AECI Ltd | Integrated Report and Annual Financial

INTEGRATED REPORT AND ANNUAL FINANCIAL STATEMENTS2017

2 ABOUT THIS REPORT

6 PROFILE AND STRATEGY

8 RISK MANAGEMENT AND MATERIAL ISSUES

13 WEALTH GENERATED AND DISTRIBUTED TO STAKEHOLDERS

14 NON-EXECUTIVEDIRECTORS

16 EXECUTIVECOMMITTEE

18 SENIOR MANAGERS

22 CHAIRMAN’SREPORT

26 CHIEFEXECUTIVE’SPERFORMANCEREVIEW

34 CHIEFFINANCIALOFFICER’SREPORT

42 STAKEHOLDER ENGAGEMENT

47 SOCIALANDETHICSCOMMITTEE’SREPORTTOSTAKEHOLDERS

49 HUMANCAPITAL

55 INTELLECTUALCAPITAL

58 SOCIALANDRELATIONSHIPCAPITAL

62 SAFETY,HEALTHANDTHEENVIRONMENT(INCL.NATURALCAPITAL)

68 INDEPENDENTASSURANCEPROVIDER’SLIMITEDASSURANCEREPORT ONSELECTEDKEYPERFORMANCEINDICATORS

72 GOVERNANCEREPORT

79 AUDITCOMMITTEE’SREPORTTOSTAKEHOLDERS

83 REMUNERATION REPORT

106 DIRECTORS’REPORT

109 SHAREHOLDER ANALYSIS

114 HISTORICALREVIEWS

116 DECLARATIONBYTHEGROUPCOMPANYSECRETARY

116 PREPARATIONOFANNUALFINANCIALSTATEMENTS

117 INDEPENDENTAUDITOR’SREPORT

120 BASISOFREPORTINGANDSIGNIFICANTACCOUNTINGPOLICIES

129 FINANCIALSTATEMENTS

196 INVESTORS’CALENDAR

197 NOTICEOFANNUALGENERALMEETING

201 FORMOFPROXY

202 NOTESTOTHEFORMOFPROXY

203 ADMINISTRATION

CONTENTS

1AECI INTEGRATED REPORT AND ANNuAl fINANcIAl sTATEmENTs 2017

ABOUT THIS REPORT

The primary objective of integrated reporting is to demonstrate an organisation’s ability to create and sustain value over the short, medium and long term. This report aims to provide stakeholders with a greater understanding of the strategy, overall sustainability, operational performance, risks and opportunities, prospects and major economic, social and environmental impacts of AECI Ltd (“the Company”) and its operating business entities (“the AECI Group” or “the Group”).

Issueswhichareidentifiedasbeingofmaterialsignificancetostakeholdersguideintegratedreporting.FortheAECIGroup,itisofparamountimportancethatthisidentificationadequatelyaddressthediversityandcomplexityof itsbusinesses.AccordinglyAECI’soverallRiskManagementFramework,whichmirrorsissuesofinterestandconcerntotheCompanyand itsstakeholders,underpinsthedeterminationofmaterialityfor thepurposesof thecontentofthisintegratedreport.

ThemethodologyandframeworkforriskmanagementarebasedontheCommitteeofSponsoringOrganizationoftheTreadwayCommissionandenhancedwiththeadoptionofISO31000formanagingrisks,andKingIIIandKingIVprinciplesonthegovernanceofrisks.

Other than the riskmanagement framework andfeedbackfromstakeholderengagements,thereportingprinciplesappliedinthepreparationofthisreportinclude:theCompaniesAct,No.71of2008(“theCompaniesAct”), inSouthAfrica; theListingsRequirementsoftheJSELimited(“JSE”);theKingReportsonCorporateGovernanceforSouthAfrica(“KingIII”and“KingIV”);theInternationalIntegratedReportingCouncil’sInternationalFramework;InternationalFinancialReportingStandards(“IFRS”);theSouthAfricanInstituteofCharteredAccount-ants(“SAICA”)FinancialReportingGuidesas issuedbytheAccountingPracticesCommitteeandFinancialPronouncementsasissuedbytheFinancialReportingStandardsCouncil;theCodeofEthicsforProfessionalAccountantsissuedbytheInternationalEthicsStandardsBoardforAccountants;theCDPClimateChangeandWaterPrograms;theinternationalchemicalindustry’sResponsibleCare®programme,aswellasAECI’sowninternalreportingstandardsanditsMemorandumofIncorporation(“MOI”).

SCOPE AND BOUNDARIESThescopeofthisreportincludesallofAECI’ssubsidiariesand jointventures.A listofprincipalsubsidiaries isprovidedinnote32totheannualfinancialstatementsandinformationonjointventuresisinnote6.Thereportrelatestothefinancialreportingperiod1January2017to31December2017.

ASSURANCE AND COMPARABILITYTheBoardofDirectors(“theBoard”)isrequiredintermsoftheCompaniesActandtheJSEListingsRequirementstoprepareannualfinancialstatementswhichfairlypresentthestateofaffairsoftheCompanyandtheGroupasattheendofthefinancialyearandoftheprofitor lossandthecashflowsfor thatperiod, inconformitywithIFRS.TheexternalauditorisresponsibleforexaminingthefinancialstatementsoftheCompanyandtheGroupandforexpressinganopiniononthesestatementstoshareholders. Inaddition,theexternalauditormustconfirmwhetherthefinancialstatementsareinaccordancewiththeCompaniesActandIFRS.

2 AECI INTEGRATED REPORT AND ANNuAl fINANcIAl sTATEmENTs 2017

00.1ABOUT THIS REPORT

Asinprioryears,externalassuranceobtainedin2017alsoincludedlimitedassuranceonselectedsustainabilityinformationwhichAECIbelievesismaterialinviewofthenatureof itsbusinessesandtheenvironment inwhichtheyoperate.

TheGroup’s InternalAuditfunctionappraisesGroupentities’internalcontrolsandsubmitsitsassessmentofthesetotheBoardonanannualbasis.Themanagementofeachoperatingbusinessalsosubmitsanannualself-assessmentof internalcontrols(InternalControlMatrix) to theAuditCommitteeaffirming that thesystemsofinternalcontrol, inentitiesforwhichtheyhaveresponsibility,areadequatefortheiroperationsandarefunctioningeffectively.

Anymaterialchangesbetweenthe releaseof theannual financial statements and the date of theintegratedreportareindicatedassuchinthisreportbymeansofspecificreferences.TheemphasisofAECI’sintegratedreportingremainsonprovidingmoredetailedinformationontheCompany’sstrategicdirectionandsustainabilityinitiatives.

In2014,AECIreviseditsstrategyanddevelopedfivekeystrategicgrowthpillars,namely:MiningSolutions,Water&Process,Plant&AnimalHealth,Food&Beverage,andChemicals.Thesepillars,whichbecamethefocusoftheCompany’sintegratedreporting,arenowtheCompany’soperatingsegmentsforthepurposesofthesegmentalreportingoffinancialperformance. Intermsofthisreporting,Property&Corporateisthesixthsegment.Itcomprisesmainlypropertyleasingandmanagementintheoffice,industrialandretailsectors,andcorporatecentrefunctionsincludingthetreasury.

INVITATION TO STAKEHOLDERSTheAECIGroupengageswithabroadspectrumofstakeholders.Theseincludeemployees,tradeunions,customers,shareholdersandfundmanagers,financiers,suppliers,technologyandbusinesspartners,localandnationalgovernmentstructuresincountrieswheretheGroupoperates,otherregulatoryandindustrybodies,thecommunitiesinwhichtheGroupoperates,specialinterestgroupsandthemedia.

TheCompanywelcomeswrittencommentsandfeedbackfromitsstakeholdersonthisintegratedreportandonothergeneralmatters.Theseshouldbeaddressedto:TheGroupCompanySecretary,AECILtd,PrivateBagX21,GalloManor,[email protected].

APPROVAL OF THE INTEGRATED REPORTTheBoardacknowledgesitsresponsibilitytoensuretheintegrityoftheintegratedreport.TheDirectorsconfirmthatindividuallyandcollectivelytheyhavereviewedthecontentoftheintegratedreportandbelieveitaddressesmaterial issues,asdeterminedbyusingAECI’sRiskManagementFrameworkasascreeningmechanism,andisafairpresentationoftheintegratedperformanceoftheGroup.

TheBoardapproved theauditedannual financialstatements,fortheyearended31December2017,on27February2018andthereleaseofthe integratedreporton11April2018.

ForandonbehalfoftheBoard

Khotso Mokhele Chairman

Mark Dytor ChiefExecutive

Woodmead,Sandton 11April2018


4

PROFILE AND STRATEGY 6

RISK MANAGEMENT AND MATERIAL ISSUES 8

WEALTH GENERATED AND DISTRIBUTED TO STAKEHOLDERS 13

NON-EXECUTIVE DIRECTORS 14

EXECUTIVE COMMITTEE 16

SENIOR MANAGERS 18

01

5

PROFILE AND STRATEGY

AECI isaSouthAfrican-basedcompanyfocusedonprovidingproductsandservicestoabroadspectrumofcustomersinthemining,watertreatment,plantandanimalhealth,foodandbeverage,infrastructureandgeneralindustrialsectors.Ithasregion-alandinternationalbusinessesinAfrica,Europe,SouthEastAsia,NorthAmericaandAustralia.

TheGroupnowcomprises17businessesand,at31December2017, ithad6522employees.Another850permanentemploy-eesjoinedtheGroupwhenSchirmbecameAECI-ownedon30January2018andafurther536joinedfromMuchAsphaltwhenthistransactionclosedon3April2018.

TheGroup’sstrategyistobethesupplierofchoiceinthemarketsinwhichitoperatesandtocontinuetogrowdomesticallyaswellasthroughongoingexpansionof itsfootprintintermsofthegeographiesandmarketsserved. In linewiththisstrategythefivegrowthpillarsareMiningSolutions(AELMiningServices,ExperseandSenmin),Water&Process (ImproChem), Plant&AnimalHealth(NulandisandnewlyacquiredSchirm),Food&Beverage(LakeFoodsandSouthernCannedProducts),andChemicals(Chemfit,ChemicalInitiatives,ChemSystems,IndustrialOleochemicalProducts,SANSTechnicalFibersandnewlyacquiredMuchAsphalt).Also inthispillararetwo jointventures—CrestChemicalsandSpecialtyMineralsSouthAfrica.

AECIwasregisteredasacompanyinSouthAfricain1924andhasbeenlistedontheJSEsince1966.Attheendof2017itsmarketcapitalisationwasR12,2billion.

AcaciaRealEstate, theGroup’spropertydivision,focusesmainlyonmanagingAECI’sleasingportfolioandontheprovisionofservicesat theUmbogintwini IndustrialComplexinKwaZulu-Natal.

MINING SOLUTIONS

WATER & PROCESSImproChemprovidesintegratedwatertreat-mentandprocesschemicals,andequipmentsolutions,foradiverserangeofapplicationsinAfrica.Theseinclude,interalia,publicandindustrialwater,desalinationandutilities.

The businesses in this pillar provide amine-to-metal solution for theminingsectorinternationally.Theofferingincludessurfactantsforexplosivesmanufacture,commercialexplosives, initiatingsystemsandblastingservicesrightthroughthevaluechaintochemicalsfororebeneficiationandtailingstreatment.

R


PROFILE AND STRATEGY

01.1

PLANT & ANIMAL HEALTH

FOOD & BEVERAGE

Nulandismanufacturesand suppliesanextensiverangeofcropprotectionproducts,plantnutrientsandservicesfortheagriculturalsectorinAfrica.

Schirm,based inGermany, isacontractmanufacturer of agrochemicals andfinechemicalswithaEuropeanandUSfootprint.ItisthelargestproviderofexternalagrochemicalformulationservicesinEurope.

Thebusinessesinthispillarsupplyingredientsandcommoditiestothedairy,beverage,wine,meat,bakery,healthandnutritionindustries.

Theothermainactivity is themanufac-tureanddistributionofabroadrangeofjuice-basedproductsanddrinks, includingformulatedcompounds,fruitconcentrateblendsandemulsions.

CHEMICALS

Thesebusinessessupplychemicalrawmate- rialsandrelatedservicesforuseacrossa broad spectrum of customers in themanufacturing,infrastructureandgeneralindustrialsectorsmainlyinSouthAfricaandinotherSouthernAfricancountries.SANSTechnicalFibersisbasedintheUSA.

JOINT VENTURES:


RISK MANAGEMENT AND MATERIAL ISSUES

The AECI Board recognises that risk management is an integral part of the Group strategy-setting process and is accountable for risk management. This is embodied in AECI’s risk philosophy which recognises that managing risk is fundamental to the generation of sustainable shareholder value and the enhancement of stakeholder interests. Risk management is integrated into the culture of the organisation and is driven by the Board’s mandate, leadership and commitment.

Byunderstandingandproperlymanagingitsrisks,AECIprovidesgreatercertaintyandsecurityfor itsemploy-ees,customers,suppliersandotherstakeholdersanditsdecisionsarebetter informed,moredecisiveandgearedatmovingtheCompanywithgreaterconfidencetowardstheachievementofitsgoals.Thealignmentofriskmanagementandstrategicdecision-makingincreasestheprobability thatAECIwillbeabletominimise itsdownsiderisksandalsocapitaliseontheupsideofrisks.Thisisenhancedbymaintaininganappropriatebalancebetweenriskandrewardinthebusiness.

Itisacknowledgedthatriskcanneverbefullyeliminated.Managementhasdesignedandimplementedprocessestoidentify,assess,manage,monitorandreportonthesignificantrisksfacedbyindividualbusinessesandtheGroupasawholeonacontinualbasis.ThisinvolvestheassessmentandmonitoringofthebroadercontextinwhichtheGroupoperatesintermsofthepoliticalandeconomiclandscape,industry,labourandfinancialmarkettrends.Work includestheanalysisof researchmaterialsandindustrybenchmarkingstudiesbyinstitutionssuchastheWorldEconomicForum,theWorldBankandControlRisk.Theseserveasanearlywarningsystemoramechanismfortheidentificationoffuturerisksandopportunities.

In2017specificattentionwasgiventounderstandingandmanagingriskinnewterritoriesandmarkets,inform-ingtheGroup’sexpansionintocountrieslikeSenegal,MadagascarandGermany.TheobjectiveistooptimisetheGroup’spositioningintermsofitsabilitytocapitaliseonopportunities.Thisisinlinewiththephilosophyoffocusingnotonlyondownsideriskbutalsoidentifyingupsideriskandbenefitingfromidentifiedopportunities.TheRiskManagementfunctionisoptimallygearedtocontinueprovidingsupportinthisregard.

AllrelatedactivitiesandprocessesareunderpinnedbytheGroupRiskManagementPolicyandtheGroupEnterpriseRiskManagementFramework(“Framework”).ThelatterisbasedontheprinciplesoftheInternationalGuidelineonRiskManagement(ISO31000)andKingIV,whereguidelinesareprovidedforthesystematic,consistentandprofessionalapproachrequiredtoensuresuccessfulandeffectiveriskmanagement.AECI’sriskmanagementprocessissupportedbyasoftwareapplicationthathasbeenimplementedGroup-wide.

ThefollowingkeymethodologyelementshavebeenembeddedintheFramework:

› the classification of risks by causational category, namelypreventable,strategicandexternalrisks.Thisfacilitatestheformulationofappropriateresponsesforeachrisk,appropriatediscussionsandsettingofappropriaterisktolerancelevelsforeachcategory;

› theriskDelegationofAuthoritywithintheAECIriskmatrix,wherebylimitshavebeensetforindividualsandteamsatdifferent levelsofseniority intermsofdecision-makingonthelevelofriskthatcanbetoleratedwithoutreferraltothenextlevelofseniority.TheRiskCommitteeandtheBoardarethehighestdecision-makingstructures;

› risk appetite, tolerance and risk rating scales.RiskappetiteisdefinedasthetotalimpactthattheGroupispreparedtoaccept, retainorpursueinachievingitsstrategicobjectives.Risktolerancerefersto itsreadinesstobearaparticularrisk,afterrisktreatment,toachieveitsobjectives;

› country risk managementusingriskdashboardsthattrackinteraliapolitical,operational,security,travelandterrorismrisksincountrieswheretheGroupcurrentlyoperatesaswellas inthosecountriestargeted intermsoftheGroup’sinternationalexpansionstrategy.

Onthebasisofthe internalriskassessmentprocessandtheoutcomesoffeedbackfromstakeholders,AECIhasidentifiedthehighlevelmaterialissuesthatcould impactthedeliveryof itsstrategyandgrowthobjectivesbothpositivelyandnegatively.Thesearesetoutonpages9and10.


RISK MANAGEMENT AND MATERIAL ISSUES

01.2

MATERIAL ISSUE DESCRIPTION MITIGATION COMMENTARY

Currency fluctuations

EffectsofastrongerZARontheGroup’sfinancialperformance.Thiscouldimpactforeignandexportrevenue.

1. GroupTreasurypolicy.

2. Currencymonitoring.

3. Marketdiversificationstrategy.

1. In2017,34%ofAECI’stotalrevenuewasfromforeignmarketsand,asaconsequence,astrongZARcouldimpactrevenueofforeignoperations.

2. AcquisitionofMuchAsphalt,whichoperatesmainlyinthelocalinfrastructuresector—anewareaofoperationforAECI.

3. ZARcouldremainstrongrelativetoUS$,buoyedbypositivemarketsentimentsubsequenttochangesintheleadershipofSouthAfrica’srulingparty.

Commodity price fluctuations

Severecommoditypricefluctuationsleadingtoadecreaseinabsolutecontributionandmargins.

1. Hedgingstrategiesforthepurchaseofmanyrawmaterials.

2. Keycommoditypricemonitoring.

3. OngoingglobalmonitoringandcomparisonofcommoditypricesbyGroupStrategicSourcing.

4. Diversificationstrategyofproductapplicationfordifferentcommoditiesinaspecificsector(e.g.mining)atbusinesslevel.

1. Rallyinmostpreciousmetalspricesandoilpricesin2017.

2. Expectationthatthepositivetrendwillcontinuein2018.

Country risk Political,operational,securityandtravelrisks incountriesinwhichtheGroupoperates.

1. Geographicdiversificationstrategy.

2. Monitoringofrisksassociated withindividualcountries.

3. GroupForeignInvestmentCommitteemonitorsrelated riskelementsofinvestinginforeignmarkets.

1. PositiveoutlookforSouthAfrica,subsequenttoleadershipchanges.

2. Pro-businessreformscontinuebeingimplementedbyseveralcountries inAfrica.

3. Globaleconomicoptimismfor2018.

4. ImprovedpositionofkeycountriesinwhichtheGroupoperatesintheWorldBank’sGlobalCompetitivenessIndex.

5. ConditionsincertainotherAfricancountriesremainofconcern,however.

Credit risk Creditriskformajorcustomersandmedium-sizedcustomers,leading tolossofincome.

1. Consistentapplicationofaccountsreceivablepolicy.

2. Commissioningandanalysisofcreditreportsforallmajorcustomers.

1. Mostminingcompaniesreportedimprovedcashflowpositionsintheirlatestfinancialresults.

2. Positiveminingsectoroutlookfor2018.

3. Globaleconomicoptimismfor2018.

4. Alevelofriskremainsinsomecountries,wheretherearechallengesinrelationtoUS$liquidity.

5. Alevelofconcernremainswithregardtotheviabilityofthelocalundergroundplatinumminingsectorowingtothe ZAR/US$exchangerate.

MATERIAL ISSUES, MITIGATION MEASURES AND OPPORTUNITIES


MATERIAL ISSUE DESCRIPTION MITIGATION COMMENTARY

Volatile mining sector in South Africa

Volatilityinthissector couldaffectthecostbaseandtheconsistencyofinvestmentinit.

1. Continuedgeographicdiversification.

2. Continueddiversificationofcustomerbaseintermsofminingmethods,mineralsminedandGroupproductlinesofferedtothem.

1. Positiveoutlookexpressedbylarge mininghouses.

2. All-roundpositiveoutlookexpressed atInvestinginAfricanMiningIndaba inFebruary2018.

3. Asurge(inUS$terms)inpreciousmetalspricesin2017(thissomewhatoffsetbystrongerZARinlocalmarket).

4. Renewedcommitmentbystakeholders tothetimelyfinalisationofaworkableMiningCharterinSouthAfrica.

Continued low or no growth in South Africa’s manufacturing sector

Continuedlowgrowthin thelocalmanufacturingsector,restrictingAECI’sorganicgrowth.

1. Geographicdiversificationstrategy.

2. Ongoingbusinessportfoliomanagement.

3. Ongoingproductandservicedevelopment.

1. RecentchangesintheleadershipofSouthAfrica’srulingpartyappeartohavesignalledamorepromisingoutlook.

2. 2018budgetforSouthAfricawellreceivedoverall,bothlocallyandinternationally.Thiscouldleadtohigherforeigndirectinvestment.

Extreme and unpredictable weather events

Extremeandunpredictableweatherevents,andfailureofclimatechangemitigationandadaptation,leadingtodroughtorfloods,watershortagesandreducedagriculturaloutput.

1. Effectsaremonitoredandrespondedtoasappropriate.

2. Geographicdiversification ofbusinesses.

3. Technologydevelopments (e.g.waterusageoptimisation).

4. Globalrawmaterialsourcingnetworkdeveloped.

1. Severeandpersistentdroughteffects,particularlyintheWesternCapein2017.

2. Effectsofthedroughtalsoimpacting otherSADCcountries.

Compliance risk, including compliance with tax and environmental laws

Litigation,penalties,criminalprosecutionandreputationaldamagecausedbyalackofunderstandingoftheapplicablelegislativeuniverse.

1. TransferPricingPolicyinplace andappliedconsistently.

2. Useofestablishedtaxconsultants forout-of-countrytaxmatters.

3. Risk-basedapproach toremediation.

4. Deploymentofworldclasstechnologyandprocessesin allremediationplans.

5. ComplianceprojectrolledoutinotherAfricancountriesofoperation.

1. Certaincomplianceobligationsoutside ofSouthAfricanotfullyunderstood.

2. IncreasedactivitybyauthoritiesinallAECIjurisdictions.

Catastrophic safety, environmental, quality and/or plant incident

Catastrophicsafety,environmental,quality and/orplantincident,resultinginreputationaldamageandpossibleloss oflicencetooperate.

1. Comprehensivesafety,healthandenvironmentmanagementsystemsinplaceinallbusinesses,includingemergencypreparednessplansandtrackingofnearmissesandincidents.

2. Criticalplantaudits.

3. Preventativemaintenanceprogrammes.

4. Regularreviewofmajorhazardousinstallationsincloseproximity tourbansettlements.

1. Adequatelydesignedinternalcontrols/preventativeprocessesinplaceand testedregularly.

2. RegulartestingoftherobustnessofBusinessContinuityandOperationalResiliencestrategies.

MATERIAL ISSUES, MITIGATION MEASURES AND OPPORTUNITIES continued


RISK MANAGEMENT AND MATERIAL ISSUESCONTINUED

01.2

LEVEL OF RISK MATURITYAECI’smaturity level,determinedthroughanassessmentbasedon itsadoptedRiskIntelligenceMaturityModel,isontheborderbetween“semi-integratedandchangedriven”and“intelligent, integratedandoptimised”,withthedesiredfuturematuritylevelbeing“intelligent, integratedandoptimised”.Thecharacteristics of the various states ofmaturity,asselfassessed,aredetailedinthe schematicbelow.

AECIwillcontinue itspursuitof itsdesiredriskmaturitylevel.Tothisend,greaterfocusin2018andinfutureyearswillbeon:

› entrenchingtheriskcultureevenfurtheracrossallentities;

› improvingaccountabilityandresponsibilityforriskmanagement;

› integratingriskmanagementfurther intostrategydevelopmentandimplementation;

› maturingtheidentificationandmanagementofupsiderisk(opportunityriskmanagement);

› revising the riskappetiteandtolerancethresholds in linewiththeDelegationofAuthorityandfinancialimperatives.

In linewith theaspiration to continuallyimprovetheAECIGovernanceandAssur-anceserviceoffering,areviewbytheInternalAuditfunctionwasundertakenin2017.ThisreviewfollowedtheProcessElementApproachcontainedintheInstituteofInternalAuditors’PracticeGuide—AssessingtheAdequacyofRiskManagementUsingISO31000.

Thereviewconcludedthat,atatechnicallevel,theAECIEnterpriseRiskManagementprocesscontainstherequiredelementsofISO31000,bothindesignandinoperation,andthattheprocessisconsideredtobefitforpurpose.

EMBEDDING A RISK-INTELLIGENT AND RESILIENT ORGANISATIONEstablishing thecontextof riskmanage-mentatAECIisthefoundationofgoodriskmanagementandisvitaltothesuccessfulimplementationof the riskmanagementprocess. Important considerations whendeterminingcontextare illustrated in theframeworkdiagramonpage12.

GiventheGroup’scompetitiveandrapidlyevolvingexternalenvironment,contextualanalysisiscrucialfortheprovisionofproactiveandinformedriskinformationthatsupportstimeousdecision-makingandleadstoeffec-tivestrategyexecution.Scanningtheexternalenvironment involvesamulti-dimensionalassessmentofkeyelementsthatshapeandareshapedbytheGroup’sactions,alsoasillustratedonpage12.

RISK INTELLIGENCE MATURITY MODEL

STAGES OF RISK MANAGEMENT MATURITY

INITIAL INFORMAL STANDARDISED AND GOVERNANCE-DRIVEN

SEMI-INTEGRATED ANDCHANGE-DRIVEN

INTELLIGENT, INTEGRATED AND OPTIMISED

› Adhoc/chaotic

› Noformalriskmanagement(“RM”)strategy

› Nouseofstandards,toolsandtechniques

› RMpredominantly “riskspecific”

› Limitedfocusonintegration

› Riskviewedsolelyasaneventwithanegativeconsequence

› Awareoftechniqueswithouttheformalapplicationofstandards

› Nodifferentiationbetween“risks” and“hazards”

› Reportingfocus

› Commonframework,programmestatementandpolicy

› Highlevelriskassessments

› Managementofallrisktypesisnotapproacheduniformly

› Riskviewedlargelyasaneventwithanegativeconsequence

› Useofstandards

› ChangemanagementapproachtoRM

› CoordinatedRM acrossbusinesses andactivities

› Alltypesofrisksaremanagedthrough auniformsystem

› Riskisviewedasuncertaintyandlinkedtoobjectives

› Drivenbyperformance-basedstandards

› Enterprise-wideapproachtoRM

› RMdrivesproactiveandinformeddecision-making

› CompanyandRMprocessesarefullyintegrated

› RMisembedded inculture

› RMisastrategicadvantage

› Soundunderstanding ofstandardsanduse oftoolsandtechniques

DES

IRED

CURR

ENTVA

LUE

ADD


ENTERPRISE RISK MANAGEMENT FRAMEWORK

INTERNAL CONTEXT SETTING

Theinternalenvironmentinwhichtheentityseekstoachieveitsobjectives:

› GOVERNANCE

› STRUCTURE

› CULTURE

› CAPABILITY

› POLICIES,PROCEDURES, ITSYSTEMSETC.

EXTERNAL CONTEXT SETTING

Theexternalenvironmentinwhichtheentityseekstoachieveitsobjectives:

› POLITICAL

› ECONOMIC

› SOCIAL

› TECHNOLOGICAL

› LEGAL

› ENVIRONMENTAL

RISK MANAGEMENT CONTEXT SETTING

Theapproachandboundariesaredefinedandappliedtotheriskassessmentathand:

› SCOPEANDBOUNDARIES

› DEFINERISKCRITERIA

› RISK ASSESSMENT METHODOLOGY

OBJECTIVE SETTING

RISK

MANAGEMENT CONTEXT SETTING

EX

TERNAL CONTEXT SETTING

INTE

RNAL CONTEXT SETTING

RISK IDENTIFICATION CATEGORIES

SCOPE REPORTING

BUSINESS ENVIRONMENT ASSESSMENT

REAL-TIMEMONITORING

BUSINESS ENTITY MANAGEMENT COMMITTEES

AECI EXECUTIVE COMMITTEE

RISK COMMITTEE

BOARD

POLITICAL ECONOMIC

ENVIRONMENTAL LOGISTICAL

SOCIAL TECHNOLOGICAL LEGAL/POLICY

G L O B A L

CONTINENTALREGIONAL

NATIONAL

CUSTOMER SPECIFIC


RISK MANAGEMENT AND MATERIAL ISSUESCONTINUED

01.2

REVENUE FROM C

USTO

MER

S +

OTHER INCOME

PURCHASED FROM SUPP

LIER

S, P

RINC

IPALS AND PARTNERS

WEA

LTH GENERATED29%

R5440mR18517m

WEALTH GENERATED AND DISTRIBUTED TO STAKEHOLDERS

R3229mR5440m

59%

4%

9%

8%

R202mR5440mR480mR5440mR429mR5440m

FINANCIERS

EMPLOYEES

STAKEHOLDERS DISTRIBUTION OF WEALTH GENERATED

VALUE CREATED

SHAREHOLDERS

GOVERNMENT

INTEREST EXPENSE

SALARIES, WAGES AND OTHER BENEFITS

DIVIDENDS PAID OR DECLARED

DIRECT TAX EXPENSE

20% R1100mR5440m

WEALTH RETAINED AND REINVESTED IN THE GROUP

100%R18517mR18517m

71%R13077mR18517m


WEALTH GENERATED AND DISTRIBUTED TO STAKEHOLDERS

01.3

GrahamDempster(62)BCom, CA(SA), Harvard Business School, INSEAD AMP

ZellahFuphe(49)BSocialSc

KhotsoMokhele(62)BSc (Agriculture), MSc (Food Science), PhD (Microbiology)

NON-EXECUTIVE DIRECTORS

GrahamwasappointedtoAECI’sBoard in2016.He isChairmanoftheRemunerationCommitteeandamemberoftheAuditandNominationsCommittees.GrahamisChairmanofLong4LifeandaNon-executiveDirectorofImperialHoldings,Sun InternationalandTelkom.HewaspreviouslyanExecu- tiveDirectoroftheNedbankGroup/NedbankLimitedandtheChiefOperatingOfficerofNedbankGroup.

Zellah joined the AECI Board in2007and chairs theSocial andEthicsCommittee.SheisExecutiveDirector—CorporateServicesatDimensionData.Shewaspreviously anExecutiveatPlesseywheresheservedasManagingExecutiveofPlesseyBroadbandInvestmentsandManagingDirectorofPlesseySouthAfricaforanumberofyears.ZellahpreviouslyservedontheBoardsofAfricOil (Chair),Engen,whereshealsochairedtheSocialEthicsCommittee,PhembaniCoal(Chair)(previouslyWorldwideCoalCarolina),theOceanaGroup,Phembani(previ-ouslyWorldwideAfricanInvestmentHoldings)andtheUnisaSchoolofBusinessLeadership.

KhotsojoinedtheAECIBoardin2016andtookuphispositionasChair-manin2017.HeisalsoChairman oftheNominationsCommitteeandamemberoftheRiskCommittee.Khotso isSpecialAdvisortotheMinisterofScienceandTechnology,Chancellor of theUniversity oftheFreeState,ChairmanofTigerBrands and Lead IndependentNon-executiveDirectoratAfrox.



01.4

RamsRamashia(60)BIuris, LLB, LLM

PhilisiweSibiya(41) CA(SA)

AllenMorgan(70) BSc, BEng (Elect), Pr Eng, CD(SA)

GodfreyGomwe(62) BAcc, MBL, CA(Z), CD(SA)

RamsjoinedtheAECIBoardin2010andservesontheSocialandEthics,Risk,NominationsandRemunera-tionCommittees.HeisamemberoftheBoardofAngloAmericanSouthAfricawhereheservesontheRiskandAuditCommitteeandchairstheSocialandEthicsCommittee.He isNon-executive ChairmanofRandRefineryandalsochairsthatcompany’sNominationandRemunerationCommittee.In2017Ramswasappointedtotheboardof theMineworkers InvestmentCompanywhereheservesontheRemunerationCommittee.He ispastChairmanofBPSouthernAfrica, SAPREF and the SouthAfricanPetroleumIndustryAssoci-ation.Between2000and2004hewasDirector-Generalof theNationalDepartmentofLabourandgovernmentChiefNegotiatorattheNationalEconomicDevelop-mentandLabourCouncil.RamsisapractisingadvocateoftheHighCourtandamemberofthePretoriaSocietyofAdvocates.

PhilisiwejoinedtheBoardandtheAuditCommitteeon27February2018.Overthepast15years,sheservedasChiefExecutiveOfficerofMTNCameroonandasChiefFinancialOfficerofMTNSouthAfrica.Morerecently,shefoundedherownprivateequitycompany.

Allen joined the AECI Boardin2010.He isChairmanof theRisk Committee, a member oftheAuditandSocialandEthicsCommitteesaswellasChairmanoftheAELFRRC.AllenspenthisworkinglifeatEskomandservedasthatcompany’sChiefExecutivefrom1994untilhisretirementin2000.OtherdirectorshipsincludeBioThermEnergy,ImalivestAssetsandKumbaIronOre.

Godfrey joined the AECI Boardin2015.His isChairmanoftheAuditCommitteeandamemberoftheRemunerationandNomina-tionsCommitteesaswellasAELMiningServices’FinancialReviewand Risk Committee (“FRRC”).GodfreyhasextensiveexperienceasanExecutiveinthemetalsandminingindustries.Atthetimeofhisearlyretirement in2014,hewasChiefExecutiveofAngloAmeri-canThermalCoalandwasalsoresponsibleforAngloAmerican’smanganeseinterests inthejointventurewithBHPBilliton.


EXECUTIVE COMMITTEE

MarkKathan*(47)CA(SA), AMP (Harvard)

EdwinLudick(53)BCom (Hons)

MarkDytor*(56)HNDP (Metalliferous Mining), PMD (UCT)

Mark isAECI’sFinancialDirectorandChiefFinancialOfficer,whichpositionshetookupin2008.PriortojoiningAECI,heheldaseniorfinancepositionatNampakandservedonthatcompany’sGroupExecutiveCommittee.InadditiontooverallresponsibilityfortheFinanceandTreasuryfunctions,MarkoverseesAECI’sCorporateCommunicationsandInvestorRelations,LegalandSecretariat, InternalAuditandITfunctionsaswellasitsRetirementFunds.HealsoplaysaleadingroleinM&Aactivities.

