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Integrated Annual Report 2013of RCL Foods Limited

FORMERLY RAINBOW CHICKEN LIMITED

The aim of the integrated annual report is to provide

stakeholders with a balanced and holistic view of the financial,

social, environmental and economic impacts of RCL Foods

Limited (“RCL” or “Group”) to enable them to obtain a better

understanding of the Group’s long-term prospects.

RCL has three operating subsidiaries, i.e. wholly owned

subsidiaries Rainbow Farms Proprietary Limited (Rainbow),

Vector Logistics Proprietary Limited (Vector) and with effect

from 1 May 2013, Foodcorp Proprietary Limited (Foodcorp),

a 64,18% subsidiary (increased to 88,1% shareholding post

year-end).

The integrated annual report includes the consolidated financial

results of RCL and its subsidiaries, however, non-financial

disclosure relating to governance, social and environmental

performance is limited to RCL and its wholly owned subsidiaries.

Future reporting will extend to Foodcorp once management

has reviewed the protocols to ensure an efficient and effective

adoption and implementation of governance and sustainability

standards.

In compiling this report, RCL has considered:

• InternationalFinancialReportingStandards(IFRS)inrespect

of the annual financial statements

• JSELimitedListingsRequirements

• KingIII

• TheCompaniesAct,2008,asamended;and

• SustainabilityReportingGuidelinesdevelopedbytheGlobal

Reporting Initiative (GRI).

RCLvaluesfeedbackandthereforewelcomesanyquestionsor

comments regarding this report. These can be emailed to the

CompanySecretary,[email protected].

Stakeholders are also directed to the Group’s websites

www.rainbowchicken.co.za,-www.vectorlog.com-and

www.foodcorp.co.za for this report and other relevant

communications regarding the Group.

Reporting approach

REPORTING

Reporting approach outside flap

RCL Foods strategy inside front cover

RCL Foods at a glance 2

RCL Foods products and service profile 4

Key performance indicators 8

Five year review 9

Definitions, ratios and statistics 10

Share and shareholder information 11

GOVERNANCE

Directorate 12

Group executive management 14

Rainbow executive management 15

Vector executive management 16

Foodcorp executive management 17

Chairman’s report 18

Chief Executive’s review 19

Financial review 26

Corporate governance report 30

Remuneration report 39

Abridged sustainability report 41

King III index 54

FINANCIAL STATEMENTS 56

Notice to shareholders 120

Form of proxy attached

Shareholders’ diary inside back cover

Corporate information inside back cover

Contents

Focus on building

a diversiFied Food business

with compelling consumer brands in sub-saharan

aFrica

RCL Foods strategy

FOOdCORP

Foodcorp is a large diversified consumer goods business, manufacturing quality products across a range of categories. Foodcorp’s portfolio is primarily focused on branded food products, but it also produces under private labels for major retailers and is the largest food supplier to Woolworths.

www.foodcorp.co.za

At a general meeting of shareholders on 2 August 2013 a special resolution was approved to change the name of the company from “Rainbow Chicken Limited” to “RCL Foods Limited”. The reason for the change is the Board believes that, post completion of the acquisition of a controlling interest in Foodcorp, the new name will better reflect the Group’s strategic vision as a consumer focused food business that adds value for consumers and customers through its range of market leading brands.

RCL Foods is listed on the JSE Limited and is a subsidiary of Remgro Limited which holds 69,7% of the issued share capital. It is the holding company of three principal operating subsidiaries, Rainbow, Vector and Foodcorp.

As part of RCL Foods’ strategy to focus on building a diversified food business with compelling consumer brands in sub-Saharan Africa, an effective 88,1% of Foodcorp was acquired.

RAINbOw

Rainbow is South Africa’s largest processor and marketer of chicken. Rainbow is no longer simply a chicken producer, but a company that has placed the consumer at the heart of its business – creating over 4 million memorable meal occasions every week. Rainbow operates in the local retail, wholesale and foodservice channels with three brands – Rainbow, Farmer Brown and Rainbow FoodSolutions. It also produces a variety of dealer-own brands for a number of retailers and wholesalers.

www.rainbowchickens.co.za

RCL INTEGRATED ANNUAL REPORT 2013 // 1

Co-Create strategy working together on the prinCiple of a “one Company”

philosophy

VECTOR

Vector is a specialist third-party logistics provider for food and food-related industries in Southern Africa, servicing the retail, wholesale and foodservice sectors. The company focuses on the frozen, chilled and ambient goods supply chain.

www.vectorlog.com

ZAM CHICK

Zam Chick houses the broiler operations of Zambeef Plc in which RCL has a 49,0% shareholding. Zambeef manages the day-to-day operations with Rainbow providing technical assistance.

www.zambeefplc.com

2 // RCL INTEGRATED ANNUAL REPORT 2013

RCL Foods at a glance

...employs 5 673 people

...has 209 rearing, laying and broiler

farms and hatcheries, with 30 million birds

on the ground

...has FIVE feed mills

producing 1,1 million tons

per year

...has 14 distribution sites and

4 plant-based cold stores

RAINBOW

VECTOR

...delivers 171 000 cases daily (43 million per year)

...manages and monitors a fleet of approximately 426 vehicles, operating on a national footprint with

bases in Johannesburg, Durban and Cape Town.

Rainbow was founded by the late Stanley Methven on his father’s farm at Hammarsdale, outside

Durban, in 1960. He first sold from a stall in central Durban. Demand

for Rainbow’s chicken grew quickly, leading to the commissioning of the first processing plant at

Hammarsdale in 1963. Today, Rainbow is South Africa’s largest processor and

marketer of chicken and operates in the local retail, wholesale and foodservice channels. Its consumer

brands are Rainbow and Farmer Brown and its business/service brands are Rainbow FoodSolutions, Cobb and

Epol.

Vector’s origins lie within I&J (an

AVI Limited company) where it

was positioned as an in-house

distribution arm. The growth of

the distribution business was

given significant impetus with

the conclusion of a distribution

arrangement with Rainbow Chicken

in 1966, although at the time this

was limited to the Natal (KZN) area.

Rainbow’s later expansion to sell and

produce nationally had a direct and

positive impact on the growth of

the I&J distribution business. In July 2001, AVI Limited

re-launched its distribution business

as a separate company and it was

subsequently renamed Vector Logistics.

Rainbow acquired Vector in July 2004

with the strategic intent of controlling

and optimising its outbound supply

chain. Vector’s key focus between

2004 and 2010 was to optimise

Rainbow’s outbound supply chain

whilst simultaneously growing and

diversifying its menu of services

with its existing customer base.

…employs 2 167 people

...has SIx processing plants

producing 392 000 tons

of chicken per year.


...has SEVEN production units:

Grocery, Milling, Baking, Pie, Beverage, Speciality Foods and Outdoor divisions

...positions its products to appeal to the

South African mass consumer market, which

represents approximately 70% of South Africa’s total population.

...employs 5 468 people

FOODCORp

Foodcorp was delisted from the JSE Limited in 1998 following a private

equity buy-out and subsequently sold to pamodzi Investment Holdings,

management and employees in April 2004. In March 2010, Foodcorp completed a

restructuring transaction whereby pamodzi sold its entire interest

to BlueBay Asset Management Limited, a UK based fund manager, Capitau partnership, a South African based

fund manager and to management and employees through a staff trust.

On 1 May 2013, RCL Foods acquired an effective 64,2% shareholding in New Foodcorp Holdings proprietary Limited,

grown to become South Africa’s third largest food producer, which brings a number of

leading brands into the RCL Foods stable. A further 23,9% was acquired post year-end to

bring the effective holding to 88,1%. Foodcorp manufactures, markets and distributes a diversified portfolio of food products

ranging from basic essentials to top-end desserts and convenience meals. Many of the products are associated with South African

tradition and heritage, and are therefore among the leading and best

recognised brands in South Africa.


RAINBOW FOODSOLUTIONS“The Chicken Experts”

A partner that can be relied on to

deliver consistency and quality while

always innovating to meet dynamic

market challenges and explore new

opportunities, Rainbow FoodSolutions is

the leading supplier of chicken products

to the foodservice industry in South

Africa.

Rainbow FoodSolutions dominates the

quick service restaurant (QSR) sector

with tailored chicken solutions for leading

customers including KFC, Nando’s,

Chicken Licken and Steers.

Rainbow FoodSolutions also offers its

high quality products and reliable service

to national contract caterers, a number of

independent fast food outlets, industrial

caterers, mines, restaurants, hotels,

clubs, hospitals, schools and various

state institutions.

Rainbow controls its entire supply chain,

thus customers are guaranteed “farm

to fork” quality assurance, giving them

total peace of mind regarding the high

standards of its products.

RCL Foods product and service profile

RAINBOW“Grade A Quality, Grade A Taste”

Fresh, frozen or processed, with

more than 50 products in the versatile

range, when it comes to variety,

value and quality, look no further than

delicious and nutritious Rainbow

chicken.

FARMER BROWN“Premium Quality”

For mouth-watering quality, taste and

freshness, you can’t beat Farmer Brown,

South Africa’s favourite premium quality

fresh chicken brand.

Farmer Brown offers a tempting selection

of succulent whole chickens and portions

as well as a number of prepared and

convenience choices.

All Farmer Brown chicken is hand

trimmed of excess fat, skin and bone –

look out for the special trim labels on all

packs.

Farmer Brown’s premium quality chicken

now offers a Core Range, Value Added

Range, and a Crumbed Range, to suit

every one of your culinary needs.


EpOL“The perfect Balance”

Epol is a major supplier to farmers and

feed agents throughout the country.

Through high quality standards, technical

expertise and innovation Epol has

specially developed feed to meet the

nutritional needs for most livestock.

With an innovative and strong technical

team at the forefront of feeding trends,

Epol provides its customers with the

perfect balance of economical input

costs and maximum yield. As the first

feed manufacturer to receive ISO 22000

certification, Epol sets world standards

to ensure food safety. Epol’s extensive

range includes both conventional feeds

and concentrates for established and

emerging farmers.

COBB“Superior Chickens in every way”

Cobb South Africa operates from two

large, modern grandparent units. The

first is at Carolina, in the Mpumalanga

Province, where the breeder and hatchery

complex was inaugurated in late 2000.

Due to the demand for the Cobb 500

product, further investments were

made and at the end of 2007 a second

production unit was opened at Mpongo

Park, near East London. Cobb now has

two strategically positioned production

units. They are strategic for supply and

biological risk management in the event of

a major disease outbreak.

Cobb aims to offer a better-quality

breed of chicken to local farmers, and

our success in this endeavour has been

unparalleled. It can largely be attributed

to the high performance and consistency

of the Cobb breed, which translates

into exceptional meat yield, excellent

appearance, uniformity and taste quality.

The Cobb breed now has over 40%

market share in South Africa.

VECTORLOGISTICSOLUTIONSSpecialised third party logistics and

sales service provider for frozen,

chilled and ambient goods.

Integrated logistics and sales

services to retail, wholesale and

foodservice sectors, including:

primary warehousing and distribution

(bulk), secondary warehousing and

distribution (break-bulk), sales and

merchandising, supply chain and

credit management.


GROCERY DIVISIONThe Grocery division consists of a

portfolio of highly recognised brands with

market leading positions. These include a

wide range of grain and edible oil-based

products, sorghum, peanut butter, rusks,

a range of pet foods as well as salad

dressings and spreads.

BAKING DIVISIONThe Baking division is the fourth largest

bakery group in the country, operating

seven bakeries and distributing its

products in four of the country’s

provinces.

FOODCORp Foodcorp is a manufacturer of locally

inspired quality food and beverage

brands. Inspired by the tastes, culture

and preferences of the regions the

businesses operate in, Foodcorp

strives to provide accessible quality

that is good for you. Foodcorp brands

are at the epicentre of the business,

and the focus of innovation.


BEVERAGE DIVISION The Beverage division produces a maize-

based health drink under the Mageu

Number 1, Phuzimpilo mageu and

Mnandi Amahewu brands.

pIE DIVISIONThe Pie division produces a range of high

quality, predominantly meat pies, pastries

and sausage rolls under the Pieman’s

brand, sold in frozen unbaked, frozen

baked and chilled baked formats.

SpECIALITY FOODSThe Speciality division produces a

range of superior ready-to-eat products,

including speciality breads, mainly

for Woolworths. The product range

includes sandwiches, muffins, desserts,

snack foods, scones, rye breads, cake

products, pastries and croissants.

MILLING DIVISIONThe Milling division operates the largest

single site flour mill in Southern Africa

and a maize mill, both based at the same

site in Pretoria.

OUTDOOR DIVISIONThe Outdoor division distributes premium

quality Weber barbeques, Weber

briquettes and Igloo coolers throughout

Southern Africa and certain Indian Ocean

islands.


2009 2010 2011* 2012 2013

Key performance indicators

REVENuE (Rm)

6 811 6 953

8 6217 855

2009 2010 2011* 2012 2013

2009 2010 2011* 2012 2013

2009 2010 2011* 2012 2013

2009 2010 2011* 2012 2013

2009 2010 2011* 2012 2013

2009 2010 2011* 2012 2013

2009 2010 2011* 2012 2013

HEAdLINE EARNINGS PER SHARE (cents)(continuing operations)

109,6120,4

132,7

88,4

FEEd COST (Rm)

2 723 2 7622 569 2 508

dIVIdENdS PER SHARE (cents)

68,076,0

84,0

EbITdA (Rm)

573,1677,1

762,6

614,5

CASH GENERATEd bY OPERATIONS (Rm)

594,5525,9

643,3

506,4

HEbITdA MARGIN (%)

8,49,7

8,87,8

RETuRN ON NET ASSETS (%)

17,820,1 20,0

14,1

HEAdLINE EARNINGS ATTRIbuTAbLE TO EquITY HOLdERS OF THE COMPANY (Rm)(continuing operations)

318,8351,5

388,8

267,1

RETuRN ON EquITY (%)

13,2 13,8 13,9

9,3

60,0

* 15 months

18,1 0,5

0,9

669,3

4,6

10 109

3 149

444,3

4,4

2009 2010 2011* 2012 2013

2009 2010 2011* 2012 2013


Five year review

***2013 ***2012 **2011 *2010 *2009R’000 R’000 R’000 R’000 R’000

CONSOLIdATEd STATEMENTS OF FINANCIAL POSITIONAssetsProperty, plant and equipment 3 647 206 1 824 072 1 600 008 1 464 929 1 383 196Intangible assets 5 777 108 317 318 287 444 287 444 287 444Deferred income tax asset 4 327 5 796Investment in joint venture 128 955Current assets 7 794 864 3 054 901 2 880 851 2 663 483 2 502 325

Total assets 17 352 460 5 196 291 4 768 303 4 415 856 4 178 761

Equity and liabilitiesEquity 7 056 209 2 906 359 2 856 333 2 660 182 2 485 910Interest-bearing liabilities – long-term 5 588 248 65 642Deferred income tax liabilities 1 409 273 432 655 372 198 320 322 243 709Retirement benefit obligations 155 350 108 587 102 162 94 670 85 655Trade and other payables – long-term 24 398Current liabilities 3 118 982 1 683 048 1 437 610 1 340 682 1 363 487

Total equity and liabilities 17 352 460 5 196 291 4 768 303 4 415 856 4 178 761

CONSOLIdATEd INCOME STATEMENTSContinuingRevenue 10 108 812 7 855 142 8 621 389 6 952 789 6 811 448

Operating profit before non-recurring items, depreciation and amortisation 444 321 614 510 762 617 677 111 549 268Legal disputes provision release 23 800Operating profit before depreciation and amortisation (EBITDA) 444 321 614 510 762 617 677 111 573 068Depreciation and amortisation (278 294) (200 286) (210 340) (157 425) (149 229)

Operating profit 166 027 414 224 552 277 519 686 423 839Finance costs (153 675) (11 358) (1 808) (900) (5 059)Finance income 53 874 7 370 21 520 14 877 22 875

Profit before tax 66 226 410 236 571 989 533 663 441 655Income tax expense (75 148) (143 469) (188 139) (178 155) (124 203)

(Loss)/profit for the year from continuing operations (8 922) 266 767 383 850 355 508 317 452Profit for the year from discontinued operation 15 311

Profit for the year 6 389 266 767 383 850 355 508 317 452Profit for the year attributable to:Equity holders of the company 26 507 266 767 383 850 355 508 317 452Non-controlling interests (20 118)

* 12 months to 31 March. ** 15 months to 30 June. *** 12 months to 30 June.


SHAREHOLdERS’ RATIOSHeadline earnings per share from continuing operationsHeadline earnings from continuing operations divided by weighted average ordinary shares in issue

dividend coverHeadline earnings per share divided by dividends per share

Net asset value per shareOrdinary shareholders’ equity divided by ordinary shares in issue at year-end

STATEMENT OF FINANCIAL POSITIONTotal assetsNon-current and current assets

Total liabilitiesNon-current and current liabilities

Net assetsTotal assets less total liabilities

INCOME STATEMENTOperating profit (EbIT)Operating profit is earnings before interest and tax

RESuLTS RATIOSHeadline EbITdA marginEarnings before interest, tax, depreciation, amortisation and headline adjustments (before tax) expressed as a percentage of revenue

EbITdA marginEarnings before interest, tax, depreciation and amortisation expressed as a percentage of revenue

Operating profit marginOperating profit expressed as a percentage of revenue

Return on net assetsProfit before tax expressed as a percentage of net assets

Net asset turnRevenue divided by net assets

Return on equityProfit attributable to equity holders of the company expressed as a percentage of average total equity

SHARE INFORMATIONPE ratioMarket share price at year-end divided by headline earnings per share from continuing operations

Definitions, ratios and statistics


***2013 ***2012 **2011 *2010 *2009

SHAREHOLdERS’ RATIOSHeadline earnings per share from continuing operations**** cents 4,6 88,4 132,7 120,4 109,6Dividends per share cents 60,0 84,0 76,0 68,0Dividend cover times 1,5 1,6 1,6 1,6Net asset value per share cents 1 228,8 985,2 971,8 909,3 853,3

STATEMENT OF FINANCIAL POSITIONTotal assets Rm 17 352 5 196 4 768 4 416 4 179Total liabilities Rm 10 296 2 290 1 912 1 756 1 693Net assets Rm 7 056 2 906 2 856 2 660 2 486Cash generated by operations Rm 669 506 643 526 595Capital expenditure Rm 486 481 360 251 293

INCOME STATEMENTRevenue Rm 10 109 7 855 8 621 6 953 6 811Operating profit Rm 166 414 552 520 424Headline earnings from continuing operations Rm 18 267 389 352 319

RESuLTS RATIOSHeadline EBITDA margin % 4,4 7,8 8,8 9,7 8,4Operating profit margin % 1,6 5,3 6,4 7,5 6,2Return on net assets % 0,9 14,1 20,0 20,1 17,8Net asset turn times 1,4 2,7 3,0 2,6 2,7Return on equity % 0,5 9,3 13,9 13,8 13,2

SHARE INFORMATIONNumber of ordinary shares– weighted average in issue**** ’000 391 076 302 193 293 075 291 918 290 904– diluted weighted average in issue**** ’000 392 189 302 876 295 018 293 694 290 904– at year-end***** ’000 574 256 294 992 293 926 292 563 291 320Market share price– at year-end cents 1 550 1 455 1 610 1 590 1 545– highest cents 1 751 1 799 1 875 1 690 1 680– lowest cents 1 249 1 400 1 495 1 390 1 150Number of shares traded ’000 46 036 11 364 25 812 17 072 21 716Value of shares traded Rm 688 174 421 271 308Total transactions ’000 12 340 2 917 3 243 3 500 3 480Number of shares traded as a percentage of issued shares % 8,0 3,9 8,8 5,8 7,5PE ratio 337,0 16,0 12,2 13,3 14,1

* 12 months to 31 March.** 15 months to 30 June.*** 12 months to 30 June.**** Year 2012 figures adjusted for impact of the rights issue.***** Excludes 51 177 217 shares issued to Eagle Creek Investments 620 Proprietary Limited in terms of the BEE scheme. Refer to

note 32 of the annual financial statements for details.

For further details pertaining to shareholder information refer to note 34 on page 114.

Share and shareholder information


MM (Manana) NHLANHLA (61)• Independent non-executive directorBSc, MA (Information Science)

Appointed: May 2005

Directorships: Mion Investments, Batho Bonke Limited, Smit Amandla Marine, Manyoro Limited and Times Media Group.

Manana is a former university lecturer in information science. Over the past 10 years Manana has been involved in building Mion Holdings, an investment company based in KwaZulu-Natal. Manana’s business experience stems from working for Thebe Investments, also serving as non-executive director on Thebe’s various companies. In 2004 Manana was a founding member of the Batho Bonke Consortium and in 2010 a founding member of the Manyoro Consortium in Foskor.

NP (Peter) MAGEZA (58) *# Independent non-executive directorACCA (UK)

Appointed: September 2009

Directorships: Clover Industries Limited, MTN Group Limited, Remgro Limited, Eqstra Holdings Limited and Sappi Limited.

Peter was formerly the Chief Operations Officer of the Absa Group. He is a Chartered Certified Accountant and a Fellow of The Association of Chartered Certified Accountants (ACCA) UK. He has gained extensive experience through holding various executive positions in the audit, financial services and the transport and logistics sectors.

dR M (Munro) GRIESSEL (75) *^ Independent non-executive directorPhD (Animal Science)

Appointed: November 2002

Membership: Chairman of the Technology Committee of the Protein Research Foundation.

Munro has over 40 years’ experience in the animal feed and livestock industries. He is an honorary life member of the Animal Feed Manufacturers Association and the South African Poultry Association.

JJ (Jannie) duRANd (46) Non-executive ChairmanBAcc (Hons), MPhil (Oxon), CA(SA)

Appointed: June 2012

Directorships: Chief Executive Officer of Remgro Limited and currently a director of a number of companies including Capevin Investments Limited, Discovery Holdings Limited, Distell Group Limited, Grindrod Limited, Mediclinic International Limited, RMI Holdings Limited and Unilever SA Holdings Proprietary Limited.

Jannie is a Chartered Accountant and was previously the Chief Investment Officer of Remgro Limited. He was also previously the Financial Director and Chief Executive Officer of VenFin Limited. Prior to his appointment as Chairman, Jannie had served as a non-executive director of RCL since March 2010.

Directorate

HJ (Hein) CARSE (52) Non-executive directorM Ing (US), MBA (UP)

Appointed: February 2013

Directorships: Air Products SA Proprietary Limited (ALT), Sabido Investments Proprietary Limited, Seacom Limited.

Hein joined Rupert International in 1996 and continued to serve the Remgro Group in the capacity of Investment Manager of VenFin Limited until November 2009, when he assumed his current position as an Investment Manager of Remgro Limited. He has gained extensive knowledge through holding positions on various Boards and Committees during his career.

RV (Roy) SMITHER (68) *^# Independent non-executive directorCA(SA)

Appointed: December 2008

Directorship: Nampak Limited.

Membership: First Rand Bank Limited Credit Committee.

Roy has a wealth of corporate experience, having served as a director and CEO of the ICS Group from 1987 to 1998 and as an executive director of Tiger Brands from 1998 to 2006.


Jb (Jb) MAGwAZA (71) # Non-executive directorMA (UK)


Directorships: Chairman of Tongaat-Hulett and Motseng Property Investment Holdings and director of Imbewu Capital Partners, Richards Bay Minerals, NPC-Cimpor and KAP International.

JB served as an industrial relations consultant to Tongaat-Hulett Sugar from 1975 to 1988. Thereafter he held various directorships within the Tongaat Group and was appointed an Executive Director of The Tongaat-Hulett Group Limited in May 1994, a position he held until he retired in August 2003.

PR (Pieter) LOuw (44) Non-executive directorCA(SA)


Directorships: Various wholly owned subsidiaries within the Remgro Group.

Pieter is a Chartered Accountant who qualified with PricewaterhouseCoopers Inc. in Stellenbosch before joining the Remgro Group in 2001. He is currently the Group Financial Manager.

RH (Rob) FIELd (42) ^• Executive directorChief Financial Officer CA(SA)

Appointed: July 2004

Directorships: RCL Foods Limited and its subsidiary companies and McCord Hospital.

Rob is a Chartered Accountant who qualified with Deloitte & Touche in Durban. Prior to joining Rainbow in May 2003 he spent four years as Commercial Director of Robertsons Homecare Proprietary Limited. During 2009 Rob was appointed as a non-executive director of McCord Hospital.

M (Miles) dALLY (56) ^• Executive directorChief Executive OfficerBCom


Directorships: RCL Foods Limited and its subsidiary companies and SC Johnson & Son of South Africa Proprietary Limited.

Miles has 31 years’ experience in the consumer goods industry and served as Group Managing Director of Robertsons Holdings Proprietary Limited from 1995 to 2002. After the unbundling of Robertsons Holdings he accepted the position of Chief Executive Officer at Rainbow Chicken Limited. Miles is currently the non-executive chairman of SC Johnson and has served on their Board since June 2008. Miles has previously served as Co-Chairman of the Consumer Goods Council of South Africa (CGCSA).

GC (Gcina) ZONdI (40) ^• Non-executive directorBCompt (Hons), AGA (SA)

Appointed: July 2008

Directorships: Imbewu Capital Partners, Reebok South Africa, Isegen South Africa, Container Conversions, Icon Construction, Bo Hire and Sales, Autovest Limited, and International Facilities Services (SA).

Gcina is the founding Chief Executive and shareholder of Imbewu Capital Partners. He is a qualified General Accountant and is an associate of the South African Institute of Chartered Accountants. He has more than ten years’ experience in the private equity industry of which six years were spent with Nedbank Capital Private Equity as a Private Equity Specialist. Prior to joining Nedbank, Gcina completed his articles of clerkship at KPMG Durban and has also worked for Hulamin Limited in the finance division for two and a half years prior to joining KPMG.

* Audit Committee (RV Smither – Chairman)

# Remuneration and Nominations Committee (NP Mageza – Chairman)

^ Risk Committee (GC Zondi – Chairman)

• Social and Ethics Committee (GC Zondi – Chairman)


Group executive management

Sb (Stephen) HEATH (57) Group Legal & Corporate Affairs DirectorBA, LLB, Grad Dip Industrial Relations, Attorney of the High Court of South Africa

Appointed: August 2007

Directorships: Rainbow Farms Proprietary Limited, Vector Logistics Proprietary Limited and Life Line Durban.

Stephen spent 18 years with Rainbow as Group Secretary and Legal Advisor prior to his appointment to the Rainbow Farms Proprietary Limited Board. Before joining the Group he gained experience both as a public prosecutor in the Department of Justice and subsequently as an attorney in private practice. He was appointed Human Resource and Legal Director in August 2007. Following the Group restructure in January 2011, Stephen was also appointed to the Board of Vector Logistics Proprietary Limited. With the appointment of Wayne Hoare as Group Human Resource Director in June 2013, Stephen reverted to Group Legal and Corporate Affairs Director.

wS (wayne) HOARE (50) Group HR DirectorBA (Hons)

Appointed: June 2013

Directorships: Rainbow Farms Proprietary Limited and Vector Logistics Proprietary Limited.

Wayne has over 25 years’ experience in human resources and people and organisation management. Prior to joining RCL, he held various positions in HR locally and internationally with Unilever and returned to South Africa in January 2013 after completing a UK based assignment as Senior Vice President of Leadership and Organisation Development.

TJ (Trevor) HARdING (51) Group IT DirectorBCom, BSc (Hons)


Directorships: Rainbow Farms Proprietary Limited and Vector Logistics Proprietary Limited.

Trevor has over 25 years’ experience in information technology and business systems process management. Prior to joining Rainbow, he held the positions of IT Director of Unilever South Africa and Robertsons. Following the Group restructure in January 2011, Trevor was also appointed to the Board of Vector Logistics Proprietary Limited.

Directorate continuedIndependent non-executive directors appointed on 27 August 2013

GM (George) Steyn (54)Independent non-executive directorBA (Law) LLB


Directorships: Du Toit Group Proprietary Limited, Kaap Agri Limited (Chairman), Pepkor Holdings Proprietary Limited

George has extensive experience in the retail sector, having joined the Pepkor Group in 1986 and has served as an Executive Director of Pep Retail Limited and Pepkor Retail Limited from 1991 to 1994 and as Managing Director from 2005 to 2011. George is actively involved in the broader community, and has been an elected Board and Council member of Stellenbosch University since 2010. George is currently the Chairman of Council, and also serves on their Audit Committee.

dTV (derrick) Msibi (44)Independent non-executive directorBBusSc, BCom (Hons), MCom, CA(SA)


Directorships: Managing Director of Investment Solutions Holdings Limited

Derrick has extensive business experience, having worked as a manager at KPMG and subsequently as an Executive Director of Old Mutual Asset Managers and Old Mutual Investment Group (SA) Proprietary Limited. Derrick has also served as a director of Foodcorp Proprietary Limited and Air Liquide Proprietary Limited.


Pd (Paul) CRuICKSHANK (39) Commercial DirectorCA(SA)

Appointed: January 2011

Paul is a Chartered Accountant who qualified with Deloitte & Touche in Durban. He joined Rainbow in 2004 as Group Financial Manager and worked in this position until being appointed to the Board in January 2011.

dS (Scott) PITMAN (51) Managing DirectorBBusSc

Appointed: April 2007

Scott has 20 years’ experience in marketing and sales where he has headed up marketing for Robertsons, Distell and Unilever and most recently as Customer Director at Unilever. Scott was appointed Managing Director of Rainbow in January 2011.

db (bonga) MAVuME (39) Agriculture Director BSc Agric (Hons), MBA (USB)


Bonga has over 10 years’ farm operations and business management experience with the Pioneer Foods Agric and Baking divisions. He joined Rainbow as Supply Chain Manager in February 2007 and was appointed Breed Director in November 2007 and Agriculture Director in April 2010.

Jb (Jason) LIVESEY (38) Customer and Marketing DirectorBCom

Appointed: April 2012

Prior to his appointment, Jason spent 16 years at Unilever, of which 13 years were in the customer division (three of these in Australia), and the last three years in the marketing division. He has a wealth of experience in leading customer initiatives in a multinational FMCG grocery environment, and more recently in heading up the marketing of a division.

wA (wouter) dE wET (47) Processing and Milling DirectorBA (Industrial Psychology)


Wouter has 15 years’ management consulting experience in various industries. He served as consultant to Rainbow from 1997 to 2006, when he was appointed as National Supply Chain Manager. His project experience in Rainbow covers the entire value chain. He was appointed Processing Director in September 2006 and took on the additional responsibility for feed milling during 2009. Wouter is also responsible for the Group Sustainability function.

Rainbow executive management

dS (daryl) MILNE (38) FoodSolutions Director


Daryl joined Rainbow in 2004 after working for Unilever in their Foods division for eight years in various customer and brand development roles. Following several years’ experience in FoodSolutions marketing, Daryl was appointed as FoodSolutions Director on 1 January 2011.


Vector executive management

bM (bruce) MACKENZIE (52) Financial DirectorACMA


Bruce has held various financial positions with the following companies: Blue Bell Wrangler, Divpac (Nampak) and the last 20 years with I&J and Vector Logistics. In 2004, Bruce was appointed as the KwaZulu-Natal Regional Operations Manager. In 2008, Bruce moved back into finance to head up Vector’s finance function and in January 2011 was appointed as Financial Director of Vector.

I (Ilse) GRAVETT-HuLTZER (41) Supply Chain DirectorBSocSci (Hons), ACMA, CGMA


Ilse started her career with Unilever and held various supply chain and commercial positions during her 12 year tenure, including Supply Chain Planning Director and Works Director. She served as Managing Executive for Manufacturing at Famous Brands and then took up the position of Managing Director for Fairfield Dairy in 2009.

PE (Paul) GIbbONS (40) Customer DirectorBCom, MBA


Paul joined Vector in 1998 and has spent time as Financial Accountant, Commercial Manager as well as Supply Chain Manager. In 2010 while Paul was Supply Chain Manager he also took responsibility for the Vector Primary Transport business. Paul was appointed to the Vector Executive in a Supply Chain Capacity before being appointed as Customer Director in December 2011.

Cd (Chris) CREEd (54) Managing DirectorIMM Dip (SA)


Prior to joining Rainbow, Chris held various trade marketing and sales roles within Bristol Myers Squibb and Adcock Ingram and then was responsible for marketing and sales of Capespan products in Europe and served as a director of London based Capespan plc. Chris was appointed Rainbow FoodSolutions Director in June 2005 and Distribution Director in March 2007. In January 2011, Chris resigned from the Rainbow Board to concentrate on his role as Managing Director of Vector.

RS (Rory) MATTHEwS (53) Operations Director BSc (Biochemistry/Genetics), PGD Industrial Relations Management

Appointed: March 2013

Rory has held positions in both Rainbow and Vector. These leadership positions covered human and industrial resource management, Rainbow inbound and outbound supply chain management, processing management and Vector operations management.

S (Shun) PILLAY (46) IT Director BPaed (Sc) (Education)


Shun has more than 20 years’ experience in the retail and logistics industry and served as Chief Information Officer of Vector from 2002 to 2010. Shun was appointed as IT Director of Vector in January 2011.


AJ (Justin) wILLIAMSON (51) Chief Executive Officer CA(SA)


Justin has been with Foodcorp since June 2001. Prior to joining Foodcorp Justin was the Chief Financial Officer and also acted as the Chief Executive Officer of Airports Company South Africa Limited (ACSA) and was actively involved in the privatisation and commercialisation of ACSA. Before that he held senior managerial positions at Chubb Security including Managing Director of Chubb Alarms.

MSG (Mafahle) MARELETSE (54) Managing Director Ready to Eat Division BA, Certificate in Financial analysis


Mafahle has served as the Managing Director of the Ready to Eat Division since January 2008. Prior to this Mafahle held the position of Marketing Director. Before joining Foodcorp, he was Managing Director at Cell C.

OJ (Ockert) JANSE VAN RENSbuRG (40) Chief Financial Officer CA(SA), Higher Diploma in Corporate Law

Appointed: May 2010

Ockert joined Foodcorp in July 2007 in an executive financial role. Ockert has served as the Chief Financial Officer and member of the Foodcorp Board since May 2010. Prior to joining Foodcorp, Ockert held the position of partner and director of PricewaterhouseCoopers.

Foodcorp executive management

Cb (Cliff) SAMPSON (54) Managing Director Consumer Brands Division MBA (Henley), MAP (Wits), Dip. Inst.

Appointed: March 2008

Cliff has been the Managing Director of the Consumer Brands Division since joining Foodcorp in January 2008. Prior to joining Foodcorp he was Managing Director of National Brands (AVI) for eight years.


“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair…” Charles Dickens

The past year for RCL has seen a spring of hope with significant advances made in building its sub-Saharan African branded food and consumer focused strategy through the Foodcorp and Zam Chick acquisitions, and a winter of despair reflected in a torrid tale of high commodity input prices and imports flooding the local poultry market decimating Rainbow’s margins.

PERFORMANCERCL’s revenue increase of 28,7% to R10,1 billion is largely due to the inclusion of two months of Foodcorp’s results. The general economic environment remains severely challenged with labour unrest, high unemployment and a depreciating currency adding further pressure to an already stretched consumer.

RCL is committed to building a diversified food business of scale in sub-Saharan Africa with compelling brands that deliver to consumer and customer needs. The Zam Chick transaction is an important entry with a credible partner into Zambia and RCL was pleased to announce a further investment in a new hatchery operation (Zamhatch) shortly after the initial deal was concluded. Competition Commission approval was obtained on 1 May 2013 for an effective 64,2% shareholding in Foodcorp, which is South Africa’s third largest food producer and brings a number of leading brands into the RCL stable. A further 23,9% of Foodcorp was purchased post year-end to bring the effective holding to 88,1%. RCL will continue to engage with Foodcorp management to position the combined businesses to take advantage of exciting growth opportunities.

CORPORATE GOVERNANCERCL complies fully with the letter and spirit of good corporate governance. The skills and diversity of the Board are well matched to RCL’s needs and are reflected in the allocation of responsibilities to members of the various sub-committees.

The Board and individual directors of RCL strive to ensure that the Group is managed in an efficient, accountable, responsible and moral manner and to this end, endorsed its compliance with King III.

Chairman’s report

RCL REMAINS COMMITTED TO ITS STRATEGIC FOCUS OF ADDING VALUE THROUGH ITS CONSUMER AND SERVICE BRANDS

SuSTAINAbILITYThe Group remains committed to the three pillars of sustainability covering economic, social and environmental practices. The Group believes that commitment to stakeholders is fulfilled only through enduring, productive relationships with other stakeholders and by establishing a reputation as a trusted Group in touch with the evolving needs and aspirations of our society. As a consequence, time, effort and money are invested in responding to the needs of all current and prospective stakeholders. This integrated annual report reflects further progress made this year towards integrated sustainability reporting.

RIGHTS ISSuE ANd dIVIdENd RCL embarked on a R3,9 billion rights offer process in January 2013 to ensure that the consolidated statement of financial position was appropriate given the significant levels of debt added via the Foodcorp transaction, as well as to fund other strategic opportunities.

In view of Rainbow’s poor trading results and the uncertainties relating to the poultry industry, the Board has resolved not to declare a dividend for the 2013 year (2012: final dividend of 32,0 cents and total dividend of 60,0 cents).

PROSPECTSThe poor state of the global and local economy means a sustainable improvement in consumer sentiment and spending is unlikely in the near future. The poultry industry, via its representative body, the South African Poultry Association (SAPA), has initiated dialogue with the highest levels of government around anti-dumping duty protection which is key to a restoration of normal trading conditions.

Despite these factors, RCL continues to explore other growth opportunities that meet the Group’s long-term strategic aspirations.

ACKNOwLEdGEMENTSRCL has truly experienced a year of two seasons and I would like to commend management for their ongoing resolve and to thank the Board for their support.

JJ durandNon-executive Chairman


Chief Executive’s review

NAME CHANGEAt a general meeting of shareholders on 2 August 2013 a special resolution was approved to change the name of the company from “Rainbow Chicken Limited” to “RCL Foods Limited”. The reason for the change is the Board believes that, post completion of the acquisition of a controlling interest in Foodcorp, the new name will better reflect the Group’s strategic vision as a consumer focused food business that adds value for consumers and customers through its range of market leading brands.

LONGER TERM GROuP STRATEGYThe Group was restructured in January 2011 into two operating units, namely Rainbow (chicken) and Vector (logistics), each with its own board and managing director responsible for the day-to-day operations, thus allowing the Chief Executive Officer and Chief Financial Officer to dedicate their focus to strategic growth opportunities for the Group. The acquisition of a controlling stake in Foodcorp and the joint venture with Zambeef Products Plc (Zambeef) are evidence of RCL’s strategic intent of becoming a diversified food business of scale in sub-Saharan Africa.

Foodcorp is a leading South African manufacturer of quality branded and private label food products. It manufactures, markets and distributes a diverse range of food products from basic essentials to top-end desserts and convenience meals.

The acquisition of Foodcorp will enable RCL to:

• Broadentherangeofrespectedbrandsandcategoriesin itsportfolio to counter the cyclical nature of the poultry industry

• Combine strengths in consumer insight between theorganisations to support product innovation and development

• Becomeafoodplayerwithsignificantscaletocompetemoreeffectively

• Open up further opportunities to expand into sub-SaharanAfrica; and

• LeverageVector’sexpertise.

On 4 February 2013 RCL announced that it had reached agreement with Zambeef of Zambia, for the purchase of 49% of Zambeef’s shareholding in Zam Chick Limited (Zam Chick) for US$14,25 million in cash. Zam Chick manages and operates Zambeef’s broiler business, including the broiler houses, chicken abattoir and processing plant.

Zambeef is a major player in the Zambian agri-business market. It has an established track record in operating in African markets with operations in Zambia, Ghana and Nigeria. This is an exciting opportunity for both Zambeef and RCL to work together in order to take the poultry industry in Zambia to a new level. Zambeef will continue to manage the day-to-day operations of Zam Chick and RCL will provide technical assistance. A further

investment was announced on 30 May 2013 whereby Zambeef and RCL will establish a broiler parent stock rearing, laying and hatching operation, Zamhatch Limited, for the supply of day old chicks. RCL and Zambeef will own 51% and 49% respectively of the new Zamhatch business, which is expected to become operational over the next two to three years. Both operations will be equity accounted as joint venture operations with the first 12 months’ financial results to March 2014 to be included in RCL’s 2014 financial results.

