OPERATIONAL REVIEW Operational profile Corporate primarily comprises the operations of the headquarters in Johannesburg, the treasury in Maidenhead, United Kingdom, and the captive insurance company. The group has a decentralised management philosophy, however, a limited range of corporate activities and services are provided including internal audit, governance and company secretarial, investor relations, corporate communications, corporate finance, risk and legal.

	The company’s corporate governance system is a keystone of the company’s primary objective to create value for its stakeholders
SIBANI MNGOMEZULU Group executive: Governance and corporate affairs

The group subscribes to high ethical standards and principles of outstanding corporate governance. This has been a defining feature of the business since the company’s foundation in 1902.

The company’s corporate governance system is a keystone of the company’s primary objective to create value for its stakeholders.

Regulatory compliance
Barloworld is incorporated in South Africa under the provisions of the Companies Act, 1973, as amended (Companies Act). The company is listed on the JSE Limited, and applies the principles contained in the Code of Corporate Practices and Conduct recommended by the King II Report on Corporate Governance for South Africa. The board of directors (the board) has confirmed that the company complies with the Listings Requirements of the JSE Limited.

The company maintains a secondary listing on the London Stock Exchange and the Namibia Stock Exchange.

Barloworld is not registered with the Securities and Exchange Commission in the United States and has unsponsored American Depository Receipts. Accordingly, the Sarbanes-Oxley Act of 2002 does not apply to the company.

The board places strong emphasis on achieving the highest standards of financial management, accounting and reporting.

The financial statements are prepared in accordance with International Financial Reporting Standards. Regarding nonfinancial aspects, the company has adopted the Global Reporting Initiative’s (GRI) Sustainability Reporting guidelines on economic, environmental and social performance.

The company’s corporate governance systems are designed to exceed minimum compliance levels and continue to evolve to meet the expectations of stakeholders.

In the year under review:
•  The board received training on the draft of the King Report on Governance for South Africa 2009 report (King III) as well as the
    implications of the newly enacted Companies Act on the board and individual directors; taking cognisance of the new requirements;
– The board undertook a comprehensive analysis of the existing composition and skills available on the board and defined the key
   attributes that would be required for future appointments;
– The board reviewed the functions of the risk and sustainability committee and based on the findings, decided to appoint two non-executive
    directors to the committee including the chairman effective 1 October 2009; and
•  An additional independent non-executive director was appointed.

Board and directors
The company has a unitary board with nine non-executive directors and five executive directors. The board provides strategic direction and implements policies on behalf of the company.

Board compositions
The company is led and controlled by the board of directors. Considerable thought is given to board balance and composition and collectively the board believes that the current mix of knowledge, skill and experience meets the requirements to lead the company effectively.

Appointments to the board
To ensure a rigorous and transparent procedure any new appointment of a director is considered by the board as a whole, on the recommendation of the nomination committee. The selection process involves consideration of the existing balance of skills and experience and a continuous process of assessing the needs of the company.

Non-executive directors are required to devote sufficient time to the company’s affairs. While there is no formal limitation on the number of other appointments directors can hold, approval from the chairman must be obtained prior to acceptance of additional commitments that may affect the time that they can devote to the company. Non-executive directors are required to advise the board of any subsequent changes to or additional commitments from time to time as approved by the chairman.

Executive directors are permitted to accept external nonexecutive board appointments. Taking cognisance of the optimal use of executive time, barring exceptional circumstances, the appointment is limited to a single external board.

Mr Johnson Njeke was appointed to the board on 16 September 2009 as an independent non-executive director.

Independence of non-executive directors
The Barloworld board comprises a majority of independent non-executive directors. The board considers eight of the nine current non-executive directors to be independent in terms of the King II definition and the guidelines outlined in the JSE Listings Requirements. The board decided in September 2009, following a review by the nomination committee, that Ms Hixonia Nyasulu could not be classified as independent in view of her participation, either directly or indirectly in the company’s black ownership transaction that resulted in approximately 10% of the company’s equity being subscribed for and issued to black partners.

Messrs Selby Baqwa and Dumisa Ntsebeza and Ms Sibongile Mkhabela are participants on the black ownership initiative as beneficiaries of a trust to which Barloworld has made a capital contribution. The nomination committee considered the independence of the abovementioned directors taking into account a number of factors including level of participation on the black ownership initiative and King II requirements. The committee found the abovementioned directors to be independent and accordingly recommended to the board that they continue to be classified as independent. The directors concerned and the board considered the matter and agreed that in terms of the King II requirements, Messrs Baqwa and Ntsebeza and Ms Mkhabela remain independent. The board noted the new requirements for independence in terms of King III which will come into effect in 2010.

The board believes that as long as non-executive directors remain independent of management and are of the right calibre and integrity, they can perform the required function of looking after the company’s interests.

