The directors remain committed to best-practice corporate governance and the principles contained in the Code of Corporate Practices and Conduct set out in the King II Report. The board continually monitors compliance to ensure ongoing improvement of operational and corporate practices and that the affairs of the group are conducted with transparency and integrity.

Accordingly, the company has appointed consultants with expertise in the corporate governance field to assist the board in implementing frameworks, processes and procedures to adequately address the requirements of the King III Report, which is effective to companies with financial years beginning on or after 1 March 2010. The board is also in the process of assessing its obligations in terms of compliance with the new Companies Act No. 71 of 2008 (“the New Act”). The New Act has been promulgated but has not yet come into effect. It will come into operation on a date to be proclaimed in the Government Gazette.

Where appropriate, this report addresses areas where the group is already compliant with the King III Report. In light of the proposed transaction with Tsogo, the new board of the Merged Entity may formulate its own strategies, policies and procedures with respect to the implementation of the King III Report as well as the New Act.

THE BOARD CHARTER

The unitary board is regulated by a formal board charter, which sets out the role of the board and the responsibilities of the directors. In line with this charter, the board is responsible for strategic development which addresses the group’s purpose, values and stakeholders and accordingly, has ensured that the procedures are in place to monitor and evaluate the implementation of its strategies, policies, senior management performance criteria and business plans.

The board maintains full and effective control over Gold Reef and is accountable and responsible for Gold Reef’s performance. The board charter codifies the board’s composition, appointment, authorities, responsibilities and processes and sets out the fiduciary duties of the directors to the company. The board charter addresses matters relating to board composition, leadership, remuneration and evaluation, review of group processes and procedures, key operational risks and corporate governance compliance. It provides the board with a mandate to exercise leadership, determine the group’s vision and strategy and monitor operational performance.

THE BOARD

In line with the King III Report, the board now comprises four executive and seven non-executive directors, with the majority being independent non-executive directors. Accordingly, five of the seven non-executive directors on the board hold independent non-executive directorships. There is one alternate non-executive director. In line with best practice, the board appointed Dr. EN Banda as independent Chairman on 2 July 2009. Click here for the names and brief curriculum vitae of the directors.

The roles of the independent Chairman and CEO are strictly separated. The Chairman provides leadership to the board and oversees its efficient operation while the CEO is responsible for proposing, updating, implementing and maintaining the strategic direction of Gold Reef as well as ensuring that the day-to-day affairs of the group are appropriately supervised and controlled. Executive directors assist the CEO and are responsible for implementing strategy and operational decisions in respect of the company’s day-to-day operations. The non-executive directors are high merit individuals who contribute a wide range of skills, knowledge and experience to the board’s decision-making process and are not involved in the daily operations of the group.

M Krok resigned on 2 July 2009 as chairman and director of Gold Reef. On 25 August 2009 P Vallet was appointed as a non-executive director to the Gold Reef board. Two non-executive directors, AJ Aaron and J Leutgeb and two alternates, A Krok and R Vierziger, resigned during 2009.

The board meets at least quarterly with additional meetings convened when necessary. Directors are comprehensively briefed in advance of board meetings and are provided with all necessary information to enable them to discharge their responsibilities. A table of directors’ attendance at board meetings is set out in the Directors’ Report. In terms of the Articles of Association, directors are subject to retirement by rotation and re-election at least once every three years.

All directors have unrestricted access to the advice and services of the Company Secretary and to company records, information, documents and property. Non-executive directors also have unfettered access to management at any time. All directors are entitled, at Gold Reef’s expense, to seek independent professional advice on any matters pertaining to the group where they deem this to be necessary.

BOARD PROCESSES

New appointments
New board appointments are considered by the board as a whole, taking into account a blend of skills and experience as well as concerns such as diversity. In terms of Gold Reef’s Articles of Association new directors hold office until the next annual general meeting at which their appointment must be confirmed/ratified by shareholders. An informal induction programme is in place which includes introductions to key senior management and site visits. New appointees receive copies of the latest interim announcements and annual financial statements and are introduced to the company’s policies and procedures. The Company Secretary is responsible for implementing this induction programme which also sets out the new directors’ responsibilities and fiduciary duties, as well as ongoing guidance on the relevant statutory and regulatory framework.

