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Notes to the financial statements

for the year ended 30.6.2012

Group Company
2012
R’000 		2011
R’000 		2012
R’000 		2011
R’000

31.

Investment in subsidiary
Investment in subsidiary company
Clover SA 326 735 326 735
    Share-based payment investment in Clover SA 23 315 11 924
      Total investment in subsidiary 350 050 338 659
           
Subsidiary and joint venture Effective interest in capital Investment in subsidiaries and joint ventures Profit/(loss) after taxation
2012 2011 2012 2011 2012 2011
Name of company Country of incorporation Nature of business % % R’000 R’000 R’000 R’000
Clover SA South Africa Dairy manufacturing, distribution, sales 100 100 326 735 326 735 169 298 449 654
Clover Beverages@ South Africa Marketing of non-alcoholic beverage products 100 100 – – – 88 909
Clover Botswana Botswana Dairy manufacturing, distribution, sales 100 70 23 111 3 893 21 202 3 159
Clover Manhattan# South Africa Distribution and sales of ice tea 50,1 50,1 3 034 3 034 1 120 1 229
Clover Swaziland Swaziland Distribution and sales of dairy products in Swaziland 100 100 1 1 (77) 2 483
Lactolab South Africa Testing of dairy products 52 52 – – 2 087 1 239
Clover Capital South Africa Finance 100 100 91 000 91 000 – –
Clover Fonterra# South Africa Marketing, selling and distribution of dairy and related ingredient products 51 51 3 060 3 060 12 297 6 593
Clover West Africa Nigeria Marketing of non-alcoholic beverage products 100 55 468 243 (10 539) (6 239)
Clover Namibia Namibia Distribution and sales of dairy products in Namibia 100 100 – – (2 752) (664)
# Joint venture
@ In the process of deregistration
 
Group Company
2012
R’000 		2011
R’000 		2012
R’000 		2011
R’000

32.

Share based payments

32.1

Equity-settled share appreciation rights scheme
  – Clover Share Appreciation Rights Plan (2010) (Ordinary shares in CIL)

On 31 May 2010 the ordinary and preference shareholders approved the Clover Share Appreciation Rights Plan (2010) as well as the placement of 16 million (after the 2 for 1 split) unissued ordinary shares under the control of the Directors to fulfil the company’s potential future obligations in terms of the plan. The salient features of the scheme are as follows:

The Company’s obligations in terms of this plan can at the election of the Remuneration Committee be settled in cash or by the issue of ordinary shares.

New SAR may be encashed at the election of the participants at any time after they have vested, provided that the participant concerned is still in the employ of Clover. An encashment employee will be paid an amount equal to the difference between the fair market value of ordinary shares on the date of issue of the new SAR in question and the fair market value of the ordinary shares on the date of encashment. Further details on the scheme are available in the detailed circular issued to shareholders on 7 May 2010.

The SAR granted are expensed over their vesting period in terms of IFRS 2. The estimated fair value of these SAR was calculated using the Hull-White Trinomial Lattice valuation model. The following inputs were used for the calculation of the fair value:

Initial allocation – Expected volatility of 30,3%, risk free rate of 8,90% and a dividend yield of 2,34%.

Second allocation – Expected volatility of 14,9%, risk free rate of 8,90% and a dividend yield of 2,34%.

Third allocation – Expected volatility of 19,9%, risk free rate of 8,55% and a dividend yield of 3,33%.

Allocation to new Executive Committee member – Expected volatility of 17,4%, risk free rate of 7,94% and a dividend yield of 2,00%.
Share appreciation rights
Description Grant date Weighted average remaining contractual life (years) Grant price (Rand) SAR granted not yet exercised Weighted average fair
value per right (cents)		 Vesting period
Clover’s Share Appreciation Rights Plan (2010) – Initial allocation 31 May 2010 * Till employment terminates R4,67 15 500 000

(2011: 15 500 000)

 R2,11 One third on

31 May 2013, a further third on 31 May 2014 and a final third on 31 May 2015
Clover’s Share Appreciation Rights Plan (2010) – Second allocation 18 August 2010 * Till employment terminates R0,00 1 466 667

(2011: 2 000 000)

 R4,31 One third on 18 August 2011, a third on 18 August 2012 and final third on 18 August 2013
Clover’s Share Appreciation Rights Plan (2010) – Third allocation 1 July 2011 Six years R11,00 2 093 918

(2011: Nil)

 R3,11 All on 1 July 2014
Clover’s Share Appreciation Rights – Allocation to new Executive Committee member 1 June 2012 Seven years R13,50 953 620

(2011: Nil)

 R4,03 One third on 1 June 2015, a third on 1 June 2016 and final third on 1 June 2017
Group Company
2012
R’000 		2011
R’000 		2012
R’000 		2011
R’000
Provision against income
Share-based payment reserve 13 115 11 192    
   

33.

