8/20

11(S

peci

al)

04/1

1/20

11

17/0

2/20

12

18/0

5/20

12

NON-EXECUTIVE DIRECTORSJG RADEMEYERJF MALHERBE xJA LOUW x

The financial director, general manager group finance, internal and external auditors attended the Committee meetings by invitation. Other members of management attended as required.

The Committee agendas provide for confidential meetings between the members and internal and external auditors. No such meetings took place or were requested during the reporting period.

Committee evaluationAs part of the annual evaluation, the performance of the Committee

and its members were assessed and found to be satisfactory. In addi-tion, members were assessed in terms of the independence require-ments of King III and the Companies Act. All members of the Committee continue to meet the independence requirements.

ROLES AND RESPONSIBILITIESDuring the period under review, the Committee fulfilled the statutory duties as required by the Companies Act and recommended in King III, as well as various additional responsibilities assigned to it by the Board.

External auditor appointment and independenceThe Committee has satisfied itself that the external auditor, PricewaterhouseCoopers (PwC), conducted its duties independently and that no limitations were imposed by management on PwC whilst performing their duties during the period under review.

In consultation with the Group’s executive management, the Committee agreed to the terms of the PwC engagement letter, audit plan and budgeted audit fees in respect of the 2012 financial year.

A formal framework governs the process through which PwC renders non-audit services to ensure that the audit independence is not impaired. The Committee approved the terms of a master service agreement for the provision of non-audit services by PwC as well as the nature and extent of non-audit services that may be provided in terms of a pre-approval policy. Non-audit services rendered by PwC during the period under review comprised tax advisory and compli-ance services, due diligence reviews, accounting opinions and other advisory services.

The Committee nominates PwC for re-election at the annual general meeting (AGM) of Shoprite Holdings, and Mr. A Wentzel as the designated partner to perform the functions of external auditor, until the 2013 AGM. The Committee has satisfied itself that both PwC and Mr. Wentzel are accredited with the JSE Limited as required.

Financial statements and Accounting practicesDuring the reporting period, the Committee reviewed the interim and annual financial reports of the Group and recommended the accept-ance and approval thereof to the Board.

During the review of the financial reports the Committee considered:– the accounting policies and financial statements, in order to

ensure compliance with International Financial Reporting Standards and relevant requirements of the Companies Act and the JSE Listings Requirements; and

– the audit report issued by the external auditors.

Internal controlsThe Group’s systems of internal control are designed and imple-mented to support the identification, evaluation and management of risks affecting the Group. These include controls in respect of the financial reporting process and extend across all areas of operations.

During the period under review an internal review was performed to assess the effectiveness of the Group’s system of internal controls and risk management procedures. This assessment formed the basis for the Audit Committee’s recommendation in this regard to the Board.

Management, internal and external auditors have agreed on a combined assurance model to enable these parties to report to the

Audit and Risk Committee Report


28

Committee on the efficiency of the Group’s internal financial controls. Assurance on compliance with systems of internal control and on their effectiveness is obtained through regular management reviews, assurance, testing of certain aspects of the internal financial controls systems by the external auditors during the course of their statutory audit and regular reports to the Committee by the external auditors.

During the period under review, the Committee reviewed the reports on the design, implementation and effectiveness of the Group’s systems of internal financial and risk controls. No material breakdowns in the internal and financial controls came to the atten-tion of management of the Group that required reporting.

Integrated and Sustainability reporting In fulfilling its oversight responsibilities, the Committee has reviewed the sustainability information that forms part of the Group’s Integrated Report and has assessed its consistency with operational and other information known to the Committee members, as well as its consistency with the Group’s annual financial statements.

The Committee is satisfied that the above is consistent with the Group’s financial results. As such the Committee has recommended that this be approved by the Board.

Going concernThe Committee has reviewed a documented assessment, including key assumptions, prepared by management on the going concern status of the Group. The Board’s statement on the going concern status of the Group, as supported by the Committee, is contained in the directors’ report.

Governance of riskWhilst the Board is ultimately responsible for the maintenance of an effective risk management process, the Committee assisted the Board in assessing the adequacy of the risk management process.

Under the supervision of the Committee, the risk forum (a management committee consisting of senior managers from all business units) met three (3) times during the reporting period. During these meetings significant risks affecting the Group were considered and discussed to ensure that executive management is aware of the risks affecting the Group and their respective business units. Minutes of these meetings are submitted to the Committee for consideration.

Each significant business unit within the Group has their own enterprise wide risk management plan which is updated regularly to ensure that risks affecting business units are current and that the necessary controls to mitigate these risks are in place.

The Group also has a Top 20 risk document which details the material risks of the Group as well as the necessary controls to miti-gate these risks. Business units are required to report on the risk control measures that they have implemented to address the specific risks affecting their business unit.

The Committee is satisfied that, during the course of the 2012 financial year, executive management was aware of and addressed the material risks affecting their business units and the Group as a whole.

Internal auditThe Committee is responsible for ensuring that the Group’s internal audit function is independent and has the necessary resources, standing and authority within the Group to enable it to discharge its

responsibilities effectively. Furthermore, it oversees cooperation between the internal and external auditors, and serves as a link between the Board and these functions.

The internal audit function consists of the Group internal audit team, led by the chief internal auditor and divisional audit functions that operate in the Group’s operational divisions. The divisional func-tions are centrally coordinated by the group internal audit team.

Internal audit activities all of which are risk based are performed by a team of appropriate, qualified and experienced employees. The internal audit team is responsible for reviewing and providing assur-ance on the adequacy of the internal control environment across all of the significant areas of the Group’s operations. The internal audit manager is responsible for reporting the progress and findings of internal audit’s work conducted against the Group’s approved audit plan to the Committee on a quarterly basis.

The internal audit manager has direct access to the Committee, primarily through the Chairman.

The Committee has satisfied itself that adequate, objective internal audit standards and procedures exist within the Group and that Group internal audit has complied with the required legal, regula-tory and other responsibilities as stipulated in their charter during the period under review.

Governance of information technologyThe Board has mandated the Committee to review the Group’s IT strategy and execution. In this regard the Committee reviews the implementation of all relevant IT governance mandates, policies, processes and control frameworks. Furthermore, the Committee also provides assurance to the Board on all IT related matters, including significant IT investments, by engaging both internal and external assurance providers. This assurance forms part of the Group’s combined assurance framework.

The Group’s IT governance framework is formalized in an IT governance charter and policies were formulated and implemented. The charter and policies outline the decision making rights and accountability framework for IT governance within the Group.

EVALUATION OF THE EXPERTISE AND EXPERIENCE OF FINANCIAL DIRECTOR AND FINANCE FUNCTIONThe Committee has satisfied itself that the financial director, Mr. CG Goosen, has the appropriate expertise and experience to act in this capacity.

The Committee is also satisfied that the Group finance function has the required expertise and adequacy of resources to perform the Group financial function.

JG RademeyerChairman

20 August 2012


29

Nominations Committee Report

in March 2012, Mr Rock in May 2012 and Dr Mokgokong in August 2012. The review of the Nominations Committee’s composition resulted in the appointment of Mr Kieswetter as a member of the Nominations Committee.

As required by the Memorandum of Incorporation of Shoprite Holdings, one third of the directors will retire by rotation at the forthcoming annual general meeting. Messrs JG Rademeyer, EL Nel and AE Karp will retire in terms of this provision whilst Dr ATM Mokgokong, Messrs JJ Fouché and JA Rock will retire as a result of their appointments subsequent to the previous annual general meeting but have offered themselves for re-election.

The Nominations Committee annually reviews the independence of non-executive directors that retires based on whether the director:– was employed in an executive capacity within the Group in the

previous three years;– served on the Board for a period of longer than nine years. In this

instance the Nominations Committee considers if the director’s independence, judgement and contribution to the Board deliberation could be compromised, or appear to be compromised, by this length of services;

– is a representative of a major shareholder;– is independent in character and judgement and whether there

are any circumstances which may or is likely to affect the director’s judgement;

– is a shareholder in Shoprite Holdings and that his shareholding represents a material part of the director’s personal wealth.

Having considered the circumstances of the non-executive directors, the Nominations Committee is of the view that Dr Mokgokong, Messrs Fouché and Rock can be considered as independent.

The Nominations Committee had two (2) meetings during the period under review. This committee has formal terms of reference which was reviewed during the period under review.

The key elements of the charter are the following:– The identification, evaluation and recommendation of nominees

to the Board and the board committees;– Oversee the formal induction programme for new directors;– Regularly review the structure and composition of the Board and

make recommendations to the Board in this regard;– Ensure the development of succession plans for the Board,

CEO and senior management;– Assess the effectiveness of the Board and its committees.

The following directors served on the Nominations Committee during the 2012 financial year:– Dr CH Wiese: Non-executive chairman – Mr JA Louw: Independent non-executive director; and – Mr EC Kieswetter: Independent non-executive director

(appointed on 21 May 2012)

The details of attendance at the meetings are set out below:

DIRECTOR 20 FEB 2012 21 MAY 2012CH WIESEJA LOUW

EC KIESWETTER (appointed 21 May 2012) n/a

As part of the annual review of the composition of the Board and board committees, three (3) additional independent non-executive directors were appointed to the Board. Mr JJ Fouché was appointed

This Committee was constituted as a statutory committee of the Board on 21 February 2012 to execute the duties assigned to it by the Companies Act as well as any additional duties assigned to it by the Board.

This committee has adopted formal terms of reference and will monitor the Group’s activities, taking into account relevant legislation, other legal requirements and prevailing codes of best practice with regard to:– Social and economic development;– Labour and employment;– Ensuring that the Group’s ethics are managed effectively;– Consumer relationships which includes advertising, public

relations and compliance to consumer protection laws;– The environment, health and public safety, and the impact of

activities and products and services.

The following members served on the Social and Ethics Committee during the 2012 financial year:– Mr JA Louw: Independent non-executive director and chairman; – Mr BR Weyers: Executive director;– Mr M Bosman: Alternate director;– Mr JAL Basson: Alternate director; and – Mr C Burger: General Manager Human Resources.

This committee will meet at least twice per annum and the first meeting was held on 2 May 2012.

The details of attendance of members at this meeting are set out below:

DIRECTOR 2 MAY 2012JA LOUWBR WEYERSM BOSMANJAL BASSONC BURGER

Social and Ethics Committee Report


30

Remuneration Report

The board (“Board”) of Shoprite Holdings Limited (“Shoprite Holdings” or “the Group”) and the remuneration committee (“the Remuneration Committee”) present their remuneration report setting out information applicable to the Group’s remuneration policy and in particular executive remuneration, both fixed and variable elements as well as fees paid to non-executive directors.

The Group’s executive remuneration policy continues to be driven by performance and aims at rewarding executives for the growth in the Shoprite Holdings share price, hereby creating shareholder returns. Alignment with shareholders and shareholders’ feedback is important. Such feedback has been taken into account in formulating the Group’s remuneration policy.

With regard to variable pay, for the year under review the Group operated a short term incentive bonus plan, a deferred bonus plan, a virtual option plan and a share appreciation rights plan. Performance and payment for bonus plans and the virtual option scheme are measured against operating profit targets (on a group level and on a business unit level). Eligible employees below executive level also participate in the bonus plans. The Group’s current long term incen-tive plan is a share appreciation plan and payments are linked to share price performance to ensure alignment with shareholder interests.

During the reporting period the Remuneration Committee engaged the services of reward consultants to review its long term incentive plan and based on remuneration best practices and trends, both locally and internationally, a new long term incentive plan was designed. This plan will be presented to shareholders for approval at the annual general meeting and further detail regarding the salient features of the proposed plan are provided in the integrated report. The mandate for the Remuneration Committee was also updated during the reporting period to incorporate the material recommenda-tions of King III and to assist members of the Remuneration Committee in the execution of their roles and responsibilities.

The areas covered in this remuneration report are the following:– The Remuneration Committee and its role;– Key remuneration decisions taken during the 2012 financial year;– A summary of the Company’s remuneration policy;– Current components of remuneration and forward looking policy

for the 2013 financial year;– General terms of executive directors’ employment contracts; and– Non-executive director fees and actual payments made.

On behalf of the Group, I hereby reconfirm our commitment to sustained long term growth for shareholders, supported by the Group’s remuneration policy, and look forward to further growth and successes in the next financial year.

Dr CH WieseChairman of Remuneration Committee

REMUNERATION COMMITTEE

Composition, mandate and attendance The Remuneration Committee functions as a sub-committee of the Board in terms of an agreed mandate and evaluates and monitors the Group’s remuneration philosophy and practices to ensure consist-ency with governance principles and corporate strategy. During the reporting period the mandate was reviewed and aligned with King III and The Companies Act, 2008 requirements. These amendments were also approved by the Board.

The members for the year under review were:– Dr CH Wiese (chairman)– Mr JA Louw

Both members of the Remuneration Committee are non-executive directors and Mr JA Louw is an independent non-executive director as defined by King III. The Remuneration Committee had two meet-ings during the reporting period. The attendance at these meetings is recorded below:

TABLE 1: REMUNERATION COMMITTEE MEETING ATTENDANCE

DIRECTOR 13 MARCH 2012 25 JUNE 2012

CH WIESE

JA LOUW

The chief executive officer, deputy managing and financial director and head of human resources attend meetings, by invitation, to assist the Remuneration Committee with the execution of its mandate. The company secretary also attends the meetings. No executive or senior executive is present at meetings of the committee when his/her own remuneration is discussed or considered.

The chairman of the Remuneration Committee, or in his absence, another member of the Remuneration Committee is required to attend the annual general meeting to answer questions on remuneration.

External advisors are also used by the Group to provide advice when required. In addition, the Group subscribes to a salary survey database to benchmark guaranteed pay, both with regard to the retail industry and the general market.

The terms of reference as set out in the mandate of the Remuneration Committee include:– Assisting the Board to establish a remuneration policy for direc-

tors and senior executives that will promote the achievement of strategic objectives and encourage individual performance;

– Ensuring that the mix of fixed and variable pay in cash, shares and other elements, meet the Group’s needs and strategic objectives;

– Reviewing incentive schemes to ensure continued contribution to shareholder value;

– Determining any criteria necessary to measure the performance of executive directors in discharging their functions and responsi-bilities;

– Reviewing and recommending to the Board the relevant criteria necessary to measure the performance of executives in deter-mining their remuneration;

– Recommending to the Board, based on market benchmarks, the remuneration of the chairman and non-executive directors, whose remuneration is subject to shareholder approval;


31

– Reviewing the outcomes of the implementation of the remunera-tion policy to determine if objectives were achieved;

– Reviewing and approve the remuneration policy as contained in the remuneration report as part of the integrated report;

– Ensuring that the remuneration report be put to a non-binding advisory vote by shareholders;

– Ensuring that consideration is given to executive succession planning in the Group; and

– Ensuring compliance with applicable laws and codes applicable to executive remuneration.

Key remuneration decisions taken during the 2012 fi nancial yearDuring the 2012 financial year, the Remuneration Committee reviewed components of the Group’s remuneration policy and how this links to the Group’s strategic objectives. The following key decisions were taken:– Review and approval of the proposed long-term incentive plan,

designed in line with King III and best practice requirements, for approval by shareholders;

– Review and approval of executive and broad based salary increases for the 2013 financial year;

– Approval of the short-term incentive bonus payments in respect of the 2012 financial year;

– Review and approval of the Group’s remuneration policy and report; and

– Review and approval of proposed non-executive director fees for the 2013 financial year.

REMUNERATION POLICY

Guiding principles The remuneration policy is aligned to the Group’s approach of rewarding directors and senior executives fairly and competitively, according to their capabilities, skills, responsibilities and level of performance. It has the following underlying principles: – Remuneration that is fair and just;– Retaining the services of key talent and critical skills necessary to

realise the Group’s strategic objectives over the long term;– Attracting the key talent and skills required by the Group;– Ensuring that remuneration structures are consistent with the

Group’s long term value creation for shareholders; – Remuneration that is sustainable in the long term and does not

encourage excessive risk taking by key decision makers; – Key performance areas for executives which support an

integrated approach taking into account financial metrics, sustainability, risk management, governance and other strategic objectives;

– Recognising and encouraging exceptional performance, both on an individual level as well as on a Company level.

It is the Group’s objective to provide a level of remuneration that will attract, develop, retain and motivate its employees to implement and execute its strategy in a highly competitive business environment.

The Group’s remuneration policy encourages sustainable performance and stimuli for employee motivation and retention. Executive reward policies are guided by the principle to include a strong link between pay and performance, placing a significant portion of the remuneration “at risk” measured at Group, business

unit and individual performance level. The “at risk” or variable pay includes short term incentive bonuses and long term incentives which provide alignment between executives and shareholders.

Benchmarking and position in the marketTo ensure that the Group remains competitive in the markets in which it operates, all elements of remuneration are subject to regular benchmarking. Reviews are performed annually to benchmark the Group’s remuneration against the retail industry and the general market. Executive positions are also evaluated frequently. Remuneration consultants are utilised to perform the above reviews and benchmarking exercises. The policy aims at positioning the Group as a preferred employer within the retail industry. The general approach with regard to guaranteed pay for the Group is that it is positioned at the median, but for exceptional and scarce skills a premium may be paid by the Group resulting in guaranteed pay levels, in certain circumstances, exceeding the median.

For executives, due to the size of the group, its multiple brands and its extensive footprint on the African continent, guaranteed pay, together with on-target short term incentive bonuses are bench-marked at the upper quartile values of the South African remunera-tion surveys used in the Group’s annual benchmarking. The Group believes that its remuneration policy plays an essential, vital role in realising business strategy and therefore should be competitive in the markets in which the Group operates.

Pay mix between guaranteed package and variable remuneration The Group has not formalised an on target pay mix guideline for executives as part of its remuneration policy. However, variable remuneration for on-target performance has always been the focus of the Group with regard to executives. During the period under review the split between guaranteed pay and variable remuneration paid amounted to approximately 65/35 for executives and 80/20 for other management.

During the reporting period the Group consulted with independent reward consultants and have obtained best practice benchmarks for on-target performance pay mix for executives.

In the 2013 financial year, the Remuneration Committee will review these best practice benchmarks, together with proposed allocations to executives in terms of the proposed new long term incentive plan, to ensure that executives’ pay mix drives the required behaviours and the strategic objectives of the Group.

Components of remunerationThe different components of remuneration, their objectives and their link to the business strategy as well as proposed changes in the remuneration policy are summarised on the following page.

Remuneration Report (continued)


32

TABLE 2: SUMMARY OF REMUNERATION COMPONENTS

Component Fixed/variable

Objective Link to business strategy Policy Proposed changes for 2013 financial year

Guaranteed pay Fixed Reflects scope and nature of role, job content, performance and experience

This component aligns with business strategy as it takes into account internal and external equity. Hereby, ensuring competiveness and rewarding individuals fairly based on a similar job in the market.

Generally positioned at the median, except if there is a need to retain key and critical skills.

No changes proposed.

Benefits Fixed Providing employees with contractually agreed basic benefits such as retire-ment fund benefits (provident fund), medical aid, risk benefits and life and disability insurance per the Group’s human resource policy.

Employees represented by collective bargaining units receive similar benefits i.e. medical aid, life and disability insurance and a retirement fund contributions.

Separate expatriate benefits may apply to international assignments.

Voluntary HIV/Aids counselling and testing programme.

Retirement benefits encourage a culture of saving by employees, whereas the other benefits aim to cater for employees’ physical well-being and life insurance and disability needs. Benefits recognise employees’ need for a holistic approach to guar-anteed package and are part of the overall employee value proposi-tion offered by Shoprite.

The company contributes between 7.5% – 15% towards retirement benefits as per the rules of its retirement funds.

Risk and insurance benefits are company contributions forming part of guaranteed package.

No changes to standard employment benefits.

Short-term incentive bonus

Variable Rewards and motivates achievement of agreed Group and business unit performance objectives.

Encourages growth in sustainable operating profit in the short term and rewards employees for their measurable contribution in this regard.

Operating profit is the financial metric for determining the bonus pool. The plan is subject to certain earning caps, i.e. 150% of target achieved.

Where actual profit is less than 70% of Group target operating profit, a modest bonus may be paid based on each business units’ bespoke performance criteria, for example market share growth, sales, shrinkage, strategic transformation targets, cost savings etc.

No material changes to incentive bonus plan, except for refinement of different business units’ performance criteria to support business strategy.


33

Component Fixed/variable

Objective Link to business strategy Policy Proposed changes for 2013 financial year

Long-term incentive (Cash settled share apprecia-tion rights plan)

Variable Provides value to execu-tives in line with share price growth and acts as a retention mechanism.

Creates shareholder alignment and value creation in the long term as there is only value in the long term incentive if the Company’s share price increases over the life of the plan.

The value in the apprecia-tion in share price from grant date to vesting dates are paid to executives in cash. Share appreciation rights granted vest in three equal tranches after the 3rd, 4th and 5th anni-versary of the grant date.

New proposed long term incentive plan, based on the awarding of actual shares, subject to forfeiture if certain conditions are not met by executives.

Virtual option plan Variable Provides employees who generally do not partici-pate in the share apprecia-tion rights plan with an incentive to grow the operating profit of the Group. As it operates over 5 years it is also aimed at retention.

Aims to create share-holder value creation and increase operating profit.

Eligible employees receive a notional capital amount and based on the growth in the Company’s oper-ating profit year on year the notional amount will vest. The vested amount will, however only be paid after 3,4 and 5 years (in equal amounts).

No changes.

Deferred Bonus plan

Variable Requires employees to defer a portion of their bonuses for up to 5 years and therefore aid reten-tion.

Aimed at retention of key talent.

The criteria are the same as for the short term incentive bonus, but the deferred bonus is only paid in equal amounts after year 3, 4 and 5. In the event of a participant terminating employment (besides death and disa-bility) the deferred bonus will be forfeited.

No changes.


Total guaranteed package The Group operates a total guaranteed package structure which includes all fixed pay components summarised above, namely:– Guaranteed pay; and– Benefits.

In terms of its terms of reference and benchmarking policy, the Remuneration Committee conducts an annual review of the Group’s guaranteed packages.

INCREASESAnnual increases are awarded based on employees’ total guaranteed package value. Annual increases in the total guaranteed package are determined with reference to the scope and nature of an employee’s role, market benchmarks, personal performance and competence, affordability, company performance and projected consumer price index figures. The Chief Executive Officer of the Group may review and recommend amendments to proposed increases to guaranteed packages for employees. Such recommendations are presented to the Remuneration Committee for approval. Executives’ annual increase in guaranteed packages are reviewed and approved by the

Remuneration Committee in terms of the Board approved mandate.Collective bargaining agreements typically exclude performance

based increases and uniform increases, based on the agreements reached between the Company and the bargaining units, are mostly awarded to these employees.

Variable remuneration

SHORT TERM INCENTIVE BONUS PLANThe annual short term incentive plan intends to recognise the achievement of a combination of Group and business unit objectives.

Executives and management participate in the short-term incen-tive scheme which runs over the financial year of the Group. This is a self-funding scheme as the bonus pool is determined based on an operating profit target. The value of the on target bonus earning potential for the plan is included in the annual budget and is provided for in the financial statements.

The quantum of the bonus pool is determined on Group level, but is moderated by the financial performance of each business unit within the Group. Therefore, on Group level, where between 70% and 100% of operating profit target is achieved and the business unit


34

achieves the same or a larger percentage of its operating profit budget, the business units’ bonus pool will be the actual percentage of operating profit budget achieved. However, where the business unit performance does not match or exceed Group performance, participants may earn a bonus based on the bespoke performance criteria applicable to each business unit pre-determined at the begin-ning of the financial year. This ensures that each participant is meas-ured against his specific area of responsibility. Various weightings are also included in the criteria to encourage participants to maximise their role and functionality, such criteria may include:– market share growth; – sales;– shrinkage;– strategic transformation targets (BBBEE); – cost savings; and– stock days, etc.

Employees from all nineteen (19) of the Group’s business units participate in the plan.

The plan also makes provision for stretch targets above the operating profit target set. Where more than 100% of target is achieved on a Group level and this performance is matched or exceeded on a business unit participants can earn up to 150% of their on-target incentive. However, where the current year operating profit does not exceed the previous year operating profit the bonus pool is limited to 100% of the operating profit target.

The annual bonus pool is therefore capped at 150% of operating profit target in instances of financial outperformance.

On an individual executive level the earning potential as a percentage of guaranteed remuneration is expressed below.

TABLE 3: SHORT TERM INCENTIVE BONUS EARNING POTENTIAL AS % OF GUARANTEED REMUNERATION

Position Target as % of guaranteed

remuneration

Stretch as % of g uaranteed

remunerationFinancial Director 58% 86%Executives 56% 85%

Long term incentive plansLong-term incentives are offered through participation in Share Appreciation Rights Plan (“SAR”), a virtual option plan and a deferred bonus plan.

A new long term incentive plan has been developed based on best practice which will be presented to shareholders for approval.

The salient features of the current long term incentives as well as the proposed long term incentive are set out below.

SHARE APPRECIATION RIGHTS PLAN (SAR)The SAR was introduced during 2007. The purpose of the SAR is to align shareholders value creation with the incentive received by executives as gains are determined based on the growth in the share price. Its secondary aim is to retain the services of key individuals for execution of the Group’s strategic objectives. A total of 49 executives participate in the SAR.

Participants in the SAR are remunerated in cash to the value of the appreciation of a specific number of the Company’s ordinary shares over three (3), four (4) and five (5) year period/s. The cash value,

based on the share price appreciation, is determined from allocation date to vesting date. The share appreciation rights vest as follows:– One third after the third anniversary of the grant date;– Another third after the fourth anniversary of the grant date; and– The remainder after the fifth anniversary of the grant date.

During the reporting period no SAR allocations were made to participants. The last allocation will vest in 2015 and no further allocations will be made in terms of this plan.

VIRTUAL OPTION PLAN The virtual option plan is aimed at providing employees who do not participate in the SAR, for example middle management and other key employees and scarce skilled employees, with an incentive to advance the interests of the Group over the long term.

The strategic intent of the plan includes the retention of key employees, providing employees with an opportunity to earn variable remuneration, based on performance to create alignment with shareholders’ interests.

In terms of this plan, a notional capital amount is allocated to participants. Subject to certain conditions, a bonus is determined each year by multiplying the capital amount allocated with the percentage growth in the operating profit of the Group on a year to year basis (i.e. the calculation is based on the percentage growth in operating profit between the current financial year and the previous financial year). The bonus determined in terms of this plan vests equally over a three, four and five year period and is only paid then.

DEFERRED BONUS PLANIn terms of the deferred bonus plan participants are measured on the same criteria which are applicable for the short term incentive bonus plan. The bonus determined as such, however, is deferred and is paid in equal amounts after year three, four and five. Deferred bonuses can be forfeited prior to payment in the event of the participant terminating employment with the Company (apart from death and disability).

The deferred bonus plan therefore serves as a retention mechanism.

PROPOSED EXECUTIVE SHARE PLAN (2012)Based on best practice locally and globally, the Remuneration Committee appointed independent reward consultants to provide recommendations on the design principles of a new long term incentive to replace the current SAR.

The Remuneration Committee has reviewed the proposed Executive Share Plan rules and has approved it, subject to share-holder approval. The shareholders are referred to ordinary resolution 15 on page 111 of the integrated report. The salient features of the proposed plan have been attached to the resolution and the complete plan rules are available for inspection at the Company’s registered address.

The main characteristics of the proposed plan, the performance and vesting conditions applicable to the long term incentive instru-ments and the types of instruments which can be allocated to eligible employees in terms of the plan has been summarised in the diagram overleaf.


35

DIAGRAM 1: SUMMARY OF PROPOSED EXECUTIVE SHARE PLAN

NON-EXECUTIVE DIRECTORS’ REMUNERATION

Independent non-executive directorsIndependent, non-executive directors do not have any employment contracts and do not receive any benefits associated with permanent employment.

The Board, on recommendation by the Remuneration Committee have decided that independent non-executive directors should not be remunerated by means of a base fee and attendance fee in respect of their board and committee obligations. This is as non-executive directors are required to prepare for all meetings and feedback is required by the Board, albeit it the meeting is not actually attended by the non-executive director. The fee structure is therefore based on a retainer basis. The fee structure is reviewed annually and bench-marks for non-executive fees for companies of similar size and comparable industries are considered in setting the proposed non-executive fees. The fee structure is subject to prior approval by shareholders at the annual general meeting of Shoprite Holdings. Travelling and accommodation expenses actually incurred by directors to attend meetings are paid by the Group.

Co-investment SharesForfeitable, restricted

shares allocated based on the value of the investment made by the participant in the plan. Specific vesting

conditions.

Retention SharesForfeitable, restricted

shares which is subject to continued employment for vesting. Aimed at retaining

key talent in exceptional circumstances.

Performance SharesForfeitable, restricted

shares allocated which is subject to performance

conditions and continued employment for vesting.


DilutionThe current SAR and the virtual option plan are cash settled, therefore settlement creates no dilution.In terms of the proposed Executive Share Plan rules an overall limit of approximately 3% (three per centum) of the issued shares of the Company has been imposed when shares are allocated and issued in terms of the plan. An individual limit of approximately 0.5% (comma five per centum) has been imposed.

However, if shares are purchased in the open market for settlement of allocations in terms of the proposed Executive Share Plan the limits will not be impacted. It is the intention of the Group to mostly purchase shares in the open market for purposes of settlement.

CONTRACTS OF EMPLOYMENTExecutive directors and executives of the Group do not have fixed terms contracts, but are employed in terms of the Group’s standard contract of employment. The notice period for termination of service varies between one (1) calendar month and twelve (12) months. Normal retirement age ranges between 60 and 65 years, unless requested by the Board to extend this term. Executive directors and executives also do not have exceptional benefits associated with the termination of services. Restraint of trade agreements are also in place for selected executives.

Executive Share Plan

2012


36

The proposed fee structure for the period 1 November 2011 – 30 October 2012 is as follows:

TABLE 4: PROPOSED NON-EXECUTIVE DIRECTORS’ FEES

BOARDChairman of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . R273 000Lead Independent Director . . . . . . . . . . . . . . . . . . . . . . . . . R142 000Non-Executive Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . R129 000

AUDIT COMMITTEEChairman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . R193 000Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . R96 000

REMUNERATION COMMITTEEChairman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . R50 000Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . R30 000

NOMINATION COMMITTEEChairman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . R50 000Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . R30 000

SOCIAL AND ETHICS COMMITTEEChairman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . R65 000

Refer to special resolution 1 from pages 111 to 112 for approval by shareholders in terms of section 66 of the Companies Act.

Non independent non-executive directorsShoprite Holdings has one (1) non independent non-executive director, Dr CH Wiese. The emoluments paid by the Group to Dr Wiese, is paid to Chaircorp (Pty) Ltd, a management company of which Dr Wiese is an employee.

Fees paid to non-executive directorsThe annual fees payable to non-executive directors for the period 1 November 2010 – 30 October 2011 were approved by shareholders on 31 October 2011 and thereafter paid as presented in the table below:

BOARDChairman of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . R218 000Lead Independent Director . . . . . . . . . . . . . . . . . . . . . . . . . R113 000Non-Executive Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . R103 000

AUDIT COMMITTEEChairman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . R154 000Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . R77 000

REMUNERATION PAID TO EXECUTIVE AND ALTERNATE DIRECTORSThe Group views its executive and alternate directors as prescribed officers as defined in terms of the Companies Act.

Details of the remuneration paid to executive directors and alternate directors for the period under review are disclosed on pages 83 to 84 of the financial statements. The long term incentives which vested during the period under review are disclosed on page 75 to 76 of the financial statements in note 15.4.2.


37


ContentsStatement of Responsibility by the Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Certificate of the Company Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Currency of Annual Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Report of the Independent Auditor on the Consolidated Financial Statements to the Shareholders of Shoprite Holdings Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Directors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Statement of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Notes to the Annual Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Operating Segment Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

Annexure A – Interests in Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

The annual financial statements for the year ended June 2012 have been audited by PricewaterhouseCoopers Inc., in compliance with the applicable requirements of the Companies Act, 2008. The preparation of the audited annual financial statements was supervised by Mr. M Bosman, CA(SA).

Annual Financial StatementsShoprite Holdings Ltd and its Subsidiaries as at June 2012

38

39

Statement of Responsibility by the Board of DirectorsShoprite Holdings Limited and its subsidiaries for the year ended June 2012

Approval of Annual Financial Statements

The Company and Group annual financial statements of Shoprite Holdings Ltd, as identified in the first paragraph, were approved by the Board of directors on 20 August 2012 and signed on its behalf by:

C H Wiese J W BassonChairman Chief Executive Officer

The directors are responsible for the preparation and fair presentation of the annual financial statements of the Company and Group, comprising the directors’ report, the statements of financial position at June 2012, the statements of comprehensive income, changes in equity and cash flows for the year then ended, and the notes to the financial statements, which include a summary of significant accounting policies and other explanatory notes, in accordance with International Financial Reporting Standards (IFRSs) and the requirements of the Companies Act of South Africa.

The directors are satisfied that the information contained in the annual financial statements fairly represents the financial position at year-end and the financial performance and cash flows of the Company and Group.

The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement,

whether due to fraud or error, and for maintaining adequate accounting records and an effective system of risk management as well as the preparation of the supplementary schedules included in these financial statements.

The directors believe that the Company and Group have adequate resources to continue trading as a going concern in the foreseeable future. The annual financial statements support the viability of the Company and the Group.

The Group’s external auditors, PricewaterhouseCoopers Incorporated, audited the Company and Group annual financial statements, and their report is presented on page 40. The external auditors were given unrestricted access to all financial records and related data, including minutes of all meetings of shareholders, the board of directors and committees of the board. The directors believe that all representations made to the independent auditors during their audit are valid and appropriate.


40

We have audited the consolidated and separate financial statements of Shoprite Holdings Limited set out on pages 41 to 106, which comprise the statements of financial position as at 30 June 2012, and the statements of comprehensive income, statements of changes in equity and statements of cash flows for the year then ended, and the notes, comprising a summary of significant accounting policies and other explanatory information, and the directors’ report.

DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL STATEMENTSThe Company’s directors are responsible for the preparation and fair presentation of these consolidated and separate financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatements, whether due to fraud or error.

AUDITOR’S RESPONSIBILITYOur responsibility is to express an opinion on these consolidated and separate financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated and separate financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the

assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OPINIONIn our opinion, the consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of Shoprite Holdings Limited as at 30 June 2012, and its consolidated and separate financial performance and its consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa.

PricewaterhouseCoopers Inc. Director: A WentzelRegistered Auditor

Cape Town20 August 2012

Independent Auditor’s Report to the Shareholders of Shoprite Holdings Limited

Currency of Annual Financial Statements

2012 2011

USA dollar 8.297 6.770 Pound sterling 12.953 10.873 Euro 10.443 9.825 Zambia kwacha 0.002 0.002 Mozambique metical 0.293 0.239 Botswana pula 1.078 1.035

2012 2011

Uganda shilling 0.003 0.003 Malawi kwacha 0.031 0.045 Mauritian rupee 0.266 0.242 Angolan kwanza 0.087 0.073 Indian rupee 0.147 0.152 Ghanian cedi 4.311 4.455

2012 2011

Madagascan ariary 0.004 0.004 Nigerian naira 0.051 0.045 Tanzania shilling 0.005 0.004 Congolese frank 0.009 0.008

The annual financial statements are expressed in South African rand. The approximate rand cost of a unit of the following currencies at year-end was:

Certificate of the Company Secretary

In terms of section 88 (e) of the Companies Act no 71 of 2008 (as amended) I, PG du Preez, in my capacity as Company Secretary, confirm that for the year ended 30 June 2012, the Company has lodged with the Companies and Intellectual Property Commission, all such returns as are required of a public company in terms of the Companies Act and that all such returns and notices are true, correct and up to date.

PG du PreezCompany Secretary 20 August 2012


41

Directors’ ReportShoprite Holdings Ltd and its Subsidiaries

NATURE OF BUSINESSShoprite Holdings Limited (“Shoprite Holdings”) is an investment holding company listed on the Johannesburg Stock Exchange Limited (“JSE”) in the “food retailers & wholesalers” sector. Secondary listings are also maintained on the Namibian and Zambian Stock Exchanges.

SHOPRITE HOLDINGS COMPRISES OF THE FOLLOWING MAIN SUBSIDIARIES:

Shoprite Checkers (Pty) Ltd:Supermarkets: Serves a broad customer base through Shoprite, Shoprite Hyper, Checkers, Checkers Hyper and Usave store formats. Supply Chain Management: A highly sophisticated supply line services the Group’s outlets in 17 countries. The Group prides itself in running a state-of-the-art distribution operation and became the first South African retailer to receive the ISO 9002 accreditation for import and export handling.Fast Foods: The Hungry Lion chain boasts modern, well-designed stores with an inescapable focus on fried chicken. Hungry Lion now operates outlets within South Africa, Botswana, Zambia, Lesotho, Swaziland, Namibia, Angola and the Democratic Republic of Congo.Franchise: The OK Franchise Division’s stores offer a wide range of perishable and non-perishable food items and liquor. The franchise division encompasses seven (7) supermarket/convenience outlet brands namely OK Foods, OK Grocer, OK Minimark, OK Value, Friendly Grocer, 7-Eleven and Priceclub, a wholesaler Megasave as well as three (3) add-on liquor outlets under the Enjoy OK Liquorstore, Friendly Liquormarket and 7-Eleven Liquormarket brands. Freshmark: Freshmark is the Group’s fruit and vegetable procure-ment and distribution arm and supplies fresh produce to the Group’s retail outlets. Currently one of the largest buyers of fresh produce in South Africa, Freshmark also imports fruit and vegetables to ensure a wide variety and continuity of traditionally seasonal fresh produce. Liquor Stores: Trading under the Shoprite and Checkers LiquorShop brands respectively, the liquor shops have extended the Group’s offering by providing a selection of wines, beers and a wide range of premium spirits to its customers.Meat Markets: The Group’s meat market division is the largest retailer of fresh meat on the African continent. Customers are served through in-store butcheries that employ qualified butchers and technicians.Money Markets: The Money Markets offer a comprehensive range of financial services and products to the Group’s customers through dedicated in-store service counters.Furniture: The Furniture division offers furniture, electrical appliances and home entertainment products to customers for cash or credit through its OK Furniture, OK Power Express and House and Home outlets in South Africa, Botswana, Namibia, Swaziland, Lesotho, Zambia, Mozambique and Angola.Pharmacies and wholesale distribution: MediRite’s in-store pharma-cies offer consumers an easy access to affordable healthcare and healthcare professionals. These in-store dispensaries currently operate throughout South Africa with outlets in Angola and Swaziland. The Group’s pharmaceutical wholesaler, Transpharm, sells and distributes a wide range of pharmaceutical products and surgical equipment to hospitals and clinics, dispensing doctors, veterinary

surgeons and private and corporate pharmacies. Properties: This division is tasked with the responsibility of expanding the Group’s supermarket portfolio through the identification and leasing of new supermarket premises or developing new shopping centres to accommodate one of the Group’s supermarket formats. New retail developments and the redevelopment of existing proper-ties are supervised through every stage of the planning-, design- and construction process.

Shoprite Investments Ltd:As a wholly owned subsidiary of Shoprite Holdings, Shoprite Investments was utilized as a vehicle to issue ZAR4,7 billion convert-ible bonds to qualifying investors as part of the Group’s successful capital raising concluded during March 2012. For this purpose Shoprite Investments converted to a public company. The convertible bonds were listed on the JSE during May 2012. Shoprite Investments performs the Group’s treasury functions and other financing of credit sales to third parties.

Computicket (Pty) Ltd:As a premier ticketing solution provider and one of the most recognised brand names, Computicket offers theatre, concert, festival, sport and cinema tickets along with bus tickets and gift vouchers through a network of outlets located across South Africa, a call centre as well as the Computicket website. Computicket also offers travel packages. Computicket has also recently expanded its presence to Namibia.

