AFRICA’S
LARGEST
FOOD
RETAILER
I N T E G R AT E D R E P O R T 2 0 1 2
SOUTH AFRICA
29
ANGOLA
BOTSWANA
1
DRC
3
GHANA
LESOTHO
MADAGASCAR
5
MALAWI
3
MAURITIUS
13
MOZAMBIQUE
NAMIBIA
NIGERIA
TANZANIA
3
SWAZILAND
UGANDA
ZAMBIA
ZIMBABWE
1142
54
22
16
15
11
7
5
3
2
2
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 first-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.
Shoprite Holdings Ltd comprises the following brands:
better and better
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
1
Table of Contents
Business Overview
Annual Financial Statements
Organisational Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Value-added Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Chairman’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Chief Executive’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Five-year Financial Review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Financial Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Non-Financial Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Governance
Corporate Governance Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Audit and Risk Committee Report . . . . . . . . . . . . . . . . . . . . . . . . . .
Nominations Committee Report . . . . . . . . . . . . . . . . . . . . . . . . . . .
Social and Ethics Committee Report . . . . . . . . . . . . . . . . . . . . . . . .
Remuneration Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24
28
30
30
31
Shareholder Information
Shareholder Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notice to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Memorandum of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . .
Form of Proxy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholder’s Diary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
107
108
118
144
146
146
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.
2
Set out below is an organigram of Shoprite Holdings Ltd and its main subsidiaries.
SUBSIDIARIES OF
SHOPRITE HOLDINGS LTD
100%
100%
100%
100%
Shoprite Checkers (Pty) Ltd
Shoprite International Ltd
Shoprite Insurance
Company Ltd
Shoprite Investments Ltd
Has operations in:
South Africa
Namibia
Swaziland
Lesotho
Mauritius
Has operations in:
Zambia
Mozambique
Botswana
Madagascar
Uganda
Tanzania
Angola
Computicket (Pty) Ltd
Ghana
Has operations in:
Zimbabwe
South Africa
Nigeria
Namibia
Malawi
Democratic Republic of Congo
100%
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
Distribution of Operations
Nigeria
Ghana
Uganda
Tanzania
DRC
Total
1 334
corporate
stores.
Malawi
Mozambique
Zambia
Angola
Mauritius
Zimbabwe
Namibia
3
Madagascar
Botswana
Swaziland
Lesotho
1
6
Ghana
2
1
4
4
Madagascar
7
Malawi
2
Mauritius
3
5
Namibia
14
Nigeria
5
Swaziland
6
Tanzania
3
Uganda
3
Zambia
19
Zimbabwe
1
13
76
27
26
20
56
111
OK Enjoy
Friendly
Stores
Sentra
Megasave
OK Value
OK Minimark
OK Grocer
120
18
11
94
68
44
88
4
1
2
7
1
1
10
11
1
Lesotho
Mozambique
46
Checkers
MediRite
3
16
Shoprite
MediRite
4
OK Foods
OK Furniture
Usave
216
9
Checkers
LiquorShop
1
215
Shoprite
LiquorShop
5
DRC
28
Friendly
Liquor
Botswana
162
Hungry
Lion
5
House
& Home
339
Angola
OK Power
Express
South Africa
Checkers
Hyper
Shoprite
Checkers
South Africa
5
1
2
3
4
Outside SA
85
5
Total
424
167
28
3
3
17
10
3
3
1
1
1
8
2
7
2
9
2
4
2
1
2
44
32
1
3
30
2
9
2
4
11
12
259
248
17
49
150
15
85
29
30
31
68
111
18
11
2
1
4
96
69
48
88
ECONOMIC OVERVIEW
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
19,625
1,853
23 699
24,304
1,941
21,851
16,166
1,289
22,017
Population (millions)
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
2,138
160,342
50,591
1,176
42,176
35,201
13,585
12,575
Population (millions)
Source: International Monetary Fund, World Economic Outlook Database, April 2012
The Group
Brand
Summary
Target market
LSM 4-7
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.
Store numbers
RSA: 339
Non RSA: 85
Total: 424
LSM 1-5
RSA: 215
Non RSA: 41
4
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
better and better
LSM 8-10
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
LSM 8-10
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 accessories, garden and pool care, outdoor gear, home improvement, homeware, baby products, toys and stationery. Checkers Hyper stores operate
in South Africa only and are found in areas with high population densities.
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.
RSA: 216
Non RSA: 32
Total: 248
LSM 5-7
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
RSA: 28
Non RSA: 0
Total: 28
LSM 5-7
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.
RSA: 162
Non RSA: 5
RSA: 16
Non RSA: 1
Total: 17
Brand
Summary
Target market
LSM 7-10
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.
Now, with over 130 pharmacies, MediRite is on its way to becoming the
most convenient pharmacy for millions of South African grocery shoppers. 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: 132
Non RSA: 4
5
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.
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.
RSA: 46
Non RSA: 3
Total: 49
Same as
Shoprite and
Checkers
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.
Store numbers
RSA: 162
Non RSA: 3
Total: 165
Targets
pharmacies,
vets, clinics,
hospitals and
dispensing
doctors
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: 358
Non RSA: 40
Total: 398
Financial Highlights
Shoprite Holdings Ltd and its Subsidiaries
June
2012
R’000
%
increase
Sale of merchandise
Trading profit
Earnings before interest, income tax, depreciation and amortisation (EBITDA)
Profit before income tax
Headline earnings
PERFORMANCE MEASURES
Headline earnings per share (cents)
Dividends per share declared (cents)
Dividend cover (times)
Trading margin (%)
Return on average shareholders’ equity (%)
82
4
5
4
3
730
665
746
481
114
19.6
19.8
587
134
352
707
212
72
3
4
3
2
297
986
898
876
569
607.0
303.0
2.0
5.64
26.0
777
697
255
368
006
507.6
253.0
2.0
5.51
39.3
DEFINITIONS
Return on average shareholders’ equity
Headline 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.
500
40 000
30 000
400
82 730
72 297
67 402
59 319
33 511
600
50 000
29 704
700
38 950
60 000
26 641
917
70 000
R Million
766
20 000
300
200
10 000
100
2012
2011
2010
2009
2008
2006
2004
2012
2011
2010
2009
2008
2007
2006
2005
2004
2007
0
0
2005
800
704
900
846
1 100
1 000
80 000
984
1 200
90 000
47 652
1 079
1 300
1 166
1 400
1 334
SALES
1 246
NUMBER OF CORPORATE STORES
SHOPRITE HOLDINGS LTD SHARE PRICE
16 000
14 000
12 000
Cents
10 000
8 000
6 000
4 000
2 000
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
Jun 12
Dec 11
Jun 11
Dec 10
Jun 10
Dec 09
Jun 09
Dec 08
Jun 08
Dec 07
Jun 07
Dec 06
Jun 06
Dec 05
Jun 05
Dec 04
Jun 04
Dec 03
Jun 03
Dec 02
0
Jun 02
6
14.4
17.0
17.3
15.6
21.2
June
2011
R’000
Value-added Statement
Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012
June
2012
R’000
Sale of merchandise
Investment income
Cost of goods and services
%
82 730 587
224 425
(70 135 100)
VALUE ADDED
June
2011
R’000
%
72 297 777
122 277
(61 341 791)
12 819 912
100.0
11 078 263
100.0
EMPLOYEES
Salaries, wages and service benefits
6 930 791
54.1
6 089 252
55.0
PROVIDERS OF CAPITAL
Finance costs to providers of funds
Dividends to providers of share capital
1 645 161
223 563
1 421 598
12.8
1.7
11.1
1 315 375
125 964
1 189 411
11.8
1.1
10.7
INCOME TAX
Income tax on profits made
1 438 889
11.2
1 346 826
12.2
REINVESTED
Reinvested in the Group to finance future expansion and growth
Depreciation and amortisation
Retained earnings
2 805 071
1 200 106
1 604 965
21.9
9.4
12.5
2 326 811
1 006 442
1 320 369
21.0
9.1
11.9
12 819 912
100.0
11 078 263
100.0
Employed as follows:
EMPLOYMENT OF VALUE ADDED
2012
2011
21.9%
Reinvested
21.0%
Reinvested
11.2%
Income tax
12.2%
Income tax
Employees
55.0%
Employees
11.8%
Providers
of capital
54.1%
12.8%
Providers
of capital
7
Board of Directors
Shoprite Holdings Ltd
EXECUTIVE DIRECTORS
8
Dr JW Basson (66)
Mr BR Weyers (60)
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.
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.
Mr CG Goosen (59)
EXECUTIVE ALTERNATE
DIRECTORS
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 JAL Basson (36)
B Acc
General 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 AE Karp (53)
Mr PC Engelbrecht (43)
General Manager: Furniture Division
– Joined OK Bazaars during 1990.
– Appointed to the board of Shoprite
Holdings in 2005.
– Director of Shoprite Checkers (Pty) Ltd
and various other group subsidiaries.
BCompt Hons CA(SA)
Chief Operating Officer
– Appointed as Shoprite Holdings alternate
director in 2005.
– Director of Shoprite Checkers (Pty) Ltd
and various other group subsidiaries.
Mr EL Nel (63)
NON-EXECUTIVE DIRECTOR
BCom CTA CA(SA)
General Manager: Retail Investments
– Joined the Shoprite group in 1997.
– Appointed to the board of Shoprite
Holdings in 2005.
– Director of Shoprite Checkers (Pty) Ltd
and various other group subsidiaries.
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
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.
INDEPENDENT NON-EXECUTIVE
DIRECTORS
Mr JG Rademeyer (63)
Mr JF Malherbe (83)
BCom CTA CA(SA)
– Appointed as director of Shoprite
Holdings in 2002.
– Lead Independent director and Chairperson
of the Audit and Risk Committee.
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.
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.
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
10
CH Wiese
SOUTH AFRICA AND THE GLOBAL
ECONOMIC ENVIRONMENT
Since our previous report, there has not been any material improvement 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 materials. 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 AFRICA
Despite 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
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
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.
SUSTAINABILITY
The 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 responsible, 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 management 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 affordable prices.
The board is deeply concerned about the high level of unemployment 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
transformation 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
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.
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.
BOARD OF DIRECTORS
ACKNOWLEDGMENT
The 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.
We 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 everchanging 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.
CAPITAL RAISING
In March this year, Shoprite Holdings undertook a successful capital
raising of about R8 billion by way of a concurrent share and convertible 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
C H Wiese
Chairman
20 August 2012
11
Chief Executive’s Report
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 BUSINESS
12
JW Basson
BUSINESS ENVIRONMENT
Competition 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 benefited from imports at reduced prices from South Africa due to a
weaker rand and saw fewer pressures on their growing middle class.
OPERATIONAL REVIEW
The 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.
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
All 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 considerable 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 supermarket for the 5th consecutive time and No 1 in all five grocery categories including overall customer experience, respectively. After yearend 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
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.
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 SERVICES
To 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
13
Chief Executive’s Report (continued)
14
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 supermarket 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.
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 SERVICES
In 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.
NON-RSA EXPANSION
FURNITURE DIVISION
The 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
The 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 investment 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.
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 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.
OK FRANCHISE
The Franchise Division uses the Group’s very substantial procurement 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.
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.
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
J W Basson
Chief executive
20 August 2012
15
Five-year Financial Review
Shoprite Holdings Ltd and its Subsidiaries
STATEMENT OF COMPREHENSIVE INCOME
Sale of merchandise
16
June
2012
R’000
June
2011
R’000
June
2010
R’000
June
2009
R’000
June
2008
R’000
82 730 587
72 297 777
67 402 440
59 318 559
47 651 548
Trading profit
Exchange rate (losses)/gains
Items of a capital nature
4 665 134
(8 343)
(93 687)
3 986 697
( 446)
(78 533)
3 490 441
(77 824)
(25 580)
2 940 914
3 005
(31 227)
2 296 550
33 187
6 756
Operating profit
Interest received
Finance costs
4 563 104
142 166
(223 563)
3 907 718
94 614
(125 964)
3 387 037
105 741
(93 690)
2 912 692
191 566
(86 142)
2 336 493
183 915
(59 149)
Profit before income tax
Income tax
4 481 707
(1 438 889)
3 876 368
(1 346 826)
3 399 088
(1 111 792)
3 018 116
(999 478)
2 461 259
(875 570)
3 042 818
2 529 542
2 287 296
2 018 638
1 585 689
STATEMENT OF FINANCIAL POSITION
ASSETS
Property, plant and equipment
Other investments
Deferred income tax assets
Intangible assets
Current assets
Fixed escalation operating lease accrual
9 668 559
107 592
413 645
894 296
19 810 853
10 573
8 168 749
63 964
326 457
719 105
11 416 236
9 246
6 577 677
65 942
288 677
611 037
10 442 805
5 559
5 359 587
50 440
277 951
354 434
10 690 843
6 233
4 502 928
41 604
248 614
319 825
9 733 319
7 993
TOTAL ASSETS
30 905 518
20 703 757
17 991 697
16 739 488
14 854 283
EQUITY AND LIABILITIES
Capital and reserves
Non-controlling interest
12 745 042
62 675
7 084 700
58 750
5 904 832
67 184
4 960 000
69 295
4 758 656
60 182
Permanent capital
Interest-bearing borrowings
Other liabilities
12 807 717
4 035 434
14 062 367
7 143 450
49 755
13 510 552
5 972 016
40 448
11 979 233
5 029 295
30 727
11 679 466
4 818 838
22 899
10 012 546
TOTAL EQUITY AND LIABILITIES
30 905 518
20 703 757
17 991 697
16 739 488
14 854 283
2 381.6
590.0
607.0
607.0
303.0
2.0
5.64
31.2
8.4
0.315
70.60
1 399.8
495.9
507.6
507.6
253.0
2.0
5.51
39.2
8.8
0.007
156.24
1 166.7
450.1
455.4
451.6
227.0
2.0
5.18
41.7
8.9
0.007
N/A
990.2
396.5
401.1
390.8
200.0
2.0
4.96
41.1
8.9
0.006
N/A
938.0
309.5
309.9
298.6
155.0
2.0
4.82
37.0
9.1
0.005
N/A
Profit for the year
STATISTICS PER ORDINARY SHARE
AND FINANCIAL RATIOS
Net asset value per share
Earnings per share
Headline earnings per share
Diluted headline earnings per share
Dividend per share
Dividend cover (based on headline earnings)
Trading margin
Headline earnings on average total permanent capital
Inventory turn
Interest-bearing borrowings: Total equity
Net finance costs cover
(cents)
(cents)
(cents)
(cents)
(cents)
(times)
(%)
(%)
(times)
(:1)
(times)
DEFINITIONS
Trading 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.
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
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
Sales
2010/2011
R’000
Sales
2011/2012
R’000
Sales
growth
%
Supermarkets RSA
Supermarkets non-RSA
Furniture
Other Segments
57 213 793
7 316 698
3 059 648
4 707 638
64 584 215
9 174 147
3 400 185
5 572 040
12.9
25.4
11.1
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 difficult 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 profit
Gross 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 income
Other 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.
Expenses
Cost 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 profit
The trading margin increased from 5,51% to 5,64% due to the higher
turnover, the increase in the gross margin and the careful management of expenses.
17
Financial Report (continued)
Foreign exchange differences
As 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 translation reserve (FCTR). In essence, most foreign exchange differences
in the income statement are due to US dollar denominated shortterm 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.
18
The table below gives the approximate rand cost of a unit of the
following major currencies at year-end:
USA dollar
Euro
Zambian kwacha
Angolan kwanza
Mozambican metical
Nigerian naira
2009
2010
2011
2012
8.02
11.2511
0.0015
0.1033
0.2976
0.0541
7.745
9.674
0.0015
0.0834
0.2245
0.0518
6.7697
9.8251
0.0014
0.0727
0.2394
0.0444
8.2974
10.4428
0.0016
0.0868
0.2932
0.0508
Net interest paid
The 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 expense
The 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 share
Headline 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 ASSETS
During 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
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
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 merchandising, 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 amortised 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-INVESTMENTS
During the year the Group and other shareholders bought outright the
international treasury systems of RMB Global Solutions.
