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

21. 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    2.0    743.9 
Shares issued in terms of the Massmart Thuthukani Empowerment Trust  2,058,117    0.2   
Shares issued in terms of the Massmart Black Scarce Skills Trust  182,884     
Ordinary shares issued - June 2012  216,124,461    2.2    743.9 
Treasury shares  (43,152)     6.7 
Ordinary shares issued excluding treasury shares - June 2012  216,081,309    2.2    750.6 
Balance at June 2012  216,124,461    2.2    750.6 
Shares issued in terms of the Massmart Thuthukani Empowerment Trust  739,578     
Shares issued in terms of the Massmart Black Scarce Skills Trust  46,156     
Ordinary shares issued - December 2012  216,910,195    2.2    750.6 
Treasury shares  (30,510)     1.5 
Ordinary shares issued excluding treasury shares - December 2012  216,879,685    2.2    752.1 

* The number of shares is the ordinary shares issued before deducting treasury shares

  • 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     
Net shares issued in terms of the Massmart BEE transaction  12,192,748    0.1   
Shares converted to ordinary shares  (2,058,117)    
Treasury shares  (10,134,631)   (0.1)  
Balance at June 2012     
Net shares issued in terms of the Massmart BEE transaction  10,134,631    0.1   
Shares converted to ordinary shares  (739,578)    
Treasury shares  (9,395,053)   (0.1)  
Balance at December 2012     

  • 'A' convertible redeemable non-cumulative participating preference shares, which have a par value of 1 cent, are held in the Massmart Thuthukani Empowerment Trust. These shares carry one vote per share, which are 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     
Net shares issued in terms of the Massmart BEE transaction  3,295,662     
Shares converted to ordinary shares  (182,884)    
Treasury shares  (3,112,778)    
Balance at June 2012     
Net shares issued in terms of the Massmart BEE transaction  3,112,778     
Shares converted to ordinary shares  (46,156)    
Treasury shares  (3,066,622)    
Balance at December 2012     

  • '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 are cast by the 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

  • 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.
  • 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.

22. Other reserves

  December 2012
Rm
  June 2012
Rm
Foreign currency translation reserve  57.3    32.2 
Hedging reserve  1.7    5.9 
Share-based payment reserve  579.2    803.3 
Capital redemption reserve fund  0.2    0.2 
Amortisation of trademarks    76.5 
Fair value adjustment of available-for-sale financial asset  (13.2)   (13.2)
Fair value adjustment on listed shares  4.0    0.6 
Change in non-controlling interests  1.9    1.9 
Cost of acquiring minority interests  (306.1)   (292.5)
Treasury shares  (1.7)   (0.2)
  323.3   614.7 
Reconciliation of the foreign currency translation reserve:       
Balance at the beginning of the year  32.2    (35.4)
Translation on consolidation  25.1    67.6 
Balance at the end of the year  57.3    32.2 

  • Exchange differences relating to the translation from functional currencies of the Group's foreign subsidiaries into Rands are accounted for in the foreign currency translation reserve. 
  December 2012
Rm
  June 2012
Rm
Reconciliation of the hedging reserve:       
Balance at the beginning of the year  5.9    (2.2)
Reclassification of cash flow hedge reserve to income statement 13.1    (9.3)
FEC asset  (12.4)   20.9 
FEC liability  (6.5)   (0.3)
Deferred taxation  1.6    (3.2)
Balance at the end of the year  1.7    5.9 

  • The hedging reserve represents hedging gains and losses recognised on the effective portion of cash flow hedges. The hedge is released from equity at the same time the forecast transaction is recognised in profit or loss. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to profit or loss for the period. 
  December 2012
Rm
  June 2012
Rm
Reconciliation of the share-based payment reserve:       
Balance at the beginning of the year  803.3    689.5 
Share-based payment expense related to the Massmart Holdings Limited Employee Share Trust  30.0    44.4 
Share-based payment expense related to the Massmart Thuthukani Empowerment Trust  1.8    12.8 
Share-based payment expense related to the Massmart Black Scarce Skills Trust  8.1    8.9 
Share-based payment expense related to Walmart  28.6    47.7 
Share-based payment expense related to the Massmart Thuthukani Empowerment Trust released to distributable reserves  (292.6)  
Balance at the end of the year  579.2    803.3 

