Annual financial statements

• Audit and risk committee report
• Approval of the financial statement
• Certificate by Company Secretary
• Independent Auditor's report
• Directors' report
• Consolidated statement of comprehensive income
• Consolidated statement of financial position
• Consolidated statement of changes in equity
• Consolidated statement of cash flows
• Notes to the consolidated financial statements
• Notes 1 - 10
• Notes 11 - 20
• Notes 21 - 30
• Notes 31 - 34
• Abbreviations
• Definitions

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31	SHARE-BASED PAYMENTS
	31.1	Equity-settled share appreciation rights scheme
		– Clover Share Appreciation Rights Plan (2010) (ordinary shares in CIL)
		On 31 May 2010 the ordinary and preference shareholders approved the Clover Share Appreciation Rights Plan (SAR) as well as the placement of 16 million unissued ordinary shares under the control of the Directors to fulfil the Group's potential future obligations in terms of the plan. The main rules of the scheme are as follows:
		The Group's obligations in terms of this plan can at the election of the Group be settled in cash or by the issue of ordinary shares.
		New SAR may be exercised at the election of the participants, at any time after they have vested, provided that the participant concerned is still in the employment of Clover. On exercise employees will be awarded shares to the value equal to the difference between the fair market value of ordinary shares on the date of issue of the new SAR in question and the fair market value of the ordinary shares on the date of exercise.
		Further details on the scheme are available in the detailed circular issued to shareholders on 7 May 2010 and the Report on Remuneration here.
		The SAR granted are expensed over their vesting period in terms of IFRS 2. The estimated fair value of these SAR was calculated using the Hull-White Trinomial Lattice valuation model.
		The following inputs were used for the calculation of the fair value:
		Initial allocation – Expected volatility of 30,3%, risk free rate of 8,90% and a dividend yield of 2,34%.
		Third allocation – Expected volatility of 19,9%, risk free rate of 8,55% and a dividend yield of 3,33%.
		Allocation to new executive committee member – Expected volatility of 17,4%, risk free rate of 7,94% and a dividend yield of 2,00%.
		Fourth allocation – Expected volatility of 17,4%, risk free rate of 7,94% and a dividend yield of 2,00%
		Fifth allocation – Expected volatility of 24,3%, risk free rate of 6,67% and dividend yield of 1,74%.
		Sixth allocation – Expected volatility of 21,4%, risk free rate of 7,01% and dividend yield of 1,80%.
		Allocation to new executive committee member – Expected volatility of 22,7%, risk free rate of 7,45% and a dividend yield of 2,14%.
		Seventh allocation – Expected volatility of 26,9%, risk free rate of 7,37% and dividend yield of 1,92%.
		Expected volatility is calculated based on the average share price per day and the intra-day share price movements since listing.
		Eighth allocation – Expected volatility of 33,0%, risk free rate of 8,19% and a dividend yield of 2,95%.

   
 

GROUP			COMPANY
2016 R'000	2015 R'000		2016 R'000	2015 R'000
		Provision against income
12 697	18 080	Share-based payment expense

 

There were no changes made to the share appreciation rights or the executives' interests therein after 30 June 2016 up to the approval of the annual financial statements.