Ongoing corporate governance education
The Company Secretary is responsible for informing directors on an ongoing basis of major regulatory and legislative developments in order to keep the board abreast of current requirements. The company involves its sponsor and other relevant experts where necessary to ensure that the level of information is adequate to enable the board to fulfil its duties.

Conflict of interests
Directors are required to disclose at each board meeting their shareholding, additional directorships and any potential conflicts of interest to the Chairman and the Company Secretary who, together with the sponsor, ensure that any share dealings and other required information is published on SENS.

Directors’ and officers’ liability insurance
Directors’ and officers’ liability insurance cover is in place.

Share dealing
A group-wide share trading policy is in place whereby all directors and employees who have access to financial results and other price sensitive information are prohibited from dealing in Gold Reef shares during ‘closed periods’ as defined or while the company is operating under cautionary. These employees are expressly informed when the group is entering a ‘closed period’ and that dealing in Gold Reef shares during that period is prohibited. Further, directors are obliged to obtain clearance from the Chairman, or failing him, the Chairman of the Audit and Risk Committee, prior to dealing in the shares of the company and to report any share dealings (including transactions in terms of the Gold Reef Share Scheme) to the Company Secretary who, together with the sponsor, ensures that the information is published on SENS.

Annual evaluation
The board conducts ongoing self-evaluation exercises based on a predetermined checklist.

Annual general meeting
Attendance by all directors at the annual general meeting is encouraged. At the July 2009 Gold Reef annual general meeting the Chairman of the Audit and Risk Committee and Chairperson of the Remuneration and Nominations Committee were in attendance, as were the CEO and FD. In addition, one other executive and two other non-executive directors were in attendance at the annual general meeting. The notice for any general meeting of shareholders includes an explanation of the reason for, and the effect of, any proposed special resolution. The company’s transfer secretaries attend each meeting to assist with the recording of shareholders’ attendance and to count the votes. The Chairman confirms with the meeting whether the votes will be counted by way of a show of hands or a poll. The Chairman takes time during the meeting, ensuring that the resolutions have been read and allowing time for questions.

Board Committees
All committees have satisfied their responsibilities during the year in compliance with their Charters. The chairpersons of the committees or another committee member nominated by them, attend the company’s annual general meeting.

Audit and Risk Committee
The Audit and Risk Committee is chaired by independent nonexecutive director, JC Farrant and comprises one other independent non-executive director. On 25 November 2009, P Vallet was appointed as an alternate to both members of the Audit and Risk Committee. The committee met three times during the year, which the directors believe is sufficient for the purposes of discharging the committee’s responsibilities. Additional special meetings are convened as and when required. The CEO, FD, Group Internal Audit Manager and external auditors are invited to attend every meeting and management members attend as required.

As set out in its formal Charter the Audit and Risk Committee is responsible for assisting the board in fulfilling its fiduciary oversight responsibilities for the following:

1. financial reporting process;
2. system of risk management;
3. system of internal controls;
4. internal audit process;
5. the annual independent audit of the company’s and group’s financial statements;
6. engagement of other external audit firms (e.g. for fair and reasonable opinions);
7. the group’s compliance with:
1. laws and regulations;
2. its articles of association;
3. its code of conduct (ethics);
4. corporate governance;
5. BEE requirements set by gambling boards and the Department of Trade and Industry;
6. its fraud policy; and
7. Audit Committee and Audit Forum management and reporting responsibilities.

Additional responsibilities include recommending the appointment of the head of internal audit, recommending the appointment of the external auditors, establishing principles for utilisation of external auditors for non-audit services, assessing the performance and credentials of the FD as well as reviewing the group’s compliance with the Companies Act, the Income Tax Act, the King II and King III Reports, the JSE Listings Requirements and all other relevant statutes.

Subject to overall board responsibility, the committee is further responsible for risk management. It continually assesses the major business and operational risks faced by the group and recommends and monitors appropriate risk management strategies. Key risks are continually monitored and assessed at least annually. The risks are assessed against mitigating factors to produce residual risks. The committee satisfies itself that the residual risk is within its risk tolerance. If the risk tolerance is breached additional steps will be taken to reduce it to within the risk tolerance. The risk, mitigating factor, residual risk and the rationale used in the above is adequately documented. In an attempt to combat fraud a crime hot line has been established and offers the callers anonymity and confidentiality.

