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Governance progress in 2011

COMPLIANCE MANAGEMENT

In 2011 the Company established a compliance function apart from its Legal Department with the specific aim of formalising and integrating the Group’s compliance processes. The objective is to establish a system to facilitate the effectiveness and efficiency of Group operations and assist with general compliance with the regulatory universe in an integrated manner. Work is ongoing in this regard and is aimed at ensuring that AECI is not adversely exposed to legal and compliance risks.

Further progress towards achieving compliance with many of the principles of King III was made and a compliance framework was designed and distributed to the Board for guidance and monitoring.

KING III INDEX as at end 2011

PRINCIPLES	APPLY	PARTIALLY APPLY	UNDER REVIEW/DO NOT APPLY
1. Ethical leadership and corporate citizenship
The Board should provide effective leadership based on an ethical foundation	x
The Board should ensure that the Company is and is seen to be a responsible corporate citizen	x
The Board should ensure that the Company’s ethics are managed effectively	x
Assurance statement on ethics in Integrated Report	x
2. Boards and Directors
The Board should act as the focal point for and custodian of corporate governance	x
The Board should appreciate that strategy, risk performance and sustainability are inseparable	x
Directors act in the best interests of the Company	x
The Chairman of the Board is an Independent Non-Executive Director	x
The Board should provide effective leadership based on an ethical foundation	x
The Board should ensure that the Company is and is seen to be a responsible corporate citizen	x
The Board should ensure that the Company’s ethics are managed effectively	x
The Board should ensure that the Company has an effective and independent Audit Committee	x
The Board should be responsible for the governance of risk
The Board should be responsible for Information Technology (“IT”) governance		x
The Board should ensure that the Company complies with applicable laws and considers adherence to non-binding rules, codes and standards	x
The Board should ensure that there is an effective, risk-based Internal Audit	x
The Board should appreciate that stakeholders’ perceptions affect the Company's reputation	x
The Board should ensure the integrity of the Company’s Integrated Report	x
The Board should report on the effectiveness of the Company’s system of internal control	x
The Board and its Directors should act in the best interests of the Company	x
The Board should consider business rescue proceedings or other turnaround mechanisms as soon as the Company is financially distressed, as defined in the Act	x
The Board should elect a Chairman of the Board who is an Independent Non-Executive Director. The Chief Executive of the Company should not also fulfill the role of Chairman of the Board	x
The Board should appoint the Chief Executive and establish a framework for the delegation of authority	x
The Board should comprise a balance of power, with a majority of Non-Executive Directors. The majority of Non-Executive Directors should be Independent	x
Directors should be appointed through a formal process	x
The induction and ongoing training and development of Directors should be conducted through formal processes	x
The Board should be assisted by a competent, suitably qualified and experienced Company Secretary	x
The evaluation of the Board, its Committees and individual Directors should be performed every year	x
The Board should delegate certain functions to well-structured Committees but without abdicating its own responsibilities	x
A governance framework should be agreed between the Group and its subsidiary Boards		x
Companies should remunerate Directors and Executives fairly and responsibly	x
Companies should disclose the remuneration of each individual Director and certain Senior Executives	x
Shareholders should approve the Company’s remuneration policy	x
3. Audit Committee
The Board should ensure that the Company has an effective and independent Audit Committee	x
Audit Committee members should be suitably skilled and experienced Independent Non-Executive Directors	x
The Audit Committee should be chaired by an Independent Non-Executive Director	x
The Audit Committee should oversee integrated reporting	x
The Audit Committee should ensure that a combined assurance model is applied to provide a coordinated approach to all assurance activities	x
The Audit Committee should satisfy itself of the expertise, resources and experience of the Company’s finance function	x
The Audit Committee should be responsible for overseeing Internal Audit	x
The Audit Committee should be an integral component of the risk management process	x
The Audit Committee is responsible for recommending the appointment of the external auditor and overseeing the external audit process	x
The Audit Committee should report to the Board and stakeholders on how it has discharged its duties
4. The governance of risk
The Board should be responsible for the governance of risk	x
The Board should determine the levels of risk tolerance	x
The Risk Committee or Audit Committee should assist the Board in carrying out its risk responsibilities	x
The Board should delegate to Management the responsibility to design, implement and monitor the risk management plan	x
The Board should ensure that risk assessments are performed on a continual basis	x
The Board should ensure that frameworks and methodologies are implemented to increase the probability of anticipating unpredictable risks	x
The Board should ensure that Management considers and implements appropriate risk responses	x
The Board should ensure continual risk monitoring by Management	x
The Board should receive assurance regarding the effectiveness of the risk management process	x
The Board should ensure that there are processes in place enabling complete, timely, relevant, accurate and accessible risk disclosure to stakeholders	x
5. The governance of IT
The Board should be responsible for IT governance		x
IT should be aligned with the performance and sustainability objectives of the Company		x
The Board should delegate to Management the responsibility for the implementation of an IT governance framework		x
The Board should monitor and evaluate significant IT investments and expenditure		x
IT should form part of the Company’s risk management		x
The Board should ensure that information assets are managed effectively		x
The Risk Committee and Audit Committee should assist the Board in carrying out its IT responsibilities		x
6. Compliance with laws, rules, codes and standards
The Board should ensure that the Company complies with applicable laws and considers adherence to non-binding rules, codes and standards	x
The Board and each individual Director should have a working understanding of the effect of the applicable laws, rules, codes and standards on the Company and its business	x
Compliance risk should form an integral part of the Company’s risk management process	x
The Board should delegate to Management the implementation of an effective compliance framework and processes	x
7. Internal Audit
The Board should ensure that there is an effective risk-based Internal Audit	x
Internal Audit should follow a risk-based approach to its plan	x
Internal Audit should provide a written assessment of the effectiveness of the Company’s system of internal control and risk management	x
The Audit Committee should be responsible for overseeing Internal Audit	x
Internal Audit should be strategically positioned to achieve its objectives	x
8. Governing stakeholder relations
The Board should appreciate that stakeholders’ perceptions affect a Company’s reputation	x
The Board should delegate to Management the task of dealing with stakeholder relationships proactively	x
The Board should strive to achieve the appropriate balance between its various stakeholder groupings, in the best interests of the Company	x
Companies should ensure the equitable treatment of shareholders	x
Transparent and effective communication with stakeholders is essential for building and maintaining their trust	x
The Board should ensure that disputes are resolved as effectively, efficiently and expeditiously as possible	x
9. Integrated reporting and disclosure
The Board should ensure the integrity of the Company’s Integrated Report	x
Sustainability reporting and disclosure should be integrated with the Company’s financial reporting	x
Sustainability reporting and disclosure should be independently assured	x

With regard to the new Companies Act, the Board endorsed a plan to achieve full compliance with this Act.

With regard to the JSE Listings Requirements, Management reviewed the changes to the rules and regulations and the implications of these were presented to the Board to confirm common understanding.

An impact analysis of the Consumer Protection Act was conducted and business contracts were realigned with this Act where necessary. Training on the provisions of the Act was conducted for relevant staff.

In the area of stakeholder engagement, which is highly valued by the Board, the formalising of stakeholder identification processes will be pursued in 2012. The objective is to enhance the Company’s understanding of the information needs of key stakeholders in order to address these needs in its reporting processes. To ensure transparency, risk information affecting stakeholders will continue to be shared with stakeholders without compromising commercially privileged information.