The strategic framework for each company is reflected in their “strategy houses” presented in their review sections. This represents the output of an important process within each company where the company’s leadership participates in defining the strategy and committing to specific actions to achieve the agreed performance targets. A similar process is followed at Foodcorp, the output of which will be shared in future.

Whilst we remain cautious about investing in these difficult current market conditions, strategy demands a longer term mind-set and we recognise investment is an imperative to realise RCL’s growth strategy. There is significant uncertainty within the local poultry industry at present that demands that Rainbow reviews its investment plans and overall business model. The output of this review and any actions deemed appropriate will be decided in the coming months.

RESuLTS OVERVIEwRCL’s 2013 headline EBITDA of R446,2 million decreased by 27,4% over the prior year, but would have decreased by 50,2% without the inclusion of two months of Foodcorp’s results. Headline earnings from continuing operations of R18,1 million decreased by 93,2% over the prior year largely as a result of the poor Rainbow results and the impact of the exchange rate movement on the Foodcorp Eurobond from 1 May to 30 June. Non-deductible transaction costs of R45,6 million have also been included which largely accounts for the effective tax rate of 113,5% along with certain non-deductible funding costs (R83,0 million) within the Foodcorp holding structure.

Rainbow’s results are very poor, driven by the Individually Quick Frozen (IQF) range having sold below cost for most of the financial year. The South African Poultry Association (SAPA) has engaged extensively with government and the International Trade Administration Commission (ITAC) to find an acceptable solution to imports and dumping of poultry products that promotes fair trade whilst affording protection to local jobs. These conditions have merely served to reinforce RCL’s strategic focus on brands.

The R3,9 billion rights offer conducted in January 2013 helped to offset the significant debt levels inherited via the Foodcorp transaction as well as fund the Foodcorp and Zam Chick transactions. The earnings per share calculations have been restated for the prior year to take into account the impact of the rights offer, albeit an immaterial adjustment.

AS PART OF RCL FOODS’ STRATEGY TO FOCUS ON BUILDING A DIVERSIFIED FOOD BUSINESS wITH COMPELLING CONSUMER BRANDS IN SUB-SAHARAN AFRICA, AN EFFECTIVE 88,1% OF FOODCORp WAS ACQUIRED


SEGMENTAL REPORTINGThe Group is viewed as having three operating segments, namely Rainbow, Vector and Foodcorp. The Zambian joint venture results will be included from 2014 as their financial year-end is March and it is not practicable to include the results to 30 June. As the effective date of control was 1 April 2013, RCL will not equity account their results in 2013.

2013 2012R’000 R’000

Revenue 10 108 812 7 855 142

Rainbow 8 143 587 7 196 632Vector 1 476 888 1 339 580Foodcorp 1 217 505Sales between segments:Vector to Rainbow (725 790) (681 070)Vector to Foodcorp (3 378)

Operating (loss)/profit: Rainbow (3 680) 245 487 Vector 143 303 168 737 Foodcorp 99 010Unallocated Group costs (72 606)

Operating profit 166 027 414 224 Finance costs (153 675) (11 358)Finance income 53 874 7 370

Profit before tax 66 226 410 236

Rainbow’s negative operating margin is disappointing but explained by poor retail pricing due to an over supplied local market and high feed costs. Despite a 10,3% increase in revenue, Vector’s operating profit declined by 15,1%. This impact was

largely attributable to Vector’s fortunes following those of its key principals (volume pressure and their pursuit of cheaper routes to market in the form of direct deliveries) as well as investment in new capacity not being fully utilised. The distribution industry’s reference for operating margin is normally expressed against gross revenue as opposed to distribution revenue stated above, in which case Vector’s margin computes to 1,2% (2012: 1,5%). Foodcorp’s operating margin for the two months was 8,1%. The unallocated Group costs of R72,6 million is largely due to transaction costs of R45,6 million and other listed company expenses.

RAINbOw REVIEw OF OPERATIONS Rainbow’s resultsIt has been an extremely difficult year for the poultry industry and Rainbow has not been immune to the industry’s challenges. High import volumes along with the dumping of poultry products, consumer pressure and record feed costs have all contributed to a difficult trading environment.

An acceptable performance in the Quick Service Restaurants (QSRs), foodservice sector and added value in retail was negated by mainstream chicken, notably IQF, which sold at a considerable loss for most of the year. Despite an overall 5,1% volume growth in tons per day and 6,3% average realisation increase over the comparable period, Rainbow posted a R3,7 million loss for the year as a result of not being able to recover the 19,2% rand per ton increase in feed cost. Feed cost now comprises 55,0% of the total processed cost of the bird.

IQF pricing has at certain times during this financial year traded at prices lower than those of 2011, despite above inflation increases in key cost lines like feed, fuel, electricity and water. A restoration of normal trading conditions is required for the poultry industry in South Africa to survive.

Chief Executive’s review continued

F15 strategy

Strategy into action – current year

we believe...

How? by restlessly driving…• Consumers’ and customers’ needs first • Better brand propositions which reflect what we do • Our whole business to see and do things differently

Vision

Change the game

Detailed strategic goals set for each business unit

The single reason we

exist

Our partners in reaching our consumers

Excellence gives us fuel for growth

Investing responsibly for growth

The right team

5brands

5 thrusts

Aggressive added value growth

Grow the profitability of mainstream chicken

Live sustainability

Step change the business

Create space for growth


2013

Rainbow’s results were further negatively impacted by strikes and municipal breakdowns in Rustenburg, costing the business R33,0 million. All other costs have been managed to an acceptable increase of 7,9% over the prior year.

Management has embarked on a number of initiatives to mitigate the impacts of the poor trading conditions and losses being incurred from IQF. These initiatives include the conversion of broiler house heating from gas to coal which resulted in a significant cost saving, an investment in freezing capacity to allow greater production mix flexibility, a restructure process across all functions within the business, and focus on the customer mix to optimise profitability.

Impairment assessmentIn view of the losses being incurred in Rainbow, and in compliance with the requirements of IAS 36 (Impairment of assets), the Boards of Rainbow and RCL have considered the need for an impairment of assets. Based on the outcome of the discounted cash flow model and the need to await the outcome of the application for anti-dumping protection, the Boards have decided that it would be inappropriate to impair poultry assets at this point. It must, however, be stated that if there is not a notable improvement in operating margins within the next 12 months, then an impairment of assets will become necessary.

Poultry industryFrom a macro-economic perspective the global economic slowdown experienced post the 2008 credit crisis continues to impact negatively on consumer spending. The local poultry industry is a significant component of the South African agricultural sector, and poultry remains the most affordable protein. The local chicken market is estimated to have grown by 7% to R29,8 billion over the past year, a combination of a 4% volume growth and a 3% realisation increase.

Source: SARS (July 2013)

Argentina 5%Brazil 20%

Argentina 4%

Canada 2%

Canada 10%

Ireland 4%

Other 7%

Brazil 29%

EU 74%

bONE IN CHICKEN IMPORTS

2011

EU 45%

Imports maintaining their record levels and dumping of productImports of chicken (excluding Mechanically Deboned Meat (MDM)) for the financial year 2013 was 242 128 tons which is 10 000 tons per month above the long-term average. The graph overleaf depicts chicken import levels over the past nine years.

The country of origin of imports has changed over the last few years with a significant increase being experienced from European countries which enjoy a free trade agreement with South Africa. The pie charts below depict poultry imports (excluded MDM) from country of origin for the 12 months to June 2013 versus 2011.

Consequent over-supply has led to low IQF pricing despite the record high input costs. A decision regarding a general tariff application is expected in the near future, whilst a ruling on the anti-dumping application against certain European countries is expected in early 2014.

Escalating feed raw material costsDroughts in Argentina and the USA had a significant impact on international maize and soya prices, with extremely low stock levels in the USA heightening price volatility. These high prices are expected to continue until the latter half of this calendar year when the USA crop harvesting begins. The USA is expecting a large crop with near perfect weather conditions thus far. Forward market prices are reflecting an inverse from December 2013 onwards, confirming the market expectations of this crop.

Local maize prices continued to reflect significant volatility over the reporting period and have remained high relative to historical levels. The period commenced with a market price of R2 180/ton, which peaked at R2 731/ton early in the period and thereafter decreased to close on 30 June 2013 at R2 220/ton. The average market price for maize for this period was R2 361/ton compared to the average market price of R2 233/ton over the previous 12-month period, an increase of 5%.


The first half of the financial year saw exchange rates reasonably stable, however, the rand depreciated by 18,7% versus the dollar in the latter part of the year, closing at R9,95.

There was significant volatility in the international Chicago Board of Trade (CBOT) price of soyameal which commenced the financial year at $427 per short ton, increasing to a record high of $548 per short ton in August and then decreasing to $480 per short ton at the end of June 2013. The average market price for soyameal for this period was $455 per short ton compared to the average market price of $351 per short ton over the previous 12-month period, an increase of 30%. As with maize, these levels are significantly higher than historical averages.

Injection cap proposed by governmentRainbow continues to play an active role in working with government and the industry in order to adopt a responsible approach to the injection of poultry meat.

In December 2012 the Department of Agriculture, Forestry and Fisheries (DAFF) published its intention to cap injection at 8% in South Africa. Rainbow welcomes the decision to cap injection at appropriate levels, however, it believes that 8% is too low to deliver a quality succulent product as demanded by consumers and to restore the natural loss of fluids from defrosting. Rainbow has engaged with DAFF and provided input into scientific benchmarks for the appropriate levels of brine injection and consumer protection. All poultry stakeholders submitted their proposals to DAFF on 18 January 2013 with proposed legislation expected to be announced within the next six months.

Chicken brands Rainbow’s range of products is classified into either “added value” or “mainstream” chicken. Demand for, and consequently profitability of, added value categories is more consistent. These categories include the foodservice channel and key product ranges within the retail sector. The foodservice channel is characterised by a strong focus on investment in innovation technologies and customised products, which ensures a sustainable partnership between Rainbow and its customers. The Rainbow FoodSolutions brand which services the foodservice channel (restaurant and catering), focuses on specialist product categories that fulfil

the above criteria. Key added value product ranges within retail include chilled processed meats, fully cooked, freezer to fryer and speciality raw chicken packs. All products which are not classified as added value fall into mainstream chicken and include fresh and frozen primary, secondary and tertiary categories.

Rainbow’s mainstream chicken pricing, similar to the balance of the market, has been negatively impacted by the imbalance in supply and demand in the South African poultry market. Significantly higher feed costs over the past few years have not been recovered in chicken realisations, and consequently margins of mainstream chicken products remain under severe pressure.

Innovation of Rainbow added value in retail has added to the portfolio and landed well with consumers. Rainbow is now also focused on innovation opportunities in mainstream chicken and launched Mama’s into retail as an added value alternative to IQF. Mama’s is a smaller portion fixed quantity pack size that assures mothers of adequate portions to feed their entire families. Added value retail products are more resilient than mainstream products but have also failed to fully recover the increase in input costs.

Supply chainThe financial year has been characterised by above inflation cost increases in electricity, gas, coal and diesel. Rainbow’s supply chain, through improved efficiencies and capital investment, has made good progress in limiting its overall c/kg cost increase (excluding feed) to 7,9%.

In the current year investment in the supply chain has been limited to capex required to maintain operations. No volume enhancing capex has been approved this year. The capital expenditure in freezing capacity at the processing plants in the prior year has enabled greater plant flexibility and mix improvement. Overall the key performance indicators of mortality, average daily gain, feed conversion ratio and yield have been maintained at the improved levels achieved in the prior year.

The Rustenburg plant was significantly impacted by a wildcat strike in November 2012, a further eight-week strike over wage increases from April to June 2013 and water and electricity supply issues. The cost impact of these issues is estimated at R33,0 million.


TOTAL CHICKEN IMPORTS (ExCLudING MdM) (TONS/MONTH)

35 000

30 000

25 000

20 000

15 000

10 000

5 000

0Jul 04 Dec 04 Jul 05 Dec 05 Jul 06 Dec 06 Jul 07 Dec 07 Jul 08 Dec 08 Jul 09 Dec 09 Jul 10 Dec 10 Jul 11 Dec 11 Jul 12 Dec 12 Jul 13

Source: SAPA


Vector footprint and servicesVector has a national footprint of 14 distribution centres and 4 plant-based cold stores located in most of the major cities in South Africa. It offers a fully integrated outbound frozen supply chain, from manufacturer to customer. Vector offers four integrated services to match the needs of each client’s specific requirements covering warehousing, distribution, sales solutions and supply chain intelligence. Through the integration of these services, customers and principals are able to leverage supply chain efficiencies and value from their partnership with Vector.

Market conditionsDepressed economic conditions and weak consumer demand, particularly in the retail sector, have had a negative impact on Vector’s performance during the 2013 financial year. Most of Vector’s principals are experiencing sluggish and in some cases negative growth. The take-on of two new principals, Namib Poultry and Mello Pies, as well as growth in the Pick n Pay basket, compensated for some of the revenue declines from existing business. Added to these pressures, the logistics sector continues to be challenged by increasing operating costs driven by high fuel and electricity prices which have not been fully recovered in Vector’s margin. Vector is proud to have been nominated Burger King’s distribution partner, with their first store having opened in May 2013.

Review of operations and resultsVector’s operating profit declined by 15,1% from R168,7 million in 2012 to R143,3 million in 2013. Revenue grew by 10,2%, reaching R1,5 billion for the year under review, whilst operating costs grew 13,4% due to investment in new capacity. Despite a good start to the year, Vector’s results were challenged in the second half due to a decline in volumes across most of its principals which saw revenue growth slow to 3,9% over the prior year in the Principal Secondary Distribution business. This was

largely caused by depressed economic conditions, the impact of imports on Vector’s business and a shift by principals to a cheaper distribution route through direct deliveries, resulting in an under recovery of fixed costs in the network. Significant investment in capacity was committed at the beginning of the 2013 financial year as part of Vector’s growth strategy when an additional 17 000 pallet positions of cold storage space was introduced at Midrand. This facilitated the consolidation of all the Pick n Pay inland volumes from six different sites to one location as well as growth in the Pick n Pay basket. This new facility also enabled the take-on of incremental bulk storage volumes – notably Nature’s Choice and Makro, which contributed towards a 28,6% revenue growth in the bulk storage business. The take-on of new business is phased and it is not always possible to fill capacity immediately, which impacted on Vector’s operating profit in 2013 due to an under recovery of fixed costs. However, it positions the business well for future growth. Despite these challenges, all other business models performed well, including the plant-based cold storage business where revenue grew by 22,7% as a result of a 5 200 pallet expansion to the cold storage facility based at the Rainbow Rustenburg processing plant.

Costs were well managed during the period under review through a number of initiatives to improve efficiencies, sustainability awareness, stock loss reduction and general cost containment. Many of the benefits of the “Space for Growth” project initiated during 2012, which covered a full review of Vector’s organisation design, network evaluation and assessment of various procurement opportunities, have started coming to fruition with further opportunities to be pursued during the 2014 financial year. The implementation of the second phase of the Adexa demand planning tool is on track and it has contributed to a reduction in inventories and increased service levels in 2013.

VECTOR REVIEw OF OPERATIONS

F15 strategy

Strategy into action - current year

we believe...

Vision

Vector will be Africa’s chosen multi-temperature route to market solution.

Vector delivers Supply Chain Excellence through innovative customised solutions. Key to our success is our frozen expertise, integrated network and information systems and our people.

Detailed strategic goals set for each business unit

Our partners in reaching our consumers

Excellence gives us fuel for growth

Investing responsibly for growth

The right team

4thrusts

Deliver route to market excellence

Leverage services for value

Step change the business

Live sustainability

4 integrated services

WAREHOUSING

SALES SOLUTIONS SUPPLY CHAIN INTELLIGENCE

DISTRIBUTION


FOOdCORP REVIEw OF OPERATIONS backgroundFoodcorp is a leading South African manufacturer of quality branded and private label food products. Foodcorp manufactures, markets and distributes a diversified portfolio of food products ranging from basic essentials to top-end desserts and convenience meals. Many of the products are associated with South African tradition and heritage, and are therefore among the leading and best recognised brands in South Africa. The continued success of the brands reflects the strategic decision to focus on value-added branded business and product innovation and reduce dependence on commodity price movements.

The product range includes peanut butter, pet food, mayonnaise, edible oils, breads and bakery products and wheat flour, as well as certain traditional South African products such as rusks, sorghum meal, mageu and white maize meal. Foodcorp also manufactures

bakingThe Baking division produces a range of bread loaves and bread rolls from seven sites located in the Gauteng, Limpopo, North West and Mpumalanga provinces. Its bakery products are sold under the Sunbake brand. Certain of the bakeries produce a range of private label products, including speciality loaves and rolls for Woolworths.

PieThe Pie division with its primary manufacturing facility in Krugersdorp and a second facility in Centurion, continues to produce superior quality meat-based pies. It remains the market leader with extensive penetration in all trade channels. 62% of the business is through the retail sector, wholesale channel and general trade and 38% through the forecourt channel. Pies are produced in three formats: frozen unbaked, frozen baked and chilled baked.

beverageThe Beverage division produces a maize-based health drink under the Mageu Number 1, Phuzimpilo and Mnandi brand names. Mageu Number 1 has remained the market leader of mageu in South Africa for more than 20 years.

SpecialityThe Speciality division produces a range of superior convenience food and baked products predominantly for South Africa’s premier food retailer, Woolworths. This product range includes certain biltong products, sandwiches, muffins, dairy desserts, salads, party foods, artisan breads, cakes and pastries.


GroceryThe Grocery division produces a diverse portfolio of strong, highly recognised brands with leading market positions in South Africa. The brands include Nola mayonnaise, Yum Yum peanut butter, Ouma rusks, Bobtail and various other branded pet food and Monati sorghum. In addition, the division produces private label products for all the leading South African retailers. Continuous product development and packaging innovation ensure that the brands remain at the forefront of the market and competitive both in product quality, packaging design and presentation. Focus on manufacturing excellence ensures that products are produced and distributed at low cost guaranteeing consumer affordability and accessibility.

MillingThe Milling division is a wheat and maize operation with its mill situated in Pretoria and is the largest single wheat milling complex in South Africa. The business serves a diverse customer base through two focused customer teams: one targets the consumer channels and the other industrial customers consisting of larger bakeries, food processors and in-store bakeries.

The division produces a range of flours for the consumer market under the Supreme brand as well as a range of maize meal in varying grades mainly under the Tafelberg and Safari brands. The latter is sold through retail and wholesale channels as well as in export markets. A focused range of bulk flours and specialised premixes is available through the industrial division which services the diverse needs of industrial bakers, food processors and in-store bakeries. The division supplies most of the flour within the Foodcorp Group as well as to a selected customer base including large multinational food companies, independent bakeries, as well as corporate and independent in-store bakeries.

and sells a wide range of quality convenience ready-to-eat products including pies, a range of products for Woolworths, the premium food retailer in South Africa targeting the high income segment, and a range of speciality breads and cakes for Woolworths and other retailers.

Foodcorp positions its products to appeal to the South African mass consumer market, which represents approximately 70% of South Africa’s total population and supplies most of the products nationally to major retail and wholesale outlets. These include Shoprite-Checkers, Woolworths, Pick n Pay, Spar and Walmart-Massmart, independent retailers, forecourts and the foodservice industry. A limited number of products are exported, principally to the rest of Africa and the Middle East.

Foodcorp is managed under six production units, being the Grocery, Milling, Baking, Pie, Beverage and Speciality divisions.


Innovation centreFoodcorp has a strong focus on product development and innovation which is supported by Foodcorp’s state of the art innovation centre in Cape Town, known as The 7th Floor, aimed at positioning Foodcorp as the most innovative food company in South Africa. The 7th Floor is unique in South Africa and was initiated to improve South Africa’s food offerings for the benefit of the whole country.

disposal of Fishing division The Foodcorp Fishing division operates in the pelagic, hake and lobster sectors and has government granted fishing quotas in each of the three sectors. Foodcorp entered into a sale agreement to dispose of this division and it is thus presented as a discontinued operation. Completion of the transaction is subject to the fulfilment of certain conditions, including approval by the South African competition authorities.

Operational results

Foodcorp had a reasonable trading performance for the two-month period, amidst tough trading conditions and constrained consumer spending. Net revenue from continuing operations amounted to R1,2 billion and operating profit R99,0 million. The net interest expense was R159,7 million but included a negative net accounting adjustment to the fair value of the euro denominated debt amounting to R70,9 million. Foreign exchange rate movements on foreign debt are accounted for as part of the cost of funding on the interest line in the income statement.

INFORMATION TECHNOLOGY (IT)During this reporting period, RCL has optimised and extended the SAP Enterprise Resource Planning systems within the business following the July 2012 implementation. The replacement process for the remaining legacy systems has continued. The implementation of SAP has significantly enhanced the visibility and planning of Rainbow’s supply chain and operational costs across the business. The delivery of a comprehensive consignment stock management solution between Rainbow and Vector at the end of June 2013 will greatly improve the management of all stock related transactions. Further initiatives have included enhancements within the Feed, Agriculture and Processing areas through the use of specialised global poultry-based applications. Extended focus has also been placed on the optimisation of the outbound supply chain through the Vector system solutions. The implementation of global best practice processes and shared services will enable the delivery of significant business benefits into the future. The leveraging of the Group’s IT systems and optimised business processes remains a key enabler within the business.

SuSTAINAbILITYThe Group recognises that there is a need to conduct business in a responsible and ethical manner that contributes to the long-term sustainability of the communities and environment in which the business operates. The Group places high priority on sustainable business practices, ensuring that they are incorporated into the business’s culture, leadership, governance and strategy.

The Group further recognises that true sustainability cannot succeed in isolation, and as such the sustainability strategy has been integrated into the overall business strategy as one of the strategic drivers of the business. In line with the Group’s “Strategy into Action” (SIA) process, the sustainability strategy has been converted into a number of strategic goals, each with measureable key performance indicators and targets. This integrated management approach is fundamental to the sustainability focus and ensures strong alignment between the sustainability strategy and the day-to-day business activities. The Risk Committee’s oversight of the sustainability initiatives provides the business with the ideal platform to identify both risks and opportunities on a continual basis.

dIRECTORATEMr Chris van den Heever resigned as a non-executive director from the Board with effect from 1 February 2013 and is currently seconded to RCL from Remgro in order to focus on projects aligned to the Group’s strategic growth plans. Mr Hein Carse, who like Chris is an Investment Executive at Remgro, was appointed as a non-executive director of the Board with effect from 19 February 2013. Mr Derrick Msibi and Mr George Steyn were also appointed as non-executive directors with effect from 27 August 2013.

CONCLuSIONRCL is well positioned after the Zam Chick and Foodcorp transactions to grow aggressively into sub-Saharan Africa. RCL can continue to meet the challenges and embrace the opportunities of the future by virtue of the solid foundations that have been laid across the entire organisation.

I would like to express my appreciation to our loyal employees for their valued commitment to the business, especially considering the difficult market conditions experienced over the past few years. My appreciation also extends to fellow Board members, the leadership team, valued customers and shareholders for their ongoing support.

M dally

Chief Executive Officer


Financial review

2013 2012 %

FINANCIAL HIGHLIGHTSRevenue Rm 10 108,8 7 855,1 28,7Headline EBITDA Rm 446,2 614,9 (27,4)Headline EBITDA margin % 4,4 7,8 (3,4)Headline EBIT Rm 167,9 414,7 (59.5)Headline EBIT margin % 1,7 5,3 (3,6)Net finance cost Rm 99,8 4,0 NMEffective tax rate % 113,5 35,0 (78,5) Headline earnings – continuing operations Rm 18,1 267,1 (93,2)Headline earnings per share – continuing operations cents 4,6 88,4 (94,8)Fully diluted headline earnings per share – continuing operations cents 4,6 88,2 (94,8)Capital expenditure Rm 485,9 480,9 (1,1) Return on equity % 0,5 9,3 (8,8)Cash generated by operations Rm 669,3 506,4 32,2Dividends per share cents 60,0 (100,0)

OVERVIEw ANd MARKET CONdITIONSThe year under review has been a tumultuous one characterised by uncertainty and volatility. Evidence that the global economy is on track for a sustained recovery proved elusive. Although crude oil prices declined sharply in early calendar 2013 on the back of a lacklustre global economy, poor demand and higher stocks, lingering geo-political concerns played their role in supporting prices.

South Africa posted a 2012 GDP growth rate of 2,5%, a figure that fell below aspirations as strife in the mining sector, especially in the latter part of calendar 2012, hurt economic growth and rattled foreign investors. The threat of protracted and violent industrial action continues to loom large. South Africa’s economic growth for 2013 is forecast at a meagre 1,8%, a growth number that can’t be expected to help South Africa’s worsening unemployment figure of 25,6%.

Over the course of the last 12 months the rand weakened, firstly in response to the Marikana incident and then again sharply in the second quarter of calendar 2013 on concerns that the US Federal Reserve was to curtail its bond buying programme. The weaker rand has made imports more expensive, resulting in an already stressed consumer having to manage record fuel prices. Inflation has remained within the Reserve Bank’s target band of 3% and 6%, though the full effect of higher fuel prices is expected to push the consumer price index through the 6% level in the months ahead. Interest rates have remained at record lows over the period. The Monetary Policy Committee finds itself in the unfortunate position of having little room to manoeuvre, as further rate cuts to stimulate growth risk pushing inflation through the 6% level, hurting economically depressed households further.

Exchange rate volatility has continued during the current year. The R/US$ exchange rate increased from R8,38 at the beginning of the current financial year to R9,95 at the end of June 2013, an 18,7% increase. The average year-on-year increase was 15%. As Rainbow’s entire soya requirements are imported, the foreign exchange exposure is significant.

The acquisition of Foodcorp has meant that the Group now has significant exposure to the euro through Foodcorp’s Senior Secured Notes. Partial hedges are in place, however, the rand depreciated against the euro in the two months since 1 May 2013 by 7,9% from 11,89 to 12,83 at year-end.

The following graph depicts the R/US$ exchange rate over the past four financial years, with the percentage movements reflecting the average period-on-period changes.

R/uS$ ExCHANGE RATE

FY2010 FY2011 FY2012 FY2013

11

10

9

8

7

6

-12%-9%

+9%

+15%


Soft commodity procurementDuring the period all commodities experienced significant volatility and generally increasing price levels. Over the past decade the pressure on global grain stocks has risen as a consequence of the switch to biofuels in the US and rising demand for food from the growing middle class in developing countries.

The drought in the USA last year caused grain and oilseed prices to rise sharply. Higher food prices are part of a structural change in the global economy. As expected, there was some rebalancing as farmers planted more maize crops to take advantage of higher prices. Maize and soya are the key ingredients in Rainbow’s chicken feed, and wheat in Foodcorp’s milling and baking operations, and are therefore covered below.

MaizeThe consequences of the drought in the USA from June 2012 onwards resulted in the record high price for corn of $8,43 per bushel ($332 per ton) in August 2012 on CBOT. Although volatility remained high, the corn price declined during the reporting period to end at $6,79 per bushel ($267 per ton).

The high corn price encouraged producers in the USA to increase corn planting during the USA spring in 2013, resulting in the highest area planted to corn in decades.

Other areas in the world (South America and the former Soviet Union states) also increased plantings of corn. The impact of the expected replenishment of corn stock will only be seen after the current reporting period.

South African maize producers increased maize plantings during the spring of 2012 to 2,78 million hectares, up from the previous season’s figure of 2,69 million hectares. The maize crop experienced an excellent start during the early part of the season, giving rise to expectations of a crop size in the order of 13 million tons.

Production conditions remained excellent in the eastern part of the South African production area, but a drought in the western part of the Free State and the North West Province reduced the expected crop size to the latest official figure of 11,39 million tons. This is down from the previous season’s crop size of 12,1 million tons.

Despite the tight stock situation, maize exports continued during the reporting period. The price of yellow maize peaked at R2 830/ton at the beginning of August 2012 and then subsequently declined to R2 220 at the end of June 2013.

The average market price for maize over the reporting period was R2 368/ton, which compares with the average market price of R2 246/ton for the previous period, an average increase of 5%.

The following graph depicts the nearby SAFEX yellow maize price over the past four financial years, with the percentage movements reflecting the average period-on-period changes.

R/TON SAFEx YELLOw MAIZE PRICE

FY2010 FY2011 FY2012 FY2013

3 000

2 500

2 000

1 500

1 000

500

0

-24%

+4%

+59%+5%

SoyaThe price of soybean meal as traded on CBOT commenced the financial year at a price of $427 per short ton, increasing to a record high of $548 per short ton in August 2012 and then decreasing to $480 per short ton at the end of June 2013. The average market price for soybean meal for this period was $455 per short ton compared to the average market price of $351 per short ton over the previous 12-month period, an increase of 30%. The significant volatility in the international price of soybean meal was driven by the severe drought in the USA in 2012. More recently a record South American crop and the prospect of a record USA crop later in the year could see CBOT prices return to the low $300 range.

The following graph depicts the CBOT soybean US$ price over the past four prior financial years, with the percentage movements reflecting the average period-on-period changes.

uS$/SHORT TON CbOT SOYbEAN PRICE

FY2010 FY2011 FY2012 FY2013

600

500

400

300

200

100

0

+1%+7%

+30%

+1%

R/TON SAFEx wHEAT PRICE

FY2010 FY2011 FY2012 FY2013

4 000

3 500

3 000

2 500

2 000

1 500

1 000

500

0

-22%

+21% +3%

+22%

wheat Local wheat prices have been at high levels throughout the reporting period. The average market price for local wheat for this period was R3 488/ton compared to the average market price of R2 849/ton over the previous 12-month period, an increase of 22%.

South Africa is a net importer of wheat and wheat prices are therefore correlated to international wheat prices and the exchange rate.

The following graph depicts the SAFEX wheat price over the past four financial years, with the percentage movements reflecting the average period-on-period changes.


INCOME STATEMENTRevenue increased by 28,7% for the year ended 30 June 2013 largely due to the inclusion of Foodcorp’s results for two months.

Despite the increase in revenue and inclusion of the Foodcorp results for two months, headline EBITDA decreased by 27,4% reflecting the current difficult trading environment in the South African economy. Rainbow has experienced a difficult year with high import volumes and record feed input costs decimating margins. Whilst Rainbow’s added value products have delivered an acceptable performance, IQF products have sold below cost for most of the financial year. Vector’s operating profit decreased by 15,1% to R143,3 million due to investment in additional capacity and a slowdown in volumes in the second half of the year. Foodcorp’s operating profit for the two months to June was R99,0 million but earnings were compromised due to a R70,9 million negative adjustment on the euro denominated debt arising from the depreciation in the exchange rate from 1 May to 30 June.

The following graph depicts headline EbITdA from both a statutory perspective and adjusted for unrealised gains or losses on financial instruments used in Rainbow’s feed raw material procurement strategy. The IAS 39 adjustment does not take into account the mark-to-market adjustments on Foodcorp debt as this is considered part of the Group’s funding costs. For the period under review, the pre-taxation impact on the Group’s results of these unrealised positions is a positive impact of R9,4 million, being largely related to the increase in maize prices, especially during the latter part of the reporting period (2012: R13,2 million positive impact).

Finance costThe increase in net finance cost to R99,8 million is mainly a consequence of the significant levels of debt in Foodcorp.

Foodcorp debt and hedging profile

First priority Senior Secured NotesOn 4 March 2011, Foodcorp issued €390,0 million Senior Secured Notes with a coupon rate of 8,75% per annum and a maturity date of 1 March 2018.

Payments under the 2018 Notes consist of two components, namely the principal due on 1 March 2018 and coupon payments due semi-annually on 1 September and 1 March. In order to hedge the foreign currency exposure, the following foreign exchange contracts were entered into:

• The principal was hedged 50% through a performanceparticipating foreign exchange contract and 50% through a vanilla forward exchange contract, both for six years maturing on 1 March 2017

Financial review continued

2010 2011* 2012 2013

HEAdLINE EbITdA

620

9.78.9

7.8

4.4

8.98.2

7.7

4.3671 710

769

602 615

437 446

Headline EBITDA margin(%)

Pre-IAS 39

Post-IAS 39

Headline EBITDA (Rm)

* 15-month period.

• Thesemi-annualcouponpaymentshavebeenpartiallyhedged(50%) at inception using forward exchange contracts maturing on each coupon payment date, until 1 March 2017; and

• Inaddition,theremainingportionofthecouponpaymentdueon 1 September 2013 was recently hedged using a vanilla forward exchange contract.

The mark-to-market effects of the hedging arrangements are accounted for in the income statement under financing costs.

Payment-in-kind (PIK) note debt instrumentDuring May 2013 the Group repurchased and held a €52,9 million PIK note within the Foodcorp funding structure. The principal amount and accrued interest are eliminated for the RCL consolidated accounts.

Effective tax rateThe effective tax rate has increased from 35,0% to 113,5%. The abnormal tax rate is largely due to non-deductible transaction costs (R45,6 million) and the non-allowance of certain funding costs and foreign exchange losses (R83,0 million) within the Foodcorp holding structure.

STATEMENT OF FINANCIAL POSITIONThe acquisition of Foodcorp during the current financial year has had a significant impact on the Group’s statement of financial position with IFRS 3 (Statement of business combinations) requiring recognition of net assets acquired at fair value. This resulted in assets and liabilities acquired on 1 May 2013 amounting to R6,6 billion and R7,8 billion respectively. The purchase price of the acquisition was R1,0 billion resulting in goodwill of R2,6 billion being recognised after the completion of a preliminary purchase price allocation (PPA) exercise. The statement of financial position reflects an increase in working capital balances due to the scale of the Foodcorp business. Certain key items are highlighted below.

Non-current assetsProperty, plant and equipment (PP&E)In addition to the R1 611,8 million of PP&E acquired as part of Foodcorp, capital expenditure for the 12-month period was R477,0 million (2012: R451,0 million). Significant individual capex initiatives included the Rustenburg and Bushvalley expansions (R137,0 million), conversion of chicken house heating from gas to coal (R71,8 million) and investment in additional freezing and chilling capacity in Worcester (R44,2 million). All expansion capex spend related to prior year approvals was completed in the current financial year.

Intangible assetsTrademarks and customer relationship intangible assets of R2,9 billion were recognised on the acquisition of Foodcorp. The significant value of these intangibles acquired shows the wealth

CAPEx SPENd ANd dEPRECIATION (Rm)

118

Capex spend RmDepreciation Rm

136149 157

210 199

261

2007 2008 2009 2010 2011* 2012 2013

214

315 293251

360

481 477

* 15-month period.


of the brands added to the Group by the Foodcorp acquisition. Capital expenditure relating to intangible assets amounted to R8,9 million (2012: R29,9 million) and is mainly in respect of Rainbow’s continued investment in the SAP ERP system which went live on 1 July 2012.

The investment in joint venture relates to the purchase of 49,0% of Zambeef’s shareholding in Zam Chick Limited for US$14,25 million (R129,0 million).

Current assets and current liabilitiesThe movement in inventories, trade and other receivables and trade and other payables are all largely attributable to the inclusion of Foodcorp. The valuation of inventories and biological assets have also increased due to higher raw material and feed prices and Vector’s take-on of the new Customer Secondary Distribution (CSD) customers. Despite difficult economic conditions, trade debtors continue to be well managed across the Group.

The preference shares receivable of R130,3 million relates to amounts receivable from the Foodcorp management share ownership structure, which has been settled subsequent to year-end as part of the acquisition of management’s shares.

The sale agreement that has been entered into to dispose of the Fishing division of Foodcorp has resulted in R536,6 million of assets and R178,7 million of liabilities being classified as held for sale. Completion of the transaction is subject to the fulfilment of certain conditions, including approval by the South African competition authorities.

The significant increase in derivative assets of R340,7 million primarily relates to the hedging arrangements put in place in order to hedge the foreign currency exposure on the Foodcorp foreign debt.

Cash on hand and investment in money market fund has increased from R305,8 million in 2012 to R2 763,2 million in 2013 as a result of the R3,9 billion rights offer in January 2013, offset by the Foodcorp and Zam Chick investments.

Non-current liabilitiesThe deferred tax of R1 409,3 million (2012: R432,7 million) arises from numerous temporary differences across the Group. The significant increase has arisen due to the inclusion of Foodcorp.

The post-retirement medical obligation of R155,4 million (2012: R108,6 million) arises from the actuarial valuation of the Group’s potential liability arising from post-retirement medical aid contributions in respect of current and future retirees. This liability is unfunded. The obligation of the Group to pay medical aid benefits after retirement is no longer part of the conditions of employment for Rainbow employees engaged after 1 October 2003 and for Vector employees engaged after 1 January 1997. Foodcorp provides post-retirement medical benefits to certain retired employees. The Group has an unrecognised actuarial loss of R14,9 million (2012: R14,2 million) which arises mainly due to differences in the actuarial assumptions applied from year to year. This actuarial loss will be recognised to the extent that it is in excess of 10% of the obligation over the remaining working lives of the participating employees.

The significant increase in interest-bearing liabilities primarily relates to Foodcorp’s €390,0 million Senior Secured Notes. These liabilities are offset by a positive R340,7 million of derivative financial instruments relating to the hedging structure.

Gearing and capital structureYear-end gearing of 83,5% (interest-bearing liabilities to equity) is higher than management’s view of the optimal capital structure. Net gearing, taking into account cash and cash equivalents

and investment in money market fund at the reporting date is 44,3%. The short-term focus will be to eliminate intragroup debt inefficiencies within the funding structure and to assess capital requirements taking into account future investment opportunities. Foodcorp has the option to redeem 10% of the Senior Secured Notes prior to March 2014 at 103% of the principal amount.

Minority interestsA minority interest of R331,4 million has been reflected in the statement of changes in equity and arose due to the outside shareholding in Foodcorp by Foodcorp management and Capitau Investment Advisory Proprietary Limited. The minority interest value has been determined on the basis of a minority interest stake with no control premium included.

Cash flow and working capitalCash generated by operations increased by 32,2% or R162,9 million in comparison to the prior period. The increase in cash generation is attributable to the inclusion of the Foodcorp results for two months which has been offset to a certain degree by the negative cash generation in Rainbow as a result of poor trading results.

The R117,3 million increase in inventories and biological assets was mainly impacted by Vector’s take-on of the new CSD customers. The higher feed commodity prices also impacted the valuation of feed raw materials and biological assets. Offsetting the inventory increase, trade and other payables were R160,7 million higher than the comparative period.

The lower net tax outflow of R60,9 million is a function of the lower 2013 taxable profit base with Rainbow and Foodcorp in a nil tax paying position.

Cash movement (including investment in money market funds) for the period is summarised as follows:

Rm

Opening balance 305,8Operating profit adjusted for non-cash flow items 516,8Working capital changes 152,5Net finance income 43,4Tax paid (61,0)Dividends paid (94,4)Capital expenditure (including intangibles) (485,9)Acquisition of subsidiary and joint venture (875,9)Issue of shares 3 881,0Interest-bearing liabilities (715,3)Discontinued operation – net cash inflows 52,4Other 43,8

Closing balance 2 763,2

Return on equityReturn on equity decreased to 0,5% (2012: 9,3%) being impacted by Rainbow’s poor operating performance.

ACCOuNTING POLICIESThe Group’s accounting policies are governed by International Financial Reporting Standards (IFRS). Guidance has been obtained from the International Financial Reporting Interpretations Committee (IFRIC) and circulars.

The Group maintains the view that the standards set the minimum requirements for financial reporting. The financial statements in this integrated annual report have been prepared with the aim of exposing the reader to a detailed view of the results, using a simplified approach, in the hope of facilitating a deeper and more informed understanding of the Group’s performance.


