Annual financial statements

GROUP								COMPANY
2017 R’000	2016 R’000							2017 R’000	2016 R’000
		31	INVESTMENT IN SUBSIDIARY AND JOINT VENTURE
			Investment in subsidiary company
			Clover SA					326 735	326 735
			Total investment in subsidiary					326 735	326 735
			Share of investment in a joint venture
–	–		Clover Futurelife
38 946	31 651		Clover Fonterra
38 946	31 651

 

				Effective interest in capital		Gross Investment in subsidiaries and joint ventures1		Profit/(loss) after taxation3
Subsidiary and joint ventureName of COMPANY	Country of incorporation		Nature of business	2017 %	2016 %	2017 R’000	2016 R’000	2017 R’000	2016 R’000
Clover SA2	South Africa		Dairy manufacturing, distribution, sales	100	100	326 735	326 735	171 180	299 074
Real Beverage COMPANY	South Africa		Manufacturing and sales of fruit juices	100	100	466 958	444 958	(45 019)	(14 389)
Clover Botswana	Botswana		Dairy manufacturing, distribution, sales	100	100	23 111	23 111	44 425	75 492
Clover MilkyWay	South Africa		Dairy manufacturing and sales	100	100	80 000	50 050	(5 317)	(8 861)
Clover Swaziland	Swaziland		Distribution and sales of dairy products in Swaziland	100	100	1	1	1 306	(1 208)
Clover Fonterra#	South Africa		Marketing, selling and distribution of dairy and related ingredient products	51	51	38 946	31 651	18 486	14 015
Clover Frankies	South Africa		Marketing, sales, distribution and production of CSD’s	100	51	19 854	10 928	(3 851)	518
Clover Good Hope	South Africa		Manufactures, distributes, sells and markets a range of soy based milk alternatives	51	51	14 822	7 068	1 829	1 380
Clover West Africa	Nigeria		Marketing of non-alcoholic beverage products	100	100	468	468	(1 027)	71 273
Clover Namibia	Namibia		Distribution and sales of dairy products in Namibia	100	100	*	*	2 494	5 167
Clover Waters	South Africa		Marketing, sales, distribution and production of water and iced tea	70	70	146 985	76 669	(3 536)	(1 935)
Clover Futurelife	South Africa		Manufactures, distributes, sells and markets a range of functional food products	50.1	50.1	*	*	(7)	253
Clover Pride	South Africa		Manufactures, distributes, sells and markets a range of food products	51	–	31 768	–	1 007	–
Dairy Farmers of South Africa	South Africa		Milk collection and dairy sales	100	–	405 311	–	(4 483)	–

 

#	Joint venture.
*	Amounts less than R1 000.
1	Held by Clover SA.
2	Held by CIL.
3	Before inter company eliminations.

 

GROUP								COMPANY
2017 R’000	2016 R’000							2017 R’000	2016 R’000
			Clover Frankies
			Subsidiary’s statement of financial position
3 605	9 265		Current assets including cash and cash equivalents of R0,23 million (2016: R1,6 million) and inventory R1.3 million (2016: R4,3 million)
11 627	12 233		Non-current assets including property, plant and equipment of R0,2 million (2016: R0,36 million) and intangibles (2016: R11,4 million)
–	(597)		Non-current liabilities including deferred tax Rnil million (2016: R0,6 million)
(6 107)	(6 925)		Current liabilities including trade and other payables of R6,1 million (2016: R6,9 million)
(9 125)	(13 976)		Equity (Net asset value)
100%	51%		Portion of the Group’s ownership
9 125	7 128		Net asset value of the investment
			Subsidiary’s revenue and profit
18 932	20 568		Revenue
(14 290)	(9 864)		Cost of sales
(8 615)	(8 976)		Sales, marketing, distribution and administrative expenses
(475)	(262)		Net finance cost
(4 448)	1 466		Profit before taxation
597	(450)		Income tax expense
(3 851)	1 016		Profit for the year
100%	51%		Portion of the Group’s ownership
(3 117)	518		Group’s share of (loss)/profit for the year
5 624			Acquisition of non-controlling interest in subsidiary - Refer to note 3.2 for more details
(510)	–		Dividend received

