Corporate Governance Compliance Statement

The directors of Primedia Limited are responsible and accountable to shareholders for ensuring compliance with the highest standards of corporate governance and for maintaining an effective system of internal controls. The board remains fully committed to the principles of integrity, transparency and accountability in its dealings with its shareholders and other stakeholders. It endorses and ensures that the company remains compliant with the Code of Corporate Practices and Conduct, as stipulated in the King II Report.

BOARD OF DIRECTORS

The board is responsible to shareholders for setting the direction of Primedia through the establishment of strategic objectives and key policies. The board accepts that it is ultimately accountable and responsible for the performance and affairs of Primedia and that the chief executive and executive directors are responsible for the management of the day-to-day affairs of the company. The board considers issues of strategic direction by setting long-term strategic objectives, approving major acquisitions, disposals and capital expenditure, determining risk parameters, approving budgets and other matters having a material effect on Primedia.

Structure

Primedia has a unitary board of fifteen directors. The board consists of an appropriate mix of executive and non-executive directors, with five executive directors, four non-executive directors and six independent non-executive directors. It is therefore able to ensure that no one individual has unfettered powers of decision and authority. The composition of the board reflects the demographic and gender diversity of the country, with 60% of the current directors being black, and 33% black females. The role of the chairman and the chief executive are separated and a non-executive director acts as chairman.

Skills and experience of the board

Primedia’s directors have a wide range of expertise as well as significant experience in financial and commercial activities. All directors have access to management and to such information as is needed to carry out their duties and responsibilities fully and effectively. Furthermore, all directors are entitled to seek independent professional advice concerning the affairs of Primedia, at the company’s expense. The board undertakes a self-assessment annually to review its mix of skills, performance during the year, the contribution of individual directors and the effectiveness of its committees.

Selection, appointment and rotation of directors

Appointment of directors are considered by the remuneration and nominations committee and after due consideration to the satisfaction of the committee, the appointments are recommended to the full board for approval. All new appointments are subjected to “fit and proper” tests as required by the JSE Limited listings requirements. Newly appointed directors are subjected to a detailed induction process which covers business and regulatory issues, corporate governance, minutes, charters, policies and procedures and administrative matters.

All directors are subject to election by shareholders at the first opportunity following their appointment and, subsequently, at each three-year interval in accordance with Primedia’s articles of association. In total, at least one-third of the directors retire by rotation annually.

Accountability, responsibility and delegation of authority

Subject to specific matters reserved for its decision, the board delegates certain responsibilities to management and a number of standing committees, which operate within defined terms of reference laid down by the board. The formal delegation of authority is not intended to mitigate or discharge either the board or individual directors’ responsibilities.

Board committees have clearly defined, written terms of reference setting out their role and function, term, responsibility, scope of authority and procedures for reporting to the board of directors. The committees fulfil an essential role in assisting the board in the performance of its duties. The committees are each chaired by an independent non-executive director except for the executive committee and the remuneration and nominations committee, which are chaired by an executive director and a non-executive director respectively.

The board has expressly included in its charter an annual review of the composition and chairmanship of its various committees to ensure their continued relevance.

Board charter

A formal charter setting out the board’s responsibilities has been adopted by the board. The key principles of the charter are:

• The composition and role of the board;
• Duties of directors;
• Appointment of directors and the chief executive;
• Induction, training and self assessments;
• Monitoring of key risks, compliance and internal controls;
• Approval of the group’s strategic plan, annual budget and quarterly forecasts;
• Approval of levels of authority and responsibility of the subcommittees of the board; and
• Corporate governance.

Board meetings

The board meets on a regular basis, at least four times a year. During the 2006 financial year, five board meetings were held. In terms of the articles of association, the chairman of the board is required to be elected annually and in this regard Mr AP Nkuna was elected by the directors for a term ending on 30 November 2006. Directors are timeously informed of matters to be discussed at board meetings and provided with the relevant agenda and supporting documentation.