  • The share-based payment reserve arises on grant of share options to employees under the Employee Share Incentive Schemes. Details of the Employee Share Incentive Schemes can be found in note 28. The share-based payment valuation was performed by Alexander Forbes for all periods and all schemes are equity-settled share schemes. 
  • The share-based payment expense related to Walmart is included in the valuation of the Massmart Holdings Limited Employee Share Trust. Related details are provided below. 
  • On 1 October 2012, the final conversion of 'A' preference shares to ordinary shares through the Thuthukani Trust occurred. The employees had the option of converting their remaining share allocation into Massmart ordinary shares and continue to receive 100% of the dividend on their ordinary shares or they could sell their remaining share allocation and receive net proceeds after tax and selling expenses. The relevant share-based payment reserve was released to retained income. 
  December 2012
Rm
  June 2012
Rm
Amortisation of trademarks       
Balance at the end of the year    76.5 
  • Reserve released to retained earnings required by lapse of restrictive condition on this reserve.
  December 2012
Rm
  June 2012
Rm
Fair value adjustment of available-for-sale financial asset       
Balance at the end of the year  (13.2)   (13.2)

  • In the 2007 financial year, the decision was made to prospectively deconsolidate the results of the Zimbabwean Makro operations. 
  • In terms of IAS 27 Consolidated and Separate Financial Statements, control is defined as 'the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities'. It is evident from the current social, political and economic developments within Zimbabwe that control does not exist. This has been evidenced through the forcing of retailers to sell goods at predetermined prices and the inablility of the Massmart Group to repatriate monies. It is Massmart's view that, throughout the 2012 financial year, it did not have control over the Zimbabwean operations and as such the results remain deconsolidated.  
  • On deconsolidation in 2007, the investment in Makro Zimbabwe was reflected as an 'available-for-sale' financial asset. The fair value of this asset was determined to be zero and the adjustment taken to equity as a reserve. For the period under review the fair value was again assessed as zero and as a result there has been no fair value movement. Details can be found in note 15
  • The agreement to sell the assets of Makro Zimbabwe was signed in November 2010 and was finalised in late February 2011.  The loss on sale of R38.6 million in that period represented the costs relating to the disposal of the Makro Zimbabwe stores. 

Massmart Share Schemes

Massmart Holdings Limited Employee Share Trust

Details of the share options outstanding during the year are as follows:

  December 2012    June 2012 
  Number of
share options
  Weighted
average
exercise price
Rand 
  Number of
share options
  Weighted
average
exercise price
Rand
Outstanding at the beginning of the year  9,702,840    119.5    6,079,937    76.1 
Granted during the year  1,676,064    167.8    5,176,251    156.7 
Forfeited during the year  (194,474)   140.1    (245,753)   115.0 
Exercised during the year  (726,605)   73.7    (1,307,595)   65.9 
Outstanding at the end of the year  10,457,825    130.0    9,702,840    119.5 
Exercisable at the end of the year  2,088,773        2,514,775     

In December 2012, the weighted average share price at the date of exercise for share options exercised during the year was R174.99. The options outstanding at the end of the year had a weighted average remaining contractual life of 7.8 years. Options were granted on 1 September 2012 and 15 October 2012. The estimated fair values of the options granted on these dates were R47.63 and R47.97. 

In June 2012, the weighted average share price at the date of exercise for share options exercised during the year was R161.17. The options outstanding at the end of the year had a weighted average remaining contractual life of 7.8 years. Options were granted on 1 September 2011, 1 November 2011, 1 March 2012, 1 April 2012 and 16 May 2012. The estimated fair values of the options granted on these dates were R46.77, R43.88, R50.52, R47.11 and R48.37. 

These fair values were calculated using the binomial model. The inputs into the model were as follows: 

  December 2012   June 2012
Weighted average share price (Rand) at granting dates  170.3    163.7 
Expected volatility  29.2% - 29.65%    30.4% - 31.7% 
Expected life  5 - 6 years    3 - 10 years 
Risk-free rate  5.95% - 6.2%    6.4% - 7.5% 
Expected dividend yield  2.5% - 5.0%    2.5% - 5.0% 

Expected volatility was determined by calculating the historical volatility of the Company's share price over the number of previous years corresponding with the option lifetime. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

A significant valuation assumption used in the model relates to exercise behaviour and is detailed as follows: 
33% of option holders will exercise their options when the share price is equal to 120% of the strike price 
33% of option holders will exercise their options when the share price is equal to 150% of the strike price 
33% of option holders will exercise their options at the end of the theoretical "optimal" time 

Massmart Thuthukani Empowerment Trust 

In 2012, the weighted average share price at the date of exercise for share options was R168.24. On 1 October 2012, the Thuthukani Trust came to an end. More information is provided with the reserve movement above. 

