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Corporate governance

Introduction

As a new-era company, Exxaro understands that diversity, empowerment and development at every level can only be achieved through effective, transparent and accountable leadership.

Exxaro’s leadership, in turn, recognises that good corporate governance practices are vital in maintaining high standards of integrity, professionalism and ethical behaviour. Exxaro’s directors are fully committed to embedding the principles of transparency and accountability in the group’s various business operations, ensuring the creation of value for all stakeholders.

In making good governance a hallmark of Exxaro, the directors are guided by established tenets in creating longterm value for all:

Adhere to sound principles of direction and management
Implement best practices on corporate management
Keenly understand conceptual issues in corporate governance, including a review of recent developments in better understanding corporate governance systems and mechanisms
Clarify the issues pertaining to the board of directors and management
Recognise shareholder/stakeholder rights and responsibilities.

Best-practice corporate governance structures ensure a dynamic cycle of improvement where every individual is guided by a common set of values as we expand our quality portfolio of assets. At Exxaro, our values guide the waythe organisation is managed and controlled.

In compliance with the mining charter, Exxaro is currently one of the largest black-owned and managed
resources companies listed on the JSE, comfortably exceeding charter requirements with a 56% black economic empowerment (BEE) shareholding.

Compliance with King II
The Exxaro board, its committees and management believe compliance is key in maintaining the group’s values.
The group supports the provisions and principles of corporate governance as defined by the King II report and the Listing Requirements of the JSE. In the review period, the group complied in all material respects with the Code of Corporate Practices and Conduct published in King II and the Listing Requirements of the JSE.

To ensure that excellent corporate governance practices are entrenched in the Exxaro group, all entities are
obliged to subscribe to the spirit and principles of King II. While the Exxaro board takes overall responsibility
for compliance with King II, the directors of subsidiaries are required to continuously monitor compliance with these principles within their legal entities.

Ethics

In line with Exxaro’s value of honest responsibility, compliance with the group’s code of ethics is monitored by
an executive general manager, the group risk manager and the company secretary, and awareness of ethical
behaviour is encouraged throughout the group by communicating regularly with employees.

During the year, all business units were assessed for risks related to corruption. Training in anti-corruption
policies and procedures is integrated into the Exxaro induction programme for new employees and during annual competence update training for existing staff.

Formal disciplinary measures are in place to deal with any identified incidents of corruption. In addition to Exxaro’s other compliance and enforcement activities, a reporting hotline (“whistle-blowing”) has been established through which all stakeholders can report suspected corruption, other reportable irregularities, or contraventions of group values with guaranteed anonymity.

Hotline: 0800 20 35 79
Hotmail: Exxaro@tip-offs.com

Numerous alleged irregularities were reported on the hotline with one case of corruption resulting in criminal
prosecution.

Exxaro regularly participates in industry initiatives focused on developing equitable public policies for the mining sector. However, the group does not directly or indirectly support political parties, individual politicians and related institutions through financial or in-kind contributions.

Board of directors

Functions
The board is the focal point of Exxaro’s corporate governance system and remains ultimately accountable and responsible for the company’s performance and affairs. The board charter clearly sets out the purpose and composition of the board, responsibilities of board members, requirements for board meetings and remuneration of directors. The charter was reviewed during the year to assess compliance with the current regulatory framework and changes made where necessary.

The primary responsibility of the board is to determine the company’s purpose and values and provide
strategic direction. It is also responsible for identifying key risk areas and performance indicators, monitoring performance against agreed objectives, advising on financial matters and reviewing the performance of executive management against defined objectives and industry standards.

Composition
The board collectively contains the skills, experience, demographic diversity and combination of personalities
appropriate to ensure effective leadership and sound governance within the organisation.

As a truly South African company that supports and actively drives transformation in everything we do, we are proud that the majority of our board members are historically disadvantaged South Africans.

Following the retirement of Dr Con Fauconnier and the appointment of Sipho Nkosi as chief executive officer (CEO) on 1 September 2007, the board currently comprises 13 directors:

four independent non-executive directors
three executive directors
six non-executive directors.

In categorising the capacity of each director as executive, non-executive or independent, Exxaro has been guided by the provisions of King II.

Independence
There is a clear distinction in Exxaro between the roles of chairman and CEO to ensure that no-one has unfettered powers of decision-making. Exxaro is in the process of identifying suitable candidates with the objective of appointing an independent chairman. In the year under review, an acting chairman was appointed to ensure continuity in the board’s activities. The acting chairman of Exxaro’s board is an independent director, responsible for the effective functioning of that body.

