RETAILER FOOD LARGEST INTEGRATED REPORT 2012

AFRICA’S

ZIMBABWE 1 29

UGANDA 3 3

SWAZILAND 13 TANZANIA

NIGERIA 5 54 11

MAURITIUS 3

MALAWI 5

MADAGASCAR 7 16

GHANA 3

DRC 2 15 22 1142 SOUTH AFRICA 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 to Accra and on some Indian Ocean islands. Management’s goal is to provide all communities in Africa with food and household items in a fi rst-world shopping environment, at the lowest prices. At the same time the Group is inextricably linked to Africa, contributing to the nurturing of stable economies and the social upliftment of its people.

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 Contents ...... 38 The Group ...... 4 Financial Highlights ...... 6 Shareholder Information Value-added Statement ...... 7 Shareholder Analysis ...... 107 Board of Directors ...... 8 Notice to Shareholders ...... 108 Chairman’s Report ...... 10 Memorandum of Incorporation ...... 118 Chief Executive’s Report ...... 12 Form of Proxy ...... 144 Five-year Financial Review ...... 16 Administration ...... 146 Financial Report ...... 17 Shareholder’s Diary ...... 146 Non-Financial Report ...... 20

Governance Corporate Governance Report ...... 24 Audit and Risk Committee Report ...... 28 Nominations Committee Report ...... 30 Social and Ethics Committee Report ...... 30 Remuneration Report ...... 31 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 Shoprite Investments Ltd Company Ltd Has operations in: Has operations in: South Africa Zambia Namibia Mozambique Swaziland Botswana Lesotho 100% Tanzania Computicket (Pty) Ltd Angola Has operations in: Zimbabwe South Africa Namibia Democratic Republic of Congo

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Distribution of Operations

Nigeria

Ghana Uganda

DRC Tanzania Total 1 334 Malawi Mozambique corporate Angola Zambia stores. Zimbabwe Mauritius 3 Botswana Madagascar Namibia Swaziland Lesotho

South Africa Shoprite Checkers Checkers Hyper Usave OK Furniture OK Power Express House & Home Hungry Lion OK Foods OK Grocer OK Minimark OK Value Megasave Sentra Friendly Stores OK Enjoy Friendly Liquor Shoprite LiquorShop Checkers LiquorShop Shoprite MediRite Checkers MediRite South Africa 339 162 28 215 216 16 46 120 13 76 27 26 20 56 111 18 11 94 68 44 88 Angola 5 9 4 4 2 Botswana 5 1 3 6 1 7 1 1 DRC 1 1 Ghana 2 1 Lesotho 4 4 5 1 2 Madagascar 7 Malawi 2 3 Mauritius 3 Mozambique 5 3 3 Namibia 14 4 17 10 2 7 2 9 2 4 10 11 2 1 Nigeria 5 Swaziland 6 3 3 1 2 Tanzania 3 Uganda 3 Zambia 19 1 1 8 Zimbabwe 1 Outside SA 85 5 44 32 1 3 30 2 9 2 4 11 12 2 1 4 Total 424 167 28 259 248 17 49 150 15 85 29 30 31 68 111 18 11 96 69 48 88

ECONOMIC OVERVIEW

Angola Botswana DRC Ghana Lesotho Madagascar Malawi Mauritius Mozambique Gross domestic product, constant 3,404 4,621 5.735 13,606 4,198 0,539 5,482 4,111 7,145 prices (% change) Inflation, average consumer prices 13,5 8,464 10.709 8,725 5,623 10,556 7,62 6,537 10,351 (% change) Population (millions) 19,625 1,853 23 699 24,304 1,941 21,851 16,166 1,289 22,017

Namibia Nigeria South Africa Swaziland Tanzania Uganda Zambia Zimbabwe Gross domestic product, constant 3,614 7,19 3,148 0,274 6,671 6,689 6,565 9,319 prices (% change) Inflation, average consumer prices 5,75 10,841 4,999 6,105 7,029 6,524 8,659 3,47 (% change) Population (millions) 2,138 160,342 50,591 1,176 42,176 35,201 13,585 12,575

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

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 The Group

Brand Summary Target market Store numbers

LSM 4-7 RSA: 339 Non RSA: 85 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. 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 RSA: 162 Non RSA: 5 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 RSA: 28 Non RSA: 0 Checkers Hyper offers the same specialty food selections and great value as Checkers, but within large-format stores that encourage bulk rather than convenience shopping. The general merchandise ranges are far wider in Hyper stores, focusing on categories like small appliances, pet acces- sories, garden and pool care, outdoor gear, home improvement, home- ware, baby products, toys and stationery. Checkers Hyper stores operate in South Africa only and are found in areas with high population densities. Total: 28

LSM 5-7 RSA: 216 Non RSA: 32

The OK Furniture chain, with its wide geographic spread of stores, strives to offer a wide range of furniture, electrical appliances and home entertainment products at the lowest prices with impeccable service, at discounted prices, for cash or on credit. It sells quality cheaply not cheap quality. Total: 248

LSM 5-7 RSA: 16 Non RSA: 1

A chain of small-format stores located mainly in high-density areas, selling a carefully selected range of white goods and home entertainment products as well as bedding and carpeting, for cash or competitive credit options. Total: 17

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Brand Summary Target market Store numbers

LSM 7-10 RSA: 46 Non RSA: 3

House & Home offers its consumers a quality shopping experience with a large selection of affordable, exclusive and well-known ranges of furniture, appliances, home entertainment products and floor coverings. Total: 49

Same as RSA: 132 Shoprite and Non RSA: 4 Now, with over 130 pharmacies, MediRite is on its way to becoming the Checkers most convenient pharmacy for millions of South African grocery shop- 5 pers. MediRite Pharmacies inside Shoprite and Checkers stores meet the growing need for easily accessible and affordable healthcare for all our customers. Many of our pharmacies are located in supermarkets serving previously disadvantaged areas where there are few medical practitioners. Total: 136

Same as RSA: 162 Shoprite and Non RSA: 3 Checkers

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. Total: 165

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

The various store formats, RSA: 358 with their Non RSA: 40 different identities and facilities, cater to the The OK Franchise Division (OKFD) enabled the Group to gain a foothold needs of the in a diverse range of mostly smaller, convenience-oriented markets community in situated in rural towns, suburbs and neighbourhoods. The stores offer a which they are wide range of fresh and non-perishable food items, as well as non-foods. located. These The OKFD encompasses ten supermarket and convenience outlet range from lower formats under the OK and Friendly brands, a wholesaler (Megasave), to middle income and two add-on liquor outlets (Enjoy OK Liquor Store, Friendly consumers, Liquormarket). The OK brand is only awarded to outlets that meet living standards specific requirements. measurement 4 to 8, and from convenience shopping to bulk buy. Total: 398

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Financial Highlights Shoprite Holdings Ltd and its Subsidiaries

June June % 2012 2011 increase R’000 R’000

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

PERFORMANCE MEASURES Headline earnings per share (cents) 19.6 607.0 507.6 Dividends per share declared (cents) 19.8 303.0 253.0 Dividend cover (times) 2.0 2.0 6 Trading margin (%) 5.64 5.51 Return on average shareholders’ equity (%) 26.0 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.

NUMBER OF CORPORATE STORES SALES

1 400 90 000 1 334 82 730 1 300 1 246 80 000 72 297

1 200 1 166 67 402 1 100 1 079 70 000 59 319 1 000 984 917 60 000

900 846 47 652 800 766

704 50 000

700 38 950 40 000

600 33 511 R MillionR 29 704

500 30 000 26 641 400 300 20 000 200 10 000 100 0 0 2011 2011 2012 2012 2010 2010 2007 2007 2005 2005 2008 2009 2008 2009 2004 2006 2004 2006

SHOPRITE HOLDINGS LTD SHARE PRICE

16 000 14 000 12 000 10 000 8 000 Cents 6 000 4 000 2 000 0 Jun 11 Jun 12 Jun 10 Jun 07 Jun 02 Jun 05 Jun 03 Jun 08 Jun 09 Jun 04 Jun 06 Dec 11 Dec 10 Dec 07 Dec 02 Dec 05 Dec 03 Dec 08 Dec 09 Dec 04 Dec 06

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Value-added Statement Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012

June June 2012 2011 R’000 % R’000 %

Sale of merchandise 82 730 587 72 297 777 Investment income 224 425 122 277 Cost of goods and services (70 135 100) (61 341 791) VALUE ADDED 12 819 912 100.0 11 078 263 100.0

Employed as follows:

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

PROVIDERS OF CAPITAL 1 645 161 12.8 1 315 375 11.8 7 Finance costs to providers of funds 223 563 1.7 125 964 1.1 Dividends to providers of share capital 1 421 598 11.1 1 189 411 10.7

INCOME 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 2 805 071 21.9 2 326 811 21.0 Depreciation and amortisation 1 200 106 9.4 1 006 442 9.1 Retained earnings 1 604 965 12.5 1 320 369 11.9

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

2012

2011

21.9% Reinvested

21.0% Reinvested 11.2% Income tax 54.1% Employees 12.2% Income tax 55.0% 12.8% Employees Providers 11.8% of capital Providers of capital

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Board of Directors Shoprite Holdings Ltd

EXECUTIVE DIRECTORS

Dr JW Basson (66) Mr BR Weyers (60) BCom CTA CA(SA) DCom (hc) General Manager: Marketing Chief Executive Officer & Product Development – Joined Pep Stores Ltd as financial – Joined the Shoprite Group in 1980. manager in 1971. – Appointed as director of Shoprite – Appointed as Chief Executive Officer Holdings in 1997. of Shoprite Holdings in 1979. – Director of Shoprite Checkers (Pty) Ltd. – Managing director of Shoprite – Serves on the Social and Ethics Checkers (Pty) Ltd. Committee.

Mr CG Goosen (59) EXECUTIVE ALTERNATE BCom Hons CA(SA) DIRECTORS 8 Deputy Managing Director and Financial Director Mr JAL Basson (36) – Joined the Pepkor Group as financial B Acc manager in 1983. General Manager: Hungry Lion – Appointed as financial director of – Appointed as Shoprite Holdings Shoprite Holdings in 1993. alternate director in 2005. – Director of Shoprite Checkers (Pty) Ltd – Director of Shoprite Checkers (Pty) Ltd and various other group subsidiaries. and various other group subsidiaries. – Serves on the Social and Ethics Mr B Harisunker (60) Committee. Divisional Manager – Joined Checkers in 1969. Mr M Bosman (55) – Appointed to the board of Shoprite B Acc Hons CA(SA) Holdings in 2002. General Manager: Group Finance – Director of Shoprite Checkers (Pty) Ltd – Appointed as Shoprite Holdings alternate and various other group subsidiaries. director in 2005. Responsible for the group’s retail – Director of Shoprite Checkers (Pty) Ltd operations in Mauritius, Madagascar and various other group subsidiaries. and Mozambique and international – Serves on the Social and Ethics sourcing. Committee.

Mr AE Karp (53) Mr PC Engelbrecht (43) General Manager: Furniture Division BCompt Hons CA(SA) – Joined OK Bazaars during 1990. Chief Operating Officer – Appointed to the board of Shoprite – Appointed as Shoprite Holdings alternate Holdings in 2005. director in 2005. – Director of Shoprite Checkers (Pty) Ltd – Director of Shoprite Checkers (Pty) Ltd and various other group subsidiaries. and various other group subsidiaries.

Mr EL Nel (63) NON-EXECUTIVE DIRECTOR BCom CTA CA(SA) General Manager: Retail Investments Dr CH Wiese (70) – Joined the Shoprite group in 1997. BA LLB DCom (hc) – Appointed to the board of Shoprite – Appointed as Chairman of Shoprite Holdings in 2005. Holdings in 1991. – Director of Shoprite Checkers (Pty) Ltd – Chairs the Remuneration and and various other group subsidiaries. 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.

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 INDEPENDENT NON-EXECUTIVE DIRECTORS

Mr JG Rademeyer (63) Mr JF Malherbe (83) BCom CTA CA(SA) BCom LLB – Appointed as director of Shoprite – Appointed as a director of Shoprite Holdings in 2002. Holdings in 1999. – Lead Independent director and Chairperson – Serves on the Audit and Risk Committee. of 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 Dr ATM Mokgokong (55) – Re-appointed as director of Shoprite MB ChB, D Comm (hc) 9 Holdings in 2012. – Appointed as a director of Shoprite – Former member of the Shoprite Holdings Holdings in 2012. Audit and Risk, Remuneration and – Executive Chairperson of Community Nomination Committees. Investment Holdings (Pty) Ltd and – Serves as a non-executive director of Non-Executive Chairperson of Rebosis Pepkor Holdings Ltd. Property Fund Ltd and Jasco Electronics Ltd. Mr EC Kieswetter (53) – Serves on the boards of Afrocentric Ltd B Ed (Science Education) and Medscheme Ltd. MCom (cum laude) (SA and – Serves on the advisory committee of International Tax) the University of Pretoria within the Executive MBA (Strategy and Business Department of Economic and Transformation) (UK) Management Sciences. MA (Science Education – Cognitive Development) Mr JA Rock (42) – Appointed as a director of Shoprite BA (Hons), MA, ACA Holdings in 2010. – Appointed as a director of Shoprite – Serves on the Nomination and Holdings in 2012. Remuneration Committees. – Qualified chartered accountant. – Group Chief Executive of Alexander – Previous Group Executive at SARS. Forbes Equity Holdings (Pty) Ltd – Currently appointed as General Manager and holds various directorships at Exxaro Services. within Alexander Forbes group subsidiaries. NON-EXECUTIVE ALTERNATE – Previous Deputy Commissioner at DIRECTOR SARS and member of National Treasury Tax Revenue Committee. Adv JD Wiese (31) BA, MIEM (Italy), LLB Mr JA Louw (68) – Appointed as alternate director of BSc Hons B(B&A) Hons Shoprite Holdings in 2005. – Appointed as director of Shoprite – Serves on the boards of various listed Holdings in 1991. companies. – Chairperson of the Social and – Advocate of the High Court of Ethics Committee. South Africa. – Serves on the Audit and Risk, Remuneration and Nomination Committees. – Holds directorships in various private companies.

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Chairman’s Report

we are doing. They learn about the opportunities we offer from our ongoing communications across all the institutions for higher education in our country, yielding for us a rich harvest of talented young people whose skills can be moulded and refined to fit the needs of the Group. As a result we have an enviable depth of management to grow the business. For us, the benefits of innovation can only be realised fully if supported by our own infrastructure and that is what we create and maintain in every market where we operate. Competition in food retailing is relentless, so it is critical that we retain our leadership position by staying at the cutting edge of developments, from applying the most advanced information systems to monitoring changes in consumer preferences and advances in store design and layout. This we achieve through ongoing research, exposure to global trends and 10 CH Wiese 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 SOUTH AFRICA AND THE GLOBAL time, we never veer from our primary business namely ensuring ECONOMIC ENVIRONMENT quality food at the lowest possible prices. Since our previous report, there has not been any material improve- ment in the global environment in which South Africa trades. In the SUSTAINABILITY European Union, collectively the country’s largest trading partner, the The Non-financial Report on page 20 describes the considerable crisis seems to be deepening as the fear of member countries progress we have made in the course of the reporting period in defaulting spreads from Greece to Italy to Spain. In the East the placing the sustainability of the business on a more structured Chinese economy has slowed and so has the demand for raw mate- footing. In the report we identify the issues that underlie our financial rials. The one area of steady growth, albeit off a low base, has been performance and further clarify our strategic response to the Africa. The IMF predicts that for at least the next five years, Africa challenges we face in ensuring our continued profitable growth. will remain the focus of the fastest economic growth, with seven of One of the major steps we took to formalise our response was by the world’s ten fastest developing economies now on this continent. establishing a Social and Ethics Committee whose task it is to ensure South Africa, the continent’s largest economy, has not been faring that we manage our business holistically and operate in a respon- quite as well. Exports to traditional markets so far this year have been sible, ethical and sustainable manner. It works alongside and in close below 2011 levels. Economic growth has been lacklustre and official collaboration with the Audit and Risk Committee and oversees the projections for the year have been adjusted downwards more than people side of what we do in the same way as the Audit and Risk once. Structural problems in the economy and labour regime Committee oversees the financial side. constraints are but two of the factors hampering growth. According to market research, 67% of the country’s adult Unemployment amongst those actively seeking jobs, dropped population buy groceries from our stores. That is more than 23 million marginally from 25,2% to 24,9% in the second quarter of this year people. I find that quite humbling and also intimidating in terms of the but remains unacceptably high. Employment initiatives announced by responsibility it places on us to provide these consumers with quality the Government in February this year are hopefully still to take effect. food at prices they can afford. We established a food safety manage- In the meantime, the number of recipients of social grants has ment system run nationally by a team of food technologists to ensure increased to 15,3 million. Although unsustainable at this level in the products we sell conform to the highest food safety standards. And long run given the country’s limited tax base, these grants are also all we continue to invest billions in infrastructure that guarantees those that stands between a great many people and dire poverty. products reach consumers on time, in prime condition and at afford- able prices. THE GROUP AND AFRICA The board is deeply concerned about the high level of unemploy- Despite the rather gloomy predictions for the world economy, there ment in the country, especially as those most affected are young are many reasons why we as a board believe Shoprite will continue people who have just come into the labour market. The board has to do well into the future. Part of the reason for our optimism is our therefore declared itself willing to support the Government in any of active involvement on the continent of Africa. There should be no its initiatives aimed at creating meaningful employment for young doubt that there are formidable challenges inherent in trading here. people in a business environment. We stand ready to do our bit. Our experience of almost two decades in Africa, I believe, has also helped us contend with the challenges posed by the present BROAD-BASED BLACK ECONOMIC economic environment, for the continent has toughened us and EMPOWERMENT (B-BBEE) taught us how to trade successfully under often taxing conditions. We firmly believe Broad-based Black Economic Empowerment It has taught management to innovate – if you cannot, you don’t (B-BBEE) is fundamental to ensuring the economic democratisation survive – and to think creatively. of this country. We are therefore committed to integrating This need to be innovative or go under has created a very special trans formation into our business strategies at all levels. One aspect breed of managers at the Shoprite Group. It is an approach that has of this process is the training and fast-tracking of black management. also attracted young, adventurous people wanting to be part of what Another is preferential procurement and in the past year we more

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 than doubled to R42 billion the value of products acquired from a nominal value of R4,7 billion. The bonds, which may be converted suppliers with B-BBEE credentials. A third is the Shoprite to Shoprite shares during the life of the bond, carry semi-annual Development Trust which has invested R70 million in enterprise interest of 6,5% per annum and will be redeemable at par in April development. 2017, unless converted into shares at the election of the bond holder. The Group has thus qualified as a Level 4 B-BBEE contributor, The new capital and loan funding strengthened our balance sheet compared to Level 6 attained in the previous financial year. and is being used to accelerate our expansion plans in South Africa The Sustainability Report published on our corporate website and the rest of Africa in terms of new stores and infrastructure. It will www.shopriteholdings.co.za sets out in greater detail the progress also enable us to selectively pursue acquisition opportunities that that had been made. present themselves in the future.

BOARD OF DIRECTORS ACKNOWLEDGMENT The board is in the process of being restructured. In the course of We could not have achieved the results we did this past year if it the year two new directors were appointed. They are Mr JA Rock had not been for a supreme effort by people at all levels of the and Mr J Fouché. Mr Rock, a chartered accountant and a past group organisation. I am particularly indebted to my fellow board members executive of the South African Revenue Service, is presently the for the clear direction they have provided in a challenging and ever- 11 general manager of Exxaro Services, a listed empowerment group changing environment; to management for the success with which in the mining sector. Mr Fouché, who has a legal background, was they brought to reality the board’s vision for the Group, and to every re-appointed to the board after retiring in 2008, following 17 years of member of staff who simply put their heads down and worked to service. After year-end it was announced that Dr Anna Mokgokong ensure the success we have enjoyed this past year. I extend my had been appointed as the Group’s first female main-board director. gratitude to all of them. Dr Mokgokong, South African Business Woman of the Year in 1999, is the co-founder and chairwoman of Community Investment Holdings.

CAPITAL RAISING In March this year, Shoprite Holdings undertook a successful capital raising of about R8 billion by way of a concurrent share and convert- C H Wiese ible bond offering. To this end the company issued 27,1 million new Chairman 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 20 August 2012

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 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 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 12 JW Basson 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 BUSINESS ENVIRONMENT defined by the Living Standards Measure (LSM). Although each Competition among food retailers across the spectrum became more serves its own particular target group there is nevertheless consider- intense during the 12 months to June 2012 at both the top and able overlap in customers, determined by factors such as location bottom end of the market. The Group nevertheless maintained its and brand loyalty. price advantage in the market without sacrificing profitability due to While Shoprite, the largest of the three in terms of turnover and the efficiency of its supply chain which enables it to maintain high the number of stores, is aimed at the mass middle market, some service levels. 14% of its shoppers fall in the category LSM 8 to 10. This is a result South African consumers continued to face persistent high levels of the chain’s strategy introduced a number of years ago to retain its of unemployment, rising electricity, schooling and transport costs, traditional customers even as they become more affluent by and the impact of a weaker rand which affected the prices of all upgrading the shopping environment and also stocking aspirational imports. Inflation increased across the spectrum, but food was products in addition to its wide range of staple foods. During the particularly hard hit with official food inflation increasing from 3,2% to year it continued to expand its presence in previously marginalised 8,8% during the period under review. However, the government residential areas providing a standard of neighbourhood food played its part in assisting consumers and the economy by keeping shopping not hitherto available to residents. interest levels at their lowest in 30 years while continuing the The strength of the Shoprite brand continues to be a major factor payment of social grants from child maintenance to old age pensions, in its success. This was confirmed when, according to both the to an increasing number of low-income recipients. Sunday Times Top Brands awards and The Times/Sowetan Retail Consumers elsewhere in Africa, whose predominantly cash-based Awards in 2011, South Africans rated Shoprite as the No 1 super- societies are in the main further removed from the fall-out of Europe’s market for the 5th consecutive time and No 1 in all five grocery cate- escalating sovereign-debt crisis, had an easier time of it. They bene- gories including overall customer experience, respectively. After year- fited from imports at reduced prices from South Africa due to a end it was announced that Shoprite was again the winner, for the weaker rand and saw fewer pressures on their growing middle class. third consecutive year, in the convenience and grocery store category of the 2012 Sunday Times Top Brands Awards, of which the winners OPERATIONAL REVIEW are voted in by consumers. The past 12 months was a gratifying period that saw the Group Despite increasing competition, Checkers continued to expand its appointing its 100 000th employee, having created more than 7000 customer base in the higher LSM categories and to maintain its new jobs due to its successful expansion programme – this in a time position for the fourth year running as the fastest-growing national when unemployment in the country remains at an unacceptably high food chain in its segment of the market, growing turnover of both level. Of our employees, 99% are recruited from the communities supermarkets and hypers by 11,9%. It is constantly expanding where our stores are located in the 17 countries in which we do product ranges in its chosen specialist areas such as estate wines, business. Most of our employees come from previously disadvantaged exotic cheeses and branded meat products, and introducing new communities; all of them have now been provided with a viable specialist categories linked to a modern lifestyle. In addition to financial future. To enable those 100 000 staff members to offer communicating with its target audience through the conventional customers the best possible service, we provided more than 200 000 channels of the printed media, radio and television, the chain is also training interventions. increasingly reaching out to especially younger consumers through The Group’s average internal food inflation in its South African the social media. supermarkets increased from -0,1% in the previous year to 4,9%, With sales in excess of R4 billion Usave has become a meaningful which was kept substantially below the country’s official food price niche player in domestic food retailing and a significant business inflation. This reflects positively on the Group’s commitment to keep within the Group. It continued its fast growth rate of the past by food prices low and will stand consumers in good stead in the opening a net 24 new outlets during the period under review and coming year if the speculated price increases become a reality to the increasing turnover by 19,9%. It now operates 215 strategically extent of economists’ recent forecasts. located stores in South Africa. Its predominantly small-format stores

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Being in control of every aspect of the supply chain, manage- ment can ensure a high level of product availability on-shelf and because of the effi ciency of its operations, the Group can maintain its low price-positioning to the benefi t of consumers.

remain rigorously focused on value and price. At the same time which encompasses all major educational institutions in the country. management is also experimenting with additional formats to The most suitable candidates are recruited and undergo, like all other increase the chain’s appeal to a larger audience. staff members, regular focused training to equip them for a future In the 12 months to June the Group opened a net 61 new leadership role in the business. supermarkets of which 44 are in South Africa, bringing its total 13 supermarket compliment to 875. It is planning to open a further COMPLEMENTARY SERVICES 103 new stores in the 2013 financial year. This rate of growth is made To strengthen the concept of one-stop shopping in the minds of possible by existing infrastructure with the capacity to service new consumers several years ago the Group introduced the Money stores without significant additional investment. Market concept in its two major chains. These Money Markets, Management is confident about the future of its supermarket which are manned by specially trained members of store staff, offer a operations where the focus will remain on service and price constantly expanding range of services from bus, flight and theatre leadership. Being in control of every aspect of the supply chain, tickets to the payment of utility accounts and traffic fines. The ability management can ensure a high level of product availability on-shelf to transfer money to anywhere in the country continues as a highly and because of the efficiency of its operations, the Group can prized service for those consumers without access to banking maintain its low price-positioning to the benefit of consumers without facilities, and every month millions of consumers now make use of compromising its profitability. this facility at our stores. This efficiency is equally dependent on the quality of the people The objective of expanding supporting services in such a way that employed and the extent to which their skills are developed and consumers can concentrate their shopping in a single store was honed. The Group operates a graduate recruitment programme taken further a few years ago with the establishment of what are

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Chief Executive’s Report (continued)

today two fully-fledged businesses in their own right: MediRite, a stores is sourced from local suppliers. In the case of fresh produce, chain of full-service in-store pharmacies and LiquorShop. almost 80% of what is sold in its supermarkets in Zambia is provided At 30 June 2012 MediRite had a presence in 136 Shoprite and by local growers to the specifications set by the Group; in Nigeria the Checkers stores, having opened a net 15 new pharmacies during a figure is already close to 60% while in Angola it is nearing 50%. year in which it also established a presence for the brand in Angola. By operating in a number of markets, the Group is largely buffered The value of the healthcare advice provided by MediRite’s trained against the fall-out from an economic downswing in one or two of pharmacists at the request of customers in areas where medical them. Entry barriers to trading in Africa remain high. After almost two services are limited, is confirmed on an almost daily basis while the decades Shoprite has gained the experience and knowledge of number of prescriptions filled by staff increased to 3,2 million. trading successfully beyond its home-base. Its main focus for growth MediRite is also strengthening its relationship as a preferred provider remains the resource-rich countries of West Africa as well as some with a number of medical aid societies for whom the size of its SADEC countries in which it is already well established. During the footprint is of material importance in the distribution of chronic year much work was done expanding and improving supply lines into medication. To this end management is investigating additional Africa to support a faster rate of growth. formats that could further increase its footprint. 14 MediRite pharmacies are provisioned for more than 95% of its GROUP SERVICES products by its wholesale division, Transpharm. Following the In the past year the Group spent close on R1 billion on further takeover, the latter has managed to rebuild its client base to a large extending its centralised distribution facilities. The size of the main extent, and in the period under review reported particularly strong Cape Town distribution centre (DC) was doubled following the growth in the Western Cape. massive expansion of its single-roof Centurion facility to 140 000m² Developing our pharmaceutical interests in South Africa is at in 2011. In the year to June 2013, new DCs will come on stream in present being hampered by factors such as medicine price Cape Town, Durban and Port Elizabeth. The latest technological regulation. However, MediRite expects to benefit substantially developments are incorporated in the design of all three. from the Government’s intended National Health Plan that will The extent and sophistication of its supply chain gives the Group a provide essential health care to everyone. substantial advantage which in the long run substantially exceeds the LiquorShop not only supplement wine sales inside the super- cost of the initial investment. With the efficiencies achieved the market with their own extensive range of wines but add to that an Group can provision its stores quicker and more efficiently than when extensive product mix of spirits, beers and ciders in an upmarket suppliers do so directly with the result that product availability is environment that offers consumers a relaxed shopping experience. greatly improved. The Group’s DC’s, with a fleet of more than 500 The chain is nevertheless highly competitive on price and has quickly trucks, currently have a service level advantage over direct supplier created substantial demand for in particular its house brands in deliveries. Shrinkage is substantially reduced due to centralised selected spirits categories. This combination of factors enabled it to control systems. During the period under review the number of increase income on existing business by 23% in an alcoholic suppliers delivering to DCs instead of directly to stores increased by beverage market that grew 8,2% overall in value. During the more than 100. reporting period LiquorShop continued its rapid growth rate opening The Group’s International Trade Division operates its own 45 new outlets to bring its total number to 165. A comparable distribution centres in Madagascar and Angola while also making number of new shops are envisaged for the 2013 financial year. extensive use of the free port of Mauritius.

NON-RSA EXPANSION FURNITURE DIVISION The Group’s non-RSA operation experienced a very successful The above inflationary increases in household expenditure on food year with turnover in its 131 stores increasing by 25,4% at current and other essential requirements continued to erode disposable exchange rates and by 19,7% at constant currencies. Both the income and thus expenditure on durable goods. Despite this trend number of customer transactions and their basket size grew by sales in OK Furniture and OK Power Express both of which target the about 10%. For the first time more than 100 million transactions lower to middle income market and represent 62% of the division’s were recorded for the year. Marketing tailored to the needs of local turnover, continued to show satisfactory growth. Sales in OK communities was stepped up and produced most pleasing results. Furniture and OK Power Express increased 15,3% on the previous There are indications that foreign developers are showing year while the substantially lower growth of 4,9% in House & Home renewed interest in investing in Africa. However, obtaining suitable reflected the financial pressures experienced by consumers in the sites remained the major impediment to growth. The Group was higher-income segment of the market. Overall the division reported a nevertheless able to open 18 new stores during the year while a sales increase of 11,1% to R3,4 billion in an environment in which further 30 are scheduled to open before June 2013. One of the new continuing price deflation averaged 5,1%. Growth in existing stores stores – a full-service supermarket – is located in in the was 8,8%. The 33,5% increase in trading profit substantially Democratic Republic of Congo (DRC). Shoprite is the first South exceeded the growth in sales. African retailer to open its doors in that country. The store employs The division’s solid performance resulted from its on-going invest- more than 200 local people of whom 25 are Congolese recruited in ment in new stores, its rigid adherence to a highly competitive pricing South Africa and trained here before they returned to Kinshasa to policy and improved levels of customer service. In the course of the take up their new positions. reporting period 15 new stores – all OK Furniture outlets – were The Group now employs more than 11 000 people in the 16 opened to bring the store count to 314 of which 248 trade under the countries in which it has a presence outside South Africa. In addition, an OK Furniture banner. Negotiations for a further 24 stores have been increasing percentage of the merchandise on the shelves of these 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 management team who have worked together for a long time, and I The Franchise Division uses the Group’s very substantial procure- am inspired by the many talented young professionals who have ment infrastructure to offer franchisees the most competitive prices. joined our ranks bringing with them fresh ideas and new insights. During the year the division implemented the acquisition of the However, my greatest appreciation goes to the thousands ordinary Friendly, Seven Eleven and Price Club franchise chains from staff members who strive on a daily basis to build our business into Metcash. Although not all the Metcash members could be retained, the best it can be. To all of them my heartfelt thanks. the division’s number of franchise members did increase from 269 to 15 398. The additional sales of these predominantly small-format stores enabled the division to increase turnover by 19,1% to R3,7 billion. Trading profit grew by 21,1% as no additional infrastructure was required to service new members.

ACKNOWLEDGMENT It was not an easy year by any stretch of the imagination as far as market conditions were concerned. The 12 months under review presented many challenges which at times our ingenuity and will to J W Basson succeed. However, they also provided us with the satisfaction of Chief executive 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 20 August 2012

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Five-year Financial Review Shoprite Holdings Ltd and its Subsidiaries

June June June June June 2012 2011 2010 2009 2008 R’000 R’000 R’000 R’000 R’000

STATEMENT OF COMPREHENSIVE INCOME Sale of merchandise 82 730 587 72 297 777 67 402 440 59 318 559 47 651 548 Trading profit 4 665 134 3 986 697 3 490 441 2 940 914 2 296 550 Exchange rate (losses)/gains (8 343) ( 446) (77 824) 3 005 33 187 Items of a capital nature (93 687) (78 533) (25 580) (31 227) 6 756 Operating profit 4 563 104 3 907 718 3 387 037 2 912 692 2 336 493 Interest received 142 166 94 614 105 741 191 566 183 915 Finance costs (223 563) (125 964) (93 690) (86 142) (59 149) Profit before income tax 4 481 707 3 876 368 3 399 088 3 018 116 2 461 259 16 Income tax (1 438 889) (1 346 826) (1 111 792) (999 478) (875 570) Profit for the year 3 042 818 2 529 542 2 287 296 2 018 638 1 585 689

STATEMENT OF FINANCIAL POSITION ASSETS Property, plant and equipment 9 668 559 8 168 749 6 577 677 5 359 587 4 502 928 Other investments 107 592 63 964 65 942 50 440 41 604 Deferred income tax assets 413 645 326 457 288 677 277 951 248 614 Intangible assets 894 296 719 105 611 037 354 434 319 825 Current assets 19 810 853 11 416 236 10 442 805 10 690 843 9 733 319 Fixed escalation operating lease accrual 10 573 9 246 5 559 6 233 7 993 TOTAL ASSETS 30 905 518 20 703 757 17 991 697 16 739 488 14 854 283

EQUITY AND LIABILITIES Capital and reserves 12 745 042 7 084 700 5 904 832 4 960 000 4 758 656 Non-controlling interest 62 675 58 750 67 184 69 295 60 182 Permanent capital 12 807 717 7 143 450 5 972 016 5 029 295 4 818 838 Interest-bearing borrowings 4 035 434 49 755 40 448 30 727 22 899 Other liabilities 14 062 367 13 510 552 11 979 233 11 679 466 10 012 546 TOTAL EQUITY AND LIABILITIES 30 905 518 20 703 757 17 991 697 16 739 488 14 854 283

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

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 The Group maintained its price competitiveness in a market characterised by aggressive food discounting. Despite reducing the Sale of merchandise margins on basic foods the Group nevertheless increased gross profit – Total turnover increased by 14,4% to R82,73 billion. This was a margins as a result of a slightly higher contribution by non-food items satisfactory performance seen in the context of the state of the and an increase in efficiencies in systems and logistic infrastructure. economy in general. 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 following table gives the turnover per segment: the increase in turnover and efficiencies in logistical infrastructure already mentioned. Shrinkage remains well under control, but crime SEGMENTAL SALES continues to be a scourge with perpetrators becoming more brazen Sales Sales Sales by the day. This forces the Group to increase its spend on security 2010/2011 2011/2012 growth and loss control. R’000 R’000 % Other operating income Supermarkets RSA 57 213 793 64 584 215 12.9 17 Supermarkets non-RSA 7 316 698 9 174 147 25.4 Other operating income increased by 25,3% to R2,33 billion, mainly Furniture 3 059 648 3 400 185 11.1 due to an increase in commissions received and premiums earned. Other Segments 4 707 638 5 572 040 18.4 Finance income earned (5,2%) remains under pressure due the reduction in interest rates, but other items grew in excess of turnover Total sales 72 297 777 82 730 587 14.4 growth.

– The Group’s investment in world-class systems and logistic Expenses infrastructure and its policy of lowest prices saw it continuing to Cost management remains a high priority for the Group as trading gain on the opposition. By sticking to these principles, the Group margins are always under pressure due to the increased competition was able not only to retain the loyalty and support of customers in food retailing. across the spectrum, but also to extend its customer base. – Depreciation and amortisation: The Group is continuing to – Supermarkets RSA reported a 12,9% growth in turnover to increase its investment in information technology. It is also R64,58 billion. Customers on average remained financially opening new stores while simultaneously implementing an stressed, but Supermarkets RSA opened a net 55 stores and had on-going refurbishment programme for older stores. On average, a number of highly successful promotions during the year which stores are revamped every seven to eight years. In addition, contributed to its turnover growth. Value-added categories like 107 new stores were opened during the year and 17 closed. cheese, wine and meat saw continued improvements to their – Operating leases: Rental increases for existing stores are ranges and supplied customers with world-class products. generally in line with those in the property market as a whole. – Internal food inflation increased from a deflation of 0,1% in 2011 The net 90 new stores opened during the year and the increase in to an inflation of 4,9% in 2012. This compares with the official turnover also saw a commensurate increase in turnover rentals. food inflation of 8,8% for the 2012 financial year. Certain lease payments were reduced by head leases that were – Supermarkets Non-RSA, in a similar inflationary environment, either not renewed or were renegotiated during the year. contributed R9,17 billion to Group turnover after conversion to – Employee benefits: The increase in staff costs of 13,3% was rand. Due to the relative weakness of the rand in relation to the mainly due to the additional staffing requirements in the light of US dollar and most African currencies in which the Group trades, the increase in turnover and the new stores opened. Productivity this translated into a turnover growth of 25,4% in rand terms. In continued to improve while further focus was placed on improving constant currencies the growth was 19,7%. and maintaining in-store service levels. Included in Employee – Trading conditions for the furniture business also remained diffi- benefits are provisions for long-term incentives to retain staff. cult with an internal deflation of 5,1%, but it managed to increase – Other expenses: These costs, which increased by 22,4%, cover turnover by 11,1% to R3,40 billion. This turnover growth was expenses such as electricity and water, repairs and maintenance, achieved without sacrificing margins. Trading profit increased by a security and commissions paid. The Group maintained its healthy 33,5% to R175,5 million (2011: R131,5 million). The provision for the reinstatement of leased buildings where it has strongest turnover growth at 15,3% was again reported by OK an obligation to maintain their exterior. Other expenses grew at a Furniture, which targets middle- to lower- income consumers. faster rate than turnover, and were mainly due to increases in Credit participation increased in OK Furniture and OK Power electricity (tariff increases), commission paid (more customers Express by 2,18% with a 5,01% increase in House and Home. making use of cards), repairs and maintenance (revamps and This assisted trading margins although finance income grew at a other general expenses) and motor vehicle running expenses (fuel slower pace due to reduced interest rates. and other costs). Some of the other expenses outgrew turnover due to the number of new stores opened. Gross profi t Gross profit comprises primarily gross margin after markdowns and Trading profi t shrinkage. In line with IFRS (IAS 2: Inventory and IFRIC Circular The trading margin increased from 5,51% to 5,64% due to the higher 9/2006), the Group deducted settlement discounts and rebates turnover, the increase in the gross margin and the careful manage- received from the cost of inventory. ment of expenses.

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Financial Report (continued)

Foreign exchange differences can be found. During the year the Group spent R921 million on such As stated in the accounting policies, the balance sheets of foreign land and buildings. Refurbishments cost R350 million, while subsidiaries are converted to rand at closing rates. These translation R756 million was spent on new stores (excluding land and buildings), differences are recognised in equity in the foreign currency transla- R401 million on information technology and the balance on normal tion reserve (FCTR). In essence, most foreign exchange differences replacements. The Group is in the process of upgrading its merchan- in the income statement are due to US dollar denominated short- dising, master data and central stock ledger systems. This process term loans in operations outside South Africa and balances in will continue into the next financial year. Capital commitments of US dollar held in offshore accounts. R1,71 billion relating to these improvements have been entered into During the year the rand weakened while the currencies of some of for the next financial year. the countries in Africa where the Group does business maintained their Intangible assets consist mainly of goodwill paid for acquisitions, levels against the US dollar. The result was a currency loss of R8,34 trademarks acquired and software. Goodwill represents the premium million compared to a loss of R0,45 million in the previous financial year. paid for certain businesses and is tested for impairment annually based on the value-in-use of these businesses, calculated by using The table below gives the approximate rand cost of a unit of the cash-flow projections. 18 following major currencies at year-end: Software represents the Group’s investment in certain computer software that is used in its daily operations. The Group continued its 2009 2010 2011 2012 investment in new SAP software which, like all software, is amor- USA dollar 8.02 7.745 6.7697 8.2974 tised over its useful life of three to seven years. Euro 11.2511 9.674 9.8251 10.4428 Trademarks mainly represent the purchased Computicket, Zambian kwacha 0.0015 0.0015 0.0014 0.0016 Transpharm and Seven Eleven/Friendly Grocer trademarks and is Angolan kwanza 0.1033 0.0834 0.0727 0.0868 amortised over 20, 16 and 20 years respectively. Mozambican metical 0.2976 0.2245 0.2394 0.2932 Nigerian naira 0.0541 0.0518 0.0444 0.0508 AVAILABLE-FOR-SALE-INVESTMENTS During the year the Group and other shareholders bought outright the Net interest paid international treasury systems of RMB Global Solutions. The Group utilised overnight call facilities for both short-term deposits and borrowings for most of the year. As in the past, the LOANS AND RECEIVABLES Group funded all capital projects utilising short-term borrowings and During the last quarter of the financial year the Group called for the cash reserves. conversion of its 13 500 000 redeemable, convertible cumulative During March 2012 the Group issued 27,1 million new ordinary preference shares in Pick & Buy Ltd, a retailing supermarket group in shares as well as 6,5% convertible bonds. See Non-current liabilities Mauritius. These preference shares were then redeemed and the later in this report for full details. As a result finance costs increased proceeds utilised to subscribe for a 25% shareholding in Winhold to R223,5 million, but at the same time Interest received increased Limited, a newly created holding company of Pick and Buy. The by 50% to R142,2 million, due to the short-term investment of Group then exercised its rights to take up a further 24% in Winhold surplus cash. Ltd to bring its holding to 49%. Ireland Blyth Limited, a company listed on the Mauritian Stock Exchange, holds the other 51%. Income tax expense The balance consists mainly of amounts owing by franchisees The effective income tax rate is higher than the nominal income for franchises and for fixtures and fittings sold to them. tax rate due to certain non-deductible expenses such as leasehold improvements as well as income tax losses in certain non-RSA DEFERRED INCOME TAX ASSETS countries that cannot be utilised for Group purposes. The income tax Deferred income tax is provided, using the liability method, for expense includes an amount of R91,8 million in respect of secondary calculated income tax losses and temporary differences between the tax on companies relating to the final dividend for 2011 which was income tax bases of assets and liabilities, and their carrying values for paid at the beginning of the financial year. financial reporting purposes. This asset developed primarily from provisions created for various purposes as well as the fixed escala- Headline earnings per share tion operating lease accrual. 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 Current assets consequent increase in trading profit of 17,0%. INVENTORIES STATEMENT OF FINANCIAL POSITION Inventories totalled R8,68 billion, an increase of 23% on the previous year. The inventory turn, based on the sale of merchandise, was Non-current assets 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 PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS following: During the year the Group spent R3,14 billion on property, plant and – Provisioning a net 90 new stores. equipment and software compared to R3,02 billion in 2011. The – Extending the distribution centres in Centurion and Brackenfell Group is also continuing with its policy to purchase vacant land for with a greater number of products now flowing through these strategic purposes and for creating retail space when no developers facilities.

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 TRADE AND OTHER RECEIVABLES The Group intends to use the proceeds of the offerings to: Trade and other receivables mainly represent instalment sale debtors, – Fund organic growth initiatives, opening new stores in existing franchise debtors, buy-aid societies and rental debtors. Adequate markets and investing further in optimising supply-chain and allowance is made for potential bad debts and the outstanding distribution capabilities. debtor’s book is reviewed regularly. – Accelerate the Group’s African expansion through the purchase The allowance for impairment and unearned finance income in and development of property in both new and existing African respect of instalment sale debtors amounted to 13,18% compared to markets. 13,19% the previous year. This minimal decrease was made possible – Enhance the Group’s ability to pursue acquisitions in South Africa by the quality of the book. and abroad. – Increase balance sheet flexibility and proactively manage the CASH AND CASH EQUIVALENTS AND BANK OVERDRAFTS capital structure, better aligning the funding of the Group’s Net cash and cash equivalents amounted to R7,92 billion at year-end, long-term investments with long-term capital, repaying short-term compared to an overdraft of R80,5 million in 2011. This movement credit facilities and diversifying funding sources; and was mainly due to the following: – Further improve working capital management, leveraging – Capital expenditure, mainly on land and buildings, of R3,10 billion. increased liquidity to obtain better terms from suppliers and 19 – The proceeds from the share and convertible bond issue which strategically building inventory in an inflationary environment. led to the inflow of approximately R8 billion. – The fact that the date of the Statement of Financial Position fell In terms of the Memorandum of Incorporation of Shoprite Holdings after the calendar month-end thereby causing certain 30-day term Ltd its borrowing powers are unlimited. creditors to be paid after year-end. This also accounts for the increase in Trade and other payables. Current liabilities

Share capital PROVISIONS On 29 March 2012 Shoprite Holdings had a successful placement of Adequate provision is made for post-retirement medical benefits, new Shoprite Holdings ordinary shares and convertible bonds for reinstatements, onerous lease contracts, long-term employee gross proceeds of approximately R8 billion. This was done by way of benefits and all outstanding insurance claims. The Group has settled concurrent accelerated book build offerings to qualifying investors. a major portion of the post-retirement medical liability in the past. Shoprite Holdings Ltd issued 27,1 million new ordinary shares The remaining liability relates mainly to pensioners and will be settled under a general authority at R127,50 per share, for gross proceeds of during subsequent financial years. approximately R3,5 billion. Also see Convertible bonds below. The equity component of the convertible bonds is included in Credit sales Equity in accordance with IAS 32. The Group continued to supply credit facilities as part and parcel of its furniture business. The management and administration of this Non-current liablities debtor’s book is done in-house as the granting of credit is deemed an integral part of selling furniture. 6,5% CONVERTIBLE BONDS On 2 April 2012, and as per the concurrent accelerated book build Shoprite insurance offerings referred to above, Shoprite Investments Ltd issued 6,5% The Group operates its own short-term insurance company as part of convertible bonds due April 2017 in a nominal amount of R4,5 billion. the furniture business. During the year under review net premiums On 9 May 2012 a further issue for a nominal amount of R200 million earned amounted to R295 million compared to R257 million the was made to Shoprite Checkers (Pty) Ltd, to be utilised as part of an previous year. As in the past, the Group accounts for premiums incentive scheme for its employees. earned and extended guarantee fees over the life of the policy. Specific authority was granted at an extraordinary general meeting In South Africa, insurance premiums are invoiced and earned on a on 28 June 2012 for the issue of a maximum of 30 million new monthly basis. This is in line with the National Credit Act. ordinary shares of Shoprite Holdings Ltd upon conversion of the At year-end the insurance company had a solvency margin of 83% convertible bonds. The initial conversion price is R168,94 per ordinary (2011: 76%) compared to the minimum requirement of 15% as per share. On 28 May 2012 these convertible bonds were successfully the Insurance Act. listed on the JSE.

