why do this in numerous ways. -...

Country Bird Holdings Integrated Annual Report 201132

Our operating area is characterised

by vastly disparate income groups –

where the extremely rich often live side

by side with the extremely poor. In

this environment, where nutrition can

be a daily challenge, the quality and

affordability of our protein products

becomes even more significant.

Over the years, Country Bird has

received the highest accolades for

quality from some of the most discerning

customers. More importantly, we

understand that our core business is

putting good food on the table – and we

do this in numerous ways.why


Sustainability report

REPORTING CONTEXT AND SCOPE

The purpose of the sustainability report is to document and explain the management of material sustainability

risks that the group faces. The risks that have been tabled below were identified through a process of

interviews with the managing directors or general managers of the reporting segments and via the risk

committee that meets twice a year. Issues raised through the stakeholder engagement process have been

taken into account herein. Risks have been prioritised on the basis of their potential impact, the likelihood of

occurrence and having taken into account the mitigating controls in place.

Segment Sustainability risk Action

Poultry SA I. Water – Large quantities of water are used in the

operation which need to be treated before it can

be discharged.

Continued use of best practices in treating

and releasing waste.

II. Waste – Biological waste needs to be disposed of in

the correct manner to prevent disease, comply with

regulation, and observe human sensitivities.

Continued use of best practices in treating

and releasing waste.

III. Energy – Cooling operations use large amounts of

electricity and rely on a constant supply.

Installation of generators at critical plants.

Discussions with Eskom for early warning.

IV. Skills – Many skills are industry specific and need to be

developed in-house.

Remuneration policy to attract and retain

human capital.

V. Press – Misinformed press spread false information

and damage our reputation.

Employment of reputation management

consultancy to assist in public relations.

VI. Imports – Illegal and dumped poultry products present

significant pricing challenges and the lack of food

safety standards on some of these products poses

reputational risk to the industry.

Continued engagement with industry

bodies and indirectly with government on

the issue.

Poultry

Other Africa

I. Minority shareholder – The minority shareholder in

Botswana is the company’s landlord and also its

largest customer. A good working relationship is

important.

Regular meetings and discussions (formal

and informal) with the shareholder.

II. Veterinary services – It is a challenge to secure readily

available high-quality veterinary services.

Use of South African quality veterinarians

and continued search for local service

providers.

III. Breeding stock supply – Grandparent day-old chicks

are flown in from the UK/USA and the supply can be

subject to disruption.

Constant communication and disease

monitoring of overseas supplier.

Animal Feed

SA

I. Energy – Milling operations rely on a constant supply of

clean power.

Installation of generators at critical plants.

Discussions with Eskom for early warning.

II. Communications – Rural operations are reliant

on effective data communication links to ensure

smooth running.

Ongoing discussions with Telkom and

other telephone service providers.

III. Skills – Many skills are industry specific and need to be

developed in-house.

Remuneration policy to attract and retain

human capital.

Animal Feed

Other Africa

IV. Storage – The use of outside storage is prevalent. Particular attention to weatherproof

covers, fumigation and stock counts to

minimise losses.

V. Procurement – Transport and distance from production

areas pose a challenge.

Utilisation of group procurement

services to source best priced local and

international commodities.

VI. Imports – Developing countries are vulnerable to cheap

imports from countries with well-developed agricultural

infrastructure.

Continued lobbying of government to

assist the development of agricultural

infrastructure to improve efficiency and

create employment.

Country Bird Holdings Integrated Annual Report 2011 35

STRATEGY

The strategy of the group is developed at two levels.

The first is at the group level where macro factors

such as return to shareholders, corporate citizenship,

sustainability risks and opportunities and strategic

direction are the primary focus. The second is at

segmental level where micro issues such as production

levels, market penetration, distribution channels and

efficiency, among others, are considered under the

umbrella of the group level strategy.

The South African Poultry segment has a formally

documented strategic plan through to 2017.

This is appropriate given the lead times of poultry

production from grandparent rearing to broiler

processing. Other segments have slightly shorter

time horizons, but in all cases sufficient flexibility

is retained to enable the group to move into

advantageous situations that may arise.

GOVERNANCE

The group ascribes to the latest trends in

outstanding corporate governance. A broad

outline of the corporate governance framework

is described below and all aspects have

been adapted to consider the multiple areas

of sustainability.

The shareholders have appointed a board

consisting of five non-executive and three executive

members. The board members have been

appointed for the blend of skills that they contribute

as a team. The non-executive members retire

annually and offer themselves for re-election at

the annual general meeting.

The board is assisted by subcommittees such

as the audit committee, the risk committee, the

remuneration committee and the information

technology committee. These committees have

an appropriate amount of responsibility delegated

to them by the board to discharge their various

responsibilities as envisaged in King III. Further

information about the meetings and attendance is

given on pages 42 and 44 of this report.

At an executive level the chief executive officer

retains overall responsibility for the day-to-day

running of the group. All reporting segments,

through the companies incorporated to house

them, have their own management structures

incorporating the key roles of operations,

marketing and financial administration. A group

policy and procedure manual has been produced

to provide continuity and consistency throughout

all segments.

The group has appointed KPMG to perform

the function of internal audit. There is an

approved rolling three-year risk-based internal

audit plan whereby key processes and aspects

of the group’s governance and reporting are

reviewed at least once every three years. This

is complemented by a series of ad hoc reviews

conducted as required to check areas that may

have been identified through the external audit,

any possible concerns raised by the board audit

committee, or through the hotline.

