ShareData · INTEGRATED ANNUAL REPORT 2016. Integrated Annual Report . 2016. l e. a d e r s h i p . r e s p e c t . i n n o v a t i o n. . NAVIGATION. The integrated ann

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Integrated Annual Report 2016

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www.tasteholdings.co.za

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SOCIAL AND RELATIONSHIP

Page 58

HOW TO NAVIGATE THIS REPORTTo facilitate reading and navigating the report, we have incorporated the following symbols

INTELLECTUAL Page 72

NATURAL Page 74

FINANCIAL Page 57

MANUFACTURED Page 56

HUMAN Page 62

ifc What we value1 COMPANY REVIEW1 Why invest in Taste Holdings2 About Taste Holdings6 Our story8 Ten-year review

10 Report scope and boundary11 Salient financial information12 Business model14 Group structure15 Store distribution16 Board of directors19 Key risks and mitigation controls25 Strategy, risks and opportunities27 LEADERSHIP REVIEW27 Chairman’s Letter30 Message from the Chief Executive Officer38 Chief Financial Officer’s letter to stakeholders48 PERFORMANCE REVIEW48 Food Division52 Luxury Goods Division56 Built (manufactured) capital57 Financial capital58 Social and relationship capital62 Human capital72 Intellectual capital74 Natural capital76 Corporate governance report90 Annual Financial Statementsibc Administration

CONTENTS

Country of incorporation and domicile South Africa

Nature of business and principal activities The main object of the company is to carry on business as restaurateurs and franchisors.

Directors Carlo Ferdinando GonzagaEvangelos TsatsarolakisDuncan John CrossonRamsay L’Amy DalyGrant Michael PattisonSebastian Patel Anthony BermanWessel Petrus van der Merwe Hylton Roy RabinowitzKevin Michael Utian

Registered office 12 Gemini StreetLinbro Business ParkSandton2065

Business address 12 Gemini StreetLinbro Business ParkSandton2065

Postal address PO Box 1125FerndaleRandburg2160

Auditors BDO South Africa IncorporatedChartered Accountants (SA)Registered Auditors

Sponsor Merchantec Capital

Company Secretary Ithemba Governance and Security Solutions (Pty) Ltd

Company registration number 2000/002239/06

ADMINISTRATION

Taste Holdings is a South African-based management group that owns and licenses a portfolio of franchised and owned, category specialist and formula driven coffee, QSR and luxury retail brands housed within two divisions: Food and Luxury Goods. The group is strategically focused on:• licensing leading global brands; • leveraging our scale among our “low cost” food brands;• increasing ownership of corporate owned stores across

both divisions; and • supporting this growth through a leveraged shared

resources and vertically integrated platform.

IF OUR TRUE NORTH ACTS AS A BEACON GUIDING OUR EVERYDAY DECISIONS, THEN THESE VALUES ARE THE COMMON GLUE THAT HOLDS US TOGETHER.

WHAT WE VALUE

WHO WE AREOUR STRATEGIC FRAMEWORK

“We want to build a community where we all go home every day renewed with the energy that comes only from the appreciation and pride of hard work, done well.”

Taste Holdings Integrated Annual Report 2016

Doing the right thing all the time. Being honest, but compassionate.

Integrity

Respect yourself, colleagues and diversity of culture, opinion and race.

Respect

Listen to the world. Enrol good minds to interpret it. Act on what you hear.

Intellect

Be positive. Work hard because you can. Believe in what you do.

Passion and Energy

Think big. Don’t be afraid to imagine. Act on your imagination.

Innovation

Spend your energy on all the things that matter. Make big changes to big things.

Focus

The ability to make sound decisions and inspire others to perform well.

Leadership

We are clearly focused on becoming the preferred vertically integrated QSR and retail franchisor and licensee in Africa; giving superior returns to franchisees and shareholders; displaying leading corporate social citizenship and making a positive impact within the

communities we trade.

TRUE NORTHOUR VISION FOR A BETTER COMPANY

Where team members come to each other’s assistance.

Teamwork

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NATURAL Page 74

FINANCIAL Page 57


HUMAN Page 62



CONTENTS











ADMINISTRATION





WHAT WE VALUE





Integrity


Respect


Intellect


Passion and Energy


Innovation


Focus


Leadership





Teamwork

1

Company review

WHY INVEST IN TASTE HOLDINGS

DIVISIONAL CONTRIBUTION TO GROUP

Taste has a 16-year record of consistent growth, astute capital management and excellent governance, founder led with professional executive management. Over the past four years it has introduced globally leading brands into its portfolio across Coffee (Starbucks), Pizza (Domino’s Pizza); and Luxury Goods (Rolex, Omega, Breitling, TAG Heuer, Longines, Cartier, IWC and Montblanc).

These brands each have strong growth opportunities in southern Africa and long-term earning potential. Taste is now the leading custodian of globally leading brands across multiple categories in southern Africa.

Taste will now focus on bedding down and optimising these brands, while building the institutional capacity to acquire further sought-after brands in time.

• SystemsalesofR1.1billion• LocatedinfiveAfricancountries• 453outlets,nationalfootprint• Diversifiedcustomerappeal:85%oftheincome

groupscateredfor(LSM4–10)• SouthernAfricanlicenseeforStarbucks,the

world’sleadingcoffeeretailerandroaster• SouthernAfricanlicenseeforDomino’sPizza,the

world’slargestpizzadeliverychain• ScootersPizzaandStElmo’sconversionsto

Domino’sPizzaunderway• OwnsSouthAfrica’sleadingfishtake-awaybrand,

TheFish&ChipCo,andthefastgrowingZebro’sChickenbrand

• Establishedworld-classdoughmanufacturinganddistributionfacilities

• Currentfocusonbeddingdownnewbrandsandstoredevelopment

Corerevenue*

54%46%

Numberofstores(foryearendedFebruary2016)

QSRCasualdiningLowcostLuxuryGoods

* Segmentrevenuecontributionbeforeinter-segmentrevenuesandcorporateservices.

QSRSPECIALISTJEWELLERYFOCUS

SPECIALISTWATCHFOCUS

CASUALDINING

• AnnualisedsystemsalesofR613million• Nationalfootprint• 87outletsacrosssouthernAfrica• NWJisthethird-largestbrandinSouthAfricaby

numberofoutlets• LeadingretailerofluxurySwisswatchesin

SouthAfrica• Specialistwatchfocus – Appealtobroadspectrumofconsumersinboth

“affordableluxury”andpremiumwatches – IntroducingRichemontbrands(Cartier,IWC,

Montblanc)throughArthurKaplanstores – NWJistheonlyverticallyintegratedand

franchisedluxurygoodschaininSouthAfrica – Owns58stores,with29franchised

(2015:owned54stores)

21%

9%

54%

16%

LOWCOST

COFFEE

TasteHoldings IntegratedAnnual Report 2016

Food Jewellery

System-widesales

36%

64%


Maxi’s Awell-establishedcasual-diningrestaurantformatservingbreakfast,lunchanddinner.Thebrandisfamilyfriendly,withamenuofferingclassiccomfortfood.

Domino’s Pizza Domino’sPizzaistheworld’slargestpizzadeliverybrand,withmorethan12100outletsspreadover80countries.Tastehasa30-yearmasterlicenceagreementtodevelopthebrandinSouthAfricaandsevenAfricancountries.Domino’sleadsitsmarketcategoryduetoworld-classmanufacturinganddistributionofitsfoodingredients,systemisedfastdeliveryandindustryleadinge-commerceplatforms.

Zebro’s Chicken TargetsthesameconsumersasTheFish&ChipCo(LSM4–7).ItsbrandofferingisbasedonauniquecookingmethodwithaproprietaryBBQflavourprofile.Zebro’shasthelowestset-upcostsofanynationalchaininthechickensegment.

The Fish & Chip Co Thetake-awayfishbrandwiththemostoutletsinSouthAfrica.TheFish&ChipCooffersgoodquality,affordablefoodaimedatlowertomiddleincomeconsumers.TheSundayTimesTopBrandsAwards2015surveyonceagainratedTheFish&ChipCoasthetopfishbrandinSouthAfrica’sfastfoodsector.

Scooters Pizza & St Elmo’sBothofthesebrandsarebeingconvertedtoDomino’sPizzaasplanned.Thosestoresthatremainunconvertedwillcontinuetobesupportedbyagreementwiththesefranchisees.

Starbucks Since1971,StarbucksCoffeeCompanyhasbeencommittedtoethicallysourcingandroastinghigh-qualityArabicacoffee.Today,inmorethan70countrieswithmorethan24000storesaroundtheglobe,Starbucksisthepremierroasterandretailerofspecialtycoffeeintheworld.

Casual dining

Low

cos

t

Coffee

QSR

ABOUT TASTE HOLDINGS

Taste’sfoodbrandsarestrategicallyspreadacrossadiversifiedportfolioofthemostpopularproductcategoriesanddiningoccasions,includingcoffee,chicken,pizza,fish,breakfastandburgers.Thesebrandsareaimedat:

• middle and upper income consumers (Starbucks Coffee, Domino’s Pizza, Scooters Pizza,StElmo’sandMaxi’s);and

• thelargelowtomiddleincomeconsumersegment(TheFish&ChipCoandZebro’sChicken).

These brands are all underpinned by strong value price points and relatively simplein-storeoperations,makingthemidealtofranchiseorownascorporatestores.

WiththeexceptionofStarbucksandDomino’sPizza,franchiseesownalmostalloutlets.

Food Division

Taste Holdings Integrated Annual Report 2016 3

Company review

Segmental information

%change

28 February 2016Audited

R’000

28February2015AuditedR’000

Core segment revenue

Food 24 492 191 397778

Core segment EBITDA*

Food (113) (4 578) 36076

Segment assets

Food 49 497 017 334332

*EBITDA–EarningsBeforeInterest,Tax,DepreciationandAmortisation.

BuonGustoCuisineiswhollyownedbyTasteasitsfoodservicesandglobalsupplychainbusinessandsuppliesthe food outlets of Taste’s various brands. BuonGusto aggregates andwarehouses inventory through twodistribution depots located in Gauteng and Cape Town. Logistics are conducted through a combination ofownedandrentedvehiclesthatcaterforambient,frozenandchilledinventory.

Employees • Numberofemployees–792.

Supply chain and distribution

Domino’sPizzaMaxi’s–RestaurantTheFish&ChipCo–Take-awayZebro’sChicken–Take-away

R2.3millionR1.8million–R2.3millionR569000R745000

7%6%R627exVATperweek4%

5%4%R627exVATperweek2%

80m2–110m2

120m2–150m2

60m2–100m280m2–100m2

Set-up cost1 Royalty2 Marketing fund contribution2 Average store size

Notes:1 ThisisapproximateandexcludesVAT.2 Thisisbasedonapercentageofturnover.3 LSM–“LivingStandardsMeasure”.

Domino’s PizzaScooters PizzaSt Elmo’sMaxi’s

The Fish & Chip CoZebro’s Chicken

Income group

LSM3 group 10 9 8 7 6 5 4 3 2 1

Upper middle BRich A

Served bythe informalsector, rural

Middle class C The poor D

Casual dining/Low cost

Starbucks


NWJ This33-year-oldbrandservesthemiddletoupperincomemarketandoffersjewelleryfromaffordablefashionitemstopiecescraftedin18ctgold.Withinthisbrand,Tasteoperatesbothfranchisedandcorporateownedstores.Atyearend,itdirectlyowned47ofthe76NWJoutlets.Thegroup’smanufacturingcapabilitymanufacturessome45%ofwhatthebrandsells.

World’s Finest WatchesWorld’sFinestWatches,aspecialistluxurywatchretailerlocatedinNelsonMandelaSquare,Sandton,isaniconicdestinationforenthusiastsandcollectors.ThisstoreoffersacuratedrangeofthefinestSwissbrandedwatches.TheWorld’sFinestWatchesisacorporateownedstore.

Arthur KaplanArthurKaplanisaluxuryjewelleryandSwisswatchretailerwithstoreslocatedinpremiumSouthAfricanshoppingcentres.ArthurKaplan’sbrandappealisitslegacyofpersonalattention,createdovermanydecades.AlltenArthurKaplanstoresarecorporateowned.ArthurKaplanistheleadingretailerofluxurySwisswatches,includingRolex,Omega,Breitling,TAGHeuer,LonginesandRado.ArecentagreementconcludedwithRichemonthasaddedCartier,IWCandMontblancrangesasa“storewithinstore”concept.

ABOUT TASTE HOLDINGS continued

Taste’sLuxuryGoodsDivisionoffersadiversifiedportfolioaimedatfirsttimejewellerybuyersrightthroughtodiscerningpremiumSwisswatchcollectors.

TheNWJbrandoffersawiderangeofprimarily9ctand18ctgoldandsilver jewellery,aswellasnumerous branded watches aimed at entry level watch buyers. Its vertically integrated modelsupports a strong value proposition, innovation and guaranteedquality. Arthur Kaplan’s 40-yearbespoke jewellery heritage is complemented by being South Africa’s largest retailer of luxurySwisswatches,therebyappealingtomiddleandupperincomeconsumers.World’sFinestWatchessupportscollectorsofpremiumluxurywatches.

Luxury Goods Division


Company review

NWJ R1.2millionplusstock 5% 4% 60m2

Set-up cost1 Royalty2 Marketing fund contribution2 Average store size

Segmental information

%change

28 February 2016Audited

R’000

28February2015AuditedR’000

Core segment revenueLuxuryGoods 79 570 509 319324

Core segment EBITDALuxuryGoods 42 69 600 49055

Segment assetsLuxuryGoods 16 416 219 360353

Supply chain and distributionNWJ is the only national vertically integrated and franchised Luxury Goods business in South Africa. Itmanufacturesapproximately45%ofNWJ’sinventoryfromaDurbanmanufacturingfacility.Itisoneoffewfacilities that has its gold content in products certifiedby the SouthAfricanBureauof Standards (SABS)and distributes 100% of the goods sold through its brands, whether to franchise or corporate ownedoutlets.NWJ’s in-housemanufacturingcapabilitysupports in-house innovation,fastroutestomarketandgreatercontroloverinputcosts.TheremainingNWJinventoryissourcedfromacombinationoflocalandinternationalsuppliers.

Employees •Numberofemployees–345.

World’s Finest Watches

NWJArthur Kaplan


Income group

LSM1 group 10 9 8 7 6 5 4 3 2 1

Upper middle BRich A

Served bythe informalsector, rural

Middle class C The poor D

Notes:1 ThisisapproximateandexcludesVAT.2 Thisisbasedonapercentageofturnover.3 LSM–“LivingStandardsMeasure”.


REVENUE (2006 – 2016)

SYSTEM-WIDE SALES (2002 – 2016)

MULTI-BRANDED

2005 – 2007

OUR STORY

ScootersPizzawinsbestpizzainJo’burgintheLeisureOptions

ReadersChoiceAwards.

2006

ScootersPizzawinsFASANewcomerFranchisor

andBrandBuilderoftheYearAwards.

2002

ScootersPizzaacquiresChessPizzaandconverts

sevenoutlets.

ScootersPizzaexpandstoGauteng.

ThreeScootersPizzaoutletsopeninGautenginoneday.

2001

2005ScootersPizzaacquiresall

28Maxi’sstores.

Maxi’sbecomesthethird-largestplayerinitscategory.

TasteHoldingsislistedonthealternativeexchange(Altx)of

theJSE.

ScootersPizzaisrenamedtoTasteHoldingstoreflectits

multi-brandedbusinessmodel.

2006

ScootersPizzawinsFASABrandBuilderoftheYearAward.

2007

2000September:ScootersPizza,thefoundingentityofTaste

opensitsdoors.

December:AnothersixScootersPizzastoresopened.

ScootersPizzabecomesamemberofproudlySouth

Africancampaign.

ScootersPizzaopensfirststoreinWesternCape.

2003

NWJwinsFASANewcomerFranchisoroftheYearAward.

2004

SINGLE BRANDED

2000 – 2004

R21M

R33M

R199M

R136M

R233M

R304M

R506M

R241M

R567M

R752M

R909M

R1.3B

R1.48B

R29M

R582MR717M

R1.58B

R34MR121M

R308M

R373M

R676M

R4M

R170M

R1.01B

R1.72B


Company review

2008 – 2010

DIVERSIFICATION AND VERTICAL INTEGRATION

2011

ScootersPizzawinsFASABrandBuilderoftheYearAward.

TasteHoldingsdeclaredmaidendividendofthreecentspershare.

TasteHoldingsmovedtomainboardoftheJSE.

TasteHoldingsexceedsR750millionsystem-widesales.

2012

TasteHoldingsreports27%compoundannualgrowthratefor

lastsixyearsinHEPS.

LaunchesNWJcreditcardfacility.

AcquiresTheFish&ChipCo.

Establishestwodistributiondepotsservicingmorethan500ofits

Foodfranchises.

TasteHoldingslaunchesBuonGusto;theverticalintegrationarm

oftheFoodDivision.

2009

Maxi’swinsFASAFranchisoroftheYearAward.

TasteHoldingsacquiresStElmo’s–a23-year-oldpizzabrand.

ScootersPizzacelebratestheirtenthbirthday.

2010

NWJisaFASAFranchisoroftheYearfinalist.

2008

2008TasteHoldingsacquiresNWJ.

TasteHoldingsbuildsNWJtobecomethesecond-largest

jewellerygroupinSA.

TasteHoldingsacquiresstrategicBJ’ssitesandconvertsthemtoMaxi’s.

2013GrowsTheFish&ChipCobrandintothelargestcategoryplayerbyunits.

2014AcquiresZebro’sChicken,a15-year-

oldchickenbrand.

Signsa30-yearmasterfranchiseagreementwithDomino’sPizza.

AcquiresArthurKaplanandWorld’sFinestWatches.

Registersinauguralbondprogrammeandhasfirstrightsoffertocapitaliseourstrategicgrowth.

WinstheIASAwardforbestreportingandcommunications.

CarloGonzagainductedintoFASAhalloffame.

BUILDING SCALE AND OPERATIONAL LEVERAGE

2011 – 2014

CONSOLIDATED AND ORGANIC GROWTH

2015 – PRESENT

2015Signsa25-yearagreementtodevelopStarbucksinSA.

TheFish&ChipCoawardedthe“TopFishBrand”inthetake-away

categorybySundayTimes.

Maxi’snominatedinTop10sit-downrestaurantcategoryby

SundayTimes.

Maxi’snominatedbyGatewayMagazineinfavouriteplaceto

shopcategory.

Successfullyconverted65ScootersPizzaandStElmo’sstoresto

Domino’sPizza.

2016OpenedfirsttwoStarbucksstoresin

RosebankandMallofAfrica.


Keyindicators

28Feb2007R’000

29Feb2008R’000

28Feb2009R’000

28Feb2010R’000

28Feb2011R’000

29Feb2012R’000

28Feb2013R’000

28Feb2014R’000

28Feb2015R’000

29 Feb2016

R’000Ten-year

CAGR1

Revenue(core)2 R’000 29507 33793 136345 199607 233751 304264 506431 580012 7171023 1 010 729 47%EBITDA(core)2 R’000 10649 12119 29053 32391 37083 41733 51829 59916 73158 47 271 26%Operatingprofit(core)2 R’000 10649 11715 25585 26927 30768 35181 42892 49010 58090 19 799 16%Cashgeneratedfromoperatingactivities R’000 6995 10216 24053 34429 32036 39132 36118 42832 58553 (93 479) –System-widesales R’000 308000 373000 567000 676000 752000 909000 1380000 1480000 1580000 1 720 000 22%Headlineearnings(core)2 R’000 7784 9973 15448 15874 18255 21421 29344 31042 36181 4 740 5%Headlineearningspershare(core)2 cents 6.6 7.9 10.2 9.3 10.7 12.4 15.1 15.7 16.1 1.5 (7%)

1Compoundannualgrowthrate–thisiscalculatedfromauditedfiguresfromFebruary2007.2“Core”wasintroducedin2014asaconsequenceoftheDomino’sPizzarollout.32015revenueandcostofsaleshavebeenreducedbyR6.6millionrespectively,whichrepresentthemarketingroyaltieson corporateownedstoresthatwerenoteliminatedonconsolidation.Thisrestatementhashadnoimpactonthe2015profit.

TEN-YEAR REVIEW

Core revenue (R’000)

1200

1000

800

600

400

200

02016

1010729

2008

33793

2010

199607

2012

304264

2013

506431

2014

580012

2007

29507

2009

136345

2011

233751

2015

717102

System sales (R’000)18001600140012001000800600400200

02016

1720000

2008

373000

2010

676000

2012

909000

2013

1380000

2014

1480000

2007

308000

2009

567000

2011

752000

2015

1580000

Core EBITDA (R’000)

80706050403020100

2016

47271

2008

12119

2010

32391

2012

41733

2013

51829

2014

59916

2007

10649

2009

29053

2011

37083

2015

73158


Company review

Keyindicators

28Feb2007R’000

29Feb2008R’000

28Feb2009R’000

28Feb2010R’000

28Feb2011R’000

29Feb2012R’000

28Feb2013R’000

28Feb2014R’000

28Feb2015R’000

29 Feb2016

R’000Ten-year

CAGR1

Revenue(core)2 R’000 29507 33793 136345 199607 233751 304264 506431 580012 7171023 1 010 729 47%EBITDA(core)2 R’000 10649 12119 29053 32391 37083 41733 51829 59916 73158 47 271 26%Operatingprofit(core)2 R’000 10649 11715 25585 26927 30768 35181 42892 49010 58090 19 799 16%Cashgeneratedfromoperatingactivities R’000 6995 10216 24053 34429 32036 39132 36118 42832 58553 (93 479) –System-widesales R’000 308000 373000 567000 676000 752000 909000 1380000 1480000 1580000 1 720 000 22%Headlineearnings(core)2 R’000 7784 9973 15448 15874 18255 21421 29344 31042 36181 4 740 5%Headlineearningspershare(core)2 cents 6.6 7.9 10.2 9.3 10.7 12.4 15.1 15.7 16.1 1.5 (7%)

1Compoundannualgrowthrate–thisiscalculatedfromauditedfiguresfromFebruary2007.2“Core”wasintroducedin2014asaconsequenceoftheDomino’sPizzarollout.32015revenueandcostofsaleshavebeenreducedbyR6.6millionrespectively,whichrepresentthemarketingroyaltieson corporateownedstoresthatwerenoteliminatedonconsolidation.Thisrestatementhashadnoimpactonthe2015profit.

Food

R1.11billion

R0.61billion

Jewellery

Breakdownofsystem-widesales

“Aproventrackrecordofprofitablecapitalallocationsincelisting tenyearsago.”

be the #1 pizza company in the world and in every neighbourhood

DOMINO’S PIZZAVISION AND MISSION

to inspire and nurture the human spirit – one person, one cup and

one neighbourhood at a time

STARBUCKSVISION AND MISSION


REPORT SCOPE AND BOUNDARY

WelcomeTaste Holdings is proud to present our 2016integrated annual report, which builds on thecorporateintegratedthinkingandreportingjourneycommencedin2013.

Forclarityandbrevity,thisintegratedannualreportdiscusses only those matters considered mostmaterial to our shareholders and stakeholdersfor them to make properly informed decisionsregardingTasteHoldings.

Further,andmorein-depthinformation,isprovidedonourwebsiteandthroughothermedia.

Frameworks appliedThis integrated annual report accords with theCompanies Act, No. 71 of 2008 (Companies Act),theJSEListingsRequirementsandwherepossible,the recommendations of the King Report onGovernanceforSouthAfrica2009(KingIIIreport).The group annual financial statements werepreparedinaccordancewithInternationalFinancialReportingStandards(IFRS).

AsrecommendedbyKingIII,thisintegratedannualreport was also prepared in accordancewith theInternational Integrated Reporting Council’s (IIRC)International Integrated Reporting framework(IR framework). Taste’s board of directors (theboard) and management have endorsed the IRframework’s concepts, guiding principles andcontentelements.

PurposeThis integrated annual report is intended toconcisely and accurately inform our stakeholderuniverseofourstrategy,governance,performanceand prospects in terms of Taste’s value creationovertheshort,mediumandlongterm.

The business model, the six capitals and value creationThe IIRC’ssixcapitalsmodel isusedasabasis fordescribing the group’s allocation of resources, itsachievement of goals, risks and opportunities,and its ability to create value, both now and inthefuture.

Preparation and presentationTaste’s2016integratedannualreportwaspreparedfortheperiod1March2015to29February2016and covers the activities of Taste Holdings, itssubsidiaries and associates operating in southernAfrica. The board and management is of theview that the material matters published in thisintegrated annual report offer a balanced mix ofinformationforreportreaderstoassessthegroup’s

performanceandprospects.Thesematerialmatterswere identified through our risk managementprocess, strategy workshops and stakeholderengagement.

Matters raised through stakeholder engagementareassessedintermsofthestakeholder’sinfluence,legitimacyandurgency.

The executive directors and senior managementwere instrumental in preparing this integratedannual report and the board has fulfilledits responsibilities in terms of the King IIIrecommendations.

Directors’ statement of responsibilityThe board of directors acknowledges itsresponsibility to ensure the integrity of theintegrated annual report. This integrated annualreport was prepared in accordance with theInternational Integrated Reporting (IR) frameworkand the board believes that it presents fairly theperformanceofthegroupanditsmaterialmatters.On the recommendation of the audit and riskcommittee, the board of directors approved the2016integratedannualreporton25May2016.

Chairman and CEO

Forward-looking statementsTheIIRCencouragescompaniestodiscloseforward-looking information, so that investors can betterunderstandacompany’sfutureprospectsandmakeinformed investment decisions. The informationin this integrated annual report thus contains“forward-lookingstatements”regardingourintent,belief or current expectations with respect toTasteHoldings’businessesandoperations,marketconditions,resultsofoperation,financialcondition,capitaladequacy,andriskmanagementpractices.

Readersarecautionednottoplaceunduerelianceontheseforward-lookingstatements.Tasteneitherintends,norassumesanyobligation, toupdateorrevisetheseforward-lookingstatementsinlightofdevelopmentswhichdifferfromthoseanticipated.

While due carehasbeenused in thepreparationof forecast information, actual results may varyin a materially positive or negative manner.Important factors that could cause the group’sactual results to differ from those in its forward-lookingstatementsincludegovernmentregulation,economic,strategic,politicalandsocialconditionsoutside Taste’s control. Past performance is not areliableindicationoffutureperformance.


Company review

*Allmeasuresreferto“core”measures.

• Established74Domino’sPizzastoresin16months

• 15%increaseinsame-storesalesinLuxuryGoods

• OversubscribedrightsofferofR226million

• SuccessfullyintegratedArthurKaplanandWorld’sFinestWatches

• SecuredexclusiverightstodevelopStarbucksinSouthAfrica

KEY FEATURES AND ACHIEVEMENTS

SALIENT FINANCIAL INFORMATION

Revenue* 41%to R1.01 billion (2015: R717.1 million)

to 1.5 cents (2015: 16.1 cents)Headline earnings per share* (91%)

to R47.2 million (2015: R73.1 million)EBITDA* (35%)

to R1.72 billion (2015: R1.58 billion)System-wide sales 9%

to R19.8 million (2015: R58.1 million)Operating profit*

(66%)

Headline earnings* (87%)to R4.7million (2015: R36.2 million)

to 120.8 cents (2015: 90.2 cents)Net tangible asset value per share 34%


BUSINESS MODELINTEGRATION, DECENTRALISATION AND COLLABORATION

Theoverarchingobjectiveofthemodelistocreatevaluethatisgreaterthanthesumofitsparts.

The objective of the model is to provide thedivisionswithopportunitiesandaccesstofinancialand human resources that theywould otherwisenot have had, orwould not have hadwithin thesame time period. It does this by facilitating thesharingofknowledgeacrossdivisionsorbusinessunits that leads to competitive advantage atdivisional level, when compared to standalonebrands.Itfurthermandatesdivisionstoparticipateactivelyinlookingforareaswheresharingwillleadtothecreationofcompetitiveadvantageandlowercostsofservicesatdivisionallevel.

IntegrationTaste Holdings pursues investment in verticalintegration opportunities that are typicallydefensible against the broader range of suppliersin the market, have protectable intellectualproperty and add incremental value. These havetypically been focused on high volume productswhere owning or controlling the manufacturingcomponentgeneratescompetitiveadvantage.

DecentralisationTasteHoldingsdecentralisesmanagementdecision-making to where this is most effectively done.The model is executed through an executivecommittee (Exco), chaired by the group CEO.Taste’sExcocomprisestheCEO,CFOandexecutivedirectorsofTasteHoldings.TheTastemanagementmodelempowersdivisionstogrowtheirprofitandgenerate operating leverage through operationalautonomy within an agreed strategic andoperationalframework.

Thegroupisresponsiblefor:• approvingbrandanddivisionalstrategies;• theaccompanyingoperationalframework;• identification, development and retention of

humancapitalacrossthegroup;• managingthecashflows,capitalallocationand

financial structures of the divisions to the bestadvantageofthegroup;and

• promoting and incentivising collaborationbetweenthedivisionsacrosskeybusinessdriversandsharedplatforms.

The group also manages a central treasuryfunction, which raises capital and allocates itacross thegroup inaccordancewithapre-agreedsetofcriteriaapprovedbytheboard.Thetreasuryis managed through an investment committeecomprising the CEO, CFO, executive directors andgroupcommercialexecutive.

CollaborationOperational leverage, best practice and learningsfromnewinitiatives(e.g.e-commerce)aresharedacrossbusinessunitsthroughdivisionalandgroupexecutive teams whose financial incentives arebased on a mix of business unit and divisionalperformance.

VerticalInte

gration

Collaboration

Decentralisation


OUR MODEL IN BRIEF

Company review

VER

TICA

L IN

TEG

RAT

ION

LEV

ERA

GED

SU

PPO

RT

CUST

OM

ER/B

RA

ND

FO

CUS

Amixofownedandlicensedbrandsthatcanbe#1or#2ineachcategorytheytrade,thattogethertargetmorethan85%oftheadultpopulation...

Brandleadershipandskillsnecessarytowinintheeyesofthecustomerarenotsharedandarebrandspecific.

...withselectedmanufacturingcapabilitywhereinnovationiscriticalandcapexandskillsaremoderate.

MANAGING DIRECTOR

FULL OPERATIONS TEAM

DEDICATED BRAND MANAGEMENT

OPERATING STANDARDS AND

COMPLIANCE

BRAND LEADERSHIP

• HACCP COMPLIANT• QUALITY ASSURANCE• SUPPLIER AUDITS

• PRODUCT DEVELOPMENT AND INNOVATION

• ISO 22 000 TARGET CERTIFICATION

• CENTRAL WAREHOUSING• DISTRIBUTION• ORDER TAKING

• LOGISTICS• GLOBAL PROCUREMENT• REPLENISHMENT

HU

MA

N R

ESOU

RCES

...supportedbycentralisedsupplychainsthatcontrolroutetomarketacrossfiveAfricancountries...

...butaresupportedbysharedservicesplatformsthatareleveragedgivingbrandsaccesstoresourcesatalowercostthaniftheywerestandalone.

TREASURYCAPITAL –

ALLOCATIONFUNDING

GOVERNANCERISK

LEGAL

REAL ESTATEHUMAN

RESOURCESIT

ACCOUNTINGPAYROLL

TAX

OurBuonGustoCuisinefooddistributionunithasbeendevelopedintoaworldclassfacilityandhasbeenvettedbyDomino’sandStarbucks.


GROUP STRUCTURE

Taste Food Franchising (Pty) Ltd

Buon Gusto Cuisine Pty (Ltd)

Taste Holdings Luxury Goods Division

(Pty) LtdNWJ Holdings (Pty) Ltd

NWJ Retail (Pty) Ltd (58%) AKJ Holdings (Pty) Ltd

Arthur Kaplan (Pty) Ltd

Arthur Kaplan Jewellers of Distinction (Pty) Ltd

World’s Finest Watches (Pty) Ltd

AKJ Retail (Pty) Ltd

Maple Investments (Pty) Ltd

International Swiss Watch Company (Pty) Ltd

Scooters Pizza Grosvenor Crossing (Pty) Ltd

Scooters Pizza Western Cape Retail (Pty) Ltd

Scooters Pizza Wierda Park (Pty) Ltd

Scooters Pizza Retail (Pty) Ltd

Scooters Pizza Pietermaritzburg (Pty) Ltd

Maxi’s Grill Marketing (Pty) Ltd

Taste Holdings Limited

Taste Holdings Share Trust

* Allsubsidiariesarewhollyownedunlessindicatedotherwise.

Luxury Goods Division Food Division


Company review

Lesotho

Swaziland

Western Cape

Northern Cape

North West

Botswana

Eastern Cape

Gauteng

Zimbabwe

Namibia

KwaZulu-Natal

Free State

Limpopo

Mpumalanga

4 5 1

2 1 5 2

26 1 32 8

7 2 35 4

2

2

1 7 44 3

2 30 3

3 3 16 1

41 17

82 34

3

1 1

2620 7 19

4 6 17 5

Mozambique1 1

5

STORE DISTRIBUTIONas at 29 February 2016

SCOOTERS PIZZA ST ELMO’S DOMINO’S PIZZA

MAXI’S THE FISH & CHIP CO ZEBRO’S CHICKEN

NWJ ARTHUR KAPLAN WORLD’S FINEST WATCHES

QSR (113) Casual dining (49) Low cost (291) Luxury Goods (87)

Supportcentres 7

Fooddistribution 2 Foodmanufacturing 1 Jewellerymanufacturinganddistribution

1


BOARD OF DIRECTORSNON-EXECUTIVE DIRECTORS

31

BA,LLBIndependentNon-executiveDirectorChairmanoftheremunerationcommittee MemberofthenominationscommitteeAppointed:March2000

Bill is a BA LLB graduate of Stellenbosch University. Hewas admitted as an attorney, notary and conveyancerand practiced as the Chairman of RLDaly Incorporated,an attorneys firm which specialises in the provision ofcall centre services to national corporates, retailers andbanks.HewasoneofthefoundingshareholdersandtheChairperson of Scooters Pizza (Pty) Ltd and has, sinceinception until February 2016, been the Chairpersonof TasteHoldings Limited. Bill is a director of a numberof companies including a Director and the DeputyChairperson of HBZ Bank Limited, and brings a wealthof business experience to the group which has provedinvaluable,particularlyinthelastnumberofyears.

RAMSAYL’AMY(BILL)DALY(73)

2

BScEngElecIndependentNon-executiveChairmanChairmanofthenominationscommitteeChairmanofthesocial,ethicsandtransformationcommitteeMemberoftheremunerationcommitteeAppointed:March2014

GrantiscurrentlyCEOofGpam(Pty)Ltd,aprivateequityand venture capital business.Healso sitson theboardsofvariousprivatecompanies.PriortoestablishingGpam(Pty) Ltd in October 2014, he was with South AfricanretailerMassmartHoldingsLimited for17years, the lastsevenofwhichasCEO,duringwhichtimeheledthesaleofamajoritystakeinthecompanytoUS-basedWalMartStoresInc.

GrantgraduatedfromtheUniversityofCapeTownin1992with a first class BSc Honours degree in Heavy CurrentElectricalEngineering.

GRANTMICHAELPATTISON(45)

BBusSci(UCT)IndependentNon-executiveDirectorMemberoftheauditandriskcommitteeAppointed:March2012

Sebastian is a Managing Executive at BrimstoneInvestment Corporation Limited (Brimstone),whichpositionhetookupinJuly2010.Sebastianfocuses on evaluating prospective investmentopportunitiesforBrimstone,aswellashelpingtomanage Brimstone’s current investments. Priorto joining Brimstone, Sebastian spent six and ahalf years at Nedbank Capital primarily in theCorporateFinancedivision.SebastianisaFellowoftheInstituteofActuaries.

SEBASTIANPATEL(35)

4

CA(SA)IndependentNon-executiveDirectorChairmanoftheauditandriskcommitteeAppointed:April2009

As a chartered accountant (SA), Tony practiced inDurban within the auditing profession his entireworking life.Tony isalsoanFSBqualifiedFinancialPlannerhavingbeen(until30April2015)adirectorofandsubstantialshareholderinafinancialplanningbusiness operating in Durban, Stellenbosch,JohannesburgandPortElizabeth.Heservedarticleswith G Hackner, Benn & Co, to which firm hereturned after a few years on his own, remainingwiththem,nowGrantThornton,until1March2009when he retired as a partner. TonywasManagingPartner of the Durban office from 2003 for fiveyears. Tony has had extensive experience in andconsulting on taxation, mergers and acquisitions,trusts,estateplanning,valuations,exchangecontrolandcorporateandgeneralbusiness.Tony’sfavouredinvolvementis,however,inrealestate.

ANTHONY(TONY)BERMAN(73)

1 2 3 4


Company review

6

BCom,BAcc,CA(SA)IndependentNon-executiveDirectorMemberoftheremunerationandnominationscommitteeAppointed:September2000

KevinistheCEOofCoricraftGroup(Pty)Limited,havingtakenupthispositioninApril2012.Priortothishespent16 years at Nando’s formally as Managing Director ofNando’sSouthAfricaandthereafterasadirectoroftheNando’s global group. Kevin is a chartered accountantbyprofession,andhasbeenaboardmember fromtheinception of Scooters Pizza in 2000. Kevin’s experienceof the franchise model and exposure to internationalmarketsmakeshiscontributioninvaluabletothegroup.

KEVINMICHAELUTIAN(47)7

5

Non-executiveDirectorAppointed:August2008

Hyltonbeganhis career in the jewellery industrywhenhe first opened Hylton’s Jewellers in 1983. The secondstorefollowed inthesameyearandthenamechangedtoNatalWholesaleJewellers.In1988,Hyltonwentontoextendthebrandwhenhepurchasedashare inoneofthe oldest jewellery manufacturers in Durban, DurbanManufacturing Jewellers, which supplied NWJ with themajority of its locally manufactured jewellery givingNWJ the ability to offer excellent quality jewellery atcompetitive prices. Hylton has played a significant rolein influencing the jewellery industry in South Africa.Hylton retired in November 2011, but still serves as anon-executive director and is focused on sharing hisimmeasurablewealthandexperiencewiththeteam.

HYLTONROYRABINOWITZ(67)CA(SA)IndependentNon-executiveDirectorMemberoftheauditandriskcommitteeMemberoftheremunerationandnominationscommitteeAppointed:November2011

Beforestartinghisownbusinessin1998,Wesselcompletedhis articles in 1996 at Arthur Anderson and joinedGensec Investment Bank for a period of two years. Hegained valuable experience in investment banking, dealstructuring,privateequityandunderwriting.During1998,hestartedacorporatefinancebusinessandbuiltitintooneof thebiggest advisorybusinesses for small andmediumcompanies.Thebusinesswasrankedbydealmakersinthetop10corporateadvisoryfirms formorethanfiveyears.Hewasinvolvedinmorethan30listings,variouscorporatefinance transactions and private equity transactions.He participated actively in more than 22 boards as aDesignatedAdviserorsponsoroverthelastfewyearsandgained valuable experience as an adviser to the variousboards.Hesoldhisbusinessduring2008toablack-ownedfinancialservicesgroupwhereheheadedupthecorporateadvisorybusiness.Wesselisnowactivelyinvolvedasanon-executivememberinfivelistedcompanies.

WESSELPETRUSVANDERMERWE(47)

5 6 7


BOARD OF DIRECTORSEXECUTIVE DIRECTORS

1

BSocSci,LLBChiefExecutiveOfficerChairmanoftheexecutiveandinvestmentcommitteeAppointed:March2000

Carlo completed a postgraduate LLB degree at theUniversity of Natal after which he and his father,Luigi, owned four franchised pizza outlets in theDurban region. In 1999, Carlo sold his interests andcommenced the groundwork to create a new pizzadelivery concept which became Scooters Pizza inSeptember 2000. Since 2000, Carlo has headed upthe team that saw the evaluation of Scooters Pizzato the Taste Holdings businesses of today. In 2014,Carlo was inducted into the FASA Hall of Fame forTaste’s contribution to franchising in South Africa.Carloguidesthestrategicdirectionofthecompany,itsgrowth strategy and human capital development. Healsochairstheexecutiveand investmentcommittees.Carlo also serves on the board of Endeavor SA, anon-profit organisation that supports high-impactentrepreneursglobally.

CARLOFERDINANDOGONZAGA(42)

3

BCompt(Hons)ChiefExecutiveOfficer–LuxuryGoodsDivisionMemberoftheexecutiveandinvestmentcommitteeAppointed:November2000

Duncan obtained his BCompt (Hons) while servingarticles with Morrison Murray in Durban. Duncangained valuable experience in a manufacturing anddistribution environment servicing the retail and fast-moving consumer goods industry. Duncan progressedtoChiefFinancialOfficerandshareholderofthegroupof companies. Duncan joined Scooters Pizza in 2000and has been amember of the board of directors ofScooters Pizza since 2001 and Taste Holdings Limitedsinceinception.DuncanwasappointedChiefOperatingOfficerofNWJFine Jewellery in September2009andsubsequently, Chief Executive Officer in April 2010.FollowingtheacquisitionofArthurKaplaninDecember2014, Duncan was appointed Chief Executive Officerof the Taste Holdings Luxury Goods Division. DuncanwasappointedtotheboardoftheJewelleryCouncil’sof South Africa in April 2011 and has served on theJewelleryCouncil’sexecutivecommitteefromFebruary2012 to 2014. Duncan has been instrumental in thesuccessfulmanagement and control of the significantgrowthofthegroupoverthepast16years.Duncanisamemberof theexecutive committeeand chairs theLuxuryGoodsDivisionmanagementcommittee.

DUNCANJOHNCROSSON(50)

2

CA(SA)ChiefFinancialOfficerMemberoftheexecutiveandinvestmentcommitteeMemberofthesocial,ethicsandtransformationcommitteeAppointed:September2009

Evan qualified as a chartered accountant in 2001 aftercompleting his articles with PricewaterhouseCoopers. Heleft PwC and spent seven years with the JSE-listed SpurGroupwherehegainedextensiveexperiencewithinthefoodfranchising industry having been exposed to the financial,operationalandsupplychainaspectsofthebusiness.Hethen

EVANGELOS(EVAN)TSATSAROLAKIS(41)

1 2 3

served as Financial Director within a logistics group ofcompanies.EvanjoinedTasteHoldingsinApril2009andwasappointedtotheboardinSeptember2009asChiefFinancialOfficer.Evanactsinanon-executivecapacitytothemanagementboardsoftheFoodandLuxuryGoodsDivisionsandisamemberoftheexecutivecommittee.


Company review

Risks Risk philosophy and cultureAs a business manipulating resources to create value, Taste Holdings is inherently exposed to severalcategoriesofrisks.Tomanagetheserisks,theboardinstitutedariskmanagementprocesswiththeobjectiveofeffectivelybalancingriskandreward,basedonaphilosophyaimedatmaximisingbusinessopportunitiesandminimisingadverseoutcomes.

