Massmart Year Ended June 2012

CONTENTS
MASSMART AT A GLANCE 1
Financial highlights Our business model Our vision Our investment proposition Our mission Corporate accountability synopsis Our shares and shareholder information Group prole Store regional map Executive Directors Non-executive Directors Executive Committee Chairman's letter to stakeholders Chief Executive Ofcer's review Financial Directors review Denitions and formulas Massmart since 1990 Ten-year review
STAKEHOLDERS GUIDE
1 2 4 4 5 6 8 10 16 18 19 22 29 32 38 61 62 64 79 87 95 104 112 117 118 120 122 134 140 145 146 147 148 151 164 172 173 174 178 183 185 189 190 191 192 193 194 275 275 276 277 278 279 289 299
Massmart recognises that its business must serve to all stakeholders. This guide will direct you to the parts of this annual report that specically address the interests of dierent stakeholder groups.
SHAREHOLDERS: Massmart has 6,356 shareholders in South Africa and abroad ranging from major institutions to individuals. Chairman's letter to stakeholders Chief Executive Ofcer's review Financial Director's review Ten-year Review Group Financial Statements 29 32 38 64 183
REPORTS TO STAKEHOLDERS 29 TEN-YEAR REVIEW 61 OPERATIONAL REVIEW 79
Massdiscounters divisional review Masswarehouse divisional review Massbuild divisional review Masscash divisional review Channel and Shared Services review
Introduction Engaging with stakeholders Dening sustainability priorities Massmarts progress update Performance indicators Further reading Exceptions to King III Board and Committee attendance Board Committees The Board Audit and Risk Committee Nomination and Remuneration Committee Social and Ethics Committee Executive Committee Compliance, transparency and accountability Investor relations Approval of the annual nancial statements Directors' report Income statement Statement of comprehensive income Statement of nancial position Statement of cash ows Statement of changes in equity Notes to the annual nancial statements Income statement Statement of comprehensive income Statement of nancial position Statement of cash ows Statement of changes in equity Notes to the annual nancial statements Notice of annual general meeting Form of proxy
EMPLOYEES: Massmart employs over 32,000 people across it operations. Many thousands more rely on our employees for their livelihoods. Corporate Accountability Operational Review Chief Executive Ofcer's Review Corporate Governance 117 79 32 145
NAVIGATION
READ MORE
CORPORATE ACCOUNTABILITY 117
CORPORATE GOVERNANCE 145
COMMUNITIES: Massmart operates from 321 stores in South Africa and 27 stores in 11 other sub-Saharan countries and is integrally involved with the communities around its operations. Corporate Accountability Corporate Governance Operational Review Chairmans letter to stakeholders 117 145 79 29 FORMULA
CUSTOMERS: Massmart appeals to a wide variety of customers ranging from LSM 2 to 10. Operational Review Chairmans letter to stakeholders Group Financial Statements Corporate Accountability 79 29 183 117
DEFINITION
GROUP FINANCIAL STATEMENTS 183
SUPPLIERS: Massmart sources goods and uses the services of approximately 9,449 active suppliers. Group Financial Statements Operational Review Chief Executive Ofcer's Review Financial Director's Review Corporate Accountability Corporate Governance 183 79 32 38 117 145
INSIGHT
COMPANY FINANCIAL STATEMENTS 275
REFER TO WEB
SHAREHOLDER INFORMATION 289
Massmart Integrated Annual Report 2012
FINANCIAL HIGHLIGHTS
UP BY 15.6%
UP BY 3.7%
DOWN BY 0.9%
R61,209.1m
TOTAL SALES
2011: R52,950.1m
R2,134.6m
OPERATING PROFIT*
2011: R2,058.7m
32.8%
RETURN ON EQUITY*
2011: 33.7%
PER SHARE PERFORMANCE

UP BY 8.9% UP BY 2.8%
FINANCIAL STATISTICS
R1,363.6m
HEADLINE EARNINGS* 2011: R1,252.7m UP BY 38.0%
632.6c
UP BY 3.1%
HEADLINE EARNINGS* 2011: 615.5 cents
3.7%
TRADING PROFIT BEFORE INTEREST AND TAXATION MARGIN* 2011: 4.1%
R1,216.7m
HEADLINE EARNINGS INCLUDING WALMART COSTS 2011: R881.9m UP BY 62.8%
398.0c
DIVIDENDS 2011: 386.0 cents UP BY 8.7%
42.2%
2011: 47.2%
RETURN ON CAPITAL EMPLOYED*
R2,668.5m
CASH GENERATED FROM OPERATIONS 2011: R1,639.4m * Excluding effect of Walmart costs READ MORE: PAGE 61 TEN-YEAR REVIEW More detail on definitions and explanatory notes.
2,015.9c
NET ASSET VALUE 2011: 1,854.2 cents
19.6%
DEBT: EQUITY 2011: 15.1% READ MORE: PAGE 217 GROUP FINANCIAL STATEMENTS More detail on headline earnings per share can be found in note 12.
19.2%
RETURN ON INVESTED CAPITAL
Massmart at a Glance
OUR BUSINESS MODEL

MASSMART GROUP MASSMART HOLDINGS
Massmart has evolved into a business model that empowers its Divisions to take trading decisions suited to their individual operating needs but within a strategic operating and nancial framework set by the Group.
This has several advantages. The framework guarantees consistent compliance with the best governance standards and national legislative requirements. It commits each Division to implementing Massmarts core strategy of being a high-volume, low-margin distributor of quality branded consumer goods for cash, and ensures expansion plans add net value to the Group. At the same time, Divisions can extract greater value from being part of a larger Group with greater access to goods and services or negotiating better terms and rebates with suppliers and service providers. The Divisions are differentiated as retail or wholesale formats that address different customer and market proles. The model operates through four entities: Massmart Holdings, the shareholder of the operating Divisions that consolidates the Groups nancial, treasury, tax and company secretarial functions and is headed by the Financial Director; R Channel, where Divisions can share best practice and develop mutually benecial collaborative efforts; R Shared Services, which handles those activities identied by Channel that are more cost effective to share across Divisions; and R the four operating Divisions themselves, who report directly to the Chief Operating Ofcer.
R
Massmart Holdings performs the Group management role and denes the strategic and broad operating principles that guide the Groups activities. Its functions include budget approval and capital allocation, store site location, executive appointments, development and retention, corporate affairs, human capital and internal audit. A business intelligence unit collates and analyses Divisional data to inform Group strategy and decision-making.
Decentralised decision-making is given effect through a Group Executive Committee reporting to the Group Chief Executive Ofcer (CEO). The Committees members comprise the CEOs of Massmarts four operating Divisions and a Group Executive from each of Massmart Holdings, Channel and Shared Services. Massmart Holdings Executives are also represented on each of the four Divisional boards as nonexecutive directors.
MASSMART IS A MANAGED PORTFOLIO OF FOUR DIVISIONS, EACH FOCUSED ON HIGH-VOLUME, LOW-MARGIN, LOW-COST DISTRIBUTION OF MAINLY BRANDED CONSUMER GOODS FOR CASH, THROUGH 348 STORES IN 12 COUNTRIES IN SUB-SAHARAN AFRICA.
MASSMART CHANNEL
MASSMART SHARED SERVICES
MASSMART DIVISIONS
Massmart Channel consists of formal trading and functional forums where ideas on collaboration across Divisions are shared. Trading forums cover Food and Liquor, General Merchandise, and Cellular. Functional forums include Technology, Information and Process (TIP), Operations, Supply Chain and Human Resources. Trading forums are headed by Divisional CEOs and functional forums are headed by Group Executives. Directors and Executives from the Divisions attend forums in their specic areas of competence. Once consensus is reached on a collaborative proposal, the Executive Committee approves whether it should be rolled out across the Group.
Massmart Shared Services implements collaborative agreements reached by Channel. The most important are Group supplier negotiations for all products sold across the Group. Shared Services also handles the Groups Payroll functions, the Shipping and associated Treasury functions for direct imports, and managing private or exclusive brands shared across Massmarts trading Divisions.
Massmarts Divisions comprise Massdiscounters, Masswarehouse, Massbuild and Masscash. Each has a dedicated management team focusing on a particular retail or wholesale format, merchandise proposition and customer base, and is empowered to take trading decisions within a strategic framework and governance structure dened by the Group.
SELL BUY
MASSWAREHOUSE
WAREHOUSE CLUB
GENERAL MERCHANDISE DISCOUNTER AND FOOD RETAILER
MASSDISCOUNTERS
FOOD WHOLESALER, RETAILER AND BUYING ASSOCIATION
MASSCASH
SELL BUY
SELL BUY
MASSMART HOLDINGS
OVERALL GROUP STRATEGY AND PERFORMANCE MANAGEMENT
CH
ANN
EL AN
D SHARED SE
RVI
CE
HOME IMPROVEMENT RETAILER AND BUILDING MATERIALS SUPPLIER
MASSBUILD
BUY SELL
OUR VISION
THE MASSMART VISION

Massmart is a South African retail and wholesale distributor, with 321 stores in South Africa and27stores in sub-SaharanAfrica.
OUR SUPPLIERS
Will regard Massmart as a valued partner in accessing and understanding their end-consumers.
OUR INVESTORS
Will regard Massmart as a portfolio rendering superior returns relative to the JSE Retail sector.
OUR CUSTOMERS
Will regard Massmarts wholesale and retail formats as their rst choice when buying those categories of merchandise offered by the formats.
OUR COMMUNITY
Including Government, will regard Massmart as a socially accountable corporation.
CAREER RETAILERS
Will regard Massmart as the preferred employer in the distribution industry.
OUR INVESTMENT PROPOSITION

STRATEGIC AND STRUCTURAL CLARITY
R Through four focused Divisions, each a leader in its target market and business model R Where additional value is created through inter-Divisional collaboration R Behaviour is aligned through shortand long-term incentives R While adhering strictly to organic and acquisitive growth criteria
MANAGEMENT DEPTH, QUALITY AND DIVERSITY

R The 46 Group and Divisional Executives hold 86 qualications of which 65 are degrees, are an average age of 46 years, and 22% are African, Coloured or Indian
LOW RISK
R Earnings underpinned by high cash generation R Limited nancial leverage R Conservative through-the-cycle store opening plans
OUR MISSION
Massmart is a South African-based, globally competitive, regional management group, invested in a portfolio of dierentiated, complementary, focused wholesale and retail formats, each reliant on high volumes and operational excellence as the foundation of price leadership, in the distribution of mainly branded consumer goods for cash. The Group actively seeks the continual improvement of performance in the portfolio and its parts, through strategic and structural clarity, high market shares, excellent management, principle-driven ethical leadership, cost-eective technology and the sharing or agglomeration of capabilities, knowledge, resources, inuence and information. To this end, thought leadership, individual and collective performance, and collaboration throughout the Group are appropriately rewarded, with executive management incentivised predominantly on Group performance.
DIVERSIFICATION
R Merchandise Massmart is the second largest distributor of consumer goods in Africa, and is the leading retailer of general merchandise, liquor, home improvement and building supplies, and the leading food wholesaler R Formats trading through a variety of formats R Customers serving all mass-market consumers R Geography operating in twelve sub-Saharan African countries
GROWTH
R Continuously improving the productivity of capital, space and labour R Strengthening Supply Chain activities R Upweighting Group private label efforts R Complementing store growth through targeted acquisitions and greeneld opportunities R Expansion into Food Retail through Cambridge Foods, Game Foodco and Makro Fresh
GOOD GOVERNANCE
R Board composition three executive and seven non-executive directors R Recognised record of good disclosure R Compliant with King III Report and the JSE SRII R Member of the Ethics Institute of Southern Africa
CORPORATE ACCOUNTABILITY SYNOPSIS

Massmarts 2012 Corporate Accountability Report remains consistent in content, style and format with our 2011 report in order to provide continuing progress on identied themes and interventions.
In addition to the Human Capital, Black Economic Empowerment, Climate Change, African Operations and Corporate Social Investment scorecards, we have introduced the Product Safety scorecard that highlights our performance in managing customer complaints and product recalls.
1. STAKEHOLDER ENGAGEMENT
1 2 3
CONSOLIDATE
VALIDATE
WE VALIDATED THE RELEVANCE OF THE IDENTIFIED PRIORITIES WITH INTERNAL AND EXTERNAL STAKEHOLDERS WE REVIEWED AND CONTEXTUALISED OUR ENGAGEMENT PROCESS OUTPUT
WE CONDUCTED DESKTOP REVIEWS AND INTERACTED WITH INDEPENDENT INTERNAL AND EXTERNAL SUBJECT-MATTER EXPERTS
WE UNDERTOOK MEDIA RESEARCH TO REVIEW ISSUES TACKLED BY LEADING MEDIA ORGANISATIONS AND WIDER SOCIETY
WE ASSESSED THE STATUS OF ENVIRONMENTAL INITIATIVES WITH THE GROUPS KEY SUPPLIERS THROUGH SURVEYS, WORKSHOPS AND SITE VISITS
WE CONSOLIDATED IDENTIFIED ISSUES WITH OUR ACCOUNTABILITY THEMES AND ASSOCIATED OBJECTIVES
2. PROGRESS
ENERGY SECURITY
55*
235* 1,882*
HIVD/ AIDS
WATER SECURITY
WASTE MANAGEMENT
1,895*
2,798*
FOOD SECURITY
CORRUPTION
5,817*
9,726*
11,373*
* number of mentions
AT MASSMART WE
ENERGY SECURITY:
continued to embed energy efcient solutions in new store design
PRIORITISED ISSUES
FOOD SECURITY:
launched the Ezemvelo Direct Farm programme
HIV/AIDS:
have conducted 43,723 voluntary HIV tests since the inception of our Impilo programme
CORRUPTION:
have promoted awareness of the Massmart Ethics Line
WATER SECURITY:
harvested rainwater and condensate at our Builders and new generation Makro stores
JOB SECURITY:
pledged to create 15,000 jobs over ve years
WASTE MANAGEMENT:
have increased the number of our active recycling sites and surveyed the practices of our SA stores
EDUCATION:
have donated purpose-designed early childhood development kits to under-resourced pre-schools and crches
HIGHEST PRIORITY
LOWEST PRIORITY
JOB SECURITY
EDUCATION
3. ACCOUNTABILITY THEMES
The development of our accountability themes and the classication of our interventions have assisted us in providing clear and effective communication to our stakeholders on our corporate accountability commitment. We continue to monitor and review our initiatives to ensure that we remain relevant.
ACCOUNTABILITY THEME 1
ENABLE SUSTAINABLE SUPPLY AND CONSUMERISM

4. KEY PERFORMANCE INDICATORS MASSMART GROUP
VALUE ADDED (Rm)*
MINIMISE THE GROUP ENVIRONMENTAL FOOTPRINT
CHAMPION SOCIAL EQUALITY INITIATIVES
MASSDISCOUNTERS
MASSWAREHOUSE
MASSBUILD
MASSCASH
14,886.5
CUSTOMER SATISFACTION (%)
4,128.6 88.0 37.9 88.2 77.4 264.1 4.5 89.3
3,894.1 86.0 64.4 68.0 65.7 345.0 0.6 n/a
2,715.9 86.0 61.6 41.4 65.2 64.7 1.3 89.8
4,013.8 82.0 39.4 68.1 59.5 112.6 3.4 82.8
86.2 48.4 78.5

OUR BBBEE SCORE (%)
EMPLOYEES WITH MEDICAL BENEFITS (%)
BLACK PROFESSIONALS AS A % OF MANAGEMENT PROFESSIONALS
72.8 183.7 3.1 87.8

* OTHER: R134.1 million
OUR PURCHASED ELECTRICITY EMISSIONS INTENSITY (TONNES CO2E/(GLA)M2)
CORPORATE SOCIAL INVESTMENT AS % OF PAT
AFRICA OPERATIONS LOCAL MANAGEMENT AS A % OF TOTAL MANAGEMENT
OUR SHARES AND SHAREHOLDER INFORMATION

KEY INFORMATION
Ordinary shares Authorised 500,000,000 Issued 216,124,461 6,356 Number of shareholders Year-end End of June Ordinary general meeting of shareholders Held annually in Johannesburg towards the end of November Administrators of shareholders register Computershare Investor Services (Pty) Ltd 70 Marshall Street Johannesburg, 2000 Share code MSM
SHARES
1 - 1,000 shares 1,001 - 10,000 shares 10,001 - 100,000 shares 100,001 - 1,000,000 shares 1,000,001 shares and over 1,266,527 2,237,457 5,452,895 16,136,229 191,031,353
SHAREHOLDER SPREAD
SHAREHOLDERS SPLIT BETWEEN PUBLIC AND NON-PUBLIC
%
0.5 1.1 2.7 8.4 87.3
SHARES
Non-public: Walmart subsidiary: Main Street 830 (Pty) Ltd 113,859,293 Non-public: Directors and Executives of the Company Non-public: Share trust Public shareholders 1,110,467 43,152 101,111,549
%
52.7 0.5 0.0 46.8
HIGH, LOW AND CLOSING SHARE PRICE (CENTS PER SHARE)
DISTRIBUTION OF SHAREHOLDERS
FOREIGN SHAREHOLDING
2008
2009 Closing 6 149 8 000
2010
2011
2012
12 200 13 239 12 580 15 460 7 275 11 358
16 835 18 550 13 748
SHARES
Walmart subsidiary: 113 859 293 Main Street 830 (Pty) Ltd Unit Trusts/Mutual Fund 47 438 191 Pension Funds 24 516 172 Other Managed Funds 10 421 292 Sovereign Wealth 5 539 885 Private Investors 4 162 808 Custodians 4 021 684 Charity 1 069 317 Insurance Companies 907 142 Exchange-Traded Fund Total 890 720 American Depository Receipts 507 811 Investment Trust 243 383 Local Authority 30 166 Remainder 2 516 597
%
52,7 21,9 11,3 4,8 2,6 1,9 1,9 0,5 0,4 0,4 0,2 0,1 0,0 1,3 South Africa Walmart subsidiary: Main Street 830 (Pty) Ltd* United States of America and Canada United Kingdom Rest of Europe Rest of World
SHARES
19,611,704 113,859,293 26,362,025 42,535,882 4,310,545 9,445,012
%
9.1 52.7 12.2 19.7 2.0 4.3
High Low 9 724 9 029 5 910 5 650
* South African company ultimate holding company is Walmart Stores, Inc.
100 90 80 70 60 50 40 30 20
89.5 67.0 57.0 41.6 25.0

2008
91.0
72.0
41.6
26.5
2009
24.8
2010 2011 2012
MASSMART FOREIGN HOLDING
JSE GENERAL RETAILERS AVERAGE FOREIGN HOLDING
MASSMARTS SHARE PRICE AND TRADING VOLUMES ON THE JOHANNESBURG STOCK EXCHANGE (REBASED TO R12.95)
200 175 150 125
MASSMART TRADING VOLUMES (Rm)
200 175 150 125 100 75 50 25

Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Jun-12
MASSMART SHARE PRICE AND JSE GENERAL RETAILERS INDEX
100 75 50 25 0
MASSMART SHARE PRICE
JSE GENERAL RETAILERS INDEX
BIANNUAL MASSMART TRADING VOLUMES
PRINCIPAL SHAREHOLDERS Number of shares Walmart subsidiary: Main Street 830 (Pty) Ltd 113,859,293 Equity stake (%) 52.7
Custodians and managers holding 3% or more The following shareholders, custodians and managers held benecially, directly or indirectly, more than 3% of the Companys shares: Number of shares Aberdeen Asset Management Group Public Investment Corporation JP Morgan Asset Management Baillie Gifford & Co Limited 24,868,287 12,403,856 10,037,877 7,508,459 Equity stake (%) 11.5 5.7 4.6 3.5
10
GROUP PROFILE
MASSMART GROUP MASSDISCOUNTERS
DIVISIONS
STORES AND OUTLETS
348 stores
107 stores
18 stores
COUNTRIES
SA, Botswana, Ghana, Lesotho, Malawi, Mozambique, Namibia, Nigeria, Swaziland, Tanzania, Uganda, Zambia
SA, Botswana, SA Ghana, Malawi, Mozambique, Namibia, Nigeria, Tanzania, Uganda, Zambia
PRODUCT CATEGORIES
Food/Liquor/General Merchandise/ Home Improvement Supplies
General Merchandise, Food and FMCG
Electrical Appliances
FINANCIAL HIGHLIGHTS AND CONTRIBUTION TO GROUP
Sales R61,209.1 million
24 37
Sales (24%)
13
25
Trading prot before tax* R2,456.8 million
Trading prot before tax* R813.0 million
12 18 Trading profit
33
before taxation (33%)
37
* Trading prot denitions can be found on page 61.
11
MASSWAREHOUSE
WAREHOUSE CLUB
MASSBUILD
MASSCASH
16 warehouse clubs
28 stores
27 stores
29 stores
80 stores
43 stores
552 outlets
SA
SA, Botswana
SA
SA, Mozambique
SA, Botswana, Lesotho, Namibia, Swaziland
SA
SA, Botswana, Namibia, Swaziland
Food/Liquor/General Merchandise
Home Improvement Supplies/ Tools/Building Materials
Home Building Improvement Materials/ Supplies/ Tools Tools/Building Materials
Food/Liquor/ Food/ Groceries Groceries/ Ethnic Cosmetics
Food/ Groceries
24 37
Sales (25%)
24 37
Sales (13%)
24 37
Sales (38%)
13
25
13
25
13
25
33
33
33
37
37
37
12
GROUP PROFILE CONTINUED

DIVISIONS
HIGHLIGHTS
R Continued low product sales R R R R
R Opened 13 new stores, our most ever R Increased Foodco stores from four
ination Effective cost control Higher occupancy costs and depreciation Effective working capital management Highest ever capital expenditure levels disposable income New stores Interest rates Social grants Product ination
to 20
R Grew sales in Africa by 23.1% and
DionWired by sales 37.9%

R Piloted online shopping at DionWired
KEY SALES DRIVERS
R Consumer condence and R R R R
R Product deation R Price perception R Interest rates R Consumer condence and disposable
income
R New stores R African economic recovery
2012 TRADING SPACE (M2) 2015 NET NEW STORES TARGET 2015 NET NEW TRADING SPACE TARGET (M2)
1,350,300 95
415,186 36
363,000
99,000
13
MASSWAREHOUSE
WAREHOUSE CLUB
MASSBUILD
MASSCASH
R Sales up 20,8% to R15,4 billion R Acquisition of Fruitspot completed R Three new Makro stores opened R Food Retail offering rolled out
R Sales growth of 11.9% R Good prot growth from great cost control R Our rst non-South African Builders Warehouse store performed well R Private Label strategy gaining traction
R Wholesale stable and performing well R Cambridge Food continued to grow in competitive market R Progress made with Fresh offering in Wholesale R Growth of franchise brands, especially Saverite supermarkets
R Product ination R Price perception R Interest rates
R Interest rates R Residential property prices and housing
R Food ination, particularly commodities R Social grants R New stores R Retail food acquisitions
growth R Consumer condence R Consumer condence and disposable and disposable income income R Price perception R New stores R New stores 146,026 7 406,987 18
382,101 34
87,000
70,000
107,000
14
GROUP PROFILE CONTINUED

DIVISIONS
MEDIUM-TERM OBJECTIVES
R R R R R R R R
Maintain trading aggression Organic store growth Explore greeneld opportunities Sustainability Explore acquisitions African expansion Supply Chain development Food Retail expansion
R New Game outlets in South Africa
and Africa
R Private Label R Realise Supply Chain efciencies R Leverage further benets from RCS
relationship
R Foodco roll-out
PERFORMANCE AGAINST OBJECTIVES
R Good trading with strong R R R R
comparable sales growth 7.3% growth in trading space Acquisition of the Rhino Cash and Carry Group and Fruitspot Massdiscounters RDC completed Food Retail expansion on plan
R R R R
Eight new Game stores Five new DionWired stores Third RDC commissioned Twenty Foodco stores built or converted
REVISED MEDIUM-TERM OBJECTIVES
R Drive operating disciplines R Invest in Food Retail R Explore everyday low price (EDLP)
and everyday low cost (EDLC)

R Extract value from Walmart R Investigate African Food Retail R Lead on corporate citizenry
R R R R R R R
Drive trading aggression and innovation Extract value from Supply Chain Drive Foodco roll-out Invest in Food Retail skills Drive Food Retail disciplines Invest in Fresh Private Label
MAJOR POTENTIAL RISK AREAS
R Labour unrest R Insufcient progress with R R R R
R Financial health and condence of
consumers in South Africa and Africa

R Supply Chain execution R African economic volatility and recovery R Food safety
transformation at executive level Economic volatility Acquisition risk Competitive intensity Customer safety
15
MASSWAREHOUSE
WAREHOUSE CLUB
MASSBUILD
MASSCASH
R Open new stores R Leverage customer
relationship management capabilities R Continue to invest in Supply Chain capability R Private Label
R Opened one new
R New stores in South Africa and Africa R Supply Chain capability R Private Label
R Aggressively grow Food Retail format R Finalise roll-out point-of-sales IT system
in all stores
R Manage Wholesale for cash and returns R Private Label
R One new Builders Warehouse store and
R Opened ve and acquired 15 new Retail
R R R
store and converted one SAP Forecasting and Replenishment applied successfully Secured new sites Acquired Fruitspot Established ve Fresh stores
two new Builders Express stores R Improved protability in Builders Warehouse and Builders Express, and gained market share R Approved central Regional Distribution Centre
stores and one Wholesale store

R Rebranding retail stores as
Cambridge Food
R Reached a total of 104 Saverite
franchise stores
R New stores in South
R Extract benets from IT and structural R R R R R
R Stabilise Retail operations with good
Africa R Convert existing stores to include Fresh R Invest in Supply Chain capability R Private Label
R Food safety R Supply Chain
investments Reinvigorate new store pipeline Continue SADC expansion Build and commission new Distribution Centre Private Label Investigate new format
operating disciplines
R Complete point of sale IT system roll-out
in Gauteng and RDC

R Invest in Franchise skills capability and
brand
R Drive market share gain R Government social welfare programme R Effect of labour unrest on purchasing
R System implementation to enable SADC
execution
R Customer safety
and DC R Implementation of new DC R New market risk
power
R Time to secure new sites R Food safety R Attraction and retention of retail skills
16
STORE REGIONAL MAP
GHANA
NIGERIA
2
UGANDA
1 1
TANZANIA MALAWI
COLOUR DENOTES THE STORES BY CHAIN
1 1 2
ZAMBIA
MOZAMBIQUE
NUMBER DENOTES THE NUMBER OF STORES IN THAT SPECIFIC REGION DENOTES CITIES AND TOWNS
NAMIBIA
2 9 1
BOTSWANA SWAZILAND LESOTHO SOUTH AFRICA
INTERNATIONAL: A TOTAL OF 27 STORES CHAIN Game COUNTRY Botswana Ghana Malawi Mozambique Namibia Nigeria Tanzania Uganda Zambia Botswana STORES 2 1 2 1 2 2 1 1 1 9 2 1 1 1 CITY Francistown and Gaborone Accra Blantyre Maputo Oshakati and Windhoek Lagos Dar es Salaam Kampala Lusaka Francistown, Gaborone 2, Mahalapye, Maun 3, Palapye and Selebi Phikwe Maseru 2 Windhoek Manzini Gaborone
CBW
Lesotho Namibia Swaziland Builders Warehouse Botswana
17
1 MAKHADO 1 1 1 1 2 1 1 POLOKWANE 1 TZANEEN MOKOPANE 11 11 BRITS 1 LIMPOPO 21 1 1 PRETORIA 8 2 11 4 11 1 1 3 1 1 NELSPRUIT RUSTENBURG 1 1 1 5 GROBLERSDAL 1 MAFIKENG KRUGERSDORP OLIFANTSFONTEIN 1 1 1 1 6 9 14 1 1 1 1 HAZYVIEW 4 6 GAUTENG WITBANK JOHANNESBURG 1 MIDRAND NORTH WEST 1 MIDDELBURG POTCHEFSTROOM 1 1 20 6 SECUNDA 1 1 1 ERMELO 1 VRYBURG VANDERBIJLPARK 1 1 1 1 1 1 MPUMA- 1 PIET VEREENIGING KLERKSDORP
THOHOYANDOU
MANGUZI
LANGA
1
RETIEF
MKUZE
UPINGTON
1
KIMBERLEY WELKOM
1 1
VRYHEID
11
EMPANGENI
NONGOMA
NEWCASTLE
1
SPRINGBOK
NORTHERN CAPE
QWA QWA 1 1 DUNDEE 1 PHUTHADITJHABA ESHOWE 1 FICKSBURG 1 2 LADYSMITH 1 KWAZULURICHARDS BAY 1 BLOEMFONTEIN 1 PIETERMARITZBURG NATAL 1 1 BALLITO 1 1 EDENDALE 1 1 1 LADYBRAND 1 1 5 2 1 UMHLANGA UMZIMKULU 1 1 BOTSHABELO ISIPINGO 1 2 1 2 1 1 KOKSTAD 1 1 3 1 6 DURBAN 2 1 UMLAZI THABA NCHU HARDING 1 1 1 1 1 11 1 AMANZIMTOTI PARK RYNIE 1 1 1 PORT SHEPSTONE 1 1 1 WILLOWVALE MATATIELE SHELLEY BEACH 1 1 UMZINTO UMTATA 1
FREE STATE
2 1 MTUBATUBA 1 1 1 1 1 ULUNDI 1 1 1
MARGATE
VREDENBURG
EASTERN CAPE BIZANA WESTERN
QUEENSTOWN
9 1 3 BUTTERWORTH 2 1 1 1 GONUBIE
LUSIKISIKI
11
2 1 3 1 WORCESTER CAPE 2 5 1 1 1 9 PAARL1 1 1 1 1 1 1 1 MONTAGUE 1 1 1 1 1 STELLENBOSCH 1 KNYSNA 1 1 1 CAPE TOWN 1 1 1 GEORGE 1 JEFFREYS BAY
SOMERSET WEST HERMANUS ZEVENSWACHT MOSSEL BAY
1 1 1 KING WILLIAMS TOWN 2

UITENHAGE
1 1 1
EAST LONDON
1 1 3 2
PORT ELIZABETH
SOUTH AFRICA: A TOTAL OF 321 STORES SOUTH AFRICA 2011 Game DionWired Makro Builders Warehouse Builders Trade Depot Builders Express CBW Cambridge Jumbo GROUP 87 13 14 27 30 24 59 27 6 287 CHANGE 7 5 2 (1) 3 2 16 34 2012 94 18 16 27 29 27 61 43 6 321 2011 13 13 26 INTERNATIONAL CHANGE 1 1 2012 13 1 13 27 2011 100 13 14 27 30 24 72 27 6 313 TOTAL CHANGE 7 5 2 1 (1) 3 2 16 35 2012 107 18 16 28 29 27 74 43 6 348
18
EXECUTIVE DIRECTORS
1
GRANT PATTISON (41) BSC (ENG) (HONS) (UCT)
2
GUY HAYWARD (47) BCOM, CTA (UCT), CA(SA)
3
ILAN ZWARENSTEIN (37) BCOM BACC, CA(SA)
Chief Executive Ofcer and member of the Social and Ethics Committee Appointed 7 December 2004 Grant graduated from the University of Cape Town as an Electrical Engineer. After four years with the Anglo American group and two years consulting with The Monitor Group, Grant joined Massmart as Executive Assistant to the Executive Chairman in 1998. He has since held various positions within the Group, including Managing Director of Massdiscounters and Group Commercial Executive. He joined the Executive Committee in 2000 and the Board in 2004, becoming Deputy Chief Executive Ofcer in 2005, Chief Executive Ofcer Designate in 2006 and Chief Executive Ofcer on 1 July 2007.
Chief Operating Ofcer Appointed 15 May 2001 Guy graduated from the University of Cape Town in 1986 and, after serving articles with Deloitte, Haskins & Sells, qualied as a Chartered Accountant in 1989. During the 1990s he held nancial roles at Malbak and CNA Gallo in South Africa and at Goldman Sachs in London. He joined Massmart as Group Financial Executive in 2000 and was appointed Chief Financial Ofcer in 2001. In May 2012 he was appointed Chief Operating Ofcer. Guy is also a Governor of Hilton College.
Financial Director Appointed 7 May 2012 Ilan graduated from the University of the Witwatersrand in 1997. After completing his articles in 2000, he remained with Grant Thornton where he served as a manager in Corporate Finance and in Audit. In February 2003, Ilan was appointed as a partner at Grant Thornton. He joined Massmart at the end of 2005 as Group Finance Executive and was appointed Company Secretary in 2006. In May 2012, Ilan was appointed as Financial Director.
19
NON-EXECUTIVE DIRECTORS
4
MARK J LAMBERTI (62) BCOM, MBA (WITS), PPL (HARVARD)
5 At the end of June 2007 he relinquished his executive role to become non-executive Chairman. His role as architect and leader of Massmart has been widely recognised with numerous awards including that of the Ernst & Young South African Entrepreneur of the Year in 2001. Mark currently serves as Chief Executive Ofcer of Transaction Capital Limited and a director and executive committee member of Business Leadership South Africa. His commitment to education has led to his involvement as a benefactor, director or advisor to a number of educational institutions, including the Wits Business School where he is an Honorary Professor.
CHRIS SEABROOKE (59) BCOM, BACC, MBA, FCMA
Chairman of the Board and Chairman of the Remuneration and Nominations Committee Appointed 1 August 1988 Following progress through a multifunctional retail career that began in 1975, Mark was appointed Managing Director of the ailing six-store Makro chain in 1988. After successful repositioning of the chain, he founded Massmart in 1990 to pursue an aggressive growth strategy in high-volume, lowgross margin, low-expense retailing and wholesaling. In 1996, he was appointed Executive Chairman of Massmart and from July 2003 CEO and Deputy Chairman of the Board.
Deputy Chairman of the Board and Lead Independent Director, Chairman of the Audit and Risk Committee and a member of the Remuneration and Nominations Committee Appointed 1 February 2000 Chris has been a director of over 20 stock exchange-listed companies. He is currently CEO of Sabvest Limited, Chairman of Metrole Holdings Limited and Transaction Capital Limited and a director of Datatec Limited, Chrometco Limited, Net1 UEPS Technologies Inc (Nasdaq/JSE) and Brait S.E. (Luxembourg/JSE). He is also a director of a number of unlisted companies including Mineworkers Investment Company Proprietary Limited. He is a former Chairman of the South African State Theatre and former Deputy Chairman of the inaugural National Arts Council of South Africa. He is a member of the Institute of Directors.
20
NON-EXECUTIVE DIRECTORS CONTINUED

6
DAVID CHEESEWRIGHT (50) BSC (1ST CLASS) MATHEMATICS AND SPORTS SCIENCE, LOUGHBOROUGH UNIVERSITY (UK)
7
JEFFREY DAVIS (49) BS ACCOUNTING (PENNSYLVANIA STATE UNIVERSITY), EMBA (UNIVERSITY OF PITTSBURGH)
8
DR NOLULAMO (LULU) GWAGWA (53) MSC (KZN), MSC (LSE), PHD (UCL)
President and Chief Executive Ofcer Walmart EMEA Appointed 23 November 2011 David Cheesewright is the President and Chief Executive Ofcer for Walmart EMEA. He leads Walmarts retail operations and oversees business development in Europe, the Middle East, Africa and Canada. Davids career spans more than 20 years across the international retail and manufacturing sectors. Prior to his current role, he was President and Chief Executive Ofcer of Walmarts Canadian operation, and previously Chief Operating Ofcer of ASDA, Walmarts operation in the United Kingdom. He joined ASDA in 1999, holding senior positions over a nine-year period. Before his careers with ASDA and Walmart, David held a range of leadership positions in the United Kingdom with Mars Confectionery, the worlds leading confectionery company.
Walmart Stores Inc.s Senior VicePresident Finance and Treasurer Appointed 20 June 2011 Jeffrey Davis is Walmart Stores Inc.s Senior Vice-President Finance & Treasurer and has responsibility for treasury operations, capital markets, investor relations and risk management. Jeffrey was previously Senior Vice President of Finance and Strategy, Operations, for Walmart U.S. He joined Walmart in 2006 as Vice President of Finance for the Walmart U.S. health and wellness merchandise unit. Previously, he served as Chief Financial Ofcer for Lakeland Tours, LLC, where he led its acquisition growth strategy and was responsible for all accounting, nancial reporting, treasury and capital structuring, and strategic planning functions. Prior to that, Jeffrey was Chief Financial Ofcer for McKesson General Medical and he held a number of nancial leadership roles at the Hillman Co, a private investment holding company. He also spent four years at KPMG Peat Marwick as an audit supervisor.
Member of the Audit and Risk Committee Appointed 1 November 2006 Lulu is Chief Operating Ofcer of Lereko Investments Proprietary Limited. She was Deputy Director General in the National Department of Public Works, responsible for establishing the national public works programme, and completed a ve-year term as the CEO of the Independent Development Trust. She has served on various Government commissions, is the CEO of Lereko, and is a nonexecutive director of FirstRand Limited and Sun International Limited.
7 8
21
9
PHUMZILE LANGENI (38) BCOM (NATAL), BCOM (HONS) (UNISA)
10
JOHN P (JP) SUAREZ (48) BA (HONS) (TUFTS UNIVERSITY) JD (UNIVERSITY OF PENNSYLVANIA) C DOUGLAS McMILLON (45) BSC BUSINESS ADMINISTRATION (UNIVERSITY OF ARKANSAS), MBA (UNIVERSITY OF TULSA)
Chairperson of the Social and Ethics Committee and member of the Audit and Risk Committee Appointed 25 August 2004 Phumzile is the Executive Chairperson of Afropulse Group Proprietary Limited, a women-led investment, investor relations and corporate advisory house. She is a stockbroker by training and was previously the economic advisor to the Minister of Minerals and Energy, and an executive director of dual-listed junior platinum miner, Anooraq Resources. Phumzile is the non-executive chairman of Astrapak Limited, a non-executive director of Imperial Holdings Limited, Peermont Global Proprietary Limited, the Mineworkers Investment Company Proprietary Limited, Primedia Proprietary Limited, Transaction Capital Proprietary Limited, Metrole Holdings Limited and a member of the Port Regulator.
Senior Vice President of International Business Development for Walmart International and a member of the Social and Ethics Committee Appointed 20 June 2011 John Peter (JP) Suarez is the Senior Vice President of International Business Development for Walmart International. JP is responsible for leading Walmarts international merger and acquisition activities, international real estate and construction activities, and global format development efforts. Prior to being named to his current position in 2011, JP was Senior Vice President and General Counsel for Walmart International. He joined the company in 2004 as Vice President and General Counsel for Sams Club. His previous experience includes serving as the United States EPA Assistant Administrator for Enforcement and Compliance, acting as a federal and state prosecutor, and working as Chief Enforcement Ofcer over New Jerseys gaming industry.
President and Chief Executive Ofcer of Walmart International Operations Appointed 20 June 2011. Resigned 20 August 2012 In line with the Walmart International regional reporting structure that was implemented post the Massmart-Walmart merger, Doug McMillon, who is the Chief Executive Ofcer and President of Walmart International Operations, resigned from the Massmart Board of Directors with effect from 20 August 2012. Doug was appointed to the Massmart Board upon completion of the Massmart-Walmart transaction on 20 June 2011.
10
22
EXECUTIVE COMMITTEE
1
GRANT PATTISON (41) BSC (ENG) (HONS) (UCT)
responsibility for the Supply Chain of that company in 2003 and was appointed to the Massmart Executive Committee as Group Commercial Executive in 2006. In June 2009, Jay was appointed as Retail Director of Masscash where he was responsible for the Cambridge Food business. In February, Jay was appointed Divisional Managing Director of
and then with The Hub (a division of the Mr Price Group), and in 2002 joined Masscash as Financial Director, becoming Operations Director in 2008. In February, Neville was appointed Divisional Managing Director of Masscash Wholesale and a member of the Massmart Executive Committee. 6
DON FRIESON (54) BACHELORS DEGREE IN OPERATIONS MANAGEMENT (UNIVERSITY OF TENNESSEE)
Chief Executive Ofcer 2

GUY HAYWARD (47) BCOM, CTA (UCT), CA(SA)
Chief Operating Ofcer 3

ILAN ZWARENSTEIN (37) BCOM BACC, CA(SA)
Cambridge Foods and in September 2012, he was appointed to head up Massmarts eCommerce initiative. He remains a member of the Massmart Executive Committee.
Financial Director 4
JAY CURRIE (38) BSC (NATAL)
Massmart Chief Integration Ofcer and Senior Vice President, Walmart U.S. Following 13 years working as a Transportation and Supply Chain professional, Don joined Walmart in 1999 as District Manager for the Private Fleet Division and was promoted to Vice President Private Fleet Operations in 2001. He has served in a variety of increasing leadership roles in logistics and store operations including Regional Vice President, Logistics Vice President, Store Operations Regional General Manager and Senior Vice President/ Divisional President. Don joined the Massmart Executive Committee in August 2011.
5
NEVILLE DUNN (43) BCOM (NATAL), CA(SA)
eCommerce Executive Following a period managing Mala Mala Game Reserve and founding a small IT solutions provider, Jay joined Business Connexion as a Network Engineer before taking a position with Massdiscounters as IT Technical Manager in November 1999. He was appointed to the Massdiscounters Board in 2002 as IT Director. In addition to his IT responsibilities, he assumed Board
Divisional Managing Director of Masscash Wholesale Neville graduated from University of Natal (Durban) in 1990 with a BCom in Accounting followed by a Post-Graduate Diploma and after serving articles with Deloitte & Touche, qualied as a Chartered Accountant in 1992. From 1995, Neville held various nancial roles with Robertsons Proprietary Limited
3 5
23
7
DOUG JONES (39) BCOM, PGDA (UCT), CA(SA)
10 partner at Andersen Consulting (now Accenture) and Marketing Director at CNA. He joined Massmart as Group Projects Executive in September 2004 and was appointed Group Corporate Affairs Executive in September 2005. Brian joined the Massmart Executive Committee in July 2007. 9
PEARL MAPHOSHE (44) BA (HONS), HDIPED (DURBAN-WESTVILLE), MA (LONDON) MNCANE MTHUNZI (39) BCOM (ECONOMICS), PMD, GEDP (GIBS)
Divisional Managing Director of Masswarehouse, Chairman of the Massmart Retirement Funds After qualifying as a Chartered Accountant in 1998, Doug moved to Canada with Deloitte. He worked for Coca-Cola Enterprises in Toronto for a number of years before returning to South Africa to join ABI (the Soft Drink Division of SAB Limited). Doug joined Makro as Finance Director in 2007 and became Commercial Director in 2010. Doug was appointed Divisional Managing Director in September 2012, and joined the Massmart Executive Committee at the same time. 8
BRIAN LERONI (48) BA (WITS), MPHIL (STELLENBOSCH)
Group Supplier Development Executive Mncane is the former CEO of the Consumer Goods Council of South Africa (CGCSA). He has been the Managing Director of the Black Management Forum (BMF). Prior to joining the BMF he worked for Microsoft as Sales Executive. He was also a Senior Manager at PWC. He started his career at Accenture, where he worked in a number of industries both locally and internationally handling largescale systems integrations and business solutions for a number of clients over a period of seven years. He serves as Independent Non-Executive Director on other boards. Mncane joined the Massmart Executive Committee in October 2011.
Group Human Capital Executive, Chairperson of the HR Forum and member of the Sustainability and Transformation Committee Prior to joining Massdiscounters Pearl worked for Telkom, Old Mutual and for Umgeni Water as General Manager: Corporate Services. Prior to assuming responsibility for Human Capital on the Massmart Executive Committee from August 2007, Pearl was Director of Human Resources at Massdiscounters. She brings broad experience in managing and developing human capital to the Group.
Group Corporate Affairs Executive and member of the Sustainability and Transformation Committee Brians work experience includes executive positions at Masstores Proprietary Limited, an associate
10
24
EXECUTIVE COMMITTEE CONTINUED

11
GARETH (JOE) OWENS (63)
SA Breweries in senior nancial roles, before joining the Massmart Group as Financial Director of Massdiscounters in 2005. In April 2007, he was appointed Chief Executive of Massdiscounters and a member of the Massmart Executive Committee. 13
MICHAEL (MIKE) SPIVEY (48) BSC (UNIVERSITY OF ARKANSAS), MASTERS IN LAW IN INTERNATIONAL BANKING AND FINANCE (BOSTON UNIVERSITY), JURIS DOCTORATE (JD)
Divisional Chief Executive of New Formats Joe joined Makro in 1971. He worked for the Checkers Group from 1978 to 1988 after which he returned to Makro as Merchandise Director. He was appointed Managing Director of Makro in 1993, Divisional Chief Executive of Makro in 1999, Divisional Chief Executive of Massbuild in 2005 and Divisional Chief Executive of New Formats in February 2008. Joe has 40 years of mass merchant, general merchandise and FMCG experience. 12
JAN POTGIETER (43) BCOMPT (HONS), CTA (FREE STATE), CA(SA)
lived in Budapest, Hungary and worked as an associate with an international law rm and a foreign trade bank where he specialised in cross-border merger and acquisition transactions. At Massmart, Mike directs the Companys legal and regulatory affairs and serves on the Massmart Executive Committee. 14
LLEWELLYN STEENEVELDT (43) BSC ENG (PHYS MET), GDE (INDUSTRIAL), MBA
Massmart General Counsel and Chief Compliance Ofcer Mike joined Massmart in 2011 following the Walmart transaction. He has a multi-faceted 20-year global business career that includes transactional, regulatory, nance and business development experiences. At Walmart, Mike provided legal and compliance counsel to numerous segments of the business. As a leader at the Export-Import Bank of the United States, Mike served as a senior attorney focusing on cross-border trade and structured transactions, and later led the Banks sales, marketing and product development operations. Early in his career, Mike 12
Group Commercial Executive and Chairman of the TIP and Operations Forums Llewellyn graduated from the University of the Witwatersrand in 1991 as a Physical Metallurgist. After seven years with TongaatHulett group and three years with the Industrial Development Corporation, Llewellyn joined Massmart as Business Analyst in 2002. He has since held various positions within the Group, including Executive Assistant to the CEO and Managing Director of Builders Express. Llewellyn was appointed Group Commercial Executive and joined the Massmart Executive Committee in July 2009.
Divisional Chief Executive of Massdiscounters and Chairman of the Cellular Forum Jans early career was spent in nancial roles in various industries until becoming a business manager at Clover SA for three years. He then spent seven years at 11
13
14
25
15
KEVIN VYVYAN-DAY (47) BCOM, BACC (WITS), CA(SA)
16
LLEWELLYN WALTERS (48) BA, LLB (WITS)
17
ROBIN WRIGHT (56) BCOM (NATAL), CA (SA)
Divisional Chief Executive of Cambridge Food, member of the Audit and Risk Committee and Chairman of the General Merchandise Forum After qualifying as a Chartered Accountant in 1989, Kevin consulted at both the Strategy Group (Deloitte) and Gemini Consulting. He joined UPD as Group Operations and Systems Director in 1995 and became Group Chief Executive Ofcer in 1996. Kevin joined Massmart as Divisional Chief Executive responsible for Makro and as a member of the Massmart Executive Committee in 2005. In September 2012, Kevin was appointed Divisional Chief Executive of Cambridge Food.
Divisional Chief Executive of Massbuild Llewellyn spent 13 years in the banking industry where he held senior positions in a number of specialist nancial institutions before joining ABSA. In June 2003, Llewellyn joined Super Group, a JSE-listed Supply Chain and logistics company where his last position was divisional managing director responsible for the Groups African operations. He joined Massmart in November 2008 as Divisional Chief Executive for Builders Warehouse, later becoming responsible for the whole Division, and was appointed to the Massmart Executive Committee upon joining.
Group Food Executive and Chairman of the Food and Liquor Forum After graduating from Natal University with a BCom degree and qualifying with his CA(SA) in 1978, Robin spent six years in retailing and wholesaling at WG Brown before founding CCW in 1985. In 1998, he sold a controlling interest in CCW to Massmart and was appointed to the Massmart Executive Committee. He led the acquisition and integration of Browns and Weirs, and has spearheaded the growth of the Division to become South Africas leading food wholesaler. In February 2012, Robin was appointed Group Food Executive and he remains a member of the Massmart Executive Committee.
16
17
15
GAME, EAST RAND MALL, BOKSBURG
REPORTS TO STAKEHOLDERS
GAME, EAST RAND MALL, BOKSBURG
CONTENTS
R CHAIRMANS LETTER TO STAKEHOLDERS R CHIEF EXECUTIVE OFFICERS REVIEW R FINANCIAL DIRECTORS REVIEW 29 32 38
29
CHAIRMANS LETTER TO STAKEHOLDERS

At the end of Massmarts rst full year as a Walmart subsidiary, it is my privilege to introduce the 2012 Massmart Integrated Annual Report.
Environment
Over the past year there was a general deterioration in the business environment. The global economy remained fragile with Americas recovery tentative, Chinas growth slowing and much of Europe in recession. The performance of subSaharan African countries was mixed and there were increasing indications (ie retail, manufacturing and particularly mining) that South Africas 2012 GDP growth rate forecast of 2.7% would be under pressure. South Africas daily discourse was dominated by two themes corruption and political manoeuvring, with the resultant distractions in anticipation of the next presidential term. A sub-text was an anti-business leftist ideology which purports to represent the disadvantaged, while promulgating laws which in some cases stie enterprise and employment. Sadly too, there was frequently a destructive racial overtone, which one had hoped would have abated after 18 years of democracy. All of the above culminated too often in aggressive confrontation, in violation of some of the core tenets of our ne constitution, epitomised by the Marikana massacre on the 16th August the worst failure of business, Government and union leadership since 1994.
MARK J LAMBERTI CHAIRMAN
THE STRATEGIC INTENT OF THIS PROGRAMME WAS TO:
Strategy
In 2008, we took the decision to invest through the economic cycle, despite the impact it might have on short-term prots and protability. This resulted in the implementation of an ambitious programme of investment in acquisitions, new stores, distribution centres, systems and people. The strategic intent of this programme was to sustain the Groups organic growth in sub-Saharan Africa, re-engineer the supply chain and position Massmart as a serious competitor in food retail. As 2012 drew to a close, the extent of the progress in every division was cause for satisfaction. Over the past four years we have: opened or acquired 106 stores representing 302,761 m2 of trading space; opened 281,000 m2 of Regional Distribution Centre space; employed over 8,000 new associates; and we have a Food Retail business generating R9 billion in annualised sales. All of this was accomplished concurrent with the unexpected acquisition of 51% of your Group by Walmart, the well-publicised challenges to the approval of the transaction, and the management commitment required for formal integration of Massmart into Walmart.
SUSTAIN THE GROUP'S GROWTH IN SUB-SAHARAN AFRICA
RE-ENGINEER THE SUPPLY CHAIN
POSITION MASSMART AS A SERIOUS COMPETITOR IN FOOD RETAIL
30
Reports to Stakeholders
OVER THE PAST 4 YEARS WE HAVE: OPENED OR ACQUIRED
Board changes
The year commenced with a smaller Board comprising four independent non-executive directors, three Walmart non-executive directors, and two executive directors. During the year the following changes were made:
R Doug McMillon, President and Chief Executive Ofcer of Walmart
106
GROWN BY
NEW STORES
302,761 m2
OF TRADING SPACE OPENED
International, resigned and was replaced by David Cheesewright, President and Chief Executive Ofcer of Walmart EMEA; R Guy Hayward relinquished his role as Chief Financial Ofcer to assume the role of Chief Operations Ofcer; and R Ilan Zwarenstein was appointed to the Board as Financial Director.
Group performance
The strategic, operational, nancial and societal performance of Massmart in the year to 24 June 2012 is described in detail throughout this report. The performance of the Group is adequate in the environment, and the management team has done well to balance the increased responsibilities demanded of them post the Walmart transaction. The Board is comfortable that the management team is close to the successes and failures of the past period, has a good understanding of the performance of the Business and is responding appropriately. We remain in an investment phase with capital expenditure at an all-time high as the business invests for future growth.
281,000 m2
EMPLOYED OVER
OF REGIONAL DISTRIBUTION CENTRES
8,000
NEW ASSOCIATES GENERATED
R9 bn
Governance
With Walmart now holding a majority stake in Massmart, the structure and operations of the Board needed to change. We have done so cognisant of our responsibilities to all stakeholders, in particular both majority and minority shareholders, to ensure the highest levels of governance. The Board has adopted a new reporting process, and new governance processes, taking into account the need to include the value offered by the skills of the majority shareholder, whilst being cognisant of the rights of the minority shareholders. The Board has also adopted the necessary processes and practices in line with the new Companies Act.
IN ANNUALISED SALES IN THE FOOD RETAIL BUSINESS
Integrated reporting
The milieu in which multinational public companies are enjoined to operate continues to become more challenging worldwide. Exacerbated by the global nancial crisis, the economic, competitive, technological, societal, legislative, regulatory and environmental complexities are increasing in every country and sector, with stakeholders more strident both in their demands on corporations and with some justication in their critique of corporate leadership.
31
In addition, stakeholders expect South African business leaders to respond to four interrelated realities arising from our unique history: the socio-economic divide; the skills shortage; the transformation imperative; and rampant crime and corruption. Since its founding, Massmart has recognised that sustainability is assured only by understanding and meeting the reasonable demands of all stakeholders. In 2011, we embarked on a process of stakeholder engagement to gain a more informed perspective on issues of importance to them and the role that we as retailers can play in addressing these issues. The process resulted in a ranking of sustainability priorities and the classication of various accountability interventions within three broad themes: enable sustainable supply and consumerism; minimise the Groups environmental footprint; and champion social equality initiatives. The impact of this approach has been signicant in addressing many of the issues mentioned above. This years corporate accountability report provides detail on the positive interventions we have made, and reinforces our commitment to engage with stakeholders to dene sustainability priorities as a means to the effective integration of commerciality and accountability.
"Since its founding, Massmart has recognised that sustainability is assured only by understanding and meeting the reasonable demands of all stakeholders."
READ MORE: PAGES 117 141 CORPORATE ACCOUNTABILITY More detail can be found in the Corporate Accountability Report.
Appreciation
Over the past four years, in every division and in difcult economic circumstances, Massmart addressed a strategic agenda staggering in its breadth, intensity and complexity. Concurrently we became a subsidiary of Walmart and embarked on a journey of integration with, and learning from, the worlds largest retailer. Together these developments have created a new platform for Massmarts progress and growth as a leading distributor of consumer goods in sub-Saharan Africa. Massmarts position today is a result of two major factors: the rst, a rare combination of executive acumen, managerial capability and staff commitment; the second the unwavering condence and support of Walmart. My thanks are due to Grant Pattison and every member of Massmarts management and staff, to all at Walmart who have been so generous with their experience and warmth, and to my colleagues on the Board, whose counsel and oversight have ensured the quality and potential of your investment.
MARK J. LAMBERTI Chairman 5 October 2012
32
CHIEF EXECUTIVE OFFICERS REVIEW

The past year has been one of the busiest in Massmarts history. We have been simultaneously implementing our organic growth strategy, re-engineering our supply chain, establishing ourselves as a food retailer, integrating with Walmart and completing the remaining legal aspects of the Walmart transaction.
GRANT PATTISON CHIEF EXECUTIVE OFFICER
We have made good progress on all fronts and, perhaps most importantly, we can now put the Walmart transaction and its related stresses and distractions behind us. Whilst we still have much to do and learn, we are integrated with Walmart and the transaction has been approved by all the required authorities. The nancial year ended much as expected a mixed performance. The core business performed well, while the investments in supply chain and Food Retail were a drag on the Groups nancial performance, with investments in skills and assets happening in advance of value generation. Towards the end of the June 2012 nancial year we restructured the management team. We appointed our previous Chief Financial Ofcer, Guy Hayward, as Chief Operating Ofcer and his second-in-charge, Ilan Zwarenstein, as Financial Director. Early in the new nancial year we re-assigned responsibilities within the Group executive team. While we have been transacting and integrating since late 2010, our competitors have been responding to Walmarts investment in the South African retail sector and so we have now turned our full focus back to serving customers and responding to competitors, informed with new perspectives, skills and assets.
Financial performance
UP BY 8.9%
R1,363.6m
HEADLINE EARNINGS BEFORE TRANSACTION COSTS 2011: R1,252.7m
For the 52 weeks to June 2012, Massmarts total sales increased by 15.6%, operating prot by 21.0% and headline earnings by 38.0%. Excluding the costs relating to the Walmart integration and transaction however, operating prot increased by 3.7% and headline earnings by 8.9%.
33
The underlying trading was resilient with comparable sales increasing by 9.6% while product ination remained low at only 1.8%. The derived 7.8% increase in comparable sales volumes was material and put pressure on operating costs, the impact of which was somewhat mitigated by supply chain efciencies. Although the South African Rand weakened against the US Dollar and our basket of African currencies during the nancial year, the Group incurred a foreign exchange translation loss on its foreign businesses of R72.5 million. This was due mainly to the unrealised translation loss caused by the signicant currency devaluation in Malawi in May 2012. As with the disposal of the Makro Zimbabwe business last year, we continued to clean up some of our smaller poor-performing businesses resulting in some once-off costs and inefciencies of similar magnitude in both nancial periods. Underlying cost pressures remain a challenge. The Groups signicant investment in new stores, the Food Retail conversions (Foodco) and the new Regional Distribution Centres (RDCs) caused both occupancy costs and depreciation to increase ahead of sales growth. A secondary effect is the aboveination increases in local government taxes and services. At a Divisional level, Massbuild and Masswarehouse both performed well and increased trading prot before tax by 22.7% and 12.8%, respectively. Massdiscounters struggled somewhat in South Africa but performed well outside of South Africa, increasing overall trading prot before tax by 4.0%. Masscash had a difcult year with trading prot before tax declining by 22.8% with the accelerated investment in skills and assets, and one or two own-goals, hampering nancial performance. Cash generated by operations increased by 62.8% to R2.7 billion, supported by a solid working capital performance, which nanced a record R1.7 billion in capital spending on maintaining and growing operations, and acquisitions. READ MORE: PAGES 79 111 OPERATIONAL REVIEW More detail on the operational performance can be found in: R Massdiscounters divisional review p.79 R Masswarehouse divisional review p.87 R Massbuild divisional review p.95 R Masscash divisional review p.104
Walmart relationship
An important area of management focus has been the development of our relationship with Walmart as our majority shareholder. The impact of having Walmart as a majority shareholder is fundamental and affects almost every part of Massmarts operations. In summary, managements objective has been to align with Walmart where necessary and appropriate and to extract value from its signicant global capabilities, to the benet of all key stakeholders, in general, and to both majority and minority shareholders, specically.
34
CHIEF EXECUTIVE OFFICERS REVIEW CONTINUED

We achieved the bulk of the objectives around alignment between the two organisations and the rst signs of value were evident in the income statement towards the end of the 2012 nancial year, although not signicant enough to cover the costs of integration. Value is expected to exceed costs for the 12 months ending December 2013. Overall, relationships with all key stakeholders are in good shape. Importantly, management relationships with the broader Walmart Group continue to be warm and effective, bringing stability to the management team. In addition, a concerted effort has resulted in the return of relations with the South African Government to the same levels as before the Walmart transaction, and in improving relationships with the Departments of Agriculture and Trade and Industry, both of whom are important to the ongoing operations of the Group.
Environment
Whilst South African GDP growth estimates declined throughout the June 2012 nancial year, Massmarts high comparable sales growth suggests a healthy overall consumer environment for the period. We sense that within the South African consumer-base however, middle-income consumers, particularly those that rely on unsecured credit to fund their purchases, came under increasing nancial pressure. The large growth in new consumer credit accounts at our consumer credit partner, RCS, also points towards a trend of increasing use of unsecured credit. Competition in most product categories increased as the battle for market share intensied, indicative of a healthy competitive environment. Most major retailers are being innovative in the search for growth by focusing on new categories, whilst the independent retailers remain nimble, exploiting opportunities in the market. Wage settlements remain above ination, requiring management to seek productivity gains. This puts downward pressure on employment gures in the comparable business whilst total employment will increase from organic store growth. The proposed amendments to the South African labour regulations will require us to manage exi-time workers differently, although the regulations will not affect the balance between full-time and exi-time employment. They will however, increase the costs of managing the exi-time employees, which will again require management to look for productivity gains. Massmarts labour relations remain sound and our wage agreements have, almost without exception, been concluded earlier than we experienced a year ago and, in some instances, with two-year agreements.
35
Our participation in the affairs of government and industry are of growing importance and we will increase our contribution to the policy debates on matters affecting business, trade and the economy at large.
Corporate Accountability review

In line with the Accountability framework that we introduced in our 2011 report, we continue to focus on three Accountability themes of: enabling sustainable supply and consumerism; minimising the Groups environmental footprint; and championing social equality issues. The Accountability initiatives associated with each theme remain largely unchanged, although we have developed a clearer sense of prioritisation through an assessment of each initiative in terms of the following ve criteria:
R What is the legislative/regulatory driver for this initiative? R What direct commercial benet will ow from this initiative? R What resonance does this initiative have with government and civil society-
READ MORE: PAGES 117 141 CORPORATE ACCOUNTABILITY More detail can be found in the Corporate Accountability Report.
driven public discourse?