Extensive use is made of financial reporting with

daily, weekly and monthly reports to monitor the

segmental performance against budgets and

forecasts. Budgets are set annually prior to the

commencement of the financial year and forecasts,

using budgets as a base, are updated to reflect

changes in the operating environment throughout

the year.


Sustainability report (continued)

STAKEHOLDER ENGAGEMENTStakeholder engagement is critically important in identifying sustainability risks, managing and mitigating risks

that stem from stakeholders and for effectively informing stakeholders of major CBH developments.

Stakeholder Sustainability risk Frequency of engagement Outcome

Shareholders Competitive returns,

management accountability,

regulatory compliance, sound

governance, proactive risk

management and accurate

financial reporting.

Ad hoc on SENS, frequent ad hoc telephone

discussions with significant shareholders,

bi-annual investor presentations, trading

updates, website updates and the

annual report.

At the time of writing

there were no

unaddressed issues.

Government Regulation of maize.

Poultry imports.

Formal regular engagement through

industry bodies (SAPA, AFMA).

Adequate regulatory

framework in place with

the opportunity to improve

the policing thereof.

Telkom Theft of lines resulting in

communication disruption.

Informal engagement upon disruption with

formal discussions aimed at interventions

to prevent future disruption.

The incidence of cable

theft remains a challenge

for Telkom.

Eskom Interrupted power supplies

impacting production.

Regular formal discussions to anticipate and

avert demand overload. Initiatives under

way to reduce company dependence on

national grid.

Outages still occurring

but generator installations

where practical.

Local

municipalities

Road infrastructure. Frequent formal and informal interaction to

achieve road improvement in rural areas.

Potholes and deterioration lead to frequent

vehicle breakdowns resulting in bird-in-

transit mortalities.

Action steps formalised

with the group assisting

in repair of certain high-

traffic roads.

Customers Adherence to customer

standards to allow us

to supply.

Frequent scheduled and unscheduled

audits of facilities to ensure standards

are maintained.

All audits passed and

all corrective actions

completed on time.

Suppliers Certain suppliers (eg breeding

stock) indispensible to supply

chain.

Regular formal planning sessions with

frequent informal interactions to ensure

continuity of competitively priced product.

No supply interruptions

in the last 12 months and

back-up plans in place.

The group did not have any requests for information which were lodged in terms of the Promotion of Access

to Information Act.

Furthermore, the group did not incur any material regulatory penalties, fines or sanctions for contraventions or

non-compliance with statutory obligations.

PERFORMANCEAs part of the ongoing improvement initiatives that have been put in place in the documentation and reporting

of sustainability issues, certain factors have been identified as being measurable. These items and their

measurement, with comparisons to the prior year, are tabulated below with the anticipation of further items

being added to this in future.

WaterLitres/Ton

ElectricityKWh/Ton

GasKg/Ton

DieselLitres/Ton

2011 2010 2011 2010 2011 2010 2011 2010

Poultry RSA 8,60 8,41 353,74 411,98 9,36 10,27 1,10 1,37 Other Africa 11,34 10,12 332,39 337,63 – – 18,63 21,61

Animal Feeds RSA 43,88 41,93 33,69 36,49 – – – –Other Africa 118,54 173,27 50,21 60,96 10,24 10,91 1,75 2,36 Beef

RSA 2,24 2,94 301,54 314,37 – – 8,39 5,28

Notesa. All measures above are per ton of product produced.b. In some instances boreholes are used and some of these do not have flow meters. It is the intention of the group to

install flow meters at these sites.c. In Zambia, waste water is treated and then used in a market gardening scheme to assist the local residents in growing

vegetables and cash crops for sale for their own personal gain. It also irrigates a tree plantation, the timber from which is used in the construction of poultry houses.


ASSURANCE AND REPORTING STANDARDS

The contents of this sustainability report have not been independently assured, however, the following

assurance has been obtained:

The percentages refer to the score or rating obtained as a result of the audit performed and indicate

adherence to standards and procedures required.

Audit Year Tigane Botshabelo Mafikeng

Pick n Pay 2008 Not done 81% 91%

2009 92% 91% 76%

2010 85,5% and 86,3% 91% 91%

STAR (KFC) 2008 81,5% and 76,5%

85,5% and 86,3%

Not done

Not done

Not done

Not done

2009 85,4% and 85,3%

86,19% and 87,35%

Not done Not done

2010 86,64% and 87,14%

85,75% and 86,65%

Not done Not done

2011 86,2% and 88,34% Not done Audit outstanding

Nando's 2008 Not done 84%

83%

90%

2009 Not done 89% 88%

2010 Not done Not done Not done

SABS 2008 7 non-conformances (cleared

– pass)

1 non-conformance (cleared – pass) 1 non-conformance

(cleared – pass)

2009 0 non-conformances 2 non-conformances (in process) 0 non-conformances

2010 0 non-conformances – HACCP

0 non-conformances – PAS 220

0 non-conformances – HACCP

1 minor non-conformance – PAS 220

Non-conformance was cleared

0 non-conformances

– HACCP

0 non-conformances

– PAS 220

May 2011 0 non-conformances – HACCP

0 non-conformances – PAS 220

Not yet done Not yet done

North West

province:

HAS

inspections

2008 First place Not done in Free State

Pass HAS audit done by the

Department of Agriculture

Second place

2009 Second place Not done First place



Department

of

Agriculture:

Export

2008 Pass Pass Pass

2009 Pass Pass Pass

2010 Pass Pass Pass

Animal

welfare

2010 Process plant – 88,9% Not done Not done

Broilers – 79,3%

Catching and transport – 67,7%

2011 Process plant – 91,4%

Broilers – 90%

Catching and transport – 85,9%

Breeding Rearing Mafikeng –

89,9%

Breeding Laying Mafikeng –

91,1%

Hatchery Mafikeng – 88,6%

Not done Not done


Sustainability report (continued)

Where information is not measurable, estimates

and judgements are used, based on management’s

best estimates and historical events. These

estimates and judgements are based on historical

experience and other factors such as expectations

of future events that are believed to be reasonable

under the circumstances. In compiling this report,

management has used skills and knowledge of the

industry to make estimates to establish material

priorities of items reported upon.