Mr Steve Pfeiffer is considered as independent notwithstanding the fact that he is a partner of a law firm in the United States that provides advice to the company from time to time. After due consideration, the board has concluded that the extent of the services provided by Mr Pfeiffer to the company is not material.

The nomination committee reviews regularly the independent status of all non-executive directors.

Retirement of directors
Executive directors, in accordance with the articles of association of the company, retire from the board at 63 years of age whilst non-executive directors by convention retire at the annual general meeting immediately following the director’s 70th birthday.

Mr Mike Levett retired from the board following the annual general meeting in January 2009.

In terms of the company’s articles of association, at every annual general meeting, at least one-third of the directors retire from the board. According to the Companies Act, a director appointed by the board to fill a vacant seat must retire from that office at the next annual general meeting.

Chairman and chief executive officer
No individual has unfettered powers of decision-making. Responsibility for running the board and executive responsibility for conduct of the business are differentiated. Accordingly, the roles of the chairman of the board and of the chief executive officer are separate.

The chairman is responsible for leadership of the board, ensuring its effectiveness on all aspects of its role and setting its agenda. The chairman is also responsible for ensuring that the directors receive accurate, timely and clear information. The chairman also ensures effective communication with shareholders and facilitates the effective contribution of non-executive directors in particular and ensures constructive relations between executive and non-executive directors.

The chief executive provides leadership to the executive team in running the business and co-ordinates proposals developed by the executive committee for consideration by the board.

Board charter
The general powers of the directors are set out in the company’s articles of association. They have further unspecified powers and authority in respect of matters which may be exercised and dealt with by the company, which are not expressly reserved to the members of the company in general meeting.

The main responsibilities of the board as set out in the board charter are as follows:

• Approval of the strategic plan and the annual business plan, the setting of objectives and the review of key risks and performance areas;
• Monitoring the implementation of board plans and strategies against a background of economic, environmental and social issues
  relevant to the company and international political and economic conditions, as well as the mitigation of risks by management;
• Appointment of the chief executive officer and maintenance of a succession plan;
• The appointment of directors, subject to election by the members in general meeting; and
• Determination of overall policies and processes to ensure the integrity of the company’s management of risk and internal control.

The charter expresses the board’s philosophy regarding customer satisfaction, quality and safety of products and services; optimising the use of assets and maximising employees’ productivity; respect for human dignity and observance of fundamental human rights; national and international corporate citizenship, including sound relationships with regulatory authorities.

Whilst retaining overall accountability and subject to matters reserved to itself, the board has delegated to the chief executive officer and other executive directors authority to run the day-today affairs of the company.

Strategy
The board, on the advice and recommendation of the executive committee, is responsible to the shareholders and other stakeholders for setting the strategic direction of the company.

Annually, the board considers a forward looking strategic plan presented by the heads of the divisions. The five year strategic plan is debated by the executive committee before being consolidated and presented to the board following a review of each division’s internal strategic plans.

Board meetings
Board meetings are convened by formal notice incorporating a detailed agenda together with relevant written proposals and reports. Information is distributed in a timely manner prior to board meetings, to facilitate adequate preparation for thorough discussion at these meetings. A number of decisions were taken between board meetings by written resolution in accordance with the company’s articles of association.

Where directors are travelling in countries other than where a meeting is held and are not able to attend in person, video and tele-conferencing facilities allow them to participate in the debate and conclusions reached or resolutions taken.

Board attendance
During the year under review, six scheduled meetings were held. Five of these were held in South Africa and the other was held in Spain. Attendance at these meetings is as shown below.

Name	13/11/2008	29/01/2009	31/03/2009	07/05/2009	24/07/2009	30/09/2009
DB Ntsebeza (Chairman)
CB Thomson (Chief executive officer)
SAM Baqwa		X
PJ Blackbeard
AGK Hamilton
M Laubscher
MJ Levett			n/a	n/a	n/a	n/a
SS Mkhabela
MJN Njeke	n/a	n/a	n/a	n/a	n/a
SS Ntsaluba
TH Nyasulu
SB Pfeiffer
G Rodriquez de Castro Garcia de los Rios
OI Shongwe
DG Wilson

Assessing the performance of board members
Annually, the performance of the chairman of the board, the chief executive officer and the board as a whole is appraised. The chairman and the chief executive officer do not participate in discussions regarding their own performance.

Board effectiveness and evaluation
Self evaluation of the performance and effectiveness of the board and its committees was carried out. In addition, this year a peer evaluation was performed where each director was given the opportunity to assess the performance of individual directors. This exercise was conducted by means of individual questionnaires prepared by the company secretary and completed individually by each member of the board. Responses were submitted directly to the company secretary and treated in strict confidence. The company secretary collated the results of the questionnaires and reported the findings to the board and committee chairmen. The chairman advised the board and board committees of the outcome of the exercise.