EdwinisManagingDirectorofAEL.HejoinedChemserveasaHumanResourcesManagerin1991,wasappointedtoitsExecutiveCommit-tee in2008andto itsBoard inJanuary2010.EdwinjoinedAECI’sExecutiveCommittee later thatyear.HehasservedasManagingDirector at four companies intheChemicalssegmentandasChairmanofanumberofotherGroupentities.

MarkassumedhisroleasAECI’sChiefExecutive in2013.Hewasappointed to AECI’s ExecutiveCommittee in 2010 and to itsBoard inJanuary2013.HavingjoinedChemicalServicesLimited(“Chemserve”)asasalesrepresen- tativein1984,andaftermanagingtwoChemservecompanies,Markwasappointed toChemserve’sExecutiveCommitteein1998andsubsequentlytoitsBoard.

* ExecutiveDirector


EXECUTIVE COMMITTEE

01.5

DeanMurray(49)NDip Chemical Engineering, Global Executive Development Programme (GIBS)

DeanMulqueeny(51)NHD Analytical Chemistry, Global Executive Development Programme (GIBS)

KhosiMatshitse(61)BA, MA (African Literature and Art of Teaching), Certificate in Strategic Human Resources, Senior Leadership Development Programme Certificate

DeanjoinedtheGroupasManag-ingDirectorofChemiphoswhenChemserveacquiredthatbusinessin2006.In2007,hewasappointedManagingDirectorofLakeInter-national.HewasappointedtotheAECIChemicalsExecutivein2013andChairmanofanumberofGroupcompanies.DeanwasappointedtotheAECIExecutiveCommitteeinJanuary2018.

DeanjoinedChemserveasasalesrepresentative in1990andheldseveralsalespositionsbeforegoingontoserveasManagingDirectorofthreeChemservecompaniesfrom2004.HelefttheGroup in2011,returningin2015asamemberoftheAECIChemicalsExecutiveandChairmanofanumberofGroupcompanies.DeanwasappointedtotheAECIExecutiveCommitteeinJanuary2018.

KhosijoinedAECIasGroupExecu-tive:HumanCapitalandamemberof the ExecutiveCommittee in2012.Sheoverseesthetransfor-mationof theGroup,assists inthe internationalisationofAECI’sbusinessesandhasprogressedthetransformationoftheHumanCapitalfunction intoastrategicserviceprovider.KhosihasworkedasaconsultantintheOrganisationDesign and Development andChangedisciplinesandhasheldseniorHumanCapitalpositionsatothercompanies.


SENIOR MANAGERS

NeilFranklin(49)B-Tech (Safety Management)

ToniSerra(55) IwanSchutte(46)CA(SA), CIA

NominiRapoo(54)BCom (Law), UED, LLB, Admitted Attorney of the High Court, Certificate in Corporate Governance

NeilisAECI’sGroupSafety,Health and Environment(“SHE”)Manager,appointedin2017.Hehasextensiveexperience in SHE r iskmanagementinminingandpetrochemicalmanufactur-ingacrosssmallandlargeoperatingsitesglobally.

Toni is AECI’s Chief Infor-mationOfficerwithoverallresponsibilityformanagingIToperations,includingtheformulation and imple-mentationoftheGroup’sITstrategy.Hehasextensiveexperience in the IT field,includingthatgainedinhisrole as Chief InformationOfficeratNampak.

Iwan is theGroup’s Inter-nal Audit Manager. Priorto this position he wasDivisional Internal AuditManagerresponsiblefortheformerSpecialtyChemicalssegment.HejoinedAECIin2004.

NominijoinedAECIin2011asGroupCompanySecretary.Inadditiontohercommercialandlegaldegrees,shehasqualificationsandextensiveexperienceacrossaspectrumofdisciplinesincludingriskandcompliancemanagement,internalaudit,legalservicesandcorporategovernance.


SENIOR MANAGERS

01.6

TrevorRoberts(41)BSc Eng (Industrial), BSc Hons (Tech Management), MBA

GuguMthethwa(58)BSc Eng (Chem), MBA

TrevorStarke(49)CA(SA)

FulviaPutero(55)MA (Translation)

GrahamThompson(42)CA(SA)

Trevor is Head of AECI’sGroup Strategic Sourcing,established in2016.Priortothis,hewasamemberofAEL’sExecutiveCommit-teewith responsibilityforthesupplychain,sourcing,marketing and strategiccapitalprojects.TrevorjoinedtheGroupin1999.

GuguisGroupM&AManager. ShejoinedAECIin2011.Herwork experience includesvariousroles inthechemi-cal processing and pulpmanufacturingindustries,aswellasinvestmentbanking.

Trevor is Group Treasurerwithoverallresponsibilityfortreasuryfunctions,CorporateCentreaccounting,payrolland office management.HejoinedAECIin1997andworkedinGroupAccountingbeforemovingtotheTrea- suryin1999.

Fulvia isAECI’sCorporateCommunicationsandInves-tor RelationsManager. AgraduateoftheUniversityof theWitwatersrand,shejoinedtheGroup’sPublici-tyDepartmentasaJuniorPressOfficerin1986.

Graham is Group Finan-cialManagerwithoverallresponsibilityfortheGroup’sfinanceandtaxfunctions.HejoinedAECIin2005asGroupAccountant.


20

CHAIRMAN’S REPORT 22

CHIEF EXECUTIVE’S PERFORMANCE REVIEW 26

CHIEF FINANCIAL OFFICER’S REPORT 34

02

21

CHAIRMAN’S REPORT

Dear stakeholders

It gives me great pleasure to report that, in my first year as Chairman of AECI, the Company achieved very pleasing results thanks to a particularly strong trading performance in the last quarter. Operating profit was R1 579 million, 18% higher year-on-year.

Headlineearningspershare(“HEPS”)of959centswasthehighesteverrecordedand17%higherthanin2016.Earningspershare(“EPS”) increasedby22%from735centsto900cents.HeadlineearningsimprovedfromR864millionlastyeartoR1012million,inlinewiththegrowthinHEPS.DetailedcommentaryontheseandotherfinancialmetricsarepresentedintheChiefFinancialOfficer’sreport.

Inlinewithstrategy,theresultsfor2017werethefirstpresentedinaformatthatreflectsthekeygrowthpillarsthathaveunderpinnedAECI’sgrowthaspirationssince2014.Thesepillars,whicharenowtheGroup’sreportingsegmentsareMiningSolutions,Water&Process,Plant&AnimalHealth,Food&Beverage,andChemicals.Businessesineachpillarofferdifferingproductsandservicesandaremanagedseparatelybecausetheyrequiredifferenttechnologyandmarketingstrategies.

More informationonthepillarsandtheir respectiveresultsandprospectsisprovidedintheChiefExecutive’sPerformanceReview.

PERFORMANCE DRIVERSAECI’sresultswereenabledbyarecovery intheglobalresourcessector,withhigherpricesformostcommoditiesprovidingastimulusforincreasedoutputfromtheminingsector.GrowthwasevidentinalmostallcountriesintheGroup’sextensivefootprintontheAfricancontinentandin Asia Pacificand validated the strategy to diversifythebusinessgeographically.

MorethanhalfofthetotalrevenuefromAECI’sexplo-sivesandminingchemicalsoffering,whichaccountedfor69%ofprofitabilityin2017,isnowearnedoutsideofSouthAfricaanditismostlydenominatedinUSdollars.

OftheGroup’stotalrevenue,34%(orR6236million)wasgeneratedfromforeignoperationsandexports.Thiswasslightlylowerthan2016’sR6479millionbecauseofthestrongerexchangerateoftherandagainsttheUSdollar.Theaverageratein2017wasR13,31versusR14,72 intheprioryear.This impactednotonlythemining-relatedbusinessesbutalsoallotherGroupentitiesthatservicecustomersinAfrica,particularlyintheagriculturalsectorandthewatertreatmentindustry.

Therandstrengthalsolargelyoffsethigherchemicalinputprices,whichweredrivenbythehigheroilprice.ThisexacerbatedthechallengesforAECI’sbusinesseswhosecustomersaremainlyinthelocalmanufacturingsector.Thissectorcontinuedtocontractinanenvironmentofsluggishgrowth.

TheeffectsonagricultureandthewatertreatmentindustryofsevereandpersistentdroughtconditionsintheWesternCape,inparticular,andinotherSouthernAfricanregionscurtailedgrowthintherelevantGroupbusinesses.

SAFETY, HEALTH AND THE ENVIRONMENT (“SHE”)SHE-relatedmattersremainapriorityfortheAECIGroup’smanagementandfortheCompany’sBoard.AECIembarkedonanewjourneyin2017withthelaunchofitsZeroHarmcampaignwhichisattheheartofanewSHEstrategy.ThisstrategyhasbeenendorsedbytheBoard,followingarigorousdevelopmenton-boardingprocessthroughouttheGroup.ThestrategywillbeexecutedoverthemediumtolongtermandwilldrivetheGroup’saspirationstooperatesustainably,withoutharmtopeople,theenvironmentorthecommunitiesinwhicheachofitsbusinessesoperates.

Tragically,afatalityoccurredon26July2017.AcontractortankerdriverwhowasdeliveringmoltensulphurtotheChloorkopsiteonbehalfofasupplier,succumbedtoinjurieshesustainedwhenhefellfromthetopofthetankerwhileintheprocessoftransferringtheproduct.Hisnamehasbeenwithheldoutofrespectforhisfamily.ThisfatalityovershadowedtheimprovementintheTotalRecordableIncidentRate(“TRIR”)to0,39from0,45recordedin2016.TheTRIRmeasuresthenumberofincidentsper200000hoursworked.

Nomajororseriousenvironmental incidentsoccurred.TheGroupcommencedtrackingprocesssafetyincidentsintheyearandthis information is reportedonforthefirsttimeinthisintegratedreport.


CHAIRMAN’S REPORT

02.1

HUMAN CAPITAL

EMPLOYEE DEVELOPMENTProgresscontinuedtobemadeintermsofenablingandfacilitatingthedevelopmentandgrowthofAECI’semployees—theGroup’sgreatestasset.Intheareaofemployeerepresentation,itispleasingthatimprove-mentsareevidentacrossmostemployment levels.Significantworkremainstobedone,however,particularlyatthemostseniorlevels.Additionalprogrammesandinitiativestoacceleratetransformationattheselevelshavebeen initiatedorareatanadvancedplanningstage.FurtherdetailsonemployeedevelopmentandotherHumanCapitalmatters,includinginteraliaB-BBEEandengagementwithorganisedlabour,areprovidedintheHumanCapitalandIntellectualCapitalcommentarycommencingonpages49and55respectively.

SOCIO-ECONOMICDEVELOPMENT(“SED”)SEDisanationalandglobalimperativewhichisembeddedintheAECIGroup’sculture.AECIisaresponsiblecorporatecitizenandinvestsincommunity-focusedorganisationsandinitiatives.TheobjectiveistodevelopandupliftvulnerablecommunitiesneighbouringGroupoperations,inparticular,andacrossSouthAfricaingeneral.

In2017,R35millionwasinvestedinqualifyinginitiativesacrossallnineprovinces.Thishadapositiveimpacton82projects,itsignalledcollaborationwith64beneficiarypartnersandbenefitedover390000beneficiaries.PleasereadtheSocialandRelationshipCapitalreportonpage58.

ACQUISITIONS AND INVESTMENTSTwosignificantacquisitionswereannounced inthelastquarterof2017.BothareinpursuitoftheGroup’sstrategytoaccelerate itsgrowthbyexpanding intonewmarketsanddiversifyingitsgeographicfootprint.

Agreementwasreachedon27October2017fortheacquisi-tionofMuchAsphaltfromCapitalworksPrivateEquityanditspartners.Thetransactionclosedon3April2018,whentheadjustedcashconsiderationofR1988millionwaspaid.

MuchAsphalt isSouthAfrica’stopmanufacturerandsupplierofhotandcoldmixasphaltproducts,andamanufacturer,supplierandapplicatorofbituminousroadbinders,emulsions,primes,pre-coatsandmodifiedbinders.Productsareused,forexample,intheconstructionandmaintenanceofalltypesofroads,airportrunways,parkingfacilities,harbourquays,damliningsandracingtracks.

ThisacquisitionseestheGroupenteringanewareaofbusiness,therebydiversifyingthemarketsinwhichitoperates.MuchAsphaltwilloperateasastandaloneentityinAECI’sChemicalspillar.

KhotsoMokheleCHAIRMAN

23

On8November2017, theGroupannouncedthat ithadtakenasignificantstepforward intermsof itsinternationalexpansionstrategywiththeacquisitionfromImperialHoldingsofSchirm.

Schirm,whichhasfoursitesinGermanyandoneintheUSA,isacontractmanufacturerofagrochemicalsandfinechemicalswithaEuropeanandUSfootprint.ItisthelargestproviderofexternalagrochemicalformulationservicesinEurope.

Thisacquisition,AECI’sfirstofsuchasizeinEurope,wassettledforaconsiderationof€128,4millionon30January2018.ThebusinesswilloperateasastandaloneentityinthePlant&AnimalHealthsegment.

Wewelcome536employeesfromMuchAsphaltand850employeesfromSchirmtotheGroup.

TheintegrationofthesetwoacquisitionswillbeamajorfocusforboththeBoardandExecutivein2018,toensurethatwedeliveronthebusinesscase.

Earlierin2017,AECItookasteponthewaytobecomingaglobalrenewablechemicalsbusinessafterinvestingUS$5million inOriginMaterials,astart-upbasedinCalifornia,USA,thathaspioneeredthedevelopmentofbio-basedchemicalswhichcanbeprocessedintoa largenumberofproductsforapplication inglobalmarketsworthoverUS$200billion.

Origin’sproprietaryprocessuses100%sustainableandrenewableresourcesthatdonotdivertresourcesorlandfromfoodproductionforhumanoranimalconsumption.Theprocessutilisesfeedstocksuchaswoodchips,sawdust,andpreviouslyusedcardboard.

AECIhasjoinedforceswithOriginMaterialstoformanindustrialpartnershiptosupportthedevelopmentofrenewabletechnologies.ThisisinlinewiththeGroup’svaluesofGoingGreen,beingBoldandbeingInnovative.

R22millionhasbeeninvestedinthenewlyestablishedGoodChemistryFund.Theobjectiveofthisfund istofacilitateenterpriseandsupplierdevelopmentforBlackentrepreneursinSouthAfricagenerallyandforthechemicalindustrysupplychaininparticular.Moreinformationonthefundanditsobjectivesisincludedonpage53.

BOARD OVERSIGHT AND GOVERNANCETheBoardwasfullyengagedintheCompany’saffairsduring2017.Overandabove its inputrequiredasamatterofcourseby theCompaniesActandotherlegalandregulatoryframeworks,theBoardalsohadsignificantinvolvementandengagementinotherareas.

ACQUISITIONS AND INVESTMENTSIntermsofthesizeableinvestmentsandacquisitionseffectedduringtheyeartheBoardappointedanadhocInvestmentsCommittee,comprisedsolelyofNon- executiveDirectors,tooverseetherelativeprocessesanddecisionsonitsbehalfandtoreportbackaccordinglytothefullBoard.TheInvestmentsCommitteehassincebeenconfirmedasaStandingCommitteeoftheBoard.

REMUNERATION POLICYTheChairmanoftheRemunerationCommittee, theChairmanoftheAuditCommitteeandI,onbehalfoftheBoard,haveengagedat lengthwithkey institu-tionalshareholdersregardingproposedchangestotheRemunerationPolicy.ThesechangesseektoaddressconcernsraisedbysomeshareholdersregardingtheexistingPolicy.

TherevisedPolicy,theapprovalofwhichwillbesoughtattheforthcomingAnnualGeneralMeetingoftheCompanyon31May2018,isincludedintheRemunerationreportthatcommencesonpage83.

ROTATION OF EXTERNAL AUDITORInDecember2017theBoardresolvedinfavouroftheearlyadoptionoftheIndependentRegulatoryBoardforAuditors’decisioninrespectofthemandatoryrotationofexternalauditorsatleastevery10years.Accordingly,theexternalauditorfor2017,KPMGInc.,willnotbeconsideredforreappointmentforthe2018financialyear.Thechangewilltakeeffectontheclose-outofallmatterspertainingtotheauditforthefinancialyearending31December2017.

KPMGhasbeenAECI’sauditorfor93years,duringwhichtimethefirmhasprovidedarobust,independ-entandhighlycompetentservicetotheGroupand itsshareholders.


CHAIRMAN’S REPORTCONTINUED

02.1

KING IVProgresswasmadeintheyearintermsofadvancingtherealignmentoftheCompany’spracticesandreportingwiththeguidelinescontainedinKingIV,inparticular,andwithchanginglegislativeframeworks,ingeneral.TheBoardacceptsthatthisrealignmentwill requireongoingcommitmentinpursuitofprogressivevalue-addandefficienciestothebenefitofallstakeholders. AsummaryofadherencetoKingIVappearsonpage77.

EVALUATION OF PERFORMANCE OF THE BOARDTheBoardundertook theevaluationof theChair-man’sperformanceaswellastheevaluationoftheperformanceandindependenceoftheNon-executiveDirectorswhowillretirebyrotationandareeligibleforre-electiontotheBoard. InformationonthisprocessandkeyoutcomesisincludedintheGovernancereportonpage73.

CHANGES TO THE BOARDTherewereseveralchangestotheBoardin2017,withtheretirementofSchalkEngelbrechtasChairmanandNon-executiveDirectoroftheCompanyon28February2017andthatofRichardDunneasNon-executiveDirectorandChairmanoftheAuditandRemunerationCommitteeson29May2017.MosesKgosanaandLiziweMdaresignedasNon-executiveDirectorson29September2017and27November2017,respectively.

TheBoardthanksthemallfortheircontributionstotheaffairsoftheCompanyandtheBoardduringtheirtenure.

On 27 February 2018,weweremost pleased toannouncethatPhilisiweSibiyahadjoinedtheBoardasaNon-executiveDirectorwitheffectfromthatdate.PhilisiwewillalsoserveontheAuditCommitteeandwelookforwardtoherinput.

OUTLOOKThe recentdevelopments in the leadershipof thegoverningpoliticalpartyandsubsequentchangestotheCabinetofSouthAfricabodewellforafutureofthecountryandhavecreatedasenseofhopethatisreminiscentoftheonsetofdemocracyin1994.

PoliticaldevelopmentsinothercountriesintheSouthernAfricanDevelopmentCommunityaddtothesensethattherearefreshwindsofchangesweepingthroughtheregion.Foranysuchchangetoconsolidate,itwillbe importantforallsectorsofsocietytoplaytheirrespectiveconstructiveroles. It is inthisregardthattheprivate sector should seriously introspectandmakeitsvalue-addingcontributionforthebenefitofallstakeholders.

Fromaglobalperspective,commoditypriceshaveincreasedduetostrongerdemandandchemicalpriceshaveincreasedonthebackofhigheroilprices.

Thismorefavourableenvironmentboth locallyandinternationallyshouldpresentopportunitiesforAECI’sdiverseportfolioofbusinesses.AsthetwoacquisitionsareintegratedintotheGroup,themanagementofcashandthecontrolofcostswillcontinuetobeafocustoensurethattheCompany’sbalancesheetremainsstrong.

TherateofexchangeoftherandagainsttheUSdollaranduncertainweatherpatternsaretwokeyfactorsthatcouldhavean importanteffectonthecomingyear’sperformance.

ACKNOWLEDGEMENTSIwishtorecordmythankstoallourstakeholdersinclud-ingmyfellowBoardmembers,AECI’smanagement,itsemployeesandcustomersfortheirsupportin2017.WithourcombinedandsustainedcommitmentwecanlookforwardtoenhancingtheCompany’sperformancestillfurtherin2018.

Khotso Mokhele Chairman



SAFETY, HEALTH AND THE ENVIRONMENT (“SHE”)IntermsofourResponsiblevalue,inparticular,aseriousdisappointmentintheyearwasthetragicfatalitythatoccurredatourChloorkopsiteinJuly2017.IwishtoechothesentimentsexpressedinthisregardbyourChairmaninhisreporttoyou.MattersrelatingSHEareandwillalwaysbeapriorityforus.Ouraspirationistooperatesustainably,withoutharmtopeople,theenvironmentorthecommunitiesinwhicheachofourbusinessesoperates.TheGroup’snewZeroHarmstrategy,whichisdiscussedonpage62,setsoutmilestonesforthisjourney.

Thediligentmanagementof theGroup’senvironmentalfootprintisalsotopofmindandisinnotonlyinlinewiththeZeroHarmstrategybutalso intrinsicallyboundtoourGoingGreenvalue.AECIacknowledgesthatithasadutytomeettheexpectationsofthebroadersocietyandchanges in legislativeframeworkswhen itcomesto itsenviron-mentalperformance. In linewiththis, themostsignificantundertakingfortheshorttomediumtermistheinvestmentofR200millionincapitalexpenditurethathasbeenapprovedforprojectsatourModderfonteinexplosivesmanufacturingoperationssoastoachievecompliancewithrevisedemissionstandardsby2020.

PEOPLEOurpeopleareourgreatestassetandtheirdevelopmentandadvancement isanotherpriority,inlinewithourvalueofbeingEngaged.ItisonlywiththeirinputandcommitmentthatwecanadvanceouraspirationsofbeingBoldandInnovative.IampleasedtoreportthattheresultsofeffortstoenhanceAECI’sEmployeeValuePropositionwereevidentintheyear.

Goodprogresswasmadeinareassuchasperformancemanagement, thedesignofaprogressiveHumanCapitalManagementSolutionsoftwareprogramme,andEmploy-mentEquity(“EE”).InEE,theGroup’sEEPlanthatranfrom2014to2017contributedtobetterinclusivityatmostemploymentlevels.However,workremainstobedoneatthemostsenior levelsandthecommitmentofboththeBoardandmanagementissteadfastinthisregard.

BROAD-BASED BLACK ECONOMIC EMPOWERMENT (“B-BBEE”)AECIrecognisestheimportanceofachievingasustainablesocio-economicenvironmentthroughthemeaningfulparticipationofBlackpeopleinthemainstreameconomyandtheCompanyiscommittedtotheimplementationandsuccessofbroad-basedempowermentinallitsbusinessesinSouthAfrica.

AECIwasaLevel4B-BBEEContributor intermsoftheB-BBEEActandthepreviousCodesofGoodPractice.ThisdeterioratedtoLevel8oncetheAmendedCodestookeffect.TheobjectivebecametoreturntoLevel4bynolaterthan2020andadditionalmeasureswereputinplacetoachievethis.Itwasextremelypleasing,therefore,thattheGroupexceededitsobjectivewhenitwasassessedasaLevel3 Contributor inApril2018.ThekeymeasurethatenabledthiswastheGroup’sR22millioninvestmentintheyearinthenewlyestablishedGoodChemistryFund.TheobjectiveofthisfundistofacilitateenterpriseandsupplierdevelopmentforBlackentrepreneursinSouthAfricagenerallyandforthechemicalindustrysupplychaininparticular.Thiswillbetotheadvantageoftheindividualsaffectedandthecountryasawhole.MoredetailedcommentaryonthisandothermattersintheveryimportantB-BBEEarenacanbefound intheHumanCapitalreportcommencingonpage49.

GOVERNANCEStrongand responsivegovernancestruc-tures,undertheBoard’s leadership,areattheheartofourcorporatecitizenshipimper-atives.Furtherrefinementstointeraliariskmanagementsystemsandprocessesweremadeintheyearandareexplained intheRiskManagementandGovernancereportscommencingonpages8and72,respectively.

Dear Stakeholders

Our BIGGER values — of being Bold, Innovative, Going Green, and being Engaged and Responsible underpin all activities in the AECI Group. The continued embedding and practical application of these values played a pivotal role in the achievement of good financial results and significant strategic progress in 2017, to the benefit of our shareholders, our employees and the communities in which they live, our customers and suppliers, and the economies of the countries in which we operate.

CHIEF EXECUTIVE’S PERFORMANCE REVIEW


CHIEF EXECUTIVE’S PERFORMANCE REVIEW

02.2

MarkDytorCHIEFEXECUTIVE

BUSINESS PERFORMANCETheChairmanhassummarisedtheyear’sperformanceandthekeyinternalandexternalfactorsthataffectedit.Themovements intheZAR/US$exchangerate,oilpricesandthe impactsofthedrought intheWesternCape,inparticular,werekeyamongthese.

Hehasalsohighlightedthat,forthefirsttime,wepresentedtheGroup’sresultsbygrowthpillarsoastobetteralignourreportingwithourgrowthstrategy.ThesepillarsarenowthereportingsegmentsandthecontributionofeachofthemtotheGroup’srevenueandprofitability isshown inthechartsonthenextpage.

27

MINING SOLUTIONS

▲5,5%VOLUMES

R9718mREVENUE▼2,2%

R1097mPROFIT FROM OPS▲20,4%

Thissegmentcomprisesexplosives(AELMiningServices(“AEL”))andminingchemicals(ExperseandSenmin). It istheGroup’slargest,mostinternationalisedbusiness.Thesecompanieshave their own unrestricted intellectualproperty,enablingthemtoservicecustomersworldwide.Betweenthemtheyhavecloseto100operations(includingmanufacturingplants,salesofficesanddistributioncentres)inmorethan20countries,withaparticularlyextensivefootprintinAfrica.AELhasanestab-lishedpresenceinIndonesiaandAustraliaandbothSenminandExpersehavealsoexpandedtheirfootprintsintoothercountries.

Diversificationisalsosignificantintermsofcustomers’miningmethodsandthemineralsthattheymine.The2017percentagerevenuesplitbymineralminedwasasfollows:

22 PLATINUM20 GOLD16 COPPER15 IRON ORE12 COAL5 DIAMOND2 URANIUM8 OTHER

22

20

16

15

12

52

8

ProfitfromoperationsimprovedsignificantlytoR1097million—20,4%aheadoflastyear’sR911millionasaresultofvolumegrowthandamorefavourableproductmix inthesegmentasawhole.Theoperatingmarginalsoimprovedfrom9,2%to11,3%.Theseexcellentimprovementswererealisedeventhoughrevenuedeclinedby2,2%toR9718million(2016:R9938million)duemainlytolowerammoniaprices,andhencesellingprices,formostoftheyearandastrongerrandagainsttheUSdollar.Morethan50%ofrevenueinthissegmentisUSdollarbased.Movementsintheammoniapriceandtheexchangerateareillustratedinthegraphsonthefacingpage.

EXPLOSIVESOverallbulkexplosivesvolumes increasedby6,5%andby1,7%forinitiatingsystems.

InSouthAfrica,explosivesvolumeswere4,8%higherwith robustdemand inthesecondhalf-yearfromcustomersinthesurfacecoal,ironoreandplatinumminingsectors.Under-groundgoldandplatinumminingcustomersremainedunder significant costpressureandtherewereseveralmineclosures.Theconclusionofanumberofcorporateactionswillseeconsolidationofmineownership intheundergroundmarketin2018.Volumesofinitiatingsystemsgrewby1%.

2017 OUTER CIRCLE2016 INNER CIRCLE

PROFIT/(LOSS) FROM OPERATIONS (%)

MINING SOLUTIONSWATER & PROCESS PLANT & ANIMAL HEALTHFOOD & BEVERAGECHEMICALSPROPERTY & CORPORATE

6968

1212

8 13

14

24

29

(17)

(23)

REVENUE (%)EXCLUDES INTER-SEGMENT REVENUE

MINING SOLUTIONSWATER & PROCESS PLANT & ANIMAL HEALTHFOOD & BEVERAGECHEMICALSPROPERTY & CORPORATE

5252

8

8

1313

6 6

1919

2

2


CHIEF EXECUTIVE’S PERFORMANCE REVIEWCONTINUED

02.2

IntherestofAfrica,explosivesvolumesgrewby5,2%.HighercopperpricesbenefitedthebusinessinCentralAfricawhiletheWestAfricangoldminingsectorcameunderpressureascustomersminedtheirstockpiles.Deploymenttoservicenewbusinessgainedinthefirsthalfoftheyearcommencedinthelastquarter.

VolumesintheAsiaPacificregionwere12,5%higheryear-on-yearonthebackofhigherdemandfromcoalminingcustomersandadditionalcontractssecured.ThebusinessesinIndonesiaandAustraliawereprofitableandcashgenerative.

MINING CHEMICALSTheminingchemicalsbusinessesdeliveredasolidperformance.Therewasgoodgrowthinsurfactants,withimprovedconditionsintheminingsector.InSouthAfrica,Senminalsogrewinlinewiththeimprovementinminingoutput.Exportsaleswerelower,however,primarilyasaresultofakeydistributorlosingmarketshare.Overallminingchemicalsvolumesdeclinedby1,3%.

Lookingahead,theglobalminingindustryappearstobeonasolidrecoverypath.Sentimentismorepositivethanitwas18monthsagoandthelonger-termoutlookforinvestmentinthesectorhasimproved.

AECI’sMiningSolutionssegmentiswellplacedtobenefitfromthis.Enhancedandinnovativeproductsandservicescontinuetobeaddedtotheofferingforestablishedandnewcustomers.Examplesincludepumpableemulsionexplosiveswhichareappliedinundergroundmining.Theseproductshavesafety-andcost-relatedbenefitsandarealreadywellacceptedinSouthAfrica’sgoldminingsector.

Anotherexampleisdevelopmentworkinprogressonwirelesselectronicdetonatorsdesignedto improveaccuracyandsafetyinever-deepernarrowreefmining.

Senmin’sR90millionxanthatesexpansionproject isprogressingwellandcommissioningisexpectedinthesecondhalfof2018.Thiswilladdabout4000tonnesperannumofcapacityattheSasolburgsite.Xanthatesareusedinthebeneficiationofmineralssuchasgold,platinumandcopperanddemandissignificant,includinginCentralAfricawherethecopperminingsector isundergoingaprice-drivenresurgence.

AMMONIA PRICE PER TONNE

8 000

7 000

6 000

5 000

4 000

3 000

2 000

1 000

0

800

700

600

500

400

300

200

100

0

ZAR US$

US$ZAR

Source: AEL

JAN

15

JAN

16

JAN

17

MAY

15

MAY

16

MAY

17

JUL

15

JUL

16

JUL

17

MA

R 1

5

MA

R 1

6

MA

R 1

7

SEP

15

SEP

16

SEP

17

NO

V 1

5

NO

V 1

6

DEC

17

ZAR Ave. 16 = 5 571

US$ Ave. 16 = 360

ZAR Ave. 17 = 4 534

US$ Ave. 17 = 277

ZAR/US$ EXCHANGE RATE

18

17

16

15

14

13

12

11

10

9

Source: Bloomberg

JAN

16

JAN

18

Open Jan 16 = 15,48 Open Jan 17 = 13,73

Close Dec 17 = 12,31

OC

T 16

AP

R 1

6

JUL

16

OC

T 17

JUL

17

AP

R 1

7

JAN

17

Ave. 16 = 14,72

Ave. 17 = 13,31


Biocult’sofferingisonecomponentofNulan-dis’NuWayphilosophy.NuWayrecognisesthemomentumthatbio-agriculture isgainingglobally,includinginAfricawhereNulandis’footprintwasexpandedthroughtheacquisi-tionofFarmersOrganisation,in2015.NuWayisaholistic,moreenvironmentallyfriendlyapproachtotheapplicationofproductsforsoilandplanthealth.Thisapproachwillcontinuetoberolledoutin2018andinfutureyears.

SCHIRMTheacquisitionofSchirmwasannouncedinNovember2017andwascompletedwitheffectfrom30January2018.Thiscompanyiscurrentlybeing integrated intotheAECIGroup,whereitwilloperateasastandaloneentityinthePlant&AnimalHealthsegment.

Schirmisanestablishedcontractchemicalmanufacturerwhichprovidesan integrat-edserviceacrosstheentirevaluechainofsynthesis, formulation and packaging ofagrochemicalsandfinechemicals.Agrochem-icalproducts includeherbicides,fungicidesand insecticideswhile thefinechemicalsportfoliocomprises rawmaterialsfor thebiocides,personalandhomecare,adhesivesandrubberindustries.

Thecompanyistheleadingproviderofformu-lationservicesforagrochemicals inEuropeanditsservicesinclude:

› synthesis: rawmaterials fromsuppliersorcustomersareconvertedtochemicalproductsandeithersoldtocustomersorutilisedbySchirminformulationprocesses;

› formulation:Schirmusesproductsfromitsownsynthesisprocessand/orproductsfromcustomersandsellsformulationsinbulktothosecustomers;and

› packagingandlabellingofliquidandsolidchemicalproductsinallpackagingsizes.

The sale of agrochemicals accounts forapproximately80%of Schirm’s revenue,withfinechemicalscontributingthebalance.Approximately80%ofrevenueisgeneratedinEurope,primarilyinGermany,andtherestisgeneratedintheUSA.

Thereare great opportunities for similarprojectsnotonlyacrossSouthAfricabutalsoinEastandWestAfrica.Potentialinvestmentsinplantandproductionequipmenttoservethemarket inboththeseregionsarebeingassessed.

PLANT & ANIMAL HEALTH (Nulandis)

▲11,5%VOLUMES

R2543mREVENUE▲0,1%

R133mPROFIT FROM OPS▼22,9%

RevenuewasflatatR2543million(2016: R2 540 million). Profit from operationsdeclinedby22,9%toR133million (2016:R172million),primarilyasaconsequenceofthedroughtintheWesternCapeandthestrongerZAR/US$exchangerate.

Theworseningtrendinbelow-averagerainfallintheWesternCapeoverthelastthreeyearsisevidentinthegraphabove.

DroughteffectsalsohadanimpactonFarmersOrganisationinMalawi.

TheinvestmentinthecalciumnitratesandammoniumnitratesplantatModderfonteinwascompletedandNulandisrecordedrobustgrowthinitsbulknutritiondivision.

