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JCI Limited

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Directors Respond to Additional Section 181 Queries

 
3 April 2007-

RANDGOLD’S ANSWERS TO THE FURTHER QUESTIONS RAISED BY DAVID PALMER FOLLOWING UPON THE MEETING HELD ON THE 9TH OF MARCH 2007 AT 09H00 IN THE AUDITORIUM AT 28 HARRISON STREET JOHANNESBURG, WHICH QUESTIONS WERE INVITED FROM SHAREHOLDERS BY THE CHAIRMAN, MR DAVID NUREK.

A successful investor in his own right, Izan de Bruin’s achievements can be attributed to the ideal mix of entrepreneurial endeavour, consummate expertise in the stockmarket and a relentless pursuit of passion for education in the financial arena.

His independent asset management company, Xenium Financial Managers has consistently produced excellent returns for its clients. His stockbroking training company is responsible for the successful careers of over 50 black investment professionals. His financial intelligence courses, some conducted in partnership with the JSE and FASET, have altered the lives of many South Africans.

His entrepreneurial spirit has lead to the successful creation of various successful companies in both the financial, agriculture and services industries.

Over the years he has contributed to financial columns in media like Classic fm, RSG, The Star, Sunday Times and many others.

General

At the meeting of Shareholders which took place on Friday 9 March 2007 in accordance with the provisions of Section 181 of the Companies Act No 61 of 1973, as amended, Randgold informed its Shareholders that should they wish to raise further questions, arising from the answers furnished in response to those asked by the Requisitionists, they were invited to do so by 17h00 on Friday 9 March 2007.

In response to this invitation, Mr Palmer addressed a letter to Randgold by the prescribed time, requesting answers to further questions addressed by him.

The matters raised by Mr Palmer together with Randgold’s responses thereto are set out below.

In considering the responses furnished by Randgold, Shareholders are asked to bear in mind that where Randgold fails to respond to any allegation and/or conclusion reached by Mr Palmer it is not to be taken as having admitted such allegation(s) and/or conclusion(s).

Shareholders are further asked to bear in mind that following upon the Section 181 component of the business transacted at the meeting of 9 March 2007, Shareholders were asked in terms of Section 179(4) of the Companies Act to vote in respect of the Directors of Randgold. Such voting did take place in consequence of which Messrs Nurek, Gray, Nissen, Steyn and Ms. Madumise were re-elected as Directors of Randgold. The criticisms leveled against certain of these Directors in terms of the Section 181 Questions, and the questions contained in Mr Palmer’s letter were well known to the Shareholders at the time of their vote.

  1. Matter raised for response

    Further to today’s meeting for the abovementioned Company, in terms of South African law, I understand the position for stolen shares to be as follows. If shares have been stolen then sold in the market through a broker/bank these shares have to be returned and the loss had to be taken by the JSE/bank. In view of the above, please communicate to me as to through whom all Randgold Resources shares were sold and kindly confirm that the Directors are taking the necessary legal action.

  2. Response

    Randgold is of the view that the summary and legal conclusions reached by Mr. Palmer are neither a correct or complete statement of the position under South African Law. Randgold assures Shareholders that all steps will be taken to ensure that the persons who wronged it, are held accountable for their actions.

  3. Matter raised for response

    A further point in respect of the Loan Agreement is that security should have been obtained in respect of the loan, was this done? If no security has been obtained, this is not a Loan Agreement but perhaps theft. It is the fiduciary duty of the Directors to ensure that all appropriate action and actions are taken against any financial institution that could have been involved in the above. Has action been taken in this regard? Failure to take the necessary action against the Parties concerned would be a breach of fiduciary duty. Are the Directors aware of this?

    Response

    Randgold considers the conclusions reached by Mr. Palmer to be inaccurate and moreover disagrees with the standpoint that the failure to obtain security constitutes theft. Shareholders are again advised that Randgold is pursuing all possible avenues against those who have wronged Randgold.

  4. Matter raised for response

    It is my opinion that there was a total lack of information forthcoming from the Chairman of the meeting to Shareholders at a duly constituted and legal meeting under section 181. I find it appalling that Shareholders have waited close to two years to be refused any meaningful information. I recommend that your board call a meeting to provide the necessary information to correct your error in judgment today. Is this not another breach of fiduciary duty?

    Response

    Your perception is not shared. All information other than that which related to confidential matters and price sensitive information were in the view of Randgold properly and adequately addressed. It is to be stressed, that Shareholders are not entitled under the guise of a Section 181 Requisition to insist upon the disclosure of matters which are confidential and of a price sensitive nature and which have the consequence of inhibiting the Company from properly conducting its affairs in the future.

