Annual financial statements

The audited financial statements contained in this section were prepared under the supervision of Louis Jacques Botha, CA(SA), in his capacity as Chief Financial Officer of the Group.

notes to the Consolidated financial statementsfor the year ended 30 June 2014

Group					Company
2014 R’000	2013 R’000				2014 R’000	2013 R’000
		31.	Share-based payments
			31.1	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 (SAR) as well as the placement of 8 million unissued ordinary shares under the control of the Directors to fulfil the Group’s potential future obligations in terms of the plan. The main rules of the scheme are as follows: The Group’s obligations in terms of this plan can at the election of the Group 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 employment of Clover. On encashment employees 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 and the remuneration report. 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%. Fourth allocation – Expected volatility of 17,4%, risk free rate of 7,94% and a dividend yield of 2,00% Allocation to new Executive Committee member – Expected volatility of 24,3%, risk free rate of 7,94% and a dividend yield of 2,18%. Fifth allocation – Expected volatility of 24,3%, risk free rate of 6,67% and dividend yield of 1,74%. Sixth allocation – Expected volatility of 21,4%, risk free rate of 7,01% and dividend yield of 1,80%.

Share appreciation rights
Description	Grant date	Weighted average remaining contractual life (years)	Exercise price	SAR granted not yet exercised	Estimated weighted average fair value per right at grant date (Adjusted for 2 for 1 share split	Vesting period
Clover’s Share Appreciation Rights Plan (2010) – Initial allocation	31 May 2010	*Till employment terminates	R4,67	10 932 272 (2013: 12 676 780)	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	186 667 (2013: 933 335)	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	Four years	R11,00	1 614 939 (2013: 1 614 939)	R3,11	Full allocation vest on 1 July 2014
Clover’s Share Appreciation Rights – Allocation to Executive Committee member ER Bosch	1 June 2012	Five years	R13,50	953 620 (2013: 953 620)	R4,03	One-third on 1 June 2015, one-third on 1 June 2016 and a final third on 1 June 2017
Clover’s Share Appreciation Rights Plan (2010) – Fourth allocation	1 July 2012	Five years	R13,73	2 737 742 (2013: 2 737 742)	R3,70	Full allocation vest on 1 July 2015
Clover’s Share Appreciation Rights Plan (2010) – Allocation to Executive Committee member MM Palmeiro	1 October 2012	Five years	R15,15	925 500 (2013: 925 500)	R3,95	One-third on 1 October 2015, a third on 1 October 2016 and a final third on 1 October 2017
Clover’s Share Appreciation Rights Plan (2010) – Fifth allocation	1 July 2013	Six years	R16,83	3 041 063 (2013: Nil)	R4,97	Full allocation vest on 1 July 2016
Clover’s Share Appreciation Rights Plan (2010) – Sixth allocation	30 June 2014	Seven years	R17,31	3 134 141 (2013: Nil)	R4,83	Full allocation vest on 30 June 2017

Group			Company
2014 R’000	2013 R’000		2014 R’000	2013 R’000
		Provision against income
17 351	18 407	Share-based payment reserve

32.	Directors’ remuneration and interests
	32.1	Directors’ remuneration
			2014
			Basic salary R’000	Fees for services as Director R’000	Car allowance R’000	Individual per- formance bonus R’000	Profit share bonus	Retirement and medical contri- butions R’000	Other benefits* R‘000	Total R’000	Share apprecia- tion rights exercised R’000
		Executive Directors
		JH Vorster	3 945		1 083	1 436		622	52	7 138	4 464
		LJ Botha	2 690		758	797		407	56	4 708	1 338
		CP Lerm(Dr)	2 329		673	913		375	47	4 337	743
		Total remuneration of Executive Directors	8 964	–	2 514	3 146	–	1 404	155	16 183	6 545
		Non-executive Directors
		WI Büchner		1 038					–	1 038
		MG Elliot		144					7	151
		JC Hendriks (Dr)		254					–	254
		TA Wixley		783					–	783
		SF Booysen (Dr)		710					15	725
		NP Mageza		203					–	203
		JNS Du Plessis (Adv)		478					14	492
		NA Smith		340					7	347
		N Mokhesi		254					–	254
		B Ngonyama		275					–	275
		PR Griffin		72					–	72
		Total remuneration of Non-executive Directors	–	4 551	–	–	–	–	43	4 594	–
		Total Directors’ remuneration	8 964	4 551	2 514	3 146	–	1 404	198	20 777	6 545
		Other Executives (prescribed officers)
		H Lubbe	2 346		677	913		377	256	4 569	743
		JHF Botes (Dr)	2 357		678	923		380	252	4 590	743
		ER Bosch	2 375		650	1 141		403	84	4 653
		MM Palmeiro	1 934		545	811		355	699	4 344
		Total remuneration of other Executives	9 012	–	2 550	3 788	–	1 515	1 291	18 156	1 486
		* Travel and accommodation expenses, fees paid for directorships held in subsidiaries.