R What relevance does this initiative have for Walmarts global sustainability
commitments?
R What positive leverage does this initiative present for Massmart-Walmarts
reputation in Africa? This is an important renement that further addresses the concern we raised in our 2010 and 2011 annual reports, that our Corporate Accountability agenda had become too cluttered. You can read more about our Accountability prioritisation matrix on page 123 in the Corporate Accountability section of this report. A major highlight has been the positive and tangible impact that Walmart has had on our way of thinking about Accountability. Walmart is deservedly acknowledged as a global leader in this eld. We have enjoyed the benet of their experience, specically in the areas of small-scale farmer development (direct-to-farm), energy efciency, primary packaging rationalisation and supplier advocacy. Benets to Massmart have included exposure to new ideas and innovations, sharing of intellectual capital and lessons learned, and access to materials and business case guidelines. You will notice further reference to Walmarts impact in the Corporate Accountability progress update starting on page 122. Finally, I want to pay tribute to the various Broad-Based Black Economic Empowerment practitioners across the Group, who contributed toward Massmart achieving a BBBEE score of 72.8%, Level 4, even after a 7.2% decline in the Ownership element of the scorecard as the result of the
36
CHIEF EXECUTIVE OFFICERS REVIEW CONTINUED

vesting of shares held by Massmarts Thuthukani Staff Empowerment Trust. Massdiscounters veried score of 77.4%, which was higher than the score of the top ranked retailer in Financial Mail Top Empowerment Companies 2012 survey, was remarkable. Looking forward, I am especially enthusiastic about the introduction of READ MORE: PAGE 124 CORPORATE ACCOUNTABILITY More detail on Walmarts ethical sourcing framework. Walmarts ethical sourcing framework (see page 124) and believe that overall we have consolidated a solid base on which to further develop our Corporate Accountability agenda.
Strategy
We have made good progress on our four priorities of: completing the Walmart transaction; Walmart integration; maintaining trading momentum; and being a good corporate citizen. Legally, the Walmart transaction is complete, save for the anticipated nal ruling from the Competition Appeal Court on the amount, purpose and governance of the Supplier Development Fund. The three other conditions from the Competition Tribunal have been implemented; 222 of the 503 previously retrenched Massdiscounters employees have been re-employed across the Group. We began implementing the Supplier Development Fund in terms of our existing commitments but, pending the Appeal Court ruling, have put any new commitments on hold. The formal Walmart Integration project is complete. Governance, control, risk and
"About 368 Massmart employees attended the annual Walmart shareholders conference in May 2012..."
reporting dimensions have been aligned and the basic processes to continually extract value from the transaction are now in place. The formal Integration process will wind down over the period to June 2013 whilst processes are handed over to Massmart line-management. About 368 Massmart employees attended the annual Walmart shareholders conference in May 2012, completing the process of welcoming Massmart into the Walmart family. On Maintaining Trading Momentum, all strategic agenda projects have progressed well. We completed the Massdiscounters RDC network with the opening of the third and nal RDC in Durban in July 2012; opened our rst Food DC; improved our competence in Food Retail; increased Private Label and Financial Services penetration; and continued with our roll-out of Food Retail. On Corporate Citizenry, we maintained our Level 4 BBBEE status; continue
LEVEL BBBEE
to drive advocacy on environmental sustainability with our suppliers; reduced our Groups environmental footprint through investment in waste management and energy efciency; and maintained our private public partnerships with various South African government departments and services including Basic
37
Education; Agriculture, Forestry & Fisheries; the South African Police Services; Treasury; the SABS and the SANDF.
Prospects
For the 14 weeks to 30 September 2012, total stores sales increased by 16.6% and comparable stores sales increased by 7.8%, continuing the trends experienced at the close of the last nancial period. With the coming change in Massmarts nancial year-end, the next reporting period will be the 26-week nancial year to December 2012. Sales and gross margins are expected to grow satisfactorily, although cost pressures will remain. Currently we expect no improvement in the Groups net trading margin for either the 26-weeks to December 2012 or for the year to December 2013. Beyond the next 18 months, we believe the Group is well positioned for strong growth, in both sales and prots. PROSPECTS
14 weeks to 30 September 2012 Total stores sales growth 16.6% Comparable stores sales growth 7.8%
Appreciation
In a year as busy as this one, we are particularly grateful for the support we received from all colleagues employed in the Group, our suppliers, our advisors, our new colleagues in Walmart and our colleagues in civil society and government. We are also appreciative of the support from our Board and shareholders. Thank you all.
GM PATTISON Chief Executive Ofcer 5 October 2012
38
FINANCIAL DIRECTORS REVIEW

Key issues:
R Continued low product ination R Effective cost control R Higher occupancy costs and depreciation R Effective working capital management R Highest capital expenditure levels
Financial impact of Walmart transaction

The Walmart transaction became effective on 20 June 2011 at which time Walmart acquired 51% of Massmarts issued shares, on a fully diluted basis,
ILAN ZWARENSTEIN FINANCIAL DIRECTOR
for a cash consideration of R148 per share. The Competition Commission and the Competition Tribunal have approved the transaction. The only outstanding issue remains that of the Supplier Development Fund, which is covered in the CEO review. During the 2012 year, the Walmart transaction, integration and related costs amounted to R185.4 million. These costs included the costs of the Walmart expatriates currently operating in the Group, other related employment costs, the cost of integrating and aligning systems and the cost of sending 368 staff members, at all levels of the Group, to the Walmart Annual Shareholders Conference in Bentonville. In the 2011 nancial year, the total transaction cost amounted to R408.8 million, which included advisors fees and expenses of R238.7 million, the establishment of the R100.0 million Supplier Development Fund (required by the Competition Tribunal) and R70.1 million in accelerated IFRS 2 Share-based Payment charges. Going forward, this cost should normalise at around R50.0 million a year from the end of 2013. The benets of the transaction, while difcult to quantify, have been substantial. To date, these have largely been intellectual and soft benets assisting the Group with its strategic journey into Food Retail, leaning on the experience of Walmart as we roll out our supply chain and logistics strategy, including the roll-out of the Regional Distribution Centres (RDCs), the beginning of the Groups directto-farm process and most recently the introduction of some new private label brands, including the Great Value brand.
Acquisitions
During the year, the Group acquired two businesses, being Fruitspot and the Rhino Cash and Carry Group. Both of these acquisitions are aligned to the Groups strategy of rolling out Food Retail. Makro acquired Fruitspot with effect from 2 January 2012 and Cambridge acquired the Rhino Cash
39
and Carry Group with effect from 1 March 2012. Together these acquisitions amounted to a net cash purchase price of R326.7 million and gave rise to goodwill of R485.2 million. Liabilities raised on the business acquisitions of R182.3 million are dependent on these businesses achieving certain prot hurdles in the next two years.
Disposals
During the nancial year, the Group disposed of the Score stores acquired in 2009. The loss on disposal amounted to R12.1 million. A small cash and carry business in Mozambique is in the process of being sold. The assets and liabilities have been revalued to the lower of carrying value and fair value less costs to sell and disclosed separately as non-current assets or liabilities classied as held for sale in the statement of nancial position.
Accounting policies
There were no signicant changes in accounting policies during the year.
Financial targets
The Group has medium-term nancial targets or measures that we believe represent optimal performance levels within the income statement, statement of nancial position, or the combination of both. Certain of these targets are stretch targets that will only be achieved in the medium term. In addition, these targets are also through-the-cycle targets, meaning that during a strongly negative or positive economic environment, we may under- or over-perform against those targets. These target ratios are shown below: Medium-term target ratios ROS > 5.0% Denition Return on sales (ROS) is the ratio of prot before tax, excluding Walmart costs and foreign exchange amounts, to sales ROE > 35% Return on equity (ROE) is the ratio of headline earnings excluding Walmart costs, to average ordinary shareholders equity Gearing 30% Gearing is the ratio of average long-term interest-bearing debt to average ordinary shareholders equity Dividend cover of x 1.55 Dividend cover represents the ratio of headline earnings to dividends paid to ordinary shareholders
READ MORE: PAGE 194 GROUP FINANCIAL STATEMENTS More detail on the accounting policies can be found in note 1.
DEFINITIONS THROUGH THE CYCLE The financial targets are intended to apply in a benign to positive economic environment, ie one representing the average growth rate of an economiccycle.
40
FINANCIAL DIRECTORS REVIEW CONTINUED

Return on sales (ROS)
This ratio combines all the key income statement elements, being sales, gross RETURN ON SALES BEFORE WALMART COSTS (%) margin, supplier income, expenses (including depreciation and amortisation), and net interest, but excludes Walmart costs and foreign exchange translation gains or losses. Every key nancial aspect of the retail or wholesale business model is therefore captured in this ratio. In addition, the largest asset investment in the Divisions is net working capital (being inventory and trade receivables), less the associated funding liability (in trade payables). The relative success
2008 2009 2010 2011 2012
of managements impact on net working capital will therefore be reected in changed net nance charges or receipts from one year to the next. The reason foreign exchange translation gains or losses are excluded is because they are largely well beyond managements control, are volatile, and do not reect the sustainable protability of the Division or Group. Returns for 2012 were negatively impacted by the increased depreciation and occupancy costs. These costs comprised approximately 6.5% and 22.4% of total costs and increased by 24.8% and 23.7%, respectively. The increased depreciation and occupancy cost is a consequence of the Groups signicant increase in RDCs, the roll-out of new stores including three new Makros during the year and the introduction of Food Retail to three Divisions. Massmart's current ROS is 3.4% (2011: 3.7%).
4.8
4.6
4.0
3.7
3.4
Return on equity
Massmart is committed to delivering superior returns to shareholders over the RETURN ON AVERAGE SHAREHOLDERS EQUITY BEFORE WALMART COSTS (%) longer term. The Groups medium-term targets are to exceed a 35% return on average ordinary shareholders equity (ROE). The decline in the Groups protability (measured by ROS) during the economic recession in 2009 and 2010 was the main cause of the decline in the Groups return on shareholders equity. This was also affected by the Groups ongoing investment in new stores and new businesses which increased the size of the
2008 2009 2010 2011 2012
50.7
41.7
34.9
33.7
32.8
net asset value. As the Groups protability improves, and as the new stores and business begin to trade optimally, the ROE will improve to higher levels. In 2011 and 2012, the signicant strategic investment in capital assets already discussed caused the ROE to remain at lower levels. Massmarts current return on average shareholders equity (excluding Walmart costs) is 32.8% (2011: 33.7%). The Divisions are responsible for delivering operational returns, being their returns to their net working capital and non-current assets excluding goodwill and trademarks. In addition to these operational returns, Massmart, through the Board and Executive Committee, is responsible for delivering investment returns that will also include the book value of intangibles (specically goodwill arising
41
from acquisitions), as well as setting the Groups gearing levels that will inuence returns to shareholders and the overall risk prole. Depending upon the purchase price, retail and wholesale acquisitions tend to generate signicant accounting goodwill owing to the relatively low net asset values of these business models. The Divisions are recapitalised annually by Massmart with non-interest-bearing shareholders funds that are equivalent to the book value of long-term assets in each Division. Each Division must therefore fund its net working capital position through cash or interest-bearing debt, depending upon the characteristics of that business model. This process enables divisional returns to be evaluated and compared on a consistent basis across the Group, and from one year to the next. This policy has not been rigidly applied in Masscash owing to minority shareholders in that business, although interest income from one year to the next is generally comparable.
Gearing (or leverage)

Massmart prefers some gearing, of approximately 30%, in order to leverage the return on shareholders equity but without introducing excessive nancial risk to the Group. Given the Groups high cash generation and our historical preference for leasing rather than owning our stores, it is difcult to permanently or meaningfully gear (ie maintain a net interest-bearing debt position) the Group over the long term. It should be noted here however, that our stores lease obligations represent a signicant form of permanent gearing (these lease obligations currently represent a discounted present value of approximately R6.5 billion (2011: R5.5 billion)). From 2008, the Group decided rather to own than lease certain of its larger stand-alone store formats, specically Makro and Builders Warehouse stores, and this will add incrementally to the Groups gearing. This change does not however, represent a major nancial shift as all it will be doing is converting a xed long-term lease commitment, which is recorded off-balance sheet, to an on-balance sheet asset or liability. As regards to nancing any acquisitions, depending on the target companys cash prole and cash generation ability, this gearing ratio may be increased. In addition to the above, the Group is continuing with its strategic drive of investing for the future. This includes the roll-out of Food Retail across three of the Divisions, the roll-out of new stores, including the continued roll-out of new Makro stores and the opening of new RDCs. This has the effect of pushing the gearing levels up in the short term.
Rm Gearing
Average interestbearing debt for the year Average capital and reserves
2012 38.9%
2011 39.9%
1,618.8 4,161.4
1,484.8 3,717.8
Average interest-bearing debt is calculated by grossing up the net interest paid of R115.1 million (2011: R107.2 million) by the average interest rate of 7.11% (2011: 7.22%).
42

As the period-end statement of nancial position tends to be unrepresentative of the Groups average net cash or debt position during the year (including higher cash balances that are paid to creditors after month-end), the Groups gearing levels are best calculated using the net interest paid (or received) for the nancial period. The Groups average gearing was 38.9% (2011: 39.9%) for the nancial year.
Dividend cover
Massmarts previous dividend policy was to declare and pay a total annual cash dividend representing a 1.70 times dividend cover ratio. The reference point for the calculation is headline earnings, which includes the effect of the Thuthukani IFRS 2 charge and associated dividend. No adjustment is made to the dividend calculation for the unrealised or non-cash portion of any foreign exchange translation gain or loss, unless these gures become material. In light of the new South African Dividend Tax introduced with effect from 1 April 2012 (Dividend Tax), the Groups dividend cover has been adjusted to reect the benet to the Company of no longer paying the Secondary Tax on Companies (STC) on the net dividend. Consequently Massmarts new dividend policy is to declare and pay a total annual cash dividend representing a 1.55 times dividend cover unless circumstances dictate otherwise. This ratio is not a target because it is already being achieved but is disclosed to give shareholders clarity on future dividend levels. The Board believes that this dividend cover ratio is appropriate, given the Groups current and forecast cash generation, planned capital expenditure and gearing levels. Historical actual dividend cover ratios: 2012 2011 2010 1.46 2009 1.55 2008 1.70 2007 1.70 2006 2.00 2005 2.00 2004 2.00
Dividend cover 1.59* 1.59*
* This was calculated using headline earnings before Walmart costs (taxed).
43
Income statement
2012 Rm Sales Gross prot Gross margin Other income Expenses Operating expenses as a % of sales Trading prot Trading prot as a % of sales Foreign exchange loss Operating prot before Walmart costs Walmart transaction, integration and related costs Loss on disposal of Makro Zimbabwe (note 8) Operating prot Operating prot as a % of sales Finance costs Finance income Net nance costs Prot before taxation Prot before taxation as a % of sales Taxation Prot for the year Headline earnings: Including Walmart costs Excluding Walmart costs Headline earnings per share (cents): Including Walmart costs Excluding Walmart costs 61,209.1 11,252.0 18.4% 153.8 (9,198.7) 15.0% 2,265.3 3.7% (72.5) 2011 Rm 52,950.1 9,668.3 18.3% 139.4 (7,676.7) 14.5% 2,182.9 4.1% (72.3) 3.8 % change 15.6 16.4 10.3 (19.8) READ MORE: PAGE 189 217 GROUP FINANCIAL STATEMENTS More detail on the consolidated income statement and related notes can be found in: R Income statement p.189 R Other income (note 4) p.209 R Net finance costs (note 9) p.214 R Taxation (note 10) p.215 R Headline earnings (note 12) p.217
2,134.6 (185.4) 1,949.2 3.2% (183.9) 68.8 (115.1) 1,834.1 3.0% (618.2) 1,215.9
2,058.7 (408.8) (38.6) 1,611.3 3.0% (140.4) 33.2 (107.2) 1,504.1 2.8% (585.3) 918.8
3.7 READ MORE: PAGES 79 111 OPERATIONAL REVIEW More detail on the operational performance can be found in: R Massdiscounters divisional review p.79 R Masswarehouse divisional review p.87 R Massbuild divisional review p.95 R Masscash divisional review p.104
21.0
(31.0) 107.2 (7.4) 21.9
(5.6) 32.3
1,216.7 1,363.6
881.9 1,252.7
38.0 8.9
564.5 632.6
433.3 615.5
30.3 2.8
44

Sales
Total Group sales for the 2012 nancial year amounted to R61.2 billion. Total DEFINITIONS COMPARABLE SALES Comparable sales are sales figures quoted for stores that have traded, and will trade, for all 12 months of both the current and prior year. Thesestores sales would therefore exclude new store openings or closings in the current and prior year. UNWEIGHTED New space has not been proportionately adjusted if the store was only open for part of the financialyear. and comparable store sales for the 2012 nancial year increased by 15.6% and 9.6%, respectively. The Groups average product selling price ination rate for the year was 1.8% (2011: -1.3%). Ination/deation for each of the Groups major product categories is shown in the table alongside. The effect of General Merchandise being in deation throughout the year is that the Group needed to move greater volumes of boxes in order to achieve an equivalent amount of Rand sales. Looking ahead to December 2012, some ination is expected to return to General Merchandise, although this will likely be marginal. Food ination is likely to increase signicantly in the short term, mainly as a result of global supply shortages of many commodities, including maize and oil. If the Rand remains stable, product ination should increase towards 4% 6%. During the 2012 nancial year, the Group opened 25 stores, closed ve stores, and acquired 15 stores, resulting in a total of 348 stores. Net trading space increased by 7.3% to a total of 1,350,300m2.
Gross prot
+ 1.8% + 6.5% + 1.4% 4.9%
The Groups gross margin of 18.38% is above the prior years 18.26%. The increase is a result of improved gross margins in Massbuild and a higher contribution from Game Africa. These increases however, were offset by a greater Food contribution across the Group. The Groups gross margin is dependent upon the sales mix across the Divisions and the required trading aggression occasioned by competitor activity. In a positive economic cycle, it should increase marginally owing to the increased contribution from the higher-margin Massbuild Division, as well as a higher proportion of General Merchandise sales. Gross prot includes rebates and other forms of income earned from suppliers as well as ongoing revenue from sales of cellular products and airtime.
GROUP PRODUCT INFLATION
FOOD AND LIQUOR INFLATION
HOME IMPROVEMENT INFLATION
Other income
Other income of R153.8 million (2011: R139.4 million) comprises royalties and franchise fees from in-store third parties, property rentals, investment income excluding interest, sundry third party management and administration fees, distribution income and income from insurance premium contributions.
GENERAL MERCHANDISE DEFLATION
45
Expenses
2012 Rm Depreciation and amortisation Impairment of assets Employment costs Occupancy costs Other operating costs Total expenses (594.2) (16.5) (4,336.1) (2,059.9) (2,192.0) (9,198.7) 2011 Rm (476.3) (10.0) 3,766.3) (1,664.7) (1,759.4) (7,676.7) % change (24.8) (65.0) (15.1) (23.7) (24.6) (19.8) INSIGHT EXPENSES Employment and occupancy costs together represent 69.5% of the Groups total expenses.
Due to the new stores, specically the three new Makro stores, the investment in Food Retails supply chain and infrastructure, and IT upgrades across most Divisions, total expenses (excluding foreign exchange losses) increased by 19.8%. The impact of the Groups continued investment in growth can be seen in the 24.8% higher depreciation and amortisation charge and the 23.7% increase in occupancy costs. Comparable expenses remained well controlled and increased by 7.0%. Total expenses represent 15.0% of sales, an increase compared to the prior years 14.5%. The major expense categories and signicant expenses included in total expenses are discussed in more detail below. Employment costs, the Groups single largest cost category at 47.1% of total expenses, are 15.1% higher than the prior year. As a percentage of sales, employment costs decreased marginally to 7.08% (2011: 7.11%). On a comparable basis, these costs increased by only 11.9%. Included in employment costs are IFRS 2 Share-based Payments charges of R66.1 million (2011: R110.7 million) which arise from shares and options issued to beneciaries of the Massmart Employee Share Trust, the Thuthukani BEE Staff Scheme and Black Scarce Skills Trust. The Group employed 10.7% more employees (on a full-time equivalent basis or FTE and excluding acquisition FTEs) compared to 2011, increasing as we opened new stores and from acquisitions. For the forthcoming nancial year, the Groups salary increases are between 5.0% and 7.0% and wage increases, which have all been nalised, are in a range of 7.0% and 8.2%. Occupancy costs, the Groups second biggest operating cost at 22.4% of total expenses, increased by 23.7%. On a comparable basis, these costs increased by 13.1%. UP BY 23.7% UP BY 15.1%
R4,336.1m
EMPLOYMENT COSTS 2011: R3,766.3m
R2,059.9m
OCCUPANCY COSTS 2011: R1,664.7m
46

Property lease costs comprise 67.8% of total occupancy costs, the balance comprises ancillary property costs including municipal rates and services which continue to increase in excess of national South African ination levels. Expressed as a percentage of sales, occupancy costs, at 3.4%, are higher than the prior year equivalent of 3.1%. The Massdiscounters RDCs, the opening of new stores, including three new Makro stores, and the roll-out of Food Retail across the Group resulted in the high increase in occupancy costs. As Makro continues on its aggressive new store roll-out coupled with the continued roll-out of RDCs, this Group ratio is likely to deteriorate slightly over the next 18 months. The lease-smoothing accounting policy applicable to operating leases (thereby affecting all store leases) has the effect of keeping comparable-store lease charges broadly equal from one year to the next, and so any increase in property lease costs between the years would be from new stores. Another effect of this accounting policy is that annual lease escalations no longer increase the Groups lease charge. Adjusting for the non-cash lease-smoothing adjustment in both years shows that annual cash occupancy costs increased by 22.2% while total trading space increased by 7.3%. Depreciation and amortisation is the Groups third largest cost category and represents 6.5% of total expenses. Owing to the accelerated capital investment in new stores and RDCs, the depreciation and amortisation charge increased by 24.8% which is well ahead of sales growth, and will continue to increase ahead of sales growth, for the next 18 months due to the Groups capital expansion programme. Most Divisions refurbish their stores on a regular basis, resulting in steadily higher depreciation charges. The three major cost categories described above together represent 76.0% of the Groups total expenses. Other operating costs represent every other item of expense in the Group, including insurance, bad debts, travel, professional fees, advertising and marketing, stationery and consumables. Combined, this category represents the most manageable or variable, costs and so while total costs in this category increased by 24.6%, comparable costs increased by only 6.3% due to intense management focus.
Other signicant items

As noted in the summarised income statement above, included in operating prot are net unrealised and realised losses on foreign currency transactions and translations of R72.5 million (2011: net loss of R72.3 million).
47
During the 2012 nancial year, the translation of the Group's African balance sheets accounted for R124.7 million of this (2011: R52.2 million loss) and there was a net translation gain from other foreign monetary balances of R52.2 million (2011: R20.1 million loss). During May 2012, the Government of Malawi devalued the countrys currency by 50%. The effect of this (included above) was a loss on translation of the loans in Malawi which amounted to R145.6 million. This loss was offset by the Rand weakness compared to the Groups African currencies basket. Should the Rand weaken against these currencies, it is likely that the Group will report foreign exchange gains. More detail is provided in note 7 on page 211 and note 39 on page 253 on the nature of the Groups foreign currency exposure, particularly with regard to the African stores. When a new store is opened, large once-off or exceptional operating costs can be incurred in preparing the store (including temporary staff, marketing initiatives, special promotions, signage, amongst others). These costs are referred to as store pre-opening costs and in 2012 amounted to R82.0 million (2011: R43.2 million) which included the new Makro stores. Store preopening costs are likely to remain high as we continue to roll out new Makro stores and Food Retail across the Group.
EBITDA AND EBITDAR

Rm 2012 2011 % change
Operating prot before Walmart costs 2,134.6 2,058.7 Depreciation and amortisation Impairment of assets EBITDA Occupancy costs EBITDAR
3.7
(594.2) (16.5)
(476.3) (10.0)
24.8 65.0 7.9 23.7 14.1
2,745.3 2,545.0 (2,059.9) (1,664.7) 4,805.2 4,209.7
Trading and operating prot

Group trading prot, which is shown before accounting for the Walmart costs, grew by 3.8% which is signicantly below sales growth of 15.6%. The Groups lower net margin growth is a result of expense pressure due to investing in new stores and RDCs and the additional costs resulting from the need to move additional volumes due to deation in General Merchandise. Expressed as a percentage of sales, Group trading prot deteriorated from 4.1% to 3.7%. Group operating prot before Walmart costs, which includes the foreign currency translation movements, was 3.7% above the prior year. The Groups 2012 nancial performance has been covered in detail above, but can broadly be summarised as:
R Total sales growth boosted by new stores and acquisitions during the year; R Good comparable sales growth achieved despite low product ination; R Higher gross margins in Massbuild; R High occupancy and depreciation costs in line with the Groups strategic
UP BY 3.8%
R2,265.3m
TRADING PROFIT 2011: R2,182.9m
READ MORE: PAGE 61 TEN-YEAR REVIEW Refer to Ten-year review for definitions of terms used in this section.
investment in the future; and

R Effective comparable cost control.
48

Net nance costs
Using net interest paid as a proxy, the Groups average net gearing (or nancial leverage) for the 2012 nancial year was 38.9% (2011: 39.9%). Taking into account anticipated capital expenditure and excluding any unforeseen developments or new initiatives, the Group will remain net geared for the foreseeable future.
Taxation
TAXATION CALCULATION
South African corporate taxation
28.0% in 2011
The total tax charge represents an overall tax rate of 33.7% (2011: 38.9%). The current and prior years gures are distorted by the effect of the nondeductible portion of the Walmart costs. Adjusting for these reduces the Group tax rate to a more representative 32.5%. The slightly improved tax rate is partly caused by the increased protability reducing the effect of non-deductible charges. For several years the Groups tax rate has been higher than the standard South African corporate rate due to the charge from the Secondary Tax on Companies (STC) payable on net dividends. In the current year STC added 4.3% (2011: 5.6%) to the tax rate. The effective tax rate should drop slightly due to the decrease in the proportion of non-deductible expenditure. Due to the abolishment of STC and reduced effect of non-deductible expenditure, we expect Massmarts future effective tax rate to be at or near the South African corporate rate of 28%, although higher tax rates in certain foreign jurisdictions may marginally increase this. Massmart is unconcerned at any specic element of historical tax risk in the Group, but there remains the uncertainty that material adjustments arising from potentially unfavourable tax assessments of previous tax returns, some of which have not yet been assessed by SARS, could impact future tax charges. Extending this uncertainty is that SARS can reopen any tax assessment within three years of issuing such assessment.
28.0% 4.3% 1.0% 0.4% 33.7%
Secondary Tax on Companies

5.6% in 2011
IFRS 2
2.1% in 2011
Other
3.2% in 2011
Overall tax rate

38.9% in 2011
TOTAL TAX CHARGE

R585.3m in 2011
R618.2m
Headline earnings
Headline earnings, before Walmart costs, of R1,363.6 million (2011: HEADLINE EARNINGS BEFORE WALMART COSTS (cents) R1,252.7 million) are 8.9% above the prior year. Including transaction costs however, reduces headline earnings to R1.216.7 million which is 38.0% above the prior year. The more representative gure is 8.9% which better reects the Groups actual trading performance in 2012. Headline earnings per share (HEPS), before Walmart costs, of 632.6 cents,
2008 2009 2010 2011 2012
is 2.8% higher than the 2011 HEPS of 615.5 cents. The increase in HEPS is lower than headline earnings due to the increase of 12.2 million shares resulting from the Walmart transaction. Including Walmart costs however, reduces HEPS to 564.5 cents which is 30.3% below the prior year.
634.1
605.0
567.2
615.5
632.6
49
After adjusting for the potential future conversion of 4.7 million shares (2011: 11.2 million) shares, the diluted HEPS before Walmart costs is 619.0 cents (2011: 583.5 cents). Under the calculation required by IFRS, the number of potentially dilutive shares was increased due to the signicantly higher weighted-average Massmart share price during this nancial year.
Statement of nancial position

2012 Rm Assets Non-current assets Current assets Non-current assets classied as held for sale Total assets Equity Capital and reserves Minority interest Total equity Liabilities Non-current liabilities Current liabilities Non-current liabilities classied as held for sale Total equity and liabilities 7,175.8 11,895.9 103.2 19,174.9 4,356.9 207.9 4,564.8 1,486.0 12,982.2 141.9 19,174.9 2011 Rm 5,846.7 11,427.6 17,274.3 3,965.9 215.8 4,181.7 1,205.2 11,887.4 17,274.3 READ MORE: PAGE 191 237 GROUP FINANCIAL STATEMENTS More detail on the consolidated statement of financial position and related notes can be found in: R Statement of financial position p.191 R Property, plant and equipment (note13) p.219 R Goodwill (note 14) p.221 R Other intangibles (note 15) p.222 R Investments (note 16) p.223 R Other financial assets (note 17) p.225 R Deferred taxation (note 18) p.226 R Inventories (note 19) p.227 R Trade, other receivables and prepayments (note 20) p.228 R Minority interest (note 23) p.234 R Non-current liabilities (note 24) p.234 R Non-current provisions (note 25) p.235 R Trade and other payables (note26) p.236 R Provisions (note 27) p.237 R Other current liabilities (note 28) p.237
This review covers the consolidated statement of nancial position and the related notes.
Non-current assets
2012 Rm Non-current assets Property, plant and equipment Goodwill Other intangibles Investments Other nancial assets Deferred taxation 7,175.8 3,520.6 2,521.4 347.1 321.9 134.6 330.2 2011 Rm 5,846.7 2,717.8 2,049.4 309.0 367.6 137.9 265.0
Property, plant and equipment and goodwill together represent 84.2% (2011: 81.5%) of the Groups total non-current assets.
50

Massmart continually refurbishes older stores and is building new stores and CAPITAL EXPENDITURE, ACQUISITIONS, AND TOTAL CASH FLOW AS A % OF SALES (Rm) 2.7%
2.6% 327.9 2.1% 2.1% 171.0
Distribution Centres, and so during 2012 expenditure of R1,236.8 million (2011: R1,042.4 million) was spent on property, plant and equipment. Of this, R550.1 million (2011: R249.6 million) was replacement capital expenditure, while the balance of R686.7 million (2011: R792.8 million) was invested in new capital assets, including new stores and the new RDC. Acquisitions added a further R106.9 million (2011: R82.2 million) to Group property, plant and equipment. Goodwill increased by R472.0 million, reecting the two principal movements
198.5
369.9
340.1
309.6
346.1
843.0
637.1
710.4
1.5%
354.5
268.3
284.0
345.4
of goodwill arising from the acquisition of Fruitspot and the Rhino Cash and Carry Group (R486.4 million) less an impairment of R16.5 million. Under IFRS all goodwill must be tested annually against the value of the business units with which it is associated and, if overstated, that goodwill must be impaired. Other than as noted earlier, no goodwill impairment was necessary this year or in the prior year. Other intangibles primarily represent computer software that IFRS requires to be
2008 2009 2010 2011 2012
ACQUISITION EXPANSION REPLACEMENT TOTAL CASHFLOW AS A % OF SALES
CAPITAL EXPENDITURE, ACQUISITIONS AND BUYBACKS (Rm)

206.7 273.9 327.9
disclosed in this category. In terms of IFRS the depreciation charge arising from this asset category is classied as an amortisation charge. During the 2009 nancial year the Group began to implement its strategic plan of investing in the future. This included the opening of a number of RDCs (space increase > 400% in three years); the roll-out of new Makro stores (opened three new stores in 2012); and the roll-out of Food Retail across the Group including Cambridge and Foodco. Capital expenditure as a percentage of sales therefore increased from 1.2% of sales in 2006 to 2.7% at the end of 2012. Capital expenditure for the next 18 months is budgeted to remain at current
198.5
126.0
369.9
137.2
171.0
694.6
2008 2009 2010 2011 2012
577.9
630.1
1,188.4
1,347.5
271.8
levels due to the continued roll-out of Makro stores; the Massdiscounters Foodco conversions and new stores; and the opening of the Massbuild RDC.
SHARE BUYBACKS ACQUISITIONS TOTAL CAPEX
Investments and other nancial assets

Investments comprise mainly a R177.2 million (2011: R250.0 million) participation in an international treasury, shipping and trading business unit, revalued to reect the foreign-denominated net assets within that business unit. The R82.0 million (2011: R70.6 million) shown as a bare dominium revaluation represents the Groups proportionate share of the estimated market value of the right to acquire bare dominiums in certain Makro stores in 2022. Other nancial assets of R134.6 million (2011: R137.9 million) include executive and employee loans of R82.4 million (2011: R92.5 million) owed
51
by participants in the Massmart employee share purchase trust that attract zero percent interest. This loan amount reduces as employees sell their shares and repay the associated loans and increases where executives elect to own Massmart shares, funded with these loans, rather than options issued by the trust. As a result of Walmart acquiring 51% in 2011 of the unvested shares, executives were required to settle the loans associated with those shares hence the reduction of the amounts due in this category. The nance lease deposit of R37.6 million (2011: R45.3 million) is related to the nancing of the Makro Strubens Valley store originally built in 2003.
Deferred tax
The deferred tax asset arises primarily from numerous temporary differences, including tax deductions on trademarks, the operating lease liability arising from the lease-smoothing accounting policy, and unutilised assessed losses. This net asset will reduce over time as the associated tax benets are utilised.
Current assets
2012 Rm Current assets Inventories Trade, other receivables and prepayments Taxation Cash and bank balances Restricted cash held on behalf of Massmart Employee Share Trusts beneciaries 11,895.9 7,615.6 2,953.9 21.0 1,305.4 2011 Rm 11,427.6 6,199.7 2,562.7 22.5 1,549.1
1,093.6
Net inventories represent approximately 55.6 days sales (on historic sales basis), marginally higher than the prior years gure of 52.3 days. The 22.8% increase in stock is largely a result of the additional stores in the Group and an increase in Food inventory as a result of anticipated price increases due to global supply shortages. In general, Massdiscounters, being a retail discounter with 125 stores, with several stores in Africa with longer supply-chains, has the highest inventory levels and its sales days in inventory are almost double those for Massmarts wholesale businesses (Makro and Masscash). Builders Warehouse also has higher inventory days than the Group average, given the broader and deeper merchandise range in its stores.
2008 2009 2010 2011 2012
INVENTORY DAYS
54.7
50.5
52.5
52.3
55.6
52

General Merchandise net inventory of R3,221.7 million (2011: R2,694.1 million) represents about 42.3% of total Group inventory, while Food net inventory at R2,434.0 million (2011: R1,862.3 million) is the second largest Group inventory category but with the fastest stock-turns. This inventory category has increased by 30.7% due to the Cambridge expansion. Home Improvement net inventory levels have increased from the new stores in that Division and higher sales growth. Total trade, other receivables and prepayments, net of provisions, is 15.3% higher than the prior year and is marginally below sales growth. Included here are net trade accounts receivable of R1,545.2 million (2011: R1,273.4 million), which increased by 21.3%. The businesses continue to focus on keeping debtors within their terms. Although trade credit is offered to certain customers in Massbuild and in Masscash, it is well controlled, is insured with a credit risk insurer, and is kept within the Groups parameters. Allowances for doubtful debts at year-end increased from 4.5% of total trade receivables to 5.1% at June 2012. For more detail, refer also to the commentary on credit risk in the Financial risks section in note 39 on page 253.
Non-current liabilities
2012 Rm Non-current liabilities Non-current liabilities: Interest-bearing Interest-free Non-current provisions Deferred taxation 1,486.0 852.7 345.8 259.0 28.5 2011 Rm 1,205.2 598.7 417.3 167.0 22.2
Major items included in the total of R1,486.0 million (2011: R1,205.2 million) are medium-term bank loans, capitalised nance leases, the operating lease liability arising from the lease-smoothing adjustment, non-current provisions and deferred tax. The interest-bearing liabilities included in this category are medium-term bank loans and this balance increased during the nancial year as a new R750.0 million ve-year, xed rate, amortising loan was raised at 7.9%. Two three-year amortising loans of R500.0 million were each secured during 2010 and 2011, respectively. Interest is xed on these loans at 9.8% and 8.1%, respectively.
Massmart Integrated Annual Report 2012 STORE PROGRESS OPENING BALANCE

GAME STORES OPENED KNYSNA (WESTERN CAPE) CARNIVAL MALL (GAUTENG) MIDDELBURG (MPUMALANGA) ROSEBANK (GAUTENG) THOHOYANDOU (LIMPOPO) ULUNDI (KZN) ZEVENSWACHT (WESTERN CAPE) ENUGU (NIGERIA) GAME STORE CLOSED QUATRE BORNES (MAURITIUS) DIONWIRED STORES OPENED NICOLWAY (GAUTENG) BOKSBURG (GAUTENG) TYGERVALLEY (WESTERN CAPE) CANAL WALK (WESTERN CAPE) BLUE ROUTE (WESTERN CAPE) MAKRO STORES OPENED POLOKWANE (LIMPOPO) NELSPRUIT (MPUMALANGA) MONTAGUE (WESTERN CAPE) MAKRO STORE CLOSED MILNERTON (CAPE TOWN) BUILDERS WAREHOUSE STORE OPENED GABORONE (BOTSWANA) BUILDERS EXPRESS STORES OPENED BRYANSTON (GAUTENG) AMANZIMTOTI (KZN) MASSCASH WHOLESALE STORE OPENED EMPANGENI LIQUORS (KZN) MASSCASH WHOLESALE STORE CLOSED GINGINDHLOVU (KZN) CAMBRIDGE FOOD STORES OPENED HILLBROW (GAUTENG) KEMPSTAR (GAUTENG) MABOPANE (GAUTENG) NEWGATE (GAUTENG) RHINO, KING WILLIAMS TOWN (EASTERN CAPE) CAMBRIDGE FOOD STORES CLOSED ASTOR EXPRESS BARAGWANATH WALKWAY (GAUTENG) ASTOR EXPRESS VAN DER WALT (GAUTENG) RHINO STORES ACQUIRED RHINO, BIZANA (EASTERN CAPE) RHINO, LUSKISIKI C&C (EASTERN CAPE) RHINO, MTHATA (EASTERN CAPE) RHINO, HAMMANSKRAAL (GAUTENG) RHINO, EDENDALE (KZN) RHINO, HARDING (KZN) RHINO, KOKSTAD (KZN) RHINO, MATATIELE (KZN) RHINO, MTUBATUBA (KZN) RHINO, PIETERMARITZBURG (KZN) RHINO, PORT SHEPSTONE C&C (KZN) RHINO, ULUNDI (KZN) RHINO, UMLAZI (KZN) RHINO, UMZIMKULU (KZN) RHINO, UMZINTO (KZN)
53
313 8
Capitalised nance lease balances are R75.5 million (2011: R58.5 million). The largest balance in non-current non-interest-bearing liabilities is the total operating lease liability of R342.8 million (2011: R414.3 million) arising from the lease-smoothing accounting policy and which will be released over the remaining period of the Groups operating leases. Included in non-current provisions is the long-term provision of R78.2 million (2011: R66.0 million) arising from the actuarial valuation of the Groups potential liability, unfunded, arising from post-retirement medical aid contributions owed to current and future retirees. With effect from 1999, postretirement medical aid benets were no longer offered to new employees joining the Group. The R100.0 million Supplier Development Fund raised as part of the Competition Tribunals approval of the Walmart transaction is included here as it is to be spent over three years. Annually, Massmart must report to the Tribunal about our expenditure and achievements under this condition. The Fund has been put on hold until a ruling from the Competition Tribunal is given. Included in the interest-free amount are liabilities raised on business acquisitions related to the long-term portion of the nal cash settlements from the acquisitions of Fruitspot and the Rhino Cash and Carry Group. The acquisitions were effected on 2 January 2012 and 1 March 2012, respectively. The deferred tax liability arises primarily from prepayments and property, plant and equipment.
-1 5
3 -1 1 2 1 -1 5
Current liabilities
2012 Rm Current liabilities Trade and other payables Massmart Employee Share Trusts beneciaries liability Provisions Taxation Other current liabilities Bank overdrafts 12,982.2 11,302.0 139.7 259.0 648.9 632.6 2011 Rm 11,887.4 9,381.8 1,093.6 26.8 170.6 409.9 804.7
-2
15
Included in the total trade and other payables gure are trade payables of R8,908.8 million (2011: R7,553.9 million) representing approximately 57.1 days of cost of sales (using the historic basis), which is slightly higher than the prior years gure of 55.9 days. The gure is representative of the Groups supplier terms.
TOTAL STORES IN 2012
348
54

As noted earlier, owing to payments to creditors being made shortly after each month-end, the Group trade payables balances at year-end are not representative of the average during the remaining nancial period. The amount by which year-end trade payables are overstated in comparison to the average cannot be accurately calculated but is approximately R1.5 billion. Included in the interest-free amount are liabilities raised on business INSIGHT CASH FLOW ANALYSIS Working capital movements can be volatile. Depending upon creditor payment cycles the extent of the movement tends to be overstated at month- and year-end and so is generally not indicative of the intrayear average. Trading represents Operating cash before working capital movements. acquisitions related to the short-term portion of the nal cash settlements from the acquisitions of Fruitspot and the Rhino Cash and Carry Group. The current taxation liability reects the Groups liability for provisional corporate tax payments that are generally payable within a few days of the nancial year-end. Major items in other current liabilities include R503.8 million
(2011: R286.8 million) being the short-term portion of the medium-term loans noted above.
Cash ow statement
Cash ow from operating activities 2012 Rm CASH GENERATED FROM OPERATIONS (Rm) Cash ow from operating activities Operating cash including cash-effect of Walmart costs Working capital movements Cash generated from operations Interest received Interest paid Investment income Dividends received Taxation paid Dividends paid Net cash inow from operating activities 2011 Rm
2,614.6 53.9 2,668.5 68.8 (183.9) 0.1 3.8 (595.6) (838.8) 1,122.9
2,264.8 (625.4) 1,639.4 33.2 (140.4) 46.8 2.1 (645.1) (822.5) 113.5
2008
2009
2010
2011
2012
2,321.7 2,462.0 2,639.4 1,639.4 2,668.5
READ MORE: PAGE 251 GROUP FINANCIAL STATEMENTS More detail on the consolidated cash flow can be found in note 38.
Operating cash before working capital movements increased by 15.4% to R2,614.6 million (2011: R2,264.8 million). Included in operating cash is the cash effect of the transaction amounting to R122.9 million (2011: R238.7 million). The Groups working capital management improved signicantly and R53.9 million was released from working capital during the year (2011: -R625.4 million). Total capital expenditure (replacement and expansion) was R1,347.5 million, an increase on the prior years total of R1,188.4 million. Capital expenditure for the year is the highest in the history of the Group but is in line with the Groups
55
strategy of investing for the future. Capital expenditure will remain at similar levels for the next 18 months while the Group continues to roll out new Makro stores and the Massbuild RDC. Investment in subsidiaries has been described in more detail in the Acquisitions paragraph on page 38. Cash ow from investing and nancing activities 2012 Rm Cash ow from investing activities Investment to maintain operations Investment to expand operations Proceeds on disposal of property, plant and equipment Proceeds on disposal of assets classied as held for sale Investment in subsidiaries Other investing activities Net cash outow from investing activities Cash ow from nancing activities Net cash inow from nancing activities Net decrease in cash and cash equivalents Foreign exchange movements taken to statement of changes in equity Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year 345.9 (139.3) 67.6 744.4 672.8 615.3 (569.1) 2.6 1,310.9 744.4 (637.1) (710.4) 10.2 6.5 (327.9) 50.7 (1,608.0) 2011 Rm (345.4) (843.0) 25.2 15.0 (171.0) 21.3 (1,297.9)
Financial risks
Liquidity risk Liquidity risk is considered low owing to the Groups conservative funding structure and its high cash generation. Massmarts liquidity requirements are continually assessed through the Groups cash management and treasury function. The Group has total banking facilities, incorporating overnight, short- and medium-term borrowings, letters of credit and forward exchange contracts of R6,071.7 million (2011: R4,918.9 million). As at June 2012, total interestbearing debt amounted to R2.1 billion (2011: R1.8 billion). As the Group begins to build inventory levels for the festive season, net interestbearing debt will increase up to a maximum of approximately R2.3 billion in October/November, but will reduce rapidly as Christmas trading accelerates with commensurately higher cash proceeds. READ MORE: PAGE 253 GROUP FINANCIAL STATEMENTS More detail on financial risks and sensitivity analyses can be found in note 39.
56

Interest risk Interest rate exposure is actively monitored owing to the Groups signicant intra-month cash movements and the seasonal changes in its net funding prole during the nancial year. As noted above, interest rates on the three medium-term bank loans are xed at 9.8%, 8.1% and 7.9%, respectively. The remaining interest-bearing funding is done through overnight facilities at oating interest rates. Of the Groups total nancial liabilities of R13.2 billion, 80.3% or R10.6 billion is represented by non-interest-bearing trade and other payables funding. Credit risk Credit is available to wholesale customers at Makro, Massbuild and Masscash, and is adequately controlled by using appropriately trained personnel, applying credit granting criteria, continual monitoring and the use of software tools. A portion of the trade debtors book in Masscash is insured and a further portion is secured through general notarial bonds, pledges and other forms of security. Similarly, the trade debtors books in Builders Warehouse and Builders Trade Depot are also insured. Currency risk Where possible and practical, currency risk in the Group is actively managed. All foreign-denominated trading liabilities are covered by matching forwardexchange contracts. At nancial year-end, there were open forward exchange contracts totalling R635.5 million (2011: R446.3 million) of which 98.7% (2011: 99.1%) were US Dollar liabilities. The sensitivity of the Group to this exposure is shown in note 39 on page 262. In brief, using the US Dollar as a proxy for the Groups total currency exposure, if the Rand strengthened by 5% from the year-end rate of R8.40/US Dollar, there would be a R6.0 million charge, while a 5% weakening would give rise to a R6.0 million gain (2011 equivalent gures were R3.8 million). Foreign-denominated assets are not covered by forward exchange contracts, as these are permanent assets held for the long term. The Groups exposure to the African currencies has been explained in note 7 READ MORE: PAGE 211 GROUP FINANCIAL STATEMENTS More detail on the Groups exposure to the African currencies. on page 211 and further detail on the sensitivity analysis can be found in note 39 on page 263.
57
Technical review
The appropriate accounting policies, supported by sound and prudent management judgement and estimates, have been consistently applied. The Groups accounting policies are governed by IFRS and the AC 500 series as issued by the Accounting Practices Board and guidance has been obtained from effective IFRICs and circulars. Due to the nature and volatility of Exposure Drafts (EDs), no review has been provided, except for the lease exposure draft specically discussed above. The Group believes that accounting standards set the minimum requirement for nancial reporting, and thus more information is provided than required. The nancial statements in this Integrated Annual Report have been prepared with the aim of exposing the reader to a very detailed view of the numbers, using a simplied approach, in the hope of facilitating a deeper and informed understanding of the business. Our efforts have been recognised in the South African Ernst & Young Excellence in Corporate Reporting Awards where Massmart has received an Excellent rating for the past seven years. READ MORE: PAGE 205 GROUP FINANCIAL STATEMENTS The detailed technical review can be found in note 2.
Going-concern assertion
The Board has formally considered the going-concern assertion for Massmart and its subsidiaries and believes that it is appropriate for the forthcoming nancial year. See page 187 for more detail.
Appreciation
I would like to acknowledge and pay tribute to the high-quality performances and signicant efforts invested by my Finance colleagues and their teams at the Massmart Divisions and the Massmart corporate ofce. The 2012 nancial year was a particularly difcult year for the Groups Finance teams. Faced with many changes, including the Walmart integration, they delivered superbly on the ongoing demands of their Divisions and the Group.
Ilan Zwarenstein Financial Director 5 October 2012
DIONWIRED, NICOLWAY, BRYANSTON
TEN-YEAR REVIEW
DIONWIRED, NICOLWAY, BRYANSTON
CONTENTS
R DEFINITIONS AND FORMULAS R MASSMART SINCE 1990 R TEN-YEAR REVIEW 61 62 64
61
DEFINITIONS AND FORMULAS

Employment costs Includes the IFRS 2 Share-based Payment expense. Other operating costs Includes the foreign exchange gains and losses. Walmart costs Includes professional fees, integration costs, expatriate employment costs, sharebased payments, travel, consulting costs and other direct expenses relating to the Walmart transaction. Net nance costs Interest received less interest paid. EBITDA Earnings before interest, taxation, depreciation, amortisation and asset impairments. EBITDAR Earnings before interest, taxation, depreciation, amortisation, asset impairments and occupancy costs. Trading prot before interest and taxation Earnings before interest, taxation, asset impairments, the BEE IFRS 2 charge, foreign exchange movements, loss on disposal of business, assets classied as held for sale and Walmart related costs. Comparable sales Sales gures quoted for stores that have traded, and will trade, for all 12 months of the current and prior year. FTE (full-time equivalents) Includes all permanent employees and the permanent equivalent of temporary employees and contracted workers. Trading space (m2) Trading space excludes parking, yard, warehouse space, ofce space and receiving areas. Sales per store (R000) Sales Number of stores Sales for Shield, CellShack, Saverite, Kawena and Kangela are excluded as they do not have stores. Sales per FTE (R000) Sales FTEs Sales per trading m2 (R000) Sales Trading m2 Sales for Shield, CellShack, Saverite, Kawena and Kangela are excluded as they do not have stores. Net asset turn Sales Net assets The Group denes net assets as capital reserves and interest-bearing LT liabilities. Gross margin (%) Gross prot Sales Operating margin (%) Operating prot Sales Quick ratio Current assets excluding inventory Current liabilities Trading prot before interest and taxation margin (%) Trading prot before interest and taxation Sales EBITDA margin (%) EBITDA Sales Effective tax rate (%) Taxation Prot before tax Note 10 on page 215 of the nancial section holds further information. Return on average shareholders' equity (%) Headline earnings Average of opening and closing equity attributable to equity holders of the parent Return on capital employed (%) Operating prot before asset impairments Average of opening and closing capital employed balances The Group denes capital employed as capital and reserves and interest-bearing LT liabilities. Return on invested capital (%) Adjusted operating prot Average invested capital Adjusted operating prot includes nance income and adds back depreciation, amortisation and occupancy costs. Average invested capital is average total assets of continuing operations plus average accumulated depreciation and amortisation less average accounts payable less average accrued liabilities plus occupancy costs x 8. Debt: Equity (%) Debt Capital and reserves Debt comprises non-current interestbearing liabilities. Cash earnings cover Operating cash ow per share Headline earnings per share Net cash to total equity (%) Cash and cash equivalents, net of borrowings Total equity at the end of the year Current ratio Current assets Current liabilities Inventory days Inventory Total cost of sales Inventory turn Total cost of sales Inventory Payable days Trade payables Total cost of sales Asset turn Sales Total assets Total liabilities to total equity Current and non-current liabilities Total equity Headline earnings per share Headline earnings Weighted average number of shares in issue Diluted headline earnings per share Headline earnings Diluted weighted average number of shares in issue Attributable earnings per share Earnings attributable to the equity holders of the parent Weighted average number of shares in issue Dividends/distribution Distribution to shareholders Cash generated from operations before working capital movements per share Cash generated from operations before working capital movements Weighted average number of shares in issue Operating cash ow per share Net cash ow from operations Weighted average number of shares in issue Net cash ow from operations is after working capital movements, and excludes exceptional items and dividends paid. Net asset value per share Capital and reserves Total number of shares in issue Dividend cover Headline earnings per share Interim and nal dividend per share
62
Ten-year Review
MASSMART SINCE 1990

Annual sales and corporate activity through the years
R Makro was the founding entity of Massmart with 6 stores
R10.4bn R8.9bn R5.8bn

1994 1998 1999
2000
R1bn
1990
R1.2bn
1991
R1.5bn
1992
R2.7bn
1993
R3.3bn
R3.5bn
1995
R4.1bn
1996
R4.8bn
1997
READ MORE: PAGES 79 111 OPERATIONAL REVIEW More detail on each divisions operation and strategy.
R Massmart listed on 4 July 2000 on the JSE Limited
R Acquired 378 Shield members on 1 March 1992
R Acquired 20 Dion stores on 31 May 1993
Acquired 14 CCW stores on 1 June 1998
R Acquired 26 Game stores on 1 July 1999
Massmart founded
R20.4bn
R Acquired 5 Builders Warehouse stores on 28 February 2003
R23.8bn
R SHVs 31% shareholding in Massmart sold to local and international investors in January 2004
R Acquired 3 De La Rey stores on 1 June 2005 R Acquired 14 Servistar stores on 1 June 2005 R Acquired 34 Federated Timbers stores on 1 June 2005
R30.0bn
R BEE general staff transaction announced R Disposal of Furnex on 28 February 2006
R34.8bn
2007
R Introduction of DionWired in Massdiscounters
R43.1bn
R Acquired 6 Cambridge Food stores in December 2008 R Acquired 3 Buildrite stores in June 2009
R47.5bn
2010
R Acquisition of 13 businesses in Masscash and Massbuild
R53.0bn
R Walmart 51% acquisition became effective on 20 June 2011 R Acquisition of six businesses in Masscash and Massbuild R Introduction of FoodCo in Massdiscounters
R61.2bn
R Acquisition of Fruitspot on 2 January 2012 R Acquisition of the Rhino Cash and Carry Group on 1 March 2012
R11.6bn
R Acquired 6 Jumbo stores on 1 April 2001
2001
R16.7bn
2002 2003 2004
R Acquired 22 Brown and Weirs stores on 1 July 2001 R Acquired Furnex on 1 January 2002 R In June 2002 Wooltru unbundled its 41% shareholding in Massmart
R25.4bn
2005 2006
R39.8bn
2008 2009 2011 2012
63
64
Ten-year Review
INCOME STATEMENTS IN RANDS

as at 24 June 2012
Nine-year growth %
Income statement (Rm) Continuing operations: Sales Cost of sales Gross prot Other income Depreciation and amortisation costs Impairment of assets Employment costs Occupancy costs Foreign exchange (loss)/prot Other operating costs Operating prot before Walmart costs Walmart transaction, integration and related costs Loss on disposal of Makro Zimbabwe Operating prot Net nance costs Exceptional items Prot before tax Taxation Prot for the year from continuing operations Discontinued operation: Prot/(loss) for the year Loss on disposal Prot for the year Attributable to: Equity holders of the parent Preference shareholders Minority interest Prot for the year Trading prot before Walmart costs, interest and taxation EBITDA before Walmart costs EBITDAR before Walmart costs Headline earnings Headline earnings before Walmart costs Share-based payment expense excluding related charges Massmart Holdings Limited Employee Share Trust Massmart Thuthukani Empowerment Trust Massmart Black Scarce Skills Trust Total Annual growth (%) Total sales Comparable sales Estimated Group sales (deation)/ination (%) Trading prot Prot before tax 11.8 12.1 12.0
2012
2011
2010
2009
13.0 15.6
61,209.1 (49,957.1) 11,252.0 153.8 (594.2) (16.5) (4,336.1) (2,059.9) (72.5) (2,192.0) 2,134.6 (185.4) 1,949.2 (115.1) 1,834.1 (618.2) 1,215.9 1 ,215.9 1,173.5 6.1 36.3 1,215.9 2,265.3 2,745.3 4,805.2 1,216.7 1,363.6
52,950.1 (43,281.8) 9,668.3 139.4 (476.3) (10.0) (3,766.3) (1,664.7) (72.3) (1,759.4) 2,058.7 (408.8) (38.6) 1,611.3 (107.2) 1,504.1 (585.3) 918.8 918.8 838.7 38.4 41.7 918.8 2,182.9 2,545.0 4,209.7 881.9 1,252.7
47,451.0 (38,955.9) 8,495.1 99.6 (382.8) (3.7) (3,352.9) (1,415.1) (87.7) (1,485.8) 1,866.7 1,866.7 (46.7) 1,820.0 (608.2) 1,211.8 1,211.8 1,129.9 46.5 35.4 1,211.8 2,027.8 2,253.2 3,668.3 1,138.6 1,138.6
43,128.7 (35,351.0) 7,777.7 103.1 (343.1) (1.6) (2,965.8) (1,170.4) (78.4) (1,370.9) 1,950.6 1,950.6 (48.6) 1,902.0 (620.4) 1,281.6 1,281.6 1,210.9 38.0 32.7 1,281.6 2,097.5 2,295.3 3,465.7 1,207.1 1,207.1
13.2
12.0 12.6 13.8 16.0 10.9 12.3
44.4 12.8 8.9 66.1 15.6 9.6 1.8 3.8 21.9
68.8 33.5 8.4 110.7 11.6 5.2 (1.3) 7.6 (17.4)
79.7 57.8 11.9 149.4 10.0 2.6 (0.4) (3.3) (4.3)
66.6 54.7 12.2 133.5 10.7 8.2 11.4 4.7 (1.6)
Denitions/explanations to the ratios and terms above can be found on page 61. * 2008 was a 53-week period. For comparative purposes, the adjusted pro forma 52-week period has been used where appropriate.
65
2008*
2007
20061
20051
20042
20033 SALES (Rbn)
38,958.3
34,807.6
29,963.6
25,381.5
23,787.7
20,369.5
(31,781.7) (28,435.7) (24,650.0) (21,202.0) (20,183.2) (17,319.5) 7,176.6 6,371.9 5,313.6 4,179.5 3,604.5 3,050.0 159.2 157.1 117.0 135.6 107.9 81.8 (297.8) (240.9) (202.9) (157.5) (133.5) (107.8) (4.7) (26.3) (5.4) (74.6) (49.5) (2,723.1) (2,449.8) (2,079.0) (1,656.7) (1,416.6) (1,168.5) (952.3) (846.0) (740.5) (644.0) (563.7) (408.8) 62.5 (41.4) 33.3 26.8 (31.7) (28.0) (1,427.3) (1,251.3) (1,108.0) (891.4) (716.1) (671.0) 1,993.1 1,993.1 (59.7) 1,933.4 (632.8) 1,300.6 1,300.6 1,256.6 22.5 21.5 1,300.6 2,002.4 2,295.6 3,247.9 1,261.9 1,261.9 1,673.3 1,673.3 (44.4) 1,628.9 (554.8) 1,074.1 1,074.1 1,049.9 8.9 15.3 1,074.1 1,795.3 1,940.5 2,786.5 1,083.3 1,083.3 1,328.1 1,328.1 (32.2) 1,295.9 (444.6) 851.3 3.7 (1.8) 853.2 828.5 24.7 853.2 1,300.2 1,536.4 2,276.9 836.6 836.6 992.3 992.3 (20.2) 972.1 (307.5) 664.6 (82.1) 582.5 580.1 2.4 582.5 965.5 1,149.8 1,793.8 651.9 651.9 776.2 776.2 (7.2) 5.0 774.0 (253.9) 520.1 520.1 511.2 8.9 520.1 882.5 984.3 1,548.0 583.1 583.1 698.2 698.2 (50.4) 6.7 654.5 (215.2) 439.3 439.3 429.3 10.0 439.3 775.7 855.5 1,264.3 480.0 480.0
2008
2009
2010
2011
2012
39.0
43.1
47.5
53.0
61.2
HEADLINE EARNINGS BEFORE WALMART COSTS (Rm)
2008
2009
2010
2011
2012
1,261.9 1,207.1 1,138.6 1,252.7 1,363.6
TRADING PROFIT BEFORE WALMART COSTS, INTEREST AND TAXATION (Rm)
42.0 62.3 4.8 109.1 11.9 10.8 7.5 11.5 18.7
19.0 52.2 2.1 73.3 16.2 12.5 4.9 38.1 25.7
17.4 17.4 18.1 5.5 0.0 34.7 33.3
17.0 17.0 6.7 5.3 (2.2) 9.4 25.6
7.8 7.8 16.8 10.7 (1.2) 13.8 18.3
1.2 1.2 21.9 18.0 10.0 44.9 33.5
2008
2009
2010
2011
2012
2,002.4 2,097.5 2,027.8 2,182.9 2,265.3
66
Ten-year Review
STATEMENT OF FINANCIAL POSITION AND STATEMENT OF CASH FLOWS IN RANDS

as at 24 June 2012
Nine-year growth %
Statement of nancial position (Rm) Assets Non-current assets Current assets Inventory Restricted cash held on behalf of Massmart Employee Share Trusts' beneciaries Non-current assets classied as held for sale Total assets Equity and liabilities Total equity Non-current liabilities Current liabilities Trade and other payables Massmart Employee Share Trusts' beneciaries liability Non-current liabilities classied as held for sale Total equity and liabilities Statement of cash ows (Rm) Operating cash Working capital movements Cash generated from operations Net interest paid Investment income Dividends received Taxation paid Dividends paid Net cash ow from operating activities Investment to maintain operations Investment to expand operations Other Net cash ow from investing activities Net cash ow from nancing activities Net (decrease)/increase in cash and cash equivalents Foreign exchange losses taken to FCTR Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year 13.6
2012
2011
2010
2009
19.1 11.2 14.6
7,175.8 11,895.9 7,615.6 103.2
5,846.7 10,334.0 6,199.7 1,093.6 17,274.3 4,181.7 1,205.2 10,793.8 9,381.8 1,093.6 17,274.3 2,264.8 (625.4) 1,639.4 (107.2) 46.8 2.1 (645.1) (822.5) 113.5 (345.4) (843.0) (109.5) (1,297.9) 615.3 (569.1) 2.6 1,310.9 744.4
4,974.9 9,314.5 5,601.5 14,289.4 3,591.8 895.3 9,802.3 9,194.3 14,289.4 2,346.8 292.6 2,639.4 (46.7) 33.8 2.3 (552.8) (822.4) 1,253.6 (284.0) (346.1) (500.6) (1,130.7) 193.8 316.7 (30.9) 1,025.1 1,310.9
4,397.5 8,129.4 4,893.2 12,526.9 3,096.7 858.3 8,571.9 7,670.3 12,526.9 2,398.2 63.8 2,462.0 (48.6) 29.5 13.4 (700.3) (867.4) 888.6 (354.5) (340.1) (2.8) (697.4) (160.7) 30.5 (27.3) 1,021.9 1,025.1
13.7 14.8 6.6 14.3 13.3
19,174.9 4,564.8 1,486.0 12,982.2 11,302.0 141.9
13.7 13.3 14.6
19,174.9 2,614.6 53.9 2,668.5 (115.1) 0.1 3.8 (595.6) (838.8) 1,122.9 (637.1) (710.4) (260.5) (1,608.0) 345.9 (139.2) 67.6 744.4 672.8
Denitions/explanations to the ratios and terms above can be found on page 61. * 2008 was a 53-week period. For comparative purposes, the adjusted pro forma 52-week period has been used where appropriate. ** The opening cash ow in 2005 does not agree to the closing cash ow in 2004 due to the results being restated for IFRS from 2005 The difference relates to Makro Zimbabwe being consolidated as a result of IFRS.
67
2008*
2007
20061
20051
20042
20033 TOTAL ASSETS (Rbn)
3,840.5 8,060.4 4,758.6 11,900.9 2,766.5 1,015.9 8,118.5 7,380.0 11,900.9 2,394.9 (73.2) 2,321.7 (64.1) 47.7 2.2 (668.1) (709.9) 929.5 (268.3) (309.6) (320.3) (898.2) (222.7) (191.4) 4.6 1,208.7 1,021.9
3,448.2 7,401.4 4,027.3 10,849.6 2,264.8 1,122.2 7,462.6 6,755.7 10,849.6 1,926.4 (28.3) 1,898.1 (44.4) 53.6 2.5 (531.6) (565.1) 813.1 (152.9) (317.9) (220.0) (690.8) (288.4) (166.1) (1.5) 1,376.3 1,208.7
3,034.1 6,584.3 3,221.0 9,618.4 1,952.4 1,133.8 6,532.2 5,875.7 9,618.4 1,543.6 260.4 1,804.0 (32.7) 34.6 3.2 (487.4) (402.8) 918.9 (178.5) (184.1) (96.9) (459.5) 506.0 965.4 6.1 404.8 1,376.3
2,769.6 5,363.6 2,677.0 8,133.2 1,559.0 744.5 5,829.7 5,001.7 8,133.2 1,136.5 110.5 1,247.0 (22.0) 35.2 (337.5) (416.4) 506.3 (256.1) (157.6) (696.8) (1,110.5) (22.6) (626.8) 5.4 1,026.2** 404.8
1,789.5 5,319.8 2,356.5 7,109.3 1,461.5 774.7 4,873.1 4,437.8 7,109.3 1,015.2 255.3 1,270.5 (5.5) 19.0 (124.2) (218.7) 941.1 (136.3) (263.3) (35.7) (435.3) (39.8) 466.0 (4.2) 563.4 1,025.2
1,483.3 4,559.8 2,236.7 6,043.1 1,319.1 838.8 3,885.2 3,684.2 6,043.1 848.9 (63.6) 785.3 (50.4) 11.0 (77.5) (166.6) 501.8 (83.6) (216.6) (208.8) (509.0) 30.8 23.6 (10.5) 550.3 563.4 RETURN ON CAPITAL EMPLOYED BEFORE WALMART COSTS (%)
2008 2009 2010 2011 2012 2008 2009 2010 2011 2012
11.9
12.5
14.3
17.3
19.2
CASH GENERATED FROM OPERATIONS (Rm)
2,321.7 2,462.0 2,639.4 1,639.4 2,668.5
2008
2009
2010
2011
2012
70.1
62.2
51.8
47.2
42.2
68
Ten-year Review
STORES AND PRODUCTIVITY MEASURES IN RANDS

as at 24 June 2012
Nine-year growth %
Ratios/indicators Operating statistics Depreciation and amortisation costs as a % of sales Impairment costs as a % of sales Employment costs as a % of sales Occupancy costs as a % of sales Total expenses as a % of sales Number of stores by chain Game Dion DionWired Massdiscounters Makro Masswarehouse Builders Warehouse Builders Trade Depot Builders Express Massbuild Wholesale Cash and Carry Retail Cash and Carry Masscash Total number of stores FTE (full-time equivalents) Trading space (m2) Sales per store (R000) Sales per FTE (R000) Sales per trading m2 (R000) 10.9 7.6
2012
2011
2010
2009
(1.0) (0.0) (7.1) (3.4) (15.1) 107 18 125 16 16 28 29 27 84 80 43 123 348 32,439
(0.9) (0.0) (7.1) (3.1) (14.6) 100 13 113 14 14 27 30 24 81 78 27 105 313 27,729 1,280,936 158,780 1,910 39
(0.8) (0.0) (7.1) (3.0) (14.2) 91 11 102 13 13 24 31 21 76 77 20 97 288 26,585 1,179,466 153,575 1,785 37
(0.8) (0.0) (6.9) (2.7) (13.8) 87 6 93 13 13 22 32 17 71 67 12 79 256 24,518 1,087,459 159,350 1,759 38
9.7 1,350,300 166,223 1,887 43
Denitions/explanations to the ratios and terms above can be found on page 61. * 2008 was a 53-week period. For comparative purposes, the adjusted pro forma 52-week period has been used where appropriate. ** Includes the two Makro Zimbabwe stores from 2005, the date from which the results have been consolidated due to IFRS, and excludes them from 2007, the date from which the results have been deconsolidated.
69
2008*
2007
20061
20051
20042
20033 TOTAL NUMBER OF STORES
(0.8) (0.0) (7.0) (2.4) (13.7) 84 6 90 13 13 22 28 18 68 68 3 71 242 24,308 1,047,539 152,167 1,603 35
(0.7) (0.1) (7.0) (2.4) (14.0) 82 6 2 90 12 12 21 28 15 64 69 3 72 238 24,436 994,277 136,895 1,422 33
(0.7) (0.0) (6.9) (2.5) (13.7) 70 10 80 14 14 20 31 14 65 69 69 228 22,412 973,116 122,509 1,337 29
(0.6) (6.5) (2.5) (13.1) 61 11 72 14** 14 15 33 14 62 65 65 213 20,277 877,878 143,122 1,421 32
(0.6) (0.3) (6.0) (2.4) (12.3) 56 11 67 12 12 8 8 63 63 150 17,565 648,923 136,662 1,354 32
(0.5) (0.2) (5.7) (2.0) (11.9) 55 11 66 13 13 6 6 52 52 137 16,763 586,030 129,007 1,216 30 SALES PER TRADING m2 (R000)
2008 2009 2010 2011 2012 2008 2009 2010 2011 2012
242
256
288
313
348
TRADING SPACE (000 m2)
1,048
1,087
1,179
1,281
1,350
2008
2009
2010
2011
2012
35
38
37
39
43
70
Ten-year Review
RETURNS, PROFITABILITY AND SHARE INFORMATION IN RANDS

as at 24 June 2012
Nine-year growth %
Productivity ratios Net asset turn Gross margin (%) Operating margin before Walmart costs (%) Trading prot before Walmart costs, interest and taxation margin (%) EBITDA margin before Walmart costs (%) Effective tax rate (%) Protability and gearing ratios Return on average shareholders' equity before Walmart costs (%) Return on capital employed before Walmart costs (%) Debt: Equity (%) Cash earnings cover Solvency and liquidity ratios Net cash to total equity (%) Current ratio Quick ratio Inventory days Inventory turn Payable days Asset turn Total liabilities to total equity Per share performance (cents) Headline earnings before Walmart costs Diluted headline earnings before Walmart costs Attributable earnings Dividends/distribution Cash generated from operations before working capital movements Operating cash ow Net asset value Dividend cover Stock exchange information Shares in issue (millions) Weighted average number of shares (millions) Diluted weighted average number of shares (millions) Shares traded (millions) Percentage of shares traded (%) Earnings yield (%) Dividends yield (%) Market capitalisation (Rm) Share price South African (cents): High Low Closing
2012 11 18.4 3.5 3.7 4.5 33.7
2011 11 18.3 3.9 4.1 4.8 38.9
2010 12 17.9 3.9 4.3 4.7 33.4
2009 13 18.0 4.5 4.9 5.3 32.6
32.8 42.2 19.6 1.6 14.7 0.9 0.3 56 6.6 57 3.2 3.2 632.6 619.0 544.4 398.0 1,213.0 910.1 2,015.9 1.4 216.1 215.5 220.3 91.9 42.5 3.2 2.4 36,384.6 18,700 12,821 16,835
33.7 47.2 15.1 1.1 17.8 1.0 0.4 52 7.0 56 3.1 3.1 615.5 583.5 412.1 386.0 1,112.8 459.9 1,854.2 1.1 213.9 203.5 214.7 200.7 93.8 3.1 2.9 28,316.0 15,460 11,358 13,239
34.9 51.8 11.1 1.8 36.5 1.0 0.4 52 7.0 60 3.3 3.0 567.2 542.7 562.8 386.0 1,169.0 1,034.1 1,722.0 1.5 201.5 200.8 209.8 215.4 106.9 4.6 3.2 24,582.5 12,580 7,275 12,200
41.7 62.2 4.9 1.5 33.1 0.9 0.4 51 7.2 56 3.4 3.0 605.0 591.6 606.9 386.0 1,201.9 880.1 1,517.5 1.6 201.3 199.5 204.1 232.7 115.6 7.6 4.8 16,104.2 9,029 5,650 8,000
days days
11,2 11,3 10,8 17,0 12,3 11,7 13,3
71
2008* 13 18.4 5.1 5.1 5.9 32.7
2007 13 18.3 4.8 5.2 5.6 34.1
20061 12 17.7 4.4 4.3 5.1 34.3
20051 12 16.5 3.9 3.8 4.5 31.6
20042 14 15.2 3.3 3.7 4.1 32.8
20033 13 15.0 3.4 3.8 4.2 32.9

2008 2009 2010 2011 2012
OPERATING MARGIN BEFORE WALMART COSTS (%)
50.7 70.1 9.8 1.3 36.9 1.0 0.4 55 6.7 60 3.3 3.3 634.1 619.0 631.5 386.0 1,203.5 823.8 1,359.8 1.7 201.2 199.0 203.9 254.1 126.3 10.3 6.3 12,371.5 9,724 5,910 6,149
52.3 66.1 18.0 1.3 53.4 1.0 0.5 52 7.1 60 3.2 3.8 540.4 530.9 523.7 320.0 961.0 687.5 1,113.5 1.7 201.1 200.5 204.0 235.9 117.3 6.0 3.6 17,694.4 9,997 4,185 8,800
48.9 57.1 27.3 1.6 70.5 1.0 0.5 48 7.7 60 3.1 3.9 419.3 408.3 415.3 210.0 773.7 662.5 946.0 2.0 201.0 199.5 204.9 233.3 116.0 9.5 4.8 8,819.7 6,408 4,185 4,387
44.2 51.4 9.2 1.4 26.0 0.9 0.5 46 7.9 60 3.1 4.2 327.6 316.4 291.5 183.0 571.1 463.6 762.0 2.0 199.6 199.0 206.1 188.1 94.2 6.5 4.1 8,937.9 5,370 3,145 4,477
42.8 52.7 14.1 2.0 70.1 1.1 0.6 43 8.6 60 3.3 3.9 293.1 282.7 256.9 159.0 510.3 583.0 717.8 2.0 199.2 199.0 206.2 256.6 128.8 7.9 4.9 6,489.6 3,359 2,080 3,258
35.4 46.3 19.1 1.4 42.7 1.2 0.6 47 7.7 56 3.4 3.6 242.4 235.6 216.8 97.0 428.6 337.5 653.0 2.5 198.6 198.1 203.8 86.1 43.4 10.3 4.6 4,170.3 2,222 1,275 2,100
5.1
4.5
3.9
3.9
3.5
RETURN ON AVERAGE SHAREHOLDERS' EQUITY BEFORE WALMART COSTS (%)
2008
2009
2010
2011
2012
50.7
41.7
34.9
33.7
32.8
MARKET CAPITALISATION (Rbn)
2008
2009
2010
2011
2012
12.4
16.1
24.6
28.3
36.4
72
Ten-year Review
INCOME STATEMENT, STATEMENT OF FINANCIAL POSITION AND STATEMENT OF CASH FLOWS IN US DOLLARS
as at 24 June 2012
Nine-year growth %
Income statement ($m) Continuing operations: Sales Cost of sales Gross prot Other income and expenses Operating prot Finance costs Exceptional items Prot before tax Taxation Prot for the year from continuing operations Discontinued operation: Prot/(loss) for the year Loss on disposal Prot for the year Attributable to: Equity holders of the parent Preference shareholders Minority interest Prot for the year Headline earnings before Walmart costs Statement of nancial position ($m) Total equity Net cash/(borrowings) Total assets Inventories Trade and other payables Statement of cash ows ($m) Cash generated from operations Net cash ow from operating activities Net cash ow from investing activities Exchange rates (Rand/US$) At year-end Average for the year 13.8
2012
2011
2010
2009
15.0 17.6 14.0
7,897.9 (6,446.1) 1,451.8 (1,200.4) 251.4 (14.9) 236.5 (79.8) 156.7 156.7 151.2 0.8 4.7 156.7 175.9 518.7 80.1 2,282.7 906.6 1,345.5 344.3 144.9 (207.5) 8.40 7.75
7,521.3 (6,148.0) 1,373.3 (1,144.5) 228.8 (15.2) 213.6 (83.1) 130.5 130.5 119.1 5.5 5.9 130.5 177.9 570.6 107.1 2,485.5 892.0 1,349.9 232.9 16.1 (184.4) 6.95 7.04
6,235.3 (5,119.0) 1,116.3 (871.1) 245.2 (6.1) 239.1 (79.9) 159.2 159.2 148.4 6.1 4.7 159.2 149.6 452.4 170.9 1,863.0 730.3 1,198.7 346.8 164.7 (148.6) 7.67 7.61
4,765.6 (3,906.2) 859.4 (643.9) 215.5 (5.4) 210.1 (68.6) 141.5 141.5 133.7 4.2 3.6 141.5 133.4 384.7 129.1 1,577.7 616.3 966.0 272.0 98.2 (77.1) 7.94 9.05
14.1 13.9
13.9 14.3 13.7 13.0 13.9 12.5 16.6 15.6
73
2008*
2007
20061
20051
20042
20033 SALES ($bn)
5,329.5 (4,347.7) 981.8 (709.1) 272.7 (8.2) 264.5 (86.6) 177.9 177.9 171.9 3.1 2.9 177.9 172.6 343.7 128.4 1,495.1 597.8 927.1 317.6 127.2 (122.9) 7.96 7.31
4,821.0 (3,938.5) 882.5 (650.8) 231.7 (6.1) 225.6 (76.8) 148.8 148.8 145.5 1.2 2.1 148.8 150.0 311.0 167.9 1,506.9 559.3 938.3 262.9 112.6 (95.7) 7.20 7.22
4,667.2 (3,839.6) 827.6 (620.8) 206.8 (5.0) 201.8 (69.3) 132.5 0.6 (0.3) 132.8 129.0 3.8 132.8 130.3 254.3 184.0 1,285.9 430.6 785.5 281.0 143.1 (71.6) 7.48 6.42
4,087.2 (3,414.2) 673.0 (513.2) 159.8 (3.3) 156.5 (49.5) 107.0 (13.2) 93.8 93.4 0.4 93.8 105.0 226.0 60.1 1,208.5 397.8 743.2 200.8 81.5 (178.8) 6.73 6.21
3,477.7 (2,950.8) 526.9 (413.5) 113.4 (1.1) 0.7 113.0 (37.1) 75.9 75.9 74.6 1.3 75.9 85.2 225.5 161.7 1,121.3 371.7 700.0 185.7 137.6 (63.6) 6.34 6.84
2,248.3 (1,911.6) 336.7 (259.6) 77.1 (5.6) 0.7 72.2 (23.8) 48.4 48.4 47.3 1.1 48.4 53.0 163.5 71.1 762.1 282.1 464.6 86.7 55.4 (56.2)
2008 2009 2010 2011 2012 2008 2009 2010 2011 2012
5.3
4.8
6.2
7.5
7.9
TOTAL ASSETS ($bn)
2008
2009
2010
2011
2012
1.5
1.6
1.9
2.5
2.3
CASH GENERATED FROM OPERATIONS ($m)
7.93 9.06
317.6
272.0
346.8
232.9
344.3
74
Ten-year Review
PROFITABILITY AND SHARE PERFORMANCE IN US DOLLARS

as at 24 June 2012
Nine-year growth %
Ratios/indicators Protability and gearing ratios Return on average shareholders' equity before Walmart costs (%) Return on capital employed before Walmart costs (%) Debt: Equity (%) Liquidity ratios Current ratio Inventory days Per share performance (cents) Headline earnings before Walmart costs Diluted headline earnings before Walmart costs Attributable earnings Dividends/distribution Cash generated from operations before working capital movements Operating cash ow Net asset value Dividend cover Stock exchange information Market capitalisation ($m) Exchange rates (Rand/US$) At year-end Average for the year 13.2 13.3 12.7 19.0 14.2 13.6 12.6
2012
2011
2010
2009
32.3 41.7 19.6 0.9 51 81.6 79.9 70.3 51.4 156.5 117.4 240.0 1.4 4,331.5 8.40 7.75
34.8 48.7 15.1 1.0 53 87.4 82.9 58.5 54.8 158.1 65.3 266.8 1.1 4,074.2 6.95 7.04
35.7 53.0 11.1 1.0 52 74.5 71.3 74.0 50.7 153.6 135.9 224.5 1.5 3,205.0 7.67 7.61
36.6 54.6 4.9 0.9 58 66.8 65.4 67.1 42.7 132.8 97.2 191.1 1.6 2,028.2 7.94 9.05
Denitions/explanations to the ratios and terms above can be found on page 61. * 2008 was a 53-week period. For comparative purposes. the adjusted pro forma 52-week period has been used where appropriate. Technical clarication: 1. These amounts exclude amounts relating to the discontinued operation (Furnex). 2. These amounts have not been restated for IFRS. 3. These amounts have not been restated for IFRS or for SAICA's reinterpretation of IAS 17 Leases.
75
2008 *
2007
20061
20051
20042
20033 RETURN ON AVERAGE SHAREHOLDERS' EQUITY BEFORE WALMART COSTS (%)
52.7 72.7 9.8 1.0 50 86.7 84.7 86.4 52.8 164.6 112.7 170.8 1.7 1,554.2 7.96 7.31
53.1 67.2 18.0 1.0 52 74.8 73.5 72.5 44.3 133.1 95.2 154.7 1.7 2,457.6 7.20 7.22
54.3 63.2 27.3 1.0 41 65.3 63.6 64.7 32.7 120.5 103.2 126.5 2.0 1,179.1 7.48 6.42
46.5 54.3 9.2 0.9 43 52.8 51.0 46.9 29.5 92.0 74.7 113.2 2.0 1,328.1 6.73 6.21
43.8 54.1 14.1 1.1 46 42.9 41.3 37.6 23.2 74.6 85.2 113.2 2.0 1,023.6 6.34 6.84
35.0 45.7 19.1 1.2 54 26.8 26.0 23.9 10.7 47.3 37.3 82.3 2.5 525.9
2008 2009 2010 2011 2012
2008
2009
2010
2011
2012
52.7
36.6
35.7
34.8
32.3
RETURN ON CAPITAL EMPLOYED BEFORE WALMART COSTS (%)
7.93 9.06
72.7
54.6
53.0
48.7
41.7
MAKRO, MONTAGUE GARDENS
OPERATIONAL REVIEW
MAKRO, MONTAGUE GARDENS
CONTENTS
R MASSDISCOUNTERS DIVISIONAL REVIEW R MASSWAREHOUSE DIVISIONAL REVIEW R MASSBUILD DIVISIONAL REVIEW R MASSCASH DIVISIONAL REVIEW R CHANNEL AND SHARED SERVICES REVIEW 79 87 95 104 112
79
MASSDISCOUNTERS DIVISIONAL REVIEW