 

GROUP								COMPANY
2017 R’000	2016 R’000							2017 R’000	2016 R’000
			Clover Good Hope
			Subsidiary’s statement of financial position
29 878	27 302		Current assets including cash and cash equivalents of R9,7 million (2016: R3,6 million) and inventory of R7,7 million (2016: R8,7 million)
6 959	7 329		Non-current assets including property, plant and equipment of Rnil million (2016: Rnil million) and intangibles of R7,0 million (2016: R7,3 million)
(508)	(657)		Non-current liabilities including deferred tax R0,5 million
(25 034)	(26 265)		Current liabilities including trade and other payables of R25 million
(11 295)	(7 709)		Equity (Net asset value)
51%	51%		Portion of the Group’s ownership
5 760	3 932		Net asset value of the investment
			Subsidiary’s revenue and profit
90 405	16 206		Revenue
(73 663)	(13 480)		Cost of sales
(10 372)	(1 293)		Sales, marketing, distribution and administrative expenses
(283)	1 721		Other operating (expenses)/income
(1 090)	(65)		Net finance cost
4 997	3 089		Profit before taxation
(1 411)	(383)		Income tax expense
3 586	2 706		Profit for the year
51%	51%		Portion of the Group’s ownership
1 829	1 380		Group’s share of profit for the year
–	–		Dividend received

 

GROUP								COMPANY
2017 R’000	2016 R’000							2017 R’000	2016 R’000
			Clover Waters
			Subsidiary’s statement of financial position
53 894	58 049		Current assets including cash and cash equivalents R2,6 million (2016: Rnil) and inventory R24,5 million (2016: R27,95 million)
150 236	132 674		Non-current assets including property, plant and equipment R112 million (2016: R97,8 million) and deferred tax asset of R4.9 million (2016:Rnil million)
–	(9 866)		Non-current liabilities including deferred tax Rnil million (2016: R2,7 million)
(166 916)	(138 729)		Current liabilities including trade and other payables of R138,2 million (2016: R138,2 million)
(37 214)	(42 128)		Equity (Net asset value)
70%	70%		Portion of the Group’s ownership
26 050	29 490		Net asset value of the investment
			Subsidiary’s revenue and profit
252 564	306 672		Revenue
(163 763)	(195 972)		Cost of sales
(74 626)	(87 740)		Sales, marketing, distribution and administrative expenses
(14 140)	(21 011)		Other operating expenses
(12 605)	(5 992)		Net finance cost
(12 570)	(4 043)		Loss before taxation
7 518	1 279		Income tax
(5 052)	(2 764)		Loss for the year
70%	70%		Portion of the Group’s ownership
(3 536)	(1 935)		Group’s share of loss for the year
–	–		Dividend received

 

GROUP								COMPANY
2017 R’000	2016 R’000							2017 R’000	2016 R’000
			Clover Pride (inclusive of the purchase price allocation per note 3.1)
			Subsidiary’s statement of financial position
23 096			Current assets including cash and cash equivalents of R0,4 million and inventory R13,9 million
59 493			Non-current assets including property, plant and equipment of R0,5 million and intangibles R59,0 million
(117)			Non-current liabilities including deferred tax R0,1 million
(20 563)			Current liabilities including trade and other payables of R20,4 million
(61 909)			Equity (Net asset value)
51%			Portion of the Group’s ownership
31 574			Net asset value of the investment
			Subsidiary’s revenue and profit
22 358			Revenue
(15 016)			Cost of sales
(3 562)			Sales, marketing, distribution and administrative expenses
(797)			Other operating (expense)/income
(241)			Net finance cost
2 742			Profit before taxation
(767)			Income tax expense
1 975			Profit for the year
51%			Portion of the Group’s ownership
1 007			Group’s share of profit for the year
–			Dividend received

 

Refer to note 4 for the joint ventures namely Clover Fonterra Ingredients and Clover Futurelife.