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Non-Financial Report

To deliver on Shoprite’s consumer promise of consistent low prices, To further protect customer interests, the Group has the Group has to be efficient in every aspect. This pragmatic worked hard to ensure compliance with the South African approach to efficiency also applies to sustainability issues that affect Consumer Protection Act 68 of 2008 (the CPA) and other the Group’s long-term success. Group senior management centrally regulations. The Group educates its customer base on their manages all sustainability-related concerns and ensures implementa- rights and obligations through its Consumer leaflets avail- tion across all divisions. At an operational level, each business able at all stores. division is responsible for incorporating sustainability targets and Outside South Africa, customer complaints are handled practices into its own operations by focusing on those concerns most at store or divisional office level. In South Africa, the toll- important to their division. free centralised Customer Service Centre (Checkline) Furthermore, South Africa’s retail industry continues to face serves supermarket customers while the Customer Care increasingly stringent regulatory requirements. The complexity of Line serves furniture division customers. This year, a new maintaining compliance increases significantly as the compliance centralised customer feedback system was implemented landscape evolves. To manage these concerns, the Group has to improve customer query resolution. established a comprehensive compliance programme that ensures 20 it becomes and remains compliant with all relevant legislative and 2. SOCIAL regulatory requirements in its operating environments. For in-depth information regarding the Group’s response to 2.1 Recruitment and talent management its material issues beyond the scope of this non-financial report, please refer to the Sustainability Report available online at STAFF REPRESENTATION www.shopriteholdings.co.za. 2012 2011 2010 Total permanent (SA only) 89 341 83 867 76 318 1. STAKEHOLDER ENGAGEMENT Percentage of black Central to Shoprite’s long-term success is its ability to representation 95.06 94.67 94.47 effectively engage with stakeholders on issues of mutual interest; together identifying solutions to drive the business The labour-intensive nature of the retail industry historically forward. The Group’s main stakeholder groups include: goes hand in hand with high turnover rates among entry-level customers, employees, suppliers and trade partners, employees. The Group’s ability to attract and retain human government and regulatory bodies, communities, labour capital is therefore fundamental to its ability to provide excel- unions, franchisees, media, business partners and lent customer service and meet human resource needs. associations and, of course, shareholders and investors. By managing the efficacy of recruitment processes, the The Group pursues positive and constructive employee Group is improving the quality of its recruitment activities. relations, both individually and through formal representa- During the year under review, the Group opened a central tive bodies, actively engaging local labour unions in Recruitment Centre for the Western Cape to streamline the operating countries to ensure employees’ needs are well recruitment process and gain access to more suitable understood and their concerns addressed. candidates. If the centre proves successful, it will be rolled Requirements and expectations regarding suppliers are out to other areas. An e-recruitment platform is also being clearly communicated by the Group through supplier developed to support both Head Office and store recruit- agreements and a quality assurance programme that ment processes. Efforts were put into developing the ensures supplier compliance with quality, labelling and food Group’s Employee Value Proposition to appeal more to safety requirements. Through an enhanced understanding graduates and school leavers. of supplier conditions, the Group aims to develop business Employee retention plans, succession planning and models for long-term growth. training programmes all play a key role in talent manage- The Group continues to build relationships with govern- ment. General business-wide career paths and succession ment and regulatory bodies, and actively works to address planning structures have been developed, with the focus common interests. It is also important to play a supportive currently on the Group’s store level positions, the bulk of its role in the communities in which the Group operates. workforce. Individual departments implement employee Communities are both customers and employees, and the performance reviews and appraisals at their own discretion. Group believes that these communities must benefit both The Group believes that the high productivity of the from and through Shoprite business. The Group has various business and a turnover rate of 16.0% for all employees initiatives that engage and empower communities with the (including part-time employees) – as compared with an aim of reducing poverty and unemployment. international industry average for retail and leisure of 30.2% – is an indicator of overall staff satisfaction. 1.1 Customers The Group’s objective is to be a preferred shopping destina- 2.2 Learning and development tion for consumers by selling food and general merchandise The Group has 14 registered training schools in South at low prices, from conveniently located outlets in a comfort- Africa, mostly offering accredited training programmes able and enjoyable shopping environment. All staff members, relevant to Shoprite’s operations. Customer service forms who deal with the public face-to-face and at store level, an integral part of all training programmes within the Group. undergo product-specific and customer service training. Thirty-two of the Group’s training programmes have

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 been reviewed and redesigned during the last 12 months South Africa has one of the highest rates of robbery and ensuring compliance with the latest SETA standards and violent theft in the world. As the Group is largely cash requirements. The SETA-driven nationally funded Skills driven, extra precautions are required to prevent attacks Development Project placed 562 learners on 12-month and losses during money transfer. A number of security learnerships and 619 learners on three-month skills measures are employed by the Group, including regular programmes. The Group is committed to employing 90% of security inspections and audits at stores and shopping all successful candidates on completion of their training. centres and a range of physical security methods. Group participation in SETA projects has enabled it to The Group is a member of the Consumer Goods exceed its objective of providing training and employment Council, which identifies crime trends and advises on how opportunities to a thousand learners annually, with a total of to mitigate risks. 1 715 learners trained during the period under review. Two new skills development projects were initiated in the fourth 2.6 HIV/Aids programme quarter through which 100 deaf learners and more than 500 HIV/Aids is one of the main challenges facing South Africa other learners will be afforded the opportunity to gain today, and an important concern for the Group. Shoprite accredited training in the next period under review. believes it requires concerted attention and effective inter- 21 The Group’s flagship Management Training Scheme (MTS) ventions that benefit employees and their families. An actu- has been registered as an NQF Level 4 Operation Supervision arial evaluation has estimated the prevalence of HIV among Qualification. Shoprite was able to train approximately 12% of Shoprite employees at 17.8%, broadly in line with the its Trainee Managers in the period under review. communities the Group serves and from where it recruits By the end of June 2012, the Group’s total spend on its employees. tertiary qualification bursaries amounted to R11.1 million in This year, the Group’s Voluntary Counselling and Testing the period under review. A total of R14.4 million has been (VCT) project was strengthened by appointing an inde- allocated for spending by December 2012, amounting to an pendent wellness management company to offer free increase of 21% in bursary spend this year. testing and counselling at 124 Shoprite facilities in South Africa. A total of 3 585 staff members were voluntarily 2.3 Organised labour relations tested, revealing a prevalence rate of 7.8%. Shoprite aims to foster good working relationships with organised labour structures and monitor and resolve 2.7 Product safety and labelling employee issues before they lead to industrial action. Just The Group considers food safety one of its top business under one-third (32 293) of its employees are represented priorities and has spent considerable time and resources on by unions and collective bargaining structures. The Group the implementation of a robust food safety policy, compliant engages with labour unions in 12 of the 17 countries in with all regulatory and relevant food safety standards. The which it operates. It remains committed to global standards newly initiated Food Safety Management System (FSMS) in labour relations and recently signed an agreement with assures compliance by addressing elements such as product Uni Global Union to that effect. testing and recalls, supplier audits, cold chain management, This year, the Group worked with more than ten different distribution and traceability and hygiene and risk assessments. unions and signed 14 different wage and benefit agreements. The Group’s food safety focus is aligned with interna- There was no strike action in South Africa affecting Shoprite tional Farm-to-Fork practices, and the Group further or the retail sector in general for the period under review. complies with product standards set by the National Regulator for Compulsory Specifications (NRCS), the South 2.4 Employee benefi ts African Bureau of Standards (SABS) for electrical products, Employee satisfaction strongly influences productivity levels, and the Gas Board for gas-operated appliances. and the Group therefore provides many of the conventional Food suppliers are approved only once the Food Safety employee offerings and various personal benefits and Department has confirmed their compliance and verified programmes to incentivise employees. The remuneration their food safety certification. The Group has contracted an policy governs employee salaries that are competitive and international organisation that specialises in food assurance this, combined with a range of incentive schemes, serves and certification to maintain its food safety database to improve the Group’s ability to attract and retain employees regarding supplier status. The Food Safety Department and improve employee performance. The Group’s remuner- prioritises the monitoring of high-risk suppliers and products. ation policy is set out in greater detail in the Remuneration The Group has incorporated the labelling requirements of Report on pages 31 to 37 of the Integrated Report. South Africa’s Consumer Protection Act (CPA) as well as other relevant labelling requirements of the Department of 2.5 Occupational health, safety and security Health, Department of Agriculture and Department of Trade The health and safety of its employees and customers and Industry into its supplier contracts and trade terms. remain of paramount importance to the Group, and preven- tative initiatives are a priority. The Group employs a compre- 2.8 Responsible lending hensive IT-based occupational health and safety (H&S) The Group’s three furniture chains – OK Furniture, OK management system which has streamlined the measuring, Power Express and House and Home – offer credit facilities monitoring and managing of all H&S-related activities. to consumers. Credit sales represent 30.7% (2011: 29.5%)

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Non-Financial Report (continued)

of total sales of these three brands, with furniture group erment by initiating and making contributions to enterprise sales constituting just 4.2% of Group sales overall. and socio-economic development programmes. This is The credit offering is aligned with the provisions of the achieved primarily through grants and the supply of initial low 2005 National Credit Act of South Africa (NCA) and the or zero-interest loans. The Shoprite Group has made R70 relevant laws in the other countries in which the Group million available to the Trust to accomplish its goals. The operates. Credit agreement interest rates are calculated in Trust founded the Mossel Bay Enterprise Trust in November accordance with regulatory requirements and the market 2011. The Trust’s first project was the establishment of a risks within different furniture chains, and are lower than shopping centre in Kwanoqaba township in Mossel Bay. those recommended by the NCA. The Group’s Freshmark suppliers’ initiative supports small B-BBEE suppliers through a variety of methods 3. TRANSFORMATION including training and favourable payment terms. Forty-four per cent (44%) of the Group’s fresh produce suppliers 3.1 Employment equity (212 of a total of 481) supply less than R500 000 worth of RSA STAFF REPRESENTATION produce to the Group annually. 22 4.94% 3.4 CSI and socio-economic development African Shoprite understands that its business and the communi- 2.95% Coloured ties in which it operates are interdependent. Good relations 19.92% Indian and contributions to socio-economic upliftment create White & foreign business opportunities for all. The Group focuses its 72.18% 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 Shoprite is committed to equality and non-discrimination, 1% of its net profit after tax (NPAT) on CSI projects. and aims to embed these values within the company The Group hopes that the establishment of the Shoprite culture. The Group is on track to achieve its employment Checkers Development Trust will improve the impact of equity goals for the current plan period (2010 to 2015). the Group’s CSI financial contributions. Combined black representation in the junior-to-lower The Shoprite Mobile Soup Kitchens aim to bolster the management levels exceeds the Economically Active nutrition of underprivileged people of South Africa, Population (EAP) statistic, and the Group has achieved especially children, the aged and unemployed and victims nearly 80% of the statistic within its middle management of natural disasters. In the period under review, 3 547 302 level. Steady progress has been made in improving black servings of soup and bread were distributed countrywide. representation at senior management levels during the last Slightly damaged Shoprite foodstuff deemed unfit for reporting period with almost 12.67% improvement of display in the Group’s stores is donated to registered not- overall black representation within top management. Black for-profit organisations that distribute the items to female representation has been a key focus area, showing poverty-stricken communities. over 68.34% improvement within the top management The Shoprite Checkers Women of the Year Awards aims level. The Group currently employs 166 (2011: 81) people in to celebrate the positive socio-economic contributions of South Africa with disabilities and plans to improve this South African women by honouring exemplary and figure considerably in the next period under review. visionary women who are making a difference in their communities. Winners each receive R30 000 in cash, as 3.2 Preferential procurement well as R100 000 to assist in the development of their B-BBEE performance forms part of the supplier selection individual programmes. criteria, and preference is given to black female suppliers. Further, the Group partners with the Western Cape and Most of the Group’s 14 500 suppliers and service providers Gauteng police departments in various crime-prevention have good B-BBEE credentials. Group B-BBEE spend on campaigns. preferential procurement was R42.2 billion (2011: R18.2 billion) during the period under review and it achieved a score of 4. ENVIRONMENT AND CLIMATE CHANGE 15.21 out of 20 (2011: 11/20) on the B-BBEE Scorecard. However, as the largest retailer in Africa, Shoprite is unable 4.1 Electricity consumption to meet transformation targets by relying on existing black Over the last three years, the Group has taken steps suppliers alone and has therefore become actively involved towards managing its electricity consumption more in enterprise development to build capacity within the local effectively. A comprehensive energy monitoring system supplier base. has been implemented in the majority of the Group’s South African supermarkets. The system is continually being 3.3 Enterprise development optimised and represents a major step in accurately Shoprite founded the Shoprite Checkers Development Trust measuring, monitoring and reporting electricity consump- (the Trust) to advance broad-based black economic empow- tion. Despite these efforts, the average Eskom price

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 increases of 26% (2011) and 16% (2012) implemented during the period under review have increased the Group’s electricity bill by over 34%. The Group has started to develop consumption bench- marks for the various types of stores it operates. A dedi- cated team is working closely with experts and equipment manufacturers to evaluate electricity-efficient initiatives and technologies, with a focus on refrigeration and lighting.

4.2 Transport and fuel consumption As distribution is a fundamental component of the retail Award Winners 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 Shoprite Group is proud to recognise 23 The Group pioneered and continually enhances its large- suppliers for their unstinting support scale centralised distribution network in South Africa. The Group’s ability to distribute centrally has minimised the and collaborative approach toward our number of supplier vehicles making direct-to-store business over the past year. deliveries. This reduces fuel consumption throughout the product supply chain and enables Shoprite to streamline various other business processes. The Group continues to CEO AWARDS monitor and evaluate all technologies and processes Jeff Art Signs available for reducing fossil fuel use across its supply chain, Tilespace such as vehicle routing and scheduling systems and store ordering systems. PERISHABLES AND SERVICE DEPARTMENTS Willowton Group 4.3 Water consumption The Group is investigating and piloting a range of large- CONFECTIONERY AND BEVERAGES scale water-saving initiatives. One of these is the installa- Simba tion of a state-of-the-art grey-water system at the Group’s new distribution centre in Centurion. The Group aims to enhance its water-monitoring programme in line with the TOILETRIES Unilever functionality enabled for electricity consumption across its supermarkets in the next year. HOUSEBRAND / PRIVATE LABELS 4.4 Recycling and packaging Heartland Foods In the period under review, a number of initiatives to reduce packaging and waste across the Group’s operations were UPCOMING SUPPLIERS implemented. A reclamation centre for damaged goods is Eagles Valley Poultry now operational and the extension of the service to cover more types of recyclable material is being investigated. MEAT MARKETS Reusable roll-tainers were introduced to replace wooden Meat Traders pallets and reduce the use of shrink-wrap material for stabi- lising product during transportation. FRUIT & VEGETABLES Harvest Fresh 4.5 Carbon disclosure During the period under review, the Group initiated its first GENERAL MERCHANDISE carbon footprint assessment following Carbon Disclosure Control Chemicals (Pty) Ltd Project (CDP) protocols. Electricity consumption in super- markets and fuel usage in the supply chain constitutes the AMBIENT GROCERIES bulk of the Group’s carbon footprint. The Group attributes Rhodes Food Group the increase in Scope 2 emissions over last year’s estimate to better reporting. FURNITURE The Group, however, has not yet completed a full carbon Restonic footprint assessment and no specific reduction targets have therefore been set. As the monitoring systems mature, CONTRACTORS / SERVICE PROVIDERS Shoprite fully intends to increase the scope, accuracy and Salient disclosure of its carbon footprint in the coming years.

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Corporate Governance Report

The board of directors (“the Board”) of Shoprite Holdings Limited meeting. Directors also have a record of high attendance of board (“Shoprite Holdings or “Group”) promotes and supports high stand- and committee meetings; ards of corporate governance, integrity and ethics that will contribute – The Board does not intend to institute a formal dispute resolution towards the on-going sustainability of the Group, facilitate long term- process as the existing processes within the Group are term shareholder value and enhance the benefits that all other stake- satis factorily and do not require separate formal processes; holders derive from the Group’s continued success. – The Company’s 2012 Sustainability Report was not audited by an In an environment of increasing regulation, it is the Group’s objec- independent external service provider as the key indicators were tive to maintain a balance between the governance expectations of obtained through a formal process that also involved independent investors, and other stakeholders, and the expectation to deliver service providers; increasing financial returns. – The Head of the Group’s internal audit function does not solely The Board is ultimately responsible for ensuring that governance report to the Audit and Risk Committee. Instead, he reports standards are met and is assisted in this regard by senior manage- administratively to the General Manager Group Finances but ment who aims to instil a culture of compliance and good governance functionally to the Audit and Risk Committee. The Audit and Risk throughout the Group. Sound corporate governance structures and Committee believes that his independence is however encour- 24 processes are being applied and are considered to be pivotal to aged and respected. deliver sustainable growth and returns in the best interest of all stakeholders. THE BOARD OF DIRECTORS The adherence to sound governance principles is advocated by The Board is collectively responsible to the shareholders of Shoprite the Board which endorses the principles contained in the King Report Holdings for the long term success of the Group and for its overall on Governance for South Africa 2009 (“King III”). An independent strategic direction, values and governance. It provides the leadership assessment of the Group’s standard of governance is provided by the necessary for the Group to meet its business objectives within the JSE Socially Responsible Investment (SRI) Index. During the 2011 framework of its internal controls, whilst also discharging the Group’s SRI evaluation the Group met 29/32 of the core governance indica- obligations to its shareholders. tors and 25/33 desirable governance indicators. Shoprite Holdings has a unitary board structure comprising of With regard to the 2012 financial period, the directors of Shoprite fourteen (14) directors in total. The Board consists of eight (8) Holdings confirm that the Group has, except as outlined immediately non-executive directors and six (6) executive directors. below, complied in all material aspects with King III. The Group has furthermore complied with all the corporate governance provisions in Board Committees the JSE Listings Requirements during this period. Board committees assist the Board in executing its duties, powers and authorities. The Board delegates authority to the board commit- SUMMARY OF KING III PRINCIPLES NOT APPLIED tees. The role and responsibilities of each committee are recorded in Companies listed on the JSE are required to report and disclose their formal terms of reference. The Audit and Risk and the Social and application of the King III principles. Ethics Committees have additional responsibilities by virtue of the Companies Act, 2008. During the 2012 financial period, the Group has not complied with the following principles: The Board has established four (4) committees: – The Chairman of the Board, Dr CH Wiese is not an independent – Audit and Risk Committee; non-executive director, but given his commercial knowledge, – Social and Ethics Committee; experience and skills, the Board deems this to be appropriate in – Nominations Committee; and view of Dr Wiese’s significant contribution to the functioning and – Remuneration Committee. effectiveness of the Board; – The Chairman of the Board acts as ex-officio chairman of the Each board committee has formal terms of reference that are Remuneration and Nomination Committees. Although he is not reviewed on a regular basis. The chairpersons of these committees independent, the Board supports his chairmanship of these formally report to the Board after each meeting on all matters within committees given the necessity to align the Group’s remuneration its duties and responsibilities. approach with its business strategy; – The Board and the Audit & Risk Committee performed self- Board Responsibilities evaluations on their respective effectiveness but have decided not The Board has adopted a formal board charter which has been to disclose the overview of the appraisal process, results and implemented to identify, define and record the functions and action plans in the integrated report due to the sensitive nature composition of the Board and to serve as reference to new directors. thereof; This charter was updated during the reporting period to include – Directors were not evaluated individually as part of the evaluation changes required by the Companies Act. process. Independent non-executive directors are evaluated individually with regard to their independence and specifically the The Board’s principle responsibilities include: independence of directors that have served on the Board for – providing effective leadership based on an ethical foundation; longer than nine (9) years; – addressing all aspects that are of strategic importance for the Group; – The Board is of the view that directors should not earn attendance – ultimate responsibility for the strategic direction of the Group; fees in addition to a base fee. Directors add significant value to – ensuring that the Group’s strategy will result in sustainable the Group outside of the confines of a formal board or committee outcomes;

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 – risk management and IT governance; Board. He is assisted in this regard by members of executive and – monitoring compliance with laws, regulations and codes of good senior management that heads the various divisions and depart- practice; ments within the Group. – ensuring that the Group is and is seen to be a responsible corpo- rate citizen. Lead Independent Director Mr JG Rademeyer is the lead independent director. The function of The Board is of the opinion that it has adhered to the terms of reference the lead independent director is to provide leadership and advice to as detailed in the board charter for the financial year under review. the Board when the Chairman has a conflict of interest without detracting from or undermining the authority of the Chairman. Meetings of the Board The Board convened six (6) times during the 2012 financial year. Four Non-executive Directors (4) of these meetings were scheduled whilst two (2) special meet- The Board consists of eight (8) non-executive directors of which ings were convened and related to the Group’s successful capital seven (7) are independent as defined in the King III Code. raising concluded in March 2012. The attendance of directors at Dr CH Wiese is not independent in view of his material shareholding these board meetings are recorded below. in Shoprite Holdings. 25 The full particulars of the directors of Shoprite Holdings are set Attendance at Board Meetings out on pages 8 and 9 of this report. The Board is satisfied that its current members possess the required collective skills and experience to carry out its responsibili- ties of achieving the Group’s objectives and to create value to share- holders over the long term.

Board Appointment 22/08/11 07/11/11 12/12/11 (special) 20/02/12 11/04/12 (special) 21/05/12 The Board regularly reviews it’s composition as well as the composi- NON–EXECUTIVE DIRECTORS tion of board committees which are aligned with applicable legislation CH WIESE — and regulations. Appointments to the Board are done in a formal and JJ FOUCHE — transparent manner as required by the JSE Listings Requirements. EC KIESWETTER — JA LOUW — In making an appointment the Board takes cognisance of the know- JF MALHERBE — ledge, skills, and experience of a potential candidate, as well as any JG RADEMEYER — — other attributes considered necessary for the role. JA ROCK The appointment of directors is a matter for the Board as a whole. EXECUTIVE DIRECTORS The Board is assisted by the Nominations Committee who considers JW BASSON the suitability of potential directors and makes recommendations to CG GOOSEN the Board in this regard. B HARISUNKER Directors are not appointed for a fixed term. In terms of the AE KARP Memorandum of Incorporation (“MOI”) of Shoprite Holdings, all EL NEL directors retire by rotation at least once every three (3) years but can BR WEYERS make themselves available for re-election by shareholders. There is a clear division at Board level of responsibility and balance Chairman and Chief Executive Offi cer of power and authority to ensure that no one director has unfettered The roles and duties of the non-executive chairman and the chief powers in decision making. executive officer are separated and clearly defined. Dr CH Wiese is the non-executive chairman who provides guid- Induction of directors and on-going updates ance and leadership to the Board and also ensures that the Board A comprehensive induction programme has been developed for new functions effectively, focussed and as a unit. directors to ensure that they are briefed and have the required under- standing of the Group’s structure, operations and policies to enable The Chairman’s role includes: them to fulfil their duties and responsibilities as directors. The – encouraging debate and constructive criticism; company secretary is responsible for the administration of the – setting agendas for board meetings in conjunction with the chief Group’s induction programme. executive officer and the company secretary; New directors are provided with details of applicable legislation – leading the Board’s performance assessments; and regulations, Shoprite Holdings’ MOI, relevant mandates as well – facilitating the relationship between the Board and the chief as documents setting out their duties and responsibilities as direc- executive officer; tors. Directors are invited to briefing sessions to keep them abreast – ensuring that adequate time is allocated for discussion on of pending new legislation. strategic issues. Confl icts of interests and directors personal The chief executive officer, Dr JW Basson, reports to the Board and fi nancial interests is responsible for the day-to-day business of the Group as well as the The Group’s policy in this regard is applicable to all directors and formulation and implementation of strategies once approved by the employees. Directors are required to declare their personal financial

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Corporate Governance Report (continued)

interests and those of related persons in contracts with the Group ACCOUNTABILITY annually. A list in this regard is tabled annually and the register in which such interests are recorded is available for inspection at each Audit and Risk Committee annual general meeting of Shoprite Holdings. A description of the responsibilities and work undertaken by the Audit and Risk Committee during this year is included in the report by Board effectiveness and evaluation the chairman of the committee on page 28. His report also deals with An internal questionnaire based evaluation of the Board was the Group’s internal controls, governance of risk as well as the performed for the period under review. This evaluation covered the internal audit function. size and composition of the Board, directors’ induction and develop- ment effectiveness, board meetings, relationship between the Board Group Auditors and management, skills needed by the Board and its committees as At the annual general meeting of Shoprite Holdings held on well as stakeholder relations. 31 October 2011, the appointment of PriceWaterhouseCoopers Inc The overall outcome of the evaluation was acceptable. as the external auditors of the Group until the 2012 annual general meeting was approved by shareholders. Further details on the 26 COMPANY SECRETARIAL FUNCTION external auditors are contained in the report of the chairman of the The company secretary is appointed and removed by the Board and audit and risk committee. acts as a central source of information and advice to the Board and within the Group on matters of ethics and good corporate govern- Corporate Ethics ance. The Group is committed to achieving high standards of ethical behav- All directors have unlimited access to the advice and services of iour. The Tip-Offs anonymous hotline is independently managed by a the company secretary, who is accountable to the Board for ensuring third party service provider. This hotline can be used by the Group’s that procedures are complied with and that sound corporate govern- suppliers and employees to report any suspected unethical behav- ance and ethical principles are adhered to. Independent advisory iour. Although this hotline allows employees to make anonymous services are retained by the company secretary at the request of the reports and guarantees the protection of their identity in accordance Board or board committees. with the provisions of the Protected Disclosure Act, 2000, the Group The company secretary also provides a communication link with prefers to create an open reporting environment through the various investors and liaises with the Group’s transfer secretaries and line managers. All cases are investigated by the Group Risk Manager sponsors on relevant matters. in conjunction with internal audit and the Group legal department As required by King III, the company secretary also acts as where required. During the 2012 financial year a total of 111 incidents secretary to the various sub-committees of the Board and attends all of suspected unethical behaviour within the Group were reported of meetings of the Board and the committees. He is required to ensure which 25 resulted in disciplinary action, dismissals, resignations and/ that all minutes of shareholders meetings, board meetings and all or criminal charges being laid against such employees. meetings of committees of the Board are properly recorded and that During the period under review the Group’s code of conduct was all required returns are lodged as required by the Companies Act. reviewed and amended in-line with best practices in this regard. The company secretary is not a director of Shoprite Holdings and The code of conduct sets out the standard expected from employees has an arm’s length relationship with the Board and the directors. when dealing with customers, fellow employees, suppliers, competi- The company secretary is also the compliance officer and ensures tors and other stakeholders. All employees are required to adhere to that the Group complies with all the required legislation and the code of conduct. regulations applicable to its various business activities. No material breaches of the Group’s code of conduct were reported during the 2012 financial year. SHARE DEALINGS BY DIRECTORS AND SENIOR PERSONNEL Legislative and Regulatory Compliance The Group has implemented a policy relating to share dealings by The recent changes in the legislative, regulatory and best practices directors and senior personnel who, by virtue of their positions, have standards in the corporate governance environment in South Africa comprehensive knowledge of the Group’s affairs. This policy imposes necessitated diligent consideration and review of the Group’s closed periods to prohibit dealing in Shoprite Holdings securities governance policies and procedures. In this regard the Group before the announcement of the interim and year-end financial conducts regular reviews of current and emerging legislation and results or during any other period that is considered to be price- requirements. sensitive. The company secretary disseminates written notices to all The Group’s compliance function resorts under the company directors and senior personnel throughout the Group. This is in secretary and monitors and assesses the impact of legislation on the compliance with the market abuse provisions of the Securities business. External specialists have been engaged to assist and Services Act of 2004 and the JSE Listings Requirements in respect advise the Group in this regard. A regulatory universe is compiled of dealings by directors. annually for the Group with the assistance of a specialist service Dealings in Shoprite Holdings securities by directors and alternate provider that identifies and reviews all current, proposed and directors of Shoprite Holdings and its main trading subsidiary are impending legislation and the potential impact on the Group’s various disclosed as required by the JSE Listings Requirements. The Board business units. Response to such legislation is addressed through has also implemented a formal approval framework which governs the most efficient and effective channel. Compliance resources and the approvals required by these directors prior to their dealings in programs are introduced by utilising a risk based approach where Shoprite Holdings securities. after on-going compliance is monitored and tested through various

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 means. Compliance reports are presented to the Audit and Risk Regular, pertinent communication with shareholders assists the Committee. Group to improve shareholder relationships. The chief executive officer, deputy managing/financial director are designated investor Of particular relevance during the reporting period was: spokespersons and meet with fund managers, analysts and the – The Companies Act No 71 of 2008 and Regulations media on a regular basis. Investor activities include the presentation The Group continued to implement measures to ensure compli- of interim and annual results, participation in investor conferences ance with the Companies Act. A Social and Ethics Committee was and the issuing of regular operational updates. A corporate website established by the Board as required. The MOI of Shoprite also communicates all the latest financial and non-financial data to all Holdings was amended to comply with the Companies Act and stakeholders. Shareholders are also encouraged to attend the annual will be presented to shareholders for approval at the annual general meeting of Shoprite Holdings which provides an opportunity meeting on 29 October 2012. for shareholders to raise pertinent questions and to interact with – The Consumer Protection Act (CPA) directors. Committee chairpersons also attend the annual general Further steps were taken to entrench the Group’s compliance meetings to respond to shareholder’s questions. with the CPA., the most significant being amendments to the Further information on the Group’s stakeholder engagement can various agreements between the Group and its suppliers and be obtained from the Sustainability report published on the Group’s 27 measures to reduce the Group’s product liability risk. website at www.shopriteholdings.co.za. – The Protection of Personal Information Bill The Board is not aware of any material requests made by any A project team has been established to determine and manage stakeholder under the Promotion of Access to Information Act during the impact of this bill on the Group’s various business units and to the reporting period that were either complied with or denied. ensure that the Group will be compliant when the bill is promul- gated. COMPETITIVE CONDUCT The Group operates in the retail sector which is a highly competitive The Group had no instances of major non-compliance with legislation industry. It is therefore highly protective of all its intellectual property during the period under review. and know-how. Interaction with other retailers is generally restricted to forums in which co-operation at industry level is required for INVESTOR AND STAKEHOLDER RELATIONS purposes of making representation to government. The Group is a The Group’s relevance to the markets and societies in which it oper- member of the Consumer Goods Council of South Africa. ates, depends on meaningful engagement with all stakeholders. Its During the period under review, a competition law compliance stakeholder management approach involves the optimal application framework and programme was established with the assistance of of resources to build and maintain good relationships with stake- the Group’s legal advisors. This programme will be further holders. This assists the Group to understand the expectations of its entrenched within the Group. stakeholders, minimize reputational risk and form strong partnerships which ultimately underpins the sustainability of the Group. POLITICAL PARTY SUPPORT The Group appreciates the importance of dissemination of accurate Whilst the Group supports the democracy in South Africa, it does not information to all its stakeholders. Financial and non-financial informa- make financial donations to individual political parties. tion is disseminated timeously and accurately to all stakeholders.

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Audit and Risk Committee Report

INTRODUCTION and its members were assessed and found to be satisfactory. In addi- We are pleased to present our report to shareholders for the financial tion, members were assessed in terms of the independence require- year ended 30 June 2012. The Audit and Risk Committee (“the ments of King III and the Companies Act. All members of the Committee”) is an independent statutory committee appointed by Committee continue to meet the independence requirements. the Shoprite Holdings board of directors (“the Board”) who delegates duties and responsibilities to the Committee. ROLES AND RESPONSIBILITIES The main purpose of the Committee is to assist the Board in During the period under review, the Committee fulfilled the statutory monitoring the integrity of financial statements and overseeing the duties as required by the Companies Act and recommended in King Integrated Report. It is also responsible for the effectiveness of the III, as well as various additional responsibilities assigned to it by the Group’s internal financial controls and oversees the internal and Board. external audit functions. The Companies Act, 2008 (as amended) (“the Companies Act”) furthermore requires the Committee to External auditor appointment and independence perform specific responsibilities. The Committee has satisfied itself that the external auditor, The Committee’s terms of reference are formalized in a charter PricewaterhouseCoopers (PwC), conducted its duties independently 28 approved by the Board. With the introduction of the King Code of and that no limitations were imposed by management on PwC whilst Governance Principles (“King III”) and the enactment of the performing their duties during the period under review. Companies Act, the Committee had to review its terms of reference In consultation with the Group’s executive management, the to bring them in line with new legislation and regulations. In addition Committee agreed to the terms of the PwC engagement letter, audit to performing this function for Shoprite Holdings, the Committee also plan and budgeted audit fees in respect of the 2012 financial year. accepted and performed the role for all the Group’s South African A formal framework governs the process through which PwC subsidiaries. renders non-audit services to ensure that the audit independence is During the period under review, the Committee conducted its not impaired. The Committee approved the terms of a master service affairs in accordance with the charter and has discharged its respon- agreement for the provision of non-audit services by PwC as well as sibilities as required by the charter, the Companies Act and the mate- the nature and extent of non-audit services that may be provided in rial requirements of King III. terms of a pre-approval policy. Non-audit services rendered by PwC during the period under review comprised tax advisory and compli- AUDIT COMMITTEE MEMBERS, ance services, due diligence reviews, accounting opinions and other MEETING ATTENDANCE AND ASSESSMENT advisory services. The Committee consists of three (3) independent non-executive The Committee nominates PwC for re-election at the annual directors elected by the shareholders of Shoprite Holdings on general meeting (AGM) of Shoprite Holdings, and Mr. A Wentzel as recommendation by the Board and is chaired by Mr JG Rademeyer. the designated partner to perform the functions of external auditor, Committee meetings are held at least four (4) times a year as until the 2013 AGM. The Committee has satisfied itself that both required by the charter. Where a quorum was not present all PwC and Mr. Wentzel are accredited with the JSE Limited as decisions were approved at the next meeting where a quorum was required. present. During the period under review, the Audit Committee met five (5) times. A special Committee meeting was held on 26 August Financial statements and Accounting practices 2011 to approve the 2011 annual financial statements of the During the reporting period, the Committee reviewed the interim and Company. annual financial reports of the Group and recommended the accept- ance and approval thereof to the Board. The attendance of the Committee members is recorded below: 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

15/08/2011 26/08/2011 (Special) 04/11/2011 17/02/2012 18/05/2012 the JSE Listings Requirements; and NON-EXECUTIVE DIRECTORS – the audit report issued by the external auditors. JG RADEMEYER JF MALHERBE x Internal controls JA LOUW x The Group’s systems of internal control are designed and imple- mented to support the identification, evaluation and management of The financial director, general manager group finance, internal and risks affecting the Group. These include controls in respect of the external auditors attended the Committee meetings by invitation. financial reporting process and extend across all areas of operations. Other members of management attended as required. During the period under review an internal review was performed The Committee agendas provide for confidential meetings to assess the effectiveness of the Group’s system of internal controls between the members and internal and external auditors. No such and risk management procedures. This assessment formed the basis meetings took place or were requested during the reporting period. for the Audit Committee’s recommendation in this regard to the Board. Committee evaluation Management, internal and external auditors have agreed on a As part of the annual evaluation, the performance of the Committee combined assurance model to enable these parties to report to the

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Committee on the efficiency of the Group’s internal financial controls. responsibilities effectively. Furthermore, it oversees cooperation Assurance on compliance with systems of internal control and on between the internal and external auditors, and serves as a link their effectiveness is obtained through regular management reviews, between the Board and these functions. assurance, testing of certain aspects of the internal financial controls The internal audit function consists of the Group internal audit systems by the external auditors during the course of their statutory team, led by the chief internal auditor and divisional audit functions audit and regular reports to the Committee by the external auditors. that operate in the Group’s operational divisions. The divisional func- During the period under review, the Committee reviewed the tions are centrally coordinated by the group internal audit team. reports on the design, implementation and effectiveness of the Internal audit activities all of which are risk based are performed Group’s systems of internal financial and risk controls. No material by a team of appropriate, qualified and experienced employees. The breakdowns in the internal and financial controls came to the atten- internal audit team is responsible for reviewing and providing assur- tion of management of the Group that required reporting. ance on the adequacy of the internal control environment across all of the significant areas of the Group’s operations. The internal audit Integrated and Sustainability reporting manager is responsible for reporting the progress and findings of In fulfilling its oversight responsibilities, the Committee has reviewed internal audit’s work conducted against the Group’s approved audit the sustainability information that forms part of the Group’s plan to the Committee on a quarterly basis. 29 Integrated Report and has assessed its consistency with operational The internal audit manager has direct access to the Committee, and other information known to the Committee members, as well as primarily through the Chairman. its consistency with the Group’s annual financial statements. The Committee has satisfied itself that adequate, objective The Committee is satisfied that the above is consistent with the internal audit standards and procedures exist within the Group and Group’s financial results. As such the Committee has recommended that Group internal audit has complied with the required legal, regula- that this be approved by the Board. tory and other responsibilities as stipulated in their charter during the period under review. Going concern The Committee has reviewed a documented assessment, including Governance of information technology key assumptions, prepared by management on the going concern The Board has mandated the Committee to review the Group’s IT status of the Group. The Board’s statement on the going concern strategy and execution. In this regard the Committee reviews the status of the Group, as supported by the Committee, is contained in implementation of all relevant IT governance mandates, policies, the directors’ report. processes and control frameworks. Furthermore, the Committee also provides assurance to the Board on all IT related matters, including Governance of risk significant IT investments, by engaging both internal and external Whilst the Board is ultimately responsible for the maintenance of an assurance providers. This assurance forms part of the Group’s effective risk management process, the Committee assisted the combined assurance framework. Board in assessing the adequacy of the risk management process. The Group’s IT governance framework is formalized in an IT Under the supervision of the Committee, the risk forum (a governance charter and policies were formulated and implemented. management committee consisting of senior managers from all The charter and policies outline the decision making rights and business units) met three (3) times during the reporting period. accountability framework for IT governance within the Group. During these meetings significant risks affecting the Group were considered and discussed to ensure that executive management is EVALUATION OF THE EXPERTISE AND EXPERIENCE aware of the risks affecting the Group and their respective business OF FINANCIAL DIRECTOR AND FINANCE FUNCTION units. Minutes of these meetings are submitted to the Committee for The Committee has satisfied itself that the financial director, consideration. Mr. CG Goosen, has the appropriate expertise and experience to act Each significant business unit within the Group has their own in this capacity. enterprise wide risk management plan which is updated regularly to The Committee is also satisfied that the Group finance function ensure that risks affecting business units are current and that the has the required expertise and adequacy of resources to perform necessary controls to mitigate these risks are in place. the Group financial function. The Group also has a Top 20 risk document which details the material risks of the Group as well as the necessary controls to miti- JG Rademeyer gate these risks. Business units are required to report on the risk Chairman control measures that they have implemented to address the specific risks affecting their business unit. 20 August 2012 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

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Nominations Committee Report

The Nominations Committee had two (2) meetings during the period in March 2012, Mr Rock in May 2012 and Dr Mokgokong in August under review. This committee has formal terms of reference which 2012. The review of the Nominations Committee’s composition was reviewed during the period under review. resulted in the appointment of Mr Kieswetter as a member of the Nominations Committee. The key elements of the charter are the following: As required by the Memorandum of Incorporation of Shoprite – The identification, evaluation and recommendation of nominees Holdings, one third of the directors will retire by rotation at the to the Board and the board committees; forthcoming annual general meeting. Messrs JG Rademeyer, – Oversee the formal induction programme for new directors; EL Nel and AE Karp will retire in terms of this provision whilst – Regularly review the structure and composition of the Board and Dr ATM Mokgokong, Messrs JJ Fouché and JA Rock will retire as make recommendations to the Board in this regard; a result of their appointments subsequent to the previous annual – Ensure the development of succession plans for the Board, general meeting but have offered themselves for re-election. CEO and senior management; – Assess the effectiveness of the Board and its committees. The Nominations Committee annually reviews the independence of non-executive directors that retires based on whether the director: 30 The following directors served on the Nominations Committee during – was employed in an executive capacity within the Group in the the 2012 financial year: previous three years; – Dr CH Wiese: Non-executive chairman – served on the Board for a period of longer than nine years. In this – Mr JA Louw: Independent non-executive director; and instance the Nominations Committee considers if the director’s – Mr EC Kieswetter: Independent non-executive director independence, judgement and contribution to the Board (appointed on 21 May 2012) deliberation could be compromised, or appear to be compromised, by this length of services; The details of attendance at the meetings are set out below: – is a representative of a major shareholder; DIRECTOR 20 FEB 2012 21 MAY 2012 – is independent in character and judgement and whether there CH WIESE are any circumstances which may or is likely to affect the JA LOUW director’s judgement; EC KIESWETTER – is a shareholder in Shoprite Holdings and that his shareholding (appointed 21 May 2012) n/a represents a material part of the director’s personal wealth.

As part of the annual review of the composition of the Board and Having considered the circumstances of the non-executive directors, board committees, three (3) additional independent non-executive the Nominations Committee is of the view that Dr Mokgokong, directors were appointed to the Board. Mr JJ Fouché was appointed Messrs Fouché and Rock can be considered as independent.