LOANS AND RECEIVABLES
During 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 ASSETS
Deferred 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 escalation operating lease accrual.
Current assets
INVENTORIES
Inventories 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.
TRADE AND OTHER RECEIVABLES
Trade 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 OVERDRAFTS
Net 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 capital
On 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 BONDS
On 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
PROVISIONS
Adequate 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 sales
The 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 insurance
The 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
20
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 implementation 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 representative 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 government 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 destination for consumers by selling food and general merchandise
at low prices, from conveniently located outlets in a comfortable 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.
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
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 available at all stores.
Outside South Africa, customer complaints are handled
at store or divisional office level. In South Africa, the tollfree 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 REPRESENTATION
Total permanent (SA only)
Percentage of black
representation
2012
2011
2010
89 341
83 867
76 318
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 excellent 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 recruitment 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 management. 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
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 benefits
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 remuneration 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 preventative initiatives are a priority. The Group employs a comprehensive 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 interventions that benefit employees and their families. An actuarial 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 independent 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 international 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
22
RSA STAFF REPRESENTATION
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
4.94%
2.95%
19.92%
72.18%
African
Coloured
Indian
White & foreign
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 empowSHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
Shoprite understands that its business and the communities 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 notfor-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 consumption. Despite these efforts, the average Eskom price
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 benchmarks for the various types of stores it operates. A dedicated 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 largescale 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 largescale water-saving initiatives. One of these is the installation 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 stabilising 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 supermarkets 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.
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 AWARDS
Jeff Art Signs
Tilespace
PERISHABLES AND SERVICE DEPARTMENTS
Willowton Group
CONFECTIONERY AND BEVERAGES
Simba
TOILETRIES
Unilever
HOUSEBRAND / PRIVATE LABELS
Heartland Foods
UPCOMING SUPPLIERS
Eagles Valley Poultry
MEAT MARKETS
Meat Traders
FRUIT & VEGETABLES
Harvest Fresh
GENERAL MERCHANDISE
Control Chemicals (Pty) Ltd
AMBIENT GROCERIES
Rhodes Food Group
FURNITURE
Restonic
CONTRACTORS / SERVICE PROVIDERS
Salient
23
Corporate Governance Report
24
The board of directors (“the Board”) of Shoprite Holdings Limited
(“Shoprite Holdings or “Group”) promotes and supports high standards of corporate governance, integrity and ethics that will contribute
towards the on-going sustainability of the Group, facilitate long termterm shareholder value and enhance the benefits that all other stakeholders derive from the Group’s continued success.
In an environment of increasing regulation, it is the Group’s objective 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 management 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 indicators 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 APPLIED
Companies 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 selfevaluations 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
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
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
satisfactorily 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 encouraged and respected.
THE BOARD OF DIRECTORS
The 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 Committees
Board committees assist the Board in executing its duties, powers
and authorities. The Board delegates authority to the board committees. 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 Responsibilities
The 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;
– 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 corporate 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 Board
The Board convened six (6) times during the 2012 financial year. Four
(4) of these meetings were scheduled whilst two (2) special meetings 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.
NON–EXECUTIVE DIRECTORS
CH WIESE
JJ FOUCHE
EC KIESWETTER
JA LOUW
JF MALHERBE
JG RADEMEYER
JA ROCK
EXECUTIVE DIRECTORS
JW BASSON
CG GOOSEN
B HARISUNKER
AE KARP
EL NEL
BR WEYERS
21/05/12
11/04/12 (special)
20/02/12
12/12/11 (special)
07/11/11
22/08/11
Attendance at Board Meetings
—
—
—
—
—
—
—
Chairman and Chief Executive Officer
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 guidance 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 departments within the Group.
Lead Independent Director
Mr 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 responsibilities of achieving the Group’s objectives and to create value to shareholders over the long term.
Board Appointment
The Board regularly reviews it’s composition as well as the composition 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 knowledge, 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 updates
A comprehensive induction programme has been developed for new
directors to ensure that they are briefed and have the required understanding 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 directors. Directors are invited to briefing sessions to keep them abreast
of pending new legislation.
Conflicts of interests and directors personal
financial interests
The Group’s policy in this regard is applicable to all directors and
employees. Directors are required to declare their personal financial
25
Corporate Governance Report (continued)
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 development 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.
26
COMPANY SECRETARIAL FUNCTION
The 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 governance.
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 governance 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 PERSONNEL
The 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 pricesensitive. 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.
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
ACCOUNTABILITY
Audit and Risk Committee
A 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 Auditors
At 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 Ethics
The Group is committed to achieving high standards of ethical behaviour. 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 behaviour. 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, competitors 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 Compliance
The 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
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 compliance 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 promulgated.
The Group had no instances of major non-compliance with legislation
during the period under review.
INVESTOR AND STAKEHOLDER RELATIONS
The Group’s relevance to the markets and societies in which it operates, depends on meaningful engagement with all stakeholders. Its
stakeholder management approach involves the optimal application
of resources to build and maintain good relationships with stakeholders. 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 information 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 CONDUCT
The 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 SUPPORT
Whilst the Group supports the democracy in South Africa, it does not
make financial donations to individual political parties.
27
Audit and Risk Committee Report
INTRODUCTION
AUDIT COMMITTEE MEMBERS,
MEETING ATTENDANCE AND ASSESSMENT
The 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.
and its members were assessed and found to be satisfactory. In addition, members were assessed in terms of the independence requirements of King III and the Companies Act. All members of the
Committee continue to meet the independence requirements.
ROLES AND RESPONSIBILITIES
During 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 independence
The 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 compliance 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 practices
During the reporting period, the Committee reviewed the interim and
annual financial reports of the Group and recommended the acceptance and approval thereof to the Board.
17/02/2012
18/05/2012
NON-EXECUTIVE DIRECTORS
JG RADEMEYER
JF MALHERBE
JA LOUW
04/11/2011
26/08/2011
(Special)
The attendance of the Committee members is recorded below:
15/08/2011
28
We 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 responsibilities as required by the charter, the Companies Act and the material requirements of King III.
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.
x
Internal controls
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 evaluation
As part of the annual evaluation, the performance of the Committee
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
The Group’s systems of internal control are designed and implemented 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
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 attention 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 concern
The 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 risk
Whilst 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 mitigate 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 audit
The 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 functions 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 assurance 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, regulatory and other responsibilities as stipulated in their charter during the
period under review.
Governance of information technology
The 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 FUNCTION
The 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 Rademeyer
Chairman
20 August 2012
29
Nominations Committee Report
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.
30
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
CH WIESE
JA LOUW
EC KIESWETTER
(appointed 21 May 2012)
20 FEB 2012
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
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.
Social and Ethics Committee Report
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.
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
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
JA LOUW
BR WEYERS
M BOSMAN
JAL BASSON
C BURGER
2 MAY 2012
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 incentive 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 recommendations 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 Wiese
Chairman 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 consistency 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
31
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 meetings 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 directors 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 responsibilities;
– Reviewing and recommending to the Board the relevant criteria
necessary to measure the performance of executives in determining 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;
Remuneration Report (continued)
– Reviewing the outcomes of the implementation of the remuneration 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
financial year
32
During 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
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
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 market
To 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 benchmarked at the upper quartile values of the South African remuneration 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 remuneration
The 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.
TABLE 2: SUMMARY OF REMUNERATION COMPONENTS
Component
Fixed/
variable
Objective
Link to business strategy
Policy
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 No changes proposed.
median, except if there is
a need to retain key and
critical skills.
Benefits
Fixed
Providing employees with
contractually agreed basic
benefits such as retirement fund benefits
(provident fund), medical
aid, risk benefits and life
and disability insurance
per the Group’s human
resource policy.
Retirement benefits
encourage a culture of
saving by employees,
whereas the other
benefits aim to cater for
employees’ physical wellbeing and life insurance
and disability needs.
Benefits recognise
employees’ need for a
Employees represented
holistic approach to guarby collective bargaining
anteed package and are
units receive similar
part of the overall
benefits i.e. medical aid,
employee value proposilife and disability insurance tion offered by Shoprite.
and a retirement fund
contributions.
The company contributes
between 7.5% – 15%
towards retirement
benefits as per the rules
of its retirement funds.
Proposed changes for
2013 financial year
No changes to standard
employment benefits.
Risk and insurance
benefits are company
contributions forming part
of guaranteed package.
Separate expatriate
benefits may apply to
international assignments.
Voluntary HIV/Aids
counselling and testing
programme.
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
Remuneration Report (continued)
Component
Fixed/
variable
Objective
Link to business strategy
Policy
Proposed changes for
2013 financial year
Long-term
incentive
(Cash settled
share appreciation rights plan)
Variable
Provides value to executives 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 appreciation 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 anniversary 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 Aims to create sharegenerally do not particiholder value creation and
pate in the share apprecia- increase operating profit.
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.
Eligible employees receive No changes.
a notional capital amount
and based on the growth
in the Company’s operating 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).
Deferred Bonus
plan
Requires employees to
defer a portion of their
bonuses for up to 5 years
and therefore aid retention.
The criteria are the same No changes.
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 disability) the deferred bonus
will be forfeited.
34
Variable
Aimed at retention
of key talent.
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.
INCREASES
Annual 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
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
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 PLAN
The 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 incentive 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
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 beginning of the financial year. This ensures that each participant is measured 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
Financial Director
Executives
Target as % of
guaranteed
remuneration
58%
56%
Stretch as % of
guaranteed
remuneration
86%
85%
Long term incentive plans
Long-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 PLAN
In 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 shareholder 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 instruments 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
Remuneration Report (continued)
DIAGRAM 1: SUMMARY OF PROPOSED EXECUTIVE SHARE PLAN
Executive
Share Plan
2012
36
Retention Shares
Forfeitable, restricted
shares which is subject to
continued employment for
vesting. Aimed at retaining
key talent in exceptional
circumstances.
Co-investment Shares
Forfeitable, restricted
shares allocated based on
the value of the investment
made by the participant in
the plan. Specific vesting
conditions.
Dilution
The 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 EMPLOYMENT
Executive 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.
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
Performance Shares
Forfeitable, restricted
shares allocated which is
subject to performance
conditions and continued
employment for vesting.
NON-EXECUTIVE DIRECTORS’ REMUNERATION
Independent non-executive directors
Independent, 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 benchmarks 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.
The proposed fee structure for the period 1 November 2011 –
30 October 2012 is as follows:
TABLE 4: PROPOSED NON-EXECUTIVE DIRECTORS’ FEES
BOARD
Chairman of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . R273 000
Lead Independent Director . . . . . . . . . . . . . . . . . . . . . . . . . R142 000
Non-Executive Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . R129 000
AUDIT COMMITTEE
Chairman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . R193 000
Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . R96 000
REMUNERATION COMMITTEE
Chairman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . R50 000
Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . R30 000
NOMINATION COMMITTEE
Chairman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . R50 000
Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . R30 000
SOCIAL AND ETHICS COMMITTEE
Chairman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 directors
Shoprite 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 directors
The 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:
BOARD
Chairman of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . R218 000
Lead Independent Director . . . . . . . . . . . . . . . . . . . . . . . . . R113 000
Non-Executive Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . R103 000
AUDIT COMMITTEE
Chairman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . R154 000
Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . R77 000
REMUNERATION PAID TO EXECUTIVE AND
ALTERNATE DIRECTORS
The 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
Annual Financial Statements
Shoprite Holdings Ltd and its Subsidiaries as at June 2012
38
Contents
Statement 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).
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
Statement of Responsibility by the Board of Directors
Shoprite Holdings Limited and its subsidiaries for the year ended June 2012
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.
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
Chairman
J W Basson
Chief Executive Officer
39
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 Preez
Company Secretary
20 August 2012
Currency of Annual Financial Statements
40
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:
USA dollar
Pound sterling
Euro
Zambia kwacha
Mozambique metical
Botswana pula
2012
2011
8.297
12.953
10.443
0.002
0.293
1.078
6.770
10.873
9.825
0.002
0.239
1.035
Uganda shilling
Malawi kwacha
Mauritian rupee
Angolan kwanza
Indian rupee
Ghanian cedi
2012
2011
0.003
0.031
0.266
0.087
0.147
4.311
0.003
0.045
0.242
0.073
0.152
4.455
Madagascan ariary
Nigerian naira
Tanzania shilling
Congolese frank
2012
2011
0.004
0.051
0.005
0.009
0.004
0.045
0.004
0.008
Independent Auditor’s Report to the Shareholders
of Shoprite Holdings Limited
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
STATEMENTS
The 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 RESPONSIBILITY
Our 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
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the
entity’s preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as
well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion.
OPINION
In our opinion, 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 Wentzel
Registered Auditor
Cape Town
20 August 2012
Directors’ Report
Shoprite Holdings Ltd and its Subsidiaries
NATURE OF BUSINESS
Shoprite 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 procurement 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 pharmacies 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 properties 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 convertible 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 REVIEW
The 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 dividends
Details are reflected in note 28 to the Group’s annual financial
statements.
41
Directors’ Report (continued)
Shoprite Holdings Ltd and its Subsidiaries
Ordinary dividends
An 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 CAPITAL
42
The 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 CONCERN
The 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 foreseeable 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.
BORROWINGS
Shoprite 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 RESOLUTIONS
At the annual general meeting of Shoprite Holdings held on
31 October 2011, shareholders approved the following special
resolutions:
– Special 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.
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
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 SECRETARY
The 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’ AND ALTERNATE DIRECTORS’
INTERESTS IN ORDINARY SHARES
Direct
Beneficial
CH Wiese
JW Basson
JJ Fouche
CG Goosen
B Harisunker
AE Karp
EC Kieswetter
JA Louw
JF Malherbe
EL Nel
JG Rademeyer
JA Rock
BR Weyers
JAL Basson
M Bosman
PC Engelbrecht
JD Wiese
Indirect
Beneficial
Total
2012
BOARD COMMITTEES
The reports of the various board committees are included in the
corporate governance report from pages 24 to 27.
Total
2011
0 95 649 698 95 649 698 89 917 398
0 10 071 652 10 071 652 10 110 084
472 171
0
472 171
472 171
3 000 1 203 202 1 206 202 1 206 202
406 189
0
406 189
400 189
147 269
0
147 269
147 269
1 000
0
1 000
0
0
50 000
50 000
150 000
0
72 453
72 453
72 453
0
148 727
148 727
148 727
0
10 000
10 000
10 000
0
0
0
0
404 594
0
404 594
404 594
3 070
86 131
89 201
80 600
125 000
0
125 000
110 000
128 000
146 622
274 622
224 055
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:
PC Engelbrecht
Direct
Beneficial
Indirect
Beneficial
Total
2 000
53 378
55 378
DIRECTOR’S INTEREST IN NON-CONVERTIBLE,
NON-PARTICIPATING, NO PAR VALUE DEFERRED
SHARES
CH Wiese
Total
2012
Total
2011
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 GOVERNANCE
Statements 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.
AUDITORS
PricewaterhouseCoopers Incorporated will continue in office in
accordance with Section 90(1) of the Companies Act.
EVENTS AFTER THE REPORTING DATE
Other 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 COMPANY
Shoprite Holdings has no holding company. An analysis of the main
shareholders appears on page 107 of this report.
LITIGATION STATEMENT
The 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.
