Corporate Governance And Risk Management Report

Corporate governance and risk management

PRINCIPLES AND IMPLEMENTATION OF CORPORATE GOVERNANCE

The directors of TMG are committed to effective corporate governance and the need for high ethical standards in conducting the Group’s business. TMG has substantially applied the principles set out in the King Report on Governance for South Africa 2009 (King III) since its listing on the JSE in September 2012. For the year under review, the exceptions were that the chairman of the board was also the chairman of the audit and risk committee, and that the nominations committee did not have a majority of independent members. The nominations committee is addressing these issues. TMG’s King III application register is available on the TMG website. The directors acknowledge that they are responsible for TMG’s affairs. This responsibility includes a strong focus on compliance with the qualitative aspects of corporate governance to ensure implementation matches the needs of the business.

BOARD OF DIRECTORS TMG has a unitary board. At year end, there were four independent non-executive directors, two non-executive directors and two executive directors. There are five black directors. Non-executive directors provide judgement on issues of strategy, performance, resources and standards of conduct based on their range of skills and commercial expertise. Executive directors propose strategies and implement operational decisions, and execute specific roles and functions in their areas of expertise. Appointments to the board are made in a formal and transparent manner, with the assistance of the nominations committee. Changes in the directorate are detailed on pages  and  of this integrated annual report.

There is a clear division of responsibilities at board level, captured in a policy that provides evidence of the balance of power between the independent non-executive chairman, chief executive officer and non-executive directors. The roles of chairman and chief executive officer are separate. The chairman provides overall leadership to the board without limiting the principles of collective responsibility for board decisions. The chairman has no executive functions. The chief executive officer is responsible for developing and recommending to the board a strategy and vision for the Group, as well as an annual business plan and budget to support the strategy. The board rigorously interrogates the strategy and provides input. The chief executive officer exercises final executive authority to run the Company efficiently on a day-to-day basis, and is the leading interface between the board and executive management.

The board believes its members have the expertise and experience to fulfil their obligations to the Company and all its stakeholders.

No board member has served as a director for more than nine years.

The board has a defined charter in line with King III which sets out its roles and responsibilities, namely, to:

 Provide effective leadership based on an ethical foundation  Ensure that the Company is, and is seen to be, a responsible corporate citizen, not only in the financial aspects of its business, but also the impact operations have on the environment and the society in which it operates  Exercise leadership and ensure that all deliberations, decisions and actions are based on the four values underpinning good governance - responsibility, accountability, fairness and transparency  Build and sustain an ethical corporate culture and ensure the Company’s ethics are managed effectively  Be the custodian of the Group’s corporate governance and be responsible for ensuring it complies with all relevant laws and codes of best governance practices and considers adherence to other non-binding rules, codes and standards  Facilitate the establishment of mechanisms and processes that support stakeholders in constructive engagement with the Company  Be accountable for the performance and affairs of the Company, appreciating that strategy, risk, performance and sustainability are inseparable. The board provides strategic direction by proposing, discussing and questioning, while evaluating and approving plans and strategies based on TMG’s values and objectives and stakeholder interests and expectations  Empower management to provide timely, accurate and relevant feedback on progress with approved operational and investment plans and strategies  Be responsible for risk management and monitoring with assistance from the audit and risk committee  Prepare and approve the Company’s annual integrated report, ensuring it conveys adequate information on the Company’s financial and sustainability performance, focusing on substance over form  Advocate and promote good governance by the Company’s subsidiaries.

The board delegates certain functions to well-structured committees without abdicating its own responsibilities. Delegation is formal and involves:

 Establishing and approving formal terms of reference for each permanent committee of the board  Appropriately constituting these committees with due regard to the skills required by each  An annual review of the permanent committees’ terms of reference.

Annual strategic review meetings enable comprehensive objectives to be developed for the Group, its business units, executives and senior management. Once the board has approved the strategy, it oversees and monitors the progress of the business at quarterly board meetings, with additional meetings held as required.