In June 2012, the weighted average share price at the date of exercise for share options was R150.18.  The options outstanding at the end of the year had a weighted average remaining contractual life of 3 months.  These fair values were calculated using the binomial model. The inputs into the model were as follows: 

  December 2012   June 2012
Weighted average share price (Rand) at granting dates (no issues in 2008, 2009, 2010, 2011 or 2012) n/a    56.9 
Expected volatility  n/a    30.1% - 32.3% 
Expected life  n/a    5 years 
Risk-free rate  n/a    8.3% - 8.4% 
Expected dividend yield  n/a    3.7% 

Expected volatility was determined by calculating the historical volatility of the Company's share price over the number of previous years corresponding with the option lifetime. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. 

Massmart Black Scarce Skills Trust 

In December 2012, the weighted average share price at the date of exercise for share options exercised during the year was R131.54. The options outstanding at the end of the year had a weighted average remaining contractual life of 3.3 years. Options were granted on 1 October 2012. The estimated fair values of the options granted on these dates were R36.09. 

In June 2012, the weighted average share price at the date of exercise for share options exercised during the year was R153.83. The options outstanding at the end of the year had a weighted average remaining contractual life of 3.5 years. Options were granted on 1 October 2011 and 1 April 2012. The estimated fair values of the options granted on these dates were R32.19 and R37.10. 

These fair values were calculated using the binomial model. The inputs into the model were as follows: 

  December 2012   June 2012
Weighted average share price (Rand) at granting dates  168.4    34.0 
Expected volatility  21.2% - 29.19%    22.6% - 31.5% 
Expected life  3 - 5 years    3 - 5 years 
Risk-free rate  5.4% - 5.8%    6.3% - 7.9% 
Expected dividend yield  2.5% - 5.0%    2.5% - 5.0% 


Expected volatility was determined by calculating the historical volatility of the Company's share price over the number of previous years corresponding with the option lifetime. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. 

23. Non-current liabilities

  December 2012
Rm
  June 2012
Rm

Interest-bearing 

     
Unsecured       
Medium-term payable  4.4    4.3 
Less: Included in current liabilities  (4.4)   (4.3)
   
Secured       
Medium-term bank loans  1,031.3    1,281.0 
Less: Included in current liabilities  (414.7)   (503.8)
  616.6    777.2 
Capitalised finance leases  88.6    110.4 
Less: Included in current liabilities  (33.4)   (34.9)
  55.2    75.5 
Total interest-bearing liabilities  671.8    852.7 

Interest-free 

     
Unsecured       
Loans to non-controlling interests  3.0    3.0 
Operating lease liability  393.3    404.9 
Less: Included in trade and other payables  (90.6)   (62.1)
  302.7    342.8 
Total interest-free liabilities  305.7    345.8 
Total non-current liabilities  977.5    1,198.5 

  • Included in current liabilities is a medium-term payable of R4.4 million (June 2012: R4.3 million), which is an amount owing to the Massmart Education Trust relating to cash reserves and interest invested with Group Treasury. The short-term portion has been accounted for in note 27.
  • Included in medium-term bank loans above is a fixed term loan of R500.0 million which was secured during the second half of the 2010 financial year repayable quarterly over three years. The loan bears interest at 9.8%. The loan is secured by intragroup cross suretyships. The short-term portion has been accounted for in note 27.
  • Included in medium-term bank loans above is a fixed term loan of R500.0 million which was secured during the second half of the 2011 financial year repayable quarterly over three years. The loan bears interest at 8.1%. The loan is secured by intragroup cross suretyships. The short-term portion has been accounted for in note 27.
  • Included in medium-term bank loans above is a fixed term loan of R750.0 million which was secured during the second half of the June 2012 financial year repayable quarterly over five years. The loan bears interest at 7.88%. The loan is secured by intragroup cross suretyships. The short-term portion has been accounted for in note 27.
  • Capitalised finance leases include vehicle, fixtures, fittings, plant and computer equipment and property leases, repayable in monthly instalments varying from one to five years at varying interest rates between 8.0% and 16.0% (June 2012: between 4.0% and 17.5%). The short-term portion has been accounted for in note 27.
  • The capitalised finance leases are secured by moveable assets with a book value of R56.3 million (June 2012: R68.5 million) and the property lease by the value of the underlying land amounting to R33.4 million (June 2012: R34.4 million). These assets are accounted for in note 12.
  • The operating lease liability relates to the lease smoothing adjustment required by IAS 17 Leases. The short-term portion has been accounted for in note 25.
  • For IAS 39 Financial Instruments: Recognition and Measurement accounting treatment of these values, see note 38.