Toenableastrongriskculture,thefollowingpracticeswereimplemented:• Risk leadershipandstrategymanagedthrougha“top-down”approach,with risk reporting followinga

“bottomup”approach.• To ensure accountability and enforcement, risk management responsibilities are assigned to specific

individuals.• Athoroughriskmanagementprocessforidentifying,assessingandmeasuringriskevents.• Formulationofappropriateandeffectiveriskresponses.

TheGroupRiskOfficerhasresponsibility for reportingonrisk to theexecutivecommittee,auditandriskcommitteeandboardofdirectorsatintervalsdeterminedbytheboard.

KEY RISKS AND MITIGATION CONTROLS

“BottomUp”

Communicateandconsult

“Top-down”

Monito

r,reviewan

drep

ort

Groupobjectivesandstrategies

Externalenvironment

Internalenvironment

Riskresponse

Riskevaluation

Riskidentification

Risk

assessmen

t


Top ten risks

Risk Impact Probability

Sustainedincreaseinloadshedding High High

Exchangeratefluctuation Medium High

Franchiseeprofitability High Medium

Insufficientinsurancecoverage High Low

Securityatstoresandheadoffice High High

InterruptionofdoughproductionforDomino’sPizza High Low

Eventofdefaultundergroupbondprogramme High Low

Merchandisesuppliernon-delivery High Medium

InterruptionofDomino’sPizzadoughproductionduetofire High Low

Reputationaldamage High Low

KEY RISKS AND MITIGATION CONTROLS continued

StarbucksMallofAfrica.


Company review

Risk description Description of impact Mitigation

Sustained increase in load shedding

The potential impact of loadshedding stretches across bothdivisionsandwillaffectcorporateandfranchisee owned facilities throughlower revenues and profitability.Government has assured the SouthAfrican public that scheduled loadsheddinghasended,butthenationalpower grid’s reserve power marginremainsinsufficientintheeventofamajorbreakdown.

• Franchisee investment in generators,although these are expensive and incertain instances limited by landlordsandstorelocations.Thisisalsothecaseforcorporateownedstores

• AgeneratorissitedattheMidrandfooddistributionandmanufacturingfacility

• In an extended outage, the Midrandfacilitycansupplyupto400storesandtheCapeTownfacilityupto200stores.Refrigerated containers or refrigeratedtrucks can be brought in to storemanufactured dough. Should eitherfacility be interrupted for an extendedperiod, the other facility can pick upfull national supplyby reorganising thetransportroutesandschedules

• Suppliershavebeenidentifiedtoprovidecontinuityofsupplyforstoreinventories

• Insurancecoverisinplaceforfoodstockdeterioration

• Group financial systems are housedoffsite and a Disaster Recovery facilityhasbeenprepared

• Critical systems at the various brandheadofficesaresupportedbyUPS

• Domino’s Pizza stores only keep a fewdaysofdoughonhandatmostandwillbe unable to trade should the doughsupply be interrupted for an extendedperiod

Exchange rate fluctuation

An unfavourablemove in the USD/ZARexchange ratewill increase thecostofstoreequipmentforStarbucksand Domino’s Pizza. In addition,margins may be affected due toimportation of key ingredients. Forjewellery, exchange rate effects arepassedonthroughthesupplychain.

Certain locally sourced productsareeffectively linked to theEuroorUSDexchangerates,renderingtheirlocalpriceexposedtofluctuationsinthese exchange rates. Wild-caughthakeiscurrentlyonesuchproduct.

• Thegroupisbuyingforwardonimportedstockitems,withinreason,butremainsexposedinthemediumterm

• Tastehastakenoutforwardcontracts



Franchisee profitability

Franchisees’marginscouldbeerodeddue to high inflation, interest rateincreases and continuous input costrises such as double-digit electricityincreases. The cost of sales mayincreasesharplyduetofoodinflation,lower than planned sales growthand increased labour and fuel costs.The non-payment of managementroyaltieswill reduceour incomeandmarketing spend for driving brandsforward. Non-profitable stores willhave to close, which negativelyaffects brand awareness. Closureswould hinder new store growth andreducerevenues.

• Strong,focusedoperationalteams• Actively drive down input costs, where

possible• Strategicallysetmenupricing,toensure

GrossProfit (GP)andCostofSale (COS)are in line with set targets and marketexpectations

• Target and aggressively drive growththroughrelevantKPIs

• Reducenewstoresetupcosts• Continuouslymeasureandcommunicate

financialbenchmarksacrossthesystem• Identify poor performing stores and

proactivelyaddressthese• Continue with brand repositioning and

redesignmenusandstores• Aggressive national and regional

marketingstrategies

Insufficient insurance coverage

Iftargetedbycriminals,thepotentialexists for theLuxuryGoodsDivisionto incur losses above the insurancelimits set at company stores andhead office. Franchisees could thenbe unable to obtain finance fromlending institutions or credit fromNWJ due to restricted insurancelimitsonrobberies.

• Insurance coverage is annually andcloselyreviewedtoensurethatadequategroupcoverismaintained

Security at stores and head office

An armed robbery could harm staffand customers, while resulting instock lossandbusiness interruption.Franchisees may choose not tore-open stores following a robberyandstafforcustomerfatalitiescouldhaveareputationalimpact.

• Consistently maintain stringent securityprocessesandmeasures

• Maintain a sound working relationshipwithsecurityserviceproviders

• Stafftrainingimprovesstorevigilance• Head office and operations to assist

robbedstoresresumetradewithminimaldowntime

• Security measures are constantlybeing evaluated and improved as perrecommendations

• A store upgrade programme is ongoing,withsomeriskiersitesrecentlyrelocatedand revamped. Upgrading the storesreducesriskasthenewlayoutstrengthensmerchandise on display security. Rolexstoresareidentifiedashighrisk

• TheFacetsystemprovidesphysicalaccesscontrolandphotographicsurveillance

• Pre-employment polygraph testing andminimumhiringcriteriahaveensurednofidelityissuestodate



Company review


Interruption of dough production for Domino’s Pizza

Doughproductionmaybeinterruptedas a result of water supply,contamination and/or industrialaction. Domino’s stores would notbe able to trade during an extendedinterruptionofdoughsupply.

• Watertankrentals• StringentDomino’sPizzastandardsand

processesareinplace.Thesearetestedfrequently

• Taste’s food manufacturing andpreparation facilities are HACCPcompliantandundergoingaccreditation

• Thedoughproduction facility’s team isnot currentlyunionised,but temporarylabour can be utilised in the event ofindustrialaction

• In the case of extended interruption,the Midrand facility can supply up to400storesandtheCapeTownfacilityupto 200 stores. Should either facility beinterruptedforanextendedperiod,theotherfacilitycanprovidethefullnationalsupplybydivertingthetransportfleettothatfacilityandreschedulingroutes

• TheMidrandfacilityhasgeneratorsabletorunitsentireoperations

Event of default under group bond programme

An event of default can triggerimmediate payment of bondproceeds or perfection of securityprovidedunderthebond.

• The group reviews forecasts andconstantly engages with bond agentsandattorneys

Merchandise supplier non-delivery

Non-delivery of stock willdisrupt supply and hinder groupdistribution. Theft or robbery ofinternational merchandise coulddelay product delivery and impacton advertised promotions. Deliveryservice providers who performinadequately or cease operatingcould result in customer andfranchisee dissatisfaction and harmbrandreputations.

• Source new courier methods andalternativesupplierstoensurethatlossofparcelsintransitisminimised

• Anationwidecourierhasalleviatedtheriskofnon-delivery

• An alternative service provider onstandby,ifrequired

• Supplier performance is monitoredand the use of multiple suppliersminimiserisk

• Tastemaintainscloserelationshipswithsuppliersandmonitorstheiroperations

• Back-up service providers thatunderstandthegroup’scapabilitiesandinformation requirements are alwaysoncall

• High-value deliveries are not made onpredetermineddates

• Stock flows are kept constant, withregular smaller deliveries rather thansinglebigones

• Head office proximity to the Sandtonhubreducesdeliveryrisk



Interruption of Domino’s Pizza dough production due to fire

Domino’sPizzastoresonlykeepafewdaysofdoughonhandatbestandwillbe unable to trade should the doughsupplybeinterruptedforlonger.

• Fire suppression systems installed inbothdoughmanufacturingfacilities

• Inthecaseofextendedinterruption,theMidrand facility can supply up to 400storesandtheCapeTownfacilityupto200stores

• Alternate refrigeration facilities in theform of reefers or refrigerated truckscanbebroughtintostoremanufactureddough

• Shouldeitherfacilitybe interruptedforan extended period, the other facilitywill be able to pick up full nationalsupply

Reputational damage

Reputational damage may result ifconsumers become ill from a foodproductsoldinstoreormanufacturedbyTaste.ThishasthepotentialtospiralintoTVcoveragethat labelsbrandsasunsafe for consumption, resulting infallingreputationandsales.

• RetainedaPRcompanythatcanmanagereputationalcrises

• Monthly inspections of in-storeoperations

• Suppliers must conform with specificcriteria and pass audits of theiroperations. Domino’s Pizza andStarbucksphysicallyauditlocalsuppliersbefore possibly accrediting them assuitablesuppliers

• Incoming raw materials and processedgoods are tested regularly by anindependentfirm

• Hygiene practices are Hazard AnalysisCriticalControlPoint(HACCP)compliant,andconductedinaccordancewithbestpractice

• Thegroupisreviewingitsproductrecallpolicies and considering additionalinsurancefordistributionactivitiessuchasthecoldchain

• Public liability insurance is in place forstoresandfoodmanufacturingfacilities

OurMidrandandCapeTowndistributionfacilitiesareHACCPcompliantandwillbeHACCPaccreditedduringtheyear.



Company review

STRATEGY, RISKS AND OPPORTUNITIES

Our strategy for long-term growthFormulated in 2014, Taste’s strategy is foundeddirectly on a clear vision andmission. It is driventhrough a competency framework of skills andexperiencethatunderpineachlevel,fromspecificbrandsuptoeachdivision.

Each brand and division is operated by semi-autonomousmanagementteamswiththemandateand flexibility to lead within agreed parameters.Costandoperationalefficienciesaresupportedbyasinglesupplychainandsharedsystemsplatformineachdivision.

Thegroupheadofficeprovidesstrategicguidance,a central treasury, corporate governance and riskmanagement.

The Arthur Kaplan strategyTocompeteeffectivelyforupperincomeconsumers,Tastebelieves inacquiringordeveloping thebestbrands in their categories. Arthur Kaplan is theleading luxurySwisswatchretailer inSouthAfricaandoffersacompellingrangeofjewellery.Wearefurther reinforcingArthurKaplan’spositionat thetop end of South Africa’s luxury goods segmentby reimagining and revamping the stores andintroducingnewluxurybrands,mostnotablyfromRichemont.

WeareexamininglocationsforaddingnewArthurKaplanstoresinSouthAfricaandinsub-equatorialAfrica,where there is a considerable appetite forluxurySwisswatchbrands.OurnewArthurKaplanstore opened its doors at the Mall of Africa inApril2016.

The Starbucks strategy LicensingaglobalcategoryleadersuchasStarbucksfits with Taste’s drive to be a custodian of theworld’s leading brands. The Starbucks licenseemodelenablesTastetodirectlyownitsoutletsandthe groupwill benefit further from the increasedproductvolumesthroughourdistributioncentres.

Intime,theStarbucksbrandequitywillhelpTasteexpand into other African countries. Starbucksoperations align well with the shared services

platformcreatedintheTasteFoodDivisionoverthelasttwoyears.

Taste expects ordering in advance throughsmartphones or computers to become a majortrend.Wecan learnmuchfromStarbucks’shighlyevolvedonlineorderingplatform,which isoneoftheworld’smostadvanced.

The Domino’s Pizza strategyOver the next five years, Taste intends growingDomino’sPizzaintosouthernAfrica’sleadingpizzadeliverybrand.

AcquiringtheDomino’sPizzalicencelinksTastetoamyriadofglobalresources,includingbestoperatingpractices, new product pipelines and Domino’sPizza’sglobalonlineorderingplatform.

The Domino’s Pizza rollout has also compelledTaste to produce fresh dough to extremely highstandards. Manufactured and distributed fromcentral facilities, this requirement adds furthervolumes to the Taste supply chain and supportsconsistencyinpizza-making.

The long viewAsdiscussedintheCEO’saddresslastyear,Taste’soverallstrategyrestsonfourpillars:• deepening our vertical integration in food

throughself-distribution• increasing corporate ownership of outlets in

selectedbrands• being a key player in the lower income food

segment(Zebro’sChicken,TheFish&ChipCo)• owning or licensing the world’s best brands

(Starbucks,Domino’sPizza)

Basedonourbrand-facingcompetencies,Tastecanacquire and integratemost brands that fitwithina group or divisional strategy. Diverse productscanbeofferedundertheTasteumbrella,basedonspreadsofcomplementarybrands.

Investing in other product categories is always astrategicoption,thoughTastewillfocusfornowonbedding down and leveraging our Arthur Kaplan,StarbucksandDomino’sPizzabrands.


STRATEGY, RISKS AND OPPORTUNITIES

Taste Holdings’ core strengths

Customers AdeepunderstandingofsouthernAfricanlowtohighincomecustomersinQSRandretail.Ourbrands address 85% of South Africa’s demographic and capitalise on the major social-economic themes of an emerging and aspirational consumer who is time starved, seeksconvenienceandwishestodisplaystatusthroughuniversallyrecognisedsymbolsofluxury.

Brands Weunderstandhowtobuildbrands(wehavebuiltsixofourown)acrossmultiplecustomersegments.Wearealsoexemplarybrandcustodiansforsomeworld-renownedbrandsintheircategories.

Franchising Weunderstandandaregreatatfranchising.Beingafranchisormakesusabetterfranchiseeandlicenseeofinternationalbrands.

Leverage through scale

Tastehasdevelopedscaleofoperations–anadvantageinthehighlyconsolidatedsouthernAfrican market. This reduces costs and enables us to more quickly engage new conceptsandbrands.

Vertical integration We control and own our distribution and, therefore, our route to market. Our in-housemanufacturingcapabilitiesensurequality,innovationandowncontrolofstockinventories.

Targeted executive compensation

Ourmotivational remuneration framework attracts and retains the professional executivesthatfitintoTaste’sstrategy.

Corporate store ownership

Ourcurrentstrategyistodirectlyown30%ofourFoodDivisionoutlets,whichcomplementour50%+ownershipofLuxuryGoodsDivisionstores.

Governance and transparency

Sincelistingtenyearsago,TasteHoldingshasprescribedtorigorouscorporategovernanceandtransparency,whichweareintensifyinginresponsetocurrentbestpractices.

Access to capital We have a proven track record for raising capital in both the debt and equity markets.Followingourlatestcapitalraise,thegrouphasdrawndownjustR225millionofaR1billionDomesticMediumTermNoteprogramme.

Leveraging our core strengths for the future

Customers Themoreweunderstandaboutconsumersinourtargetedincomebands,themorerelevantourspreadofofferingbecomestoourchosenmarkets.

Own brands versus licensed brands

Whetherhomegrownorinternational,Tasteintendsoperatingthebrandsmostsuitedtothemarketswehaveselected.

Franchising and corporate ownership

Webelieve thatwe are a better franchisor and licensee ifwe directly own andmanage asignificantpercentageofouroutlets.

Leverage through scale

Our shared services platform reduces costs and ensures that outlets receive products ofconsistentquality.Wecanrespondquicker tonewproduct linesandmaketheseprofitablemorequickly.

Vertical integration Weselecttheproductsthatweshouldlogicallymanufacturein-houseandself-distributethesetoalloutlets.

Targeted executive compensation

Tastealreadyhas a rangeof executive skills acrossour competency frameworkandwill beaugmentingthesewithnewtalentthroughoutthenextfinancialyear.

Focused brand leadership

We are ensuring that every brand gets sufficient resources for its executive leadership,operations,marketing,andhumanresourcemanagement.

Fewer, larger brands All brands require the same structureandattention to succeed.AsTastedevelops,wewillseekoutbrandsthatofferoptimumreturnsfortheamountofmanagementfocusandgroupresourcesrequired.

Governance and transparency

Wehave longbelieved that good governance is intrinsic to a sustainable company, aswellas being essential for entering new countries and establishing partnerships with credibleinternationalbusinesses.TasteiscompliantwiththeUSA’sForeignCorruptPracticesAct(FCPA)andthisyearweintendfurtherextendingourinternalethicsandanti-corruptionawarenesstrainingthroughoutthegroup.


Leadershipreview

LEADERSHIP REVIEW

Dear StakeholderDuring the financial year just ended, Taste againseized theopportunity to licenseaglobalbrandandintroduce it to southern Africa. We partnered withStarbucks Coffee, the world’s pre-eminent coffeeroasterandretailer.Tasteseesthepotentialforupto200 Starbucks outlets as catalysts for an expandingcoffeeshopcommunityacrossthesubcontinent.

WithglobalbrandsDomino’sPizzaandStarbucks inour food brand portfolio, along with the premiumSwiss watch brands retailed through the group’sLuxuryGoodsDivision,togetherwithourestablishedlocalbrands,Tastehasaggregatedastrongportfolioofgrowthdriversfortheforthcomingyears.

Macro-economic overviewSouthAfrica’spoliticalandeconomic instabilitymustbeviewedwithin thecontextofworldwidevolatility.Financial markets are fragile and unpredictable,regional wars are causing multitudes of people toflee for safe havens, political systems are beingdeeplyquestionedandclimatechangeis increasinglyrecognised as the cause of erratic and damagingweather.

CHAIRMAN’S LETTER

HowardSchultz,CEOStarbucksInternational,atthelaunchofStarbucksSouthAfrica.

RAMSAYL’AMY(BILL)DALY

“Thereisnodignitylikethedignitythatcomesfrombeingabletowork.”


LEADERSHIP REVIEW continued

CHAIRMAN’S LETTER continued

WithinSouthAfrica,wearecopingwiththeworstdroughtinacentury,systemicunemploymentandinequality,andagovernmentstrugglingtoprovideadequateservicedelivery.

Againstthatbackground,Tastecouldhaveretreatedintodefendingitsexistingbrands,orwecouldhavetaken the opportunity to introduce a long-termgrowth driver in an adjacent beverage and foodsegment. I’m proud that the board showed theforesightandnervetodecideonthelatter.

LuxuryGoodssame-storesalesincreased

15%

Performance overview TheLuxuryGoodsDivisionperformedwell,withitsluxurySwisswatchbrandsbeingparticularlystrongperformers. An agreement was reached withRichemonttoplaceseveralofitsluxurybrandsintoselectedArthurKaplanstores.WearenowclearlythebiggestretailerofpremiumSwisswatchbrandsin southern Africa and are presently re-imagingthe Arthur Kaplan outlets to better reflect theirprestigeofferings.

NWJ,abrandwithwiderconsumerappeal,isalsobeing re-imaged and those stores that have hadthemakeover,have immediately lifted their salesvolumes.

After two years of evaluation and negotiation,landingtheStarbuckslicenceisadistinctfeatherinTaste’scap.Iamconfidentthispartnershipwillpayoffhandsomelyforyearsintothefuture.

Bedding down the Domino’s Pizza franchisebecame amore arduous and expensive processthan originally anticipated, but most of theScooters Pizza and St Elmo’s conversions arenow done. We learnt major lessons that have

preparedusfortheStarbucksrollout,whichwillhaveaslowertrajectory.Ianticipatethatintime,these two brands will provide a large slice ofTaste’srevenue.

Zebro’s Chicken has continued to perform aboveexpectations, but we continued wrestling withthemenu quality versus valuemix at The Fish&ChipCofranchise,duetothesoaringpriceoffishin recentyears. I feel thatwehavenow resolvedmost of the difficulties, with a series of changesto the store branding andmenu having restoredfundamentalprofitability.

Thisfranchise’sresultsfromourfirstmonthsinthe2016/2017financialyeararemostencouraging.

Ten-yearCAGRof

47%revenue

Personally, it’s sad to see our bedrock brands ofmany years such as Scooters Pizza and St Elmo’senter into their sunset phases as their storesconvertacrosstoDomino’sPizza,butthetimewasrighttobebold.

Creating jobs for the unemployedI’m delighted that the Starbucks employeephilosophywill work seamlessly with the Khulisa“Changing Lanes” programme we instituted forDomino’s Pizza, which has already created over300jobsforpreviouslyunemployedyouth.

SouthAfricahasoneofthehighestunemploymentrates in the world and employers should utiliseevery opportunity to create new jobs. ThroughKhulisa and Changing Lanes, the Starbucksrollout will create hundreds of new jobs, reachcountlessmore dependants and teach previouslyunemployed people skills that are transportablethroughout the food and hospitality industries,essentially filling a gap in education and betterpreparingforthemodernserviceeconomy.


Leadershipreview

Corporate governance and sustainabilityAs chairman of Taste for the past 16 years, oneof my key duties was to ensure that the group’sinternal controls are working and kept up tostandard.Aspartofthisresponsibility,I’veoverseenannual assessments of our corporate governanceprocessesagainstevolvingbestpractices.

TheKing IIIand international integratedreportingrequirements have driven a fundamental shiftin how boards manage their duties and reportcompany results to shareholders and otherstakeholders. Taste keeps abreast of theseinitiatives and this integrated report is compiledfor transparency, brevity and a sharp focus onrelevantissues.

As our monitoring and measuring systems forenvironmental and social impacts improve, weintend making our sustainability reporting moreextensive.Lookingaftertheenvironmentinwhichweliveandwork isnon-negotiable;therefore,wewillworktoimprovethataspectofourreporting.

A key aspect of sustainability in tumultuousSouthAfrica is tocreateviableworkandskills forunemployedpeople.Tasteisactivelydoingthisasa fundamentalaspectofourcorporatecitizenshipinSouthAfrica.

In closingAfter 16 years as Taste’s chairman – from ourbeginningsastheunlistedScootersPizzabusinesstothemulti-brand,diversifiedandJSE-listedgroupwearenow–Icanlookbackwithtremendousprideonwhatwehaveachieved.Tastehasbeenbuiltuponvisionandenergy.Iamgratifiedathavingbeenpart of that journey and for working alongsidesomeexceptionallycompetentbusinesspeople.

PassingonthechairmanshiptoGrantPattisonisaprivilege,ashisaccomplishmentsinretailbusinessare legendary.Taste is in safehandsand thiswastherightmomentformetostepback intoanon-executivedirectorrole.

The next few years may be challenging for allbusiness,asSouthAfricaand theworlddealwithsocial unrest and unpredictable economics, butI am confident that Taste is well overseen by anoutstanding board and executive team and willweatherthisstorm.

Tastepeopleatalllevelshaveworkedextraordinarilyhard over the past four years to identify andintegrate brands – international and local – fromseveralmarketsegments.

Now is the time to focus on bedding thesedown thoroughly and to create full value. Thefundamentalsandstrategiesareallinplace.

Warmregards

Bill Daly1 Grant Pattison2

Chairman Chairman

1Bill Daly resigned as chairman of the board on 23February2016.

2GrantPattisonwasappointedchairmanoftheboardon23February2016.

TasteHoldings IntegratedAnnual Report 201630

LEADERSHIP REVIEW

Dear StakeholderThe 2016 year was yet another watershed year forTasteHoldingsand Ipersonallyhavenever feltmoreprivilegedtoleadsuchanexceptionalteamofpartnerswhocontinuetodrivethegrowthagenda,oftenintheface of scepticism and contrary to popular thinking.Shareholders are seldom acclaimed so early in CEOmessages, but I would be remiss by not recognisingupfront that the opportunities we have to build anenduringbusinessofconsequenceinsouthernAfricais underpinned by the overwhelming support fromour shareholders over the last two years.While theArthur Kaplan (and the global brands it presents),Domino’sPizzaandStarbucksCoffeeopportunitiesareenormousintheirpotentialimpactonTaste,thetwoCARLOFERDINANDOGONZAGA

MESSAGE FROM THE CHIEF EXECUTIVE OFFICER

“Ifpeoplebelievetheysharevalueswithacompany,theywillstayloyaltothebrand.” –HowardSchultz

global foodopportunitiesaregreenfieldsoperations,

withtheshort-termhurdles these inevitablybringto

licenseesandinvestors.Weacceptboththechallenge

andresponsibilityoftheseopportunities.

The last two years have seen us focusmuch of our

energyoutwardaswepursuedastrategyoflicensing

global brands across our two divisions, as well as

building on our representation among SouthAfrica’s

large base of low income consumers. We acquired

Zebro’sChicken inMarch2014andhavegrown it to

64 outlets, increasing system-wide sales this year

alone by 25%. Adding Arthur Kaplan and World’s

Finest Watches to the group in November 2014,OurfirstStarbucksstoreopened21AprilinRosebank.

TasteHoldings IntegratedAnnual Report 2016 31

Leadershipreview

broadened Taste’s Luxury Goods business tobecomethelargestretailerofluxurySwisswatchesinsouthernAfrica,includingbrandssuchasRolex,Hublot,Omega,Breitling,TAGHeuerandLongines.We have since extended our premium brandoffering to include Cartier, IWC and Montblanc,amongothers.Inearly2014,wesignedanexclusivelicenceagreementwithDomino’sPizza,theworld’slargestpizzadeliveryande-commercebrand.ThatNovember, we opened our first Domino’s storesand during this year, converted Scooters and StElmo’sstoresandbuiltnewoutletssothatwehad74Domino’sPizzastoresatyearend.InJune2015,after two years of evaluation and negotiation,we announced Taste’s signing of an exclusivedevelopment agreement with Starbucks CoffeeCompany, with the first two Starbucks Coffeeoutlets in sub-Saharan Africa which opened inApril2016.

Takingontwosubstantiveopportunities insuchacompressedtimeperiodhastraditionallybeenthedomainofunlistedentities,giventheuncertaintiesof getting major new businesses launched. Theimmediate financial scoreboard will show thatthese opportunities have not comewithout theirlessons, often earned in sweat and ultimately,reflected in our short-term earnings. Having nowsecuredmultiplelong-termdriversofearnings,wehaveenteredaperiodofinwardfocustounlockthevaluetheseopportunitieshold.

Financial snapshotThe short-term financial effects of launchingDomino’s are clearly evident in the decline inearningsintheFoodDivisionevenafterexcludingonce-offcosts.Thiswillcontinueintheforthcomingyear, especially in light of Starbucks launching inApril 2016. This has been offset by remarkableperformances in our Luxury Goods business, inparticular Arthur Kaplan, which performancehas continued into the first months of the 2017financialyear.

Group system-wide sales increased 9% toR1.72 billion compared to the 12 months ended28 February 2015. The acquisition of Arthur

Kaplan,additionalcorporatestores,and increasesin the Food services business saw an additionalR293.6 million of core revenue added, anincrease of 41% over 2015, and surpassingR1 billion for the first time to R1.01 billion(2015: R717.1 million). Core gross profit marginincreased to 40.6% (2015: 39.6%) as corporatestoresbecomemoresignificantcontributorsacrossbothdivisions.ThisaddedR126millioncoregrossprofitcomparedto thepriorperiod.CoreEBITDAdecreased35%consequent to the start-upof thecorporate store ownership programme in theFoodDivision. The cost of capital raised (throughincreasedborrowingsandadditionalsharesinissuethrough equity raised) in addition to a materialdepreciation increase relating to corporate storeownership have seen core headline earnings pershare(HEPS)declineto1.5cents(2015:16.1cents)forthecurrentperiod.

Given the opportunities we have to investin accretive Starbucks and Arthur Kaplanopportunities, and in linewithourpriordividendpolicybasedoncoreHEPS,wehavenotdeclaredadividendthisyear.

R226millionrightsofferwas

36%oversubscribed

Confident backing for our R226 million rights offerOn13October2015,TasteHoldingssetouttoraiseR226millionbywayofarenounceablerightsofferin terms of which we offered 75 464 476 newshares at a subscription price of 300 cents perrightsoffershare.

At close of business on 30 October 2015, morethan 102million rights offer shares equivalent toR308 million were subscribed for, resulting in a36% oversubscription. The results show that ourshareholdersareconfidentinourbusinessstrategyandlong-termvision.


Broadening Taste’s executive capacityAmajorlessongainedfromourfirstyearofbringingin Domino’s Pizza was our shortage of executivecapacity,especially inhumanresources (HR).Asaconsequence, Taste has since recruited seasonedseniorexecutivestotakecontrolofspecificaspectsoftheFoodbusinessandfortheHRfunction–whichiscriticalforrecruitingandtrainingthenumberofnew employees required. For that reason, and attherequestoftheboard,ItookpersonalchargeastheFoodDivisionCEOafterJayCurrieunfortunatelydecided to emigrate. This boarddecision enabledmetosettleinanewexecutiveteamfortherolloutoftwoglobalbrands.

Withthelessonswelllearnt,wenowhaveabundantexecutiveHR,informationtechnology(IT)andfoodbrand expertise to continue a smooth rollout ofDomino’sandStarbucksstores.

Zebro’sChickensystem-widesalesincreased

25%Direct store ownershipAt year end, Taste directly owned 26 Domino’sstoresandintendsowningallitsStarbucksoutlets.We will also continue adding corporate ownedstorestoour jewellerybusiness,aswehavebeendoingforthepastfouryears.

TheintroductionofDomino’sPizzapropelledTastethroughasteeplearningcurveonself-owningandmanagingbrandedstores.Ayeardownthelineand26Domino’sstoreslater,Iammoreconvincedthanever that strategically owning corporate stores isthe right decision, but also acknowledge that wehave not yet developed the people capabilityweneed to be consistently successful at store level.Wehavearoadmaponhowtogetthereandthatisoursingularfocusinthecomingtwoyears.

Corporateownedstoresenabletightercontrolsandquicker responses tomarketshifts.Thestoresdo,

however, require a deep spread of managementandoperationalskillstooperateconsistentlywell,andweare, therefore,workinghardonrecruitingandtrainingtherightpeopleatall levels. Intime,thismanagementcapacitywillstandTasteingoodstead when further brand opportunities presentthemselves.

We anticipate expanding our corporate ownedDomino’s stores from 26 to approximately 40 bytheendof2016,fromacombinationofconversionsandnewstores.

With regard to our established local foodbrands,thesewillbemadeentirelyavailabletofranchisees.We look forward to taking the learnings gainedfrom Domino’s and Starbucks across to ourfranchisee brands and refining their processes inline with international best practices, especiallywheremultiplestoreownerscanbenefitfromourprocesses and learnings from our own corporatestoreownership.

Gaining of brand intellectual capital Taste’s ITteamistrulyexceptionalandhasbuiltasophisticated e-commerce platform for Domino’sPizza in South Africa. This same team is nowworkingtolaunchtheStarbucksloyaltyprogramme(theworld’s largest) inSouthAfrica,MyStarbucksRewards.

The transfer of skills and intellectual capital fromStarbucksandDomino’sisunprecedented,asthesebrandsbuildtheirknowledgefrommajormarketsaround the world, including China, India and theUSA. In time, these learningswill permeate fromTastethroughouttheindustryandultimatelymakethe South African food industry more globallycompetitive.

Concerns have been raised that Starbucks willoverwhelm the independent coffee shops. Webelieve exactly the opposite, as experience hasshown that Starbucks will grow the local coffeedrinking population exponentially. We havealready seen this through the much wider rangeof consumers that we see in our stores, whencomparedtoothercoffeeofferingsinthecountry.


MESSAGE FROM THE CHIEF EXECUTIVE OFFICER continued


Leadershipreview

Bringing in global brandsIntroducing Starbucks and Domino’s Pizza toSouthAfricahas captured thepublic imagination,butweareasdelightedtolaunchsomerenownedglobal luxury brands within the Arthur Kaplanportfolio.Lastyear,weenteredintoanagreementwithRichemont toofferwatches,andaccessoriesfrom Cartier, IWC and Montblanc through selectArthurKaplanstores.OurrevampedstoresretailingRolex, Hublot, Omega, Breitling, TAG Heuer,Longines and these luxury Richemont brandsfurther entrenches our position as the leadingretailerofluxurySwisswatchesinSouthAfrica.

International brands are increasingly attractedto the South Africanmarket, and in the long runtheir entry will benefit local consumers due tothe learnings from their accumulated intellectualcapital, and global experience they bring to themarket.

Merelyoriginating in theUSAdoesnotguaranteesuccess in the localmarket andwe are cognisantthat we will have to earn each customer’srespect,oneengagementatatime.Domino’sandStarbucks both feature digital platforms at theforefrontof their strategiesandweare recipientsof those learnings. Digital engagement will bean increasingly large component of how weengagewith customers and having access to thiscombinedsetoflearningswillensureTaste’sfuturecompetitiveness in a channel that may deliver agrowingpercentageofourfoodsalesinfuture.

Starbuckshasthe

fastest free wi-fiinapublicretailfoodsettinginSA

Luxury Goods Division overviewTaste’s Luxury Goods Division is pleased toreport a brightly positive set of results due to anoutstanding performance by the Arthur KaplanandWorld’sFinestWatchesoutlets, supportedbysolidreturnsfromourNWJbrand,inparticulartheNWJcorporateownedstores.

Overall revenue increasedby79%toR570.5millionandcoreEBITDAlifted42%toR69.6million.Samestore sales exceeded15% for thedivision, a trulyoutstandingperformancegiven theexchange ratevolatilityandweakconsumersentiment.

This exemplary performancemust be seen in thelight of prevailing market conditions that dictateagainst luxury purchases, though in the currenteconomic circumstances,precious stone jewelleryand premium branded watches can be seen asstoresofvalue.

Weascribemuchofthisperformanceduetoakeenunderstanding of our consumer markets and there-imagingoftheArthurKaplanandNWJstoresinresponsetoourmarketresearchofourconsumers.

Therevampedstoresacrossbothbrandsreportedsignificant rises in their revenue, which showsthat the re-imaging of these brands is resonatingwith their consumers. Although we still seeopportunities to acquire and convert existingindependentjewellers,particularly intheWesternCape,weare currently focusedonoptimisingourcurrent jewellery store portfolio both in ArthurKaplanandNWJ.

ChallengesOn thedownside,wehad todealwith the issuesof exchange rates, potential theft and mediocrefranchiseeperformanceinourNWJbusiness.Tasteobviously cannotmanage exchange rates, butweand our trading partners canmitigate the effectsofthesetothebestofourability,andwehavedoneacrediblejobduringtheyear.

Although the US Dollar and the Swiss Franc rosesignificantly against the Rand in this financialyear, we were able to work proactively with ourinternational brand partners in Europe and theUSA to mute the foreign exchange effects. As aresult, these currency shifts have so far had aminimalimpactonourcustomers.

A more serious challenge was that the franchiseowners of NWJ stores began slowing down therestocking of their inventories due to uncertaintyregarding their selling volumes in the current


economicclimate.Thispracticedisruptedourownsales forecasting and inventory stocking levels,which negatively impacted our December sales,traditionallythehighestsalesmonthinNWJ.

Food Division overviewLaunching two international brands in 18monthshas certainly demanded major effort andcommitment.Afteracquiring several brands since2012, we are now focusing on optimising theseandbuildingTaste’smanagementandoperationalcapacity.HavingavarietyofgloballyleadingbrandsinTaste’sportfoliowilldriveorganicgrowthforthenextfewyears,andourfocusis,therefore,onthesegrowthvectors.

Taste has achieved a staggering amount sinceembarkingonthisjourneyofacquisitionsin2012.TheFish&ChipCoandZebro’s acquisitionswereabout getting the right brands to enter the lowincome food segment. By complementing thesewithinternationalpizzaandcoffeebrands,wehavewidened our appeal to almost all income groupsacrossSouthAfrica.

Building new systems into the Taste culture hasbeenastiffchallenge,butwehaveworkedthroughtheprocessesandlearntmuchasaresult.Havinglaunched Domino’s Pizza recently,misstepsmadethere havebeen avoided as the Starbucks rolloutgathersmomentum.



Learnings from Domino’sIntroducingaglobalbrandtotheSouthAfricanpizzasectorandintegratingitssystemsandnuancesintoa companywasalwaysgoing tobring its shareofdifficulties.AndDomino’sdid.Westillhavestoreslefttoconvert,followingwhichourfocuswillbeonleveragingourexistingassetbase,Domino’sglobalresources, and our Starbucks learnings to unlocktheearningpotentialoftheDomino’sPizzabrand.

Ten-yearCAGRof

22% system-widesales

In hindsight, going from zero to more than 300store-based people in the space of four monthswas not sufficient time to thoroughly align newtraineeswith theDomino’sPizzaculture,and thismisalignmenthasbeentherootcauseofmanyofour stores’ challenges, andultimately reflected inourearnings.Systemswerestillbeingputintoplacewhentheinitialstoresopened,creatingalessthanidealenvironment.ThesemistakeswillbeavoidedatallcostswiththeStarbucksrollout.

The positive aspect of converting quickly is thatTastehasanassetbaseof74storestooptimiseanduponwhich to build. Thedownside of convertingso swiftly is that we prioritised the conversionsandnotthepeoplecapacityandexpertiseneededto support these.Wealsoconverted fewer storesthanoriginallyplanned,mainlyduetomakingourselection criteria for conversion more stringentwithregardtositesandpotentialpartners.Whilestorenumbersareanindicatorofsystemstrengththey can be a distraction to building a solidprofitablebusiness,especiallyinacorporateownedenvironment.

Withhardlessonshavingbeenabsorbed,TastewillnowfocusonmakingitstwoglobalbrandslucrativeintheSouthAfricanenvironment.

Local food brands Duetoanunprecedentedriseinwild-caughthakeprices in recent years, and amore recent potatoprice hike, The Fish & Chip Co encountered stiff

74Domino’soutletsopenin16months.


Leadershipreview

headwindsoverthepasttwoyearsandanumberof stores due to franchisee profitability beingimpacted by rising input costs. With consumersthemselvesunderfinancialpressure,passingthesecostsontoconsumerswasnotviable.

Management worked hard to find the balancebetweenvalueandquality, so thatourcustomerswill continue enjoying their fish-based meals.A series of improvements to the menu and thestore layout appears to have turned the tide.The secondhalfof theyear sawsame-store salesimproveto-12.2%(-20%inthefirsthalf)andmoreencouragingly,achievepositivesame-storesalesforbothMarchandAprilthisyear.Althoughearlydaysyet,wehaveretainedahigher-than-expected231stores(weforecastapproximately200atthestartof theyear). Whilefishprices remain stubbornlyhigh, potato prices have nearly halved sinceDecember, improving franchisee gross marginsconsiderably.

Same-storesalesinMaxi’simprovedinthesecondhalfoftheyear,showingaswingofmorethan5%fromthefirsthalf,to2.9%forthesecondsixmonths.Zebro’sChickensame-storesalesincreased7.2%fortheperiodandcontinuetogrowataboveinflation.System-wide sales increased by more than 25%andthebrandcontinuestogrowfromstrengthtostrength,especiallyintheWesternCape.

The Starbucks rollout and brand promiseAsplanned,weopenedourfirstStarbucksstoreinApril 2016, in Rosebank.Unexpectedly, oneweeklaterwe opened the second store in theMall OfAfrica, the largest first-phase mall developmentin Africa. Consumer response wildly exceededour, and Starbucks’s, expectations with queuesstill visible at the outlets weeks later. Our foodoffering is performing better than we envisagedandwearepleasedwiththeadoptionofthebrandby the younger population – a segment that webelieve is considerably underserved among SouthAfricanofferings.Wehavealsobeenabletoofferwhatwebelieve is simply the fastest freewi-fi inapublic retail foodsetting inSouthAfrica.Pricingwas a topic ofmuch conjecture prior to openingandwe are pleased thatwe have surprisedmostcommentators by delivering a price point to our

“Starbucksdoesnotentitleustosuccess.Wearecommitted

toearningourcustomers’respectonecupatatime.”

HowardSchultz,CEOStarbucksInternational,addressingthebaristasatStarbucksMallofAfrica.


customersthatmakesthebrandwidelyaccessible.We have also invested deeply in the StarbucksReserve brand and both our stores now join thelessthan2%ofStarbucksstoresaroundtheworldthat offer these rare micro-lot and exclusivecoffees that are specifically roasted in Seattle inverylimitedquantities.StarbucksReservepresentscoffee to a wide audience in a manner that iscurrentlynotofferedinSouthAfrica.

Wearehumbledby theearlycustomer response,but acutely aware that the Starbucks brand doesnotentitleustosuccessandthatwehavetoearnourcustomers’respectonecupatatime.

With this inmind,wewill initiallyopenStarbucksstoresataslowerratethanwedidwithDomino’sPizza, as we intend getting the operations andtrainingprogrammes for our partners to leadourstore rollout, rather than in reverse. While wehave articulated 12 – 15 stores in the first twoyears,wearefocusedonensuringindividualstoreprofitabilityandontriallingnewformats,likedrive-thru’s,earlyoninourrollout.

In line with our commitment to localising ourinvestment, we were able to brief local artisansto manufacture almost every single piece offurniture in our stores, including the bespokeceilings and wall, bar counters, and furniture. Todo this in our first stores was a herculean effortbut symbolic of our commitment to ensuring ourinvestment benefits local producers as much aspossible.Similarly,ourfoodofferingsawussourceover95%ofourrangefromlocalsuppliers,withamedium-termplantoincreasethattosome99%.

Starbucks drives skills and community developmentOur team selected for the Starbucks launch wassent to theUnitedKingdomforbetweentwoandthree months of intensive training. A full serviceStarbucks storewasbuilt atTaste’sheadoffice tobethe initial training facility.UsingStarbucksasaforceforgood,wearecommittedtointegratethreestreamsofemployees inour stores: Experiencedbaristas and managers from within the industryarerecruitedtoprovidecoffee leadership,aswellas mentors to other partners. We also look to

recruit students, who can earn an income whilestudying by working a restricted but flexiblenumber of hours per week. This assists studentstopayfortheirstudiesandwebenefitthroughtheintellectualcapitalthatuniversitystudentsbringtoanybusiness.Inthethirdcategory,our“ChangingLanes”programmeseeksourpromisingcandidatesyoungwhoareeithercurrentlyunemployedorareschool leavers, but live in the areaswhere storesarebased.Theseyoungpeopleundergo intensivetraining and mentoring by experienced stafferssothattheyareenabledtocreatecoffeeindustrycareersforthemselves.

We have already employed 16 partners throughthe “Changing Lanes” programme and all areperforming admirably under the mentorship ofmore seasoned recruits. These are in additionto over 300 Changing Lanes employees who arealready employed in Domino’s Pizza stores, withmanymoretoberecruitedasDomino’scontinuesitsexpansion.