Shoprite International Ltd:Incorporated in the Republic of Mauritius, Shoprite International is the holding company for the majority of the Group’s non-South African retail and property investments.

Shoprite Insurance Company Ltd:Provides first and third party short term insurance to the Group and its customers.

Other Group Subsidiaries:The interests of Shoprite Holdings in other subsidiaries are set out on page 106 of the Integrated Report.

FINANCIAL REVIEWThe Group’s headline earnings per share amounts to 607 cents for the year (2011: 507,6 cents). Details of the profit of Shoprite Holdings and its subsidiaries are contained in the statement of comprehensive income on page 45 with reference to the operating segment information on page 59. The financial position of Shoprite Holdings and its subsidiaries are recorded in the statement of financial position on page 44. Further details are furnished in the notes to the annual financial statements on pages 48 to 105. The Group’s net asset value per share as at 30 June 2012 was 2382 cents (2011: 1400 cents).

DISTRIBUTION TO SHAREHOLDERS

Preference dividendsDetails are reflected in note 28 to the Group’s annual financial statements.


42

Ordinary dividendsAn interim cash dividend (no. 126) of 109 cents per share was paid on 30 April 2012. A final dividend (no. 127) of 194 cents per share, declared on 21 August 2012, is payable on 17 September 2012, bringing the total dividend for the year to 303 cents (2011: 253 cents) per ordinary share.

SHARE CAPITALThe authorised share capital of Shoprite Holdings remained unchanged at 650 000 000 (six hundred and fifty million) ordinary shares of 113,4 cents (one hundred and thirteen comma four cents) each.

On 29 March 2012, Shoprite Holdings issued 27,100,000 additional ordinary shares of 113,4 cents each resulting in an increase of the total number of issued Shoprite Holdings ordinary shares to 570 579 460 (2011 – 543 479 460) shares of 113,4 cents each.

On 28 June 2012, shareholders approved the issue of an additional 13,803,405 non-convertible, non-participating, no par value deferred shares in the share capital of Shoprite Holdings to Thibault Square Financial Services (Pty) Ltd pursuant to the issue of the additional ordinary shares as referred to above. These deferred shares were however only issued subsequent to the financial year end.

As at 30 June 2012, 35 436 472 (6.2%) ordinary shares were held as treasury shares by a wholly owned subsidiary of Shoprite Holdings.

GOING CONCERNThe annual financial statements of the Group were prepared on a going concern basis.

The board has performed a formal review of the Group’s results and its ability to continue trading as a going concern in the foresee-able future.

The directors of Shoprite Holdings confirm that they are satisfied that the Group has adequate resources to continue in business for the foreseeable future.

BORROWINGSShoprite Holdings has unlimited borrowing powers in terms of its Memorandum of Incorporation (MOI).

The Group’s overall level of debt increased from R50 million to R4 035 million during the financial year under review.

SPECIAL RESOLUTIONSAt the annual general meeting of Shoprite Holdings held on 31 Octo ber 2011, shareholders approved the following special resolutions:– Specia l resolution number 1: Remuneration payable to

Non-Executive Directors; – Special resolution number 2: Financial Assistance to

Subsidiaries, Related and inter-related entities; and – Special resolution number 3: General Approval to repurchase

shares.

At the meeting of shareholders of Shoprite Holdings held on 28 June 2012, the following special resolutions were approved:– Special resolution number 1: Specific authority to directors of

Shoprite Holdings to allot and issue a maximum of 30,000,000 ordinary shares for the purpose of converting the convertible bonds;

– Special resolution number 2: Specific authority to the directors of Shoprite Holdings to allot and issue up to a maximum of 15,280,522 deferred shares to Thibault Square Financial Services (Pty) Ltd pursuant to the conversion of convertible bonds;

– Special resolution number 3: Specific authority to the directors of Shoprite Holdings to allot and issue up to a maximum of 13,803,405 deferred shares to Thibault Square Financial Services (Pty) Ltd pursuant to the share placement of 29 March 2012; and

– Special resolution number 4: The provision of financial assistance in terms of section 44 of the Companies Act.

During the reporting period the following special resolutions were passed by main Group subsidiaries:

Shoprite Checkers (Pty) Ltd– Special resolution number 1: The provision of financial

assistance in terms of sections 44 and 45 of the Companies Act.

Shoprite Investments Ltd– Special resolution number 1: The conversion from a private to a

public company; and – Special resolution number 2: The issuing of convertible bonds in

the aggregate value of R1,7 billion to Titan Premier Investments (Pty) Ltd in terms of section 41 of the Companies Act.

Note: Although the required approval has been granted, the above issue has not been effected to date.

DIRECTORS AND SECRETARYThe directors’ names and details are furnished on pages 8 and 9 and the company secretary’s name, business and postal address on page 118 of the Integrated Report.

In terms of the Memorandum of Incorporation of Shoprite Holdings (“the MOI”), no less than one third of the directors shall retire by rotation at each annual general meeting.

Messrs JG Rademeyer, EL Nel and AE Karp retire as directors, in terms of paragraph 14.1 of the MOI of the Company, at the annual general meeting. All these directors have offered themselves for re-election as directors of Shoprite Holdings.

During the financial year, the Board approved the appointment of Messrs JJ Fouché and JA Rock as Non-Executive Directors of Shoprite Holdings. On 6 August 2012, the Board appointed Dr ATM Mokgokong as a Non-Executive Director. In terms of Article 13.2 of the MOI Messrs Fouché, Rock and Dr Mokgokong retire at the annual general meeting on 29 October 2012, but being eligible, offer themselves for re-election.

The board supports the re-election of these directors.

Directors’ Report (continued)Shoprite Holdings Ltd and its Subsidiaries


43

DIRECTORS’ AND ALTERNATE DIRECTORS’ INTERESTS IN ORDINARY SHARES

DirectBeneficial

Indirect Beneficial

Total2012

Total2011

CH Wiese 0 95 649 698 95 649 698 89 917 398JW Basson 0 10 071 652 10 071 652 10 110 084JJ Fouche 472 171 0 472 171 472 171CG Goosen 3 000 1 203 202 1 206 202 1 206 202B Harisunker 406 189 0 406 189 400 189AE Karp 147 269 0 147 269 147 269EC Kieswetter 1 000 0 1 000 0JA Louw 0 50 000 50 000 150 000 JF Malherbe 0 72 453 72 453 72 453EL Nel 0 148 727 148 727 148 727JG Rademeyer 0 10 000 10 000 10 000JA Rock 0 0 0 0BR Weyers 404 594 0 404 594 404 594JAL Basson 3 070 86 131 89 201 80 600M Bosman 125 000 0 125 000 110 000PC Engelbrecht 128 000 146 622 274 622 224 055JD Wiese 0 14 074 14 074 14 074

After the Group’s financial year end and expiry of the closed trading period directors or alternate directors purchased the following amount of shares on the open market:

DirectBeneficial

Indirect Beneficial Total

PC Engelbrecht 2 000 53 378 55 378

DIRECTOR’S INTEREST IN NON-CONVERTIBLE, NON-PARTICIPATING, NO PAR VALUE DEFERRED SHARES

Total2012

Total2011

CH Wiese 276 821 666 276 821 666

On 26 July 2012, Shoprite Holdings issued an additional 13,803,405 non-convertible, non-participating, no par value deferred shares in the share capital of Shoprite Holdings to Thibault Square Financial Services (Pty) Ltd, an entity related to Dr CH Wiese, pursuant to the issue of the additional ordinary shares.

CORPORATE GOVERNANCEStatements of the board’s application of the codes of good corporate governance are set out in the corporate governance report on page 24, which forms part of this directors’ report and the remuneration report on page 31.

BOARD COMMITTEESThe reports of the various board committees are included in the corporate governance report from pages 24 to 27.

AUDITORSPricewaterhouseCoopers Incorporated will continue in office in accordance with Section 90(1) of the Companies Act.

EVENTS AFTER THE REPORTING DATEOther than the issue of the additional deferred shares to Thibault Square Financial Services (Pty) Ltd, there have been no material changes in the affairs or financial position of the Group and its subsidiaries from 30 June 2012 to the date of this report.

HOLDING COMPANYShoprite Holdings has no holding company. An analysis of the main shareholders appears on page 107 of this report.

LITIGATION STATEMENTThe two disputes between the Group and South African Breweries Plc related to the purchase of OK Bazaars (1929) Limited are in the process of being determined through arbitration.

The investigation initiated during June 2009 by the Competition Commission of South Africa (“the Commission”) into the alleged anti-competitive conduct of various food retailers which includes the Group’s main trading subsidiary, Shoprite Checkers (Pty) Ltd, is still on-going with no referral of any of the complaints investigated to the Competition Tribunal to date.

The referral by the Commission of the complaint of alleged abuse of dominance against Computicket (Pty) Ltd must still be heard by the Competition Tribunal.

The claim instituted in the High Court of Lagos by AIC Limited during April 2010 against the Group’s main trading subsidiary, Shoprite Checkers (Pty) Ltd and its Nigerian subsidiary, Retail Supermarkets Nigeria Ltd, on the basis of alleged breach of contract has not proceeded to trial and such date must still be allocated by the Lagos High Court.

Save as recorded above, the directors are not aware of any legal or arbitration proceedings, including proceedings that are pending or threatened, that may have or have had in the recent past, being at least the previous twelve (12) months, a material effect on the Group’s financial position.

44

C O M PA N Y GROUP

June June June June2011 2012 2012 2011

R’000 R’000 Notes R’000 R’000


Statement of Financial PositionShoprite Holdings Ltd and its Subsidiaries as at June 2012

ASSETSNON-CURRENT ASSETS

— — Property, plant and equipment 3 9 668 559 8 168 749 1 654 503 2 305 512 Interests in subsidiaries 5 — —

— — Investment in associate 6 103 886 — — — Available-for-sale investments 7 — 59 656 — — Loans and receivables 8 3 706 4 308

237 363 Deferred income tax assets 9 413 645 326 457 — — Intangible assets 10 894 296 719 105

— — Fixed escalation operating lease accrual 11 10 573 9 246

1 654 740 2 305 875 11 094 665 9 287 521 CURRENT ASSETS

— — Inventories 12 8 680 109 7 055 867 — 15 327 Trade and other receivables 13 2 702 031 2 255 390 — — Current income tax assets 81 190 38 543

10 774 74 237 Interests in subsidiaries 5 — — — — Loans and receivables 8 16 197 46 226

603 555 3 387 853 Cash and cash equivalents 7 939 333 1 961 551

614 329 3 477 417 19 418 860 11 357 577

— — Assets held for sale 4 391 993 58 659

2 269 069 5 783 292 TOTAL ASSETS 30 905 518 20 703 757 EQUITYCAPITAL AND RESERVES ATTRIBUTABLE TO EQUITY HOLDERS

616 583 647 314 Share capital 15 647 314 616 583 293 072 3 672 069 Share premium 3 672 069 293 072

— — Treasury shares 15 (320 146) (337 406)1 347 574 1 425 607 Reserves 16 8 745 805 6 512 451 2 257 229 5 744 990 12 745 042 7 084 700

— — NON-CONTROLLING INTEREST 62 675 58 750 2 257 229 5 744 990 TOTAL EQUITY 12 807 717 7 143 450

LIABILITIESNON-CURRENT LIABILITIES

2 450 2 450 Borrowings 17 4 006 698 26 177 — — Deferred income tax liabilities 9 152 085 25 377 — — Provisions 18 338 791 339 200 — — Fixed escalation operating lease accrual 19 520 206 455 787 — — Trade and other payables 20 21 878 263 455

2 450 2 450 5 039 658 1 109 996 CURRENT LIABILITIES

1 126 24 975 Trade and other payables 20 12 711 704 9 807 743 — — Borrowings 17 28 736 23 578 — — Derivative financial instruments 14 231 3 606

4 247 7 028 Current income tax liabilities 151 025 464 316 — — Provisions 18 138 634 104 117 — — Bank overdrafts 22 858 2 042 100

4 016 3 849 Shareholders for dividends 4 955 4 851 9 389 35 852 13 058 143 12 450 311

11 840 38 302 TOTAL LIABILITIES 18 097 801 13 560 307 2 269 069 5 783 292 TOTAL EQUITY AND LIABILITIES 30 905 518 20 703 757

45

C O M PA N Y GROUP


R’000 R’000 Notes R’000 R’000


Statement of Comprehensive IncomeShoprite Holdings Ltd and its Subsidiaries for the year ended June 2012

— — Sale of merchandise 82 730 587 72 297 777 — — Cost of sales (65 752 642) (57 624 408)

— — GROSS PROFIT 16 977 945 14 673 369 1 307 681 1 655 057 Other operating income 21 2 325 312 1 855 841

— — Depreciation and amortisation 22 (1 090 295) (933 592) — — Operating leases 23 (1 940 221) (1 700 468) — — Employee benefits 24 (6 530 468) (5 762 045)

(3 508) (8 937) Other expenses (5 077 139) (4 146 408)

1 304 173 1 646 120 TRADING PROFIT 4 665 134 3 986 697 (1) — Exchange rate losses (8 343) (446) — — Items of a capital nature 27 (93 687) (78 533)

1 304 172 1 646 120 OPERATING PROFIT 25 4 563 104 3 907 718 33 574 64 438 Interest received 142 166 94 614

(198) (126) Finance costs 28 (223 563) (125 964)

1 337 548 1 710 432 PROFIT BEFORE INCOME TAX 4 481 707 3 876 368 (131 060) (114 556) Income tax expense 29 (1 438 889) (1 346 826)

1 206 488 1 595 876 PROFIT FOR THE YEAR 3 042 818 2 529 542

OTHER COMPREHENSIVE INCOME, NET OF INCOME TAX — — Fair value movements on available-for-sale investments 16 (51 219) 1 950 — — Foreign currency translation differences 16 288 699 (142 451)

1 206 488 1 595 876 TOTAL COMPREHENSIVE INCOME FOR THE YEAR 3 280 298 2 389 041

PROFIT ATTRIBUTABLE TO:

1 206 488 1 595 876 Owners of the parent 3 026 563 2 509 780 — — Non-controlling interest 16 255 19 762

1 206 488 1 595 876 3 042 818 2 529 542

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:

1 206 488 1 595 876 Owners of the parent 3 264 043 2 369 279 — — Non-controlling interest 16 255 19 762

1 206 488 1 595 876 3 280 298 2 389 041

Basic and diluted earnings per share (cents) 30 590.0 495.9

46


Statement of Changes in EquityShoprite Holdings Ltd and its Subsidiaries for the year ended June 2012

Attributable to equity holders

TotalNon-

controlling Share Share Treasury Other RetainedR’000 Notes equity interest Total capital premium shares reserves earnings

GROUPBALANCE AT JUNE 2010 5 972 016 67 184 5 904 832 616 583 293 072 (337 406) 140 920 5 191 663

Total comprehensive income 2 389 041 19 762 2 369 279 — — — (140 501) 2 509 780 Profit for the year 2 529 542 19 762 2 509 780 2 509 780 Recognised in equity Net fair value movement on available-for-sale investments 16 2 267 2 267 2 267 Income tax effect of net fair value movement on available-for-sale investments 16 (317) (317) (317) Foreign currency translation differences 16 (142 451) (142 451) (142 451)

Transfer to contingency reserve 16 — — 4 509 (4 509)Dividends distributed to shareholders (1 217 607) (28 196) (1 189 411) (1 189 411)

BALANCE AT JUNE 2011 7 143 450 58 750 7 084 700 616 583 293 072 (337 406) 4 928 6 507 523

Total comprehensive income 3 280 298 16 255 3 264 043 — — — 237 480 3 026 563 Profit for the year 3 042 818 16 255 3 026 563 3 026 563 Recognised in equity Net fair value movement on available-for-sale investments 16 (59 557) (59 557) (59 557) Income tax effect of net fair value movement on available-for-sale investments 16 8 338 8 338 8 338 Foreign currency translation differences 16 288 699 288 699 288 699

Equity component of convertible bonds issued during the year 16 333 880 333 880 333 880 Proceeds from ordinary shares issued 15 3 409 728 3 409 728 30 731 3 378 997 Treasury shares' loss 74 289 74 289 17 260 57 029 Transfer from contingency reserve 16 — — (33 536) 33 536 Dividends distributed to shareholders (1 433 928) (12 330) (1 421 598) (1 421 598)

BALANCE AT JUNE 2012 12 807 717 62 675 12 745 042 647 314 3 672 069 (320 146) 542 752 8 203 053

COMPANYBALANCE AT JUNE 2010 2 327 918 2 327 918 616 583 293 072 — 2 152 1 416 111

Total comprehensive income Profit for the year 1 206 488 1 206 488 1 206 488

Dividends distributed to shareholders (1 277 177) (1 277 177) (1 277 177)

BALANCE AT JUNE 2011 2 257 229 2 257 229 616 583 293 072 — 2 152 1 345 422

Total comprehensive income Profit for the year 1 595 876 1 595 876 1 595 876

Proceeds from ordinary shares issued 15 3 409 728 3 409 728 30 731 3 378 997 Dividends distributed to shareholders (1 517 843) (1 517 843) (1 517 843)

BALANCE AT JUNE 2012 5 744 990 5 744 990 647 314 3 672 069 — 2 152 1 423 455

47

C O M PA N Y GROUP


R’000 R’000 Notes R’000 R’000


Statement of Cash FlowsShoprite Holdings Ltd and its Subsidiaries for the year ended June 2012

(64 496) 89 042 CASH FLOWS FROM/(UTILISED BY) OPERATING ACTIVITIES 3 334 804 1 543 646

1 304 172 1 646 120 Operating profit 4 563 104 3 907 718 (1 306 771) (1 652 535) Less: investment income (82 259) (27 663)

1 — Non-cash items 32.1 1 714 522 1 459 480 — — Payments for cash settlement of share appreciation rights (287 540) (218 037)

Payments for settlement of post-retirement medical benefits liability — — 36.2 (1 779) (2 630)

(285) 8 521 Changes in working capital 32.2 649 234 (1 324 359)

(2 883) 2 106 Cash generated from/(utilised by) operations 6 555 282 3 794 509 33 574 77 728 Interest received 159 024 110 519

(198) (126) Interest paid (125 745) (125 964)1 306 771 1 639 245 Dividends received 65 401 11 758

(1 276 499) (1 518 010) Dividends paid 32.3 (1 433 824) (1 216 084) (125 261) (111 901) Income tax paid 32.4 (1 885 334) (1 031 092)

65 535 (714 472) CASH FLOWS (UTILISED BY)/FROM INVESTING ACTIVITIES 32.5 (3 110 892) (2 937 011) — 3 409 728 CASH FLOWS FROM FINANCING ACTIVITIES 32.6 7 767 685 9 329

1 039 2 784 298 NET MOVEMENT IN CASH AND CASH EQUIVALENTS 7 991 597 (1 384 036) 602 517 603 555 Cash and cash equivalents at the beginning of the year (80 549) 1 344 587

(1) — Effect of exchange rate movements on cash and cash equivalents 5 427 (41 100)

603 555 3 387 853 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 7 916 475 (80 549)

Consisting of: 603 555 3 387 853 Cash and cash equivalents 7 939 333 1 961 551

— — Bank overdrafts (22 858) (2 042 100)

603 555 3 387 853 7 916 475 (80 549)


48

Notes to the Annual Financial StatementsShoprite Holdings Ltd and its Subsidiaries for the year ended June 2012

1. ACCOUNTING POLICIES The principal accounting policies adopted in the preparation

of the consolidated financial statements are set out below and are consistent with those applied in the previous year, unless otherwise stated.

The consolidated Group’s and separate Company’s financial statements were authorised for issue by the board of directors on 20 August 2012.

1.1 Basis of preparation The financial statements are prepared in accordance with

and comply with International Financial Reporting Standards (IFRS) and the South African Companies Act (Act No 71 of 2008) as amended. The financial statements are prepared under the historical cost convention, as modified by the revaluation of certain financial instruments to fair value.

1.1.1 USE OF JUDGMENTS, ASSUMPTIONS AND ESTIMATES 1.1.1.1 Judgments The preparation of the financial statements in accordance

with IFRS requires management to exercise its judgment in the process of applying the Group’s accounting policies. The most significant judgments in applying the Group’s accounting policies relate to the following:

a) Valuation of inventory: Trading inventories are valued by use of the retail inventory method as an approximation of weighted average cost. Significant judgment is required in the application thereof, specifically as far as it relates to gross margin percentages, accrual rates for rebates and settlement discounts and shrinkage rates applied.

b) Segment reporting: IFRS 8 requires an entity to identify its operating segments. Once an entity has done that, it is required to determine its reportable segments. Reportable segments may comprise single operating segments or an aggregation of operating segments. Aggregation of one or more operating segments into a single reportable segment is permitted where certain conditions are met, the principle conditions being that the operating segments should have similar economic characteristics and the operating segments are similar in respect of the products and services offered, nature of production processes, type or class of customers, distri-bution methods, and regulatory environment.

The Group’s management has assessed the above mentioned aggregation criteria in respect of its identified retail operating segments and believe that it have been satisfied, therefore it has elected to aggregate these segments as allowed by IFRS 8.

1.1.1.2 Assumptions and estimates The preparation of the financial statements in accordance

with IFRS requires the use of certain critical accounting estimates and assumptions. The most significant assump-tions and estimates used in applying the Group’s accounting policies relate to the following:

a) Impairment of assets: The Group performs a review of loss-making stores and considers the need for the

impairment of assets under these circumstances. This determination requires significant judgment. The Group evaluates amongst other things, the duration and extent of the losses, the near-term business outlook for the store, and the possible redeployment of the assets between stores. Refer to note 22.

b) Useful lives of assets: In determining the depreciation and amortisation charge for property, plant and equipment and intangible assets, management applies judgment in estimating the useful lives and residual values of these different asset classes. Refer to note 22.

c) Income taxes: The Group is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the worldwide accrual for income taxes. The Group recognises liabilities for anticipated uncertain income tax positions based on estimates of potential additional taxes due. With regards to deferred income tax assets for unutilised income tax losses, judgment is also required to whether sufficient future taxable income will be available against which these losses can be utilised. Refer to notes 1.11 and 29.

d) Allowances for doubtful debts: Trade receivables include instalment sale debtors and franchise debtors for which allowances for impairment are made in accordance with the accounting policy in note 1.15. These calculations involve the discounting of projected future cash flows and require the use of estimates. Details regarding the allowances are set out in note 13.

e) Employee benefit accruals and provisions: Various assumptions are applied in determining the valuations of post-retirement medical benefits, share based payment accruals and long term employee benefits as set out in notes 1.20, 1.22, 15, 18 and 36.

Estimates and assumptions that have a significant risk of causing a material adjustment to the carrying value of assets and liabilities in a subsequent year relate to the following: income taxes; allowances for doubtful debts and employee benefit allowances.

All estimates and underlying assumptions are based on historical experience and various other factors that manage-ment believes are reasonable under the circumstances. The results of these estimates form the basis of judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and any affected future periods.

1.1.2 USE OF ADJUSTED MEASURES The measures listed on the following page are presented as

management believes it to be relevant to the understanding of the Group’s financial performance. These measures are used for internal performance analysis and provide additional useful information on underlying trends to equity holders. These measures are not defined terms under IFRS


49

and may therefore not be comparable with similarly titled measures reported by other entities. It is not intended to be a substitute for, or superior to, measures as required by IFRS.

a) Trading profit on the face of the statement of compre-hensive income, being the Group’s operating results excluding foreign exchange rate differences and income or expenditure of a capital nature.

b) Income or expenditure of a capital nature on the face of the statement of comprehensive income, being all re-measurements excluded from the calculation of head-line earnings per share in accordance with the guidance contained in SAICA Circular 3/2009: Headline Earnings. The principal items that will be included under this measure are: gains and losses on disposal and scrapping of property, plant and equipment, intangible assets and assets held for sale; impairments or reversal of impair-ments; any non-trading items such as gains and losses on disposal of investments, operations and subsidiaries.

c) Interest received on the face of the statement of comprehensive income, being only interest received on call and operating bank account balances.

1.2 Consolidation 1.2.1 SUBSIDIARIES Subsidiaries are entities (including special purpose entities)

which are, directly or indirectly, controlled by the Group. Control is established where the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The existence and effect of potential voting rights that are currently exercis-able or convertible are considered when assessing whether the Group controls another entity. The acquisition method of accounting is used to account for business combinations.

The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired as well as liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of the acquisition over the fair value of the Group’s share of the identifiable net assets of the subsidiary acquired is recorded as goodwill. If the cost of the acquisi-tion is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the statement of comprehensive income. A subsidiary is consolidated from the date on which control is transferred to the Group and is no longer consolidated from the date that the control ceases. Where necessary, accounting poli-cies of subsidiaries have been changed to ensure consist-ency with the policies adopted by the Group. All intergroup transactions, balances and unrealised gains and losses on transactions between Group companies have been elimi-nated.

1.2.2 JOINT VENTURES Joint ventures are those entities over which the Group

exercises joint control in terms of a contractual agreement. The Group’s interests in jointly controlled entities are accounted for by proportionate consolidation. The Group combines its proportionate share of the assets, liabilities, revenue, income and expenses, on a line-for-line basis, with similar items in the financial statements of the Group. The results of joint ventures are included in the Group’s annual financial statements from the effective date of joint control until the effective date that joint control ceases. Where applicable, accounting policies applied by joint ventures have been changed to ensure consistency with the policies adopted by the Group.

1.2.3 ASSOCIATES Associates are those entities over which the Group

exercises significant influence but not control. Significant influence is presumed to exist when the Group holds between 20% and 50% of the voting rights of another entity. The Group’s investments in associates are accounted for using the equity method and are initially recognised at cost. Investments in associates include goodwill identified on acquisition, net of any accumulated impairment losses.

The Group’s share of post-acquisition profit or loss and its share of post-acquisition movements in other compre-hensive income are recognised in the statement of comprehensive income and in other comprehensive income respectively, with a corresponding adjustment to the carrying amount of the investment, from the date that significant influence commences until the date that signifi-cant influence ceases. When the Group’s share of losses in an associate equals or exceeds its investment in the asso-ciate, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate. Where applicable, accounting policies applied by associates have been changed to ensure consistency with the policies adopted by the Group.

1.2.4 TRANSACTIONS WITH NON-CONTROLLING INTERESTS The Group treats transactions, such as share purchases,

with non-controlling interests as transactions with equity owners of the Group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

1.3 Foreign currency translation 1.3.1 FUNCTIONAL AND PRESENTATION CURRENCY All items in the financial statements of the Group’s subsidi-

aries and joint ventures are measured using the currency of the primary economic environment in which the entity oper-ates (the functional currency). The Group’s consolidated financial statements are presented in South African rand,


50

which is Shoprite Holdings Ltd’s functional and the Group’s presentation currency.

1.3.2 TRANSACTIONS AND BALANCES Foreign currency transactions are translated into the func-

tional currency using the average exchange rates for the relevant month. These average exchange rates approxi-mate the spot rate at the date of the transaction. Gains and losses resulting from the settlement of such transactions, and from the translation of monetary assets and liabilities denominated in foreign currencies at closing rates, are recognised in the statement of comprehensive income.

1.3.3 FOREIGN OPERATIONS The results and the financial position of all Group subsidi-

aries, joint ventures and associates that have a functional currency that is different from the presentation currency of the Group are translated into the presentation currency as follows:

i) Assets and liabilities for each statement of financial posi-tion presented are translated at the closing rate at the date of that statement of financial position;

ii) Income and expenses for each statement of compre-hensive income presented are translated at the average exchange rates for the period presented; and

iii) All resulting translation differences are recognised in other comprehensive income and presented as a sepa-rate component of equity in the foreign currency transla-tion reserve (FCTR).

On consolidation, exchange rate differences arising from the translation of the net investment in foreign operations are also taken to the FCTR. The Group’s net investment in a foreign operation is equal to the equity investment plus all monetary items that are receivable from or payable to the foreign operation, for which settlement is neither planned nor likely to occur in the foreseeable future.

When a foreign operation is disposed of or sold and the Group loses control, joint control or significant influence over the foreign operation all related exchange rate differ-ences recognised in other comprehensive income and accumulated in equity in the FCTR are reclassified from equity to the statement of comprehensive income as part of the profit or loss on the sale of the operation. On partial disposal of a foreign subsidiary, where a change occurs in the absolute ownership percentage held by the Group and control is not lost, a proportionate share of all related exchange rate differences recognised in other comprehen-sive income is re-attributed to the non-controlling interests in that foreign operation. On partial disposal of a foreign joint venture or associate, where a change occurs in the absolute ownership percentage held by the Group and joint control or significant influence is not lost, a proportionate share of all related exchange rate differences recognised in other comprehensive income are reclassified from equity to the statement of comprehensive income.

Goodwill and fair value adjustments arising on the acqui-sition of a foreign subsidiary are treated as assets and liabili-

ties of the foreign subsidiary and are translated at the closing rate.

1.4 Property, plant and equipment Property, plant and equipment are tangible assets held by

the Group for use in the supply of goods, rental to others or administrative purposes and are expected to be used during more than one period. All property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated impairment. The historical cost includes all expenditure that is directly attributable to the acquisition of the buildings, machinery, equipment and vehicles and is depreciated on a straight-line basis, from the date it is avail-able for use, at rates appropriate to the various classes of assets involved, taking into account the estimated useful life and residual values of the individual items. Land is not depreciated, as it has an unlimited useful life. Improvements to leasehold properties are shown at cost and written off over the remaining period of the lease and the items useful life.

Management determines the estimated useful lives, residual values and the related depreciation charges at acquisition and these are reviewed at each statement of financial position date. If appropriate, adjustments are made and accounted for prospectively as a change in estimate.

Useful lives: Buildings ................................................................ 20 years Machinery ...................................................... 5 to 10 years Vehicles .......................................................... 5 to 10 years Trolleys .................................................................... 3 years Equipment ...................................................... 5 to 10 years Computer equipment ....................................... 4 to 5 years Aeroplane .............................................................. 15 years The cost of major refurbishments is capitalised as property,

plant and equipment to the extent that it can be recovered from future use of the assets. The capitalised amounts are depreciated over the relevant write-off periods. All other repairs and maintenance are charged to the statement of comprehensive income during the period in which these are incurred.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposal or scrapping of property, plant and equipment, being the difference between the net proceeds on disposal or scrapping and the carrying amount, are recognised in the statement of comprehensive income.

1.5 Financial instruments The Group classifies its financial instruments in the

following categories: available-for-sale financial assets, loans and receivables, financial liabilities and derivatives at fair value through profit and loss. The classification depends on the purpose for which the financial instruments were acquired. Management determines the classification of its financial instruments at initial recognition and re-evaluates

Notes to the Annual Financial Statements (continued)Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012


51

such designations when circumstances indicate that reclas-sification is permitted. The Group assesses at each state-ment of financial position date whether there is objective evidence that a financial instrument or a group of financial instruments is impaired.

Financial assets are derecognised when the contractual rights to the cash flows from the financial assets expire or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognised when they are extinguished, i.e. when the contractual obligation is discharged, cancelled, expires or when a substantial modification of the terms occur.

1.6 Compound financial instruments Compound financial instruments issued by the Group

comprise convertible bonds that can be converted to share capital at the option of the holder and the number of shares to be issued does not vary with changes in their fair value.

The liability component of a compound financial instru-ment is recognised initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognised initially at the difference between the fair value of the compound financial instru-ment as a whole and the fair value of the liability compo-nent. Any directly attributable transaction costs are allo-cated to the liability and equity components in proportion to their initial carrying amounts.

Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amor-tised cost using the effective interest method. The equity component of a compound financial instrument is not re-measured subsequent to initial recognition except on conversion or expiry.

1.7 Derivative financial instruments Derivatives, being forward foreign exchange rate contracts,

categorised as at fair value through profit or loss, are either assets or liabilities. A classification between current and non-current is made based on the remaining contractual maturity of the foreign exchange rate contracts over the following 12 months. Purchases and settlements of derivative financial instruments are initially recognised on the trade date at fair value. Derivative financial instruments are subsequently carried at fair value. Transaction costs are expensed as it is incurred. Realised and unrealised gains and losses arising from changes in the fair value of derivative financial instruments are included in the state-ment of comprehensive income as other income or other expenses in the period in which they arise. The fair value of forward foreign exchange rate contracts is determined using exchange rates at the statement of financial position date. The Group does not apply hedge accounting.

1.8 Available-for-sale financial assets The Group’s listed and unlisted equity investments are

classified as financial assets available-for-sale. Purchases and sales of available-for-sale investments are recognised

on the trade date at fair value, including transaction costs. Investments are subsequently carried at fair value. Realised and unrealised gains and losses arising from changes in the fair value of these investments are recognised in other comprehensive income and accumulated in a reserve within equity. When available-for-sale investments are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the statement of comprehensive income as gains and losses from the disposal of investments. These investments are included in non-current assets, unless management intends to dispose of the investments within 12 months of the statement of financial position date.

Interest on available-for-sale securities calculated using the effective interest method is recognised in the state-ment of comprehensive income as part of other income. Dividends on available-for-sale equity instruments are recognised in the statement of comprehensive income as part of other income when the Group’s right to receive payments is established.

The fair value of these investments is based on quoted transaction prices (for listed investments) or the underlying net asset value or appropriate valuation models (for unlisted investments). If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using recognised valuation techniques.

For the purposes of impairment testing a significant or prolonged decline in the fair value of the equity instrument below its cost is considered as an indicator that the securi-ties are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from equity and recognised in the statement of compre-hensive income. Impairment losses on equity instruments recognised in the statement of comprehensive income are not reversed through the statement of comprehensive income.

1.9 Loans and receivables Loans and receivables are non-derivative financial assets

with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no inten-tion of trading the receivable, and purchases and sales are recognised at trade date at fair value, including transaction costs. Loans and receivables are subsequently carried at amortised cost using the effective interest method. These financial assets are included under current assets unless it matures later than 12 months after the statement of financial position date.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the loans and receivables carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate appli-cable to the relevant loans and receivables. The carrying


52

amount will be reduced and the loss recognised in the statement of comprehensive income.

1.10 Investments in subsidiaries The Company’s investments in the ordinary shares of its

subsidiaries are carried at cost less impairment losses and, if denominated in foreign currencies, are translated at historical rates. Purchases and sales of these investments are recognised on the trade date at cost, including transac-tion costs.

1.11 Deferred income tax Deferred income tax is recognised, using the liability

method, for calculated income tax losses and temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combina-tion that, at the time of the transaction, affects neither accounting nor taxable profit nor loss. Deferred income tax is determined using tax rates and laws that have been enacted or substantively enacted by the statement of finan-cial position date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which tempo-rary differences can be utilised. Management applies judg-ment to determine whether sufficient future taxable profit will be available after considering, amongst others, factors such as profit histories, forecasted cash flows and budgets.

Deferred income tax is recognised on temporary differ-ences arising on the consolidation of investments in subsid-iaries and joint ventures, except where the timing of the reversal of the temporary difference can be controlled by the Group, and it is probable that the temporary difference will not reverse in the foreseeable future.

The Group is subject to taxes in numerous jurisdictions. Significant judgment is required in determining the world-wide accrual for income taxes. There are many transactions and calculations during the ordinary course of business for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated uncertain income tax positions based on best informed estimates of whether additional income taxes will be due. Where the final income tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current income tax and deferred income tax assets and liabilities in the period in which such determination is made.

1.12 Intangible assets 1.12.1 GOODWILL Goodwill represents the excess of the cost of an acquisition

over the fair value of the Group’s share of the net assets of the acquired subsidiary or operation at the date of acquisi-tion. Goodwill denominated in a foreign currency is trans-lated at closing rates. Goodwill is tested for impairment

annually and whenever there is indication of impairment. Goodwill is carried at cost less accumulated impairment losses. Goodwill is allocated to cash-generating units (CGUs) for the purpose of impairment testing. The alloca-tion is made to those CGUs or groups of CGUs that are expected to benefit from the business combination in which the goodwill arose. Each of those CGUs represents the Group’s investment in a trading unit or a group of trading units. Gains and losses on the disposal of an entity that has related goodwill include the carrying amount of the related goodwill. An impairment loss recognised for good-will shall not be reversed in a subsequent period.

1.12.2 SOFTWARE Software represents all costs incurred to acquire the assets

and bring it into use. These costs are amortised over the estimated useful life of the relevant software, being between three and seven years, on a straight-line basis.

Costs associated with implementing or maintaining software are recognised as an expense when incurred. Costs that are directly associated with the purchase and customisation of identifiable and unique software controlled by the Group, and that will probably generate future economic benefits beyond one year, are recognised as intangible assets. Direct costs include the software development employee costs and an appropriate portion of relevant overheads.

Software’s useful lives are reviewed at each statement of financial position date. If appropriate, adjustments are made and accounted for prospectively as a change in estimate.

1.12.3 TRADEMARKS Acquired trademarks and licences are initially shown at

historical cost and trademarks and licences acquired in a business combination are recognised at fair value at the acquisition date. Trademarks have a finite useful life and are subsequently measured at cost less accumulated amortisa-tion and impairment losses. Amortisation is calculated using the straight-line method to allocate the cost of trademarks and licences over their estimated useful lives, being 16 to 20 years. The useful lives are reviewed at each statement of financial position date. If appropriate, adjustments are made and accounted for prospectively as a change in esti-mate.

1.12.4 CUSTOMER RELATIONSHIPS Customer relationships acquired in a business combination

are recognised at fair value at the acquisition date. The customer relationships have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method over the expected useful life of 10 years.

1.13 Non-current assets held for sale Non-current assets and/or disposal groups are classified as

assets held for sale and are stated at the lower of the carrying amount and fair value less cost to sell if their



53

carrying amount will be recovered principally through a sale transaction rather than through continued use and this sale is considered highly probable.

1.14 Inventories Trading inventories are stated at the lower of cost, using

the weighted average cost formula, and net realisable value. The weighted average cost formula is determined by applying the retail inventory method. The cost of merchan-dise is the net of: invoice price of merchandise; insurance; freight; customs duties; an appropriate allocation of distri-bution costs; trade discounts; rebates and settlement discounts. The retail method approximates the weighted average cost and is determined by reducing the sales value of the inventory by the appropriate percentage gross margin. The percentage used takes into account inventory that has been marked down below original selling price. An average percentage per retail department is used. Net real-isable value is the estimated selling price in the ordinary course of business.

1.15 Trade and other receivables Trade and other receivables are recognised at trade date at

fair value. Subsequent recognition is measured at amor-tised cost using the effective interest method, less allow-ance made for impairment of these receivables. An allow-ance for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indi-cators that the trade receivable is impaired. The amount of the allowance is the difference between the carrying amount and the recoverable amount, being the present value of the expected cash flows, discounted at the original effective interest rate. Any resulting impairment losses are included in other expenses in the statement of comprehen-sive income. The impairment of instalment sale receivables is done on a collective basis due to the wide-spread customer base. When a receivable is uncollectible, it is written off against the allowance for impairment for receiva-bles. Subsequent recoveries of amounts previously written off are recognised in the statement of comprehensive income.

1.16 Leases 1.16.1 WHERE THE GROUP IS THE LESSEE Leases of assets under which a significant portion of the

risks and rewards of ownership are effectively retained by the lessor are classified as operating leases. Certain prem-ises and other assets are leased. Payments made in respect of operating leases with a fixed escalation clause are charged to the statement of comprehensive income on a straight-line basis over the lease term. All other lease payments are expensed as they become due. Incentives paid to enter into a lease agreement are expensed in the

statement of comprehensive income as operating lease expense over the lease term. Minimum rentals due after year-end are reflected under commitments.

When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense and any unamortised portion of the fixed escalation lease accrual is recognised in the statement of comprehensive income in the period in which termination takes place.