The CEO is in charge of the company as a whole and is directly responsible to the board. Among others, he is responsible for ensuring the company achieves its strategic and fi nancial objectives, and for monitoring its day-today operational requirements.

Appointments and succession planning
Within its powers, the entire board selects and appoints directors, including the CEO and executive directors, on the recommendations of the transformation, human resources, remuneration and nomination committee (TREMCO).

TREMCO considers non-executive director succession planning and makes appropriate recommendations to the board.

We have exceeded all key South African legislative requirements for transformation. Best practice corporate governance structures are in place and we will continue to set the standard in developing and training people
— within and beyond the company — to address the critical skills shortage in South Africa.

All appointments are in terms of a formal and transparent process. Candidates are selected against criteria
deemed appropriate for Exxaro, given the nature of the company, the industry in which it operates and its
transformation objectives.

The chairman is appointed for a term not exceeding one year and is nominated from the ranks of independent
non-executive directors.

To ensure efficient staggering of director rotation, directors are subject to retirement and may be nominated for re-election every three years with the proviso that no director will hold offi ce for more than three consecutive periods. The retirement age for non-executive directors is 70 years, effective at the annual general meeting after the date on which they turned 70.

The group is currently engaged in a process to identify a suitable chairman. It is the group’s intention to have a chairman appointed by mid-year 2008.

Accountability
Exxaro’s directors are reputable, skilled and experienced and bring appropriate judgement to bear on the issues at hand. Non-executive directors understand Exxaro’s mission, strategy and business and add specialist expertise to the group.

Exxaro regards open communication with its directors as a priority in ensuring their accountability. Therefore
all material information is disseminated to them between board meetings.

The company secretary is responsible for the duties set out in section 268G of the Companies Act. In terms
of Exxaro policy, directors have free access to the company secretary and to independent professional advisers, whether in legal, technical or accounting areas, at the company’s expense.

Remuneration
TREMCO considers and submits recommendations to the board on fees to be paid to each non-executive director. Any changes to fees are approved by the board and submitted to shareholders at the annual general meeting for approval prior to implementation and payment.

In line with generally accepted governance practices, independent non-executive directors do not have
service contracts and are not members of the group’s pension scheme.

Non-executive directors’ remuneration is summarised below:

	Fees for	Benefits and
	services	allowances¹	Total
Name	R	R	R
PM Baum²	191 657		191 657
JJ Geldenhuys	240 659	3 676	244 335
U Khumalo²	154 562		154 562
Dr D Konar	253 481		253 481
VZ Mntambo	176 201		176 201
RP Mohring²	183 414	5 737	189 151
M Msimang³	23 852		23 852
PKV Ncetezo	176 201	7 383	183 584
NMC Nyembezi-Heita	197 840		197 840
NL Sowazi²	183 414		183 414
D Zihlangu	179 292	9 233	188 525
			1 986 602

1 Includes travel allowances
2 Fees paid to their respective employers and not to individuals
3 Resigned on 28 May 2007

ATTENDANCE

	Appointed
Board meetings	to board	Feb	May	June	Aug	*Oct	Nov
Director
PM Baum	17 Feb 04	•	A	•	•	•	•
Dr CJ Fauconnier	1 June 01	•	•	•	•	n/a	n/a
JJ Geldenhuys	1 June 01	•	•	•	•	•	•
U Khumalo	28 Nov 06	A	•	•	•	A	•
MJ Kilbride	1 June 01	•	A	•	•	•	•
Dr D Konar (acting chairman)	1 June 01	•	•	•	•	•	•
VZ Mntambo	28 Nov 06	•	A	•	•	A	•
RP Mohring	28 Nov 06	•	•	A	•	•	•
PKV Ncetezo	28 Nov 06	•	•	•	•	•	•
SA Nkosi	18 Oct 01	•	•	•	•	A	•
NMC Nyembezi-Heita	28 Nov 06	•	A	•	•	A	•
NL Sowazi	28 Nov 06	•	A	•	•	•	•
DJ van Staden	1 June 01	•	•	•	•	•	•
D Zihlangu	28 Nov 06	•	•	A	•	•	•

*Special
A Apologies • Attended • n/a Retired on 31 August

Board committees

The board has appointed three committees to assist in effectively discharging its responsibilities. All committees fulfil their responsibilities within clearly defined written terms of reference, which deal explicitly with their purpose and function, reporting procedures and written scope of authority.

