integrated annual report 2012 - famousbrands.mcewan.co.za

Integrated Annual Report 2012

Financial highlights 1Our vision, strategic intent and core beliefs

2

Famous Brands ‘recipe’ 3Business model 4Trading footprint 5Franchise network 5Board of directors 8 Key management 10 Chairman’s statement 12 Chief Executive Officer’s report 15

Six year review 22

Value added statement 23

Corporate governance and sustainability report 24

Annual financial statements 30

Shareholder analysis 79

Shareholders’ diary 79

Notice of annual general meeting 82

Form of proxy 87

Administration IBC

Contents

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Chairman’s Statement


Revenue

up 15% to R2 156 million

Operating profit

up 15% to R413 million

Headline earningsper share

up 15% to 278 cents

Dividends per share

up 29% to 200 cents

Net borrowings to equity

improved to

10%

Financial highlights

Revenue (Rm)

2 200

2 000

1 800

1 600

1 400

1 200

1 000

80007 08 09 10 11 12

Operating profit (Rm)

450

400

350

300

250

200

150

10007 08 09 10 11 12

Headline earningsper share (cents)

300

250

200

150

10007 08 09 10 11 12

Dividends per share (cents)

200

175

150

125

100

75

50

2507 08 09 10 11 12

Cash generated by operations (Rm)

400

350

300

250

200

150

10007 08 09 10 11 12

Net borrowingsto equity (%)

50

40

30

20

10

007 08 09 10 11 12

2 Integrated Annual Report 2012

Our strategic intent

Our business is focused on growth and development of

best-in-class franchised leisure brands supported by a business

model which maximises stakeholder value creation.

Our vision

To embark boldly on a journey which doubles the size

of our business by 2013.

Our core beliefs

People Brands Customers Quality High performance

Integrity Teamwork


Our primary orientation remains that of an integrated franchise system

Building great and enduring brands will always be our obsession

Our franchisees are our #1 customer and we must unshakeably offer them a business model that works

We must be consumer driven – always affordable, available and accessible

Within our industry we will be the lowest cost producer

We will stay out of anything that is not leisure food and beverage

Remain a ‘family’ but never lose our high performance culture

South Africa and rest of Africa are our #1 priority trading markets

Famous Brands ‘recipe’

Chairman’s Statement


Business model

Franchising division International

Houses the Group’s offshore intellectual property and brands. This division is responsible for development of the existing Wimpy brand.

Franchising division Domestic (Mainstream Brands)

Houses the Group’s brands that are of a mainstream nature, namely those brands which have broad consumer appeal and are wholly owned trademarks. Whilst contained within a single business unit, the model of ‘brand stewardship’, or competition between brands is firmly entrenched through stand-alone strategic structures.

Franchising division Domestic (Developing Brands)

Houses brands that are in a development phase, or are being repositioned to compete tactically within clearly defined trade channels.

Franchising division Domestic (Theatre of Foods)

Houses the Group’s niche brand trademarks which are held through joint venture partnerships in which the Group has a controlling interest.

The MAD Lab MAD is the acronym for Marketing. Artistry. Design. This newly created business unit has been established to bring about a significant step change in the Group’s marketing, new product development and restaurant design capabilities.

Food Services division Responsible for extending the Group’s trademarks into the FMCG retail and wholesale markets.

New Business divisionResponsible for the centralised processing and approval of all new franchisee and landlord/developer enquiries. Accountable for all lease negotiations ensuring optimum rental agreements are negotiated on behalf of our franchise partners. Also manages the Group’s strategic alliance partners.

Development division Provides a turnkey service to all of the Group’s brands and their respective franchise partners, offering a comprehensive range of services surrounding all new restaurant openings, revamps and relocations.

Procurement division Custodian of the Group’s centralised procurement function. Accountable for procurement of all product, capital equipment, services and the like. Also serves as the Group’s sales forecasting and stock movement function.

Manufacturing divisionRepresents a key part of the Group’s backward integration model, tasked with manufacturing a range of licensed products for use by the franchise network. Also accountable for quality assurance of all manufactured and outsourced products required by the various brands.

Logistics division Represents the Group’s route-to-market, delivering to the franchise network a complete basket of products required for brand-specific menus.

Corporate Houses the Group’s ‘back of house’ functions which provide a service to the various operating business units.

Franchising division




The MAD Lab Food Servicesdivision

New Businessdivision

Developmentdivision

Procurementdivision

Manufacturingdivision

Logistics division

Corporate

International Domestic MainstreamBrands

Domestic Developing Brands

Domestic Theatre ofFoods

MarketingArtistry Design

Retail and Wholesale

– Wimpy UK – Steers– Wimpy– Debonairs

Pizza– FishAways– Mugg & Bean– KEG– Milky Lane

– Giramundo– Brazilian

Café– House of Coffees– McGinty’s– The Brewers

Guild– O’Hagan’s– Blacksteer

Home of Shisanyama

– tashas– Vovo Telo– Juicy Lucy

– Group Marketing and social media

– Group restaurant design

– Group product development

– Steers– Wimpy– Baltimore– TruFruit– Aqua Monte– Mugg & Bean

– Site selection

– Franchisee selection

– Lease negotiation

– Strategic alliance management

– Drawings– Costing– Procurement– Project

management

– Supplier appointment and audits

– Price negotiations

– New business integration

– Planning and forecasting

– Sauces and spices

– Meat and chicken products

– Bakery– Ice-cream– Fruit juice– Mineral water

– Gauteng– Western Cape– KwaZulu-Natal– Free State– Eastern Cape– Mpumalanga

– Human Resources

– Finance– Information

Technology– Legal


Trading footprint

Total number of restaurants at 29 February 2012

Domestic International Total

Steers 492 41 533

Wimpy 491 30 521

Wimpy UK – 121 121

Debonairs Pizza 315 56 371

FishAways 117 6 123

House of Coffees 14 – 14

Brazilian Café 48 – 48

tashas 8 – 8

Mugg & Bean 123 5 128

Blacksteer Home of Shisanyama 2 – 2

Blacksteer 2 – 2

O’Hagan’s 15 4 19

McGinty’s 4 – 4

KEG 23 1 24

Giramundo 12 – 12

Vovo Telo 8 – 8

Milky Lane 70 11 81

Juicy Lucy 12 1 13

The Brewers Guild 2 – 2

Creative Coffees 9 – 9

Total 1 767 276 2 043

Franchise network

UK 121

Ivory Coast 4

Nigeria 3

Sudan 5

Kenya 12

Tanzania 3

Namibia 25

Botswana 26

South Africa 1 767

Malawi 4

Mozambique 3

Swaziland 8

Lesotho 3

Zambia 19

Dubai 2

Zimbabwe 11Mauritius 27

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Board of directors

1. Panagiotis Halamandaris (65)

Non-executive Chairman

Peter, a founding member of the company, has made an important contribution to the Famous Brands Group since 1974. He has served on various portfolio committees over the years, assuming the position of Chairman of the listed entity upon listing in November 1994. As from March 2007, Peter assumed the position of Non-executive Chairman.

2. Periklis Halamandaris (57)

Non-executive Director

Periklis was one of the original founding members of the Group and has in excess of 20 years’ experience in the food and franchising industry. He was appointed to the board of Famous Brands Limited in 1994 and was responsible for expanding the operations of the Group beyond the borders of South Africa. Periklis resigned from the board during the course of 1999 to concentrate on his private business. In March 2001 he was re-appointed to the board as a non-executive director.

3. Theofanis Halamandaris (61)

Executive Deputy Chairman

Theofanis has made a significant contribution to the Group since 1974 through the fulfilment of various responsibilities. He assumed the position of Chief Executive Officer in March 2001, after serving as the Group Managing Director for three years. After retiring as Chief Executive

Officer in May 2010, Theofanis took over from John Halamandres as Executive Deputy Chairman of the Group.

4. John Lee Halamandres (58)

Non-executive Director Member of the audit committee and

remuneration committee

With experience in all aspects of Famous Brands’ business, John retired from executive management in March 2001. A founding member of the company, he served as Managing Director from November 1994 until March 1997, after which he assumed the role of Chief Executive Officer until his appointment as Non-executive Deputy Chairman in March 2001, a position he held until May 2010. John continues to serve on the Famous Brands board in the capacity of non-executive director.

5. Stanley John Aldridge (59)

Group Financial Director Member of the social and ethics committee

CA(SA)

Stan is a chartered accountant and completed his articles with Deloitte. He was a financial executive and director of the Edcon Group with a career spanning 20 years from 1981 to 2001. Thereafter he was Finance Director, Card Division at Standard Bank until 2007. He has consulted to various companies including Nando’s and Master Card Africa Inc. Stan joined Famous Brands in November 2008.

1. Panagiotis Halamandaris

2. Periklis Halamandaris

3. Theofanis Halamandaris

4. John Lee Halamandres

5. Stanley Aldridge

1. 2.

3. 4. 5.


6. Kevin Hedderwick

7. Bheki Sibiya

8. Hymie Levin

9. Christopher Boulle

6. Kevin Alexander Hedderwick (59)

Chief Executive Officer Member of the social and ethics committee

Kevin joined the Group in February 2000 as Managing Director of the Steers Brand. He has an excellent business record, combining food, beverage and franchising. Kevin has held senior executive positions in a number of blue-chip companies including SA Breweries, Distell and Foodcorp. Prior to joining the Group, Kevin was a partner and Managing Director of KEG Franchising. In March 2001 Kevin was appointed Chief Operating Officer, a position he held for nine years, before being appointed Chief Executive Officer of Famous Brands in May 2010.

7. Bheki Lindinkosi Sibiya (55)

Non-executive Director Member of the remuneration committee BAdmin, MBA

Bheki is currently Chief Executive of the Chamber of Mines. Prior to this appointment, he was the Director of the Wits Business School. He is also Chairman of Smartvest, CapAfrica, Brait South Africa, Pretoria Portland Cement and a Deputy Chairman at Tiger Brands. He brings to the board a wealth of expertise in BEE, employment equity, change management and corporate governance gained as former Chief Executive Officer of Business Unity South Africa, and from experience attained in a range of positions held at companies including Transnet, Tongaat Hulett Sugar, SA Breweries and Ford Motor Company.

8. Hymie Reuvin Levin (67)

Non-executive Director Chairman of the audit committee and remuneration

committee BCom, LLB, LLM, H Dip Tax Law, H Dip Company Law

Hymie has been a non-executive director of Famous Brands Limited since its listing on the JSE in 1994. He is a senior partner of HR Levin Attorneys and his experience spans more than 40 years. His areas of expertise include corporate law, mergers, local and international taxation, acquisitions and listings. Hymie is also a non-executive director of several listed and non-listed companies and chairman of some of them.

9. Christopher Boulle (40)

Alternate Director Chairman of the social and ethics committee and

member of the audit committee BCom, LLB, LLM

Chris is a commercial, corporate finance, tax and trust attorney and his expertise includes cross-border transactions, mergers and acquisitions, BEE transactions and advising on stock exchange listings both locally and internationally. He currently serves as a non-executive director of four companies listed on the JSE and as a trustee of various trusts. His experience as a non-executive director of listed companies spans over a decade. He commenced his legal career at HR Levin Attorneys where he is now one of the two senior partners. Chris joined the Famous Brands Limited board as alternate director to Hymie Levin in December 2011.

6. 7.

8. 9.


Arlene Botha (49) Group Human Resources Executive

Arlene has extensive experience in the human resources field, having

started her career in the brewing industry whilst completing her

postgraduate Diploma in Management – Human Resources at Wits

Business School. She later joined the soft drinks industry and

thereafter spent some time with a multi-national tobacco company,

before joining Famous Brands.

Steven Dike (42) Group New Business and Development Executive

Steven completed his Bachelor of Architecture at Wits and thereafter

his professional registration as an Architect. He managed his own

architectural practice before joining a listed restaurant franchisor as a

Design Manager. Steven has over 14 years of experience in the design

and development of restaurants. He joined Famous Brands in 2002

and was appointed Managing Executive of the Development Division.

In 2011, responsibility for the Group’s New Business function was

added to his portfolio.

Darren Hele (40) Chief Operating Officer – Franchising

Darren started his career at Pleasure Foods whilst studying for and

completing a BCom degree. After starting out in the finance

department he moved into Operations and later Procurement. After

participating in the management buyout of Pleasure Foods in 1996 he

held executive roles at Whistle Stop and Wimpy before joining

Famous Brands in 2003. He served as the Managing Director of

Wimpy in SA and the UK for eight years and three years respectively.

Darren was appointed Chief Operating Officer of the Franchising

Division in May 2011.

Brent Kairuz (33) Managing Executive – Creative Coffee Franchising

Brent started his career by founding a company called Kairuz

Corporation in 1998 which later became known as Kairuz Holdings.

He has had over 14 years’ extensive food experience in both captive

market and high street retail operations. On 1 May 2011, Famous

Brands and Kairuz Holdings formed a new joint venture partnership

under a new company, Creative Coffee Franchising, which controls all

the Kairuz Cafés, Coffee Couture, Juicy Lucy and House of Coffees

franchised brands.

Graeme Morrison (42) Managing Executive – Casual Dining

After completing his BCom and LLB, Graeme opened his first

Debonairs Pizza restaurant in 1995. He subsequently owned a number

of Debonairs Pizza restaurants, and in 2000 joined Famous Brands as

the Debonairs Pizza National Operations Manager. Since then he has

held a number of Managing Executive positions in Famous Brands,

most recently taking on the Casual Dining portfolio, which includes

Mugg & Bean and the Group’s Pub and Restaurant division.

Derrian Nadauld (38) Managing Executive – Wimpy

Derrian joined Famous Brands in May 2000 as a member of the

Debonairs Pizza operations team. Over the past 12 years, he has held

various operational, management and executive roles within

Debonairs Pizza, Steers, Coffee Brands and Wimpy. Between

November 2008 and December 2011, Derrian served as Managing

Executive of Debonairs Pizza and was appointed Managing Executive

of Wimpy in January 2012.

Valentine Bourdos Nichas (50) Managing Executive – Steers,

FishAways and Giramundo

Val completed a two-year diploma through the Public Relations

Institute of South Africa before starting her career with fashion

retailers Greatermans/Garlicks. She later moved to Edgars where she

was appointed Marketing Director. She subsequently joined the food

industry and was appointed Marketing Director of Debonairs Pizza,

and then later Senior Vice President for Rich Product Corporation of

SA. She returned to Famous Brands in 2007 to take on the role of

Managing Executive of Wimpy, a position which she held for three

years. Val was appointed Managing Executive of Steers in January 2010

and in October 2011, FishAways and Giramundo were added to her

existing Steers portfolio.

Gary Oelofse (50) Group Procurement Executive

Gary started his career as a production management trainee at Toyota

SA and was involved in all aspects of manufacturing. He then moved

to TW Beckett and Co. where he was involved in the farming,

production and marketing of tea and coffee for a period of five years,

whereafter he joined the AVI group in 1996. Here he was involved in

strategic sourcing for a period of 13 years before joining Distell for a

three-year period in procurement. Gary joined Famous Brands in

February 2012 as Group Procurement Executive.

Key management


Linda Thomas (39) Group Marketing and Innovations Executive

After completing her Bachelor of Social Science degree at the

University of Natal, Linda started her career in the pharmaceutical

industry and for 10 years held various sales management and

marketing positions. In 2000 she joined Tiger Brands as a brand

manager and in 2003 she was promoted to Category Marketing

Manager on the Condiments and Ingredients portfolio. In 2007 she

joined Famous Brands as Marketing Executive for Debonairs Pizza,

and in 2010 she moved across to Steers as the Marketing Executive. In

2011 Linda was appointed Managing Executive of Mugg & Bean. Linda

was appointed to Group Marketing and Innovations Executive in 2012.

Pedja Turanjanin (44) Managing Executive – Developing Brands

and Markets

Pedja started his career in a family business with his father, whilst

studying engineering at Sarajevo University. Upon arrival in South

Africa in 1991 he joined Steers Holdings. After starting at Steers

Restaurants he moved into operations and thereafter into

manufacturing and logistics. As of May 2012, Pedja was appointed

Managing Executive Developing Brands and Markets, assuming

responsibility for all of the Group’s emerging/developing/joint venture

brands and markets. Prior to his latest assignment Pedja held the

position of Group Procurement and Quality Assurance Executive.

Tom Westhphal (44) Managing Executive Group Manufacturing and

Technical Executive

After obtaining his BSc Honours in Microbiology, Tom started his

career in 1989 at the National Institute for Virology. He then moved

into the food industry at Unilever as Packaging Manager and then to

North Hills Farm, where he produced food products for Woolworths.

Tom joined Irvin and Johnson as Quality Control Manager at the chip

manufacturing plant in 1994, whereafter he was appointed Group

Quality Manager at Clover SA. He then ventured into his own business

before returning to the corporate environment at Danone and more

recently as Group Innovations Manager at McCain Food. He joined

Famous Brands as Group Manufacturing and Technical Executive in

April 2012.

Chris Woolfenden (43) General Manager – Wimpy UK

Chris started his career at Wimpy working part-time as a store

supervisor whilst at college. He joined the Wimpy UK team on a

permanent basis in 1994. Chris has held various senior operational

positions and with the purchase of Wimpy UK in 2007 he took on the

role of Business Development Manager. In March 2010 Chris was

appointed General Manager of Wimpy UK.

André Piehl (42) Managing Executive – Debonairs Pizza

André has a marketing background, having applied his trade at

Nielsen, SA Breweries, Leo Burnett, Royal Canin and Famous Brands.

Over the past six years at Famous Brands he has held various

marketing, management and executive roles within Steers, Coffee

Brands, FishAways, Retail and Debonairs Pizza. In January 2012 André

was appointed as Managing Executive of Debonairs Pizza.

Geoff Pyle (48) Group Financial Executive and Company Secretary

Geoff completed his accounting articles at Ernst and Young before

qualifying as a Chartered Accountant in 1991. From 1992 to 2006 Geoff

was employed by the Edcon Group where he held various financial

positions including Group Executive Treasury. He is well versed in all

aspects of retail financial management, including treasury, tax,

management accounting, company secretarial, insurance and risk

management. In the three years prior to his appointment at Famous

Brands he managed his own consultancy business.

Natasha Sideris (36) Managing Executive – tashas

After completing her BA degree in Psychology at Wits University,

Natasha began her career in the food industry when she joined the

Fishmonger group in 1995. In 1998 she joined Nino’s head office as

Operations Manager. After a three-year period in this position she

acquired the Nino’s restaurant franchise in Bedfordview. Natasha’s

passion for creation and innovation in food was demonstrated with

the launch of her signature boutique daytime café concept, tashas.

Pioneering a new category in the food industry, her first tashas

restaurant opened in Atholl 2005.

Tony Stephens (50) Managing Executive – Logistics

Tony started his career as an operations trainee with SA Breweries

beer division and spent the next 23 years with the company in various

sales and distribution capacities within South Africa, as well as in

Botswana and Zambia. He joined Famous Brands in 2005 and was

appointed head of the Group’s Logistics division. In March 2009

responsibility for the Manufacturing division was added to his portfolio

and he assumed responsibility for the Group’s entire inward and

outbound supply chain. In April 2012 Tony was appointed Managing

Executive of the Logistics division.


Chairman’s statement

Panagiotis Halamandaris Non-executive Chairman

Five-year compound growth in revenue of 20%

Five-year compound growth in operating profit of 22%

Awarded 10th position in Sunday Times 2011 Top 100 JSE companies’ survey

Attained landmark share price of 5 000 cents

Dividend up 29% to a record 200 cents

YEAR IN OVERVIEWWhilst there is some talk of early signs of economic recovery in

the country, the period under review remained challenging for

retailers. The economy featured a subdued real GDP growth

rate of 3.1%, continued high levels of unemployment at 24%,

limited real wage increases, and consumer spend pressured by

rising power and fuel costs and widespread food inflation – all

serving to exacerbate prevailing pessimistic consumer

sentiment. Despite the prime lending rate remaining unchanged

at historically low levels and a reduction in the household debt

to disposable income ratio, consumer indebtedness remained

extremely high, averaging 75%.

In this broad economic context, the food services sector

experienced a range of discernible new trends:

Unprecedented fragmentation developed in the category as

operators resorted to desperate measures to retain their

foothold in the market. Predominant features included

aggressive price cutting and promotional activities;

divergence by established brands from traditional core

menu offerings; entry into unrelated categories and portion

size re-engineering.

Additional pressure was exerted by traditional retailers attempting

to gain market share from conventional convenience-centred food

services operators.

The quick service restaurant segment gained market share at the

expense of casual dining offerings.

Whilst the number of consumers increased across the food

services category, the frequency of visits declined by 10% to

their lowest level in 12 years, and in line with 2005.

Notwithstanding these testing conditions, Famous Brands has

delivered creditable results for the year ended 29 February 2012,

achieved through intensified focus and improvements in the front

and back ends of the business.

Group revenue and operating profit grew by 15% to R2.16 billion

(2011: R1.88 billion) and R413 million (2011: R358 million) respectively.

The operating margin remained steady at the record level of

19.1% achieved in the prior comparative period.

Net interest paid decreased 29% to R11 million (2011: R15 million) due

to reduced net borrowings arising from sustained strong cash flows

and the prevailing low interest rate environment.


The Group’s tax rate increased to 33.3% (2011: 32.8%) in the reporting

period due mainly to the impact of the increased capital gains tax

rate on deferred tax balances. This was significantly offset by prior

year tax adjustments.

Headline earnings per share and earnings per share both increased

by 15% to 278 cents per share.

Cash generated from operations before changes in working capital

increased by 15% to R452 million. Working capital requirements

absorbed R53 million mainly as a result of a return to more normal

inventories compared with the prior year’s understocked position.

After changes in working capital, cash generated from operations

amounted to a healthy R399 million (2011: R397 million). Tax payments

of R132 million were 6% up on the prior year. Capital expenditure of

R88 million was incurred and comprised mainly R31 million for the

acquisition of the Milky Lane and Juicy Lucy trademarks on 1 March

2011 as well as Supply Chain expansion activities. These included

R18 million for the chicken fillet plant in the Manufacturing division,

R6 million for a new Logistics depot in Nelspruit which commenced

deliveries in April 2012, and fleet additions.

After payment of R159 million (2011: R128 million) in dividends, cash

flows were sufficient to pay down net borrowings by R19 million

(2011: R58 million). The low level of borrowings, net of cash and bank

balances, of R82 million (2011: R101 million) and representing a mere

10% of equity (2011: 14%), allows ample room to grow our business

organically or by acquisition.

The Local Franchising division, which comprises operations in South

Africa and 15 African countries, reported a satisfactory performance

in an extremely competitive environment. In South Africa system-wide

sales across our brand portfolio increased by 8%, while like-on-like

sales grew 5%; our African business improved system-wide and

like-on-like sales by 21% and 7% respectively. Combined revenue for

the South African and African operations increased 14% to

R440 million (2011: R386 million), whilst operating profit in this division

rose 13% to R265 million (2011: R235 million).

The results delivered by Wimpy UK are a reflection of the dire trading

conditions experienced in that country. Revenue in Sterling declined

19%, and in Rand terms by 13% to R82 million (2011: R95 million).

Operating profit decreased 30% to R8 million (2011: R11 million).

This division makes a nominal contribution to Group revenue and

operating profit, namely 3.8% and 1.8% respectively.

The Supply Chain division, comprising our Manufacturing and Logistics

operations, delivered another gratifying performance. Consolidated

revenue grew by 17% whilst operating profit rose 21%. Increased

volumes and tight management of costs ensured that the operating

margin improved to 8.7% from 8.4% notwithstanding the Group’s

deliberate strategy in the first half of the year to absorb margin

pressure created by rampant beef price increases.

Famous Brands’ continued efforts to strengthen its investment

proposition were supported by individual and institutional

shareholders, reflected in the share price which breached 5 000 cents

for the first time in the Group’s history. Further acknowledgement by

the investment community was demonstrated in the Group achieving

tenth position in the Sunday Times 2011 Top 100 JSE companies’

survey, which is a measurement of wealth earned for shareholders

over a five-year period.

I am delighted to announce that our brands were once again awarded

a range of accolades in the annual consumer survey, Leisure Options.

For the 16th and 14th consecutive year respectively, Steers won the

‘best burger’ and ‘best chips’ awards; Debonairs Pizza won ‘best pizza’

for the 12th time; and Mugg & Bean won ‘best coffee shop’ for the

12th consecutive year. Our Theatre of Food brands, tashas and Vovo

Telo, also did us proud, winning the ‘best breakfast restaurant’ and

‘best new restaurant’ awards for the first time.

The continued recognition from the financial market and our loyal

customers is both rewarding and humbling.

CORPORATE ACTIONThe Group extended its Theatre of Foods portfolio with the creation of

a new business, Creative Coffee Franchise Systems (Pty) Ltd (Creative

Coffees), thereby introducing a new strategic direction for its House

of Coffees and Juicy Lucy brands. With effect from 1 May 2011, the

trademarks and franchise agreements of the House of Coffees and

Juicy Lucy brands were moved into Creative Coffees and merged

with the business of Kairuz Holdings (Pty) Ltd, a company specialising

in servicing the retail and food offerings in the private hospital

industry. Creative Coffees is managed by Kairuz founder, Brent Kairuz.

Famous Brands retains a 61% controlling shareholding in the new

company. Creative Coffees comprises 14 franchised House of Coffees

restaurants, 12 franchised Juicy Lucy restaurants and nine other

restaurants situated in private hospitals nationwide.

SUSTAINABILITY Famous Brands’ headcount increased by 54 new staff members in the

reporting period, bringing the total head office personnel complement

to 1 311.

The industrial relations climate is a cordial one, with management

committed to ongoing and deliberate relationship-building initiatives

with shop floor representatives.

Executive succession and human capital development remain key

priorities for management. Pipeline succession is a continuous focus

initiated from the recruitment and selection phase. Growth of talent is

measured bi-annually through our human capital review process.

The Group opened its state-of-the-art training institute in May 2011.

This facility is designed to train franchise partners and their staff to

operate a branded franchise business with the goal of improving


Chairman’s statement continued

Despite the negative effect which these factors will have on the

industry, the Group’s all-encompassing business model, exceptional

calibre of personnel and best-in-class leisure brands position Famous

Brands for continued growth. Management’s challenge will be to

capitalise on each and every opportunity that arises – an undertaking

they are admirably equipped to achieve.

APPRECIATIONThe gratifying performance outlined in this report is testament to the

dedication of our exceptional executive management team and all the

staff of Famous Brands. Their commitment to the goals and aspirations

of our business is extraordinary and I would like to congratulate and

thank each of them.