The board and its committees were found to operate effectively and those few areas identified for action would be addressed during 2010.

Induction and training
The company secretary arranges an appropriate induction programme for new directors. This includes an explanation of their fiduciary duties and responsibilities and arranging visits to operations, where discussions with management facilitate an understanding of the company’s affairs and operations.

In the year under review, a site visit of the Barloworld Finanzauto operations in Arganda, Spain, was arranged to coincide with the July 2009 board meeting. The directors gained first-hand knowledge of the operation, results and prospects as explained by resident executive management.

Directors are apprised, wherever relevant, of any new legislation and changing commercial risks that may affect the affairs of the company.

The board supports the development of all employees and also the development of directors, by availing them the opportunity to attend external courses and seminars. Further training is made available dependent upon each director’s requirements and the quality and relevance of the training available.

In certain circumstances, it may become necessary for a non-executive or independent director to obtain independent professional advice in order to act in the best interests of the company. Such a director also has unrestricted access to the chairman, executive directors and the company secretary. Where a non-executive or independent director takes reasonable action and costs are incurred, these are borne by the company.

Board of directors
Non-executive

Dumisa Ntsebeza (59) Chairman	Selby Baqwa (58) Non-executive director	Gordon Hamilton (64) Non-executive director

Sibongile Mkhabela (53) Non-executive director	Johnson (JJ) Njeke (50) Non-executive director	Sango Ntsaluba (49) Non-executive director

Hixonia Nyasulu (55) Non-executive director	Steve Pfeiffer (62) Non-executive director	Gonzalo Rodriguez de Castro Garcia de los Rios (67) Non-executive director

Clive Thomson (43) Chief executive officer	Don Wilson (52) Finance director	John Blackbeard (52) CEO: Barloworld Handling

Martin Laubscher (49) CEO: Barloworld Automotive	Isaac Shongwe (47) CEO: Barloworld Logistics	Peter Bulterman (53)* CEO: Barloworld Equipment Southern Africa * Appointed to the board with effect from 1 October 2009

Company secretary
The company secretary provides the board as a whole and directors individually with guidance on the discharge of their responsibilities. He is also a central source of information and advice to the board and within the company on matters of ethics and good corporate governance. Appointment and removal of the company secretary are matters for the board as a whole. The company secretary maintains and regularly updates a corporate governance manual, copies of which are distributed to all newlyappointed directors and divisional senior managers.

The company secretary ensures that in accordance with the pertinent laws, the proceedings and affairs of the board and its members, the company itself and, where appropriate, the owners of securities in the company, are properly administered. The company secretary ensures compliance with the rules and Listings Requirements of the JSE Limited and where appropriate, other stock exchanges on which the company’s securities are listed. The company secretary also assists in developing the annual board plan, administers the long term incentive schemes and ensures compliance with the statutory requirements of the company and its subsidiaries in South Africa.

Board committees
The board has seven sub-committees which have been established to assist the board in discharging its responsibilities. These committees listed hereunder play an important role in enhancing good corporate governance, improving internal controls and, thus, the performance of the company:

Each board committee acts according to its written terms of reference approved by the board. They set out its purpose, membership requirements, duties and reporting procedures. Board committees may take independent professional advice at the company’s expense. The committees are subject to regular evaluation by the board in regard to performance and effectiveness.

Chairmen of the board committees and the lead client service partner of the external auditors of the company are required to attend annual general meetings to answer any questions raised by shareholders.

The board has determined that the seven sub-committees have fulfilled their responsibilities for the year under review in compliance with their terms of reference, respectively.

Executive committee
The executive committee comprises five executive directors and an additional six executive members, inclusive of Mr Ian Stevens who was appointed in the current year. The committee as at 30 September 2009 comprised:

The board has delegated a wide range of matters relating to the company’s management to the executive committee, including:
• financial, strategic, operational, governance, risk and functional issues;
• formulation of the group strategy and policy; and
• alignment of group initiatives.

The committee held 12 formal meetings during the year and additional sessions focusing on strategy and initiatives taken to develop intellectual capital in the group. The committee assists the chief executive officer to guide and control the overall direction of the business of the company, monitor business performance and to act as a medium of communication and co-ordination between business units, group companies and the board.

Executive committee attendance

Current

20/10/08

10/11/08

03/12/08

23/01/09

19/02/09

18/03/09

05/05/09

18/05/09

17/06/09

16/07/09

14/08/09

28/09/09

CB Thomson   (Chairman)

PJ Blackbeard

X

X

X

PJ Bulterman

X

KT Kweyama

X

X

X

M Laubscher

S Mngomezulu

V Salzmann

X

X

DM Sewela

X

X

OI Shongwe

X

IG Stevens

*

*

*

P Stuiver

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

DG Wilson

* indicates attendance by invitation.