To ascertain their performance and effectiveness, committees are subject to regular evaluation by the board.

The board believes these committees have effectively discharged their responsibilities for the year and that there was transparency and full disclosure from the committees to the board.

Audit, risk and compliance committee

Composition and meeting procedures
The committee consists of three members and the majority (including the chairman) are independent directors.
Executive directors, the senior audit partner and head of the outsourced internal audit function also attend
meetings and have unrestricted access to the chairman and committee members. Non-executive directors may also attend at the invitation of the committee.

When required, suitably qualified people may be co-opted to render specialist services.

The committee meets at least four times a year.

Role, purpose and principal functions
The committee reviews the principles, policies and practices adopted in preparing the financial statements of the company and its subsidiaries. It also ensures that interim and annual financial statements and any other formal announcements relating to the company’s financial performance comply with the Companies Act, the JSE Listing Requirements and International Financial Reporting Standards.

The committee reviews the work of the group’s external and internal auditors to ensure the adequacy and
effectiveness of Exxaro’s financial, operating, compliance and risk management controls. Exxaro’s policy on non-audit services, which is annually reviewed by the committee, details which services may or may not be provided by Exxaro’s external auditors and covers:

basic accounting assistance
payroll services
tax services
human resources services
information technology services
appraisal or valuation services
legislative and administrative decision-making and corporate governance
internal audit and risk management.

The above policy was complied with in the year under review.

ATTENDANCE

	Appointed
Director	to committee	Feb	May	Aug	Nov
Dr D Konar (chairman)	11 Feb 02	•	•	•	•
RP Mohring	30 May 07	n/a	•	•	•
NL Sowazi	30 May 07	n/a	•	•	•

• Attended n/a Not on committee

Safety, health and environment committee (SHE)

Composition and meeting procedures
The committee consists of five members with an independent chairman. The CEO and chief operating officer
(COO) attend meetings as ex officio members.

General managers of commodity businesses, safety/health/environment, human resources and technology
management attend meetings by invitation. Suitably qualified people may be co-opted onto the committee when necessary to render specialist services.

The committee meets at least three times a year.

Role, purpose and principal functions
The purpose of the committee is to develop the framework, policies and guidelines for health, environmental and safety management group-wide.

The role of the committee is to:

oversee the development of policies and guidelines for safety, health, environmental management
review the policies and performance of the company as a whole on the progressive implementation of SHE policies
encourage independently managed subsidiaries, associates and significant investments to develop their own SHE policies that are consistent with those of the group
receive reports on substantive SHE risks and liabilities
monitor key indicators on accidents and incidents and, where appropriate, ensure this information is
communicated to other companies managed by or associated with the company
consider for adoption substantive national and international regulatory and technical developments
facilitate participation, co-operation and consultation on SHE matters with government, national and
international organisations, supernational authorities, other companies and other SHE associations.

ATTENDANCE

	Appointed
Director	to committee	April	July	Nov
JJ Geldenhuys (chairman)	11 April 02	•	•	•
Dr CJ Fauconnier	11 April 02	•	•	n/a
MJ Kilbride	11 April 02	•	•	•
SA Nkosi	23 May 03	•	•	A
D Zihlangu	18 April 07	•	•	•

• Attended A Apologies n/a Retired on 31 August

TREMCO

During the year, the human resources, remuneration and nomination committee was merged with the transformation committee to form TREMCO. This was done to minimise duplicated responsibilities as
transformation has a strong human element.

Composition and meeting procedures
The committee consists of four members, with the chairman being an independent director. The CEO, chief
financial officer (CFO), executive general manager: human resources, and compensation and benefits advisers may be invited to attend any meeting.

Suitably qualified people may be co-opted onto the committee to render the specialist services required to assist the committee in its deliberations on any particular matter.

The committee meets at least five times a year.

Role, purpose and principal functions
The purpose of the committee is to:

make recommendations on the composition of the board and board committees and to ensure that the board consists of individuals equipped to fulfil the role of director of the company
guide, monitor, review and evaluate the company’s progress on transformation, specifically the three primary pillars of employment equity, community involvement and preferential procurement
ensure the company’s remuneration strategies, packages and schemes are related to achieving business objectives and delivering shareholder value
ensure compliance with statutory and best-practice requirements on labour and industrial relations
management, and that appropriate human resources strategies, policies and practices are in place.