1.16.2 WHERE THE GROUP IS THE LESSOR Portions of owner-occupied properties and leased proper-

ties are leased or subleased out under operating leases. The owner-occupied properties are included in property, plant and equipment in the statement of financial position. Rental income in respect of operating leases with a fixed escalation clause is recognised on a straight-line basis over the lease term. Incentives received to enter into a lease agreement are released to the statement of comprehensive income as operating lease income over the lease term. All other rental income is recognised as it becomes due.

When an operating lease is terminated before the lease period has expired, any payment received from the lessee by way of penalty is recognised as income and any unamor-tised portion of the fixed escalation lease accrual is recog-nised in the statement of comprehensive income in the period in which termination takes place.

1.17 Cash and cash equivalents and bank overdrafts

Cash and cash equivalents and bank overdrafts are carried at cost and, if denominated in foreign currencies, are trans-lated at closing rates. Cash comprises cash on hand and cash at banks. Cash equivalents are short-term highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of change in value. Bank overdrafts are disclosed separately on the face of the statement of financial position.

1.18 Share capital Ordinary shares and non-convertible, non-participating

deferred shares, including incremental costs directly attributable to the issue of new shares, are both classified as equity.

Where entities controlled by the Group purchase the Company’s shares, the consideration paid, including attributable transaction costs net of income taxes, is deducted from capital and reserves attributable to equity holders as treasury shares until they are sold. Where such shares are subsequently sold, any consideration received is included in capital and reserves attributable to equity holders. Dividends received on treasury shares are eliminated on consolidation.

1.19 Borrowings Borrowings are recognised initially at fair value, net of trans-

actions costs incurred. Borrowings are subsequently stated at amortised cost and any difference between the proceeds


54

(net of transaction costs) and the redemption value is recognised in the statement of comprehensive income over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Group has the unconditional right to defer settlement of the liability for at least 12 months after the statement of financial position date.

Preference shares, which carry non-discretionary dividend obligations, are classified as non-current liabilities at amortised cost. Amortised cost is calculated using the effective interest yield method. The dividends on these preference shares are recognised in the statement of comprehensive income as finance costs.

1.20 Provisions Provisions are recognised when the Group has a present

legal or constructive obligation as a result of past events; it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. The Group has discounted provisions to their present value where the effect of the time value of money is material. The notional interest charge representing the unwinding of the provision discounting is included in the statement of comprehensive income.

1.20.1 ONEROUS LEASE CONTRACTS The Group recognises a provision for onerous lease

contracts when the expected benefits, including subleasing income, to be derived from non-cancellable operating lease contracts are lower than the unavoidable costs of meeting the contract obligations. The unavoidable contracted costs are applied over the remaining periods of the relevant lease agreements. The notional interest charge relating to the unwinding of the provisions discounting is included in the statement of comprehensive income as finance costs.

1.20.2 PROVISION FOR OUTSTANDING INSURANCE CLAIMS The Group recognises a provision for the estimated direct

cost of settling all outstanding claims at year-end. The provision for outstanding claims at year-end includes a provision for cost of claims incurred but not yet reported at year-end as well as for the cost of claims reported but not yet settled at year-end. The provision for cost of claims incurred but not yet reported (IBNR) at year-end is deter-mined by using established claims patterns. Full provision is made for the cost of claims reported but not yet settled at year-end by using the best information available.

1.20.3 LONG-TERM EMPLOYEE BENEFITS Long-term employee benefits are provided to employees

who achieve certain predetermined milestones of service within the Group. The Group’s obligation under these plans is valued by independent qualified actuaries at year-end and the corresponding liability is raised. Payments are set off against the liability. Movements in the liability, including notional interest, resulting from the valuation by the

actuaries are charged against the statement of comprehen-sive income as employee benefits.

1.20.4 REINSTATEMENT PROVISION Where it has a contractual obligation in respect of certain

operating lease agreements, the Group provides for expected reinstatement costs to be incurred at the expiry of the lease.

1.21 Trade and other payables Trade and other payables are recognised initially at fair value

and subsequently at amortised cost using the effective interest method.

Financial guarantee contracts are recognised initially at fair value and subsequently at the higher of: the initially recognised fair value, less appropriate cumulative amortisa-tion recognised on a straight-line basis over the estimated duration of the contract, or an amount that is the best estimate of the expenditure required to settle the present obligation at statement of financial position date. Intra-group financial guarantees are eliminated on consolidation.

When the financial guarantee contract is issued by the Company to a subsidiary the fair value at initial recognition is capitalised as part of the investment in the relevant subsidiary.

1.22 Employee benefits 1.22.1 PENSION OBLIGATIONS Group companies operate various pension schemes. The

schemes are funded through payments to trustee-adminis-tered funds in accordance with the plan terms.

Provident fund A defined-contribution plan is a pension plan under which

the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.

The Group’s contributions to defined contribution plans in respect of services rendered in a particular period are recognised as an expense in that period. Additional contri-butions are recognised as an expense in the period during which the associated services are rendered by employees.

1.22.2 POST-RETIREMENT MEDICAL BENEFITS The Group provides for post-retirement medical benefits,

where they exist. The expected costs of these benefits are accrued over the period of employment based on past services and charged to the statement of comprehensive income as employee benefits. This post-retirement medical benefit obligation is measured at present value by discounting the estimated future cash outflows using interest rates of government bonds that are denominated in the currency in which the benefits will be paid and that have the terms to maturity approximating the terms of the related post-employment liability. The future cash outflows are estimated using amongst others the following assump-



55

tions: health-care cost inflation; discount rates; salary infla-tion and promotions and experience increases; expected mortality rates; expected retirement age; and continuation at retirement. Valuations of this obligation are carried out annually by independent qualified actuaries in respect of past-service liabilities using the projected unit credit method. Actuarial gains or losses and settlement premiums, when it occurs, are recognised immediately in the statement of comprehensive income as employee benefits.

1.22.3 CASH-SETTLED SHARE-BASED PAYMENTS The Group recognises a liability for cash-settled share-

based payments calculated at current fair value determined at each statement of financial position date. The fair value is calculated using relevant pricing models. This amount is expensed through the statement of comprehensive income over the vesting periods.

1.22.4 BONUS PLANS The Group recognises a liability and an expense for

bonuses, based on formulas that take into consideration the Group’s trading profit after certain adjustments. The accrual for this liability is made where a contractual or constructive obligation exists.

1.23 Impairment of non-financial assets Non-financial assets that have an indefinite useful life are

not subject to depreciation and amortisation and are tested for impairment at each statement of financial position date. Assets that are subject to depreciation and amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the full carrying amount may not be recoverable. The determination of whether an asset is impaired requires significant management judgment and, amongst others, the following factors will be considered: duration and extent to which the fair value of the asset is less than its cost; industry, geographical and sector perfor-mance; changes in regional economies; and operational and financing cash flows.

Where the carrying value of an asset exceeds its esti-mated recoverable amount, the carrying value is impaired and the asset is written down to its recoverable amount. The recoverable amount is calculated as the higher of the asset’s fair value less cost to sell and the value in use. These calculations are prepared based on management’s assumptions and estimates such as forecasted cash flows; management budgets and industry, regional and geograph-ical operational and financial outlooks. For the purpose of impairment testing the assets are allocated to cash-gener-ating units (CGUs) or a group of CGUs. CGUs are the lowest levels for which separately identifiable cash flows can be determined. The related impairment expense is charged to the statement of comprehensive income as expenditure of a capital nature.

The Group assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods for an asset other than goodwill may no longer

exist or may have decreased. If any such indication exists the Group will immediately recognise the reversal as income of a capital nature in the statement of comprehen-sive income. An impairment loss recognised for goodwill shall not be reversed in a subsequent period.

1.24 Revenue recognition Revenue comprises the fair value of the consideration

received or receivable for the sale of merchandise from ordinary Group-operating activities, net of value added tax, rebates and discounts and after eliminating sales within the Group. Sales are recognised upon delivery of products and customer acceptance. Payment is usually received via cash, debit card or credit card. Related card transaction costs are recognised in the statement of comprehensive income as other expenses. When merchandise is sold under instal-ment sale agreements, the present value of the instalment sale payments is recognised as a receivable.

1.25 Other operating income Other operating income is recognised as follows:

1.25.1 FINANCE INCOME EARNED When merchandise is sold under instalment sale agree-

ments, the present value of the instalment sale payments is recognised as a receivable. The difference between the gross receivable and the present value of the receivable is recognised as unearned finance income. Finance income is recognised over the term of the instalment sale using the effective interest method, which reflects a constant periodic rate of return.

1.25.2 RENTAL INCOME Rental income in respect of operating leases with a fixed

escalation clause is recognised on a straight-line basis over the lease term. All other rental income is recognised as it becomes due. Refer note 1.16.2.

1.25.3 FRANCHISE FEES RECEIVED Franchise fees received comprises fees received from

franchisees and are recognised when the underlying sales, which give rise to the income, occur.

1.25.4 PREMIUM INCOME Premium income is recognised in the period it is earned.

Net premiums earned are all written premiums relating to policies incepted during the period less amounts that are unearned at statement of financial position date. Refer note 1.31.2.

1.25.5 INTEREST INCOME Interest income is recognised as it accrues, taking into

account the effective yield on the related asset.

1.25.6 DIVIDEND INCOME Dividend income is recognised when the shareholders’

right to receive payment is established.


56

1.25.7 GIFT VOUCHERS AND SAVINGS STAMPS Proceeds from the sale of gift vouchers and saving stamps

are initially recognised in other payables, deferring the income. The income is recognised as cash sales of goods when the gift vouchers or savings stamps are redeemed.

1.25.8 COMMISSION RECEIVED The Group acts as a payment office for the services and

products provided by a variety of third parties to the Group’s customers. The agent’s commissions received by the Group from the third parties for the payment office service are recognised as other income. Commissions relating to third-party products are recognised when the underlying third-party payments take place. Commissions relating to third-party services are recognised based on the stage of completion by reference to services performed to date as a percentage of the total services to be performed.

1.26 Borrowing costs Borrowing costs directly attributable to the acquisition,

construction or production of qualifying assets, are capital-ised to the cost of that qualifying asset. General borrowing costs are capitalised by calculating the weighted average expenditure on the qualifying asset and applying a weighted average borrowing rate to the expenditure. Specific borrowing costs are capitalised according to the borrowing costs incurred on the specific borrowing provided the borrowing facility is utilised specifically for the qualifying asset. All other borrowing costs incurred are recognised as an expense in the statement of comprehen-sive income and are accrued on a time basis by reference to the principal amounts outstanding and at the interest rate applicable.

1.27 Current and deferred income tax The income tax expense for the period comprises current

and deferred income tax. Income tax is recognised in the statement of comprehensive income, except to the extent that it relates to items recognised directly in equity, in which case it will also be recognised directly in equity.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the statement of financial position date in the countries where the Group operate and generate taxable income.

Dividends declared by South African companies within the Group before 1 April 2012 are subject to secondary tax on companies (“STC”). The STC expense is included in the statement of comprehensive income in the period that the related dividend is paid. Cash dividends declared by South African companies within the Group from 1 April 2012 are subject to dividend tax which is a tax on the shareholder.

Deferred income tax is calculated and recognised in terms of note 1.11.

1.28 Earnings per share Earnings and headline earnings per share are calculated by

dividing the net profit attributable to equity holders of the Group and headline earnings, respectively, by the weighted

average number of ordinary shares in issue during the year, excluding the ordinary shares held by the Group as treasury shares.

For the diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all ordinary shares with dilutive potential. Convertible debt has dilutive potential. The convertible debt is assumed to have been converted into ordinary shares and the net profit is adjusted to eliminate the interest expense less the tax effect.

1.29 Government grants Government grants, being assistance by government in the

form of allowances and refunds for certain expenditure, are recognised at fair value when the Group complies with the conditions attached to the grants and the grants have been received. The grants are recognised, on a systematic basis, in the statement of comprehensive income as a deduction of the related expense over the periods necessary to match them with the related costs.

1.30 Dividends distributed to shareholders Dividends are accounted for on the date they have been

declared by the Company.

1.31 Basis of accounting for underwriting activities 1.31.1 CLASSIFICATION OF CONTRACTS Insurance risk is risk other than financial risk, transferred

from the holder of a contract to the issuer. The accounting policies of the Group are in accordance with the policies for recognition and measurement of short-term insurance contracts as outlined in SAICA Circular 2/2007 and IFRS 4: Insurance Contracts.

Contracts under which the Group accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder or other benefi-ciary if a specified uncertain future event (the insured event) adversely affects the policyholder or other beneficiary, are classified as insurance contracts.

An insurance risk is deemed significant if, and only if, an insured event could cause an insurer to pay significant additional benefits in any scenario, excluding scenarios that lack commercial substance. If significant additional benefits would be payable in scenarios that have commercial substance, the condition in the previous sentence may be met even if the insured event is extremely unlikely or even if the expected (i.e. probability weighted) present value of contingent cash flows is a small proportion of the expected present value of all the remaining contractual cash flows.

1.31.2 RECOGNITION AND MEASUREMENT OF CONTRACTS a) Premiums arising from general insurance business Gross written premiums comprise the premiums on

insurance contracts entered into during the year. Premiums are disclosed gross of commission payable to intermediaries and exclude taxes and levies based on premiums. Premiums are accounted for as income when the risk related to the insurance policy incepts.



57

b) Unearned premium allowance The allowance for unearned premiums comprises the

proportion of gross premiums written which relate to the unexpired period at the reporting date and is esti-mated to be earned in the following or subsequent financial years. The unearned premium allowance is computed separately for each insurance contract on a basis appropriate to the Group’s release from insured risk, using the 365th method.

c) Claims arising from insurance business Claims incurred in respect of insurance contracts consist

of claims and claims-handling expenses paid during the financial year together with the movement in the provi-sion for incurred but not reported claims. Provisions for incurred but not reported claims comprise provisions for claims arising from insured events that incurred before the statement of financial position date, but which had not been reported to the Group by that date.

d) Provision for outstanding claims Provision is made for the estimated final cost of all

claims that had not been settled by the reporting date, less amounts already paid. Liabilities for unpaid claims are estimated, using the input of assessments for individual cases reported to the Group and statistical analyses, to estimate the expected cost of more complex claims that may be affected by external factors. The Group does not discount its liabilities for unpaid claims.

e) Contingency reserve A contingency reserve was maintained in terms of the

Insurance Act, 1998. The utilisation of this reserve, in case of a catastrophe, was subject to the approval of the Financial Services Board. Transfers to this reserve were reflected in the statement of changes in equity, and were indicated in the statement of financial position as a non-distributable reserve under capital and reserves. The contingency reserve was calculated as 10% of net written premiums.

In terms of the Capital Adequacy Requirements introduced by the Financial Services Board, this reserve is no longer required with effect from 1 January 2012 and this reserve was transferred to distributable reserves.

f) Reinsurance The Group has evaluated its exposure to risk and deter-

mined that significant reinsurance protection is not required.

g) Liabilities and related assets under liability adequa-cy test

At each statement of financial position date, liability adequacy tests are performed on the Group’s Insurance entities to ensure the adequacy of the contract liabilities net of related deferred acquisition cost (DAC) and any related assets (i.e. the value of business acquired assets (VOBA)). In performing these tests, current best estimates of future contractual cash flows and claims-handling and administration expenses, as well as invest-ment income from the assets backing such liabilities,

are used. Any deficiency is immediately charged to profit or loss initially by writing off DAC or VOBA and by subsequently establishing a provision for losses arising from liability adequacy tests (the unexpired risk provi-sion).

1.32 Related parties Individuals, as well as their close family members, or

entities are related parties if one party has the ability, directly or indirectly, to control or jointly control the other party or exercise significant influence over the other party in making financial and/or operating decisions or if the parties are jointly controlled. Key management personnel are defined as all directors of Shoprite Holdings Ltd and the prescribed officers of the main trading subsidiary (Shoprite Checkers (Pty) Ltd) of the Group.

1.33 Operating segment information An operating segment is a component of the Group that

engages in business activities which may earn revenues and incur expenses and whose operating results are regularly reviewed by the Group’s chief operating decision maker (this being the Shoprite Holdings Ltd board of directors), in order to allocate resources and assess perfor-mance and for which discrete financial information is available.

Operating segments, which display similar economic characteristics and have similar products, services, customers, methods of distribution and regulatory environ-ments are aggregated for reporting purposes.

The Group has the following four reportable segments: 1. Supermarkets RSA – all retail operations under the

Shoprite, Checkers, Checkers Hyper, Usave and Hungry Lion brands in South Africa, retailing products such as food, clothing, general merchandise, cosmetics and liquor.

2. Supermarkets Non-RSA – all retail operations under the Shoprite, Checkers, Checkers Hyper, Usave and Hungry Lion brands outside of South Africa, retailing products such as food, clothing, general merchandise, cosmetics and liquor.

3. Furniture – all retail operations under the OK Furniture, OK Power Express, and House & Home brands trading in RSA and Non-RSA, retailing products such as furni-ture, household appliances and home entertainment systems for cash or credit.

4. Other operating segments – all other operations not included in the above segments, trading in RSA and Non-RSA, including franchise operations and retail and wholesale of pharmaceutical products.

These segments were identified and grouped together using a combination of the products and services offered by the segments and the geographical areas in which they operate.

The amounts reported to the chief operating decision maker are measured in a manner consistent with that in the statement of comprehensive income and statement of financial position.

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012SHOPRITE HOLDINGS LTD SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012INTEGRATED REPORT 2012SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012

58

1.34 Standards, interpretations and amendments that are not yet effective at June 2012 The Group has considered the following new standards, and interpretations and amendments to existing standards, which are not yet

effective as at June 2012:

Number Title Effective for year endingAmendments to IFRS 1 First-time Adoption on Government Loans June 2014Amendments to IFRS 7 Disclosures – Offsetting Financial Assets and Financial Liabilities June 2014IFRS 9 Financial Instruments June 2016IFRS 10 Consolidated Financial Statements June 2014IFRS 11 Joint Arrangements June 2014IFRS 12 Disclosure of Interests in Other Entities June 2014IFRS 13 Fair Value Measurement June 2014Amendments to IAS 1 Presentation of Financial Statements June 2013Amendments to IAS 12 Deferred tax: Recovery of Underlying Assets June 2013Amendments to IAS 19 Employee Benefits June 2014Amendments to IAS 27 Separate Financial Statements June 2014Amendments to IAS 28 Investments in Associates and Joint Ventures June 2014Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities June 2015IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine June 2014

The Group has not early adopted any of the above and the application thereof in future financial periods is not expected to have a significant impact on the Group’s reported results, financial position and cash flows.

IFRS 11: Joint Arrangements eliminates the existing policy choice of proportionate consolidation for jointly controlled entities. Equity accounting becomes mandatory for participants in joint ventures. When transitioning from the proportionate consolidation method to the equity method, the Group should recognise their initial investment in the joint venture as the aggregate of the carrying amounts that were previously proportionately consolidated. The Group’s interests in joint ventures are disclosed in note 42.

IFRS 12: Disclosure of Interests in Other Entities requires increased disclosures that help financial statement readers to evaluate the nature, risks and financial effects associated with the Group’s interests in subsidiaries, associates, joint arrangements and unconsoli-dated structured entities.

Amendments to IAS 1: Presentation of financial statements requires entities to separate items presented in other comprehensive income into two groups, based on whether or not they may be recycled to profit or loss in the future.

Revised IAS 28: Investments in Associates and Joint Ventures now includes the requirements for joint ventures, as well as associ-ates, to be equity accounted following the issue of IFRS 11.

1.35 Standards, interpretations and amendments effective at June 2012 The following new standards, and interpretations and amendments to existing standards, that are effective as at June 2012 had no

significant effect on the Group’s operations:

Number TitleAmendments to IFRS 1 Amendments to IFRS 1: Severe Hyperinflation and Removal of Fixed Dates for First-time

AdoptersAmendments to IFRS 7 Improved disclosures for transfer transactions of financial assets issuedAmendments to IAS 24 Related party disclosuresVarious Improvements to IFRSs 2010Amendments to IFRIC 14 Pre-payments of a Minimum Funding RequirementAC 504 IAS 19 (AC116) – The limit on a defined benefit asset, Minimum funding requirements and

their interaction in the South African pension fund environment


59

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012

2 OPERATING SEGMENT INFORMATION2.1 Analysis per reportable segment

June 2012

Supermarkets RSA

Supermarkets Non-RSA Furniture

Other operating segments Consolidated

R’000 R’000 R’000 R’000 R’000

Sale of merchandiseExternal 64 584 215 9 174 147 3 400 185 5 572 040 82 730 587 Inter-segment 1 749 501 4 949 — — 1 754 450

66 333 716 9 179 096 3 400 185 5 572 040 84 485 037

Trading profit 3 887 334 466 277 175 492 136 031 4 665 134

Depreciation and amortisation 992 998 144 550 44 152 18 406 1 200 106

Total assets 22 312 020 4 527 078 2 386 342 1 680 078 30 905 518

June 2011

Supermarkets RSA

Supermarkets Non-RSA Furniture

Other operating segments Consolidated

R’000 R’000 R’000 R’000 R’000

Sale of merchandiseExternal 57 213 793 7 316 698 3 059 648 4 707 638 72 297 777 Inter-segment 1 512 692 — — — 1 512 692

58 726 485 7 316 698 3 059 648 4 707 638 73 810 469

Trading profit 3 302 262 415 524 131 484 137 427 3 986 697

Depreciation and amortisation 831 309 111 274 41 025 22 834 1 006 442

Total assets 14 600 472 2 996 263 2 035 346 1 071 676 20 703 757

2.2 Geographical analysisJune 2012

South AfricaOutside

South Africa ConsolidatedR’000 R’000 R’000

Sale of merchandise – external 72 492 035 10 238 552 82 730 587

Non-current assets* 8 473 336 2 100 092 10 573 428

June 2011

South AfricaOutside

South Africa ConsolidatedR’000 R’000 R’000

Sale of merchandise – external 64 068 311 8 229 466 72 297 777

Non-current assets* 7 569 684 1 327 416 8 897 100

*Non-current assets consist of property, plant and equipment, intangible assets and fixed escalation operating lease accruals.

60



3 PROPERTY, PLANT AND EQUIPMENT — — 3.1 Land at cost 1 065 048 827 698

3.2 BuildingsCost 2 902 799 2 540 157 Accumulated depreciation and impairment (205 577) (154 792)

— — Carrying value 2 697 222 2 385 365

3.3 Machinery, equipment and vehicles*Cost 9 023 982 7 780 263 Accumulated depreciation and impairment (3 901 887) (3 419 949)

— — Carrying value 5 122 095 4 360 314

*Includes aircraft with a carrying value of R92 million (2011: R78 million).

3.4 Improvements to leasehold propertyCost 1 081 961 828 105 Accumulated depreciation and impairment (297 767) (232 733)

— — Carrying value 784 194 595 372

— — Total property, plant and equipment 9 668 559 8 168 749

C O M PA N Y GROUP


R’000 R’000 R’000 R’000

61


3. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

Reconciliation of carrying values

R’000 Land Buildings

Machinery, equipment and

vehiclesLeasehold

improvements Total

Carrying value at June 2010 676 620 1 955 731 3 639 626 305 700 6 577 677

Additions 203 103 722 982 1 705 964 221 224 2 853 273 Reclassification (55 571) (140 913) (12) 163 585 (32 911)Reclassification to software — — (145) — (145)Transfer to assets held for sale (note 4) — (55 808) — — (55 808)Transfer from assets held for sale (note 4) — — — 6 989 6 989 Acquisition of subsidiaries and operations (note 32.5.1) 11 000 — 1 228 — 12 228 Disposal — (6 331) (67 837) (27 784) (101 952)

Proceeds on disposal (27) (90) (33 371) (29 994) (63 482)Profit/(loss) on disposal and scrapping 27 (6 241) (34 466) 2 210 (38 470)

Depreciation (281) (27 653) (854 417) (66 169) (948 520)Reversal of impairment (note 3.5) — 4 984 — — 4 984 Impairment (note 3.5) — (16 745) (44 590) — (61 335)Exchange rate differences (7 173) (50 882) (19 503) (8 173) (85 731)

Carrying value at June 2011 827 698 2 385 365 4 360 314 595 372 8 168 749

Additions 294 974 626 131 1 773 152 218 090 2 912 347 Reclassification — (52 515) 186 52 329 — Reclassification to software — — (17 153) — (17 153)Transfer to assets held for sale (note 4) (63 189) (254 345) — (15 800) (333 334)Acquisition of subsidiaries and operations (note 32.5.1) — — 19 788 — 19 788 Disposal (12 099) (37 129) (56 539) (57 047) (162 814)

Proceeds on disposal (12 945) (37 855) (34 341) (64 173) (149 314)Profit/(loss) on disposal and scrapping 846 726 (22 198) 7 126 (13 500)

Depreciation (281) (36 506) (1 021 822) (74 298) (1 132 907)Reversal of impairment (note 3.5) — — 16 720 — 16 720 Impairment (note 3.5) — (20 487) (13 443) — (33 930)Exchange rate differences 17 945 86 708 60 892 65 548 231 093

Carrying value at June 2012 1 065 048 2 697 222 5 122 095 784 194 9 668 559

62


C O M PA N Y GROUP


R’000 R’000 R’000 R’000


3 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)3.5 Impairment/reversal of impairment of property,

plant and equipmentThe recoverable amount of all property, plant and equipment is determined based on the higher of value-in-use and fair value less cost to sell. The assumptions and estimates used by management in determining the recoverable amount of assets, for which there is a significant impairment or reversal of impairment, is detailed below.

In determining the fair value less cost to sell of affected land and buildings, cash flow projections based on projected net market-related rentals covering the next planning period were used. An average pre-tax market capitalisation rate of 10.14% (2011: 9.43%) was used.

Reclassifications for the previous year included an amount of R32.9m that was reclassified from land to prepaid leases. This related to land leased for a period of 99 years in various African countries.

The fair value less cost to sell of affected assets, other than land and buildings, was based on management’s best estimates taking into account recent selling prices obtained for similar assets in the Group, adjusting these values for the condition of the relevant assets.

The reversal of impairment, in the current and previous financial year, was due to improvements in the economic environment in which Group companies, where assets were previously impaired, operate. The original impairment charge as well as the reversal is included in the statement of comprehensive income as items of a capital nature. This impairment originated in the Supermarkets RSA operating segment.

4 ASSETS HELD FOR SALE — — Carrying value 391 993 58 659

It is the Group’s policy to invest in fixed property only when appropriate rental space is not available. Certain land and build-ings in the RSA Supermarket segment have been reclassified as assets held for sale as the Group periodically re-evaluates its fixed property holdings in line with this policy. The Group is currently in the process of actively seeking buyers for these properties.

During the previous financial year certain properties were transferred back to property, plant and equipment. The sale of these properties were reconsidered as it was no longer economically viable. This decision to reclassify had no significant effect on the Group’s results.

4.1 Reconciliation of carrying valueCarrying value at the beginning of the year 58 659 26 372 Transfer from property, plant and equipment (note 3) 333 334 55 808 Transfer to property, plant and equipment (note 3) — (6 989)Proceeds on disposal — (28 360)Profit on disposal — 12 868 Exchange rate differences — (1 040)

— — Carrying value at the end of the year 391 993 58 659

63

C O M PA N Y GROUP


R’000 R’000 R’000 R’000


5 INTERESTS IN SUBSIDIARIES 211 490 862 499 Investments in ordinary shares

1 443 013 1 443 013 Investments in preference shares 10 774 74 237 Amounts owing by subsidiaries

1 665 277 2 379 749 — —

Analysis of total interests in subsidiaries1 654 503 2 305 512 Non-current

10 774 74 237 Current

1 665 277 2 379 749 — —

Detail analysis of the Company’s interests in subsidiaries are given in annexure A.

Investments in preference shares consist of convertible and redeemable, both under certain conditions, non-cumulative preference shares.

Amounts owing by subsidiaries of the Company are interest-free, unsecured and are payable on demand.

6 INVESTMENT IN ASSOCIATEInvestment in Winhold Ltd

— — Investment in ordinary shares 103 886 —

The Group acquired a 49% interest in Winhold Ltd during the year under review. Winhold Ltd is an unlisted retailing super-market group in Mauritius, denominated in Mauritian rupees.

Reconciliation of carrying valueCarrying value at the beginning of the year — — Investment in ordinary shares acquired 103 886 —

— — Carrying value at the end of the year 103 886 —

Summary of financial information of Winhold LtdAssets 230 326 — Liabilities (18 557) — Turnover 1 183 768 — Profit for the year 8 084 —

64


C O M PA N Y GROUP


R’000 R’000 R’000 R’000


7 AVAILABLE-FOR-SALE INVESTMENTSUnlisted share investments

— —Nil (2011: 100) “S” class ordinary shares in RMB Global Solutions (Pty) Ltd — 59 656

This investment was realised via dividends received during the year under review. The investment at the end of the previous year was denominated in ZAR and the fair value was based on the underlying net asset value of RMB Global Solutions (Pty) Ltd as it was mainly represented by short-term USD bank deposits at financial institutions with a Moody’s long-term credit rating of Aa2.za.

8 LOANS AND RECEIVABLESPreference share investment (note 8.1) — 32 640 Amounts owing by franchisees (note 8.2) 18 924 16 886 Other 979 1 008

— — 19 903 50 534

Analysis of total loans and receivablesNon-current 3 706 4 308 Current 16 197 46 226

— — 19 903 50 534

8.1 Preference share investment — 32 640 The preference share investment at the end of the previous year consisted of 13 500 000 6% redeemable, under certain conditions, convertible cumulative preference shares in Pick & Buy Ltd (retailing supermarket group – Mauritius) denominated in Mauritian rupees. The preference shares were redeemed at par during the year under review.

65

C O M PA N Y GROUP


R’000 R’000 R’000 R’000


8 LOANS AND RECEIVABLES (CONTINUED)8.2 Amounts owing by franchisees

Gross amount 30 024 28 584 Accumulated impairment (11 100) (11 698)

— 18 924 16 886

The weighted average variable interest rate (linked to the South African prime rate) on these amounts was 8.3% (2011: 9.6%)p.a. and the amounts are repayable between one and five years. The amounts are mainly denominated in ZAR. The maximum exposure to credit risk at the reporting date is the carrying value which approximates fair value. Balances are due within 30 days of statement date and the age analysis of these amounts are reviewed on a monthly basis. All amounts past due 60 days or more are individually impaired. The credit history of all franchisees are verified with an external credit bureau. Notarial and mortgage bonds and bank guarantees to the value of R18 million (2011: R37 million) are held as collateral for these amounts.

Reconciliation of accumulated impairmentBalance at July 11 698 6 561 Allowance for impairment for the year 642 5 137 Unused amounts reversed (1 240) —

— — Balance at June 11 100 11 698

The allowance for impairment relates to the following amounts owing by franchisees:

Receivable in the next year 6 870 4 788 Receivable between 1 and 3 years 6 982 8 549 Receivable between 3 and 5 years 911 2 639

— — 14 763 15 976

Amounts owing by franchisees relate to a wide-spread number of franchisees which are individually insignificant.

The individually impaired amounts owing by franchisees relate to franchisees experiencing unexpectedly difficult economic situations. It was assessed that a portion of the receivables is expected to be recovered. Interest of R1.8 million (2011: R2.8 million) was accrued on these balances during the year under review. All balances that were past due were considered for impairment.

66


C O M PA N Y GROUP


R’000 R’000 R’000 R’000


9 DEFERRED INCOME TAX 237 363 Deferred income tax assets (note 9.1) 413 645 326 457

— — Deferred income tax liabilities (note 9.2) (152 085) (25 377)

237 363 Net deferred income tax assets 261 560 301 080

The movement in the net deferred income tax assets is as follows: 200 237 Carrying value at the beginning of the year 301 080 269 724 37 126 Charge to profit for the year 90 135 34 678 37 126 Provisions and accruals 84 681 70 643 — — Allowances on property, plant and equipment (26 421) (67 634) — — Fixed escalation operating lease accrual 8 325 5 611 — — Allowances on intangible assets 1 909 2 136 — — Share-based payment accrual 11 581 18 747 — — Unrealised exchange rate differences 2 976 11 717 — — Tax losses 7 088 (6 443) — — Tax rate change (4) (99) — — Charged to other comprehensive income 8 338 (317) — — Charged to equity (136 249) — — — Exchange rate differences (1 744) (3 005)

237 363 Carrying value at the end of the year 261 560 301 080

9.1 Deferred income tax assets 237 363 Provisions and accruals 355 701 316 404

— — Allowances on property, plant and equipment (280 146) (300 964) — — Fixed escalation operating lease accrual 143 990 144 251 — — Allowances on intangible assets (23 413) (25 947) — — Share-based payment accrual 170 247 158 826 — — Unrealised exchange rate differences 16 298 13 561 — — Fair value differences — (8 337) — — Tax losses 30 968 28 663

237 363 413 645 326 457

— — Net taxable temporary differences to be settled after more than 12 months (90 251) (88 057)

237 363 Net deductible temporary differences to be recovered within 12 months 503 896 414 514

237 363 413 645 326 457

9.2 Deferred income tax liabilitiesProvisions and accruals 95 071 (3 366)Allowances on property, plant and equipment 86 684 60 803 Fixed escalation operating lease accrual (7 576) 1 221 Allowances on intangible assets 624 3 Unrealised exchange rate differences (17 078) (11 997)Tax losses (5 640) (21 286)

— — 152 085 25 377

— —Net taxable temporary differences to be settled after more than 12 months 171 168 36 916

— —Net deductible temporary differences to be recovered within 12 months (19 083) (11 539)

— — 152 085 25 377

67

C O M PA N Y GROUP


R’000 R’000 R’000 R’000


10 INTANGIBLE ASSETSGoodwill (note 10.1) 191 536 180 981 Software (note 10.2) 615 453 451 143 Trademarks (note 10.3) 47 069 41 378 Customer relationships (note 10.4) 40 238 45 603

— — 894 296 719 105

10.1 GoodwillGross amount 321 534 217 269 Impairment losses (129 998) (36 288)

— — Carrying value 191 536 180 981

Reconciliation of carrying valueCarrying value at the beginning of the year 180 981 167 074 Acquisition of subsidiaries and operations (note 32.5.1) 72 491 14 676 Impairment (note 10.1.1) (61 605) (769)Exchange rate differences (331) —


10.1.1 IMPAIRMENT OF GOODWILLGoodwill is allocated to the Group’s cash-generating units (CGUs). The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by manage-ment covering five-year planning periods. Cash flows beyond these planning periods are extrapolated using an estimated growth rate of 6.0% (2011: 4.6%). This does not exceed the long-term average growth rate for the business in which the CGUs operate. The following represent significant assumptions on which management based cash flow projections.

Supermarket operations % %

Operating margin* 6.7 5.9Growth rate** 6.0 4.6Pre-tax discount rate*** 11.4 14.1

Other operations % %

Operating margin* 5.7 6.1Growth rate** 6.0 4.6Pre-tax discount rate*** 8.3 9.3

* Forecasted operating margin, based on budgets, relating to the specific CGUs to which goodwill is allocated. This rate does not apply to the Group as a whole.

**Weighted average sales growth rate

***Pre-tax discount rate applied to the cash flow projections

These key assumptions are used for the analysis of each CGU within the geographical segment. Management determines budgeted sales growth rates and gross profit margins based on past performance and its expectations of the retail market within the relevant country or area. The discount rates used reflect specific risks relating to the relevant segments.

The impairment charge in the current financial year under review arose in CGU’s in the Supermarkets RSA, Supermarkets non-RSA and Other operating segments. This impairment was the result of a significant reduction in the future expected sales due to a weakening in the general economic conditions in which these CGU’s operates.

68


C O M PA N Y GROUP


R’000 R’000 R’000 R’000


10 INTANGIBLE ASSETS (CONTINUED)10.2 Software

Gross amount 782 598 574 714 Accumulated amortisation and impairment losses (167 145) (123 571)

— — Carrying value 615 453 451 143

Reconciliation of carrying valueCarrying value at the beginning of the year 451 143 348 737 Additions 56 159 36 575 Internally generated 149 263 115 371 Reclassification from property, plant and equipment (note 3) 17 153 145 Disposal (95) (1)

Proceeds on disposal (1) (1)Loss on disposal and scrappings (94) —

Amortisation (58 223) (49 677)Exchange rate differences 53 (7)


Included in the gross amount of software is R449m (2011: R288m) that relates to cost capitalised for software not yet in use. This relates mainly to the implementation of SAP merchandis-ing software. The gross amount of software not yet in use was evaluated for impairment by the directors at the statement of financial position date.

10.3 TrademarksGross amount 193 640 177 756 Accumulated amortisation (146 571) (136 378)

— — Carrying value 47 069 41 378

Reconciliation of carrying valueCarrying value at the beginning of the year 41 378 44 258 Acquisition of subsidiaries and operations (note 32.5.1) 9 302 — Amortisation (3 611) (2 880)


10.4 Customer relationshipsGross amount 53 650 53 650 Accumulated amortisation (13 412) (8 047)

— — Carrying value 40 238 45 603

Reconciliation of carrying valueCarrying value at the beginning of the year 45 603 50 968 Amortisation (5 365) (5 365)


69

C O M PA N Y GROUP


R’000 R’000 R’000 R’000


11 FIXED ESCALATION OPERATING LEASE ACCRUALOperating lease receipts straight-lined 11 504 9 449 Less: current (included under trade and other receivables: note 13) (931) (203)

— — 10 573 9 246

12 INVENTORIES — — Trading goods 8 680 109 7 055 867

13 TRADE AND OTHER RECEIVABLESInstalment sales

Gross amount (note 13.1) 1 283 036 1 099 858 Accumulated impairment (note 13.2) (135 712) (118 029)Unearned finance income (33 335) (27 066)Insurance contract allowances– Unearned premiums (note 13.3) (178 408) (156 520)

— — 935 581 798 243 — — Trade receivables (note 13.4) 1 205 979 881 100 — 15 327 Other receivables (note 13.5) 339 839 353 932 — — Prepayments and taxes receivable 196 883 205 107 — — Fixed escalation operating lease accrual (note 11) 931 203 — — Amounts owing by joint ventures (note 13.6) 22 818 16 805

— 15 327 2 702 031 2 255 390

13.1 Instalment salesThe Group has entered into various instalment sale agreements for household furniture. The periods of these contracts range between 1 and 2 years and the weighted average interest rate on these receivables is 20.8% (2011: 22.0%) p.a. The amounts are mainly denominated in ZAR. The maximum exposure to credit risk at the reporting date is the carrying value which approximates fair value. Instalment sales comprise a wide-spread client base and external credit checks are made to ensure that all instalment sale clients have an appropriate credit history. Furniture items, including appliances and electronic products are held as collateral for all instalment sale agreements.

Instalment sale receivablesFuture minimum instalment payments receivable under non-cancellable instalment sale agreements

Not later than 1 year 837 879 647 468 Later than 1 year not later than 2 years 445 157 452 390

— — 1 283 036 1 099 858

70


C O M PA N Y GROUP


R’000 R’000 R’000 R’000


13 TRADE AND OTHER RECEIVABLES (CONTINUED)13.2 Accumulated impairment

Reconciliation of accumulated impairmentBalance at July 118 029 115 906 Allowance for impairment for the year 161 878 41 583 Receivables written off during the year as uncollectible (153 834) (54 865)Penalty interest accrued 9 702 14 578 Exchange rate differences 1 298 1 350 Unused amounts reversed (1 361) (523)

— — Balance at June 135 712 118 029

The accumulated impairment relates to actual arrears, individual repayments that are past due, and the age analysis below reflects the period that these amounts are overdue.

