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Pick n Pay Stores Group

Directors' report

for the period ended 3 March 2013

Pick n Pay STORES LIMITED AND ITS SUBSIDIARIES

Nature of business

The Company, which is domiciled and incorporated in the Republic of South Africa and listed on the JSE, the recognised securities exchange in South Africa, is an investment holding company. The Group comprises trading subsidiaries that retail food, clothing, general merchandise, pharmaceuticals and liquor throughout southern Africa, both on an owned and franchise basis. The Group also acquires and develops strategic retail and distribution sites.

The nature of the business of the subsidiaries held directly and indirectly is presented in note 5 of the Company annual financial statements.

Review of financial results and activities

The reviews of financial results and activities of the Group are contained in the Chief Finance Officer's report here. During the period under review the Group adopted a 52-week reporting calendar for all future financial periods. Refer to note 29 for further details.

Audit committee

We draw your attention to the audit committee report here where we set out the responsibilities of the committee and how it has discharged these responsibilities during the period.

Dividends declared

The directors have declared a final dividend (dividend 90) of 69.25 cents per share out of income reserves. The dividend is subject to dividend withholding tax at 15%. The last day to trade in order to participate in the dividend (CUM dividend) will be Friday, 7 June 2013. The shares will trade ex dividend from the commencement of business on Monday, 10 June 2013 and the record date will be Friday, 14 June 2013. The dividends will be paid on Tuesday, 18 June 2013. Refer to note 5 for adetailed analysis.

Share capital

The issued ordinary share capital remained unchanged during the period at 480 397 321 shares.

At period end, the Pick n Pay Employee Share Purchase Trust held 2 046 597 (2012: 2 482 193) shares in the Company and 9 115 723 (2012: 9 011 002) shares in Pick n Pay Holdings Limited and a subsidiary company held
1 845 803 (2012: 1 845 103) shares in Pick n Pay Holdings Limited, all of which are accounted for as treasury shares. These shares are held to meet obligations of options granted.

Going concern

These annual financial statements have been prepared on the going-concern basis.

The Board has performed a formal review of the Company and Group's ability to continue trading as going concerns in the foreseeable future and, based on this review, considers that the presentation of the financial statements on this basis is appropriate.

The Group ensures that it complies with the liquidity and solvency requirements for any dividend payment and provision of financial assistance as per the requirements of the Companies Act 2008.

Competition Commission

In August 2012, a subsidiary company received a summons from the Competition Commission regarding an investigation into whether or not long-term exclusive lease agreements, as entered into between landlords and various South African national retail chains, are anti-competitive. Pick n Pay is co-operating fully with the Competition Commission in providing all information requested, and remains convinced that no anti-competitive behaviour exists.

In February 2013, a subsidiary company received notification of a complaint laid against it with the Competition Commission by a small number of Pick n Pay franchisees relating to the sourcing of suppliers and the centralised buying system. Pick n Pay co-operated fully with the Competition Commission in providing all information requested. After reviewing all documentation, the Competition Commission declined to refer the complaint to the Competition Tribunal.

Following the recent statutory changes to, inter alia, the Competitions Act, the Consumer Protection Act and the Companies Act 2008, our franchise agreement was thoroughly reviewed by both commercial and competition lawyers, and was amended to ensure that Pick n Pay and our franchisees remain compliant with all statutory requirements.

Legal proceedings

The Company and its subsidiaries are not, and have not in the 2013 annual financial period been involved in any legal or arbitration proceedings which may have or have had a material effect on the financial position of the Pick n Pay Group of Companies, nor is the Company aware of any such proceedings that are pending or threatened.

Special resolutions

On 15 June 2012 the Company's shareholders approved the following special resolutions as tabled in the notice to the annual general meeting:

Directors' fees for the 2013 annual financial period

Shareholders approved the directors' fees.

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