Audit committee
The audit committee, which is required to have a minimum of three members, comprises Messrs Gordon Hamilton (chairman), Johnson Njeke and Sango Ntsaluba, all of whom are independent directors. Mr Gonzalo Rodriguez de Castro was co-opted on to the committee for the meeting of 6 May 2009. The quorum for a meeting is two members, personally present throughout the meeting. The chairman of the company is not a member of the committee.

The audit committee’s terms of reference include inter alia:
• Considering the independence of the external auditors and making recommendations to the board on the appointment or dismissal of the external auditors;
• Evaluating the independence, effectiveness and performance of the external auditors and considering any non-audit
  services rendered by those auditors, including satisfying themselves as to the validity of the non-audit services and defining any limits in this regard;
• Considering and reviewing the reliability and accuracy of financial information and appropriateness of accounting policies and disclosure practices;
• Examining and reviewing the interim report, final profit statement, annual financial statements, prospectus or any other
  documentation to be published by the company;
• Reviewing compliance with applicable laws, best corporate governance practices, accounting standards and regulatory requirements;
• Reviewing the effectiveness of the group risk assessment process, adequacy of accounting records and internal control systems; and
• Monitoring and supervising the functioning and performance of internal audit.

The board places strong emphasis on maintaining appropriate systems of internal control. An internal control scoreboard is tabled and reported to the audit committee for each business operation bi-annually. All significant deviations from laid out internal control policies and procedures are also reported. The audit committee assists the board in its deliberations regarding the company’s continuing viability as a going concern.

The chairman of the committee reports to the board on the activities and recommendations made by the committee.

The finance director, head of internal audit and the external audit partner attend all meetings.

Audit committee attendance
Current	12/11/08	14/11/08	06/05/09	29/09/09
AGK Hamilton (Chairman)
MJ Levett			n/a	n/a
MJN Njeke	n/a	n/a	n/a
SS Ntsaluba
G Rodriguez de Castro	n/a	n/a		n/a

Each year the committee makes an assessment of the qualifications, expertise, resources and independence of the company’s auditors. This assessment is based upon reports produced by the auditors, the committee’s own dealings with the auditors and feedback from the executive team.

The independence and objectivity of the auditors is regularly considered by the committee.

The Barloworld SA audit committee attends to the statutory requirements outlined in the South African Companies Act for Barloworld Limited and its South African subsidiaries. The committee members comprise Messrs Hamilton, Njeke and Ntsaluba, all of whom are independent directors.

The report of the audit committee is on page 63.

General purposes committee
The general purposes committee is required to have a minimum number of three members, the majority of whom must be independent.

The chief executive officer is currently the only executive member of the committee, which comprises Messrs Dumisa Ntsebeza
(chairman), Gordon Hamilton, Steve Pfeiffer and Clive Thomson.

General purposes committee attendance
Current	12/11/08	28/01/09	01/02/09	22/02/09	30/03/09	06/05/09	23/07/09	29/09/09
DB Ntsebeza   (Chairman)
AGK Hamilton
MJ Levett				n/a	n/a	n/a	n/a	n/a
SB Pfeiffer
CB Thomson

The committee’s role is to consider issues of significance to the company. It advises the board on matters having local and international political, economic and social implications regarding the affairs and business of the company. Progress in regard to the strategic plan is reviewed and recommendations regarding any adjustments to it are submitted to the board for approval. The committee ensures that material matters such as acquisitions and disposals, which require the attention of the board, are timeously submitted for consideration.

Nomination committee
The nomination committee, which must have a minimum of three members, consists exclusively of independent directors and comprises Messrs Dumisa Ntsebeza (chairman), Selby Baqwa, Gordon Hamilton and Steve Pfeiffer and Ms Sibongile Mkhabela. The chief executive officer may be invited to attend meetings.

The committee makes recommendations to the board on the composition of the board and the balance between executive and non-executive directors. Skill, experience and diversity are taken into account in this process. In the year under review the board mandated the committee to recommend an appropriate structure post the 2007 unbundlings and disposals. The size of the board, balance between executive and non-executive directors, resident and non-resident non-executive directors and skills and expertise came up for consideration.

The board endorsed the recommendation that executive representation on the board be retained, subject to a majority of non-executive directors. Any additional appointments to be made would reinforce current skills and expertise possessed by the board.

The committee is responsible for identifying and nominating candidates for the approval of the board as additional directors or to fill any board vacancies when they arise. It also advises the board on succession planning, particularly in respect of the chairman of the board and chief executive officer.

In addition, the committee recommends directors, who retire in terms of the company’s articles of association, for re-election.

