The directors of Vukile Property Fund Limited believe in and support good corporate governance.

Introduction

The directors of Vukile Property Fund Limited believe in and support good corporate governance.

In South Africa, the King Code of Corporate Practice and Conduct (“King II”) recommends how companies should address corporate governance issues and the directors of Vukile endorse these recommendations fully. The company has implemented the relevant recommendations, adjusted for its specific circumstances.

 

The board of directors has a formal written charter that has been designed taking into account legislative requirements, King II recommendations and best practice. The board is in the process of reviewing and applying the King III recommendations, as appropriate.

The main functions of the board covered by the charter are:

• determining the overall objectives of the group, developing the strategies to meet those
objectives and monitoring performance;
• balancing the interests of all stakeholders of the company;
• determining and reviewing mandates and terms of reference of board committees;
• appointing the CEO and delegating authority;
• monitoring performance of the CEO and the executive directors;
• approving and reviewing company policies;
approving other major group activities, including remuneration, capital funding, the financial statements, acquisitions, sales and capital expenditure in terms of an approval framework approved by the board;
• ensuring that a budgeting process exists and measuring actual performance against budgets;
• taking ultimate responsibility for the adequacy of operational and financial systems as well
as regulatory compliance;
• monitoring the effectiveness of risk management, controls and governance processes; and
• any other issues that have not specifically been mandated to any sub-committee.

The board of Vukile consists of seven non-executive and three executive directors. The chairman is a non-executive director. The board meets at least four times a year. Remuneration of nonexecutive directors is subject to the recommendations of the human resources and nomination committee to the board and, from time to time, approved in the annual general meeting.

Four of the seven non-executive directors are independent and, as such, not subject to any relationship that might interfere with the execution of their independent judgement. Their wideranging business experience enables them to contribute materially to the group’s affairs.

One third of non-executive directors have to retire annually by rotation and, if eligible, become available for re-election.Non-executive directors are obliged to retire at the annual general meeting following their 65th birthday.

The board of directors’ independence from the executive management team is ensured by the following:

• separation of the roles of chairman and chief executive;
• the board being dominated by independent non executive directors;
• the audit and remuneration committee having a majority of independent directors;
• non-executive directors not holding service contracts; and
• all directors having access to the advice and services of the company secretary.

The committee consists of four independent non-executive directors. Meetings are held at least three times a year and the internal and external auditors attend the meetings by invitation. The committee has its own terms of reference and there is an external and internal audit charter regulating the interaction with the external and internal auditors. The terms of reference of the committee for the company, MICC Property Income Fund Limited and MICC Properties (Proprietary) Limited includes, inter alia, the appointment or termination of the services of internal and external auditors, the fees payable to the internal and external auditors, the
nature and extent of non-audit services which may be provided by the external auditors, the review and approval of financial policies (and any changes thereto), the review of audit recommendations and the review of the interim and annual financial statements prior to submission to the board. The audit and risk committee’s duties also include:

The chairman, chief executive and the financial director are invited to attend all meetings.

After obtaining information as to their policies, processes and procedures the audit and risk committee is satisfied that the auditors, Grant Thornton, are independent of the group and that these financial statements are in compliance with the provisions of applicable legislation.

The committee consists of four non-executive directors and meets at least twice a year. The chief executive officer is invited to attend the meetings. The terms of reference of the committee include, inter alia, the following:

• the determination and review of the company’s human resource philosophy and principles. 
• the group’s remuneration policy.
• performance measurement policy.
• the recommendation to the board of discretionary bonuses and the annual percentage salary increase of staff and executives.
• the recommendation to the board on the remuneration of non-executive directors.
• recommendations to the board on the appointment of new executive as well as non-executive directors.
• succession planning for the chairman and chief executive positions.

The committee consists of three non-executive directors and two executive directors and meets as and when required. The purpose and function of the investment committee is:

• to consider recommendations from management for acquisitions, capital expenditure or disposals;
• to authorise and approve such transactions and capital expenditure as falls within its approval mandate; and
• to make recommendations to the board regarding transactions and capital expenditure that falls outside its approval mandate.

It is the board’s responsibility to oversee the group’s system of internal control and to keep its effectiveness under review. The system is designed to manage, rather than eliminate, the risk of failure to achieve business objectives and can provide only a reasonable, rather than absolute, assurance against material misstatement or loss.

The board has established an ongoing process for identifying, evaluating and managing the significant risks of the group. This has been in place throughout the year ended 31 March 2010 and is regularly reviewed by the audit and risk committee and the board. Vukile has appointed KPMG to conduct internal audit functions based on key risk areas on a regular basis and to report to the audit and risk committee.

The board regularly receives reports setting out key financial performance indicators. Monitoring of key indicators assists the board to consider control issues.
 

The group functions within the bounds of a formal approval framework approved by the board. The approval framework covers the signing powers of all authorities and approval bodies within the group as well as for the service providers.
 

The company secretary provides guidance to the board as a whole and to individual directors with regard to how their responsibilities should properly be discharged in the best interests of the company. The company secretary also oversees the appointment of new directors and assists the chairman and the chief executive in determining the annual board plan and formulating governance and board related issues.

The company secretary:

• has an arms-length relationship with the board;
• ensures that board and committee charters are kept up-to-date;
• prepares and circulates minutes of board and committee
meetings; and
• assists with the evaluation of the board of directors.

The board has considered and recorded the facts and assumptions on which it relies to conclude that the group will continue as a going concern in the financial year ahead. The directors are of the opinion that the group will be a going concern in the year ahead.
 

Appropriateness and experience of the financial director

The audit and risk committee resolved that the expertise and experience of the financial director is considered to be appropriate for the requirements of the group.
 

The directors and staff of Vukile are required to adhere to the highest ethical standards, as embodied in the written code of ethics of the group, thereby ensuring that business practices are conducted in a manner which is beyond reproach.