Directors' report

The directors have pleasure in presenting their report which forms part of the summary consolidated financial statements of the group, for the year ended 31 March 2015.

Nature of business and review of operations

The nature of the business of the company and its subsidiaries, as well as detailed commentary on the group’s operations are provided in the Business Overview section of this report.

Share capital

As at 31 March 2015, the authorised share capital of the company was 900 000 000 ordinary shares of 4 cents each and the issued share capital was 460 730 557 ordinary shares of 4 cents each. Further details are set out in note 24 to the annual financial statements, available on the company’s website:

During the year under review, the issued ordinary share capital of the company increased from 460 622 957 shares to 460 730 557 shares as a result of options being exercised in respect of 107 600 shares in terms of the Illovo Sugar Limited 1992 Share Option Scheme.


An analysis of shareholders and their shareholdings appear in the Corporate Governance Report

An analysis of the relevant disclosures by nominee shareholders as at 31 March 2015, pursuant to section 56(3) of the Companies Act, revealed four beneficial shareholdings equal to or exceeding 5% of the issued ordinary share capital, details of which appear here.

Illovo Sugar Limited 1992 Share Option Scheme

During the financial year ended 31 March 2006, the Illovo Sugar Limited Phantom Share Scheme replaced the further granting of share options in terms of the Illovo Sugar 1992 Share Option Scheme (the option scheme). All share options previously granted have now been exercised or forfeited.

In terms of the rules of the option scheme, all share options were granted at the closing market price of the shares on the JSE on the trading day immediately preceding the day on which the relevant options were granted.

As approved at the annual general meeting of shareholders held on 17 July 2002, a total of 33 000 000 ordinary shares were reserved and placed under the control of the directors for the purpose of the option scheme. The table below reflects the options granted to, and exercised by, the executive directors and senior managers as at 31 March 2015:

   Number of shares 
Options granted as at 1 April 2014  27 717 000 
Options expired during the year under review  (3 600)
Options granted as at 31 March 2015  27 713 400 
Options exercised, allotted and issued as at 1 April 2014  27 605 800 
Options exercised during the year under review  107 600 
Options unexercised as at 31 March 2015  – 
Options granted as at 31 March 2015  27 713 400 

Illovo Sugar Phantom Share Scheme

The board approved the adoption of the PSS in 2005, and in 2007 introduced certain performance hurdles related to the future earnings of the company. These performance hurdles are more fully explained in the Remuneration Report.

While the rules of the PSS are modelled on those of the option scheme, the important difference is that options under the PSS are “cash settled” rather than “equity settled”. Accordingly, the PSS is not classified as a share incentive scheme in terms of the JSE Listings Requirements. The vesting periods are the same as those applicable to the option scheme; one-third becoming vested on each of the third, fourth and fifth anniversaries of the relevant grant date, with the maximum period for the exercising of options being ten years. The grant price of an option is determined as being equal to the average of the closing market prices of Illovo shares on the JSE for the 30-trading days immediately preceding the grant date of the relevant option. The cash settlement amount of an option is equal to the difference between the closing market price of Illovo shares on the trading day immediately preceding that on which an option is exercised and the grant price. The participants receive the equivalent net proceeds as under the option scheme, but without incurring broking fees.

The advantages of the PSS include that there is no necessity to issue new shares when options are exercised (ie, no share dilution) and ease of administration.

The Remuneration/Nomination Committee approves the granting of all share options in terms of the PSS. Phantom options granted to and exercised by executive directors and senior managers as at 31 March 2015 are as follows:

Options granted  Phantom shares 
Options granted as at 1 April 2014  11 992 625 
New options granted during the year under review   1 552 500 
Options forfeited during the year under review  (492 100)
Options granted as at 31 March 2015  13 053 025 
Options exercised as at 1 April 2014  2 782 550 
Options exercised during the year under review  156 150 
Options unexercised as at 31 March 2015  10 114 325 
Options granted as at 31 March 2015  13 053 025 

The options granted and unexercised as at 31 March 2015 are as follows:

