Corporate governance

Over the last 12 months the composition and effectiveness of the RBH governance structures and the issue of RBH representatives on the boards of investee companies were reviewed by the Board and Executive Committee to ensure sufficient shareholder involvement, and to align the company with the changes that were brought about by the amended King Report on Corporate Governance (King III) and the amended Companies Act.

RBH's shareholder, the Royal Bafokeng Nation (RBN), and the company's Board and management are in agreement that good corporate governance is imperative. This applies to subsidiary and investee companies which must also commit to the highest levels of corporate governance.

RBH is currently a Level 1 Contributor in accordance with the Department of Trade and Industry's Codes of Good Practice.

Sustainability reporting framework and reporting

The Board is committed to the objective of sustainable development, which is a broader term than the principle of 'Social Responsibility' referred in the King II Code. Sustainable development applies both to the company and to its shareholders.

RBH recently adopted a sustainability strategy and has prepared its first integrated sustainable development report for 2009. Further, the company has undertaken to have its 2010 Annual Review assured in accordance with the standards of the Global Reporting Initiative (GRI).

The Board is committed to the implementation of the principles of transparency and disclosure in all its relations with its stakeholders. In practice this means making material, accurate and meaningful information available to its stakeholders in a timely manner.

As a community-based investment company, RBH is particularly sensitive to the need to deliver effective sustainable development and to present information on the company in accordance with triple bottom line standards and the principles of the GRI.

Governance structures

Shareholder

RBH is a holding company for its direct and indirect subsidiaries which hold investments (together with RBH, the RBH Group). At the end of 2009, the RBN completed the restructuring of its commercial assets and donated its shares in RBH to the trustees of the Royal Bafokeng Nation Development Trust (RBNDT) (IT 2482/2004). Thus RBH is a private company that is wholly owned by the trustees of the RBNDT for the benefit of the beneficiaries of the RBNDT.

The shareholder has the ultimate power to remove directors and is governed in its relationship with the company through the Articles of Association. The shareholder of RBH holds an annual general meeting (AGM) in the third quarter of every year.

Board of Directors

Role

The Board of Directors is responsible to the shareholder for the performance of the RBH Group. Its role includes the establishment, review and monitoring of strategic objectives; the approval of major acquisitions, disposals and capital expenditure; and overseeing the RBH Group's systems of internal control, governance and risk management.

The Chief Executive Officer is responsible for the execution of strategy and the day-to-day management of RBH, and is supported by the Executive Committee.

Composition

At all times the RBH Board must have a minimum of three directors, the majority of whom must be non-executive. The chairman of the Board, who must be a non-executive director, is responsible for leading the Board and for its effectiveness.

In addition to the non-executive chairman, the Board comprises three executive directors, two non-executive directors and one independent director.

Meetings

The Board meets four times a year. Additional Board meetings may be convened during the year when required. The number of meetings of the boards of RBH's subsidiaries complies with statutory requirements.

Board committees

Subject to those matters reserved for its decision, the Board delegates certain responsibilities to two standing committees: the Human Resources and Nominations Committee and the Audit and Risk Management Committee.

Human Resources and Nominations Committee

The Human Resources and Nominations Committee is responsible for establishing and developing RBH's general policy on remuneration for executive management and nonexecutive directors and has been delegated the power to approve specific packages for individuals.

The committee has a minimum of three members. The chairman and the majority of members are non-executive directors. RBH is aiming to have the entire membership of the Human Resources and Nominations Committee made up of independent directors as this constitutes best practice.

The Human Resources and Nominations Committee makes recommendations to the Board on the appointment of new executive and non-executive directors, including making recommendations regarding the composition of the Board and its committees and the balance between executive and nonexecutive directors.

The committee regularly reviews and updates the succession plans for directors and senior managers.