Wesourceover

95% ofourfoodrangefrom

local suppliersIn conclusionAs a fundamentally entrepreneurially spiritedcompany we have relentlessly pursuedopportunitiesthatcandeliverlong-termvalue.WehavesuccessfullypositionedTastetobetheleadinglicensee for global brands in their respectivecategories,butwehavemuchworktodotobreathelife into these opportunities. The last two yearshave been bitter-sweet: Domino’s has not goneexactly according to plan, while Zebro’s, ArthurKaplan and Starbucks have materially exceededexpectations. We have committed to leveragingthese opportunities to the exclusion of othermaterialacquisitionsintheneartermaswebelievethat the brands we represent have significantlong-termearningspotential.




Leadershipreview

In appreciationMr Bill Daly has resigned as Taste’s chairman, ashefeelsitistimeforafreshpersonalitytotaketherole.Billremainsontheboardasaninvaluableandindependentnon-executivedirector.

In2000,BillbecamethefirstchairmanofScootersPizza,thefoundingentityofTasteHoldings. Inhis16-yeartenure,Billguidedthegroupfromasinglebrand,start-upbusinesstothemulti-brandedlistedbusiness that Taste is today.We thankBill for hisoutstanding contribution as chairman and lookforward to his continued guidance as a director.Personally, Bill has been awise counsellor duringthemanyyearsweworkedtogether,forwhichIamdeeplygrateful.

Taste’s new chairman is Grant Pattison, anexperienced and renowned retailer, who wasalreadyontheboardasanon-executivedirector.

As Ihavediscussedat some length in this report-back, we all had to be at the top of our games

to assimilate the global brands entering intoour business over the past year. This demandedanotheryearofextraordinaryeffortfromallTastepartners–whichagain–theydeliveredwithskill,energyandgoodwill.Theboardandtheexecutiveteamareexceptionallyfortunatetobestandingonthe shoulders of such committed and competentpartners.

Wemaybuildbeautifulstoresanddevelopworld-class systems and infrastructure, but it is theenergy,commitmentandhumanityofourpartnersthatbreathelifeintoallthatwebuild.Thankyou.

Carlo GonzagaChiefExecutiveOfficer

“Asabusinesswehaveanobligationtoshareoursuccessandempowerourcountry’syouthwithskillstocontributemeaningfullytoourcountryinthefuture.”

Taste Holdings Integrated Annual Report 201638 TasteHoldings IntegratedAnnual Report 201638

Dear StakeholderThepasttwoyearshavebeenexceptionallybusyandexcitingduringwhichwelaiddownthefoundationsforsolidmedium-andlong-termgrowth.

Food• Beginning with the acquisition of Zebro’s Chicken

in March 2014, complementing its establishedpresence of The Fish & Chip Co among lowerincome consumers, the Food Division successfullyintegratedthisbrandintothegroupandhasgrownthisbrand’sstorebasebyover50%;

• ThefooddivisionbecamethelicenseeofDomino’sPizza, the world’s leading pizza delivery brandand embarked on successfully launching andestablishing this globalbrand inSouthAfrica. Thisproject involved [1] the conversion of ScootersPizza and St Elmo’s stores to Domino’s stores; [2]significantlyscalingthedivision’sverticalintegrationplatform through the establishment of doughproductionandworld-classdistributionfacilities inJohannesburgandCapeTown;and[3]makingthedecisiontoexitcorporatestoreownershipinMaxi’sandTheFish&ChipsCo,focusinginsteadexclusivelyonStarbucksandDomino’s corporateoutlets.Thedivisionopened26Domino’scorporatestores;and

• On 14 July 2015, after announcing that it hadsecured the exclusive development agreementto develop Starbucks – theworld’s leading coffeeroaster and retailer, the division began gearingup for the launch of this global brand and all itselements in South Africa. The first two Starbucksstores were opened in April 2016 and the brandhasexceededourexpectationswithinitialcustomerfeedback being enormously positive.We envisage12to15outletsbeingbuiltinthenext24months.

Luxury Goods• TheLuxuryGoodsDivisionsuccessfullyincorporated

the Arthur Kaplan and World’s Finest Watchesbusinessandisnowtheleadingretailer(bynumberofoutlets)ofluxurySwisswatches–beingstewards

EVANGELOS(EVAN)TSATSAROLAKIS

CHIEF FINANCIAL OFFICER’S LETTER TO STAKEHOLDERS



Leadershipreview

TasteHoldings IntegratedAnnual Report 2016 39

of brands like Rolex, Hublot, Omega, Breitling,TAGHeuer, Longines and Rado,more recently,alsorepresentingCartier,IWCandMontblancinselectedoutlets;and

• NWJcontinuedaddingmorecorporatestorestotheirportfolioastheyhavebeendoingoverthepastfouryears.

During thepast 24months, the grouphas raisedsufficient capital through a combination of debtand equity in order to be able to achieve andcapitaliseonalltheaboveviasignificantinvestmentin capital expenditure, resources, human capitalandtechnology.

Corerevenueup

41% toR1.01billion(2015:R717.1million)

Performance overviewCore earningsAswithpreviousyears, thegroupdiscloses core/normalisedearnings.Thecompanyuses this coreearningsmeasuretointernallyevaluateoperatingperformance, to evaluate itself against its peers,andtodeterminefutureperformancetargetsandlong-range planning. Additionally, the companybelievesthatstakeholderscoveringthecompany’sperformance also utilise a similarmeasure. Tastewilldisclosethisfinancialmeasureforaslongasitisrelevanttostakeholders.

Core earnings exclude Domino’s and Starbuckscosts, and other once-off costs and revenues.Domino’s costs includes upfront costs relatingto the launching of the Domino’s brand, theestablishmentofdoughproductionanddistributionfacilities (including the temporary Domino’singredient subsidy as ingredient suppliers andspecificationsarelocalised)andtheconversionoftheScootersPizzaandStElmo’sstorestoDomino’sstores which includes opening corporate ownedtraining stores required for the conversion andtheinterestthereon.StarbuckscostsincludecostsincurredwithregardstoestablishingtheStarbucksbrand in South Africa such as initial training and

travel;employmentcostsofadedicatedStarbucksteam well in advance of the first store opening;pre-openingmarketing andmarket research; andestablishingITandotherinfrastructure.

Domino’s Pizza once-off costs of R62.7 million(2015:R18.9million)relatetothefollowing:

• R9.8 million associated with establishingspecialised national training teams (2015:R6.8million);

• R2.8 million pre-opening expenses (2015:R7.2million);

• R8.3 million ongoing project managementfees and other non-recurring costs (2015:R4.9million);

• R12.3 million temporary ingredient subsidy asingredientsbecomelocalised(2015:nil);

• R2.9 million of lost income as each ScootersPizza and St Elmo’s store is closed for threeweeks in order for it to be converted into aDomino’sstore(2015:nil);

• R15.2million,R12.5millionofwhichrelatestoan upfront and conservative provision for baddebts made against the contribution given tofranchiseestoconverttheirstorestoDomino’sstores(seeotherfinancialassets)(2015:nil);

• R5.8millionofimpairmentstotheScootersandSt Elmo’smarketing funds as the Scooters andSt Elmo’s brands are converted to Domino’sstores(2015:nil);and

• R5.6 million of impairments of Scooters andStElmo’sintangibleassetsandgoodwillasstoresareconvertedtoDomino’s(2015:nil).

System-widesalesup

9% toR1.72billion(2015:R1.58billion)

The group anticipates that the once-off and up-front costs relating to the Domino’s project willcontinuetobeexcludedfromcoreearningsuntiltheconversionofScootersPizzaandStElmo’sstorestoDomino’siscompleteandwillnotbematerialtothegroupfortheyearending28February2017.


Starbucksonce-off costsofR8.3million (2015:nil)relatetothefollowing:

• R4.3 million of employment and recruitmentcosts of a dedicated Starbucks team ahead ofopening;

• R2.8 million of travel expenses relating totrainingofStarbucksteamabroad;and

• R1.2 million of ongoing project managementcosts.

Starbuckscostswillcontinuetobeincurredinthenext financial year and it is anticipated that theexclusion from core earningswill not bematerialbeyondtheyearending28February2017.

Other once-off costs of R25.8 million (2015:R5.8million)areasfollows:

• R2.8 million legal fees pertaining to The Fish& Chip Co litigation (2015: R0.7 million). Thislitigationwasamicablyresolved inAugust2015andallactionsbetweenpartieswerewithdrawn;

• R4.6million relating to theadditionalpurchaseconsideration for Arthur Kaplan which wasaccountedforthroughprofitandloss;

• R8.3millionof lease smoothing charges (2015:3.4million);

• R10.1 million of impairments to non-currentassets held for sale and certain goodwill andintangibles relating to The Fish & Chip Co andMaxi’s storesconsequent to thedecisionmadeto exit corporate storeownership in these twobrands,focusinginsteadexclusivelyonStarbucksandDomino’scorporateoutlets(2015:Rnil);and

• Core revenue and cost of sales exclude thecontribution made to franchisees for theconversionoftheirstorestoDomino’sPizza.

The tax on the core earnings adjustment iscalculatedonlyonexpensesthataredeductiblefortaxationpurposes.


CHIEF FINANCIAL OFFICER’S LETTER TO STAKEHOLDERS continued

SecuredexclusiverightstodevelopStarbucksoutletsin

SouthAfrica


Leadershipreview

Summarised group consolidated statement of comprehensive incomeReconciliation to core earnings

Coreearnings%change

29 February2016

R’000

Core earningsadjustment

2016R’000

28 FebruaryCore earnings

2016R’000

28FebruaryCoreearnings

2015R’000

Revenue 41 1 062 829 (52 100) 1 010 729 717102Costofsales (652 865) 52 100 (600 765) (432657)Gross profit 44 409 964 – 409 964 284445Otherincome 30 – 30 796Operatingcosts 71 (459 577) 96 854 (362 723) (212083)EBITDA (35) (49 583) 96 854 47 271 73158Amortisationanddepreciation 82 (29 120) 1 648 (27 472) (15068)Operating (loss)/profit (66) (78 703) 98 502 19 799 58090Investmentrevenue 126 14 597 – 14 597 6465Financecosts 101 (27 050) 3 375 (23 675) (11794)(Loss)/profit before taxation (80) (91 156) 101 877 10 721 52761Taxation 17 055 (21 638) (4 583) (15849)(Loss)/profit for the period (83) (74 101) 80 239 6 138 36912Othercomprehensiveincome – – – –Minorityshareholders (1 705) – (1 705) (531)Total comprehensive (loss)/income for the period (88) (75 806) 80 239 4 433 36381Attributable to:Equityholdersofthecompany (88) (75 806) 80 239 4 433 36381(Loss)/earnings per share attributable to equity holders of the company(Loss)/earningspershare(cents) (91) (24.2) 25.7 1.4 16.2Diluted(loss)/earningspershare(cents) (91) (23.9) 25.3 1.4 15.8Dividendsdeclaredpershare(cents) – – – 6.5Reconciliation of headline earnings:(Loss)/earningsattributabletoordinaryshareholders (88) (75 806) 80 239 4 433 36381Adjustedfor:Impairmentlosses 14 812 (14 812) – –Profit/(loss)onsaleofproperty,plantandequipmentandnon-currentassetsavailable-for-sale 1 259 (882) 377 (246)Taxeffectonheadlineearningsadjustments (235) 164 (70) 46Headline (loss)/earnings attributable to ordinary shareholders (87) (59 970) 64 710 4 740 36181Weightedaveragesharesinissue(‘000) 312 615 312 615 312 615 225225Weightedaveragedilutedsharesinissue(‘000) 316 766 316 766 316 766 230879(Loss)/earningspershare(cents) (91) (24.2) 25.7 1.5 16.2Diluted(loss)/earningspershare(cents) (91) (23.9) 25.3 1.4 15.8Headline(loss)/earningspershare(cents) (91) (19.2) 20.7 1.5 16.1Dilutedheadline(loss)/earningspershare(cents) (90) (18.9) 20.4 1.5 15.7


Segmental reviewCondensed group consolidated segmental report of core earnings

%

change

29 February 2016

R’000

28February2015R’000

Core revenue

Food 24 492 191 397778

LuxuryGoods 79 570 509 319324

Corporateservices 18 12 249 10353

Inter-segmentrevenues 520 (64 220) (10353)

Group core revenue 41 1 010 729 717102

Core EBITDA

Food (113) (4 578) 36076

LuxuryGoods 42 69 600 49055

Corporateservices 48 (17 750) (11972)

Group core EBITDA (35) 47 272 73159

Core operating profit

Food (188) (23 823) 27153

LuxuryGoods 41 63 027 44582

Corporateservices 42 (19 404) (13644)

Group core operating profit (66) 19 799 58091



Comprehensive income (refers to core earnings)RevenueThepriorperiod (“2015”or“prioryear”) revenueandcostofsaleshavebeenreducedbyR6.6millionrespectively, which represents the marketingroyalties on corporate owned stores that werenot eliminated from revenue and cost of salesrespectively. This restatement has had no impactonthe2015profit.

Bothdivisions contributed to the41% increase ingroupcorerevenuefortheyearended29February2016(“thecurrentperiod”or“2016”).

• The 24% increase in the core revenue of theFoodDivisiontoR492.1millionisduemainlytothe increase in corporate storeownership. Thedivision owned and operated 35 stores at theendof2016,nineofwhichhavesincebeensold,closedorarebeingclosed(2015:18stores).

• The79%increaseincorerevenueintheLuxuryGoodsDivision to R570.5million is duemainly

totheacquisitionofArthurKaplanandWorld’sFinest Watches in November 2014, whichrevenue isnotdirectlycomparable to thepriorperiod.

Gross profitCoregrossprofitincreasedby44%toR409.9millionand core gross profit margin improved to 40.6%(2015: 39.6%). This increase is as a direct resultofowningandoperatingmorecorporatestoresinbothdivisionsin2016.

Operating costsBothdivisions contributedequally to thenominalincrease in core operating costs in addition to anincrease of R5.8 million in corporate services.Groupoperatingcostsasapercentageofrevenueincreasedto35.9%(2015:29.6%)mainlyduetotheincreaseincostsintheFoodDivisionconsequenttotheestablishmentofthetwodoughmanufacturingfacilities (which are not comparable to the priorperiod);themovetoanewfooddistributionfacilityinMidrand;andadditionalcorporatestores(26of


Leadershipreview

whichareDomino’sstores),whencomparedtothepriorperiod.Thisresultedincostsasapercentageofrevenue intheFoodDivision increasingto40%(2015: 26%). The Luxury Goods Division’s costincrease was mainly due to the costs associatedwith the Arthur Kaplan business, which are notcomparabletothepriorperiodasthisbusinesswasacquired inNovember2014.Notwithstandingthisincrease, costs as a percentage of its revenue forthe Luxury Goods Division remained unchangedat29%.

Earnings before interest, tax, depreciation and amortisation (EBITDA)The group uses core EBITDA as a key internalmeasure to evaluate performance; for peergroup comparisons; for performance targetsand to determine long-range planning. For thecurrent period, core EBITDA decreased by 35%to R47.2 million (2015: R73.1 million). Thispredominantly is due to the decline in the coreEBITDA of the Food Division as a result of thepreviouslymentionedincreaseincosts.TheLuxuryGoods Division core EBITDA increased by 42%andisattributabletotheArthurKaplanacquisition.Arthur Kaplan currently trades at a lower coreEBITDA margin than the NWJ business and thistogether with the decline in core EBITDA of theFoodDivisioncontributedtothegroupcoreEBITDAmargindecliningto4.7%(2015:10.2%).

Amortisation and depreciationThe increase of R12.4 million to R27.4 million indepreciation and amortisation is a result of thegroupowningmorecorporatestores, inparticularDomino’s Pizza outlets, as well as operating thenew food distribution and dough manufacturingfacilities inMidrandandCapeTown.The facilitiesbecamefullyoperationalin2016.

Investment revenue and finance costsInvestment revenue increased by R8.1 million toR14.6millionduetocashraisedas followsduringthecurrentperiod:

• R94.7 million cash raised via a specific issueand a general issue of shares for cash in April2015. Shareholders are referred to the SENSannouncement released on 21 April 2015 forfurtherdetails;

• As part of the R1 billion Domestic MediumTerm Note (DMTN) programme, further notesto the value of R100 million were issuedduring the currentperiod. This capital raised iscomplementarytothecapitalraisedthroughtheequityissueasdetailedabove;and

• R226 million raised through a fully subscribedrightsoffer to shareholders inNovember2015.Shareholdersarereferredtotheannouncementreleased on SENS on 13 October 2015 forfurtherdetails.

Finance costs increased by R11.9 million toR23.7 million due to the inaugural issue ofR125 million notes on 30 July 2014 under thegroup’sDMTNprogramme,aswellastheadditionalR100millionnotesissuedduringthecurrentperiod.Thegroup’seffectiveinterestrateis10.6%.

TaxationThegroup’scoreeffective tax rate for thecurrentperiod is 42.7% due to once-off and continuingnon-deductible expenses related to capitalprojects.Thetaxonthecoreearningsadjustmentiscalculatedonlyonexpensesthataredeductiblefortaxationpurposes.Thegroup’scoreeffectivetaxrateisexpectedtoremainabove28%.

CoreEBITDAdecreasedto

R47.2 million

(2015:R73.1million)

Headline earningsCoreheadlineearningsdeclinedto1.5cents(2015:16.1 cents) consequent to the losses incurred bytheFoodDivisionandduetotheadditionalequitythat was raised during the last 17 months, theproceedsofwhichwerepartlydeployedduringtheyear.Thefollowingshareissueswereundertakeninthecurrentyear:

• 31 073 773 shares issued during the period atR3.05 per share on 21 April 2015, partially byway of a general issue of shares for cash andpartiallybywayofaspecific issueofsharesforcash. Shareholders are referred to the SENSannouncement released on 21 April 2015 forfurtherdetails.


• 75464476shares issued in thecurrentperiodatR3.00pershareintermsofafullysubscribedrightsoffertoshareholders.

• 3 345 560 shares issued to the Taste HoldingsShareTrustintermsoftheTasteHoldingsLimitedshareoptionscheme.

• 1726727sharesissuedinthecurrentperiodtotheArthurKaplanvendorsatR3.33pershare.

CoreEBITDAdecreasedto

R47.2 million

(2015:R73.1million)

In terms of the Arthur Kaplan purchase and saleagreement, an additional purchase considerationwas payable to the Arthur Kaplan sellers if theprofit after tax of Arthur Kaplan for the periodfrom 1 July 2014 to 30 June 2015 exceededR12.386 million. This additional consideration iscalculatedbymultiplyingR4.21foreveryR1.00withwhichtheprofitaftertaxexceedsR12.386million,up to a total additional amount of R35 million.Due to the exceptional performance of ArthurKaplansinceitsacquisition,theadditionalpurchaseconsideration amounted to R17.4 million. OnlyR15 million was raised as a financial liability at28February2015.IntermsofIFRS,thisdifferencehas been expensed in the income statementand we have included it in the core earningsadjustment.R5.8millionoftheadditionalpurchaseconsideration was discharged by the issue of1 726 727 Taste shares to the Arthur KaplanvendorsatR3.33pershareinaccordancewiththepurchase and sale agreement and the remainderwassettledincashinSeptember2015.IntermsofIFRS, the difference between the agreed price ofR3.33 and the price on the date the shareswereissuedhasbeenexpensedtotheincomestatement,amountstoR2.2millionandwehaveincludeditinthecoreearningsadjustment.

FINANCIAL POSITIONNon-current assetsThe capital investment in Domino’s corporatestores,aswellasinestablishingthenewdistributionanddoughmanufacturingfacilitiesinJohannesburg

and Cape Town (which included the purchase ofthepropertyonwhichtheJohannesburgfacilityissituatedofR19million),accountedfortheincreaseinproperty,plantandequipmenttoR159.7million(2015:R104million).

R24.3millionofthecontributionsmadetoScootersand St Elmo’s franchisees for the conversion oftheirstorestoDomino’s(afurtherR20.8millionisaccountedforunderotherfinancialassets)aswellassecuringthe25-yearexclusiveStarbuckslicenseisthereasonfortheincreaseinintangibleassetstoR117.1million(2015:R93.2million).

The decrease in goodwill by R3.1 million toR108.9million from the prior year is attributablemainly to the impairmentof thegoodwill relatingtheStElmo’sbrandasthisbrandwillbeconvertedintoDomino’sPizza.

Deferred tax assets increased to R56.6 million(2015:R13.6million)duetotheIFRSlossbeforetaxreportedbytheFoodDivision.

Other financial assets (current and non-current)Theseconsistmainlyof:

• loansmadetomarketingfundsofbrandswithinthe group, including pre-funding the Domino’smarketing fund through a loan to launch thebrandinSouthAfrica;

• extendedpaymenttermsgiventofranchiseesofthegroup,includingaportionofthecontributionsmade to Scooters and St Elmo’s franchiseesfor the conversion of their stores to Domino’s.Thisportionamounted toR20.8millionatyearend. In termsof IFRS, theotherportionof thiscontribution is disclosed in intangible assetsandamountstoR24.3million.Asat29February2016,59storeshadbeenconvertedtoDomino’sPizzastores;and

• Other financial assets totalled R81.2million atyearend(2015:R27.9million).

Current assetsJewellery and watch inventory increased byR34 million commensurate to the increase inthe Luxury Goods business and R19 million ofequipment inventory required for the Domino’sstore conversions was secured and purchased




Leadershipreview

in advance due to the lead time required tomanufacture and deliver this inventory to SouthAfrica.GroupinventoryamountedtoR289.2millionatyearend(2015:R234.3million).

Trade and other receivables decreased toR88.9 million (2015: R97.5 million). Included intrade receivables in the prior year is a receivableamountingtoR20millionthatpertainstoTheFish& Chip Co litigation that has been fully settled inthecurrentperiod.ExcludingthisR20million, theincrease in tradeandotherreceivablesover2015amountstoR11.4million.

EquityThe increase in share premium account ofR328.5million toR611.1million is consequent totheissueofstoresdiscussedpreviously.

Borrowings shares (including short-term)Thegroup issuedadditionalnotesofR100millionduring the year under its DMTN programme,increasing itsborrowings toR255.8million (2015:R134.3million).

Lease equalisation With the substantial increase in corporatestore ownership across both divisions, leaserentals are now amaterial expense to the groupand the lease smoothing charge in terms ofIAS17 is separately disclosed. The balance onthe lease equalisation account at year end isR11.2million(2015:R3.4million).Thisisanon-cashitemandisexcludedfromcoreearnings.

Current liabilitiesThe trade and other payables decreased toR129.3 million (2015: R140.8 million). Includedin trade andother payables in theprior year is a

payable amounting to R17.2 million that relatestoTheFish&ChipCo litigation.This litigationhasbeenfullysettledinthecurrentyear.ExcludingthisR17.2 million, the increase in trade and otherpayablesover2015amountstoR5.7million.

Coreheadlineearningspershare

decreased1.5 cents(2015:16.1cents)

Cash flowCashutilisedinoperatingactivitiesforthecurrentperiod includes the costs and working capitalassociatedtheretointermsofthecoreadjustment.It also includes the settlement of the R15millionfinancial liability to the Arthur Kaplan sellers asdescribedabove.Excludingtheeffectofthesetwofactors, thegroupcashconversion ratio is16%ofcoreEBITDA (2015:79%).Thedecline in the ratioismainly attributable to the increase in jewelleryinventory.

InvestingactivitiesconsumedR183.4million(2015:R211million)comprisingmainlyof:

• R77.8 million spent on additional corporatestores inbothdivisionsandonestablishing thenew distribution and dough manufacturingfacilitiesinJohannesburgandCapeTown;

• a net of R45 million in contributions made toScootersPizzaandStElmo’sfranchiseesfortheconversion of their stores to Domino’s stores(in terms of IFRS, R24.3million of this amountis reflected in intangibles and R20.8 million isreflectedinotherfinancialassets);

• R11.3 million of equipment that is leasedto franchisees who convert their stores toDomino’sPizza;

• R35 million loan provided to the Domino’smarketing fund to launch the brand in SouthAfrica;

• R4 million of computer software purchasedmainly for the Domino’s online orderingplatform;and

• R2.8millionpaidforthelicencetodevelopandoperateStarbucksoutletsinSouthAfrica.




R31.6 million was paid in dividends and financecosts (2015: R19.2 million) and R122 million ofadditional debt and R328 million of additionalequitywas raisedduring theyear tofinancebothDomino’s and Starbucks projects, as well as thecorporate store opportunities identified in theLuxury Goods Division. As a result, the groupreportedanetincreaseinitscashpositionfortheyearofR125.8million.

GearingThe group raises capital based on opportunitiesthat become available to us. Certain of theseopportunities require more equity than others.Therefore,thegroup’slevelofgearingatanypointintimeconsiderstheseopportunitiestogetherwiththegroup’s futurecashflows,aswell as thedebtcovenantsintermsoftheDMTNprogramme.

Gearing

2011 2012 2013 2014 2015 2016

40

35

30

25

20

15

10

5

0

%

Netdebt/equity

31

2326

30

21

13

Thedecreaseinthegroupgearingin2016isduetomoreequitythandebtraisedduringtheyear,themajorityofwhichhasnotyetbeendeployed.

The gearing levelswill increase to prior historicallevels as the excess cash is deployed in valuecreatingprojects.

Capital allocationFinancialrisksrelatedtoliquidity,interestrateriskand exchange rate risk are monitored by grouptreasury. The Taste Holdings Group acts as thetreasury for both divisions and is responsible formanagingfundsandraisingcapitalasrequired.This

arrangementenablesthedivisionstofocusontheirbusinessoperations,ratherthanequityanddebt.

Asallfundsarecentrallymanaged,Taste’sliquidityis closely monitored and idle cash is minimisedacrossdivisions.Thetreasuryfunctionensuresthatgroupresourcesareallocatedtothebestpossibleinvestmentopportunities.

Ourdivisionsareencouragedtomotivateinvestmentopportunities, which the group investmentcommittee will evaluate in line with agreedboardparameters inorder tomaximise returnoninvestmentandtoensurethatshareholdervalueisincreased in themediumto longterm.Thegroupassessesallinvestmentopportunitiesbasedonthepredictive futurecashflowof theseopportunitiesby utilising the group’s weighted average cost ofcapital adjusted upwards for opportunity-specificrisks.Currently,thethresholdinternalrateofreturn(IRR)is25%.

The group actively monitors capital allocation byreviewing investment performance against theirspecificinvestmentcases.

DividendsIn line with our historical dividend cover policyof 2.5 – 3 times core earnings per share, andtaking into account the opportunities to investin Starbucks and Arthur Kaplan growth, nodividend has been declared for the year ended29February2016.


Leadershipreview

In conclusionThe group has now built strong foundations andtogetherwiththeimprovedqualityofleadershipinitsdivisionswillfocusonexecutingandmaximisingthegrowthopportunitiesthatareavailable.

Ithasbeenatryingandtestingtimeforthefinanceteamsthisyearwithallthepressuresoflaunchingtwo global brands and integrating a successfulwatch and jewellery business while at the sametime continuing to support the group’s existingbrands.Iwishtothankourfinanceteamsforrisingto this year’s challenges and for continuing todeliver high standards of financial reporting andI alsowish to thank the board and the chairmanoftheauditcommitteefortheirvaluableguidanceduringtheyear.

Warmregards

Evan TsatsarolakisChiefFinancialOfficer

SuccessfullyintegratedArthurKaplanandWorld’sFinestWatches


PERFORMANCE REVIEWFOOD DIVISION

BrandsTaste’s Food Division manages a portfolio of owned and licensed globally leading brands across diversified major product categories and a broad range of income groups. While household spending by price sensitive income groups is constrained, South African consumers remain attracted to the value, variety and convenience that our brands offer.

• OpeningthreeStarbucksoutlets:atrainingstoreatheadofficeandthefirsttworetailstores,atRosebankandtheMallofAfrica,allin45days

• 74Domino’soutletsnowopen,injust16months• Significant recruiting of senior executive skills, on the back of the Domino’s conversion and

Starbuckslaunch• SuccessfullaunchofDomino’se-commerceplatformforonlineordering• Zebro’sChickendeliveredexcellentresultsandbrandgrowthintheWesternCape–25%growth

insystem-widesales• MaterialimprovementinTheFish&ChipCoassame-storesalesturnedpositive

Highlights

Starbucks Coffee Company andTaste Holdings announced a25-year licensed partnershipon 14 July 2015, granting Tastethe exclusive rights to developStarbucks outlets in southern

Africa. Founded in 1971, Starbucks is the largestspecialty coffee roaster and retailer in theworld.Thepartnershipwillseefull-formatStarbucksstoresopening across South Africa, bringing the entireStarbucks range of food, beverages and ethically-sourcedArabicacoffeestolocalconsumers.

As Taste is the licensee,wewill ownandoperatethestoresdirectly.Thepartnershipwilldelivergreatcoffee, innovative design and job opportunitiesbothdirectlyandindirectly.

ThefirststoreopenedinJohannesburgon21April2016, with the second in the Mall of Africa on28April2016.Onefurtherstore isplanned inthecalendaryearto31December2016.

The Domino’s Pizza brandhas grown rapidly, with over70 stores open across SouthAfrica by February 2016.Todate,fewerScootersandStElmo’sstoreswereconvertedthanplannedasTasteslowed

down the rollout to optimise training and resolveoperational bottlenecks, in particular relating totraining of teammembers. 53 Scooters Pizza andnineStElmo’sdeliveryoutletshavebeenconvertedto the Domino’s offering. This conversion projectrequires significant group expenditure, but weremainconfidentthatitwillbealong-term“gamechanger”forTasteHoldings.

The Domino’s e-commerce platform and orderingsystem was successfully launched in October 2015and current performance is materially exceedingexpectations.


Maxi’s, having adopted asmaller store format thisyear, remains a material

contributor within Taste’s local brand portfolio.Thebrand’sprofitisderivedpartlyfromleveragingthe shared resourcebase andBuonGusto supplychain effectively. We are currently divesting ofcorporate Maxi’s stores to focus on franchiseesupportandgrowth.

Zebro’s Chicken is a popularbrand in the low costsegment that is growingremarkably well, particularly

intheWesternCape.With25%growthinjustoneyearwithTaste,we intendpursuingmarket shareaggressivelyandrollingoutthebrandmorewidelyacrossSouthAfrica.

After two difficult years, TheFish & Chip Co stabilisedand sales improved fromthe beginning of 2016.Fewer stores closed thananticipated during the year

andtherepositioningofthebrandimagehasbeenpositiveinthepilotstores.Deliveringvalueremainschallengingduetorisinginputcosts,suchaswild-caughthake,electricityandpotatopricing.

Purchased as part of Taste’s low cost segmentoffering, the brand appears to have found thebalance between value and input costs. A seriesof improvements such as re-imaged stores anda refreshed menu have been positively acceptedbyconsumers.

Scooters Pizza stores aredestinedforconversiontotheDomino’sPizzabrand.Although in its sunsetphase,theScootersbrandperformedsatisfactorily.

Like Scooters, St Elmo’s delivery outlets arebeing converted to Domino’s and the remainingrestaurants will be managed supported throughourlocalandownedbrandsbusinessunit.

Performancereview

Maxi’ssmallerformatstore.

Zebro’sChicken–25%growthfor2016financialyear.

Re-imagedTheFish&ChipCostore.


Challenges and opportunitiesChallengesProviding valuewhilemaintaining profitability inthefaceofrisinginputcostsisachallengeacrossall brands. Theeffectof a sluggisheconomyandhigh consumer debt is being felt, particularly ininput costs. Food inflation due to the drought ishigh. We are, however, working with local andglobal suppliers to keepa lidonprices.Manyofour menu items cost less than cooking a familymealathome.

The Domino’s Pizza conversion has been a largeproject and presented several challenges duringthe first year. Operational and HR systems werestillbeingputintoplacewhenthestoresopened,resultinginlessthanoptimalservicestandardsattimes.Having learntonce,thesemistakeswillbeavoidedatallcostswiththeStarbucksrollout.

Our first experiences with a global brand hasyieldedvaluable lessons thatcanbe imparted toallTastebrands.

OpportunitiesStarbucksandDomino’sarestand-outopportunitiesinourFoodDivisionandwillprovideanassetbaseforlong-termsustainedgrowth.

SinceacquiringDomino’sasourfirstinternationalbrand, Taste has experienced an unprecedentedinternal learning curve. The group has beenafforded access to newways of thinking aroundprocesses,systemsandpeople,aswellasanentrypoint to the global supply chain. We intend toextendtheseadvantagestoourlocalbusinesses.

The Starbucks agreement has driven Taste tohaveallfacilitiesHACCPcertified.Thefoodsafetystandards thathave comewithour internationalbrands have benefited Taste, our customers andoursuppliers.

Domino’sbusinessisexperiencingapleasinguptakeof online ordering following the introduction ofthe Domino’s online ordering platform. Withconvenience becoming increasingly important toconsumers, our digital platforms offer enormouspotential.

NowthatTheFish&ChipCoisstabilising,weseenewopportunityforfranchisees.We’verefreshedthestore“lookandfeel”.

A further opportunity for franchisees is Zebro’s,ourfast-growingchickenoffering.Numerousstoreoptions will come onto the market as Zebro’sexpandsacrossSouthAfrica.

Corporate vs franchised storesRunningaglobalbrandentailsfarmoreattributesthan the ability to manage stores. A significantdepth of management and operational skillsis required to run these consistently well. Ourcorporateownedstores,Domino’sandStarbucks,givethegroupanabilitytorecruittherightpeopleand respond swiftly tomarket needs. Corporateownershipofthesebrandsisastrategicadvantageandoffersatightlevelofcontrol.

In future, corporate store ownership will belimited to the Domino’s and Starbucks brands,though we may set up temporarily corporateownedstoresinotherbrandsforspecificreasons.Due to management capacity and the desire tospreadopportunities,allotherfoodoutletswillbefranchiseeownedandmanaged.

Human resources and job creationTaste hasmade significant improvements to ourHR capacity over the year. We have recruitedexperienced executives to build managementdepthandtakecontrolofaspectswherewehaveunderperformed.

Our “Changing Lanes” programme is used torecruit unemployed young people who live inlocal communities. These people are usuallyinexperienced,requiringasignificantcommitmentwhenselectingandtrainingcandidates.Wehaverefinedtheprogrammetobecomemoreeffectiveat retaining staff by improving our screeningand coaching. Although the industry generallycarries a high turnover, by imparting industryskills, Taste is making a positive contribution toSouthAfrica’sworkforceingeneral.

PERFORMANCE REVIEW continuedFOOD DIVISION continued


Performancereview

We have opened a fully equipped Starbuckstraining store at Taste’s head office, which isrunningatfullspeedtocreateapipelineoftrainedStarbuckspersonnelforfuturegrowth.

Procurement and distributionOur Buon Gusto Cuisine food distribution unitmanages the food supply chain to all outletsin the division and supplies the bulk of theirrequirements.Ithasdevelopedintoaworld-classfacility and has been vetted by Domino’s andStarbucks.Theirapprovalswouldopenthedoortointernationalexports.

However, to maintain the standard of ourinternationalbrands,westillimportcertainitemsthatlocalsupplierscan’tmatchforquality.

Buon Gusto is based at two distribution depotslocatedinGautengandCapeTown.Itownsalargefleet of multi-temperature vehicles to transportfoodproductsaroundthecountry.

Exchange rateFood inflation has climbed steadily, which hasforced menu price increases. The Food Divisionismitigatingthesethroughimproveddistributionand cost controls, so that,where possible, costsarenotpassedontoconsumers.Thepriceoffishremains at themercyof theweak SouthAfricancurrency,whichresultsinexportparitypricingandmuchofthecatchbeingexported.

Theexchange ratehasnot significantly impactedonourStarbucksmodel’ssetupandpricing.We’vemanaged to localise nearly all of the furnitureinputs andhaveused local artists and craftsmenextensively for our first built stores. The onlyimports have been specialised equipment andcertain furniture items that could not be locallyproducedontime.Naturally, thecoffeeproductswill be imported from Starbucks distributioncentres.

Overall outlookHaving focused externally in the last four years,wearenowenteringaperiodofsustainedinwardfocus on the existing asset base to leverageopportunitieswehaveinStarbucks,Domino’sand

ourlowcostbrandsandtheleveragetheyprovideinour supply chain.Overall,webelieve thatourbrand offerings are well placed for sustainableorganicgrowth;therefore,wewillfocusondrivingand supporting that growth. Focus in Domino’sPizza will move from conversion to growth, andwebelievethatnewstoregrowthwillmaterialisein the laterpart of the year.Ourprimary goal isto optimise the corporate store network anddemonstrate theDomino’sbrandpromise to theconsumerthroughfocuson improvedoperationsandcontinuedfocusonuniquedigitalengagement.

TheStarbucksopportunityisbecomingincreasinglyalignedwithourexpectations.Consumerreactionin the first month of trade has been materiallyahead of even our optimistic expectations.Mostpleasing,however, is thenumberof youngcustomers, a market that is largely underservedin South Africa. We have managed to launchwithpricingthatwebelievehasmadethebrandaccessible to awide spectrumof customers andbelievewewillberewardedinthelongterm.Webelieve that the Starbucks Coffee offering willprovetobealong-termsustainableadvantageinthefoodsector.

OurBuonGustomanufacturingfacilitiesareHACCPcompliant.


PERFORMANCE REVIEW continuedLUXURY GOODS DIVISION

• Corerevenueincreased79%toR570.5million(2015:R319.3million)• CoreEBITDAincreased42%toR69.6million(2015:R49million)• ExceptionalgrowthofluxurySwisswatchsales• Same-storesalesinthedivisionincreased15%despiteexchangerateslippage• ArthurKaplandeliveredoutstandingorganicgrowth• SecuredrepresentationofCartier,IWCandMontblanc

Highlights

Brands

Taste’s Luxury Goods Division is aimed at middle and upper income consumers. Our Arthur Kaplan brand targets the upper middle to high income brackets, while NWJ is positioned for a broader middle to upper income band. Our World’s Finest Watches store is aimed at discerning upper income watch enthusiasts.

The high end luxury market remained fairly resilient against the current adverse economic conditions. While this growth has continued into 2016, we are cautious as to its ability to continue.

This33-year-oldbrandservesthemiddletoupper incomemarket,offering jewellery rangingbroadly from affordable fashionitemstocrafted18ctgoldpieces.NWJ comprises both franchised

and corporate owned stores. By year end, Tastehad opened or acquired an additional fivecorporateownedoutletstodirectlyown47ofthe76NWJoutlets.

In response to changing consumer tastes andmarket research, all new NWJ stores openingfrom 2015 onwards were designed in line witha refreshed NWJ image. Our aim is to reinforcethe brand positioning as a unique value retailer,within our overarching strategy of quality, valueand choice. The refreshed stores have beenpositivelyreceivedandarecurrentlytradingbetterthan expected. NWJ’s latest outlet launched inMidrand’srecentlyopenedMallofAfrica.

Highlights • Revenueincreasedby8%andcashsalesgrew

by10.7%• Gross margin in corporate owned stores

improvedby1.4%• International watch and jewellery brands

grewsalesby9.4%• Revamped stores achieved double-digit like-

on-likegrowthinsales• A further six stores will be revamped in

2016/2017• Three new stores were opened in South

Africa,plusoneinZimbabwe• 45%ofNWJretail inventory ismanufactured

internally through a Durban facility thatsignificantly improved its productionefficienciesthroughtheyear

• Six stores were revamped to feature NWJ’snewbrandimageduringthereportingperiod

• Fournewstoreswereopened


Performancereview

Disappointments• Many franchisee stores delivered mediocre

performances due to sub-optimum restockingof inventory, which impacted the sales of ourmanufacturingandwarehousingfacilities

• TheChristmastradingperiodwasdisappointing,with like-on-like sales 6.5% below last year’sresults

• Creditsaleswerehamperedbymanyconsumersbeingunabletoqualifyforcredit

• Endedtheyearwiththreefewerstoresthanatthebeginning,mainlyasaresultofredeployingassetsintobettersuitedlocations

A luxury jewelleryand Swiss watch

retailerwithstoreslocatedinSouthAfrica’smajorshopping centres, the Arthur Kaplan reputationfor superlative personal attention has beencraftedover40years.

AlltenArthurKaplanandtheoneWorld’sFinestWatches stores are directly owned by TasteHoldings.

Highlights • Total revenue growth up 31% and core

EBITDAup75%• Stockturnimproved15%,theresultofgood

salesgrowth• Awarded authorised retailer status for the

first time for Richemont brands such asCartier,IWCandMontblanc

• Increased access to Rolex, Omega, BreitlingandLonginesranges

• Complete renovation of Kolonnade store,nearPretoria

• UpgradedourCenturion,Waterfall,Riversideand Loch Logan stores to the new ArthurKaplan brand identity, which includes achange in signage, jewellery displays andpointofsalematerial

• Launched new jewellery brand positioningcampaign

• WehavebuiltanArthurKaplanstoreattheMallofAfricainApril2016,withretailrightsfor premium Swiss brands, including Rolex,Omega, Breitling, TAG Heuer, Longines andMontblanc

During theyear, theKolonnadeoutlet inPretoriawasrevampedtoreflect theSandtonstore’s lookand feel,with sales increasing 30% following theredesign.

TheGatewaystoreinDurbanwasalsorevampedtofacilitatetheintroductionofCartierandIWCwatchbrandsandtoenhancethedisplayareasofRolexandOmega.

Arthur Kaplan jewellery manufacture is not yetvertically integrated into the group, althoughsynergies with shared resources in the LuxuryGoodsDivisionarealreadybeingleveraged.

This bespokewatch store

in the prestigious Nelson Mandela Square haslong become an icon for watch collectors andenthusiasts. Its brand portfolio includes Rolex,Hublot, Omega, Breitling, TAG Heuer, Longinesand Rado. Like Arthur Kaplan, it performed wellabovetheprioryear.

ArthurKaplanandWorld’sFinestWatchesextendedtheirpremiumbrandofferingtoincludeCartier,IWC,Montblanc.


OpportunitiesArthur Kaplan will leverage its new retailpartnershipwiththepremiumSwisswatchbrandsacross selected stores during 2017. This will besupportedbyupgradingthepremiumwatchzonesinexistingstorestocapitaliseonthegrowingluxurywatchawarenessofSouthAfricanconsumers.

Threecompletestorerefurbishmentsareplannedduring the 2017 financial yearwhichwill includeupgradestothenewArthurKaplanbrandidentity,improve jewellery retail appeal and allow newprestigewatchbrandstobeintroduced.

ChallengesThe constantly depreciating Rand creates priceincreases each year for South African consumersandthreatenstopushcertainluxuryproductsoutoftheirfinancialreach.Tosomeextent,purchasingdiamondsandpremiumwatchesasstoresofvalueareoffsetsagainstvolatilecurrencies.

Should consumers perceive that crime levels areincreasing,theymaydecidenottopurchaseluxuryjewelleryorwatches.

For the NWJ brand, erratic stock purchases byfranchisees complicates the management ofinventory and revenue and they are presentlynot keeping up with the sales of the corporateownedstores.