30 days 23 302 19 918 60 days 14 404 12 665 90 days 10 564 9 515 120 days 8 217 7 645 150 days 6 638 6 318 180 days 5 451 5 384 + 180 days 34 391 37 313

— — 102 967 98 758

The accumulated impairment is calculated with reference to actual default history of the Group’s instalment sale receivables on a collective basis and is in line with industry norms. On this basis the provision of R136 million (2011: R118 million) was calculated taking into account the actual arrears of R103 million (2011: R99 million) and an amount of R304 million (2011: R243 million) which represents the maximum exposure if all debtors included in actual arrears continued to default. It was assessed that a portion of the receivables is expected to be recovered. All amounts that have not been impaired are fully performing and have no overdue instalments. Based on this the credit quality of these amounts is considered to be satisfactory.

13.3 Allowance for unearned premiumsAn analysis of the allowance for unearned premiums is set out below:Balance at the beginning of the year 156 520 142 298 Premiums written during the year (note 21.3) 316 623 271 589 Amortisation charged to income (note 21.3) (294 735) (257 367)

— — Balance at the end of the year 178 408 156 520

71

C O M PA N Y GROUP


R’000 R’000 R’000 R’000


13 TRADE AND OTHER RECEIVABLES (CONTINUED)13.4 Trade receivables

Gross amount 1 316 460 975 300 Accumulated impairment (110 481) (94 200)

— — 1 205 979 881 100

Trade receivables consist mainly of sale of merchandise to franchisees and buying aid societies. The amounts are mainly denominated in ZAR. The maximum exposure to credit risk at the reporting date is the carrying value which approximates fair value. Balances are due within 30 days of statement date and the age analysis of these amounts are reviewed on a monthly basis. All amounts past due 60 days or more are individually impaired. Franchisees comprise a wide-spread client base and the credit history of all franchisees are verified with an external credit bureau. Notarial and mortgage bonds and bank guaran-tees with a face value of R557 million (2011: R717 million) are held as collateral for these amounts. Long standing trading relationships exist with the buying aid societies and the Group reviews the credit history, based on its own records as well as information from an external credit bureau, of these societies on a cyclical basis. Based on this the Group considers the credit quality of all fully performing amounts as satisfactory.

Reconciliation of accumulated impairmentBalance at July 94 200 90 073 Allowance for impairment for the year 27 245 12 928 Receivables written off during the year as uncollectible (6 759) (1 471)Exchange rate differences 118 (2 876)Unused amounts reversed (4 323) (4 454)

— — Balance at June 110 481 94 200

The provision for impairment relates to trade receivables of R155 million (2011: R94 million) receivable within the next 12 months.

These individually impaired amounts relate mostly to franchisees experiencing unexpectedly difficult economic situations. It was assessed that a portion of the receivables is expected to be recovered. Interest of R1,7 million (2011: R1,5 million) was accrued on these balances during the year under review.

Trade receivables of R35 million (2011: R62 million) that were past due between 30 and 60 days of statement date were not impaired. These amounts relate to a number of debtors for whom there is no recent history of default.

72


C O M PA N Y GROUP


R’000 R’000 R’000 R’000


13 TRADE AND OTHER RECEIVABLES (CONTINUED) — — 13.5 Other receivables 339 839 353 932

Other receivables consist of various operational debtors such as rental and municipal deposits refundable. The amounts are mainly denominated in ZAR. The maximum exposure to credit risk at the reporting date is the carrying value which approxi-mates fair value. The age analysis of these amounts are reviewed on a monthly basis and no allowance for impairment has been made. If the credit risk of any individual receivables is deemed to be material the credit history of the relevant client will be verified with an external credit bureau. No security is held for these balances.

— — 13.6 Amounts owing by joint ventures 22 818 16 805 These amounts owing are unsecured, payable on demand and earn interest at an average of 5.4% (2011: 6.0%) p.a. The maximum exposure to credit risk at the reporting date is the carrying value and the Group does not hold any collateral as security. The amounts are mainly denominated in ZAR and are not impaired.

14 DERIVATIVE FINANCIAL INSTRUMENTSForward foreign exchange rate contracts (note 39.1.1)

— — Current liabilities 231 3 606

As at June 2012 the settlement dates on open forward contracts ranged between one and three (2011: one and three) months. The local currency amounts to be received and contractual exchange rates of the Company’s outstanding contracts were:US dollar rand equivalent at rates averagingR1 = $0,1180 (2011: R1 = $0,1451)

Outflow (308 808) (385 297)Inflow 302 177 379 682

Swedish krona rand equivalent at rates averagingN/A (2011: R1 = SEK0,9354)

Outflow — (4 486)Inflow — 3 951

Euro rand equivalent at rates averagingR1 = €0,0944 (2011: R1 = €0,1011)

Outflow (68 524) (58 793)Inflow 67 419 58 610

73

C O M PA N Y GROUP


R’000 R’000 R’000 R’000


15 SHARE CAPITAL, TREASURY SHARES AND SHARE INCENTIVE SCHEMES

15.1 Ordinary share capitalAuthorised:

650 000 000 (2011: 650 000 000) ordinary shares of 113.4 cents each

Issued:

616 306 647 037 570 579 460 (2011: 543 479 460) ordinary shares of 113.4 cents each 647 037 616 306

Reconciliation of movement in number of ordinary shares issued:

Number of sharesBalance at the beginning of the year 543 479 460 543 479 460 Shares issued during the year 27 100 000 —

Balance at the end of the year 570 579 460 543 479 460

Treasury shares held by Shoprite Checkers (Pty) Ltd and The Shoprite Holdings Ltd Share Incentive Trust are netted off against share capital on consolidation. The net number of ordinary shares in issue for the Group are:

Number of sharesIssued ordinary share capital 570 579 460 543 479 460 Treasury shares (note 15.3) (35 436 472) (37 346 947)

535 142 988 506 132 513

The unissued ordinary shares are under the control of the directors who may issue them on such terms and conditions as they deem fit until the Company’s next annual general meeting.

All shares are fully paid up.

74


C O M PA N Y GROUP


R’000 R’000 R’000 R’000


15 SHARE CAPITAL, TREASURY SHARES AND SHARE INCENTIVE SCHEMES (CONTINUED)

15.2 Deferred share capitalAuthorised:

360 000 000 (2011: 360 000 000) non-convertible, non-participating no par value deferred shares

Issued:276 821 666 (2011: 276 821 666) non-convertible, non-participating no par value deferred shares 277 277 277 277

The unissued deferred shares are not under the control of the directors, and can only be issued under predetermined circumstances as set out in the Memorandum of Incorporation of Shoprite Holdings Ltd.

All shares are fully paid up and carry the same voting rights as the ordinary shares.

616 583 647 314 647 314 616 583

15.3 Treasury shares — — 35 436 472 (2011: 37 346 947) ordinary shares 320 146 337 406

Reconciliation of movement in number of treasury shares for the Group:

Number of sharesBalance at the beginning of the year 37 346 947 37 346 947 Movement in shares held by The Shoprite Holdings Ltd Share Incentive Trust

Shares disposed during the year (506 036) — Movement in shares held by Shoprite Checkers (Pty) Ltd

Shares purchased during the year 506 036 — Shares' loss during the year (1 910 475) —

Balance at the end of the year 35 436 472 37 346 947

15.4 Share incentive schemesIn terms of the rules of The Shoprite Holdings Ltd Share Incentive Trust, the trustees are authorised to acquire and allocate shares which in total may not exceed 20% of the issued ordinary share capital of the Company.

15.4.1 SHARE PURCHASE SCHEMEAll ordinary shares held by The Shoprite Holdings Ltd Share Incentive Trust were sold to Shoprite Checkers (Pty) Ltd during the year under review.

Reconciliation of movement in number of ordinary shares held by The Shoprite Holdings Ltd Share Incentive Trust:

Number of sharesBalance at the beginning of the year 506 036 506 036 Shares sold to Shoprite Checkers (Pty) Ltd (506 036) —

Balance at the end of the year — 506 036

75

C O M PA N Y GROUP


R’000 R’000 R’000 R’000


15 SHARE CAPITAL, TREASURY SHARES AND SHARE INCENTIVE SCHEMES (CONTINUED)

15.4 Share incentive schemes (continued)15.4.1 SHARE PURCHASE SCHEME (CONTINUED)

Fair value of treasury shares held by The Shoprite Holdings Ltd Share Incentive Trust — 51 514

15.4.2 CASH-SETTLED SHARE-BASED PAYMENTSThe Group has granted cash-settled share-based payments to directors and management. The rights to cash-settled share-based payments entitle the participants to receive cash pay-ments based on the difference between the share price at the date of the exercise of the rights and the strike price which relates to the share price at the date of the grant. The number of shares on which the rights are based as well as the strike prices and the exercise and expiry dates are set out below. The Group has recognised the liability in respect of the cash-settled share-based payments and included it in payables (refer note 20).

Refer note 24 for the expense recognised in the statement of comprehensive income as employee benefits.

Weighted average strike price per share

Number of shares on which rights are based

2012 2011 2012 2011Movements in rights to cash-settled share-based payments

Balance at the beginning of the year R29,69 R30,17 9 441 667 13 400 000 Exercised during the year R31,78 R31,31 (4 049 999) (3 958 333)Forfeited during the year R31,31 — (183 334) —

Balance at the end of the year R28,02 R29,69 5 208 334 9 441 667

Rights to cash-settled share-based payments on June 2012 are unconditional on the following dates or immediately in the case of a deceased estate:

29 Aug 2011 — R31,31 — 3 958 333 29 Aug 2012 R31,31 R31,31 3 816 666 3 958 333 10 Oct 2011 — R45,45 — 133 333 10 Oct 2012 R45,45 R45,45 133 333 133 333 10 Oct 2013 R45,45 R45,45 133 334 133 334 9 Oct 2012 R62,35 R62,35 41 667 41 667 9 Oct 2013 R62,35 R62,35 41 667 41 667 9 Oct 2014 R62,35 R62,35 41 667 41 667 CH Wiese: refer next page R6,50 R6,50 1 000 000 1 000 000

R28,02 R29,69 5 208 334 9 441 667

76



Number of shares on which rights are based

Director Expiry date Exercise date At June 2011

Exercised during the

year At June 2012Strike price

per share

CH Wiese* 5 Sep 2022 Currently exercisable 1 000 000 — 1 000 000 R6,50

JAL Basson 29 Aug 2011 29 Aug 2011** 41 667 (41 667) — R31,31

JAL Basson 29 Aug 2012 29 Aug 2012 41 667 — 41 667 R31,31

M Bosman 29 Aug 2011 29 Aug 2011** 116 667 (116 667) — R31,31

M Bosman 29 Aug 2012 29 Aug 2012 116 666 — 116 666 R31,31

PC Engelbrecht 29 Aug 2011 29 Aug 2011** 250 000 (250 000) — R31,31

PC Engelbrecht 29 Aug 2012 29 Aug 2012 250 000 — 250 000 R31,31

CG Goosen 29 Aug 2011 29 Aug 2011** 316 667 (316 667) — R31,31

CG Goosen 29 Aug 2012 29 Aug 2012 316 666 — 316 666 R31,31

B Harisunker 29 Aug 2011 29 Aug 2011** 116 667 (116 667) — R31,31

B Harisunker 29 Aug 2012 29 Aug 2012 116 666 — 116 666 R31,31

AE Karp 10 Oct 2011 10 Oct 2011*** 133 333 (133 333) — R45,45

AE Karp 10 Oct 2012 10 Oct 2012 133 333 — 133 333 R45,45

AE Karp 10 Oct 2013 10 Oct 2013 133 334 — 133 334 R45,45

EL Nel 29 Aug 2011 29 Aug 2011** 133 333 (133 333) — R31,31

EL Nel 29 Aug 2012 29 Aug 2012 133 334 — 133 334 R31,31

BR Weyers 29 Aug 2011 29 Aug 2011** 100 000 (100 000) — R31,31

BR Weyers 29 Aug 2012 29 Aug 2012 100 000 — 100 000 R31,31

*The right to the cash-settled share-based payments have been granted via a management company.**The market price of share appreciation rights exercised on 29 August 2011 was R102,30 per share.***The market price of share appreciation rights exercised on 10 October 2011 was R116,67 per share.

15 SHARE CAPITAL, TREASURY SHARES AND SHARE INCENTIVE SCHEMES (CONTINUED) 15.4 Share incentive schemes (continued) 15.4.2 CASH-SETTLED SHARE-BASED PAYMENTS (CONTINUED)

Cash-settled share-based payments issued to directors

77


C O M PA N Y GROUP


R’000 R’000 R’000 R’000

16 RESERVES1 345 422 1 423 455 Retained earnings 8 203 053 6 507 523

2 152 2 152 Other reserves (note 16.1) 542 752 4 928

1 347 574 1 425 607 8 745 805 6 512 451

16.1 Other reserves 209 209 Reserve on conversion from no par value to par value shares 209 209

1 943 1 943 Capital redemption reserve 1 943 1 943 — — Equity component of convertible bonds 333 880 — — — Foreign currency translation reserve 206 720 (81 979) — — Contingency reserve — 33 536 — — Fair value reserve — 51 219

2 152 2 152 542 752 4 928

16.1.1 RECONCILIATION OF CARRYING VALUES OF OTHER RESERVES

R’000

Equity component of

convertible bonds

Foreign currency

translation reserve

Contingency reserve

Fair value reserve Other

Balance at June 2010 — 60 472 29 027 49 269 2 152

Foreign currency translation differences (142 451)Transfer from distributable reserves 4 509 Net fair value gains on available-for-sale investments, net of income tax 1 950

Net fair value gains 2 267 Related income tax (317)

Balance at June 2011 — (81 979) 33 536 51 219 2 152

Equity component of convertible bonds on initial recognition 470 129Deferred income tax on equity component of convertible bonds (136 249)Foreign currency translation differences 288 699 Transfer to distributable reserves (33 536)Net fair value gains on available-for-sale investments, net of income tax (51 219)

Net fair value gains (59 557)Related income tax 8 338

Balance at June 2012 333 880 206 720 — — 2 152

78


C O M PA N Y GROUP


R’000 R’000 R’000 R’000


17 BORROWINGSConsisting of:

2 450 2 450 Shoprite Holdings Ltd preference share capital (note 17.1) 2 450 2 450 — — Shoprite International Ltd preference share capital (note 17.2) 182 149 — — Convertible bonds (note 17.3) 3 975 330 — — — First National Bank of Namibia Ltd (note 17.4) 57 472 47 156

2 450 2 450 4 035 434 49 755

Analysis of total borrowings 2 450 2 450 Non-current 4 006 698 26 177

— — Current 28 736 23 578

2 450 2 450 4 035 434 49 755

17.1 Shoprite Holdings Ltd preference share capitalAuthorised:

175 000 (2011: 175 000) 6% non-convertible cumulative preference shares of R2 each325 000 (2011: 325 000) 5% non-convertible cumulative preference shares of R2 each225 000 (2011: 225 000) second 5% non-convertible cumulative preference shares of R2 each1 000 000 (2011: 1 000 000) third 5% non-convertible cumulative preference shares of R2 each

Issued:175 000 (2011: 175 000) 6% non-convertible cumulative preference shares of R2 each 350 350 350 350 325 000 (2011: 325 000) 5% non-convertible cumulative preference shares of R2 each 650 650 650 650 225 000 (2011: 225 000) second 5% non-convertible cumulative preference shares of R2 each 450 450 450 450 500 000 (2011: 500 000) third 5% non-convertible cumulative preference shares of R2 each 1 000 1 000 1 000 1 000

2 450 2 450 2 450 2 450

17.2 Shoprite International Ltd preference share capital20 (2011: 20) “Malawi” redeemable under certain conditions, preference shares of USD1,82 each 1 543 1 259 2 (2011: 2) “Angola” redeemable under certain conditions, preference shares of USD1,82 each 155 126 Accumulated losses recognised (1 516) (1 236)

— — 182 149

79

C O M PA N Y GROUP


R’000 R’000 R’000 R’000


17 BORROWINGS (CONTINUED)17.3 Convertible bonds

The Group issued 6.5% convertible bonds for a principal amount of R4,5 billion on 2 April 2012. The bonds mature five years from the issue date at their nominal value of R4,5 billion or can be converted into shares at the holders’ option at the maturity date at the rate of 5 919.26 shares per R1 million. The Group holds, subject to conditions, rights on early redemption. The values of the liability component and the equity conversion component were determined at issuance of the bond.

The fair value of the liability component, included in non-current borrowings, was calculated using a market interest rate for an equivalent non-convertible bond. The residual amount, repre-senting the value of the equity conversion option, is included in shareholders’ equity in other reserves, net of income taxes.

The convertible bond recognised in the statement of financial position is calculated as follows:

Face value of convertible bonds issued on 2 April 2012* 4 347 641 — Equity component (note 16.1)* (470 129) —

— — Liability component on initial recognition at 2 April 2012 3 877 512 — Interest expense (note 28) 97 818 —

— — Liability component at the end of the year 3 975 330 —

* The transaction costs have been allocated to the equity and liability components based on their relative day one values.

The fair value of the liability component of the convertible bonds amounted to R4,1 billion at the statement of financial position date. The fair value is calculated using cash flows discounted at a rate based on the borrowings rate of 8.5%.

17.4 First National Bank of Namibia LtdThis loan is unsecured, will be repaid within the next 24 months in equal instalments and bears interest at an average of 8.82% (2011: 9.19%) p.a. — — 57 472 47 156

18 PROVISIONSProvision for post-retirement medical benefits (note 36.2) 33 355 33 534 Provision for onerous lease contracts 44 165 50 578 Provision for outstanding claims 2 353 2 134 Provision for long-term employee benefits 257 937 219 831 Reinstatement provision 139 615 137 240

— — 477 425 443 317

80



18 PROVISIONS (CONTINUED) Reconciliation of carrying values

R’000

Post-retirement

medical benefits

Onerous lease

contractsOutstanding

claims

Long-term employee

benefits Reinstatement

provision Total

Balance at June 2010 32 404 41 421 1 459 158 981 141 378 375 643 Additional provisions 1 240 21 356 675 59 461 11 570 94 302 Unused amounts reversed (312) (159) — (321) (732) (1 524)Utilised during the year (2 630) (10 818) — (6 354) (14 912) (34 714)Accretion of discount 2 832 (1 222) — 8 572 — 10 182 Exchange rate differences — — — (508) (64) (572)

Balance at June 2011 33 534 50 578 2 134 219 831 137 240 443 317

Additional provisions 76 29 823 219 55 104 11 549 96 771 Unused amounts reversed (1 328) (15 049) — (4 932) (1 925) (23 234)Utilised during the year (1 779) (23 064) — (20 882) (7 249) (52 974)Accretion of discount 2 852 1 877 — 7 506 — 12 235 Exchange rate differences — — — 1 310 — 1 310

Balance at June 2012 33 355 44 165 2 353 257 937 139 615 477 425

Analysis of total provisions2011Non-current 33 534 26 009 — 218 568 61 089 339 200 Current — 24 569 2 134 1 263 76 151 104 117

33 534 50 578 2 134 219 831 137 240 443 317

2012

Non-current 33 355 29 069 — 208 573 67 794 338 791 Current — 15 096 2 353 49 364 71 821 138 634

33 355 44 165 2 353 257 937 139 615 477 425

Discount rates used2011 9% 12% N/A 9% 12%2012 9% 9% N/A 8% 9%

C O M PA N Y GROUP


R’000 R’000 R’000 R’000

19 FIXED ESCALATION OPERATING LEASE ACCRUALOperating lease payments straight-lined (refer note 23) 576 437 522 205 Less: current (included under trade and other payables: note 20) (56 231) (66 418)

— — 520 206 455 787

81

C O M PA N Y GROUP


R’000 R’000 R’000 R’000


20 TRADE AND OTHER PAYABLES — — Trade payables 8 163 845 6 303 789

966 24 777 Other payables and accruals 2 927 422 2 254 512 — — Employee benefit accruals 743 836 655 394

160 198 Indirect taxes payable 204 540 200 323 — — Amounts owing to joint ventures (note 20.1) 7 665 3 917 — — Fixed escalation operating lease accrual (note 19) 56 231 66 418 — — Cash-settled share-based payment accrual (note 15.4.2) 630 043 586 845

1 126 24 975 12 733 582 10 071 198

Analysis of trade and other payables — — Non-current 21 878 263 455

1 126 24 975 Current 12 711 704 9 807 743

1 126 24 975 12 733 582 10 071 198

— — 20.1 Amounts owing to joint ventures 7 665 3 917 These loans are unsecured, payable on demand and bear interest at an average of 3.4% (2011: 1.2%) p.a.

21 OTHER OPERATING INCOME — — Finance income earned 206 354 196 066

1 306 771 1 652 535 Investment income (note 21.1) 82 259 27 663 — — Franchise fees received 47 438 38 262 — — Operating lease income (note 21.2) 251 482 231 900 — — Commissions received 485 734 412 386 — — Premiums earned (note 21.3) 294 735 257 367

910 2 522 Other income 957 310 692 197

1 307 681 1 655 057 2 325 312 1 855 841

21.1 Investment income — 12 955 Interest received from subsidiaries — — — — Interest received from joint ventures 279 965 — 335 Interest received other 16 579 14 940

1 306 751 1 639 223 Dividends – subsidiaries — — 20 22 – unlisted investments 65 401 11 758

1 306 771 1 652 535 82 259 27 663

21.2 Operating lease incomeThe Group has entered into various operating lease agreements as the lessor of property.

Leases on properties are contracted for periods of between 1 and 9 years (2011: 1 and 13 years). Rental comprises mainly minimum monthly payments. Rental escalations vary, but average at a rate of 7.5% (2011: 8.3%) p.a.

21.3 Premiums earnedPremiums written 316 623 271 589 Change in allowance for unearned premiums (21 888) (14 222)

— — 294 735 257 367

82


C O M PA N Y GROUP


R’000 R’000 R’000 R’000


22 DEPRECIATION AND AMORTISATIONProperty, plant and equipment 1 132 907 948 520 Intangible assets 67 199 57 922

1 200 106 1 006 442 Disclosed as cost of sales (109 811) (72 850)

— — 1 090 295 933 592

23 OPERATING LEASESThe Group has entered into various operating lease agreements on property, plant and equipment.

Leases on properties are contracted for periods of between 5 and 10 years (2011: 3 and 10 years) with renewal options averaging a further 3 to 15 years. Rental comprises minimum monthly payments and contingent payments based on turnover levels. Turnover rentals, where applicable, average 1.84% (2011: 1.84%) of turnover. Rental escalations vary, but average at a rate of 6.52% (2011: 6.76%) p.a.

Operating lease payments – property 1 902 258 1 692 493 Operating lease payments – equipment 80 858 81 943


— — 1 940 221 1 700 468

Consisting of:Minimum lease payments 1 733 591 1 543 435 Contingent lease payments 249 525 231 001

— — 1 983 116 1 774 436

24 EMPLOYEE BENEFITSWages and salaries 6 305 672 5 514 459 Cash-settled share-based payments (note 15.4.2) 275 580 256 618 Post-retirement medical benefits (note 36.2) 1 600 3 760 Retirement benefit contributions (note 36.1) 347 939 314 415


— — 6 530 468 5 762 045

24.1 Learnership allowancesThe Group has, during the year under review, received certain learnership allowances.

Sector Educational Training Authorities (SETA) grantsIn terms of the SETA grant in South Africa the Group can recoup Skills Development Levies (SDLs) to the extent that training, as prescribed by SETA, is provided to its employees. This resulted in a reduction in SDLs of R24,236,590 (2011: R20,601,405) for the year under review. The net amount is taxable at 28% (2011: 28%).

83

C O M PA N Y GROUP


R’000 R’000 R’000 R’000


25 OPERATING PROFITDetermined after taking into account the following:

— — Fair value gains/(losses) on financial instruments 3 375 (5 105)

— — Policyholder claims and benefits paid 24 965 14 073 — — – claims paid 24 746 13 398 — — – movement in accumulated unpaid claims (note 18) 219 675

26 DIRECTORS’ REMUNERATION 69 032 78 261 Executive directors

845 1 227 Non-executive directors

69 877 79 488 — — (69 032) (78 261) Less: paid by subsidiaries and joint ventures

845 1 227 — —

The only prescribed officers of the Group are the Shoprite Holdings Ltd directors and alternate directors, as listed below.

For details of equity and cash-settled share-based payment instruments issued to directors refer note 15.4.

The South African Companies Act (Act No 71 of 2008), as amended, requires certain new disclosures in respect of directors’ remuneration. All disclosures relating to share appreciation rights exercised are now disclosed in note 15.4.

2012 2011

R’000Remune-

ration

Perfor-mance bonus

Retirement and

medical benefits

Other benefits Total

Remune-ration

Perfor-mance bonus

Retirement and

medical benefits

Other benefits Total

Executive directors and alternatesJW Basson 40 620 — 35 309 40 964 32 063 — 3 963 449 36 475 JAL Basson 1 257 1 008 215 161 2 641 1 137 1 350 194 142 2 823 M Bosman 1 727 1 487 397 168 3 779 1 601 1 327 322 204 3 454 PC Engelbrecht 2 785 1 864 513 222 5 384 2 475 1 610 423 198 4 706 CG Goosen 3 354 2 658 804 229 7 045 3 104 2 410 708 257 6 479 B Harisunker 2 112 1 235 702 153 4 202 1 957 921 592 190 3 660 AE Karp 3 143 2 256 641 247 6 287 2 908 540 557 266 4 271 EL Nel 2 104 1 760 370 172 4 406 1 942 1 450 334 171 3 897 BR Weyers 1 627 1 300 422 204 3 553 1 534 1 180 361 192 3 267

58 729 13 568 4 099 1 865 78 261 48 721 10 788 7 454 2 069 69 032

84



C O M PA N Y GROUP


R’000 R’000 R’000 R’000

27 ITEMS OF A CAPITAL NATUREProfit/(loss) on disposals of property (note 3) 1 572 (6 214)Profit on disposals of assets held for sale (note 4) — 12 868 Loss on disposals and scrappings of plant, equipment and intangible assets (note 3 & 10) (15 166) (32 256)Insurance claims paid (1 094) (217)Impairment of property, plant and equipment and assets held for sale (note 3 & 4) (17 210) (56 351)Impairment of goodwill (note 10.1) (61 605) (769)(Loss)/profit on other investing activities (184) 4 406

— — (93 687) (78 533)

28 FINANCE COSTS — — Interest on convertible bonds 97 818 —

72 — Interest paid 125 412 125 608 — — Interest paid to joint ventures 207 230

126 126 Preference dividends 126 126 21 21 6% non-convertible cumulative preference shares 21 21 32 32 5% non-convertible cumulative preference shares 32 32 23 23 Second 5% non-convertible cumulative preference shares 23 23 50 50 Third 5% non-convertible cumulative preference shares 50 50

198 126 223 563 125 964

2012 2011Fees Total Fees Total

Non-executive directorsJJ Fouché (appointed 26/03/2012) 32 32 — — EC Kieswetter 120 120 101 101 JA Louw 211 211 101 101 JF Malherbe 210 210 176 176 JG Rademeyer 312 312 259 259 JA Rock (appointed 15/05/2012) 22 22 — — CH Wiese* 320 320 208 208

1 227 1 227 845 845

*Paid to Chaircorp (Pty) Ltd in its capacity as employer.

26 DIRECTORS’ REMUNERATION (CONTINUED)

85

C O M PA N Y GROUP


R’000 R’000 R’000 R’000


29 INCOME TAX EXPENSE29.1 Classification

131 060 114 556 South African income tax 1 306 833 1 162 478 — — Foreign income tax 132 056 184 348

131 060 114 556 1 438 889 1 346 826

29.2 Consisting of: 12 879 26 032 Current income tax 1 409 413 1 223 548 1 165 (1 030) Prior year income tax 1 609 28 295

— — Withholding income tax 26 159 7 991 117 053 89 680 Secondary income tax on companies 91 843 121 670

131 097 114 682 1 529 024 1 381 504 (37) (126) Deferred income tax (90 135) (34 678)

131 060 114 556 1 438 889 1 346 826

29.3 Reconciliation of income tax 374 513 478 921 South African current income tax at 28% (2011: 28%) 1 254 878 1 085 383

(243 453) (364 365) Net adjustments 184 011 261 443 35 35 Preference dividends (230) (255)

(365 897) (458 989) Dividend income (18 312) (5 966) 4 191 5 939 Other exempt income and non-deductible expenses (177) 76 058

— — Income tax allowances (9 898) (2 648) — — Deferred income tax asset previously not recognised (6 922) (25 242)

1 165 (1 030) Prior year income tax 1 609 28 295 117 053 89 680 Secondary income tax on companies 91 843 121 670

— — Effect of foreign income tax rates 35 999 33 398 — — Withholding income tax 26 159 7 991 — — Deferred income tax asset not recognised 63 940 28 142

131 060 114 556 Income tax 1 438 889 1 346 826

9.8% 6.7% Effective tax rate 32.1% 34.7%

29.4 Secondary income tax on companies

89 674 — Secondary income tax on companies on proposed or envisaged dividends — 89 674

If the total distributable reserves of the Company of R1,345 million at the end of the previous year were to be declared as dividends, the secondary income tax impact at a rate of 10% would have been R135 million.

The South African Government replaced secondary income tax on companies with a dividend tax on shareholders with effect from 1 April 2012.

86


C O M PA N Y GROUP


R’000 R’000 R’000 R’000


29 INCOME TAX EXPENSE (CONTINUED)29.5 Net calculated income tax losses and net

deductible temporary differences Calculated income tax losses and net deductible temporary differences at year-end 1 843 759 1 424 491 Applied in the provision for deferred income tax 1 479 506 1 137 964

— — 364 253 286 527

The utilisation of the income tax relief, translated at closing rates, to the value of R108,638,479 (2011: R95,036,491), calculated at current income tax rates on the net calculated income tax losses, is dependent on sufficient future taxable income in the companies concerned.

The carry forward of all gross calculated income tax losses is indefinite, except for certain African countries, as set out below:

Expiry date of income tax relief30 June 2012 — 1 625 30 June 2013 2 776 3 165 30 June 2014 8 276 7 542 30 June 2015 8 369 3 802 30 June 2016 4 025 4 744 30 June 2017 19 483 16 879 30 June 2018 2 603 — 30 June 2019 — 103

— — 45 532 37 860

Calculated temporary differences on consolidation associated with investments in subsidiaries for which deferred income tax liabilities have not been created — — 108 566 89 255

87


30 EARNINGS PER SHARE2012

GrossIncome tax

effect NetR’000

Profit attributable to equity holders 3 026 563Profit on disposals of property (note 3) (1 572) 294 (1 278)Loss on disposals and scrappings of plant, equipment and intangible assets (note 3 & 10) 15 166 (3 856) 11 310 Insurance claims paid 1 094 (306) 788 Impairment of property, plant and equipment and assets held for sale (note 3 & 4) 17 210 (2 170) 15 040 Impairment of goodwill (note 10.1) 61 605 — 61 605 Loss on other investing activities 184 — 184

Headline earnings 93 687 (6 038) 3 114 212

2011

GrossIncome tax

effect NetR’000

Profit attributable to equity holders 2 509 780Loss on disposals of property (note 3) 6 214 (197) 6 017 Profit on disposals of assets held for sale (note 4) (12 868) 1 802 (11 066)Loss on disposals and scrappings of plant, equipment and intangible assets (note 3 & 10) 32 256 (9 077) 23 179 Insurance claims paid 217 (61) 156 Impairment of property, plant and equipment and assets held for sale (note 3 & 4) 56 351 (12 311) 44 040 Impairment of goodwill (note 10.1) 768 — 768 Profit on other investing activities (4 405) 537 (3 868)

Headline earnings 78 533 (19 307) 2 569 006

2012 2011Number of shares

Number of ordinary shares– In issue 535 143 506 133 – Weighted average 513 019 506 133

Earnings per share Cents– Earnings 590.0 495.9 – Headline earnings 607.0 507.6

Diluted earnings per share is unchanged from basic earnings per share, as the inclusion of the dilutive potential ordinary shares would increase earnings per share and is therefore not dilutive. Convertible debt outstanding at the reporting date (refer note 17.3), which were anti-dilutive in the current year, could potentially have a dilutive impact in the future.

88


C O M PA N Y GROUP


R’000 R’000 R’000 R’000


31 DIVIDENDS PER SHARECents 31.1 Dividends per share paid Cents

147.0 165.0 No 125 paid 19 September 2011 (2011: No 123 paid 20 September 2010) 165.0 147.0

88.0 109.0 No 126 paid 30 April 2012 (2011: No 124 paid 22 March 2011) 109.0 88.0

235.0 274.0 274.0 235.0

31.2 Dividends per share declared

165.0 194.0 No 127 payable 17 September 2012 (2011: No 125 paid 19 September 2011) 194.0 165.0

32 CASH FLOW INFORMATION32.1 Non-cash items

— — Depreciation of property, plant and equipment 1 132 907 948 520 — — Amortisation of intangible assets 67 199 57 922 — — Net fair value (gains)/losses on financial instruments (3 375) 5 105 1 — Exchange rate losses 8 343 446 — — (Profit)/loss on disposals of property (1 572) 6 214 — — Profit on disposals of assets held for sale — (12 868)

— — Loss on disposals and scrappings of plant, equipment and intangible assets 15 166 32 256

— — Impairment of property, plant and equipment and assets held for sale 17 210 56 351

— — Impairment of goodwill 61 605 769 — — Movement in provisions 34 577 70 876 — — Movement in cash-settled share-based payment accrual 330 738 272 808 — — Movement in fixed escalation operating lease accrual 51 724 21 081

1 — 1 714 522 1 459 480

32.2 Changes in working capital — — Inventories (1 526 104) (1 000 474) — (15 327) Trade and other receivables (239 945) (236 566)

(285) 23 848 Trade and other payables 2 415 283 (87 319)

(285) 8 521 649 234 (1 324 359)

32.3 Dividends paid (3 338) (4 016) Shareholders for dividends at the beginning of the year (4 851) (3 328)

(1 277 177) (1 517 843) Dividends distributed to equity holders (1 421 598) (1 189 411) — — Dividends distributed to non-controlling interest (12 330) (28 196)

4 016 3 849 Shareholders for dividends at the end of the year 4 955 4 851

(1 276 499) (1 518 010) (1 433 824) (1 216 084)

32.4 Income tax paid 1 589 (4 247) Prepaid/(payable) at the beginning of the year (425 773) (75 361)

(131 097) (114 682) Per statement of comprehensive income (1 529 024) (1 381 504) — — Acquisition of subsidiaries and operations (note 32.5.1) (372) —

4 247 7 028 Payable at the end of the year 69 835 425 773

(125 261) (111 901) (1 885 334) (1 031 092)

89

C O M PA N Y GROUP


R’000 R’000 R’000 R’000


32 CASH FLOW INFORMATION (CONTINUED)32.5 Cash flows (utilised by)/from investing activities

Investment in property, plant and equipment and intangible assets to expand operations — — (2 359 020) (2 283 322)Investment in property, plant and equipment and intangible assets to maintain operations — — (758 749) (721 897)

— — Proceeds on disposals of property, plant and equipment and intangible assets 149 315 63 483

— — Proceeds on disposals of assets held for sale — 28 360 — (651 009) Other investing activities 34 409 3 493

(1 342 957) (2 316 447) Amounts paid to subsidiaries — — 1 408 492 2 252 984 Amounts received from subsidiaries — —

— — Investment in associate (103 886) — — — Acquisition of subsidiaries and operations (note 32.5.1) (72 961) (27 128)

65 535 (714 472) (3 110 892) (2 937 011)

32.5.1 ACQUISITION OF SUBSIDIARIES AND OPERATIONSThe Group acquired a 100% shareholding in a subsidiary and various operations. The acquisitions had no significant impact on the Group’s results.

The assets and liabilities arising from the acquisitions were as follows:Property, plant and equipment (note 3) 19 788 12 228 Trademark (note 10.3) 9 302 — Trade and other receivables (note 13) 97 647 — Trade and other payables (note 20) (133 560) (1 087)Current income tax (372) — Inventories (note 12) 7 665 1 311

470 12 452 Goodwill (note 10.1) 72 491 14 676

— — Purchase consideration 72 961 27 128

32.6 Cash flows from financing activities — 3 409 728 Proceeds from ordinary shares issued 3 409 728 — — — Proceeds from convertible bonds issued 4 347 641 — — — Increase in borrowings from First National Bank of Namibia Ltd 10 316 9 329

— 3 409 728 7 767 685 9 329

90


C O M PA N Y GROUP


R’000 R’000 R’000 R’000


33 CONTINGENT LIABILITIESAmounts arising in the ordinary course of business relating to property and other transactions from which it is anticipated that no material liabilities will arise. 206 168 157 792

Shoprite Holdings Ltd and its main trading subsidiary, Shoprite Checkers (Pty) Ltd, have irrevocably and unconditionally guaran-teed all amounts payable by the issuer, Shoprite Investments Ltd, in respect of the convertible bonds (refer note 17.3).

34 COMMITMENTS34.1 Capital commitments

Contracted for property, plant and equipment 1 464 732 1 261 803 Contracted for intangible assets 242 735 81 731 Authorised by directors, but not contracted for 2 077 445 1 781 928

— — Total capital commitments 3 784 912 3 125 462

— — Capital commitments for the 12 months after accounting date 3 784 912 3 125 462

Funds to meet this expenditure will be provided from the Group’s own resources and borrowings.

34.2 Operating lease commitmentsFuture minimum lease payments under non-cancellable operating leases:– Not later than one year 1 609 405 1 220 407 – Later than one year not later than five years 5 107 226 4 012 189 – Later than five years 2 739 322 2 075 058

9 455 953 7 307 654 Less: fixed escalation operating lease accrual (note 19) (576 437) (522 205)

— — 8 879 516 6 785 449

34.3 Operating lease receivablesFuture minimum lease payments receivable under non-cancellable operating leases:– Not later than one year 175 323 237 924 – Later than one year not later than five years 354 467 313 153 – Later than five years 36 070 13 191

565 860 564 268 Less: fixed escalation operating lease accrual (note 11) (11 504) (9 449)

— — 554 356 554 819

91

C O M PA N Y GROUP


R’000 R’000 R’000 R’000


35 BORROWING POWERSIn terms of the Memorandum of Incorporation of the Company the borrowing powers of Shoprite Holdings Ltd are unlimited.

36 POST-RETIREMENT BENEFITS36.1 Retirement funds

Group companies provide post-retirement benefits in accordance with the local conditions and practices in the countries in which they operate.

The Group provides retirement benefits to 68.9% (2011: 57.1%) of employees and 3.2% (2011: 4.3%) of the employees belong to national retirement plans. The monthly contributions are charged to the statement of comprehensive income.

All company funds are defined contribution funds. All South African funds are subject to the Pension Fund Act of 1956.

During the year under review contributions to retirement funding have been calculated as 347 939 314 415

36.2 Medical benefitsFull provision for post-retirement medical benefits, where they exist, are made with reference to actuarial valuations in respect of past services liabilities. The liability relates mainly to pensioners and will be settled during the next financial years.