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 (SAR) as well as the placement of 16 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 exercised 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 exercise employees will be awarded shares to the value 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 exercise.
	Further details on the scheme are available in the detailed circular issued to shareholders on 7 May 2010 and the Report on Remuneration on page 77 to 88.
	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%.
	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%
	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%.
	Allocation to new executive committee member – Expected volatility of 22,7%, risk free rate of 7,45% and a dividend yield of 2,14%.
	Seventh allocation – Expected volatility of 26,9%, risk free rate of 7,37% and dividend yield of 1,92%.
	Expected volatility is calculated based on the average share price per day and the intra-day share price movements since listing.
	Eighth allocation – Expected volatility of 33,0%, risk free rate of 8,19% and a dividend yield of 2,95%.
	Ninth allocation - Expected volatility of 26,7%, risk free rate of 7,98% and a dividend yield of 3,48%.

 

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	1 808 459(2016: 1 808 459)	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) – Third allocation	1 July 2011		Two years	R11,00	57 778(2016: 57 778)	R3,11	Full allocation vested on 1 July 2014
Clover’s Share Appreciation Rights Plan (2010)– Allocation to Executive Committee member ER Bosch	1 June 2012		Three years	R13,50	953 620(2016: 953 620)	R4,03	One-third on 1 June 2015, one-third on1 June 2016 and a final third on 1 June 2017
Clover’s Share Appreciation Rights Plan (2010) – Fourth allocation	1 July 2012		Three years	R13,73	1 474 962(2016: 1 474 962)	R3,70	Full allocation vested on 1 July 2015
Clover’s Share Appreciation Rights Plan (2010)– Allocation to Executive Committee member MM Palmeiro	1 October 2012		Three years	R14,15	925 500(2016: 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		Four years	R16,83	2 256 153(2016: 2 588 288)	R4,97	Full allocation vests on 1 July 2016
Clover’s Share Appreciation Rights Plan (2010) – Sixth allocation	20 June 2014		Five years	R17,31	697 562(2016: 2 325 208)	R4,83	Full allocation vests on 30 June 2017
Clover’s Share Appreciation Rights Plan (2010) – Allocation to Executive Committee member J van Heerden	26 September 2014		Three years	R17,55	501 425(2016: 501 425)	R5,25	One third on 26 September 2017, one third on 26 September 2018 and a final third on 26 September 2019
Clover’s Share Appreciation Rights Plan (2010) – Seventh allocation	30 June 2015		Five years	R17,34	2 779 769(2016: 2 779 769)	R5,38	Full allocation vests on 30 June 2018
Clover’s Share Appreciation Rights Plan (2010) – Eighth allocation	30 June 2016		Four years	R18,44	2 679 262(2016: 2 679 262)	R5,58	Full allocation vests on 30 June 2019
Clovers Share Appreciation Rights Plan (2010) - Ninth allocation	30 June 2017		Five years	R16,75	3 108 839	R 4.40	Full allocation vest on 30 June 2020

 

GROUP						COMPANY
2017 R’000	2016 R’000					2017 R’000	2016 R’000
			Provision against income
5 865	12 697		Share-based payment expense

 

There were no changes made to the share appreciation rights or the executives’ interests therein after 30 June 2017 up to the approval of the annual financial statements.