Biocult’strialsinboththeUSAandCanadaweresuccessfulandthenextphaseoftheexpansionprogrammewillbepursuedfollow-ingregulatoryapproval.

BiocultistheleadingproduceranddistributorofMycorrhizaeinAfrica,supplyingitsproductsto someof largestandmost successfulfarms inSouthAfrica,Namibia,BotswanaandKenya.

Mycorrhizaeisanaturalproductthatpromotessustainableagriculturethroughsoilhealth.Itcanbeappliedtofarmsandlandscapesofallsizesandhasbeendevelopedforuseinawiderangeofagriculturalsectors,includingwheat,maize,animalfeed,fruit,vegetables,legumes,tropicalproduce,vineandsugar.

WATER & PROCESS (ImproChem)

▲9,4%VOLUMES


R182mPROFIT FROM OPS▲14,2%

ImproChemprovidesintegratedwatertreat-mentandprocesschemicals,andequipmentsolutions,foradiverserangeofapplicationsinAfrica,whereaccesstowaterofappropriatequality issometimesscarce.Applicationsinclude,interalia,publicandindustrialwater,desalinationandutilities.

Thestrategyistocontinuetoleveragethebenefitsoftheestablishedfootprintonthecontinentandpleasingprogresswasmadeinthepublicwaterandindustrialsectorsintheyearunderreview.30%ofImproChem’stotalrevenueisnowgeneratedinotherAfricancountries.ThisenabledImproChemtoachievegrowthandimproveitsmargininlinewithexpectations.

RevenueofR1454millionwas3,2%higher(2016:R1408million)andprofitfromopera-tionsgrewby14,2%toR182million(2016:R159million).Growth intheSouthAfricancoremarket,however,wascurtailedbypoorconditionsinthemanufacturingsectoranddroughteffectsintheWesternCape.

Fourcontractsfortheinstallationofdesali-nationplantsforindustrialcustomersintheWesternCapeweresecuredfordelivery inthefirsthalfof2018andadditionaloppor-tunitieshavebeenidentified.Theseplantstreatseawater todrinkingwaterqualitystandards,makingitpossibleforcustomerstobeself-sufficientintermsoftheirprocesswaterrequirements.Typically,eachplanthasthecapacitytodesalinateaboutonemillionlitresofseawateraday.

ImproChemalsocontinuedtosupplycontain-erisedwaterplantstocommunitieslivinginareaswhereaccesstopotablewater isachallenge. Inoneinstance,acommunity ineThekwini,KwaZulu-Natal,wasprovidedwithaccesstopotablewaterjust10daysaftertheplanthadbeeninstalled.

800

600

400

200

0

CUMULATIVE RAINFALL: WESTERN CAPE

Data: SAWS through GSOD Figure: Climate System Analysis Group, UCT

2015 2016 2017 20 to 80 percentile range (40 years)JA

N

JAN

JUL

MA

R

MAY

NO

V

SEP

mm



02.2

reviewedandredoubleditsstandardmonitor-ingandmanagementeffortsinviewoftherecentoutbreakoflisteriosis.

TheAfoodableListeriaManagementProgram(“ALMP”)encompassesthetestingofindicatormicroorganismsandpathogensandappliestoallprocessingandstorageunits.TheALMPis a fully documented and implementedprocessand,as it isa requirementoftheFSSC22000:2016accreditation,itisreviewedregularlyandsubjectedtoannualauditingbytheaccreditationbody.

CHEMICALS (Chemfit,ChemicalInitiatives,ChemSystems,IndustrialOleochemicalProducts, SANSTechnicalFibers)

▲1,0%VOLUMES


R365mPROFIT FROM OPS▼7,2%

ThissegmentremainsextremelyimportanttotheGroup.Itsdiverseconstituentbusinesses,mostofwhicharefocusedonSouthAfrica’smanufacturingsector,arehighlycashgenera-tive,tothebenefitofAECIasawhole.Althoughtheygenerallyhaverelatively lowcapitalexpenditurerequirements, investmentsforgrowththatproviderequisiteratesofreturnarenonethelessevaluatedonanongoingbasis.Asanexampleofthis,aUS$6,1millioninvestmenthasbeenapprovedfortheinstal-lationofsinglestagepolyestermanufacturingequipmentatSANSTechnicalFibers intheUSAtomeetgrowinglocaldemand.

Thebusinessesseektogroworganicallyandthroughbolt-onacquisitions.Otherkeydriversarecostcontrolandportfoliomanagementsoastoreactquicklytochangesincustomers’requirements.

In2017,revenuefromthesegmentinapoortradingenvironmentwasflatR3564million(2016:R3548million).AlthoughprofitfromoperationsofR365milliondeclinedby7,2%(2016:R394million)thisstillrepresented24%oftheGroup’stotalprofitability.

wasR64million(2016:R13million).Intheprioryear,goodwillrelatingtothepoultrybusinesswasimpairedatacostofR28million.

LakeFoods’foodadditivesandperlitefiltrationdivisionsperformedwell.Newproductswereaddedtothefoodadditivesportfolio,inparticu-lar,throughagreementswithexistingandnewprincipalsandthisisexpectedtobenefitthesegment’sperformancegoingforward.

Inthejuicebusiness,solidprogresswasmadein implementingthestrategytogrowthehighervalue-addedformulatedjuicebusiness(through,interalia,partnershipswithCloverandothermultinationalcustomers)andtofocuslessontradingactivities.

Owingtoextremeweatherevents,suchassevereflooding inArgentinaanddroughtconditions inpartsofSouthAfrica, itwasnecessarytopurchasestrategicconsignmentsofrawmaterialsforthejuicebusiness.Thishadanegativeimpactontradeworkingcapitalbutacorrectionshouldbeevidentbythemiddleof2018.

AsiteadjacenttoSCP’scurrentCapeTownoperationswasacquiredfortheexpansionofwarehousing,distributionandtechnicalfacil-ities.ItisintendedthatallFood&BeverageactivitiesintheWesternCapewillultimatelybeconsolidatedonthatsite.

FOOD SAFETYIn thefood industry,productsafety isofpivotal importance.LakeFoods’Afoodabledivision ispotentiallythehighestatriskofcontaminationbybacteria,includinglisteria.Thisbusinessproducesanextensiverangeofitsownunbrandedproductsforthecateringandbutcherymarketsaswellasactingasamanufacturerandco-packerforlargerlocalcompanies, includingsomeretailoutlets.Afoodablealsoproducesanextensiveselec-tionofethnicproductsforagroupoflocalandinternationalexporters.

Inlinewithitspolicyandregulatoryobliga-tiontoproactively implementproceduresandprogrammestodealwithbacteria intheproductionenvironment,Afoodablehas

Schirmisasupplierto leadingglobalcropprotectionchemicalproducerssuchasBayer,BASF,DuPont,Syngenta,SumitomoChemicalandLanxess.Ithasrelationshipsaveragingover30yearswithits10largestcustomers.

Over the last twofinancialyears,Schirminvestedapproximately€25millionincapitalexpenditure intermsofcertaincontractualarrangementswithstrategiccustomersandon installingastate-of the-artsynthesisplantatitsSchönebecksite.Sparecapacityremainingfromtheupgradewillbefilledinthecomingyears.Theseinvestmentshaveprovidedtheadditionalcapacitynecessarytoachieve significantgrowth inSchirm’ssynthesisoperations.

AECIalreadyhaswell-establishedbusinessesinAfrica,SouthEastAsia,NorthAmericaandAustraliaandtheacquisitionofSchirmwasanexcellentfitintermsoftheGroup’sinternationalexpansionandcurrencydiver-sificationstrategies.

SchirmpresentedastronginvestmentcaseforAECI. Inadditionto itsmarket-leadingposition,customerrelationshipsandrecentcapacity expansion, there are potentialsynergiesassociatedwiththeextensionofSchirm’smanufacturingexpertisetotherestoftheGroupaswellasexpansionandsupplychainopportunitiesforNulandis.Further,thereareopportunitiesforAECItoreplacesomeoftherawmaterials itcurrently importsfromthirdpartiesandtoenhancegeographicandproductdiversityforitsChemicalsportfolio.Differingseasonaldemandcyclesinthenorth-ernandsouthernhemispheresalsopresentpotentialbenefits.

FOOD & BEVERAGE (LakeFoodsandSouthernCannedProducts(“SCP”))

▲7,2%VOLUMES


R64mPROFIT FROM OPS▲>100%

RevenueofR1195millionwas6,5%higherthan2016’sR1122million.Profitfromoperations


SA MANUFACTURING VOLUMES

115

110

105

100

95

90

85

80

Seasonally adjusted Trend cycle

JAN

08

JAN

10

JAN

09

JAN

11

JAN

12

JAN

13

JAN

16

JAN

17

JAN

15

JAN

14

DEC

17

Dec y-o-y = 2,0%Cum change y-o-y = -0,5%

Base: 2015 = 100 Source: Stats SA

Index

ThemaincontributorstothedeclineweretheclosureofHuntsmanTioxideattheendof2016,withanegativeR25millionimpactoncontribution,andthesharpstrengtheningofthe localcurrencyagainsttheUSdollaratyear-endinparticular.Overthefullyeartheeffectsof thestronger randcurtailedthebenefitsofhigheroilprices,whichdriveincreasesinchemicalinputpricesandhencesellingprices.

It was nonetheless commendable that,notwithstandingdepressedmarketconditions,overallvolumes increasedby1%andtheoperatingmarginremainedrobustat10,2%(2016:1,1%).Ascanbeseen inthegraphabove,outputfromSouthAfrica’smanufac-turingsectorcontractedby0,5%overthefullyearbutincreasedby2%year-on-yearforthemonthofDecember.Thisturnaroundappearedtobecontinuinginto2018.AECIhastheplantcapacityavailabletorespondquicklytoanygrowthindemandfromitscustomers.

In2016,theGroupearnedR28millionfromitsjointventuresandassociates.Noearningswerereceivedin2017owingtoaR54millionimpairmentofCrestChemicals’causticsodabusiness.CrestChemicals isa50% jointventurewithBrenntagAG.

MUCH ASPHALTThe acquisition of Much Asphalt fromCapitalworksPrivateEquityanditspartners,announcedinOctober2017,wasconcludedon3April2018.MuchAsphaltisSouthAfrica’sleadingmanufacturerandsupplierofhotandcoldmixasphaltproducts,andamanufac-turer,supplierandapplicatorofbituminousroadbinders,emulsions,primes,pre-coatsandmodifiedbinders.ThisbusinesswillbeintegratedintotheChemicalssegment.

TheacquisitionisinlinewithAECI’sstrategytoaccelerate itsgrowthbydiversifying itsproductsandmarkets.

GOING GREENIn line,too,withthediversification impera-tivenotonlyforthe immediatefuturebutalsoforthelonger-term,theGroupmadeastrategicinvestmentofUS$5millioninOriginMaterials(“Origin”)andJointDevelopmentAgreementsarebeingprogressed.Origin isaprivately-ownedcompanyintheUSwithnewtechnology inrenewablechemicals. Itisanticipatedthatapioneerplantwillbeconstructedinthefirsthalfof2019.

INNOVATIONBoththeacquisitionofMuchAsphaltandtheinvestmentinOriginwereopportunitiesidenti-fiedviatheAECIGrowthOffice,establishedaspartoftheGroup’s Innovation initiativelaunchedin2016.

TheobjectiveistoaccelerategrowthintheGroup’srevenueandprofitability.ProjectsarebroadlycategorisedasbeingintheBusinessofTomorrow,withthefocusonvalueinthelonger term,or in theBusinessofTodaywhereinnovationdriveshomeinonreducinginternalcostsandenhancingefficienciesincurrentoperations.

IntheBusinessofTomorrow,andinadditionto theOrigin partnership, good progresswasmadewithregardtootheropportuni-ties inrelevantstart-upsand/ordisruptors.Technologypartnershipswithuniversitiesandresearchinstitutionslocallyandabroadalsoprogressed.

FortheBusinessofToday,employeessubmittheirinnovativeideasviaanIdeationPlatform.Theimplementationoffourofthese ideaswasbeingadvancedbytheendof2017andthesignificantadoptionbyourpeopleofthisinitiativebodeswellfortheoverallbusinessgoingforward.

ACKNOWLEDGEMENTSItwouldnothavebeenpossibletoachieve2017’sresultsorprogresstheimplementationoftheGroup’soverallgrowthstrategywithoutthededicationandsupportoftheBoard,theGroup’smanagementteamsandallofourvaluedemployees.Ithankeachoneofyou.

Thanksarealsoduetoourmanybusinesspartners, customers, suppliersandotherstakeholderswhose unwavering supportremainshighlyappreciated.

Mark Dytor ChiefExecutive




02.2

33

CHIEF FINANCIAL OFFICER’S REPORT

MarkKathanCHIEFFINANCIALOFFICER

HIGHEST-EVER RECORDED HEPS

+17,2%to959cORDINARY DIVIDENDS FOR THE YEAR

+10%to478cps

34

CHIEF FINANCIAL OFFICER’S REPORT

02.3

OPERATING SEGMENTSDuring2017,AECIcompletedtherealignmentofitsinternalreportingtoreflectmanagementstructuresinsupportofitsfivestrategicgrowthpillars.Financial reportingtostakeholders,includingthat intheintegratedreport,wassimilarlyrealigned.Inprioryears,theoperatingsegmentswerereportedasExplosives,Chemi-calsandProperty.Thesegmentalreportingfor2017reflectsthestrategicgrowthpillarsforthefirsttimeandthiswillcontinueinfutureyears.ThesegmentsareMiningSolutions,Water&Process,Plant&AnimalHealth,Food&Bever-age,andChemicals.Moredetail,includingtherestatementofcomparativeresultsintheprioryear, isprovidedinnote31tothefinancialstatementsinsupportofthischange.

Alsoinsupportofthepillarstrategy,andtoreducecostsandcomplexity,theGroupcontin-uedtorestructureitslegalentities.ThiswasspecificallyapplicabletotheMiningSolutionsandWater&Processsegments,whereanumberoflegalentitieswerecombined.

FINANCIAL PERFORMANCEAECIperformedverywellin2017despitethechallengesofastrengtheningrandandtheprevailingeconomicandpoliticalclimateinSouthAfrica.Weareverypleasedwithourresultsandthestrategicbasethatwehaveconsolidatedandwearepositiveintermsofourprospectsforthefuture,asalreadyoutlinedbyboththeChairmanandtheChiefExecutive.

TheGroup’stotalrevenuedeclinedby1%asdidtheproportionofrevenuegeneratedoutsideSouthAfrica.Foreignincomeinrandtermswasaffectedbythestrongerlocalcurrencyyear-on-yearandlowerammoniumnitratepricesintheperiod.Itwasgratifying,though,thatvolumegrowthwasachievedonthebackoftherecoveryincommodityprices,particularlyinthelastquarter.

Operatingprofitwas18%higheratR1579millionandEBITDAofR2176million(excludingequity-accountedearnings)improvedby11%.

Thesemovementswereaffectedby:

› ayear-on-year reduction in the levelofimpairmentsofproperty,plantandequip-ment;

› theeffectsofde-riskingthedefined-benefitobligationsforpastandcurrentemployees,which impactedresults inboth2016and2017;and

› accrualofthecostsincurredinrespectofthetwosignificantbusinesscombinationsannouncedduringtheyear.

Takingtheseadjustmentsintoaccount,theGroup’sunderlyingperformancenonethelessshowedapleasingimprovement,asdemon-stratedintheanalysisbelow.

TheunderlyingEBITDAincreasedby4,2%toR2285million(excludingequity-accountedearnings).

Dear stakeholders

This report is intended to provide a high level overview of the financial performance of the AECI Group for the year ended 31 December 2017.

UNDERLYING PERFORMANCERmillions 2017 2016 %change

Reportedoperatingprofit 1 579 1 335 18

Transactioncosts 105 —

Defined-benefitsettlementcosts 4 149

Impairments 13 82

1 701 1 566 9


EARNINGS PER SHAREHeadlineearningspershare(“HEPS”)increasedby17%toarecord959centsandbasicearningspershareroseby22%to900cents.Resultsinboth2016and2017wereaffectedbyequiv-alentonce-offcosts.TheunderlyingHEPSwas1061cents,a15%increaseover2016’scomparableresult,whileunderlyingEPSwas 1003cents,anincreaseof20%ontheunder-lyingEPSof837centsearnedintheprioryear.

DIVIDENDSTheBoarddeclaredafinalordinarycashdividendof340centsforthe2017financialyear.Thiswas13%upon2016’s300centsandbroughtthetotaldividendfortheyearto478cents(435centsin2016),a10%year-on-yearincrease.

Grossdividendsof40centsand44centspersharewerealsodeclaredontheunlistedBordinarysharesgrantedtoemployees intheircapacityasbeneficiariesoftheAECIEmployeesShareTrust. Thisbrought thedividendsdeclaredonthosesharesinlinewiththedividendsdeclaredontheAECIordinarysharesuptoand includingtheendofthe2017financialyear.

BUSINESS COMBINATIONS AND INVESTMENTSTwosignificantacquisitionswereannouncedinthelastquarter.BothareinpursuitoftheGroup’sstrategytoaccelerateitsgrowthbycontinuingtodiversifyitsgeographicfootprintandbyexpandingintonewmarkets.

TheacquisitionofSchirm,foracashconsider-ationof€128,4millionfromImperialHoldings,becameeffectiveon30January2018.SchirmisbasedinGermanyanditwilloperateasastandaloneentity inAECI’sPlant&AnimalHealthsegment.Thebusinessisbeingintegrat-edandtheinitialaccountingforthebusinesscombinationis inprogress.TheacquisitionofMuchAsphaltfromCapitalworksPrivateEquityanditspartners,foranadjustedcashconsiderationofR1988million,closedon3April2018andthisbusinesswillnowbeintegratedintotheChemicalssegment.

AECIisevaluatingitsfundingoptionsforthesetwosignificanttransactions,thebiggestoftheirkindintheCompany’slonghistory.BridgingfacilitiesareinplacethroughtheStandardBankofSouthAfricaandthesewillbereplacedbyappropriatefundingduringthecourseof2018.

Also in linewith itspursuitofacceleratedgrowththroughdiversification,theGroupmadeastrategicinvestmentofUS$5million(R65million)inOriginMaterials(“Origin”).Originisaprivately-ownedcompanyintheUSAwithnewtechnologyinrenewablechemicals.

RETURN ON INVESTED CAPITAL (%)

HEADLINE EARNINGS AND DIVIDENDS PER ORDINARY SHARE

1 000

800

600

400

200

0

’13

’13

’14

’14

’15

’15

’16

’16

’17

’17

Headline earnings (Cents)

Dividends declared(Cents)

14

13

12

11

10

9


CHIEF FINANCIAL OFFICER’S REPORTCONTINUED

02.3

R22millionhasbeeninvestedinthenewlyestablishedGoodChemistryFund.Theobjec-tiveoftheFundistofacilitateenterpriseandsupplierdevelopmentforBlackentrepreneursinSouthAfricagenerallyandforthechemicalindustrysupplychaininparticular.

Thesaleofaninitial51%ofSouthernCannedProducts’OlivePridebusinesstoCloverSA(Pty)LtdwascompletedwithAECIretainingsignificantinfluenceandaccountingforthecontinuingresultsoftheseparatecompany,CloverPride,asanassociate.

FINANCIAL POSITION AND CASH FLOW TheGroupgeneratedcashflowsofR1221million from itsoperatingactivities. Thisrepresentedadisappointingdeclineof37%over2016.Theobjectivefor2017wastofurtheroptimiseworkingcapitalormaintainthe levelsachieved in2016. ImprovementwasnotachievedattheoverallGrouplevel,thoughsomesuccesseswereachievedinafewbusinesses.Anexcellentsalesperfor-manceinthelastquartercontributedtotheadditionalworkingcapitalinvestment.Whilethissurgeinsaleswaspositive,managementhasre-emphasisedthefocusoncontrollingworkingcapitalastheGroupmovestoahighergearingpositiononcebothlargeacqui-sitionstakeeffect.Atyear-end,theGroup’stradeworkingcapitaltorevenueratiowas15,4%—adeteriorationfromthe12,7%inDecember2016.Althoughworkingcapitalwasnotexcessiveatyear-end,managementwillcontinuetodrivethereductionofthisratiotoensurethatoptimallevelsaremaintainedineachbusiness.

R704millionwasinvestedincapitalprojects(2016:R502million).ThiswaswellabovetheGroup’sdepreciationandamortisationchargeandreversedthetrendestablishedintheprecedingthreeyearswhencapitalexpenditurewascontainedbelowthislevel.Ofthetotalinvestment,R288millionwasforexpansionprojects,includingtheexpansionofSenmin’sxanthatesproductioncapacitywhereR36,9millionhadbeenspentbyyear-end,expendituretosupportbusinessexpansionintherestofAfricaandprojectsinthePlant&AnimalHealthandFood&Beveragesegments.MaintenanceexpenditureaccountedforthebalanceandincludedthestatutoryshutdownofAEL’sNo.11NitricAcidplantatModderfontein.

Netdebt,whichincludeslong-termandshort-termdebtandcash,increasedmarginallyin2017primarilyasaresultoftheinvestmentinworkingcapital intheyear.TheGroup’sdebttoequityratio,orgearing,was5%at31December2017(3%inDecember2016).Gearingwill increasein2018astheGroupexpectstofundtheacquisitionsofSchirmandMuchAsphaltprimarilythroughtermdebt.

RETURN ON NET ASSETS

12 000

10 000

8 000

6 000

4 000

2 000

0

20

18

16

14

12

10

8

6

4

2

0

Average assets at cost (Rm)

Return on net assets (%)

NET WORKING CAPITAL TO REVENUE

3 500

3 000

2 500

2 000

1 500

1 000

500

0

25

20

15

10

5

0

Net working capital(Rm)

Net working capital to revenue(%)

’13

’13

’14

’14

’15

’15

’16

’16

’17

’17


TheGroup’soperationsgeneratedcashflowsofR2350million,marginallyhigherthan2016’sresult.Interestpaiddeclinedyear-on-year,asexpected,duetothelowerlevelofnetdebtthroughouttheperiod.Taxpaidwaslowerdespitethehigherprofitbeforetaxdueprinci-pallytolowerwithholdingtaxesandprovisionalorassessedtaxespaidin2017.Althoughthecashgenerationinworkingcapitalseenin2016couldnotberepeated,thiswastemperedbyimprovedtradinginthelastquarterandhencetheinvestmentinworkingcapital.Therewasalsoacashoutflowinsettlementoftheaccrualforthedefined-benefitobligationsmadein2016.Dividendspaid increasedby14%toR497millionin2017.

TheGroup’stermdebtwasR1600millionatyear-end,unchangedfrom2016,R500millionofthedebtwillberepaidin2018.Short-termdebtwasapproximatelyR30million.AECI’scommitment toacquisitionsamountedto R4173millionwhichwillbefundedbybridg-ingloansintheshorttermasalternativesareevaluated.

AllloancovenantsweremetandAECI’sexter-nalcreditratingfromaSouthAfricancreditratingagencyremainedata long-term“A”ratingwitha“stable”outlook.Thefundingoftheacquisitionshasthepotentialtosubstan-tiallyincreasethegearingandrequireafocusoncashmanagementandgenerationin2018toensurethatthispositionismaintained.

TAXProfitaftertaxfortheyearincreasedby21%,slightlyhigherthantheincreaseinprofitfromoperations.AECIincurredalowernetinterestbutatahighereffectivetaxrate.Thegoodcashgenerationin2016assistedinkeepingthelevelofborrowingslowerinthecurrentyear.

Theeffectivetaxratewas30%,comparedto29%intheprioryear,owingmostly toincreaseddividendwithholdingtaxespaidintheyearaswellastheimpactofthecapitalcostsaccruedfortheacquisitions.

CORPORATE COSTSCorporatecostswereimpactedsignificantlybyprofessionalfeesofR105millioninrespectoftheacquisitions.In2016corporatecostswereimpactedbytheR149millionlossrecognisedonthesettlementofdefined-benefitobligations.Excludingthoseonce-offitems,costswerewellcontained,assistedbystabledefined-benefitcostsandasimilarlevelofchargesinrespectoflong-termincentiveschemes.

BORROWINGS AND GEARING

2 500

2 000

1 500

1 000

500

0

40

35

30

25

20

15

10

5

0

Net borrowings(Rm)

Gearing(%)

RETURN ON SHAREHOLDERS’ INTEREST

10 000

9 000

8 000

7 000

6 000

5 000

4 000

3 000

2 000

1 000

0

18

16

14

12

10

8

6

4

2

0

Return on shareholders’ interest(%)

’13

’13

’14

’14

’15

’15

’16

’16

’17

’17

Average ordinary shareholders’ interest (Rm)


CHIEF FINANCIAL OFFICER’S REPORTCONTINUED

02.3

EXPLOSIVES LICENSEE IN INDONESIAGoodprogresswasmadeinsubmittingVATreturnsonthelicensee’sbehalfforthe2016financialyeartorecoverthecreditduetoAECI.

Thedoubtfuldebtsprovisionraisedin2015(R57million)inrespectofthelongcyclesforinputVATrefunds in Indonesiawasstill inplaceasAEL’sexplosiveslicenseeinIndone-siaappliedfor taxamnesty intermsofaprogrammeofferedbythe IndonesianTaxOffice.Thelicensee’samnestyapplicationwaswithreferencetoalltaxassetsandliabilitiesforfinancialyearsuptoandincluding2015.Asaresult,theVATrefundduetothelicenseewillnotberecoveredfromtheIndonesianTaxOffice.Itisnotexpectedthatanyassociatedamountswillberecoveredfromthelicensee.AECIispursuingalternativesforrecoverywiththelicensee.

Thetotalamountowed isR75million,ofwhichR65millionhadbeenprovidedforatyear-end.AELisplanningtoexittheexistingarrangementandtoappointanewlicenseeonceduediligenceonthislicenseehasbeencompletedandappropriateagreementsandcontrolshavebeenputinplace.

DEFINED-BENEFIT OBLIGATIONSDetailsregardingtheitemsbelowarecontainedinnote29tothefinancialstatements.

PENSION FUNDSDuringtheyear,furthersettlementpaymentsandsection14transfersfordeferredpension-ersandpensionersoftheAECIPensionFund(“APF”)wereeffected.ThesesettlementsandtransfersdidnothaveanyimpactontheGroupasthesettlementaccountingwasrecog-nisedin2015.Thereareonlyfourpensionermemberswhostillneedtobetransferredorpaid.Itishopedthatthisprocesswillbecompletedin2018.Considerationwouldbegiventhereaftertofinallydistributinganyremainingsurplustostakeholdersandformallyclosingthesefunds.

Somefurtherprogresswasmadeinconvertingtheremainingtwodefined-benefitfundsintheGroup,withmorethan75%ofmembersofeachofthesefundsacceptingtheiroffers.IntheDuluxEmployeesPensionFund,almostallmembershavenowacceptedtheseoffers.TherequiredruleschangesweresubmittedtotheRegistrarofPensionsFundsandapprovalswerereceivedtowardsyear-endandearlyin2018.Asanextstep,section14applicationswillbepreparedandsubmitted.Thiswillonlybedoneonceallacceptanceshavebeenprocessed,dataandanychangessuppliedhavebeenverifiedandpensionpurchaseshavebeencosted.

POST-RETIREMENTMEDICALAID(“PRMA”)During2017, the settlement offerswereimplementedwiththepurchaseofannuitiesfrom,andthroughasection14transferfromtheAPFto,theMMIGroupLtd.ThisresultedinanadditionalsettlementcostofR4millionduetochangesinthecostoftheannuitiesinlinewithmarketrates.

There remain 483 pensioners and 73employees inSouthAfricaentitledtothePRMAsubsidy.Nofurthersettlementofferswillbemadetothemandtheobligationwillbesettledoverthelivesofthemembers.

PERFORMANCE SHARES (“PS”)In2017,afurthertrancheofPSallocatedintermsofthe2012Long-termIncentivePlan(“LTIP”)vested.Thenumberofsharesthat vested was determined based onAECI’scomparativetotalshareholderreturnin relationtoapeergroupofcompanies,measuredfrom1June2014to1June2017.AECIachievedsixthpositioninthecomparatorgroup, resulting inamultipleof1,8beingappliedtotheallocatedsharestodeterminethenumberofsharesthatvested.

ThePSvestedon30June2017foralleligibleExecutivesandSeniorManagersintheGroup.Atransactionwasentered into inJuneforR44million,withathirdpartyintermediary,toenabletheCompanytosettleitsobligationsforthisvesting, intermsoftheLTIPrules.Theseshareswerepurchasedinthemarketbytheintermediary,inlinewithAECI’sstrategyofsettlingitsobligationsinthiswayratherthanthroughthe issueofnew,potentiallydilutiveshares.

The2017allocationofPSrepresentedahigherinitialallocationthaninpreviousyears,thoughtherewasnochangetothescheme.ThishigherallocationwasrequiredsincePS istheonlyLTIincentiveschemestillactive.Theearnings-growthunitspreviously issued intermsoftheLTIParenolongerbeingissued.TheGrouphasreviewedtheLTIPandhasrevisedit.Additionalvestingconditionshavebeenincludedtobringtheschemeinlinewiththecurrentremunerationphilosophy.

FurtherdetailsonthePSaredescribedintheRemunerationreportcommencingonpage83andinnote29tothefinancialstatements.

ACKNOWLEDGEMENTSIwould like toexpressmy thanks to theAuditCommittee,theGroup’sReporting,Tax,Governance,Legal,InternalAudit,IT,Treasury,InvestorRelationsandRetirementFundsteamsinallthebusinessesandcountriesinwhichweoperate.Theircontinueddiligenceandprofessionaloversightof theGroup’sfinances,internalcontrolsandrelatedmattersisappreciatedbyme,myExecutiveCommitteecolleaguesandtheBoard.

Mark Kathan ChiefFinancialOfficer



40

STAKEHOLDER ENGAGEMENT 42

SOCIAL AND ETHICS COMMITTEE’S REPORT TO STAKEHOLDERS 47

HUMAN CAPITAL 49

INTELLECTUAL CAPITAL 55

SOCIAL AND RELATIONSHIP CAPITAL 58

03

41

Keystakeholdersincludeemployees,tradeunions,internalandexternalauditors,shareholdersandfundmanagers,financiers,customers,suppliers,technologyandbusinesspartners, localandnationalgovernmentstructuresincountrieswheretheGroupoperates, industrybodies,thecommunitiesinwhichtheGroupoperates,specialinterestgroupsandthemedia.

Engagementswithcertainstakeholdersare largelythedomainofeitherAECIorof itsbusinesses,withothersbeingofinterestatbothlevels.Thegraphicbelowsummarisesstakeholdergroupingsandinformationflows.TheapproachtoengagingwithdiversestakeholdergroupsandAECI’seffortsinthisregardaresummarisedhere.

STAKEHOLDER ENGAGEMENT

ENGAGEMENT FLOWS

GROUP BUSINESSES/JVs

INTER-GROUP RELATIONSHIPS

CUSTOMERS

SUPPLIERS

PRINCIPALS AND PARTNERS

EMPLOYEES

TRADE UNIONS

INTERNAL AND EXTERNAL AUDITORS

GOVERNMENT

COMMUNITIES

INTEREST GROUPS

INDUSTRY BODIES

MEDIA

SHAREHOLDERS

FUND MANAGERS

FINANCIERS

FINANCIAL ANALYSTS

JSE

The AECI Group comprises a broad spectrum of businesses in more than 20 countries. There are currently 16 operating entities reporting to the AECI Executive Committee (“Executive Committee”) and, via this Committee, to the Board.

The spectrum of businesses is matched by a range of stakeholders — those persons or groups who can affect or be affected by the Group’s activities.


03.1STAKEHOLDER ENGAGEMENT

INTERACTION BETWEEN AECI AND ITS BUSINESSESTwo-wayinteractionbetweenAECIanditsbusinessesoccursonanongoingbasis,bothformallyand informally.FormalstructuresincludeoperatingentityBoardmeetings,businessreviewsandExecutiveCommitteemeetings. AECI’s Executive Directors areinattendanceatmostofthesemeetings(exceptwherebusinessesarenotbasedinSouthAfrica).

Otherforums,suchassegment-specificorGroup-wideconferencesandmanagementmeetings, also provide opportunities forinformationsharingandrelationshipbuilding.

TheGroup’sstrengthisenhancedbysharingbestpracticeandexperienceinallareasofactivity.Acultureofcollaborationacrossbusinesseshasbeendeveloped.Thestream-liningandharnessingofefficiencies,includingthoseenabledbycentralisedstrategicsourc-ing,backedbyacommondriveforexcellenceleadstobetter resultsfor thebusinessesindividuallyandfortheGroupasacollective.

STAKEHOLDERS WITH WHOM ENGAGEMENT IS MOSTLY VIA AECI

AECI AND SHAREHOLDERS AND FUND MANAGERS, FINANCIERS, AND FINANCIAL ANALYSTSAECIcommunicateswiththesestakeholdersbywayofanumberofprocesses, includ-ingannouncementsreleasedontheJSE’sStockExchangeNewsService(“SENS”),thedisseminationoffinancialresultsandreportselectronicallyandinprint,resultspresenta-tions,business-specificpresentationsandsitevisitsandone-on-oneorsmallgroupmeetings.

TheCompany’sChiefExecutive,ChiefFinan-cialOfficerandmembersoftheExecutiveCommitteeconducttimelypresentationsontheGroup’sperformanceandstrategytoinsti-tutionalinvestors,financiers,financialanalystsandthemediainSouthAfrica.TheExecutiveDirectorsalsoundertakeroadshowsinEuropeandtheUSA,aimedmostlyatpotentialinves-tors.Further,thereareregularone-on-onemeetingswiththisgroupofstakeholders.

Presentations,corporateactionsandfinan-cialresults,aswellasanyotherinformationdeemedrelevant,arepublishedontheCompa-ny’swebsite.Stakeholdersareadvisedofsuchnewly-publisheditemsviaSENS.OtherinformationontheCompany,suchasinteraliaitsmanagementandhistory,isalsoavailableonthewebsite.