COMMUNITIES

CBH is involved in various activities across the

region in which we operate aimed at community

development. Supreme has supported the following

institutions with monthly supplies of chicken and/or

eggs, all of which are situated in the communities

from which our staff are employed:

Supreme launched a sponsorship initiative for

Bloemfontein Child Welfare during 2010. Through

this social responsibility initiative, the company

hosts a monthly Supreme Poultry Chicken Day

and provides chicken and eggs, benefiting some

520 children at nine safe houses located in the

Bloemfontein region. This has made a meaningful

contribution to the lives of these children. The

company’s CSI activities are carried out under the

“Love Chicken” umbrella.

Nutri Feeds launched an ABET programme during

the year, under which 75 adult employees of Nutri

Feeds will receive training in numeracy literacy of

40 hours per employee.

In Zambia, donations in the form of chicken, feed

and eggs are made to a wide range of communities

and local government organisations. Weekly

contributions of commercial eggs are made to

the Women’s Federation for World Peace and

Missionaries to assist with feeding Aids orphans

and street children. Similarly the business supports

the Lusaka Animal Welfare Society. Donations of

feed and feed blocks were made to the Elephant

Orphanage and the Wildlife Conservation Trust.

In Botswana, six organisations benefited from the

support of Ross Botswana in various forms, from

cash donations to the supply of day-old chicks for

community feeding schemes. These organisations

include the following: Phaphane Policing Cluster,

Stepping Stones International, Pilane Village

Development Council, Lady Khama Charitable

Trust, World Community Counselling Organisation

and Lebitha.


STAFF

CBH recognises the importance of its people and is focused on building a community of people who have

a common purpose.

Supreme Poultry Nutri Feeds Beef Ross Africa

Number of employees 3 425 358 139 1 261

Permanent 2 956 353 131 1 029

Non-permanent 469 5 8 232

Number of workers covered by

collective bargaining agreement

608 336 78 0

Injuries on duty

Number of major incidents 0 0 0 0

Number of minor incidents 62 2 49 7

Man hours lost due to injury on duty 911 184 753 356

Fatalities 0 0 0 0

Programmes relating to life

threatening diseases

All plants have

clinics on

site where an

occupational

health nurse

provides education

and assistance.

Department of

Health presents six

Aids awareness

programmes

Clinics on

premises to

provide education

and assistance

No formal

programmes

Local government

and World Health

Organisation

programmes

Skills development

In-house training 501 101 71 34

External 0 72 6 34

Launch of the sponsorship initiative with Bloemfontein Child Welfare during 2010.


Economic value-added statement

Creating value for stakeholders through sustainable economic growth and development encompasses

a number of elements. In generating economic value for shareholders and other stakeholders, CBH provides

a quality and affordable food source. The business generated R122,9 million in net income during 2011, from

which major stakeholders benefited in varying proportions as indicated in the table below. Employees were

the main beneficiaries, followed by government through taxes and shareholders through capital repayments.

2011R

2010

R

Revenue 2 834 658 939 2 433 660 139

Cost of goods sold and services (2 176 097 897) (1 950 432 286)

Value added 658 561 042 483 227 853

Finance income 1 841 222 2 042 347

Total value added 660 402 264 485 270 200

Distributed as follows:

To pay employees

Salaries, wages and benefits 46% 300 748 305 55% 266 672 190

To pay providers of capital 11% 71 122 163 18% 85 256 651

Finance cost 7% 47 402 436 11% 55 451 731

Capital repayment 4% 23 719 727 6% 29 804 921

Taxation 23% 151 200 035 17% 84 560 627

Normal tax 8% 52 129 222 4% 21 394 872

VAT 9% 61 623 835 7% 34 167 971

Employees' tax 6% 37 446 979 6% 28 997 785

To replace assets

Depreciation 6% 37 903 577 6% 31 162 993

To expand operations

Attributable income 15% 99 428 184 4% 17 617 738

Total value added 100% 660 402 264 100% 485 270 200

2011

45

23

11

21

2010

55

17

18

10

Employees

Shareholders

Government

Reinvested


CBH subscribes to the principles of the King III

Report and Code which took effect on 1 March

2010. Scope for improvement in the application of

certain aspects of the King III Report and Code will

again be reviewed and addressed during the course

of the financial year ending 30 June 2012.

The directors seek at all times to conduct

business with integrity and accountability, and in

line with the code of ethics incorporated in the

board charter. This entails ongoing implementation

of structures, policies and practices that enhance

corporate governance in the group’s best interests

and for the ultimate benefit of all stakeholders.

BOARD OF DIRECTORS

The CBH board consists of eight members. Of

these, four directors are classified as independent

non-executive directors. One director is a non-

executive director and three are executive directors.

The board is chaired by Bryan Kent, an

independent non-executive director. The

chairperson is responsible for providing leadership

to the board, overseeing its efficient operation and

has been tasked with ensuring effective corporate

governance practices. The roles of chairman and

chief executive officer are separate and a clear

division of responsibility exists.