Corporate governance report

RCL is committed to the highest level of corporate governance and ethical business behaviour. The directors recognise that good corporate governance is essentially about leadership and that there exists the need to conduct the enterprise with integrity and in compliance with legislation, regulations and best practices relevant to the Group’s business. Governance in the Group extends beyond mere legislative and regulatory compliance and the directors strive to entrench an enterprise wide culture of good governance and ethical conduct. The Board therefore sets the tone and standards that must be consistently applied by executive management and all employees. These standards are applicable to the day-to-day operations of the Group and interactions with all stakeholders. Appropriate corporate governance structures, practices and processes are in place and are actively monitored and revised periodically to reflect best practice.

STATEMENT OF COMPLIANCEFor the 2013 financial year, the Board is of the opinion that the Group applied the requirements of King III except as disclosed in the King III Index provided on page 54 of this Integrated Annual Report. The Board is further satisfied that it met the requirements of the Companies Act, 2008, as amended, and the JSE Listings Requirements unless otherwise explained.

bOARd OF dIRECTORSboard structure and compositionThe Board is the highest governing authority within the Group and has ultimate responsibility for governance. The Group has a unitary Board that comprises nine non-executive (four of whom are independent) and two executive directors.

The Chairman is not independent but the roles of Chairman and Chief Executive Officer are separate and a clear division of responsibility exists. The non-executive directors take responsibility for ensuring that the Chairman encourages proper deliberation of all matters requiring the Board’s attention, and the Board ensures that there is an appropriate balance of power and authority so that no one individual or block of individuals can dominate the Board’s decision-making process. To ensure good governance and as recommended by King III, Mr RV Smither maintains his role as lead independent director.

The executive directors have overall responsibility for implementing the Group’s strategy. Non-executive directors complement the skills and experience of the executive directors and bring judgement to bear, independent of management, on the Board’s deliberations and decisions through, inter alia, their knowledge and experience.

Details of the directorate are provided on pages 12 to 17 of the Integrated Annual Report.

board responsibilitiesThe Board gives strategic direction to the Group under the chairmanship of Mr JJ Durand. The Board retains full and effective control over the Group and monitors executive management in implementing plans and strategies. Currently, the Board’s responsibility extends to all dependent subsidiaries including Foodcorp. In the new year, the Board will review how it further incorporates certain functions relating to Foodcorp into the relevant Board committees.

The roles and responsibilities of the Board and its committees are set out in formal charters which are reviewed annually to ensure that they remain relevant. The Board and its committees are supplied with complete and timely information which enables them to discharge their responsibilities efficiently and effectively. Directors have unrestricted access to all Group information, records, documents and property. Non-executive directors have access to management and may meet separately with management, without the attendance of executive directors. The information needs of the Board are well defined and regularly monitored. All directors have access to the advice and services of the Company Secretary, and directors may obtain independent professional advice at the Group’s expense, should they deem this necessary. In terms of the Board Charter, the Board has responsibility for:

• Acting as a focal point for, and custodian of, corporategovernance

• Providing strategic leadership, integrity and judgement anddirecting RCL so as to achieve its goals and objectives

• EnsuringthatRCLisseenasaresponsiblecorporatecitizenby having due regard for financial and non-financial aspects of its business

• EnsuringthatRCL’sethicsareeffectivelymanaged

• Ensuring that RCL has an effective and independent AuditCommittee

• Ensuringtheeffectivegovernanceofrisk

• EnsuringtheeffectivegovernanceofInformationTechnology

• EnsuringthatRCLcomplieswithapplicablelaws,regulationsand codes of business practice

• Ensuring that there is an effective risk based Internal Auditfunction

• EnsuringtheintegrityofRCL’sIntegratedAnnualReport

• EnsuringthatindividualdirectorsactinthebestinterestofRCL

• Defining levelsofauthority, reservingspecificpowersto itselfand delegating other matters to management

• EstablishingtheBoardcommittees’termsofreference;and

• EnsuringthattheevaluationoftheBoard,itscommitteesandindividual directors is performed on an annual basis.

For the period under review, the Board has satisfied its responsibilities in compliance with the Charter.

To enable the Board to properly discharge its responsibilities and duties, certain responsibilities of the Board have been delegated to Board committees.

board committees and attendanceThe Board has established four principal Board committees to assist in discharging its responsibilities. The creation of Board committees does not reduce the directors’ overall responsibilities and therefore all committees must report and make recommendations to the Board. The Board committees are as follows:


bOARd ANd COMMITTEE MEETING ATTENdANCE

board members Status board Audit RiskRemuneration and

Nominations Social and

Ethics

Dr M Griessel Independent non-executive 5/5 3/3 2/2

NP Mageza Independent non-executive 4/5 3/3 3/3©

MM Nhlanhla Independent non-executive 3/5 2/2

RV Smither Independent non-executive 5/5 3/3© 1/2 3/3

HJ Carse1 Non-executive 3/3

JJ Durand Non-executive 5/5© 3/3

PR Louw Non-executive 5/5

JB Magwaza Non-executive 5/5 3/3

CM van den Heever2 Non-executive 2/2

GC Zondi Non-executive 5/5 2/2© 2/2©

M Dally Executive 5/5 2/2 2/2

RH Field Executive 5/5 2/2 2/2

© Chairman

1 Appointed on 19 February 2013.

2 Resigned on 1 February 2013.

Specific responsibilities have been formally delegated to the Audit Committee, the Remuneration and Nominations Committee, the Social and Ethics Committee and the Risk Committee. Formal documented charters define terms of reference, duration and functions, clearly agreed upon reporting procedures and scope

of authority for each committee. There is transparency and full disclosure from the committees to the Board. Committees are free to obtain independent external professional advice as and when necessary and are subject to evaluation by the Board to ascertain their performance and effectiveness.

GOVERNANCE STRUCTURE: RCL BOARD COMMITTEES

Executivemanagement

teams

RCL board

Audit CommitteeRemuneration

and Nominations Committee

Social and Ethics Committee Risk Committee

Risk Management Team

Internal Audit


bOARd COMMITTEES

Committee CompositionScheduled meetings Main responsibility

Audit Committee RV Smither©

Dr M Griessel

NP Mageza

Three times per annum

Review the Group’s financial position and make recommendations to the Board on all financial matters, business risks, internal controls and compliance

Risk Committee GC Zondi©

M Dally

RH Field

Dr M Griessel

RV Smither

Twice per annum Oversight of the Group’s risk and sustainability strategies

Remuneration and Nominations Committee

NP Mageza©

JB Magwaza

RV Smither

Twice per annum •Assessmentandapprovaloftheremuneration strategy for the Group, and the determination of short- and long-term pay structures for Group executives

•Assessment,recruitmentandnominationofnon-executive directors; and

•Approvaloftheappointmentofexecutivedirectors

Social and Ethics Committee GC Zondi©

M Dally

RH Field

MM Nhlanhla

Twice per annum Monitor the Group’s activities with regard to:

•Socialandeconomicdevelopment

•Goodcorporatecitizenship

•Consumersrelationships

•Theenvironment,healthandpublicsafety;and

•Labourandemploymentequity

Corporate governance continued

directors’ independenceAll independent non-executive directors are subject to an independence evaluation by the Board. The Board considers whether the director is independent in character and judgement and whether there are any relationships or circumstances which are likely to affect, or could appear to affect, the director’s independence. Having considered the responses, the Board is of the opinion that Messrs NP Mageza, RV Smither, Mrs MM Nhlanhla and Dr M Griessel are independent. All other non-executive directors are not considered independent due to their capacities as directors of either Remgro Limited or the BEE consortium, who are major shareholders in RCL.

All directors are required to declare, on an annual basis, any interest in proposed transactions or arrangements with the Group. In addition, all other material interests are disclosed by directors, as and when they arise.

Company SecretaryThe Board is cognisant of the duties imposed on the Company Secretary who is accordingly empowered to properly fulfil those duties.

Mr JMJ Maher is the Company Secretary and in addition to the statutory duties, he fulfils the following functions in line with the Board Charter:

• inductionofdirectors

• Providesthe Board and directors individually with guidance as to how their responsibilities should be properly discharged in the best interests of the Group

• ProvidesguidancetotheBoardonthedutiesofthedirectors,matters of ethics and good governance; and

• Actsastheprimarypointofcontactbetweenshareholdersandthe Group.

During the reporting period the Board expanded its annual evaluation process of the Board, committees and directors, by also including an annual evaluation in respect of the Company Secretary. The Board has considered and is satisfied that the Company Secretary is competent and has the requisite qualifications and experience to effectively execute his duties.

The Board confirms that the Company Secretary maintains an arm’s length relationship with the Board and the directors, taking into account that the Company Secretary is not a director of the Company and is not related to any of the directors.

dealing in securitiesThe Group has a formal policy, established by the Board and implemented by the Company Secretary, prohibiting dealing in securities by directors, officers and other selected employees for a designated period preceding the announcement of its financial results or in any other period considered sensitive. The Chairman, through the Company Secretary, approves all dealings by directors during “open” periods.

ExECuTIVE MANAGEMENT TEAM

CompositionScheduled meetings Main responsibility

Refer pages 14 to 17 Once per month Deliberate and take day-to-day decisions on all matters affecting entity and Group strategy and operations, and make recommendations, which have their sanction, to the Board for approval


Appointments to the boardProcedures for appointment to the Board are formal and transparent and a matter for the Remuneration and Nominations Committee. The Remuneration and Nominations Committee consists of three non-executive directors and meets at least twice a year. Mr NP Mageza is the Chairman of the Remuneration and Nominations Committee. The other members during the year were Messrs JJ Durand, JB Magwaza and RV Smither. The Chairman of the Board will in future serve as chairman of the committee for nomination matters. The Chief Executive Officer and Group Human Resources Director also attend meetings of the Remuneration and Nominations Committee.

The committee considers the Board’s composition, retirements and appointments of additional and replacement directors. Executive directors are appointed to the Board on the basis of skill, experience and level of contribution to the Group and are responsible for the running of the business. Non-executive directors are selected on the basis of industry knowledge, professional skills and experience. On appointment to the Board, new directors visit the Group’s businesses and meet with senior management, as appropriate, to facilitate their understanding of the Group and their fiduciary responsibilities. The Board has reviewed its required mix of skills and experience and other qualities such as demographics and diversity in order to assess its effectiveness and that of its committees and the contribution of each director.

In accordance with the Memorandum of Incorporation, one-third of directors are subject to retirement and re-election by shareholders on an annual basis. As a result of this requirement, at the 2013 annual general meeting, the following directors will retire by rotation but all offer themselves for re-election: Mr JJ Durand, Mr PR Louw, Mrs MM Nhlanhla and Mr GC Zondi.

RemunerationAnnualised fees payable to Board and committee members are as follows:

2014 2013Chairman Member Chairman Member

R R R R

RCL Board 232 320 193 600 193 600 193 600Audit Committee 184 800 92 400 154 000 77 000Risk Committee 87 120 52 272 72 600 43 560Remuneration and Nominations

Committee 79 860 41 916 72 600 43 560Social and Ethics Committee 72 600 43 560 72 600 43 560

The Remuneration and Nominations Committee determines the remuneration of directors at levels sufficient to attract, retain and incentivise individuals of quality. Only non-executive directors receive fees for their services on the Board and on Board committees. Executive directors are remunerated in terms of their contracts of employment with the Group. Except for executive directors’ employment contracts, there are no other contracts of service between any of the directors and any subsidiaries within the Group.

board effectivenessFor the year ended 30 June 2013, the Company Secretary facilitated a performance evaluation of the Board and its committees. Each director was requested to complete a questionnaire which assessed the effectiveness of the following categories:

• Boardcompositionandmeetings

• Boardcommittees

• Boardinformation

• Boardorientationanddevelopment

• Boardfunctioningandprocesses

• Chairman;and

• Personalevaluation.

The results of the individual assessments are consolidated by the Company Secretary and the Chairman of the Board is responsible for determining any actions required to enhance the effectiveness of the Board.

AudIT COMMITTEEThe role of the Audit Committee is to review the Group’s financial position and make recommendations to the Board on all financial matters, business risks, internal controls and compliance. This includes assessing the integrity and effectiveness of related control systems to ensure that the Group’s business is conducted in a proper and economically sound manner.

The responsibilities of the Audit Committee are incorporated into the committee’s charter which is reviewed annually and approved by the Board. The committee has conducted its affairs in compliance with this charter and has discharged its responsibilities contained therein.

Audit Committee membership and resourcesThe Audit Committee consists of three independent non-executive directors. Mr RV Smither chairs the committee and its other members are Dr M Griessel and Mr NP Mageza. All members of the committee have the requisite financial knowledge and commercial skills and experience to contribute effectively to committee deliberations.

The committee meets at least twice a year as per the Audit Committee charter. The Chairman of the Board, Chief Executive Officer, Chief Financial Officer, Group Audit and Risk Manager (GARM) and representatives from the external auditors attend meetings by invitation. Other members of the Board and management team attend as required. The committee meets separately with the external auditors and internal auditors at least once a year without management present, to ensure that all relevant matters have been identified and discussed without undue influence.

Roles and responsibilitiesThe Audit Committee’s roles and responsibilities include its statutory duties per the Companies Act of South Africa and the responsibilities assigned to it by the Board. The Audit Committee fulfils an oversight role regarding financial reporting risks, internal financial controls and fraud risk and Information Technology (IT) risks as it relates to financial reporting.

The Audit Committee has discharged its key responsibilities as follows:

• Reviewedtheinterimresults,period-endfinancialstatements,sustainability disclosure and integrated report, culminating in a recommendation to the Board. In the course of its review the committee:

– took appropriate steps to ensure that the financial statements are prepared in accordance with International Financial Reporting Standards (IFRS)

– considered and, when appropriate, made recommendations on financial statements, accounting practices and internal financial controls

• ConfirmedtheInternalAuditcharterandauditplan


• Evaluatedtheeffectivenessofriskmanagement, controls and governance processes and satisfied itself about the adequacy and effectiveness of the Group’s system of internal financial controls

• Reviewed the appropriateness of the combined assurancemodel in addressing all significant risks facing the Group

• ConsideredandrecommendedtotheBoardtheappointmentand retention of external auditors

• Evaluatedtheindependenceandeffectivenessoftheexternalauditors

• Approvedtheauditfeesandengagementtermsoftheexternalauditors; and

• Determined the nature and extent of allowable non-auditservices and approved the terms for the provision of non-audit services by the external auditors.

The role of the Audit Committee applies to all the subsidiaries of the Group.

Expertise and experience of the CFO and finance functionAs required by the JSE Listings Requirements, the Audit Committee is satisfied that the CFO and his management team have appropriate expertise and experience for the Group.

External auditPricewaterhouseCoopers (PWC) are the incumbent auditors for all the Group companies. The committee continually monitors the independence and objectivity of the external auditors.

During the period, PWC provided certain non-audit services, including tax services and a review of Rainbow’s feed raw material procurement process. Total fees incurred during the 2013 financial year to PWC were R7,8 million of which R1,0 million related to non-audit services. During the course of the year under review, the Audit Committee reviewed a report by the external auditors of relationships they consider may have a bearing on their independence and objectivity. The Audit Committee concluded that there were no areas of conflict.

The Audit Committee has nominated, for election at the annual general meeting, PWC as the external audit firm and Mr Harish Ramsumer as the designated auditor responsible for performing the functions of auditor for the 2014 financial year. The Audit Committee has satisfied itself that the audit firm and designated auditor are accredited as such on the JSE list of auditors.

Risk managementThe Board has assigned oversight of the Group’s risk management function to the Risk Committee. The Chairman of the Audit Committee is also a member of the Risk Committee, thereby ensuring that information relevant to these committees is transferred regularly.

Internal Audit functionInternal Audit is an independent, objective function that provides assurance on the Group’s activities geared towards creating value and improving business processes. Internal Audit is responsible for:

• MonitoringtheadequacyandeffectivenessoftheGroup’sriskmanagement process

• EvaluatingtheGroup’sgovernanceprocesses

• Evaluatinginternalcontrolscontinuouslytodeterminewhetherthey are adequately designed, operating efficiently and effectively and recommending improvements; and

• Providingasourceofinformation,asappropriate,forinstancesof fraud, corruption, unethical behaviour and irregularities.

Internal controls reviewed consist of strategic, operating, financial reporting and compliance controls and include controls relating to:

• Theinformationmanagementenvironment

• Thereliabilityandintegrityoffinancialandoperatinginformation

• Thesafeguardingofassets

• Theeffectiveandefficientuseofcompanyresources;and

• Compliance with relevant policies, procedures, laws andregulations.

The purpose, authority and responsibility of the Internal Audit activity is defined and governed by an Internal Audit Charter approved by the Audit Committee and Board. The activities of the Internal Audit function are co-ordinated by the GARM. To ensure independence, the GARM reports functionally to the Audit Committee and, only from an administrative perspective, to the CEO. The GARM holds a senior position in the organisation and his appointment or dismissal is subject to ratification by the Audit Committee. Internal Audit has free and unrestricted access to management, employees, activities, physical locations and to all information considered necessary for the proper execution of Internal Audit’s work, at the discretion of the GARM. Confidentiality of information is maintained and information is not disclosed without proper authority.

The annual Internal Audit plan is based on an assessment of risk areas identified by management, as well as focus areas highlighted by the Audit Committee and executive directors which ensures that a risk based audit approach is applied. The annual plan is also updated as appropriate to ensure that it is responsive to changes in the business. A comprehensive report of Internal Audit findings is presented to the Executive Management regularly and the Audit Committee when it meets.

Follow-up audits are performed in areas where control weaknesses are found. In addition to the Internal Audit findings, the report to the Audit Committee includes an update on the progress made against the audit plan and statistics on follow-up audits conducted. Internal Audit is also involved in IT throughout the Group to ensure satisfactory IT governance and assurance. All new major IT projects are subject to pre and/or post-implementation reviews.

Internal Audit co-ordinates its scope and efforts with External Audit in order to provide efficient and effective assurance to the Audit Committee.

Internal Audit comprises a dedicated team of appropriately qualified and technically experienced personnel. Where necessary certain audits are outsourced to consultants with appropriate skills and technical expertise, for example specialised IT reviews.

The Audit Committee, External Audit and the GARM completed an assessment of the Internal Audit function for the year. This assessment was supplemented by the results of the Audit Satisfaction Questionnaires (ASQ) that were completed by management during the year. The Chairman of the Audit Committee and the GARM are responsible for determining any actions required to enhance the effectiveness of the Internal Audit function. The Audit Committee will commission an independent quality assurance review at an appropriate future date.

Internal controlsThe executive directors are responsible for ensuring that internal control systems exist that provide reasonable assurance regarding the safeguarding of assets and the prevention of their unauthorised use or disposition, proper accounting records are maintained and the financial and operational information used in the business is reliable.



Having considered:

• The resultsof the formaldocumented reviewof theGroup’ssystem of internal control and risk management, including the design, implementation and effectiveness of the Group’s system of internal financial controls conducted by the Internal Audit function during the year

• Informationandexplanationsgivenbymanagement

• Discussionswith theExternalAuditorsontheresultsof theiraudit; and

• ThereportfromtheAuditCommittee,

nothing has come to the attention of the Board that causes it to believe that the Group’s system of internal controls and risk management is not effective and that the internal financial controls do not form a basis for the preparation of reliable financial statements.

Going concernThe Audit Committee reviewed a documented assessment by management of the going concern premise of the Group before concluding to the Board that the company will be a going concern in the foreseeable future.

RISK COMMITTEE ANd MANAGEMENTThe Board considers risk management to be a key business discipline designed to balance risk and reward and to protect the Group against uncertainties that could threaten the achievement of business objectives.

The Board has documented a corporate risk management policy that defines the objectives of and commitment to risk management. The policy is based on principles of the International Committee of Sponsoring Organisations of the Treadway Commission (COSO) framework and complies with the requirements of King III. It involves continuous risk identification at both a strategic and operational level, as well as the evaluation of mitigating controls.

Related risk management frameworks and methodologies are regularly assessed and enhanced, where appropriate, to ensure that the Group’s ability to anticipate and adequately respond to unpredictable risks is improved.

Management remains accountable to the Board for designing, implementing and monitoring the processes of risk management and integrating it into the day-to-day activities of the Group.

The Risk Committee is responsible for overseeing the adequacy and overall effectiveness of the Group’s risk management function and its implementation by management. The terms of reference of the Risk Committee also includes oversight of sustainability within the Group.

Risk Committee membershipThe Risk Committee comprises Messrs GC Zondi (Chairman), M Dally (CEO), RH Field (CFO), RV Smither (Audit Committee Chairman) and Dr M Griessel. In order to facilitate the effective assessment of risks at all levels in the Group, the GARM and director in charge of sustainability attended the committee’s biannual meetings by invitation.

ResponsibilitiesThe committee charter includes the following key responsibilities:

Risk Management• Oversee thedevelopmentandannual reviewofapolicyand

plan for risk management to recommend for approval to the Board

• Monitor implementation of the policy and plan for riskmanagement taking place by means of risk management systems and processes

• MakerecommendationstotheBoardconcerningthelevelsoftolerance and appetite, and monitoring that risks are managed within the levels of tolerance and appetite as approved by the Board

• Overseethattheriskmanagementplaniswidelydisseminatedthroughout the Group and integrated in the day-to-day activities of the Group

• Ensurethatriskmanagementassessmentsareperformedona continuous basis

• Ensurethatframeworksandmethodologiesareimplementedto increase the possibility of anticipating unpredictable risks

• Ensure that management considers and implementsappropriate risk responses

• Ensurethatcontinuousriskmonitoringbymanagementtakesplace

• Liaise closely with the Audit Committee to exchangeinformation relevant to risk

• Express thecommittee’s formalopinion to theBoardon theeffectiveness of the system and process of risk management; and

• Review reporting concerning riskmanagement that is to beincluded in the integrated report to ensure that it is timely, comprehensive and relevant.

Sustainability• MakerecommendationstotheBoardconcerningkeypolicies,

strategies and performance indicators

• Provide appropriate guidance and strategic direction onsustainability issues affecting the Group; and

• Review the Group’s annual sustainability report prior tosubmission to the Board for approval.

The Risk Committee is satisfied that it has carried out its responsibilities for the year in compliance with its approved mandate.

Risk assessmentFormal risk assessments are performed biannually in May and November where existing risks are re-assessed and new and emerging risks are identified through a combination of facilitated workshops and interviews with Group executives and management. The RCL risk universe is the foundation for conducting the strategic risk assessment and provides management with another filter to determine if any key business risk areas have been overlooked which could make the organisation vulnerable. Risk reviews are proactive in not only determining negative areas but also identifying areas of opportunity where effective risk management can be turned into competitive advantage.

The Group risk register summarises the significant risks faced by the Group, taking into account the likelihood of occurrence, the potential impact, velocity and the related mitigating factors and compensating controls. Management’s treatment of risks are aligned to the risk appetite and tolerance approved by the Board. Appropriate risk response strategies in relation to the Group’s major risks have been developed and implemented. The adequacy and effectiveness of these strategies are reviewed on an ongoing basis to ensure that they are responsive to changes in the dynamic environment in which the Group operates.

Combined AssuranceRCL operates a combined assurance framework, which aims to optimise the assurance coverage obtained from management,


internal assurance providers and external assurance providers on the risk areas affecting the Group.

RCL’s combined assurance framework is integrated with the Group’s risk management approach. Risks facing the Group are identified, evaluated and managed by implementing risk mitigations. Assurance on the effectiveness of the internal controls is obtained from various assurance providers in a co-ordinated manner, which avoids duplication of effort. The combined assurance helps to identify gaps or improvement areas in the internal controls.The Risk Committee considers the risks and the assurance provided through the combined assurance framework and periodically advises the Board on the state of risks and controls in RCL’s operating environment. This information is used as the basis for the Board’s review, sign-off and reporting to stakeholders via the Integrated Annual Report, on risk management and the effectiveness of internal controls within the Group.

KEY RISKS

business risk Context Risk response

Volatility in raw material prices and exchange rates

Significant increase in raw material costs which cannot be passed onto customers

•RawmaterialprocurementiscentralisedwithinbothRainbowandFoodcorp

•Clearprocurementstrategyandpolicyisdefined

•TheProcurementCommitteesmeetatleastmonthlytoreviewmarket factors and set mandates

Recovery of required chicken realisations

Market demand and product price fluctuations due to:

•Competitionfromotherdomesticandinternational poultry producers and processors

•Highlevelsofimports

•Consumerdisposalincomeandspend

•Regularmanagementforecastsandreviewsthatfocusonactionsrequired to deliver desired performance

•Participationinindustrybodies,e.g.SAPAthatrepresenttheinterest of poultry producers

•BuildingRainbow’sbrandsthroughinnovationandmarketingprogrammes

Level of injection cap proposed by government

The much publicised topic of poultry meat injection and government’s proposal to introduce a cap is another issue facing the local poultry industry. An injection cap is likely to result in an erosion of IQF profit margins across all poultry producers, the extent of which will only be determined once the legislated injection level is introduced

Rainbow is playing an active role in working with government and the industry to adopt a responsible approach to the injection of poultry meat which is more in line with Rainbow’s current practice and international best practice

Energy and water security and pricing

The Group is aware of the need to reduce the usage of both water and electricity in light of constrained availability and recent price increases

•Asustainabilityframeworkisinplacefordefiningandreviewingenvironmental objectives and targets

•Continualfocusonwastewaterreductionandintroductionofwater re-use systems

•Researchintowaystoreduceenergyconsumption,e.g.useofenergy saving lighting on farms and alternative energy sources, i.e. chicken litter, wind and solar energy

Non-compliance with laws and regulations

The Group’s operations are subject to legislation and regulations by authorities that oversee, including but not limited to:

•Financialstandards

•Foodlabellingrequirements

•Facilityandproductrequirements

•Safety,HealthandEnvironmentalrequirements and standards for staff, consumers and customers

•Alegalcomplianceframeworkisinplace

•Rainbow’sTotalIntegratedManagementSystem(TIMS)facilitatesthe validation of Rainbow’s systems and product information to ensure compliance with South African regulatory and statutory requirements

•Ongoingemployeeawarenessprogrammes

•ComplianceismonitoredandtestedonanongoingbasisbyInternal Audit, External Audit and third party providers

Key risks The table below provides a brief description of the key operational and strategic risks to which the Group is exposed and the mitigating controls in place to manage these risks.

The Group’s risk management processes and practises were independently assessed during the 2011 financial year and were categorised as “developed”. Opportunities for further enhancement are evaluated on an ongoing basis.

Legal complianceThe Group has implemented a wide legal compliance framework which is designed to increase awareness of the applicable legislation and to provide assurance to the Board that the risks posed by non-compliance with legislative and regulatory obligations are being addressed.

The key elements of the framework include:

• Acomprehensivelegalregisterwhichisupdatedonanongoingbasis



The Group has adopted Control Objectives for Information and Related Technology (COBIT) as a guideline for establishing and maintaining effective internal controls, including compliance, continuity management and risk. An IT Project Portfolio Management (PPM) tool is in place to align and structure processes to better measure and manage the overall IT portfolio by ensuring that appropriate project management principles are applied to all new IT projects. These frameworks and associated IT policies and standards ensure that IT risks within the Group are minimised. The IT risk management process is included into the Group combined assurance process. Back up and disaster recovery plans over key financial systems have been formalised and are tested on a regular basis.

Internal Audit performed an assessment of IT governance processes against best practice principles as espoused in King III which confirmed that the maturity of the Group’s IT processes are largely aligned to its desired maturity levels. The Group’s current focus is on enhancing its IT platform to deliver greater value and efficiency.

KEY RISKS continued

business risk Context Risk response

disease outbreaks at farms

The outbreak of poultry diseases can impact negatively on the ability to conduct operations and the demand for Rainbow’s products

The Group adheres to good farming practices and extensive precautionary measures are in place to ensure the health of the flocks:

•Bio-exclusionproceduresareinplace(physicalaccesscontrols,shower procedures, site clothes, foot dip tanks, vehicle sprays at key sites, insulated houses, trained employees)

•TestingofflockseverymonthforAvianInfluenza,Newcastle,Salmonella and Infectious Bronchitis

Fire at distribution facilities, plants and farms

Fires will affect the ability to conduct operations which will impact on financial results

The Group works closely with external risk assessors and insurers to ensure that all facilities have the highest level of fire detection and prevention. Key controls include:

•AllequipmentissubjecttoregularInfraredInspection(IRIS)audits

•Firehydrantsandsprinklersystems

•CO2 systems for electrics

•Fireteamsandtraining

•Firealarmsandsmokedetectors

•Newpanelsarefireretardant

•Flammablesubstancesarestoredseparately

Non-conforming food products

Products could potentially be subjected to food hazards if not managed within the supply chain. As a result the Group may be subject to product liability claims and product recalls

•FoodsafetyrisksarecontrolledbyintroducingHazard,Analysisand Critical Control Points (HACCP) methodology across the supply chain

•TheGroup’sTIMSallowsittomanagerisksassociatedwithincoming material, minimise and reduce risks during production, transportation and distribution to customers

IT systems failure

The Group’s operations are dependent on reliable, secure, effective and efficient IT systems

•Formaldisasterrecoveryplansandbackupstrategiesareinplaceand steps are taken to ensure these plans are tested regularly and updated accordingly

•Keyapplicationsarehostedoutofgenuinedatacentrefacilitiesaccompanied by appropriate power and network redundancy

•Physicalsecurityatthedatacentrefacilitiesarerobustwiththerequired access and environmental monitoring in place

•Thetargetedtechnologyrefreshcycleisbetweenthreetofiveyears, thus ensuring key applications run on supported platforms

• Divisional legal champions who ensure that their respective divisions monitor and comply with all regulations and legislation; and

• Legalcompliancepreventionandmonitoringstrategies.

The Group attempts to keep up to date with all intended or promulgated legislation through regular interaction with the Group’s corporate attorneys.

The audit and risk teams assess significant legal risks and the level of compliance as part of their annual audit activities and reports from the various functions are submitted to the Risk, Audit and Social and Ethics Committees on a regular basis.

IT governance IT is an integral part of RCL’s business and is fundamental to the support, growth and sustainability of the Group. IT within the Group is directed by a dedicated IT director and the overall responsibility for IT governance lies with the Board. Through the IT strategy, the IT roadmap is aligned to the Group’s business objectives to ensure that IT consistently enables sustainable value driven solutions and services to the Group.


SOCIAL ANd ETHICS COMMITTEEResponsibilitiesThe role of the Social and Ethics committee is to assist the Board with monitoring and reporting on social, ethical and transformational practices that are consistent with good and responsible corporate citizenship. The committee has adopted formal terms of reference which is subject to an annual review by the Board. Responsibilities of the committee include the statutory duties as per the Companies Act. The responsibility of monitoring sustainability, health and public safety practices remains with the Risk Committee, however, the governance of ethics was transferred from the Audit Committee during the year of review.

Committee membership and meetingsThe Social and Ethics Committee comprises Messrs GC Zondi (Chairman), M Dally (CEO), RH Field (CFO) and Mrs MM Nhlanhla. The Group Legal and Corporate Affairs Director and the GARM are permanent invitees to this committee. The Committee met twice during the financial year with the objective of setting out its annual work plan and reviewing the Group’s progress on key performance areas relating to:

• Corporatesocialinvestment

• Stakeholderrelations

• Broad-basedblackeconomicdevelopment

• Labourrelationsandworkingconditions

• Employmentequity

• Consumerrelations;and

• Ethicsandcompliance.

The committee’s role also includes the monitoring of the Group’s participation and results achieved in various sustainability surveys and indices.

Code of corporate conduct and ethics During the year under review, the Group reviewed and updated its Corporate Code of Conduct and Ethics Policy to ensure alignment with statutory requirements and the business philosophy of the Group. RCL’s induction programme educates new employees on the ethics, values and business culture of the Group. It is a requirement that all employees sign an acknowledgement that they have read and understood the contents of the policy and that contravention of the basic standards contained therein may result in disciplinary action, including dismissal. The Corporate Code of Conduct and Ethics Policy is available to all employees on the Group’s intranet.

The Corporate Code of Conduct and Ethics Policy promotes commitment to:

• Applying the highest standards of integrity in all its dealingswith all stakeholders

• Carryingonofbusiness through faircommercialcompetitivepractices

• Tradingwithcustomersandsupplierswhosubscribetoethicalbusiness practices

• Non-discriminatoryemploymentpracticesandthepromotionof employees to realise their potential through training and development of their skills; and

• Beingproactivetowardenvironmentalandsocialsustainabilityissues.

Further, through the policy the Board is able to:

• Clearlystateacceptableandunacceptablepractices

• Guidepolicybyprovidingasetofethicalcorporatestandards

• Encourage ethical behaviour of the Board, managers andemployees at all levels

• Guideethicaldecision-making

• Makeethicalinfringementseasytoidentify

• Promoteawarenessof,andsensitivityto,ethicalissues;and

• Facilitatedisputeresolution.

Tipp-Offs Anonymous hotlineIn addition to the Group’s other compliance and enforcement activities, the Board recognises the need for a confidential reporting mechanism covering fraud and other risks (whistle-blowing). The whistle-blowing hotline, an anonymous toll-free number, is part of the Group’s anti-fraud and anti-corruption efforts and is supported by the Corporate Code of Conduct. This hotline provides an impartial facility for all stakeholders to report fraud, statutory malpractice, crime and deviations from policy.

In line with its commitment to transparency and accountability, the Group takes action against employees and others who are guilty of fraud, corruption or other misconduct, or who are in breach of Group policies. Procedures are in place for the independent investigation of matters reported and for appropriate follow-up action.

During the 2013 financial year, 50% of calls that were classified as criminal were resolved resulting in either resignations or disciplinary action against the relevant individuals. The balance of the calls were closed due to either insufficient information supplied by the caller or that the allegations were found to be untrue.

The following aspects also fall within the ambit of the Social and Ethics Committee but are dealt with in more detail in the Abridged Sustainability Report included on pages 41 to 53.

• Consumerrelationships,includingthecompany’sadvertising,public relations and compliance with consumer protection laws

• LabourandEmployment;and

• CorporateSocialInvestment.

The Social and Ethics Committee is satisfied that it has carried out its responsibilities for the year in compliance with its approved mandate.

The Chairman of the Social and Ethics Committee, Mr GC Zondi, will be available at the Annual General Meeting to answer any questions relating to the statutory obligations of the committee.

Analysis of allegations by category


3

4

3

79

9

3

9

6

5

7

11

4

5

8

15

8

6

7

12

Criminal unethical behaviour HR Other

2009 2010 2011 2012 2013

17

30

33

29

32


Remuneration report

REMuNERATION ANd NOMINATIONS COMMITTEEThe Remuneration and Nominations Committee is responsible for the assessment and approval of the remuneration strategy for the Group, determination of short and long-term incentive pay structures for Group executives, positioning of senior executive pay levels relative to local and international industry benchmarks and assessment and authorisation of specific reward proposals for the Group’s executive directors and management. The objective of the remuneration strategy is to employ the necessary skills for the company to achieve its business goals and to base remuneration on personal and company performance in accordance with competitive market practices.

The Remuneration and Nominations Committee operates under the delegated authority of the Board and consists of three non-executive directors and meets at least twice a year. Mr NP Mageza is the Chairman of the Remuneration and Nominations Committee. The other members during the year were Messrs JJ Durand, JB Magwaza and RV Smither. The Chief Executive Officer and Group HR Director attend meetings of the Remuneration and Nominations Committee but are excluded from the review of their own remuneration.

A schedule setting out directors’ remuneration and equity interests appears in note 31 on pages 105 to 111.

The mandate of the Remuneration and Nominations Committee also includes:

• Providingguidanceonevaluatingtheperformanceofexecutivedirectors

• ReviewingandrecommendingtotheBoardtheremunerationof executive directors

• Reviewing and approving general proposals for salaryadjustments in the Group

• Approvingprinciplesonwhichshort-termincentivesforallstaffare based

• ApprovingallawardspursuanttotheRCLShareAppreciationRights Scheme

• Approvingtheoverallcostofremunerationincreasesawarded

• Approvingannualperformancebonuses;and

• Reviewingtheexecutivesuccessionplan.

The committee considers the views of the Chief Executive Officer on the performance and remuneration of his colleagues. The Chief Executive Officer and Group HR Director assist the Remuneration and Nominations Committee with analysis of external market data and trends.

In applying agreed remuneration policies, the Remuneration and Nominations Committee is committed to the principles of accountability and transparency and to ensuring that the reward arrangements are linked to Group performance, and are market related and support the business strategies.

GROuP REMuNERATION PHILOSOPHYRecognising that the Group is operating in a competitive environment, the remuneration philosophy:

• Plays an integral part in supporting the implementation ofRCL’s business strategies

• Motivatesandreinforcesindividualandteamperformance

• FocusesonaTotalRewardModelthatintegratesbothfinancialand non-financial benefits; and

• Is applied equitably, fairly and consistently in relation tojob responsibility, the employment market and personal performance.

The Group’s application of remuneration practices:

• Aims to be competitive in specific market sectors in whichpeople are employed

• Determines the value proposition of the various positionswithin functions

• Ensures that performance management forms an integralpart of remuneration, thereby influencing the remuneration components of base pay and incentives; and

• Applies good governance to remuneration practices withinapproved structures.

The alignment of these remuneration principles aims to meet the strategic objectives of:

• Attracting,retainingandmotivatingkeyandtalentedpeople

• Competing in themarketplacewith the intention of being apreferred employer; and

• Rewarding individual and business performance andencouraging superior performance.

Fixed remunerationFollowing established market best practice, salaries are set with reference to the scope and nature of an individual’s role and his or her performance and experience, comparing with the upper-quartile pay levels of South African companies to ensure sustainable performance and market competitiveness.

Employees receive guaranteed packages which includes membership of one of the Group’s approved medical aid schemes and a vehicle allowance for necessary business travel. Retirement and risk benefits, including death-in-service benefits, also apply, subject to the rules of the Rainbow Pension and Provident Funds.

Employees’ fixed remuneration is reviewed and increased annually in October by the Remuneration and Nominations Committee.

Annual performance bonusIn addition to guaranteed packages, executive directors and members of management participate in an annual performance bonus scheme to reward the achievement of agreed Group and company financial, strategic and personal performance objectives.

The Remuneration and Nominations Committee sets the performance target for the bonus scheme based on the annual budget which takes into account prevailing market conditions and ensures that a demanding target is in place to encourage performance.

Long-term incentive plansExecutive directors and key selected employees currently participate in three long-term incentive plans designed to recognise their contribution to the business by enabling them to participate in the growth in the value of the Group.

The RCL Share Incentive Scheme (RSIS) was previously the only such plan, but developments in the regulatory environment and the change in practice both internationally and locally with regard to incentive schemes necessitated a review of the RSIS by the Board. As a result, the Board recommended the adoption of a new RCL Share Appreciation Rights Scheme (RSARS), based on equity-settled share appreciation rights. The salient features of the RSARS were included in the 2009 annual report, and the adoption of the new scheme was approved by shareholders on 31 July 2009.


Remuneration report continued

The Remuneration and Nominations Committee has not issued any further share options in respect of the RSIS since adoption of the RSARS, and the RSIS will simply be allowed to run its course in respect of existing share options. The existing RSIS will remain in place for share options granted and offers made under that scheme until such time as the share options are exercised or lapse or are substituted with awards under the new RSARS.

All other Group employees participate in the growth in the value of the Group through the Employee Share Ownership Programme (ESOP).

RCL Share Incentive Scheme (RSIS)Within the limits imposed by the company’s shareholders and the JSE Limited, the Remuneration and Nominations Committee approved and granted share options on an annual basis, as well as periodically when either an employee was promoted or a new appointment was made to an appropriate management position. The share options were granted at the closing share price ruling on the trading days approved by the Remuneration and Nominations Committee.

Share options vest after stipulated periods and are exercisable up to a maximum of ten years from the grant dates (if granted prior to 31 March 2005) or seven years from the grant dates (if granted after 31 March 2005).

Share options granted vest as follows:

• Firstthird–secondanniversaryofgrantdate

• Secondthird–thirdanniversaryofgrantdate;and

• Finalthird–fourthanniversaryofgrantdate.

