NETCARE LIMITED — Governance Information 2015

Jan 15, 2015

Corporate governance report

Corporate governance provides the foundation upon which the Group is managed in accordance with the highest standards of ethics and in a manner that is efficient and accountable. Transparency and accountability are strictly applied, along with adherence to the Group's values, as the key principles that guide all the Group's business activities.

Introduction

This report provides an outline of the policies and frameworks that guide the Board in discharging its duties and the internal controls that support the executive management team in managing the Group. These controls promote an awareness of risk and good governance in every area of the business.

Netcare's approach to corporate governance focuses on performance and conformance, and extends beyond legislative and regulatory compliance. We have adopted a holistic approach to ensure decisions are taken openly and transparently, within an ethical framework. The Group consistently improves its governance framework and related policies to ensure they accurately reflect best practice.

At Netcare, we encourage greater integration of governance into operational management. This supports value creation through a sustained focus on improving systems and processes across the business, and combining clinical and governance oversight. In short, we are leveraging governance to constantly improve the way the business is managed, information is shared and protocols are established, guided by the Triple Aim framework.

Ultimately, applying the principles of good governance in every area of the business leads to value creation for all stakeholders. This supports a sustainable business with sustainable returns, which, in turn, attracts essential investment into the healthcare sector.

King III

Netcare is committed to and fully endorses the principles of good corporate governance as recommended in the Code of Corporate Practices and Conduct set out in the King Report on Corporate Governance for South Africa (King III) and the JSE Listings Requirements. The office of the Company Secretary benchmarked Netcare's practices against King III and found that all the principles have been applied.

The composition of the Nomination Committee has been appropriately revised to accurately reflect the JSE Listings Requirements, with the Chairman of the Board assuming chairmanship of the Nomination Committee from 1 October 2014. This followed a detailed review of local and international best practice at the Nomination Committee meeting convened in June 2014.

AIR King III compliance checklist.

Apply or explain principle

Sustainability information disclosed in our annual integrated report and our online report was subjected to stringent internal review, and was independently assured by Global Carbon Exchange SA Proprietary Limited (GCX). The verification was performed in accordance with the principles of the WBCSD/WRI GHG Protocol Corporate Accounting Standard, 2nd Edition, 2004 (the GHG Protocol Corporate Standard). Netcare requested a limited level of assurance on the GHG Protocol Corporate Standard assertion.

A detailed independent verification of Netcare's Broad-based Black Economic Empowerment (B-BBEE) scorecard (South Africa only) was performed.

AIR SA: Transformation report.

The Board has delegated the responsibility to deal with stakeholder relationships in a proactive and constructive fashion to management, and the Group has finalised its stakeholder communication strategy. Consequently, all King III principles have been complied with for the period under review.

Group Internal Audit also performed a review of selected performance measures for our South African operations. Netcare successfully planned and implemented a combined assurance framework that will collate the efforts of all assurance providers at Netcare to avoid duplication of assurance services and optimise assurance costs.

AIR More details on this process can be found in internal control and internal audit below.

While the Group's direct impact on the environment is limited, we continue to focus on minimising our carbon footprint and enhancing our sustainability initiatives. We have developed and refined our environmental policy and management plan with defined action plans and targets to reduce energy and water usage, and increase recycling and control of waste. We consistently participate in the CDP's Carbon and Water Disclosure Projects. Netcare also ensures that energy and water efficiency considerations inform decision-making, which includes implementing efficient mechanisms to manage the Group's utilities.

AIR SA: Environment report and UK: Environment report.

Netcare has a robust approach to managing relationships with stakeholders, and understands the important role our stakeholders play in supporting value creation for the Group. We have clearly identified our stakeholder groups and the Board has endorsed the communication strategy to be implemented to ensure enhanced and comprehensive stakeholder communications. Netcare subscribes to all stakeholder management principles in King III and has implemented a series of governance mechanisms to enhance implementation of these principles. The dedicated stakeholder relations director has implemented the stakeholder management strategy and engagement protocol, which is underpinned by Netcare's principle of values-based engagement.

AIR Stakeholder engagement report: SA and Stakeholder engagement report: UK.

Compliance

The Board is committed to complying with all applicable legislation and regulations, and is kept informed of changes to standards, codes and relevant sector developments that could potentially affect the Group and its operations. The Board also requires all business units, departments and subsidiaries to conform to applicable laws. For the period under review, the Board is satisfied that the Group complied with the JSE Listings Requirements and the substance of the principles embodied in King III. It also considers other voluntary codes in reviewing the Group's governance framework, including the principles of the UN Global Compact, OECD recommendations and the Millennium Development Goals.

Netcare has critically reviewed the recommendations of the International Integrated Reporting Framework issued in December 2013, which encourages companies to establish and report on their most relevant and material issues. Netcare defines material issues as those which have the potential to have a substantial impact on our ability to create and sustain value for stakeholders. Netcare also endorses the G3 approach by focusing on the material issues which are core to the business.

The Board is regularly updated on legislative developments and considers adherence to non-binding rules, codes and standards as an integral part of doing business. The Board and senior management remain informed of the requirements of competition legislation and other legislation that affects the healthcare sector.

The Risk Committee has included compliance as a risk to be monitored to mitigate any potential impact on the business. During 2014, this served to strengthen the compliance review and monitoring framework, with each business unit reviewed in respect of the governance, compliance, legislative and contractual risks that required attention. In addition, the review completed during the current year evaluated the full regulatory environment that affects the Group and that is relevant to the healthcare sector. Netcare continues to follow a co-ordinated approach to embedding compliance with existing laws across the Group.

