SA additional reports 1

King III compliance checklist

King III compliance checklist

for the year ended 30 September 2013

This checklist has been prepared in terms of the JSE Listings Requirements and sets out Netcares approach to corporate governance in
relation to the King Report on Governance for South Africa (King III). The following table includes the Groups application of the King III
principles and references to the Groups annual integrated report, annual financial statements (AFS), and the online reports forming part
of the annual integrated report (AIR), where further details can be found.
Chapter King III principle Compliance Additional comments Reference

1. Ethical and corporate citizenship

1.1 The board should The Board recognises that good governance i AIR: Corporate
provide effective emanates from effective, responsible leadership, governance
leadership based on an which is characterised by the ethical values of report Ethics
ethical foundation. responsibility, accountability, fairness and
transparency. The Groups Ethics Policy articulates
the Groups position on conflicts of interest, gifts,
confidentiality, fair dealings and protection and
appropriate utilisation of Netcares assets. Note that
Netcare endeavoured to measure its level of ethics
awareness, compliance and adherence on a
Group-wide basis during 2013.
1.2 The board should ensure The Board considers not only financial performance,
that the company is and but also the ethical relationship between the Group
is seen to be a and the societies in which it operates. The Group
responsible corporate Social and Ethics Committee and Group
citizen. Sustainability Committee have been established to
appropriately address the requirements of this
principle.
1.3 The board should ensure The Board subscribes to the Groups values and i AIR: Corporate
that the companys Code of Ethics. The Group has a whistle-blowing governance
ethics are managed mechanism in place to facilitate the anonymous report Ethics
effectively. reporting of alleged theft, fraudulent, corrupt or
unethical behaviour in the Group, which is
facilitated through the Fraud and Ethics Hotline.
The Group Social and Ethics Committee monitors
implementation, reporting and training and
awareness of ethics and the Code across the Group.

2. Boards and directors

2.1 The board should act as The Boards terms of reference explicitly cater for this IR Refer to the
the focal point for, and requirement. The Board meets four times a year. Board charter
custodian of, corporate available at: www.
governance. netcareinvestor.
co.za/jse_sri.php

2.2 The board should The Board informs and approves the Groups IR Refer to the
appreciate that strategy, strategy and satisfies itself that business plans are Board charter
risk, performance and not encumbered by unexamined risks. The Board available at: www.
sustainability are also ensures that the strategy will result in netcareinvestor.
co.za/jse_sri.php
inseparable. sustainable outcomes and considers sustainability to
be both a necessity and a business opportunity.
2.3 The board should As per 1.1 above.
provide effective
leadership based on an
ethical foundation.

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Chapter King III principle Compliance Additional comments Reference

2.4 The board should ensure As per 1.2 above.

that the company is, and
is seen to be, a
responsible corporate
citizen.
2.5 The board should ensure As per 1.3 above.
that the companys
ethics are managed
effectively.
2.6 The board should ensure The Board ensures that the Company has an
that the company has an effective and independent Audit Committee as set
effective and out in the comments to chapter 3.
independent audit
committee.
2.7 The board should be The Board is responsible for the governance of risk
responsible for the as set out in the comments to chapter 4.
governance of risk.
2.8 The board should be The Board is responsible for IT governance as set
responsible for out in the comments to chapter 5.
information technology
(IT) governance.
2.9 The board should ensure The Board ensures that the Group complies with
that the company applicable laws and considers adherence to
complies with applicable non-binding rules, codes and standards as set out in
laws and considers the comments to chapter 6.
adherence to non-
binding rules, codes and
standards.
2.10 The board should ensure The Board ensures that there is an effective
that there is an effective risk-based internal audit as set out in the comments
risk-based internal audit. to chapter 7.
2.11 The board should The Board appreciates that stakeholders
appreciate that perceptions affect the Groups reputation as set out
stakeholders in the comments to chapter 8.
perceptions affect the
companys reputation.
2.12 The board should ensure The Board ensures the integrity of the Groups
the integrity of the integrated report as set out in the comments to
companys integrated chapter 9.
report.
2.13 The board should report The Board reports on the effectiveness of the
on the effectiveness of Groups system of internal controls as set out in the
the companys system of comments to chapters 7.
internal controls.
2.14 The board and its The directors act in the best interest of the Group by, i AIR: Corporate
directors should act in among other actions, disclosing conflicts where they governance
the best interests of the exist, dealing in securities only as allowed by report
company. directors dealing policies and by adhering to legal
standards of conduct. Where required, they are
permitted to take independent advice.
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Chapter King III principle Compliance Additional comments Reference