43
Statement of Financial Position
Shoprite Holdings Ltd and its Subsidiaries as at June 2012
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
Notes
June
2012
R’000
June
2011
R’000
9 668 559
—
103 886
—
3 706
413 645
894 296
8 168 749
—
—
59 656
4 308
326 457
719 105
ASSETS
44
—
1 654 503
—
—
—
237
—
—
2 305 512
—
—
—
363
—
NON-CURRENT ASSETS
Property, plant and equipment
Interests in subsidiaries
Investment in associate
Available-for-sale investments
Loans and receivables
Deferred income tax assets
Intangible assets
3
5
6
7
8
9
10
Fixed escalation operating lease accrual
11
—
—
1 654 740
2 305 875
—
—
—
10 774
—
—
15 327
—
74 237
—
603 555
3 387 853
614 329
3 477 417
—
—
Assets held for sale
2 269 069
5 783 292
TOTAL ASSETS
EQUITY
616 583
293 072
—
1 347 574
2 257 229
—
2 257 229
647 314
3 672 069
—
1 425 607
5 744 990
—
5 744 990
2 450
—
—
—
—
2 450
2 450
—
—
—
—
2 450
1 126
—
—
4 247
—
—
4 016
9 389
11 840
2 269 069
24 975
—
—
7 028
—
—
3 849
35 852
38 302
5 783 292
CURRENT ASSETS
Inventories
Trade and other receivables
Current income tax assets
Interests in subsidiaries
Loans and receivables
12
13
5
8
Cash and cash equivalents
CAPITAL AND RESERVES ATTRIBUTABLE TO
EQUITY HOLDERS
Share capital
Share premium
Treasury shares
Reserves
4
15
15
16
NON-CONTROLLING INTEREST
TOTAL EQUITY
LIABILITIES
NON-CURRENT LIABILITIES
Borrowings
Deferred income tax liabilities
Provisions
Fixed escalation operating lease accrual
Trade and other payables
CURRENT LIABILITIES
Trade and other payables
Borrowings
Derivative financial instruments
Current income tax liabilities
Provisions
Bank overdrafts
Shareholders for dividends
TOTAL LIABILITIES
TOTAL EQUITY AND LIABILITIES
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
17
9
18
19
20
20
17
14
18
10 573
9 246
11 094 665
9 287 521
8 680 109
2 702 031
81 190
—
16 197
7 055 867
2 255 390
38 543
—
46 226
7 939 333
1 961 551
19 418 860
11 357 577
391 993
58 659
30 905 518
20 703 757
647 314
3 672 069
(320 146)
8 745 805
12 745 042
62 675
12 807 717
616 583
293 072
(337 406)
6 512 451
7 084 700
58 750
7 143 450
4 006
152
338
520
21
5 039
698
085
791
206
878
658
26
25
339
455
263
1 109
177
377
200
787
455
996
12 711 704
28 736
231
151 025
138 634
22 858
4 955
13 058 143
18 097 801
30 905 518
9 807
23
3
464
104
2 042
4
12 450
13 560
20 703
743
578
606
316
117
100
851
311
307
757
Statement of Comprehensive Income
Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012
C O M PA N Y
GROUP
June
2011
R’000
June
2012
R’000
—
—
—
—
—
1 307 681
—
—
—
(3 508)
—
1 655 057
—
—
—
(8 937)
GROSS PROFIT
Other operating income
Depreciation and amortisation
Operating leases
Employee benefits
Other expenses
1 304 173
(1)
—
1 646 120
—
—
TRADING PROFIT
Exchange rate losses
Items of a capital nature
1 304 172
33 574
(198)
1 646 120
64 438
(126)
OPERATING PROFIT
Interest received
Finance costs
1 337 548
(131 060)
1 710 432
(114 556)
PROFIT BEFORE INCOME TAX
Income tax expense
1 206 488
1 595 876
PROFIT FOR THE YEAR
—
—
—
—
1 206 488
1 595 876
1 206 488
—
1 595 876
—
1 206 488
1 595 876
1 206 488
—
1 595 876
—
1 206 488
1 595 876
June
2012
R’000
June
2011
R’000
82 730 587
(65 752 642)
72 297 777
(57 624 408)
16 977 945
2 325 312
(1 090 295)
(1 940 221)
(6 530 468)
(5 077 139)
14 673 369
1 855 841
(933 592)
(1 700 468)
(5 762 045)
(4 146 408)
4 665 134
(8 343)
(93 687)
3 986 697
(446)
(78 533)
28
4 563 104
142 166
(223 563)
3 907 718
94 614
(125 964)
29
4 481 707
(1 438 889)
3 876 368
(1 346 826)
3 042 818
2 529 542
(51 219)
288 699
1 950
(142 451)
3 280 298
2 389 041
3 026 563
16 255
2 509 780
19 762
3 042 818
2 529 542
3 264 043
16 255
2 369 279
19 762
3 280 298
2 389 041
590.0
495.9
Notes
Sale of merchandise
Cost of sales
OTHER COMPREHENSIVE INCOME, NET OF INCOME TAX
Fair value movements on available-for-sale investments
Foreign currency translation differences
21
22
23
24
27
25
16
16
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
PROFIT ATTRIBUTABLE TO:
Owners of the parent
Non-controlling interest
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of the parent
Non-controlling interest
Basic and diluted earnings per share (cents)
30
45
Statement of Changes in Equity
Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012
Attributable to equity holders
Total
equity
Noncontrolling
interest
Total
Share
capital
Share
premium
Treasury
shares
Other
reserves
Retained
earnings
BALANCE 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
Profit for the year
Recognised in equity
Net fair value movement on
available-for-sale investments
Income tax effect of net fair value
movement on available-for-sale
investments
Foreign currency translation
differences
2 389 041
2 529 542
19 762
19 762
2 369 279
2 509 780
—
—
—
(140 501)
2 509 780
2 509 780
R’000
Notes
GROUP
46
16
2 267
2 267
2 267
16
(317)
(317)
(317)
16
(142 451)
(142 451)
(142 451)
16
—
(1 217 607)
—
(1 189 411)
4 509
(28 196)
(4 509)
(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
Profit for the year
Recognised in equity
Net fair value movement on
available-for-sale investments
Income tax effect of net fair value
movement on available-for-sale
investments
Foreign currency translation
differences
3 280 298
3 042 818
16 255
16 255
3 264 043
3 026 563
—
—
—
237 480
3 026 563
3 026 563
Transfer to contingency reserve
Dividends distributed to shareholders
Equity component of convertible
bonds issued during the year
Proceeds from ordinary shares issued
Treasury shares' loss
Transfer from contingency reserve
Dividends distributed to shareholders
16
(59 557)
(59 557)
(59 557)
16
8 338
8 338
8 338
16
288 699
288 699
288 699
16
15
333 880
3 409 728
74 289
—
(1 433 928)
(12 330)
333 880
3 409 728
74 289
—
(1 421 598)
12 807 717
62 675
12 745 042
647 314
3 672 069
616 583
293 072
16
BALANCE AT JUNE 2012
333 880
30 731
3 378 997
17 260
(33 536)
57 029
33 536
(1 421 598)
(320 146)
542 752
8 203 053
—
2 152
1 416 111
COMPANY
BALANCE AT JUNE 2010
2 327 918
2 327 918
Total comprehensive income
Profit for the year
1 206 488
1 206 488
Dividends distributed to shareholders
(1 277 177)
(1 277 177)
BALANCE AT JUNE 2011
2 257 229
2 257 229
Total comprehensive income
Profit for the year
1 595 876
1 595 876
3 409 728
(1 517 843)
3 409 728
(1 517 843)
30 731
3 378 997
5 744 990
5 744 990
647 314
3 672 069
Proceeds from ordinary shares issued
Dividends distributed to shareholders
BALANCE AT JUNE 2012
15
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
1 206 488
(1 277 177)
616 583
293 072
—
2 152
1 345 422
1 595 876
(1 517 843)
—
2 152
1 423 455
Statement of Cash Flows
Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012
C O M PA N Y
GROUP
June
2011
R’000
June
2012
R’000
June
2012
R’000
June
2011
R’000
(64 496)
89 042
CASH FLOWS FROM/(UTILISED BY) OPERATING ACTIVITIES
3 334 804
1 543 646
1 304 172
(1 306 771)
1
—
1 646 120
(1 652 535)
—
—
Operating profit
Less: investment income
Non-cash items
Payments for cash settlement of share appreciation rights
Payments for settlement of post-retirement medical
benefits liability
Changes in working capital
4 563 104
(82 259)
1 714 522
(287 540)
3 907 718
(27 663)
1 459 480
(218 037)
—
(285)
—
8 521
36.2
32.2
(1 779)
649 234
(2 630)
(1 324 359)
(2 883)
33 574
(198)
1 306 771
(1 276 499)
(125 261)
2 106
77 728
(126)
1 639 245
(1 518 010)
(111 901)
Cash generated from/(utilised by) operations
Interest received
Interest paid
Dividends received
Dividends paid
Income tax paid
32.3
32.4
6 555 282
159 024
(125 745)
65 401
(1 433 824)
(1 885 334)
3 794 509
110 519
(125 964)
11 758
(1 216 084)
(1 031 092)
65 535
—
(714 472)
3 409 728
CASH FLOWS (UTILISED BY)/FROM INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
32.5
32.6
(3 110 892)
7 767 685
(2 937 011)
9 329
1 039
602 517
2 784 298
603 555
NET MOVEMENT IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at the beginning of the year
Effect of exchange rate movements on cash and cash
equivalents
7 991 597
(80 549)
(1 384 036)
1 344 587
Notes
32.1
(1)
—
5 427
(41 100)
603 555
3 387 853
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR
7 916 475
(80 549)
603 555
—
3 387 853
—
Consisting of:
Cash and cash equivalents
Bank overdrafts
7 939 333
(22 858)
1 961 551
(2 042 100)
603 555
3 387 853
7 916 475
(80 549)
47
Notes to the Annual Financial Statements
Shoprite 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.
b)
1.1 Basis of preparation
48
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, distribution 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 assumptions 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
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
c)
d)
e)
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.
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.
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.
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.
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 management 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
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 comprehensive 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 headline 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 impairments; 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 exercisable 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 acquisition 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 policies of subsidiaries have been changed to ensure consistency with the policies adopted by the Group. All intergroup
transactions, balances and unrealised gains and losses on
transactions between Group companies have been eliminated.
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 comprehensive 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 significant influence ceases. When the Group’s share of losses in
an associate equals or exceeds its investment in the associate, 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 subsidiaries and joint ventures are measured using the currency of
the primary economic environment in which the entity operates (the functional currency). The Group’s consolidated
financial statements are presented in South African rand,
49
Notes to the Annual Financial Statements (continued)
Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012
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 functional currency using the average exchange rates for the
relevant month. These average exchange rates approximate 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.
50
1.3.3 FOREIGN OPERATIONS
The results and the financial position of all Group subsidiaries, 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 position presented are translated at the closing rate at the
date of that statement of financial position;
ii) Income and expenses for each statement of comprehensive 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 separate component of equity in the foreign currency translation 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 differences 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 comprehensive 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 acquisition of a foreign subsidiary are treated as assets and liabili-
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
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 available 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
such designations when circumstances indicate that reclassification is permitted. The Group assesses at each statement 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 instrument 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 instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated 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 amortised 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 statement 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 statement 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 securities are impaired. If any such evidence exists for availablefor-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 comprehensive 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 intention 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 applicable to the relevant loans and receivables. The carrying
51
Notes to the Annual Financial Statements (continued)
Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012
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 transaction costs.
1.11 Deferred income tax
52
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 combination 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 financial 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 temporary differences can be utilised. Management applies judgment 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 differences arising on the consolidation of investments in subsidiaries 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 worldwide 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 acquisition. Goodwill denominated in a foreign currency is translated at closing rates. Goodwill is tested for impairment
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
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 allocation 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 goodwill 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 amortisation 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 estimate.
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
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 merchandise is the net of: invoice price of merchandise; insurance;
freight; customs duties; an appropriate allocation of distribution 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 realisable 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 amortised cost using the effective interest method, less allowance made for impairment of these receivables. An allowance 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 indicators 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 comprehensive 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 receivables. 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 premises 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 properties 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 unamortised portion of the fixed escalation lease accrual is recognised in the statement of comprehensive income in the
period in which termination takes place.
1.17 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 translated 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 transactions costs incurred. Borrowings are subsequently stated
at amortised cost and any difference between the proceeds
53
Notes to the Annual Financial Statements (continued)
Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012
(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.
54
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 determined 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
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
actuaries are charged against the statement of comprehensive 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 amortisation 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. Intragroup 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-administered 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 contributions 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-
tions: health-care cost inflation; discount rates; salary inflation 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 sharebased 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 performance; changes in regional economies; and operational and
financing cash flows.
Where the carrying value of an asset exceeds its estimated 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 geographical operational and financial outlooks. For the purpose of
impairment testing the assets are allocated to cash-generating 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 comprehensive 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 instalment 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 agreements, 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.
55
Notes to the Annual Financial Statements (continued)
Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012
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.
56
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 capitalised 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 comprehensive 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
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
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 beneficiary 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.
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 estimated 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 provision 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 determined that significant reinsurance protection is not
required.
g) Liabilities and related assets under liability adequacy 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 claimshandling and administration expenses, as well as investment 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 provision).
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 performance 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 environments 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 furniture, 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.
57
Notes to the Annual Financial Statements (continued)
Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012
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:
58
Number
Amendments to IFRS 1
Title
First-time Adoption on Government Loans
Effective for year ending
June 2014
Amendments to IFRS 7
Disclosures – Offsetting Financial Assets and Financial Liabilities
June 2014
IFRS 9
Financial Instruments
June 2016
IFRS 10
Consolidated Financial Statements
June 2014
IFRS 11
Joint Arrangements
June 2014
IFRS 12
Disclosure of Interests in Other Entities
June 2014
IFRS 13
Fair Value Measurement
June 2014
Amendments to IAS 1
Presentation of Financial Statements
June 2013
Amendments to IAS 12
Deferred tax: Recovery of Underlying Assets
June 2013
Amendments to IAS 19
Employee Benefits
June 2014
Amendments to IAS 27
Separate Financial Statements
June 2014
Amendments to IAS 28
Investments in Associates and Joint Ventures
June 2014
Amendments to IAS 32
Offsetting Financial Assets and Financial Liabilities
June 2015
IFRIC 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 unconsolidated 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 associates, 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
Amendments to IFRS 1
Title
Amendments to IFRS 1: Severe Hyperinflation and Removal of Fixed Dates for First-time
Adopters
Amendments to IFRS 7
Improved disclosures for transfer transactions of financial assets issued
Amendments to IAS 24
Related party disclosures
Various
Improvements to IFRSs 2010
Amendments to IFRIC 14
Pre-payments of a Minimum Funding Requirement
AC 504
IAS 19 (AC116) – The limit on a defined benefit asset, Minimum funding requirements and
their interaction in the South African pension fund environment
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
2 OPERATING SEGMENT INFORMATION
2.1 Analysis per reportable segment
June 2012
Supermarkets Supermarkets
RSA
Non-RSA
R’000
R’000
Sale of merchandise
External
Inter-segment
Trading profit
Depreciation and amortisation
Total assets
Furniture
R’000
Other
operating
segments
R’000
Consolidated
R’000
64 584 215
1 749 501
9 174 147
4 949
3 400 185
—
5 572 040
—
82 730 587
1 754 450
66 333 716
9 179 096
3 400 185
5 572 040
84 485 037
3 887 334
466 277
175 492
136 031
4 665 134
992 998
144 550
44 152
18 406
1 200 106
22 312 020
4 527 078
2 386 342
1 680 078
30 905 518
Furniture
R’000
Other
operating
segments
R’000
Consolidated
R’000
June 2011
Supermarkets Supermarkets
RSA
Non-RSA
R’000
R’000
Sale of merchandise
External
Inter-segment
Trading profit
Depreciation and amortisation
Total assets
57 213 793
1 512 692
7 316 698
—
3 059 648
—
4 707 638
—
72 297 777
1 512 692
58 726 485
7 316 698
3 059 648
4 707 638
73 810 469
3 302 262
415 524
131 484
137 427
3 986 697
831 309
111 274
41 025
22 834
1 006 442
14 600 472
2 996 263
2 035 346
1 071 676
20 703 757
South Africa
R’000
June 2012
Outside
South Africa
R’000
Consolidated
R’000
72 492 035
10 238 552
82 730 587
8 473 336
2 100 092
10 573 428
South Africa
R’000
June 2011
Outside
South Africa
R’000
Consolidated
R’000
64 068 311
8 229 466
72 297 777
7 569 684
1 327 416
8 897 100
2.2 Geographical analysis
Sale of merchandise – external
Non-current assets*
Sale of merchandise – external
Non-current assets*
*Non-current assets consist of property, plant and equipment, intangible assets and fixed escalation operating lease accruals.