Through the Compliance Committee, the compliance function also assesses the impact of all significant new laws and amendments on the Group and provides ongoing monitoring of the legislative landscape. Timelines, implementation areas and business owners are then assigned to facilitate any required changes. During 2014, this process was strengthened through training sessions with management on key pieces of health sector regulation and the role of the Compliance Committee.

Netcare can confirm that no contravention that could expose the Company to any actual or contingent risk or liability was identified. During the year under review, Netcare complied with all relevant legislation and was not subject to any material penalties, fines or criminal prosecutions.

www The Compliance Committee's terms of reference can be found at www.netcareinvestor.co.za/jse\_sri.php.

Based on recommendations by Group Internal Audit, a risk-based approach has been adopted for reviewing the majority of policies in place. This review was completed in September 2014 and is updated regularly.

During 2014, the Group enhanced its compliance with the Protection of Personal Information Act (POPI). Although POPI is not yet in effect, Netcare has taken a proactive approach to managing compliance with this new piece of legislation and embarked on an extensive review of practices and processes to ensure personal information is appropriately protected.

Litigation and legal

The Company Secretary and General Counsel has been assigned the responsibility to provide oversight of the Group legal function.

As is the case in the ordinary course of business, the Group is subject to legal proceedings, claims and actions. Although the outcomes of matters instituted against the Group cannot be predicted, the Group is suitably resourced to manage this process. Detailed legal reports are tabled to the Risk Committee and the Chairman of the Risk Committee reports to the Board on any material legal matters. The Board is of the opinion that there is no legal action either pending, ongoing or potentially threatening that will materially affect the operations of the Group.

Board of directors

Structure, composition and rotation

The Board of directors is responsible for the organisation in its entirety. It functions within the ambit of an annually reviewed charter, and instructs and oversees the management and control structure that directs and executes all functions within the organisation. It also drives strategy.

The directors embrace these responsibilities and endeavour to ensure that Group strategy, risk, performance and sustainability are managed in an integrated way that supports value creation for the Group. The Board provides effective leadership based on an ethical foundation of responsibility, accountability, fairness and transparency.

Netcare has a unitary Board structure with an appropriate balance of executive and non-executive directors. At 30 September 2014, the Board comprised nine directors; two directors are executive, and the remaining seven non-executive directors are independent. With the recent appointment of J Watts as a director from 17 November 2014, the number of executive directors will increase to three.

www The biographical details of directors can be found at www.netcareinvestor.co.za/over\_board.php.

Netcare's directors have a wide range of expertise and experience in strategic, financial, commercial and healthcare activities, ensuring effective leadership of the Group. Moreover, they are drawn from diverse backgrounds that reflect the demographics of South Africa with due regard to gender diversity. The composition of the Board ensures that there is a balance of power and authority, specified in a Board-approved appointment policy, so that no individual has unfettered decision-making powers.

The Board is led by the Chairman, SJ Vilakazi, who is an independent non-executive director.

Generally, directors have no fixed term of appointment and retire by rotation every three years. If available, they are considered for re-appointment at the annual general meeting. The details of the directors that are available for re-election in terms of the rotation principle are set out in the annual general meeting notice.

To ensure the Board retains sufficient skills over time, the Nomination Committee constantly reviews new candidates to supplement the Board and to ensure succession plans are in place. Consideration is given to candidates who will maintain a balance of skills and experience, and who will continue to promote rigorous debate.

On appointment, non-executive directors are provided with a letter of appointment which sets out their duties, responsibilities, expected time commitments and details on obtaining independent advice, among other information. An induction programme assists newly appointed directors to understand their fiduciary duties and the responsibilities of executive management. The programme is co-ordinated by the Chairman and supported by the Company Secretary.

The Group has an insurance policy that insures directors against liabilities they may incur in carrying out their duties.

Independence and performance

Assisted by the Nomination Committee and Chairman's Forum, the Board assesses its overall performance and that of individual directors, including their independence, on an ongoing basis. The continued independence of independent non-executive directors that have served for a period of nine years is evaluated, including factors that may impair their independence. This process is deliberated by the Nomination Committee in accordance with recommended governance practice.

Messrs JM Kahn and APH Jammine have served as independent directors for more than nine years. Pursuant to the recommendation of the Nomination Committee, the Board performed a rigorous review, on both an objective and subjective basis, and is satisfied that there are no relationships or circumstances likely to affect, or which appear to affect, their judgement as directors. The Board is also satisfied that their independence is not affected or impaired by their length of service.

The Board is satisfied that the Chairman of the Board, SJ Vilakazi, is independent and free from any conflicts of interest.

The Board is assessed annually through an internally conducted process overseen by the Chairman's Forum that deals with individual directors as well as the Board and its various committees. The Chairman's Forum has been supplemented by a questionnaire-based review to facilitate further discussion on Board effectiveness and director development. In 2014, a focused questionnaire was completed in respect of the Audit Committee's performance, and questionnaires may be completed in respect of specific committees during 2015.

Board responsibilities and charter

The Board is accountable to shareholders and other stakeholders for the performance of the Group. It is responsible for the strategic direction of the Group and its primary objective of creating and building sustainable value for all its stakeholders. The Board does this by establishing goals, and managing and monitoring their achievement. The Board Charter was reviewed in 2014 by both the Board and the Company Secretary, and remains unchanged.

www The Board Charter is available at www.netcareinvestor.co.za/jse\_sri.php.

