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Pick n Pay Holdings Group

Directors' report

for the period ended 3 March 2013

Pick n Pay HOLDINGS 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, was formed with the sole purpose of holding a controlling interest in Pick n Pay Stores Limited. The Company is entitled to redistribute any dividend received from Pick n Pay Stores Limited.

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.

Share value

The directors consider that the ratio of the dividend paid per share for the period of Pick n Pay Holdings Limited (PIKWIK) of 40.78 cents, to that of Pick n Pay Stores Limited (PICKNPAY), 84.00 cents, determines the relative value of a Pick n Pay Holdings Limited share, which, based on these figures, is 48.5% (2012: 48.5%) of a Pick n Pay Stores Limited share.

Dividends declared

The directors have declared a final dividend (dividend 63) of 33.61 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 8 for a detailed analysis.

Investment

The Company's sole asset is its 53.6% (2012: 53.6%) direct shareholding in its subsidiary, Pick n Pay Stores Limited, and its only source of income is the dividend received from Pick n Pay Stores Limited. After taking into account the Pick n Pay Stores Limited treasury shares held by the Group, the Company's effective holding in Pick n Pay Stores Limited at period end is 53.8% (2012: 53.8%).

Share capital

The issued ordinary share capital remained unchanged during the period at 527 249 082 shares.

As at period end, the Pick n Pay Employee Share Purchase Trust and a subsidiary company held
9 115 723 (2012: 9 011 002) and 1 845 803 (2012: 1 845 103) shares in the Company, respectively.
These shares are reflected as treasury shares in the annual financial statements.

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, consider 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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