Toensurethatshareholderswithoutaccesstoelectroniccommunicationarenotprejudiced,AECIcurrentlypublishesandreportsondetails

ofitscorporateactionsandfinancialperfor-manceinatleastonedailynationalEnglishnewspaperasrequiredbytheJSE.

AECI AND THE JSEAsanentity listed inSouthAfrica,AECI isrequiredtocomplywiththe legalframe-workoftheJSEListingsRequirements,theCompaniesActandKingIII.AlignmentwithKingIVprogressedin2017andthisprocesswillcontinue.

ComplianceismanagedlargelythroughtheCompany’sLegalandSecretariatandCorpo-rateCommunicationsfunctions.Interactionwith theJSE isviaRandMerchantBank(adivisionofFirstRandBankLimited)asAECI’scorporatesponsor inSouthAfrica,whensuchsponsorinputisrequired.FurtherliaisonwiththeJSE,suchasworkrelatedtoassessmentsforinclusioninspecificIndices,isundertakendirectly.

STAKEHOLDERS WITH WHOM ENGAGEMENT IS VIA AECI AS WELL AS ITS BUSINESSES

THE GROUP AND ITS EMPLOYEESThesameinformationthatissharedwithinves-torsandotherfinancially-basedstakeholdersismadeavailabletoemployeesGroup-wide.Thistakesplacevianewslettersande-mailsfromtheChiefExecutive,presentationsbyhimtoGroupmanagementandsimilarinteractionsbetweenGroupmanagementteamsandthebusinessesforwhichtheyareresponsible.

Across all businesses, Human CapitaldepartmentsandSpecialistsareprimarilyresponsiblefortheGroup’spolicies,proceduresandpractices inemployment,benefitsandrelatedhumanresourcematters,andforthecommunicationoftheseviaestablishedstruc-tures.AtGrouplevel,businessesparticipateinforumsandstructuresdealingwith,interalia,EmploymentEquityandSHE-relatedstrategiesandperformancetracking.

THE GROUP AND TRADE UNIONSTheAECIGroupsubscribestothefreedomofassociationprincipleandrecognisestherightofallemployeestojoinatradeunionoftheirchoice.Representativetradeunions,therefore,arerecognisedasoneoftheGroup’sstakeholders.AlistofunionswithwhomformalrecognitionagreementsareinplaceisavailableonAECI’swebsite.TheseunionsparticipateinvariousconsultativeandnegotiationstructuressuchasManagement/ShopStewardsConsul-tativeForums,EmploymentEquityandSkillsDevelopmentSteeringCommittees,WellnessCommitteesandSafety,HealthandEnviron-mentCommitteesthatdealwithissuesthataffectemployees’interests.

GroupbusinessesinSouthAfricaaremembersoftheNationalBargainingCouncilfortheChemical Industry (“NBCCI”). Substantivecollectiveagreements for theBargainingUnitarenegotiatedonanannualbasiswithrepresentativetradeunionsundertheauspicesoftheNBCCI—IndustrialChemicalSector.SeniorIndustrialRelationsManagersfromtheGroupparticipateinthisforumasemployerrepresentatives.

THE GROUP AND INTERNAL AND EXTERNAL AUDITORSThisengagementisdrivenbygoodgovern-ance requirements, through compliancewithrelevantlegislationandstandards.Thisincludesthelimitedassurance,undertakenannually forpublication in the integratedreport,ofselectednon-financial indicatorswhichAECIbelievesarematerialinviewofthenatureofitsbusinessesandtheenvironmentinwhichtheyoperate.

TheDirectorsarerequired intermsoftheCompaniesActandtheJSEListingsRequire-mentstoprepareannualfinancialstatementswhichfairlypresentthestateofaffairsoftheCompanyandtheGroupasattheendofthefinancialyearandoftheprofitorlossforthatperiod,inconformitywithIFRS.Theexternalauditor isresponsibleforauditingthefinancialstatementsoftheCompanyand itssubsidiariesandforexpressing itsopiniononthesestatementstoshareholders.Inaddition,theexternalauditorisresponsibleforconfirmingwhetherthefinancialstatementsmeettherequirementsoftheCompaniesActandIFRS. In2017,theexternalauditorwasalsoengagedtocarryoutanAgreedUponProceduresReviewinrespectoftheinterimfinancialresultsto30June.

TheDirectorsmustensurethatGroupentitiesmaintainadequateaccountingrecords,andthataneffectiveriskmanagementprocessandinternalcontrolsareinplacetosafeguardtheassetsoftheGroupandtopreventanddetectfraudandotherirregularities.ToenabletheDirectorstomeettheseresponsibilities,managementsetsstandardsandimplementssystemsofriskmanagementand internalcontrolaimedatreducingtheriskoferrororlossinacost-effectivemanner.TheGroup’sInternalAuditfunctionappraisestheinternalcontrolsofGroupbusinessesandsubmitsitsassessmentofthesetotheBoardonanannualbasis.

Themanagement teamofeachbusinessalsosubmitsanannualself-assessmentofinternalcontrol(InternalControlMatrix)totheAuditCommitteeaffirmingthatthesystemsofinternalcontrol,inentitiesforwhichtheyhaveresponsibility,areadequatefortheiroperationsandarefunctioningeffectively.InternalAuditassessesthecontrolsoppositethismatrixandreportsthereontotheAuditCommittee.


THE GROUP AND GOVERNMENT/AUTHORITIESAECIanditsbusinessesaresubjecttothelawsofthejurisdictionsinwhichtheyoperate.ThismeansgovernmentsandregulatorsareabletohaveverysignificantimpactsontheGroupasawholeorononeormoreofitsentities.Asaconsequence,themanagementoftheseimpactsthroughengagementwithrelevantauthoritiesisabusinessimperative.

Suchengagementmayrangefromadvocacyinitiativesassociatedwiththedevelopmentoflegislationandstandards,tocooperativeworkwiththoseregulatorswhohavetherespon-sibilityofgoverningtheGroup’sactivitiesthroughtheapplicationoftheselawsandstandards.Tofacilitateengagement,AECIand/oritsbusinessesmaychoosetodeveloprelationshipswithrelevantgovernmentandregulatoryentitiesinaproactivemanner.

AllgovernmentengagementbyAECIemploy-eesissubjecttotheGroup’sCodeofEthicsandBusinessConduct(“theCode”)asapprovedbytheAECIBoard.TheCode“isdesignedtoprovideclearguidelinesforengagingwithallstakeholders”andthereisanexplicitexpecta-tionthatemployeeswillhavezero-tolerancetobriberyandcorruption.Thestatementthat“AECIwillnotcondoneanyviolationofthelaw”isunequivocal.Withrespecttodonations,theCodeisclearthat“nodonationswillbemadetopoliticalpartiesandpoliticalcandidatesunderanycircumstances”.

A second policy document of relevanceis theDelegationofAuthorityFramework(“theFramework”),therevisionofwhichwasapprovedbytheAECIBoardin2017.

ThisdocumentnotesthattheAECIBoard“isultimatelyaccountableandresponsiblefortheperformanceandaffairsoftheAECIGroupofCompanies…andderivesitsauthorityprimar-ilyfromthe(Company’s)MOIaswellasthegeneralregulatoryframeworkandcommonlaw”.TheFrameworkstipulatesthatSubsid-iaryBoardsandotherhigh-levelCommitteeshavebeensetupto,interalia,ensure“thatthebusinessentityisruninaccordancewithgoodcorporategovernancepractices”.TheFramework isclearthat “nodelegationofauthoritymaybeexercisedforanyimmoralorunlawfulpurposes”.Whilenaturallysilentonthedetailsofgovernmentengagement,thedocumentclarifiesgovernancerolesandresponsibilitiesintheGroup.

AECI’sengagementwithgovernmentmaytakeplaceatthelevelofnational,provincialandlocalormunicipalentities. Itmayalsoinvolvea rangeof regulatorybodies.ThemajorityofAECI’sgovernmentengagementactivitiestakeplaceinSouthAfrica.However,thescopeofthiscommentaryincludesthoseactivitieswhichtakeplaceinotherjurisdictionsinwhichAECIoperates.

InSouthAfrica,thepointsofcontactsetoutinthetablebelowarecurrentlyseenaspriorityareasforgovernmentengagement.ThisviewisinformedbyAECI’sriskregisters.InmostcasesengagementisdirectlybetweenGrouppersonnelandtherespectivegovernmentofficial(s).Incertaincases,though,itisdeemedmoreeffectiveand/ormorepracticalfortheengagementtotakeplaceundertheauspicesofindustryforums.ThemainsuchforumistheChemicalandAlliedIndustries’Association(“CAIA”),ofwhichAECIisafoundermemberandonwhoseBoardAECIisrepresentedinthepersonofitsChiefExecutive.

InjurisdictionsotherthanSouthAfrica,itisnotappropriatetotabulatesuchasetofprioritiesbasedonfunctionalareas.TheseprioritiesdifferfromcountrytocountrybasedonthenatureofAECI’soperations,country-specific factors and the level ofmaturity of thebusinessineachcountry.

Accountabilityforgovernmentengagementinthesejurisdictionslieswiththein-countryManagingDirector.TheManagingDirectormustascertainthepriorityareasofengagementandisexpectedtoformrelationshipswithgovern-mentofficialsandregulatorsaccordingly.

KEY POINTS OF CONTACT FOR GOVERNMENT ENGAGEMENT IN SOUTH AFRICA

DEPARTMENT LEVEL ACCOUNTABILITY

PRESIDENCY Minister ChairmanandChiefExecutive,viaCAIAanddirectly

LABOUR National

Provincial

ChiefInspectorHealthandSafety

GroupTransformationManagerandGroupExecutive:HumanCapital

GroupTransformationManagerandGroupExecutive:HumanCapital

GroupSHEManager

WATER AND SANITATION National—Director

Provincial

Municipality

GroupSHEManager,viaCAIA

GroupSHEManager

BusinessOperationsManagers

POLICE ChiefInspectorExplosives AELSafetyManager

SARS LargeBusinessCentre

Commissioner

GroupFinancialManager

ChiefFinancialOfficer

TRADE AND INDUSTRY (including Competition authorities)

National—Director-General ChiefExecutive,viaCAIAanddirectly

GroupCompanySecretary

ENVIRONMENT National—Director-General

National—Director

Provincial—various

Municipality

ChiefExecutive,directlyandviaCAIA

GroupSHEManager

GroupSHEManager

BusinessOperationsManagers


STAKEHOLDER ENGAGEMENTCONTINUED

03.1

Whereappropriate,ManagingDirectorsareencouragedto leverageexisting relation-shipsalreadyestablishedbytheircustomers’businesses.ManagingDirectorsmayalsocallondiplomaticstaffatSouthAfricanembas-sies,includingbutnotlimitedtoDepartmentofTradeandIndustryrepresentatives.

Under conditions of uncertainty, and inaccordancewiththeFramework,issuescanbeescalatedtoHeadOfficefunctionsormoreseniorExecutivesifrequired.

THE GROUP AND NEIGHBOURING COMMUNITIESAECI has formal structures in place forengagingwith itsneighbouringcommuni-ties. In themid-1990s, theUmbogintwiniIndustrialComplex(“UIC”)wasthefirstsiteorbusinessintheGroup(andSouthAfrica)tosignaformalcharterwithitsneighbours.Thechartersetsoutprinciples,responsibilitiesandprocedurestoserveasaframeworkforinteractionbetweentheparties.

Communities livingwithinthefootprintofinfluenceofmanufacturingandstoragesitesaremostoftenconcernedaboutthepotentialeffectsofsite incidentsandthemanage-mentofthese.Emergencypreparednessandemergencyresponseinformation,therefore,issharedwithneighboursusingchannelssuchasthedistributionofpamphlets,localmediaandadvertisements,andinvitationstoparticipateinsite-basedemergencyexercises.Thelatterparticipationisviarepresentativesmandatedbycommunitiestorepresenttheminthesematters.

StructuresinplaceatAECI’slargestoperatingsitesinclude:

› at Modderfontein, AEL oversees thefunctioningofaCommunityAwarenessandEmergencyResponse(“CAER”)Committee;and

› attheUIC,issue-specificstakeholderandcommunityliaisonforumsdealwithinteraliawaterquality(includingdischargestosea),airemissions, remediationactivities,anddevelopmentplans.AlthoughstakeholderengagementsaregenerallymanagedbytheUmbogintwiniIndustrialAssociation,theAECIGroupprovidesassistancewithlogis-ticalarrangementsand,moreimportantly,throughthesite’sCommunityLiaisonOfficer.

Otherinteractionsincludelocalsocio-economicdevelopmentprojectsintheareasofeducation,health,theenvironment,charitablecontribu-tions,andskillsandenterprisedevelopment.Often,contributionsarenotonlyincashbutalsointheformofexpertiseandguidance.ThisisalsotrueforanumberofbusinessesbeyondSouthAfrica’sborders.

CommunitiesinwhichtheGroupoperatesorhasaninterestinSouthAfricaaretheprimaryintendedbeneficiariesoftheAECICommunityEducationandDevelopmentTrust,establishedin2012aspartofAECI’sBroad-basedBlackEconomicEmpowermenttransactions.

THE GROUP AND SPECIAL INTEREST GROUPSThesestakeholdersareoften,butnotalways,alignedwithcommunitiesinwhichtheGroupoperates.

Althoughtheirengagement requirementsoftenoverlapwiththoseofcommunities,theirneedsarerecognisedseparately.

Whereverpossible,suchstakeholdersareencouragedtoparticipateintheGroup’saffairsviaexistingstructures(liaisonforumsandthelike).Wherethisisnotpossibleseparatearrangementsaremadetomeettheneedsofsuchstakeholderswho,asarule,areconcernedmainlywithmattersbroadlyclassifiedasbeingenvironmentally-andhealth-based.Arrangementsincludemeetings,site/businessvisitsandparticipationin/supportofinterestgroupinitiatives.

ExamplesofinterestgroupsinSouthAfricainclude theModderfontein ConservationSocietyandtheWildlifeandEnvironmentSocietyofSouthAfrica.

THE GROUP AND THE MEDIAAllissuespertainingtotheGroupanditsstake-holdersareofpotentialinteresttothemediainitsroleasaconduitforpublicinformation.

AECI’sCorporateCommunicationsfunctionmaintainsregularcontactwiththemediabydisseminatingrelevantinformationproactivelyorinresponsetoenquiries.Groupbusinessesalsointeractwiththemediaregardingmattersspecifictotheirsitesorbusinesses.Otherthan in instanceswheremediacomment/coveragerelatestomarketingorproductnews,businessesarerequiredtokeeptheAECIHeadOfficeinformedoflikelymediacoverage.

This isparticularlytrue in instanceswherepotentiallycontroversialornegativecommentisexpected,orwhenitispossiblethatcoveragewillimpacton/refertotheGroupasawhole.

Wherebusinessesdonothavethenecessaryresourcestodealwithmedia requestsorenquiries on their own, AECI’s CorporateCommunicationsfunctionprovidesguidanceor respondsonthatbusiness’behalfafterhavingconfirmedthecontentoftheresponsewithmanagement.

Forcommunication inanysituationwhichcanbedefinedasacrisisorpotentialcrisis(operational, industrialaction, legal issuesetc.),thepreparednessofeachbusinessforsuchaneventuality isconfirmedbyannualLettersofAssurancesubmittedbytheManag-ingDirectorsofGroupbusinessestotheAECIChiefExecutive.

Depending on the type and scale of anemergency,AECIHeadOfficeresourcesaremadeavailabletoassisttheaffectedsiteorbusiness. Thehierarchy for escalatingnotificationsof incidents,andsubsequentprogressreports, isclearlydefinedandhasbeencommunicatedtoallbusinesses.

THE GROUP AND INDUSTRY BODIESInadditiontoits involvementinCAIA,AECIand itsbusinessesparticipate inanumberof initiativesandassociationspertinenttoallorsomeoftheirbusinessactivities.Inthisway,issuesrelevanttothesustainabilityoftheCompanyorthatofoneormoreof itsbusinessesareaddressed.

Initiativesinclude:

› longstandingmembershipofandinvolve-ment inSAFEXInternational,whichaimstoprotectpeopleandpropertyagainstdangersanddamagebysharingexperiencesintheglobalexplosives industry.AnAELrepresentativeservesontheorganisation’sBoardofGovernors;

› activemembershipoftheResponsibleCare®StandingCommittee;

› activemembershipandleadershipoftheProcessSafetyForumsinKwaZulu-NatalandGautengforSouthAfrica’schemicalindustry;

› theChemicalsHandlingandEnvironmentalForumistaskedwithpromotingtherespon-siblehandlingofchemicalsthroughouttheirlifecyclebyprovidingaforumforstakehold-erstodiscusscritical issuespertainingtothehandling,storage,transportanddistri-butionofhazardouschemicals.TheForumcomprisesrepresentativesofCAIAmembercompanies,governmentdepartments,otherallied industryassociationsandvariousindustryexperts.AECI is representedatthisForum;

› ResponsibleCare®istheglobalchemicalindustry’svoluntaryinitiativeforthecontinual improvementofperformance in safety,healthandenvironmentalpractices. It isapubliccommitmenttotheresponsiblemanagementandstewardshipofproductsandservicesthroughtheir lifecycle. It isalsothevehicleusedbytheindustryinitspursuitof improvedproductstewardship.ResponsibleCare®was launchedbytheCanadianChemicalProducers’Associationin1984andhassincebeenadoptedinmorethan60countries.CAIAisthecustodianof


ResponsibleCare®inSouthAfrica,with161SouthAfricanbusinessesbeingsignatories.AECIisasignatorytoResponsibleCare®,asarealloftheGroup’scompaniesinSouthAfrica intheirownright.Signatorieshavetheircompliancewith theManagementPracticeStandardsverifiedbyindependentassuranceproviders;

› participationintheCDPClimateChangeandtheCDPWaterPrograms.TheCDPisaglobalinitiativeadministeredlocallybytheNational BusinessInitiative.TheCDPisaninterna-tionalvoluntarydisclosureprogramme.Dataongreenhousegasemissionsandclimatechangeresponseactionsbybusinessarecollated on behalf of global investors.TheCDPWaterProgrammeisaimedatcatalysingsustainablecorporatewatermanagementglobally;

› theGroup iswell represented in legisla-tiveforumsinstructuresoftheChemicalIndustriesEducationandTrainingAuthor-ity.SubjectmatterexpertsrepresentAECIatemployerorganisations includingtheNationalAssociationofSpecialityChemi-calsEmployersAssociation,theNationalInstituteofExplosivesTechnologyandtheNationalArtisanTrainingCommittee.TheserelationshipsoptimisetheGroup’sabilitytomakecontributionsthataresuitableandbeneficialtothesectorsinwhichitoperates.

STAKEHOLDERS WITH WHOM ENGAGEMENT IS MOSTLY VIA GROUP BUSINESSES

GROUP BUSINESSES AND CUSTOMERS/SUPPLIERSCustomerserviceandengagementisattheheartofthedailybusinessofAECI’soperatingentities.Itisfundamentaltothevalue-addbusinessmodeland,assuch,itembracesthespectrumofbusiness-relatedissuesthatcouldaffectperformanceandalsoaddressesexter-nalconsiderationssuchaslabourrelations,socio-politicalstabilityand,inSouthAfrica,B-BBEEmatters.

EachGroupbusinesshasarobustsysteminplacetoensurethatanychangesincustomers’needsaremetquicklyandefficiently.Equally,relationshipswithsuppliersaremonitoredcontinuallyandaremodifiedasrequired.Termsofengagementwithcustomersandsuppliersareclearlydefinedand,whereappropriate,Group-widepoliciesandproceduresguidethebusinessestoensurethatcustomer-orsupplier-relatedrisksareproperlyunderstoodandmanagedinlinewithAECI’sriskappetite.

GROUP BUSINESSES AND TECHNOLOGY AND BUSINESS PARTNERSLong-termtechnologyandotheragreements,aswellasstrategicallyadvantageouspartner-ships,areoneofthebasesfortheAECIGroup’sgrowth. Individualbusinessesengagewiththeirprincipalsandpartnersasamatterofcourse.Majorchanges,developmentsoropportunitiesareescalatedtotheExecutiveCommitteeandthentotheBoard,dependingonthesignificanceoftherealorproposedchange,developmentoropportunity.

Thisensuresthatissuessuchascompetitorandcustomertrends,economicconditionsand industrytrends,andtheappropriate-nessoftechnologies,productsandservices areaddressed.


STAKEHOLDER ENGAGEMENTCONTINUED

03.1

SOCIAL AND ETHICS COMMITTEE’S REPORT TO STAKEHOLDERS

Dear stakeholders

This report is provided by the Social and Ethics Committee (“the Committee”) appointed in respect of the 2017 financial year of AECI Ltd. This report incorporates the requirements of Section 43 of the Regulations of the Companies Act.

MEMBERSHIPFourmeetingswereheldintheyearandfulldetailsonthemeetingdatesandattendancebymembersareavailableviathelinkwww.aeci.co.za/governance-board-com-meetings.php.

Themembersintheyearwere:

› ZFuphe(Chairman)

› GJCundill(resignedon31March2017)

› MADytor

› NAFranklin(appointedon3April2017)

› MVKMatshitse

› AJMorgan

› RRamashia

Abridgedbiographiesof the currentmembersarepublishedelsewhereinthisintegratedreport.MsFuphehasservedontheCommitteesince2008,AdvRamashiasince2010,MsMatshitsesince2012,MrDytorsince2013,andMrMorgansince2014.MrFranklinwasappointedtotheCommitteeon3April2017.

COMMITTEE OBJECTIVESTheBoardofDirectorshasconferreduponthemembersoftheCommitteethefollowingpowers:

STATUTORY DUTIES › Toconsider,recommendandmonitorAECI’sactivitieswithregardtothefollowingandreportaccordinglytotheBoard:

» goodcorporatecitizenship,specificallyinrelationto(i)thepromotionofequality,(ii)thepreventionofunfairdiscriminationandthereductionofcorruption,and(iii)AECI’srecordofsponsorship,donationsandcharitablegiving;

» labourandemploymentmatters:specificallyinrelationtoAECI’sstandingon(i)theInternationalLabourOrganization’sprotocolondecentworkandworkingconditions,and(ii)employeerelationsandcontributionstotheeducationaldevelopmentofemployees;

» safety,healthandtheenvironment:specificallyinrelationtotheimpactoftheAECIGroup’sactivitiesandthoseofitsproductsandservices;

» socialandeconomicdevelopmentofdefinedcommu-nities:specificallyinrelationto(i)the10principlessetout intheUnitedNationsGlobalCompact,(ii)theOrganisationforEconomicCo-operationandDevelopment’srecommendationsregardingcorrup-tion,(iii)theSouthAfricanEmploymentEquityAct,No.55of1998,(the“EmploymentEquityAct”),and(iv)theSouthAfricanBroad-BasedBlackEconomicEmpowermentAct,No.53of2003;and

» consumerrelations:specificallyinrelationtoadver-tising,publicrelationsandcompliancewithconsumerprotectionlaws.

› Tomonitor and advance the implementation ofpoliciesandplansapprovedbytheBoardonmattersascontemplatedabove.


SOCIAL AND ETHICS COMMITTEE’S REPORT TO STAKEHOLDERS

03.2

NON-STATUTORYDUTIESTheCommitteeisfurthermandatedasfollows:

› tomonitortothebestofitsabilitythatAECIanditsoperatingbusinessentitiesadheretotheapprovedCodeofEthicsandBusinessConductpolicyandguidelines;

› toprovideguidanceandadviceonsustainabilitytrendsand issuesrelevanttotheAECIGroupaswellasreviewandapprovetheGroup’sSustainabilitypolicyfromtimetotime.TheCommitteewillbeinformedofthesustainabilityrisksasrecordedintheAECIGrouprisk registerandproviderelated inputtotheRiskCommittee,asappropriate.Further,theCommitteewillreviewSafety,HealthandEnvironmentalIncidentreports;and

› tomonitortothebestofitsabilitythatAECIanditsoperatingbusinesseshaveproperlyidentifiedstake-holders,andunderstandtheirissues,andensurethatallstakeholdersaretreatedinanequitableandfairmanner.Detailsof identifiedstakeholdersandtheAECIGroup’sapproachtoengagementwiththemappearintheStakeholderEngagementcommentary.

KEY ACTIVITIES IN THE YEAR UNDER REVIEW

THE COMMITTEE › receivedandreviewedreportsonAECI’smanagementofsafety,healthandenvironmentalissues,includingextensiveengagementregardingthetragicfatalitythatoccurredon26July2017;

› receivedandendorsed,afterextensiveengagementwithmanagement,AECI’srevisedsafety,healthandenvironmentZeroHarmstrategy;

› receivedandreviewedreportsonAECI’sprogressonEmploymentEquity (“EE”) in itsSouthAfricanoperations.ThisincludedtheevaluationandapprovalofthetargetswhichmanagementwouldsubmittotheSouthAfricanDepartmentofLabourin itsnewthree-yearEEPlan,thatwillapplyfrom2017to2020;

› receivedandreviewedreports relatingtoBroad-basedBlackEconomicEmpowermentandtheeffectofamendmentstotheCodesofGoodPractice;

› receivedandreviewedreportsonethicsmanagementacrosstheGroup,includingtheworkingsoftheTip-offsAnonymouswhistle-blowingline;

› received and reviewed reports on AECI’s talentmanagementprocesses,includingretentionstrategies,successionplansandreportsonterminationtrends;

› receivedandreviewedreportsontheAECIEmployeesShareTrust, includingthereviewandapprovalofaproposaltopayadividendtobeneficiariesofthistrustin2017;and

› receivedandreviewedreportsontheAECICommunityEducationandDevelopmentTrust.

Zellah Fuphe Chairman



SOCIAL AND ETHICS COMMITTEE’S REPORT TO STAKEHOLDERS CONTINUED

03.2

HUMAN CAPITAL

The Human Capital function has continued its journey towards becoming a strategically- focused service in support of the Group’s growth aspirations in the context of ever-changing inter-nal and external social, legislative and other requirements. A summary of the Function’s initiatives and achievements in 2017, as well as its focus areas for the coming year, is presented below as well as in the Intellectual Capital and Social and Relationship Capital sections of this Integrated report.

REPRESENTATION BY RACIAL GROUP AT ALL MANAGEMENT LEVELS 2014 TO 2017 PERFORMANCE AND 2020 TARGETS (%)

70

60

50

40

30

20

10

0

TOTAL BLACK

2014 2015 2016 2017 TARGET

AFRICAN COLOURED INDIAN WHITE FOREIGN NATIONALS


HUMAN CAPITAL

03.3

REPRESENTATION BY RACE AND GENDER AT ALL MANAGEMENT LEVELS 2014 TO 2017 (%)

40

30

20

10

0

AFRICAN

Male Female Male Female

COLOURED

Male Female

INDIAN

Male Female

WHITE

Male Female

FOREIGN NATIONALS

TARGET ACHIEVED

EMPLOYMENT EQUITY (“EE”) AND TRANSFORMATIONThethree-yearEEplanranfromSeptember2014toAugust2017,atwhichtimeasingle,consolidatedreportforallAECIbusinessesinSouthAfricawassubmittedtotheDepartmentofLabour.

Thetablesonpage49andbelowillustratetheprogressmadeintermsofrepresentationbyracialgroupsandgenderatallmanagementlevelsoverthedurationoftheplan.The2017and2016comparativesarepresentedgraphicallyonthefollowingtwopages.

Thenewthree-yearEEplanthatwillrunfromSeptember2017toAugust2020wasfinalisedafterextensiveconsultationwithstakeholders.Thenumericalgoalsandtargetsweresetwiththeintentionof improvingrepresentationofAfricansandColoureds,inlinewiththenationalEconomicallyActivePopulation(“EAP”)statistics,atSeniorandMiddlemanagementoccupationallevels.

Inadditiontosustainingpeoplemanagementinitiativesalreadyinplace,theGroupwillincreaseitsfocusonthefollowinginterventionstosupporttheachievementofsettargets:

GENDER MAINSTREAMINGThelevelofrepresentationbywomenatalloccupation-allevelsisnotadequatewhenmeasuredagainstthenationalEAPdata.Agendermainstreamingprojectwillbeinitiatedtoidentifybarriersandpromoteaffirmativeactionmeasuresthatwillcontributetobetterinclusivityanddiversityintheworkplace.In2017,33%ofManagersintheGroupwerefemale.Thetargetistoincreasethisto35%by2020.

PEOPLE WITH DISABILITIESADisabilityandInclusivenessPolicyisinplacetoregulatethemanagementofissuesrelatingtodisability,particu-larly in termsofdisclosureandconfidentiality.Theintentionistocreateaconduciveworkingenvironmentwhereemployeeswillvoluntarydeclaretheirdisabilities.

Buildingawarenessandcapacityamongkeystake-holdersremainedthefocusin2017.Assessmentofthesuitabilityofthephysicalenvironmentforpeoplewithdisabilitiesalsocontinued.


HUMAN CAPITALCONTINUED

03.3

1

1

2

TOP MANAGEMENT 50%

1 BLACK FEMALE

1 BLACK MALE

0 WHITE FEMALES

2 WHITE MALES

11

26

12

65

SENIOR MANAGEMENT 41%

11 BLACK FEMALES

26 BLACK MALES

12 WHITE FEMALES

65 WHITE MALES

107

213

94

258

MIDDLE MANAGEMENT AND PROFESSIONALS 60%

107 BLACK FEMALES

213 BLACK MALES

94 WHITE FEMALES

258 WHITE MALES

405

819

199

260

JUNIOR MANAGEMENT AND SKILLED 83%

405 BLACK FEMALES

819 BLACK MALES

199 WHITE FEMALES

260 WHITE MALES

60

153

1

UNSKILLED AND DEFINED DECISION-MAKING 99%

60 BLACK FEMALES

153 BLACK MALES

0 WHITE FEMALES

1 WHITE MALE

526

1 787

SEMI-SKILLED AND DISCRETIONARY DECISION-MAKING 98%

526 BLACK FEMALES

1 787 BLACK MALES

41 WHITE FEMALES

35 WHITE MALES

41 35

REPRESENTATION BY OCCUPATIONAL LEVEL, RACE AND GENDER — YEAR-ON-YEAR COMPARATIVESThepercentagesaccompanyingthegraphicsbelowandonthefollowingpageindicatethecombinedrepresentationbyBlackpeopleandWhitefemales(includingForeigners)ateachemploymentlevelinAECI’sSouthAfricanoperations.

’17 *

* Indicateslimitedassurance.Seepage68.51AECI INTEGRATED REPORT AND ANNuAl fINANcIAl sTATEmENTs 2017

1

1

2

TOP MANAGEMENT 50%

1 BLACK FEMALE

1 BLACK MALE

0 WHITE FEMALES

2 WHITE MALES

11

26

9

63

SENIOR MANAGEMENT 40%

11 BLACK FEMALES

26 BLACK MALES

9 WHITE FEMALES

63 WHITE MALES

88

199

106

289

MIDDLE MANAGEMENT AND PROFESSIONALS 56%

88 BLACK FEMALES

199 BLACK MALES

106 WHITE FEMALES

289 WHITE MALES

375

784

201

283

JUNIOR MANAGEMENT AND SKILLED 81%

375 BLACK FEMALES

784 BLACK MALES

201 WHITE FEMALES

283 WHITE MALES

48

183

UNSKILLED AND DEFINED DECISION-MAKING 99%

48 BLACK FEMALES

183 BLACK MALES

0 WHITE FEMALES

0 WHITE MALES

515

1 797

SEMI-SKILLED AND DISCRETIONARY DECISION-MAKING 98%

515 BLACK FEMALES

1 797 BLACK MALES

43 WHITE FEMALES

40 WHITE MALES

43 40

REPRESENTATION BY OCCUPATIONAL LEVEL, RACE AND GENDER — YEAR-ON-YEAR COMPARATIVES

’16 *

* Indicateslimitedassurance.Seepage68.52 AECI INTEGRATED REPORT AND ANNuAl fINANcIAl sTATEmENTs 2017


03.3

BROAD-BASED BLACK ECONOMIC EMPOWERMENT (“B-BBEE”)AECIsupports theSouthAfricangovern-ment’sBroadBasedBlackEmpowerment(“B-BBEE”)Act,No.53of2003,theCodesofGoodPracticesgazettedin2007andtheAmendedCodesof2013.AECIalsorecognisesthe importanceofachievingasustainablesocio-economicenvironment throughthemeaningfulparticipationofBlackpeopleinthemainstreameconomyandtheCompanyiscommitted to the implementationandsuccessofbroad-basedempowerment inallitsbusinessesinSouthAfrica.

AECIwasaLevel4B-BBEEContributor intermsoftheformerCodesofGoodPractice.WiththeapplicationoftheAmendedCodes,thisdroppedtoLevel8.AECIactivelypursuedarecoverytoLevel4and implementedaformalplantoaccelerateitstransformationjourney. ItwasextremelypleasingthattheCompanynotonlyregainedbutexceededitspriorContributorstatus.AECIreceiveditsnewB-BBEEcertificateon4April2018.Acopyisavailableviathe linkwww.aeci.co.za/about-bbbee-certificates.php.

TheresultperelementoftheLevel3scorecardisdisplayedinthetableabove.

OWNERSHIPThemaximumscorefortheOwnershipelementwasmaintained.AECI’sB-BBEEownershiptransactionswereapprovedbyshareholdersinJanuary2012.TheB-BBEEshareholdingcomprisesoftheAECIEmployeesShareTrust(“EST”),theAECICommunityEducationandDevelopmentTrustandtheTisoAELDevel-opmentTrust.

Withthisownershipstructure,plusmandatedinvestmentsandotherpublicshareholders,theCompanyhasBlackOwnershipof57,96%andBlackFemaleOwnershipof18,82%intermsoftheAmendedCodes.