2.15 The board should The financial performance and going concern status
consider business of the Company is monitored by the Audit Committee
rescue proceedings or and the Board.
other turnaround
mechanisms as soon as
the company is
financially distressed as
defined in the Act.
2.16 The board should elect a The Board has elected an independent non- i AIR: Overview
chairman of the board executive Chairman who has been assessed and Board of directors;
who is an independent declared as independent. The Chief Executive Corporate
non-executive director. Officer (CEO) and the Chairman are two governance report
Board of directors
The CEO of the separate individuals.
company should not also
fulfil the role of chairman
of the board.
2.17 The board should The Board formally appoints the CEO on an annual IR Terms of reference
appoint the chief basis, and ensures that the role of the CEO is of the Board and
executive officer and formalised and his performance evaluated against its committees
establish a framework for specified criteria. The Board has established and sub-
committees are
the delegation of committees to which certain responsibilities and available at: www.
authority. authority is delegated. netcareinvestor.
co.za/jse_sri.php.

2.18 The board should There are presently eight (8) non-executive directors i AIR: Overview
comprise a balance of of which seven (7) have been assessed and Board of directors;
power, with a majority of declared as independent. Corporate
non-executive directors. governance report
Board of directors
The majority of non-
executive directors
should be independent.
2.19 Directors should be Directors are formally appointed, and rotated for
appointed through a re-election by shareholders at the Annual General
formal process. Meeting (AGM).
2.20 The induction of and New and inexperienced directors are suitably trained
ongoing training and through formal induction. Directors are kept up to
development of directors date through regular briefings and continuing
should be conducted corporate governance updates.
through formal
processes.
2.21 The board should be The Board is assisted by a competent, suitably i AIR: Corporate
assisted by a competent, qualified and experienced Company Secretary who governance report:
suitably qualified and complies with the requirements set out in the Company Secretary
experienced company Companies Act.
secretary.
2.22 The evaluation of the The required evaluations are conducted on an annual i AIR: Corporate
board, its committees basis, both formally and informally, with the feedback governance report
and the individual being addressed at the appropriate level thereafter. Board of directors
directors should be No issues of concern were raised during 2013.
performed every year.

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Chapter King III principle Compliance Additional comments Reference

2.23 The board should Appropriate committees are duly constituted and i AIR: Corporate
delegate certain each has formulated terms of reference that are governance report
functions to well- reviewed annually. Board of directors
structured committees
but without abdicating its
own responsibilities.
2.24 A governance framework A governance framework is established between the
should be agreed Group and the subsidiary boards.
between the group and
its subsidiary boards.
2.25 Companies should The Board has established a Group Remuneration i AIR: Remuneration
remunerate directors Committee, consisting solely of non-executive report
and executives fairly and directors, who assist the Board in setting and
responsibly. administering a fair, equitable and responsible Refer to
remuneration policy. IR
Remuneration
Committees
terms of reference
available at: www.
netcareinvestor.
co.za/jse_sri.php

2.26 Companies should The remuneration of directors and prescribed i AIR: Remuneration
disclose the officers is disclosed in the Remuneration report report
remuneration of each and the annual financial statements. AFS Note 35 to
individual director and AFS the Group annual
certain senior financial statements
executives.
2.27 Shareholders should The Groups remuneration policy was approved by i AIR: Remuneration
approve the companys shareholders of the Company at the last AGM held report
remuneration policy. on 8 February 2013 by way of a non-binding Remuneration policy
advisory vote.

