INTRODUCTION

The AECI Group and its directors are committed to the principles of good corporate governance and to applying the highest ethical standards in conducting business. The Board is committed to the principles of openness, integrity and accountability and supports the principles contained in the Code of Corporate Practices and Conduct set out in the King II report on Corporate Governance ("King II"). The Board is taking steps to ensure that the Group will be compliant with the third King Report on Corporate Governance for South Africa, 2009 ("King III").

The Board considers that, throughout the accounting period as well as at the date of this report, the Company has been in compliance with the principles contained in King II. AECI has further reviewed the rules and regulations of the Listings Requirements of the JSE Limited ("JSE") and is satisfied that it complied in all material respects with these regulations.

To the best of the Board's knowledge, the Company is also in compliance with the provisions of the Companies Act, No. 61 of 1973, as amended ("the Act").

In subscribing to the principles of King II, business process and governance practice have been refined over the years in response to developing trends in local and international best practice. The Company believes that a corporate culture of compliance with all applicable laws and procedures is a core competence of good corporate governance and that this culture of good governance serves to maximise sustainable returns and to provide all stakeholders with the assurance that the Group's businesses are being managed appropriately.

The Board strives continually to find the correct balance between encouraging entrepreneurial flair and accountability, and providing strategic leadership through the maintenance of strong governance.

The Board is satisfied that, in the 2009 financial year, its decision-making capability and the accuracy of the Company's reporting and financial results were maintained at a high level at all times with reliance being placed on the internal and external auditors and the Audit and Risk Committee to raise any issues of financial- and risk-related concerns.

The Company strives constantly to develop and improve existing corporate governance structures and practices to ensure continued compliance with the recommendations of King II and other good governance practices.

The Board's governance policies and procedures are updated regularly to ensure ongoing adherence to the Listings Requirements of the JSE, King II and current legislation.

AECI will evaluate areas where governance at a corporate and subsidiary company level can be strengthened. The implications of the proposed new Companies Act, No. 71 of 2008, in South Africa, as well as King III will also be analysed and appropriate steps taken to ensure compliance.