Corporate Governance

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. Some years ago, the Board subscribed to the Code of Corporate Practices and Conduct as contained in the King Report on Corporate Governance of November 1994 ("King I"). The Board considers that the Company complies with all provisions of that Code. The Group further endorses the principles of openness, integrity and accountability advocated by the Code of Corporate Practices and Conduct set out in the King II Report on Corporate Governance ("King II"). The Board considers that, as at the date of this report, the Company is also in compliance with the principles contained in the amended Code.

As far back as 1987, during a formal review of Group purpose and values, one of the Group's commitments was "honesty and integrity in all our activities". In addition to subscribing to the principles of King I and 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

The Board charter

The AECI Board operates under an approved charter which regulates the way business is conducted by the Board. The charter is modeled on the principles recommended by King II, incorporates the powers of the Board, 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 charter, the Board:

• defines its mission as representing the interests of shareholders in perpetuating a successful business that adheres to the vision and values of the Company and creates long-term value for shareholders;
• is accountable and responsible to shareholders for the performance and affairs of the Company;
• determines the Company's objectives, values and stakeholders relevant to its business and gives strategic direction to management;
• maintains full and effective control of the Company by ensuring that appropriate processes and procedures are in place to monitor and evaluate the implementation by management of its strategies, policies, performance criteria and business plans. To this end the Board undertakes a formal annual review of the Company's strategy and that of its component businesses, and similarly of the budgets proposed by management at the start of each financial year;
• appoints the chief executive and ensures that succession is planned;
• ensures that the Company complies with all relevant laws, regulations and codes of best business practice and that it communicates with its shareholders and other relevant stakeholders openly with substance prevailing over form;
• assesses at least annually the key risk areas of the business and determines the policies and processes necessary to ensure the integrity of internal controls and risk management in the Company;
• develops the framework, policies and guidelines for safety, health and environmental management and other aspects of corporate citizenship, and monitors key indicators of performance in this field;
• defines levels of materiality, reserving specific powers to itself and delegating other matters with written authority to management; and
• establishes and sets the terms of reference for sub-committees of the Board.

Board of directors

In terms of the Company's articles of association, at least half of all directors must at all times be non-executive directors. At 25 February 2008, the Board comprised four executive and seven non-executive directors, six of whom are independent.

Board members are required, on an annual basis, to perform an "independence test" based on the guidelines provided in the listing requirements of the JSE Limited ("JSE").

The role and person of the non-executive chairman is separate from that of the chief executive. The Board meets quarterly and on other occasions when necessary. Directors are appointed or removed by the Board or by the Company's shareholders in general meeting, in each case in accordance with the articles of association. The appointment of new directors by the Board is subject to confirmation by shareholders in general meeting and all directors are subject to retirement by rotation and re-election by shareholders at least once every three years. A balance of skills, 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 candidates.

Board assessment and evaluation of directors

In terms of the Board charter directors must be assessed both individually and 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 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 also evaluate the performance of the chairman of the Board on an annual basis. Given that a new chairman was elected and appointed in May 2007, an evaluation of the performance of the chairman did not take place in the financial year under review.

The Board must evaluate the performance and effectiveness of the Board committees on an annual basis to determine areas in which the functioning of the committees requires improvement. In this regard, the audit and risk committee performed a self-evaluation test during its last meeting of 2007. Similar exercises will be done at the other committees during 2008.

In addition, on a regular basis 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;
• 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.

The last independent performance review was carried out in 2006.

The Board met four times in 2007. Attendance at meetings was as follows:

	19 February	21 May	23 July	26 November
NC Axelson (Retired 31 July)
FPP Baker
CB Brayshaw (Retired 21 May)
RMW Dunne
GN Edwards
S Engelbrecht
Z Fuphe (Appointed 1 November)
MJ Leeming
LM Nyhonyha
AC Parker (Appointed 21 May)
AE Pedder CBE (Retired 21 May)
F Titi
LC van Vught
RA Williams (Appointed 1 August)
indicates attendance.

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 operation. 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.