Social and Ethics Committee Report

This Committee was constituted as a statutory committee of the The following members served on the Social and Ethics Committee Board on 21 February 2012 to execute the duties assigned to it by during the 2012 financial year: the Companies Act as well as any additional duties assigned to it by – Mr JA Louw: Independent non-executive director and chairman; the Board. – Mr BR Weyers: Executive director; – Mr M Bosman: Alternate director; This committee has adopted formal terms of reference and will – Mr JAL Basson: Alternate director; and monitor the Group’s activities, taking into account relevant legislation, – Mr C Burger: General Manager Human Resources. other legal requirements and prevailing codes of best practice with regard to: This committee will meet at least twice per annum and the first – Social and economic development; meeting was held on 2 May 2012. – Labour and employment; – Ensuring that the Group’s ethics are managed effectively; The details of attendance of members at this meeting are set out below: – Consumer relationships which includes advertising, public DIRECTOR 2 MAY 2012 relations and compliance to consumer protection laws; JA LOUW – The environment, health and public safety, and the impact of BR WEYERS activities and products and services. M BOSMAN JAL BASSON C BURGER

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Remuneration Report

The board (“Board”) of Shoprite Holdings Limited (“Shoprite REMUNERATION COMMITTEE Holdings” or “the Group”) and the remuneration committee (“the Remuneration Committee”) present their remuneration report setting Composition, mandate and attendance out information applicable to the Group’s remuneration policy and in The Remuneration Committee functions as a sub-committee of the particular executive remuneration, both fixed and variable elements Board in terms of an agreed mandate and evaluates and monitors the as well as fees paid to non-executive directors. Group’s remuneration philosophy and practices to ensure consist- The Group’s executive remuneration policy continues to be driven ency with governance principles and corporate strategy. During the by performance and aims at rewarding executives for the growth in reporting period the mandate was reviewed and aligned with King III the Shoprite Holdings share price, hereby creating shareholder and The Companies Act, 2008 requirements. These amendments returns. Alignment with shareholders and shareholders’ feedback is were also approved by the Board. important. Such feedback has been taken into account in formulating the Group’s remuneration policy. The members for the year under review were: With regard to variable pay, for the year under review the Group – Dr CH Wiese (chairman) operated a short term incentive bonus plan, a deferred bonus plan, a – Mr JA Louw virtual option plan and a share appreciation rights plan. Performance 31 and payment for bonus plans and the virtual option scheme are Both members of the Remuneration Committee are non-executive measured against operating profit targets (on a group level and on a directors and Mr JA Louw is an independent non-executive director business unit level). Eligible employees below executive level also as defined by King III. The Remuneration Committee had two meet- participate in the bonus plans. The Group’s current long term incen- ings during the reporting period. The attendance at these meetings is tive plan is a share appreciation plan and payments are linked to share recorded below: price performance to ensure alignment with shareholder interests. During the reporting period the Remuneration Committee TABLE 1: REMUNERATION COMMITTEE MEETING ATTENDANCE engaged the services of reward consultants to review its long term DIRECTOR 13 MARCH 2012 25 JUNE 2012 incentive plan and based on remuneration best practices and trends, CH WIESE both locally and internationally, a new long term incentive plan was designed. This plan will be presented to shareholders for approval at JA LOUW the annual general meeting and further detail regarding the salient features of the proposed plan are provided in the integrated report. The chief executive officer, deputy managing and financial director The mandate for the Remuneration Committee was also updated and head of human resources attend meetings, by invitation, to assist during the reporting period to incorporate the material recommenda- the Remuneration Committee with the execution of its mandate. The tions of King III and to assist members of the Remuneration company secretary also attends the meetings. No executive or senior Committee in the execution of their roles and responsibilities. executive is present at meetings of the committee when his/her own remuneration is discussed or considered. The areas covered in this remuneration report are the following: The chairman of the Remuneration Committee, or in his absence, – The Remuneration Committee and its role; another member of the Remuneration Committee is required to attend – Key remuneration decisions taken during the 2012 financial year; the annual general meeting to answer questions on remuneration. – A summary of the Company’s remuneration policy; External advisors are also used by the Group to provide advice – Current components of remuneration and forward looking policy when required. In addition, the Group subscribes to a salary survey for the 2013 financial year; database to benchmark guaranteed pay, both with regard to the retail – General terms of executive directors’ employment contracts; and industry and the general market. – Non-executive director fees and actual payments made. The terms of reference as set out in the mandate of the On behalf of the Group, I hereby reconfirm our commitment to Remuneration Committee include: sustained long term growth for shareholders, supported by the – Assisting the Board to establish a remuneration policy for direc- Group’s remuneration policy, and look forward to further growth and tors and senior executives that will promote the achievement of successes in the next financial year. 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 Dr CH Wiese of executive directors in discharging their functions and responsi- Chairman of Remuneration Committee bilities; – Reviewing and recommending to the Board the relevant criteria necessary to measure the performance of executives in deter- mining their remuneration; – Recommending to the Board, based on market benchmarks, the remuneration of the chairman and non-executive directors, whose remuneration is subject to shareholder approval;

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Remuneration Report (continued)

– Reviewing the outcomes of the implementation of the remunera- unit and individual performance level. The “at risk” or variable pay tion policy to determine if objectives were achieved; includes short term incentive bonuses and long term incentives – Reviewing and approve the remuneration policy as contained in which provide alignment between executives and shareholders. the remuneration report as part of the integrated report; – Ensuring that the remuneration report be put to a non-binding Benchmarking and position in the market advisory vote by shareholders; To ensure that the Group remains competitive in the markets in – Ensuring that consideration is given to executive succession which it operates, all elements of remuneration are subject to regular planning in the Group; and benchmarking. Reviews are performed annually to benchmark the – Ensuring compliance with applicable laws and codes applicable to Group’s remuneration against the retail industry and the general executive remuneration. market. Executive positions are also evaluated frequently. Remuneration consultants are utilised to perform the above reviews Key remuneration decisions taken during the 2012 and benchmarking exercises. The policy aims at positioning the fi nancial year Group as a preferred employer within the retail industry. The general During the 2012 financial year, the Remuneration Committee approach with regard to guaranteed pay for the Group is that it is 32 reviewed components of the Group’s remuneration policy and how positioned at the median, but for exceptional and scarce skills a this links to the Group’s strategic objectives. The following key premium may be paid by the Group resulting in guaranteed pay decisions were taken: levels, in certain circumstances, exceeding the median. – Review and approval of the proposed long-term incentive plan, For executives, due to the size of the group, its multiple brands designed in line with King III and best practice requirements, for and its extensive footprint on the African continent, guaranteed pay, approval by shareholders; together with on-target short term incentive bonuses are bench- – Review and approval of executive and broad based salary marked at the upper quartile values of the South African remunera- increases for the 2013 financial year; tion surveys used in the Group’s annual benchmarking. The Group – Approval of the short-term incentive bonus payments in respect believes that its remuneration policy plays an essential, vital role in of the 2012 financial year; realising business strategy and therefore should be competitive in – Review and approval of the Group’s remuneration policy and the markets in which the Group operates. report; and – Review and approval of proposed non-executive director fees for Pay mix between guaranteed package and variable the 2013 financial year. remuneration The Group has not formalised an on target pay mix guideline for REMUNERATION POLICY executives as part of its remuneration policy. However, variable remuneration for on-target performance has always been the focus Guiding principles of the Group with regard to executives. During the period under The remuneration policy is aligned to the Group’s approach of review the split between guaranteed pay and variable remuneration rewarding directors and senior executives fairly and competitively, paid amounted to approximately 65/35 for executives and 80/20 for according to their capabilities, skills, responsibilities and level of other management. performance. It has the following underlying principles: During the reporting period the Group consulted with independent – Remuneration that is fair and just; reward consultants and have obtained best practice benchmarks for – Retaining the services of key talent and critical skills necessary to on-target performance pay mix for executives. realise the Group’s strategic objectives over the long term; In the 2013 financial year, the Remuneration Committee will – Attracting the key talent and skills required by the Group; review these best practice benchmarks, together with proposed – Ensuring that remuneration structures are consistent with the allocations to executives in terms of the proposed new long term Group’s long term value creation for shareholders; incentive plan, to ensure that executives’ pay mix drives the required – Remuneration that is sustainable in the long term and does not behaviours and the strategic objectives of the Group. encourage excessive risk taking by key decision makers; – Key performance areas for executives which support an Components of remuneration integrated approach taking into account financial metrics, The different components of remuneration, their objectives and their sustainability, risk management, governance and other strategic link to the business strategy as well as proposed changes in the objectives; remuneration policy are summarised on the following page. – 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 TABLE 2: SUMMARY OF REMUNERATION COMPONENTS

Component Fixed/ Objective Link to business strategy Policy Proposed changes for variable 2013 financial year

Guaranteed pay Fixed Reflects scope and nature This component aligns Generally positioned at the No changes proposed. of role, job content, with business strategy as median, except if there is performance and it takes into account a need to retain key and experience internal and external critical skills. equity. Hereby, ensuring competiveness and rewarding individuals fairly based on a similar job in the market. Benefits Fixed Providing employees with Retirement benefits The company contributes No changes to standard 33 contractually agreed basic encourage a culture of between 7.5% – 15% employment benefits. benefits such as retire- saving by employees, towards retirement ment fund benefits whereas the other benefits as per the rules (provident fund), medical benefits aim to cater for of its retirement funds. aid, risk benefits and life employees’ physical well- and disability insurance being and life insurance Risk and insurance per the Group’s human and disability needs. benefits are company resource policy. Benefits recognise contributions forming part employees’ need for a of guaranteed package. Employees represented holistic approach to guar- by collective bargaining anteed package and are units receive similar part of the overall benefits i.e. medical aid, employee value proposi- life and disability insurance tion offered by Shoprite. and a retirement fund contributions.

Separate expatriate benefits may apply to international assignments.

Voluntary HIV/Aids counselling and testing programme.

Short-term Variable Rewards and motivates Encourages growth in Operating profit is the No material changes to incentive bonus achievement of agreed sustainable operating financial metric for incentive bonus plan, Group and business unit profit in the short term determining the bonus except for refinement of performance objectives. and rewards employees pool. The plan is subject to different business units’ for their measurable certain earning caps, i.e. performance criteria to contribution in this regard. 150% of target achieved. support business strategy.

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.

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Remuneration Report (continued)

Component Fixed/ Objective Link to business strategy Policy Proposed changes for variable 2013 financial year

Long-term Variable Provides value to execu- Creates shareholder The value in the apprecia- New proposed long term incentive tives in line with share alignment and value tion in share price from incentive plan, based on (Cash settled price growth and acts as a creation in the long term grant date to vesting dates the awarding of actual share apprecia- retention mechanism. as there is only value in are paid to executives in shares, subject to tion rights plan) the long term incentive if cash. Share appreciation forfeiture if certain the Company’s share price rights granted vest in conditions are not met by increases over the life of three equal tranches after executives. the plan. the 3rd, 4th and 5th anni- versary of the grant date.

Virtual option plan Variable Provides employees who Aims to create share- Eligible employees receive No changes. 34 generally do not partici- holder value creation and a notional capital amount pate in the share apprecia- increase operating profit. and based on the growth tion rights plan with an in the Company’s oper- incentive to grow the ating profit year on year operating profit of the the notional amount will Group. As it operates over vest. The vested amount 5 years it is also aimed at will, however only be paid retention. after 3,4 and 5 years (in equal amounts).

Deferred Bonus Variable Requires employees to Aimed at retention The criteria are the same No changes. plan defer a portion of their of key talent. as for the short term bonuses for up to 5 years incentive bonus, but the and therefore aid reten- deferred bonus is only tion. paid in equal amounts after year 3, 4 and 5. In the event of a participant terminating employment (besides death and disa- bility) the deferred bonus will be forfeited.

Total guaranteed package Remuneration Committee in terms of the Board approved mandate. The Group operates a total guaranteed package structure which Collective bargaining agreements typically exclude performance includes all fixed pay components summarised above, namely: based increases and uniform increases, based on the agreements – Guaranteed pay; and reached between the Company and the bargaining units, are mostly – Benefits. awarded to these employees.

In terms of its terms of reference and benchmarking policy, the Variable remuneration Remuneration Committee conducts an annual review of the Group’s guaranteed packages. SHORT TERM INCENTIVE BONUS PLAN The annual short term incentive plan intends to recognise the INCREASES achievement of a combination of Group and business unit objectives. Annual increases are awarded based on employees’ total guaranteed Executives and management participate in the short-term incen- package value. Annual increases in the total guaranteed package are tive scheme which runs over the financial year of the Group. This is a determined with reference to the scope and nature of an employee’s self-funding scheme as the bonus pool is determined based on an role, market benchmarks, personal performance and competence, operating profit target. The value of the on target bonus earning affordability, company performance and projected consumer price potential for the plan is included in the annual budget and is provided index figures. The Chief Executive Officer of the Group may review for in the financial statements. and recommend amendments to proposed increases to guaranteed The quantum of the bonus pool is determined on Group level, but packages for employees. Such recommendations are presented to is moderated by the financial performance of each business unit the Remuneration Committee for approval. Executives’ annual within the Group. Therefore, on Group level, where between 70% increase in guaranteed packages are reviewed and approved by the and 100% of operating profit target is achieved and the business unit

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 achieves the same or a larger percentage of its operating profit based on the share price appreciation, is determined from allocation budget, the business units’ bonus pool will be the actual percentage date to vesting date. The share appreciation rights vest as follows: of operating profit budget achieved. However, where the business – One third after the third anniversary of the grant date; unit performance does not match or exceed Group performance, – Another third after the fourth anniversary of the grant date; and participants may earn a bonus based on the bespoke performance – The remainder after the fifth anniversary of the grant date. criteria applicable to each business unit pre-determined at the begin- ning of the financial year. This ensures that each participant is meas- During the reporting period no SAR allocations were made to ured against his specific area of responsibility. Various weightings are participants. The last allocation will vest in 2015 and no further also included in the criteria to encourage participants to maximise allocations will be made in terms of this plan. their role and functionality, such criteria may include: – market share growth; VIRTUAL OPTION PLAN – sales; The virtual option plan is aimed at providing employees who do not – shrinkage; participate in the SAR, for example middle management and other – strategic transformation targets (BBBEE); key employees and scarce skilled employees, with an incentive to – cost savings; and advance the interests of the Group over the long term. 35 – stock days, etc. The strategic intent of the plan includes the retention of key employees, providing employees with an opportunity to earn variable Employees from all nineteen (19) of the Group’s business units remuneration, based on performance to create alignment with participate in the plan. shareholders’ interests. The plan also makes provision for stretch targets above the In terms of this plan, a notional capital amount is allocated to operating profit target set. Where more than 100% of target is participants. Subject to certain conditions, a bonus is determined achieved on a Group level and this performance is matched or each year by multiplying the capital amount allocated with the exceeded on a business unit participants can earn up to 150% of percentage growth in the operating profit of the Group on a year to their on-target incentive. However, where the current year operating year basis (i.e. the calculation is based on the percentage growth in profit does not exceed the previous year operating profit the bonus operating profit between the current financial year and the previous pool is limited to 100% of the operating profit target. financial year). The bonus determined in terms of this plan vests The annual bonus pool is therefore capped at 150% of operating equally over a three, four and five year period and is only paid then. profit target in instances of financial outperformance. On an individual executive level the earning potential as a DEFERRED BONUS PLAN percentage of guaranteed remuneration is expressed below. In terms of the deferred bonus plan participants are measured on the same criteria which are applicable for the short term incentive bonus TABLE 3: SHORT TERM INCENTIVE BONUS EARNING POTENTIAL plan. The bonus determined as such, however, is deferred and is paid AS % OF GUARANTEED REMUNERATION in equal amounts after year three, four and five. Deferred bonuses Position Target as % of Stretch as % of can be forfeited prior to payment in the event of the participant guaranteed g uaranteed terminating employment with the Company (apart from death and remuneration remuneration disability). Financial Director 58% 86% The deferred bonus plan therefore serves as a retention mechanism. Executives 56% 85% PROPOSED EXECUTIVE SHARE PLAN (2012) Long term incentive plans Based on best practice locally and globally, the Remuneration Long-term incentives are offered through participation in Share Committee appointed independent reward consultants to provide Appreciation Rights Plan (“SAR”), a virtual option plan and a deferred recommendations on the design principles of a new long term bonus plan. incentive to replace the current SAR. A new long term incentive plan has been developed based on The Remuneration Committee has reviewed the proposed best practice which will be presented to shareholders for approval. Executive Share Plan rules and has approved it, subject to share- The salient features of the current long term incentives as well as holder approval. The shareholders are referred to ordinary resolution the proposed long term incentive are set out below. 15 on page 111 of the integrated report. The salient features of the proposed plan have been attached to the resolution and the complete SHARE APPRECIATION RIGHTS PLAN (SAR) plan rules are available for inspection at the Company’s registered The SAR was introduced during 2007. The purpose of the SAR is address. to align shareholders value creation with the incentive received by The main characteristics of the proposed plan, the performance executives as gains are determined based on the growth in the share and vesting conditions applicable to the long term incentive instru- price. Its secondary aim is to retain the services of key individuals for ments and the types of instruments which can be allocated to eligible execution of the Group’s strategic objectives. A total of 49 executives employees in terms of the plan has been summarised in the diagram participate in the SAR. overleaf.

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,

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Remuneration Report (continued)

DIAGRAM 1: SUMMARY OF PROPOSED EXECUTIVE SHARE PLAN

Executive Share Plan 2012

36

Retention Shares Co-investment Shares Performance Shares Forfeitable, restricted Forfeitable, restricted Forfeitable, restricted shares which is subject to shares allocated based on shares allocated which is continued employment for the value of the investment subject to performance vesting. Aimed at retaining made by the participant in conditions and continued key talent in exceptional the plan. Specific vesting employment for vesting. circumstances. conditions.

Dilution NON-EXECUTIVE DIRECTORS’ REMUNERATION The current SAR and the virtual option plan are cash settled, therefore settlement creates no dilution. Independent non-executive directors In terms of the proposed Executive Share Plan rules an overall limit of Independent, non-executive directors do not have any employment approximately 3% (three per centum) of the issued shares of the contracts and do not receive any benefits associated with permanent Company has been imposed when shares are allocated and issued in employment. terms of the plan. An individual limit of approximately 0.5% (comma The Board, on recommendation by the Remuneration Committee five per centum) has been imposed. have decided that independent non-executive directors should not be However, if shares are purchased in the open market for remunerated by means of a base fee and attendance fee in respect settlement of allocations in terms of the proposed Executive Share of their board and committee obligations. This is as non-executive Plan the limits will not be impacted. It is the intention of the Group to directors are required to prepare for all meetings and feedback is mostly purchase shares in the open market for purposes of required by the Board, albeit it the meeting is not actually attended by settlement. the non-executive director. The fee structure is therefore based on a retainer basis. The fee structure is reviewed annually and bench- CONTRACTS OF EMPLOYMENT marks for non-executive fees for companies of similar size and Executive directors and executives of the Group do not have fixed comparable industries are considered in setting the proposed terms contracts, but are employed in terms of the Group’s standard non-executive fees. The fee structure is subject to prior approval by contract of employment. The notice period for termination of service shareholders at the annual general meeting of Shoprite Holdings. varies between one (1) calendar month and twelve (12) months. Travelling and accommodation expenses actually incurred by Normal retirement age ranges between 60 and 65 years, unless directors to attend meetings are paid by the Group. 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 The proposed fee structure for the period 1 November 2011 – Non independent non-executive directors 30 October 2012 is as follows: Shoprite Holdings has one (1) non independent non-executive director, Dr CH Wiese. The emoluments paid by the Group to TABLE 4: PROPOSED NON-EXECUTIVE DIRECTORS’ FEES Dr Wiese, is paid to Chaircorp (Pty) Ltd, a management company of which Dr Wiese is an employee. BOARD Chairman of the Board ...... R273 000 Fees paid to non-executive directors Lead Independent Director ...... R142 000 The annual fees payable to non-executive directors for the period Non-Executive Director ...... R129 000 1 November 2010 – 30 October 2011 were approved by shareholders on 31 October 2011 and thereafter paid as presented in the table AUDIT COMMITTEE below: Chairman ...... R193 000 Member ...... R96 000 BOARD Chairman of the Board ...... R218 000 REMUNERATION COMMITTEE Lead Independent Director ...... R113 000 37 Chairman ...... R50 000 Non-Executive Director ...... R103 000 Member ...... R30 000 AUDIT COMMITTEE NOMINATION COMMITTEE Chairman ...... R154 000 Chairman ...... R50 000 Member ...... R77 000 Member ...... R30 000 REMUNERATION PAID TO EXECUTIVE AND SOCIAL AND ETHICS COMMITTEE ALTERNATE DIRECTORS Chairman ...... R65 000 The Group views its executive and alternate directors as prescribed officers as defined in terms of the Companies Act. Refer to special resolution 1 from pages 111 to 112 for approval by Details of the remuneration paid to executive directors and shareholders in terms of section 66 of the Companies Act. 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.

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 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 whether due to fraud or error, and for maintaining adequate of the annual financial statements of the Company and Group, accounting records and an effective system of risk management as comprising the directors’ report, the statements of financial position well as the preparation of the supplementary schedules included in at June 2012, the statements of comprehensive income, changes in these financial statements. equity and cash flows for the year then ended, and the notes to the The directors believe that the Company and Group have adequate financial statements, which include a summary of significant resources to continue trading as a going concern in the foreseeable accounting policies and other explanatory notes, in accordance future. The annual financial statements support the viability of the with International Financial Reporting Standards (IFRSs) and the Company and the Group. requirements of the Companies Act of South Africa. The Group’s external auditors, PricewaterhouseCoopers The directors are satisfied that the information contained in the Incorporated, audited the Company and Group annual financial annual financial statements fairly represents the financial position at statements, and their report is presented on page 40. The external year-end and the financial performance and cash flows of the auditors were given unrestricted access to all financial records and Company and Group. related data, including minutes of all meetings of shareholders, the The directors are also responsible for such internal control as the board of directors and committees of the board. The directors believe directors determine is necessary to enable the preparation of that all representations made to the independent auditors during their 39 financial statements that are free from material misstatement, 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 J W Basson Chairman Chief Executive Officer 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: 2012 2011 2012 2011 2012 2011 USA dollar 8.297 6.770 Uganda shilling 0.003 0.003 Madagascan ariary 0.004 0.004 Pound sterling 12.953 10.873 Malawi kwacha 0.031 0.045 Nigerian naira 0.051 0.045 Euro 10.443 9.825 Mauritian rupee 0.266 0.242 Tanzania shilling 0.005 0.004 Zambia kwacha 0.002 0.002 Angolan kwanza 0.087 0.073 Congolese frank 0.009 0.008 Mozambique metical 0.293 0.239 Indian rupee 0.147 0.152 Botswana pula 1.078 1.035 Ghanian cedi 4.311 4.455 Independent Auditor’s Report to the Shareholders of Shoprite Holdings Limited

We have audited the consolidated and separate financial statements assessment of the risks of material misstatement of the financial of Shoprite Holdings Limited set out on pages 41 to 106, which statements, whether due to fraud or error. In making those risk comprise the statements of financial position as at 30 June 2012, and assessments, the auditor considers internal control relevant to the the statements of comprehensive income, statements of changes in entity’s preparation and fair presentation of the financial statements equity and statements of cash flows for the year then ended, and the in order to design audit procedures that are appropriate in the notes, comprising a summary of significant accounting policies and circumstances, but not for the purpose of expressing an opinion on the other explanatory information, and the directors’ report. effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL reasonableness of accounting estimates made by management, as STATEMENTS well as evaluating the overall presentation of the financial statements. The Company’s directors are responsible for the preparation and fair We believe that the audit evidence we have obtained is sufficient presentation of these consolidated and separate financial statements and appropriate to provide a basis for our audit opinion. in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa, and for such OPINION internal control as the directors determine is necessary to enable the In our opinion, the consolidated and separate financial statements preparation of consolidated and separate financial statements that present fairly, in all material respects, the consolidated and separate are free from material misstatements, whether due to fraud or error. financial position of Shoprite Holdings Limited as at 30 June 2012, and its consolidated and separate financial performance and its AUDITOR’S RESPONSIBILITY consolidated and separate cash flows for the year then ended in Our responsibility is to express an opinion on these consolidated and accordance with International Financial Reporting Standards and the separate financial statements based on our audit. We conducted our requirements of the Companies Act of South Africa. 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 PricewaterhouseCoopers Inc. the consolidated and separate financial statements are free from Director: A Wentzel material misstatement. Registered Auditor An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The Cape Town procedures selected depend on the auditor’s judgement, including the 20 August 2012

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Directors’ Report Shoprite Holdings Ltd and its Subsidiaries

NATURE OF BUSINESS surgeons and private and corporate pharmacies. Shoprite Holdings Limited (“Shoprite Holdings”) is an investment Properties: This division is tasked with the responsibility of expanding holding company listed on the Johannesburg Stock Exchange Limited the Group’s supermarket portfolio through the identification and (“JSE”) in the “food retailers & wholesalers” sector. Secondary leasing of new supermarket premises or developing new shopping listings are also maintained on the Namibian and Zambian Stock centres to accommodate one of the Group’s supermarket formats. Exchanges. New retail developments and the redevelopment of existing proper- ties are supervised through every stage of the planning-, design- and SHOPRITE HOLDINGS COMPRISES OF THE construction process. FOLLOWING MAIN SUBSIDIARIES: Shoprite Investments Ltd: Shoprite Checkers (Pty) Ltd: As a wholly owned subsidiary of Shoprite Holdings, Shoprite Supermarkets: Serves a broad customer base through Shoprite, Investments was utilized as a vehicle to issue ZAR4,7 billion convert- Shoprite Hyper, Checkers, Checkers Hyper and Usave store formats. ible bonds to qualifying investors as part of the Group’s successful Supply Chain Management: A highly sophisticated supply line capital raising concluded during March 2012. For this purpose services the Group’s outlets in 17 countries. The Group prides itself Shoprite Investments converted to a public company. The convertible 41 in running a state-of-the-art distribution operation and became the bonds were listed on the JSE during May 2012. Shoprite Investments first South African retailer to receive the ISO 9002 accreditation for performs the Group’s treasury functions and other financing of credit import and export handling. sales to third parties. Fast Foods: The Hungry Lion chain boasts modern, well-designed stores with an inescapable focus on fried chicken. Hungry Lion now Computicket (Pty) Ltd: operates outlets within South Africa, Botswana, Zambia, Lesotho, As a premier ticketing solution provider and one of the most Swaziland, Namibia, Angola and the Democratic Republic of Congo. recognised brand names, Computicket offers theatre, concert, Franchise: The OK Franchise Division’s stores offer a wide range of festival, sport and cinema tickets along with bus tickets and gift perishable and non-perishable food items and liquor. The franchise vouchers through a network of outlets located across South Africa, division encompasses seven (7) supermarket/convenience outlet a call centre as well as the Computicket website. Computicket also brands namely OK Foods, OK Grocer, OK Minimark, OK Value, offers travel packages. Computicket has also recently expanded its Friendly Grocer, 7-Eleven and Priceclub, a wholesaler Megasave presence to Namibia. as well as three (3) add-on liquor outlets under the Enjoy OK Liquorstore, Friendly Liquormarket and 7-Eleven Liquormarket Shoprite International Ltd: brands. Incorporated in the Republic of Mauritius, Shoprite International is the Freshmark: Freshmark is the Group’s fruit and vegetable procure- holding company for the majority of the Group’s non-South African ment and distribution arm and supplies fresh produce to the Group’s retail and property investments. retail outlets. Currently one of the largest buyers of fresh produce in South Africa, Freshmark also imports fruit and vegetables to ensure Shoprite Insurance Company Ltd: a wide variety and continuity of traditionally seasonal fresh produce. Provides first and third party short term insurance to the Group and Liquor Stores: Trading under the Shoprite and Checkers LiquorShop its customers. brands respectively, the liquor shops have extended the Group’s offering by providing a selection of wines, beers and a wide range Other Group Subsidiaries: of premium spirits to its customers. The interests of Shoprite Holdings in other subsidiaries are set out on Meat Markets: The Group’s meat market division is the largest page 106 of the Integrated Report. retailer of fresh meat on the African continent. Customers are served through in-store butcheries that employ qualified butchers and FINANCIAL REVIEW technicians. The Group’s headline earnings per share amounts to 607 cents for Money Markets: The Money Markets offer a comprehensive range the year (2011: 507,6 cents). Details of the profit of Shoprite Holdings of financial services and products to the Group’s customers through and its subsidiaries are contained in the statement of comprehensive dedicated in-store service counters. income on page 45 with reference to the operating segment Furniture: The Furniture division offers furniture, electrical appliances information on page 59. The financial position of Shoprite Holdings and home entertainment products to customers for cash or credit and its subsidiaries are recorded in the statement of financial position through its OK Furniture, OK Power Express and House and Home on page 44. Further details are furnished in the notes to the annual outlets in South Africa, Botswana, Namibia, Swaziland, Lesotho, financial statements on pages 48 to 105. The Group’s net asset value Zambia, Mozambique and Angola. per share as at 30 June 2012 was 2382 cents (2011: 1400 cents). Pharmacies and wholesale distribution: MediRite’s in-store pharma- cies offer consumers an easy access to affordable healthcare and DISTRIBUTION TO SHAREHOLDERS healthcare professionals. These in-store dispensaries currently operate throughout South Africa with outlets in Angola and Preference dividends Swaziland. The Group’s pharmaceutical wholesaler, Transpharm, sells Details are reflected in note 28 to the Group’s annual financial and distributes a wide range of pharmaceutical products and surgical statements. equipment to hospitals and clinics, dispensing doctors, veterinary

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Directors’ Report (continued) Shoprite Holdings Ltd and its Subsidiaries

Ordinary dividends At the meeting of shareholders of Shoprite Holdings held on An interim cash dividend (no. 126) of 109 cents per share was paid 28 June 2012, the following special resolutions were approved: on 30 April 2012. A final dividend (no. 127) of 194 cents per share, – Special resolution number 1: Specific authority to directors of declared on 21 August 2012, is payable on 17 September 2012, Shoprite Holdings to allot and issue a maximum of 30,000,000 bringing the total dividend for the year to 303 cents (2011: 253 cents) ordinary shares for the purpose of converting the convertible bonds; per ordinary share. – Special resolution number 2: Specific authority to the directors of Shoprite Holdings to allot and issue up to a maximum of SHARE CAPITAL 15,280,522 deferred shares to Thibault Square Financial Services The authorised share capital of Shoprite Holdings remained (Pty) Ltd pursuant to the conversion of convertible bonds; unchanged at 650 000 000 (six hundred and fifty million) ordinary – Special resolution number 3: Specific authority to the directors shares of 113,4 cents (one hundred and thirteen comma four cents) of Shoprite Holdings to allot and issue up to a maximum of each. 13,803,405 deferred shares to Thibault Square Financial Services On 29 March 2012, Shoprite Holdings issued 27,100,000 (Pty) Ltd pursuant to the share placement of 29 March 2012; and additional ordinary shares of 113,4 cents each resulting in an increase – Special resolution number 4: The provision of financial 42 of the total number of issued Shoprite Holdings ordinary shares to assistance in terms of section 44 of the Companies Act. 570 579 460 (2011 – 543 479 460) shares of 113,4 cents each. On 28 June 2012, shareholders approved the issue of an During the reporting period the following special resolutions were additional 13,803,405 non-convertible, non-participating, no par value passed by main Group subsidiaries: deferred shares in the share capital of Shoprite Holdings to Thibault Square Financial Services (Pty) Ltd pursuant to the issue of the Shoprite Checkers (Pty) Ltd additional ordinary shares as referred to above. These deferred – Special resolution number 1: The provision of financial shares were however only issued subsequent to the financial year assistance in terms of sections 44 and 45 of the Companies Act. end. As at 30 June 2012, 35 436 472 (6.2%) ordinary shares were Shoprite Investments Ltd held as treasury shares by a wholly owned subsidiary of Shoprite – Special resolution number 1: The conversion from a private to a Holdings. public company; and – Special resolution number 2: The issuing of convertible bonds in GOING CONCERN the aggregate value of R1,7 billion to Titan Premier Investments The annual financial statements of the Group were prepared on a (Pty) Ltd in terms of section 41 of the Companies Act. going concern basis. Note: Although the required approval has been granted, the above The board has performed a formal review of the Group’s results issue has not been effected to date. and its ability to continue trading as a going concern in the foresee- able future. DIRECTORS AND SECRETARY The directors of Shoprite Holdings confirm that they are satisfied The directors’ names and details are furnished on pages 8 and 9 and that the Group has adequate resources to continue in business for the company secretary’s name, business and postal address on page the foreseeable future. 118 of the Integrated Report. In terms of the Memorandum of Incorporation of Shoprite BORROWINGS Holdings (“the MOI”), no less than one third of the directors shall Shoprite Holdings has unlimited borrowing powers in terms of its retire by rotation at each annual general meeting. Memorandum of Incorporation (MOI). Messrs JG Rademeyer, EL Nel and AE Karp retire as directors, The Group’s overall level of debt increased from R50 million to in terms of paragraph 14.1 of the MOI of the Company, at the annual R4 035 million during the financial year under review. general meeting. All these directors have offered themselves for re-election as directors of Shoprite Holdings. SPECIAL RESOLUTIONS During the financial year, the Board approved the appointment At the annual general meeting of Shoprite Holdings held on of Messrs JJ Fouché and JA Rock as Non-Executive Directors of 31 October 2011, shareholders approved the following special Shoprite Holdings. On 6 August 2012, the Board appointed resolutions: Dr ATM Mokgokong as a Non-Executive Director. In terms of Article – Special resolution number 1: Remuneration payable to 13.2 of the MOI Messrs Fouché, Rock and Dr Mokgokong retire at Non-Executive Directors; the annual general meeting on 29 October 2012, but being eligible, – Special resolution number 2: Financial Assistance to offer themselves for re-election. Subsidiaries, Related and inter-related entities; and The board supports the re-election of these directors. – Special resolution number 3: General Approval to repurchase shares.

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 DIRECTORS’ AND ALTERNATE DIRECTORS’ BOARD COMMITTEES INTERESTS IN ORDINARY SHARES The reports of the various board committees are included in the corporate governance report from pages 24 to 27. Direct Indirect Total Total Beneficial Beneficial 2012 2011 AUDITORS CH Wiese 0 95 649 698 95 649 698 89 917 398 PricewaterhouseCoopers Incorporated will continue in office in JW Basson 0 10 071 652 10 071 652 10 110 084 accordance with Section 90(1) of the Companies Act. JJ Fouche 472 171 0 472 171 472 171 CG Goosen 3 000 1 203 202 1 206 202 1 206 202 EVENTS AFTER THE REPORTING DATE B Harisunker 406 189 0 406 189 400 189 Other than the issue of the additional deferred shares to Thibault AE Karp 147 269 0 147 269 147 269 Square Financial Services (Pty) Ltd, there have been no material EC Kieswetter 1 000 0 1 000 0 changes in the affairs or financial position of the Group and its JA Louw 0 50 000 50 000 150 000 subsidiaries from 30 June 2012 to the date of this report. JF Malherbe 0 72 453 72 453 72 453 EL Nel 0 148 727 148 727 148 727 HOLDING COMPANY 43 JG Rademeyer 0 10 000 10 000 10 000 Shoprite Holdings has no holding company. An analysis of the main JA Rock 0 0 0 0 shareholders appears on page 107 of this report. BR Weyers 404 594 0 404 594 404 594 JAL Basson 3 070 86 131 89 201 80 600 LITIGATION STATEMENT M Bosman 125 000 0 125 000 110 000 The two disputes between the Group and South African Breweries PC Engelbrecht 128 000 146 622 274 622 224 055 Plc related to the purchase of OK Bazaars (1929) Limited are in the JD Wiese 0 14 074 14 074 14 074 process of being determined through arbitration. The investigation initiated during June 2009 by the Competition After the Group’s financial year end and expiry of the closed trading Commission of South Africa (“the Commission”) into the alleged period directors or alternate directors purchased the following anti-competitive conduct of various food retailers which includes the amount of shares on the open market: Group’s main trading subsidiary, Shoprite Checkers (Pty) Ltd, is still Direct Indirect on-going with no referral of any of the complaints investigated to the Beneficial Beneficial Total Competition Tribunal to date. PC Engelbrecht 2 000 53 378 55 378 The referral by the Commission of the complaint of alleged abuse of dominance against Computicket (Pty) Ltd must still be heard by DIRECTOR’S INTEREST IN NON-CONVERTIBLE, the Competition Tribunal. NON-PARTICIPATING, NO PAR VALUE DEFERRED The claim instituted in the High Court of Lagos by AIC Limited SHARES during April 2010 against the Group’s main trading subsidiary, Shoprite Checkers (Pty) Ltd and its Nigerian subsidiary, Retail Total Total Supermarkets Nigeria Ltd, on the basis of alleged breach of contract 2012 2011 has not proceeded to trial and such date must still be allocated by the CH Wiese 276 821 666 276 821 666 Lagos High Court. Save as recorded above, the directors are not aware of any legal On 26 July 2012, Shoprite Holdings issued an additional 13,803,405 or arbitration proceedings, including proceedings that are pending or non-convertible, non-participating, no par value deferred shares in the threatened, that may have or have had in the recent past, being at share capital of Shoprite Holdings to Thibault Square Financial least the previous twelve (12) months, a material effect on the Services (Pty) Ltd, an entity related to Dr CH Wiese, pursuant to the Group’s financial position. 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.

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Statement of Financial Position Shoprite Holdings Ltd and its Subsidiaries as at June 2012

COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 Notes R’000 R’000

ASSETS NON-CURRENT ASSETS — — Property, plant and equipment 3 9 668 559 8 168 749 1 654 503 2 305 512 Interests in subsidiaries 5 — — — — Investment in associate 6 103 886 — — — Available-for-sale investments 7 — 59 656 — — Loans and receivables 8 3 706 4 308 237 363 Deferred income tax assets 9 413 645 326 457 44 — — Intangible assets 10 894 296 719 105 — — Fixed escalation operating lease accrual 11 10 573 9 246 1 654 740 2 305 875 11 094 665 9 287 521 CURRENT ASSETS — — Inventories 12 8 680 109 7 055 867 — 15 327 Trade and other receivables 13 2 702 031 2 255 390 — — Current income tax assets 81 190 38 543 10 774 74 237 Interests in subsidiaries 5 — — — — Loans and receivables 8 16 197 46 226 603 555 3 387 853 Cash and cash equivalents 7 939 333 1 961 551 614 329 3 477 417 19 418 860 11 357 577

— — Assets held for sale 4 391 993 58 659

2 269 069 5 783 292 TOTAL ASSETS 30 905 518 20 703 757 EQUITY CAPITAL AND RESERVES ATTRIBUTABLE TO EQUITY HOLDERS 616 583 647 314 Share capital 15 647 314 616 583 293 072 3 672 069 Share premium 3 672 069 293 072 — — Treasury shares 15 (320 146) (337 406) 1 347 574 1 425 607 Reserves 16 8 745 805 6 512 451 2 257 229 5 744 990 12 745 042 7 084 700 — — NON-CONTROLLING INTEREST 62 675 58 750 2 257 229 5 744 990 TOTAL EQUITY 12 807 717 7 143 450 LIABILITIES NON-CURRENT LIABILITIES 2 450 2 450 Borrowings 17 4 006 698 26 177 — — Deferred income tax liabilities 9 152 085 25 377 — — Provisions 18 338 791 339 200 — — Fixed escalation operating lease accrual 19 520 206 455 787 — — Trade and other payables 20 21 878 263 455 2 450 2 450 5 039 658 1 109 996 CURRENT LIABILITIES 1 126 24 975 Trade and other payables 20 12 711 704 9 807 743 — — Borrowings 17 28 736 23 578 — — Derivative financial instruments 14 231 3 606 4 247 7 028 Current income tax liabilities 151 025 464 316 — — Provisions 18 138 634 104 117 — — Bank overdrafts 22 858 2 042 100 4 016 3 849 Shareholders for dividends 4 955 4 851 9 389 35 852 13 058 143 12 450 311 11 840 38 302 TOTAL LIABILITIES 18 097 801 13 560 307 2 269 069 5 783 292 TOTAL EQUITY AND LIABILITIES 30 905 518 20 703 757

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Statement of Comprehensive Income Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012

COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 Notes R’000 R’000

— — Sale of merchandise 82 730 587 72 297 777 — — Cost of sales (65 752 642) (57 624 408) — — GROSS PROFIT 16 977 945 14 673 369 1 307 681 1 655 057 Other operating income 21 2 325 312 1 855 841 — — Depreciation and amortisation 22 (1 090 295) (933 592) — — Operating leases 23 (1 940 221) (1 700 468) — — Employee benefits 24 (6 530 468) (5 762 045) (3 508) (8 937) Other expenses (5 077 139) (4 146 408) 1 304 173 1 646 120 TRADING PROFIT 4 665 134 3 986 697 45 (1) — Exchange rate losses (8 343) (446) — — Items of a capital nature 27 (93 687) (78 533) 1 304 172 1 646 120 OPERATING PROFIT 25 4 563 104 3 907 718 33 574 64 438 Interest received 142 166 94 614 (198) (126) Finance costs 28 (223 563) (125 964) 1 337 548 1 710 432 PROFIT BEFORE INCOME TAX 4 481 707 3 876 368 (131 060) (114 556) Income tax expense 29 (1 438 889) (1 346 826) 1 206 488 1 595 876 PROFIT FOR THE YEAR 3 042 818 2 529 542

OTHER COMPREHENSIVE INCOME, NET OF INCOME TAX — — Fair value movements on available-for-sale investments 16 (51 219) 1 950 — — Foreign currency translation differences 16 288 699 (142 451) 1 206 488 1 595 876 TOTAL COMPREHENSIVE INCOME FOR THE YEAR 3 280 298 2 389 041

PROFIT ATTRIBUTABLE TO: 1 206 488 1 595 876 Owners of the parent 3 026 563 2 509 780 — — Non-controlling interest 16 255 19 762 1 206 488 1 595 876 3 042 818 2 529 542

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: 1 206 488 1 595 876 Owners of the parent 3 264 043 2 369 279 — — Non-controlling interest 16 255 19 762 1 206 488 1 595 876 3 280 298 2 389 041

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

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Statement of Changes in Equity Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012

Attributable to equity holders Non- Total controlling Share Share Treasury Other Retained R’000 Notes equity interest Total capital premium shares reserves earnings

GROUP 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 2 389 041 19 762 2 369 279 — — — (140 501) 2 509 780 Profit for the year 2 529 542 19 762 2 509 780 2 509 780 Recognised in equity Net fair value movement on available-for-sale investments 16 2 267 2 267 2 267 Income tax effect of net fair value movement on available-for-sale 46 investments 16 (317) (317) (317) Foreign currency translation differences 16 (142 451) (142 451) (142 451)

Transfer to contingency reserve 16 — — 4 509 (4 509) Dividends distributed to shareholders (1 217 607) (28 196) (1 189 411) (1 189 411) BALANCE AT JUNE 2011 7 143 450 58 750 7 084 700 616 583 293 072 (337 406) 4 928 6 507 523

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

Equity component of convertible bonds issued during the year 16 333 880 333 880 333 880 Proceeds from ordinary shares issued 15 3 409 728 3 409 728 30 731 3 378 997 Treasury shares' loss 74 289 74 289 17 260 57 029 Transfer from contingency reserve 16 — — (33 536) 33 536 Dividends distributed to shareholders (1 433 928) (12 330) (1 421 598) (1 421 598) BALANCE AT JUNE 2012 12 807 717 62 675 12 745 042 647 314 3 672 069 (320 146) 542 752 8 203 053

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

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

Dividends distributed to shareholders (1 277 177) (1 277 177) (1 277 177) BALANCE AT JUNE 2011 2 257 229 2 257 229 616 583 293 072 — 2 152 1 345 422

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

Proceeds from ordinary shares issued 15 3 409 728 3 409 728 30 731 3 378 997 Dividends distributed to shareholders (1 517 843) (1 517 843) (1 517 843) BALANCE AT JUNE 2012 5 744 990 5 744 990 647 314 3 672 069 — 2 152 1 423 455

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Statement of Cash Flows Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012

COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 Notes R’000 R’000

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

1 304 172 1 646 120 Operating profit 4 563 104 3 907 718 (1 306 771) (1 652 535) Less: investment income (82 259) (27 663) 1 — Non-cash items 32.1 1 714 522 1 459 480 — — Payments for cash settlement of share appreciation rights (287 540) (218 037) Payments for settlement of post-retirement medical — — benefits liability 36.2 (1 779) (2 630) (285) 8 521 Changes in working capital 32.2 649 234 (1 324 359) 47

(2 883) 2 106 Cash generated from/(utilised by) operations 6 555 282 3 794 509 33 574 77 728 Interest received 159 024 110 519 (198) (126) Interest paid (125 745) (125 964) 1 306 771 1 639 245 Dividends received 65 401 11 758 (1 276 499) (1 518 010) Dividends paid 32.3 (1 433 824) (1 216 084) (125 261) (111 901) Income tax paid 32.4 (1 885 334) (1 031 092)

65 535 (714 472) CASH FLOWS (UTILISED BY)/FROM INVESTING ACTIVITIES 32.5 (3 110 892) (2 937 011) — 3 409 728 CASH FLOWS FROM FINANCING ACTIVITIES 32.6 7 767 685 9 329 1 039 2 784 298 NET MOVEMENT IN CASH AND CASH EQUIVALENTS 7 991 597 (1 384 036) 602 517 603 555 Cash and cash equivalents at the beginning of the year (80 549) 1 344 587 Effect of exchange rate movements on cash and cash (1) — equivalents 5 427 (41 100) 603 555 3 387 853 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 7 916 475 (80 549)

Consisting of: 603 555 3 387 853 Cash and cash equivalents 7 939 333 1 961 551 — — Bank overdrafts (22 858) (2 042 100) 603 555 3 387 853 7 916 475 (80 549)

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Notes to the Annual Financial Statements Shoprite Holdings Ltd and its Subsidiaries for the year ended June 2012

1. ACCOUNTING POLICIES impairment of assets under these circumstances. This The principal accounting policies adopted in the preparation determination requires significant judgment. The Group of the consolidated financial statements are set out below evaluates amongst other things, the duration and extent and are consistent with those applied in the previous year, of the losses, the near-term business outlook for the unless otherwise stated. store, and the possible redeployment of the assets The consolidated Group’s and separate Company’s between stores. Refer to note 22. financial statements were authorised for issue by the board b) Useful lives of assets: In determining the depreciation of directors on 20 August 2012. and amortisation charge for property, plant and equipment and intangible assets, management applies 1.1 Basis of preparation judgment in estimating the useful lives and residual The financial statements are prepared in accordance with values of these different asset classes. Refer to note 22. and comply with International Financial Reporting Standards c) Income taxes: The Group is subject to income taxes in (IFRS) and the South African Companies Act (Act No 71 of numerous jurisdictions. Significant judgment is required 2008) as amended. The financial statements are prepared in determining the worldwide accrual for income taxes. 48 under the historical cost convention, as modified by the The Group recognises liabilities for anticipated uncertain revaluation of certain financial instruments to fair value. income tax positions based on estimates of potential additional taxes due. With regards to deferred income 1.1.1 USE OF JUDGMENTS, ASSUMPTIONS AND ESTIMATES tax assets for unutilised income tax losses, judgment is 1.1.1.1 Judgments also required to whether sufficient future taxable The preparation of the financial statements in accordance income will be available against which these losses can with IFRS requires management to exercise its judgment in be utilised. Refer to notes 1.11 and 29. the process of applying the Group’s accounting policies. d) Allowances for doubtful debts: Trade receivables include The most significant judgments in applying the Group’s instalment sale debtors and franchise debtors for which accounting policies relate to the following: allowances for impairment are made in accordance with a) Valuation of inventory: Trading inventories are valued by the accounting policy in note 1.15. These calculations use of the retail inventory method as an approximation involve the discounting of projected future cash flows of weighted average cost. Significant judgment is and require the use of estimates. Details regarding the required in the application thereof, specifically as far as it allowances are set out in note 13. relates to gross margin percentages, accrual rates for e) Employee benefit accruals and provisions: Various rebates and settlement discounts and shrinkage rates assumptions are applied in determining the valuations of applied. post-retirement medical benefits, share based payment b) Segment reporting: IFRS 8 requires an entity to identify accruals and long term employee benefits as set out in its operating segments. Once an entity has done that, it notes 1.20, 1.22, 15, 18 and 36. is required to determine its reportable segments. Reportable segments may comprise single operating Estimates and assumptions that have a significant risk of segments or an aggregation of operating segments. causing a material adjustment to the carrying value of Aggregation of one or more operating segments into a assets and liabilities in a subsequent year relate to the single reportable segment is permitted where certain following: income taxes; allowances for doubtful debts and conditions are met, the principle conditions being that employee benefit allowances. the operating segments should have similar economic All estimates and underlying assumptions are based on characteristics and the operating segments are similar in historical experience and various other factors that manage- respect of the products and services offered, nature of ment believes are reasonable under the circumstances. The production processes, type or class of customers, distri- results of these estimates form the basis of judgments bution methods, and regulatory environment. about the carrying value of assets and liabilities that are not The Group’s management has assessed the above readily apparent from other sources. Actual results may mentioned aggregation criteria in respect of its identified differ from these estimates. The estimates and underlying retail operating segments and believe that it have been assumptions are reviewed on an ongoing basis. Revisions satisfied, therefore it has elected to aggregate these to accounting estimates are recognised in the period in segments as allowed by IFRS 8. which the estimate is revised and any affected future periods. 1.1.1.2 Assumptions and estimates The preparation of the financial statements in accordance 1.1.2 USE OF ADJUSTED MEASURES with IFRS requires the use of certain critical accounting The measures listed on the following page are presented as estimates and assumptions. The most significant assump- management believes it to be relevant to the understanding tions and estimates used in applying the Group’s of the Group’s financial performance. These measures are accounting policies relate to the following: used for internal performance analysis and provide a) Impairment of assets: The Group performs a review of additional useful information on underlying trends to equity loss-making stores and considers the need for the holders. These measures are not defined terms under IFRS

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 and may therefore not be comparable with similarly titled 1.2.2 JOINT VENTURES measures reported by other entities. It is not intended to be Joint ventures are those entities over which the Group a substitute for, or superior to, measures as required by exercises joint control in terms of a contractual agreement. IFRS. The Group’s interests in jointly controlled entities are a) Trading profit on the face of the statement of compre- accounted for by proportionate consolidation. The Group hensive income, being the Group’s operating results combines its proportionate share of the assets, liabilities, excluding foreign exchange rate differences and income revenue, income and expenses, on a line-for-line basis, with or expenditure of a capital nature. similar items in the financial statements of the Group. The b) Income or expenditure of a capital nature on the face of results of joint ventures are included in the Group’s annual the statement of comprehensive income, being all financial statements from the effective date of joint control re-measurements excluded from the calculation of head- until the effective date that joint control ceases. Where line earnings per share in accordance with the guidance applicable, accounting policies applied by joint ventures contained in SAICA Circular 3/2009: Headline Earnings. have been changed to ensure consistency with the policies The principal items that will be included under this adopted by the Group. measure are: gains and losses on disposal and scrapping 49 of property, plant and equipment, intangible assets and 1.2.3 ASSOCIATES assets held for sale; impairments or reversal of impair- Associates are those entities over which the Group ments; any non-trading items such as gains and losses exercises significant influence but not control. Significant on disposal of investments, operations and subsidiaries. influence is presumed to exist when the Group holds c) Interest received on the face of the statement of between 20% and 50% of the voting rights of another comprehensive income, being only interest received on entity. The Group’s investments in associates are call and operating bank account balances. accounted for using the equity method and are initially recognised at cost. Investments in associates include 1.2 Consolidation goodwill identified on acquisition, net of any accumulated 1.2.1 SUBSIDIARIES impairment losses. Subsidiaries are entities (including special purpose entities) The Group’s share of post-acquisition profit or loss and which are, directly or indirectly, controlled by the Group. its share of post-acquisition movements in other compre- Control is established where the Group has the power to hensive income are recognised in the statement of govern the financial and operating policies of an entity so as comprehensive income and in other comprehensive to obtain benefits from its activities. The existence and income respectively, with a corresponding adjustment to effect of potential voting rights that are currently exercis- the carrying amount of the investment, from the date that able or convertible are considered when assessing whether significant influence commences until the date that signifi- the Group controls another entity. The acquisition method cant influence ceases. When the Group’s share of losses in of accounting is used to account for business combinations. an associate equals or exceeds its investment in the asso- The cost of an acquisition is measured as the fair value ciate, the Group does not recognise further losses, unless it of the assets given, equity instruments issued and liabilities has incurred legal or constructive obligations or made incurred or assumed at the date of exchange. Identifiable payments on behalf of the associate. Where applicable, assets acquired as well as liabilities and contingent liabilities accounting policies applied by associates have been assumed in a business combination are measured initially at changed to ensure consistency with the policies adopted by their fair values at the acquisition date, irrespective of the the Group. extent of any non-controlling interest. The excess of the cost of the acquisition over the fair value of the Group’s 1.2.4 TRANSACTIONS WITH NON-CONTROLLING INTERESTS share of the identifiable net assets of the subsidiary The Group treats transactions, such as share purchases, acquired is recorded as goodwill. If the cost of the acquisi- with non-controlling interests as transactions with equity tion is less than the fair value of the net assets of the owners of the Group. For purchases from non-controlling subsidiary acquired, the difference is recognised directly in interests, the difference between any consideration paid the statement of comprehensive income. A subsidiary is and the relevant share acquired of the carrying value of net consolidated from the date on which control is transferred assets of the subsidiary is recorded in equity. Gains or to the Group and is no longer consolidated from the date losses on disposals to non-controlling interests are also that the control ceases. Where necessary, accounting poli- recorded in equity. cies of subsidiaries have been changed to ensure consist- ency with the policies adopted by the Group. All intergroup 1.3 Foreign currency translation transactions, balances and unrealised gains and losses on 1.3.1 FUNCTIONAL AND PRESENTATION CURRENCY transactions between Group companies have been elimi- All items in the financial statements of the Group’s subsidi- nated. aries and joint ventures are measured using the currency of the primary economic environment in which the entity oper- ates (the functional currency). The Group’s consolidated financial statements are presented in South African rand,

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 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 ties of the foreign subsidiary and are translated at the presentation currency. closing rate.