Board meetings are attended by a majority of directors and the chairmen of the board committees attend the annual general meeting and any general meetings held during the year to answer questions.

Directors’ attendance at board meetings:

	26/08/05	25/11/05	24/02/06	08/06/06	09/06/06
AP Nkuna
(Chairman)
W Kirsh
O Ighodaro
FA Gazendam	A
K Pillay
MN Lekota1
I Kirsh	A
HM Madima
P Maw
MJ Bosman	A
NJM Canca	A		A
HM Khoza		A
K Motaung2		A	A	A
CS Seabrooke
BJT Shongwe					A
SV Zilwa

EXECUTIVE COMMITTEE

The chief executive, William Kirsh, chairs the executive committee, which includes all the executive directors of the company. The committee is empowered and responsible for implementing the strategies and policies determined by the board, managing the business and affairs of the company, prioritising the allocation of capital, technical and human resources and establishing best management practices. The committee is also responsible for appointing and monitoring the performance of senior managers.

The committee comprises William Kirsh (Chairman), Ferdi Gazendam, Kuben Pillay, Funke Ighodaro and Melody Lekota. The committee met regularly each month during the year under review.

REMUNERATION AND NOMINATIONS COMMITTEE

The remuneration and nominations committee met twice during the year and comprises four non-executive directors, namely Paul Nkuna, Mike Bosman, Humphrey Khoza and Chris Seabrooke. All members, with the exception of Paul Nkuna, are independent nonexecutive directors. The committee receives advice from the group HR Director as well as specialist remuneration consultants from time to time. The committee has a formal charter that has been approved by the board.

The remuneration and nominations committee members’ attendance at meetings:

	31/10/05	07/06/06
AP Nkuna (Chairman)
MJ Bosman
HM Khoza
CS Seabrooke

The committee is responsible for determining the remuneration philosophy for Primedia, including short and long-term incentive plans and for agreeing the individual remuneration package (salary, bonuses and share options) of the group’s top executive management.

The committee provides assistance to the board of directors in fulfilling its responsibility to shareholders and the investment community and in ensuring that the company’s senior executives are compensated in accordance with the company’s total remuneration goals. It also advises and recommends compensation strategies, policies and salary packages necessary to support group strategic objectives.

The committee makes recommendations to the board on the appointment of new executive and non-executive directors, the composition of the board generally and the balance between executive and non-executive directors.

The committee also co-ordinates an annual written review of the performance of all the board committees and the board itself, and performs an appraisal of the chief executive and chairman.

Remuneration philosophy

In terms of the group’s remuneration philosophy, guaranteed salary packages are reviewed annually in the context of individual and business performance and benchmarked for senior executives at the 75% quartile of market trends.

Incentive bonuses are payable to executives based on a combination of individual, divisional and group performance. Incentive criteria are agreed early in the group’s financial year when objectives are set out in contract form. During the past year, key measures included the achievement of growth objectives encompassing organic growth and innovation, demonstrating leadership competency and meeting transformation scorecard targets.

In order to align the interests of staff with those of shareholders, share options are awarded to senior employees as well as employees who are identified as key talent. The annual allocation of share options to selected employees is based on a percentage of each individual’s annual salary package. Share options are granted at market price. Share options issued in December 2002, December 2003 and June 2006 vest in three tranches from the second anniversary of the date the share options were granted. Share options issued in May 2005 and December 2005 vest in four tranches from the second anniversary of the date the share options were granted. All share options granted, except those granted during 2005, are valid for five years. The share options granted in May and December 2005 are valid for six years.

Note 37 of the annual financial statements provides details of the remuneration, fees and share options paid and allocated to directors during the financial year.

AUDIT AND GOVERNANCE COMMITTEE

The primary role of the audit committee is to ensure the integrity of financial reporting and the audit process, and to ensure that a sound internal control system is maintained.