Mr Johnson Njeke having been appointed during the financial year, is required to retire at the upcoming annual general meeting. Messrs Selby Baqwa, Dumisa Ntsebeza, Isaac Shongwe and Don Wilson are required to retire by rotation. All retiring directors are eligible and have offered themselves as available for election or re-election respectively.

At its meeting in November 2009, the committee considered the candidates who are standing for election or re-election at the forthcoming annual general meeting (as referred to in Ordinary Resolutions [2 to 6] in the Notice of Annual General Meeting on pages 224 to 226 of this document). Based on the skills, experience and contribution of each to the board, the committee recommends to shareholders the election of each of the above mentioned directors.

Empowerment and transformation committee
For the year under review, the empowerment and transformation committee comprised Ms Sibongile Mkhabela (chairman), two other independent non-executive directors, namely Messrs Selby Baqwa and Dumisa Ntsebeza and two executive directors namely Messrs Isaac Shongwe and Clive Thomson. The executive responsible for human resources and transformation throughout the group attends meetings of the committee by invitation.

The committee must have a minimum of three members, two of whom must be independent. The committee monitors on behalf of the board the group’s initiatives to promote diversity and advance the objectives of non-discrimination, and supports management in embracing the principles of transformation on an enterprise-wide basis across all facets of the group’s activities. In South Africa the committee receives reports from group companies on progress against the BEE scorecard developed by the South African department of Trade and Industry.

The committee may consult, whenever appropriate, with any other member of the board or expert on any subject-matter to be dealt with by the committee.

Empowerment and transformation committee attendance
Current	28/01/09	30/03/09	29/09/09
SS Mkhabela (Chairman)
SAM Baqwa
MJ Levett		n/a	n/a
DB Ntsebeza
OI Shongwe
CB Thomson

Nomination committee attendance
Current	12/11/08	16/01/09	28/01/09	30/03/09	06/05/09	23/07/09	29/09/09
DB Ntsebeza (Chairman)
SAM Baqwa					X
AGK Hamilton
MJ Levett				n/a	n/a	n/a	n/a
SS Mkhabela
SB Pfeiffer

Remuneration report
This report sets out the company’s remuneration policy and practice for executive directors. It also provides details of the remuneration paid to, and interests in shares and share options acquired by executive and non-executive directors during the financial year ended 30 September 2009.

Remuneration committee
The remuneration committee, which must have a minimum of three members, consists exclusively of independent directors and comprises Messrs Steve Pfeiffer (chairman), Gordon Hamilton and Dumisa Ntsebeza. The chief executive officer may be invited to attend meetings of the committee, but may not participate in any discussion of his own remuneration.

The remuneration committee makes recommendations to the board on the structure and development of policy on executive and senior management remuneration, taking into account market conditions. It determines the criteria necessary to measure the performance of the executive directors in discharging their functions and responsibilities. It also determines remuneration packages for the chief executive officer and executive directors of the company.

In respect of non-executive directors, the remuneration committee makes recommendations to the board in respect of fees to be paid to each non-executive director for services rendered as a member of the board or a board sub-committee. Once these fees have been adopted by the board, they are submitted to the shareholders in general meeting for approval prior to implementation and payment. Details of the fees paid to non-executive directors are set out in detail on page 191 of this annual report. Details of fees proposed to shareholders for approval are set out below.

Wherever appropriate, the remuneration committee consults with the chief executive officer or other executive or nonexecutive directors in fulfilling their duties under the committee’s terms of reference.

Key remuneration highlights and developments
In the year under review Barloworld continued to apply a global grading system to determine the appropriate level of compensation, harmonise intellectual capital management and to nurture and recognise talent and reward superior performance.

The benefits of implementing a global grading system across the group at executive and senior management levels include standardisation across business units and countries, consistent benchmarking and transparency.

The remuneration committee retained PricewaterhouseCoopers (PwC) as its independent remuneration adviser throughout the period under review.

Remuneration philosophy
Remuneration plays a critical role in attracting, motivating and retaining high-performing and talented individuals to achieve Barloworld’s objectives. In line with the interests of shareholders, reward is set at responsible and competitive levels in relation to both local and relevant overseas markets. Barloworld’s philosophy aims to establish a level of guaranteed remuneration that is competitive, short-term incentives that reward individuals for achieving targets and for exceptional performance, and a long-term share incentive scheme that supports retention and motivation of key skills.

Remuneration committee attendance
Current	12/11/08	28/01/09	30/03/09	06/05/09	23/07/09	29/09/09
SB Pfeiffer (Chairman)
AGK Hamilton
MJ Levett			n/a	n/a	n/a	n/a
DB Ntsebeza

Non-executive directors’ emoluments
Standard fees
Fees are fixed by the shareholders in general meeting on proposals agreed to by the board on the recommendation of the remuneration committee, which has been advised by independent external remuneration consultants.

