Massmart staff receive fourth empowerment dividend payout
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Beneficiaries of the Massmart Thuthukani Staff Empowerment Trust have seen a massive increase in the value of the dividends earned on their shares since the first dividend payout in April 2007.
Mass merchandise retailer Massmart delivered R11, 521, 895.68 in dividend payments to the Trust in October, bringing the total dividend payout for the 2008 calendar year to R27, 582,675.12. This is nearly double the amount paid in 2007, when participants earned R14 388 300. Dividends are payable in April and October.
The increase is largely due to the way in which the Trust, created as part of Massmart’s BEE transaction, operates, with participants’ benefits increasing each year. During the first year of the transaction, participants earned 25% of the full Massmart dividend. In the current year, this has increased to 50%. 2009 will see the figure increase to 75% and from 2010 participants will be entitled to the full dividend.
The Thuthukani Staff Empowerment Trust currently has 11099 beneficiaries, all of whom were issued shares in Massmart based on their length of service with the group. As an indicator, staff with less than one year’s service as at 1 October 2006 received 450 units and those with 20 years service or more received 2 600 units. As shareholders, they control 8% of the group.
At the time the transaction came into effect (01 October 2006) shares were issued to the Thuthukani Trust at R49.98 and with the share price currently trading at R78.00, beneficiaries will have seen a capital growth of 56%.
“Thuthukani is structured in such a way that it delivers multiple benefits. Not only is it a means of creating wealth for our people, it also aligns staff and shareholder interests and is a powerful retention tool in an industry where staff turnover is high,” says Massmart CEO Grant Pattison.
Participants have earned a total of R41, 970, 975.12 in dividends since April 2007. The total value of the 18 million shares when the Trust was set up in October 2006 was approximately R900-million. Today, the value is estimated at R1 404-billion.
The staff dividend per share paid in October was 96.5 cents (50% of the ordinary dividend per share) and the average dividend paid per participant was R1018. 70, although specific individual dividend payments vary based on length of service.
Media release issued by:
Brunswick Group LLP – 011 502 7300
Cecilia de Almeida
083 325 9169
082 802 4265
Media queries should be addressed to:
Group Corporate Affairs Executive
Massmart Holding Ltd
011 517 0000
Notes to Editor
About Thutukani Empowerment Trust
Massmart’s BEE transaction was implemented by the group on 1 October 2006. The transaction involved placing 18 million shares representing approximately 9% of Massmart’s equity in trust for the benefit of Massmart’s permanent staff.
The BEE Transaction included the setting up of two trusts: the Thuthukani Empowerment Trust and The Black Management Trust.
The beneficiaries have vested rights that are similar to those of existing Massmart shareholders, including voting rights, the right to earn dividends and to earn a capital profit by selling their shares in the future. The Thuthukani Empowerment Trust has nine trustees, of which four are elected by the beneficiaries, four are appointed by Massmart and one person is an independent previously disadvantaged professional who may be elected by the trustees to act as chairman of the trust. The majority of the trustees are previously disadvantaged individuals.
At a high level, the Thuthukani Empowerment Trust operates as follows:
Massmart issued “A” Preference Shares to the Thuthukani Empowerment Trust; the number of “A” Preference Shares allocated to beneficiaries of the Thuthukani Empowerment Trust was based on length of service with the Group.
At the end of years four, five and six (being 1 October 2010, 2011 and 2012, respectively) 33.3% of the “A” Preference Shares will become available to the beneficiaries, who may then elect to receive the benefits flowing from these newly available “A” Preference Shares. If the beneficiary makes no election, the “A” Preference Shares will be held until the scheme comes to an end (at the end of six years), when an automatic election will be deemed to occur. When the employee elects to receive his benefit, then he will receive ordinary shares with a value equal to the difference between the price of an ordinary share at the time of his election and the reference price (being R49.98) multiplied by the size of his allocation.
Dividends are paid in cash into the beneficiaries’ bank accounts within a few weeks after the declaration of Massmart’s ordinary dividend. The trust is once-off and will be wound up in or about 2013. Any undistributed “A” Preference Shares will then be distributed to beneficiaries, while any forfeited or unallocated “A” Preference Shares will be redeemed.