   Option price  Number 
 Expiry date   (cents) of shares
12 July 2015  829  191 550 
29 October 2016  1 634  213 600 
23 July 2017  2 364  538 700 
9 July 2018  2 867  1 113 875 
13 July 2019  2 808  1 588 000 
20 July 2020  2 856  1 113 000 
26 May 2021  2 702  1 124 500 
22 May 2022  2 573  1 453 100 
21 May 2023  3 445  1 284 000 
20 May 2024  2 878  1 494 000 
      10 114 325 

Details of options granted to executive directors, any options exercised during the year, and options unexpired and unexercised as at 31 March 2015, are provided in the Remuneration Report.

With the introduction of the FSP (referred to below), the future annual awards made to a recipient in terms of the PSS are reduced having regard to the quantum of any shares awarded to him in terms of the FSP.

Forfeitable Share Plan

As more fully described in the Remuneration Report, the FSP was introduced in May 2014 to provide a long-term incentive plan for directors and selected senior employees, thereby providing a mechanism to attract and retain executives and other key management whose skills are required to enable the company to fulfil its long-term goals, which the PSS does not provide.

The FSP is not a share option scheme contemplated in Schedule 14 of the JSE Listings Requirements. 

In May 2014, 224 000 shares were awarded to executive directors and senior employees. These shares were purchased and transferred to the relevant participants on 2 December 2014. A schedule of the shares awarded to the executive directors of the company appears in the Remuneration Report.

Illovo Sugar Limited Employees’ Share Purchase Scheme

The Illovo Sugar Limited Employees’ Share Purchase Scheme (ESPS) was established in 1996 to enable employees to share directly in the profitability and growth of the company, by assisting them to acquire shares in the company. Any contribution made by an employee for the purchase of shares is enhanced by a 10% company contribution, and the company pays for any trading costs. Employees may acquire up to 5 000 shares in aggregate and 1 000 shares in a continuous 12-month period, by means of regular monthly contributions (deducted from their salaries) or a lump sum payment. The ESPS is administered by a trust, the trustees of which are appointed by the board. A similar purchase scheme is operated in Malawi in respect of shares in Illovo Sugar (Malawi) Limited.

During the year under review, the trustees of the ESPS undertook net purchases of 42 816 shares in the company, thereby increasing the total number of shares held to 279 025. Of these shares, which are all registered in the name of the trust, 279 024 are held on behalf of 633 participants. All such shares have been fully paid for by the participants.

Capital distributions

An interim capital distribution (number 46) of 37.0 cents per share which was declared on 28 November 2014 and a final capital distribution (number 47) of 53.0 cents per share was declared on 21 May 2015 (both by way of a reduction of contributed tax capital), making a total distribution for the year of 90.0 cents per share.

In respect of the final capital distribution, pursuant to the requirements of section 46 of the Companies Act, after due consideration the board concluded that the company would satisfy the relevant solvency and liquidity test immediately after completing the proposed distribution.

The interim capital distribution was paid on 12 January 2015 and the final capital distribution will be paid on 6 July 2015.

Subsidiary companies

The names and financial information concerning the subsidiaries of the company are set out in the notes to the financial statements which may be accessed on our website at

Directorate and Company Secretary

The names of the directors and the Company Secretary in office at the date of this report are reflected here in this report. The details of the company’s business and postal addresses are set out here.

Resignations and appointments

During the year under review, Mr G M Rhodes resigned as a non-executive director with effect from 31 October 2014 and Mr J Cowper was appointed as non-executive director with effect from 10 March 2015. Subsequent to the year-end, Mr G Gomwe was appointed as an independent non-executive director with effect from 1 June 2015 and Dr S Kana was nominated as a director subject to his election by the shareholders at the annual general meeting on 15 July 2015.

In terms of the company’s Memorandum of Incorporation, one-third of the non-executive directors must retire at the company’s annual general meeting, being those who have been longest in office. Prof P M Madi, Messrs D G MacLeod and M J Hankinson and Mrs C W N Molope will retire at the forthcoming annual general meeting. Mr MacLeod and Prof Madi have not made themselves available for re-election and will retire from the board with effect from the close of the annual general meeting. 