Directors’ remuneration and interests
 

33.1

Directors’ remuneration
2012
Basic salary Fees for services as Director Car allowance Individual performance bonus Profit share bonus Retirement contributions Other benefits* Total Share appreciation rights exercised
R’ 000 R’ 000 R’ 000 R’ 000 R’ 000 R’ 000 R’ 000 R’ 000
Executive Directors                  
JH Vorster 3 498   979 2 243 2 020 673 60 9 473 –
HB Roode 2 651   754 1 482 1 334 462 75 6 758 1 468
LJ Botha 2 395   672 1 339 1 206 391 48 6 051 1 504
CP Lerm (Dr) 1 989   581 1 111 1 002 355 198 5 236 489
Total remuneration of Executive Directors 10 533 – 2 986 6 175 5 562 1 881 381 27 518 3 461
Non-executive Directors                  
JAH Bredin   907         20 927  
HPF du Preez   252         3 255  
WI Büchner   417         – 417  
MG Elliot   252         31 283  
JC Hendriks (Dr)   329         27 356  
TA Wixley   684         – 684  
SF Booysen (Dr)   437         6 443  
NP Mageza   354         – 354  
JNS Du Plessis (Adv)   431         43 474  
NA Smith   252         14 266  
Total remuneration of Non-executive Directors – 4 315 – – – – 144 4 459 –
Total Directors’ remuneration 10 533 4 315 2 986 6 175 5 562 1 881 525 31 977 3 461
Other Executives (prescribed officers)                  
H Lubbe 1 882   537 1 052 947 299 52 4 769 489
JHF Botes (Dr) 1 879   536 1 051 946 300 39 4 751 489
E Bosch (Appointed 1 June 2012) 190   52     17 6 265  
Total remuneration of other Executives 3 951 – 1 125 2 103 1 893 616 97 9 785 978
* Medical contributions, travel and accommodation expenses, fees paid for directorships held in subsidiaries
2011
Basic salary Fees for services as Director Car allowance Individual performance bonus Profit share bonus Retirement contributions Other benefits* Total Share
appreciation
rights exercised
R’ 000 R’ 000 R’ 000 R’ 000 R’ 000 R’ 000 R’ 000
Executive Directors                  
JH Vorster 3 100   864 2 080 3 068 800   9 912  
HB Roode 2 358   655 1 319 1 945 582   6 859  
LJ Botha 1 850   536 1 035 1 526 449   5 396  
CP Lerm (Dr) 1 840   533 1 029 1 517 460   5 379  
Total remuneration of Executive Directors 9 148 – 2 588 5 463 8 056 2 291 – 27 546  
Non-executive Directors                  
JAH Bredin   1 084         112 1 196  
HPF du Preez   466         77 543  
WI Büchner   187         55 242  
MG Elliot   176         109 285  
JC Hendriks (Dr)   186         66 252  
VP Turner   137         67 204  
TA Wixley   475         3 478  
JW Lotz   88         13 101  
MG Mackenzie   78         14 92  
FG Meyer   88         31 119  
DK Smith   339         70 409  
SF Booysen (Dr)   170         2 172  
NP Mageza   132         2 134  
JNS Du Plessis (Adv)   140         31 171  
NA Smith   39         8 47  
Total remuneration of Non-executive Directors – 3 785 – – – – 660 4 445  
Total Directors’ remuneration 9 148 3 785 2 588 5 463 8 056 2 291 660 31 991  
Other Executives (prescribed officers)                  
H Lubbe 1 370   410 766 1 130 348   4 024  
JHF Botes (Dr) 1 370   410 766 1 130 190   3 866  
A Schoeman (Retired 31 December 2010) 693   203 426 426 105   1 853  
Total remuneration of other Executives 3 433 – 1 023 1 958 2 686 643 – 9 743  
   