Separate audit forums are in place at Akani Egoli, Silverstar Casino, Akani Msunduzi, West Coast Leisure, Garden Route Casino, Goldfields Casino and Queens Casino. These forums comply with the standards and practices set by Gold Reef’s Audit and Risk Committee. The Internal Audit Manager and the external auditors of each of these companies report their findings to the respective audit forums and Gold Reef’s Audit and Risk Committee. The external auditors report to the Audit and Risk Committee to confirm that they have remained independent from Gold Reef and its subsidiaries for the year. The Audit and Risk Committee is satisfied that the auditors have remained independent throughout the year. The committee conducts self-evaluation exercises as set out in its Charter. Findings and recommendations are then reported to the board. The exercise did not identify any areas of concern for the year.

Company Secretary
The role of Company Secretary is seen as pivotal in good corporate governance. The Company Secretary is tasked with providing guidance to directors with regard to discharging their duties. She maintains an open door policy and is a central source of guidance and advice on ethics and good governance. JS Friedman resigned as company secretary and was replaced by L Fick with effect from 25 November 2009.

Code of Ethics
The group has developed and implemented a Code of Ethics and Conduct which has been communicated to all units throughout the group and, to ensure that the group’s reputation for integrity remains untarnished, a zero tolerance policy has been adopted confirming the board’s commitment to the code.

Management
Operational management is appointed by the board based on the appropriate skills and experience necessary to perform the relevant functions. Processes have been formalised to promote interactive dialogue and decision-making between management and executive directors. This also facilitates the disclosure to the directors of any conflict or potential conflict of interest on the part of management. For example, formalised delegation of authority documents are distributed to each unit which clarify the levels of authority given as well as management’s obligations in the following areas:

1. contracts binding on the company;
2. disposal of assets;
3. banking;
4. appointment and dismissal of senior staff;
5. organisational structure;
6. collective bargaining arrangements;
7. marketing initiatives;
8. budgets and reports;
9. appointments of lawyers, auditors and consultants;
10. legal proceedings;
11. donations;
12. conflicts of interest;
13. travel and accommodation;
14. policies, procedures and manuals;
15. operating expenditure;
16. capital expenditure;
17. dealing with the press;
18. health and safety; and
19. compliance with the law.

The performance of senior managers is independently reviewed by the company’s executive directors.

ACCOUNTING AND AUDITING

External audit
Gold Reef’s external auditors are responsible for providing an independent audit opinion on whether the financial statements are fairly presented in compliance with IFRS. The preparation of the financial statements and the effective operation of internal controls, remains the responsibility of the directors and management. The Audit and Risk Committee is responsible for recommending the appointment of the external auditor and overseeing the external audit process. In line with its Charter, the Audit and Risk Committee has:

1. evaluated the independence and effectiveness of the external
2. auditors,
3. considered and approved the audit fee payable to the external auditors in respect of the audit for the year ended 31 December 2009 ahead of the annual audit as well as their terms of engagement, taking into consideration factors such as the timing of the audit, the extent of work required and the scope of the audit;
4. ensured and satisfied itself that the appointments of the external auditors, the designated auditor and IFRS advisor are in compliance with the Companies Act, The Auditing Profession Act, 2005 and the Listings Requirements of the JSE Limited;
5. considered and pre-approved all audit and non-audit services provided by the external auditors exceeding R250 000 for any single engagement, ensuring that the independence of the external auditors is not compromised;
6. reviewed and assessed the company’s risk identification, measurement, and control systems and their implementation; and
7. reviewed and approved the group accounting policies.

Internal audit
The group’s internal audit function is housed in Akani Egoli and seconded to Gold Reef, Silverstar Casino, Akani Msunduzi, West Coast Leisure, Garden Route Casino, Goldfields Casino, Queens Casino and Gold Reef City Theme Park on a cost recovery basis. The Group Internal Audit Manager co-ordinates this process and attends all of the meetings. He also reports at Gold Reef Audit and Risk Committee meetings and has direct access to the Chairman of the Audit and Risk Committee. Unrestricted consultation is encouraged between the internal audit function and directors, management and Gold Reef’s external auditors.