Board meetings

The Board met four times during the year in Sandton, with all meetings convened by formal notice. Ad hoc meetings are held when necessary. Information is distributed in a timely manner prior to Board meetings, to facilitate adequate preparation for relevant deliberation.

Attendance of directors at Board meetings

for the year ended 30 September 2014

Director	Status	Attendance
T Brewer	Independent non-executive	4/4
APH Jammine	Independent non-executive	4/4
JM Kahn	Independent non-executive	4/4
MJ Kuscus	Independent non-executive	4/4
KD Moroka	Independent non-executive	4/4
SJ Vilakazi	Independent non-executive	4/4
N Weltman	Independent non-executive	4/4
HR Levin	Non-executive	1/41
RH Friedland	Executive	4/4
KN Gibson	Executive	4/4

1. HR Levin retired on 28 February 2014.

Governance framework

The Group continues to improve its corporate governance framework by entrenching responsible governance and effective operation of Board committees. In accordance with the established principles of delegation of authority, the Board has delegated specific duties to Board committees that are responsible for assisting the Board in discharging its responsibilities and providing an in-depth focus on specific areas in accordance with the Group's governance structure.

The governance framework provides the roadmap for the Group to reach its strategic objectives within compliance requirements, balancing the interests of stakeholders, minimising and avoiding conflicts of interest, and practicing good corporate behaviour. Sound corporate governance practices are implicit in our values, culture and processes.

1 Advisory and Ethics Committee.

1. This has always been an operational committee but we have elected to update our operational committees' organogram with this committee to ensure a comprehensive review of the work of all committees within the Group is provided.

The Board's six governance committees comprise directors, executives and senior management, who deal with specific risks facing the organisation in a structured manner and in accordance with Board-approved terms of reference. These terms of reference are reviewed annually to ensure that each committee's conduct and oversight accords with the various recommendations of King III, the Companies Act, applicable legislation and, where appropriate, international best practice.

The Company Secretary undertook an extensive review of the Board Charter and the terms of reference of all committees, and confirmed that both the Board and committees remained fully compliant. This is confirmed on an annual basis by each committee.

www The terms of reference of each committee are available at www.netcareinvestor.co.za/jse\_sri.php.

The chairpersons confirmed that their respective committees materially complied with their terms of reference during the period under review. The Board committees are also supplemented with nine operating committees.

Composition of Board committees

at 30 September 2014

					Quality	Social and
Director	Audit	Risk	Nomination	Remuneration	Leadership	Ethics
T Brewer	Chair			ü
RH Friedland	Inv	ü	Inv	Inv	ü	ü
KN Gibson	Inv	ü
APH Jammine1	ü		ü	ü
JM Kahn		Chair	ü	Chair		ü
MJ Kuscus		ü			Chair	ü
HR Levin2	ü			ü
KD Moroka						Chair
SJ Vilakazi	Inv	ü	Chair	ü	Inv	Inv
D van den Bergh					ü
N Weltman	ü	ü			ü

ü Member.

Inv By invitation.

1. In accordance with the revised Listings Requirements, the Nomination Committee agreed that APH Jammine will no longer serve as the Chairman of the Nomination Committee. As of 1 October 2014, this role will be conducted by the Chairman, SJ Vilakazi.

2. Retired on 28 February 2014.

Committee meeting attendance

for the year ended 30 September 2014

					Quality	Social and
Director	Audit	Risk	Nomination2	Remuneration	Leadership	Ethics
T Brewer	4/4			2/2
RH Friedland	Inv	2/2	Inv	Inv	1/2	2/2
KN Gibson	Inv	2/2
APH Jammine	4/4		1/1	1/2
JM Kahn		2/2	1/1	1/2		2/2
MJ Kuscus		2/2			2/2	2/2
HR Levin1	1/4			1/2
K Moroka						2/2
SJ Vilakazi	Inv	1/2	1/1	2/2
D van den Bergh					2/2
N Weltman	3/4	2/2			2/2

Inv By invitation.

1. Retired on 28 February 2014.

2. The formal meeting held by the Nomination Committee was supplemented by a series of ad hoc informal meetings throughout the year.

Board committees purpose and focus areas for 2014

Committee	Purpose	Key focus in 2014
Audit	Assists the Board in monitoring the integrity ofthe Company's financial statements, accountingpolicies and internal control functions, as well asstatutory functions.	Successful oversight of the planning and roll-outof the combined assurance framework andimplementation of the control self-assessmentprocess. Increased meetings to four per annumto ensure oversight of external audit function
	AIRAudit Committee report.	and related audit fees.
Risk	Ensures that there are adequate riskmanagement processes in place to identify andmonitor the management of key risks and thesuitability of risk mitigation plans.	Reviewed the reporting mechanisms to ensurethat top risks received prioritised attention.Reviewed the management of control selfassessments and the process applicable to
	Further details on risks and the Group's approachAIRto risk management can be found atwww.netcareinvestor.co.za/reports/ar_2014/our-top-risks.php.	managing and oversight of legal andcompliance risk as proposed by the CompanySecretary and General Counsel.
Nomination	Assists with appointing directors and evaluatingleadership requirements of the Group, whileassisting the Board in planning for Boardsuccession.	Ensured ongoing compliance with requirementsin terms of Regulation 3.84 of the JSE ListingsRequirements and reviewed and revised thechairmanship of the Committee.
Remuneration	Determines directors' and senior executives'remuneration, and levels of remuneration of allemployees, as well as adjustment ofremuneration if so required. Also reviewsadditional remuneration such as bonuses,	Supplemented the performance metrics used toevaluate executives and senior management,and extensively reviewed the RemunerationPolicy.
	incentives and the implementation of theForfeitable Share Plan.	The Remuneration Committee framework canAIRbe found at www.netcareinvestor.co.za/reports/ar_2014/ gov-remuneration-introduction.php.
QualityLeadership	Reviews the availability of transparent andaccountable systems for the provision ofpatient-centred, safe, high-quality care. Identifiesareas of clinical risk and standardised clinicalpractice.	Reviewed systems to enhance measurableimprovements in quality outcomes. Focused onimproving clinician engagement in qualityimprovement through enhanced governancestructures.
Social and Ethics	Monitors Netcare's activities in compliance withregulation 43(5) of the Companies Act, andoversight of social and economic development,and good corporate citizenship.	Approved the submission of the UN GlobalCompact assessment tool and endorsedNetcare's commitment to comply with the GlobalCompact Principles3.