33.2

Interest of Directors and other Executives in share appreciation rights
The interest of executive and non-executive directors in the shares of the company provided for in the form of share appreciation rights are set out in the table below
Number of rights as at 30 June 2011 Share appreciation rights granted
during the year 		Number of right exercised/cancelled during the year Number of rights as at 30 June 2012 Share price on date exercised Grant price Date from which exercisable
JH Vorster 4 587 200     4 587 200  

 R4,67 One third on 31 May 2013, a further third on 31 May 2014 and a final third on 31 May 2015
  800 000     800 000   R0,00 One third on 18 August 2011, a third on 18 August 2012 and final third on 18 August 2013
    821 256   821 256   R11,00 All on 1 July 2014
HB Roode 2 616 762     2 616 762   R4,67 One third on 31 May 2013, a further third on 31 May 2014 and a final third on 31 May 2015
  400 000   133 333 266 667 11,01 R0 ,00 One third on 18 August 2011, a third on 18 August 2012 and final third on 18 August 2013
    478 979   478 979   R11,00 All on 1 July 2014
CP Lerm (Dr) 2 454 758     2 454 758   R4,67 One third on 31 May 2013, a further third on 31 May 2014 and a final third on 31 May 2015
  133 336   44 446 88 890 11,01 R0,00 One third on 18 August 2011, a third on 18 August 2012 and final third on 18 August 2013
    1 119   1 119   R11,00 All on 1 July 2014
LJ Botha 2 443 140     2 443 140   R4,67 One third on 31 May 2013, a further third on 31 May 2014 and a final third on 31 May 2015
  400 000   133 333 266 667 11,28 R0,00 One third on 18 August 2011, a third on 18 August 2012 and final third on 18 August 2013
    404 063   404 063   R11,00 All on 1 July 2014
Total Executive Directors 13 835 196 1 705 417 11 1123 15 229 501      
Other Executives (prescribed officers)
H Lubbe 2 027 236     2 027 236   R4.67 One third on 31 May 2013, a further third on 31 May 2014 and a final third on 31 May 2015
  133 332   44 444 88 888 11.01 R0,00 One third on 18 August 2011, a third on 18 August 2012 and final third on 18 August 2013
    57 778   57 778   R11,00 All on 1 July 2014
JHF Botes (Dr) 1 370 904     1 370 904   R4.67 One third on 31 May 2013, a further third on 31 May 2014 and a final third on 31 May 2015
  133 332   44 444 88 888 11.00 R0,00 One third on 18 August 2011, a third on 18 August 2012 and final third on 18 August 2013
    330 723   330 723   R11,00 All on 1 July 2014
ER Bosch   953 620   953 620   R13.50 One third on 1 June 2015, a third on 1 June 2016 and final third on 1 June 2017
Total other Executives 3 664 804 1 342 121 88 888 4 918 037      
Total 17 500 000 3 047 538 400 000 20 147 538      
   

33.3

Interest of Directors and other Executives of the Company in ordinary share capital
Number of shares at 30 June    
2012 2011    
Direct Indirect Associates Direct Indirect Associates    
  Executive Directors
7 505 496 – 398 315 7 505 496 – 352 215   JH Vorster
5 388 276 – – 5 388 276 – –   HB Roode
3 309 341 – – 3 309 341 – –   CP Lerm (Dr)
2 542 049 – – 2 542 049 – –   LJ Botha
18 745 162 – 398 315 18 745 162 – 352 215  
  Non-executive Directors
411 265 – – 411 265 – –   JAH Bredin*
64 634 – – 364 634 – –   HPF du Preez*
– 480 400 – – 480 400 1 461 564   WI Büchner*
241 689 – – 241 689 – –   MG Elliot*
1 112 892 – – 1 242 892 – –   JC Hendriks (Dr)*
47 619 – – 47 619 – –   TA Wixley
– 1 306 586 – – 1 306 586 –   NA Smith (Appointed 10 March 2011)
1 878 099 1 786 986 – 2 308 099 1 786 986 1 461 564  
20 623 261 1 786 986 398 315 21 053 261 1 786 986 1 813 779   Total Directors’ interest in ordinary share capital
  Other Executives (prescribed officers)
523 810 – – 523 810 – –   H Lubbe
547 619 – – 547 619 – –   JHF Botes (Dr)
1 071 429 – – 1 071 429 – –   Total interest of other Executives in ordinary share capital
 
* These Directors are trustees of the Clover Milk Producer Trust that holds 21 530 353 (2011: 20 996 284) ordinary shares in the Company.
   