The internal audit function evaluates and examines the operations’ activities and resultant business risks. The internal audit plan is based on risk assessments and compliance requirements. The scope of the function includes compliance auditing of specific areas stipulated by the relevant gambling boards as well as assessing the adequacy of internal controls, fraud prevention, risk management and the safeguarding of assets.

The internal audit function is operated in accordance with the terms of reference set out in an Internal Audit Charter. The function is as envisaged in the Standards for the Professional Practice of Internal Auditing, which is fully endorsed by the applicable codes on corporate governance.

Internal Controls and Risk Management
The board is responsible for the group’s systems of internal control and risk management. These systems of internal control are designed to provide reasonable but not absolute assurance as to the integrity and reliability of the financial statements and to safeguard and maintain accountability of the group’s assets. These systems provide reasonable but not absolute assurance regarding the safeguarding of assets against unauthorised disposal or use, compliance with statutory laws and regulations and the maintenance of proper accounting records as well as the adequacy and reliability of financial information. The directors have satisfied themselves that adequate systems of internal control are in place to mitigate significant risks identified to an acceptable level. Nothing has come to their attention to indicate that a material breakdown in the functioning of these systems within the group has occurred during the year.

The group’s systems of internal control are further designed to detect and minimise significant fraud, potential liability, loss and material misstatement. There are inherent limitations to the effectiveness of any system of internal control, including the possibility of human error and the circumvention or overriding of controls. The system is therefore designed to manage rather than eliminate risk of failure and opportunity risk.

The internal audit department holds regular risk workshops with the general managers and other relevant senior managers at all of the properties. At these workshops, the results of the previous workshop are reviewed and any new risks are raised and their effect debated. Based on the outcome of these workshops, each property’s risk register is updated and the reports submitted to the Audit and Risk Committee for review. The Audit and Risk Committee reports to the board, which is responsible for assessing the risks that are continually identified through the risk management process. Together with the Audit and Risk Committee, the board monitors the implementation of the appropriate risk management strategies throughout the group.

Key risks facing the group include:

Exchange rate fluctuations
Increase in gaming taxes
Legislative and regulatory changes
Penetration of new markets/
local gaming market saturation
HIV/AIDS pandemic
Organised crime targeting casinos countrywide
Health and safety
Municipal services
Injury to patrons
Strategic and aggressive marketing campaigns are initiated by group casinos to protect
and grow market share.
Casino management reviews cost control to manage margin erosion.
The activities of direct competitors are monitored.
Forward exchange contracts.
CASA membership provides Gold Reef with a platform to lobby government on tax
changes.
CASA membership provides Gold Reef with a platform to lobby government on any
impending changes.
Part of the rationale behind the proposed transaction between Gold Reef and Tsogo is to
enable our shareholders to benefit from the earnings, geographical and market segment
diversifi cation.
See HIV/AIDS on page 35.
Gold Reef partners with local police in all regions to ensure the protection of casino
premises. The group has enhanced security and risk management measures at all casinos.
Regular reviews of operations are conducted for compliance with health and safety
regulations (see page 34).
Gold Reef has suffi cient backup and generator capacity available at all properties.
Emergency plans for supply of water.
A disaster recovery plan is in place at all properties.
Staff members are trained in fi re fi ghting, fi rst aid and evacuation procedures.
On-site clinics attend to the medical needs of staff and patrons.
Gold Reef City Theme Park has daily inspections of all its rides and subscribes to ADIPS
internationally accredited safety standard.
The group has public liability insurance in place.

DISCLOSURE STATEMENT

The annual report deals adequately with disclosures pertaining to the annual financial statements, auditors’ responsibility, accounting records, internal controls, risk management, accounting policies, adherence to accounting standards, going concern issues and adherence to codes of governance.
Competition for disposable income

Gold Reef believes that for a company to run efficiently and responsibly it is important to have sound governance at all levels of its operations and to have appropriate oversight at executive level. To this end, Gold Reef has designed this code to guide its conduct and that of all its directors, managers and employees. The group is committed to a policy of fair dealing and integrity in the conduct of its business. This commitment, which is actively endorsed by the board of directors, is based on a fundamental belief that business should be conducted using the principles described below. The group expects all executives and employees to share its commitment to high moral, ethical and legal standards.