The board has an approvals framework which is regularly reviewed and updated. It clearly sets out authority levels for the board, its committees and executive management. Matters specifically reserved for the board’s decision include the adoption of TMG’s strategic direction and the approval of financial reports for public disclosure, the budget and significant capital expenditure.

As part of the governance structure, the board also approved a directors’ code of conduct, directors’ expenses policy and a policy for dealing with price-sensitive information.

All board members are required to disclose their shareholdings in TMG, outside directorships, personal financial interests and any potential conflicts of interest.

Board and committee members are supplied with comprehensive information to discharge their duties effectively.

The board approved a risk management framework that includes a risk management policy and plan. The risk management framework facilitates a proactive risk management process, and the inculcation of TMG’s risk management culture throughout the Group to optimise related efforts. The board approved the appointment of a group risk officer in terms of the risk management framework. The board also approved a compliance framework. A group compliance officer and operational compliance officers have been appointed in terms of this framework. The board is not aware of anything that would suggest a material breakdown in internal controls during the financial year.

2 The board agreed that the term ‘prescribed officer’, introduced by the new Companies Act, applied to TMG’s executive committee members who are not also executive directors of the Company. The company secretary informed the relevant people accordingly.

A collective board-effectiveness evaluation was performed at the end of the financial year. ATTENDANCE AT BOARD MEETINGS 3 3 2 1 1 1 0 0 0 2 2 2

r n v a u o M J

2 1 8 1 1 Name K D Dlamini (Chairman) P P P A D Bonamour P P P J H W Hawinkels P P P W Marshall-Smith P P P H K Mehta P P P R Naidoo P P P M S M Xayiya P P P M R Basel1 P P – Present

1 MR Basel was appointed a director on 8 November 2012 and resigned on 1 March 2013.

BOARD COMMITTEES

During the year, the following permanent committees assisted the board in discharging its responsibilities and obligations: audit and risk committee, remuneration committee, nominations committee and the transformation, social and ethics committee. Membership of the audit and risk committee is reflected in its report on page . Membership of the remuneration committee is reflected in its report on page . Membership of the transformation, social and ethics committee is reflected in its report on page .

All committees report to the board on their activities. The board is cognisant that this does not detract from its ultimate responsibility and accountability for the affairs of the Company.

The board is satisfied that all committees discharged their responsibilities satisfactorily in accordance with their terms of reference. Copies of these terms of reference are available from the company secretary on request.

Audit and risk committee

Full details of this committee are set out in its report on pages  to .

Remuneration committee

Full details of this committee are set out in its report on pages  to .

Nominations committee

The members of the nominations committee, specifically regarding gender diversification, considered various candidates for appointment to the board, and recommended the appointment of Manana Nhlanhla. Messrs KD Dlamini (chairman) and HK Mehta were the committee members during the year.

3 Transformation, social and ethics committee

The transformation, social and ethics committee met on 10 June 2013. It reviewed the Company’s transformation and initiatives in place and to be implemented for the social and ethics matters detailed in regulation 43 accompanying the Companies Act. As at the Company’s year-end, the committee members were Mr MSM Xayiya (chairman), Ms MM Nhlanhla and Mr AD Bonamour.

Executive committee and business unit management committees

The executive committee, comprising TMG’s senior management, meets quarterly. Other members of TMG’s management attend by invitation, as required.

Business unit management committee meetings are held quarterly, ensuring appropriate oversight of the business units. Significant matters raised at these meetings are referred to the executive committee.

COMPANY SECRETARY

The company secretary ensures the board remains cognisant of its duties and that all directors have full and timely information that may be relevant in the proper discharge of their duties, collectively and individually, with detailed guidance on their duties, responsibilities and powers. Directors have unrestricted access to the advice and services of the company secretary, who plays an active role in the corporate governance process.

The company secretary assists in determining the annual board plan and agenda, and in formulating governance and board-related matters. She is closely involved in the induction and orientation of new directors, and acts as secretary for committees of the board.

