MASSMART BUSINESS MODEL

Massmart has evolved a business model that empowers its Divisions to take trading decisionssuited to their individual operating needs but within a strategic operating and financial frameworkset by the Group.

This has several advantages:

The framework guarantees consistent compliance with the best governance standards and national legislative requirements. It commits each Divisionto implementing Massmart’s core strategy of being a high-volume, low-margin distributor of quality branded consumer goods for cash, and ensuresexpansion plans add net value to the Group.At the same time, Divisions can extract greater value from being part of a larger Group with greater access to goods and services or negotiating betterterms and rebates with suppliers and service providers. The Divisions are differentiated as retail or wholesale formats that address different customerand market profiles.Decentralised decision-making is given effect through a Group Executive Committee reporting to the Group Chief Executive Officer (CEO). TheCommittee’s members comprise the CEOs/Managing Directors of Massmart’s four operating Divisions and a Group Executive from each of MassmartHoldings, Channel and Shared Services. Massmart Holdings’ Executives are also represented on each of the four Divisional boards as non-executivedirectors.

The model operates through the following four units:

MASSMART HOLDINGS

Massmart Holdings performs the Group management roleand defines the strategic and broad operating principlesthat guide the Group’s activities.

MASSMART CHANNEL

Massmart Channel consists of formal trading andfunctional forums where ideas on collaboration acrossDivisions are shared.

MASSMART SHARED SERVICES

Massmart Shared Services implements collaborativeagreements reached by Channel. The most important areGroup supplier negotiations for all products sold acrossthe Group.

MASSMART DIVISIONS

Massmart’s Divisions, who report directly to the ChiefOperating Officer, comprise Massdiscounters,Masswarehouse, Massbuild and Masscash.

AFRICAN STORE MAP

SOUTH AFRICAN REGIONAL STORE MAP

MASSDISCOUNTERS DIVISIONAL REVIEWGENERAL MERCHANDISE DISCOUNTER AND FOOD RETAILER

FINANCIAL PERFORMANCE

STORE HIGHLIGHTS

The Massdiscounters’ brands

Massdiscounters operates two retail formats: Game and DionWired. Game is a discount retailerof General Merchandise and non-perishable and dry groceries for home, leisure and businessuse, operating throughout South Africa and in 14 cities in sub-Saharan Africa. TraditionallyGame has been a discounter of General Merchandise, but our format renewal, with theintroduction of perishable food has intentionally pushed the brand towards a multi-categoryformat.

We now have 107 Game stores in South Africa and 14 in Africa, bringing our total footprint to121. We also have 22 DionWired stores, which sell middle- to upper-end electronics andappliances across South Africa.

The Game positioning offers customers the widest range of branded products, at the best pricefor a given set of product specifications and a quality guarantee for customers . We ensure thatcustomers are assured of the best value at every logical price point. The Game trading model ispromotionally-driven, with five million copies of our weekly promotional leaflets distributed inSouth Africa. By working closely with our suppliers and benchmarking ourselves againstcompetitors, we are able to offer our customers well-priced products representing great value.

Currently 48 Game stores provide a perishable food offering adding further everyday value toour customers. Over the next few years, we intend to roll out perishable food to mostGame stores.

Game Liquor was included with the format renewal to complete our offering and increase foottraffic. We now have 30 Game Liquor stores, which are performing in line with expectations.

DionWired’s product displays create an easy, exciting and interactive shopping experience,offering the latest in-home entertainment, computing, video and digital photographicequipment and appliances. DionWired sells complete technological solutions, oftendemonstrating the interconnectivity of the latest innovations and products in-store. The Techexperts manning our in-store Hi-tech Smart service centres are on hand to offer the best adviceand onsite repairs and services.

Although all our products are competitively priced, DionWired’s proposition is not founded onprice alone. Our main proposition is to offer the widest range of some of the world’s leading anddiscerning brands such as Apple, Smeg, Miele, Marantz, Bose and Onkyo to the South Africanhigher-income consumer.