We value the strong relationships we have with our franchise partners,

suppliers and financiers and thank them for their continued support

for the business.

I would like to extend my gratitude to our customers, who continue to

enjoy our brands – we are inspired by your loyalty in this testing

economic environment.

Our institutional and individual shareholders have rewarded us with

their ongoing conviction in our strategy and investment proposition

and we look forward to meeting your expectations in the year ahead.

Panagiotis Halamandaris

Non-executive Chairman

the service and quality offering to customers. Since inception

577 candidates have completed the five-day Fundamental

Restaurant Management course.

DIVIDENDS AND DIVIDEND POLICYIn respect of the new Dividends Tax, shareholders are advised that the

Group has negligible secondary tax on companies’ credits available.

Accordingly, the final dividend has been increased to ensure that

shareholders are in an improved cash position notwithstanding the

introduction of the Dividends Tax.

The final dividend of 120 cents per share together with the interim

dividend of 80 cents per share, equate to total dividends of 200 cents

per share (2011: 155 cents) declared for the year, an increase of 29%.

The dividend has been declared from income reserves. The dividend

cover has been reduced to 1.4 times, which is considered sustainable

given Famous Brands’ strong cash-generating ability. In considering

future dividend declarations, the board will be guided by the Group’s

cash requirements according to future cash flow forecasts.

DIRECTORATEShareholders are advised that Christopher Hardy Boulle was

appointed as an alternate non-executive director to Hymie Reuvin

Levin, with effect from December 2011. He will also serve as chairman

of the social and ethics committee and as a member of the audit

committee.

Chris is a commercial, corporate finance, tax and trust attorney and

his expertise includes cross border transactions, mergers and

acquisitions, BEE transactions and advising on stock exchange listings

both locally and internationally. He is one of two senior partners at

HR Levin Attorneys, as well as a non-executive director of four

JSE listed companies and a trustee of various trusts.

We would like to extend a warm welcome to Chris and look forward to

his contribution.

OUTLOOKThe bulk of consumers in payment arrears are middle-class earners,

the traditional target market for food services operators. To entice

them to resume previous levels of spending will demand intensified

innovation, particularly should interest rates increase and economic

uncertainty persist.

Electricity tariffs and fuel costs are anticipated to continue to escalate,

the former by at least 16% per annum in 2012 and 2013. Beef and

maize prices have stabilised, but at levels which will continue to

constrain consumer spend, and general food inflation is expected to

keep rising.


Chief Executive Officer’s report

Kevin HedderwickChief Executive Officer

R2 billion revenue milestone exceeded

Headline earnings per share up 15%

Operating margin maintained at record 19.1%

Net borrowings to equity improves to 10%

146 restaurants opened, surpassing landmark goal of 2 000

Traction gained in Africa with 33 new restaurants and 21% increase in system-wide sales

REVIEW OF THE GROUP’S PERFORMANCEIt is a full year since I assumed the position of Chief Executive

Officer of Famous Brands, and I am delighted to report on a

performance that saw us deliver against our stated strategies,

and continue to unlock value for the Group’s stakeholders.

At the centre of this solid performance is an unshakeable

business model underpinned by extraordinary people and

consistent processes.

Following a phase of frenetic acquisitive growth in the past two

years, we undertook to focus on consolidating and integrating

our new businesses, a programme which has been concluded

and is reflected in the improvements in revenue and profitability

of our Franchising and Supply Chain divisions.

Our ongoing efforts to drive innovations in product, trading format,

marketing and technology are demonstrated by the range of

achievements listed under the individual brands discussed in this

report.

Breaking through the 2 000 restaurant mark was a high point in the

year and a significant milestone for us. In an intensely competitive

marketplace, this achievement is evidence of the strength of our

brands and testament to the support we enjoy from our loyal

franchise partners and customers.

A total of 146 new restaurants were opened during the year

(2011: 111), 113 of them in South Africa and the balance of 33 in

Africa, north of our borders; the latter achievement is a reflection of

Famous Brands’ success in gaining traction in the region. In addition,

99 restaurants were revamped (2011: 81), 92 of them in South Africa

and the balance in Africa.

In light of the strong growth potential evident in the African market the

Group restructured its operations to facilitate a regional rather than

brand-specific focus. Accordingly, Country Managers were appointed

for the Group’s three key geographical areas, Central Africa and

Zambia, East Africa and West Africa. The Group currently trades in

15 African countries and will concentrate on expanding its presence in

those markets. The restructured operation augurs well to advance our

growth objectives.


I’m pleased to report that we also made good progress in building

manufacturing and logistics capacity on behalf of franchisees and

expanding the basket of products available to them via our supply chain.

RESULTSGroup revenue grew by 15% to R2.16 billion (2011: R1.88 billion),

matched by a 15% increase in operating profit to R413 million

(2011: R358 million). The operating margin was 19.1% in line with

the record high achieved in the prior comparative period.

Headline earnings per share increased 15% to 278 cents

(2011: 242 cents).

In addition to R31 million spent on acquiring the Milky Lane and Juicy

Lucy trademarks, capital expenditure of R57 million was incurred

(2011: R45 million), funded out of cash reserves. This expenditure was

employed in increasing plant, equipment and fleet capacity, upgrades

and routine maintenance to existing facilities, and further

enhancement of the Group’s business intelligence platform.

STAYING ON STRATEGY – THE FAMOUS BRANDS RECIPEAs the size of our business expands and evolves in an ever-changing

environment it is imperative that we remain true to our goals and

values and continue to deliver on our promise to all stakeholders.

In this regard we have articulated and encapsulated our core DNA in a

recipe that will keep us focused in achieving our audacious ambitions,

which include striving to be a JSE Top 100 company by market

capitalisation within five years.

Our primary orientation is to be an integrated franchise system with

great and enduring brands which compete in the food and beverage

sector in South Africa and Africa. Our goal is to be a lowest cost

producer ensuring that we remain consumer driven by being

affordable, available and accessible. Our franchisees are our number

one customer. Our culture is one of high performance.

THINKING OUT OF THE BOXThe Group’s brand stewardship model comprising independent teams

dedicated to individual brands which compete against each other

continues to be a cornerstone of the business. To complement this

model and to introduce a step-change in innovative thinking, the

Group has invested in a R5 million concept, the acronymically named

MAD lab (Marketing. Artistry. Design.), which will focus on building

marketing, product development and restaurant design capabilities.

COMMUNICATION IS KEYThe Group prides itself on its responsiveness to franchisees and

customers. In this regard, several initiatives have been introduced to

improve communication:

An electronic forum called ‘Talk to Kevin’ affords franchise partners

across the brands wherever they might trade, direct access to the

CEO. This vehicle is working well and provides an important means

to evaluate the health of the franchise network.

Further to this goal, the Group is commissioning a national

franchisee satisfaction survey conducted by an independent

external resource to provide a quantitative assessment of how

franchisees rate the Group as a franchisor.

A programme is under way to centralise and bring in-house

Famous Brands’ currently outsourced call centre. This new call

centre will be available to customers and franchise partners and

is designed to deliver a far more personalised service.

DIVISIONAL REPORTFRANCHISING – LOCALThis division delivered pleasing results given the prevailing subdued

trading conditions and the fact that growth amongst the Group’s

mainstream brands, which feature massive existing restaurant

networks, is off a high base. Revenue improved 14% to R440 million

(2011: R386 million) and operating profit increased 13% to R265 million

(2011: R235 million). The operating profit margin was 60.2% compared

with 60.9% in the prior year, slightly lower, effectively a function of

investing in newly acquired and developing brands in advance of

royalty collections.

System-wide sales (which include new restaurant openings) improved

8% in South Africa and 21% in Africa on a comparable year-on-year

basis. Like-on-like sales grew 5% and 7% respectively.

STEERSThe Group’s mother brand delivered another satisfactory

performance in a competitive landscape that is characterised by

aggressive price and promotional activities. A key highlight of the year

was the launch of Steers’ new ‘Uncut’ image which included a new

corporate identity. This was supported by the launch of product

innovations such as the extended King Steer range, a new range of

chicken burgers and the relaunch of the brand’s Hero roll range,

ice-cream and milkshake offerings.

WIMPY SAFittingly, the Group’s milestone 2 000th restaurant opened during the

year was a Wimpy, located in KwaZulu-Natal, the birthplace of the

first-ever Wimpy, opened in 1967 in Durban.

The roll-out of the new Wimpy design is gaining momentum, with the

completion of 26 revamps in South Africa in the review period. During

the year the brand also recorded its maiden entry into Mauritius, to

popular acclaim.

In the local market the breakfast category witnessed aggressive

competition and a proliferation of non-traditional operators seeking to

expand their appeal to consumers. Wimpy’s recent adjustments to

product innovations, pricing strategies and promotional tactics have

proved rewarding and the brand stands to increase its share of this

market as the breakfast category continues to grow.

Chief Executive Officer’s report continued


MILKY LANEThis brand was successfully integrated into the Group’s franchising

and supply chain structures, delivering significant synergies and

efficiency gains. Implementation of a new strategic direction including

a new corporate identity and store design commenced during the year

and management is confident that Milky Lane stands to regain its

former lustre in a market that is showing good growth.

GIRAMUNDOManagement has elected to employ a conservative policy in rolling out

this brand in its start-up phase. Nine restaurants were opened during

the period, each reporting encouraging results. Most significant is the

extremely high degree of acceptance which the flame grilled chicken

product enjoys among consumers, delivering beyond expectation.

VOVO TELOThe Group’s joint venture artisan bakery offering reported a pleasing

performance, exceeding sales forecasts and growing its footprint from

three to eight franchised bakeries during the period. The brand plans

to open a further 15 bakeries in the forthcoming year and extend its

presence from Gauteng and the Eastern Cape to the Western Cape

and KwaZulu-Natal.

tashas This signature boutique café brand continued to build on its highly

successful track record. Two new restaurants were opened during the

period, with a further two launched in the first quarter of the new

financial year, including the brand’s flagship tashas le parc restaurant

in Hyde Park, and tashas Nicolway in Bryanston.

CREATIVE COFFEESCreative Coffees is Famous Brands’ fourth joint venture partnership.

Established in 2011, this business houses four brands, namely Juicy

Lucy, Coffee Couture, Kairuz Café and House of Coffees, and is

designed to extend the Group’s presence into captive markets that it

has previously not participated in, such as the private healthcare

sector. Significant progress was made in bedding down the operations

and strategy in the reporting period.

The relaunch of Juicy Lucy as a high street offering is imminent and

management is optimistic that this re-energised brand will challenge the

norms of the traditional health food quick service restaurant market.

BLACKSTEER HOME OF SHISANYAMADuring the year the Group introduced its Blacksteer Home of

Shisanyama concept, its first foray into the mass-based entry-level

market, with an offering designed to capture the appetites of LSM 3 to

6 consumers. The pilot restaurant, situated in Jules Street in Malvern,

was followed by a second restaurant in Musina, Limpopo province.

DEBONAIRS PIZZAWith a record 48 new restaurants opened across South Africa and

Africa, Debonairs Pizza is at the forefront of driving per capita

consumption in this category. This vigorous growth in demand for

pizza, particularly amongst black consumers, is demonstrated by the

following statistic: at the end of February 2012 Debonairs Pizza’s

turnover in Africa represented 40.5% of the Group’s total brand

revenue in Africa – double the size of the Steers brand which has

been trading in the region for far longer.

At the forefront of this brand’s phenomenal growth has been an

underlying first-to-market mindset.

Cutting edge innovations and technology, consistent promotional

messaging, trading format flexibility and an everyday value-for-money

offering ensured this brand continued to gain momentum against both

its direct and indirect competitive set.

MUGG & BEANThis brand enjoyed several highlights during the year including

opening 17 restaurants – an all-time high – and its first-time entry into

the promising Mauritian and Zambian markets.

Mugg & Bean’s ‘On the Move’ model continued to gain traction, with

10 new restaurants opened on Total service station forecourts this

year. Mugg & Bean ‘Metro’, the brand’s ‘compact’ footprint model, was

launched in the Newcastle Mall in KwaZulu-Natal and achieves the

goal of penetrating markets previously inaccessible due to the brand’s

historical ‘large-scale’ format.

FISHAWAYSThe take-out seafood category pioneered by FishAways 14 years

ago has experienced a tremendous surge in new operators, which

has served to grow the overall category. In this environment,

FishAways’ offering flourished and the brand achieved record sales

growth of 15.3%.

RESTAURANT AND PUB DIVISIONThis division, comprising the KEG, The Brewers Guild, O’Hagan’s and

McGinty’s brands, experienced a particularly tough trading year.

In response to general economic pressure and increased calls for

responsible drinking there has been a shift from in-restaurant to

at-home alcohol consumption. Furthermore the Group’s plans to

relaunch the new-look KEG brand were delayed by the moratorium on

new liquor licences in Gauteng – a situation which remains unresolved.

The Brewers Guild concept has experienced slower than anticipated

growth in this testing environment, but management remains

optimistic that the offering will gain momentum given the undertaking

from numerous existing O’Hagan’s and McGinty’s franchisees to

convert to this model during the forthcoming year, including the very

high profile McGinty’s site at OR Tambo International Airport.


Chief Executive Officer’s report continued

The following projects were concluded during the period:

Full commissioning of a chicken fillet plant which commenced

supplying product to the franchise network with effect from

November 2011.

Take-on of the soft serve component for Milky Lane and business

of the Western Cape region which was previously outsourced.

Capital expenditure of R29 million was invested primarily in

commissioning the R18 million chicken fillet plant and a sugar tube

filling machine. A further R11 million has been budgeted for the

commissioning of a sausage plant and additional freezer capacity

at the ice-cream plant in the forthcoming year.

LOGISTICSThe Logistics division reported a 20% increase in revenue to

R1.52 billion (2011: R1.26 billion). Operating profit rose 37% to

R53 million (2011: R38 million), producing a record operating margin

of 3.5% (2011: 3.1%), achieved despite the business contending with

a 16% increase in fuel prices. This stellar result was derived from

attaining critical mass in line items handled, which increased by 43%

during the period, and productivity improvements in the Owner-Driver

programme. In this regard the take-on of the Milky Lane basket

nationally and additional business in KwaZulu-Natal and the Free State

which was previously outsourced, was particularly significant. The

Owner-Driver programme continues to thrive, with the Owner-Drivers’

share of total volume delivered ranging between 40% and 49% in the

KwaZulu-Natal and Western Cape regions.

Capital expenditure of R11 million was employed during the period,

including the commissioning early in the new financial year of a new

depot in Nelspruit which will service 111 franchised partners in that

market, delivering a full basket of dry and refrigerated products, a

business which was previously outsourced.

Securing bigger, better equipped premises in Bloemfontein and Port

Elizabeth will be a priority in the forthcoming period.

PROSPECTSOur unwavering goal is to build an organisation that exceeds the

expectations of all our stakeholders. This ambition can only be

achieved by continuing to sweat every component of the front and

back ends of the business.

In the period ahead we will centralise our procurement function aimed

at enabling Famous Brands to become an even lower cost producer;

we will be investing further in the goal to shift the business to a fully

integrated end-to-end business solution system by 2015; we will be

growing our presence in market segments where we currently have

no representation, including identifying new joint venture partnerships;

and we will continue to explore opportunities to leverage the

synergies afforded by our supply chain.

The positive response from consumers and potential franchisees is

encouraging and the roll-out of the brand will commence in the

forthcoming period.

NEW BUSINESS AND DEVELOPMENT DIVISIONThis division has once again reported an admirable performance

ensuring that our brands continue to find representation across all

corners of the African market. Not only did the unit open a total

of 146 new restaurants but through the revamp of 99 existing

restaurants, it continues to play a key role in ensuring that our brands

remain relevant and contemporary in the eyes of the consumer.

The contribution of this division to the evolution of the trading formats

of Steers ‘Uncut’, Milky Lane, Blacksteer Home of Shisanyama, The

Brewers Guild and Debonairs Pizza Drive Thru has been invaluable.

FRANCHISING – INTERNATIONALSevere economic conditions and pessimistic consumer sentiment

continued to restrain growth in the food services sector in the United

Kingdom.

In this environment, Wimpy UK, which contributes 3.8% to Group

turnover, reported a decrease in revenue Sterling of 19%, and in

Rand terms by 13% to R82 million (2011: R95 million).

Operating profit declined 30% to R8 million (2011: R11 million).

The operating profit margin was 9.2% (2011: 11.3%). This division’s

contribution to Group operating profit is nominal, in the order of 1.8%.

During the year one revamp was undertaken and another one is

currently under way. Encouragingly, there has been increased interest

from new and existing franchisees and a further four restaurants will

be opened in the 2013 fiscal year.

SUPPLY CHAINThe Group’s Manufacturing and Logistics divisions are contained in

the Supply Chain business unit; these divisions are managed and

measured separately.

Combined revenue grew to R1.61 billion (2011: R1.38 billion), an

increase of 17%. Operating profit improved 21% to R141 million

(2011: R116 million) whilst the margin rose to 8.7% from 8.4%.

MANUFACTURINGThe Manufacturing division increased revenue by 13% to R747 million

(2011: R664 million). Operating profit rose 13% to R88 million (2011:

R78 million), resulting in a margin of 11.7% (2011: 11.7%)

notwithstanding a deliberate margin absorption strategy in the meat

processing plants, which experienced a 30% average increase in bulk

beef prices. The effect of this strategy in the first half of the year was

successfully reversed by astute investment in red meat stocks and

pricing adjustments in the second half of the year.


We are tremendously inspired and energised by the opportunities

which lie ahead.

APPRECIATIONI would like to pay tribute to the members of the executive

management team for their exceptional efforts this year. Each division

in the business has delivered an improved performance in very

difficult trading conditions, a remarkable achievement which deserves

acknowledgement. To all of our staff who comprise the Famous

Brands team – a heartfelt thank you for your valuable contribution.

Our franchisees have played a vital role in helping to grow the

business this year. We appreciate your commitment to our partnership

and look forward to enhancing this relationship.

Our petroleum partners are invaluable to our growth strategy and I’d

like to extend our appreciation to them. I would also like to thank our

suppliers for their consistently high service delivery ethic.

The enduring relationships built up over the years with property

developers and landlords continue to assist in fuelling our expansion

and achieving our goal to be ‘within arm’s reach of desire’.

I value the support and counsel received from my fellow board

members and founding shareholders over the year. As we take this

business to the next level, I am confident that Famous Brands will

continue to satisfy the expectations of all our stakeholders.

Kevin A Hedderwick

Chief Executive Officer

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Six year review

Closing earnings yield: Headline earnings per share as a percentage of market value per share at year end.Closing price to earnings ratio: Market value per share divided by headline earnings per share at year end.Dividend cover: Headline earnings per share divided by dividends per share declared out of earnings for the year.EBITDA: Earnings before interest, taxation, depreciation, amortisation and impairment losses.Headline earnings: Net profit for the year adjusted for profit/loss on sale of property, plant and equipment, investments and impairment losses.Headline earnings per share: Headline earnings divided by the weighted average number of ordinary shares in issue during the year.

Basic earnings per share: Net profit for the year divided by the weighted average number of ordinary shares in issue during the year.Cash generated by operations: Comprises cash receipts from customers less cash paid to suppliers and employees as reflected in the cash flow statement. Cash realisation rate: This ratio is calculated by expressing cash generated by operations as a percentage of EBITDA and reflects the proportion of cash operating profit realised after working capital movements.Closing dividend yield: Dividends per share as a percentage of market value per share at year end.

Growth %* 2012 2011 2010 2009 2008 2007

STATEMENT OF COMPREHENSIVE INCOME AND CASH FLOWSRevenue 19.8 R000 2 155 615 1 878 036 1 684 840 1 549 244 1 190 301 872 151Operating profit before impairment losses 22.3 R000 412 656 358 453 307 947 261 916 217 383 150 659Operating profit margin % 19.1 19.1 18.3 16.9 18.3 17.3Profit after taxation R000 268 054 230 999 191 640 147 902 131 081 87 114Cash generated by operations R000 398 710 396 929 351 961 277 184 198 997 172 054EBITDA R000 441 692 384 486 331 572 281 806 233 838 163 549Cash realisation rate % 90.3 103.2 106.1 98.4 85.1 105.2 Headline earnings 21.8 R000 267 438 230 502 194 307 150 283 135 189 99 686

STATEMENT OF FINANCIAL POSITIONTotal assets R000 1 221 169 1 139 312 1 070 829 1 052 208 856 133 673 375Total equity 22.6 R000 840 370 708 594 583 926 492 291 408 311 303 480Net assets R000 985 227 871 200 815 363 796 089 603 661 358 864Net debt R000 81 572 101 389 160 665 225 286 123 846 21 337

PROFITABILITY AND ASSET MANAGEMENTReturn on total assets % 35.0 32.4 29.0 27.4 28.4 25.1Return on net assets % 44.5 42.5 38.2 37.4 45.2 42.0Return on equity % 34.5 35.7 36.1 33.4 38.0 36.1Net asset turn times 2.3 2.2 2.1 2.2 2.5 2.4Interest cover times 38.7 24.0 14.9 5.9 11.4 24.0Net debt/equity % 9.7 14.3 27.5 45.8 30.3 7.0

SHAREHOLDERS’ RATIOSBasic earnings per share cents 277.6 241.8 202.5 159.3 136.7 99.5Headline earnings per share cents 278.3 242.0 205.6 159.2 143.6 113.8Dividends per share 33.0 cents 200 155 114 76 66 48Dividend cover times 1.4 1.6 1.8 2.1 2.2 2.4Net tangible asset value per share cents 151 51 (31) (71) 1 98Net asset value per share cents 874 740 615 521 432 346

STOCK EXCHANGE STATISTICSMarket value per share– at year end cents 4 405 3 850 2 560 1 475 1 624 1 590– highest cents 4 650 4 525 2 560 1 800 2 050 1 660– lowest cents 3 510 2 456 1 325 1 200 1 500 980Closing dividend yield % 4.5 4.0 4.5 5.2 4.1 3.0Closing earnings yield % 6.3 6.3 8.0 10.8 8.8 7.2Closing price to earnings ratio times 15.8 15.9 12.5 9.3 11.3 14.0Number of shares issued 96 192 435 95 817 596 94 894 596 94 448 096 94 448 096 87 595 244Market capitalisation 24.9 Rm 4 237 3 689 2 429 1 393 1 534 1 393

*Five-year compound growth % pa.

2012

Definitions


Value added statement

For the year ended 29 February 2012

Operating profit: Profit before impairment losses, interest and taxation.Operating profit margin: Operating profit as a percentage of revenue. (Measures the return on revenue of the operating activities of the Group.)Return on equity: Headline earnings as a percentage of average shareholders’ interest. (Measures the return earned on the capital provided by the shareholders.)Return on net assets: Operating profit as a percentage of average net assets. (Measures the effectiveness with which net assets were utilised.)Return on total assets: Operating profit as a percentage of average total assets. (Measures the effectiveness with which the total assets were utilised.)

Interest cover: Operating profit divided by net interest paid. (Measures the capability to service borrowing obligations from current profit.)Net assets: Total assets other than cash, bank balances and deferred tax assets less interest-free trading liabilities.Net asset turn: Revenue divided by average net assets.Net asset value per share: Ordinary shareholders’ equity divided by number of shares in issue.Net debt: Total interest-bearing borrowings less cash. It is calculated by adding current and non-current interest-bearing borrowings and bank overdrafts and deducting positive cash balances.Net tangible asset value per share: Ordinary shareholders’ equity less intangible assets divided by the number of shares in issue.

DefinitionsDefinitions continued

2012 R000 %

2011R000 %

WEALTH CREATEDTurnover 2 155 615 1 878 036 Cost of materials and services (1 444 728) (1 252 641)Other income 8 053 16 002

718 940 100 641 397 100

WEALTH DISTRIBUTEDEmployeesSalaries, wages and related benefits 269 194 37 240 908 38

Providers of capitalDividends to shareholders 159 150 127 971 Interest paid on borrowings and finance charges 18 705 30 936

177 855 25 158 907 25

GovernmentCompany tax 117 961 99 675 Tax on dividends 15 989 12 845

133 950 19 112 520 17

WEALTH RETAINED FOR REPLACEMENT OF ASSETS AND FUTURE GROWTHAmortisation of intangibles, depreciation of property, plant and equipment 29 036 26 033 Retained income 108 905 103 029

137 941 19 129 062 20 718 940 100 641 397 100

The value added statement shows the wealth that the Group has created through its activities and how this wealth has been distributed to stakeholders. The statement reflects the amounts retained and re-invested in the Group for the replacement of assets and the development of future operations.

2012 R000 %

Wealth distributed and retained2012 2011

37%

25%

19%

19%

38%

25%

17%

20%

Employees

Providers of capital

Government

Retained for future growth


Corporate governance and sustainability report

monitor operational performance and management;

endeavour to ensure that information technology (IT) governance is

appropriate for the size and complexity of the business;

endeavour to ensure that the Group complies with sound codes of

business behaviour;

endeavour to ensure that appropriate control systems are in place

for the proper management of risk, financial control and

compliance with all laws and regulations;

appoint the Chief Executive Officer (CEO) and ensure that

succession planning for executive management is in place;

regularly identify and monitor key risk areas;

oversee the company’s disclosure and communication process;

and

ensure that enlightened practices are in place to attract talent and

provide meaningful employment in a transforming society.

The board met three times during the past financial year. Details of the

directors in office during the year and their attendance at board and

committee meetings are provided on page 25.

There are no service contracts with non-executive directors. Executive

directors’ service agreements may be terminated with one to three

months’ notice. In terms of the articles of association one-third of the

board has to retire on a rotational basis each year at the company’s

annual general meeting. The retiring directors are those who have

served the longest in office. The retiring directors may offer

themselves for re-election. The appointment of new directors is

subject to confirmation by shareholders at the first annual general

meeting after their appointment. Biographical details of all directors

are set out on pages 8 and 9 of the integrated annual report.

The daily management and administration of the Group’s affairs are

the responsibility of the Executive Deputy Chairman and the CEO.

In addition to the board charter, they are guided by an approvals

framework setting out the respective responsibilities of the board

and executive management.

All directors have access to the advice and services of the Company

Secretary. In appropriate circumstances, they may seek independent

professional advice about the affairs of the company at the company’s

expense. The director concerned would initially discuss and clear the

matter with the Chairman or the Company Secretary unless this would

be inappropriate.

An orientation and induction programme for directors is in place.