The company secretary, Joanne Matisonn (FCIS HDip Co Law (Wits)), was appointed secretary to TMG on 3 September 2012. She was previously group secretary at Avusa from 1 February 1998.

In line with the JSE Listings Requirements, the board has assessed the competence, qualifications and experience of the group secretary and concluded that she has the expertise to carry out her duties. This conclusion was arrived at after reviewing her competence, qualification and experience. The board is satisfied that an arms-length relationship exists between it and the company secretary as she is not a member of the board, is not involved in day-to-day operations of the Group and is not a prescribed officer.

4 ACCOUNTABILITY, AUDIT AND RISK MANAGEMENT

External audit The external auditors are responsible for reporting on whether the financial statements are fairly presented in terms of International Financial Reporting Standards and the Companies Act. The external auditors offer reasonable, but not absolute, assurance on the accuracy of financial disclosures. The preparation of all financial statements is the responsibility of the board.

There is consultation between external and internal auditors to ensure an efficient and comprehensive audit process. This includes periodic meetings to discuss matters of mutual interest.

The audit and risk committee determines the principles for approving the use of the external auditors for non-audit services.

Internal audit The board, guided by the audit and risk committee, is satisfied that the Group had an effective internal audit function that operated in line with a board-approved internal audit charter for the year under review. The internal audit function was provided by Sizwe Ntsaluba Gobodo, an external service provider. The roles and functions of the internal auditors were defined by the standards of the Institute of Internal Auditors.

Internal audit provided an independent, objective assurance that added value to the Company’s operations. Internal audit assisted the Group in accomplishing its objectives by bringing a systematic, disciplined approach to evaluating and improving the effectiveness of the Group’s risk management, internal control and governance processes.

Internal audit plans covered matters identified in risk management assessments as well as issues highlighted by the board, audit and risk committee, executive directors and senior management.

The internal audit function was terminated effective 1 July 2013 based on a cost-benefit decision.

Financial and operational risks and controls Risk governance operates within a defined structure approved by the board and monitored by the audit and risk committee. The objectives are to identify the level of risk appropriate to the Group, taking into account the need to increase shareholder value through an entrepreneurial culture and ensuring the Group achieves its objectives. Risk identification includes both actual and potential risks. The potential impact of key risks is measured against a broad set of assumptions.

Steps to mitigate risks and compensating controls are implemented and monitored. This process is recorded in a critical risk areas document that covers a broad range of risks including physical and operational risks, human resources risks, technology risks, business continuity and disaster recovery risks, credit and market risks, and compliance risks. All business unit management committees review and update their own critical risk areas at least twice a year.

The following critical risk areas that may impact at a Group level have been identified:

Risk Risk mitigation

1. Content delivery shift from TMG is bolstering its physical product and adopting digital delivery physical to digital platforms.

2. Piracy TMG is involved in educating the general public to avoid buying pirated products. The Entertainment business provides financial support to the Southern African Federation Against Copyright Theft 5 (SAFACT) to combat piracy.

3. Loss of licences and agencies Strategic management of Group licences is in place, and includes building and maintaining relationships with licensors.

4. Loss of key personnel Retention of key employees is an important part of the Group’s human resources function. In cases where key personnel do leave, their replacement is identified in advance by succession planning.

5. Contravention of Competition Act Compliance with competition law is continually reviewed.

6. Power outages Generators have been acquired to provide power to critical sites and processes during power outages.

7. Loss of key customers Strategic management of key customers is in place, and includes building and maintaining relationships with these customers.

8. Ability to service borrowings Cashflow is continually managed and reviewed.

9. Destruction of Head Office Relevant security is maintained for the building. building

Systems of internal controls include defined lines of accountability. The board is satisfied as to the effectiveness of the Company’s internal controls.

Operational risks are managed to acceptable levels by ensuring the appropriate infrastructure, controls, systems and people are in place across the Group. Contingency plans are in place to ensure ongoing product and service delivery under adverse conditions.