Against the backdrop of global economic uncertainty, the weakness of the South African currency and ongoing product deation, Massdiscounters again gained market share and recorded double-digit sales growth. We delivered our highest trading prot before tax (excluding foreign exchange movements) of R813.0million, representing growth of 4.0% on the prioryear.
Managements attention was focused on the opening of new stores across the Division. We opened seven Game SA stores, our second Game store in Nigeria and DionWired extended its footprint with a further ve stores in South Africa. In addition, 20 Foodco stores are now operational. This was the highest number of stores opened in one year by Massdiscounters. During the year, we rolled out our differentiated food offering, Foodco, which provides a narrow, but relevant assortment of items. This roll-out extends to both new stores and the conversion of existing stores. We managed to achieve this while stabilising and improving the supply chain for perishable and fresh goods. The Foodco format has enjoyed broad customer acceptance and we have seen much success, particularly in stand-alone locations and sites that cater to the value-seeking consumer. LiquorMart was included with the Foodco format renewal to complete our offering and increase foot trafc to our general merchandise stores. We now have six LiquorMart stores, which are performing in line with expectations. Liquor licence approvals by the authorities remain a challenge, particularly in Gauteng. We increased the footprint of DionWired to 18 stores by opening ve stores during the year, in some of the higher LSM retail locations in South Africa including Nicolway, Blue Route, Tygervalley, Canal Walk and Boksburg. This is now a national brand with wide customer acceptance. DionWired successfully trialled their regional online shopping in Gauteng. The pilot met our objectives of proving the case for online shopping and providing critical information about this new channel. We nalised and tested data processes, security, payment gateways, call-centre management, and logistics relating to DionWired.co.za and, effective July 2012, have launched it nationally. We now plan to redesign the Game website.
R 26 stores acquired 1 July 1998 R Now 107 stores R Operating in SA, Botswana, Ghana, Malawi, Mozambique, Namibia, Nigeria, Tanzania, Uganda, Zambia R General merchandise, Food Retail and FMCG R LSM 5 10
HIGHLIGHTS OF THE YEAR

R Opened 13 new stores, our most ever R Increased Foodco stores from four to 20 R Grew sales in Africa by 23.1% and DionWired by 37.9% R Piloted online shopping at DionWired
107
STORES
15
STORES
R 20 Dion stores acquired 31 May 1993 R Dion stores rebranded to Game stores in 2000 R Launched greeneld DionWired concept stores in 2006 R Now 15 stores R Operating in SA R General merchandise R LSM 8 10
80
Operational Review
MASSDISCOUNTERS DIVISIONAL REVIEW CONTINUED

MASSDISCOUNTERS STORE PROGRESS OPENING BALANCE GAME
STORES OPENED KNYSNA (WESTERN CAPE) CARNIVAL MALL (GAUTENG) MIDDELBURG (MPUMALANGA) ROSEBANK (GAUTENG) THOHOYANDOU (LIMPOPO) ULUNDI (KZN) ZEVENSWACHT (WESTERN CAPE) ENUGU (NIGERIA) STORE CLOSED QUATRE BORNES (MAURITIUS)
100 8
From a Game SA marketing perspective, we continued to focus on annual events, whilst improving relevance of regular campaigns and communication with our customers. The proven "Whats the Big Deal?" birthday event for Game ran during the period and utilised multiple communication mediums in innovative ways, including using an unprecedented 23 TV channels at the same time. In addition to the weekly distribution of the Game leaet into over ve million homes, awareness of the campaign was also achieved through the use of bulk SMS messages, a mobi site, weekly emailers, daily Facebook activity, advertising on 10 radio stations and in-store signage. In Game Africa, our strategy has been redened with a targeted approach per country, based on individual market demands, local product and media opportunities. Initiatives creating in-store excitement and shopper entertainment proved particularly successful.
-1
The positioning of DionWired was supported through advertising on premium TV channels, creative use of print media and consistent in-store execution. Looking ahead, we will continue to rene our advertising strategy and as a discounter, use innovative marketing techniques to be more disruptive in the market place, drive events and grow brand activity on social networks. The growth in our customer databases is signicant and is due mainly to new initiatives within existing mediums such as our websites and enhanced use of social media platforms. We also plan to take advantage of the database we have developed through our private label credit card, supported by independent consumer credit company, RCS. Private brands remain an important strategic initiative, offering our customers more opportunity to save money, and the Foodco private brand has been wellaccepted by our customer base. Walmart private brands such as Mainstays and Great Value are being introduced into the business.
107
13 5
OPENING BALANCE DIONWIRED

STORES OPENED WILLIAM NICHOL (GAUTENG) BOKSBURG (GAUTENG) TYGERVALLEY (WESTERN CAPE) CANAL WALK (WESTERN CAPE) BLUE ROUTE (WESTERN CAPE)
18
STORE DISTRIBUTION Game DionWired
1 1 2 1 2
1 1 2 1 1 1 8 4 1 1 6 1 1 20 1 11 1 1 1 1 1 1 1 1 5 2 1 1 1
1 2
1 1 1
1 2 1 1 1 2 2 1 3 1
1 1 1 1
1
1 9 1 1 1
81
The Massdiscounters brands

Massdiscounters operates two retail formats: Game and DionWired. Game is a discount retailer of General Merchandise and predominantly non-perishable groceries for home, leisure and business use, operating throughout South Africa and in 13 major cities in sub-Saharan Africa. Traditionally Game has been a discounter of General Merchandise, but our format renewal, with the introduction of Foodco, has pushed the brand towards a multi-category format. We now have 94 Game stores in South Africa and 13 in Africa, bringing our total footprint to 107. We also have 18 DionWired stores, which sell middle- to upper-end electronics and appliances across South Africa.
Game
At Game our positioning offers customers the widest range of branded products, at the best price, for a given set of product specications. We ensure that customers are assured of the best value at every logical price point. The Game trading model is promotionally-driven, with ve million copies of our weekly promotional leaets distributed in South Africa. By working closely with our suppliers and benchmarking ourselves against competitors, we are able to offer our customers well-priced products representing great value. Currently 20 Game stores provide a food offering under the Foodco sub-brand, providing further everyday value to our customers. Over the next few years, we intend to roll out Foodco to most Game stores.
DionWired
DionWireds product displays create an easy, exciting and interactive shopping experience, offering the latest in-home entertainment, computing, video and digital photographic equipment and appliances. DionWired sells complete technological solutions, often demonstrating the interconnectivity of the latest innovations and products in-store. The Tech experts manning our in-store Tech Smart service centres are on hand to offer the best advice and onsite repairs and services. Although all our products are competitively priced, DionWireds proposition is not founded on price alone. Our main proposition is to offer the widest range of some of the worlds leading and discerning brands such as Apple, Smeg, Miele, Marantz, Bose and Onkyo to the South African higherend consumer. Game, East Rand Mall, Boksburg
Operating environment
Inationary pressure in food commodities, fuel and utilities, and mediocre job-creation adversely affected the South African middle-income consumer. Consumer condence was further impacted by moderate wage growth and a static residential property market. All these factors combined to contain consumer spending. Despite this trading environment, Massdiscounters continued to gain market share across most product categories. With the market having become extremely competitive, aggressive promotional activity across the retail sector has become the norm and our value-for-money offering continued to appeal to customers in this uncertain economic environment.
DionWired, Nicolway, Bryanston
82
Operational Review

Contrary to expectations of the Rand softening during the nancial year, it remained strong. High product deation experienced in some categories positively impacted sales of products such as televisions and computers. There is a hidden cost to this high sales volume growth, in the form of greater throughput in the Massdiscounters supply chain and stores, with the concomitant higher logistics costs.
Massdiscounters reported total sales of R14.8 billion, representing growth of 11.0%. Comparable sales growth was 4.4% and sales deation of 3.3% was recorded. By containing comparable expense growth at 6.3%, we were able
UP BY 11.0%
to deliver trading prot before tax, excluding foreign exchange movements, of R813.0 million, representing a growth of 4.0% on the prior year. The weakening of the Rand against other African currencies resulted in higher Rand sales and prots from those countries. This year sales growth recovered to a positive 23.1% and African sales growth in own currency was positive, with double-digit sales growth of 16.5% for the year, while trading prots increased by 43.6% in Rand terms and 36.8% in own currency. DionWired achieved sales growth of 37.9% with sales deation of 15.1%, therefore achieving real growth of 53.4%. 2012 52 week 2011 52 week 13,332.5 744.0 5.6 38.0 782.0 5.9 749.7 5.6 2,283.8 84 336.3 81.6 113 387,594 3,430 8,445 117,987 34 1,579 2010 52 week 12,164.9 612.8 5.0 47.6 660.4 5.4 586.9 4.8 2,134.7 85 285.1 290.6 102 355,423 3,485 8,876 119,264 34 1,371
R14.8 bn
SALES
2011: 13.3 bn
Sales Trading prot before interest1 Trading prot before interest as % sales Net nance income Trading prot before taxation1 Trading prot before taxation as % sales Operating prot before taxation Operating prot before taxation as % sales Inventories Inventory days2 Net capital expenditure3 Cash ow from operating activities Number of stores Trading area Average trading area per store Number of employees Sales per store Sales per m2 Sales per employee
1. 2. 3. 4.
Rm Rm % Rm Rm % Rm % Rm days Rm Rm m2 m2 R000 R000 R000
14,805.7 749.8 5.1 63.2 813.0 5.5 719.4 4.9 2,661.2 89 505.9 (136.1) 125 415,186 3,321 9,972 118,446 36 1,485
Trading prot is earnings before asset impairments, BEE IFRS 2 charges, foreign exchange movements and Walmart costs. The ratios have been calculated using year-end statement of nancial position gures. Net capital expenditure is dened as capital expenditure less disposal proceeds. Denitions/explanations to the ratios and terms above can be found on page 61.
83
Improving eciencies
Supply chain development through Regional Distribution Centres (RDCs) is a key strategic initiative to improve overall business efciencies, reduce costs and improve in-stock levels for customers. To further enable the RDC implementation, a Strategic Supply Chain Integration department has been established. They will act as the custodian of supply chain-related processes and systems by ensuring alignment and optimisation across merchandise, logistics and store operations, with the customer being at the centre. Our suppliers are being integrated into the RDC network, and many are starting to understand the benets of using our network. The Cape RDC performed well, servicing 24 stores in the Cape region, including Foodco stores. The Gauteng RDC now services 74 stores and is also operating successfully. Racking in the facility has been extended to accommodate larger volumes of stock. In July 2012 the KwaZulu-Natal RDC was successfully relocated to Riverhorse Valley from Pinetown. Managing expenses remains important with personnel cost increases driven by new store openings; the statutory increase in the temporary wage tariff; as well as additional positions created at head ofce. An initiative to identify and implement payroll and labour scheduling IT systems will position us to have an integrated human resources system; access control; payroll- and labourscheduling capabilities. Our integration with Walmart created opportunities to leverage this global retailers processes to improve our capabilities. Activities are under way to obtain a better understanding of the Walmart IT architecture and roadmaps in order to evaluate them against our business strategies and align them with our systems roadmaps. This will allow us to obtain maximum leverage from Walmart systems while minimising disruption to our business operations. IT operations received a boost with the appointment of a Strategic Architecture Manager to head up the architecture strategy. The initial focus of this team will be in the Finance and Logistics business areas, including an evaluation of key IT systems as part of a ve-year review cycle. In line with our "Best of Suite" IT strategy, a JDA Demand Forecasting tool is being implemented and a Promotions Planning and Optimisation module will be rolled out. In addition, enterprise planning, as well as price and markdown optimisation modules, will be implemented over the next three years. SUPPLY CHAIN DEVELOPMENT:
REGIONAL DISTRIBUTION CENTRES
IMPROVE BUSINESS EFFICIENCIES REDUCE COSTS IMPROVE IN-STOCK LEVELS
Investing in our human resources

Massdiscounters aims to provide a strong leadership pipeline and to maintain a stable employee relation environment. The Talent department spearheads various initiatives to align our organisational culture with leadership development, and our recruitment processes aim to nd a balance between education, exposure and experience of new employees.
"The Talent department spearheads various initiatives to align our organisational culture with leadership development..."
84
Operational Review

Arising from the June 2011 Competition Tribunal ruling on the Walmart/ Massmart merger, all 503 employees retrenched in a Massdiscounters 2010 re-engineering project linked to the RDC investment and re-alignment, have been contacted and offered alternative employment within the Massmart Group. A total of 222 retrenched employees have accepted new positions in Massdiscounters and across the Group. In July 2012, we also signed a two-year wage agreement with the South African Commercial, Catering and Allied Workers Union (SACCAWU). Massdiscounters achieved a BBBEE score of 77.4, retaining our Level 3 status, something about which we are very proud.
Game, East Rand Mall, Boksburg
Investing in our community

Supporting projects that improve the education of disadvantaged children remains a priority for Massdiscounters. Our headline initiative to support nutrition for disadvantaged school children is our Amalunchbox project being the distribution of mobile kitchens built into converted shipping containers. Now in its fth year, Amalunchbox was born from the belief that you cant teach a hungry child, and we work together with the Department of Education to make their national School Nutrition Programme more effective. We achieved a milestone during the nancial year when we handed over our 100th Amalunchbox container kitchen. We estimate that these kitchens provide 20 million meals per year to hungry learners. Through our Tools to Teach project, we have been a committed partner to Rally to Read, an annual event where volunteers deliver purpose-built units containing teaching materials, books and educational supplies to teachers in rural schools across the country. Each stationery box contains enough basic stationery for a class of 50 and each year Game has added more value to the packs. The kits are estimated to cost R1,000 each and Game donated R1.2 million to schools during the year. One of the ways we raise funds for the Tools to Teach project is through our Gift Wrap service during the December festive period, with Game shoppers raising R800,000 to part fund this initiative. This project lives together with Tools to Play, a similar initiative but one that is more focused on the provision of carefully selected toys to support early childhood development.
MILESTONE
100th
AMALUNCHBOX KITCHEN CONTAINER
85
Another programme which received great coverage was the East Coast Radio Toy Story with Game, an initiative to raise funds and donate toys to children in orphanages and hospitals over the festive period. Our DionWired Smartboard project provides high technology smartboards to schools catering for children with disabilities. Game also distributed 8,100 mosquito nets as part of an initiative to prevent malaria in Africa. The donated nets are distributed to those who are most vulnerable, including pregnant mothers and small children. Treated with longlasting insecticide, the nets have an estimated success rate of reducing malaria by up to 60%.
Investing in our environment

We continued to drive energy efciency at our stores and warehouses, with a particular focus on using the latest technologies in our lighting and cooling systems. The majority of cathode ray tube screens have been replaced with energy efcient LCD screens and our Gauteng RDC lighting operates with motion detectors, reducing our energy consumption. Our RDCs will be equipped to manage waste and will use third-party waste management service providers, thereby reducing emissions and consolidating waste. As consumers became more aware of their choices and impact on the environment, we introduced an energy-wise initiative in the major appliance category. We also now show the environmental specications of products in our advertising pamphlets so that consumers can make more informed choices about the products they buy. INFORMED CONSUMER CHOICES:
ENERGYWISE
INITIATIVE IN THE MAJOR APPLIANCE CATEGORY
Opportunities in Africa
Massdiscounters new store pipeline in Africa looks promising after many years of hard work. We remain condent that we can double our African store footprint by 2016. The uptake of our Foodco offering in African cities has been overwhelming. Our priorities remain: achieving a consistent supply chain; range improvement; and sufcient scale to ensure we offer consumers a complete shopping experience. The unprotable Mauritius store was closed in December 2011.
DionWired, Nicolway, Bryanston
86
Operational Review

Risks and rewards
General controls in our business remain good. Of the 250 calls received through our ethics line during the period, a large proportion of the calls (73%), related to issues governed by the Labour Relations Act or were HR-related, rather than relating to criminal or unethical behaviour. MASSDISCOUNTERS DIRECTORATE GRANT PATTISON CHAIRMAN JAN POTGIETER CHIEF EXECUTIVE NORMAN DRIESELMANN CHIEF FINANCIAL OFFICER DON FRIESON NON-EXECUTIVE DIRECTOR RICHARD FULLER STORE OPERATIONS DIRECTOR ANN HANSEN FINANCIAL DIRECTOR JOHN HART IT DIRECTOR AND LOGISTICS DIRECTOR GUY HAYWARD NON-EXECUTIVE DIRECTOR RICHARD MILLSON MARKETING DIRECTOR ROGANY RAMIAH HUMAN RESOURCES DIRECTOR MIKE SPIVEY NON-EXECUTIVE DIRECTOR MARK TURNER AFRICA DIRECTOR TYRONE VIEIRA MERCHANDISE DIRECTOR ILAN ZWARENSTEIN NON-EXECUTIVE DIRECTOR We continue to keep a close eye on the Labour Relations Amendment Bill and the Basic Conditions of Employment Amendment Bill, part of several changes to labour laws that were rst proposed in 2010 and have been under protracted negotiation in the National Economic and Development Labour Council (Nedlac). To minimise risk, Massdiscounters does not use labour brokers in our stores. We continue to evaluate the impact of the amendments as they relate to non-standard employment contracts. Our business remains susceptible to foreign exchange rate uctuations in African countries and we manage this by regularly repatriating cash, undertaking currency sensitivity analyses and maintaining optimal funding and management of the foreign operations balance sheets.
Future outlook
Over the next 18 months, Massdiscounters will focus on bedding down many of the changes implemented over the past three years. With 17 Game stores to open in South Africa, two in Africa and four new DionWired stores, we expect our aggressive growth strategy to continue to take market share and deliver our low-cost, low-margin, high-volume business model to more customers in a highly competitive retail sector. At DionWired our focus on a unique customer experience, as well as our extensive bouquet of services, will differentiate the brand on a national basis as discerning customers seek value and solutions in their purchases. At Game we will continue to seek out and introduce the worlds leading consumer brands alongside our aggressive roll-out of Private Label to ensure that we offer the range of products required to retain our customers in this challenging market. The evolution of the Foodco brand will follow three phases as we grow scale and volumes and continue to seek opportunities in the planning, sourcing and distribution of fresh produce. We plan to open or convert 18 more Foodco stores in the next 18 months, bringing the total to 38 Foodco stores by December 2013.
87
MASSWAREHOUSE DIVISIONAL REVIEW

Masswarehouse continued to grow its footprint while maintaining a good margin performance across all major categories. Makros Food achieved sales of almost R7.0billion, while Liquor achieved sales of more than R2.7billion, cementing our position as a leading distributor of consumer goods to the South African mass market.
During the period we focused on new stores, building the Food Retail offering, and integration with both Walmart and our new acquisition, Fruitspot. We successfully opened three new stores during the year: Polokwane; Montague Gardens (Cape Town); and Nelspruit and the Makro Milnerton store was converted to a Distribution Centre. Since the June 2012 year-end, we have opened another two stores: Cape Gate in August 2012; and Bloemfontein in September 2012. We also expanded the Johannesburg Makro Distribution Centre by 11,000m2 to 27,000m2. The integration of Masswarehouse into the Walmart family has been positive, with the projects related to culture, governance and value completed. The resultant positive impacts include leverage through the global organisations resources; processes and merchandise availability; culture alignment as well as enhanced co-operation with other divisions in the Massmart Group. We will continue to work closely with the integration team to leverage further synergies. Consistent with our strategy to grow our fresh fruit and vegetable proposition to customers, we nalised the acquisition of Fruitspot during the year and have made signicant progress in integrating the business from both an administrative as well as an operational perspective. The introduction of the Makro store credit card, funded and administered by third-party credit provider RCS, provided additional impetus to the business. Whilst this is currently small, we monitor the performance closely and hope it grows rapidly in the coming nancial year. HIGHLIGHTS OF THE YEAR
R Sales up 20.8% to R15.4 billion R Acquisition of Fruitspot completed R Three new Makro stores opened R Food Retail offering being rolled out
16
STORES
R Now 16 stores in South Africa R Food, liquor, general merchandise R Liquor and general merchandise LSM 6-10 and Food LSM 2-6
The Makro formula

The Makro model is unusual in that it sells General Merchandise to retail customers while much of its Food and Liquor is sold to wholesale customers. This blend gives the brand a robustness that enables it to trade comfortably through most economic cycles. The big-box warehouse club format with our no-frills approach keeps costs down and provides the platform for our highvolume, low-margin sales offering of quality branded merchandise. Our customer database of Makro store cards used at the point of purchase helps us to keep track of the spending patterns of our 2.1 million active members and we communicate regularly with them through targeted promotional material.
88
Operational Review
MASSWAREHOUSE DIVISIONAL REVIEW CONTINUED

Our value proposition
MASSWAREHOUSE STORE PROGRESS OPENING BALANCE MAKRO
STORES OPENED POLOKWANE (LIMPOPO) NELSPRUIT (MPUMALANGA) MONTAGUE GARDENS (WESTERN CAPE) STORE CLOSED MILNERTON (WESTERN CAPE)
Makros offerings are tailor-made to t a variety of customer needs across all our merchandising categories. Our Food offering caters to wholesale shoppers ranging from informal traders and grocery store owners to hoteliers, restaurateurs, ofces and schools. Wholesalers account for up to 80% of Makros food sales and most shop during the week for the convenience of our wide range of good-value, quality consumables. At weekends, our focus shifts to promoting good buys for retail food and grocery shoppers who can achieve substantial savings on their monthly household basket compared with other mass retail outlets. Our liquor offering also caters to both the retail and wholesale customer. Makros liquor outlets, immediately adjacent to our main outlets, continue to increase their range of premium brands especially in wine and whisky. These products are sold at a low margin to maintain and grow our share of the market. At the same time we have maintained a strong presence of beer and budget brands for liquor wholesalers looking for good value.
14 3
-1
16
Makro is a predominantly cash-focused business and consumers spending power is therefore integral to our performance. Lower nominal income and employment growth, coupled with higher ination meant consumers had less real disposable income during the period. A combination of higher food, fuel and electricity prices may erode consumers purchasing power for some time, however the relatively low interest rate environment and growth in unsecured credit should provide some support to consumer spending in the year ahead. Food ination rmed to 6.3% and we experienced 4.0% ination in the Liquor business. The trend of deation within General Merchandise continued, with average prices down 4.9% over the nancial year.
STORE DISTRIBUTION Makro

4 1 3
1 1
89
A solid trading performance was reected in sales for the year totalling R15.4 billion, up 20.8% over the previous year. Comparable sales growth was 11.6% and product ination was measured at 1.9%. Trading prot before interest and tax grew by 12.8%, lower than sales growth due to the cost of opening new stores. Operating prot before tax increased from R780.5 million to R910.2 million and this included new store pre-opening expenses of R37.6 million. Liquor was the fastest-growing category with sales up 21.2% on the previous year while General Merchandise grew 18.5% and Food (with the inclusion of Fruitspot), 21.2%. Capital expenditure for the year amounts to R318.9 million, up from R188.4 million spent in 2011. The net working capital cycle worsened slightly by 4.5%, from the impact of new stores and higher food ination.
UP BY 20.8%
R15.4 bn
SALES
2011: 12.7 bn
2012 52 week Sales Trading prot before interest1 Trading prot before interest as % sales Net nance income Trading prot before taxation1 Trading prot before taxation as % sales Operating prot before taxation Operating prot before taxation as % sales Inventories Inventory days2 Net capital expenditure3 Cash ow from operating activities Number of stores Trading area Average trading area per store Number of employees Sales per store Sales per m2 Sales per employee
1. 2. 3. 4. 5.
2011 52 week 12,722.9 749.0 5.9 54.2 803.2 6.3 780.5 6.1 1,239.2 42 188.4 (7.3) 14 128,417 9,173 2,877 908,779 99 4,422
2010 52 week 11,501.2 685.4 6.0 57.8 743.2 6.5 738.5 6.4 1,161.0 44 77.3 246.3 13 118,208 9,093 2,644 884,708 97 4,350
15,370.6 844.5 5.5 61.8 906.3 5.9 910.2 5.9 1,793.2 51 318.9 76.5 16 146,026 9,127 3,519 960,663 105 4,368
Trading prot is earnings before asset impairments, BEE IFRS 2 charges, foreign exchange movements and Walmart costs. The ratios have been calculated using year-end statement of nancial position gures. Net capital expenditure is dened as capital expenditure less disposal proceeds. The above results exclude Makro Zimbabwe. Details can be found in note 8 on page 213. Denitions/explanations to the ratios and terms above can be found on page 61.
90
Operational Review

Improving eciencies
Masswarehouse remained focused on managing expenses and reducing the cost base in line with our strategy of being a low-cost, low-margin, highvolume business. We introduced several cost-saving initiatives to reduce overall building costs as well as ongoing maintenance costs and managed to keep comparable expense growth to only 12.9% for the year. We continued our focus on replenishment and forecasting systems and processes, to ensure optimal stock positions. Our investment in the inbound supply chain via Makro Logistics Services further supports the aim of lowering the landed cost of product in our stores. We have worked hard to build and strengthen a supply chain that supports this low-cost, high-efciency approach. We aim to be our suppliers preferred route to market, providing their consumers with access to product at the lowest possible cost.
Makro, Montague Gardens

Masswarehouse employs 3,499 people across our operations. Our internal training and development initiatives aim to enhance productivity, customer service and operational efciencies. With a number of new stores opening during the period, 289 staff underwent rigorous new store training covering skills such as customer service, stock control, receiving and detail checking, reporting, business rules and procedures and discounting. The result was that staff operated at high productivity levels during the openings as well as during peak trading periods. Increased management presence in all receiving departments assisted with stock management, helped improve administration and combated operational shrinkage. To ensure that our stores comply with the highest occupational health and safety standards, we undertook an internal skills audit of our lifting machine operators and used assessors accredited by the Transport Education & Training Authority (SETA) to conduct specialised training. This programme will be rolled out throughout the business in the coming year. The Consumer Protection Act remains a priority and regular performance meetings are held to assess progress and report back on any incidents raised. Our transformation plan focuses on four areas: recruitment and selection from designated groups; training and development of black employees; afrmative action to source and identify talent; and employing people with disabilities. Diversity training for both management and employees is a key component of our transformation strategy. Our BBBEE score was 65.7% this year (2011: 73.8%) making us a Level 4 contributor. More than 86.8% of our staff members are black and more than 37.9% are black women.
MASSWAREHOUSE:
3,499
EMPLOYEES INTERNAL TRAINING AND DEVELOPMENT INITIATIVES ENHANCES:
R Productivity R Customer service R Operational efciencies
91
Masswarehouse ensures the development of a strong pipeline of talent across all management levels by offering our staff market-related remuneration, providing rewarding incentive schemes and world-class training and development opportunities. Although our remuneration packages for employment equity candidates at top and senior management may be above market-related salary packages, a major challenge remains the retention of senior management from these designated groups. In total, 14.7% of our senior managers and 37.5% of top management are black, compared with 77.8% at skilled technical level and 50.0% of professionally skilled staff. Masswarehouse believes in empowering employees through educational opportunities and sponsored a number of employees to study in tertiary institutions through our bursary programme. In addition, a total of 2,102 (permanent) and 1,867 (non-permanent) employees undertook various training courses last year. This included 129 black employees who were included in fast-track skills development programmes and 226 participants who enrolled in learnerships. We also employed 62 people with disabilities and 32 employees with a hearing disability were enrolled in Adult Education and Training learnerships. Through our Impilo Wellness and Careways support programme, voluntary HIV/Aids counselling and testing was provided to 684 members of our staff. We now support 45 staff on antiretroviral treatment. Masswarehouse prides itself on its open lines of communication and encourages feedback from all levels of staff. We communicate with our staff through a variety of channels including newsletters and executive communication sessions. Members of executive management visit all stores monthly where they interact with management and staff. Formal reviews with each of the merchandise Divisions at head ofce level are also held. The CEO conducts six-monthly briengs of larger groups and certain milestones are celebrated throughout the year such as long service awards. Senior executives gather on an annual basis for discussions and briengs on developments in Masswarehouse and the greater Massmart Group.
"Masswarehouse ensures the development of a strong pipeline of talent across all management levels by offering our staff marketrelated remuneration, providing rewarding incentive schemes and world-class training and development opportunities."
Makro, Montague Gardens
92
Operational Review

Masswarehouses Corporate Social Investment is focused on making an impact AREAS OF FOCUS: on the lives of the poorest of the poor in the communities in which we operate. Each Makro store sponsors and supports initiatives within their immediate vicinity, and builds relationships with recipients. Particular areas of focus are nutritional support, education and environmental sustainability. We look to support sustainable programmes that are not solely dependent on hand-outs or hand-holding for continuity; the aim is to have a project gain a momentum of its own.
NUTRITIONAL SUPPORT
EDUCATION
We support the Excellence in Schools programme through the respective provincial governments, and donated R300,000 to the Departments of Education in each of the Gauteng, Western Cape and KwaZulu-Natal Provinces.
ENVIRONMENTAL SUSTAINABILITY
A further R240,000 was donated to The Tomorrow Trust which supports orphaned and poor children with their studies to help them pass school exams and to prepare for tertiary education opportunities.
"We look to support sustainable programmes that are not solely dependent on hand-outs..."
The Izzi Trust used the R500,000 donation from Makro to prepare and distribute meals for nancially-disadvantaged children. Other nutritional support was provided via the African Childrens Feeding Scheme, who received R600,000 from Makro; in this way we provided more than 500,000 meals to nancially stressed families this year. We continue to support the Starsh Greathearts Foundation, as well as Wildlands Conservation Trust who are doing impactful work through their Trees for Life programme. The SUCCEED (Supporting Caregivers and Centres in Early Childhood Development) Project is a collaboration between Makro and Hope Worldwide, and has as its objective the building of capacity of ECD centres that serve vulnerable children, so that the children in their care receive the stimulation, education, protection, development and nutrition to full their potential. We have committed almost R4.0 million to December 2013, of which R1.1 million was donated in the year under review. To date we have engaged 20 centres in the programme and nine centres in Diepsloot, ve centres in Zandspruit and six centres in the Daveyton area, caring for a total of 1,301 children.
"...collaboration between Makro and Hope Worldwide, and has as its objective the building of capacity of ECD centres that serve vulnerable children..."
During the report period we made more than R82.0 million is early payments to black-owned suppliers to help them better manage their cash ow. Approximately 7.5% of our total procurement spend is on black-owned businesses. During the year Makro initiated an owner-driver scheme, aimed at improving customer service and developing small businesses. To date the roll-out of the project has been completed in the Gauteng region and we anticipate completing the national roll-out by December 2012.
93

Masswarehouse remains at the forefront of improving energy efciency in the retail environment with energy-saving initiatives saving approximately 700,000 KWh per month across our new stores. We began replacing jumbo freezers with more efcient glass door freezers, where appropriate. High speed vertical doors with insulation and better temperature control were also installed in some stores to conserve energy and improve cold chain efciencies in the receiving areas of our fresh produce departments. Technology that enables condensate water from refrigeration units to be reclaimed and heat generated by refrigerant gas to be channelled back for use in the buildings hot water systems was also installed to help green our operations and preserve frozen stock more efciently. We also retrotted the trading oors in some stores to make better use of natural light. Lighting controllers were installed to switch off trading oor lights when not required. Makro replaced existing metal hydralite ttings in new existing stores with LED high bay light ttings. The LED lights are 58% more efcient than high bay lights and have a longer life span, in turn reducing maintenance costs. Masswarehouse undertook an evaluation process with Eskom on energy-saving upgrades for existing Makro stores. Once the evaluation and rebate scheme is complete, an upgrade proposal will be forwarded to the Board for approval. The recycling of dry waste generated income for the Division of R1.8 million (2011: R1.5 million). Makro, Montague Gardens SAVING +\FOREFRONT OF ENERGY EFFICIENCY IN THE RETAIL ENVIRONMENT:
700,000KWh
ACROSS NEW STORES
94
Operational Review

Risks and rewards
With the introduction of our Food Retail offering, food safety remains a key focus for Masswarehouse. To ensure control and improve on current standards, service contracts have MASSWAREHOUSE DIRECTORATE GRANT PATTISON CHAIRMAN DOUG JONES DIVISIONAL MANAGING DIRECTOR BRUCE CAYZER FOOD DIRECTOR DON FRIESON NON-EXECUTIVE DIRECTOR GUY HAYWARD NON-EXECUTIVE DIRECTOR GARRY HENDRY LIQUOR DIRECTOR DERICK KALAN GENERAL MERCHANDISE DIRECTOR GERT LOURENS OPERATIONS DIRECTOR CHRIS NEZAR MARKETING DIRECTOR PIETER SCHOEMAN IT DIRECTOR MIKE SPIVEY NON-EXECUTIVE DIRECTOR LLEWELLYN STEENEVELDT NON-EXECUTIVE DIRECTOR DONOVAN WRIGHT HR DIRECTOR ILAN ZWARENSTEIN NON-EXECUTIVE DIRECTOR been initiated with independent specialists to perform audits on food safety and handling as well as occupational health and safety audits. Each Makro sites occupational health and safety performance is audited bi-annually and food safety reviews are conducted each quarter. The rst round of independent inspections was completed and we employed a bio-technologist to assist operations in implementing processes and standards. In addition, we updated and revised our Food Safety Management Manual which is used for training. We are also set to introduce food safety standards and requirements to which all suppliers and sub-contractors will have to adhere in future. The impact of the Consumer Protection Act on customer complaints remains relatively low and we continue to deal with complaints efciently and appropriately.
Future outlook
We plan to open two Makro stores per year until 2015, giving us a footprint of 23 stores in South Africa. Initiatives for the year ahead include rolling out our Food Retail offering and new butchery design across all Makro stores. We also plan to complete the integration of Fruitspot and drive growth and cross-selling opportunities across the business. Our e-commerce plan is expected to be nalised shortly and we aim to create an online retail store by mid-2013. This will also enable us to enhance the use of social media and digital direct marketing vehicles to drive footfall into both our online and bricks and mortar stores, as well as better align our product marketing to consumer needs. We plan to implement a mobile solution to facilitate sales, team operations as well as improve customer service to resale traders. In the year ahead, Masswarehouse will continue to build momentum and maximise operating income, exploring new business areas, new categories of customer and optimising the returns on the trading space in our stores.
95
MASSBUILD DIVISIONAL REVIEW

Massbuild continued to deliver good sales and prot growth in a tough trading environment which saw further competitor consolidation. Our African expansion progressed with a new store opening in Botswana and further investment in Mozambique.
Builders Warehouse, Builders Express and Builders Trade Depot delivered a strong performance on the back of increased sales and improved efciencies in all formats. The fully integrated Massbuild structure enables our different business units to function as part of a centralised organisation but with dedicated format resources employed in areas of strategic differences. At Builders Warehouse, our sales growth can be attributed to specic events that were aimed at increasing customers spend with us. We ensured stock continuity in core ranges and offered customers a full range of products resulting in a one-stop shopping experience enabling them to complete their projects. Our focus on the trade customer has led to signicant growth in the building material category in a tough economic climate. The rst Builders Warehouse store outside of South Africa was opened in September 2011, in Gaborone, Botswana, and it is performing ahead of expectations. At Builders Express, the improvement in performance was the result of focusing on the Retail basics. Simple initiatives to ensure stock availability and specic sales campaigns resulted in customers responding well to our offering, generating higher sales. New Builders Express stores were opened in Bryanston and Amanzimtoti, and the previous Builders Trade Depot Store in Ballito was converted to the Builders Express brand. Our Builders Trade Depot stores remained focused on offering the correct and complete range of products in all the phases of a building project. Massbuilds roof-truss strategy was nalised by centralising operations and regionalising the manufacturing and sale of trusses resulting in market share gains. Re-introducing treating tanks and the stocking of hardwoods into the business will further reduce the operating costs of the truss plants. In Mozambique, our fourth brand, Kangela, reported a decline in sales as a result of the cement over-supply in that country. We are planning new stores in Tete and Maputo and the extension of relevant inventory ranges into each of the regional stores. Structural changes were recently made to better manage the business and Massbuild has committed the necessary resources from an accounting, operational, merchandise and supply chain perspective to ensure protable growth. HIGHLIGHTS OF THE YEAR
R Sales growth of 11.9% R Good prot growth from great cost control R Our rst non-South African Builders Warehouse store performed well R Private label strategy gaining momentum
28
STORES
R Five Builders Warehouse stores acquired in February 2003 R Three De La Rey stores acquired in June 2005, rebranded to Builders Warehouse R Now 28 stores R Operating in SA and Botswana R Home improvement supplies/tools/ building materials R LSM 5 10
27
STORES
R 14 Servistar stores acquired in June 2005, rebranded to Builders Express R Now 27 stores R Operating in SA R Home improvement suppliers/ tools/building materials R LSM 5 10
29
STORES
R 34 Federated Timbers stores acquired in June 2005, rebranded to Builders Trade Depot R Now 29 stores R Operating in SA, Mozambique R Building materials/tools R LSM 4 8
96
Operational Review
MASSBUILD DIVISIONAL REVIEW CONTINUED

The Massbuild brands
Massbuild operates three main complementary brands: Builders Warehouse, which operates large home improvement stores in major urban areas; Builders Express, a chain of smaller neighbourhood home improvement stores; and Builders Trade Depot, focusing on delivering the core range for all phases of building projects, focusing on contractors. Massmart acquired ve Builders Warehouse stores operating in Johannesburg and Pretoria in 2003, bought and rebranded three De La Rey stores in the Western Cape in 2005 and now operates 27 Builders Warehouse stores in seven provinces in South Africa and one in Gaborone, Botswana. Builders Warehouse follows the big-box or warehouse retail format, offering home owners, DIY enthusiasts and building and maintenance contractors a comprehensive range of competitively priced products under one roof, with a large garden centre display and a builders supplies yard. The brand is unique in that it is the only home improvement warehouse in South Africa. Builders Express was formed in 2005 when Massmart bought and rebranded 14 Servistar stores operating in the Eastern Cape and KwaZulu-Natal. Massbuild now operates 27 home and garden Builders Express stores in four provinces that cater to home owners and provide a ller strategy for the Group situated in convenient locations with aesthetically pleasing displays, customer-friendly store layouts and offering personalised service and advice. Builders Trade Depot was formed when 34 Federated Timber stores were acquired and rebranded in 2005. Seven smaller stores have since been closed and after some conversions and acquisitions, Builders Trade Depot now operates 29 stores catering mostly for medium- to large-sized contractors and tradesmen engaged in building, maintenance and renovation projects. It also focuses on servicing the needs of construction entrepreneurs who need trade credit, telephonic ordering and want bulk goods delivered from low-cost outlets. The Company acquired Kangela in Mozambique in 2010, and this represents our fourth brand. There are 13 Kangela outlets in Mozambique, with cement and construction materials making up a higher proportion of sales than in South Africa.

Builders Warehouse and Builders Express are both pioneers in introducing retail principles to the South African home improvement and DIY sector and attaching garden centres to hardware stores. The clean, friendly and uncluttered look and feel of our stores offers customers a shopping experience traditionally not associated with the sector. Our new stores aim to introduce a retail theatre where lighting, colour and ambience enhance the shopping experience, signage is clean and bold, and product displays are enticing. Several of our private brands, including Mastercraft hand tools and Builders Pride, have become household names, with our customers assured of stringent quality control and best supplier practices. During the year Private Label contributed more than 11.7% to our total sales and drove margin growth.
97
In both the residential and commercial property markets, Builders Trade Depots value proposition to customers is our ability to consistently deliver an appropriate, professional range at highly competitive basket prices, combined with exceptional contractor support services in a relationshipdriven environment. The Kangela building materials business is well placed to take advantage of the growing home improvement, DIY and building contractor markets in Mozambique. We believe that building hardware and home improvement as a format has much potential as the African middle-class grows on the back of increased investment and economic growth and development.
MASSBUILD STORE PROGRESS OPENING BALANCE BUILDERS WAREHOUSE

STORE OPENED GABORONE (BOTSWANA)
27 1
28
24 2 1
Our operating environment

Nationally, average house prices remained static but declined at the upper level. In addition, South African banks remained reluctant to grant residential mortgage advances without substantial deposits, affecting the number of consumers able to buy property. The building industry also remained under pressure, with building plans approved continuing to decline. The additions and alterations markets also deteriorated, but stabilised at levels above those experienced in the midnineties. These factors combined to make it more attractive for homeowners to improve their existing houses rather than to buy a better house. Home maintenance requirements drove consumers purchasing behaviour and the hardware; paint and glass retail sectors saw a signicant improvement towards the end of the year. OPENING BALANCE BUILDERS EXPRESS
STORES OPENED BRYANSTON (GAUTENG) AMANZIMTOTI (KZN) STORES CONVERTED BALLITO (KZN)
27
30 -1
OPENING BALANCE BUILDERS TRADE DEPOT STORE DISTRIBUTION Builders Warehouse Builders Trade Depot Builders Express
1 1 1 1 1 1 5 1 1 6 9 1 1 1
STORE CONVERTED BALLITO (KZN)
29
1 1 1
1
1 1
1 1 1 1 3 1 1 1 11 1 1 1
1 1 1 1
2 1 5
1 11 1 1
1 1 1 3 1 1 1 1
98
Operational Review

With comparable sales growth of 10.4% and sales ination of 1.5%, we achieved solid volume growth of 8.9% in a tough market. Expenses have been well managed during the year with comparable expenses growing at 4.5%. Working capital has been well managed with the supplier funding gap being improved by six days and together with the improved operating performance resulted in a 26.9% increase in interest income despite lower interest rates. This growth was almost entirely offset by the high cost of investment into the African markets and the net result was a 22.7% growth in trading prot before tax, a pleasing outcome in this operating environment.
UP BY 11.9%
R8.1 bn
SALES
2011: 7.3 bn
2012 52 week Sales Trading prot before interest1 Trading prot before interest as % sales Net nance income Trading prot before taxation1 Trading prot before taxation as % sales Operating prot before taxation Operating prot before taxation as % sales Inventories Inventory days2 Net capital expenditure3 Cash ow from operating activities Number of stores Trading area Average trading area per store Number of employees Sales per store4 Sales per m2 Sales per employee
1. 2. 3. 4. 5.
2011 52 week 7,271.0 315.1 4.3 39.6 354.7 4.9 368.5 5.1 1,062.1 74 140.8 (13.0) 81 412,996 5,099 6,834 86,697 17 1,064
2010 52 week 6,366.9 260.5 4.1 31.2 291.7 4.6 275.7 4.3 943.6 74 143.2 165.4 76 384,625 5,061 6,409 80,495 16 993
8,138.0 389.8 4.8 45.5 435.3 5.3 442.7 5.4 1,198.3 75 304.9 209.9 84 406,987 4,845 7,390 93,997 19 1,101
Trading prot is earnings before asset impairments, BEE IFRS 2 charges, foreign exchange movements and Walmart costs. The ratios have been calculated using year-end statement of nancial position gures. Net capital expenditure is dened as capital expenditure less disposal proceeds. Sales for Kangela are excluded as the business does not have stores. Denitions/explanations to the ratios and terms above can be found on page 61.
99
Improving eciencies
There was a focus on improving efciencies through daily in-store disciplines; margin management; shrink management and expense control. Massbuild managed to contain cost increases at below ination levels and decreased the rate of inventory shrinkage and scrapping to less than 1.0%, in line with worldclass standards. Expenses were also reined in through better staff scheduling. The construction of the 35,000m2 Regional Distribution Centre (RDC) in Midrand, Gauteng, progressed well and it is expected to become operational in April 2013. Massbuilds RDC team visited similar Walmart facilities in the United States to gain experience and insight into operations, especially with regard to inventory forecasting and replenishment, in order to optimise the central warehousing and distribution network. A new SAP Forecasting and Replenishment system was rolled out across the business, leading to better stock management and improving stock availability. In order to drive Massbuild towards its desired IT strategy, Massbuild has embarked on a project of consolidating its operations into a single hierarchy on SAP, as well as implementing SAP in Builders Trade Depot, which currently runs on the Kerridge system. This project will be complete by August 2013. During the year ahead, Massbuild will focus on extracting efciencies in the supply chain across our African operations.
IMPROVE EFFICIENCIES THROUGH:
DAILY IN-STORE DISCIPLINES MARGIN MANAGEMENT EXPENSE CONTROL
Investing in human resources

Finding the right people to deliver on our growth strategy will be a critical success factor as our expected store growth is aggressive. Training and development remains a priority in our human resources plan, especially at supervisory level. All team members are empowered with general product knowledge and undertake training on an ongoing basis. Massbuild aims to provide a compelling workplace for its employees and internal communication remains an important aspect of our mission to create an inspiring workplace in our stores. We drive the culture in our organisation through the Builders Formula for Success. This culture has been dened by our staff and identies the behaviours, practices and business principles that drive business success and those that detract from it. This is expressed as a graphic formula and so can be represented visually and verbally. This formula has become integrated into everything we do including the Walmart 3 Basic Beliefs. The formula is measured quarterly and feedback is provided to our staff as to how we are living the Builders Formula for Success. This formula has not only added tremendous value in integrating our three main Massbuild business units from a people perspective, but has also created the platform to support our everyday business and growth strategies.
"Massbuild aims to provide a compelling workplace for its employees..."
100
Operational Review

Massbuilds monthly newsletter and monthly staff meetings give an opportunity for employees to provide feedback to management. The monthly birthday breakfasts also allow staff members to interact with the CEO and senior management at head ofce and provide channels for staff to generate new ideas and provide feedback to management. We continue to encourage our staff to be tested for cholesterol, HIV, diabetes and high blood pressure through our Impilo programme. More than 370 staff members (permanent and temporary) underwent voluntary HIV testing and 58 employees are currently on antiretroviral treatment. In conjunction with Impilo, an employee-assistance programme is being launched in September 2012 that will further benet staff by providing advice and support for psychosocial, legal and nancial well-being.
+ +
Massbuild remains committed to the development and training of our staff. During the past year a total of 16,366 days of training were undertaken, not only meeting current training and development needs, but ensuring succession planning and meeting new store staff requirements internally. A total of 3,942 permanent employees underwent training of which 81.9% were from designated groups. Courses ranged from a basic ve-day induction programme, through to specialist technical skills training and a suite of management and leadership development programmes for junior through to senior management. Our business depends on staff having excellent product knowledge as a basis for giving good customer service. In-house subject matter experts and suppliers are used to train employees. To ensure a pipeline of future business leaders, management and leadership development is also a key focus area of Massbuilds education programme. Our senior staff attended various development programmes run by Massmarts Corporate University. In addition, 482 staff from junior non-supervisory to senior management attended nancial management training and 83 managers attended an Interaction Management course, our primary leadership training for all managers. Massbuild places a strong emphasis on health and safety training. A total of 1,205 employees attended various courses including gas handling safety; rst aid; re ghting; handling hazardous chemicals; and racking and stacking. In terms of transformation of our business, the percentage of black employees (African, Coloured, Indian) reached 24.4% at senior management level (2011: 21.5%); 52.1% at middle management level (2011: 52.8%); and 72.0% at junior management level (2011: 68.2%). While representation at junior management level is adequate, middle and senior management levels remain areas for further improvement. Training and development of previously disadvantaged staff is prioritised to ensure that they are well placed to be fairly considered for career opportunities. Supervisory Development Learnership programmes have been implemented as a vehicle for a structured approach to supervisory level advancement.
2 x2+ + + + 2 3 + + + +
x2+
101
We improved our performance on the BBBEE scorecard to 59.13 points and are a Level 5 contributor. We continue to work with our suppliers to improve their BBBEE credentials, driving transformation backward into our supply chain.

Massbuild provides support to a range of corporate social investment initiatives which focus mainly on youth development as well as feeding schemes. Our staff members are also actively involved in CSI programmes through our Staff Volunteer Programme. Last year Massbuilds CSI budget was distributed as follows: Education and Community Development (80%); Staff Volunteer Programme (15%); and welfare and ad-hoc projects (5%). Builders Warehouse sponsored vegetable tunnels by donating 30 tunnels to disadvantaged schools across the country. These enable schools to grow vegetables such as spinach and tomatoes and assist them to feed underprivileged children. The project forms part of the Massmart feeding scheme project. We also supported the Lap-desk programme which provides lap-desks to schools lacking desks and formal infrastructure, mainly in rural areas. Massbuild donated 8,520 lap-desks to disadvantaged schools across the country. Massbuild partnered with MNet Cares and renovated a cottage at the St. Marys Childrens Home in Rosettenville, south of Johannesburg. We also helped build a school in Cosmo City outside Johannesburg, providing building materials and cash donations for the project. As part of our drive to support enterprise development, Builders Warehouse continued its support of the Hot Dog Cafe and The Coffee Stops concept, where we sponsored ambitious and talented unemployed youngsters to start their own businesses. Builders Warehouse Polokwane opened a coffee shop this year and this brings the total to nine Coffee Stops and 16 Hot Dog Cafe franchises operating at selected Builders Warehouse stores.
EDUCATION AND COMMUNITY DEVELOPMENT
80%
15%
STAFF VOLUNTEER PROGRAMMES
5%
WELFARE AND AD HOC PROJECTS
Builders Warehouse, Northriding.
Builders Express, Bryanston
Builders Trade Depot, Soweto.
102
Operational Review

Our carbon footprint is measured on an annual basis by a verication agency and we met our target of reducing electricity consumption by 12% across Massbuilds operations over the period. This was made possible by using technologies to monitor electricity consumption in each store, enabling us to implement measures to further reduce consumption. Our new stores are built with energy efciency as a key consideration and they utilise the latest technology, including clear roong panels that maximise natural light without affecting the ambient temperature of the store. Each Builders Warehouse store is also tted with water tanks to harvest rainwater, which we use to water plants in our garden centres. Massbuild has worked closely with Eskom and has set up an exchange programme to enable customers to swap their old light bulbs for energy efcient CFLs. There is also a strong drive to promote solar power and water-saving products in our stores. Through our Eco-wise range we help to empower our customers to better manage their water and electricity usage. Eco-wise has a complete offering from solar geysers to rooftop water tanks for rain water harvesting. Massbuild implemented a store-based waste management programme which promotes recycling. A waste management policy has been standardised and reporting is accurate, consistent and auditable. Massbuild also reduces waste by using sorters trained in waste management, who ensure that our stores recycle as much material as possible. Nationally our stores provide collection bins for uorescent tubes; compact uorescent lamps; rechargeable and standard batteries. The disposal of the non-recyclables is also auditable and in line with waste management legislation. We have implemented green procurement guidelines for all merchandise. All suppliers are given the opportunity to join the Eco-wise programme and selected suppliers have been approached to be private brand suppliers of Eco-wise products. In total we support 300 product categories that are endorsed as environmentally-friendly, including paint, timber, light bulbs and panel heaters.
"... we met our target of reducing electricity consumption by
12%
across Massbuild's operations..."
Builders Trade Depot, Soweto
103
The Africa team has been strengthened, with a designated merchandise manager appointed to focus on supply chain and inventory issues at a country level and a regional operations manager with sole focus on the African operations. Our learnings around stock availability; range; and regionallyrelevant marketing at our new store in Botswana will be invaluable as we plan to open a store each in Zambia and Mozambique in 2013. Massbuilds marketing strategy in Africa will be on store-specic promotions and relevant promotional pricing. A comprehensive action plan has been developed to ensure we are the market leader in specic categories. Suppliers will be approached to participate in weekly promotions to help grow basket size and foot trafc and the on-time delivery reliability of key suppliers is being tracked. The top 20 selling products have been identied per department and these will be monitored to ensure on-shelf availability and best price in the market.
MASSBUILD DIRECTORATE GRANT PATTISON CHAIRMAN LLEWELLYN WALTERS CHIEF EXECUTIVE THASHMI DOORASAMY HR DIRECTOR DON FRIESON NON-EXECUTIVE DIRECTOR NEVILLE HATFIELD MERCHANDISE DIRECTOR GUY HAYWARD NON-EXECUTIVE DIRECTOR CHRIS LOURENS OPERATIONS DIRECTOR ZANDILE MANANA MARKETING DIRECTOR ALEX RYMASZEWSKI STORE DEVELOPMENT DIRECTOR MICHAEL SPIVEY NON-EXECUTIVE DIRECTOR ANDRE STEYN BUILDERS EXPRESS DIRECTOR ANDRIES STRYDOM BUILDERS TRADE DEPOT DIRECTOR CHRIS TUGMAN IT DIRECTOR SIMON WHITE FINANCIAL DIRECTOR ILAN ZWARENSTEIN NON-EXECUTIVE DIRECTOR
Risks and rewards

Stagnant housing prices and little or no Government infrastructure spending remain the biggest risks to growing our business. However, as our stores continue to offer value for money, great customer service and a range of products that meet consumers needs, Massbuild is positioned to take market share in this highly competitive sector. Unfortunately, there were a number of armed robberies at some of our stores and tragically a customer was shot and killed by eeing armed robbers at our Rivonia store in February 2012.
Future outlook
Massbuilds ve-year plan includes roll-out of new stores, revamping or relocating others and aligning our brands to service key markets. There are opportunities for Massbuild to benet from the experience of Walmart and our staff will look to share knowledge and experience with the worldrecognised retailer. As Massbuild seeks to nd innovative ways to meet our customers needs, we will look to increase the convenience factor for our contractor customers by offering online catalogue services. Good progress has been made around the development of an e-commerce strategy to provide customers with more choice and advice, a development which will be a rst for the hardware sector.
104
Operational Review
MASSCASH DIVISIONAL REVIEW

During the period Masscash continued to invest further in its Retail business, in line with its strategy to target Food Retail at the lower LSM groups. Both Divisions have carved out niches for themselves in a highly competitive market as they seek to oer consumers the best value. Masscash is now positioned to deliver an attractive Retail Food proposition based on everyday low prices through highvolume low-cost stores positioned both in and outside prime township shopping mall sites and major commuter nodes.
Retail Division
In the three years since it launched, Cambridge Food has grown into a business with 43 stores and an annualised turnover in excess of R5 billion. We plan to double this over the next ve years through new store openings and the growth of our existing stores. Some of our competitors responded to the growing presence of Cambridge Food with aggressive pricing strategies, but with our low-cost model Cambridge Food continued to provide low prices on the items that matter most to our customers. Cambridge Food focused on delivering a consistent and value-driven brand message to all our customers through several campaigns and at all times giving customers a compelling deal. Marketing campaigns created in-store excitement and contributed to the building of the Cambridge Food brand leading to increasing spontaneous awareness of the brand and substantial improvements in our price perception. The store development team made signicant progress in designing a store prototype that requires less capital investment. Effective March 2012, we completed the acquisition of the Rhino Cash and Carry Group, which gave us 15 additional stores located mostly in southern KwaZulu-Natal and the Eastern Cape. We opened ve new stores and converted a further two stores to the Cambridge Food brand, and closed two small stores in keeping with our focus on larger format stores. We expect to open four new Rhino stores in the next 18 months. HIGHLIGHTS OF THE YEAR
R Wholesale stable and performing well R Cambridge Food continued to grow in competitive market R Progress made with Food Retail offering in Wholesale R Growth of franchise brands, especially Saverite supermarkets
80
STORES
R 14 CCW stores acquired in June 1998 R 6 Jumbo stores acquired in April 2001 R 22 Brown and Weirs stores acquired in July 2010 R Two chains combined under CBW format from July 2001 R Now 80 Masscash Wholesale stores R Operating in SA, Botswana, Lesotho, Namibia, Swaziland R Food/liquor/groceries/ethnic cosmetics R LSM 2 6
43
STORES
R 15 Rhino Cash and Carry Group stores acquired 1 March 2012 R Now 43 stores R Operating in SA R LSM 2 5
552
OUTLETS
R 378 members acquired 1 March 1992 R Now 495 members and 552 outlets R Operating in SA, Botswana, Namibia, Swaziland R Food/groceries R LSM 2 6
105
Wholesale Division
Traditionally, the lower LSM markets have not been served well in the Food Retail category. Most of our wholesale customers, many of whom are spaza shop owners, are not geared to sell fresh produce to their customers, lacking the necessary skills and infrastructure, such as fridges. We believe however, that this is rapidly changing with the increase in electrication of township and outlying areas. We have therefore continued to invest in building the Food Retail category so that we increase our share of our customers basket. Masscash purchased the remaining minority shareholding of Rahme, our Johannesburg-based fruit and veg distribution business and took control of all operational aspects. Rahme now forms a key part of the Groups produce initiative being run as Massfresh. The Saverite franchise base increased to 104 stores with a healthy pipeline of new stores. Our focus is on enhancing our Food Retail offering; launching a Saverite private label; and focusing on distribution capability to drive efciencies for us and our customers. To kick-start the establishment of our Saverite franchise business, in 2010 we bought 14 Score stores across the country. After experiencing difcult trading in almost all the stores, we have now sold or closed most of these stores. After it failed to deliver on expected supply chain efciencies, we are in the process of selling the Mozambique-based business, Kawena, back to its original shareholders. The assets and liabilities have been classied as held for sale in the statement of nancial position. We believe however, that opportunities remain for Masscash and the Kawena owners to work together in the areas of logistics, distribution and warehousing in that country. We are building a cash and carry store in Xai Xai that should open during 2013.
MASSCASH STORE PROGRESS OPENING BALANCE MASSCASH WHOLESALE*

STORE OPENED EMPANGENI LIQUORS (KZN) STORES CONVERTED SUNSHINE STORE ELECTRON (GAUTENG) SUNSHINE STORE PLAZA (GAUTENG) STORE CLOSED GINGINDHLOVU (KZN)
78 1 2 -1
80
27 5
OPENING BALANCE CAMBRIDGE FOOD

STORES OPENED HILLBROW (GAUTENG) KEMPSTAR (GAUTENG) MABOPANE (GAUTENG) NEWGATE (GAUTENG) RHINO, KING WILLIAMS TOWN (EASTERN CAPE) STORES CONVERTED SUNSHINE STORE ELECTRON (GAUTENG) SUNSHINE STORE PLAZA (GAUTENG) STORES CLOSED ASTOR EXPRESS BARAGWANATH WALKWAY (GAUTENG) ASTOR EXPRESS VAN DER WALT (GAUTENG) STORES ACQUIRED RHINO, BIZANA (EASTERN CAPE) RHINO, LUSIKISIKI C&C (EASTERN CAPE) RHINO, MTHATA (EASTERN CAPE) RHINO, HAMMANSKRAAL (GAUTENG) RHINO, EDENDALE (KZN) RHINO, HARDING (KZN) RHINO, KOKSTAD (KZN) RHINO, MATATIELE (KZN) RHINO, MTUBATUBA (KZN) RHINO, PIETERMARITZBURG (KZN) RHINO, PORT SHEPSTONE C&C (KZN) RHINO, ULUNDI (KZN) RHINO, UMLAZI C&C (KZN) RHINO, UMZIMKULU (KZN) RHINO, UMZINTO (KZN)
-2 -2
15
The Masscash brands

Masscash consists of a Wholesale Division with cash and carry food and cosmetics businesses and Retail food outlets which target the lower LSM groups. Our Wholesale Division consists of CBW Holdings, Jumbo Cash and Carry, Trident, Cellshack and Shield whilst our Retail Division is consolidated under the Cambridge Food banner and the Rhino Cash and Carry Group. CBW and Trident wholesale food, liquor, groceries and cosmetics in bulk to independent general dealers, Government feeding schemes, franchise members, small traders and hawkers in peri-urban and rural areas within southern Africa.

* INCLUDING JUMBO
43
106
Operational Review
MASSCASH DIVISIONAL REVIEW CONTINUED

Jumbo sells mainly cosmetics, toiletries and hair-care products to individual customers and independent general dealers. Shield is a voluntary buying association that buys products in bulk on behalf of 495 members who own wholesale or retail food businesses in South Africa, Botswana, Namibia and Swaziland. We offer wholesale customers with formal operations the ability to trade under national retail brands such as Saverite, Multisave, Powersave and Liquorland. Our marketing team offers support to these supermarkets and bottle stores, assisting owners with marketing initiatives such as designing of leaets, signage and implementing national television and radio advertising campaigns. On the retail side, all our outlets are consolidated under the Cambridge Food Jumbo, Crown Mines brand. Cambridge Foods mission is to help its customers save money every day so that they can live better. Food Retail service departments, consisting of an on-site bakery, butchery and fresh fruit and vegetable offering form an important component of our Cambridge Food retail offering.