MANAGEMENT CONTROL AND SKILLS DEVELOPMENTAECIsubscribestoacultureofinclusivityanddiversity.ItsintegratedHumanCapitaliniti-ativesareaimedatimprovingdemographicdiversityatalloccupational levels.Annualqualitativeandquantitativeplansareformu-latedtoensurethatGroupbusinessesworktowardstheachievementofdefinedEEandskillsdevelopmentgoals.Asindicatedonpage50,particularattentionisbeingpaidtotheinclusionofwomenatalloccupationallevelsbutespeciallyatsenior levels,andpeoplewithdisabilities.

Duetothescarcityofcertaincriticalskillsinthechemicalsindustry,itisimperativethatAECI’sskillsdevelopmentstrategybealignedwith itsEEplans.Anadequatenumberoflearners,apprenticesandinternscontinuetobesupportedtoensurethatbusinessrequire-mentswillbemetintothefuture.In2017thefocuswasonimprovingtheabsorptionratesoflearners,apprenticesandinternswhohavecompletedtheirstudies.

AECI actively improved its reporting toreinforceregularandaccuraterecordingofskillsdevelopment.ThiswasfundamentalintheachievementofahigherSkillsDevelop- mentscore.

ENTERPRISE AND SUPPLIER DEVELOPMENT(“E&SD”)Significantstridesweremade in theyearthroughafocusedpreferentialprocurementstrategyandtheestablishmentoftheGoodChemistryFund.ThelatterfundwillinvestuptoR50millioninE&SDinitiativesrelatingtoSouthAfrica’schemicals industry.Businessdevelopmentservices,investments(equityorgrants)andloansarebeingmadeavailabletoidentifiedqualifyingbeneficiaries.Thespecificobjectiveofthefund istofillsomeoftheexistingtransformationgapsinAECI’ssupplychainandthatoftheindustryasawhole.

TheGoodChemistryFundiscurrentlyengagedin projects relating to New Era farming,chemicaldistributionchannels,engineeringmaintenanceandtransportation.

AECIachieved100%preferentialprocure-mentspendrecognitioninitslatestB-BBEEassessment.Thisspendisattributabletotwosub-elementsofthepreferentialprocurementscorecard,namelyspendoncompliantsuppli-ers(generic/large)andspendonsuppliersthataremorethan51%Black-owned.

SOCIO-ECONOMICDEVELOPMENTDetailsof theGroup’sendeavours,whichenabledittoretainthemaximumscoreforthiselementofthescorecard,areoutlinedonpages58and59.

2018 B-BBEE SCORECARD BY ELEMENT2018 2017

Ownership 25 25

ManagementControl 11,19 12,91

SkillsDevelopment 16,92 11,45

EnterpriseandSupplierDevelopment 32,06 4,06

Socio-economicDevelopment 5 5

90,17 58,42

B-BBEELevel Level3 Level8

CustomerSpendRecognition 110% 10%


EMPLOYEE RELATIONSAECI subscribes to the principles of theInternationalLabourOrganization’s (“ILO”)conventions. HumanCapital policies areintolerantofanyformofunfairdiscrimina-tion,harassment,child labour, intimidationorbullyingintheworkplace.

Tosafeguardadherencetotheseprinciplesandpolicies,andtofacilitateunderstandingandgoodrelationships, relevanttraining isprovidedformanagement,shopstewardsandemployees.

Policiesarereviewedregularlyforcontinuedalignment with legislative and businessrequirements.Violationofthesepoliciesandassociatedstandardsresultsinappropriatedisciplinaryaction.

LABOUR LEGISLATIONThefollowingitemsreceivedattentionintheyeartoensurecomplianceinanever-changingstatutoryenvironmentintheGroup’scountriesofoperation:

› inSouthAfrica,formalrecognitionagree-mentswithallrepresentativetradeunionsremainedinplace,inlinewiththeamendedLabourRelationsAct,No.66of1995.Therewere improvements inthemanagementof temporary employment and labourbrokercontracts infavourofpermanentemploymentwheneverthis iswarrantedandjustifiable;

› inTanzania,wherebusinessesintheMiningSolutionssegmentoperate,changesweremade tocomplywithanew regulationwhichprovidesthatthegrievanceproce-duremustbedisplayedinaconspicuousplaceandtheemployermustensurethatemployeesareawareandsensitised intermsofthisprocedure.

TRADE UNION AND EMPLOYEE PARTICIPATIONAECI subscribes to the ILO’s conventionsregarding employees’ rights to freedomofassociationand collective bargaining.SectionalForumshavebeenestablishedatoperatingplant leveltoenhancemutuallybeneficialengagementbetweenmanagementandemployees.

InSouthAfrica,allthemainchemicalindustrytradeunionsarerecognised.Approximately47%ofemployeesintheGroup’slocaloperationsaremembersoftradeunions.Approximately32%ofemployeesareinthebargainingunit,with28%beingunionmembers.

SimilarrecognitionagreementsexistinothercountrieswhereAECIoperates.Approximately59%ofthoseemployeesareunionmembers.AlistofunionswithwhomtheGrouphasformalrecognitionagreementsinplaceisavailableat www.aeci.co.za/pdf/trade-unions/2017-trade-unions.pdf.

Itwasverypleasingthatatwo-yearsubstan-tivecollectiveagreementforbargainingunitemployees inSouthAfricawasconcludedundertheauspicesoftheNationalBargainingCouncilfortheChemical Industry.Thiswillensurelabourmarketstabilityandcertaintyintheindustryfortheperiod1July2017to30June2019.

Thefocusoverthenextthreeyearswillbeondevelopingapartnershipmodelformanagementandemployeeengagements,implementingastandardjobevaluationsystemGroup-wideandformalisingastandardremunerationphilosophy.Stepsinthisregardwillinclude,interalia:

› establishmentofOperatingBusinessandSectionalForums;

› capacity-buildingformanagement,employ-eesandemployeerepresentativestoenablestronger partnerships in all countries ofoperation;

› alignmentofbargainingunitpositionswiththePatersonframeworktoensurethatastandardjobprofileassessmentmethod-ologyisappliedacrosstheGroup;

› roll-outofemployeerelationssoftwareforcasetracking,recordkeeping,reporting,andtheearlyidentificationoftrendsthatmayrequireproactiveinterventions.

THE EST2017markedthefifthanniversaryoftheEST.Sinceinceptionin2012,dividendpaymentsinexcessofR7millionhavebeenpaidto 5643beneficiaries.

Intheyearunderreview,theTrusteesoftheESTundertooknumerousactivitiesinfulfillingtheirmandatetoempowerbeneficiaries,including:

A ROBUST AUDIT PROCESS

was commissioned to verify and update the beneficiaries database

AN ENGAGING GENERAL MEETING

of beneficiaries was held in May to provide them with a comprehensive and transparent update on the EST’s performance, and for them to mandate the Trustees to vote on their behalf at AECI’s AGM

A NOMINATION AND ELECTION PROCESS

for independent Trustees was concluded

A GROSS DIVIDEND OF 40 CENTS

per B ordinary share was paid to beneficiaries in September 2017



03.3

TALENT ACQUISITIONInthehighereducationandtrainingpillaroftheWorldEconomicForumCompetitivenessReport2016-2017,SouthAfricawasrankedlastof140countriesin“Qualityofmathandscienceeducation”and138thin“Qualityoftheeducationalsystem”.Theseeducationalchallengesunderscoretheimportanceofskillsretentionanddevelopmentinpursuitofthedeliveryofbusinessgrowth.Attractingandretainingscarceandcriticalskillsinahighlycompetitivemarketsremainsachallengeandanareaofstrategicfocus.

Tosafeguard itsfuturegrowth, theGroupcontinuestofosterapipelineoftalentviaits internal Learning and Developmentprogrammesandthrough itspartnershipswith secondary and tertiary educationalinstitutions.InSouthAfrica,theemphasisisondesignatedcandidatesandwomen.

Recruitmentcampaignshavebeenheld inoutlyingregionstobuildstronglocaltalentpipelines.Whereverpossible,preferenceinemploymentisgiventopeoplefromcommu-nitieswhichareclosetoGroupoperations.

TALENT MANAGEMENTIn2017,existingprojectsandprogrammestoenableandfacilitateemployeegrowthcontinuedandotherswereinitiatedtoenhancetheworkplaceengagementandexperience.

Improvedleadershipcapabilityandapipelineoffuture leadersareachievedthroughtheGroup’spartnershipwiththeGordonInstituteofBusinessScience(“GIBS”).GIBSprovidescustomisedandaccreditedmanagementinter-ventionsinthecontextoftheAECILeadershipandManagementDevelopmentProgrammes.TheGIBSprogrammescaterforleadersfromjuniortoseniormanagementlevelsandofferparticipantsthemostup-to-dateknowledge.

Atseniorandmiddlemanagement levelsparticipantsareexposedtostretchassign-ments, from individual and syndicateperspectives,thatencompassactionlearn-ing and business improvements. Growthand improvementopportunitiesthathaverealapplicationintheGroupare identified.Theoutcomesoverthe lasttwoyearsaredemonstratedbygoodresultsinGroup-widecollaborationandinnovationinitiatives.

Thefifthintakeofemployees,acrossalllevels,participatedin2017.Thesustainedsuccessof thisprogrammewas illustratedbytheneedtopresenttheFoundationandMiddleManagement levelcoursefor twogroupsofemployees.Overfiveyears,morethan540employeeshavebenefitedintotal,with80%ofthembeingfromdesignatedgroups.Approximately80%ofallgraduatesremainemployedacrosstheGroup.

ThreeSeniorManagerswereenrolledonthe GIBS Global Executive DevelopmentProgramme.EnrolmentwillcontinueuntilallSeniorManagershavehadanopportunitytoattend.

AtindividualGroupbusinesslevel,significanttimewas invested inworkforceplanningthrough the development of successionplanstoaddresstheshort-and long-termemploymentneeds.

PERFORMANCE MANAGEMENTTheexecutionofperformancemanagementinAECIhasevolvedconsiderablyinrecentyears.Anautomatedperformancemanagementsystem,namedKhulaNathi(“GrowWithUs”inZulu),wasimplementedacrosstheGroup’sSouthAfricanoperationsinMarch2017andmadeavailabletoemployeesinothercountriesofoperationtwomonthslater.

Employeesembracedthesystemandcontrib-utedto itssuccessful implementationbyparticipatinginengagementsessionsandbysettingtheirKPIsfor2017inKhulaNathi.Themid-yearandyear-endperformancereviewswereconductedonthesystem.Theprocesswasautomatedfurtherthrougha“reviewtopayment”processwherebyemployees’finalperformanceratingsareexportedandprovidedas input into thecompensationprocesswithoutrequiringmanualintervention.

Automationhasresultedinthestandardisationofannualactivities,minimisationofadmini- strationandimprovedreportingcapabilities.

While the focus in2017wasprimarilyonenabling employees to use the on-linesystemforsettingKPIsandreviewingtheirperformance,conversationsremainthemostimportantaspectofperformancemanage-ment.Movingforward,therefore,embeddingperformancemanagementintheGroupwillemphasisethequalityofperformanceconver-sationsbetweenManagersandemployees.

LEARNING AND DEVELOPMENTLearningandtrainingarekeycomponentsofAECI’sEmployeeValueProposition.Skillsandbehavioursthatpromoteacultureofcontinuouslearning,leadershipanddiversityarefundamen-taltotheachievementoftheGroup’sstrategicgoalsandobjectives,includingitsEEtargets.

Trainingprogrammesensurethetimelyavaila-bilityoftheGroup’shumancapitalrequirementsand learning interventions aim to deliverwell-rounded,competentemployeeswhomakecontributionsthatprovidethemwithpersonalgrowthandfacilitateincreasedproductivityandhenceimprovedshareholdervalue.

The Learning andDevelopment functionremainscommittedtoallowingemployeestogrowandadvancetheircareersintheGroup.Theemployment level “banded”approachinplacegivesemployeesopportunitiestoparticipateinprogrammesappropriatetotheirlevelsofwork,butalsotoattendinterventionsatmoreadvancedlevels.

INTELLECTUAL CAPITAL

As an international organisation, AECI actively seeks to attract and retain talent at all levels in all its countries of operation. The Group’s key policies, programmes and initiatives in support of its Employer Value Proposition are presented here.


INTELLECTUAL CAPITAL

03.4

EMPLOYEE ASSISTANCETraininginitiativesconcentrateparticularlyonacceleratingthedevelopmentofemployeesfromdesignatedgroups.

In2017theGroup increased itsfinancialassistanceforemployeesby41%throughtheAECIEmployeeStudyAssistanceScheme(26%increasein2016).Investmentoverthelastfouryears is illustratedinthetableatthetopofthepage.

CoursesofstudypursuedincludedMastersinBusinessAdministration,BachelorofArtsPsychologyinHumanResources,BachelorofScienceandBachelorofAccountingSciencedegreesaswellasNationalDiplomasinElectri-calEngineering,AnalyticalChemistry,SafetyManagementandOperationsManagement.

SkillsDevelopment(“SD”)isapriorityelementintheamendedBroadBasedBlackEconomicEmpowermentCodesofGoodPracticeanditisvitalthatGroupbusinessesinSouthAfricaachievethe40%threshold.Workshopswereheldduring2017toup-skillemployeesondatacapturerequirementsforthenewlydeployedSAGEBEE123Systemsoastomaximisescores.

InvestmentintheExternalBursarySchemeandtheEmployeeDependentBursarySchemeassists inachievingthisthresholdastheseinvestmentsaremeasuredaspartofSD.

BURSARY SCHEMESAECIsponsoredfull-timestudents,primarilyfromdesignatedgroups,whowerestudyingtowardsqualifications identifiedascriticalandscarceskills,throughtheExternalBursaryScheme.Fieldsofstudypursued includedchemistry,agriculture,andchemical,mechan-icalandminingengineering.

GraduatesareemployedintheGroupforaminimumof12monthsaspartofthebursarywork-backrequirementandtogainindustryexperience.Thisdevelopmentprogrammeisdependentonpositionsavailableand itwaspleasingthatallsevenstudentswhograduatedattheendof2016orduring2017wereplaced inthebusiness.Afurthersixstudentscompletedthetheoreticalcompo-nentoftheirdiplomasandcommencedtheirinternships.R4,4millionwas invested tosupport35students in2017comparedtoR1,7millionfor26studentsintheprioryear.ThesignificantincreaseinfinancingwasduemainlytotheGroupofferingextendedvacationworkopportunitiestostudents.Thishasbuiltstrongerrelationshipsbetweenthemandthebusinessandshouldbenefittheretentionrateofgraduateswhoaretheleadersandtechnicalexpertsofthefuture.

BENEFICIARIES OF EMPLOYEE STUDY ASSISTANCE SCHEME BY RACIAL GROUP AND GENDER 2014 TO 2017

African Coloured Indian WhiteTotal by gender Total

beneficiariesTotal investment (R millions)Year M F M F M F M F M F

2014 82 63 — 8 5 16 7 8 94 95 189 1,9

2015 46 33 3 4 8 10 11 9 68 56 124 2,3

2016 89 59 5 11 11 15 12 14 117 99 216 2,9

2017 116 76 8 17 15 18 15 18 154 129 283 4,1

Total 333 231 16 40 39 59 45 49 433 379 812 11,2

INVESTMENT IN BURSARY SCHEMES IN 2017

SchemeNo. of beneficiaries

Designated group beneficiaries (%)

Female beneficiaries (%)

Investment in 2017 (R millions)

External 35 94 42 4,4

Employeedependent 34 100 64 0,7

Totalbeneficiaries 69 97 53 5,1

SUMMARY OF CHIETA GRANTS IN 2017Type of grant (R millions) 2017 2016

Mandatory 4,8 4,3

Discretionary 6,0 3,3

Totalgrants 10,8 7,6


INTELLECTUAL CAPITALCONTINUED

03.4

Group representatives attended variousstudentdaysatuniversitiesasAECIbrandambassadorsand toadvise studentsonbursaryopportunitiesandcareerprospectsintheCompany.

Further financial support was providedthroughtheEmployeeDependentBursarySchemetodependentsofemployeesinlowerincomebrackets.Thebursaryrecipientmustregisterwithanaccreditededucationalinsti-tutionforatertiaryqualification,irrespectiveofthecourseofstudy.Thenumberofbursaryholders increasedto34from27 in2016.Asummaryof investments inthebursaryschemesissetoutonpage56.

INTERACTIONS WITH THE CHIETAAECI’slearninganddevelopmentstrategiesarealignedtotheEmploymentEquityActandtheSkillsDevelopmentActNo.97of1998.Accordingly,theWorkplaceSkillsPlansandAnnualTrainingReportsofGroupbusinessesinSouthAfricaweresubmittedtimeouslytotheChemicalIndustriesEducation&TrainingAuthoritystructures(“CHIETA”),asrequiredbylegislation.

CollaborationbetweentheGroupandtheCHIETAstakeholderscontinuedandthecriteriarequiredforfundingapplicationshavebeenimplemented,asdemonstratedbytheincreaseinfundingreceived(seetableonthefacingpage).Thefigurefor2017includespaymentsreceivedtoend-September.ThetotalamountwillincreasewhentheCHIETAmakesfurtherpaymentsinlieuandwhenDiscretionaryGrantinterventionsarecompleted.

OnlythreemanufacturingsitesintheGroupareyettobeaccreditedasapprovedworkplacesforlearnershipandapprenticeshiplearning.TheGroupremainswellrepresentedinlegislativeforumsoftheCHIETA.SubjectmatterexpertsrepresentAECIatemployerorganisationssuchastheNationalAssociationofSpecialityChemi-calsEmployersAssociation(“NASCEA”),theNationalInstituteofExplosivesTechnologyandtheNationalArtisanTrainingCommittee.TheserelationshipsoptimisetheGroup’sabilitytomakecontributionssuitableandbeneficialtothesectorsinwhichitoperates.NASCEAhasalsorequestedthatAECInominatearepre-sentativetoserveontheCHIETABoardfor2018.Thisnominationwillbefinalisedin2018.

DetailsofprojectsandprogressintheareaofLearningandDevelopmentbyAECI’sbusinesssegmentsareavailableviathelinkwww.aeci.co.za/sustainability-training.php.

HUMAN CAPITAL MANAGEMENT SOLUTIONThe2020strategicobjectiveoftheHumanCapitalfunctionistoenhancecurrentpracticessoastoenableleaderstoimproveemployeeengagementinternationally.

Thefoundationfor this is transformationofthepeoplemanagementlandscapeandtheassociatedoperatingmodelacrosstheAECIGroup in all countries of operation. Thiswillbeachieved throughdeliveryoftheHumanCapitalManagementSolutionProgramme—acollaborativeeffortbetweentheGroup’sHumanCapitalandITfunctions

andexternalserviceproviders,withinputfromkeystakeholders inthebusiness.Arobustgovernancemethodologywillunderpintheexecutionoftheprogrammewhichissupport-edbytheChiefExecutive,astheProgrammeSponsorandtheGroupExecutive:HumanCapital,astheProgrammeOwner.

Thetechnologysolutionbeingimplementediscloud-based,withmobilefunctionality,anditwill integrateHumanCapitalfurther intothefabricofAECI’severydaybusiness.Itwillbepossibletogeneratedata-driveninsightstoenhanceworkforceperformanceandthusoverallbusinessperformance.

ArobustHumanCapitaloperatingmodelwillalsounderpinthisinitiative,enablingstand-ardisedprocessesandasolidgovernanceframeworkthatpromotemoreeffectivepeoplemanagementandbenefitlinemanagerswhoareexpectedtobeuniformlyfair,transparentandequitableinmanagingtheworkforce.

Asanintegratedsolutionforallemployee- relatedtransactionsthroughoutanemployee’s period of employment, the system willultimatelyallowforthecentralisationanddecentralisationofHumanCapitalprocessesandactivities,asrequired.


SOCIAL AND RELATIONSHIP CAPITAL

AECI accepts that it has responsibilities and account-ability, as a corporate citizen, to achieve shared value that is best achieved through a stakeholder-inclusive approach. The Group has a valuable role to play in the development of communities where it operates and it needs to be responsive to the growing and legitimate needs of these communities and South Africa as a whole.

SOCIO-ECONOMIC DEVELOPMENT (“SED”)In 2017, the Group contributed to meeting SouthAfrica’s national development imperatives throughSEDprogrammesdesignedtoenableimpactfulsocialtransformation.

R35millionwasinvestedinqualifyinginitiativesacrossallnineprovincesinSouthAfrica,withapositivecontribu-tionto96projects,inpartnershipswith73organisationsandimpactingover450000beneficiaries.

This contribution was realised through the AECIGroupSEDProgrammes,an integratedbusinessandpeople-centricstructurewhich isexecutedthroughtheAECICorporateSocial InvestmentFund,theAECICommunityEducationandDevelopmentTrust(“CEDT”)andtheTisoAELDevelopmentTrust.Thephilosophyoftheprogrammesisthatofsustainabledevelopment,whichdrivesallgovernanceanddecision-making.ThisphilosophyisalignedtotheKingIVprinciplesanddrivesdevelopmentprogrammesthatmeettheneedsofthepresentwithoutcompromisingtheabilityoffuturegenerationstomeettheirownneeds.

Theprocessadoptedtoachievesustainabledevelopmentincludes:

› comprehensiveneedsanalyses;

› amulti-disciplinarydevelopmentapproach;

› crediblestrategicpartnerships

› achievingmaximumimpact;

› targetedoutcomesandimpact-basedgrantmanagement;

› proactiveriskmanagement;and

› robustmonitoringandevaluation.

Investmentsintheyearwereimplementedacrosstheeightbroadareasoffocus.Theseareas,withcorre-sponding investedamountsoverthelastfouryears,areshownonthefacingpage.

Overandabovethestructuredprogrammes,discre-tionarygrantswerealsoallocatedtowardsnationalemergenciesin2017.

TheCEDTpartneredwithGiftoftheGiverstoprovideemergencyrelieftocommunitiesneighbouringGroupoperatingareasinKwaZulu-NatalandtheWesternCape.AtUmbogintwini,neighbourswereseriouslyaffectedbyfloodsinOctober.Foodparcels,blanketsandmattresseswereprovidedto200families.

Furtherreliefwasprovidedtofarms intheWesternCapeaffectedbytheseveredroughtconditionsthatpersist inthatprovince.Animalfeedwasdonatedtoassistinsafeguardingthelivelihoodsof100families(1000beneficiaries)intheKlawerregion.

EMPLOYEE VOLUNTEERISMAECI’semployeeshavemadesignificantprogress intermsofvolunteerismcampaignswhicharealignedwiththeSEDProgrammestrategyandprioritiesandarecomplementaryintermsofmakingameaningfulimpact.Thetwocampaignsin2017focusedoneducation:

› careerguidanceeducationandawareness,withover5000informationbookletsdonatedtolearners;and

› theBarefootNoMoreCampaign,whichsawoverR500000beingdonatedtowardstheprovisionofschoolshoes,stationeryandunderwearfor3000needylearnersacrossthecountry.

AECIthanksallitsSEDpartnersforenablingitsongoingeffortstohaveameaningfulandsustainableimpactthelivesofmany.

R35m INVESTED IN 2017 IN:

9 PROVINCES

96 PROJECTS

73 ORGANISATIONS

450000 BENEFICIARIES

5000CAREER GUIDANCE BOOKLETS DISTRIBUTED

200FAMILIES RECEIVED FOOD PARCELS, BLANKETS AND MATTRESSES

1000BENEFICIARIES POSITIVELY IMPACTED BY ANIMAL FEED ASSISTANCE

R500000DONATED FOR SCHOOL SHOES AND SUPPLIES

3000LEARNERS BENEFITED FROM DONATIONS


SOCIAL AND RELATIONSHIP CAPITAL

03.5

Of the total investment in 2017, R21 million was allocated to programmes aligned with the needs of communities in which AECI’s businesses operated. AEL also invested in SED initiatives in Zambia, Ghana and Australia. Projects ranged from infrastructure development of local community facilities, to water access programmes, skills development and education. PLANT & ANIMAL HEALTH R1,4m

MINING SOLUTIONS R10,7m FOOD & BEVERAGE R3,6m

WATER & PROCESS R3,5m CHEMICALS R1,8m

SED INVESTMENTS BY BUSINESS SEGMENT IN 2017

SED FOCUS AREAS AND SUMMARY OF INVESTMENTS: 2014 TO 2017

ENVIRONMENT—R4MILLIONENHANCING ENVIRONMENTAL AWARENESS AND DRIVING ENVIRONMENTALLY-FOCUSED COMMUNITY UPLIFTMENT PROGRAMMES.

INCLUSION—R3MILLIONINCREASING THE EMPLOYMENT POTENTIAL OF PEOPLE LIVING WITH DISABILITIES.

SKILLSDEVELOPMENT—R15MILLIONIMPROVING INTERMEDIATE ARTISANAL AND TECHNICAL COMPETENCIES BY SUPPORTING INITIATIVES THAT PROVIDE ACCREDITED QUALIFICATIONS.

EDUCATION—R30MILLIONIMPROVING EDUCATIONAL OUTCOMES THROUGH LEARNER AND EDUCATOR DEVELOPMENT. IMPROVING THE PREPAREDNESS FOR YOUNG SCHOOL LEAVERS AND ENABLING ACCESS TO TERTIARY EDUCATION QUALIFICATIONS.

FOODSECURITY—R5MILLIONPROVIDING ACCESS TO BASIC FOOD AND NUTRITION.

HEALTH—R4MILLIONENABLING ACCESS TO PRIMARY HEALTHCARE.

ORPHANS AND VULNERABLE CHILDREN—R4MILLIONREDUCING/MITIGATING THE VULNERABILITY OF CHILDREN.

WATER—R7MILLIONCREATING AWARENESS ON WATER CONSERVATION AND STRENGTHENING EFFORTS TO PROVIDE POTABLE WATER TO COMMUNITIES.

Readmoreatwww.aeci.co.za/sustainability-sed-programmes.php.


60

SAFETY, HEALTH AND THE ENVIRONMENT 62

NATURAL CAPITAL 63

INDEPENDENT ASSURANCE PROVIDER’S LIMITED ASSURANCE 68 REPORT ON SELECTED KEY PERFORMANCE INDICATORS

04

61

The AECI Group, as a matter of policy, is commit-ted to a clean, safe and healthy environment for its employees, contractors, customers and surrounding communities.

Tofulfilthispolicycommitment,asetofSafety,HealthandEnvironmental(“SHE”)StandardshasbeenagreedtoandapprovedbytheChiefExecutive.TheSocialandEthicsCommitteeoverseesthesemattersandreportsbacktothefullBoard.TheStandards,asstatedbelow,aredesignedforimplementationinAECI’sfederalstructure.TheChiefExecutiveholdstheManagingDirectorofeachAECIbusinessaccountableforensuringthatimplemen-tationiseffectedappropriatelyinthebusinessheorshemanages.EachGroupbusinessmust:

› adoptasafety,healthandenvironmentalPolicythatmeetstheneedsofthebusiness;

› holdlinemanagementaccountablefortheimplemen-tationofthesafety,healthandenvironmentalPolicy;

› developandmaintainappropriateprocedures tosupportthesafety,healthandenvironmentalPolicy;

› managesafety,healthandenvironmentalrisksinamannerthatmeetsallthelegalrequirementsofthecountriesinwhichitoperatesandacceptedinterna-tionalcriteria;

› bepreparedforanddealwithanyemergency;

› ensurethatemployeesandcontractorsaretrainedeffectively;

› maintaina recordofsafety,healthandenviron- mentalinformationandmeetstatutoryrecord-keepingrequirements;and

› auditperformanceagainstitsPolicy,standardsandproceduresand report this regularly to theAECIExecutiveCommittee.

ThekeyperformanceindicatorsforreportingpurposesarepreparedinaccordancewithAECI’sinternalreportingcriteria.Theseareavailableviathelinkwww.aeci.co.za/sustainability-reporting-standards.php.

REVISED STRATEGYAsingleSHEandQuality(“SHEQ”)strategywasdevel-opedduring2017.Thisstrategy isaimedatdrivingstandardisationinSHEQmanagementacrosstheGroupanddeliveringanewlong-termgoalandvisionasfollows:

OurgoalisZeroHarm.Weaspiretooperatesustainably,withoutharmtopeople,theenvironmentandthecommunitiesinwhichweoperate.

Thevisionreflectsanorganisationalbeliefsystemthatdrivescontinuousimprovementoverthelong-term— ajourneytowardsZeroHarm.

Thestrategyhas12focusareasthatwillbedevelopedandimplementedoverfouryearstodeliverimprovedperformancesinProcessSafety,OccupationalSafety,OccupationalHealth, Environmental Performance,ProductTransportationandQuality.Workcommencedintheyearonthepriorityareas,namely:LeadershipAlignmenttoZeroHarm,EmployeeEngagement,ProcessSafetyManagement,Life-savingBehavioursandSHERiskManagement.

ThestrategyhasbeenendorsedbytheleadershipofallGroupcompaniesaswellastheAECIExecutiveCommittee,theSocialandEthicsCommitteeandthefullAECIBoard.TheChiefExecutiveremainsaccountableforSHEQperformance.

Implementationandthemeasurementoftheeffec-tivenessofthisstrategyismanagedthroughanewlyconstitutedGroupSHECommitteeandprogress isreportedonamonthlybasistotheExecutiveCommitteeandquarterlytotheSocialandEthicsCommittee.

COMPLIANCEThelegalenvironmentinwhichtheGroupoperatesisincreasinglycomplexowingtoadditionalSHE-relatedlegislativerequirementsinSouthAfricaandthediversityof legislation incountries intheGroup’sgeographicfootprint.In2016aspecialistthird-partySHEconsult-ingfirmwascontractedtoundertakeandmanageanextensiveauditprogrammeacrossallAECIsites,internationally.Theprogrammecontinuedthrough2017andwascompletedinDecember.Atotalof57siteswereaudited,withprimaryfocusonlegalcomplianceinSHEmatters.TheauditresultsandprogressintermsofaddressingassociatedfindingsarediscussedbythemanagementteamsconcernedaswellasbeingtrackedbytheExecutiveCommitteeonamonthlybasis.

SAFETY, HEALTH AND THE ENVIRONMENT


04.1SAFETY, HEALTH AND THE ENVIRONMENT

Asreportedinprioryears,certainmanufac-turingoperationsatAEL’sModderfonteinfacilitywereunabletomeetalltheminimumemissionsstandardsthatcameintoeffecton1April2015,intermsoftheNationalEnviron-mentalManagement:AirQualityAct,No.39of2004.AELsubmittedanapplicationtotheregulatoryauthoritiesforthepostponementofthecompliancetimeframes,soastoallowthecompanysufficienttimetomakethenecessarycommitmentsofcapitalrequiredtoachievefullcompliance. In2017, theDepartmentofEnvironmentalAffairs(“DEA”)respondedtothisrequestby issuinga letteroutliningalternativelimitstobeadheredtobetween24April2017and30March2020.AELhassincecommencedinstallingabatementequipment,andwillcontinuetodosooverthenexttwoyears, inordertomeetthe2020MinimumEmissionStandards.

As inpreviousyears,eachManagingDirec-torhassubmittedaLetterofAssurancetotheChief Executive, describing themainSHE-relatedrisksfacedbyhisorherbusinessandthecontrolsinplacetomanagethese,andalsoconfirmingthatthebusiness is incompliancewithAECI’sSHEStandards.Wheresuchconfirmationcannotbegiven,thelevelofnon-complianceisdescribedanddetailsoftheplansinplacetoachievecomplianceareprovided.

SHEQ MANAGEMENT SYSTEMSAECI’sbusinessesand/oroperatingsitesarerequired toalign theirSHEQManagementSystemswithanexternalstandardagainstwhichthird-partyauditsmaybeundertaken.Themostcommonlyadoptedsuchstandardsare:

› OHSAS18001(aninternationaloccupationalhealthandsafetymanagementstandard);

› ISO14001(aninternationalenvironmentalmanagementstandard);

› NOSA5Star(aSouthAfricanSHEManage-mentSystem);and

› ResponsibleCare®.Thisistheglobalchemi-cal industry’svoluntary initiativeforthecontinualimprovementofperformanceinSHEpractices.

AELutilisesitsin-houseWorldClasssystemwhichcomprisessevenelements, includingsafety,healthandtheenvironment,butalsocommencedaprogrammeintheyeartoobtaincertificationagainstOHSAS18001:2007.TheCentralEngineeringDepartment,based inModderfontein,achievedcertificationin2017andanumberofotherareasareearmarkedforthesamecertificationoverthenextfewyears.

NATURAL CAPITAL

2017 HIGHLIGHTS

9644TONNES OF WASTE RECYCLED

11,8%YEAR-ON-YEAR REDUCTION IN HAZARDOUS WASTE GENERATION

6,2%YEAR-ON-YEAR REDUCTION IN WATER CONSUMPTION

Maintained “B”LevelSTATUS PERFORMANCE IN THE CDP CLIMATE CHANGE AND WATER PROGRAMS, DESPITE STRICTER CRITERIA

ENVIRONMENTAL INCIDENTSBecause the Group has well over 100manufacturingsitesandanextensiveproducttransportation network, the responsiblemanagementofenvironmental incidents isan importantaspectofAECI’svalues.Thepreventionof incidentsdetrimentaltotheenvironmentremainsakeyfocusareaanditispleasingtoreportthattherewereno*majororseriousenvironmental incidentsin2017(no*majororseriousincidentsin2016).

Environmental incidents are reported toexternalstakeholdersthroughstructuressuchasModderfontein’sCommunityAwarenessandEmergencyResponseCommittee,Stake-holderForumsandLicenceAdvisoryForums.IncidentsarealsoreportedonamonthlybasistotheExecutiveCommittee.