  5. Matter raised for response

    Please confirm in writing to me that I will obtain a verbatim transcript of the meeting today including the comments made by Shareholders. Is this not a right of a shareholder? It is quite clear that a recording was taking place at the venue.

    Response

    A copy of the transcript has already been made available to Mr Palmer. Should any other Shareholders wish to inspect the transcript they are invited to make arrangements with Randgold’s Company Secretary, Roger Pearcey who may be contacted on (011) 688 5100.

  6. Matter raised for response

    At the meeting the Chairman stated that Allan Gray had received absolutely no confidential information from the Directors additional to what other Shareholders have received and was in the exact same position that other Shareholders are in. In view of the above, could you confirm this in writing and also that there is no confidentiality agreement between Randgold and Allan Gray? Could this writing please be in an affidavit format?

    Response

    At the meeting held on the 9th of March 2007 the Chairman indicated that to the best of his knowledge no other shareholder had obtained any additional information. Mr Nurek understood the question to have been raised in the context of the Section 181 Requisition only. Shareholders are referred to the joint announcement published by Randgold and JCI on 15 March 2007, wherein reference is made to the discussions held with Randgold’s major Shareholders and the information furnished to such Shareholders.

  7. Matter raised for response

    To me there is a conflict of interest amongst the Directors and in respect of this matter we reserve our rights to act against the Directors in their personal capacities. Could you ensure that this is placed before the Directors at the next board meeting? Please confirm when this has been done. The Company and or any insurance Company should not be held liable for the actions of the Directors. Can you confirm the insurance companies have been informed accordingly?

    Response

    The Company notes the reservation by Mr. Palmer of the right to act against Directors of the Company. Shareholders are referred to the provisions of Article 136 and 137 of its Articles of Association which indemnifies Directors where they have acted in good faith. In addition, Shareholders are advised that the Company enjoys insurance for the acts of its Directors and Officers however does not share the view of Mr Palmer that the Directors are conflicted. Randgold denies that Mr Palmer has suffered any loss of any nature in regard to the actions of the Directors. In addition, Shareholders are reminded that in spite of the allegations of conflict and other matters raised in the Section 181 requisition, a democratic vote of the Shareholders took place subsequent to the Section 181 meeting the effect of which was to re-elect the Board. Randgold’s insurers have nevertheless been fully informed of the stance adopted by Mr Palmer.

  8. Matter raised for response

    I noted with interest the Chairman’s comments regarding the delay and inability of the Company in producing audited financial statements. While we accept that the resignation of the previous financial Director may have impacted that, I assume that significant fees are being paid to KPMG for the completion of the forensic audit which one would have thought would have given us an accurate view of the current financial state of the Company. How does the mediation process have anything to do with the delay as surely this is for the future, and has no relevance in reporting the past? Is this not just additional evidence of a cover up? When can we expect to have financial statements for the years up to and including the financial year 2006? Please assure us that no attempt will be made to settle mediation process until the Shareholders have been presented with final financial statements.

    Response

    Shareholders are reminded of the reasons advanced by Randgold as to why audited financial statements have not to date been finalised. Those reasons are still valid. In addition, Shareholders are reminded that the Company is doing everything within its power to finalise audited financial statements as soon as practicably possible. The finalisation of financial statements is dependant upon a Resolution of the disputes between Randgold and JCI. The Company notes the request for an assurance that no attempt will be made to settle the mediation process until the financial statements have been prepared, but it does not agree that the process should be suspended pending the finalisation thereof.

  9. Matter raised for response

    I believe the last set of accounts produced by the auditing Company Price Waterhouse were inaccurate. Has any legal action been taken against said auditors? What happened to the forensic report prepared by Umbono, and why were KPMG called in?

    Response

    Shareholders are referred to the response furnished by Randgold in answer to similar questions raised by the Requisitionists in the Section 181 Requisition. Randgold re-iterates that actions against a variety of persons are in the process of being formulated and certain of these actions are underway. It would be inappropriate to comment further at this stage, however Shareholders will be advised as and when further developments unfold. Randgold wishes to point out that whilst Umbono was appointed as forensic auditors, the services of KPMG have been retained as Randgold’s auditors, they having replaced Charles Orbach and Company. Umbono and KPMG have been appointed in respect of different roles, Umbono not rendering the services of auditors. Shareholders are also advised that the division of KPMG which undertook the forensic investigation of JCI is a completely distinct division of KPMG having no affiliation with the division which has been appointed by the Company as its statutory auditors.

  10. Matter raised for response

    The Directors must surely be aware that claims may prescribe. Will all the necessary summonses be issued against all parties to ensure that nothing prescribes?

    Response

    The Company is in the process of taking such steps as are necessary and will remain mindful of prescription.

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