1.3.2 TRANSACTIONS AND BALANCES 1.4 Property, plant and equipment Foreign currency transactions are translated into the func- Property, plant and equipment are tangible assets held by tional currency using the average exchange rates for the the Group for use in the supply of goods, rental to others or relevant month. These average exchange rates approxi- administrative purposes and are expected to be used during mate the spot rate at the date of the transaction. Gains and more than one period. All property, plant and equipment are losses resulting from the settlement of such transactions, stated at historical cost less accumulated depreciation and and from the translation of monetary assets and liabilities accumulated impairment. The historical cost includes all denominated in foreign currencies at closing rates, are expenditure that is directly attributable to the acquisition of recognised in the statement of comprehensive income. the buildings, machinery, equipment and vehicles and is depreciated on a straight-line basis, from the date it is avail- 1.3.3 FOREIGN OPERATIONS able for use, at rates appropriate to the various classes of 50 The results and the financial position of all Group subsidi- assets involved, taking into account the estimated useful aries, joint ventures and associates that have a functional life and residual values of the individual items. Land is not currency that is different from the presentation currency of depreciated, as it has an unlimited useful life. the Group are translated into the presentation currency as Improvements to leasehold properties are shown at cost follows: and written off over the remaining period of the lease and i) Assets and liabilities for each statement of financial posi- the items useful life. tion presented are translated at the closing rate at the Management determines the estimated useful lives, date of that statement of financial position; residual values and the related depreciation charges at ii) Income and expenses for each statement of compre- acquisition and these are reviewed at each statement of hensive income presented are translated at the average financial position date. If appropriate, adjustments are made exchange rates for the period presented; and and accounted for prospectively as a change in estimate. iii) All resulting translation differences are recognised in other comprehensive income and presented as a sepa- Useful lives: rate component of equity in the foreign currency transla- Buildings ...... 20 years tion reserve (FCTR). Machinery ...... 5 to 10 years Vehicles ...... 5 to 10 years On consolidation, exchange rate differences arising from Trolleys ...... 3 years the translation of the net investment in foreign operations Equipment ...... 5 to 10 years are also taken to the FCTR. The Group’s net investment in a Computer equipment ...... 4 to 5 years foreign operation is equal to the equity investment plus all Aeroplane ...... 15 years monetary items that are receivable from or payable to the foreign operation, for which settlement is neither planned The cost of major refurbishments is capitalised as property, nor likely to occur in the foreseeable future. plant and equipment to the extent that it can be recovered When a foreign operation is disposed of or sold and the from future use of the assets. The capitalised amounts are Group loses control, joint control or significant influence depreciated over the relevant write-off periods. All other over the foreign operation all related exchange rate differ- repairs and maintenance are charged to the statement of ences recognised in other comprehensive income and comprehensive income during the period in which these accumulated in equity in the FCTR are reclassified from are incurred. equity to the statement of comprehensive income as part An asset’s carrying amount is written down immediately of the profit or loss on the sale of the operation. On partial to its recoverable amount if the asset’s carrying amount is disposal of a foreign subsidiary, where a change occurs in greater than its estimated recoverable amount. the absolute ownership percentage held by the Group and Gains and losses on disposal or scrapping of property, control is not lost, a proportionate share of all related plant and equipment, being the difference between the net exchange rate differences recognised in other comprehen- proceeds on disposal or scrapping and the carrying amount, sive income is re-attributed to the non-controlling interests are recognised in the statement of comprehensive income. in that foreign operation. On partial disposal of a foreign joint venture or associate, where a change occurs in the 1.5 Financial instruments absolute ownership percentage held by the Group and joint The Group classifies its financial instruments in the control or significant influence is not lost, a proportionate following categories: available-for-sale financial assets, share of all related exchange rate differences recognised in loans and receivables, financial liabilities and derivatives at other comprehensive income are reclassified from equity to fair value through profit and loss. The classification depends the statement of comprehensive income. on the purpose for which the financial instruments were Goodwill and fair value adjustments arising on the acqui- acquired. Management determines the classification of its sition of a foreign subsidiary are treated as assets and liabili- financial instruments at initial recognition and re-evaluates

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 such designations when circumstances indicate that reclas- on the trade date at fair value, including transaction costs. sification is permitted. The Group assesses at each state- Investments are subsequently carried at fair value. Realised ment of financial position date whether there is objective and unrealised gains and losses arising from changes in the evidence that a financial instrument or a group of financial fair value of these investments are recognised in other instruments is impaired. comprehensive income and accumulated in a reserve Financial assets are derecognised when the contractual within equity. When available-for-sale investments are sold rights to the cash flows from the financial assets expire or or impaired, the accumulated fair value adjustments have been transferred and the Group has transferred recognised in equity are included in the statement of substantially all risks and rewards of ownership. Financial comprehensive income as gains and losses from the liabilities are derecognised when they are extinguished, i.e. disposal of investments. These investments are included in when the contractual obligation is discharged, cancelled, non-current assets, unless management intends to dispose expires or when a substantial modification of the terms of the investments within 12 months of the statement of occur. financial position date. Interest on available-for-sale securities calculated using 1.6 Compound financial instruments the effective interest method is recognised in the state- 51 Compound financial instruments issued by the Group ment of comprehensive income as part of other income. comprise convertible bonds that can be converted to share Dividends on available-for-sale equity instruments are capital at the option of the holder and the number of shares recognised in the statement of comprehensive income as to be issued does not vary with changes in their fair value. part of other income when the Group’s right to receive The liability component of a compound financial instru- payments is established. ment is recognised initially at the fair value of a similar The fair value of these investments is based on quoted liability that does not have an equity conversion option. The transaction prices (for listed investments) or the underlying equity component is recognised initially at the difference net asset value or appropriate valuation models (for unlisted between the fair value of the compound financial instru- investments). If the market for a financial asset is not active ment as a whole and the fair value of the liability compo- (and for unlisted securities), the Group establishes fair value nent. Any directly attributable transaction costs are allo- by using recognised valuation techniques. cated to the liability and equity components in proportion to For the purposes of impairment testing a significant or their initial carrying amounts. prolonged decline in the fair value of the equity instrument Subsequent to initial recognition, the liability component below its cost is considered as an indicator that the securi- of a compound financial instrument is measured at amor- ties are impaired. If any such evidence exists for available- tised cost using the effective interest method. The equity for-sale financial assets, the cumulative loss – measured as component of a compound financial instrument is not the difference between the acquisition cost and the re-measured subsequent to initial recognition except on current fair value, less any impairment loss on that financial conversion or expiry. asset previously recognised in profit or loss – is removed from equity and recognised in the statement of compre- 1.7 Derivative financial instruments hensive income. Impairment losses on equity instruments Derivatives, being forward foreign exchange rate contracts, recognised in the statement of comprehensive income are categorised as at fair value through profit or loss, are either not reversed through the statement of comprehensive assets or liabilities. A classification between current and income. non-current is made based on the remaining contractual maturity of the foreign exchange rate contracts over the 1.9 Loans and receivables following 12 months. Purchases and settlements of Loans and receivables are non-derivative financial assets derivative financial instruments are initially recognised on with fixed or determinable payments that are not quoted in the trade date at fair value. Derivative financial instruments an active market. They arise when the Group provides are subsequently carried at fair value. Transaction costs are money, goods or services directly to a debtor with no inten- expensed as it is incurred. Realised and unrealised gains tion of trading the receivable, and purchases and sales are and losses arising from changes in the fair value of recognised at trade date at fair value, including transaction derivative financial instruments are included in the state- costs. Loans and receivables are subsequently carried at ment of comprehensive income as other income or other amortised cost using the effective interest method. These expenses in the period in which they arise. The fair value of financial assets are included under current assets unless it forward foreign exchange rate contracts is determined matures later than 12 months after the statement of using exchange rates at the statement of financial position financial position date. date. The Group does not apply hedge accounting. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as 1.8 Available-for-sale financial assets the difference between the loans and receivables carrying The Group’s listed and unlisted equity investments are amount and the present value of the estimated future cash classified as financial assets available-for-sale. Purchases flows discounted at the original effective interest rate appli- and sales of available-for-sale investments are recognised cable to the relevant loans and receivables. The carrying

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 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 annually and whenever there is indication of impairment. statement of comprehensive income. Goodwill is carried at cost less accumulated impairment losses. Goodwill is allocated to cash-generating units 1.10 Investments in subsidiaries (CGUs) for the purpose of impairment testing. The alloca- The Company’s investments in the ordinary shares of its tion is made to those CGUs or groups of CGUs that are subsidiaries are carried at cost less impairment losses and, expected to benefit from the business combination in if denominated in foreign currencies, are translated at which the goodwill arose. Each of those CGUs represents historical rates. Purchases and sales of these investments the Group’s investment in a trading unit or a group of are recognised on the trade date at cost, including transac- trading units. Gains and losses on the disposal of an entity tion costs. that has related goodwill include the carrying amount of the related goodwill. An impairment loss recognised for good- 1.11 Deferred income tax will shall not be reversed in a subsequent period. Deferred income tax is recognised, using the liability method, for calculated income tax losses and temporary 1.12.2 SOFTWARE 52 differences arising between the tax bases of assets and Software represents all costs incurred to acquire the assets liabilities and their carrying values for financial reporting and bring it into use. These costs are amortised over the purposes. However, the deferred income tax is not estimated useful life of the relevant software, being accounted for if it arises from initial recognition of an asset between three and seven years, on a straight-line basis. or liability in a transaction other than a business combina- Costs associated with implementing or maintaining tion that, at the time of the transaction, affects neither software are recognised as an expense when incurred. accounting nor taxable profit nor loss. Deferred income tax Costs that are directly associated with the purchase and is determined using tax rates and laws that have been customisation of identifiable and unique software controlled enacted or substantively enacted by the statement of finan- by the Group, and that will probably generate future cial position date and are expected to apply when the economic benefits beyond one year, are recognised as related deferred income tax asset is realised or the deferred intangible assets. Direct costs include the software income tax liability is settled. Deferred income tax assets development employee costs and an appropriate portion are recognised only to the extent that it is probable that of relevant overheads. future taxable profit will be available against which tempo- Software’s useful lives are reviewed at each statement rary differences can be utilised. Management applies judg- of financial position date. If appropriate, adjustments are ment to determine whether sufficient future taxable profit made and accounted for prospectively as a change in will be available after considering, amongst others, factors estimate. such as profit histories, forecasted cash flows and budgets. Deferred income tax is recognised on temporary differ- 1.12.3 TRADEMARKS ences arising on the consolidation of investments in subsid- Acquired trademarks and licences are initially shown at iaries and joint ventures, except where the timing of the historical cost and trademarks and licences acquired in a reversal of the temporary difference can be controlled by business combination are recognised at fair value at the the Group, and it is probable that the temporary difference acquisition date. Trademarks have a finite useful life and are will not reverse in the foreseeable future. subsequently measured at cost less accumulated amortisa- The Group is subject to taxes in numerous jurisdictions. tion and impairment losses. Amortisation is calculated using Significant judgment is required in determining the world- the straight-line method to allocate the cost of trademarks wide accrual for income taxes. There are many transactions and licences over their estimated useful lives, being 16 to and calculations during the ordinary course of business for 20 years. The useful lives are reviewed at each statement which the ultimate tax determination is uncertain. The of financial position date. If appropriate, adjustments are Group recognises liabilities for anticipated uncertain income made and accounted for prospectively as a change in esti- tax positions based on best informed estimates of whether mate. additional income taxes will be due. Where the final income tax outcome of these matters is different from the amounts 1.12.4 CUSTOMER RELATIONSHIPS that were initially recorded, such differences will impact the Customer relationships acquired in a business combination current income tax and deferred income tax assets and are recognised at fair value at the acquisition date. The liabilities in the period in which such determination is made. customer relationships have a finite useful life and are carried at cost less accumulated amortisation. Amortisation 1.12 Intangible assets is calculated using the straight-line method over the 1.12.1 GOODWILL expected useful life of 10 years. Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net assets of 1.13 Non-current assets held for sale the acquired subsidiary or operation at the date of acquisi- Non-current assets and/or disposal groups are classified as tion. Goodwill denominated in a foreign currency is trans- assets held for sale and are stated at the lower of the lated at closing rates. Goodwill is tested for impairment carrying amount and fair value less cost to sell if their

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 carrying amount will be recovered principally through a sale statement of comprehensive income as operating lease transaction rather than through continued use and this sale expense over the lease term. Minimum rentals due after is considered highly probable. year-end are reflected under commitments. When an operating lease is terminated before the lease 1.14 Inventories period has expired, any payment required to be made to the Trading inventories are stated at the lower of cost, using lessor by way of penalty is recognised as an expense and the weighted average cost formula, and net realisable any unamortised portion of the fixed escalation lease value. The weighted average cost formula is determined by accrual is recognised in the statement of comprehensive applying the retail inventory method. The cost of merchan- income in the period in which termination takes place. dise is the net of: invoice price of merchandise; insurance; freight; customs duties; an appropriate allocation of distri- 1.16.2 WHERE THE GROUP IS THE LESSOR bution costs; trade discounts; rebates and settlement Portions of owner-occupied properties and leased proper- discounts. The retail method approximates the weighted ties are leased or subleased out under operating leases. average cost and is determined by reducing the sales value The owner-occupied properties are included in property, of the inventory by the appropriate percentage gross plant and equipment in the statement of financial position. 53 margin. The percentage used takes into account inventory Rental income in respect of operating leases with a fixed that has been marked down below original selling price. An escalation clause is recognised on a straight-line basis over average percentage per retail department is used. Net real- the lease term. Incentives received to enter into a lease isable value is the estimated selling price in the ordinary agreement are released to the statement of comprehensive course of business. income as operating lease income over the lease term. All other rental income is recognised as it becomes due. 1.15 Trade and other receivables When an operating lease is terminated before the lease Trade and other receivables are recognised at trade date at period has expired, any payment received from the lessee fair value. Subsequent recognition is measured at amor- by way of penalty is recognised as income and any unamor- tised cost using the effective interest method, less allow- tised portion of the fixed escalation lease accrual is recog- ance made for impairment of these receivables. An allow- nised in the statement of comprehensive income in the ance for impairment of trade receivables is established period in which termination takes place. when there is objective evidence that the Group will not be able to collect all amounts due according to the original 1.17 Cash and cash equivalents and bank terms of the receivables. Significant financial difficulties of overdrafts the debtor, probability that the debtor will enter bankruptcy Cash and cash equivalents and bank overdrafts are carried or financial reorganisation, and default or delinquency in at cost and, if denominated in foreign currencies, are trans- payments (more than 30 days overdue) are considered indi- lated at closing rates. Cash comprises cash on hand and cators that the trade receivable is impaired. The amount of cash at banks. Cash equivalents are short-term highly liquid the allowance is the difference between the carrying investments that are readily convertible to known amounts amount and the recoverable amount, being the present of cash and are subject to an insignificant risk of change in value of the expected cash flows, discounted at the original value. Bank overdrafts are disclosed separately on the face effective interest rate. Any resulting impairment losses are of the statement of financial position. included in other expenses in the statement of comprehen- sive income. The impairment of instalment sale receivables 1.18 Share capital is done on a collective basis due to the wide-spread Ordinary shares and non-convertible, non-participating customer base. When a receivable is uncollectible, it is deferred shares, including incremental costs directly written off against the allowance for impairment for receiva- attributable to the issue of new shares, are both classified bles. Subsequent recoveries of amounts previously written as equity. off are recognised in the statement of comprehensive Where entities controlled by the Group purchase the income. Company’s shares, the consideration paid, including attributable transaction costs net of income taxes, is 1.16 Leases deducted from capital and reserves attributable to equity 1.16.1 WHERE THE GROUP IS THE LESSEE holders as treasury shares until they are sold. Where such Leases of assets under which a significant portion of the shares are subsequently sold, any consideration received is risks and rewards of ownership are effectively retained by included in capital and reserves attributable to equity the lessor are classified as operating leases. Certain prem- holders. Dividends received on treasury shares are ises and other assets are leased. Payments made in eliminated on consolidation. respect of operating leases with a fixed escalation clause are charged to the statement of comprehensive income on 1.19 Borrowings a straight-line basis over the lease term. All other lease Borrowings are recognised initially at fair value, net of trans- payments are expensed as they become due. Incentives actions costs incurred. Borrowings are subsequently stated paid to enter into a lease agreement are expensed in the at amortised cost and any difference between the proceeds

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 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 actuaries are charged against the statement of comprehen- recognised in the statement of comprehensive income over sive income as employee benefits. the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities 1.20.4 REINSTATEMENT PROVISION unless the Group has the unconditional right to defer Where it has a contractual obligation in respect of certain settlement of the liability for at least 12 months after the operating lease agreements, the Group provides for statement of financial position date. expected reinstatement costs to be incurred at the expiry Preference shares, which carry non-discretionary of the lease. dividend obligations, are classified as non-current liabilities at amortised cost. Amortised cost is calculated using the 1.21 Trade and other payables effective interest yield method. The dividends on these Trade and other payables are recognised initially at fair value preference shares are recognised in the statement of and subsequently at amortised cost using the effective comprehensive income as finance costs. interest method. Financial guarantee contracts are recognised initially at 54 1.20 Provisions fair value and subsequently at the higher of: the initially Provisions are recognised when the Group has a present recognised fair value, less appropriate cumulative amortisa- legal or constructive obligation as a result of past events; it tion recognised on a straight-line basis over the estimated is probable that an outflow of resources embodying duration of the contract, or an amount that is the best economic benefits will be required to settle the obligation, estimate of the expenditure required to settle the present and a reliable estimate of the amount of the obligation can obligation at statement of financial position date. Intra- be made. The Group has discounted provisions to their group financial guarantees are eliminated on consolidation. present value where the effect of the time value of money When the financial guarantee contract is issued by the is material. The notional interest charge representing the Company to a subsidiary the fair value at initial recognition unwinding of the provision discounting is included in the is capitalised as part of the investment in the relevant statement of comprehensive income. subsidiary.

1.20.1 ONEROUS LEASE CONTRACTS 1.22 Employee benefits The Group recognises a provision for onerous lease 1.22.1 PENSION OBLIGATIONS contracts when the expected benefits, including Group companies operate various pension schemes. The subleasing income, to be derived from non-cancellable schemes are funded through payments to trustee-adminis- operating lease contracts are lower than the unavoidable tered funds in accordance with the plan terms. costs of meeting the contract obligations. The unavoidable contracted costs are applied over the remaining periods of Provident fund the relevant lease agreements. The notional interest A defined-contribution plan is a pension plan under which charge relating to the unwinding of the provisions the Group pays fixed contributions into a separate entity. discounting is included in the statement of comprehensive The Group has no legal or constructive obligations to pay income as finance costs. further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to 1.20.2 PROVISION FOR OUTSTANDING INSURANCE CLAIMS employee service in the current and prior periods. The Group recognises a provision for the estimated direct The Group’s contributions to defined contribution plans cost of settling all outstanding claims at year-end. The in respect of services rendered in a particular period are provision for outstanding claims at year-end includes a recognised as an expense in that period. Additional contri- provision for cost of claims incurred but not yet reported at butions are recognised as an expense in the period during year-end as well as for the cost of claims reported but not which the associated services are rendered by employees. yet settled at year-end. The provision for cost of claims incurred but not yet reported (IBNR) at year-end is deter- 1.22.2 POST-RETIREMENT MEDICAL BENEFITS mined by using established claims patterns. Full provision is The Group provides for post-retirement medical benefits, made for the cost of claims reported but not yet settled at where they exist. The expected costs of these benefits are year-end by using the best information available. accrued over the period of employment based on past services and charged to the statement of comprehensive 1.20.3 LONG-TERM EMPLOYEE BENEFITS income as employee benefits. This post-retirement medical Long-term employee benefits are provided to employees benefit obligation is measured at present value by who achieve certain predetermined milestones of service discounting the estimated future cash outflows using within the Group. The Group’s obligation under these plans interest rates of government bonds that are denominated in is valued by independent qualified actuaries at year-end and the currency in which the benefits will be paid and that the corresponding liability is raised. Payments are set off have the terms to maturity approximating the terms of the against the liability. Movements in the liability, including related post-employment liability. The future cash outflows notional interest, resulting from the valuation by the are estimated using amongst others the following assump-

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 tions: health-care cost inflation; discount rates; salary infla- exist or may have decreased. If any such indication exists tion and promotions and experience increases; expected the Group will immediately recognise the reversal as mortality rates; expected retirement age; and continuation income of a capital nature in the statement of comprehen- at retirement. Valuations of this obligation are carried out sive income. An impairment loss recognised for goodwill annually by independent qualified actuaries in respect of shall not be reversed in a subsequent period. past-service liabilities using the projected unit credit method. Actuarial gains or losses and settlement 1.24 Revenue recognition premiums, when it occurs, are recognised immediately in Revenue comprises the fair value of the consideration the statement of comprehensive income as employee received or receivable for the sale of merchandise from benefits. ordinary Group-operating activities, net of value added tax, rebates and discounts and after eliminating sales within the 1.22.3 CASH-SETTLED SHARE-BASED PAYMENTS Group. Sales are recognised upon delivery of products and The Group recognises a liability for cash-settled share- customer acceptance. Payment is usually received via cash, based payments calculated at current fair value determined debit card or credit card. Related card transaction costs are at each statement of financial position date. The fair value is recognised in the statement of comprehensive income as 55 calculated using relevant pricing models. This amount is other expenses. When merchandise is sold under instal- expensed through the statement of comprehensive income ment sale agreements, the present value of the instalment over the vesting periods. sale payments is recognised as a receivable.

1.22.4 BONUS PLANS 1.25 Other operating income The Group recognises a liability and an expense for Other operating income is recognised as follows: bonuses, based on formulas that take into consideration the Group’s trading profit after certain adjustments. The accrual 1.25.1 FINANCE INCOME EARNED for this liability is made where a contractual or constructive When merchandise is sold under instalment sale agree- obligation exists. ments, the present value of the instalment sale payments is recognised as a receivable. The difference between the 1.23 Impairment of non-financial assets gross receivable and the present value of the receivable is Non-financial assets that have an indefinite useful life are recognised as unearned finance income. Finance income is not subject to depreciation and amortisation and are tested recognised over the term of the instalment sale using the for impairment at each statement of financial position date. effective interest method, which reflects a constant Assets that are subject to depreciation and amortisation are periodic rate of return. reviewed for impairment whenever events or changes in circumstances indicate that the full carrying amount may 1.25.2 RENTAL INCOME not be recoverable. The determination of whether an asset Rental income in respect of operating leases with a fixed is impaired requires significant management judgment and, escalation clause is recognised on a straight-line basis over amongst others, the following factors will be considered: the lease term. All other rental income is recognised as it duration and extent to which the fair value of the asset is becomes due. Refer note 1.16.2. less than its cost; industry, geographical and sector perfor- mance; changes in regional economies; and operational and 1.25.3 FRANCHISE FEES RECEIVED financing cash flows. Franchise fees received comprises fees received from Where the carrying value of an asset exceeds its esti- franchisees and are recognised when the underlying sales, mated recoverable amount, the carrying value is impaired which give rise to the income, occur. and the asset is written down to its recoverable amount. The recoverable amount is calculated as the higher of the 1.25.4 PREMIUM INCOME asset’s fair value less cost to sell and the value in use. Premium income is recognised in the period it is earned. These calculations are prepared based on management’s Net premiums earned are all written premiums relating to assumptions and estimates such as forecasted cash flows; policies incepted during the period less amounts that are management budgets and industry, regional and geograph- unearned at statement of financial position date. Refer note ical operational and financial outlooks. For the purpose of 1.31.2. impairment testing the assets are allocated to cash-gener- ating units (CGUs) or a group of CGUs. CGUs are the lowest 1.25.5 INTEREST INCOME levels for which separately identifiable cash flows can be Interest income is recognised as it accrues, taking into determined. The related impairment expense is charged to account the effective yield on the related asset. the statement of comprehensive income as expenditure of a capital nature. 1.25.6 DIVIDEND INCOME The Group assesses at each reporting date whether Dividend income is recognised when the shareholders’ there is any indication that an impairment loss recognised in right to receive payment is established. prior periods for an asset other than goodwill may no longer

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 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 average number of ordinary shares in issue during the year, Proceeds from the sale of gift vouchers and saving stamps excluding the ordinary shares held by the Group as treasury are initially recognised in other payables, deferring the shares. income. The income is recognised as cash sales of goods For the diluted earnings per share, the weighted average when the gift vouchers or savings stamps are redeemed. number of ordinary shares in issue is adjusted to assume conversion of all ordinary shares with dilutive potential. 1.25.8 COMMISSION RECEIVED Convertible debt has dilutive potential. The convertible debt The Group acts as a payment office for the services and is assumed to have been converted into ordinary shares products provided by a variety of third parties to the Group’s and the net profit is adjusted to eliminate the interest customers. The agent’s commissions received by the expense less the tax effect. Group from the third parties for the payment office service are recognised as other income. Commissions relating to 1.29 Government grants third-party products are recognised when the underlying Government grants, being assistance by government in the third-party payments take place. Commissions relating to form of allowances and refunds for certain expenditure, are 56 third-party services are recognised based on the stage of recognised at fair value when the Group complies with the completion by reference to services performed to date as a conditions attached to the grants and the grants have been percentage of the total services to be performed. received. The grants are recognised, on a systematic basis, in the statement of comprehensive income as a deduction 1.26 Borrowing costs of the related expense over the periods necessary to match Borrowing costs directly attributable to the acquisition, them with the related costs. construction or production of qualifying assets, are capital- ised to the cost of that qualifying asset. General borrowing 1.30 Dividends distributed to shareholders costs are capitalised by calculating the weighted average Dividends are accounted for on the date they have been expenditure on the qualifying asset and applying a declared by the Company. weighted average borrowing rate to the expenditure. Specific borrowing costs are capitalised according to the 1.31 Basis of accounting for underwriting activities borrowing costs incurred on the specific borrowing 1.31.1 CLASSIFICATION OF CONTRACTS provided the borrowing facility is utilised specifically for the Insurance risk is risk other than financial risk, transferred qualifying asset. All other borrowing costs incurred are from the holder of a contract to the issuer. The accounting recognised as an expense in the statement of comprehen- policies of the Group are in accordance with the policies for sive income and are accrued on a time basis by reference recognition and measurement of short-term insurance to the principal amounts outstanding and at the interest contracts as outlined in SAICA Circular 2/2007 and IFRS 4: rate applicable. Insurance Contracts. Contracts under which the Group accepts significant 1.27 Current and deferred income tax insurance risk from another party (the policyholder) by The income tax expense for the period comprises current agreeing to compensate the policyholder or other benefi- and deferred income tax. Income tax is recognised in the ciary if a specified uncertain future event (the insured event) statement of comprehensive income, except to the extent adversely affects the policyholder or other beneficiary, are that it relates to items recognised directly in equity, in classified as insurance contracts. which case it will also be recognised directly in equity. An insurance risk is deemed significant if, and only if, an The current income tax charge is calculated on the basis insured event could cause an insurer to pay significant of the tax laws enacted or substantively enacted at the additional benefits in any scenario, excluding scenarios that statement of financial position date in the countries where lack commercial substance. If significant additional benefits the Group operate and generate taxable income. would be payable in scenarios that have commercial Dividends declared by South African companies within substance, the condition in the previous sentence may be the Group before 1 April 2012 are subject to secondary tax met even if the insured event is extremely unlikely or even on companies (“STC”). The STC expense is included in the if the expected (i.e. probability weighted) present value of statement of comprehensive income in the period that the contingent cash flows is a small proportion of the expected related dividend is paid. Cash dividends declared by South present value of all the remaining contractual cash flows. African companies within the Group from 1 April 2012 are subject to dividend tax which is a tax on the shareholder. 1.31.2 RECOGNITION AND MEASUREMENT OF CONTRACTS Deferred income tax is calculated and recognised in a) Premiums arising from general insurance business terms of note 1.11. Gross written premiums comprise the premiums on insurance contracts entered into during the year. 1.28 Earnings per share Premiums are disclosed gross of commission payable to Earnings and headline earnings per share are calculated by intermediaries and exclude taxes and levies based on dividing the net profit attributable to equity holders of the premiums. Premiums are accounted for as income Group and headline earnings, respectively, by the weighted when the risk related to the insurance policy incepts.

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 b) Unearned premium allowance are used. Any deficiency is immediately charged to The allowance for unearned premiums comprises the profit or loss initially by writing off DAC or VOBA and by proportion of gross premiums written which relate to subsequently establishing a provision for losses arising the unexpired period at the reporting date and is esti- from liability adequacy tests (the unexpired risk provi- mated to be earned in the following or subsequent sion). financial years. The unearned premium allowance is computed separately for each insurance contract on a 1.32 Related parties basis appropriate to the Group’s release from insured Individuals, as well as their close family members, or risk, using the 365th method. entities are related parties if one party has the ability, c) Claims arising from insurance business directly or indirectly, to control or jointly control the other Claims incurred in respect of insurance contracts consist party or exercise significant influence over the other party in of claims and claims-handling expenses paid during the making financial and/or operating decisions or if the parties financial year together with the movement in the provi- are jointly controlled. Key management personnel are sion for incurred but not reported claims. Provisions for defined as all directors of Shoprite Holdings Ltd and the incurred but not reported claims comprise provisions for prescribed officers of the main trading subsidiary (Shoprite 57 claims arising from insured events that incurred before Checkers (Pty) Ltd) of the Group. the statement of financial position date, but which had not been reported to the Group by that date. 1.33 Operating segment information d) Provision for outstanding claims An operating segment is a component of the Group that Provision is made for the estimated final cost of all engages in business activities which may earn revenues claims that had not been settled by the reporting date, and incur expenses and whose operating results are less amounts already paid. Liabilities for unpaid claims regularly reviewed by the Group’s chief operating decision are estimated, using the input of assessments for maker (this being the Shoprite Holdings Ltd board of individual cases reported to the Group and statistical directors), in order to allocate resources and assess perfor- analyses, to estimate the expected cost of more mance and for which discrete financial information is available. complex claims that may be affected by external factors. Operating segments, which display similar economic The Group does not discount its liabilities for unpaid characteristics and have similar products, services, claims. customers, methods of distribution and regulatory environ- e) Contingency reserve ments are aggregated for reporting purposes. A contingency reserve was maintained in terms of the Insurance Act, 1998. The utilisation of this reserve, in The Group has the following four reportable segments: case of a catastrophe, was subject to the approval of the 1. Supermarkets RSA – all retail operations under the Financial Services Board. Transfers to this reserve were Shoprite, Checkers, Checkers Hyper, Usave and Hungry reflected in the statement of changes in equity, and Lion brands in South Africa, retailing products such as were indicated in the statement of financial position as a food, clothing, general merchandise, cosmetics and non-distributable reserve under capital and reserves. liquor. The contingency reserve was calculated as 10% of net 2. Supermarkets Non-RSA – all retail operations under the written premiums. Shoprite, Checkers, Checkers Hyper, Usave and Hungry In terms of the Capital Adequacy Requirements Lion brands outside of South Africa, retailing products introduced by the Financial Services Board, this reserve such as food, clothing, general merchandise, cosmetics is no longer required with effect from 1 January 2012 and liquor. and this reserve was transferred to distributable 3. Furniture – all retail operations under the OK Furniture, reserves. OK Power Express, and House & Home brands trading f) Reinsurance in RSA and Non-RSA, retailing products such as furni- The Group has evaluated its exposure to risk and deter- ture, household appliances and home entertainment mined that significant reinsurance protection is not systems for cash or credit. required. 4. Other operating segments – all other operations not g) Liabilities and related assets under liability adequa- included in the above segments, trading in RSA and cy test Non-RSA, including franchise operations and retail and At each statement of financial position date, liability wholesale of pharmaceutical products. adequacy tests are performed on the Group’s Insurance These segments were identified and grouped entities to ensure the adequacy of the contract liabilities together using a combination of the products and net of related deferred acquisition cost (DAC) and any services offered by the segments and the geographical related assets (i.e. the value of business acquired assets areas in which they operate. (VOBA)). In performing these tests, current best The amounts reported to the chief operating decision estimates of future contractual cash flows and claims- maker are measured in a manner consistent with that in handling and administration expenses, as well as invest- the statement of comprehensive income and statement ment income from the assets backing such liabilities, of financial position.

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 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:

Number Title Effective for year ending Amendments to IFRS 1 First-time Adoption on Government Loans 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 58 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 unconsoli- dated structured entities. Amendments to IAS 1: Presentation of financial statements requires entities to separate items presented in other comprehensive income into two groups, based on whether or not they may be recycled to profit or loss in the future. Revised IAS 28: Investments in Associates and Joint Ventures now includes the requirements for joint ventures, as well as associ- ates, to be equity accounted following the issue of IFRS 11.

1.35 Standards, interpretations and amendments effective at June 2012 The following new standards, and interpretations and amendments to existing standards, that are effective as at June 2012 had no significant effect on the Group’s operations:

Number Title Amendments to IFRS 1 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 Other Supermarkets Supermarkets operating RSA Non-RSA Furniture segments Consolidated R’000 R’000 R’000 R’000 R’000 Sale of merchandise External 64 584 215 9 174 147 3 400 185 5 572 040 82 730 587 Inter-segment 1 749 501 4 949 — — 1 754 450 66 333 716 9 179 096 3 400 185 5 572 040 84 485 037

Trading profit 3 887 334 466 277 175 492 136 031 4 665 134 Depreciation and amortisation 992 998 144 550 44 152 18 406 1 200 106 59 Total assets 22 312 020 4 527 078 2 386 342 1 680 078 30 905 518

June 2011 Other Supermarkets Supermarkets operating RSA Non-RSA Furniture segments Consolidated R’000 R’000 R’000 R’000 R’000 Sale of merchandise External 57 213 793 7 316 698 3 059 648 4 707 638 72 297 777 Inter-segment 1 512 692 — — — 1 512 692 58 726 485 7 316 698 3 059 648 4 707 638 73 810 469

Trading profit 3 302 262 415 524 131 484 137 427 3 986 697 Depreciation and amortisation 831 309 111 274 41 025 22 834 1 006 442 Total assets 14 600 472 2 996 263 2 035 346 1 071 676 20 703 757

2.2 Geographical analysis June 2012 Outside South Africa South Africa Consolidated R’000 R’000 R’000 Sale of merchandise – external 72 492 035 10 238 552 82 730 587 Non-current assets* 8 473 336 2 100 092 10 573 428

June 2011 Outside South Africa South Africa Consolidated R’000 R’000 R’000 Sale of merchandise – external 64 068 311 8 229 466 72 297 777 Non-current assets* 7 569 684 1 327 416 8 897 100

*Non-current assets consist of property, plant and equipment, intangible assets and fixed escalation operating lease accruals.

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

COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 R’000

3 PROPERTY, PLANT AND EQUIPMENT — — 3.1 Land at cost 1 065 048 827 698

3.2 Buildings Cost 2 902 799 2 540 157 Accumulated depreciation and impairment (205 577) (154 792) — — Carrying value 2 697 222 2 385 365

60 3.3 Machinery, equipment and vehicles* Cost 9 023 982 7 780 263 Accumulated depreciation and impairment (3 901 887) (3 419 949) — — Carrying value 5 122 095 4 360 314

*Includes aircraft with a carrying value of R92 million (2011: R78 million).

3.4 Improvements to leasehold property Cost 1 081 961 828 105 Accumulated depreciation and impairment (297 767) (232 733) — — Carrying value 784 194 595 372 — — Total property, plant and equipment 9 668 559 8 168 749

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 3. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

Reconciliation of carrying values Machinery, equipment and Leasehold R’000 Land Buildings vehicles improvements Total Carrying value at June 2010 676 620 1 955 731 3 639 626 305 700 6 577 677

Additions 203 103 722 982 1 705 964 221 224 2 853 273 Reclassification (55 571) (140 913) (12) 163 585 (32 911) Reclassification to software — — (145) — (145) Transfer to assets held for sale (note 4) — (55 808) — — (55 808) Transfer from assets held for sale (note 4) — — — 6 989 6 989 Acquisition of subsidiaries and operations (note 32.5.1) 11 000 — 1 228 — 12 228 61 Disposal — (6 331) (67 837) (27 784) (101 952) Proceeds on disposal (27) (90) (33 371) (29 994) (63 482) Profit/(loss) on disposal and scrapping 27 (6 241) (34 466) 2 210 (38 470) Depreciation (281) (27 653) (854 417) (66 169) (948 520) Reversal of impairment (note 3.5) — 4 984 — — 4 984 Impairment (note 3.5) — (16 745) (44 590) — (61 335) Exchange rate differences (7 173) (50 882) (19 503) (8 173) (85 731) Carrying value at June 2011 827 698 2 385 365 4 360 314 595 372 8 168 749

Additions 294 974 626 131 1 773 152 218 090 2 912 347 Reclassification — (52 515) 186 52 329 — Reclassification to software — — (17 153) — (17 153) Transfer to assets held for sale (note 4) (63 189) (254 345) — (15 800) (333 334) Acquisition of subsidiaries and operations (note 32.5.1) — — 19 788 — 19 788 Disposal (12 099) (37 129) (56 539) (57 047) (162 814) Proceeds on disposal (12 945) (37 855) (34 341) (64 173) (149 314) Profit/(loss) on disposal and scrapping 846 726 (22 198) 7 126 (13 500) Depreciation (281) (36 506) (1 021 822) (74 298) (1 132 907) Reversal of impairment (note 3.5) — — 16 720 — 16 720 Impairment (note 3.5) — (20 487) (13 443) — (33 930) Exchange rate differences 17 945 86 708 60 892 65 548 231 093 Carrying value at June 2012 1 065 048 2 697 222 5 122 095 784 194 9 668 559

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

COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 R’000

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 391 993 58 659

It is the Group’s policy to invest in fixed property only when appropriate rental space is not available. Certain land and build- ings in the RSA Supermarket segment have been reclassified as assets held for sale as the Group periodically re-evaluates its fixed property holdings in line with this policy. The Group is currently in the process of actively seeking buyers for these properties.

During the previous financial year certain properties were transferred back to property, plant and equipment. The sale of these properties were reconsidered as it was no longer economically viable. This decision to reclassify had no significant effect on the Group’s results.

4.1 Reconciliation of carrying value Carrying value at the beginning of the year 58 659 26 372 Transfer from property, plant and equipment (note 3) 333 334 55 808 Transfer to property, plant and equipment (note 3) — (6 989) Proceeds on disposal — (28 360) Profit on disposal — 12 868 Exchange rate differences — (1 040) — — Carrying value at the end of the year 391 993 58 659

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 R’000

5 INTERESTS IN SUBSIDIARIES 211 490 862 499 Investments in ordinary shares 1 443 013 1 443 013 Investments in preference shares 10 774 74 237 Amounts owing by subsidiaries 1 665 277 2 379 749 — —

Analysis of total interests in subsidiaries 1 654 503 2 305 512 Non-current 10 774 74 237 Current 63 1 665 277 2 379 749 — —

Detail analysis of the Company’s interests in subsidiaries are given in annexure A.

Investments in preference shares consist of convertible and redeemable, both under certain conditions, non-cumulative preference shares.

Amounts owing by subsidiaries of the Company are interest-free, unsecured and are payable on demand.

6 INVESTMENT IN ASSOCIATE Investment in Winhold Ltd — — Investment in ordinary shares 103 886 —

The Group acquired a 49% interest in Winhold Ltd during the year under review. Winhold Ltd is an unlisted retailing super- market group in Mauritius, denominated in Mauritian rupees.

Reconciliation of carrying 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 —

Summary of financial information of Winhold Ltd Assets 230 326 — Liabilities (18 557) — Turnover 1 183 768 — Profit for the year 8 084 —

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

COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 R’000

7 AVAILABLE-FOR-SALE INVESTMENTS Unlisted share investments Nil (2011: 100) “S” class ordinary shares in RMB Global — — Solutions (Pty) Ltd — 59 656

This investment was realised via dividends received during the year under review. The investment at the end of the previous year was denominated in ZAR and the fair value was based on the underlying net asset value of RMB Global Solutions (Pty) 64 Ltd as it was mainly represented by short-term USD bank deposits at financial institutions with a Moody’s long-term credit rating of Aa2.za.

8 LOANS AND RECEIVABLES Preference share investment (note 8.1) — 32 640 Amounts owing by franchisees (note 8.2) 18 924 16 886 Other 979 1 008 — — 19 903 50 534

Analysis of total loans and receivables Non-current 3 706 4 308 Current 16 197 46 226 — — 19 903 50 534

8.1 Preference share investment — 32 640 The preference share investment at the end of the previous year consisted of 13 500 000 6% redeemable, under certain conditions, convertible cumulative preference shares in Pick & Buy Ltd (retailing supermarket group – Mauritius) denominated in Mauritian rupees. The preference shares were redeemed at par during the year under review.

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 R’000

8 LOANS AND RECEIVABLES (CONTINUED) 8.2 Amounts owing by franchisees Gross amount 30 024 28 584 Accumulated impairment (11 100) (11 698) — 18 924 16 886

The weighted average variable interest rate (linked to the South African prime rate) on these amounts was 8.3% (2011: 9.6%) p.a. and the amounts are repayable between one and five 65 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 11 698 6 561 Allowance for impairment for the year 642 5 137 Unused amounts reversed (1 240) — — — Balance at June 11 100 11 698

The allowance for impairment relates to the following amounts owing by franchisees: Receivable in the next year 6 870 4 788 Receivable between 1 and 3 years 6 982 8 549 Receivable between 3 and 5 years 911 2 639 — — 14 763 15 976

Amounts owing by franchisees relate to a wide-spread number of franchisees which are individually insignificant.

The individually impaired amounts owing by franchisees relate to franchisees experiencing unexpectedly difficult economic situations. It was assessed that a portion of the receivables is expected to be recovered. Interest of R1.8 million (2011: R2.8 million) was accrued on these balances during the year under review. All balances that were past due were considered for impairment.