Audit and Risk Management Committee

The Audit and Risk Management Committee consists of a minimum of three members. Appointments to this committee are made by the Board in consultation with the committee's chairman. The Human Resources and Nominations Committee is actively seeking an independent Board member with the requisite experience in accounting and financial management to take over the chairmanship of the Audit and Risk Management Committee. This appointment should have been completed in 2009 but was delayed. Moreover, RBH is aiming to have the entire membership of the Audit and Risk Management Committee made up of independent directors as this constitutes best practice.

The primary role of the Audit and Risk Management Committee is to ensure the integrity of financial reporting and the audit process, and the maintenance of a sound risk management and internal control system.

In pursuing these objectives, the committee oversees relations with the external auditors. It approves the external auditors' terms of engagement, scope of work, the annual audit and the applicable levels of materiality.

The committee also monitors developments in corporate governance to ensure that RBH continues to apply high and appropriate standards. The Audit and Risk Management Committee's recommendations are submitted to the Board for approval.

Internal controls and risk management

The Board takes overall responsibility for risk management, while management is accountable for designing, implementing and monitoring the process of risk management.

The Board policy on risk management defines acceptable risk tolerance levels and determines the continuous monitoring of risk and control processes required across business-specific risk areas, to provide the basis for regular and exceptional reporting to business management and boards, the Executive Committee and the Board.

RBH seeks to have a sound system of internal control, based on its policies and guidelines in all of its subsidiaries, material associates and joint ventures. In those companies that are independently managed, as well as in joint ventures, the directors who are representing RBH seek assurance that significant risks are being managed.

Effectiveness of internal controls and risk management

The Board receives inputs on the effectiveness of internal control mechanisms as follows:

• regular management reporting;
• the Executive: Finance reports every quarter on the operation of the financial and accounting control frameworks; and
• the Board also receives assurance from the Audit and Risk Management Committee, which derives its information, in part, from regular audit reports on risk and internal control throughout RBH.

Public disclosure of information

The company publishes on its website, www.bafokengholdings.com, and keeps current the following information:

Ownership: this is presented in a diagram of the RBH Group structure showing the major shareholdings, ultimate beneficial ownership and the percentage of shares held by each.

Governance structure: there is a chart of the governance structure of the RBH Group indicating the principal organs of the company's governance and to which entity each reports.

Corporate events calendar: a Board-approved diary outlines the corporate events for the calendar year, including shareholder meetings.

Policies: corporate governance, Board Charter, terms of reference for board committees, code of ethics, corporate social investment and employment equity.

Accounting and auditing

The Board approves the terms of reference for the Audit and Risk Management Committee and its members.

Annual Financial Statements for the year ended 31 December 2009 will be prepared in accordance with International Financial Reporting Standards (IFRS).

RBH has appointed PriceWaterhouseCoopers, an internationally recognised accounting firm, as its independent external auditors for the year ended 31 December 2009. The external auditors report to the Audit and Risk Management Committee and RBH expects that it will rotate the audit partners regularly.

Compliance and enforcement

The Board is ultimately responsible for the RBH Group's compliance with the Board-approved governance policies. In this task, the Board has delegated certain responsibilities to management. The Chief Executive Officer has overall management responsibility for ensuring that the company complies with the law, the Board Charter policies regarding corporate governance and the company's code of ethics.

The Executive: Corporate has primary responsibility for the implementation and monitoring of governance policies and procedures. The Company Secretary is responsible for the preparation for, and the holding of, Board meetings and the AGM.

The Board believes that it is the responsibility of every employee and director of RBH to observe and implement the company's governance policies. The company's code of ethics applies to every individual in the RBH Group and establishes the general culture of governance and compliance with rules and policies. The approval framework, delegation of authority and internal guidelines of RBH establish responsibility for compliance at every level of the RBH Group with internal control processes in place to ensure compliance. These internal controls are assessed by external parties and their effectiveness reported to the Board.

The Board addresses any shortfalls in compliance identified by the external audit process, recommends any changes and every year reviews the need for a standing committee on governance. Compliance can also be monitored by external parties.

The corporate governance policy is made available on the RBH website. It includes comments on the extent to which RBH complies with the King III Code and provides explanations for any divergences from compliance.