When Arthur Kaplan stores are refurbished theyare closed forapproximately three to fourweeksanddependingonthetimingoftherefurbishmentmay not recover those lost sales during thefinancialyear.

Procurement and manufacturingEach year, Taste conducts market research withvariousconsumersetsandcontrolgroupstotrackcurrent trends. Brand audits are also conducted.Taste’s buyers and designers travel regularly tojewellery fairs around the world to stay abreastof internationaldesign trends.Vertical integrationenables new lines to get to market quickly. Thelatestdesignscanbedevelopedlocally,withpriceskept down through in-house manufacturing andvolumepurchasesofrawmaterial.

InnovationsNWJ reduced costs and improved efficiencies bystreamlining its supplier base, and by negotiatingbetter prices and trading terms through volumepurchasesandeconomiesofscale.

We now purchase diamonds directly frominternationalsupplierstoobtainhigh-qualitystonesatlowerprices.

NWJhascontractedaplanningconsultancy,whichhasimprovedinternaltargetgoalsettingandsalesforecasting.

Exchange rateShortly before FY2015/2016, the Swiss Francappreciated considerably against all currencies.This caused a global increase in Swiss watchprices, which could have significantly reducedlocaldemand.MostSwissbrandshaveproactivelymanagedthisthreatbyphasinginpriceadjustmentsandfocusingnewproductdevelopmentonslightlylowerpricepoints.InSouthAfrica,theSwissbrandsspreadthepriceincreasesthroughouttheyearsothatconsumerdemandwasnotdampened.

LuxuryGoodsworksalongwiththeSwissbrandsbyreplenishing our watch and jewellery inventoriesregularlytoaverageouttheeffectofexchangeratefluctuations and avoid large purchases at specificexchangerates.

TheRand/Dollarexchangerateandpricesforsilverandgoldhadlittleimpactonthejewellerybusinessoverthepastyear.

TheftInternal theft by staff is on the rise across allindustries; therefore, Taste continually reviewsour internal controls to ensure our preventativesystemsremaineffective.Thesemeasures includedailyhigh-valuestockcountsandinvestigationsintopossiblestaffcollusion.Polygraphsareusedforpre-employmentandinvestigativeenquiries.Avirtualmanagerprogrammewillbeintroducedtofurthermonitorcompliancewithoursecuritypoliciesandprocedures.

Shoplifting is increasing in South Africa, largelydue to low prosecution rates. Valuables such ascell phones, electronics and jewellery are always

PERFORMANCE REVIEW continuedLUXURY GOODS DIVISION continued


Performancereview

atarget.Asaresult,mallshaveincreasedsecurityand improved cash transit processes. Taste alsoreceivesregularupdatesfromtheJewelleryCouncilofSouthAfricaregardingstorethefts,includingthemodusoperandiandphotographsofsuspects.

NWJ, Arthur Kaplan and World’s Finest Watcheshave instituted a self-insurance policy thatadequatelycoverstheriskofhigh-costtheft.

Human resources and job creationThe division’s ongoing expansion has madeskills development a major priority and we haveembraced this opportunity to train people in theLuxuryGoodssector.

Agreatdealofeffortgoesintomaintainingsellingskills and service levels. Jewellery and timepieceretail demands that all frontline employeesmusthavedetailedproductknowledge,butitdoestaketimetoinstiltherequiredpolishanddiscernment.

OutlookThe rationaleunderlying theacquisitionofArthurKaplanhasthusfarprovedtoberobust.Sincethisacquisition,consumerdemandhasinfactincreased,

despite the depreciating Rand, while stock turnshave increased as investment into inventory hasgrown. Our re-imaged stores continue to showgrowth well above inflation and the combinationofaccesstocapital,newlookstoresanda43-yearheritageofpersonalservicehaspositionedArthurKaplan to forge new relationshipswith renownedbrandssuchasCartier, IWCandMontblanc. Ithasalsoresultedinstrengthenedrelationshipswithourexisting luxury Swisswatch brands such as Rolex,Hublot,Omega,Breitling,TAGHeuerandLongines.HavingopenedaluxurywatchstoreintheMallofAfricainApril2016,weareevaluatingopportunitiestoexpandArthurKaplanintotheWesternCape;re-imagetheremainingstoresandbuildourportfolioofpremiumluxurySwissbrands.

The division’sNWJ brand continues to seek valueaccretive opportunities that are not alwaysreflectedinabsolutestorenumbers.NWJhasalsoexpandedintoZimbabwe,NamibiaandwillopeninBotswanaduringthe2017year.OurlearningswithNWJinthesemarketswillpavethewayforpossiblyexpandingArthurKaplanbeyondSouthAfrica.

ArthurKaplanrevampedstoresreflectedapositiveincreaseinsales.


PERFORMANCE REVIEW continuedBUILT (MANUFACTURED) CAPITAL

Corporate store ownership at year endFood DivisionDomino’s Pizza 26Scooters Pizza 0St Elmo’s 0Maxi’s 3Zebro’s 0The Fish & Chip Co 6*

35* Sold since year end.

Luxury Goods DivisionNWJ 47Arthur Kaplan 10World’s Finest Watches 1

58

Procurement and manufacturing Buon Gusto Cuisine is expanding into a world-class distribution facility and has being vetted by Starbucks and Domino’s Pizza to supply products locally, in some instances, internationally. South Africa’s prices have become competitive due to the falling Rand; therefore, Buon Gusto could potentially export quality products to markets around the world. Buon Gusto currently supplies protein products, spice, pre-mixes and sauces into food brands.

Starbucks is committed to social responsibility standards for its store merchandise, furniture and other items. High standards have been set for our suppliers and assistance is offered when corrections need to be made to their business practices. Adherence to those standards informs our sourcing decisions and ensures we are working with suppliers who share our commitment to ethical sourcing.

All the furniture required to open our first Starbucks stores were procured or manufactured locally, the only imports being specialised equipment.

The entire Starbucks fresh food programme has been localised; with only the impulse items at till point such as branded peppermints and chocolates currently having to be imported. South African artisans are making all our food products and have had to pass Starbucks quality controls and audits. This is a marketable advantage to them, as they can now enter export markets.

South Africa is one of the first markets in the world to use a completely localised version of Rooibos and have built a platform off which to make rooibos-based drinks. This drink platform was developed in close partnership with Starbucks, which is testament to their commitment to localising.

Food distribution network• Distribution centres in Midrand and Cape Town • Buon Gusto owns a fleet of 12 refrigerated trucks • New online ordering system launched• Halaal accredited food supply chain

Refurbished jewellery storesOur refurbished Arthur Kaplan (two) and NWJ (seven) stores have both shown excellent results from being re-imaged, which gives the opportunity to launch new brands that will create richer brand experiences with existing brands. This has been instrumental to Arthur Kaplan signing on Cartier, IWC and Montblanc. We will continue re-modelling our stores over the next 18 months.

• Launched Starbucks in South Africa, by opening outlets in Rosebank and the Mall of Africa in April 2016, as well as a training facility at Linbro Business Park

• 65 stores were converted from Scooters Pizza/St Elmo’s to new Domino’s Pizza stores during the financial year

• Corporate ownership of 26 Domino’s Pizza stores, with 48 franchised stores – a total of 74 Domino’s Pizza outlets at the financial year end

• Continue to grow corporate stores in our jewellery business• Production facility and food distribution centres are being HACCP certified

Highlights

Performance review


Investment committeeThe decision of where to allocate capital is primarily made by the board of directors. The board sets the framework for how opportunities are evaluated; the thresholds for which allocations can be made by the five-person investment committee, and which are referred to the board. It also sets the strategic direction in which the company seeks opportunities.

Capital allocation• Capital is primarily allocated on the basis

of the strategic fit within identified growth areas. Identifying these growth areas follows a process of annually mapping core competencies by division and reviewing past performance of capital allocation against their specific investment cases.

• The group assesses all capital allocation opportunities based on the predicted future cash flows of those opportunities, using the group’s weighted average cost of capital, adjusted upwards for opportunity-specific risks.

• The threshold internal rate of return must support the compound annual growth rate (CAGR) and headline earnings per share (HEPS) target. Currently, the threshold internal rate of return is 25%.

• For acquisitions, the discounted cash flow (DCF) value must exceed the price by a margin of safety. The price paid must yield an IRR of above 25% based on the future cash flows.

• Capital allocation is currently made within the context of returning dividends to shareholders in terms of a relatively conservative dividend policy.

FINANCIAL CAPITAL

• 15th consecutive year of revenue growth• Restructured access to capital to align with our five-year strategic plan• Registered R1 billion corporate bond programme with inaugural issue in July 2014• Oversubscribed rights offer of R226 million in November 2015

Highlights

As the business has grown, capital raising for expansion and acquisition has changed from being transactionally based and raised within the division deploying the capital, to a group function that takes into account the group’s cash flows and various funding metrics.

The group, therefore, acts in a treasury function to maximise the utilisation of cash. The division, brand or business unit is charged appropriately for the cost of capital, as if it has raised the capital, and may not necessarily reflect the group’s actual source of funds at that particular instance. This capital cost charge is important when setting incentive targets and evaluating performance within divisions and business units.


The value of Taste’s stakeholders Our social licence to operate depends largely on the quality of our stakeholder relationships and our positive or negative impacts on them. Our economic growth is underpinned by the value of our relationships with shareholders, employees, brand partners, franchisees, customers, suppliers and the broader communities in which we operate.

We are acutely aware of the socio-economic challenges faced by communities around our stores. Our approach to community development recognises that our impact goes beyond the workplace and that our long-term sustainability is linked with that of our communities.

Stakeholder engagementShareholdersOur shareholders are part owners of Taste Holdings and play a significant role in the group’s operations. Our shareholders elect the board of directors who appoint and supervise senior officers, including the Chief Executive Officer and the Chief Financial Officer. They also play an indirect role through the stock market.

Taste’s board of directors answers to shareholders, not to management.

The group provides timely and transparent disclosures to shareholders by means of:• annual formal presentations;• SENS releases as required;• an annual integrated report; and

• telephonic and in-person interactions as requested.

EmployeesStrong employee engagement results in increased employee trust, job satisfaction and group efficiency. Taste Holdings communicates regularly with employees by means of:• an annual results and strategy presentation to

staff, by the CEO;• quarterly publication of “The Taste Times”

magazine;• personal assessments; and• peer reviews.

Taste Holdings regularly evaluates employee feedback. Employee relationships are described in greater detail under “human capital” on page 62.

FranchiseesWe firmly believe franchising is a social responsibility at work every day. The entrepreneurship unlocked by franchises underpins sustainable economic growth by transferring skills and creating jobs.

While each division has its own channels of engaging with its own franchisees, we share certain common practices across all our divisions. These include:• conducting regular franchisee meetings

throughout the year;• providing focused training to existing franchisees;• a franchisee advisory council;• annual recognition of high-performing franchisees,

by brand;

PERFORMANCE REVIEW continuedSOCIAL AND RELATIONSHIP CAPITAL

• Signed an exclusive licensee partnership with Starbucks• Added prestige Richemont owned brands, Cartier, IWC and Montblanc to existing Swiss watch brands• Over 300 “Changing Lanes” young people employed in Domino’s Pizza outlets, with the first 16 started

in the Starbucks rollout• Donated over R260 000 to Just Footprints Foundation in cash and services• Continued supporting Endeavour SA through funding, board membership and services• Increased direct black ownership in Taste above 15%

Highlights


Performance review

• circulating The Taste Times to all franchisees and managers;

• encouraging feedback and news on local events for inclusion in The Taste Times; and

• store visits conducted by an executive director of the group.

Franchisees utilise our outsourced call centre to give us feedback on our service levels to them.

Engagement with franchisee employees is maintained via in-store evaluations, training and promotional launches throughout the year.

CustomersIn a competitive marketplace, customer satisfaction plays a significant role in how much revenue we generate. Taste builds customer relationships through:• customer satisfaction surveys;• customer research;• mystery shoppers; and• an outsourced call centre.

All comments are maintained in a central database and acted on as required. We respond swiftly to customer complaints, as these can result in reputational damage. Feedback from customers creates valuable opportunities to increase the overall quality of our customer service.

SuppliersTaste Holdings has a transparent pricing policy and fair procurement practices. The group engages with suppliers via supplier visits, performance measurements and quality assurance.

Taste is currently vetting all our suppliers in accordance with the Starbucks and Domino’s licence quality expectations. Although there may be short term pain for suppliers who choose to comply with these standards, approved suppliers could enter export markets.

The food safety standards demanded by Domino’s and Starbucks will benefit our customers and our suppliers.

Media Taste is accessible to the public media and is committed to providing accurate information. Newsworthy corporate activities are supported by media releases and interview opportunities. Journalists and analysts are encouraged to attend shareholder or results presentations.

The value of international partnershipsPartnering with international brands strengthens Taste’s value proposition and broadens the group’s access to global supply chains, intellectual property and global best practices.

The transfer of operational skills from Starbucks and Domino’s is unprecedented for Taste, as these brands build their knowledge from major markets around the world. In time, these learnings will permeate from Taste throughout the industry and ultimately make the South African food industry more globally competitive.

Our strategic partnership with Richemont has gained luxury licensed brands such as Cartier, IWC and Montblanc for Arthur Kaplan. This has strengthened the group’s position of being the largest retailer (by number of outlets) of luxury Swiss watches in southern Africa.

We care – socially responsible businessCreating new jobsJob creation and enterprise development are critical to developing the South African economy. Taste’s franchising business model provides proven and sustainable enterprise development opportunities for small businesses, which are supported by seasoned franchisors. At the same time, franchised outlets create new jobs. (See our human capital achievements on page 62 for further details on our job creation successes).

In many cases, the opening of a new Taste franchise store provides people with their first job. In addition, they gain portable skills through the skills training they receive in our outlets.


PERFORMANCE REVIEW continuedSOCIAL AND RELATIONSHIP CAPITAL continued

Just Footprints Foundation is a registered non-profit organisation founded in 2008 with the aim of meeting the need for a unique, safe and secure outdoor camping experience for children with serious health and life challenges.

Refugee children from the Sacred Heart College at the December Christmas camp.

Christmas came early for the “campers” and the elderly from TLC Home for the aged in Hammanskraal.


Performance review

Our corporate social responsibility programme focuses on establishing social infrastructure and supporting children suffering from life-threatening diseases and life challenges.

We contribute through the Just Footprints Foundation, which is a registered non-profit organisation founded in 2008 with the aim of meeting the need for a unique, safe and secure outdoor camping experience for children with serious health and life challenges.

“Camp Footprints” provides opportunities for these special children to participate in an amazing life-changing adventure, to learn new skills through intentional programming to develop confidence and enhance their self-esteem in a safe and nurturing “fun” camp environment. Our campers are encouraged to be fearless, to escape, fantasize and be joyful kids once again.

Taste Holdings Camp Footprints Camps: December 2015Changing schools can be a traumatising experience, but when you are forced to change schools because your family had to flee their home, and country is even more extreme. One school has opened its doors to refugee children, helping them ease into the South African schooling system.

Since 2008, Sacred Heart College in Observatory, Johannesburg has operated an educational programme for refugee children.

The school, called Three2Six, is a bridging programme for refugee children who have difficulties with registering with South African schools either because the families are unable to pay school fees and other related expenses to get their children into schools or the parents do not have all the documents needed.

Just Footprints heard about this wonderful programme and through the Taste Holdings brands were able to do two camps in early December 2015. Christmas came early for 50 campers in grades 1 and 2 and then 72 campers from grades 3, 4 and 5. The programme included sports, swimming and going on daily game drives. The highlight for both camps was a visit from Father Christmas and the team from Taste joining them and preparing lunch and joining in their activities.

These camps had a wonderful message that was spread through international borders and schools throughout South Africa. From volunteers representing Australia, Germany to grade 11 students from various schools in Gauteng. Our message was clear language is not a barrier but working in unity ensured our campers had an amazing experience filled with laughter, fun, summer holidays and new friends.

Corporate social initiativesDuring the period under review, the Taste Food and Jewellery divisions contributed to various social initiatives such as:• Just Footprints Foundation• 67-minutes for Mandela Day• TLC Old Aged Home Dinokeng, Hammanskraal• Frida Hartley Shelter for abused women and

children

Good food and to have loads of fun are the only rules at the Just Footprints camp.


PERFORMANCE REVIEW continuedHUMAN CAPITAL

Performance • 46% of our middle managers are historically disadvantaged South Africans (HDSAs) (2015: 20%)• 26% increase in middle management employees from 2015• 77% of our total permanent workforce is HDSAs • HDSA females make up 44% of our workforce• 145% growth in Taste Holdings workforce in just 24 months, creating 653 new corporate office jobs • 68% of our junior managers are historically disadvantaged South Africans (HDSAs) (2015: 63%)

• A company in which each person is treated with respect and dignity • An environment of fun and hard work in which team members support each other without a

second thought• A home away from home where egos are replaced with gratitude and humility• A community from which employees go home every day renewed with energy that only comes from

the feeling of accomplishment from hard work well done, pride and appreciation

TASTE’S VISION FOR ALL STAFF

• Continued partnership with Khulisa Social Solutions on the “Changing Lanes” programme for bringing unemployed youth into the food industry – placed more than 300 currently unemployed youth into our business

• Strengthened the Food Division’s executive capacity in key areas to oversee massive expansion• A Starbucks pilot team of eight people sent to the UK for intensive training programme of eight

to 12 weeks to return to South Africa and initiate local training• Revised the executive share option scheme to improve retention among executives

Highlights

Building skills and creating jobs Our largest contribution to society is the dignity that comes with work. This is only possible through skills transfer and sustainable employment.

Research has indicated, for every semi-skilled, junior management, or entry-level store-based employee there are approximately eight dependants, making our societal impact exponential.

The benefits we provide our full-time employees, over and above the legally mandated employment benefits, include paying above minimum wages and salaries. We also pay additional bonuses annually, based on performance against both individual criteria and company performance.

All pay grades are market-related and job-specific, with no gender differentials.


Creating new jobs in townshipsWhere possible, Taste hires management and staff from local communities. This policy is being vigorously applied as the Domino’s Pizza and Starbucks stores open across the country.

Taste Holdings is an early adopter of Khulisa’s Collaborative Corporate volunteer Programme (CCvP) which trains and recruits employees from local communities. Khulisa and Taste’s “Changing Lanes” programme is used to recruit young employees for new Domino’s Pizza and Starbucks Coffee stores.

Taste’s five-day “Changing Lanes Life Skills and Job Readiness” programme, implemented by Khulisa, includes modules specific to working within the Quick Service Restaurant (QSR) industry. Candidates learn what will be expected of them and trainers can assess whether they are suitable recruits

for the industry. Candidates are given a food and transport stipend during this five-day programme.

Following this programme, a Taste representative is introduced to the candidates in their community environment, to give the potential employer an opportunity to gain an understanding of where the candidates live and of the environmental circumstances that may at times impact on their ability to perform – notably transport issues. This has proved to be a successful retention strategy.

After successful candidates and the store manager have been introduced, they begin work at a Domino’s Pizza or Starbucks store.

After each programme, a number of young people are permanently employed and undergo brand-specific intensive training, for which they are remunerated, per their employment contract.

Performance review


PERFORMANCE REVIEW continuedHUMAN CAPITAL continued

Split by skill type 2016

20.2%

7.9%5.2%

66.7%

Semi- and unskilled Junior management

Middle management Senior and top management

Growth of HDSA employees by skill

300

250

200

150

100

50

0

-50

40

35

30

25

20

15

10

5

0

-5

Year-on-year % growth Number of new employees

4%

34%

Senior management

Middle management

Junior management

Semi-skilled

Total workforce

2%

(3%)

0%

(2%)

275%

11%

215%

28%

* Historically disadvantaged South Africans.

500

400

300

200

100

0

-100

Year-on-year* nominal growth in employees by skill type

212%

441%

34%

159%

274%

10%53

% 125%

(25%

)

(2%

)6% 23

%

36%

2% 26%

Year-on-year* % growth in employees by skill type

Senior management

Middle management

Junior management

Semi-skilled

Total workforce

2014 2015 2016

140120100

80604020

0-20

47% 67

%3%

50% 58

%1%

69%

96%

(10%

)

(6%

)20

%

64%

129%

8%

41%

Senior management

Middle management

Junior management

Semi-skilled

Total workforce

2014 2015 2016

* These figures are based on the average number of people employed per store multiplied by the number of stores opened per brand. They are not net figures. Corporate store staff refer to both staff employed at the support office and in corporate owned stores. The other figures relate to franchisee employed staff. We cannot yet track staff retention or employment once they leave the employ of a store, although we do know they will have gained skills that are suited to today’s economy and would be better equipped to find employment in the future.

New jobs created and people trained

1 240

856743

1 313

2012 2013 2014 2015 2016

1 400

1 200

1 000

800

600

400

200

0

319

306

9424

651

356

250

56

512

323

193

212

201

14173

441

New store productionNew store managers

New front line/serviceNew corporate staff

591

285

17110134


Training and developmentWe provide training for our franchisees and their employees before a new outlet is opened, and ongoing training once the outlet is operating. With each store we open we create approximately 10 – 20 new entry-level jobs in the community in which an outlet has been opened.

We also provide additional support to assist franchisees with limited financial skills.

Luxury Goods DivisionTotal hours of training: 2 141

A wide variety of training was offered, with the most hours allocated to:• Customer service (10.8%)• Bag content (5.1%)• New accounts (5.1%)• Whistle blower training (4.9%)• Watch repairs (4.5%)• Diamonds (4.2%)• Stock counts (4%)

Average hours of training• Based on 239 employees = 8.96 per employees • Or 239 + new recruits of 47 = 289 – then

average training hours = 7.49 per employee• However, the actual number includes casual

employees and this average then equates to 5.5 hours per employee.

Food DivisionTotal hours of training: 12 536Maxi’s: 8 People – Training hours = 80Domino’s: 176 people – Training hours = 10 056Starbucks: 9 people – Training hours = 2 400

Training done for franchisees is not factored in as part of Taste Holdings HR.

Average hours of training

Performance review

Luxury Goods Division skills developmentTaste partnered with the Wholesale and Retail Seta for Retail Management Development (W&RSETA) programme, from which four store managers graduated in April 2016.

Early Morning Training allows all stores to spend at least 30 minutes a week on specified topics in the format of pre-test training, based on content provided followed by a post-test assessment.

Store personnel were developed by undergoing skills development enhancement programmes focusing on:• Customer service • Retail sales and store management • Friedman’s selling skills• Advanced selling skills

The division enhanced access to product knowledge by joining Brand Gurus, an online platform for training store personnel via their smart phones to allow for self-development.


The Arthur Kaplan training and refresher cycleEmployees undergo a three-week induction that includes:• Company policies, procedures and systems• Product knowledge• Collection stories• Customer experience• Added customer services

Current employees undergo training every six months to keep up to date on company policies and their products. These include:• Company policies, procedures and systems• Managerial development for earmarked staff

members• Product knowledge• Collection stories• New product launches• Customer experience• Revised customer services

Luxury Goods DivisionEarly Morning Training (EMT) allows all stores to spend a minimum of 30 minutes a week on a specified topic.

External programmes focus on bridging the skills gaps between current and expected standards, as well as personal growth and development.

Food DivisionDomino’s managers enter a five-week Galway-Mayo Institute of Technology (GMIT) training programme before being assigned to a store.

Domino’s insiders and drivers enter a two-week programme.

Further internal training has been implemented as from 1 March 2016, to be reported in FY2017.

Programmes for skills management and lifelong learning


Recruitment, retention and scarce skillsA major social challenge is that millions of South Africans are unemployable in a modern economy through lack of marketable skills; driven primarily by a lack of literary and poor basic education.

As a socially aware and growing business, we are playing our part in addressing this challenge through two initiatives:• sustainable job creation for semi-skilled workers

and skills transfer at adult level; and• social investment in early literacy at pre-

school and primary school level in historically underprivileged areas.

Rates of new employee hires and turnover High employee turnover is an endemic issue in the food and hospitality industry, worldwide. High turnover rates cause extra costs in recruitment and training. Nevertheless, by imparting industry skills, Taste accepts that we are making a positive contribution to South Africa’s workforce in general and that our workforce turnover is artificially high

as many leave our direct employ to be taken up by our franchisees.

Turnover of staff also creates opportunities for upward mobility and development of those who show exceptional potential.

We have refined the “Changing Lanes” programme to become more effective at retaining staff through improved screening and coaching. We are also reviewing employee benefits to ensure that high-performance individuals are recognised and developed.

Leadership developmentSouth Africa and Taste Holdings alike needs skilled business entrepreneurs and leaders at all levels, preferably in line with the national demographic profile.

Our operational leadership team must have the necessary skills to continue growing a flourishing business. Taste is, therefore, investing in upskilling our employees with the aim of developing a succession pipeline into all levels of management.

Performance review


The Food Division has recruited highly regarded new executives to support the Domino’s Pizza and Starbucks Coffee rollouts, as well as our own brands. Each executive has been exposed to immersions at both Domino’s and Starbucks support centres around the world, within their specific areas of expertise.

Specific initiatives include:• conducting individual assessments on senior

managers and implementing coaching interventions when necessary; and

• ensuring the alignment of incentive to strategy as a priority across all employee layers.

Employee relationsTaste is committed to recognising our responsibility to enable employees to develop as individuals and contributors to the organisation. The group CEO presents the group strategy and results to all employees twice annually to coincide with the release of results.

Taste’s values, codes of conduct and ethicsAs part of the induction process, employees are made aware of the practices that guide their employment. They sign an acknowledgement of receipt after receiving their induction pack, which is continually updated due to amendments or deviations. The disciplinary code is implemented to correct any deliberate deviation from standards.

No issues of discrimination were recorded in the period.

We did not experience any internal employee relations issues that warrant specific reporting. Employee discipline occurring in this period was well within normal parameters.

Taste Holdings does not presently have collective agreements with any unions, as the majority of our employees have not taken up union membership. Key issues such as health and safety are therefore discussed in specific internal forums.

Luxury Goods DivisionNWJ is not unionised

Food Division• Current employees as at end February

2016 = 593• Employees covered by agreement as at

end February 2016 = 259• Percentage is 43.68%

Percentage of employees covered by collective bargaining agreements

Luxury Goods DivisionAll permanent employees undergo two bi-annual performance reviews per year for the periods of March to August and September to February.

Over and above this, employees who do not meet minimum performance standards undergo performance management on a one-on-one basis. These may result in corrective warnings.

Food DivisionAll permanent employees undergo two bi-annual performance reviews per year for the periods of March to August and September to February.

Over and above this, employees who do not meet minimum performance standards undergo performance management on a one-on-one basis. These may result in corrective warnings.

Performance and career development reviews


Labour practices and human rights due diligenceLabour practices in the supply chain The Luxury Goods Division has not become aware of any negative labour practices in the supply chain. Additionally, employment equity measures are being rolled out in our manufacturing facilities.

Negative labour practices are not apparent in the Food Division’s supply chain.

Labour practice grievances in the groupNo grievances about labour practices were filed in the Luxury Goods Division, while one grievance was filed by the Food Division over the reporting period.

Security personnel trained in the organisation’s human rights policies or proceduresNo human rights training has been conducted for security personnel regarding human rights. The group does not employ security personnel at Taste Food Franchising (TFF) stores.

Total number and percentage of operations that have been subject to human rights reviewsAs human rights principles are built into our operations, this is a non-issue.

Number of grievances about human rights impacts filed, addressed, and resolved through formal grievance mechanismsNone.

Employment equityTaste provides the training, set-up and logistical support that enables franchisees to build their businesses, create employment and transfer skills. Franchising is widely recognised as a successful mechanism for advancing the goals inherent in the Department of Trade and Industry’s broad-based black economic empowerment (B-BBEE) guidelines, particularly in line with its measures for skills development and enterprise development.

Remuneration is job-specific; therefore, women and men are paid equally in the same job categories. All employees are paid within the parameters set by the relevant bargaining councils or regulatory bodies in each industry sector.

70

60

50

40

30

20

10

0

HDSA franchisees as a % of total

54%

2013 2014 2015 2016

62%

Total HDSA employees Female HDSA employees

54%

15% 16% 15%

61%

17%

The company’s employment equity (EE) achievements for 2014 are:

• % HDSAs across all management levels; and

• % of employees are women.

Luxury Goods has an employment equity (EE) committee comprising 16 staff members across six occupational levels.

Return to work and retention rates after parental leaveAll new parents are entitled to parental or maternity leave. All employees who went on maternity leave returned to work after the required period.

The Starbucks Reserve® range: special, limited availability coffees are the foundation of the Starbucks Reserve™ Roastery and Tasting Room



Performance review

Workforce statistics Taste Holdings – Group direct

Male Female

Able-bodied Disabled Able-bodied Disabled

Afr

ican

Colo

ured

Indi

an

Whi

te

Afr

ican

Colo

ured

Indi

an

Whi

te

Afr

ican

Colo

ured

Indi

an

Whi

te

Afr

ican

Colo

ured

Indi

an

Whi

te

Tota

l SA

w

orkf

orce

% b

lack

re

pres

enta

tion

% fe

mal

e bl

ack

repr

esen

tati

on

Senior and top management 1 1 26 2 1 2 2 7 17 59 25 19

Middle management 3 6 25 11 5 8 24 6 1 1 90 46 34

Junior management 51 4 29 36 1 53 10 8 36 2 230 68 32

Semi-skilled and unskilled 254 14 8 38 2 338 27 18 58 1 758 87 50

Total permanent workforce 2016 308 19 44 125 2 0 2 2 404 44 41 135 6 1 2 2 1 137 77 44

Total permanent workforce 2015 259 21 26 124 1 0 0 1 445 36 53 137 0 0 0 0 1 103 76 48

Group franchiseesMale Female

Able-bodied Disabled Able-bodied Disabled

Afr

ican

Colo

ured

Indi

an

Whi

te

Afr

ican

Colo

ured

Indi

an

Whi

te

Afr

ican

Colo

ured

Indi

an

Whi

te

Afr

ican

Colo

ured

Indi

an

Whi

te

Tota

l SA

w

orkf

orce

% b

lack

re

pres

enta

tion

% fe

mal

e bl

ack

repr

esen

tati

on

Group franchisees 2016 96 5 88 125 0 0 1 0 52 5 16 42 0 0 0 0 430 61 17

Group franchisees 2015 89 14 108 195 0 0 2 1 37 6 40 56 0 0 0 0 548 54 15

Racial and gender breakdown of Taste workforce in 2016

African Coloured Indian White

Total workforce Males Females Gender breakdown

Females Males

6%

63%8%

23%

19%

62%9%

25%

7%

65%6%

22%

44%56%

Operational changes Taste Holdings has not experienced any situations that would require notice given for operational changes. Should these situations arise, we will respond in accordance with prescribed legislation and common law.

Health and safety We have a moral and legal obligation to safeguard and protect our employees and our customers

against injury, disease and risks to their health and safety. Our health and safety committees hold monthly health and safety meetings at which any potential risks and issues affecting the health and safety of our employees are addressed.

Taste Holdings is committed to providing safe food products to its affiliated franchise restaurants. The state-of-the-art food distribution centres we established in 2015 include high-volume


manufacturing facilities producing spices, sauces, dough pre-mixes and added-value meat products. Our main objective is to operate under the Hazard Analysis and Critical Control Point (HACCP) food safety management system to ensure the systematic assessment of all the steps involved in our food manufacturing centres, which are certified by the South African Bureau of Standards (SABS) against the HACCP criteria. The system allows us to trace the origin of all our input products.

In addition, we monitor our fleet of vehicles in real time and receive alerts if the cold chain is

broken. We apply benchmark hygiene principles throughout our manufacturing process and our food technologist ensures that all the products we produce comply with our specifications before they are dispatched to customers. We have a number of robust food safety systems in place, all of which we regard as being high priority. These include employing good manufacturing principles and quality management in relation to our HACCP system.


Luxury Goods Division12 members make up this committee.

Food DivisionBuon Gusto, Taste’s distribution and manufacturing subsidiary, does have safety committees, and committees within the retail store environment will be established in the current year.

Percentage of total workforce represented in formal joint management-worker health and safety committees

Workers with high incidence or high risk of diseases related to their occupationThese risks are not linked to the Luxury Goods Division; however, Food Division drivers face the traffic accident risk inherent on South Africa’s roads.

Health and safety topics covered in formal agreements with trade unionsNo formal agreement with any trade unions as yet, as none have reached the representivity to be recognised.

HACCP safety management system HACCP is a food safety management system that enables food processing and catering industries to introduce and maintain a cost-effective, ongoing food safety programme. HACCP involves the systematic assessment of all the main steps involved in a food manufacturing operation and the identification of those steps that are critical to the safety of the product.

Health and safety trainingTaste employees are trained in:• first aid;• health and safety representative training;• forklift operation;• pest control;• standard operating procedures;• critical control points (CCPs) and fire fighting;• hazard identification and risk analysis

(HIRA) training;• temperature monitoring and control (both

crucial in controlling product quality);• food factory and personal hygiene;• training in the use of Pastel Evolution software;• standard operating procedures;• electrode boiler operation;• critical control points (CCPs) training; and• spectank training for all employees in basic

chemical usage, dilutions, chemical safety, basic hygiene and hand washing.

Performance review


Safety performanceDuring the period under review, two injuries on duty were recorded in the Luxury Goods Division, and 13 in the Food Division.

We do not yet formally track these incidents, but can confirm that most were due to unfortunate mishaps rather than risks intrinsic to our operations. Sadly, a Domino’s delivery driver died in a road accident in Gauteng in December. Taste is in a process of developing a unified group database for health and safety information and planning.

Although not formally defined as injuries on duty (IOD), the effects of robberies can impact on employees and they require trauma counselling, anxiety treatment and recovery time.

Percentage of significant product and service categories for which health and safety impacts are assessed for improvementTaste has adequate controls in place from the supplier of the ingredients right through to the

final product served to the customer. We conduct supplier audits and test ingredients to ensure that they meet our required standards. Regular audits are conducted in our corporate and franchise stores to ensure quality compliance.

Total number of incidents of non-compliance with regulations and voluntary codes concerning the health and safety impacts of products and services during their lifecycleFood products are strictly regulated for health and safety, while Luxury Goods must conform with standards in their sectors. No incidents of non-compliance were reported.

Starbucks sources only Arabica coffee from more than 30 countries from around the world.


PERFORMANCE REVIEW continuedINTELLECTUAL CAPITAL

Starbucks licence intellectual gains• Access to global best practices, operations and

new products• Launching the world’s largest loyalty programme

in South Africa later this year• Improved standards in our supply chain• Stronger focus on sustainability practices• Unique approach to mitigating unemployment

Intellectual competenciesTaste Holdings is driven through a competency framework of skills and experience that underpins each level, from specific brands up to each division, and then to a compact and focused group head office.

Based on our broad base of appropriate competencies, Taste has the capability to acquire and integrate any brand that matches the group or divisional strategy. That is how diverse products can be offered in the same holding structure, based on spreads of complementary brands in our Food and Luxury Goods Divisions.

Although each brand appeals to its own target market group, Taste Holdings applies a cascading strategy across all its integrated brands. Each brand benefits from the group’s strong competency framework, which includes:

• identifying and acquiring appropriate real estate;• hiring and training staff;• common IT systems;• merchandising;• procurement;• distribution; and• manufacturing.

Curating internal knowledge Intellectual capital dovetails with human capital through employee competence, skills, training and development, which includes knowledge of work procedures, work ethics and values, and experience.

Taste is fortunate to have an experienced executive team with considerable exposure to the industry. This team was substantially upgraded following the Starbucks agreement, with our senior food executive team expanding to enhance skills in: • human resources;• new property;• new product development; • safety; and• IT.

During the reporting period, we refined our recruitment programme to become more effective at retaining staff by using better screening and

• Significant intellectual capital gains from working with global leading brands – Starbucks Coffee and Domino’s Pizza

• Built a full service Starbucks store at head office to serve as a training facility• Intensive training of mentoring staff at Starbucks UK facilities• Invaluable access to digital and mobile food ordering channels• Expanded our executive and senior management capacity• Strengthened our corporate store management skills• Remodelling of jewellery stores led to increased sales

Highlights


Performance review

coaching. We are also reviewing employee benefits to ensure that high-performance individuals are recognised and developed.

Technology developmentTaste’s IT team has unique skills and have built a leading e-commerce platform for Domino’s Pizza. The online ordering system launched in October 2015 and the offering has been well received.

The Starbucks digital platforms have great potential, as customers will be able to transact using their mobile phones. A rewards programme is also available, as part of the Starbucks loyalty programme. The entire Starbucks digital platform will be launched in South Africa towards the end of 2016.

Brands and reputationWe are focused on becoming the preferred vertically integrated franchisor and licensee in Africa – not by size but by excelling in our chosen areas of diversified operation.

The group has developed a deep understanding of southern African low to high income customers in Quick Service Restaurants (QSR) and retail. Our brands address 85% of South Africa’s demographic and capitalise on the major social-economic themes of an emerging and aspirational consumer who is time starved, seeks convenience and wishes to display status through universally recognised symbols of luxury.

We understand how to build brands (we have built six of our own) across multiple customer segments. We are also exemplary brand custodians for world-renowned brands in their categories.


The Starbucks sustainability gainManaging Taste’s environmental impacts requires collaboration between our business functions and continuous improvements in processing and monitoring of inputs/outputs. Starbuck’s is recognised as a world leader in sustainability practices:• Since 2004, Starbucks has been pursuing

strategies to address climate change and help farmers mitigate the impact on their farms

• Starbucks is working to bring select stores to LEED® building standards and ensures that the approach to designing, building, and maintaining stores is inclusive of a range of environmental goals

• Starbucks works constantly towards increasing recycling, promoting reusable cups and reducing the waste associated with cups and other packaging

• Renewable energy credits are purchased by conserving the energy and water used in stores

• Starbucks has a strong focus on reducing the environmental footprint of its operations and is helping to ensure access to clean water in coffee-growing communities

Taste’s partnership with Starbucks is an excellent opportunity to absorb how Starbucks manages its sustainability issues without having the re-invent the wheel for ourselves. We could utilise localised

Starbucks practices to reduce our environmental impact by looking at all aspects of our business, how they intersect and how we can integrate our efforts to realise meaningful reductions in environmental impacts. These learnings will be shared with our suppliers and franchisees to help spread wider positive changes.

• Starbucks is committed to environmental sustainability, ethically produced and sourced products• Continued procuring over 90% of fresh-caught hake from sustainable fish supplies, despite rising prices • Continued support of local dairy industry by procuring cheese from local suppliers• Adhered strictly to the Kimberley Process for the procurement of diamonds in our Luxury

Goods Division

Highlights

PERFORMANCE REVIEW continuedNATURAL CAPITAL


Taste’s IT team have built a leading e-commerce platform to Domino’s Pizza, an online ordering system.

Becoming more energy efficient Taste’s most material impact on natural capital is our consumption of energy, in the form of electricity used to power our stores, prepare food and manufacture jewellery, as well as the fuel consumed by our fleet of vehicles. We are working to reduce the greenhouse gas emissions resulting from our coal-powered electricity consumption. Fuel and electricity prices continue to increase above the rate of inflation; therefore, it is also in Taste’s and our customers’ interests that we reduce our energy consumption.

We set ourselves a target of reducing our energy consumption by 20% over four years; however, it has proved difficult to measure due to non-standard metering from various municipalities and landlords.

All new Taste outlets are designed for energy efficiency through layout and equipment, while existing stores are retro-fitted to reduce energy consumption when being converted or renovated.

Our vehicle fleets are now fuelled at contracted suppliers, which has improved monitoring of consumption. Improved trip planning has enabled Taste to significantly reduce the number of trucks used for local deliveries.

WaterMunicipal water supplies are Taste’s only source of water. The bulk of our water is utilised in the production of our menus and inventories, with the remaining water utilised for hygiene purposes.

Recycled input materialsThese are not specifically tracked but elements of our inputs, such as packaging, are made of recycled materials. Our Starbucks partnership will enable best practices for reducing waste, increasing recycling and promoting reusable cups.

During the reporting period, no significant environmental grievances, fines or sanctions were received.

Performance review


Governance and management systemsGood governance is the cornerstone of the Taste Holdings group’s board and committee structure. Our board recognises its leadership role in taking responsibility for the governance of the group and it sets the company’s values and is responsible for establishing and maintaining a strong ethical culture throughout the group.

Our board performs its governance responsibilities within a framework of policies and controls which provide for effective risk assessment and management of our economic, environmental and social performance. The board’s responsibilities are outlined in its charter which the board

How we govern our businessOur approach to governanceTaste Holdings believes that good corporate governance, which includes transparency and accountability, is key to the integrity of our organisation and our ability to manage risk and perform at optimum levels. Underpinning our disciplined approach to governance is our determination to ensure we maintain a balance between good governance and the spirit of entrepreneurship that has built our business.

We recognise that strategy, performance, sustainability and risk are inseparable. Our board also takes into consideration the concerns and priorities of our wider stakeholder environment in its strategic guidance and decision-making process.

To ensure that we consistently practise effective corporate governance throughout the Taste Holdings group, our board materially applies the principles of King III and the Listings Requirements of the JSE (see the King III Index and our reporting in terms of section 3.84 of the JSE Listings Requirements on our website).

Statement of complianceJSE LimitedThe company is subject to, and remains compliant with, the Listings Requirements of the JSE Limited.

Our board governance structure

CORPORATE GOVERNANCE REPORT

Audit and risk committee Social, ethics and transformation committee*

Two divisional executive management committees

Company secretary

Remuneration and nominations committee

Board of directors

Board committees

Shareholders and other stakeholders

Executive and investment committee

Executive directors – three Non-executive directors – one Independent non-executive directors – six

30%

10%

60%

Total

Taste Holdings’ board independence as at 29 February 2016


Corporate governance

reviews and adopts annually. Mandates, charters and terms of reference governing the board and its committees are available from our company secretary. The board also plays an important role in setting ethical standards of conduct for the group.

The board charter, which is closely aligned with the recommendations of King III, details the responsibilities and duties of the board, which are also addressed in our memorandum of incorporation.

Shareholders are required to elect the members of our audit and risk committee, which is a statutory committee in terms of the Companies Act, at our annual general meeting. The members of our social, ethics and transformation committee, which is also a statutory committee, are reappointed annually by the board.

The board of directorsMeets a minimum of three times a year, but met four times in 2015/2016. It also convenes additional meetings as necessary. In addition, the CEO and CFO met with board members at least three times a year outside of the formal board meetings. Board packs are distributed prior to the meetings.

As at the reporting date, the board comprises seven non-executive directors, six of which are independent, and three executive directors. The chairman is an independent non-executive director.

The chairperson ensures the overall effectiveness of the board and its committees; that the board provides effective leadership, maintains ethical

standards and is responsible, accountable, fair and transparent; and that strategies are developed and implemented with the objective of achieving sustainable economic, social and environmental performance.