The chief executive officer, Jeff Wright, is

responsible for formulating, implementing and

maintaining the strategic direction of CBH,

as well as ensuring that the day-to-day affairs

of the company are appropriately supervised

and controlled.

The board’s responsibilities include providing

CBH with clear strategic direction, ensuring that

there is adequate succession planning at senior

levels, overseeing operational performance and

management, determining policies and processes

which seek to ensure the integrity of CBH’s risk

management and internal controls, implementing

and maintaining the company’s communication

policy and overseeing director selection, orientation

and evaluation.

The roles and responsibilities of the board and

its committees are set out in formal charters

which are reviewed annually to ensure that they

remain relevant.

The board retains full and effective control over the

business of CBH. It has defined levels of authority,

through a written delegation of authority, which

sets out the decisions the board wishes to reserve

for itself. The delegation is regularly reviewed

and monitored. The board is accountable for

communicating appropriate risk and control policies

through the group. Non-executive directors bring an

independent view to the board’s decision-making.

All directors are required to comply with the

requirements of King III and the Companies Act

and the company secretary provides appropriate

guidance in this regard.

All directors are required to declare, on an annual

basis, any interest in a proposed transaction or

arrangement with the group. In addition, all other

material interests are disclosed by directors, as and

when they arise.

Corporate governance report


Corporate governance report (continued)

RE-ELECTION OF DIRECTORS AND NEW

APPOINTMENTS

Non-executive directors have fixed terms of

appointment and all the non-executive directors

are subject to retirement and re-election by

shareholders every year. The names of the directors

to retire at the forthcoming annual general meeting

(AGM) appear in the directors’ report contained

in the 2011 annual financial statements and in

the annual general meeting notice bound into the

annual financial statements.

Generally, directors have been and will be

nominated based on their calibre, credibility,

knowledge, experience, the beneficial impact they

are expected to exert over the company’s affairs

and the time and attention they are able to devote

to their duties. The remuneration committee is

responsible for vetting the individuals proposed

for directorship and making recommendations

to the full board for approval. Before nomination,

appropriate background checks are performed on

proposed new directors.

The board ensures that all new directors are

adequately informed on CBH’s business,

policies and meeting dates and procedures.

This is achieved through the provision of relevant

information and by induction during which new

directors also receive the board charter.

ATTENDANCE AT MEETINGS

The board of directors meets at least four times a

year with additional meetings called if necessary

or desirable. Information relevant to a meeting is

supplied on a timely basis to the board ensuring

directors can make reasoned decisions. The

directors have unrestricted access to CBH

information, records, documents and management,

and where appropriate, they may seek the advice of

independent professionals on matters concerning

the affairs of the group, at the expense of CBH.

Four board meetings and one strategy session

took place during the year under review. Details of

attendance at these meetings are as follows:

Board member Position18 August

201022 November

201026 January

201112 May

2011*13 May

2011

BH Kent Chairman

JD Wright Chief executive officer

R Gibbison Non-executive director

GP Heath Non-executive director

IWM Isdale Non-executive director Apology

KW James Executive director

CD Stein Non-executive director Apology

RJ Taylor Group financial director

*Strategy meeting.

BOARD EFFECTIVENESS

With the assistance of the internal audit function, the company undertook a performance evaluation of

the board and its committees. Each director was requested to complete a questionnaire which assessed

the effectiveness of the board or committee and fulfilment of the board charter or terms of reference.

The chairman of the board is responsible for determining any actions required to enhance the effectiveness

of the board.


BOARD COMMITTEES

To enable the board to properly discharge its

responsibilities and duties, certain responsibilities

of the board have been delegated to board

committees. The creation of board committees

does not reduce the directors’ overall

responsibilities and therefore all committees must

report and make recommendations to the board.

The board established various committees on which

non-executive directors play important roles. The

responsibilities delegated to board committees are

formally documented in the terms of reference for

that committee, which have been approved by the

board and are reviewed annually. The effectiveness

of the committees is reviewed annually by the

board, based on a self-evaluation done by each

committee to the degree to which it has fulfilled its

terms of reference.

AUDIT COMMITTEE

The role of the audit committee is to review

the group’s financial position and make

recommendations to the board on all financial

matters, business risks, internal controls and

compliance. This includes assessing the integrity

and effectiveness of related control systems to

ensure that the group’s business is conducted in a

proper and economically sound manner.

The audit committee is chaired by an independent

non-executive director. The committee consists

of three additional members, two of whom are

independent non-executive directors. Members

of the committee are Bryan Kent (chairman),

Ray Gibbison, Ian Isdale and Geoff Heath. Bryan

Kent is chairman of both the board and audit

committee. Due to his knowledge of the group, and

his experience and knowledge of accounting and

auditing, it was considered appropriate for him to

remain as chairman of the audit committee.

In performing its duties, the committee maintains

an effective working relationship with the board,

management and other board committees,

notably the risk committee whose minutes are

noted at audit committee meetings. In so doing,

risk management controls any aspects under the

auspices of the risk committee as well as the status

of any specific risk issues dealt with by the risk

committee are noted.

The audit committee reviews the effectiveness

of the risk management process and internal

control in the group with reference to findings

of both the internal and external auditors. Other

areas covered include the review of important

accounting issues, including specific disclosures

in the financial statements, a review of major audit

recommendations and all matters required in terms

of legislation.

The internal and external auditors have direct

access to the audit committee and are invited to all

meetings of the committee.