In fulfilling its responsibility of monitoring the integrity of financial reports to shareholders, the audit committee reviews the accounting principles, policies and practices adopted in the preparation of public financial information and examines documentation relating to the annual report, interim report and preliminary announcement. The clarity of disclosures included in the financial statements is reviewed by the audit committee, as well as the basis for significant estimates and judgements. In assessing the accounting treatment of major transactions open to different approaches, the committee considered written reports by management and the external auditors.

The financial directors of all of the group’s major operations have provided confirmation that financial and accounting control frameworks operate satisfactorily. The audit committee considered summaries of the significant risk and control issues arising from these reports as well as the regular reports received from the internal and external auditors.

The audit committee approved the external auditors’ terms of engagement, scope of work, the process for the 2006 interim and year-end audits and the applicable levels of materiality. Based on written reports submitted, the audit committee reviewed, with the external auditors, the findings of their work and confirmed that all significant matters were satisfactorily resolved.

The audit committee considered information pertaining to nonaudit work performed by the external auditors during 2006 and has concluded that the nature and extent of non-audit work do not present a threat to the external auditors’ independence.

Based on its assessment of the external auditors’ performance and independence, the audit committee has recommended the reappointment of Deloitte & Touche as auditors until the conclusion of the annual general meeting in 2006.

The internal audit function reports directly to the audit committee. The mandate and annual coverage plans of the internal audit function were approved by the audit committee, which also considered the results of the internal audit work.

The audit committee comprises an equal number of independent non-executive and non-executive directors, namely Chris Seabrooke, Tshidi Madima, Peter Maw and Sindi Zilwa. The group’s chief financial officer, Funke Ighodaro, and head of internal audit, Henry Enslin, attend all audit committee meetings by invitation.

As required by its terms of reference, the audit committee, chaired by an independent non-executive director, met four times during the year to coincide with key dates within the financial reporting and auditing cycle. Two of their meetings were followed by discussions, independent of management, with the external audit partners and the head of internal audit.

The audit and governance committee members’ attendance at meetings:

	19/08/05	18/11/05	17/02/06	25/05/06
CS Seabrooke	A
(Chairman)
HM Madima
P Maw
SV Zilwa

RISK COMMITTEE

The risk committee currently comprises Bheki Shongwe, Ferdi Gazendam, Funke Ighodaro, William Kirsh, Peter Maw and Kuben Pillay. The committee is chaired by an independent non-executive director and met three times during the financial year.

The risk committee members’ attendance at meetings:

	21/07/05	22/11/05	05/06/06
BJT Shongwe (Chairman)			A
FA Gazendam
O Ighodaro
W Kirsh
P Maw			A
K Pillay

The board is responsible for the process of risk management and has mandated the risk committee to ensure that significant risks are identified, evaluated and managed on an ongoing basis. Management is accountable to the board for designing, implementing and monitoring the process of risk management.

The board’s policy on risk management encompasses all significant business risks to the group, including financial, operational and compliance risks, which could undermine the achievement of the group’s business objectives. Managers are supported in giving effect to their risk responsibilities through policies and guidelines on risk and control management. The risk assessment and reporting criteria are designed to ensure that risks and opportunities are adequately identified, evaluated and managed at the appropriate level in each business and also that the individual and collective impact of the identified risks on the group as a whole is taken into consideration. In this regard, subsidiary company boards and senior managers carry out an annual assessment of risk as part of their strategic review process, to identify and assess the impact of critical risks facing their individual business units and the adequacy and effectiveness of control factors at all levels. These risks are then ranked on the basis of probability and impact, and action plans are put in place to address them and responsibilities allocated.

The risk committee reviews the activities and effectiveness of the group’s risk management activities twice a year and ensures that those risks which impact on the group as a whole, are adequately addressed.

The system of internal control, which is embedded in all key operations, provides reasonable assurance that the group’s business objectives will be achieved within acceptable risk tolerance levels. These risk tolerance levels are set in each business unit and vary depending on the nature, scope and size of the business. In addition, the board receives assurance from the audit committee, which relies on regular internal and external audit reports, on risk and controls throughout the group.