Future outlook

Over the next financial year, Massdiscounters will focus on bedding down and leveraging manyof the changes implemented over the past three years. With seven Game stores to open inSouth Africa, three Game stores to open in the rest of sub-Saharan Africa, and one newDionWired store planned, we expect our growth strategy to continue to take market share anddeliver our low-cost, low-margin, high-volume business model to more customers in a highlycompetitive retail sector.

At Game we will continue to seek out and introduce the world’s leading consumer brandsalongside our roll-out of Private Label and perishable food to ensure that we offer the range ofproducts required to attract customers in this challenging market. We will partially reduce ourexposure to HiTech and Multimedia and will introduce limited ranges of Baby and Clothing.

At DionWired our focus on a unique customer experience, as well as our extensive bouquet ofservices, will differentiate the brand on a national basis as discerning customers seek valueand solutions in their purchases.

We plan to open or convert 13 more stores in the next 12 months, bringing the total to 61 Gamestores selling perishable food by December 2014.

Divisional Strategy 2014

Focus on Game SA brand promise – lowestprices, focused ranges and qualityguaranteeImprove in-store shopping experiencesImprove IT and Supply Chain efficienciesContinue roll out of foodIncrease Game Liquor stores

Improving Efficiencies

Our Regional Distribution Centres (RDC’s) havehelped to:

Improve business efficienciesImprove in-stock levelLeverage supply chain

INVESTING IN OUR COMMUNITYNow in its seventh year, Amalunchbox was born from the belief that “you can’t teach a hungrychild”, and we work together with the Department of Education to make their national SchoolNutrition Programme more effective.

INVESTING IN OURHUMAN RESOURCES

B-BBEE LEVEL 3

Grant Pattison

ChairmanRobin Wright

Chief Executive OfficerNorman Drieselmann

FinancialRichard Fuller

Store Operations

John Hart

LogisticsGuy Hayward

Non-executiveMark Huxtable

ITAndrew Jackson

Dion Wired

Rogany Ramiah

Human ResourcesMike Spivey

Non-executiveMark Turner

AfricaAlan van der Bergh

Food

Tyrone Vieira

MerchandiseIlan Zwarenstein

Non-executive

Living Standards measure (LSM)

The South African Advertising Research Foundation (SAARF) Living Standards Measure (LSM) has become the most widelyused segmentation tool in South Africa. It is a means of segmenting the South African market that cuts across race, gender,age or any other variable used to categorise people. Instead, it groups people according to their living standards.

READ MORE:

Letter to StakeholdersFinancial Director’s Review

MASSWAREHOUSE DIRECTORATE

MASSWAREHOUSE DIVISIONAL REVIEWWAREHOUSE CLUB

FINANCIAL PERFORMANCE

STORE HIGHLIGHTS

The Masswarehouse brands

The Makro model is unusual in that it sells General Merchandise primarily to retail customerswhile much of its Food and Liquor is sold to wholesale customers, although increasingly retailcustomers are taking advantage of the low food prices afforded by the warehouse model. Thisblend gives the brand a robustness that enables it to trade comfortably through most economiccycles. The big-box warehouse club format with our no-frills approach keeps costs down andprovides the platform for our high-volume, low-margin sales offering of quality brandedmerchandise. Our customer database of Makro store cards used at the point of purchase helpsus to keep track of the spending patterns of our 2.4 million active members and wecommunicate regularly with them through targeted promotional material.

Fruitspot is an established wholesaler and distributor of fresh and cut fruit and vegetables, andwas bought by Makro in 2012.

Makro’s offerings are tailor-made to fit a variety of customer needs across all ourmerchandising categories.

Our Food offering caters to wholesale shoppers ranging from informal traders and grocerystore owners to hoteliers, restaurateurs, offices and schools. Wholesalers account for the bulkof Makro’s food sales and most shop during the week for the convenience of our wide range ofgood-value, quality consumables. At weekends, our focus shifts to promoting good buys forretail food and grocery shoppers who can achieve substantial savings on their monthlyhousehold basket compared with other traditional food retail outlets.