All our stores apply the trading philosophy of supplying the right range of products at competitive prices to low- to middle-income wholesale customers. We keep costs down by employing a no-frills cash and carry warehouse format, coupled with basic distribution centres that supply our private label and general merchandise ranges. Our private label food brands, Econo, Heritage and Cambridge, offer our customers exceptional value and the assurance of STORE DISTRIBUTION CBW Jumbo Cambridge
1 1 1 1 1 1 1 1 1
stringent quality and safety controls. Our stores are conveniently located and offer the best quality and affordable prices.
1 1 1
2 1 1
1 1 12 2 1 1 1 1 1 1 1 11 1 1 1 6 1 1 1 1 1 1 1 1 2 1 1 1 1 1 1 1 2
1 1 1 2 3 1 9
14 1 1 6 1
9 1 2
107
During the past year national employment increased marginally by 1.5%; real wage growth measured in at 3.4%; and there was a 5.5% increase in the number of social grant recipients, coupled with a nominal increase of 5.3% in grant payouts. These factors helped buoy consumer spending in the lowerincome groups. Although CPI is currently within the 4% 6% range, currently high international prices for grains will ow into the South African food market, including proteins, and we expect food ination to increase, possibly into low double-digits. This will put lower-income consumers under pressure. Growth in real wages, employment and social grant payouts is expected to slow in 2012/13, but to remain positive. Food ination continued to positively inuence our trading results during the period assisting sales and margin growth.
"We have adopted a multi-faceted approach to transforming our business including aligning our training interventions with succession planning and talent management."
2012 52 week Sales Trading prot before interest1 Trading prot before interest as % sales Net nance income Trading prot before taxation1 Trading prot before taxation as % sales Operating prot before taxation Operating prot before taxation as % sales Inventories Inventory days2 Net capital expenditure3 Cash ow from operating activities Number of stores Trading area Average trading area per store Number of employees Sales per store4 Sales per m2 Sales per employee
1.
2011 52 week 19,623.7 374.8 1.9 16.9 391.7 2.0 404.6 2.1 1,613.6 33 244.0 93.3 105 351,929 3,352 9,276 158,289 47 2,116
2010 52 week 17,418.0 469.1 2.7 26.5 495.6 2.8 498.4 2.9 1,354.4 31 95.6 154.1 97 321,210 3,311 8,395 148,927 45 2,075
22,894.8 281.2 1.2 21.0 302.2 1.3 273.9 1.2 1,954.3 34 314.2 586.9 123 382,101 3,107 11,245 160,762 52 2,036
2. 3. 4. 5.
Trading prot is earnings before asset impairments, BEE IFRS 2 charges, foreign exchange movements, loss on disposal of business, assets classied as held for sale and Walmart costs. The ratios have been calculated using year-end statement of nancial position gures. Net capital expenditure is dened as capital expenditure less disposal proceeds. Sales for Shield, Cellshack, Saverite and Kawena are excluded as they do not have stores. Denitions/explanations to the ratios and terms above can be found on page 61.
108
Operational Review

The Division reported total sales of R22.9 billion, representing growth of 16.7%. Comparable store sales increased by 11.6% with estimated product ination of 6.1%. This Division traded hard in a competitive environment and invested heavily in Food Retail stores, skills, distribution, IT systems and brand-building. This investment came at a cost, compounded by some operational errors and a failed small acquisition. Trading trends in the nal quarter to June 2012 were encouraging and both the Wholesale and Retail parts of this Division are poised for growth. We look forward to improving protability from the Wholesale Division, bolstered by food ination, whilst investing for growth in the Retail Division. The low comparable sales growth, coupled with cost growth associated with the aggressive investment in structure and capacity in the Retail Division, cause trading prot before taxation of R302.2 million to be 22.8% lower than the prior year. Total capital expenditure of R317.7 million for the year was signicantly higher than the prior years R259.3 million mainly as a result of the acquisitions and refurbishments discussed above.
UP BY 16.7%
R22.9 bn
SALES
2011: 19.6 bn
Improving eciencies
Extracting efciencies remains a key focus of the Masscash business, with the implementation of an integrated stock system planned to improve invoicing accuracy, remove manual interfaces and result in major cost savings in our distribution centres. The system has been successfully rolled out to all Wholesale and Retail stores, with the nal roll-out into Gauteng in the coming nancial year. We successfully piloted an enhanced buying functionality for Saverite members and pilot tested the integration of cash and carry and Shield deals into the Saverite members buying system, giving them the ability to order inventory off their system. Once all enhancements have been made, this will greatly improve Saverite members buying and administration processes. Our regional distribution centres have tight physical controls and efciencies have been improved through the input of Massdiscounters and Walmart experience and learnings.
INTEGRATED STOCK SYSTEM:
IMPROVE INVOICING ACCURACY REMOVE MANUAL INTERFACES SAVE COSTS
109

We continued to invest signicant resources in up-skilling and training our staff. In total 683 employees attended courses ranging from basic retail training to soft skills development and diversity awareness, to health-and-safety and information-technology training. Adult Basic Education and Training remains an ongoing offering for our employees and we granted 284 learnerships to black staff. Culture training was a Walmart priority for the year and we successfully trained the entire leadership team to roll out the culture awareness programme to all stores. We have adopted a multi-faceted approach to transforming our business including aligning our training interventions with succession planning and talent management. Masscash achieved a Level 5 score at 59.5 points, as veried by Empowerdex. Finding appropriate equity candidates for senior management positions remains a challenge, with only 24.1% of our senior managers being black and 41.5% of professionals and middle-managers. Masscash employs 63 people with disabilities. We continue to run a successful mentoring programme and during the current period nine previously disadvantaged graduates were successfully promoted to more challenging roles. Our Business Process team has been transformed, with all analysts being black as well as the majority of the support team. During the next nancial year the rst Cambridge Food learnership grants will allow 80 unemployed people to train in basic retail skills and 50 currently employed staff to enrol in a programme geared for supervisory roles in the areas of receiving, front ofce and supermarkets. In support of the Massmart Impilo programme, we launched the Masscash HIV/Aids programme. Many of our stores are in rural areas where HIV infection rates are high and the rate of HIV-positive Masscash employees on an HIV management programme increased from 487 to 696, partly due to an increase in our staff complement through acquisitions. We offered voluntary counselling and testing services to all our employees, of whom 14.3% chose to be tested. We have an ownership mentality in our national, regional and store leadership teams, all of whom are empowered to trade and who are incentivised through prot shares. Minority equity partners who have sold a majority share in their businesses to Masscash are accommodated and continue to operate with us, thus retaining important entrepreneurial talent in the business. Cambridge Food, Baragwanath Hotel, Soweto ATTENDED COURSES RANGING FROM BASIC RETAIL TRAINING TO SOFT SKILLS DEVELOPMENT AND DIVERSITY AWARENESS, TO HEALTH-AND-SAFETY AND INFORMATIONTECHNOLOGY TRAINING
EMPLOYEES
683
110
Operational Review

We extend credit facilities to black wholesale customers on attractive terms and AREAS OF FOCUS: continue to assist the development of small- and medium-sized black business through various banner groups who are given preferential pricing and special promotions to assist their stores.
FOOD SECURITY IMPROVED EDUCATION FOR DISADVANTAGED STUDENTS
Investing in our communities

Masscash supports projects that focus on building food security and improve educational outcomes for disadvantaged students. Thousands of children continue to receive a balanced meal at a container kitchen sponsored by Masscash. During the nancial year we donated 15 more kitchens to schools and community centres throughout the country, adding to the 52 already in place. Each container costs about R67 000 to convert and a Masscash store then adopts a container and provides a safe and hygienic food preparation environment for volunteers to prepare and distribute food to hungry school children. Cambridge Food partnered on a pilot basis with Foodbank, an NGO that distributes food that has passed its sell-by date but which is still safe to eat, to the underprivileged. Masscash also funded and assisted in the construction of 32 hawker stands and a covered walkway for the local hawkers trading outside the Mabopane Cambridge Food store. Store-specic community outreach initiatives included providing food for a school for disabled children, providing soup to customers and engaging with the local police forces. Cambridge Food also hosted 11 cake-decorating competitions for local pre-primary schools across the country, painted the Greyville Pre-primary School in KwaZulu-Natal and sponsored two school signs.
Jumbo, Crown Mines
111
For several years Masscash has traded in Namibia and Botswana and our operations have performed well. We plan to expand our presence in Mozambique through a store in Xai Xai and use this as a base to develop a wholesale and retail footprint in the rest of the country. Masscash intends to expand into the rest of Africa once we have bedded down our existing operations. MASSCASH DIRECTORATE GRANT PATTISON CHAIRMAN NEVILLE DUNN DIVISIONAL MANAGING DIRECTOR OF MASSCASH WHOLESALE KEVIN VYVYAN-DAY DIVISIONAL CHIEF EXECUTIVE OF CAMBRIDGE FOODS JANE BRUYNS HR DIRECTOR DON FRIESON NON-EXECUTIVE DIRECTOR GUY HAYWARD NON-EXECUTIVE DIRECTOR DINO HOLMES FINANCIAL DIRECTOR OF MASSCASH WHOLESALE PEARL MAPHOSHE NON-EXECUTIVE DIRECTOR EBEN MARE FINANCIAL DIRECTOR OF CAMBRIDGE FOODS MIKE MARSHALL BUSINESS SYSTEMS AND PROCESS DIRECTOR JON MARTINEK MERCHANDISE DIRECTOR MIKE SPIVEY NON-EXECUTIVE DIRECTOR LLEWELLYN STEENEVELDT NON-EXECUTIVE DIRECTOR ROBIN WRIGHT GROUP FOOD EXECUTIVE ILAN ZWARENSTEIN NON-EXECUTIVE DIRECTOR
Risks and rewards

The roll-out of our Food Retail offering was accompanied by a focus on food safety. A food safety management system was implemented and training was conducted in all stores. All private label products include a customer care number and calls are directed to a call centre. We plan to develop a framework for the management of all customer complaints and compliments.
Future outlook
We anticipate a continuation of the aggressive trading amongst the corporate food retailers serving the low-income customer. However, we are cautiously optimistic about our growth over the next year. The LSM 2 6 market remains highly fragmented, and Masscash is well-positioned to offer new retail formats and to expand our current footprint to better supply food, cosmetics, liquor, cigarettes and cellular to lower-end consumers. To ensure future growth, Masscash will focus on building its Retail Division, expanding the wholesale range to include meat as well as fruit and vegetables, growing the franchise formats and expanding into Africa. Our strategy is to open 10 more stores through our Rhino acquisition each year as we seek to grow our footprint nationally. The Company will also seek to develop the quality and depth of its new store pipeline and the speedy conclusion of binding agreements to secure approved sites.
112
Operational Review
CHANNEL AND SHARED SERVICES REVIEW

We believe that the value of the Massmart Group should be greater than the sum of its parts. This philosophy underpins Massmarts approach to collaboration across the Divisions which is facilitated and implemented by our Channel and Shared Services functions.
Channel
The Channel function provides a secure and structured place for our Divisions to share information and collaborate in a way that we believe will materially benet the Group. This is done primarily by organising forums, in specic areas of competence and interest, which bring together the best and most senior skills in the Group in each functional area. These forums are chaired by members of the Group Executive Committee and consist of both trading and functional forums. The Channel structure served as an internal Massmart resource to drive the Walmart integration process through the relevant forums, providing Group leverage, the sharing of Best Practice and opportunity identication. Each forum is tasked with performing four key functions, outlined below: The rst, and most important, is identifying common opportunities across Divisions where the capability and resources of the Group can be leveraged to increase prots or reduce costs across some or all Divisions in a way that could not be entirely achieved by any Division acting independently. This can take the form, for example, of sharing private label products, collaborating on product sourcing, supplier negotiations to reduce the cost per unit from shared vendors, or building shared supplier relationships. Secondly, forums are also used to reach agreement on common standards that are important for Divisions to adhere to. In addition to this, forums assign and monitor Group representation on external standards and industry bodies and engage government in legislative processes relevant to our industry. Thirdly, forums perform a peer review function to improve performance. Massmart Divisions assess each other for adherence to agreed Group standards and operating norms, and ensure appropriate measures are adopted to mitigate against risks material to the Group. Lastly, forums function as a place to share internally and externally sourced learning. Divisional level data is gathered, analysed and benchmarked at Group level, then presented and debated at the various forums, and experiences across Divisions that will materially advantage the Group are shared. Processes piloted in one Division can be rolled out in another, reducing execution risk. External learning takes the form of presentations from conferences, visiting other local and international retail sites, gathering market share data meaningful in tracking Divisional category performance against competitors and monitoring competitor activity through supplier and market intelligence. Regular presentations to forums from outside experts keep Group and Divisional executives up to date with the latest developments in our industry and operating environment.
Trading forums
The Massmart Groups trading forums consist of the Food, Liquor, General Merchandise and Cellular Forums. During the year, Massmarts trading forums continued their focus on Joint Business Planning and data-sharing initiatives with strategic suppliers. With the enactment of the Consumer Protection Act (April 2011), the forums remained focused on legislative compliance and product safety and quality assurance, including the adoption of key global standards such as GFSI in regard to food safety.
113
In May 2012, Massmart invited 10 of their largest South African suppliers to participate in a unique tailored programme in Bentonville USA in order to prepare them for the collaborative Joint Business Planning utilised globally by Walmart with key strategic suppliers. This trip included exposure to Walmart senior leadership and business formats, together with a deeper education on business philosophies around collaborative business process focusing on the customer. The trip was well attended and feedback was overwhelmingly positive.
Functional forums
Our functional forums are the Technology, Information and Process (TIP), Operations & Construction, Real Estate, Finance, Supply Chain and Human Resources Forums. These focus on the management of skills and the procurement of resources and services required to support key Group-wide activities. The scope of the Operations forum was broadened during the year to include a focus on benchmarking and reducing design and construction costs compared to Walmart formats in North and South America. In addition, this forum has reached new levels of collaboration in respect of operating more efciently on non-merchandise sourcing. This has provided a strong foundation for the introduction of the Walmart We Operate for Less model. The Supply Chain Forum worked closely with Walmart Integration on developing a Massmart strategic plan to identify collaborative supply chain leverage opportunities. The HR Forum collaborated with Walmart on delivering the Integration culture work streams. The Massmart Corporate University continues to deliver outstanding programmes such as the Executive Development Programme, Leadership Development Programme, Graduate Development Programme, and various Functional Skills Training programmes. The TIP Forum focused on leveraging Walmart global technology vendors to improve cost efciencies, service and support.
Shared Services
The Shared Services teams provide services to the Divisions that can be provided more efciently in aggregate rather than as Divisions may be able to source individually. These services are requested by the Channel forums (described above) and are ultimately accountable to these forums for their performance. These services must respond to Divisional needs and be of higher value measured as quality, cost and benet than can be sourced externally or generated inside the Division. A Shared Services teams relationship with the Divisions is one of a service provider that must strive for excellence and become the best among competitors. The Divisions are their customers and their reason for existing. Shared Services currently includes: Supplier Liaison and Administration; International Commerce; Employee Benets and Shared Private Label management. The Supplier Liaison and Administration team achieves savings by negotiating supplier contracts at Group level. This team also focused on the roll-out of the Joint Business Planning process (JBP) to 17 multi-national and seven local vendors. The International Commerce team handles the treasury and logistics aspects of importing products directly to be sold across our Divisions. During the past year, this team engaged substantially with Walmart to ensure our processes align with best practice, and we have taken advantage of savings available on sea freight rates and service provider fees at origin. Employee benets aggregate the employee retirement and medical funds to achieve lower per unit costs and possible greater benets from scale. The Shared Private Label team manages various brands that are private or exclusive to Massmart and shared across trading Divisions; and had an important year with the launch of its newest brand, Blacksmith power tool accessories. We achieved great collaboration between the chains in launching Walmarts Great Value brand. This has further allowed us to initiate some exciting projects to bring more of the Walmart power brands into South Africa.
BUILDERS TRADE DEPOT, SOWETO
LEVEL 4 BBBEE SCORE OF
72.82%
CORPORATE ACCOUNTABILITY
12,024 RURAL WOMEN

NEW MAKRO STORES NOW
MICRO LOANS TO
1,244
SUPPLIERS HAVE PARTICIPATED IN OUR SURVEYS SINCE 2009
25%
CONTENTS
R R R R R ENGAGING WITH STAKEHOLDERS DEFINING SUSTAINABILITY PRIORITIES MASSMART'S PROGRESS UPDATE PERFORMANCE INDICATORS FURTHER READING
MORE ENERGY EFFICIENT

118 120 122 134 140
3,000
KILOLITRES OF RAINWATER WERE HARVESTED
117
Massmarts Corporate Accountability proposition is to achieve commercial success by adopting a mass distribution business model that proactively incorporates the input of our stakeholders to eectively integrate commerciality and accountability.
This report sets out to demonstrate how we give practical effect to this proposition, from our rst engagement with stakeholders through to the implementation of accountability initiatives that respond to opportunities to: champion social equality initiatives; enable sustainable supply and consumerism; and minimise our Group environmental footprint. Together with further readings, we are for the rst time providing a self declaration on our report at application Level C, as part of the Global Reporting Initiative G3 Reporting Guidelines. Our accountability initiatives are wide ranging and extend from integrating small holder farmers into our supply chain, rationalising private label product packaging and improving store energy efciency to championing black economic empowerment and increasing employee access to affordable private healthcare benets. If you would like to engage Massmart about any aspect of this report or our wider corporate accountability agenda then please contact info@massmart.co.za Our overall approach is reected in the structure of our report, which comprises the following sections: R Engaging with stakeholders R Dening sustainable priorities R Massmarts progress update R Massmarts accountability by the numbers R Supplementary reading
CA THI
L CO
MMITM
ENT TO ALL STA
KEH
OLD
ER
STAKEHOLDER ENGAGEMENT
CORPORATE ACCOUNTABILITY COMMITMENT

Informed by integrated risk/opportunity assessment
Highest value to cost ratio proposition
OPTIMAL CUSTOMER VALUE
Massmart's approach to corporate accountability is developed in consultation with its stakeholders, the aim of which is to optimise the Groups performance by integrating commerciality and accountability.
Lowest cost route to market
EFFICIENT SUPPLIER CHANNEL
Market leadership and superior total returns
COMMERCIAL SUCCESS
118
Corporate Accountability
ENGAGING WITH STAKEHOLDERS

We continue to place high emphasis on stakeholder engagement, recognising that a well-structured and authentically executed stakeholder engagement process plays a vital role in shaping our Corporate Accountability agenda.
WE CONDUCTED DESKTOP REVIEWS AND INTERACTED WITH INDEPENDENT INTERNAL AND EXTERNAL SUBJECTMATTER EXPERTS
Massmart conducted web-based research to remain updated on public policy issues and those specically relevant to the retail industry. To improve the effectiveness of this exercise, we have employed a Stakeholder Manager who is dedicated to investigating and providing guidance on these issues. We have ongoing engagements with subject-matter experts to assess if we remain current in our focus and are managing their expectations.
WE UNDERTOOK MEDIA RESEARCH TO REVIEW ISSUES TACKLED BY LEADING MEDIA ORGANISATIONS AND WIDER SOCIETY
Massmart utilised an in-house tracking tool to research the leading societal issues on social media platforms such as Facebook and Twitter as well as searching for mentions on other online news sites. We also engaged our media relations company to conduct research on print media. The objective of the media research was to ensure that we are aware of socially relevant issues and that our accountability objectives are aligned, where applicable.
WE ASSESSED THE STATUS OF OUR INITIATIVES WITH THE GROUPS KEY SUPPLIERS THROUGH SURVEYS AND SITE VISITS
Massmart has implemented an advocacy process to encourage responsible supplier conduct in the supply chain. The process included a combination of self-assessment surveys, issuespecic workshops and random data verication site visits. We conducted surveys and workshops in the areas of environmental sustainability, palm oil, marine advocacy and social sustainability.
119
Arising largely from the appointment of a dedicated Stakeholder Research Manager we have signicantly improved our internal stakeholder engagement capability. Specically, we implemented a more dynamic media-based public discourse monitoring process, as well as a more expansive stakeholder surveying capability. In addition, we have, for the rst time, formulated a separate Stakeholder Engagement Report. After conducting a leading media public discourse review, stakeholder workshops and issue-specic stakeholder surveys we have re-validated, in broad terms, the corporate accountability focus communicated in our 2011 Corporate Accountability Report. The following is a summary of the engagement process that we followed and the key stakeholder issues that continue to inuence our corporate accountability priorities. For further information access our Stakeholder Engagement Report at: http://www.massmart.co.za/pdf/2012/massmart_stakeholder_engagement_2012.pdf
4
CONSOLIDATE
VALIDATE
WE CONSOLIDATED IDENTIFIED ISSUES WITH OUR ACCOUNTABILITY THEMES AND ASSOCIATED OBJECTIVES
We assessed our accountability themes and objectives against the frequency and urgency of issues identied in the media and consolidated these to form the basis of our stakeholder engagement workshops.
WE VALIDATED THE RELEVANCE OF THE IDENTIFIED PRIORITIES WITH INTERNAL AND EXTERNAL STAKEHOLDERS
We hosted workshops with internal and external stakeholders to obtain feedback on our accountability themes and objectives formulated in 2011. Participants at our workshops included civil society, suppliers and functional representatives within our own Group. The purpose of the workshops was to assess the validity and relevance of our accountability themes, to improve understanding of stakeholder expectations and to identify new perspectives.
WE REVIEWED AND CONTEXTUALISED OUR ENGAGEMENT PROCESS OUTPUT

Finally, we consolidated feedback from all of the various stakeholder engagements and assessed these against our current themes and objectives to re-dene, if required, our accountability focus going forward.
120
DEFINING SUSTAINABILITY PRIORITIES

Issues identied by desktop study and media review, prioritised by stakeholders and ranked in order of ascending priority.
STAKEHOLDER ENGAGEMENT
ENVIRONMENTAL
Massmart engaged with suppliers and internal and external stakeholders through a series of stakeholder workshops and ad hoc meetings.
SUPPLIER RELATIONSHIP
MARINE ADVOCACY SURVEY
PALM OIL ADVOCACY SURVEY
TOTAL SUPPLIER SURVEYS SINCE 2009
1,244
SURVEYS CONDUCTED WORKSHOP PARTICIPANTS
BUSINESSES
Eskom Tiger Brands Nedbank
PROFESSIONALS
Food & Liquor Forum Manager Human Resources Manager Operations Forum Manager
Internal Audit IT Executive Store Department Manager
ANALYSE, CONTEXTUALISE AND INCORPORATE

output into revised Group accountability commitment
INDIVIDUALLY RE-FORMULATE
relevance of Massmarts declared accountability objectives
DEBATE AND CHALLENGE

relevance of Massmarts declared accountability objectives
ISSUES IDENTIFIED
LOWEST PRIORITY
by desktop study and media review, prioritised by stakeholders.
ENERGY SECURITY
HIV/AIDS
55*
235* 1,882*
WATER SECURITY
WASTE MANAGEMENT
1,895*
2,798*
FOOD SECURITY
121
SUSTAINABLE PALM OIL MARINE ADVOCACY ENVIRONMENTAL SUSTAINABILITY FOCUSSED ENGAGEMENT SOCIAL SUSTAINABILITY
Sime Darby Nestl FR Waring I&J Hamboldt Trading Foodcorp Endangered Wildlife Trust Conservation International World Wildlife Fund
Conservation International Nola Greenpeace World Wildlife Fund Rainforest Alliance Round Table for Sustainable Palm Oil Endangered Wildlife Trust Ocean Fresh Gold Chain Sea Harvest Canon Hewlett Packard Glomail Nola Patleys Econo-Heat Afrisam Osram
Empowerdex Social Innovations South African Institute of Race Relations Black Management Forum
ORGANISATIONS
Siyakhana Initiative South African Institute for Race Relations National Business Initiative Endangered Wildlife Trust
WORKSHOP PROCESS
The workshop process was designed specifically to help identify and prioritise key issues of National concern.
IDENTIFY AND INTEGRATE

new participant-specific accountability priorities
PRIORITISE
issues based on significance to participants
PRESENT AND DEBATE

accountability issues identified by desktop study and media review
CORRUPTION
5,817*
9,726*
11,373*
* number of mentions
PRIORITISED ISSUES
HIGHEST PRIORITY
JOB SECURITY
EDUCATION
122
MASSMART'S PROGRESS UPDATE

In this section we provide feedback about our corporate accountability progress with reference to the three accountability themes that were introduced in our 2011 Corporate Accountability Report.
As communicated in 2011, each theme comprises shared Group and Division-specic accountability initiatives. It is mandatory for the Divisions to implement shared Group initiatives whilst Division-specic initiatives are entirely discretionary, reecting accountability commitments identied by the Divisional management teams.
123
In a further development we have prioritised shared and Division-specic accountability initiatives in line with the following considerations:
1
What is the legislative/regulatory driver for this initiative?
2
What direct commercial benet will ow from this initiative?
3
What resonance does this initiative have with government and civil society-driven public discourse?
4
What relevance does this initiative have for Walmarts global sustainability commitments?
5
What positive leverage does this initiative present for MassmartWalmarts reputation in Africa?
Each initiative, and its associated level of prioritisation, is revisited, based on stakeholder input, on a bi-annual basis. A practical consequence is that levels of prioritisation change, new initiatives may be introduced and existing initiatives are sometimes discontinued. The matrix below indicates the relative prioritisation of our active accountability initiatives, each of which is discussed in further detail in the remainder of this section:
MINIMISE ENVIRONMENTAL FOOTPRINT

R Energy efciency (M)

R R R Broad-based black economic empowerment (M) Socio-economic development (M) Womens economic empowerment (M) Socio-economic impact of the Massmart-Walmart merger
PRIORITY 1
R R R
Direct farm Global ethical sourcing (M) Primary packaging rationalisation
PRIORITY 2
Local supplier advocacy
Secondary packaging recycling (M)
PRIORITY 3
R R R R
Consumer e-waste recycling Post-consumer waste recycling Eco-label advocacy Consumer empowerment
Water efciency
R R
Employee healthcare benets (M) Employee HIV/Aids benets (M)
*(M) Mandatory initiatives
124
MASSMART'S PROGRESS UPDATE CONTINUED
We want to play a positive role in society through the decisions we take in our supply chain.
DIRECT FARM
OBJECTIVE:
To support and integrate emerging farmers into Massmarts fresh produce supply chain
As a part of our focus on food-producer security and job creation, we have initiated a direct farm programme that aims to provide emerging farmers with market access by integrating them into Massmarts fresh produce supply chain. Based on Walmarts direct farm experience in India, the programme provides access to services that include mentoring by larger commercial farmers and training by our NGO partner, Technoserve. A pilot programme comprising 40 small-scale farmers has been set up in Ofcalaco in Limpopo Province. The average holding size of each farm is between ve and 10 hectares, with crops that include tomatoes, onions, butternut, spinach and carrots. Additional communities have been identied in other parts of South Africa.
REFER TO WEB: http://www.massmart.co.za/pdf/2012/massmart_direct_farm_programme.pdf
Initiative name changed from "Sustainable Agriculture" to "Direct Farm".
*GLOBAL ETHICAL SOURCING
OBJECTIVE:
To partner with private label, direct import and non-branded merchandise suppliers to ensure adherence to Walmart Supplier Standards
Walmart strives to positively impact global supply chain practices by raising its own standards and partnering with other retailers, brands, NGOs and government leaders to nd innovative and sustainable ways to improve working conditions and protect the environment. With this in mind, Massmart has committed to implementing Walmarts ethical sourcing programme, starting in 2013. Covering the sourcing of private brand, non-branded and imported merchandise, the objectives of the programme include: improving working conditions for factory workers around the globe; supporting strong social and environmental conditions in factories; and empowering workers through supplier development and womens empowerment initiatives
REFER TO WEB: http://corporate.walmart.com/global-responsibility/ethical-sourcing/standardsfor-suppliers *New initiative.
125
PRIMARY PACKAGING RATIONALISATION

OBJECTIVE:
*To partner with willing suppliers to identify and implement opportunities to rationalise private label product packaging
Inspired and informed by Walmarts well-known packaging rationalisation expertise, Massmart hosted its rst ever product packaging workshop with private label buyers in the Group. The workshop, which included support from Astrapak, Packaging Council of South Africa (PACSA) and South African Plastic Recycling Organisation (SAPRO), provided buyers with a practical framework to identify opportunities to improve resource efciency and improve recyclability of private label product packaging. The workshop was a success and has resulted in the implementation by Builders Warehouse of a private label packaging audit. Our immediate priority is to expose all buyers in the Group to the workshops, after which a private label packaging rationalisation audit will be conducted within each Division. Through this process, and based upon Walmarts experience, we are optimistic that we will optimise packaging resource use and improve the safety and recyclability attributes of our private label packaging.
REFER TO WEB: http://www.massmart.co.za/pdf/2012/massmart_focuses_on_packaging_ rationalisation.pdf *Changed objective to read "rationalise" in place of "reduce".
LOCAL SUPPLIER ADVOCACY

OBJECTIVE:
To share knowledge with willing local suppliers to facilitate voluntary achievement of higher environmental and human rights standards in the retail supply chain
Massmart runs an active supplier advocacy process with the objective of encouraging responsible supplier conduct in our supply chain. The advocacy process incorporates a combination of self-assessment surveys, issue-specic workshops, random data verication site visits and sharing of comparative data. A combined total of 750 suppliers have participated in the process since it was launched in 2009. Our 2012 supplier advocacy agenda covered 117 suppliers and focused on understanding palm oil procurement practices of private label suppliers, shery management practices of seafood suppliers and the integrated environmental planning commitment of strategic suppliers. A sustainable agriculture initiative will be added to our 2013 supplier advocacy agenda.
REFER TO WEB: http://www.massmart.co.za/pdf/2012/massmart_denes_seafood_sourcing_ policy.pdf http://www.massmart.co.za/pdf/2011/proling_supplier_environmental.pdf
750
SUPPLIERS HAVE PARTICIPATED IN OUR SURVEYS SINCE 2009
126
CONSUMER E-WASTE RECYCLING

OBJECTIVE:
To implement postconsumer e-waste recycling schemes in major metropolitan areas
Currently in its fourth year of implementation, Makros e-waste partnership with Fujitsu-Siemens enables consumers to responsibly dispose of e-waste. We currently operate e-waste collection facilities at 10 Makro stores and estimate that 334 tons of e-waste have been collected since inception of the project. Approximately 98% of the associated components and materials have been diverted from landll. The remaining 2% that could not be recovered, reused or recycled was safely disposed to landll. We are grateful to Fujitsu-Siemens, who led the establishment of this programme. Given the success of the scheme, we are now exploring opportunities to involve a more representative spectrum of hi-technology brand owners in the initiative.
REFER TO WEB: http://www.massmart.co.za/pdf/Fujitsu_ewaste.pdf
POST-CONSUMER WASTE RECYCLING

OBJECTIVE:
To implement, in line with customer demand, regionally-based postconsumer waste recycling schemes in our stores
As indicated in our 2011 Corporate Accountability Report, we have been pilot testing post-consumer waste take-back schemes at selected stores, including compact uorescent light (CFL) and battery waste collection points at Builders Warehouse and Builders Express stores. Customer support of these schemes has however been indifferent and it is likely that we will discontinue them in favour of alternatives for which we can demonstrate greater customer demand. One such alternative involves a partnership between Builders Warehouse and Amalgamated Appliance Holdings, who are pilot testing a used small appliance customer take-back and recycling initiative. Whilst we do not operate specic customer-focused paper, board and plastic recycling schemes, we continue to accept and recycle modest volumes of packaging waste that are sometimes returned to our stores by environmentally aware customers.
127
ECO-LABEL ADVOCACY
OBJECTIVE:
To promote adoption by suppliers of independently veried eco-labels or equivalents such as Marine Stewardship Council
We indicated in our June 2011 report that we want to formalise our approach to eco-labelling. After researching and gauging the perspectives of external stakeholders, including suppliers, we have formalised an initial position on eco-labelling. Our position is that, whilst we will not enforce the adoption of eco-labels as a procurement screen, we will proactively facilitate interaction between eco-label owners, our buyers and key suppliers to build awareness of the benets of participation in viable eco-label programmes. To this end we have scheduled eco-label awareness workshops with selected suppliers and eco-label programme owners and have prioritised energy efciency, marine stewardship and forestry stewardship as immediate focus areas. We are disappointed that we have not made more demonstrable progress in the consistent application of energy efciency labelling standards on the major appliances sold in our stores.
CONSUMER EMPOWERMENT
Consumer empowerment is about highlighting the responsible product choices that customers could make in the interests of minimising negative social and environmental impacts. We do this mostly through our Eco-wise environmental awareness programme. In our last report, we said that we intended launching an Eco-wise website and we have achieved this objective. Disappointingly, the number of visitors to the site has been lower than anticipated. An important Eco-wise development has been the introduction of an Ecowise product information panel that has been designed to inform and assist consumers to make better informed product choices that are good for the environment. To date these information panels are being trialled on 12 private label products including lawn dressing and potting soil. We continue to run customer demand-driven environmentally-friendly product promotions, examples of which include the promotion of recycled ofce paper, solar-powered garden lighting, solar-powered desk lamps, and LED security lighting. Massbuild is working in partnership with Ellies to promote energy efcient products through the store within a store concept.
REFER TO WEB: http://www.massmart.co.za/pdf/2011/eco-wise_brand_update.pdf http://www.massmart.co.za/pdf/2011/making_saving_the_planet.pdf
OBJECTIVE:
To empower consumers to make responsible consumer choices more frequently
128
MINIMISE THE GROUP We want to minimise the direct ENVIRONMENTAL environmental impact of our retail FOOTPRINT infrastructure and operations.
Walmart is an energy efciency leader and has been instrumental in revitalising our focus in this area. A historical barrier to energy efciency at Massmart has been the indifferent business case associated with implementing signicant legacy store energy efciency retrots, such as the installation of specialised skylights to reduce reliance on electrical lighting. By assisting to procure skylights at considerably more affordable prices, Walmart has enabled Makro to embark on a legacy store retrot programme that will see electrical lighting being supplemented by natural lighting. A retrot at Makro Woodmead, the rst store to be impacted by the programme, has already been completed. In the same way, Walmart has reinforced the view that energy savings are dependent upon accurate measurement of electricity consumption, and that installation of independent metering should not be optional. It is now mandatory, rather than optional, for all Massmart stores to install independent energy tracking. Builders Warehouse had made most progress and is consolidating independently metered data centrally, enabling the implementation of better informed legacy store energy-saving initiatives. We continue to embed energy efcient solutions in new store design. Makro's ve newest stores, starting with Makro Vaal, are on average 25% more energy efcient than their comparable legacy stores. Similarly, Game's Foodco stores incorporate solutions such as advanced energy efcient refrigeration units to reduce electricity consumption. Walmart has an aspirational goal to be supplied by 100% renewable energy by 2025. We have therefore, with Walmart's encouragement and assistance, revived an investigation to identify opportunities to deploy viable renewable energy options within the Group.
REFER TO WEB: http://www.massmart.co.za/pdf/2011/energy_efciency.pdf
ENERGY EFFICIENCY
OBJECTIVE:
To improve energy efciency in line with formatspecic energy intensity benchmark ranges
NEW MAKRO STORES
25%
MORE ENERGY EFFICIENT
129
SECONDARY PACKAGING RECYCLING

OBJECTIVE:
To recycle secondary packaging (specically board and plastic waste) that is generated in stores and distribution centres
As described in our 2011 Corporate Accountability Report, our objective is, ideally, to achieve a situation of zero paper, board and plastic secondary packaging waste to landll, mainly through the implementation of store-based recycling sites. Last year we reported the existence of approximately 172 stores that were actively recycling waste. This year we can conrm that we have 226 stores, representing 71% of all South African stores. The majority of all store waste recycled is board (83.5%) followed by plastic (9.4%) and paper (7.1%). We estimate that approximately 9,600 tons of plastic, board and paper waste were diverted from landll and recycled during the current reporting period. Following input received from Walmart, we conducted a survey of the waste management practices of all our South African stores. We achieved a 100% response rate to the survey and have identied opportunities to rationalise the number of recycling service providers, increase the number of participating stores and improve the accuracy of waste disposal data.
WATER EFFICIENCY
OBJECTIVE:
To harvest rainwater to supplement nurseries (at Builders Warehouse) and landscaping irrigation requirements
We harvest water at approximately 34 stand-alone store sites. This includes harvesting rainwater at all Builders Warehouse and Builders Express stores and condensate harvesting at our ve new generation Makro stores. The water harvested in this way is used to supplement nursery irrigation needs at Builders Warehouse and store landscaping requirements at our new Makro stores. We estimate that, in the 2011 calendar year, 3,000 kilolitres of rainwater were harvested by Builders Warehouse and Builders Express, representing a 38% decrease on the 2010 calendar year. Condensate harvesting at Makro involves collecting the condensate from store fridges and air-conditioning units, resulting in the use of less water for refrigeration and cooling. Interestingly, this integrated solution also improves refrigeration and cooling energy efciency. Plans are in place to retrot selected Makro stores with condensate harvesting technology. Furthermore, Game and DionWired's three new regional distribution centres are tted with water efcient ttings, such as low volume showers and taps, which has resulted in an estimated 40% reduction in water consumption.
REFER TO WEB: http://www.massmart.co.za/pdf/2012/massmart_water_harvesting_strategies.pdf
3,000
KILOLITRES OF RAINWATER WERE HARVESTED
130
CHAMPION socio-economic development SOCIAL EQUALITY opportunities in our direct sphere INITIATIVES of inuence.
BROAD-BASED BLACK ECONOMIC EMPOWERMENT
OBJECTIVE: Massmart's current Level 4 BBBEE score of 72.82%, led to our being ranked second amongst all listed retailers in the 2012 FM Top Empowerment Companies Survey. Interestingly, the Massdiscounters (Game and DionWired) veried score of 77.41% is higher than the score of the top ranked retailer in the survey. Our Group score declined marginally as the result of the vesting of 3.4 million staff shares held by Thuthukani Employee Empowerment Trust. Although this resulted in a 7.16 point decline in the Ownership element of the Group scorecard, our overall BBBEE score decreased by only three points. The difference was offset, mainly, by improving Preferential Procurement performance from 12.9 to 15 points and improving Skills Development performance from 10.6 to 12.2 points. The launch of a R100 million supplier development fund, which has already beneted black wine brand owners and black smallholder farmers, will provide a qualitative boost to Enterprise Development activities. In addition, Walmart has volunteered to advocate adoption of the BBBEE Codes to the global management teams of multi-national suppliers. We remain committed to improving Employment Equity and pleasingly black managers comprise 78.5% of all managers and professionals employed in the Group.
REFER TO WEB: http://www.massmart.co.za/pdf/2011/reaping_the_benets_of_share_ ownership.pdf
We want to be responsive to
To achieve and maintain Level 4 BBBEE contributor status
LEVEL 4 BBBEE SCORE OF
72.82%
131
SOCIO-ECONOMIC DEVELOPMENT
Massmarts core SED focus is primary school nutrition, early childhood development (ECD) and school maintenance projects. Massmarts schools nutrition initiatives are led by the installation of mobile container kitchens. Initially funded by Game and Masscash, in partnership with the Department of Education, the Walmart Foundation joined the programme and donated a further $1.0 million, under the auspices of the Nelson Mandela Foundation and Basic Education Department's 94+ campaign. Approximately 20.0 million meals are prepared, per annum, in operating container kitchens. Added to this, Builders Warehouses "Vegetables Under Construction" initiative enabled the sustainable cultivation of fresh vegetables at schools and Makro provided assistance to the Centaurus and African Children's feeding schemes. Massmart, Cambridge Food and Game Foodco provided further support by way of food donations to FoodBank SA. Our ECD focus is led by Makro who along with HOPE Worldwide have developed the Makro Growing Hope, Sowing Minds programme aimed at assisting crches, caring for orphaned and vulnerable children, to achieve the minimum standards to qualify for government support. Game donated purpose designed ECD kits to under-resourced pre-schools and crches. Filled with puzzles, books, building blocks, musical instruments these Tools to Play kits aim to help develop young childrens abilities. Builders Warehouse has developed a solution for schools in need of maintenance. Sturdy, prefabricated storage sheds packed with maintenance tools, garden implements and other DIY supplies are donated to deserving schools. 3,500 back-to-school stationery hampers were donated to children of deceased South African Police Services ofcers and 5,000 goodwill food hampers to families who have members deployed in the South African National Defence Force. These projects are possible because of the generous support of key suppliers. All of these initiatives are, wherever possible, designed and implemented in consultation with the relevant government authorities.
REFER TO WEB: http://www.massmart.co.za/pdf/2012/massmart_approach_to_csi_2012.pdf http://www.massmart.co.za/pdf/2012/massmart_champions_primary_school_ feeding.pdf http://www.massmart.co.za/pdf/2012/massmart_container_kitchen_initiative.pdf
OBJECTIVE:
To invest a minimum of 1.0% prot after tax (PAT) in education-focused social development initiatives that benet the poorest of the poor
19.5
MILLION MEALS ARE PREPARED, PER ANNUM
132
*WOMENS ECONOMIC EMPOWERMENT

OBJECTIVE:
To increase economic opportunities for women by improving employment, education and business opportunities
Walmart has a world-wide goal to empower women in employment and in the supply chain. At Massmart, women represent 45% of managers and professionals, the Massmart-WDB Rural Women's Trust has disbursed microloans to 12,024 rural women, the Massmart bursary scheme is targeted exclusively at women undergraduates and one focus of our wholesale stores is to optimise procurement opportunities for women managed (stokvel) collective savings schemes. More recently we have, at Walmart's instigation, started proling women-owned suppliers in order to promote their merchandise to a broader audience of buyers within the Group. As important, is our initiative to better understand the career barriers that confront female employees at Massmart; we achieve this through the deployment of an empowerment survey to 1,409 females across all of our Divisions. We realise that we have a long way to go but hope through these initiatives to make a tangible difference to women in the community, the retail supply chain and our business.
REFER TO WEB: http://www.massmart.co.za/pdf/2012/massmart_works_to_support_women_ entrepreneurs_July_2012.pdf http://www.massmart.co.za/pdf/2012/Empowering_women_is_a_priority_for_ Massmart_June_2012.pdf http://www.massmart.co.za/pdf/rural_women_18102011.pdf
SOCIOECONOMIC IMPACT OF THE MASSMARTWALMART MERGER

OBJECTIVE:
*New initiative.
To commission an academic study of the socio-economic impact of Walmarts entry into South Africa
Toward the end of 2012, Massmart issued a request for a proposal to researchers at the University of Cape Town Graduate School of Business. The objective of the research proposal was to assess the impact of the Massmart-Walmart merger on factors such as consumer pricing, job creation, emerging farmer development and local manufacturing. The implementation of the proposed research project was however superseded by the Competition Appeal Court (CAC), who directed the merging rm to commission and fund a study by an expert panel nominated by organised labour, various government departments and Massmart-Walmart. The expert study, which was intended to recommend to the Court a framework for the operation of the MassmartWalmart Supplier Development programme, was completed and submitted to the court in May 2012. At the time of writing the court has still to hand down its decision in relation to the ndings of the expert panel.
133
EMPLOYEE HEALTHCARE BENEFITS

OBJECTIVE:
To increase permanent employees access to affordable subsidised private medical benets
We estimate that 48.4% of permanent employees have access to private medical benets, representing an improvement of 6% over last year, but still short of the target of 60% that we set in 2008. To achieve this target we have, since 2008, implemented a choice of four additional affordable private health benet packages. Unfortunately employee uptake, which is voluntary for staff who were employed before 2008, has been modest. In an attempt to improve accessibility to private medical benets we have introduced an annual window period where employees with pre-existing conditions can qualify for benets cover without being penalised. In addition, we continue voluntary employee health risk assessment screening aimed at early detection of priority ailments such as diabetes, raised cholesterol, obesity and high blood pressure. Since July 2010 more than 17,000 tests have been conducted, resulting in health counselling for staff who were found to be at risk. More recently (August 2012) we used the opportunity presented by the appointment of a new health services provider to enhance this screening intervention by implementing improved chronic disease and employee assistance programmes.
REFER TO WEB: http://www.massmart.co.za/pdf/2010/massmart_Health_and_Wellness_ Report.pdf
EMPLOYEE HIV/AIDS BENEFITS

OBJECTIVE:
To combat the rate of infection amongst employees and to provide all employees and their spouses with free access to pre-HAART and HAART programmes
Based on testing conducted in the last year, the estimated HIV-prevalence amongst employees is, at 6.63%, considerably lower than the national average of 11.0%. 43,723 voluntary HIV tests have been conducted since inception of the programme. Whilst we aspire to achieve a 70% HIV-testing penetration rate, our service providers' data appears to be unreliable, creating uncertainty about our current testing penetration. As a result, a new service provider has been appointed to remedy this situation. Altogether 88% of HIV-positive staff and their spouses are receiving support and treatment, including antiretrovirals and nutritional supplements, from the Massmart Impilo Employee Wellness programme. The remaining 12% of HIV-positive employees cite factors such as fear of disclosure and a preference to consult traditional healers as reasons for not enrolling on the Impilo programme. We have been struggling, for some time, to reliably extend our HIV programme into other African countries, largely because of our own inability to source local service providers. However, this year we made modest, but still insufcient progress, by expanding coverage to Lesotho.
REFER TO WEB: http://www.massmart.co.za/pdf/2011/impilo2011_ed.pdf
134
HUMAN CAPITAL PERFORMANCE INDICATORS

FLEXI-TIMERS (%)
33.9
2012
32.1
2011
33.0
2010
33.0
2009
13.8
COMPARATIVE
UNIONISED STAFF (%)
36.2
2012
37.3
2011
38.0
2010
35.0
2009
36.5
COMPARATIVE
Massmart views % unionised staff as an indicator of commitment to freedom of association.
BLACK MANAGEMENT AS A % OF ALL MANAGEMENT AND PROFESSIONALS
78.5
2012
77.7
2011
77.0
2010
77.0
2009
71.0
COMPARATIVE
Highest levels of representation are at middle management and junior management level.
ESTIMATED % EMPLOYEES WITH MEDICAL BENEFITS
48.4
2012
41.9
2011
41.0
2010
38.0
2009
16.4
COMPARATIVE
ESTIMATED STAFF TURNOVER (%)
10.0
2012
10.2
2011
9.4
2010
9.3
2009
14.9
COMPARATIVE
AVERAGE MINIMUM WAGE (R)
2,953
2012
2,589
2011
2,555
2010
2,139
2009
2,299
COMPARATIVE
Notes Comparative data represents the best available performance disclosed by South African retailers, except for: R Flexi-timers sourced from Quarterly Labour Force Survey, Quarter 2 2012 R Employees with medical benets sourced from 2010/2011 South Africa Survey R Average minimum wage sourced from Sectoral Determination for Wholesale and Retail Sectors R HIV prevalence which represents published national prevalence rate
ESTIMATED PER CAPITA TRAINING INVESTMENT PERMANENT (R)
3,012
2012
1,879
2011
1,574
2010
1,261
2009
2,848
COMPARATIVE
Integration and alignment with Walmart practice has impacted positively on training activity.
HIV PREVALENCE (%)
6.6
2012
5.6
2011
5.5
2010
6.4
2009
11.0
COMPARATIVE
Prevalence has increased but remains well below the national prevalence rate. We are still investigating the reason for the increase.
MEASUREMENTS AND ASSUMPTIONS Human capital data is based on Group and Divisional payroll data. HIV prevalence is based on Right to Care VCT testing gures. Due to the large number and geographical positioning of stores, testing is not conducted at all stores every year. HIV prevalence is based on staff tested in a particular year. Data is internally audited prior to publication.
Additional Human Capital Scorecard information can be found under GRI III Questions and Answers at www.massmart.co.za
135
BBBEE PERFORMANCE INDICATORS

OWNERSHIP (%)
7.6
2012
14.8
2011
6.6
2010
5.9
2009
18.6
COMPARATIVE
MANAGEMENT CONTROL (%)
5.2
2012
5.2
2011
5.6
2010
6.0
2009
9.4
COMPARATIVE
As a result of the vesting of 3.4 million staff shares due to the Walmart-Massmart transaction, our ownership score has decreased by 7.16%. This score is based upon the continuing benets calculation as per the BBBEE Codes of Good Practice.
EMPLOYMENT EQUITY (%)
12.6
2012
12.3
2011
11.5
2010
9.2
2009
12.3
COMPARATIVE
SKILLS DEVELOPMENT (%)
12.2
2012
10.6
2011
10.4
2010
6.7
2009
12.2
COMPARATIVE
Massmart's score is currently the highest of all listed retailers.
PREFERENTIAL PROCUREMENT (%)
15.0
2012
12.9
2011
12.2
2010
8.0
2009
18.5
COMPARATIVE
Improvement in this score reects greater emphasis on gathering of BBBEE scorecards by Massmart merchants.
ENTERPRISE DEVELOPMENT (%)
15.0
2012
15.0
2011
15.0
2010
15.0
2009
15.0
COMPARATIVE
SOCIO-ECONOMIC DEVELOPMENT (%)
5.0
2012
BBBEE SCORE (%)
5.0
2011
5.0
2010
5.0
2009
5.0
COMPARATIVE
Notes R Comparative data represents the best performance in the Retail Sector as published in the FM Top Empowerment Companies Survey 2012 R (%) Indicates percentage score achieved on the BBBEE scorecard
72.8
2012
75.9
2011
66.1
2010
55.7
2009
77.0
COMPARATIVE
A lower ownership score has reduced the Group's overall BBBEE score. Massmart was rated the second most empowered listed retailer in the FM Top Empowerment Companies Survey 2012.
MEASUREMENTS AND ASSUMPTIONS Massmart's BBBEE gures are calculated externally by Empowerdex Economic Empowerment Rating Agency. These gures are based on actual staff numbers (not estimates) and are believed to be 100% accurate at the time at which they were published. BBBEE scores are calculated retrospectively, therefore the data reported is based on the scorecard compiled in February 2012 for the period ended November 2011.
Additional BBBEE Scorecard information can be found under GRI III Questions and Answers at www.massmart.co.za
136
CSI PERFORMANCE INDICATORS

TOTAL MASSMART GROUP AND WALMART FOUNDATION CSI SPEND AS % OF PROFIT AFTER TAX (PAT)
3.1
2012
2.0
2011
1.6
2010
1.8
2009
TOTAL MASSMART GROUP AND WALMART FOUNDATION CONTRIBUTION (Rm)
The Walmart Foundation supplemented the Massmart Group investment with a contribution of R8.3 million.
37.4
2012
2011
2010
2009
Supplier and staff contributions, amounting to approximately R9.2 million, include initiatives such as the SANDF food hamper and the SAPS stationery hamper projects. Contribution to feeding schemes has increased as a result of food donations from our Foodco stores.
TOTAL MASSMART GROUP , WALMART FOUNDATION AND SUPPLIER AND STAFF CONTRIBUTION (Rm)
46.4
2012
24.4
2011
20.6
2010
23.5
2009
TOTAL INVESTMENT IN NUTRITION PROGRAMMES (Rm)
26.2
2012
7.8
2011
4.3
2010
5.9
2009
TOTAL INVESTMENT IN INFRASTRUCTURE AND SCHOOL MAINTENANCE (Rm)
0.5
2012
2011
2010
2009
TOTAL INVESTMENT IN EARLY CHILDHOOD DEVELOPMENT (Rm)
1.2
2012
2011
2010
2009
Discretionary spend has reduced as the Group's Divisions place increased focus on agship initiatives. This does however, remain a slow process due to commitment to longterm projects.
TOTAL INVESTMENT IN DIVISIONAL DISCRETIONARY PROJECTS (Rm)
9.5
2012
10.6
2011
10.2
2010
9.3
2009
MEASUREMENTS AND ASSUMPTIONS CSI data is based on actual Group expenditure gures which have been internally audited. CSI gures are believed to be 100% accurate at time of publication.
Notes R Government beneciaries include the Department of Basic Education, the Ministry of Women, Children and Persons with Disabilities, the South African National Defence Force and the South African Police Service. Support is provided through the provision of container kitchens, food hampers, stationery hampers and assistance with service delivery. R Investment in feeding schemes includes spend on container kitchens, vegetable gardens, NGO and government feeding schemes and Foodbank contributions. R Investment in early childhood development includes Game's Tools to Play early childhood development kits and Tools to Teach stationery hampers. R Investment in infrastructure and school maintenance is based on a Builder's Warehouse project that provides schools with equipment and supplies for basic building repair and maintenance. R Investment in discretionary projects includes donations to Community Chest, Vodacom Wheelchair Fund and others. R Where no prior years' data is provided, this indicates a new indicator on the scorecard. Additional CSI Scorecard information can be found under GRI III Questions and Answers at www.massmart.co.za
137
AFRICA OPERATIONS PERFORMANCE INDICATORS

LOCAL EMPLOYEES AS A % OF TOTAL (AFRICA) HEAD COUNT
98.2
2012
97.7
2011
97.7
2010
98.0
2009
LOCAL MANAGEMENT AS A % OF TOTAL MANAGEMENT
89.3
2012
86.7
2011
87.0
2010
86.0
2009
LOCAL EXECUTIVE STORE MANAGERS AS A % OF TOTAL EXECUTIVE STORE MANAGERS
35.7
2012
27.0
2011 UNKNOWN 2011
27.0
2010 UNKNOWN 2010
50.0
2009
Notes R We have, for the foreseeable future, discontinued energy intensity reporting due to accuracy concerns. We will re-introduce this indicator once we have improved accuracy R While HIV-testing has been conducted in Lesotho, there has been insufcient testing at our African stores to provide a reliable prevalence percentage. We continue to focus on this, and hope to expand testing further in the future
PRODUCTIVITY LOST TO MALARIA AS A % OF TOTAL WORK DAYS
UNKNOWN
2012
1.0
2009
LOCAL PROCUREMENT AS A % OF TOTAL PROCUREMENT
22.0
2012
21.0
2011
18.4
2010
19.0
2009
Whilst we are experiencing difculty tracking this indicator, we have succeeded, in partnership with Kingsley Holgate, in distributing 13,500 insecticide-treated mosquito nets over the last four years.
CORPORATE SOCIAL INVESTMENT (Rm)
Local procurement has improved but we have not yet reached the 25% target. Specic initiatives include the provision of mosquito nets and food donations to the communities in which we operate.
0.7
2012
0.4
2011
0.7
2010
0.2
2009
CUSTOMER SATISFACTION INDEX (%)
82.0
2012
83.0
2011
82.0
2010
82.0
2009
This score is based entirely on Massdiscounters' customer satisfaction survey.
PENALTIES FOR LEGAL NON-COMPLIANCE (NUMBER OF INCIDENTS)
20.0
2012
9.0
2011
5.0
2010
1.0
2009
Penalties incurred for the reporting period amounted to R128,414 and relate to issues such as the late submission of training levies and tax returns as well as incorrect product descriptions on invoices. This is signicantly higher than previous years and can be attributed to an increased number of stores in Africa
MEASUREMENTS AND ASSUMPTIONS African Operations information includes data for the Group's Massdiscounters, Massbuild and Masscash Divisions, with the exception of electricity consumption and local procurement, for which Massbuild and Masscash data, respectively, was unavailable. Data is internally audited prior to publication.
Additional Africa Operations Scorecard information can be found under GRI III Questions and Answers at www.massmart.co.za
138
CLIMATE CHANGE AND ENVIRONMENTAL PERFORMANCE INDICATORS

ESTIMATED WATER CONSUMPTION (KL/M2)
2.6
2012
2.6
2011
1.6
2010
1.8
2009
1.4
COMPARATIVE
Water usage has remained constant and has been derived with reference to the cost of water consumed. Increased energy consumption can be attributed to an increase in Massdiscounters' energy intensity as a result of the installation of additional refrigeration units. Scope 1 emissions have remained fairly constant for the reporting period. The slight decline is as a result of an increase in sales turnover.
ESTIMATED ANNUALISED PURCHASED ENERGY CONSUMPTION INTENSITY (KWH/(GLA)M2)
184
2012
178
2011
181
2010
184
2009
218
COMPARATIVE
ESTIMATED GROUP SCOPE 1 EMISSIONS INTENSITY (TONNES/Rm)
0.4
2012
0.5
2011
0.4
2010
2009
2
1.4
COMPARATIVE
ESTIMATED GROUP SCOPE 1 EMISSIONS INTENSITY (TONNES CO2E/(GLA)M )
0.02
2012
0.02
2011
0.01
2010
2009
0.10
COMPARATIVE
ESTIMATED GROUP SCOPE 2 EMISSIONS INTENSITY (TONNES/Rm)
5.0
2012
5.3
2011
5.6
2010
5.8
2009
2
10.4
COMPARATIVE
ESTIMATED GROUP SCOPE 2 EMISSIONS INTENSITY (TONNES CO2E/(GLA)M )
0.18
2012
0.18
2011
0.19
2010
0.19
2009
0.2
COMPARATIVE
Scope 2 emissions have remained constant due to relatively consistent operational energy consumption and an adjusted emissions factor for electricity.
MEASUREMENTS AND ASSUMPTIONS Scope 1 and 2 emissions gures are calculated externally by Global Carbon Exchange consultants. Scope 1 emissions relate to direct emissions resulting from Company-owned vehicle, generator use and refrigerant gas emissions. Massmart trend data is not available for Scope 1 2008/2009 emissions since this information has historically been reported by calendar year rather than nancial year. Scope 2 gures are based on Divisional electricity consumption gures. Energy consumption data is annualised and normalised (outlying data is excluded). Consequently, the margin for error on reported data is considered to be between 10% 15%. Electricity consumption and Scope 2 emissions gures include African operations. Scope 2 emissions factor has been updated from 1.03 to 0.99. The total Group sales are used to calculate Scope 1 and 2 emissions intensity per Rand million (Rm). Water usage has been derived with reference to the cost of water consumed. Water consumption is based on Rand Water Tariff for retail customers.
Additional Climate Change and Environmental Performance Scorecard information can be found under GRI III Questions and Answers at www.massmart.co.za
139
CONSUMER PROTECTION ACT PERFORMANCE INDICATORS

NUMBER OF CUSTOMER COMPLAINTS INVOLVING PRODUCT QUALITY (NOT SAFETY RELATED) OR WARRANTY CLAIMS NUMBER OF CUSTOMER COMPLAINTS INVOLVING PROMOTIONAL CLAIMS, INSUFFICIENT STOCKS OR MARKETING ERRORS
5,499
2012
This represents an estimated 0.00035% of all sales transactions.
We have introduced regulatory inspection tracking mechanisms in all stores to reduce quality-related claims.
3,318
2012
This represents an estimated 0.00021% of all sales transactions.
NUMBER OF CUSTOMER COMPLAINTS INVOLVING PRODUCT LIABILITY CLAIMS AND PRODUCT SAFETY CLAIMS
138
2012
With the introduction of a product recall system and new labelling initiatives, we are focused on reducing customer complaints, specically regarding liability and safety.
NUMBER OF COMPLAINTS AT NATIONAL CONSUMER COMMISSION / TRIBUNAL
29
2012
All complaints have been attended to and resolved with customers however, we have experienced difculty with closing cases at the NCC.
NUMBER OF PRODUCT RECALLS IN FOOD AND LIQUOR
21
2012
We are pleased to have introduced an automatic recall system, that assists in speed to market and reporting to suppliers.
NUMBER OF PRODUCT RECALLS IN GENERAL MERCHANDISE AND HOME IMPROVEMENT
45
2012
The majority of product recalls were on electrical goods.
NUMBER OF RANDOM PRODUCT TESTS CONDUCTED ON PRIVATE LABEL PRODUCTS
2,426
2012
Product tests were conducted on 1,152 products indicating multiple tests on the same product, ensuring safety and quality of private label products. Notes R Customer complaints refer to those logged through the central complaints system and exclude those at stores which are resolved immediately at the store R All recalls conducted were preventative and voluntary, with no legal liability imposed by government departments or claimed by customers
MEASUREMENTS AND ASSUMPTIONS Consumer Protection Act data is based on actual Group and Divisional gures which have been internally audited. Consumer Protection Act gures are believed to be 100% accurate at time of publication.
Additional Product Safety Scorecard information can be found under GRI III Questions and Answers at www.massmart.co.za
140
FURTHER READING
Massmarts Corporate Accountability Report provides highlights of the Groups accountability progress. We refer you to the Massmart website for detailed information on our focus and achievements.
2012 GRI III Questions and Answers: A series of Questions and Answers derived from the Global Reporting Initiative III that describes Massmarts performance with reference to this standard. WEB http://www.massmart.co.za/sustainability/GRI/strategy.asp
Accountability Theme 1: Enable Sustainable Supply and Consumerism Direct Farm: Massmarts Direct Farm Programme Ezemvelo
Sustainable agriculture is a key strategic initiative to drive affordability, quality and safety of food for our customers, enable security of supply and reduce adverse environmental impacts. This Group Update describes Massmarts pilot Direct Farm Programme Ezemvelo launched in the Limpopo Province and how smallholder farmers are being trained and assisted in getting their produce direct to market. WEB http://www.massmart.co.za/pdf/2012/massmart_direct_farm_programme.pdf
Global Ethical Sourcing

Walmarts Standards for Suppliers are fundamental expectations of its suppliers, related to social and environmental conditions in all its markets. The Standards are utilised to evaluate employment practices and environmental compliance in facilities producing merchandise for sale by Walmart and any of its stores, world-wide. To nd out more on this refer to the web link. WEB http://corporate.walmart.com/global-responsibility/ethical-sourcing/standards-for-suppliers
Primary Packaging Rationalisation: Packaging rationalisation a key focus for Massmart

Three-quarters of nished products require some form of packaging, which makes packaging rationalisation an important consideration when it comes to enabling sustainable consumerism. This Group Update details Massmarts efforts to reduce the cost and improve the sustainability, recyclability and safety of its private label product packaging. WEB http://www.massmart.co.za/pdf/2012/massmart_focuses_on_packaging_rationalisation.pdf
Local Supplier Advocacy: Massmart develops advocacy programme for its seafood suppliers
Eighty-ve percent of the worlds sh stocks are either overexploited or being exploited to their full capacity. To help promote greater accountability and environmental sensitivity in the seafood supply chain, Massmart has developed a structured supplier advocacy process and seafood sourcing policy. This Group Update will provide information around Massmarts approach to promoting more responsible and sustainable practices in its seafood supply chain. WEB http://www.massmart.co.za/pdf/2012/massmart_denes_seafood_sourcing_policy.pdf
Local Supplier Advocacy: Proling supplier environmental awareness

Massmart recognises the effect its operations have on the environment and understands that the biggest impact that the Group can have is through supplier advocacy. In an effort to advocate environmental responsibility, the Company conducts regular surveys regarding the environmental practices of its suppliers. Refer to this Group Update for the recorded results. WEB http://www.massmart.co.za/pdf/2011/proling_supplier_environmental.pdf
Consumer Empowerment: Eco-wise brand update

Massmarts Eco-wise brand was launched in 2008 to promote consumer awareness about more environmentally friendly merchandise options. This Group Update summarises the progress that has been made in this regard. WEB http://www.massmart.co.za/pdf/2011/eco-wise_brand_update.pdf
Consumer Empowerment: Making saving the planet and saving money easier
Massmart encourages its chains to promote environmentally responsible products in line with consumers growing expectations. This is a summary of some recent product promotions aligned to this objective. WEB http://www.massmart.co.za/pdf/2011/making_saving_the_planet.pdf
Accountability Theme 2: Minimise the Group Environmental Footprint Energy Efciency: Massmart measures its 2011 energy efciency
A Group Update that offers a detailed account of the pitfalls, challenges and achievements involved in measuring energy efciency. Data integrity remains a challenge. WEB http://www.massmart.co.za/pdf/2011/energy_efciency.pdf
Water Efciency: Massmarts water-harvesting strategies

South Africa is among the 30 driest nations in the world. With a growing population of citizens and burgeoning demand for food and living facilities, water has become a precious resource. This Group Update outlines Massmarts efforts to sustainably reduce the use of water at its facilities. WEB http://www.massmart.co.za/pdf/2012/massmart_water_harvesting_strategies.pdf
141
Accountability Theme 3: Champion Social Equality Initiatives Broad-based Black Economic Empowerment: Reaping the benets of share ownership Thuthukani pays out
The Thuthukani Staff Empowerment Trust was launched in 2006, when permanent staff members were issued equity at R49.98. This Group Update quanties benets paid to Thuthukani staff culminating in the purchase of 51% of Massmart equity at R148, when Walmart partnered with Massmart. WEB http://www.massmart.co.za/pdf/2011/reaping_the_benets_of_share_ownership.pdf
Socio-economic Development: Massmarts approach to Corporate Social Investment in 2012

Traditionally 85% of Massmarts CSI work has been done in the areas of nutrition and education. In both cases, efforts have been aimed at beneting learners at primary schools in South Africas poorest communities. When it comes to feeding programmes, initiatives were and continue to be focused on installing container kitchens, at public schools on the Department of Basic Educations School Nutrition Programme. WEB http://www.massmart.co.za/pdf/2012/massmart_approach_to_csi_2012.pdf
Socio-economic Development: Massmart champions primary school feeding

Massmarts corporate social investment goal is to offer the greatest possible positive impact in areas that matter most. At the root of some of South Africas biggest problems are causes that can be addressed through focused initiatives. One such area is poor nutrition in primary schools and the negative impact it has on learner development. This Group Update highlights all of Massmarts feeding initiatives since 2008. The ultimate aim is to put tools in the hands of people who can help improve food security in South African communities. WEB http://www.massmart.co.za/pdf/2012/massmart_champions_primary_school_feeding.pdf
Socio-economic Development: Massmarts container kitchen initiative

Education is a powerful tool, an essential factor for changing the future of poorer communities in South Africa. But before a child can learn, before they can make the best of the educational opportunities afforded them they need to eat. This Group Update describes Massmarts Container Kitchen corporate social initiative, making a measurable difference for school children in South Africa. WEB http://www.massmart.co.za/pdf/2012/massmart_container_kitchen_initiative.pdf
Womens Economic Empowerment: Massmart works to support women entrepreneurs

Massmart looks for ways to support income-producing ventures for women. This Group Update focuses on the various ways Massmart aims to empower women including bringing greater numbers of women into its retail and wholesale supply chain, nancing rural women entrepreneurs and helping women who run (stokvel) collective savings schemes save on bulk purchases. Whether in local communities or in its stores, Massmarts goal remains the same: to expand the access that women have to entrepreneurial opportunities that can improve their lives. WEB http://www.massmart.co.za/pdf/2012/massmart_works_to_support_women_entrepreneurs_July_2012.pdf
Womens Economic Empowerment: Empowering women in the workplace is a priority for Massmart
This Group Update reports on several interviews with women working for Massmart or participating in Massmarts career building schemes. The Group offers bursaries to young women interested in obtaining retail-related degrees, it helps launch the careers of recent university graduates and it promotes women through the retail ranks, continuously aiming to empower women in the workplace. WEB http://www.massmart.co.za/pdf/2012/Empowering_women_is_a_priority_for_Massmart_June_2012.pdf
Womens Economic Empowerment: Massmart is focused on developing rural women in South Africa
Massmart focuses on creating income-producing opportunities for rural women, historically amongst the most marginalised in South African society. This Group Update provides detail on the establishment of the Massmart Womens Development Business (WDB) Rural Womens Development Fund and the continued support. WEB http://www.massmart.co.za/pdf/rural_women_18102011.pdf
Employee Healthcare Benets: Massmart encourages early detection of priority illnesses

Massmarts commitment to sustainability in our markets starts with sustainable health and productivity of all employees in the most comprehensive scope of remediation possible. It makes good business sense and is a real, human contribution to South Africas future. This Group Update emphasises Massmarts steps in improving the lives of its employees. WEB http://www.massmart.co.za/pdf/2010/massmart_Health_and_Wellness_Report.pdf
Employee HIV/AIDS Benets: Massmart winning the ght against HIV/Aids

With an estimated 11% or 5.7 million South Africans tested as HIV-positive, the impact of the disease is being felt in all aspects of South African life. Since 2001 Massmart has been proactively involved in the testing, counselling and education of its permanent employees. Massmarts programme is called Impilo and it has made steady progress in helping HIV-positive individuals. WEB http://www.massmart.co.za/pdf/2011/impilo2011_ed.pdf
BUILDERS EXPRESS, BRYANSTON
CORPORATE GOVERNANCE
BUILDERS EXPRESS, BRYANSTON
CONTENTS
R R R R R R R R R R EXCEPTIONS TO KING III BOARD AND COMMITTEE ATTENDANCE BOARD COMMITTEES THE BOARD AUDIT AND RISK COMMITTEE NOMINATION AND REMUNERATION COMMITTEE SOCIAL AND ETHICS COMMITTEE EXECUTIVE COMMITTEE COMPLIANCE, TRANSPARENCY AND ACCOUNTABILITY INVESTOR RELATIONS 145 146 147 148 151 164 172 173 174 178
145
Massmart believes that the rst steps towards good corporate governance must include embracing the requirements of the relevant governance and regulatory frameworks, as well as corporate best practice.
More than this, Massmart believes that sustainable and effective corporate governance is best demonstrated through a consistent pattern of doing the right thing regardless of the circumstances. The primary South African corporate governance framework is King III on Corporate Governance (King III), which forms the backbone to Massmarts own corporate governance framework; in addition Massmart applies high ethical standards which are considered essential for any governance framework in which to operate. In addition to this corporate governance framework, the Group is committed to complying with all legislation, regulations and best practices relevant to our business, in every country where we conduct business. For the 2012 nancial year, apart from the exceptions outlined below, the Board conrms that the Group complied with the Code of Corporate Practices and Conduct as set out in King III.
Exceptions to King III

R King III states that the chairman of the board should be an independent non-executive director. Mr Mark Lamberti
R R
was appointed non-executive Chairman in July 2007 and, as he was previously the Chief Executive Ofcer (CEO) of Massmart, he could not be considered independent until June 2010. The Board is therefore satised that Mr Mark Lamberti should now be considered an independent director. Recognising however that some may differ with this view, Mr Chris Seabrooke, the non-executive Deputy Chairman, maintains his role as the Groups Lead Independent Director. In addition, to ensure good governance, and as recommended by King III, the chairmanship of each of the three Board Committees is held by independent directors. Following the Walmart transaction, the reconstituted Board does not have a majority of independent non-executive directors as required by King III. In mitigation, the majority of the non-executive directors are independent, as are the Chairman and Deputy Chairman. King III requires that the salaries of the three most highly-paid employees who are not executive directors should be disclosed. Due to their specialised retail skills, the highly competitive South African retail environment and the employees value to Massmart, the Board does not wish to disclose this information for each of the individuals but has instead disclosed the total salaries of the three employees concerned on page 171. The Board does not believe that directors should earn attendance fees in addition to a base fee. Many directors add signicant value to the Group outside of the formal Board and Committee meetings, sometimes greater value than they might do within the connes of a formal meeting. The Board does not ask the shareholders for non-binding approval for the Groups remuneration policies. The rationale and basis for the Groups executive remuneration policy is carefully considered by the Nomination and Remuneration Committee and is documented in the Integrated Annual Reports. Shareholders with concerns at this policy should contact the Chairmen of either the Board or the Nomination and Remuneration Committee. The head of the Groups Internal Audit function, the Chief Audit Executive (CAE), does not report to the Audit and Risk Committee. Instead, the CAE reports administratively to the CEO but functionally to the Audit and Risk Committee. The Committee believes that the CEO respects and encourages the independence of the CAE and his department, and that the CAE, in turn, is able to maintain his independence despite his administrative reporting-line to the CEO. The Board does not have a formal dispute resolution process as it believes that the existing processes within the Group operate satisfactorily and do not require a more formal and separate mechanism. Contrary to the recommendations in King III, the Board is unable to remove directors without shareholder approval, except where a director retires by rotation or retires as required by the Memorandum of Incorporation. The Board believes that all directors, but particularly non-executive directors, represent the Companys shareholders and so it should be the shareholder body that nally approves a directors appointment or dismissal from the Board. King III recommends that the Companys sustainability report be audited by an independent external professional. Massmarts sustainability report has not been audited but verication of the key sustainability metrics on pages 134 139 have been obtained through agreed upon procedures performed by Massmart Internal Audit Services. A copy of the agreed upon procedures report is available at the registered ofce of the Company.
146
Corporate Governance
BOARD AND COMMITTEE ATTENDANCE

STATUS/POSITION BOARD MEMBERS MJ Lamberti CS Seabrooke JA Davis NN Gwagwa GRC Hayward P Langeni CD McMillon1 D Cheesewright2 GM Pattison JP Suarez I Zwarenstein3 MANAGEMENT N Gray B Leroni P Maphoshe M Mthunzi M Spivey K Vyvyan-Day EXTERNAL Prof D de Jong Independent member
C
BOARD
AGM
AUDIT AND RISK
NOMINATION AND REMUNERATION
SOCIAL AND ETHICS
Independent Non-executive Independent Non-executive Non-executive Independent Non-executive Executive Independent Non-executive Non-executive Alternate to CD McMillon Executive Non-executive Executive
3/4C 4/4 4/4 4/4 4/4 4/4 3/4 4/4 4/4 4/4*
1/1c 1/1 1/1 1/1 1/1 1/1 1/1
4/4
C
2/3C 3/3 3/3* 2/3 3/3* 3/3*
2/2C 1/2* 2/2 2/2
3/4* 4/4 4/4* 4/4 1/4* 3/4* 4/4*
Chief Audit Executive Corporate Affairs Executive Human Capital Executive Supplier Development Executive General Council and Chief Compliance Ofcer Divisional Chief Executive Cambridge Food
1/1* 1/1* 1/1*
3/4* 1/4* 3/4*
1/3*
2/2* 2/2* 2/2*
2/2*
Chairperson of the committee * Invitee 1 Resigned from the Board on 20 August 2012 2 Appointed to the Board on 20 August 2012 (Appointed as alternate director to CD McMillon on 23 November 2011)
3
Appointed to the Board on 7 May 2012
READ MORE: PAGE 147 CORPORATE GOVERNANCE Greater detail on each Committees terms of reference, activities and meetings held during the financialyear.
147
BOARD COMMITTEES
COMPOSITION SCHEDULED MEETINGS RESPONSIBILITY
AUDIT AND RISK COMMITTEE

READ MORE: PAGE 151
R Chris Seabrooke R Dr Lulu Gwagwa R Phumzile Langeni
4 TIMES
during the year
More information on the activities and responsibility of the Audit and Risk Committee.
R Overseeing the effectiveness of the Groups internal control systems. R Reviewing the scope and effectiveness of the external and internal audit functions. R Ensuring that adequate accounting records have been maintained. R Ensuring the appropriate accounting policies have been adopted and consistently applied. R Reviewing and reporting on compliance with King III. R Testing that the Groups going-concern assertion remains appropriate. R Overseeing the quality and integrity of the annual nancial statements. R Overseeing the Groups risk management programme as contemplated in King III. R Designing, monitoring and communicating the Groups remuneration policies. R Considering and approving executive remuneration including short- and long-term incentives. R The assessment, recruitment and nomination of new non-executive directors.
NOMINATION AND REMUNERATION R Mark Lamberti R Chris Seabrooke COMMITTEE

