THE BOARD

COMPOSITION

The Company adopts the philosophy that the Board needs to be large enough to accommodate the necessary skills, but still small enough to promote cohesion, flexibility and effective participation. Currently, AECI's Board consists of nine directors, five of whom are independent non-executive directors, one is a non-executive director and three are executive directors, as follows:

Independent non-executive directors

1. F Titi (chairman)
2. RMW Dunne
3. Z Fuphe
4. MJ Leeming
5. LM Nyhonyha

Non-executive director

1. S Engelbrecht

Executive directors

1. GN Edwards (chief executive)
2. FPP Baker (retiring on 31 March 2010)
3. KM Kathan (financial director and chief financial officer)

Mr AC Parker resigned as an independent non-executive director with effect from 31 December 2009.

The guidelines contained in the Listings Requirements of the JSE were used to determine the category most applicable to each director, whether independent non-executive, non-executive or executive.

The position of chairman is held by an independent non-executive director.

SKILLS AND EXPERIENCE OF THE BOARD

The Board comprises persons with experience in diverse industries including banking, chemical, accounting and business. The Board is of the opinion that having directors with relevant business and industry experience is beneficial to the Board as a whole, since directors with such backgrounds can provide a useful perspective on significant risks and competitive advantages as well as an understanding of the challenges facing the business.

The Board monitors the mix of skills and experience of directors to assess whether the Board has the necessary tools to perform its oversight function effectively. The Board further reviews the skills, knowledge, gender and diversity at Board level going forward to ensure that it is appropriate and effective and takes into account succession plans for non-executive and executive directors.

The expectation of the Board is that, at a minimum, directors should possess the requisite knowledge and expertise to fulfil an appropriate role within the mix of capabilities the Board deems appropriate, and to exercise diligence. This includes attending Board and committee meetings and coming prepared to provide thoughtful input at such meetings. Directors need to devote an appropriate amount of time and attention to their duties and develop the broad-based as well as the specific knowledge required to fulfil their obligations in this regard.

Directors are expected to:

• prepare for and attend all Board and committee meetings, unless there are exceptional circumstances preventing them from doing so;
• actively participate in meetings;
• attend shareholders' meetings;
• develop and maintain a high level of knowledge about the Company's business;
• keep current in the directors' own specific fields of expertise; and
• develop a broad understanding of their role and responsibilities as directors.

OTHER DIRECTORSHIPS

Directors are expected to ensure that they have sufficient time available to properly carry out their duties and responsibilities as directors of the Company. Non-executive directors, in particular, are required to carefully assess and guard against potential conflicts of interest and entanglements such as service on an excessive number of boards.

MEETINGS AND ATTENDANCE

It is regarded as critical that directors have sufficient information to enable them to make informed decisions and, therefore, the Board continually reviews the information requirements of directors to enable them to fulfil their duties and responsibilities effectively.

Directors are informed timeously of matters that will be discussed at Board meetings and are provided with information relating thereto about a week prior to scheduled meetings. Board meetings are structured to encourage participation and dialogue and to ensure effective decision making. Submissions relevant to the agendas of Board and committee meetings are sent to directors and members of the committees about a week in advance of meetings. All submissions and matters discussed at meetings are strictly confidential.

The annual strategy session is usually held in May of each year and is designed to facilitate the review of the Company's medium- and long-term strategic plans and priorities.

The Board meets at least quarterly and on other occasions when necessary. There were five Board meetings during the financial year. Attendance by directors at Board meetings is set out in this section of this annual report.

APPOINTMENTS TO THE BOARD

A balance of skills and experience, gender and demographic representation is taken into account in determining an effective composition of the Board. Board appointments are done in accordance with a formal appointment policy, which includes proper screening of candidates, formal interviews and the completion of a "fit and proper" test by successful applicants.

RETIREMENT AND RE-ELECTION OF DIRECTORS

The Company's articles of association require a minimum of six and a maximum of 12 directors, the majority of whom should be independent. Between annual general meetings, the Board may appoint a director/s to fill casual vacancies or as an additional director by majority vote to serve until the next annual general meeting.

One third of the directors are subject, by rotation, to retirement and re-election at the annual general meeting in terms of the Company's articles of association. The names of directors submitted for re-election are accompanied by brief biographical details (in this section of this annual report) to enable shareholders to make an informed decision in respect of their election. Directors who will present themselves for re-election at the forthcoming annual general meeting are:

• Z Fuphe
• MJ Leeming
• F Titi

TERMS OF EMPLOYMENT OF DIRECTORS

Executive directors are employees of the Company and have standard terms and conditions of employment and do not receive any special remuneration or other benefits for their additional duties as executive directors. None of the executive directors have extended employment contracts or special termination benefits, and there is no restraint of trade in place. The Board, on the recommendation of the Remuneration Committee, determines the remuneration of executive directors and other senior executive managers. No non-executive director has an employment contract with the Company.

BOARD ASSESSMENT AND EVALUATION OF DIRECTORS

In terms of the Board charter, directors must be assessed individually as well as collectively as a Board. The collective assessment of the Board must evaluate the Board's contribution as a whole and, specifically, must review areas in which the functions of the Board could be improved.