59
Notes to the Annual Financial Statements (continued)
Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012
C O M PA N Y
GROUP
June
2011
R’000
June
2012
R’000
—
—
June
2012
R’000
June
2011
R’000
1 065 048
827 698
Cost
Accumulated depreciation and impairment
2 902 799
(205 577)
2 540 157
(154 792)
Carrying value
2 697 222
2 385 365
9 023 982
(3 901 887)
7 780 263
(3 419 949)
5 122 095
4 360 314
1 081 961
(297 767)
828 105
(232 733)
3 PROPERTY, PLANT AND EQUIPMENT
3.1 Land at cost
3.2 Buildings
—
—
60
3.3 Machinery, equipment and vehicles*
Cost
Accumulated depreciation and impairment
—
—
Carrying value
*Includes aircraft with a carrying value of R92 million (2011: R78 million).
3.4 Improvements to leasehold property
Cost
Accumulated depreciation and impairment
—
—
Carrying value
—
—
Total property, plant and equipment
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
784 194
595 372
9 668 559
8 168 749
3. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Reconciliation of carrying values
Land
Buildings
Machinery,
equipment and
vehicles
Carrying value at June 2010
676 620
1 955 731
3 639 626
305 700
6 577 677
Additions
Reclassification
Reclassification to software
Transfer to assets held for sale (note 4)
Transfer from assets held for sale (note 4)
Acquisition of subsidiaries and operations
(note 32.5.1)
Disposal
Proceeds on disposal
Profit/(loss) on disposal and scrapping
Depreciation
Reversal of impairment (note 3.5)
Impairment (note 3.5)
Exchange rate differences
203 103
(55 571)
—
—
—
722 982
(140 913)
—
(55 808)
—
1 705 964
(12)
(145)
—
—
221 224
163 585
—
—
6 989
2 853 273
(32 911)
(145)
(55 808)
6 989
11 000
—
(27)
27
(281)
—
—
(7 173)
—
(6 331)
(90)
(6 241)
(27 653)
4 984
(16 745)
(50 882)
1 228
(67 837)
(33 371)
(34 466)
(854 417)
—
(44 590)
(19 503)
—
(27 784)
(29 994)
2 210
(66 169)
—
—
(8 173)
12 228
(101 952)
(63 482)
(38 470)
(948 520)
4 984
(61 335)
(85 731)
Carrying value at June 2011
827 698
2 385 365
4 360 314
595 372
8 168 749
Additions
Reclassification
Reclassification to software
Transfer to assets held for sale (note 4)
Acquisition of subsidiaries and operations
(note 32.5.1)
Disposal
Proceeds on disposal
Profit/(loss) on disposal and scrapping
Depreciation
Reversal of impairment (note 3.5)
Impairment (note 3.5)
Exchange rate differences
294 974
—
—
(63 189)
626 131
(52 515)
—
(254 345)
1 773 152
186
(17 153)
—
218 090
52 329
—
(15 800)
2 912 347
—
(17 153)
(333 334)
—
(12 099)
(12 945)
846
(281)
—
—
17 945
—
(37 129)
(37 855)
726
(36 506)
—
(20 487)
86 708
19 788
(56 539)
(34 341)
(22 198)
(1 021 822)
16 720
(13 443)
60 892
—
(57 047)
(64 173)
7 126
(74 298)
—
—
65 548
19 788
(162 814)
(149 314)
(13 500)
(1 132 907)
16 720
(33 930)
231 093
1 065 048
2 697 222
5 122 095
784 194
9 668 559
R’000
Carrying value at June 2012
Leasehold
improvements
Total
61
Notes to the Annual Financial Statements (continued)
Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
R’000
391 993
58 659
Carrying value at the beginning of the year
Transfer from property, plant and equipment (note 3)
Transfer to property, plant and equipment (note 3)
Proceeds on disposal
Profit on disposal
Exchange rate differences
58 659
333 334
—
—
—
—
26 372
55 808
(6 989)
(28 360)
12 868
(1 040)
Carrying value at the end of the year
391 993
58 659
3 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
3.5 Impairment/reversal of impairment of property,
plant and equipment
The 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.
62
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
It is the Group’s policy to invest in fixed property only when
appropriate rental space is not available. Certain land and buildings 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 value
—
—
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
C O M PA N Y
GROUP
June
2011
R’000
June
2012
R’000
211 490
1 443 013
10 774
862 499
1 443 013
74 237
1 665 277
2 379 749
1 654 503
10 774
2 305 512
74 237
1 665 277
2 379 749
June
2012
R’000
June
2011
R’000
—
—
5 INTERESTS IN SUBSIDIARIES
Investments in ordinary shares
Investments in preference shares
Amounts owing by subsidiaries
Analysis of total interests in subsidiaries
Non-current
Current
63
—
—
103 886
—
Reconciliation of carrying value
Carrying value at the beginning of the year
Investment in ordinary shares acquired
—
103 886
—
—
Carrying value at the end of the year
103 886
—
230 326
(18 557)
1 183 768
8 084
—
—
—
—
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 ASSOCIATE
—
—
Investment in Winhold Ltd
Investment in ordinary shares
The Group acquired a 49% interest in Winhold Ltd during the
year under review. Winhold Ltd is an unlisted retailing supermarket group in Mauritius, denominated in Mauritian rupees.
—
—
Summary of financial information of Winhold Ltd
Assets
Liabilities
Turnover
Profit for the year
Notes to the Annual Financial Statements (continued)
Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
R’000
—
59 656
—
18 924
979
32 640
16 886
1 008
19 903
50 534
3 706
16 197
4 308
46 226
19 903
50 534
—
32 640
7 AVAILABLE-FOR-SALE INVESTMENTS
—
—
Unlisted share investments
Nil (2011: 100) “S” class ordinary shares in RMB Global
Solutions (Pty) Ltd
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.
64
8 LOANS AND RECEIVABLES
Preference share investment (note 8.1)
Amounts owing by franchisees (note 8.2)
Other
—
—
Analysis of total loans and receivables
Non-current
Current
—
—
8.1 Preference share investment
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.
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
R’000
30 024
(11 100)
28 584
(11 698)
18 924
16 886
8 LOANS AND RECEIVABLES (CONTINUED)
8.2 Amounts owing by franchisees
Gross amount
Accumulated impairment
—
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 impairment
Balance at July
Allowance for impairment for the year
Unused amounts reversed
—
—
Balance at June
The allowance for impairment relates to the following amounts
owing by franchisees:
Receivable in the next year
Receivable between 1 and 3 years
Receivable between 3 and 5 years
—
—
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.
65
11 698
642
(1 240)
6 561
5 137
—
11 100
11 698
6 870
6 982
911
4 788
8 549
2 639
14 763
15 976
Notes to the Annual Financial Statements (continued)
Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012
C O M PA N Y
GROUP
June
2011
R’000
June
2012
R’000
237
—
363
—
Deferred income tax assets (note 9.1)
Deferred income tax liabilities (note 9.2)
237
363
Net deferred income tax assets
200
37
37
—
—
—
—
—
—
—
—
—
—
237
126
126
—
—
—
—
—
—
—
—
—
—
The movement in the net deferred income tax assets is as follows:
Carrying value at the beginning of the year
Charge to profit for the year
Provisions and accruals
Allowances on property, plant and equipment
Fixed escalation operating lease accrual
Allowances on intangible assets
Share-based payment accrual
Unrealised exchange rate differences
Tax losses
Tax rate change
Charged to other comprehensive income
Charged to equity
Exchange rate differences
237
363
Carrying value at the end of the year
237
—
—
—
—
—
—
—
363
—
—
—
—
—
—
—
237
363
—
—
June
2012
R’000
June
2011
R’000
413 645
(152 085)
326 457
(25 377)
261 560
301 080
301 080
90 135
84 681
(26 421)
8 325
1 909
11 581
2 976
7 088
(4)
8 338
(136 249)
(1 744)
269 724
34 678
70 643
(67 634)
5 611
2 136
18 747
11 717
(6 443)
(99)
(317)
—
(3 005)
261 560
301 080
355 701
(280 146)
143 990
(23 413)
170 247
16 298
—
30 968
316 404
(300 964)
144 251
(25 947)
158 826
13 561
(8 337)
28 663
413 645
326 457
(90 251)
(88 057)
9 DEFERRED INCOME TAX
66
9.1 Deferred income tax assets
237
363
237
363
Provisions and accruals
Allowances on property, plant and equipment
Fixed escalation operating lease accrual
Allowances on intangible assets
Share-based payment accrual
Unrealised exchange rate differences
Fair value differences
Tax losses
Net taxable temporary differences to be settled after
more than 12 months
Net deductible temporary differences to be recovered
within 12 months
503 896
414 514
413 645
326 457
95 071
86 684
(7 576)
624
(17 078)
(5 640)
(3 366)
60 803
1 221
3
(11 997)
(21 286)
152 085
25 377
171 168
36 916
(19 083)
(11 539)
152 085
25 377
9.2 Deferred income tax liabilities
Provisions and accruals
Allowances on property, plant and equipment
Fixed escalation operating lease accrual
Allowances on intangible assets
Unrealised exchange rate differences
Tax losses
—
—
—
—
—
—
—
—
Net taxable temporary differences to be settled after
more than 12 months
Net deductible temporary differences to be recovered
within 12 months
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
R’000
10 INTANGIBLE ASSETS
Goodwill (note 10.1)
Software (note 10.2)
Trademarks (note 10.3)
Customer relationships (note 10.4)
—
—
191
615
47
40
536
453
069
238
180
451
41
45
981
143
378
603
894 296
719 105
321 534
(129 998)
217 269
(36 288)
Carrying value
191 536
180 981
Reconciliation of carrying value
Carrying value at the beginning of the year
Acquisition of subsidiaries and operations (note 32.5.1)
Impairment (note 10.1.1)
Exchange rate differences
180 981
72 491
(61 605)
(331)
167 074
14 676
(769)
—
Carrying value at the end of the year
191 536
180 981
10.1 Goodwill
Gross amount
Impairment losses
—
—
—
—
10.1.1 IMPAIRMENT OF GOODWILL
Goodwill 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 management 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*
Growth rate**
Pre-tax discount rate***
Other operations
Operating margin*
Growth rate**
Pre-tax discount rate***
*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 nonRSA 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.
%
%
6.7
6.0
11.4
5.9
4.6
14.1
%
%
5.7
6.0
8.3
6.1
4.6
9.3
67
Notes to the Annual Financial Statements (continued)
Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
R’000
782 598
(167 145)
574 714
(123 571)
615 453
451 143
451
56
149
17
143
159
263
153
(95)
(1)
(94)
(58 223)
53
348 737
36 575
115 371
145
(1)
(1)
—
(49 677)
(7)
615 453
451 143
193 640
(146 571)
177 756
(136 378)
Carrying value
47 069
41 378
Reconciliation of carrying value
Carrying value at the beginning of the year
Acquisition of subsidiaries and operations (note 32.5.1)
Amortisation
41 378
9 302
(3 611)
44 258
—
(2 880)
Carrying value at the end of the year
47 069
41 378
53 650
(13 412)
53 650
(8 047)
Carrying value
40 238
45 603
Reconciliation of carrying value
Carrying value at the beginning of the year
Amortisation
45 603
(5 365)
50 968
(5 365)
Carrying value at the end of the year
40 238
45 603
10 INTANGIBLE ASSETS (CONTINUED)
10.2 Software
Gross amount
Accumulated amortisation and impairment losses
—
—
Carrying value
Reconciliation of carrying value
Carrying value at the beginning of the year
Additions
Internally generated
Reclassification from property, plant and equipment (note 3)
Disposal
Proceeds on disposal
Loss on disposal and scrappings
Amortisation
Exchange rate differences
68
—
—
Carrying value at the end of the year
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 merchandising 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 Trademarks
Gross amount
Accumulated amortisation
—
—
—
—
10.4 Customer relationships
Gross amount
Accumulated amortisation
—
—
—
—
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
R’000
11 504
(931)
9 449
(203)
10 573
9 246
8 680 109
7 055 867
11 FIXED ESCALATION OPERATING LEASE ACCRUAL
Operating lease receipts straight-lined
Less: current (included under trade and other receivables: note 13)
—
—
—
—
12 INVENTORIES
Trading goods
69
13 TRADE AND OTHER RECEIVABLES
Instalment sales
Gross amount (note 13.1)
Accumulated impairment (note 13.2)
Unearned finance income
Insurance contract allowances
– Unearned premiums (note 13.3)
—
—
—
—
—
—
—
—
15 327
—
—
—
—
15 327
Trade receivables (note 13.4)
Other receivables (note 13.5)
Prepayments and taxes receivable
Fixed escalation operating lease accrual (note 11)
Amounts owing by joint ventures (note 13.6)
1 283 036
(135 712)
(33 335)
1 099 858
(118 029)
(27 066)
(178 408)
(156 520)
935
1 205
339
196
581
979
839
883
931
22 818
798
881
353
205
243
100
932
107
203
16 805
2 702 031
2 255 390
837 879
445 157
647 468
452 390
1 283 036
1 099 858
13.1 Instalment sales
The 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 widespread 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 receivables
Future minimum instalment payments receivable under
non-cancellable instalment sale agreements
Not later than 1 year
Later than 1 year not later than 2 years
—
—
Notes to the Annual Financial Statements (continued)
Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
R’000
118 029
161 878
(153 834)
9 702
1 298
(1 361)
115 906
41 583
(54 865)
14 578
1 350
(523)
135 712
118 029
23 302
14 404
10 564
8 217
6 638
5 451
34 391
19 918
12 665
9 515
7 645
6 318
5 384
37 313
102 967
98 758
156 520
316 623
(294 735)
142 298
271 589
(257 367)
178 408
156 520
13 TRADE AND OTHER RECEIVABLES (CONTINUED)
13.2 Accumulated impairment
70
Reconciliation of accumulated impairment
Balance at July
Allowance for impairment for the year
Receivables written off during the year as uncollectible
Penalty interest accrued
Exchange rate differences
Unused amounts reversed
—
—
Balance at June
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
60 days
90 days
120 days
150 days
180 days
+ 180 days
—
—
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 premiums
An analysis of the allowance for unearned premiums is
set out below:
Balance at the beginning of the year
Premiums written during the year (note 21.3)
Amortisation charged to income (note 21.3)
—
—
Balance at the end of the year
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
R’000
1 316 460
(110 481)
975 300
(94 200)
1 205 979
881 100
13 TRADE AND OTHER RECEIVABLES (CONTINUED)
13.4 Trade receivables
Gross amount
Accumulated impairment
—
—
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 guarantees 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 impairment
Balance at July
Allowance for impairment for the year
Receivables written off during the year as uncollectible
Exchange rate differences
Unused amounts reversed
—
—
Balance at June
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.
