The King Reports on Code of Practices and Conduct echo principles deeply embedded in the fabric of the group from which VenFin originated.

Since its inception in the 1940s the Rembrandt group was principle-driven and guided by the philosophy of its founder, Dr Anton Rupert. The group was led by example and no formal codes of conduct were necessary.

VenFin inherited, with pride, this sound corporate governance system – a model for doing business ethically –which does not need to be enforced but stems from internal conviction.

One of the corner stones of our business model is the belief that a company has three levels of responsibility: shareholders, staff and the community. The group’s shareholders are served by sound business practices and a continued quest for excellence which ensure that profitable investments are being made.

Another foundation stone on which the group has been built, is partnership. Many years ago this unique policy of co-determination, co-responsibility and mutual trust served as a launching platform for the Rembrandt group’s expansions overseas. Dr Rupert gave philosophical content to this policy, as it was practised internationally since the early 1950s, through the formulation of the following seven principles:

• He who covets all will lose all. Only through sharing mankind will preserve itself from harm.
• Help others to help themselves. You should not try to do more for people than they can do for themselves, otherwise lasting dependence is created.
• Nobody can trade with paupers. You cannot sell to people who have no money.
• Neither wealth nor goodwill can be created by a give-away policy. The surest way of losing a friend is to do him too big a favour without giving him the opportunity of doing something in return.
• Progress is contagious, and if prosperity is shared it leads to greater prosperity. Always place yourself in the other man’s shoes; also consider his point of view.
• Confidence begets confidence. It is certainly a risk to trust, but mistrust is an even greater risk that can lead to disaster.

A third foundation stone of the group is represented by a set of values for doing business successfully. These values, shared by Dr Rupert with an audience in 1956, are:

• Honesty – because it lasts the longest.
• Correctness – because it creates trust with friends and foes.
• Service – in every respect: to your client, your neighbour and your country.
• Mutual support – so that you can push others up the ladder, while climbing yourself, because if you pull others down, you will also fall.
• Faith – that all will work out well if everyone does his/her duty.

This wisdom and these timeless values served the group well for over half a century and today still form the basis of VenFin’s value system.

Therefore, it comes naturally to VenFin to endorse, and to comply with the principles of the King Reports as it corresponds to the way in which business has been conducted in the group for more than 50 years.

In accordance with the recommendations of King II, the Board adopted a formal charter, as set out below.

CORPORATE STRUCTURE

The Company is an investment holding company.

Investments of the Company mainly comprise both listed and unlisted companies which are not controlled by VenFin but are, due to significant influence and board representation, mostly associated companies.

The Company’s activities are concentrated on the management of investments and the provision of support, rather than being involved in the day-to-day management of business units of investees. The Company is a long-term investor, forging strategic alliances on a partnership basis while endeavouring to add value.

All the Company’s associates endorse the Code of Corporate Practices and Conduct. The Company continues to encourage, where possible, full compliance within the investee portfolio and where not, disclosure.

BOARD CHARTER

A charter, read and endorsed by all directors of VenFin, has been implemented to:

• identify, define and record the responsibilities, functions and composition of the Board; and to
• serve as a reference to new directors.

The charter is available for inspection at the registered address of the Company.

The Board, having reflected on the following, is satisfied that for the year under review, it executed the required actions contained in the charter satisfactorily.

COMPOSITION OF THE BOARD

All directors of VenFin have access to the advice of the company secretary and any relevant outside persons when required.

VenFin has a fully functional Board, comprising executive and non-executive directors, which leads and controls the group. Currently there are two executive and nine non-executive directors of whom six are independent. In this charter, executive directors are collectively referred to as executive management.

The VenFin Board will not comprise fewer than four or more than eighteen directors or any other number as may be determined from time to time. Efforts are being made to ensure that the Board’s composition reflects the demographics of South Africa adequately. In addition, it is a function of the Board to ensure that the collective skills and experience of members are suitable to carry out its responsibilities. Circumspection is exercised by the Board in the selection of directors, as well as their orientation.

The roles of the chairman and the chief executive officer are separated. The chairman is a non-executive director but is not independent. The arrangement whereby it is the responsibility of the Board to focus on “performance” in directing the commercial and economic fortunes of the Company, is deemed not only appropriate but also essential.

Board members are listed here.

ROLE AND RESPONSIBILITIES

The Board provides strategic direction by proposing, discussing and questioning, whilst evaluating and approving plans and strategies. In directing the group, the Board exercises leadership, integrity and judgement based on fairness, accountability, responsibility and transparency in order to achieve continuing prosperity for the group.