Our Liquor offering also caters to both the retail and wholesale customer. Makro’s liquoroutlets, immediately adjacent to our main stores, carry a range of standard and premiumbrands especially in wine, champagne, whisky and brandy. These products are sold at a lowmargin to maintain and grow our share of the market. At the same time we have maintained astrong presence in beer and budget brands for liquor wholesalers looking for good value.

Future outlook

Initiatives for the year ahead include the continued focus on Food Retail, including the additionof a fresh fruit and vegetable offering as well as a redesigned butchery format in all Makrostores. We also plan to continue to drive the performance and growth of Fruitspot by ensuringthat it becomes the supplier of choice to Gauteng-based businesses across the MassmartGroup.

Our e-commerce plan is underway with the launch of our online retail store having happened inQ1 2014. This will provide access to our General Merchandise proposition for customers in thechannel of their choice, at a time most convenient to them, while also allowing the brand,through the use of social media and digital direct marketing, to drive footfall into our stores.

Having launched a mobile solution to facilitate sales and improve customer service tocommercial customers, we now look to the next level of servicing our corporate and businesscustomer by implementing a Business-to-Business solution.

In the year ahead, Masswarehouse will continue building momentum to maximise operatingincome, exploring new business areas and product categories, and optimising the returns withparticular focus on the new online business.

Divisional strategy 2014

Get new stores to trading maturityEnhance Food Retail offering, and refineFresh and Butchery offeringGain market share in Food and LiquorWiden Baby categoryIncrease number of commercial customersSupply Chain and Inventory optimisationLeverage CRMRefocus on low cost, high volume businessmodelRelaunch web site in support of omnichannel strategy

INVESTING IN OUR COMMUNITYThe SUCCEED (Supporting Caregivers and Centres in Early Childhood Development) Project is acollaboration between Makro and Hope Worldwide, and has as its objective the building of acapacity of Early Childhood Development Centres that serve vulnerable children, so that thechildren in their care receive the stimulation, education, protection, development and nutrition tofulfil their potential. As at the end of 2013, the SUCCEED Project was supporting 4,016 youngchildren through 44 ECD (Early Childhood Development) Centres.

Through supporting the ECD Centres, this initiatives set specific overall ECD Centre norms andstandards, trained some of the Practitioners working at these centres in NQF Level 4, improved theoverall infrastructure at these facilities to make it more conducive to early childhood development,conduct ECD parenting workshops and monitor the overall nutritional intake of these youngchildren. This Project is in the process of being expanded to the Eastern Cape and Western Cape toexpand the reach and to better serve the communities in which Makro operates.

INVESTING IN OURHUMAN RESOURCES

B-BBEE LEVEL 5

INVESTING IN OURENVIRONMENTWinner of the 2013 of the 2013Eskom ETA award in theCommercial category

Grant Pattison

ChairmanDoug Jones

Divisional Managing DirectorGuy Hayward

Non-executiveGarry Hendry

Food

Derick Kalan

General MerchandiseJonathan Koff

LiquorGert Lourens

OperationsMelanie Louw

Marketing

Pieter Schoeman

ITMike Spivey

Non-executive DirectorJulie Wilford

FinancialDonovan Wright

Human Resources

Ilan Zwarenstein

Non-executive

DEFINITION: Trading Space (m2)

Trading space excludes parking, yard, warehouse space, office space and receiving areas

READ MORE:

Letter to StakeholdersFinancial Director’s Review

MASSWAREHOUSE DIRECTORATE

MASSBUILD DIVISIONAL REVIEWHOME IMPROVEMENT RETAILER AND BUILDING MATERIALS SUPPLIER

FINANCIAL PERFORMANCE

STORE HIGHLIGHTS

The Massbuild brands

Massmart, with its strategy of investing in the acquisitive and organic growth, previously madeseveral acquisitions in the home improvement sector. The acquisitions of Builders Warehouse(2003), Federated Timbers (2005), De La Rey (2005) and Servistar (2005) have established thegroup as the largest participant and, in many respects, the leader in this growing consumersector. In order to ensure focus and extract synergies these assets constituted the MassbuildDivision of Massmart. The division consolidated into one single legal entity in July 2010 whichhouses all four formats, each clearly defined in its client focus and market.