1. Netcare submitted its Communication on Progress and all related submissions which outline the Group's commitment to the UN Global Compact Principles.

Committee	Purpose	Key focus in 2014
Executive	As the principal executive decision-makingcommittee within the governance framework, theExecutive Committee oversees key operationaland commercial decisions with due regard tothe Group's strategy.It also monitors the competitive landscape toappropriately shape and approve Groupphilosophy and practices. It reviews the Group'sdivisional and operational performance on amonthly basis.	Adjusted and refined the Group's strategy inaccordance with macroeconomic factors andstructural changes. Focused on the complianceenvironment with specific reference to oversightof the combined assurance matrix and thesubmissions made to the CompetitionCommission in respect of the Healthcare Inquirycurrently underway.
Finance andInvestment	Monitors capital expenditure against definedhurdles and financial requirements. Reviewspost-implementation updates of key projects.Monitors treasury protocols.	Reviewed the Group's transactions approvalframework and ensured ongoing adherence.
GHG Subcommittee	It meets quarterly to review the GHG Board andrelated committee reports. It also convenes onan ad hoc basis to deliberate and reviewstrategic issues. It ensures there is oversightover issues and decisions that are specific tothe United Kingdom.	Operational efficiencies.
CombinedAssuranceCommittee	Reports functionally to the Audit Committee,which exercises stewardship over theCommittee. Identifies, specifies and co-ordinatesthe sources of assurance over Netcare's keyrisks to provide executive management, theAudit Committee and the Risk Committee with aframework that details the main assuranceproviders. Reports on matters of a significantnature, including high risk items and whether thelevel of assurance provided is suitable.	Embedded the combined assurance matrix forthe top business risks affecting Netcare. Thesame approach will be applied in developing acombined assurance matrix for each division/business unit.
Working Capital	Monitors and reviews working capitalrequirements.	Met 2014 working capital targets.
OperationalTransformation	Monitors implementation of the Group'stransformation strategies in respect of B-BBEElegislation and regulations, and liaises withrelevant stakeholders regarding B-BBEE targets.	Improved on the 2013 B-BBEE score andmaintained Level 2 B-BBEE rating. Completedthe impact analysis of the revised codes andrelated legislation.
Sustainability	Oversees key sustainability issues and thecollation of data applicable to climate change.	Approved energy savings strategy and keyenergy enhancement projects.
	Develops the strategy to initiate and oversee thepromotion of energy efficient initiatives while	AIRSA: Environment report.
	ensuring a suitable level of integration in theGroup's sustainability reporting.	Updated and approved the revisedenvironmental policy and implementation of thefive-year sustainability strategy and platform.
IT Steering	Manage IT risk and IT governance in terms of adefined strategy to improve business outcomes.Provides recommendations and makesdecisions regarding IT priorities, funding andother IT and security requirements. Providesstrategic and governance direction for IT acrossthe business.	Reviewed the Control Objectives for Informationand Related Technology (COBIT) framework,directed the move to a new data centre andMultiprotocol Label Switching provider, andreviewed the IT strategy for the Group. TheBoard is satisfied that IT governance is properlymanaged and aligned to business needsand strategy.
Compliance	Reviews the applicability of new legislation andassesses the level of awareness of, andcompliance to, existing legislation.	Increased awareness of compliance withlegislation through compliance training andregular updates. Established the POPI SteeringCommittee and oversaw a detailed review ofcompliance awareness across the Group.
Tariff	Provides direction on negotiation with funders.	Negotiated competitively sustainable rates.

Operating committees purpose and focus areas for 2014

Corporate governance in the United Kingdom

Corporate governance philosophy

General Healthcare Group (GHG) and its operational subsidiaries, including BMI Healthcare, understand that they must conduct their business within the ambit of stakeholder expectations and local regulations. GHG strives to maintain the highest standards of discipline, integrity and transparency, combining the twin requirements of compliance and performance to support an appropriate legal, regulatory and institutional foundation.

Overall structure

The Board of GHG leads our corporate governance, encompassing the business, service, safety and quality aspects of BMI Healthcare's activities. Committees of the Board have been established to deal with specific components of governance.

The GHG Board comprises executive and non-executive directors. The 10 non-executive directors are generally appointed by and drawn from GHG's investors, although the shareholders' agreement provides scope for a non-executive Chairman, independent of shareholders.

