T R EPO R ATED ANNUAL R INTEG 2014 2014 REMGRO LIMITED 2014 INTEGRATED ANNUAL REPORT CREATING SHAREHOLDER VALUE SINCE 1948 MORE INFORMATION This Integrated Annual Report is published as part of a set of reports in respect of the financial year ended 30 June 2014, all of which are available on the Company’s website at www.remgro.com. 2014 ANNUAL 2014 SUSTAINABLE FINANCIAL STATEMENTS DEVELOPMENT REPORT INVESTOR TOOLS Cross-reference to Download from View more information Will take you to information relevant sections within our website: on our website: that is suitable to view on this report www.remgro.com www.remgro.com your smartphone. CONTENTS OVERVIEW OF BUSINESS REMGRO’S APPROACH TO REPORTING 2 Scope and boundaries of report, external audit and assurance and significant events SALIENT FEATURES 3 GrOUP PROFILE 4 Summary of the Company’s business, group structure, history, our business model, ownership structure, understanding the business of an investment holding company, and key objectives and principal integrated risks SIX-YEAR REVIEW AND SHARE STATISTICS 12 DIRECTORATE AND MEMBERS OF COMMITTEES 14 EXECUTIVE MANAGEMENT STRUCTURE 16 SHAREHOLDERS’ DIARY AND COMPANY INFORMATION 17 REPORTS TO SHAREHOLDERS CHAIRMAN’S REPORT 18 CHIEF EXECUTIVE OFFICER’S REPORT 21 CHIEF FINANCIAL OFFICER’S REPORT 26 INVESTMENT REVIEWS 34 GOVERNANCE AND SUSTAINABILITY CORPORATE GOVERNANCE REPORT 65 RISK MANAGEMENT REPORT 72 SOCIAL AND ETHICS COMMITTEE REPORT 78 ABRIDGED SUSTAINABLE DEVELOPMENT REPORT 80 REMUNERATION REPORT 89 FINANCIAL REPORT SUMMARY FINANCIAL STATEMENTS 97 NOTICE TO SHAREHOLDERS 123 ExPLANATORY NOTES TO THE NOTICE TO SHAREHOLDERS 129 SHAREHOLDERs’ aCTIONS REQUIRED FORM OF PROXY ATTACHED REMGRO LIMITED INTEGRATED ANNUAL REPORT | 1 | REMGRo’S APPROACH TO REPORTING The 2014 Integrated Annual Report provides a holistic view January 2014, Remgro only has two main operating of Remgro’s business model, how the Company is managed subsidiaries, i.e. RCL Foods and Wispeco Holdings Pro- and also how it manages its investments. In this regard our prietary Limited (Wispeco). As RCL Foods (a 78% subsidiary) main focus is to provide a complete analysis of our business is listed on the JSE, detailed information regarding its to satisfy the information needs of key stakeholders that use financial, sustainability and social performance is available the Integrated Annual Report. In order to ensure that we on its website at www.rclfoods.com. As from 30 June 2014 address all the material issues that matter to us, our share- RCL Foods’ reporting will also include TSB. holders and other stakeholders, we also report on matters such as: Wispeco is an unlisted wholly owned subsidiary which is operated and managed on a decentralised basis as an } Our business model; and independent entity with an autonomous board of directors. } Our most significant business risks, as identified through Based on the above, as well as the fact that Wispeco our integrated risk management process. only represents 0.62% of Remgro’s intrinsic net asset value, only summarised “non-financial“ disclosure relating to The information provided thus aims to provide our social and environmental performance will be provided stakeholders with a good understanding of the financial, for Wispeco. This is in line with Remgro’s reporting on the social, environmental and economic impacts of the Group financial performance of its investee companies. to enable them to evaluate the ability of Remgro to create and sustain value for our stakeholders. Following on the philosophy outlined above, Remgro manages all investee companies on the same decentralised This Integrated Annual Report was prepared in accordance basis, irrespective of whether they are subsidiaries, associates with International Financial Reporting Standards, the Listings or joint ventures. Therefore data relating to the social and Requirements of the JSE Limited, as well as the Companies environmental performance of subsidiaries, associates Act (No. 71 of 2008), as amended, where relevant. Reporting and joint ventures, over which Remgro does not exercise on sustainable development was done based on the operational control, are not covered in detail in this report. principles and recommendations regarding integrated However, information is provided in instances where material sustainability reporting as contained in the King Report sustainable development issues are at stake. on Governance for South Africa 2009 (King III). The recommendations contained in the International Integrated Except where otherwise indicated, all disclosures relating Reporting Frame work were also noted and applied wherever to social and environmental performance thus only relate to possible. Remgro’s activities at its head office in Stellenbosch. This