1142 54 29 22 16 15 13 11 7 5 5 3 3 3 3 2 1 ZIMBABWE ZAMBIA UGANDA SWAZILAND TANZANIA NIGERIA NAMIBIA MOZAMBIQUE MAURITIUS MALAWI MADAGASCAR LESOTHO GHANA DRC BOTSWANA ANGOLA SOUTH AFRICA AFRICA’S LARGEST FOOD RETAILER INTEGRATED REPORT 2012 2 Shoprite Holdings Limited is an investment holding company whose combined subsidiaries constitute the largest fast moving consumer goods (FMCG) retail operation on the African continent. Its various chains operate a total of 1 334 corporate stores in 17 countries, all integrated electronically into a central data base and replenishment system. The Group’s primary business is food retailing to consumers of all income levels, and there are outlets from Cape Town to Accra and on some Indian Ocean islands. Management’s goal is to provide all communities in Africa with food and household items in a 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 Madagascar Mauritius Uganda 100% Tanzania Computicket (Pty) Ltd Angola Ghana Has operations in: Zimbabwe South Africa Nigeria Namibia Malawi 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.