36.2.1 THE PRINCIPAL ACTUARIAL ASSUMPTIONS USED FOR ACCOUNTING PURPOSES ARE AS FOLLOWS:

Health-care cost inflation 10.3% 9.8%Discount rate 9.3% 8.8%Salary adjustments– inflation 7.7% 7.3%– promotions and experience increases 1.5% 1.5%Continuation at retirement 100.0% 95.0%Expected retirement age 63 years 60 years

The assumed rates of mortality are as follows:During employment: SA: 85-90 (light) ultimate table

(2011: SA 85-90 (light) ultimate table)Post-employment: PA (90) ultimate table rated down 2 years

plus 1% p.a. improvement from 2006 (2011: PA (90) ultimate table rated down 2 years plus 1% p.a. improvement from 2006)

92


C O M PA N Y GROUP


R’000 R’000 R’000 R’000


36 POST-RETIREMENT BENEFITS (CONTINUED)36.2 Medical benefits (continued)

36.2.2 THE MOVEMENT IN THE LIABILITY RECOGNISED IN THE STATEMENT OF FINANCIAL POSITION (NOTE 18) WAS AS FOLLOWS:Balance at the beginning of the year 33 534 32 404 Total expense charged to the statement of comprehensive income (note 36.2.3) 1 600 3 760 Benefits paid (1 779) (2 630)

— — Balance at the end of the year 33 355 33 534

36.2.3 THE AMOUNTS RECOGNISED IN THE STATEMENT OF COMPREHENSIVE INCOME WERE AS FOLLOWS:Current service cost 76 115 Net actuarial (gains)/losses recognised during the year (1 328) 813 Interest cost 2 852 2 832

— — Total included in employee benefits (note 24) 1 600 3 760

The effect of a 1% increase in the assumed health-care cost inflation is as follows:

Increase in the current service and interest cost 454 443 Increase in the post-retirement medical benefit liability 4 730 4 878

The effect of a 1% decrease in the assumed health-care cost inflation is as follows:

Decrease in the current service and interest cost 369 359 Decrease in the post-retirement medical benefit liability 3 870 3 975

36.2.4 TREND ANALYSIS OF POST-RETIREMENT MEDICAL BENEFITS

R’000Present value

of obligationExperience

adjustments

30 June 2008 181 099 4 563 30 June 2009 243 268 1 687 30 June 2010 32 404 5 907 30 June 2011 33 534 963 30 June 2012 33 355 1 878

93


37 FINANCIAL INSTRUMENTS BY CATEGORY

Loans and receivables

Available-for-sale Total

GroupR’000 2012FINANCIAL ASSETS AS PER STATEMENT OF FINANCIAL POSITIONLoans and receivables 19 903 19 903 Instalment sales 935 581 935 581 Trade receivables 1 205 979 1 205 979 Other receivables excluding prepayments and taxes receivable 339 839 339 839 Amounts owing by joint ventures 22 818 22 818 Cash and cash equivalents 7 939 333 7 939 333

10 463 453 — 10 463 453

R'000 2011FINANCIAL ASSETS AS PER STATEMENT OF FINANCIAL POSITIONAvailable-for-sale investments 59 656 59 656 Loans and receivables 50 534 50 534 Instalment sales 798 243 798 243 Trade receivables 881 100 881 100 Other receivables excluding prepayments and taxes receivable 353 932 353 932 Amounts owing by joint ventures 16 805 16 805 Cash and cash equivalents 1 961 551 1 961 551

4 062 165 59 656 4 121 821

CompanyR'000 2012FINANCIAL ASSETS AS PER STATEMENT OF FINANCIAL POSITIONAmounts owing by subsidiaries 74 237 74 237 Other receivables excluding prepayments and taxes receivable 15 327 15 327 Cash and cash equivalents 3 387 853 3 387 853

3 477 417 — 3 477 417

R'000 2011FINANCIAL ASSETS AS PER STATEMENT OF FINANCIAL POSITIONAmounts owing by subsidiaries 10 774 10 774 Cash and cash equivalents 603 555 603 555

614 329 — 614 329

The nominal value less estimated credit adjustments of trade and other receivables are assumed to approximate their fair values.

The book value of all other financial assets approximate the fair values thereof.

94



Financial liabilities

Liabilities at fair value through profit and loss Total

GroupR'000 2012FINANCIAL LIABILITIES AS PER STATEMENT OF FINANCIAL POSITIONBorrowings 4 035 434 4 035 434 Reinstatement provision 139 615 139 615 Trade payables 8 163 845 8 163 845 Other payables and accruals excluding taxes payable and employee benefit accruals 2 927 422 2 927 422 Amounts owing to joint ventures 7 665 7 665 Derivative financial instruments 231 231 Bank overdrafts 22 858 22 858 Shareholders for dividends 4 955 4 955

15 301 794 231 15 302 025

R'000 2011FINANCIAL LIABILITIES AS PER STATEMENT OF FINANCIAL POSITIONBorrowings 49 755 49 755 Reinstatement provision 137 240 137 240 Trade payables 6 303 789 6 303 789 Other payables and accruals excluding taxes payable and employee benefit accruals 2 254 512 2 254 512 Amounts owing to joint ventures 3 917 3 917 Derivative financial instruments 3 606 3 606 Bank overdrafts 2 042 100 2 042 100 Shareholders for dividends 4 851 4 851

10 796 164 3 606 10 799 770

CompanyR'000 2012FINANCIAL LIABILITIES AS PER STATEMENT OF FINANCIAL POSITIONBorrowings 2 450 2 450 Other payables and accruals excluding taxes payable and employee benefit accruals 24 777 24 777 Shareholders for dividends 3 849 3 849

31 076 — 31 076

R'000 2011FINANCIAL LIABILITIES AS PER STATEMENT OF FINANCIAL POSITIONBorrowings 2 450 2 450 Other payables and accruals excluding taxes payable and employee benefit accruals 966 966 Shareholders for dividends 4 016 4 016

7 432 — 7 432

The nominal value less estimated credit adjustments of trade and other payables are assumed to approximate their fair values.

The fair value of the liability component of the convertible bonds included in borrowings amounted to R4,1 billion at the statement of financial position date. The fair value is calculated using cash flows discounted at a rate based on the borrowings rate of 8.5%.

The book value of all other financial liabilities approximate the fair values thereof.

37 FINANCIAL INSTRUMENTS BY CATEGORY (CONTINUED)

95

C O M PA N Y GROUP


R’000 R’000 R’000 R’000


38 FAIR VALUE DISCLOSURESAll financial instruments measured at fair value are classified using a three-tiered fair value hierarchy that reflects the signifi-cance of the inputs used in determining the measurement. The hierarchy is as follows:

Level 1 – Measurements in whole or in part are done by reference to unadjusted, quoted prices in an active market for identical assets and liabilities. Quoted prices are readily available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm’s length basis.

Level 2 – Measurements are done by reference to inputs other than quoted prices that are included in level 1. These inputs are observable for the financial instrument, either directly (i.e. as prices) or indirectly (i.e. from derived prices).

Level 3 – Measurements are done by reference to inputs that are not based on observable market data.

Available-for-sale investments are measured at fair value. The investment in RMB Global Solutions (Pty) Ltd at the end of the previous year was classified at level 2.

Derivatives – being foreign exchange contracts – are measured at fair value and classified at level 2.

39 FINANCIAL RISK MANAGEMENT39.1 Financial risk factors

The Group’s activities expose it to a variety of financial risks, including the effects of changes in debt, foreign currency exchange rates and interest rates. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses derivative financial instruments such as foreign exchange rate contracts as economic hedges, to hedge certain exposures.

Risk management is carried out by a central treasury depart-ment under policies approved by the Board of Directors. The treasury department identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange rate risk, interest rate risk, credit risk, use of derivative financial instruments and investing excess liquidity.

96


C O M PA N Y GROUP


R’000 R’000 R’000 R’000


39 FINANCIAL RISK MANAGEMENT (CONTINUED)39.1 Financial risk factors (continued)

39.1.1 MARKET RISKa) Currency risk

The Group operates internationally and is exposed to currency risk arising from various currency exposures. The treasury department hedges the Group’s net position in each foreign currency by using call deposits in foreign currencies and derivative financial instruments in the form of forward foreign exchange rate contracts for all cumulative foreign commit-ments of three months or more. Forward foreign exchange rate contracts are not used for speculative purpose. These instru-ments are not designated as hedging instruments for purposes of accounting.

Currency exposure arising from the net monetary assets in individual countries, held in currencies other than the functional currency of the Group, are managed primarily through convert-ing cash and cash equivalents not required for operational cash flows to US dollar. The US dollar is the preferred currency due to its history of stability, liquidity and availability in most markets.

Material concentrations of currency risk exists within the Group’s cash and cash equivalents. The net cash and cash equivalents are denominated in the following currencies:

603 555 3 387 853 South African rand 6 886 082 (603 468) — — USA dollar 426 892 148 131 — — Zambian kwacha 65 845 52 476 — — Malawi kwacha 77 622 62 935 — — Angolan kwanza 82 872 51 358 — — Botswana pula 7 290 24 296 — — Mauritian rupee 4 443 17 973 — — Nigerian naira 36 787 7 306 — — Namibian dollar 114 207 56 859 — — Swaziland emilangeni 91 568 30 241 — — Lesotho maluti 45 227 11 098 — — Mozambique metical 39 159 34 109 — — Other currencies 38 481 26 137

603 555 3 387 853 7 916 475 (80 549)

97

C O M PA N Y GROUP


R’000 R’000 R’000 R’000



39.1.1 MARKET RISK (CONTINUED)a) Currency risk (continued)

The Group does not have significant foreign creditors as most inventory imports are prepaid.

Where material concentrations of currency risk exists within the Group a sensitivity analysis was performed to calculate what the increase/decrease in profit for the year would have been if the various individual currencies strengthened or weakened against the ZAR and the USD. At 30 June 2012 the total possible decrease in Group post-tax profit, calculated for all possible currency movements, was R47,791,217 with the ZAR/USD exchange rate (with an expected 0.8% decline) contributing R41,835,011 to this number. At 30 June 2011 the total possible decrease in Group post-tax profit, calculated for all possible currency movements, was R339,045 with the ZAR/USD exchange rate (with an expected 8.5% decline) contribut-ing R7,536,798 to this number. These changes had no material effect on the Group’s equity.

The amounts were calculated with reference to the financial instruments, exposed to currency risk at the reporting date and does not reflect the Group’s exposure throughout the reporting period as these balances may vary significantly due to the self funding nature of the Group’s required working capital and cyclical nature of cash received from sale of merchandise and payment to trade and other payables. The possible currency movements were determined based on management’s best estimates taking into account prevailing economic and market conditions and future expectations.

The Group has a number of investments in foreign subsidiaries, whose net assets are exposed to foreign currency translation risk. Although not subject to market risk, the following constitut-ed significant concentrations of net monetary assets/(liabilities), including short-term surplus funds, in currencies other than the reporting currency as at 30 June, subject to translation risk.

98


C O M PA N Y GROUP


R’000 R’000 R’000 R’000



39.1.1 MARKET RISK (CONTINUED)a) Currency risk (continued)

Net monetory assets/(liabilities)

per currency

Rand EquivalentCountry Foreign currency R’000 R’000

Angola Kwanza (160 799) 176 659 Botswana Pula (9 732) (13 355)DRC Congolese Francs (3 376) (2 393)Egypt Egyptian pound 854 402 Europe Euro 1 058 (40)Ghana Cedi (11 372) 9 799 Great Britain British Pound — 115 India Rupee 1 444 (2 051)Madagascar Ariary (14 989) 8 824 Malawi Kwacha 55 402 (40 198)Mauritius Mauritian rupee (13 130) (3 227)Mozambique Metical 42 707 (9 101)Nigeria Naira (61 162) 30 733 Tanzania Shilling (6 087) 8 535 Uganda Shilling (12 015) 4 404 USA Dollar 380 989 (153 561)Zambia Kwacha (113 952) 79 924

b) Cash flow and fair value interest rate riskThe Group’s interest rate risk arises mainly from daily call accounts and bank overdrafts. These carry interest at rates fixed on a daily basis and expose the Group to cash flow interest rate risk. The Group analyses this interest rate exposure on a dynamic basis. Daily cash flow forecasts are done and combined with interest rates quoted on a daily basis. This information is then taken into consideration when reviewing refinancing/reinvesting and/or renewal/cancellation of existing positions and alternative financing/investing. Based on these scenarios, the Group calculates the impact on profit and loss of a defined interest rate shift. The scenarios are run only for cash/borrowings that represent the major interest-bearing positions. The weighted average effective interest rate on call accounts was 5.8% (2011: 6.2%).

The interest rate on individual instalment sale receivables (refer note 13) is fixed and expose the Group to fair value interest rate risk which is mitigated by charging appropriate margins and the fact that the maximum term of these contracts are 24 months.

For exposure to interest rate risk on other monetary items refer to the following:

– Loans and receivables: note 8– Amounts owing by joint ventures: note 13– Interest-bearing borrowings: note 17– Amounts owing to joint ventures: note 20

99

C O M PA N Y GROUP


R’000 R’000 R’000 R’000



39.1.1 MARKET RISK (CONTINUED)b) Cash flow and fair value interest rate risk (continued)

Where material concentrations of interest rate risk exists within the Group a sensitivity analysis was performed to calculate what the increase/decrease in profit for the year would have been if the various individual interest rates the Group’s financial instruments are subject to strengthened or weakened. At 30 June 2012 the total possible increase in Group post-tax profit, calculated for all possible interest rate movements, was R13,447,767. The estimated increase of 50 basis points in the South African prime rate would have resulted in a possible increase in Group post-tax profit of R13,375,126. At 30 June 2011 the total possible decrease in Group post-tax profit, calculated for all possible interest rate movements, was R7,142,099. The estimated increase of 50 basis points in the South African prime rate would have resulted in a possible decrease in Group post-tax profit of R7,123,119. These changes had no material effect on the Group’s equity.

The amounts were calculated with reference to the financial instruments exposed to interest rate risk at the reporting date and does not reflect the Group’s exposure throughout the reporting period as these balances may vary significantly due to the self funding nature of the Group’s required working capital and cyclical nature of cash received from sale of merchandise and payment to trade and other payables. The possible interest rate movements were determined based on management’s best estimates taking into account prevailing economic and market conditions and future expectations.

39.1.2 CREDIT RISKCredit risk is managed on a group basis. Potential concentration of credit risk consists primarily of cash and cash equivalents, trade and other receivables, financial guarantees and invest-ments.

Funds are only invested with South African financial institutions with a minimum Moody’s short-term credit rating of P-2 and a minimum Moody’s long-term rating of Baa2. For financial institutions outside South Africa the required minimum Moody’s short-term and long-term credit ratings are P-1 and Aa3 respectively. Due to the Group’s international operational requirements it is forced to transact with financial institutions in certain countries where independent internationally accredited credit ratings are not available. In these instances the Group’s exposure to credit risk at each of these financial institutions are evaluated by management on a case by case basis. Cash bal-ances deposited with these financial institutions are kept to an operational minimum and are transferred, subject to exchange control regulations and available suitable foreign currency, to financial institutions with acceptable credit ratings. The Group has policies that limit the amount of credit exposure to any one financial institution.

100


C O M PA N Y GROUP


R’000 R’000 R’000 R’000



39.1.2 CREDIT RISK (CONTINUED)Sales to retail customers are settled in cash or using debit and credit cards. Except for the total exposure represented by the respective statement of financial position items, the Group has no other significant concentration of credit risk. Accounts receivable comprise a wide-spread client base and the Group has policies in place to ensure that all sales of goods and services on credit are made to customers with an appropriate credit history. These policies include reviewing the Group’s own credit history with the customer, verifying the credit history with an external credit bureau, as well as a formalised application process where the creditworthiness of the customer is assessed. The Group also obtains security from its franchisees.

Credit risk exposure resulting from financial guarantee liabilities relating to trading partners are evaluated by management on a monthly basis taking into consideration the credit rating of the underlying parties as well as their financial position. Financial guarantees are kept to an operational minimum and reassessed regularly.

For exposure to credit risk on other monetary items refer to the following:

– Loans and receivables: note 8– Trade and other receivables: note 13– Trade and other payables: note 20

The table below shows the cash invested at the statement of financial position date at financial institutions grouped per Moody’s short-term credit rating of the financial institutions.

Rating 603 555 3 387 853 P-1 6 993 720 1 709 014

— — P-2 298 227 41 037 — — No rating available 128 065 154 661 — — Cash on hand and in transit 519 321 56 839

603 555 3 387 853 Total cash and cash equivalents 7 939 333 1 961 551

101

C O M PA N Y GROUP


R’000 R’000 R’000 R’000



39.1.3 LIQUIDITY RISKLiquidity risk resulting from the settlement of the 6.5% convertible bonds is considered to be acceptable as these bonds are expected to be converted into ordinary shares and will most likely not lead to cash outflows. Undiscounted contractual cash flows will result in cash outflows of R146,25 million bi-annually until April 2017, being interest payable at 6.5% on the nominal value of R4,5 billion.

All other significant financial liabilities of the Group matures within 12 months of statement of financial position date.

The risk of illiquidity is managed by using cash flow forecasts; maintaining adequate unutilised banking facilities (2012: R6,621,490,032; 2011: R2,818,407,632) and unlimited borrowing powers. All unutilised facilities are controlled by the Group’s treasury department in accordance with a treasury mandate as approved by the Board of Directors.

The Group’s derivative financial instruments that will be settled on a gross basis are detailed in note 14. The amounts disclosed are the contractual undiscounted cash flows. All balances are due within 12 months and equal their carrying values, as the impact of discounting is not significant.

39.2 Insurance riskThe Group underwrites insurance products with the following terms and conditions:

– Credit protection which covers the risk of the customer being unable to settle the terms of the credit agreement as a result of death, disability or qualifying retrenchment.

– All risk cover which covers the repair or replacement of the product due to accidental loss or damage within the terms and the conditions of the policy, and extended guarantees which covers the repair or replacement of faulty products as an extension of the suppliers’ guarantees.

The risk under any one insurance contract is the possibility that an insured event occurs as well as the uncertainty of the amount of the resulting claim. By the very nature of an insurance contract, this risk is random and unpredictable.

102


C O M PA N Y GROUP


R’000 R’000 R’000 R’000


39 FINANCIAL RISK MANAGEMENT (CONTINUED)39.2 Insurance risk (continued)

Underwriting risk is the risk that the Group’s actual exposure to short-term risks in respect of policy-holding benefits will exceed prudent estimates. Where appropriate, the above risks are managed by senior management and directors.

Within the insurance process, concentration risk may arise where a particular event or series of events could impact heavily on the Group’s resources. The Group has not formally monitored the concentration risk; however, it has mitigated against concentration risk by structuring event limits in every policy to ensure that the probability of underwriting loss is minimised. Therefore the Group does not consider its concentration risk to be high.

40 CAPITAL RISK MANAGEMENTThe Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stake-holders and to maintain an optimal capital structure to reduce the cost of capital. Total capital is considered to be equity as shown in the statement of financial position.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The gearing ratio is calculated as interest- bearing borrowings divided by equity and was 31.51% (2011: 0.70%) on the statement of financial position date. The Group converted part of it’s short term borrowings into longer term borrowings during the year under review to match the nature and terms of borrowings with the expenditure the funds are intended for.

The Group is currently maintaining a two times dividend cover based on headline earnings per share.

103

C O M PA N Y GROUP


R’000 R’000 R’000 R’000


41 RELATED-PARTY INFORMATIONRelated-party relationships exist between the Company, subsidiaries, directors, as well as their close family members, and key management of the Company.

During the year under review, in the ordinary course of business, certain Group companies entered into transactions with each other. All these intergroup transactions have been eliminated in the annual financial statements on consolidation.

Shoprite Investments Ltd issued 6.5% senior unsecured guaranteed convertible bonds to the value of R4,5 billion during the year under review, convertible into ordinary shares of Shoprite Holdings Ltd. Shoprite Holdings Ltd and Shoprite Checkers (Pty) Ltd have irrevocably and unconditionally given its guarantee to the Trustee for the benefit of the bondholders for all amounts payable by the issuer in respect of the convertible bonds (refer note 17.3).

Non-executive director, CH Wiese, is a director and indirect beneficial shareholder of Titan Share Dealers (Pty) Ltd, which holds an option to purchase R1,7 billion in nominal amount of convertible bonds issued by Shoprite Investments Ltd during the year from Rand Merchant Bank, a division of FirstRand Bank Ltd. The option strike price is the principal amount plus any accrued interest outstanding for the period. The option is exercisable at any time until maturity of the convertible bonds in April 2017. Titan Share Dealers (Pty) Ltd also entered into a sub-underwriting agreement with Rand Merchant Bank and received a fee of R36,4 million for its sub-underwriting commitment.

Non-executive director, CH Wiese, is an employee of Chaircorp (Pty) Ltd, a management company that renders advisory services to Shoprite Checkers (Pty) Ltd in return for an annual fee. An amount of R7,637,973 (2011: R5,782,798) was paid to Chaircorp (Pty) Ltd for advisory services to Shoprite Checkers (Pty) Ltd.

Details of the remuneration of directors, and equity and cash-settled share-based payment instruments issued to directors, are disclosed in notes 15 and 26.

Key management personnel compensationShort-term employee benefits 169 617 142 869 Post-employment benefits 13 300 16 021 Share-based payments 253 974 188 521 Directors’ fees 1 227 845

— — 438 118 348 256

104


C O M PA N Y GROUP


R’000 R’000 R’000 R’000


41 RELATED-PARTY INFORMATION (CONTINUED)During the year key management have purchased goods at the Group’s usual prices less a 15% discount. Discount ranging from 5% to 15% is available to all permanent full-time and flexi-time employees.

During the financial year under review, in the ordinary course of business, certain Group companies purchased certain products and services from certain entities, in which directors JW Basson, CH Wiese, EL Nel and JA Louw, or their direct family members, have a significant influence. These purchases were concluded at what management believe to be market-related prices and are insignificant in terms of the Group’s total operations for the year.

These purchases and related balances were as follows:Purchase of merchandise 229 384 80 784 Utilisation of services 6 872 573 Year-end balances 5 198 4 070

The Group has a 50% interest in the Hungry Lion joint venture (refer note 42). The other 50% is indirectly held by alternate director JAL Basson.

The following transactions took place between the Hungry Lion joint venture and the Group during the year under review:

Administration fees paid to the Group 4 388 3 709 Rent paid to the Group 1 906 2 000 Interest paid to the Group 558 1 930 Interest paid to the joint venture 414 460

The year-end balances relating to the transactions with the joint venture are disclosed in notes 13 and 20.

The Company received the following from its subsidiary, Shoprite Checkers (Pty) Ltd:

1 305 1 382 Annual administration fee — 12 955 Interest

105

C O M PA N Y GROUP


R’000 R’000 R’000 R’000


42 JOINT VENTURESThe Group holds directly the following interests in joint ventures:

Hungry Lion Fast Foods (Pty) Ltd 50% 50%Hungry Lion Mauritius Ltd 50% 50%

The consolidated results include the following amounts relating to the Group’s interest in joint ventures.

Statement of comprehensive incomeSale of merchandise 262 264 221 290

Profit before income tax 8 610 13 557 Income tax expense (5 574) (1 015)

Profit for the year 3 036 12 542

Statement of financial positionNon-current assets 49 408 39 538 Current assets 22 890 19 947 Current liabilities 18 405 13 873

Statement of cash flowsNet cash flow from operating activities 23 057 729 Net cash flow from investing activities (22 668) (13 243)Net cash flow from financing activities 2 265 (19 613)

Capital commitments 756 2 065

106


Interest in Subsidiaries – Annexure A

Country of incorporation

Issued ordinary and

preference share

capital and premium

Percentage shares held

by Group Investment in shares Amount owing by/(to)June 2012 June 2011 June 2012 June 2011

R’000 % R’000 R’000 R’000 R’000

DIRECT SUBSIDIARIESOK Bazaars (1998) (Pty) Ltd South Africa 2 700 100 — — — — Shoprite Checkers (Pty) Ltd South Africa 1 128 908 100 174 431 174 431 71 486 7 559 Shoprite Investments Ltd South Africa 20 000 100 20 000 150 — (150)Shoprite International Ltd Mauritius 2 074 172 100 2 074 172 1 443 013 — — Shoprite Insurance Company Ltd South Africa 20 230 100 20 230 20 230 — — Shoprite Checkers Properties Ltd South Africa 26 196 100 16 679 16 679 3 365 3 365

2 305 512 1 654 503 74 851 10 774

INDIRECT SUBSIDIARIESAfrica Supermarkets Ltd* Zambia — 100 (614) Checkers Chatsworth Ltd South Africa 2 000 48 Computicket (Pty) Ltd South Africa 69 133 100 Megasave Trading (Pvt) Ltd* India 118 383 100 Mercado Fresco de Angola Lda* Angola 342 100 Medirite (Pty) Ltd South Africa — 100 OK Bazaars (Lesotho) (Pty) Ltd* Lesotho 300 50 OK Bazaars (Namibia) Ltd* Namibia 500 100 OK Bazaars (Swaziland) (Pty) Ltd* Swaziland 200 100 OK Bazaars (Venda) Ltd South Africa 2 400 50 Propco Mozambique Lda* Mozambique 432 100 Retail Holdings Botswana (Pty) Ltd* Botswana 46 648 100 Retail Supermarkets Nigeria Ltd* Nigeria 522 100 Sentra Namibia Ltd* Namibia 5 880 100 Shophold (Mauritius) Ltd* Mauritius 189 116 100 Shoprite Angola Imobiliaria Lda* Angola 342 100 Shoprite Checkers Tanzania Ltd* Tanzania 258 621 100 Shoprite Checkers Uganda Ltd* Uganda 41 612 100 Shoprite Egypt for Internal Trade SAE* Egypt 40 424 100 Shoprite Ghana (Pty) Ltd* Ghana 31 417 100 Shoprite Lesotho (Pty) Ltd* Lesotho 1 100 Shoprite Madagascar S.A.* Madagascar 128 288 100 Shoprite (Mauritius) Ltd* Mauritius 132 869 100 Shoprite Namibia (Pty) Ltd* Namibia — 100 Shoprite RDC SPRL* DRC 81 719 100 Shoprite Supermercados Lda* Angola 342 100 Shoprite Too (Pty) Ltd* Tanzania 1 870 100 Shoprite Trading Ltd* Malawi 1 100

2 305 512 1 654 503 74 237 10 774 *Converted at historical exchange rates

NOTE:General information in respect of subsidiaries is set out in respect of only those subsidiaries of which the financial position or results are material for a proper appreciation of the affairs of the Group. A full list of subsidiaries is available on request.

107


Shareholder AnalysisShoprite Holdings Ltd and its Subsidiaries as at June 2012

SHAREHOLDER SPREADNo of Shareholders % No of Shares %

1 – 1,000 shares 11 135 74.16 3 361 750 0.591,001 – 10,000 shares 2 963 19.73 9 300 483 1.6310,001 – 100,000 shares 677 4.51 21 749 793 3.81100,001 – 1,000,000 shares 179 1.19 59 248 987 10.38Over 1,000,001 shares 61 0.41 476 918 447 83.58

Totals 15 015 100.00 570 579 460 100.00

DISTRIBUTION OF SHAREHOLDERSNo of Shareholders % No of Shares %

Banks 201 1.34 263 149 232 46.12Brokers 41 0.27 4 902 255 0.86Close Corporations 148 0.99 201 020 0.04Endowment Funds 83 0.55 577 757 0.10Individuals 11 696 77.90 18 216 625 3.19Insurance Companies 44 0.29 8 198 753 1.44Investment Companies 25 0.17 4 176 037 0.73Medical Aid Schemes 4 0.03 38 770 0.01Mutual Funds 238 1.59 30 404 825 5.33Nominees & Trusts 1 958 13.04 47 024 817 8.24Other Corporations 88 0.59 130 873 0.02Own Holdings 1 0.01 35 436 472 6.21Private Companies 307 2.04 61 511 187 10.78Public Companies 16 0.11 349 977 0.06Retirement Funds 165 1.10 96 260 860 16.87

Totals 15 015 100.00 570 579 460 100.00

PUBLIC / NON – PUBLIC SHAREHOLDERSNo of Shareholders % No of Shares %

Non – Public Shareholders 45 0.30 144 579 324 25.33Directors of the company 44 0.29 109 142 852 19.13Own Holdings 1 0.01 35 436 472 6.21

Public Shareholders 14 970 99.70 426 000 136 74.66

Totals 15 015 100.00 570 579 460 100.00

BENEFICIAL SHAREHOLDERS HOLDING 1% OR MORENo of Shares %

Wiese, CH 95 649 698 16.76Government Employees Pension Fund 76 756 999 13.45Capital Group 64 064 926 11.23Shoprite Checkers (Pty) Ltd 35 436 472 6.21Lazard 23 706 352 4.15JPMorgan 13 681 498 2.40Vanguard 11 211 401 1.96BlackRock 10 822 029 1.90Basson, JW 10 071 652 1.77First State Investments 9 875 526 1.73Fidelity 9 426 727 1.65T. Rowe Price 7 843 553 1.37Namibian Government Institutions Pension Fund 6 935 208 1.22

Totals 375 482 041 65.81


108

1. NOTICE OF MEETING Notice is hereby given that the AGM of Shoprite Holdings

will be held at the Company’s registered office, corner William Dabs and Old Paarl Roads, Brackenfell, South Africa on Monday, 29 October 2012 at 09:15 (South African time).

2. MEMORANDUM OF INCORPORATION The Companies Act, Nr 71 of 2008 (“the Companies Act”)

came into effect on 1 May 2011 (“the Effective Date”). From the Effective Date the Company’s Memorandum of Association and Articles of Association became known as its Memorandum of Incorporation (“MOI”). In this notice of annual general meeting, the term MOI is used to refer to the Company’s Memorandum of Association and Articles of Association.

3. WHO MAY ATTEND AND VOTE? 3.1 If you hold dematerialised shares which are registered in

your name or if you are the registered holder of certificated shares:

– You may attend the annual general meeting in person; – Alternatively, you may appoint a proxy to represent you

at the AGM and to attend, participate in, and speak and vote at the AGM in your place by completing the attached form of proxy in accordance with the instruc-tions it contains and returning it to the company secre-tary or transfer secretaries at their addresses set out below to be received not later than 09:15 (SA time) on Friday 26 October 2012. A proxy need not be a share-holder of the Company.

3.2 If you hold dematerialised shares which are not registered

in your name and: – wish to attend the annual general meeting, you must

obtain the necessary letter of authority from your CSDP or broker; or

– do not wish to attend the annual general meeting, but would like your vote to be recorded at the meeting, you should contact your CSDP or broker and furnish them with your voting instructions, you must not complete the attached form of proxy.

3.3 The record date for purposes of determining which share-

holders are entitled to receive this notice is determined in terms of section 59(1)(a) of the Companies Act being 26 September 2012.

3.4 The date on which shareholders must be recorded as such

in the register maintained by the transfer secretaries of the Company for purposes of being entitled to attend and vote at this meeting is determined in terms of section 59(1)(b) of the Companies Act being Friday,19 October 2012 (“Voting Record Date)

3.5 In terms of section 63(1) of the Companies Act, any person

attending or participating in the AGM must present reason-ably satisfactory identification and the chairperson of the meeting must be reasonably satisfied that the right of any

Notice to Shareholders: Annual General Meeting (AGM)Shoprite Holdings Ltd and its Subsidiaries as at June 2012

Shoprite Holdings Limited (Incorporated in the Republic of South Africa)

(Registration number 1936/007721/06)JSE share code: SHPNSX share code: SRH

LUSE share code: SHOPRITEISIN: ZAE000012084

(“Shoprite Holdings” or “the Company”)

person to participate and vote has been reasonably verified. Suitable forms of identification will include a valid identifica-tion document, driver’s license or passport.

3.6 Should any shareholder, or a representative proxy from a shareholder, wish to participate in the AGM by way of electronic participation, that shareholder should make an application in writing (including details on how the share-holder or its representative) to participate to the transfer secretaries or company secretary at their addresses listed below, to be received by them at least seven (7) business days before the AGM, to enable the transfer secretaries to arrange for the shareholder or its representative or proxy, to provide reasonably satisfactorily identification to the transfer secretaries for purposes of section 63(1) of the Companies Act and to enable the transfer secretaries to provide details on how to access the AGM by way of electronic participation.

3.7 Votes at the AGM will be conducted by way of a poll and

not on a show of hands. 3.8 If you are in any doubt as to what action you should take

arising from the following resolutions, please consult your stockbroker, banker, attorney, accountant or other profes-sional adviser immediately.

4. INTEGRATED REPORT A copy of the Company’s Integrated Report for the year

ended 30 June 2012 and the reports of the directors and independent auditors are delivered herewith.

5. PURPOSE OF MEETING The purpose of this meeting is to present the: – directors report to the shareholders; – summarised audited financial statements to the year

ended 30 June 2012; – reports of the audit and risk as well as the social and

ethics committees; and to consider and, if deemed fit, to pass, with or without

modification, the resolutions set out below. The following resolutions will be considered at the meeting,

and, if deemed fit, passed with or without modification:

5.1 Ordinary Resolution Number 1: Annual Financial Statements

“Resolved that the summarised annual financial statements of the Company and the Group for the year ended 30 June 2012 circulated with this notice, including the reports of the directors and independent auditors be and are hereby approved.”

For ordinary resolution number 1 to be approved by share-holders it must be supported by more than 50% of the voting rights exercised on the resolution by shareholders present or represented by proxy at this meeting.


109

5.2 Ordinary Resolution Number 2: Re-Appointment Of Auditors

“Resolved that PricewaterhouseCoopers Inc. (PwC) be re-elected as independent registered auditors of the Company for the period until the next annual general meeting of the Company (noting that Mr A Wentzel is the individual registered auditor of PwC who will undertake the audit in respect of the financial year ending 30 June 2013) as recommended by the Company’s Audit and Risk Committee.”

For ordinary resolution number 2 to be approved by share-

holders it must be supported by more than 50% of the voting rights exercised on the resolution by shareholders present or represented by proxy at this meeting.

5.3 Ordinary Resolution Number 3: Re-Election of Mr JG Rademeyer

“Resolved that Mr JG Rademeyer, who is required to retire as director of the Company at this AGM and who is eligible and available for re-election, is hereby reappointed as director with immediate effect.”

Age: 62 First Appointed: 2002 Educational qualifications: BCom CTA CA(SA) Other directorships: None. Mr Rademeyer is the Lead Independent director and also

serves as the Chairman of the Audit and Risk Committee. For ordinary resolution number 3 to be approved by share-


5.4 Ordinary Resolution Number 4: Re-Election of Mr EL Nel

“Resolved that Mr EL Nel, who is required to retire as director of the Company at this AGM and who is eligible and available for re-election, is hereby reappointed as director with immediate effect.”

Age: 63 First Appointed: 2005 Educational qualifications: BCom CTA CA(SA) Other directorships: Mr Nel serves as a director on the

board of Shoprite Checkers (Pty) Ltd and various other Shoprite Holdings subsidiaries.



5.5 Ordinary Resolution Number 5: Re-Election of Mr AE Karp

“Resolved that Mr AE Karp who is required to retire as director of the Company at this AGM and who is eligible for re-election and available, is hereby reappointed as director with immediate effect.”

Age: 53 First Appointed: 2005 Other directorships: Mr Karp serves as a director on the

board of Shoprite Checkers (Pty) Ltd and various other Shoprite Holdings subsidiaries.



5.6 Ordinary Resolution Number 6: Re-Election of Mr JJ Fouché

“Resolved that Mr JJ Fouché, who is required to retire as a director of the Company at this AGM and who is eligible for re-election and available, is hereby reappointed as director with immediate effect.”

Age: 64 First Appointed: 1991 Educational qualifications: BCom LLB Other directorships: Director of Pepkor Holdings (Pty) Ltd Mr Fouché served as a director of Shoprite Holdings and

member of the Audit and Risk, Nominations and Remuneration Committees from 1991 – 2008.



5.7 Ordinary Resolution Number 7: Re-Election of Mr JA Rock

“Resolved that Mr JA Rock, who is required to retire as a director of the Company at this AGM and who is eligible for re-election and available, is hereby reappointed as director with immediate effect.”

Age: 42 First Appointed: 2012 Educational qualifications: BA(Hons) MA ACA Other directorships: None For ordinary resolution number 7 to be approved by share-



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Notice to Shareholders (continued)Shoprite Holdings Ltd and its Subsidiaries as at June 2012

5.8 Ordinary Resolution Number 8: Re-Election of Dr ATM Mokgokong

“Resolved that Dr ATM Mokgokong, who is required to retire as director of the Company at this AGM and who is eligible for re-election and available, is hereby reappointed as director with immediate effect.”

Age: 54 First Appointed: 2012 Educational qualifications: BSc MB ChB Doctorate

Commerce (Honoris Causa) Directorship: Afrocentric Investment Corporation Limited,

Jasco Electronics Limited, Medscheme Limited, Rebosis Property Fund and CIH (Pty) Ltd.



5.9 Ordinary Resolution Number 9: Appointment of Mr JG Rademeyer as Chairperson and Member of The Shoprite Holdings Audit Committee

“Subject to the re-election of Mr Rademeyer as a director pursuant to ordinary resolution 3, it is resolved that Mr JG Rademeyer be elected as Chairperson and member of the Shoprite Holdings Audit and Risk Committee with imme-diate effect in terms of section 94(2) of the Companies Act of 2008.”

Age: 62 First appointed to Audit Committee: 2005 Educational qualifications: BCom CTA CA(SA) For ordinary resolution number 9 to be approved by share-


5.10 Ordinary Resolution Number 10: Appointment of Mr JA Louw as Member of the Shoprite Holdings Audit Committee

“Resolved that Mr JA Louw be elected as member of the Shoprite Holdings Audit and Risk Committee with imme-diate effect in terms of section 94(2) of the Companies Act, 2008.”

Age: 68 First appointed to Audit Committee: 2011 Educational qualifications: BSc Hons B(B&A) Hons For ordinary resolution number 10 to be approved by share-

holders it must be supported by more than 50% of the voting rights exercised on the resolution by shareholders present or represented by proxy at this meeting

5.11 Ordinary Resolution Number 11: Appointment of Mr JF Malherbe as Member of The Shoprite Holdings Audit Committee

“Resolved that Mr JF Malherbe be elected as member of the Shoprite Holdings Audit and Risk Committee with immediate effect in terms of section 94(2) of the Companies Act, 2008.”

Age: 83 First Appointed to Audit Committee: 2007 Educational qualifications: BCom LLB For ordinary resolution number 11 to be approved by share-

holders it must be supported by more than 50% of the voting rights exercised on the resolution by shareholders present or represented by proxy at this meeting

5.12 Ordinary Resolution Number 12: General Authority Over Unissued Ordinary Shares

“Resolved that 28,5 million (approximately 5% of the issued ordinary share capital that includes treasury shares) of the authorised but unissued ordinary shares in the capital of the Company be and are hereby placed under the control and authority of the directors of the Company until the next annual general meeting and that the directors of the Company be and are hereby authorised and empowered to, without first offering those shares to shareholders pro rata to their shareholding, allot, issue and otherwise dispose of such ordinary shares to a person or persons on such terms and conditions and at such times as the directors of the Company may from time to time and in their discretion deem fit, subject to the provisions of the Companies Act, the MOI of the Company and JSE Listings Requirements, when applicable, and any other exchange on which the shares of the Company may be quoted or listed from time to time.”

For ordinary resolution number 12 to be approved by shareholders it must be supported by more than 50% of the voting rights exercised on the resolution by share-holders present or represented by proxy at this meeting.