33	DIRECTORS’ REMUNERATION AND INTERESTS

33.1	Directors’ remuneration

	2017
	Basic salary		Fees for services as Director		Individual performance bonus	Profit share bonus	Retirement and medical contributions	Re-imbursive expenses	Other benefits*	Total
	R’000		R’000		R’000	R’000	R’000	R’ 000	R’000	R’000
Executive Directors
JH Vorster	5 500		–		–	–	628	–	283	6 411
ER Bosch	3 397		–		–	–	452	–	132	3 981
Total remuneration of Executive Directors	8 897		–		–	–	1 080	–	415	10 392
Non-Executive Directors
WI Büchner	–		1 191		–	–	–	–	–	1 191
TA Wixley (resigned 28 November 2016)	–		374		–	–	–	–	–	374
SF Booysen (Dr)	–		840		–	–	–	–	–	840
JNS Du Plessis (resigned 11 January 2017)	–		249		–	–	–	8	–	257
NA Smith	–		414		–	–	–	–	–	414
N Mokhesi	–		637		–	–	–	–	–	637
B Ngonyama	–		539		–	–	–	–	–	539
PR Griffin (resigned 28 November 2016)	–		134		–	–	–	18	–	152
Total remuneration of Non-Executive Directors	–		4 378		–	–	–	26	–	4 404
Total Directors’ remuneration	8 897		4 378		–	–	1 080	26	415	14 796
Other executives (prescribed officers)
H Lubbe	3 285		–		–	–	409	–	170	3 864
JHF Botes (Dr)	3 300		–		–	–	430	–	169	3 899
MM Palmeiro	2 708		–		–	–	340	–	760	3 808
J van Heerden	2 635		–		–	–	324	–	241	3 200
Total remuneration of other executives	11 928		–		–	–	1 503	–	1 340	14 771

*

Other benefits include long service award payouts, leave payouts on retirement, housing allowances for expatriates, travel and accommodation expenses.

 

	2016
	Basic salary  R’000		Fees for services as director R’000		Individual performance bonus R’000	Profit share bonus  R’000	Retirement and medical contributions  R’000	Re-imbursive expenses  R’ 000	Other benefits*  R’000	Total  R’000
Executive directors
JH Vorster	5 500		–		1 654	4 279	1 292	–	1 407	14 132
LJ Botha	3 767		–		636	–	465	–	362	5 230
CP Lerm (Dr)	3 296		–		1 120	1 878	715	–	860	7 869
ER Bosch	1 669		–		568	953	378	–	65	3 633
Total remuneration of Executive Directors	14 232		–		3 978	7 110	2 850	–	2 694	30 864
Non-Executive Directors
WI Büchner	–		1 191		–	–	–	–	–	1 191
TA Wixley	–		899		–	–	–	–	–	899
SF Booysen (Dr)	–		818		–	–	–	39	–	857
JNS Du Plessis	–		520		–	–	–	36	–	556
NA Smith	–		371		–	–	–	–	–	371
N Mokhesi	–		432		–	–	–	–	–	432
B Ngonyama	–		472		–	–	–	–	–	472
PR Griffin	–		321		–	–	–	–	–	321
Total remuneration of Non-Executive Directors	–		5 024		–	–	–	75	–	5 099
Total Directors’ remuneration	14 232		5 024		3 978	7 110	2 850	75	2 694	35 963
Other executives (prescribed officers)
H Lubbe	3 285		–		1 118	1 877	701	–	167	7 148
JHF Botes (Dr)	3 300		–		1 121	1 882	700	–	166	7 169
ER Bosch (became a director on 2 January 2016)	1 669		–		567	952	378	–	64	3 630
MM Palmeiro	2 708		–		1 432	1 902	591	–	755	7 388
J van Heerden	2 382		–		608	1 020	452	–	237	4 699
Total remuneration of other executives	13 344		–		4 846	7 633	2 822	–	1 389	30 034

 

*

Other benefits include long service award payouts, leave payouts on retirement, housing allowances for expatriates, travel and accommodation expenses.

 

	2017 R’000	2016 R’000
Share appreciation rights exercised and settled by the issue of shares
Executive directors
JH Vorster	–	19 892
LJ Botha (Resigned 2 January 2016)	–	11 234
CP Lerm (Dr)*	332 135	13 414
Executives (Prescribed officers)
	332 135	44 540

 

All share appreciation rights exercised by Executives as part of the MPCRE (refer to page 87: – legacy scheme SARS issues) were settled in shares.