Directors have unrestricted access to company information and

records. Procedures are in place to address situations where directors

may have a conflict of interest. A register of directors’ declarations of

interests is retained.

Company SecretaryMr JG Pyle (CA)SA held office as Company Secretary throughout the

year. The board considers him to be suitably competent and qualified

to fulfil the role. His biographical details and curriculum vitae (CV) are

set out on page 11 of this integrated annual report.

CORPORATE GOVERNANCEThe board of directors of Famous Brands is fully committed to

business integrity, fairness, transparency and accountability in all its

activities. In support of this commitment, the board subscribes to

sound corporate governance in all aspects of the business and to

the ongoing development and implementation of best practices. In

addition, a code of ethics, which seeks to raise the ethical awareness

of conducting business, is in place. In preparation of the annual

financial statements, the company complies with the Listings

Requirements of the JSE Limited (JSE). Famous Brands generally

embraces the principles incorporated in the Code of Corporate

Practices and Conduct outlined in the third King report (King III) and

our conduct is usually based on those principles. The board,

comprising mainly founding shareholders and long-serving directors,

does not meet the independence criteria of King III. We believe the

individual members apply their minds independently, comply with the

Companies Act, No. 71 of 2008 and act in the interests of all

shareholders motivated also by their personal shareholdings in the

company. Their leadership, wise counsel and in-depth knowledge

are all attributes that add value to the deliberations of the board. Our

integrated annual report deals with most of the requirements of an

integrated report as required by King III but there is limited detailed

reporting on our impact on the environment. This is because the

board believes that our activities do not severely impact the

environment nor threaten the sustainability of either the company’s

existing operations or the environment which future generations

will inherit. This corporate governance and sustainability report is

presented to illustrate to shareholders how the company:

applies the principles of good corporate governance;

manages risk;

considers its ongoing sustainability; and

invests in the well-being of its people and society.

The boardDuring the year under review the board of Famous Brands consisted

of six non-executive (including one alternate) and three executive

directors. The board is chaired by a non-executive chairman,

Mr Panagiotis Halamandaris, a founding shareholder. In the only

change to the membership of the board, on 1 December 2011,

Mr Christopher (Chris) Boulle, a legal partner in HR Levin Attorneys,

was invited to serve on the board as an alternate to Mr Hymie Levin

who anticipates that other time pressures may prevent him from full

attendance at board meetings. With his legal, financial and commercial

background, Chris has been asked to chair the recently established

social and ethics committee as well as serve on the audit committee.

The primary functions of the board, which is governed by a charter,

are to:

review and approve corporate strategy;

determine the Group’s purpose and values;

retain full and effective control of the Group;

approve and oversee major capital expenditures, acquisitions and

disposals;

review and approve annual budgets and business plans;


enable the Group to remain an employer of choice; and

ensure a blend of skills that consistently achieves predetermined

business objectives and targets.

Emolument recommendations include the granting of options in

terms of the Group’s share incentive scheme and performance-

based incentives. The committee is also responsible for making

recommendations to the board on all fees payable by the company

to non-executive directors for membership of both the board and

sub-committees.

The committee plays an integral part in succession planning,

particularly in respect of the CEO and executive management.

Attendance at board and committee meetings during the year ended 29 February 2012

BoardAudit

committeeRemuneration

committee

Number of meetings 3 3 3

Board member

SJ Aldridge 3 3* n/a

CH Boulle 1 1 1

P Halamandaris 3 3* n/a

P Halamandaris (Jnr) 2 2 2

T Halamandaris 2 n/a 2*

JL Halamandres 3 3 3

KA Hedderwick 3 3* 3*

HR Levin 2 2 2

BL Sibiya 3 n/a 1

*By invitation.

Mr CH Boulle was appointed an alternate non-executive director to

Mr HR Levin with effect from 1 December 2011 and attended the only

board meeting held since that date.

Risk management and internal controlsThe board, which is accountable for the total process of risk

management and internal control, delegates responsibility for such

activities to responsible executives. Importantly, risk management

remains an integral part of the executive management’s function and

includes management of both operational and business risks.

The internal control environment is constantly under review and

subject to continual and ongoing improvements. A key cornerstone

of internal control is monthly individual business unit financial reviews.

This forum examines results against budget and the prior year

rigorously and reviews assets for impairment.

The internal audit department has responsibility to review high risk

areas. Although the head of internal audit reports directly to the Group

Financial Director, the committee is satisfied that the Group Financial

Board sub-committeesTo enable the board to discharge its onerous responsibilities and duties,

certain responsibilities of the board have been delegated to board

committees. The following committees have been constituted:

audit committee;

remuneration committee; and

social and ethics committee.

These committees’ activities are governed by charters approved by the

board. The social and ethics committee was established on 28 February

2012 and met for the first time on 18 May 2012. All committees are

chaired by non-executive directors and are directly responsible to

the board.

Audit committeeThe audit committee consists of three non-executive directors and meets

at least twice a year. Meetings are attended by the CEO, Group Financial

Director as well as internal and external auditors. The committee is

entirely satisfied with the competence and expertise of the Group

Financial Director and has reported as such to the board who endorses

that recommendation. The committee operates in terms of its charter and

reviews audit, accounting and financial reporting issues. In addition, the

committee provides support to the board on good corporate governance

and on the risk profile and risk management in the Group. Both internal

and external auditors have unlimited access to the chairman of the audit

committee. The role of the committee is, inter alia:

to review the effectiveness of the Group’s systems of internal control,

including financial control and business risk management, and to

endeavour to ensure that effective internal control systems are

maintained;

to satisfy itself of the expertise, resources and experience of the

company’s finance function;

to monitor and supervise the effective functioning and performance of

the internal auditors;

to ensure that the scope of the internal audit function has no

limitations imposed by management and that there is no impairment

of its independence;

to evaluate the independence, effectiveness and performance of the

external auditors and obtain assurance from the auditors that

adequate accounting records are being maintained;

to appoint the external auditors on an annual basis;

to ensure that the respective roles and functions of external audit and

internal audit are sufficiently clarified and co-ordinated; and

to review financial statements for proper and complete disclosure of

timely, reliable and consistent information, and to confirm that the

accounting policies used are appropriate.

Remuneration committeeThe charter of this committee provides for at least three members

of which the majority must be non-executive. The chairman is a

non-executive director. The committee meets at least twice a year.

The key mandate of the committee is to compile emolument

proposals in accordance with the Group’s remuneration strategy.

This is designed and tailored to:

continue to attract, retain and motivate executives of the highest

calibre;


Corporate governance and sustainability report continued

assessed through a scorecard measurement process against clearly

defined accountabilities or goals set out at the commencement of the

year. Potential is identified through ranking employees and managers

on a ‘People Balance Sheet’ and managing training and development

opportunities arising from that intervention. Remuneration

recommendations including discretionary performance-based

bonuses are linked to the assessment process. Key to the

sustainability and future of the company’s business is managing the

succession pipeline, in particular, of senior and executive employees.

The current target is to ensure a 1:1 succession cover ratio of the

leadership level, meaning that each leader has a potential successor

that can fill the position in a short time span.

Internal recruitment and promotion is a natural part of the

company’s growth culture where employees are positioned to align

their capabilities with the Group’s business plan. Where additional

skills are needed they are recruited externally in an efficient, rigorous

and cost effective process. The challenge is to balance promotional

opportunities for developing employees with the attraction of talent

from the external market.

Employee satisfaction and moraleAnnual morale measurements continue to act as an indicator of

overall organisational health. Famous Brands’ climate survey scores

translate into business unit action plans and the company’s

effectiveness is monitored by successfully utilising this tool as the

‘people barometer’ of the business.

Group health and wellnessFamous Brands partners with an outsourced third party, Occupational

Care South Africa to address the wellness needs of our employees.

Assistance takes the form of onsite primary and occupational care

in addition to external referrals for professional and medical support.

This service includes the management of life threatening diseases

where Famous Brands is committed to providing education and, in

certain instances, medication to improve the quality of life of affected

employees.

Employment equity and skills development forumReporting to the social and ethics committee is a nominated skills

and equity committee representative who is responsible for

monitoring targets and progress against the Group’s committed plans.

A registered Skills Development Facilitator is tasked with the

submission of plans and reports to the Department of Labour and

Culture, Arts, Tourism, Hospitality, Sport and Education Training

Authority (CATHSETA) on an annual basis.

Remuneration, benefits and performance bonusesFamous Brands remains committed to equitable and competitive

pay practices when compared to the national market. Regular

benchmarking with credible institutions confirms this.

Benefits include retirement funding, medical aid (optional as requested

by employees) and the ability for all administrative level employees to

Director respects the independence of the function. The incumbent

has direct access to the audit committee chairman.

A formal process of business risk assessment is conducted at least

annually. Key risks are highlighted and together with further control

actions, are reported to the board. Major risks identified are as follows:

Fluctuations in commodity food and fuel prices – whilst these can

be hedged on a short-term basis, in the long term, sustained price

increases may damage individual franchisee profitability, thus

jeopardising future income.

Lack of economic growth in the markets we operate in, leading

to potential job losses and the resulting impact on consumers’

discretionary spend. This could lead to below budget sales, an

increase in the number of underperforming franchised restaurants,

possible closures and increased bad debts, all of which could affect

future income.

A disruption in business activity, particularly IT, arising from disaster.

Heightened industrial relations activity leading to disruption in

Supply Chain service to the franchise network.

A threat to current business practices through legislation or

regulation.

Loss of key personnel.

Our highly sought after brands are supported through ongoing

marketing investment and backed by a successful and integrated

business model. These factors, combined with excellent management,

detailed control and strong cash generation are key factors in

mitigating the abovementioned risks.

SUSTAINABILITY REPORTHUMAN CAPITALThe company’s integrated people management practices are critical to

support the goal of ‘Doubling the size of the business by 2013’.

Key areas of focus are:

Empowerment and talent management

Employee satisfaction and morale

Group health and wellness

Employment equity and skills development forum

Industrial relations

Remuneration, benefits and performance bonuses

Legislative compliance

Empowerment and talent managementHuman capital is considered a core corporate asset at Famous Brands,

with the calibre of our people considered a key ingredient to the

Group’s success. This means hiring the best and helping them fulfil

their potential thus building management capability. Key competitive

advantage will arise from a team of motivated, well-trained employees

passionate about what they do.

Talent management (performance and potential) is measured through

the company’s bi-annual human capital reviews. Performance is


Going concernBased on positive forward financial projections, the directors are

confident that the Group operates a highly sustainable business model

which will continue as a going concern in the years ahead. The annual

financial statements set out in this integrated annual report have been

prepared in accordance with International Financial Reporting

Standards and they are based on appropriate accounting policies that

have been consistently applied.

EthicsThe company’s code of ethics requires all directors and employees

to act with honesty and integrity and to maintain the highest ethical

standards. The code deals with compliance with laws and regulations,

conflicts of interest, relationships with customers and suppliers,

remuneration, outside employment and confidentiality.

Directors’ shareholdingThe direct and indirect holdings, and share options of the directors

of Famous Brands Limited at 29 February 2012 are set out in notes

25 and 27 respectively.

Non-executive directors do not participate in the share incentive scheme.

Personal share dealingsThe board complies with requirements of the JSE in relation to

restrictions on the trading of Famous Brands shares by directors and

employees during defined closed periods. Closed periods extend

from 31 August and 28 or 29 February, being the commencement of

interim and year end reporting dates, until 24 hours after the date of

announcement of the results. Closed periods also include any other

period during which the company is trading under cautionary

announcement. The Company Secretary notifies all directors and

employees prior to the commencement of the closed trading periods

of the prohibitions contained in the Insider Trading Act relating to

share dealings whilst in possession of price-sensitive information.

Details of directors’ share dealings are disclosed to the listings division

of the JSE and communicated through the securities exchange news

service, SENS. These dealings are disclosed at board meetings. There is

a process in place in terms of the requirements of the JSE for directors

to obtain prior clearance before dealing in the company’s shares.

Stakeholder communicationThe board ensures that material matters of interest and concern to

shareholders and other stakeholders are addressed transparently in

the company’s public disclosure and communication. The CEO and

Group Financial Director meet with shareholders and analysts as well

as with the financial press in order to ensure accurate reporting of

company matters. All pertinent company announcements are placed

on the company’s website.

earn an annual discretionary performance bonus, over and above

their guaranteed cost to company package.

Bargaining unit employees enjoy a basic plus benefit remuneration

scheme where Famous Brands contributes to their provident fund.

Legislative complianceThe Group continues to comply with legislation governing the

employment relationship in line with the requirements of the

Department of Labour and CATHSETA. These include the Labour

Relations Act (LRA), Employment Equity Act (EEA) and the Skills

Development Act (SDA).

OTHEREmployee safetyAll necessary precautions and measures are taken to ensure the

safety of employees and the number of incidents involving injury

during the year was negligible. All properties adhere to strict

guidelines in terms of monitoring and implementing health and safety

requirements. This is done through health and safety committees as

well as appointed responsible people in terms of the Occupational

Health and Safety Act. Health and safety training in respect of fire

prevention and fire fighting as well as basic first aid is mandatory

for all staff.

Broad-based black economic empowerment (BBBEE)Famous Brands continues to strive for compliance with respect to

BBBEE, and to this end, has partnered with Empowerlogic to guide

and advise on progress.

Food safety and qualityFamous Brands is committed to achieve high product safety and

quality standards in all its manufacturing business units. An internal

Total Quality Management (TQM) system is deployed and through

continuous improvement enhances good practice and lifts standards.

The Group invests capital in maintenance, technology, and

cost efficiency projects to ensure that its facilities meet world class

standards in manufacturing efficiency, food safety, quality control and

quality assurance. A Supplier Quality Assurance (SQA) programme

exists to measure, control and manage food safety and quality of

products manufactured by suppliers. Independent audits are

conducted at suppliers’ facilities and quality control testing is

performed to ensure compliance.

Consumer regulatory complianceFamous Brands is a member of the Consumer Goods Council of

South Africa (CGCSA). We comply with all key legislation and

regulations relating to consumers and are compliant with the new

Labelling and Advertising of Foodstuff Regulation (R146 of 2010) which

came into effect on 1 April 2011. The main requirements that affect

Famous Brands relate to product labelling, product liability and

product safety, and customer complaints handling.

image to come


Annual financial statements

CONTENTSReport by the audit committee 31

Declaration by the Company Secretary 31

Directors’ responsibilities and approval 32

Report of the independent auditors 33

Report of the directors 34

Statements of comprehensive income 36

Statements of financial position 37

Statements of changes in equity 38

Statements of cash flows 39

Notes to the annual financial statements 40

Annexure A: Schedule of investments in subsidiaries 78

Shareholder analysis 79

EXCHANGE RATES

The following significant exchange rates were applied in the preparation of the Group results:2012 2011

Rand to GB Pound – average 11.83 11.22

– closing 11.96 11.40

Rand to Euro – average 10.23 9.56

– closing 10.14 9.65

Rand to US Dollar – average 7.39 7.26

– closing 7.55 7.07

Euro to GB Pound – average 1.16 1.17

– closing 1.18 1.18

2012

The reports and statements set out below were prepared under the supervision of Mr SJ Aldridge CA(SA), Group Financial

Director, and comprise the annual financial statements presented to the members.

LEVEL OF ASSURANCE

These annual financial statements have been audited in compliance with the applicable requirements of the Companies

Act No. 71 of 2008.



In terms of section 94 of the Company’s Act, No. 71 of 2008, the

report by the audit committee, which is chaired by Mr HR Levin, is

presented below. During the financial year ended, in addition to

the duties set out in the audit committee’s charter, (a summary is

provided on page 25 of this report), the audit committee carried

out its functions, inter alia, as follows:

nominated the appointment of RSM Betty & Dickson

(Johannesburg) as the registered independent auditor after

satisfying itself through enquiry that RSM Betty & Dickson

(Johannesburg) is independent as defined in terms of the

Companies Act, No. 71 of 2008;

determined the fees to be paid to RSM Betty & Dickson

(Johannesburg) and its terms of engagement;

ensured that the appointment of RSM Betty & Dickson

(Johannesburg) complied with the legislation relating to the

appointment of auditors; and

approved a non-audit services policy which determines the

nature and extent of any non-audit services which RSM

Betty & Dickson (Johannesburg) may provide to the Group.

RSM Betty & Dickson (Johannesburg) provides non-audit services

to the Group and the audit committee has pre-approved the

contract for tax administration services by the auditors.

The audit committee has satisfied itself through enquiry that

RSM Betty & Dickson (Johannesburg) and Ms J Kitching, the

designated auditor, are independent of the Group.

The audit committee is entirely satisfied with the competence and

expertise of the Group Financial Director.

The audit committee recommended the financial statements for

the year ended 29 February 2012 for approval to the board. The

board has subsequently approved the financial statements which

will be open for discussion at the forthcoming annual general

meeting.

HR LevinAudit committee chairman

Report by the audit committee

Declaration by the Company Secretary

I certify that Famous Brands Limited has lodged with the Companies and Intellectual Property Commission (CIPC) and previously with

the Companies and Intellectual Property Registration Office (CIPRO) all such returns as are required of a public company in terms of the

Companies Act, No. 71 of 2008, as amended, and that all such returns are to the best of my knowledge and belief true, correct and up

to date.

JG PyleCompany Secretary18 May 2012



Directors’ responsibilities and approval

The directors are required by the South African Companies Act,

No. 71 of 2008, to maintain adequate accounting records and are

responsible for the content and integrity of the annual financial

statements and related financial information included in this

report. It is their responsibility to ensure that the annual financial

statements present fairly the state of affairs of the Group as at the

end of the financial year and the results of its operations and cash

flows for the year then ended, in conformity with International

Financial Reporting Standards (IFRS), the AC 500 standards as

issued by the Accounting Practices Board and its successor, the

South African Companies Act, No. 71 of 2008 and the Listings

Requirements of the JSE Limited. The external auditors are

engaged to express an independent opinion on the annual

financial statements.

The annual financial statements are prepared in accordance

with IFRS and are based upon appropriate accounting policies

consistently applied and supported by reasonable and prudent

judgements and estimates.

The directors acknowledge that they are ultimately responsible

for the system of internal financial control established by the

company and place considerable importance on maintaining a

strong control environment. To enable the directors to meet these

responsibilities, the board of directors sets standards for internal

control aimed at reducing the risk of error or loss in a cost-

effective manner. The standards include the proper delegation of

responsibilities within a clearly defined framework, effective

accounting procedures and adequate segregation of duties to

ensure an acceptable level of risk. These controls are monitored

throughout the Group and all employees are required to maintain

the highest ethical standards in ensuring the Group’s business is

conducted in a manner that, in all reasonable circumstances, is

above reproach. The focus of risk management in the Group is on

identifying, assessing, managing and monitoring all known forms

of risk across the Group. While operating risk cannot be fully

eliminated, the Group endeavours to minimise it by ensuring that

appropriate infrastructure, controls, systems and ethical behaviour

are applied and managed within predetermined procedures

and constraints.

The audit committee, together with the internal auditors,

perform an oversight role in matters related to financial and

internal controls.

The directors are of the opinion, based on the information and

explanations given by management, that the system of internal

control provides reasonable assurance that the financial records

may be relied on for the preparation of the annual financial

statements. However, any system of internal financial control can

provide only reasonable, and not absolute, assurance against

material misstatement or loss.

The directors have reviewed the Group’s cash flow forecast for the

subsequent year and, in light of this review and the current

financial position, they are satisfied that the Group has access to

adequate resources to continue in operational existence for the

foreseeable future. The annual financial statements set out on

pages 34 to 79, which have been prepared on the going concern

basis, were approved by the board of directors on 18 May 2012

and are signed on its behalf by:

P Halamandaris KA Hedderwick

Non-executive Chairman Chief Executive Officer


TO THE MEMBERS OF FAMOUS BRANDS LIMITED

We have audited the annual financial statements and Group

annual financial statements of Famous Brands Limited,

which comprise the statements of financial position as at

29 February 2012, and the statements of comprehensive income,

statements of changes in equity and statements of cash flows for

the year then ended, and a summary of significant accounting

policies and other explanatory notes, and the directors’ report,

as set out on pages 34 to 79.

DIRECTORS’ RESPONSIBILITY FOR THE ANNUAL FINANCIAL STATEMENTS

The company’s directors are responsible for the preparation and

fair presentation of these annual financial statements in

accordance with International Financial Reporting Standards, the

AC 500 standards as issued by the Accounting Practices Board

and its successor, and the requirements of the Companies Act, No.

71 of 2008. This responsibility includes: designing, implementing

and maintaining internal control relevant to the preparation and

fair presentation of annual financial statements that are free from

material misstatement, whether due to fraud or error; selecting

and applying appropriate accounting policies; and making

accounting estimates that are reasonable in the circumstances.

AUDITORS’ RESPONSIBILITY

Our responsibility is to express an opinion on these annual

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

whether the annual financial statements are free from material

misstatement.

An audit involves performing procedures to obtain audit evidence

about the amounts and disclosures in the annual financial

statements. The procedures selected depend on the auditors’

judgement, including the assessment of the risks of material

misstatement of the annual 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 annual 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

annual financial statements.

We believe that the audit evidence we have obtained is sufficient

and appropriate to provide a basis for our audit opinion.

OPINION

In our opinion, the annual financial statements present fairly, in all

material respects, the financial position of Famous Brands Limited

and its subsidiaries as at 29 February 2012, and its financial

performance and its cash flows for the year then ended in

accordance with International Financial Reporting Standards, the

AC 500 standards as issued by the Accounting Practices Board

and its successor, and the requirements of the Companies Act,

No. 71 of 2008.

RSM Betty & Dickson (Johannesburg)Registered Auditors

Per: J Kitching CA(SA) RAPartner

18 May 2012

Midrand

Report of the independent auditors


The directors have pleasure in submitting their report for the year

ended 29 February 2012.

NATURE OF BUSINESS

Famous Brands Limited is a holding company listed on the JSE

Limited under the category Consumer Services: Travel and Leisure.

Famous Brands Limited is Africa’s leading Quick Service and

Casual Dining Restaurant franchisor which also has representation

in the United Kingdom. The global footprint of the Group now

stands at 2 043 franchised restaurants spread across South Africa,

15 other African countries and the United Kingdom. Its brand

portfolio includes Steers, Wimpy, Debonairs Pizza, Mugg & Bean,

FishAways, Longhorn, House of Coffees, Coffee Couture, Brazilian

Café, tashas, KEG, McGinty’s, O’Hagan’s, Giramundo, Vovo Telo,

Milky Lane, Juicy Lucy, The Brewers Guild, Blacksteer and

Blacksteer Home of Shisanyama. The Group manufactures and

supplies its franchisees, the retail trade and broader hospitality

industry with a wide range of meat, sauces, bakery, ice-cream,

fruit juice and mineral water products.

DIRECTORS’ RESPONSIBILITIES

The responsibilities of the company’s directors are detailed on

page 32 of this report.

FINANCIAL STATEMENTS AND RESULTS

The company’s and Group’s results and financial position are

reflected in the annual financial statements on pages 34 to 79.

CORPORATE GOVERNANCE AND SUSTAINABILITY

The corporate governance and sustainability report is set out on

pages 24 to 27.

FIXED ASSETS

There was no major change in the nature or the use of the

property, plant, equipment and intangible assets owned by the

company or any of its subsidiaries during the year under review.

DIVIDENDS

The following information relates to the dividends paid and

declared during the year under review:

Interim ordinaryThe directors declared an interim ordinary dividend No. 34 of

80 cents per ordinary share, which was paid on Monday,

19 December 2011 to ordinary shareholders recorded in the

books of the company at the close of business on Thursday,

15 December 2011.

Final ordinaryThe directors declared a final ordinary dividend No. 35 of 120 cents

per ordinary share, payable on Monday, 16 July 2012 to ordinary

shareholders recorded in the books of the company at the close

of business on Friday, 13 July 2012.

SHARE CAPITAL

The authorised and issued share capital of the company at

29 February 2012 is set out in note 15 to the annual financial

statements.

Share issues during the yearThe company issued 374 839 ordinary shares for a cash

subscription of R5.7 million to participants of the Steers Share

Incentive Scheme.

Shareholder spreadIn terms of the JSE Limited Listings Requirements, Famous Brands

Limited complies with the minimum shareholder spread

requirements, with 61.32% (2011: 59.76%) of ordinary shares being

held by the public at 29 February 2012. Details of the company’s

shareholder spread are as recorded on page 79.

Material shareholdersAccording to information received by the directors, besides

the directors themselves, there were only two shareholders

beneficially holding, directly or indirectly, at 29 February 2012 in

excess of 5.0% of the ordinary share capital. They are:

Coronation Fund Managers 28.68% (2011: 28.07%).

Enderle SA Proprietary Limited 5.05% (2011: 5.07%).

STAFF SHARE INCENTIVE SCHEME AND OPTION SCHEME

Details are reflected in note 27.

DIRECTORS AND COMPANY SECRETARY

The names of the directors and the Company Secretary of the

company at the date of this report are detailed on pages 8 and 9

and page 11 respectively. In terms of the company’s articles of

association Messrs Panagiotis Halamandaris, Bheki Lindinkosi

Sibiya and Periklis Halamandaris retire at the annual general

meeting, and being eligible, offer themselves for re-election.

Mr Christopher Hardy Boulle was appointed as alternate non-

executive director to Mr Hymie Reuvin Levin subsequent to the last

annual general meeting and is required to retire at the first annual

general meeting held thereafter, but has offered himself for

re-election.

SUBSIDIARIES

Details of the company’s subsidiary companies are contained in

Annexure A to the annual financial statements. The company had

an interest in its subsidiaries’ aggregate profit after taxation of

R294 837 697 (2011: R258 776 152) and in their losses after

taxation of R1 193 902 (2011: R15 557 370).

ACQUISITIONS

The trademarks and franchise agreements of the following

businesses were acquired:

Milky Lane and Juicy Lucy – effective 1 March 2011, for a

purchase consideration of R30.9 million.

Report of the directors


SPECIAL RESOLUTIONS PASSED BY SUBSIDIARIES

No special resolutions of any significance were passed by any

subsidiaries during the year under review.

BORROWING POWERS

The company has unlimited borrowing powers in terms of its

articles of association.

APPROVAL OF THE ANNUAL FINANCIAL STATEMENTS

The annual financial statements were approved by the board of

directors at Midrand on 18 May 2012 and are signed on its behalf

by:

P Halamandaris KA HedderwickNon-executive Chairman Chief Executive Officer

The Group extended its Theatre of Foods portfolio with the

creation of a new business, Creative Coffee Franchise Systems

Proprietary Limited (Creative Coffees), thereby introducing a new

strategic direction for its House of Coffees and Juicy Lucy brands.