The board has determined that the risk committee has satisfied its responsibilities for the year under review in compliance with its terms of reference.

TRANSFORMATION COMMITTEE

The transformation committee met twice during the year and consists of executive, non-executive and independent nonexecutive directors. Humphrey Khoza, an independent nonexecutive director, chairs the meetings. The other committee members are Ferdi Gazendam, Funke Ighodaro, William Kirsh, Paul Nkuna, Kuben Pillay and Sindi Zilwa.

The group human resource director, Melody Lekota, attends the meetings by invitation.

The transformation committee members’ attendance at meetings:

	08/11/05	01/06/06
HM Khoza (Chairman)
FA Gazendam
O Ighodaro	A
W Kirsh
AP Nkuna
K Pillay
SV Zilwa

Primedia recognises that transformation is a key business imperative and accordingly has implemented a range of strategies to ensure the successful transformation of Primedia, including employment equity, equity ownership, skills and enterprise development, preferential procurement and social development. In this regard, the group’s transformation objectives are governed by a charter which is monitored on an ongoing basis by the group transformation committee.

Primedia is once again proud to have been ranked 1st in the media sector and 34th overall during the 2006 Financial Mail/Empowerdex Top Empowerment survey.

Our progress to date against our transformation objectives has been as follows:

Employment equity

Employment equity (“EE”) in the workplace is an important aspect of transformation within the group and is also a key objective of our recruitment strategy. Primedia strives to provide an environment which promotes diversity, redresses past imbalances in the group’s staffing structure and eliminates all forms of discrimination, whether based on race, religion or gender. In this regard, the group has a published employment equity policy and submits employment equity reports and plans to the Department of Labour on an annual basis. The group’s progress in achieving its employment equity targets is reflected as follows:

Primedia has performed well against all set targets. Both the advertising and content divisions have had notable improvements over the year, with an increase in black representation at the majority of the management levels. A differentiation strategy is being driven to attract and retain employees, particularly at the middle to senior management levels.

Skills development

All the companies within the group comply fully with the Skills Development Act. The group spends in excess of 2% of total payroll towards skills development, of which over 60% is directed towards historically disadvantaged employees. There continues to be a strong focus on management and leadership development evidenced by the various courses conducted within the divisional companies as well as the leadership seminars facilitated by group human capital.

Equity ownership

Over the years, Primedia’s direct financial support to empowerment entities has been significant, including over R400 million of own capital invested to enable empowerment companies to acquire stakes in a number of our businesses, including Ster-Kinekor and Africa on Air. In addition, Primedia has created significant value for its empowerment partners including the value unlocked by the former minority shareholders in Africa on Air.

As part of its ongoing commitment to broad-based black economic empowerment, Primedia recently facilitated the increase in its BEE economic shareholding from 6% to 18%, by Mineworkers Investment Company (“MIC”). Primedia has identified MIC as its strategic BEE partner due to MIC’s commercial background, understanding of the media section, its broad-based nature, current shareholding and existing relationship with Primedia.

Preferential procurement

Primedia is committed to adopting and developing supportive procurement policies to facilitate and leverage the growth of historically disadvantaged South African companies. Wherever possible, Primedia will ensure that preferred supplier status is accorded to such suppliers. Most group companies have instituted informal systems to track procurement expenditure and have started the accreditation process with Empowerdex which has ensured that preferential procurement spend in these entities is audited and confirmed. Approximately 21% of the total procurement expenditure is directed towards black owned and black empowered suppliers as defined by the Department of Trade and Industry.

RELATIONS WITH SHAREHOLDERS

During the year, there have been regular presentations and meetings with institutional investors to communicate the strategy and performance of Primedia. Executive directors attend such presentations and meetings. The company’s website (www.primedia.co.za) provides the latest and historical financial and other information on Primedia, including such presentations.

During the year, there have been regular presentations and meetings with institutional investors to communicate the strategy and performance of Primedia. Executive directors attend such presentations and meetings. The company’s website (www.primedia.co.za) provides the latest and historical financial and other information on Primedia, including such presentations.