71
94 200
27 245
(6 759)
118
(4 323)
90 073
12 928
(1 471)
(2 876)
(4 454)
110 481
94 200
Notes to the Annual Financial Statements (continued)
Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012
C O M PA N Y
GROUP
June
2011
R’000
June
2012
R’000
—
—
June
2012
R’000
June
2011
R’000
339 839
353 932
22 818
16 805
231
3 606
(308 808)
302 177
(385 297)
379 682
—
—
(4 486)
3 951
(68 524)
67 419
(58 793)
58 610
13 TRADE AND OTHER RECEIVABLES (CONTINUED)
13.5 Other receivables
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 approximates 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.
72
—
—
13.6 Amounts owing by joint ventures
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 INSTRUMENTS
—
—
Forward foreign exchange rate contracts (note 39.1.1)
Current liabilities
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 averaging
R1 = $0,1180 (2011: R1 = $0,1451)
Outflow
Inflow
Swedish krona rand equivalent at rates averaging
N/A (2011: R1 = SEK0,9354)
Outflow
Inflow
Euro rand equivalent at rates averaging
R1 = €0,0944 (2011: R1 = €0,1011)
Outflow
Inflow
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
R’000
647 037
616 306
15 SHARE CAPITAL, TREASURY SHARES AND
SHARE INCENTIVE SCHEMES
15.1 Ordinary share capital
Authorised:
650 000 000 (2011: 650 000 000) ordinary shares of
113.4 cents each
616 306
647 037
Issued:
570 579 460 (2011: 543 479 460) ordinary shares of
113.4 cents each
Reconciliation of movement in number of ordinary
shares issued:
Number of shares
Balance 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 shares
Issued 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.
73
Notes to the Annual Financial Statements (continued)
Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
R’000
277
277
647 314
616 583
320 146
337 406
15 SHARE CAPITAL, TREASURY SHARES AND
SHARE INCENTIVE SCHEMES (CONTINUED)
15.2 Deferred share capital
Authorised:
360 000 000 (2011: 360 000 000) non-convertible,
non-participating no par value deferred shares
74
277
277
Issued:
276 821 666 (2011: 276 821 666) non-convertible,
non-participating no par value deferred shares
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
—
—
15.3 Treasury shares
35 436 472 (2011: 37 346 947) ordinary shares
Reconciliation of movement in number of treasury shares for
the Group:
Balance at the beginning of the year
Movement in shares held by The Shoprite Holdings Ltd
Share Incentive Trust
Shares disposed during the year
Movement in shares held by Shoprite Checkers (Pty) Ltd
Shares purchased during the year
Shares' loss during the year
Balance at the end of the year
Number of shares
37 346 947
37 346 947
(506 036)
—
506 036
(1 910 475)
—
—
35 436 472
37 346 947
15.4 Share incentive schemes
In 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 SCHEME
All 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:
Balance at the beginning of the year
Shares sold to Shoprite Checkers (Pty) Ltd
Balance at the end of the year
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
Number of shares
506 036
506 036
(506 036)
—
—
506 036
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
R’000
—
51 514
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
15.4.2 CASH-SETTLED SHARE-BASED PAYMENTS
The Group has granted cash-settled share-based payments to
directors and management. The rights to cash-settled sharebased payments entitle the participants to receive cash payments 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 sharebased payments and included it in payables (refer note 20).
75
Refer note 24 for the expense recognised in the statement of
comprehensive income as employee benefits.
Weighted average
strike price per share
Movements in rights to cashsettled share-based payments
Balance at the beginning
of the year
Exercised during the year
Forfeited during the year
Balance at the end of
the year
Rights to cash-settled sharebased payments on June 2012
are unconditional on the
following dates or immediately
in the case of a deceased
estate:
29 Aug 2011
29 Aug 2012
10 Oct 2011
10 Oct 2012
10 Oct 2013
9 Oct 2012
9 Oct 2013
9 Oct 2014
CH Wiese: refer next page
Number of shares
on which rights are based
2012
2011
2012
2011
R29,69
R31,78
R31,31
R30,17
R31,31
—
9 441 667
(4 049 999)
(183 334)
13 400 000
(3 958 333)
—
R28,02
R29,69
5 208 334
9 441 667
—
R31,31
—
R45,45
R45,45
R62,35
R62,35
R62,35
R6,50
R31,31
R31,31
R45,45
R45,45
R45,45
R62,35
R62,35
R62,35
R6,50
—
3 816 666
—
133 333
133 334
41 667
41 667
41 667
1 000 000
3 958 333
3 958 333
133 333
133 333
133 334
41 667
41 667
41 667
1 000 000
R28,02
R29,69
5 208 334
9 441 667
Notes to the Annual Financial Statements (continued)
Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012
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
76
Director
Expiry date
Exercise date
CH Wiese*
5 Sep 2022
Currently exercisable
Number of shares on which rights are based
Exercised
during the
At June 2011
year
At June 2012
1 000 000
—
1 000 000
Strike price
per share
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.
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
C O M PA N Y
GROUP
June
2011
R’000
June
2012
R’000
1 345 422
2 152
1 423 455
2 152
1 347 574
1 425 607
209
1 943
—
—
—
—
209
1 943
—
—
—
—
2 152
2 152
June
2012
R’000
June
2011
R’000
8 203 053
542 752
6 507 523
4 928
8 745 805
6 512 451
209
1 943
333 880
206 720
—
—
209
1 943
—
(81 979)
33 536
51 219
542 752
4 928
16 RESERVES
Retained earnings
Other reserves (note 16.1)
16.1 Other reserves
Reserve on conversion from no par value to par value shares
Capital redemption reserve
Equity component of convertible bonds
Foreign currency translation reserve
Contingency reserve
Fair value reserve
16.1.1 RECONCILIATION OF CARRYING VALUES OF OTHER RESERVES
R’000
Balance at June 2010
Equity
component of
convertible
bonds
Foreign
currency
translation
reserve
Contingency
reserve
Fair value
reserve
Other
—
60 472
29 027
49 269
2 152
Foreign currency translation differences
Transfer from distributable reserves
Net fair value gains on available-for-sale
investments, net of income tax
Net fair value gains
Related income tax
Balance at June 2011
Equity component of convertible bonds
on initial recognition
Deferred income tax on equity component
of convertible bonds
Foreign currency translation differences
Transfer to distributable reserves
Net fair value gains on available-for-sale
investments, net of income tax
Net fair value gains
Related income tax
Balance at June 2012
(142 451)
4 509
1 950
2 267
(317)
—
(81 979)
33 536
51 219
2 152
470 129
(136 249)
288 699
(33 536)
(51 219)
(59 557)
8 338
333 880
206 720
—
—
2 152
77
Notes to the Annual Financial Statements (continued)
Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
R’000
2 450
182
3 975 330
57 472
2 450
149
—
47 156
4 035 434
49 755
4 006 698
28 736
26 177
23 578
4 035 434
49 755
350
350
650
650
450
450
17 BORROWINGS
2 450
—
—
—
2 450
—
—
—
2 450
2 450
2 450
—
2 450
—
2 450
2 450
78
Consisting of:
Shoprite Holdings Ltd preference share capital (note 17.1)
Shoprite International Ltd preference share capital (note 17.2)
Convertible bonds (note 17.3)
First National Bank of Namibia Ltd (note 17.4)
Analysis of total borrowings
Non-current
Current
17.1 Shoprite Holdings Ltd preference share capital
Authorised:
175 000 (2011: 175 000) 6% non-convertible cumulative
preference shares of R2 each
325 000 (2011: 325 000) 5% non-convertible cumulative
preference shares of R2 each
225 000 (2011: 225 000) second 5% non-convertible
cumulative preference shares of R2 each
1 000 000 (2011: 1 000 000) third 5% non-convertible
cumulative preference shares of R2 each
350
350
650
650
450
450
1 000
1 000
2 450
2 450
Issued:
175 000 (2011: 175 000) 6% non-convertible cumulative
preference shares of R2 each
325 000 (2011: 325 000) 5% non-convertible cumulative
preference shares of R2 each
225 000 (2011: 225 000) second 5% non-convertible
cumulative preference shares of R2 each
500 000 (2011: 500 000) third 5% non-convertible
cumulative preference shares of R2 each
1 000
1 000
2 450
2 450
1 543
1 259
155
(1 516)
126
(1 236)
182
149
17.2 Shoprite International Ltd preference share capital
20 (2011: 20) “Malawi” redeemable under certain
conditions, preference shares of USD1,82 each
2 (2011: 2) “Angola” redeemable under certain
conditions, preference shares of USD1,82 each
Accumulated losses recognised
—
—
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
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.
79
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, representing 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*
Equity component (note 16.1)*
4 347 641
(470 129)
—
—
—
—
Liability component on initial recognition at 2 April 2012
Interest expense (note 28)
3 877 512
97 818
—
—
—
—
Liability component at the end of the year
3 975 330
—
57 472
47 156
*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 Ltd
—
—
This 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.
18 PROVISIONS
Provision for post-retirement medical benefits (note 36.2)
Provision for onerous lease contracts
Provision for outstanding claims
Provision for long-term employee benefits
Reinstatement provision
—
—
33
44
2
257
139
355
165
353
937
615
477 425
33
50
2
219
137
534
578
134
831
240
443 317
Notes to the Annual Financial Statements (continued)
Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012
18 PROVISIONS (CONTINUED)
Reconciliation of carrying values
Postretirement
medical
benefits
Onerous
lease
contracts
Outstanding
claims
Balance at June 2010
Additional provisions
Unused amounts reversed
Utilised during the year
Accretion of discount
Exchange rate differences
32 404
1 240
(312)
(2 630)
2 832
—
41 421
21 356
(159)
(10 818)
(1 222)
—
1 459
675
—
—
—
—
158 981
59 461
(321)
(6 354)
8 572
(508)
141 378
11 570
(732)
(14 912)
—
(64)
375 643
94 302
(1 524)
(34 714)
10 182
(572)
Balance at June 2011
33 534
50 578
2 134
219 831
137 240
443 317
Additional provisions
Unused amounts reversed
Utilised during the year
Accretion of discount
Exchange rate differences
76
(1 328)
(1 779)
2 852
—
29 823
(15 049)
(23 064)
1 877
—
219
—
—
—
—
55 104
(4 932)
(20 882)
7 506
1 310
11 549
(1 925)
(7 249)
—
—
96 771
(23 234)
(52 974)
12 235
1 310
Balance at June 2012
33 355
44 165
2 353
257 937
139 615
477 425
Analysis of total provisions
2011
Non-current
Current
33 534
—
26 009
24 569
—
2 134
218 568
1 263
61 089
76 151
339 200
104 117
33 534
50 578
2 134
219 831
137 240
443 317
33 355
—
29 069
15 096
—
2 353
208 573
49 364
67 794
71 821
338 791
138 634
33 355
44 165
2 353
257 937
139 615
477 425
9%
9%
12%
9%
N/A
N/A
9%
8%
12%
9%
R’000
80
Long-term
employee Reinstatement
benefits
provision
Total
2012
Non-current
Current
Discount rates used
2011
2012
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
R’000
576 437
(56 231)
522 205
(66 418)
520 206
455 787
19 FIXED ESCALATION OPERATING LEASE
ACCRUAL
Operating lease payments straight-lined (refer note 23)
Less: current (included under trade and other payables: note 20)
—
—
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
C O M PA N Y
GROUP
June
2011
R’000
June
2012
R’000
—
966
—
160
—
—
—
—
24 777
—
198
—
—
—
1 126
24 975
—
1 126
—
24 975
1 126
24 975
—
—
June
2012
R’000
June
2011
R’000
8 163 845
2 927 422
743 836
204 540
7 665
56 231
630 043
6 303 789
2 254 512
655 394
200 323
3 917
66 418
586 845
12 733 582
10 071 198
21 878
12 711 704
263 455
9 807 743
12 733 582
10 071 198
7 665
3 917
20 TRADE AND OTHER PAYABLES
Trade payables
Other payables and accruals
Employee benefit accruals
Indirect taxes payable
Amounts owing to joint ventures (note 20.1)
Fixed escalation operating lease accrual (note 19)
Cash-settled share-based payment accrual (note 15.4.2)
Analysis of trade and other payables
Non-current
Current
20.1 Amounts owing to joint ventures
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
—
1 306 771
—
—
—
—
910
—
1 652 535
—
—
—
—
2 522
1 307 681
1 655 057
—
—
—
1 306 751
20
12 955
—
335
1 639 223
22
1 306 771
1 652 535
Finance income earned
Investment income (note 21.1)
Franchise fees received
Operating lease income (note 21.2)
Commissions received
Premiums earned (note 21.3)
Other income
206
82
47
251
485
294
957
354
259
438
482
734
735
310
196
27
38
231
412
257
692
066
663
262
900
386
367
197
2 325 312
1 855 841
—
279
16 579
—
65 401
—
965
14 940
—
11 758
82 259
27 663
316 623
(21 888)
271 589
(14 222)
294 735
257 367
21.1 Investment income
Interest received from subsidiaries
Interest received from joint ventures
Interest received other
Dividends – subsidiaries
– unlisted investments
21.2 Operating lease income
The 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 earned
Premiums written
Change in allowance for unearned premiums
—
—
81
Notes to the Annual Financial Statements (continued)
Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
R’000
Property, plant and equipment
Intangible assets
1 132 907
67 199
948 520
57 922
Disclosed as cost of sales
1 200 106
(109 811)
1 006 442
(72 850)
1 090 295
933 592
Operating lease payments – property
Operating lease payments – equipment
1 902 258
80 858
1 692 493
81 943
Disclosed as cost of sales
1 983 116
(42 895)
1 774 436
(73 968)
1 940 221
1 700 468
1 733 591
249 525
1 543 435
231 001
1 983 116
1 774 436
Wages and salaries
Cash-settled share-based payments (note 15.4.2)
Post-retirement medical benefits (note 36.2)
Retirement benefit contributions (note 36.1)
6 305
275
1
347
5 514
256
3
314
Disclosed as cost of sales
6 930 791
(400 323)
6 089 252
(327 207)
6 530 468
5 762 045
22 DEPRECIATION AND AMORTISATION
—
—
23 OPERATING LEASES
82
The 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.
—
—
Consisting of:
Minimum lease payments
Contingent lease payments
—
—
24 EMPLOYEE BENEFITS
—
—
24.1 Learnership allowances
The Group has, during the year under review, received certain
learnership allowances.
Sector Educational Training Authorities (SETA) grants
In 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%).
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
672
580
600
939
459
618
760
415
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
R’000
3 375
(5 105)
24 965
24 746
219
14 073
13 398
675
25 OPERATING PROFIT
Determined after taking into account the following:
—
—
Fair value gains/(losses) on financial instruments
—
—
—
—
—
—
Policyholder claims and benefits paid
– claims paid
– movement in accumulated unpaid claims (note 18)
83
26 DIRECTORS’ REMUNERATION
69 032
845
78 261
1 227
69 877
(69 032)
79 488
(78 261)
845
1 227
Executive directors
Non-executive directors
—
—
—
—
Less: paid by subsidiaries and joint ventures
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.
R’000
Executive
directors
and alternates
JW Basson
JAL Basson
M Bosman
PC Engelbrecht
CG Goosen
B Harisunker
AE Karp
EL Nel
BR Weyers
Remuneration
40
1
1
2
3
2
3
2
1
620
257
727
785
354
112
143
104
627
58 729
2012
Retirement
and
Performedical
mance
benefits
bonus
Other
benefits
—
008
487
864
658
235
256
760
300
35
215
397
513
804
702
641
370
422
309
161
168
222
229
153
247
172
204
13 568
4 099
1 865
1
1
1
2
1
2
1
1
Total
40
2
3
5
7
4
6
4
3
964
641
779
384
045
202
287
406
553
78 261
Remuneration
32
1
1
2
3
1
2
1
1
2011
Retirement
and
Performedical
mance
benefits
bonus
Other
benefits
063
137
601
475
104
957
908
942
534
—
350
327
610
410
921
540
1 450
1 180
3 963
194
322
423
708
592
557
334
361
449
142
204
198
257
190
266
171
192
48 721
10 788
7 454
2 069
1
1
1
2
Total
36
2
3
4
6
3
4
3
3
475
823
454
706
479
660
271
897
267
69 032
Notes to the Annual Financial Statements (continued)
Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012
26 DIRECTORS’ REMUNERATION (CONTINUED)
2012
Fees
Non-executive directors
JJ Fouché (appointed 26/03/2012)
EC Kieswetter
JA Louw
JF Malherbe
JG Rademeyer
JA Rock (appointed 15/05/2012)
CH Wiese*
84
2011
Fees
Total
Total
32
120
211
210
312
22
320
32
120
211
210
312
22
320
—
101
101
176
259
—
208
—
101
101
176
259
—
208
1 227
1 227
845
845
*Paid to Chaircorp (Pty) Ltd in its capacity as employer.