33.4

Interest of Directors and other Executives of the company in preference share capital
Number of shares at 30 June  
2012 2011  
Direct Indirect Associates Direct Indirect Associates  
  Executive Directors
3 696 232 – – 3 696 232 – –   JH Vorster
1 996 097 – – 4 341 514 – –   HB Roode
1 650 385 – – 1 650 385 – –   CP Lerm (Dr)
– – – – – –   LJ Botha
7 342 714 – – 9 688 131 – –  
  Non-executive Directors
– – – – – 40 000   JAH Bredin
– – – 90 609 – –   WI Büchner
88 065 – – 88 065 – –   MG Elliot
– 229 885 – – 361 625 –   JC Hendriks (Dr)
– – – – 358 562 –   NA Smith (appointed 10 March 2011)
88 065 229 885 – 178 674 720 187 40 000  
7 430 779 229 885 – 9 866 805 720 187 40 000   Total Directors’ interest in preference share capital
              There was no change in the shareholding of Directors in the ordinary and preference shares of the Company, between the end of the financial year and the approval of the financial statement by the Board on 6 September 2012.
               
Group Company
2012
R’000 		2011
R’000 		2012
R’000 		2011
R’000

34.

Long-service bonus

34.1

Introduction
  The Group rewards employees with long service by remunerating them with a lump sum after a specific number of service years. Assumptions and valuation methods are as follows:

34.2

Background
  The long-service bonuses which employees receive differ between employees whose employment date was before 1 January 2001 and employees whose employment date was after 1 January 2001. The benefit is as follows:

Employees with an employment date before 1 January 2001

Employees receive a bonus of three times their monthly basic salary after 15 years service and one time their monthly basic salary every five years thereafter.

Employees with an employment date after 1 January 2001

Employees receive a bonus of 10% of their monthly basic salary after 10 years’ service, 15% after 15 years’ service, 20% after 20 years’ service, 25% after 25 years’ service, etc.

34.3

Valuation method
  The projected unit credit method is used in the calculations. The values of the past service liabilities and the future service liabilities are given separately. The past service liability is the value of the accumulated liability as at the calculation date in respect of service already rendered. The future service liability is the value of the liability from service after the calculation date until the next date the employee is entitled to receive a bonus payment. The total liability is evenly distributed over the period since service inception until the date when the benefit is payable.
     

34.4

Valuation results

    
        Past service liability    
        The total past service liability in respect of long-service bonuses is set out as follows:    
30 175 31 340     Employees with employment date before 01/01/2001    
983 873     Employees with employment date after 01/01/2001    
31 158 32 213     Total past service liability    
    The valuation results as at 30 June 2012 are based on best estimate assumptions. The valuation is very sensitive to the real return rate assumed. For every 1% variance in the assumed rate of return, the liability varies by approximately R1 million. The results as at 30 June 2011 are based on the previous best estimates. The figures do not agree with the provisions as per the Group statements as the full liability for the joint venture has been included in the valuation results.
% %     % %
 

34.5

Past service liability build-up
    The build-up of the total past service liability for the past year, using the best estimate assumptions are as follows:
9,0 9,4     a) The following discount rate per annum was used for the calculation of interest cost.
7,5 7,4     b) The following salary escalation rate per annum and merit increases were used.
    c) For current service cost an assumption is made that there are no withdrawls during the finacial year.
    d) For benefits paid it is assumed that all benefits were paid as estimated by Clover.
R’000 R’000     R’000 R’000
    The increase in the past service liability is summarised as follows:
    Past services liability build-up
32 213 30 427     Opening balance
2 852 2 944     Plus: Interest cost
1 821 1 761     Current service cost
(7 447) (8 817)     Less: Benefits paid
1 719 5 898     Acturial loss/(gain)    
31 158 32 213     Closing balance    
   
   

35.

Events after the reporting period
  On 28 August 2012 the Competition Commission conditionally approved Clover SA’s acquisition of the Real Juice Co. Holdings (Pty) Ltd from AVI Ltd. Clover SA accepted the conditions posed and the effective date of the transaction will be on 1 October 2012.

Other than the above, no significant events occurred subsequent to the year-end.
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