The committee meets three times a year. Executive

directors and selected management attend these

meetings as attendees but are not allowed to vote.

The significant functions of the committee include:

external auditor

services

The role of the audit committee applied to all the

subsidiaries of the group.

The committee satisfies itself annually of the

expertise, resources and experience of the

company’s finance function and the chief financial

officer’s suitability.



Attendance at audit committee meetings:

Name Position18 August

201022 November

201013 May

2011

BH Kent Chairman

R Gibbison Non-executive director


IWM Isdale Non-executive director Apology

C Stein* Non-executive director Apology

By invitation:

JD Wright Chief executive officer

RJ Taylor Chief financial officer

*Not reappointed to the committee with effect from 30 June 2011, when the group aligned committee memberships with

the requirements of King III.

RISK COMMITTEE

The risk committee was established during the

financial year. This committee comprises the chief

financial officer (chairman) and the managing directors

of the subsidiaries of CBH. Internal audit is also

present at the meetings, by standing invitation. The

committee meets at least twice a year.

The committee oversees management compliance

with risk management policies and procedures,

and reviews the adequacy of the risk management

framework in relation to appropriate risks.

The main objectives of the committee are as follows:

strategies in liaison with executive directors and

senior managers

audit committee, internal auditors and other

parties engaged in risk management activities

risk-related information presented on corporate

accountability and specific associated risks,

as well as the financial, business and strategic

risk areas.

REMUNERATION COMMITTEE

The remuneration committee is concerned

with executive remuneration. The members of

the committee are Ray Gibbison (chairman),

Geoff Heath and Bryan Kent.

The remuneration committee met two times during

the year under review and the main task of the

committee in this financial year was to recommend

a new executive reward scheme and share

option scheme.

The committee was assisted by independent

advisers.

Attendance at meetings:

Board member Position10 May

201016 September

2010

R Gibbison Chairman


BH Kent Non-executive director* Not applicable Not applicable

JD Wright (by invitation)

Chief executive officer

*Appointed to the remuneration committee as from 1 July 2011.


The functions of this committee include:

and responsibly

accordance with legislation

implementation of remuneration policies in

relation to non-executive directors, executive

directors and other executives’ remuneration.

The remuneration strategy is aimed at ensuring that

levels of remuneration are sufficient to attract, retain

and motivate executives and, where appropriate,

at aligning the executives’ interests with those of

shareholders. Consequently, the strategy is aimed

at ensuring that the performance-related elements

of an executive’s remuneration should constitute a

meaningful portion of total remuneration.

Executive director and management remuneration

comprises the following four principal elements:

The remuneration committee recommends fees

payable to non-executive directors for approval

by the shareholders. The proposed fees for non-

executive directors for the next two years are based

on best practice and market information. Details of

the proposed fees are set out in the notice of the

annual general meeting appearing on pages 138

to 141.

REMUNERATION POLICY

The objective of the policy is to attract and retain

the correct level of skills within the organisation

such that it is adequately resourced with human

capital. The policy is also designed to pay fair

compensation for the work performed at every level

of the organisation taking into account the level

of qualification, skills and experience to perform

the various tasks. The compensation has various

elements to it:

that the employee earns. Benchmarking

exercises are undertaken periodically to

ensure that the fixed remuneration base is

competitive with specific regard to the industry,

the complexity of the tasks, and the level of

responsibility.

is a variable element to total remuneration

whereby employees are incentivised to meet

certain targets, the attainment of which is linked

to a predefined financial reward. Limits are

in place to ensure that the variable elements

are capped at a certain percentage of the

fixed remuneration.

members of the organisation participate in a

long-term incentive scheme designed to align

their efforts with the shareholders’ expectation of

capital growth in their investment. Formerly this

was in the format of a share option scheme but

this has been replaced with an appreciation rights

scheme or “Phantom Share Scheme”.

INTERNAL AUDIT

The internal audit function is provided by KPMG’s

internal audit services. The functions of the internal

audit function consist of the following:

audit plan for the year

approval by the audit committee

audit committee

planning and promote their reliance on internal

audit work performed

the testing of controls, according to the agreed

internal audit plan.

The purpose, authority and responsibility of the

internal audit activity is defined and governed by

an internal audit charter, approved by the audit

committee and board. Internal audit has free and

unrestricted access to management, employees,

activities, physical locations and to all information

considered necessary for the proper execution of

internal audit’s work.



The internal audit function has unrestricted access

to the chairman of the audit and risk committees.

EXTERNAL AUDIT

PricewaterhouseCoopers Inc (PwC) is the external

auditor of CBH and its subsidiaries. The audit

committee continually monitors the independence

and objectivity of the external auditors. During the

year, PwC provided certain non-audit services.

The audit committee concluded that there were no

areas of conflict.

The external auditors attend all audit committee

meetings and have unrestricted access to the

chairman of the audit committee.

The audit committee has nominated, for re-election

at the annual general meeting, PwC as the external

audit firm and Louis Rossouw as the designated

auditor responsible for performing the functions

of auditor, for the 2012 financial year. The audit

committee has satisfied itself that the audit firm and

designated auditor are accredited as such on the

JSE list of auditors.

INTERNAL FINANCIAL CONTROLS

The directors are responsible for ensuring

that internal control systems exist that provide

reasonable assurance regarding the safeguarding

of assets and the prevention of their unauthorised

use or disposition, proper accounting records

are maintained and the financial and operational

information used in the business is reliable.