READ MORE: PAGE 164
3 TIMES
during the year
More information on the activities and responsibility of the Nomination and Remuneration Committee.
R Doug McMillon/ David Cheesewright
SOCIAL AND ETHICS COMMITTEE

READ MORE: PAGE 172
More information on the activities and responsibility of the Social and Ethics Committee.
R Phumzile Langeni R Grant Pattison R JP Suarez
TWICE
during the year
R Assist the Group with its responsibility towards sustainability with respect to practices that are consistent with good corporate citizenship. R Assess the Groups standing in terms of consumer relationships, with particular attention to the United Nations Global Compact Principles and the OECD recommendations concerning corruption. R Consider the Groups contribution to the social and economic development within our communities. R Assess the Groups contribution to labour and employment, the environment and health and public safety. R Deliberates and takes decisions or makes recommendations on all matters affecting Group strategy and operations, including risk management, and executive and senior management succession.
EXECUTIVE COMMITTEE
READ MORE: PAGE 173
MASSMART AT A GLANCE
Biographical details of each Executive Committee member.
R R R R R R R R R R R R R R R R R
Grant Pattison Guy Hayward Ilan Zwarenstein Jay Currie Neville Dunn Don Frieson Doug Jones Brian Leroni Pearl Maphoshe Mncane Mthunzi Joe Owens Jan Potgieter Mike Spivey Llewellyn Steeneveldt Kevin Vyvyan-Day Llewellyn Walters Robin Wright
MONTHLY
148
THE BOARD
The Board of Massmart is responsible for directing the Group towards the THE BOARD COMPRISES: EXECUTIVE DIRECTORS INDEPENDENT NON-EXECUTIVE DIRECTORS NON-EXECUTIVE DIRECTORS achievement of the Massmart vision and mission. The Board is therefore
3 4 3
accountable for the development and execution of the Groups strategy, operating performance and nancial results, as well as being the custodian of the Groups corporate governance. The Board appreciates that strategy, risk, performance and sustainability are inseparable. The Board is responsible for its own composition, the appointment of the Chairman and the CEO, and the constitution and composition of its Committees. The Board has a charter setting out its policies, roles and responsibilities in the execution of its mandate described above. Each Board Committee also has a charter, or terms of reference, that is formally signed off by the Board. Annually in November the Committees and Board review, and amend if necessary, the respective charters to ensure their relevance. The role of all directors is to bring independent judgement and experience to the Boards deliberations and decisions. The Board comprises three executive directors, four independent non-executive directors and three non-executive directors. In line with the Walmart International regional reporting structure that was implemented post the Massmart-Walmart merger, Mr Doug McMillon, who is the Chief Executive Ofcer and President of Walmart International Operations, resigned from the Massmart Board of Directors with effect from 20 August 2012. Doug was appointed to the Massmart Board upon completion of the Massmart-Walmart transaction on 20 June 2011.
READ MORE: PAGES 18 21 MASSMART AT A GLANCE Biographical details of each Board member.
Mr David Cheesewright, who is the Chief Executive Ofcer and President of Walmarts Europe Middle East Africa (EMEA) region into which Massmart reports, has been appointed in Dougs stead with effect from 20 August 2012. David was previously appointed as an alternative director on the Massmart board on 23 November 2011. On 7 May 2012, Mr Guy Hayward was appointed Chief Operating Ofcer (COO), previously Chief Financial Ofcer, and Mr Ilan Zwarenstein was appointed Financial Director (FD), previously Company Secretary and Group Finance Executive. Annually, the Nomination and Remuneration Committee prepares and circulates a questionnaire aimed at gauging the independence status of each non-executive director. This is completed by each non-executive director and returned to the Committee, which then considers each directors independence.
149
The Committee feels that the following aspects are important in assessing a non-executive directors independence:
R whether the director had been employed in an executive capacity in the
Group in the previous three years;

R whether the director had served on the Board for longer than nine years. In
this case, the Committee considers whether that directors independence, judgement and contribution to the Boards deliberation could be compromised, or may appear to be compromised, by this length of service;
R whether the director is a representative of a major shareholder; and R whether the proportion of that directors shareholding in Massmart (if any)
or directors fees represented a material part (10% or more) of their wealth or income. In addition to the above, the Committee considers whether the director is independent in character and judgement and whether there are circumstances which are likely to affect, or could appear to affect, the directors judgement. Having considered the circumstances of each non-executive director, the Committee believes that with effect from June 2011 four of the nonexecutive directors can be considered independent while the three Walmartappointees are not considered independent. Finally, the Committee believes that none of the four independent non-executive directors, or entities associated with or controlled by him/her, owns shares in Massmart which, relative to his/her personal wealth or income, are sufciently material to affect his/her independence. The Board is comfortable that it meets the King III principle of having an arms-length relationship with the Company Secretary and conrms that the Company Secretary is not a director within the Group. The Company Secretary, Mr Philip Sigsworth, CA(SA), was the nancial director of another listed company, Austro Group, prior to joining Massmart, where he also performed company secretarial work. As such, the Board conrms that it has assessed and is happy with the qualication, competence and expertise of the Company Secretary. The Company Secretary assists the Board in fullling its functions and is empowered by the Board to perform his duties. The Company Secretary, directly or indirectly:
R assists the Chairman, CEO, COO and FD with induction of new directors; R assists the Board with director orientation, development and education; R ensures that the Group complies with all legislation applicable/relevant to
"The Board is comfortable that it meets the King III principle of having an arms-length relationship with the Company Secretary and conrms that the Company Secretary is not a director within the Group."
Massmart;
R monitors the legal and regulatory environment and communicates new
legislation and any changes to existing legislation relevant to the Board and the Divisions; and
R provides the Board with a central source of guidance and assistance.
150
THE BOARD CONTINUED

One-third of the directors are required to retire every year, as a result of which all directors retire by rotation at least every three years and are then eligible for re-election. In addition, shareholders must ratify the initial appointment of each director at the rst annual general meeting following that directors appointment. As a result of the requirement that at least one-third of the directors compulsorily retire every year or following their initial appointment to the Board, at the 21 November 2012 annual general meeting the following directors retire by rotation but all offer themselves for re-election: Messrs D Cheesewright, JA Davis, GRC Hayward and I Zwarenstein; and Dr NN Gwagwa.
Board process and evaluation

The Board meets four times a year and on an ad hoc basis should a particular THE BOARD WORKS TO A FORMAL AGENDA WHICH COVERS: issue demand its attention. In addition, the Board meets annually to formally consider and approve the strategies of the Massmart Divisions and Group. The Boards authority is devolved sequentially through the Massmart Executive
STRATEGY
Committee, the Divisional Boards and the Divisional Executive Committees, as formally prescribed by the Massmart Governance Authorities (described below). In addition, the Board has delegated certain specic responsibilities to three Board Committees, also described more fully below. These Committees assist the Board and directors in discharging their duties and responsibilities under King III and the Governance Authorities. Full transparency of the Committees deliberations is
STRUCTURE
encouraged and the minutes of all Committee meetings are included in the formal Board papers at the ensuing Board meeting. All directors are welcome to attend any Board Committee meeting or Divisional Board meeting. The Massmart Governance Authorities describes the specic levels of authority and required approvals for all major decisions at both Group and Divisional
OPERATING PERFORMANCE
level. It claries which executive position, Committee or Board needs to be consulted prior to taking the decision, which body makes the decision and which bodies should thereafter be informed of the decision. Where appropriate, it now includes the Walmart position on the decision. The Board works to a formal agenda that covers strategy, structure, operating
GROWTH INITIATIVES
performance, growth initiatives, sustainability, investor relations, risk and governance, and any other key activities of the Group. An annual agenda structure ensures that other areas including IT and compliance are addressed. Formal Board papers are prepared for every discussion item on the meetings agenda and are distributed timeously to Board members. Directors are encouraged to take independent advice, at the Companys cost, for the proper execution of their duties and responsibilities.
151
During this nancial year no director felt it necessary to seek such advice. They also have direct, unfettered access to the Groups external auditors, professional advisors and to the advice and services of the Company Secretary. Directors have unrestricted access to any executive, manager or employee in the Group. Annually in October, the Nomination and Remuneration Committee facilitates a comprehensive formal performance evaluation of the CEO, comprising a self-evaluation, a questionnaire evaluating the CEO by every nonexecutive director, and an appraisal of the CEO by each of his direct reports using a different questionnaire. The Board Chairman provides the summary and feedback of the above to the CEO, and he is encouraged to probe and debate any aspect of the evaluation with the Board. At the same time, all Board members complete a detailed Board selfassessment, covering the composition, duties, responsibilities, process and effectiveness of the Board. Similarly, all Board Committee members complete detailed self-assessments covering the same aspects of their committees. The results of these assessments are collated by the Company Secretary and sent in summarised form to the respective Board and Committee Chairpersons for a formal written response. The summarised results together with the Chairpersons written responses are included in the Board papers at the November meeting. Finally, all Board members formally assess the Chairmans performance and the Deputy Chairman provides the feedback to the Chairman. These assessments are approached in a constructive manner and provide valuable input that enhances the effectiveness of the Chairman, the Board and its Committees.
SUSTAINABILITY
INVESTOR RELATIONS
RISK
GOVERNANCE
AUDIT AND RISK COMMITTEE

The reconstituted Audit and Risk Committee comprises Mr Chris Seabrooke (Chairman) and Ms Phumzile Langeni and Dr Lulu Gwagwa, all of whom are independent non-executive directors and who each have the requisite nancial and commercial skills and experience to contribute to the Committees deliberations. The roles and responsibilities of the previously separate Risk and Audit Committees were combined with effect from June 2011. Cambridge Food CEO, Mr Kevin Vyvyan-Day, attends the Risk section of this Committee meeting.
OTHER KEY ACTIVITIES OF THE GROUP
READ MORE: PAGE 147 CORPORATE GOVERNANCE More information on the Audit and Risk Committee.
Audit
The CEO, the COO, the FD, senior nancial executives of the Group and representatives from the External and Internal Auditors attend all meetings by invitation.
152
AUDIT AND RISK COMMITTEE CONTINUED

AUDIT AND RISK COMMITTEE RESPONSIBILITIES:
R Overseeing the effectiveness of the Groups governance, risk and internal control systems. R With regard to the External Auditor, to nominate their appointment, to determine audit fees payable, to predetermine fees and scope of non-audit services, and monitor their independence. R Reviewing the scope and effectiveness of the External and Internal Audit functions. R Ensuring that adequate accounting records have been maintained. R Ensuring the appropriate accounting policies have been adopted and consistently applied. R Reviewing and reporting on the application of King III. R Testing that the Groups goingconcern assertion remains appropriate. R Overseeing the quality and integrity of the annual nancial statements. R Ensuring that Internal Audit reports functionally to the Committee, is considered independent, and applies King III and IIA standards. It approves Internal Audits plan and ensures that Internal Audit have sufcient resource and skill to effectively perform their function. R Reviewing the adequacy and effectiveness of combined assurance, compliance and IT. R Receiving and reviewing the assurance assertion of Internal Audit and presenting this to the Board.
The Internal and External Auditors have unfettered access to the Audit and Risk Committee and its members, and both present formal reports to the Committee. The Chairman of the Committee meets quarterly with the CAE, and at the start of every Committee meeting the External Auditors have a private audience with the Committee. In specic response to the requirements of the Companies Act, King III and in terms of its charter, the Committee can report as follows:
R The Committee has reviewed the scope, quality, effectiveness, independence
and objectivity of the External Auditors and is satised with all of these areas. Ernst & Young have been proposed to the shareholders for approval to be the Groups auditor for the nancial year ending 23 December 2012 (a sixmonth nancial year occasioned by a change in year-end from June to December). The change in year-end and the proposed appointment of Ernst & Young are both intended to align the Group better with Walmarts nancial reporting requirements. Ernst & Young, and audit partner Allister Carshagen, are, in the Committees opinion, independent of the Group.
R The Committee is satised that the internal nancial controls of the Divisions
and Group operated effectively throughout the 2012 nancial year and can be relied upon. In addition, the Committee is satised with the Groups accounting policies and that these have been appropriately and consistently applied throughout the 2012 nancial year.
R The Committee reviewed this Integrated Annual Report and recommended it
to the Board for approval.

R The nature and extent of non-audit services provided by the External Auditors
is reviewed annually to ensure that fees for such services do not become so signicant as to call into question their independence of Massmart. The nature and extent of any future non-audit services have been dened and pre-approved, and the total fee associated with those non-audit services may not exceed 50% of the total audit fee without approval of the Committee. During the 2012 nancial year, non-audit services represented 25.9% of the audit fee. If it appears that this guideline will be exceeded on a consistent basis, non-audit services will be outsourced to alternative auditors.
R No reportable irregularities were identied and reported by the External
Auditors to the Committee.

R The Massmart website (www.massmart.co.za) has a link enabling the
general public to lodge complaints with the Committee. Since establishing this functionality in 2009, no complaints have been received. Annually the Committee considers whether it is meeting its duties and responsibilities as set out in the Committee charter and in terms of the requirements of the Companies Act.
153
As part of the Audit section, the Committee receives reports on Group companies nancial performance, governance, and internal controls, adherence to accounting policies, compliance and areas of signicant risk, amongst others. The Committee also receives written reports by both the External and Internal Auditors, which are accompanied by discussion with Committee members. After considering these reports, the Committee formally reports to the Board, twice each year, regarding the overall control framework and effectiveness of controls. Each of the four Divisions has a Financial Review Committee which meets twice a year before the nalisation and release of the Groups Interim and Preliminary nancial results, respectively. These Committees effectively function as Divisional Audit Committees but not strictly in the manner required by the regulators or King III. The attendance at these meetings includes the following invitees: the FD, Divisional Chief Executive and Divisional Finance Director, key nance and accounting staff, members of Internal and External Audit, and Massmart Corporate Finance executives. Minutes from these meetings are included with the papers of the following Committee meeting. Annually the Audit and Risk Committee reviews the Financial Review Committee minutes, External Audit report and annual nancial statements to comply with the Companies Act requirements of a holding company audit committee and its responsibilities in regard to all Company subsidiaries. The Groups interim and provisional reports are always subject to independent review by the External Auditors. The Committees report in accordance with section 94(7)(f) of the Companies Act, can be found in the Directors Report on page 185.
"Each of the four Divisions has a Financial Review Committee which meets twice a year."
Suitability of the nancial director

As required by the JSE, the Committee and Board have considered the skills, qualications and performance of the FD, Ilan Zwarenstein, and are unanimously satised of his continuing suitability for the position. His biographical details can be found on page 18.
External audit
During the nancial year, Deloitte & Touche were the External Auditors for all Group companies, with the exception of Massmart International Limited who are audited by RBC Trust Company (Guernsey) Limited, and the following companies who are audited by Ernst & Young:
R The Rhino Cash and Carry Group; R Fruitspot; R The Zimbabwean entities of Mercantile Investment Company (1971)
READ MORE: PAGE 183 GROUP FINANCIAL STATEMENTS The detailed Audit and Risk Committee report.
(Pvt) Ltd and the Dealsave Trust; and

R Builders Trade Depot (Botswana) (Pty) Ltd.
154

FEES TO EXTERNAL AUDITORS: Rm 20.6 Non-audit services 7.2
Audit services
During the year, Deloitte & Touche provided certain non-audit services, including tax reviews and advice, and reviews of information technology systems and % 74.1 25.9 100.0 applications. Total fees paid during the 2012 nancial year to Deloitte & Touche were R26.8 million, of which R7.2 million related to non-audit services.
Internal audit
The Committee considers Massmart Internal Audit Services (MIAS) to be an independent, objective body providing assurance to the Groups governance, risk and control activities. MIAS comprises a dedicated team that, although managed from Massmart Corporate, is deployed Group-wide. The team comprises appropriately tertiary qualied and experienced personnel, including internal audit and retail/wholesale professionals, to ensure the delivery of a relevant and high-quality risk-based audit service. Pleasingly, 91% of the audit team is African, Coloured or Indian. The responsibilities of MIAS are dened and governed by a charter approved by the Audit and Risk Committee and the Board. MIAS has the unequivocal support of the Board and this Committee and has access to any part of or person in Massmart. All employees are expected to co-operate positively with MIAS. To ensure independence, MIAS reports functionally to the Audit and Risk Committee and administratively to the CEO. Massmart does not apply the King III recommendation that this Committee be responsible for the appointment, remuneration, performance/assessment and where necessary dismissal of the CAE. This process is conducted jointly by the Committee and the Massmart Executive Directors as this is deemed more effective. The Committee approves
27.8
INTERNAL AUDIT:
R MIAS is an objective body providing assurance concerning the Groups governance, risk and control activities. R MIAS has the unequivocal support of the Board and Audit and Risk Committee. R MIAS is considered independent and has been subjected to a quality review. R The MIAS team formally reports any material ndings at the Divisional Boards and the Audit and Risk Committee on a quarterly basis. R There is signicant MIAS involvement in Information Technology (IT) throughout the Group to ensure satisfactory IT governance and assurance.
the annual MIAS plan and the MIAS budgets. The CAE has unrestricted access to anyone in the organisation, has frequent and independent discussions and updates with the Committee Chairman and Massmart Executive Directors. The CAE holds a senior executive position in the organisation and has an inuential impact across the business strategically and operationally. The Board provides MIAS with the authority to attend any strategic session, Committee or Board meeting and to have unrestricted access to all information across the Group to assist with its determination of the types and levels of governance, control and risk that exist across Massmart. The MIAS team formally reports any material ndings and matters of signicance to the Divisional Boards on a quarterly basis and to the Audit and Risk Committee when it meets. The reports highlight whether actual or potential risks to business are being appropriately managed and controlled. Progress in addressing previous unsatisfactory audit ndings is monitored until MIAS reports the proper resolution of the problem area. There is signicant MIAS involvement in IT throughout the Group in order to ensure satisfactory IT governance and assurance. All new major IT systems in the Group require specic MIAS sign-off prior to implementation and all signicant IT projects are subject to MIAS review.
155
The MIAS role is twofold: to assess the process and controls around large IT projects at signicant phases of these projects; and to assess the control environment within existing IT systems and the Groups general computer control environment. MIAS adopted the COBIT methodology for technology auditing several years ago. MIAS and External Audits scope and work-plans, and those of other assurance providers, are properly co-ordinated and when appropriate are relied upon in order to provide efcient and effective assurance to the Committee and to reduce the governance burden. MIAS applies the standards of the International Institute of Internal Auditors and the recommendations of King III and has had a quality review and was found to generally conform (the standard required by the Internal Audit Institute and the highest standard possible).
Risk
The Board recognises its responsibility to report a balanced and accurate assessment of the Groups nancial results and position, its business, operations and prospects. Aspects of how this is achieved are covered in the section below.
Internal control framework

Massmart maintains clear principles and procedures designed to achieve corporate accountability and control across the Group. These are codied in the Massmart Governance Authorities that describes the specic levels of authority and the required approvals necessary for all major decisions at both Group and Divisional level. Through this framework, operational and nancial responsibility is formally and clearly delegated to the Divisional Boards. This is designed to maintain an appropriate control environment within the constraints of Board-approved strategies and budgets, while providing the necessary local autonomy for day-to-day operations. AUDIT AND RISK COMMITTEE TEST COMPLIANCE RISK MODEL The Board is responsible for the risk management programme that attempts to balance the risks and rewards in achieving the Groups objectives. On behalf of the Board, the Audit and Risk Committee oversees the Groups risk management programme. Responsibility for risk management and loss prevention rests however, with the Group and Divisional Executive Committees.
BOARD OF DIRECTORS
RESPONSIBLE FOR RISK/ RETURN OF THE BUSINESS
UD
IT A
NT
ER
S|
MA S
S SWA R E H O US E | M A
SB
UI
LD
INTERNAL AUDIT TEST COMPLIANCE
MA
SS C
ASH
EX
ND RISK COMM EE E CU T I V E C OM M I T T S TR A TEGIC RISK OPE R AT I O N A L R I S K
E ITT
MA S
SD I
SC
OU
156

Massmarts risk landscape, split into strategic and operational risk, can be summarised as follows:
STRATEGIC/ENVIRONMENTAL RISK BUSINESS MODEL
R Non-adherence to business model or poor strategic execution R Insufcient progress with transformation
Risk and the Audit and Risk Committee

The Board considers risk management to be a key business discipline designed to balance risk and reward, and to protect the Group against risks and uncertainties that could threaten the achievement of business objectives. The Boards risk strategy has been established through debate with the executive directors where the Groups risk tolerance has been considered and balanced against the drive towards the achievement of its strategies and objectives. The Committee is responsible to the Board for overseeing the Groups risk management programme. The day-to-day responsibility for risk management, including maintaining an appropriate loss prevention and internal control framework, remains with the executives of the Group and of each Division. The Committees primary role is one of oversight and therefore it reviews and assesses the dynamic interventions, within the Groups available resources and skills, required in response to business-specic, industry-wide and general risks. The Committee tables a Group risk register, aggregated from those prepared by the Divisions and the Group Executive Committee, to the Board annually in August. The Committee considers there to be two categories of Group risk which can broadly be described as Strategic/Environmental risks and Operational risks. Strategic/Environmental risks, tend to be longer-term or more material in nature and can, in most cases, only be monitored, managed and partially mitigated through longer-term strategic or tactical business responses. These risks, which, for example, include executive talent retention and succession, transformation and supply chain, are the primary focus of the Groups Risk Management process. The Group risk register summarises the major risks facing the Group, taking into
HUMAN CAPITAL
R Talent retention and succession
ECONOMIC
R Economic volatility
GOVERNANCE/REGULATORY
R Expected standards of sustainability conduct R FCPA and related non-compliance risk
OPERATIONAL RISK OPERATING ENVIRONMENT

R Major store re R Supply chain R In-store health and safety R Reliance on IT systems
GEO-POLITICAL/ECONOMIC
R Complexity of the Groups African operations
account the likelihood of occurrence, the potential impact and any mitigating factors or compensating controls. The Audit and Risk Committee oversees the maintaining of a sound system of governance, risk management and control with regard to operations, safeguarding assets, reliability of management reporting, and compliance with laws and regulations. Operational risks by their nature can be immediately addressed or mitigated by local management actions. These risks which include in-store health, safety and security, compliance, re prevention and detection, IT systems and food safety, amongst others are therefore the direct responsibility of each Divisional Executive Committee where a Loss Prevention or Risk Ofcer has line-responsibility for overseeing these risks.
COMPETITIVE
R Competitor attack on our major merchandise categories
FINANCIAL (COVERED IN THE GROUP FINANCIAL STATEMENTS ON PAGES 253 266)

R Market risk (comprising interest rate risk, currency risk and other price risk) R Liquidity risk R Credit risk
157
Litigation and legal

On 9 March 2012 the Competition Appeals Court of South Africa dismissed a review application initiated by various Government ministries. Within the same order, the court also considered an appeal lodged by various trade unions. On the appeal, the court approved the merger between Walmart and Massmart subject to two conditions relating to prior retrenchments and Massmart's voluntary undertaking to create a Supplier Development Fund. Massmart has taken all necessary and reasonable steps to reinstate those employees who were subject to the retrenchment and presented themselves for reinstatement. With respect to the Supplier Development Fund condition, all parties to the litigation have presented their views and we are now awaiting a nal ruling from the court.
Information Technology
Protecting Massmarts electronic assets is increasingly complex as networks, systems and electronic data expand and, in some cases, are shared with third parties and business partnerships. Depending on the internet for communication brings additional risk. Ensuring proper system security, data integrity and business continuity is the responsibility of the Board, but is given effect by the Audit and Risk Committee, the Massmart Technology Information and Process Forum (TIP) and Massmarts formally contracted IT business partners and providers and is independently reviewed by the External and Internal Auditors.
Financial risk and appraisal

Financial targets agreed in Group budgets and strategy processes are predicated on assumptions about the future that are uncertain and may prove incorrect or inaccurate. The monitoring and management of this risk is the responsibility of the Group Executive Committee. Monthly performance is measured and compared to the budget and prior year, and corrective or remedial action taken as appropriate. Despite extensive nancial, accounting and management controls and procedures, including reviews by Internal and External Auditors, there are risks arising from the Groups cash management and treasury operations, direct and indirect taxation, and employee or third-party fraud or economic crime. In addition to nancial reviews, Massmart has implemented voluntary processes that enable independent reviews of its corporate accountability performances. These include a bi-annual ethics review by the South African Institute of Ethics and an annual SRII review that is co-ordinated by the JSE.
158

Group risk landscape strategic/environmental risk
RISK LANDSCAPE
Business model/ Strategic execution
RISK
Non-adherence to business model or poor strategic execution
DEFINITION
Through non-adherence to, or poor implementation and execution of, our business model and/or strategy, the Groups longer-term nancial performance and competitive positioning could be severely compromised. The resultant nancial performance may be sub-optimal on either an absolute or relative basis.
Business model/ Strategic execution
Insufcient progress with transformation
There is the possibility of adverse reputational exposure due to the Divisions or the Group not fullling, or under delivering, in respect of BBBEE requirements. In the broader national context, inadequate transformation at all levels by Massmart and other South African businesses will curb the countrys longer-term growth potential and maintain the current, unacceptable and unsustainable, levels of social and economic inequality. This issue includes insufcient black representation at executive level at the Group and Divisions.
Human capital
Talent retention and succession
This covers four broad issues being: the national scarcity of retail-specic skills; the challenge to develop and retain sufcient business and leadership skills internally to ensure our longer-term competitiveness; a possible over-dependence on key leaders in the Group; and the need for an actively managed leadership succession pipeline.
159
PROBABILITY
LOW
POTENTIAL IMPACT
Financial impact HIGH Business impact HIGH
RISK MITIGATION
The Group insists on strategic clarity at the Divisions and Massmart Holdings. The strategies of all Divisions and the Group are formally documented and are reviewed annually at Divisional level, at Group Executive Committee level and then by the Board. A Divisions strategies dictate managements operational tactics and priorities. The annual budget process is an output of these reviews.
LOW
Financial impact MED Business impact HIGH
The Board-approved BBBEE strategy covering the elements of the Code of Good Practice has been implemented Group-wide. The most recent annual external BBBEE rating resulted in a Level 4 status. Transformation is an agenda item at all Divisional and Group Board meetings and a senior executive at Massmart has overall responsibility for delivering the strategy. A BBBEE staff share issue amounting to 10% of the pre-dilution shares of Massmart was implemented in 2006 and all permanent Massmart employees, not already participants in the existing employee share trust, became beneciaries at that time. In 2008, the Groups ve black non-executive directors at the time, each purchased 20,000 discounted Massmart shares. This remains a major focus area. The Executive Committee actively monitors the progress, development and possible succession plans for the Top 200 employees, as well as monitoring a further 200 employees. There are in-house education programmes prepared and presented in conjunction with local and international business schools that focus on developing middle and junior executives. Annual re-side chats are held with each executive in the Group, which are attended by that persons superior and a third executive. The Groups remuneration policy, incorporating short- and longer-term incentives, is designed to reward signicant outperformance and provides an opportunity for staff to accumulate wealth and which may act as a retention mechanism.
HIGH
Financial impact MED Business impact HIGH
160

Group risk landscape strategic/environmental risk continued
RISK LANDSCAPE
Economic
RISK
Economic volatility
DEFINITION
This concern focuses on three potential impacts, the rst being the possible nancial impact on the Group and the second being the possible adverse effect on consumer expenditure of dramatic changes in key economic variables including ination, interest and exchange rates. The third concerns adverse systemic socio-economic impact of the HIV/Aids pandemic. With approximately 30% of the Groups merchandise being imported, directly and indirectly, any sudden changes in the exchange rate will eventually affect stock valuation. Foreign currency uctuations in those African countries where Game operates stores affects the level of sales and earnings reported by those stores in South African currency, and results in potentially adverse translation differences affecting earnings. The valuation of stock imported into those countries from South Africa becomes inationary. Increases in interest rates will make South African corporate funding more expensive, with an adverse impact on protability. Higher cost ination may affect Group protability where these cost increases cannot be controlled or no additional productivity is achieved. Consistently lower ination rates may make long-term property leases with higher xed escalation rates appear expensive and potentially affect protability. South African consumer behaviour appears to be more affected by sudden and large changes in economic variables, including exchange rates and local interest and ination rates, than by gradual changes in these variables. It follows that a sudden deterioration in one or several of these economic variables may dampen levels of consumer expenditure, thereby reducing Group sales growth and potentially Group or Divisional protability.
Governance/ Regulatory
Expected standards of sustainability conduct
There is a growing potential threat of signicant reputational risk associated with the failure to meet stakeholders increased expectations around sustainability in its many forms. These expectations may be shaped by a variety of standards of conduct as encapsulated in codes such as Global Reporting Initiative, Global Compact, JSE SRII, Broad-based Black Economic Empowerment Codes of Good Practice, Marine Stewardship Council (MSC), Forestry Stewardship Council (FSC) and ISO 14001 certication. Increasingly, the Group needs to comply with some or all of these standards.
161
PROBABILITY
HIGH
POTENTIAL IMPACT
Financial impact MED Business impact MED
RISK MITIGATION
All direct foreign exchange import liabilities are covered forward, providing certainty about the expected landed cost of merchandise and also providing a four- to six-month buffer against changing the cost of imported inventory should there be any sudden deterioration in the exchange rate. The value of inventory in the supply chain between manufacturer and retailer is generally actively managed lower by all participants. This reduces the extent of any imported inventory that is over- or under-valued following a sudden change in the exchange rate. Interest rates on the Groups medium-term debt have been xed to provide certainty as to the future cost of this funding, and this will keep the Group partially immune to any adverse increases in corporate borrowing rates. Property lease escalation rates are negotiated as low as possible, taking market conditions into account, and certain property leases are ination-linked, within a cap (maximum rate) and collar (minimum rate). Salary and wage increases are necessarily negotiated in the context of the South African socio-economic environment. Where a negotiated increase may be higher than is commercially desired or justiable, productivity measures may be introduced to reduce the net cost of the higher wages. The Group continually explores means of keeping the net assets of Games African operations to a minimum, thereby potentially reducing the translation effect of any currency movement. This includes repatriating cash prots as frequently as possible and settling cross-border liabilities timeously.
LOW
The Group has implemented transparent stakeholder interactions with special interest groups, which inform our view on stakeholder expectations and the management thereof. There is ongoing identication, monitoring and adoption of relevant principles and standards of sustainability that are consistent with Massmarts core values and industry norms. Massmart is in the JSE SRII and it subscribes to MSC and FSC, inter alia.
162

Group risk landscape operational risk
RISK LANDSCAPE
Operational
RISK
Supply chain
DEFINITION
Supply chain describes all the business processes concerning the movement of inventory in the Group, and is not restricted to logistics but extends into IT systems and business processes around those systems. An efcient and effective supply chain should ensure the lowest-cost movement, and holding, of inventory and the optimisation of in-store inventory levels for given levels of demand. An ineffective or inefcient supply chain may result in sub-optimal inventory management, with duplication of costs and over- or under-stocking affecting holding costs or rates of sales.
Operational
In-store health and safety
The Groups large warehouse format means that large and sometimes heavy quantities of inventory are moved, stored and stacked sometimes at great heights in our stores. Despite compliance with all relevant legislation, there remains the risk of injury or death to customers or employees should bulky items collapse, with the associated signicant reputational risk.
Operational
Reliance on IT systems
With millions of transactions daily, the Group is dependent upon reliable, secure, effective and efcient IT systems, including the management and storage of data and information. Major IT implementations or initiatives can distract management, be costly, destabilise other IT platforms and the business, and/or perform sub-optimally post-implementation. The Group may overly rely on one or more service providers. Secure and reliable connectivity with key transactional intermediaries including banks is critical. Finally, at a strategic level, there exists a potential for misalignment between business strategy and IT capability, which can result in reduced operational effectiveness. This refers to the multiple levels of risk, and the associated complexity, of doing business in 12 countries across Africa, each with different regulatory, scal and customs environments. Political risk can become an issue. African currencies can be illiquid, making them vulnerable to any withdrawal of hard currencies. Bureaucracy and/or currency illiquidity can delay cash repatriations. There are also operational and logistical challenges in managing the lengthy supply chain. There are, in addition, often challenges presented in securing legal title to land in some countries.
Geopolitical/ Economic
Complexity of the Groups African operations
Competitive
Competitor attack on our major merchandise categories
This refers to the potential adverse impact of a sustained attack by a major competitor (local or international) on one or more of the Groups major merchandise categories or formats.
163
PROBABILITY
LOW
POTENTIAL IMPACT
Financial impact HIGH Business impact MED
RISK MITIGATION
Massdiscounters, Makro and Builders Warehouse have implemented IT software to automate the forecasting and replenishment (F&R) of inventory. Massdiscounters has about 75% of their sales by value being automatically replenished. This ratio is about 70% in Builders Warehouse and 20% in Makro. Massdiscounters now operates three substantial Regional Distribution Centres (RDCs) in Cape Town, Johannesburg and Durban. These have been very effective in addressing supply chain concerns and have improved inventory shrinkage levels and in-stock service levels in the stores. Makro operate two DCs in Johannesburg and Builders Warehouse are commissioning one. Risk ofcers in each Division are responsible for monitoring and improving compliance. Executive awareness and scrutiny is high. There is formal communication with suppliers and logistics providers around specied stacking protocols. We continually use Massmart Internal Audit and third party service providers to review in-store health and safety procedures. Warning signs in higher risk areas are on display.
LOW
Financial impact LOW Business impact HIGH
LOW
Financial impact HIGH Business impact MED
All the Groups IT development, hardware and software, must be specically approved and then monitored by the Groups Technology, Information and Processes Forum (TIP), representing all the Divisions IT executives, MIAS and, where appropriate, the external service providers. Divisional Boards must sign off all IT developments. MIAS has signicant IT expertise and independently assesses all IT developments and is part of the go-live decision on any project. External Auditors review the IT general control environment in the major Divisions on an agreed rotation basis.
MED
Careful pre-selection of countries for new stores, with a thorough evaluation of customs, tax, exchange control and business legislation. Regular repatriation of cash. Although there is a natural economic hedge in place because our SA operations supply the African stores, IFRS accounting standards have broken this hedge, resulting in increased volatility of reported foreign currency movements. Dedicated executives across several functions monitor and manage the African operations. Keep supply chain as short as practical. Develop relationships with key government and regulatory authorities in those countries.
HIGH
Financial impact HIGH Business impact HIGH
Maintain a relevant and competitive product offering that offers affordable value to our customers. Invest in brand awareness and loyalty. Manage low-cost efcient operations. Ensure suppliers believe that our stores and associated supply chain offer an ideal route to market. Optimise our store locations, and ensure regular store refurbishments and format renewal.
164
NOMINATION AND REMUNERATION COMMITTEE

READ MORE: PAGE 147 CORPORATE GOVERNANCE More information on the Nomination and Remuneration Committee. The Nomination and Remuneration Committee (the Committee) comprises Messrs Mark Lamberti (Chairman), David Cheesewright and Chris Seabrooke. With the exception of Mr David Cheesewright, all Committee members are independent non-executive directors. The CEO attends all Committee meetings by invitation. Massmart, through the Nomination and Remuneration Committee, implements remuneration policies that enable it to recruit, retain and motivate the executive talent needed to achieve superior performance. The Committee, with periodic advice from external executive remuneration consultants, ensures the provision of executive remuneration packages that are competitive with reference to other major South African retail companies, as well as other companies similar to Massmart in their size, spread and complexity. Our executive remuneration policy has three components, being:
R the xed portion, specically the monthly basic cash salary, and benets
including motor vehicles, retirement funding and medical aid;

R the short-term or performance incentives, represented as multiples of basic
monthly salary, and linked to the achievement of prot growth and/or personal performance. If achieved, these incentives are paid annually; and
R long-term equity incentives under the Massmart Holdings Limited Employee
Share Trust. The Committee considers and recommends to the trustees of the Massmart Holdings Limited Employee Share Trust any proposed shares or options that are granted in terms of the Share Trust rules. Annually the Committee reviews the Groups employee benet funds, specically the in-house medical scheme and the provident and pension funds, considering their performance, nancial stability and the general principles governing the benet levels being applied. The Massmart remuneration policy strives for xed remuneration at the median to upper quartile of comparable positions. At least every two years the Committee receives a report prepared by independent remuneration consultants on the recent trends in, and the current levels of, short- and long-term executive remuneration in South Africa. In 2012 the Committee received such a report prepared by 21st Century Business & Pay Solutions, an independent remuneration consultancy. As a result of this report, the remuneration of several executives and senior managers was adjusted. With regard to short-term or performance incentives, Massmart places particular emphasis on generous annual incentives for high performance for both executive directors and executive management.
165
This policy, communicated to and understood by the Groups executives, codies a range of performance incentives linked to annual headline earnings per share growth for the Group in excess of average CPI (as reported by StatsSA) plus 5%, or growth in prot before tax for each Division, as appropriate. Executives can earn an increasing multiple of their monthly basic salary depending upon the earnings growth exceeding CPI plus 5% or higher percentage increments. With effect from 2006, an element of the annual incentive bonus was linked to corporate accountability performance, specically the achievement of BBBEE transformation targets approved by the Nomination and Remuneration Committee. This incentive can amount to an additional one to three months salary. The Committee also has the discretion to reward superior individual performance. Long-term equity incentive plans ensure the alignment of executive reward with shareholders interests, in particular the sustained creation of shareholder value. New issues of annual allocations of shares or options are only allowed when Massmarts growth in headline earnings per share in the prior year exceeds average CPI plus 5%; consequently there was no annual issue during the 2012 nancial year. The amount allocated is based upon a factor of the executives total prior year remuneration including incentive bonus. The Committee believes that participants in the employee share scheme should, on average, hold unvested shares or options representing value equivalent to approximately three times their annual remuneration. With effect from 2002, only members of the Executive Committee can elect to receive scheme shares, whilst all other participants receive options. Non-executive directors fees paid in the current nancial year are detailed below: 2012 Chairman of the Board Deputy Chairman Directors Committee Chairmen Committee members R775,000 R555,000 R230,000 R225,000 R107,000 2013 R822,000 R590,000 R244,000 R238,000 R113,000
The fees paid to the trustees of the Massmart Holdings Limited Employee Share Trust are R40,000 each and R50,000 for the Chairperson.
166

CONTINUED Interest of directors in the Company Share Scheme
Relevant date Pattison, GM Balance at the beginning of the previous year Shares traded Shares traded Shares traded Shares traded Shares traded Options exercised Options exercised Options exercised New shares/options granted Balance at the beginning of the year Options exercised Options exercised New shares/options granted Balance at the end of the year Comprising:
Subscription price R
Market price R
Number of shares/ share options
Gain on sale/ exercise R000
Expiry date
26 May 2004 23 May 2006 24 May 2007 26 May 2008 27 May 2009 27 August 2001 27 August 2001 1 April 2005
29.87 54.13 94.25 72.86 77.56 10.95 10.95 41.91
121.93 148.00 148.00 148.00 148.00 121.93 148.00 148.00
1,562,298 (35,919) (382,500) (28,052) (43,480) (43,929) (50,000) (51,000) (204,000) 723,418 (49,000) (100,000) 158,603 733,021
35,904 1,508 3,264 3,092 5,549 6,990 21,640
27 August 2001 1 April 2005
10.95 41.91
148.51 173.89
77,947 6,732 13,159
1 September 2011 153.84
19,891 31 March 2015 22 May 2016 23 May 2017 25 May 2018 26 May 2019 31 August 2021
1 April 2005 41.91 23 May 2006 54.13 24 May 2007 94.25 26 May 2008 72.86 27 May 2009 77.56 1 September 2011 153.84
96,000 367,500 26,948 41,768 42,202 158,603
Hayward, GRC Balance at the beginning of the previous year Shares traded* Shares traded* Shares traded Shares traded Shares traded Shares traded
10 March 2000 26 May 2004 1 April 2005 23 May 2006 24 May 2007 1 April 2008
14.61 29.87 41.91 54.13 94.25 66.91
148.00 148.00 148.00 148.00
1,032,898 (8,643) (43,881) (102,000) (76,500) (25,445) (20,729)
10,820 7,180 1,362 1,680
167
Relevant date Hayward, GRC continued Shares traded 26 May 2008 Shares traded 27 May 2009 Options exercised 13 November 2000 Options exercised 27 August 2001 Options exercised 27 August 2001 New shares/options granted Balance at the beginning of the year Options exercised New shares/options granted New shares/options granted Balance at the end of the year Comprising:
Subscription price R 72.86 77.56 12.25 10.95 10.95
Market price R 148.00 148.00 121.93 121.93 148.00
Number of shares/ share options (38,070) (109,753) (100,000) (75,000) (38,250) 394,627 (36,750) 120,987 149,542 628,406
Gain on sale/ exercise R000 2,860 7,728 10,968 8,324 5,242
Expiry date
27 August 2001
10.95
148.51
56,164 5,043
1 September 2011 153.84 16 May 2012 159.62
5,043 31 March 2015 22 May 2016 23 May 2017 31 March 2018 25 May 2018 26 May 2019 31 August 2021 15 May 2022
1 April 2005 41.91 23 May 2006 54.13 24 May 2007 94.25 1 April 2008 66.91 26 May 2008 72.86 27 May 2009 77.56 1 September 2011 153.84 16 May 2012 159.62
98,000 73,500 24,444 19,912 36,573 105,448 120,987 149,542
* These shares were transferred to a private trading account
Zwarenstein, I Balance on date appointed as Executive Director New shares/options granted Balance at the end of the year Comprising:
110,983 16 May 2012 159.62 91,676 202,659 1 April 2008 66.91 26 May 2008 72.86 27 May 2009 77.56 1 September 2011 153.84 16 May 2012 159.62 8,226 24,111 14,705 63,941 91,676 31 March 2018 25 May 2018 26 May 2019 31 August 2021 15 May 2022
R Shares and options at reporting date can be found in the Directors report on page 185.
168

CONTINUED Directors emoluments
Otherwise in connection with the affairs of Massmart Holdings Limited R000 Gains on exercise of share options and on shares purchased by directors R000
Services as directors of Massmart Holdings Limited R000 For the year ended June 2012 Executive directors Pattison, GM Hayward, GRC Zwarenstein, I3
Salary and allowances R000
Bonuses and performancerelated payments1 R000
Other benets R000
Retirement and related benets R000
Fringe benet of interestfree loans used to nance Subtotal shares2 R000 R000
Total R000
3,899 2,995 366 7,260
828 522 2 1,352
409 314 35 758
5,136 3,831 403 9,370
1,654 1,329 2,983
19,891 5,043 24,934
26,681 10,203 403 37,287
Non-executive directors Lamberti, MJ Seabrooke, CS Davis, JA Gwagwa, NN Langeni, P McMillon, CD4 Suarez, JP
976 891 354 574 2,795
7,260
1,352
758
976 891 354 574 2,795 4,406 2,107 2,547 6,346 5,051 2,279 5,900 5,346 3,837 2,035 3,195 2,822 2,147 1,945 49,963 62,128
9 100 621 581 134 673 1 321 258 2,698 5,681
7,890 7,346 5,031 854 1,314 4,527 165 2,000 29,127
976 891 354 574 2,795 12,305 9,553 8,199 7,200 6,946 6,940 6,065 5,346 4,510 4,036 3,516 2,822 2,405 1,945 81,788
Prescribed Ofcers Prescribed Ofcer A Prescribed Ofcer B Prescribed Ofcer C Prescribed Ofcer D Prescribed Ofcer E Prescribed Ofcer F Prescribed Ofcer G Prescribed Ofcer H Prescribed Ofcer I Prescribed Ofcer J Prescribed Ofcer K Prescribed Ofcer L Prescribed Ofcer M Prescribed Ofcer N
Total
2,795
54,061 121,870
1. In order to match incentive awards with the performance to which they relate, bonuses above reect the amounts approved in respect of each year and not amounts paid in that year. 2. Held in terms of the rules of the Company's share scheme. 3. Appointed 7 May 2012. 4. Resigned 20 August 2012.
169
Services as directors of Massmart Holdings Limited R000 For the year ended June 2011 Executive directors Pattison, GM Hayward, GRC
Other benets R000
Otherwise in connection with the affairs of Massmart Holdings Limited R000
Fringe benet of interestfree loans used to nance Subtotal shares2 R000 R000
Gains on exercise of share options and on shares purchased by directors R000
Total R000
3,738 2,751 6,489
3,678 2,064 5,742
478 389 867
386 289 675
8,280 5,493 13,773
3,829 3,073
77,947 56,164
90,056 64,730
6,902 134,111 154,786
Non-executive directors Lamberti, MJ Seabrooke, CS Brand, MD* Davis, JA Dlamini, KD* Gwagwa, NN Hodkinson, JC* Langeni, P Matthews, IN* Maw, P * McMillon, CD Suarez, JP Mokhobo, DNM* Rubin, MJ*
825 745 404 413 315 209 550 739 428 306 209 5,143
6,489
5,742
867
675
40 40 40
825 745 404 413 315 209 550 779 428 306 209 5,183 3,235 5,229 5,690 2,866 5,828 4,278 2,750 2,664 2,726 2,510 37,776 56,732
5 1,413 1,533 1,960 822 229 334 591
45,185 22,108 21,401 19,086 14,531 13,522 10,016 9,391 8,564 5,267
825 745 404 413 315 209 550 779 428 306 209 5,183 48,425 28,750 28,624 23,912 20,359 18,622 12,995 12,389 11,881 7,777
Prescribed Ofcers Prescribed Ofcer A Prescribed Ofcer B Prescribed Ofcer C Prescribed Ofcer D Prescribed Ofcer E Prescribed Ofcer F Prescribed Ofcer G Prescribed Ofcer H Prescribed Ofcer I Prescribed Ofcer J
6,887 169,071 213,734 13,789 303,182 373,703
Total
5,143
1. In order to match incentive awards with the performance to which they relate, bonuses above reect the amounts accrued in respect of each year and not amounts paid in that year. 2. Held in terms of the rules of the Company's share scheme. *Resigned 20 June 2011.
170

CONTINUED Directors emoluments continued
The comments on this page provide further background and context to the gures disclosed in the Directors emoluments and Interests of directors in the Companys Share Scheme tables. These notes can also be found in the Group nancial statements, note 35 on page 246 and note 36 on page 248.
GM Pattison
Following a third party executive remuneration analysis which assessed positions of similar stature and complexity, the Nomination and Remuneration Committee awarded Grant a 4.3% increase to his salary and allowances for the 2012 nancial year, from R3.7 million to R3.9 million. Grant did not receive a bonus for this nancial year. During the 2012 nancial year Grant converted and sold 149,000 Massmart options, realising a gain on exercise of share options of R19.9 million. Through the Share Scheme, Grant holds 733,021 Massmart shares and options of which 42,202 shares and 158,603 options are held in the Pattison Family Trust, of which Grant is a beneciary. The average length of time that he has held these is 4.8 years and the average strike price is R77.99 per share. The Pattison Family Trust also directly owns 218,055 Massmart shares.
GRC Hayward
Following a third party executive remuneration analysis which assessed positions of similar stature and complexity, the Nomination and Remuneration Committee awarded Guy an 8.9% increase to his salary and allowances for the 2012 nancial year, from R2.8 million to R3.0 million. Guy did not receive a bonus for this nancial year. During the 2012 nancial year Guy converted and sold 36,750 Massmart options, realising a gain on exercise of share options of R5.0 million. Through the Share Scheme, Guy holds 628,406 Massmart shares and options of which 19,912 shares are held in the Bluett-Hayward Trust, of which Guy is a beneciary. The average length of time that he has held these is 3.1 years and the average strike price is R103.51 per share. Guy also owns 36,517 Massmart shares directly.
171
I Zwarenstein
Ilan was appointed to the Board on 7 May 2012, having previously been Company Secretary. His salary and allowances for the 2012 nancial year, as reected in the directors emoluments table are representative of his salary and allowances during his time in this role. In his previous position, Ilan received an ad hoc bonus of two months salary for this nancial year and this is reected in the prescribed ofcer section of the directors emoluments table. Ilan did not convert and sell any Massmart options in his capacity as FD. Through the Share Scheme, Ilan holds 202,659 Massmart options. The average length of time that he has held these is 1.2 years and the average strike price is R137.76 per share.
Top three executives salaries

King III recommends that the salaries of the top three executives, excluding executive directors, should be disclosed. Due to their specialised retail skills, the highly competitive South African retail environment and the employees value to Massmart, the Board does not wish to disclose this information for each of the individuals but has instead disclosed the total salaries of the three employees concerned. In the 2012 nancial year, the top three executives combined salaries (comprising basic salary, motor vehicle, medical aid and retirement benets) were R7.3 million (2011: R9.6 million).
Non-executive directors fees

The Boards policy is to pay non-executive directors fees that are competitive but not in the top quartile. As noted at the beginning of this Corporate Governance section, attendance fees are not paid. The Walmart-appointed non-executive directors do not receive fees from Massmart. The following fees and fee increases, for the period commencing on 22 November 2012 to the date on which the Company's annual general meeting in respect of its 2013 nancial year will be held, will be proposed for approval at the November 2012 annual general meeting:
R Chairman R Deputy chairman R Non-executive directors R Committee chairpersons R Committee members
R822,000 R590,000 R244,000 R238,000 R113,000
172
SOCIAL AND ETHICS COMMITTEE

READ MORE: PAGE 147 CORPORATE GOVERNANCE More information on the Social and Ethics Committee. Previously called the Sustainability Committee, this Committee has been renamed and now includes in its terms of reference the requirements of the Companies Act, 2008, as amended (Companies Act), in regard to this type of committee. The Committee was reconstituted as a result of the Walmart transaction and now comprises Ms Phumzile Langeni (Chairperson) and Messrs Grant Pattison and JP Suarez. Ms Pearl Maphoshe (Group Human Capital Executive), Mr Brian Leroni (Group Corporate Affairs Executive), and an independent expert, Professor Derek de Jongh (Director: Centre for Responsible Leadership, The Faculty of Economic and Management Sciences, University of Pretoria) are invitees to this Committee. The role of the Committee broadly is to assist the Group with its responsibility SOCIAL AND ETHICS COMMITTEE:
The Companies Act includes specic responsibilities including: R the Companys standing in terms of the United Nations Global Compact Principles R the OECD recommendations concerning corruption R the contribution to development within our communities R labour and employment R the environment and health and public safety
towards sustainability with respect to practices that are consistent with good corporate citizenship. The Companies Act includes specic responsibilities including: the Companys standing in terms of the United Nations Global Compact Principles, the OECD recommendations concerning corruption, the contribution to development within our communities, labour and employment, and the environment and health and public safety. The Committee met twice during the nancial year with the objective of reviewing Massmarts Socially Responsible Investment Index, broad-based black economic empowerment, and sustainability reporting performance. Performance in each of these areas is measured with reference to the Johannesburg Stock Exchanges (JSE) Socially Responsible Investment Index (SRII) criteria, the Department of Trade and Industrys Broad-based Black Economic Empowerment (BBBEE) scorecard and the Global Reporting Initiative III guidelines. The Committee is satised with Massmarts sustainability performance and is
LEVEL BBBEE
particularly encouraged that the Group continues to exceed its interim BBBEE target and is now a Level 4 contributor. Further detail on the Groups sustainability practices can be found in the section titled Corporate Accountability on pages 117 141.
173
EXECUTIVE COMMITTEE
The Massmart Executive Committee is the most senior executive decisionmaking body in the Group. The Committee is chaired by the CEO (Grant Pattison) and comprises the COO (Guy Hayward), FD (Ilan Zwarenstein), Group Human Capital Executive (Pearl Maphoshe), eCommerce Executive (Jay Currie), Group Corporate Affairs Executive (Brian Leroni), the ve divisional Chief Executives (Neville Dunn, Doug Jones, Jan Potgieter, Kevin Vyvyan-Day and Llewellyn Walters), the Chief Executive of the New Formats Division (Joe Owens), the Group Food Executive (Robin Wright), the Group Supplier Development Executive (Mncane Mthunzi) and the Group Commercial Executive (Llewellyn Steeneveldt). Following the Walmart transaction, the Committee was bolstered by a General Counsel and Chief Compliance Ofcer (Mike Spivey) and an Integration Executive (Don Frieson). The Committee deliberates, takes decisions or makes recommendations on all matters of strategy and operations. Within the parameters described by the Board-approved Governance Authorities, the decisions or recommendations are sometimes referred to the Board or its relevant Committee for nal approval, while in other cases the power to take decisions is delegated to Divisional Boards or Executive Committees. The Executive Committee has specic responsibility, inter alia, for:
R monitoring and measuring the structures, trends and performance
READ MORE: PAGE 147 CORPORATE GOVERNANCE More information on the Executive Committee.
"The Committee deliberates, takes decisions or makes recommendations on all matters of strategy and operations."
of markets and competition;

R strategic planning; R dening, conguring, nancing and structuring the Groups portfolio
of assets;
R shaping and approving the competitive strategies, operating plans
and budgets of the Divisions and functional departments;

R measuring, monitoring and taking proactive corrective action
on Divisional performance;
R ensuring adequate risk management, controls, governance,
and compliance throughout the Group; and

R shaping and approving succession plans and senior executive
management appointments.
174
COMPLIANCE, TRANSPARENCY AND ACCOUNTABILITY

Annual general meeting
Attendance by all directors at Massmarts annual general meeting is strongly INSIGHT ANNUAL GENERAL MEETING
13h00 Wednesday, 21 November 2012 Massmart House 16 Peltier Drive Sunninghill Ext 6 Sandton
encouraged while attendance for Board Committee Chairpersons is compulsory. At the November 2011 Massmart annual general meeting the Chairpersons of the Nomination and Remuneration Committee and the Audit and Risk Committee were in attendance, as were the Board Chairman, CEO, COO and FD. In total, three non-executive directors attended the annual general meeting. The Companys transfer secretaries attend every general meeting of shareholders to assist with the recording of shareholders attendance and to tally the votes. The Chairman conrms with the meeting that votes will be counted by way of poll, ie all votes are counted, rather than by way of a show of hands.
Share buyback programme

Annually the Group seeks, and obtains, the approval of the shareholders in general meeting to repurchase Massmart shares. This authority valid until the following years annual general meeting and subject to the Listings Requirements of the JSE allows the Group to purchase its own shares not exceeding 15% of that class of the Company's issued share capital, at a price not greater than 10% above the preceding ve-day weighted average. Shareholders have been asked to renew this authority at the forthcoming November 2012 annual general meeting. During the year to June 2012, no Massmart shares were purchased on the open market by a Massmart subsidiary. The amount and timing of any future purchases will be determined by the Board and are dependent on the Boards view on the intrinsic value of Massmart shares, the ruling market price from time to time, the Groups cash position and future cash requirements, and prevailing market conditions. The Massmart Employee Share Trust acquires shares from time to time on the JSE open-market to mitigate the dilution caused by the Company issuing new shares when options are exercised by participants. During the 2012 nancial year, the Massmart Employee Share Trust purchased 1.2 million shares for R206.7 million which were utilised to meet vesting share options.
Share dealings
No director, executive or employee may deal, directly or indirectly, in Massmart shares where that person may be aware of unpublished price-sensitive information. There are strict closed periods during which all directors, executives and employees are not allowed to deal in Massmart shares.
175
The periods begin one month prior to the end of each reporting date (these reporting dates being December and June) and end on the public release of the Group results. A closed period also applies from the date when Massmart issues a cautionary announcement. In addition, all directors, executives and employees, and their associates as dened by the JSE, are not allowed to deal in Massmart shares in the nal hour of trading on the JSE. All share dealings by a director, executive or employee must be authorised by the CEO, the COO or the FD. Any dealings by the CEO are authorised by the Chairman, and dealings by the COO and the FD are authorised by the CEO.
Corporate ethics
Massmart is committed to achieving the highest standards of ethical behaviour and continued its strong emphasis on promoting awareness of, and compliance with, Massmarts Code of Ethical Conduct. MASSMART ETHICS LINE
Total calls 2012 2011 35 50 31 46 52 48 31 45 60 49 45 40 532
Massmart Ethics Line

Massmart has an Ethics Hotline that is independently run by Deloitte Tip-Offs Anonymous. Deloitte Tip-Offs Anonymous has been certied by the External Whistle-blowing Hotline Services Provider Standard E01.1.1. This Hotline can be used by all Massmart employees and suppliers to report any suspected unethical behaviour.
Ethics structure and system

From 1 July 2011 the Massmart Ethics Ofce adopted Walmarts ethics system, IntegriLink, to record all calls received. Calls are investigated by the Divisional Ethics Ofcers and, where necessary, by the MIAS. All calls are monitored by the Massmart Ethics Ofce, and signicant calls by the Walmart Global Ethics Ofce. The Group Ethics Forum meets twice a year where the call statistics and trends are discussed. The appointment of Ethics Ofcers in all Divisions, and the formulation and regular meetings of the Group Ethics Forum have ensured the continued focus on the consistent application of ethics practice and training within Massmart.
July August September October November December January February March April May June Total Increase
41 46 48 38 58 45 43 42 53 58 76 49 597 12.2%
BREAKDOWN OF TOTAL CALLS
Call statistics
During the 2012 nancial year, 53% of calls received were HR-related matters with 47% of calls being of an ethical nature; 27.1% of calls of an ethical nature that were received and closed during 2012 were substantiated. Total calls for the year under review were 12.2% higher than the previous year (see table alongside).
%
Ethics HR 47 53
176
COMPLIANCE, TRANSPARENCY AND ACCOUNTABILITY CONTINUED

Ethics awareness
The Massmart Ethics Ofce continuously distributes ethics awareness communications throughout Massmart:
R Regular emailers providing communication on relevant topics are sent to all
employees with access to an email address and for management to display on all notice boards. The following emailers were distributed during 2012: Employee theft, Whistle-blowing, Bribery, Proteering and Conict of interest.
R Ethics posters are situated in all stores and head ofces. The posters
currently displayed are: Do what is right and What does ethics mean? which will soon be available in ten languages, and two other posters that explain the Massmart Ethics Line and our values.
Ethics risk survey

This year Massmart contracted the Ethics Institute of South Africa to conduct an Ethics Risk Survey. The survey aims to measure Massmarts ethics management and to produce an ethics risk prole. The results of the survey will inform the next steps in Massmarts ethics management programme and prioritise the behavioural and cultural areas on which to focus. The survey was conducted using manual questionnaires in all Divisions, including all African operations. An outstanding achievement in obtaining 16,080 completed questionnaires will provide a high level of reliability from the data gathered. The results of the survey will be reported at a Massmart Group level, by Division and for the different Regions in both South Africa and Africa, and will provide information on:
R staff awareness of Massmarts ethics interventions; R ethical risks; R recommendations to mitigate these identied risks; and R ethics management opportunities.
Do what is right, fair, honest and legal!

Contact the Massmart Ethics Line: Call 0800 20 32 46 SMS 32846 Fax 0800 00 77 88 Email massmart@ethics-line.com www.walmartethics.com Outside of SA +27 31 508 6488
Suppliers and service providers

Massmart regularly communicates its ethical standards to suppliers and service providers, and attempts to ensure that they comply with these standards. This is achieved in the following ways, just to mention a few: suppliers and service providers are invited to make use of the Ethics Hotline, Massmarts formal trading agreements detail ethical practices that suppliers are expected to uphold, and supplier ethical cards are distributed with supplier communications.
177
Compliance
Monitoring and achieving legal and regulatory compliance across the Group has always been a fundamental tenet of our business model. King III however, requires that the compliance process should be more formal with clear responsibilities and reporting. To this end, the Finance Directors in each Division are the Compliance Ofcers (and Risk Ofcers), and have been formally tasked with ensuring that their respective Divisions monitor and comply with all regulations and legislation. Compliance across the Group is exercised as follows:
R The environment is monitored, formally and informally, via several sources
including specically-appointed service providers that review all proposed or impending legislation and regulations, as well as non-executive directors, and contacts with Government bodies, supplier bodies and consumer groups.
R Depending upon where the response to the impending legislation can most
efciently and effectively be addressed, the task would fall to one of the trading forums (Food, Liquor, General Merchandise, Cellular) or functional forums (TIP, Finance) or even the Group Executive Committee. The members of these forums are also tasked with keeping their respective Divisions apprised of intentions to support the role of the Divisional Compliance Ofcers.
R Ongoing compliance is monitored and tested through various means
including MIAS, External Audit and third-party service providers. Reports from these entities are presented to the Audit and Risk Committee. The Group Compliance Ofcer is an in-house legal resource at Massmart Corporate who is a qualied lawyer and reports to the FD. The impending legislation that may have a potentially material impact on the Group includes:
R Payment Card Industry Data Security Standard; and R Protection of Personal Information Act.
178
INVESTOR RELATIONS
INSIGHT SENS
SENS is a system provided by the JSE, which publishes company announcements and price-sensitive information. The key purpose of SENS is to ensure that this information is accessible to the investing community interested in trading on the JSE, as soon as it is vetted by the JSE Listings Division.
We strive to provide useful and frequent disclosure to our shareholders, regardless of how uncomfortable this may be in periods of diculty or underperformance.
Massmart reports formally to shareholders twice a year (in February and August) when its half-year and full-year results, together with a thorough executive overview, are announced and issued to shareholders and the media. On both occasions the CEO, COO, FD and certain Group Executives give presentations to institutional investors, analysts and the media.
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Analyst presentation and preliminary announcement Final dividend declared Cape Town institutional investor roadshow Johannesburg institutional investor roadshow Final dividend paid United States institutional investor roadshow United Kingdom institutional investor roadshow Publication of Integrated Annual Report Annual General Meeting Financial year-end* Analyst presentation and preliminary announcement Final dividend declared* Cape Town institutional investor roadshow Johannesburg institutional investor roadshow Final dividend paid* Financial half-year*
* New Massmart nancial year-end
Early in January and July, shortly after the conclusion of the half-year and full-year trading periods, on release of the Integrated Annual Report and at the Groups annual general meeting in November, Massmart releases sales updates reporting on the Groups year-to-date sales performance. In addition, annually in May, the CEO, COO and FD host a day-long visit by institutional analysts and investors to Massmart stores. A sales update is released along with this visit.
179
During the year, apart from closed periods, the CEO, COO and FD together meet regularly with institutional shareholders and, in addition, are available for meetings or conference calls with analysts and any existing or prospective Massmart shareholder. Prots are distributed to shareholders at interim and year-end by way of a cash dividend. In light of the new Dividend Tax introduced with effect from 1 April 2012, the Groups dividend cover has been adjusted to reect the benet to the Company of no longer paying Secondary Tax on Companies on the net dividend. Consequently, Massmarts new dividend policy is to declare and pay an interim and nal cash dividend representing a 1.55 times dividend cover unless circumstances dictate otherwise. A further dividend is distributed to Thuthukani shareholders, arising from the Massmart black economic empowerment transaction which came into effect in October 2006. The Thuthukani dividend is now 100% of the ordinary dividend.
SHARES
South Africa 19,611,704 9.1 Walmart subsidiary: 113,859,293 52.7 Main Street 830 (Pty) Ltd* United States of America 26,362,025 12.2 and Canada United Kingdom 42,535,882 19.7 Rest of Europe 4,310,545 2.0 Rest of World 9,445,012 4.3 * South African company ultimate holding company is Walmart Stores, Inc.
COMPANY SECRETARY: P Sigsworth, CA(SA) CONTACT DETAILS: Registered ofce Massmart House 16 Peltier Drive, Sunninghill Ext 6 Sandton, 2146, South Africa Postal address Private Bag X4, Sunninghill 2157, South Africa Telephone number + 27 (0) 11 517 0000 Facsimile number + 27 (0) 11 517 0020 Website www.massmart.co.za INDICATORS: Company registration number 1940/014066/06 (incorporated in South Africa) JSE share code MSM ISIN ZAE000152617
DESIGN PARTNERS: Publisher annual report Ince (Pty) Ltd Design agency Studio Shelf Photographer G Gilmour CORPORATE PARTNERS: Transfer secretaries Computershare Investor Services (Pty) Ltd 70 Marshall Street, Johannesburg, 2001 Principal bankers ABSA Bank Limited First National Bank (A division of FirstRand Bank Limited) Investec Bank Limited Nedbank Group Limited The Standard Bank of South Africa Limited Auditors Deloitte & Touche Corporate law advisors Cliffe Dekker Hofmeyr Edward Nathan Sonnenbergs Lead sponsor Deutsche Securities (SA) (Pty) Ltd
BUILDERS WAREHOUSE, NORTHRIDING
GROUP FINANCIAL STATEMENTS

BUILDERS WAREHOUSE, NORTHRIDING
CONTENTS
R APPROVAL OF THE ANNUAL FINANCIAL STATEMENTS R DIRECTORS REPORT R INCOME STATEMENT R STATEMENT OF COMPREHENSIVE INCOME R STATEMENT OF FINANCIAL POSITION R STATEMENT OF CASH FLOWS R STATEMENT OF CHANGES IN EQUITY R NOTES TO THE ANNUAL FINANCIAL STATEMENTS 183 185 189 190 191 192 193 194
183
APPROVAL OF THE AUDITED ANNUAL FINANCIAL STATEMENTS

The audited annual nancial statements were approved by the Board of Directors on 5 October 2012 and signed on its behalf by:
GM Pattison Chief Executive Ofcer
I Zwarenstein Financial Director
The preparation of the Groups consolidated results was supervised by the Financial Director, Ilan Zwarenstein, BCom, CA(SA). These results have been audited in compliance with any applicable requirements of the Companies Act of South Africa and were prepared under s29(1) of this Act.
Company secretary certicate

I, Philip Sigsworth, the Company Secretary of Massmart Holdings Limited, certify that to the best of my knowledge and belief, all returns required of a public company have, in respect of the year under review, been lodged with the Registrar of Companies and that all such returns are true, correct and up to date.
Philip Sigsworth Company Secretary
Annual compliance certicate for issuers with a primary listing on the JSE
I, the undersigned, Ilan Zwarenstein, being duly authorised hereto, certify to the JSE Limited (the JSE) that Massmart Holdings Limited and its directors have, during the 12 months ended 31 December 2011, complied with all Listings Requirements and every disclosure requirement for continued listing on the JSE imposed by the JSE during that period.
I Zwarenstein Duly authorised hereto, for and on behalf of the Directors of the Company
Independent auditors report

To the shareholders of Massmart Holdings Limited We have audited the consolidated and separate annual nancial statements of Massmart Holdings Limited set out on pages 189 to 285, which comprise the statements of nancial position as at 24 June 2012, and the statements of comprehensive income, statements of changes in equity and statements of cash ows for the year then ended, and the notes, comprising a summary of signicant accounting policies and other explanatory information. Directors responsibility for the nancial statements The Companys directors are responsible for the preparation and fair presentation of these nancial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of nancial statements that are free from material misstatement, whether due to fraud or error.
184
Group Financial Statements
APPROVAL OF THE AUDITED ANNUAL FINANCIAL STATEMENTS CONTINUED

Auditors responsibility Our responsibility is to express an opinion on these nancial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the nancial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the nancial statements. The procedures selected depend on the auditors judgement, including the assessment of the risks of material misstatement of the nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of the nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the nancial statements. We believe that the audit evidence we have obtained is sufcient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the nancial statements present fairly, in all material respects, the consolidated and separate nancial position of Massmart Holdings Limited as at 24 June 2012, and its consolidated and separate nancial performance and its consolidated and separate cash ows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa. Other reports required by the Companies Act As part of our audit of the consolidated and separate nancial statements for the year ended 24 June 2012, we have read the Directors Report, the Audit and Risk Committees Report and the Company Secretarys Certicate for the purpose of identifying whether there are material inconsistencies between these reports and the audited nancial statements. These reports are the responsibility of the respective preparers. Based on reading these reports we have not identied material inconsistencies between these reports and the audited nancial statements. However, we have not audited these reports and accordingly do not express an opinion on these reports.
Deloitte & Touche Registered Auditor Per: AJ Dennis Partner 5 October 2012 Buildings 1 and 2, Deloitte Place The Woodlands Woodlands Drive Woodmead Sandton
National Executive:
LL Bam Chief Executive, AE Swiegers Chief Operating Ofcer, GM Pinnock Audit, DL Kennedy Risk Advisory, NB Kader Tax, TP Pillay Consulting, K Black Clients and Industries, JK Mazzocco Talent and Transformation, CR Beukman Finance, M Jordan Strategy, S Gwala Special Projects, TJ Brown Chairman of the Board, MJ Comber Deputy Chairman of the Board. A full list of partners and directors is available on request.
BBBEE rating:
Level 2 contributor in terms of the Chartered Accountancy Profession sector code. Member of Deloitte Touche Tohmatsu Limited.
185
DIRECTORS REPORT
Directors responsibilities
The directors acknowledge responsibility for the preparation of the annual nancial statements, which, in their opinion, fairly present the results and cash ows for the nancial year and the state of affairs of Massmart Holdings Limited and its subsidiaries at the end of the nancial year. The external auditors are responsible for reporting on the fair presentation of these nancial statements. The Company and its subsidiaries have maintained adequate accounting records and an effective system of internal controls to ensure the integrity of the underlying information. Appropriate accounting policies, supported by sound and prudent managerial judgements and estimates, have been consistently applied. The Audit and Risk Committee of the Board reviews the nancial information presented and ensures that there has been adherence to International Financial Reporting Standards. Internal and External Auditors of Group companies have unrestricted access to the Committee.
Group nancial results