The GHG Board includes two executive directors, the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO). The recently appointed CEO, Jill Watts, has also been appointed to the Board of Netcare. The General Counsel is not a director but attends GHG's Board meetings and ensures proper records are kept of the meetings. The CEO is responsible for day-to-day operations and BMI Healthcare's strategic development, and was appointed to the Netcare Limited Board of directors on 17 November 2014. The CFO is responsible for its financial management. The General Counsel is responsible for advice to the Board and the executive, GHG's compliance with its responsibilities and relations with external regulators.

The constitution and function of the Board committees are as follows:

Audit Committee – Chaired by a non-executive director, its responsibilities include:

• ✜ Appointment and remuneration of external auditors;
• ✜ Overall responsibility for internal and external audit of GHG's financial activities and financial reporting;
• ✜ BMI Healthcare's internal controls; and
• ✜ Other financial and business risk issues, including specific compliance functions.

Remuneration Committee – Chaired by a non-executive director, it reviews and sets BMI Healthcare's remuneration strategy and salary and benefit levels across BMI Healthcare to ensure competitive remuneration. It also monitors the management of equity and any other management incentive arrangements in place.

Quality and Risk Committee – Chaired by a senior Netcare director who is independent of the Board, it monitors the safety, effectiveness and quality of BMI Healthcare's

operational activities. It also monitors BMI Healthcare's healthcare regulatory compliance, clinical operational conformity to internal policy, and, in conjunction with the Audit Committee and Board, the level of risk tolerated by GHG.

Finance and Investment Committee – Chaired by one of the non-executive directors, it reviews potential capital investments and capital projects, and undertakes follow-on post acquisition reviews.

Leadership Committee – The team comprises GHG's senior executive functional and regional heads, with meetings chaired by the CEO. The Committee is now four years old and has a sub-board focusing on operational delivery matters. Other specialist boards, including a Clinical Governance Board and a Non-clinical Risk Board, also report to the Leadership Committee. The role of the Leadership Committee, together with its boards, addresses all operational matters and is the principal executive decision-making body within BMI Healthcare.

Corporate Social Responsibility (CSR) Committee – This Committee comprises representation from key functional heads. Its role is to agree BMI Healthcare's CSR strategy and to review the compliance of the strategy against key performance indicators.

JSE Socially Responsible Investment index

Netcare has participated in the JSE Socially Responsible Investment (SRI) index since its inception. The SRI index assesses performance in terms of corporate governance and the environmental, economic and social sustainability practices of listed companies. The Group qualified for the 2013 SRI index based on the Experts in Responsible Investment Solutions (EIRIS) assessment. Netcare was named a best performer in 2013 and retained this status in 2014.

SRI Index scorecard

	2014	2013
Governance andsustainability
Core indicators	32/32	32/32
Desirable indicators	30/33	30/33
Social
Core indicators	39/39	39/39
Desirable indicators	38/49	36/49
Environmental
Impact	Low	Low
Policy	Met	Met
Systems	Met	Met
Reporting4	Met BP Level	Met
Climate change4	BP Level	BP level

1. Best Performer (BP) level indicates that all six climate change indicators have been met.

Netcare also voluntarily participated in a number of governance surveys including the 2014 Dow Jones Review and Vigeo Rating.

Company Secretary

All directors have access to the advice and services of the Company Secretary, L Bagwandeen, who acts as a conduit between the Board and the Group. The Company Secretary is also responsible for the flow of information to the Board and its committees, and for ensuring compliance with Board procedures. In addition to various statutory functions, the Company Secretary provides individual directors and the Board as a whole with guidance on duties, responsibilities and powers, and the impact of legislative and regulatory developments while maintaining an arm's length relationship with the Board. The Company Secretary provides a pivotal role in ensuring the requisite advice is provided to the Board on issues of law, governance and related matters.

The Board has empowered the Company Secretary with the responsibility for advising the Board, through the Chairman, on all governance matters including the duties set out in Section 88 of the Companies Act.

Consistent with Regulation 3.84 of the JSE Listings Requirements, the qualifications and experience of the Company Secretary were formally evaluated by the Nomination Committee and subsequently ratified by the Board. Based on this process and the review of the quality of governance outputs, it was formally recommended to the Board that the Company Secretary is suitably qualified, experienced and fit and proper to perform the function of Company Secretary of the Company.

AIR The Company Secretary's qualifications are available at www. netcareinvestor.co.za/reports/ar_2014/sao-executive-committee. php.

Professional advice

The directors are entitled, at the Group's expense, to seek professional advice about the affairs of the Group, and have unrestricted access to all Group information, records, documents and property. This can be procured independently or co-ordinated through the Company Secretary who is also the Group General Counsel.

Share dealings

Directors' dealings in the securities of Netcare Limited are subject to a policy based on regulatory requirements and governance best practice. Dealings in the Company's shares by directors and directors of major subsidiaries require the written prior approval of the Chairman. Details of directors' share dealings are disclosed to the Listing Divisions of the JSE Limited and communicated through its electronic news services.

The Group operates a closed period policy in line with the JSE Listings Requirements. During these closed periods, directors, officers, directors of major subsidiaries and associates as defined by the JSE Listings Requirements are prohibited from dealing in the Company's shares. Parties who may have access to confidential or price-sensitive information are cautioned against the possibility of insider trading. All processes were updated to accord with the Financial Markets Act.

Conflict of interest

This was stringently reviewed in 2014 to revise and enhance all applicable policies to ensure that all employees within the Group disclose any potential conflict of interest as well as any gift or invitation by a supplier or third party. Where conflicts exist in respect of directors, they are requested to recuse themselves from meetings.