* Retired 30 June 2016

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:

	Allocation ofrights	Number of rights at allocation date	Number of rights as at 30 June 2016	Share appreciation rights granted during the year	Number of rights exercised*/ cancelled^ during the year	Number of rights as at 30 June 2017	Number of rights that have vested as at 30 June 2017	Share price on date exercised	Grant price	Date from which exercisable
JH Vorster	Fourth	1 036 716	696 716			696 716	696 716	18.72	13.73	All on 1 July 2015.
	Fifth	879 589	879 589			879 589	879 589		16.83	All on 1 July 2016.
	Sixth	906 510	906 510		634 557^	271 953	271 953		17.31	All on 30 June 2017.
	Seventh	975 927	975 927			975 927			17.34	All on 30 June 2018.
	Eighth	919 753	919 753			919 753			18.44	All on 30 June 2019.
	Ninth	1 087 427		1 087 427		1 087  427			16.75	All on 30 June 2020.
CP Lerm (Dr) (retired 30 June 2016)	Fifth	332 135	332 135		332 135*	–		19.03	16.83	All on 1 July 2016.
ER Bosch	Allocation of newly appointed	953 620	953 620			953 620	953 620		13.50	One-third on 1 June 2015, a third on 1 June 2016 and final third on 1 June 2017.
	Fifth	332 135	332 135			332 135	332 135		16.83	All on 1 July 2016.
	Sixth	342 301	342 301		239 611^	102 690	102 690		17.31	All on 30 June 2017.
	Seventh	371 988	371 988			371 988			17.34	All on 30 June 2018.
	Eighth	362 256	362 256			362 256			18.44	All on 30 June 2019.
	Ninth	426 302		426 302		426 302			16.75
Total Executive Directors		8 926 659	7 072 930	1 513 729	1 206 303	7 380 356	3 236 703

 

	Allocation of rights	Number of rights at allocation date	Number of rights as at 30 June 2016	Share appreciation rights granted during the year	Number of rights exercised*/ cancelled^ during the year	Number of rights as at 30 June 2017	Number of rights that have vested as at 30 June 2017	Share price on date exer- cised	Grant price	Date from which exercisable
Other executives (prescribed officers)
H Lubbe	First	2 027 236	1 351 491			1 351 491	1 351 491		4.67	One-third on 31 May 2013, a further third on 31 May 2014 and a final third on 31 May 2015.
	Third	57 778	57 778			57 778	57 778		11.00	All on 1 July 2014.
	Fourth	389 123	389 123			389 123	389 123		13.73	All on 1 July 2015.
	Fifth	332 135	332 135			332 135	332 135		16.83	All on 1 July 2016.
	Sixth	342 301	342 301		239 611^	102 690	102 690		17.31	All on 30 June 2017.
	Seventh	370 992	370 992			370 992			17.34	All on 30 June 2018.
	Eighth	349 625	349 625			349 625			18.44	All on 30 June 2019.
	Ninth	413 886		413 886		413 886			16.75	All on 30 June 2020.
JHF Botes (Dr)	First	1 370 904	456 968			456 968	456 968		4.67	One-third on 31 May 2013, a further third on 31 May 2014 and a final third on 31 May 2015.
	Fourth	389 123	389 123			389 123	389 123		13.73	All on 1 July 2015.
	Fifth	332 135	332 135			332 135	332 135		16.83	All on 1 July 2016.
	Sixth	342 301	342 301		239 611^	102 690	102 690		17.31	All on 30 June 2017.
	Seventh	372 023	372 023			372 023			17.34	All on 30 June 2018.
	Eighth	350 598	350 598			350 598			18.44	All on 30 June 2019.
	Ninth	417 645		417 645		417 645			16.75	All on 30 June 2020.
MM Palmeiro	Allocation of newly appointed	925 500	925 500			925 500	617 000		14.15	One-third on 1 October 2015, a third on 1 October 2016 and final third on 1 October 2017.
	Fifth	380 159	380 159			380 159	380 159		16.83	All on 1 July 2016.
	Sixth	391 795	391 795		274 257^	117 538	117 538		17.31	All on 30 June 2017.
	Seventh	417 246	417 246			417 246			17.34	All on 30 June 2018.
	Eighth	415 808	415 808			415 808			18.44	All on 30 June 2019.
	Ninth	423 249		423 249		423 249			16.75	All on 30 June 2020.
J van Heerden	Allocation of newly appointed	501 425	501 425			501 425			17.55	One third on 26 September 2017, a third on 26 September 2018 and final third on 26 September 2019.
	Seventh	271 593	271 593			271 593			17.34	All on 30 June 2018.
	Eighth	281 222	281 222			281 222			18.44	All on 30 June 2019.
	Ninth	340 330		340 330		340 330			16.75	All on 30 June 2020.
Total other executives		12 206 132	9 021 341	1 595 110	753 478^	9 862 973	4 628 831
Total		21 132 791	16 094 271	3 108 839	1 959 781	17 243 329	7 865 534