24. Non-current provisions and other

  December 2012
Rm
  June 2012
Rm
Onerous lease provision  30.4    33.9 
Less: Payable within one year included in current provisions  (7.3)   (6.2)
Provision for Supplier Development Fund    94.9 
Liabilities raised on business acquisitions  188.7    182.3 
Less: Payable within one year included in current provisions  (124.1)   (124.1)
Provision for post-retirement medical aid contributions  81.5    78.2 
  169.2    259.0 

Reconciliation of non-current provisions 

  Opening
balance
Rm
  Reallocated
to current
provisions
Rm
  Amounts
provided
Rm
  Amounts
utilised
Rm
  Unused
amounts
reversed
Rm
  Closing
balance
Rm
December 2012                       
Onerous lease provision  27.7        (2.8)   (1.8)   23.1 
Provision for Supplier Development Fund  94.9    (94.9)        
Liabilities raised on business acquisitions  58.2      6.4        64.6 
Provision for post-retirement medical aid contributions  78.2      3.3        81.5 
  259.0    (94.9)   9.7    (2.8)   (1.8)   169.2 
June 2012                       
Onerous lease provision  1.0      27.7    (1.0)     27.7 
Provision for Supplier Development Fund  100.0        (5.1)     94.9 
Liabilities raised on business acquisitions      58.2        58.2 
Provision for post-retirement medical aid contributions  66.0      12.2        78.2 
  167.0      98.1    (6.1)     259.0 

  • Liabilities raised on business acquisitions increased in the current year due to the interest being capitalised on this contingent payment. 
  Repayable
within 1year*
Rm
  Repayable
in 2 - 5 years
Rm
  Repayable
after 5 years
Rm
  Total
Rm
December 2012  131.4    82.2    87.0    300.6 
June 2012  130.3    173.5    85.5    389.3 

* Included in current provisions in note 26.

Post-retirement medical aid 

  • Certain Group companies provide post-retirement healthcare benefits to their retirees. This fund is accounted for as a defined benefit plan and measured using the projected unit credit method. The liability is unfunded. The significant assumptions are listed below. Of particular importance is the 'interest rate - medical inflation rate' gap of 0.5% (June 2012: 0.5%) used in calculating the provision. 
  December 2012   June 2012
Significant assumptions:       
Discount rate  9.5% pa    8.25% pa 
Healthcare cost inflation  9.0% pa    7.75% pa 
CPI inflation  7.0% pa    5.75% pa 
Expected retirement age  65 years    65 years 
Membership discontinued at retirement or death-in-service  0%    0% 
Movements in the post-retirement medical aid liability (Rm):       
Opening defined benefit obligation  78.2    66.0 
Current service cost  1.3    2.5 
Interest cost  3.1    5.7 
Employer benefits paid  (0.9)   (1.7)
Net actuarial (gain)/loss recognised in the year  (0.2)   5.7 
Closing defined-benefit obligation  81.5    78.2 

  • Movements in the defined benefit obligation are expensed in the income statement in 'Employment costs'.
  • The last valuation of the liability for the post-retirement medical aid contributions was performed as at Dec 2012 by Alexander Forbes, Fellow of the Institute of Actuaries (June 2012: Alexander Forbes, Fellow of the Institute of Actuaries). The current year costs have been assessed in accordance with the advice of independent actuaries.
  • The net actuarial (gain)/loss in the current year arose as a result of a combination of the following factors:
    • Unexpected changes in the membership and membership profile resulted in a net gain of R0.4 million (June 2012: R0.1 million).
    • Other miscellaneous items resulted in an unexpected loss of R0.1 million.
    • An unexpected loss of R7.0 million arose in the prior period as a result of an decrease in the real discount rate, ie a decrease in the difference between the discount rate and the healthcare cost inflation assumption from 1.0% per annum to 0.5% per annum.
    • Lower than expected inflation resulted in a net gain of R1.2 million in the prior period.