The nancial results of the Group are set out in the income statement, statement of comprehensive income, the statement of cash ows and the statement of changes in equity. The nancial position of the Group is set out in the statement of nancial position.
Dividend
In light of the new South African Dividend Tax introduced with effect from 1 April 2012 (Dividend Tax), Massmart has adjusted the Companys dividend policy, which is now to declare and pay an interim and nal cash dividend representing a 1.55 times dividend cover (the policy was 1.7 times dividend cover prior to the introduction of the Dividend Tax). For the period to June 2012, the Board has resolved to pay a nal cash dividend equal to that of the prior year, notwithstanding the resultant lower dividend cover, due to the strong liquidity position of the Group and its growth prospects. The Groups nal cash dividend has been adjusted to reect the benet to the Company of no longer paying the Secondary Tax on Companies (STC) on the net dividend. With regard to the nal distribution to shareholders, the directors resolved to distribute to shareholders registered in the books of the Company on 14 September 2012, a nal gross cash dividend of 146 cents (2011: 134 cents) per share, bringing the total dividend for the year to 398 cents (2011: 386 cents) per share. There were no STC credits available for use as part of the nal cash dividend. The number of shares in issue at the date of this declaration was 216,146,751. The dividend was declared out of income reserves. The dividend was subject to the local dividend tax rate of 15% which resulted in a net dividend to those shareholders who are not exempt from paying dividend tax of 124.10 cents per share. Massmart's tax reference number is 9900/196/71/9. A Thuthukani dividend equivalent to 100% of the Massmart ordinary dividend per share (146 cents) was paid to the Massmart Thuthukani Empowerment Trust on 17 September 2012. Alongside please nd the movement in ordinary and preference shares for the period under review. MASSMART ADDRESS
The Companys registered ofce and postal address are as follows: Registered ofce
SHARES IN ISSUE
Ordinary shares Closing balance June 2010 New shares issued Converted preference shares* Closing balance June 2011 New shares issued Converted preference shares* Closing balance June 2012 Preference shares Closing balance June 2010 New shares issued Converted to ordinary shares Closing balance June 2011 Converted to ordinary shares Closing balance June 2012 201,495,504 6,331,173 6,056,783 213,883,460 2,241,001 216,124,461 21,545,193 6,056,783 15,488,410 2,241,001 13,247,409
Massmart House
16 Peltier Drive, Sunninghill Ext 6, Sandton, 2146 South Africa Postal address Private Bag X4, Sunninghill, 2157, South Africa
* The preference shares relate to Massmarts Thuthukani Empowerment Trust and Black Scarce Skills Trust
186
DIRECTORS REPORT CONTINUED

Directorate and Secretary
The current directorate of the Company is shown on pages 18 to 21. In line with the Walmart International regional reporting structure that was implemented post the Massmart-Walmart merger, Doug McMillon, who is the Chief Executive Ofcer and President of Walmart International Operations resigned from the Massmart Board of Directors with effect from 20 August 2012. Doug was appointed to the Massmart Board upon completion of the MassmartWalmart transaction on 20 June 2011. David Cheesewright, who is the Chief Executive Ofcer and President of Walmarts Europe Middle East Africa (EMEA) region into which Massmart reports, has been appointed in Dougs stead with effect from 20 August 2012. David was previously appointed as an alternate director on the Massmart Board on 23 November 2011. On 7 May 2012, Guy Hayward, who had been Chief Financial Ofcer since 2001, assumed the role of Chief Operating Ofcer. Ilan Zwarenstein, who has been Group Finance Executive since 2006, assumed the role of Financial Director, and was appointed to the Board and the Massmart Executive Committee, relinquishing the role of Company Secretary. These changes were required to enable greater operational focus on achieving the Groups ambitious strategic plans, whilst at the same time responding to the additional responsibilities created by the acquisition of a controlling stake in Massmart by Walmart. The Board now comprises ten directors of whom seven are non-executive and four are independent. In addition, each Board Committee is chaired by an independent director. The Company Secretary provides a central source of guidance and advice to the Board, and within the Company, on matters of ethics and good governance. The Company Secretary is Philip Sigsworth, CA(SA), whose business and postal addresses are the same as that of the Company. Philip was appointed on 7 May 2012. In accordance with the provisions of the Companys Articles of Association, D Cheesewright and I Zwarenstein will resign and JA Davis, NN Gwagwa and GRC Hayward will retire at the annual general meeting. Being eligible, D Cheesewright, JA Davis, NN Gwagwa, GRC Hayward and I Zwarenstein offer themselves for re-election.
Interests of directors in the Companys shares

At 24 June 2012, directors owned ordinary shares in the Company, or options over ordinary shares in the Company, directly or indirectly, aggregated as to benecial and non-benecial ownership, as follows: 2012 Shares Benecial Non-executive directors MJ Lamberti CS Seabrooke D Cheesewright JA Davis NN Gwagwa P Langeni CD McMillon JP Suarez Executive directors GM Pattison GRC Hayward I Zwarenstein Nonbenecial Options Benecial Nonbenecial Shares Benecial Nonbenecial 2011 Options Benecial Nonbenecial
9,800 9,800 2,400
9,800 9,800
245,000
696,473 394,394
254,603 270,529 202,659
696,473 394,394
245,000 36,750
187
At the date of this report, the directors holdings were as follows: 2012 Shares Benecial Non-executive directors MJ Lamberti CS Seabrooke D Cheesewright JA Davis NN Gwagwa P Langeni CD McMillon JP Suarez Executive directors GM Pattison GRC Hayward I Zwarenstein Nonbenecial Options Benecial Nonbenecial Shares Benecial Nonbenecial 2011 Options Benecial Nonbenecial
9,800 9,800
9,800 9,800 2,400
245,000
696,473 222,894
254,603 270,529 202,659
696,473 394,394
354,603 120,987
Subsidiaries
R R R R R
As at the date hereof, the following companies are principal subsidiaries of the Company: Massbuild (Proprietary) Limited (previously Builders Trade Depot) Masscash Holdings (Proprietary) Limited Massmart International Holdings Limited (incorporated in Mauritius) Massmart Management & Finance Company (Proprietary) Limited Masstores (Proprietary) Limited
2004/035206/07 1997/014716/07 47902 C1/GBL 1992/004084/07 1991/006805/07
Details of the Companys interests in material subsidiaries are set out in note 37 on page 250. Total net prot after tax for all subsidiaries for the 2012 nancial year amounted to R458.6 million (2011: R1,004.4 million).
Borrowing powers
In terms of the Articles of Association, the Group has unlimited borrowing powers. At 24 June 2012, borrowings were R2.1 billion (2011: R1.8 billion).
Holding company
The Companys holding company is Walmart Stores, Inc.
Going concern
The directors are of the opinion that the business will be a going concern in the year ahead. In reaching this opinion, the directors considered the following factors: R strong positive cash ows from trading; R no recurring operating losses at Divisional and Group level; R well-controlled working capital and good quality inventory; R approved short- and long-term nancing, with sufcient additional short-term borrowing capacity if required; R key executive management in place; R there have been no material changes that may affect the Group in any of our customer, product or geographic markets; and R budgets to December 2013 reect a continuation of the above positive issues.
188
DIRECTORS REPORT CONTINUED

Litigation
On 9 March 2012 the Competition Appeals Court of South Africa dismissed a review application initiated by various Government ministries. Within the same order, the court also considered an appeal lodged by various trade unions. On the appeal, the court approved the merger between Walmart and Massmart subject to two conditions relating to prior retrenchments and Massmarts voluntary undertaking to create a Supplier Development Fund. Massmart has taken all necessary and reasonable steps to reinstate those employees who were subject to the retrenchment and presented themselves for reinstatement. With respect to the Supplier Development Fund condition, all parties to the litigation have now presented their views and we are now awaiting a nal ruling from the court.
Change in year-end
In order to align the Group better with Walmart Stores, Inc. (Massmarts ultimate holding company), Massmarts yearend has changed from the end of June to the end of December. The change in year-end means that Massmart will report audited results for the six months to December 2012 in February 2013, and audited results for the 12 months to December 2013 in February 2014.
Audit and Risk Committee report

The Audit and Risk Committee met four times during the year and the Internal and External Auditors presented formal reports to the Committee and attended meetings by invitation. In response to the requirements of the Companies Act, King III and in terms of its Charter, the Committee can report as follows: R The scope, independence and objectivity of the External Auditors was reviewed. R The audit rm Deloitte & Touche, and audit partner Andr Dennis, are, in the Committees opinion, independent of the Company. R Ernst & Young have been proposed to the shareholders for approval to be the Groups auditor for the "nancial year" ending 23 December 2012 (a six-month nancial year occasioned by a change in year-end from June to December). The change in year-end and the proposal of Ernst & Young are both intended to align the Group better with Walmart. Ernst & Young, and audit partner Allister Carshagen, are, in the Committees opinion, independent of the Company. R On an ongoing basis, the Committee reviews and approves the fees proposed by the External Auditors. R The appointment of the External Auditor complies with the Companies Act, as amended, and with all other legislation relating to the appointment of External Auditors. R The nature and extent of non-audit services provided by the External Auditors has been reviewed to ensure that the fees for such services do not become so signicant as to call into question their independence. R The nature and extent of future non-audit services have been dened and pre-approved. R No reportable irregularities were identied and reported by the External Auditors to the Committee. R The Committee is satised that the internal nancial controls of the Divisions and Group operated effectively throughout the 2012 nancial year and can be relied upon. In addition, the Committee is satised with the Groups accounting policies and that these have been appropriately and consistently applied throughout the 2012 nancial year. R The Committee reviewed this integrated annual report and recommended it to the Board for approval. R As at the date of this report, no complaints have been received relating to accounting practices and internal audit of the Company or to the content or auditing of the Companys nancial statements, or to any related matter. R The Massmart website (www.massmart.co.za) has a link enabling the general public to lodge complaints with the Committee. Since establishing this functionality in 2009, no complaints have been received.
Subsequent events
There are no subsequent events. On behalf of the Board
Philip Sigsworth Company Secretary 5 October 2012
189
INCOME STATEMENT
for the year ended 24 June 2012
Notes Revenue Sales Cost of sales Gross prot Other income Depreciation and amortisation Impairment of assets Employment costs Occupancy costs Foreign exchange loss Other operating costs Operating prot before Walmart costs Walmart transaction, integration and related costs Loss on disposal of Makro Zimbabwe Operating prot Finance costs Finance income Net nance costs Prot before taxation Taxation Prot for the year Prot attributable to: Owners of the parent Preference shareholders Non-controlling interests Prot for the year Earnings per share (cents) Basic EPS Diluted basic EPS Dividend/distribution per share (cents) Interim Final Total Headline earnings Headline earnings before Walmart costs (taxed) Headline EPS (cents) Headline EPS before Walmart costs (taxed) (cents) Diluted headline EPS (cents) Diluted headline EPS before Walmart costs (taxed) (cents) 11 12 12 12 12 12 12 12 12 10 4 5 7 4
2012 Rm 61,362.9 61,209.1 (49,957.1) 11,252.0 153.8 (594.2) (16.5) (4,336.1) (2,059.9) (72.5) (2,192.0) 2,134.6 (185.4) 1,949.2 (183.9) 68.8 (115.1) 1,834.1 (618.2) 1,215.9 1,173.5 6.1 36.3 1,215.9 544.4 532.7 252.0 146.0 398.0 1,216.7 1,363.6 564.5 632.6 552.3 619.0
2011 Rm 53,089.5 52,950.1 (43,281.8) 9,668.3 139.4 (476.3) (10.0) (3,766.3) (1,664.7) (72.3) (1,759.4) 2,058.7 (408.8) (38.6) 1,611.3 (140.4) 33.2 (107.2) 1,504.1 (585.3) 918.8 838.7 38.4 41.7 918.8 412.1 390.7 252.0 134.0 386.0 881.9 1,252.7 433.3 615.5 410.8 583.5
6 8 6 9 9
23
190
STATEMENT OF COMPREHENSIVE INCOME

2012 Rm Prot for the year Foreign currency translation reserve Revaluation of listed shares Cash ow hedges Less income tax relating to the cash ow hedges Other comprehensive income for the year, net of tax Total comprehensive income for the year Total comprehensive income attributable to: Owners of the parent Preference shareholders Non-controlling interests Total comprehensive income for the year 1,215.9 67.6 0.2 11.3 (3.2) 75.9 1,291.8 1,249.4 6.1 36.3 1,291.8
2011 Rm 918.8 2.6 0.1 (2.2) 0.6 1.1 919.9 839.8 38.4 41.7 919.9
PROFIT WATERFALL (Rm)
12,000
10,000
8,000
6,000
4,000
2,000
0
Gross prot Other income Depreciation Impairment of Employment and assets costs amortisation Occupancy costs Other operating costs Walmart costs Net nance costs Taxation Prot for the year
191
STATEMENT OF FINANCIAL POSITION

as at 24 June 2012
Notes Assets Non-current assets Property, plant and equipment Goodwill Other intangibles Investments Other nancial assets Deferred taxation Current assets Inventories Trade, other receivables and prepayments Taxation Cash and bank balances Restricted cash held on behalf of Massmart Employee Share Trusts beneciaries Non-current assets classied as held for sale Total assets Equity and liabilities Equity attributable to equity holders of the parent Share capital Share premium Other reserves Retained prot Minority interest Total equity Non-current liabilities Non-current liabilities: Interest-bearing Interest-free Non-current provisions Deferred taxation Current liabilities Trade and other payables Massmart Employee Share Trusts beneciaries liability Provisions Taxation Other current liabilities Bank overdrafts Non-current liabilities classied as held for sale Total equity and liabilities 26 39.3 27 28 38.10 8 24 24 25 18 21 21 22 23 19 20 38.10 39.3 8 13 14 15 16 17 18
2012 Rm 7,175.8 3,520.6 2,521.4 347.1 321.9 134.6 330.2 11,895.9 7,615.6 2,953.9 21.0 1,305.4 103.2 19,174.9 4,356.9 2.2 750.6 614.7 2,989.4 207.9 4,564.8 1,486.0 852.7 345.8 259.0 28.5 12,982.2 11,302.0 139.7 259.0 648.9 632.6 141.9 19,174.9
2011 Rm 5,846.7 2,717.8 2,049.4 309.0 367.6 137.9 265.0 11,427.6 6,199.7 2,562.7 22.5 1,549.1 1,093.6 17,274.3 3,965.9 2.0 743.9 444.4 2,775.6 215.8 4,181.7 1,205.2 598.7 417.3 167.0 22.2 11,887.4 9,381.8 1,093.6 26.8 170.6 409.9 804.7 17,274.3
192
STATEMENT OF CASH FLOWS

Notes Cash ow from operating activities Operating cash before working capital movements Working capital movements Cash generated from operations Interest received Interest paid Investment income Dividends received Taxation paid Dividends paid Net cash inow from operating activities Cash ow from investing activities Investment to maintain operations Investment to expand operations Proceeds on disposal of property, plant and equipment Proceeds on disposal of assets classied as held for sale Investment in subsidiaries Other investing activities including minority interests acquired Net cash outow from investing activities Cash ow from nancing activities Shares issued (net of costs) Increase in non-current liabilities Increase in current liabilities Net acquisition of treasury shares Net cash inow from nancing activities Net decrease in cash and cash equivalents Foreign exchange movements taken to statement of comprehensive income Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year 38.10 38.4 38.5 38.6 38.7 38.8 38.9 38.1 38.2
2012 Rm 2,614.6 53.9 2,668.5 68.8 (183.9) 0.1 3.8 (595.6) (838.8) 1,122.9 (637.1) (710.4) 10.2 6.5 (327.9) 50.7 (1,608.0) 239.4 233.5 (127.0) 345.9 (139.2) 67.6 744.4 672.8
2011 Rm 2,264.8 (625.4) 1,639.4 33.2 (140.4) 46.8 2.1 (645.1) (822.5) 113.5 (345.4) (843.0) 25.2 15.0 (171.0) 21.3 (1,297.9) 481.9 210.9 62.7 (140.2) 615.3 (569.1) 2.6 1,310.9 744.4
38.3
193
STATEMENT OF CHANGES IN EQUITY

Share capital Rm Balance as at June 2010 Total comprehensive income Dividends declared (note 11) Net changes in minority interests Distribution to minorities Minorities relating to acquisitions Share-based payment expense Share trust loss Issue of share capital (net of costs) Treasury shares (acquired)/realised Balance as at June 2011 Total comprehensive income Dividends declared (note 11) Net changes in minority interests Distribution to minorities Cost of acquiring minority interests Share-based payment expense Share trust loss Issue of share capital (net of costs) Treasury shares realised Balance as at June 2012 2.0 2.0
Share premium Rm 142.0 481.6 120.3 743.9
Other reserves* Rm (44.1) 1.1 (40.5) (16.8) (144.8) (245.1)
Sharebased payment reserve* Rm 508.7 180.8 689.5
Equity attributable to equity Retained holders of prot the parent Rm Rm 2,861.1 877.1 (822.4) (140.2) 2,775.6 3,469.7 878.2 (822.4) (40.5) (16.8) 180.8 (140.2) 481.6 (24.5) 3,965.9
Minority interests Rm 122.1 41.7 (1.0) (27.5) 80.5 215.8
Total Rm 3,591.8 919.9 (822.4) (41.5) (27.5) 63.7 180.8 (140.2) 481.6 (24.5) 4,181.7
0.2 2.2
6.7 750.6
75.9 (20.5) 1.1 (188.6)
113.8 803.3
1,179.6 (838.8) (127.0) 2,989.4
1,255.5 (838.8) (20.5) 113.8 (127.0) 0.2 7.8 4,356.9
36.3 (5.3) (38.9) 207.9
1,291.8 (838.8) (5.3) (38.9) (20.5) 113.8 (127.0) 0.2 7.8 4,564.8
* These reserves have been combined in the statement of nancial position as other reserves
194
NOTES TO THE ANNUAL FINANCIAL STATEMENTS

1. Accounting policies
Basis of accounting
The nancial statements have been prepared on the historical cost basis, except for the revaluation of certain non-current assets and nancial instruments to fair value. The nancial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) and the requirements of the Companies Act of South Africa. The principal accounting policies adopted are set out below. These policies have been consistently applied for the period under review.
Basis of consolidation
The Group annual nancial statements incorporate the annual nancial statements of the Company (Massmart Holdings Limited) and the entities it controls. Control is achieved where the Company has the power to govern the nancial and operating policies of an entity so as to obtain benets from its activities. The operating results of the subsidiaries are consolidated from the date on which effective control is transferred to the Group and up to the effective date of disposal. Separate disclosure is made of minority interests where the Groups investment is less than 100%. Minority interests consist of the amount of those interests at the date of the original business combination and the minoritys share of changes in equity since the date of the combination. Losses applicable to the minoritys interest in the subsidiarys equity are allocated against the interest of the Group, except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses. All inter-company transactions and balances, income and expenses are eliminated in full on consolidation. Where necessary, adjustments are made to the nancial statements of subsidiaries to bring the accounting policies used into line with those used by the Group.
Business combinations
READ MORE: PAGE 208 GROUP FINANCIAL STATEMENTS More detail on acquisitions within the financial year can be found in note3. The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquirees identiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 Business Combinations are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classied as held for sale in accordance with IFRS 5 Non-current
195
Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair value less costs to sell. The interest of minority shareholders in the acquiree is initially measured at the minoritys proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.
Segmental information
The Group is organised into four divisions for operational and management purposes. Massmart reports its primary business segment information on this basis and on a secondary basis by signicant geographical region based on location of assets. READ MORE: PAGE 267 GROUP FINANCIAL STATEMENTS More detail on segmental reporting can be found in note40.
Comparative gures
When an accounting policy is altered, comparative gures are restated if required by the applicable accounting statement and where material. During the last nancial year, the accounting policy for borrowing costs was amended. The change had no impact on the nancial results of the Group and hence no restatements were required in the Groups nancials.
Interests in associates
An associate is an enterprise over which the Group has signicant inuence, but that is neither a subsidiary nor an interest in a joint venture. Signicant inuence is the power to participate in the nancial and operating policy decisions of the investee but is not control or joint control over those policies. The results, assets and liabilities of associates are incorporated in these nancial statements using the equity method of accounting, except when the investment is classied as held for sale, in which case it is accounted for under IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. The carrying amount of such interests is reduced to recognise any decline, other than a temporary decline, in the value of individual investments. The carrying amount reects the Groups share of net assets of the associate and includes any goodwill on acquisition, less any impairment in the value of individual investments. Any excess of the cost of acquisition over the Groups share of the fair values of the identiable net assets of the associate at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of the investment. Any deciency of the cost of acquisition below the Groups share of the fair values of the identiable net assets of the associate at the date of acquisition (ie discount on acquisition) is credited to prot or loss in the period of acquisition. Where a Group enterprise transacts with an associate of the Massmart Group, unrealised prots and losses are eliminated to the extent of the Groups interest in the relevant associate, except where unrealised losses provide evidence of an impairment of the asset transferred. READ MORE: PAGE 223 GROUP FINANCIAL STATEMENTS More detail on the associate company held in the prior period can be found in note16.
196

CONTINUED
1. Accounting policies continued

Goodwill
READ MORE: PAGE 221 GROUP FINANCIAL STATEMENTS More detail on goodwill and the Groups cash-generating units can be found in note14. Goodwill arising on consolidation of a subsidiary represents the excess of the cost of acquisition over the Groups interest in the net fair value of the identiable assets, liabilities and contingent liabilities of a subsidiary or jointly controlled entity at the date of acquisition. Any deciency of the cost of acquisition below the fair values of the identiable net assets acquired (ie discount on acquisition) is credited to prot or loss in the period of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill is allocated to each of the Groups cashgenerating units expected to benet from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated rst to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period. On disposal of a subsidiary or jointly controlled entity, the attributable amount of goodwill is included in the determination of the prot or loss on disposal. The Groups policy for goodwill arising on the acquisition of an associate is described under Interests in associates above.
Non-current assets held for sale

READ MORE: PAGE 213 GROUP FINANCIAL STATEMENTS More detail on non-current assets held for sale can be found in note8. Non-current assets and disposal groups are classied as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale which should be expected to qualify for recognition as a completed sale within one year from the date of classication. Non-current assets (and disposal groups) classied as held for sale are measured at the lower of the assets previous carrying amount and fair value less costs to sell. READ MORE: PAGE 219 GROUP FINANCIAL STATEMENTS More detail on property, plant and equipment can be found in note13.
Property, plant and equipment

Freehold land is shown at cost and is not depreciated. Property, plant and equipment is shown at cost less accumulated depreciation, and reduced by any accumulated impairment losses. Property cost includes professional fees. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.
197
Where expenditure incurred on property, plant and equipment will lead to future economic benets accruing to the Group, these costs are capitalised. Repairs and maintenance are expensed as and when incurred. Depreciation is charged so as to write off the cost of assets, other than land, over their estimated useful lives, using the straight-line method, on the following bases:
R Buildings R Computer hardware R Leasehold improvements
R Fixtures, ttings, plant, equipment and motor vehicles
50 years 4 to 15 years 3 to 8 years Shorter of lease period or useful life
Useful life and residual value is reviewed annually and the prospective depreciation is adjusted accordingly. Assets held under nance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, over the term of the relevant lease. The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in prot or loss.
Intangible assets
Trademarks are measured initially at purchased cost. Intangible assets are shown at cost less accumulated amortisation, and reduced by any accumulated impairment losses. Amortisation is charged so as to write off the cost of assets over their estimated useful lives, using the straight-line method, on the following bases:
R Trademarks R Right of use R Computer software
READ MORE: PAGE 222 GROUP FINANCIAL STATEMENTS More detail on intangible assets can be found in note15.
10 years 10 years 3 to 8 years
Useful life is reviewed annually and the prospective depreciation is adjusted accordingly.
Impairment of tangible and intangible assets excluding goodwill

At each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets may be impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount for an individual asset, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identied, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identied. READ MORE: PAGE 219, PAGE 222 GROUP FINANCIAL STATEMENTS More detail on impairment can be found in note 13 (Property, plant
and equipment) and note 15 (Other intangibles).
198

CONTINUED

The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash ows are discounted to their present value using a discount rate that reects current market assessments of the time value of money and the risks specic to the asset. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. Impairment losses are recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of an asset (cash-generating unit) is increased to the revised estimate of its recoverable amount. This is done so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in prot or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
Revenue recognition
READ MORE: PAGE 209 GROUP FINANCIAL STATEMENTS More detail on revenue can be found in note4. Revenue of the Group comprises net sales, royalties and franchise fees, investment income, nance charges, property rentals, management and administration fees, commissions and fees, dividends, distribution income, income from insurance premium contributions and excludes value-added tax. Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts and sales-related taxes. Sales of goods are recognised when goods are delivered and title has passed. Interest income is accrued on a time basis, by reference to the principal outstanding and the interest rate applicable. READ MORE GROUP FINANCIAL STATEMENTS
More detail on finance leases can be found in: R Note 9 Net finance costs p.214 R Note 17 Other financial assets p.225 R Note 24 Non-current liabilities p.234 More detail on operating leases can be found in: R Note 6 Operating profit p.210 R Note 24 Non-current liabilities p.234 R Note 26 Trade and other payables p.236 R Note 32 Operating lease commitments p.243
Dividend income from investments is recognised when the shareholders rights to receive payment have been established. Other revenue is recognised on the accrual basis in accordance with the substance of the relevant agreements and measured at fair value of the consideration receivable.
Leasing
Leases are classied as nance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classied as operating leases. Assets held under nance leases are capitalised at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor, net of nance charges, is included in the statement of nancial position as a nance lease obligation. Lease payments are apportioned between nance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to prot or loss.
199
Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease.
Foreign currencies
The individual nancial statements of each Group entity are presented in the currency of the primary economic environment in which the entity operates (ie its functional currency). For the purpose of the consolidated nancial statements, the results and nancial position of each entity are expressed in the functional currency of the Group, and the presentation currency for the consolidated nancial statements. Transactions in currencies other than the Group reporting currency (South African Rands) are initially recorded at the rates of exchange prevailing on the dates of the transactions. In order to hedge its exposure to certain foreign exchange risks, the Group has a policy of covering forward all its foreign exchange liability transactions of a trading nature (see below for details of the Groups accounting policies in respect of such derivative nancial instruments). At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences arising on the settlement and retranslation of monetary items are included in prot and loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in prot and loss for the period. However, where fair value adjustments of nonmonetary items are recognised directly in equity, exchange differences arising on the retranslation of these non-monetary items are also recognised directly in equity. On consolidation, the assets and liabilities of the Groups overseas operations (including comparatives) are translated at exchange rates prevailing on the reporting date. Income and expense items are translated at the average exchange rates for the period unless exchange rates uctuate signicantly. Exchange differences arising, if any, are classied as equity and transferred to the Groups translation reserve. Such translation differences are recognised as income or as expenses in the period in which the operation is disposed of. The nancial statements (including comparatives) of foreign subsidiaries and associates that report in the currency of a hyperinationary economy are restated in terms of the measuring unit current at the reporting date before they are translated into South African Rands. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. READ MORE: GROUP FINANCIAL STATEMENTS
More detail on foreign currencies can be found in: R Note 6 Operating profit p.210 R Note 7 Foreign exchange gains and losses p.211 R Note 22 Other reserves p.232
200

CONTINUED

Government grants
READ MORE: PAGE 242 GROUP FINANCIAL STATEMENTS More detail on retirement benefit costs can be found in note30. Government grants for staff training costs are recognised in prot or loss over the periods necessary to match them with the related costs and are deducted in reporting the related expense. Income is not recognised until there is reasonable assurance that the grants will be received.
Retirement benet costs

Payments to dened contribution plans are charged as an expense as they fall due. There are no dened retirement benet plans in the Group.
Post-retirement healthcare benets

READ MORE: PAGE 235 GROUP FINANCIAL STATEMENTS More detail on post-retirement medical aid can be found in note25. Post-retirement healthcare benets are provided by certain Group companies to qualifying employees and pensioners. The healthcare benet costs are determined through annual actuarial valuations by independent consulting actuaries using the projected unit credit method. Such gains or losses are recognised over the expected remaining working lives of the participating members. Adjustments are made annually through prot or loss for provisions held for members who have already retired. Actuarial gains and losses are recognised in full in the period in which they occur.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax. READ MORE: PAGE 215, PAGE 226, GROUP FINANCIAL STATEMENTS More detail on taxation can be found in note 10 (Taxation) and note 18 (Deferred taxation). The tax charge payable is based on taxable prot for the year. Taxable prot differs from prot as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Groups liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date. Deferred taxation is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amounts of assets and liabilities in the nancial statements and the corresponding tax bases used in the computation of taxable prot. In general, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable prot will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities, which affects neither the tax prot nor the accounting prot at the time of the transaction. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
201
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufcient taxable prots will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability settled. Deferred tax is charged or credited in the income statement, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. Secondary Taxation on Companies (STC) is payable on net dividends paid and is recognised as a tax charge in prot or loss in the year it is incurred. Any tax on capital gains is deferred if the proceeds of the sale of the assets are invested in similar assets, but the tax will ultimately become payable on sale of that similar asset.
Inventories
Inventories, which consist of merchandise, are valued at the lower of cost and net realisable value. Cost is calculated on the weighted-average method. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. READ MORE: PAGE 227 GROUP FINANCIAL STATEMENTS More detail on inventories can be found in note19.
Financial instruments
Financial assets and nancial liabilities are recognised on the Groups statement of nancial position when the Group becomes a party to the contractual provisions of the instrument. Financial assets are classied into the following specied categories:
R Fair value through prot or loss (FVTPL)
These are held at fair value and any adjustments to fair value are taken to the income statement. Listed investments are carried at market value by reference to stock exchange quoted selling prices. R Loans and receivables These are held at amortised cost less any impairment losses recognised to reect irrecoverable amounts. R Held-to-maturity investments These are held at amortised cost less any impairment losses recognised to reect irrecoverable amounts. R Available-for-sale investments These are held at fair value and any adjustment to fair value is taken to equity. The classication depends on the nature and purpose of the nancial assets and is determined at the time of initial recognition. Effective interest method This is a method of calculating the amortised cost of a nancial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the nancial asset or, where appropriate, a shorter period.
READ MORE: PAGES 253 266 GROUP FINANCIAL STATEMENTS More detail on financial instruments can be found in note39.
202

CONTINUED

Income is recognised on an effective interest basis for debt instruments other than those nancial assets designated as at fair value through prot or loss. Loans and receivables Trade receivables, loans and other receivables are measured initially at fair value, and are subsequently measured at amortised cost using the effective interest method. Appropriate allowances for estimated irrecoverable amounts are recognised in prot and loss when there is objective evidence that the asset is impaired. Cash and cash equivalents Cash and cash equivalents are measured at fair value. For purposes of the statement of cash ows, cash and cash equivalents comprise cash on hand, deposits held on call with banks and investments in money-market instruments that are readily convertible to a known amount of cash and are subject to an insignicant risk of change in value, net of bank overdrafts. Investments Investments are recognised and derecognised on a trade date basis where the purchase or sale of an investment is under contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, plus directly attributable transaction costs. At subsequent reporting dates, debt securities that the Group has the express intention and ability to hold to maturity (held-to-maturity debt securities) are measured at amortised cost using the effective interest method, less any impairment loss recognised to reect irrecoverable amounts. An impairment loss is recognised in prot or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the investments carrying amount and the present value of estimated future cash ows discounted at the effective interest rate computed at initial recognition. Impairment losses are reversed in subsequent periods when an increase in the investments recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the investment at the date the impairment is reversed shall not exceed what the amortised cost would have been had the impairment not been recognised. Investments other than held-to-maturity debt securities are classied as either investments held-for-trading or as available-for-sale, and are subsequently measured at fair value. Where securities are held for trading purposes, gains and losses arising from changes in fair value are included in prot or loss for the period. Unrealised gains and losses on available-for-sale investments are recognised directly in equity until the disposal or impairment of the relevant investment, at which time the cumulative gain or loss previously recognised in equity is included in the prot or loss for the period. Impairment losses recognised in prot or loss for equity investments classied as available-for-sale are not subsequently
READ MORE: PAGE 223 GROUP FINANCIAL STATEMENTS More detail on investments can be found in note16.
203
reversed through prot or loss. Impairment losses recognised in prot or loss for debt instruments classied as available-for-sale are subsequently reversed if an increase in the fair value of the instrument can be objectively related to an event occurring after the recognition of the impairment loss. Listed investments are carried at market value, which is calculated by reference to stock exchange quoted selling prices at the close of business on the reporting date. Financial liabilities and equity Financial liabilities are classied according to the substance of the contractual arrangements entered into and the denitions of a nancial liability and an equity instrument. Debt instruments issued, which carry a right to convert to equity that is dependent on the outcome of uncertainties beyond the control of both the Group and the holder, are classied as liabilities, except where conversion is certain. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Financial liabilities, other than derivative instruments, are recognised at amortised cost, comprising original debt less principal payments and amortisations. Financial liabilities include nance lease obligations, interest-bearing bank loans and overdrafts, and trade and other payables. The accounting policy for nance lease obligations is outlined on page 198. Bank borrowings Interest-bearing bank loans and overdrafts are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the Groups accounting policy for borrowing costs (see below). Trade payables Trade and other payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest method. Equity instruments Equity instruments are recorded as the proceeds received, net of direct issue costs. Derivative nancial instruments and hedge accounting The Groups activities expose it primarily to the nancial risks of changes in foreign exchange rates and interest rates. The Group uses foreign exchange forward contracts to hedge its exposure to foreign currency uctuations relating to certain rm trading commitments. The use of nancial derivatives is governed by the Groups policies approved by the Board, which provide written principles on the use of nancial derivatives consistent with the Groups risk management strategy. The Group does not trade in derivative nancial instruments for speculative purposes.
READ MORE: PAGE 198 GROUP FINANCIAL STATEMENTS The accounting policy for finance lease lease obligations.
204

CONTINUED

Derivative nancial instruments are initially measured at fair value on the contract date, and are re-measured to fair value at subsequent reporting dates. The effective portion of the changes in fair value of derivative nancial instruments that are designated and qualify as cash ow hedges are recognised directly in equity. The gain or loss relating to the ineffective portion is recognised immediately in prot or loss. If the hedged rm commitment or forecast transaction results in the recognition of an asset or liability, then, at the time the asset or liability is recognised, the associated gains or losses on the derivative that had previously been recognised in equity are included in the initial measurement of the asset or liability. Amounts deferred in equity are recognised in prot or loss in the same period in which the hedged rm commitment affects prot or loss. Changes in the fair value of derivative nancial instruments that do not qualify as cash ow hedges are recognised in prot or loss as they arise. The hedge is de-designated as a cash ow hedge at the Shipped on Board date, and discontinued when the hedging instrument is sold, expired, terminated, exercised, or no longer qualies for hedge accounting. At the time, any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the forecast transaction is recognised in prot or loss. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to prot or loss for the period.
Provisions
READ MORE: PAGE 235, PAGE 237 GROUP FINANCIAL STATEMENTS More detail on provisions can be found in note25 and note 27. Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, and it is probable that the Group will be required to settle that obligation. Provisions are measured at managements best estimate of the expenditure required to settle the obligation at the reporting date, and are discounted to present value where the effect is material.
Share-based payments
The Group issues equity-settled share-based payments to employees who are beneciaries of the various Group share schemes. Equity-settled share-based payments are measured at fair value (excluding the effect of non-marketbased vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Groups estimate of shares that will eventually vest and adjusted for the effect of non-market-based vesting conditions. Fair value is measured by use of a binomial model. The expected life used in the model has been adjusted, based on managements best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.
READ MORE: PAGE 232 GROUP FINANCIAL STATEMENTS More detail on share-based payments can be found in note22.
Borrowing costs
All borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset. All other borrowing costs are recognised as an expense in the period in which they are incurred.
205
2. Technical review
Massmart rst adopted International Financial Reporting Standards (IFRS) with effect from 1 July 2005. Subsequent amendments have been made to the standards, resulting in revised issues. All these amendments have been complied with in line with the transitional provisions of that standard. There has been no impact on the business, nancial or practical of any amendments become effective in the past nancial year. At the date of authorisation of these nancial statements, the following relevant standards were in issue but not yet effective. The Group has elected not to early adopt any of these standards. As the Group has changed its year-end to December effective December 2012, this will impact the adoption dates on the standards listed below and will be different to what was previously reported on. IFRS 7 Financial Instruments: Disclosure amended in December 2011 relates to the offsetting of assets and liabilities. This standard becomes effective for year-ends beginning on or after 1 January 2013 which is the Groups December 2013 year-end. This standard will have no nancial or disclosure impact on the Groups results. IFRS 9 Financial Instruments Phase One Classication and measurement of nancial assets and liabilities is effective for year-ends beginning on or after 1 January 2015, the Groups December 2015 nancial year. IFRS 9, once complete, will replace IAS 39 Financial Instruments: Recognition and Measurement. The second and third Phases of the project will deal with the impairment of nancial instruments and hedge accounting, respectively. There is no nancial impact on the Groups results resulting from Phase One, however, there will be disclosure changes. IFRS 10 Consolidated Financial Statements replaces the consolidation requirements in SIC-12 Consolidation Special Purpose Entities and IAS 27 Consolidated and Separate Financial Statements. This standard builds on the existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated nancial statements of the parent company and provides additional guidance to assist in the determination of control where this is difcult to assess. IFRS 10 will have no nancial impact on the Group results but the impact on the Groups disclosure is still under review. This standard is effective for the Groups December 2013 nancial year. IFRS 11 Joint Arrangements deals with the accounting for joint arrangements and focuses on the rights and obligations of the arrangement, rather than its legal form. The standard requires a single method for accounting for interests in jointly controlled entities. IFRS 11 is effective for the Groups December 2013 nancial year. As the Group has no joint arrangements, this standard has no nancial or disclosure impact on the Groups results. IFRS 12 Disclosure of Interests in Other Entities is a comprehensive standard on disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off-balance sheet vehicles. IFRS 12 requires sufcient transparency to enable users of nancial statements to evaluate the nature of, and risks associated with, its interests in other entities and the effects of those interests on its nancial position, nancial performance and cash ows. The standard is effective for the Groups December 2013 nancial year and will have no nancial impact on the Groups results, except for additional disclosure.
206

CONTINUED
2. Technical review continued

IFRS 13 Fair Value Measurement provides guidance on fair value measurement and provides additional disclosure requirements. This standard is effective for the Groups December 2013 nancial year and we anticipate that it will have a limited nancial impact, if any, on the Groups results. Currently the Group has extensive nancial instrument disclosure and anticipate this standard to have a limited impact on disclosure as well. IAS 1 Presentation of Financial Statements issued in June 2011 contains a small amendment to revise the way other comprehensive income is presented. This standard requires other comprehensive income to be separated into items that may in a future period be reclassied to prot or loss, and items that may never be reclassied to prot or loss. This standard becomes effective for year-ends beginning on or after 1 July 2012 which is the Groups six-month December 2012 year-end. This standard will have no nancial impact on the Groups results, but will have a disclosure impact. IAS 12 Income Taxes issued in December 2010 contains a limited scope amendment relating to the recovery of the underlying assets. This standard becomes effective for year-ends beginning on or after 1 January 2012 which is the Groups six-month December 2012 year-end. This standard will have no nancial or disclosure impact on the Groups results. IAS 19 Employee Benets amended in June 2011 resulting from the post-employment benets and termination benets projects. A signicant amendment is the removal of the corridor approach for recognising actuarial gains and losses, requiring full balance sheet recognition of surpluses and decits. As the Group already accounts for its Post Retirement Medical Aid this way (being the only dened plan in the Group), this standard has no nancial or disclosure impact on the Groups results. This standard becomes effective for year-ends beginning on or after 1 January 2013 which is the Groups December 2013 year-end. IAS 27 Separate Financial Statements was amended in May 2011 to take into account the changes required in this standard due to the introduction of IFRS 10 Consolidated Financial Statements. This standard becomes effective for year-ends beginning on or after 1 January 2013 which is the Groups December 2013 year-end. This standard will have no nancial impact on the Groups results. The impact on the Groups disclosure is still under review. IAS 28 Investments in Associates and Joint Ventures was amended in May 2011 to take into account the changes required in this standard due to the introduction of IFRS 11 Joint Arrangements. This standard becomes effective for year-ends beginning on or after 1 January 2013 which is the Groups December 2013 year-end. This standard will have no nancial or disclosure impact on the Groups results. IAS 32 Financial Instruments: Presentation amended in December 2011 relates to the offsetting of assets and liabilities. This standard becomes effective for year-ends beginning on or after 1 January 2013 which is the Groups December 2013 year-end. This standard will have no nancial or disclosure impact on the Groups results.
207
Whilst the Group does not provide comments on Exposure Drafts, ED 288 Exposure Draft of an Amendment to Statements of Generally Accepted Accounting Practice Leases issued in August 2010, remains an area of focus. This ED contains various proposals to improve the nancial reporting of lease contracts. The accounting treatment under the existing standard IAS 17 Leases is determined by the classication of the lease. Classication as an operating lease results in the lessee not recording any assets or liabilities in the statement of nancial position under IFRS. This results in many investors having to adjust the nancial statements (using disclosures and other available information) to estimate the effects of lessees operating leases for the purpose of investment analysis. The proposed ED would result in a consistent approach to lease accounting for both lessees and lessors a right-of-use approach. Among other changes, this approach would result in the liability for payments arising under the lease contract and the right to use the underlying asset being included in the lessees statement of nancial position, thus providing more complete and useful information to investors and other users of nancial statements. As part of the transition, we would remove the lease liability that is currently accounted for in the statement of nancial position resulting from SAICA Circular 07/2005: Operating Leases that required us to smooth operating leases. We anticipate the exposure draft becoming a standard in approximately two years. We are currently unable to estimate accurately the nancial impact on the Group, although understood to be material, as the change proposed has raised some concerns in the nancial community. Once these issues have been claried, we will indicate the nancial impact on the Groups results. Two circulars issued in the current nancial year relate to public companies. Circular 3/2012 Headline Earnings issued in June 2012 provides additional guidance and clarity to the headline earnings calculation and had no nancial or disclosure impact on the Groups results. Circular 3/2011 Impact of the Dividends Tax on Deferred Tax Assets Arising From Unutilised Secondary Tax on Companies (STC) Credits was issued in February 2012. All the STC credits in the Group were utilised before dividends tax became effective and thus there is no nancial or disclosure impact on the Groups results. The Groups accounting policies are governed by IFRS and the AC 500 series as issued by the Accounting Practices Board and guidance has been obtained from effective IFRICs and circulars. Due to the nature and volatility of Exposure Drafts (EDs), no review has been provided, except for the lease exposure draft specically discussed above. The Group believes that accounting standards set the minimum requirement for nancial reporting, and thus more information is provided than required. The nancial statements in this annual report have been prepared with the aim of exposing the reader to a very detailed view of the numbers, using a simplied approach, in the hope of facilitating a deeper and informed understanding of the business.
208

CONTINUED
3. Acquisition of subsidiaries
Subsidiaries acquired Purchasing division 2012 Rhino Cash and Carry Group Fruitspot 2011 JD's Cash and Carry Savemoor Cash and Carry Rahme Guys International Cambridge Nongoma Liquorland Express Mica Cedar Square Masscash Masswarehouse Masscash Masscash Masscash Masscash Masscash Massbuild Principal activity Retail Cash and Carry Distribution Retail Cash and Carry Retail Cash and Carry Retail Cash and Carry Retail Cash and Carry Wholesale Cash and Carry Home improvement/ hardware Date of acquisition 1 March 2012 2 January 2012 1 November 2010 15 November 2010 1 July 2010 1 July 2010 1 March 2011 1 September 2010 Control acquired (%) 100 100 100 100 100 100 100 100
51% of Kangela was acquired on 29 June 2009, a further 49% was acquired on 1 June 2011, the prior nancial year.
Analysis of assets and liabilities acquired The net asset value of the businesses acquired during the year was R40.9 million (2011: R46.0 million) on the date of acquisition. Net cash outow on acquisition 2012 Rm Total purchase price Less: Cash and cash equivalents of subsidiary Net cash position for the Group
R The net cash outow as reected above can be found in note 38.8 on page 252. R Liabilities were raised on the business acquisitions for R182.3 million. The long-term portion can be found in note
2011 Rm (170.3) (0.7) (171.0)
(346.7) 18.8 (327.9)
25 on page 235 and the short-term portion can be found in note 27 on page 237. Goodwill arising on acquisition
R Goodwill arose in the business combinations because the cost of the combination included a control premium. In
addition, the consideration paid for the combination effectively included amounts in relation to the benet of the expected synergies, revenue growth and future market development. These benets are not recognised separately from goodwill as the future economic benets arising from them cannot be reliably measured. R Goodwill was recognised in the current and prior year on all the acquisitions listed above. R Goodwill of R486.4 million (2011: R185.0 million) raised on the acquisitions reected above, is recognised in note 14 on page 221.
209
4. Revenue
2012 Rm Sales Change in fair value of nancial assets carried at fair value through prot or loss Instalment-sale nance charges Dividends from listed investments Dividends from unlisted investments Royalties and franchise fees Management and administration fees Property rentals Commissions and fees Distribution income Income from insurance premium contributions Other 61,209.1 11.4 1.9 0.1 3.8 33.8 5.1 2.1 52.0 1.5 9.4 32.7 61,362.9 2011 Rm 52,950.1 56.6 1.8 2.1 34.3 3.7 3.4 20.3 4.2 13.0 53,089.5
5. Impairment of assets
Note Goodwill 14 2012 Rm 16.5 16.5 2011 Rm 10.0 10.0
R The impairment of assets in the current and prior year relates to the impairment of certain acquired goodwill
in Masscash.
210

CONTINUED
6. Operating prot
2012 Rm Credits to operating prot include: Foreign exchange prot Prot on disposal of tangible and intangible assets Charges to operating prot include: Depreciation and amortisation (owned assets): Buildings Fixtures, ttings, plant and equipment Computer hardware Leasehold improvements Motor vehicles Computer software Right of use Trademarks Depreciation and amortisation (leased assets): Buildings Fixtures, ttings, plant and equipment Computer equipment Motor vehicles Foreign exchange loss Share-based payment expense: Massmart Holdings Limited Employee Share Trust Massmart Thuthukani Empowerment Trust Massmart Black Scarce Skills Trust Operating lease charges: Land and buildings Plant and equipment Computer equipment Motor vehicles Loss on disposal of tangible and intangible assets Walmart transaction, integration and related costs: Advisor fees Share-based payment charge Supplier fund Depreciation charge on motor vehicles Integration and related costs Fees payable: Administrative and outsourcing services Consulting Auditors remuneration: Current year fee Prior year underprovision Tax advice and reviews Consulting and business reviews Contract assignments 2.4 570.6 11.3 348.8 68.5 45.5 24.1 68.3 3.7 0.4 23.6 1.9 5.0 7.7 9.0 72.5 66.1 44.4 12.8 8.9 1,394.5 1,286.7 62.9 3.5 41.4 15.0 185.4 47.7 0.6 137.1 136.2 75.2 61.0 27.9 20.6 0.1 5.6 1.1 0.5 2011 Rm 89.0 2.3 454.1 10.7 271.9 59.7 36.6 18.7 54.3 1.9 0.3 22.2 2.0 3.0 6.7 10.5 161.3 110.7 68.8 33.5 8.4 1,136.6 1,083.5 35.2 3.5 14.4 6.3 408.8 238.7 70.1 100.0 88.5 70.9 17.6 24.9 17.3 0.3 4.3 1.7 1.3
211
7. Foreign exchange gains and losses

2012 Rm Foreign exchange loss arising from loans to African operations* Foreign exchange gain arising from hedges Foreign exchange gain/(loss) arising from an investment in offshore trading structure Foreign exchange (loss)/gain arising from the translation of foreign creditors (124.7) 5.9 48.2 (1.9) (72.5) 2011 Rm (52.2) 0.5 (21.5) 0.9 (72.3)
* Includes foreign exchange gain/(loss) arising from the translation of other small monetary loan balances as described in the explanation below.
The Group was exposed to the following currencies for the period under review and their year-end exchange rates were: Country United States United Kingdom European Union Botswana Ghana Malawi Mauritius Mozambique Namibia Nigeria Tanzania Uganda Zambia
Source: Oanda Currency converter
Currency US Dollar Pound Sterling Euro Botswana Pula Ghanaian New Cedi Malawian Kwacha Mauritian Rupee Mozambican New Metical Namibian Dollar Nigerian Naira Tanzanian Shilling Ugandan Shilling Zambian Kwacha
Spot rate June 2010 7.6740 11.5606 9.4155 1.1134 5.4126 0.0524 0.2240 0.2257 1.0000 0.0518 0.0054 0.0034 0.0015
Spot rate June 2011 6.9508 11.0958 9.8651 1.0680 4.6419 0.0469 0.2524 0.2456 1.0000 0.0449 0.0044 0.0028 0.0015
Spot rate June 2012 8.4049 13.1009 10.5201 1.0854 4.3563 0.0311 0.2730 0.3037 1.0000 0.0517 0.0053 0.0034 0.0016
Foreign exchange loss arising from loans to African operations In Massdiscounters, a loan is initially provided to African operations as start-up capital and then maintained as a working capital loan. This loan attracts foreign exchange gains/(losses) when it is translated into the functional currency of that entity at year-end. Where the operation holds other monetary balances not in its functional currency, that balance will also attract foreign exchange gains/(losses) when translated at year-end. These balances are not material and have been ignored in the explanation overleaf.
212

CONTINUED
7. Foreign exchange gains and losses continued

The graph below indicates the appreciation (rise in line) or depreciation (fall in line) of each currency to the Rand in the past year. In May, the Malawian Kwacha devalued by 50%. This offset the gains experienced by the other African currencies which strengthened against the Rand in the current nancial year.
AFRICAN CURRENCIES SPOT RATE RELATIVE TO THE RAND (BASED TO JUNE 2011)
1.3 1.2 1.1 1.0 0.9 0.8 0.7 0.6
Jun 2011 Sep 2011 Dec 2011 Mar 2012 Jun 2012
Botswana Pula Namibian Dollar
Ghanaian New Cedi Nigerian Naira
Malawian Kwacha Tanzanian Shilling
Mauritian Rupee Ugandan Shilling
Mozambican New Metical Zambian Kwacha
Where there is a depreciation of the African currency (alternatively, a strengthening in the Rand) the resulting impact is a foreign exchange loss on the loan. From the graph, it is evident that almost all the African currencies strengthened against the Rand (only the Ghanaian New Cedi and Zambian Kwacha closed weaker against the Rand), which would explain a foreign exchange gain in the income statement. In May, the Malawian Kwacha devalued by 50% which offset the gains experienced by the other African currencies. In the prior nancial year, the African currencies depreciated against the Rand (only the Rupee and New Metical closed stronger against the Rand), which explains the foreign exchange loss in that period. The African operations trade in their local currency, which for reporting purposes is also their functional currency. The foreign exchange gain/(loss) that arises when translating the foreign operation into Rands (the Groups presentation currency) is accounted for in the FCTR on the statement of nancial position. Further details on these translations can be found in note 22 on page 232. Foreign exchange gain arising from hedges The Group uses foreign exchange forward contracts to hedge its exposure to foreign currency uctuations relating to certain rm trading commitments. The foreign exchange gain that arises from the hedges is recognised in prot or loss.
213
Most of the Group FECs are US Dollar denominated. The graph below shows that the Rand closed relatively weaker on the US Dollar in the current year, which gave rise to a foreign exchange gain on the FECs:
US DOLLAR SPOT RATE RELATIVE TO THE RAND

8,500
8,4049 8,1297
8,100 7,700 7,300
7,6740
6,9508
6,900 6,500
Jun 2010 Dec 2010 Jun 2011 Dec 2011 Jun 2012
6,6378
Foreign exchange gain/(loss) arising from an investment in offshore trading structure The Groups offshore trading structure is a US Dollar-denominated investment. The graph above shows that the Rand closed relatively weaker on the US Dollar in the current year, which gave rise to a foreign exchange gain on this investment. In the prior year the Rand closed relatively stronger on the US Dollar, which gave rise to a foreign exchange loss on this investment. Foreign exchange (loss)/gain arising from the translation of foreign creditors Foreign creditors resulting from foreign stock purchases are translated into functional currency at year-end and the exchange difference is accounted for in prot or loss. As the bulk of foreign creditors are recorded in US Dollars, this exchange difference can be explained by the movement in the Rand against the US Dollar as illustrated in the graph above. However, as payments are made to creditors throughout the year that attract different rates of exchange, the entire exchange gain/(loss) cannot be linked to the closing Rand/US Dollar movement.
8. Events with nancial implications in the current or prior year

Hyperination In the 2007 nancial year, the decision was made to prospectively deconsolidate the results of the Zimbabwean Makro operations. In terms of IAS 27 Consolidated and Separate Financial Statements, control is dened as the power to govern the nancial and operating policies of an entity so as to obtain benets from its activities. It is evident from the current social, political and economic developments within Zimbabwe that control does not exist. This has been evidenced through the forcing of retailers to sell goods at predetermined prices and the inablility of the Massmart Group to repatriate monies. It is Massmarts view that, throughout the 2012 nancial year, it did not have control over the Zimbabwean operations and as such the results remain deconsolidated. On deconsolidation in 2007, the investment in Makro Zimbabwe was reected as an available-for-sale nancial asset. The fair value of this asset was determined to be zero and the adjustment taken to equity as a reserve. For the period under review the fair value was again assessed as zero and as a result there has been no fair value movement. Details can be found in note 16 on page 223.
214

CONTINUED
8. Events with nancial implications in the current or prior year continued

The agreement to sell the assets of Makro Zimbabwe was signed in November 2010 and was nalised in late February 2011. The loss on sale of R38.6 million represents costs relating to the disposal of the Makro Zimbabwe stores. Non-current assets classied as held for sale A small cash and carry business in Mozambique, currently reported in the Masscash segment, is in the process of being sold. Another cash and carry business in South Africa, also reported in the Masscash segment, has been sold. The decision to dispose of the businesses was taken when the nancial results indicated that the businesses were not producing the long-term gains anticipated. The assets and liabilities of the Mozambican business have been revalued to the lower of carrying value and fair value less costs to sell and disclosed separately as non-current in the statement of nancial position. 2012 Rm (7.9) (12.1) 16.3 13 15 18 8.6 0.4 7.3 86.9 62.5 22.5 1.9 103.2 141.9 141.9 141.9
Notes
Included in the income statement in other operating costs: Fair value adjustment on assets classied as held for sale Loss on disposal of business Included in the statement of nancial position: Non-current assets Property, plant and equipment Other intangibles Deferred taxation Current assets Inventories Trade, other receivables and prepayments Taxation Total assets Current liabilities Trade and other payables Total liabilities
9. Net nance costs

2012 Rm Finance costs Interest on bank overdrafts and loans Interest on obligations under nance leases 174.6 9.3 183.9 Finance income Income from investments, receivables and bank accounts 68.8 68.8
R Details on the loans and nance leases can be found in note 24 on page 234.
2011 Rm 131.4 9.0 140.4 33.2 33.2
215
10. Taxation
2012 Rm Current year South African normal taxation: Current taxation Deferred taxation Foreign taxation: Current taxation Deferred taxation Withholding tax Secondary taxation on companies Taxation effect of participation in export partnerships Total Prior year over-provision: South African normal taxation: Current taxation Deferred taxation Foreign taxation: Current taxation Deferred taxation (impairment of deferred taxation assets) 2011 Rm
540.8 (34.1) 72.6 (32.8) (2.8) 74.1 0.6 618.4
503.1 (20.5) 39.5 (0.6) 83.9 0.3 605.7
(6.7) 2.6 5.9 (2.0) (0.2)
(15.0) (5.5) (0.1) 0.2 (20.4) 585.3
Taxation as reected in the Income Statement
618.2
R Two companies in the Group participate in Trencor export partnerships. As the companies are liable for the tax effect
of the participation, the amount is classied as a taxation charge. Details on the export partnership can be found in note 16 on page 223. 2012 % The rate of taxation is reconciled as follows: Standard corporate taxation rate Exempt income Disallowable expenditure Foreign income Prior year over-provision (including impairment) Secondary taxation on companies Other Effective rate 28.0 (0.1) 3.0 0.7 4.3 (2.2) 33.7 2011 % 28.0 (0.4) 10.7 0.9 (1.4) 5.6 (4.5) 38.9
216

CONTINUED
11. Dividends paid to shareholders

2012 Rm Final cash dividend No 23 (2011: No 21) Interim cash dividend No 24 (2011: No 22) Final Thuthukani preference share dividend No 10 (2011: No 8) Interim Thuthukani preference share dividend No 11 (2011: No 9) Total dividends paid 288.6 544.1 2.5 3.6 838.8 2011 Rm 270.1 514.0 6.8 31.5 822.4
R No 21 of 134.0 cents declared on 25 August 2010 and paid on 20 September 2010 (R270.1 million). R No 22 of 252.0 cents declared on 23 February 2011 and paid on 22 March 2011 (R514.0 million). R No 23 of 134.0 cents declared on 24 August 2011 and paid on 19 September 2011 (R288.6 million). R No 24 of 252.0 cents declared on 21 February 2012 and paid on 19 March 2012 (R544.1 million). R No 25 of 146.0 cents declared on 21 August 2012 and paid on 17 September 2012 (R315.6 million). R No 8 of 134.0 cents declared on 25 August 2010 and paid on 20 September 2010 to the Massmart Thuthukani
Empowerment Trust (R23.6 million).

R No 9 of 252.0 cents declared on 23 February 2011 and paid on 22 March 2011 to the Massmart Thuthukani

R No 10 of 134.0 cents declared on 24 August 2011 and paid on 19 September 2011 to the Massmart Thuthukani

R No 11 of 252.0 cents declared on 21 February 2011 and paid on 19 March 2012 to the Massmart Thuthukani

R No 12 of 146.0 cents declared on 21 August 2012 and paid on 17 September 2012 to the Massmart Thuthukani
Empowerment Trust (R1.4 million). Withholding tax of 15% was applied to the dividends declared on 21 August 2012 and paid on 17 September 2012, in line with the new Dividends Taxation legislation.
217
12. Earnings per share

Ordinary shares In issue Weighted average Diluted weighted average 2012 Pretaxation Rm Attributable and headline earnings per share The calculation of attributable and headline earnings per share is based on the weighted average number of ordinary shares. The calculation is reconciled as follows: Prot attributable to the equity holders of the parent Adjustments after minorities: Loss/(prot) on disposal of tangible assets Loss on disposal of business Fair value adjustments on assets classied as held for sale Impairment of assets Headline earnings Walmart costs Headline earnings before Walmart costs Posttaxation Rm Pretaxation Rm 2012 Number of shares 216,124,461 215,539,458 220,284,100 2011 Posttaxation Rm 2011 Number of shares 213,883,460 203,516,310 214,683,140
Cents/share
Cents/share
1,173.5
544.4
838.7
412.1
12.6 12.1 7.9 16.5
8.9 9.9 7.9 16.5 1,216.7 146.9
4.1 4.6 3.7 7.7 564.5 68.1
(2.9) 34.9 10.0
(1.7) 34.9 10.0 881.9 370.8
(0.8) 17.1 4.9 433.3 182.2
185.4
408.8
1,363.6
632.6
1,252.7
615.5
218

CONTINUED
12. Earnings per share continued

2012 Rm Diluted attributable and diluted headline earnings per share The calculation of diluted attributable and diluted headline earnings per share is based on the weighted average number of ordinary shares. The calculation is reconciled as follows: Prot attributable to the equity holders of the parent Adjustment for impact of issuing ordinary shares Diluted attributable earnings Headline earnings Adjustment for impact of issuing ordinary shares Diluted headline earnings Diluted headline earnings before Walmart costs 2011 Rm 2012 Cents/share 2011 Cents/share
1,173.5 1,173.5 1,216.7 1,216.7
838.7 838.7 881.9 881.9
544.4 (11.7) 532.7 564.5 (12.2) 552.3
412.1 (21.4) 390.7 433.3 (22.5) 410.8
1,363.6
1,252.7
619.0 2012 Number of shares
583.5 2011 Number of shares
Weighted average shares outstanding Weighted average shares outstanding for basic and headline earnings per share Potentially dilutive ordinary shares resulting from outstanding options Weighted average shares outstanding for diluted and diluted headline earnings per share
215,539,458 4,744,642
203,516,310 11,166,830
220,284,100
214,683,140
R Both the Thuthukani A preference shares and the Black Scarce Skills B preference shares are predominantly
dilutive and have a small effect on diluted basic and diluted headline earnings per share.
219
13. Property, plant and equipment

Cost/carrying value Rm 2012 Owned assets Freehold land and buildings Fixtures, ttings, plant and equipment Computer hardware Leasehold improvements Motor vehicles Accumulated depreciation Rm Net book value Rm
909.9 3,358.1 464.7 598.4 166.7 5,497.8
52.4 1,476.2 283.4 206.0 62.1 2,080.1 15.1 7.2 11.4 20.5 54.2 2,134.3
857.5 1,881.9 181.3 392.4 104.6 3,417.7 34.4 32.5 16.1 19.9 102.9 3,520.6
Capitalised leased assets Freehold land and buildings Fixtures, ttings, plant and equipment Computer hardware Motor vehicles
49.5 39.7 27.5 40.4 157.1
Total 2011 Owned assets Freehold land and buildings Fixtures, ttings, plant and equipment Computer hardware Leasehold improvements Motor vehicles
5,654.9
793.2 2,680.6 418.3 464.1 109.5 4,465.7
42.0 1,273.3 286.5 160.4 47.6 1,809.8 13.2 10.3 13.1 19.9 56.5 1,866.3
751.2 1,407.3 131.8 303.7 61.9 2,655.9 36.3 4.9 8.3 12.4 61.9 2,717.8
Capitalised leased assets Freehold land and buildings Fixtures, ttings, plant and equipment Computer hardware Motor vehicles
49.5 15.2 21.4 32.3 118.4
Total
4,584.1
R Certain capitalised leased property, plant and equipment is encumbered as per note 24 on page 234.
220

CONTINUED
13. Property, plant and equipment continued

Opening net book value Rm Reconciliation of property, plant and equipment: 2012 Owned assets Freehold land and buildings Fixtures, ttings, plant and equipment Computer hardware Leasehold improvements Motor vehicles Capitalised leased assets Freehold land and buildings Fixtures, ttings, plant and equipment Computer hardware Motor vehicles Total 2011 Owned assets Freehold land and buildings Fixtures, ttings, plant and equipment Computer hardware Leasehold improvements Motor vehicles Additions through acquisitions Rm Foreign Classiexchange Re- ed as Depregain/ classi- held for ciation (loss) cations sale Rm Rm Rm Rm Closing net book value Rm
Additions Rm
Disposals Rm
751.2 1,407.3 131.8 303.7 61.9
122.7 796.1 117.7 126.1 47.8
41.5 1.7 22.0 65.2 34.5 2.5 4.7 41.7 106.9
(4.6) (13.6) (1.0) (4.1) (1.7) (25.0) (0.6) (0.8) (1.4) (26.4)
(11.3) (348.8) (68.5) (45.5) (24.7) (498.8) (1.9) (5.0) (7.7) (9.0) (23.6) (522.4)
(0.5) 2.1 0.4 13.8 0.7 16.5 16.5
1.3 0.8 2.1 (1.3) (0.8) (2.1)
857.5
(4.0) 1,881.9 (0.8) 181.3 (1.6) 392.4 (2.2) 104.6 (8.6) 3,417.7 34.4 32.5 16.1 19.9 102.9
2,655.9 1,210.4 36.3 4.9 8.3 12.4 61.9 13.0 13.4 26.4
2,717.8 1,236.8
(8.6) 3,520.6
466.4 1,098.9 104.9 250.9 58.3
243.3 567.6 87.4 92.7 38.6
52.2 28.4 0.8 0.6 0.2 82.2 82.2
(13.9) (1.5) (1.3) (15.0) (31.7) (4.3) (4.3) (36.0)
(10.7) (271.9) (59.7) (36.6) (18.7) (397.6) (2.0) (3.0) (6.7) (10.5) (22.2) (419.8)
(1.8) (0.1) (2.6) (1.5) (6.2) (6.2)
751.2
1,407.3 131.8 303.7 61.9 2,655.9 36.3 4.9 8.3 12.4 61.9
1,979.4 1,029.8 Capitalised leased assets Freehold land and buildings Fixtures, ttings, plant and equipment Computer hardware Motor vehicles 38.3 7.9 12.6 17.0 75.8 Total such review in the current period. 2.4 10.2 12.6
2,055.2 1,042.4
2,717.8
R The Group has reviewed the residual values and useful lives of the assets. No material adjustment resulted from R The following useful lives are used in the calculation of depreciation:
Buildings 50 years Fixtures, ttings, plant and equipment 4 to 15 years Motor vehicles 4 to 10 years Computer hardware 3 to 8 years Leasehold improvements Shorter of lease period or useful life R There is no investment property in the Group and all assets are held at historical cost.
221
14. Goodwill
2012 Rm Reconciliation of goodwill: Balance at the beginning of the year Additions through acquisitions Impairment Foreign exchange gain/(loss) Balance at the end of the year Goodwill acquired in a business combination is allocated, at acquisition, to the cash-generating units (CGUs) that are expected to benet from that business combination. Before recognition of impairment losses, the carrying amount of signicant goodwill had been allocated as follows: Masscash Holdings (Pty) Ltd Builders Warehouse (a division of Massbuild (Pty) Ltd) Builders Trade Depot (a division of Massbuild (Pty) Ltd) Fruitspot Rhino Cash and Carry Group 1,090.7 901.1 163.9 321.3 1,105.9 529.1 370.7 2,049.4 486.4 (16.5) 2.1 2,521.4 2011 Rm 1,875.0 185.0 (10.0) (0.6) 2,049.4
R The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be
impaired.
R When testing goodwill for impairment, the recoverable amounts of the CGUs are determined as the lower of value in
use and fair value less costs to sell. The key assumptions for the value in use calculations are discount rates, growth rates and expected changes to selling prices and direct costs during the period. Management estimates discount rates using rates that reect current market assumptions of the time value of money and the risks specic to the CGUs. The growth rates are based on industry growth forecasts. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market. R The Group prepares cash ow forecasts based on the CGUs results for the next ve years. A terminal value is calculated based on a conservative growth rate of 3% (2011: 3%). This rate does not exceed the average long-term growth rate for the relevant markets. The valuation method applied is consistent with the prior period.
R The rate used to discount the forecast cash ows is 10.5% (2011: 10.5%). R The impairment of goodwill in the current and prior year relates to the impairment of certain acquired goodwill
in Masscash.
R The majority of additions through acquisitions in 2012 relate to the purchase of Rhino Cash and Carry Group and
Fruitspot. Further details relating to these acquisitions can be found in note 3 on page 208.
R In 2011 the additions through acquisitions relate to the purchase of Mica Cedar Square, Kangela, JDs Cash and
Carry, Savemoor Cash and Carry, Rahme Guys International, Cambridge Nongoma and Liquorland Express. Further details relating to these acquisitions can be found in note 3 on page 208. R During the year the Massbuild division completed a section 45 transaction resulting in all the assets and liabilities being recorded in one entity, namely Builders Trade Depot. This explains the goodwill illustrated above in Builders Warehouse being recorded as zero and the increase in the goodwill recorded in Builders Trade Depot.
222

CONTINUED
15. Other intangibles

Cost/carrying value Rm 2012 Owned assets Computer software Right of use Trademarks Total 2011 Owned assets Computer software Right of use Trademarks Total Opening net book value Rm Additions through acquisitions Rm Accumulated amortisation Rm Net book value Rm
572.9 46.8 4.4 624.1
268.6 5.5 2.9 277.0
304.3 41.3 1.5 347.1
521.4 37.6 4.4 563.4
250.2 1.7 2.5 254.4 Foreign exchange gain Rm Classied as held for sale Rm
271.2 35.9 1.9 309.0 Closing net book value Rm
Reconciliation of other intangible assets: 2012 Owned assets Computer software Right of use Trademarks Total 2011 Owned assets Computer software Right of use Trademarks Total
Additions Rm
Disposals Rm
Amortisation Rm
271.2 35.9 1.9 309.0
101.7 9.0 110.7
0.1 0.1
(0.3) (0.3)
(68.3) (3.7) (0.4) (72.4)
0.4 0.4
(0.4) (0.4)
304.3 41.3 1.5 347.1
218.6 2.2 220.8
108.4 37.8 146.2
(1.5) (1.5)
(54.3) (1.9) (0.3) (56.5)
271.2 35.9 1.9 309.0
R The Group has reviewed the useful lives of the assets for reasonability. There were no material adjustments in the
current period.
R The following useful lives are used in the calculation of amortisation:
Computer software Right of use Trademarks
3 to 8 years 10 years 10 years
223
16. Investments
2012 Rm Investment in associate Share of post-acquisition prot, net of dividend received On 11 October 2010, one of Massmarts subsidiaries acquired the remaining 66.7% shares in Clidet No 484 (Pty) Ltd and so this former associate has been consolidated accordingly. Purchase of 66.7% of Clidet No 484 (Pty) Ltd by a Massmart subsidiary Details of the Groups associate at date of purchase were as follows: Name of associate Clidet No 484 (Pty) Ltd Place of incorporation and operation South Africa Proportion of ownership interest 33.3% Proportion of voting power held 33.3% Principal activity Investment property 33.3% of the R100 share capital was purchased for R33. The nancial reporting date for Clidet No 484 (Pty) Ltd is 26 June. This investment fell into the corporate segment in terms of segmental reporting. Summarised nancial information in respect of the Groups associate is set out below: Total assets Total liabilities Net assets Groups share of associates net assets Revenue Prot for the year Groups share of associates prot for the year has been included in other operating costs in the consolidated income statement. Unlisted investments Fair value through prot or loss (FVTPL) Held for trading Bare dominium revaluation Other investments Investment in offshore trading structure Total nancial assets classied as held for trading Designated as at FVTPL Participation in insurance cell-captive on extended warranties Participation in insurance cell-captive on premium contributions Total nancial assets designated as at FVTPL Total fair value through prot or loss (FVTPL) Loans and receivables Trencor export partnership Total loans and receivables Held-to-maturity investments carried at amortised cost Other investments Total held-to-maturity investments Total unlisted investments Listed investments Available-for-sale investments Other investments Total listed investments Total investments 2011 Rm 9.3
(9.3)
59.3 31.7 27.6 9.3 1.8 19.5 6.5
82.0 177.2 259.2 18.8 35.1 53.9 313.1 3.0 3.0 0.1 0.1 316.2
70.6 7.9 250.0 328.5 5.8 25.7 31.5 360.0 3.6 3.6 0.1 0.1 363.7
5.7 5.7 321.9
3.9 3.9 367.6
224

CONTINUED
16. Investments continued

2012 Rm Reconciliation of nancial assets carried at fair value through prot or loss (FVTPL): Opening balance Fair value adjustments taken to the income statement Interest on investment taken to nance income Realisation of a portion of the investment in offshore trading structure recognised in cash reserves Other Foreign exchange gains/(losses) taken to the income statement Closing balance Further details on the investments in this category:
R The bare dominium revaluation reects Massmarts right to acquire a
2011 Rm
360.0 20.8 1.4 (109.4) (7.9) 48.2 313.1
307.7 65.9 7.9 (21.5) 360.0
49.9% share in the bare dominium over seven Makro properties.