3. Audit committee
3.1 The board should ensure The Board evaluates the effectiveness and i AIR: Corporate
that the company has an independence of the Group Audit Committee on an governance report
effective and annual basis. The Group Audit Committee met Board of directors
independent audit three (3) times in the 2013 financial year and also
committee. can elect to meet with internal and external auditors
without management being present. This was not
exercised for the period under review.
3.2 Audit committee The Group Audit Committee members are suitably i AIR: Corporate
members should be skilled and experienced non-executive directors. The governance report
suitably skilled and majority (3) of the Group Audit Committee are also Board of directors
experienced independent.
independent non-
executive directors.
3.3 The audit committee The Group Audit Committee is chaired by an i AIR: Corporate
should be chaired by an independent non-executive director, whose governance report
independent non- independence has been both formally declared and Board of directors
executive director. assessed. The Chairman of the Group Audit
Committee attends the AGM.
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Chapter King III principle Compliance Additional comments Reference

3.4 The audit committee The Group Audit Committee has delegated the i AIR: Corporate
should oversee responsibility to management to review all content of governance report
integrated reporting. the annual integrated report. The Group Audit Board of directors,
Committee is ultimately responsible for the content Internal control and
internal audit;
and integrity of the annual integrated report.
AFS: Audit
AFS Committee report

3.5 The audit committee The Group Audit Committee monitors the relationship i AIR: Corporate
should ensure that a between the external assurance providers and the governance report
combined assurance Group. The roll-out of a formal combined assurance Internal control and
model is applied to model will be implemented in 2014 through a internal audit
provide a co-ordinated co-ordinated governance process approved by the
approach to all Group Audit Committee.
assurance activities.
3.6 The audit committee During the year, the Audit Committee considered the AFS: Audit
should satisfy itself of experience and expertise of the Chief Financial AFS Committee report
the expertise, resources Officer (CFO). The finance function is reviewed and
and experience of the assessed on an annual basis through the CFO and
companys finance Audit Chairperson in conjunction with the Human
function. Resource function.
3.7 The audit committee The Group Audit Committee is responsible for AFS: Audit
should be responsible performance management of Internal Audit, as and AFS Committee report
for overseeing of internal when the Committee deems appropriate. AIR: Corporate
audit. i
governance report
Internal control and
internal audit
3.8 The audit committee The Group Risk Committee minutes are tabled at i AIR: Corporate
should be an integral Group Audit Committee meetings on a biannual governance report
component of the risk basis. A Group Audit Committee member is also a Risk management
management process. member of the Group Risk Committee and provides report
periodic feedback.
3.9 The audit committee is The Group Audit Committee nominates the external AFS: Audit
responsible for auditor for appointment at the AGM; approves the AFS Committee report
recommending the terms of engagement and remuneration for the
appointment of the external audit engagement; monitors and reports on
external auditor and the independence of the external auditor; defines a
overseeing the external policy for non-audit services provided by the external
audit process. auditor and approves the contracts for non-audit
services; is informed of any reportable irregularities
identified and reported by the external auditor; and,
reviews the quality and effectiveness of the external
audit process.
3.10 The audit committee The Group Audit Committee approves its reports, AFS: Audit
should report to the which are included in the AIR. It also reports through AFS Committee report
board and shareholders the Chairperson to the Board and externally to
on how it has discharged shareholders at the AGM.
its duties.

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Chapter King III principle Compliance Additional comments Reference

4. The governance of risk

4.1 The board should be The Board is aware of this responsibility and has an i AIR: Corporate
responsible for the established Group Risk Committee to aid the governance report
governance of risk. governance of risk. Board of directors;
Risk management
report

4.2 The board should The Board has established the risk levels that it can i AIR: Risk
determine the levels of tolerate versus the risk that it is willing to take (risk management report
risk tolerance. appetite).
4.3 The risk committee or The Group Risk Committee assists the Board in its i AIR: Risk
audit committee should responsibility for the governance of risk. management report
assist the board in
carrying out its risk
responsibilities.
4.4 The board should The Board has delegated to management the i AIR: Risk
delegate to management responsibility to design, implement and monitor the management report
the responsibility to risk management plan.
design, implement and
monitor the risk
management plan.
4.5 The board should ensure The Group Risk Committee met twice during the i AIR: Risk
that risk assessments 2013 financial year, which included discussions of management report
are performed on a the risk assessments, and risk framework and
continual basis. methodology.
4.6 The board should ensure The Group Risk Committee has ensured that the risk i AIR: Risk
that frameworks and assessment framework and methodology increases management report
methodologies are the probability of anticipating unpredictable risks.
implemented to increase
the probability of
anticipating
unpredictable risks.
4.7 The board should ensure The Group Risk Committee report is tabled annually i AIR: Risk
that management for consideration by the Board. The Committee management report
considers and Chairperson raises issues at Board meetings if it is
implements appropriate so required, and also ensures that management
risk responses. considers and implements the appropriate risk
responses.
4.8 The board should ensure The Group Risk Committee reports to the Board and i AIR: Risk
continual risk monitoring includes a review of the risks monitored by management report
by management. management.
4.9 The board should The Group Risk Committee provides the required i AIR: Risk
receive assurance assurance with regard to the risk management management report
regarding the process to the Board.
effectiveness of the risk
management process.
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Chapter King III principle Compliance Additional comments Reference