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
R’000
1 572
—
(6 214)
12 868
(15 166)
(1 094)
(32 256)
(217)
(17 210)
(61 605)
(184)
(56 351)
(769)
4 406
(93 687)
(78 533)
97 818
125 412
207
126
21
32
23
50
—
125 608
230
126
21
32
23
50
223 563
125 964
27 ITEMS OF A CAPITAL NATURE
Profit/(loss) on disposals of property (note 3)
Profit on disposals of assets held for sale (note 4)
Loss on disposals and scrappings of plant, equipment
and intangible assets (note 3 & 10)
Insurance claims paid
Impairment of property, plant and equipment and assets held
for sale (note 3 & 4)
Impairment of goodwill (note 10.1)
(Loss)/profit on other investing activities
—
—
—
72
—
126
21
32
23
50
—
—
—
126
21
32
23
50
198
126
28 FINANCE COSTS
Interest on convertible bonds
Interest paid
Interest paid to joint ventures
Preference dividends
6% non-convertible cumulative preference shares
5% non-convertible cumulative preference shares
Second 5% non-convertible cumulative preference shares
Third 5% non-convertible cumulative preference shares
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
R’000
1 306 833
132 056
1 162 478
184 348
1 438 889
1 346 826
Current income tax
Prior year income tax
Withholding income tax
Secondary income tax on companies
1 409
1
26
91
1 223
28
7
121
Deferred income tax
1 529 024
(90 135)
1 381 504
(34 678)
1 438 889
1 346 826
South African current income tax at 28% (2011: 28%)
Net adjustments
Preference dividends
Dividend income
Other exempt income and non-deductible expenses
Income tax allowances
Deferred income tax asset previously not recognised
Prior year income tax
Secondary income tax on companies
Effect of foreign income tax rates
Withholding income tax
Deferred income tax asset not recognised
1 254 878
184 011
(230)
(18 312)
(177)
(9 898)
(6 922)
1 609
91 843
35 999
26 159
63 940
1 085 383
261 443
(255)
(5 966)
76 058
(2 648)
(25 242)
28 295
121 670
33 398
7 991
28 142
Income tax
1 438 889
1 346 826
32.1%
34.7%
—
89 674
29 INCOME TAX EXPENSE
29.1 Classification
131 060
—
114 556
—
131 060
114 556
12 879
1 165
—
117 053
26 032
(1 030)
—
89 680
131 097
(37)
114 682
(126)
131 060
114 556
374 513
(243 453)
35
(365 897)
4 191
—
—
1 165
117 053
—
—
—
478 921
(364 365)
35
(458 989)
5 939
—
—
(1 030)
89 680
—
—
—
131 060
114 556
9.8%
6.7%
South African income tax
Foreign income tax
29.2 Consisting of:
413
609
159
843
548
295
991
670
29.3 Reconciliation of income tax
Effective tax rate
29.4 Secondary income tax on companies
89 674
—
Secondary income tax on companies on proposed or
envisaged dividends
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.
85
Notes to the Annual Financial Statements (continued)
Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
R’000
1 843 759
1 479 506
1 424 491
1 137 964
364 253
286 527
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
Applied in the provision for deferred income tax
—
—
86
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 relief
30 June 2012
30 June 2013
30 June 2014
30 June 2015
30 June 2016
30 June 2017
30 June 2018
30 June 2019
—
—
—
—
Calculated temporary differences on consolidation associated
with investments in subsidiaries for which deferred income tax
liabilities have not been created
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
2
8
8
4
19
2
—
776
276
369
025
483
603
—
1
3
7
3
4
16
625
165
542
802
744
879
—
103
45 532
37 860
108 566
89 255
30 EARNINGS PER SHARE
R’000
Profit attributable to equity holders
Profit on disposals of property (note 3)
Loss on disposals and scrappings of plant, equipment and intangible
assets (note 3 & 10)
Insurance claims paid
Impairment of property, plant and equipment and assets held for sale (note 3 & 4)
Impairment of goodwill (note 10.1)
Loss on other investing activities
Headline earnings
R’000
Profit attributable to equity holders
Loss on disposals of property (note 3)
Profit on disposals of assets held for sale (note 4)
Loss on disposals and scrappings of plant, equipment and intangible assets
(note 3 & 10)
Insurance claims paid
Impairment of property, plant and equipment and assets held for sale (note 3 & 4)
Impairment of goodwill (note 10.1)
Profit on other investing activities
Headline earnings
2012
Income tax
effect
Net
294
3 026 563
(1 278)
166
094
210
605
184
(3 856)
(306)
(2 170)
—
—
11 310
788
15 040
61 605
184
93 687
(6 038)
3 114 212
Gross
2011
Income tax
effect
Net
6 214
(12 868)
(197)
1 802
2 509 780
6 017
(11 066)
32 256
217
56 351
768
(4 405)
(9 077)
(61)
(12 311)
—
537
23 179
156
44 040
768
(3 868)
78 533
(19 307)
2 569 006
Gross
(1 572)
15
1
17
61
87
2012
Number of shares
Number of ordinary shares
– In issue
– Weighted average
Earnings per share
– Earnings
– Headline earnings
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.
535 143
513 019
Cents
590.0
607.0
2011
506 133
506 133
495.9
507.6
Notes to the Annual Financial Statements (continued)
Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
R’000
31 DIVIDENDS PER SHARE
31.1 Dividends per share paid
Cents
147.0
88.0
165.0
109.0
235.0
274.0
No 125 paid 19 September 2011 (2011: No 123 paid
20 September 2010)
No 126 paid 30 April 2012 (2011: No 124 paid 22 March 2011)
Cents
165.0
109.0
147.0
88.0
274.0
235.0
194.0
165.0
1 132 907
67 199
(3 375)
8 343
(1 572)
—
948 520
57 922
5 105
446
6 214
(12 868)
15 166
32 256
31.2 Dividends per share declared
88
165.0
194.0
No 127 payable 17 September 2012 (2011: No 125 paid
19 September 2011)
32 CASH FLOW INFORMATION
32.1 Non-cash items
—
—
—
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1
—
—
—
(285)
—
(15 327)
23 848
(285)
8 521
(3 338)
(1 277 177)
—
4 016
(4 016)
(1 517 843)
—
3 849
(1 276 499)
(1 518 010)
1 589
(131 097)
—
4 247
(4 247)
(114 682)
—
7 028
(125 261)
(111 901)
Depreciation of property, plant and equipment
Amortisation of intangible assets
Net fair value (gains)/losses on financial instruments
Exchange rate losses
(Profit)/loss on disposals of property
Profit on disposals of assets held for sale
Loss on disposals and scrappings of plant, equipment
and intangible assets
Impairment of property, plant and equipment and assets
held for sale
Impairment of goodwill
Movement in provisions
Movement in cash-settled share-based payment accrual
Movement in fixed escalation operating lease accrual
17
61
34
330
51
210
605
577
738
724
56 351
769
70 876
272 808
21 081
1 714 522
1 459 480
(1 526 104)
(239 945)
2 415 283
(1 000 474)
(236 566)
(87 319)
649 234
(1 324 359)
(4 851)
(1 421 598)
(12 330)
4 955
(3 328)
(1 189 411)
(28 196)
4 851
(1 433 824)
(1 216 084)
(425 773)
(1 529 024)
(372)
69 835
(75 361)
(1 381 504)
—
425 773
(1 885 334)
(1 031 092)
32.2 Changes in working capital
Inventories
Trade and other receivables
Trade and other payables
32.3 Dividends paid
Shareholders for dividends at the beginning of the year
Dividends distributed to equity holders
Dividends distributed to non-controlling interest
Shareholders for dividends at the end of the year
32.4 Income tax paid
Prepaid/(payable) at the beginning of the year
Per statement of comprehensive income
Acquisition of subsidiaries and operations (note 32.5.1)
Payable at the end of the year
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
R’000
(2 359 020)
(2 283 322)
(758 749)
(721 897)
149 315
—
34 409
—
—
(103 886)
(72 961)
63 483
28 360
3 493
—
—
—
(27 128)
(3 110 892)
(2 937 011)
19 788
9 302
97 647
(133 560)
(372)
7 665
12 228
—
—
(1 087)
—
1 311
Goodwill (note 10.1)
470
72 491
12 452
14 676
Purchase consideration
72 961
27 128
3 409 728
4 347 641
10 316
—
—
9 329
7 767 685
9 329
32 CASH FLOW INFORMATION (CONTINUED)
32.5 Cash flows (utilised by)/from investing activities
—
—
—
—
—
—
—
(1 342 957)
1 408 492
—
—
—
—
(651 009)
(2 316 447)
2 252 984
—
—
65 535
(714 472)
Investment in property, plant and equipment and intangible
assets to expand operations
Investment in property, plant and equipment and intangible
assets to maintain operations
Proceeds on disposals of property, plant and equipment and
intangible assets
Proceeds on disposals of assets held for sale
Other investing activities
Amounts paid to subsidiaries
Amounts received from subsidiaries
Investment in associate
Acquisition of subsidiaries and operations (note 32.5.1)
32.5.1 ACQUISITION OF SUBSIDIARIES AND OPERATIONS
The 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)
Trademark (note 10.3)
Trade and other receivables (note 13)
Trade and other payables (note 20)
Current income tax
Inventories (note 12)
—
—
—
—
—
3 409 728
—
—
—
3 409 728
32.6 Cash flows from financing activities
Proceeds from ordinary shares issued
Proceeds from convertible bonds issued
Increase in borrowings from First National Bank of Namibia Ltd
89
Notes to the Annual Financial Statements (continued)
Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
R’000
206 168
157 792
Contracted for property, plant and equipment
Contracted for intangible assets
Authorised by directors, but not contracted for
1 464 732
242 735
2 077 445
1 261 803
81 731
1 781 928
33 CONTINGENT LIABILITIES
Amounts arising in the ordinary course of business relating to
property and other transactions from which it is anticipated that
no material liabilities will arise.
Shoprite Holdings Ltd and its main trading subsidiary, Shoprite
Checkers (Pty) Ltd, have irrevocably and unconditionally guaranteed all amounts payable by the issuer, Shoprite Investments
Ltd, in respect of the convertible bonds (refer note 17.3).
90
34 COMMITMENTS
34.1 Capital commitments
—
—
Total capital commitments
3 784 912
3 125 462
—
—
Capital commitments for the 12 months after accounting date
3 784 912
3 125 462
Future minimum lease payments under non-cancellable
operating leases:
– Not later than one year
– Later than one year not later than five years
– Later than five years
1 609 405
5 107 226
2 739 322
1 220 407
4 012 189
2 075 058
Less: fixed escalation operating lease accrual (note 19)
9 455 953
(576 437)
7 307 654
(522 205)
8 879 516
6 785 449
Future minimum lease payments receivable under
non-cancellable operating leases:
– Not later than one year
– Later than one year not later than five years
– Later than five years
175 323
354 467
36 070
237 924
313 153
13 191
Less: fixed escalation operating lease accrual (note 11)
565 860
(11 504)
564 268
(9 449)
554 356
554 819
Funds to meet this expenditure will be provided from the
Group’s own resources and borrowings.
34.2 Operating lease commitments
—
—
34.3 Operating lease receivables
—
—
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
R’000
35 BORROWING POWERS
In terms of the Memorandum of Incorporation of the Company
the borrowing powers of Shoprite Holdings Ltd are unlimited.
36 POST-RETIREMENT BENEFITS
36.1 Retirement funds
Group companies provide post-retirement benefits in
accordance with the local conditions and practices in the
countries in which they operate.
91
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
10.3%
9.3%
9.8%
8.8%
7.7%
1.5%
100.0%
63 years
7.3%
1.5%
95.0%
60 years
36.2 Medical benefits
Full 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
Discount rate
Salary adjustments
– inflation
– promotions and experience increases
Continuation at retirement
Expected retirement age
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)
Notes to the Annual Financial Statements (continued)
Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
R’000
33 534
32 404
1 600
(1 779)
3 760
(2 630)
33 355
33 534
76
(1 328)
2 852
115
813
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
Increase in the post-retirement medical benefit liability
454
4 730
443
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
Decrease in the post-retirement medical benefit liability
369
3 870
359
3 975
36 POST-RETIREMENT BENEFITS (CONTINUED)
36.2 Medical benefits (continued)
92
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
Total expense charged to the statement of comprehensive
income (note 36.2.3)
Benefits paid
—
—
Balance at the end of the year
36.2.3 THE AMOUNTS RECOGNISED IN THE STATEMENT OF
COMPREHENSIVE INCOME WERE AS FOLLOWS:
Current service cost
Net actuarial (gains)/losses recognised during the year
Interest cost
—
—
36.2.4 TREND ANALYSIS OF POST-RETIREMENT MEDICAL BENEFITS
Present value
of obligation
R’000
30
30
30
30
30
June
June
June
June
June
2008
2009
2010
2011
2012
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
181
243
32
33
33
099
268
404
534
355
Experience
adjustments
4 563
1 687
5 907
963
1 878
37 FINANCIAL INSTRUMENTS BY CATEGORY
Loans and
receivables
Group
R’000
FINANCIAL ASSETS AS PER STATEMENT OF FINANCIAL POSITION
Loans and receivables
Instalment sales
Trade receivables
Other receivables excluding prepayments and taxes receivable
Amounts owing by joint ventures
Cash and cash equivalents
Availablefor-sale
2012
19
935
1 205
339
22
7 939
903
581
979
839
818
333
19
935
1 205
339
22
7 939
10 463 453
R'000
FINANCIAL ASSETS AS PER STATEMENT OF FINANCIAL POSITION
Available-for-sale investments
Loans and receivables
Instalment sales
Trade receivables
Other receivables excluding prepayments and taxes receivable
Amounts owing by joint ventures
Cash and cash equivalents
—
50
798
881
353
16
1 961
10 463 453
59 656
59
50
798
881
353
16
1 961
59 656
4 121 821
534
243
100
932
805
551
74 237
15 327
3 387 853
74 237
15 327
3 387 853
—
3 477 417
2011
10 774
603 555
614 329
10 774
603 555
—
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.