32	DIRECTORS' REMUNERATION AND INTERESTS
	32.1 Directors' remuneration

		2016
		Basic salary  R'000	Fees for services as Dire R'000 ctor	Individual performance bonus  R'000	Profit share bonus  R'000	Retirement and medical lcontributions  R'000	Re-imbursive expenses  R'000	Other benefits*  R'000	Total R'000
	Executive Directors
	JH Vorster	5 500	–	1 654	4 279	1 292	–	1 407	14 132
	LJ Botha (resigned 2 January 2016)	3 767	–	636	–	465	–	362	5 230
	CP Lerm (Dr) (retired 30 June 2016)	3 296	–	1 120	1 878	715	–	860	7 869
	ER Bosch (appointed 2 January 2016 as director)	1 669	–	568	953	378	–	65	3 633
	Total remuneration of Executive Directors	14 232	–	3 978	7 110	2 850	–	2 694	30 864
	Non-Executive Directors
	WI Büchner	–	1 191	–	–	–	–	–	1 191
	TA Wixley	–	899	–	–	–	–	–	899
	SF Booysen (Dr)	–	818	–	–	–	39	–	857
	JNS Du Plessis	–	520	–	–	–	36	–	556
	NA Smith	–	371	–	–	–	–	–	371
	N Mokhesi	–	432	–	–	–	–	–	432
	B Ngonyama	–	472	–	–	–	–	–	472
	PR Griffin	–	321	–	–	–	–	–	321
	Total remuneration of Non-Executive Directors	–	5 024	–	–	–	75	–	5 099
	Total Directors' remuneration	14 232	5 024	3 978	7 110	2 850	75	2 694	35 963
	Other executives (prescribed officers)
	H Lubbe	3 285	–	1 118	1 877	701	–	167	7 148
	JHF Botes (Dr)	3 300	–	1 121	1 882	700	–	166	7 169
	ER Bosch (became a director on 2 January 2016)	1 669	–	567	952	378	–	64	3 630
	MM Palmeiro	2 708	–	1 432	1 902	591	–	755	7 388
	J van Heerden	2 382	–	608	1 020	452	–	237	4 699
	Total remuneration of other executives	13 344	–	4 846	7 633	2 822	–	1 389	30 034

 *Other benefits include long service award payouts, leave payouts on retirement, housing allowances for expatriates, travel and accommodation expenses.  

		2015
		Basic salary  R'000	Fees for services as director  R'000	Individual performance bonus  R'000	Profit share bonus  R'000	Retirement and medical contributions  R'000	Re-imbursive expenses  R' 000	Other benefits*  R'000	Total  R'000
	Executive directors
	JH Vorster	5 129	–	1 615	6 446	1 376	–	277	14 843
	LJ Botha	3 512	–	1 210	3 406	874	–	168	9 170
	CP Lerm (Dr)	3 079	–	1 059	2 996	762	–	157	8 053
	Total remuneration of Executive Directors	11 720	–	3 884	12 848	3 012	–	602	32 066
	Non-Executive Directors
	WI Büchner	–	1 111	–	–	–	–	–	1 111
	TA Wixley	–	897	–	–	–	–	–	897
	SF Booysen (Dr)	–	743	–	–	–	–	–	743
	JNS Du Plessis	–	512	–	–	–	54	–	566
	NA Smith	–	330	–	–	–	5	–	335
	N Mokhesi	–	359	–	–	–	–	–	359
	B Ngonyama	–	432	–	–	–	–	–	432
	PR Griffin	–	299	–	–	–	–	–	299
	Total remuneration of Non-Executive Directors	–	4 683	–	–	–	59	–	4 742
	Total Directors' remuneration	11 720	4 683	3 884	12 848	3 012	59	602	36 808
	Other executives (prescribed officers)
	H Lubbe	3 063	–	1 091	2 995	782	–	162	8 093
	JHF Botes (Dr)	3 077	–	1 094	3 002	780	–	161	8 114
	ER Bosch (became a director on 2 January 2016)	3 068	–	1 039	3 002	830	–	129	8 068
	MM Palmeiro	2 525	–	1 259	2 235	626	–	739	7 384
	J van Heerden	1 785	–	475	915	391	–	121	3 687
	Total remuneration of other executives	13 518	–	4 958	12 149	3 409	–	1 312	35 346

  *Other benefits include long service award payouts, leave payouts on retirement, housing allowances for expatriates, travel and accommodation expenses.

 

		2016  R' 000	2015  R' 000
	Share appreciation rights exercised and settled by the issue of shares
	Executive directors
	JH Vorster	19 892	53 652
	LJ Botha	11 234	31 610
	CP Lerm (Dr)	13 414	12 423
	Executives (Prescribed officers)
	JHF Botes (Dr)	–	9 856
		44 540	107 541

   

All share appreciation rights exercised by Executives as part of the MPCRE (refer to here: - legacy scheme SARS issues) were settled in shares.

32.2	Interest of Directors and other executives in share appreciation rights

The interest of Executive and Non-Executive Directors in the shares of the Company provided for in the form of share appreciation rights are set out in the table below:

 

 

Under the SAR Scheme, the aggregate number of ordinary shares which may be acquired by the Executives may not exceed 16 million ordinary shares. At 30 June 2016, a total of 11 202 483 (30 June 2015: 8 619 271 ordinary shares) have been issued to Executives, with the balance of 4 797 517 ordinary shares remaining available for issue.