After approving operational and investment plans and strategies, the Board empowers executive management to implement these and to provide timely, accurate and relevant feedback on progress made.

However, the Board remains accountable for the overall success of the approved strategies, based on values, objectives and stakeholder requirements, and for the process and policy which ensures the integrity of risk management and internal controls. The Board is the focal point of the group’s corporate governance and is also responsible for ensuring that it complies with all relevant laws, regulations and codes of best business practices.

The Board monitors the operational and investment performance of the group, including relevant financial and non-financial aspects. It also ensures that procedures and practices are in place to protect the Company’s assets and reputation.

VenFin’s Board established the following subcommittees to assist it in discharging its duties and responsibilities:

• The Remuneration Committee, consisting of three non-executive directors, advises the Board on remuneration and terms of employment of all directors and members of senior management. Additionally, it participates annually in evaluating the performance of directors, the effectiveness of the Board as well as that of the Audit and Risk Committee. The Chairman of the Board is chairman of this committee. The chief executive officer attends meetings only by invitation.
  
  The committee has a formal mandate and its effectiveness is evaluated by the Board accordingly.
  
  Directors do not have long-term contracts or exceptional benefits associated with the termination of services.
  
• The Audit and Risk Committee, consisting of three non-executive directors and one executive director, reviews the adequacy and effectiveness of the following: the financial reporting process, the system of internal control, the management of financial, investment, technological and operating risks, risk funding, the internal and external audit processes, the Company’s process for monitoring compliance with laws and regulations, its own code of business conduct, as well as procedures implemented to safeguard the Company’s assets. The chairman of the committee is an independent non-executive director.
  
  The committee also monitors the effectiveness of governance structures implemented by the boards of those entities it invests in.
  
  The committee has a formal mandate and its effectiveness is evaluated by the Board accordingly.
  
• The Executive Committee, consisting of two executive directors, meets regularly between Board meetings to deal with issues delegated by the main Board. Senior management is present at these meetings and to this end it continually interfaces with them.
  
• The Nomination Committee, consisting of three non-executive directors, is responsible for succession planning and for the nomination of directors.

The appointment and orientation of new directors are also the responsibility of the Board. Non-executive directors are selected for their broader knowledge and experience and are expected to contribute effectively to decision-making and the formulation of strategies and policy.

On the other hand, executive directors contribute their detailed insight into day-to-day operations, which enables the Board to identify goals, provide direction and determine the feasibility of proposed strategies as well as monitoring of investments. These directors are generally responsible for operational decisions and their implementation.

The Board annually reviews and assesses the mix of skills and experience offered by its members as well as its composition in view of the country’s demographics to ensure that it is adequately equipped to achieve the Company’s objectives and to create value for shareholders over the long term.

MEETINGS AND QUORUM

The articles of association require three directors to form a quorum for Board meetings. A majority of members, preferably with significant representation of the non-executive directors, is required to attend all committee meetings.

The VenFin Board meets at least five times a year. The Audit and Risk Committee meets at least four times a year, and the Remuneration Committee and the Nomination Committee meet at least once a year.

MATERIALITY AND APPROVAL FRAMEWORK

Issues of material or strategic nature, which might impact on the reputation of the Company, are referred to the Board. All other issues, as mandated by the Board, are dealt with at executive management level.

The minutes of all the committee meetings are circulated to the members of the Board. Issues that require the Board’s attention or a Board resolution are highlighted and included as agenda items for the next Board meeting.

REMUNERATION PRINCIPLES

The Company’s policy regarding the remuneration of all directors and senior management aims at:

• attracting potential directors and senior management of high calibre;
• providing directors and senior management with remuneration that is fair and just;
• ensuring that no discrimination occurs; and
• recognising and encouraging exceptional and value-added performance.

In line with these objectives, the Remuneration Committee annually reviews and evaluates the performance of each executive director and members of executive management, and determines the annual salary adjustments for each. For this purpose it refers to salary surveys compiled by independent organisations.

DUTIES OF THE DIRECTORS

According to the Companies Act, which does not differentiate between executive and non-executive directors, the Company directors:

prepare the annual financial statements that should represent fairly the Company’s state of affairs and its profit or loss position for the period under review; select suitable accounting policies and apply them consistently; state whether applicable accounting standards have been followed; and endeavour to make judgements and estimates that are reasonable and prudent.

They also have a duty to:

keep proper accounting records; take steps to safeguard the assets of the Company; prevent and detect fraud and other irregularities; implement a system of internal control and review its effectiveness; implement effective risk management processes and monitor its efficiency; ensure compliance with all relevant laws; disclose conflicts of interest; and disclose information truthfully.