Projection of defined benefit obligation

  • Provided that all actuarial assumptions are borne out in practice the accrued liability is expected to increase each year in line with:
    • The rate of discount,
    • Plus the cost of an additional year's accrual for in-service members (service cost),
    • Less the benefit payments made by the employer in respect of continuation members.
A projection of results:    December 2013
Defined benefit obligation at December 2012    81.5 
Current service cost    2.8 
Interest cost    7.6 
Expected employer benefits paid    (2.0)
Defined benefit obligation at December 2013    89.9 


Sensitivity analysis 

  • The valuation results are based on a number of assumptions. The value of the defined-benefit obligation could be overstated or understated, depending on the extent to which actual experience differs from the assumptions adopted. 
  Central
assumption
  Decrease   Increase
Sensitvity analysis on the defined benefit obligation:           
1% increase or decrease in the rate of healthcare cost inflation  9.0%    -1.0%    1.0% 
Defined-benefit obligation in (Rm) 81.5    67.9    99.1 
% change      -16.7%    21.6% 
0.5% increase or decrease in the rate of healthcare cost inflation for the next 5 years, thereafter returning to a healthcare cost inflation of 9%  9.0%    -0.5%    0.5% 
Defined-benefit obligation in (Rm) 81.5    74.2    89.7 
% change      -8.9%    10.1% 
5% and 10% increase in the rate of healthcare cost inflation for the next 5 years, thereafter returning to a healthcare cost inflation of 9%  9.0%    5.0%    10.0% 
Defined-benefit obligation in (Rm) 81.5    100.7    123.5 
% change      23.6%    51.6% 
1% increase or decrease in the discount rate  9.5%    - 1%    + 1% 
Defined-benefit obligation in (Rm) 81.5    99.1    68.0 
% change      21.7%    -16.5% 
1 year increase or decrease in the expected retirement age  65 years    - 1 year    + 1 year 
Defined-benefit obligation in (Rm) 81.5    85.9    77.4 
% change      5.4%    -5.0% 
Sensitvity analysis on the aggregate of the current service and interest cost:           
1% increase or decrease in the rate of healthcare cost inflation  9.0%    -1.0%    1.0% 
Current service cost and interest cost (Rm) 10.5    8.6    12.9 
% change      -18.1%    23.6% 
1% increase or decrease in the rate of healthcare cost inflation  7.75%    -1.0%    1.0% 
Current service cost and interest cost from the previous valuation (Rm) 9.2    7.5    11.3 
% change      -18.1%    23.7% 


Amounts for the current and previous four periods are as follows:

  December 2012   June 2012   June 2011   June 2010   June 2009
Defined-benefit obligation  81.5    78.2    66.0    58.3    55.1 

25. Trade and other payables

  December 2012
Rm
  June 2012
Rm
Trade payables  12,601.3    8,908.8 
Operating lease liability - short-term portion  90.6    62.1 
Leave pay accrual  195.4    175.3 
FEC liability  10.5    4.0 
Income received in advance  27.6    31.0 
Insurance income received in advance  91.6   
Rebates and advertising owing to buying members  91.3    60.3 
Shareholders for dividends  15.0    14.5 
Interest accrual  10.3    14.4 
Walmart accrual  76.7    73.7 
Sundry payables and other accruals  2,095.2    1,957.9 
  15,305.5    11,302.0 

  • The operating lease liability relates to the lease smoothing adjustment required by IAS 17 Leases. The long-term portion has been accounted for in note 23.
  • The Group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe, normally around 60 days. Payables are non-interest bearing and have an average term of 68 days (June 2012: 57 days). Settlement discounts received range from 1.1% to 2.5% (June 2012: 1.0% to 3.0%).
  • For IAS 39 Financial Instruments: Recognition and Measurement accounting treatment of these values, see note 38.

26. Current provisions and other

  December 2012
Rm
  June 2012
Rm
Onerous lease provision  7.3    6.2 
Liabilities raised on business acquisitions  124.1    124.1 
Provision for Supplier Development Fund  225.4   
Other  7.0    9.4 
  363.8    139.7 

  • Provisions raised against specific assets, for example inventories and trade receivables, are accounted for with those assets and are detailed in the relevant notes.
  • The provision for Supplier Development Fund was accounted for as a non-current provision in the prior period and as a current provision in the current financial year.

Reconciliation of current provisions

  Opening
balance
Rm
  Reallocated
from
non-current
provisions
Rm
  Amounts
provided
Rm
  Amounts
utilised
Rm
  Unused
amounts
reversed
Rm
  Closing
balance
Rm
December 2012                       
Onerous lease provision  6.2      2.9      (1.8)   7.3 
Liabilities raised on business acquisitions  124.1            124.1 
Provision for Supplier Development Fund    94.9    140.0    (9.5)     225.4 
Other  9.4      4.0    (4.1)   (2.3)   7.0 
  139.7    94.9    146.9    (13.6)   (4.1)   363.8 
June 2012                       
Onerous lease provision  14.4      3.4    (9.7)   (1.9)   6.2 
Liabilities raised on business acquisitions      124.1        124.1 
Other  12.4      4.5    (5.7)   (1.8)   9.4 
  26.8      132.0    (15.4)   (3.7)   139.7 