 

Number of shares at 30 June 2016									Number of shares at 30 June 2015
Direct	Indirect	Associates							Direct	Indirect	Associates
			32.3	Interest of Directors and other executives of the Company in ordinary share capital
				Executive Directors
5 254 846	4 500 000	398 315		JH Vorster					8 346 599	–	398 315
3 574 220	–	–		CP Lerm (Dr) (retired 30 June 2016)					3 294 122	–	–
–	–	–		LJ Botha (resigned 2 January 2016)					2 318 014	–	–
8 829 066	4 500 000	398 315							13 958 735	–	398 315
				Non-Executive Directors
–	480 400	–		WI Büchner*					–	628 400	–
–	888 814	–		NA Smith					–	997 586	–
47 619	–	–		TA Wixley					47 619	–	–
15 245	–	–		PR Griffin					53 245	–	–
62 864	1 369 214	–							100 864	1 625 986	–
8 891 930	5 869 214	398 315		Total Directors' interests in ordinary share capital					14 059 599	1 625 986	398 315
				Other executives (prescribed officers)
342 222	–	–		H Lubbe					459 712	–	–
951 998	–	–		JHF Botes (Dr)					951 998	–	–
1 294 220	–	–		Total interest of other Executives in ordinary share capital					1 411 710	–	–
				There have been no changes in Directors' interests in the share capital of the Company between the end
				of the financial year and the date of the approval of the annual financial statements.
				* This Director is a trustee of the Clover Milk Producer Trust that holds 23 100 000 (2015: 22 553 000) ordinary shares in the Company.

 

GROUP						COMPANY
2016 R'000	2015 R'000					2016 R'000	2015 R'000
		33	Long-service bonus
			33.1	Introduction
				The Group rewards employees with long service by remunerating them with a lump sum after a specific number of service years. Assumptions and valuation methods are as follows:
			33.2	Background
				The long-service bonuses which employees receive differ between employees whose employment date were before 1 January 2001 and employees whose employment date was after 1 January 2001.
				The benefit is as follows:
				Employees with an employment date before 1 January 2001
				Employees receive a bonus of three times their monthly basic salary after 15 years service and one time their monthly basic salary every five years thereafter.
				Employees with an employment date after 1 January 2001
				Employees receive a bonus of 10% of their monthly basic salary after 10 years' service, 15% after 15 years' service, 20% after 20 years' service, 25% after 25 years' service, etc.
			33.3	Valuation method
				The projected unit credit method is used in the calculations. The values of the past service liabilities and the future service liabilities are given separately. The past service liability is the value of the accumulated liability as at the calculation date in respect of service already rendered. The future service liability is the value of the liability from service after the calculation date until the next date the employee is entitled to receive a bonus payment. The total liability is evenly distributed over the period since service inception until the date when the benefit is payable.
			33.4	Valuation results
				Past service liability
				The total past service liability in respect of long-service bonuses is set out as follows:
19 420	22 963			Employees with employment date before 01/01/2001
2 426	1 905			Employees with employment date after 01/01/2001
21 846	24 868			Total past service liability
				The valuation results as at 30 June 2015 are based on best estimate assumptions. The valuation is very sensitive to the real return rate assumed. For every 1% variance in the assumed rate of return, the liability varies by approximately R1 million. The results as at 30 June 2014 are based on the previous best estimates.
			33.5	Past service liability build-up
				The build-up of the total past service liability for the past year, using the best estimate assumptions are as follows:
8.42	9.00			a)	The following discount rate per annum was used for the calculation of interest cost
7.46	8.20			b)	The following salary escalation rate per annum and merit increases were used
				c)	For current service cost an assumption is made that there are no withdrawals during the financial year
				d)	For benefits paid it is assumed that all benefits were paid as estimated by Clover
R'000	R'000					R'000	R'000
				The increase in the past service liability is summarised as follows:
				Past services liability build-up
24 869	26 376			Opening balance
1 782	2 394			Plus: Interest cost
1 099	1 252			Current service cost
(8 785)	(10 653)			Less: Benefits paid
2 882	5 500			Actuarial loss
21 847	24 869			Closing balance

34	EVENTS AFTER THE REPORTING PERIOD
	No significant events occurred subsequent to the year-end that would require disclosure or amendment of these financial statements.