On resignation, share options which have not yet vested will lapse and share options which have vested may be exercised before the last day of employment. On retirement, share options which have not yet vested will lapse and share options which have vested may be exercised within six months from the date of retirement. On death, share options which have not yet vested will lapse and share options which have vested may be exercised by beneficiaries within six months from the date of death.

RCL Share Appreciation Rights Scheme (RSARS)The new RSARS provides executive directors and selected employees with conditional rights to receive RCL ordinary shares, referred to as Share Appreciation Rights (SAR).

Within the limits imposed by the company’s shareholders and the JSE Limited, the Remuneration and Nominations Committee approves and awards SAR on an annual basis, as well as periodically when either an employee is promoted or a new appointment is made to an appropriate management position. Recipients of SAR become entitled to RCL shares having a value equal to the increase in the market value of a number of notional RCL shares. The market value of RCL shares for the purposes of determining award prices and exercise prices is the volume-weighted average price of RCL shares traded on the JSE for the five business days immediately preceding the award dates and exercise dates approved by the Remuneration and Nominations Committee.

SAR awards vest after stipulated periods and are exercisable up to a maximum of seven years from the award dates.

SAR awards vest as follows:

• Firstthird–thirdanniversaryofawarddate

• Secondthird–fourthanniversaryofawarddate;and

• Finalthird–fifthanniversaryofawarddate.

On resignation, SAR awards which have not yet vested will lapse and SAR awards which have vested may be exercised before the last day of employment. On retirement, unvested SAR awards vest immediately and all SAR awards may be exercised within 12 months from the date of retirement. On death, unvested SAR awards vest immediately and all SAR awards may be exercised by beneficiaries within 12 months from the date of death.

RCL Conditional Share Plan (CSP)The salient features of the CSP were included in the 2012 annual report, and the adoption of the additional scheme was approved by shareholders on 20 November 2012. The CSP was introduced to address the retention of executives in the company. The CSP operates in conjunction with the current Share Appreciation Rights scheme (SAR). The company intends only using the CSP to make ad hoc allocations as and when the need arises to address retention or recruitment issues.

Under the CSP, participants will receive a conditional award of shares on the award date. Provided that they remain in the employment of the company over the vesting period, shares will be settled to the participants on the vesting date. Participants will have no shareholder or dividend rights before the vesting date.

Employee Share Ownership Programme (ESOP)Employees are key to the future ambitions of the business, and in 2008 shareholders approved a Broad-based Black Economic empowerment (BEE) transaction, the largest participant which is the Rainbow Employee Trust. The trust was established to facilitate the implementation of the Employee Share Ownership Programme (ESOP), which enables all employees to participate in the future growth of the business and to share in the wealth that they help to create. Participation extends to all permanent employees on a non-discriminatory basis, and excludes only executive directors and selected employees who participate in either the RSIS or the RSARS outlined above.

In terms of the ESOP, all participating employees have been allocated the same number of units, irrespective of seniority or position in the Group. Each unit represents a potential future RCL shareholding, as they will be converted on 30 July 2018 into RCL shares in the hands of the employees. To encourage staff retention, employees who remain employed by the Group for a period of five years qualify for additional units.

POLICY ON dIRECTORS’ FEES ANd REMuNERATIONThe directors are appointed to the Board to bring competencies and experience appropriate to achieving the Group’s objectives.

Executive directorsThe current employment agreements of executive directors outline the components of their remuneration. At present, remuneration is divided into two components: a fixed component and a variable component comprising an annual performance bonus and long-term incentives in the form of the RSIS and RSARS, ensuring that a portion of their package is linked to the achievement of improved business performance.

directors’ service contractsThere are no fixed-term service contracts for executive or non-executive directors.

Non-executive directorsThe Remuneration and Nominations Committee determines the remuneration of non-executive directors.


Abridged sustainability report

INTROduCTIONRCL’s sustainability report is presented annually as part of its integrated report, but in an abridged format. The detailed sustainability report is included on RCL’s website at www.rainbowchicken.co.za.

RCL recognises that true sustainability cannot succeed in isolation and as such the sustainability strategy has been integrated in the overall business strategy and forms one of the strategic drivers of the business. In line with the company’s “Strategy into Action” (SIA) process, the sustainability strategy has been converted into a number of strategic goals, each with measureable key performance indicators and targets. This integrated management approach ensures strong alignment between the sustainability

strategy and the day-to-day business activities. Sustainability action plans and targets can be found in the table below.

RCL has established appropriate governance structures for the advancement of sustainable development through a sustainability charter which has been included as part of the Risk Committee mandate. In addition, management systems have been implemented, some of which are independently verified, that provide the platform for managing the Group’s economic, social and environmental practices as indicated in the pages that follow.

Foodcorp results relating to environmental, social and governance practices will be included in the sustainability report from the next financial year.

SuSTAINAbILITY TARGETS

Action plansLong-term targets 2014 targets

Sustainability structure and systems

Align Group sustainability strategy with national and global best practices and strategic thrusts

Agree and roll out Group structure

Agree structure for new acquisitions and align systems for data capture, analysis, and opportunity identification

Develop framework and strategy for Group by consulting with key stakeholders. Establish “sustainability culture/mindset” within the Group

Develop and implement sustainability reporting system

Include new acquisitions in sustainability measurements and agree targets with operational units. Consolidate projects and initiatives and share knowledge and synergies across the Group

Identify sustainability “champion” for each division across the Group and align actions with Group sustainability strategy

Identify and train sustainability champions in operational areas

ISO 14000 and waste management strategy

Ensure sound environmental conformance (with possible cost savings) through all divisions across the Group by engaging in waste reduction initiatives (Reduce, Re-use, Renew, Recycle)

Achieve ISO 14001 at all mills, plants and farms

Have all facilities ISO 140001 certified by 2014 financial year-end

Reduce RCL’s impact on water, air and ground by reducing and eliminating pollution

By 2020 reduce:– food waste

by 30% – carbon emissions

by 5% – waste to landfill

by 10%

Engage with all packaging suppliers on RCL’s packaging strategy, identify and quantify opportunities and formalise implementation plan

Brand development Brand RCL’s sustainability progress by being part of a formal programme to enlighten consumers. Align RCL’s sustainability focus with programme guidelines

Live sustainability through brands

Evaluate reputable sustainability certification bodies and select the appropriate programme to participate in

Implement sustainable sourcing strategy and policies to align RCL’s sustainability strategy with that of suppliers

Source products, services and ingredients from responsible, sustainable suppliers

Develop a sustainable sourcing policy and initiate roll out to suppliers


STAKEHOLdER ENGAGEMENT PROCESSThe Group subscribes to a partnership approach in the way business is conducted. It seeks to constructively engage its key stakeholders so as to understand and be able to respond to their needs. Interaction occurs with key stakeholders in the business through a number of formal and informal channels, including participation in industry forums, the investor relations function and consumer care line.

While shareholders are primarily concerned with value creation, government and local communities are looking to the Group to create direct and indirect job opportunities, improve community infrastructures and protect the environment. The Group’s stakeholder process is therefore underpinned by management’s responsibility to remain visible and accessible to all its stakeholders and will continue to emphasise open and transparent dialogue in

Key stakeholders dialogue channels and forms of engagement

Shareholders andother providers of capital

•Annualgeneralmeeting •SENSannouncements

•Investorrelations •Integratedannualreport

•Bi-annualresultsannouncements •Websites

•Tradingupdates

Business partnersand customers

•Facetofaceinterventions

•Regularmeetingsandworkshops

•Market,customerandin-storesurveys

Local community •Selectedprojectsaspartofcorporatesocialinvestment

•Regularmeetingswithmunicipalitiesandcivicorganisations

Government and regulators •Corporateaffairs,legalandinvestorrelationsfunctions

Industry •SouthAfricanPoultryAssociation(SAPA)

•ConsumerGoodsCouncilofSouthAfrica(CGCSA)

•AnimalFeedManufacturersAssociation(AFMA)

•SouthAfricanAgriculturalProcessorsAssociation(SAAPA)

Consumers •Consumercareline •Advertisingcampaignsinprintandmedia

•Consumerandproductsurveys •Consumerimmersions

Staff and unions •Roadshows •Performancereviewsandcareerplanning

•GoodtoGreatleadershipjourney •Managementandunionmeetings

•Intranet •Confidentialhotlinethrough

•Staffmeetingsandtraining Tip-offs Anonymous

Suppliers •Directrelationshipswithsupplierstoenablepartnerships

•Facetofaceinterventions

•Regularmeetingsandworkshops

order to anticipate trends and make changes where possible to the way it currently operates.

The Board accepts its duty to present a balanced and understandable assessment of the Group’s position in reporting to stakeholders and the greater demands for transparency and accountability regarding non-financial matters. The quality of the information is based on the principles of openness and substance over form. The integrated annual report seeks to address matters of significant interest and concern to all stakeholders and to present a comprehensive and objective assessment of the Group, so that all stakeholders with a legitimate interest in the Group’s affairs can obtain a complete, fair and honest account of its performance.

The table below sets out the Group’s key stakeholders and a brief description of the nature of interactions.

Abridged sustainability report continued


ECONOMIC SuSTAINAbILITY PRACTICES Creating value for stakeholders through sustainable economic growth and development encompasses a number of elements. In generating economic value for shareholders and other stakeholders, RCL provides a quality and affordable food source to the South African nation and creates jobs both within the business and along the supply chain in the formal and informal sectors. The Group is committed to doing business through

fair commercial competitive practices and to trading with customers and suppliers that subscribe to the same high ethical business practices. The Group generated headline earnings from continuing operations of R18,1 million for the year ended 30 June 2013, from which major stakeholders benefited in varying proportions as indicated in the table below. Employees were the main beneficiaries.

2013 2012VALuE AddEd STATEMENT % R’000 % R’000

Revenue 10 108 812 7 855 142Paid suppliers (8 055 069) (5 971 078)

Value added by operations 2 053 743 1 884 064Finance income 53 874 7 370

Total value added 2 107 617 1 891 434

Applied as follows:To pay employeesSalaries, wages and benefits 74,6 1 572 952 67,1 1 269 554To pay providers of capital 11,8 248 084 13,7 258 604

Interest paid 7,3 153 675 0,6 11 358Dividends paid 4,5 94 409 13,1 247 246

Tax (excluding VAT) 3,6 75 148 7,6 143 469Reinvested in the business 10,0 211 433 11,6 219 807

Depreciation and amortisation 13,2 278 294 10,6 200 286Retained earnings (3,2) (66 861) 1,0 19 521

100,0 2 107 617 100,0 1 891 434

bEE Scorecard

bEE category ElementMaximum

score

Score

2012 2011

Direct empowerment Ownership 20 13,86 11,04

Management 10 2,68 2,92

HR development Employment equity 15 6,92 5,45

Skills development 15 7,21 4,11

Indirect empowerment Preferential procurement 20 15,39 12,48

Enterprise development 15 15,00 15,00

Socio-economic development 5 5,00 4,85

Total score 66,06 55,85

Recognition status Level 4100% contributor

Level 580% contributor

The current BBBEE certificate expires in September 2013. Verification for this financial period will be conducted in August 2013. The Group’s aim is to retain a level 4 status, by strategically focusing on three elements, namely Employment Equity, Skills Development (both of which are further detailed in the section on Social Sustainability Practices) and Preferential Procurement. The table below provides a breakdown of 2011 and 2012 BEE scores.

The Group continues to focus on all BEE procurement aspects, while encouraging further Qualifying Small Enterprises (QSE) and Exempted Micro Enterprises (EME) participation, and further leveraging opportunities of sourcing from black and black women owned suppliers.



Contract growersThe Group has achieved maximum points on Enterprise Development mainly due to Rainbow’s contract grower initiative which has proven its significant potential to deliver true empowerment to previously disadvantaged persons in the poultry industry. A contract grower is a farmer that rears chickens on behalf of Rainbow using the grower’s own farm and facilities, with Rainbow supplying the chicks, feed and in some instances the transfer of skills.

The fundamental principle is that the farms must be owner managed ensuring that there is a true transfer of skills, knowledge, accountability and responsibility from Rainbow to the grower. All growers are managed and mentored against the Rainbow standards and best operating practices. Rainbow’s key performance indicators (KPIs) are used and best operating practices manuals (BOPs) are followed ensuring that the strictest animal welfare and bio-security practices are enforced.

Growers or potential growers are given all the necessary guidance and support, including the development of the business plan, access to finance and day-to-day management of their independent growing operation. Regular interactive workshops are held with Rainbow’s local and international partners, suppliers and specialists to ensure that the necessary knowledge and skills are transferred and maintained at the highest levels.

For the reporting period Rainbow’s expenditure on contract growers was R217 million with 27% or R59 million of that amount paid to black growers.

ENVIRONMENTAL SuSTAINAbILITY PRACTICESThe management of RCL shall endeavour to conduct all its activities in such a way that the environment is not adversely affected. The Group acknowledges that it has a legal and moral responsibility towards the environment, its employees, its customers, its neighbours, its business and future generations. In addition, the Group favours suppliers and partners who have similar environmental policies.

The Group strives to use the best environmental practices on all land used for farming, processing, milling or distribution operations, whether it be owned or leased. See a summary of carbon emission and water reduction targets on page 47.

Nature conservationThe Group supports nature conservation and views it as an important national heritage. In this regard, Rainbow leases approximately 630 hectares to the North West Parks Board for the enlargement of the Rustenburg Nature Reserve, for one rand per annum. Additionally, at the Group’s 1 547 hectare Roodewaal farm near Koster in the North West province, Rainbow has permission from the Department of Nature Conservation to conserve game. Bordered by three game farms, it actively supports the North West Parks Board and game farming in the area by helping to ensure wildlife and plant conservation.

In KwaZulu-Natal (KZN), 2 000 indigenous trees were planted, acting as natural biosecurity barriers between farms and surrounding areas. This project was undertaken in partnership with the Wildlands Conservation Trust, directly benefiting local communities who grow seedlings in exchange for tuition aids.

Environmental management systemThe Group is in the process of implementing an Environmental Management System based on ISO 14001 principles. All mills are fully certified. All other Rainbow sites excluding Agriculture KZN have been through a stage one ISO 14001 certification audit. The sites are assessed for environmental legal compliance once in a three year cycle. Implementation is 76% complete with full completion expected by the end of the 2014 financial year.

Environmental Impact Assessments (EIA)The Group conducts Environmental Impact Assessments as required by the Department of Agriculture and Environmental Affairs when considering investment in new or upgrading existing facilities.

This process allows for comments and input from all interested stakeholders and affected parties. An Environmental Management Plan (EMP) is established for the construction phase of these projects, to serve as a guide to assist in minimising the potential environmental impact of these business initiatives.

Category winner at The Green Supply Chain 2012 Awards

– LED Poultry house lighting solution

– Best project between R1 million and R10 million

Poultry house upgrades in KwaZulu-Natal – Application of roof insulation

– Roof insulation resulting in improved temperature control

– Reduced heat loss and improved energy consumption


Environmental risks Risks are mitigated by

Natural resource depletion An updated environmental policy providing the framework for setting and reviewing environmental objectives and targets

Air pollutionOdours from processing plants and mills

Environmental management programmes and key performance indicators that are monitored regularly

Poultry disease outbreaks on farms Effective bio-security and security procedures at all operations

Waste disposal Service level agreements aligned to ISO 14000 standards with waste management service providers for the safe disposal of diseased birds and contaminated or hazardous waste

Fires Fire breaks maintained on all farming operations

Ground and surface water pollution Bund walls around all tanks and storage areas containing hazardous liquids

Hazardous chemical, diesel and gas spillage Chemical store rooms allowing for segregation of hazardous chemicals

Indirect emissions from high electricity consumption Smart metering monitoring key electricity consumers, i.e. mills, processing facilities, distribution warehouses and load reduction programmes implemented where applicable

Direct emissions from boiler fuel combustion Emissions testing of boilers as per Air Quality Act. Key performance indicators driving efficient boiler operation and fuel savings at all sites

Water shortages and water quality Regular water quality assessments and proactive management to ensure sufficient and reliable water supply

Daily operation, and project related activities and related risks

Induction of all new employees and contractors on specific site health and safety and environmental risks

Effective training programmes focusing on environmental policy and practices

Induction of all management staff on environmental and sustainability policies and strategies

Effective, documented health and safety procedures

Energy usageTo drive energy saving and carbon footprint reduction the Group has set a target reduction of 5% per ton produced on heat and power consumption. This target is based on 2012 consumption and is supported by a number of initiatives:

• Poultry houseupgradesconsistingof ventilationcontrol andredesign ensures that electrical and heating requirements are reduced. Improved insulation of poultry houses also contributes to energy savings and optimum temperatures inside poultry houses

• Rainbow’s agricultural engineers continued the rollout ofthe improved poultry house lighting systems. Rainbow was announced winner for Best Project between R1 million and R10 million at the Green Supply Chain 2012 Awards. Rainbow implemented a green supply chain solution by converting the incandescent lighting in 36 facilities in three provinces to LED systems with dimming controllers, reducing consumption by 117 000 kWh per month. The aim of the project was to reduce electricity consumption, improve light quality and reduce waste and maintenance costs. Incandescent and compact fluorescent lights were replaced with LED lights to ensure better uniformity — from 50% to 80% — and bulb life was increased from 900 hours to 4 500 hours. This is the first poultry house lighting solution to comply with the International Cobb poultry husbandry standard and with national regulations for electrical installation

• Installation of variable speed drives (VSDs) at the VectorPeninsula distribution hub resulted in reduced energy consumption by up to 70% and a reduction in noise levels by up to 10% on evaporators

• Desiccant dryer optimisation at smaller distribution facilitiesrealised energy savings of up to 13 000 kWh; and

• SmartmeteringenablesRainbowtogathercriticallyimportantdata on electricity consumption and demand patterns. It enables facility managers and engineers to trend historical consumption patterns and to exercise better control over how operations are managed. Smart metering provides the necessary “baseline” data for feasibility studies on energy conservation, optimisation and co-generation initiatives. It also provides good insight into post-implementation success rates when comparing pre- and post-installation data sets. All milling operations and processing plants have installed smart metering systems.

waterPoor water quality and water shortages are significant potential risks to the business. Rainbow has mitigated the risk of water shortages by building additional reservoirs to hold capacity in times of shortage, and is looking at ways of reducing the demand for water in rearing the parent stock, broiler birds and in the slaughtering process. With significant water usage, water effluent needs to be managed and every effort is made to recycle effluent water. Measuring wastage enables early detection of system defects that can be rectified to minimise potential losses and impact on the environment.

Recycled water from the three major primary processing plants is used as grey water for outside cleaning and transporting production waste, and the balance is discharged to municipal effluent plants for further recycling. Water is only discharged or used as recycled water once the Biological Oxygen Demand (BOD) and Chemical Oxygen Demand (COD) levels are reduced to acceptable standards.

ENVIRONMENTAL RISK RCL has identified the following potential environmental risks in its operations:



Rainbow has undertaken to improve the quality of effluent at its Bushvalley operation in Limpopo, by investing in an effluent treatment plant which operates with a number of treatment ponds wherein enzymes break up proteins and fats in the effluent. This system will treat raw effluent with levels of ≥3 000 COD to river discharge limits of 75 COD using no chemicals. The project became fully operational at the end of August 2013.

waste and recycled productsThe Group analyses all types of waste material generated. Options for possible re-use and disposal are assessed to ensure that it is used or disposed of in the most environmentally friendly way.

Rainbow uses the following recycled products from other suppliers in its processes

• Woodshavingsasbeddingforthechickenhouses

• Recycledpaperisutilisedinthefinishedproductoutercartonpackaging

• Recycled plastic is utilised in the manufacture of plasticcatching crates; and

• 150tonsofrecycledconstructionrubblewasusedtoimproveaccess to certain KwaZulu-Natal farms.

PackagingPackaging preserves, protects, contains, transports, informs and sells Rainbow’s products. Reducing the pre- and post-consumer impact of packaging materials is a responsibility the Group takes very seriously. Rainbow has also added the recycling codes and statements such as “care for our environment” and “dispose of packaging responsibly” to all packaging material. Rainbow has also challenged its strategic packaging suppliers to assist with finding ways of implementing the 4Rs to all packaging materials used (i.e. Reduce, Re-use, Recycle, Recover).

The next financial period will see a rollout of the Rainbow Packaging Strategy and its supporting targets. The amount of packaging required to package one ton of chicken has a 69% lower carbon impact on the environment than one ton of chicken returned and dumped. Although packaging has a comparatively small contribution to product related carbon emissions, it plays an extremely important role in protecting the product and ensuring that it reaches the consumer looking and tasting good.

Specific packaging projects will therefore be implemented and contribute directly, alongside electricity, water and fuel projects, to our overall company sustainability target of a 34% reduction in carbon emissions by 2020.

The future focus will be on:

• Reducingfoodwaste

• Reducingcarbonemissions

• Reducingwastetolandfill

Baseline audits conducted on packaging consumption have allowed specific targets to be set towards reducing the impact on waste to landfill despite growing production volumes.

By designing packaging with the environment in mind, Rainbow has reduced indirect CO2 emissions through the following initiatives:

• Eliminating 230 tons/annum of carton board (equivalent to 96 tons CO2e/annum) by moving certain products out of carton board and into polypropylene plastic bailer bags

• With increased focus, improved processes and successfulimplementation, Rainbow continues to keep split bag returns down which would have negatively impacted post-consumer waste to landfill with an extra 8 tons of Low Density Polyethylene (LDPE) plastic – together with chicken dumped – equivalent to 8 300 tons CO2e/annum

• Rainbow successfully converted 100% of cartons usedfor frozen product distribution to recycled liners avoiding consumption of 346 tons of virgin liner; and

• Cartonboardboxesusedassecondarypackaginghavebeenreplaced with re-useable plastic crates. Care is taken to ensure that a high level of hygiene is maintained at all times. This initiative has already achieved a 51 ton carton board saving since June 2012 with a forecasted 94 tons per annum saving equivalent to 98 tons of CO2e/annum.


Emissions to airThe Group recognises its responsibilities in terms of the Air Quality Act, No 39 of 2004, and as such ensures that Rainbow’s animal matter reduction plants, coal-fired boilers and boiler stacks are well maintained and routinely inspected.

An Environmental Air Quality management procedure has been circulated to and accepted by all areas of the business. The objective of this procedure is to protect the environment by providing reasonable measures for the protection and enhancement of the quality of air, the prevention of air pollution and ecological degradation; and to enhance the quality of ambient air for the sake of securing an environment that is not harmful to the health and wellbeing of people.

Additional management process controls within Rainbow’s rendering plants ensure:

• Capacitiesofallcookersanddriersarenotexceeded

• Alternative disposal of raw material is available throughregistered waste companies

• Cookingrecipesarebalancedtopreventodours

• Routinescheduledmaintenanceiscarriedoutfortheeffectiverunning of all equipment; and

• Theuseofspecialistconsultantstoinvestigatepossiblefurtherimprovements in rendering of processing waste material.

Rainbow has invested in odour control systems at the Worcester, Rustenburg and Hammarsdale processing plants.

While there is currently no legislation governing vehicle emissions, the Group and especially Vector is conscious of this impact on

the environment and as a result all vehicles are maintained and replaced on a regular basis to minimise both emissions and diesel fuel wastage.

Carbon disclosureIn the 2010 Carbon Disclosure Leadership Index, the Group achieved 84% and joint seventh position in the SA top 100 companies. Due to a recent reduction in market capitalisation, the Group was not included in the 2011, 2012 and 2013 samples, however, RCL continues to participate in Remgro’s submission of the Carbon Disclosure Project by providing information on its greenhouse gas emissions.

Carbon footprint trendsCarbon footprint trend data illustrates our progress with regard to emissions reduction strategies. The graph below shows the carbon footprint for 2011 to 2013. Scope 1 emissions declined by 6,4% from 2011 to 2012 as a result of a reduction in direct fuel consumption mainly through improved efficiencies in coal boilers. The increase in Scope 1 emissions from 2012 to 2013 by 29% was due to the addition of operational capacity at Bushvalley and a change from LPG to coal heating at a number of broiler farms. Scope 2 emissions increased by 4,9% from 2011 to 2012 as a result of additional cold storage infrastructure constructed and leased as part of the distribution network expansion and declined by 1% in 2013 due to efficiency initiatives. Scope 3 emissions remained fairly constant from 2011 to 2013.

While the absolute carbon footprint increased by 8% from 2011 to 2013, carbon emissions per ton of product sold reduced from 0,68 tCO2 in 2011 to 0,58 tCO2 in 2013. The annual footprints and tCO2/ton processed for sales are summarised in the graph below.

CO2 intensity (tCO2e/ton processed for sales)

2011 2012 2013

Carbon footprint by Scope (tCO2e)

2011 2012 2013

350 000

300 000

250 000

200 000

150 000

100 000

50 000

0

0,80

0,70

0,60

0,50

0,40

0,30

0,20

0,10

0

Scope 1 Scope 2 Scope 3



Greenhouse gas emission reduction goals and targetsEmission reduction action plans, goals and targets are valuable as they illustrates RCL’s plans to reduce emissions. Performance tracking highlights progress with regard to targets. The table below shows RCL’s action plans, targets and performance.

CARbON EMISSION ANd wATER REduCTION TARGETS

Action plansLong-term reduction targets 2013 Targets

Performance (2012 versus 2011) 2014 Targets

CA

Rb

ON

EM

ISS

ION

S

Manage Group sustainability report and carbon disclosure project

Measurement systems to be in place measuring at least Scope 1 and Scope 2 carbon emissions in all areas of the Group

Participate in CDP Participated in CDP as part of Remgro submission

Participate in CDP

Add specific carbon reduction targets to Group divisional SIA’s and monitor monthly

As of 2010, reduce carbon emissions by 34% by 2020

Reduce emissions by 5%

Compared to the 2010 base year RCL has: •Reducedemissions

by 0,4% in 2011 •Increasedemissions

by 1,5% in 2012

Reduce emissions intensity per ton produced by 5%

Improve monitoring and management

Undergo energy efficiency assessments

Consider energy efficient equipment upgrades

Co-ordinate and manageenergy consumption reduction projects

As of 2010, reduce grid generated electricity by 30% by 2020

Reduce electricity by 5%

kWh consumption (includes Vector) increased by 3% due to operational growth

Reduce electricity per ton produced by 5%

Compared to the 2010 base year, by 2020 we aim to reduce use of fossil fuels by 10%

Reduce gas and coal use per ton produced by 5%

Coal consumption increased by 3%

Reduce coal consumption per ton produced by 5%

LPG consumption increased by 3%

Reduce LPG consumption per ton delivered by 5%

Compared to the 2010 base year, by 2020 we aim to reduce vehicle emissions by 20% and increase vehicle fuel economy by 20%

Reduce diesel consumption per ton delivered by 5%

Tracking of diesel consumption started in 2012

Reduce diesel consumption per ton delivered by 3%

Study feasibility of co-generation projects (Waste-To Energy, PV Solar and Wind) and re-define payback model

As of 2010, reduce grid generated electricity by 30% by 2020

Identify feasible renewable energy sources

A number of technologies considered

Roll out one renewable energy pilot project

wA

TE

R u

SA

GE

Add specific water reduction targets to Group divisional SIA’s and monitor monthly

Reduce processing water usage to 8ℓ per bird

Reduce ℓ/bird for entire supply chain by 1ℓ

Water consumption increased by 4%

Reduce ℓ/bird by 5% in each area of Rainbow’s business

Co-ordinate and manage water consumption reduction projectsImplement water-efficiency projects where feasible


SOCIAL SuSTAINAbILITY PRACTICES EmployeesThe Group recognises the importance of its people in attaining sustained business performance. Human resource policies and operational strategies, which include an understanding of national imperatives and relevant legislation, have been implemented across the Group. This provides a platform for building a community of inspirational people who have a common purpose. Specific focus areas include:

Key area business response

Human capital •TheGroupfirmlybelievesthatsustainabilityissynonymouswithachievinglong-termhumancapitaldevelopment and corporate social responsibility objectives. The “Good to Great” journey process has again been effective in developing the business leadership and achieving alignment with the respective strategies

Talent management

•Attractingandretainingtalent,supportedbyleadershipandtalentmanagementprogrammes,iskeytotransforming the organisation from “Good to Great”

•Underpinningthisareindividualdevelopmentplansandsoundsuccessionplanswhichensurethathighpotential employees are recognised and prepared for the future

•Aspartofthetalentmanagementprocess,peopledevelopmentsystemsandprocesseshavebeenenhancedwith greater emphasis on the integration of the 2015 Employment Equity objectives. The Leadership Standards and Behaviours have been rolled out across the business, promoting behaviours that ensure every manager is accountable for sustainable delivery. Employees are also able to access specific training within defined learning pathways, such as leadership and professional skills

Employee relations •TheGroupacknowledgestherightofallitsemployeestofreedomofassociation,andactivelydrivesbestmanagement practices in all its operations in order to create a work environment conducive to productivity, participation and organisational stability

•Throughconstructiverecognitionagreements,theGrouphasasignificantbargainingunit,with74%ofitsemployees within the bargaining unit, and for whom the recognised trade unions negotiate annually their salaries and conditions of employment. To ensure proper communication and engagement with the recognised trade unions, our social partners and various trade union regional and site based employee representative forums are in place to facilitate information sharing and consultation

•Inordertoensureequitableandfairworkingconditions,theGrouphaswelldevelopeddisciplinaryandgrievance policies and procedures. These policies and procedures are communicated to all employees during their induction, through training, on the intranet and through ongoing communication of the Group’s standards, policies and procedures

Remuneration •TheGroup’sphilosophyistorewardforperformancethatachievestheorganisation’sobjectives.Competitiveremuneration packages are structured in order to attract, reward and retain the talent needed to achieve the strategic goals. Salaries are reviewed annually

•TheGroupcontinuallyreviewsitsrewardandremunerationpoliciesandstrategyinlinewithindustrybestpractice. By doing this, an effective and equitable compensation practice across the organisation is maintained

Resourcing Resourcing scarce and critical skills has continued to prove challenging, especially within specific geographies. The Group has focused on improving resourcing strategy and practices by:

•Enhancingtheuseofpsychometrictoolsinaidingtherecruitmentdecision

•ImprovingtheuseofresourcingperformanceindicatorsaspartofanintegratedHRdashboard

•Leveragingtechnologyandmaximisinguseofane-recruitmentportal

•Effectivemanagementofresourcingserviceprovidersandservicelevelagreements

•Maximisingtheeffectivenessofmediaadvertisingchannelsforresourcing

•Growingthebursaryandgraduateentrychannels;and

•Emphasisonemploymentequity(EE)appointments

By acknowledging that no resourcing strategy operates in isolation, but rather is integrated into the overall HR strategy and policy framework, the following key activities have been implemented:

•CentralisationofmanagementrecruitmentacrosstheGroup,streamliningtheprocess,creatingconsistencyinregard to best practices, creating a positive experience for applicants

•ContinuedfocusonAfrican,ColouredandIndian(ACI)recruitsatmanagementlevel

•Developmentofprofessionalrecruitmentskillsamongsthumanresourcesandlinemanagementteams

•GloballyrecognisedbehaviouraleventinterviewingprocesseshavebeenrolledouttomanagerswithintheGroup to equip them with the skills they need to deliver the resourcing strategy and partner with recruitment to find the best talent for their teams; and

•BuiltarecruitmentnetworktoenhanceRCL’semployerbrandinthemarketplace



Key area business response

Employment equity •RCLisanequalopportunityemployercommittedtoapolicyofemploymentequity.Progresstowardsachievingthe Group’s workforce diversity objectives is measured through Group targets and monthly progress reporting

•Thereisaprocessofiterativeconsultationandengagementwiththebusinessesemploymentequitycommittees to ensure that the Group delivers against its employment equity plan for 2015

•Continuousengagementandconsultationwiththeregionalemploymentequitycommitteesforallissuesrelating to workplace diversity

•Theintegratedbusinesstransformationor“journey”processpreviouslyrolledouttomanagementwithinthebusiness has been further rolled down to all employees at all levels within the organisation. This provides the opportunity for all employees to connect with and relate to fellow employees from many different cultures, backgrounds and genders, and encourages employees to view each other as unique individuals

Staff healthand safety

•AnationalhealthandsafetypolicyhasbeenadoptedbytheBoardwhichcommitsalloperationsandfacilitiesto the provision and maintenance of a working environment that is healthy and safe

•Seniormanagersinvestigatelosttimeinjuriesanddetermineactionstopreventarecurrenceofincidents

•Riskmanagementaudits(bothinternalandexternal)andhealthandsafetykeyperformanceindicatorsarekeyelements in evaluating performance

•Healthandsafetyregisterspecificallydesignedtohighlightandaddressanylegalissues

•Occupationalhealthcareinfrastructurewithaccreditedserviceproviderstoprovidebestpractice

•Healthandsafetyrisksaremitigatedbyhaving:

– Dedicated risk control personnel in each operation

– Health and Safety Committees in each operation consisting of elected health and safety representatives, workers’ union representatives and management, who meet on a monthly basis to address risks

– Occupational health and safety risk identification and assessment

– Policies and procedures on how to mitigate each of the risks, in addition to ensuring compliance with all legislation

– Centralised reporting and monitoring of all issues and incidents; and

– Training programmes for all employees in all aspects of health and safety, ensuring appropriate understanding, accountability and responsibility for health and safety

•DisablingIncidentfrequencyrate(DIFR)relatestothenumberofdisablingincidentsper200000man-hoursworked. A disabling incident is defined as any incident in which an employee is booked off work for more than a shift following the incident. The DIFR for 2012/13 was 1,67

Employee wellnessand HIV/AIDS

•TheGroupiscommittedtoprovideemployeewellnessprogrammesthatensurethatitsemployeeshaveaccess to support initiatives that focus on health and wellness, alcohol and substance abuse and HIV/AIDS. The Group’s HIV/AIDS policy guides the business in the management of HIV/AIDS, placing emphasis on education and peer education, prevention, voluntary counselling and testing

•AspartofHumanResourcesstrategytodelivervitalityandemployeewellness,aNationalWellnessDaywasheld on 30 November with specific emphasis on providing assessment facilities in order to create awareness around various health and wellness issues and to empower employees to take responsibility for their health status

•TheGroupengagestheservicesofCarewaysandpartnerswithLifeOccupationalHealthandOccuwelltoensure that the Group delivers professional onsite service in many of the operations


ConsumersConsumers are becoming increasingly proactive with regard to issues such as health and safety, farming practices, animal welfare, product safety and product labelling. The Group regards these issues as critical to its business and addresses them in a variety of ways.

Consumer complaintsThe Group continuously engages with consumers through the following:

• Nationalcomplaintssystem

• TheRainbowwebsite

• Consumerimmersions

• Consumercareline

• Advertisingcampaignsintheprintandmedia;and

• Consumerproductsurveys.

The national complaint system provides a care line for all Rainbow products. All details are centrally logged and emails are forwarded daily to the national complaints department where dedicated personnel manage all complaints. Personal contact with customers and consumers, response time and actions taken to prevent the same problems from occurring again, are keys to

the success achieved thus far with the care line. The information is communicated to all relevant teams for action and presented to executive management at the national management review. In 2013, the Group responded to 99% of complaints within 48 hours.

Through these avenues the Group receives feedback from consumers and customers, covering complaints, queries and compliments.

ISO management systemsAs a participant in the food industry, the Group complies with the strictest standards and continuous monitoring by internal and external parties ensures that these standards are adhered to. International Standards Organisation (ISO) principles are therefore embedded in the TIMS across the supply chain to ensure customer satisfaction, to build customer trust, to reap commercial benefits and to drive sustainability in a changing environment.

Stakeholder concerns

business response

Product quality and safety

The Group demonstrates its commitment to product quality and safety through:

•Appointingcertifiedmeatinspectors,processingandengineeringpersonneltoensuresafeproductswhichcomply with defined specifications

•AppointingSafetyHealthEnvironmentQuality(SHEQ)teamstoverifyprocessing,foodsafety,legalandqualitycompliance by conducting audits

•AdoptingTotalIntegratedManagementSystem(TIMS)toolswhichareusedtomonitor,trend,verify,validateand report facility standards, equipment standards, processes and activities that impact on processing performance, food safety and product quality

•Coldchainmaintenanceduringprocessing,warehousingandtransport

•Ensuringthatrawmaterials,ingredientsandpackagingmaterialsaretraceablewithmockrecallsbeingconducted; and

•CompliancewithISO22000

Labelling •TheGroupiscommittedtoadheringtolabellingregulations

•ConformstotheregulationsintheFoodstuffs,CosmeticsandDisinfectantsAct,No154of1972andcompliance with regulation R146 was completed in March 2012

•SupportstheConsumerGoodsCouncilofSouthAfrica(CGCSA)andGlobalStandards(GS1)inlistingofallproducts with GS1

•LabellingofallsaleableunitswithEAN-13barcodesandcartonswithITF-14barcodes

•Cartonlabelreflectsproductionbatchnumber,casenumber,productiondateandsell-bydate

•Suppliersofpackagingmaterialwithpre-printedbarcodesareobligedtocomplywithGS1standards

Halaal status •ChickensareslaughteredbyHalaalslaughterersandallingredientsusedforRainbowbrandshaveHalaalstatus

•InspectorsfromtheSouthAfricanNationalHalaalAuthority(SANHA)andfromtheMuslimJudicialCouncil(MJC) ensure that all practices are in accordance with Halaal standards

Consumer insight •MarketingandproductdevelopmentteamsensurethattheGroupdevelopsandmarketscompetitivebrandsatcompetitive prices

•TheGroupkeepsabreastofnationalandinternationaltrends,throughresearchandconsumerinteractionswithin a variety of target markets



ISO Operation

ISO 22000 National office, further processing plants, Hammarsdale, Rustenburg and Worcester primary processing plants, agricultural operations, feed mills and distribution centres

ISO 9001 Feed mills

ISO 14001 Feed mills

ISO 14001* Agricultural operations, further processing plants, primary processing plants and distribution hubs

OHSAS 18001 Hammarsdale primary processing plant and feed mills

OHSAS 18001* Rustenburg and Worcester primary processing plants, further processing plants, distribution hubs and agricultural operations

ISO 17025 Laboratories

* In process of being implemented

CORPORATE SOCIAL INVESTMENTRainbow, as South Africa’s largest processor and marketer of chicken, provides protein to a large number of South Africans, thus playing an important role in feeding the nation. RCL believes that it has a responsibility to assist in improving the lives of disadvantaged communities in the areas in which the company operates, and has a corporate social investment (CSI) policy which seeks to make a significant impact in this regard.

A key focus of the Group’s CSI policy is education, and the Group is proud to be involved with the Star Schools Project. The Group has partnered with Star Schools to drive this programme, allowing underprivileged high school learners in grades 10 to 12 access to extra tuition in Maths, Science and English. Established in Hammarsdale in 2007, the programme has since been extended to Worcester and Rustenburg. To date over 350 learners have passed through the programme, which has brought about significant improvements in individual performance and the group pass rate. Top performers in each location are recognised and bursaries for tertiary study are awarded. Group staff also offer career guidance at each site’s annual career day.

RCL encourages the learners to continue their studies in such fields as food technology and engineering, and given the shortage of skills in these areas, this will ensure a valuable future resource to the Group.

The Group has an established bursary programme aimed at the children of our employees, and is able to provide a bursary to children with good academic results and potential, but without the financial means to achieve a tertiary qualification. Total CSI spend (excluding bursaries, HIV, health and wellness spend) was R4,15 million in 2013.

RCL understands that the arts play a vital role in developing the “whole person” and boosting individual self-esteem. To give young actors and singers exposure to the “real” theatre environment, RCL sponsors the Young Performers Project, which for the past 12 years has been producing a top-class annual musical with a cast of performers drawn from schools around Durban.

RCL achieved the maximum score of 5 for the socio-economic development element of the B-BBEE scorecard.

ASSuRANCESustainability performance and reporting has not been independently assured for the year. The Board has relied on internal assurance providers with regard to the reliability of sustainability issues in the integrated report. Independent assurance will be included on the Board’s agenda for the 2014 financial year.