PRINCIPLES OF ETHICAL CONDUCT

Corporate governance and transparency
The group is committed to the highest standards of corporate governance as enshrined in the King II report and, once it becomes effective, the King III Report. In addition, the group believes that being transparent is imperative to the sustainability of its operations. Accordingly, the group commits itself to timely and accurate communication of information about its business to its active stakeholders on a regular basis. All financial and other information will be presented in a manner that at least meets the minimum requirements of the laws of the country in which the group operates.

Compliance with the law
We respect and comply with the laws of the country in which we operate. This includes corporate laws, common law as well as specific laws, including regulations of all the gambling boards. We will strive to be a good corporate citizen of the country in which we do business.

Competition and marketing
We will respect the rights of competitors, patrons and suppliers. The only competitive advantages we seek are those gained through superior and innovative products, services and marketing. In our advertising and other public communications we will avoid not only untruths, but also excessive exaggeration and overstatement that may mislead members of the public. Our advertising and public statements will comply with the minimum standards set by the advertising authorities and the gambling boards of all the provinces.

Conflict of interest
We expect all directors, managers and employees to avoid any conduct which might lead to a conflict with their responsibilities to the company. It is also expected of every director, manager and employee to be influenced in all the decisions they make, by the interests of the company and not personal gain. All directors, managers and employees may not use their positions within the company for personal gain. It is expected of every director to regularly declare their business interests and directorships to the board.

Payments to government personnel
We do not make illegal payments or give gifts of substantial value to government officials of any country with a view to influencing them to make decisions or judgements that are favourable to our company.

Kickbacks and gratuities
We do not offer or accept kickbacks or bribes. We do not accept or offer gifts of substantial value unless this is declared in terms of the company’s policies.

Political contributions and activities
The group does not, directly or indirectly, participate in political activities nor does the group provide substantial support to any political parties or individuals. However, recognising the history of our country and the need to foster the principles of democracy both in our country and the African continent, the group may make political donations to identified political parties. Any decision to donate substantial cash to a political party shall require the board’s approval.

Employment practices
The group’s policy is not only to comply with the employment laws of our country but to uphold international best practices in people management. We believe that the sustainable growth of our company depends as much on our people as it does on our operational expertise. To this end our employment policies are designed to empower employees, develop them and create an environment in which each employee can perform and grow to his or her fullest potential regardless of race, gender or disability. We also strive to attract and retain the highest calibre staff while at the same time redressing historic imbalances, where they exist.

Responsibilities to local communities

The group is committed to the upliftment and development of local communities. To this end the group sets aside a portion of its profits for initiatives aimed at improving and developing the communities within which it operates. In certain circumstances, community trusts have been established for this purpose.

Risk management
Managing risk effectively is an integral part of the group’s operations. Executive directors are involved in continuous and consistent efforts to identify, assess, manage and monitor all forms of risks across the group. This is done via the group’s Internal Audit and Risk department which assesses each operation, identifies risks and ranks each aspect in terms of its potential to disrupt or cause loss to the group’s business. Detailed reports are submitted to both the executive directors and the Audit and Risk Committee where all forms of risks are assessed and interventions to mitigate the risks identified. While the general and detailed risk assessment is done twice a year, financial and treasury risks are assessed and managed regularly within set guidelines.

Safety, health and environment
Realising its obligations as a corporate citizen of the country, the group strives to fully comply with all the laws governing safety, health and environment. All employees are informed of the group’s policies governing these areas and are trained on their responsibilities in this regard. To enhance the wellbeing of its employees, the group has put in place staff welfare programmes including access to clinic facilities at some of its properties. These facilities are also available to the group’s patrons when urgent medical assistance is required during a visit to its properties. While the group’s main business activities pose minimal risk to the environment, environmental management practices have been integrated as part of its operation.

Code of conduct
In line with the principles in this code, it is expected of all directors, managers and employees to be accountable for their actions and act in a manner that will position the company as being:

• Transparent, honest and frank in its dealings with stakeholders;
• Consistent and committed in honouring its legal and moral obligations;
• Committed to upholding the highest standards of ethics;
• Well-respected with regards to integrity and credibility; and a
• Responsible corporate citizen of the country in which it operates.