27. Other current liabilities

  December 2012
Rm
  June 2012
Rm
Medium-term bank loans  414.7    503.8 
Capitalised finance leases  33.4    34.9 
Massmart Education Foundation loan  4.4    4.3 
Trade finance facility  94.9    92.4 
Lamberti Education Foundation Trust loan  13.8    13.5 
  561.2    648.9 

  • Included in medium-term bank loans above is a fixed term loan of R500.0 million which was secured during the second half of the 2010 financial year repayable quarterly over three years. The loan bears interest at 9.8%. The loan is secured by intragroup cross suretyships. The medium-term portion has been accounted for in note 23.
  • Included in medium-term bank loans above is a fixed term loan of R500.0 million which was secured during the second half of the 2011 financial year repayable quarterly over three years. The loan bears interest at 8.1%. The loan is secured by intragroup cross suretyships. The medium-term portion has been accounted for in note 23.
  • Included in medium-term bank loans above is a fixed term loan of R750.0 million which was secured during the second half of the financial year repayable quarterly over five years. The loan bears interest at 7.88%. The loan is secured by intragroup cross suretyships. The medium-term portion has been accounted for in note 23.
  • Capitalised finance leases include vehicle, fixtures, fittings, plant and computer equipment and property leases, repayable in monthly instalments varying from one to five years at varying interest rates between 8.0% and 16.0% (2011: between 4.0% and 17.5%). The medium-term portion has been accounted for in note 23.
  • The capitalised finance leases are secured by moveable assets with a book value of R56.3 million (June 2012: R68.5 million) and the property lease by the value of the underlying land amounting to R33.4 million (June 2012: R34.4 million). These assets are accounted for in note 12.
  • The Massmart Education Foundation loan represents cash reserves invested with Group Treasury. The long-term portion has been accounted for in note 23.
  • The trade finance facility is an offshore US Dollar facility available for working capital requirements. The Group has used this facility to fund four African working capital loans - namely Botswana, Ghana, Malawi and Mozambique (2011: Botswana, Ghana, Malawi and Mozambique). The facility is capped at USD 20.0 million, of which we have utilised USD 11.0 million (June 2012: USD 11.0 million) at the reporting date.
  • The Lamberti Education Foundation Trust loan represents cash reserves invested with Group Treasury.
  • For IAS 39 Financial Instruments: Recognition and Measurement accounting treatment of these values, see note 38.

28. Employee Share Incentive Schemes

  December 2012
000s
  June 2012
000s

Massmart Holdings Limited Employee Share Trust 

     
Total shares and options available to the scheme  39,500    39,500 
Total shares and options available to the scheme  39,500    39,500 
Shares and treasury shares issued to the scheme  (16,493)   (16,493)
Remaining capacity for issue in terms of the JSE practice  23,007    23,007 
Opening balance of shares and options  11,085    7,554 
New shares and options offered to employees and executive directors  1,676    5,176 
Shares and options sold by employees and directors  (988)   (1,399)
Shares repurchased from/ forfeited by employees and options lapsed/ forfeited  (194)   (246)
Closing balance of shares and options  11,579    11,085 


The closing balance includes 1,121,116 (June 2012: 1,382,228) shares and 10,457,825 (June 2012: 9,702,840) options. Shares and options previously issued to employees who then subsequently left the Group are excluded from the figures above. The amendments needed to bring the Share Trust rules in line with the new JSE Schedule 14 requirements were approved by the shareholders at the AGM on 24 November 2010.

Options may be exercised at any time, but shares arising out of options may only be sold when they have vested with the participant.

Vesting occurs over a five-year period as follows:
- 25% two years after the offer date;
- 50% three years after the offer date;
- 75% four years after the offer date;
- 100% five years after the offer date; and
- expires ten years after the offer date.

In terms of the scheme rules, all share loans on offers must be repaid or options exercised no later than 10 years from the offer date.