The Group has implemented the following ISO Management Systems


KEY STATISTICS2013 2012

Rm Rm

ECONOMIC PERFORMANCE INdICATORSImpact on suppliersTotal paid to suppliers 8 057 5 971Total contracted spend# 1 935 1 659Major sources of suppliers#:– transport 436 460– total contract growers 166 173– BEE contract growers 59 45– electricity 285 233Impact on employeesTotal payroll and benefits 1 571 1 270Impact on providers of capitalTotal interest paid to funders 154 11Total dividends to ordinary shareholders 94 247Reserves (67) 20Impact on public sectorTax (excluding VAT) 75 143Impact on communitySocial responsibility expenditure# 4 4

ENVIRONMENTAL PERFORMANCE INdICATORS#

Water consumption (kℓ) 8 225 608 7 795 275Energy consumption– coal (tons) 47 860 25 789– gas (kℓ) 18 608 30 571– diesel (kℓ) 5 885 5 916Recycled waste products– cardboard waste (tons) 352 327– poultry litter (m3) 402 214 393 924– plastic waste (tons) 455 439– scrap metal and timber (tons) 654 546– treated water for recycling (kℓ) 2 340 960 2 368 833– treated water as a percentage of total water consumption (%) 29 30Non-compliance, prosecution and fines nil nil

SOCIAL PERFORMANCE INdICATORS#

Full-time employees 13 308 7 942Net full-time employment reduction 248 66Bargaining unit employees (%) 74 74Training expenditure (Rm) 14 15Disabling incident frequency rate 1,7 1,6

# Excludes Foodcorp.


Ethical leadership and corporate citizenship

✔ Effective leadership based on an ethical foundation

✔ Responsible corporate citizen

✔ Effective management of company’s ethics

boards and directors

✔ The Board is the focal point for and custodian of corporate governance

✔ Strategy, risk, performance and sustainability are inseparable

• The Board should consider business rescue proceedings (BRP) when appropriate1

✔ Directors act in the best interests of the company

¥ The Chairman of the Board is an independent non-executive director2

✔ Framework for the delegation of authority has been established

# The Board comprises a balance of power, with a majority of non-executive directors who are independent3

✔ Directors are appointed through a formal process

✔ Formal induction and ongoing training of directors is conducted

✔ The Board is assisted by a competent, suitably qualified and experienced Company Secretary

¥ Regular performance evaluations of the Board, its committees and the individual directors4

¥ Appointment of well-structured committees and oversight of key functions5

✔ A governance framework should be agreed between the Group and its subsidiary Boards

✔ Directors and executives are fairly and responsibly remunerated6

✔ Remuneration of directors and prescribed officers disclosed

✔ The company’s remuneration policy is approved by its shareholders7

Internal audit

✔ Effective risk-based internal audit

✔ Written assessment of the effectiveness of the company’s system of internal controls and risk management

✔ Internal audit is strategically positioned to achieve its objectives

Audit Committee

✔ Effective and independent

✔ Suitably skilled and experienced independent non-executive directors

✔ Chaired by an independent non-executive director

✔ Oversees integrated reporting

✔ A combined assurance model is applied to improve efficiency in assurance activities

✔ Satisfies itself of the expertise, resources and experience of the company’s finance function

✔ Oversees internal audit

✔ Integral to the risk management process

✔ Oversees the external audit process

✔ Reports to the Board and shareholders on how it has discharged its duties

Compliance with laws, codes, rules and standards

✔ The Board ensures that the company complies with relevant laws

✔ The Board and directors have a working understanding of the relevance and implications of non-compliance

✔ Compliance risk forms an integral part of the company’s risk management process

✔ The Board has delegated to management the implementation of an effective compliance framework and processes

Governing stakeholder relationships

✔ Appreciation that stakeholders’ perceptions affect a company’s reputation

✔ Management proactively deals with stakeholder relationships

✔ There is an appropriate balance between its various stakeholder groupings

✔ Equitable treatment of shareholders

✔ Transparent and effective communication to stakeholders

¥ Disputes are resolved effectively and timeously8

The governance of information technology

✔ The Board is responsible for Information Technology (IT) governance

✔ IT is aligned with the performance and sustainability objectives of the company

✔ Management is responsible for the implementation of an IT governance framework

✔ The Board monitors and evaluates significant IT investments and expenditure

✔ IT is an integral part of the company’s risk management

✔ Information assets are managed effectively

✔ The Risk Committee and Audit Committee assist the Board in carrying out its IT responsibilities

The governance of risk

✔ The Board should be responsible for the governance of risk and setting levels of risk tolerance

✔ The Board should determine the levels of risk tolerance

✔ The Risk Committee assists the Board in carrying out its risk responsibilities

✔ The Board delegates the risk management plan to management

✔ The Board should ensure that risk assessments and monitoring are performed on a continual basis

✔ Frameworks and methodologies are implemented to increase the probability of anticipating unpredictable risks

✔ Management implements appropriate risk responses

✔ The Board receives assurance on the effectiveness of the risk management process

✔ Sufficient risk disclosure to stakeholders

Integrated reporting and disclosure

✔ Ensures the integrity of the company’s integrated report

✔ Sustainability reporting and disclosure is integrated with the company’s financial reporting

# Sustainability reporting and disclosure is independently assured9

Key: ✔ Compliant ¥ Partially compliant # Under review • Not applicable

King III indexThe following provides an assessment of RCL’s compliance with King III


Note Explanation Further reading

1 The Board has however adopted a BRP policy

2 The Chairman of the Board is not independent due to his position as CEO of Remgro Limited who is the major shareholder of RCL. Mr RV Smither maintains his role as RCL’s lead independent director

Board structure and composition on pages 12 and 13

3 The majority of the directors are currently not independent, however, an appropriate balance of power exists where the decision-making process cannot be dominated by one individual or group of individuals

Board structure and composition on pages 12 and 13

4 The Board and committees perform a self-evaluation annually, but have decided not to disclose results and action plans in the integrated report due to the potentially sensitive nature thereof

5 The Chairman of the Risk and Social and Ethics Committees is not independent. Other Committee directors however take responsibility for ensuring that the Chairman encourages proper deliberation of all matters requiring the Committee’s attention

6 The Board does not believe that directors should earn attendance fees in addition to a base fee. Many directors add significant value to the Group outside of the formal Board and committee meetings

Remuneration report on page 39

7 The Board does not intend to ask the shareholders for a non-binding approval for RCL’s remuneration policy. The rationale and basis for the Group’s executive remuneration policy is carefully considered by the Remuneration and Nominations Committee and is documented in the annual report

Remuneration report on page 39

8 The Board does not intend to institute a formal dispute resolution process as it believes that the existing processes within the Group operate satisfactorily and do not require a more formal and separate mechanism. Shareholders have remedies in terms of the Companies Act

9 Independent assurance in respect of sustainability reporting and disclosures will be considered for the 2014 annual report

Internal assurance on page 52


Financial statements

REGULATORY APPROVALSApproval of the annual financial statements 57Report of the Audit Committee 57Certificate by the Company Secretary 57Report of the directors 58Independent auditor’s report to the shareholders 59

GROUP FINANCIAL STATEMENTSConsolidated statement of financial position 60Consolidated income statement 61Consolidated statement of comprehensive income 61Consolidated statement of changes in equity 62Consolidated cash flow statement 63Notes to the consolidated cash flow statement 64Accounting policies 65Notes to the consolidated financial statements 77

COMPANY FINANCIAL STATEMENTSCompany statement of financial position 115Company statement of comprehensive income 115Company statement of changes in equity 116Company cash flow statement 116Notes to the company cash flow statement 116Notes to the company financial statements 117


The directors are responsible for the preparation and integrity of the annual financial statements of the company and the Group and other information included in this report which has been prepared in accordance with International Financial Reporting Standards. The directors are also responsible for the systems of internal control.

The directors, supported by the Audit Committee, are of the opinion, based on the information and explanations given by management and the internal auditors and on comment by the independent external auditors on the results of their statutory audit, that the Group’s internal accounting controls are adequate, so that the financial records may be relied upon for preparing the financial statements and maintaining accountability for assets and liabilities. The directors believe that the Group’s assets are protected and used as intended in all material respects with appropriate authorisation. Nothing has come to the attention of the directors to indicate that any material breakdown in the functioning of these controls, procedures and systems has occurred during the period.

In preparing the annual financial statements, the Group has used appropriate accounting policies, supported by reasonable judgements and estimates, and has complied with all applicable accounting standards. The directors are of the opinion that the annual financial statements present fairly the financial position of the company and the Group at 30 June 2013 and the results of its operations for the year then ended. The directors are also of the opinion that the Group will continue as a going concern in the year ahead.

The annual financial statements set out on pages 60 to 119, which have been prepared on the going concern basis, were approved by the Board of directors on 27 August 2013 and are signed on its behalf by:

JJ Durand M DallyNon-executive Chairman Chief Executive Officer

27 August 2013

Report of the Audit Committeefor the year ended 30 June 2013

The Audit Committee submits this report, as required in terms of the Companies Act of South Africa, in respect of the year ended 30 June 2013. The Audit Committee consists of three non-executive directors who act independently as described in section 94 of the Act. During the year three meetings were held and the committee members attended all the meetings. At the meetings the members fulfilled all their functions as prescribed by the Act. A detailed list of the functions of the Audit and Risk Committees is contained in the corporate governance report. The Audit Committee has satisfied itself that the auditors are independent of the company and the Group and are therefore able to conduct their audit functions without any influence from the Group.

RV SmitherChairman of the Audit Committee

27 August 2013

Certificate by the Company Secretaryfor the year ended 30 June 2013

I hereby certify that in respect of the year ended 30 June 2013, the company has lodged with the Registrar of Companies all such returns as are required of a public company in terms of section 88(2) of the Companies Act of South Africa and that all such returns are true, correct and up to date.

JMJ MaherCompany Secretary

27 August 2013

Approval of the annual financial statementsfor the year ended 30 June 2013


CHANGE OF NAMEAt a general meeting of shareholders on 2 August 2013 a special resolution was approved to change the name of the company from Rainbow Chicken Limited to RCL Foods Limited. The reason for the change is the Board believes that, post completion of the acquisition of a controlling interest in New Foodcorp Holdings Proprietary Limited (Foodcorp), the new name will better reflect the Group’s strategic vision as a consumer focused food business that adds value for consumers and customers through its range of market leading brands.

NATURE OF BUSINESSRCL Foods Limited (RCL) is committed to its strategic focus of building a diversified food business of scale in sub-Saharan Africa that has compelling brands that deliver to consumer and customer needs.

It is the holding company of three principal operating subsidiaries, Rainbow Farms Proprietary Limited, Vector Logistics Proprietary Limited and Foodcorp Proprietary Limited.

STATED CAPITALA R3,9 billion equity raising rights offer was completed in March 2013 which necessitated an increase in the authorised ordinary shares of the company to 1 billion. The issued ordinary shares increased by 279 264 878 (2012: 1 065 999) during the year due to the rights offer and share options and share appreciation rights being exercised. At the reporting date, unexercised share options totalling 8 735 693 (2012: 10 478 408) had been granted to participants in the RCL Share Incentive Scheme. No further options will be issued and the scheme will be allowed to run its course. At the reporting date 24 179 966 unexercised share appreciation rights (2012: 16 888 147) had been granted to participants. A conditional share plan was approved during the year and 1 977 746 conditional shares were awarded under the scheme. These options, rights and conditional shares are granted at the discretion of the Remuneration and Nominations Committee.

On 30 July 2008, 51 177 217 shares were issued to Eagle Creek Investments 620 Proprietary Limited in terms of the BEE transaction. For accounting purposes, these shares are treated as not issued.

Shareholders will be asked to consider an ordinary resolution at the forthcoming annual general meeting for the unissued shares of the company to remain under the control of the directors until the following annual general meeting.

FINANCIAL RESULTSThe profit for the year attributable to equity holders of the company amounted to R26,5 million (2012: R266,8 million). This translates into a headline earnings per share from continuing operations of 4,6 cents (2012: 88,4 cents) based on the weighted average shares in issue during the year with the prior year restated for the impact of the rights offer. The restatement was not a material adjustment.

DIVIDENDS In view of Rainbow’s poor trading results and the uncertainties relating to the poultry industry, the Board has resolved not to declare a dividend for the 2013 financial year (2012: final dividend 32,0 cents and total dividend 60,0 cents).

BEE TRANSACTIONRCL’s BEE transaction was concluded on 30 July 2008 with the issue of 51 177 217 shares to the consortium. As noted in the 2009 annual report, for accounting purposes the transaction is treated as an option and therefore has not had an impact on the per share calculations. The only impact on RCL’s results is the recurring employee portion of the option charge.

SUBSIDIARIESDetails of RCL’s interest in its subsidiaries are set out in note 1 on page 117. The aggregate profit after tax, so far as concerns the interest of the company in its subsidiaries, amounts to R40,5 million (2012: R316,6 million).

HOLDING COMPANYIndustrial Partnership Investments Proprietary Limited, a company incorporated in the Republic of South Africa and a wholly owned subsidiary of Remgro Limited, is the holding company of RCL.

DIRECTORS The names of the directors are listed on pages 12 and 13.

DIRECTORS’ SHAREHOLDINGSAt the date of this report, the directors in aggregate held direct beneficial interests in 1 451 653 (2012: 1 342 000) ordinary shares in the company and had indirect beneficial interests in 6 693 323 (2012: 6 673 071) ordinary shares. Details of directors’ shareholdings are set out in note 31 of the notes to the Group annual financial statements.

SUBSEQUENT EVENTSOn 1 July 2013, RCL agreed with Foodcorp management to purchase their 23,9% shareholding in New Foodcorp Holdings Proprietary Limited for a cash consideration of R393,0 million. No other material change has taken place in the affairs of the Group between the end of the financial year and the date of this report.

Report of the directors for the year ended 30 June 2013


We have audited the consolidated and separate financial statements of RCL Foods Limited set out on pages 60 to 119, which comprise the statements of financial position as at 30 June 2013, and the income statements, statements of comprehensive income, statements of changes in equity and statements of cash flows for the year then ended, and the notes, comprising a summary of significant accounting policies and other explanatory information.

DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL STATEMENTSThe company’s directors are responsible for the preparation and fair presentation of these consolidated and separate financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error.

AUDITOR’S RESPONSIBILITYOur responsibility is to express an opinion on these consolidated and separate financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated and separate financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OPINIONIn our opinion, the consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of RCL Foods Limited as at 30 June 2013, and its consolidated and separate financial performance and its consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa.

OTHER REPORTS REQUIRED BY THE COMPANIES ACTAs part of our audit of the consolidated and separate financial statements for the year ended 30 June 2013, we have read the Directors’ Report, the Audit Committee’s Report and the Company Secretary’s Certificate for the purpose of identifying whether there are material inconsistencies between these reports and the audited consolidated and separate financial statements. These reports are the responsibility of the respective preparers. Based on reading these reports we have not identified material inconsistencies between these reports and the audited consolidated and separate financial statements. However, we have not audited these reports and accordingly do not express an opinion on these reports.

PricewaterhouseCoopers Inc. Director: H RamsumerRegistered Auditor

Durban27 August 2013

Independent auditor’s report to the shareholders of RCL Foods Limited for the year ended 30 June 2013


Note 2013

R’000 2012

R’000

ASSETSNon-current assetsProperty, plant and equipment 1 3 647 206 1 824 072 Intangible assets 2 5 777 108 317 318 Deferred income tax asset 17 4 327 Investment in joint venture 3 128 955

9 557 596 2 141 390

Current assetsInventories 5 1 322 055 873 040 Biological assets 6 537 059 476 427Trade and other receivables 7 2 111 849 1 347 671 Preference shares receivable 4 130 275 Derivative financial instruments 8 361 505 20 811 Tax receivable 32 325 31 160 Cash and cash equivalents 2 313 191 305 792 Investment in money market fund 450 000Assets of disposal group classified as held for sale 9 536 605

7 794 864 3 054 901

Total assets 17 352 460 5 196 291

EQUITY Stated capital 10 5 079 194 1 198 253 Share-based payments reserve 11 185 188 160 724 Other reserves 12 1 041 Retained earnings 1 479 480 1 547 382

Equity attributable to equity holders of the company 6 744 903 2 906 359 Non-controlling interests 311 306

Total equity 7 056 209 2 906 359

LIABILITIESNon-current liabilitiesInterest-bearing liabilities 15 5 515 289 65 642 Deferred income tax liabilities 17 1 409 273 432 655 Preference share liabilities 13 72 959 Retirement benefit obligations 14 155 350 108 587 Trade and other payables 16 24 398

7 177 269 606 884

Current liabilitiesTrade and other payables 16 2 630 899 1 648 147 Interest-bearing liabilities 15 297 229 33 243 Preference share liabilities 13 5 089Derivative financial instruments 8 5 766 3 Current income tax liabilities 1 343 1 655 Liabilities of disposal group classified as held for sale 9 178 656

3 118 982 1 683 048

Total liabilities 10 296 251 2 289 932

Total equity and liabilities 17 352 460 5 196 291

Consolidated statement of financial position as at 30 June 2013


Note 2013

R’000 2012

R’000

Continuing operationsRevenue 10 108 812 7 855 142

Operating profit before depreciation and amortisation (EBITDA) 444 321 614 510 Depreciation and amortisation 18 (278 294) (200 286)

Operating profit 19 166 027 414 224 Finance costs 20 (153 675) (11 358)Finance income 21 53 874 7 370

Profit before tax 66 226 410 236 Income tax expense 22 (75 148) (143 469)

(Loss)/profit after tax from continuing operations (8 922) 266 767 Profit for the year from discontinued operation 9 15 311

Profit for the year 6 389 266 767

Profit for the year attributable to:Equity holders of the company 26 507 266 767 Non-controlling interests (20 118)

6 389 266 767

Earnings per share from continuing and discontinued operationsattributable to equity holders of the company 23 Basic earnings per shareFrom continuing operations (cents) 4,3 88,3* From discontinued operation (cents) 2,5

From profit for the year attributable to equity holders of the company (cents) 6,8 88,3

Diluted earnings per shareFrom continuing operations (cents) 4,3 88,1* From discontinued operation (cents) 2,5

From profit for the year (cents) 6,8 88,1

* Adjusted for the effects of the rights offer, refer to note 23.

Consolidated income statement for the year ended 30 June 2013

Consolidated statement of comprehensive income for the year ended 30 June 2013

2013 2012R’000 R’000


Other comprehensive incomeItems that may be reclassified subsequently to profit or loss:Cash flow hedges 1 019 Currency translation differences 22

Other comprehensive income for the year net of tax 1 041

Total comprehensive income for the year 7 430 266 767

Total comprehensive income for the year attributable to:Equity holders of the company 27 548 266 767 Non-controlling interests (20 118)

7 430 266 767


Consolidated statement of changes in equityfor the year ended 30 June 2013

Attributable to equity holders of the company

Stated capital

Other reserves

Share- based

payments reserve

Retained earnings Total

Non-controlling

interests Total R’000 R’000 R’000 R’000 R’000 R’000 R’000

Balance at 1 July 2011 1 189 684 138 788 1 527 861 2 856 333 2 856 333 Total comprehensive income for the year 266 767 266 767 266 767 Ordinary dividends paid (247 246) (247 246) (247 246)BEE share-based payments charge 3 383 3 383 3 383 Employee Share Incentive Scheme:– proceeds from shares issued 8 569 8 569 8 569 – value of employee services 18 553 18 553 18 553

Balance at 1 July 2012 1 198 253 160 724 1 547 382 2 906 359 2 906 359

Profit for the year 26 507 26 507 (20 118) 6 389Other comprehensive income 1 041 1 041 1 041Ordinary dividend paid (94 409) (94 409) (94 409)Acquisition of subsidiary 331 424 331 424 BEE share-based payments charge 3 336 3 336 3 336 Rights issue 3 857 469 3 857 469 3 857 469 Employee Share Incentive Scheme:– proceeds from shares issued 23 472 23 472 23 472 – value of employee services 21 128 21 128 21 128

Balance at 30 June 2013 5 079 194 1 041 185 188 1 479 480 6 744 903 311 306 7 056 209


2013 2012Note R’000 R’000

Cash flows from operating activitiesCash generated by operations A 669 279 506 369 Finance costs paid (8 599) (11 358)Finance income received 51 980 7 370 Net cash inflows from operating activities – discontinued operation 53 293Tax paid B (60 938) (71 642)

Cash available from operating activities 705 015 430 739 Dividends paid (94 409) (247 246)

Net cash inflow from operating activities 610 606 183 493

Cash flows from investing activitiesReplacement property, plant and equipment (298 083) (305 354)Expansion property, plant and equipment (178 921) (56 805)Intangible asset additions (8 853) (26 248)Acquisition of subsidiary C (747 008) (92 500)Acquisition of joint venture (128 955)Proceeds on disposal of property, plant and equipment 2 581 26 256 Proceeds on preference shares receivable 41 264 Investment in money market fund (450 000)Net cash outflow from investing activities – discontinued operation (759)

Net cash outflow from investing activities (1 768 734) (454 651)

Cash flows from financing activitiesRepayments of interest-bearing liabilities (827 777) Advances of interest-bearing liabilities 112 472 98 885Issue of shares 3 880 941 8 569 Net cash outflow from financing activities – discontinued operation (109)

Net cash inflow from financing activities 3 165 527 107 454

Net movement in cash and cash equivalents 2 007 399 (163 704)Cash and cash equivalents at the beginning of the year 305 792 469 496

Cash and cash equivalents at the end of the year D 2 313 191 305 792

Consolidated cash flow statement for the year ended 30 June 2013


2013 2012R’000 R’000

A. CASH GENERATED BY OPERATIONSOperating profit 166 027 414 224 Adjusted for:

Depreciation and amortisation 278 294 200 286 Loss on disposal of property, plant and equipment 1 906 427 Movement in retirement benefit obligations 6 677 6 425 Movement in derivative financial instruments – non-cash flow hedges 17 685 (24 277)Fair value adjustment in biological assets (1 513) 2 767 Unrealised foreign exchange gains 14 630 Share-based payments – BEE charge 3 336 3 383 Share-based payments – Employee Share Option Scheme 21 128 18 553 Cash flow hedges released 2 737Other non-cash flow items 5 905

516 812 621 788

Working capital changes:Movement in inventories (58 176) (208 236)Movement in biological assets (59 119) (33 968)Movement in trade and other receivables 109 106 (88 119)Movement in trade and other payables 160 656 214 904

152 467 (115 419)

669 279 506 369

B. TAX PAIDAmount refundable at the beginning of the year 29 505 40 875 Acquisition of subsidiary (149)Charged to the income statement (59 312) (83 012)

Normal tax (59 157) (60 930)Prior year over provision (155) 2 642 Secondary tax on companies (24 724)

Amount refundable at the end of the year (30 982) (29 505)

(60 938) (71 642)

C. ACQUISITION OF SUBSIDIARY/BUSINESS COMBINATIONCash paid for subsidiary (1 026 225) (92 500)Cash acquired from business 279 217

(747 008) (92 500)

D. CASH AND CASH EQUIVALENTSCash and cash equivalents include restricted balances of R39,2 million (2012: R29,7 million). Restricted cash balances consist of initial margin balances with the JSE Limited which serve as collateral for derivative positions held at year-end. This cash will only be accessible by the Group when the related derivative positions are closed. Certain cash and cash equivalents have been pledged as security for certain borrowings (refer to note 15).

The carrying amount of cash and cash equivalents approximates their fair value.

Notes to the consolidated cash flow statement for the year ended 30 June 2013


BASIS OF PREPARATIONThe Group and company financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), IFRIC interpretations, SAICA Financial Reporting guides, the requirements of the Companies Act of South Africa and the Listings Requirements of the JSE Limited under the supervision of the Chief Financial Officer, Robert Field CA(SA). The financial statements have been prepared using the historical cost convention except for biological assets and financial instruments at fair value through profit and loss. The accounting policies comply with IFRS and have been consistently applied to all years presented except for the amendments to IAS 1 (Presentation of financial statements) that became effective 1 July 2012. The adoption of this standard has no effect on the results, nor has it required any restatement of the results.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity or where assumptions and estimates are significant to the consolidated financial statements, are disclosed on page 72.

BASIS OF CONSOLIDATIONSubsidiariesSubsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. The Group also assesses existence of control where it does not have more than 50% of the voting power but is able to govern the financial and operating policies by virtue of de facto control.

De facto control may arise in circumstances where the size of the Group’s voting rights relative to the size and dispersion of holdings of other shareholders give the Group power to govern the financial and operating policies.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The Group applies the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date through profit or loss.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.

Investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments. Cost also includes direct attributable costs of investment.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised in profit or loss.

Inter-company transactions, balances, income and expenses on transactions between Group companies are eliminated. Profits and losses resulting from inter-company transactions that are recognised in assets are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Changes in ownership in subsidiaries without Group controlTransactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions, that is as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains and losses on disposals to non-controlling interests are also recorded in equity.

Disposal of subsidiariesWhen the Group ceases to have control any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit and loss. The fair value is the initial carrying amount for the purpose of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit and loss.

Joint venturesEntities that are jointly controlled through contractual arrangements between the Group and other parties are classified as joint ventures and accounted for according to the equity method. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor’s share of profit or loss of the investee after the date of acquisition.

Accounting policies for the year ended 30 June 2013


The Group determines at each reporting date whether there is any objective evidence that the joint venture is impaired. If this is the case, the Group calculates the amount of the impairment as the difference between the recoverable amount of the joint venture and its carrying value and recognises the amount adjacent to share of profit/(loss) of associates in the income statement.

Accounting treatment for subsidiaries in company financial statementsDividend income from subsidiaries is recognised in the income statement when the right to receive payment is established.

FOREIGN CURRENCY TRANSLATIONFunctional and presentation currencyItems included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The functional currency of the Group and the presentation currency of the Group is rand.

Transactions and balancesForeign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges. Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the income statement within “finance income or costs”. All other foreign exchange gains and losses are presented in the income statement within “other (losses)/gains”. Translation differences related to changes in amortised cost are recognised in profit and loss, and other changes in carrying amount are recognised in other comprehensive income.

Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit and loss are recognised in profit and loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets, such as equities classified as available for sale, are included in other comprehensive income.

The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• assetsandliabilitiesforeachstatementoffinancialpositionpresentedistranslatedattheclosingrateatthedateofthatstatementof financial position

• incomeandexpensesforeachincomestatementaretranslatedataverageexchangerates(unlessthisaverageisnotareasonableapproximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and

• allresultingexchangedifferencesarerecognisedinothercomprehensiveincome.

PROPERTY, PLANT AND EQUIPMENTProperty, plant and equipment are stated at historical cost less accumulated depreciation less impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the assets. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance costs are charged to the income statement during the financial period in which they are incurred.

Depreciation is provided on property, plant and equipment at rates that reduce the cost thereof to estimated residual values over the expected useful lives of the asset on a straight-line basis. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. Where assets are identified as being impaired, that is when the recoverable amount has declined below its carrying amount, the carrying amount is reduced to reflect the decline in value.

Gains or losses on disposals are determined by comparing proceeds with the carrying amount. These are included in the income statement.

Depreciation is calculated over the following estimated useful lives:

Buildings 20 to 50 yearsLeasehold improvements Period of leasePlant and equipment– capitalised and owned 3 to 25 yearsVehicles– capitalised and owned 3 to 8 yearsFurniture 10 to 20 years

Capital work in progress is not depreciated until such a time as the asset is available for use.

Land is not depreciated.

INTANGIBLE ASSETSTrademarks and customer relationshipsSeparately acquired trademarks are shown at historical cost. Trademarks and customer relationships acquired in a business combination are recognised at fair value at the acquisition date.

The useful lives of trademarks are assessed to be either finite or indefinite. The useful lives of customer relationships are considered to be finite. Trademarks with finite lives and customer relationships are amortised over the useful life on a straight-line basis and assessed for

Accounting policies continued for the year ended 30 June 2013


impairment whenever there is an indication that the intangible asset may be impaired. Amortisation periods and amortisation methods are reviewed annually.

The useful lives of intangible assets are as follows:

Trademarks Indefinite/15 yearsCustomer relationships 10 to 20 years

Trademarks with indefinite lives are not amortised but are reviewed annually to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment to a finite life is made on a prospective basis. These tests are done either individually or at the cash-generating level. Factors considered in reaching a conclusion include the economic viability of the asset itself and where it is a component of a larger economic unit, the viability of that unit itself.

GoodwillGoodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the Group’s interest in net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree and the fair value of the non-controlling interest in the acquiree. It is reported in the statement of financial position as a non-current asset and carried at cost less accumulated impairment losses. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level. Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Computer softwareCosts associated with maintaining computer software programs are recognised as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets when the following criteria are met:

• itistechnicallyfeasibletocompletethesoftwareproductsothatitwillbeavailableforuse

• managementintendstocompletethesoftwareproducttouse

• thereisanabilitytouseorsellthesoftwareproduct

• thesoftwareproductwillgenerateprobablefutureeconomicbenefits

• adequatetechnical,financialandotherresourcestocompletethedevelopmentandtouseareavailable;and

• theexpenditureattributabletothesoftwareproductduringitsdevelopmentcanbereliablymeasured.

Directly attributable costs that are capitalised as part of the software product include the software development employee costs and an appropriate portion of relevant overheads.

Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

Computer software development costs recognised as assets are amortised over their estimated useful lives, which does not exceed 10 years and are stated at cost less accumulated amortisation.

IMPAIRMENT OF NON-FINANCIAL ASSETSAssets that have an indefinite useful life, for example goodwill and certain trademarks, are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill, that were impaired, are reviewed for possible reversal of the impairment at each reporting date.

DISPOSAL GROUPS HELD FOR SALE Disposal groups are classified as assets and liabilities held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less cost to sell.

INVENTORIESFinished goods, raw materials, ingredients and consumables are valued at the lower of cost, determined on a first-in first-out basis, and net realisable value. Costs include expenditure incurred in acquiring the inventories and bringing them to their present location and condition, all direct production costs and an appropriate portion of overheads based on normal capacity. Slaughtered chickens are transferred to inventory at fair value less estimated point-of-sale costs. Net realisable value is the estimated selling price in the ordinary course of business, less estimated selling expenses.

BIOLOGICAL ASSETSLive broiler birds and breeding stock are measured at fair value less estimated point-of-sale costs at reporting dates. Fair value is determined based on market prices or, where market prices are not available, by reference to sector benchmarks.


Breeding stock includes the Cobb grandparent breeding and the parent rearing and laying operations. Broiler hatching eggs are included in breeding stock.

Gains and losses arising on the initial recognition of biological assets at fair value less estimated point-of-sale costs and from a change in fair value less estimated point-of-sale costs are recognised in the income statement in the period in which they arise.

STATED CAPITALOrdinary shares are classified as equity.

Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Treasury sharesShares in the company held by Group companies are classified as treasury shares and are held at cost. These shares are treated as a deduction from the issued number of shares and taken into account in the calculation of the weighted average number of shares. The cost price of the shares is deducted from the Group’s equity.

CURRENT AND DEFERRED TAXThe tax expense for the period comprises current and deferred tax.

The current tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the reporting date. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations are subject to interpretation, and establishes provisions where appropriate on the basis of amounts expected to be paid to tax authorities.

Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also recognised in other comprehensive income or directly in equity respectively.

Deferred tax is calculated using tax rates that have been enacted or substantively enacted at the reporting date and that are expected to apply to the period when the liability is settled or asset realised. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax value used in the computation of taxable income. Deferred tax assets are raised only to the extent that their recoverability is probable.

A deferred tax liability is recognised for taxable temporary differences arising on investments in subsidiaries and joint ventures except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when they relate to income taxes levied by the same tax authority and the Group intends to settle its current tax assets and liabilities on a net basis.

SECONDARY TAX ON COMPANIES (STC)STC was provided on dividend payments made before 1 April 2012, net of dividends received, and was recognised as a taxation charge. STC was abolished effective 1 April 2012 and has been replaced by a new withholding tax which is levied on the shareholder and not the company, with the exception of non-cash dividends.

EMPLOYEE BENEFITSRetirement fundsThe Group has defined contribution plans. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in current and prior periods.

The assets of the plans are held in separate trustee-administered funds. These plans are funded by payments from the employees and the Group, taking into account recommendations of independent qualified actuaries.

The Group’s contributions to the defined contribution pension plans are charged to the income statement in the period to which they relate.

Post-retirement medical benefits – Defined benefit planFor Rainbow and Vector employees engaged pre-October 2003 and January 1997 respectively, the Group provides post-retirement medical benefits to its retirees. Foodcorp provides post-retirement medical benefits to certain retired employees. The entitlement to post-retirement medical benefits is based on the employees remaining in service up to retirement age. The projected unit credit method of valuation is used to calculate the liability for post-retirement medical benefits and is calculated annually by independent actuaries.

If the cumulative unrecognised actuarial gains and losses at the end of the previous reporting period exceed 10% of the obligation, that excess is recognised in future periods over the expected average remaining working lives of the participating employees in the income statement. Past service costs are recognised in the income statement in the period that they arise.

Bonus planThe Group recognises a liability where contractually obliged or where there is past practice that has created a constructive obligation. Management participates in a bonus plan whereby bonuses are paid in respect of out-performance against targets. All bonuses are authorised by the Remuneration and Nominations Committee.



Share-based paymentsThe Group operates share-based compensation plans under which the Group receives services from employees as consideration for equity instruments (options and rights) of the Group. The fair value of the employees’ services received in exchange for the grant of the options or rights is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted:

• includinganymarketperformanceconditions

• excludingtheimpactofanyserviceandnon-marketperformancevestingconditions;and

• includingtheimpactofanynon-vestingconditions

Non-market performance and service conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are satisfied.

The fair value determined at the grant date is expensed on a straight-line basis over the vesting period with a corresponding increase in equity and is based on the Group’s estimate of options that will eventually vest. Fair value is measured by the use of a binomial model excluding non-market vesting conditions. Non-market vesting conditions are included in assumptions about the number of options and rights that are expected to vest.

At each reporting date, the Group revises its estimates of the number of options or rights that are expected to vest based on non-market vesting conditions. The Group recognises the impact on the original estimates, if any, in the income statement with a corresponding adjustment to equity.

When the options or rights are exercised, the company issues new shares. The proceeds, net of any directly attributable transaction costs received, are credited to share capital when the options or rights are exercised.

The grant by the Group of options over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity in the parent entity accounts.

BEE TRANSACTIONSBEE transactions where the Group receives or acquires goods or services as consideration for the issue of equity instruments of the Group are treated as share-based payment transactions.

BEE transactions where employees are involved are measured and accounted for on the same basis as share-based payments as disclosed above.

Transactions in which share-based payments are made to parties other than employees are measured by reference to the fair value of equity instruments granted if no specific goods or services are received. Vesting of the equity instrument occurs immediately and an expense and related increase in equity is recognised on the date that the instrument is granted. No further measurement or adjustments are required as it is presumed that the BEE credentials are received upfront.

LEASESLeases of property, plant and equipment where the Group assumes substantially all of the risks and rewards of ownership are classified as finance leases. Finance leased assets are capitalised at the lease’s commencement at the lower of the fair value of the leased asset and the present value of the future minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in non-current liabilities. The assets are depreciated over the shorter of the period of the lease or the period over which the particular category of asset is otherwise depreciated. Lease finance charges are charged to the income statement over the term of the relevant lease using the effective interest rate method.

Leases where the lessor retains a significant portion of the risks and rewards of ownership are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease.

The Group ensures that the following two requirements are met in order for an arrangement transacted by the Group to be classified as a lease:

• fulfilmentofthearrangementisdependentontheuseofanassetorassets,andthisfactisnotnecessarilyexplicitlystatedbythecontract but rather implied; and

• thearrangementinsubstanceconveysarighttousetheasset.

The Group’s assessment of whether an arrangement contains a lease is made at the inception of the arrangement, with reassessment occurring in the event of limited changes in circumstances.

Where the Group concludes that it is impracticable to separate payments for the lease from other payments required by the arrangement:

• inthecaseofafinancelease,theGrouprecognisesanassetandaliabilityatanamountequaltothefairvalueoftheunderlyingasset. Subsequently the liability is reduced as payments are made and an imputed finance charge on the liability is recognised using the Group’s incremental borrowing rate of interest; and

• inthecaseofanoperatinglease,allpaymentsunderthearrangementaretreatedasleasepayments.


REVENUERevenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is disclosed net of value added tax, returns, rebates and discounts and after eliminating sales within the Group.

Sales of goods comprise the sale of milling, agricultural produce and consumer goods. Sales of services comprise logistics and distribution services where the Group acts as an agent on behalf of a principal and earns commission and fees.

Revenue is recognised when a Group entity has delivered products to the customer (in the case of services when the underlying products have been delivered), the customer has accepted the products, the amount of revenue can be reliably measured, and collectability of the related receivable is reasonably assured.

The Group bases its estimates of incentive rebates and settlement discounts on historical results.

INTEREST INCOMEInterest income is recognised using the effective interest method. When a loan and receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans and receivables is recognised using the original effective interest rate.

FINANCIAL INSTRUMENTSFinancial instruments recognised on the statement of financial position include investments, preference shares, derivative instruments, trade and other receivables, cash and cash equivalents, investment in money market funds, trade and other payables and interest-bearing debt. Financial instruments are recognised when the Group is party to a contractual arrangement and are initially measured at fair value.

The Group classifies its financial assets at fair value through profit and loss and loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

Financial instruments at fair value through profit and lossFinancial assets at fair value through profit and loss, which comprise derivative instruments, unless designated as hedges, are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term. Assets in this category are classified as current assets. Gains or losses arising from changes in the fair value of the financial assets at fair value through profit and loss are recognised in the income statement in the period in which they arise.

Financial assets carried at fair value through profit and loss are initially recognised at fair value and transaction costs are expensed in the income statement.

Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The Group’s loans and receivables comprise trade and other receivables, preference shares receivable and cash and cash equivalents in the statement of financial position.

Investment in money market fundsInvestment in money market funds relate to investments in shares in liquidity funds of which the underlying investments have maturities of up to one year. The shares in these funds are callable on a daily basis.

DerecognitionFinancial assets (or a portion thereof) are derecognised when the Group has substantially transferred all risks and rewards of ownership. On derecognition, the difference between the carrying amount of the financial asset and the proceeds receivable is included in the income statement.

Financial liabilities (or a portion thereof) are derecognised when the obligation specified in the contract is discharged, cancelled or expires. On derecognition, the difference between the carrying amount of the financial liability, including related unamortised costs, and any amount paid is included in the income statement.

Recognition and measurementRegular purchases and sales of financial assets are recognised on the trade-date, the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit and loss.

Accounting for derivative financial instruments and hedging activitiesDerivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as hedges of highly probable forecast transactions (cash flow hedge).

The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

The fair values of various derivative instruments used for hedging purposes are disclosed in note 8. Movements on the hedging reserve in shareholders’ equity are shown in the statement of changes in equity.

Trading derivatives are classified as a current asset or liability. The full fair value of a hedging derivative is classified as a non-current asset or liability if the remaining maturity of the hedged item is more than 12 months and, as a current asset or liability, if the maturity of the hedged item is less than 12 months.



Cash flow hedgeThe effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in the income statement.

Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item will affect profit and loss (for instance when the forecast sale that is hedged takes place). However, when the forecast transaction that is hedged results in the recognition of a non-financial asset (for example, inventory) or a liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.

Derivatives that do not qualify for hedge accountingCertain derivative instruments do not qualify for hedge accounting and are accounted for at fair value through profit and loss. Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are recognised immediately in the income statement.

Forward commitments to purchase maize for own use and consumption are designated executory in nature, and excluded from the fair value adjustment. Embedded derivatives are treated as separate derivatives when their risk and characteristics are not closely related to those of the host contract.

Impairment of financial assetsAssets carried at amortised costThe Group assesses at the end of each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

For the loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the income statement. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in the income statement.

Fair value estimationThe fair value of financial instruments traded in active markets (such as publicly traded derivatives) is based on quoted market prices at the statement of financial position date. The quoted market price used for financial assets held by the Group is the current market price; the appropriate quoted market price for financial liabilities is the current ask price.