To achieve this, he encourages constructive debate and discussion within the board through a culture of openness and constructive challenge. He makes himself available to shareholders for discussion on corporate governance matters and matters of concern.

Board members are accountable to shareholders and they owe a duty of care and diligence to the company. They act in the best interests of the company and its shareholders. To fulfil their role, board members participate in rigorous and constructive debate and discussion. The board is responsible for:• strategy, strategic decision-making and execution;• governing the company on behalf of its

shareholders;• engaging with stakeholders;• Taste Holdings’ approach to corporate

citizenship, safety, health, the environment, ethics and risk;

• its own governance, including the rotation of directors, training of directors, conflicts of interest and the appointment of directors;

• monitoring and assessing Taste Holdings’ reputation in the marketplace; and

• establishing the framework within which capital is allocated.


The directors’ attendance at the board meetings for the year under review was as follows:

Member 18 May 2015 29 July 2015 8 Oct 2015 23 Feb 2016

A Berman P P P P

DJ Crosson P P P P

JB Currie1 P P P A

RL Daly2 P P P P

CF Gonzaga P P P P

S Patel P P P P

GM Pattison3 P P P P

HR Rabinowitz P P P P

E Tsatsarolakis P P P P

K Utian P P P P

WP vd Merwe P P P P

CORPORATE GOVERNANCE REPORT continued

Audit and risk committeeThis committee meets a minimum of three times a year with special meetings called as and when required. The committee also meets with the group’s external auditors and Taste Holdings’ executive management periodically.

It comprises three independent non-executive directors. The CEO and CFO, who attend meetings by invitation, do not have a vote. The chairperson of the board is not a member of the committee. The external auditor also attends meetings by invitation.

The audit and risk committee ensures that appropriate checks and balances are in place to ensure robust, independent and efficient audit processes and that financial reporting throughout the group is accurate and reliable. The audit and risk committee has updated, formal board approved terms of reference. The board is satisfied that the committee has complied with these terms and with its legal and regulatory responsibilities as set out in the Companies Act (No 71 of 2008), as amended (Companies Act), King III and the JSE Listings Requirements. The terms of reference for the audit and risk committee intend to ensure compliance with both governance recommendations and statutory requirements.

The board believes that the members collectively possess the knowledge and experience to exercise oversight of the company’s financial management, external auditors, the quality of the company’s financial controls, the preparation and evaluation of the company’s financial statements and financial reporting. The board has established and maintains internal controls and procedures, which are reviewed on a regular basis. These are designed to manage the risk of business failures and to provide reasonable assurance against such failures but this is not a guarantee that such risks are eliminated. The statutory report of the committee can be found on page 93 and the risk management report is on page 20.

The audit committee:• reviews and oversees Taste Holdings’ integrated

reporting; • review and monitor its system of internal

controls; • reviews the findings of the external auditors and

once our internal audit function is established, will review its findings and oversee the internal audit function;

• obtains external assurance on the financial statements included in Taste Holdings’ integrated annual report and recommends them to the board for approval;

1 JB Currie resigned as director on 1 March 2016.2 RL Daly resigned as chairman of the board on

23 February 2016.3 GM Pattison was appointed chairman of the board on

23 February 2016.

Key:P PresentA Apology


• carries out its statutory duties set out in section 90 of the Companies Act, 2008;

• satisfies itself as to the expertise and experience of the group’s financial director and its financial function. During the financial year under review, the committee agreed to an action plan in respect of areas of the group where financial skills and/or procedures are inadequate;

• satisfies itself that management regularly monitors the group’s compliance with the Franchise Association’s code of conduct;

• assists the board with its responsibility for IT governance by ensuring that the group manages its information assets effectively, that an IT governance framework is in place and that management is implementing the framework; and

• monitors and evaluates significant IT investment and expenditure, if and when necessary.

The risk committee:• considers risk in its widest sense;• identifies and assesses all risks, their impact and

the probability of them occurring;• monitors the perceived effectiveness of the

group’s existing controls and systems and assesses their integrity;

• ensures the company’s risk policies and strategies are effective and effectively managed;

• establishes and maintains a common understanding of the body of risks that need to be addressed if the company is to achieve its corporate objectives;

• reviews and confirms the company’s levels of risk tolerance and its risk profile at least twice a year;

• coordinates the group’s risk management efforts, reviews the results and ensures appropriate action is taken;

• monitors external development relating to corporate accountability, including emerging and prospective risks and opportunities; and

• reviews and discusses the group risk register, which is aggregated from the risk registers prepared by the risk officers of the company.

In February 2016, the audit and risk committee formally evaluated the performance and effectiveness of the external auditor in terms of King III and the JSE Listings Requirements.

It confirmed the suitability and effectiveness of the external auditor and nominated BDO South Africa

Inc. for reappointment as external auditor for the coming financial year, having satisfied itself that the company and its individual auditors are properly accredited and independent.

The committee also determines and carefully monitors the use of the external auditor for non-audit-related services. The formal policy in place precludes the auditor from providing services that could impair audit independence.

The members’ attendance at the committee meetings for the year under review was as follows:

Member18 May

20158 Oct 2015

22 Feb 2016

A Berman P P P

S Patel P P P

WP vd Merwe P P P

Key:

P Present

Remuneration and nominations committeeThe combined remuneration and nominations committee meets at a minimum of two times a year, but also convenes additional meetings as necessary.

The committee comprises four independent non-executive directors. The CEO attends portions of these meetings by invitation. He does not have a vote, nor does he participate in discussion regarding his remuneration. External remuneration specialist companies are requested to present to the remuneration committee as required.

The chairperson of the board is the chairperson of the nominations committee, as required by the JSE Listings Requirements.

Details of directors’ fees and remuneration are fully disclosed in the financial statements. In addition, the proposed fees to be paid to non-executive directors for approval by shareholders by way of a special resolution are set out in the notice of the AGM. Non-executive directors only receive remuneration that is due to them as members of the board. Directors serving as members on board committees receive additional remuneration. Remuneration of executive directors in their capacities as executive members of the management team as approved by



the committee is fully disclosed in the consolidated financial statements. The committee invites executives and senior managers of the group to attend meetings by invitation in order to perform its mandate.

Remuneration responsibilities include:• approving, guiding and influencing human

resource policies and strategies;• ensuring appropriate transparent disclosure of

remuneration;• skills development;• recommending appropriate levels of

remuneration to be paid to the members of the board of directors;

• upholding, reviewing and amending, if appropriate, the company’s remuneration philosophy and policy with particular reference to the remuneration of executive directors and senior management;

• ensuring that executive directors and senior management are fairly rewarded for their individual contributions to the company’s overall performance, having regard to the interests of stakeholders and the financial condition of the group;

• approving remuneration packages to attract, retain and motivate high-performing executive directors and senior management; and

• benchmarking remuneration against competitor companies and third-party salary surveys.

Nominations responsibilities include:• setting the criteria for board nominations

and ensuring the appointment of directors is transparent;

• identifying, evaluating and recommending suitable candidates for appointment to the board;

• succession planning;• ensuring Taste Holdings’ leadership is

representative of all race groups and is in accordance with the spirit and targets set by the dti codes of good practice; and

• ensuring directors retire and are re-elected in accordance with the company’s memorandum of incorporation.

The members’ attendance at the committee meetings for the year under review was as follows:

Member 18 May 2015 22 Feb 2016

RL Daly P P

K Utian P P

GM Pattison P P

WP vd Merwe P A

Key: P Present A Apology

Social, ethics and transformation committeeTaste Holdings established a social, ethics and transformation committee in accordance with the requirements of the Companies Act. The committee met once during the period under review. This committee executes the duties assigned to it by the Companies Act, as well as any additional duties assigned to it by the board of directors. Although management is tasked with the day-to-day operational sustainability of their respective areas of business, the board remains ultimately responsible for group sustainability and has delegated certain duties in this regard to the social, ethics and transformation committee.

A formal charter has been adopted which guides the committee in ensuring that the group conducts its business in an ethical and properly governed manner and of reviewing or developing policies, governance structures and practices for sustainability.

As at the reporting date, members’ of the committee are as follows:• GM Pattison (Chairman)• E Tstatsarolakis• T Doorasamy

Management reports to the committee on matters relevant to its deliberations and the committee in turn draws relevant matters to the attention of the board and reports on them to the shareholders at the annual general meeting. Mechanisms to encourage ethical behaviour such as the code of ethics, corporate citizenship policies and the whistle blower hotline were confirmed as adequate by the committee in the year. No human rights incidents were reported during the year. In South Africa,



aspects such as prohibition of child labour, forced compulsory labour and discriminatory practices are monitored by the Department of Labour in addition to the committee.

The primary role of the committee is to supplement, support, advise and provide guidance on the effectiveness or otherwise of management’s efforts in respect of social, ethics and sustainable development-related matters which include: • embedding an ethical culture;• safety, health and wellness;• socio-economic development;• human resource development;• employment equity and transformation;• the group’s empowerment credentials;• the group’s corporate social responsibility;• protection of company assets; and• stakeholder engagement.

Executive and investment committeeMeets monthly or more often if required to review detailed operating performance of the company and assess capital allocation proposals in line with the board’s mandate.

As at the reporting date, the committee comprises three executive directors and the group commercial executive, by invitation. The group CEO is the chairperson and the group CFO the deputy chairperson.

The executive committee comprises the group’s executive directors. It is responsible for the daily running of the group and regularly reviews current operations in detail, and develops strategy and policy proposals for submission to the board.

The CEO liaises on a regular basis with the CFO and other directors, with regard to matters concerning the daily running of the group to be raised at the committee meetings. The executive committee, which also acts as an investment committee, meets at least once a month, assists the CEO with the performance of his duties, and is responsible for, inter alia:• developing strategy, operational plans, policies,

procedures and budgets for consideration by the board;

• implementing the group’s strategy;• carrying out the board’s mandates and directives;• the operational activities of the Taste Holdings

group;• monitoring operational and financial

performance against set objectives; • executing Taste Holdings’ compliance and

disclosure obligations; and• deciding on capital allocation across the group,

including replacement and investment capital, based on proposals submitted by the divisions in terms of the board-agreed investment mandate.

Company secretaryThe group’s company secretary is responsible for administering the proceedings and affairs of the directorate, the company and, where appropriate, owners of securities in the company, in accordance with the relevant laws. The company secretary is available to assist all our directors with advice on their responsibilities, their professional development and any other relevant assistance they may require.

iThemba Governance and Statutory Solutions (Pty) Limited (iThemba), represented by Ms Elise Beukes, is appointed as the company secretary of Taste Holdings. Neither iThemba or Elise Beukes are a director or a shareholder of Taste Holdings, or any of its subsidiaries. On that basis, the board is comfortable that both the shareholders and directors of iThemba and Ms Beukes have maintained an independent relationship with the executive team, the board and the individual directors in terms of section 3.84(j) of the JSE Listings Requirements.

The board has unlimited access to the company secretary, who advises the board and its committees on issues, including compliance with group policies and procedures, statutory regulations and relevant governance principles and recommendations. The company secretary attends board and committee meetings to ensure that comprehensive minutes of meetings are recorded. The company secretary maintains an arm’s length relationship with the executive team, the board and the individual directors.



The company secretary has provided the board with documentary evidence of her levels of competence in terms of fulfilling her responsibilities as company secretary, which included her qualifications and experience.

Ms Beukes has over four years’ experience as the company secretary of a listed company and has a legal qualification, as well as several company secretarial qualifications.

She has never been censured by the JSE, penalised or fined for any misconduct. The board, having assessed her abilities based on her qualifications, experience and the level of competence she has demonstrated as Taste Holdings’ company secretary as required in terms of section of 3.84(i) of the JSE Listings Requirements, agreed that Ms Beukes is sufficiently qualified, competent and experienced to act as Taste Holdings’ company secretary. Our policies and terms of reference are available through the company secretary.

Reporting in terms of section 3.84 of the JSE Listings Requirements on board governance processesRequirement Principle Approach

3.84(a) There must be a policy detailing the procedures for the appointment to the board.

Appointments must be formal and transparent and a matter for the board as a whole, assisted where appropriate by a nominations committee.

If a nominations committee is appointed, such committee must only constitute non-executive directors and the majority must be independent. The committee must be chaired by the chairman of the board.

Our directors are appointed by means of a transparent and formal procedure, governed by the mandate and terms of reference or our remuneration and nominations committee and the board charter. The board adheres to a formal board policy in this regard.

The remuneration and nominations committee’s responsibilities include setting the criteria for board nominations, identifying, evaluating and recommending to the board suitable candidates for appointment to the Taste Holdings board, as well as succession planning.

The members of the remuneration and nominations committee are all independent non-executive directors and the nominations committee is chaired by the chairman of the board.

3.84(b) There must be a policy evidencing a clear balance of power and authority at board level to ensure that no one director has unfettered powers.

Our board charter demonstrates that there is a clear balance of power and authority at board level and that no one director has unfettered powers. Decisions, if not unanimous, are taken by a simple majority with one vote per director. The chairman does not have a casting vote.



Requirement Principle Approach

3.84(c) Issuers must have a CEO and a chairman and these positions must not be held by the same person.

The chairman must either be an independent director or the issuer must appoint a lead independent director as defined in the King Code.

The CEO and chairman positions in Taste Holdings are held by different people and the chairman is an independent non-executive director. This principle is documented in the board charter.

3.84(d) Issuers must appoint an audit committee in compliance with the King Code.

Taste Holdings has a combined audit and risk committee. Its membership is set out on page 79 of this integrated annual report. The committee currently has three members all of whom are independent non-executive directors, as set out in the King Code.

Issuers must appoint a remuneration committee in compliance with the King Code.

The board has appointed a combined remuneration and nominations committee, which has four members all of whom are independent non-executive directors.

As already explained, Taste Holdings has a combined audit and risk committee and a combined remuneration and nominations committee, which is tasked with the responsibilities of a nomination committee.

Where appropriate, issuers must appoint a risk and nominations committee.

The company does not have separate risk and nominations committees as these are combined into the audit and risk committee.

The composition of such committees, a brief description of their mandates, the number of meetings held and any other relevant information must be disclosed in the annual report.

Brief descriptions of the mandates of these committees and the number of meetings held during the year are available on pages 77 to 81 of this integrated annual report.

3.84(e) Brief CV of each director standing for election or re-election must accompany relevant notice of meeting.

Information appears on pages 16 to 18 of this integrated annual report.

3.84(f) Capacity of directors in relation to executive, non-executive and independent must be categorised and disclosed in the relevant documentation.

This information is also contained in the curriculum vitae mentioned in 3.84(e). The composition of our committees is in accordance with the requirements of the Companies Act and the King Code.



Requirement Principle Approach

3.84(g) Issuers must have a full-time executive financial director.

Taste Holdings has a full-time Chief Financial Officer who does not hold any other position nor does he have any other commitments that could be considered as full- or part-time employment.

3.84(h) The audit committee must consider, on an annual basis, and satisfy itself of the appropriateness of the expertise and experience of the financial director and report thereon in the annual report.

Our audit and risk committee annually considers and satisfies itself of the appropriateness of the expertise and experience of the Chief Financial Officer and has reported on its findings in its audit and risk committee report on page 93 of our annual financial statements.

3.84(i) The provision deals with the competence, qualifications and experience of the company secretary and the board of directors’ responsibility in relation thereto.

We would refer you to page 81 of this integrated annual report where the company secretary’s competence, qualifications and experience are set out, as are the board’s assessment of her abilities to carry out her responsibilities.

3.84(j) The provision deals with the arm’s length relationship between the board of directors and the company secretary and the board of directors’ responsibility in relation thereto.

We would also refer you to page 81 of this integrated annual report where it is stated that the company secretary maintains an arm’s length relationship with the executive team, the board and the individual directors.

Our application of King IIIEvery year we consider the 75 corporate principles of King III. We have provided an update below of our actions in terms of the principles we listed in 2016 as not yet fully applied by Taste Holdings. A comprehensive assessment of all of the 75 principles can be found on our website under the governance section.

King III principle Current and future actions

Internal audit function The group is satisfied that an appropriate risk management function is in place, and has compliance officers in place for its financial products segment to monitor compliance with the relevant regulations. During this year, an internal audit function will be established.




Statement of internal controlThe board acknowledges overall responsibility for the group’s system of internal controls. This includes the establishment of an appropriate control environment and framework, as well as reviewing the effectiveness, adequacy and integrity of this system.

Our system of internal controls is based on an ongoing process designed to identify the principal risks to the achievement of policies, aims and objectives, to evaluate the nature and extent of those risks and to manage them efficiently, effectively and economically. Our system of internal controls is designed to manage rather than eliminate risk. Accordingly, the system can only provide reasonable and not absolute assurance against the occurrence of any material misstatement or loss.

The group has an ongoing process for identifying, evaluating, monitoring and managing the principal risks affecting the achievement of our business objectives, which is embedded in the group’s processes and structures.

Delegation of responsibilitiesThe group has clearly defined the delegation of responsibilities for both executive and operating management, which includes authorisation levels, for all aspects of the business. The delegation of these responsibilities is reviewed annually.

Policies and proceduresClearly documented policies and procedures are set out in Taste Holdings’ policies and are subject to regular review and updating.

Divisional review meetingsDivisional and operating unit review meetings are held monthly. They are chaired by the divisional CEO and attended by the CEO and CFO at least once a quarter. Operational, financial and key management issues are identified, discussed and actioned at these meetings.

Monitoring of resultsSales from outlets and through the distribution centres are monitored daily and weekly. Monthly

monitoring of financial results against budget takes place at both divisional and board level. Major variances against the budget are followed up by management and action is taken.

Code of ethicsThe group adheres to the stringent Franchise Association’s code of ethics, which commits our employees to high standards of integrity, behaviour, good faith and accountability in dealing with our stakeholders.

We expect our directors, employees, employees of companies providing outsourced functions and our suppliers to comply with the principles of this code and to act in accordance with it.

The social, ethics and transformation committee monitors ethical behaviour in the group. Where there is any non-compliance with this code of conduct, disciplinary action is taken and consistently enforced across the group to discourage a recurrence.

The Taste Holdings group does not engage or condone the perpetration of any illegal acts in the conduct of its business. It is the policy of the Taste Holdings board to actively pursue and prosecute perpetrators of fraudulent or other illegal activities of which they become aware.

Certification by company secretaryIn terms of section 88(2)(e) of the Companies Act 71 of 2008, as amended, I certify that, to the best of my knowledge and belief, the company has, in respect of the financial year reported upon, lodged with the Companies and Intellectual Property Commission all returns required of a public company in terms of the Act and that all such returns are true, correct and up to date.

E Beukes iThemba Governance and Statutory Solutions (Pty) Ltd

25 May 2016


Share dealingsThe board has an approved Trading in Shares Policy in terms of which dealing in the company’s shares by directors and employees is prohibited during closed periods. Directors may also not deal in the company’s shares without first advising and obtaining clearance from the chairperson of the board. In the absence of the chairperson, clearance must be obtained from any two directors. No director or executive may trade in Taste shares during closed periods as defined in the JSE Listings Requirements. The directors of the company advise the company secretary of all their dealings in securities for publication purposes.

Directors and employees are subject to an embargo on trading in shares during closed periods when the company is operating under a cautionary announcement and in the period between the close of annual and half-yearly reporting periods and the publishing of results.

Relationship with stakeholdersThe board is very much aware of the importance of constructive and positive relationships with all stakeholders of the group. The company maintains dialogue with its key financial audiences, especially institutional shareholders and analysts. The investor relations team manages the dialogue with these audiences and presentations take place at the time of publishing final results. The company adopts a proactive stance in timely dissemination of appropriate information to stakeholders through print and electronic news releases and the statutory publication of the company’s financial performance. The board encourages shareholders to attend its annual general meeting, notice of which is contained in this integrated annual report, where shareholders will have the opportunity to put questions to the board, including the chairmen of the board committees.

Remuneration reportOur remuneration philosophyThe group’s remuneration policy is based on the premise that fair and competitive remuneration motivates individual achievement and enhances a

company’s general performance. We achieve what we believe is fair and competitive remuneration through combining fixed and performance-enhancing incentives with the aim of attracting and retaining competent and experienced employees. We recognise that senior management have more influence over the long term than junior management and seek to reward those who are committed to long-term value creation more than short-term opportunists. Despite having relatively complex operations, we seek to align individual performance to group performance, but recognise that individuals are relatively more motivated by incentives linked to objectives within their sphere of influence. There is, therefore, a trade-off between incentives linked solely to group performance and objectives linked solely to individual performance. We seek to strike an appropriate balance between the two. As a professional company, Taste seeks to have efficient and transparent remuneration practices that are conservatively aligned with best practice, regulation and legislation.

Base remuneration policyAs part of its strategy to attract and retain top individuals in their area of expertise, Taste’s strategy is to pay base salaries in the 50th percentile, as per external salary surveys. Our base pay for executive directors and senior management is benchmarked annually against direct industry peers, comparable listed companies and at least one salary survey specialist company. We also take into consideration the revenue, profit and the number of employees and assets under that person’s control. Where no adjustment is due to an employee, salary increases are guided by a combination of the consumer price index and prevailing trends among listed companies, based on surveys carried out by specialist companies.

During the year, no ex gratia payments were made to directors, executive committee or management committee members.

Retention and incentive policyThe main purpose of our remuneration policy and structure is to align management and shareholder




interests. At the core of this alignment are the retention of key employees and the linking of management performance measures to shareholder and enterprise value. To this end, the group uses two structures to retain employees. Our short-term cash incentive programme rewards increases in company profitability, while our long-term incentive scheme rewards increases in enterprise value and creates disincentives for participating employees to leave the employ of the company.

Short-term cash incentive programmeParticipants in the long-term share incentive scheme (LTI) as well as selected other participants have as part of their potential annual remuneration the ability to earn a cash payment based on annual audited profit targets set annually by the board. This is in terms of a short-term cash incentive scheme (STI). The amount an individual can earn is capped based on recommendations from external remuneration specialists.

Long-term share incentive schemeThere are two schemes in operation, the first of which ran its course in the 2012 financial year. For completeness, the structure is described as follows:

A share option scheme was initiated in May 2010 for those who were members of the executive committee at that time. The scheme gave participants the right to acquire ordinary shares at a strike price of 43 cents per share (being the 30-day volume-weighted average of Taste shares on the grant date of 6 may 2010). Options vested in three tranches from 2012 to 2014. Once vesting of a tranche has been triggered, a third of the options within the tranche can be exercised one year after vesting was triggered, a further third, two years after the vesting was triggered and the final third, three years after the vesting was triggered. The options must be exercised within five years of vesting being triggered. Upon cessation of employment, options that have been granted and accepted but which have not yet vested are forfeited, unless approval for the employee to retain his/her options is obtained from the trustees. All options must be exercised no later than the eighth

anniversary on which they were granted unless approval is obtained from the trustees. Due to various constraints in this long-term share incentive scheme, the remuneration committee approved a share option scheme that was principally driven during the year ended February 2013.

The scheme is based on the following principles:• Share options are issued annually in a consistent,

transparent and principled manner linked to cost-to-company.

• The quantum of options granted is linked to the market value of the individual, being the sum of the cost-to-company and the short-term incentive granted the previous year.

• The quantum is calculated as a multiple of the market value of an individual, taking into account seniority, responsibility and contribution to the group value. The multiples range from 0.25 times annual cost-to-company to 1.25 times annual cost.

• The qualifying factor for the issue of share options is currently CPI + 6% at the headline earnings per share (HEPS) level.

• The options will vest over a five-year period in 25% tranches and the first tranche can only be exercised after 24 months.

• All options must be exercised within five years.

The remuneration committee can award ad hoc options to individuals based on individual performance.

The strike price of the options is the 30-day volume weighted price prior to the granting date of the options.

In February 2015, the committee undertook an external review of the scheme in light of King III, Schedule 14 of the JSE Listings Requirements and section 8C of the Income Tax Act.

King III provides that “Options or other conditional share awards are normally granted for the year in question and in expectation of service over a performance measurement period of not less than three years. Accordingly, shares and options should not vest or be exercisable within three


years from the date of grant. In addition, options should not be exercisable more than 10 years from the date of grant. For new schemes it is best practice to restrict the exercisable period to less than seven years”. As the first tranche of the 2013 scheme vests in 24 months it has been resolved to comply with King III in the revision whereby the first tranche will vest after three years.

The scheme is compliant with Schedule 14 of the JSE Listings Requirements and the revision to the scheme will remain compliant.

The revised scheme is based on the following principles:• Share options are awarded annually, with no

conditions being attached to the award. An award in one year is not a de facto guarantee of an award for the forthcoming year or any year thereafter.

• Share options are split into two types of options: – options that have no strike price i.e. when

exercised, the purchase price to be paid for the shares which are the subject of the option is zero cents. These are referred to as “Retention Options” and are designed with a retention purpose in mind.

– options that: * have a strike price i.e. when exercised, the

purchase price to be paid for the shares which are the subject of the option is the 30 day VWAP.

* are adjusted based on the achievement of certain performance targets.

These are referred to as “Performance Options” and closely align any value created with an increase in enterprise value and ultimately the share price.

• The number of options granted annually is calculated based on a multiple of a participant’s annual cost-to-company excluding cash bonuses received during the relevant period divided by the VWAP when the Remuneration Committee approves the grant.

• The multiples of cost-to-company per band take into account seniority, responsibility and contribution to the Group. The multiples are between the 25th and the 50th percentiles of actual multiples issued for JSE companies and reviewed by the board annually as proposed by an external remuneration consultant. The multiples for Retention Options range from 0.25 to 0.65 times annual cost-to-company and multiples for Performance Options range from 1 to 2.15 times annual cost-to-company.

• Both options are exercisable in three equal tranches, with the first tranche being capable of exercise 36 months after the date of an acceptance of the award, the second tranche 12 months thereafter and the third and final tranche 12 months after that.

• In line with best practice and King III, the Scheme introduces the concept of conditions of exercise and, in the case of Performance Options introduces an adjustment, including a potential “claw back”, to the number of options that are exercisable based on the achievement of certain performance targets.

– Exercise of a Retention Option is conditional on the participant being in the employ of the Group.

– Exercise of Performance Options is conditional on the participant being in the employ of the Group, and the number of Performance Options that are exercisable are adjusted based on the achievement of certain performance targets, as follows:

• The performance targets are the financial targets, at divisional or brand level, that are agreed to annually by the board and are currently based on core operating profit budgets for the forthcoming year. Certain senior executives, including the Group chief executive officer and chief financial officer, are currently measured on core headline earnings per share growth over the three years prior to exercise, as well as core EBITDA, growth. This measure is currently set at a base of CPI plus 50% of CPI.




• The number of Performance Options that the participant can exercise can increase (capped at 50% of the original award) or decrease (to zero) from the original award, based on the average performance over the three year period prior to exercise, in accordance with a pre-agreed sliding scale. This ensures that only consistently sustainable financial results are rewarded.

• “Core” earnings will be determined by the audit committee.

• All shares must be exercised within six years.

Disclosure of remunerationKing III recommends that a company should disclose the salaries paid to the top three executives, excluding executive directors.

The Taste Holdings board has decided that because of the value of these employees to the company and the highly competitive nature of the South African retail environment it is not in the interests of the company to disclose the individual salaries of these three executives. Instead, we are disclosing the combined salaries paid to these three executives in the 2016 financial year. Including their basic salaries, motor vehicle allowance, medical aid benefits and bonuses they were paid a total of R6 420 017.33.

The remuneration paid to directors is disclosed on pages 146 to 147 of the financial statements contained in this integrated annual report.

Non-executive directors’ feesIn accordance with Taste Holdings’ policy of ensuring that non-executive directors’ fees are market-related, the company benchmarks annually against direct competitors and comparable listed companies. The fees for our non-executive directors are paid in the context of good governance and in line with our strategy of attracting and retaining high-calibre individuals as custodians of the company’s business.

The fees are based on a methodology which takes into account membership or chairpersonship of a sub-committee. They vary according to the different roles, such as chairperson, that non-executive directors undertake in the board subcommittees.

To avoid any conflict of interest, non-executive directors do not and will not participate in any share-based incentive scheme or any other incentive scheme that the company may implement. Non-executive fees are tabled annually for approval by the company’s shareholders. The non-executive directors’ fees paid in the 2016 financial year are set out below. In consideration of the evolving requirements of the board, the international licensing arrangements and increased number of meetings, with consideration to peer group comparisons, the remuneration committee proposed that the fees of non-executive directors’ increase in the 2017 financial year as per the table below.

2016Paid

R

2017Proposed fee

R

Chairman of the board 300 000 345 000

Board membership 166 000 166 000

Chairman of the audit and risk committee 100 000 85 000

Member of the audit and risk committee 50 000 71 000

Chairman of any other board committee 50 000 52 000

Member of any other board committee 30 000 36 000


ANNUAL FINANCIAL STATEMENTS

These annual financial statements have been audited in compliance with the applicable requirements of the Companies Act of South Africa.

These annual financial statements were authorised on 25 May 2016 by the board of directors.

Contents

91 Directors’ responsibility and approval

92 Declaration by company secretary

92 Preparation of financial statements

93 Report by audit and risk committee

94 Directors’ report

99 Report of the independent auditor

100 Statement of financial position

101 Statement of comprehensive income

102 Statement of changes in equity

103 Statement of cash flows

104 Notes to the annual financial statements

154 Shareholders’ analysis

155 Shareholders’ diary

155 JSE performance

156 Notice of annual general meeting

162 Annual general meeting – Explanatory notes

167 Form of proxy

168 Notes to the form of proxy

Financial statements


DIRECTORS’ RESPONSIBILITY AND APPROVALfor the year ended February 2016

The directors are required by the Companies Act of South Africa 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 fairly present the state of affairs of the company and group as at the end of the financial year and the results of their operations and cash flows for the period then ended, in conformity with International Financial Reporting Standards, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the requirements of the Companies Act of South Africa and the Listing Requirements of the JSE Limited. The external auditors are engaged to express an independent opinion on the annual financial statements.

These annual financial statements 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 group 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 company and group and all employees are required to maintain the highest ethical standards in ensuring the company and group’s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the company and group is on identifying, assessing, managing and monitoring all known forms of risk across the company and group. While operating risk cannot be fully eliminated, the company and group endeavour to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints.

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 annual 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 year to 28 February 2017 and, in light of this review and the current financial position, they are satisfied that the group has, or has access to, adequate resources to continue in operational existence for the foreseeable future.

The external auditor is responsible for independently reviewing and reporting on the group’s annual financial statements. The annual financial statements have been examined by the group’s external auditor and the report is presented on page 99.

The annual financial statements set out on pages 100 to 153, which have been prepared on the going‑concern basis, were approved by the board of directors on 25 May 2016 and were signed on its behalf by:

Ramsay L’Amy Daly Grant Pattison Carlo Ferdinando GonzagaNon-executive Chairman Chairman Chief Executive Officer

Sandton25 May 2016


In terms of section 88(2)(e) of the Companies Act of South Africa, I certify that to the best of my knowledge all returns and notices as are required by the Companies Act for a public company have been lodged with the Companies and Intellectual Properties Commission and that all such returns and notices are true, correct and up to date.

Ithemba Governance and Statutory Solutions (Pty) Limited Company Secretary

Sandton25 May 2016

DECLARATION BY COMPANY SECRETARY

PREPARATION OF FINANCIAL STATEMENTS

The financial statements set out on pages 100 to 153 have been prepared and supervised by the Chief Financial Officer, Evangelos Tsatsarolakis CA(SA).



The composition of the audit and risk committee is in line with the provisions of the Companies Act of South Africa and is chaired by Anthony Berman. During the financial year ended 29 February 2016, in addition to the duties set out on page 78, the audit and risk committee:• hasreviewedthequalityandeffectivenessofthescopeoftheexternalaudit;• has nominated BDO South Africa Incorporated (BDO) as the registered independent auditor after

satisfyingitselfthroughenquirythatBDOisindependentasdefinedintermsoftheCompaniesAct;• hassatisfieditselfthroughenquirythattheauditpartner,MrStephenShaw,isindependent;• hasapprovedthetermsofengagementandfeespaidtoBDO;• hasreviewedthenatureofnon-auditservicesprovidedbytheexternalauditorsinordertoensurethat

the fees for such services do not become so significant as to call to question their independence. BDO provides non‑audit services to a subsidiary company and the audit committee has pre‑approved the contractfortaxadministration;

• noreportableirregularitieswereidentifiedandreportedbyBDOtothecommittee;• therewasnomaterialweaknessinfinancialcontrolswhichresultedinmaterialfinanciallossduringthe

yearunderreview;• theauditandriskcommitteehasconsideredandsatisfieditselfoftheappropriatenessoftheexpertise

and experience of the financial director, Evan Tsatsarolakis, and is unanimously satisfied of his continuing suitability for the position. The committee has further assessed the appropriateness of the expertise and adequacy of resources of the finance function and experience of the senior members of management responsibleforthefinancefunctionandconcludesthattheseareadequate;and

• the audit and risk committee recommended the annual financial statements for the year ended 29 February 2016 for approval to the board. The board has subsequently approved the annual financial statements which will be open for discussion at the forthcoming annual general meeting.

Anthony BermanChairman – Audit and Risk committee

Sandton25 May 2016

REPORT BY AUDIT AND RISK COMMITTEEfor the year ended February 2016


The directors have pleasure in submitting their report for the year ended 29 February 2016.

Nature of businessTaste Holdings Limited is a South African‑based management group listed on the JSE Limited, the recognised securities exchange in South Africa. Taste Holdings Limited is the leading licensor of global brands in the Southern Africa region. It owns and licenses a portfolio of franchised and owned, category specialists, Quick Service Restaurants (QSR), coffee and luxury retail brands currently represented in five countries in Southern Africa.ItsFoodDivisionlicensestheworld’sleadingcoffeeretailerandroaster,Starbucks;theworld’slargestpizza delivery chain, Domino’s and owns South Africa’s leading fish take away brand (by outlets), The Fish & ChipCo; inaddition toZebro’sChickenandMaxi’s. (ScootersPizzaandStElmo’sWoodfiredPizzawillbeconverted to Domino’s outlets). Along with these customer facing brands the division, through its manufacturing and distribution business, manufactures sauces, spices, dough and value added meat products and distributes the majority of the products used by its food outlets.

Its Luxury Goods Division owns NWJ, the third largest national jewellery chain in Southern Africa, World’s Finest Watches and Arthur Kaplan. It is now the leading retailer (by number of outlets) of luxury Swiss watches in the region with brands like Rolex, Cartier, Hubot, Omega, Breitling, IWC and Tag Heuer among its custodian brands. This division also manufactures and distributes jewellery to all the NWJ stores.

AcquisitionsDuring the year, in line with its strategy, the group made the following acquisitions (for more details refer to note 19).• AcquiredafurthertwoNWJstoresfromfranchisees;and• Acquiredfivefoodoutletsfromfranchisees

In July 2015, the group signed an exclusive development agreement to develop Starbucks Coffee Company (“Starbucks”) outlets in South Africa. As Taste is the licensee, it will own and operate the stores directly. Including renewal options, the agreement is for 25 years and includes certain rights for other African countries, subject to certain conditions. Since 1971, Starbucks Coffee Company has been committed to ethically sourcing and roasting high‑quality Arabica coffee. Today, with more than 22 000 stores around the globe, Starbucks is the premier roaster and retailer of specialty coffee in the world.

Financial statements and results The group results and financial position are reflected in the financial statements on pages 100 to 153. The group recorded a loss after tax for the year ended 29 February 2016 of R75.8 million (2015 profit after tax: R15.6 million).

Events subsequent to year-endThe directors are not aware of any other matter or circumstance arising since the end of the year up to the date of this report.

Authorised and issued share capitalThe authorised share capital of the company remained unchanged for the year ended 29 February 2016, details of which are set out in note 14 of the annual financial statements. The following share issues were made during the year:• Generalissueof22877051shareswereissuedatR3.05on24April2015;• Specificissueof8196722shareswereissuedatR3.05on1July2015;

DIRECTORS’ REPORTfor the year ended February 2016



These issues were made for the purpose of continuing the Domino’s brand launch in South Africa, including the opening of a further 20 Domino’s corporate stores and establishment of a dough manufacturing and distribution facility in Cape Town. Shareholders are referred to the announcement made on SENS on 21 April 2015 for further details.

• 3345560ordinarysharesrangingbetween43centsand421centswereissuedtotheTasteHoldingsShare Trust in anticipation of share options being exercised in terms of the Taste Holdings share optionscheme;

• 1726727shareswereissued@R3.33insettlementoftheArthurKaplanpurchaseprice;and• 75464476sharesissuedatR3.00intermsofafullysubscribedrightsoffertoshareholderseffectiveon

November 2015. The groups reason for this capital raised was to fund he Starbucks roll out and to expand the Arthur Kaplan footprint. Shareholders are referred to announcement made on SENS on 13 October 2015 for further details.

As at 29 February 2016, 2 405 238 ordinary shares were held by The Taste Holdings Share Trust. These are treated as treasury shares and are eliminated on consolidation.

Employee share option schemeDetails are reflected in note 30 of the annual financial statements.

BorrowingsIn terms of the articles of Memorandum of Incorporation, the directors may exercise all powers of the company to borrow money, as they consider appropriate. During the year, Taste Holdings issued a further R100 million notes in terms of its R1 billion Domestic Medium Term Note programme. This debt was complementary to the equity that was raised in April and July 2015 (see note 15).

DividendsIn line with our historical dividend cover policy of 2.5 – 3 times core earnings per share, and taking into account the opportunities to invest in Starbucks and Arthur Kaplan growth, no dividend has been declared for the year ended 29 February 2016.

Capital expenditureThe significant capital expenditure incurred during the year related to the acquisition and construction of corporate stores in the food and Luxury Goods Divisions, the continuance of the Domino’s pizza roll‑out and the establishing the new distribution and dough manufacturing facilities in Midrand and Cape Town which included the purchase of the property on which the Midrand facility is situated on. The purchase price of this property amounted to R19 million. This capital expenditure was funded with equity and external debt funding.


DirectorsThe directors of the company during the year and to the date of this report are as follows:

NameCarlo Ferdinando Gonzaga Duncan John Crosson Jay Bayne Currie – resigned 1 March 2016Kevin Michael Utian Hylton Roy RabinowitzRamsay L’Amy Daly (Bill) – resigned as chairman of the Board on 23 February 2016Anthony Berman (Tony)Evangelos TsatsarolakisWessel Petrus van der Merwe Sebastian Patel Grant Michael Pattison – appointed as chairman of the Board on 23 February 2016

In terms of the Memorandum of Incorporation, Anthony Berman, Bill Daly and Sebastian Patel retire at the forthcoming annual general meeting. These gentlemen, both being eligible, offer themselves for re‑election. Service agreements with the directors of Taste Holdings Limited at the date hereof do not impose any abnormal notice periods on the company.

Shareholders will be asked to confirm these reappointments at the forthcoming annual general meeting.

Company SecretaryDuring the year there was a change in Company Secretary. The secretary of the company is Ithemba Governance and Statutory Solutions (Pty) Limited of:

Business address 12 Gemini Street Linbro Business Park Frankenwald 2065

Postal address PO Box 1125 Ferndale Randburg 2160

Special resolutionsAt a general meeting of the shareholders on 30 June 2015, the following resolutions were passed:– General authority to directors to acquire the company’s shares.– Approval of fees payable to the non‑executive directors for the year ended 29 February 2016.– Approval of authority to directors to provide financial assistance to all subsidiaries and their inter‑related

companies within the Taste Holdings group of companies.

Directors’ responsibilityThe responsibility of the company’s directors are detailed on page 91 of this report.

DIRECTORS’ REPORT continuedfor the year ended February 2016



Directors’ interestsNo contracts in which directors or officers of the company or group had an interest and that significantly affected the affairs or business of the company or any of its subsidiaries were entered into during the year.

Number of shares held

DirectorBeneficially

directBeneficially

indirect Total %

At 29 February 2016Carlo Ferdinando Gonzaga and associates – 5 491 891 5 491 891 1.46Duncan John Crosson 4 711 082 – 4 711 082 1.25Ramsay L’Amy Daly (Bill) and associates 85 000 4 805 758 4 890 758 1.30Jay Bayne Currie – resigned 1 March 2016 9 135 551 – 9 135 551 2.42Hylton Roy Rabinowitz and associates 426 358 32 039 954 32 466 312 8.6Kevin Utian and associates – 1 292 000 1 292 000 0.34Anthony Berman 2 180 250 – 2 180 250 0.58Wessel Petrus van der Merwe and associates – 1 938 000 1 938 000 0.51Evangelos Tsatsarolakis 161 500 – 161 500 0.04Grant Michael Pattison – 2 000 000 2 000 000 0.53

16 699 741 47 567 603 64 267 344 17.03At 28 February 2015Carlo Ferdinando Gonzaga and associates – 6 091 891 6 091 891 2.29Duncan John Crosson 4 711 082 – 4 711 082 1.77Ramsay L’Amy Daly (Bill) and associates 85 000 5 429 758 5 514 758 2.08Jay Bayne Currie 10 061 768 – 10 061 768 3.79Hylton Roy Rabinowitz and associates 426 358 32 039 954 32 446 312 12.22Kevin Utian and associates – 1 292 000 1 292 000 0.49Anthony Berman 1 744 200 – 1 744 200 0.66Wessel Petrus van der Merwe and associates – 1 550 400 1 550 400 0.58Evangelos Tsatsarolakis 129 200 – 129 200 0.05Grant Michael Pattison – 2 000 000 2 000 000 0.75

17 157 608 48 404 003 65 561 611 24.68

There has been no change in the directors’ interests between the end of the financial year and the date of approval of the financial statements.


Corporate governance and sustainabilityThe corporate governance and sustainability report is set out on pages 76 to 89.

Shareholder spreadDetails of the company’s shareholder spread are recorded on page 154.

LitigationFish & Chip Co litigationAs announced on SENS on 5 August 2015, the litigation between The Traditional Fish and Chips (Pty) Ltd and others, Buon Gusto Cuisine (Pty) Ltd and Taste, as disclosed in the 2015 Integrated Annual Report, has now been fully and finally settled between the parties, on an amicable basis, the parties having specifically agreed that the Sale Agreement concluded between them came into full force and effect on 1 February 2012.

All the actions between the parties have now been withdrawn.

Domino’s Pizza litigationAs announced in October 2015, all legal proceedings against, inter alia, Taste, Taste Food Franchising Proprietary Limited (“TFF”), a wholly owned subsidiary of Taste Holdings Limited and Domino’s Pizza International Inc. have been unconditionally and irrevocably withdrawn against Taste, TFF and Domino’s on the basis that same have become fully and finally settled.

Going concernThe annual financial statements have been prepared on the going‑concern basis. Having reviewed the group’s financial projections, the directors believe that the group will continue trading as a going concern in the foreseeable future.