With effect from 1 May 2011, the trademarks and franchise

agreements of the House of Coffees and Juicy Lucy brands were

moved into Creative Coffees and merged with the business of

Kairuz Holdings Proprietary Limited, a company specialising in

servicing the retail and food offerings in the private hospital

industry. Famous Brands retains a 61% controlling shareholding in

the new company.

EVENTS AFTER THE REPORTING PERIOD

The directors are not aware of any material matter or

circumstance arising since the end of the financial year.

SPECIAL RESOLUTIONS

On 29 June 2011 shareholders renewed the approval, as a

general authority, of the acquisition by the company or any of its

subsidiaries of issued ordinary shares of the company, valid until

the next annual general meeting. At the next annual general

meeting to be held on 23 August 2012 shareholders will be

asked to renew this general authority as set out in the notice

to members.



Group Company

Notes

2012R000

2011

R000

2012R000

2011

R000

Revenue 3 2 155 615 1 878 036 647 2 806

Cost of goods sold (1 232 648) (1 064 883) – –

Gross profit 922 967 813 153 647 2 806

Selling and administrative expenses (510 311) (454 700) (60) (2 494)

Operating profit 412 656 358 453 587 312

Dividends received from subsidiaries 175 000 170 000

Operating profit before interest and taxation 412 656 358 453 175 587 170 312

Net interest (paid)/received (10 652) (14 934) 122 96

Profit before taxation 4 402 004 343 519 175 709 170 408

Taxation 5 (133 950) (112 520) (16 365) (13 856)

Profit after taxation for the year 268 054 230 999 159 344 156 552

Foreign currency translation differences 7 837 (5 182)

Total comprehensive income for the year 275 891 225 817 159 344 156 552

Profit after taxation attributable to:

Equity holders of the company 266 811 230 260 159 344 156 552

Non-controlling interests 1 243 739

Total comprehensive income attributable to:

Equity holders of the company 274 648 225 078 159 344 156 552

Non-controlling interests 1 243 739

Earnings per share attributable to equity holders of the company

Basic earnings per ordinary share (cents) 6 278 242

Diluted earnings per ordinary share (cents) 6 272 237

2012R000

2012R000

Statements of comprehensive income


Group Company

Notes

2012R000

2011

R000

2012R000

2011

R000

ASSETS

Non-current assets

Property, plant and equipment 9 155 739 130 847 – –

Intangible assets 10 694 977 659 668 – –

Investment in subsidiaries 11 252 935 234 796

Deferred tax assets 12 8 588 2 808 2 276 2 511

Total non-current assets 859 304 793 323 255 211 237 307

Current assets

Inventories 13 119 987 75 552 – –

Taxation 1 386 1 468 – –

Trade and other receivables 14 199 912 182 572 – –

Cash and cash equivalents 21.6 40 580 86 397 1 085 4 734

Total current assets 361 865 345 989 1 085 4 734

Total assets 1 221 169 1 139 312 256 296 242 041

EQUITY AND LIABILITIES

Equity attributable to equity holders of the company

Share capital 15 962 958 962 958

Share premium 16 36 075 30 422 37 445 31 794

Non-distributable reserves 17 14 171 (3 044) 38 791 29 413

Retained earnings 783 584 675 338 168 549 167 770

834 792 703 674 245 747 229 935

Non-controlling interests 5 578 4 920

Total equity 840 370 708 594 245 747 229 935

Non-current liabilities

Long-term borrowings 18 52 216 122 011 – –

Deferred lease liabilities 20 5 658 8 858 5 658 8 065

Deferred tax liabilities 12 48 750 46 163 – –

Total non-current liabilities 106 624 177 032 5 658 8 065

Current liabilities

Trade and other payables 19 186 774 178 907 240 205

Deferred lease liabilities 20 3 165 1 038 2 470 902

Short-term borrowings 18 69 936 65 775 – –

Share-based payment liability 27.2 913 – – –

Shareholders for dividends 671 686 671 686

Taxation 12 716 7 280 1 510 2 248

Total current liabilities 274 175 253 686 4 891 4 041

Total equity and liabilities 1 221 169 1 139 312 256 296 242 041

2012R000

2012R000

At 29 February 2012

Statements of financial position



Notes

Sharecapital

R000

Sharepremium

R000

Non-distribu-

tablereserves

R000

Retainedearnings

R000

Attribu-table

to equity holders

of the company

R000

Non-controlling

interestsR000

Totalequity

R000

GROUP

28 February 2011

Balance at 1 March 2010 949 15 186 (5 201) 572 707 583 641 285 583 926

Issue of share capital and premium 9 15 236 15 245 15 245

Share-based payments 7 339 7 339 7 339

Total comprehensive income for the year (5 182) 230 260 225 078 739 225 817

Dividends 8 (127 629) (127 629) (343) (127 972)

Non-controlling interest arising on business acquisitions 4 239 4 239

Balance at 28 February 2011 958 30 422 (3 044) 675 338 703 674 4 920 708 594

29 February 2012

Balance at 1 March 2011 958 30 422 (3 044) 675 338 703 674 4 920 708 594



Total comprehensive income for the year 7 837 266 811 274 648 1 243 275 891

Dividends 8 (158 565) (158 565) (585) (159 150)

Balance at 29 February 2012 962 36 075 14 171 783 584 834 792 5 578 840 370

COMPANY

28 February 2011

Balance at 1 March 2010 949 16 559 22 074 138 967 178 549 178 549



Total comprehensive income for the year 156 552 156 552 156 552

Dividends 8 (127 749) (127 749) (127 749)

Balance at 28 February 2011 958 31 794 29 413 167 770 229 935 229 935

29 February 2012

Balance at 1 March 2011 958 31 794 29 413 167 770 229 935 229 935



Total comprehensive income for the year 159 344 159 344 159 344

Dividends 8 (158 565) (158 565) (158 565)

Balance at 29 February 2012 962 37 445 38 791 168 549 245 747 245 747

Statements of changes in equity



Group Company

Notes

2012R000

2011

R000

2012R000

2011

R000

CASH FLOW FROM OPERATING ACTIVITIES

Cash receipts from customers 2 137 562 1 852 153 647 2 806

Cash paid to suppliers and employees (1 738 852) (1 455 224) (864) (2 047)

Cash generated by operations 21.1 398 710 396 929 (217) 759

Dividends received 175 000 170 000

Net interest (paid)/received (10 652) (14 934) 122 96

Taxation paid 21.2 (131 719) (123 895) (16 868) (12 861)

Net cash flow from operating activities 256 339 258 100 158 037 157 994

Dividends paid 21.3 (159 165) (127 817) (158 580) (127 594)

Net cash retained from operating activities 97 174 130 283 (543) 30 400

CASH FLOW FROM INVESTING ACTIVITIES

Expended on property, plant and equipment – expansion (45 793) (15 794) – –

Expended on property, plant and equipment – replacement (9 776) (25 546) – –

Acquisition of businesses 21.5 (30 896) (40 000) – –

Investment in subsidiaries 21.4 – (3 800) – –

Expended on intangible assets (1 030) (3 893) – –

Proceeds from disposal of property, plant and equipment 3 263 1 818 – –

Net cash flow from investing activities (84 232) (87 215) – –

CASH FLOW FROM FINANCING ACTIVITIES

Movement in share capital and reserves 5 657 15 245 5 654 15 245

Decrease in Group loans (8 760) (44 241)

Interest-bearing borrowings repaid (65 634) (67 399) – –

Net cash flow from financing activities (59 977) (52 154) (3 106) (28 996)

Change in cash and cash equivalents (47 035) (9 086) (3 649) 1 404

Foreign currency effect 1 218 963

Cash and cash equivalents at the beginning of the year 86 397 94 520 4 734 3 330

Cash and cash equivalents at the end of the year 21.6 40 580 86 397 1 085 4 734

2012R000

2012R000

Statements of cash flows



ACCOUNTING POLICIES1. PRESENTATION OF ANNUAL FINANCIAL STATEMENTS

The annual financial statements have been prepared in accordance

with International Financial Reporting Standards, the AC 500 standards

as issued by the Accounting Practices Board and its successor, and

the Companies Act, No. 71 of 2008. The annual financial statements

have been prepared on the historical cost basis, except for the

measurement of investment properties and certain financial

instruments at fair value, and incorporate the principal accounting

policies set out below. They are presented in South African Rands.

These accounting policies are consistent with the previous period,

except for the changes set out in note 2 – New standards and

interpretations.

The preparation of annual financial statements in conformity with

International Financial Reporting Standards 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 areas where assumptions and

estimates are significant to the annual financial statements are

disclosed in note 1.1.

1.1 Significant judgements and sources of estimation

uncertainty

In preparing the annual financial statements, management is

required to make estimates and assumptions that affect the

amounts represented in the annual financial statements and related

disclosures. Use of available information and the application of

judgement is inherent in the formation of estimates. Actual results in

the future could differ from these estimates which may be material

to the annual financial statements. Significant judgements include:

Allowance for slow moving, damaged and obsolete inventory

Judgement is used to write inventory down to the lower of cost or

net realisable value. Management has made estimates of the

selling price and direct cost to sell on certain inventory items. The

writedown is included in the operating profit.

Options granted

Management uses either a trinomial tree which takes account of

the vesting period (European style option) and the period post

vesting (American style option) or the Black-Scholes-Merton

model to determine the value of the options at issue date.

Additional details regarding the estimates are included in

note 27 – Share-based payments.

Impairment testing

The recoverable amounts of cash-generating units and individual

assets have been determined based on the higher of value-in-use

calculations and fair values less costs to sell. These calculations

require the use of estimates and assumptions. It is reasonably

possible that the assumptions may change which may then

impact estimations and may then require a material adjustment to

the carrying value of goodwill, intangible and tangible assets.

The Group reviews and tests the carrying value of assets when

events or changes in circumstances suggest that the carrying

amount may not be recoverable. In addition, goodwill is tested on

an annual basis for impairment. Assets are grouped at the lowest

level for which identifiable cash flows are largely independent of

cash flows of other assets and liabilities. If there are indications

that impairment may have occurred, estimates are prepared of

expected future cash flows for each group of assets. Expected

future cash flows used to determine the value-in-use of goodwill,

intangible and tangible assets are inherently uncertain and could

materially change over time.

Provisions

Provisions were raised and management determined an estimate

based on the information available.

Contingent provisions on business combinations

Contingencies recognised in the current year required estimates and

judgements (refer to notes 21.4 and 21.5 on business combinations).

Taxation

Judgement is required in determining the provision for income

taxes due to the complexity of legislation. There are many

transactions and calculations for which the ultimate tax

determination is uncertain during the ordinary course of business.

Where the final tax outcome of these matters is different from the

amounts that were initially recorded, such differences will impact

the income tax and deferred tax provisions in the period in which

such determination is made.

The Group recognises the net future tax benefit related to

deferred income tax assets to the extent that it is probable that

the deductible temporary differences will reverse in the

foreseeable future. Assessing the recoverability of deferred

income tax assets requires the Group to make significant

estimates related to expectations of future taxable income.

Estimates of future taxable income are based on forecast cash

flows from operations and the application of existing tax laws in

each jurisdiction. To the extent that future cash flows and taxable

income differ significantly from estimates, the ability of the Group

to realise the net deferred tax assets recorded at the end of the

reporting period could be impacted.

Allowance for doubtful debts

Past experience indicates a reduced prospect of collecting

debtors over the age of three months. Trade receivable balances

Notes to the annual financial statements


The useful lives of items of property, plant and equipment have

been assessed as follows:

Item Average useful life

Buildings 50 years

Leasehold property 7 to 10 years

Plant and machinery 5 to 15 years

Furniture, fixtures and office equipment 4 to 10 years

Motor vehicles 5 to 8 years

IT equipment 3 years

Computer software 2 to 3 years

The residual value, useful life and depreciation method of each

asset is reviewed at the end of each reporting period. If the

expectations differ from previous estimates, the change is

accounted for as a change in accounting estimate.

Each part of an item of property, plant and equipment with a cost

that is significant in relation to the total cost of the item is

depreciated separately.

The depreciation charge for each period is recognised in profit or

loss unless it is included in the carrying amount of another asset.

The gain or loss arising from the derecognition of an item of

property, plant and equipment is included in profit or loss when

the item is derecognised. The gain or loss arising from the

derecognition of an item of property, plant and equipment is

determined as the difference between the net disposal proceeds,

if any, and the carrying amount of the item.

1.3 Intangible assets

An intangible asset is recognised when:

it is probable that the expected future economic benefits that

are attributable to the asset will flow to the entity; and

the cost of the asset can be measured reliably.

Intangible assets are initially recognised at cost.

Expenditure on research (or on the research phase of an internal

project) is recognised as an expense when it is incurred.

An intangible asset arising from development (or from the

development phase of an internal project) is recognised when:

it is technically feasible to complete the asset so that it will be

available for use or sale;

there is an intention to complete and use or sell it;

there is an ability to use or sell it;

it will generate probable future economic benefits;

there are available technical, financial and other resources to

complete the development and to use or sell the asset; and

the expenditure attributable to the asset during its development

can be measured reliably.

older than three months are regularly assessed by management

and provided for at its discretion. Debt arising from the sale of

products to franchisees and franchise fees due, although past

due, is generally regarded as recoverable if the related trading

outlet continues to operate.

Property, plant and equipment

Management has made certain estimates with regard to the

determination of estimated useful lives and residual values of

items of property, plant and equipment, as disclosed further in

note 1.2.

Leases

Management has applied its judgement to classify all lease

agreements that the company is party to as operating leases, as

they do not transfer substantially all the risks and rewards of

ownership to the Group. Furthermore, as the operating lease in

respect of premises is only for a relatively short period of time,

management has made a judgement that it would not be

meaningful to classify the lease into separate components for the

land and for the buildings for the current lease, and the agreement

will be classified in its entirety as an operating lease.

1.2 Property, plant and equipment

The cost of an item of property, plant and equipment is recognised

as an asset 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.

Property, plant and equipment is initially measured at cost.

Costs include costs incurred initially to acquire or construct

an item of property, plant and equipment and costs incurred

subsequently to add to, replace part of, or service it. If a

replacement cost is recognised in the carrying amount of an item

of property, plant and equipment, the carrying amount of the

replaced part is derecognised.

Property, plant and equipment is carried at cost less accumulated

depreciation and any impairment losses.

Property, plant and equipment are depreciated on the straight-line

basis over their expected useful lives to their estimated residual

value.



1.5 Financial Instruments

Classification

The Group classifies financial assets and financial liabilities into

the following categories:

Financial assets at fair value through profit or loss – designated.

Loans and receivables.

Available-for-sale financial assets.

Financial liabilities at fair value through profit or loss – designated.

Financial liabilities measured at amortised cost.

Classification depends on the purpose for which the financial

instruments were obtained/incurred and takes place at initial

recognition. Classification is re-assessed on an annual basis,

except for derivatives and financial assets designated as at fair

value through profit or loss. This later category shall not be

classified out of the fair value through profit or loss category.

Initial recognition and measurement

Financial instruments are recognised initially when the Group

becomes a party to the contractual provisions of the instruments.

The Group classifies financial instruments, or their component

parts, on initial recognition as a financial asset, a financial liability

or an equity instrument in accordance with the substance of the

contractual arrangement.

Financial instruments are measured initially at fair value, except

for equity investments for which a fair value is not determinable,

which are measured at cost and are classified as available-for-sale

financial assets.

For financial instruments which are not at fair value through profit

or loss, transaction costs are included in the initial measurement

of the instrument.

Subsequent measurement

Loans and receivables are subsequently measured at amortised

cost, using the effective interest rate method, less accumulated

impairment losses.

Available-for-sale financial assets are subsequently measured at

fair value. This excludes equity investments for which a fair value

is not determinable, which are measured at cost less accumulated

impairment losses.

Gains and losses arising from changes in fair value are

recognised in other comprehensive income and accumulated in

equity until the asset is disposed of or determined to be impaired.

Interest on available-for-sale financial assets calculated using the

effective interest rate method is recognised in profit or loss as

part of other income. Dividends received on available-for-sale

equity instruments are recognised in profit or loss as part of other

income when the Group’s right to receive payment is established.

Intangible assets are carried at cost less any accumulated

amortisation and any impairment losses.

An intangible asset is regarded as having an indefinite useful life

when, based on all relevant factors, there is no foreseeable limit to

the period over which the asset is expected to generate net cash

inflows. Amortisation is not provided for on these intangible

assets, but they are tested for impairment annually and whenever

there is an indication that the asset may be impaired. For all other

intangible assets amortisation is provided on a straight-line basis

over their useful life.

The amortisation period and the amortisation method for

intangible assets are reviewed every year end.

Reassessing the useful life of an intangible asset with a finite

useful life after it was classified as indefinite is an indicator that

the asset may be impaired. As a result the asset is tested for

impairment and the remaining carrying amount is amortised over

its useful life.

Internally generated brands, franchise agreements, recipes,

customer lists and items similar in substance are not recognised

as intangible assets.

Amortisation is provided to write down the intangible assets, on a

straight-line basis, to their residual values as follows:

Item Useful life

Trademarks Indefinite

Lease premiums, franchise

incentives or similar

Agreement period

1.4 Investments in subsidiaries

Company annual financial statements

In the company’s separate annual financial statements, investments

in subsidiaries are carried at cost less any accumulated impairment.

The cost of an investment in a subsidiary is the aggregate of:

the fair value, at the date of exchange, of assets given, liabilities

incurred or assumed, and equity instruments issued by the

company; plus

any costs directly attributable to the purchase of the subsidiary.

An adjustment to the cost of a business combination contingent

on future events is included in the cost of the combination if the

adjustment is probable and can be measured reliably.

Notes to the annual financial statements continued


Impairment losses are reversed when an increase in the financial

asset’s recoverable amount can be related objectively to an event

occurring after the impairment was recognised, subject to the

restriction that the carrying amount of the financial asset at the date

that the impairment is reversed shall not exceed what the carrying

amount would have been had the impairment not been recognised.

Reversals of impairment losses are recognised in profit or loss

except for equity investments classified as available-for-sale.

Impairment losses are also not subsequently reversed for

available-for-sale equity investments which are held at cost

because fair value was not determinable.

Where financial assets are impaired through use of an allowance

account, the amount of the loss is recognised in profit or loss

within operating expenses. When such assets are written off, the

write-off is made against the relevant allowance account.

Subsequent recoveries of amounts previously written off are

credited against operating expenses.

Loans to/(from) Group companies

These include loans to and from holding companies, fellow

subsidiaries and subsidiaries and are recognised initially at fair

value plus direct transaction costs.

Loans to Group companies are classified as financial assets at fair

value through profit or loss.

Loans from Group companies are classified as financial liabilities

at fair value through profit or loss.

Loans to shareholders, directors, managers and employees

These financial assets are classified as loans and receivables.

Trade and other receivables

Trade receivables are measured at initial recognition at fair value,

and are subsequently measured at amortised cost using the

effective interest rate method. Appropriate allowances for

estimated irrecoverable amounts are recognised in profit or loss

when there is objective evidence that the asset is impaired.

Significant financial difficulties of the debtor, probability that the

debtor will enter bankruptcy or financial re-organisation, and

default or delinquency in payments (more than 90 days overdue)

are considered indicators that the trade receivable is impaired.

The allowance recognised is measured as the difference between

the asset’s carrying amount and the present value of estimated

future cash flows discounted at the effective interest rate

computed at initial recognition.

The carrying amount of the asset is reduced through the

use of an allowance account, and the amount of the loss is

Changes in fair value of available-for-sale financial assets

denominated in a foreign currency are analysed between

translation differences resulting from changes in amortised cost

and other changes in the carrying amount. Translation differences

on monetary items are recognised in profit or loss, while

translation differences on non-monetary items are recognised in

other comprehensive income and accumulated in equity.

Financial liabilities at amortised cost are subsequently measured

at amortised cost, using the effective interest rate method.

Derecognition

Financial assets are derecognised when the rights to receive cash

flows from the investments have expired or have been transferred

and the Group has transferred substantially all risks and rewards

of ownership.

Fair value determination

The fair values of quoted investments are based on current bid

prices. If the market for a financial asset is not active (and for

unlisted securities), the Group establishes fair value by using

valuation techniques. These include the use of recent arm’s length

transactions, reference to other instruments that are substantially

the same, discounted cash flow analysis, and option-pricing

models making maximum use of market inputs and relying as little

as possible on entity-specific inputs.

Impairment of financial assets

At each reporting date the Group assesses all financial assets,

other than those at fair value through profit or loss, to determine

whether there is objective evidence that a financial asset or group

of financial assets has been impaired.

For amounts due to the Group, significant financial difficulties of

the debtor, probability that the debtor will enter bankruptcy and

default of payments are all considered indicators of impairment.

In the case of equity securities classified as available-for-sale, a

significant or prolonged decline in the fair value of the security

below its cost is considered an indicator of impairment. If any

such evidence exists for available-for-sale financial assets, the

cumulative loss measured – as the difference between the

acquisition cost and current fair value, less any impairment loss

on that financial asset previously recognised in profit or loss – is

removed from equity as a reclassification adjustment to other

comprehensive income and recognised in profit or loss.

Impairment losses are recognised in profit or loss.



A deferred tax liability is recognised for all taxable temporary

differences associated with investments in subsidiaries, branches

and associates, and interests in joint ventures, except to the

extent that both of the following conditions are satisfied:

the parent, investor or venturer is able to control the timing of

the reversal of the temporary difference; and

it is probable that the temporary difference will not reverse in

the foreseeable future.

A deferred tax asset is recognised for all deductible temporary

differences to the extent that it is probable that taxable profit will

be available against which the deductible temporary difference

can be utilised, unless the deferred tax asset arises from the initial

recognition of an asset or liability in a transaction that:

is not a business combination; and

at the time of the transaction, affects neither accounting profit

nor taxable profit (tax loss).

A deferred tax asset is recognised for all deductible temporary

differences arising from investments in subsidiaries, branches and

associates, and interests in joint ventures, to the extent that it is

probable that:

the temporary difference will reverse in the foreseeable future;

and

taxable profit will be available against which the temporary

difference can be utilised.

A deferred tax asset is recognised for the carry forward of

unused tax losses and unused STC credits to the extent that it is

probable that future taxable profit will be available against which

the unused tax losses and unused STC credits can be utilised.

Deferred tax assets and liabilities are measured at the tax rates

that are expected to apply to the period when the asset is realised

or the liability is settled, based on tax rates (and tax laws) that

have been enacted or substantively enacted by the end of the

reporting period.

Tax expenses

Current and deferred taxes are recognised in profit or loss for the

period, except to the extent that the tax arises from:

a transaction or event which is recognised, in the same or a

different period, to other comprehensive income, or

a business combination.

Current tax and deferred taxes are charged or credited to other

comprehensive income if the tax relates to items that are

credited or charged, in the same or a different period, to other

comprehensive income.

Current tax and deferred taxes are charged or credited directly to

equity if the tax relates to items that are credited or charged, in

the same or a different period, directly in equity.

recognised in profit or loss within operating expenses. When

a trade receivable is uncollectable, it is written off against

the allowance account for trade receivables. Subsequent

recoveries of amounts previously written off are credited against

operating expenses in profit or loss.

Trade and other receivables are classified as loans and

receivables.

Trade and other payables

Trade payables are initially measured at fair value, and are

subsequently measured at amortised cost, using the effective

interest rate method.

Other payables are classified as other financial liabilities.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand

deposits, and other short-term highly liquid investments that are

readily convertible to a known amount of cash and are subject to

an insignificant risk of changes in value. These are initially and

subsequently recorded at fair value.

Bank overdraft and borrowings

Bank overdrafts and borrowings are initially measured at fair

value, and are subsequently measured at amortised cost, using

the effective interest rate method. Any difference between the

proceeds (net of transaction costs) and the settlement or

redemption of borrowings is recognised over the term of the

borrowings in accordance with the Group’s accounting policy for

borrowing costs.

1.6 Taxation

Current tax assets and liabilities

Current tax for current and prior periods is, to the extent unpaid,

recognised as a liability. If the amount already paid in respect of

current and prior periods exceeds the amount due for those

periods, the excess is recognised as an asset. Current tax liabilities

(assets) for the current and prior periods are measured at the

amount expected to be paid to (recovered from) the tax

authorities, using the tax rates (and tax laws) that have been

enacted by the end of the reporting period.

Deferred tax assets and liabilities

A deferred tax liability is recognised for all taxable temporary

differences, except to the extent that the deferred tax liability

arises from:

the initial recognition of goodwill; or

the initial recognition of an asset or liability in a transaction which:

– is not a business combination; and

– at the time of the transaction, affects neither accounting

profit nor taxable profit (tax loss).



When inventories are sold, the carrying amount of those

inventories are recognised as an expense in the period in which

the related revenue is recognised. The amount of any writedown

of inventories to net realisable value and all losses of inventories

are recognised as an expense in the period the writedown or

loss occurs. The amount of any reversal of any writedown of

inventories, arising from an increase in net realisable value,

are recognised as a reduction in the amount of inventories

recognised as an expense in the period in which the reversal

occurs.

1.9 Impairment of assets

The Group assesses at the end of each reporting period whether

there is any indication that an asset may be impaired. If any such

indication exists, the Group estimates the recoverable amount of

the asset.

Irrespective of whether there is any indication of impairment, the

Group also:

tests intangible assets with an indefinite useful life or

intangible assets not yet available for use for impairment

annually by comparing its carrying amount with its

recoverable amount. This impairment test is performed during

the annual period and at the same time every period; and

tests goodwill acquired in a business combination for

impairment annually.

If there is any indication that an asset may be impaired, the

recoverable amount is estimated for the individual asset. If it is

not possible to estimate the recoverable amount of the individual

asset, the recoverable amount of the cash-generating unit to

which the asset belongs is determined.

The recoverable amount of an asset or a cash-generating unit is

the higher of its fair value less costs to sell and its value-in-use.

If the recoverable amount of an asset is less than its carrying

amount, the carrying amount of the asset is reduced to its

recoverable amount. That reduction is an impairment loss.

An impairment loss of assets carried at cost less any

accumulated depreciation or amortisation is recognised

immediately in profit or loss. Any impairment loss of a revalued

asset is treated as a revaluation decrease.

Goodwill acquired in a business combination is, from the

acquisition date, allocated to each of the cash-generating units,

or groups of cash-generating units, that are expected to benefit

from the synergies of the combination.

