notes to the COMPANY annual financial statements for the year ended 23 December 2012

1. Revenue

  December 2012
26 weeks
Rm
  June 2012
52 weeks
Rm
Dividends received (included are dividends from subsidiary companies) 474.8    946.5 
Management and administration fees received (included are management and administration fees from subsidiary companies) 8.2    20.0 
  483.0    966.5 

2. Operating profit

  December 2012
26 weeks
Rm
  June 2012
52 weeks
Rm
 

Operating income includes:

       
Foreign exchange profit  0.3    0.7   
Ongoing cellular income 11.0    14.6   

Operating loss includes:

       
Share-based payment  3.6    4.0   
Contribution to pension scheme  0.4    0.7  *


* Included in Employment costs in Company Income Statement

3. Net finance (expense)/income

  December 2012
26 weeks
Rm
  June 2012
52 weeks
Rm
Finance expense       
Interest on Group loans  (1.6)  
Finance income       
Interest on Group loans  1.1    0.7 
Interest from Receiver of Revenue  0.4    0.4 
Net finance (expense)/income  (0.1)   1.1 

4. Taxation 

  December 2012
26 weeks
Rm
  June 2012
52 weeks
Rm
Current year       
South African normal taxation       
Current taxation  0.2    2.0 
Deferred taxation  0.1    2.6 
Withholding taxation  0.2   
Secondary taxation on companies    67.6 
Total  0.5    72.2 
       
The rate of taxation is reconciled as follows:  December 2012
%
  June 2012
%
Standard corporate taxation rate  28.0    28.0 
Exempt income  (28.2)   (31.9)
Disallowable expenditure  0.2    4.8 
Withholding taxation  0.1   
Secondary taxation on companies    8.1 
Other    (0.3)
Effective rate  0.1    8.7 

5. Interest in subsidiaries

  December 2012
Rm
  June 2012
Rm
Interest in subsidiaries       
Masscash Holdings (Proprietary) Limited  82.2    82.2 
Massbuild (Proprietary) Limited  296.2    296.2 
Tiradeprops 60 (Proprietary) Limited  5.0    5.0 
Tiradeprops 66 (Propretary) Limited  5.0    5.0 
Game Discount World (Mauritius) Limited  0.1    0.1 
Massmart International Holdings Limited  81.4    81.4 
  469.9    469.9 
  • Details of net shares at cost can be found in note 36 in the Group Financial Statements. 
     
Amounts owing to subsidiaries       
Massmart Management and Finance Company (Proprietary) Limited  (48.4)   (106.8)
Masstores (Proprietary) Limited  (437.6)   (454.3)
Tiradeprops 60 (Proprietary) Limited  (5.9)   (5.9)
Tiradeprops 66 (Propretary) Limited  (5.9)   (5.9)
Game Discount World (Mauritius) Limited  (0.1)   (0.1)
The Drop Inn Group of Liquor Supermarkets (Proprietary) Limited  (2.7)   (2.7)
  (500.6)   (575.7)

  • These loans are unsecured, interest free and have no fixed terms of repayment except for Massmart Management and Finance Company (Proprietary) Limited. The Massmart Management and Finance Company (Proprietary) Limited is unsecured, bears interest at varying rate linked to prime rates and has no fixed term of repayment. 
Amounts owing by subsidiaries       
Masscash Holdings (Proprietary) Limited  83.2    83.2 
Massbuild (Proprietary) Limited  1,255.8    1,255.8 
Massmart Holdings Executive Share Trust  38.3    44.4 
Mystic Blue Trading 62 (Proprietary) Limited  200.0    200.0 
Massmart Trust  0.2    0.2 
  1,577.5    1,583.6 
  • These loans are unsecured, interest free and have no fixed terms of repayment. 
     
  June 2012
Rm
  June 2011
Rm
Interest in subsidiaries      
The interest in subsidiaries was previously reported as follows: 103.9    103.9 
Shares at cost less amounts written off 1,373.9    1,599.8 
Amounts owing by subsidiaries 1,477.8    1,703.7 

  • The prior year Interest in subsidiaries has been reclassified to Amounts owing by subsidiaries and Amounts owing to subsidiaries to take into account the terms of the respective agreements.
  • A third statement of financial position has not been provided as the reclassification had no impact on the net asset value or the profit generated by the company in the current or prior period.
  • If a third statement of financial position had been presented the reclassification on the June 2011 financial statements would have reflected the following:
Non current assets      
Interest in subsidiaries     1,703.7 
Transfer to current assets     (1,248.6)
Transfer to current liabilities     14.7 
      469.8 
Current assets      
Amounts owing by subsidiaries     1,248.6 
      1,248.6 
Current liabilities      
Amounts owing to subsidiaries     14.7 
      14.7 

6. Other financial assets

  December 2012
26 weeks
Rm
  June 2012
52 weeks
Rm

Unlisted investments 

     
Investment in Imagegate Limited (UK)1  4.9    4.6 
Investment in Massmart Black Scarce Skills Trust and Massmart Thuthukani Empowerment Trust  0.2    0.2 

Listed investments 

     
Investment in shares 0.7    0.5 
  5.8    5.3 

  • The directors' value the unlisted investments at R5.1 million (2012: R4.8 million).
  • For IAS 39 Financial Instruments: Recognition and Measurement accounting treatment of these financial assets, see note 38 in the Group Financial Statements.

