Notice

Corporate Governance

The introduction and release of King III in September 2009 redefined the meaning of corporate governance in the South African business environment. The new Companies Act has also incorporated some of this thinking and will ensure that shareholders are treated in a respected and transparent manner.

South Ocean Holdings aims to ensure that it complies fully with the latest code in the new financial year.

Although the code is only applicable for the group in the 2010 financial year, South Ocean Holdings has evaluated its corporate governance activities to establish gaps that might exist between its current compliance activities
and the requirements of the code. The company has already commenced the process of closing any identified gaps.

Code of Ethics policy

The board has formally adopted a Code of Ethics which it has made available to all employees within the group. The group’s corporate philosophy is one which is based on all directors and employees conducting themselves with integrity in both their internal and external dealings and consistently and uncompromisingly adhering to the highest standards of ethical behaviour.

The group strives to ensure that the principles enshrined in the Code of Ethics are entrenched, as an integral part of South Ocean Holdings corporate culture. The essential principles of ethical behaviour feature regularly in training sessions and the summary Code of Ethics is displayed prominently in work areas to encourage top-of-mind awareness. Our intention is that our business actions and dealings should be wholly governed by these ethical principles.

The board of directors

Composition

Control of the company is vested with the board of directors which meets quarterly. The board decides on all material matters affecting the company. The board consists of a majority of non-executive and independent non-executive directors with only the CEO and the CFO representing executive management on the board.

The board is governed by a formally adopted board charter which serves as a guiding document for all activities of the board. This charter is periodically reviewed and evaluated in line with the changes in legislation and governance guidelines. The charter does not provide for any specific maximum number of board members, but allows the board to evaluate itself continuously with regard to the sufficiency of the number of board members given the duties and responsibilities at any stage.

The board is authorised to appoint new directors between Annual General Meetings. In such cases the appointees are required to retire and stand for re-election at the next Annual General Meeting of the company.

Non-executive directors

Non-executive directors bring a diversity of experience, insight and independent judgement to issues of strategy, performance, resources and standards of conduct, while contributing to decision making through
their knowledge and experience. They are individuals of high calibre and integrity with significant experience in their respective fields and they provide a depth of wisdom based on knowledge and experience. These
attributes protect shareholders’ interests while ensuring that powers are not concentrated in one group of individuals.

Non-executive directors do not have fixed terms of appointment but they are required to retire by rotation and are eligible for re-election by shareholders at the Annual General Meeting of the company.

In terms of the company’s Articles of Association, all new directors appointed after the last Annual General Meeting are to retire at the next Annual General Meeting of the company. A third of the directors retire
annually. The directors to retire are those who have been longest in office since their last election.

Executive directors

Executive directors appointed by the board occupy senior positions within the group, and have been selected for their experience and value they bring to the group and the board at large.

The chairman

The code provides for the appointment of an independent non-executive Chairman and as a result, the roles of Chairman and CEO do not vest in the same board member.

The board elects the Chairman based on his or her experience and potential contribution to the achievement of the objectives of the board as stated in its charter.

Company Secretary

The Company Secretary is responsible for ensuring that board procedures and applicable laws and regulations are fully observed and adhered to. The appointment and removal of the Company Secretary is a matter for determination by the entire board. All directors have access to the advice and the services of the Company Secretary and, in appropriate circumstances, are entitled and authorised, at the group’s expense, to seek independent professional advice concerning the affairs of the group.

Director development and evaluation

Induction

All new directors are inducted into the company by the CEO and the Chairman. After an informal evaluation has been made to establish the developmental needs of the relevant director, the company arranges for the director to be provided with the necessary training at the company’s cost.

Where it is considered that the director has experience from sitting on various boards, only company-specific development is considered necessary. The group is investigating the possibility of instituting an ongoing continuing professional development programme for directors.

Director evaluation

There is a requirement by the code for the board to evaluate its effectiveness continually as a unit and that of the individual directors. This includes evaluating the board in terms of mix of skills, experience, demographics and diversity. South Ocean Holdings has already begun the process of putting in place a periodic director evaluation mechanism which should be implemented in the 2010 financial year. Since the listing of the group, no formal evaluation has been undertaken; however, continuous, unstructured evaluations have been undertaken to determine the effectiveness of the board and that of the individual directors.