An impairment loss is recognised for cash-generating units if the

recoverable amount of the unit is less than the carrying amount

Secondary tax on companies is accounted for through profit and

loss for the period.

1.7 Leases

A lease is classified as a finance lease if it transfers substantially

all the risks and rewards incidental to ownership. A lease is

classified as an operating lease if it does not transfer

substantially all the risks and rewards incidental to ownership.

Finance leases – lessee

Finance leases are recognised as assets and liabilities in the

statement of financial position at amounts equal to the fair value of

the leased property or, if lower, the present value of the minimum

lease payments. The corresponding liability to the lessor is included

in the statement of financial position as a finance lease obligation.

The discount rate used in calculating the present value of the

minimum lease payments is the interest rate implicit in the lease.

The lease payments are apportioned between the finance charge

and reduction of the outstanding liability. The finance charge is

allocated to each period during the lease term so as to produce a

constant periodic rate on the remaining balance of the liability.

Operating leases – lessee

Operating lease payments are recognised as an expense on a

straight-line basis over the lease term. The difference between

the amounts recognised as an expense and the contractual

payments are recognised as a deferred lease asset or liability.

This liability is not discounted.

Any contingent rents are expensed in the period they are incurred.

1.8 Inventories

Inventories are measured at the lower of cost and net realisable

value.

Net realisable value is the estimated selling price in the ordinary

course of business less the estimated costs of completion and the

estimated costs necessary to make the sale.

The cost of inventories comprises all costs of purchase, costs of

conversion and other costs incurred in bringing the inventories to

their present location and condition.

The cost of inventories of items that are not ordinarily

interchangeable and goods or services produced and segregated

for specific projects is assigned using specific identification of the

individual costs.

The cost of inventories is assigned using the weighted average

cost formula. The same cost formula is used for all inventories

having a similar nature and use to the entity.



When the goods or services received or acquired in a share-based

payment transaction do not qualify for recognition as assets, they

are recognised as expenses.

For equity-settled share-based payment transactions the goods or

services received and the corresponding increase in equity are

measured, directly, at the fair value of the goods or services

received provided that the fair value cannot be estimated reliably.

If the fair value of the goods or services received cannot be

estimated reliably, their value and the corresponding increase in

equity, indirectly, are measured by reference to the fair value of

the equity instruments granted.

For cash-settled share-based payment transactions, the goods or

services acquired and the liability incurred are measured at the

fair value of the liability. Until the liability is settled, the fair value of

the liability is remeasured at each reporting date and at the date

of settlement, with any changes in fair value recognised in profit

or loss for the period.

If the share-based payments granted do not vest until the

counterparty completes a specified period of service, the Group

accounts for those services as they are rendered by the

counterparty during the vesting period (or on a straight-line basis

over the vesting period).

If the share-based payments vest immediately the services

received are recognised in full.

For share-based payment transactions in which the terms of the

arrangement provide either the entity or the counterparty with

the choice of whether the entity settles the transaction in cash

(or other assets) or by issuing equity instruments, the

components of that transaction are recorded, as a cash-settled

share-based payment transaction if, and to the extent that, a

liability to settle in cash or other assets has been incurred, or as

an equity-settled share-based payment transaction if, and to the

extent that, no such liability has been incurred.

1.12 Employee benefits

Short-term employee benefits

The cost of short-term employee benefits (those payable within

12 months after the service is rendered, such as paid vacation

leave and sick leave, bonuses, and non-monetary benefits such

as medical care) are recognised in the period in which the service

is rendered and are not discounted.

The expected cost of compensated absences is recognised as an

expense as the employees render services that increase their

entitlement or, in the case of non-accumulating absences, when

the absence occurs.

of the units. The impairment loss is allocated to reduce the

carrying amount of the assets of the unit in the following order:

first, to reduce the carrying amount of any goodwill allocated

to the cash-generating unit; and

then, to the other assets of the unit, pro rata on the basis of

the carrying amount of each asset in the unit.

An entity assesses at each reporting date whether there is any

indication that an impairment loss recognised in prior periods for

assets other than goodwill may no longer exist or may have

decreased. If any such indication exists, the recoverable amounts

of those assets are estimated.

The increased carrying amount of an asset other than goodwill

attributable to a reversal of an impairment loss does not exceed the

carrying amount that would have been determined had no

impairment loss been recognised for the asset in prior periods.

A reversal of an impairment loss of assets carried at cost

less accumulated depreciation or amortisation other than

goodwill is recognised immediately in profit or loss. Any reversal

of an impairment loss of a revalued asset is treated as a

revaluation increase.

1.10 Share capital and equity

An equity instrument is any contract that evidences a residual

interest in the assets of an entity after deducting all of its liabilities.

If the company re-acquires its own equity instruments, the

consideration paid, including any directly attributable incremental

costs (net of income taxes) on those instruments, is deducted from

equity until the shares are cancelled or re-issued. No gain or loss is

recognised in profit or loss on the purchase, sale, issue or

cancellation of the company’s own equity instruments.

Consideration paid or received shall be recognised directly in equity.

Shares in the company held by the Steers Share Incentive Trust are

classified as treasury shares. The cost of these shares is deducted

from equity. The number of shares held is deducted from the

number of issued shares and the weighted average number of

shares in the determination of earnings per share. Dividends

received on treasury shares are eliminated on consolidation.

1.11 Share-based payments

Goods or services received or acquired in a share-based payment

transaction are recognised when the goods or services are

received. A corresponding increase in equity is recognised if the

goods or services were received in an equity-settled share-based

payment transaction or a liability if the goods or services were

acquired in a cash-settled share-based payment transaction.



When the outcome of a transaction involving the rendering of

services can be estimated reliably, revenue associated with the

transaction is recognised by reference to the stage of

completion of the transaction at the end of the reporting period.

The outcome of a transaction can be estimated reliably when all

the following conditions are satisfied:

the amount of revenue can be measured reliably;

it is probable that the economic benefits associated with the

transaction will flow to the Group;

the stage of completion of the transaction at the end of the

reporting period can be measured reliably; and

the costs incurred for the transaction and the costs to

complete the transaction can be measured reliably.

When the outcome of the transaction involving the rendering of

services cannot be estimated reliably, revenue shall be recognised

only to the extent of the expenses recognised that are recoverable.

Service revenue is recognised by reference to the stage of

completion of the transaction at the end of the reporting period.

Stage of completion is determined by services performed to date

as a percentage of total services to be performed.

Revenue is measured at the fair value of the consideration received

or receivable and represents the amounts receivable for goods and

services provided in the normal course of business, net of trade

discounts and volume rebates, and value added tax.

Interest is recognised, in profit or loss, using the effective interest

rate method.

Franchise fees are recognised on the accrual basis in accordance

with the substance of the relevant agreements.

Dividends are recognised, in profit or loss, when the company’s

right to receive payment has been established.

Franchise joining fees are recognised in the month when the

outlet opens for trading.

1.15 Advertising levies

The Group receives advertising levies from franchisees which are

utilised in the advertising and promotion of the Group’s brands.

Advertising expenditure incurred in excess of the levies received is

carried forward as a prepaid expense to be set off against future

levies. Any amounts not expended are carried forward as liabilities

to set off against future advertising expenditure.

1.16 Cost of sales

When inventories are sold, the carrying amount of those

inventories is recognised as an expense in the period in which the

related revenue is recognised. The amount of any writedown of

The expected cost of profit sharing and bonus payments

is recognised as an expense when there is a legal or constructive

obligation to make such payments as a result of past performance.

Defined contribution plans

Payments to defined contribution retirement benefit plans are

charged as an expense as they fall due.

1.13 Provisions and contingencies

Provisions are recognised when:

the Group has a present obligation as a result of a past event;

it is probable that an outflow of resources embodying

economic benefits will be required to settle the obligation; and

a reliable estimate can be made of the obligation.

The amount of a provision is the present value of the expenditure

expected to be required to settle the obligation.

Where some or all of the expenditure required to settle a

provision is expected to be re-imbursed by another party, the

re-imbursement shall be recognised when, and only when, it

is virtually certain that re-imbursement will be received if the

entity settles the obligation. The re-imbursement shall be

treated as a separate asset. The amount recognised for the

re-imbursement shall not exceed the amount of the provision.

Provisions are not recognised for future operating losses. If an

entity has a contract that is onerous, the present obligation under

the contract shall be recognised and measured as a provision.

After their initial recognition, contingent liabilities recognised

in business combinations that are recognised separately are

subsequently measured at the higher of:

the amount that would be recognised as a provision; and

the amount initially recognised less cumulative amortisation.

Contingent assets and contingent liabilities are not recognised.

Contingencies are disclosed in note 22.

1.14 Revenue

Revenue from the sale of goods is recognised when all the

following conditions have been satisfied:

the Group has transferred to the buyer the significant risks and

rewards of ownership of the goods;

the Group retains neither continuing managerial involvement

to the degree usually associated with ownership nor effective

control over the goods sold;

the amount of revenue can be measured reliably;

it is probable that the economic benefits associated with the

transaction will flow to the Group; and

the costs incurred or to be incurred in respect of the

transaction can be measured reliably.



non-monetary items that are measured in terms of historical

cost in a foreign currency are translated using the exchange

rate at the date of the transaction; and

non-monetary items that are measured at fair value in a

foreign currency are translated using the exchange rates at the

date when the fair value was determined.

Exchange differences arising on the settlement of monetary items

or on translating monetary items at rates different from those at

which they were translated on initial recognition during the period

or in previous annual financial statements are recognised in profit

or loss in the period in which they arise.

When a gain or loss on a non-monetary item is recognised to other

comprehensive income and accumulated in equity, any exchange

component of that gain or loss is recognised to other comprehensive

income and accumulated in equity. When a gain or loss on a

non-monetary item is recognised in profit or loss, any exchange

component of that gain or loss is recognised in profit or loss.

Cash flows arising from transactions in a foreign currency are

recorded in Rand by applying to the foreign currency amount the

exchange rate between the Rand and the foreign currency at

the date of the cash flow.

Investments in subsidiaries

The results and financial position of a foreign operation are

translated into the functional currency using the following

procedures:

assets and liabilities for each statement of financial position

presented are translated at the closing rate at the date of that

statement of financial position;

income and expenses for each item of profit or loss are

translated at exchange rates at the dates of the transactions;

and

all resulting exchange differences are recognised to other

comprehensive income and accumulated as a separate

component of equity.

Exchange differences arising on a monetary item that forms part of

a net investment in a foreign operation are recognised initially to

other comprehensive income and accumulated in the translation

reserve. They are recognised in profit or loss as a reclassification

adjustment through to other comprehensive income on disposal

of net investment.

Any goodwill arising on the acquisition of a foreign operation and

any fair value adjustments to the carrying amounts of assets and

liabilities arising on the acquisition of that foreign operation are

treated as assets and liabilities of the foreign operation.

inventories to net realisable value and all losses of inventories are

recognised as an expense in the period the writedown or loss

occurs. The amount of any reversal of any writedown of

inventories, arising from an increase in net realisable value, is

recognised as a reduction in the amount of inventories

recognised as an expense in the period in which the reversal

occurs.

The related cost of providing services recognised as revenue

in the current period is included in cost of sales.

1.17 Borrowing costs

Borrowing costs that are directly attributable to the acquisition,

construction or production of a qualifying asset are capitalised as

part of the cost of that asset until such time as the asset is ready

for its intended use. The amount of borrowing costs eligible for

capitalisation is determined as follows:

actual borrowing costs on funds specifically borrowed for the

purpose of obtaining a qualifying asset less any temporary

investment of those borrowings; and

weighted average of the borrowing costs applicable to

the entity on funds generally borrowed for the purpose of

obtaining a qualifying asset. The borrowing costs capitalised do

not exceed the total borrowing costs incurred.

The capitalisation of borrowing costs commences when:

expenditures for the asset have occurred;

borrowing costs have been incurred; and

activities that are necessary to prepare the asset for its

intended use or sale are in progress.

Capitalisation is suspended during extended periods in which

active development is interrupted.

Capitalisation ceases when substantially all the activities

necessary to prepare the qualifying asset for its intended use or

sale are complete.

All other borrowing costs are recognised as an expense in the

period in which they are incurred.

1.18 Translation of foreign currencies

Foreign currency transactions

A foreign currency transaction is recorded, on initial recognition in

Rand, by applying to the foreign currency amount the spot

exchange rate between the functional currency and the foreign

currency at the date of the transaction.

At the end of the reporting period:

foreign currency monetary items are translated using the

closing rate;



attributable to the business combination are expensed as incurred,

except the costs to issue debt which are amortised as part of the

effective interest and costs to issue equity which are included in equity.

Contingent consideration is included in the cost of the

combination at fair value as at the date of acquisition. Subsequent

changes to the assets, liability or equity which arise as a result of

the contingent consideration are not affected against goodwill,

unless they are valid measurement period adjustments.

The acquiree’s identifiable assets, liabilities and contingent

liabilities which meet the recognition conditions of IFRS 3 Business

Combinations are recognised at their fair values at acquisition date,

except for non-current assets (or disposal group) that are classified

as held-for-sale in accordance with IFRS 5 Non-current Assets

Held-for-sale and Discontinued Operations, which are recognised at

fair value less costs to sell.

Contingent liabilities are only included in the identifiable assets

and liabilities of the acquiree where there is a present obligation

at acquisition date.

On acquisition, the Group assesses the classification of the

acquiree’s assets and liabilities and reclassifies them where the

classification is inappropriate for Group purposes. This excludes

lease agreements and insurance contracts, whose classification

remains as per their inception date.

Non-controlling interest arising from a business combination is

measured either at its share of the fair value of the assets and

liabilities of the acquiree or at fair value. The treatment is not an

accounting policy choice but is selected for each individual

business combination, and disclosed in notes 21.4 and 21.5 for

business combinations.

In cases where the Group held a non-controlling shareholding in

the acquiree prior to obtaining control, that interest is measured

to fair value as at acquisition date. The measurement to fair value

is included in profit or loss for the year. Where the existing

shareholding was classified as an available-for-sale financial asset,

the cumulative fair value adjustments recognised previously to

other comprehensive income and accumulated in equity are

recognised in profit or loss as a reclassification adjustment.

Goodwill is determined as the consideration paid, plus the fair

value of any shareholding held prior to obtaining control, plus non-

controlling interest and less the fair value of the identifiable assets

and liabilities of the acquiree.

Goodwill is not amortised but is tested on an annual basis for

impairment. If goodwill is assessed to be impaired, that

impairment is not subsequently reversed.

The cash flows of a foreign subsidiary are translated at the

exchange rates between the functional currency and the foreign

currency at the average rate of the year or period.

1.19 Consolidation

Basis of consolidation

The consolidated annual financial statements incorporate the annual

financial statements of the company and all entities, including

special purpose entities, which are controlled by the company.

Control exists when the company has the power to govern the

financial and operating policies of an entity so as to obtain

benefits from its activities.

The results of subsidiaries are included in the consolidated annual

financial statements from the effective date of acquisition to the

effective date of disposal.

Adjustments are made when necessary to the annual financial

statements of subsidiaries to bring their accounting policies in line

with those of the Group.

All intra-group transactions, balances, income and expenses are

eliminated in full on consolidation.

Non-controlling interests in the net assets of consolidated

subsidiaries are identified and recognised separately from the

Group’s interest therein, and are recognised within equity. Losses

of subsidiaries attributable to non-controlling interests are

allocated to the non-controlling interest even if this results in a

debit balance being recognised for non-controlling interest.

Transactions which result in changes in ownership levels, where

the Group has control of the subsidiary both before and after the

transaction are regarded as equity transactions and are

recognised directly in the statement of changes in equity.

The difference between the fair value of consideration paid or

received and the movement in non-controlling interest for such

transactions is recognised in equity attributable to the owners of

the parent.

Where a subsidiary is disposed of and a non-controlling

shareholding is retained, the remaining investment is measured to

fair value with the adjustment to fair value recognised in profit or

loss as part of the gain or loss on disposal of the controlling interest.

Business combinations

The Group accounts for business combinations using the acquisition

method of accounting. The cost of the business combination is

measured as the aggregate of the fair values of assets given, liabilities

incurred or assumed and equity instruments issued. Costs directly



interest shall be measured at their acquisition date fair values,

unless otherwise required by IFRS.

It further provides transitional provisions for dealing with

contingent consideration arrangements in a business combination

that occurred before the effective date of the revised IFRS 3.

For equity-settled share-based payment transactions of the

acquiree that the acquirer does not exchange for its share-based

payment transactions, vested transactions shall be measured as

part of minority interest at market based measure. Unvested

transactions shall be measured at market based measure as if the

acquisition date were grant date. This measure is then allocated to

minority interest based on the ratio of vesting period completed

to the greater of total vesting period or original vesting period.

The effective date of the amendment is for years beginning on or

after 1 July 2010.

The Group has adopted the amendment for the first time in the

2012 annual financial statements.

The impact of the amendment is not material.

2010 Annual Improvements Project: Amendments to IAS 1

Presentation of Financial Statements

The amendment now requires that an entity must present, either

in the statement of changes in equity or in the notes, an analysis

of other comprehensive income by item.


after 1 January 2011.



The adoption of this amendment has not had a material impact on

the results of the Group, but has resulted in more disclosure than

would have previously been provided in the annual financial

statements.

2.2 Standards and Interpretations early adopted

The Group has chosen not to early adopt any new standards and

interpretations.

2.3 Standards and interpretations not yet effective

The Group has chosen not to early adopt the following standards

and interpretations, which have been published and are

mandatory for the Group’s accounting periods beginning on or

after 1 March 2012 or later periods:

Goodwill arising on acquisition of foreign entities is considered an

asset of the foreign entity. In such cases the goodwill is translated to

the functional currency of the Group at the end of each reporting

period with the adjustment recognised to other comprehensive

income and accumulated as a separate component of equity.

1.20 Dividends declared

Dividends payable are recognised as a liability in the period in

which they are declared.

2. NEW STANDARDS AND INTERPRETATIONS

2.1 Standards and interpretations effective and adopted in

the current year

In the current year, the Group has adopted the following standards

and interpretations that are effective for the current financial year

and that are relevant to its operations:

IFRIC 19 Extinguishing Financial Liabilities with Equity

Instruments

IFRIC 19 applies to debt for equity swaps in circumstances where

a debtor and creditor renegotiate the terms of a financial liability

such that the debtor extinguishes part or all of the financial liability

by issuing equity instruments to the creditor. Where the debt for

equity swap is within the scope of IFRIC 19, the issue of equity

instruments by the debtor shall be consideration paid to

extinguish the liability and shall be measured at the fair value of

the equity instrument, unless fair value cannot be determined. If

the fair value of the equity instruments cannot be measured

reliably, the issue shall be measured at the fair value of the

financial liability extinguished. If the issue also relates to a

modification of any remaining liability, then the issue shall be

allocated to the liability which was extinguished and which

remains. The difference between the carrying amount of the

liability which was extinguished and the consideration paid shall

be recognised in profit or loss.


after 1 July 2010.



The impact of the amendment is not material.

2010 Annual Improvements Project: Amendments to IFRS 3

Business Combinations

The amendment clarifies the initial measurement of non-controlling

interests. Only those interests which represent a present ownership

interest shall be measured at either fair value or the present

ownership’s proportionate share in the recognised amounts of the

acquiree’s identifiable net assets. All other components of minority



IFRS 9 Financial Instruments

The effective date of the standard is for years beginning on or


The Group expects to adopt the standard for the first time in the


It is unlikely that the standard will have a material impact on the

Group’s annual financial statements.

IFRS 10 Consolidated Financial Statements







IAS 27 Separate Financial Statements



The Group expects to adopt the amendment for the first time in

the 2014 annual financial statements.

It is unlikely that the amendment will have a material impact on

the Group’s annual financial statements.

IFRS 7 Financial Instruments: Disclosures







IFRS 12 Disclosure of Interests in Other Entities







IFRS 13 Fair Value Measurement







IAS 1 Presentation of Financial Statements


after 1 July 2012.

The Group expects to adopt the amendment for the first time in

the 2014 annual financial statements.

It is unlikely that the amendment will have a material impact on

the Group’s annual financial statements.

2.4 Standards and interpretations not yet effective or

relevant

All other standards and interpretations that have been published and

are mandatory for the Group’s accounting periods beginning on or

after 1 March 2012 or later periods are not relevant to its operations.




Group Company

2012R000

2011

R000

2012R000

2011

R000

3. REVENUE

Sale of goods 1 685 638 1 465 948 – –

Services rendered and franchise revenue 459 423 402 876 647 2 806

Financing element of revenue 10 554 9 212 – –

2 155 615 1 878 036 647 2 806

4. PROFIT BEFORE TAXATION

Profit before taxation is arrived at after taking into account,

amongst other items, those detailed below:

Amortisation of intangible assets 1 795 1 631 – –

Auditors’ remuneration 3 053 3 462 – –

Audit fee 2 732 2 925 – –

Fees for other services 321 537 – –

Depreciation of property, plant and equipment 27 241 24 402 – –

Directors’ remuneration 600 740

Executive directors 9 850 12 203

Non-executive directors 600 740

Less: Amounts paid by subsidiaries (9 850) (12 203)

Employee costs 259 816 233 569 – –

Foreign exchange loss/(profit) 298 245 (101) 198

Fair value adjustment on investment – – – (6 587)

Impairment of investment – – – 6 587

Impairment of goodwill 1 242 – – –

Interest and finance charges paid 18 705 30 936 – 11

Interest received (8 053) (16 002) (122) (107)

Operating lease charges on immovable property 79 956 76 417 15 252 15 252

Operating lease charges recovered from sub-lessees (37 448) (49 272) (15 252) (15 252)

Operating lease charges on movable property 2 102 1 930 – –

(Profit)/loss on disposal of company-owned restaurants (1 442) 560 – –

Loss/(profit) on disposal of property, plant and equipment 239 (223) – –

Share-based payments – equity-settled 9 378 7 339 – –

Share-based payments – cash-settled 913 – – –

5. TAXATION

Normal taxation

Current taxation 119 687 94 900 274 780

Deferred taxation (4 219) 3 155 235 52

Movement in deferred taxation due to change in capital gains

taxation rate 5 588 – – –

Indirect and withholding taxes – 2 122 – 41

(Over)/underprovision prior years (deferred and current) (3 095) (502) – 208

Secondary taxation on companies 15 989 12 845 15 856 12 775

133 950 112 520 16 365 13 856

2012R000

2012R000


Group Company

2012R000

2011

R000

2012R000

2011

R000

5. TAXATION continued

Reconciliation of rate of taxation

South African normal rate of taxation 28.0 28.0 28.0 28.0

Reduction in rate for year, due to: (1.1) (0.1) (27.7) (27.6)

Dividend income – – (27.7) (27.6)

Deferred taxation overprovision prior years (1.1) – – –

Current taxation overprovision prior years – (0.1) – –

Increase in rate for year, due to: 6.4 4.9 9.0 7.7

Secondary taxation on companies 4.0 3.7 9.0 7.5

Indirect and withholding taxes – 0.6 – –

Increase in capital gains taxation rate 1.3 – – –

Current taxation underprovision prior years 0.4 – – 0.1

Disallowable expenditure 0.7 0.6 – 0.1

Effective rate of taxation 33.3 32.8 9.3 8.1

The capital gains taxation rate applied in the current year was

66.67% of 28% (2011: 50% of 28%).

6. EARNINGS AND DILUTED EARNINGS PER SHARE R000 R000

The calculation of basic earnings per ordinary share is based

on earnings of R266 811 594 (2011: R230 259 811) and a

weighted average number of shares in issue of 96 102 435

(2011: 95 245 418).

The weighted average number of shares is calculated after

taking into account the effect of setting off nil (2011: 161)

treasury shares held by the share incentive scheme against the

issued share capital.

The calculation of diluted earnings per ordinary share is based

on diluted earnings of R271 624 391 (2011: R234 086 607) and a

weighted average number of shares in issue of 99 937 435

(2011: 98 905 257), after taking into account the effect of the

possible issue of 3 835 000 (2011: 3 660 000) ordinary shares in

the future relating to the share incentive scheme.

Reconciliation between earnings and diluted earnings:

Attributable profit to equity holders of the company 266 811 230 260

Adjustment for:

After taxation interest receivable on future share placements 4 813 3 827

Diluted earnings 271 624 234 087

Earnings per share (cents) 278 242

Diluted earnings per share (cents) 272 237

2012R000

2012R000



Group Company

2012R000

2011

R000

2012R000

2011

R000

7. HEADLINE EARNINGS AND DILUTED HEADLINE EARNINGS PER SHARE

The calculation of headline earnings per ordinary share is based

on headline earnings of R267 438 818 (2011: R230 502 504) and

a weighted average number of shares of 96 102 435

(2011: 95 245 418).

The weighted average number of shares is calculated after

taking into account the effect of setting off nil (2011: 161)

treasury shares held by the share incentive scheme against the

issued share capital.

The calculation of diluted headline earnings per ordinary share

is based on diluted headline earnings of R272 251 615

(2011: R234 329 300) and a weighted average number of shares

in issue of 99 937 435 (2011: 98 905 257), after taking into account

the effect of the possible issue of 3 835 000 (2011: 3 660 000)

ordinary shares in the future relating to the share incentive

scheme.