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

COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 R’000

9 DEFERRED INCOME TAX 237 363 Deferred income tax assets (note 9.1) 413 645 326 457 — — Deferred income tax liabilities (note 9.2) (152 085) (25 377) 237 363 Net deferred income tax assets 261 560 301 080

The movement in the net deferred income tax assets is as follows: 200 237 Carrying value at the beginning of the year 301 080 269 724 37 126 Charge to profit for the year 90 135 34 678 66 37 126 Provisions and accruals 84 681 70 643 — — Allowances on property, plant and equipment (26 421) (67 634) — — Fixed escalation operating lease accrual 8 325 5 611 — — Allowances on intangible assets 1 909 2 136 — — Share-based payment accrual 11 581 18 747 — — Unrealised exchange rate differences 2 976 11 717 — — Tax losses 7 088 (6 443) — — Tax rate change (4) (99) — — Charged to other comprehensive income 8 338 (317) — — Charged to equity (136 249) — — — Exchange rate differences (1 744) (3 005) 237 363 Carrying value at the end of the year 261 560 301 080

9.1 Deferred income tax assets 237 363 Provisions and accruals 355 701 316 404 — — Allowances on property, plant and equipment (280 146) (300 964) — — Fixed escalation operating lease accrual 143 990 144 251 — — Allowances on intangible assets (23 413) (25 947) — — Share-based payment accrual 170 247 158 826 — — Unrealised exchange rate differences 16 298 13 561 — — Fair value differences — (8 337) — — Tax losses 30 968 28 663 237 363 413 645 326 457

Net taxable temporary differences to be settled after — — more than 12 months (90 251) (88 057) Net deductible temporary differences to be recovered 237 363 within 12 months 503 896 414 514 237 363 413 645 326 457

9.2 Deferred income tax liabilities Provisions and accruals 95 071 (3 366) Allowances on property, plant and equipment 86 684 60 803 Fixed escalation operating lease accrual (7 576) 1 221 Allowances on intangible assets 624 3 Unrealised exchange rate differences (17 078) (11 997) Tax losses (5 640) (21 286) — — 152 085 25 377

Net taxable temporary differences to be settled after — — more than 12 months 171 168 36 916 Net deductible temporary differences to be recovered — — within 12 months (19 083) (11 539) — — 152 085 25 377

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 R’000

10 INTANGIBLE ASSETS Goodwill (note 10.1) 191 536 180 981 Software (note 10.2) 615 453 451 143 Trademarks (note 10.3) 47 069 41 378 Customer relationships (note 10.4) 40 238 45 603 — — 894 296 719 105

10.1 Goodwill Gross amount 321 534 217 269 67 Impairment losses (129 998) (36 288) — — Carrying value 191 536 180 981

Reconciliation of carrying value Carrying value at the beginning of the year 180 981 167 074 Acquisition of subsidiaries and operations (note 32.5.1) 72 491 14 676 Impairment (note 10.1.1) (61 605) (769) Exchange rate differences (331) — — — Carrying value at the end of the year 191 536 180 981 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 manage- ment covering five-year planning periods. Cash flows beyond these planning periods are extrapolated using an estimated growth rate of 6.0% (2011: 4.6%). This does not exceed the long-term average growth rate for the business in which the CGUs operate. The following represent significant assumptions on which management based cash flow projections. Supermarket operations % % Operating margin* 6.7 5.9 Growth rate** 6.0 4.6 Pre-tax discount rate*** 11.4 14.1 Other operations % % Operating margin* 5.7 6.1 Growth rate** 6.0 4.6 Pre-tax discount rate*** 8.3 9.3

* Forecasted operating margin, based on budgets, relating to the specific CGUs to which goodwill is allocated. This rate does not apply to the Group as a whole. **Weighted average sales growth rate ***Pre-tax discount rate applied to the cash flow projections These key assumptions are used for the analysis of each CGU within the geographical segment. Management determines budgeted sales growth rates and gross profit margins based on past performance and its expectations of the retail market within the relevant country or area. The discount rates used reflect specific risks relating to the relevant segments. The impairment charge in the current financial year under review arose in CGU’s in the Supermarkets RSA, Supermarkets non- RSA and Other operating segments. This impairment was the result of a significant reduction in the future expected sales due to a weakening in the general economic conditions in which these CGU’s operates.

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

COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 R’000

10 INTANGIBLE ASSETS (CONTINUED) 10.2 Software Gross amount 782 598 574 714 Accumulated amortisation and impairment losses (167 145) (123 571) — — Carrying value 615 453 451 143

Reconciliation of carrying value Carrying value at the beginning of the year 451 143 348 737 68 Additions 56 159 36 575 Internally generated 149 263 115 371 Reclassification from property, plant and equipment (note 3) 17 153 145 Disposal (95) (1) Proceeds on disposal (1) (1) Loss on disposal and scrappings (94) — Amortisation (58 223) (49 677) Exchange rate differences 53 (7) — — Carrying value at the end of the year 615 453 451 143

Included in the gross amount of software is R449m (2011: R288m) that relates to cost capitalised for software not yet in use. This relates mainly to the implementation of SAP merchandis- ing software. The gross amount of software not yet in use was evaluated for impairment by the directors at the statement of financial position date.

10.3 Trademarks Gross amount 193 640 177 756 Accumulated amortisation (146 571) (136 378) — — Carrying value 47 069 41 378

Reconciliation of carrying value Carrying value at the beginning of the year 41 378 44 258 Acquisition of subsidiaries and operations (note 32.5.1) 9 302 — Amortisation (3 611) (2 880) — — Carrying value at the end of the year 47 069 41 378

10.4 Customer relationships Gross amount 53 650 53 650 Accumulated amortisation (13 412) (8 047) — — Carrying value 40 238 45 603

Reconciliation of carrying value Carrying value at the beginning of the year 45 603 50 968 Amortisation (5 365) (5 365) — — Carrying value at the end of the year 40 238 45 603

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 R’000

11 FIXED ESCALATION OPERATING LEASE ACCRUAL Operating lease receipts straight-lined 11 504 9 449 Less: current (included under trade and other receivables: note 13) (931) (203) — — 10 573 9 246

12 INVENTORIES — — Trading goods 8 680 109 7 055 867

13 TRADE AND OTHER RECEIVABLES 69 Instalment sales Gross amount (note 13.1) 1 283 036 1 099 858 Accumulated impairment (note 13.2) (135 712) (118 029) Unearned finance income (33 335) (27 066) Insurance contract allowances – Unearned premiums (note 13.3) (178 408) (156 520) — — 935 581 798 243 — — Trade receivables (note 13.4) 1 205 979 881 100 — 15 327 Other receivables (note 13.5) 339 839 353 932 — — Prepayments and taxes receivable 196 883 205 107 — — Fixed escalation operating lease accrual (note 11) 931 203 — — Amounts owing by joint ventures (note 13.6) 22 818 16 805 — 15 327 2 702 031 2 255 390

13.1 Instalment 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 wide- spread client base and external credit checks are made to ensure that all instalment sale clients have an appropriate credit history. Furniture items, including appliances and electronic products are held as collateral for all instalment sale agreements.

Instalment sale receivables Future minimum instalment payments receivable under non-cancellable instalment sale agreements Not later than 1 year 837 879 647 468 Later than 1 year not later than 2 years 445 157 452 390 — — 1 283 036 1 099 858

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

COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 R’000

13 TRADE AND OTHER RECEIVABLES (CONTINUED) 13.2 Accumulated impairment Reconciliation of accumulated impairment Balance at July 118 029 115 906 Allowance for impairment for the year 161 878 41 583 Receivables written off during the year as uncollectible (153 834) (54 865) Penalty interest accrued 9 702 14 578 Exchange rate differences 1 298 1 350 70 Unused amounts reversed (1 361) (523) — — Balance at June 135 712 118 029

The accumulated impairment relates to actual arrears, individual repayments that are past due, and the age analysis below reflects the period that these amounts are overdue. 30 days 23 302 19 918 60 days 14 404 12 665 90 days 10 564 9 515 120 days 8 217 7 645 150 days 6 638 6 318 180 days 5 451 5 384 + 180 days 34 391 37 313 — — 102 967 98 758

The accumulated impairment is calculated with reference to actual default history of the Group’s instalment sale receivables on a collective basis and is in line with industry norms. On this basis the provision of R136 million (2011: R118 million) was calculated taking into account the actual arrears of R103 million (2011: R99 million) and an amount of R304 million (2011: R243 million) which represents the maximum exposure if all debtors included in actual arrears continued to default. It was assessed that a portion of the receivables is expected to be recovered. All amounts that have not been impaired are fully performing and have no overdue instalments. Based on this the credit quality of these amounts is considered to be satisfactory.

13.3 Allowance for unearned premiums An analysis of the allowance for unearned premiums is set out below: Balance at the beginning of the year 156 520 142 298 Premiums written during the year (note 21.3) 316 623 271 589 Amortisation charged to income (note 21.3) (294 735) (257 367) — — Balance at the end of the year 178 408 156 520

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 R’000

13 TRADE AND OTHER RECEIVABLES (CONTINUED) 13.4 Trade receivables Gross amount 1 316 460 975 300 Accumulated impairment (110 481) (94 200) — — 1 205 979 881 100

Trade receivables consist mainly of sale of merchandise to franchisees and buying aid societies. The amounts are mainly denominated in ZAR. The maximum exposure to credit risk at 71 the reporting date is the carrying value which approximates fair value. Balances are due within 30 days of statement date and the age analysis of these amounts are reviewed on a monthly basis. All amounts past due 60 days or more are individually impaired. Franchisees comprise a wide-spread client base and the credit history of all franchisees are verified with an external credit bureau. Notarial and mortgage bonds and bank guaran- tees with a face value of R557 million (2011: R717 million) are held as collateral for these amounts. Long standing trading relationships exist with the buying aid societies and the Group reviews the credit history, based on its own records as well as information from an external credit bureau, of these societies on a cyclical basis. Based on this the Group considers the credit quality of all fully performing amounts as satisfactory.

Reconciliation of accumulated impairment Balance at July 94 200 90 073 Allowance for impairment for the year 27 245 12 928 Receivables written off during the year as uncollectible (6 759) (1 471) Exchange rate differences 118 (2 876) Unused amounts reversed (4 323) (4 454) — — Balance at June 110 481 94 200

The provision for impairment relates to trade receivables of R155 million (2011: R94 million) receivable within the next 12 months.

These individually impaired amounts relate mostly to franchisees experiencing unexpectedly difficult economic situations. It was assessed that a portion of the receivables is expected to be recovered. Interest of R1,7 million (2011: R1,5 million) was accrued on these balances during the year under review.

Trade receivables of R35 million (2011: R62 million) that were past due between 30 and 60 days of statement date were not impaired. These amounts relate to a number of debtors for whom there is no recent history of default.

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

COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 R’000

13 TRADE AND OTHER RECEIVABLES (CONTINUED) — — 13.5 Other receivables 339 839 353 932 Other receivables consist of various operational debtors such as rental and municipal deposits refundable. The amounts are mainly denominated in ZAR. The maximum exposure to credit risk at the reporting date is the carrying value which approxi- mates fair value. The age analysis of these amounts are reviewed on a monthly basis and no allowance for impairment has been made. If the credit risk of any individual receivables is 72 deemed to be material the credit history of the relevant client will be verified with an external credit bureau. No security is held for these balances.

— — 13.6 Amounts owing by joint ventures 22 818 16 805 These amounts owing are unsecured, payable on demand and earn interest at an average of 5.4% (2011: 6.0%) p.a. The maximum exposure to credit risk at the reporting date is the carrying value and the Group does not hold any collateral as security. The amounts are mainly denominated in ZAR and are not impaired.

14 DERIVATIVE FINANCIAL INSTRUMENTS Forward foreign exchange rate contracts (note 39.1.1) — — Current liabilities 231 3 606

As at June 2012 the settlement dates on open forward contracts ranged between one and three (2011: one and three) months. The local currency amounts to be received and contractual exchange rates of the Company’s outstanding contracts were: US dollar rand equivalent at rates averaging R1 = $0,1180 (2011: R1 = $0,1451) Outflow (308 808) (385 297) Inflow 302 177 379 682 Swedish krona rand equivalent at rates averaging N/A (2011: R1 = SEK0,9354) Outflow — (4 486) Inflow — 3 951 Euro rand equivalent at rates averaging R1 = €0,0944 (2011: R1 = €0,1011) Outflow (68 524) (58 793) Inflow 67 419 58 610

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 R’000

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

Issued: 570 579 460 (2011: 543 479 460) ordinary shares of 73 616 306 647 037 113.4 cents each 647 037 616 306

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.

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

COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 R’000

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

Issued: 74 276 821 666 (2011: 276 821 666) non-convertible, 277 277 non-participating no par value deferred shares 277 277

The unissued deferred shares are not under the control of the directors, and can only be issued under predetermined circumstances as set out in the Memorandum of Incorporation of Shoprite Holdings Ltd.

All shares are fully paid up and carry the same voting rights as the ordinary shares. 616 583 647 314 647 314 616 583

15.3 Treasury shares — — 35 436 472 (2011: 37 346 947) ordinary shares 320 146 337 406

Reconciliation of movement in number of treasury shares for the Group: Number of shares Balance at the beginning of the year 37 346 947 37 346 947 Movement in shares held by The Shoprite Holdings Ltd Share Incentive Trust Shares disposed during the year (506 036) — Movement in shares held by Shoprite Checkers (Pty) Ltd Shares purchased during the year 506 036 — Shares' loss during the year (1 910 475) — Balance at the end of the year 35 436 472 37 346 947

15.4 Share incentive 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: Number of shares Balance at the beginning of the year 506 036 506 036 Shares sold to Shoprite Checkers (Pty) Ltd (506 036) — Balance at the end of the year — 506 036

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 R’000

15 SHARE CAPITAL, TREASURY SHARES AND SHARE INCENTIVE SCHEMES (CONTINUED) 15.4 Share incentive schemes (continued) 15.4.1 SHARE PURCHASE SCHEME (CONTINUED) Fair value of treasury shares held by The Shoprite Holdings Ltd Share Incentive Trust — 51 514

15.4.2 CASH-SETTLED SHARE-BASED PAYMENTS The Group has granted cash-settled share-based payments to 75 directors and management. The rights to cash-settled share- based payments entitle the participants to receive cash pay- ments based on the difference between the share price at the date of the exercise of the rights and the strike price which relates to the share price at the date of the grant. The number of shares on which the rights are based as well as the strike prices and the exercise and expiry dates are set out below. The Group has recognised the liability in respect of the cash-settled share- based payments and included it in payables (refer note 20).

Refer note 24 for the expense recognised in the statement of comprehensive income as employee benefits.

Weighted average Number of shares strike price per share on which rights are based 2012 2011 2012 2011 Movements in rights to cash- settled share-based payments Balance at the beginning of the year R29,69 R30,17 9 441 667 13 400 000 Exercised during the year R31,78 R31,31 (4 049 999) (3 958 333) Forfeited during the year R31,31 — (183 334) — Balance at the end of the year R28,02 R29,69 5 208 334 9 441 667

Rights to cash-settled share- based payments on June 2012 are unconditional on the following dates or immediately in the case of a deceased estate: 29 Aug 2011 — R31,31 — 3 958 333 29 Aug 2012 R31,31 R31,31 3 816 666 3 958 333 10 Oct 2011 — R45,45 — 133 333 10 Oct 2012 R45,45 R45,45 133 333 133 333 10 Oct 2013 R45,45 R45,45 133 334 133 334 9 Oct 2012 R62,35 R62,35 41 667 41 667 9 Oct 2013 R62,35 R62,35 41 667 41 667 9 Oct 2014 R62,35 R62,35 41 667 41 667 CH Wiese: refer next page R6,50 R6,50 1 000 000 1 000 000 R28,02 R29,69 5 208 334 9 441 667

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 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

Number of shares on which rights are based Exercised during the Strike price Director Expiry date Exercise date At June 2011 year At June 2012 per share CH Wiese* 5 Sep 2022 Currently exercisable 1 000 000 — 1 000 000 R6,50 JAL Basson 29 Aug 2011 29 Aug 2011** 41 667 (41 667) — R31,31 JAL Basson 29 Aug 2012 29 Aug 2012 41 667 — 41 667 R31,31 76 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 COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 R’000

16 RESERVES 1 345 422 1 423 455 Retained earnings 8 203 053 6 507 523 2 152 2 152 Other reserves (note 16.1) 542 752 4 928 1 347 574 1 425 607 8 745 805 6 512 451

16.1 Other reserves 209 209 Reserve on conversion from no par value to par value shares 209 209 1 943 1 943 Capital redemption reserve 1 943 1 943 — — Equity component of convertible bonds 333 880 — 77 — — Foreign currency translation reserve 206 720 (81 979) — — Contingency reserve — 33 536 — — Fair value reserve — 51 219 2 152 2 152 542 752 4 928

16.1.1 RECONCILIATION OF CARRYING VALUES OF OTHER RESERVES

Equity Foreign component of currency convertible translation Contingency Fair value R’000 bonds reserve reserve reserve Other Balance at June 2010 — 60 472 29 027 49 269 2 152

Foreign currency translation differences (142 451) Transfer from distributable reserves 4 509 Net fair value gains on available-for-sale investments, net of income tax 1 950 Net fair value gains 2 267 Related income tax (317)

Balance at June 2011 — (81 979) 33 536 51 219 2 152

Equity component of convertible bonds on initial recognition 470 129 Deferred income tax on equity component of convertible bonds (136 249) Foreign currency translation differences 288 699 Transfer to distributable reserves (33 536) Net fair value gains on available-for-sale investments, net of income tax (51 219) Net fair value gains (59 557) Related income tax 8 338

Balance at June 2012 333 880 206 720 — — 2 152

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

COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 R’000

17 BORROWINGS Consisting of: 2 450 2 450 Shoprite Holdings Ltd preference share capital (note 17.1) 2 450 2 450 — — Shoprite International Ltd preference share capital (note 17.2) 182 149 — — Convertible bonds (note 17.3) 3 975 330 — — — First National Bank of Namibia Ltd (note 17.4) 57 472 47 156 2 450 2 450 4 035 434 49 755

78 Analysis of total borrowings 2 450 2 450 Non-current 4 006 698 26 177 — — Current 28 736 23 578 2 450 2 450 4 035 434 49 755

17.1 Shoprite Holdings Ltd preference share 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

Issued: 175 000 (2011: 175 000) 6% non-convertible cumulative 350 350 preference shares of R2 each 350 350 325 000 (2011: 325 000) 5% non-convertible cumulative 650 650 preference shares of R2 each 650 650 225 000 (2011: 225 000) second 5% non-convertible 450 450 cumulative preference shares of R2 each 450 450 500 000 (2011: 500 000) third 5% non-convertible 1 000 1 000 cumulative preference shares of R2 each 1 000 1 000 2 450 2 450 2 450 2 450

17.2 Shoprite International Ltd preference share capital 20 (2011: 20) “Malawi” redeemable under certain conditions, preference shares of USD1,82 each 1 543 1 259 2 (2011: 2) “Angola” redeemable under certain conditions, preference shares of USD1,82 each 155 126 Accumulated losses recognised (1 516) (1 236) — — 182 149

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 R’000

17 BORROWINGS (CONTINUED) 17.3 Convertible bonds The Group issued 6.5% convertible bonds for a principal amount of R4,5 billion on 2 April 2012. The bonds mature five years from the issue date at their nominal value of R4,5 billion or can be converted into shares at the holders’ option at the maturity date at the rate of 5 919.26 shares per R1 million. The Group holds, subject to conditions, rights on early redemption. The values of the liability component and the equity conversion component were determined at issuance of the bond. 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, repre- senting the value of the equity conversion option, is included in shareholders’ equity in other reserves, net of income taxes.

The convertible bond recognised in the statement of financial position is calculated as follows:

Face value of convertible bonds issued on 2 April 2012* 4 347 641 — Equity component (note 16.1)* (470 129) — — — Liability component on initial recognition at 2 April 2012 3 877 512 — Interest expense (note 28) 97 818 — — — Liability component at the end of the year 3 975 330 —

* The transaction costs have been allocated to the equity and liability components based on their relative day one values.

The fair value of the liability component of the convertible bonds amounted to R4,1 billion at the statement of financial position date. The fair value is calculated using cash flows discounted at a rate based on the borrowings rate of 8.5%.

17.4 First National Bank of Namibia 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. 57 472 47 156

18 PROVISIONS Provision for post-retirement medical benefits (note 36.2) 33 355 33 534 Provision for onerous lease contracts 44 165 50 578 Provision for outstanding claims 2 353 2 134 Provision for long-term employee benefits 257 937 219 831 Reinstatement provision 139 615 137 240 — — 477 425 443 317

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 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

Post- retirement Onerous Long-term medical lease Outstanding employee Reinstatement R’000 benefits contracts claims benefits provision Total Balance at June 2010 32 404 41 421 1 459 158 981 141 378 375 643 Additional provisions 1 240 21 356 675 59 461 11 570 94 302 Unused amounts reversed (312) (159) — (321) (732) (1 524) Utilised during the year (2 630) (10 818) — (6 354) (14 912) (34 714) Accretion of discount 2 832 (1 222) — 8 572 — 10 182 Exchange rate differences — — — (508) (64) (572) 80 Balance at June 2011 33 534 50 578 2 134 219 831 137 240 443 317 Additional provisions 76 29 823 219 55 104 11 549 96 771 Unused amounts reversed (1 328) (15 049) — (4 932) (1 925) (23 234) Utilised during the year (1 779) (23 064) — (20 882) (7 249) (52 974) Accretion of discount 2 852 1 877 — 7 506 — 12 235 Exchange rate differences — — — 1 310 — 1 310 Balance at June 2012 33 355 44 165 2 353 257 937 139 615 477 425

Analysis of total provisions 2011 Non-current 33 534 26 009 — 218 568 61 089 339 200 Current — 24 569 2 134 1 263 76 151 104 117 33 534 50 578 2 134 219 831 137 240 443 317

2012 Non-current 33 355 29 069 — 208 573 67 794 338 791 Current — 15 096 2 353 49 364 71 821 138 634 33 355 44 165 2 353 257 937 139 615 477 425

Discount rates used 2011 9% 12% N/A 9% 12% 2012 9% 9% N/A 8% 9%

COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 R’000

19 FIXED ESCALATION OPERATING LEASE ACCRUAL Operating lease payments straight-lined (refer note 23) 576 437 522 205 Less: current (included under trade and other payables: note 20) (56 231) (66 418) — — 520 206 455 787

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 R’000

20 TRADE AND OTHER PAYABLES — — Trade payables 8 163 845 6 303 789 966 24 777 Other payables and accruals 2 927 422 2 254 512 — — Employee benefit accruals 743 836 655 394 160 198 Indirect taxes payable 204 540 200 323 — — Amounts owing to joint ventures (note 20.1) 7 665 3 917 — — Fixed escalation operating lease accrual (note 19) 56 231 66 418 — — Cash-settled share-based payment accrual (note 15.4.2) 630 043 586 845 1 126 24 975 12 733 582 10 071 198 81

Analysis of trade and other payables — — Non-current 21 878 263 455 1 126 24 975 Current 12 711 704 9 807 743 1 126 24 975 12 733 582 10 071 198

— — 20.1 Amounts owing to joint ventures 7 665 3 917 These loans are unsecured, payable on demand and bear interest at an average of 3.4% (2011: 1.2%) p.a.

21 OTHER OPERATING INCOME — — Finance income earned 206 354 196 066 1 306 771 1 652 535 Investment income (note 21.1) 82 259 27 663 — — Franchise fees received 47 438 38 262 — — Operating lease income (note 21.2) 251 482 231 900 — — Commissions received 485 734 412 386 — — Premiums earned (note 21.3) 294 735 257 367 910 2 522 Other income 957 310 692 197 1 307 681 1 655 057 2 325 312 1 855 841

21.1 Investment income — 12 955 Interest received from subsidiaries — — — — Interest received from joint ventures 279 965 — 335 Interest received other 16 579 14 940 1 306 751 1 639 223 Dividends – subsidiaries — — 20 22 – unlisted investments 65 401 11 758 1 306 771 1 652 535 82 259 27 663

21.2 Operating lease 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 316 623 271 589 Change in allowance for unearned premiums (21 888) (14 222) — — 294 735 257 367

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

COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 R’000

22 DEPRECIATION AND AMORTISATION Property, plant and equipment 1 132 907 948 520 Intangible assets 67 199 57 922 1 200 106 1 006 442 Disclosed as cost of sales (109 811) (72 850) — — 1 090 295 933 592

23 OPERATING 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.

Operating lease payments – property 1 902 258 1 692 493 Operating lease payments – equipment 80 858 81 943 1 983 116 1 774 436 Disclosed as cost of sales (42 895) (73 968) — — 1 940 221 1 700 468

Consisting of: Minimum lease payments 1 733 591 1 543 435 Contingent lease payments 249 525 231 001 — — 1 983 116 1 774 436

24 EMPLOYEE BENEFITS Wages and salaries 6 305 672 5 514 459 Cash-settled share-based payments (note 15.4.2) 275 580 256 618 Post-retirement medical benefits (note 36.2) 1 600 3 760 Retirement benefit contributions (note 36.1) 347 939 314 415 6 930 791 6 089 252 Disclosed as cost of sales (400 323) (327 207) — — 6 530 468 5 762 045

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 COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 R’000

25 OPERATING PROFIT Determined after taking into account the following:

— — Fair value gains/(losses) on financial instruments 3 375 (5 105)

— — Policyholder claims and benefits paid 24 965 14 073 — — – claims paid 24 746 13 398 — — – movement in accumulated unpaid claims (note 18) 219 675 83

26 DIRECTORS’ REMUNERATION 69 032 78 261 Executive directors 845 1 227 Non-executive directors 69 877 79 488 — — (69 032) (78 261) Less: paid by subsidiaries and joint ventures 845 1 227 — —

The only prescribed officers of the Group are the Shoprite Holdings Ltd directors and alternate directors, as listed below.

For details of equity and cash-settled share-based payment instruments issued to directors refer note 15.4.

The South African Companies Act (Act No 71 of 2008), as amended, requires certain new disclosures in respect of directors’ remuneration. All disclosures relating to share appreciation rights exercised are now disclosed in note 15.4.

2012 2011 Retirement Retirement Perfor- and Perfor- and Remune- mance medical Other Remune- mance medical Other R’000 ration bonus benefits benefits Total ration bonus benefits benefits Total

Executive directors and alternates JW Basson 40 620 — 35 309 40 964 32 063 — 3 963 449 36 475 JAL Basson 1 257 1 008 215 161 2 641 1 137 1 350 194 142 2 823 M Bosman 1 727 1 487 397 168 3 779 1 601 1 327 322 204 3 454 PC Engelbrecht 2 785 1 864 513 222 5 384 2 475 1 610 423 198 4 706 CG Goosen 3 354 2 658 804 229 7 045 3 104 2 410 708 257 6 479 B Harisunker 2 112 1 235 702 153 4 202 1 957 921 592 190 3 660 AE Karp 3 143 2 256 641 247 6 287 2 908 540 557 266 4 271 EL Nel 2 104 1 760 370 172 4 406 1 942 1 450 334 171 3 897 BR Weyers 1 627 1 300 422 204 3 553 1 534 1 180 361 192 3 267 58 729 13 568 4 099 1 865 78 261 48 721 10 788 7 454 2 069 69 032

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

26 DIRECTORS’ REMUNERATION (CONTINUED)

2012 2011 Fees Total Fees Total Non-executive directors JJ Fouché (appointed 26/03/2012) 32 32 — — EC Kieswetter 120 120 101 101 JA Louw 211 211 101 101 JF Malherbe 210 210 176 176 JG Rademeyer 312 312 259 259 JA Rock (appointed 15/05/2012) 22 22 — — CH Wiese* 320 320 208 208 1 227 1 227 845 845 84

*Paid to Chaircorp (Pty) Ltd in its capacity as employer.

COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 R’000

27 ITEMS OF A CAPITAL NATURE Profit/(loss) on disposals of property (note 3) 1 572 (6 214) Profit on disposals of assets held for sale (note 4) — 12 868 Loss on disposals and scrappings of plant, equipment and intangible assets (note 3 & 10) (15 166) (32 256) Insurance claims paid (1 094) (217) Impairment of property, plant and equipment and assets held for sale (note 3 & 4) (17 210) (56 351) Impairment of goodwill (note 10.1) (61 605) (769) (Loss)/profit on other investing activities (184) 4 406 — — (93 687) (78 533)

28 FINANCE COSTS — — Interest on convertible bonds 97 818 — 72 — Interest paid 125 412 125 608 — — Interest paid to joint ventures 207 230 126 126 Preference dividends 126 126 21 21 6% non-convertible cumulative preference shares 21 21 32 32 5% non-convertible cumulative preference shares 32 32 23 23 Second 5% non-convertible cumulative preference shares 23 23 50 50 Third 5% non-convertible cumulative preference shares 50 50

198 126 223 563 125 964

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 R’000

29 INCOME TAX EXPENSE 29.1 Classification 131 060 114 556 South African income tax 1 306 833 1 162 478 — — Foreign income tax 132 056 184 348 131 060 114 556 1 438 889 1 346 826

29.2 Consisting of: 12 879 26 032 Current income tax 1 409 413 1 223 548 1 165 (1 030) Prior year income tax 1 609 28 295 85 — — Withholding income tax 26 159 7 991 117 053 89 680 Secondary income tax on companies 91 843 121 670 131 097 114 682 1 529 024 1 381 504 (37) (126) Deferred income tax (90 135) (34 678) 131 060 114 556 1 438 889 1 346 826

29.3 Reconciliation of income tax 374 513 478 921 South African current income tax at 28% (2011: 28%) 1 254 878 1 085 383 (243 453) (364 365) Net adjustments 184 011 261 443 35 35 Preference dividends (230) (255) (365 897) (458 989) Dividend income (18 312) (5 966) 4 191 5 939 Other exempt income and non-deductible expenses (177) 76 058 — — Income tax allowances (9 898) (2 648) — — Deferred income tax asset previously not recognised (6 922) (25 242) 1 165 (1 030) Prior year income tax 1 609 28 295 117 053 89 680 Secondary income tax on companies 91 843 121 670 — — Effect of foreign income tax rates 35 999 33 398 — — Withholding income tax 26 159 7 991 — — Deferred income tax asset not recognised 63 940 28 142

131 060 114 556 Income tax 1 438 889 1 346 826

9.8% 6.7% Effective tax rate 32.1% 34.7%

29.4 Secondary income tax on companies Secondary income tax on companies on proposed or 89 674 — envisaged dividends — 89 674

If the total distributable reserves of the Company of R1,345 million at the end of the previous year were to be declared as dividends, the secondary income tax impact at a rate of 10% would have been R135 million.

The South African Government replaced secondary income tax on companies with a dividend tax on shareholders with effect from 1 April 2012.

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

COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 R’000

29 INCOME TAX EXPENSE (CONTINUED) 29.5 Net calculated income tax losses and net deductible temporary differences Calculated income tax losses and net deductible temporary differences at year-end 1 843 759 1 424 491 Applied in the provision for deferred income tax 1 479 506 1 137 964 — — 364 253 286 527

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 — 1 625 30 June 2013 2 776 3 165 30 June 2014 8 276 7 542 30 June 2015 8 369 3 802 30 June 2016 4 025 4 744 30 June 2017 19 483 16 879 30 June 2018 2 603 — 30 June 2019 — 103 — — 45 532 37 860

Calculated temporary differences on consolidation associated with investments in subsidiaries for which deferred income tax — — liabilities have not been created 108 566 89 255

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 30 EARNINGS PER SHARE 2012 Income tax R’000 Gross effect Net Profit attributable to equity holders 3 026 563 Profit on disposals of property (note 3) (1 572) 294 (1 278) Loss on disposals and scrappings of plant, equipment and intangible assets (note 3 & 10) 15 166 (3 856) 11 310 Insurance claims paid 1 094 (306) 788 Impairment of property, plant and equipment and assets held for sale (note 3 & 4) 17 210 (2 170) 15 040 Impairment of goodwill (note 10.1) 61 605 — 61 605 Loss on other investing activities 184 — 184 Headline earnings 93 687 (6 038) 3 114 212 87 2011 Income tax R’000 Gross effect Net Profit attributable to equity holders 2 509 780 Loss on disposals of property (note 3) 6 214 (197) 6 017 Profit on disposals of assets held for sale (note 4) (12 868) 1 802 (11 066) Loss on disposals and scrappings of plant, equipment and intangible assets (note 3 & 10) 32 256 (9 077) 23 179 Insurance claims paid 217 (61) 156 Impairment of property, plant and equipment and assets held for sale (note 3 & 4) 56 351 (12 311) 44 040 Impairment of goodwill (note 10.1) 768 — 768 Profit on other investing activities (4 405) 537 (3 868) Headline earnings 78 533 (19 307) 2 569 006

2012 2011 Number of shares Number of ordinary shares – In issue 535 143 506 133 – Weighted average 513 019 506 133

Earnings per share Cents – Earnings 590.0 495.9 – Headline earnings 607.0 507.6

Diluted earnings per share is unchanged from basic earnings per share, as the inclusion of the dilutive potential ordinary shares would increase earnings per share and is therefore not dilutive. Convertible debt outstanding at the reporting date (refer note 17.3), which were anti-dilutive in the current year, could potentially have a dilutive impact in the future.

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

COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 R’000

31 DIVIDENDS PER SHARE Cents 31.1 Dividends per share paid Cents No 125 paid 19 September 2011 (2011: No 123 paid 147.0 165.0 20 September 2010) 165.0 147.0 88.0 109.0 No 126 paid 30 April 2012 (2011: No 124 paid 22 March 2011) 109.0 88.0 235.0 274.0 274.0 235.0

31.2 Dividends per share declared 88 No 127 payable 17 September 2012 (2011: No 125 paid 165.0 194.0 19 September 2011) 194.0 165.0

32 CASH FLOW INFORMATION 32.1 Non-cash items — — Depreciation of property, plant and equipment 1 132 907 948 520 — — Amortisation of intangible assets 67 199 57 922 — — Net fair value (gains)/losses on financial instruments (3 375) 5 105 1 — Exchange rate losses 8 343 446 — — (Profit)/loss on disposals of property (1 572) 6 214 — — Profit on disposals of assets held for sale — (12 868) Loss on disposals and scrappings of plant, equipment — — and intangible assets 15 166 32 256 Impairment of property, plant and equipment and assets — — held for sale 17 210 56 351 — — Impairment of goodwill 61 605 769 — — Movement in provisions 34 577 70 876 — — Movement in cash-settled share-based payment accrual 330 738 272 808 — — Movement in fixed escalation operating lease accrual 51 724 21 081 1 — 1 714 522 1 459 480

32.2 Changes in working capital — — Inventories (1 526 104) (1 000 474) — (15 327) Trade and other receivables (239 945) (236 566) (285) 23 848 Trade and other payables 2 415 283 (87 319) (285) 8 521 649 234 (1 324 359)

32.3 Dividends paid (3 338) (4 016) Shareholders for dividends at the beginning of the year (4 851) (3 328) (1 277 177) (1 517 843) Dividends distributed to equity holders (1 421 598) (1 189 411) — — Dividends distributed to non-controlling interest (12 330) (28 196) 4 016 3 849 Shareholders for dividends at the end of the year 4 955 4 851 (1 276 499) (1 518 010) (1 433 824) (1 216 084)

32.4 Income tax paid 1 589 (4 247) Prepaid/(payable) at the beginning of the year (425 773) (75 361) (131 097) (114 682) Per statement of comprehensive income (1 529 024) (1 381 504) — — Acquisition of subsidiaries and operations (note 32.5.1) (372) — 4 247 7 028 Payable at the end of the year 69 835 425 773 (125 261) (111 901) (1 885 334) (1 031 092)

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 R’000

32 CASH FLOW INFORMATION (CONTINUED) 32.5 Cash flows (utilised by)/from investing activities Investment in property, plant and equipment and intangible — — assets to expand operations (2 359 020) (2 283 322) Investment in property, plant and equipment and intangible — — assets to maintain operations (758 749) (721 897) Proceeds on disposals of property, plant and equipment and — — intangible assets 149 315 63 483 — — Proceeds on disposals of assets held for sale — 28 360 89 — (651 009) Other investing activities 34 409 3 493 (1 342 957) (2 316 447) Amounts paid to subsidiaries — — 1 408 492 2 252 984 Amounts received from subsidiaries — — — — Investment in associate (103 886) — — — Acquisition of subsidiaries and operations (note 32.5.1) (72 961) (27 128) 65 535 (714 472) (3 110 892) (2 937 011)

32.5.1 ACQUISITION OF SUBSIDIARIES AND 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) 19 788 12 228 Trademark (note 10.3) 9 302 — Trade and other receivables (note 13) 97 647 — Trade and other payables (note 20) (133 560) (1 087) Current income tax (372) — Inventories (note 12) 7 665 1 311 470 12 452 Goodwill (note 10.1) 72 491 14 676 — — Purchase consideration 72 961 27 128

32.6 Cash flows from financing activities — 3 409 728 Proceeds from ordinary shares issued 3 409 728 — — — Proceeds from convertible bonds issued 4 347 641 — — — Increase in borrowings from First National Bank of Namibia Ltd 10 316 9 329 — 3 409 728 7 767 685 9 329

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

COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 R’000

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. 206 168 157 792

Shoprite Holdings Ltd and its main trading subsidiary, Shoprite Checkers (Pty) Ltd, have irrevocably and unconditionally guaran- teed all amounts payable by the issuer, Shoprite Investments 90 Ltd, in respect of the convertible bonds (refer note 17.3). 34 COMMITMENTS 34.1 Capital commitments Contracted for property, plant and equipment 1 464 732 1 261 803 Contracted for intangible assets 242 735 81 731 Authorised by directors, but not contracted for 2 077 445 1 781 928 — — Total capital commitments 3 784 912 3 125 462

— — Capital commitments for the 12 months after accounting date 3 784 912 3 125 462 Funds to meet this expenditure will be provided from the Group’s own resources and borrowings.

34.2 Operating lease commitments Future minimum lease payments under non-cancellable operating leases: – Not later than one year 1 609 405 1 220 407 – Later than one year not later than five years 5 107 226 4 012 189 – Later than five years 2 739 322 2 075 058 9 455 953 7 307 654 Less: fixed escalation operating lease accrual (note 19) (576 437) (522 205) — — 8 879 516 6 785 449

34.3 Operating lease receivables Future minimum lease payments receivable under non-cancellable operating leases: – Not later than one year 175 323 237 924 – Later than one year not later than five years 354 467 313 153 – Later than five years 36 070 13 191 565 860 564 268 Less: fixed escalation operating lease accrual (note 11) (11 504) (9 449) — — 554 356 554 819

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 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

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 10.3% 9.8% Discount rate 9.3% 8.8% Salary adjustments – inflation 7.7% 7.3% – promotions and experience increases 1.5% 1.5% Continuation at retirement 100.0% 95.0% Expected retirement age 63 years 60 years

The assumed rates of mortality are as follows: During employment: SA: 85-90 (light) ultimate table (2011: SA 85-90 (light) ultimate table) Post-employment: PA (90) ultimate table rated down 2 years plus 1% p.a. improvement from 2006 (2011: PA (90) ultimate table rated down 2 years plus 1% p.a. improvement from 2006)

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

COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 R’000

36 POST-RETIREMENT BENEFITS (CONTINUED) 36.2 Medical benefits (continued) 36.2.2 THE MOVEMENT IN THE LIABILITY RECOGNISED IN THE STATEMENT OF FINANCIAL POSITION (NOTE 18) WAS AS FOLLOWS: Balance at the beginning of the year 33 534 32 404 Total expense charged to the statement of comprehensive income (note 36.2.3) 1 600 3 760 92 Benefits paid (1 779) (2 630) — — Balance at the end of the year 33 355 33 534

36.2.3 THE AMOUNTS RECOGNISED IN THE STATEMENT OF COMPREHENSIVE INCOME WERE AS FOLLOWS: Current service cost 76 115 Net actuarial (gains)/losses recognised during the year (1 328) 813 Interest cost 2 852 2 832 — — Total included in employee benefits (note 24) 1 600 3 760

The effect of a 1% increase in the assumed health-care cost inflation is as follows: Increase in the current service and interest cost 454 443 Increase in the post-retirement medical benefit liability 4 730 4 878

The effect of a 1% decrease in the assumed health-care cost inflation is as follows: Decrease in the current service and interest cost 369 359 Decrease in the post-retirement medical benefit liability 3 870 3 975

36.2.4 TREND ANALYSIS OF POST-RETIREMENT MEDICAL BENEFITS

Present value Experience R’000 of obligation adjustments 30 June 2008 181 099 4 563 30 June 2009 243 268 1 687 30 June 2010 32 404 5 907 30 June 2011 33 534 963 30 June 2012 33 355 1 878

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 37 FINANCIAL INSTRUMENTS BY CATEGORY

Loans and Available- receivables for-sale Total

Group R’000 2012 FINANCIAL ASSETS AS PER STATEMENT OF FINANCIAL POSITION Loans and receivables 19 903 19 903 Instalment sales 935 581 935 581 Trade receivables 1 205 979 1 205 979 Other receivables excluding prepayments and taxes receivable 339 839 339 839 Amounts owing by joint ventures 22 818 22 818 Cash and cash equivalents 7 939 333 7 939 333 93 10 463 453 — 10 463 453

R'000 2011 FINANCIAL ASSETS AS PER STATEMENT OF FINANCIAL POSITION Available-for-sale investments 59 656 59 656 Loans and receivables 50 534 50 534 Instalment sales 798 243 798 243 Trade receivables 881 100 881 100 Other receivables excluding prepayments and taxes receivable 353 932 353 932 Amounts owing by joint ventures 16 805 16 805 Cash and cash equivalents 1 961 551 1 961 551 4 062 165 59 656 4 121 821

Company R'000 2012 FINANCIAL ASSETS AS PER STATEMENT OF FINANCIAL POSITION Amounts owing by subsidiaries 74 237 74 237 Other receivables excluding prepayments and taxes receivable 15 327 15 327 Cash and cash equivalents 3 387 853 3 387 853 3 477 417 — 3 477 417

R'000 2011 FINANCIAL ASSETS AS PER STATEMENT OF FINANCIAL POSITION Amounts owing by subsidiaries 10 774 10 774 Cash and cash equivalents 603 555 603 555 614 329 — 614 329

The nominal value less estimated credit adjustments of trade and other receivables are assumed to approximate their fair values.

The book value of all other financial assets approximate the fair values thereof.

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 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)

Liabilities at fair Financial value through liabilities profit and loss Total

Group R'000 2012 FINANCIAL LIABILITIES AS PER STATEMENT OF FINANCIAL POSITION Borrowings 4 035 434 4 035 434 Reinstatement provision 139 615 139 615 Trade payables 8 163 845 8 163 845 Other payables and accruals excluding taxes payable and employee benefit accruals 2 927 422 2 927 422 94 Amounts owing to joint ventures 7 665 7 665 Derivative financial instruments 231 231 Bank overdrafts 22 858 22 858 Shareholders for dividends 4 955 4 955 15 301 794 231 15 302 025

R'000 2011 FINANCIAL LIABILITIES AS PER STATEMENT OF FINANCIAL POSITION Borrowings 49 755 49 755 Reinstatement provision 137 240 137 240 Trade payables 6 303 789 6 303 789 Other payables and accruals excluding taxes payable and employee benefit accruals 2 254 512 2 254 512 Amounts owing to joint ventures 3 917 3 917 Derivative financial instruments 3 606 3 606 Bank overdrafts 2 042 100 2 042 100 Shareholders for dividends 4 851 4 851 10 796 164 3 606 10 799 770

Company R'000 2012 FINANCIAL LIABILITIES AS PER STATEMENT OF FINANCIAL POSITION Borrowings 2 450 2 450 Other payables and accruals excluding taxes payable and employee benefit accruals 24 777 24 777 Shareholders for dividends 3 849 3 849 31 076 — 31 076

R'000 2011 FINANCIAL LIABILITIES AS PER STATEMENT OF FINANCIAL POSITION Borrowings 2 450 2 450 Other payables and accruals excluding taxes payable and employee benefit accruals 966 966 Shareholders for dividends 4 016 4 016 7 432 — 7 432

The nominal value less estimated credit adjustments of trade and other payables are assumed to approximate their fair values.

The fair value of the liability component of the convertible bonds included in borrowings amounted to R4,1 billion at the statement of financial position date. The fair value is calculated using cash flows discounted at a rate based on the borrowings rate of 8.5%.

The book value of all other financial liabilities approximate the fair values thereof.

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 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 signifi- cance of the inputs used in determining the measurement. The hierarchy is as follows:

Level 1 – Measurements in whole or in part are done by reference to unadjusted, quoted prices in an active market for identical assets and liabilities. Quoted prices are readily available from an exchange, dealer, broker, industry group, 95 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 depart- ment under policies approved by the Board of Directors. The treasury department identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange rate risk, interest rate risk, credit risk, use of derivative financial instruments and investing excess liquidity.

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

COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 R’000

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 96 exchange rate contracts for all cumulative foreign commit- ments of three months or more. Forward foreign exchange rate contracts are not used for speculative purpose. These instru- ments are not designated as hedging instruments for purposes of accounting.

Currency exposure arising from the net monetary assets in individual countries, held in currencies other than the functional currency of the Group, are managed primarily through convert- ing cash and cash equivalents not required for operational cash flows to US dollar. The US dollar is the preferred currency due to its history of stability, liquidity and availability in most markets.

Material concentrations of currency risk exists within the Group’s cash and cash equivalents. The net cash and cash equivalents are denominated in the following currencies:

603 555 3 387 853 South African rand 6 886 082 (603 468) — — USA dollar 426 892 148 131 — — Zambian kwacha 65 845 52 476 — — Malawi kwacha 77 622 62 935 — — Angolan kwanza 82 872 51 358 — — Botswana pula 7 290 24 296 — — Mauritian rupee 4 443 17 973 — — Nigerian naira 36 787 7 306 — — Namibian dollar 114 207 56 859 — — Swaziland emilangeni 91 568 30 241 — — Lesotho maluti 45 227 11 098 — — Mozambique metical 39 159 34 109 — — Other currencies 38 481 26 137 603 555 3 387 853 7 916 475 (80 549)

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 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 97 what the increase/decrease in profit for the year would have been if the various individual currencies strengthened or weakened against the ZAR and the USD. At 30 June 2012 the total possible decrease in Group post-tax profit, calculated for all possible currency movements, was R47,791,217 with the ZAR/USD exchange rate (with an expected 0.8% decline) contributing R41,835,011 to this number. At 30 June 2011 the total possible decrease in Group post-tax profit, calculated for all possible currency movements, was R339,045 with the ZAR/ USD exchange rate (with an expected 8.5% decline) contribut- ing R7,536,798 to this number. These changes had no material effect on the Group’s equity.