At the annual general meeting held on 29 January 2009 shareholders resolved that in terms of article 61 of the company’s articles of association, the fees payable to the chairman and non-executive directors for their services to the board, audit committee and the other board committees be fixed as follows:

Fees for additional services
The remuneration committee approved an appropriate fee structure for any additional services, where applicable, to be provided by non-executive directors.

Details of remuneration, fees and other benefits earned by nonexecutive directors in the past year are given on page 191.

Executive directors’ remuneration
Levels of remuneration have been designed to attract, retain and motivate the executive directors in line with market conditions. A significant proportion of the executive directors’ remuneration has been structured as variable pay so as to link corporate and individual performance.

The company embarked on a benchmarking process during the year under review to ensure that the packages awarded to executive directors were competitive. The benchmarking was conducted by PE Corporate Services, the company engaged to advise on benchmarking and review of executive remuneration. The findings were reviewed by PwC, the lead advisor to the remuneration committee. Remuneration data from the comparator group of companies’ most recent published accounts was reviewed and analysed and, where necessary, an appropriate adjustment to the compensation of the executive directors was applied. The comparator group of companies consists of large international South African companies.

As part of this review, the committee, with assistance from its advisors, assessed the appropriateness of the quantum of, and balance between, guaranteed and variable remuneration.

The committee reviews the elements of the reward packages of executive directors annually. Remuneration packages are assessed relative to the market benchmarks of companies of comparable size, market sector, business complexity and international scope.

Reward levels are targeted to be commercially competitive, on the following basis:
• Guaranteed remuneration is based on the role complexity and scope of responsibility as measured by the Watson Wyatt Global Grading System;
• Although the company’s guaranteed remuneration policy guideline recommends competitiveness at market benchmark levels, the most relevant
  market competitive position for total reward levels are based on individual performance;
• Company performance, individual performance and changes in responsibilities are also taken into consideration in setting salary levels each year; and
• In order to avoid disproportionate packages across divisions and business units of the group and between executives, adjustments are made as
  deemed necessary to ensure broad internal consistency. Adjustments may also be made to the reward levels for individuals to facilitate cross
  business unit mobility to either grow a business unit or enter new markets.

The elements of the reward package are detailed below and the components for each director are reflected in the tables accompanying this report.

In the year under review, the remuneration package of executive directors comprised the following elements:

• Base pay
  The executive directors’ base salary is reviewed annually. The current levels are at the lower quartile of the group of comparator companies,
  which is made up of large international South African companies. Given the comparator companies used, this level is considered to be competitive
  in the appropriate labour market. Individual and company performance and changes in responsibilities are also taken into account when determining
  base pay annually.

• Benefits
  – Retirement funding
  – Medical cover
  – Personal accident cover
  – Vehicle scheme

• Variable pay
  This consists of short-term and long-term incentives.

Short-term incentives (bonuses) are paid in cash and their
aim is to increase shareholder value.

The bonus is made up of two elements – personal objectives and financial objectives.

In terms of the financial objectives, there are two separate conditions to be achieved, each accounting for 50% of the financial component. The first condition relates to a cash flow target and the second relates to an operating profit target. Where on-target performance is achieved, a bonus of 60% of annual basic pay will be awarded.

In respect of personal objectives, a bonus of up to 30% of annual basic pay can be earned where 100% of personal objectives are achieved.

During the year, the structure of bonuses awarded to executive directors and the threshold, target and stretch levels were reviewed. Consideration was given to international trends as well as market practice for large listed South African companies.

The levels set take into account the current trading conditions and challenges being faced by the company and also represent the stretching of targets to motivate and retain senior employees. In particular, the stretch targets have been set at a level which represents a significant and meaningful level of stretch in the current business environment and the threshold targets have been set at a level which represents the minimum level of acceptable performance for the business.

The targets which must be achieved by the chief executive officer in order to earn a bonus differ slightly from those set out above in that he can earn 75% of his annual basic salary for meeting the financial objectives at target level and 120% of his annual basic salary for meeting the financial objectives at stretch level. The maximum bonus potential is 150% of annual basic salary, which is the same as the previous financial year.

The actual targets set for threshold, target and stretch performance vary between individual business units and directors depending upon their different circumstances.

Long-term incentive scheme The aim of the long-term incentive schemes operated by Barloworld is to incentivise employees to create long-term value for shareholders and stakeholders. In addition, such schemes assist the company to retain key talent in order that its business objectives be met.

The long-term incentive schemes currently in operation are as follows:

Termination periods for executive directors
There are no directors with service contracts with termination benefits exceeding one year’s salary and notice periods in excess of one year.

