Directors' Report

The directors have pleasure in presenting their report for the year ended 31 August 2012.

Nature of business

The company is an investment holding company listed in the Food and Drug Retailers sector of the JSE Limited. Its subsidiaries include the country’s leading provider of health and beauty merchandise through a network of 595 stores in southern Africa. The company’s subsidiaries cover the pharmaceutical supply chain from wholesale distribution to retail pharmacy as well as beauty and cosmetic products. The company operates primarily in southern Africa.

Group financial results

The results of operations for the year are set out in the consolidated statement of comprehensive income of the annual financial statements. The profit attributable to ordinary shareholders for the year is R689 million (2011: R651 million).

Share capital

In terms of the specific authority granted by shareholders in the general meeting held on 1 June 2011 as contemplated in section 38 of the Companies Act No. 71 of 2008 (as amended), the company elected to issue 5 471 386 shares for a subscription price of 1 cent and a premium thereon of R45.05 each to New Clicks South Africa Proprietary Limited in order to raise cash to make distributions to its shareholders.

During the year under review the company continued with its share buy-back programme as set out below.

17 197 177 shares held by a subsidiary of the company as treasury shares at 1 September 2011
5 471 386 shares issued to a subsidiary of the company in order to raise cash to make distributions
217 661 shares in terms of general repurchase between 1 September 2011 and 31 August 2012 by a subsidiary of the company
22 886 224 held by a subsidiary of the company as treasury shares at 31 August 2012

Distributions to shareholders

Interim

The directors approved a distribution of 44.1 cents per share (2011: 37.0 cents per share) comprising a dividend from distributable reserves (“the distribution”). The distribution was paid on 2 July 2012 to shareholders registered on 29 June 2012.

Final

The directors have approved a final distribution of 107.9 cents per share (2011: 88.0 cents per share). A distribution of 15.2 cents per “A” share (2011: 12.5 cents) was declared for participants in the employee share ownership programme. The source of such distributions will be from distributable reserves. The distributions will be payable on 28 January 2013 to shareholders registered on 25 January 2013.

Events after the financial year-end

No significant events, other than the declaration of the final distribution, as set out above, took place between the end of the financial year under review and the date of this report.

Directors and secretary

The names of the directors in office at the date of this report are set out here, and the company secretary’s details are set here.

Resignation

Michael Harvey resigned as an executive director with effect from 12 June 2012.

Retirement and re-election of directors

In accordance with the company’s memorandum of incorporation (“MOI”) Fatima Jakoet, David Kneale and David Nurek retire by rotation at the forthcoming annual general meeting. The retiring directors, being eligible, offer themselves for re-election.

Directors’ interest in shares

David Nurek, indirectly through a family trust, sold 39 682 shares at a price of R39.79 per share on 25 October 2011.

In terms of the cash-settled long-term employee incentive scheme which requires all participants at the end of the three-year incentive performance period to purchase shares on the open market to the equivalent of 25% of the after-tax cash settlement value, the executive directors and company secretary made the following purchases on 12 December 2011 at a price of R45.22 per share: David Kneale purchased 50 080 shares, Michael Harvey purchased 20 144 shares, Bertina Engelbrecht purchased 15 666 shares and David Janks purchased 3 736 shares.

David Janks, indirectly through a family trust, sold 712 shares at a price of R54.60 per share and 4 288 shares at a price of R55.15 per share on 27 July 2012.

Details of Directors’ shareholdings are disclosed here.

Incentive schemes

Information relating to the incentive schemes is set out here.

Special resolutions

Special resolutions passed at the annual general meeting held on 17 January 2012:

Special Resolution No. 1: General authority to repurchase shares

Special Resolution No. 2: Approval of directors’ fees

Special Resolution No. 3: General approval to provide financial assistance

Subsidiary companies

The names of the company’s main subsidiaries and financial information relating thereto appear here on the annual financial statements.

The interest of the company in the aggregate income after taxation is R689 million (2011: R651 million).