Mr Hankinson and Mrs Molope have made themselves available for re-election as non-executive directors at the annual general meeting. The board recommends their re-appointment to the shareholders, based on the recommendation of the Nomination Committee following a formal assessment of their performance as directors (as reported in the Corporate Governance Report).

Consequent upon Mr MacLeod’s retirement, the board of directors has appointed Mr T Munday as Chairman of the board, with effect from the close of the annual general meeting on 15 July 2015.


As indicated in the Corporate Governance Report, in addition to the annual evaluations of the board and the individual directors, the Nomination Committee carried out formal evaluations of:

  • the performance of the non-executive directors standing for re-election (ie, Mr M J Hankinson and Mrs C W N Molope); and
  • the independence and performance of those non-executive directors who have held office as such for more than nine years (ie, Dr D Konar and Mr A R Mpungwe), both of whom were found to be independent, taking into account all relevant factors, including that there were no relationships or circumstances likely to affect, or appearing to affect, the relevant director’s judgement.

In addition, written confirmation was obtained from each of the independent non-executive directors that he/she continues to meet the requirements for independence in accordance with the criteria contemplated in paragraph 67 of Chapter 2 of King III.

Beneficial interests

The beneficial interests of the directors holding office in the issued ordinary share capital of the company were as follows:

     18 June 2015  31 March 2015  31 March 2014
   Direct Indirect Direct Indirect Direct  Indirect 
Hankinson M J   3 925  3 925   3 925  3 925  3 925  3 925 
MacLeod D G  225 000     225 000     450 000    
Dalgleish G B   172 000#     75 000#         
Abdool-Samad M H   62 000#     31 000#         
Hulley J P   92 000#     33 000#         
Riddle L W   47 000#     24 000#         
Total  601 925  3 925  391 925  3 925  453 925  3 925 

# Shares held in terms of Forfeitable Share Plan.

No non-beneficial interests were held by any of the directors. The register of interests of directors in the shares of the company is available for inspection at the registered office.

Directors’ remuneration

At the forthcoming annual general meeting, shareholders will be requested to pass a non-binding advisory vote, approving the company’s remuneration policy, as contemplated by King III.

Pursuant to the requirements of section 66(9) of the Companies Act, shareholders will also be requested to pass special resolutions to approve the following annual fees payable to the non-executive directors with effect from 1 April 2015, as well as an additional fee of R28 000 per day for any unscheduled board or board committee meetings:

   Current  Proposed 
   R  R 
Chairman*  2 200 000    
For the period 1 April to 15 July 2015#    638 904 
For the period 16 July 2015 to 31 March 2016##    1 068 493 
Director  270 000  287 000 
Audit Committee      
Chairman  255 000  272 000 
Member  127 500  135 500 
Remuneration/Nomination Committee      
Chairman   180 000  192 000 
Member  120 000  128 000 
Risk Management Committee   129 750    
Chairman  138 000 
Member  86 500  92 000 
Social and Ethics Committee      
Chairman  129 750  138 000 
Member  86 500  92 000 
The fee paid to Mr D G MacLeod as Chairman of the board is inclusive of all other committee membership fees and is payable monthly in arrears. All other fees are paid quarterly in arrears. 
# This amount represents a pro rata share of an annual fee of R2.2 million. 
## This amount represents a pro rata share of an annual fee of R1.5 million. 

Given the generally high level of attendance at meetings, the board does not consider it appropriate for non-executive directors’ fees to comprise a meeting attendance fee as well as a base fee.

Having taken appropriate advice, the directors are of the view that section 66(9) of the Companies Act does not apply to the remuneration paid to the executive directors as employees of the company.


Date: Wed, 15 July

Time: 14:00

Venue: Illovo Sugar Park

Notice of AGM


Contact Us

Illovo Sugar Park, 1 Montgomery Drive, Mount Edgecombe, KwaZulu-Natal

Tel: +27 31 508 4300