The Board formulates the Company’s communication policy and ensures that spokespersons adhere to it. This responsibility includes clear, balanced and truthful communication to shareholders and relevant stakeholders. This includes its commitments to social, environmental and ethical governance.

After evaluating in terms of their respective charters, the directors are of the opinion that the Board and the subcommittees have discharged all their responsibilities.

CONFLICTS

Mechanisms have been put in place to recognise, respond to and manage any potential conflicts of interest. Directors sign, at least once a year, a declaration stating that they are not aware of any conflicts of interest that may exist due to their interest in or association with any other company.

In addition, directors disclose their interest in contracts that are significant to the Company’s business. Any potential conflict of interest is disclosed as soon as it arises.

All information acquired by directors in the performance of their duties, which is not disclosed publicly, is treated as confidential. Directors may not use, or appear to use, such information for personal advantage or for the advantage of third parties.

Directors of the Company are required to comply with the VenFin Code of Conduct and the prescriptions of the JSE regarding inside information, transactions and disclosure of transactions.

COMPANY SECRETARY AND PROFESSIONAL ADVICE

Directors are entitled to seek, at the Company’s expense, independent professional advice concerning the affairs of the group. They have unlimited access to the services of the company secretary, who is responsible to the Board to ensure that proper corporate governance principles are adhered to. Board orientation or training is done when appropriate.

GOING CONCERN

At least once a year the Board considers the going concern status of the group with reference to the following:

• net available funds and the liquidity thereof;
• the group’s Residual Risk Profile;
• world economic events;
• the following year’s strategic/business plan and budgets; and
• the group’s current financial position.

RISK MANAGEMENT AND INTERNAL CONTROL

In determining strategic objectives, the Board of Directors has ensured its understanding of all the risks accepted in the Company’s investment portfolio with a view to maximising sustainable profits and growth.

These risks are continuously measured against the risk appetite determined by the Board.

The categories of risk identified can be broadly classified as follows:

• Performance risk relates to those risks managed by the Board and includes strategic risk, opportunity risk, reputation risk, liquidity risk, and also risks relating to corporate governance, social responsibility and stakeholder relations.
  
• Investment risk inherent to existing investments. The Board has delegated the responsibility for investment risk management to the boards of the various investment companies. The Board monitors that these delegated responsibilities are effectively executed by appointing its own members or VenFin senior management in non-executive capacity on those boards.
  
  These risks are furthermore managed at VenFin by ensuring that future investments are subject to rigorous due-diligence reviews. These reviews would include, inter alia, verification of intellectual property rights, management competency, business plans, market analyses, contractual rights, product feasibility, cash flow and liquidity requirements. Consideration is also given to ensure that the investment is optimally structured taking cognisance of investment instruments.
  
  Performance of operational management, measured against budgets and other performance measurement criteria, is regularly appraised for timeous corrective action, when deemed appropriate.
  
• Operational risk includes operational effectiveness and efficiency, safeguarding of assets, compliance with relevant laws and regulations, reliability of reporting, effective operational risk management, human resource risk, technology risks, business continuity and risk funding. Various operational risks have been transferred to M&I as part of the agreement with that service company. This includes human resource risks, information technology risks, treasury risk and certain pure risks.

The Board has documented and implemented a comprehensive risk management system, which incorporates continuous risk assessment, evaluation, and internal control embedment.

The Enterprise-wide Risk Management system applicable to the Company is as follows:

• Group risk analysis
  The purpose of the group risk analysis is to reconfirm and update the group’s consolidated risk profile. This ensures that the residual risk profiles (risk post internal control) by investment, and in total, remain within the risk tolerances set by the Board and that new emerging risks are identified and timeously responded to.
  
• Activity risk analysis
  The activity risk assessment further refines the Company’s risk assessment at key activity level relevant to the achievement of objectives and ensures that risk management initiatives are duly prioritised and resourced.
  
• Operational risk management
  The Board influences the control environment by setting ethical values and organisational culture whilst ensuring that management styles, delegated authorities, business plans and management competency are appropriate, effective and efficient.    
  
  Operational risks are managed by means of internal control. This is a process designed to provide reasonable assurance regarding the achievement of organisational objectives and to reduce the possibility of loss or misstatement to within accepted levels. The effectiveness of risk management is measured by the level of reduction of the cost of risk.  
  