The chairman conducted one-on-one interviews with each Board member to obtain their views on the effectiveness of the Board as a whole and on the strategy and structure of the Company. There were also meetings attended by the non-executive directors only. The opinions of the members on the role and functioning of the Board were sent to the chief executive by the chairman.

The Remuneration Committee, in consultation with the chairman of the Board, evaluates the chief executive on a regular basis. The evaluation is based on objective criteria, including business performance, achievement of long-term strategic objectives, development of management, and other such issues. The Remuneration Committee must provide an evaluation report for deliberation by the full Board.

The Board must evaluate the performance of the chairman of the Board on an annual basis. Every second or third year, as required, an independent third party undertakes a performance review of the Board in terms of the following:

• the quality and overall effectiveness of Board meetings;
• the information available to Board members to support decision making;
• the Board's role in the formulation of and commitment to business strategy;
• the Board's evaluation of the chief executive and the planning for succession;
• an evaluation of the Board's structure in terms of its executive and non-executive components; and
• the suitability of the Board's composition and sub-committees.

ROLES AND RESPONSIBILITIES

The Board operates under an approved Board charter which regulates the way business is conducted. The Board charter provides a clear division of responsibilities and sets out the accountability of Board members, collectively and individually, to ensure an appropriate balance of power and authority.

In terms of the Board charter, the primary responsibilities of the Board include the following:

• to provide strategic direction to the Company;
• to determine the Company's purpose, values and stakeholders relevant to its business and to develop strategies combining all three elements;
• to ensure that procedures are in place to monitor and evaluate the implementation of strategies, policies, senior management performance criteria and business plans;
• to review and approve the financial objectives, plans and actions, including significant capital allocations and expenditure;
• to define its mission as representing the interests of the Company and its shareholders in perpetuating a successful business that adheres to the vision and values of the Company and creates long-term value for shareholders;
• to be accountable and responsible to shareholders for the performance and affairs of the Company;
• to determine the Company's objectives, values and stakeholders relevant to its business and give strategic direction to management;
• to appoint the chief executive and ensure that succession is planned;
• to ensure that the Company complies with all relevant laws and regulations and that it communicates with its shareholders and other stakeholders openly with substance prevailing over form;
• to assess at least annually the key risk areas of the business and determine the policies and processes necessary to ensure the integrity of internal controls and risk management in the Company;
• to develop the framework, policies and guidelines for safety, health and environmental management and other aspects of corporate citizenship, and monitor key indicators of performance in this field;
• to define levels of materiality, reserving specific powers to itself and delegating other matters with written authority to management; and
• to establish and set the terms of reference for sub-committees of the Board.

MATTERS RESERVED FOR BOARD DECISION

The following matters are reserved for decision by the Board, on the basis of any recommendation as may be made from time to time by the Executive Committee or other committees:

• approval of the Company's strategy and monitoring the implementation thereof;
• adoption of any significant change to or departure from accounting policies;
• changes to the Board and its committees;
• exercise of borrowing powers;
• approval of the declaration of distributions to shareholders;
• the approval of budgets on an annual basis;
• capital funding: terms and conditions of rights issues, capital issues or issues of convertible stock including shares or stock issued for acquisitions;
• community investment: approval of annual budgets and special/extraordinary single contributions in excess of R5 million;
• approval of employee share incentive/option schemes, rules and amendments to rules recommended by the Remuneration Committee;
• formulation or approval of recommended policies relating to employment equity;
• investments, fixed assets and capital projects: commitments, acquisitions or disposals in excess of limits specified by the Board from time to time;
• litigation: prosecution, defence or settlement of, where material and except in the ordinary course of business;
• pension and provident funds: approval of rules and amendments thereto having a material effect on the actuarial liabilities of the funds, where applicable; and
• prioritisation of resources: prioritising the allocation of capital and technical and human resources.

BOARD RELATIONSHIP TO STAFF AND EXTERNAL ADVISORS

To the extent that they may require such access to make informed decisions, Board members have unrestricted access to the Company's records, information, documents and property. In addition, Board members have unrestricted access to consult senior management on any aspect of the Company's operations. Finally, Board members may collectively or individually, at the expense of the Company, consult external professional advisors on any matter of concern to the Company after having advised the chief executive or chairman.

INDUCTION AND TRAINING

For the Board to function effectively, the resources necessary for developing and refreshing the knowledge and skills of non-executive directors must be provided. To this end, all non-executive directors have an open invitation to visit the operations of the Company and to meet with management. The objective is to ensure that non-executive directors are able to obtain as full a picture of the Company's operations as possible, in order to make informed decisions and hence enhance the effectiveness of the Board.

Although the Company does not have a formal procedure for the induction and training of directors to ensure that they are aware of their statutory duties, obligations and potential liabilities, the Company secretary has compiled directors' manuals, which are updated on a regular basis.

The Company secretary further provides directors with updates on regulations and statutory matters at each Board meeting.

DELEGATION OF AUTHORITIES

The Board has approved the delegation of authorities to the Board sub-committees and to the Executive Committee, where appropriate.