The amounts were calculated with reference to the financial instruments, exposed to currency risk at the reporting date and does not reflect the Group’s exposure throughout the reporting period as these balances may vary significantly due to the self funding nature of the Group’s required working capital and cyclical nature of cash received from sale of merchandise and payment to trade and other payables. The possible currency movements were determined based on management’s best estimates taking into account prevailing economic and market conditions and future expectations.

The Group has a number of investments in foreign subsidiaries, whose net assets are exposed to foreign currency translation risk. Although not subject to market risk, the following constitut- ed significant concentrations of net monetary assets/(liabilities), including short-term surplus funds, in currencies other than the reporting currency as at 30 June, subject to translation risk.

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

COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 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

Rand Equivalent 98 Country Foreign currency R’000 R’000 Angola Kwanza (160 799) 176 659 Botswana Pula (9 732) (13 355) DRC Congolese Francs (3 376) (2 393) Egypt Egyptian pound 854 402 Europe Euro 1 058 (40) Ghana Cedi (11 372) 9 799 Great Britain British Pound — 115 India Rupee 1 444 (2 051) Madagascar Ariary (14 989) 8 824 Malawi Kwacha 55 402 (40 198) Mauritius Mauritian rupee (13 130) (3 227) Mozambique Metical 42 707 (9 101) Nigeria Naira (61 162) 30 733 Tanzania Shilling (6 087) 8 535 Uganda Shilling (12 015) 4 404 USA Dollar 380 989 (153 561) Zambia Kwacha (113 952) 79 924

b) Cash flow and fair value interest rate 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 COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 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 99 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 invest- ments.

Funds are only invested with South African financial institutions with a minimum Moody’s short-term credit rating of P-2 and a minimum Moody’s long-term rating of Baa2. For financial institutions outside South Africa the required minimum Moody’s short-term and long-term credit ratings are P-1 and Aa3 respectively. Due to the Group’s international operational requirements it is forced to transact with financial institutions in certain countries where independent internationally accredited credit ratings are not available. In these instances the Group’s exposure to credit risk at each of these financial institutions are evaluated by management on a case by case basis. Cash bal- ances deposited with these financial institutions are kept to an operational minimum and are transferred, subject to exchange control regulations and available suitable foreign currency, to financial institutions with acceptable credit ratings. The Group has policies that limit the amount of credit exposure to any one financial institution.

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

COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 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 100 services on credit are made to customers with an appropriate credit history. These policies include reviewing the Group’s own credit history with the customer, verifying the credit history with an external credit bureau, as well as a formalised application process where the creditworthiness of the customer is assessed. The Group also obtains security from its franchisees.

Credit risk exposure resulting from financial guarantee liabilities relating to trading partners are evaluated by management on a monthly basis taking into consideration the credit rating of the underlying parties as well as their financial position. Financial guarantees are kept to an operational minimum and reassessed regularly.

For exposure to credit risk on other monetary items refer to the following: – Loans and receivables: note 8 – Trade and other receivables: note 13 – Trade and other payables: note 20

The table below shows the cash invested at the statement of financial position date at financial institutions grouped per Moody’s short-term credit rating of the financial institutions.

Rating 603 555 3 387 853 P-1 6 993 720 1 709 014 — — P-2 298 227 41 037 — — No rating available 128 065 154 661 — — Cash on hand and in transit 519 321 56 839 603 555 3 387 853 Total cash and cash equivalents 7 939 333 1 961 551

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 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. 101

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.

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

COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 R’000

39 FINANCIAL RISK MANAGEMENT (CONTINUED) 39.2 Insurance risk (continued) Underwriting risk is the risk that the Group’s actual exposure to short-term risks in respect of policy-holding benefits will exceed prudent estimates. Where appropriate, the above risks are managed by senior management and directors.

Within the insurance process, concentration risk may arise where a particular event or series of events could impact 102 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 stake- holders and to maintain an optimal capital structure to reduce the cost of capital. Total capital is considered to be equity as shown in the statement of financial position.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The gearing ratio is calculated as interest- bearing borrowings divided by equity and was 31.51% (2011: 0.70%) on the statement of financial position date. The Group converted part of it’s short term borrowings into longer term borrowings during the year under review to match the nature and terms of borrowings with the expenditure the funds are intended for.

The Group is currently maintaining a two times dividend cover based on headline earnings per share.

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 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 169 617 142 869 Post-employment benefits 13 300 16 021 Share-based payments 253 974 188 521 Directors’ fees 1 227 845 — — 438 118 348 256

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

COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 R’000

41 RELATED-PARTY INFORMATION (CONTINUED) During the year key management have purchased goods at the Group’s usual prices less a 15% discount. Discount ranging from 5% to 15% is available to all permanent full-time and flexi- time employees.

During the financial year under review, in the ordinary course of business, certain Group companies purchased certain products and services from certain entities, in which directors 104 JW Basson, CH Wiese, EL Nel and JA Louw, or their direct family members, have a significant influence. These purchases were concluded at what management believe to be market- related prices and are insignificant in terms of the Group’s total operations for the year.

These purchases and related balances were as follows: Purchase of merchandise 229 384 80 784 Utilisation of services 6 872 573 Year-end balances 5 198 4 070

The Group has a 50% interest in the Hungry Lion joint venture (refer note 42). The other 50% is indirectly held by alternate director JAL Basson.

The following transactions took place between the Hungry Lion joint venture and the Group during the year under review:

Administration fees paid to the Group 4 388 3 709 Rent paid to the Group 1 906 2 000 Interest paid to the Group 558 1 930 Interest paid to the joint venture 414 460

The year-end balances relating to the transactions with the joint venture are disclosed in notes 13 and 20.

The Company received the following from its subsidiary, Shoprite Checkers (Pty) Ltd: 1 305 1 382 Annual administration fee — 12 955 Interest

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 COMPANY GROUP June June June June 2011 2012 2012 2011 R’000 R’000 R’000 R’000

42 JOINT VENTURES The Group holds directly the following interests in joint ventures:

Hungry Lion Fast Foods (Pty) Ltd 50% 50% Hungry Lion Mauritius Ltd 50% 50%

The consolidated results include the following amounts relating to the Group’s interest in joint ventures. 105 Statement of comprehensive income Sale of merchandise 262 264 221 290

Profit before income tax 8 610 13 557 Income tax expense (5 574) (1 015) Profit for the year 3 036 12 542

Statement of financial position Non-current assets 49 408 39 538 Current assets 22 890 19 947 Current liabilities 18 405 13 873

Statement of cash flows Net cash flow from operating activities 23 057 729 Net cash flow from investing activities (22 668) (13 243) Net cash flow from financing activities 2 265 (19 613)

Capital commitments 756 2 065

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Interest in Subsidiaries – Annexure A

Issued ordinary and preference share Percentage Country of capital and shares held incorporation premium by Group Investment in shares Amount owing by/(to) June 2012 June 2011 June 2012 June 2011 R’000 % R’000 R’000 R’000 R’000

DIRECT SUBSIDIARIES OK Bazaars (1998) (Pty) Ltd South Africa 2 700 100 — — — — Shoprite Checkers (Pty) Ltd South Africa 1 128 908 100 174 431 174 431 71 486 7 559 Shoprite Investments Ltd South Africa 20 000 100 20 000 150 — (150) Shoprite International Ltd Mauritius 2 074 172 100 2 074 172 1 443 013 — — 106 Shoprite Insurance Company Ltd South Africa 20 230 100 20 230 20 230 — — Shoprite Checkers Properties Ltd South Africa 26 196 100 16 679 16 679 3 365 3 365 2 305 512 1 654 503 74 851 10 774

INDIRECT SUBSIDIARIES Africa Supermarkets Ltd* Zambia — 100 (614) Checkers Chatsworth Ltd South Africa 2 000 48 Computicket (Pty) Ltd South Africa 69 133 100 Megasave Trading (Pvt) Ltd* India 118 383 100 Mercado Fresco de Angola Lda* Angola 342 100 Medirite (Pty) Ltd South Africa — 100 OK Bazaars (Lesotho) (Pty) Ltd* Lesotho 300 50 OK Bazaars (Namibia) Ltd* Namibia 500 100 OK Bazaars (Swaziland) (Pty) Ltd* Swaziland 200 100 OK Bazaars (Venda) Ltd South Africa 2 400 50 Propco Mozambique Lda* Mozambique 432 100 Retail Holdings Botswana (Pty) Ltd* Botswana 46 648 100 Retail Supermarkets Nigeria Ltd* Nigeria 522 100 Sentra Namibia Ltd* Namibia 5 880 100 Shophold (Mauritius) Ltd* Mauritius 189 116 100 Shoprite Angola Imobiliaria Lda* Angola 342 100 Shoprite Checkers Tanzania Ltd* Tanzania 258 621 100 Shoprite Checkers Uganda Ltd* Uganda 41 612 100 Shoprite Egypt for Internal Trade SAE* Egypt 40 424 100 Shoprite Ghana (Pty) Ltd* Ghana 31 417 100 Shoprite Lesotho (Pty) Ltd* Lesotho 1 100 Shoprite Madagascar S.A.* Madagascar 128 288 100 Shoprite (Mauritius) Ltd* Mauritius 132 869 100 Shoprite Namibia (Pty) Ltd* Namibia — 100 Shoprite RDC SPRL* DRC 81 719 100 Shoprite Supermercados Lda* Angola 342 100 Shoprite Too (Pty) Ltd* Tanzania 1 870 100 Shoprite Trading Ltd* Malawi 1 100 2 305 512 1 654 503 74 237 10 774 *Converted at historical exchange rates

NOTE: General information in respect of subsidiaries is set out in respect of only those subsidiaries of which the financial position or results are material for a proper appreciation of the affairs of the Group. A full list of subsidiaries is available on request.

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Shareholder Analysis Shoprite Holdings Ltd and its Subsidiaries as at June 2012

SHAREHOLDER SPREAD No of Shareholders % No of Shares % 1 – 1,000 shares 11 135 74.16 3 361 750 0.59 1,001 – 10,000 shares 2 963 19.73 9 300 483 1.63 10,001 – 100,000 shares 677 4.51 21 749 793 3.81 100,001 – 1,000,000 shares 179 1.19 59 248 987 10.38 Over 1,000,001 shares 61 0.41 476 918 447 83.58 Totals 15 015 100.00 570 579 460 100.00

DISTRIBUTION OF SHAREHOLDERS No of Shareholders % No of Shares % Banks 201 1.34 263 149 232 46.12 Brokers 41 0.27 4 902 255 0.86 Close Corporations 148 0.99 201 020 0.04 107 Endowment Funds 83 0.55 577 757 0.10 Individuals 11 696 77.90 18 216 625 3.19 Insurance Companies 44 0.29 8 198 753 1.44 Investment Companies 25 0.17 4 176 037 0.73 Medical Aid Schemes 4 0.03 38 770 0.01 Mutual Funds 238 1.59 30 404 825 5.33 Nominees & Trusts 1 958 13.04 47 024 817 8.24 Other Corporations 88 0.59 130 873 0.02 Own Holdings 1 0.01 35 436 472 6.21 Private Companies 307 2.04 61 511 187 10.78 Public Companies 16 0.11 349 977 0.06 Retirement Funds 165 1.10 96 260 860 16.87 Totals 15 015 100.00 570 579 460 100.00

PUBLIC / NON – PUBLIC SHAREHOLDERS No of Shareholders % No of Shares % Non – Public Shareholders 45 0.30 144 579 324 25.33 Directors of the company 44 0.29 109 142 852 19.13 Own Holdings 1 0.01 35 436 472 6.21

Public Shareholders 14 970 99.70 426 000 136 74.66 Totals 15 015 100.00 570 579 460 100.00

BENEFICIAL SHAREHOLDERS HOLDING 1% OR MORE No of Shares % Wiese, CH 95 649 698 16.76 Government Employees Pension Fund 76 756 999 13.45 Capital Group 64 064 926 11.23 Shoprite Checkers (Pty) Ltd 35 436 472 6.21 Lazard 23 706 352 4.15 JPMorgan 13 681 498 2.40 Vanguard 11 211 401 1.96 BlackRock 10 822 029 1.90 Basson, JW 10 071 652 1.77 First State Investments 9 875 526 1.73 Fidelity 9 426 727 1.65 T. Rowe Price 7 843 553 1.37 Namibian Government Institutions Pension Fund 6 935 208 1.22 Totals 375 482 041 65.81

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Shoprite Holdings Limited (Incorporated in the Republic of South Africa) Notice to Shareholders: (Registration number 1936/007721/06) JSE share code: SHP NSX share code: SRH Annual General Meeting (AGM) LUSE share code: SHOPRITE ISIN: ZAE000012084 Shoprite Holdings Ltd and its Subsidiaries as at June 2012 (“Shoprite Holdings” or “the Company”)

1. NOTICE OF MEETING person to participate and vote has been reasonably verified. Notice is hereby given that the AGM of Shoprite Holdings Suitable forms of identification will include a valid identifica- will be held at the Company’s registered office, corner tion document, driver’s license or passport. William Dabs and Old Paarl Roads, Brackenfell, South Africa on Monday, 29 October 2012 at 09:15 (South African time). 3.6 Should any shareholder, or a representative proxy from a shareholder, wish to participate in the AGM by way of 2. MEMORANDUM OF INCORPORATION electronic participation, that shareholder should make an The Companies Act, Nr 71 of 2008 (“the Companies Act”) application in writing (including details on how the share- came into effect on 1 May 2011 (“the Effective Date”). holder or its representative) to participate to the transfer From the Effective Date the Company’s Memorandum of secretaries or company secretary at their addresses listed Association and Articles of Association became known as below, to be received by them at least seven (7) business its Memorandum of Incorporation (“MOI”). In this notice of days before the AGM, to enable the transfer secretaries to annual general meeting, the term MOI is used to refer to arrange for the shareholder or its representative or proxy, the Company’s Memorandum of Association and Articles of to provide reasonably satisfactorily identification to the 108 Association. transfer secretaries for purposes of section 63(1) of the Companies Act and to enable the transfer secretaries to 3. WHO MAY ATTEND AND VOTE? provide details on how to access the AGM by way of 3.1 If you hold dematerialised shares which are registered in electronic participation. your name or if you are the registered holder of certificated shares: 3.7 Votes at the AGM will be conducted by way of a poll and – You may attend the annual general meeting in person; not on a show of hands. – Alternatively, you may appoint a proxy to represent you at the AGM and to attend, participate in, and speak and 3.8 If you are in any doubt as to what action you should take vote at the AGM in your place by completing the arising from the following resolutions, please consult your attached form of proxy in accordance with the instruc- stockbroker, banker, attorney, accountant or other profes- tions it contains and returning it to the company secre- sional adviser immediately. tary or transfer secretaries at their addresses set out below to be received not later than 09:15 (SA time) on 4. INTEGRATED REPORT Friday 26 October 2012. A proxy need not be a share- A copy of the Company’s Integrated Report for the year holder of the Company. ended 30 June 2012 and the reports of the directors and independent auditors are delivered herewith. 3.2 If you hold dematerialised shares which are not registered in your name and: 5. PURPOSE OF MEETING – wish to attend the annual general meeting, you must The purpose of this meeting is to present the: obtain the necessary letter of authority from your CSDP – directors report to the shareholders; or broker; or – summarised audited financial statements to the year – do not wish to attend the annual general meeting, but ended 30 June 2012; would like your vote to be recorded at the meeting, you – reports of the audit and risk as well as the social and should contact your CSDP or broker and furnish them ethics committees; and with your voting instructions, you must not complete the attached form of proxy. to consider and, if deemed fit, to pass, with or without modification, the resolutions set out below. 3.3 The record date for purposes of determining which share- holders are entitled to receive this notice is determined in The following resolutions will be considered at the meeting, terms of section 59(1)(a) of the Companies Act being 26 and, if deemed fit, passed with or without modification: September 2012. 5.1 Ordinary Resolution Number 1: 3.4 The date on which shareholders must be recorded as such Annual Financial Statements in the register maintained by the transfer secretaries of the “Resolved that the summarised annual financial statements Company for purposes of being entitled to attend and vote of the Company and the Group for the year ended 30 June at this meeting is determined in terms of section 59(1)(b) of 2012 circulated with this notice, including the reports of the the Companies Act being Friday,19 October 2012 (“Voting directors and independent auditors be and are hereby Record Date) approved.”

3.5 In terms of section 63(1) of the Companies Act, any person For ordinary resolution number 1 to be approved by share- attending or participating in the AGM must present reason- holders it must be supported by more than 50% of the ably satisfactory identification and the chairperson of the voting rights exercised on the resolution by shareholders meeting must be reasonably satisfied that the right of any present or represented by proxy at this meeting.

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 5.2 Ordinary Resolution Number 2: 5.5 Ordinary Resolution Number 5: Re-Appointment Of Auditors Re-Election of Mr AE Karp “Resolved that PricewaterhouseCoopers Inc. (PwC) be “Resolved that Mr AE Karp who is required to retire as re-elected as independent registered auditors of the director of the Company at this AGM and who is eligible for Company for the period until the next annual general re-election and available, is hereby reappointed as director meeting of the Company (noting that Mr A Wentzel is the with immediate effect.” individual registered auditor of PwC who will undertake the audit in respect of the financial year ending 30 June 2013) Age: 53 as recommended by the Company’s Audit and Risk First Appointed: 2005 Committee.” Other directorships: Mr Karp serves as a director on the board of Shoprite Checkers (Pty) Ltd and various other For ordinary resolution number 2 to be approved by share- Shoprite Holdings subsidiaries. holders it must be supported by more than 50% of the voting rights exercised on the resolution by shareholders For ordinary resolution number 5 to be approved by share- present or represented by proxy at this meeting. holders it must be supported by more than 50% of the 109 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 5.6 Ordinary Resolution Number 6: “Resolved that Mr JG Rademeyer, who is required to retire Re-Election of Mr JJ Fouché as director of the Company at this AGM and who is eligible “Resolved that Mr JJ Fouché, who is required to retire as a and available for re-election, is hereby reappointed as director of the Company at this AGM and who is eligible for director with immediate effect.” re-election and available, is hereby reappointed as director with immediate effect.” Age: 62 First Appointed: 2002 Age: 64 Educational qualifications: BCom CTA CA(SA) First Appointed: 1991 Other directorships: None. Educational qualifications: BCom LLB Other directorships: Director of Pepkor Holdings (Pty) Ltd Mr Rademeyer is the Lead Independent director and also serves as the Chairman of the Audit and Risk Committee. Mr Fouché served as a director of Shoprite Holdings and member of the Audit and Risk, Nominations and For ordinary resolution number 3 to be approved by share- Remuneration Committees from 1991 – 2008. holders it must be supported by more than 50% of the voting rights exercised on the resolution by shareholders For ordinary resolution number 6 to be approved by share- present or represented by proxy at this meeting. holders it must be supported by more than 50% of the voting rights exercised on the resolution by shareholders 5.4 Ordinary Resolution Number 4: present or represented by proxy at this meeting. Re-Election of Mr EL Nel “Resolved that Mr EL Nel, who is required to retire as 5.7 Ordinary Resolution Number 7: director of the Company at this AGM and who is eligible Re-Election of Mr JA Rock and available for re-election, is hereby reappointed as “Resolved that Mr JA Rock, who is required to retire as a director with immediate effect.” director of the Company at this AGM and who is eligible for re-election and available, is hereby reappointed as director Age: 63 with immediate effect.” First Appointed: 2005 Educational qualifications: BCom CTA CA(SA) Age: 42 Other directorships: Mr Nel serves as a director on the First Appointed: 2012 board of Shoprite Checkers (Pty) Ltd and various other Educational qualifications: BA(Hons) MA ACA Shoprite Holdings subsidiaries. Other directorships: None

For ordinary resolution number 4 to be approved by share- For ordinary resolution number 7 to be approved by share- holders it must be supported by more than 50% of the holders it must be supported by more than 50% of the voting rights exercised on the resolution by shareholders voting rights exercised on the resolution by shareholders present or represented by proxy at this meeting. present or represented by proxy at this meeting.

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Notice to Shareholders (continued) Shoprite Holdings Ltd and its Subsidiaries as at June 2012

5.8 Ordinary Resolution Number 8: 5.11 Ordinary Resolution Number 11: Re-Election of Dr ATM Mokgokong Appointment of Mr JF Malherbe as Member of “Resolved that Dr ATM Mokgokong, who is required to The Shoprite Holdings Audit Committee retire as director of the Company at this AGM and who is “Resolved that Mr JF Malherbe be elected as member of eligible for re-election and available, is hereby reappointed the Shoprite Holdings Audit and Risk Committee with as director with immediate effect.” immediate effect in terms of section 94(2) of the Companies Act, 2008.” Age: 54 First Appointed: 2012 Age: 83 Educational qualifications: BSc MB ChB Doctorate First Appointed to Audit Committee: 2007 Commerce (Honoris Causa) Educational qualifications: BCom LLB Directorship: Afrocentric Investment Corporation Limited, Jasco Electronics Limited, Medscheme Limited, Rebosis For ordinary resolution number 11 to be approved by share- Property Fund and CIH (Pty) Ltd. holders it must be supported by more than 50% of the 110 voting rights exercised on the resolution by shareholders For ordinary resolution number 8 to be approved by share- present or represented by proxy at this meeting holders it must be supported by more than 50% of the voting rights exercised on the resolution by shareholders 5.12 Ordinary Resolution Number 12: General present or represented by proxy at this meeting. Authority Over Unissued Ordinary Shares “Resolved that 28,5 million (approximately 5% of the 5.9 Ordinary Resolution Number 9: Appointment of issued ordinary share capital that includes treasury shares) Mr JG Rademeyer as Chairperson and Member of the authorised but unissued ordinary shares in the capital of The Shoprite Holdings Audit Committee of the Company be and are hereby placed under the control “Subject to the re-election of Mr Rademeyer as a director and authority of the directors of the Company until the next pursuant to ordinary resolution 3, it is resolved that Mr JG annual general meeting and that the directors of the Rademeyer be elected as Chairperson and member of the Company be and are hereby authorised and empowered to, Shoprite Holdings Audit and Risk Committee with imme- without first offering those shares to shareholders pro rata diate effect in terms of section 94(2) of the Companies Act to their shareholding, allot, issue and otherwise dispose of of 2008.” such ordinary shares to a person or persons on such terms and conditions and at such times as the directors of the Age: 62 Company may from time to time and in their discretion First appointed to Audit Committee: 2005 deem fit, subject to the provisions of the Companies Act, Educational qualifications: BCom CTA CA(SA) the MOI of the Company and JSE Listings Requirements, when applicable, and any other exchange on which the For ordinary resolution number 9 to be approved by share- shares of the Company may be quoted or listed from time holders it must be supported by more than 50% of the to time.” voting rights exercised on the resolution by shareholders For ordinary resolution number 12 to be approved by present or represented by proxy at this meeting. shareholders it must be supported by more than 50% of the voting rights exercised on the resolution by share- 5.10 Ordinary Resolution Number 10: holders present or represented by proxy at this meeting. Appointment of Mr JA Louw as Member of the Shoprite Holdings Audit Committee 5.13 Ordinary Resolution Number 13: “Resolved that Mr JA Louw be elected as member of the General Authority to Issue Shares for Cash Shoprite Holdings Audit and Risk Committee with imme- “Resolved that the directors of the Company be and are diate effect in terms of section 94(2) of the Companies Act, hereby authorised by way of a general authority, to issue all 2008.” or any of the authorised, but unissued shares in the capital of the Company, for cash, as and when they in their discre- Age: 68 tion deem fit, subject to the Companies Act, the MOI of the First appointed to Audit Committee: 2011 Company, the JSE Listings Requirements and any other Educational qualifications: BSc Hons B(B&A) Hons exchange on which the shares of the Company may be quoted from time to time, when applicable, subject to the For ordinary resolution number 10 to be approved by share- following limitations, namely that: holders it must be supported by more than 50% of the – the equity securities which are the subject of the issue voting rights exercised on the resolution by shareholders for cash must be of a class already in issue, or where present or represented by proxy at this meeting this is not the case, must be limited to such securities or rights that are convertible into a class already in issue; – any such issue will only be made to “public share- holders” as defined in the JSE Listings Requirements

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 and not related parties, unless the JSE otherwise 5.14 Ordinary Resolution 14: General Authority to agrees, but may be made to such “public shareholders” Directors and/or Secretary and in such quantities that the directors in their discre- “Resolved that any one of the directors of Shoprite tion may deem fit; Holdings or the company secretary be and are hereby – the number of ordinary shares issued for cash shall not authorised to do all things, perform all acts and to sign and in the aggregate in any 1 (one) financial year, exceed 5% execute all documentation necessary to implement the (five percent) of the Company’s issued ordinary shares ordinary and special resolutions adopted at the AGM” on the first day of that financial year. The ordinary shares For ordinary resolution number 14 to be approved by (“Conversion Shares’’) to be issued pursuant to the shareholders it must be supported by more than 50% of approval by shareholders on 28 June 2012 on conver- the voting rights exercised on the resolution by share- sion of the Convertible Bonds issued by Shoprite holders present or represented by proxy at this meeting. Investments Limited will not be taken into account to calculate whether the aforesaid threshold has been 5.15 Ordinary Resolution 15: exceeded and the Company will accordingly be entitled Approval of Executive Share Plan to issue the Conversion Shares in cash in addition to the “Resolved that that the rules of the Shoprite Holdings 111 ordinary shares that may be issued pursuant to this Executive Share Plan (“the Plan”), which rules have been approval. The number of ordinary shares which may be initialled by the company secretary for identification issued shall be based on the number of ordinary shares purposes and the implementation of the Plan be and are in issue, added to those that may be issued in future hereby approved.” (arising from the conversion of options/convertibles) at The background and salient features of the Plan is the date of such application, less any ordinary shares attached to this Notice as Annexure “A”. The rules of the issued, or to be issued in future arising from options/ Plan initialled by the company secretary will be available for convertible ordinary shares issued during the current inspection at the registered office of Shoprite Holdings, cnr financial year, plus any ordinary shares to be issued Old Paarl and William Dabs Roads, Brackenfell, Cape Town pursuant to a rights issue which has been announced, is during business hours from Thursday 27 September 2012 irrevocable and fully underwritten, or an acquisition to Friday 26 October 2012. which has had final terms announced. The above calcu- For ordinary resolution number 15 to be approved by lation shall exclude the Conversion Shares; shareholders it must in terms of JSE Listings Requirements – this authority be valid until the Company’s next annual be supported by at least 75% of the voting rights exercised general meeting, provided that it shall not extend on the resolution by shareholders present or represented beyond 15 (fifteen) months from the date that this by proxy at this meeting. authority is given; – a paid press announcement will be published giving full 5.16 Resolution 16: Non-Binding Advisory Vote: details, including the impact on the net asset value and Endorsement of Remuneration Policy earnings per share, at the time of any issue, repre- “Resolved that, through a non-binding advisory vote, the senting on a cumulative basis within one (1) financial Company’s remuneration policy (excluding the remunera- year, 5% (five percent) or more of the number of shares tion of the non-executive directors and members of board in issue prior to the issue in terms of this authorisation; committees for their services as directors) as set out in the – in determining the price at which an issue of shares may Remuneration report in the integrated report, is endorsed.” be made in terms of this general authority, the For resolution number 16 to be approved by share- maximum discount permitted will be 10% (ten percent) holders it must be supported by more than 50% of the of the weighted average traded price on the JSE of voting rights exercised on the resolution by shareholders those shares measured over the 30 (thirty) business present or represented by proxy at this meeting. days prior to the date that the price of the issue is deter- mined or agreed by the directors of the Company.” 5.17 Special Resolution Number 1: Remuneration Payable to Non-Executive For ordinary resolution number 13 to be approved by share- Directors holders it must in terms of the JSE Listings Requirements “Resolved in terms of section 66(9) of the Companies Act , be supported by more than 75% of the voting rights exer- Nr 71 of 2008, as amended, that the annual remuneration of cised on the resolution by shareholders present or repre- the non-executive directors for the twelve months from sented by proxy at this meeting. 1 November 2011 – 31 October 2012 be approved as follows:

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Notice to Shareholders (continued) Shoprite Holdings Ltd and its Subsidiaries as at June 2012

Shoprite Holdings Board and Committee Fees – loan to, – guarantee of any obligation of, 2011/2012 2010/11 – suretyship in respect any obligation of, – indemnity undertakings in respect of obligations of, BOARD – the securing (in any form) of any debt or obligations of, Chairman of the Board R273 000 R218 000 or Lead Independent Director R142 000 R113 000 – payments to or for the benefit of, Non-Executive Director R129 000 R103 000 such a person or company or corporation, director, AUDIT COMMITTEE prescribed officer or member which the board of the Chairman R193 000 R154 000 Company may deem fit on the terms and conditions and for Member R96 000 R77 000 amounts that the board of the Company may determine on terms and conditions and for amounts that the board of the REMUNERATION COMMITTEE Company may determine. 112 Chairman R50 000 — For special resolution number 2 to be approved by Member R30 000 — shareholders it must be supported by at least 75% of the voting rights exercised on the resolution by shareholders NOMINATION COMMITTEE present or represented by proxy at this meeting. Chairman R50 000 — Member R30 000 — Reason for and effect of special resolution number 2 This special resolution will grant the Company’s directors the SOCIAL AND ETHICS COMMITTEE authority to authorise financial assistance in any of the forms Chairman R65 000 — described in the resolution to a director or prescribed officer of the Company (to be utilized as part of an incentive For special resolution number 1 to be approved by share- scheme, where applicable) or of a related or inter-related holders it must be supported by at least 75% of the voting company, or to a related or inter-related company or corpora- rights exercised on the resolution by shareholders present tion, (“any related or inter-related company or corporation’’ or represented by proxy at this meeting. has herein the same meaning as in section 45 of the Act and which meaning includes all the subsidiaries of the Company) Reason for and effect of special resolution number 1 to the Company or to a member of such a related or The reason for and effect for special resolution number 1 is inter-related corporation, or to a person related to any such to grant the Company the authority to pay remuneration to company, corporation, director, prescribed officer or member its directors for their services as directors for the period as contemplated in section 45 of the Companies Act. ending on 31 October 2012. Notice to the shareholders of the Company in terms of 5.18 Special Resolution 2: Financial Assistance to section 45(5) of the Companies Act, of a resolution Subsidiaries, Related and Inter-Related Entities adopted by the Board authorising the Company to provide Resolved in terms of section 45(3)(a)(ii) of the Companies such direct or indirect fi nancial assistance: Act, Act 71 of 2008, as amended, (“the Act’’), subject to – By the time that this notice of the AGM is delivered to compliance with the requirements of the Company’s shareholders, the board would have adopted a written Memorandum of Incorporation, the Act and the JSE board resolution (“the Section 45 Board Resolution”) Listings Requirements as presently constituted and authorising the Company to provide at any time during amended from time to time as a general approval, that the the period of two (2) years from the date the above board of the Company be authorised during a period of two special resolution number 2 is adopted, any direct or (2) years from the date of this special resolution to indirect financial assistance as contemplated in section authorise the Company to provide direct or indirect financial 45 of the Companies Act to any one or more related or assistance to a director or prescribed officer of the inter-related companies or corporations of the Company; Company or of a related or inter-related company, or to a – The Section 45 Board Resolution will only be subject to related or inter-related company or corporation, (“any and only effective to the extent that special resolution related or inter-related company or corporation’’ has herein number 2 is adopted by shareholders and the provision the same meaning as in section 45 of the Act and which of any such direct or indirect financial assistance by the meaning includes all the subsidiaries of the Company) to Company, pursuant to such resolution, will always be the Company or to a member of such a related or inter- subject to the board being satisfied that immediately related corporation, or to a person related to any such after providing such financial assistance, the Company company, corporation, director, prescribed officer or will satisfy the solvency and liquidity test as referred to member , in one or more of the following forms: 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

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 – The Company hereby provides notice of the Section 45 does not apply, this special resolution is required. Board resolution to shareholders of the Company. This special resolution will grant the Company the authority to provide financial assistance as contemplated by 5.19 Special Resolution Number 3: Financial section 44 of the Companies Act. Assistance for Subscription of Securities “Resolved that the Company be and is hereby authorised, 5.20 Special Resolution Number 4: as a general authority contemplated in section 44(3)(a)(ii) of General Approval to Repurchase Shares the Companies Act, Act 71 of 2008 (“the Companies Act’’) “Resolved that, the Company and/or any subsidiary of the to provide direct or indirect financial assistance by way of a Company be and are hereby authorised by way of a general loan, guarantee, the provision of security or otherwise of approval to acquire the issued ordinary shares of the the kind referred to in section 44 of the Companies Act to Company, upon such terms and conditions and in such any employee of the Company or of a subsidiary of the amounts as the directors of the Company may from time to Company or of a related or inter-related company (“related time determine, but subject to the Memorandum of or inter-related company or corporation’’ has herein the Incorporation of the Company, the provisions of the the same meaning as in section 44 of the Companies Act) to Companies Act, Act 71 of 2008, as amended, and the JSE 113 the Company, for the purpose of, or in connection with, the Listings Requirements and any other exchange on which subscription of any shares or other securities to be issued the shares of the Company may be quoted or listed from by the Company or for the purchase of any shares or other time to time, where applicable, and provided that: securities of the Company or for the purchase of any – the repurchase of securities will be effected through the convertible bonds issued by Shoprite Investments Limited main order book operated by the JSE trading system or for the subscription of those bonds by such employees, without any prior understanding or arrangement on the terms and conditions that the board of the Company between the Company and the counterparty, or other may deem fit.” manner approved by the JSE; For special resolution number 3 to be approved by – this general authority shall be valid until the Company’s shareholders it must be supported by at least 75% of the next annual general meeting, provided that it shall not voting rights exercised on the resolution by shareholders extend beyond 15 (fifteen) months from the date of present or represented by proxy at this meeting. passing of this special resolution; – in determining the price at which the Company’s ordi- Reason for and effect of special resolution number 3 nary shares are acquired by the Company or its subsidi- Subject to the approval of ordinary resolution 15, the new aries in terms of this general authority, the maximum Shoprite Holdings Executive Share Plan (“Plan”) will be premium at which such ordinary shares may be acquired introduced to replace the current share appreciation right will be 10% (ten percent) of the weighted average of the scheme that expired on 29 August 2012. The purpose of market price at which such ordinary shares are traded on the Plan is to provide selected senior executives of the the JSE, as determined over the 5 (five) trading days Group with the opportunity of receiving Shoprite Holdings immediately preceding the date of the repurchase of Ltd securities through the awarding of forfeitable shares. such ordinary shares by the Company; Forfeitable share awards comprise three (3) types of instru- – the number of ordinary shares acquired in the aggregate ments, namely Co-investment Shares, Performance Shares in any 1 (one) financial year do not exceed 5% (five and Retention Shares. percent) of the number of the Company’s issued Participants may for instance in terms of the Plan rules ordinary shares on the date that this special resolution is be required to purchase 6,5% convertible bonds issued by adopted; Shoprite Investments Limited from Shoprite Checkers (Pty) – prior to entering the market to proceed with the repur- Ltd and Co-investment Shares are then awarded to them chase, the Company’s sponsor has complied with its based on the value of Participant’s investment in this regard. responsibilities contained in Schedule 25 of the JSE A participant’s investment in the bonds will be financed by Listings Requirements; utilizing his own funds or by way of a loan from the – prior to entering the market to repurchase the Company or the subsidiary employer. Loans could also be Company’s securities, a board resolution to authorise made in terms of the Plan to provide financial assistance in the repurchase will have been passed in accordance respect of the acquisition of shares in terms of the Plan. with the requirements of section 46 of the Companies Loans to participants are interpreted as financial assistance Act, and stating that the Board has acknowledged that it for the subscription of or purchase of securities in terms of has applied the solvency and liquidity test as set out in section 44 of the Companies Act. Financial Assistance by section 4 of the Companies Act and has reasonably the Company (should it be granted) may fall within the concluded that the Company will satisfy the solvency exemption in section 44(3)(a)(i) of the Companies Act which and liquidity test immediately after completing the will mean that the Company may provide that financial assis- proposed repurchase; tance without the approval of a special resolution. However – the Company or its subsidiaries will not repurchase to ensure that the Board is properly authorized to provide securities during a prohibited period as defined in para- such financial assistance in cases where that exemption graph 3.67 of the JSE Listings Requirements, unless

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Notice to Shareholders (continued) Shoprite Holdings Ltd and its Subsidiaries as at June 2012

there is a repurchase programme in place where the best interest of the Company to extend such general dates and quantities of securities to be traded during the authority. relevant period are fixed (not subject to any variation) The proposed general authority would enable the and full details of the programme have been disclosed in Company or any subsidiary of the Company to repurchase an announcement on SENS prior to the commencement up to a maximum of 28,528,973 (twenty eight million five of the prohibited period; hundred and twenty eight thousand nine hundred and – when the Company has cumulatively repurchased 3% seventy three) ordinary shares of the Company, repre- (three percent) of the initial number of the relevant class senting 5% (five percent) of the issued ordinary share of securities, and for each 3% (three percent) in aggre- capital of Company as at 30 June 2012. gate of the initial number of that class acquired there- The reason for the passing of special resolution number after, an announcement will be made; and 4 is to authorise the Company and/or its subsidiaries by way – the Company only appoints one agent to effect any of a general authority from shareholders to repurchase repurchase(s) on its behalf.” ordinary shares issued by the Company. Once adopted this special resolution will permit the 114 For special resolution number 4 to be approved by share- Company or any of its subsidiaries, to repurchase such holders it must be supported by at least 75% of the voting ordinary shares in terms of the Companies Act, its MOI rights exercised on the resolution by shareholders present and the JSE Listings Requirements. or represented by proxy at this meeting Disclosures in Terms of Section 11.26 Statement by the Board of Directors of the JSE Listings Requirements The directors of the Company have no specific intention to The JSE Listings Requirements require the following effect the resolution, but will continually review the disclosures in respect of special resolution 4, some of Company’s position, having regard to prevailing circum- which are disclosed in the integrated report of which this stances and market conditions, in considering whether to notice forms part: repurchase its own shares. – Directors and management ...... pages 8 and 9 – Major shareholders of the Company ...... page 107 After having considered the effect of the repurchase of – Directors’ interests in securities ...... page 43 ordinary shares pursuant to this general authority, the direc- – Share capital of Company ...... pages 73 to 76 tors of the Company in terms of the relevant provisions of the Companies Act and the JSE Listings Requirements Material Change confirm that they will not undertake such purchase unless: Other than the facts and developments as referred to on – the Company and the Group are in a position to repay pages 28 to 29 of the integrated report, there have been no their debt in the ordinary course of business for the 12 material changes in the affairs or financial position of the (twelve) month period after the date of the notice of the Company and its subsidiaries since the date of signature of AGM; the audit report and the date of this notice. – the assets of the Company and the Group, being fairly valued in accordance with the accounting policies used Directors’ Responsibility Statement in the latest annual financial statements are, after the The directors, whose names are given on pages 8 to 9 of repurchase, in excess of the liabilities of the Company the integrated report, collectively and individually accept full and the Group for the 12 (twelve) month period after the responsibility for the accuracy of the information and certify date of the notice of the AGM; that to the best of their knowledge and belief there are no – the ordinary capital and reserves of the Company and facts that have been omitted which would make any the Group are adequate for the 12 (twelve) month period statement false or misleading and that all reasonable after the date of the notice of the AGM; enquiries to ascertain such facts have been made. – the available working capital is adequate to continue the operations of the Company and the Group for a period of Litigation Statement 12 (twelve) months after the date of the notice of the Save for the disclosure in the directors report on page 43 of AGM. the directors, whose names are given on pages 8 to 9 of the integrated report of which this notice forms part, are Reason for and effect of special resolution number 4 not aware of any legal or arbitration proceedings, including The JSE Listing Requirements 5.72 (c) and 5.76 require that proceedings that are pending or threatened, that may have the Company or any subsidiary of the Company may only or have had in the recent past, being at least the previous repurchase or purchase securities issued by the Company if 12 (twelve) months, a material effect on the Group’s approved by its shareholders by way of a special resolution. financial position. 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 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 115 amended, that came into operation on 1 May 2011 it became necessary to reconcile the existing Memorandum of Incorporation of the Company with the new Companies Act and schedule 10 of the JSE Listings Requirements. The effect of the adoption of special resolution number 5 will be that the existing Memorandum of Incorporation (comprising of a Memorandum of Association and Articles of Association) will be repealed and that the Memorandum of Incorporation annexed hereto as Annexure “B” will on filing thereof with the Companies and Intellectual Property Commission become the new Memorandum of Incorporation of the Company. The JSE has also approved the new Memorandum of Incorporation.

6. TRANSACTION OF OTHER BUSINESS

FOR SHOPRITE HOLDINGS LIMITED

PG Du Preez Company Secretary

27 September 2012

THE COMPANY SECRETARY Cnr William Dabs and Old Paarl Roads PO Box 215, Brackenfell, 7560 South Africa Facsimile: +27 (0) 21 980 4468 E-mail Adress: [email protected]

SOUTH AFRICAN TRANSFER SECRETARIES Computershare Investor Services (Pty) Ltd 70 Marshall Street, Johannesburg, 2001 PO Box 61051, Marshalltown, 2107 Facsimile: +27 (0) 11 688 5238

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Salient Features of the Shoprite Holdings Executive Share Plan (“The Plan”) – Annexure A

1. INTRODUCTION primarily be based on the Employee’s annual salary, grade, The Company currently has a share appreciation right performance, retention and attraction requirements and scheme (“the SAR”) in place. No Awards have been made market benchmarks. [LR14.1(f)] in terms of the SAR to Participants since October 2009. Historic awards made under the SAR will be allowed to 2.6 The Remuneration Committee will set appropriate Vesting continue to fruition. The Company intends to adopt the Plan Periods, Vesting Conditions and Performance Conditions, tabled to replace the SAR. The Plan will be used primarily as as relevant, for each Award. an incentive to Participants to deliver the Group’s business strategy over the long-term. It can also be used as a 2.7 The Rules of the Scheme will be flexible in order to allow retention mechanism and as a tool to attract prospective for Settlement in any of the following manners: Employees. Participants in the Plan will be provided with – By way of a market purchase of Shares; the opportunity to share in the success of the Group and – Use of treasury Shares; provide direct alignment between Participants and – Issue of Shares. shareholders’ interests. [LR 14.1(e)] 116 The exact method will however be determined by the 2. SALIENT FEATURES OF THE PLAN Remuneration Committee. 2.1 The Remuneration Committee may, in its discretion, call upon the employer subsidiaries to make recommendations 2.8 The maximum number of Shares which may at any one to it as to which of their respective Employees should be time be Allocated under the Plan shall not exceed incentivised, retained or to attract individuals by the making 15,000,000 (fifteen million) Shares, which represents of an Award of Forfeitable Shares. Eligible Employees approximately 3% (three per centum) of the number of include any person holding permanent salaried employment issued Shares as at the date of approval of the Plan by or office with any employer Subsidiary but excluded any shareholders. This limit will not be affected by Shares non-executive Director of Shoprite Holdings. [LR14.1(a)] purchased in the open market for settlement of this Plan. [LR14.1(b)] 2.2 Awards of Forfeitable Shares will be made on an ad hoc basis or on an annual basis, as and when the Remuneration 2.9 The maximum number of Shares which may be Allocated to Committee, in consultation with the chief executive officer an individual in respect of all unvested Awards may not of the Group, decides that there is a merit in making the exceed 3,750,070 (three million seven hundred and fifty Award to a particular Employee. When the chief executive thousand and seventy) Shares, which represents approxi- officer is eligible to receive an Award of Forfeitable Shares, mately 0.5% (comma five per centum) of the number of issued he will be excluded from the decision to make such an Shares as at date of approval of the Plan by shareholders. Award. [LR14.1(c)]

2.3 Awards which may be made in terms of the Plan consist 2.10 Shares Allocated under the Plan, which are not subse- of the following: quently Settled to an Employee as a result of the forfeiture – Ad-hoc Co-investment Share Awards based on the thereof, will be excluded in calculating the Company limit. value of the Investment made by an Employee in the Similarly, any Shares purchased in the market in Settlement Company where such Award value will be at the of the Plan will be excluded. [LR14.3(f)] Remuneration Committee’s discretion, to the maximum value of a one to one (1:1) ratio in relation to the 2.11 The Employee will give no consideration for the grant or Investment made; Settlement of an Award of Co-investment Shares, – Performance Share Awards to drive pre-determined Performance Shares or Retention Shares. [LR14.1(d)] Company Performance Conditions; and – Ad-hoc Retention Share Awards made to address 2.12 Employees terminating employment due to resignation or retention requirements. dismissal on grounds of misconduct, poor performance, dishonest behaviour or fraudulent conduct, dismissal based 2.4 Co-investment Awards will be subject to continued on operational requirements as contemplated in terms of employment (“Vesting Condition”) and a condition that the South African labour law and compulsory or early Investment should be held by the Participant for the Vesting Retirement will be classified as bad leavers and will forfeit Period (“Additional Vesting Condition”). Retention Awards all unvested Awards. [LR14.1(h)] will only be subject to the Vesting Condition. Performance Share Awards will be subject to Performance Conditions 2.13 Employees terminating employment due to death will be and the Vesting Condition. [LR14.1(f)] classified as good leavers and all Retention Share Awards will Vest on the Date of Termination of Employment. 2.5 The number of Forfeitable Shares subject to an Award Co-investment Share Awards, will also in the event of death made to an Employee, and the extent to which the Award Vest on the Date of Termination of Employment, but of Forfeitable Shares consist of Performance Shares, will subject to the fulfilment of the Additional Vesting Condition.