Reconciliation of headline earnings:

Attributable profit to equity holders of the company 266 811 230 260

Adjustments net of taxation for:

Loss on disposal of company-owned restaurants and impairment

of goodwill 455 406

Loss/(profit) on disposal of property, plant and equipment 172 (164)

Headline earnings 267 438 230 502

Adjustment for:

After taxation interest receivable on future share placements 4 813 3 827

Diluted headline earnings 272 251 234 329

Headline earnings per share (cents) 278 242

Diluted headline earnings per share (cents) 272 237

8. DIVIDENDS

No. 33 of 85 cents, paid 4 July 2011 81 611 60 957 81 611 60 957

No. 34 of 80 cents, paid 19 December 2011 76 954 66 792 76 954 66 792

158 565 127 749 158 565 127 749

Dividends on treasury shares held through the share incentive

scheme – (120)

158 565 127 629 158 565 127 749

Dividends in the 2011 financial year were as follows:

No. 31 of 64 cents, paid 19 July 2010

No. 32 of 70 cents, paid 29 November 2010

2012R000

2012R000



Land and buildings

R000

Leasehold improve-

mentsR000

Plant and equipment

R000

Motor vehicles

R000

Computer equipment

R000

Computer software

R000

Furniture, fittings

and office equipment

R000TotalR000

9. PROPERTY, PLANT AND EQUIPMENT

2012

GROUP

Cost

Opening balance 8 140 8 126 103 289 73 273 21 623 10 670 24 156 249 277

Additions 2 461 1 787 26 510 13 140 3 017 3 246 5 408 55 569

Foreign currency

translation – 130 – – – – 363 493

Disposals (3) – (2 091) (4 108) (38) (41) (774) (7 055)

Closing balance 10 598 10 043 127 708 82 305 24 602 13 875 29 153 298 284

Accumulated depreciation

Opening balance 227 5 343 33 870 33 923 14 298 9 837 20 932 118 430

Depreciation for the year 72 1 602 10 417 8 535 3 716 378 2 521 27 241

Foreign currency

translation – 67 – – – – 361 428

Disposals – – (1 147) (1 826) (14) (3) (564) (3 554)

Closing balance 299 7 012 43 140 40 632 18 000 10 212 23 250 142 545

Net carrying amount 10 299 3 031 84 568 41 673 6 602 3 663 5 903 155 739

Items of property, plant and equipment with a carrying amount of R285 134 (2011: R6 162 832) are pledged as security for secured

loans (refer to note 18.1).

Land and buildings comprise Erf 344 Halfway House Ext. 17 Township Registration division I.R. in Gauteng province measuring

7 505 square metres, Erf 219 Sunderland Ridge Ext. 1, Centurion in Gauteng province measuring 1 500 square metres and Erf 218

Sunderland Ridge Ext. 1, Centurion in Gauteng province measuring 1 500 square metres.

The fair value of land and buildings is estimated by the directors to be R11 225 000 (2011: R11 225 000). Land and buildings are

valued every three years and the last valuation date was 28 February 2011.

Land andbuildings

R000

Leasehold improve-

mentsR000

Plant andequipment

R000

Motor vehicles

R000

Computer equipment

R000

Computer software

R000

Furniture, fittings

and office equipment

R000TotalTTR000



Land and

buildings

R000

Leasehold

improve-

ments

R000

Plant and

equipment

R000

Motor

vehicles

R000

Computer

equipment

R000

Computer

software

R000

Furniture,

fittings and

office

equipment

R000

Total

R000

9. PROPERTY, PLANT AND EQUIPMENT continued

2011

GROUP

Cost

Opening balance 7 765 8 048 87 264 59 738 15 183 10 280 24 106 212 384

Additions 375 182 16 558 16 249 6 471 395 1 110 41 340

Foreign currency

translation – (104) – – – – (289) (393)

Disposals – – (533) (2 714) (31) (5) (771) (4 054)

Closing balance 8 140 8 126 103 289 73 273 21 623 10 670 24 156 249 277


Opening balance 227 4 867 25 706 25 858 11 771 8 852 19 523 96 804

Depreciation for the year – 504 8 634 9 612 2 532 985 2 135 24 402

Foreign currency

translation – (28) – – – – (282) (310)

Disposals – – (470) (1 547) (5) – (444) (2 466)

Closing balance 227 5 343 33 870 33 923 14 298 9 837 20 932 118 430

Net carrying amount 7 913 2 783 69 419 39 350 7 325 833 3 224 130 847

COMPANY

Cost

Opening balance – 2 030 – – – – – 2 030

Disposals – (2 030) – – – – – (2 030)

Closing balance – – – – – – – –


Opening balance – 2 030 – – – – – 2 030

Disposals – (2 030) – – – – – (2 030)

Closing balance – – – – – – – –

Net carrying amount – – – – – – – –



2012 2011

Trade-marks

R000Goodwill

R000

Franchise incentives,

lease premiums

and similarR000

TotalR000

Trade-marks

R000Goodwill

R000

Franchise incentives,

lease premiums

and similarR000

TotalR000

10. INTANGIBLE ASSETSGROUP

CostOpening balance 249 403 400 421 14 620 664 444 215 469 389 614* 11 305 616 388

Acquired in business

combinations 30 896 – – 30 896 35 664 13 588 – 49 252

Additions – – 1 030 1 030 401 – 3 492 3 893

Impairment – (1 242) – (1 242) – – – –

Foreign currency

translation 2 648 3 442 (1 321) 4 769 (2 131) (2 781) (177) (5 089)

Closing balance 282 947 402 621 14 329 699 897 249 403 400 421 14 620 664 444

Accumulated amortisation

Opening balance – – 4 776 4 776 – – 3 073 3 073

Amortisation for the year – – 1 795 1 795 – – 1 631 1 631

Foreign currency

translation – – (1 651) (1 651) – – 72 72

Closing balance – – 4 920 4 920 – – 4 776 4 776

Net carrying amount 282 947 402 621 9 409 694 977 249 403 400 421 9 844 659 668

* The credit arising from the UK debt restructure during 2010 amounting to R28 842 439 was reallocated from accumulated amortisation to cost of goodwill in the 2011 financial year. This had no effect on the net carrying amount of goodwill.

TrademarksAll the Group’s trademarks have been assessed as indefinite life intangible assets. The trademarks acquired in 2012 as part of a

business combination relate to the acquisition of the businesses of Milky Lane and Juicy Lucy. The trademarks acquired in 2011

as part of business combinations relate to the acquisition of the businesses of KEG, McGinty’s, Blacksteer and Vovo Telo artisan

bakery and café.

The Group does not amortise its brands by value. In arriving at the conclusion that a brand has an indefinite life, management

considers that the Group is a brands business and expects to acquire, hold and support brands for an indefinite period. The Group

supports its brands through spending on consumer marketing and through significant investment in promotional support.

Indefinite life trademarks are assessed as such, as management believes there is no foreseeable limit over which the Group

will continue to generate revenues from their continued use. Supporting this assumption is the fact that the brands held are

established, well known, and can reasonably be expected to generate revenues beyond the Group’s strategic planning horizon.

In addition, the Group can continue to renew legal rights attached to such trademarks, without significant costs, and intends to do

so beyond the foreseeable future.

As disclosed in note 18, the Group has hypothecated certain trademarks in favour of Investec Bank Limited.

GoodwillGoodwill acquired during the year ended February 2011 as part of business combinations related to the acquisitions of the

O’Hagan’s brand and Giramundo, a peri-peri flame-grilled chicken business.

Franchise incentives, lease premiums and similarFranchise incentives and similar represent financial assistance given to franchisees in respect of fit-out costs. Together with lease

premiums, these are initially measured at cost and amortised over the period of the agreements.

2012

Trade-marks

R000Goodwill

R000

Franchiseincentives,

lease premiums

and similarR000

TotalR000

Notes to the annual financial statements




10. INTANGIBLE ASSETS continued

Impairment reviews of goodwill and indefinite life intangible assetsFor the purposes of impairment testing, goodwill is allocated to the smallest cash-generating unit. Significant goodwill and

indefinite life intangible asset carrying amounts and the cash-generating units to which they relate are detailed below:

Unit(s) allocated

2012Carrying amount

R000

2011Carrying amount

R000

Trademarks

Franchise division – LocalWimpy, Debonairs Pizza, FishAways, Milky Lane, Juicy Lucy,

Steers, tashas, Blacksteer, Vovo Telo, KEG, McGinty’s,

Local franchise revenue stream 111 896 80 659

Mugg & Bean Mugg & Bean revenue stream 114 357 114 357

Franchise division – InternationalWimpy UK Famous Brands UK franchise revenue stream 56 694 54 046

GoodwillFranchise division – LocalWimpy, Debonairs Pizza, FishAways, Steers, O’Hagan’s Local franchise revenue stream 297 423 297 423Franchise division – InternationalWimpy UK Famous Brands UK franchise revenue stream 72 718 70 519

South African-based intangibles: The recoverable amounts of trademarks and goodwill have been determined on the basis of

value-in-use calculations. Value-in-use calculations use cash flow projections based on 2013 financial year budgets, approved by

management, extrapolated by a combination of volume growth rates and long-term growth rates of between 6% and 35% for four

years. These five-year cumulative cash flows are discounted using a pre-tax weighted average cost of capital of 15.8% (2011: 16.9%).

UK-based intangibles: The recoverable amounts of trademarks and goodwill and other intangibles have been determined on the

basis of value-in-use calculations. Value-in-use calculations use cash flow projections based on 2013 financial year budgets,

approved by management, extrapolated over the following four years with an annuity calculation thereafter to represent a terminal

value at an average growth rate of 3% (2011: 5%). The five-year cumulative cash flow was discounted using a pre-tax weighted

average cost of capital of 9.9% (2011: 10.5%). For the period to February 2012 an impairment of R1 242 150 or GBP105 000 was

recognised.

Key assumptions used in value-in-use calculations include budgeted manufacturing margins and budgeted franchise revenue

streams. Such assumptions are based on historical results adjusted for anticipated future growth. These assumptions are a

reflection of management’s past experience in the market in which these units operate.

Based on the above assumptions, management’s calculations of recoverable amounts were greater than the carrying amounts.

Sensitivity analysisIf the revised estimated pre-tax discount rate applied to the discounted cash flows had been 10% less favourable than

management’s estimates, the Group would need to reduce the carrying value of the trademarks by Rnil (2011: Rnil) and goodwill by

R14 873 572 (2011: R9 035 369). The increase in the possible impairment is principally due to a deterioration in forecast trading

conditions. If the actual gross margin and the pre-tax discount rate had been more favourable than management’s estimates, the

Group would not be able to reverse any impairment losses that arose on trademarks, if this resulted from the disposal of the

relevant business in the cash-generating unit, as no previous trademark impairment has been recognised. IAS 36 does not permit

reversing an impairment loss for goodwill.

2012Carrying amount

R000


Group Company

2012R000

2011

R000

2012R000

2011

R000

11. INVESTMENT IN SUBSIDIARIES

Unlisted shares at cost less amounts written off 326 997 317 618

Net amount owing to subsidiaries (74 062) (82 822)

252 935 234 796

A schedule of subsidiaries of the company is set out in Annexure A.

12. DEFERRED TAXATION

Movement:

Balance at the beginning of the year 43 355 39 563 (2 511) (2 563)

Acquired in business combinations – 1 213 – –

Adjustment in respect of the prior year (4 562) – – –

Foreign currency effect (543) (576)

Movement through profit and loss (3 676) 3 155 235 52

Movement due to change in capital gains taxation rate 5 588 – – –

40 162 43 355 (2 276) (2 511)

Analysis:

Excess capital allowances over depreciation 20 583 25 185 – –

Effect of taxation losses (359) (15) – –

Prepayments 1 118 1 562 – –

Provisions (6 661) (7 834) – –

Other temporary differences (10 067) (5 502) (2 276) (2 511)

4 614 13 396 (2 276) (2 511)

Trademark valuation upon business combinations 35 548 29 959 – –

40 162 43 355 (2 276) (2 511)

The deferred tax liability of R35 548 369 (2011: R29 960 511) is

associated with the valuation of the trademarks under IFRS 3 Business Combinations. This will only reverse on a change in tax rate, an

impairment of the trademark asset or on disposal of the businesses.

The balance comprises:

Aggregate of deferred tax assets (8 588) (2 808) (2 276) (2 511)

Aggregate of deferred tax liabilities 48 750 46 163 – –

40 162 43 355 (2 276) (2 511)

13. INVENTORIES

Raw materials 49 110 21 372 – –

Finished goods 69 000 53 657 – –

Consumables 1 877 523 – –

119 987 75 552 – –

The amount of inventories recognised as an expense during the period amounted to R1 232 647 744 (2011: R1 057 340 240).

Writedowns of inventories to their net realisable value and obsolete stock provisions, mainly relating to finished goods, amounted

to R2 626 110 (2011: R4 684 195), and have reduced gross inventories to the carrying amounts above.

There are no inventories pledged as security for liabilities.

2012R000

2012R000



Group Company

2012R000

2011

R000

2012R000

2011

R000

14. TRADE AND OTHER RECEIVABLES

Gross trade receivables 199 796 181 742 – –

Provisions for impairments (6 252) (7 604) – –

Net trade receivables 193 544 174 138 – –

Prepayments 976 937 – –

Other 5 392 7 497 – –

199 912 182 572 – –

As disclosed in note 18.2, the Group has ceded certain trade

receivables in favour of Investec Bank Limited.

GROUP

Credit quality of trade and other receivables

The Group has a wide customer base. No credit rating has been

obtained from banks. One debtor has a balance in excess of 5%

of the trade receivables balance amounting to R16 865 133 (2011:

R13 796 691).

The table below illustrates the trade receivables ageing analysis:

Less than 30 days 174 134 148 810

31 to 60 days 14 777 16 138

61 to 90 days 8 020 4 335

91 to 120 days 180 3 720

Over 120 days 2 685 8 739

199 796 181 742

It is the policy of the company to allow 7 to 90 day payment terms.

Fair value of trade and other receivables

There is no material difference between the fair value of trade

and other receivables and their book value.

Trade and other receivables past due and not impaired

Trade and other receivables which are less than three months

past due are not considered to be impaired.

At 29 February 2012, amounts further past due but not impaired

were Rnil (2011: R4 854 887). The ageing of these amounts further

past due but not impaired was as follows:

30 days – 1 439

Over 30 days – 3 416

2012R000

2012R000



Group Company

2012R000

2011

R000

2012R000

2011

R000

14. TRADE AND OTHER RECEIVABLES continued

Trade and other receivables impaired

At 29 February 2012, trade and other receivables were impaired

and provided for.

The amount of the provision at 29 February 2012 was R6 251 951

(2011: R7 603 960).

The ageing of these receivables is as follows:

31 to 90 days 3 387 –

Over 90 days 2 865 7 604

6 252 7 604

Reconciliation of provisions for impairment of trade and other receivables

Opening balance 7 604 6 288

Provision for impairment 613 4 414

Amounts written off as uncollectible (1 965) (3 098)

6 252 7 604

The maximum exposure to credit risk at the reporting date is the

fair value of trade and other receivables above.

The Group does not hold any collateral as security.

15. SHARE CAPITAL

Authorised

200 000 000 (2011: 200 000 000) ordinary par value shares

of 1 cent each 2 000 2 000 2 000 2 000

Issued

96 192 435 (2011: 95 817 596) ordinary par value shares of 1 cent

each 962 958 962 958

Adjusted for treasury shares held

Nil (2011: 161) ordinary par value shares of 1 cent each held by

the share incentive scheme – –

Adjusted issued

96 192 435 (2011: 95 817 435) ordinary par value shares of

1 cent each 962 958 962 958

Unissued

103 807 565 (2011: 104 182 404) ordinary par value shares

of 1 cent each 1 038 1 042 1 038 1 042

15% of the unissued shares are under the control of the directors until the next annual general meeting.

5 199 916 (2011: 5 518 690) of the unissued ordinary shares are specifically reserved for the share incentive scheme, of which 3 835 000

(2011: 3 660 000) options have already been offered to and accepted by directors and employees.

2012R000

2012R000



Group Company

2012R000

2011

R000

2012R000

2011

R000

16. SHARE PREMIUM

Balance at the beginning of the year 30 422 15 189 31 794 16 559

Premium on shares issued 5 651 15 236 5 651 15 235

Sale of treasury shares 2 –

36 075 30 425 37 445 31 794

Nil (2011: 161) treasury shares held by the share incentive

scheme at cost – (3)

Balance at the end of the year 36 075 30 422 37 445 31 794

17. NON-DISTRIBUTABLE RESERVES

Capital profit on sale of the company’s business to a subsidiary 10 775 10 775

Foreign currency translation reserve (13 845) (21 682)

Share-based payments 28 016 18 638 28 016 18 638

14 171 (3 044) 38 791 29 413

18. INTEREST-BEARING BORROWINGS

18.1 Instalment sale liabilities

Secured in terms of instalment sale agreements held with

Nedbank over property, plant and equipment having a carrying

amount of R285 134 (2011: R6 162 832) (refer to note 9). The

agreements bear interest at prevailing market rates when

entered into and are repayable over a period of 36 to 60 months.

The current monthly instalment is R15 538 (2011: R413 985).

Instalment sale agreements arose to facilitate the purchase of

property, plant and equipment. 114 1 777 – –

18.2 Secured loans

Secured loan from Investec Bank Limited bearing interest at 2.25%

above the three month JIBAR rate. The final quarterly repricing

JIBAR rate was 5.60% (2011: 5.575%). The loan is repayable in

quarterly instalments which commenced on 15 August 2008 with

a final instalment on 16 May 2013. The current instalment is

R8 363 809 (2011: R8 362 094). The loan arose to fund the

acquisition of the Cape Franchising business and related assets. 39 589 68 584 – –

Secured loan from Investec Bank Limited bearing interest at 4.0%

above the three month JIBAR rate. The final quarterly repricing

JIBAR rate was 5.60% (2011: 5.575%). The loan is repayable in

quarterly instalments which commenced on 11 February 2010

with a final instalment on 11 November 2014. The current

instalment is R6 644 235 (2011: R6 641 750). The loan arose to

fund the acquisition of the Mugg & Bean business. 63 905 83 274 – –

2012R000

2012R000



Group Company

2012R000

2011

R000

2012R000

2011

R000

18. INTEREST-BEARING BORROWINGS continued

18.2 Secured loans continued

Secured loan from Investec Bank Limited bearing interest at 2.25% above the three month JIBAR rate. The final quarterly repricing JIBAR rate was 5.58% (2011: 5.55%). The loan is repayable in quarterly instalments which commenced on 1 June 2006 with a final instalment on 30 November 2012. The current instalment is R514 044 (2011: R513 905). The loan arose to enable the Group to repay debt and facilitate cash flow requirements. 1 997 3 845 – –

Secured loan from Investec Bank Limited bearing interest at 2.25% above the three month JIBAR rate. The final quarterly repricing JIBAR rate was 5.60% (2011: 5.575%). The loan is repayable in quarterly instalments which commenced on 1 June 2007 with a final instalment on 26 February 2013. The current instalment is R2 228 377 (2011: R2 228 037). The loan arose to enable the Group to facilitate cash flow requirements. 8 502 16 366 – –

Secured loan from Investec Bank Limited bearing interest at 2.25% above the three month JIBAR rate. The final quarterly repricing JIBAR rate was 5.58% (2011: 5.55%). The loan is repayable in quarterly instalments which commenced on 1 June 2007 with a final instalment on 1 March 2013. The current instalment is R1 672 237 (2011: R1 671 734). The loan arose to enable the Group to facilitate cash flow requirements. 8 045 13 940 – –

The above loans from Investec Bank Limited are secured by irrevocable, unconditional, joint and severable guarantees issued by the company and certain of its subsidiaries. As further security for the obligations arising in terms of the guarantees issued above, certain subsidiaries have hypothecated their rights to their trademarks and ceded their trade receivables in favour of the bank.

In terms of the articles of association of the company, the borrowing powers of the directors shall be unlimited.

Repayments within one year will be funded by existing cash balances and future cash inflows.

Total liabilities 122 152 187 786 – –

Repayable within one year transferred to current liabilities 69 936 65 775 – –

Non-current liabilities 52 216 122 011 – –

Repayable within 2 – 5 years 52 216 122 011 – –

19. TRADE AND OTHER PAYABLES

Trade payables 90 856 82 857 115 1

Accruals and deferred income 82 396 85 286 – 1

Advertising levy surplus 2 758 5 499 – –

Other 10 764 5 265 125 203

186 774 178 907 240 205

Accruals and deferred income represent miscellaneous contractual liabilities that relate to expenses that were incurred, but not paid for at the year end and income received during the year, for which the Group had not supplied the goods or services at the end of the year.

The book value of trade payables, accruals and deferred income is considered to be in line with their fair value at the statement of financial position date.

Other payables comprise miscellaneous minor items.

2012R000

2012R000




Group Company

2012R000

2011

R000

2012R000

2011

R000

20. DEFERRED LEASE LIABILITIES

Opening balance 9 896 9 177 8 967 8 384

Movement during the year (1 073) 719 (839) 583

Closing balance 8 823 9 896 8 128 8 967

Analysed as follows:

Current liabilities 3 165 1 038 2 470 902

Non-current liabilities 5 658 8 858 5 658 8 065

8 823 9 896 8 128 8 967

21. CASH FLOW INFORMATION

21.1 Reconciliation of profit before taxation to cash generated by operations

Profit before taxation 402 004 343 519 175 709 170 408

Adjustments for:

Amortisation of intangible assets 1 795 1 631 – –

Depreciation on property, plant and equipment 27 241 24 402 – –

Dividends received (175 000) (170 000)

Equity loans foreign currency effect 597 (1 500) – –

Fair value adjustment on investment – – – (6 587)

Impairment of investment – – – 6 587

Impairment of goodwill 1 242 – – –

Movement in share-based payment liability 913 – – –

Movement in deferred lease liabilities (1 073) 719 (838) 583

Movement in doubtful debts provision (1 352) 1 316 – –

Net interest paid/(received) 10 652 14 934 (122) (96)

Loss/(profit) on disposal of property, plant and equipment 239 (227) – –

Share-based payments reserve 9 378 7 339 – –

Cash generated before changes in working capital 451 636 392 133 (251) 895

Working capital changes (52 926) 4 796 34 (136)

(Increase)/decrease in inventories (44 430) 4 592 – –

Increase in receivables (15 690) (23 039) – –

Increase/(decrease) in payables 7 194 23 243 34 (136)

Cash generated by operations 398 710 396 929 (217) 759

21.2 Reconciliation of taxation paid during the year

Amounts owing at the beginning of the year (5 812) (20 342) (2 248) (1 305)

Amounts charged to profit and loss (133 950) (112 520) (16 365) (13 856)

Adjustment for deferred taxation (3 193) 3 155 235 52

Foreign currency effect (94) –

Amounts owing at the end of the year 11 330 5 812 1 510 2 248

(131 719) (123 895) (16 868) (12 861)

2012R000

2012R000


Group Company

2012R000

2011

R000

2012R000

2011

R000

21. CASH FLOW INFORMATION continued

21.3 Reconciliation of dividends paid during the year

Amounts owing at the beginning of the year (686) (531) (686) (531)

Amounts charged to retained earnings (159 150) (127 972) (158 565) (127 749)

Amounts owing at the end of the year 671 686 671 686

(159 165) (127 817) (158 580) (127 594)

21.4 Investment in subsidiaries

Effective 1 October 2010, a 51% interest was acquired in Vovo

Telo Bakery and Café Proprietary Limited for a consideration of

R3.8 million. The purchase consideration was allocated to the

trademark.

Fair value of assets and liabilities acquired

Intangible assets – trademark – 8 664

Deferred tax liability – (1 213)

Net assets acquired – 7 451

Non-controlling interests measured at their share of the fair value

of net assets – (3 651)

Cash flow on investment in subsidiary – 3 800

Effective 1 August 2010, a 51% interest was acquired in Souldance

Holdings 11 Proprietary Limited, the entity housing the

Giramundo chicken business, for a consideration of R1.2 million.

The Group capitalised the venture at R1.2 million resulting in

goodwill of R588 000 and effectively there was no Group cash

outflow as a result of the transaction.

Fair value of assets after capitalisation – 1 200

Non-controlling interests measured at their share of the fair value

of net assets – (588)

– 612

Amount capitalised – 1 200

Goodwill – 588

Cash flow on investment in subsidiary – –

Total cash flow on investment in subsidiaries – 3 800

2012R000

2012R000




Group Company

2012R000

2011

R000

2012R000

2011

R000

21. CASH FLOW INFORMATION continued

21.5 Acquisition of businesses

Effective 1 March 2011, the Group acquired the businesses of the

Juicy Lucy and Milky Lane brands for a purchase consideration

of R30.9 million*. The purchase consideration was allocated to

trademarks. 30 896 –

Effective 1 September 2010, the Group acquired the businesses

of the KEG and McGinty’s brands for a purchase consideration

of R27.0 million*. The purchase consideration was allocated

to trademarks. – 27 000

Net assets acquired 30 896 27 000

Cash flow on acquisition of businesses 30 896 27 000

Effective 1 December 2010, the Group acquired the pub and grill

business of the O’Hagan’s brand for a purchase consideration of

R13.0 million*. The full purchase consideration was allocated to

goodwill because of anticipated scale and merger benefits. – 13 000

Net assets acquired – 13 000

Cash flow on acquisition of business – 13 000

Total cash flow on acquisition of businesses 30 896 40 000

Revenues and operating profits of these acquisitions have been

incorporated into the Group’s reporting structures and segments

and additional synergies are not measured independently.

* The acquisition of these brands aligns with our strategic intent to grow and develop franchised leisure brands supported by the Group’s vertically integrated business model.

21.6 Cash and cash equivalents

Cash and cash equivalents included in the cash flow statements

comprise the following statement of financial position items:

Cash and bank balances 40 580 86 397 1 085 4 734

As described in the accounting policies certain bank overdrafts payable on demand fluctuate from being positive to overdrawn and

are considered an integral part of the Group’s cash management for cash flow statement purposes.

There is no material difference between the fair value and the book value of cash and cash equivalents.

22. CONTINGENT LIABILITIES

22.1 The company and its South African subsidiaries have issued an irrevocable, unconditional, joint and severable guarantee in favour

of Investec Bank Limited to secure the Group’s obligations. The total Group obligation at year end amounts to R122 038 146 (2011:

R186 009 765). As a further security, certain companies within the Group have hypothecated rights to trademarks in favour of

Investec Bank Limited.

22.2 The company and its South African subsidiaries have issued an unlimited suretyship in favour of First National Bank to secure the

banking facilities entered into by certain subsidiary companies.

22.3 Guarantees issued by banks in favour of trade creditors totalled R6 898 914 (2011: R3 877 951).

2012R000

2012R000


23. COMMITMENTS

23.1 Operating leases – leasehold premises and equipment

The company and the Group have commitments arising from property leases for its own business operations and leases entered

into to secure key sites for franchised outlets. With regard to leases entered into to secure key sites, it is the Group’s policy to enter

into sub-lease agreements with the franchisees on the same terms and conditions as those in the main lease.

In circumstances where the amounts recoverable are lower than the amounts payable, the company immediately recognises

provisions for onerous contracts.

Certain operating commitments relating to computer equipment exist.

The net future minimum rentals due under operating leases are as follows:

Group Company

2012R000

2011

R000

2012R000

2011

R000

Gross amounts due 159 122 161 406 48 263 64 353

Amounts recoverable from sub-lessees (72 085) (73 792) (48 263) (64 353)

87 037 87 614 – –

The gross future minimum rentals due are repayable as follows:

Payable within the next twelve months 49 612 43 516 17 722 16 090

Payable within two to five years 108 742 117 890 30 541 48 263

Thereafter 768 – – –

159 122 161 406 48 263 64 353

23.2 Capital expenditure

Approved by the directors but not contracted for 35 328 43 968 – –

This capital expenditure relates to additions and improvements to production facilities, motor vehicles, franchise incentives,

computer equipment and furniture and fittings.