  Risk management principles along with internal controls are embedded into the daily activities of the Company. An automated risk management tool, Risk Minimiser® , supports this process and delivers self-assessment functionality to line managers by translating controls, benchmarked and linked to key performance indicators, into daily activity lists.  
  
  The system supports the values of transparency, mutual respect and accountability. Key outputs from the system include:   
  
• Assurance regarding compliance with key controls
• Exception reporting regarding control deviations
• Real-time risk profiles based on validated data
• Cost of risk and incident monitoring
• Electronic distribution of all relevant policies, procedures, laws and practices from centrally updated databases
• Automated communication and tracking of control enhancement activities


This system furthermore caters for control self-assessment criteria whereby senior management, serving in non-executive director capacities at investee boards, render additional assurance that proper risk management and governance practices are effected in those entities. Management structures have been established to focus on certain key risk activities, including safety, health, environment, security, tax, risk funding and treasury.


• Risk funding
  Risk funding is viewed as a cost of capital activity aimed at reducing the Company’s residual exposures to risk with potential catastrophic impacts or risks that cannot be cost beneficially managed.
  
• Integrated assurance
  The Board does not only rely on the adequacy of the control embedment process but regularly receives and considers reports on the effectiveness of risk management activities. The Audit and Risk Committee ensures that the assurance functions of management as well as internal and external audit are sufficiently integrated.   
  
  The various assurance providers to the Board comprise the following:  
  
  • The Executive Committee and senior management consider the Company’s risk strategy and policy along with the effectiveness and efficiency thereof.  
    
  • The Audit and Risk Committee focuses on reviewing the adequacy of risk management strategies, systems of internal control, risk profiles, legal compliance, internal and external audit reports and also reviews the independence of the auditors, the extent and nature of their engagements, coverage and findings.    
    
    This committee also ensures, by means of review and enquiry, as to the effectiveness of audit and risk committees established in entities invested in.  
    
     This committee also reviews the level of disclosure in the annual reports and the appropriateness of policies adopted by management, the fraud register and other loss incidents reported.   
    
    The Board reviews the functionality of the Audit and Risk Committee against its charter.
    
    
    INTERNAL AUDIT
    The Company has an internal audit function, which has been outsourced to M&I’s Risk Management and Internal Audit department. It is an effective independent appraisal function and employs a risk-based audit approach, formally defined in accordance with the Institute of Internal Auditors’ (IIA) definition of internal auditing and documented in a charter approved by the Board. The head of this department has direct access to the chairman of the Audit and Risk Committee as well as to the chairman of the group.
    
    EXTERNAL AUDIT
    The Company’s external auditors attend all Audit and Risk Committee meetings and have direct access to the chairman of the Audit and Risk Committee. Their audit coverage is adequately integrated with the Internal Audit functions without their scope being restricted.
    
    Other services provided by the auditing firm mainly relate to tax matters and are effected by a department independent to the audit partners. Independence is further assured by terms of appointment.

The Audit and Risk Committee has reviewed the risk management programmes and systems of internal control of the Company and its subsidiaries for the financial year to 30 June 2004. The directors are of the opinion that, based on inquiries made and the reports from the internal and external auditors, the risk management programmes and systems of internal control were effective for the period under review.

SERVICE COMPANY

M&I, controlled by Rembrandt Trust (Proprietary) Limited, renders management and support services to VenFin.

VenFin pays fees to M&I which cover the overhead costs of the management of VenFin. These fees are a maximum of 0.463% per year of the market capitalisation of VenFin, calculated on a monthly average basis. This percentage may not be exceeded without the approval of 75% of all classes of shareholders of VenFin. The fees for the past year are disclosed in note 13 to the annual financial statements.

COMMUNICATION TO STAKEHOLDERS

The Board places great emphasis on communication to shareholders and other stakeholders to ensure that they are kept appropriately informed on matters affecting the group. Financial reports and announcements, meetings with analysts and the VenFin website are used to provide relevant information to shareholders.

The group’s financial results are published in the financial media, so as to maximise its communication to its smaller individual shareholders. Meetings with major shareholders and investment analysts follow the release of final results. Board members attend VenFin’s Annual General Meeting, to which all shareholders are invited.

VenFin is committed to transparency and disclosure of relevant and appropriate information in its Annual Report and through other communication channels, to ensure a proper evaluation of the performance of VenFin.

DEALINGS IN SECURITIES

In accordance with the Listings Requirements of the JSE, the Company has adopted a code of conduct for insider trading. During the closed period directors and designated employees are prohibited from dealing in the Company’s securities. During open periods directors and personnel may only deal in the Company’s securities with the approval of the chairman or the chief executive officer. The closed period endures from the end of a financial reporting period until the publication of financial results for that period. Additional closed periods may be declared from time to time if circumstances so warrant.