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. The Group used a variety of methods and makes assumptions that are based on market conditions existing at each statement of financial position date. Quoted market prices or dealer quotes for similar instruments are used for long-term debt. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. The fair value of forward exchange contracts is determined using forward exchange market rates at the statement of financial position date.

The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

Trade and other receivablesTrade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets. Trade receivables and preference shares are recognised initially at fair value and are subsequently measured at amortised cost using the effective interest rate method, less accumulated impairment losses. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties or delinquency in payments are considered to be indicators that trade receivables are impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the original effective interest rate. The difference is recognised as an expense in the income statement. When a trade receivable is uncollectable it is written off against the provision account for trade receivables. Subsequent recoveries of amounts previously written off are credited in the income statement.

Cash and cash equivalentsCash and cash equivalents include cash on hand, deposits held on call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts.


Trade and other payablesTrade payables are obligations to pay for goods and services that have been acquired in the ordinary course of business from suppliers. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method.

Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

BorrowingsBorrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

Foreign borrowings are valued at spot rates at year-end and changes in fair value are accounted for in terms of hedging accounting policy.

Preference sharesPreference shares are mandatorily redeemable on a specific date and are thus classified as liabilities. The dividends on these preference shares are recognised in the income statement as finance costs.

OffsetFinancial assets and financial liabilities are offset if there is a currently enforceable legal right to offset and there is an intention either to settle on a net basis or to realise the asset and settle the liability simultaneously.

DIVIDEND DISTRIBUTIONDividend distribution to the company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which the dividends are approved by the company’s Board.

OPERATING SEGMENTSOperating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer.

STATEMENT OF COMPREHENSIVE INCOME LINE ITEMSThe following additional line items, headings and subtotals are presented on the face of the income statement as management believes them to be relevant to the understanding of the Group’s financial performance:

• operatingprofitbeforedepreciationandamortisation,beingthetradingincomeoftheGroup.

CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTYThe key assumptions and sources of estimation uncertainty at the reporting date that could have significant risk of causing material adjustment to the carrying amounts of the assets and liabilities within the new financial year:

Useful lives and residual values of assetsItems of property, plant and equipment are depreciated over their useful lives taking into account residual values. Useful lives and residual values are reviewed annually, taking into account factors such as the expected usage, physical output, market demand for the output of the assets and legal or similar limits on the assets.

Impairment of assetsIn view of the losses being incurred in Rainbow, and in compliance with the requirements of IAS 36 (Impairment of assets), the Board of Rainbow and RCL have considered the need for an impairment of assets. Based on the outcome of the discounted cash flow model and the need to await the outcome of the application for anti-dumping protection, the Boards have decided that it would be inappropriate to impair poultry assets at this point. It must, however, be stated that if there is not a notable improvement in operating margins within the next 12 months, then an impairment of assets will become necessary.

Goodwill and trademarksGoodwill and indefinite life trademarks are considered for impairment at least annually.

Determining whether goodwill is impaired requires an estimation of the value-in-use of the cash-generating units to which goodwill has been allocated. The value-in-use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value of future cash flows. Management estimates the discount rate using pre-tax rates that reflect current market assessments of the time value of money and risks specific to the cash-generating units. The growth rates are based on industry and customer growth forecasts.

Determining whether trademarks are impaired requires an estimation of the value-in-use of the trademark. The value-in-use calculation requires the entity to estimate the future cash flows expected to arise from the trademark and a suitable discount rate in order to calculate the present value of future cash flows. Management estimates the discount rate using pre-tax rates that reflect current market assessments of the time value of money and risks specific to the cash-generating units. The growth rates are based on industry and customer growth forecasts.

The key assumptions used in the calculations are disclosed in note 2 to the financial statements.

Fair value assessment of biological assetsThe determination of fair value is based on active market values, where appropriate, or management’s assessment of the fair value based on available industry data and benchmark statistics. The key assumptions used in the calculation of the fair value are the day old chick prices and the market price of feed consumed.



Liability for post-retirement medical benefitsThe liability is determined by annual actuarial assumptions. The key estimates and assumptions relating to the actuarial calculation are disclosed in note 14 to the financial statements.

Business combinationsCritical accounting estimates and assumptions were also made during the purchase price allocation process in accounting for acquisitions as business combinations in accordance with IFRS 3 (Business combinations). These estimates and assumptions relate to the determination of useful lives of assets, discount rates, growth rates and valuation of unlisted investments.

The key assumptions used in the calculations are disclosed in note 33 to the financial statements.

IMPACT OF FUTURE AMENDMENTS TO ACCOUNTING STANDARDS AND INTERPRETATIONSManagement has considered all standards, interpretations and amendments that are in issue but not yet effective. The standards, interpretations and amendments that are relevant to the Group but which the Group has not early adopted are as follows:

NUMBER TITLE AND SUMMARYIAS 19 Amendments to employee benefits (1 January 2013) – Recognition of actuarial gains and losses (remeasurements) “Actuarial gains and losses” are renamed “remeasurements” and will be recognised immediately in “other comprehensive

income” (OCI). Actuarial gains and losses will no longer be deferred using the corridor approach or recognised in profit and loss; this is likely to increase statement of financial position and OCI volatility.

Remeasurements recognised in OCI will not be recycled through profit and loss in subsequent periods.

Recognition of past-service cost/curtailment Past-service costs will be recognised in the period of a plan amendment; unvested benefits will no longer be spread over

a future-service period. A curtailment now occurs only when there is a significant reduction in the number of employees. Curtailment gains/losses are accounted for as past-service costs.

Measurement of pension expense Annual expense for a funded benefit plan will include net interest expense or income, calculated by applying the discount

rate to the net defined benefit asset or liability. This will replace the finance charge and expected return on plan assets, and will increase benefit expenses for most entities. There will be no change in the discount rate, which remains a high-quality corporate bond rate where there is a deep market in such bonds, and a government bond rate in other markets.

Presentation in the income statement There will be less flexibility in income statement presentation. Benefit cost will be split between (i) the cost of benefits accrued

in the current period (service cost) and benefit changes (past-service cost, settlements and curtailments), and (ii) finance expense or income. This analysis can be in the income statement or in the notes.

Disclosure requirements Additional disclosures are required to present the characteristics of benefit plans, the amounts recognised in the financial

statements, and the risks arising from defined benefit plans and multi-employer plans. The objectives and principles underlying disclosures are provided; these are likely to require more extensive disclosures and more judgement to determine what disclosure is required.

Distinction between “short-term” and “other long-term” benefits The distinction between short- and long-term benefits for measurement purposes is based on when payment is expected,

not when payment can be demanded. An obligation measured as a long-term benefit could therefore be presented as a current liability when it is expected to be settled after more than one year, but does not have the unconditional ability to defer settlement for more than one year.

Treatment of expenses and taxes relating to employee benefit plans Taxes related to benefit plans should be included either in the return on assets or the calculation of the benefit obligation,

depending on their nature. Investment management costs should be recognised as part of the return on assets; other costs of running a benefit plan should be recognised as period costs when incurred. This should reduce diversity in practice but might make the actuarial calculations more complex.

Termination benefits Any benefit that has a future-service obligation is not a termination benefit. This will reduce the number of arrangements that

meet the definition of termination benefits. A liability for a termination benefit is recognised when the entity can no longer withdraw the offer of the termination benefit or recognises any related restructuring costs. This might delay recognition of voluntary termination benefits.

Risk or cost sharing features The measurement of obligations should reflect the substance of arrangements where the employer’s exposure is limited or

where the employer can use contributions from employees to meet a deficit. This might reduce the defined benefit obligation in some situations. Determining the substance of such arrangements will require judgement and significant disclosure.

IAS 27 Separate financial statements (1 January 2013) IAS 27 has been renamed “Separate financial statements”; it continues to be a standard dealing solely with separate financial

statements. The existing guidance for separate financial statements is unchanged.


NUMBER TITLE AND SUMMARYIAS 28 Investments in associates and joint ventures (1 January 2013) This standard includes the requirements for joint ventures, as well as associates, to be equity accounted following the issue

of IFRS 11.

IFRS 10 Consolidated financial statements (1 January 2013) IFRS 10 replaces all of the guidance on control and consolidation in IAS 27 (Consolidated and separate financial statements),

and SIC-12 (Consolidation – special purpose entities). IAS 27 is renamed (Separate financial statements); it continues to be a standard dealing solely with separate financial statements. The existing guidance for separate financial statements is unchanged.

IFRS 10 changes the definition of control so that the same criteria are applied to all entities to determine control. This definition is supported by extensive application guidance that addresses the different ways in which a reporting entity (investor) might control another entity (investee). The changed definition and application guidance is not expected to result in widespread change in the consolidation decisions made by IFRS reporting entities, although some entities could see significant changes.

All entities will need to consider the new guidance. The core principle that a consolidated entity presents a parent and its subsidiaries as if they are a single entity remains unchanged, as do the mechanics of consolidation.

IFRS 10 excludes guidance specifically for investment companies, as the IASB continues to work on a project on accounting by investment companies for controlled entities.

The new standard also includes guidance on agent/principal relationships. An investor (the agent) may be engaged to act on behalf of a single party or a group of parties (the principals). Certain power is delegated to the agent − for example, to manage investments. The investor may or may not have control over the pooled investment funds. IFRS 10 includes a number of factors to consider when determining whether the investor has control or is acting as an agent.

IFRS 11 Joint arrangements (1 January 2013) Changes in the definitions have reduced the “types” of joint arrangements to two: joint operations and joint ventures. The

existing policy choice of proportionate consolidation for jointly controlled entities has been eliminated. Equity accounting is mandatory for participants in joint ventures. Entities that participate in joint operations will follow accounting much like that for joint assets or joint operations today.

The standard also provides guidance for parties that participate in joint arrangements but do not have joint control.

IFRS 9 Financial instruments (1 January 2015) Financial assets IFRS 9 addresses classification and measurement of financial assets.

The standard replaces the multiple classification and measurement models in IAS 39 with a single model that has only two classification categories: amortised cost and fair value.

Classification under IFRS 9 is driven by the entity’s business model for managing the financial assets and the contractual characteristics of the financial assets. A financial asset is measured at amortised cost if two criteria are met:

• theobjectiveofthebusinessmodelistoholdthefinancialassetforthecollectionofthecontractualcashflows;and

• thecontractualcashflowssolelyrepresentpaymentsofprincipalandinterest.

The new standard removes the requirement to separate embedded derivatives from financial asset hosts. It requires a hybrid contract to be classified in its entirety at either amortised cost or fair value. Most embedded derivatives introduce variability to cash flows. This is not consistent with the notion that the instrument’s contractual cash flows solely represent the payment of principal and interest. Most hybrid contracts with financial asset hosts will therefore be measured at fair value in their entirety.

Two of the existing three fair value option criteria become obsolete under IFRS 9, as a fair value driven business model requires fair value accounting, and hybrid contracts are classified in their entirety. The remaining fair value option condition in IAS 39 is carried forward to the new standard – that is, management may still designate a financial asset as at fair value through profit and loss on initial recognition if this significantly reduces an accounting mismatch. The designation at fair value through profit and loss will continue to be irrevocable.

IFRS 9 prohibits reclassifications except in rare circumstances when the entity’s business model changes; in this case, the entity is required to reclassify affected financial assets prospectively.

There is specific guidance for contractually linked instruments that create concentrations of credit risk, which is often the case with investment tranches in a securitisation. In addition to assessing the instrument itself against the IFRS 9 classification criteria, management should also “look through” to the underlying pool of instruments that generate cash flows to assess their characteristics. To qualify for amortised cost, the investment must have equal or lower credit risk than the weighted-average credit risk in the underlying pool of instruments, and those instruments must meet certain criteria. If “a look through” is impracticable, the tranche must be classified at fair value through profit and loss.

IFRS 9 classification principles indicate that all equity investments should be measured at fair value. However, management has an option to present in other comprehensive income unrealised and realised fair value gains and losses on equity investments that are not held for trading. Such designation is available on initial recognition on an instrument-by-instrument basis and is irrevocable. There is no subsequent recycling of fair value gains and losses to profit and loss; however, dividends from such investments will continue to be recognised in profit and loss.

The cost exemption for unquoted equities and derivatives on unquoted equities has been removed, but guidance is provided on when cost may be an appropriate estimate of fair value.



NUMBER TITLE AND SUMMARYIFRS 9 Financial instruments (1 January 2015) continued Financial liabilities The requirements in IAS 39 regarding the classification and measurement of financial liabilities have been retained, including

the related application and implementation guidance.

Under the new standard, entities with financial liabilities designated at fair value through profit and loss (FVTPL) recognise changes in the fair value due to changes in the liability’s credit risk directly in OCI. There is no subsequent recycling of the amounts in OCI to profit and loss, but accumulated gains or losses may be transferred within equity.

However, if presenting the change in fair value attributable to the credit risk of the liability in OCI would create an accounting mismatch in profit and loss, all fair value movements are recognised in profit and loss. An entity is required to determine whether an accounting mismatch is created when the financial liability is first recognised, and this determination is not reassessed. The mismatch must arise due to an economic relationship between the financial liability and a financial asset that results in the liability’s credit risk being offset by a change in the fair value of the asset.

Financial liabilities that are required to be measured at FVTPL (as distinct from those that the entity has designated at FVTPL), including financial guarantees and loan commitments measured at FVTPL, will continue to have all fair value movement recognised in profit and loss. Derivatives such as foreign currency forwards and interest rate swaps, or a bank’s own liabilities that it holds in its trading portfolio, continue to have all fair value movements recognised in profit and loss.

Derecognition of financial instruments The requirements in IAS 39 for determining when financial instruments are derecognised from the statement of financial

position have also been relocated to IFRS 9 without change.

IFRS 7 Amendment to IFRS 7 (Disclosures) – Offsetting financial assets and financial liabilities (1 January 2013) The amended disclosures will require more extensive disclosures than are currently required under IFRS and US GAAP.

The disclosures focus on quantitative information about recognised financial instruments that are offset in the statement of financial position, as well as those recognised financial instruments that are subject to master netting or similar arrangements irrespective of whether they are offset.

IFRS 12 Disclosure of interests in other entities (1 January 2013) IFRS 12 sets out the required disclosures for entities reporting under the two new standards, IFRS 10 (Consolidated financial

statements), and IFRS 11 (Joint arrangements); it replaces the disclosure requirements currently found in IAS 28 (Investments in associates).

IFRS 13 Fair value measurement (1 January 2013) This standard aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single

source of fair value measurement and disclosure requirements for use across IFRSs. The requirements, which are largely aligned between IFRSs and US GAAP, do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs or US GAAP.

IFRS 32 Offsetting financial assets and financial liabilities (1 January 2014) The amendments do not change the current offsetting model in IAS 32, which requires an entity to offset a financial asset and

financial liability in the statement of financial position only when the entity currently has a legally enforceable right of set-off and intends either to settle the asset and liability on a net basis or to realise the asset and settle the liability simultaneously.

The amendments clarify that the right of set-off must be available today – that is, it is not contingent on a future event. It also must be legally enforceable for all counterparties in the normal course of business, as well as in the event of default, insolvency or bankruptcy.

IMPROVEMENTS TO IFRS 2011Amendment to IAS 1 (Presentation of financial statements)The amendment clarifies the disclosure requirements for comparative information when an entity provides a third statement of financial position either:

• asrequiredbyIAS8(Accountingpolicies,changesinaccountingestimatesanderrors),or

• voluntarily.

When an entity produces an additional statement of financial position as required by IAS 8, the statement of financial position should be as at the date of the beginning of the preceding period – that is, the opening position. No notes are required to support this statement of financial position.

When management provides additional comparative information voluntarily – for example, statement of profit and loss, statement of financial position – it should present the supporting notes to these additional statements.

Amendment to IFRS 1 as a result of the above amendment to IAS 1The consequential amendment clarifies that a first-time adopter should provide the supporting notes for all statements presented.

Amendment to IAS 16 (Property, plant and equipment)The amendment clarifies that spare parts and servicing equipment are classified as property, plant and equipment rather than inventory when they meet the definition of property, plant and equipment.


The previous wording of IAS 16 indicated that servicing equipment should be classified as inventory, even if it was used for more than one period. Following the amendment, this equipment used for more than one period is classified as property, plant and equipment.

Amendment to IAS 32 (Financial instruments: Presentation)The amendment clarifies the treatment of income tax relating to distributions and transaction costs.

Prior to the amendment, IAS 32 was ambiguous as to whether the tax effects of distributions and the tax effects of equity transactions should be accounted for in the income statement or in equity.

The amendment clarifies that the treatment is in accordance with IAS 12. Therefore, income tax related to distributions is recognised in the income statement, and income tax related to the costs of equity transactions is recognised in equity.

Amendment to IAS 34 (Interim financial reporting)The amendment clarifies the disclosure requirements for segment assets and liabilities in interim financial statements.

The amendment brings IAS 34 into line with the requirements of IFRS 8 (Operating segments).

A measure of total assets and liabilities is required for an operating segment in interim financial statements if such information is regularly provided to the CODM and there has been a material change in those measures since the last annual financial statements.

Amendment to IAS 36 (Recoverable amount disclosures for non-financial assets)This amendment addresses the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal.

Amendment to IAS 39 (Novation of derivatives and continuation of hedge accounting)This amendment will allow hedge accounting to continue in a situation where a derivative, which has been designated as a hedging instrument, is novated to effect clearing with a central counterparty as a result of laws or regulation, if specific conditions are met (in this context, a novation indicates that parties to a contract agree to replace their original counterparty with a new one). This relief has been introduced in response to legislative changes across many jurisdictions that would lead to the widespread novation of over-the-counter derivatives. These legislative changes were prompted by a G20 commitment to improve transparency and regulatory oversight of over-the-counter derivatives in an internationally consistent and non-discriminatory way. Similar relief will be included in IFRS 9 (Financial instruments).

Adoption of these standards by the Group in future reporting periods is not expected to have a significant impact on the financial statements of the Group or company, apart from the application of IAS 19. IAS 19 eliminates the option to defer the recognition of actuarial gains and losses. The remeasurement will be required to be presented in other comprehensive income in full.



1. PROPERTY, PLANT AND EQUIPMENT

Land and buildings

Plant, equipment

and furniture Vehicles

Capitalised leased assets:

Plant

Capitalised leased assets:

Vehicles Leasehold

improvements

Capital work-in- progress Total

R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000

30 June 2013CostAt the beginning of the year 1 192 144 1 910 666 269 305 7 918 155 863 3 535 896 Transfers out of capital work-in-progress* (63 458) (63 458)Acquisition of subsidiary** 571 446 687 279 106 881 53 219 36 824 25 530 130 659 1 611 838Additions 100 640 343 756 68 079 8 006 2 535 1 287 23 631 547 934 Disposals (1 078) (25 989) (15 425) (42 492)

At the end of the year 1 863 152 2 915 712 428 840 69 143 39 359 26 817 246 695 5 589 718

Accumulated depreciationAt the beginning of the year 503 686 1 069 410 136 748 1 980 1 711 824 Disposals (841) (17 389) (12 304) (30 534)Depreciation 53 020 171 018 32 078 3 020 1 161 925 261 222

At the end of the year 555 865 1 223 039 156 522 5 000 1 161 925 1 942 512

Net book amount 1 307 287 1 692 673 272 318 64 143 38 198 25 892 246 695 3 647 206

30 June 2012CostAt the beginning of the year 1 077 483 1 743 582 244 381 98 497 3 163 943 Transfers out of capital work-in-progress* (98 497) (98 497)Additions 92 660 164 328 35 355 7 918 155 863 456 124 Acquired in a business combination** 35 000 47 851 9 649 92 500 Disposals (12 999) (45 095) (20 080) (78 174)

At the end of the year 1 192 144 1 910 666 269 305 7 918 155 863 3 535 896

Accumulated depreciationAt the beginning of the year 466 034 973 129 124 772 1 563 935 Disposals (3 442) (35 276) (12 773) (51 491)Depreciation 41 094 131 557 24 749 1 980 199 380

At the end of the year 503 686 1 069 410 136 748 1 980 1 711 824

Net book amount 688 458 841 256 132 557 5 938 155 863 1 824 072

* Transfers out of capital work-in-progress have been disclosed within additions of each of the appropriate individual categories.

** Refer to note 33 for details of business combinations.

Notes to the consolidated financial statements for the year ended 30 June 2013


2013 2012R’000 R’000

1. PROPERTY, PLANT AND EQUIPMENT continuedDepreciation expense charged in:Cost of sales 188 836 142 383 Selling and marketing expenses 7 543 1 769 Administration expenses 23 918 32 832 Distribution expenses 40 925 22 396

261 222 199 380

Continuing operationsCapital commitments:Contracted and committed 110 702 186 831 Approved but not contracted 184 529 73 703

295 231 260 534

There are no capital commitments for the discontinued operation.

The Group has reviewed the residual values and useful lives used in the calculation of the depreciation charge for the year. The review did not highlight any requirement for an adjustment to the residual values and useful lives.

Capital commitments include all projects for which specific Board approval has been obtained up to reporting date. Projects for which specific Board approval has not yet been obtained are excluded. The capital expenditure will be financed from available resources.

A register of land and buildings is available for inspection at the registered office of the company.

The Group leases various office equipment, plant and machinery and vehicles under finance lease arrangements. The lease term is five years. The net book value of the assets leased amounts to R102 341 000 (2012: R5 938 000).

Certain items of property, plant and equipment have been pledged as security for certain borrowings (refer to note 15).

Notes to the consolidated financial statements continued for the year ended 30 June 2013

Customer Software Trademarks relationships Goodwill Total

R’000 R’000 R’000 R’000 R’000

2. INTANGIBLE ASSETS30 June 2013Opening net book amount 29 874 287 444 317 318 Acquisition of subsidiary* 7 289 1 864 389 978 471 2 617 860 5 468 009 Additions 8 853 8 853 Amortisation charge (5 169) (11 903) (17 072)

Closing net book amount 40 847 1 864 389 966 568 2 905 304 5 777 108

Cost 46 922 1 914 889 978 471 2 905 304 5 845 586 Accumulated amortisation and impairment (6 075) (50 500) (11 903) (68 478)

Net book amount 40 847 1 864 389 966 568 2 905 304 5 777 108

30 June 2012Opening net book amount 287 444 287 444 Transfer from work-in-progress 4 532 4 532 Additions 26 248 26 248 Amortisation charge (906) (906)

Closing net book amount 29 874 287 444 317 318

Cost 30 780 50 500 287 444 368 724 Accumulated amortisation and impairment (906) (50 500) (51 406)

Net book amount 29 874 287 444 317 318

* Refer to note 33 for details of business combination.


2013 2012

2. INTANGIBLE ASSETS continuedSoftwareFinite life/indefinite life Finite life Finite lifeAmortisation period 3 – 10 years 10 yearsMethod of amortisation Straight-line Straight-lineIs intangible title restricted in any way yes no

TrademarksFinite lifeFinite life/indefinite life Finite life Finite lifeAmortisation period 15 years 15 yearsMethod of amortisation Straight-line Straight-lineIs intangible title restricted in any way no no

Trademarks comprise Farmer Brown, Bonny Bird, FarmFare and Epol, all of which were acquired on acquisition of Bonny Bird Farms Proprietary Limited and Epol Proprietary Limited in 1991.

Indefinite lifeFinite life/indefinite life indefiniteIs intangible title restricted in any way yes

Trademarks comprise Ouma, Nola, Yum Yum, Nutso, Bobtail, Catmor, Dogmor, Sunbake, Ultra dog, Canine Cuisine, Mageu, Monati , Optimizer, Glenryk, 5 Star, Mnandi, Supreme, Tafelberg, Safari and Piemans, all of which were acquired on acquisition of New Foodcorp Holdings Proprietary Limited (indirectly Foodcorp) (refer to note 33 for further details).

Customer relationshipsFinite life/indefinite life Finite lifeAmortisation period 10 – 20 yearsMethod of amortisation Straight-lineIs intangible title restricted in any way yes

GoodwillGoodwill relates to the acquisition of Vector Logistics Proprietary Limited in 2005 and New Foodcorp Holdings Proprietary Limited (indirectly Foodcorp) in the current financial year.

2013R’000

2012R’000

Goodwill is made up as follows:Vector Logistics Proprietary Limited 287 444 287 444 New Foodcorp Holdings Proprietary Limited 2 617 860

2 905 304 287 444

Goodwill relating to the acquisition of Vector Logistics Proprietary LimitedThe recoverable amount of a cash-generating unit is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management and future periods based on estimated growth rates. Cash flows beyond a five-year period are extrapolated using the estimated growth rates stated below.

Key assumptions used in the goodwill impairment test:Discount rate – pre-tax (%) 20,8 17,3 Discount rate – post-tax (%) 15,0 12,3 Perpetuity growth rate (%) 5,0 5,5 Period (years) 5 5

The perpetuity growth rate is consistent with long-term inflation forecasts. The discount rate reflects specific risks relating to the cash-generating unit.

No impairment was required in the current year or prior year.

Sensitivity analysis of assumptions used in the goodwill impairment test:Discount rate – movement (%) +2 +2– impairment nil nilPerpetuity growth rate – movement (%) -0,5 -2– impairment nil nil



2013 2012

2. INTANGIBLE ASSETS continuedGoodwill relating to the acquisition of New Foodcorp Holdings Proprietary LimitedGoodwill is allocated to the Group’s cash-generating units (CGUs) identified according to business segment. The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management and future periods based on estimated growth rates. Cash flows beyond a five-year period are extrapolated using the estimated growth rates stated below.

Key assumptions used in the goodwill impairment test:Discount rate – pre-tax (%) 14,2Discount rate – post-tax (%) 10,2Perpetuity growth rate (%) 5,0Period (years) 5

The perpetuity growth rate is consistent with long-term inflation forecasts. The discount rate reflects specific risks relating to the CGUs.

No impairment was required in the current year.

Sensitivity analysis of assumptions used in the goodwill impairment test:Discount rate– movement (%) +2– impairment (Rm) 700Perpetuity growth rate – movement (%) -0,5– impairment (Rm) 1,764

Trademarks – indefinite useful life The recoverable amount of each CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management and future periods based on estimated growth rates. Cash flows beyond a five-year period are extrapolated using the estimated growth rates stated below.

Key assumptions used in the impairment test:Discount rate – pre-tax (%) 14,2Discount rate – post-tax (%) 10,2Perpetuity growth rate (%) 5,0Period (years) 5The perpetuity growth rate is consistent with long-term inflation forecasts. The discount rate reflects specific risks relating to the cash-generating unit.

No impairment was required in the current year.

Sensitivity analysis of assumptions used in the goodwill impairment test:Discount rate – movement (%) +2– impairment nilPerpetuity growth rate – movement (%) -2– impairment nil

Certain intangible assets have been pledged as security for certain borrowings (refer to note 15).


2013 2012R’000 R’000

3. INVESTMENT IN JOINT VENTUREShares – at cost 128 955

Carrying value 128 955

Relates to 49,0% shareholding in Zam Chick Limited (a company incorporated in Zambia).

The effective date of the transaction was 1 April 2013 and as Zam Chick has a year-end of 31 March, the Group will equity account for Zam Chick’s 12-month results to March 2014 in the Group’s 2014 financial reporting period.

The purchase allocation is not considered to be final.

The Group’s share of the joint venture’s aggregate assets and liabilities is as follows:Assets 48 708Liabilities 8 335Interest held (%) 49,0

4. PREFERENCE SHARES RECEIVABLEPreference shares in Foodcorp Management Holdings Proprietary Limited 130 275Preference shares are measured at amortised cost.

The investment in preference shares consist of shares in aggregate of R1,00 each.

The preference shares are redeemable. The dividends are cumulative at a dividend rate of 8,28%.

The preference shares receivable have been pledged as security for certain borrowings (refer to note 15).

The preference shares receivable have been redeemed after year-end.

The carrying amount of the preference shares receivable approximates their fair value.

5. INVENTORIESFinished goods 493 768 556 411 Raw materials and ingredients 751 123 260 879 Consumables 77 164 55 750

At the end of the year 1 322 055 873 040

Amount of inventory written down to net realisable value 184 295 135 335Amount included in inventory as write down to net realisable value 31 821 31 637Certain inventories have been pledged as security for certain borrowings (refer to note 15).

6. BIOLOGICAL ASSETSBreeding stockAt the beginning of the year at fair value 254 912 224 095 Gain arising from cost inputs 853 918 777 803 Decrease due to harvest (841 879) (750 921)Fair value adjustment 5 045 3 935

At the end of the year at fair value 271 996 254 912

Broiler stockAt the beginning of the year at fair value 221 515 221 131 Gain arising from cost inputs 3 756 212 3 562 041 Decrease due to harvest (3 737 954) (3 586 544)Fair value adjustment 25 290 24 887

At the end of the year at fair value 265 063 221 515

Total at the end of the year at fair value 537 059 476 427



2013 2012R’000 R’000

7. TRADE AND OTHER RECEIVABLESTrade receivables 1 933 349 1 234 904 Less: provision for impairment of trade receivables (31 273) (24 798)

Net trade receivables 1 902 076 1 210 106 Prepayments 125 374 45 096 Other receivables 84 399 92 469

At the end of the year 2 111 849 1 347 671

Credit risk:Collateral held/insurance yes yesTerms (days) 30 30Credit Guarantee Insurance Cover (CGIC) 994 916 994 237 Mortgage bonds – registered value 30 600 43 000 Notarial bonds – registered value 100 990 Cessions – book value 300 800 Bank guarantees – actual value 3 400 3 000

1 029 316 1 042 027

Provision for impairment movementAt the beginning of the year (24 798) (25 222)Acquisition of subsidiary (10 325)Receivables impaired (4 100) (7 377)Impairments utilised 586 538 Unused amounts reversed 7 364 7 263

At the end of the year (31 273) (24 798)

The other classes within trade and other receivables do not contain impaired assets.

Trade receivables that are less than 30 days are not considered past due. Past due receivables, not impaired, relate to a number of independent customers for whom there is no recent history of default. The ageing relating to these trade receivables is as follows:

30 to 90 days 141 791 178 870 Over 90 days 7 770 16 034

149 561 194 904

The individually impaired receivables relate mainly to customers in unexpected difficult economic situations. The ageing of these receivables is as follows:

30 to 90 days (9 459) (1 612)Over 90 days (21 814) (23 186)

(31 273) (24 798)

In the current year, 54% (2012: 84%) of the Group’s trade receivables have been covered by CGIC and other collateral in the form of bonds and guarantees. The Group’s trade receivables that are not covered by CGIC relate to a number of independent customers for whom there is no recent history of default. Other receivables do not include any amounts that are past due or impaired.

All trade and other receivables are due within one year of the reporting date.

The carrying amount of trade and other receivables approximates their fair values.

Certain trade receivables have been pledged as security for certain borrowings (refer to note 15).


2013 2012Assets Liabilities Assets LiabilitiesR’000 R’000 R’000 R’000

8. DERIVATIVE FINANCIAL INSTRUMENTSDerivative financial assets and liabilitiesSoya options 7 296 14 375 Soya oil options 1 012 12Diesel hedge 1 593Maize options 4 613 6 424Forward exchange contracts 336 849 141 3Euro participation hedge 15 767

Total 361 505 5 766 20 811 3

Gains and losses recognised in the hedging reserve in equity on forward foreign exchange contracts that qualify for hedge accounting as of 30 June 2013 will be recognised in the income statement in the period or periods during which the hedged forecast transaction affects the income statement.

There has been no ineffective portion recognised in profit or loss from the cash flow hedges.



2013 2012R’000 R’000

9. NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONThe assets and liabilities of the Fishing division, included in the Foodcorp segment, have been presented as held for sale. The Group has concluded a heads of agreement with Oceana Group Limited.

Completion of the sale is subject to the fulfilment of certain conditions, including but not limited to, approval from the Department of Agriculture, Forestry and Fishing and competition authorities.

The effective date of the transaction will be the first business day of the month, immediately following the month during which the transaction becomes unconditional.

Net cash inflow from operating activities 53 293 Net cash outflow from investing activities (759)Net cash outflow from financing activities (109)

Total cash flows – discontinued operation 52 425

Assets of disposal group classified as held for saleProperty, plant and equipment 118 538 Goodwill 138 867 Trademarks and other intangibles 120 074 Investments 12 Inventory 69 075 Trade and other receivables 56 561 Trade receivables intercompany 33 409 Tax receivable 69

Total assets 536 605

Liabilities of disposal group classified as held for saleInterest-bearing liabilities 1 876 Trade and other payables 85 425 Current income tax liabilities 1 648 Derivative financial instruments 89 707

Total liabilities 178 656

Non-controlling interest classified as held for sale 5 490 As the assets and liabilities presented as held for sale were acquired in a business combination, no income/expenses have been recognised in other comprehensive income relating to disposal group classified as held for sale.

Analysis of the result of the discontinued operation, and the result recognised on the measurement of assets or disposal group, is as follows:Revenue 122 039 Expenses (100 631)

Profit before tax 21 408

Income tax expense (6 097)

Profit for the year 15 311

Attributable to:Equity holders of the company 9 821 Non-controlling interests 5 490


2013 2012R’000 R’000

10. STATED CAPITALAuthorised1 000 000 000 (2012: 575 525 772) ordinary shares of no par value.Issued ordinary shares of no par value:

Number of shares

At the beginning of the year 294 991 606 1 198 253 1 189 684 Rights issue 276 964 802 3 857 469 Shares issued in terms of Share Incentive Plans 2 300 076 23 472 8 569

At the end of the year 574 256 484 5 079 194 1 198 253

Details pertaining to the rights issue Proceeds from rights issue 3 932 900Transaction costs (75 431)

3 857 469

Statutory shares in issue 625 433 701Less: shares issued in terms of BEE scheme* (51 177 217)

Total 574 256 484

* On 30 July 2008, 51 177 217 shares were issued to Eagle Creek Investments 620 Proprietary Limited in terms of the BEE transaction. For accounting purposes, these shares are not treated as issued (refer to note 32 for further details).

The unissued ordinary shares are under the control of the directors until the forthcoming annual general meeting.

RCL Share Incentive SchemeDetails of share options granted under this plan are as follows:

Issue price prior to rights issue(cents)

Issue pricepost

rights issue*(cents)

Date options granted

Options at 30 June

2012

Adjustment in

respect of rights issue*

Options exercised

during the year

Options forfeited

during the year

Options at 30 June

2013

Optionsexercisable

at 30 June

2013

510 475 21 May 2004 15 801 768 (12 811) 3 758 3 758 1 039 967 25 May 2006 1 724 173 126 947 (1 851 120)1 011 941 1 September 2006 92 318 6 934 (99 252)1 660 1 545 1 April 2007 312 650 23 047 335 697 335 697 1 635 1 521 1 August 2007 5 063 875 392 563 (46 209) (115 571) 5 294 658 5 294 6581 659 1 544 23 November 2007 102 986 7 480 110 466 110 466 1 420 1 321 22 May 2008 3 041 605 220 123 (251 905) (119 064) 2 890 759 2 890 7591 400 1 303 1 February 2009 125 000 9 355 (34 000) 100 355 100 355

10 478 408 787 217 (2 295 297) (234 635) 8 735 693 8 735 693

* The issue price and number of outstanding options were amended as a result of the rights issue in order to place the holders in the same position as they were before the rights issue. The amendments have no financial effect for the Group as they have placed the participants in the same economic position as they were before the rights issue.

The weighted average share prices were as follows:2013Rand

2012Rand

Weighted average issue price of options in issue at the beginning of the year 14,66 14,08Weighted average issue price of options in issue at the end of the year 14,53 14,66Weighted average exercise price of options exercised during the year 10,19 8,04Weighted average issue price of options forfeited during the year 15,26 16,14Weighted average share price at date options exercised during the year 15,82 15,29



10. STATED CAPITAL continuedRCL Share Appreciation Rights SchemeDetails of share appreciation rights awarded under this plan are as follows:

Issuepriceprior torights issue(cents)

Issuepricepost

rights issue*

(cents)

Daterights

awarded

Rights at

30 June 2012

Rights awarded

during the year

Adjust-ment

in respect of

rights issue*

Rights exercised

during the year

Rights forfeited during

the year

Rights at

30 June 2013

Rights exercisable

at 30 June

2013

1 534 1 427 1 August 2009 5 150 981 376 797 (60 015) (161 963) 5 305 800 1 726 386 1 583 1 473 2 June 2010 5 458 275 394 251 (150 489) 5 702 037 1 886 145 1 526 1 420 1 September 2010 141 546 10 507 (152 053)1 768 1 645 1 June 2011 5 594 913 408 805 (307 323) 5 696 395 1 521 1 415 1 December 2011 108 872 8 175 117 047 1 504 1 400 1 January 2012 166 223 12 306 178 529 1 543 1 436 1 April 2012 267 337 19 991 287 328 1 419 1 320 5 September 2012 5 641 697 415 652 (259 222) 5 798 127 1 458 1 458 27 February 2013 126 961 126 961 1 612 1 612 1 June 2013 967 742 967 742

16 888 147 6 736 400 1 646 484 (60 015) (1 031 050) 24 179 966 3 612 531

* The issue price and number of outstanding rights were amended as a result of the rights issue in order to place the holders in the same position as they were before the rights issue. These amendments have no financial effect for the Group as they have placed the participants in the same economic position as they were before the rights issue.

The weighted average fair value of rights awarded during the year was R3,02 (2012: R3,80).

The weighted average share prices was as follows:2013Rand

2012Rand

Weighted average issue price of rights in issue at the beginning of the year 16,27 16,30Weighted average issue price of rights in issue at the end of the year 14,71 16,27Weighted average exercise price of rights exercised during the year 14,27Weighted average issue price of rights forfeited during the year 15,17 16,23Weighted average award price of rights awarded during the year 14,47 15,27Weighted average award price of rights exercised during the year 15,81

RCL Conditional Share Plan Details of conditional shares awarded under this plan are as follows:

Conditional Conditional Conditional Conditional Conditional Date Conditional shares shares shares shares sharesconditional shares at awarded Adjustment exercised forfeited at exercisable shares 30 June during in respect of during during 30 June at 30 June awarded 2012 the year rights issue* the year the year 2013 2013

14 December 2012 1 840 476 137 270 1 977 746

* The number of outstanding conditional shares was amended as a result of the rights issue in order to place the holders in the same position as they were before the issue. These amendments have no financial effect for the Group as they have placed the participants in the same economic position as they were before the rights issue.

The weighted average fair value of conditional shares awarded during the year was R10,74 (2012: Rnil).

The weighted average share prices was as follows: 2013 2012

Weighted average issue price of rights in issue at the beginning of the year nilWeighted average issue price of rights in issue at the end of the year nilWeighted average exercise price of rights exercised during the year nilWeighted average issue price of rights forfeited during the year nilWeighted average award price of rights awarded during the year nil

For a description of the above incentive plans, refer to the remuneration report on page 39 of the Integrated Annual Report.


10. STATED CAPITAL continued Expected volatility for all of the incentive plans was determined calculating the historical volatility of the share price over the previous four years, adjusted for the impact on the share price of the offer by Remgro to minorities in March 2007. 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.

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

2013 2012

Expected volatility (%) 19,8 – 24,7 24,9 – 25,8Risk-free rate (%) 5,6 – 6,3 7,1 – 7,2Expected dividend yield (%) 4,4 4,6Contractual life (years) 7 or 10 7 or 10Weighted average contractual life – options (years) 1,36 2,1Weighted average contractual life – rights (years) 4,69 5,1

2013 2012R’000 R’000

11. SHARE-BASED PAYMENTS RESERVEEmployee share schemeAt the beginning of the year 100 847 82 294 Value of employee services expensed during the year 21 128 18 553

At the end of the year 121 975 100 847

BEE transactionAt the beginning of the year 59 877 56 494 Employee portion – recurring 3 336 3 383

At the end of the year 63 213 59 877

Total at the end of the year 185 188 160 724

12. OTHER RESERVESCash flow hedgesAt the beginning of the yearRevaluation of cash flow hedges 797Taxation impact 222

At the end of the year 1 019

Foreign currency translation reserveAt the beginning of the yearCurrency translation on foreign subsidiary 22

At the end of the year 22

Total at the end of the year 1 041

There were no inefficiencies to be recorded from cash flow hedges (2012: Rnil).