Ramsay L’Amy Daly Grant Pattison Carlo Ferdinando GonzagaNon-executive Chairman Chairman Chief Executive Officer

DIRECTORS’ REPORT continuedfor the year ended February 2016



REPORT OF THE INDEPENDENT AUDITORfor the year ended February 2016

To the shareholders of Taste Holdings LimitedWe have audited the group annual financial statements of Taste Holdings Limited, which comprise the consolidated statement of financial position as at 29 February 2016, the consolidated statement of comprehensive income, consolidated statement of changes in equity, and consolidated statement of cash flows for the year then ended, a summary of significant accounting policies and other explanatory notes, as set out on pages 100 to 153.

Directors’ responsibility for the financial statementsThe company’s directors are responsible for the preparation and fair presentation of these annual financial statements in accordance with International Financial Reporting Standards (IFRS) and the requirements of the Companies Act of South Africa. 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.

Auditors’ responsibilityOur 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 auditor’s 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 the directors, 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.

OpinionIn our opinion, the group annual financial statements present fairly, in all material respects, the consolidated financial position of the group as of 29 February 2016, and of their consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa.

Other reports required by the Companies ActAs part of our audit of the financial statements for the year ended 29 February 2016, we have read the directors’ report, the audit and risk committee’s report and the company secretary’s declaration for the purpose of identifying whether there are material inconsistencies between these reports and the audited financial statements. These reports are the responsibility of the respective preparers. Based on reading these reports we have not identified material inconsistencies between these reports and the audited financial statements. However, we have not audited these reports and accordingly do not express an opinion on these reports.

Report on other Legal and Regulatory RequirementsIn terms of the IRBA Rule published in Government Gazette Number 39475 dated 4 December 2015, we report that BDO South Africa Incorporated has been the auditor of Taste Holdings Limited for 15 years.

BDO South Africa Incorporated 22 Wellington RoadStephen Shaw ParktownDirector 2193Registered Auditor

25 May 2016


Group Notes2016

R’0002015

R’000

ASSETSNon-current assetsProperty, plant and equipment 4 159 767 104 057*Intangible assets 5 117 180 93 236*Goodwill 5 108 967 112 090Netinvestmentinfinancelease 6 10 742 –Other financial assets 7 78 324 26 566Deferred tax 8 56 648 13 647

531 628 349 596Non-current assets held for sale 9 3 459 7 178Current assetsNetinvestmentinfinancelease 6 459 –Other financial assets 7 2 921 1 399Advertising levies 10 5 444 8 255Inventories 11 289 245 234 355Trade and other receivables 12 88 996 97 577Current tax receivables 3 610 3 024Cash and cash equivalents 13 202 644 62 883

593 319 407 493Total assets 1 128 406 764 267EQUITY AND LIABILITIESEquityEquity attributable to equity holders of companyShare capital and share premium 14 611 192 282 637Retained earnings 37 239 132 212 Equity‑settled share‑based payments reserve 30 6 221 3 724Equity attributable to owners of the company 654 652 418 573Non‑controlling interest 1 174 (531)Total equity 655 826 418 042LiabilitiesNon-current liabilitiesBorrowings 15 248 906 130 757Leaseequalisation 16 6 517 2 117Deferred tax 8 40 379 32 691

295 802 165 565Current liabilitiesCurrent tax payable 3 805 751Bank overdrafts 13 32 148 18 142Borrowings 15 6 984 3 568Balances due to vendors 15 – 1 000Lease equalisation 16 4 495 1 312Other financial liabilities – 15 000Trade and other payables 18 129 346 140 887

176 778 180 660Total liabilities 472 580 346 225Total equity and liabilities 1 128 406 764 267

* Refer to Note 37.2 for details of reclassification.

CONSOLIDATED STATEMENT OF FINANCIAL POSITIONfor the year ended February 2016



Group Notes2016

R’0002015

R’000

Revenue 20 1 062 829 717 102* Cost of sales 21 (652 865) (432 657)*Gross profit 409 964 284 445Other income 30 796Operating expenses (488 697) (253 604)Operating (loss)/profit 22 (78 703) 31 637Investment revenue 23 14 597 6 465Finance costs 24 (27 050) (13 140)(Loss)/profit before taxation (91 156) 24 962Taxation 25 17 055 (8 813)(Loss)/profit for the year (74 101) 16 149Other comprehensive income – –Non‑controlling interest (1 705) (531)Total comprehensive (loss)/income for the year (75 806) 15 618Attributable to:Equity holders of the company (75 806) 15 618(Loss)/earnings per share attributable to equity holders of the companyBasic (loss)/earnings per share (cents) 35 (24.2) 6.9Fully diluted (loss)/earnings per share (cents) 35 (23.9) 6.8

* Refer to Note 37.1 for details of prior period restatement.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEfor the year ended February 2016


Group

SharecapitalR’000

Sharepremium

R’000

Equity-settledshare-based

payment reserve

R’000

Retainedearnings

R’000

Total attributable

to equity holders

of the company

R’000

Non-controlling

interestR’000

TotalequityR’000

Balance at 28 February 2014 2 94 545 1 772 128 624 224 943 – 224 943

Changes in equity:

Issue of shares 1 186 912 – – 186 913 – 186 913

Options exercised – 1 177 – – 1 177 – 1 177

Total comprehensive income for the year – – – 16 149 16 149 (531) 15 618

Share‑based payment – – 1 952 – 1 952 – 1 952

Dividends paid (refer to note 17) – – – (12 561) (12 561) – (12 561)

Total changes 1 188 089 1 952 3 588 193 630 (531) 193 099

Balance at 28 February 2015 3 282 634 3 724 132 212 418 573 (531) 418 042

Changes in equity:

Issue of shares 1 325 207 – – 325 208 – 325 208

Options exercised – 3 347 – – 3 347 – 3 347

Total comprehensive income for the year – – – (75 806) (75 806) 1 705 (74 101)

Share‑based payment – – 2 497 – 2 497 – 2 497

Dividends paid (refer to note 17) – – – (19 167) (19 167) – (19 167)

Total changes 1 328 554 2 497 (94 973) 236 079 1 705 237 784

Balance at 29 February 2016 4 611 188 6 221 37 239 654 652 1 174 655 826

Notes 14 14 30

CONSOLIDATED STATEMENT OF CHANGES IN EQUITYfor the year ended February 2016



Group Notes2016

R’0002015

R’000

Cash flows from operating activities

Cash (utilised)/generated by operating activities 26 (93 479) 58 553

Investment revenue 23 14 597 6 465

Dividends paid 17 (19 142) (12 532)

Finance costs 24 (27 050) (13 140)

Income tax paid 27 (15 790) (13 130)

Net cash from operating activities (140 864) 26 216

Cash flows from investing activities

Acquisition of property, plant and equipment 4 (77 865) (74 635)*

Proceeds on disposal of property, plant and equipment 382 270

Acquisition of non‑current asset held‑for‑sale 9 (4 587) (7 178)

Disposal of non‑current asset held‑for‑sale 9 319 –

Acquisition of intangible assets 5 (32 798) (5 296)*

Acquisition of businesses 19 (4 378) (115 512)

Investment in finance lease (11 201) –

Loans advanced (57 098) (15 253)

Loans repaid 3 818 6 429

Net cash from investing activities (183 408) (211 175)

Cash flows from financing activities

Proceeds from issue of shares 328 554 179 590

Loans raised 15 121 565 125 000

Loans repaid – (68 367)

Net cash from financing activities 450 119 236 223

Change in cash and cash equivalents 125 847 51 264

Cash acquired from business acquisition 19 (92) (14 171)

Cash and cash equivalents at beginning of the year 44 741 7 648

Cash and cash equivalents at end of the year 13 170 496 44 741

* Refer to Note 37.2 for details of reclassification.

CONSOLIDATED STATEMENT OF CASH FLOWSfor the year ended February 2016


1. Accounting policies Presentation of annual financial statements The group annual financial statements have been prepared in accordance with International Financial

Reporting Standards (IFRS) and International Financial Interpretations committee (IFRICs), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council and its successor, and the Companies Act of South Africa. The group annual financial statements have been prepared on the historical cost basis and incorporate the principal accounting policies set out below.

These accounting policies are consistent with the previous period, except for changes set out in note 2 – new standards and interpretations.

Basis of consolidation The consolidated annual financial statements incorporate the annual financial statements of the

company and all investees which are controlled by the company.

Thecompanyhascontrolofaninvesteewhenithaspowerovertheinvestee;itisexposedtoorhasrightstovariablereturnsfrominvolvementwiththeinvestee;andithastheabilitytouseitspowerover the investee to affect the amount of the investor’s returns.

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 company.

All intra‑company 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 company’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.

Business combinations Acquisitions of subsidiaries and businesses are accounted for using the purchase method. The cost of

the business combination is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 Business Combinations are recognised at their fair values at the acquisition date, except for non‑current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair value less costs to sell.

Costs directly attributable to the business combination are expensed as incurred.

The non‑controlling interest in the acquiree is initially measured at the minority’s proportion of the net fair value or carrying amount of the assets, liabilities and contingent liabilities recognised.

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.

NOTES TO THE ANNUAL FINANCIAL STATEMENTSfor the year ended February 2016



1. Accounting policies (continued) Goodwill arising on business combination Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the

excess of the cost of the business combination over the group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If the group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss.

Goodwill is not amortised but is subject to an annual impairment review (refer to note 1.3).

Trademarks recognised as part of a business combination Trademarks are recognised as an intangible asset where the trademark has a long‑term value.

The group shall recognise a trademark when, and only when: • theentitycontrolstheassetasaresultofpastevents; • itisprobablethatfutureeconomicbenefitsassociatedwiththeassetwillflowtotheentity;and • thefairvalueorcostoftheassetcanbemeasuredreliably.

Acquired trademarks are only recognised where title is clear or the trademark could be sold separately from the rest of the business and the earnings attributable to it are separately identifiable. The group typically arrives at the cost of such trademarks on a relief from royalty basis.

Where the acquired trademark is seen as having a finite useful economic life, it is subject to amortisation, which in respect of trademarks currently held is 10 to 40 years, being the period for which the group has exclusive rights to those trademarks.

Trademarks are reflected at cost less accumulated amortisation and impairment (also refer to note 1.4).

1.1 Significant estimates and judgements 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 estimates include:

Trade receivables and loans and receivables The group assesses its trade receivables and loans and receivables for impairment at each reporting

date. In determining whether an impairment loss should be recorded in profit or loss, the group makes judgements as to whether there are observable data indicating a measurable decrease in the estimated future cash flows from a financial asset.

The impairment for trade receivables and loans and receivables is calculated on a portfolio basis, based on historical loss ratios, adjusted for national and industry‑specific economic conditions and other indicators present at the reporting date that correlate with defaults on the portfolio. These annual loss ratios are applied to loan balances in the portfolio and scaled to the estimated loss emergence period.

Impairment testing The group assesses at each reporting date 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 company also: • testsgoodwillacquiredinabusinesscombinationforimpairmentannually.


1. Accounting policies (continued) 1.1 Significant estimates and judgements (continued) 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. Key assumptions used in the calculation of the recoverable amounts are discount rates, terminal value growth rates and EBITDA growth rate.

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 of the units. The impairment loss is allocated to reduce the carrying amount of the assets of the unit in the following order:

• first,toreducethecarryingamountofanygoodwillallocatedtothecash-generatingunit;and • then,totheotherassetsoftheunit,prorataonthebasisofthecarryingamountofeachassetin

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.

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. The group recognises liabilities for anticipated tax issues based on estimates of whether additional taxes will be due. 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 future tax benefit related to deferred income tax assets to the extent that it is probable that the deductible temporary differences as well as assessed losses 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 reporting date could be impacted.

NOTES TO THE ANNUAL FINANCIAL STATEMENTS continuedfor the year ended February 2016



1. Accounting policies (continued) 1.1 Significant estimates and judgements (continued) Allowance for slow-moving, damaged and obsolete stock Management has made estimates of the selling price and direct cost to sell on inventory items to

write stock down to the lower of cost and net realisable value. Any write‑down is included in operating profit. Any stock that is physically identified as slow moving, damaged or obsolete is written off when discovered.

Estimated residual values and useful lives of property, plant and equipment Property, plant and equipment is depreciated to its estimated residual value over its estimated

useful life.

Management has applied its judgement based on past experience to determine expected useful lives and residual values of property, plant and equipment (refer to note 1.2).

The depreciation method applied to an asset shall be reviewed at least at each financial year‑end and, if there has been a significant change in the expected pattern of consumption of the future economic benefits embodied in the asset, the method shall be changed to reflect the changed pattern.

1.2 Property, plant and equipment Property, plant and equipment is carried at cost less accumulated depreciation and any impairment

losses.

The cost of an item of property, plant and equipment is recognised as an asset when: • itisprobablethatfutureeconomicbenefitsassociatedwiththeitemwillflowtothecompany;and • thecostoftheitemcanbemeasuredreliably.

Costs include costs incurred initially to acquire an item of property, plant and equipment and costs incurred subsequently to add to 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.

Depreciation commences when an asset is available for use. Depreciation is charged so as to write off the depreciable amount of items to their residual values, over their estimated useful lives on a straight‑line basis, being a method that reflects the pattern in which the asset’s future economic benefits are expected to be consumed by the group.

Where an item comprises major components with different useful lives, the components are accounted for as separate items of property, plant and equipment and depreciated over their estimated useful lives.

Item Average useful life

Land – not depreciatedBuildings 50 yearsFurniture and fixtures 6 yearsGeneral equipment 5 yearsIT equipment 3 yearsKitchen equipment 5 yearsLeasehold improvements 5 yearsMotor vehicles 5 yearsOffice equipment 5 – 6 yearsPlant and machinery 5 years


1. Accounting policies (continued)1.2 Property, plant and equipment (continued) 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.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying value is greater than its estimated recoverable amount.

1.3 Goodwill Goodwill arising on the acquisition of a subsidiary represents the excess of the cost of acquisition over

the group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary recognised at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses.

On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

Internally generated goodwill is not recognised as an asset. A gain on bargain purchase on acquisition is recognised directly in profit or loss.

1.4 Intangible assets An intangible asset is recognised when: • itisprobablethattheexpectedfutureeconomicbenefitsthatareattributabletotheassetwillflow

totheentity;and • thecostoftheassetcanbemeasuredreliably.

Intangible assets acquired in a business combination are identified and recognised separately from goodwill where they satisfy the definition of an intangible asset and their fair values can be measured reliably. The cost of such intangible assets is their fair value at the acquisition date.

Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets acquired separately.

Intangible assets acquired separately are reported at cost less accumulated amortisation and accumulated impairment losses. Amortisation is charged on a straight‑line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each annual reporting period, with the effect of any changes in estimate being accounted for on a prospective basis (refer to note 1.1).

Franchise contributions represent the premium paid for the securing of key sites. Franchise contributions are carried at cost less accumulated amortisation and any impairment losses. Franchise contributions are amortised over the period of the underlying lease agreements. Franchise contributions are classified as intangible assets.

Amortisation is provided to write down the intangible assets, on a straight‑line basis, to nil as follows: Item Useful life Trademarks and intellectual property 10 – 40 years Franchise contributions Agreement period Master franchise licence 25 – 30 years Computer software 3 years Key site premiums Agreement period




1. Accounting policies (continued)1.5 Investments in subsidiaries Group annual financial statements The group annual financial statements include those of the holding company and its subsidiaries. The

results of the subsidiaries are included from the date of acquisition or from the date control is achieved. The results of subsidiaries are included to the date of disposal or the date control is relinquished.

On acquisition the group recognises the subsidiary’s identifiable assets, liabilities and contingent liabilities at fair value, except for assets classified as held for sale, which are recognised at fair value less costs to sell.

1.6 Financial instruments Initial recognition 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.

The group classifies financial assets and financial liabilities into the following categories: • loansandreceivables;and • financialliabilitiesmeasuredatamortisedcost.

Financial assets and financial liabilities are recognised on the group’s balance sheet when the company becomes party to the contractual provisions of the instrument.

Derecognition Financial assets are derecognised when the rights to receive cash flows from the investments have

expired or have been transferred and the company has transferred substantially all risks and rewards of ownership.

Transaction costs are included in the initial measurement of the instrument.

Loans and receivables Loans and receivables are measured at initial recognition at fair value and are subsequently measured

at amortised cost using the effective interest rate method.

Trade and other receivables Trade and other 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 reorganisation, and default or delinquency in payments (more than 30 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 recognised in profit or loss within operating expenses. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited in profit or loss against operating expenses.

Trade and other receivables are classified as loans and receivables.


1. Accounting policies (continued)1.6 Financial instruments (continued) Trade and other payables Trade and other payables are initially measured at fair value, and are subsequently measured at

amortised cost, using the effective interest rate method.

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 measured at fair value and subsequently recorded at amortised cost.

Cash and cash equivalents are classified as loans and receivables.

Bank overdrafts 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 settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the group’s accounting policy for borrowing costs. Bank overdrafts and borrowings are classified as liabilities at amortised cost.

Other financial liabilities Other financial liabilities are measured initially at fair value and subsequently at amortised cost, using

the effective interest rate method. These include loans due to vendors and long‑term employee benefits.

Other financial assets Other financial assets classified as loans and receivables are initially recognised at fair value plus

transaction costs, and are subsequently carried at amortised cost less any accumulated impairment.

These financial assets are not quoted in an active market and have fixed or determinable payments.

1.7 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 or substantively enacted by the balance sheet date.

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: • theinitialrecognitionofgoodwill;or • theinitialrecognitionofanassetorliabilityinatransactionwhich: – isnotabusinesscombination;and – at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).

A deferred tax liability is recognised for all taxable temporary differences associated with investments in subsidiaries, except to the extent that both of the following conditions are satisfied:

• theparentisabletocontrolthetimingofthereversalofthetemporarydifference;and • itisprobablethatthetemporarydifferencewillnotreverseintheforeseeablefuture.




1. Accounting policies (continued)1.7 Taxation (continued) 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:

• isnotabusinesscombination;and • atthetimeofthetransaction,affectsneitheraccountingprofitnortaxableprofit(taxloss).

A deferred tax asset is recognised for all deductible temporary differences arising from investments in subsidiaries, to the extent that it is probable that:

• thetemporarydifferencewillreverseintheforeseeablefuture;and • taxableprofitwillbeavailableagainstwhichthetemporarydifferencecanbeutilised.

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 balance sheet date.

A deferred tax asset is recognised for the carry forward of unused tax losses to the extent that it is probable that future taxable profit will be available against which the unused tax losses can be utilised.

Tax expenses Current and deferred taxes are recognised as income or an expense and included in profit or loss for

the period, except to the extent that the tax arises from: • atransactionoreventwhichisrecognised,inthesameoradifferentperiod,directlyinequity;or • abusinesscombination.

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 to equity.

1.8 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 lease – lessor The company recognises finance lease receivables in the statement of financial position.

Finance income is recognised based on a pattern reflecting a constant periodic rate of return on the company’s net investment in the finance lease.

Operating lease – 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 is recognised as an operating lease asset or liability. The asset or liability is not discounted.

1.9 Inventories Inventories are initially measured at cost Inventories are subsequently measured at the lower of cost and net realisable value on the weighted

average basis.

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.


1. Accounting policies (continued)1.9 Inventories (continued) 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 write‑down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write‑down or loss occurs. The amount of any reversal of any write‑down 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.

1.10 Non-current assets held for sale Non‑current assets are held for sale if their carrying amount will be recovered principally through a

sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable, the asset is available for immediate sale in its present condition, and management is committed to the sale.

Non‑current assets classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell.

Non‑current assets held for sale are not depreciated (or amortised) while they are classified as held for sale.

Assets held for sale which were acquired with the intention to resell are measured at the lower of their carrying amount and fair value less costs to sell. These assets are not depreciated while held for sale.

1.11 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.

Ordinary shares are classified as equity.

Shares in the company held by the Taste Holdings Share Trust are classified as treasury shares. 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.

1.12 Equity-settled share-based payments reserve Where equity‑settled share options are awarded to employees, the fair value of the options at the

date of grant is charged to the profit or loss over the vesting period with a corresponding increase in equity recorded in a share option reserve. Non‑market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Non‑vesting conditions and market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied.

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.

1.13 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) is recognised in the period in which the services are rendered and is not discounted.




1. Accounting policies (continued)1.14 Provisions and contingencies Provisions are recognised when: • thegrouphasapresentobligationasaresultofapastevent; • itisprobablethatanoutflowofresourcesembodyingeconomicbenefitswillberequiredtosettle

theobligation;and • areliableestimatecanbemadeoftheobligation.

The amount of the 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 reimbursed by another party, the reimbursement shall be recognised when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement shall be treated as a separate asset. The amount recognised for the reimbursement 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:

• theamountthatwouldberecognisedasaprovision;and • theamountinitiallyrecognisedlesscumulativeamortisation.

1.15 Revenue Revenue from the sale of goods is recognised when all the following conditions have been satisfied: • thegrouphastransferredtothebuyerthesignificantrisksandrewardsofownershipofthegoods; • thegroupretainsneithercontinuingmanagerialinvolvementtothedegreeusuallyassociatedwith

ownershipnoreffectivecontroloverthegoodssold; • theamountofrevenuecanbemeasuredreliably; • itisprobablethattheeconomicbenefitsassociatedwiththetransactionwillflowtothegroup;and • thecostsincurredortobeincurredinrespectofthetransactioncanbemeasuredreliably.

Revenue for services is recognised in the period when they are rendered.

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 balance sheet date. The outcome of a transaction can be estimated reliably when all the following conditions are satisfied:

• theamountofrevenuecanbemeasuredreliably; • itisprobablethattheeconomicbenefitsassociatedwiththetransactionwillflowtothegroup; • thestageofcompletionofthetransactionatthebalancesheetdatecanbemeasuredreliably;and • thecostsincurredforthetransactionandthecoststocompletethetransactioncanbemeasured

reliably.

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.

Franchise fees and advertising levies are recognised on the accrual basis as services are rendered or the rights used in accordance with the substance of the related franchise agreements. Advertising levies are recognised as revenue to the extent of the expenditure incurred.

Franchise joining fees are recognised in the month when the outlet opens for trading and are considered services rendered.

Retail outlet sales are recognised from sale of goods.


1. Accounting policies (continued)1.15 Revenue (continued) Development revenue is related to the conversion/renovation charged to the franchisees and is

recognised as services rendered. This occurs ultimately in the month the outlet opens for trading.

Dividends are recognised in profit or loss, when the group’s right to receive payment has been established.

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

1.16 Borrowing costs

Borrowing costs are recognised as an expense in the period in which they are incurred.

1.17 Advertising levies In terms of the group’s franchise agreements, the group receives advertising levies from franchisees

which are held and accounted for separately in marketing funds. These funds are utilised for the procurement of marketing and advertising services for the benefit of franchisees. Advertising expenditure incurred in excess of the levies received is carried forward as a prepaid expense in the group statement of financial position to be set off against future levies.

Any amounts not expended are carried forward as liabilities in the group statement of financial position to be set off against future advertising expenditure.

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 each balance sheet date: • foreigncurrencymonetaryitemsaretranslatedusingtheclosingrate; • non-monetary items that are measured in terms of historical cost in a foreign currency are

translatedusingtheexchangerateatthedateofthetransaction;and • non-monetaryitemsthataremeasuredatfairvalueinaforeigncurrencyaretranslatedusingthe

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.

1.19 Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the

chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Taste executive committee. Intersegment revenues comprise services rendered between entities within the group. Intersegment revenues are accounted for as if the sale were to third parties, ie at current market prices.




2. New standards and interpretations2.1 Standards and interpretations effective and adopted in the current year At reporting date, the following new standards, revisions and amendments to issued accounting

standards and interpretations, which are relevant to the group but not yet effective, have not been adopted by the group:

– IFRS 2: Share-based Payment This standard added the definitions of performance conditions and service conditions and amended

the definitions of vesting conditions and market conditions.

This amendment did not have a significant impact on the group’s disclosure for the year ended 29 February 2016.

– IFRS 3: Business Combinations This standard includes amendments to the measurement requirements for all contingent consideration

assets and liabilities including those accounted for under IFRS 9 as well as amendments to the scope paragraph for the formation of a joint arrangement.


– IFRS 8: Operating Segments This amendment includes disclosure requirements regarding the judgements made by management

in applying the aggregation criteria, as well as those to certain reconciliations.


– IFRS 13: Fair Value Measurement Annual Improvements 2010 – 2012 Cycle: Amendments to clarify the measurement requirements for

those short‑term receivables and payables

Annual Improvements 2011 – 2013 Cycle: Amendments to clarify that the portfolio exception applies to all contracts within the scope of, and accounted for in accordance with, IAS 39 or IFRS 9.


– IAS 1: Presentation of Financial Statements The amendments are designed to encourage entities to apply professional judgement in determining

what information to disclose in their financial statements. For example, the amendments make clear that materiality applies to the whole of financial statements and that the inclusion of immaterial information can inhibit the usefulness of financial disclosures. Furthermore, the amendments clarify that entities should use professional judgement in determining where and in what order information is presented in the financial disclosures.


– IAS 16: Property, Plant and Equipment Amendments to both IAS 16 and IAS 38 establishing the principle for the basis of depreciation and

amortisation as being the expected pattern of consumption of the future economic benefits of an asset. Clarifying that revenue is generally presumed to be an inappropriate basis for measuring the consumption of economic benefits in such assets.



2. New standards and interpretations (continued)2.1 Standards and interpretations effective and adopted in the current year (continued) – IAS 19: Employee Benefits Amendments to Defined Benefit Plans: Employee Contributions whereby the requirements in IAS 19

for contributions from employees or third parties that are linked to service have been amended.


– IAS 24: Related Party Disclosures This standard includes amendments to the definitions and disclosure requirements for key

management personnel.


– IFRS 9: Financial Instruments Amendments include the measurement requirements for all contingent consideration assets and

liabilities included under IFRS 9. This amendment did not have a significant impact on the group’s disclosure for the year ended 29 February 2016.

2.2 New accounting standards and interpretations not yet adopted – IAS 38: Intangible Assets Amendments to both IAS 16 and IAS 38 establishing the principle for the basis of depreciation and

amortisation, as being the expected pattern of consumption of the future economic benefits of an asset. Clarifying that revenue is generally presumed to be an inappropriate basis for measuring the consumption of economic benefits in such assets.

The standard is effective for periods on or after 1 January 2016.

This amendment is not expected to have a significant impact on the group’s disclosure.

– IFRS 15: Revenue from Contracts from Customers New standard that requires entities to recognise revenue to depict the transfer of promised goods or

services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This core principle is achieved through a five‑step methodology that is required to be applied to all contracts with customers.

The new standard will also result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively and improve guidance for multiple‑element arrangements.

The effective date of the standard has been postponed to 1 January 2018.

It is therefore anticipated that these amendments will be adopted in the group’s consolidated financial statements for the annual period beginning 1 March 2018. The impact has not yet been discussed by management. The company will perform a detailed assessment of this standard and will provide more information in the year ending 28 February 2017.

– IFRS 9: Financial Instruments A finalised version of IFRS 9 has been issued which replaces IAS 39: Financial Instruments: Recognition

and Measurement. The completed standard comprises guidance on Classification and Measurement, Impairment Hedge Accounting and Derecognition.

IFRS 9 introduces a new approach to the classification of financial assets, which is driven by the business model in which the asset is held and their cash flow characteristics. A new business model was introduced which does allow certain financial assets to be categorised as “fair value through other comprehensive income” in certain circumstances. The requirements for financial liabilities are mostly carried forward unchanged from IAS 39. However, some changes were made to the fair value option for financial liabilities to address the issue of own credit risk.




2. New standards and interpretations (continued)2.2 New accounting standards and interpretations not yet adopted (continued) – IFRS 9: Financial Instruments (continued) The standard is effective for periods beginning on or after 1 January 2018.

The new model introduces a single impairment model being applied to all financial instruments, as well as an “expected credit loss” model for the measurement of financial assets. IFRS 9 contains a new model for hedge accounting that aligns the accounting treatment with the risk management activities of an entity, in addition, enhanced disclosures will provide better information about risk management and the effect of hedge accounting on the financial statements. IFRS 9 carries forward the derecognition requirements of financial assets and liabilities from IAS 39.

It is anticipated that these amendments will be adopted in the group’s consolidated financial statements for the annual period beginning 1 March 2018. It is not anticipated that the application of the new standard will have a significant impact on amounts reported in respect of the group’s financial assets and financial liabilities. However, it is not practicable to provide a reasonable estimate of that effect until a detailed review has been completed.

– IFRS 5, Non-current assets Held for Sale and Discontinued Operations Annual Improvements 2012 – 2014 Cycle: Amendments clarifying that a change in the manner of

disposal of a non‑current asset or disposal group held for sale is considered to be a continuation of the original plan of disposal, and accordingly, the date of classification as held for sale does not change. The standard is effective for periods beginning on or after 1 January 2016.


– IFRS 7 Financial Instruments: Disclosures Annual Improvements 2012 – 2014 Cycle: Amendment clarifying under what circumstances an entity

will have continuing involvement in a transferred financial asset as a result of servicing contracts. As well as amendment clarifying the applicability of previous amendments to IFRS 7 issued in December 2011 with regard to offsetting financial assets and financial liabilities in relation to interim financial statements prepared under IAS 34. The standard is effective for periods beginning on or after 1 January 2016.


– IFRS 16 Leases New standard that introduces a single lessee accounting model and requires a lessee to recognise

assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognise a right‑of‑use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. A lessee measures right‑of‑use assets similarly to other non‑financial assets (such as property, plant and equipment) and lease liabilities similarly to other financial liabilities. As a consequence, a lessee recognises depreciation of the right‑of‑use asset and interest on the lease liability, and also classifies cash repayments of the lease liability into a principal portion and an interest portion and presents them in the statement of cash flows applying IAS 7 Statement of Cash Flows.


2. New standards and interpretations (continued)2.2 New accounting standards and interpretations not yet adopted (continued) – IFRS 16 Leases (continued) IFRS 16 contains expanded disclosure requirements for lessees. Lessees will need to apply judgement

in deciding upon the information to disclose to meet the objective of providing a basis for users of financial statements to assess the effect that leases have on the financial position, financial performance and cash flows of the lessee. IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently. IFRS 16 also requires enhanced disclosures to be provided by lessors that will improve information disclosed about a lessor’s risk exposure, particularly to residual value risk.

IFRS 16 supersedes the following Standards and Interpretations: (a) IAS 17: Leases; (b) IFRIC 4: Determining whether an arrangement contains a Lease; (c) SIC‑15: Operating Leases — Incentives;and (e) SIC‑27: Evaluating the Substance of Transactions Involving the Legal Form of a Lease.


3. Segment reportingFor management reporting purposes, the group is organised into three major operating divisions: – FoodDivision;– LuxuryGoodsDivision;and– Corporate services.

All food related business is aggregated under the Food Division because all these brands relate to food and have similar characteristics. The Food Division consists of Domino’s Pizza, Scooters Pizza, StElmo’s,Maxi’s,Zebro’sChicken,TheFish&ChipCoandStarbucksfranchiseandretaildivisions,aswell as the food manufacturing and distribution business. Luxury Goods Division consists of NWJ franchise, wholesale and retail, as well as Arthur Kaplan and World’s Finest Watches because they are all jewellery related businesses with similar characteristics. Corporate services consist of the holding company of all the subsidiaries within the group.

Such structural organisation is determined by the nature of risks and returns associated to each business segment and is representative of the internal reporting structure used for management reporting.

Segment profit includes revenue and expenses directly attributable to a segment and the relevant portion of enterprise revenue and expenses that can be allocated on a reasonable basis to a segment.

Segment assets and liabilities comprise those operating assets and liabilities that are directly attributable to the segment or can be allocated to the segment on a reasonable basis.

Segment capital expenditure has been included in the segment report as the majority of this capital expenditure was incurred by the food segment for continued integration and capacity expansion of the food distribution business with the food segment.

Intersegment revenues comprise costs charged out to the divisions by corporate services, and intercompany revenues within the food segment.




3. Segment reporting (continued)The following tables present details of revenue, operating profit, assets, liabilities and depreciation and amortisation, finance costs, investment revenue and capital expenditure by business segment:

Food Division

LuxuryGoods

DivisionCorporate

services

Inter-segmentdivision

revenues Total

R’000 R’000 R’000 R’000 R’000

2016

Revenue 544 291 570 509 12 249 (64 220) 1 062 829

Operating (loss)/profit (111 019) 53 565 (21 249) – (78 703)

Investment revenue 5 693 658 35 594 (27 348) 14 597

Finance costs (20 079) (11 423) (22 896) 27 348 (27 050)

(Loss)/profit before taxation (125 405) 42 800 (8 551) – (91 156)

Segment depreciation and amortisation (20 893) (6 573) (1 654) – (29 120)

Segment assets 497 017 416 219 215 170 – 1 128 406

Segment liabilities 129 434 212 378 130 768 – 472 580

Segment capital expenditure 67 064 11 652 40 – 78 756

Impairment of assets 14 812 – – – 14 812

2015

Revenue* 397 778 319 324 10 353 (10 353) 717 102

Operating profit/(loss) 6 499 41 618 (16 480) – 31 637

Investment revenue 2 596 403 12 317 (8 851) 6 465

Finance costs (7 924) (5 900) (8 167) 8 851 (13 140)

Profit/(loss) before taxation 1 171 36 121 (12 330) – 24 962

Segment depreciation and amortisation (8 923) (4 473) (1 672) – (15 068)

Segment assets 334 332 360 353 69 582 – 764 267

Segment liabilities 142 278 180 748 23 199 – 346 225

Segment capital expenditure 72 307 12 791 33 – 85 131

The group’s only geographic location is Southern Africa.

* Please refer to Note 37.1 for details of prior period restatement.


4. Property, plant and equipment

2016 2015*

CostR’000

Accumulateddepreciation

R’000

CarryingvalueR’000

CostR’000

Accumulateddepreciation

R’000


Land and Buildings 20 243 (84) 20 159 – – –

Furniture and fixtures 101 522 (30 696) 70 826 80 333 (23 131) 57 202

Motor vehicles 14 611 (3 657) 10 954 11 793 (1 951) 9 842

Office equipment 1 787 (1 204) 583 1 392 (1 009) 383

IT equipment 6 661 (4 939) 1 722 5 962 (4 256) 1 706

Kitchen equipment 40 788 (10 164) 30 624 29 179 (5 452) 23 727

General equipment 641 (378) 263 583 (263) 320

Leasehold improvements 27 332 (2 746) 24 585 12 522 (1 713) 10 807

Plant and machinery 1 284 (1 232) 52 1 284 (1 214) 70

Total 214 867 (55 100) 159 767 143 047 (38 990) 104 057

* Refer to note 37.2 for reclassification.

Reconciliation of property, plant and equipment – 2016

Openingbalance

R’000Additions

R’000

Acquisitionof business

R’000Disposals

R’000Depreciation

R’000Total

R’000

Land and Buildings – 20 243 – – (84) 20 159

Furniture and fixtures 57 202 25 520 891 (1 064) (11 723) 70 826

Motor vehicles 9 842 3 594 – (480) (2 002) 10 954

Office equipment 383 439 – – (239) 583

IT equipment 1 706 1 127 – (45) (1 066) 1 722

Kitchen equipment 23 727 11 773 – (17) (4 859) 30 624

General equipment 320 58 – – (115) 263

Leasehold improvements 10 807 15 108 – (32) (1 298) 24 585

Plant and machinery 71 2 – – (23) 52

Total 104 058 77 865 891 (1 638) (21 409) 159 767

Land and buildings comprise of the property in Midrand where the dough manufacturing and food distribution facilities are located.




4. Property, plant and equipment (continued)Reconciliation of property, plant and equipment – 2015*

Openingbalance

R’000Additions

R’000


R’000Disposals

R’000Depreciation

R’000Total

R’000

Furniture and fixtures 9 450 43 963 8 007 (8) (4 210) 57 202Motor vehicles 5 473 5 429 369 (46) (1 383) 9 842Office equipment 501 85 – – (203) 383IT equipment 1 409 709 528 (36) (904) 1 706Kitchen equipment 6 102 18 849 778 – (2 002) 23 727General equipment 421 10 – – (111) 320Leasehold improvements 5 209 5 532 814 – (748) 10 807Plant and machinery 35 58 – – (23) 70Total 28 601 74 635 10 496 (90) (9 584) 104 057

* Refer to note 37.2 for reclassification.The carrying value of property, plant and equipment held under a finance lease is as follows:

2016R’000

2015R’000

Motor vehicles 8 078 6 991Kitchen equipment 287 784Furniture and fixtures 5 778 3 613IT equipment 123 184

Property, plant and equipment excluding land and buildings is ceded as security in terms of the Senior Secured Notes issue as well as the Revolving Credit Facility (refer to note 15).

5. Intangible assets2016 2015*

CostR’000

Accumulatedamortisation

and impairment

R’000


CostR’000

Accumulatedamortisation

R’000


Trademarks and intellectual property 92 668 (14 737) 77 931 97 104 (12 463) 84 641Master franchise licence 7 486 (225) 7 261 4 731 (131) 4 600Franchise conversion contributions 25 535 (1 177) 24 358 – – –Computer software 6 780 (1 700) 5 080 2 403 (1 092) 1 312Key site premiums 6 564 (4 014) 2 550 4 056 (1 373) 2 683 Total 139 033 (21 853) 117 180 108 294 (15 059) 93 236* Refer to note 37.2 for reclassification.


5. Intangible assets (continued)Reconciliation of intangible assets – 2016

Opening balance

R’000Additions

R’000

Acquisition of business

R’000Impairment

R’000Amortisation

R’000Total

R’000

Trademarks and intellectual property 84 641 – – (2 288) (4 422) 77 931 Master franchise licences 4 600 2 886 – – (225) 7 261 Franchise conversion contributions – 25 535 – – (1 177) 24 358 Computer software 1 311 4 377 – – (608) 5 080 Key site premiums 2 683 – 2 508 (1 362) (1 279) 2 550Total 93 236 32 798 2 508 (3 650) (7 711) 117 180

Reconciliation of intangible assets – 2015*

Opening balance

R’000Additions

R’000


R’000Amortisation

R’000Total

R’000

Trademarks and intellectual property 75 654 – 12 702 (3 715) 84 642Master franchise licences – 4 731 – (131) 4 600Computer software 1 175 401 – (265) 1 311Key site premiums 3 891 165 – (1 373) 2 683Total 80 720 5 297 12 702 (5 484) 93 236* Refer to note 37.2 for reclassification.

2016 R’000

2015 R’000

Trademarks and intellectual property consist of:NWJ trademark 50 791 52 358The Fish & Chip Co trademark 16 413 17 444St Elmo’s trademark – 397St Elmo’s recipes – 2 000General recipes – 374Zebro'sChickentrademark 10 727 12 068Total 77 931 84 641Master franchise licences consists of:Master franchise licence – Domino’s 4 442 4 600Master franchise licence – Starbucks 2 819 –Total 7 261 4 600




5. Intangible assets (continued) Trademarks and intellectual property The Natal Wholesale Jewellers (NWJ) trademark originated through the acquisition of the NWJ

subsidiary during the 2009 financial year. This trademark is amortised on a straight‑line basis over its useful life of 40 years. The remaining amortisation period is 32.4 years.

The Fish & Chip Co trademark originated through the purchase of The Fish & Chip Co business on 1 February 2012. This trademark is amortised on a straight‑line basis over its useful life of 20 years. The remaining amortisation period is 15.9 years.

Both the St Elmo’s trademark and the St Elmo’s recipe intangible were impaired at year‑end. They were both amortised, on a straight‑line basis, over ten years.

The general recipes trademark originated through the purchase of certain key recipes from a sauce supplier. This intangible has been impaired at year‑end. This intangible was amortised over ten years, on a straight‑line basis.

Zebro’s Chicken trademark originated through the purchase of the Zebro’s Chicken business on 1 March 2014. This trademark is amortised on a straight‑line basis over its useful life of ten years. The remaining amortisation period is eight years.

Master franchise licences The Domino’s master franchise licence originates from an exclusive 30‑year master franchise

agreement with Domino’s Pizza International Franchising Inc. signed on 10 April 2014 to develop the Domino’s Pizza brand in Southern Africa. This master licence is amortised on a straight‑line basis over its useful life of 30 years. The remaining amortisation period is 28.1 years.

The Starbuck’s licence agreement is a 25‑year exclusive agreement to develop Starbucks coffee outlets in South Africa. This master licence is amortised on a straight‑line basis over its useful life of 25 years. The remaining amortisation period is 24.4 years.

Franchise conversion contributions These represent the fair value adjustment on inception of franchise contributions made to Scooters

Pizza and St Elmo’s franchisees to assist in the conversion of their stores to Domino’s Pizza (see note 7). These are amortised over the duration of the underlying franchise agreements of ten years.

Key site premiums Key site premiums represents the cost of key sites acquired for new corporate owned stores, or on

behalf of franchised stores where the site is considered strategic.

Key site premiums are amortised over the duration of the lease term.

During the current period the food division acquired 5 key sites for new corporate owned stores (refer to 19.3).

2016 2015

CostR’000

Accumulatedimpairments

R’000


CostR’000

Accumulatedimpairments

R’000


Goodwill 112 143 (3 176) 108 967 112 090 – 112 090

Total 112 143 (3 176) 108 967 112 090 – 112 090


5. Intangible assets (continued)Reconciliation of goodwill – 2016

Opening balance

R’000


R’000Impairment

R’000Total

R’000

Goodwill 112 090 53 (3 176) 108 967

Total 112 090 53 (3 176) 108 967

Reconciliation of goodwill – 2015Opening balance

R’000


R’000Total

R’000

Goodwill 78 756 33 334 112 090

Total 78 756 33 334 112 090

For the purposes of impairment testing, goodwill is allocated to the following cash‑generating units:

2016R’000

2015R’000

Maxi’s 14 759 14 759

The Fish & Chip Co 50 233 50 233

St Elmo’s – 2 333

Zebro'sChicken 7 705 7 705

Arthur Kaplan 20 301 20 301

NWJ Retail (Pty) Limited 1 735 1 735

Company‑owned stores – Jewellery 13 477 13 426

Company‑owned stores – Food Division 757 1 598

Total goodwill 108 967 112 090

Between June 2015 and September 2015, the Luxury Goods Division acquired the assets of two franchised NWJ stores as these stores were located in key strategic sites. The goodwill acquired as a result of these acquisitions amounts to R53 000 (refer to note 19.1).

During the current period, the Food Division acquired five food outlets. There was no goodwill acquired for the purchase of these five stores (refer to note 19.3).