4.10 The board should ensure A Risk management report is included in the AIR. i AIR: Risk
that there are processes management report
in place enabling
complete, timely,
relevant, accurate and
accessible risk
disclosure to
stakeholders.

5. The governance of information technology

5.1 The board should be The Board has established an IT Steering Committee i AIR: Corporate
responsible for to assist in its IT governance responsibilities. The IT governance report
information technology governance framework supports effective and Board of directors
(IT) governance. efficient management and decision making around IR Refer to the
the utilisation of IT resources to facilitate the IT Steering
achievement of the Groups objectives and the Committees
management of IT-related risk. The Committee has in terms of reference
available at: www.
place terms of reference, policies, decision-making
netcareinvestor.
structures, accountability framework, IT reporting, co.za/jse_sri.php
and an IT internal control framework. A detailed
review of the COBIT framework has been
undertaken.
5.2 IT should be aligned with The Board ensures that the IT strategy is integrated
the performance and into the Groups strategic and business processes,
sustainability objectives and that IT adds value to the Groups objectives.
of the company.
5.3 The board should Responsibility for managing the IT governance
delegate to management framework is delegated to management. The
the responsibility for the framework supports effective and efficient
implementation of an IT management and decision making around the
governance framework. utilisation of IT resources to facilitate the achievement
of the Groups objectives and the management of
IT-related risk. This has been reviewed extensively
during 2013 in accordance with the COBIT
Framework.
5.4 The board should The Board is responsible for ensuring good
monitor and evaluate governance principles are in place for the acquisition
significant IT investments and disposal of IT goods and services. IT
and expenditure. management ensures good project management
principles are applied. The Board also ensures that
the information and intellectual property contained in
the information systems are protected.
5.5 IT should form an IT risk management includes disaster recovery i AIR: Risk
integral part of the planning, IT legal risks and compliance to laws, rules, management report
companys risk codes and standards that are an integral part of the
management. Groups risk management.
5.6 The board should ensure The Board ensures that processes are in place to i AIR: Risk
that information assets ensure information assets are effectively managed. management report
are managed effectively.

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Chapter King III principle Compliance Additional comments Reference

5.7 A risk committee and IT representatives are invited to attend the Audit and i AIR: Risk
audit committee should Risk Committee meetings. Detailed feedback has management report
assist the board in been made to both Committees on the IT AFS: Audit
carrying out its IT Governance Framework and progress reports are AFS Committee report
responsibilities. provided on the implementation of the COBIT
framework to ensure that any IT risk is appropriately
managed and mitigated.

6. Compliance with laws, rules, codes and standards

6.1 The board should ensure A detailed compliance framework has been i Online: Corporate
that the company implemented. Papers on legislative and governance governance report
complies with applicable developments that affect the Group are tabled to the
laws and considers Board and Board Committees on a periodic basis.
adherence to non- The Compliance Committee is also mandated to
binding rules, codes and manage this process.
standards.
6.2 The board and each Directors are suitably qualified and trained through
individual director should formal induction. Directors are kept up to date
have a working through regular briefings included in the
understanding of the Board packs.
effect of the applicable
laws, rules, codes and
standards on the
company and its
business.
6.3 Compliance risk should A compliance function is established and managed
form an integral part of by the Company Secretary and Legal function of
the companys risk Netcare. A risk-based approach has been adopted.
management process.
6.4 The board should The Company Secretary and Legal function perform
delegate to management the functions of a Compliance department that
the implementation of an endeavours to achieve compliance through periodic
effective compliance review of policies and processes to ensure ongoing
framework and compliance with applicable law.
processes.