Retirement and pensions
The retirement age for executive directors is 63. All executive directors participate in a defined contribution retirement fund designed to enable them to make appropriate financial provision for their retirement.

Risk and sustainability committee
The management of risk and sustainability issues is inherently an operational function. Accordingly, the risk and sustainability committee comprises the chief executive officer, other executive directors of the company and divisional chief executive officers. On 1 October 2009, two independent non-executive directors, including the chairman, were appointed to the committee. The group risk services manager and the executive responsible for the group’s sustainability initiatives attends all meetings of the committee.

The chairman of the committee is required to report to the board on the recommendations made by the committee.

The committee assists the board in recognising all material risks and sustainability issues to which the group is exposed and ensuring that the requisite risk management culture, practices, policies and systems are progressively implemented and functioning effectively.

These include, among others, business continuity management, occupational health and safety, environmental management and ethical commercial behaviour.

The functions of the committee inter alia include:
• Setting out a formal policy for the management of risks;
• Reviewing and assessing the integrity and effectiveness of risk management process each year;
• Considering annually the consolidated risk assessment results and determining trends, common areas of concern, emerging risks,
  and the most significant risks for reporting to the board;
• Monitoring and reviewing changes in stakeholders’ expectations, corporate governance codes and best practice guidelines relating to risk issues;
• Receiving reports covering matters relating to substantive environmental and health and safety risks;
• Reviewing and approving the insurance renewal programme;
• Reviewing and approving the sustainability report; and
• Determining and recommending to the board for approval, the company’s risk appetite.

Risk and sustainability committee attendance
Current	11/11/08	30/03/09	05/05/09	07/08/09
DG Wilson (Chairman)
PJ Blackbeard
M Laubscher
OI Shongwe				X
CB Thomson

The audit committee carries out an independent oversight role of the risk and sustainability management process.

Risk management process
In terms of a written risk management philosophy statement issued by the chief executive officer and endorsed by the directorate, the company is committed to managing its risks and opportunities in the interests of all stakeholders. Every employee has a responsibility to act in this manner.

An ongoing systematic, enterprise-wide risk assessment process supports the group’s risk management philosophy. This ensures that risks and opportunities are not only adequately identified, evaluated and managed at the appropriate level in each division, but also that their individual and joint impact on the group as a whole is taken into consideration.

Divisional boards and senior managers carry out an annual self-assessment of risk. This process identifies critical business, operational, financial and compliance exposures facing the group and the adequacy and effectiveness of control factors at all levels. The assessment methodology takes into account severity and probability of occurrence and applies a rating based on the quality of control, thereby ranking risks and setting priorities. The top risks, elevated to group level, are addressed through action plans put in place with responsibilities assigned.

The group risk department oversees the process from the perspective of strategic direction, ongoing improvement in methodology and process, and technical assistance. The internal auditors assist the audit committee in evaluating the effectiveness of the risk management process and comment thereon in their own assessment reports.

As the group develops new business and expands into new markets and territories, it is faced with increasingly complex and changing environments. By integrating the risk management process with the group’s strategic direction the risk-return tradeoff is optimised. This enhances competitive advantage, growth and the employment of capital. In the case of joint ventures and associates, the company encourages adherence to the same risk management philosophy and policies.

Internal audit
With its responsibilities clearly defined and approved by the audit committee, internal audit continued to function throughout the group during the past year.

Internal audit focused on the following main areas: • Appraising and advising on systems, procedures and management controls; • Assessing the effectiveness of risk management processes; • Evaluating the reliability and integrity of management and financial information; • Assessing the control over assets and verifying their existence; • Reviewing compliance with policies and procedures; and • Recommending improvements in procedures and systems to enhance efficiencies and prevent fraud.

Risk focused audit plans for the year under review, with input from divisional management, were approved in November 2008. Audit findings were formally reported to divisional audit committees in April/May and again at financial year end. These divisional committees are chaired by officers who are nonexecutive to the respective divisions.

The head of internal audit co-ordinates the internal audit function worldwide and reports to the chairman of the audit committee regularly throughout the year, providing details of audit coverage and any significant findings.

The internal audit process did not highlight any breakdowns in internal control that were known to have had a material impact on the reported financial information.

Internal audit undertook a high level review of the risk management processes across the group and reported at the special risk focused meeting of the audit committee in September 2009.

Although not reliant on external auditors for any resource support, the head of internal audit continues to liaise with them with a view to maximising efficiencies of audit coverage where possible. During the year, internal audit utilised the services of independent external firms to supplement its internal resources to enable the department to complete their planned audit coverage for the year.