656
534
243
100
932
805
551
2012
3 477 417
R'000
FINANCIAL ASSETS AS PER STATEMENT OF FINANCIAL POSITION
Amounts owing by subsidiaries
Cash and cash equivalents
903
581
979
839
818
333
2011
4 062 165
Company
R'000
FINANCIAL ASSETS AS PER STATEMENT OF FINANCIAL POSITION
Amounts owing by subsidiaries
Other receivables excluding prepayments and taxes receivable
Cash and cash equivalents
Total
93
Notes to the Annual Financial Statements (continued)
Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012
37 FINANCIAL INSTRUMENTS BY CATEGORY (CONTINUED)
Financial
liabilities
94
Group
R'000
FINANCIAL LIABILITIES AS PER STATEMENT OF FINANCIAL POSITION
Borrowings
Reinstatement provision
Trade payables
Other payables and accruals excluding taxes payable
and employee benefit accruals
Amounts owing to joint ventures
Derivative financial instruments
Bank overdrafts
Shareholders for dividends
Liabilities at fair
value through
profit and loss
2012
4 035 434
139 615
8 163 845
4 035 434
139 615
8 163 845
2 927 422
7 665
231
2 927 422
7 665
231
22 858
4 955
231
15 302 025
22 858
4 955
15 301 794
R'000
FINANCIAL LIABILITIES AS PER STATEMENT OF FINANCIAL POSITION
Borrowings
Reinstatement provision
Trade payables
Other payables and accruals excluding taxes payable
and employee benefit accruals
Amounts owing to joint ventures
Derivative financial instruments
Bank overdrafts
Shareholders for dividends
2011
49 755
137 240
6 303 789
49 755
137 240
6 303 789
2 254 512
3 917
2 254
3
3
2 042
4
3 606
2 042 100
4 851
10 796 164
Company
R'000
FINANCIAL LIABILITIES AS PER STATEMENT OF FINANCIAL POSITION
Borrowings
Other payables and accruals excluding taxes payable and
employee benefit accruals
Shareholders for dividends
3 606
512
917
606
100
851
10 799 770
2012
2 450
2 450
24 777
3 849
24 777
3 849
31 076
R'000
FINANCIAL LIABILITIES AS PER STATEMENT OF FINANCIAL POSITION
Borrowings
Other payables and accruals excluding taxes payable and
employee benefit accruals
Shareholders for dividends
Total
—
31 076
2011
2 450
2 450
966
4 016
966
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.
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
R’000
38 FAIR VALUE DISCLOSURES
All financial instruments measured at fair value are classified
using a three-tiered fair value hierarchy that reflects the significance 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 MANAGEMENT
39.1 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 department 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.
95
Notes to the Annual Financial Statements (continued)
Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
R’000
6 886 082
426 892
65 845
77 622
82 872
7 290
4 443
36 787
114 207
91 568
45 227
39 159
38 481
(603 468)
148 131
52 476
62 935
51 358
24 296
17 973
7 306
56 859
30 241
11 098
34 109
26 137
7 916 475
(80 549)
39 FINANCIAL RISK MANAGEMENT (CONTINUED)
39.1 Financial risk factors (continued)
39.1.1 MARKET RISK
a) 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 commitments of three months or more. Forward foreign exchange rate
contracts are not used for speculative purpose. These instruments are not designated as hedging instruments for purposes
of accounting.
96
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 converting 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
—
—
—
—
—
—
—
—
—
—
—
—
603 555
3 387 853
South African rand
USA dollar
Zambian kwacha
Malawi kwacha
Angolan kwanza
Botswana pula
Mauritian rupee
Nigerian naira
Namibian dollar
Swaziland emilangeni
Lesotho maluti
Mozambique metical
Other currencies
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
R’000
39 FINANCIAL RISK MANAGEMENT (CONTINUED)
39.1 Financial risk factors (continued)
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) contributing 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 constituted 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.
97
Notes to the Annual Financial Statements (continued)
Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
R’000
39 FINANCIAL RISK MANAGEMENT (CONTINUED)
39.1 Financial risk factors (continued)
39.1.1 MARKET RISK (CONTINUED)
a) Currency risk (continued)
Net monetory
assets/(liabilities)
per currency
98
Country
Foreign currency
Angola
Botswana
DRC
Egypt
Europe
Ghana
Great Britain
India
Madagascar
Malawi
Mauritius
Mozambique
Nigeria
Tanzania
Uganda
USA
Zambia
Kwanza
Pula
Congolese Francs
Egyptian pound
Euro
Cedi
British Pound
Rupee
Ariary
Kwacha
Mauritian rupee
Metical
Naira
Shilling
Shilling
Dollar
Kwacha
b) Cash flow and fair value interest rate risk
The 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
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
Rand Equivalent
R’000
R’000
(160 799)
(9 732)
(3 376)
854
1 058
(11 372)
—
1 444
(14 989)
55 402
(13 130)
42 707
(61 162)
(6 087)
(12 015)
380 989
(113 952)
176 659
(13 355)
(2 393)
402
(40)
9 799
115
(2 051)
8 824
(40 198)
(3 227)
(9 101)
30 733
8 535
4 404
(153 561)
79 924
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
R’000
39 FINANCIAL RISK MANAGEMENT (CONTINUED)
39.1 Financial risk factors (continued)
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 RISK
Credit 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 investments.
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 balances 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.
99
Notes to the Annual Financial Statements (continued)
Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
R’000
39 FINANCIAL RISK MANAGEMENT (CONTINUED)
39.1 Financial risk factors (continued)
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.
100
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.
603 555
—
—
—
3 387 853
—
—
—
Rating
P-1
P-2
No rating available
Cash on hand and in transit
6 993
298
128
519
603 555
3 387 853
Total cash and cash equivalents
7 939 333
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
720
227
065
321
1 709
41
154
56
014
037
661
839
1 961 551
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
R’000
39 FINANCIAL RISK MANAGEMENT (CONTINUED)
39.1 Financial risk factors (continued)
39.1.3 LIQUIDITY RISK
Liquidity 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 risk
The 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.
101
Notes to the Annual Financial Statements (continued)
Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
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.
102
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 MANAGEMENT
The 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 stakeholders 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 interestbearing 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.
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
June
2011
R’000
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
R’000
41 RELATED-PARTY INFORMATION
Related-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.
103
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 compensation
Short-term employee benefits
Post-employment benefits
Share-based payments
Directors’ fees
—
—
169
13
253
1
617
300
974
227
142 869
16 021
188 521
845
438 118
348 256
Notes to the Annual Financial Statements (continued)
Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
R’000
229 384
6 872
5 198
80 784
573
4 070
4 388
1 906
558
414
3 709
2 000
1 930
460
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 flexitime 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 marketrelated prices and are insignificant in terms of the Group’s total
operations for the year.
104
These purchases and related balances were as follows:
Purchase of merchandise
Utilisation of services
Year-end balances
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
Rent paid to the Group
Interest paid to the Group
Interest paid to the joint venture
The year-end balances relating to the transactions with the joint
venture are disclosed in notes 13 and 20.
1 305
—
1 382
12 955
The Company received the following from its subsidiary,
Shoprite Checkers (Pty) Ltd:
Annual administration fee
Interest
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
C O M PA N Y
June
2011
R’000
GROUP
June
2012
R’000
June
2012
R’000
June
2011
R’000
50%
50%
50%
50%
42 JOINT VENTURES
The Group holds directly the following interests in
joint ventures:
Hungry Lion Fast Foods (Pty) Ltd
Hungry Lion Mauritius Ltd
The consolidated results include the following amounts relating
to the Group’s interest in joint ventures.
Statement of comprehensive income
Sale of merchandise
Profit before income tax
Income tax expense
Profit for the year
Statement of financial position
Non-current assets
Current assets
Current liabilities
Statement of cash flows
Net cash flow from operating activities
Net cash flow from investing activities
Net cash flow from financing activities
Capital commitments
105
262 264
221 290
8 610
(5 574)
13 557
(1 015)
3 036
12 542
49 408
22 890
18 405
39 538
19 947
13 873
23 057
(22 668)
2 265
729
(13 243)
(19 613)
756
2 065
Interest in Subsidiaries – Annexure A
Country of
incorporation
106
DIRECT SUBSIDIARIES
OK Bazaars (1998) (Pty) Ltd
Shoprite Checkers (Pty) Ltd
Shoprite Investments Ltd
Shoprite International Ltd
Shoprite Insurance Company Ltd
Shoprite Checkers Properties Ltd
INDIRECT SUBSIDIARIES
Africa Supermarkets Ltd*
Checkers Chatsworth Ltd
Computicket (Pty) Ltd
Megasave Trading (Pvt) Ltd*
Mercado Fresco de Angola Lda*
Medirite (Pty) Ltd
OK Bazaars (Lesotho) (Pty) Ltd*
OK Bazaars (Namibia) Ltd*
OK Bazaars (Swaziland) (Pty) Ltd*
OK Bazaars (Venda) Ltd
Propco Mozambique Lda*
Retail Holdings Botswana (Pty) Ltd*
Retail Supermarkets Nigeria Ltd*
Sentra Namibia Ltd*
Shophold (Mauritius) Ltd*
Shoprite Angola Imobiliaria Lda*
Shoprite Checkers Tanzania Ltd*
Shoprite Checkers Uganda Ltd*
Shoprite Egypt for Internal Trade SAE*
Shoprite Ghana (Pty) Ltd*
Shoprite Lesotho (Pty) Ltd*
Shoprite Madagascar S.A.*
Shoprite (Mauritius) Ltd*
Shoprite Namibia (Pty) Ltd*
Shoprite RDC SPRL*
Shoprite Supermercados Lda*
Shoprite Too (Pty) Ltd*
Shoprite Trading Ltd*
South Africa
South Africa
South Africa
Mauritius
South Africa
South Africa
Zambia
South Africa
South Africa
India
Angola
South Africa
Lesotho
Namibia
Swaziland
South Africa
Mozambique
Botswana
Nigeria
Namibia
Mauritius
Angola
Tanzania
Uganda
Egypt
Ghana
Lesotho
Madagascar
Mauritius
Namibia
DRC
Angola
Tanzania
Malawi
Issued
ordinary and
preference
share
capital and
premium
Percentage
shares held
by Group
R’000
%
2
1 128
20
2 074
20
26
700
908
000
172
230
196
—
2 000
69 133
118 383
342
—
300
500
200
2 400
432
46 648
522
5 880
189 116
342
258 621
41 612
40 424
31 417
1
128 288
132 869
—
81 719
342
1 870
1
100
100
100
100
100
100
Investment in shares
June 2012
June 2011
R’000
R’000
Amount owing by/(to)
June 2012
June 2011
R’000
R’000
—
431
000
172
230
679
—
174 431
150
1 443 013
20 230
16 679
—
71 486
—
—
—
3 365
—
7 559
(150)
—
—
3 365
2 305 512
1 654 503
74 851
10 774
174
20
2 074
20
16
100
48
100
100
100
100
50
100
100
50
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
(614)
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.
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
Shareholder Analysis
Shoprite Holdings Ltd and its Subsidiaries as at June 2012
SHAREHOLDER SPREAD
No of Shareholders
%
1 – 1,000 shares
1,001 – 10,000 shares
10,001 – 100,000 shares
100,001 – 1,000,000 shares
Over 1,000,001 shares
11 135
2 963
677
179
61
74.16
19.73
4.51
1.19
0.41
Totals
15 015
No of Shares
3
9
21
59
476
361
300
749
248
918
%
750
483
793
987
447
0.59
1.63
3.81
10.38
83.58
100.00
570 579 460
100.00
DISTRIBUTION OF SHAREHOLDERS
No of Shareholders
%
No of Shares
%
Banks
Brokers
Close Corporations
Endowment Funds
Individuals
Insurance Companies
Investment Companies
Medical Aid Schemes
Mutual Funds
Nominees & Trusts
Other Corporations
Own Holdings
Private Companies
Public Companies
Retirement Funds
201
41
148
83
11 696
44
25
4
238
1 958
88
1
307
16
165
1.34
0.27
0.99
0.55
77.90
0.29
0.17
0.03
1.59
13.04
0.59
0.01
2.04
0.11
1.10
263 149 232
4 902 255
201 020
577 757
18 216 625
8 198 753
4 176 037
38 770
30 404 825
47 024 817
130 873
35 436 472
61 511 187
349 977
96 260 860
46.12
0.86
0.04
0.10
3.19
1.44
0.73
0.01
5.33
8.24
0.02
6.21
10.78
0.06
16.87
Totals
15 015
100.00
570 579 460
100.00
No of Shareholders
%
No of Shares
%
45
44
1
0.30
0.29
0.01
144 579 324
109 142 852
35 436 472
25.33
19.13
6.21
Public Shareholders
14 970
99.70
426 000 136
74.66
Totals
15 015
100.00
570 579 460
100.00
No of Shares
%
PUBLIC / NON – PUBLIC SHAREHOLDERS
Non – Public Shareholders
Directors of the company
Own Holdings
BENEFICIAL SHAREHOLDERS HOLDING 1% OR MORE
Wiese, CH
Government Employees Pension Fund
Capital Group
Shoprite Checkers (Pty) Ltd
Lazard
JPMorgan
Vanguard
BlackRock
Basson, JW
First State Investments
Fidelity
T. Rowe Price
Namibian Government Institutions Pension Fund
Totals
95
76
64
35
23
13
11
10
10
9
9
7
6
649
756
064
436
706
681
211
822
071
875
426
843
935
698
999
926
472
352
498
401
029
652
526
727
553
208
16.76
13.45
11.23
6.21
4.15
2.40
1.96
1.90
1.77
1.73
1.65
1.37
1.22
375 482 041
65.81
107
Notice to Shareholders:
Annual General Meeting (AGM)
Shoprite Holdings Ltd and its Subsidiaries as at June 2012
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
108
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 instructions it contains and returning it to the company secretary 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 shareholder 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 shareholders 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 reasonably satisfactory identification and the chairperson of the
meeting must be reasonably satisfied that the right of any
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
Shoprite Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1936/007721/06)
JSE share code: SHP
NSX share code: SRH
LUSE share code: SHOPRITE
ISIN: ZAE000012084
(“Shoprite Holdings” or “the Company”)
person to participate and vote has been reasonably verified.
Suitable forms of identification will include a valid identification 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 shareholder 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 professional 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 shareholders 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.
5.2 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 shareholders 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 shareholders 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.
5.4 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.
For ordinary resolution number 4 to be approved by shareholders 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.
5.5 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.
For ordinary resolution number 5 to be approved by shareholders 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.
5.6 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.
For ordinary resolution number 6 to be approved by shareholders 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.
5.7 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 shareholders 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
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.”
110
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.
For ordinary resolution number 8 to be approved by shareholders 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.
5.9 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 immediate 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 shareholders 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.
5.10 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 immediate 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 shareholders 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
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
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 shareholders 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 shareholders 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 discretion 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 shareholders” as defined in the JSE Listings Requirements
–
–
–
–
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 discretion 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 conversion 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 calculation 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, representing 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 determined or agreed by the directors of the Company.”
For ordinary resolution number 13 to be approved by shareholders it must in terms of the JSE Listings Requirements
be supported by more than 75% of the voting rights exercised on the resolution by shareholders present or represented 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 shareholders 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 remuneration 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 shareholders 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:
111
Notice to Shareholders (continued)
Shoprite Holdings Ltd and its Subsidiaries as at June 2012
Shoprite Holdings Board and Committee Fees
BOARD
Chairman of the Board
Lead Independent Director
Non-Executive Director
AUDIT COMMITTEE
Chairman
Member
112
2011/2012
2010/11
R273 000
R142 000
R129 000
R218 000
R113 000
R103 000
R193 000
R96 000
R154 000
R77 000
REMUNERATION COMMITTEE
Chairman
Member
R50 000
R30 000
—
—
NOMINATION COMMITTEE
Chairman
Member
R50 000
R30 000
—
—
SOCIAL AND ETHICS COMMITTEE
Chairman
R65 000
—
For special resolution number 1 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 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 interrelated corporation, or to a person related to any such
company, corporation, director, prescribed officer or
member , in one or more of the following forms:
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
–
–
–
–
–
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 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
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 financial 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
– 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.”
For special resolution number 3 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 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 instruments, 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 assistance 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 ordinary shares are acquired by the Company or its subsidiaries 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 repurchase, 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 paragraph 3.67 of the JSE Listings Requirements, unless
113
Notice to Shareholders (continued)
Shoprite Holdings Ltd and its Subsidiaries as at June 2012
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 aggregate of the initial number of that class acquired thereafter, an announcement will be made; and
– the Company only appoints one agent to effect any
repurchase(s) on its behalf.”
114
For special resolution number 4 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
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 circumstances 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 directors 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
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
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, representing 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.
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”.