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 For Performance Shares, on death the portion which Vest of the Award not Vested will lapse. Where the Company will be determined based on the extent to which the undergoes a Change of Control, the terms may make Performance Condition has been satisfied and the number provision therefore that the Plan continue to operate as set of complete months served since Award Date to the Date out in the Rules or that Participants’ rights under the Plan is of Termination of Employment over the total number of replaced with awards in respect of shares in one or more months in the Vesting Period. [LR14.1(h)] other companies on a basis which is determined by an independent merchant bank or auditor to be fair and 2.14 Employees terminating employment due to ill-health, disa- reasonable to Participants. [LR14.1(g) and 14.3(a)] bility, injury will also be classified as good leavers and a portion of the Award will Vest on the Date of Termination of 2.16 In the event of a variation in Share capital such as a Employment. For Co-investment Shares and Retention Capitalisation Issue, subdivision of Shares, consolidation Shares the portion which will Vest will be determined based of Shares, liquidation etc. Participants shall continue to on the number of complete months served since the Award participate in the Plan. The Remuneration Committee may Date to the Date of Termination of Employment over the make such adjustment to the Award or take such other Total number of months in the Vesting Period. The Vesting action to place Participants in no worse a position than they 117 of Co-investment Shares will also be subject to the fulfil- were prior to the happening of the relevant event and to ment of the Additional Vesting Condition until the Date of provide that the fair value of the Award, immediately after Termination of Employment. For Performance Shares the the event, is materially the same as the fair value of the portion of Shares which will Vest will be determined based Award immediately before the event. The issue of Shares on the extent to which the Performance Condition has been as consideration for an acquisition, and the issue of Shares satisfied and the number of complete months served since or a vendor consideration placing will not be regarded as a the Award Date to the Date of Termination of Employment circumstance that requires any adjustment to Awards. over the total number of months in the Vesting Period. The Where the Remuneration Committee regards an adjust- remainder of the Award not Vested will lapse. [LR14.1(h)] ment as necessary, Auditors, acting as experts and not as arbitrators and whose decision shall be final and binding on 2.15 In the event of a Change of Control, a portion of the Award all persons affected thereby, shall confirm to the Company will Vest. This portion will reflect the number of months in writing that these are calculated on a non-prejudicial served since the Award Date to the Date of Termination of basis. The Auditors shall confirm in writing to the Employment over the total number of months in the Remuneration Committee whether those adjustments Vesting Period and the extent to which the Performance were calculated in accordance with the Rules of the Plan. Condition (if any) for Performance Shares has been satisfied Any adjustments made will be reported in the Company’s over the Performance Period or the Additional Vesting annual financial statements in the year during which the Condition has been met until Date of Termination of adjustment is made. [LR14.3(b), (c), (d) and (e)] Employment for the Co-investment Shares. The remainder

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Memorandum of Incorporation

This is the Memorandum of Incorporation (MOI) tabled and adopted by way of a Special Resolution in accordance with section 16(1)(c) of the Companies Act No 71 of 2008 at the Shareholders Meeting of the Company held on 29 October 2012 and has been initialled by the Company Secretary for purposes of identification.

Company Secretary

COMPANIES AND INTELLECTUAL PROPERTY COMMISSION

Republic of South Africa Memorandum of Incorporation of Shoprite Holdings Limited 118 (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 Interpretation ...... 120 2 Conflicts with The MOI ...... 122 3 Amendment of The MOI ...... 122 4 Rules ...... 122 PART B – STATUS AND POWERS OF THE COMPANY ...... 122 5 Status as Public Company ...... 122 6 Powers of The Company ...... 122 7 Limitation of Liability ...... 123 PART C – CAPITALISATION AND SECURITIES OF THE COMPANY ...... 123 8 Share Capital ...... 123 9 Rights of The Shares ...... 123 119 10 Variation of Share Capital ...... 125 11 Issue of Securities ...... 126 12 Commission ...... 127 13 Register and Certificates ...... 127 14 Transfer of Securities ...... 127 15 Capitalisation Shares ...... 128 16 Acquisition of Shares Issued by the Company ...... 128 17 Debt Instruments ...... 128 18 Beneficial Interests ...... 128 19 Joint Holders of Securities ...... 129 20 Legal Representatives ...... 129 PART D – SHAREHOLDERS RIGHTS AND PROCEEDINGS ...... 129 21 Shareholders Right to Information ...... 129 22 Single Shareholder's Authority to Act ...... 129 23 Proxy Representation ...... 130 24 Record Dates ...... 130 25 Shareholders Meetings ...... 131 26 Notice of Shareholders Meetings ...... 131 27 Conduct of Meetings ...... 131 28 Shareholder Meeting Quorum and Adjournment ...... 132 29 Chairperson of Shareholders Meetings ...... 132 30 Shareholders Resolutions ...... 133 31 Written Resolutions by Shareholders ...... 133 PART E – DIRECTORS POWERS AND PROCEEDINGS ...... 133 32 Authority of the Board of Directors ...... 133 33 Appointment of Directors ...... 133 34 Alternate Directors ...... 136 35 Board Committees ...... 136 36 Chairperson of The Board ...... 136 37 Directors Meetings ...... 137 38 Written Resolutions by Directors ...... 138 39 Executive Directors ...... 138 40 Payments to Directors ...... 138 41 Borrowing Powers ...... 139 42 Indemnification and Insurance for Directors ...... 139 PART F – GENERAL PROVISIONS ...... 141 43 Financial Statements and Access to Company Information ...... 141 44 Financial Assistance ...... 141 45 Distributions ...... 141 46 Notices ...... 142 47 Loss of Documents ...... 142 48 Odd-Lots ...... 142

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Memorandum of Incorporation (continued)

PART A – THE MOI AND RULES capital of the Company, having the rights, limitations and other terms contemplated in clause 9.2 of this MOI;

1 INTERPRETA TION 1.2.11 “Director” – a Director of the Company; In this Memorandum of Incorporation, clause headings are used for convenience only and shall not be used in 1.2.12 “Equity Securities” – equity securities as defined its interpretation and, unless the context clearly in the JSE Listing Requirements; indicates a contrary intention, – 1.2.13 “IFRS” – the International Financial Reporting 1.1 an expression that denotes – Standards adopted from time to time by the International Accounting Standards Board,, or its 1.1.1 any gender, includes the other genders; successor body, as adapted for use in the Republic from time to time by the Financial Reporting 120 1.1.2 a natural Person, includes an artificial or juristic Standards Council established in terms of Person and vice versa; section 203 of the Companies Act;

1.1.3 the singular, includes the plural and vice versa; 1.2.14 “JSE” – JSE Limited (registration number 2005/022939/06), a public Company duly incorpo- 1.2 the following expressions shall bear the meanings rated in accordance with the laws of the Republic, assigned to them below and cognate expressions shall licensed as an exchange under the Securities bear corresponding meanings, – Services Act;

1.2.1 “Auditors” – the Auditors of the Company 1.2.15 “JSE Listings Requirements” – the Listings appointed from time to time in accordance with the Requirements of the JSE and all other applicable Act; rules, regulations, requirements and rulings of the JSE. Any requirements of this MOI in relation to 1.2.2 “Board” – the board of Directors of the Company such JSE Listings Requirements shall only apply for from time to time; as long as Securities of the Company are listed on the JSE; 1.2.3 “Business Day” – any day other than a Saturday, Sunday or public holiday in the Republic; 1.2.16 “Legal Representative” – any Person who has submitted proof (which is satisfactory to the Board) 1.2.4 “Certificated Securities” – Securities evidenced of his appointment (and, to the extent required by by a certificate as contemplated in section 49(1); the Board, the continuation of that appointment) as – 1.2.5 “Central Securities Depository” – the Central Securities Depository as defined in section 1 of the 1.2.16.1 an executor of the estate of a deceased Securities Services Act; Shareholder, or a curator, guardian or trustee of a Shareholder whose estate has been seques- 1.2.6 “Commission” – the Companies and Intellectual trated or who is otherwise under any disability; Property Commission established by section 185 of the Companies Act; 1.2.16.2 the liquidator of any Shareholder that is a body corporate in the course of being wound-up; or 1.2.7 “Companies Act” – the Companies Act No 71 of 2008, as amended or re-enacted and for the time 1.2.16.3 the Business Rescue Practitioner of any being in force, including all schedules to such Act; Shareholder which is a Company undergoing Business Rescue proceedings; 1.2.8 “Company” – the Company defined as such on the front page of this MOI; 1.2.17 “Memorandum of Incorporation” or “MOI” – the memorandum of incorporation of the Company, 1.2.9 “CSDP” – a depository institution accepted by a being this document (and including any Schedules Central Securities Depository as a “participant” in hereto), as amended or replaced from time to time; terms of the exchange operated by the JSE in the Republic; 1.2.18 “Ordinary Share” – an ordinary share in the capital of the Company, with a par value of 113.4 cents 1.2.10 “Deferred Share” – a non-convertible, non-partici- each having the preferences, rights, limitations and pating, no par value deferred share in the share other terms contemplated in clause 9.1;

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 1.2.19 “Ordinary Shareholder” – a Shareholder who Uncertificated Securities Register referred to in holds an Ordinary Share; Section 50(3);

1.2.20 “Person” or “Entity” – includes any natural or 1.2.32 “Uncertificated Securities” – Securities of the juristic person, association, business, close corpora- kind described in Section 49(2)(b); tion, company, concern, enterprise, firm, partner- ship, joint venture, trust, undertaking, voluntary 1.3 if any provision in a definition is a substantive provision association, body corporate, and any similar entity; conferring a right or imposing an obligation on any Person, then, notwithstanding that it is only in a defini- 1.2.21 “Regulations” – the Companies Regulations of tion, effect shall be given to that provision as if it were 2011, and any other regulations made in terms of a substantive provision in the body of this MOI; the Companies Act for so long as they remain of force and effect; 1.4 the use of the word “including”, “includes” and “include”, followed by a specific example/s, shall not 1.2.22 “Republic” – the Republic of South Africa; be construed as limiting the meaning of the general 121 wording preceding it and the eiusdem generis rule 1.2.23 “Securities” – collectively – shall not be applied in the interpretation of that general wording or those specific example/s; 1.2.23.1 Shares, debentures, notes, bonds, units or other instruments, irrespective of their form or title 1.5 where any term is defined within a particular clause (including any options thereon and rights other than this clause 1, that term shall bear the thereto) issued or authorised to be issued by the meaning ascribed to it in that clause wherever it is Company; and used in this MOI;

1.2.23.2 anything falling within the meaning of the defini- 1.6 any capitalised word or expression that is not tion of “securities” as defined in section 1 of otherwise defined in this MOI, but is defined in the the Securities Services Act; Companies Act, shall bear the same meaning as it bears in the Companies Act. For the avoidance of 1.2.24 “Securities Services Act” – the Securities doubt, it is recorded that any reference to “Present at Services Act No 36 of 2004; such Meeting” or “Present at the Meeting” shall be construed in accordance with the definition of 1.2.25 “SENS” – the Securities Exchange News Service “Present at a Meeting” in the Companies Act and established and operated by the JSE; without derogating from the aforesaid ,a Person other than a natural person will also be “Present at such 1.2.26 “Share” – an Ordinary Share or a Deferred Share or Meeting” or “Present at the Meeting” if represented any other share issued by the Company; at such or that Meeting by a duly authorised represent- ative; 1.2.27 “Shareholder” – a holder of a Share who is entered as such in the Sub-Register or certificated 1.7 a reference to a “section” refers to the corresponding Securities Register of the Company as provided for section of the Companies Act; in Section 50; 1.8 this MOI shall be deemed to authorise the Company to 1.2.28 “Shareholders Resolution” – an Ordinary do anything which the Companies Act empowers a Resolution or Special Resolution; 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 1.9 references in the left-hand margins to sections of the Act; Companies Act designated by the letter “S” and the numbers of the sections referred to are for information 1.2.30 “Sign” – includes the reproduction of a signature purposes only and shall not be used in the interpreta- by lithography, printing, or any kind of stamp or any tion of this MOI; other mechanical or electronic process, and “Signature” has the corresponding meaning; 1.10 the headings of clauses in this MOI are for information purposes only and shall not be used in the interpreta- 1.2.31 “Sub-Register” – the record of Uncertificated tion of this MOI; and Securities administered and maintained by a CSDP, which forms part of the Securities Register in terms 1.11 save to the extent otherwise provided by this MOI, the of the Companies Act and which is the Company’s provisions of the Company’s MOI in force immediately

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Memorandum of Incorporation (continued)

prior to the adoption of this MOI shall, to the exclusion for a method for the alteration or amendment of the of this MOI, continue to regulate any matter which, by MOI other than those methods contemplated in the provisions of the Companies Act, continues to be clause 3.2 apply. regulated by the law relating to companies as it existed immediately prior to the coming into operation of the 3.4 Any change to the name of the Company and any vari- Companies Act. ation of the share capital of the Company referred to in clause 10.3 shall be effected by an amendment to this 2 CONFLICTS WITH THE COMPANIES ACT MOI by way of a Special Resolution as referred to in In accordance with the Companies Act, in any instance clause 3.2.2. where there is a conflict between a provision (be it express or tacit) of this MOI and – 4 RULES The Board is prohibited from making, amending or 2.1 an Alterable Provision of the Companies Act, the provi- appealing any Rules and the authority of the Board in sion of this MOI shall prevail to the extent of the this regard is hereby excluded. 122 conflict, and to the extent that such Alterable Provision of the Companies Act expressly allows for the Company to adopt the conflicting provision; or PART B – STATUS AND POWERS 2.2 an Unalterable Provision of the Companies Act, the Unalterable Provision of the Companies Act shall OF THE COMPANY 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 5 STATUS AS PUBLIC COMPANY would otherwise apply to the Company in terms of an Unalterable Provision of this Act in which case such a 5.1 The Company is a Pre-Existing Company, and accord- provision will prevail. ingly continues to exist as if it had been incorporated and registered in terms of the Companies Act. 3 AMENDMENT OF THE MOI 5.2 The Ordinary Shares issued by the Company are freely 3.1 Every provision of this MOI is capable of amendment transferable, subject to compliance with the procedural in accordance with sections 16(1)(a), 16(1)(c), and requirements for transfer contained in clause 14. 152(6)(b) of the Companies Act, and, accordingly, there is no provision of this MOI which may not be amended 5.3 The Company is entitled to offer its Ordinary Shares to as contemplated in section 15(2)(b) or 15(2)(c) of the the public, subject to compliance with this MOI and Companies Act. the Companies Act.

3.2 This MOI may only be altered or amended – 5.4 The Company is, accordingly, classified as a Public Company in terms of section 8(2) of the Companies 3.2.1 in compliance with a court order on the basis set Act. out in section 16(1)(a) and 16(4) of the Companies Act and any other applicable provisions of the 6 POWERS OF THE COMPANY Companies Act; or 6.1 The Company is governed by – 3.2.2 by way of a Special Resolution of the Shareholders passed in accordance with section 16(1)(c) of the 6.1.1 the Unalterable Provisions of the Companies Act; Companies Act, read in conjunction with the remaining provisions of the Companies Act and this 6.1.2 the Alterable Provisions of the Companies Act, MOI; or subject to the extensions, limitations, substitutions or variations set out in this MOI; and 3.2.3 as contemplated in section 17 and 152(6)(b) of the Companies Act. 6.1.3 the other provisions of this MOI.

3.3 Save as specifically provided for in clause 3.2, this MOI 6.2 The Company has, subject to section 19(1)(b)(i) of the is not capable of amendment by any other method. Companies Act, all of the legal powers and capacity of Accordingly, the provisions of section 16(1)(b) of the an individual, and the legal powers and capacity of the Companies Act shall not apply, nor shall any other Company are not subject to any restrictions, limitations Alterable Provisions of the Companies Act that allows or qualifications contemplated in section 19(1)(b)(ii) of

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 the Companies Act. In particular and without dero- within the same group as contemplated in para- gating from the aforesaid the Company may borrow graphs a(ii) and a(iii) of the definition of any amount without limitation and provide any form of Distribution in the Companies Act) to Ordinary security for the fulfilment of any of its obligations. Shareholders, whether during the existence of the Company or upon its dissolution. 6.3 There is no provision of this MOI which constitutes a restrictive condition as contemplated in section 15(2) 9.2 Deferred Shares (b) of the Companies Act. 9.2.1 Subject to the provisions of the Companies Act, the 6.4 No Special Resolution contemplated in section 20(2) or Company shall be entitled to allot and issue as fully section 20(6) of the Companies Act to ratify any action paid up Shares a separate class of non-convertible, which is contrary to the JSE Listings Requirements non-participating, no par value deferred Shares, each shall be proposed to the Shareholders unless other- known as “Deferred Shares”, and the following wise agreed to by the JSE. class rights shall attach to the Deferred Shares: 123 7 LIMITATION OF LIABILITY 9.2.1.1 as regards a return of capital, the Deferred No Person shall, solely by reason of being an Shares will rank, equal to the issue price of 0,1 Incorporator, Shareholder or Director of the Company, cent per Deferred Share, after the Ordinary be liable for any liabilities or obligations of the Shares in the Company on a winding up but shall Company. not otherwise be entitled to participate in any assets or surplus assets of the Company whether on a winding up or in any other circum- stances; PART C – CAPITALISATION AND 9.2.1.2 the Deferred Shares shall not be convertible into SECURITIES OF THE COMPANY 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 8 SHARE CAPITAL dividends (whether in the form of cash, bonus The numbers and classes of Shares which the shares, assets or otherwise) shall be declared or Company is authorised to issue are set out in paid in respect of the Deferred Shares; Schedule 1 to this MOI. 9.2.1.4 the Deferred Shares shall not participate in any 9 RIGHTS OF THE SHARES rights issue of the Company;

9.1 Ordinary shares 9.2.1.5 the Company shall recognise only Thibault Square Financial Services (Pty) Limited registra- 9.1.1 Each Ordinary Share in the issued share capital of tion number 1992/004170/07 (“the Permitted the Company ranks pari passu with, and is identical Holder”) as the beneficial and registered holder in all respects to, every other Ordinary Share in of the Deferred Shares; respect of all rights, and entitles its holder to – 9.2.1.6 the Deferred Shares shall not be transferable, 9.1.1.1 the right to be entered into the Securities whether by delivery, registration or otherwise Register as the registered holder of an Ordinary and shall accordingly not be capable of being Share; listed on any stock exchange;

9.1.1.2 exercise one vote on any matter to be decided 9.2.1.7 the Permitted Holder shall only be entitled to by Shareholders of the Company (other than hold Deferred Shares for as long as it holds not matters which are, in terms of this MOI or the less than 10% of the Ordinary Share capital of Companies Act, to be decided solely by the the Company in issue on the date of the first holders of any other class/es of Share(s)); issue of Deferred Shares to the Permitted Holder (“the Minimum Holding”); Accordingly: 9.1.1.3 participate equally with every other Ordinary Share in any Distribution (except for payment in 9.2.1.7.1 if the Permitted Holder at any time disposes lieu of a capitalisation share and any considera- (whether by sale, exchange, donation or tion payable by the Company for any of its own otherwise) of any Ordinary Shares in the Shares or for any shares of a another company capital of the Company, the Company shall

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Memorandum of Incorporation (continued)

proportionately acquire such number of the 9.3.3 The 6% preference shares shall not carry any Deferred Shares then held by the Permitted voting rights unless the fixed cumulative preferen- Holder, at 0,1 cent per Deferred Share, as tial dividend is in arrear and unpaid for more than would maintain the ratio between the 12 (twelve) months calculated from the expiration Ordinary Shares and Deferred Shares held by of any financial year of the Company or when a the Permitted Holder which existed immedi- resolution is submitted for winding-up the ately prior to such disposal; Company. In either of these events the 6% preference shares shall carry the same right of 9.2.1.7.2 whenever the Company issues Ordinary Shares voting as the Ordinary Shares. (whether pursuant to a rights issue, as a capitali- sation award, or otherwise) (“the Fresh Issue”), 9.4 Rights, privileges and conditions attaching the Permitted Holder shall be entitled to to the 5% cumulative preference shares of subscribe for such number of additional R2 each (“the 5% preference shares”) Deferred Shares at 0,1 cent per share as would 124 result in the permitted holder continuing to hold 9.4.1 The 5% preference shares shall carry the right out the ratio of Deferred Shares to Ordinary Shares of the profits from time to time available for distri- which it held immediately prior to the Fresh bution to a fixed cumulative preferential dividend of Issue. The Company shall be obliged to allot and five per cent (5%) per annum, which dividends shall issue the Deferred Shares subscribed for by the be payable half-yearly on the last days of February Permitted Holder against receipt of the subscrip- and August in each year. tion consideration; 9.4.2 The 5% preference shares shall rank for dividend 9.2.1.7.3 if the Permitted Holder at any time ceases to next after the 6% preference shares, but in priority hold the Minimum Holding, the Company shall to the Ordinary Shares. acquire all of the Deferred Shares then held by the Permitted Holder on notice to the Permitted 9.4.3 In the event of the Company having being wound Holder at 0,1 cent for each Deferred Share, up, the 5% preference shares shall rank for repay- ment of capital and any arrears of dividend, provided that “acquire” for purposes of whether declared or not, and calculated up to the articles 9.2.1.7.1 and 9.2.1.7.3 shall bear the date of the commencement of the winding-up, next meaning ascribed thereto in section 85 of the after the 6% preference shares, but in priority to Companies Act, 1973 (as amended); the Ordinary Shares.

9.2.1.8 the Permitted Holder shall be entitled to be 9.4.4 The 5% preference shares shall not be entitled to present and to vote either in person, or by proxy, participate further in the profits or surplus assets of at any meeting of the Company, by virtue of the the Company. Deferred Shares, and shall be entitled on a poll to one vote in respect of every Deferred Share 9.4.5 The 5% preference shares shall carry the same held by it. voting rights as the existing 6% preference shares.

9.3 Rights privileges and conditions attaching 9.4.6 The Company shall not have the right to modify, to the 6% cumulative preference shares of vary or qualify in any manner the rights hereby R2 each (“the 6% preference shares”) attached, except with the consent of three-fourths of the holders of the 5% preference shares. 9.3.1 The 6% preference shares shall carry the right out of the profits from time to time available for distri- 9.5 Rights, privileges and conditions attaching bution to a fixed cumulative preferential dividend of to the second 5% cumulative preference six per cent (6%) per annum on the capital paid up shares of R2 each (“the second 5% prefer- or credited as paid up thereon and shall be entitled, ence shares”) in the event of the winding-up of the Company, in priority to the Ordinary Shares, to repayment of 9.5.1 The second 5% preference shares shall carry the capital and any arrears of the preferential dividend right out of the profits from time to time available whether declared or not, calculated up to the date for distribution to a fixed cumulative preferential of commencement of the winding-up. dividend of 5% per annum reckoned from the date of allotment of such shares on the capital paid up or 9.3.2 The 6% preference shares shall not be entitled to credited as paid up thereon subject to the provi- participate further in the profits or surplus assets of sions of 9.5.2. The dividends in respect of the the Company. second 5% preference shares shall be paid half-

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 yearly, namely on the last days of February and 9.6.2 The third 5% preference shares shall rank for divi- August in each and every year. dend subsequent to the 175 000 6% preference shares and the 325 000 5% preference shares and 9.5.2 The second 5% preference shares shall rank for 225 000 second 5% preference shares, but in dividend subsequent to the 175 000 6% preference priority to the Ordinary Shares for the time being of shares and the 325 000 5% preference shares, but the Company or any other shares to be issued by in priority to the Ordinary Shares for the time being the Company. of the Company or any other shares to be issued by the Company. 9.6.3 The third 5% preference shares shall in a winding- up be entitled to rank as regards repayment of 9.5.3 The second 5% preference shares shall in a capital, and any arrears of the preferential dividend winding-up be entitled to rank as regards repay- whether declared or not, calculated up to the date ment of capital, and any arrears of the preferential of the commencement of the winding-up, subse- dividend whether declared or not calculated up to quent to the 175 000 6% preference shares, the date of the commencement of the winding-up 325 000 5% preference shares and 225 000 second 125 subsequent to the 175 000 6% preference shares 5% preference shares, but in priority to the and the 325 000 5% preference shares for the time Ordinary Shares for the time being of the Company, being of the Company or any other shares to be or any other shares to be issued by the Company, issued by the Company, but the second 5% prefer- but the third 5% preference shares shall not be ence shares shall not be entitled to participate entitled to participate further in the profits or further in the profits or surplus assets of the surplus assets of the Company. Company. 9.6.4 The third 5% preference shares shall not carry any 9.5.4 The second 5% preference shares shall not carry any voting rights unless the fixed cumulative preferen- voting rights unless the fixed cumulative preferential tial dividend is in arrear and unpaid for more than 12 dividend is in arrear and unpaid for more than 12 (twelve) months, calculated from the expiration of (twelve) months, calculated from the expiration if any any financial year of the Company, or when a reso- financial year of the Company or when a resolution is lution is submitted for winding-up the Company, or submitted for winding-up the Company. In either of for the purpose of altering the MOI in any manner these events the preference shares shall carry the directly affecting the rights attached thereto. In same right of voting as the Ordinary Shares. either of these events, the preference shares shall carry the same rights of voting as the Ordinary 9.5.5 The Company shall not at any time have the right to Shares. modify, vary or qualify in any manner the rights hereby attached to the second 5% preference 9.6.5 The Company shall not at any time have the right to shares except with the consent of three-fourths of modify, vary or qualify in any manner the rights the holders of the second 5% preference shares. hereby attached to the third 5% preference shares, except with the consent of three-fourths of the 9.5.6 Save as aforesaid the second 5% preference holders of the third 5% preference shares. shares shall rank equally share for share with the existing preference and Ordinary Shares. 9.6.6 The Company shall not at any time issue more than 500 000 third 5% preference shares in whole or in 9.6 Rights, privileges and conditions attaching part except with the consent of the majority in to the third 5% cumulative preference value of the holders of the original 500 000 third 5% shares of R2 each (“the third 5% preference preference shares given at a separate class shares”) meeting.

9.6.1 The third 5% preference shares shall carry the right 9.6.7 Save as aforesaid the third 5% preference shares shall out of the profits from time to time available for rank equally share for share with the existing prefer- distribution to a fixed cumulative preferential divi- ence and Ordinary Shares. dend of 5% per annum reckoned from the date of allotment of such shares, on the capital paid up or 10 VARIATION OF SHARE CAPITAL credited as paid up thereon subject to the provi- sions of 9.6.2. The dividends in respect of the third 10.1 Notwithstanding the provisions of section 36(3) of the 5% preference shares shall be paid half-yearly, Companies Act, the Board shall not have the power namely on the last days of February and August in to – each and every year.

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Memorandum of Incorporation (continued)

10.1.1 increase or decrease the number of authorised 10.3.9.2 if there is any other class/es of Shares in issue, Shares of any class of the Shares; it has also been approved by a Special Resolution of all of the Shareholders of the 10.1.2 reclassify any classified Shares that have been Company entitled to vote thereon, which Special authorised but not issued; Resolution shall only be proposed after the Special Resolution referred to in 10.3.9.1 has 10.1.3 classify any unclassified Shares that have been been passed. authorised but not issued; or 10.4 The preferences, rights, limitations or any other terms 10.1.4 determine the preferences, rights, limitations or of any class of Shares must not be varied in response other terms of any Shares in a class contemplated to any objectively ascertainable external fact or facts as in Section 36(1)(d), provided for in sections 37(6) and 37(7) of the Companies Act and the powers of the Board are limited accordingly. which powers shall only be capable of being exer- 126 cised by the Shareholders, as contemplated in 10.5 No further Securities ranking in priority to, or pari passu clause 10.3. with, existing preference Shares, of any class, shall be created without a Special Resolution passed at a sepa- 10.2 Each Share issued by the Company shall entitle its rate meeting of such preference Shareholders. holder to vote on any proposal to amend the prefer- ences, rights, limitations or other terms associated 11 ISSUE OF SECURITIES with that Share. 11.1 Except for the Deferred Shares, the Company may 10.3 The Shareholders may, by amendment to the MOI by only issue Securities which are freely transferable. The way of a Special Resolution, – Company may only issue Securities which have been authorised by or in terms of this MOI. 10.3.1 increase or decrease the number of authorised Shares of any class of the Shares except to the 11.2 Notwithstanding the provisions of section 40(5), all extent restricted by Regulation 31(2); Securities of the Company for which a listing is sought on the JSE must, unless otherwise required by any 10.3.2 reclassify any classified Shares that have been statute, only be issued after the Company has received authorised but not issued; the consideration approved by the Board for the issu- ance of such Securities. 10.3.3 classify any unclassified Shares that have been authorised but not issued; 11.3 Except where Equity Securities are issued:

10.3.4 determine the preferences, rights, limitations or 11.3.1 in accordance with one of the approvals described other terms of any Shares in a class contemplated in clause 11.4 hereunder; or in Section 36(1)(d); 11.3.2 for an acquisition of assets, 10.3.5 create any class of Shares; the Company must in the event that it wishes to 10.3.6 convert one class of Shares into one or more other issue Equity Securities, offer (“Pro-rata Offer”) classes of Shares, including the conversion of par those Equity Securities to all the existing holders of value shares into no par value shares; Equity Securities of that class of Equity Securities (or, if there are no Equity Securities of that class in 10.3.7 consolidate or subdivide any Securities; issue, to the Ordinary Shareholders) pro-rata in proportion to their existing Shareholdings. For the 10.3.8 change the name of the Company; or avoidance of doubt this clause 11.3 will not apply to the Deferred Shares. 10.3.9 vary any preferences rights, limitations or other terms of any class of Shares already in issue, but no 11.4 The Board may: such variation shall be implemented unless – 11.4.1 with the approval of an Ordinary Resolution of the 10.3.9.1 it has been approved by a Special Resolution Shareholders; or adopted by the holders of that class of Shares at a separate meeting or it has been consented to 11.4.2 where required by section 41 of the Companies Act, in writing by the holders of all the issued Shares with the approval of a Special Resolution of the of that class; and Shareholders,

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 authorise the issue by the Company of any unissued 13.4 The certificates evidencing any Certificated Securities Securities (including Equity Securities and/or of the Company shall comply with the requirements convertible Securities) or options to subscribe for such set out in section 51(1) of the Companies Act and shall unissued Securities to any Person/s provided that such otherwise be in such form as may be determined by issue(s) has/have, where required, been approved by the Board. the JSE and comply/ies with the JSE Listings Requirements. Any such Ordinary Resolution (referred 13.5 If any certificate is defaced, lost or destroyed, it may to in 11.4.1 above) or Special Resolution (referred to in be replaced on payment of such fee, if any, and on 11.4.2 above) may in general authorise the Board to such terms as the Board may determine. issue Securities or options to subscribe for Securities of the Company for cash or any other consideration 13.6 The conversion of Certificated Securities to that they in their discretion may deem fit (subject to Uncertificated Securities or of Uncertificated Securities section 40 of the Companies Act) to any Person or to Certificated Securities shall occur in accordance entity that they in their discretion may deem fit or may with the Regulations, any applicable provisions of the authorise the issue of Securities or options to Securities Services Act and any applicable require- 127 subscribe for Securities to specific Persons or entities ments or rules of the JSE, STRATE and the relevant (in all cases without having to comply with any of the CSDP or Central Securities Depositary. provisions of clause 11.3 above). 14 TRANSFER OF SECURITIES 11.5 Save as provided for in clause 11.3 or specifically included as one of the rights, preferences or other 14.1 Save in the case of a transfer which is effected by terms upon which any class of Shares are issued, no operation of law and overrides the requirements of this Shareholder shall have any rights to a Pro-Rata Offer or MOI, no person may transfer any Securities in the pre-emptive or other similar preferential right to be Company to any other person without first complying offered or to subscribe for any additional Securities with the requirements for transfer as set out in this issued by the Company. MOI.

11.6 The Company may issue the Securities authorised by 14.2 Transfer of ownership in any Uncertificated Securities the Board in terms of clause 11.3 or 11.4 above. and Certificated Securities shall be effected in accord- ance with the provisions of the Companies Act. 12 COMMISSION The Company shall not pay commission exceeding 14.3 The Company shall not enter into its Securities 10% to any Person in consideration for their Register the transfer of any Certificated Securities, subscribing or agreeing to subscribe, whether abso- unless – lutely or conditionally, for any Securities of the Company. 14.3.1 the transfer is evidenced by a proper instrument of transfer signed by the transferor and transferee, the 13 REGISTER AND CERTIFICATES form of which shall be determined by the Board from time to time, which has been delivered to the 13.1 The Securities issued by the Company shall be issued Company at its Registered Office together with – in Certificated or Uncertificated form. 14.3.1.1 such proof as the Board may require of the 13.2 The Company shall establish or cause to be estab- authority of the signatory/ies to that instrument lished, and shall maintain, a Securities Register in of transfer; and accordance with the Companies Act and the Regulations and, to the extent that the form of and the 14.3.1.2 the certificate in respect of Securities being manner of maintaining the Securities Register is not transferred; or prescribed, the Board shall determine the form and manner thereof. 14.3.2 the transfer was effected by operation of law.

13.3 The Company shall enter into its Securities Register 14.4 Subject to the provisions of this Memorandum of the transfer of any Certificated Securities which is Incorporation, every instrument of transfer and accom- effected in accordance with clause 14 and shall include panying documents received by the Company referred in such entry the information required by section 51(5) to in clause 14.3.1 shall be deemed to remain in full of the Companies Act. 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

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Memorandum of Incorporation (continued)

effect to any duly signed instrument of transfer which 16 ACQUISITION OF SHARES ISSUED BY was accepted by any officer of the Company as being THE COMPANY in order before the lodging of such notice of revoca- Subject to the provisions of the Companies Act and tion. the JSE Listings Requirements, the Company may acquire any Shares issued by the Company on the 14.5 Fully paid Securities shall not be subject to any lien in basis that – favour of the Company and shall be freely transferable. 16.1 all or a portion of the price payable on such acquisition 15 CAPITALISATION SHARES may be paid out of the funds of or available to the Company whether or not such payment results in a 15.1 The Board shall – reduction of the share capital, stated capital, reserves, any capital redemption reserve fund and/or any other 15.1.1 have the power and the authority to approve the account of the Company; and issuing of any authorised Shares as capitalisation 128 shares; or 16.2 the Shares so acquired shall be restored to the status of unissued shares and the authorised share capital of 15.1.2 subject to clause 15.2, have the power and the the Company shall remain unaltered. authority to resolve to permit the Shareholders to elect to receive a cash payment in lieu of a capitali- 17 DEBT INSTRUMENTS sation share, 17.1 The Board may authorise the Company to issue but the Board shall not have the power or authority secured or unsecured debt instruments as defined and to issue Shares of one class as capitalisation shares set out in section 43(2) of the Companies Act; provided in respect of the Shares of another class unless that the Board shall not be entitled to issue any debt specifically authorised by the Shareholders by instruments that grants the holder thereof any rights means of an Ordinary Resolution authorising the regarding – specific transaction contemplated. The authority of the Board to issue capitalisation shares in accord- 17.1.1 attending and voting at Shareholders Meetings and ance with section 47(1) of the Companies Act is the appointment of Directors; and accordingly limited and restricted by this Memorandum of Incorporation. 17.1.2 the receipt by the holder thereof of anything other than repayment of the capital amount thereof and 15.2 The Board may not resolve to offer a cash payment in payment of interest thereon, all in cash, without the lieu of awarding a capitalisation share, as contem- approval of the Shareholders by way of a Special plated in clause 15.1.2, unless the Board – Resolution. Without limiting the foregoing, it is recorded that a debt instrument may not confer on 15.2.1 has considered the Solvency and Liquidity Test as its holder any right to receive any Shares or other required by section 46, on the assumption that Securities of the Company or any other Entity or every such Shareholder would elect to receive any other property (whether on conversion or cash; and redemption or repurchase of the debt instrument or otherwise) without the approval of a Special 15.2.2 is satisfied that the Company would satisfy the Resolution. Solvency and Liquidity Test immediately upon the completion of the Distribution. 17.2 The authority of the Board to authorise the Company to issue secured or unsecured debt instruments, as 15.3 If, on any capitalisation issue, Shareholders would, but set out in section 43(2), is accordingly limited or for the provisions of this clause 15, become entitled to restricted by this Memorandum or Incorporation. fractions of Shares, the Board shall, subject to any contrary provisions in the Resolution authorising the 18 BENEFICIAL INTERESTS capitalisation issue, be entitled to round off the Securities issued by the Company may be held by, and number of capitalisation shares to be received to the registered in the name of, one Person for the benefi- nearest whole number or to sell the Shares resulting cial interest of another Person, but no Person other from the aggregation of those fractions, on such terms than the registered holder of a Security shall (save to and conditions as it deems fit, for the benefit of the the extent expressly provided for in this MOI) be enti- relevant Shareholders, and any Director shall be tled to exercise any of the rights associated with that empowered to Sign any instrument of transfer or other Security and the Company shall not recognise any instrument necessary to give effect to that sale. Person other than the registered holder of a Security as the holder (whether beneficial or otherwise) of that

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Security. The holding of the Company’s Securities by a and this clause 20.1 shall be read together with registered holder for the beneficial interest of another clause 19; and Person is accordingly limited and restricted by this MOI. 20.2 if so required by that Legal Representative or by the Board, be entered into the Securities Register of the 19 JOINT HOLDERS OF SECURITIES Company nomine officio in the place and on behalf of Where two or more Persons are registered as the that Security Holder, provided that (i) if the Legal holders of any Security, they shall be deemed to hold Representative so entered into the Securities Register that Security jointly, and – ceases to be the Legal Representative of that Security Holder, the Board shall, pending the appointment of 19.1 notwithstanding anything to the contrary contained another Legal Representative for that Security Holder anywhere else in this MOI, on the death, sequestra- or the transfer of the relevant Security to any other tion, liquidation or legal disability of any one of those Person who is entitled to become the holder of that joint holders who is not represented by a Legal Security, be entitled to suspend the rights of the holder Representative as referred to in clause 20, the of that Security to vote and shall be entitled to with- 129 remaining joint holders may be recognised, at the hold (and retain until such transfer has occurred) all discretion of the Board, as the only Persons having title Distributions payable to the holder of that Security; and to that Security; (ii) that Security Holder shall not, merely by virtue of the appointment, or entry into the Securities Register 19.2 any one of those joint holders may give effective of the Legal Representative, be released from any obli- receipts for any Distributions or other payments or gation arising out of or in connection with the holding accruals payable to those joint holders; of that Security.

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 PART D – SHAREHOLDERS RIGHTS notices or payments from the Company (and any notice or payment given to that joint holder shall be AND PROCEEDINGS 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 21 SHAREHOLDERS RIGHT TO a right to vote on any matter may vote either person- INFORMATION ally or by proxy at any meeting in respect of that Each Shareholder and each Person who is the regis- Security as if he were solely entitled to exercise that tered holder of, or holds a beneficial interest in, any vote, and, if more than one of those joint holders is Securities issued by the Company shall have the infor- present at any meeting of Shareholders, either person- mation rights set out in section 26(1) of the Companies ally or by proxy, the joint holder who tenders a vote Act. (including an abstention) and whose name stands in the Securities Register before the other joint holders 22 SINGLE SHAREHOLDER’S who are present, in person or by proxy, shall be the AUTHORITY TO ACT joint holder who is entitled to vote in respect of that As contemplated in section 57(2) of the Companies Security; Act, if, at any time, the Company has only one Shareholder – 19.5 the Company shall be entitled to refuse to register more than 5 (five) Persons as the joint holders of a 22.1 that Shareholder may exercise any and all of the Voting Security. Rights pertaining to the Company, at any time, without notice or compliance with any other internal formali- 20 LEGAL REPRESENTATIVES ties, and that power is not limited or restricted by this A Legal Representative of the holder of any Security MOI; and issued by the Company (“Security Holder”) shall – 22.2 the provisions of clauses 24 (Record Dates), 26 (Notice 20.1 be the only Person recognised by the Company as to Shareholders Meetings), 27 (Conduct of having any rights in respect of or title to a Security Shareholders Meeting), 28 (Shareholder Meeting registered in the name of the Security Holder whom Quorum and Adjournment), 30 (Shareholder he represents; provided that if a Security Holder or his Resolutions) and 31 (Shareholders Acting Other Than Legal Representative is a joint holder of that Security, at a Meeting) shall not apply. then this clause 20.1 shall not detract from clause 19

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Memorandum of Incorporation (continued)

23 PROXY REPRESENTATION 23.7.2 after midnight on the day on which the instrument revoking the appointment (if revocable), 23.1 A Shareholder may, at any time by written proxy appointment (“Proxy Instrument”) which complies of that proxy was delivered to the Registered Office with this MOI and the Companies Act, appoint any of the Company (marked urgent and for the atten- individual, including an individual who is not a tion of the Company secretary, chairperson or Shareholder of the Company, as a proxy to – managing Director of the Company and accompa- nied by such proof of the identity and authority of 23.1.1 participate in, and speak and vote at, a Shareholders the signatory as may reasonably be required by the Meeting on behalf of the Shareholder; or Board or the chairperson of any meeting referred to in the proviso to this clause 23.7) or to any other 23.1.2 give or withhold written consent on behalf of the Person entitled to accept the Proxy Instrument or Shareholder to a decision contemplated in revocation on behalf of the Company; provided that clause 31, the Board, or the chairperson of any meeting at 130 which the proxy wishes to exercise any rights of and any such proxy appointment (and any invitation the Shareholder, may agree to allow any such Proxy by the Company to appoint a proxy and any form Instrument or revocation to become effective prior supplied by the Company for use as a Proxy to the time when it would otherwise have become Instrument) shall be governed by section 58 of the effective in terms of this clause 23. Companies Act and this clause 23. 23.8 A proxy shall, as contemplated in section 58(7) of the 23.2 The Board may determine a standard form of Proxy Companies Act, be entitled, in the Proxy’s own discre- Instrument and make it available to Shareholders on tion, to exercise, or abstain from exercising, any voting request. right of the Shareholder; provided that if the Proxy Instrument specifically provides otherwise then the 23.3 Subject to the provisions of the Companies Act, a specific provisions of the Proxy Instrument shall Proxy Instrument may be an instrument created or prevail. transmitted by electronic or other means, including electronic mail or facsimile. 24 RECORD DATES The Board may, in accordance with section 59 of the 23.4 A Proxy Instrument which complies with the Companies Act and the Regulations, determine and Companies Act and this MOI shall, if any meeting to publish a Record Date for the purposes of determining which it relates is adjourned or postponed, unless the which Shareholders are entitled to – contrary is stated thereon, be valid at that meeting when it resumes after such adjournment or 24.1 receive a notice of a Shareholders Meeting; commences after such postponement, even if it had not been lodged timeously for use at the meeting as 24.2 participate in and vote at a Shareholders Meeting; originally scheduled (prior to the adjournment or post- ponement); 24.3 decide any matter by written consent or by Electronic Communication; 23.5 A Shareholder may not appoint more than one Person concurrently as proxies, and may not appoint more 24.4 receive a Distribution; or than one proxy to exercise Voting Rights attached to different Securities held by the Shareholder. 24.5 be allotted or exercise any other rights;

23.6 A proxy may not delegate the proxy’s authority to act provided that – on behalf of the Shareholder to another Person, unless the right to delegate is specifically contained in the 24.5.1 if the Board does not determine a Record Date for Proxy Instrument and the delegation occurs by way of any action or event, as contemplated in this a further Proxy Instrument which itself complies with clause 24, the Record Date shall, subject to the requirements of the Companies Act and this MOI. clause 24.5.2, be as determined in accordance with section 59(3) of the Companies Act; and 23.7 A proxy shall not be entitled to exercise any rights of the Shareholder who appointed that proxy – 24.5.2 whilst Shares of the Company are listed on the JSE, the Record Date shall be determined in accordance 23.7.1 until the expiry of 48 hours after the time on which with the JSE Listings Requirements. the Proxy Instrument containing the appointment; or

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 25 SHAREHOLDERS MEETINGS 27.1.2 must always make provision for any Shareholder, or proxy for a Shareholder, to participate by Electronic 25.1 The Company shall not be required to hold any meet- Communication in every Shareholders Meeting that ings of Shareholders other than those required by the is being held in person, Companies Act and/or the JSE Listings Requirements. and any Electronic Communication facility so 25.2 Without limiting the foregoing, the Company shall hold employed must ordinarily enable all Persons partici- a Shareholders meeting in the circumstances contem- pating in the meeting to at least speak and hear plated in section 61(2) of the Companies Act. each other at approximately the same time and to participate reasonably effectively in the meeting, 25.3 The Board or the chairperson of the Board or any with or without an intermediary. The authority of Prescribed Officer of the Company or Director author- the Company shall be limited and restricted accord- ised by the Board is entitled to call a Shareholders ingly. Meeting at any time, whereupon the Company will be obliged to hold that Shareholders Meeting. 27.2 Subject to clause 27.1, the responsibility for, and any 131 expense of gaining access to the medium or means of 25.4 The Board or any other person entitled to convene a Electronic Communication employed for any meeting of the Board and who convenes the Shareholders Meeting shall be that of the Shareholder Shareholders Meeting shall determine the location for or proxy. If a provision has been made for a any Shareholders Meeting of the Company and the Shareholders Meeting to be conducted by Electronic Company may hold any such meeting in the Republic Communication or for participation in a Shareholders or any foreign country and, accordingly, the authority of Meeting by Electronic Communication and the the Board, as contemplated in section 61(9) of the medium or means of such Electronic Communication Companies Act, is not limited or restricted by this MOI. is available and functioning, then the Shareholders Meeting shall be entitled to proceed even if a 26 NOTICE OF SHAREHOLDERS MEETINGS Shareholder or proxy is not able to gain access to the medium or means of Electronic Communication so 26.1 The Company must – employed.

26.1.1 deliver notice of each Shareholders Meeting to – 27.3 The Company shall ensure that any notice of any meeting of Shareholders, at which it will be possible 26.1.1.1 all Shareholders as of the Record Date for for Shareholders to participate by way of Electronic receiving notice of that Shareholders’ Meeting; Communication, shall inform Shareholders of that form and of participation and shall provide any necessary infor- mation to enable Shareholders or their proxies to 26.1.1.2 the JSE, access the available medium or means of Electronic Communication. at least fifteen Business Days before that Shareholders Meeting is to begin; and 27.4 The manner in which a Shareholder who participates by way of Electronic Communication in a Shareholders 26.1.2 simultaneously with delivery of any notice in terms of Meeting may exercise his Voting Rights will be deter- clause 26.1.1, announce such notice through SENS. mined by the chairperson of the Board.