Maxi’s The Maxi’s goodwill formed part of the Maxi’s assets acquired in the 2006 financial year. The

recoverable amount has been calculated using the value‑in‑use valuation method, which discounts to present value, the future after‑tax cash flows, attributable to the Maxi’s business, using an applicable discount rate. Cash flows were determined using projections from financial budgets approved by directors covering a three‑year period, for revenue, gross profit and operating profit margin expectations. The key assumptions used in these budgets are a reflection of management’s past experience in the market in which the unit operates. Cash flows beyond the three‑year period, for a further two years, have been extrapolated using a steady 8% (2015: 8%) per annum growth rate. Beyond this five‑year period, the group used a terminal growth rate of 5% (2015: 5%). These cash flows were discounted using a discount rate of 16.75% (2015: 15%). The various sensitivity analyses performed by changing key variables by 1% in the calculation resulted in the recoverable amount exceeding the carrying amount in all instances.




5. Intangible assets (continued) The Fish & Chip Co The goodwill on The Fish & Chip Co formed part of the assets acquired in The Fish & Chip Co and

represents the excess of the purchase price paid over the fair value of acquired assets and liabilities. The recoverable amount has been calculated using the value‑in‑use valuation method, which discounts to present value, the future after‑tax cash flows, attributable to The Fish & Chip Co business, using an applicable discount rate. Cash flows were determined using projections from financial budgets approved by directors covering a three‑year period, for gross profit and operating profit margin expectations. The key assumptions used in these budgets are a reflection of management’s past experience in the market in which the unit operates. Cash flows beyond the three‑year period, for a further two years, have been extrapolated using a steady 8% (2015: 8%) per annum growth rate. Beyond this five‑year period the group used a terminal growth rate of 5% (2015: 5%). These cash flows were discounted using a discount rate of 16.75% (2015: 15%). The various sensitivity analyses performed by changing key variables by 1% in the calculation resulted in the recoverable amount exceeding the carrying amount in all instances.

St Elmo’s During the year the goodwill associated with St Elmo’s was impaired as the number of outlets declined

due to these being converted into Domino’s Pizza outlets.

Zebro’s Chicken TheZebro’sChickengoodwillrepresentstheexcessofthepurchasepricepaidoverthefairvalueof

acquired assets and liabilities as at 1 March 2014. The recoverable amount has been calculated using the value‑in‑use valuation method, which discounts to the present value, the future after‑tax cash flows,attributabletotheZebro’sChickenbusiness,usinganapplicablediscountrate.Cashflowsweredetermined using projections from financial budgets approved by directors covering a three‑year period for revenue, gross profit and operating profit margin expectations. The key assumptions used in these budgets are a reflection of management’s past experience in the market in which the unit operates. Cash flows beyond the three‑year period, for a further two years, have been extrapolated using a steady 8% per annum growth rate. Beyond this five‑year period the group used a terminal growth rate of 5% (2015: 5%). These cash flows were discounted using a discount rate of 16.75% (2015: 15%). The various sensitivity analyses performed by changing key variables by 1% in the calculation resulted in the recoverable amount exceeding the carrying amount in all instances.

Arthur Kaplan The Arthur Kaplan goodwill represents the excess of the purchase price paid over the fair value of

acquired assets and liabilities as at 27 November 2014. The recoverable amount has been calculated using the value‑in‑use valuation method, which discounts to the present value, the future after‑tax cash flows, attributable to the Arthur Kaplan (Pty) Limited business, using an applicable discount rate. Cash flows were determined using projections from financial budgets approved by directors covering a three‑year period for revenue, gross profit and operating profit margin expectations. The key assumptions used in these budgets are a reflection of management’s past experience in the market in which the unit operates. Cash flows beyond the three‑year period, for a further three years, have been extrapolated using a steady 10% (2015: 11%) per annum growth rate, and the terminal value has been determined after this six year period. These cash flows were discounted using a discount rate of 14.75% (2015: 13.89%). The various sensitivity analyses performed by changing key variables by 1% in the calculation resulted in the recoverable amount exceeding the carrying amount in all instances.


5. Intangible assets (continued) NWJ Retail (Pty) Limited The NWJ Retail (Pty) Limited goodwill represents the excess of purchase price paid over the fair value of

acquired assets and liabilities as at 1 September 2014. The recoverable amount has been calculated using the value‑in‑use valuation method, which discounts to the present value, the future after‑tax cash flows, attributable to the NWJ Retail business, using an applicable discount rate. Cash flows were determined using projections from financial budgets approved by directors covering a three‑year period for revenue, gross profit and operating profit margin expectations. The key assumptions used in these budgets are a reflection of management’s past experience in the market in which the unit operates. Cash flows beyond the three‑year period, for a further three years, have been extrapolated using a growth rate of between 2% to 6% (2015: 2%) and a terminal value has been determined after this six year period. These cash flows were discounted using a discount rate of 20% (2015: 20%). The various sensitivity analyses performed by changing key variables by 1% in the calculation resulted in the recoverable amount exceeding the carrying amount in all instances.

Company-owned stores – NWJ This amount represents the excess of the purchase price paid over the fair value of acquired assets

and liabilities of jewellery stores purchased by the Jewellery Division. The recoverable amount has been calculated using the value‑in‑use valuation method, which discounts to present value, the future after‑tax cash flows, attributable to these stores, using an applicable discount rate. Cash flows were determined using projections from financial budgets approved by directors covering a three‑year period, for revenue, gross profit and operating profit margin expectations. The key assumptions used in these budgets are a reflection of management’s past experience in the market in which the unit operates. Cash flows beyond the three‑year period, for a further three years, have been extrapolated using a growth rate between 2% to 6% (2015: 3%) and a terminal value has been determined after this six year period. These cash flows were discounted using a discount rate of 20% (2015: 20%). The various sensitivity analyses performed by changing key variables by 1% in the calculation resulted in the recoverable amount exceeding the carrying amount in all instances.

Beyond this five‑year period the group used a terminal growth rate of 8% (2015: 8%).

Company-owned stores – Food Division This amount represents the excess of the purchase price paid over the fair value of acquired assets

and liabilities of food stores purchased by the Food Division. The recoverable amount has been calculated using the value‑in‑use valuation method, which discounts to present value, the future after‑tax cash flows, attributable to these stores, using an applicable discount rate. Cash flows were determined using projections from financial budgets approved by directors covering a three‑year period, for revenue, gross profit and operating profit margin expectations. The key assumptions used in these budgets are a reflection of management’s past experience in the market in which the unit operates. Cash flows beyond the three‑year period, for a further two years, have been extrapolated using a steady 3.5% (2015: 3.5%) per annum growth rate. Beyond this five year period the group used a terminal growth rate of 5%. These cash flows were discounted using a discount rate of 20% (2015: 20%). The various sensitivity analyses performed by changing key variables by 1% in the calculation resulted in the recoverable amount exceeding the carrying amount in all instances.

6. Net investment in finance lease The finance lease asset is recognised in respect of agreements for the rental of equipment to

franchisees in the Food Division for which the present value of the minimum lease payments due in terms of the lease agreements amounted substantially to the fair value of the equipment at the time the agreements were entered into.

The finance leases are for a period of ten years. The lessor holds these assets as security. Within

1 year 2 to 5 years > 5 years Total

Gross investment in finance lease 2 635 12 519 18 362 33 516 Unearned Finance income (2 176) (10 037) (10 102) (22 315)

459 2 482 8 260 11 201




7. Other financial assets2016

R’0002015

R’000

Loans and receivables

Extended terms to food franchise storesThese amounts represent extended payment terms given by the brands to certain franchisees. These amounts attract no interest, are unsecured and are repayable over an average of 24 months.

2 458 3 017

Domino’s marketing fundThis loan bears interest at the prime rate and is repayable over the master franchise agreement term commencing 1 March 2019 over the balance of the master franchise agreement.

49 397 14 126

Loans to The Fish & Chip Co storesThese loans were given to certain franchisees to finance the shortfall of the new store cost. They attract interest at the prime interest rate and are generally repayable over a period ranging between 12 and 36 months. These loans are secured over the asset of the stores.

1 509 1 608

NWJ marketing fundThis loan is unsecured, bears interest at the prime lending rate and is repayable in 120 equal instalments of R30 410 (2015: 30 410) per month.

2 090 2 249

Scooters Pizza marketing fundThis loan is unsecured, bears interest at the prime (2015: prime) lending rate and is repayable in 96 (2015: 108) equal instalments of R28 039 (2015: R57 922) per month.

1 832 4 235

Maxi’s marketing fundThis loan is unsecured, bears interest at the prime (2015: prime) lending rate and is repayable in 96 (2015: 108) equal instalments of R28 634 (2015: R27 764) per month.

1 937 2 030

Zebro’s marketing fundThe loan is unsecured and bears interest at the prime rate and is repayable in 120 equal instalments of R12 803 per month.

1 000 –

St Elmo’s marketing fundThis loan is unsecured, bears interest at the prime (2015: prime) lending rate and is repayable in 96 (2015: 108) equal instalments of R3 007 (2015: R9 572) per month.

196 700

Franchise conversion contributionsContributions granted to Scooters Pizza and St Elmo’s franchisees to assist with the conversion of their stores to Domino’s Pizza. These contributions bear no interest and have varying repayment periods based on repayment thresholds applicable to each individual franchisee spanning as long as 120 months. In terms of the franchise agreement, these contributions are immediately payable upon sale of store or cancellation of franchise agreement. Personal securities are in place for all these contributions.

20 826 –

81 245 27 965

Non‑current assets 78 324 26 566

Current assets 2 921 1 399

81 245 27 965


7. Other financial assets (continued)2016

R’0002015

R’000

Franchise conversion contributes comprise:

Gross contributions 59 394 –

Less fair value adjustment recognised on inception as an intangible asset (see note 5) (25 535) –

33 859 –

Less fair value adjustment – current year recognised through profit and loss (510) –

33 349

Less impairment (12 523)*

Net conversion contributions 20 826

The directors consider that the carrying amount of the franchise conversion contributions is at fair value as noted above.

The directors consider that the carrying amount of interest‑bearing loans and other receivables approximate their fair value as these are linked to market‑related interest rates. The recoverable amount of extended loans to food franchisees approximates the fair value, because of the short‑term nature of these loans.

The credit quality of other financial assets is as follows:

Not past due – not impaired 58 496 23 341

Past due – not impaired 1 922 4 624

Not past due ‑ Impaired (franchise conversion contributions) 33 349* –

Past due – impaired 1 655 644

Provision for impairment (14 177) (644)

81 245 27 965

2016 2015

Ageing of amounts past due

Past due total

R’000

Provision forimpairment

R’000

Net past due not impaired

R’000

Past due total

R’000

Provision forimpairment

R’000

Net past due not impaired

R’000

120 days 3 578 (1 655) 1 923 5 268 (644) 4 624

3 578 (1 655) 1 923 5 268 (644) 4 624

More than 120 days* – (12 523) (12 523) – – –

– (12 523) (12 523) – – –

* The franchise conversion contributions are not past due but provisionally impaired where repayment is expected to extend beyond ten years.

No formal credit ratings are available for any of these assets. The credit risk on the loans to the marketing funds is assessed as low due to management’s past experience and knowledge of the business.

The risk on the conversion contributions has been assessed as low due to the additional provisions contained in the franchise agreement (refer to franchise conversion contributions on page 127).

Other financial assets is ceded as security in terms of the Senior Secured Notes issue as well as the Revolving Credit Facility (refer to note 15).




7. Other financial assets (continued) Reconciliation of provision for impairment of other financial assets is as follows:

2016R’000

2015R’000

Opening balance 644 2 109

Provision raised 14 149 2 041

Provision reversed (617) (3 506)

Closing balance 14 177 644

Carrying amounts of other financial assets that have been renegotiated:

Other financial assets 2 045 2 123

8. Deferred taxAdvertising levies and marketing funds (17 349) (8 102)

Prepayments (675) (968)

Provisions, accruals and deposits 16 346 7 009

Temporary differences relating to acquisition of business (22 129) (23 231)

Accelerated wear and tear 565 (334)

Tax losses available for set‑off against future taxable income 39 511 6 582

16 269 (19 044)

Deferred tax asset 56 648 13 647

Deferred tax liability (40 379) (32 691)

16 269 (19 044)

Reconciliation of deferred tax

At beginning of the year (19 044) (19 201)

Recognised through profit or loss 35 313 4 184

Acquisition of business – (4 027)

16 269 (19 044)

Thedeferred tax liability raisedon theacquisitionofbusiness relates toTheFish&ChipCo,Zebro’sChicken, NWJ and St Elmo’s trademark intangibles. This liability will decrease as the intangibles are amortised over their expected useful lives.

Deferred tax assets have been recognised in respect of all tax losses and other temporary differences giving rise to deferred tax assets where the directors believe it is probable that these assets will be recovered, having reviewed the group’s financial projections. There are no unrecognised deferred tax assets on assessed losses.


9. Non-current assets held for sale2016

CostR’000

ImpairmentR’000


Maxi’s 644 – 644

The Fish & Chips Co 3 943 (1 128) 2 815

Total 4 587 (1 128) 3 459

Reconciliation of non-current assets held for sale – 2016

Opening balance

R’000


R’000Impairment

R’000Disposals

R’000Total

R’000

Maxi’s 4 749 644 (4 749) – 644

The Fish & Chips Co 2 429 3 943 (3 238) (319) 2 815

Total 7 178 4 587 (7 987) (319) 3 459

The above represents stores from the Food Division that have been acquired from franchisees and have immediately been classified as non‑current assets held for sale.

Non‑current assets held for sale are not depreciated while they are held for sale.

The carrying amount of these assets approximated their fair value at year end.

Reconciliation of non‑current assets held for sale – 2015

CostR’000


Maxi’s 4 749 4 749

The Fish & Chips Co 2 429 2 429

Total 7 178 7 178

Opening balance

R’000


R’000Total

R’000

Maxi's – 4 749 4 749

The Fish & Chips Co – 2 429 2 429

Total – 7 178 7 178

10. Advertising levies2016

R’0002015

R’000

Current asset 5 444 8 255

This amount represents advertising expenditure incurred in excess of the levies received from franchisees (refer to note 1.17). This amount is recovered through controlled underspending of marketing funds in subsequent years.

Total 5 444 8 255




11. Inventories2016

R’0002015

R’000


Raw materials and components 4 014 3 611

Finished goods 243 934 208 907

Packaging 3 944 3 552

Food Division

Catering equipment 19 152 155

Raw materials and components 4 687 6 130

Finished goods 13 514 12 000

Total 289 245 234 355

All inventories have been ceded as security in terms of the Senior Secured Note issue as well as the Revolving Credit Facility (refer to note 15).

12. Trade and other receivablesGross trade receivables 78 216 79 006

Provisions for doubtful debts (16 431) (18 606)

Net trade receivables 61 785 60 400

Prepayments 2 600 364

Deposits 852 497

Sundry debtors 14 745 22 092

VAT 6 138 4 578

Store development in advance 2 876 9 646

Total 88 996 97 577

No independent credit ratings are available for any of the trade receivables. The credit quality of trade receivables have been assessed based on the historical information of the counterparty and any evidence of financial distress, including non‑adherence to credit terms. Normal credit terms are within 30 days from statement.

2016 2015Gross tradereceivables

R’000

Provision fordoubtful debt

R’000

Net tradereceivables

R’000

Gross tradereceivables

R’000

Provision fordoubtful debt

R’000

Net tradereceivables

R’000

Less than 30 days 23 346 – 23 346 24 671 – 24 67131 to 60 days – – – 4 272 – 4 272

61 to 90 days 5 109 (658) 4 451 2 831 (136) 2 695

91 to 120 days 9 864 (504) 9 360 2 640 (75) 2 565

Over 120 days 39 897 (15 269) 24 628 44 592 (18 395) 26 197

78 216 (16 431) 61 785 79 006 (18 606) 60 400

As of 29 February 2016, trade and other receivables were impaired and provided for.

The amount of the provision as of 29 February 2016 is R16 430 739 (2015: R18 605 920).


12. Trade and other receivables (continued)

2016R’000

2015R’000

Reconciliation of provision for doubtful debts of trade and other receivables is as follows:

Opening balance 18 606 17 974

Provision for doubtful debt raised 7 021 5 691

Provision for doubtful debt reversed – (884)

Amounts written off as uncollectable (9 196) (4 175)

16 431 18 606

The maximum exposure to credit risk at the reporting date is the fair value of each class of trade receivables mentioned above.

The group does not hold any collateral as security. All amounts receivable are denominated and recoverableinZAR.Thegroupdebtorshavebeencededassecurity intermsoftheSeniorSecuredNote issue as well as the Revolving Credit Facility (refer to note 15).

13. Cash and cash equivalents2016

R’0002015

R’000

Cash and cash equivalents consist of:

Cash on hand 106 555

Bank balances 202 538 62 328

Bank overdraft (32 148) (18 142)

170 496 44 741

A guarantee is in place over facilities to the amount of R226 766 (2015: R149 700) in favour of the lessor of a lease entered into by Taste Holdings Limited with the lessor.

A blanket guarantee is in place over facilities to the amount of R7 121 156 (2015: R6 364 937) in favour of the lessor for leases entered into by Taste Luxury Goods Division with these lessors.

A blanket guarantee is in place over facilities to the amount of R1 551 409 (2015: R1 567 060)in favour of the lessor for leases entered into by Arthur Kaplan (Pty) Limited with these lessors.

A blanket guarantee is in place over facilities to the amount of R2 355 708 (2015: R1 007 472) in favour of the lessor for leases entered into by Taste Food Franchising (Pty) Limited with these lessors.

There is a R70 million (2015: R55 million) overdraft facility in place with Rand Merchant Bank. The facility increased temporarily to R97 million, for the period 1 September to 7 January, each year. The bank overdraft bears the same security as the Senior Secured Notes (refer to note 15).




14. Share capital and share premiumNumber of shares

2016 2015

Ordinary share capital (par value of R0,00001 each)

Authorised 500 000 000 500 000 000

Issued (fully paid up) 377 322 380 265 711 844

In issue at 1 March 265 711 844 202 537 260

General share issue (24 April 2015)1 22 877 051

Specific share issue (1 July 2015)1 8 196 722

Rights issue (16 November 2015)2 75 464 476 60 052 514

Shares issued to vendors3 1 726 727 2 442 792

Shares issued to Taste Holdings Share Trust4 3 345 560 679 278

In issue at 29 February 377 322 380 265 711 844

Treasury shares5 (par value of R0,00001 each) (2 405 238) (2 248 000)

In issue at 29 February – excluding treasury shares5 374 917 142 263 463 8441 Shares issued at R3.05 per share2 Shares issued at R3 per share3 Shares issued at R3.33 per share4 Shares issued between R0.43 - R4.21 in anticipation of shares issues being exercised in terms of the Taste Holdings

share option scheme5 Treasury shares held by Taste Holdings Share Trust

122 627 260 unissued ordinary shares are under the control of the directors in terms of a resolution passed at the last annual general meeting. This authority remains in force until the next annual general meeting.

34 000 000 (2015: 34 000 000) of the unissued ordinary shares are specifically reserved for the share incentive scheme, of which 20 259 559 (2015: 23 447 880) options have already been offered to and accepted by employees.

2016R’000

2015R’000

Share capital

Balance at 1 March 3 2

Shares issued 1 1

Balance at 29 February 4 3

Share premium

Balance at 1 March 282 634 94 545

Shares issued 98 817 178 411

Optionsexercised 3 347 1 177

Rights issue 226 394 8 501

Balance at 29 February 611 192 282 634


15. Borrowings 2016

R’0002015

R’000

15.1 Senior secured floating rate notes 1

Notes issued 125 000 125 000

Interest accrued 1 102 943

Fees capitalised (2 767) (3 133)

Fees amortised 627 366

On 31 July 2014, Taste Holdings Limited issued Senior Secured Notes with a nominal value of R125 million in terms of a registered R1 billion DomesticMediumTermNoteprogramme.Thesenotesaresecuredbycession in security, general notarial bonds over all moveable assets of the company and its subsidiaries, and the company’s cross guarantees from all Taste Holdings subsidiaries. Interest is payable quarterly in arrears at a rate of three‑month JIBAR, reset quarterly, plus 3.4%. The notes mature on 31 July 2019, subject to their maturity structure.

15.2 Senior secured floating rate notes 2 75 000 –

Notes issued 680 –

Interest accrued (720) –

Fees capitalised 120 –

Fees amortised

On 22 April 2015, Taste Holdings Limited issued Senior Secured Notes with a nominal value of R75 million in terms of a registered R1 billion Domestic Medium Term Note programme. These notes are secured by cession in security, general notarial bonds over all moveable assets of the company and its subsidiaries, and the company’s cross guarantees from all Taste Holdings subsidiaries. Interest is payable quarterly in arrears at a rate of three‑month JIBAR, reset quarterly, plus 3.7%. The notes mature on 30 April 2020, subject to their maturity structure.

15.3 Senior secured floating rate notes 3Notes issued 25 000 –Interest accrued 244 –Fees capitalised – –Fees amortised – –On 8 September 2015, Taste Holdings Limited issued Senior Secured Notes with a nominal value of R25 million in terms of a registered R1 billion Domestic Medium Term Note programme. These notes are secured by cession in security, general notarial bonds over all moveable assets of the company and its subsidiaries, and the company’s cross guarantees from all Taste Holdings subsidiaries. Interest is payable quarterly in arrears at a rate of three‑month JIBAR, reset quarterly, plus 4.5%. The notes mature on 30 October 2020, subject to their maturity structure.




15. Borrowings (continued)2016

R’0002015

R’000

15.4 Revolving credit facility 19 169 –On 29 July 2014, Taste Holdings Limited entered into a Revolving Credit Facility agreement with Rand Merchant Bank Limited with a nominal value of R40 million. This RCF is secured by cession in security, general notarial bonds over all moveable assets of the company and its subsidiaries, and the company’s cross guarantees from all Taste Holdings subsidiaries. Interest is payable quarterly in arrears at a rate of three‑month JIBAR, reset quarterly, plus 3.5%. The RCF matures on 28 July 2017.

15.5 WesBank 12 435 11 149 These secured loans bear interest at the prime rate ranging from prime less 0.5% to prime + 2.25% and are payable over a period ranging from 48 – 60 months. The loan is secured over property, plant and equipment (refer to note 4).

15.6 Balances due to vendors – 1 000Balances due to The Fish and Chip Co vendors. This loan represents a portion of the purchase price that is due to the vendor for stock purchased.

255 890 135 325 Non-current liabilitiesSenior secured floating rate notes 223 030 122 859 Revolving Credit Facility 19 000 –WesBank 6 876 7 898

248 906 130 757The carrying value of the non‑current liabilities approximates their fair value because these are linked to market interest rates.Current liabilitiesSenior secured floating rate notes 1 256 317 Revolving Credit Facility 169 –WesBank 5 559 3 251 Balance due to vendors – 1 000

6 984 4 568 255 890 135 325

16. Lease equilisationFuture lease equilisation payments under non‑cancellable agreements

– within one year 4 495 1 312

– one to five years 6 517 2 117

11 012 3 429


17. Dividends paid2016

R’0002015

R’000

Gross dividends – Final 2015: 6.5 cents paid (2014: 6.2 cents) 19 291 12 751 Dividends on treasury shares held through the share incentive scheme (124) (190)

19 167 12 561 Less: Shareholders for dividends (25) (29)

19 142 12 532 No dividends were declared during the year.

The company’s tax reference number is 9493089149P.

18. Trade and other payablesTrade payables 91 636 89 376 Development deposits 9 139 29 057VAT 1 563 4 038Payroll accruals 5 535 6 462 Dividends payable 109 84 Other accrued expenses and deposits 21 364 11 870

129 346 140 887The directors consider that the carrying amount of trade and other payables approximates their fair value due to their short‑term nature.

19. Acquisition of businesses19.1 Acquisition of jewellery stores

During the year, NWJ acquired the business of two NWJ stores. These stores were located in key strategic sites. The rationale for this acquisition is consistent with the division’s strategy of:– expandingitscorporatestoreownership;and– retaining key strategic sites.

Goodwill arose on acquisition as a result of the excess of the rest of the acquisition over the group’s interest in the net fair value of the identifiable assets of the business recognised at date of acquisition.

Noneofthegoodwillrecognisedisexpectedtobedeductibleforincometaxpurposes.

The fair value of assets and liabilities acquired is set out below:

R’000

Property, plant and equipment 891

Inventory 1 019

Bank overdraft (93)

Fair value of assets acquired 1 817

Consideration paid (1 870)

In cash (1 224)

Balance owed by vendors* (646)

Goodwill acquired (53)* Vendors debt owing set-off against purchase price.During the period that these two stores were owned/operated by NWJ, they contributed R4.6 million torevenueandR477504tooperatingprofit.Therevenueandoperatingprofitasifthesestoreswereowned for the full year cannotbedisclosed, as completeand compliantfinancial recordsof thesestores prior to the dates that they were acquired could not be obtained.




19. Acquisition of businesses (continued)19.2 Acquisition of Arthur Kaplan

Goodwill arose on the acquisition of Arthur Kaplan on 27 November 2014 as a result of the excess of the cost of acquisition over the group’s interest in the net fair value of the identifiable assets recognised at the date of acquisition. This goodwill amounted to R20.3 million. The purchase price allocation was provisionally accounted for in the prior year in accordance with IFRS 3. This purchase consideration has now been finalised and there has been no change to goodwill.

Accordingtothepurchaseandsaleagreement,anadditionalpurchaseconsiderationwaspayableifthe profit after tax of Arthur Kaplan for the period from 1 July 2014 to 30 June 2015 exceeded R12.386million.ThisadditionalconsiderationwascalculatedbymultiplyingR4.21foreveryR1.00withwhichtheprofitaftertaxexceedsR12.386million,uptoatotaladditionalamountofR35million.Anysavingsmadeoradditionalexpensesincurredasaresultofthetransferofownershiptothepurchaserwere excluded from this calculation. This additional purchase consideration amounted to R17.4million,R15millionofwhichwasraisedasafinancialliabilityat28February2015.IntermsofIFRS, this difference of R2.4 million has been expensed into profit and loss. R5.8 million of theadditionalpurchaseconsiderationwasdischargedbytheissueof1726727TastesharestotheArthurKaplan vendors at R3.33 per share in accordance with the purchase and sale agreement and the remainderwassettledincashinSeptember2015.IntermsofIFRSthedifferencebetweentheagreedpriceofR3.33andthepriceonthedatetheshareswereissuedhasbeenexpensedtoprofitandlossand amounts to R2.2 million.

19.3 Acquisition of Food Stores During the current period, the Food Division acquired the business of five food outlets in order to expand its corporate store footprint. These stores were immediately converted to Domino’s Pizza corporate stores.

The fair value of assets and liabilities acquired is set out below:

2016R’000

Intangible assets 2 508

Fair value of assets acquired 2 508

Considerationpaid (2 508)

In cash (1 782)

Balance owed by vendors* (726)

Goodwill acquired –* Vendors debt owing set-off against purchase price.

2016R’000

2015*R’000

20. RevenueSale of goods 910 614 608 231

Services rendered and franchise revenue 82 360 94 728

Store development 69 855 14 143

1 062 829 717 102

21. Cost of salesSale of goods 542 666 378 437

Services rendered 48 559 43 608

Store development 61 640 10 612

Cost of goods sold and services rendered 652 865 432 657 * Please refer to note 37.1 for details of prior period restatement.


22. Operating (loss)/profit2016

R’0002015

R’000

Operating (loss)/profit for the year is stated after accounting for the following:Operating lease chargesPremises 73 948 35 860Motor vehicles – 118Equipment 701 1 320

74 649 37 298Loss/(profit) on sale of property, plant and equipment 1 259 (246)Depreciation of property, plant and equipment 21 409 9 584Share‑based payment expense 2 497 1 952 Employee costs 175 891 113 544Research and development 291 318 Loss/(profit) on exchange differences 1 837 (92)Contingent payment for Arthur Kaplan acquisition 4 615 –Impairment – intangible asset 3 650 – – goodwill 3 176 – – non‑current assets held for sale 7 987 – Amortisation of intangibles 7 711 5 484

23. Investment revenueInterest on other financial assets 3 056 – Interest on finance lease 1 189 – Bank 10 352 6 465

14 597 6 465 24. Finance costs

Borrowings 27 050 13 140 27 050 13 140

25. TaxationMajor components of the tax expenseCurrentSA normal income tax – current period 18 141 13 042SA normal income tax – recognised in current year for prior periods 117 (78)Dividend tax – recognised in current year for prior periods – 33

18 258 12 997DeferredCurrent period (35 312) (4 184) Recognised in current year for prior periods – –

35 312 (4 184)(17 055) 8 813

Reconciliation of the tax expense % %

Reconciliation between applicable tax rate and average effective tax rate:Applicable tax rate 28 28Prior period under provision (0.13) (0.32)Deferred tax asset/(liability) not raised 0.29 (1.89)Dividend tax – 0.13 Exempt income 0.86 –Disallowable expenses (10.31) 9.39Effective rate 18.71 35.31




26. Cash generated from operations2016

R’0002015

R’000

(Loss)/profit before taxation (91 156) 24 962

Adjustments for:

Depreciation and amortisation 29 120 15 068

Loss/(profit) on sale of property, plant and equipment 1 259 (246)

Loss/(profit)onforeignexchange 1 837

Fairvalueadjustmentonconversioncontributions(refernote7) 510

Investment revenue (14 597) (6 465)

Finance costs 27 050 13 140

Impairment loss 14 812 –

Share‑based payment expense 2 527 1 952

Changes in working capital:

Inventories (53 871) 7 625

Trade and other receivables 8 071 (21 306)

Advertising levies 2 811 (7 835)

Trade and other payables (13 435) 13 229

Contingentliability (15 000) 15 000

Balance due to vendors (1 000) –

Lease equalisation 7 583 3 429

93 479 58 553

27. Tax paidBalance at beginning of the period 2 273 2 140

Current tax for the period recognised in income statement (18 258) 13 263

Balance at end of the period 195 (2 273)

(15 790) 13 130

28. CommitmentsThe group has commitments arising from property leases for its own business operations, leases entered into to secure key sites for franchised outlets as well as contracts entered into to lease motor vehicles and equipment. With regard to leases entered into to secure sites, it is the group’s policy to enter into sub‑lease agreements with the franchisees where applicable on the same terms and conditions as those in the main lease.

Certain property leases have contingent rental payable based on turnover clauses. Leases are subject to escalation and renewal clauses along normal commercial terms.


28. Commitments (continued)The net future minimum rentals due under operating leases are as follows:

2016R’000

2015R’000

Amounts due for motor vehicles and equipment 776 543

Gross amounts due under property leases 196 305 140 417

Property leases with related parties 9 349 11 272

Property leases – other 186 956 129 145

Less amounts recoverable from sub‑lessees – (3 030)

197 081 137 930

The net future minimum rentals are repayable as follows:

Payable within the next 12 months 55 103 37 619

Two to five years 135 084 96 046

More than five years 6 894 4 265

197 081 137 930

Capital commitments

An amount of R68.6 million has been approved for capital expenditure for the 2017 financial year in respect of the Starbucks rollout, the Domino’s rollout, new jewellery stores and store revamps. This capital expenditure will be funded from current reserves and facilities.

29. Related partiesRelated party Position in group Nature of interest

Carlo Gonzaga Executive director Majority shareholder in partnership with Jay Currie in 15 Taste Food Franchising outlets

Jay Currie Executive director – resigned 1 March 2016

Majority shareholder in partnership with Carlo Gonzaga in 15 Taste Food Franchising outlets

Hylton Roy Rabinowitz Non-executivedirector Majority shareholder in the company that NWJ rents its premises from

Arvid Smedsrud CEO – Food manufacturing Majority shareholder in the company that the group rents its premises, for its food production facility, from. The group alsoprocures certain food products from this company

Timothy Fitzgerald Production manager – NWJ Majority shareholder in one NWJ outlet

The group, in the ordinary course of business, entered into various transactions with related parties. The transactions between the group and all the above have occurred under terms and conditions that are no more favourable than those entered into with third parties in arm’s length transactions.

2016R’000

2015R’000

Franchise income received from related parties 4 834 3 635

Rent paid to related party 3 364 2 950

Stock sold to related parties 28 779 15 831

Stock purchased from related parties 660 2 161

Grossconversioncontributionsadvanced 15 600 –




30. Equity-settled share-based payments reserveTaste Holdings Limited operates the Taste Holdings Share Trust which incorporates, among other things, share option schemes which enables directors and executive management to benefit from the Taste Holdings share price performance and forms part of the retention strategy for key executive management.

Scheme 1This scheme confers the right to participants to acquire ordinary shares at a strike price of 43 cents per share (30‑day volume‑ weighted average of Taste shares on the grant date). Options vest in three tranches from the second anniversary of the option grant date. Once vesting of a tranche has been triggered, a third of the options within the tranche can be exercised one year after vesting was triggered, a further third two years after the vesting was triggered and the final third three years after the vesting was triggered. The options must be exercised within five years of vesting having been triggered. Upon cessation of employment, options that have been granted and accepted but not yet vested are forfeited unless approval is obtained from the trustees.

All options must be exercised no later than the eighth anniversary on which they were granted unless approval is obtained from the trustees.

Schemes 2, 3, 4, 5These schemes were introduced in the previous financial year. These schemes confer the right to participants to acquire ordinary shares at a strike price determined as the volume‑weighted average price of an ordinary share over the 30 business days immediately preceding the option grant date. Options vest and can be exercised in four equal tranches, beginning on the second anniversary of option grant date up to the fifth anniversary of the option grant date. Upon cessation of employment, options that have been granted and accepted but not yet vested are forfeited unless approval is obtained from the trustees. All options must be exercised by no later than the sixth anniversary of the option grant date unless approval is obtained from the trustees.

2016 2015

Number

Weighted average exercise

price (cents) Number


price (cents)

Scheme 1

Share options vested and were exercised during the year.

There are no further share options available for allocation.

The number of share options granted and accepted are:

Opening balance 4 919 444 43 6 334 000 43

Granted and accepted – – – –

Exercised* (2 541 651) 43 (1 414 556) 43

Forfeited – 43 – 43

Granted and accepted – shares not issued yet 2 377 793 43 4 919 444 43

Number of share options granted to and accepted by directors 1 497 793 – 2 797 444 –

* Weighted average share price at the date of exercise ranged between R4.40 and R4.72.


30. Equity-settled share-based payments reserve (continued)

Vesting period of options granted and accepted

Number of options Latest vesting date

1 670 128 Year to Feb 2017

652 110 Year to Feb 2018

55 555 Year to Feb 2019

2 377 793

2016 2015

Number




price (cents)

Scheme 2



Opening balance 575 000 254 1 425 000 254

Granted and accepted – – –

Forfeited (600 000) –

Exercised* (125 000) (250 000) 254

Granted and accepted – shares not issued yet 450 000 575 000 254

Number of share options granted to and accepted by directors – – – –



275 000 Year to Feb 2017

175 000 Year to Feb 2018

450 000

* Weighted average share price at the date of exercise was R4.72.





2016 2015

Number




price (cents)

Scheme 3



Opening balance 1 405 723 386 1 658 335 386


Forfeited – 386 – –

Exercised* (187 653) – (252 612) 386


Number of share options granted to and accepted by directors 933 376 – 1 052 126 –



515 208 Year to Feb 2017

351 431 Year to Feb 2018

351 431 Year to Feb 2019

1 218 070


2016 2015

Number




price (cents)

Scheme 4No share options vested or were exercised during the year. The number of share options granted and accepted are:

Opening balance 2 500 000 367 2 500 000 367


Forfeited – – – –







1 250 000 Year to Feb 2017

625 000 Year to Feb 2018

625 000 Year to Feb 2019

2 500 000

2016 2015

Number




price (cents)

Scheme 5



– 1 November 2013 832 865 370 832 865 370

– 16 April 2014 921 788 358 921 788 358

– 1 June 2014 1 507 763 370 1 507 763 370

– 29 July 2014 6 460 575 372 6 460 575 372

– 1 August 2014 778 831 372 778 831 372

– 1 September 2014 1 046 512 344 1 046 512 344

– 1 December 2014 980 392 306 980 392 306

– 19 January 2015 1 518 987 316 1 518 987 316

Exercised* (334 017) – – –





3 636 641 Year to Feb 2017

3 428 424 Year to Feb 2018

3 428 424 Year to Feb 2019

3 220 208 Year to Feb 2020

13 713 696


IFRS 2 required the fair value of equity‑settled share‑based payments granted to employees to be valued at the grant date and recognised in profit and loss over the vesting period. The fair value of each share option granted has been valued at grant date using the widely accepted Black‑Scholes‑Merton model which takes into account vesting periods. All market conditions were assumed to be met. Expected volatility was determined by using the daily stock volatility of the stock price over the last five years.




30. Equity-settled share-based payments reserve (continued)Scheme 5 Scheme 4 Scheme 3 Scheme 2 Scheme 1

Thefollowingassumptionswere applied in determining thevalueoftheshareoptionsgranted during the year:

Numberofoptionsgrantedand accepted 13 713 696 2 500 000 1 218 070 450 000 2 764 332

Weighted average fair value ofoptions 47 cents 31 cents 43 cents 37 cents 15 cents

Exercise price 306 – 372 cents 367 cents 386 cents

225 – 421 cents 43 cents

Closing price of Taste share at grant date 329 cents 355 cents 385 cents

230 – 400 cents 230 cents

Expectedvolatilityofshareprice (%)

39.35% – 61.39% 61.12% 66.73%

105.39% – 110.24% 110.24%

Risk‑free rate for the life of theoption

6.04% – 7.80% 6.22% 6.14%

5.29% – 6.94% 6.94%

Expectedlifeofoptions 5 years 5 years 5 years 5 years 6 years

Expected dividend yield 1.75% – 2.25% 2.32% 2.32% 1.48% 1.48%

Reconciliationofshare-basedpaymentexpensechargeddirectlytoprofitorloss:

2016R’000

2015R’000

Balance at beginning of the year 3 724 1 772

Chargetoprofitorloss 2 497 1 952

Incrementalchargeresultingfromoptionrevaluation – 1 952

Charge for the year 2 497 –

Balance at end of the year 6 221 3 724


31. Directors’ emoluments

Executive – Paid by companyYear ended 2016

BasicR’000

Allowances and

benefitsR’000

TotalR’000

Short-term

employee benefits*

R’000

Long-termemployee

benefits^R’000

TotalR’000

Carlo Ferdinando Gonzaga 2 404 127 2 531 – 2 628 5 159

Evangelos Tsatsarolakis 1 564 112 1 676 206 1 255 3 137

Jay Bayne Currie – resigned 1 March 2016 2 644 26 2 670 – – 2 670

6 612 265 6 877 206 3 883 10 966

Executive – Paid by subsidiaryYear ended 2016

Duncan John Crosson 1 833 67 1 900 317 698 2 915

1 833 67 1 900 317 698 2 915

Executive – Paid by companyYear ended 2015

Carlo Ferdinando Gonzaga 1 965 131 2 096 – 1 970 4 066

Evangelos Tsatsarolakis 1 456 116 1 572 – 999 2 571

Jay Bayne Currie 2 070 45 2 115 – 2 115

5 491 292 5 783 – 2 969 8 752

Executive – Paid by subsidiaryYear ended 2015

Duncan John Crosson 1 661 99 1 760 – 727 2 487

1 661 99 1 760 – 727 2 487

* In order to match incentive awards with the performance to which they relate, incentive bonuses above reflect the amounts accrued in respect of each year and not amounts paid in that year.

^ During the year, these directors exercised options in terms of the Taste Holdings share option scheme.AlltheaboveexecutivedirectorsarepartofthegroupexecutivecommitteeandhavebeenidentifiedasprescribedofficersintermsoftheCompaniesActofSouthAfrica.

2016Number

2015Number

Share options held by executive directors are detailed below:

Carlo Ferdinando Gonzaga 1 448 509 2 061 621

Evangelos Tsatsarolakis 1 126 680 1 545 430

Duncan John Crosson 1 511 221 1 897 760

Jay Bayne Currie – resigned 1 March 2016 2 833 260 2 833 260

6 919 670 8 338 071

These share options have been granted in terms of the Taste Holdings Share Trust. The strike price of these varies based on the date these options were granted and accepted, details of which are in note 30.




31. Directors’ emoluments (continued)

Non-executive fees2016

R’0002015

R’000

Ramsay L’Amy Daly (Bill) 300 249

KevinMichaelUtian 196 134

Wessel Petrus van der Merwe 273 161

Anthony Berman 266 241

Hylton Roy Rabinowitz 166 107

Brimstone Investment Corporation Limited – S Patel 246 134

Grant Pattison 216 120

1 663 1 146

32. Financial assets and liabilities by category

Notes

Loans andreceivables

R’000Total

R’000

Financial assets by category

2016

Net investment in Finance lease 6 11 201 11 201

Other financial assets 7 81 245 81 245

Advertising levies 10 5 444 5 444

Trade and other receivables 12 80 258 80 258

Cash and cash equivalents 13 202 538 202 538

380 686 380 686

2015

Other financial assets 7 27 965 27 965

Advertising levies 10 8 255 8 255

Trade and other receivables 12 92 635 92 635

Cash and cash equivalents 13 62 883 62 883

191 738 191 738

Notes

Liabilitiesat amortised

costR’000

Total R’000

Financial liabilities by category

2016

Bank overdraft 13 32 148 32 148

Borrowings 15 255 890 255 890

Trade and other payables 18 127 783 127 783

415 821 415 821


32. Financial assets and liabilities by category (continued)

Notes

Liabilitiesat amortised

costR’000

Total R’000

2015

Bank overdraft 13 18 142 18 142

Borrowings 15 134 325 134 325

Other financial liabilities 15 000 15 000

Balances due to vendors 15 1 000 1 000

Trade and other payables 18 136 849 136 849

305 316 305 316

33. Risk managementThe group’s activities expose it to a variety of risks. These risks include: liquidity risk, interest rate risk, credit risk and foreign exchange risk.

Liquidity riskThe group’s exposure to liquidity risk is that insufficient funds will be available to meet future obligations as they fall due. The group manages liquidity risk through an ongoing review of its future commitments and of the facilities available from financial institutions. Cash flow forecasts are prepared and adequate unutilised borrowing facilities are maintained. The following table represents the group’s outstanding contractual maturity profile. The analysis presented is based on the undiscounted contractual obligation.

Notes<1 year

R’0001 – 2 years

R’0002 – 5 years

R’000Total

R’000

2016

Bank overdrafts 13 32 148 32 148

Borrowings 15 6 984 23 709 225 197 255 890

Balances due to vendors 15 – – – –

Trade and other payables 18 129 346 – – 129 346

168 478 23 709 225 197 417 384

2015

Bank overdrafts 13 18 142 – – 18 142

Borrowings 15 3 568 4 946 128 579 137 093

Other financial liabilities 19.2 15 000 – – 15 000

Balances due to vendors 15 1 000 – – 1 000

Trade and other payables 18 140 887 – – 140 887

178 597 4 946 128 579 312 122




33. Risk management (continued)Interest rate riskThe group’s interest rate risk arises from fixed and variable rate interest‑bearing assets and liabilities described in the table below. The group manages its interest rate exposure, by only depositing cash and cash equivalents with major banks with high‑quality credit standing and by limiting exposures to any one counterparty.