Notes

1. Classified as a 'loan and receivable' financial asset for IAS 39 purposes.

7. Deferred taxation

  December 2012
26 weeks
Rm
  June 2012
52 weeks
Rm
The major movements during the year are analysed as follows:       
(Liability)/ asset at the beginning of the year  (0.1)   2.5 
Charge to profit or loss for the year  (0.1)   (2.6)
Liability at the end of the year  (0.2)   (0.1)
The major components of deferred taxation are analysed as follows:       
Other temporary differences  (0.2)   (0.1)
  (0.2)   (0.1)

8. Issued capital

  Share capital    Share premium 
  December 2012
Rm
  June 2012
Rm
  December 2012
Rm
  June 2012
Rm
Authorised               
500,000,000 (June 2012: 500,000,000) ordinary shares of 1 cent each  5.0    5.0     
20,000,000 (June 2012: 20,000,000) non-redeemable cumulative non-participating preference shares of 1 cent each  0.2    0.2     
18,000,000 (June 2012: 18,000,000) 'A' convertible redeemable non-cumulative participating preference shares of 1 cent each  0.2    0.2     
4,000,000 (June 2012: 4,000,000) 'B' convertible redeemable non-cumulative participating preference shares of 1 cent each       
               
Issued               
216,910,195 (June 2012: 216,124,461) ordinary shares of 1 cent each  2.2    2.2    752.1    750.6 
9,395,053  (June 2012: 10,134,631) 'A' convertible redeemable non-cumulative participating preference shares of 1 cent each  0.1    0.1     
3,066,622 (June 2012: 3,112,778) 'B' convertible redeemable non-cumulative participating preference shares of 1 cent each       

  Number of
shares
  Share capital
Rm
  Share premium
Rm
Ordinary shares           
Balance at June 2011  213,883,460.0    2.0    743.9 
Shares issued in terms of the Massmart Thuthukani Empowerment Trust  2,058,117.0    0.2   
Shares issued in terms of the Massmart Black Scarce Skills trust  182,884.0     
Ordinary shares in issue - June 2012  216,124,461.0    2.2    743.9 
Treasury shares  (43,152.0)     6.7 
Ordinary shares in issue excluding treasury shares - June 2012  216,081,309.0    2.2    750.6 
           
Balance at June 2012  216,124,461.0  * 2.2    750.6 
Shares issued in terms of the Massmart Thuthukani Empowerment Trust  739,578.0     
Shares issued in terms of the Massmart Black Scarce Skills trust  46,156.0     
Ordinary shares in issue - December 2012  216,910,195.0    2.2    750.6 
Treasury shares  (30,510.0)     1.5 
Ordinary shares in issue excluding treasury shares - December 2012  216,879,685.0    2.2    752.1 
           
* Ordinary shares, which have a par value of 1 cent, carry one vote per share and carry the right to dividends.           
           
  Number of
shares
  Share capital
Rm
  Share premium
Rm
'A' convertible redeemable non-cumulative participating preference shares           
Balance at June 2011  12,192,748.0    0.2   
Shares converted to ordinary shares  (2,058,117.0)   (0.1)  
Balance at June 2012  10,134,631.0    0.1   
Shares converted to ordinary shares  (739,578.0)    
Balance at December 2012  9,395,053.0    0.1   

  • '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 beneficiary, 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
  Share capital
Rm
  Share premium
Rm
'B' convertible redeemable non-cumulative participating preference shares           
Balance at June 2011  3,295,662.0     
Shares converted to ordinary shares  (182,884.0)    
Balance at June 2012  3,112,778.0     
Shares converted to ordinary shares  (46,156.0)    
Balance at December 2012  3,066,622.0     

  • '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 is cast by the appointed trustees, and do not carry the right to dividends. On election of the beneficiary, 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
  • As at December 2012, executives and senior employees have options over 10,457,825 (June 2012: 9,702,840) ordinary shares of which 8,369,052 (June 2012: 7,188,065) are unvested.
  • 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 28 in the Group Financial Statements.
  • During the current year, the only shares bought in the market were by the Share Trust where 0.7 million shares ( 0.3% of average shares in issue) were bought at an average price of R174.38 totalling R124.5 million.
  • During the prior 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.
  • 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

  December 2012
26 weeks
Rm
  June 2012
52 weeks
Rm
Balance at the beginning of the year  8.5    3.1 
Treasury shares  0.3    1.2 
Share-based payment reserve  3.6    4.0 
Revaluation of listed investments  0.1    0.2 
Balance at the end of the year  12.5    8.5 
Reconciliation of the treasury share reserve       
Balance at the beginning of the year  2.1    0.9 
Movement on treasury shares  0.3    1.2 
Balance at the end of the year  2.4    2.1 
Reconciliation of the share-based payment reserve       
Balance at the beginning of the year  5.7    1.7 
Share-based payment expense related to Massmart Holdings Limited Employee Share Trust  3.6    4.0 
Balance at the end of the year  9.3    5.7 
Reconciliation of the listed investments reserve       
Balance at the beginning of the year  0.7    0.5 
Revaluation of listed investments to market value  0.1    0.2 
Balance at the end of the year  0.8    0.7 

  • 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 28 in the Group Financial Statements. The share-based payment valuation was performed by Alexander Forbes for all periods and the scheme is equity-settled.

10. Cross-suretyships and promissory notes

  December 2012
Rm
  June 2012
Rm
Cross-suretyships under banking and other financial facilities  5,903.1    5,903.1 
  5,903.1    5,903.1 

  • 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. 
  • Promissory notes that represent commitments under non-cancellable operating leases of R208.9 million (June 2012: R303.9 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 R193.6 million (June 2012: R262.8 million), discounted at 10.5% (June 2012: 15.0%). In accordance with IAS 17 Leases, the rentals paid are amortised over the entire remaining lease period on a straight-line basis. 
  • At the balance sheet date the Massmart Group was net cash positive.