The adequacy and effectiveness of the Company’s risk management is assessed by internal and external assurance providers. The board is aware that it operates in a dynamic environment, and is alert to new areas of risk exposure that may require its attention. Accordingly, there is a continual focus on ensuring the control environment in which the business operates is understood and maintained at the required level.

The board is satisfied that an adequate risk management process is in place to identify, evaluate and manage key risks faced by the Group.

DIRECTORS’ RESPONSIBILITY

The directors acknowledge their responsibility for the adequacy of accounting records, effectiveness of risk management and the internal control environment, appropriateness of accounting policies, and the bases of estimates and provisions. The directors also acknowledge their responsibility for preparing the annual financial statements, adhering to appropriate accounting standards, and preparing related information that fairly presents the state of affairs and the results of the Company and of the Group.

6 GOING CONCERN

The directors confirm they are satisfied that the Company and the Group have adequate financial resources to continue in business for the foreseeable future. Accordingly, the annual financial statements have been prepared on the going-concern basis.

BUSINESS ETHICS AND CODE OF CONDUCT

The Group complies with applicable laws and regulations. Dealings with stakeholders are based on integrity and ethics. TMG conducts its business through fair practices, and trades with suppliers who subscribe to similar ethical standards. The Company’s code of conduct, set out on page , is incorporated into the group human resources manual and communicated within the Group and with external parties. The Company’s editorial charter affirms its commitment to the principle of editorial independence. In addition to complying with national, corporate and industry standards and regulations, TMG also abides by various media-specific codes of conduct.

The directors’ code of conduct is in line with the recommendations of King III. It covers a wide range of business practices and procedures. It does not endeavour to cover every issue that may arise, but sets out basic principles to guide directors of the Company and its subsidiaries to deal with ethical issues, to advise on channels to report possible unethical conduct and to foster a culture of honesty and accountability.

SHARE DEALINGS BY DIRECTORS AND MANAGEMENT

In line with statutory and regulatory obligations and best practice, directors and management may not deal directly or indirectly in the Company’s shares during specific closed periods. These closed periods operate from year end to the announcement of annual results, and from half-year end to the announcement of interim results. Restrictions on share dealings are also applied during any other period considered sensitive in terms of the requirements of the JSE Limited.

Directors and the company secretary require the prior approval of the chairman, chief executive officer or financial director before dealing in the Company’s shares.

INDUSTRY ENGAGEMENT

TMG is actively engaged in a variety of industry bodies, including World Association of Newspapers, Print and Digital Media South Africa, Newspaper Association of South Africa, South African Press Association, Magazine Publishers Association of South Africa, Printing Industries Federation of South Africa, Southern African Federation Against Copyright Theft, National Organisation for Reproduction Rights in Music in Southern Africa, Content Delivery and Storage Association, Recording Industry of South Africa, South African Music Performance Rights Association, Publishing Association of South Africa, South African Booksellers’ Association, and Sustainable Energy Society of Southern Africa, through funding and by the leading roles played by TMG executives and management in these industry bodies.

COMMUNICATIONS WITH SHAREHOLDERS

The chairman and executive directors regularly engage with major shareholders, institutional investors, analysts and the media. Group operations have their own programmes in place to inform stakeholders on material issues.

7 Financial results are published in the press, and on the Company’s website. Shareholders have been offered the opportunity to receive financial results electronically. Shareholders are invited to attend the annual general meeting of the Company.

There were still numerous certificated shareholders at 30 June 2013. Shareholders are reminded that they are unable to deal in their TMG shares unless the shares are dematerialised.

TMG encourages as many shareholders as possible to receive annual and interim financial reports, and other corporate documentation, in a user-friendly electronic format. Shareholders who wish to take advantage of this service are kindly requested to contact Computershare whose details appear on page . Once registered to receive electronic information, shareholders receive email notification of the release of annual and interim financial reports. This notification directs shareholders to the appropriate page on TMG’s website to view the documents concerned.