The following options granted to employees and directors in terms of the Massmart Employee Share Incentive Scheme have not yet been exercised:

Offer date  Expiry date    Exercise
price (R)
  No of
options at
June 2012
  No of
options
forfeited
and
expired
  No of
options
exercised
  New
options
granted
  No of
options at
December
2012
1 April 2005  31 March 2015    41.91    96,000      49,000      47,000 
1 May 2005  30 April 2015    43.42           
27 May 2005  26 May 2015    42.97    35,765      19,012      16,753 
31 May 2005  30 May 2015    42.88    23,329      10,759      12,570 
1 October 2005  30 September 2015    52.48           
1 November 2005  31 October 2015    51.91    13,701      12,461      1,240 
30 November 2005  29 November 2015    51.19    10,431      1,809      8,622 
1 April 2006  31 March 2016    58.74    17,605      1,512      16,093 
23 May 2006  22 May 2016    54.13    52,621      16,425      36,196 
25 August 2006  24 August 2016    51.93    8,509      2,962      5,547 
1 October 2006  30 September 2016    56.42    5,685      2,011      3,674 
15 November 2006  14 November 2016    62.04    16,905          16,905 
23 February 2007  22 February 2016    67.79    116,591      55,673      60,918 
2 April 2007  1 April 2017    82.67    6,432          6,432 
24 May 2007  23 May 2017    94.25    406,282      91,236      315,046 
24 August 2007  23 August 2017    80.75    65,359      14,702      50,657 
30 November 2007  29 November 2017    71.58    59,710      10,318      49,392 
1 April 2008  31 March 2018    66.91    438,656    522    82,134      356,000 
26 May 2008  25 May 2018    72.86    1,034,427    4,551    113,245      916,631 
1 September 2008  31 August 2018    79.86    189,822      19,252      170,570 
27 October 2008  26 October 2018    72.42    175,305      46,179      129,126 
15 November 2008  14 November 2018    79.91    37,851      5,302      32,549 
1 March 2009  28 February 2019    70.71    138,857    7,238    13,786      117,833 
27 May 2009  26 May 2019    77.55    989,771    15,454    89,770      884,547 
1 September 2009  31 August 2019    79.15    66,329      12,903      53,426 
1 October 2009  30 September 2019    87.60    28,153      5,115      23,038 
16 November 2009  15 November 2019    88.71    31,426      4,061      27,365 
1 March 2010  28 February 2020    90.49    145,519      12,491      133,028 
1 April 2010  31 March 2020    108.95    89,818    7,508    2,887      79,423 
1 May 2010  30 April 2020    110.00    71,607    17,255    10,357      43,995 
1 September 2010  31 August 2020    120.42    264,415      21,243      243,172 
1 September 2011  31 August 2021    153.84    3,647,556    104,533        3,543,023 
1 November 2011  31 October 2021    157.27    468,863          468,863 
1 March 2012  28 February 2022    174.88    448,807    11,021        437,786 
1 April 2012  31 March 2022    164.09    122,954          122,954 
16 May 2012  15 May 2022    159.62    377,779          377,779 
1 September 2012  31 August 2022    168.03      26,392      1,298,245    1,271,853 
15 October 2012  14 October 2022    167.06          377,819    377,819 
          9,702,840    194,474    726,605    1,676,064    10,457,825 

  December 2012
000s
  June 2012
000s

Massmart Thuthukani Empowerment Trust 

     
Total shares and options available to the scheme  18,000    18,000 
Opening balance of share units  1,053    4,176 
Shares sold  (1,053)   (3,123)
Closing balance of share units    1,053 


Vesting occurs over a six-year period as follows:
- 33,3% in October 2010;
- 33,3% in October 2011;
- 33,4% in October 2012; and
- expires six years after the offer date.

The following options granted to eligible employees in terms of the Massmart Thuthukani Empowerment Trust have not yet been exercised:

Offer date  Expiry date    Exercise
price (R)
  No of
options
opening
balance
  No of
options
forfeited
and
expired
  No of
options
exercised
  No of
options
closing
balance
December 2012                       
1 October 2006  30 September 2012    50.0    1,052,860      1,052,860   
                       
June 2012                       
1 October 2006  30 September 2012    50.0    4,175,647      3,122,787    1,052,860 


  December 2012
000s
  June 2012
000s

Massmart Black Scarce Skills Trust 

     
Total preference shares available to the scheme  3,979    3,979 
Reconciliation of units       
Opening balance of share units  1,740    890 
New share units offered to employees  250    1,209 
Shares sold by employees  (155)   (318)
Share units repurchased from/forfeited by employees and options lapsed/forfeited  (80)   (41)
Closing balance of share units  1,755    1,740 
Conversion of share units into preference shares  507    426 


Vesting occurs over a five-year period as follows:
- 25% two years after the offer date;
- 50% three years after the offer date;
- 75% four years after the offer date;
- 100% five years after the offer date; and
- expires five years after the offer date.