GROUP ETHICS

VenFin’s commitment to ethical behaviour is contained in the following widely published documents:

• Code of ethics
• Code of conduct
• Fraud prevention policy
• Internet policy
• Disciplinary code

The Board was responsible for the establishment and distribution of these documents with compliance being monitored by means of management structures, internal audit, and the group’s central forensic function including hotlines.

ACCESS TO INFORMATION

VenFin complies with the regulations of the Promotion of Access to Information Act (Act No 2 of 2000), which ensure the constitutional right of access to information required for the exercising or protection of rights.

DIRECTORS’ EMOLUMENTS

The emoluments of directors for the year ended 30 June 2004 were as follows (Refer to note 20):

		2004			2003
		Non-			Non-
	Executive	executive	Total	Executive	executive	Total
	R’000	R’000	R’000	R’000	R’000	R’000
Salaries and fees	5 411.3	3 080.2	8 491.5	4 523.2	2 164.1	6 687.3
Retirement fund contributions	1 073.3	463.1	1 536.4	879.3	376.8	1 256.1
Short-term bonus	–	–	–	468.7	–	468.7
Long-term incentive scheme	2 238.3	–	2 238.3	586.4	–	586.4
Other benefits	315.4	207.2	522.6	312.4	205.0	517.4
	9 038.3	3 750.5	12 788.8	6 770.0	2 745.9	9 515.9
		Salaries			Salaries
	Fees	and other	Total	Fees	and other	Total
	R’000	R’000	R’000	R’000	R’000	R’000
Paid by:
The Company	748.0	–	748.0	270.0	–	270.0
Management company	541.0	11 499.8	12 040.8	500.0	8 745.9	9 245.9
	1 289.0	11 499.8	12 788.8	770.0	8 745.9	9 515.9
Year ended 30 June 2004
				Long-term
	Salaries	Retirement	Short-term	incentive	Other	2004
	and fees	fund	bonus	scheme	benefits(4)	Total
	R’000	R’000	R’000	R’000	R’000	R’000
Executive
Jan Durand (1)	1 420.1	281.7	–	–	98.2	1 800.0
Josua Malherbe	3 991.2	791.6	–	2 238.3	217.2	7 238.3
Subtotal	5 411.3	1 073.3	–	2 238.3	315.4	9 038.3
Non-executive (non-independent)
Piet Beyers (5)	575.0	114.3	–	–	49.2	738.5
Jan Dreyer (1)(5)	596.2	118.6	–	–	49.2	764.0
Johann Rupert ((2)(5)	1 161.0	230.2	–	–	108.8	1 500.0
Subtotal	2 332.2	463.1	–	–	207.2	3 002.5
Non-executive (independent)
G T Ferreira (2)	126.5					126.5
John Newbury (1)	170.5					170.5
Elias Links (3)	110.0					110.0
Anthony Fletcher (1)(3)	121.0					121.0
Mike Bosman (3)	110.0					110.0
Liesbeth Botha (3)	110.0					110.0
Subtotal	748.0					748.0
Total	8 491.5	1 536.4	–	2 238.3	522.6	12 788.8

VENFIN SHARE SCHEME

During the year the trustees of the VenFin Share Scheme (“the scheme”) did not offer any unissued ordinary shares, reserved for the scheme, to directors. (Also refer to the Report of the Board of Directors on page 78)

Current status
– Ordinary shares
							Balance
	Shares		Number		Number	Number	of shares
	accepted	Offer	of shares	Offer	of shares	of shares	accepted
	before	price	offered	price	accepted	offered	as at
Participant	30 June 2002	(Rand)	2003	(Rand)	2003	2004	30 June 2004
Executive
Jan Durand	754 717	15.90	201 342	14.90	201 342	–	956 059
Josua Malherbe	1 216 235	15.90	–	–	–	–	1 216 235
Josua Malherbe *	796 344	15.90	671 141	14.90	*	–	*
Subtotal	1 970 952		201 342		201 342	–	2 172 294
Non-executive
Piet Beyers	533 049	15.90	–	–	–	–	533 049
Jan Dreyer	533 049	15.90	–	–	–	–	533 049
Johann Rupert	987 654	20.25	–	–	–	–	987 654
Johann Rupert	228 580	15.90	–	–	–	–	228 580
Subtotal	2 282 332		–		–	–	2 282 332
Total	4 253 284		201 342		201 342	–	4 454 626