R The investment in offshore trading structure is in M-class preference shares
representing an international treasury, shipping and trading business unit.

R The participation in an insurance cell-captive on extended warranties
relates to an insurance arrangement with Mutual & Federal pertaining to extended warranties sold within the Group. R The participation in an insurance cell-captive on premium contributions relates to an insurance arrangement with Unison pertaining to general insurance within the Group. Reconciliation of loans and receivables: Opening balance Investment realised Closing balance Further details on the investments in this category: R The Trencor export partnership represents our participation in export containers. Reconciliation of held-to-maturity investments: Opening balance Amortisation taken to the income statement Closing balance Reconciliation of available-for-sale investments: Opening balance Fair value adjustment Closing balance Further details on the investments in this category:
R Listed investments include shares held on the JSE and the Zimbabwe Stock Exchange. R The directors value the unlisted investments at R316.2 million (2011: R363.7 million). R For IAS 39 Financial Instruments: Recognition and Measurement accounting treatment of these investments, see
3.6 (0.6) 3.0
3.8 (0.2) 3.6
0.1 0.1 3.9 1.8 5.7
0.7 (0.6) 0.1 0.3 3.6 3.9
note 39 on pages 253 266.
225
17. Other nancial assets

2012 Rm Employee share trust loans to the directors and executive committee members of Massmart Holdings Limited: Balance at the beginning of the year Advanced during the year Repayments Balance at the end of the year Other employees loans: Housing and staff loans Finance lease deposit Loan to a related party Other loans 2011 Rm
91.8 2.2 (11.6) 82.4 0.5 37.6 13.9 0.2 52.2 134.6
203.9 5.5 (117.6) 91.8 0.7 45.3 0.1 46.1 137.9
R These loans are classied as Loans and receivables. For IAS 39 Financial Instruments: Recognition and
Measurement accounting treatment of these values, see note 39 on pages 253 266.
R All housing and staff loans bear interest at various rates below the prime interest rate. The loans to the employee share
trust participants, including executive directors, attract interest of zero percent and are secured by the underlying shares. The loans are secured by pledges of 1,382,228 (2011: 1,581,899) ordinary shares in Massmart Holdings Limited, with a market value of R232,698,084 (2011: R209,427,609). R The nance lease deposit accrues interest at 13.6%. R Details of the housing and employee share trust loans to the directors and Executive Committee members of Massmart Holdings Limited: Pattison, GM Rm 2012 Balance at the beginning of the year Advanced during the year Repayments Balance at the end of the year 2011 Balance at the beginning of the year Advanced during the year Repayments Balance at the end of the year 25.8 0.6 (1.8) 24.6 54.8 1.6 (30.6) 25.8 Hayward, GRC Rm 20.7 0.5 (1.4) 19.8 43.9 1.2 (24.4) 20.7 Zwarenstein, I Rm Other Executive Committee Rm 45.3 1.1 (8.4) 38.0 105.2 2.7 (62.6) 45.3
Total Rm 91.8 2.2 (11.6) 82.4 203.9 5.5 (117.6) 91.8
226

CONTINUED
18. Deferred taxation

2012 Rm The movements during the year are analysed as follows: Net asset at the beginning of the year Credit/(charge) to the income statement (including foreign exchange movements) Credit/(charge) to comprehensive income Acquisitions/(disposals) of subsidiaries Non-current assets classied as held for sale Net asset at the end of the year Deferred taxation balances are presented in the statement of nancial position as follows: Deferred taxation assets Deferred taxation liabilities Credit/ (charge) to comprehensive income Rm 242.8 66.3 (3.2) 3.1 (7.3) 301.7 2011 Rm 218.9 26.4 0.6 (3.1) 242.8
330.2 (28.5) 301.7 Acquisi- Non-current assets tions/ classied (disposals) as held of for sale subsidiaries Rm Rm
265.0 (22.2) 242.8
Opening balance Rm 2012 Temporary differences Trademarks Assessed loss unutilised Export partnerships Debtors provisions Prepayments Creditors provisions Property, plant and equipment Finance leases Long-term provisions Income not accrued Deferred income Operating lease adjustment Other temporary differences Total 2011 Temporary differences Trademarks Assessed loss unutilised Export partnerships Debtors provisions Prepayments Creditors provisions Property, plant and equipment Finance leases Long-term provisions Income not accrued Deferred income Operating lease adjustment Other temporary differences Total
Credit/ (charge) to the income statement Rm
Foreign exchange movements Rm
Closing balance Rm
0.8 88.7 (3.8) 14.1 (179.4) 74.4 (93.7) 8.4 47.1 (0.1) 48.1 277.1 (38.9) 242.8
67.7 0.6 4.0 (27.2) (14.9) (18.4) (8.0) 1.4 0.1 17.3 26.8 12.2 61.6
(3.2) (3.2)
0.1 0.3 2.4 0.3 3.1
(1.0) (4.3) (24.6) 22.6 (7.3)
3.2 (0.4) 1.3 (0.1) 0.7 4.7
0.8 158.6 (3.2) 18.2 (206.6) 55.1 (109.7) 0.7 48.5 42.1 303.8 (6.6) 301.7
0.8 65.5 (4.0) 11.2 (149.8) 63.3 (73.7) 10.8 16.6 (5.1) 54.6 259.1 (30.4) 218.9
30.3 0.2 3.0 (29.6) 11.2 (17.4) (2.4) 30.5 5.0 (5.5) 18.3 (8.9) 34.7
0.6 0.6
(3.1) (3.1)
(7.1) (0.1) (0.1) 0.5 (1.0) (0.3) (0.2) (8.3)
0.8 88.7 (3.8) 14.1 (179.4) 74.4 (93.7) 8.4 47.1 (0.1) 48.1 277.1 (38.9) 242.8
227
19. Inventories
2012 Rm Food Inventory at cost Provisions 2,619.9 (185.9) 2,434.0 Liquor Inventory at cost Provisions 539.6 (20.0) 519.6 General Merchandise Inventory at cost Provisions 3,490.6 (268.9) 3,221.7 Home Improvement Inventory at cost Provisions 1,614.8 (174.5) 1,440.3 Total inventory net of provisions Carrying amount of inventories carried at net realisable value
R Inventories are carried at the lower of cost and net realisable value. R Provisions include: shrinkage and obsolescence provisions, write-downs to net realisable value and unearned
2011 Rm 1,992.6 (130.3) 1,862.3 398.2 (20.6) 377.6 2,934.3 (240.2) 2,694.1 1,421.5 (155.8) 1,265.7 6,199.7 148.5
7,615.6 167.8
rebates and settlement discounts per SAICA Circular 9/2006: Transactions Giving Rise to Adjustments to Revenue/ Purchases. R Inventory is fully funded by trade payables. Details of trade payables can be found in note 26 on page 236. R No inventory is pledged as security.
COMPOSITION OF TOTAL INVENTORIES (%)

%
32.0 6.8 42.3 18.9 Food Liquor General Merchandise Home Improvement
228

CONTINUED
20. Trade, other receivables and prepayments

2012 Rm Trade receivables Allowance for doubtful debts Prepayments Other accounts receivable FEC asset Total receivables net of provisions Movement in allowance for doubtful debts Balance at the beginning of the year Amounts written off during the year Amounts recovered during the year Decrease in provision relating to assets classied as held for sale Increase in provision recognised in the income statement Balance at the end of the year Ageing of debtors provided for: 60 to 90 days 90 to 120 days 120+ days Total 1,628.0 (82.8) 1,545.2 33.9 1,353.9 20.9 2,953.9 59.8 (17.8) (2.4) (1.5) 44.7 82.8 12.8 4.4 65.6 82.8 2011 Rm 1,333.2 (59.8) 1,273.4 47.5 1,241.8 2,562.7 56.1 (20.3) 24.0 59.8 10.7 2.8 46.3 59.8
R No interest is charged on the trade receivables for the rst 30 days from the date of the invoice. Thereafter, differing
structures exist between the Divisions with interest being charged between 0% and 24% (2011: 12% and 24%) per annum on the outstanding balance. Trade receivables between 30 days and 180 days are provided for based on estimated irrecoverable amounts from the sale of goods, determined by reference to past default experience. It is the Groups policy to provide fully for all receivables that are past due because historical experience is such that these receivables are generally not recoverable, except for those specically identied below. R Before accepting any new customer, the Group uses an external credit scoring system to assess the potential customers credit quality and denes credit limits by customer. Limits and scoring attributed to customers are reviewed quarterly to once a year. There is no customer who represents more than 5% of the total balance of trade receivables. R Included in the Groups trade receivables balance are debtors with a carrying amount of R73.1 million (2011: R8.8 million) which are past due at the reporting date for which the Group has not provided. The Group considers the amounts recoverable and currently holds security over these debtors or the debtors are insured. The average age of these receivables is 78 days (2011: 82 days). 2012 Rm Ageing of past due debtors but not impaired 60 to 90 days 90 to 120 days 120+ days Total 52.2 13.9 7.0 73.1 2011 Rm 6.3 2.5 8.8
R In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the directors believe that there is no further credit provision required in excess of the allowance for doubtful debts. R There were no specic trade receivables under liquidation in the current or prior year. R Trade receivables are classied as Loans and receivables. For IAS 39 Financial Instruments: Recognition and Measurement accounting treatment of these values, see note 39 on pages 253 266.
229
21. Issued capital

Share capital 2012 Rm Authorised 500,000,000 (2011: 500,000,000) ordinary shares of 1 cent each 20,000,000 (2011: 20,000,000) non-redeemable cumulative non-participating preference shares of 1 cent each 18,000,000 (2011: 18,000,000) A convertible redeemable non-cumulative participating preference shares of 1 cent each 4,000,000 (2011: 4,000,000) B convertible redeemable non-cumulative participating preference shares of 1 cent each Issued 216,124,461 (2011: 213,883,460) ordinary shares of 1 cent each 10,134,631 (2011: 12,192,748) A convertible redeemable non-cumulative participating preference shares of 1 cent each 3,112,778 (2011: 3,295,662) B convertible redeemable non-cumulative participating preference shares of 1 cent each 2011 Rm Share premium 2012 2011 Rm Rm
5.0
5.0
0.2
0.2
0.2
0.2
2.2
2.0
750.6
743.9
0.1
0.2
Number of shares
Share capital Rm 2.0 2.0 2.0 2.0 0.2 2.2 2.2
Share premium Rm 142.0 481.6 623.6 120.3 743.9 743.9 743.9 6.7 750.6
Ordinary shares Balance at June 2010 Shares issued in terms of the Massmart Executive Share Scheme Shares issued in terms of the Massmart Thuthukani Empowerment Trust Shares issued in terms of the Massmart Black Scarce Skills Trust Ordinary shares issued June 2011 Treasury shares Ordinary shares issued excluding treasury shares June 2011 Balance at June 2011 Shares issued in terms of the Massmart Thuthukani Empowerment Trust Shares issued in terms of the Massmart Black Scarce Skills Trust Ordinary shares issued June 2012 Treasury shares Ordinary shares issued excluding treasury shares June 2012
201,495,504 6,331,173 5,480,922 575,861 213,883,460* (107,644) 213,775,816 213,883,460* 2,058,117 182,884 216,124,461 (43,152) 216,081,309
* The number of shares is the ordinary shares issued before deducting treasury shares.
R Ordinary shares, which have a par value of 1 cent, carry one vote per share and carry the right to dividends.
230

CONTINUED
21. Issued capital continued

Number of shares A convertible redeemable non-cumulative participating preference shares Balance at June 2010 Net shares issued in terms of the Massmart BEE transaction Shares converted to ordinary shares Treasury shares Balance at June 2011 Net shares issued in terms of the Massmart BEE transaction Shares converted to ordinary shares Treasury shares Balance at June 2012 Share capital Rm Share premium Rm
17,673,670 (5,480,922) (12,192,748) 12,192,748 (2,058,117) (10,134,631)
0.2 (0.2) 0.1 (0.1)
R A convertible redeemable non-cumulative participating preference shares, which have a par value of 1 cent, are
held in the Massmart Thuthukani Empowerment Trust. These shares carry one vote per share, which are cast by the appointed trustees, and carry the right to dividends. On election of the beneciary, the shares will convert to ordinary shares on a one-for-one basis and will rank pari passu with all ordinary shares then in issue. Number of shares B convertible redeemable non-cumulative participating preference shares Balance at June 2010 Net shares issued in terms of the Massmart BEE transaction Shares converted to ordinary shares Treasury shares Balance at June 2011 Net shares issued in terms of the Massmart BEE transaction Shares converted to ordinary shares Treasury shares Balance at June 2012 Share capital Rm Share premium Rm
3,871,523 (575,861) (3,295,662) 3,295,662 (182,884) (3,112,778)
R B convertible redeemable non-cumulative participating preference shares, which have a par value of 1 cent, are
held in the Massmart Black Scarce Skills Trust. These shares carry one vote per share, which are cast by the trustees, and do not carry the right to dividends. On election of the beneciary, the shares will convert to ordinary shares on a one-for-one basis and will rank pari passu with all ordinary shares then in issue. Share options granted under the Massmart Holdings Limited Employee Share Trust
R At June 2012, executives and senior employees have options over 9,702,840 (2011: 6,079,937) ordinary shares
of which 7,188,065 (2011: 3,846,383) are unvested.

R Share options granted under the Employee Share Incentive Scheme carry no rights to dividends and no voting rights.
Further details of the Employee Share Incentive Scheme are contained in note 29 on page 238.
231
Share options granted under the Massmart Holdings Limited Employee Share Trust (continued)
R During the current year, the only shares bought in the market were by the Share Trust where 1.2 million shares
(0.6% of average shares in issue) were bought at an average price of R166.28 totalling R206.7 million.
R During the prior year, the only shares bought in the market were by the Share Trust where 2.1 million shares
R The directors have the authority, until the next annual general meeting, to issue the ordinary shares of the Company
up to a maximum of 5% of the shares already issued.
22. Other reserves

2012 Rm Foreign currency translation reserve Hedging reserve Share-based payment reserve Capital redemption reserve fund Amortisation of trademarks Fair value adjustment of available-for-sale nancial asset Fair value adjustment on listed shares Change in minority interests Cost of acquiring minority interests Treasury shares Reconciliation of the foreign currency translation reserve: Balance at the beginning of the year Translation on consolidation Balance at the end of the year
R Exchange differences relating to the translation from functional currencies
2011 Rm (35.4) (2.2) 689.5 0.2 76.5 (13.2) 0.4 1.9 (272.0) (1.3) 444.4 (38.0) 2.6 (35.4)
32.2 5.9 803.3 0.2 76.5 (13.2) 0.6 1.9 (292.5) (0.2) 614.7 (35.4) 67.6 32.2
of the Groups foreign subsidiaries into Rands are accounted for in the foreign currency translation reserve. Reconciliation of the hedging reserve: Balance at the beginning of the year Movement on cash ow hedges Balance at the end of the year
R The hedging reserve represents hedging gains and losses recognised on
(2.2) 8.1 5.9
(0.6) (1.6) (2.2)
the effective portion of cash ow hedges. The hedge is released from equity at the same time the forecast transaction is recognised in prot or loss. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to prot or loss for the period. Reconciliation of the share-based payment reserve: Balance at the beginning of the year Share-based payment expense related to the Massmart Holdings Limited Employee Share Trust Share-based payment expense related to the Massmart Thuthukani Empowerment Trust Share-based payment expense related to the Massmart Black Scarce Skills Trust Share-based payment expense related to Walmart Balance at the end of the year 689.5 44.4 12.8 8.9 47.7 803.3 508.7 68.8 33.5 8.4 70.1 689.5
R The share-based payment reserve arises on grant of share options to employees under the Employee Share Incentive
Schemes. Details of the Employee Share Incentive Schemes can be found in note 29 on page 238. The sharebased payment valuation was performed by Alexander Forbes for all periods and all schemes are equity-settled share schemes.
232

CONTINUED
22. Other reserves continued

Massmart Share Schemes Massmart Holdings Limited Employee Share Trust Details of the share options outstanding during the year are as follows: 2012 2012 Number of share options Outstanding at the beginning of the year Granted during the year Forfeited during the year Exercised during the year Outstanding at the end of the year Exercisable at the end of the year 6,079,937 5,176,251 (245,753) (1,307,595) 9,702,840 2,514,775 Weighted average exercise price Rand 76.07 156.65 115.03 65.87 119.45 2011 Number of share options 14,156,168 584,117 (411,375) (8,248,973) 6,079,937 2,233,554 2012 In 2012, the weighted average share price at the date of exercise for share options exercised during the year was R161.17. The options outstanding at the end of the year had a weighted average remaining contractual life of 7.8 years. Options were granted on 1 September 2011, 1 November 2011, 1 March 2012, 1 April 2012 and 16 May 2012. The estimated fair values of the options granted on these dates were R46.77, R43.88, R50.52, R47.11 and R48.37. In 2011, the weighted average share price at the date of exercise for share options exercised during the year was R144.12. The options outstanding at the end of the year had a weighted average remaining contractual life of 6.9 years. Options were granted on 1 September 2010. The estimated fair values of the options granted on this date was R52.17. These fair values were calculated using the binomial model. The inputs into the model were as follows: Weighted average share price (Rand) at granting dates Expected volatility Expected life Risk-free rate Expected dividend yield 163.65 30.4% 31.7% 3 10 years 6.4% 7.5% 2.5% 5.0% 135.92 32.8% 34.2% 3 10 years 6.5% 7.2% 4.3% 4.5% 2011 2011 Weighted average exercise price Rand 71.46 120.42 77.71 71.21 76.07
Expected volatility was determined by calculating the historical volatility of the Companys share price over the number of previous years corresponding with the option lifetime. The expected life used in the model has been adjusted, based on managements best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
233
Massmart Thuthukani Empowerment Trust 2012 In 2012, the weighted average share price at the date of exercise for share options was R150.18. The options outstanding at the end of the year had a weighted average remaining contractual life of three months. In 2011, the weighted average share price at the date of exercise for share options was R145.70. The options outstanding at the end of the year had a weighted average remaining contractual life of 15 months. These fair values were calculated using the binomial model. The inputs into the model were as follows: Weighted average share price (Rand) at granting dates (no issues in 2008, 2009, 2010, 2011 or 2012) Expected volatility Expected life Risk-free rate Expected dividend yield Expected volatility was determined by calculating the historical volatility of the Companys share price over the number of previous years corresponding with the option lifetime. The expected life used in the model has been adjusted, based on managements best estimate, for the effects of nontransferability, exercise restrictions and behavioural considerations. Massmart Black Scarce Skills Trust In 2012, the weighted average share price at the date of exercise for share options exercised during the year was R153.83. The options outstanding at the end of the year had a weighted average remaining contractual life of 3.5 years. Options were granted on 1 October 2011 and 1 April 2012. The estimated fair values of the options granted on these dates were R32.19 and R37.10. In 2011, the weighted average share price at the date of exercise for share options exercised during the year was R145.87. The options outstanding at the end of the year had a weighted average remaining contractual life of 3.0 years. No options were granted in the 2011 nancial year. These fair values were calculated using the binomial model. The inputs into the model were as follows: Weighted average share price (Rand) at granting dates Expected volatility Expected life Risk-free rate Expected dividend yield 2011
56.91 30.1% 32.3% 5 years 8.3% 8.4% 3.7%
56.91 30.1% 32.3% 5 years 8.3% 8.4% 3.7%
34.01 22.6% 31.5% 3 5 years 6.3% 7.9% 2.5% 5.0%
107.55 32.6% 37.1% 3 5 years 7.1% 8.4% 4.6% 4.9%
Expected volatility was determined by calculating the historical volatility of the Companys share price over the number of previous years corresponding with the option lifetime. The expected life used in the model has been adjusted, based on managements best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
234

CONTINUED
23. Minority interest

2012 Rm At the beginning of the year Net changes in minority interests Income attributable to minorities Minorities relating to acquisitions Distribution to minorities At the end of the year 215.8 (5.3) 36.3 (38.9) 207.9 2011 Rm 122.1 (1.0) 41.7 80.5 (27.5) 215.8
R The minority interests comprise mainly CBW store managers holdings in certain Masscash stores. R The minorities relating to acquisitions is the take on minority balance on all acquisitions in the period.
24. Non-current liabilities

2012 Rm Interest-bearing Unsecured Medium-term payable Less: Included in current liabilities 2011 Rm
4.3 (4.3)
4.2 (4.2)
Secured Medium-term bank loans Less: Included in current liabilities
1,281.0 (503.8) 777.2
827.0 (286.8) 540.2 80.8 (22.3) 58.5 598.7
Capitalised nance leases Less: Included in current liabilities
110.4 (34.9) 75.5
Total interest-bearing liabilities Interest-free Unsecured Minority shareholders loans Income received in advance Less: Included in trade and other payables
852.7
3.0
3.0 21.5 (21.5) 392.5 21.8 414.3 417.3 1,016.0
Operating lease liability Less: Included in trade and other payables
404.9 (62.1) 342.8
Total non-interest bearing liabilities Total non-current liabilities
345.8 1,198.5
235
R Included in current liabilities is a medium-term payable of R4.3 million (2011: R4.2 million), which is an amount
R R
owing to the Massmart Education Foundation relating to cash reserves invested with Group Treasury. The short-term portion has been accounted for in note 28 on page 237. A xed term loan of R500.0 million was secured during the second half of the 2010 nancial year repayable quarterly over three years. The loan bears interest at 9.8%. The loan is secured by intra-group cross-suretyships. The short-term portion has been accounted for in note 28 on page 237. A xed term loan of R500.0 million was secured during the second half of the 2011 nancial year repayable quarterly over three years. The loan bears interest at 8.1%. The loan is secured by intra-group cross-suretyships. The short-term portion has been accounted for in note 28 on page 237. A xed term loan of R750.0 million was secured during the second half of the nancial year repayable quarterly over ve years. The loan bears interest at 7.88%. The loan is secured by intra-group cross-suretyships. The short-term portion has been accounted for in note 28 on page 237. Capitalised nance leases include vehicles, xtures, ttings, plant and computer equipment and property leases, repayable in monthly instalments varying from one to ve years at varying interest rates between 4.0% and 17.5% (2011: between 4.0% and 17.5%). The short-term portion has been accounted for in note 28 on page 237. The capitalised nance leases are secured by moveable assets with a book value of R68.5 million (2011: R24.2 million) and the property lease by the value of the underlying land amounting to R34.4 million (2011: R36.4 million). These assets are accounted for in note 13 on page 219. The operating lease liability relates to the lease smoothing adjustment required by IAS 17 Leases. The short-term portion has been accounted for in note 26 on page 236. For IAS 39 Financial Instruments: Recognition and Measurement accounting treatment of these values, see note 39 on pages 253 266.
25. Non-current provisions

2012 Rm Onerous lease provision Less: Payable within one year included in current provisions Provision for Supplier Development Fund Liabilities raised on business acquisitions Less: Payable within one year included in current provisions Provision for post-retirement medical aid contributions and other medical aid provisions 33.9 (6.2) 94.9 182.3 (124.1) 78.2 259.0 Repayable within 1 year* Rm 2012 2011
* Included in current provisions in note 27 on page 237.
2011 Rm 15.4 (14.4) 100.0 66.0 167.0
Repayable in 2 5 years Rm 173.5 101.0
Repayable after 5 years Rm 85.5 66.0
Total Rm 389.3 181.4
130.3 14.4
R Certain Group companies provide post-retirement healthcare benets to their retirees. This fund is accounted for as
a dened benet plan and measured using the projected unit credit method. The liability is unfunded. The main assumption used in calculating the costs and the provision is an interest rate medical ination rate gap of 0.5% (2011: 1.0%).
236

CONTINUED
25. Non-current provisions continued

2012 Rm The net expense recognised in the income statement is: Current service cost Interest cost Benets paid against balance sheet held liability Net actuarial loss recognised in the year Net expense recognised as part of employment costs Movements in the post-retirement medical aid liability: Opening dened benet obligation Expense as above Closing dened-benet obligation 2.5 5.7 (1.7) 5.7 12.2 66.0 12.2 78.2 2011 Rm 2.4 5.2 (1.5) 1.6 7.7 58.3 7.7 66.0
R The last valuation of the liability for the post-retirement medical aid contributions was performed as at 30 June 2012
by Alexander Forbes, Fellow of the Institute of Actuaries (2011: Alexander Forbes, Fellow of the Institute of Actuaries). The current year costs have been assessed in accordance with the advice of independent actuaries.
R The net actuarial loss in the current year arose as a result of a combination of the following factors: R An unexpected loss of R7.0 million (2011: R5.6 million) arose as a result of a decrease in the real discount
rate, ie a decrease in the difference between the discount rate and the healthcare cost ination assumption from 1.0% per annum to 0.5% per annum (2011: 1.5% per annum to 1.0% per annum).
R Lower than expected ination resulted in a net gain of R1.2 million (2011: R1.7 million). R Unexpected changes in the membership and membership prole resulted in a net gain of R0.1 million
(2011: R2.3 million).

R Other than the changes listed above, the remaining assumptions are consistent with the assumptions applied in the
prior year.
26. Trade and other payables

2012 Rm Trade payables Income received in advance short-term portion Operating lease liability short-term portion Leave pay accrual FEC liability Sundry payables and other accruals 8,908.8 62.1 175.3 4.0 2,151.8 11,302.0 2011 Rm 7,553.9 21.5 (21.8) 149.5 3.7 1,675.0 9,381.8
R The operating lease liability relates to the lease smoothing adjustment required by IAS 17 Leases. The long-term
portion has been accounted for in note 24 on page 234.

R The Group has nancial risk management policies in place to ensure that all payables are paid within the credit
timeframe. Settlement discounts received range from 1.0% to 3.0% (2011: 1.0% to 3.0%).
R For IAS 39 Financial Instruments: Recognition and Measurement accounting treatment of these values,
see note 39 on pages 253 266.
237
27. Provisions
2012 Rm Onerous lease provision Liabilities raised on business acquisitions Other 6.2 124.1 9.4 139.7
R Provisions raised against specic assets, for example inventories and trade receivables, are offset against
2011 Rm 14.4 12.4 26.8
those assets. Opening balance Rm Amounts provided Rm Amounts utilised Rm Unused amounts reversed Rm Closing balance Rm
Reconciliation of provisions: 2012 Onerous lease provision Liabilities raised on business acquisitions Other
14.4 12.4 26.8
3.4 124.1 4.5 132.0
(9.7) (5.7) (15.4)
(1.9) (1.8) (3.7)
6.2 124.1 9.4 139.7
2011 Onerous lease provision Leasehold improvements Other
2.1 1.5 22.2 25.8
15.0 15.0
(2.7) (1.5) (9.6) (13.8)
(0.2) (0.2)
14.4 12.4 26.8
28. Other current liabilities

2012 Rm Medium-term bank loans Capital short-term portion Interest accrual 2011 Rm
503.8 503.8 34.9 4.3 92.4 13.5 648.9
286.8 8.1 294.9 22.3 4.2 75.6 12.9 409.9
Capitalised nance leases Massmart Education Foundation loan Trade nance facility Lamberti Education Foundation Trust loan
R A xed term loan of R500.0 million was secured during the second half of the 2010 nancial year repayable
quarterly over three years. The loan bears interest at 9.8%. The loan is secured by intra-group cross-suretyships. The medium-term portion has been accounted for in note 24 on page 234.
238

CONTINUED
28. Other current liabilities continued

R A xed term loan of R500.0 million was secured during the second half of the 2011 nancial year repayable
R R
R R
quarterly over three years. The loan bears interest at 8.1%. The loan is secured by intra-group cross-suretyships. The medium-term portion has been accounted for in note 24 on page 234. A xed term loan of R750.0 million was secured during the second half of the nancial year repayable quarterly over ve years. The loan bears interest at 7.88%. The loan is secured by intra-group cross-suretyships. The mediumterm portion has been accounted for in note 24 on page 234. Capitalised nance leases include vehicles, xtures, ttings, plant and computer equipment and property leases, repayable in monthly instalments varying from one to ve years at varying interest rates between 4.0% and 17.5% (2011: between 4.0% and 17.5%). The medium-term portion has been accounted for in note 24 on page 234. The capitalised nance leases are secured by moveable assets with a book value of R68.5 million (2011: R24.2 million) and the property lease by the value of the underlying land amounting to R34.4 million (2011: R36.4 million). These assets are accounted for in note 13 on page 219. The Massmart Education Foundation loan represents cash reserves invested with Group Treasury. The long-term portion has been accounted for in note 24 on page 234. The trade nance facility is an offshore US Dollar facility available for working capital requirements. The Group has used this facility to fund four African working capital loans namely Botswana, Ghana, Malawi and Mozambique (2011: Botswana, Ghana, Malawi and Mozambique). The facility is capped at USD 20.0 million, of which we have utilised USD11.0 million (2011: USD10.9 million) at the reporting date. The Lamberti Education Foundation Trust loan represents cash reserves invested with Group Treasury. For IAS 39 Financial Instruments: Recognition and Measurement accounting treatment of these values, see note 39 on pages 253 266.
29. Employee share incentive schemes

2012 000s Massmart Holdings Limited Employee Share Trust Total shares and options available to the scheme Total shares and options available to the scheme Shares and treasury shares issued to the scheme Remaining capacity for issue in terms of the JSE practice Opening balance of shares and options New shares and options offered to employees and executive directors Shares and options sold by employees and directors Shares repurchased from/forfeited by employees and options lapsed/forfeited Closing balance of shares and options 39,500 39,500 (16,493) 23,007 7,554 5,176 (1,399) (246) 11,085 2011 000s 39,500 39,500 (16,493) 23,007 17,515 584 (10,134) (411) 7,554
The closing balance includes 1,382,228 (2011: 1,474,255) shares and 9,702,840 (2011: 6,079,937) options. Shares and options previously issued to employees who then subsequently left the Group are excluded from the gures above. The amendments needed to bring the Share Trust rules in line with the new JSE Schedule 14 requirements were approved by the shareholders at the AGM on 24 November 2010. Options may be exercised at any time, but shares arising out of options may only be sold when they have vested with the participant.
239
Vesting occurs over a ve-year period, as follows:

R 25% two years after the offer date; R 50% three years after the offer date; R 75% four years after the offer date; R 100% ve years after the offer date; and R expires ten years after the offer date.
In terms of the scheme rules, all share loans on offers must be repaid or options exercised no later than 10 years from the offer date. The following options granted to employees and directors in terms of the Massmart Employee Share Incentive Scheme have not yet been exercised: Exercise price (R) 10.95 12.03 41.91 43.42 42.97 42.88 52.48 51.91 51.19 58.74 54.13 51.93 56.42 62.04 67.79 82.67 94.25 80.75 71.58 66.91 72.86 79.86 72.42 79.91 70.71 77.55 79.15 87.60 88.71 90.49 108.95 110.00 Number of options at June 2011 110,091 24,500 196,000 1,242 45,316 23,554 1,059 14,461 22,069 45,965 78,836 20,128 13,311 39,455 147,856 7,290 575,943 73,116 113,960 534,443 1,334,508 206,460 286,801 48,455 147,428 1,174,634 121,617 33,268 36,087 145,519 94,402 75,997 Number of options forfeited and expired 1,446 12,342 21,330 10,957 26,646 40,989 Number of options exercised 110,091 24,500 100,000 1,242 9,551 225 1,059 760 11,638 28,360 26,215 11,619 7,626 22,550 31,265 858 168,215 7,757 54,250 83,445 278,751 16,638 100,539 10,604 8,571 158,217 14,299 5,115 4,661 4,584 4,390 New options granted Number of options at June 2012 96,000 35,765 23,329 13,701 10,431 17,605 52,621 8,509 5,685 16,905 116,591 6,432 406,282 65,359 59,710 438,656 1,034,427 189,822 175,305 37,851 138,857 989,771 66,329 28,153 31,426 145,519 89,818 71,607
Offer date 27 August 2001 16 January 2002 1 April 2005 1 May 2005 27 May 2005 31 May 2005 1 October 2005 1 November 2005 30 November 2005 1 April 2006 23 May 2006 25 August 2006 1 October 2006 15 November 2006 23 February 2007 2 April 2007 24 May 2007 24 August 2007 30 November 2007 1 April 2008 26 May 2008 1 September 2008 27 October 2008 15 November 2008 1 March 2009 27 May 2009 1 September 2009 1 October 2009 16 November 2009 1 March 2010 1 April 2010 1 May 2010
Expiry date 26 August 2011 15 January 2012 31 March 2015 30 April 2015 26 May 2015 30 May 2015 30 September 2015 31 October 2015 29 November 2015 31 March 2016 22 May 2016 24 August 2016 30 September 2016 14 November 2016 22 February 2016 1 April 2017 23 May 2017 23 August 2017 29 November 2017 31 March 2018 25 May 2018 31 August 2018 26 October 2018 14 November 2018 28 February 2019 26 May 2019 31 August 2019 30 September 2019 15 November 2019 28 February 2020 31 March 2020 30 April 2020
240

CONTINUED
29. Employee share incentive schemes continued

Exercise price (R) 120.42 153.84 157.27 174.88 164.09 159.62 Number of options at June 2011 286,166 6,079,937 Number of options forfeited and expired 21,751 92,425 17,867 245,753 Number of options exercised 1,307,595 New options granted 3,739,981 486,730 448,807 122,954 377,779 5,176,251 2012 000s Massmart Thuthukani Empowerment Trust Total shares and options available to the scheme Opening balance of share units Shares sold Shares repurchased from/forfeited by employees and options lapsed/forfeited Closing balance of share units Vesting occurs over a six-year period, as follows:
R 33.3% in October 2010; R 33.3% in October 2011; R 33.4% in October 2012; and R expires six years after the offer date.
Offer date 1 September 2010 1 September 2011 1 November 2011 1 March 2012 1 April 2012 16 May 2012
Expiry date 31 August 2020 31 August 2021 31 October 2021 28 February 2022 31 March 2022 15 May 2022
Number of options at June 2012 264,415 3,647,556 468,863 448,807 122,954 377,779 9,702,840 2011 000s 18,000 12,826 (8,550) (100) 4,176
18,000 4,176 (3,123) 1,053
The following options granted to eligible employees in terms of the Massmart Thuthukani Empowerment Trust have not yet been exercised: Exercise price (R) 49.98 Number of options opening balance 4,175,647 Number of options forfeited and expired 100,635 No of options exercised 3,122,787 8,550,028 Number of options closing balance 1,052,860 4,175,647
Offer date 2012 1 October 2006 2011 1 October 2006
Expiry date 30 September 2012 30 September 2012
49.98 12,826,310
241
2012 000s Massmart Black Scarce Skills Trust Total preference shares available to the scheme Reconciliation of units: Opening balance of share units New share units offered to employees Shares sold by employees Share units repurchased from/forfeited by employees and options lapsed/forfeited Closing balance of share units Conversion of share units into preference shares Vesting occurs over a ve-year period, as follows: 25% two years after the offer date; 50% three years after the offer date; 75% four years after the offer date; 100% ve years after the offer date; and expires ve years after the offer date. 3,979 890 1,209 (318) (41) 1,740 426
2011 000s 3,979 2,203 (1,148) (165) 890 380
R R R R R
The following options granted to eligible employees in terms of the Massmart Black Scarce Skills Trust have not yet been exercised: Exercise price (R) 56.42 82.67 71.58 66.97 75.52 71.96 77.56 108.95 143.74 164.09 Number of options opening balance 127,325 7,672 3,221 327,790 250,998 24,775 7,784 140,045 889,610 2011 1 October 2006 2 April 2007 30 November 2007 1 April 2008 1 October 2008 1 April 2009 27 May 2009 1 April 2010 30 September 2012 1 April 2013 29 November 2013 31 March 2014 30 September 2014 31 March 2015 26 May 2015 31 March 2016 56.42 82.67 71.58 66.97 75.52 71.96 77.56 108.95 318,485 17,309 9,277 796,507 681,787 59,759 15,889 303,862 2,202,875 Number of options forfeited and expired 1,945 6,704 32,503 41,152 9,842 25,827 95,514 7,742 25,657 164,582 Number of options exercised 125,380 7,672 1,899 103,666 57,440 5,756 1,946 14,620 318,379 181,318 9,637 6,056 442,890 335,275 27,242 8,105 138,160 1,148,683 New options granted 773,909 436,083 1,209,992 Number of options closing balance 1,322 217,420 193,558 19,019 5,838 125,425 741,406 436,083 1,740,071 127,325 7,672 3,221 327,790 250,998 24,775 7,784 140,045 889,610
Offer date 2012 1 October 2006 2 April 2007 30 November 2007 1 April 2008 1 October 2008 1 April 2009 27 May 2009 1 April 2010 1 October 2011 1 April 2012
Expiry date 30 September 2011 1 April 2012 29 November 2012 31 March 2013 30 September 2013 31 March 2014 26 May 2014 31 March 2015 30 September 2016 31 March 2017
242

CONTINUED
30. Retirement benet information

All full-time permanent Massmart staff are members of either the Massmart Pension Fund, the Massmart Provident Fund or the SACCAWU National Provident Fund. These funds are dened contribution funds and are subject to the Pension Funds Act, 1956. Following the recent acquisitions, many of their staff are still members of the retirement funds of the previous business owners. Projects are underway to transfer these employees to one of the above funds in future. With effect from 1 March 2007, the Massmart Pension Fund and Massmart Provident Fund have been classied as valuation exempt. This exemption was renewed on 1 March 2010 with the current exemption set to expire on 1 March 2013. The statutory process has changed and the next application for renewal should result in the funds remaining valuation exempt indenitely whilst they meet the required criteria. The nancial position of the funds is monitored on a quarterly basis, with a full external audit conducted annually. Contributions received by the funds for the year ended 30 June 2012 amounted to R342 million (2011: R294 million). The Groups contribution of R205 million (2011: R176 million) was included in the income statement for the year as part of the employee costs.
31. Commitments
2012 Rm Commitments in respect of capital expenditure approved by directors: Contracted for Stores to be opened Distribution centre to be opened Stores to be refurbished Purchase of land Purchase of plant and equipment Purchase of new system software Purchase of new computer hardware Purchase of motor vehicles Store relocations Store conversions Minor revamps Other 231.6 11.3 46.4 26.4 43.5 9.1 8.5 0.4 20.4 72.0 2.1 0.4 472.1 Not contracted for Stores to be opened Stores to be refurbished Purchase of plant and equipment Purchase of new system software Purchase of new computer hardware Purchase of motor vehicles Store relocations Store conversions Minor revamps Minority buyouts and acquisitions Other 322.6 29.2 35.3 4.0 53.1 28.7 54.7 39.1 30.0 1.6 598.3 1,070.4 520.1 117.9 17.9 40.3 8.5 12.0 11.6 9.9 738.2 225.5 57.9 15.0 58.1 115.8 45.9 43.5 31.4 593.1 1,331.3 2011 Rm
R Massmart has the right of rst refusal on the sale of any shares by the minority shareholders in various CBW stores.
Historically Massmart has exercised this right. The amount to be paid in future, should Massmart exercise its rights, totals R259.9 million (2011: R244.2 million). R Capital commitments will be funded using current facilities.
243
32. Operating lease commitments

2012 Rm Land and buildings Year 1 Years 2 to 5 Subsequent to year 5 1,329.8 5,104.2 5,799.3 12,233.3 Plant and equipment Year 1 Years 2 to 5 5.5 7.4 12.9 Other Year 1 Years 2 to 5 Subsequent to year 5 9.8 15.0 24.8 12,271.0 2011 Rm 1,082.1 4,595.3 4,616.0 10,293.4 5.8 6.4 12.2 10.8 17.4 0.2 28.4 10,334.0
R Promissory notes that represent commitments under non-cancellable operating leases of R303.9 million
(2011: R485.2 million) entered into by Masstores (Pty) Ltd on behalf of certain Makro stores are included in operating lease commitments in land and buildings. These leases terminate in December 2020 and have a discounted present value of R262.8 million (2011: R338.0 million), discounted at 15% (2011: 15%). In accordance with IAS 17 Leases, the rentals paid are amortised over the entire remaining lease period on a straight-line basis.
33. Contingent liabilities

2012 Rm Contingent liabilities 2011 Rm
R Other than noted below, there are no current or pending legal or arbitration proceedings, of which the Group
is aware, which would have a material effect on the Groups nancial position.
R The Competition Appeal Court issued judgement on 9 March 2012, approving the Walmart/Massmart merger
subject to two conditions relating to prior retrenchments and Massmarts voluntary undertaking to create a Supplier Development Fund. Massmart has taken all necessary and reasonable steps to reinstate those employees who were subject to the retrenchment and presented themselves for reinstatement. With respect to the Supplier Development Fund condition, all parties to the litigation have now presented their views and we are now awaiting a nal ruling from the court.
244

CONTINUED
34. Related-party transactions

2012 Rm Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below. Compensation of key management personnel: The remuneration of executive directors and other key management (dened as the 17-person Massmart Executive Committee) during the year was as follows: Short-term benets (salaries, benets and short-term incentives) Retirement benets Other long-term benets Gains on exercise of share options 2011 Rm
56.3 3.0 5.7 54.1 119.1
46.6 2.4 13.8 297.9 360.7
R The remuneration of directors and key executives is determined by the Nomination and Remuneration Committee
having regard to the performance of individuals and market trends. There were six additional members on the Executive Committee in the current year. Two were appointed at the end of the previous nancial year, and thus were not accounted for in the numbers above in the previous nancial year. One was appointed after the current nancial year-end, and thus was not accounted for in the numbers above for the current year.
R The gains on exercise of share options in 2011 arise mainly as a result of the Walmart acquisition in June 2011.
Other related-party transactions:

R Transactions between the Company and Walmart (its Holding Company) are accounted for in Walmart transaction,
integration and related costs in the income statement. These costs comprise professional fees, integration costs, expatriate employment costs, share-based payments, travel, consulting costs and other direct expenses relating to the Walmart transaction, of which certain amounts remain unpaid at the reporting date. The income statement detail is disclosed in note 6 on page 210.
R From time to time, in the normal course of business, Massmart and its divisions make use of private aircraft hired
from competitively selected charter companies, two of which operate aircraft indirectly benecially owned by the Groups Chairman, Mark Lamberti.
R The Group holds cash reserves on behalf of the Lamberti Education Foundation Trust. Further details relating to
these cash reserves can be found in note 28 on page 237.

R Loans to directors have been disclosed in note 17 on page 225. R The post-retirement medical aid liability, Massmart Pension Fund and Massmart Provident Fund are managed for
the benet of past and current employees of the Group. Further details can be found in note 25 and note 30 on pages 235 and 242, respectively.
245
35. Directors emoluments

The comments below provide further background and context to the gures disclosed in this note, Directors emoluments, and Interests of directors in the Companys Share Scheme (note 36 on page 248).
GM Pattison
Following a third party executive remuneration analysis which assessed positions of similar stature and complexity, the Nomination and Remuneration Committee awarded Grant a 4.3% increase to his salary and allowances for the 2012/13 nancial year, from R3.74 million to R3.90 million. Grant did not receive a bonus for this nancial year. During the 2012 nancial year Grant converted and sold 149,000 Massmart options, realising a pre-tax gain on exercise of share options of R19.9 million. Through the Share Scheme, Grant holds 733,021 Massmart shares and options of which 42,202 shares and 158,603 options are held in the Pattison Family Trust, of which Grant is a beneciary. The average length of time that he has held these is 4.8 years and the average strike price is R77.99 per share. The Pattison Family Trust also directly owns 218,055 Massmart shares.
GRC Hayward
Following a third party executive remuneration analysis which assessed positions of similar stature and complexity, the Nomination and Remuneration Committee awarded Guy an 8.9% increase to his salary and allowances for the 2012/13 nancial year, from R2.75 million to R3.00 million. Guy did not receive a bonus for this nancial year. During the 2012 nancial year Guy converted and sold 36,750 Massmart options, realising a pre-tax gain on exercise of share options of R5.0 million. Through the Share Scheme, Guy holds 628,406 Massmart shares and options of which 19,912 shares are held in the Bluett-Hayward Trust, of which Guy is a beneciary. The average length of time that he has held these is 3.1 years and the average strike price is R103.51 per share. Guy also owns 36,517 Massmart shares directly.
I Zwarenstein
Ilan was appointed to the Board on 7 May 2012. His salary and allowances for the 2012 nancial year, as reected in the table, are representative of his salary and allowances during his time in this role. In his previous position, Ilan received an ad hoc bonus of two months salary for this nancial year and this is reected in the prescribed ofcer section of the table. Ilan did not convert and sell any Massmart options in his capacity as Financial Director. Through the Share Scheme, Ilan holds 202,659 options. The average length of time that he has held these is 1.2 years and the average strike price is R137.76 per share.
246

CONTINUED
35. Directors emoluments continued

Otherwise in connection with the affairs of Massmart Holdings Limited R000 Gains on exercise of share options and on shares purchased by directors R000
Services as directors of Massmart Holdings Limited R000 For the year ended June 2012 Executive directors Pattison, GM Hayward, GRC Zwarenstein, I3
Other benets R000
Subtotal R000
Fringe benet of interestfree loans used to nance shares2 R000
Total R000
3,899 2,995 366 7,260
828 522 2 1,352
409 314 35 758
5,136 3,831 403 9,370
1,654 1,329 2,983
19,891 5,043 24,934
26,681 10,203 403 37,287
Non-executive directors Lamberti, MJ Seabrooke, CS Davis, JA Gwagwa, NN Langeni, P McMillon, CD4 Suarez, JP
976 891 354 574 2,795
7,260
1,352
758
976 891 354 574 2,795 4,406 2,107 2,547 6,346 5,051 2,279 5,900 5,346 3,837 2,035 3,195 2,822 2,147 1,945 49,963 62,128
9 100 621 581 134 673 1 321 258 2,698 5,681
7,890 7,346 5,031 854 1,314 4,527 165 2,000 29,127 54,061
976 891 354 574 2,795 12,305 9,553 8,199 7,200 6,946 6,940 6,065 5,346 4,510 4,036 3,516 2,822 2,405 1,945 81,788 121,870
Prescribed Ofcers Prescribed Ofcer A Prescribed Ofcer B Prescribed Ofcer C Prescribed Ofcer D Prescribed Ofcer E Prescribed Ofcer F Prescribed Ofcer G Prescribed Ofcer H Prescribed Ofcer I Prescribed Ofcer J Prescribed Ofcer K Prescribed Ofcer L Prescribed Ofcer M Prescribed Ofcer N
Total
2,795
1. In order to match incentive awards with the performance to which they relate, bonuses above reect the amounts approved in respect of each year and not amounts paid in that year. 2. Held in terms of the rules of the Companys share scheme. 3. Appointed 7 May 2012. 4. Resigned 20 August 2012.
247
Services as directors of Massmart Holdings Limited R000 For the year ended June 2011 Executive directors Pattison, GM Hayward, GRC
Other benets R000
Otherwise in connection with the affairs of Massmart Holdings Limited R000
Subtotal R000
Fringe benet of interestfree loans used to nance shares2 R000
Gains on exercise of share options and on shares purchased by directors R000
Total R000
3,738 2,751 6,489
3,678 2,064 5,742
478 389 867
386 289 675
8,280 5,493 13,773
3,829 3,073 6,902
77,947 56,164
90,056 64,730
134,111 154,786
Non-executive directors Lamberti, MJ Seabrooke, CS Brand, MD* Davis, JA Dlamini, KD* Gwagwa, NN Hodkinson, JC* Langeni, P Matthews, IN* Maw, P * McMillon, CD Suarez, JP Mokhobo, DNM* Rubin, MJ*
825 745 404 413 315 209 550 739 428 306 209 5,143
6,489
5,742
867
675
40 40 40
825 745 404 413 315 209 550 779 428 306 209 5,183 3,235 5,229 5,690 2,866 5,828 4,278 2,750 2,664 2,726 2,510 37,776 56,732
5 1,413 1,533 1,960 822 229 334 591 6,887 13,789
45,185 22,108 21,401 19,086 14,531 13,522 10,016 9,391 8,564 5,267
825 745 404 413 315 209 550 779 428 306 209 5,183 48,425 28,750 28,624 23,912 20,359 18,622 12,995 12,389 11,881 7,777
Prescribed Ofcers Prescribed Ofcer A Prescribed Ofcer B Prescribed Ofcer C Prescribed Ofcer D Prescribed Ofcer E Prescribed Ofcer F Prescribed Ofcer G Prescribed Ofcer H Prescribed Ofcer I Prescribed Ofcer J
169,071 213,734 303,182 373,703
Total
5,143
1. In order to match incentive awards with the performance to which they relate, bonuses above reect the amounts accrued in respect of each year and not amounts paid in that year. 2. Held in terms of the rules of the Companys share scheme. * Resigned 20 June 2011.
248

CONTINUED
36. Interests of directors in the Companys share scheme

Details of directors shares and share options per director: Subscription price R Market price R Number of shares/ share options Gain on sale/ exercise R000
Relevant date Pattison, GM Balance at the beginning of the previous year Shares traded Shares traded Shares traded Shares traded Shares traded Options exercised Options exercised Options exercised New shares/options granted
Expiry date
26 May 2004 23 May 2006 24 May 2007 26 May 2008 27 May 2009 27 August 2001 27 August 2001 1 April 2005
29.87 54.13 94.25 72.86 77.56 10.95 10.95 41.91
121.93 148.00 148.00 148.00 148.00 121.93 148.00 148.00
1,562,298 (35,919) (382,500) (28,052) (43,480) (43,929) (50,000) (51,000) (204,000) 723,418 (49,000) (100,000) 158,603 733,021
35,904 1,508 3,264 3,092 5,549 6,990 21,640
Balance at the beginning of the year 27 August 2001 Options exercised Options exercised 1 April 2005 New shares/options granted 1 September 2011 Balance at the end of the year Comprising: 1 April 2005 23 May 2006 24 May 2007 26 May 2008 27 May 2009 1 September 2011
10.95 41.91 153.84
148.51 173.89
77,947 6,732 13,159
19,891 31 March 2015 22 May 2016 23 May 2017 25 May 2018 26 May 2019 31 August 2021
41.91 54.13 94.25 72.86 77.56 153.84
96,000 367,500 26,948 41,768 42,202 158,603
Hayward, GRC Balance at the beginning of the previous year Shares traded* Shares traded* Shares traded Shares traded Shares traded Shares traded
10 March 2000 26 May 2004 1 April 2005 23 May 2006 24 May 2007 1 April 2008
14.61 29.87 41.91 54.13 94.25 66.91
148.00 148.00 148.00 148.00
1,032,898 (8,643) (43,881) (102,000) (76,500) (25,445) (20,729)
10,820 7,180 1,362 1,680
249
Relevant date Hayward, GRC continued Shares traded 26 May 2008 Shares traded 27 May 2009 Options exercised 13 November 2000 Options exercised 27 August 2001 Options exercised 27 August 2001 New shares/options granted Balance at the beginning of the year Options exercised 27 August 2001 New shares/options granted 1 September 2011 New shares/options granted 16 May 2012 Balance at the end of the year Comprising: 1 April 2005 23 May 2006 24 May 2007 1 April 2008 26 May 2008 27 May 2009 1 September 2011 16 May 2012
Subscription price R
Market price R
Number of shares/ share options
Gain on sale/ exercise R000
Expiry date
72.86 77.56 12.25 10.95 10.95
148.00 148.00 121.93 121.93 148.00
(38,070) (109,753) (100,000) (75,000) (38,250) 394,627 (36,750) 120,987 149,542 628,406
2,860 7,728 10,968 8,324 5,242
10.95 153.84 159.62
148.51
56,164 5,043
5,043 31 March 2015 22 May 2016 23 May 2017 31 March 2018 25 May 2018 26 May 2019 31 August 2021 15 May 2022
41.91 54.13 94.25 66.91 72.86 77.56 153.84 159.62
98,000 73,500 24,444 19,912 36,573 105,448 120,987 149,542
* These shares were transferred to a private trading account.
Zwarenstein, I Balance on date appointed as Executive Director New shares/options granted Balance at the end of the year Comprising:
110,983 16 May 2012 159.62 91,676 202,659 1 April 2008 26 May 2008 27 May 2009 1 September 2011 16 May 2012 66.91 72.86 77.56 153.84 159.62 8,226 24,111 14,705 63,941 91,676 31 March 2018 25 May 2018 26 May 2019 31 August 2021 15 May 2022
R Shares and options at reporting date can be found in the Directors report on page 185.
250

CONTINUED
37. Principal subsidiaries

Details of Massmarts material subsidiary companies are as follows: Number of shares in issue 000s Place of incorporation and operation Voting power % Principal activity Shares at book value Rm Indebtedness Rm
Name of company 2012 De La Rey 1001 Building Materials (Pty) Ltd
Ownership %
South Africa
100
Selling of building 100 materials Wholesale and retail of DIY 100 products Wholesale cash 100 and carry 100 Holding company 100 Holding company Management, investment and 100 nance Retailing, warehousing, mass 100 merchandising
28.4
154.6
Massbuild (Pty) Ltd Jumbo Cash and Carry (Pty) Ltd Masscash Holdings (Pty) Ltd Massmart International Holdings Ltd Massmart Management & Finance Company (Pty) Ltd
South Africa South Africa South Africa Mauritius
100 100 100 100
74.5 1.0
81.4
South Africa
100
(106.8)
Masstores (Pty) Ltd
200
South Africa
100
103.9
(478.0) (348.8)
2011 De La Rey 1001 Building Materials (Pty) Ltd South Africa 100 Selling of building 100 materials Wholesale and retail of DIY 100 products Wholesale cash 100 and carry 100 Holding company 100 Holding company Management, investment and 100 nance Retailing, warehousing, mass 100 merchandising 28.4 154.6
Massbuild (Pty) Ltd Jumbo Cash and Carry (Pty) Ltd Masscash Holdings (Pty) Ltd Massmart International Holdings Ltd Massmart Management & Finance Company (Pty) Ltd
South Africa South Africa South Africa Mauritius
100 100 100 100
74.5 1.0
992.3 81.5
South Africa
100
34.0
Masstores (Pty) Ltd
200
South Africa
100
103.9
(478.0) 784.4
R The above details are given in respect of interests in subsidiaries, where material. A full list of subsidiaries is
available to shareholders, on request, at the registered ofce of the Company.
251
38. Notes to the cash ow statement

2012 Rm 38.1 Cash ow from trading Prot before taxation Adjusted for: Depreciation, amortisation and impairment Net loss on disposal of property, plant and equipment Interest income Interest expense Investment income Dividend income Share-based payment expense Unrealised foreign exchange loss Other non-cash movements Other Walmart non-cash movements Supplier Development Fund Share-based payment expense Depreciation 1,834.1 610.7 12.6 (68.8) 183.9 (0.1) (3.8) 66.1 (24.0) (44.4) 48.3 47.7 0.6 2,614.6 38.2 Working capital movements Increase in inventories Increase in trade receivables and prepayments Increase in trade payables Decrease in provisions (1,373.4) (369.4) 1,814.6 (17.9) 53.9 38.3 Taxation paid Normal taxation: Amounts owing at the beginning of the year Amounts owing at the end of the year Other Receiver of Revenue balance acquired on current year acquisitions Taxation charged to the income statement (excluding deferred taxation) 2011 Rm 1,504.1 486.3 4.0 (33.2) 140.4 (46.8) (2.1) 110.7 3.9 (72.6) 170.1 100.0 70.1 2,264.8 (589.3) (241.9) 207.2 (1.4) (625.4)
(148.1) 238.0 (0.8) (0.2) (684.5) (595.6)
(179.8) 148.1 (1.7) (611.7) (645.1) (25.6) (27.4) (152.5) (44.0) (95.9) (345.4) (310.4) (21.4) (415.1) (46.0) (12.5) (37.6) (843.0)
38.4 Investment to maintain operations Land and buildings/leasehold improvements Vehicles Fixtures, ttings, plant and equipment Computer hardware Computer software
(89.9) (35.1) (334.6) (90.5) (87.0) (637.1)
38.5 Investment to expand operations Land and buildings/leasehold improvements Vehicles Fixtures, ttings, plant and equipment Computer hardware Computer software Right of use
(158.9) (26.1) (461.5) (40.2) (14.7) (9.0) (710.4)
252

CONTINUED
38. Notes to the cash ow statement continued

2012 Rm 38.6 Proceeds on disposal of property, plant and equipment Vehicles Fixtures, ttings, plant and equipment Computer equipment and software 3.3 6.2 0.7 10.2 38.7 Proceeds on disposal of assets classied as held for sale 6.5 2011 Rm 20.5 4.4 0.3 25.2 15.0
38.8 Investment in subsidiaries Fair value of assets and liabilities acquired in subsidiaries: Cash and cash equivalents Inventories Trade and other receivables and prepayments Tangible assets Intangible assets Taxation Trade payables Provisions Long-term debt Deferred taxation Goodwill Minorities Total purchase price Less: Cash and cash equivalents of subsidiary Cash impact of acquisition, net of cash and cash equivalents acquired 38.9 Other investing activities including minority interests acquired Offshore investment Cost of acquiring minority interests Other
(18.8) (105.0) (51.3) (106.9) (0.1) 0.2 158.9 208.6 57.2 (3.1) (486.4) (346.7) 18.8 (327.9) 72.9 (25.8) 3.6 50.7
0.7 (23.6) (0.5) (82.2) 1.7 16.8 3.1 20.1 3.1 (185.0) 75.5 (170.3) (0.7) (171.0) (26.4) (48.3) 96.0 21.3 1,549.1 (804.7) 744.4
38.10 Cash and cash equivalents at the end of the year Cash on hand and balances with banks Bank overdrafts Cash and cash equivalents at the end of the year
1,305.4 (632.6) 672.8
253
39. Financial instruments

Capital risk management The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balances. The capital structure of the Group consists of debt, more specically medium-term interest-bearing debt and equity attributable to equity holders of the parent, comprising share capital, share premium, other reserves and retained prot. (See notes 21 and 22, respectively, on pages 229 and 231.) The targeted level of gearing is determined after consideration of the following key factors:
R the needs of the Group to fund current and future capital expenditure to achieve its stated production growth
target; and
R the desire of the Group to maintain its gearing within levels considered to be acceptable taking into account potential
business opportunities and the position of the Group in the business cycle. The Group has medium-term debt facilities that include certain covenants, including:
R maximum gearing ratio; R minimum interest cover; and R specied levels of shareholders equity.
The Groups general banking facility can be analysed as follows: 2012 Rm Available cash reserves General banking facility 672.8 3,311.9 3,984.7 2011 Rm 778.4 2,233.5 3,011.9
Signicant accounting policies Details of signicant accounting policies, including the recognition criteria, the basis for measurement and the basis on which income and expenses are recognised, in respect of each category of nancial asset, nancial liability and equity instrument, are disclosed under the notes in accounting policies (in note 1 on pages 194 204). Categories of nancial instruments Fair values of nancial instruments All nancial instruments have been classied according to the relevant IAS 39 Financial Instruments: Recognition and Measurement category. There is no difference between their fair value and carrying value and they are accounted for as follows: Financial assets Fair value through prot or loss (FVTPL) These are held at fair value and any adjustments are taken to the income statement. Listed investments are carried at market value by reference to stock exchange quoted selling prices. Loans and receivables These are held at amortised cost less any impairment losses recognised to reect irrecoverable amounts.
254

CONTINUED
39. Financial instruments continued

Categories of nancial instruments continued Held-to-maturity investments These are held at amortised cost less any impairment losses recognised to reect irrecoverable amounts. Available-for-sale investments These are held at fair value and any adjustment to fair value is taken to other comprehensive income. Financial liabilities Fair value through prot or loss (FVTPL) These are held at fair value and any adjustments are taken to the income statement. Liability at amortised costs These are held as non-trading liabilities and are shown at amortised cost. The cash ows expected from the Groups participation in export partnerships over the next two to ve years cannot, in the opinion of the directors, be accurately fair valued and therefore have not been discounted. For fair presentation purposes, it is noted that any fair value impairment in the amounts due to the Group by virtue of its participation in such partnerships would result in a corresponding reduction in the fair value of the related deferred tax liability. Consequently, such fair value impairment would have no impact on either the statement of cash ows or income statement of the Group.
255
Total Rm 2012 Non-current assets Property, plant and equipment Goodwill Other intangibles Investments Bare dominium revaluation Investment in offshore trading structure Participation in insurance cell-captive on extended warranties Participation in insurance cell-captive on premium contributions Trencor export partnership Other unlisted investments Other listed investments Other nancial assets Housing and staff loans Employee share trust loans Finance lease deposit Loan to a related party Other loans Deferred taxation Current assets Inventories Trade, other receivables and prepayments Trade and other receivables Prepayments Taxation Cash and bank balances Non-current assets classied as held for sale Total assets
Nonnancial instrument Rm
Financial instrument Rm
FVTPL Rm
Liability at amortised cost Rm
Held-toLoans and maturity receivables investments Rm Rm
Availableforsale nancial assets Rm
3,520.6 2,521.4 347.1 321.9 82.0 177.2
3,520.6 2,521.4 347.1
321.9 82.0 177.2
313.1 82.0 177.2
3.0
0.1
5.7
18.8
18.8
18.8
35.1 3.0 0.1 5.7 134.6 0.5 82.4 37.6 13.9 0.2 330.2
330.2
35.1 3.0 0.1 5.7 134.6 0.5 82.4 37.6 13.9 0.2
35.1
3.0 134.6 0.5 82.4 37.6 13.9 0.2
0.1
5.7
7,615.6 2,953.9 2,920.0 33.9 21.0 1,305.4 103.2
7,615.6 122.6 88.7 33.9 21.0
2,831.3 2,831.3 1,305.4 103.2 4,696.4
20.9 20.9 334.0
2,810.4 2,810.4 1,305.4 4,253.4
0.1
103.2 108.9
19,174.9 14,478.5
256

CONTINUED

Categories of nancial instruments continued Availableforsale nancial assets Rm
Total Rm 2012 Non-current liabilities Non-current liabilities interest-bearing Medium-term bank loans Capitalised nance lease Non-current liabilities interest-free Minority shareholders loans Operating lease liability Non-current provisions Deferred taxation Current liabilities Trade and other payables Trade payables Operating lease liability Sundry payables and other accruals Provisions Taxation Other current liabilities Medium-term payable Medium-term bank loans Capitalised nance lease Bank overdrafts Non-current liabilities classied as held for sale Total liabilities
FVTPL Rm
Liability at amortised cost Rm
Held-toLoans and maturity receivables investments Rm Rm
852.7 777.2 75.5 345.8 3.0 342.8 259.0 28.5 11,302.0 8,908.8 62.1 2,331.1 139.7 259.0 648.9 110.2 503.8 34.9 632.6 141.9 14,610.1
342.8 342.8 105.9 28.5
852.7 777.2 75.5 3.0 3.0 153.1
852.7 777.2 75.5 3.0 3.0 153.1
652.8 10,649.2 62.1 590.7 9.0 259.0 8,908.8 1,740.4 130.7 648.9 110.2 503.8 34.9 632.6 141.9
4.0 10,645.2 4.0 8,908.8 1,736.4 130.7 648.9 110.2 503.8 34.9 632.6 141.9
1,398.0 13,212.1
4.0 13,208.1
257
Total Rm 2011 Non-current assets Property, plant and equipment Goodwill Other intangibles Investments Bare dominium revaluation Investment in offshore trading structure Participation in insurance cellcaptive on extended warranties Participation in insurance cell-captive on premium contributions Trencor export partnership Other unlisted investments Other listed investments Other nancial assets Housing and staff loans Employee share trust loans Finance lease deposit Other loans Deferred taxation Current assets Inventories Trade, other receivables and prepayments Trade and other receivables Prepayments Taxation Cash and bank balances Restricted cash held on behalf of Massmart Employee Share Trusts beneciaries* Total assets
FVTPL Rm
Liability at Held-toamortised Loans and maturity cost receivables investments Rm Rm Rm
Availableforsale nancial assets Rm
2,717.8 2,049.4 309.0 367.6 70.6 250.0 5.8
2,717.8 2,049.4 309.0
367.6 70.6 250.0 5.8
360.0 70.6 250.0 5.8
3.6
0.1
3.9
25.7 3.6 8.0 3.9 137.9 0.7 91.8 45.3 0.1 265.0 6,199.7 2,562.7 2,515.2 47.5 22.5 1,549.1
265.0 6,199.7 47.5 47.5 22.5
25.7 3.6 8.0 3.9 137.9 0.7 91.8 45.3 0.1 2,515.2 2,515.2 1,549.1
25.7 7.9
3.6 137.9 0.7 91.8 45.3 0.1 2,515.2 2,515.2 1,549.1
0.1
3.9
1,093.6
1,093.6
360.0
1,093.6 5,299.4
0.1
3.9
17,274.3 11,610.9 5,663.4
* These amounts represent the net cash proceeds held in the three Massmart Employee Share Trusts, and the corresponding liability to the beneciaries, as a result of the Walmart transaction. The cash was distributed to beneciaries shortly after 26 June 2011. The Massmart Employee Share Trusts are consolidated with the Group results. In the statement of cash ows, the two amounts have been contrad in the cash inow from nancing activities.
258

CONTINUED

Categories of nancial instruments continued Availableforsale nancial assets Rm
Total Rm 2011 Non-current liabilities Non-current liabilities interestbearing Medium-term bank loans Capitalised nance lease Non-current liabilities interestfree Minority shareholders loans Operating lease liability Non-current provisions Deferred taxation Current liabilities Trade and other payables Trade payables Operating lease liability Income received in advance Sundry payables and other accruals Massmart Employee Share Trusts beneciaries liability* Provisions Taxation Other current liabilities Medium-term payable Medium-term bank loans Capitalised nance lease Bank overdrafts Total liabilities
FVTPL Rm
Liability at Held-toamortised Loans and maturity cost receivables investments Rm Rm Rm
598.7 540.2 58.5 417.3 3.0 414.3 167.0 22.2 9,381.8 7,553.9 (21.8) 21.5 1,828.2 1,093.6 26.8 170.6 409.9 92.7 294.9 22.3 804.7 13,092.6
414.3 414.3 167.0 22.2
598.7 540.2 58.5 3.0 3.0
3.7 3.7 3.7
598.7 540.2 58.5 3.0 3.0 9,378.4 7,553.9 1,824.5 1,093.6 409.9 92.7 294.9 22.3 804.7 12,288.3
(0.3) 9,382.1 7,553.9 (21.8) 21.5 26.8 170.6 800.6 1,828.2 1,093.6 409.9 92.7 294.9 22.3 804.7 12,292.0
* These amounts represent the net cash proceeds held in the three Massmart Employee Share Trusts, and the corresponding liability to the beneciaries, as a result of the Walmart transaction. The cash was distributed to beneciaries shortly after 26 June 2011. The Massmart Employee Share Trusts are consolidated with the Group results. In the statement of cash ows, the two amounts have been contrad in the cash inow from nancing activities.
259
Financial risk management The Group does not trade in nancial instruments but, in the ordinary course of business operations, the Group is exposed to a variety of nancial risks arising from the use of nancial instruments. These risks include: R market risk (comprising interest rate risk, currency risk and other price risk); R liquidity risk; and R credit risk. The Group has developed a comprehensive risk management process to facilitate, control and monitor these risks. This process includes formal documentation of policies, including limits, controls and reporting structures. The Executive Committee is responsible for risk management activities within the Group. Market risk management Market risk is the risk that the fair value or future cash ows of a nancial instrument will uctuate because of changes in market prices. The market risks to which the Group is primarily exposed include currency risk, interest rate risk, and other price risk. Market risk is managed by identifying and quantifying risks on the basis of current and future expectations and ensuring that all trading occurs within dened parameters. This involves the review and implementation of methodologies to reduce risk exposure. The reporting on the state of the risk and risk practices to executive management is part of this process. The processes set up to measure, monitor and mitigate these market risks are described below. There has been no change to the Groups exposure to market risk or the manner in which it manages and measures the risk since the prior period. Interest rate management During the year, the position of the Group alternated between having surplus cash and being in a borrowed position. The size of the Group's position, be it either surplus cash or borrowings, exposes it to interest rate risk. The interestbearing debt funding requirements and the investment of surplus cash funds are managed by Massmart through its own commercial bank facilities.
260