It is anticipated that this expenditure will be financed by existing borrowing facilities and internally generated funds.

24. RETIREMENT BENEFIT PLANS

Employees within the Group are members of four provident funds. Three funds are administered by Liberty Life and one fund by

Borwa Financial Services. Each fund provides benefits on a defined contribution basis. The funds are subject to the Pensions Fund

Act of 1956 as amended. All employees of the Group are eligible to be members of the funds. As at 29 February 2012, the

membership of the funds was 1 187 (2011: 1 123) employees. The Group’s contribution to the provident funds for the year was

R14 250 268 (2011: R12 218 153). The market value of the investments of the various funds as at 29 February 2012 was R57.3 million

(2011: R47.3 million).

2012R000

2012R000




25. DIRECTORS’ INTEREST IN SHARES

Beneficial Total

Name of director Direct

000Indirect

0002012 000

2011 000

Executive

Mr T Halamandaris 10 000 – 10 000 10 135

Mr KA Hedderwick 996 – 996 1 256

Non-executive

Mr HR Levin 1 000 – 1 000 1 000

Mr P Halamandaris 2 196 9 070 11 266 11 542

Mr P Halamandaris (Jnr) 7 722 155 7 877 8 177

Mr JL Halamandres 6 066 – 6 066 6 443

27 980 9 225 37 205 38 553

No director has any non-beneficial interest in the ordinary shares of the company.

The company has not been advised of any changes in the above interests of the directors during the period up to the date of this

report.

26. DIRECTORS’ REMUNERATION

Name of director

For services as directors

R000

Remune-rationR000

BonusesR000

Allowances and

benefitsR000

TotalR000

29 February 2012

Executive

Mr T Halamandaris 1 621 531 712 2 864

Mr KA Hedderwick 3 673 1 279 168 5 120

Mr SJ Aldridge 1 458 408 – 1 866

Non-executive

Mr HR Levin 110 110

Mr P Halamandaris 120 120

Mr P Halamandaris (Jnr) 80 80

Mr JL Halamandres 130 130

Mr BL Sibiya 120 120

Mr CH Boulle 40 40

600 6 752 2 218 880 10 450

Less: Paid by subsidiaries – (6 752) (2 218) (880) (9 850)

600 – – – 600

Direct000

Indirect000

2012 000

Di


R000

Remune-rationR000

BonusesR000

Allowances and

benefitsR000

TotalR000


26. DIRECTORS’ REMUNERATION continued

Name of director


R000

Remune-rationR000

BonusesR000

Allowances and

benefitsR000

TotalR000

28 February 2011

Executive

Mr T Halamandaris 2 725 1 684 737 5 146

Mr KA Hedderwick 3 081 1 600 452 5 133

Mr SJ Aldridge 1 326 550 48 1 924

Non-executive

Mr HR Levin 220 220

Mr P Halamandaris 160 160

Mr P Halamandaris (Jnr) 80 80

Mr JL Halamandres 160 160

Mr BL Sibiya 120 120

740 7 132 3 834 1 237 12 943

Less: Paid by subsidiaries – (7 132) (3 834) (1 237) (12 203)

740 – – – 740

Performance bonuses reflect the amounts accrued in respect of the year to which the performance relates.

There were no contributions to provident funds by the Group on behalf of the directors.

IFRS 2 Share-based Payments amounts of R2 043 301 (2011: R1 385 606), R1 475 639 (2011: R1 268 488) and R626 212 (2011: R407 130)

were recognised in respect of options granted to Mr KA Hedderwick, Mr T Halamandaris and Mr SJ Aldridge respectively. The

directors’ share-based payment amounts are not included in the remuneration above.

27. SHARE-BASED PAYMENTS

27.1 Equity-settled share-based payments

Famous Brands Limited operates The Steers Share Incentive Trust (Share Incentive Scheme). This enables directors, executive

management and specified directors of subsidiaries to benefit from the Famous Brands Limited share price performance.

This scheme confers the right to participants to acquire ordinary shares at the value of the Famous Brands Limited share at the

date that the option is granted. On acceptance of the option, the participant has the right to exercise the option at any time, after

vesting, during the option life, in as many tranches as the participant may elect. To receive shares, participants must be employed

by the company when the rights to the shares vest. The directors of the company may amend the vesting period of the options by

board resolution.

The scheme has a single type of vesting category as illustrated below:

Vesting category Vests at

end of year%

vestingExpiry after grant (years)

Type A 3 100 7

Vests atend of year

% vesting

Expiry after grant (years)

Vests at



27. SHARE-BASED PAYMENTS continued

27.1 Equity-settled share-based payments continued

A reconciliation of the movement of all share options is detailed below:

Option exercise price range (Rand)

Number of options

Share Incentive Scheme 2012 2011 2012 2011

Opening balance 15.00 – 28.00 12.00 – 18.25 3 660 000 3 170 000

Options granted and accepted – management 43.40 28.00 470 000 820 000

Options granted and accepted – directors 43.40 28.00 200 000 650 000

Lapses 16.10 – 43.40 15.00 – 16.10 (120 000) (57 000)

Allotted and issued 15.00 – 18.25 12.00 – 18.25 (375 000) (923 000)

Options granted, shares not issued up to end of period 3 835 000 3 660 000

The last options were granted on 30 May 2011.

The following options have been granted and accepted, but delivery of shares will only take place in the future:

Number of ordinary shares Option exercise price (Rand) Last vesting date

10 000 18.25 Year to February 2011


1 675 000 16.10 Year to February 2013

1 400 000 28.00 Year to February 2014


3 835 000

Share options held by executive directors are detailed below:

Number of options

2012 2011

Mr T Halamandaris 650 000 650 000

Mr KA Hedderwick 850 000 700 000

Mr SJ Aldridge 250 000 200 000

The share options granted have been valued, at grant date, using either the Black-Scholes-Merton model or a trinomial tree which

takes account of the vesting period (European style option) and the period post-vesting (American style option).

Expected volatility of the share price was determined by giving consideration to the historical volatility of the Famous Brands

Limited share price.

The weighted fair value of the options granted and the related assumptions utilised are detailed below:

2012 2011

Number of options granted and accepted 670 000 1 470 000

Weighted average fair value at grant date (Rand) 10.88 9.35

The principal inputs are as follows:

Weighted average share price (Rand) 44.11 29.69

Exercise price (Rand) 43.40 28.00

Expected life (years) 4.0 5.0

Expected volatility (%) 27 31

Risk-free interest rate (%) 7.47 7.82

Average expected dividend yield (%) 3.0 3.8

During 2012 the equity-based share-based payment charge to profit or loss amounted to R9 377 940 (2011: R7 338 635).

2012 2012

Option exercise price (Rand) Last vesting dateOption e

2012

2012



27. SHARE-BASED PAYMENTS continued

27.2 Cash-settled share-based payments

For cash-settled share-based payments, the liability of the fair value of unexercised share appreciation rights which are expected

to vest, is determined initially at grant date and then revalued at each reporting date and amortised over the applicable period.

During 2011, the Group introduced a share appreciation bonus scheme which allows certain senior managers to earn a bonus

based upon the increase in the Famous Brands Limited share price between the grant date and the vesting date. Executive

directors have not been granted rights under this scheme. Participants are allocated a notional number of shares (rights) and will

be paid a cash bonus equal to the share price appreciation at the expiry of the three-year period.

The scheme has a single type of vesting category, namely that rights vest and expire three years after the grant date. Payment of

the bonuses must occur within 10 business days of the vesting date.

Rights granted on 30 May 2011 amounted to 93 500 at a notional grant price of R43.40. After 5 000 rights lapsed, there were 88 500

rights outstanding at 29 February 2012.

The share options granted have been valued, at grant date, using the Black-Scholes-Merton model. The principal inputs for the

valuations of the cash-settled share-based payments granted in May 2011 were the same as for the valuations of the equity-settled

share-based payments granted on the same date.

During 2012, the cash-settled share-based payment charge to profit or loss amounted to R913 144 (2011: Rnil). Based upon the

closing share price of 4 405 cents at 29 February 2012 the potential liability has been provided for.

28. RELATED PARTY TRANSACTIONS

The Group, in the ordinary course of business, entered into various transactions with related parties. These transactions occurred

under terms and conditions no more favourable than those entered into with third parties.

28.1 Franchise agreements

Directors have interests in 14 franchised outlets. Franchise fees and product sales have been charged under terms and conditions

no more favourable than those entered into with third parties.

28.2 Lease agreements

The Group has entered into lease agreements with an entity controlled by certain directors. The transactions were concluded at

market-related rates prevailing at the time of entering into the transactions.

28.3 Supply agreements

The Group has entered into a supply agreement with an entity controlled by certain directors. All products purchased were

concluded at market-related prices.

28.4 Professional fees

Professional fees have been paid to a firm of which two non-executive directors are partners. The transactions were conducted at

market-related rates prevailing at the time of entering into the transactions.

28.5 Management fees

Management fees have been paid to an executive director of a subsidiary company for providing operational management

services to the franchising business. The transactions were conducted at market-related rates prevailing at the time of entering

into the transactions.

The aggregate of the above transactions is as follows: 2012R000

2011R000

Sale of product and franchise fee revenue 31 253 2 621

Lease payments 16 090 14 668

Purchases of product 84 359 49 520

Professional fees paid 118 111

Management fees paid 2 894 –

Amounts owing to related parties 390 182

Amounts receivable from related parties 1 544 –

28.6 Transactions between the holding company and subsidiaries

Rent received 16 194 14 668

Dividends received 175 000 170 000

Management fees received by the company from the operating subsidiary for statutory costs incurred 647 2 806

2012R000



28. RELATED PARTY TRANSACTIONS continued

28.7 Directors’ remuneration

The remuneration for directors of the holding company paid during the year by subsidiaries within the Group has been disclosed in

note 26.

28.8 Employee remuneration

The remuneration to all employees amounted to R259 815 591 (2011: R233 568 577).

29. RISK MANAGEMENT

The board of directors has approved strategies for the management of financial risks, which are in line with corporate objectives.

These guidelines set up the short-term and long-term objectives and actions to be taken in order to manage the financial risks that

the Group faces.

The major guidelines of this policy are the following:

Minimise interest rate, currency and market risk for all kinds of transactions.

All financial risk management activities are carried out and monitored at central level.

All financial risk management activities are carried out on a prudent and consistent basis and follow the best market practices.

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk),

credit risk, liquidity risk and capital risk.

The following table summarises the carrying amount of financial assets and liabilities recorded at 29 February 2012 by IAS 39

category:

Group Company

2012R000

2011

R000

2012R000

2011

R000

Financial assets

Available-for-sale: Investment in subsidiaries 326 997 317 618

Cash and cash equivalents 40 580 86 397 1 085 4 734

Loans and receivables: Trade and other receivables 199 912 182 572 – –

Fair value through profit or loss: Loans to Group companies 5 246 6 492

240 492 268 969 333 328 328 844

Financial liabilities

Measured at amortised cost: Trade and other payables 176 010 173 642 115 2

Measured at amortised cost: Borrowings 122 152 187 786 – –

Fair value through profit or loss: Loans from Group companies 79 308 89 314

Measured at amortised cost: Shareholders for dividends 671 686 671 686

298 833 362 114 80 094 90 002

For financial instruments measured at fair value through profit or loss, in terms of the hierarchy, these are classified as level 3 as

the valuation techniques used are not based on observable market data.

2012R000

2012R000



29. RISK MANAGEMENT continued

29.1 Liquidity risk

The Group manages liquidity risk on the basis of expected maturity dates, through an ongoing review of future commitments and

credit facilities. Cash flow forecasts are prepared, adequate borrowing facilities are secured and utilisation monitored.

The following table analyses financial liabilities by remaining contractual maturity (contractual and undiscounted cash flows):

Less than 1 year

R000 1 – 5 years

R000 Total R000

GROUP

2012

Trade and other payables 176 010 – 176 010

Interest-bearing borrowings 86 166 56 545 142 711

Shareholders for dividends 671 – 671

262 847 56 545 319 392

2011

Trade and other payables 173 642 – 173 642

Interest-bearing borrowings 79 448 134 199 213 647


253 776 134 199 387 975

COMPANY

2012

Trade and other payables 115 – 115

Loans from Group companies 79 308 – 79 308


80 094 – 80 094

2011

Trade and other payables 2 – 2

Loans from Group companies 89 314 – 89 314


90 002 – 90 002

The carrying amount of the financial liabilities is considered to be in line with the fair value at the reporting date.

At present the Group expects to pay all liabilities at their contractual maturity. In order to meet such cash commitments the Group

expects operating activities to generate sufficient cash inflows. In addition, the Group holds financial assets for which there is a

liquid market and that are readily available to meet liquidity needs.

Less than1 year

R000 1 – 5 years

R000Total R000

Less t




29.2 Interest rate risk

The Group’s exposure to interest rate risk mainly concerns financial liabilities. Liabilities are both floating rate and non-interest-bearing.

At present the Group does not hold loans and receivables that are long term in nature. The following table analyses the breakdown

of liabilities by type of interest rate:

Group Company

2012R000

2011

R000

2012R000

2011

R000

Floating rate 122 152 187 786 – –

Non-interest-bearing 176 681 174 328 80 094 90 002

298 833 362 114 80 094 90 002

Sensitivity analysis

A hypothetical increase/decrease in interest rates of 50 basis points, with all other variables remaining constant, would increase/

decrease profit after taxation by R283 328 (2011: R384 766).

A hypothetical increase/decrease in interest rates by 100 basis points, with all other variables remaining constant, would increase/

decrease profit after taxation by R566 656 (2011: R769 532).

The analysis has been performed for floating interest rate financial liabilities.

The impact of a change in interest rates on floating interest rate financial liabilities has been assessed in terms of the changing of

their cash flows and therefore in terms of the impact on net expenses.

As the Group has no significant interest-bearing assets, the Group’s income and operating cash flows are substantially independent

of changes in market interest rates.

29.3 Foreign currency risk

Since the Group operates internationally, it is exposed to foreign currency risk as part of its normal industrial and commercial

business.

The Group has certain investments in foreign operations whose net assets are exposed to foreign currency translation risk.

The Group, on occasion, hedges transactional foreign exchange exposures.

Financial assets are analysed by currency as follows: Group

2012

*CU000 2011

*CU000

*CU000: Currency unit thousands

GB Pound

Trade and other receivables 316 570

Cash and cash equivalents 2 717 2 318

Euro


Cash and cash equivalents 289 108

US Dollar


Cash and cash equivalents 1 062 826

Botswana Pula

Cash and cash equivalents – 2 195

2012R000

2012R000

2012*CU000




29.3 Foreign currency risk continued

Financial liabilities are analysed by currency as follows: Group

2012

*CU000 2011

*CU000

GB Pound

Trade and other payables 894 974

Euro

Trade and other payables 5 13

Exchange rates used for conversion of foreign amounts were:

Euro to GB Pound 1.18 1.18

Rand to Euro 10.14 9.65

Rand to GB Pound 11.96 11.40

Rand to US Dollar 7.55 7.07

Rand to Botswana Pula 1.07 1.09

Sensitivity analysis

At 29 February 2012, if the Rand had weakened/strengthened by 10% against any currency above, with all other variables held

constant, profit after taxation for the year would not have changed significantly.

29.4 Credit risk

Credit risk is managed on a Group-wide basis.

Credit risk consists mainly of cash deposits, cash equivalents and trade debtors. The Group only deposits cash with major banks

with high quality credit standing and limits exposure to any one counterparty.

Trade receivables comprise a widespread customer base. Management evaluates credit risk relating to customers on an ongoing

basis. If customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, risk control

assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual

risk limits are set based on internal or external ratings in accordance with limits set by the board. The utilisation of credit limits is

monitored regularly. Sales to retail customers are settled in cash or using major credit cards. Refer to note 14 for details on the

quality and provision for impairment of trade receivables.

Financial assets exposed to credit risk at year end were as follows:Group Company

2012R000

2011

R000

2012R000

2011

R000

Trade and other receivables 199 912 182 572 – –

Cash and cash equivalents 40 580 86 397 1 085 4 734

240 492 268 969 1 085 4 734

The Group is exposed to a number of guarantees for the overdraft facilities of Group companies and for guarantees issued in

favour of Investec Bank Limited. Refer to note 18.2 for additional details.

29.5 Capital risk

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern to provide

sustainable returns for shareholders, benefits for other stakeholders and to maintain, over time, an optimal capital structure to

reduce the cost of capital.

The capital structure of the Group consists of interest-bearing borrowings (note 18), cash and cash equivalents (note 21.6) and

equity as disclosed in the statement of financial position.

There have been no material changes to the Group’s management of capital, the strategy for capital maintenance or externally

imposed capital requirements from the previous years.

2012*CU000

2012R000

2012R000



30. PRIMARY (BUSINESS UNITS) AND SECONDARY (GEOGRAPHICAL) SEGMENT REPORT

For management purposes, the Group is organised into three major operating divisions: Franchising, Manufacturing and Logistics.

The Manufacturing and Logistics divisions are grouped together within a total Supply Chain business. Such structural organisation

is determined by the nature of risks and returns associated with each business segment and defines the management structure

as well as the internal reporting system. It represents the basis on which the Group reports its primary segment information.

The global operations of the Group are divided into two principal geographical areas. In the South African segment, housing

operations throughout Africa, the Group has all three business segments reflected below whereas in the United Kingdom only

a Franchising segment exists.

2012R000 %

2011R000 %

Segment revenue

Franchising 439 946 20 386 015 21

Supply Chain 1 613 907 75 1 382 778 73

Manufacturing 747 244 35 663 812 35

Logistics 1 516 375 70 1 262 325 67

Eliminations (649 712) (30) (543 359) (29)

Corporate 19 829 1 14 577 1

South Africa 2 073 682 96 1 783 370 95

Franchising (UK) 81 933 4 94 666 5

Group revenue 2 155 615 100 1 878 036 100

Segment profit

Franchising 264 685 64 234 971 66

Supply Chain 140 508 34 116 233 32

Manufacturing 87 784 21 77 788 22

Logistics 52 724 13 38 445 10

Corporate (40) 0 (3 489) (1)

South Africa 405 153 98 347 715 97

Franchising (UK) 7 503 2 10 738 3

Group profit 412 656 100 358 453 100

Segment assets

Franchising 617 469 53 569 924 54

Supply Chain 390 328 33 309 031 30

Manufacturing 175 138 15 120 838 12

Logistics 215 190 18 188 193 18

Corporate 15 995 1 23 743 2

South Africa 1 023 792 87 902 698 86

Franchising (UK) 146 823 13 145 941 14

Group assets 1 170 615 100 1 048 639 100

2012R000 %



30. PRIMARY (BUSINESS UNITS) AND SECONDARY (GEOGRAPHICAL) SEGMENT REPORT continued

2012R000 %

2011R000 %

Segment liabilities

Franchising 70 764 30 61 689 28

Supply Chain 91 117 39 87 304 40

Manufacturing 45 179 19 38 433 18

Logistics 45 938 20 48 871 22

Corporate 41 308 18 40 875 19

South Africa 203 189 87 189 868 87

Franchising (UK) 29 248 13 29 469 13

Group liabilities 232 437 100 219 337 100

Capital expenditure

Franchising 7 370 13 5 011 12

Supply Chain 40 033 72 29 445 71

Manufacturing 29 189 53 9 866 24

Logistics 10 844 19 19 579 47

Corporate 8 094 15 6 844 17

South Africa 55 497 100 41 300 100

Franchising (UK) 72 0 40 0

Group capital expenditure 55 569 100 41 340 100

Depreciation

Franchising 4 345 16 4 393 18

Supply Chain 16 885 62 14 944 61

Manufacturing 9 641 35 8 235 34

Logistics 7 244 27 6 709 27

Corporate 4 753 17 4 637 19

South Africa 25 983 95 23 974 98

Franchising (UK) 1 258 5 428 2

Group depreciation 27 241 100 24 402 100

The following table provides details of assets and liabilities not

allocated to business segments:

Assets

Deferred taxation 8 588 2 808

Taxation 1 386 1 468

Cash and cash equivalents 40 580 86 397

50 554 90 673

Liabilities

Borrowings 122 152 187 786

Deferred taxation 12 823 15 629

Shareholders for dividend 671 686

Taxation 12 716 7 280

148 362 211 381

2012R000 %


Annexure A – Schedule of investments in subsidiaries

Sharecapital Interest Shares

Amounts owing by/(to)

subsidiaries Profit/(loss)

2012

%2011

% 2012 R000

2011 R000

2012 R000

2011 R000

2012 R000

2011 R000

Direct

Baltimore Ice-Cream Proprietary Limited5 – – 100 – – – – – (1 493)

Creative Coffee Franchise Systems Proprietary Limited1 100 61 100 – – – – 939 –

Debonairs Pizza Proprietary Limited3 100 100 100 110 110 97 – 5 866 5 003

Famous Brands (Cyprus) Limited2 70 657 820 100 100 70 471 70 471 2 120 2 019 1 033 –

Famous Brands Development Proprietary Limited5 – – 100 – – – – – (5 624)

Famous Brands Food Services Proprietary Limited4 100 100 100 – – – – – –

Famous Brands Franchise Company Proprietary Limited5 – – 100 – – – – – 3 488

Famous Brands Management Company Proprietary Limited1 100 100 100 40 405 31 026 (74 252) (84 258) 229 998 189 822

FishAways Proprietary Limited3 2 000 100 100 2 269 2 269 – – 806 526

Mugg & Bean Franchising Proprietary Limited1 101 100 100 100 000 100 000 2 872 2 872 16 458 16 523

Pleasure Foods Proprietary Limited4 800 100 100 – – (1) (1) – (9)

Pleasure Foods Company Stores Proprietary Limited5 – – 100 – – – – – (3 437)

Pleasure Foods Intellectual Property Proprietary Limited3 800 100 100 107 499 107 499 (5 055) (5 055) 24 488 26 647

Pleasure Foods Property Holdings 1 Proprietary Limited1 100 100 100 – – – – (80) 10

The Steers Share Incentive Trust 100 100 – – – 1 444 95 145

Stedewish Proprietary Limited3 100 100 100 – – – – – –

Steers Proprietary Limited3 200 100 100 6 243 6 243 157 157 5 717 6 388

Steers Group Stores Proprietary Limited5 – – 100 – – – – – 21

TruFruit Proprietary Limited5 – – 100 – – – – – (1 403)

Indirect

Catermeat Proprietary Limited4 100 100 100 (14) –

Famous Brands Properties Proprietary Limited5 – – 100 – (2 186)

Famous Brands UK Limited2 5 434 185 95 95 4 829 8 571

Mountain Rush Trading 4 Proprietary Limited1 100 51 51 1 713 672

Quantum International Proprietary Limited4 1 000 100 100 – (32)

Quickstep Investment 10 Proprietary Limited4 1 000 100 100 (196) (7)

Souldance Holdings 11 Proprietary Limited1 100 51 51 (905) (138)

Steers Holdings (Jersey) Limited2 16 100 100 1 529 952

Vovo Telo Bakery and Café Proprietary Limited1 1 000 51 51 1 (38)

Venus Solutions Limited2 9 584 100 100 1 367 (1 189)

Wimpy Marketing Fund Proprietary Limited4 2 100 100 – 8

326 997 317 618 (74 062) (82 822) 293 644 243 220

Total losses (1 195) (15 556)

Total profit 294 839 258 776

All the above subsidiaries are incorporated in South Africa, except for Famous Brands UK Limited and Venus Solutions Limited, incorporated in the United Kingdom, Famous Brands (Cyprus) Limited, incorporated in Cyprus and Steers Holdings (Jersey) Limited, incorporated in Jersey.

Main business1. Franchisor, product manufacture, distribution, management and administration2. Offshore holding company3. Trademark owning4. Dormant5. Deregistered

2012 %

2012 R000

2012 R000

2012 R000


Shareholder analysis

Shareholders’ diary

Number of

shareholders %Number

of shares %

ANALYSIS OF SHAREHOLDERS

Holdings

1 – 10 000 4 215 91.22 6 944 583 7.21

10 001 – 50 000 282 6.10 6 094 487 6.34

50 001 – 100 000 41 0.89 2 977 581 3.10

100 001 – 1 000 000 69 1.49 24 496 484 25.47

1 000 001 and more 14 0.30 55 679 300 57.88

4 621 100.00 96 192 435 100.00

ANALYSIS OF HOLDING

Individuals 3 454 74.74 41 138 261 42.77

Insurance companies 10 0.22 783 834 0.81

Investment trusts 507 10.97 11 905 773 12.38

Other companies and corporate bodies 650 14.07 42 364 567 44.04

4 621 100.00 96 192 435 100.00

MAJOR SHAREHOLDERS (holding 5% or more of the shares in issue) excluding directors

Coronation Life Managers Limited 27 589 750 28.68

Enderle S.A. Proprietary Limited 4 854 689 5.05

32 444 439

SHAREHOLDER SPREAD

Public 4 615 99.87 58 987 230 61.32

Non-public: directors 6 0.13 37 205 205 38.68

4 621 100.00 96 192 435 100.00

Number of shareholders %

Number of shares %

Financial year end Monday, 29 February 2012

Reports and profit announcements

Profit and dividend announcement Monday, 21 May 2012

Annual report Friday, 15 June 2012

Interim report October 2012

Annual general meeting Thursday, 23 August 2012

Dividend No. 35 information

Last day to trade cum-dividend Friday, 6 July 2012

Shares commence trading ex-dividend Monday, 9 July 2012

Record date Friday, 13 July 2012

Payment of dividend Monday, 16 July 2012

Share certificates may not be dematerialised or rematerialised between Monday, 9 July 2012 and Friday, 13 July 2012, both dates inclusive.


Notice of annual general meeting

Famous Brands Limited(Registration number 1969/004875/06)

(Incorporated in the Republic of South Africa)

(Famous Brands or the company)

JSE share code: FBR ISIN: ZAE000053328

Notice is hereby given that the eighteenth annual general meeting

(AGM) of shareholders of the company will be held at the offices of

the company, 478 James Crescent, Halfway House, Midrand on

Thursday, 23 August 2012 at 14:00 for the purpose of: (i) dealing

with such business as may lawfully be dealt with at the meeting

and (ii) considering and, if deemed fit, passing, with or without

modification, the ordinary and special resolutions set out hereunder

in the manner required by the Companies Act, No 71 of 2008,

as amended (the Companies Act), as read with the Listings

Requirements of the JSE Limited (JSE Listings Requirements) which

meeting is to be participated in and voted at by shareholders

recorded in the company’s securities register as at the record

date of Friday, 10 August 2012.