	2013
	Basic salary R’000	Fees for services as Director R’000	Car allow- ance R’000	Individual per- formance bonus R’000	Profit share bonus	Retire- ment and medical contri- butions R’000	Other benefits* R‘000	Total R’000	Share apprecia- tion rights exercised R’000
Executive Directors
JH Vorster	3 778		1 048	1 454	1 615	761	57	8 713	8 498
HB Roode (retired 30 June 2012)	2 863		816	931	1 034	541	43	6 228	11 967
LJ Botha	2 587		733	832	925	487	51	5 615	–
CP Lerm (Dr.)	2 240		664	975	696	438	41	5 054	11 852
Total remuneration of Executive Directors	11 468	–	3 261	4 192	4 270	2 227	192	25 610	32 317
Non-executive Directors
JAH Bredin (resigned 30 November 2012)		490					9	499
HPF du Preez (resigned 30 November 2012)		136					–	136
WI Büchner		747					–	747
MG Elliot		272					46	318
JC Hendriks (Dr.)		342					26	368
TA Wixley		739					–	739
SF Booysen (Dr.)		513					17	530
NP Mageza		383					–	383
JNS Du Plessis (Adv.)		435					34	469
NA Smith		272					16	288
Total remuneration of Non-executive Directors	–	4 329	–	–	–	–	148	4 477	–
Total Directors’ remuneration	11 468	4 329	3 261	4 192	4 270	2 227	340	30 087	32 317
Other Executives (prescribed officers)
H Lubbe	2 256		655	975	696	440	55	5 077	9 897
JHF Botes (Dr.)	2 266		657	975	696	441	46	5 081	6 895
ER Bosch	2 283		629	1 219	580	456	70	5 237	–
MM Palmeiro (appointed 1 October 2012)	930		264	398	190	172	336	2 290	–
Total remuneration of other Executives	7 735	–	2 205	3 567	2 162	1 509	507	17 685	16 792
* Travel and accommodation expenses, fees paid for directorships held in subsidiaries.

32.2	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 2013	Share appreciation rights granted during the year	Number of rights exercised/ cancelled during the year	Number of rights as at 30 June 2014	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.
		266 667		266 667	–	16,74	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.
		1 036 716			1 036 716		R13,73	All on 1 July 2015.
			879 589		879 589		R16,83	All on 1 July 2016.
			906 510		906 510		R17,31	All on 30 June 2017.
	CP Lerm (Dr)	1 636 505			1 636 505		R4,67	One-third on 31 May 2013, a further third on 31 May 2014 and a final third on 31 May 2015.
		44 445		44 445	–	16,72	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.
		389 123			389 123		R13,73	All on 1 July 2015.
			332 135		332 135		R16,83	All on 1 July 2016.
			342 300		342 300		R17,31	All on 30 June 2017.
	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.
		266 667		80 000	186 667	16,73	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.
		533 657			533 657		R13,73	All on 1 July 2015.
			452 775		452 775		R16,83	All on 1 July 2016.
			466 633		466 633		R17,31	All on 30 June 2017.
	Total Executive Directors	12 430 558	3 379 942	391 112	15 419 388
	Other Executives (prescribed officers)
	H Lubbe	1 351 491			1 351 491		R4,67	One-third on 31 May 2013, a further third on 31 May 2014 and a final third on 31 May 2015.
		44 444		44 444	–	16,72	R0	One-third on 18 August 2011, a third on 18 August 2012 and final third on 18 August 2013.
		57 778			57 778		R11	All on 1 July 2014.
		389 123			389 123		R13,73	All on 1 July 2015.
			332 135		332 135		R16,83	All on 1 July 2016.
			342 301		342 301		R17,31	All on 30 June 2017.
	JHF Botes (Dr)	913 936			913 936		R4,67	One-third on 31 May 2013, a further third on 31 May 2014 and a final third on 31 May 2015.
		44 444		44 444	–	16,72	R0	One-third on 18 August 2011, a third on 18 August 2012 and final third on 18 August 2013.
		330 723			330 723		R11	All on 1 July 2014.
		389 123			389 123		R13,73	All on 1 July 2015.
			332 135		332 135		R16,83	All on 1 July 2016.
			342 301		342 301		R17,31	All on 30 June 2017.
	E 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.
			332 135		332 135		R16,83	All on 1 July 2016.
			342 301		342 301		R17,31	All on 30 June 2017.
	MM Palmeiro	925 500			925 500		R15,15	One-third on 1 October 2015, a third on 1 October 2016 and final third on 1 October 2017.
			380 159		380 159		R16,83	All on 1 July 2016.
			391 795		391 795		R17,31	All on 30 June 2017.
	Total other Executives	5 400 182	2 795 262	88 888	8 106 556
	Total	17 830 740	6 175 204	480 000	23 525 944