CONTINUED

Financial risk management continued The carrying amount of the Groups nancial assets and liabilities at reporting date that are subject to interest rate risk is as follows: Subject to interest rate movement Fixed Floating Rm Rm 2012 Financial assets Investments Bare dominium revaluation Investment in offshore trading structure Participation in insurance cell-captive on extended warranties Participation in insurance cell-captive on premium contributions Trencor export partnership Other unlisted investments Other listed investments Other nancial assets Housing and staff loans Employee Share Trust loans Finance lease deposit Loan to a related party Other loans Trade, other receivables and prepayments Trade and other receivables Cash and bank balances Non-current assets classied as held for sale Total nancial assets Financial liabilities Non-current liabilities interest-bearing Medium-term bank loans Capitalised nance lease Non-current liabilities interest-free Minority shareholders loans Non-current provisions Trade and other payables Trade payables Sundry payables and other accruals Provisions Other current liabilities Medium-term payable Medium-term bank loans Capitalised nance lease Bank overdrafts Non-current liabilities classied as held for sale Total nancial liabilities 503.8 34.9 1,391.4 58.2 124.1 110.2 632.6 925.1 3.0 94.9 8,908.8 1,740.4 6.6 141.9 10,895.6 3.0 153.1 8,908.8 1,740.4 130.7 110.2 503.8 34.9 632.6 141.9 13,212.1 777.2 75.5 777.2 75.5 38.1 1,305.4 1,308.4 2,831.3 103.2 3,349.9 2,831.3 1,305.4 103.2 4,696.4 0.5 37.6 82.4 13.9 0.2 0.5 82.4 37.6 13.9 0.2 3.0 82.0 177.2 18.8 35.1 0.1 5.7 82.0 177.2 18.8 35.1 3.0 0.1 5.7 Non-interest bearing Rm
Total Rm
261
Subject to interest rate movement Fixed Floating Rm Rm 2011 Financial assets Investments Bare dominium revaluation Investment in offshore trading structure Participation in insurance cell-captive on extended warranties Participation in insurance cell-captive on premium contributions Trencor export partnership Other unlisted investments Other listed investments Other nancial assets Housing and staff loans Employee share trust loans Finance lease deposit Other loans Trade, other receivables and prepayments Trade and other receivables Cash and bank balances Restricted cash held on behalf of Massmart Employee Share Trusts' beneciaries Total nancial assets Financial liabilities Non-current liabilities interest-bearing Medium-term bank loans Capitalised nance lease Non-current liabilities interest-free Minority shareholders' loans Trade and other payables Trade payables Sundry payables and other accruals Massmart Employee Share Trusts' beneciaries liability Other current liabilities Medium-term payable Medium-term bank loans Capitalised nance lease Bank overdrafts Total nancial liabilities 92.7 294.9 22.3 1,008.6 804.7 804.7 540.2 58.5 46.0 1,549.1 1,093.6 2,646.3 0.7 45.3 3.6
Non-interest bearing Rm
Total Rm
70.6 250.0 5.8 25.7 8.0 3.9
70.6 250.0 5.8 25.7 3.6 8.0 3.9
91.8 0.1
0.7 91.8 45.3 0.1
2,515.2 2,971.1
2,515.2 1,549.1 1,093.6 5,663.4
540.2 58.5
3.0
3.0
7,553.9 1,828.2 1,093.6 10,478.7
7,553.9 1,828.2 1,093.6 92.7 294.9 22.3 804.7 12,292.0
262

CONTINUED

Financial risk management continued Interest rate sensitivity The Group is sensitive to the movements in the SA prime interest rate. The rates of sensitivity represent management's assessment of the possible change in interest rates. The average interest rate for the Group for the year was 7.11% (2011: 7.22%), and the variable interest paid was R53.0 million (2011: R59.4 million). If the SA prime interest rate increased and decreased by 50 average basis points (2011: increased and decreased by 50 average basis points) at year-end, the income for the year would have decreased and increased by R3.7 million, respectively (2011: decreased and increased by R4.1 million, respectively). Currency risk management All foreign-denominated trading liabilities are covered by forward exchange contracts. Foreign-denominated assets are not covered by forward exchange contracts. The carrying amount of the Group's foreign currency-denominated monetary assets at reporting date is as follows: South African Rand Rm 2012 Investments Trade receivables Cash and bank balances 139.5 2,697.3 270.3 3,107.1 2011 Investments Trade receivables Cash and bank balances 117.6 2,409.6 1,414.3 3,941.5 US Dollar Rm 177.2 (11.9) 165.3 250.0 0.4 104.4 354.8 Euro Rm 11.3 11.3 10.2 10.2 Other Rm 5.2 134.0 403.1 542.3 105.2 309.1 414.3 Total Rm 321.9 2,831.3 672.8 3,826.0 367.6 2,515.2 1,838.0 4,720.8
263
Foreign currency sensitivity The US Dollar is the primary currency to which the Group is exposed. In the past, the US Dollar movement against the Rand has been a good proxy for the Group's exposure to the basket of African currencies. During the 2009 nancial year, this relationship broke as the African currencies weakened considerably and can be seen in the graph below. In the 2010 and the 2011 nancial years, the relationship was restored. For the current year, the relationship was maintained, except for Malawi, where the Kwacha was devalued by 50% in May 2012. This distorts the graph as illustrated below which indicates that the African basket weakened against the Rand: RELATIONSHIP BETWEEN THE AFRICAN BASKET AND THE US DOLLAR (%)
25 20 15 10 5 0 -5 -10 -15 -20 -25
2005 2006 2007 2008 2009 2010
STRENGTH
RAND MOVEMENT
WEAKNESS
2011
2012
Rand/African basket
Rand/US$
This graph shows the annual change of closing spot rates at each nancial year-end. The table below indicates the Group's sensitivity at year-end to movements in the relevant foreign currencies on nancial instruments, excluding forward exchange contracts. The rates of sensitivity are the rates used when reporting the currency risk to the Executive Committee of the Group and represents management's assessment of the possible change in reporting foreign currency exchange rates. Currency US Dollar Pound Sterling Euro Botswana Pula Ghanaian New Cedi Malawian Kwacha Mauritian Rupee Mozambican New Metical Namibian Dollar Nigerian Naira Tanzanian Shilling Ugandan Shilling Zambian Kwacha Spot rate June 2012 8.4049 13.1009 10.5201 1.0854 4.3563 0.0311 0.2730 0.3037 1.0000 0.0517 0.0053 0.0034 0.0016 Spot rate June 2011 6.9508 11.0958 9.8651 1.0680 4.6419 0.0469 0.2524 0.2456 1.0000 0.0449 0.0044 0.0028 0.0015 Rm 5% increase 0.4 0.1 0.4 0.5 8.5 0.1 0.6 0.7 0.9 1.1 0.4 Rm 5% decrease (0.4) (0.1) (0.4) (0.5) (8.5) (0.1) (0.6) (0.7) (0.9) (1.1) (0.4)
For each 5% increase, prot is increased and the nancial asset is increased, for each 5% decrease, prot is decreased and the nancial asset is decreased.
264

CONTINUED

Financial risk management continued Forward foreign exchange contracts Forward exchange contracts are entered into to manage exposure to uctuations in foreign currency exchange rates on specic trading transactions. The Group's policy is to enter into forward contracts for all committed foreign currency purchases. Forward foreign exchange contracts have been accounted for according to IAS 39 Financial Instruments: Recognition and Measurement. Fair value has been determined using money market derivative rates at 24 June 2012 (26 June 2011) and the net gain or exposure on the contracts has been reected in the nancial statements. At year-end, the open forward exchange contracts were as follows: Foreign currency millions 2012 US Dollar Sterling Euro Swiss Francs Australian Dollar 75.7 0.4 0.2 0.1 Fair value adjustment Rm 16.8 0.1 16.9 2011 US Dollar Sterling Euro 62.8 0.2 0.1 (3.6) (3.6) Contract equivalent Rm 627.5 5.0 2.0 0.4 0.6 635.5 442.5 2.5 1.3 446.3 7.0 11.5 10.0 Average exchange rate
8.3 13.1 10.7 8.8 8.1
Forward foreign exchange contracts sensitivity The following table indicates the Group's sensitivity of the outstanding forward exchange contracts at the reporting date to movements in the US Dollar. The US Dollar is the primary currency in which the Group has entered into forward foreign exchange contracts. The rates of sensitivity are the rates used when reporting the currency risk to the Executive Committee of the Group and represents management's assessment of the possible change in foreign currency exchange rates. The Rand/US Dollar year-end rate was R8.40 (2011: R6.95). US Dollar Rm 5% increase 2012 Prot/(loss) Derivative nancial assets/(liabilities) Equity 2011 Prot/(loss) Derivative nancial assets/(liabilities) Equity Rm 5% decrease
34.8 32.2 2.6
(29.6) (32.2) (2.6)
18.3 21.9 0.9
(25.6) (21.9) (0.9)
265
Liquidity risk management Liquidity risk is the risk that the Group will be unable to meet a nancial commitment in any location or currency. This risk is minimised through the holding of cash balances and sufcient available borrowing facilities (refer to note 24 on page 234). In addition, detailed cash ow forecasts are regularly prepared and reviewed so that the cash needs of the Group are managed according to its requirements. The following table details the Group's contractual maturity for its non-derivative nancial liabilities. The table has been compiled based on the undiscounted cash ows of nancial liabilities based on the earliest date on which the Group can be required to repay the liability. The cash ows include both the principal and interest payments. Repayable within 1 year Rm 2012 Financial liabilities Non-current and current liabilities interest-bearing: Medium-term payable Medium-term bank loans Capitalised nance lease Non-current liabilities interest-free: Minority shareholders' loans Provisions Trade and other payables: Trade payables Sundry payables and other accruals Bank overdrafts Non-current liabilities classied as held for sale Total undiscounted cash ows of the Group's nancial liabilities Less: Future nance charges Total nancial liabilities Repayable 2 5 years Rm Repayable after 5 years Rm Total Rm
110.2 593.4 41.9
887.4 80.7
0.2
110.2 1,480.8 122.8
130.7 8,908.8 1,740.4 632.6 141.9 12,299.0
153.1 1,121.2
3.1 3.3
3.1 283.8 8,908.8 1,740.4 632.6 141.9 13,424.4 (212.3) 13,212.1
266

CONTINUED

Financial risk management continued Repayable within 1 year Rm 2011 Financial liabilities Non-current and current liabilities interest-bearing: Medium-term payable Medium-term bank loans Capitalised nance lease Non-current liabilities interest-free: Minority shareholders' loans Trade and other payables: Trade payables Sundry payables and other accruals Massmart Employee Share Trusts' beneciaries liability Bank overdrafts Total undiscounted cash ows of the Group's nancial liabilities Less: Future nance charges Total nancial liabilities Repayable 2 5 years Rm Repayable after 5 years Rm Total Rm
92.7 361.6 29.5
575.3 67.3
92.7 936.9 96.8
7,553.9 1,828.2 1,093.6 804.7 11,764.2
642.6
3.0 3.0
3.0 7,553.9 1,828.2 1,093.6 804.7 12,409.8 (117.8) 12,292.0
Credit risk management Potential areas of credit risk include trade and consumer accounts receivable and short-term cash investments. Credit risk arises from the risk that a counterparty may default or not meet its obligations timeously. Trade accounts receivable consist primarily of a large, widespread customer base. Group companies regularly monitor the nancial position of their customers. Where considered appropriate, credit guarantee insurance is used. The granting of credit is controlled by application and account limits. Provision is made for both specic and general bad debts, and at the year-end management did not consider there to be any material credit risk exposure that was not already covered by credit guarantee insurance or bad debt provisions. Further details relating to trade and other receivables can be found in note 20 on page 228. The carrying amount of the nancial assets represents the Group's maximum exposure to credit risk without taking into consideration any collateral provided: Maximum credit risk 2012 2011 Rm Rm Investments: Trencor export partnership Trade, other receivables and prepayments: Trade and other receivables Cash and bank balances
3.0 2,831.3 1,305.4 4,139.7
3.6 2,515.2 2,642.7 5,161.5
267
40. Segmental reporting

Primary business segments The Group is organised into four divisions for operational and management purposes, being Massdiscounters, Masswarehouse, Massbuild and Masscash. Massmart reports its primary business segment information on this basis. The principal offering for each division is as follows: Massdiscounters general merchandise discounter and food retailer Masswarehouse warehouse club Massbuild home improvement retailer and building materials supplier Masscash food wholesaler, retailer and buying association Total Rm 2012 Sales Operating prot before interest and taxation Trading prot before interest and taxation* Net nance (costs)/income Operating prot before taxation Trading prot before taxation* Inventory Total assets Total liabilities Net capital expenditure** Depreciation and amortisation Impairment losses Non-cash items other than depreciation and impairment Cash ow from operating activities Cash ow from investing activities Cash ow from nancing activities 61,209.1 1,949.2 2,265.3 (115.1) 1,834.1 2,456.8 7,615.6 19,174.9 14,610.1 1,337.3 594.2 16.5 54.7 1,122.9 (1,608.0) 345.9 Corporate Rm (205.4) (306.6) (512.0) 8.6 (2,763.5) (6,237.5) (106.6) 16.1 (34.7) 385.7 187.1 (1,070.1) Massdiscounters Rm 14,805.7 656.2 749.8 63.2 719.4 813.0 2,661.2 5,912.0 5,775.7 505.9 213.2 51.9 (136.1) (505.9) 607.7 Masswarehouse Rm 15,370.6 848.4 844.5 61.8 910.2 906.3 1,793.2 4,838.7 5,032.5 318.9 110.2 22.5 76.5 (455.8) 245.5 Massbuild Rm 8,138.0 397.2 389.8 45.5 442.7 435.3 1,198.3 4,298.5 4,131.3 304.9 119.7 18.3 209.9 (304.9) 332.9 Masscash Rm 22,894.8 252.9 281.2 21.0 273.9 302.2 1,954.3 6,889.2 5,908.1 314.2 135.0 16.5 (3.3) 586.9 (528.5) 229.9
SALES JUNE 2012
TRADING PROFIT BEFORE TAXATION JUNE 2012
%
24.2 25.1 13.3 37.4 Massdiscounters Masswarehouse Massbuild Masscash
%
33.1 36.9 17.7 12.3
268

CONTINUED
40. Segmental reporting continued

Primary business segments continued Total Rm 2011 Sales Operating prot before interest and taxation Trading prot before interest and taxation* Net nance (costs)/income Operating prot before taxation Trading prot before taxation* Inventory Total assets Total liabilities Net capital expenditure** Depreciation and amortisation Impairment losses Non-cash items other than depreciation and impairment Cash ow from operating activities Cash ow from investing activities Cash ow from nancing activities SALES JUNE 2011 Corporate Rm Massdiscounters Rm Masswarehouse Rm Massbuild Rm Masscash Rm
52,950.1 1,611.3 2,182.9 (107.2) 1,504.1 2,331.6 6,199.7 17,274.3 13,092.6 1,148.2 476.3 10.0 274.4 113.5 (1,297.9) 615.3
(543.3) (255.9) (799.2) 1.0 (911.3) (4,090.2) 238.7 14.8 213.4 (41.1) (225.1) (119.1)
13,332.5 711.7 744.0 38.0 749.7 782.0 2,283.8 5,212.5 5,123.9 336.3 169.2 33.7 81.6 (336.4) 223.4
12,722.9 726.3 749.0 54.2 780.5 803.2 1,239.2 3,952.6 4,163.4 188.4 87.4 (32.4) (7.3) (167.5) 27.3
7,271.0 328.9 315.1 39.6 368.5 354.7 1,062.1 3,708.5 3,541.6 140.8 108.5 65.5 (13.0) (169.5) 350.5
19,623.7 387.7 374.8 16.9 404.6 391.7 1,613.6 5,312.0 4,353.9 244.0 96.4 10.0 (5.8) 93.3 (399.4) 133.2
TRADING PROFIT BEFORE TAXATION JUNE 2011
%
25.2 24.0 13.7 37.1 Massdiscounters Masswarehouse Massbuild Masscash
%
33.5 34.4 15.3 16.8
The corporate column includes certain consolidation entries. All inter-company transactions have been eliminated in the above results. Additional information can be found in the Operational review on pages 79 111.
* Trading prot before taxation is earnings before corporate net interest, asset impairments, BEE transaction IFRS 2 charges, foreign exchange movements, loss on disposal of business, assets classied as held for sale and Walmart-related costs. ** Net capital expenditure is dened as capital expenditure less disposal proceeds.
269
Secondary geographic segments The Group's four divisions operate in two principal geographical areas South Africa and the rest of Africa. Total 2012 Rm Sales Segment assets Net capital expenditure 61,209.1 19,174.9 1,337.3 South Africa 2012 Rm 56,456.2 18,036.1 1,212.1 Rest of Africa 2012 Rm 4,752.9 1,138.8 125.2 Total 2011 Rm 52,950.1 17,274.3 1,148.2 South Africa 2011 Rm 49,044.1 16,492.4 1,086.6 Rest of Africa 2011 Rm 3,906.0 781.9 61.6
All inter-company transactions have been eliminated in the above results.
41. Value added statement

2012 June Rm Sales, royalties, franchise fees, rentals and management and administration fees (inclusive of VAT) Cost of sales Interest and investment income Net costs of services and other operating expenses Value added Applied as follows: To employees as salaries, wages and other benets To Government as taxation To shareholders as dividends To lenders as interest Depreciation and amortisation Minorities Net earnings retained Total
2011 June Rm
69,167.1 (49,957.1) 81.8 (4,405.3) 14,886.5 4,456.6 8,435.4 838.8 183.9 594.8 36.3 340.7 14,886.5 29.9 56.7 5.6 1.2 4.0 0.2 2.4 100.0
60,457.4 (43,281.8) 89.9 (3,953.8) 13,311.7 3,766.3 8,009.9 822.5 140.4 476.3 41.7 54.6 13,311.7 28.3 60.2 6.2 1.1 3.6 0.3 0.3 100.0
VALUE ADDED STATEMENT

%
29.9 56.7 5.6 1.2 4.0 0.2 2.4 To employees as salaries, wages and other benefits To Government as taxation To shareholders as dividends To lenders as interest Depreciation and amortisation Minorities Net earnings retained
270

CONTINUED
42. Critical accounting judgements and key sources of estimation uncertainty

Critical judgements in applying the Group's accounting policies In the process of applying the Group's accounting policies, which are described in note 1 on pages 196 204, management has not made any critical judgements that have a signicant effect on the amounts recognised in the nancial statements, apart from those involving estimations discussed below and the Walmart Supplier Development Fund discussed in note 33 on page 243. Key sources of estimation uncertainty
R Property, plant and equipment
Property, plant and equipment is depreciated over its useful life taking into account, where appropriate, residual values. Assessment of useful lives and residual values are performed annually, taking into account factors such as technological innovation, maintenance programmes, market information and management considerations. In assessing the residual values, the remaining life of the asset, its projected disposal value and future market conditions are taken into account. For more detail on property, plant and equipment, please see note 13 on page 219.
R Goodwill impairment
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the Group to estimate the future cash ows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. The carrying amount of goodwill at the reporting date was R2,521.4 million (2011: R2,049.4 million). The impairment recognised in the current and prior year relates to the impairment of certain acquired goodwill in Masscash. Details of the impairment loss calculation are provided in note 14 on page 221.
R Inventory provisions
Inventory provisions include shrinkage, obsolescence and write-downs which take into account historical information related to sales trends and stock counts and represent the expected write-down between the estimated net realisable value and the original cost. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. For more detail on the provisions, please see note 19 on page 227.
R Allowance for doubtful debts
The Group assesses its doubtful debt allowance at each reporting date. Key assumptions applied are the estimated debt recovery rates and the future market conditions that could affect recovery. For more detail on the allowance, please see note 20 on page 228.
R Fair value of options granted
The fair value of options granted in terms of IFRS 2 Share-based Payment is obtained using option pricing models. Assumptions include expected volatility, expected life, risk-free rate and expected dividend yield. By obtaining an external valuation by accredited valuators, management is of the opinion that the risk relating to estimation uncertainty has been mitigated. For more detail on the valuations, please see note 22 on page 231.
R Provision for post-retirement medical aid
Post-retirement healthcare benets are provided to certain retired employees. Actuarial valuations are performed to assess the nancial position of the fund. Assumptions used include the discount rate, healthcare cost ination, mortality rates, withdrawal rates and membership. By obtaining an external valuation by accredited valuators, management is of the opinion that the risk relating to estimation uncertainty has been mitigated. Details can be found in note 25 on page 235.
R Deferred tax assets
Deferred tax assets are raised to the extent that it is probable that future taxable prot will be available against which the unused tax losses and unused tax credits can be utilised. Assessment of future taxable prot is performed at every reporting date, in the form of future cash ows using a suitable growth rate. For more detail on deferred taxation, please see note 18 on page 226.
271
43. Events after the reporting date

There are no material post-reporting date events.
44. Shareholder analysis

The following analysis of shareholders was extracted from the shareholders register as at June 2012: Number Shareholder spread 1 1,000 shares 1,001 10,000 shares 10,001 100,000 shares 100,001 1,000,000 shares 1,000,001 shares and over 5,348 753 183 52 20 6,356 Distribution of shareholders Walmart subsidiary: Main Street 830 (Pty) Ltd Unit trusts/mutual fund Pension funds Other managed funds Sovereign wealth Private investors Custodians Charity Insurance companies Exchange-traded fund total American Depositary Receipts Investment trust Local authority Remainder % 84.1 11.8 2.9 0.8 0.4 100.0 Number of shares 1,266,527 2,237,457 5,452,895 16,136,229 191,031,353 216,124,461 % 0.6 1.0 2.5 7.5 88.4 100.0
1 96 88 45 17 22 14 6 4 2 3 3 1 6,054 6,356
1.5 1.4 0.8 0.3 0.3 0.2 0.1 0.1 95.3 100.0
113,859,293 47,438,191 24,516,172 10,421,292 5,539,885 4,162,808 4,021,684 1,069,317 907,142 890,720 507,811 243,383 30,166 2,516,597 216,124,461
52.7 21.9 11.3 4.8 2.6 1.9 1.9 0.5 0.4 0.4 0.2 0.1 1.3 100.0
Non-public/public shareholders Non-public shareholders: Walmart subsidiary: Main Street 830 (Pty) Ltd Directors and Group Executives of the Company Share trusts Public shareholders
1 4 1 6,350 6,356
0.1 99.9 100.0
113,859,293 1,110,467 43,152 101,111,549 216,124,461
52.7 0.5 46.8 100.0
Custodians and managers holding 3% or more The following custodians and managers held benecially, directly or indirectly, more than 3% of the Company's shares: R Aberdeen Asset Management Group R Public Investment Corporation R JP Morgan Asset Management R Baillie Gifford & Co Ltd
24,868,287 12,403,856 10,037,877 7,508,459
11.5 5.7 4.6 3.5
CAMBRIDGE FOOD, BARAGWANATH HOTEL, SOWETO
COMPANY FINANCIAL STATEMENTS

CAMBRIDGE FOOD, BARAGWANATH HOTEL, SOWETO
CONTENTS
R INCOME STATEMENT R STATEMENT OF COMPREHENSIVE INCOME R STATEMENT OF FINANCIAL POSITION R STATEMENT OF CASH FLOWS R STATEMENT OF CHANGES IN EQUITY 275 275 276 277 278
R NOTES TO ANNUAL FINANCIAL STATEMENTS 279
275
INCOME STATEMENT
Notes Revenue Management and administration fees received Dividends received Employment costs Net operating (loss)/income Operating prot Finance income Net nance income Prot before taxation Taxation Prot for the year Prot attributable to: Owners of the parent Prot for the year Dividend per share Interim Final* Total
* Declared after the nancial year-end.
2012 Rm 966.5 20.0 946.5 (20.6) (117.5)
2011 Rm 2,058.2 27.8 2,030.4 (19.6) 13.4 2,052.0 0.7 0.7 2,052.7 (84.3) 1,968.4 1,968.4 1,968.4
828.4 1.1
3 4
1.1 829.5 (72.2) 757.3 757.3 757.3
252.0 146.0 398.0
252.0 134.0 386.0
R Details of the dividend can be found in note 11 on page 216 in the Group nancial statements. R With the exception of the accounting policies relevant to the basis of consolidation, the accounting policies are in
line with the Massmart Group accounting policies. Refer to note 1 on page 194 of the Group nancial statements.
STATEMENT OF COMPREHENSIVE INCOME

Notes Prot for the year Other comprehensive income Revaluation of listed investments Total comprehensive income for the year Total comprehensive income attributable to: Owners of the parent Total comprehensive income for the year
2012 Rm 757.3
2011 Rm 1,968.4 1,968.4 1,968.4 1,968.4
0.2 757.5 757.5 757.5
276
Company Financial Statements
STATEMENT OF FINANCIAL POSITION

as at 24 June 2012
Notes Assets Non-current assets Interests in subsidiaries Other nancial assets Deferred taxation Current assets Taxation Cash and bank balances Total assets Equity and liabilities Capital and reserves Share capital Share premium General reserves Retained prot Preference shares Total equity Non-current liabilities Deferred taxation Current liabilities Trade and other payables Taxation Total equity and liabilities 7 8 8 9 8 5 6 7
2012 Rm
2011 Rm
1,483.1 1,477.8 5.3 7.8 7.8 1,490.9
1,710.7 1,703.7 4.5 2.5 12.1 3.3 8.8 1,722.8
1,468.0 2.2 750.6 8.5 706.7 0.1 1,468.1 0.1 0.1 22.7 22.1 0.6 1,490.9
1,698.3 2.0 743.9 3.1 949.3 0.2 1,698.5 24.3 24.3 1,722.8
R The accounting policies are in line with the Massmart Group accounting policies. Refer to note 1 on page 194
of the Group nancial statements.
277
STATEMENT OF CASH FLOWS

Notes Cash ow from operating activities Operating (decit)/cash before working capital movements Working capital movements Cash (decit)/generated from operations Interest received Investment income Taxation paid Dividends paid Net cash (outow)/inow from operating activities Cash ow from investing activities: Loans to subsidiaries Other investing activities Net cash inow/(outow) from investing activities Cash ow from nancing activities: Shares issued (net of costs) Net acquisition of treasury shares Net cash (outow)/inow from nancing activities Net decrease in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year 11.1 11.2
2012 Rm (112.7) (2.2) (114.9) 1.1 946.5 (65.7) (873.0) (106.0) (490.4) 722.4 232.0 (127.0) (127.0) (1.0) 8.8 7.8
2011 Rm 17.7 14.2 31.9 0.7 2,030.4 (79.1) (846.1) 1,137.8 (911.0) (576.1) (1,487.1) 481.6 (140.2) 341.4 (7.9) 16.7 8.8
11.3 11.4
11.5
278
STATEMENT OF CHANGES IN EQUITY

Share capital Rm Balance as at 30 June 2010 Total comprehensive income Share trust loss Dividends paid Realisation of prior year treasury shares Issue of shares Treasury shares Share-based payment reserve Balance as at 30 June 2011 Total comprehensive income Share trust loss Dividends paid Issue of shares Treasury shares Share-based payment reserve Balance as at 30 June 2012 2.0 2.0 0.2 2.2
Share premium Rm 269.0 7.4 481.6 (14.1) 743.9 6.7 750.6
Preference shares Rm 0.2 0.2 (0.1) 0.1
General reserves Rm 6.9 (1.2) (2.6) 3.1 0.2 1.2 4.0 8.5
Retained prot Rm (32.7) 1,968.4 (140.2) (846.1) 949.4 757.3 (127.0) (873.0) 706.7
Total Rm 245.4 1,968.4 (140.2) (846.1) 7.4 481.6 (15.3) (2.6) 1,698.6 757.5 (127.0) (873.0) 0.1 7.9 4.0 1,468.1
279

1. Revenue
2012 Rm Dividends received (included are dividends from subsidiary companies) Management and administration fees received (included are management and administration fees from subsidiary companies) 946.5 20.0 966.5 2011 Rm 2,030.4 27.8 2,058.2
2. Operating prot
Credits to operating prot include: Foreign exchange prot Charges to operating prot include: Foreign exchange loss Share-based payment Contribution to pension scheme 4.0 0.7 0.5 (2.6) 0.7 0.7 0.7
3. Net nance income

Finance income Interest on Group loans Interest from Receiver of Revenue Net nance income 0.7 0.4 1.1 0.7 0.7
4. Taxation
Current year South African normal taxation: Current taxation Deferred taxation Secondary taxation on companies Total The rate of taxation is reconciled as follows: Standard corporate taxation rate Exempt income Disallowable expenditure Secondary taxation on companies Other Effective rate 2.0 2.6 67.6 72.2 % 28.0 (31.9) 4.8 8.1 (0.3) 8.7 2.2 3.1 79.0 84.3 % 28.0 (27.7) 4.0 (0.2) 4.1
280

CONTINUED
5. Interest in subsidiaries
2012 Rm Shares at cost less amounts written off Amounts owing by subsidiaries 103.9 1,373.9 1,477.8
R Details of net shares at cost can be found in note 37 on page 250 in the Group nancial statements. R These loans are unsecured, earn interest at variable rates and have no xed terms of repayment. R Massmart Holdings Limited has subordinated its right to claim payment of its shareholders loan. The loan,
2011 Rm 103.9 1,599.8 1,703.7
amounting to R725.6 million (2011: R1,298.9 million), is interest free, unsecured and does not have any xed terms of repayment. R Included in amounts owing by subsidiaries are employee share trust loans to directors of Massmart Holdings Limited, to the value of R44.4 million (2011: R46.5 million). See note 17 on page 225 in the Group nancial statements.
6. Other nancial assets

2012 Rm Unlisted investments Investment in Imagegate Limited (UK)1 Investment in Massmart Black Scarce Skills Trust and Massmart Thuthukani Empowerment Trust Listed investments 4.6 0.2 0.5 5.3
1. Classied as a 'loans and receivables' nancial asset for IAS 39 purposes.
2011 Rm 4.0 0.2 0.3 4.5
R The directors value the unlisted investments at R4.8 million (2011: R4.2 million). R For IAS 39 Financial Instruments: Recognition and Measurement accounting treatment of these nancial assets,
see note 39 on page 253 in the Group nancial statements.
7. Deferred taxation
2012 Rm The major movements during the year are analysed as follows: Net asset at the beginning of the year Charge to prot or loss for the year Net (liability)/asset at the end of the year The major components of deferred taxation are analysed as follows: Other temporary differences 2.5 (2.6) (0.1) (0.1) (0.1) 2011 Rm 5.6 (3.1) 2.5 2.5 2.5
281

CONTINUED
8. Issued capital
Share capital 2012 2011 Rm Rm Authorised 500,000,000 (2011: 500,000,000) ordinary shares of 1 cent each 20,000,000 (2011: 20,000,000) non-redeemable cumulative non-participating preference shares of 1 cent each 18,000,000 (2011: 18,000,000) 'A' convertible redeemable non-cumulative participating preference shares of 1 cent each 4,000,000 (2011: 4,000,000) 'B' convertible redeemable non-cumulative participating preference shares of 1 cent each Issued 216,124,461 (2011: 213,883,460) ordinary shares of 1 cent each 10,134,631 (2011: 12,192,748) 'A' convertible redeemable non-cumulative participating preference shares of 1 cent each 3,112,778 (2011: 3,295,662) 'B' convertible redeemable non-cumulative participating preference shares of 1 cent each Share premium 2012 2011 Rm Rm
5.0
5.0
0.2
0.2
0.2
0.2
2.2
2.1
750.6
743.9
0.1
0.1
282

CONTINUED
8. Issued capital continued

Number of shares Ordinary shares Balance at June 2010 Shares issued in terms of the Massmart Executive Share Scheme Shares issued in terms of the Massmart Thuthukani Empowerment Trust Shares issued in terms of the Massmart Black Scarce Skills Trust Ordinary shares in issue June 2011 Realisation of treasury shares Treasury shares Ordinary shares in issue excluding treasury shares June 2011 Balance at June 2011 Shares issued in terms of the Massmart Executive Share Scheme Shares issued in terms of the Massmart Thuthukani Empowerment Trust Shares issued in terms of the Massmart Black Scarce Skills Trust Ordinary shares in issue June 2012 Treasury shares Ordinary shares in issue excluding treasury shares June 2012 201,495,504 6,331,173 5,480,922 575,861 213,883,460* (107,644) 2.0 2.0 269.0 481.6 750.6 7.4 (14.1) Share capital Rm Share premium Rm
213,775,816 213,883,460* 2,058,117 182,884 216,124,461 (43,152)
2.0 2.0 0.2 2.2
743.9 743.9 743.9 6.7
216,081,309
2.2
750.6
* Ordinary shares, which have a par value of 1 cent, carry one vote per share and carry the right to dividends.
Number of shares 'A' convertible redeemable non-cumulative participating preference shares Balance at June 2010 Shares converted to ordinary shares Balance at June 2011 Shares converted to ordinary shares Balance at June 2012 17,673,670 (5,480,922) 12,192,748 (2,058,117) 10,134,631
Share capital Rm
Share premium Rm
0.2 0.2 (0.1) 0.1
R 'A' convertible redeemable non-cumulative participating preference shares, which have a par value of 1 cent, are
held in the Thuthukani Empowerment Trust. These shares carry one vote per share, which is cast by the appointed trustees, and carry the right to dividends. On election of the beneciary, the shares will convert to ordinary shares, on a one-for-one basis and will rank pari passu with all ordinary shares then in issue.
283

CONTINUED
Number of shares 'B' convertible redeemable non-cumulative participating preference shares Balance at June 2010 Shares converted to ordinary shares Balance at June 2011 Shares converted to ordinary shares Balance at June 2012 3,871,523 (575,861) 3,295,662 (182,884) 3,112,778
Share capital Rm
Share premium Rm
R 'B' convertible redeemable non-cumulative participating preference shares, which have a par value of 1 cent, are
held in the Black Scarce Skills Trust. These shares carry one vote per share, which is cast by the appointed trustees, and do not carry the right to dividends. On election of the beneciary, the shares will convert to ordinary shares on a one-for-one basis and will rank pari passu with all ordinary shares then in issue. Share options granted under the Massmart Holdings Limited Employee Share Trust
R As at June 2012, executives and senior employees have options over 9,702,840 (2011: 6,079,937) ordinary
shares of which 7,188,065 (2011: 3,846,383) are unvested.

R Share options granted under the Employee Share Incentive Scheme carry no rights to dividends and no voting rights.
Further details of the Employee Share Incentive Scheme are contained in note 29 on page 238.
R During the current year, the only shares bought in the market were by the Share Trust where 1.2 million shares
R During the prior year, the only shares bought in the market were by the Share Trust where 2.1 million shares
R The directors have the authority, until the next annual general meeting, to issue the ordinary shares of the Company
up to a maximum of 5% of the shares already issued.
9. General reserves
2012 Rm Balance at the beginning of the year Treasury shares Share-based payment reserve Revaluation of listed investments 3.1 1.2 4.0 0.2 8.5 2011 Rm 6.9 (1.2) (2.6) 3.1
R The share-based payment reserve arises on the granting of share options to employees under the Employee Share
Incentive Scheme. Details of the Employee Share Incentive Scheme can be found in note 29 on page 238 in the Group nancial statements. The share-based payment valuation was performed by Alexander Forbes for all periods and the scheme is equity-settled.
284

CONTINUED
10. Cross-suretyships and promissory notes

2012 Rm Cross-suretyships under banking and other nancial facilities 5,903.1 5,903.1 2011 Rm 4,973.0 4,973.0
R Banking facilities incorporate, amongst others, letters of credit, forward exchange contracts and electronic fund
transfers. These facilities have been secured by cross-suretyships between Group companies.
R Other nancial facilities relate to Promissory notes that represent commitments under non-cancellable operating
leases of R303.9 million (2011: R485.2 million) entered into by Masstores (Pty) Ltd on behalf of Makro and are included in operating lease commitments in land and buildings. These leases terminate in December 2020 and have a discounted present value of R262.8 million (2011: R338.0 million), discounted at 15% (2011: 15%). In accordance with IAS 17 Leases, the rentals paid are amortised over the entire remaining lease period on a straight-line basis.
R At the reporting date the Massmart Group was net cash positive.
285
11. Notes to the cash ow statement

2012 Rm 2011 Rm
Cash ow from trading Prot before taxation Adjustment for: Interest received Investment income Share-based payment expense Other non-cash movements
829.5 (1.1) (946.5) 4.0 1.4 (112.7)
2,052.7 (0.7) (2,030.4) (2.6) (1.3) 17.7
Working capital movements (Decrease)/increase in trade and other payables
(2.2) (2.2)
14.2 14.2
Taxation paid Amounts owing at the beginning of the year Amounts charged to the income statement Deferred taxation Amounts owing/(receivable) at the end of the year Cash amounts paid Dividends paid Cash dividends paid to shareholders Net acquisition of treasury shares Share trust losses
3.3 (72.2) 2.6 0.6 (65.7)
5.4 (84.3) 3.1 (3.3) (79.1)
(873.0)
(846.1)
(127.0) (127.0)
(140.3) (140.3)
JUMBO, CROWN MINES
SHAREHOLDER INFORMATION
JUMBO, CROWN MINES
CONTENTS
R NOTICE OF ANNUAL GENERAL MEETING R FORM OF PROXY 289 299
289
NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that the annual general meeting of holders of all classes of shares of the Company will be held at 13h00 at Massmart House, 16 Peltier Drive, Sunninghill Ext 6, Sandton, on Wednesday, 21 November 2012, for purposes of: 1. Transacting the following business: 1.1 to present the audited annual nancial statements of the Company and its subsidiaries (the Group) for the year ended 24 June 2012; 1.2 to elect directors in the place of those resigning and retiring in 1.3 accordance with the Companys Memorandum of Incorporation; and such other business as may be transacted at an annual general meeting. 2. Considering and, if deemed t, passing, with or without modication, the below mentioned ordinary and special resolutions. The Board of directors of the Company has determined, in accordance with section 59 of the Companies Act, 71 of 2008, as amended (Act), that the record date for shareholders to be recorded as shareholders in the securities register of the Company in order to: (i) be entitled to receive this notice of annual general meeting is Friday, 12 October 2012 and (ii) be entitled to attend, participate and vote at the annual general meeting is Friday, 16 November 2012. The last date to trade to be entitled to attend, participate and vote at the annual general meeting is Friday, 9 November 2012.
Ordinary business
The audited annual nancial statements of the Company and the Group (as approved by the directors of the Company), including the directors report, the Audit and Risk Committee report and the external auditors report for the year ended 24 June 2012, circulated together with this notice, are presented to the shareholders for their consideration. The complete audited annual nancial statements for the year ended 24 June 2012 are set out on pages 189 to 285 of the integrated annual report. The complete audited nancial statements for the year ended 26 June 2011 can be found on the Companys website: www.massmart.co.za
Ordinary resolutions
1. Resolved that Mr D Cheesewright, who resigns as required by the Memorandum of Incorporation and has offered himself for re-election, be and is hereby re-elected to the Board of directors of the Company. In terms of the Act, more than 50% of the voting rights exercised on this resolution must be cast in favour of ordinary resolution number 1 for it to be adopted.
290
Shareholder Information
NOTICE OF ANNUAL GENERAL MEETING CONTINUED

INSIGHT INITIAL APPOINTMENT DATES OF DIRECTORS STANDING FOR RE-ELECTION:

D Cheesewright 20 August 2012 JA Davis 20 June 2011 NN Gwagwa 1 November 2006 GRC Hayward 15 May 2001 I Zwarenstein 7 May 2012
2.
Resolved that Mr JA Davis, who retires by rotation and has offered himself for re-election, be and is hereby re-elected to the Board of directors of the Company. In terms of the Act, more than 50% of the voting rights exercised on this resolution must be cast in favour of ordinary resolution number 2 for it to be adopted.
3.
Resolved that Dr NN Gwagwa, who retires by rotation and has offered herself for re-election, be and is hereby re-elected to the Board of directors of the Company. In terms of the Act, more than 50% of the voting rights exercised on this resolution must be cast in favour of ordinary resolution number 3 for it to be adopted.
READ MORE: PAGE 18 21 MASSMART AT A GLANCE Biographical details of directors. 4.
Resolved that Mr GRC Hayward, who retires by rotation and has offered himself for re-election, be and is hereby re-elected to the Board of directors of the Company. In terms of the Act, more than 50% of the voting rights exercised on this resolution must be cast in favour of ordinary resolution number 4 for it to be adopted.
READ MORE: PAGE 147 CORPORATE GOVERNANCE Further details relating to the directors.
5.
Resolved that Mr I Zwarenstein, who resigns as required by the Memorandum of Incorporation and has offered himself for re-election, be and is hereby re-elected to the Board of directors of the Company. In terms of the Act, more than 50% of the voting rights exercised on this resolution must be cast in favour of ordinary resolution number 5 for it to be adopted.
6.
Resolved that Ernst & Young Inc. (with Mr Allister Carshagen as the Audit Partner) be and are hereby elected as the Companys auditors for the ensuing nancial year to hold ofce until the Companys next annual general meeting, as approved by the Audit and Risk Committee and recommended to shareholders. In terms of the Act, more than 50% of the voting rights exercised on this resolution must be cast in favour of ordinary resolution number 6 for it to be adopted.
7.
Resolved that the following persons be and are hereby appointed, each by way of a separate vote, as members of the Audit and Risk Committee: 7.1 CS Seabrooke (Chairman) 7.2 NN Gwagwa* 7.3 P Langeni.
* Subject to her re-election as a director pursuant to ordinary resolution number 3.
In terms of the Act, more than 50% of the voting rights exercised on this resolution must be cast in favour of ordinary resolutions numbers 7.1, 7.2 and 7.3 for them to be adopted.
291
8.
Resolved that all the ordinary shares in the authorised but unissued share capital of the Company be and are hereby placed under the control of the directors, who shall be authorised to allot and issue such shares to such person or persons on such terms and conditions as they may deem t but not exceeding 5% of the number of ordinary shares already in issue. Such allotment will be in accordance with and subject to the Act and the JSE Limited (JSE) Listings Requirements (JSE Listings Requirements). In terms of the Act, more than 50% of the voting rights exercised on this resolution must be cast in favour of ordinary resolution number 8 for it to be adopted.
9.
Resolved that, subject to the JSE Listings Requirements, the directors be and are hereby authorised to issue the ordinary shares in the authorised but unissued share capital of the Company for cash to such person or persons on such terms and conditions as they may deem t, subject to the following: 9.1 9.2 the shares shall be of a class already in issue; the shares shall be issued to public shareholders (as dened in the JSE Listings Requirements) and not to related parties (as dened in the JSE Listings Requirements); 9.3 9.4 the issues in the aggregate in any one nancial year shall not exceed 5% of the number of shares already in issue; the maximum discount at which the shares may be issued shall be 10% of the weighted average traded price of the shares over the 30 business days prior to the date that the price of the issue is agreed between the Company and the party subscribing for the shares; 9.5 the authority hereby granted will be valid until the Companys next annual general meeting, provided that it will not extend to beyond 15 months; and 9.6 once shares representing, on a cumulative basis within a nancial year, 5% or more of the Companys issued ordinary and/or preference share capital prior to that issue, have been issued, the Company shall publish an announcement in accordance with paragraph 11.22 of the JSE Listings Requirements. Pursuant to the JSE Listings Requirements, the Company will only be entitled to implement this general authority to allot and issue ordinary shares for cash if this ordinary resolution number 9 is passed by a majority of 75% or more of the votes cast by all shareholders present or represented by proxy at the annual general meeting, excluding any votes cast by the Massmart Holdings Limited Employee Share Trust.
292

INSIGHT BUYBACKS IN THE 2012 FINANCIAL YEAR

Number of shares 91,662 75,000 27,883 30,000 50,000 25,445 50,000 25,000 50,000 50,000 37,000 20,000 25,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 36,113 20,000 30,000 Total Share transaction price (R) value (Rm) 150.60 152.02 154.41 158.82 160.10 161.15 158.65 155.56 146.26 159.23 155.79 157.31 157.49 182.59 183.43 178.71 178.73 179.45 174.10 171.80 173.79 175.44 172.46 173.13 164.77 160.04 163.73 163.85 13.8 11.4 4.3 4.8 8.0 4.1 7.9 3.9 7.3 8.0 5.8 3.1 3.9 9.1 9.2 8.9 8.9 9.0 8.7 8.6 8.7 8.8 8.6 8.7 8.2 5.8 3.3 4.9
Special resolutions
Special Resolution Number 1
Resolved, as a special resolution, that the Company and/or its subsidiaries be and are hereby authorised to generally repurchase the ordinary and/or preference shares in the issued share capital of the Company from such shareholder/s, at such price, in such manner and subject to such terms and conditions as the directors may deem t, but subject to the Memorandum of Incorporation of the Company, the Companies Act, 71 of 2008, as amended (Act) and the JSE Listings Requirements, and provided that: 1.1 the authority hereby granted will be valid until the Companys next annual general meeting, or for 15 months from the date of this special resolution, whichever period is shorter; 1.2 repurchases may not be made at a price greater than 10% above the weighted average of the market value for the shares determined over the 5 business days immediately preceding the date that the repurchase is effected; 1.3 repurchases in the aggregate in any one nancial year shall not exceed 15% of that class of the Companys issued share capital; 1.4 the repurchase of shares will be effected through the order book operated by the JSE trading system and will be done without any prior understanding or arrangement between the Company and the counterparty; 1.5 the Company may only appoint one agent, at any point in time, to effect the repurchases on the Companys behalf; 1.6 neither the Company nor its subsidiaries may repurchase shares during a prohibited period (as dened in the JSE Listings Requirements) unless a repurchase programme is in place where the dates and quantities of shares to be traded during the relevant period are xed (not subject to variation) and where full details of the programme have been disclosed in an announcement over the Securities Exchange News Service prior to the commencement of the prohibited period; 1.7 an announcement complying with paragraph 11.27 of the JSE Listings Requirements will be published by the Company when the Company and/ or its subsidiaries have cumulatively repurchased 3% of the Companys initial number of issued ordinary and/or preference share capital and for each 3% in aggregate thereafter; and 1.8 a resolution by the Board of directors that it authorises such repurchase, that the Company and its subsidiaries have passed the solvency and liquidity test as set out in section 4 of the Act and that, since the application by the Board of directors of the solvency and liquidity test, there have been no material changes to the nancial position of the Group. Statement by the Board of directors In accordance with the JSE Listings Requirements, the directors state that: (a) the intention of the directors is to utilise the authority at a future date, provided that the cash resources of the Company are in excess of its
Date 25 Aug 11 29 Aug 11 30 Aug 11 31 Aug 11 1 Sept 11 2 Sept 11 6 Sept 11 14 Sept 11 26 Sept 11 31 Oct 11 14 Nov 11 21 Nov 11 21 Nov 11 22 Feb 12 22 Feb 12 23 Feb 12 23 Feb 12 23 Feb 12 24 Feb 12 27 Feb 12 28 Feb 12 29 Feb 12 8 Mar 12 9 Mar 12 21 May 12 28 May 12 30 May 12 30 May 12
293
requirements. In this regard, the directors will take into account, inter alia, an appropriate capitalisation structure for the Company and the long-term cash needs of the Company, and will ensure that any such utilisation is in the interests of the shareholders; (b) having considered the effect of the maximum number of ordinary and preference shares that may be acquired pursuant to the authority and the date upon which such repurchase/s will take place:
R the Company and the Group will in the ordinary course of business
be able to pay its debts for a period of 12 months after the date of the proposed repurchase/s;
R the assets of the Company and the Group will be in excess of the
liabilities of the Company and the Group for a period of 12 months after the date of the proposed repurchase/s, such assets and liabilities being recognised and measured in accordance with International Financial Reporting Standards and in accordance with the accounting policies used in the annual nancial statements of the Company and the Group for the year ended 24 June 2012;
R the issued share capital and reserves of the Company and the Group
will be adequate for ordinary business purposes for a period of 12 months after the date of the proposed repurchase/s; and
R the working capital available to the Company and the Group will be
adequate for ordinary business purposes for a period of 12 months after the date of the proposed repurchase/s. The Company will ensure that its sponsor provides the necessary sponsor letter on the adequacy of the working capital in terms of the JSE Listings Requirements, prior to the commencement of any repurchase of the Company shares on the open market. The following additional information, which appears in the integrated annual report of which this notice forms part, is provided in terms of the JSE Listings Requirements for purposes of special resolution number 1:
R directors and management pages 18 to 25; R major shareholders page 271; R material changes page 187; R directors interests in shares page 186; R share capital of the Company page 227; and R litigation page 188.
The directors, whose names are set out on pages 18 to 21 of the integrated annual report, collectively and individually, accept responsibility for the accuracy of information contained in this special resolution number 1 and certify that, to the best of their knowledge and belief, there are no other facts, the omission of which would make any statement false or misleading and that they have made all reasonable enquiries in this regard.
294

Other than the facts and developments reported in the integrated annual report, there have been no material changes in the affairs or nancial position of the Company and its subsidiaries since the date of this notice. In terms of the Act, at least 75% of the voting rights exercised on this resolution must be cast in favour of special resolution number 1 for it to be adopted.

Resolved, as a special resolution, that the following directors remuneration (due to the applicable directors for services rendered by them in their capacities as such), be and is hereby approved for the period commencing on 22 November 2012 to the date on which the Companys annual general meeting in respect of its 2013 nancial year will be held: Chairman of the Board Deputy Chairman Directors Committee Chairmen Committee Members R822,000 R590,000 R244,000 R238,000 R113,000."
In terms of the Act, at least 75% of the voting rights exercised on this resolution must be cast in favour of special resolution number 2 for it to be adopted.

Approval of new Memorandum of Incorporation 3.1 Resolved, as a special resolution of the holders of ordinary shares and subject to the passing of special resolution numbers 3.2 and 3.3, that the existing Memorandum of Incorporation of the Company (previously known as the Memorandum and Articles of Association of the Company) be and is hereby replaced in its entirety by the Memorandum of Incorporation (a draft of which has been tabled at the annual general meeting and initialled by the chairman for identication purposes), with effect from the date of ling the notice of amendment with the Companies and Intellectual Property Commission. In terms of the Act, at least 75% of the voting rights exercised by holders of ordinary shares on this resolution must be cast in favour of special resolution number 3.1 for it to be adopted. 3.2 Resolved, as a special resolution of the holders of A preference shares and subject to the passing of special resolutions 3.1 and 3.3, that the existing Memorandum of Incorporation of the Company (previously known as the Memorandum and Articles of Association of the Company) be and is hereby replaced in its entirety by the Memorandum of Incorporation (a draft of which has been tabled at the annual general meeting and initialled by the chairman for identication purposes), with effect from the date of ling the notice of amendment with the Companies and Intellectual Property Commission.
295
In terms of the Act, at least 75% of the voting rights exercised by holders of A preference shares on this resolution must be cast in favour of special resolution number 3.2 for it to be adopted. 3.3 Resolved, as a special resolution of the holders of B preference shares and subject to the passing of special resolutions 3.1 and 3.2, that the existing Memorandum of Incorporation of the Company (previously known as the Memorandum and Articles of Association of the Company) be and is hereby replaced in its entirety by the Memorandum of Incorporation (a draft of which has been tabled at the annual general meeting and initialled by the chairman for identication purposes), with effect from the date of ling the notice of amendment with the Companies and Intellectual Property Commission. In terms of the Act, at least 75% of the voting rights exercised by the holders of B preference shares on this resolution must be cast in favour of special resolution number 3.3 for it to be adopted. The full text of the proposed new Memorandum of Incorporation is available on the Companys website: www.massmart.co.za, or on request to info@massmart.co.za, and is available for inspection at the Companys registered ofce during normal business hours from 1 November 2012 up to and including the date of the annual general meeting.

"Resolved, as a special resolution, to the extent required in terms of, and subject to the provisions of, section 45 of the Companies Act 71 of 2008, as amended (Act), that the shareholders hereby approve of the Company providing, at any time and from time to time during the period of 2 years commencing on the date of this special resolution, any direct or indirect nancial assistance as contemplated in such section of the Act to any 1 or more related or inter-related companies or corporations (as dened in the Act) of the Company and/or to any 1 or more members of any such related or inter-related company or corporation and/or to any 1 or more persons related to any such company or corporation, on such terms and conditions as the Board of directors of the Company, or any one or more persons authorised by the Board of directors of the Company from time to time for such purpose, deems t, provided that any such nancial assistance shall not in the aggregate exceed an amount of R10,000,000,000 in any nancial year.". In terms of the Act, at least 75% of the voting rights exercised on this resolution must be cast in favour of special resolution number 4 for it to be adopted.
296

The following direct and/or indirect nancial assistance was provided by the Company to related and/or inter-related companies and/or corporations of the Company in respect of the nancial year ended 24 June 2012: Rbn Cross Suretyships in respect of banking facilities Promissory notes in respect of operating leases Loans to subsidiary companies Total 5.9 0.3 1.4 7.6
It is anticipated that such nancial assistance will increase during the period of 2 years commencing on the date of special resolution number 4, mainly as a result of the Groups expansion and acquisition plans but that the total nancial assistance after such anticipated increase will not exceed R10 billion. In the event that the Company provides nancial assistance to its subsidiary companies in the form of loans, the Companys solvency and liquidity will not be impaired as the Company will raise an asset in its books for the equivalent amount then due by that subsidiary. Notice to shareholders of the Company in terms of section 45(5) of the Act of a resolution adopted by the Board authorising the Company to provide direct or indirect nancial assistance R By the time this notice of annual general meeting is delivered to shareholders, the Board of directors will have adopted a resolution (Section 45 Board Resolution) authorising the Company to provide, at any time and from time to time during the period of 2 years commencing on the date on which special resolution number 4 is adopted, any direct or indirect nancial assistance as contemplated in section 45 of the Act to any one or more related or inter-related companies or corporations of the Company and/or to any one or more members of any such related or inter-related company or corporation and/or to any one or more persons related to any such company or corporation, provided that any such nancial assistance shall not in the aggregate exceed an amount of R10,000,000,000 in any nancial year. R The Section 45 Board Resolution will be effective only if and to the extent that special resolution number 4 is adopted by the shareholders, and the provision of any such direct or indirect nancial assistance by the Company, pursuant to such resolution, will always be subject to the Board of directors being satised that (i) immediately after providing such nancial assistance, the Company will satisfy the solvency and liquidity test as referred to in section 45(3)(b)(i) of the Act, and that (ii) the terms under which such nancial assistance is to be given are fair and reasonable to the Company as referred to in section 45(3)(b)(ii) of the Act. R In as much as the Section 45 Board Resolution contemplates that such nancial assistance will in the aggregate exceed onetenth of one percent of the Company's net worth at the date of adoption of such resolution, the Company hereby provides notice of the Section 45 Board Resolution to shareholders. Such notice will also be provided to any trade union representing any employees of the Company.
297
Identication, voting and proxies

Shareholders are entitled to attend, speak and vote at the annual general meeting. In terms of section 63(1) of the Act, any person attending or participating in the annual general meeting must present reasonably satisfactory identication and the person presiding at the annual general meeting must be reasonably satised that the right of any person to participate in and vote (whether as a shareholder or as proxy for a shareholder) has been reasonably veried. Forms of identication include valid identity documents, drivers licences or passports. Shareholders holding dematerialised shares, but not in their own name, must furnish their Central Securities Depository Participant (CSDP) or broker with their instructions for voting at the annual general meeting. If your CSDP or broker, as the case may be, does not obtain instructions from you, it will be obliged to act in accordance with your mandate furnished to it, or if the mandate is silent in this regard, complete the form of proxy attached. Unless you advise your CSDP or broker, in terms of the agreement between you and your CSDP or broker by the cut-off time stipulated therein, that you wish to attend the annual general meeting or send a proxy to represent you at the annual general meeting, your CSDP or broker will assume that you do not wish to attend the annual general meeting or send a proxy. If you wish to attend the annual general meeting or send a proxy, you must request your CSDP or broker to issue the necessary letter of authority to you. Shareholders holding dematerialised shares, and who are unable to attend the annual general meeting and wish to be represented thereat, must complete the form of proxy attached in accordance with the instructions therein and lodge it with or mail it to the transfer secretaries, Computershare Investor Services Proprietary Limited (Computershare). A form of proxy (which is attached) must be dated and signed by the shareholder appointing a proxy and should be forwarded to reach Computershare by no later than 13h00 on Monday, 19 November 2012. Before a proxy exercises any rights of a shareholder at the annual general meeting, such form of proxy must be so delivered. In compliance with the provisions of section 58(8)(b)(i) of the Act, a summary of the rights of a shareholder to be represented by proxy, as set out in section 58 of the Act, is set out immediately hereunder: R A shareholder entitled to attend and vote at the annual general meeting may appoint any individual (or two or more individuals) as a proxy or as proxies to attend, participate in and vote at the annual general meeting in the place of the shareholder. A proxy need not be a shareholder of the Company. R A proxy appointment must be in writing, dated and signed by the shareholder appointing a proxy and, subject to the rights of a shareholder to revoke such appointment (as set out below), remains valid only until the end of the annual general meeting.
VOTING PERCENTAGES
Ordinary shares 216,081,309 A preference shares 10,134,631 B preference shares 3,112,778 Issued share capital 229,328,718
EMPLOYEE SHARE TRUST
%
Massmart Holdings Limited Employee Share Trust Massmart Thuthukani Empowerment Trust Massmart Black Scarce Skills Trust Public Shareholders 8.6 1.8 0.2 89.4
MASSMART EMPLOYEE SHARE TRUSTS

Massmart Holdings Limited Employee Share Trust Massmart Thuthukani Empowerment Trust Massmart Black Scarce Skills Trust Public shareholders
8.6 1.8 0.2 89.4
Shares held by the employee share trust will not be taken into account for ordinary resolution number 9 and special resolution number 1
298

R A proxy may delegate the proxy's authority to act on behalf of a shareholder
to another person, subject to any restrictions set out in the instrument appointing the proxy.
R The appointment of a proxy is suspended at any time and to the extent that
the shareholder who appointed such proxy chooses to act directly and in person in the exercise of any rights as a shareholder.
R The appointment of a proxy is revocable by the shareholder in question
cancelling it in writing, or making a later inconsistent appointment of a proxy, and delivering a copy of the revocation instrument to the proxy and to Computershare. The revocation of a proxy appointment constitutes a complete and nal cancellation of the proxy's authority to act on behalf of the shareholder as of the later of: (i) the date stated in the revocation instrument, if any and (ii) the date on which the revocation instrument is delivered to Computershare as required in the rst sentence of this paragraph.
R If the instrument appointing the proxy or proxies has been delivered to
Computershare, as long as that appointment remains in effect, any notice that is required by the Act or the Company's Memorandum of Incorporation to be delivered by the Company to the shareholder, must be delivered by the Company to: (i) the shareholder or (ii) the proxy or proxies, if the shareholder has: (a) directed the Company to do so in writing and (b) paid any reasonable fee charged by the Company for doing so.
R Attention is also drawn to the "Notes to the form of proxy". R The completion of a form of proxy does not preclude any shareholder from
attending the annual general meeting.

R Shareholders may participate (but not vote) electronically in the annual
general meeting. Shareholders wishing to participate in the annual general meeting electronically should contact the assistant company secretary on info@massmart.co.za or +27 11 517 0000 not less than ve business days prior to the annual general meeting. Access to the annual general meeting by way of electronic participation will be at the shareholders expense. Only persons physically present at the annual general meeting or represented by a valid proxy shall be entitled to cast a vote on any matter put to a vote of shareholders. By order of the Board
Philip Sigsworth Company Secretary 5 October 2012
299
FORM OF PROXY
Incorporated in the Republic of South Africa Registration number 1940/014066/06 JSE share code: MSM ISIN: ZAE000152617 ("Massmart" or "the Company") For use by certicated and dematerialised shareholders who have own name registration of shares on Friday, 16 November 2012 at the annual general meeting to be held at Massmart House, 16 Peltier Drive, Sunninghill Ext 6, Sandton, at 13h00, on Wednesday, 21 November 2012. I/We (Please PRINT full names) of (address) being the holders of 1. 2. ordinary shares/A preference shares/B preference shares, hereby appoint (see note 3), or failing him/her, or failing him/her,
the chairman of the annual general meeting as my/our proxy to participate in, speak and vote for me/us on my/our behalf at the annual general meeting which will be held for the purpose of considering and, if deemed t, passing the ordinary and special resolutions to be proposed and at each adjournment of the annual general meeting and to vote for or against the ordinary and special resolutions or to abstain from voting in respect of the shares in the issued capital of the Company registered in my/our name/s, in accordance with the following instructions (see note 4). Signed at .............................................................. on .......................................................................2012 Signature .................................................................................................................................................. Assisted by me (where applicable) ............................................................................................................... Insert an "X" or the number of Ordinary Shares/A Preference Shares/B Preference Shares (see note 4) FOR AGAINST ABSTAIN OS* PS* OS* PS* OS* PS* ORDINARY RESOLUTIONS 1. Re-election of Mr D Cheesewright to the Board of directors 2. Re-election of Mr JA Davis to the Board of directors 3. Re-election of Dr NN Gwagwa to the Board of directors 4. Re-election of Mr GRC Hayward to the Board of directors 5. Re-election of Mr I Zwarenstein to the Board of directors 6. Election of Ernst & Young Inc. as the Companys auditors 7. Appointment of the Audit and Risk Committee members: 7.1 CS Seabrooke 7.2 NN Gwagwa 7.3 P Langeni 8. Placement of unissued ordinary share capital under the control of the directors, not exceeding 5% of the shares in issue 9. Authorisation for the directors to issue ordinary shares for cash, not exceeding 5% of the shares in issue SPECIAL RESOLUTIONS 1. Authorisation for the Company and/or its subsidiaries to repurchase its own shares 2. Approval of directors remuneration 3. Approval of new Memorandum of Incorporation: 3.1 By the ordinary shareholders of the Company 3.2 By the A preference shareholders of the Company 3.3 By the B preference shareholders of the Company 4. Authorisation to provide nancial assistance (Indicate with an "X" or the relevant number of shares, in the applicable space, how you wish your votes to be cast.) If you return this form duly signed, without any specic directions, the proxy will vote as he/she thinks t. Completed forms of proxy must be lodged with Computershare Investor Services Proprietary Limited, not less than 48 (forty-eight) hours before the time for holding the annual general meeting, ie by no later than 13h00 on Monday, 19 November 2012. *OS Ordinary shares Please read the notes on the reverse side of this form of proxy. *PS Preference shares
300
NOTES TO THE FORM OF PROXY

1. A form of proxy is only to be completed by those shareholders who are: 1.1 holding shares in certicated form; or 1.2 recorded on the sub-register of the Company in dematerialised electronic form in own name on the record date for attending, participating and voting at the annual general meeting. If you have already dematerialised your shares through a Central Securities Depository Participant (CSDP) or broker and wish to attend the annual general meeting, you must request your CSDP or broker to provide you with a letter of representation or you must instruct your CSDP or broker to vote by proxy on your behalf in terms of the agreement between yourself and your CSDP or broker. A shareholder may insert the name of a proxy or the names of alternative proxies of the shareholders choice in the space/s provided, with or without deleting the chairman of the annual general meeting but any such deletion must be initialled by the shareholder. The person whose name stands rst on this form of proxy and who is present at the annual general meeting will be entitled to act as proxy to the exclusion of those whose names follow. Please insert an X in the relevant space according to how you wish your votes to be cast. However, if you wish to cast your votes in respect of a lesser number of shares than you own in the Company, insert the number of shares held in respect of which you wish to vote. Failure to comply with the above will be deemed to authorise the proxy to vote or to abstain from voting at the annual general meeting as he/she deems t in respect of all the shareholders votes exercisable at the annual general meeting. A shareholder or his/her proxy is not obliged to use all the votes exercisable by the shareholder or by his/her proxy, but the total of the votes cast and in respect of which abstention is recorded may not exceed the total of the votes exercisable by the shareholder or by his/her proxy. Forms of proxy must be received by the transfer secretaries, Computershare Investor Services Proprietary Limited (Computershare), Ground Floor, 70 Marshall Street, Johannesburg 2001 (PO Box 61051, Marshalltown 2107) by no later than 13h00 on Monday, 19 November 2012. The completion and lodging of this form of proxy will not preclude the relevant shareholder from attending the annual general meeting and speaking and voting in person at such meeting to the exclusion of any proxy appointed in terms of this form of proxy. Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity or other legal capacity must be attached to this form of proxy unless previously recorded by Computershare or waived by the chairman of the annual general meeting. Any alterations or corrections made to this form of proxy must be initialled by the signatory/ies. A minor must be assisted by his/her parent or guardian unless the relevant documents establishing his/her legal capacity are produced or have been registered by Computershare.
2.
3.
4.
5.
6.
7.
8. 9.
10. The chairman of the annual general meeting may accept any form of proxy which is completed other than in accordance with these notes if the chairman is satised as to the manner in which the shareholder wishes to vote. 11. If any shares are jointly held, the rst name appearing in the register shall, in the event of a dispute, be taken as a shareholder. Transfer secretaries Computershare Investor Services Proprietary Limited Ground Floor 70 Marshall Street Johannesburg 2011 PO Box 61051, Marshalltown 2107 Telephone: 011 370 5000 Call Centre: 086 110 09818

Massmart Year Ended June 2012

Încărcat de

Informații document

Descriere originală:

Titlu original

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

Massmart Year Ended June 2012

Încărcat de

Drepturi de autor:

Formate disponibile

CONTENTS

REPORTS TO STAKEHOLDERS 29 TEN-YEAR REVIEW 61 OPERATIONAL REVIEW 79

CORPORATE ACCOUNTABILITY 117

CORPORATE GOVERNANCE 145

GROUP FINANCIAL STATEMENTS 183

COMPANY FINANCIAL STATEMENTS 275

SHAREHOLDER INFORMATION 289

Massmart Integrated Annual Report 2012

PER SHARE PERFORMANCE

HEADLINE EARNINGS* 2011: 615.5 cents

TRADING PROFIT BEFORE INTEREST AND TAXATION MARGIN* 2011: 4.1%

RETURN ON CAPITAL EMPLOYED*

OUR BUSINESS MODEL

Massmart Integrated Annual Report 2012

MASSMART SHARED SERVICES

GENERAL MERCHANDISE DISCOUNTER AND FOOD RETAILER

FOOD WHOLESALER, RETAILER AND BUYING ASSOCIATION

HOME IMPROVEMENT RETAILER AND BUILDING MATERIALS SUPPLIER

THE MASSMART VISION

OUR INVESTMENT PROPOSITION

MANAGEMENT DEPTH, QUALITY AND DIVERSITY

Massmart Integrated Annual Report 2012

CORPORATE ACCOUNTABILITY SYNOPSIS

Massmart Integrated Annual Report 2012

ENABLE SUSTAINABLE SUPPLY AND CONSUMERISM

MINIMISE THE GROUP ENVIRONMENTAL FOOTPRINT

CHAMPION SOCIAL EQUALITY INITIATIVES

4,128.6 88.0 37.9 88.2 77.4 264.1 4.5 89.3

3,894.1 86.0 64.4 68.0 65.7 345.0 0.6 n/a

2,715.9 86.0 61.6 41.4 65.2 64.7 1.3 89.8

4,013.8 82.0 39.4 68.1 59.5 112.6 3.4 82.8

86.2 48.4 78.5

EMPLOYEES WITH MEDICAL BENEFITS (%)

BLACK PROFESSIONALS AS A % OF MANAGEMENT PROFESSIONALS

72.8 183.7 3.1 87.8

OUR PURCHASED ELECTRICITY EMISSIONS INTENSITY (TONNES CO2E/(GLA)M2)

CORPORATE SOCIAL INVESTMENT AS % OF PAT

AFRICA OPERATIONS LOCAL MANAGEMENT AS A % OF TOTAL MANAGEMENT

OUR SHARES AND SHAREHOLDER INFORMATION

SHAREHOLDERS SPLIT BETWEEN PUBLIC AND NON-PUBLIC

HIGH, LOW AND CLOSING SHARE PRICE (CENTS PER SHARE)

2009 Closing 6 149 8 000

12 200 13 239 12 580 15 460 7 275 11 358

16 835 18 550 13 748

High Low 9 724 9 029 5 910 5 650

* South African company ultimate holding company is Walmart Stores, Inc.

Massmart Integrated Annual Report 2012

89.5 67.0 57.0 41.6 25.0

MASSMART FOREIGN HOLDING

JSE GENERAL RETAILERS AVERAGE FOREIGN HOLDING

200 175 150 125 100 75 50 25

MASSMART SHARE PRICE

JSE GENERAL RETAILERS INDEX

BIANNUAL MASSMART TRADING VOLUMES

STORES AND OUTLETS

Food/Liquor/General Merchandise/ Home Improvement Supplies

General Merchandise, Food and FMCG

FINANCIAL HIGHLIGHTS AND CONTRIBUTION TO GROUP

Sales R61,209.1 million

Sales R14,805.7 million

Trading prot before tax* R2,456.8 million

Trading prot before tax* R813.0 million