Kindly note that meeting participants (including proxies) will be

required to provide reasonably satisfactory identification before being

entitled to attend or participate in the meeting. Forms of identification,

include valid identity documents, drivers’ licences and passports.

Memorandum of incorporationUntil the revised Companies Act came into effect on 1 May 2011,

the company was governed under its memorandum of association

(memorandum) and articles of association (articles). On the date

that the Companies Act came into effect, the memorandum and

articles of the company became the company’s memorandum of

incorporation (MOI). Accordingly, for consistency of reference in

this notice of the AGM, the terms MOI or memorandum of

incorporation are used throughout to refer to the company’s

MOI (which previously comprised the memorandum and articles,

as aforesaid). All references in this notice of the AGM (including all

of the ordinary and special resolutions contained herein) to

the company’s MOI refer to provisions of that portion of the

company’s memorandum and/or articles (as the case may be).

ORDINARY RESOLUTIONS

The percentage of voting rights required for an ordinary resolution

to be adopted is more than 50% (fifty percent) of the voting rights

exercised on the resolution at a quorate meeting.

1. ORDINARY RESOLUTION NO. 1: ADOPTION OF THE ANNUAL FINANCIAL STATEMENTS

‘RESOLVED THAT the annual financial statements of the

company for the year ended 29 February 2012, together with

the directors’ report and the report of the auditors be and are

hereby received and adopted.’

Explanatory note

The reason for and effect of ordinary resolution No. 1 is to give

Famous Brands shareholders the opportunity to formally

consider and accept the Famous Brands Integrated Annual

Report including the consolidated audited financial statements

of the company as required by section 30(3)(d) of the

Companies Act.

2. ORDINARY RESOLUTION NO. 2: RE-APPOINTMENT AND REMUNERATION OF AUDITORS

‘RESOLVED THAT RSM Betty & Dickson (Johannesburg), be

re-appointed as the independent auditors of the company, it

being noted that J Kitching is the registered individual auditor

who will undertake the audit. The directors are authorised to

determine the auditor’s remuneration for the past year.’

Explanatory note

The reason for ordinary resolution No. 2 is that the Companies

Act requires the appointment or re-appointment of the

company’s auditors each year at the AGM of the company.

3. ORDINARY RESOLUTION NO. 3: APPOINTMENT OF DIRECTORS AND RE-ELECTION OF DIRECTORS

3.1 ‘RESOLVED THAT Christopher Hardy Boulle should

remain in office as alternate non-executive director to

Hymie Reuvin Levin. This confirms his election by the

directors on 1 December 2011 and continuing service.’

Explanatory note

The reason for and effect of ordinary resolution 3.1 is to

appoint as the alternate director, Christopher Hardy Boulle

as recommended by the directors on 1 December 2011.

‘RESOLVED to individually re-elect the following non-

executive directors (ordinary resolutions 3.2 to 3.4). The

board recommends the election of these directors, who

retire by rotation in terms of the MOI and being eligible

thereto, make themselves available for re-election.’

3.2 Ordinary resolution No. 3.2 – Re-election of Panagiotis

Halamandaris.

3.3 Ordinary resolution No. 3.3 – Re-election of Bheki

Lindinkosi Sibiya.

3.4 Ordinary resolution No. 3.4 – Re-election of Periklis

Halamandaris.

Explanatory note

The reason for and effect of ordinary resolutions 3.2 to 3.4 is

to re-elect the directors that retire by rotation in terms of the

MOI of the company.

‘RESOLVED to re-elect Susan Louise (Santie) Botha as a

non-executive director and Darren Paul (Darren) Hele as an

executive director, by way of separate resolutions, who retire

in accordance with the provisions of article 53.3 of the

company’s memorandum of incorporation, by virtue of their

respective appointments on 1 June 2012 being made

pursuant to the last AGM and are required to retire at this

AGM. Both Santie Botha and Darren Hele, being eligible, offer

themselves for re-election.’


3.5 Ordinary resolution No. 3.5 – Re-election of Darren Hele.

3.6 Ordinary resolution No. 3.6 – Re-election of Santie Botha.

Santie Botha: abridged curriculum vitae

Santie was born in 1964 and graduated from Stellenbosch

University with a B.Econ in 1985 and Honours B.Econ the

following year. She has had a highly successful career. After

commencing work as a marketing graduate with Unilever

she held executive director positions responsible for sales

and marketing at ABSA Bank and MTN Group, both listed

entities on the JSE. Her current major external positions,

directorships or associations are Chancellor: Nelson

Mandela Metropolitan University (Port Elizabeth); non-

executive directorships of both Tiger Brands Limited and

Imperial Holdings Limited.

Brief curricula vitae of directors who have offered

themselves for appointment or re-election are included

on pages 8, 9 and 10 of the report.

4. ORDINARY RESOLUTION NO. 4: APPOINTMENT OF AND RE-ELECTION OF THE MEMBERS OF THE FAMOUS BRANDS AUDIT COMMITTEE

‘RESOLVED to individually elect the following directors

(ordinary resolutions 4.1 to 4.3) of the company as the

members of the Famous Brands audit committee until the

conclusion of the next AGM of the company. The board

recommends the election of these members.’

4.1 Ordinary resolution No. 4.1 – Re-election of Hymie

Reuvin Levin as a member and chairman.

4.2 Ordinary resolution No. 4.2 – Re-election of John Lee

Halamandres as a member.

4.3 Ordinary resolution No. 4.3 – Appointment of

Christopher Hardy Boulle as a member.

Explanatory note

The reason for and effect of ordinary resolutions 4.1 to 4.3 is

to appoint and re-elect the members of the audit committee

of the company as required in terms of section 94(2) of the

Companies Act.

Brief curricula vitae of directors who have offered

themselves for appointment and re-election are included on

pages 8 and 9 of the report.

5. ORDINARY RESOLUTION NO. 5: RATIFICATION OF EXECUTIVE DIRECTORS’ REMUNERATION

‘RESOLVED THAT the remuneration paid to executive directors

(reflected on page 68) for the past financial year be ratified.’

Explanatory note

The reason for and effect of ordinary resolution No. 5 is to

ratify the remuneration paid to executive directors for the

year ended 29 February 2012.

6. ORDINARY RESOLUTION NO. 6: RATIFICATION OF NON-EXECUTIVE DIRECTORS’ FEES

‘RESOLVED THAT the fees paid to non-executive directors

(reflected on page 68) for the past financial year be ratified.’

Explanatory note


ratify the fees paid to non-executive directors for the year

ended 29 February 2012.

7. ORDINARY RESOLUTION NO. 7: TO PLACE 4% (FOUR PERCENT) OF THE UNISSUED SHARES UNDER DIRECTORS’ CONTROL

‘RESOLVED THAT 4% (four percent) of the authorised but

unissued share capital of the company, from time to time, be

placed under the control of the directors of the company until

the next AGM with the authority to allot and issue all or part

thereof in their discretion, subject to section 38 of the

Companies Act, and the Listings Requirements of the JSE and

the company’s MOI.’

Explanatory note


place a limited number of shares under the control of the

directors which, by way of example, may be required to be

issued in terms of share scheme grants.

8. ORDINARY RESOLUTION NO. 8: AMENDMENTS TO THE STEERS SHARE INCENTIVE SCHEME (2001)

‘RESOLVED THAT the Steers Share Incentive Scheme (2001),

as previously amended, be and is hereby amended in

accordance with the updated rules as initialled by the

chairman of the AGM for purposes of identification. The

updated rules will be available for inspection at the

registered office of the company from 31 July 2012.’

In terms of the JSE Listings Requirements this ordinary

resolution No. 8 must be passed by a 75% (seventy five

percent) majority of votes cast by shareholders present or

represented by proxy at the AGM, excluding all votes

attached to shares in the company owned and controlled by

existing participants in the Steers Share Incentive Scheme

(2001) and that may be affected by the proposed

amendments.

Explanatory note

The Steers Share Incentive Scheme (2001) was adopted by

shareholders at the company’s AGM held in 2002 and

currently provides for the granting of awards to participants.

The rules of the scheme follow the practices which were

generally followed at that time. The rules have now been

updated to adopt more modern practice and to comply with

Schedule 14 of the JSE Listings Requirements, as approved

by the JSE.


9. ORDINARY RESOLUTION NO. 9: AUTHORITY FOR DIRECTORS OR COMPANY SECRETARY TO IMPLEMENT RESOLUTIONS

‘RESOLVED to authorise and empower any two directors or the

Company Secretary and any director signing together, to do all

such things and sign all such documents and take all such

actions as they consider necessary to implement the ordinary

and special resolutions set out in the notice convening the

eighteenth AGM of the company.’

SPECIAL RESOLUTIONS

The percentage of voting rights required for a special resolution to

be adopted is more than 75% (seventy five percent) of the voting

rights exercised on the resolution at a quorate meeting.

To consider and, if approved, to pass, with or without modification,

the following four special resolutions:

SPECIAL RESOLUTION NO. 1: APPROVAL OF NON-EXECUTIVE DIRECTORS’ REMUNERATION FOR THEIR SERVICES AS DIRECTORS

‘RESOLVED THAT in terms of section 66(9) of the Companies Act,

payment of the remuneration for the services as non-executive

directors of Famous Brands is approved for the period from 1 June

2012 as set out in the following table. These increases represent

an average increase of 5% (five percent) on the fees applicable in

respect of the 12 months to 31 May 2012.’

Proposed non-executive directors’ fees (alternate directors inclusive)Payment per attendance at meetings only

Per meeting

Current

to

June 2012

Rand

Proposed

after

June 2012

Rand

Chairman of the board or other

committee 5 000 5 000

Board attendee 40 000 42 000

Attendee at one of each audit,

remuneration or social and ethics

committee (only payable if not

receiving a fee for board

attendance) 15 000 15 000

Explanatory note

This resolution is proposed in order to comply with the

requirements of the Companies Act. In terms of section 65(11)(h)

of the Companies Act, read with sections 66(8) and 66(9),

remuneration may only be paid to directors for their services as

directors in accordance with a special resolution approved by the

shareholders within the previous two years.

Current

to

June 2012

Rand

Proposed

after

June 2012

Rand

SPECIAL RESOLUTION NO. 2: ADOPTION OF NEW MEMORANDUM OF INCORPORATION

‘RESOLVED THAT the new memorandum of incorporation (new

MOI) of the company, which will be available for inspection at the

registered office of the company from 31 July 2012, be adopted in

substitution of the company’s existing MOI, in terms of section

16(1)(c)(ii) of the Companies Act.’

Explanatory note

The reason and effect of special resolution No. 2 is to enable the

company to comply with the provisions of the Companies Act

in order to adopt the new MOI in substitution of the existing

memorandum and articles. The MOI regulates the relationship

between the company and its shareholders and between

shareholders of the company inter se.

SPECIAL RESOLUTION NO. 3: GENERAL AUTHORITY TO PROVIDE FINANCIAL ASSISTANCE TO RELATED OR INTER-RELATED ENTITIES

‘RESOLVED THAT the board of directors of the company be and

are hereby authorised, to the extent required by and subject to

sections 44 and 45 of the Companies Act and the requirements, if

applicable, of (i) the MOI; and (ii) the JSE Listings Requirements,

to cause the company to provide direct or indirect financial

assistance to a related or inter-related company, or to a

shareholder of a related or inter-related company, or shareholder,

provided that no such financial assistance may be provided at any

time in terms of this authority after the expiry of two years from

the adoption of this special resolution No. 3.’

Explanatory note

Notwithstanding the title of section 45 of the Companies Act, being

‘Loans or other financial assistance to directors’, on a proper

interpretation, the body of the section may also apply to financial

assistance provided by a company to related or inter-related

companies, including, among others, its subsidiaries, for any

purpose. Furthermore, section 44 of the Companies Act may also

apply to the financial assistance so provided by a company to

related or inter-related companies, in the event that financial

assistance is provided for the purposes of, or in connection with,

the subscription of any option, or any securities, issued or to be

issued by the company or a related or inter-related company, or for

the purchase of any securities of the company or a related or

inter-related company. Both sections 44 and 45 of the Companies

Act provide, among others, that the particular financial assistance

must be provided only pursuant to a special resolution of the

shareholders, adopted within the previous two years, which

approved such assistance whether for the specific recipient, or

generally for a category of potential recipients, and the specific

recipient falls within that category and the board of directors must

be satisfied that: (a) immediately after providing the financial

assistance, the company would satisfy the solvency and liquidity

test, and (b) the terms under which the financial assistance is

proposed to be given are fair and reasonable to the company.

Notice of annual general meeting continued


In the normal course of business the company is often required

to grant financial assistance, including but not limited to loans,

guarantees in favour of third parties, such as financial institutions,

service providers and counterparties (in respect of the provision

of banking facilities, acquisition transactions, debt capital) for the

obligations of the company or a related or inter-related company, or

to a shareholder of a related or inter-related company, or to a

person related to any such company or shareholder. Special

resolution No. 3 will enable the company to provide such financial

assistance to subsidiaries and juristic persons in the Famous

Brands group or other person that is or becomes related or

inter-related to the company for any purpose in the normal course

of business.

SPECIAL RESOLUTION NO. 4: GENERAL AUTHORITY TO REPURCHASE SHARES

‘RESOLVED THAT the company approves, as a general approval

contemplated in section 48 of the Companies Act, the acquisition

by the company (or by a subsidiary of the company) of ordinary

shares issued of the company on such terms and conditions and

in such amounts as the directors of the company may decide, but

subject always to the provisions of the Companies Act and the

Listings Requirements of the JSE, which general approval shall

endure until the next AGM of the company (when this approval

shall lapse unless it is renewed at that AGM, provided that it shall

not extend beyond 15 months from the date of registration of this

special resolution), subject to the following limitations:

(a) the repurchase of securities is implemented through the order

book of the JSE trading system, without any prior

understanding or arrangement between the company and the

counterparty;

(b) the company is so authorised by its MOI;

(c) the general purchase is limited to a maximum of 20% in

aggregate of the company’s issued share capital in any one

financial year;

(d) the general purchase by the subsidiaries of the company is

limited to a maximum of 10% in aggregate of the company’s

issued share capital;

(e) the general purchase is not made at a price greater than 10%

above the weighted average of the market value for the

securities for the five business days immediately preceding

the date on which the transaction was effected;

(f) the repurchase does not take place during a prohibited period

as defined in paragraph 3.67 of the Listings Requirements of

the JSE unless there is a repurchase programme in place and

the dates and quantities of shares to be repurchased during

the prohibited period are fixed and full details thereof have

been disclosed in an announcement over SENS prior to

commencement of the prohibited period;

(g) the company publishes an announcement after it or its

subsidiaries have cumulatively acquired 3% (three percent) of

the number of ordinary shares in issue at the time that the

shareholders’ authority for the purchase is granted and for

each 3% (three percent) in aggregate of the initial number

acquired thereafter; and

(h) the company appoints only one agent at any point in time to

effect any repurchases on its behalf.

After considering the aggregate effect of the maximum

repurchase, the directors of the company are of the opinion that

for a period of 12 months after the date of this notice of the AGM:

the company and the company’s subsidiaries (the Group) shall

satisfy the solvency and liquidity test in the manner

contemplated by the Companies Act and the Listings

Requirements of the JSE;

the company and the Group will be able, in the ordinary course

of business, to repay their debts;

the assets of the company and the Group, fairly valued in

accordance with IFRS, will be in excess of the liabilities of the

company and the Group;

the share capital and reserves of the company and the Group

will be adequate for ordinary business purposes;

the working capital of the company and the Group will be

adequate for ordinary business purposes; and

the company’s sponsor will confirm the adequacy of the

company’s working capital for the purposes of undertaking the

repurchase of shares in writing to the JSE prior to the company

(or any subsidiary) entering the market to proceed with the

repurchase.’

Explanatory note

The reason for and effect of special resolution No. 4 is to authorise

the company and its subsidiaries, by way of general approval, to

acquire the company’s issued ordinary shares on terms and

conditions and in amounts to be determined by the directors of

the company, subject to certain statutory provisions and the

Listings Requirements of the JSE.

Directors’ statement regarding the utilisation of the authority sought

The directors of the company have no specific intention to effect

the provisions of this special resolution, but will, however,

continually review the company’s position, having regard to the

prevailing circumstances and market conditions, in considering

whether to effect the provisions of this special resolution.

Other disclosures in terms of section 11.26 of the Listings Requirements of the JSE

The following additional information, some of which may appear

elsewhere in the integrated annual report of which this notice

forms part, is provided in terms of the Listings Requirements of

the JSE for purposes of this general authority:

Directors and management – pages 8 to 11;

Major beneficial shareholders – page 79;

Directors’ interests in ordinary shares – page 68; and

Share capital of the company – page 61.


Litigation statement

The directors of the company whose names appear on pages 8

and 9 of the Integrated Annual Report of which this notice forms

part, are not aware of any legal or arbitration proceedings

including proceedings that are pending or threatened, that may

have or had in the recent past (being at least the previous 12

months) a material effect on the Group’s financial position.

Directors’ responsibility statement

The directors whose names appear on pages 8 and 9 of the

Integrated Annual Report, collectively and individually accept full

responsibility for the accuracy of the information pertaining to

special resolution No. 4 and certify that, to the best of their

knowledge and belief, there are no facts that have been omitted

which would make any statement false or misleading, all

reasonable enquiries to ascertain such facts have been made and

the special resolution contains all information required by the

Companies Act and the Listings Requirements of the JSE.

Material changes

Other than the facts and developments reported on in the

Integrated Annual Report, there have been no material changes in

the affairs or financial position of the company and its subsidiaries

since the date of signature of the audit report and up to the date

of this notice.

VOTING AND PROXIES

A shareholder of the company entitled to attend, speak and vote

at the AGM is entitled to appoint a proxy or proxies to attend,

speak and on a poll to vote, in his stead. The proxy need not be a

shareholder of the company. A form of proxy is attached for the

convenience of any certificated shareholder and own name

registered dematerialised shareholder who cannot attend the

AGM, but who wishes to be represented.

Notice of annual general meeting continued

Additional forms of proxy may also be obtained on request from

the company’s registered office. The completed forms of proxy

must be deposited at, posted or faxed to the transfer secretaries

at the address set out on page IBC, to be received by no later than

14:00 on Tuesday, 21 August 2012. Any member who completes

and lodges a form of proxy will nevertheless be entitled to attend

and vote in person at the AGM should the shareholder

subsequently decide to do so.

On a show of hands, every shareholder of the company present

in person or represented by proxy shall have one vote only. On

a poll, every shareholder of the company present in person or

represented by proxy shall have one vote for every share held in

the company by such shareholder.

Shareholders who have dematerialised their ordinary shares

through a Central Securities Depository Participant (CSDP) or

broker, other than ‘own name’ registered dematerialised

shareholders, and who wish to attend the AGM must request their

CSDP or broker to issue them with a letter of representation.

Alternatively, dematerialised shareholders other than ‘own name’

registered dematerialised shareholders, who wish to be

represented, must provide their CSDP or broker with their voting

instructions in terms of the custody agreement between them and

their CSDP or broker in the manner and timeframe stipulated.

By order of the board

JG PyleCompany Secretary18 May 2012


Form of proxy

For use by the holders of the company’s certificated ordinary shares (certified shareholder) and/or dematerialised ordinary shares

held through a Central Securities Depository Participant (CSDP) or broker who have selected ‘own name’ registration (own name

dematerialised shareholders) at the 18th AGM of the company to be held at 478 James Crescent, Midrand on Thursday, 23 August 2012 at

14:00 and at any adjournment thereof.

Not for the use by holders of the company’s dematerialised ordinary shares who are not ‘own name’ dematerialised shareholders. Such

shareholders must contact their CSDP or broker timeously if they wish to attend and vote at the AGM and request that they be issued

with the necessary authorisation to do so, or provide the CSDP or broker timeously with their voting instructions should they not wish to

attend the AGM in order for the CSDP or broker to vote thereat in accordance with their instructions.

I/We

of (address)

being the registered owner/s of ordinary shares in

the company hereby appoint

or failing him/her

or failing him/her, the chairperson of the AGM, as my/our proxy to act for me/us and on my/our behalf at the AGM which will be held for the

purpose of considering and, if deemed fit, passing, with or without modification, the special and ordinary resolutions to be proposed thereat

and at any adjournment thereof; and to vote for and/or against the special and ordinary resolutions and/or abstain from voting in respect of

the ordinary shares registered in my/our name(s), in accordance with the following instructions:

*Please indicate with an ‘X’ in the appropriate spaces below how you wish your votes to be cast. Unless otherwise instructed, my/our

proxy may vote as he/she thinks fit.Number of votes

For* Against* Abstain*

1. Ordinary resolution No. 1: Adoption of the annual financial statements2. Ordinary resolution No. 2: Re-appointment and remuneration of auditors3. Ordinary resolution No. 3: Appointment of directors and re-election of directors

3.1 Christopher Hardy Boulle3.2 Panagiotis Halamandaris3.3 Bheki Lindinkosi Sibiya3.4 Periklis Halamandaris3.5 Darren Hele3.6 Santie Botha

4. Ordinary resolution No. 4: Re-election of the members of the Famous Brands audit committee4.1 Hymie Reuvin Levin4.2 John Lee Halamandres4.3 Christopher Hardy Boulle

5. Ordinary resolution No. 5: Ratification of executive directors’ remuneration6. Ordinary resolution No. 6: Ratification of non-executive directors’ fees7. Ordinary resolution No. 7: To place 4% (four percent) of the unissued shares under

directors’ control8. Ordinary resolution No. 8: Amendments to the Steers Share Incentive Scheme (2001)9. Ordinary resolution No. 9: Authority for directors or Company Secretary to implement

resolutions1. Special resolution No. 1: Approval of non-executive directors’ remuneration for their

services as directors2. Special resolution No. 2: Adoption of new memorandum of incorporation3. Special resolution No. 3: General authority to provide financial assistance to related or

inter-related entities4. Special resolution No. 4: General authority to repurchase shares

Signed this day of 2012

Signature

Assisted by (if applicable)

Please read the notes on the reverse.

Famous Brands Limited(Registration number 1969/004875/06)(Incorporated in the Republic of South Africa)(Famous Brands or the company)JSE Share code: FBR ISIN: ZAE000053328


NOTES TO THE FORM OF PROXY

1. This form of proxy is to be completed only by those

shareholders who are:

(a) holding shares in a certificated form; or

(b) recorded in the sub-register in electronic form in their

‘own name’.

2. Shareholders who have dematerialised their shares and

wish to attend the AGM must contact their Central Securities

Depository Participant (CSDP) or broker who will furnish

them with the necessary authority to attend the AGM, or

they must instruct their CSDP or broker as to how they wish

to vote in this regard. This must be done in terms of the

agreement entered into between the shareholders and their

CSDP or broker.

3. Each shareholder is entitled to appoint one or more proxies

(who need not be a shareholder of the company) to attend,

speak and, on a poll, vote in place of that shareholder at the

AGM.

4. A shareholder may insert the name of a proxy or the names

of two alternative proxies of the shareholder’s choice in the

space provided, with or without deleting ‘the chairperson of

the AGM’. The person whose name stands first on the form

and who is present at the AGM will be entitled to act as

proxy to the exclusion of those whose names follow.

5. A shareholder’s instructions to the proxy must be indicated

by the insertion of the relevant number of votes exercisable

by that shareholder in the appropriate box(es) provided.

Failure to comply with the above will be deemed to

authorise the chairperson of the AGM, if the chairperson is

the authorised proxy, to vote in favour of the special and

ordinary resolutions at the AGM, or any other proxy to vote

or to abstain from voting at the AGM as he/she deems fit, in

respect of all the shareholder’s votes exercisable thereat.

6. A shareholder or his/her proxy is entitled but not obliged to

vote in respect of all the ordinary shares held by such

shareholder. The total number of votes for or against the

special and ordinary resolutions and in respect of which any

abstention is recorded may not exceed the total number of

shares held by such shareholder.

7. 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 company’s transfer secretaries or

waived by the chairperson of the AGM.

8. The chairperson of the AGM may accept or reject any form of

proxy which is completed and/or received other than in

accordance with these instructions, provided that he shall

not accept a proxy unless he is satisfied as to the manner in

which a shareholder wishes to vote.

9. Any alterations or corrections to this form of proxy must be

signed by the relevant signatory(ies).

10. The completion and lodging of this form of proxy does not

preclude the relevant shareholder from attending the AGM

and speaking and voting in person thereat to the exclusion

of any proxy appointed by the shareholder.

11. A minor must be assisted by his/her parent/guardian unless

the relevant documents establishing his/her legal capacity

are produced or have been registered by the company’s

transfer secretaries.

12. Where there are joint holders of any shares, only that holder

whose name appears first in the register in respect of such

shares need to sign this form of proxy.

13. Forms of proxy must be lodged at, posted to, or faxed to

Link Market Services South Africa, 13th Floor, Rennie House,

19 Ameshoff Street, Braamfontein, 2001 (PO Box 4844,

Johannesburg, 2000), Fax: +27 86 674 3330 to reach the

company by no later than 14:00 on Tuesday, 21 August 2012.

Form of proxy continued

BASTION GRAPHICS

Administration

COMPANY SECRETARY

Mr JG Pyle

REGISTERED OFFICE

478 James CrescentHalfway House1685

POSTAL ADDRESS

PO Box 2884Halfway House1685

AUDITORS

RSM Betty & Dickson (Johannesburg)

BANKERS

First National BankInvestec Bank

Famous Brands LimitedRegistration number 1969/004875/06

TRANSFER SECRETARIES

Link Market Services (Proprietary) Limited (Registration number 2000/007239/07)13th Floor, Rennie House19 Ameshoff StreetBraamfontein2001

SPONSOR

The Standard Bank of South Africa Limited(Registration number 1969/017128/06)3 Simmonds StreetJohannesburg2001

WEBSITE ADDRESS

www.famousbrands.co.za

CONTACT INFORMATION

Tel: +27 11 315 3000Fax: +27 11 315 [email protected]

478 James Crescent,Midrand, South Africa, 1685

integrated annual report 2012 - famousbrands.mcewan.co.za

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