Based on the results of the formal documented

review of the design, implementation and

effectiveness of the group’s system of internal

financial controls conducted by the internal audit

function during the 2011 financial year and,

considering information and explanations given by

management and discussions with the external

auditors on the results of their audit, the audit

committee is satisfied with the effectiveness of the

company’s internal financial controls.

COMPANY SECRETARY

To enable the board to function effectively, all directors

have full and timely access to all information that

may be relevant to the proper discharge of their

duties and obligations. This includes information

such as agenda items for board meetings, corporate

announcements, investor communications and any

other developments which may affect the group.

The company secretary is responsible for facilitating

this access.

The company secretary acts as adviser to the board

and plays a pivotal role in ensuring compliance with

statutory regulations and corporate governance.

The company secretary is also responsible for the

induction of new directors, tabling information on

relevant regulatory and legislative changes, and

giving guidance to the directors regarding their

duties and responsibilities. The directors have

unlimited access to the advice and services of the

company secretary.

CODE OF ETHICS AND BUSINESS

CONDUCT

The board is committed to creating a culture of the

highest levels of professionalism and integrity in its

business dealings with stakeholders. The code of

ethics sets out high standards of honesty, integrity

and mutual respect. Directors and employees are

expected to act in terms of the code of ethics at

all times.

An independent ethics hotline is available where

unethical behaviour, workplace dishonesty,

fraud, theft or any other crime may be reported

anonymously. All calls logged on the hotline are

reported to the audit committee. The board has no

reason to believe that there was any material non-

compliance with CBH’s code of ethics during the

year under review.

The board has an insider trading policy in place,

in terms of which closed periods (as defined in

the JSE Listings Requirements) apply. During any

closed period, the directors, officers and defined

employees and members of their households

(“specified persons”) may not deal in CBH shares.


Should any specified persons wish to deal in

CBH shares during an open period, written

clearance must be obtained from the chairman

before any dealing takes place. In terms of the

JSE Listings Requirements, any share dealings by

directors are required to be published on SENS. A

register of all share dealings is maintained by the

company secretary and reviewed by the board on

a regular basis.

STAKEHOLDER COMMUNICATION

In all communication with stakeholders, the

board aims to represent a balanced and

understandable assessment of CBH’s position.

This is done through adhering to the principles of

openness and substance over form and striving

to address material matters of significant interest

to all stakeholders.

The board encourages shareholder attendance

at general meetings and provides full and

understandable explanations of the effects of

resolutions to be proposed. Communication with

institutional shareholders and investment analysts

is maintained through periodic presentation

of financial results, one-on-one visits, trading

statements and press announcements of

interim and final results, as well as the proactive

dissemination of any messages considered

relevant to investors. The quality of this

information is based on the standards of

promptness, relevance and transparency.

The group makes every effort to ensure that

information is distributed through an appropriate

range of communication channels to ensure the

security and integrity of the information and that

critical financial information reaches all shareholders

simultaneously.

RISK MANAGEMENT

The objective of risk management is to identify,

assess, manage and monitor the risks to which

the business is exposed, in the interest of all

stakeholders.

The group has established a culture of managing

risk. A significant number of embedded processes,

resources and structures are in place to address

risk management needs. These range from internal

audit systems, insurance, IT security, compliance

processes, quality management and a number of

other processes.

A risk committee has been established to identify

and manage risk at both the subsidiary level and at

a group level. This committee reports directly to the

audit committee and the board.

The risk management process requires

management to identify, analyse and evaluate the

risks associated with activities under their control,

mitigate and control these risks, take corrective

actions, accept and monitor the risks.

The group has undergone an objective process of

business risk assessment during the period under

review with assistance from external consultants.

These risk assessments highlighted areas where

further control action was required and which is

now being undertaken. The group risk register

summarises the significant risks faced by the group,

taking into account the likelihood of occurrence,

the potential impact and the related mitigating

factors and compensation controls. Management’s

treatment of risks is aligned to the risk tolerance

and appetite approved by the board. Appropriate

risk response strategies in relation to the group’s

major risks have been developed and implemented.

The adequacy and effectiveness of these strategies

are reviewed on an ongoing basis to ensure that

they are responsive to changes in the dynamic

environment in which the group operates.

INTEGRATED REPORTING

Sustainability performance and reporting has not

been independently assured for the year except

for the assurance obtained as indicated on

page 37. The board has relied information provided

by management with regard to the reliability of

sustainability issues in the integrated annual report.

Independent assurance will be included on the

board’s agenda for the 2012 financial year.


King III index

Ethical leadership and corporate citizenship Compliance with laws, codes, rules and standards

Effective leadership based on an ethical foundation The board ensures that the company complies with relevant laws

Responsible corporate citizen The board and directors have a working understanding of the relevance and implications of non-compliance

Effective management of company’s ethics Compliance risk forms an integral part of the company’s risk management process

Assurance statement on ethics in integrated annual report1 The board has delegated to management the implementation of an effective compliance framework and processes6

Boards and directors Governing stakeholder relationships

The board is the focal point for and custodian of corporate governance

Appreciation that stakeholders’ perceptions affect a company’s reputation

Strategy, risk, performance and sustainability are inseparable Management proactively deals with stakeholder relationships

Directors act in the best interests of the company There is an appropriate balance between its various stakeholder groupings

The chairman of the board is an independent non-executive director

Equitable treatment of stakeholders

Framework for the delegation of authority has been established Transparent and effective communication of stakeholders

The board comprises a balance of power, with a majority of non-executive directors who are independent

Disputes are resolved effectively and timeously7

Directors are appointed through a formal process The governance of information technology