5.13 Ordinary Resolution Number 13: General Authority to Issue Shares for Cash

“Resolved that the directors of the Company be and are hereby authorised by way of a general authority, to issue all or any of the authorised, but unissued shares in the capital of the Company, for cash, as and when they in their discre-tion deem fit, subject to the Companies Act, the MOI of the Company, the JSE Listings Requirements and any other exchange on which the shares of the Company may be quoted from time to time, when applicable, subject to the following limitations, namely that:

– the equity securities which are the subject of the issue for cash must be of a class already in issue, or where this is not the case, must be limited to such securities or rights that are convertible into a class already in issue;

– any such issue will only be made to “public share-holders” as defined in the JSE Listings Requirements


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and not related parties, unless the JSE otherwise agrees, but may be made to such “public shareholders” and in such quantities that the directors in their discre-tion may deem fit;

– the number of ordinary shares issued for cash shall not in the aggregate in any 1 (one) financial year, exceed 5% (five percent) of the Company’s issued ordinary shares on the first day of that financial year. The ordinary shares (“Conversion Shares’’) to be issued pursuant to the approval by shareholders on 28 June 2012 on conver-sion of the Convertible Bonds issued by Shoprite Investments Limited will not be taken into account to calculate whether the aforesaid threshold has been exceeded and the Company will accordingly be entitled to issue the Conversion Shares in cash in addition to the ordinary shares that may be issued pursuant to this approval. The number of ordinary shares which may be issued shall be based on the number of ordinary shares in issue, added to those that may be issued in future (arising from the conversion of options/convertibles) at the date of such application, less any ordinary shares issued, or to be issued in future arising from options/convertible ordinary shares issued during the current financial year, plus any ordinary shares to be issued pursuant to a rights issue which has been announced, is irrevocable and fully underwritten, or an acquisition which has had final terms announced. The above calcu-lation shall exclude the Conversion Shares;

– this authority be valid until the Company’s next annual general meeting, provided that it shall not extend beyond 15 (fifteen) months from the date that this authority is given;

– a paid press announcement will be published giving full details, including the impact on the net asset value and earnings per share, at the time of any issue, repre-senting on a cumulative basis within one (1) financial year, 5% (five percent) or more of the number of shares in issue prior to the issue in terms of this authorisation;

– in determining the price at which an issue of shares may be made in terms of this general authority, the maximum discount permitted will be 10% (ten percent) of the weighted average traded price on the JSE of those shares measured over the 30 (thirty) business days prior to the date that the price of the issue is deter-mined or agreed by the directors of the Company.”


holders it must in terms of the JSE Listings Requirements be supported by more than 75% of the voting rights exer-cised on the resolution by shareholders present or repre-sented by proxy at this meeting.

5.14 Ordinary Resolution 14: General Authority to Directors and/or Secretary

“Resolved that any one of the directors of Shoprite Holdings or the company secretary be and are hereby authorised to do all things, perform all acts and to sign and execute all documentation necessary to implement the ordinary and special resolutions adopted at the AGM”

For ordinary resolution number 14 to be approved by shareholders it must be supported by more than 50% of the voting rights exercised on the resolution by share-holders present or represented by proxy at this meeting.

5.15 Ordinary Resolution 15: Approval of Executive Share Plan

“Resolved that that the rules of the Shoprite Holdings Executive Share Plan (“the Plan”), which rules have been initialled by the company secretary for identification purposes and the implementation of the Plan be and are hereby approved.”

The background and salient features of the Plan is attached to this Notice as Annexure “A”. The rules of the Plan initialled by the company secretary will be available for inspection at the registered office of Shoprite Holdings, cnr Old Paarl and William Dabs Roads, Brackenfell, Cape Town during business hours from Thursday 27 September 2012 to Friday 26 October 2012.

For ordinary resolution number 15 to be approved by shareholders it must in terms of JSE Listings Requirements be supported by at least 75% of the voting rights exercised on the resolution by shareholders present or represented by proxy at this meeting.

5.16 Resolution 16: Non-Binding Advisory Vote: Endorsement of Remuneration Policy

“Resolved that, through a non-binding advisory vote, the Company’s remuneration policy (excluding the remunera-tion of the non-executive directors and members of board committees for their services as directors) as set out in the Remuneration report in the integrated report, is endorsed.”

For resolution number 16 to be approved by share-holders it must be supported by more than 50% of the voting rights exercised on the resolution by shareholders present or represented by proxy at this meeting.

5.17 Special Resolution Number 1: Remuneration Payable to Non-Executive Directors

“Resolved in terms of section 66(9) of the Companies Act , Nr 71 of 2008, as amended, that the annual remuneration of the non-executive directors for the twelve months from 1 November 2011 – 31 October 2012 be approved as follows:


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Shoprite Holdings Board and Committee Fees 2011/2012 2010/11

BOARD Chairman of the Board R273 000 R218 000 Lead Independent Director R142 000 R113 000 Non-Executive Director R129 000 R103 000

AUDIT COMMITTEE Chairman R193 000 R154 000 Member R96 000 R77 000

REMUNERATION COMMITTEE Chairman R50 000 — Member R30 000 —

NOMINATION COMMITTEE Chairman R50 000 — Member R30 000 —

SOCIAL AND ETHICS COMMITTEE Chairman R65 000 — For special resolution number 1 to be approved by share-

holders it must be supported by at least 75% of the voting rights exercised on the resolution by shareholders present or represented by proxy at this meeting.

Reason for and effect of special resolution number 1 The reason for and effect for special resolution number 1 is

to grant the Company the authority to pay remuneration to its directors for their services as directors for the period ending on 31 October 2012.

5.18 Special Resolution 2: Financial Assistance to Subsidiaries, Related and Inter-Related Entities

Resolved in terms of section 45(3)(a)(ii) of the Companies Act, Act 71 of 2008, as amended, (“the Act’’), subject to compliance with the requirements of the Company’s Memorandum of Incorporation, the Act and the JSE Listings Requirements as presently constituted and amended from time to time as a general approval, that the board of the Company be authorised during a period of two (2) years from the date of this special resolution to authorise the Company to provide direct or indirect financial assistance to a director or prescribed officer of the Company or of a related or inter-related company, or to a related or inter-related company or corporation, (“any related or inter-related company or corporation’’ has herein the same meaning as in section 45 of the Act and which meaning includes all the subsidiaries of the Company) to the Company or to a member of such a related or inter-related corporation, or to a person related to any such company, corporation, director, prescribed officer or member , in one or more of the following forms:

– loan to, – guarantee of any obligation of, – suretyship in respect any obligation of, – indemnity undertakings in respect of obligations of, – the securing (in any form) of any debt or obligations of,

or – payments to or for the benefit of, such a person or company or corporation, director,

prescribed officer or member which the board of the Company may deem fit on the terms and conditions and for amounts that the board of the Company may determine on terms and conditions and for amounts that the board of the Company may determine.

For special resolution number 2 to be approved by shareholders it must be supported by at least 75% of the voting rights exercised on the resolution by shareholders present or represented by proxy at this meeting.

Reason for and effect of special resolution number 2 This special resolution will grant the Company’s directors the

authority to authorise financial assistance in any of the forms described in the resolution to a director or prescribed officer of the Company (to be utilized as part of an incentive scheme, where applicable) or of a related or inter-related company, or to a related or inter-related company or corpora-tion, (“any related or inter-related company or corporation’’ has herein the same meaning as in section 45 of the Act and which meaning includes all the subsidiaries of the Company) to the Company or to a member of such a related or inter-related corporation, or to a person related to any such company, corporation, director, prescribed officer or member as contemplated in section 45 of the Companies Act.

Notice to the shareholders of the Company in terms of section 45(5) of the Companies Act, of a resolution adopted by the Board authorising the Company to provide such direct or indirect fi nancial assistance:

– By the time that this notice of the AGM is delivered to shareholders, the board would have adopted a written board resolution (“the Section 45 Board Resolution”) authorising the Company to provide at any time during the period of two (2) years from the date the above special resolution number 2 is adopted, any direct or indirect financial assistance as contemplated in section 45 of the Companies Act to any one or more related or inter-related companies or corporations of the Company;

– The Section 45 Board Resolution will only be subject to and only effective to the extent that special resolution number 2 is adopted by shareholders and the provision of any such direct or indirect financial assistance by the Company, pursuant to such resolution, will always be subject to the board being satisfied that immediately after providing such financial assistance, the Company will satisfy the solvency and liquidity test as referred to in section 45(3)(b)(i) and that the terms under which the financial assistance will be given are fair and reasonable to the Company as required in section 45(3)(b)(ii); and


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– The Company hereby provides notice of the Section 45 Board resolution to shareholders of the Company.

5.19 Special Resolution Number 3: Financial Assistance for Subscription of Securities

“Resolved that the Company be and is hereby authorised, as a general authority contemplated in section 44(3)(a)(ii) of the Companies Act, Act 71 of 2008 (“the Companies Act’’) to provide direct or indirect financial assistance by way of a loan, guarantee, the provision of security or otherwise of the kind referred to in section 44 of the Companies Act to any employee of the Company or of a subsidiary of the Company or of a related or inter-related company (“related or inter-related company or corporation’’ has herein the same meaning as in section 44 of the Companies Act) to the Company, for the purpose of, or in connection with, the subscription of any shares or other securities to be issued by the Company or for the purchase of any shares or other securities of the Company or for the purchase of any convertible bonds issued by Shoprite Investments Limited or for the subscription of those bonds by such employees, on the terms and conditions that the board of the Company may deem fit.”


Reason for and effect of special resolution number 3 Subject to the approval of ordinary resolution 15, the new

Shoprite Holdings Executive Share Plan (“Plan”) will be introduced to replace the current share appreciation right scheme that expired on 29 August 2012. The purpose of the Plan is to provide selected senior executives of the Group with the opportunity of receiving Shoprite Holdings Ltd securities through the awarding of forfeitable shares. Forfeitable share awards comprise three (3) types of instru-ments, namely Co-investment Shares, Performance Shares and Retention Shares.

Participants may for instance in terms of the Plan rules be required to purchase 6,5% convertible bonds issued by Shoprite Investments Limited from Shoprite Checkers (Pty) Ltd and Co-investment Shares are then awarded to them based on the value of Participant’s investment in this regard. A participant’s investment in the bonds will be financed by utilizing his own funds or by way of a loan from the Company or the subsidiary employer. Loans could also be made in terms of the Plan to provide financial assistance in respect of the acquisition of shares in terms of the Plan. Loans to participants are interpreted as financial assistance for the subscription of or purchase of securities in terms of section 44 of the Companies Act. Financial Assistance by the Company (should it be granted) may fall within the exemption in section 44(3)(a)(i) of the Companies Act which will mean that the Company may provide that financial assis-tance without the approval of a special resolution. However to ensure that the Board is properly authorized to provide such financial assistance in cases where that exemption

does not apply, this special resolution is required. This special resolution will grant the Company the

authority to provide financial assistance as contemplated by section 44 of the Companies Act.

5.20 Special Resolution Number 4:General Approval to Repurchase Shares

“Resolved that, the Company and/or any subsidiary of the Company be and are hereby authorised by way of a general approval to acquire the issued ordinary shares of the Company, upon such terms and conditions and in such amounts as the directors of the Company may from time to time determine, but subject to the Memorandum of Incorporation of the Company, the provisions of the the Companies Act, Act 71 of 2008, as amended, and the JSE Listings Requirements and any other exchange on which the shares of the Company may be quoted or listed from time to time, where applicable, and provided that:

– the repurchase of securities will be effected through the main order book operated by the JSE trading system without any prior understanding or arrangement between the Company and the counterparty, or other manner approved by the JSE;

– this general authority shall be valid until the Company’s next annual general meeting, provided that it shall not extend beyond 15 (fifteen) months from the date of passing of this special resolution;

– in determining the price at which the Company’s ordi-nary shares are acquired by the Company or its subsidi-aries in terms of this general authority, the maximum premium at which such ordinary shares may be acquired will be 10% (ten percent) of the weighted average of the market price at which such ordinary shares are traded on the JSE, as determined over the 5 (five) trading days immediately preceding the date of the repurchase of such ordinary shares by the Company;

– the number of ordinary shares acquired in the aggregate in any 1 (one) financial year do not exceed 5% (five percent) of the number of the Company’s issued ordinary shares on the date that this special resolution is adopted;

– prior to entering the market to proceed with the repur-chase, the Company’s sponsor has complied with its responsibilities contained in Schedule 25 of the JSE Listings Requirements;

– prior to entering the market to repurchase the Company’s securities, a board resolution to authorise the repurchase will have been passed in accordance with the requirements of section 46 of the Companies Act, and stating that the Board has acknowledged that it has applied the solvency and liquidity test as set out in section 4 of the Companies Act and has reasonably concluded that the Company will satisfy the solvency and liquidity test immediately after completing the proposed repurchase;

– the Company or its subsidiaries will not repurchase securities during a prohibited period as defined in para-graph 3.67 of the JSE Listings Requirements, unless


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there is a repurchase programme in place where the dates and quantities of securities to be traded during the relevant period are fixed (not subject to any variation) and full details of the programme have been disclosed in an announcement on SENS prior to the commencement of the prohibited period;

– when the Company has cumulatively repurchased 3% (three percent) of the initial number of the relevant class of securities, and for each 3% (three percent) in aggre-gate of the initial number of that class acquired there-after, an announcement will be made; and

– the Company only appoints one agent to effect any repurchase(s) on its behalf.”

For special resolution number 4 to be approved by share-

holders it must be supported by at least 75% of the voting rights exercised on the resolution by shareholders present or represented by proxy at this meeting

Statement by the Board of Directors The directors of the Company have no specific intention to

effect the resolution, but will continually review the Company’s position, having regard to prevailing circum-stances and market conditions, in considering whether to repurchase its own shares.

After having considered the effect of the repurchase of ordinary shares pursuant to this general authority, the direc-tors of the Company in terms of the relevant provisions of the Companies Act and the JSE Listings Requirements confirm that they will not undertake such purchase unless:

– the Company and the Group are in a position to repay their debt in the ordinary course of business for the 12 (twelve) month period after the date of the notice of the AGM;

– the assets of the Company and the Group, being fairly valued in accordance with the accounting policies used in the latest annual financial statements are, after the repurchase, in excess of the liabilities of the Company and the Group for the 12 (twelve) month period after the date of the notice of the AGM;

– the ordinary capital and reserves of the Company and the Group are adequate for the 12 (twelve) month period after the date of the notice of the AGM;

– the available working capital is adequate to continue the operations of the Company and the Group for a period of 12 (twelve) months after the date of the notice of the AGM.

Reason for and effect of special resolution number 4 The JSE Listing Requirements 5.72 (c) and 5.76 require that

the Company or any subsidiary of the Company may only repurchase or purchase securities issued by the Company if approved by its shareholders by way of a special resolution. The existing general authority granted by the shareholders of the Company at the previous AGM on 31 October 2011, is due to expire, unless renewed.

The directors are of the opinion that it would be in the

best interest of the Company to extend such general authority.

The proposed general authority would enable the Company or any subsidiary of the Company to repurchase up to a maximum of 28,528,973 (twenty eight million five hundred and twenty eight thousand nine hundred and seventy three) ordinary shares of the Company, repre-senting 5% (five percent) of the issued ordinary share capital of Company as at 30 June 2012.

The reason for the passing of special resolution number 4 is to authorise the Company and/or its subsidiaries by way of a general authority from shareholders to repurchase ordinary shares issued by the Company.

Once adopted this special resolution will permit the Company or any of its subsidiaries, to repurchase such ordinary shares in terms of the Companies Act, its MOI and the JSE Listings Requirements.

Disclosures in Terms of Section 11.26 of the JSE Listings Requirements

The JSE Listings Requirements require the following disclosures in respect of special resolution 4, some of which are disclosed in the integrated report of which this notice forms part:

– Directors and management . . . . . . . . . . . pages 8 and 9 – Major shareholders of the Company . . . . . . . page 107 – Directors’ interests in securities . . . . . . . . . . . . page 43 – Share capital of Company . . . . . . . . . . . . pages 73 to 76

Material Change Other than the facts and developments as referred to on

pages 28 to 29 of the integrated report, there have been no material changes in the affairs or financial position of the Company and its subsidiaries since the date of signature of the audit report and the date of this notice.

Directors’ Responsibility Statement The directors, whose names are given on pages 8 to 9 of

the integrated report, collectively and individually accept full responsibility for the accuracy of the information and certify that to the best of their knowledge and belief there are no facts that have been omitted which would make any statement false or misleading and that all reasonable enquiries to ascertain such facts have been made.

Litigation Statement Save for the disclosure in the directors report on page 43 of

the directors, whose names are given on pages 8 to 9 of the integrated report of which this notice forms part, are not aware of any legal or arbitration proceedings, including proceedings that are pending or threatened, that may have or have had in the recent past, being at least the previous 12 (twelve) months, a material effect on the Group’s financial position.


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5.20 Special Resolution Number 5: Approval of New Memorandum of Incorporation as proposed by the Board

“Resolved that the existing Memorandum of Incorporation (comprising of a Memorandum of Association and Articles of Association) be repealed and replaced by the new Memorandum of Incorporation annexed hereto as Annexure “B”.


Reason for and effect of special resolution number 5 By reason of the new Companies Act, Act 71 of 2008, as

amended, that came into operation on 1 May 2011 it became necessary to reconcile the existing Memorandum of Incorporation of the Company with the new Companies Act and schedule 10 of the JSE Listings Requirements.

The effect of the adoption of special resolution number 5 will be that the existing Memorandum of Incorporation (comprising of a Memorandum of Association and Articles of Association) will be repealed and that the Memorandum of Incorporation annexed hereto as Annexure “B” will on filing thereof with the Companies and Intellectual Property Commission become the new Memorandum of Incorporation of the Company. The JSE has also approved the new Memorandum of Incorporation.

6. TRANSACTION OF OTHER BUSINESS

FOR SHOPRITE HOLDINGS LIMITED

PG Du Preez Company Secretary

27 September 2012 THE COMPANY SECRETARY Cnr William Dabs and Old Paarl Roads PO Box 215, Brackenfell, 7560 South Africa Facsimile: +27 (0) 21 980 4468 E-mail Adress: [email protected] SOUTH AFRICAN TRANSFER SECRETARIES Computershare Investor Services (Pty) Ltd 70 Marshall Street, Johannesburg, 2001 PO Box 61051, Marshalltown, 2107 Facsimile: +27 (0) 11 688 5238


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Salient Features of the Shoprite Holdings Executive Share Plan (“The Plan”) – Annexure A

1. INTRODUCTION The Company currently has a share appreciation right

scheme (“the SAR”) in place. No Awards have been made in terms of the SAR to Participants since October 2009. Historic awards made under the SAR will be allowed to continue to fruition. The Company intends to adopt the Plan tabled to replace the SAR. The Plan will be used primarily as an incentive to Participants to deliver the Group’s business strategy over the long-term. It can also be used as a retention mechanism and as a tool to attract prospective Employees. Participants in the Plan will be provided with the opportunity to share in the success of the Group and provide direct alignment between Participants and shareholders’ interests. [LR 14.1(e)]

2. SALIENT FEATURES OF THE PLAN 2.1 The Remuneration Committee may, in its discretion, call

upon the employer subsidiaries to make recommendations to it as to which of their respective Employees should be incentivised, retained or to attract individuals by the making of an Award of Forfeitable Shares. Eligible Employees include any person holding permanent salaried employment or office with any employer Subsidiary but excluded any non-executive Director of Shoprite Holdings. [LR14.1(a)]

2.2 Awards of Forfeitable Shares will be made on an ad hoc basis or on an annual basis, as and when the Remuneration Committee, in consultation with the chief executive officer of the Group, decides that there is a merit in making the Award to a particular Employee. When the chief executive officer is eligible to receive an Award of Forfeitable Shares, he will be excluded from the decision to make such an Award.

2.3 Awards which may be made in terms of the Plan consist of the following:

– Ad-hoc Co-investment Share Awards based on the value of the Investment made by an Employee in the Company where such Award value will be at the Remuneration Committee’s discretion, to the maximum value of a one to one (1:1) ratio in relation to the Investment made;

– Performance Share Awards to drive pre-determined Company Performance Conditions; and

– Ad-hoc Retention Share Awards made to address retention requirements.

2.4 Co-investment Awards will be subject to continued employment (“Vesting Condition”) and a condition that the Investment should be held by the Participant for the Vesting Period (“Additional Vesting Condition”). Retention Awards will only be subject to the Vesting Condition. Performance Share Awards will be subject to Performance Conditions and the Vesting Condition. [LR14.1(f)]

2.5 The number of Forfeitable Shares subject to an Award made to an Employee, and the extent to which the Award of Forfeitable Shares consist of Performance Shares, will

primarily be based on the Employee’s annual salary, grade, performance, retention and attraction requirements and market benchmarks. [LR14.1(f)]

2.6 The Remuneration Committee will set appropriate Vesting Periods, Vesting Conditions and Performance Conditions, as relevant, for each Award.

2.7 The Rules of the Scheme will be flexible in order to allow for Settlement in any of the following manners:

– By way of a market purchase of Shares; – Use of treasury Shares; – Issue of Shares.

The exact method will however be determined by the Remuneration Committee.

2.8 The maximum number of Shares which may at any one time be Allocated under the Plan shall not exceed 15,000,000 (fifteen million) Shares, which represents approximately 3% (three per centum) of the number of issued Shares as at the date of approval of the Plan by shareholders. This limit will not be affected by Shares purchased in the open market for settlement of this Plan. [LR14.1(b)]

2.9 The maximum number of Shares which may be Allocated to an individual in respect of all unvested Awards may not exceed 3,750,070 (three million seven hundred and fifty thousand and seventy) Shares, which represents approxi-mately 0.5% (comma five per centum) of the number of issued Shares as at date of approval of the Plan by shareholders. [LR14.1(c)]

2.10 Shares Allocated under the Plan, which are not subse-quently Settled to an Employee as a result of the forfeiture thereof, will be excluded in calculating the Company limit. Similarly, any Shares purchased in the market in Settlement of the Plan will be excluded. [LR14.3(f)]

2.11 The Employee will give no consideration for the grant or Settlement of an Award of Co-investment Shares, Performance Shares or Retention Shares. [LR14.1(d)]

2.12 Employees terminating employment due to resignation or dismissal on grounds of misconduct, poor performance, dishonest behaviour or fraudulent conduct, dismissal based on operational requirements as contemplated in terms of South African labour law and compulsory or early Retirement will be classified as bad leavers and will forfeit all unvested Awards. [LR14.1(h)]

2.13 Employees terminating employment due to death will be classified as good leavers and all Retention Share Awards will Vest on the Date of Termination of Employment. Co-investment Share Awards, will also in the event of death Vest on the Date of Termination of Employment, but subject to the fulfilment of the Additional Vesting Condition.


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For Performance Shares, on death the portion which Vest will be determined based on the extent to which the Performance Condition has been satisfied and the number of complete months served since Award Date to the Date of Termination of Employment over the total number of months in the Vesting Period. [LR14.1(h)]

2.14 Employees terminating employment due to ill-health, disa-bility, injury will also be classified as good leavers and a portion of the Award will Vest on the Date of Termination of Employment. For Co-investment Shares and Retention Shares the portion which will Vest will be determined based on the number of complete months served since the Award Date to the Date of Termination of Employment over the Total number of months in the Vesting Period. The Vesting of Co-investment Shares will also be subject to the fulfil-ment of the Additional Vesting Condition until the Date of Termination of Employment. For Performance Shares the portion of Shares which will Vest will be determined based on the extent to which the Performance Condition has been satisfied and the number of complete months served since the Award Date to the Date of Termination of Employment over the total number of months in the Vesting Period. The remainder of the Award not Vested will lapse. [LR14.1(h)]

2.15 In the event of a Change of Control, a portion of the Award will Vest. This portion will reflect the number of months served since the Award Date to the Date of Termination of Employment over the total number of months in the Vesting Period and the extent to which the Performance Condition (if any) for Performance Shares has been satisfied over the Performance Period or the Additional Vesting Condition has been met until Date of Termination of Employment for the Co-investment Shares. The remainder

of the Award not Vested will lapse. Where the Company undergoes a Change of Control, the terms may make provision therefore that the Plan continue to operate as set out in the Rules or that Participants’ rights under the Plan is replaced with awards in respect of shares in one or more other companies on a basis which is determined by an independent merchant bank or auditor to be fair and reasonable to Participants. [LR14.1(g) and 14.3(a)]

2.16 In the event of a variation in Share capital such as a Capitalisation Issue, subdivision of Shares, consolidation of Shares, liquidation etc. Participants shall continue to participate in the Plan. The Remuneration Committee may make such adjustment to the Award or take such other action to place Participants in no worse a position than they were prior to the happening of the relevant event and to provide that the fair value of the Award, immediately after the event, is materially the same as the fair value of the Award immediately before the event. The issue of Shares as consideration for an acquisition, and the issue of Shares or a vendor consideration placing will not be regarded as a circumstance that requires any adjustment to Awards. Where the Remuneration Committee regards an adjust-ment as necessary, Auditors, acting as experts and not as arbitrators and whose decision shall be final and binding on all persons affected thereby, shall confirm to the Company in writing that these are calculated on a non-prejudicial basis. The Auditors shall confirm in writing to the Remuneration Committee whether those adjustments were calculated in accordance with the Rules of the Plan. Any adjustments made will be reported in the Company’s annual financial statements in the year during which the adjustment is made. [LR14.3(b), (c), (d) and (e)]


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Memorandum of Incorporation

This is the Memorandum of Incorporation (MOI) tabled and adopted by way of a Special Resolution in accordance with section 16(1)(c) of the Companies Act No 71 of 2008 at the Shareholders Meeting of the Company held on 29 October 2012 and has been initialled by the Company Secretary for purposes of identification.

Company Secretary

COMPANIES AND INTELLECTUAL PROPERTY COMMISSION

Republic of South Africa

Memorandum of Incorporation of Shoprite Holdings Limited(Registration number 1936/007721/06)

being a profit Company which is classified as a public Company(“the Company”)

The Company has adopted this unique form of Memorandum of Incorporation and, accordingly, the standard form of Memorandum of Incorporation for profit companies as contained in the Companies Regulations shall not apply to the Company.

This Memorandum of Incorporation replaces the Memorandum of Incorporation of the Company that was in existence at the time of adoption of this Memorandum of Incorporation.


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Table of contents

PART A – THE MOI AND RULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 1 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 2 Conflicts with The MOI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 3 Amendment of The MOI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 4 Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122

PART B – STATUS AND POWERS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 5 Status as Public Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 6 Powers of The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 7 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123

PART C – CAPITALISATION AND SECURITIES OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 8 Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 9 Rights of The Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 10 Variation of Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 11 Issue of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126 12 Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 13 Register and Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 14 Transfer of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 15 Capitalisation Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 16 Acquisition of Shares Issued by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 17 Debt Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 18 Beneficial Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 19 Joint Holders of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 20 Legal Representatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129

PART D – SHAREHOLDERS RIGHTS AND PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 21 Shareholders Right to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 22 Single Shareholder's Authority to Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 23 Proxy Representation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 24 Record Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 25 Shareholders Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 26 Notice of Shareholders Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 27 Conduct of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 28 Shareholder Meeting Quorum and Adjournment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 29 Chairperson of Shareholders Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 30 Shareholders Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 31 Written Resolutions by Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133

PART E – DIRECTORS POWERS AND PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 32 Authority of the Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 33 Appointment of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 34 Alternate Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 35 Board Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 36 Chairperson of The Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 37 Directors Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 38 Written Resolutions by Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138 39 Executive Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138 40 Payments to Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138 41 Borrowing Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139 42 Indemnification and Insurance for Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139

PART F – GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141 43 Financial Statements and Access to Company Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141 44 Financial Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141 45 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141 46 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142 47 Loss of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142 48 Odd-Lots . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142


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PART A – THE MOI AND RULES

1 INTERPRETA TION In this Memorandum of Incorporation, clause headings

are used for convenience only and shall not be used in its interpretation and, unless the context clearly indicates a contrary intention, –

1.1 an expression that denotes –

1.1.1 any gender, includes the other genders;

1.1.2 a natural Person, includes an artificial or juristic Person and vice versa;

1.1.3 the singular, includes the plural and vice versa;

1.2 the following expressions shall bear the meanings assigned to them below and cognate expressions shall bear corresponding meanings, –

1.2.1 “Auditors” – the Auditors of the Company appointed from time to time in accordance with the Act;

1.2.2 “Board” – the board of Directors of the Company from time to time;

1.2.3 “Business Day” – any day other than a Saturday,

Sunday or public holiday in the Republic;

1.2.4 “Certificated Securities” – Securities evidenced by a certificate as contemplated in section 49(1);

1.2.5 “Central Securities Depository” – the Central Securities Depository as defined in section 1 of the Securities Services Act;

1.2.6 “Commission” – the Companies and Intellectual Property Commission established by section 185 of the Companies Act;

1.2.7 “Companies Act” – the Companies Act No 71 of 2008, as amended or re-enacted and for the time being in force, including all schedules to such Act;

1.2.8 “Company” – the Company defined as such on the front page of this MOI;

1.2.9 “CSDP” – a depository institution accepted by a Central Securities Depository as a “participant” in terms of the exchange operated by the JSE in the Republic;

1.2.10 “Deferred Share” – a non-convertible, non-partici-pating, no par value deferred share in the share

capital of the Company, having the rights, limitations and other terms contemplated in clause 9.2 of this MOI;

1.2.11 “Director” – a Director of the Company;

1.2.12 “Equity Securities” – equity securities as defined in the JSE Listing Requirements;

1.2.13 “IFRS” – the International Financial Reporting Standards adopted from time to time by the International Accounting Standards Board,, or its successor body, as adapted for use in the Republic from time to time by the Financial Reporting Standards Council established in terms of section 203 of the Companies Act;

1.2.14 “JSE” – JSE Limited (registration number 2005/022939/06), a public Company duly incorpo-rated in accordance with the laws of the Republic, licensed as an exchange under the Securities Services Act;

1.2.15 “JSE Listings Requirements” – the Listings Requirements of the JSE and all other applicable rules, regulations, requirements and rulings of the JSE. Any requirements of this MOI in relation to such JSE Listings Requirements shall only apply for as long as Securities of the Company are listed on the JSE;

1.2.16 “Legal Representative” – any Person who has submitted proof (which is satisfactory to the Board) of his appointment (and, to the extent required by the Board, the continuation of that appointment) as –

1.2.16.1 an executor of the estate of a deceased Shareholder, or a curator, guardian or trustee of a Shareholder whose estate has been seques-trated or who is otherwise under any disability;

1.2.16.2 the liquidator of any Shareholder that is a body corporate in the course of being wound-up; or

1.2.16.3 the Business Rescue Practitioner of any Shareholder which is a Company undergoing Business Rescue proceedings;

1.2.17 “Memorandum of Incorporation” or “MOI” – the memorandum of incorporation of the Company, being this document (and including any Schedules hereto), as amended or replaced from time to time;

1.2.18 “Ordinary Share” – an ordinary share in the capital of the Company, with a par value of 113.4 cents each having the preferences, rights, limitations and other terms contemplated in clause 9.1;

Memorandum of Incorporation (continued)


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1.2.19 “Ordinary Shareholder” – a Shareholder who holds an Ordinary Share;

1.2.20 “Person” or “Entity” – includes any natural or juristic person, association, business, close corpora-tion, company, concern, enterprise, firm, partner-ship, joint venture, trust, undertaking, voluntary association, body corporate, and any similar entity;

1.2.21 “Regulations” – the Companies Regulations of 2011, and any other regulations made in terms of the Companies Act for so long as they remain of force and effect;

1.2.22 “Republic” – the Republic of South Africa;

1.2.23 “Securities” – collectively –

1.2.23.1 Shares, debentures, notes, bonds, units or other instruments, irrespective of their form or title (including any options thereon and rights thereto) issued or authorised to be issued by the Company; and

1.2.23.2 anything falling within the meaning of the defini-tion of “securities” as defined in section 1 of the Securities Services Act;

1.2.24 “Securities Services Act” – the Securities Services Act No 36 of 2004;

1.2.25 “SENS” – the Securities Exchange News Service established and operated by the JSE;

1.2.26 “Share” – an Ordinary Share or a Deferred Share or any other share issued by the Company;

1.2.27 “Shareholder” – a holder of a Share who is entered as such in the Sub-Register or certificated Securities Register of the Company as provided for in Section 50;

1.2.28 “Shareholders Resolution” – an Ordinary Resolution or Special Resolution;

1.2.29 “STRATE” – Strate Limited, a licensed Central Securities Depository, under the Securities Services Act;

1.2.30 “Sign” – includes the reproduction of a signature by lithography, printing, or any kind of stamp or any other mechanical or electronic process, and “Signature” has the corresponding meaning;

1.2.31 “Sub-Register” – the record of Uncertificated Securities administered and maintained by a CSDP, which forms part of the Securities Register in terms of the Companies Act and which is the Company’s

Uncertificated Securities Register referred to in Section 50(3);

1.2.32 “Uncertificated Securities” – Securities of the kind described in Section 49(2)(b);

1.3 if any provision in a definition is a substantive provision conferring a right or imposing an obligation on any Person, then, notwithstanding that it is only in a defini-tion, effect shall be given to that provision as if it were a substantive provision in the body of this MOI;

1.4 the use of the word “including”, “includes” and “include”, followed by a specific example/s, shall not be construed as limiting the meaning of the general wording preceding it and the eiusdem generis rule shall not be applied in the interpretation of that general wording or those specific example/s;

1.5 where any term is defined within a particular clause other than this clause 1, that term shall bear the meaning ascribed to it in that clause wherever it is used in this MOI;

1.6 any capitalised word or expression that is not otherwise defined in this MOI, but is defined in the Companies Act, shall bear the same meaning as it bears in the Companies Act. For the avoidance of doubt, it is recorded that any reference to “Present at such Meeting” or “Present at the Meeting” shall be construed in accordance with the definition of “Present at a Meeting” in the Companies Act and without derogating from the aforesaid ,a Person other than a natural person will also be “Present at such Meeting” or “Present at the Meeting” if represented at such or that Meeting by a duly authorised represent-ative;

1.7 a reference to a “section” refers to the corresponding section of the Companies Act;

1.8 this MOI shall be deemed to authorise the Company to do anything which the Companies Act empowers a company to do if so authorised by its MOI, unless that authority is expressly excluded;

1.9 references in the left-hand margins to sections of the Companies Act designated by the letter “S” and the numbers of the sections referred to are for information purposes only and shall not be used in the interpreta-tion of this MOI;

1.10 the headings of clauses in this MOI are for information purposes only and shall not be used in the interpreta-tion of this MOI; and

1.11 save to the extent otherwise provided by this MOI, the provisions of the Company’s MOI in force immediately


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prior to the adoption of this MOI shall, to the exclusion of this MOI, continue to regulate any matter which, by the provisions of the Companies Act, continues to be regulated by the law relating to companies as it existed immediately prior to the coming into operation of the Companies Act.

2 CONFLICTS WITH THE COMPANIES ACT In accordance with the Companies Act, in any instance

wh ere there is a conflict between a provision (be it express or tacit) of this MOI and –

2.1 an Alterable Provision of the Companies Act, the provi-sion of this MOI shall prevail to the extent of the conflict, and to the extent that such Alterable Provision of the Companies Act expressly allows for the Company to adopt the conflicting provision; or

2.2 an Unalterable Provision of the Companies Act, the Unalterable Provision of the Companies Act shall prevail to the extent of the conflict except to the extent that in terms of section 15 (2) (iii) the MOI imposed a higher standard, greater restriction, longer period of time or any similarly more onerous requirement, than would otherwise apply to the Company in terms of an Unalterable Provision of this Act in which case such a provision will prevail.

3 AMENDMENT OF THE MOI

3.1 Every provision of this MOI is capable of amendment in accordance with sections 16(1)(a), 16(1)(c), and 152(6)(b) of the Companies Act, and, accordingly, there is no provision of this MOI which may not be amended as contemplated in section 15(2)(b) or 15(2)(c) of the Companies Act.

3.2 This MOI may only be altered or amended –

3.2.1 in compliance with a court order on the basis set out in section 16(1)(a) and 16(4) of the Companies Act and any other applicable provisions of the Companies Act; or

3.2.2 by way of a Special Resolution of the Shareholders passed in accordance with section 16(1)(c) of the Companies Act, read in conjunction with the remaining provisions of the Companies Act and this MOI; or

3.2.3 as contemplated in section 17 and 152(6)(b) of the Companies Act.

3.3 Save as specifically provided for in clause 3.2, this MOI is not capable of amendment by any other method. Accordingly, the provisions of section 16(1)(b) of the Companies Act shall not apply, nor shall any other Alterable Provisions of the Companies Act that allows

for a method for the alteration or amendment of the MOI other than those methods contemplated in clause 3.2 apply.

3.4 Any change to the name of the Company and any vari-ation of the share capital of the Company referred to in clause 10.3 shall be effected by an amendment to this MOI by way of a Special Resolution as referred to in clause 3.2.2.

4 RULES The Board is prohibited from making, amending or

appealing any Rules and the authority of the Board in this regard is hereby excluded.

PART B – STATUS AND POWERS

OF THE COMPANY

5 STATUS AS PUBLIC COMPANY

5.1 The Company is a Pre-Existing Company, and accord-ingly continues to exist as if it had been incorporated and registered in terms of the Companies Act.

5.2 The Ordinary Shares issued by the Company are freely transferable, subject to compliance with the procedural requirements for transfer contained in clause 14.

5.3 The Company is entitled to offer its Ordinary Shares to the public, subject to compliance with this MOI and the Companies Act.

5.4 The Company is, accordingly, classified as a Public Company in terms of section 8(2) of the Companies Act.

6 POWERS OF THE COMPANY

6.1 The Company is governed by –

6.1.1 the Unalterable Provisions of the Companies Act;

6.1.2 the Alterable Provisions of the Companies Act, subject to the extensions, limitations, substitutions or variations set out in this MOI; and

6.1.3 the other provisions of this MOI.

6.2 The Company has, subject to section 19(1)(b)(i) of the Companies Act, all of the legal powers and capacity of an individual, and the legal powers and capacity of the Company are not subject to any restrictions, limitations or qualifications contemplated in section 19(1)(b)(ii) of



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the Companies Act. In particular and without dero-gating from the aforesaid the Company may borrow any amount without limitation and provide any form of security for the fulfilment of any of its obligations.

6.3 There is no provision of this MOI which constitutes a restrictive condition as contemplated in section 15(2)(b) of the Companies Act.

6.4 No Special Resolution contemplated in section 20(2) or section 20(6) of the Companies Act to ratify any action which is contrary to the JSE Listings Requirements shall be proposed to the Shareholders unless other-wise agreed to by the JSE.

7 LIMITATION OF LIABILITY No Person shall, solely by reason of being an

Incorporator, Shareholder or Director of the Company, be liable for any liabilities or obligations of the Company.

PART C – CAPITALISATION AND

SECURITIES OF THE COMPANY

8 SHARE CAPITAL The numbers and classes of Shares which the

Company is authorised to issue are set out in Schedule 1 to this MOI.

9 RIGHTS OF THE SHARES

9.1 Ordinary shares

9.1.1 Each Ordinary Share in the issued share capital of the Company ranks pari passu with, and is identical in all respects to, every other Ordinary Share in respect of all rights, and entitles its holder to –

9.1.1.1 the right to be entered into the Securities Register as the registered holder of an Ordinary Share;

9.1.1.2 exercise one vote on any matter to be decided by Shareholders of the Company (other than matters which are, in terms of this MOI or the Companies Act, to be decided solely by the holders of any other class/es of Share(s));

9.1.1.3 participate equally with every other Ordinary Share in any Distribution (except for payment in lieu of a capitalisation share and any considera-tion payable by the Company for any of its own Shares or for any shares of a another company

within the same group as contemplated in para-graphs a(ii) and a(iii) of the definition of Distribution in the Companies Act) to Ordinary Shareholders, whether during the existence of the Company or upon its dissolution.