Accountability and control

Financial reporting

The Board, on recommendation from the Audit Committee, is responsible for preparing the Group annual financial statements and other information presented in reports to shareholders in a manner that fairly presents the state of affairs and results of the Group's business operations. The external auditors are responsible for carrying out an independent examination of the annual financial statements in accordance with International Standards on Auditing.

The annual financial statements are prepared in terms of the South African Companies Act No 71 of 2008, the JSE Listings Requirements and International Financial Reporting Standards (IFRS).

The annual financial statements are based on appropriate accounting policies that have been consistently applied, unless specifically stated otherwise, and are supported by reasonable and prudent judgements and estimates. The Board is satisfied that the Group annual financial statements fairly present the state of affairs of the Group at the end of the financial year, and the financial performance and cash flows for the financial year.

Going concern

The Group's annual financial statements have been prepared on a going concern basis. The directors have reviewed the Group's budget and cash flow forecasts and have satisfied themselves that the Group is in a sound financial position with access to sufficient borrowing facilities to meet its foreseeable cash requirements. For this reason, the directors consider it appropriate to adopt the going concern basis in preparing the Group's annual financial statements.

AIR Directors' responsibility and approval are available at www.netcareinvestor.co.za/ reports/ar_2014/fin-directorsresponsibility-approval.php.

Internal control and internal audit

The Netcare Board is responsible for ensuring that an appropriate system of internal control is maintained to ensure that Netcare's assets are safeguarded and appropriately managed, losses arising from fraud and/or other illegal acts are minimised, and financial and operating information is fairly presented.

Group Internal Audit is an independent, objective assurance and consulting activity designed to add value and improve Netcare's control environment and operations. Group Internal Audit assists Netcare to accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes.

Group Internal Audit provides assurance to Netcare's stakeholders that the organisation operates in a responsible manner by performing the following functions:

• ✜ Evaluating risk management and governance processes;
• ✜ Performing an objective assessment of the design of the internal control framework;
• ✜ Systematically analysing and evaluating business processes and associated controls;
• ✜ Investigating and providing a source of information regarding instances of fraud, corruption, unethical behaviour and irregularities;
• ✜ Evaluating the effectiveness of key controls identified and agreed with management; and
• ✜ Effectively co-ordinating the combined assurance function which ensures appropriate coverage of Netcare's top risks by minimising duplication of effort by various assurance providers while providing appropriate assurance to management.

Group Internal Audit functions at Group level. It reports to the Netcare Board Audit Committee and assists them in the effective discharge of their responsibilities delegated to them by the Netcare Board. This is performed through independent financial, internal control and operational process reviews.

The Group Internal Audit Charter is prepared in accordance with the recommendations of King III and the standards set by the Institute of Internal Auditors. The Audit Charter is presented annually to the Board Audit Committee for its consideration and approval.

To ensure independence and sufficient objectivity, and assure the accomplishment of Group Internal Audit's responsibilities, the Head of Group Internal Audit functionally reports to the Chairperson of the Audit Committee and reports administratively to the Group CFO. The Head of Group Internal Audit has unrestricted access to all records and employees of the Company, including the Chairman of the Board, the Chairperson and members of the Audit Committee as well as the Group CEO.

Summaries of the Group Internal Audit results have been presented to the Audit Committee and senior management at regular intervals throughout the year.

As mandated by the Audit Committee, Group Internal Audit has:

• ✜ Provided information to the Audit Committee and the Board on Group Internal Audit's performance against the approved audit plan and the adequacy of departmental resources;

• ✜ Reported to the Audit Committee on the quality improvement programme being followed and the critical success factors utilised to monitor Group Internal Audit's performance;

• ✜ Responded to management requests to provide either assurance or consulting services in various areas of the business according to an approvals framework authorised by the Chairperson of the Audit Committee and the Group CEO;

• ✜ Applied an electronic system of management action tracking to monitor the timely remediation of reported control deficiencies. This system enables management to pro-actively manage the controls in their environments by identifying the accountable and responsible control owners and requiring them to populate the actions taken to remedy control deficiencies within an agreed upon timeframe;

• ✜ Reported to management at the Divisional Internal Audit Committees and the Audit Committee held at regular intervals, the status of agreed remedial actions implemented by management, to support establishing and maintaining a sound control environment; and

• ✜ Conducted a formal documented review of the design, implementation and effectiveness of the Company's system of Key Internal Financial Controls and submitted a report on internal financial controls for the year ended 30 September 2014 to the Audit Committee.

Based on the scope of their assignments, Group Internal Audit has concluded that "nothing has come to the attention of Group Internal Audit to suggest that the system of internal financial controls does not form a sound basis for the preparation of reliable financial statements".

Group Internal Audit is required to undergo an independent quality review at least every five years as per the standards set by the Institute of Internal Auditors. A reputable and accredited external audit firm conducted a quality assessment review of Netcare's Group internal audit function during the 2013 financial year and concluded that the function generally conformed to the standards of the Institute of Internal Auditors. The next external quality assessment is planned for the 2018 financial year.

The Group Internal Audit Charter and risk-based annual audit plan is approved by the Audit Committee on an annual basis. The Group Internal Audit activities are performed by teams of appropriate, qualified and experienced resources.

The Audit Committee meets regularly in separate sessions with management, external audit and Group Internal Audit in discharging its mandate.

In accordance with the requirements of King lll, Netcare has prepared a combined assurance framework through setting terms of reference for the Netcare Combined Assurance Committee, which aims to co-ordinate the efforts of all assurance providers at Netcare to avoid duplication of assurance services.