2013 2012R’000 R’000

13. PREFERENCE SHARE LIABILITIESThe preference share liabilities are made up as follows:Preference shares issued at a par value of R0,00001 and a premium of R0,9999 per share – long-term 30 000 Cumulative dividend 5 089

35 089

The cumulative preferential cash dividend is calculated at a dividend rate of 19,5% accrued on a semi-annual basis.

The cumulative redeemable preference shares are redeemable on or before 19 September 2018.

Preference shares issued at a par value of R1737,51 per share – long-term 42 959

The cumulative preferential cash dividend is calculated at a dividend rate equal to prime accrued on a annual basis.

The cumulative redeemable preference shares are redeemable on or before 10 May 2019.

The carrying amount of the preference share liabilities approximates their fair values.

14. RETIREMENT BENEFIT OBLIGATIONSPost-retirement medical benefits 155 350 108 587

Post-retirement medical obligation The obligation of the Group to pay certain medical aid benefits after retirement is no longer part of the conditions of employment for Rainbow employees engaged after 1 October 2003 and for Vector employees engaged after 1 January 1997. A number of pensioners and current employees, however, remain entitled to this benefit. The entitlement to this benefit is dependent upon the employee remaining in service until retirement age. The Group also provides certain medical aid benefits to certain retired employees of Foodcorp. The last valuation date was 30 June 2013 for Rainbow, Vector and Foodcorp. The unfunded liability for post-retirement medical aid benefits is determined actuarially each year and comprises:

At the beginning of the year 108 587 102 162 Recognised as an expense in the current year 15 116 10 461

Interest costs 11 789 8 521 Current service costs 2 301 2 262 Actuarial loss/(gain) recognised 1 026 (322)

Benefits paid (8 439) (4 036)Acquisition of subsidiary 40 086

At the end of the year 155 350 108 587 Unrecognised past service costs (13 097) (14 325)Unrecognised actuarial loss 28 081 28 549

Balance per actuarial valuation 170 334 122 811


Defined contribution pension and provident fund schemes The latest audited financial information of the schemes that are administered by the Group all reflect a satisfactory state of affairs. Amounts charged to the income statement are as follows:

2013 2012R’000 R’000

Defined contribution pension and provident schemes:– Rainbow Pension Fund 24 644 22 692 – Rainbow Provident Fund 59 944 51 077 – Rainbow Workers Provident Fund 4 703– Namflex Pension Fund 354 341

– Foodcorp Funds: – Alexander Forbes 6 835– Liberty Life 134– Sanlam Umbrella Fund 303– NBC Provident Fund 628– Old Mutual – SACCAWU 907– Setshaba 158– FAWU 475– Metropolitan IMC Fund 391

94 773 78 813

2013 2012R’000 R’000

14. RETIREMENT BENEFIT OBLIGATIONS continuedThe principal actuarial assumptions are:Discount rate (%) 8,60 8,25 Health care cost inflation (%) 8,10 7,75 Mortality – pre-retirement * * Mortality – post-retirement ** ** Impact of 1% movement in the assumed medical cost trend on:– accrued liability increase 21 816 19 081 – accrued liability decrease (19 861) (15 587)– current service and interest costs increase 2 402 2 122 – current service and interest costs decrease (1 959) (1 711)Expected contributions for the years ending June 9 346 4 839

Historical information2013

R’0002012

R’0002011

R’0002010

R’000

Present value of unfunded obligations 170 334 122 811 105 676 89 936 Experience (gain)/loss on plan liabilities (471) 3 422 2 991 (5 746)

* SA85/90 (light) ultimate.** PA(90) ultimate table rated down two years plus 1% improvement per annum from 2006.

Retirement contribution plansPension and provident fund schemes The Group contributes towards retirement funds for all permanent employees who are required to be a member of a Group implemented scheme. These schemes, detailed below, are governed by the Pension Funds Act, 1956. Their assets consist primarily of listed shares, fixed income securities, property investments and money market instruments and are held separately from those of the Group. The schemes’ assets are administered by a Board of trustees, each of which includes elected employee representatives. The Rainbow Workers Provident Fund is a union fund, administrated by Negotiated Benefits Consultants Proprietary Limited, and had no employer representatives on its Board of trustees. All members of the Rainbow Workers Provident Fund re-joined the Rainbow Farms Provident fund with effect 1 May 2012. The Pension Funds Second Amendment Bill was enacted with effect 7 December 2001. This Bill requires that the actuarial valuations at 31 March 2004, together with a plan for the apportionment on a fair basis to past and current members of the funds of any surplus established by this valuation date, must be approved by the Financial Services Board (FSB). The FSB has approved a Nil Surplus Apportionment for both the Rainbow Pension and Provident Funds and the Foodcorp Provident Fund.



The Group has provided financial institutions relating to the Senior Secured Notes with the following security for its borrowing facilities:

• ApledgeandreversionarypledgeoftradereceivablesforanamountofR856,6million

• ApledgeofinventoryforanamountofR417,1million

• ApledgeoftrademarksforanamountofR1864,4million

• ApledgeofcustomerrelationshipsforanamountofR966,6million

• ApledgeofsoftwareforanamountofR7,2million

• SpecialnotarialbondoverplantandequipmentforanamountofR400,0millionandR1,4billion

• Firstcoveringmortgagebondsovercertainspecified immovableproperty foranaggregateamountofR122,0millionand R2,8 billion

• GeneralnotarialbondovermoveableassetsforanamountofR200,0millionandR1,4billion

• FirstdeedofmortgagewiththeRegistrarofShipsovercertainfishingvesselsfortheamountofR160,0 million

• PledgeandcessionoftheordinarysharesinFoodcorpandeachofFoodcorp’ssubsidiaries;and

• CashandcashequivalentshavebeenpledgedforanamountofR48,5million.

All interest-bearing borrowings are approved by the Board.

2013 2012R’000 R’000

15. INTEREST-BEARING LIABILITIESLong-termBank borrowings 61 828Finance lease liabilities 46 940 3 814 Senior Secured Notes 5 468 349

5 515 289 65 642

Short-termBank borrowings 115 723 30 833 Finance lease liabilities 39 228 2 410 Senior Secured Notes 142 278

297 229 33 243

Bank borrowings The unsecured loan bears interest of between Jibar +1,5% and Jibar +1,65%. The outstanding loan together with the accrued interest shall be repaid in quarterly instalments on the last day of the month.

The carrying amount of bank borrowings approximates their fair values.

Finance lease liabilitiesThe finance lease liabilities bear interest at a rate between 6,5% and 10,0%.

Finance lease liabilities are effectively secured as the rights to the leased assets revert to the lessor in the event of default.

The carrying amount of the finance lease liabilities approximates their fair values.

Senior Secured Notes The Senior Secured Notes are listed on the Irish Stock Exchange, are Euro denominated and bear interest at a fixed rate of 8,75%. The Senior Secured Notes have been translated at year-end at a spot rate of R12,86. The Senior Secured Notes will mature in March 2018.The fair value of the Senior Secured Notes at year-end was R5,291 million.


2013 2012R’000 R’000

16. TRADE AND OTHER PAYABLESLong-termTrade payables 24 398

24 398

Short-termTrade payables 1 622 902 1 435 348 Accruals 414 732 195 524 Other payables 593 265 17 275

2 630 899 1 648 147

The carrying amount of trade and other payables approximates their fair values.

17. DEFERRED INCOME TAX Deferred income tax liability movement:At the beginning of the year 432 655 372 198 Acquisition of subsidiary* 955 689 Charge for the year – income statement 20 378 67 832 Charge for the year – other 988 Charge for the year – other comprehensive income (222)Prior year over provision (215) (7 375)

At the end of the year 1 409 273 432 655

Deferred income tax liability comprises:Trademarks, property, plant and equipment 1 401 112 321 073 Inventories and biological assets 166 123 156 879 Provisions (93 074) (50 457)Derivative financial instruments 914 5 824 Assessed loss (158 719)Disposal group classified as held for sale 33 634 Interest-bearing liabilities 37 014 Other 22 269 (664)

1 409 273 432 655

Deferred tax liability due after 12 months 1 256 510 304 850 Deferred tax liability due within 12 months 152 763 127 805

1 409 273 432 655

Deferred income tax asset movement:At the beginning of the yearCharge for the year – income statement 4 327

At the end of the year 4 327

Deferred income tax asset comprises:Provisions 4 327

4 327

Deferred tax assets due after 12 monthsDeferred tax assets due within 12 months 4 327

* Refer to note 33 for details on the acquisition of subsidiary.

Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through future taxable profits is probable.



2013 2012R’000 R’000

18. DEPRECIATION AND AMORTISATIONBuildings 53 020 41 094 Plant, equipment and furniture 171 018 131 557 Vehicles 32 078 24 749 Leased assets 4 181 1 980 Leasehold improvements 925

261 222 199 380 Amortisation – intangible assets 17 072 906

Total depreciation and amortisation 278 294 200 286

19. OPERATING PROFITRevenue 10 108 812 7 855 142 Cost of sales (7 824 101) (5 913 470)

Gross profit 2 284 711 1 941 672 Administration expenses (679 788) (487 082)Selling and marketing expenses (356 101) (240 652)Distribution expenses (1 282 437) (898 942)Other income 199 642 99 228

Operating profit 166 027 414 224

Disclosable items – income:Fair value adjustment on biological assets 30 355 28 822 Fair value adjustment on derivatives 102 472 67 868 Foreign exchange gains 66 815 1 572 Disclosable items – expense:Operating lease charges 100 424 67 383

– land and buildings 77 463 50 760 – plant and equipment 18 497 13 907 – other 4 464 2 716

Arrangements containing an operating lease* 660 713 632 888

– contract grower fees 224 554 172 682 – outsourced transport 436 159 460 206

Technical consultants’ and legal fees 51 713 34 629 Acquisition costs 45 599 Foreign exchange losses 58 321 5 268 Feed costs 3 149 169 2 507 748 Utilities 571 323 494 797Loss on disposal of property, plant and equipment 1 906 427 Directors’ remuneration 11 289 10 226 Staff costs 1 572 952 1 269 554

– salaries and wages 1 260 169 1 099 174 – share-based payments 23 508 18 553 – retirement benefit costs 94 773 78 813 – other post-employment benefits 15 116 10 461 – other 179 386 62 553

Administration fee paid to Group holding company 6 656 5 417 Auditors’ remuneration 7 774 5 326

– fees for the audit 6 485 5 262 – prior year under/(over) provision 3 (976)– disbursements 252 170 – fees for other services 1 034 870

* It is not practical to separate the lease element from the total costs paid in respect of these arrangements and accordingly only total costs have been disclosed.


2013 2012R’000 R’000

20. FINANCE COSTSInterest – overdraft 5 304 242 Interest – other 5 094 3 484 Interest – interest-bearing liabilities 76 493 162 Interest – preference shares 1 560Interest – Group company 8 834 7 470 Foreign exchange losses* 56 390

153 675 11 358

* Includes loss on re-measurement of Eurobonds at year-end spot rate of R378 million (2012: Rnil) and gains on re-measurement of forward exchange contracts of R360 million (2012: Rnil).

21. FINANCE INCOMEInterest – other 2 389 2 227 Interest – preference shares 1 894Call funds with financial institutions and money market fund 49 591 5 143

53 874 7 370

22. INCOME TAX EXPENSECurrent tax 59 312 58 288

South African 59 157 60 930 Prior year over/(under) provision 155 (2 642)

Deferred tax 15 836 60 457

South African 15 678 67 832 Foreign 373 Prior year over provision (215) (7 375)

Secondary tax on companies 24 724

75 148 143 469

Reconciliation of tax rate:Normal rate of tax (%) 28,0 28,0 Adjusted for:– secondary tax on companies (%) 6,0 – prior year over/(under) provision – current (%) 0,2 (0,5)– prior year over provision – deferred (%) (0,3) (1,8)– tax loss utilised (%) 0,3 – non-deductible items (%) 85,3 3,3

Effective rate of tax (%) 113,5 35,0



From continuing operationsEarnings per share – basic (cents) 4,3 88,3* – diluted (cents) 4,3 88,1* Headline earnings per share – basic (cents) 4,6 88,4* – diluted (cents) 4,6 88,2* From discontinued operationEarnings per share – basic (cents) 2,5 – diluted (cents) 2,5 Headline earnings per share– basic (cents) 2,5 – diluted (cents) 2,5

* In January 2013, the Group embarked on a fully underwritten (by Remgro via Industrial Partnership Investments Limited) R3,9 billion rights issue which was concluded in March 2013. The prior period weighted average number of shares has been adjusted by a factor of 1,03 (the adjustment factor). The adjustment factor is calculated using the share price on 1 March 2013, being the share price immediately prior to the rights issue (share price cum-rights) divided by the theoretical ex-rights price (TERP). TERP is the number of new shares multiplied by the subscription price plus the number of shares held multiplied by the ex-dividend share price, all divided by the number of new shares plus the number of shares held prior to the rights issue.

23. EARNINGS AND HEADLINE EARNINGS PER SHAREBasicBasic earnings per share is calculated by dividing the profit attributable to equity holders of the company by the weighted average number of shares in issue during the year.

DilutedDiluted earnings are calculated using the fully diluted weighted average ordinary shares in issue. Dilution is due to shares offered, but not paid and delivered to participants in the BEE transaction, the RCL Share Incentive Scheme, the RCL Share Appreciation Rights Scheme and the RCL Conditional Share Plan (refer to notes 10 and 11). A calculation is performed to determine the number of shares that could have been acquired at fair value based on the monetary value of the subscription rights attached to outstanding scheme shares. The number of shares calculated below is compared with the number of shares that would have been issued assuming the exercise of the share scheme options.

2013 2012R’000 R’000

EarningsProfit from continuing operations attributable to equity holders of the company 16 686 266 767 Profit from discontinued operation attributable to equity holders of the company 9 821

Total 26 507 266 767

Weighted average number of ordinary shares in issueWeighted average number of ordinary shares in issue – basic earnings per share 391 076 302 193* Share option dilution impact 1 113 683

Weighted average number of shares – diluted earnings per share 392 189 302 876*

Headline earningsHeadline earnings reconciliation – continuing operations:Profit for the year attributable to equity holders of the company 16 686 266 767 Loss on disposal of property, plant and equipment – net of tax of R0,5 million (2012: R0,1 million) 1 373 307

Headline earnings 18 059 267 074

Headline earnings reconciliation – discontinued operation:Profit for the year attributable to equity holders of the company 9 821

Headline earnings 9 821


2013 2012R’000 R’000

24. DIVIDENDS PER SHAREInterim – paid: 0,0 cents (2012: 28,0 cents) 82 568 Final – declared: 0,0 cents (2012: paid 32,0 cents) 94 397

Total: 0,0 cents (2012: 60,0 cents) 176 965

25. LEASE COMMITMENTSContinuing operationsOperating leases:Due within one year 111 121 81 670 Due within two to five years 166 703 205 634

277 824 287 304

In respect of:– property 233 542 246 619 – plant and equipment 34 316 32 908 – other 9 966 7 777

277 824 287 304

Discontinued operationOperating leases:Due within one year 3 636 Due within two to five years 2 055

5 691

In respect of:– property 5 497 – plant and equipment 194

5 691

In addition, the Group has operating lease commitments with rentals determined in relation to volumes of activity. It is not possible to quantify accurately future rentals payable under such lease arrangements.

26. CONTINGENCIESLegal dispute 2 250 6 000 Contract grower guarantees 12 487 22 433

14 737 28 433

The Group has a contingent liability in respect of a legal claim for the dismissal of employees. The matter is ongoing and legal counsel are of the opinion that the Group will be successful. The directors have concluded that it is highly unlikely that the Group will incur a financial loss.

The Group has contingencies in respect of contract grower arrangements whereby the Group has guaranteed bank loans given to certain contract growers. These guarantees continue for a remaining three years. It is not anticipated that any material liabilities will arise from these contingencies. However, should they arise, the Group will acquire claims against the growers’ farms which would reduce the net exposure.



2013 2012R’000 R’000

27. OPERATING SEGMENTSThe Chief Executive Officer (CEO) is the chief operating decision-maker. The CEO assesses the performance of the operating segments based on operating profit (EBIT).

The Rainbow segment is a vertically integrated chicken producer. The Vector segment is a specialist frozen third-party logistics provider, providing integrated logistics. The Foodcorp segment is a food producer and manufacturer with a diverse product basket that ranges from staples to some of South Africa’s best-known consumer brands and ready-to-eat meals.

Revenue 10 108 812 7 855 142

Rainbow 8 143 587 7 196 632 Vector 1 476 888 1 339 580 Foodcorp 1 217 505 Sales between segments:Vector to Rainbow (725 790) (681 070)Vector to Foodcorp (3 378)

Operating (loss)/profitRainbow (3 680) 245 487 Vector 143 303 168 737 Foodcorp 99 010 Unallocated Group costs (72 606)

Operating profit 166 027 414 224 Finance costs (153 675) (11 358)Finance income 53 874 7 370

Profit before tax 66 226 410 236

AssetsRainbow 6 259 613 3 791 566 Vector 4 112 394 2 925 978 Foodcorp 9 884 468 Unallocated segment 15 587Investment in joint venture 128 955 Set-off of inter-segment balances (3 048 557) (1 521 253)

Total per statement of financial position 17 352 460 5 196 291

LiabilitiesRainbow 2 014 182 2 261 363 Vector 2 709 538 1 549 822 Foodcorp 8 610 517Unallocated segment 10 571Set-off of inter-segment balances (3 048 557) (1 521 253)

Total per statement of financial position 10 296 251 2 289 932


2013 2012R’000 R’000

27. OPERATING SEGMENTS continuedAdditions to property, plant and equipment and intangible assetsRainbow Property, plant and equipment 328 183 408 371 Intangible assets 7 714 26 248 VectorProperty, plant and equipment 82 497 46 288 FoodcorpProperty, plant and equipment 66 324 Intangible assets 1 139

Depreciation and amortisationRainbow 196 620 163 871 Vector 42 024 36 415 Foodcorp 39 650

Major customersRevenue from the Group’s top five customers is:– customer A 1 817 595 1 579 724 – customer B 1 274 359 1 261 853 – customer C 480 061 331 385 – customer D 357 490 320 196 – customer E 407 020 318 845 All of the above revenue is included in the Rainbow and Foodcorp segment.

Analysis of revenueSale of food products 8 153 863 6 248 474 Sale of feed 1 201 359 948 158 Sale of services 753 590 658 510

10 108 812 7 855 142

There is no significant revenue outside of South Africa.



28. FINANCIAL RISK MANAGEMENT Financial risk factors This note presents information about the Group’s exposure to financial risks, the Group’s objectives, policies and processes for

measuring and managing these risks and the Group’s management of capital.

The Group’s financial instruments consist primarily of cash resources with financial institutions, derivatives, accounts receivable and payable, preferences shares receivable and interest-bearing liabilities. In the normal course of business, the Group is exposed to credit, interest, liquidity and market risk. In order to manage these risks, the Group may enter into transactions which make use of derivatives. They include forward exchange contracts, options, interest rate swaps and commodity futures and options. A separate committee is used to manage the risks and the hedging activities of the Group. The Group does not speculate in derivative instruments. Certain of the Group’s forward exchange contracts qualify as designated hedges for accounting purposes. Their fair values are disclosed in note 8.

The Board has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board has established the Risk Committee which is responsible for developing and monitoring the Group’s risk management policies. The Risk Committee reports regularly to the Board on its activities.

The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training, management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

Due to the recent acquisition of Foodcorp, the Board is currently assessing the impact of the acquisition on the Group’s risk management framework.

The Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Audit Committee is assisted in its oversight role by internal audit. Internal audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual

obligations. Credit risk primarily relates to trade receivables, cash investments, preference shares receivable and derivative financial instruments.

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer and there is no significant concentration of risk related to industry segments. The granting of credit is controlled by well established criteria which are reviewed on an annual basis. The maximum exposure to credit risk at the reporting date is the carrying amount of each class of financial asset and financial guarantee amounting to R14,7 million (refer to note 26).

In the current year, 54% (2012: 84%) of the Group’s trade receivables have been covered by Credit Guarantee Insurance Cover (CGIC) and other collateral in the form of bonds and guarantees. The insurance covers 90% of outstanding debt. The reduction in cover during the current year is due to the acquisition of Foodcorp which has resulted in additional trade receivables of R793,5 million. Based on Foodcorp’s stringent credit procedures and the fact that there is no significant concentration of risk related to the customers, the Board is satisfied that the trade receivables are not covered by CGIC and other collateral. The Board will reassess the need for cover in the next financial year. The credit policy requires each new customer to be analysed individually for creditworthiness before delivery and payment terms are offered. The Group’s review includes external ratings where available and in some cases bank references. Limits are established for each customer which represents the maximum trading amount without requiring further approval. These limits are reviewed on an ongoing basis. Customers that fail to meet the Group’s benchmark creditworthiness may transact with the Group on a cash basis. Customers that default on payments are closely monitored and put on “stop supply” if required.

The preference shares receivable are secured against shares in Foodcorp and have been settled subsequent to year-end.

The Group deposits cash surpluses with financial institutions of high quality and standing. The following table shows the cash and cash equivalents allocated in terms of bank rating. These ratings are based on Moody’s bank ratings.


2013 2012R’000 R’000

28. FINANCIAL RISK MANAGEMENT continuedRatingBAA1 2 312 135 305 329 Cash on hand 1 056 463

2 313 191 305 792

Investment in money market fund of R450 million relates to investments in Nedbank Limited. The investment has an AA+ rating. The fund invests in call deposits, treasury bills, negotiable certificates of deposit, fixed deposits, promissory notes and commercial paper. These instruments carry very low risk and provides a 48 hour liquidity, but cannot be classified as cash and cash equivalents as the individual instruments held by the fund do not meet the maturity criteria of IAS 7 (Statement of cash flow). These instruments are considered to be equity instruments categorised as financial assets of fair value through profit and loss.

The Group has minimal risk of illiquidity. Its unutilised borrowing capacity is R615 million (2012: R470 million). Due to the dynamic nature of the underlying businesses, the Group maintains flexibility in funding by maintaining availability under committed credit lines. Management monitors rolling forecasts of the Group’s cash and cash equivalents on the basis of expected cash flow.

The Group’s derivative financial liabilities, and current trade and other payables are all due within one year and the impact of discounting them is not significant.

The table below summarises the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments:

Less than One to Two to Greater thanone year two years three years three years Total

R’000 R’000 R’000 R’000 R’000

2013Interest-bearing liabilities – current 609 746 609 746Interest-bearing liabilities – non-current 486 463 490 121 5 505 321 6 481 905Preference share liabilities 5 089 151 090 156 179Trade and other payables (excluding employee benefit payables) 2 337 408 29 500 2 366 908 Derivative financial liabilities 5 766 5 766

2 958 009 515 963 490 121 5 656 411 9 620 504

2012Interest-bearing liabilities – current 39 917 39 917Interest-bearing liabilities – non-current 36 400 34 652 71 052Trade and other payables (excluding employee benefit payables) 1 515 731 1 515 731 Derivative financial liabilities 3 3

1 555 651 36 400 34 652 1 626 703

Market risk Interest rate risk The Group is exposed to interest rate risk on its cash deposits and interest-bearing liabilities, which can impact on the cash flows of

these instruments. The exposure to interest rate risk is managed through the Group’s cash management system which enables the Group to maximise returns whilst minimising risk. The effective interest rate for the year was 8,04% (2012: 5,57%).

The post-tax impact on the income statement as at 30 June for fluctuations in variable interest rates, with all other variables held constant, would have been as follows:

2013 2012R’000 R’000

+3% 18 861 (4 469)

Foreign currency risk In the normal course of business the Group enters into transactions denominated in foreign currencies. Trade and other payables

include net payables of R0,3 million (2012: R4,6 million), trade and other receivables of R1,2 million (2012: Rnil) in respect of sales and purchases in foreign currencies. The Group also has substantial foreign currency Senior Secured Notes that are Euro denominated. The currencies predominantly traded in by the Group are USD, GBP and EUR. As a result, the Group is subject to exposure from fluctuations in foreign currency exchange rates. The Group utilises forward exchange contracts and currency options to minimise foreign currency exchange risk in terms of its risk management policy. All forward exchange contracts and currency options are supported by underlying transactions.


28. FINANCIAL RISK MANAGEMENT continued First priority Senior Secured Notes On 4 March 2011, Foodcorp issued €390,0 million Senior Secured Notes with a coupon rate of 8,75% per annum and a maturity

date of 1 March 2018.

Payments under the 2018 Notes consists of two components, namely the principal due on 1 March 2018 and coupon payments due semi-annually on 1 September and 1 March. In order to hedge the foreign currency exposure, the following foreign exchange contracts were entered into:

• theprincipalwashedged50%throughaperformanceparticipating foreignexchangeand50%throughavanilla forwardexchange contract, both for six years maturing on 1 March 2017

• thesemi-annualcouponpaymentshavebeenpartiallyhedged(50%)atinceptionusingforwardexchangecontractsmaturingon each coupon payment date, until 1 March 2017; and

• inaddition,theremainingportionofthecouponpaymentdueon1September2013wasrecentlyhedgedusingavanillaforward exchange contract.

The mark-to-market effects of the hedging arrangements are accounted for in the income statement under financing costs.

A 10% appreciation or depreciation in the EUR will have a R565 million impact on the carrying amount of the loan. Refer below for impact of the forward exchange contract (FEC) and participation hedge, which offsets these adjustments.

Average rate

Foreigncontract amount

Fair valueof FECs

R ’000 R’000

30 June 2013EUR FECs – assets* 13,97 263 250 336 847 EUR FECs – liabilities 11,7 296 (64)USD FECs – assets 9,5 12 412 7 023 USD FECs – liabilities 9,4 1 280 894 AUD FECs – liabilities 9,4 189 77

30 June 2012EUR FECs – liabilities 10,54 30 3

* Relates to Senior Secured Notes.

Foreignoption

amount ’000

Fair value of options

R’000

30 June 2013USD currency options – assets 12 000 7 630 USD currency options – liabilities 12 000 1 552 EUR currency options – assets 900 658 EUR currency options – liabilities 900 141

30 June 2012USD currency options – assets 53 000 7 685 USD currency options – liabilities 35 000 6 941

30 June 2013Euro participation hedgeForeign currency amount 195 000



28. FINANCIAL RISK MANAGEMENT continued Currency Sensitivity of future (post-tax) income statement impact arising on the maturity of currency option contracts and trade payables:

Profit/(loss) as a result of a movement of the USD and EUR at 30 June assuming the spot price remains constant thereafter until the maturity of the contracts.

2013 2012R’000 R’000

10% increase in the value of the USD against the rand 23 239 29 32310% decrease in the value of the USD against the rand (21 378) (29 323)10% increase in the value of the EUR against the rand 653 857 10% decrease in the value of the EUR against the rand (493 443)

Commodity price and procurement risk Commodity price risk arises from the risk of an adverse effect on current or future earnings from fluctuations in the prices of

commodities. To stabilise prices for the Group’s substantial commodity requirements, derivative instruments including forward contracts, commodity options and futures contracts are used to hedge its exposure to commodity price risk.

The overriding directive is to procure commodities at the lowest cost to meet forecast requirements, both internally and for external sales. Call and put options are utilised within this framework to manage commodity requirements and supply. The use of written options is restricted to the hedging of existing long positions and is limited to put options.

The overall procurement strategy and net positions are reported monthly to the Board and an oversight committee. The oversight committee is responsible for the setting of the monthly company view with regard to future price movements. The daily trading by the procurement team is restricted in terms of this company view, unless prior approval is obtained from the Procurement Committee.

Maize and soya Sensitivity of future (post-tax) income statement impact arising on the maturity of maize and soya derivative contracts:

Profit/(loss) as a result of a movement in the spot price of maize and soya and resulting impact on tonnage at 30 June, assuming the spot price remains constant thereafter until the maturity of the contracts:

2013 2012R’000 R’000

Maize – 5% increase 510 19 194 Maize – 5% decrease (510) (19 194)Soya – 15% increase 1 745 28 225 Soya – 15% decrease (1 745) (28 225)

Rainbow Farms Proprietary Limited has entered into contract grower agreements with various counterparties to procure broiler chickens for the forthcoming financial year.

The commitment value as at 30 June 2013 was R80,6 million (2012: R19,9 million).

Capital risk management The Board’s policy is to maintain a strong capital base so as to maintain shareholder, creditor and market confidence and to sustain

the future development needs of the business. The Board monitors both the spread of shareholders and return on equity (which is defined as profit for the year expressed as a percentage of average total equity) and the level of dividends paid to shareholders.

The Group’s target is to achieve a return on shareholders’ equity in excess of 25%. In 2013 the return was 0,5 % (2012: 9,3%).

There were no changes to the Group’s approach to capital management during the year.

Fair value estimation IFRS 7 requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:

• quotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilities(level1)

• inputsotherthanquotedpricesincludedwithinlevel1thatareobservablefortheassetorliability,eitherdirectly(thatis,asprices) or indirectly (that is, derived from prices) (level 2); and

• inputsfortheassetorliabilitythatarenotbasedonobservablemarketdata(thatis,unobservableinputs)(level3).


28. FINANCIAL RISK MANAGEMENT continuedThe following table presents the Group’s assets and liabilities that are measured at fair value at 30 June.

Level 1 Level 2 Level 3 TotalR’000 R’000 R’000 R’000

30 June 2013AssetsTrading derivatives 361 505 361 505

Total assets 361 505 361 505

LiabilitiesTrading derivatives 5 766 5 766

Total liabilities 5 766 5 766

30 June 2012AssetsTrading derivatives 20 811 20 811

Total assets 20 811 20 811

LiabilitiesTrading derivatives 3 3

Total liabilities 3 3

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.



29. FINANCIAL INSTRUMENTS BY CATEGORYThe accounting policies for financial instruments have been applied to the line items below:

Loans and receivables

R’000

Assets at fairvalue through

profit and loss R’000

Derivativesused for

hedge accounting

R’000 Total

R’000

Assets per the statement of financial position30 June 2013Trade and other receivables 1 977 564 1 977 564 Preference shares receivable 130 275 130 275 Derivative financial instruments 360 708 797 361 505 Cash and cash equivalents 2 313 191 2 313 191Investment in money market fund 450 000 450 000


30 June 2012Trade and other receivables 1 272 042 1 272 042Derivative financial instruments 20 811 20 811Cash and cash equivalents 305 792 305 792

At the end of the year 1 577 834 20 811 1 598 645

Other financialliabilities

R’000

Liabilities at fair value

throughprofit and loss

R’000

Derivatives used

for hedgeaccounting

R’000 Total

R’000

Liabilities per the statement of financial position30 June 2013Interest-bearing liabilities – long-term 5 515 289 5 515 289 Interest-bearing liabilities – short-term 297 229 297 229Preference share liabilities – long-term 72 959 72 959Preference share liabilities – short-term 5 089 5 089Derivative financial instruments 5 766 5 766 Trade and other payables 2 359 894 2 359 894

At the end of the year 8 250 460 5 766 8 256 226

30 June 2012Interest-bearing liabilities – long-term 65 642 65 642Interest-bearing liabilities – short-term 33 243 33 243Derivative financial instruments 3 3Trade and other payables 1 515 731 1 515 731

At the end of the year 1 614 616 3 1 614 619


30. RELATED PARTY TRANSACTIONS Related party relationships exist between RCL Foods Limited, its subsidiaries and Remgro Limited and its subsidiaries, associates and joint ventures. Remgro Management Services Limited provides treasury services to the Group. In addition, there is preference shares receivable of R130,3 million which relate to amounts receivable from Foodcorp management share ownership structure.

Group As detailed in note 1 to the company financial statements on page 117, the company has concluded certain lending transactions with these related parties. In addition the following transactions were concluded:

2013 2012R’000 R’000

Interest paid to Remgro Management Services Limited* 8 834 7 470 Administration fee paid to Remgro Management Services Limited 6 656 5 417 Amount owing to Remgro Management Services Limited included in payables 1 820 991 Underwriting fee paid to Industrial Partnership Investments Limited 58 994 Bank charges paid to First National Bank Limited 807 550 Corporate finance transaction costs paid to Rand Merchant Bank 27 360 Net interest received from First National Bank Limited 7 764 Purchases from Unilever South Africa Proprietary Limited 63 809 2 287 Amount owing to Unilever South Africa Proprietary Limited included in payables 3 353 273 Purchases from Quality Sugars Proprietary Limited 11 309 6 641 Amount owing to Quality Sugars Proprietary Limited included in payables 1 476 910 Purchases from Grindrod South Africa Proprietary Limited 4 055 Amount owing to Grindrod South Africa Proprietary Limited included in payables 388 Purchases from PG Glass Proprietary Limited 1Preference shares receivable – Foodcorp Management Holdings Proprietary Limited 130 275 Preference shares dividend – Foodcorp Management Holdings Proprietary Limited 1 894

Key managementExecutive management and the senior leadership team are classified as key management:– short-term and post-employment benefits 113 353 96 354 – share-based payments 21 128 18 553

134 481 114 907

* There were no outstanding loans with Remgro Management Services Limited at year-end.



31. DIRECTORS’ EMOLUMENTS

Basic salary R’000

Pension contribution

R’000

Other benefits*

R’000 Total

R’000

2013M Dally 5 344 387 118 5 849RH Field 2 595 258 64 2 917

7 939 645 182 8 766

2012M Dally 4 962 359 108 5 429 RH Field 2 334 232 59 2 625

7 296 591 167 8 054

* Other benefits include company contributions to disability insurance, medical aid and UIF.

2013 2012R’000 R’000

Non-executives (for services as a director)Present directorsHJ Carse* 71JJ Durand* 189 172 Dr M Griessel 307 278 PR Louw* 189 172 NP Mageza 335 304 JB Magwaza 232 211 MM Nhlanhla 232 186 RV Smither 425 355 GC Zondi** 406 313

2 386 1 991

Past directorsCM van den Heever* 109 9MH Visser* 172

109 181

Total 2 495 2 172

* Paid to Remgro Management Services Limited.

** Paid to Imbewu Capital Partners Consulting Proprietary Limited.



31. DIRECTORS’ EMOLUMENTS continuedInterests of directors of the company in share options granted under the RCL Share Incentive SchemeOptions granted to executive directors and unexpired or unexercised as at 30 June 2013 are as follows:

Options Issue price Issue Options Gain onexercisable prior to Options at Rights price post exercised Options at optionsat 30 June rights issue 30 June issue rights issue* during 30 June Exercise exercised

2012 Rand 2012 adjustment* Rand the year 2013 price R’000

M Dally 779 211 10,39 779 211 58 442 9,67 (837 653) 15,05 4 506 1 101 317 16,35 1 101 317 87 371 15,21 1 188 688

504 245 14,20 504 245 37 979 13,21 542 224

2 384 773 2 384 773 183 792 (837 653) 1 730 912 4 506

RH Field 154 328 10,39 154 328 11 575 9,67 (165 903) 16,80 1 167 573 639 16,35 573 639 45 508 15,21 619 147 264 404 14,20 264 404 19 915 13,21 284 319

992 371 992 371 76 998 (165 903) 903 466 1 167

Total 3 377 144 3 377 144 260 790 (1 003 556) 2 634 378 5 673

* The issue price and number of outstanding options were amended as a result of the rights issue in order to place the holders in the same position as they were before the rights issue. These amendments have no financial effect for the Group as they have placed the participants in the same economic position as they were before the rights issue.

No options were issued during the year, nor will any further options be issued under the RCL Share Incentive Scheme, as this scheme has been replaced by the RCL Share Appreciation Rights Scheme approved at the 43rd annual general meeting of the shareholders held on 31 July 2009. The scheme will be simply allowed to run its course in respect of existing options.

Options Issue Issue Options Gain onexercisable price prior to Options at price post exercised Options at optionsat 30 June rights issue 30 June rights issue during 30 June Exercise exercised

2011 Rand 2011 Rand the year 2012 price R’000

M Dally 464 000 6,65 464 000 (464 000) 15,10 3 922 779 211 10,39 779 211 779 211 734 211 16,35 1 101 317 1 101 317 336 163 14,20 504 245 504 245

2 313 585 2 848 773 (464 000) 2 384 773 3 922

RH Field 128 000 6,65 128 000 (128 000) 15,13 1 085 154 328 10,39 154 328 154 328 382 426 16,35 573 639 573 639 176 269 14,20 264 404 264 404

841 023 1 120 371 (128 000) 992 371 1 085

Total 3 154 608 3 969 144 (592 000) 3 377 144 5 007


Interests of directors of the company in conditional shares awarded under the RCL Conditional Share Plan

Conditionalshares

at30 June

2012

Conditionalshares

awardedduring

the year

Adjustment in respect

of rightsissue*

Conditionalsharessettledduring

the year

Conditionalshares

at30 June

2013

M Dally 628 659 46 888 675 547 RH Field 316 517 23 607 340 124

Total 945 176 70 495 1 015 671

* The number of outstanding conditional shares was amended as a result of the rights issue in order to place the holders in the same position as they were before the rights issue. These amendments have no financial effect for the Group as they have placed the participants in the same economic position as they were before the rights issue.

** Grant date fair value of conditional shares awarded represents the total fair value of rights awarded during the year. This cost will be expensed over the right’s vesting period.

Rightsexercisable

at 30 June

2011

Issueprice prior torights issue

Rand

Rights at30 June

2011

Rightsawarded

duringthe year

Rightsexercised

duringthe year

Rights at30 June

2012Exercise

price

Gain onrights

exercisedR’000

Grant datefair valueof rightsawarded

duringthe year

R’000**

M Dally 15,34 845 679 845 67915,83 865 465 865 46517,68 665 120 665 120

2 376 264 2 376 264

RH Field 15,34 397 932 397 93215,83 401 989 401 98917,68 339 739 339 739

1 139 660 1 139 660

Total 3 515 924 3 515 924

31. DIRECTORS’ EMOLUMENTS continuedInterests of directors of the company in share appreciation rights awarded under the RCL Share Appreciation Rights SchemeShare appreciation rights awarded to executive directors and unexpired or unexercised as at the 30 June 2013 are as follows:

Rightsexer-

cisableat

30 June2012

Issueprice

prior torights issueRand

Issuepricepost

rights issue*Rand

Rightsat

30 June2012

Rightsawarded

duringthe year

Adjust-ment

in respect of

rights issue*

Rightsexercised

duringthe year

Rightsat

30 June2013

Exerciseprice

Gain onrights

exercisedR’000

Grantdate

fair valueof rights awarded

during the year**

R’000

M Dally 15,34 14,27 845 679 63 266 908 94515,83 14,73 865 465 63 791 929 25617,68 16,45 665 120 49 452 714 57214,19 13,20 714 404 53 713 768 117 1 984

2 376 264 714 404 230 222 3 320 890 1 984

RH Field 15,34 14,27 397 932 29 770 427 70215,83 14,73 401 989 29 629 431 61817,68 16,45 339 739 25 260 364 99914,19 13,20 348 317 26 188 374 505 968

1 139 660 348 317 110 847 1 598 824 968

Total 3 515 924 1 062 721 341 069 4 919 714 2 952

* The issue price and number of outstanding options were amended as a result of the rights issue in order to place the holders in the same position as they were before the rights issue. These amendments have no financial effect for the Group as they have placed the participants in the same economic position as they were before the rights issue.



Directors’ emoluments paid by Remgro Limited

Retirement Other Fees Salaries fund benefits4 Total

Fixed pay R’000 R’000 R’000 R’000 R’000

2013ExecutiveHJ Carse1 1 494 296 204 1 994 JJ Durand 213 7 080 1 447 265 9 005 PR Louw 1 209 240 204 1 653 CM van den Heever2 1 322 262 207 1 791

Subtotal 213 11 105 2 245 880 14 443

Independent non-executiveNP Mageza 285 285

Subtotal 285 285

Total 498 11 105 2 245 880 14 728

2012ExecutiveMH Visser3 166 7 311 1 696 534 9 707 JJ Durand 199 5 030 1 037 248 6 514 PR Louw 1 118 222 192 1 532 CM van den Heever 1 233 245 192 1 670

Subtotal 365 14 692 3 200 1 166 19 423

Independent non-executiveNP Mageza 266 266

Subtotal 266 266

Total 631 14 692 3 200 1 166 19 689

1 Mr HJ Carse was appointed as a director on 19 February 2013. The remuneration reflected is for 12 months ended 30 June 2013.