9.2 Deferred Shares

9.2.1 Subject to the provisions of the Companies Act, the Company shall be entitled to allot and issue as fully paid up Shares a separate class of non-convertible, non-participating, no par value deferred Shares, each known as “Deferred Shares”, and the following class rights shall attach to the Deferred Shares:

9.2.1.1 as regards a return of capital, the Deferred Shares will rank, equal to the issue price of 0,1 cent per Deferred Share, after the Ordinary Shares in the Company on a winding up but shall not otherwise be entitled to participate in any assets or surplus assets of the Company whether on a winding up or in any other circum-stances;

9.2.1.2 the Deferred Shares shall not be convertible into Shares of any other class;

9.2.1.3 the Deferred Shares shall not be entitled to participate in any profits of the Company and no dividends (whether in the form of cash, bonus shares, assets or otherwise) shall be declared or paid in respect of the Deferred Shares;

9.2.1.4 the Deferred Shares shall not participate in any rights issue of the Company;

9.2.1.5 the Company shall recognise only Thibault Square Financial Services (Pty) Limited registra-tion number 1992/004170/07 (“the Permitted Holder”) as the beneficial and registered holder of the Deferred Shares;

9.2.1.6 the Deferred Shares shall not be transferable, whether by delivery, registration or otherwise and shall accordingly not be capable of being listed on any stock exchange;

9.2.1.7 the Permitted Holder shall only be entitled to hold Deferred Shares for as long as it holds not less than 10% of the Ordinary Share capital of the Company in issue on the date of the first issue of Deferred Shares to the Permitted Holder (“the Minimum Holding”); Accordingly:

9.2.1.7.1 if the Permitted Holder at any time disposes (whether by sale, exchange, donation or otherwise) of any Ordinary Shares in the capital of the Company, the Company shall


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proportionately acquire such number of the Deferred Shares then held by the Permitted Holder, at 0,1 cent per Deferred Share, as would maintain the ratio between the Ordinary Shares and Deferred Shares held by the Permitted Holder which existed immedi-ately prior to such disposal;

9.2.1.7.2 whenever the Company issues Ordinary Shares

(whether pursuant to a rights issue, as a capitali-sation award, or otherwise) (“the Fresh Issue”), the Permitted Holder shall be entitled to subscribe for such number of additional Deferred Shares at 0,1 cent per share as would result in the permitted holder continuing to hold the ratio of Deferred Shares to Ordinary Shares which it held immediately prior to the Fresh Issue. The Company shall be obliged to allot and issue the Deferred Shares subscribed for by the Permitted Holder against receipt of the subscrip-tion consideration;

9.2.1.7.3 if the Permitted Holder at any time ceases to

hold the Minimum Holding, the Company shall acquire all of the Deferred Shares then held by the Permitted Holder on notice to the Permitted Holder at 0,1 cent for each Deferred Share,

provided that “acquire” for purposes of articles 9.2.1.7.1 and 9.2.1.7.3 shall bear the meaning ascribed thereto in section 85 of the Companies Act, 1973 (as amended);

9.2.1.8 the Permitted Holder shall be entitled to be present and to vote either in person, or by proxy, at any meeting of the Company, by virtue of the Deferred Shares, and shall be entitled on a poll to one vote in respect of every Deferred Share held by it.

9.3 Rights privileges and conditions attaching to the 6% cumulative preference shares of R2 each (“the 6% preference shares”)

9.3.1 The 6% preference shares shall carry the right out of the profits from time to time available for distri-bution to a fixed cumulative preferential dividend of six per cent (6%) per annum on the capital paid up or credited as paid up thereon and shall be entitled, in the event of the winding-up of the Company, in priority to the Ordinary Shares, to repayment of capital and any arrears of the preferential dividend whether declared or not, calculated up to the date of commencement of the winding-up.

9.3.2 The 6% preference shares shall not be entitled to participate further in the profits or surplus assets of the Company.

9.3.3 The 6% preference shares shall not carry any voting rights unless the fixed cumulative preferen-tial dividend is in arrear and unpaid for more than 12 (twelve) months calculated from the expiration of any financial year of the Company or when a resolution is submitted for winding-up the Company. In either of these events the 6% preference shares shall carry the same right of voting as the Ordinary Shares.

9.4 Rights, privileges and conditions attaching to the 5% cumulative preference shares of R2 each (“the 5% preference shares”)

9.4.1 The 5% preference shares shall carry the right out of the profits from time to time available for distri-bution to a fixed cumulative preferential dividend of five per cent (5%) per annum, which dividends shall be payable half-yearly on the last days of February and August in each year.

9.4.2 The 5% preference shares shall rank for dividend next after the 6% preference shares, but in priority to the Ordinary Shares.

9.4.3 In the event of the Company having being wound up, the 5% preference shares shall rank for repay-ment of capital and any arrears of dividend, whether declared or not, and calculated up to the date of the commencement of the winding-up, next after the 6% preference shares, but in priority to the Ordinary Shares.

9.4.4 The 5% preference shares shall not be entitled to participate further in the profits or surplus assets of the Company.

9.4.5 The 5% preference shares shall carry the same voting rights as the existing 6% preference shares.

9.4.6 The Company shall not have the right to modify, vary or qualify in any manner the rights hereby attached, except with the consent of three-fourths of the holders of the 5% preference shares.

9.5 Rights, privileges and conditions attaching to the second 5% cumulative preference shares of R2 each (“the second 5% prefer-ence shares”)

9.5.1 The second 5% preference shares shall carry the right out of the profits from time to time available for distribution to a fixed cumulative preferential dividend of 5% per annum reckoned from the date of allotment of such shares on the capital paid up or credited as paid up thereon subject to the provi-sions of 9.5.2. The dividends in respect of the second 5% preference shares shall be paid half-



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yearly, namely on the last days of February and August in each and every year.

9.5.2 The second 5% preference shares shall rank for dividend subsequent to the 175 000 6% preference shares and the 325 000 5% preference shares, but in priority to the Ordinary Shares for the time being of the Company or any other shares to be issued by the Company.

9.5.3 The second 5% preference shares shall in a winding-up be entitled to rank as regards repay-ment of capital, and any arrears of the preferential dividend whether declared or not calculated up to the date of the commencement of the winding-up subsequent to the 175 000 6% preference shares and the 325 000 5% preference shares for the time being of the Company or any other shares to be issued by the Company, but the second 5% prefer-ence shares shall not be entitled to participate further in the profits or surplus assets of the Company.

9.5.4 The second 5% preference shares shall not carry any voting rights unless the fixed cumulative preferential dividend is in arrear and unpaid for more than 12 (twelve) months, calculated from the expiration if any financial year of the Company or when a resolution is submitted for winding-up the Company. In either of these events the preference shares shall carry the same right of voting as the Ordinary Shares.

9.5.5 The Company shall not at any time have the right to modify, vary or qualify in any manner the rights hereby attached to the second 5% preference shares except with the consent of three-fourths of the holders of the second 5% preference shares.

9.5.6 Save as aforesaid the second 5% preference shares shall rank equally share for share with the existing preference and Ordinary Shares.

9.6 Rights, privileges and conditions attaching to the third 5% cumulative preference shares of R2 each (“the third 5% preference shares”)

9.6.1 The third 5% preference shares shall carry the right out of the profits from time to time available for distribution to a fixed cumulative preferential divi-dend of 5% per annum reckoned from the date of allotment of such shares, on the capital paid up or credited as paid up thereon subject to the provi-sions of 9.6.2. The dividends in respect of the third 5% preference shares shall be paid half-yearly, namely on the last days of February and August in each and every year.

9.6.2 The third 5% preference shares shall rank for divi-dend subsequent to the 175 000 6% preference shares and the 325 000 5% preference shares and 225 000 second 5% preference shares, but in priority to the Ordinary Shares for the time being of the Company or any other shares to be issued by the Company.

9.6.3 The third 5% preference shares shall in a winding-up be entitled to rank as regards repayment of capital, and any arrears of the preferential dividend whether declared or not, calculated up to the date of the commencement of the winding-up, subse-quent to the 175 000 6% preference shares, 325 000 5% preference shares and 225 000 second 5% preference shares, but in priority to the Ordinary Shares for the time being of the Company, or any other shares to be issued by the Company, but the third 5% preference shares shall not be entitled to participate further in the profits or surplus assets of the Company.

9.6.4 The third 5% preference shares shall not carry any voting rights unless the fixed cumulative preferen-tial dividend is in arrear and unpaid for more than 12 (twelve) months, calculated from the expiration of any financial year of the Company, or when a reso-lution is submitted for winding-up the Company, or for the purpose of altering the MOI in any manner directly affecting the rights attached thereto. In either of these events, the preference shares shall carry the same rights of voting as the Ordinary Shares.

9.6.5 The Company shall not at any time have the right to modify, vary or qualify in any manner the rights hereby attached to the third 5% preference shares, except with the consent of three-fourths of the holders of the third 5% preference shares.

9.6.6 The Company shall not at any time issue more than 500 000 third 5% preference shares in whole or in part except with the consent of the majority in value of the holders of the original 500 000 third 5% preference shares given at a separate class meeting.

9.6.7 Save as aforesaid the third 5% preference shares shall rank equally share for share with the existing prefer-ence and Ordinary Shares.

10 VARIATION OF SHARE CAPITAL

10.1 Notwithstanding the provisions of section 36(3) of the Companies Act, the Board shall not have the power to –


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10.1.1 increase or decrease the number of authorised Shares of any class of the Shares;

10.1.2 reclassify any classified Shares that have been authorised but not issued;

10.1.3 classify any unclassified Shares that have been authorised but not issued; or

10.1.4 determine the preferences, rights, limitations or other terms of any Shares in a class contemplated in Section 36(1)(d),

which powers shall only be capable of being exer-cised by the Shareholders, as contemplated in clause 10.3.

10.2 Each Share issued by the Company shall entitle its holder to vote on any proposal to amend the prefer-ences, rights, limitations or other terms associated with that Share.

10.3 The Shareholders may, by amendment to the MOI by way of a Special Resolution, –

10.3.1 increase or decrease the number of authorised Shares of any class of the Shares except to the extent restricted by Regulation 31(2);

10.3.2 reclassify any classified Shares that have been authorised but not issued;

10.3.3 classify any unclassified Shares that have been authorised but not issued;

10.3.4 determine the preferences, rights, limitations or other terms of any Shares in a class contemplated in Section 36(1)(d);

10.3.5 create any class of Shares;

10.3.6 convert one class of Shares into one or more other classes of Shares, including the conversion of par value shares into no par value shares;

10.3.7 consolidate or subdivide any Securities;

10.3.8 change the name of the Company; or

10.3.9 vary any preferences rights, limitations or other terms of any class of Shares already in issue, but no such variation shall be implemented unless –

10.3.9.1 it has been approved by a Special Resolution adopted by the holders of that class of Shares at a separate meeting or it has been consented to in writing by the holders of all the issued Shares of that class; and

10.3.9.2 if there is any other class/es of Shares in issue, it has also been approved by a Special Resolution of all of the Shareholders of the Company entitled to vote thereon, which Special Resolution shall only be proposed after the Special Resolution referred to in 10.3.9.1 has been passed.

10.4 The preferences, rights, limitations or any other terms of any class of Shares must not be varied in response to any objectively ascertainable external fact or facts as provided for in sections 37(6) and 37(7) of the Companies Act and the powers of the Board are limited accordingly.

10.5 No further Securities ranking in priority to, or pari passu with, existing preference Shares, of any class, shall be created without a Special Resolution passed at a sepa-rate meeting of such preference Shareholders.

11 ISSUE OF SECURITIES

11.1 Except for the Deferred Shares, the Company may only issue Securities which are freely transferable. The Company may only issue Securities which have been authorised by or in terms of this MOI.

11.2 Notwithstanding the provisions of section 40(5), all Securities of the Company for which a listing is sought on the JSE must, unless otherwise required by any statute, only be issued after the Company has received the consideration approved by the Board for the issu-ance of such Securities.

11.3 Except where Equity Securities are issued:

11.3.1 in accordance with one of the approvals described in clause 11.4 hereunder; or

11.3.2 for an acquisition of assets,

the Company must in the event that it wishes to issue Equity Securities, offer (“Pro-rata Offer”) those Equity Securities to all the existing holders of Equity Securities of that class of Equity Securities (or, if there are no Equity Securities of that class in issue, to the Ordinary Shareholders) pro-rata in proportion to their existing Shareholdings. For the avoidance of doubt this clause 11.3 will not apply to the Deferred Shares.

11.4 The Board may:

11.4.1 with the approval of an Ordinary Resolution of the Shareholders; or

11.4.2 where required by section 41 of the Companies Act, with the approval of a Special Resolution of the Shareholders,



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authorise the issue by the Company of any unissued Securities (including Equity Securities and/or convertible Securities) or options to subscribe for such unissued Securities to any Person/s provided that such issue(s) has/have, where required, been approved by the JSE and comply/ies with the JSE Listings Requirements. Any such Ordinary Resolution (referred to in 11.4.1 above) or Special Resolution (referred to in 11.4.2 above) may in general authorise the Board to issue Securities or options to subscribe for Securities of the Company for cash or any other consideration that they in their discretion may deem fit (subject to section 40 of the Companies Act) to any Person or entity that they in their discretion may deem fit or may authorise the issue of Securities or options to subscribe for Securities to specific Persons or entities (in all cases without having to comply with any of the provisions of clause 11.3 above).

11.5 Save as provided for in clause 11.3 or specifically included as one of the rights, preferences or other terms upon which any class of Shares are issued, no Shareholder shall have any rights to a Pro-Rata Offer or pre-emptive or other similar preferential right to be offered or to subscribe for any additional Securities issued by the Company.

11.6 The Company may issue the Securities authorised by the Board in terms of clause 11.3 or 11.4 above.

12 COMMISSION The Company shall not pay commission exceeding

10% to any Person in consideration for their subscribing or agreeing to subscribe, whether abso-lutely or conditionally, for any Securities of the Company.

13 REGISTER AND CERTIFICATES

13.1 The Securities issued by the Company shall be issued in Certificated or Uncertificated form.

13.2 The Company shall establish or cause to be estab-lished, and shall maintain, a Securities Register in accordance with the Companies Act and the Regulations and, to the extent that the form of and the manner of maintaining the Securities Register is not prescribed, the Board shall determine the form and manner thereof.

13.3 The Company shall enter into its Securities Register the transfer of any Certificated Securities which is effected in accordance with clause 14 and shall include in such entry the information required by section 51(5) of the Companies Act.

13.4 The certificates evidencing any Certificated Securities of the Company shall comply with the requirements set out in section 51(1) of the Companies Act and shall otherwise be in such form as may be determined by the Board.

13.5 If any certificate is defaced, lost or destroyed, it may be replaced on payment of such fee, if any, and on such terms as the Board may determine.

13.6 The conversion of Certificated Securities to Uncertificated Securities or of Uncertificated Securities to Certificated Securities shall occur in accordance with the Regulations, any applicable provisions of the Securities Services Act and any applicable require-ments or rules of the JSE, STRATE and the relevant CSDP or Central Securities Depositary.

14 TRANSFER OF SECURITIES

14.1 Save in the case of a transfer which is effected by operation of law and overrides the requirements of this MOI, no person may transfer any Securities in the Company to any other person without first complying with the requirements for transfer as set out in this MOI.

14.2 Transfer of ownership in any Uncertificated Securities and Certificated Securities shall be effected in accord-ance with the provisions of the Companies Act.

14.3 The Company shall not enter into its Securities Register the transfer of any Certificated Securities, unless –

14.3.1 the transfer is evidenced by a proper instrument of transfer signed by the transferor and transferee, the form of which shall be determined by the Board from time to time, which has been delivered to the Company at its Registered Office together with –

14.3.1.1 such proof as the Board may require of the authority of the signatory/ies to that instrument of transfer; and

14.3.1.2 the certificate in respect of Securities being transferred; or

14.3.2 the transfer was effected by operation of law.

14.4 Subject to the provisions of this Memorandum of Incorporation, every instrument of transfer and accom-panying documents received by the Company referred to in clause 14.3.1 shall be deemed to remain in full force, and the Company may allow the same to be acted upon, until written notice of revocation thereof is lodged at the Registered Office. Even after the lodging of such notice of revocation, the Company may give


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effect to any duly signed instrument of transfer which was accepted by any officer of the Company as being in order before the lodging of such notice of revoca-tion.

14.5 Fully paid Securities shall not be subject to any lien in favour of the Company and shall be freely transferable.

15 CAPITALISATION SHARES

15.1 The Board shall –

15.1.1 have the power and the authority to approve the issuing of any authorised Shares as capitalisation shares; or

15.1.2 subject to clause 15.2, have the power and the authority to resolve to permit the Shareholders to elect to receive a cash payment in lieu of a capitali-sation share,

but the Board shall not have the power or authority to issue Shares of one class as capitalisation shares in respect of the Shares of another class unless specifically authorised by the Shareholders by means of an Ordinary Resolution authorising the specific transaction contemplated. The authority of the Board to issue capitalisation shares in accord-ance with section 47(1) of the Companies Act is accordingly limited and restricted by this Memorandum of Incorporation.

15.2 The Board may not resolve to offer a cash payment in lieu of awarding a capitalisation share, as contem-plated in clause 15.1.2, unless the Board –

15.2.1 has considered the Solvency and Liquidity Test as required by section 46, on the assumption that every such Shareholder would elect to receive cash; and

15.2.2 is satisfied that the Company would satisfy the Solvency and Liquidity Test immediately upon the completion of the Distribution.

15.3 If, on any capitalisation issue, Shareholders would, but for the provisions of this clause 15, become entitled to fractions of Shares, the Board shall, subject to any contrary provisions in the Resolution authorising the capitalisation issue, be entitled to round off the number of capitalisation shares to be received to the nearest whole number or to sell the Shares resulting from the aggregation of those fractions, on such terms and conditions as it deems fit, for the benefit of the relevant Shareholders, and any Director shall be empowered to Sign any instrument of transfer or other instrument necessary to give effect to that sale.

16 ACQUISITION OF SHARES ISSUED BY THE COMPANY

Subject to the provisions of the Companies Act and the JSE Listings Requirements, the Company may acquire any Shares issued by the Company on the basis that –

16.1 all or a portion of the price payable on such acquisition may be paid out of the funds of or available to the Company whether or not such payment results in a reduction of the share capital, stated capital, reserves, any capital redemption reserve fund and/or any other account of the Company; and

16.2 the Shares so acquired shall be restored to the status of unissued shares and the authorised share capital of the Company shall remain unaltered.

17 DEBT INSTRUMENTS

17.1 The Board may authorise the Company to issue secured or unsecured debt instruments as defined and set out in section 43(2) of the Companies Act; provided that the Board shall not be entitled to issue any debt instruments that grants the holder thereof any rights regarding –

17.1.1 attending and voting at Shareholders Meetings and the appointment of Directors; and

17.1.2 the receipt by the holder thereof of anything other than repayment of the capital amount thereof and payment of interest thereon, all in cash, without the approval of the Shareholders by way of a Special Resolution. Without limiting the foregoing, it is recorded that a debt instrument may not confer on its holder any right to receive any Shares or other Securities of the Company or any other Entity or any other property (whether on conversion or redemption or repurchase of the debt instrument or otherwise) without the approval of a Special Resolution.

17.2 The authority of the Board to authorise the Company to issue secured or unsecured debt instruments, as set out in section 43(2), is accordingly limited or restricted by this Memorandum or Incorporation.

18 BENEFICIAL INTERESTS Securities issued by the Company may be held by, and

registered in the name of, one Person for the benefi-cial interest of another Person, but no Person other than the registered holder of a Security shall (save to the extent expressly provided for in this MOI) be enti-tled to exercise any of the rights associated with that Security and the Company shall not recognise any Person other than the registered holder of a Security as the holder (whether beneficial or otherwise) of that



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Security. The holding of the Company’s Securities by a registered holder for the beneficial interest of another Person is accordingly limited and restricted by this MOI.

19 JOINT HOLDERS OF SECURITIES Where two or more Persons are registered as the

holders of any Security, they shall be deemed to hold that Security jointly, and –

19.1 notwithstanding anything to the contrary contained anywhere else in this MOI, on the death, sequestra-tion, liquidation or legal disability of any one of those joint holders who is not represented by a Legal Representative as referred to in clause 20, the remaining joint holders may be recognised, at the discretion of the Board, as the only Persons having title to that Security;

19.2 any one of those joint holders may give effective receipts for any Distributions or other payments or accruals payable to those joint holders;

19.3 only the joint holder whose name stands first in the Securities Register shall be entitled to delivery of the certificate relating to that Security, or to receive notices or payments from the Company (and any notice or payment given to that joint holder shall be deemed to be notice or payment, as the case may be to all of the joint holders);

19.4 any one of the joint holders of any Security conferring a right to vote on any matter may vote either person-ally or by proxy at any meeting in respect of that Security as if he were solely entitled to exercise that vote, and, if more than one of those joint holders is present at any meeting of Shareholders, either person-ally or by proxy, the joint holder who tenders a vote (including an abstention) and whose name stands in the Securities Register before the other joint holders who are present, in person or by proxy, shall be the joint holder who is entitled to vote in respect of that Security;

19.5 the Company shall be entitled to refuse to register more than 5 (five) Persons as the joint holders of a Security.

20 LEGAL REPRESENTATIVES A Legal Representative of the holder of any Security

issued by the Company (“Security Holder”) shall –

20.1 be the only Person recognised by the Company as having any rights in respect of or title to a Security registered in the name of the Security Holder whom he represents; provided that if a Security Holder or his Legal Representative is a joint holder of that Security, then this clause 20.1 shall not detract from clause 19

and this clause 20.1 shall be read together with clause 19; and

20.2 if so required by that Legal Representative or by the Board, be entered into the Securities Register of the Company nomine officio in the place and on behalf of that Security Holder, provided that (i) if the Legal Representative so entered into the Securities Register ceases to be the Legal Representative of that Security Holder, the Board shall, pending the appointment of another Legal Representative for that Security Holder or the transfer of the relevant Security to any other Person who is entitled to become the holder of that Security, be entitled to suspend the rights of the holder of that Security to vote and shall be entitled to with-hold (and retain until such transfer has occurred) all Distributions payable to the holder of that Security; and (ii) that Security Holder shall not, merely by virtue of the appointment, or entry into the Securities Register of the Legal Representative, be released from any obli-gation arising out of or in connection with the holding of that Security.

PART D – SHAREHOLDERS RIGHTS

AND PROCEEDINGS

21 SHAREHOLDERS RIGHT TO INFORMATION

Each Shareholder and each Person who is the regis-tered holder of, or holds a beneficial interest in, any Securities issued by the Company shall have the infor-mation rights set out in section 26(1) of the Companies Act.

22 SINGLE SHAREHOLDER’S AUTHORITY TO ACT

As contemplated in section 57(2) of the Companies Act, if, at any time, the Company has only one Shareholder –

22.1 that Shareholder may exercise any and all of the Voting Rights pertaining to the Company, at any time, without notice or compliance with any other internal formali-ties, and that power is not limited or restricted by this MOI; and

22.2 the provisions of clauses 24 (Record Dates), 26 (Notice to Shareholders Meetings), 27 (Conduct of Shareholders Meeting), 28 (Shareholder Meeting Quorum and Adjournment), 30 (Shareholder Resolutions) and 31 (Shareholders Acting Other Than at a Meeting) shall not apply.


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23 PROXY REPRESENTATION

23.1 A Shareholder may, at any time by written proxy appointment (“Proxy Instrument”) which complies with this MOI and the Companies Act, appoint any individual, including an individual who is not a Shareholder of the Company, as a proxy to –

23.1.1 participate in, and speak and vote at, a Shareholders Meeting on behalf of the Shareholder; or

23.1.2 give or withhold written consent on behalf of the Shareholder to a decision contemplated in clause 31,

and any such proxy appointment (and any invitation by the Company to appoint a proxy and any form supplied by the Company for use as a Proxy Instrument) shall be governed by section 58 of the Companies Act and this clause 23.

23.2 The Board may determine a standard form of Proxy Instrument and make it available to Shareholders on request.

23.3 Subject to the provisions of the Companies Act, a Proxy Instrument may be an instrument created or transmitted by electronic or other means, including electronic mail or facsimile.

23.4 A Proxy Instrument which complies with the Companies Act and this MOI shall, if any meeting to which it relates is adjourned or postponed, unless the contrary is stated thereon, be valid at that meeting when it resumes after such adjournment or commences after such postponement, even if it had not been lodged timeously for use at the meeting as originally scheduled (prior to the adjournment or post-ponement);

23.5 A Shareholder may not appoint more than one Person concurrently as proxies, and may not appoint more than one proxy to exercise Voting Rights attached to different Securities held by the Shareholder.

23.6 A proxy may not delegate the proxy’s authority to act on behalf of the Shareholder to another Person, unless the right to delegate is specifically contained in the Proxy Instrument and the delegation occurs by way of a further Proxy Instrument which itself complies with the requirements of the Companies Act and this MOI.

23.7 A proxy shall not be entitled to exercise any rights of the Shareholder who appointed that proxy –

23.7.1 until the expiry of 48 hours after the time on which the Proxy Instrument containing the appointment; or

23.7.2 after midnight on the day on which the instrument revoking the appointment (if revocable),

of that proxy was delivered to the Registered Office of the Company (marked urgent and for the atten-tion of the Company secretary, chairperson or managing Director of the Company and accompa-nied by such proof of the identity and authority of the signatory as may reasonably be required by the Board or the chairperson of any meeting referred to in the proviso to this clause 23.7) or to any other Person entitled to accept the Proxy Instrument or revocation on behalf of the Company; provided that the Board, or the chairperson of any meeting at which the proxy wishes to exercise any rights of the Shareholder, may agree to allow any such Proxy Instrument or revocation to become effective prior to the time when it would otherwise have become effective in terms of this clause 23.

23.8 A proxy shall, as contemplated in section 58(7) of the

Companies Act, be entitled, in the Proxy’s own discre-tion, to exercise, or abstain from exercising, any voting right of the Shareholder; provided that if the Proxy Instrument specifically provides otherwise then the specific provisions of the Proxy Instrument shall prevail.

24 RECORD DATES The Board may, in accordance with section 59 of the

Companies Act and the Regulations, determine and publish a Record Date for the purposes of determining which Shareholders are entitled to –

24.1 receive a notice of a Shareholders Meeting;

24.2 participate in and vote at a Shareholders Meeting;

24.3 decide any matter by written consent or by Electronic Communication;

24.4 receive a Distribution; or

24.5 be allotted or exercise any other rights;

provided that –

24.5.1 if the Board does not determine a Record Date for any action or event, as contemplated in this clause 24, the Record Date shall, subject to clause 24.5.2, be as determined in accordance with section 59(3) of the Companies Act; and

24.5.2 whilst Shares of the Company are listed on the JSE, the Record Date shall be determined in accordance with the JSE Listings Requirements.



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25 SHAREHOLDERS MEETINGS

25.1 The Company shall not be required to hold any meet-ings of Shareholders other than those required by the Companies Act and/or the JSE Listings Requirements.

25.2 Without limiting the foregoing, the Company shall hold a Shareholders meeting in the circumstances contem-plated in section 61(2) of the Companies Act.

25.3 The Board or the chairperson of the Board or any Prescribed Officer of the Company or Director author-ised by the Board is entitled to call a Shareholders Meeting at any time, whereupon the Company will be obliged to hold that Shareholders Meeting.

25.4 The Board or any other person entitled to convene a meeting of the Board and who convenes the Shareholders Meeting shall determine the location for any Shareholders Meeting of the Company and the Company may hold any such meeting in the Republic or any foreign country and, accordingly, the authority of the Board, as contemplated in section 61(9) of the Companies Act, is not limited or restricted by this MOI.

26 NOTICE OF SHAREHOLDERS MEETINGS

26.1 The Company must –

26.1.1 deliver notice of each Shareholders Meeting to –

26.1.1.1 all Shareholders as of the Record Date for receiving notice of that Shareholders’ Meeting; and

26.1.1.2 the JSE,

at least fifteen Business Days before that Shareholders Meeting is to begin; and

26.1.2 simultaneously with delivery of any notice in terms of clause 26.1.1, announce such notice through SENS.

26.2 The notice of a Shareholders Meeting shall be in writing and shall include the items set out in section 62(3) of the Companies Act.

26.3 The notice of a Shareholders Meeting must be deliv-ered in accordance with the provisions of clause 46.

27 CONDUCT OF MEETINGS

27.1 The Company –

27.1.1 may, as contemplated in section 63 of the Companies Act, provide for a Shareholders Meeting to be conducted in whole or in part by Electronic Communication; and

27.1.2 must always make provision for any Shareholder, or proxy for a Shareholder, to participate by Electronic Communication in every Shareholders Meeting that is being held in person,

and any Electronic Communication facility so employed must ordinarily enable all Persons partici-pating in the meeting to at least speak and hear each other at approximately the same time and to participate reasonably effectively in the meeting, with or without an intermediary. The authority of the Company shall be limited and restricted accord-ingly.

27.2 Subject to clause 27.1, the responsibility for, and any expense of gaining access to the medium or means of Electronic Communication employed for any Shareholders Meeting shall be that of the Shareholder or proxy. If a provision has been made for a Shareholders Meeting to be conducted by Electronic Communication or for participation in a Shareholders Meeting by Electronic Communication and the medium or means of such Electronic Communication is available and functioning, then the Shareholders Meeting shall be entitled to proceed even if a Shareholder or proxy is not able to gain access to the medium or means of Electronic Communication so employed.

27.3 The Company shall ensure that any notice of any meeting of Shareholders, at which it will be possible for Shareholders to participate by way of Electronic Communication, shall inform Shareholders of that form of participation and shall provide any necessary infor-mation to enable Shareholders or their proxies to access the available medium or means of Electronic Communication.

27.4 The manner in which a Shareholder who participates by way of Electronic Communication in a Shareholders Meeting may exercise his Voting Rights will be deter-mined by the chairperson of the Board.

27.5 A resolution passed at any meeting that employs Electronic Communication shall, notwithstanding that the Shareholders are not present together in one place at the time of the meeting, be deemed to have been passed at a meeting duly called and constituted on the day on which, and at the time at which, the meeting was so held. For the avoidance of doubt, it is recorded that all of the provisions of clauses 27 to 31 shall apply to these meetings.

27.6 At a Shareholders Meeting a resolution put to the vote shall be decided by a poll. The poll will be conducted in the manner that the chairperson of the Shareholders Meeting may determine.


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28 SHAREHOLDER MEETING QUORUM AND ADJOURNMENT

28.1 The quorum requirements for meetings of Shareholders shall, subject to clause 28.5, be that –

28.1.1 such a meeting shall not begin unless sufficient Shareholders being not less than three in number are Present at such Meeting who are entitled to exercise, in aggregate, at least 25% of all Voting Rights that are entitled to be exercised in respect of at least one matter to be decided at the meeting; and

28.1.2 the consideration of a matter to be decided at the meeting shall not begin or continue unless suffi-cient Persons (being not less than three in number who are entitled) are Present at such Meeting who are entitled to exercise, in aggregate, at least 25% of all Voting Rights that are entitled to be exercised on that matter.

28.2 Notwithstanding the provisions of section 64(4) of the Companies Act and clause 28.1, if, within thirty minutes after the appointed time for a meeting –

28.2.1 the quorum requirements for a meeting to begin have not been satisfied, the meeting shall automati-cally be postponed without motion or vote to the same day (or if that day is not a Business Day, the next Business Day) in the next week;

28.2.2 the quorum requirements for consideration of a particular matter to begin or continue have not been satisfied, then, –

28.2.2.1 if there is other business on the agenda of the meeting, consideration of that matter may be postponed to a later time in the meeting without motion or vote; or

28.2.2.2 if there is no other business on the agenda of

the meeting, the meeting is adjourned, without motion or vote, to the same day (or if that day is not a Business Day, the next Business Day) in the next week.

28.3 The adjourned or postponed meeting may only deal with the matters that were on the agenda of the meeting that was adjourned or postponed.

28.4 The chairperson of the meeting shall be entitled to extend the thirty minute limit referred to in clause 28.2 in the circumstances contemplated in section 64(5) of the Companies Act.

28.5 If, at the time appointed in terms of this clause 28 for an adjourned meeting to resume, or for a postponed

meeting to begin, the quorum requirements have not been satisfied, the Shareholders present in person or by proxy will be deemed to constitute a quorum.

28.6 A Shareholders Meeting, or the consideration of any matter being debated at a Shareholders Meeting, may be adjourned as contemplated in sections 64(10), 64(11) and 64(12) of the Companies Act, it being recorded that the periods of adjournment set out in section 64(12) shall apply without variation.

28.7 The Board may, at any time after notice of a Shareholders Meeting has been given but prior to the commencement of that meeting, postpone that meeting to such later date as may be determined by the Board at the time of determining to postpone the meeting, or may be postponed to an unspecified date to be decided by the Board at a later stage; provided that the Board may not so postpone the date of any such meeting beyond that date (if any) by which that meeting is required by the Companies Act or this MOI to be held.

28.8 If a Shareholders’ Meeting is postponed or adjourned, whether in terms of clause 28.2 or otherwise, the Company must, by announcement on SENS, give notice to all Shareholders who were entitled to receive notice of the meeting of the postponement or adjourn-ment and that notice must contain the time and date of, and the location for, the continuation or resumption of the meeting and any other information which the Board may decide to include therein.

28.9 Even if he is not a Shareholder –

28.9.1 any Director; or

28.9.2 the Company’s attorney (or where the Company’s attorneys are a firm, any partner, director or employee thereof) or other person admitted by the chairperson of the meeting,

may attend and speak at any Shareholders Meeting, but may not vote, unless he is a Shareholder or the proxy or representative of a Shareholder.

29 CHAIRPERSON OF SHAREHOLDERS MEETINGS

29.1 The chairperson of the Board or, failing him, the deputy chairperson of the Board shall preside as the chair-person of each Shareholders Meeting; provided that, if no chairperson or deputy chairperson is present and willing to act, the Shareholders present shall elect one of the Directors or, if no Director is present and willing to act, a Shareholder, to be the chairperson of that Shareholders Meeting.



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29.2 The chairperson of a Shareholders Meeting shall, subject to the Companies Act and this MOI, determine the procedure to be followed at that meeting, but shall not have a second or casting vote at any Shareholders Meeting.

30 SHAREHOLDERS RESOLUTIONS

30.1 At any meeting of Shareholders, any Person who is Present at the Meeting, whether as a Shareholder or as a proxy for a Shareholder or as representative of a Shareholder, shall be entitled –

30.1.1 on a show of hands, to one vote, irrespective of the number of Voting Rights that the Shareholder or proxy or such representative would otherwise be entitled to exercise; and

30.1.2 on a poll, to exercise the number of Voting Rights associated with the Shares held by such Shareholder, which Voting Rights shall be deter-mined in accordance with the preferences, rights, limitations and other terms of the Shares, as set out in this MOI.

30.2 Any holder (“Other Security Holder”) of Securities (“Other Securities”), other than the holders of Ordinary Shares and the holder of the Deferred Shares, shall not be entitled to vote on any resolution at a meeting of Shareholders, except –

30.2.1 during any period provided for in clause 30.3 below, during which any dividend, any part of any dividend on such Other Securities or any redemption payment thereon remain in arrears and unpaid; and/or

30.2.2 in regard to any resolution proposed for the winding-up of the Company or the reduction of its capital;

30.3 The period referred to in clause 30.2.1 shall be the period commencing on the due date of the dividend or redemption payment in question or, where no due date is specified, the expiry of the sixth month after the end of the financial year of the Company in respect of which such dividend accrued or such redemption payment became due.

30.4 If the Other Security Holders are entitled to vote at the meeting of Ordinary Shareholders as contemplated in clause 30.2, then the Other Shareholders shall be enti-tled to 1 (one) vote for every Other Security held; provided that the total Voting Rights of the Other Security Holders in respect of the Other Securities shall not exceed 24.99% of the total votes (including the votes of the Ordinary Shareholders) exercisable at that meeting (and the votes of the Other Security

Holders shall be reduced if necessary to give effect to this proviso with any cumulative fraction of a vote in respect of any Other Securities held by Other Security Holders rounded down to the nearest whole number).

30.5 The holder of the Deferred Shares shall be entitled to vote in accordance with clause 9.2 on any resolution at a Shareholders Meeting.

30.6 In order for –

30.6.1 an Ordinary Resolution to be approved, it must be supported by more than 50% of the Voting Rights exercised on the Ordinary Resolution, as contem-plated in section 65(7); or

30.6.2 a Special Resolution to be approved, it must be supported by at least 75% of the Voting Rights exercised on the Special Resolution, as provided in section 65(9),

at a quorate meeting of Shareholders which is quorate in relation to that resolution; provided that this clause 30.6 shall not detract from the Shareholders’ ability to adopt resolutions by written vote as referred to in clause 31.

30.7 In the event that the JSE Listing Requirements require a resolution by Shareholders adopted by a 75% majority of the votes cast or supported or approved by 75% of the Voting Rights exercised, that resolution may be proposed to Shareholders as a Special Resolution and not as an Ordinary Resolution.

30.8 If any Shareholder abstains from voting in respect of any resolution, that Shareholder will, for the purposes of determining the number of votes exercised in respect of that resolution, be deemed not to have exercised a vote in respect of that resolution.

30.9 Without limiting the power of the Board to authorise or declare Distributions any Shareholders Meeting of the Company shall be entitled to sanction or declare Distributions provided the declaration of such a Distribution has also been approved by the Board in accordance with the Companies Act.

30.10 Except for those matters which require the approval or authority of a Special Resolution in terms of section 65(11), any other section of the Companies Act, any provision of the Regulations, this MOI or the JSE Listings Requirements, no other matters which the Company may undertake require the approval or authority of a Special Resolution of the Shareholders.


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31 WRITTEN RESOLUTIONS BY SHAREHOLDERS

31.1 A resolution that could be voted on at a Shareholders Meeting may instead be adopted by written vote of the Shareholders, as contemplated in section 60 of the Companies Act, if it is supported by Persons entitled to exercise sufficient Voting Rights for it to have been adopted as an Ordinary Resolution or Special Resolution, as the case may be, at a properly consti-tuted Shareholders Meeting.

31.2 Unless the contrary is stated in the resolution, any such resolution shall be deemed to have been adopted on the last day of the twenty Business Day period referred to in section 60 (1)(b) (or, if applicable, any earlier date on which the Company received the written vote of the Shareholder or the proxy of the Shareholder whose vote resulted in the resolution by being supported by sufficient votes for its adoption irrespective of any votes received thereafter).

31.3 The provisions of this clause 31 shall not apply to any Shareholder Resolution which is required for the purposes of the JSE Listings Requirements or any resolution for the election of a director.

PART E – DIRECTORS POWERS

AND PROCEEDINGS

32 AUTHORITY OF THE BOARD OF DIRECTORS

32.1 The business and affairs of the Company shall be managed by or be under the direction of the Board, which shall have the authority to exercise all of the powers and perform all of the functions of the Company, except to the extent that the Companies Act or this MOI provides otherwise.

32.2 The Board may delegate to any one or more Persons any of its powers, authority and functions (including the power to sub-delegate).

32.3 If the Securities of the Company are no longer listed on the JSE and the Company has only one Director in circumstances where the Company is allowed to operate with only one Director-

32.3.1 that Director may exercise any power or perform any function of the Board at any time, without notice or compliance with any other internal formali-ties;

32.3.2 sections 71(3) to (7) of the Companies Act shall not apply to the governance of the Company; and

32.3.3 the provisions of clauses 37 and 38 shall not apply to the governance of the Company.

33 APPOINTMENT OF DIRECTORS

33.1 The Board shall comprise not less than four Directors and not more than twenty.

33.2 Subject to clauses 33.3, 33.4 and 39 all of the Directors and any Alternate Directors shall be elected by an Ordinary Resolution of the Shareholders at a Shareholders Meeting. The provisions of section 68(2) of the Companies Act shall apply to the election of Directors, provided that a Director may not be elected by written vote in accordance with clause 31. There shall be no ex officio directors, as contemplated in section 66(4)(a)(ii) of the Companies Act, and no Person, except the Board in term of clauses 33.3 or 33.4 or 39 hereunder, or Shareholders in terms of clauses 33.2 or 33.3.16 hereunder, shall have the right to effect the direct appointment or removal of one or more Directors as contemplated in section 66(4)(a)(i) of the Companies Act.