ACCOUNTABILITY AND INTERNAL CONTROL

Company law requires the board to prepare financial statements for each year, which fairly present the financial position, the results of operations and cash flow information for the group.

In addition, the board is responsible for maintaining proper accounting records that disclose, with reasonable accuracy at any time, the financial position of the company and the group and enable the board to ensure that the financial statements comply with International Financial Reporting Standards and the Companies Act 61 of 1973, as amended.

The board also has the general responsibility for taking such steps as are reasonably open to it to safeguard the assets of the group and detect fraud and other irregularities.

Key procedures that have been established to provide effective financial control can be described under the following headings:

Internal controls and accounting records

The internal audit department is an independent appraisal function that reviews the adequacy and effectiveness of internal controls, and the systems that support them. These include controls and systems at the operating entities and also the business and financial risks that could have an adverse effect on the group. Weaknesses identified by the internal auditors are brought to the attention of the directors and management.

The external auditors provide an independent assessment of internal controls and systems through the audit work that they perform. They complement the work of the internal auditors and review all internal audit reports on a regular basis. The external auditors are also responsible for reporting on whether the financial statements are fairly presented and their report is presented here.

Financial reporting

There are comprehensive management reporting disciplines that include the preparation and adoption of an annual budget against an approved strategy by all subsidiaries.

Monthly results are reported against approved budget and prior year actual results, with updated forecasts to the end of the financial year also being presented on a quarterly basis. The group has a clearly defined framework for capital expenditure, including approved budgets and appropriate authorisation levels, beyond which such expenditure requires the approval of the board of the subsidiary and, for larger capital projects or acquisitions, the board of Primedia.

The board has reviewed the effectiveness of the systems of internal financial control for the accounting year and the period to the date of the approval of the accounts. In so doing, it considered the major business risks and the control environment.

Nothing has come to the attention of the directors, or to the attention of the internal or external auditors, to indicate that any material breakdown in the functioning of the above-mentioned controls and systems has occurred during the year under review.

The board confirms that it is satisfied that the group has adequate resources to continue business for the foreseeable future. For this reason, the company has continued to adopt the going-concern basis in preparing the financial statements.

CODE OF CONDUCT

The group’s directors, management and employees are committed to maintaining the highest ethical standards in their dealings with each other and with the group’s stakeholders.

All group employees are required to maintain the highest ethical standards in ensuring that the group’s business practices are conducted in a manner which, in all circumstances, is above reproach. This is enforced by the uniform Code of Conduct which has been adopted by the group.

PRICE-SENSITIVE INFORMATION AND CLOSED PERIODS

In accordance with the JSE Limited’s guidelines on price-sensitive information, the company has adopted a policy on information determined to be price-sensitive, confidentiality undertakings and discussions with the press, institutional investors and analysts. Only the chairman, the chief executive and the chief financial officer may discuss with third parties matters which may involve pricesensitive information.

The company follows a “closed period” principle, during which period employees and directors are prohibited from dealing in the company’s shares. The closed period as determined by the board includes the period between the end of the month of each interim and financial year-end and the publication of the results for such periods. Where appropriate, dealing in the company shares is also restricted during sensitive periods when major transactions are being negotiated and a public announcement is imminent. Directors are required to obtain approval from the chairman of the company prior to dealing in shares or share options. Directors and officers notify the company secretary of all dealings in shares of the company whether traded directly or indirectly by them and a report on shares traded is tabled at each board meeting.

COMPANY SECRETARY

The group company secretary, appointed by the board in terms of section 268A of the Companies Act, is required to provide the directors of the company, collectively and individually, with guidance as to their duties, responsibilities and powers. All directors have access to the advice and services of the group company secretary.

The secretary is also required to ensure that minutes of all shareholders’ meetings, directors’ meetings and the meetings of various committees of the board are properly recorded in accordance with section 242 of the Companies Act. These minutes are circulated to members of the board and board sub-committees.