2 Mr CM van den Heever resigned as a director on 31 January 2013. The remuneration reflected is for 12 months ended 30 June 2013.

3 Mr MH Visser passed away on 26 April 2012.

4 Other benefits include medical aid contributions and vehicle benefits.

31. DIRECTORS’ EMOLUMENTS continuedInterests of directors’ of the company in stated capitalThe aggregate beneficial holdings as at 30 June 2013 of those directors of the company holding issued ordinary shares are detailed below:

2013 2012Direct Indirect Direct Indirect

beneficial beneficial beneficial beneficial

Executive directorsM Dally 1 201 653 964 000RH Field 250 000 378 000Non-executive directorsDr M Griessel 24 680 4 680NP Mageza 252JB Magwaza* 2 558 861 2 558 861 MM Nhlanhla* 342 887 342 887 GC Zondi* 3 766 643 3 766 643

1 451 653 6 693 323 1 342 000 6 673 071

* Assumes 100% vesting in terms of BEE transaction.

There has been no change in the interest of the directors in the stated capital of the company since the end of the financial year to the date of this report.


31. DIRECTORS’ EMOLUMENTS continued Variable pay – long-term incentive plans Remgro Share Scheme June 2013 Ordinary shares

Participant

Balance of shares accepted

as at 30 June

2012

Shares accepted

during the period

Date of acceptance

of sharesOffer price

Rand

Number of shares paid and delivered1

Date of payment

and delivery of

shares2

Share price on date of

payment and

delivery of shares2

Rand

Increase in value2

R’000


as at 30 June

2013

ExecutiveMH Visser1 172 681 135,00 172 681 26/04/2012 129,60

68 230 186,70 68 230 26/04/2012 129,60

Total 240 911 240 911

1 In terms of the rules of the Remgro Share Scheme, the executor of the estate of the late Mr MH Visser was entitled to effect payment of all the shares offered to him within 12 months after the date of his death or before the expiry of the offer periods, whichever was the earlier. Full payment of all shares offered was effected during the year under review.

2 It refers to the increase in value of the scheme shares of the indicated participant from the offer date to the date of payment and delivery. The share price used to calculate the deemed increase in value for the late Mr Visser, is the Remgro share price on the date that he passed away.

Participant

Balanceof shares accepted

as at30 June

2011

Shares accepted

during the period

Date ofacceptance

of sharesOffer price

Rand

Number of shares paid and

delivered1

Date of payment

and delivery of shares2

Share price on date of

payment and delivery

of shares2

Rand

Increase in value2

R’000


as at 30 June

2012

ExecutiveMH Visser1 172 681 135,00 172 681

68 230 186,70 68 230

Total 240 911 240 911

1 In terms of the rules of the Remgro Share Scheme, the executor of the estate of the late Mr MH Visser was entitled to effect payment of all the shares offered to him within 12 months after the date of his death or before the expiry of the offer periods, whichever was the earlier. Full payment of all shares offered was effected during the year under review.

2 It refers to the increase in value of the scheme shares of the indicated participant from the offer date to the date of payment and delivery. The share price used to calculate the deemed increase in value for the late Mr Visser, is the Remgro share price on the date that he passed away.



31. DIRECTORS’ EMOLUMENTS continuedRemgro Equity Settled Share Appreciation Right Scheme (SARs) – 2013

Participant

Balance of SARs

accepted as at

30 June 2012

SARs accepted

during the

periodOffer date

Offer price2

Rand

Number of SARs

exercised

Date exercising

SARs

Share price on exercise

date

Increase in value2

R’000

Balance of SARs

accepted as at

30 June 2013

Grant date fair value

of SARs granted

during the period

ExecutiveMH Visser1 542 424 65,50 542 424 26/04/2012 129,60 34 769

486 465 97,55 486 465 26/04/2012 129,60 15 591 H Carse 20 613 78,30 20 613

2 933 75,38 2 933 1 624 82,60 1 624

38 062 97,55 38 062 7 546 29/11/2012 147,25 7 546 299 400

JJ Durand 162 354 78,30 54 118 03/04/2013 185,50 5 801 108 236 15 144 75,38 7 572 03/04/2013 185,50 834 7 572 4 220 82,60 4 220 03/04/2013 185,50 434

235 895 97,55 235 895 271 258 29/11/2012 147,25 271 258 10 762 613

PR Louw 7 066 63,97 7 066 9 058 64,23 9 058 03/04/2013 185,50 1 098

26 995 65,50 26 995 8 860 40,62 8 860 02/04/2013 183,15 1 263

27 432 97,55 27 432 22 646 29/11/2012 147,25 22 646 898 518

CM van den Heever 46 976 31,43 46 976 30/10/2012 147,05 5 431 17 961 78,30 17 961 2 680 75,38 2 680 1 419 82,60 1 419

34 292 97,55 34 292 6 830 29/11/2012 147,25 6 830 270 992

1 692 473 308 280 1 159 693 65 221 841 060 12 231 523

1 In terms of the rules of the SARs scheme, the executor of the estate of the late Mr MH Visser was entitled to exercise all the SARs granted to him at any time within 12 months after the date of his death, or before the expiry of the SARs period (being seven years from the grant date), whichever was the earlier. This right was exercised during the year under review.

2 It refers to the increase in value of the SAR Scheme shares of the indicated participants from the offer date to the date of payment and delivery. The share price used to calculate the deemed increase in value for the late Mr Visser, is the Remgro share price on the date that he passed away.


31. DIRECTORS’ EMOLUMENTS continued Remgro Equity Settled Share Appreciation Right Scheme (SARs) – 2012

Participant

Balance of SARs

accepted as at

30 June 2011

SARs accepted

during the

periodOffer date

Offer price2

Rand

Number of SARs

exercised

Date exercising

SARs

Share price on exercise

date

Increase in value3

R’000

Balance of SARs

accepted as at

30 June 2012

Grant date fair value

of SARs granted

during the period

ExecutiveMH Visser1 542 424 65,50 542 424

486 465 97,55 486 465 JJ Durand 427 047 38,90 427 047 26/10/2011 117,75 33 673

162 354 78,30 162 354 22 717 75,38 7 573 26/10/2011 117,75 258 15 144 12 662 82,60 8 442 26/10/2011 117,75 230 4 220

235 895 97,55 235 895 PR Louw 7 000 63,97 7 000

9 058 64,23 9 058 26 995 65,50 26 995 8 860 40,62 8 860

27 432 97,55 27 432 CM van den Heever 46 976 31,43 46 976

17 961 78,30 17 961 2 680 75,38 2 680 1 419 82,60 1 419

34 292 97,55 34 292

2 072 237 443 062 34 161 1 629 175

1 In terms of the rules of the SARs scheme, the executor of the estate of the late Mr MH Visser was entitled to exercise all the SARs granted to him at any time within 12 months after the date of his death, or before the expiry of the SARs period (being seven years from the grant date), whichever was the earlier. This right was exercised during the year under review.

2 In terms of the rules of the SARs scheme, the offer price of SARs that were awarded prior to the unbundling of the investment in Implats, was reduced by between R7,58 and R13,19 (depending on the offer date) to ensure that the participants were placed in substantially the same position as they were prior to the unbundling.

3 It refers to the increase in value of the SAR Scheme shares of the indicated participants from the offer date to the date of payment and delivery.

32. BEE TRANSACTION On 18 March 2008, shareholders approved a Broad-based Black Economic Empowerment (BEE) transaction. The participants in the

BEE transaction are the Imbewu Consortium, Ikamva Labantu Empowerment Trust (a Corporate and Social Investment Community Trust), the Rainbow Employee Trust and Mrs MM Nhlanhla, a non-executive director of Rainbow (collectively the BEE partners).

Details of the transaction In terms of the transaction a special purpose entity, Eagle Creek Investments 620 Proprietary Limited (Eagle Creek), acquired an

effective 15% of Rainbow’s entire issued share capital for R915,6 million on 30 July 2008. The purchase price was settled by issuing variable rate (CPIX plus 6%) cumulative redeemable preference shares in Eagle Creek to Rainbow.

Ordinary dividends paid to Eagle Creek will be applied immediately to reduce the outstanding redemption amount.

The shares issued to Eagle Creek are also subject to restrictions on alienation and encumbrance until 30 July 2018. Should Eagle Creek be unable to pay the full redemption amount payable upon redemption of the preference shares, Rainbow is entitled to effect a buy-back in terms of section 85 of the Companies Act of the number of shares whose value at that time is equivalent to the outstanding redemption amount. At 30 June 2013 the outstanding redemption amount was R1426,6 million (2012: R1 292,7 million).

Accounting principles and assumptions The terms of issuance of the ordinary shares and acquisition of the preference shares are deemed for accounting purposes to

constitute the issuance of an option in Rainbow shares granted to Eagle Creek, effective on 18 March 2008, when the shareholders’ approval was obtained. Accordingly, the issuance of the shares and the subscription by Rainbow to the Eagle Creek preference shares, has not been recognised.

The Rainbow shares attributed to the Rainbow Employee Trust, net of any shares that may be bought back by Rainbow to settle the redemption amount, will be distributed to employees who are in service of Rainbow at the end of the 10-year period. The basis of apportionment of shares to employees is set out in the trust deed and rewards longer service.



33. BUSINESS COMBINATIONSNew Foodcorp Holdings Proprietary LimitedOn 1 May 2013 the Group acquired an effective holding of 64,18% in Foodcorp through the investment vehicle Capitau Investment Management Proprietary Limited. The purchase consideration paid by Capitau Investment Management Proprietary Limited was R1,026 billion, of which R997,6 million was paid by the Group. Foodcorp manufactures, markets and distributes a diversified portfolio of food products ranging from basic essentials to top-end desserts and convenience meals. Many of the products are associated with South African tradition and heritage, and are therefore among the leading and best recognised brands in South Africa. The acquisition is in line with the Group’s strategic growth plan.

Goodwill of R2,618 billion arose from the acquisition. Goodwill mainly represents the ability of the combined business of sale to target consumer markets in sub-Saharan Africa. None of the goodwill recognised is deductible for tax purposes.

The following table summarises the consideration paid, for the fair value of assets acquired, liabilities assumed and the non-controlling interest at the acquisition date.

2013 2012R’000 R’000

Consideration at 1 May 2013Cash 1 026 225

Total consideration 1 026 225

Recognised amounts of identifiable assets acquired and liabilities assumedCash and cash equivalents 279 217Property, plant and equipment 1 611 838 Intangible assets 2 850 149 Preference shares receivable 169 648 Inventories 390 839 Net assets for a disposal group classified as held for sale 397 000 Derivative financial instruments (16 349)Current income tax liabilities (149)Trade and other receivables 878 519 Trade and other payables (845 062)Retirement benefit obligations (40 086)Interest-bearing liabilities (5 980 086)Deferred income tax liabilities (955 689)

Total identifiable net liabilities (1 260 211)

Non-controlling interest 331 424 Goodwill 2 617 860

Acquisition related costs of R44,6 million have been charged to administration expenses in the income statement for the year ended 30 June 2013.

The fair value of the non-controlling interest, in the unlisted company, was estimated by using the purchase price paid for the acquisition by Capitau Investment Management Proprietary Limited. This purchase price was adjusted for the lack of control and lack of marketability that market participants would consider when estimating the fair value of the non-controlling interest.

The revenue included in the income statement since 1 May 2013 contributed by Foodcorp was R1 217 million. Foodcorp also contributed operating profit of R99,0 million over the same period. Had New Foodcorp Holdings Proprietary Limited been consolidated from 1 July 2012, the income statement would show pro-forma revenue of R6 471,0 million and operating profit of R502 million.

The purchase allocation is not considered to be final.


30 June 30 June2013 2012

R’000 R’000

33. BUSINESS COMBINATIONS continuedPrior year business combinationBushvalley ChickensThe Group acquired the fixed assets and poultry processing operations of Bushvalley Chickens, located near Tzaneen in the Limpopo province, for a purchase consideration in cash of R92,5 million. The acquisition is in line with the Group’s strategic growth plan.

The impact on the Group’s results is minimal as the effective date of the acquisition was only 12 March 2012 and includes the following:Revenue 57 049Operating loss (including start-up costs) (4 723)

The impact on the Group’s results, had the acquisition occurred on 1 July 2011, is not presented as it is not practical to calculate due to different input costs prior to the acquisition.

Details of net assets acquired and the cost of the investment are as follows:Land 1 232Buildings 33 768Plant and equipment 47 851Vehicles 9 649

Net assets acquired 92 500

Carrying valueAs the Group acquired the assets and liabilities of this business rather than the shares of the legal entity that previously owned such assets and liabilities, it is impractical to disclose the carrying amounts in the accounting records of the previous owners prior to the acquisition. In these circumstances the Group does not have access to such carrying values.

No goodwill arose from the acquisition as the purchase consideration determined in accordance with IFRS is equal to the fair value.

The purchase allocation has been performed and was considered final in the prior financial year.



34. SHARE AND SHAREHOLDER INFORMATIONStated capitalAuthorised 1 000 000 000Issued 625 433 701*Number of shareholders 5 457Financial year-end JuneAnnual general meeting November

Number of Number ofshareholders % shares %

Shareholder spread1 – 1 000 3 435 62,9 905 345 0,11 001 – 10 000 1 545 28,3 5 598 746 0,910 001 – 100 000 381 7,0 10 148 777 1,6100 001 – 1 000 000 74 1,4 23 449 099 3,81 000 001 and over 22 0,4 585 331 734 93,6

Total 5 457 100,0 625 433 701* 100,0

Distribution of shareholdersHolding company 3 0,1 436 553 868 69,7Empowerment 1 51 177 217 8,1Mutual funds 59 1,1 54 407 467 8,7Pension funds 73 1,3 31 548 363 5,0Individuals 4 765 87,3 14 290 844 2,2Investment companies 16 0,3 20 342 853 3,3Nominees and trusts 292 5,4 6 133 568 1,0Insurance companies 13 0,2 2 833 857 0,5Endowment funds 6 0,1 252 095 0,1Private companies 90 1,7 1 832 811 0,3Banks 26 0,5 3 218 184 0,5Public companies 4 0,1 60 995 0,1Medical aid schemes 4 0,1 259 078 0,1Other corporations 28 0,5 105 507 0,1Brokers 19 0,4 1 571 828 0,2Close corporations 58 1,1 845 166 0,1

Total 5 457 100,0 625 433 701 100,0

Public and non-public shareholdersStrategic holdings (more than 10%) 3 0,1 436 553 868 69,7Empowerment 1 51 177 217 8,1Directors and associates of the company holdings 6 0,1 1 557 850 0,4

Total non-public shareholders 10 0,2 489 288 935 78,2Public shareholders 5 447 99,8 136 144 766 21,8

Total 5 457 100,0 625 433 701 100,0

Beneficial shareholders’ holding of 1% or moreRemgro Limited 436 553 868 69,7Eagle Creek Investments 620 Proprietary Limited 51 177 217 8,1Oasis Crescent Global Equity Fund 30 235 064 4,8Government Employees Pension Fund 10 621 762 3,4Investment Solutions Limited 21 640 268 1,7

* Includes 51 177 217 shares issued to Eagle Creek Investments 620 Proprietary Limited in terms of the BEE scheme (refer to note 32 for details).

35. SUBSEQUENT EVENTSOn 1 July 2013, RCL Foods Limited agreed with Foodcorp management to purchase their 23,9% shareholding in New Foodcorp Holdings Proprietary Limited for a cash consideration of R393 million. No other material change has taken place in the affairs of the Group between the end of the financial year and the date of this report.


2013 2012Note R’000 R’000

ASSETSNon-current assetsInvestment in subsidiaries 1 587 560 584 177 Loans to Group companies 1 3 507 466 633 436 Preference shares receivable 2 997 605

5 092 631 1 217 613

Total assets 5 092 631 1 217 613

EQUITY Stated capital 3 5 079 194 1 198 253 Share-based payments reserve 129 706 126 323 Accumulated loss (123 965) (107 963)

Total equity 5 084 935 1 216 613

LIABILITIESCurrent liabilitiesTrade and other payables 7 696 1 000

Total current liabilities 7 696 1 000

Total equity and liabilities 5 092 631 1 217 613

Company statement of financial position As at 30 June 2013

Company statement of comprehensive incomeFor the year ended 30 June 2013

2013 2012Note R’000 R’000

Profit before tax 4 83 178 242 249 Income tax expense 5 (4 771) (24 724)


Total comprehensive income for the year 78 407 217 525


Company statement of changes in equity For the year ended 30 June 2013

Share-based Stated capital

payments reserve

Accumulated loss Total

R’000 R’000 R’000 R’000

Balance at 1 July 2011 1 189 684 121 356 (78 242) 1 232 798 Total comprehensive income for the period 217 525 217 525 Ordinary dividends paid (247 246) (247 246)BEE share-based payments charge 3 383 3 383 Employee Share Option Scheme:– proceeds from shares issued 8 569 8 569 – value of employee services 1 584 1 584

Balance at 1 July 2012 1 198 253 126 323 (107 963) 1 216 613

Total comprehensive income for the year 78 407 78 407 Ordinary dividend paid (94 409) (94 409)BEE share-based payments charge 3 383 3 383 Rights issue 3 857 469 3 857 469 Employee Share Option Scheme:– proceeds from shares issued 23 472 23 472

Balance at 30 June 2013 5 079 194 129 706 (123 965) 5 084 935

Company cash flow statementFor the year ended 30 June 2013

2013 2012Note R’000 R’000

Cash flows from operating activitiesCash generated by operations A 71 871 242 249 Movement in share-based payments reserve 3 383 4 967 Dividends paid (94 409) (247 246)Tax paid (4 771) (24 724)Movement in trade and other payables 6 696 (286)

Net cash outflow from operating activities (17 230) (25 040)

Cash flows from investing activitiesMovement in investment in subsidiaries (3 383) (4 967)Investment in preference shares (986 298)Movement in loans to Group companies (2 874 030) 21 438

Net cash inflow from investing activities (3 863 711) 16 471

Cash flows from financing activitiesIssue of shares 3 880 941 8 569

Net cash inflow from financing activities 3 880 941 8 569

Net cash movement

Notes to the company cash flow statementFor the year ended 30 June 2013

2013 2012R’000 R’000

A. CASH GENERATED BY OPERATIONSProfit before tax 83 178 242 249 Adjusted for:Accrued interest (11 307)

71 871 242 249


Notes to the company financial statements For the year ended 30 June 2013

Issued share

capital

Issued share

capitalEffective

holdingEffectiveholding

2013 2012 2013 2012R R % %

1. INVESTMENT IN SUBSIDIARIES AND GROUP COMPANIESEffective holdingDirectly ownedRainbow Farms Investments 99 900 99 900 100 100Rainbow Farms 40 000 40 000 100 100Vector Logistics 50 50 100 100Farmer Brown 1 1 100 100East End Court 1 1 100 100RCL Group Services (formerly Bonny Bird Farms) 312 312 100 100Epol 78 000 78 000 100 100Capitau Investment Management 1 000 89,15 Indirectly ownedVector Logistics (Namibia) 100 000 100 000 100 100Rainbow Chicken Foods 100 100 100 100New Foodcorp Holdings 1 64,18 Astoria Bakery 100 64,18 Bongolethu Fishing Enterprizes 100 64,18 Boot Nr 7 Belange 1 000 64,18 Emachibini Fisheries 100 49,42 Ezintlanzini Fishing 100 62,90 Ezolwandle Fishing 100 64,18 Firlig 5 100 64,18 Firlig 6 1 64,18 First Lifestyle Group 1 64,18 First Lifestyle 1 64,18 Foodcorp Anchovy 200 64,18 Foodcorp Consumer Brands 1 64,18 Foodcorp Fishing 200 64,18 Foodcorp Hake 200 64,18 Foodcorp Lobster 200 64,18 Foodcorp Pilchards 200 64,18 Foodcorp 1 64,18 Hammer Street Investments 1 000 64,18 Jafprop 100 64,18 Lexshell 652 Investments** 100 64,18 Maxitrade 102 General Trading 1 64,18 Mkhuhlu Bakery** 450 000 64,18 NIB 5 Share Block 1 64,18 NIB 6 Share Block 1 64,18 Ntabeni Fishing 200 47,49 Orgel Vismaatskappy 25 000 64,18 Pamodzi Foods 1 64,18 Sea-Ice Manufacturers** 100 64,18 Siyasebenza Fishing 100 64,18 Trade Motto 106 1 000 64,18 Umfondini Fishing 100 64,18 Wark Investments 1 64,18 Astoria Bakery Lesotho* (LSL) 100 64,18 Fed-Cape International** (US$) 10 000 64,18

* Incorporated in Lesotho. ** Incorporated in Jersey.

All other subsidiaries listed are incorporated in the Republic of South Africa.


1. INVESTMENT IN SUBSIDIARIES AND GROUP COMPANIES continued

Shares SharesIndebted-

nessIndebted-

ness Total Total2013 2012 2013 2012 2 013 2012

R’000 R’000 R’000 R’000 R’000 R’000

Share and indebtednessRainbow Farms Investments 100 100 128 955 129 055 100 Rainbow Farms 1 142 1 142 3 378 511 633 436 3 379 653 634 578 Capitau Investment ManagementVector Logistics 456 612 456 612 456 612 456 612

457 854 457 854 3 507 466 633 436 3 965 320 1 091 290 Subsidiary portion of share-based payments reserve 129 706 126 323 129 706 126 323

587 560 584 177 3 507 466 633 436 4 095 026 1 217 613

The above loans are unsecured, interest-free and repayable at an unspecified date.

None of the above companies are listed as they are all “Proprietary Limited”.

2013 2012R’000 R’000

2. PREFERENCE SHARES RECEIVABLEPreference shares issued at a par value of R1 737,51 per share 986 298 Cumulative dividend 11 307

997 605

The cumulative preferential cash dividend is calculated at a dividend rate equal to prime accrued on an annual basis.

The cumulative redeemable preference shares are redeemable on or before 10 May 2019.

3. STATED CAPITALAuthorised1 000 000 000 (2012: 575 525 772) ordinary shares of no par valueIssued ordinary shares of no par value:

Number of shares

At the beginning of the year 294 991 606 1 198 253 1 189 684Rights issue 276 964 802 3 857 469Shares issued in terms of share incentive schemes 2 300 076 23 472 8 569


Details pertaining to the rights issueProceeds from rights issue 3 932 900Transaction costs (75 431)

3 857 469

Statutory shares in issue 625 433 701Less: shares issued in terms of BEE scheme* (51 177 217)

Total 574 256 484

* On 30 July 2008, 51 177 217 shares were issued to Eagle Creek Investments 620 Proprietary Limited in terms of the BEE transaction. For accounting purposes, these shares are not treated as issued (refer to note 32 of the consolidated financial statements for further details).

The unissued ordinary shares are under the control of the directors until the forthcoming annual general meeting.

Notes to the company financial statements continued For the year ended 30 June 2013


2013 2012R’000 R’000

4. PROFIT BEFORE TAX Dividends received from subsidiaries 110 786 247 246 Non-executive directors’ fees (2 523) (2 172)Consultancy expenses (5 728)Listed company expenses (1 948) (2 712)Foreign exchange gains – realised 17 041 Acquisition expenses (45 599)Interest received – cumulative preference dividend 11 307Interest paid (113)Other expenses (158)

83 178 242 249

5. INCOME TAX EXPENSECurrent tax 4 771

South African tax 4 771

Secondary tax on companies 24 724

4 771 24 724

Reconciliation of tax rate:Normal rate of tax (%) 28,0 28,0 Adjusted for:– secondary tax on companies (%) 6,0– non-taxable income (dividends received and preference dividends) (%) (41,1)– non-allowable expenses (%) 18,9

Effective rate of tax (%) 5,8 34,0

6. CONTINGENT LIABILITYBanking and loan facilities are renewed annually and are subject to floating interest rates. RCL Foods Limited binds itself in favour of various banking institutions as surety in solidum for and co-principal debtor jointly and severally with Rainbow Farms Proprietary Limited for facilities granted. At year-end the facilities granted amounted to R315 million (2012: R470 million). No liquidity risk to the company is considered to arise in respect of this guarantee in view of the limited utilisation by Rainbow Farms Proprietary Limited of its facilities.

7. DIVIDENDS PER SHARERefer to note 24 of the notes to the consolidated financial statements.

8. FINANCIAL RISK MANAGEMENTCredit riskThe company has guaranteed a loan of a subsidiary. The maximum exposure to credit risk at the reporting date is R125 million.

Liquidity riskThe table below summarises the maturity profile of the guaranteed loan.

Less than One to Two to Greater than one year two years three years three years Total

R’000 R’000 R’000 R’000 R’000

2013 125 347 125 347

2012 36 969 34 528 32 243 103 740


RCL FOODS LIMITED Incorporated in the Republic of South Africa Registration number 1966/004972/06 Share code: RCL ISIN: ZAE000179438“the company”

NOTICE TO SHAREHOLDERS In terms of section 59(1)(a) of the South African Companies Act, No 71 of 2008, as amended, (“the Companies Act”) the record date for the purpose of determining which shareholders of the company are entitled to receive notice of the annual general meeting is Friday, 20 September 2013. In terms of section 59(1)(b) of the Companies Act, the record date for the purpose of determining which shareholders of the company are entitled to participate in and vote at the annual general meeting is Friday, 8 November 2013. Accordingly the last day to trade in order to be registered in the register of members of the company and therefore be eligible to participate in and vote at the annual general meeting is Friday, 1 November 2013.

Notice is hereby given that the 47th annual general meeting of shareholders of RCL Foods Limited will be held at Six The Boulevard, Westway Office Park, Westville, KwaZulu-Natal on Tuesday 19 November 2013 at 08:30 to consider and, if deemed fit, to pass the following ordinary and special resolutions with or without modification and to transact such other business as may be transacted at an annual general meeting.

ORDINARY RESOLUTIONS1. ADOPTION OF ANNUAL FINANCIAL STATEMENTS Ordinary resolution number 1 Resolved that the audited annual financial statements of the company and the Group, including the directors’ report, report of the

Audit Committee and independent auditor’s report, for the year ended 30 June 2013 be received and adopted.

2. ELECTION AND RE-ELECTION OF DIRECTORS Ordinary resolution number 2.1 Resolved that Mr HJ Carse, having been appointed since the last annual general meeting, be elected as a director of the company.

Ordinary resolution number 2.2 Resolved that Mr DTV Msibi, having been appointed since the last annual general meeting, be elected as a director of the company.

Ordinary resolution number 2.3 Resolved that Mr GM Steyn, having been appointed since the last annual general meeting, be elected as a director of the company.

Ordinary resolution number 2.4 Resolved that Mr JJ Durand, who retires by rotation in accordance with the Memorandum of Incorporation of the company and who,

being eligible, has offered himself for re-election, be re-elected as a director of the company.

Ordinary resolution number 2.5 Resolved that Mr PR Louw, who retires by rotation in accordance with the Memorandum of Incorporation of the company and who,

being eligible, has offered himself for re-election, be re-elected as a director of the company.

Ordinary resolution number 2.6 Resolved that Mrs MM Nhlanhla, who retires in accordance with the Memorandum of Incorporation of the company and who, being

eligible, has offered herself for re-election, be re-elected as a director of the company.

Ordinary resolution number 2.7 Resolved that Mr GC Zondi, who retires in accordance with the Memorandum of Incorporation of the company and who, being

eligible, has offered himself for re-election, be re-elected as a director of the company.

Biographical details of the above directors can be found on pages 12, 13 and 14 of this integrated annual report, of which this notice forms part.

3. RE-APPOINTMENT OF EXTERNAL AUDITORS Ordinary resolution number 3 Resolved that the re-appointment of PricewaterhouseCoopers Incorporated as the company’s auditors, as nominated by the

company’s Audit Committee, be approved, and to note that the individual registered auditor who will undertake the audit during the financial year ending 30 June 2014 is Mr H Ramsumer.

4. ELECTION OF MEMBERS OF THE AUDIT COMMITTEE Ordinary resolution number 4.1 Resolved that Mr NP Mageza, an independent non-executive director of the company, be elected as a member of the Audit

Committee until the next annual general meeting.

Ordinary resolution number 4.2 Resolved that Mr DTV Msibi, an independent non-executive director of the company, be elected as a member of the Audit Committee

until the next annual general meeting.

Ordinary resolution number 4.3 Resolved that Mr RV Smither, an independent non-executive director of the company, be elected as a member of the Audit

Committee until the next annual general meeting.


5. CONTROL OF AUTHORISED BUT UNISSUED SHARES Ordinary resolution number 5 Resolved that the unissued ordinary shares in the capital of the company remain under the control of the directors who shall be

authorised to issue these shares at such times and on such terms as they may determine, subject to the Companies Act, the company’s Memorandum of Incorporation and the Listings Requirements of the JSE Limited (JSE).

SPECIAL RESOLUTIONS1. FINANCIAL ASSISTANCE TO RELATED OR INTER-RELATED COMPANIES OR OTHER LEGAL ENTITIES Special resolution number 1 Resolved as a special resolution pursuant to section 45(3) of the Companies Act, that the directors of the company be and they

are hereby authorised and empowered, as a general approval contemplated in section 45(3) of the Companies Act, to cause the company to provide any direct or indirect financial assistance to any company or other legal entity which is related or inter-related to the company, subject to and in accordance with the provisions of sections 45(3)(b) to 45(5).

Explanation On a regular basis, and in the ordinary course of business, the company provides loan financing, guarantees, and other support to

the related and inter-related companies/legal entities in the Group.

Section 45(2) of the Companies Act empowers the board of a company to provide direct or indirect financial assistance to a related or inter-related company or corporation. However, section 45(3) of the Companies Act provides that the board of a company may only authorise any financial assistance contemplated in section 45(2) thereof pursuant to a special resolution of the shareholders of the company adopted within the previous two years.

The reason for and effect of special resolution number 1 is to grant the directors of the company the authority to cause the company to provide financial assistance to any company or other legal entity which is related or inter-related to the company, subject to compliance with the relevant provisions of section 45 of the Companies Act.

2. APPROVAL OF NON-EXECUTIVE DIRECTORS’ REMUNERATION Special resolution number 2 Resolved as a special resolution that, unless otherwise determined by the company in a general meeting, the annual fees payable

by the company to its non-executive directors, with effect from 1 October 2013, be approved as follows:

Rands per annum Current Proposed

BoardChairman 193 600 232 320Members 193 600 232 320Audit CommitteeChairman 154 000 184 800Members 77 000 92 400Remuneration and Nominations CommitteeChairman 72 600 79 860Members 43 560 47 916Risk CommitteeChairman 72 600 87 120Members 43 560 52 272Social and Ethics CommitteeChairman 72 600 79 860Members 43 560 47 916

Explanation Section 66(9) of the Companies Act requires that a company may pay remuneration to its directors for their services as directors only

in accordance with a special resolution approved by the shareholders within the previous two years.

The reason for and effect of special resolution number 2 is to grant the company the authority to pay fees to its non-executive directors for their services as directors.

APPROVALS REQUIRED FOR RESOLUTIONS Ordinary resolutions numbers 1 to 5 contained in this notice require the approval of more than 50% (fifty percent) of the voting rights

exercised on the resolution by members present or represented by proxy at the annual general meeting.

Special resolutions numbers 1 to 2 contained in this notice require the approval of more than 75% (seventy-five percent) of the voting rights exercised on the resolutions by members present or represented by proxy at the annual general meeting.


ATTENDANCE AND VOTING BY MEMBERS OR PROXIES Ordinary members who have not dematerialised their ordinary shares or who have dematerialised their ordinary shares with own

name registration, are entitled to attend and to vote at the meeting. Any such member may appoint a proxy/proxies to attend, speak and vote in their stead (on a poll) at the meeting. A proxy need not be a member of the company. Forms of proxy, together with a notarially certified copy of the power of attorney (if applicable) or other instrument (if any), appointing the proxy and the authority under which it is signed (if any), must be deposited at the registered office of the company or posted to the Company Secretary, PO Box 2734, Westway Office Park 3635, or lodged with the transfer secretaries of the company, Computershare Investor Services Proprietary Limited at 70 Marshall Street, Johannesburg 2001, or posted to the transfer secretaries at PO Box 61051, Marshalltown 2107, so as to arrive no later than 8:30 on Friday, 15 November 2013.

Any shares held by a share trust or scheme will not have their votes at the annual general meeting taken into account for the purposes of resolutions proposed in terms of the Listings Requirements. In terms of section 48(2)(b)(ii) of the Companies Act, no voting rights may attach to any shares held in treasury.

Any forms of proxy not received by this time must be handed to the Chairman of the annual general meeting immediately prior to the annual general meeting.

On a show of hands, every member of the company present in person or represented by proxy shall have one vote only. On a poll, every member of the company shall have one vote for every share held in the company by such member.

Ordinary members who have dematerialised their ordinary shares other than with “own name” registration, should contact their Central Securities Depository Participant (CSDP) or broker in the manner and time stipulated in their agreement:

• tofurnishthemwiththeirvotinginstructions,or

• intheeventthattheywishtoattendthemeeting,toobtainthenecessaryauthoritytodoso.

PROOF OF IDENTIFICATION REQUIREDThe Companies Act requires that any person who wishes to attend or participate in a shareholders’ meeting must present reasonably satisfactory identification at the meeting. Any shareholder or proxy who intends to attend or participate at the annual general meeting must be able to present reasonably satisfactory identification at the meeting for such shareholder or proxy to attend and participate at the meeting. A green bar-coded identification document issued by the South African Department of Home Affairs, a driver’s licence or a valid passport will be accepted as sufficient identification.

JMJ MaherCompany Secretary

27 August 2013

Registered officeSix The BoulevardWestway Office ParkWestville3629

Notice to shareholders continued

RCL FOODS LIMITED Incorporated in the Republic of South Africa Registration number 1966/004972/06 Share code: RCL ISIN: ZAE000179438 (“the company”)

FORM OF PROXYThis form of proxy is only for use by:

1. Registered members who have not yet dematerialised their ordinary shares

2. Registered members who have already dematerialised their ordinary shares and registered them in their own name*

* See explanatory note 3 overleaf

I/We (name in block letters)

of (address)

being a member/members of RCL Foods Limited (registration number 1966/004972/06)

and the registered holder/s of ordinary shares in the company, hereby appoint (see instruction 1 overleaf)

1. or failing him/her

2. or failing him/her

3. the Chairman of the annual general meeting,

as my/our proxy to attend, speak and vote for me/us and on my/our behalf or to abstain from voting at the annual general meeting of the company to be held at Six The Boulevard, Westway Office Park, Westville, KwaZulu-Natal on Tuesday 19 November 2013 at 08:30 and at any adjournment thereof as follows:

In favour Against Abstain

ORDINARY RESOLUTIONS

1. Adoption of annual financial statements

2. Election and re-election of directors

2.1 Mr HJ Carse

2.2 Mr DTV Msibi

2.3 Mr GM Steyn

2.4 Mr JJ Durand

2.5 Mr PR Louw

2.6 Mrs MM Nhlanhla

2.7 Mr GC Zondi

3. Re-appointment of external auditors

4. Election of members of the Audit Committee

4.1 Mr NP Mageza

4.2 Mr DTV Msibi

4.3 Mr RV Smither

5. Control of authorised but unissued shares

SPECIAL RESOLUTIONS

1. Financial assistance to related or inter-related companies or other legal entities

2. Approval of non-executive directors’ remuneration

(Indicate instructions to proxy by way of a cross in the space provided.) Unless otherwise instructed, my/our proxy may vote as he/she thinks fit.

Signed this day of 2013.

Signature

(Please read the notes and instructions overleaf)

NOTES TO THE FORM OF PROXY 1. A member entitled to attend and vote at the annual general meeting is entitled to appoint one or more proxies to attend,

speak and vote in his/her stead. A proxy need not be a registered member of the company. Satisfactory identification must be presented by any person wishing to attend the annual general meeting, as set out in the notice.

2. Every member present in person or by proxy and entitled to vote at the annual general meeting of the company shall, on a show of hands, have one vote only, irrespective of the number of shares such member holds. In the event of a poll, each member shall be entitled to one vote in respect of each ordinary share held in the company by him/her.

3. Members registered in their own name are members who elected not to participate in the Issuer-Sponsored Nominee Programme and who appointed Computershare Custodial Services as their Central Securities Depository Participant (CSDP) with the express instruction that their uncertified shares are to be registered in the electronic sub-register of members in their own names.

Instructions on signing and lodging the form of proxy:1. A member may insert the name of a proxy or the names of two alternative proxies of the member’s choice in the space/s

provided overleaf, with or without deleting “the Chairman of the annual general meeting”, but any such deletion must be initialled by the member. Should this space be left blank, the proxy will be exercised by the Chairman of the annual general meeting. The person whose name appears first on the form of proxy and who is present at the annual general meeting will be entitled to act as proxy to the exclusion of those whose names follow.

2. A member’s voting instructions to the proxy must be indicated by the insertion of an “X”, or the number of votes exercisable by the member, in the appropriate spaces provided overleaf. Failure to do so shall be deemed to authorise the proxy to vote or to abstain from voting at the annual general meeting, as he/she thinks fit in respect of all the member’s exercisable votes. A member or his/her proxy is not obliged to use all the votes exercisable by him/her or by his/her proxy, but the total number of votes cast, or those in respect of which abstention is recorded, may not exceed the total number of votes exercisable by the member or by his/her proxy.

3. A minor must be assisted by his/her parent or guardian unless the relevant documents establishing his/her legal capacity are produced or have been registered by the transfer secretaries.

4. To be valid, the completed forms of proxy must be deposited at the registered office of the company or posted to the Company Secretary, PO Box 2734, Westway Office Park 3635, or lodged with the transfer secretaries of the company, Computershare Investor Services Proprietary Limited at 70 Marshall Street, Johannesburg 2001, or posted to the transfer secretaries at PO Box 61051, Marshalltown 2107, so as to arrive no later than 8:30 on Friday, 15 November 2013.

5. Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity must be attached to this form of proxy unless previously recorded by the transfer secretaries or waived by the Chairman of the annual general meeting.

6. The completion and lodging of this form of proxy shall not preclude the relevant member from attending the annual general meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof, should such member wish to do so.

7. The completion of any blank spaces overleaf need not be initialled. Any alterations or corrections to this form of proxy must be initialled by the signatory/ies.

8. The provisions of the Companies Act in relation to the revocation of the appointment of a proxy apply. A member may accordingly revoke a proxy appointment by cancelling it in writing, or making a later inconsistent appointment of a proxy, and delivering a copy of such revocation to the proxy and the company.

9. The Chairman of the annual general meeting may reject or accept any form of proxy which is completed other than in accordance with these instructions provided that he is satisfied as to the manner in which a member wishes to vote.

Financial year-end June

Annual general meeting November

FINANCIAL REPORTS

Announcement of results for the year August

Annual financial statements posted September

Interim report for the half year to December February

FUTURE ORDINARY DIVIDENDS

Interim dividend

Declaration February

Payment April

Final dividend

Declaration August

Payment October

Company registration number 1966/004972/06

JSE share code RCL

ISIN code ZAE000179438

Registered office/street address Six The Boulevard Westway Office Park Westville 3629

Postal address PO Box 2734 Westway Office Park 3635

Transfer secretaries Computershare Investor Services Proprietary Limited 70 Marshall Street Johannesburg 2001 PO Box 61051 Marshalltown 2107

Company Secretary JMJ Maher

Auditors PricewaterhouseCoopers Incorporated

Listing JSE Securities Exchange South Africa

Sector Food Producers

Sponsor Rand Merchant Bank (a division of FirstRand Bank Limited)

Bankers ABSA Bank Limited

Website www.rainbowchicken.co.za

Corporate information

Shareholders’ diary

www.rainbowchicken.co.za

Integrated Annual Report 2013 of RCL Foods Limited - JSE · Integrated Annual Report 2013 of RCL...

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