The following options granted to eligible employees in terms of the Massmart Black Scarce Skills Trust have not yet been exercised:

Offer date  Expiry date    Exercise
price (R)
  No of
options
opening
balance
  No of
options
forfeited
and
expired
  No of
options
exercised
  New
options
granted
  No of
options
closing
balance
December 2012                           
1 October 2006  30 September 2011    56.42           
2 April 2007  1 April 2012    82.67           
30 November 2007  29 November 2012    71.58    1,322    1,322       
1 April 2008  31 March 2013    66.97    217,420    26,751    13,062      177,607 
1 October 2008  30 September 2013    75.52    193,558    48,066    6,305      139,187 
1 April 2009  31 March 2014    71.96    19,019    306    3,112      15,601 
27 May 2009  26 May 2014    77.56    5,838    774        5,064 
1 April 2010  31 March 2015    108.95    125,425    2,995    25,354      97,076 
1 October 2011  30 September 2016    143.74    741,406      72,070      669,336 
1 April 2012  31 March 2017    164.09    436,083      29,378      406,705 
1 October 2012  30 September 2017    166.91        5,608    250,217    244,609 
          1,740,071    80,214    154,889    250,217    1,755,185 
June 2012                           
1 October 2006  30 September 2011    56.42    127,325    1,945    125,380     
2 April 2007  1 April 2012    82.67    7,672      7,672     
30 November 2007  29 November 2012    71.58    3,221      1,899      1,322 
1 April 2008  31 March 2013    66.97    327,790    6,704    103,666      217,420 
1 October 2008  30 September 2013    75.52    250,998      57,440      193,558 
1 April 2009  31 March 2014    71.96    24,775      5,756      19,019 
27 May 2009  26 May 2014    77.56    7,784      1,946      5,838 
1 April 2010  31 March 2015    108.95    140,045      14,620      125,425 
1 October 2011  30 September 2016    143.74      32,503      773,909    741,406 
1 April 2012  31 March 2017    164.09          436,083    436,083 
          889,610    41,152    318,379    1,209,992    1,740,071 

29. Retirement benefit information

All full-time permanent Massmart staff are members of either the Massmart Pension Fund, the Massmart Provident Fund or the SACCAWU National Provident Fund. These funds are defined contribution funds and are subject to the Pension Funds Act, 1956. Following the recent acquisitions, many of their staff are still members of the retirement funds of the previous business owners. Projects are underway to transfer these employees to one of the above funds in future.

The Massmart Pension Fund and Massmart Provident Fund have been classified as valuation exempt. This exemption expired on 1 March 2013 and has to be re-applied for 1 March 2014. It is expected that the respective Boards of Trustees will submit applications for continued exemption of both funds to the Financial Services Board in 2013. It is further expected that permanent valuation exemption will be granted upon such successful application by the funds.

Contributions received by the funds for the year ended 30 December 2012 amounted to R192.0 million (June 2012: R342 million). The Group's contribution of R115.0 million (June 2012: R205 million) was included in the income statement for the year in 'Employee costs'.

30. Commitments

  December 2012
Rm
  June 2012
Rm

Commitments in respect of capital expenditure approved by directors: 

     
Contracted for       
Stores to be opened  713.1    231.6 
Distribution centre to be opened  37.3    11.3 
Stores to be refurbished  9.5    46.4 
Purchase of land    26.4 
Purchase of plant and equipment  62.3    43.5 
Purchase of new system software  14.3    9.1 
Purchase of new computer hardware  7.2    8.5 
Purchase of motor vehicles  1.0    0.4 
Store relocations  53.8    20.4 
Store conversions    72.0 
Minor revamps  56.3    2.1 
Other    0.4 
  954.8    472.1 
Not contracted for       
Stores to be opened  225.0    322.6 
Stores to be refurbished  14.2    29.2 
Purchase of plant and equipment  143.4    35.3 
Purchase of new system software  85.1    4.0 
Purchase of new computer hardware  48.4    53.1 
Purchase of motor vehicles  19.0    28.7 
Store relocations    54.7 
Store conversions  67.5    39.1 
Minor revamps  55.6   
Distribution centre to be opened  57.3   
Minority buyouts and acquisitions    30.0 
Other    1.6 
  715.5    598.3 
  1,670.3    1,070.4 

  • Massmart has the right of first refusal on the sale of any shares by the minority shareholders in various Masscash stores. Historically Massmart has exercised this right. The amount to be paid in future, should Massmart exercise its rights, totals R370.5 million (June 2012: R259.9 million).
  • Capital commitments will be funded using current facilities.