Insider trading
No employee, his/her nominee or members of their immediate family may deal either directly or indirectly, at any time, in the securities of the company on the basis of unpublished pricesensitive information regarding the company’s business or affairs. No director or officer may deal in the securities of the company during the embargo period determined by the board in terms of a formal policy implemented by the company secretary. Periods of embargo are from the end of the interim and annual reporting periods to 24 hours after the announcement of financial and operating results for the respective periods. A list of persons who are restricted for this purpose has been approved by the board and is revised from time to time. A register of directors and officers is available for inspection at the company’s registered office in Sandton, South Africa.

The rules of the JSE Limited extend obligations regarding transactions in the securities of the company to include those of any major subsidiary. Those officers whose trading transactions have to be disclosed to the market within 48 hours specifically include the directors and the company secretary, but now also embrace any associate of the directors or company secretary or any independent entity or investment managers through which the directors or company secretary may derive a present or future beneficial or non-beneficial interest.

The directors or officers of the company’s major subsidiaries, whether wholly or partially owned, are also included in the list of directors, company secretary and other officers.

Trading in the company’s shares and any cessions of options over such shares is conducted on completion of an application form, in the case of securities subject to the Barloworld Share Option Scheme, or a letter in any other case. Authorisation for the transaction is given in writing by the chairman of the board, the chief executive officer or a divisional chief executive officer, as appropriate. The written authority is kept by the company secretary with the record of the particular transaction. In the event that the chairman wishes to trade, permission to do so is obtained from designated directors.

Ethics
Barloworld is committed to the highest ethical and legal standards and expects all its stakeholders to act in accordance with the highest levels of personal and professional integrity in all aspects of their occupation and activity, and to comply with all applicable laws, regulations and policies of the company.

The company’s commitment is stated in the Code of Ethics. We have a policy of zero tolerance on bribery and corruption. The company has developed measures to combat fraud with the intention to promote the established culture of high personal standards within which all business dealings are conducted.

Our Code of Ethics has the following elements:
• Obey the law
• Respect others
• Be fair
• Be honest
• Protect the environment

The company maintains an Ethics Hotline where employees and other stakeholders can report non-compliance with company policies and fraud. All incidents reported are investigated and where appropriate, action is taken.

There is a specific ethics line procedure for all concerns and complaints relating to accounting practices, internal audit, content of auditing of the company’s financial statements, internal controls of the company and any related matters.

The Barloworld Ethics line was introduced in South Africa in 2002. It is an independent and confidential system by which employees or others can report unethical or risky behaviour. Such reports can be submitted to:
Postal address:
Barloworld Ethics Line, c/o Tip-offs Anonymous
Free Post KZN 138, Umhlanga Rocks
KwaZulu-Natal, 4320, South Africa

South Africa:
Telephone: 0800 003 248
Telefax: 0800 007 788

Outside South Africa:
Telephone: +27 31 571 5633 Telefax: +27 31 560 7395

The Barloworld Ethics Line is outsourced to Tip-offs Anonymous, which is an independent body within Deloitte, our external auditors. This provides an opportunity to anyone wishing to report unethical activities or dishonest behaviour that affects the Barloworld group. Total anonymity, if desired, is assured.

An ethics line has also been implemented in most of our international businesses.

The Code of Ethics is enforced with appropriate discipline on a consistent basis.

The total number of reports generated in 2009 (185) increased by 54% from 2008 (120). This is viewed in a positive manner as it highlights the success of the Ethics Hotline in deterring fraud and unethical behaviour.

Relationship with shareholders
The company is a strong believer in transparency, best practice disclosure, consistency of communication and equal and timely dissemination of information to its shareholders. It encourages an active participation of shareholders at general meetings and maintains an investor relations programme which, inter alia, organises for corporate and divisional executives to attend regular meetings with shareholders and potential investors.

The company has regular dialogue with institutional shareholders, where it believes this to be in the interests of shareholders generally. Feedback from these visits is shared with the board. The chairman routinely offers key shareholders the opportunity of meeting with him to discuss governance, strategy or other matters. The interests of private shareholders remain paramount and in recognition of their needs, the company’s website contains a range of investor relations materials, including an update on the group’s activities, copies of all presentation material given to institutional investors and further explanation of the matters contained in the annual report.

The annual general meeting is normally attended by all the directors and shareholders are encouraged to be present and to ask questions during the meeting and they have the opportunity to meet with directors after the formal proceedings have ended.

The notice of the annual general meeting, detailing all proposed resolutions, is on pages 224 to 228 of this annual report.

Audit committee report
Report in terms of section 270A(f) of the Companies Act 1973, as amended
The audit committee has conducted its work in accordance with its terms of reference, information about which is recorded in the Corporate governance report and is pleased to present their report in terms of section 270A(f) of the Companies Act 1973 as amended for the financial year ended 30 September 2009.

AGK Hamilton
Audit committee chairman
16 November 2009