Ofthemoderateandminor incidentsthatdidoccur in2017,themostsignificantaredescribedbelow:

› AcaciaOperationsServices,Umbogintwini:aleakinacausticsodadeliverylineresultedinthischemicalenteringthestormwatersystemandanon-siteretentiondam;

› AECIChemPark,Chloorkop:contaminatedstormwaterfroma leakingsumpcausedpollutionofAECI’sneighbouringModder-fonteinproperty;

› AEL,Australia: approximately500kgofammoniumnitratespilledwhenabagofproductfelloffaflatbedtruckontotheroadsurfaceatAEL’sfacilityinBajool,Queensland;

› AEL,DRC:12bagsofammoniumnitrateporousprillwerespilledfromaserviceprovid-er’struckonthewaytoacustomer’ssite;

› AEL, Indonesia:amobilemanufacturingunittippedoverwhiletravellingtoablast-ing location.This resulted inthespillageofapproximately4000kgofexplosivesemulsion,1000kgofammoniumnitrate,125ℓofdiesel,and50ℓofhydraulicoil;

› AEL,Modderfontein,Nitrates: therewasanoverflowfromapondduringtransferofnitrogenouseffluenttothetankfarm,resultingingroundpollution;

› AEL,Modderfontein:effluentandsewageoverflowedintoacanalasaresultofthesewerdrainmanholebecomeblockedbyconcreteandsand.Thequalityofwaterdischargedwasadverselyimpacted;

› AEL,Modderfontein:spillageofapproximatelyonetonneofweakammoniumnitratesolutionimpactedthequalityofeffluentdischarged;

› Chemical Initiatives (“CI”):a spillageofsulphuroccurredontheN1highwaynearHanover, intheNorthernCape,whenthedriverofa third-party transportserviceproviderswervedtoavoidahead-oncollision;

› CI:a third-partyserviceprovider’s truckcarryingsulphuricacidleakedapproximatelyonetonneofacidontotheN12highwaytowardsPotchefstroom,NorthWest,duetoarupturedpipe;

› ChemSystems,Umbogintwini:effluentfromtheplantenteredthestormwatersystem,resultingincontaminationofalocalstream;

› ChemSystems:a resinspillage resultedfromatrafficincidentabout130kmfromMbombela,Mpumalanga.

Inalloftheincidents,clean-upwasconductedeffectivelyandtherewasnolasting,materialenvironmentalimpact.

Thereductiontrendinthenumberofminorenvironmental incidents recorded in theGroupinrecentyearshasbeenmaintained.It isconcerning,however, thatthenumberofmoderate incidentshas increased(seegraphonpage64).Alargeproportionoftheseoccurredduringthetransportationofproduct.Aseparatetrackingmethodfortransportationincidentswillbeinstitutedin2018.


ENVIRONMENTAL INCIDENTS PER YEAR *

450

400

350

300

250

200

150

100

50

0

SeriousModerateMinor

PERFORMANCE BY BUSINESS SEGMENT

MiningSolutions

Water &Process

Plant&AnimalHealth

Food&Beverage Chemicals Property

Total2017

Total2016 *

%change

Waterusage(m3) 1 781 840 72 202 26 662 55 205 867 934 142 062 2945905* 3 139 755 * (6,2)

Hazardouswastegenerated(t) 1 962 777 133 29 3 606 85 6592* 7 474 * (11,8)

Wasterecycled(t) 3 374 26 — 37 5 595 612 9 644 10 323 (6,6)

Scope1emissions (tonnesofCO2e) 327 965 579 330 3 474 11 266 22 665 366280* 314 780 * 16,4

Scope2emissions (tonnesofCO2e) 140 204 3 342 1 490 4 778 63 233 3 924 216971* 217 088 * (0,1)

Totalemissions(Scopes1and2) 583251* 531 868 * 9,7

TOTAL FOR THE GROUP

2017 2016%

change

Waterusage(m3) 2945905* 3 139 755 * (6,2)

Hazardouswastegenerated(t) 6592* 7 474 * (11,8)

Wasterecycled(t) 9 644 10 323 (6,6)

Electricityconsumption(MWh) 211 635 211 239 0,2

Energyusage(GJ) 2 320 449 2 295 753 1,1

* Indicateslimitedassurance.Seepage68.

’13 ’14 ’15 ’16 ’17


04.1SAFETY, HEALTH AND THE ENVIRONMENTCONTINUED

RESOURCE EFFICIENCYWater usage by the Group’s operationsdecreasedby6,2%to2945905m3*(2016: 3139755m3*).Themostsignificantcontributor tothiswasAEL’sModderfonteinoperations,whereanumberofplantsattheNitratesfacilityundertookastatutorymaintenanceshutdownduringtheyear.

Thegenerationofhazardouswastedecreasedsignificantlyby11,8%to6592tonnes(2016:7474tonnes).Thiswaspredominantlyduetogreaterdemandbycustomersforsulphu-ricacidby-productwhichwaspreviouslydisposedof.Recycledwastedecreasedslightly to9644tonnesfrom10323tonnesin2016.(Note: the16588tonnes reported in theprioryearwasincorrectandthefigurehasbeenamended).

CARBON FOOTPRINTTheterm“carbonfootprint” isdefinedasthetotalgreenhousegasemissionscauseddirectlyandindirectlybyanindividual,organ-isation,eventorproduct,andisexpressedastonnesofcarbondioxideequivalent(“CO2e”).AECI’scarbonfootprintwascalculatedusingtheUnitedNations’IntergovernmentalPanelonClimateChangeGuidelinesforNationalGreenhouseGasInventoriesandtheGreen-houseGasProtocol’sCorporateAccountingandReportingStandards,asdevelopedbytheWorldBusinessCouncilforSustainableDevelopment.DetailsontheoperatingandorganisationalboundariesusedtocalculateAECI’scarbonfootprintareavailableontheCompany’swebsite.Seewww.aeci.co.za/sustainability-carbon-footprint.php.

TotalCO2eemissionsincreasedby9,7%duetohigherScope1emissionsfromAEL’snitricacidfacility.TheincreasewasattributabletosignificantlyhigheronlinetimeatNo.9NitricAcidplantin2017.

Scope2emissionsweremainlyfromelectricityconsumption.TheGroupconsumed211635 MWh*ofelectricity(2016:211239MWh*).Thisrepresentsa0,2%year-on-yearincrease.Totalenergyusagewas2320449GJ*(2016:2295753GJ*).

GOING GREENFocusontheGoingGreenProgrammewassustainedintheyear,withanumberofeffluentandwateroptimisationprojectsbeingimple-mentedacrosstheGroup.Theobjectivesweretoreducewaterconsumptionand/ordischargeandalsoto improvethequalityofeffluentdischarged.Keyprojectsincludedupgradingthestormwaterandeffluent infrastructureatAECIChemPark,effluentoptimisationsolutionsatModderfonteinandseveralefflu-entqualityimprovementsatNulandis,LakeFoodsandIndustrialOleochemicalProducts.

The National Cleaner Production Centre(“NCPC-SA”)conductedenergyassessmentsatCI’sUmbogintwinifacilityandselectedprojectswillbe implementedfrom2018.WasteassessmentswerealsoconductedbytheNCPC-SAatsomeGroupfacilitiesandrelatedopportunitieswillbeassessedinthecomingyear.

LAND REMEDIATIONTheguidingprinciplesunderlyingAECI’slandremediationactivitiesaretheprotectionofhumanhealthandtheenvironmentandtheuseofgoodscience,provenconceptsandthebestavailableappropriatetechnologies.Humanhealthandenvironmentalriskassess-mentsareundertakenandthese influencesubsequentactivities.Stakeholdercommuni-cationintheremediationprocessisvitalandAECIcooperateswithregulatoryauthoritiesandsharesinformationwithinterestedandaffectedpartiesonaregularbasis.

Detailsonfinancialprovisionsforenviron-mentalliabilitiesareincludedinnote15tothefinancialstatements.

As intheprioryear, themajorityofAECI’sremediationexpenditurein2017wasattheUmbogintwini Industrial Complex as theGroup continued theprogressive roll-outof its enhanced in-situ bioremediationprogramme.Thisprogrammeinvolvesthecreationofbio-barrierzones,downgradientofthecontaminationsourceareas.Thegrowthofmicrobesinthebio-barrierzonesisenhancedsignificantlythroughtheinjectionofanutrientsource(vegetableoil),knownassubstrate,intothesubsurfacearea.Oncompletionofsubstrateinjections,itisanticipatedthatthesubstratewillferment,microbialgrowthwillbeenhancedand,overtime,an increasedrate of contaminant degradation shouldbecomeevident.Currentmonitoringresultsindicatethatconditionsarefavourablefortheestablishmentofbio-barriersandevidenceofincreasedcontaminantdegradationinsomeareasisalreadyevident.

ExtensiveengagementswithofficialsfromtheDEAtookplaceregardingGroupsitesintheWesternCape,KwaZulu-NatalandGautengtoconfirmthattheauthoritiesareinagreementwithAECI’sapproachtolandremediation.

AcomprehensiveremediationstrategyforoperationsatModderfonteinwasdevelopedandpresentedattheAECI/AuthoritiesRemedi-ationForum.Itwaspleasingthatthestrategywasadoptedbythesekeystakeholdersandimplementationwill commence in 2018.AlthoughthelargestpartofModderfonteinremainsanactivemanufacturingsite,sizeableareashavebeenidentifiedforimprovementprojectstobeexecutedintheframeworkofAECI’sRemediationActionPlan.

AECIappliedforandreceivedremediationauthorisationsforImproChem’ssitesinPieter-maritzburgandChloorkopaswellasforasiteformerlyoccupiedbyVynide(aplasticsconverter) inSomersetWest.TreatabilitystudieshavebeenconductedforboththeImproChemsites,withresultsindicatingthatthecontaminatedsoilscouldbe treated/stabilisedandretainedonsiteratherthanrequiringoff-sitedisposal.Theremediationactivitiesarescheduledfor2018.

AttheVynidesite,remediationwasprecededbydemolitionofthefactorybuildingsandsoilsampling.Withabouthalfofthedemolitionandcharacterisationworkcompleted,onlyasmallarea(about5minradius)hasbeenfoundtobesignificantlycontaminated.Ithasbeenisolatedappropriately,pendingremediation.Demolition,furthercharacterisationandanynecessaryremediationwillbeundertakenin2018.

From 1974, AECI operated the largestcoal-basedammoniaplant intheworldatModderfontein.Aby-product of the coalgasificationprocesswaslargequantitiesofcomparativelyhighcalorific-valueash.Seriouseffortsweremadetore-usethisinaspeciallydesignedandbuiltsteamboiler,butthisprovedtobeunfeasiblewiththetechnologyavailableatthetime.Asaresult,theashwasdepositedinslimesdamsonsiteandmorethan6milliontonneshadbeenaccumulatedbythetimetheammoniaplantshutdown inthe late1990s.Leavingtheashinplacewasnotanattractivepropositionbecauseasignificantareaoflandiskeptoutofproductiveuseandbecauseslimesdamsrequiremaintenanceandposepotentialthreatstotheenvironmentinthelongterm.

Theashfromthesehistoricalgasifieropera-tions at Modderfontein continues to bereclaimedbythirdparties.Itisusedbythemasanenergysourceinthemanufactureofvarioustypesofclaybricks,rangingfromclaystocktohighqualityfacebricks.


ALL WORKERS TRIR BY YEAR *

0,520,50

0,35

0,45

0,39

2017 PROCESS SAFETY TOTAL INCIDENT RATE

Non-reportable incidents

Reportable incidents

12-month moving average

26242220181614121086420

NO.

OF

INCI

DEN

TS

1,80

1,60

1,40

1,20

1,00

0,80

0,60

0,40

0,20

0,00

12-MON

TH MOVIN

G AVERAGE

JAN MAY SEPMAR JUL NOVFEB JUN OCTAPR AUG DEC

* Indicateslimitedassurance.Seepage68.

’13 ’14 ’15 ’16 ’17


04.1SAFETY, HEALTH AND THE ENVIRONMENTCONTINUED

SOCIAL CAPITAL: EMPLOYEE SAFETY AND HEALTH

HEALTH AND SAFETY PERFORMANCETheprimaryindicatorusedbyAECItomeasureitsoccupationalhealthandsafetyperfor-manceistheTotalRecordableIncidentRate(“TRIR”).TheTRIRmeasuresthenumberofincidentsper200000hoursworked.TheTRIRfor2017was0,39*,betterthan2016’srateof0,45*.Tragically,though,thisperformancewasovershadowedbyafatality*on26July2017.Acontractor tankerdriverwhowasdeliveringmoltensulphurtotheChloorkopsiteonbehalfofasupplier,succumbedtoinjurieshesustainedwhenhefellfromthetopofthetankerwhile intheprocessoftransferringtheproduct.Therewereno*fatalitiesintheprioryear.

Theoccupationalillnessratewas0,03*(2016:0,02*),withthreereportableoccupationalillnessesdiagnosed.Oneoftheserelatedtonoise-inducedhearing loss,onerelatedtooccupationalasthmaandthethirdrelatedtowork-aggravatedasthma.

PROCESS SAFETY MANAGEMENT (“PSM”)PERFORMANCEAsasignatorytoResponsibleCare®,AECIsubmitsprescribeddata to theChemicalandAlliedIndustries’Association(“CAIA”),asdescribed inCAIA’sQuantitativeIndicatorsofPerformance(“QIP”)standard.TheQIPrequirementswereupdatedin2017,obligingsignatoriestopublishdatarelatedtoprocesssafetyincidents.AspartofitsrevisedSHEQstrategy, AECI has prioritised PSMandarevised indicatorofperformancehasbeenadopted.ThisindicatorisinlinewiththeCAIAdefinitions,whicharebasedontheAmericanPetroleumInstitute’s(“API”)RecommendedPractice754,andithasbeenadoptedbyeveryGroupbusiness.PerformancedataarereportedmonthlytotheAECIExecutiveandtotheSocialandEthicsCommitteeonaquarterlybasis.

Informationonthisindicatoris includedforthefirsttimeinthisintegratedreport.

AECIhasdevelopedaProcessSafetyTotalIncidentRate(“PSTIR”)whichreflectstheoccur-renceofalllevels(severity)ofprocesssafetyincidentsinrelationtoexposurehoursworked.ThegraphonthefacingpagereflectsthePSTIRovertheyearandalsoindicatesoccurrencesofReportable vsNon-reportableevents. AReportableeventisdefinedasonewhichreachescertainthresholdsasdefinedinAPI754,commonlyreferredtoasTier1andTier2eventsintheindustry.

Atotalof112incidentsoccurredintheGroupin2017.Ofthese,25wereReportable.The12-monthmovingaveragePSTIRattheendoftheyearwas1,14.Itisrecognisedthatthereportingcultureforprocesssafetyincidentsisstillbeingestablishedand,therefore,anincreaseinthenumberof incidentscanbeexpectedinthecomingyear.

The Group’s PSM Management Systemhasbeenredefinedandkeyelementsforimplementation in2018willbeprioritised.Capacity-buildingforeffectivePSMmanage-mentwillalsobeafocus.

ANNUAL AWARDSCI’sChloorkopsitereceivedtheResponsibleCare®AwardfromCAIAattheAssociation’sannualawardsfunction.Onlyonesignatoryisrecognisedforitsachievementseachyear.

Theaward’spurposeisto:

› highlightandrecognisetheyear-on-yearSHEperformanceimprovementsofResponsibleCare®signatories;

› encouragefurtherimprovementinperfor-mancethroughtheimplementationoftheResponsibleCare®initiative;and

› publicisetheachievementsoftopyear-on-yearperformanceinCAIA’sannualResponsibleCare®PerformanceReportandinthemedia.

ForCIatChloorkop,CAIAnotedthefollowingspecificimprovements:

› effluentdischargedper tonneof tradedproduct;

› wastehierarchypertonneoftradedproduct(where waste hierarchy is the wastemanagedwithoutdisposal;eg. recycling,re-use,recovery,wastetransfer);and

› waterconsumptionper tonneof tradedproduct.

Internally, annual awards for exemplarymanagementandperformanceinSHEmatterswereawardedtoExperseandNulandis.

AECI ENVIRONMENTAL AWARD — NULANDISNulandisachievedanexcellentenvironmentalperformancein2017acrosstheairemissions,waterusageandwasteparameters.

TheLiliantonfacilityalsoachievedsignificantimprovementsintermsofeffluentcomplianceduetoprocessenhancementsontheeffluentsystem.SignificantstridesforwardweremadeattheModderfonteinfacilityintermsofbunding,housekeepingandstormwatermanagement.

AECI HEALTH AND SAFETY AWARD — EXPERSEExpersereduceditsTRIRfrom3,26in2016tozeroin2017andrecordednooccupationalillnesses.Althoughfourprocesssafetyincidentswerereported,noneofthemwereReportable.

Expersehasstrongbehaviour-basedsafetyandprocesssafetyprogrammesinplaceandthebusiness’committedleadershipissettingastrongtoneforZeroHarm.

EMPLOYEE WELLNESS TheoverallwelfareandwellbeingofAECI’semployees isas importantastheirhealthandsafety in theworkplace.TheGroup’seffortsinthisregard,mainlyinSouthAfrica,are coordinated by aWellness SteeringCommitteecomprisedof representativesfromeachoperatingsite.

Awareness initiatives andassistance foremployees in theyear includedWellnessDays,BloodDrives,WellnessWalks, andtelephonic and face-to-face counsellingservices.EnhancedreportingontheinitiativesimplementedGroup-widetodatewillprovideadeeperinsightandassistinbuildingamoreintegratedWellnessProgrammefrom2018.Thisintegratedapproachwillaimtoachievehigherengagement, inclusivity,productivityandjobsatisfactionforemployees.

INVESTOR-RELATED INITIATIVESAECIisinvolvedinthreemainsustainability- relatedinvestorinitiatives,namelytheFTSE/JSEResponsibleInvestmentIndexSeries,andtheCDPClimateChangeandWaterPrograms.The latter two are global programmes,administeredinSouthAfricabytheNationalBusinessInitiative.

AECIwasincludedintheFTSE/JSEResponsibleInvestment Indexforthethirdconsecutiveyear.AECIparticipated intheCDPClimateChangeProgramfortheeighthconsecutiveyearandachievedascoreinthe“B”perfor-manceband,asustainedgoodperformanceandascorehigher thantheCDPClimateChangeProgramaverage.AECIparticipatedintheCDPWaterProgramforthethirdyearandachievedascoreinthe“B”band.

AECI’s2017CDPsubmissionsareavailableontheCompany’swebsite,as is itsFTSEESGRatingProfile.Seewww.aeci.co.za/ sustainability-cdp-wdp-submissions.php and www.aeci.co.za/aa_ftse-russel-rating- profile.php.


INDEPENDENT ASSURANCE PROVIDER’S LIMITED ASSURANCE REPORT ON SELECTED KEY PERFORMANCE INDICATORS

SUBJECT MATTERWearerequiredtoprovidelimitedassuranceonthefollowingKPIs,markedwitha*ontherelevantpages inthereport.TheselectedKPIsdescribedbelowhavebeenpreparedinaccordancewithAECI’sreportingcriteria.ThesecriteriaareavailableonAECI’swebsitewww.aeci.co.za/sustainability-reporting- standards.php.

› Environmental indicators —numberofenvironmental incidents (totalmajorandserious)(page63);totalwaterusage,hazardous waste generated, carbonfootprint—Scope1,Scope2andtotalofScopes1and2,totalelectricityusage,totalenergyusage(allonpage64);

› Health and safety indicators —TotalRecordableIncidentRate(employeesandcontractorscombined)(page66);fatalities(employeesandcontractorscombined)(page67);occupationalillnessrate(employeesandcontractorscombined)(page67).

› Employment Equity indicators (expressed as the total number of people for each category) —Blackmales,Blackfemales,WhitemalesandWhitefemalespercategoryofTopManagement,SeniorManagement,MiddleManagementandProfessionals,JuniorManagementandSkilled,Semi-skilledandDiscretionaryDecision-makingandUnskilledandDefinedDecision-making(page51).

DIRECTORS’ RESPONSIBILITIESTheDirectorsareresponsiblefortheselection,preparationandpresentationoftheselectedKPIsinaccordancewiththeAECIreportingcrite-ria.Thisresponsibilityincludestheidentificationofstakeholdersandstakeholderrequirements,materialissues,forcommitmentswithrespecttosustainabilityperformanceandfor thedesign,implementationandmaintenanceofinternalcontrolrelevanttothepreparationofthereportthatisfreefrommaterialmisstate-ment,whetherduetofraudorerror.

OUR INDEPENDENCE AND QUALITY CONTROLWehavecompliedwiththeindependenceandallotherethicalrequirementsoftheCodeofEthicsforProfessionalAccountantsissuedbytheInternationalEthicsStandardsBoardforAccountants,whichisfoundedonfundamentalprinciplesofintegrity,objectivity,professionalcompetenceandduecare,confidentialityandprofessionalbehaviour.

KPMG Services (Pty) Ltd applies theInternationalStandardonQualityControl1 and, accordingly,maintains a compre-hensivesystemofqualitycontrol includingdocumentedpoliciesandproceduresregardingcompliancewithethicalrequirements,profes-sionalstandardsandapplicable legalandregulatoryrequirements.

OUR RESPONSIBILITYOurresponsibilityistoexpresslimitedassur-anceconclusionsontheselectedKPIsbasedontheprocedureswehaveperformedandtheevidencewehaveobtained.Weconduct-edour limitedassuranceengagement inaccordancewiththeInternationalStandardonAssuranceEngagements(“ISAE”)3000(revised), Assurance Engagements otherthanAuditsorReviewsofHistoricalFinan-cialInformation,issuedbytheInternationalAuditingandAssuranceStandardsBoard.ThatStandardrequiresthatweplanandperformourengagementtoobtainlimitedassuranceaboutwhethertheselectedKPIsarefreefrommaterialmisstatement.

Alimitedassuranceengagementundertaken in accordance with ISAE 3000 (revised)involves assessing the suitability in thecircumstancesofAECI’suseofitsreportingcriteriaguidelinesasthebasisofpreparationfortheselectedKPIs,assessingtherisksofmaterialmisstatementoftheselectedKPIswhetherduetofraudorerror, respondingtotheassessedrisksasnecessary inthecircumstances,andevaluatingtheoverallpresentationoftheselectedKPIs.Alimitedassuranceengagementissubstantiallylessinscopethanareasonableassuranceengage-ment in relation toboth riskassessmentprocedures, includinganunderstandingofinternalcontrol,andtheproceduresperformedinresponsetotheassessedrisks.

To the Directors of AECI Ltd

We have undertaken a limited assurance engagement on selected key performance indicators (“KPIs”), as described below, and presented in the Safety, Health and Environment commentary, and Human Capital commentary included in the 2017 integrated report to stakeholders of AECI Ltd (“AECI”) for the year ended 31 December 2017 (“the report”). This engagement was conducted by a multidisciplinary team of health, safety, environmental and assurance specialists with extensive experience in sustainability reporting.


04.2INDEPENDENT ASSURANCE PROVIDER’S REPORT

Theproceduresweperformedwerebasedonourprofessionaljudgementandincludedenquiries,observationofprocessesfollowed,inspectionofdocuments,analyticalproce-dures, evaluating the appropriatenessofquantificationmethodsand reportingpolicies,andagreeingwithor reconcilingunderlyingrecords.

Giventhecircumstancesoftheengagement,inperformingtheprocedureslistedabovewe:

› interviewedmembersoftheAECIExecutiveCommitteeandSeniorManagerstoobtainanunderstandingofthe internalcontrolenvironment, risk assessment processand informationsystemsrelevanttothesustainabilityreportingprocess;

› inspecteddocumentationtocorroboratethestatementsofmembersoftheAECIExecutiveCommitteeandSeniorManagersinourinterviews;

› testedtheprocessesandsystemstogener-ate,collate,aggregate,monitorandreporttheselectedKPIs;

› inspectedsupportingdocumentationandperformed analytical procedures on asamplebasistoevaluatethedatagener-ationandreportingprocessesagainstthereportingcriteria;

› assessedthereasonablenessandappropri-atenessofsignificantestimatesandjudge-mentsmadebytheDirectorsinpreparationoftheKPIs;

› undertooksitevisitstoAEL(Modderfon-tein—InitiatingSystems,OperationsandNitrates inSouthAfrica),AcaciaOpera-tionsServices (Umbogintwini),ChemicalInitiatives (Umbogintwini), IndustrialOleochemicalProducts(Jacobs),ImproChem(Umbogintwini),Nulandis (Lilianton)andSenmin(Sasolburg). Inaddition,desktopreviewswereperformedforotherAELsitesinSouthAfrica(Coal,SishenandVenetia)aswell as sites in Zambia,GhanaandIndonesia.DesktopreviewsweresimilarlyundertakenforImproChem(KwaZulu-Natal);

› evaluated whether the selected KPIspresentedinthereportareconsistentwithouroverallknowledgeandexperienceofsustainabilitymanagementandperfor-manceatAECI.

The procedures performed in a limitedassuranceengagementvaryinnaturefrom,andarelessinextentthanfor,areasonableassuranceengagement.Asaresultthelevelofassuranceobtainedinalimitedassuranceengagementissubstantiallylowerthantheassurancethatwouldhavebeenobtainedhadweperformedareasonableassuranceengagement.Accordingly,wedonotexpressareasonableassuranceopinionaboutwhetherAECI’sselectedKPIshavebeenprepared,inallmaterialrespects,inaccordancewiththeAECIreportingcriteria.

LIMITED ASSURANCE CONCLUSIONSBasedontheprocedureswehaveperformedandtheevidencewehaveobtained,nothinghascometoourattentionthatcausesustobelievethattheselectedKPIsassetoutinthesubjectmatterparagraphfortheyearended31December2017havenotbeenprepared,inallmaterialrespects, inaccordancewiththeAECIreportingcriteria.

OTHER MATTERSThemaintenanceand integrityofAECI’swebsite is the responsibility of AECI’smanagement. Our procedures did notinvolveconsiderationofthesemattersand,accordingly,weacceptnoresponsibilityforanychangestoeithertheinformationinthereportorourindependentlimitedassurancereportthatmayhaveoccurredsincetheinitialdateofitspresentationontheAECIwebsite.

RESTRICTION OF LIABILITYOurworkhasbeenundertakentoenableustoexpressalimitedassuranceconclusionontheselectedKPIstotheDirectorsofAECIinaccordancewiththetermsofourengagement,andfornootherpurpose.WedonotacceptorassumeliabilitytoanypartyotherthanAECIforourwork,forthisreport,orfortheconclusionswehavereached.

KPMG Services (Pty) Ltd

Per PD Naidoo Director

Johannesburg 11April2018

1AlbanyRoad Parktown SouthAfrica 2193


70

GOVERNANCE REPORT 72

AUDIT COMMITTEE’S REPORT TO STAKEHOLDERS 79

REMUNERATION REPORT 83

DIRECTORS’ REPORT 106

SHAREHOLDER ANALYSIS 109

HISTORICAL REVIEWS 114

DECLARATION BY THE GROUP COMPANY SECRETARY 116

PREPARATION OF ANNUAL FINANCIAL STATEMENTS 116

INDEPENDENT AUDITOR’S REPORT 117

BASIS OF REPORTING AND SIGNIFICANT ACCOUNTING POLICIES 120

FINANCIAL STATEMENTS 129

INVESTORS’ CALENDAR 196

NOTICE OF ANNUAL GENERAL MEETING AND FORM OF PROXY 197

ADMINISTRATION 203

05

71

GOVERNANCE REPORT

Thedecision-making roleof theBoard isexercisedthroughtheformulationoffunda-mentalpolicyandstrategicgoalsinconjunctionwithmanagement,whereastheoversightroleconcernsthereviewofmanagement’sdecisions, the adequacy of systems andcontrolsandtheimplementationofpolicies.InviewofamendmentstotheJSEListingsRequirements,otherlegislativechangesandtheguidelinesofKingIV,theBoardcontinuedtoleadtheiterativejourneyofrealigningtheCompany’sprocessesandstrategyinpursuitofprogressivevalue-addandefficiencies.

ApplicationoftheguidelinescontainedinKing IV isa journey thatwill continue in2018andthereafter.AsummaryofcurrentadherencetoKingIVappearsonpage77.

THE BOARD OF DIRECTORS

BOARD CHANGES DURING THE YEARThefollowingmembersresignedfromtheBoard:

› SchalkEngelbrecht,witheffectfrom 28February2017;

› RichardDunne,witheffectfrom 29May2017;

› MosesKgosana,witheffectfrom 29September2017;and

› LiziweMda,witheffectfrom 27November2017.

PhilisiweSibayawasappointedtotheBoardafter the reportingdate,witheffectfrom 27February2018.

BOARD STRUCTURE AND COMPOSITIONAECIhasaunitaryBoardstructureledbyanIndependentNon-executiveChairman,sixother IndependentNon-executiveDirectors(asatthedateofthisreport)andtwoExecu-tiveDirectors.TheBoardcharteraswellasthetermsofreferenceoftheNominationsCommitteedetailtheprocedureforappoint-mentstotheBoard.SuchappointmentsareformalandtransparentandamatterfortheBoardasawhole.

TheBoardcomplementdeclinedduring2017andtheBoardtookasteptosupplementingitsnumberswiththeappointmentofPhilisiweSibiyainFebruary2018.Thisappointment,andothersthatarebeingpursued,willsafeguardtheBoard’sabilitytodischargeofitsfiduciary duties. Appointment processes take intoaccountissuesofdiversity,raceandgenderandtheBoard,throughitsNominationsCommittee,aimstoensurethatithastherightbalanceofskills,expertiseandexperience.

Summarised biographical details of theDirectorsareprovidedonpages14to16.

The charter in termsofwhich theBoardoperateswillbeduefor reviewin2018.AcopyofthecurrentcharterandthetermsofreferenceofallBoardCommitteescanbefoundviathewebsitelinkhttp://www.aeci.co.za/gov_policy.php.

GOVERNANCE FRAMEWORKTheCompany’sgovernanceframework isdefinedas“freedomsupportedbyaframework”.

Theoverallintentionofthisframeworkistoensurethatthere isongoingperformanceimprovementandsupportforentrepreneurialflairbyGroupbusinesseswhileensuringthatatthesametimeallgovernanceandregulatoryobligationsaremet.ArobustprocessisinplacetoconfirmthattheframeworksupportingthegovernanceoftheGroupremainsrelevant,efficientandclearandalignstheexpecta-tionsof theBoard,managementandthestakeholdercommunityasawhole.

In2017,theBoardapprovedworktoremodelthegovernance framework, redefine thestrategic segmentapproachadopted fortheGroup’s growth, enhance efficienciesandencourageportfoliomanagement.Thisculminatedintheredefinitionofunderlyinginternalgovernancestructures toenablegreaterfocusandappropriateoversight inallaspectsoftheCompany’sbusinesses.

ROTATION, TENURE, DIVERSITY AND SUCCESSIONThereisnosetretirementageforNon-exec-utiveDirectors.Non-executiveDirectorsmaygenerallyserveforuptonineyears,subjecttoretirementandre-electionbyrotationassetoutintheCompany’sMOI.Extensionsofthisperiodmaybegranted,providedtheNominationsCommitteeremainssatisfiedthat theDirector’s independencehasnotbeen compromised. The independenceassessment,whichispartoftheBoardandCommitteeevaluation, isconductedonacase-by-casebasisandallBoardmembersparticipateinthereviewprocess.

The role of the Board is to exercise leadership, integrity and sound judgement in the business and to provide strategic direction to the Company, with a keen understanding of key risks, and to continually monitor performance against set objectives.

The AECI Board views good corporate governance as being fundamental to how it discharges its duty to oversee the Group as a whole. The Board’s approach is to effect continuous improvement and endeavour to go beyond minimum compliance imperatives wherever appropriate. Accordingly, in 2017 the Directors continued to oversee the application of governance requirements to facilitate their ability to execute their statutory and fiduciary responsibilities and their duty of care and skill. TheBoard,viaitsCommittees,ensuresalignmentwithbestpracticetosupporteffectiveandethicalleadership,sustainabilityandgoodcorporatecitizenship.


05.1GOVERNANCE REPORT

In2017,theBoardundertookindependenceassessments for Zellah Fuphe, KhotsoMokheleandRamsRamashia.

ThefullBoardparticipatedandtheoutcomesconfirmed thatall threewereconsideredindependent, courageous and preparedto raise issuesthatarenotalwayseasilyresolved.ThesesameDirectorsaredueforretirementbyrotationattheforthcomingAGMandtheirfellowDirectorshadnohesitationinrecommendingthemforre-election.

TheBoardismostmindfulofensuringthatthere isa robustsuccessionplan inplaceand,throughtheNominationsCommittee,has initiatedthe identificationoftalentforappointment induecourse. Inadditiontodiversityofraceandgender,inlinewiththeGenderDiversityPolicyadopted in2016,capacityandcapabilityatDirectoratelevelare top of mind when formulating andimplementingsuccessionplans.TheGenderDiversityPolicyisavailableviathelinkhttp://www.aeci.co.za/gov_policy.php.

TERMS OF EMPLOYMENT OF DIRECTORSExecutiveDirectorsareemployeesof theCompany and have standard terms andconditions of employment. Their noticeperiodsaresixmonths.TheydonotreceiveanyspecialremunerationorotherbenefitsfortheiradditionaldutiesasDirectors.TheBoard,throughitsNominationsCommittee,hashaddetaileddiscussionswiththetwoExecutiveDirectorsregardingsuccessionplanningforallkeyrolesincludingtheirown.TheBoardissatisfiedthatthepotentialriskassociatedwiththecontinuityofleadershipatthislevelhasbeenmitigatedadequately.

TheBoard,onthe recommendationof theRemunerationCommittee, determines theremunerationofExecutiveDirectors,ExecutivesandotherSeniorManagersasunderpinnedbytheremunerationphilosophyoftheCompany.

None of the Non-executive Directors areCompanyemployees.Non-executiveDirectors’remunerationisarrivedatafteranannualbench-markingexerciseperformedbytheExecutiveDirectorsandtheapprovalbyshareholdersoftheproposedfees,ontheBoard’srecommendation.

DIRECTORS’ MANAGEMENT OF CONFLICT OF INTERESTSAECIhasaConflictofInterestsPolicy(embed-dedintheGroup’sCodeofEthicsandBusinessConduct)whichprovidesguidanceandproce-duresforDirectorsonmanaginganddealingwithpotentialconflictofinterestssituations.ThesamepolicyappliestoallGroupemployees. TheGroupCompanySecretary ischargedwithmaintainingacomprehensiveregisterofDirectors’declarationsofinterestsandthisissubmittedforupdatingbytheDirectorsbeforeeachBoardmeeting.AllDirectorsdulycompletedandupdatedthisregisterin2017.