Number of shares at 30 June 2014					Number of shares at 30 June 2013
Direct	Indirect	Associates			Direct	Indirect	Associates
			32.3	Interest of Directors and other Executives of the Company in ordinary share capital
				Executive Directors
7 575 496	–	398 315		JH Vorster	7 575 496	–	398 315
–	–	–		HB Roode (Retired 30 June 2013)	3 346 547	–	–
2 919 804	–	–		CP Lerm (Dr)	3 919 804	–	–
1 568 707	–	–		LJ Botha	1 887 768	–	–
12 064 007	–	398 315			16 729 615	–	398 315
				Non-executive Directors
–	710 400	–		WI Büchner*	–	480 400	–
241 689	–	–		MG Elliot* (Resigned 26 November 2013)	241 689	–	–
1 112 892	–	–		JC Hendriks (Dr)* (Resigned 13 March 2014)	1 112 892	–	–
–	1 227 586	–		NA Smith	–	1 337 586	–
47 619	–	–		TA Wixley	47 619	–	–
95 000	–	–		PR Griffin (Appointed 13 March 2014)	–	–	–
5 977	–	–		NP Mageza (Resigned 26 November 2013)	–	–	–
1 503 177	1 937 986	–			1 402 200	1 817 986	–
13 567 184	1 937 986	398 315		Total Directors’ interests in ordinary share capital	18 131 815	1 817 986	398 315
				Other Executives (prescribed officers)
752 222	–	–		H Lubbe	771 632	–	–
738 543	–	–		JHF Botes (Dr)	738 543	–	–
1 490 765	–	–		Total interest of other Executives in ordinary share capital	1 510 175	–	–
				* These Directors are trustees of the Clover Milk Producer Trust that holds 21 932 000 (2013: 21 932 000) ordinary shares in the Company.

Group					Company
2014 R’000	2013 Restated R’000				2014 R’000	2013 R’000
		33.	Long-service bonus
			33.1	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:
			33.2	Background
				The long-service bonuses which employees receive differ between employees whose employment date were 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.
			33.3	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.
			33.4	Valuation results
				Past service liability
				The total past service liability in respect of long-service bonuses is set out as follows:
24 906	27 622			Employees with employment date before 01/01/2001
1 470	1 287			Employees with employment date after 01/01/2001
26 376	28 909			Total past service liability
				The valuation results as at 30 June 2014 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 2013 are based on the previous best estimates.
			33.5	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:
8,5	8,9			a) The following discount rate per annum was used for the calculation of interest cost
8,3	7,7			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 withdrawals during the financial 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
28 909	30 901			Opening balance
2 370	2 685			Plus: Interest cost
1 608	1 703			Current service cost
(7 747)	(9 670)			Less: Benefits paid
1 236	3 290			Actuarial loss
26 376	28 909			Closing balance

34.	Events after the reporting period
	With effect 1 July 2014 Clover SA bought the remaining 48% issued ordinary shares of Lactolab from Taurus Stock Improvement Co-operative Ltd for an amount of R5,5 million. Other than the above, no significant events occurred subsequent to the year-end.

Annual financial statements

notes to the Consolidated financial statementsfor the year ended 30 June 2014

31.

Share-based payments

31.1

Equity-settled share appreciation rights scheme

32.

Directors’ remuneration and interests

32.1

Directors’ remuneration

32.2

Interest of Directors and other Executives in share appreciation rights

32.3

Interest of Directors and other Executives of the Company in ordinary share capital

33.

Long-service bonus

33.1

Introduction

33.2

Background

33.3

Valuation method

33.4

Valuation results

33.5

Past service liability build-up

34.

Events after the reporting period