7. Internal audit
7.1 The board should ensure An independent and effective risk-based internal AFS: Audit

that there is an effective audit function exists within the Group, which complies AFS Committee report
risk-based internal audit. with the Institute of Internal Auditors standards.
i AIR: Corporate

governance report
Internal control and
internal audit
7.2 Internal audit should The Head of Internal Audit (HIA) attends Group Audit i AIR: Corporate
follow a risk-based Committee and Group Risk Committee meetings, and governance report
approach to its plan. follows a risk-based approach to its plan. Internal control and
internal audit
7.3 Internal audit should Internal Audit reviews the effectiveness of the i AIR: Corporate
provide a written internal controls of the Group on a periodic basis governance report
assessment of the and these reports are tabled to the Audit Committee. Internal control and
effectiveness of the A detailed review of the Groups Risk management internal audit
companys system of processes is also undertaken and is reported to at
internal controls and risk the Board Risk Committee.
management.
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Chapter King III principle Compliance Additional comments Reference

7.4 The audit committee
should be responsible
for overseeing internal
audit.
7.5 Internal audit should be
strategically positioned
to achieve its objectives.
The HIA is accountable to and reports to the Group AFS: Audit
Audit Committee three times a year. AFS Committee report
Internal audit planning is aligned to the strategy of
the Group. The HIA attends the Group Audit
Committee and Group Risk Committee meetings and
meets with management as and when required. The
HIA also attends the Groups Divisional Internal Audit
Committee meetings.

8. Governing stakeholder relationships

8.1 The board should The Board appreciates that close relationships with i AIR: Stakeholder
appreciate that stakeholders should be maintained and that engagement
stakeholders stakeholder perceptions affect the Groups
perceptions affect a reputation. The Board has identified the Groups
companys reputation. stakeholders.
8.2 The board should The Board has delegated its authority to various i AIR: Stakeholder
delegate to management Board committees and, in some instances, engagement
to proactively deal with management in accordance with clearly agreed
stakeholder reporting procedures and a written scope of
relationships. authority to address stakeholder relationships. This is
reviewed on a periodic basis at the Social and Ethics
Committee and in supporting operational
committees.
8.3 The board should strive The Board takes account of the legitimate interests
to achieve the and expectations of all its stakeholders in decision-
appropriate balance making in the best interests of the Group.
between its various
stakeholder groupings,
in the best interests of
the company.
8.4 Companies should Shareholders are treated equally through the
ensure the equitable distribution of information and the accessibility of this
treatment of information on SENS and the Groups investor
shareholders. relations website.
8.5 Transparent and * The Board has adopted communication guidelines
effective communication that support a responsible stakeholder
with stakeholders is communication programme. Additional work is being
essential for building and undertaken to refine this process to ensure a formal
maintaining their trust communication programme is implemented.
and confidence.
8.6 The board should ensure The Board has been apprised on a formal alternate
that disputes are dispute resolution process and such clauses are
resolved as effectively, incorporated in all legal agreements concluded by
efficiently and the Group.
expeditiously as
possible.

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Chapter King III principle Compliance Additional comments Reference

9. Integrated reporting and disclosure

9.1 The board should ensure The Group has controls to enable it to verify and AFS: Audit

the integrity of the safeguard the integrity of its AIR and the Board has AFS Committee report
companys integrated delegated the responsibilities to management to
report. evaluate disclosure.
9.2 Sustainability reporting The Groups AIR aims to provide an integrated review i AIR: Our report;
and disclosure should of operational, financial, social and environmental Operational reviews;
be integrated with the performance. Significant work has been expended Risk management
companys financial during 2013 to implement a series of energy report
reporting. interventions, supported by effective leadership (the IR Environment
Sustainability Committee is chaired by the CEO). report
These interventions are securing sustainable and
beneficial outcomes in environmental performance
and are backed by a meaningful business case (with
effective payback of all capital invested).
9.3 Sustainability reporting Netcares Broad-based Black Economic i AIR: Our report
*
and disclosure should Empowerment status has been independently
be independently assured by Empowerdex. SAs 2013 carbon footprint
assured. was not independently assured due to a change in
the timing of the audit. However, SAs carbon footprint
will be independently assured for the next AIR.
Reference
Complied
* Partly applied
AIR Annual integrated report (including online reports)
AFS Annual financial statements

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King III compliance checklist for the year ended 30 September 2013