In order to achieve its aspirations, Massbuild will continue with its four distinctive formats:

Builders Warehouse: One stop, big box outlets positioned in the major urban andregional areas in southern Africa;Builders Express: Small neighbourhood stores positioned to target the home owner;Builders Trade Depot: Building merchant and truss manufacturing outlets ideallypositioned to target the contractor and tradesmen; andBuilders Superstore: Discount Home Improvement format in townships and towns,servicing surrounding rural areas. Conveniently located, close to transport nodes and amajor food retailer.

Future outlook

Massbuild has now entered an accelerated growth phase with the aim of increasing itsfootprint by opening new stores in South Africa and southern Africa. Furthermore the division isintent on increasing its market penetration through its 4th format, Builders Superstore.Massbuild’s objective remains to be South Africa’s market leader in home improvement, DIYand building materials.

Improving efficiencies

RDC’s

Improve utilisationReduce costsImprove in-stock levels in stores

Less promotionally driven

Promotions last for longer periodsLess marketing spend

Divisional strategy 2014

New stores roll-out: grow southern Africastore footprint.Optimise Builders Trade Depot: inventoryrange, IT platform value extraction,contractors.Optimise Superstore offering and grow thebrand.Leverage RDC including Western Cape.Focus on Trade Customers and Business-to-Business (B2B).Everyday low price (EDLP).

INVESTING IN OUR COMMUNITYBuilders and Ripples for Good joined forces in 2012 with the main objective of assisting schoolswith building and renovation projects specifically targeted at impoverished South Africancommunities. In just under 2 years we have managed to reach 100 schools with another 70schools identified for 2014. One such project was Lebowa Primary School. This school caters toover 650 learners, predominantly from Sharpeville and is a no-fee school. Massbuild together withRipples For Good, carried out extensive renovations including repainting of both boys and girls’bathrooms, installation of 21 new toilet seats as well as the fixing of 18 leaking toilets. Wereplaced leaking taps and changed all lights to energy savers. We furthermore installed 18 chalkboards, built library bookshelves and sanded and varnished school desks for the library.

INVESTING IN OURHUMAN RESOURCES

B-BBEE LEVEL 5

Grant Pattison

ChairmanLlewellyn Walters

Chief Executive OfficerNeville Hatfield

Merchandise DirectorGuy Hayward

Non-executive Director

Diane Hoffman

Supply ChainChris Lourens

Operations DirectorZandile Manana

Marketing DirectorLizelle Petersen

Financial Director

Alex Rymaszewski

Store Development DirectorMike Spivey

Non-executive DirectorChris Tugman

IT DirectorSimon White

Commercial Director

Ilan Zwarenstein

Non-executive DirectorAndre Steyn

Builders Express & Builders TradeDepot Director

DEFINITION

BWH: Builders WarehouseBEX: Builders Express

Read more:

More detail relating to specific stores whichhave opened or closed can be found in theGroup Financial Director’s Review

MASSBUILD DIRECTORATE

MASSCASH DIVISIONAL REVIEWFOOD WHOLESALER, RETAILER AND BUYING ASSOCIATION

FINANCIAL PERFORMANCE

STORE HIGHLIGHTS

The Masscash brands

Masscash consists of a Wholesale Division with cash and carry food and cosmeticsbusinesses, and a Retail Division which consists of food outlets which target the lower LSMgroups. Our Wholesale Division consists of CBW, Jumbo Cash and Carry, Trident and Shieldwhilst our Retail Division is consolidated under the Cambridge Food banner and the RhinoGroup.

