GOVERNANCE ADDING VALUE

The Group's approach to corporate governance is to ensure it contributes to improved operational decision making and corporate performance, thereby reducing the risk of failure. The Group therefore aims for the relevant governance policies, structures and processes, which initially may have been brought into existence to ensure adherence with applicable regulation and codes of conduct, to add value and ensure corporate sustainability, and to enable the Group to take advantage of opportunities that arise.

OUR CORPORATE GOVERNANCE AIM IS ACHIEVED BY:

Improved corporate performance arising from sound corporate governance has manifested itself in a number of ways in the Group over an extended period, including:

• Diversity and independence of opinion in board decision making with the aim of ensuring sound outcomes
• Improved operational decision making that takes into account the breadth of the perspectives expressed
• Maintenance of discipline and integrity in management's reporting to the board
• Enhanced levels of accountability and transparency by management to the board
• Meaningful risk management processes and controls that are practically embedded in day-to-day operations and decision making
• Better and more comprehensive integrated reporting of both financial and non-financial aspects to stakeholders
• High levels of assurance regarding the reporting by management to shareholders
• Achievement of an appropriate balance in meeting the expectations of the different stakeholders of the Group

It is the view of the board that, in a demanding operating environment, the sound governance framework has served to mitigate against the erosion of value and has, in fact, preserved and created value for the business and its stakeholders in the form of lower risk, ongoing sustainability and resilience, reasonable consistency of financial performance, sound stakeholder relationships, high levels of legislative compliance and reputational integrity.

In addition to its responsibility for maintaining a sound corporate governance framework, the board is ultimately responsible for the Group's environmental and social practices, and accordingly has oversight responsibility for the environmental, social and governance (ESG) strategy and performance. The board has delegated its responsibility for monitoring the Group's ESG performance, particularly in relation to environmental and social matters, to the Social and Ethics Committee. Several of the directors have experience in managing sustainability issues and risks or have undergone relevant training (refer to table of board of directors' expertise). Details of the Social and Ethics Committee's activities during the year and how it assisted the board to monitor the Group's ESG performance is contained in the Social and Ethics Committee Report 2024 available on the website www.truworths.co.za/reports.

INNOVATION

The board promotes and enables innovation and complete alignment with the Business Philosophy in a number of ways, including:

• Ensuring that strategic projects carried out by management emphasise innovation and creativity in areas such as the development of merchandise ranges, the design of information systems, the adoption and use of artificial intelligence (AI) and machine learning, the strategies used to enhance the customer account offering, the design of stores and the expansion of e-commerce.
• Linking management's short and long-term rewards and incentives to its performance in delivering measurable outcomes that encompass innovation in relation to such strategic projects.
• Receiving presentations by management at board meetings on strategic projects and other business initiatives and critically assessing the extent of innovation evident in the progress and the benefits of such projects and initiatives.
• Delegating the responsibility for monitoring progress on strategic and other projects to the Chief Executive Officer (CEO) who, at project report-back days held quarterly, stimulates innovation and creativity by challenging management to consider new concepts, designs, systems and processes when proposing solutions to business issues.
• Communicating and emphasising to management the importance of practically applying in everyday operations the Group's Business Philosophy, at the heart of which lies innovation.

BOARD DELIBERATIONS

OFFICE

A material matter considered and discussed by the board during prior reporting periods related to the performance of Office, and the interventions planned by executive management to address the issues that had contributed to its disappointing levels of revenue and profitability in the past. In the reporting period, the board monitored the further successful implementation of these plans and was pleased to note a further material improvement in both its operational and financial performance. The matters monitored included:

• Increased operational alignment with Truworths
• The effect of having repaid Office's borrowings and availability of cash resources to deploy within the business
• Further rationalising the store portfolio by reviewing leases and closing underperforming stores
• Capitalising on opportunities to grow Office's retail footprint through the opening of new stores in strategically important locations as well as the reconfiguration of existing trading space
• Office's operational and capital expenditure and cash flow management to ensure alignment with the medium-term strategic direction
• The fair value assessment of the Office trademarks and considerations regarding the reversal of previously recognised impairment losses
• Aligning merchandise buying and planning processes with Truworths' best practices
• Aligning marketing and communication strategies, and strengthening relationships with international footwear brands
• The performance of the executive management team

The board was most satisfied with the implementation of these action plans and will continue to assess their effectiveness on an ongoing basis with a view to maintaining the business on a positive growth trajectory.

NON-EXECUTIVE DIRECTOR SUCCESSION

A further significant matter considered by the board is succession planning for long-serving non-executive directors. The board had embarked in recent years on a process of refreshing the non-executive component of the board in a systematic manner that will enable the Group to have continuity in terms of the important and ongoing contribution from long-standing directors, while newly appointed non-executive directors grow their knowledge of the Group and begin to influence board deliberations in a substantive manner. The board's succession process will look to increase skills and expertise in key areas such as 'Human resources and transformation' and 'Sustainability matters'.

Over the past six years, eight new non-executive directors have been appointed to the board as part of this succession strategy. It is envisaged that, as they have been and are to be promoted to committee membership, long-serving non-executives will be retiring from the board.

Daphne Motsepe and Wayne Muller were appointed as additional independent non-executive directors of the company with effect from 1 August 2023. Wayne was also appointed as a member of the Remuneration and Nomination committees with effect from 1 September 2023.

Maya Makanjee, an independent non-executive director since 2018, retired at the AGM on 9 November 2023.

With effect from 1 September 2023, Hans Hawinkels was appointed lead independent director.

CEO AND SENIOR EXECUTIVE SUCCESSION

The succession for the CEO and senior executives remains an important consideration for the board.

The appointment of Sarah Proudfoot and Emanuel (Mannie) Cristaudo as the Group's Joint Deputy Chief Executive Officers took effect from 1 October 2022. The board remains confident that Sarah and Mannie, together with the seven directors and 10 divisional directors of Truworths, and one director and four divisional directors of Office, are the right team to transition the Group in future years by retaining the strength of the Group's unique DNA while at the same time being able to continue to move the businesses forward.

Michael Mark retains the position of Group CEO and chairman of the material subsidiary companies. The appointments of the Group Joint Deputy CEOs confirm the board's firm belief in their competence and leadership, and that of the directors and divisional directors who report to them.