A hypothetical increase/decrease in interest rates by 1%, with all other variables remaining constant, would increase/decrease profits after tax by R2 124 578 (2015: R1 386 632) for the group.

At reporting date, the interest rate profile of the group’s interest‑bearing financial instruments was:

NotesInterest rates

applicable2016

R’0002015

R’000

Variable rate instruments

Assets

Other financial assets 7 Prime 57 961 24 948

Cash and cash equivalents 13 Daily call rates 202 538 62 328

Liabilities

Bank overdraft 13 Prime 32 148 18 142

Borrowings WesBank15

Prime to prime +2.25% 12 435 11 149

Borrowings

15

Three‑month JIBAR reset

quarterly +3.4% 123 962 123 176

Borrowings

15


quarterly +3.7% 75 080 –

Borrowings

15


quarterly +4.5% 25 244 –

Borrowings RCF

15


quarterly +3.5% 19 169 –

Foreign exchange riskThe group is exposed to foreign exchange risk only to the extent that it imports raw materials used to manufacture jewellery and inventory for the Luxury Division and inventory for the Food Division. These purchases are denominated mainly in US Dollar and Euro. The liabilities are settled in one of these foreign currencies.

As at 29 February 2016, the group had the following foreign currency denominated liabilities:

2016R’000

2015R’000

Trade and other payables – Euro 2 771 555

Trade and other payables – US Dollar 9 036 14 295

Total 11 807 14 850


33. Risk management (continued)Exchange rates used for conversion of foreign items were: USD 15.49 (2015: USD 11.66) and Euro 16.81 (2015: Euro 13.07).

If the foreign exchange rates change by R1 and were applied to the outstanding balances as at 29 February 2016, with all other variables held constant, the impact on post‑tax profits would be R748 175 (2015: R1 268 000).

In December 2015, a Forward exchange contract was entered into, which protects against fluctuations in the foreign exchange. The notional value of the hedge was Euro 400 000 and provides cover up until 31 March 2016. This resulted in a mark‑to‑market adjustment of R220 556 at 29 February 2016.

Credit risk

Credit risk is the risk of financial loss to the group if a counterparty to a financial asset fails to meet its contractual obligations. Credit risk arises on cash and cash equivalents, trade and other receivables and other financial assets. The group only deposits cash with major banks with high‑quality credit standing and limits exposure to any one counterparty.

Trade and other receivables mostly comprise of stock debtors, royalties and marketing fees receivable from franchisees.

Other financial assets comprise loans and extended terms offered to franchisees, loans to marketing funds of brands and conversion contributions.

Management evaluates credit risk relating to these receivables on an ongoing basis. The credit risk is assessed on an on‑going basis based on management’s past experience and knowledge of the business.

The granting of credit is made on application and is approved by directors. At year‑end, the group did not consider there to be any significant concentration of risk.

The following table represents the group and company’s exposure to credit risk.

Notes<1 year

R’000

1 – 2 yearsR’000

2 – 5 yearsR’000

More than 5 years

R’000Total

R’000

2016

Net investment in Finance lease 6 459 502 2 940 7 300 11 201

Other financial assets 7 2 921 3 230 9 274 65 820 81 245

Advertising levies 10 5 444 – – – 5 444

Trade and other receivables 12 80 258 – – – 80 258

Cash and cash equivalents 13 202 538 – – – 202 538

291 161 3 732 12 214 73 120 380 686

2015

Other financial assets 7 1 399 3 049 4 319 19 198 27 965

Advertising levies 10 8 255 – – – 8 255

Trade and other receivables 12 92 635 – – – 92 635

Cash and cash equivalents 13 62 328 – – – 62 328

164 617 3 049 4 319 19 198 191 183

To the extent that recoverable amounts are estimated to be less than their associated carrying values, impairment charges have been recorded in profit or loss and the carrying values have been written down to their recoverable amounts.




34. Capital managementThe board’s policy is to maintain a strong capital base so as to maintain investors’, creditor’s and market confidence and to sustain future development of the business. The capital base comprises equity and borrowings. As a result, the board reviews its total capital employed on a regular basis and makes use of several indicative ratios which are appropriate to the nature of the group’s operations and consistent with conventional industry measures. The principal ratios used in this review process are:–gearing,definedasinterest-bearingborrowings,lesscashdividedbycapitalemployed;and– return on equity, defined as headline earnings divided by average capital employed.

There were no changes in the group’s approach to capital management during the year.

In terms of existing covenants relating to capital management, the group may not exceed a net leverage ratio of 3.

The group has complied with this.

35. Earnings and headline earnings per share2016

Cents2015

Cents

(Loss)/earnings per share (24.2) 6.9

Diluted (loss)/earnings per share (23.9) 6.8

Headline (loss)/earnings per share (19.2) 6.8

Diluted headline (loss)/earnings per share (18.9) 6.7

R R

(Loss)/earnings per share is calculated on a profit for the group (75 806 699) 15 617 923

Headline (loss)/earnings per share is calculated on headline earnings (59 970 150) 15 417 743

Number Number

Weighted average number of ordinary shares 312 614 628 225 225 135

Theweightedaveragenumberofsharesiscalculatedaftertakingintoaccounttheeffectofsettingoff2 405 238 (2015: 2 248 000) treasury shares held by the Taste Holdings Share Trust against the issued share capital.


35. Earnings and headline earnings per share (continued)2016

R2015

R

Diluted headline earnings per share is based on basic earnings (75 806 699) 15 617 923

Diluted headline earnings per share is based on diluted headline earnings (59 970 150) 15 417 743

Number Number

Weighted average diluted shares in issue 316 766 246 230 878 532

Weightedaveragedilutedsharesiscalculatedaftertaking intoaccounttheeffectofthepossibleissueof4151618 (2015:5653397)ordinarysharesinthefuturerelatingtotheshareoptionschemeandthenoparvalueportionrightsissue.

R’000 R’000

Headline (loss)/earnings have been computed as follows:

(Loss)/earnings attributable to ordinary shareholders (75 806) 15 618

Adjusted for loss/(profit) on sale of property, plant and equipment 1 259 (246)

Impairment of assets 14 812 –

Gross measurements excluded from headline earnings 16 071 (246)

Tax effect (235) 46

Net measurements excluded from headline earnings 15 836 (200)

Headline earnings (59 970) 15 418

36. 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 foreseeable future.

37. Restatement of prior period37.1 The prior year revenue and cost of sales has been adjusted to take into account the marketing royalties

on corporate owned stores that were not eliminated on consolidation.

Impact on Statement of Profit or Loss increase/(decrease).

Food Division

R’000

Luxury Division

R’000Total

R’000

Revenue (1 004) (5 599) (6 603)

Cost of Sales 1 004 5 599 6 603

Net impact on profit for the year – – –




37. Restatement of prior period (continued)37.2 During the year, computer software was reclassified as intangible assets. Computer software was

previously reflected under property, plant and equipment.

Impact on Statement of Financial Position

2015R’000

Restated2015

R’000

TotalChange

2015R’000

Property, plant and equipment 105 369 104 057 (1 312)

Intangible assets 91 924 93 236 1 312

Impact on Statement of Profit or Loss increase/(decrease).

2015R’000

Depreciation (265)

Amortisation 265

Net impact on profit –


Number of shareholdings %

Number of shares %

Shareholder spread

1 – 999 1 090 32 333 362 0,09

1 000 – 9 999 1 406 42 5 164 516 1,37

10 000 – 99 999 742 22 19 826 935 5,25

100 000 shares and over 137 4 351 997 567 93,29

Total 3 375 100 377 322 380 100

Distribution of shareholders

Banks/Brokers 14 0.41 76 514 818 20.28

Close corporations 29 0.86 752 175 0.2

Endowment funds 6 0.18 20 939 074 5.55

Individuals 3 082 91.32 58 106 698 15.4

Insurance Companies 5 0.15 5 709 124 1.51

Mutual funds 8 0.24 39 138 317 10.37

Other Corporations 22 0.65 334 827 0.09

Private Companies 71 2.1 114 014 810 30.22

Public Companies 3 0.09 548 450 0.15

Retirement funds 1 0.03 4 924 644 1.31

Share trusts 1 0.03 2 405 238 0.64

Trusts 133 3.94 53 934 205 14.29

Total 3 375 100 377 322 380 100

Beneficial shareholders holding 5% or more, other than directors

Pershing Llc 67 745 871 17.95

Brimstone Investments Corporation Limited 57 568 779 15.26

Chickenland (Pty) Limited 30 769 958 8.15

PSG Konsult 29 370 077 7.78

Aaron Beare Foundation 20 909 878 5.54

Total 206 364 563 54.68

Shareholder spread

Non-public shareholders 21 0.62 191 987 232 50.88

Directors of the company 17 0.5 64 267 344 17.03

Own holdings 1 0.03 2 405 238 0.64

Strategic holdings (10% or more) 3 0.09 125 314 650 33.21

Public shareholders 3 354 99.38 185 335 148 49.12

Total 3 375 100 377 322 380 100

SHAREHOLDERS’ ANALYSISfor the year ended February 2016



Announcement of final results 25 May 2016 Annual general meeting 30 June 2016Announcement of interim results October 2016Financial year‑end 29 February

SHAREHOLDERS’ DIARYfor the year ended February 2016

JSE PERFORMANCEat February 2016

Opening price (cents) 329Closing price (cents) 210High for the year (cents) 525Low for the year (cents) 210Volume of shares traded during the year (R) 50 732 837Value of shares traded during the year 180 824 870Shares in issue 377 322 380 Market capitalisation (R) 792 376 998


Notice is hereby given that the annual general meeting of shareholders of Taste will be held at Summer Place, 69 Melville Road, Hyde Park, Johannesburg, on Thursday, 30 June 2016, at 12:00 to present the annual financial statements to shareholders and to consider and, if deemed appropriate, pass the ordinary and special resolutions listed below, with or without modification.

Kindly note that in terms of section 63(1) of the Companies Act of 2008, meeting participants (including proxies) will be required to provide reasonably satisfactory identification before being entitled to participate in or vote at the annual general meeting. Forms of identification that will be accepted include original and valid identity documents, driver’s licenses and passports.

The board of directors of the company has determined that the record date in terms of section 62(3)(a) as read with section 59(1) of the Companies Act, No 71 of 2008, as amended (“the Companies Act”) for the purpose of determining which shareholders of the company are entitled to receive notice of the annual general meeting is Friday, 20 May 2016 and the record date for purposes of determining which shareholders of the company are entitled to participate in and vote at the annual general meeting is Friday, 24 June 2016. Accordingly, the last day to trade in the company’s shares is Friday, 17 June 2016.

Shareholders are referred to the explanatory notes as attached to the notice of the annual general meeting for additional information, including abbreviated profiles of the directors standing for re‑election.

Presentation of annual financial statementsThe audited annual financial statements of the company for the year ended 29 February 2016, including the directors’ report, the auditors’ report and the report of the audit and risk committee, to be presented as required in terms of section 61(8)(a) of the Companies Act of 2008.

Report from the Social, Ethics and Remuneration CommitteeIn accordance with Companies Regulation 43(5)(c), issued in terms of the Companies Act of 2008, (Act 71 of 2008), as amended, the chairman of the Social, Ethics and Transformation Committee, or in the absence of the chairman any member of the Committee, will present the Committee’s report to shareholders at the annual general meeting.

Ordinary resolutions 1: Rotation and appointment of directorsMessrs Anthony Berman, Bill Daly and Sebastian Patel retire by rotation and, being eligible, offer themselves for re‑election as directors of the company.

In addition, any person appointed to the board of directors following the previous annual general meeting is similarly required to retire and is eligible for re‑election at the next annual general meeting.

Accordingly, shareholders are requested to consider and, if deemed fit, approve the separate ordinary resolutions set out below.

Ordinary resolutions 1.1 RESOLVED that the re‑appointment of Mr Anthony Berman as a non‑executive director of the company be and is hereby approved.

Ordinary resolutions 1.2 RESOLVED that the re‑appointment of Mr Bill Daly as a non‑executive director of the company be and is hereby approved.

NOTICE OF ANNUAL GENERAL MEETINGfor the year ended February 2016

TASTE HOLDINGS LIMITED(Incorporated in the Republic of South Africa)(Registration number 2000/002239/06)JSE code: TASISIN:ZAE000081162)(“Taste” or “the company” or “the group”)



Ordinary resolutions 1.3 RESOLVED that the re‑appointment of Mr Sebastian Patel as a non‑executive director of the company be and is hereby approved.

Brief biographies of the above directors are set out on pages 16 to 17.

Ordinary resolutions 2: Appointment of audit and risk committeeIt is proposed that the following independent non‑executive directors be appointed as members of the audit and risk committee.

Ordinary resolutions 2.1It is RESOLVED that Mr Anthony Berman be and is hereby appointed as a member and chairman of the audit and risk committee of the company, subject to his re‑election as a director pursuant to ordinary resolution number 1.1, be and is hereby approved until the conclusion of the next annual general meeting of the company in 2017.

Ordinary resolutions 2.2It is RESOLVED that Mr Wessel van der Merwe be and is hereby appointed as a member of the audit and risk committee of the company until the conclusion of the next annual general meeting of the company in 2017.

Ordinary resolutions 2.3It is RESOLVED that Mr Sebastian Patel be and is hereby appointed as a member of the audit and risk committee of the company, subject to his re‑election as a director pursuant to ordinary resolution number 1.3, be and is hereby approved until the conclusion of the next annual general meeting of the company in 2017.

Brief biographies of the above directors are set out on pages 16 to 17.

Ordinary resolution 3: Re-appointment of auditorsIt is RESOLVED, on recommendation of the audit and risk committee, that BDO South Africa Inc. be and is hereby reappointed as independent auditors of the company, the individual designated auditor, Stephen Shaw, meeting the requirements of S90 (2) of the Companies Act.

Ordinary resolution 4: Control of authorised but unissued ordinary sharesIt is RESOLVED that the authorised but unissued ordinary shares in the capital of the company be and are hereby placed under the control and authority of the directors of the company and that the directors be and are hereby authorised to allot and issue at their discretion the unissued but authorised ordinary shares in the share capital of the company and/or grant options to subscribe for the unissued shares, to such person/s for such purposes and on such terms and conditions as they may in their discretion deem fit, subject to the provisions of the JSE Listings Requirements, sections 38 and 41 of the Companies Act and the Memorandum of Incorporation of the company and, shareholders hereby waive any pre‑emptive rights thereto.

Ordinary resolution 5: Authority to issue shares for cashIt is RESOLVED that, in terms of the Listings Requirements of the JSE Limited (“JSE”), the mandate given to the directors of the company in terms of a general authority to:• allotandissue,ortoissueanyoptionsinrespectof,alloranyoftheauthorisedbutunissuedordinary

sharesinthecapitalofthecompany;and/or• sellorotherwisedisposeofortransfer,orissueanyoptionsinrespectof,ordinarysharesinthecapitalof

the company purchased by subsidiaries of the company, for cash, to such person/s on such terms and conditions and at such times as the directors may from time to time in their discretion deem fit, subject to the Companies Act, 2008 (Act 71 of 2008), as amended, the Memorandum of Incorporation of the Company and its subsidiaries and the Listings Requirements of JSE Limited (“the JSE Listings Requirements”) from time to time.


The JSE Listings Requirements currently provide, inter alia, that:• thatthisauthorityshallonlybevaliduntilthenextannualgeneralmeetingofthecompanybutshallnot

extendbeyond15monthsfromthedateofthismeeting;• the allotment and issue of the sharesmust bemade to persons qualifying as public shareholders as

definedintheJSEListingsRequirements;• theshareswhicharethesubjectoftheissueforcashmustbeofaclassalreadyinissue,orwherethisis

notthecase,mustbelimitedtosuchsharesorrightsthatareconvertibleintoaclassalreadyinissue;• thatapaidpressannouncementgivingfulldetails,includingtheimpactoftheissueonnetassetvalue,

net tangible asset value, earnings and headline earnings per share and, if applicable, diluted earnings and diluted headline earnings per share, be published after any issue representing, on a cumulative basis withinonefinancialyear,5%ofthenumberofsharesinissuepriortotheissueconcerned;

• thattheissuesinaggregateinanyonefinancialyearshallnotexceed15%ofthenumberofsharesofthecompany’s issued ordinary share capital (net of treasury shares) as at the date of this notice of annual generalmeeting,being56237571ordinaryshares;

• thatindeterminingthepriceatwhichanissueofsharesforcashwillbemadeintermsofthisauthority,the maximum discount permitted shall be 10% of the weighted average traded price of the ordinary shares on the JSE, measured over the 30 business days prior to the date that the price of the issue is agreedbetweenthecompanyandthepartysubscribingforthesecurities;and

• wheneverthecompanywishestouserepurchasedshares,heldastreasurystockbyasubsidiaryofthecompany, such use must comply with the JSE Listings Requirements as if such use was a fresh issue of ordinary shares.

Ordinary resolution 6: Advisory endorsement of the remuneration policyTo approve, as a non‑binding advisory vote in terms of the King III Report on Corporate Governance, the company’s remuneration policy (excluding the remuneration of the non‑executive directors for their services as directors and members of board committees) as set out in the Remuneration Report contained in the Integrated Report on page 79.

Ordinary resolution 7: Signing authorityTo authorise any one director or the secretary of the company to do all such things and sign all such documents as are deemed necessary to implement the resolutions set out in the notice convening the annual general meeting at which this ordinary resolution will be considered and approved at such meeting.

Special resolution 1: Approval of non-executive directors’ remunerationIt is RESOLVED, as a special resolution:• thatthecompanybeandisherebyauthorisedtopayremunerationtoitsnon-executivedirectorsfortheir

services as non‑executive directors, as contemplated in S66(8) and S66(9) of the Companies Act, (No71of2008)asamended;and

• thattheremunerationstructureandamountsassetoutbelow,beandareherebyapproveduntilsuchtime as rescinded or amended by shareholders by way of a special resolution:

Type of fee (annual fee)

Proposed fee in 2017

R

Board

Chairman 345 000

Board member 166 000

Audit and Risk Committee

Chairman 85 000

Member 71 000

Chairman of any other board committee 52 000

Member of any other board committee 36 000

NOTICE OF ANNUAL GENERAL MEETING continuedfor the year ended February 2016



Special resolution 2: General authority to repurchase sharesIt is RESOLVED, as a special resolution, that the mandate given to the company in terms of its Memorandum of Incorporation (or one of its wholly owned subsidiaries) (“MOI”) providing authorisation, by way of a general approval, to acquire the company’s own securities, upon such terms and conditions and in such amounts as the directors may from time to time decide, subject to the Listings Requirements of the JSE Limited (“the JSE”), sections 48 and 48 of the Companies Act of 2008, (Act 71 of 2008), as amended, and the company’s MOI, be extended, subject to the following:• thisgeneralauthoritybevaliduntilthecompany’snextannualgeneralmeeting,providedthatitshallnot

extend beyond 15 (fifteen) months from the date of passing of this special resolution (whichever period isshorter);

• therepurchasebeingeffectedthroughtheorderbookoperatedbytheJSEtradingsystem,withoutanypriorunderstandingorarrangementbetweenthecompanyandthecounterparty;

• repurchasesmaynotbemadeatapricegreaterthan10%(tenpercent)abovetheweightedaverageofthe market value of the ordinary shares for the 5 (five) business days immediately preceding the date on whichthetransactionwaseffected;

• anannouncementbeingpublishedassoonasthecompanyhasrepurchasedordinarysharesconstituting,on a cumulative basis, 3% (three percent) of the initial number of ordinary shares, and for each 3% (three percent) in aggregate of the initial number of ordinary shares repurchased thereafter, containing full detailsofsuchrepurchases;

• thenumberofshareswhichmaybeacquiredpursuanttothisauthorityinanyonefinancialyearmaynotin the aggregate exceed 20% (twenty percent) of the company’s issued share capital as at the date of passing of this special resolution or 10% of the company’s issued share capital in the case of an acquisition ofsharesinthecompanybyasubsidiaryofthecompany;

• the company’s sponsor confirming the adequacy of the company’s working capital for purposes ofundertaking the repurchase of ordinary shares in writing to the JSE prior to the company entering the markettoproceedwiththerepurchase;

• thecompanyand/oritssubsidiariesnotrepurchasingsecuritiesduringaprohibitedperiodasdefinedinparagraph 3.67 of the JSE Listings Requirements, unless it has in place a repurchase programme where the dates and quantities of securities to be traded during the relevant period are fixed and full details of the programme have been disclosed in an announcement published on SENS prior to the commencement oftheprohibitedperiod;

• atanypointintimethecompanyonlyappointingoneagenttoeffectanyrepurchasesonitsbehalf;and• theboardofdirectorspassingaresolutionthattheyauthorisedtherepurchaseandthatthecompany

passed the solvency and liquidity test set out in section 4 of the Companies Act and that since the test was done there have been no material changes to the financial position of the group.

The directors of the company and its subsidiaries will only utilise the general authority to purchase the company’s securities to the extent that they, having considered the effects of the maximum repurchase permitted, are of the opinion that for a period of 12 (twelve) months after the date of the notice of the annual general meeting and at the actual date of the repurchase:• thecompanyandthegroupwillbeable,intheordinarycourseofbusiness,topayitsdebts;• theworkingcapitalofthecompanyandthegroupwillbeadequateforordinarybusinesspurposes;• the assets of the company and the group, fairly valued in accordance with International Financial

ReportingStandards,willexceedtheliabilitiesofthecompanyandthegroup;• thecompany’sandthegroup’sordinarysharecapitalandreserveswillbeadequateforordinarybusiness

purposes;and• the directors have passed a resolution authorising the repurchase, resolving that the company has

satisfied the solvency and liquidity test as defined in the Companies Act and resolving that since the solvency and liquidity test had been applied, there have been no material changes to the financial position of the group.


Additional informationThe following additional information, some of which may appear elsewhere in the integrated report, is provided in terms of the JSE Listings Requirements for purposes of the general authority to repurchase the company’s securities set out in special resolution number 2 above:• majorshareholdersonpage154;and• sharecapitalofthecompanyonpage133.

Directors’ responsibility statement The directors in office, whose names appear on page 76 of the integrated report, collectively and individually accept full responsibility for the accuracy of the information pertaining to special resolution number 2 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, and that all reasonable enquiries to ascertain such facts have been made and that the special resolution contains all information required by the JSE Listings Requirements.

Material changes Other than the facts and developments reported on in the integrated report, there have been no material changes in the affairs or financial position of the company and its subsidiaries since the company’s financial year‑end and the date of signature of the integrated report.

Directors’ intention regarding the general authority to repurchase the company’s sharesThe directors have no specific intention, at present, for the company to repurchase any of its securities but consider that such a general authority should be put in place should an opportunity present itself to do so during the year which is in the best interests of the company and its shareholders.

Special resolution 3: Financial assistance to related and inter-related companiesIt is RESOLVED, by way of a special resolution in terms of section 44 and 45 of the Companies Act, that the directors of the company be and are hereby authorised to provide any direct or indirect financial assistance (which includes lending money, guaranteeing a loan or other obligation, and securing any debt or obligation) to all related and inter‑related companies within the Taste group of companies, or to any person for the purpose 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 of a related or inter‑related company, at such times and on such terms and conditions as the directors in their sole discretion deem fit and subject to all relevant statutory and regulatory requirements being met, such authority to remain in place for a period of two years or until rescinded by way of special resolution passed at a duly constituted annual general meeting of the company, provided that:(a) the board of directors of the company (“the Board”), from time to time, determines (i) the specific

recipientorgeneralcategoryofpotentialrecipientsofsuchfinancialassistance;(ii)theform,natureandextentofsuchfinancialassistance;(iii)thetermsandconditionsunderwhichsuchfinancialassistanceisprovided;and

(b) the Board may not authorise the company to provide any financial assistance pursuant to this special resolution number 3 unless the Board meets all those requirements of section 44 and 45 of the Companies Act which it is required to meet in order to authorise the company to provide such financial assistance.

Electronic participationShould any shareholder of the company wish to participate in the annual general meeting by way of electronic participation, that shareholder shall be obliged to make application in writing (including details as to how the shareholder or its representative can be contacted) to so participate, to the company secretary at the applicable address set out below at least 5 (five) business days prior to the annual general meeting in order for the company secretary to arrange for the shareholder (and its representative) to provide reasonably satisfactory identification to the transfer secretaries for the purposes of section 63 (1) of the Companies Act and for the company secretary to provide the shareholder (or its representative) with details as to how to access any electronic participation to be provided. The company reserves the right not to provide for electronic participation at the annual general meeting in the event that it determines that it is not practical to do so. The costs of accessing any means of electronic participation provided by the company will be borne by the shareholder so accessing the electronic participation.

NOTICE OF ANNUAL GENERAL MEETING continuedfor the year ended February 2016



ProxiesAny shareholder holding shares in certificated form or recorded on the company’s subregister in electronic dematerialised form in “own name” and entitled to attend, speak and vote at the meeting is entitled to appoint a proxy to attend, speak and on a poll vote in their stead. A proxy need not be a member of the company.

Proxy forms must be lodged at the offices of the transfer secretaries, Computershare Investor Services ProprietaryLimited(70MarshallStreet,CornerSauerStreet,Johannesburg;POBox61051,Marshalltown,2107), by no later than 10h00 on Monday, 27 June 2016.

All beneficial owners whose shares have been dematerialised through a Central Securities Depository Participant (CSDP) or broker other than with “own name” registration, must provide the CSDP or broker with their voting instructions in terms of their custody agreement should they wish to vote at the annual general meeting. Alternatively, they may request the CSDP or broker to provide them with a letter of representation, in terms of their custody agreements, should they wish to attend the annual general meeting.

Shareholders and proxies of shareholders are advised that they will be required to present reasonably satisfactory identification in order to attend or participate in the annual general meeting as required in terms of S63(1) of the Companies Act.

Voting thresholdsOrdinary resolutions 1 to 4, 6 and 7 are subject to a simple majority of votes.

In terms of the JSE Listings Requirements, the approval of a 75% majority of votes of all shareholders, present or represented by proxy, is required to approve ordinary resolution number 5.

The special resolutions must be supported by 75% or more of the voting rights exercised.

VotingIn terms of the JSE Listings Requirements any shares held by The Taste Share Incentive Scheme will not have its votes at the annual general meeting taken into account in determining the results of voting on ordinary resolution number 5 and special resolution number 2.

By order of the board

Elise BeukesCompany secretary


VotingA 75% majority of the votes cast by shareholders present or represented by proxy at the annual general meeting must be cast in favour of special resolutions for these to be approved. Ordinary resolutions are approved by more than 50% of the votes cast by shareholders present or represented by proxy with exception of ordinary resolution number 5 which requires a 75% approval.

Presentation of annual financial statementsAt the annual general meeting, the directors must present the annual financial statements for the year ended 29 February 2016 to shareholders, together with the reports of the directors, the audit and risk committee, and the auditors. These are contained within the integrated report.

Ordinary resolutions 1.1 to 1.3: Rotation and appointment of directorsIn accordance with the company’s memorandum of incorporation, one‑third of the directors are required to retire at each annual general meeting and may offer themselves for re‑election. In addition, any person appointed to the board of directors following the previous annual general meeting is similarly required to retire and is eligible for re‑election at the next annual general meeting.

The purpose of these resolutions is to elect, by way of separate resolutions, directors in the place of those retiring in accordance with the company’s Memorandum of Incorporation. The directors retiring are Messrs Anthony Berman, Bill Daly and Sebastian Patel, who being eligible offer themselves for re‑election.

Brief biographical details of each of the above directors and the remaining members of the board are contained on pages 16 to 18 of the integrated report of which this notice forms part.

Ordinary resolutions 2.1 to 2.3: Appointment of audit and risk committeeIn terms of S94(2) of the Companies Act, No 71 of 2008 (“the Act”), a public company must at each annual general meeting elect an audit and risk committee comprising at least three members who are directors and who meet the criteria of S94(4) of the Act. Regulation 42 to the Act specifies that one‑third of the members of the audit and risk committee must have appropriate academic qualifications or experience in the areas as listed in the regulation.

The board of directors of the company is satisfied that the proposed members of the audit and risk committee meet all relevant requirements.

The purpose of these resolutions is to appoint, by way of separate resolutions, the following independent non‑executive directors as members of the audit and risk committee:

• MrAnthonyBerman(Chairman)• MrWesselPetrusvanderMerwe• MrSebastianPatel

Ordinary resolution 3: Re-appointment of auditorsBDO South Africa Inc has indicated its willingness to continue in office and resolution 3 proposes the reappointment of that firm as the company’s auditors with effect from 1 March 2016. S90(3) of the Companies Act, No 71 of 2008 (“the Act”) requires the designated auditor to meet the criteria as set out in S90(2) of the Act.

The board of directors of the company is satisfied that both BDO and the individual designated auditor, being Stephen Shaw, meet the relevant requirements.

Ordinary resolutions 4 and 5: Control of and authority to issue authorised but unissued shares for cashIn terms of the Companies Act, No 71 of 2008 (“the Act”), directors are authorised to allot and issue the unissued shares of the company, unless otherwise provided in the company’s Memorandum of Incorporation or in instances as listed in S41 of the Act. The JSE requires that the Memorandum of Incorporation should provide that shareholders in a general meeting may authorise the directors to issue unissued securities and/or grant options to subscribe for unissued securities as the directors in their discretion think fit, provided that such transaction(s) has/have been approved by the JSE and are subject to the JSE Listings Requirements.

ANNUAL GENERAL MEETING – EXPLANATORY NOTESfor the year ended February 2016



In the absence of the Memorandum of Incorporation as contemplated in the Act, ordinary resolution 4 has been included to confirm directors’ authority to issue shares. Directors confirm that there is no specific intention to issue any shares, other than as part of and in terms of the rules of the company’s share incentive scheme, as at the date of this notice.

Also, in terms of the JSE Listings Requirements, the authority to issue shares for cash as set out in ordinary resolution 5 requires the approval of a 75% majority of the votes cast by shareholders present or represented by proxy at the annual general meeting for ordinary resolution number 5 to become effective.

Ordinary resolution 6: Advisory endorsement of remuneration policyThe King Report on Corporate Governance for South Africa, 2009 recommends that the remuneration philosophy of the company be submitted to shareholders for consideration and for an advisory, non‑binding vote to provide shareholders with an opportunity to indicate should they not be in support of the material provisions of the remuneration philosophy and policy of the company.

Ordinary resolution 7: Signing authorityAuthority is required to do all such things and sign all documents and take all such action as necessary to implement the resolutions set out in the notice and approved at the annual general meeting. It is proposed that the company secretary and/or director be authorised accordingly.

Special resolution 1: Approval of non-executive directors’ remunerationIn terms of S66(8) and S66(9) of the Companies Act, No 71 of 2008, companies may pay remuneration to directors for their services as directors unless otherwise provided by the Memorandum of Incorporation and on approval of shareholders by way of a special resolution. Executive directors are not specifically remunerated for their services as directors but as employees of the company and as such, the resolution as included in the notice requests approval of the remuneration paid to non‑executive directors for their services as directors of the company.

Special resolution 2: General authority to repurchase sharesS48 of the Companies Act, No 71 of 2008 (“the Act”) authorises the board of directors of a company to approve the acquisition of its own shares subject to the provisions of S48 and S46 having been met. In order to ensure compliance with the requirements of the Act, the Listings Requirements of the JSE Limited and the provisions of the Memorandum of Incorporation of the company, a special resolution is proposed to provide authority to the company to repurchase its shares.

Special resolution 3: Financial assistance to related and inter-related companiesS44(2) and S45(2) of the Companies Act, No 71 of 2008 (“the Act”) authorises the board to provide direct or indirect financial assistance to a related or inter‑related company or to any person in connection with any securities issued or to be issued by the company or a related or inter‑related company, subject to subsections (3) and (4) of S45 of the Act and unless otherwise provided in the company’s Memorandum of Incorporation. In terms of S45(3) of the Act, a special resolution of shareholders is required in these instances.

The main purpose of the special resolution as set out in the notice of the meeting is to approve the granting of inter‑company loans, a recognised and well known practice, details of which are also set out in the notes to the annual financial statements. In addition, the resolution will facilitate the granting of guarantees and security in connection with the borrowings by the Taste group of companies.

Special resolution number 3 will be effective only if and to the extent that such resolution is adopted by the shareholders of the company, and the provision of any such direct or indirect financial assistance by the company, pursuant to such resolution, will always be subject to the board of directors being satisfied that (i) immediately after providing such financial assistance, the company will satisfy the solvency and liquidity test as referred to in section 44(3)(b)(i) and 45(3)(b)(i) of the Companies Act, and (ii) the terms under which such financial assistance is to be given are fair and reasonable to the company as referred to in section 44(3)(b)(ii) and 45(3)(b)(ii) of the Companies Act.


GeneralShareholders and proxies attending the annual general meeting on behalf of shareholders are reminded that S63(1) of the Companies Act, No 71 of 2008 requires that reasonably satisfactory identification be presented in order for such shareholder or proxy to be allowed to attend or participate in the meeting.

Summary of the rights established in terms of section 58 of the Act as required by section 58(7)(b)For purposes of this summary, “shareholder” shall have the meaning ascribed thereto in the Act.

1. At any time, a shareholder of a company is entitled to appoint any individual, including an individual who is not a shareholder of that company, as a proxy, to participate in, speak and vote at a shareholders’ meeting on behalf of the shareholder or give or withhold written consent on behalf of such shareholder in relation to a decision contemplated in section 60 of the Act.

2. A proxy appointment must be in writing, dated and signed by the relevant shareholder, and such proxy appointment remains valid for one year after the date upon which the proxy was signed or any longer or shorter period expressly set out in the appointment, unless it is revoked in a manner contemplated in section 58(4)(c) of the Act or expires earlier as contemplated in section 58(8)(d) of the Act.

3. Except to the extent that the Memorandum of Incorporation of a company provides otherwise:

3.1 a shareholder of the relevant company may appoint two or more persons concurrently as proxies, and may appoint more than one proxy to exercise voting rights attached to different securities heldbysuchshareholder;

3.2 a proxy may delegate their authority to act on behalf of a shareholder to another person, subject toanyrestrictionsetoutintheinstrumentappointingtheproxy;and

3.3 a copy of the instrument appointing a proxy must be delivered to the company or to any other person on behalf of the relevant company before the proxy exercises any rights of the shareholder at a shareholders’ meeting.

4. Irrespective of the form of instrument used to appoint a proxy, the appointment of the proxy is suspended at any time and to the extent that the shareholder who appointed that proxy chooses to act directly and in person in the exercise of any rights as a shareholder of the relevant company.

5. Unless the proxy appointment expressly states otherwise, the appointment of a proxy is revocable. If the appointment of a proxy is revocable, a shareholder may revoke the proxy appointment by cancelling it in writing or making a later inconsistent appointment of a proxy, and delivering a copy of the revocation instrument to the proxy and the company.

6. The revocation of a proxy appointment constitutes a complete and final cancellation of the proxy’s authority to act on behalf of the relevant shareholder as of the later of the date: (a) stated in the revocationinstrument,ifany;or(b)uponwhichtherevocationinstrumentisdeliveredtotheproxyandthe relevant company as required in section 58(4)(c)(ii) of the Act.

7. If the instrument appointing a proxy or proxies has been delivered to the relevant company, as long as that appointment remains in effect, any notice that is required by the Act or the relevant company’s Memorandum of Incorporation to be delivered by such company to the shareholder, must be delivered by such company to the shareholder or to the proxy or proxies, if the shareholder has directed the relevant company to do so in writing and paid any reasonable fee charged by the company for doing so.

8. A proxy is entitled to exercise or abstain from exercising any voting right of the relevant shareholder without direction, except to the extent that the Memorandum of Incorporation or the instrument appointing the proxy provides otherwise.

ANNUAL GENERAL MEETING – EXPLANATORY NOTES continuedfor the year ended February 2016



9. If a company issues an invitation to shareholders to appoint one or more persons named by such company as a proxy or supplies a form of instrument for appointing a proxy:

9.1 such invitation must be sent to every shareholder who is entitled to notice of the meeting at whichtheproxyisintendedtobeexercised;

9.2 the invitation or form of instrument supplied by the relevant company must: (a) bear a reasonably prominentsummaryoftherightsestablishedinsection58oftheAct;(b)containadequateblankspace, immediately preceding the name or names of any person or persons named in it, to enable a shareholder to write in the name and, if so desired, an alternative name of a proxy chosen by suchshareholder;and (c)provideadequatespace for theshareholder to indicatewhether theappointed proxy is to vote in favour or against the applicable resolution/s to be put at the relevant meeting,oristoabstainfromvoting;

9.3 thecompanymustnotrequirethattheproxyappointmentbemadeirrevocable;and 9.4 the proxy appointment remains valid only until the end of the relevant meeting at which it was

intended to be used, unless revoked as contemplated in section 58(5) of the Act.

Salient dates

Last day to trade in order to be recorded in the register Friday, 17 June 2016

Record date for determining those shareholders entitled to vote at the annual general meeting Friday, 24 June 2016

Last day to lodge forms of proxy for the annual general meeting By 10h00 on Tuesday, 28 June 2016


NOTES



FORM OF PROXY

TASTE HOLDINGS LIMITED(Incorporated in the Republic of South Africa)(Registration number 2000/002239/06)JSEcode:TASISIN:ZAE000081162(“Taste” or “the company”)

Form of proxy for the annual general meeting of the company to be held at Summer Place, 69 Melville Road, Hyde Park, Johannesburg, on Thursday, 30 June 2016 (“the annual general meeting”).

Only for use by certificated shareholders, nominee companies of Central Securities Depository Participants (CSDP), brokers’ nominee companies and shareholders who have dematerialised their shares and who have elected own‑name registration and who wish to vote on the special and ordinary resolutions per the notice of the annual general meeting to which this form is attached.

Shareholders who have dematerialised their shares through a CSDP or broker must not complete this form of proxy and must provide their CSDP or broker with their voting instructions, except for shareholders who elected own‑name registration in the subregister through a CSDP, which shareholders must complete this form of proxy and lodge it with Computershare Investor Services Proprietary Limited.

Holders of dematerialised shares, other than with own‑name registration, who wish to attend the annual general meeting, must inform their CSDP or broker of such intention and request their CSDP or broker to issue them with the necessary letter of representation.

I/We (name in block letters)

of (address)

telephone number/s

being the holder/s of ordinary shares in the company, do hereby appoint

1. or failing him/her

2. or failing him/her3. the chairperson of the annual general meeting, as my/our proxy to act for me/us and on my/our behalf at the annual general meeting of the company, or any adjournment thereof, which will be held for the purpose of considering and, if deemed fit, of passing, with or without modification, the ordinary and special resolutions as detailed in the notice of annual general meeting, and to vote for and/or against the resolutions and/or abstain from voting in respect of the ordinary shares registered in my/our name/s, in accordance with the following instructions:

Number of votes (one vote per ordinary share)

For Against AbstainOrdinary resolution 1.1 Re‑election of Mr Anthony Berman as a non‑executive director

Ordinary resolution 1.2 Re‑election of Mr Bill Daly as a non‑executive director

Ordinary resolution 1.3 Re‑election of Mr Sebastian Patel as a non‑executive director

Ordinary resolution 2.1 Election of Mr Anthony Berman as a member and chairman of the audit and risk committee

Ordinary resolution 2.2 Election of Mr Wessel van der Merwe as a member of the audit and risk committee

Ordinary resolution 2.3 Election of Mr Sebastian Patel as a member of the audit and risk committee

Ordinary resolution 3 Reappointment of BDO South Africa Inc as external auditor

Ordinary resolution 4 Control of authorised but unissued ordinary shares

Ordinary resolution 5 Authority to issue shares for cash

Ordinary resolution 6 Advisory endorsement of the remuneration policy

Ordinary resolution 7 Signing authority

Special resolution 1 Approval of non‑executive directors’ remuneration

Special resolution 2 General authority to repurchase shares

Special resolution 3 Financial assistance to related and inter‑related companies

Signature

Signed at on 2016

Assisted by (if applicable)

Please see notes on reverse.


1. Each shareholder is entitled to appoint one or more proxies (none of whom need be a shareholder of the company) to attend, speak and vote in place of that shareholder at the annual general meeting.

2. Shareholder(s) that are certificated or own‑name dematerialised shareholders may insert the name of a proxy or the names of two alternative proxies of the member’s choice in the space/s provided, with or without deleting “the chairperson of the meeting”, but any such deletion must be initialled by the shareholder(s). The person whose name stands first on the form of proxy and who is present at the annual general meeting will be entitled to act as proxy to the exclusion of those whose names follow. If no proxy is named on a lodged form of proxy, the chairperson shall be deemed to be appointed as the proxy.

3. A shareholder’s instructions to the proxy must be indicated by the insertion of the relevant number of votes exercisable by the shareholder in the appropriate box provided. Failure to comply with the above will be deemed to authorise the proxy, in the case of any proxy other than the chairperson, to vote or abstain from voting as deemed fit and, in the case of the chairperson, to vote in favour of the resolution.

4. A shareholder or his/her proxy is not obliged to use all the votes exercisable by the shareholders, but the total of the votes cast or abstained from may not exceed the total of the votes exercisable in respect of the shares held by the shareholder.

5. Forms of proxy must be lodged at or posted to Computershare Investor Services Proprietary Limited, Ground Floor, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107), to be received no later than 10h00 on Tuesday, 28 June 2016.

6. The completion and lodging of this form of proxy will not preclude the relevant shareholder from attending the annual general meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof, should such shareholder wish to do so. Where there are joint holders of shares, the vote of the first joint holder who tenders a vote, as determined by the order in which the names stand in the register of members, will be accepted.

7. The chairperson of the annual general meeting may reject or accept any form of proxy which is completed and/or received otherwise than in accordance with these notes, provided that, in respect of acceptances, the chairperson is satisfied as to the manner in which the shareholder concerned wishes to vote.

8. 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 or Computershare Investor Services Proprietary Limited or waived by the chairperson of the annual general meeting.

NOTES TO THE FORM OF PROXY



CONTENTS











ADMINISTRATION





WHAT WE VALUE





Integrity


Respect


Intellect


Passion and Energy


Innovation


Focus


Leadership





Teamwork

INT

EG

RA

TE

D A

NN

UA

L RE

PO

RT

20

16



novat

ion






Page 58



NATURAL Page 74

FINANCIAL Page 57


HUMAN Page 62

Documents

ShareData · INTEGRATED ANNUAL REPORT 2016. Integrated Annual Report . 2016. l e. a d e r s h i p . r e s p e c t . i n n o v a t i o n. . NAVIGATION. The integrated ann