AFS The Audit Committee's responsibility with regard to the Group Internal Audit has been reported in the Audit Committee report in the Group annual financial statements, available at www.netcareinvestor.co.za/reports/ar\_2014/fin-audit-comitteereport.php.

Combined assurance

Combined assurance is recommended governance practice by King III, based on a general understanding that more can be done to improve assurance coverage and quality through better co-ordination of assurance providers. Combined assurance creates relationships of trust within an organisation by facilitating a shift in the level of assurance from being predominantly negative to being positive. A combined assurance model aims to optimise the assurance coverage obtained from management, and internal and external assurance providers on the risk areas affecting the company.

A five-step approach was recommended by Group Internal Audit and Forensic Services, and noted by the Audit and Risk Committees for implementing an effective combined assurance approach to compile an effective combined assurance framework:

• ✜ Step 1: Establishing the business case through a high level understanding of what assurance is provided for the risk exposures facing the enterprise;
• ✜ Step 2: Assurance reality check assess the actual assurance provided and to whom the assurance is provided. Assess the quality of the assurance;
• ✜ Step 3: Risk mapping clearly establish what assurance needs to be provided. Use the strategic, key operational and business unit-level risk profiles to establish what risks are assured and by whom, and what risks should be assured and by whom;
• ✜ Step 4: Combined assurance design communicate the approach and respective responsibilities to all stakeholders. They should agree on the common risk universe identified in step 3. Responsibilities should be defined as to what assurance is to be provided and by whom; and
• ✜ Step 5: Making combined assurance a continuing reality identify a combined assurance champion to implement the approach. The executive sponsor should provide the required authority for the project, and the champion should functionally report to the executive sponsor. Internal Audit or Risk Management is usually best placed to take on the role of champion.

The combined assurance matrix

The matrix forms the basis for discussion at Combined Assurance Committee (the Committee) meetings. The major elements of Netcare's matrix are highlighted below:

The matrix provides an overview of Netcare's current risk, internal control and assurance environment. The information recorded in the matrix relates to the current implemented activities and processes, and not future activities or processes.

Top business risks and sub-risks

The top business risks and sub-risks have been recorded on the matrix based on information gathered in preparing the Board Risk report, where the Group Risk Management function engages with key stakeholders to identify the key risks affecting their respective divisions or business units in Southern Africa.

AIR The risk report can be found at www.netcareinvestor.co.za/reports/ar\_2014/our-top-risks.php.

Key control activity

The information in the matrix describes the key control activities that have been designed and implemented by management to mitigate and/or manage the relevant top business risks and sub-risks, by focusing on the high-level control activities.

Key assurance process

The key assurance process recorded in the matrix is based on the risk mitigations identified by management. Management reviews and evaluates the key assurance processes included in the matrix and enhances the descriptions where necessary. Management recommends additional processes to be included in the matrix, or suggests processes to be removed when no longer applicable.

Assurance providers

Assurance providers include all individuals, internal functions and departments, and external parties responsible for performing key assurance processes. Group Internal Audit and Forensic Services have defined three categories of assurance providers, being:

• ✜ Management assurance including all elements of management oversight, strategy implementation, performance measurement and continuous monitoring mechanisms (such as management self assessment, management review and key performance indicators);
• ✜ Internal assurance providers internal functions and departments, independent from management, who provide management with assurance relating to the effectiveness of their key controls activities (such as quality reviews performed by the Quality Leadership Department); and
• ✜ Independent assurance providers completely independent from the implementation and operation of the key control activities and which provide objective assurance as to their adequacy and effectiveness (such as reviews performed by the Group Internal Audit function). Independent assurance providers may be internal or external to the organisation.

The Committee reviews and evaluates the assurance providers included in the matrix, based on the key assurance processes, and recommends amendments where necessary.

Focus in 2015

The Group Risk Management function will utilise the information from Netcare's combined assurance process and the matrix to inform and support preparation of the report to the Risk Committee.

We will continue to document and assess the key control activities, key assurance processes and assurance providers across all divisions and business units in relation to the top business risks affecting Netcare.

After embedding the combined assurance matrix for the top business risks affecting Netcare, the same approach will be applied to develop a combined assurance matrix for every division and business unit.

Governance of information technology

The executive and the Board recognise the importance of information technology (IT) governance in managing risks and achieving the Group's objectives. A strategic pillar for IT is to add value to the business and shareholders by integrating technical requirements with good governance, thereby ensuring sustainable practice.

The IT Steering Committee is responsible for managing IT risk and IT governance in terms of a defined strategy to improve business outcomes. The Committee enhances stakeholder value, business services, reliability and performance, and meets compliance and regulatory requirements while balancing risk mitigation and process improvement in a proactive manner.

Using the COBIT framework, which provides a foundation for decisions and investments in the governance and management of enterprise IT, the IT Department was tasked to formulate and implement the IT governance strategy. This included defining a strategic plan, defining the information architecture, acquiring the necessary hardware and software to execute the strategy, managing projects, ensuring continuous service, and monitoring the performance of the IT system.

In conjunction with the Chief Information Officer, the Company Secretary has also overseen the implementation of the POPI Steering Committee and the formulation of the POPI strategy to ensure that Netcare is ready to meet the legislative requirements of POPI once fully effective.

UN Global Compact

Netcare is a member of the UN Global Compact and supports its 10 principles on human rights, labour, environment and anticorruption. Netcare remains committed to making the principles of the UN Global Compact part of its strategy, culture and day-to-day operations. Netcare has implemented a revised programme to make employees more aware about their human rights.