Theconflictsofinterestssetoutinthetablebelowwererecordedin2017andtherelatedDirectorswererecusedfromdiscussionsanddecision-makingwhenthesematter/transactionswereconsideredanddeliberateduponbyBoard.

Savefortheseinstances,nootherconflictofinterestsorrecusalsfromBoarddiscussionsanddeliberationswerenotedinrelationtoanyproposedtransaction.AllrecusalsrecordedintheBoardminutesareavailableforinspectionbytheCompany’sexternalauditor.

INDUCTION AND ONGOING DEVELOPMENT OF DIRECTORSThe Company’sDirectors have expertiseandexperienceindiverseindustriesinclud-ingbanking,chemicals,mining, technical,accounting and strategicmatters. Uponappointment,allnewDirectorsundergoaGroup-specific inductionprogrammewhichincludesone-on-onemeetingswithExecu-tives,SeniorManagersandtheManagingDirectorsofsubsidiaries.

Newly-appointedDirectorsaresubjectedtoaninductionprocessinvolvingtheconsiderationofkeydocumentationthatisthefoundationoftheCompany’sgovernanceframework(includingbutnotlimitedtotheJSEListingsRequirements,KingIIIandKingIV,theMOIandtheCodeofEthicsandBusinessConduct).

Inaddition,theyareinvitedtovisitkeyopera-tionalsitestoenhancetheirunderstandingoftheGroup’sdiversebusinesses.

With regardtoformal training, theGroupCompanySecretaryischargedwithsourcingandorganisingrelevanttrainingforBoardmembers,basedlargelyonthespecificneedsofeachDirector.

BOARD AND COMMITTEE PERFORMANCE EVALUATIONTheBoardmaintaineditsfocusonbuildingstrongandresponsivegovernancestructuresand, in2017, itundertook itsannualeffec-tivenessevaluationundertheguidanceoftheChairmanoftheBoardandtheGroupCompanySecretary.AllNon-executiveDirec-torswereassessedtoverifytheircontinuedindependence.Thisappliedmorespecificallytothoseretiringandthosewithlongtenure,asalreadydescribed.

An area highlighted for improvementwas engagementwith shareholders onremunerationmatters inparticular. TheChairmanoftheBoardandtheChairmenoftheRemunerationandAuditCommitteesactivelypursuedthisrecommendation.

BOARD RELATIONSHIPS WITH STAFF AND EXTERNAL ADVISORSTotheextent that theymayrequiresuchaccesstomake informeddecisions,BoardmembershaveunrestrictedaccesstotheCompany’srecords,information,documentsandproperty.TheyalsohaveunrestrictedaccesstoExecutives,SeniorManagers,theinternalauditorsandtheexternalauditortoconsultonanyaspectoftheCompany’soperations.

DIRECTORS’ CONFLICTS OF INTERESTS

MATTER/TRANSACTION RELATED DIRECTOR CONFLICT OF INTERESTS

AcquisitionofSchirmfromImperialHoldings(“Imperial”).

MosesKgosana—asaNon-executiveDirectorofbothImperialandAECI.

Declarationmadeon29May2017andMrKgosanawasrecusedfromdiscussionsanddecision-makingthenceforth,asrecordedintheBoardminutesonthatday.

AcquisitionofSchirm fromImperial.

GrahamDempster—asaNon-executiveDirectorofbothImperialandAECI.

Declarationmadeon29May2017andMrDempsterwasrecusedfromdiscussionsanddecision-makingthenceforth,asrecordedintheBoardminutesonthatday.

AcquisitionofMuchAsphalt from,interalia,MICInvestmentHoldings(“MIC”).

RamsRamashia—asaNon-executiveDirectorofbothMICandAECI.

Declarationmadeon25July2017andAdvocateRamashiawasrecusedfromdiscussionsanddecision-makingthenceforth,asrecordedintheBoardminutesonthatdate.


BOARD COMMITTEES

COMMITTEE SUMMARISED DUTIES AND RESPONSIBILITIES

Audit Committee › monitor the adequacy of financial controls and reporting;

› review audit plans and adherence to these by assurance providers;

› ascertain the reliability of the internal and external audit processes;

› ensure that financial reporting complies with IFRS, the Companies Act and the JSE Listings Requirements; and

› nominate the external auditor.

Both the internal and external auditors have unrestricted access to the Chairman of the Committee and it is standard operating procedure for them to meet privately with the Committee. The Chief Executive, the Chief Financial Officer and the external and internal auditors attend meetings of the Committee by invitation. The Chairman of the Board has a standing invitation for attendance.

Owing to the size and geographic diversification of AEL, a FRRC for this business assists the Audit Committee in its work relating to this business.

More information on the Audit Committee, including a summary of its work in 2017, is published in its report to stakeholders on page 79.

Risk Committee › oversee the overall management of risk, operational resilience and business continuity;

› monitor Company decisions to ensure alignment with the risk appetite;

› ensure that proper controls and mitigations are in place to prevent risk;

› oversee IT governance and related risks; and

› oversee the compliance management processes.

In the reporting period this Committee comprised five Non-executive Directors and all the Executive Committee members, including the two Executive Directors.

Social and Ethics Committee Monitor the Company’s compliance with section 72(8) of the Companies Act, read together with regulation 43. Focus is on the following:

› recommendations on corruption of the Organisation for Economic Co-operation;

› Employment Equity Act, No. 55 of 1998 in South Africa;

› Broad-based Black Economic Empowerment Act, No. 53 of 2003;

› labour and employment principles in line with global best practice; and

› safety, health and environmental issues and performance.

More information on the Social and Ethics Committee, including a summary of its work in 2017, is published in its report to stakeholders on page 47.

Nominations Committee › consider suitable nominations for appointment to the Board and Executive succession planning, and make appropriate recommendations based on qualifications, experience, race and gender;

› oversee the appointment of Board members to serve on various Committees; and

› oversee the assessment of the Board and its Committees to ensure continual governance improvement.

This Committee is comprised solely of Non-executive Directors and chaired by the Chairman of the Board.

Remuneration Committee › establish the Group’s remuneration philosophy;

› determine the remuneration framework for Executives and Senior Managers; and

› consider, review and approve Group policy on Executive remuneration and communicate this and the implementation thereof to stakeholders in the Company’s integrated report.

This Committee is comprised solely of Non-executive Directors.

Executive Committee The Board has delegated the day-to-day running of the Company to the Chief Executive who works with an Executive Committee to assist him in this task. The Executive Committee is the highest executive decision-making structure in the Group. Central to its role is the formulation and implementation of the Group’s strategy and policy direction, and ensuring that all business activities are aligned in this respect and that the business strategy is implemented accordingly.


GOVERNANCE REPORTCONTINUED

05.1

FurthermoreBoardmembersmaycollectivelyorindividually,attheexpenseoftheCompany,consultexternalprofessionaladvisorsonanymatterofconcerntothemselvesortheCompanyafter havingadvised theChiefExecutiveortheChairman.

BOARD MEETINGSTheBoardmetfourtimes intheyearandoneofthesemeetings includedasessiontodiscuss thedevelopmentofCompanystrategy.MeetingdatesfortheBoardanditsCommittees,anddetailsofattendance,areavailableviathelinkhttp://www.aeci.co.za/gov_directorate_2016.php.BetweenBoardmeetings,theExecutiveDirectorskepttheBoardup-to-dateonemergingmaterialmattersthatcouldnotbedeferreduntilthenextformalBoardmeeting.

ThepracticebytheNon-executiveDirectorstomeetbeforethestartofeachBoardmeetingoroutsideoftheBoardRoomsoastoraisemattersofinterestandconcern,withouttheExecutiveDirectorsbeingpresent,hasbecomeanentrenchedprocessthatcontributestotheoverallmaturityofgovernance.TheChairmanoftheBoardischargedwiththeresponsibilityofconveyinganyrelateddiscussionstotheExecutiveDirectors,aswarranted.

TheChairmanoftheBoard,assistedbytheChiefExecutiveandtheGroupCompanySecretary,isresponsibleforsettingtheagendaforeachBoardmeeting.ThefullBoardhastheopportunitytoprovideinput.BoardmeetingsarescheduledwellinadvanceandtheGroupCompanySecretaryensuresthatallDirectorsareprovidedwiththeinformationrequiredtimeouslytoenablethemtoprepareformeetingsandformulatetheirviews onmatters.

BOARD COMMITTEESThe Board has established a number ofCommittees to assist it in fulfilling itsdutiesandobjectives. InNovember2017,theBoardestablishedanewcommittee,namelytheInvestmentsCommitteewhichcomprisessolelyNon-executiveDirectors.ThisCommitteeischargedwiththeresponsibilityofconsideringmaterial transactions thatincludemergers,acquisitionsandsignificantinvestments.Previouslymeetingonanadhocbasis,theCommitteehasbeenformalisedandaddedtothegovernancestructure.

Asaresultofpotentialrisksandtighttimelinesoftenassociatedwithmaterialtransactions,themembersofthisCommitteearerequiredtoworkcloselywithmanagementwithoutcompromis-ingtheirindependence.TheCommitteerevertstothefullBoardwithitsrecommendations.TheacquisitionsofSchirmandMuchAsphaltwerecasesinpointin2017.

ThetermsofreferenceoftheInvestmentsCommitteewillbedevelopedandapprovedin2018.

AllCommitteesusuallymeetbeforeeachBoardmeetingandtheChairmentableattheBoardmeetingareportoftheirCommittees’proceedings.TheminutesofeachCommitteemeetingarealsoincludedinthefullBoardinformationpack.

AllCommitteesaresatisfiedthatin2017theycarriedouttheirresponsibilitiesincompliancewiththeirmandatesandtermsofreference.

GROUP COMPANY SECRETARYTheGroupCompanySecretaryoverseestheportfolioofsecretariat,legalservices,riskandcompliancemanagement,andattendsallBoardandCommitteemeetingsassecretary,otherthanthoseoftheRemunerationCommittee.

TheBoardasawholeandindividualDirectorshaveaccesstotheGroupCompanySecretarywhoprovidesguidanceonhowtheyshoulddischargetheirdutiesandresponsibilitiesinthebestinterestsoftheCompany.In2017the Group Company Secretary oversawtheongoingeducationandtrainingoftheCompany’sDirectorsthroughtheinclusionoftopicalpapers,articlesandopinionsintheirinformationpacksandcontinuedtoassisttheBoardanditsCommittees inpreparingannualplans,agendas,minutes,andtermsofreferenceaswarranted.

In linewiththeJSEListingsRequirements,theBoardundertooktheannualperformanceappraisaloftheGroupCompanySecretary.Theassessmentreviewedtheperformanceofthe incumbent, taking intoaccountthequalityofsupport receivedandguidanceprovidedtotheBoardandmanagementduringtheyear.Allpartiesweresatisfiedwiththequalityofsupport receivedaswellasthecompetencyandexperiencedemonstratedbytheincumbent.AnabridgedbiographyoftheGroupCompanySecretary isavailableonpage18.

TheGroupCompanySecretaryisnotaDirectoroftheCompanynorofanyofitssubsidiariesand,accordingly,maintainsanarm’slengthrelationshipwiththeBoardanditsDirectors.

FULFILMENT OF BOARD RESPONSIBILITIES

ACCOUNTABILITY AND INTERNAL CONTROLTheDirectorsarerequired intermsoftheCompaniesActandtheJSEListingsRequire-mentstoprepareannualfinancialstatementswhichfairlypresentthestateofaffairsoftheGroupasattheendofthefinancialyearandoftheprofitor lossforthatperiod, inconformitywithIFRS.

TheexternalauditorisresponsibleforauditingthefinancialstatementsoftheCompanyanditssubsidiariesandforexpressingitsopinionon these statements to shareholders. Inaddition,theexternalauditorisresponsibleforconfirmingwhetherthefinancialstatementsmeettherequirementsoftheCompaniesActandIFRS.In2017,theexternalauditoralsocarriedoutcertainagreeduponprocedurespertainingtotheGroup’shalf-year resultsto30June.

FollowingdiscussionswiththeexternalauditortheDirectorsconsiderthat,inpreparingthefinancial statements, the Company hasconsistentlyusedappropriateaccountingpoliciessupportedbyreasonableandprudentjudgementandestimates.All applicableinternationalfinancial reportingstandardshavebeenfollowed.

GOING-CONCERNTheDirectorshaveformally reviewedthebudgetsandforecastsof thebusinessesandhave concluded that theGroupwillcontinue inbusiness for the foreseeablefuture.Theyalsoconducted liquidityandsolvencytestsasrequiredbytheCompaniesAct.Accordingly,thegoing-concernbasisofaccountingremainsappropriate.

COMPLIANCETheBoardanditsCommitteescontinuetomonitortheimplementationofAECI’scompli-anceframeworkandrelatedprocessestoeffectongoingimprovements.Competitionlaws,anti-bribery,anti-corruption,health,safetyandenvironmentallawsidentifiedaskeycomplianceriskareasremainofkeyfocus.TheBoard,viatheRiskCommittee,hasimple-mentedriskmitigationsandcontrolsfortheseareas,aimingtohaveabalancedapproachtocompliance,takingintoaccounttheCompany’sobligations,rightsandrelatedcosts.

TheGroup’scomplianceuniverse isrefinedcontinually,consideringallrelateddevelop-mentsintheregulatorycontextexternallyinalljurisdictionswheretheGrouphasbusinessoperations.In2017focuswasoninstallingacompliancetool,Exclaim,gearedatassistingwiththeprocessofensuringcomplianceinadiverseand largefootprint.Thisprojectwillcontinuein2018asthematurityofthecomplianceprocessdeepens.

Withoperationsinmorethan20countries,thereisagrowingrealisationthattheprocessofstayingabreastofalllegislativedevelopmentsisnotasimpleundertaking.However,thereisadeterminationtoensurethattheGroupremainsonparwiththehighstandardsthataresetbyothermultinationals.Thecomplianceprocessesandapproachwillbesubjectedtoanindependentreviewin2018togaugethematuritylevelsoftheGroup’sprocessandeffectthedesiredimprovements,whererequired.


AFRICAN PROJECT UPDATERoll-outofthisprojectcontinuedand,in2017,thedevelopmentofcomplianceuniversesdetailingalllegislativeimperativesinallotherAfricancountriesofoperationwascompleted.Althoughprogresswasslowerthananticipatedinitially,attentionwillnowshifttoimplement-ingthecomplianceframeworkinbusinessesontherestofthecontinent.

REGULATORY INTERACTIONInteractionscontinuedwithregulatorsinSouthAfricaonkeyongoingmattersassummarisedinthetableabove.TheoutcomesofthesemattersarenotexpectedtohaveamaterialeffectoneithertheoperationsoftheGrouporontheresultsaspresented.

ETHICAL BUSINESS CONDUCT

TRANSPARENCYGovernments, business, civil society andindividualcitizensarehighlyinterconnectedandinterdependent.Asaresultacompany’sactionsanditsinteractionwithitsstakeholders, both internalandexternal,arepotentiallymoresignificantthaneverbefore.AECIisnoexceptionandtheneedtobalancediversestakeholders’expectationsshapesthewaytheGroupconductsitsbusiness.Inanenviron-mentofincreasinglyempoweredcommunitiesandindividuals,socialactivismandatrustdeficit,transparencyandaccountabilityarenon-negotiable.

Anethicalcultureiskeytodrivinglong-termbusinessvalueandstakeholders’supportofbusinesses.Toembedsuchaculturemorestrongly,trainingonAECI’sCodeofEthicsandBusinessConduct(“theCode”)continuedacrosstheGroup.AcopyoftheCodeisavailable at www.aeci.co.za/governance-policy- documents.php.

ETHICAL RISKS IDENTIFIED ANDWHISTLE-BLOWINGOwingtothedifficultprevailingeconomicclimate, theBoard,via itsAuditandRiskCommittees, is cognisant that ethics- relatedriskslikeconflictofinterests,briberyandcorruptionshouldremainfocusareas.TheGroup’sethicalriskmitigationprocessesincludeawhistle-blowingservice,manage-ment reportsandthe like.Educationandcommunicationrelevanttotheserisksareacornerstoneofpreventativeprocesses.

Thewhistle-blowingservice,Tip-offsAnony-mous, ismanagedbyan independentthirdpartyandservesasaprimarytoolutilisedbyemployeesindiversecountriesofoperationtoregisterconcernsregardingnon-compliancewithpolicies,fraudandothermattersrelatingtoacceptablebusinessconduct.

In2017,thereportsreceivedwereinvestigatedbytheInternalAuditfunctionandsharedwiththeBoard.Issuesrelatedmainlyto(i)failuretofollowestablishedbusinessprocesses,(ii)unfairhumanresourcespractices,and(iii)unethicalbusinessconduct.CorrectivemeasuresincludedretrainingontheprinciplesandrequirementsoftheCodeanddiscipli-naryactionwastakenwherenecessary.Thisincludeddismissalwherethecircumstancessowarranted.

Onanannualbasis,asrequiredbytheCode,Groupemployeeswhohaveoutsideinterestsarerequiredtodeclarethem.Employeesarealsoencouragedtodeclareanygiftsthattheymayhaveacceptedorgiven,furtherunderpinning theGroup’s ethos of doingbusinessethically.

DEALING IN SECURITIESTherevisedDealing inSecuritiesandPriceSensitive InformationPolicy is inplace. Intermsofthispolicythereisa“closedperiod”thatendures fromtheendofafinancialreporting period until the publication offinancial resultsforthatperiod.Additionalclosedperiodsmaybedeclaredfromtimetotimeifcircumstancessowarrant.

DuringclosedperiodsDirectors,PrescribedOfficersandotherdesignatedemployeesareprohibitedfromdealingintheCompany’ssecurities,eitherdirectlyorindirectly.Identi-fiedemployeesareadvisedtothiseffect.TheGroupCompanySecretaryadvisestheDirectorsofalltheclosedperiods.

Thepolicyhasbeensharedwithallaffected individualstoensurefullcompliance.Acopyisavailableatwww.aeci.co.za/govern-ance-policy-documents.php.

TheGroupalsohasinplaceanInformationDisclosure and Communications PolicydesignedtorecordAECI’sprocedureswithregardtocommunicatingwiththemedia,theinvestmentcommunity,securitiesprofes-sionalsandotherstakeholderstoavoidtheselectivedisclosureofmaterialinformationandgovernthedisclosureofprice-sensitiveinformationtothepublicinabroad,compre-hensiveandlawfulmanner.Thispolicyhasbeenbroughttotheattentionofallemployeesandmustbeadheredtobythem.

DIRECTORS’ AND PRESCRIBED OFFICERS’ LIABILITY INSURANCETheCompanyhas inplaceDirectors’andPrescribedOfficers’liabilityinsurancewhichprovidessomecoveragainstlegalactionbythirdparties.

REGULATORY INTERACTION

AUTHORITY PURPOSE OF VISIT OUTCOME

Department of Trade and Industry TheNon-ProliferationSecretariatmetwithrepresentativesfromGroupbusinessesthatcarryearmarked“controlledgoods,”fortrainingonvariousaspectsoftheNon-proliferationofWeaponsofMassDestructionAct,No.87of1993.

TheofficialsweresatisfiedwiththeGroup’sengagementand,subsequently,controlsrelatingtothismattertoenhancethemanagementthereof.

Department of Labour (“DoL”) AroutinevisitwassanctionedundertheBasicConditionsofEmploymentAct,No.75of1997,whichauthorisesinspectorstovisitplacesofemploymenttoconductinspections,atareasonabletime,whererecordsarekept,withoutawarrant ornoticetoenteraplaceofemployment.

TheDoLwassatisfiedthatalltherequisitedocumentationwasinorder.

Competition Commission Thematterrelatedtopricefixingcharges inrelationtoAkuluMarchon.

ThematterwassettledandafineofR13905600 waspaidbyAkuluMarchon.



05.1

INVESTOR RELATIONS AND SHAREHOLDER COMMUNICATIONTheCompany’sChiefExecutive,ChiefFinan-cialOfficerandmembersoftheExecutiveCommitteeconducttimelypresentationsontheGroup’sperformanceandstrategytofinanciers, institutional investors,financialanalystsandthemediainSouthAfrica.

Presentations,corporateactionsandreportsonperformance,aswellasanyotherinfor-mationdeemedrelevant,arepublishedontheCompany’swebsite.Shareholdersandotherstakeholdersareadvisedofsuchnewly- publisheditemsviaSENS.OtherinformationontheCompany,suchasinteraliaitsmanage-mentteamandhistory,isalsoavailableonthewebsite.

TheCompanypublishesandreportsondetailsof itscorporateactionsandperformance,includingitshalf-andfull-yearfinancialresults,inprintandelectronicmediaasspecifiedbytheJSEListingsRequirementsfromtimetotime.AECI’sCorporateCommunicationsfunctionmaintainsregularcontactwiththemediabydisseminatingrelevantinformation.

All Non-executive Directors are invitedto attend the Company’s financial andbusiness-specificpresentations.

SUMMARY OF ADHERENCE TO KING IVAKingIVgapanalysiscanbeviewedviathewebsitelink:www.aeci.co.za/governance-king-compliance.php.

PRINCIPLE APPLIED COMMENT

Principle 1:TheGoverningBody(“GB”)*shouldleadethicallyandeffectively.

✓ SeeEthicalBusinessConductonpage76.In2018,itisplannedthattheCompany’sCodeofEthicsandBusinessConductwillbereviewedandamended,ifrequired,inlinewithinternationaldevelopments.

Principle 2:TheGBshouldgoverntheethicsoftheorganisationinawaythatsupportstheestablishmentofanethicalculture.

✓ TheGB,viaitsRiskandSocialandEthicsCommittees,continues tomonitorandsupporttheestablishmentofanethicalculture (e.g.theengagementonreportsfromTip-offsAnonymous). SeeEthicalBusinessConductonpage76.

Principle 3:Responsiblecorporatecitizenship. ✓ Fromboththecomplianceandcorporatesocialinvestmentperspectives,theGB,viaitsSocialandEthicsCommittee,focussesonhealth,safety andenvironmentalissuesandsupportsmanagementindrivingcomplianceandtheadoptionofbestpractices.

Principle 4:TheGBshouldappreciatethattheorganisation’scorepurpose,itsriskandopportunities,strategy,businessmodel,performanceandsustainabledevelopmentareallinseparableelementsofthevaluecreationprocess.

✓ TheGBapprovestheGroup’sstrategicdirectioneachyear.ManagementischargedwiththeimplementationofstrategyandreportsbackateachBoardmeeting.TheKPIsoftheExecutiveteamincludenon-financialindicatorsandarealignedwithrelatedremuneration.TheBoardassessestheGroup’ssolvencyandliquiditywitheachmaterialtransaction.

Principle 5:TheGBshouldensurethatreportsissuedbytheorganisationenablestakeholderstomakeinformedassessmentsoftheorganisation’sperformanceanditslong,mediumandshorttermprospects.

✓ TheGBapprovesthereportingframework,inclusiveofcontent.Furthermore,theGB,viatheChairmenoftheBoardandtheRemunerationCommitteeengagewithkeystakeholdersforalignment.Boththefinancialandnon-financialinformationintheIntegratedreportaresubjecttoverificationand/orauditbyindependentparties.

Principle 6:TheGBshouldserveasafocalpointandcustodianofcorporategovernanceintheorganisation.

✓ Seethelinkwww.aeci.co.za/governance-policy-documents.php.BoardCharterandtermsofreference(“TORs”)forvariousCommitteesandrelatedattendanceforeach.ThisstructureensurestheproperbalanceofpowerandauthorityatBoardlevel.Focusin2018willremainonfurtheraligningthevariousTORswithKingIVguidelines.

Principle 7:TheGBshouldcomprisetheappropriatebalanceofknowledge,skills,experience,diversityandindependenceforittodischargeitsgovernancerole andresponsibilitiesobjectivelyandeffectively.

✓ TheGBfocuseditsevaluationonindependenceissuesfortheretiringmembers,includingtheChairman,andtheothermembersundertookaself-evaluation.InadditiontheGB,viaitsNominationCommitteerecommittedtogenderdiversityobjectivesduringitssuccessionplanningprocess,inlinewithpolicy.Thefocusgoingforwardwillremainonenhancingthegenderbalance.

Principle 8:TheGBshouldensurethatitsarrangementsfordelegationwithinitsownstructurespromoteindependentjudgementandassistwiththebalance ofpowerandeffectivedischargeofduties.

✓ TheGBhassetupadequateCommitteeswithclearmandatestosupportitswork,andthesereportbacktotheGBateachBoardmeeting.Inthereportingperiod,theGBformalisedtheInvestmentsCommitteeasanadditionalstructuretoassistwiththevettingofmaterialtransactionsinbetweenBoardmeetings(withnoapprovingpowers).

* In AECI, the Board is the GB.


PRINCIPLE APPLIED COMMENT

Principle 9:TheGBshouldensurethattheevaluationofitsownperformanceandthatofitscommitteesandindividualmemberssupportcontinuedimprovementinitsperformanceandeffectiveness.

✓ TheGBconductsanevaluationofitsperformanceannuallyand forthe2017yearfocuswasonindependenceofallmembers,butmorespecificallyontheretiringmembers,includingtheChairman oftheBoard.

Principle 10:TheGBshouldensurethattheappointmentofanddelegationofmanagementcontributetoroleclarityandeffectiveexerciseofauthorityandresponsibilities.

✓ TheChiefExecutive’sappointmentisapprovedbyBoardviaitsNominationsCommitteeandhisperformanceisevaluatedbytheChairmanoftheBoardandratifiedbythefullBoard.TheGroupCompanySecretaryisappointedbytheBoardviatheChairmanand theChiefFinancialOfficer.TheSecretary’sperformanceisevaluated bybothandratifiedbytheRemunerationCommittee.

Principle 11:TheGBshouldgovernriskinawaythatsupportstheorganisationinsettingandachievingitsstrategicobjectives.

✓ Theprocessofsettingstrategyisalignedtotheriskmanagementevaluation—seeRiskManagementandMaterialIssuesonpage8. Thefocusinthecomingyearwillbeonthemeasurementofthematuritylevelsoftheriskmanagementprocess.

Principle 12:TheGBshouldgoverntechnologyandinformationinawaythatsupportstheorganisationsettingandachievingitsstrategicobjectives.

✓ FocushasbeenonestablishingapropergovernanceframeworkforIT,takingintoaccountthebusinessimperative,currentlegislationandITtrends.Goingforward,theemphasiswillbeonimprovingthedeliveryofvaluetothebusinessthroughstrategicalignment,andmitigatingtherisksofITbyembeddingaccountabilityintheGroup’sbusinesses.

Principle 13:TheGBshouldgoverncompliance withapplicablelawsandadopted,non-bindingrules,codesandstandardsinawaythatitsupportstheorganisation’sethicalandgoodcorporatecitizenship.

✓ Thefocusoftheorganisationforthereportingperiodwasonreviewingthecomplianceframeworkandapplyingarelatedtooltoassistwiththisadministrativelyintenseprocess.Inaddition,focushasbeentoensuringtheroll-outofthecomplianceframeworkinforeignjurisdictions.Thiswillcontinueinto2018.

Principle 14:TheGBshouldensurethattheorganisationremuneratesfairly,responsiblyandtransparentlysoastopromotetheachievementoftheorganisation’sstrategicobjectivesandpositiveoutcomesintheshort,mediumandlongterm.

✓ TheGB,viaitsRemunerationCommitteehasapprovedarevisedRemunerationPhilosophyandFrameworktoaligntobestmarketpractices.SeetheRemunerationCommittee’sreportonpage83.

Principle 15:TheGBshouldensurethatassuranceservicesandfunctionsenableaneffectivecontrolenvironmentandthatthesesupporttheintegrityofinformationforinternaldecision-makingandoftheorganisation’sexternalreports.

Inprogress ThereisnoformalisedapproachtocombinedassurancebuttheorganisationiscommencingarelatedprocessundertheleadershipoftheInternalAuditfunction.Focusin2018willbeonpursuingaformalframeworkforcombinedassuranceintheGroupacrossallassuranceprovidersforbettervalue-add.

Principle 16:TheGBadoptsastakeholderinclusiveapproachthatbalancesneeds,interestsandexpectationsofmaterialstakeholdersinthe bestinterestsoftheorganisationovertime.

✓ SeeStakeholderEngagementonpage42.

SUMMARY OF ADHERENCE TO KING IV continued



05.1

AUDIT COMMITTEE’S REPORT TO STAKEHOLDERS

MEMBERSHIPTheCommitteewasnominatedbytheBoardinrespectofthe2017financialyearanditsmemberswereconfirmedbyshareholdersattheAGMheldon29May2017.ShareholderswillberequestedtoconfirmtheappointmentofthemembersoftheCommitteeforthe2018financialyearattheAGMscheduledfor31May2018.

Therewerefourmeetingsheldintheyear.Fulldetailsofthemeetingdatesandattendanceareavailableviathelinkhttp://www.aeci.co.za/gov_directorate_2017.php.

TheCommitteecomprisessolelyIndependentNon-executiveDirectors.AbridgedbiographiesoftheseDirectorsarepublishedelsewhereintheintegratedreport.

Currentmembersare:

› GGomwe(Chairman)

› GWDempster

› AJMorgan

› PGSibiya

MrRMWDunneresignedon29May2017,havingservedontheCommitteesince2007andasitsChairmansince2014,andMrRJMKgosanaresignedon27September2017,havingservedontheCommitteesince2016.Theirservicesweregreatlyappreciated.

MrMorganhasservedontheCommitteesince2010,MrGomwesince2015(andasChairmansinceSeptember2017)andMrDempstersince2016.MsSibiyawasappointedon 28February2018.

PURPOSEThepurposeoftheCommitteeisto:

› assisttheBoardinoverseeingthequalityandintegrityoftheCompany’sintegratedreportingprocess, includingthefinancialstatementsandsustainabilityreporting,and

announcementsinrespectofthefinancialresults, therebyenhancingthecredibility of financial reporting and providing achannelforcommunicationbetweentheBoard,the internalandexternalauditorsandmanagement;

› ensurethataneffectivecontrolenviron-ment intheAECIGroup ismaintainedbysupportingtheBoardinthedischargeofitsdutiesrelatingtothesafeguardingofassets,theoperationofadequatesystemsandcontrols,riskmanagementandtheintegrityoffinancialstatementsandreporting;

› provide the FinancialDirector, externalauditorandtheHeadofInternalAuditwithunrestrictedaccesstotheCommitteeanditsChairman,as isrequired, inrelationtoanymatterfallingwithintheremitoftheCommittee;

› meet with the external auditor, SeniorManagers,ExecutivesandExecutiveDirec-torsastheCommitteemayelect;

› meetat leastonceayearwiththeHeadofInternalAuditandmembersofhisteamwithouttheexternalauditor,otherExecutiveBoardmembersortheCompany’sFinancialDirectorbeingpresent;

› reviewandrecommendtotheCompany’sBoard,forapproval,theCompany’sinterimfinancialresultsforthehalf-yearto30June;

› reviewandrecommendtotheCompany’sBoard,forapproval,theCompany’sauditedfinancialstatementsforthefinancialyearto31December;

› overseetheactivitiesof,andensurecoordi-nationbetween,theactivitiesoftheinternalandexternalauditors;

› performdutiesthatareassignedto itbytheCompaniesActandasgovernedbyother legislative requirements, includingthestatutoryAuditCommitteefunctionsrequiredforsubsidiarycompanies;

› receive and deal with any complaintsconcerningaccountingpractices,theInternal

Auditfunctionorthecontentandauditoffinancialstatementsorrelatedmatters;

› conductannualreviewsoftheCommittee’sworkand termsof referenceandmakerecommendationstotheBoardtoensurethattheCommitteeoperatesatmaximumeffectiveness;and

› assesstheperformanceandeffectivenessoftheCommitteeand itsmembersonaregularbasis.

EXECUTION OF FUNCTIONSThe Committee executed its duties andresponsibilitiesduringthe2017financialyearinaccordancewithitstermsofreferenceastheyrelatetotheGroup’saccounting,inter-nalauditing,internalcontrol,andintegratedreporting practices, and pursuant to theprovisionsoftheJSEListingsRequirement.

Duringtheyearunderreview:

Inrespectoftheexternalauditorandtheexter-nalaudit,theCommitteeamongothermatters:

› nominatedKPMGInc.astheexternalauditortoshareholdersforappointmentasauditorforthefinancialyearended31December2017,andensuredthattheappointmentcompliedwith all applicable legal andregulatoryrequirementsfortheappointmentofanauditor.TheCommitteeconfirmsthattheauditorisaccreditedbytheJSE;

› approvedtheexternalauditengagementletter,theauditplanandthebudgetedauditfeespayabletotheexternalauditor;

› reviewedtheaudit,evaluatedtheeffective-nessoftheauditorandits independenceandevaluatedtheexternalauditor’sinternalqualitycontrolprocedures;

› obtainedanannualwrittenstatementfromtheauditorthatitsindependencewasnotimpaired;

› obtainedassurancethatnomemberoftheexternalauditteamwashiredbytheCompanyoritssubsidiariesduringtheyear;

Dear stakeholders

This report is provided by the Audit Committee (“the Committee”) appointed in respect of the 2017 financial year of AECI Ltd. This report incorporates the requirements of the Companies Act other regulatory requirements and King IV principles. The Committee’s operation is guided by a detailed charter that is informed by the Companies Act and King IV and was approved by the Board.


AUDIT COMMITTEE’S REPORT TO STAKEHOLDERS

05.2

› obtainedassurances from theexternalauditorthatadequateaccountingrecordswerebeingmaintainedbytheCompanyanditssubsidiaries;

› appliedapolicysettingoutthecategoriesofnon-auditservicesthattheexternalauditormayandmaynotprovide,splitbetweenpermitted, permissible and prohibitedservices;

› approvedallnon-auditserviceswithKPMG; › consideredwhetheranyReportableIrregu-laritieswereidentifiedandreportedbytheexternalauditor intermsoftheAuditingProfessionAct,No.26of2005,anddeter-minedthattherewerenone;

› nominatedtheexternalauditorforeachsubsidiarycompany;and

› asrequiredbysection3.84(h)(iii)of theJSEListingsRequirements,obtainedtheinformation listed inparagraph22.15(h)of the JSEListingsRequirements in itsassessmentofthesuitabilityofDeloitte&Touche,aswellasMrPatrickNdlovu,forappointmentasexternalauditorwitheffectfrom6April2018.