33.3 The Board may appoint a person who satisfies the requirements for election as a Director to fill any vacancy and serve as a Director of the Company on a temporary basis until the earlier of the date of the next Annual General Meeting of the Company and the date on which the vacancy has been filled by election in terms of clause 33.2. During that period any person so appointed has all of the powers, functions and duties, and is subject to all of the liabilities, of any other Director of the Company. The Board may also at any time by resolution of the Board terminate the appoint-ment of such a person as Director. The authority of the Board in this regard is not limited or restricted by this MOI.

33.4 Subject to the Companies Act, the Board may appoint a person who satisfies the requirements for election as a Director to serve as an additional Director of the Company until the date of the next Annual General Meeting of the Company. During that period any person so appointed has all of the powers, functions and duties, and is subject to all of the liabilities, of any other Director of the Company. The appointment of that person as a Director will terminate at the next Annual General Meeting of the Company, unless that person is elected as a Director at that Annual General Meeting. The Board may also at any time by resolution of the Board terminate the appointment of such a person as Director. The Board may nominate such a person for election at such next Annual General Meeting.



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33.5 The Directors shall retire from office in accordance with the following provisions –

33.5.1 at each Annual General Meeting Directors comprising one third of the aggregate number of Directors (excluding the Chief Executive Officer and any other Director who is an executive Director) or, if their number is not three or a multiple thereof, then the number nearest to but not less than one third of the aggregate number of Directors (excluding the Chief Executive Officer and any Director who is an executive Director) shall retire from office;

33.5.2 the Directors to retire in terms of clause 33.5.1 shall exclude any Chief Executive Officer and any execu-tive Director and shall be those who have been longest in office since their last election, provided that if more than one of them were elected Directors on the same day, those to retire shall be determined by lot unless those Directors agree otherwise between themselves;

33.5.3 any Director appointed as such by the Directors after the conclusion of the Company’s preceding Annual General Meeting shall, in addition to the Directors retiring in terms of clause 33.5.1, retire from office at the conclusion of the Annual General Meeting held immediately after his appointment unless he is re-elected as a Director at that Annual General Meeting;

33.6 A retiring Director is eligible for re-election and may be re-elected (without having to be nominated for election in terms of clause 33.7 hereunder) and, if re-elected, shall be deemed for all purposes other than clauses 33.5.1 to 33.5.3 not to have vacated his office.

33.7 No person other than a retiring Director shall be eligible for election as a Director at any Annual General Meeting unless –

33.7.1 the Directors nominate or recommend such person for election (which may take place at any time prior to the Annual General Meeting) ; or

33.7.2 that person has been nominated in accordance with clause 33.11.

33.8 A retiring Director shall continue to act as Director throughout the Annual General Meeting at which he retires and his retirement shall become effective only at the end of such meeting.

33.9 For the avoidance of doubt, it is recorded that life directorships and directorships for an indefinite period are not permitted.

33.10 The Board may in the notice of the Annual General Meeting at which the re-election of a retiring Director is proposed, provide the Shareholders with a recom-mendation as to which retiring Directors should be re-elected, taking into account that Director’s past performance and contribution.

33.11 Any Shareholder shall be entitled to nominate any Person for election as a Director at any Shareholders Meeting, provided that such nomination, together with the consent of that person to be elected as a Director, shall be received by the Company no later than four Business Days prior to the date of such Shareholders Meeting.

33.12 The Company may not permit a Person to serve as Director if that Person is ineligible or disqualified in terms of the Companies Act.

33.13 In addition to the grounds of ineligibility and disqualifi-cation of Directors as contained in section 69 of the Companies Act, a Director shall cease to be eligible to continue to act as a Director if:

33.13.1 he absents himself from all meetings of the Board occurring within a period of six consecutive months without the leave of the Board, and the Board resolves that his office shall be vacated; provided that this clause 33.13.1 shall not apply to a Director who is represented by an Alternate Director who does not so absent himself.

33.13.2 if he becomes insolvent, or assigns his estate for the benefit of his creditors, or suspends payment or files a petition for the liquidation of his affairs, or compounds generally with his creditors; or

33.13.3 if he becomes of unsound mind; or

33.13.4 if he is removed in terms of any provision of the Act; or

33.13.5 1 (one) month or, with the permission of the Directors earlier, after he has given notice in writing of his intention to resign; or

33.13.6 if a written notice removing him from office is delivered to the Registered Office of the Company, provided that such written notice is signed by Shareholders who hold not less than 50% (fifty per cent) of the Voting Rights in the Company in the aggregate.

33.14 This MOI does not impose any minimum shareholding or other qualifications to be met by the Directors of the Company in addition to the ineligibility and disqualifica-tion provisions of the Companies Act and clause 33.13.


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33.15 Section 70 of the Companies Act shall apply to any vacancy on the Board which may arise from time to time.

33.16 If the number of Directors falls below the minimum number fixed in accordance with this Memorandum of Incorporation, the remaining Directors must, as soon as possible and in any event not later than three months from the date that the number falls below such minimum, fill the vacancy/ies in accordance with clause 33.3 or convene a Shareholders Meeting for the purpose of filling the vacancies, and the failure by the Company to have the minimum number of Directors during the said three month period does not limit or negate the authority of the Board or invalidate anything done by the Board while their number is below the minimum number fixed in accordance with this Memorandum of Incorporation.

33.17 The Directors in office may act notwithstanding any vacancy in their body, but if their number remains reduced below the minimum number fixed in accord-ance with this Memorandum of Incorporation after the expiry of the three month period contemplated in clause 33.16, they may, for as long as their number is reduced below such minimum, act only for the purpose of filling vacancies in their body in terms of section 68(3) of the Companies Act or of summoning Shareholders Meetings of the Company, but not for any other purpose.

34 ALTERNATE DIRECTORS

34.1 The appointment of an Alternate Director shall terminate –

34.1.1 when the Director to whom he is an Alternate Director ceases to be a Director; or

34.1.2 upon the removal of that Alternate Director from his office as such.

34.2 An Alternate Director shall, subject to this MOI –

34.2.1 in the place and stead of the Director to whom he is an Alternate Director, act as a Director and gener-ally exercise all the rights of a Director, but only –

34.2.1.1 at any meeting of the Board during the absence of that Director from such meeting; or

34.2.1.2 otherwise than at a meeting of the Board, if the Director to whom he is an Alternate Director is, at the time of the Alternate Director’s Signature of any resolution or consent of the kind referred to in clause 38 hereunder, absent from the Republic, or is incapacitated or if the Director to whom he is an Alternate Director has advised the Alternate Director that he is unable to act,

and if more than one Alternate Director to a Director is present at a meeting or able to act in the place of that Director and that Director has not indicated in writing who should act in his place, then those Alternate Directors may agree as to which of them should act in the place of that Director and in the absence of such agree-ment between them, the most senior of them in age shall act in the place of that Director; and

34.2.2 in all respects be subject to the terms and condi-tions existing with reference to the appointment, rights and duties and the holding of office of the Director to whom he is an Alternate Director, but shall not have any claim of any nature whatsoever against the Company for any remuneration of any nature whatsoever.

35 BOARD COMMITTEES

35.1 The Board shall appoint such committees, with such powers and duties, as may be required by the Companies Act, and may in addition –

35.1.1 appoint any number of committees of Directors; and

35.1.2 delegate to any committee any of the authority of the Board (including the authority to sub-delegate);

35.1.3 include any Person who is not a Director of the Company in such committees, and who is not ineli-gible or disqualified to be a director in terms of section 69 of the Companies Act, in such commit-tees, but such Person has no vote on any matter to be decided by the committee,

and, accordingly, the authority of the Board in this regard is not limited or restricted by this MOI.

35.2 The authority and power of any committees estab-lished by the Board is not limited or restricted by this MOI, but may, subject to the requirements of the Companies Act in respect of committees required to be established by the Companies Act, be restricted by the Board when establishing any committee or by subsequent resolution.

36 CHAIRPERSON OF THE BOARD

36.1 The Board shall be entitled, from time to time, to appoint –

36.1.1 a Director to act as the chairperson of the Board; and



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36.1.2 to appoint one or more Directors to act as deputy chairperson/s of the Board,

for such period as may be determined by the Board or for an indefinite period and, even though that period has not yet expired, to remove that chair-person or deputy chairperson from his post, with or without nominating a replacement.

36.2 The chairperson of the Board or, failing him, the deputy chairperson of the Board shall preside as the chair-person of each meeting of the Board; provided that, if no chairperson or deputy chairperson is present and willing to act, the Board present shall elect one of the Directors to be the chairperson of that meeting of the Board.

36.3 The chairperson of a meeting of the Board referred to in clause 36.1 shall, subject to the Companies Act and this MOI and any decision of the Board, determine the procedure to be followed at that meeting.

36.4 Notwithstanding the provisions of section 73(5)(e) of the Companies Act, the chairperson of the Board or any meeting of the Board shall not have a second or casting vote in addition to his deliberative vote on any matter referred to the Board.

37 DIRECTORS MEETINGS

37.1 The Board may –

37.1.1 meet, adjourn and otherwise regulate its meetings as it thinks fit; provided that, in accordance with section 73(2) of the Companies Act, any Director shall be entitled to convene or direct the Person so authorised by the Board to convene a meeting of the Board;

37.1.2 from time to time determine the form and time of the notice that shall be given of its meetings and the means of giving that notice, as contemplated in section 73(4) of the Companies Act; provided that, subject to clause 37.2, no meeting may be convened without notice to all of the Directors. The authority of the Board in this regard is not limited or restricted by this MOI.

37.2 If all of the Directors of the Company –

37.2.1 acknowledge actual receipt of the notice and agree that the meeting should proceed;

37.2.2 are present at a meeting; or

37.2.3 waive notice of the meeting,

the meeting may proceed even if the Company failed to give the required notice of that meeting, or there was a defect in the giving of the notice.

37.3 The Board –

37.3.1 may provide for a meeting of the Board to be conducted in whole or in part by Electronic Communication; and

37.3.2 must always make provision for any Director to participate by Electronic Communication in every Board Meeting that is held in person,

and any Electronic Communication facility so employed must ordinarily enable all Persons partici-pating in that meeting to at least speak and hear each other at approximately the same time, and to participate reasonably effectively in the meeting, with or without an intermediary. The authority of the Board in this regard is not limited or restricted by this MOI.

37.4 As set out in section 73(5)(b) of the Companies Act, the quorum for meetings of the Board shall be a majority in number of the Directors then in office; provided that unless the Board decides otherwise –

37.4.1 if a quorum is not present within thirty minutes after the time appointed for the commencement of any meeting of the Board, that meeting shall auto-matically be postponed without motion or vote to the same day in the following week (or if that day is not a Business Day, the next Business Day), at the same time and place. The postponed meeting may only deal with the matters that were on the agenda of the meeting that was postponed;

37.4.2 if at any such postponed meeting a quorum is not present within thirty minutes after the time appointed for the commencement of that meeting, then, notwithstanding the provisions of section 73(5)(b) of the Companies Act, the Directors present shall be deemed to constitute a quorum and shall be sufficient to vote on any resolution which is tabled at that meeting.

37.5 If a meeting of the Board is postponed or adjourned, whether in terms of clause 37.4 or otherwise, the Company must, within forty-eight hours thereafter, send notice of the postponement or adjournment to all Directors who are entitled to receive notice of the meeting (excluding those of the Directors who have agreed not to receive such notice of postponement or adjournment or agreed that the meeting may proceed without them) and that notice must contain the time and date of, and the location for, the continuation or resump-tion of the meeting and the business to be dealt with


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thereat. If written notice is not so given, the postponed or adjourned meeting may not be held or resumed and the business that would have been dealt with thereat can be dealt with at a new meeting of which fresh notice has been given in accordance with this MOI.

37.6 At any meeting of the Board, –

37.6.1 each Director has one vote on every matter to be decided by the Board; and

37.6.2 a resolution of the Board shall be passed by a majority of the votes cast in the manner set out in clause 37.6.1 at a quorate meeting of the Board and there is no casting vote, so in the case of a tied vote on a resolution, that resolution is not adopted. This clause 37.6.2 shall not detract from the Board’s ability to adopt resolutions as set out in clause 38.

37.7 The Company shall keep minutes of the meetings of the Board, and any of its committees, and include in those minutes –

37.7.1 any declaration given by notice or made by a Director, as required by section 75 of the Companies Act; and

37.7.2 every resolution adopted by the Board.

37.8 Resolutions adopted by the Board –

37.8.1 must be dated and sequentially numbered; and

37.8.2 are effective as of the date of the resolution, unless the resolution states otherwise.

37.9 Any minutes of a meeting, or a resolution, signed by the chairperson of the meeting, or by the chairperson of the next meeting of the Board, is evidence of the proceedings of that meeting, or adoption of that reso-lution, as the case may be.

38 WRITTEN RESOLUTIONS BY DIRECTORS

38.1 A decision that could be voted on at a meeting of the Board of the Company may instead be adopted by written consent of a majority of the Directors, given in person, or by electronic communication, provided that each Director has received notice of the matter to be decided.

38.2 Any such resolution or written consent shall be as valid and effective as if it had been adopted by a duly convened and constituted meeting of Directors and shall be inserted in the Companies minute book for meetings and resolutions of Directors.

38.3 Unless the contrary is stated in the resolution or written consent, any such resolution or written consent shall be deemed to have been passed on the date on which it was signed by or on behalf of the Director (or Alternate Director) who signed it last.

38.4 The resolution or written consent may consist of one or more counterpart documents, each signed by one or more Directors (or their Alternate Directors).

38.5 An Alternate Director shall only be entitled to Sign such a written resolution or consent in the circum-stances contemplated in clause 34.2.1.2 above.

39 EXECUTIVE DIRECTORS The Board may appoint, from time to time, one or

more employees of the Company and/or any Subsidiary of the Company as executive Directors of the Company. Such an executive Director shall be appointed on such terms and conditions as to remu-neration and otherwise as may be determined from time to time by a disinterested quorum of the Board.

40 PAYMENTS TO DIRECTORS

40.1 The Company may pay remuneration to its Directors for their services as such and, without detracting from the foregoing, may pay any additional remuneration as referred to in clause 40.3; provided that all such remu-neration must have been approved by a Special Resolution passed by the Shareholders within the two previous years and the authority of the Board in this regard is not restricted or limited by this MOI. For the avoidance of doubt it is recorded that this clause does not apply to remuneration paid to executive directors for their services as employees of the Company or of any of the Subsidiaries of the Company which is governed by clause 39.

40.2 Each Director shall be paid all travelling, subsistence and other expenses properly incurred by him in the execution of his duties as a Director (including attending meetings of the Board or of the Board committees); provided that such expenses shall first have been authorised or ratified by the majority of disinterested Directors at a meeting of such Directors at which the majority of such Directors were present.

40.3 Any Director who is required to –

40.3.1 devote special attention to the business of the Company; or

40.3.2 travel or reside outside the Republic for the purpose of the Company; or



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40.3.3 otherwise perform services which, in the opinion of the Directors, are outside the scope of the ordinary duties of a Director,

may be paid such extra remuneration or allowances (either in addition to or in substitution for any other remuneration to which he may be entitled to as a Director), as a disinterested quorum of the Board may from time to time determine.

41 BORROWING POWERS The –

41.1 borrowing powers of the Company; and

41.2 powers of the Company to mortgage or encumber its undertaking and property or any part thereof and to issue debentures or debenture stock (whether secured or unsecured), whether outright or as security for any debt, liability or obligation of the Company or of any third party,

shall, except for the restrictions imposed by clause 17, be unlimited and shall be exercised by the Directors.

42 INDEMNIFICATION AND INSURANCE FOR DIRECTORS

42.1 For the purposes of this 42, a Director includes –

42.1.1 a former Director and an Alternate Director;

42.1.2 a Prescribed Officer; and

42.1.3 a Person who is a member of a committee of the Board,

irrespective of whether or not the Person is also a member of the Board.

42.2 The Board may, on behalf of the Company, as contem-plated in sections 78(4), 78(5) and 78(7) of the Companies Act, –

42.2.1 advance expenses to a Director to defend litigation in any proceedings arising out of the Director’s service to the Company; and

42.2.2 directly or indirectly indemnify a Director for expenses contemplated in 42.2.1, irrespective of whether or not it has advanced those expenses, if the proceedings –

42.2.2.1 are abandoned or exculpate that Director; or

42.2.2.2 arise in respect of any liability for which the Company may indemnify the Director, in terms of 42.2.3;

42.2.3 indemnify a Director against any liability arising from the conduct of that Director, other than a liability set out in section 78(6) of the Companies Act;

42.2.4 purchase or pay for insurance to protect –

42.2.4.1 a Director against any liability or expense for which the Company is permitted to indemnify the Director in accordance with 42.2.3;

42.2.4.2 the Company against any contingency, including –

42.2.4.2.1 any expenses –

42.2.4.2.1.1 that the Company is permitted to advance in accordance with 42.2.1; or

42.2.4.2.1.2 for which the Company is permitted to indemnify a Director in accordance with 42.2.2; or

42.2.4.2.2 any liability for which the Company is permitted to indemnify a Director in accord-ance with 42.2.3,

and the authority of the Board in this regard is not limited or restricted by this MOI.

42.3 The Company shall and is hereby obliged to indemnify each Director against (and pay to each Director, on demand by that Director, the amount of) any Loss, liability, damage, cost (including all legal costs reason-ably incurred by the Director in dealing with or defending any claim) or expense (“Loss”) which that Director may suffer as a result of any act or omission of that Director in his capacity as a Director; provided that –

42.3.1 this indemnity shall not extend to any Loss –

42.3.1.1 against which the Company is not permitted to indemnify a Director by section 78(6) of the Companies Act; or

42.3.1.2 arising from any gross negligence or reckless-ness on the part of that Director, or

42.3.1.3 arising from any loss of or damage to reputation;


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42.3.1.4 in the event and to the extent that the Director has recovered or is entitled and able to recover the amount of that Loss in terms of any insur-ance policy (whether taken out or paid for by the Company or otherwise);

and Directors shall not be entitled to recover the Losses referred to in this clause 42.3.1 from the Company. All losses other than those referred to in this 42.3.1 are referred to herein as “Indemnified Losses”;

42.3.2 each Director’s right to be indemnified by the Company in terms of this clause 42 shall exist auto-matically upon his/her becoming a Director and shall endure even after he/she ceases to be a Director until he/she can no longer suffer or incur any Indemnified Loss;

42.3.3 if any claim is made against a Director in respect of any Indemnified Loss, then –

42.3.3.1 the Director shall not admit any liability in respect thereof and the Director shall notify the Company of any such claim within a reasonable time after the Director becomes aware of such claim, in order to enable the Company to contest such claim. Notwithstanding the aforegoing provisions of this 42.3.3, the Company’s liability in terms of this indemnity shall not be affected by any failure of the Director to comply with this 42.3.3, save in the event and to the extent that the Company proves that such failure has resulted in the Indemnified Loss being greater than it would have been had the Director complied with this clause 42.3.3;

42.3.3.2 the Company shall, at its own expense and with the assistance of its own legal advisers, be enti-tled to contest any such claim in the name of the Director until finally determined by the highest court to which appeal may be made (or which may review any decision or judgment made or given in relation thereto) or to settle any such claim and shall be entitled to control the proceedings in regard thereto; provided that –

42.3.3.2.1 the Director shall (at the expense of the Company and, if the Director so requires, with the involvement of the Director’s own legal advisers) render to the Company such assistance as the Company may reasonably require of the Director in order to contest such claim;

42.3.3.2.2 the Company shall regularly, and in any event on demand by the Director, inform the Director fully of the status of the contested claim and furnish the Director with all docu-ments and information relating thereto which may reasonably be requested by the Director;

42.3.3.2.3 the Company shall consult with the Director prior to taking any major steps in relation to or settling such contested claim and, in particular, before making or agreeing to any announcement or other publicity in relation to such claim;

42.3.3.2.4 the Company shall not make any admission of wrongdoing on behalf of the Director without the Directors’ express consent therefor;

42.3.4 to the extent that any Indemnified Loss consists of or arises from a claim or potential claim that the Company might otherwise have had against the Director, then the effect of this indemnity shall be to prevent the Company from making such claim against the Director, who shall be immune to such claim, and such claim shall therefore be deemed not to arise;

42.3.5 if this clause 42 is amended at any time, no such amendment shall detract from the rights of the Directors in terms of this clause in respect of any period prior to the date on which the resolution effecting such amendment is adopted by the Shareholders;

42.3.6 all provisions of this clause 42.3 are, notwith-standing the manner in which they have been grouped together or linked grammatically, severable from each other. Any provision of this clause 42.3 which is or becomes unenforceable, whether due to voidness, invalidity, illegality, unlawfulness or for any other reason whatever, shall, only to the extent that it is so unenforceable, be treated as pro non scripto and the remaining provisions of this agree-ment shall remain of full force and effect;

42.3.7 this indemnity shall not detract from any separate indemnity that the Company may Sign in favour of the Director.



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PART F – GENERAL PROVISIONS

43 FINANCIAL STATEMENTS AND ACCESS TO COMPANY INFORMATION

43.1 The Company shall prepare annual Financial Statements in accordance with the Companies Act and the Regulations and shall have those annual Financial Statements audited.

43.2 A copy of the annual Financial Statements of the Company or a summary thereof shall be distributed to all Shareholders in accordance with clause 46 as soon as reasonably possible after those annual Financial Statements have been approved by the Board and audited, but in any event no later than required by the Companies Act and at least fifteen Business Days before the date of the Annual General Meeting of the Company at which such annual Financial Statements will be considered.

44 FINANCIAL ASSISTANCE

44.1 Financial assistance for subscription for or purchase of Securities

The Board may, as contemplated in section 44 of the Companies Act and subject to the requirements of that section, authorise the Company to provide financial assistance by way of a loan, guarantee, the provision of security or otherwise, to any Person for the purpose of, or in connection with, the subscription for any option, or any Securities, issued or to be issued by the Company or a Related or Inter-related company, or for the purchase of any such Securities. The authority of the Board in this regard is, accordingly, not limited or restricted by this MOI.

44.2 Financial assistance to Directors, Prescribed Officers and Related and Inter-related Companies

The Board may, as contemplated in section 45 of Act and subject to the requirements of that section, authorise the Company to provide direct or indirect financial assistance to a Director or Prescribed Officer of the Company, or of a Related or Inter-related Company or corporation, or to a Related or Inter-related Company, or to a Member of a Related or Inter-related Company, or to a Person Related to any such Company, corporation, Director, Prescribed Officer or Member. The authority of the Board in this regard is, accordingly, not limited or restricted by this MOI.

45 DISTRIBUTIONS

45.1 Subject to the provisions of the Companies Act and this MOI, the Board may declare any Distribution.

45.2 Shareholders may by Ordinary Resolution declare a Distribution provided that such a Distribution is author-ised by a resolution of the Board.

45.3 All Distributions shall comply with the JSE Listings Requirements.

45.4 The Company may transmit or pay any Distribution or amount payable in respect of a Share by –

45.4.1 ordinary post to the postal address of the Shareholder thereof (or, where two or more Persons are registered as the joint Shareholders of any Share, to the address of the joint holder whose name stands first in the Securities Register) recorded in the Securities Register or such other address as the holder thereof may previously have notified to the Company in writing for this purpose; or

45.4.2 electronic bank transfer to such bank account as the holder thereof may have notified to the Company in writing for this purpose,

and the Company shall not be responsible for any loss in transmission.

45.5 Any Distribution or other money payable to Security Holders, –

45.5.1 which is unclaimed, may be retained by the Company and held in trust indefinitely and may while so retained be invested as the Board may deem fit until claimed by the Security Holder concerned or until the Security Holder’s claim there-fore prescribes in terms of clause 45.5.2;

45.5.2 may be claimed for a period of three years from the date on which it accrued to Security Holders, after which period the Security Holders’ claim therefor shall prescribe and the amount of that Distribution shall, unless the Board decides otherwise be forfeited for the benefit of the Company.

45.6 shall not bear interest against the Company,

and the Board shall, for the purpose of facilitating the winding-up or deregistration of the Company before the date of any such prescription, be entitled to delegate to any bank, registered as such in accordance with the laws of the Republic, the liability for payment of any such Distribution or other money, the claim for which has not been prescribed in terms of the aforegoing.


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45.7 Distributions (in the form of a dividend or otherwise) shall be paid to Shareholders registered as at a Record Date subsequent to the date of declaration or, if appli-cable, date of confirmation of the Distribution, which-ever is the later date.

46 NOTICES

46.1 Any notice that is required to be given to Shareholders or Directors –

46.1.1 may be given in any manner prescribed in the Table CR3 to the Regulations and that notice shall be deemed to have been delivered as provided for in the Regulations as a result of the relevant method of delivery; and

46.1.2 shall, simultaneously with being distributed to Shareholders, be announced through SENS and given by the Company to the Issuer Services Division of the JSE in writing in any manner prescribed in Table CR 3 to the Regulations and the manner authorised by the JSE Listings Requirements.

46.2 Each Shareholder and Director shall –

46.2.1 notify the Company in writing of a postal address, which address shall be his registered address for the purposes of receiving written notices from the Company by post; and

46.2.2 be entitled to, notify in writing to the Company an e-mail address and facsimile number, which address shall be his address for the purposes of receiving notices by way of Electronic Communication,

and, if he has not notified to the Company any such postal or email address, then he shall not be enti-tled to receive notices from the Company until such a postal or e-mail address is provided.

46.3 The postal address notified by any Shareholder to the Company in terms of clause 46.2.1 may be a postal address within or outside the Republic.

46.4 A Shareholder or Person entitled to Securities (or his/her executor) shall be bound by every notice in respect of the Securities Delivered to the Person who was, at the date on which that notice was posted, shown in the Securities Register or established to the satisfac-tion of the Directors (as the case may be) as the holder of or Person entitled to the Securities, notwithstanding that the Shareholder or Person entitled to Securities may then have been dead or may subsequently have died or have been or become otherwise incapable of acting in respect of the Securities, and notwith-standing any transfer of the Securities was not regis-tered at that date.

46.5 If joint Shareholders are registered in respect of any Securities or if more than 1 (one) Person is entitled to Securities, all notices shall be given to the Person named first in the Register in respect of the Securities, and notice so Delivered shall be sufficient notice to all the holders of or Persons entitled to or otherwise inter-ested in the Securities.

47 LOSS OF DOCUMENTS The Company shall not be responsible for the loss in

transmission of any cheque, warrant, certificate or (without any limitation eiusdem generis) other docu-ment sent through the post either to the registered address of any Holder or to any other address requested by the Holder.

48 ODD-LOTS In implementing any odd-lot offer made by the

Company in accordance with the Listing Requirements of the JSE Securities Exchange South Africa, the Company shall, in respect of Shareholders holdings less than 100 Ordinary Shares in the issued share capital of the Company (“odd-lots”) and who did not elect to retain their odd-lots or increase their odd-lot holdings, cause the odd-lots to be sold on such terms as the Directors may determine and the Company shall account to the Shareholders concerned for the proceeds attributable to the sales.



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SCHEDULE 1 – SHARE CAPITAL The numbers and classes of Shares which the Company is authorised to issue are set out below.

1. 650 000 000 Ordinary Shares, having a par value of 113,4 cents (one hundred and thirteen comma four cents) each and having the rights and limitations set out in the MOI.

2. 175 0000 6% cumulative preference shares with a par value of R2.00 each and having the preferences, rights, limitations and other terms set out in the MOI;

3. 325 000 5% cumulative preference shares with a par value of R2.00 each and having the preferences, rights, limitations and other terms set out in the MOI;

4. 225 000 second 5% cumulative preference shares with a par value of R2.00 each and having the preferences, rights, limitations and other terms set out in the MOI;

5. 1 000 000 third 5% cumulative preference shares with a par value of R2.00 each and having the preferences, rights, limitations and other terms set out in the MOI; and

6. 360 000 000 non-convertible, non-participating, non-transferable no par value, Deferred Shares and having the rights, limitations and other terms set out in the MOI.


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SHOPRITE HOLDINGS LTD SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012INTEGRATED REPORT 2012SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012

Form of ProxyShoprite Holdings Ltd

Shoprite Holdings Limited (Incorporated in the Republic of South Africa)

(Registration number 1936/007721/06)JSE share code: SHPNSX share code: SRH

LUSE share code: SHOPRITEISIN: ZAE000012084

(“Shoprite Holdings” or “the Company”)

For use only by: – certificated ordinary shareholders – dematerialised ordinary shareholders with “own name” registrations

At the annual general meeting of shareholders of Shoprite Holdings to be held at Cnr William Dabs and Old Paarl Roads, Brackenfell at 09h15 on Monday, 29 October 2012 and any adjournment thereof (“the AGM”).

Dematerialised shareholders holding shares other than with “own name” registration, must inform their CSDP or broker of their intention to attend the AGM and request their CSDP or broker to issue them with the necessary letter of representation to attend the AGM in person.

If you do not wish to attend the AGM, provide your CSDP or broker with your voting instruction in terms of your custody agreement.

I/We . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (name/s in block letters) of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

being a shareholder/shareholders of Shoprite Holdings and holding . . . . . . . . . . . . . . . . . . . . . . . ordinary shares in the Company, hereby appoint

1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .or, failing him/her,

2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .or, failing him/her,

3. the chairman of the Annual General Meeting, as my/our proxy to attend speak and vote on my/our behalf at the AGM of the shareholders of the Company to be held at 09:15 on Monday 29 October 2012 at Brackenfell, and at any adjournment thereof:

Number of shares*In favour of Against Abstain

Ordinary resolution number 1: Approval of Financial StatementsOrdinary resolution number 2: Re-appointment of AuditorsOrdinary resolution number 3: Re-election of Mr J G RademeyerOrdinary resolution number 4: Re-election of Mr E L NelOrdinary resolution number 5: Re-election of Mr A E KarpOrdinary resolution number 6: Re-election of Mr J J FouchéOrdinary resolution number 7: Re-election of Mr J A RockOrdinary resolution number 8: Re-election of Dr A T M MokgokongOrdinary resolution number 9: Appointment of Mr J G Rademeyer as Chairperson and Member of the Shoprite Holdings Audit CommitteeOrdinary resolution number 10: Appointment of Mr JA Louw as Member of the Shoprite Holdings Audit CommitteeOrdinary resolution number 11: Appointment of Mr JF Malherbe as Member of the Shoprite Holdings Audit CommitteeOrdinary resolution number 12: General Authority over Unissued Ordinary SharesOrdinary resolution number 13: General Authority to Issue Shares for CashOrdinary resolution number 14: General Authority to Directors and/or SecretaryOrdinary resolution number 15: Approval of Executive Share PlanResolution number 16: Non-binding Advisory Vote: Endorsement of Remuneration PolicySpecial resolution number 1: Remuneration Payable to Non-executive DirectorsSpecial resolution number 2: Financial Assistance to Subsidiaries, Related and Inter-related EntitiesSpecial resolution number 3: Financial Assistance for Subscription of SecuritiesSpecial resolution number 4: General Approval to Repurchase SharesSpecial resolution number 5: Approval of New Memorandum of Incorporation (MOI)

*Please indicate with an “X” in the appropriate spaces above how you wish your votes to be cast.

Unless otherwise instructed, my/our proxy may vote as he/she thinks fit.

Signed at (place) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . on (date) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2012

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shareholder’s signature

Please read the notes and instructions on following page.


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NOTES TO FORM OF PROXY 1. This form of proxy must only be used by certificated ordinary share-

holders or dematerialised ordinary shareholders who hold dematerial-ised ordinary shares with “own name” registration.

2. Dematerialised ordinary shareholders are reminded that the onus is on them to communicate with their CSDP or broker.

3. Each shareholder is entitled to appoint one or more proxies (who need not be a shareholder(s) of the Company) to attend, speak and vote in place of that shareholder at the Annual General Meeting.

4. A shareholder may insert the name of a proxy or the names of two alternative proxies of the shareholder’s choice in the space provided, with or without deleting “the chairman of the Annual General Meeting”. The person whose name stands first on the form of proxy and who is present at the Annual General Meeting will be entitled to act as proxy to the exclusion of those whose names follow.

5. A shareholder’s instructions to the proxy must be indicated by the inser-tion of the relevant number of votes exercisable by that shareholder in the appropriate box(es) provided or to mark the relevant box(es). If a box is marked without inserting a number of votes it is deemed that the proxy may exercise all the votes of the shareholder. Failure to comply with the above will be deemed to authorise the chairman of the Annual General Meeting to vote in favour of the ordinary and special resolutions at the Annual General Meeting, or any other proxy to vote or to abstain from voting at the Annual General Meeting as he/she deems fit, in respect of the shareholder’s total holding.

6. Summary of rights established by section 58 of the Companies Act, 71 of 2008

6.1 At any time, a shareholder of a company may appoint any individual, including an individual who is not a shareholder of that company, as a proxy to:

• participate in, and speak and vote at, a shareholders meeting on behalf of the shareholder; or

• give or withhold written consent on behalf of the shareholder to a decision contemplated in section 60.

6.2 A proxy appointment: • must be in writing, dated and signed by the shareholder; and • remains valid for- – one year after the date on which it was signed; or – any longer or shorter period expressly set out in the appointment,

unless it is revoked in a manner contemplated in subsection (4) (c), or expires earlier as contemplated in subsection (8) (d).

6.3 Except to the extent that the Memorandum of Incorporation of a company provides otherwise:

• a shareholder of that company may appoint two or more persons concurrently as proxies, and may appoint more than one proxy to exercise voting rights attached to different securities held by the shareholder;

• a proxy may delegate the proxy’s authority to act on behalf of the shareholder to another person, subject to any restriction set out in the instrument appointing the proxy; and

• a copy of the instrument appointing a proxy must be delivered to the company, or to any other person on behalf of the company, before the proxy exercises any rights of the shareholder at a shareholders meeting.

6.4 Irrespective of the form of instrument used to appoint a proxy: • the appointment is suspended at any time and to the extent that the

shareholder chooses to act directly and in person in the exercise of any rights as a shareholder;

• the appointment is revocable unless the proxy appointment expressly states otherwise; and

• if the appointment is revocable, a shareholder may revoke the proxy appointment by:

– cancelling it in writing, or making a later inconsistent appoint-ment of a proxy; and

– delivering a copy of the revocation instrument to the proxy, and to the company.

6.5 The revocation of a proxy appointment constitutes a complete and final cancellation of the proxy’s authority to act on behalf of the shareholder as of the later of:

• the date stated in the revocation instrument, if any; or • the date on which the revocation instrument was delivered as

required in subsection (4) (c) (ii).

6.6 If the instrument appointing a proxy or proxies has been delivered to a company, as long as that appointment remains in effect, any notice that is required by this Act or the company’s Memorandum of Incorporation to be delivered by the company to the shareholder must be delivered by the company to:

• the shareholder; or • the proxy or proxies, if the shareholder has- – directed the company to do so, in writing; and – paid any reasonable fee charged by the company for doing so.

6.7 A proxy is entitled to exercise, or abstain from exercising, any voting right of the shareholder without direction, except to the extent that the Memorandum of Incorporation, or the instrument appointing the proxy, provides otherwise.

6.8 If a company issues an invitation to shareholders to appoint one or more persons named by the company as a proxy, or supplies a form of instrument for appointing a proxy:

• the invitation must be sent to every shareholder who is entitled to notice of the meeting at which the proxy is intended to be exercised;

• the invitation, or form of instrument supplied by the company for the purpose of appointing a proxy, must:

– bear a reasonably prominent summary of the rights established by this section;

– contain adequate blank space, immediately preceding the name or names of any person or persons named in it, to enable a shareholder to write in the name and, if so desired, an alterna-tive name of a proxy chosen by the shareholder; and

– provide adequate space for the shareholder to indicate whether the appointed proxy is to vote in favour of or against any resolu-tion or resolutions to be put at the meeting, or is to abstain from voting;

• the company must not require that the proxy appointment be made irrevocable; and

• the proxy appointment remains valid only until the end of the meeting at which it was intended to be used, subject to subsection (5).

Subsection (8) (b) and (d) do not apply if the Company merely supplies a generally available standard form of proxy appointment on request by a shareholder.

7. Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity must be attached to this form of proxy, unless previously recorded by the Company’s transfer office or waived by the chairman of the Annual General Meeting.

8. The chairman of the Annual General Meeting may reject or accept any form of proxy which is completed and/or received other than in accord-ance with these instructions, provided that he is satisfied as to the manner in which a shareholder wishes to vote.

9. Any alterations or corrections to this form of proxy must be initialled by the signatory(ies).

10. The completion and lodging of this form of proxy will not preclude the relevant shareholder from attending the Annual General Meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof, should such shareholder wish to do so.

11. A minor must be assisted by his/her parent guardian unless the relevant documents establishing his/her legal capacity are produced or have been registered by the Company.

12. Where there are joint holders of any shares: – any one holder may sign this form of proxy; – the vote(s) of the senior shareholders (for that purpose seniority will

be determined by the order in which the names of shareholders appear in the Company’s register of shareholders) who tenders a vote (whether in person or by proxy) will be accepted to the exclusion of the vote(s) of the other joint shareholder(s).

13. The proxy may not delegate any of the rights or powers granted to it.

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AdministrationShoprite Holdings Ltd

Shareholders’ Diary

REGISTRATION NUMBER1936/007721/06

REGISTERED OFFICE Physical address: Cnr William Dabs and Old Paarl Roads Brackenfell, 7560, South AfricaPostal address: PO Box 215, Brackenfell, 7561, South AfricaTelephone: +27 (0) 21 980 4000Facsimile: +27 (0) 21 980 4050Website: www.shopriteholdings.co.za

COMPANY SECRETARYMr P G du PreezPhysical address: Cnr William Dabs and Old Paarl Roads Brackenfell, 7560, South AfricaPostal address: PO Box 215, Brackenfell, 7561, South AfricaTelephone: +27 (0) 21 980 4284Facsimile: +27 (0) 21 980 4468E-mail: [email protected]

TRANSFER SECRETARIES

South AfricaComputershare Investor Services (Pty) LtdPO Box 61051, Marshalltown, 2107, South AfricaTelephone: +27 (0) 11 370 5000Facsimile: +27 (0) 11 688 5248Website: www.computershare.com

NamibiaTransfer Secretaries (Pty) LtdPO Box 2401, Windhoek, NamibiaTelephone: +264 (0) 61 227 647Facsimile: +264 (0) 61 248 531

ZambiaShareTrack Zambia PO Box 37283, Lusaka, ZambiaTelephone: +260 (211) 236 783Facsimile: +260 (211) 236 785

SPONSORS

South AfricaNedbank CapitalPO Box 1144, Johannesburg, 2000, South AfricaTelephone: +27 (0)11 295 8525Facsimile: +27 (0)11 294 8525Website: www.nedbank.co.za

NamibiaOld Mutual Investment Group (Namibia) (Pty) LtdPO Box 25549, Windhoek, NamibiaTelephone: +264 (0) 61 299 3264Facsimile: +264 (0) 61 299 3528

ZambiaShareTrack Zambia PO Box 37283, Lusaka, ZambiaTelephone: +260 (211) 236 783Facsimile: +260 (211) 236 785

AUDITORSPricewaterhouseCoopers IncorporatedPO Box 2799, Cape Town, 8000, South AfricaTelephone: +27 (0) 21 529 2000Facsimile: +27 (0) 21 529 3300

BANKERSABSA Bank LtdCitibank N.A.First National Bank LtdHSBC LtdInvestec Bank LtdNedbank LtdOld Mutual Specialised Finance (Pty) LtdThe Standard Bank of South Africa LtdStandard Chartered Bank PLC

June

Financial year-end

August

Reviewed results

September

Publishing of integrated report

Payment of preference dividend

Payment of final ordinary dividend

October

Annual General Meeting

December

End of financial half-year

February

Interim results

March

Payment of preference dividend

Payment of interim ordinary dividend