CBW and Trident wholesale food, liquor, groceries and cosmetics in bulk to independentdealers, Government feeding schemes, franchise members, small traders and hawkers inperi-urban and rural areas within southern Africa.

Jumbo sells mainly cosmetics, toiletries and hair-care products to individual customers andindependent general dealers.

Shield is a voluntary buying association that buys products in bulk on behalf of 431 memberswho own wholesale or retail businesses in South Africa, Botswana and Swaziland.

Masscash offer wholesale customers with formal operations the ability to trade under nationalretail brands such as Saverite, Multisave, Powersave Liquorland and Club 10 Taverns. Ourmarketing team offers support to these supermarkets and bottle stores, assisting owners withmarketing initiatives such as designing of leaflets, signage and implementing nationaltelevision and radio advertising campaigns.

On the retail side, outlets are consolidated under the Cambridge Food or Rhino brands.Cambridge Food’s mission is to help its customers save money every day so that they can livebetter. Food Retail service departments, consisting of an on-site bakery, butchery and fresh fruitand vegetable offering form an important component of our Cambridge Food retail offering.

Future outlook

We anticipate a continuation of the aggressive trading from the corporate food retailers servingthe low-income customer. However, we are cautiously optimistic about our growth over the nextyear. The LSM 2-6 market remains highly fragmented, and Masscash is well-positioned to offernew retail formats and to expand our current footprint to better supply food, cosmetics, liquor,cigarettes and cellular services to lower-income consumers.To ensure future growth, Masscash will focus on building its Retail Division, expanding thewholesale range to include meat as well as fruit and vegetables, growing the franchise formatsand expanding into Southern Africa. Our strategy is to open 10 more stores each year as weseek to grow our footprint nationally.

Improving efficiencies

Forefront of energy efficiency in the retailenvironmentIntegrated stock system

Divisional strategy 2014

New store roll-out in South AfricaExpand into Southern Africa

Wholesale

Operate for less whilst improving customershopping experiencesReview store portfolioImprove Supply Chain & Logistics capabilityFocus on Saverite franchise

Retail

Grow profitable regionsClose smaller or less profitable stores:closed threeCambridge stores in Q1 FY14Improve fresh food assortment

INVESTING IN OUR COMMUNITYLily of the Valley has been rescuing, raising and restoring HIV/AIDS orphans for the past twentyyears in KwaZulu-Natal. The goal of the project is to raise children who are affected by theHIV/AIDS pandemic, to be sustainable leaders in their communities. Partnered with Lily of theValley in KwaZulu Natal through an agricultural fresh produce project, Masscash sponsored theconstruction of a hydroponic tunnel which is used for growing vegetables. The project seeks toraise funds for the Lily of the Valley Children’s Home. Valley Fresh is the commercial hydroponicfarming enterprise built to sustain the work of Lily of the Valley and they currently produce around5 – 8 tons of tomatoes a week, along with lettuce and salad herbs. The Lily of the Valleyorphanage is home to over 126 children and these children are the main beneficiaries of the ValleyFresh enterprise. Over 500 people access medical services through a clinic facility in theorphanage premises, which is open to surrounding community members.

INVESTING IN OURHUMAN RESOURCES

B-BBEE LEVEL 5

Grant Pattison

ChairmanGuy Hayward

Non-executivePearl Maphoshe

Non-executiveMncane Mthunzi

Non-executive

Mike Spivey

Non-executiveRobin Wright

Non-executiveRobin Wright

Non-executive

Neville Dunn

Managing DirectorJane Bruyns

Human ResourcesDino Holmes

Financial

Kevin Vyvyan-Day

Chief ExecutiveBronwynne Bester

HRChris Knight

Regional GautengEben Mare

Financial

Mike Marshall

CommercialAndrew Stein

MarketingCraig Surmon

Operations

DEFINITION: DC Space

Distribution Centre space excludes parking and yard

READ MORE:

Letter to StakeholdersFinancial Director’s Review

MASSCASH DIRECTORATE

WHOLESALE DIRECTORATE

RETAIL DIRECTORATE