Formal induction and ongoing training of directors is conducted

# The board is responsible for information technology (IT) governance8

The board is assisted by a competent, suitably qualified and experienced company secretary

IT is aligned with the performance and sustainability objectives of the company

# Regular performance evaluations of the board, its committees and the individual directors2

Management is responsible for the implementation of an IT governance framework

Appointment of well-structured committees and oversight of key functions

# The board monitors and evaluates significant IT investments and expenditure8

An agreed governance framework between the group and its subsidiary boards is in place

# IT is an integral part of the company’s risk management8

Directors and executives are fairly and responsibly remunerated # IT assets are managed effectively8

Remuneration of directors and senior executives is disclosed3 # The risk committee and audit committee assist the board in carrying out its IT responsibilities8

Other significant directorships of each board member is disclosed10 The governance of risk

# The company’s remuneration policy is approved by its shareholders4

The board is responsible for the governance of risk and setting levels of risk tolerance

Internal auditThe risk committee assists the board in carrying out its risk responsibilities

Effective risk-based internal audit The board delegates the risk management plan to management

Written assessment of the effectiveness of the company’s system of internal controls and risk management

The board ensures that risk assessments and monitoring is performed on a continual basis

Internal audit is strategically positioned to achieve its objectives Frameworks and methodologies are implemented to increase the probability of anticipating unpredictable risks9

Audit committee Management implements appropriate risk responses

Effective and independent # The board receives assurance on the effectiveness of the risk management process9

Suitably skilled and experienced independent non-executive directors

Sufficient risk disclosure to stakeholders

Chaired by an independent non-executive director5 Integrated reporting and disclosure

Oversees integrated reporting # Ensures the integrity of the company’s integrated report1

A combined assurance model is applied to improve efficiency in assurance activities1

Sustainability reporting and disclosure is integrated with the company’s financial reporting

Satisfies itself of the expertise, resources and experience of the company’s finance function

Sustainability reporting and disclosure is independently assured1

Oversees internal audit A summarised integrated report should be prepared in addition to the complete integrated report11

In complianceNon-compliance

# Partial compliance


Note Explanation

1 Independent assurance and integrity of information included in the integrated annual report will be included on the board’s agenda

for consideration for the 2012 financial year.

2 The performance of the board, committees and individual directors was not evaluated during the 2011 financial year. Performance

evaluations were commenced during August 2011 and are still to be evaluated by the chairman.

3 The remuneration of the most highly paid employees who are not directors, has not been disclosed. However, key management

remuneration has been disclosed.

4 The remuneration of the non-executive directors are approved by the shareholders on an annual basis. However, the remuneration

policy for non-executive directors is not tabled to the shareholders for approval.

5 The chairman of the board is also the chairman of the audit committee. Due to the chairman’s knowledge of the group, experience and

knowledge of accounting and auditing, it was considered appropriate for him to remain as chairman of the audit committee.

6 The compliance framework is still in the implementation process with full implementation expected within 2012.

7 There is currently no dispute resolution process. The board will consider the implementation of such a process during 2012.

8 The current IT governance frameworks and processes are currently being enhanced to ensure further alignment with King III.

9 Current risk frameworks and methodologies implemented will be further enhanced to ensure alignment with King III.

10 Other significant directorships of each board member have not been disclosed.

11 A summarised integrated report has not been prepared but will be considered for the next financial year.


GRI index

The company has adopted the Global Reporting Initiative (GRI) guidelines for the reporting of sustainability

issues during the preparation of the integrated annual report. Reporting and management systems will

continue to be developed in order to improve the application of the GRI principles in future periods.