Integrated Annual Report only includes an abridged EXTERNAL AUDIT AND ASSURANCE version of the Sustainable Development Report as well as The consolidated annual financial statements were audited summary financial statements. The detailed Sustainable by the independent external auditors, Pricewaterhouse- Development Report and Annual Financial Statements Coopers Inc., in accordance with International Standards in respect of the year under review are available on the on Auditing. The report of the external auditors in respect Company’s website at www.remgro.com. of the summary consolidated annual financial statements Remgro has applied the majority of the principles contained is included on page 107 of the Integrated Annual Report. in King III – a summary of all King III principles that were not Various other voluntary external accreditation, certification applied is presented in the Corporate Governance Report on and assurance initiatives are followed in the Group, page 65. An index on the application of all King III principles complementing the combined assurance model as covered is published on the Company’s website at www.remgro.com. throughout the Integrated Annual Report. We believe that SCOPE AND BOUNDARIES OF OUR REPORT this adds to the quality and reliability of the information presented. Refer to the abridged Sustainable Development Remgro is an investment holding company and accordingly Report on page 80 for further details. all references to “the Group“ in this context denote the Company and its subsidiaries. Disclosure is therefore limited SIGNIFICANT EVENTS DURING REPORTING PERIOD to those entities where the Group exercises control over the financial and operating policies of such entities, save where No significant events occurred during the reporting period those entities disclose the relevant information in their own or after the end of the reporting period, which may have a publicised annual reports. material impact on the size, structure or ownership of the Group. Refer to the Chief Executive Officer’s Report on Since the disposal of TSB Sugar RSA Proprietary page 21 for a summary of the most significant investment Limited (TSB) to RCL Foods Limited (RCL Foods) during activities during the year under review. | 2 | REMGRO LIMITED INTEGRATED ANNUAL REPORT OVERVIEW OF BUSINESS SALIENT FEATURES HEADLINE EARNINGS ORDINARY DIVIDEND I NTRINSIC NET ASSET PER SHARE PER SHARE VALUE PER SHARE EXCLUDING MEDICLINIC REFINANCING COST +20.5% +12.4% +20.1% FINANCIAL Year ended Year ended 30 June 30 June 2014 2013 % Restated change Headline earnings R6 635m R4 196m 58.1 – per share 1 292.4c 817.1c 58.2 Headline earnings, excluding Mediclinic refinancing cost R6 635m R5 508m 20.5 – per share 1 292.4c 1 072.6c 20.5 Dividends per share Ordinary 389.00 346.00c 12.4 – Interim 156.00c 145.00c 7.6 – Final 233.00c 201.00c 15.9 Intrinsic net asset value per share R245.96 R204.83 20.1 Remgro share price at 30 June R230.00 R189.95 21.1 Percentage discount to intrinsic net asset value 6.5% 7.3% (11.0) NON-FINANCIAL Spent on corporate social investment (CSI) (R million) – At the centre 23 14 – Share of CSI spend of investee companies 71 56 BBBEE scorecard contributor level 5 5 Ranking in carbon disclosure project Joint 2nd Joint 4th (Climate (Climate Disclosure Disclosure Leadership Leadership Index) Index) Inclusion in JSE SRI Index Yes Yes REMGRO LIMITED INTEGRATED ANNUAL REPORT | 3 | GROUP PROFILE REMG RO LIMITED* IS AN INVESTMENT HOLDING COMPANY * Remgro or the Company OUR BUSINESS Originally established in the 1940s by the late Dr Anton Rupert as a tobacco manufacturer, Remgro’s investment portfolio has evolved substantially and currently includes more than 30 investee companies. The Company is listed on the Johannesburg Securities Exchange (JSE) operated by the JSE Limited in South Africa under the “Industrials – Diversified Industrials“ sector, with the share code “REM“. Our interests consist mainly of investments in the following industries: FOOD, liQuor AND HomE CARE BANKING HEALTHCARE INSURANCE INDUSTRIAL INFRASTRUCTURE MEDIA AND SPORT | 4 | REMGRO LIMITED INTEGRATED ANNUAL REPORT OVERVIEW OF BUSINESS GROUP STRUCTURE GROUP PROFILE AT 30 JUNE 2014 REMGRO LIMITED (PRINCIPAL INVESTMENTS) FOOD, LIQUOR AND HOME CARE Unilever South Africa 25.8% Distell 31.0% RCL Foods 77.7% BANKING RMBH 27.9% FirstRand 4.0% HEALTHCARE Mediclinic 42.1% INSURANCE RMI Holdings 30.3% INDUSTRIAL Air Products South Africa 50.0% Kagiso Tiso Holdings 34.7% Total South Africa 24.9% PGSI 37.7% Wispeco 100% INFRASTRUCTURE Grindrod 22.6% CIV group 50.7% SEACOM 25.0% MEDIA AND SPORT Sabido 31.9% Premier Team Holdings 50.0% Stellenbosch Academy of Sport 100% OTHER INVESTMENTS Business Partners 42.7% TREASURY AND MANAGEMENT SERVICES Remgro Finance