ATTENDANCE

	Appointed
Director	to committee	Feb	May	July	*Nov	Nov
NMC Nyembezi-Heita (Chairman)	9 May 07	n/a	•	•	•	•
PM Baum	16 Mar 04	•	•	•	•	•
VZ Mntambo	9 May 07	n/a	•	•	A	•
PKV Ncetezo	9 May 07	n/a	•	•	•	•

*Special
• Attended A Apologies

Management committees

Executive committee
The executive committee (Exco) is chaired by the CEO and consists of 13 members. It meets formally each month and ad hoc when necessary.

Exco is mandated, empowered and held accountable for implementing the strategies, business plans and policies determined by the Exxaro board. It is also responsible for managing and monitoring the business affairs of the company in line with approved plans and budgets, prioritising the allocation of capital and other resources as approved by the board and establishing best management and operating practices.

Exxaro follows a structured process to ensure it invests in projects aligned with group strategy and which yield the required returns. In this process two forums are engaged: an initial assessment is completed by the strategic co-ordination forum and a comprehensive review is then undertaken by the investment review committee. The offshore review committee assists the board in financially co-ordinating Exxaro’s portfolio of offshore investments and interests.

The strategic co-ordination forum
The forum, chaired by the COO, meets every six weeks and its primary purpose is to ensure that all
new initiatives are aligned with the Exxaro group strategy.

This forum has been mandated to:
• ensure alignment of strategy execution and new developments
• determine strategic priorities and co-ordinate, support and monitor strategic initiatives throughout
the group
• allocate resources and accountabilities for investigations or studies.
Investment review committee
The committee, chaired by the CFO, meets monthly and its primary responsibility is to undertake comprehensive investment reviews and assess the technical feasibility and financial viability of proposed capital projects or investments prior to these requests being presented to the executive committee and Exxaro board for approval.

In fulfilling these objectives, the committee ensures that:
• each project meets the strategic, technical and investment requirements defined by the board
• critical decisions, project parameters and potential risks are adequately addressed and researched prior to recommending the commitment of funds
• each project enhances the portfolio value of Exxaro.

Offshore review committee
The committee meets quarterly, with more frequent meetings convened if required.
The primary responsibilities of this committee include:

financial control and governance of Exxaro’s offshore investments and multi-disciplinary interests
efficient financial structuring
providing for offshore investment funding and expenditure
ensuring that financial reporting, auditing and tax-related issues are properly managed
ensuring that the company’s overseas offices are effectively staffed, managed and used.

Intellectual property committee
Exxaro acknowledges the importance of intellectual property and its proper management. Chaired by the executive general manager: corporate services, an intellectual property committee has been established to ensure that possible innovations are exploited and, if appropriate, patented and properly maintained. Copyright, trademark and possible infringement issues are also addressed by this committee. The committee also comprises the company secretary, representatives of the finance and technology departments, and Exxaro’s legal representatives.

Sustainability

Sustainability is a cornerstone of the Exxaro group and our approach is embedded in the first of our corporate
values which states “empowered to grow and contribute”. Our aim is to encourage entrepreneurship as far as
possible to transform this value into reality for as many stakeholders as possible.

Black economic empowerment codes of good practice
While we understand that companies need to verify the BEE status of suppliers in terms of the Codes of
Good Practice, Exxaro confines its reporting to the requirements set out in the Mineral and Petroleum Resources Development Act and its associated mining charter scorecard.

Exxaro’s approach to transformation and empowerment, however fits well with the requirements of the BEE codes and scorecard. In structuring the new group, we ensured that:

the majority of voting rights are exercised by black people
the majority of profi ts accrue to black people
the majority of the board comprises black people

Disclosure policy

The board has adopted a formal continual disclosure of interests policy to ensure full and timely disclosure by
directors.

External communications

Exxaro believes that briefing analysts, investors and fund managers is an important element of maintaining
investor relations. However, it will only provide “price-sensitive” information after disclosing that information to
the market.

Broader stakeholder communication plans have been developed and are currently being implemented. The group believes in clear, transparent, concise and timely dissemination of relevant information to all stakeholders. This is achieved through a multitude of channels and media, including written, electronic and verbal presentations.

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