SectionG3

indicatorDescription Reference

Strategy 1.1 Statement from senior decision-maker about the relevance and

importance of sustainability to CBH, the overall vision and strategy for

the short term, medium term and long term, particularly with regard to

managing the key challenges associated with economic, environmental

and social performance

16, 17, 22

1.2 Description of key impact, risk and opportunities 22, 34

Organisational

profile

2.1 Name of the organisation Cover page

2.2 Primary products, brands and/or services 6

2.3 Operational structure of the organisation 4, 5, 6

2.4 Head office location 5

2.5 Number of countries where CBH operates, and names of countries with

major operations relevant to the sustainability issues covered in this report

5, 6

2.6 Nature of ownership 106, 137

2.7 Market served 16, 17

2.8 Scale of reporting organisation including:

– Number of employees

– Net sales

– Total capitalisation broken down in terms of debt and equity

– Quantity of products or services provided

6, 7

2.9 Significant changes in the reporting organisation during period

under review

Not applicable

2.10 Awards received during the reporting period 16

Report scope

and boundary

3.1 Reporting period 30 June 2011

3.2 Date of most recent previous report 30 June 2010

3.3 Reporting cycle 12 months

3.4 Contact details for further information about this report IBC

3.5 Process for:

– Determining materiality

– Process for prioritising topics in the report

– Identifying stakeholders expected to use this report

34

34

36

3.6 Report boundary 37

3.7 Limitation on the scope or boundary of the report 37

3.8 Basis for reporting on joint ventures, subsidiaries, leased facilities and

outsourced operations

68 – 71

3.9 Data measurement techniques and the bases of calculations, including

assumptions and techniques underlying estimations applied to the

compilation of the indicators and other information in the report

36, 38

3.10 Explanation of the effect of any restatements of information provided in

earlier reports, and the reasons for such restatement

Not applicable

3.11 Significant changes from previous reporting periods in the scope,

boundary, or measurement methods applied in the report

Not applicable

3.12 GRI table 50

3.13 Policy and current practice with regard to seeking external assurance for

the report

37

Governance 4.1 Governance structure of the organisation 41


SectionG3


4.2 Indicate whether the chairman is also an executive officer and, reasons

for this arrangement

Not applicable

4.3 Number of independent and/or non-executive members 41

4.4 Mechanisms for shareholders and employees to provide

recommendations or directions to the board

IBC

4.5 Linkage between compensation for members of the highest governance

body, senior managers and executives

45, 112, 113

4.6 Processes in place for the highest governance body to ensure conflicts of

interest are avoided

41

4.7 Process for determining the qualifications and expertise of the members

of the highest governance body for guiding the organisation’s strategy on

economic, environmental, and social topics

42

4.8 Internally developed statements of missions or values, codes of

conduct, and principles relevant to economic, environmental, and social

performance, and the status of their implementation

IFC, 17, 24, 26

4.9 Procedures of the highest governance body of overseeing the

organisation’s identification and management of economic, environmental

and social performance, including risks and opportunities, and adherence

to or compliance with internationally agreed standards, codes of conduct

and principles

41

4.10 Processes for evaluating the highest governance body’s own

performance, particularly with respect to economic, environmental and

social performance

37

4.11 Explanation of whether and how the precautionary approach or principles

are addressed by the organisation

Not addressed

4.12 Externally developed economic, environmental and social charters, principles,

or other initiatives to which the organisation subscribes or endorses

Not applicable

4.13 Memberships in associations (such as industry associations) and/or

national/international advocacy organisations in which the organisation:

– Has positions in governance bodies

– Participates in projects or committees

– Provides substantive funding beyond routine membership dues

– Views membership as strategic

24, 26, 29

4.14 List of stakeholder groups engaged by the organisation 36

4.15 Basis for identification and selection of stakeholders with whom to engage 36

4.16 Approaches to stakeholder engagement, including frequency of

engagement by type and by stakeholder group

36

4.17 Key topics and concerns that have been raised through stakeholder

engagement, and how the organisation has responded to those key

topics and concerns, including through its reporting

36

Disclosures on

management

approach

DMA EC The disclosures on management approach related to the individual

aspects reported on, including:

EC1 – Direct economic value generated and distributed

EC2 – Impacts of climate change

EC6 – Spending on locally based suppliers

EC7 – Local hiring, including at senior management level

EC8, EC9 – Economic impacts

40

Not addressed

Not addressed

45

Not addressed

DMA EN The disclosures on management approach for all environmental aspects

reported on

36

DMA LA The disclosures on management approach relating to labour practices

and decent work reported on

39

DMA HR The disclosures on management approach relating to the human rights

reported on

Not addressed

DMA SO The disclosures on management approach relating to society reported on 38

DMA PR The disclosures on management approach relating to individual aspects

reported on:

PR1, PR2 – Product health and safety impacts 2, 3, 16, 22, 37

PR4, PR5, PR8 – Customer satisfaction and privacy of data and non-

compliance with regulations

25


GRI index (continued)

SectionG3


Performance

indicators

EC1 Direct economic value generated and distribution, including revenue,

operating cost, employment compensation, donation and other

community investments, retained earnings and payments to capital

providers and governments

40

EC6 Policy, practices and proportion of spending on locally based suppliers at

significant locations of operations

Not addressed

EC8 Development and impact of infrastructure investments and services

provided primarily for public benefit through commercial, in kind, or pro

bono engagement

38

EC9 Understanding and describing significant indirect economic impacts,

including the extent of impacts

Not addressed

EN2 Percentage of materials used that are recycled input materials Not addressed

EN3 Direct energy consumption by source Not addressed

EN8 Total water withdrawal by source Not addressed

EN12 Description of significant impacts of activities, and services on biodiversity

in protected areas and areas of high biodiversity value outside protected

areas

Not addressed

EN16 Total direct and indirect greenhouse emissions by weight Not addressed

EN22 Total weight of waste by type and disposal method Not addressed

EN23 Total number and volume of significant spills None

EN26 Initiatives to mitigate environmental impacts of products and services and

extent of impact mitigation

2

EN27 Percentage of products sold and their packaging materials that are

reclaimed by category

Not addressed

EN28 Monetary value of significant fines and total number of non-monetary

sanctions for non-compliance with environmental laws and regulations

36

LA1 Total workforce by employment type, employment contract and region 39

LA4 Percentage of employees covered by collective bargaining agreements 39

LA5 Minimum notice period(s) regarding operational changes, including

whether it is specified in collective agreements

Not addressed

LA7 Rates of injury, occupational diseases, last days and absenteeism, and

total number of work-related fatalities by region

39

LA8 Education, training, counselling, prevention and risk control programmes

in place to assist workforce members, their families or community

members, regarding serious diseases

39

LA11 Programmes for skills management and lifelong learning that support the

continued employability of employees and assist them in management

career endings

39

LA13 Composition of governance bodies in terms of diversity and breakdown of

employees per category according to gender and other relevant indicators

of diversity

Not addressed

SO3 Percentage of employees trained in organisation’s anti-corruption policies

and procedures

Not addressed

SO7 Total number of legal actions for anti-competitive behaviour, anti-trust, and

monopoly practices and their outcomes

None

PR4 Total number of incidents of non-compliance with regulations and

voluntary codes concerning product and service information and labelling,

by type of outcomes

36

PR5 Practices related to customer satisfaction, including results of surveys

measuring customer satisfaction

25

HR4 Total number of incidents of discriminations and actions taken None

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