AIR For more information on our health and safety performance and our human capital initiatives, see the SA: Our people report.

Ethics

South Africa

The Netcare Board recognises that good governance emanates from effective, responsible leadership, which is characterised by the ethical values of responsibility, accountability, fairness and transparency.

The Group's Code of Ethics (the Code) articulates the Group's policy regarding conflicts of interest, gifts, confidentiality, fair dealings and protection and appropriate utilisation of Netcare's assets. Employees are discouraged from accepting any gifts or favours from suppliers that may obligate them in any way to reciprocate. The Netcare Group entrenches the Code's various principles in a number of ways, including training interventions and an annual survey.

The Group and all its divisions are committed to a policy of fair dealing and integrity in the conduct of its business. This commitment is actively endorsed by the Board of directors of Netcare, and is based on a fundamental belief that business should be conducted honestly, fairly and legally. Netcare expects all employees to share its commitment to high moral, ethical and legal standards.

The Board is committed to ensuring the consistent application of the Code. Moreover, the Group has a formal disclosure process where directors are required to declare any personal financial interests that pose a conflict of interest. This is performed on a periodic basis and is a standing agenda item at all Board meetings. The Directors' Dealing Policy also requires declaration of their interests.

The Group is mindful of the professional codes that govern the conduct and ethics of health professionals in South Africa. Netcare supports the Health Professions Council of South Africa in all its endeavours to enforce its code, principles and values.

Netcare has a whistle-blowing mechanism in place to facilitate anonymous reporting of alleged theft, or fraudulent, corrupt or unethical behaviour (including unethical medical behaviour) in the Group. This is facilitated through the Fraud and Ethics Hotline which is available to all Netcare employees, and ensures the anonymity of all reports and the protection of the employees reporting these incidents. The Fraud and Ethics Hotline can also be utilised by the public,

including suppliers and patients. Posters with relevant information are placed in the business units.

As a responsible corporate citizen, Netcare takes a zero tolerance approach to theft, fraud and corruption. Accordingly all identified cases are reported to the South African Police Services and, where appropriate, to the applicable registered bodies such as the Health Professions Council of South Africa.

The Group is uncompromising in its opposition to bribery and corruption, and has implemented various anti-corruption practices and policies. Through the Company Secretary, Netcare has also contributed to the National Business Initiative's case studies on anti-corruption in South Africa. Employees are encouraged to report any suspicion or incidences of fraud, theft, corruption and similar unethical behaviour as outlined below.

The Fraud and Ethics Hotline is one of a number of mechanisms that employees, management and external parties can use to report irregularities. All internal and external parties can contact Group Forensics by telephone, email or meeting request. Group Forensics resides within Group Risk, Audit and Forensic Services (GRAFS).

The Hotline details are: 0860FRAUD1 (0860 372 831). If anonymity is not a concern, the email address fraud@netcare.co.za can be used.

Every incident reported through the Fraud and Ethics Hotline or any other source is investigated, logged onto the defalcation register and reported on a bi-monthly basis to management. The defalcation register is also included in the Audit Committee and Risk Committee meeting packs. In the next financial year, the register will also be presented to the Social and Ethics Committee at their meetings held in June and November. The control breakdowns that gave rise to any indication of fraud or theft are logged on a follow-up database and tracked by Group Internal Audit until rectified by management.

During the year under review, GRAFS has undertaken numerous road shows and distributed fraud alerts, directives and communiqués among various Netcare business units to promote the use of the Hotline as well as to raise awareness of fraud and unethical behaviour.

Fraud and Ethics Hotline – statistics

South Africa

	Sep	%	Sep	%	Sep	%	Sep	%	Sep
	2014	change	2013	change	2012	change	2011	change	2010
General fraud1	252	50.9	167	2.5	163	6.5	153	1.3	151
Hotline2	35	16.7	30	66.7	18	12.5	16	(15.8)	29

1. General Fraud – All incidents reported to GRAFS via email, telephone or through meeting requests.

2. Hotline – Reporting of incidents via the Fraud and Ethics Hotline only.

United Kingdom

BMI Healthcare's Code of Business Conduct sets out standards for all employees which define and govern illegal and unethical behaviour. This has been supplemented by BMI Healthcare's Anti-bribery and Corruption Policy which provides further guidance on appropriate behaviour. Our employees are able to confidentially raise concerns about the conduct of others in the business, or the way in which the business is run, through our whistle-blowing policy. When issues are raised, immediate action is taken to investigate and address the matter, with BMI Healthcare's Disciplinary Policy being applied, where appropriate.

BMI Healthcare's basic values are honesty, directness and openness in dealing with others. These values encompass our relationships with employees, shareholders, customers, suppliers and local communities. Our Business Conduct Policy sets out our policy with regard to:

• ✜ Basic values;
• ✜ Confidential information;
• ✜ Equality and diversity;
• ✜ Gifts and entertainment;
• ✜ Accuracy and integrity of books and records;
• ✜ Health and safety standards affecting employees and customers;
• ✜ Outside interests;
• ✜ Mal-administration; and
• ✜ Monitoring and compliance.

Our whistle-blowing policy also provides details of the mechanism for employees to report, either by email or telephone, concerns about fraud or any other concern of a similar nature across any area of the business.

Fraud and Ethics Hotline – statistics

United Kingdom

	2014	2013	% change
General fraud	6	6	–
Hotline	1	3	(66.7)
Non-fraud(including clinical) viawhistle-blowing email
or hotline	4	11	(63.6)