Under the SAR Scheme, the aggregate number of ordinary shares which may be acquired by the Executives may not exceed 16 million ordinary shares. At 30 June 2017, a total of 11 240 883 (30 June 2016: 11 202 483 ordinary shares) have been issued to Executives, with the balance of 4 759 117 ordinary shares remaining available for issue.

* Exercised

^ Cancelled

 

Number of shares at 30 June 2017						Number of shares at 30 June 2016
Direct	Indirect		Associates			Direct	Indirect	Associates
				33.3	Interest of Directors and other executives of the Company in ordinary share capital
					Executive Directors
4 583 334	4 500 000		403 364		JH Vorster	5 254 846	4 500 000	398 315
–	–		–		CP Lerm (Dr) (retired 30 June 2016)	3 574 220	–	–
4 583 334	4 500 000		403 364			8 829 066	4 500 000	398 315
					Non-Executive Directors
–	591 492		–		WI Büchner*	–	480 400	–
–	900 085		–		NA Smith	–	888 814	–
48 222	–		–		TA Wixley^	47 619	–	–
15 245	–		–		PR Griffin^	15 245	–	–
63 467	1 491 577		–			62 864	1 369 214	–
4 646 801	5 991 577		403 364		Total Directors’ interests in ordinary share capital	8 891 930	5 869 214	398 315
					Other executives (prescribed officers)
242 222	–		–		H Lubbe	342 222	–	–
951 998	–		–		JHF Botes (Dr)	951 998	–	–
1 194 220	–		–		Total interest of other Executives in ordinary share capital	1 294 220	–	–

There have been no changes in Directors’ interests in the share capital of the Company between the end of the financial year and the date of the approval of the annual financial statements.

* This Director is a trustee of the Clover Milk Producer Trust that holds 23 700 000 (2016: 23 100 000) ordinary shares in the Company.

^ Resigned 28 November 2016

GROUP						COMPANY
2017 R’000	2016 R’000					2017 R’000	2016 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 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.
			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:
18 497	19 420			Employees with employment date before 01/01/2001
2 928	2 426			Employees with employment date after 01/01/2001
21 425	21 846			Total past service liability
				The valuation results as at 30 June 2017 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 R470 000. The results as at 30 June 2016 are based on the previous best estimates.

 

GROUP						COMPANY
2017 %	2016 %					2017 %	2016 %
			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:
7.50	8.42			a)	The following discount rate per annum was used for the calculation of interest cost
6.30	7.46			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
21 847	24 869			Opening balance
1 870	1 782			Plus:	Interest cost
1 083	1 099				Current service cost
(5 032)	(8 785)			Less:	Benefits paid
1 658	2 882				Actuarial loss
21 426	21 847			Closing balance

 

35

EVENTS AFTER THE REPORTING PERIOD

As communicated on the SENS Clover transferred the non-value added dairy business to its wholly owned subsidiary, Dairy Farmers of South Africa (Pty) Ltd. (“DFSA”), under a written transfer of business agreement with effect from 1 April 2017. In exchange for the transfer of the non-value added dairy business as aforementioned, DFSA allotted and issued to Clover, shares in DFSA. The board of directors of Clover announced that the issue and allotment of the B shares in DFSA to the milk producers has been implemented with effect from 1 July 2017 and accordingly, the milk producers now hold all the B shares which constitute 74% of the voting rights of DFSA. Clover holds all the A shares which constitute 26% of the voting rights of DFSA. Except for the above no significant events occurred subsequent to the year-end that would require disclosure or amendment to these financial statements.