26.2 The notice of a Shareholders Meeting shall be in 27.5 A resolution passed at any meeting that employs writing and shall include the items set out in section Electronic Communication shall, notwithstanding that 62(3) of the Companies Act. the Shareholders are not present together in one place at the time of the meeting, be deemed to have been 26.3 The notice of a Shareholders Meeting must be deliv- passed at a meeting duly called and constituted on the ered in accordance with the provisions of clause 46. day on which, and at the time at which, the meeting was so held. For the avoidance of doubt, it is recorded 27 CONDUCT OF MEETINGS that all of the provisions of clauses 27 to 31 shall apply to these meetings. 27.1 The Company – 27.6 At a Shareholders Meeting a resolution put to the vote 27.1.1 may, as contemplated in section 63 of the shall be decided by a poll. The poll will be conducted in Companies Act, provide for a Shareholders Meeting the manner that the chairperson of the Shareholders to be conducted in whole or in part by Electronic Meeting may determine. Communication; and

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Memorandum of Incorporation (continued)

28 SHAREHOLDER MEETING QUORUM meeting to begin, the quorum requirements have not AND ADJOURNMENT been satisfied, the Shareholders present in person or by proxy will be deemed to constitute a quorum. 28.1 The quorum requirements for meetings of Shareholders shall, subject to clause 28.5, be that – 28.6 A Shareholders Meeting, or the consideration of any matter being debated at a Shareholders Meeting, may 28.1.1 such a meeting shall not begin unless sufficient be adjourned as contemplated in sections 64(10), Shareholders being not less than three in number 64(11) and 64(12) of the Companies Act, it being are Present at such Meeting who are entitled to recorded that the periods of adjournment set out in exercise, in aggregate, at least 25% of all Voting section 64(12) shall apply without variation. Rights that are entitled to be exercised in respect of at least one matter to be decided at the meeting; 28.7 The Board may, at any time after notice of a and Shareholders Meeting has been given but prior to the commencement of that meeting, postpone that 132 28.1.2 the consideration of a matter to be decided at the meeting to such later date as may be determined by meeting shall not begin or continue unless suffi- the Board at the time of determining to postpone the cient Persons (being not less than three in number meeting, or may be postponed to an unspecified date who are entitled) are Present at such Meeting who to be decided by the Board at a later stage; provided are entitled to exercise, in aggregate, at least 25% that the Board may not so postpone the date of any of all Voting Rights that are entitled to be exercised such meeting beyond that date (if any) by which that on that matter. meeting is required by the Companies Act or this MOI to be held. 28.2 Notwithstanding the provisions of section 64(4) of the Companies Act and clause 28.1, if, within thirty 28.8 If a Shareholders’ Meeting is postponed or adjourned, minutes after the appointed time for a meeting – whether in terms of clause 28.2 or otherwise, the Company must, by announcement on SENS, give 28.2.1 the quorum requirements for a meeting to begin notice to all Shareholders who were entitled to receive have not been satisfied, the meeting shall automati- notice of the meeting of the postponement or adjourn- cally be postponed without motion or vote to the ment and that notice must contain the time and date same day (or if that day is not a Business Day, the of, and the location for, the continuation or resumption next Business Day) in the next week; of the meeting and any other information which the Board may decide to include therein. 28.2.2 the quorum requirements for consideration of a particular matter to begin or continue have not been 28.9 Even if he is not a Shareholder – satisfied, then, – 28.9.1 any Director; or 28.2.2.1 if there is other business on the agenda of the meeting, consideration of that matter may be 28.9.2 the Company’s attorney (or where the Company’s postponed to a later time in the meeting without attorneys are a firm, any partner, director or motion or vote; or employee thereof) or other person admitted by the chairperson of the meeting, 28.2.2.2 if there is no other business on the agenda of the meeting, the meeting is adjourned, without may attend and speak at any Shareholders motion or vote, to the same day (or if that day is Meeting, but may not vote, unless he is a not a Business Day, the next Business Day) in Shareholder or the proxy or representative of a the next week. Shareholder.

28.3 The adjourned or postponed meeting may only deal 29 CHAIRPERSON OF SHAREHOLDERS with the matters that were on the agenda of the MEETINGS meeting that was adjourned or postponed. 29.1 The chairperson of the Board or, failing him, the deputy 28.4 The chairperson of the meeting shall be entitled to chairperson of the Board shall preside as the chair- extend the thirty minute limit referred to in clause 28.2 person of each Shareholders Meeting; provided that, if in the circumstances contemplated in section 64(5) of no chairperson or deputy chairperson is present and the Companies Act. willing to act, the Shareholders present shall elect one of the Directors or, if no Director is present and willing 28.5 If, at the time appointed in terms of this clause 28 for to act, a Shareholder, to be the chairperson of that an adjourned meeting to resume, or for a postponed Shareholders Meeting.

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 29.2 The chairperson of a Shareholders Meeting shall, Holders shall be reduced if necessary to give effect to subject to the Companies Act and this MOI, determine this proviso with any cumulative fraction of a vote in the procedure to be followed at that meeting, but shall respect of any Other Securities held by Other Security not have a second or casting vote at any Shareholders Holders rounded down to the nearest whole number). Meeting. 30.5 The holder of the Deferred Shares shall be entitled to 30 SHAREHOLDERS RESOLUTIONS vote in accordance with clause 9.2 on any resolution at a Shareholders Meeting. 30.1 At any meeting of Shareholders, any Person who is Present at the Meeting, whether as a Shareholder or 30.6 In order for – as a proxy for a Shareholder or as representative of a Shareholder, shall be entitled – 30.6.1 an Ordinary Resolution to be approved, it must be supported by more than 50% of the Voting Rights 30.1.1 on a show of hands, to one vote, irrespective of the exercised on the Ordinary Resolution, as contem- number of Voting Rights that the Shareholder or plated in section 65(7); or 133 proxy or such representative would otherwise be entitled to exercise; and 30.6.2 a Special Resolution to be approved, it must be supported by at least 75% of the Voting Rights 30.1.2 on a poll, to exercise the number of Voting Rights exercised on the Special Resolution, as provided in associated with the Shares held by such section 65(9), Shareholder, which Voting Rights shall be deter- mined in accordance with the preferences, rights, at a quorate meeting of Shareholders which is limitations and other terms of the Shares, as set out quorate in relation to that resolution; provided that in this MOI. this clause 30.6 shall not detract from the Shareholders’ ability to adopt resolutions by written 30.2 Any holder (“Other Security Holder”) of Securities vote as referred to in clause 31. (“Other Securities”), other than the holders of Ordinary Shares and the holder of the Deferred Shares, 30.7 In the event that the JSE Listing Requirements require shall not be entitled to vote on any resolution at a a resolution by Shareholders adopted by a 75% meeting of Shareholders, except – majority of the votes cast or supported or approved by 75% of the Voting Rights exercised, that resolution 30.2.1 during any period provided for in clause 30.3 below, may be proposed to Shareholders as a Special during which any dividend, any part of any dividend Resolution and not as an Ordinary Resolution. on such Other Securities or any redemption payment thereon remain in arrears and unpaid; and/ 30.8 If any Shareholder abstains from voting in respect of or any resolution, that Shareholder will, for the purposes of determining the number of votes exercised in 30.2.2 in regard to any resolution proposed for the respect of that resolution, be deemed not to have winding-up of the Company or the reduction of its exercised a vote in respect of that resolution. capital; 30.9 Without limiting the power of the Board to authorise or 30.3 The period referred to in clause 30.2.1 shall be the declare Distributions any Shareholders Meeting of the period commencing on the due date of the dividend or Company shall be entitled to sanction or declare redemption payment in question or, where no due date Distributions provided the declaration of such a is specified, the expiry of the sixth month after the end Distribution has also been approved by the Board in of the financial year of the Company in respect of accordance with the Companies Act. which such dividend accrued or such redemption payment became due. 30.10 Except for those matters which require the approval or authority of a Special Resolution in terms of 30.4 If the Other Security Holders are entitled to vote at the section 65(11), any other section of the Companies meeting of Ordinary Shareholders as contemplated in Act, any provision of the Regulations, this MOI or the clause 30.2, then the Other Shareholders shall be enti- JSE Listings Requirements, no other matters which tled to 1 (one) vote for every Other Security held; the Company may undertake require the approval or provided that the total Voting Rights of the Other authority of a Special Resolution of the Shareholders. 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

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Memorandum of Incorporation (continued)

31 WRITTEN RESOLUTIONS BY 32.3.2 sections 71(3) to (7) of the Companies Act shall not SHAREHOLDERS apply to the governance of the Company; and

31.1 A resolution that could be voted on at a Shareholders 32.3.3 the provisions of clauses 37 and 38 shall not apply to Meeting may instead be adopted by written vote of the governance of the Company. the Shareholders, as contemplated in section 60 of the Companies Act, if it is supported by Persons entitled to 33 APPOINTMENT OF DIRECTORS exercise sufficient Voting Rights for it to have been adopted as an Ordinary Resolution or Special 33.1 The Board shall comprise not less than four Directors Resolution, as the case may be, at a properly consti- and not more than twenty. tuted Shareholders Meeting. 33.2 Subject to clauses 33.3, 33.4 and 39 all of the Directors 31.2 Unless the contrary is stated in the resolution, any and any Alternate Directors shall be elected by an such resolution shall be deemed to have been adopted Ordinary Resolution of the Shareholders at a 134 on the last day of the twenty Business Day period Shareholders Meeting. The provisions of section 68(2) referred to in section 60 (1)(b) (or, if applicable, any of the Companies Act shall apply to the election of earlier date on which the Company received the Directors, provided that a Director may not be elected written vote of the Shareholder or the proxy of the by written vote in accordance with clause 31. There Shareholder whose vote resulted in the resolution by shall be no ex officio directors, as contemplated in being supported by sufficient votes for its adoption section 66(4)(a)(ii) of the Companies Act, and no irrespective of any votes received thereafter). Person, except the Board in term of clauses 33.3 or 33.4 or 39 hereunder, or Shareholders in terms of 31.3 The provisions of this clause 31 shall not apply to any clauses 33.2 or 33.3.16 hereunder, shall have the right Shareholder Resolution which is required for the to effect the direct appointment or removal of one or purposes of the JSE Listings Requirements or any more Directors as contemplated in section 66(4)(a)(i) of resolution for the election of a director. the Companies Act.

33.3 The Board may appoint a person who satisfies the requirements for election as a Director to fill any PART E – DIRECTORS POWERS vacancy and serve as a Director of the Company on a temporary basis until the earlier of the date of the next AND PROCEEDINGS 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, 32 AUTHORITY OF THE BOARD OF and is subject to all of the liabilities, of any other DIRECTORS Director of the Company. The Board may also at any time by resolution of the Board terminate the appoint- 32.1 The business and affairs of the Company shall be ment of such a person as Director. The authority of the managed by or be under the direction of the Board, Board in this regard is not limited or restricted by this which shall have the authority to exercise all of the MOI. powers and perform all of the functions of the Company, except to the extent that the Companies Act 33.4 Subject to the Companies Act, the Board may appoint or this MOI provides otherwise. a person who satisfies the requirements for election as a Director to serve as an additional Director of the 32.2 The Board may delegate to any one or more Persons Company until the date of the next Annual General any of its powers, authority and functions (including Meeting of the Company. During that period any the power to sub-delegate). person so appointed has all of the powers, functions and duties, and is subject to all of the liabilities, of any 32.3 If the Securities of the Company are no longer listed other Director of the Company. The appointment of on the JSE and the Company has only one Director in that person as a Director will terminate at the next circumstances where the Company is allowed to Annual General Meeting of the Company, unless that operate with only one Director- person is elected as a Director at that Annual General Meeting. The Board may also at any time by resolution 32.3.1 that Director may exercise any power or perform of the Board terminate the appointment of such a any function of the Board at any time, without person as Director. The Board may nominate such a notice or compliance with any other internal formali- person for election at such next Annual General ties; Meeting.

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 33.5 The Directors shall retire from office in accordance 33.10 The Board may in the notice of the Annual General with the following provisions – Meeting at which the re-election of a retiring Director is proposed, provide the Shareholders with a recom- 33.5.1 at each Annual General Meeting Directors mendation as to which retiring Directors should be comprising one third of the aggregate number of re-elected, taking into account that Director’s past Directors (excluding the Chief Executive Officer and performance and contribution. any other Director who is an executive Director) or, if their number is not three or a multiple thereof, then 33.11 Any Shareholder shall be entitled to nominate any the number nearest to but not less than one third of Person for election as a Director at any Shareholders the aggregate number of Directors (excluding the Meeting, provided that such nomination, together with Chief Executive Officer and any Director who is an the consent of that person to be elected as a Director, executive Director) shall retire from office; shall be received by the Company no later than four Business Days prior to the date of such Shareholders 33.5.2 the Directors to retire in terms of clause 33.5.1 shall Meeting. exclude any Chief Executive Officer and any execu- 135 tive Director and shall be those who have been 33.12 The Company may not permit a Person to serve as longest in office since their last election, provided Director if that Person is ineligible or disqualified in that if more than one of them were elected terms of the Companies Act. Directors on the same day, those to retire shall be determined by lot unless those Directors agree 33.13 In addition to the grounds of ineligibility and disqualifi- otherwise between themselves; cation of Directors as contained in section 69 of the Companies Act, a Director shall cease to be eligible to 33.5.3 any Director appointed as such by the Directors continue to act as a Director if: after the conclusion of the Company’s preceding Annual General Meeting shall, in addition to the 33.13.1 he absents himself from all meetings of the Board Directors retiring in terms of clause 33.5.1, retire occurring within a period of six consecutive months from office at the conclusion of the Annual General without the leave of the Board, and the Board Meeting held immediately after his appointment resolves that his office shall be vacated; provided unless he is re-elected as a Director at that Annual that this clause 33.13.1 shall not apply to a Director General Meeting; who is represented by an Alternate Director who does not so absent himself. 33.6 A retiring Director is eligible for re-election and may be re-elected (without having to be nominated for election 33.13.2 if he becomes insolvent, or assigns his estate for in terms of clause 33.7 hereunder) and, if re-elected, the benefit of his creditors, or suspends payment or shall be deemed for all purposes other than files a petition for the liquidation of his affairs, or clauses 33.5.1 to 33.5.3 not to have vacated his office. compounds generally with his creditors; or

33.7 No person other than a retiring Director shall be eligible 33.13.3 if he becomes of unsound mind; or for election as a Director at any Annual General Meeting unless – 33.13.4 if he is removed in terms of any provision of the Act; or 33.7.1 the Directors nominate or recommend such person for election (which may take place at any time prior 33.13.5 1 (one) month or, with the permission of the to the Annual General Meeting) ; or Directors earlier, after he has given notice in writing of his intention to resign; or 33.7.2 that person has been nominated in accordance with clause 33.11. 33.13.6 if a written notice removing him from office is delivered to the Registered Office of the Company, 33.8 A retiring Director shall continue to act as Director provided that such written notice is signed by throughout the Annual General Meeting at which he Shareholders who hold not less than 50% (fifty per retires and his retirement shall become effective only cent) of the Voting Rights in the Company in the at the end of such meeting. aggregate.

33.9 For the avoidance of doubt, it is recorded that life 33.14 This MOI does not impose any minimum shareholding directorships and directorships for an indefinite period or other qualifications to be met by the Directors of the are not permitted. Company in addition to the ineligibility and disqualifica- tion provisions of the Companies Act and clause 33.13.

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Memorandum of Incorporation (continued)

33.15 Section 70 of the Companies Act shall apply to any and if more than one Alternate Director to a vacancy on the Board which may arise from time to Director is present at a meeting or able to act in time. the place of that Director and that Director has not indicated in writing who should act in his 33.16 If the number of Directors falls below the minimum place, then those Alternate Directors may agree number fixed in accordance with this Memorandum of as to which of them should act in the place of Incorporation, the remaining Directors must, as soon that Director and in the absence of such agree- as possible and in any event not later than three ment between them, the most senior of them in months from the date that the number falls below age shall act in the place of that Director; and such minimum, fill the vacancy/ies in accordance with clause 33.3 or convene a Shareholders Meeting for the 34.2.2 in all respects be subject to the terms and condi- purpose of filling the vacancies, and the failure by the tions existing with reference to the appointment, Company to have the minimum number of Directors rights and duties and the holding of office of the during the said three month period does not limit or Director to whom he is an Alternate Director, but 136 negate the authority of the Board or invalidate anything shall not have any claim of any nature whatsoever done by the Board while their number is below the against the Company for any remuneration of any minimum number fixed in accordance with this nature whatsoever. Memorandum of Incorporation. 35 BOARD COMMITTEES 33.17 The Directors in office may act notwithstanding any vacancy in their body, but if their number remains 35.1 The Board shall appoint such committees, with such reduced below the minimum number fixed in accord- powers and duties, as may be required by the ance with this Memorandum of Incorporation after the Companies Act, and may in addition – expiry of the three month period contemplated in clause 33.16, they may, for as long as their number is 35.1.1 appoint any number of committees of Directors; and reduced below such minimum, act only for the purpose of filling vacancies in their body in terms of 35.1.2 delegate to any committee any of the authority of section 68(3) of the Companies Act or of summoning the Board (including the authority to sub-delegate); Shareholders Meetings of the Company, but not for any other purpose. 35.1.3 include any Person who is not a Director of the Company in such committees, and who is not ineli- 34 ALTERNATE DIRECTORS gible or disqualified to be a director in terms of section 69 of the Companies Act, in such commit- 34.1 The appointment of an Alternate Director shall terminate – tees, but such Person has no vote on any matter to be decided by the committee, 34.1.1 when the Director to whom he is an Alternate Director ceases to be a Director; or and, accordingly, the authority of the Board in this regard is not limited or restricted by this MOI. 34.1.2 upon the removal of that Alternate Director from his office as such. 35.2 The authority and power of any committees estab- lished by the Board is not limited or restricted by this 34.2 An Alternate Director shall, subject to this MOI – MOI, but may, subject to the requirements of the Companies Act in respect of committees required to 34.2.1 in the place and stead of the Director to whom he is be established by the Companies Act, be restricted by an Alternate Director, act as a Director and gener- the Board when establishing any committee or by ally exercise all the rights of a Director, but only – subsequent resolution.

34.2.1.1 at any meeting of the Board during the absence 36 CHAIRPERSON OF THE BOARD of that Director from such meeting; or 36.1 The Board shall be entitled, from time to time, to 34.2.1.2 otherwise than at a meeting of the Board, if the appoint – Director to whom he is an Alternate Director is, at the time of the Alternate Director’s Signature 36.1.1 a Director to act as the chairperson of the Board; of any resolution or consent of the kind referred and 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 36.1.2 to appoint one or more Directors to act as deputy the meeting may proceed even if the Company chairperson/s of the Board, failed to give the required notice of that meeting, or there was a defect in the giving of the notice. for such period as may be determined by the Board or for an indefinite period and, even though that 37.3 The Board – period has not yet expired, to remove that chair- person or deputy chairperson from his post, with or 37.3.1 may provide for a meeting of the Board to be without nominating a replacement. conducted in whole or in part by Electronic Communication; and 36.2 The chairperson of the Board or, failing him, the deputy chairperson of the Board shall preside as the chair- 37.3.2 must always make provision for any Director to person of each meeting of the Board; provided that, if participate by Electronic Communication in every no chairperson or deputy chairperson is present and Board Meeting that is held in person, willing to act, the Board present shall elect one of the Directors to be the chairperson of that meeting of the and any Electronic Communication facility so 137 Board. employed must ordinarily enable all Persons partici- pating in that meeting to at least speak and hear 36.3 The chairperson of a meeting of the Board referred to each other at approximately the same time, and to in clause 36.1 shall, subject to the Companies Act and participate reasonably effectively in the meeting, this MOI and any decision of the Board, determine the with or without an intermediary. The authority of procedure to be followed at that meeting. the Board in this regard is not limited or restricted by this MOI. 36.4 Notwithstanding the provisions of section 73(5)(e) of the Companies Act, the chairperson of the Board or 37.4 As set out in section 73(5)(b) of the Companies Act, any meeting of the Board shall not have a second or the quorum for meetings of the Board shall be a casting vote in addition to his deliberative vote on any majority in number of the Directors then in office; matter referred to the Board. provided that unless the Board decides otherwise –

37 DIRECTORS MEETINGS 37.4.1 if a quorum is not present within thirty minutes after the time appointed for the commencement of 37.1 The Board may – any meeting of the Board, that meeting shall auto- matically be postponed without motion or vote to 37.1.1 meet, adjourn and otherwise regulate its meetings the same day in the following week (or if that day is as it thinks fit; provided that, in accordance with not a Business Day, the next Business Day), at the section 73(2) of the Companies Act, any Director same time and place. The postponed meeting may shall be entitled to convene or direct the Person so only deal with the matters that were on the agenda authorised by the Board to convene a meeting of of the meeting that was postponed; the Board; 37.4.2 if at any such postponed meeting a quorum is not 37.1.2 from time to time determine the form and time of present within thirty minutes after the time the notice that shall be given of its meetings and appointed for the commencement of that meeting, the means of giving that notice, as contemplated in then, notwithstanding the provisions of section section 73(4) of the Companies Act; provided that, 73(5)(b) of the Companies Act, the Directors subject to clause 37.2, no meeting may be present shall be deemed to constitute a quorum convened without notice to all of the Directors. The and shall be sufficient to vote on any resolution authority of the Board in this regard is not limited or which is tabled at that meeting. restricted by this MOI. 37.5 If a meeting of the Board is postponed or adjourned, 37.2 If all of the Directors of the Company – whether in terms of clause 37.4 or otherwise, the Company must, within forty-eight hours thereafter, send 37.2.1 acknowledge actual receipt of the notice and agree notice of the postponement or adjournment to all that the meeting should proceed; Directors who are entitled to receive notice of the meeting (excluding those of the Directors who have 37.2.2 are present at a meeting; or agreed not to receive such notice of postponement or adjournment or agreed that the meeting may proceed 37.2.3 waive notice of the meeting, without them) and that notice must contain the time and date of, and the location for, the continuation or resump- tion of the meeting and the business to be dealt with

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Memorandum of Incorporation (continued)

thereat. If written notice is not so given, the postponed 38.3 Unless the contrary is stated in the resolution or or adjourned meeting may not be held or resumed and written consent, any such resolution or written the business that would have been dealt with thereat consent shall be deemed to have been passed on the can be dealt with at a new meeting of which fresh notice date on which it was signed by or on behalf of the has been given in accordance with this MOI. Director (or Alternate Director) who signed it last.

37.6 At any meeting of the Board, – 38.4 The resolution or written consent may consist of one or more counterpart documents, each signed by one 37.6.1 each Director has one vote on every matter to be or more Directors (or their Alternate Directors). decided by the Board; and 38.5 An Alternate Director shall only be entitled to Sign 37.6.2 a resolution of the Board shall be passed by a such a written resolution or consent in the circum- majority of the votes cast in the manner set out in stances contemplated in clause 34.2.1.2 above. clause 37.6.1 at a quorate meeting of the Board and 138 there is no casting vote, so in the case of a tied 39 EXECUTIVE DIRECTORS vote on a resolution, that resolution is not adopted. The Board may appoint, from time to time, one or This clause 37.6.2 shall not detract from the Board’s more employees of the Company and/or any ability to adopt resolutions as set out in clause 38. Subsidiary of the Company as executive Directors of the Company. Such an executive Director shall be 37.7 The Company shall keep minutes of the meetings of appointed on such terms and conditions as to remu- the Board, and any of its committees, and include in neration and otherwise as may be determined from those minutes – time to time by a disinterested quorum of the Board.

37.7.1 any declaration given by notice or made by a 40 PAYMENTS TO DIRECTORS Director, as required by section 75 of the Companies Act; and 40.1 The Company may pay remuneration to its Directors for their services as such and, without detracting from 37.7.2 every resolution adopted by the Board. the foregoing, may pay any additional remuneration as referred to in clause 40.3; provided that all such remu- 37.8 Resolutions adopted by the Board – neration must have been approved by a Special Resolution passed by the Shareholders within the two 37.8.1 must be dated and sequentially numbered; and previous years and the authority of the Board in this regard is not restricted or limited by this MOI. For the 37.8.2 are effective as of the date of the resolution, unless avoidance of doubt it is recorded that this clause does the resolution states otherwise. not apply to remuneration paid to executive directors for their services as employees of the Company or of 37.9 Any minutes of a meeting, or a resolution, signed by any of the Subsidiaries of the Company which is the chairperson of the meeting, or by the chairperson governed by clause 39. of the next meeting of the Board, is evidence of the proceedings of that meeting, or adoption of that reso- 40.2 Each Director shall be paid all travelling, subsistence lution, as the case may be. and other expenses properly incurred by him in the execution of his duties as a Director (including 38 WRITTEN RESOLUTIONS BY DIRECTORS attending meetings of the Board or of the Board committees); provided that such expenses shall first 38.1 A decision that could be voted on at a meeting of the have been authorised or ratified by the majority of Board of the Company may instead be adopted by disinterested Directors at a meeting of such Directors written consent of a majority of the Directors, given in at which the majority of such Directors were present. person, or by electronic communication, provided that each Director has received notice of the matter to be 40.3 Any Director who is required to – decided. 40.3.1 devote special attention to the business of the 38.2 Any such resolution or written consent shall be as valid Company; or and effective as if it had been adopted by a duly convened and constituted meeting of Directors and 40.3.2 travel or reside outside the Republic for the shall be inserted in the Companies minute book for purpose of the Company; or meetings and resolutions of Directors.

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 40.3.3 otherwise perform services which, in the opinion of 42.2.2.2 arise in respect of any liability for which the the Directors, are outside the scope of the ordinary Company may indemnify the Director, in terms duties of a Director, of 42.2.3;

may be paid such extra remuneration or allowances 42.2.3 indemnify a Director against any liability arising (either in addition to or in substitution for any other from the conduct of that Director, other than a remuneration to which he may be entitled to as a liability set out in section 78(6) of the Companies Director), as a disinterested quorum of the Board Act; may from time to time determine. 42.2.4 purchase or pay for insurance to protect – 41 BORROWING POWERS 42.2.4.1 a Director against any liability or expense for The – which the Company is permitted to indemnify the Director in accordance with 42.2.3; 41.1 borrowing powers of the Company; and 139 42.2.4.2 the Company against any contingency, 41.2 powers of the Company to mortgage or encumber its including – undertaking and property or any part thereof and to issue debentures or debenture stock (whether secured 42.2.4.2.1 any expenses – or unsecured), whether outright or as security for any debt, liability or obligation of the Company or of any 42.2.4.2.1.1 that the Company is permitted to advance third party, in accordance with 42.2.1; or

shall, except for the restrictions imposed by clause 17, 42.2.4.2.1.2 for which the Company is permitted to be unlimited and shall be exercised by the Directors. indemnify a Director in accordance with 42.2.2; or 42 INDEMNIFICATION AND INSURANCE FOR DIRECTORS 42.2.4.2.2 any liability for which the Company is permitted to indemnify a Director in accord- 42.1 For the purposes of this 42, a Director includes – ance with 42.2.3,

42.1.1 a former Director and an Alternate Director; and the authority of the Board in this regard is not limited or restricted by this MOI. 42.1.2 a Prescribed Officer; and 42.3 The Company shall and is hereby obliged to indemnify 42.1.3 a Person who is a member of a committee of the each Director against (and pay to each Director, on Board, demand by that Director, the amount of) any Loss, liability, damage, cost (including all legal costs reason- irrespective of whether or not the Person is also a ably incurred by the Director in dealing with or member of the Board. defending any claim) or expense (“Loss”) which that Director may suffer as a result of any act or omission 42.2 The Board may, on behalf of the Company, as contem- of that Director in his capacity as a Director; provided plated in sections 78(4), 78(5) and 78(7) of the that – Companies Act, – 42.3.1 this indemnity shall not extend to any Loss – 42.2.1 advance expenses to a Director to defend litigation in any proceedings arising out of the Director’s 42.3.1.1 against which the Company is not permitted to service to the Company; and indemnify a Director by section 78(6) of the Companies Act; or 42.2.2 directly or indirectly indemnify a Director for expenses contemplated in 42.2.1, irrespective of 42.3.1.2 arising from any gross negligence or reckless- whether or not it has advanced those expenses, if ness on the part of that Director, or the proceedings – 42.3.1.3 arising from any loss of or damage to reputation; 42.2.2.1 are abandoned or exculpate that Director; or

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Memorandum of Incorporation (continued)

42.3.1.4 in the event and to the extent that the Director 42.3.3.2.2 the Company shall regularly, and in any event has recovered or is entitled and able to recover on demand by the Director, inform the the amount of that Loss in terms of any insur- Director fully of the status of the contested ance policy (whether taken out or paid for by the claim and furnish the Director with all docu- Company or otherwise); ments and information relating thereto which may reasonably be requested by the and Directors shall not be entitled to recover the Director; Losses referred to in this clause 42.3.1 from the Company. All losses other than those referred to 42.3.3.2.3 the Company shall consult with the Director in this 42.3.1 are referred to herein as prior to taking any major steps in relation to “Indemnified Losses”; or settling such contested claim and, in particular, before making or agreeing to any 42.3.2 each Director’s right to be indemnified by the announcement or other publicity in relation to Company in terms of this clause 42 shall exist auto- such claim; 140 matically upon his/her becoming a Director and shall endure even after he/she ceases to be a 42.3.3.2.4 the Company shall not make any admission Director until he/she can no longer suffer or incur of wrongdoing on behalf of the Director any Indemnified Loss; without the Directors’ express consent therefor; 42.3.3 if any claim is made against a Director in respect of any Indemnified Loss, then – 42.3.4 to the extent that any Indemnified Loss consists of or arises from a claim or potential claim that the 42.3.3.1 the Director shall not admit any liability in Company might otherwise have had against the respect thereof and the Director shall notify the Director, then the effect of this indemnity shall be Company of any such claim within a reasonable to prevent the Company from making such claim time after the Director becomes aware of such against the Director, who shall be immune to such claim, in order to enable the Company to contest claim, and such claim shall therefore be deemed such claim. Notwithstanding the aforegoing not to arise; provisions of this 42.3.3, the Company’s liability in terms of this indemnity shall not be affected 42.3.5 if this clause 42 is amended at any time, no such by any failure of the Director to comply with amendment shall detract from the rights of the this 42.3.3, save in the event and to the extent Directors in terms of this clause in respect of any that the Company proves that such failure has period prior to the date on which the resolution resulted in the Indemnified Loss being greater effecting such amendment is adopted by the than it would have been had the Director Shareholders; complied with this clause 42.3.3; 42.3.6 all provisions of this clause 42.3 are, notwith- 42.3.3.2 the Company shall, at its own expense and with standing the manner in which they have been the assistance of its own legal advisers, be enti- grouped together or linked grammatically, severable tled to contest any such claim in the name of the from each other. Any provision of this clause 42.3 Director until finally determined by the highest which is or becomes unenforceable, whether due court to which appeal may be made (or which to voidness, invalidity, illegality, unlawfulness or for may review any decision or judgment made or any other reason whatever, shall, only to the extent given in relation thereto) or to settle any such that it is so unenforceable, be treated as pro non claim and shall be entitled to control the scripto and the remaining provisions of this agree- proceedings in regard thereto; provided that – ment shall remain of full force and effect;

42.3.3.2.1 the Director shall (at the expense of the 42.3.7 this indemnity shall not detract from any separate Company and, if the Director so requires, indemnity that the Company may Sign in favour of with the involvement of the Director’s own the Director. 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 45 DISTRIBUTIONS

45.1 Subject to the provisions of the Companies Act and this MOI, the Board may declare any Distribution. 43 FINANCIAL STATEMENTS AND ACCESS TO COMPANY INFORMATION 45.2 Shareholders may by Ordinary Resolution declare a Distribution provided that such a Distribution is author- 43.1 The Company shall prepare annual Financial ised by a resolution of the Board. Statements in accordance with the Companies Act and the Regulations and shall have those annual Financial 45.3 All Distributions shall comply with the JSE Listings Statements audited. Requirements.

43.2 A copy of the annual Financial Statements of the 45.4 The Company may transmit or pay any Distribution or Company or a summary thereof shall be distributed to amount payable in respect of a Share by – all Shareholders in accordance with clause 46 as soon 141 as reasonably possible after those annual Financial 45.4.1 ordinary post to the postal address of the Statements have been approved by the Board and Shareholder thereof (or, where two or more audited, but in any event no later than required by the Persons are registered as the joint Shareholders of Companies Act and at least fifteen Business Days any Share, to the address of the joint holder whose before the date of the Annual General Meeting of the name stands first in the Securities Register) Company at which such annual Financial Statements recorded in the Securities Register or such other will be considered. address as the holder thereof may previously have notified to the Company in writing for this purpose; 44 FINANCIAL ASSISTANCE or

44.1 Financial assistance for subscription for 45.4.2 electronic bank transfer to such bank account as or purchase of Securities the holder thereof may have notified to the The Board may, as contemplated in section 44 of the Company in writing for this purpose, Companies Act and subject to the requirements of that section, authorise the Company to provide financial and the Company shall not be responsible for any assistance by way of a loan, guarantee, the provision loss in transmission. of security or otherwise, to any Person for the purpose of, or in connection with, the subscription for any 45.5 Any Distribution or other money payable to Security option, or any Securities, issued or to be issued by the Holders, – Company or a Related or Inter-related company, or for the purchase of any such Securities. The authority of 45.5.1 which is unclaimed, may be retained by the the Board in this regard is, accordingly, not limited or Company and held in trust indefinitely and may restricted by this MOI. while so retained be invested as the Board may deem fit until claimed by the Security Holder 44.2 Financial assistance to Directors, concerned or until the Security Holder’s claim there- Prescribed Officers and Related and fore prescribes in terms of clause 45.5.2; Inter-related Companies The Board may, as contemplated in section 45 of Act 45.5.2 may be claimed for a period of three years from the and subject to the requirements of that section, date on which it accrued to Security Holders, after authorise the Company to provide direct or indirect which period the Security Holders’ claim therefor financial assistance to a Director or Prescribed Officer shall prescribe and the amount of that Distribution of the Company, or of a Related or Inter-related shall, unless the Board decides otherwise be Company or corporation, or to a Related or Inter-related forfeited for the benefit of the Company. Company, or to a Member of a Related or Inter-related Company, or to a Person Related to any such 45.6 shall not bear interest against the Company, Company, corporation, Director, Prescribed Officer or Member. The authority of the Board in this regard is, and the Board shall, for the purpose of facilitating the accordingly, not limited or restricted by this MOI. 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.

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Memorandum of Incorporation (continued)

45.7 Distributions (in the form of a dividend or otherwise) 46.4 A Shareholder or Person entitled to Securities (or his/ shall be paid to Shareholders registered as at a Record her executor) shall be bound by every notice in respect Date subsequent to the date of declaration or, if appli- of the Securities Delivered to the Person who was, at cable, date of confirmation of the Distribution, which- the date on which that notice was posted, shown in ever is the later date. the Securities Register or established to the satisfac- tion of the Directors (as the case may be) as the holder 46 NOTICES of or Person entitled to the Securities, notwithstanding that the Shareholder or Person entitled to Securities 46.1 Any notice that is required to be given to Shareholders may then have been dead or may subsequently have or Directors – died or have been or become otherwise incapable of acting in respect of the Securities, and notwith- 46.1.1 may be given in any manner prescribed in the Table standing any transfer of the Securities was not regis- CR3 to the Regulations and that notice shall be tered at that date. deemed to have been delivered as provided for in 142 the Regulations as a result of the relevant method 46.5 If joint Shareholders are registered in respect of any of delivery; and Securities or if more than 1 (one) Person is entitled to Securities, all notices shall be given to the Person 46.1.2 shall, simultaneously with being distributed to named first in the Register in respect of the Securities, Shareholders, be announced through SENS and and notice so Delivered shall be sufficient notice to all given by the Company to the Issuer Services the holders of or Persons entitled to or otherwise inter- Division of the JSE in writing in any manner ested in the Securities. prescribed in Table CR 3 to the Regulations and the manner authorised by the JSE Listings 47 LOSS OF DOCUMENTS Requirements. The Company shall not be responsible for the loss in transmission of any cheque, warrant, certificate or 46.2 Each Shareholder and Director shall – (without any limitation eiusdem generis) other docu- ment sent through the post either to the registered 46.2.1 notify the Company in writing of a postal address, address of any Holder or to any other address which address shall be his registered address for requested by the Holder. the purposes of receiving written notices from the Company by post; and 48 ODD-LOTS In implementing any odd-lot offer made by the 46.2.2 be entitled to, notify in writing to the Company an Company in accordance with the Listing Requirements e-mail address and facsimile number, which of the JSE Securities Exchange South Africa, the address shall be his address for the purposes of Company shall, in respect of Shareholders holdings receiving notices by way of Electronic less than 100 Ordinary Shares in the issued share Communication, capital of the Company (“odd-lots”) and who did not elect to retain their odd-lots or increase their odd-lot and, if he has not notified to the Company any such holdings, cause the odd-lots to be sold on such terms postal or email address, then he shall not be enti- as the Directors may determine and the Company shall tled to receive notices from the Company until such account to the Shareholders concerned for the a postal or e-mail address is provided. proceeds attributable to the sales.

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 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; 143

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.

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 Form of Proxy LUSE share code: SHOPRITE ISIN: ZAE000012084 Shoprite Holdings Ltd (“Shoprite Holdings” or “the Company”)

For use only by: – certificated ordinary shareholders – dematerialised ordinary shareholders with “own name” registrations

At the annual general meeting of shareholders of Shoprite Holdings to be held at Cnr William Dabs and Old Paarl Roads, Brackenfell at 09h15 on Monday, 29 October 2012 and any adjournment thereof (“the AGM”). Dematerialised shareholders holding shares other than with “own name” registration, must inform their CSDP or broker of their intention to attend the AGM and request their CSDP or broker to issue them with the necessary letter of representation to attend the AGM in person. If you do not wish to attend the AGM, provide your CSDP or broker with your voting instruction in terms of your custody agreement.

I/We ...... (name/s in block letters) of ......

being a shareholder/shareholders of Shoprite Holdings and holding ...... ordinary shares in the Company, hereby appoint

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 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 1. This form of proxy must only be used by certificated ordinary share- as of the later of: holders or dematerialised ordinary shareholders who hold dematerial- • the date stated in the revocation instrument, if any; or ised ordinary shares with “own name” registration. • the date on which the revocation instrument was delivered as 2. Dematerialised ordinary shareholders are reminded that the onus is on required in subsection (4) (c) (ii). them to communicate with their CSDP or broker. 6.6 If the instrument appointing a proxy or proxies has been delivered to a 3. Each shareholder is entitled to appoint one or more proxies (who need company, as long as that appointment remains in effect, any notice that not be a shareholder(s) of the Company) to attend, speak and vote in is required by this Act or the company’s Memorandum of Incorporation place of that shareholder at the Annual General Meeting. to be delivered by the company to the shareholder must be delivered by the company to: 4. A shareholder may insert the name of a proxy or the names of two • the shareholder; or alternative proxies of the shareholder’s choice in the space provided, • the proxy or proxies, if the shareholder has- with or without deleting “the chairman of the Annual General Meeting”. – directed the company to do so, in writing; and The person whose name stands first on the form of proxy and who is – paid any reasonable fee charged by the company for doing so. present at the Annual General Meeting will be entitled to act as proxy to the exclusion of those whose names follow. 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 5. A shareholder’s instructions to the proxy must be indicated by the inser- Memorandum of Incorporation, or the instrument appointing the proxy, 145 tion of the relevant number of votes exercisable by that shareholder in provides otherwise. 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 6.8 If a company issues an invitation to shareholders to appoint one or more proxy may exercise all the votes of the shareholder. Failure to comply persons named by the company as a proxy, or supplies a form of with the above will be deemed to authorise the chairman of the Annual instrument for appointing a proxy: General Meeting to vote in favour of the ordinary and special resolutions • the invitation must be sent to every shareholder who is entitled to at the Annual General Meeting, or any other proxy to vote or to abstain notice of the meeting at which the proxy is intended to be exercised; from voting at the Annual General Meeting as he/she deems fit, in • the invitation, or form of instrument supplied by the company for the respect of the shareholder’s total holding. purpose of appointing a proxy, must: – bear a reasonably prominent summary of the rights established 6. Summary of rights established by section 58 of the Companies Act, by this section; 71 of 2008 – contain adequate blank space, immediately preceding the name 6.1 At any time, a shareholder of a company may appoint any individual, or names of any person or persons named in it, to enable a including an individual who is not a shareholder of that company, as a shareholder to write in the name and, if so desired, an alterna- proxy to: tive name of a proxy chosen by the shareholder; and • participate in, and speak and vote at, a shareholders meeting on – provide adequate space for the shareholder to indicate whether behalf of the shareholder; or the appointed proxy is to vote in favour of or against any resolu- • give or withhold written consent on behalf of the shareholder to a tion or resolutions to be put at the meeting, or is to abstain from decision contemplated in section 60. voting; 6.2 A proxy appointment: • the company must not require that the proxy appointment be made • must be in writing, dated and signed by the shareholder; and irrevocable; and • remains valid for- • the proxy appointment remains valid only until the end of the – one year after the date on which it was signed; or meeting at which it was intended to be used, subject to subsection – any longer or shorter period expressly set out in the appointment, (5). unless it is revoked in a manner contemplated in subsection (4) Subsection (8) (b) and (d) do not apply if the Company merely supplies a (c), or expires earlier as contemplated in subsection (8) (d). generally available standard form of proxy appointment on request by a shareholder. 6.3 Except to the extent that the Memorandum of Incorporation of a company provides otherwise: 7. Documentary evidence establishing the authority of a person signing • a shareholder of that company may appoint two or more persons this form of proxy in a representative capacity must be attached to this concurrently as proxies, and may appoint more than one proxy to form of proxy, unless previously recorded by the Company’s transfer exercise voting rights attached to different securities held by the office or waived by the chairman of the Annual General Meeting. shareholder; 8. The chairman of the Annual General Meeting may reject or accept any • a proxy may delegate the proxy’s authority to act on behalf of the form of proxy which is completed and/or received other than in accord- shareholder to another person, subject to any restriction set out in ance with these instructions, provided that he is satisfied as to the the instrument appointing the proxy; and manner in which a shareholder wishes to vote. • a copy of the instrument appointing a proxy must be delivered to the 9. Any alterations or corrections to this form of proxy must be initialled by company, or to any other person on behalf of the company, before the signatory(ies). the proxy exercises any rights of the shareholder at a shareholders meeting. 10. The completion and lodging of this form of proxy will not preclude the relevant shareholder from attending the Annual General Meeting and 6.4 Irrespective of the form of instrument used to appoint a proxy: speaking and voting in person thereat to the exclusion of any proxy • the appointment is suspended at any time and to the extent that the appointed in terms hereof, should such shareholder wish to do so. shareholder chooses to act directly and in person in the exercise of any rights as a shareholder; 11. A minor must be assisted by his/her parent guardian unless the relevant • the appointment is revocable unless the proxy appointment documents establishing his/her legal capacity are produced or have expressly states otherwise; and been registered by the Company. • if the appointment is revocable, a shareholder may revoke the proxy 12. Where there are joint holders of any shares: appointment by: – any one holder may sign this form of proxy; – cancelling it in writing, or making a later inconsistent appoint- – the vote(s) of the senior shareholders (for that purpose seniority will ment of a proxy; and be determined by the order in which the names of shareholders – delivering a copy of the revocation instrument to the proxy, and appear in the Company’s register of shareholders) who tenders a to the company. 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.

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012 Administration Shoprite Holdings Ltd

REGISTRATION NUMBER SPONSORS 1936/007721/06 South Africa REGISTERED OFFICE Nedbank Capital Physical address: Cnr William Dabs and Old Paarl Roads PO Box 1144, Johannesburg, 2000, South Africa Brackenfell, 7560, South Africa Telephone: +27 (0)11 295 8525 Postal address: PO Box 215, Brackenfell, 7561, South Africa Facsimile: +27 (0)11 294 8525 Telephone: +27 (0) 21 980 4000 Website: www.nedbank.co.za Facsimile: +27 (0) 21 980 4050 Website: www.shopriteholdings.co.za Namibia Old Mutual Investment Group (Namibia) (Pty) Ltd COMPANY SECRETARY PO Box 25549, Windhoek, Namibia Mr P G du Preez Telephone: +264 (0) 61 299 3264 Physical address: Cnr William Dabs and Old Paarl Roads Facsimile: +264 (0) 61 299 3528 146 Brackenfell, 7560, South Africa Postal address: PO Box 215, Brackenfell, 7561, South Africa Zambia Telephone: +27 (0) 21 980 4284 ShareTrack Zambia Facsimile: +27 (0) 21 980 4468 PO Box 37283, , Zambia E-mail: [email protected] Telephone: +260 (211) 236 783 Facsimile: +260 (211) 236 785 TRANSFER SECRETARIES AUDITORS South Africa PricewaterhouseCoopers Incorporated Computershare Investor Services (Pty) Ltd PO Box 2799, Cape Town, 8000, South Africa PO Box 61051, Marshalltown, 2107, South Africa Telephone: +27 (0) 21 529 2000 Telephone: +27 (0) 11 370 5000 Facsimile: +27 (0) 21 529 3300 Facsimile: +27 (0) 11 688 5248 Website: www.computershare.com BANKERS ABSA Bank Ltd Namibia Citibank N.A. Transfer Secretaries (Pty) Ltd First National Bank Ltd PO Box 2401, Windhoek, Namibia HSBC Ltd Telephone: +264 (0) 61 227 647 Investec Bank Ltd Facsimile: +264 (0) 61 248 531 Nedbank Ltd Old Mutual Specialised Finance (Pty) Ltd Zambia The Standard Bank of South Africa Ltd ShareTrack Zambia Standard Chartered Bank PLC 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 Reviewed Publishing of Annual General End of financial Interim results Payment of year-end results integrated report Meeting half-year preference dividend Payment of preference Payment of dividend interim ordinary dividend Payment of final ordinary dividend

SHOPRITE HOLDINGS LTD INTEGRATED REPORT 2012