Board committees

The board has delegated certain responsibilities to the Executive Committee, Audit and Risk Management Committee and the Remuneration Committee, the activities of which are dealt with more fully below.

Audit and Risk Management committee

All listed companies are required by the JSE to have an audit committee as well as a risk committee which should be chaired by a non-executive director. In line with this requirement, the board has established the
Audit and Risk Management Committee which fulfils the functions for both committees. The Audit and Risk Management Committee is fully mandated by the board by means of written terms of reference as to its membership, authority and duties.

This committee meets periodically, at least three times a year, with executive management and the external auditors. The external auditors have unrestricted access to the Audit and Risk Management Committee,
thus ensuring their independence and the impartiality of their reports.

This committee reviews the annual financial statements and interim reports, monitors the appropriateness of accounting policies and the effectiveness of the systems of internal control and considers the findings
of the external audit.

The committee is also responsible for the review of and ensuring that management has processes, strategies and systems in place for the identification, management and control of all the risks the group is
exposed to.

Executive Committee

The executive directors constitute a committee that meets at least ten times a year to plan, review, and manage the day-to-day activities of the group. This committee consists of the executive directors and the CEO’s of the operating companies. All matters of policy and strategy are referred to the board.

Remuneration committee

Corporate governance codes suggest that the remuneration of the executive directors and the CEO’s of the subsidiaries must be recommended by and approved by the board. The board must regularly evaluate whether the senior management of the group is fairly remunerated.

In this regard, the board has established a Remuneration Committee to advise the board on all remuneration matters. The Remuneration Committee, comprising non-executive directors, is responsible for
ensuring that the group’s directors and senior executives are fairly rewarded. In addition to ensuring the fair remuneration of the senior management of the group, the committee also evaluates and reviews the
performance of the senior executives of the group. The committee meets periodically, at least two times a year.

Insider trading

No employee or director may deal, directly or indirectly, in the company’s securities on the basis of unpublished price-sensitive information regarding the business or affairs of the group. These closed periods include from the last day of the interim and final period to publication of the relevant financial announcement on the Stock Exchange News Services (SENS). In addition, group directors may trade in the company’s securities only with the approval of the Chairman or the CEO.

In terms of the JSE listing requirements, dealings in the company’s securities by directors, their immediate family and associates are announced on SENS. The group strictly adheres to the code relating to insider trading as set out in terms of the JSE Listing Requirements. The group also ensures that all its policies are aligned to the Security Services Act, which regulates such activities.

Relationship with stakeholders

The group continues to promote dialogue with its shareholders, business analysts, business advisers and all other stakeholders. All shareholders are encouraged to attend the Annual General Meeting and to ask
questions about the group, its results and prospects.

The group encourages stakeholders to approach executive directors whenever they wish.

The group also subscribes to the principle of fair communication and disclosure. It regularly engages with the media using various means to ensure fair communication. The media has access to top management in
order to report regularly on the group’s activities.

Human resource development

The group’s philosophy is to respect individuals regardless of race, gender or creed and to ensure that all employees are afforded equal opportunities for development, personal growth and promotion. Appropriate forums are in place to ensure good people relationships throughout the organisation by serving as vehicles for information sharing, consultation and dispute resolution. Group training programmes are outcomes-based and are designed to reinforce the required knowledge and skills.

Affirmative action

The group is an equal opportunity employer and will not countenance discrimination on the basis of ethnicity or gender. A number of programmes are in place to ensure that the group’s employee profile will become more representative of the demographics of the region in which it operates whilst maintaining the group’s high standards.

Worker participation

The group employs a variety of participative structures to deal with issues that affect employees directly and materially. These include: collective bargaining mechanisms; regular shop steward and trade union meetings as well as equity skills and development meetings; structures to drive productivity improvements; safety committees and other participative forums. These structures are designed to achieve good employer/
employee relations through effective sharing of relevant information, consultation and the identification and resolution of conflict.

Going concern

The directors have satisfied themselves that the group is in a sound financial position and has adequate resources to continue to operate effectively for the foreseeable future. Accordingly, they are satisfied that it
is appropriate to adopt the going concern basis in preparing the financial statements.