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DENEB INVESTMENTS LIMITED - Appointment Of Internal Auditor

Release Date: 14/11/2018 16:50
Code(s): DNB     PDF:  
 
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Appointment Of Internal Auditor

DENEB INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2013/091290/06)
Share code: DNB
ISIN: ZAE000197398
(“Deneb” or “the Company”)


APPOINTMENT OF INTERNAL AUDITOR


1.     INTRODUCTION

       Shareholders are advised that on 14 November 2018, Deneb entered into an agreement
       (“Agreement”) with GRIPP Advisory Proprietary Limited (“GRIPP”), appointing GRIPP to
       provide internal audit and other related advisory services to the Company and its
       subsidiaries (“Engagement”).

       As Deneb’s holding company, Hosken Consolidated Investments Limited (“HCI”), also
       holds 75% of GRIPP’s issued share capital, GRIPP is a related party to Deneb, in terms
       of the JSE Limited (“JSE”) Listings Requirements. Deneb has appointed an independent
       expert to prepare a fairness opinion and the independent expert is of the opinion that the
       terms and conditions of the Engagement are fair to the shareholders of the Company.
       Kindly refer to paragraph 5 below for further information in this regard.

2.     RATIONALE FOR THE ENGAGEMENT

       The appointment of GRIPP to fulfil the internal audit function of Deneb will enhance the
       integrity of the Company’s financial reporting processes and will, in addition, provide
       Deneb with the benefit of GRIPP’s extensive knowledge, skills and experience.

       While GRIPP is a subsidiary of HCI, all shareholders of Deneb have an interest in, and
       will benefit from, any improvements in the integrity of the Company’s financial reporting.

       The Company’s financial reporting will continue to be underpinned by its independent
       external auditors, being, currently, PricewaterhouseCoopers Incorporated.

3.     PARTICULARS OF THE ENGAGEMENT

       The Engagement is not subject to the fulfilment of any conditions precedent and will
       commence on 1 December 2018 and continue for a fixed term of three years, terminating
       on 30 November 2021.

3.1.       Internal audit services

           GRIPP is to assist the Company and its subsidiaries (“Deneb Group”) on an ongoing
           basis in evaluating and testing the design and effectiveness of its internal financial
           and operational controls. The internal audit function will be an integral part of the
           Deneb Group, operating in accordance with the internal audit charter, that will be
           approved by the Company’s audit committee.

           For the duration of the Engagement, GRIPP will fulfil the role of the Deneb Group
           internal auditor and will, in accordance with GRIPP’s internal audit methodology that
           is tailored to meet the requirements of the Deneb Group, amongst other things:
            -   ensure that all risk areas are coordinated;
            -   develop a group-wide risk-based internal audit plan;
            -   report in writing any significant weaknesses in, or its observations on, the control
                structure and other areas that come to its notice and that it considers reportable.
                GRIPP will issue a report or deliverable at the end of each internal audit project;
                and
            -   ensure the internal audit functions of the Deneb Group are managed on a
                consistent and professional basis.

3.2.       Other related advisory services

           In addition to the above internal audit services, Deneb may request GRIPP to provide
           the following related advisory services:

            -   secondment of staff to the Deneb Group to assist with ad hoc accounting,
                financial management internal control, policy and procedures, and reporting
                work;
            -   the provision of internal control advice when designing or amending current
                information technology systems architecture;
            -   the provision of risk management reviews and assessments;
            -   the provision of corporate governance reviews and assessments;
            -   the provision of evaluation of effectiveness of the boards and board committees
                of Deneb Group companies;
            -   the provision of regulatory compliance reviews;
            -   information technology governance related reviews and assessments; and
            -   the provision of forensic audits and related fraud risk assessments, health checks
                and ethics surveys.

4.     FEES

       The base-line fees charged by GRIPP in relation to the internal audit services will be
       calculated, at an agreed hourly rate, on a base-line of 5 000 contracted hours per annum
       (“Base-line Fees”) and will be billed on a straight-line and monthly basis.

       The Base-line Fees will, for the 12 months from 1 December 2018 until 30 November
       2019, be calculated at the rate of R435.96 per hour, resulting in an annual fee of
       R2 179 800, excluding value added tax and disbursements. The hourly rate is subject to
       an annual increase, on each anniversary of the Agreement, equal to the consumer price
       index.

       Should Deneb request GRIPP to perform any ad hoc internal audit or additional advisory
       related engagements, the fees for such services will be scoped and billed separately to
       the Base-line Fees.

       All such additional fees, as well as travel, subsistence and other disbursements will, in
       aggregate, be limited to a maximum amount equal to the total Base-line Fees over the
       three-year period of the Engagement, with such maximum aggregate amount, taken
       together with the Base-line Fees, being referred to below collectively as the “Maximum
       Aggregate Fees”.

5.     CLASSIFICATION OF THE ENGAGEMENT

       As indicated above, GRIPP is a related party of the Company. Taking into account the
       Maximum Aggregate Fees that may become payable under the Agreement, the
       Engagement constitutes a small related party transaction under the JSE Listings
       Requirements, requiring the appointment of an independent expert (“Independent
       Expert”) to compile a fairness opinion under paragraph 10.7(b) of the JSE Listings
       Requirements.

       Accordingly, the directors of the Company have appointed PSG Capital as the
       Independent Expert to compile a fairness opinion in respect of the Engagement, in
       compliance with paragraph 10.7(b) of the JSE Listings Requirements. The Independent
       Expert has considered the terms and conditions of the Engagement and is of the opinion
       that the terms and conditions of the Engagement are fair to the shareholders of the
       Company.

       The JSE has been provided with a copy of the fairness opinion prepared by the
       Independent Expert. Copies of the fairness opinion are available for inspection at the
       Company’s registered office during normal business hours for a period of 28 days from
       the date of this announcement.

14 November 2018

Sponsor and Independent Expert
PSG Capital

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