For special resolution number 5 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 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: cosec@shoprite.co.za
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
115
Salient Features of the Shoprite Holdings Executive Share Plan
(“The Plan”) – Annexure A
1. INTRODUCTION
116
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
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
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 approximately 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 subsequently 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.
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, disability, 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 fulfilment 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 adjustment 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)]
117
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
118
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.
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
Table of contents
PART A – THE MOI AND RULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
1
2
3
4
Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
Conflicts with The MOI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
Amendment of The MOI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
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
9
10
11
12
13
14
15
16
17
18
19
20
Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
Rights of The Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
Variation of Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
Issue of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Register and Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Transfer of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Capitalisation Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
Acquisition of Shares Issued by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
Debt Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
Beneficial Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
Joint Holders of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
Legal Representatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
PART D – SHAREHOLDERS RIGHTS AND PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
21
22
23
24
25
26
27
28
29
30
31
Shareholders Right to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
Single Shareholder's Authority to Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
Proxy Representation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
Record Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
Shareholders Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
Notice of Shareholders Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
Conduct of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
Shareholder Meeting Quorum and Adjournment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
Chairperson of Shareholders Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
Shareholders Resolutions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
Written Resolutions by Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
PART E – DIRECTORS POWERS AND PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
32
33
34
35
36
37
38
39
40
41
42
Authority of the Board of Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
Appointment of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
Alternate Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
Board Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
Chairperson of The Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
Directors Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
Written Resolutions by Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
Executive Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
Payments to Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
Borrowing Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
Indemnification and Insurance for Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
PART F – GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
43
44
45
46
47
48
Financial Statements and Access to Company Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
Financial Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
Loss of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
Odd-Lots . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
119
Memorandum of Incorporation (continued)
PART A – THE MOI AND RULES
1 INTERPRETATION
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, –
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 incorporated 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 –
1.1 an expression that denotes –
120
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
1.2.7
1.2.8
1.2.9
1.2.10
“Commission” – the Companies and Intellectual
Property Commission established by section 185 of
the Companies Act;
“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;
1.2.16.1
an executor of the estate of a deceased
Shareholder, or a curator, guardian or trustee of
a Shareholder whose estate has been sequestrated 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;
“Company” – the Company defined as such on the
front page of this MOI;
1.2.17
“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;
“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;
“Deferred Share” – a non-convertible, non-participating, no par value deferred share in the share
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
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 corporation, company, concern, enterprise, firm, partnership, 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
1.2.23.2
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
anything falling within the meaning of the definition of “securities” as defined in section 1 of
the Securities Services Act;
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 definition, 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 representative;
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;
1.7 a reference to a “section” refers to the corresponding
section of the Companies Act;
1.2.28
“Shareholders Resolution” – an Ordinary
Resolution or Special Resolution;
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;
1.2.29
“STRATE” – Strate Limited, a licensed Central
Securities Depository, under the Securities Services
Act;
1.2.30
1.2.31
“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;
“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
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 interpretation of this MOI;
1.10 the headings of clauses in this MOI are for information
purposes only and shall not be used in the interpretation 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
121
Memorandum of Incorporation (continued)
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
where there is a conflict between a provision (be it
express or tacit) of this MOI and –
122
2.1 an Alterable Provision of the Companies Act, the provision 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
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 variation 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 accordingly 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 –
3.2.2
3.2.3
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
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
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
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
the Companies Act. In particular and without derogating 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.
within the same group as contemplated in paragraphs 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
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 otherwise agreed to by the JSE.
7 LIMITATION OF LIABILITY
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 circumstances;
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 registration 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:
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 consideration payable by the Company for any of its own
Shares or for any shares of a another company
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:
9.2.1.7.1
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
123
Memorandum of Incorporation (continued)
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 immediately prior to such disposal;
9.2.1.7.2
whenever the Company issues Ordinary Shares
(whether pursuant to a rights issue, as a capitalisation 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 subscription consideration;
124
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,
9.3.3
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 distribution 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 repayment 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.
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
9.3.2
The 6% preference shares shall carry the right out
of the profits from time to time available for distribution 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.
The 6% preference shares shall not be entitled to
participate further in the profits or surplus assets of
the Company.
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
The 6% 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
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.
9.5 Rights, privileges and conditions attaching
to the second 5% cumulative preference
shares of R2 each (“the second 5% preference 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 provisions of 9.5.2. The dividends in respect of the
second 5% preference shares shall be paid half-
yearly, namely on the last days of February and
August in each and every year.
9.5.2
9.5.3
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.
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.
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 rank for dividend 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 windingup 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, subsequent 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.
The second 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
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% preference shares shall not be entitled to participate
further in the profits or surplus assets of the
Company.
9.5.4
9.5.6
9.6.2
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 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 provisions 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.
9.6.4
The third 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 of
any financial year of the Company, or when a resolution 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 preference 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 –
125
Memorandum of Incorporation (continued)
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 exercised by the Shareholders, as contemplated in
clause 10.3.
126
10.2 Each Share issued by the Company shall entitle its
holder to vote on any proposal to amend the preferences, 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
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
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 separate 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 issuance 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,
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 absolutely or conditionally, for any Securities of the
Company.
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 requirements 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 accordance 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
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 established, 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.
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 accompanying 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
127
Memorandum of Incorporation (continued)
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 revocation.
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 –
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
128
15.1.2
have the power and the authority to approve the
issuing of any authorised Shares as capitalisation
shares; or
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 capitalisation 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 accordance 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 contemplated 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.
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
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 beneficial 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 entitled 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
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, sequestration, 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 personally 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 personally 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 withhold (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 obligation 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 registered holder of, or holds a beneficial interest in, any
Securities issued by the Company shall have the information 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 formalities, 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.
129
Memorandum of Incorporation (continued)
23 PROXY REPRESENTATION
23.7.2
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,
130
of that proxy was delivered to the Registered Office
of the Company (marked urgent and for the attention of the Company secretary, chairperson or
managing Director of the Company and accompanied 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.
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 postponement);
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
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
after midnight on the day on which the instrument
revoking the appointment (if revocable),
23.8 A proxy shall, as contemplated in section 58(7) of the
Companies Act, be entitled, in the Proxy’s own discretion, 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.
25 SHAREHOLDERS MEETINGS
25.1 The Company shall not be required to hold any meetings 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 contemplated 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 authorised 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 delivered in accordance with the provisions of clause 46.
27 CONDUCT OF MEETINGS
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 participating 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 accordingly.
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 information 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 determined 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.
27.1 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
27.6 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.
131
Memorandum of Incorporation (continued)
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
132
28.1.2
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
the consideration of a matter to be decided at the
meeting shall not begin or continue unless sufficient 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 automatically 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
28.2.2.2
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
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
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
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 adjournment 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 chairperson 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.
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
30.1.2
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
on a poll, to exercise the number of Voting Rights
associated with the Shares held by such
Shareholder, which Voting Rights shall be determined 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
30.2.2
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
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 entitled 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
30.6.2
an Ordinary Resolution to be approved, it must be
supported by more than 50% of the Voting Rights
exercised on the Ordinary Resolution, as contemplated in section 65(7); or
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.
133
Memorandum of Incorporation (continued)
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 constituted Shareholders Meeting.
134
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 Director32.3.1
that Director may exercise any power or perform
any function of the Board at any time, without
notice or compliance with any other internal formalities;
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
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 appointment 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.
33.5 The Directors shall retire from office in accordance
with the following provisions –
33.5.1
33.5.2
33.5.3
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;
the Directors to retire in terms of clause 33.5.1 shall
exclude any Chief Executive Officer and any executive 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;
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
33.7.2
the Directors nominate or recommend such person
for election (which may take place at any time prior
to the Annual General Meeting) ; or
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 recommendation 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 disqualification 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 disqualification provisions of the Companies Act and clause 33.13.
135
Memorandum of Incorporation (continued)
33.15 Section 70 of the Companies Act shall apply to any
vacancy on the Board which may arise from time to
time.
136
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 accordance 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.
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 agreement between them, the most senior of them in
age shall act in the place of that Director; and
34.2.2
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 ineligible or disqualified to be a director in terms of
section 69 of the Companies Act, in such committees, but such Person has no vote on any matter to
be decided by the committee,
34 ALTERNATE DIRECTORS
34.1 The appointment of an Alternate Director shall terminate –
34.1.1
34.1.2
when the Director to whom he is an Alternate
Director ceases to be a Director; or
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 generally 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,
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
in all respects be subject to the terms and conditions 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.
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 established 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
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 chairperson 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 chairperson 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.
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 participating 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.
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
37.4 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 automatically 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.
37.1 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,
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 resumption of the meeting and the business to be dealt with
137
Memorandum of Incorporation (continued)
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.
138
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 circumstances 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 remuneration and otherwise as may be determined from
time to time by a disinterested quorum of the Board.
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
37.7.2
any declaration given by notice or made by a
Director, as required by section 75 of the
Companies Act; and
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 resolution, 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.
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
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 remuneration 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
40.3.3
otherwise perform services which, in the opinion of
the Directors, are outside the scope of the ordinary
duties of a Director,
42.2.2.2
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.
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 –
41 BORROWING POWERS
42.2.4.1
The –
arise in respect of any liability for which the
Company may indemnify the Director, in terms
of 42.2.3;
a Director against any liability or expense for
which the Company is permitted to indemnify
the Director in accordance with 42.2.3;
41.1 borrowing powers of the Company; and
42.2.4.2
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
42.2.4.2.1
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 contemplated in sections 78(4), 78(5) and 78(7) of the
Companies Act, –
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
42.2.2
42.2.2.1
advance expenses to a Director to defend litigation
in any proceedings arising out of the Director’s
service to the Company; and
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 –
are abandoned or exculpate that Director; or
any liability for which the Company is
permitted to indemnify a Director in accordance 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 reasonably 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
42.2.1
any expenses –
42.2.4.2.1.1
42.1 For the purposes of this 42, a Director includes –
42.1.1
the Company against any contingency,
including –
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 recklessness on the part of that Director, or
42.3.1.3
arising from any loss of or damage to reputation;
139
Memorandum of Incorporation (continued)
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 insurance 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
140
42.3.3
42.3.3.1
42.3.3.2
42.3.3.2.1
each Director’s right to be indemnified by the
Company in terms of this clause 42 shall exist automatically 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;
if any claim is made against a Director in respect of
any Indemnified Loss, then –
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;
42.3.3.2.2
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 documents 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, notwithstanding 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 agreement 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.
the Company shall, at its own expense and with
the assistance of its own legal advisers, be entitled 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 –
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;
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
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.
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 authorised 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,
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.
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 therefore 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.
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.
45.6 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.
141
Memorandum of Incorporation (continued)
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 applicable, date of confirmation of the Distribution, whichever is the later date.
46 NOTICES
46.1 Any notice that is required to be given to Shareholders
or Directors –
46.1.1
142
46.1.2
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
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
46.2.2
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
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 entitled 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.
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
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 satisfaction 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 notwithstanding any transfer of the Securities was not registered 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 interested 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 document 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.
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.
143
Shoprite Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1936/007721/06)
JSE share code: SHP
NSX share code: SRH
LUSE share code: SHOPRITE
ISIN: ZAE000012084
(“Shoprite Holdings” or “the Company”)
Form of Proxy
Shoprite Holdings Ltd
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
144
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 Statements
Ordinary resolution number 2: Re-appointment of Auditors
Ordinary resolution number 3: Re-election of Mr J G Rademeyer
Ordinary resolution number 4: Re-election of Mr E L Nel
Ordinary resolution number 5: Re-election of Mr A E Karp
Ordinary resolution number 6: Re-election of Mr J J Fouché
Ordinary resolution number 7: Re-election of Mr J A Rock
Ordinary resolution number 8: Re-election of Dr A T M Mokgokong
Ordinary resolution number 9: Appointment of Mr J G Rademeyer as Chairperson and Member of
the Shoprite Holdings Audit Committee
Ordinary resolution number 10: Appointment of Mr JA Louw as Member of the Shoprite Holdings
Audit Committee
Ordinary resolution number 11: Appointment of Mr JF Malherbe as Member of the Shoprite
Holdings Audit Committee
Ordinary resolution number 12: General Authority over Unissued Ordinary Shares
Ordinary resolution number 13: General Authority to Issue Shares for Cash
Ordinary resolution number 14: General Authority to Directors and/or Secretary
Ordinary resolution number 15: Approval of Executive Share Plan
Resolution number 16: Non-binding Advisory Vote: Endorsement of Remuneration Policy
Special resolution number 1: Remuneration Payable to Non-executive Directors
Special resolution number 2: Financial Assistance to Subsidiaries, Related and Inter-related Entities
Special resolution number 3: Financial Assistance for Subscription of Securities
Special resolution number 4: General Approval to Repurchase Shares
Special 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
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
Please read the notes and instructions on following page.
NOTES TO FORM OF PROXY
1. This form of proxy must only be used by certificated ordinary shareholders or dematerialised ordinary shareholders who hold dematerialised 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 insertion 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 appointment 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 alternative 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 resolution 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 accordance 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.
145
Administration
Shoprite Holdings Ltd
REGISTRATION NUMBER
SPONSORS
1936/007721/06
South Africa
REGISTERED OFFICE
Nedbank Capital
PO Box 1144, Johannesburg, 2000, South Africa
Telephone: +27 (0)11 295 8525
Facsimile: +27 (0)11 294 8525
Website: www.nedbank.co.za
Physical address: Cnr William Dabs and Old Paarl Roads
Brackenfell, 7560, South Africa
Postal address: PO Box 215, Brackenfell, 7561, South Africa
Telephone: +27 (0) 21 980 4000
Facsimile: +27 (0) 21 980 4050
Website: www.shopriteholdings.co.za
Namibia
Old Mutual Investment Group (Namibia) (Pty) Ltd
PO Box 25549, Windhoek, Namibia
Telephone: +264 (0) 61 299 3264
Facsimile: +264 (0) 61 299 3528
COMPANY SECRETARY
146
Mr P G du Preez
Physical address: Cnr William Dabs and Old Paarl Roads
Brackenfell, 7560, South Africa
Postal address: PO Box 215, Brackenfell, 7561, South Africa
Telephone: +27 (0) 21 980 4284
Facsimile: +27 (0) 21 980 4468
E-mail: cosec@shoprite.co.za
Zambia
ShareTrack Zambia
PO Box 37283, Lusaka, Zambia
Telephone: +260 (211) 236 783
Facsimile: +260 (211) 236 785
TRANSFER SECRETARIES
AUDITORS
South Africa
PricewaterhouseCoopers Incorporated
PO Box 2799, Cape Town, 8000, South Africa
Telephone: +27 (0) 21 529 2000
Facsimile: +27 (0) 21 529 3300
Computershare Investor Services (Pty) Ltd
PO Box 61051, Marshalltown, 2107, South Africa
Telephone: +27 (0) 11 370 5000
Facsimile: +27 (0) 11 688 5248
Website: www.computershare.com
BANKERS
ABSA Bank Ltd
Citibank N.A.
First National Bank Ltd
HSBC Ltd
Investec Bank Ltd
Nedbank Ltd
Old Mutual Specialised Finance (Pty) Ltd
The Standard Bank of South Africa Ltd
Standard Chartered Bank PLC
Namibia
Transfer Secretaries (Pty) Ltd
PO Box 2401, Windhoek, Namibia
Telephone: +264 (0) 61 227 647
Facsimile: +264 (0) 61 248 531
Zambia
ShareTrack Zambia
PO Box 37283, Lusaka, Zambia
Telephone: +260 (211) 236 783
Facsimile: +260 (211) 236 785
Shareholders’ Diary
June
August
September
October
December
February
March
Financial
year-end
Reviewed
results
Publishing of
integrated report
Annual General
Meeting
End of financial
half-year
Interim results
Payment of
preference
dividend
Payment of
preference
dividend
Payment of final
ordinary dividend
SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012
Payment of
interim ordinary
dividend