Inrespectofthefinancialstatements,theCommitteeamongothermatters:

› confirmedthegoing-concernasthebasisofpreparationofthe interimandannualfinancialstatements;

› reviewedcompliancewith thefinancialconditionsof loancovenantsanddeter-minedthat thecapitalof theCompanywasadequate;

› examinedandreviewedthe interimandannualfinancialstatements,aswellasallfinancial informationdisclosedtostake-holders,priortosubmissiontoandapprovalbytheBoard;

› ensured that the financial statementsfairlypresentthefinancialpositionoftheCompanyandoftheGroupasattheendof thefinancial yearand the resultsofoperationsandcashflowsforthefinancialyear,andconsideredthebasisonwhichtheCompanyand its subsidiaries, jointventuresandassociatesweredeterminedtobegoing-concerns;

› consideredaccountingtreatments,signifi-cantunusualtransactionsandaccountingjudgements;

› considered the appropriateness of theaccounting policies and adopted anychangesthereto;

› ensuredthattheCompanyhasestablishedappropriatefinancialreportingprocedures,andthatthoseproceduresareoperatingeffectively;

› reviewedtheexternalauditor’sauditreport;

› reviewedtherepresentationletterrelatingtotheGroupfinancialstatements,whichwassignedbymanagement;

› consideredanyproblems identifiedandreviewed any significant legal and taxmattersthatcouldhaveamaterialimpactonthefinancialstatements;and

› met separatelywithmanagement, theexternalauditorandInternalAudit.

In respectof internalcontroland InternalAudit,includingforensicaudit,theCommitteeamongothermatters:

› reviewedandapprovedtheInternalAuditcharterandannualauditplanandevalu-atedtheindependence,effectivenessandperformanceoftheInternalAuditfunctionandcompliancewithitscharter;

› consideredthereportsoftheinternalauditorandtheexternalauditorontheGroup’ssystemsofinternalcontrolincludingfinancialcontrols,businessriskmanagementandthemaintenanceofeffective internalcontrolsystems;

› receivedassurancethatproperandadequateaccountingrecordsweremaintainedandthatthesystemssafeguardedtheassetsagainstunauthoriseduseordisposalthereof;

› reviewedsignificant issuesraisedbytheinternalandforensicauditprocessesandtheadequacyofcorrectiveactionsinresponsetosignificant internalandforensicauditfindings;and

› basedontheabove,theCommitteeformedtheopinionthat therewerenomaterialbreakdowns in internalcontrol, includingfinancialcontrols,businessriskmanagementandthemaintenanceofeffectivematerialcontrolsystems.

InrespectofriskmanagementandIT, theCommittee,insofarasrelevanttoitsfunctions:

› reviewed the Group’s policies on riskassessmentandriskmanagement,includingfraudrisksandITrisksastheypertaintofinancialreportingandthegoing-concernassessment,andfoundthemtobesound;

› consideredandreviewedthefindingsandrecommendationsoftheRiskCommittee;

› consideredthereportsofInternalAuditandtheexternalauditorinsofarasthesewererelevanttoriskmanagementandITandcouldhaveanimpactonfinancialcontrols,andensuredthattherelatedmanagementactionplanswereadequate;and

› reviewedandconsideredfeedbackfromthebusinesssegments’FinancialReviewandRiskCommitteemeetings, insofarastheserelatedtoriskmanagementandIT.

InrespectofsustainabilityissuestheCommit-teehas:

› overseen the process of sustainabilityreportingandconsideredthefindingsandrecommendationsoftheRiskCommitteeandtheSocialandEthicsCommittee.

Inrespectoflegalandregulatoryrequirementstotheextentthatthesemayhaveanimpactonthefinancialstatements,theCommittee:

› reviewedwithmanagementlegalmattersthatcouldhaveamaterialimpactontheGroup;

› reviewedwiththeCompany’sinternalcounseltheadequacyandeffectivenessoftheGroup’sprocedures,includingitsRiskManagementFramework,toensurecompliancewithlegalandregulatoryresponsibilities;


05.2AUDIT COMMITTEE’S REPORT TO STAKEHOLDERS CONTINUED

› monitoredcomplaintsreceivedviatheGroup’swhistle-blowingservice,includingcomplaintsorconcernsregardingaccountingmatters,InternalAudit,internalaccountingcontrols,contentsofthefinancialstatements,poten-tialviolationsofthelawandquestionableaccountingorauditingmatters;and

› consideredreportsprovidedbymanage-ment, Internal Audit and the externalauditor regardingcompliancewith legalandregulatoryrequirements.

Inrespectofthecoordinationofassuranceactivities,theCommitteereviewedtheplansandworkoutputsoftheexternalandinter-nalauditorsandconcludedthatthesewereadequatetoaddressallsignificantfinancialrisksfacingthebusiness.

Considered the appropriateness of theexperienceandexpertiseoftheChiefFinan-cialOfficerandFinancialDirectorandhisFinanceteamandconcludedthatthesewereappropriate.

KEY AUDIT MATTERSTheCommitteenotedthekeyauditmatterssetoutintheindependentauditor’sreport,whichare:

› accountingforincomeanddeferredtaxes;

› impairmentofgoodwill.

TheCommitteehasconsideredandevaluatedthesemattersandissatisfiedthattheyarerepresentedcorrectly.

INDEPENDENCE OF THE EXTERNAL AUDITORTheCommitteeissatisfiedthatKPMGInc.isindependentoftheCompanyandtheGroupaftertakingthefollowingfactorsintoaccount:

› representationsmadebyKPMGInc.totheCommittee;

› theauditordoesnot,exceptasexternalauditororinrenderingpermittednon-auditservices,receiveanyremunerationorotherbenefitsfromtheCompany;

› theauditor’sindependencewasnotimpairedbyanyconsultancy,advisoryorotherworkundertakenbytheauditor;

› theauditor’sindependencewasnotpreju-dicedasaresultofanypreviousappoint-mentasauditor;and

› thecriteriaspecifiedforindependencebytheIndependentRegulatoryBoardforAuditorsandinternationalregulatorybodies.

ROTATION OF EXTERNAL AUDITOROn 7 December 2017 the AECI Boardannouncedthat ithadresolved infavourof theearlyadoptionof the IndependentRegulatoryBoardforAuditors’decision inrespectofthemandatoryrotationofexternalauditorsatleastevery10years.Accordingly,thecurrentexternalauditor,KPMGInc.,willnotbeconsideredforreappointmentforthe2018financialyear.

KPMGhasbeenAECI’sauditorfor93years,duringwhichtimethefirmhasprovidedarobust, independentandhighlycompetentservicetotheGroupanditsshareholders.

ANNUAL FINANCIAL STATEMENTSFollowingthereviewbytheCommitteeoftheannualfinancialstatementsofAECILtdfortheyearended31December2017,theCommitteeisoftheviewthatinallmaterialrespectstheycomplywiththerelevantprovisionsoftheCompaniesActandIFRSandfairlypresenttheGroupandCompanyfinancialpositionatthatdateandtheresultsofoperationsandcashflowsfortheyearthenended.

TheCommitteehasalsosatisfieditselfoftheintegrityoftheremainderoftheintegratedreport.

On6April 2018,Deloitte& Touchewasappointedasthenewexternalauditor.Onthatsamedate,MrPatrickNdlovuwasappointedasdesignatedauditpartnerforthefinancialyearending31December2018.ShareholderswillbegivenanopportunitytoreappointthisauditorattheAGMscheduledtobeheldon31May2018.

Havingmet itsobligations,theCommitteerecommendedtheannualfinancialstate-ments for the year ended 31 December2017forapprovaltotheAECIBoardon27February2018.TheCommitteesubsequentlyalso recommended the integrated reportforapproval.TheBoardhasapprovedthisreport,whichwillbeopenfordiscussionattheforthcomingAGM.

OnbehalfoftheAuditCommittee

Godfrey Gomwe Chairman

Woodmead,Sandton 27February2018 and 11April2018


REMUNERATION REPORTPART 1: CHAIRMAN’S STATEMENT 83

PART 2: REMUNERATION POLICY 84

2.1 REMUNERATION COMMITTEE 84

2.2 REMUNERATION PHILOSOPHY 84

2.3 GUARANTEED PACKAGE 86

2.4 SHORT-TERM INCENTIVE 87

2.5 LONG-TERM INCENTIVE 88

2.6 PACKAGE DESIGN AND PAY MIX 91

2.7 EXECUTIVE DIRECTORS’ AND EXECUTIVES’ 92 SERVICE CONTRACTS

2.8 MINIMUM SHAREHOLDING GUIDELINE 93

2.9 NON-EXECUTIVE DIRECTORS’ FEES 93

2.10 NON-BINDING ADVISORY VOTE 93

2.11 ORDINARY RESOLUTION NO 8: AMENDMENT 93 TO LONG-TERM INCENTIVE PLAN

PART 3: IMPLEMENTATION OF POLICY IN 2017 93

3.1 GP ADJUSTMENTS 93

3.2 SHORT-TERM INCENTIVE OUTCOMES 93

3.3 LTIS AWARDED DURING 2017 94

3.4 LTI VESTING AND VESTING OUTCOMES IN 2017 96

3.5 ACTUAL REMUNERATION OUTCOMES (SINGLE FIGURE) 96

3.6 TABLE OF UNVESTED AWARDS 96

3.7 INCREASE IN NON-EXECUTIVE DIRECTORS’ FEES 96

3.8 NON-BINDING ADVISORY VOTE 96

05.3

82

REMUNERATION REPORT

PART 1: CHAIRMAN’S STATEMENTI am honoured to take up the role of Chairman of the Remuneration Committee (“the Committee”) and to continue building on the work of Richard Dunne, the previous Chairman.IthankRichardandSchalkEngelbrechtfortheirserviceontheCommitteeandtheirvaluedinputonthedirectionandprinciplesofremunerationintheAECIGroup.Further,IwelcometheChairmanofAECIKhotsoMokhele,whojoinedtheCommitteeasamemberinMay2017.

TheCommitteeseekstocomplywiththestandardssetoutinKingIVand,assuch,aparticularfocusonethicalandfairremunera-tionisanunderlyingandgoverningprinciplefortheCommitteeinitsreviewofAECI’sRemuner-ationPolicy,philosophy,andpractices.

AttheAGMinMay2017,shareholdersexpressedconcernwithrespecttotheRemunerationPolicy.Ofthevotescast,55,33%wereinfavourofthePolicyand44,7%wereagainstit.

Asaconsequenceofthehigherthan25%negativevote,membersoftheCommitteeandtheAECIExecutiveDirectorsengagedwithshareholderstounderstandtheirunderlyingconcerns.ShareholderfeedbackindicatedageneralconcerninrelationtotheperformanceconditionsoftheAECILong-termIncentivePlan(“LTIP”),inthateachinstrumentonlyhadoneperformanceconditionandtherewasnoconditionlinkedtoameasurementonreturn.

Specifically,theCommitteeandtheAECIExecu-tiveDirectorsundertookthefollowingactions:

› the reasonsfor thenegativevotewerecanvassedfromanumberofshareholders;

› shareholders’primaryconcernswereidenti-fiedasrelatingtotheLTIPscheme,withissuesbeingtheawardofretentionshares,thechoiceofperformanceconditiononperformancevestedsharesandthevestingscaleoftheperformancevestedshares;

› theCommitteeworkedextensivelythrough-out2017toformulaterevisionstotheAECILTIPperformanceconditionstoaddressshareholderfeedback;

› thisrigorousprocessinvolvedtwoindepend-entremunerationadvisorsandtwoSpecialRemunerationCommitteemeetings;

› theRemunerationPolicysectionof thisreport(Part2)outlinesthechangeswhichwereapprovedbytheCommittee;

› changes include the conversion of thedeferredshareschemeandearnings-growthunitstofairvalueequivalentperformanceshareawards;

› further,themaximumpotentialearningcapontheLTIawardswasadjustedfrom300%to200%.ParticipantsintheschemewouldreceiveanadjustedLTIawardwhichwouldfactorinthesechanges;

› theCommitteereviewedandapprovedtheintroductionofaminimumshareholdingguideline for Executives, which will beimplementedoverafive-yearperiod.

Thesechangeswerediscussedface-to-faceorviateleconferencewithanumberofinsti-tutionalshareholders(AllanGray,CoronationAssetManagers,KagisoAssetManagement,thePIC,PSGAssetManagement,SanlamInvestmentManagement)betweenJanuaryandMarch2018.TheChairmanoftheBoard,theRemunerationCommitteeandtheAuditCommitteeledtheseengagements.

TheCommittee is satisfied that the twoindependentadvisorsengagedduring2017providedindependent,non-biasedadviceandremainedobjectivethroughouttheengage-mentprocess.

Overall,theCommitteeisoftheopinionthattheAECIGroupmaintainsandadherestoitsstatedRemunerationPolicyandthatthePolicyisinlinewiththestatedprinciples.However,toremaincloselylinkedtoandalignedwithmarket best practice, the Committee, inconjunctionwiththeAECIExecutiveDirectors,hasembarkedonanevolutionaryjourneytoreviewtheRemunerationPolicyandphiloso-phyagainstmarketbestpracticeonfairness,equityandtransparency.

Theobjective is toensurethattheGroupmaintainsarobust,fit-for-purposephilosophythataddressesboth internalandexternalstakeholderrequirementsaswellasstand-ardsofethicalpay.Factoredintothisjourneywillbetheintegrationandalignmentoftheremunerationpositionsofthetwoacquisitionswhichwereannounced inthe lastquarterof2017,aswellasthereviewofhowtheAECI performancemanagement systemintegratesintotheremunerationandrewardofemployees.

Welookforwardtofurtherengagementwithstakeholdersand refinementof theAECIremunerationphilosophyduring2018astheGroupseekstoenhanceitsalignmentwithmarketbestpracticeandsecureanequitableandfairremunerationposition.

Graham Dempster Chairman


AGM RESOLUTIONS — 2017(%) FOR AGAINST

ORDINARY RESOLUTION NO. 7.1: REMUNERATION POLICY 55,33 44,67

ORDINARY RESOLUTION NO. 7.2: IMPLEMENTATION OF REMUNERATION POLICY

77,10 22,81

SPECIAL RESOLUTION NO. 1: DIRECTORS’ FEES 100 —


REMUNERATION REPORT

05.3

PART 2: REMUNERATION POLICY2.1REMUNERATIONCOMMITTEETheCommittee iscomprisedoffourNon- executiveDirectorsallofwhom, includingtheChairman,areIndependent.MeetingsoftheCommitteeareusuallyheldfourtimesayearandadditionalmeetingsareheldwhendeemednecessary.TheChiefExecutiveandtheChiefFinancialOfficerareinvitedtoattendtodiscusstheremunerationofExecutivesandSeniorManagersandtocontributetootherdiscussionsaswarranted.AlsoinattendanceistheGroupExecutive:HumanCapital.TheGroupCompensationandBenefitsManagerattendsallmeetingsassecretary.Noattendeemayparticipateinorbepresentatanydiscussionordecisionregardinghis/herownremuneration.CurrentmembersoftheCommitteeare:

› GWDempster(Chairman) › KDKMokhele(appointedon19May2017) › GGomwe › RRamashia

TheresponsibilitiesoftheCommitteeareinaccordancewithitsBoard-approvedtermsofreference,whichcomplywithKingIII.Acopyoftheseisavailableviathelinkwww.aeci.co.za/governance-policy-documents.php.OncethefullimpactofKingIVhasbeenfinal-ised,thetermswillbeamendedasrequiredtoensurecompliancewithsuchchanges.TheBoardissatisfiedthattheCommittee’scompositionisappropriatewithregardtothenecessarybalanceofknowledge,skillandexperienceofitsmembers.

2.1.1 REMUNERATION COMMITTEE ACTIONSTheCommittee considered the followingmattersandtookkeydecisions,asappropriate:

› approvalof remunerationpackages forExecutivesandSeniorManagersfor2017;

› approvalofSTIpaymentpoolsfortheGroupanditsindividualbusinesses;

› approvalofallocationprinciples,undertheLTIP,ofawardsofperformanceshares(“PS”),inlinewithpolicy;

› reviewofLTIPschemerulesandperfor-mancecriteria;

› approvalofamendedperformancecriteriafortheLTIP;

› reviewandapprovalofthevestingofthePSawardedin2014;

› reviewandapprovalofminimumshare-holdingguidelines;

› reviewandapprovalofTSRreserve listcompaniesfortheLTIP;

› reviewandapprovaloftheHEPScalcula-tionasitrelatedtothevestingoftheLTIschemes’earnings-growthunits(“EGU”)anditsearnings-basedincentive(“EBIS”)units;

› reviewofNon-executiveDirectors’fees,asrecommendedbytheExecutiveDirectors,andtheformulationofarecommendationtoshareholdersfortheapprovalofincreases;andreview;and

› approvaloftheCompany’s2017Remuner-ationreport.

2.1.2 INDEPENDENT ADVICEManagementengagedtheservicesofPwCandVasdextoassistwithmarketbenchmarks,advice,andrecommendations.

2.2REMUNERATIONPHILOSOPHYAECI’sguidingphilosophywith respect toremunerationistoofferaguaranteedpackagetoallemployeeswhichmeetstheprinciplesoutlinedon thefacingpage.Thegraphicabovepresentsahigh-leveloverviewofthephilosophyandPolicyastheyapplytoallGroupemployees,withanin-depthfocusontheremunerationofExecutives.

The remuneration philosophy targets toremunerateemployeesatthe50thpercentileofthemarketfromaguaranteedpackageperspective.

NewentrantsareappointedatorabovetheAECIminimumsalaryperlevelandprogresstowardsthe50thpercentileoveraperiodofbetweenthreeandfiveyears,whereperfor-manceisaveragetoaboveaverage.

On-target variable pay targets the50thpercentileoftotalrewardmarketbenchmarks.

ThephilosophyprovidesadetailedframeworkonAECI’sofferingoftotalremunerationandalignscloselywiththeAECIEmployeeValueProposition (“EVP”)and theperformancemanagementsystem.Itseekstocomplementandsupport thedeliveryoffinancialandnon-financialkeyobjectiveswhichunderpintheGroup’sstrategy.Furthermore,itseekstoofferemployeescompetitiveguaranteedpackageswhicharerelevanttomarketbenchmarksandallowAECItosecurekeytechnicalskills,highperformers,andfillcriticalroles.Finally,thephilosophyseekstoaligntheremuner-ationofExecutivesandSeniorManagers withthecreationofshareholdervalueandoutperformanceofcriticalobjectives.

ALIGNMENT WITH STRATEGYThe philosophy outlines the appropriaterewardforExecutivesandSeniorManagerswhocontributetotheachievementoftargetsforgrowthandshareholderreturn.Accordingly,financialperformancemeasuresandKeyPerformance Indicators (“KPI”)scorecardsdeterminethelevelsofrewardforExecutivesandSeniorManagers.

Transformation,safetyandcomplianceKPIsarecascadedviabalancedscorecardsacrossandthroughouttheorganisationtoembedbehaviourswhichpromoteaviable,productivebusinessenvironment.

REMUNERATION PHILOSOPHY: MAKE-UP OF REMUNERATION (%) BY EMPLOYMENT LEVEL

100

80

60

40

20

0

CUA – B DLCL DU EL EU F

GP STI LTI

Key: GP = Guaranteed package; STI = Short-term incentive; LTI = Long-term incentive

EMPLOYMENT LEVEL


REMUNERATION REPORT CONTINUED

05.3

PRINCIPLES

ATTRACT, MOTIVATE AND RETAIN › PositionAECItoattract,motivateandretainemployeesthroughtheprovisionofbroadbenefits,market-relatedsalaries,value-drivenincentiveschemesandarobustEVP.

RECOGNISE AND REWARD PERFORMANCE › Recogniseperformancerangingfromgoodtoexceptionalfromanobjectiveand rationalposition.

› Encourageandreinforcebehaviourswhichimprovefinancialperformance,theachievement oftransformation,safety,adherencetoriskgovernanceprinciplesandotherkeynon-financialtargetsandstandards.

FAIR AND EQUITABLE › Enablethefairandequitableprovisionofremunerationandbenefitsacrossallemploymentlevels,asappropriate.

› BenchmarkAECI’spaylevelsagainstmarketbenchmarks,internalsalaryrangesandagainsta“living”wagestandard.

ALIGNED WITH STRATEGIC OBJECTIVES › Remunerateemployeessuchthatsuperiorperformanceintheachievementofstrategicobjectivesisrewardedthroughincentiveschemes.

GOVERNANCE AND BEST PRACTICE › Balanceandaligntheneedsandexpectationsofshareholders,employees,customers andregulatorstocreatelong-termsustainablegrowth.

› Enforcetheprinciplesofgoodcorporategovernancetoprovidetheappropriateshare ofvaluetorelevantstakeholders.

GLOSSARY OF TERMS

TERM DESCRIPTION

DS Deferredshares.

EBIS Earnings-basedincentive.

FormerLTIschemeinstrument;noissuesgrantedsince2012.

EGU Earnings-growthunits.

Cash-settledschemewhichtracksgrowthinHEPS.

EVP EmployeeValueProposition.

GP Guaranteedpackage.

Basicsalary,fixedcashallowancesandCompanycontributionstobenefitschemes.

HEPS Headlineearningspershare.

LTI Long-termincentive.

CompanyschemereferredtoastheAECILTIP.

MEDIAN/50TH PERCENTILE Thevalueatthemidpointofafrequencydistributionwherethereisanequalprobability offallingaboveorbelow.

ON-TARGET Targetedearningsatthemedianorthe50thpercentile.

PS Performanceshareawards.

AECIordinaryshareawardwhichtracksCompanyperformance;equity-settled.

RONA Returnonnetassets.

STI Short-termincentive.

TOTAL REMUNERATION PACKAGE Basicsalary,fixedcashallowances,Companycontributionstobenefitschemes,variablepay(STI,LTI).

TP Tradingprofit.

TSR Totalshareholderreturn.


FAIR AND RESPONSIBLE REMUNERATIONInanongoingefforttoensureoverallfairnessofpayacrossall levelsofemployment,arobustpaydifferentialanalysisisconductedonabi-annualbasis,factoringinthewagegapbetweenjuniorandsenioremployees.Theresultsofthisanalysisareconsideredwhenreviewingpayincreasesatalllevels,butatExecutivelevelinparticular. Ingeneral,thetrendhasbeentoprovide lower increasesatExecutive levelandhigher increasesatbargainingunitlevel.

Theanalysistobeundertakenin2018willincludeadditionalfactorssuchascostoflivingincreases,inflation,paydisparitywithinoccupationallevelsandtheoverallwagegap.

Thepaydifferentialanalysis istabledwiththeExecutiveCommittee,theRemunerationCommittee,theSocialandEthicsCommit-teeandthefullAECIBoardwithassociatedactionplansforindividualGroupbusinessestoaddressanyareasofconcern.

Allbusinessesarerequiredtoreviewthepaydifferential insalary rangesandbetweenhighandlowearners.ItisAECI’spositionthatemployeesatthelowestemploymentlevelshouldearnalivingwagethatisinclusiveofmedicalandretirementfundbenefits.

TheRemunerationPolicyisalignedwiththeGroup’sEmploymentEquitytargetsinthatitseekstoallowbusinessestoreduceincomedifferentialsasappropriateandtoensurefairandequitableremunerationatalllevelsofemployment.

2.3GUARANTEEDPACKAGE

DESCRIPTION TheGPcomprisesbasepay,allowances,andretirementandmedicalaidbenefits.Itismanagedinrelationtothemarketmedian.Benefitssuchastravelallowancesandcontributionstoretirementandmedicalfundsaremaintainedatmarket-competitivelevelsandarebenchmarkedagainstmarketdataonaregularbasis.

BENCHMARKS AECIcomparesitselftothenationalmarketasrepresentedinindustrysurveyspublishedannually.Italsocomparesitselftoappropriatesector-specificsurveyswheresuchexist.Marketsurveysareusedasabasisforestablishingmarketremunerationinformationformostpositions,includingExecutivesandSeniorManagers.

TheGPforExecutivesandSeniorManagersarebenchmarkedagainstthemarketmedian(50thpercentile)ofsimilar-sizedcompaniesandindustry.

Toensurethatbenchmarksareappropriateandaccurate,AECIusesthreesetsofdatafromthreesurveyproviders,onthepremisethatdatafromthreesourcesprovideafairassumptiononpaylevels.

EVALUATION METHOD EachrolehasbeenevaluatedfurtherusingtheDeloitteExecutiveEvaluationSystem(“Execeval™”).Overandabovetherolesizeandcomplexity,Execeval™takesthefollowing intoconsideration:

› skillsandknowledge;

› conceptualabilities;

› interpersonalskills;

› jobimpact;

› problem-solvingabilities;

› decisionmaking;and

› resourcecontrol.

BENEFITS ToensurethatthecomponentelementsofGParealignedacrosstheGroup,fringebenefitsandallowancessuchasmedicalaidsubsidiesandcarallowancestructureshavebeenstandardisedforExecutivesandforSeniorManagers.



05.3

2.4SHORT-TERMINCENTIVE

DESCRIPTION TheschemeforExecutivesandSeniorManagersGroup-widecomprisesaweightedscorecardofGroupandbusiness-specificobjectivesandpersonalcomponents.

TheCompanyhasdevelopedabonusmodelforeachbusinessbasedongrowthandfinancialmanagementtargets.

BusinessesthatachievetheirTPtargetsandgrowtheirearningssubstantiallyaboveConsumerPriceIndex(“CPI”)andGrossDomesticProduct(“GDP”)ratescouldearnmultiplebonusfactors.Thebonuscurveisdesignedsothatsignificantbonuspaymentsaremadeonlytobusinesseswherethereisapositivechangeineconomicvalueadded(“EVA”)performance.

ELIGIBILITY ExecutivesandManagersatalllevels.

COMPONENTS Individualperformance(balancedscorecard)—25%;

Financialperformance(Grouporbusinessentityfinancialperformance)—75%.

FORMULA STI=annualbasicsalarymultipliedbytheon-targetpercentageperlevel.

Theon-targetportionissubjecttoasplitbetweenpersonalandfinancialperformance.

Personalperformancecanrangefrom50%to120%.

Financialperformancecanrangefrom0%to200%.

FINANCIAL PERFORMANCE TheGroup/businessfinancialratingisdeterminedbyactualfinancialperformancerelative topredeterminedtargetsforHEPSfortheGrouporTPforindividualbusinesses.

Thefinancialcomponentisbasedonathree-year“crawlingpeg”methodologyinwhichthresholds,targetsanddoublingpointsaresetfromthe“baseyear”forthreeyearsahead,withtargetedgrowthinrelationtoCPIplusGDPappliedtotheprecedingbaseyearperformance.ThedoublingpointissetatCPIplusGDPplus9%.Thereafter,themultipleisdeterminedbythegrowthabovetheon-targetHEPS/TP.

Afterthethirdyear,thebaseyearperformanceisresetpriortothenextthree-yearcycle.Thebaseyearusesthepreviousyear’sperformanceasastartingpointandisadjustedforwindfallprofitsorunusuallosses,andanyotheradjustmentsthattheCommitteemaydeemnecessarytoarriveatafairstartingpoint.

Nobonus On-target(1xbonus) 2xbonus

Achievementoforbelow90%ofon-target

BaseHEPSplusGDPplusHEPSplus1%

BaseHEPSplusGDPplus9%

INDIVIDUAL PERFORMANCE ThiselementismeasuredontheachievementofpersonaltargetsandisnotdependentonthefinancialperformanceoftheCompany/Groupbusiness.

PersonalKPIstypicallyincludeaspectssuchas:

› safetyandhealthperformance—measuredagainstfatalaccidentsandtheTotalRecordableIncidentRateonalinearscale;

› cashflowmanagement—measuredonimprovedworkingcapitalmanagementandcapitalspend;

› B-BBEE/EmploymentEquity—measuredagainstspecificacquisitions,retention,developmentandgovernancetargets;

› implementationofstrategicprojects—measuredagainstspecificprojectsagreedto withtheBoard.

ON-TARGET BONUS PERCENTAGES ChiefExecutiveandExecutives:50%ofannualbasicsalary;

SeniorManagers:between33%and50%ofannualbasicsalary.

MAXIMUM BONUS PERCENTAGES AllSTIpaymentsarecappedat150%ofGP.

Inexceptionalcases,theCommitteehastheauthoritytoextendthebonuscapto250%ofGP.ThiswillonlyoccuriftherehasbeenexceptionalgrowthinprofitsandiftheEVAandTP-sharingtargetshavebeenmetbytheGrouporbusinessconcerned.

DISCRETION OF THE COMMITTEE TheCommitteehasthefulldiscretiontoadjustbonusesand/oramendtherulesoftheschemeasitdeemsfit,takingintoaccountthebalancebetweenfairrewardfortheindividualandstakeholders’interests.


2.5LONG-TERMINCENTIVE

ELIGIBILITYExecutivesandselectedSeniorManagersoftheCompanyanditsbusinessentities.

PURPOSEThepurposeoftheLTIPistoattract,retain,motivateandrewardExecutivesandSeniorManagerswhoareabletoinfluencetheperformanceofAECIand/or itsbusinessesonabasiswhichalignstheir interestswiththoseoftheCompany’sstakeholders.TherevisedschemeallowsAECItoremaincompetitiveintermsofLTIs,itrewardslong-termsustainableCompanyperformance,actsasaretentiontoolandensuresthatExecutivesandSeniorManagersshareasignificantlevelofpersonalriskwiththeCompany’sstakeholders.ThePSelementalignstheinterestsofstakeholdersandAECI’ssenioremployeescloselybyrewardingsuperiorshareholderreturnsandfinancialperformanceinthefuture.Asannualawardsaremade,eachawardrequirestheresettingoftheperformancecriteria;itisonlywithcontinuedandsustainedoutperformancebytheCompanythatsignificantrewardaccruestoparticipants.

Inresponsetothefeedbackreceivedfromshareholders,AECIhasimplementedchangestoitsremunerationpolicyforthecurrentandfutureyears.ThetablebelowoutlinesthehighlevelchangestotheLTIscheme.

LTI SCHEME CHANGES2016 AND PRIOR YEARS

CURRENT YEAR (2017)

FUTURE YEARS (FROM 2018)

INSTRUMENTS USED EGU, PS, DS awards PS awards PS awards

PERFORMANCE CONDITIONS TSR TSR TSR, RONA, HEPS

VESTING RANGE (%) 0–300 0–300 0–200

MINIMUM SHAREHOLDING REQUIREMENTS No No Yes

AWARD MONTH July July April

Detailsfortheprior,currentandfutureyearsaredescribedindetailbelow.

2.5.1 POLICY UNTIL 2016From2012to2016,theAECILTIPcomprisedthreeinstruments,namelyawardsofEGUs,PSandDS.

DetailsonpreviousPSawardsandtheperformancevestingprofilearepresentedinPart3.

OPERATION AND INSTRUMENTS AnnualawardofPS.

PS ThePSwillvestonthethirdanniversaryoftheaward,totheextentthattheCompanyhasmetspecifiedperformancecriteriaovertheinterveningperiod.

Thevaluepersharethatvestsisthefullvalueoftheshare(thereisnostrikeprice),butthenumberofsharesthatwillvestdependsonwhethertheCompany’sperformanceovertheinterveningthree-yearperiodhasbeenontarget,oranunder-oranover-performanceagainstthetarget/ssetattheawarddate.

PERFORMANCE CONDITIONS FOR PS The2015awardmethodologyofvestingwillmeasuretheCompany’scomparativeTSR inrelationtoapeergroupof17companies(includingAECI):

Afrox Astral Aveng

Grindrod JDGroup Illovo

TongaatHulett Northam Omnia

PPC Rainbow Reunert

Sappi Barloworld Nampak

Pioneer



05.3

PERFORMANCE CONDITIONS FOR PS (continued)

VESTING VS POSITIONING IN RELATION TO COMPARATOR GROUP (%)

16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1

PERFORMANCE SHARES VESTING

350

300

250

200

150

100

50

0

MUL

TIPL

E

TSR POSITION

0 0 0

3050

6080 90

140

100

180

220260

300 300 300

Thispeergroupwasselectedfromaportfolioofcompanies:

› ofsimilarsizetoAECIintermsofmarketcapitalisation,atthetimethepeergroup wasconstituted;

› theyaresimilarlyimpacted,bothnegativelyandpositively,byexternalfactors;and

› theyrepresentessentiallyabalancedportfolioofalternativeinvestmentstoaninvestmentinAECI.

2.5.2 CURRENT POLICY: 2017 ISSUETobetteraligntheLTIschemewiththedeliveryofshareholderreturnsandmarketbestpractices,theAECILTIPwasrevisedduring2017.Detailsofthenewpolicyareoutlinedbelow.Twokeychangestotheschemewere:

1. Conversion of EGUs to PSTheEGUinstrumenttrackedgrowthinHEPSperformanceoverathree-yearperiodandwassettledincash,aftervesting,overanadditionalthree-yearperiod.Asaninstrument,itwasfailingtodeliverrealvaluetotheparticipants.Furthermore,marketbestpracticeindicatesthatanLTIinstrumentshouldhavemorethanoneperformanceconditionandpreferablyshouldbeequity-settled.

Assuch,the2017EGUawardswereconvertedonafairvaluebasistoanequivalentPSaward.Theconversioncalculationfactoredinthevariousvestingperiodsandmarketversusnon-marketperformanceconditions.

AllEGUawardsissuedpriorto2017remainineffectandwillvestunderthetermsonwhichtheywereissued.The2017LTIawardofPSislinkedtothecurrentTSRperformanceconditionandpeergroup.

2. Conversion of DS scheme to PSAfterdueconsiderationoftheappropriatenessofanon-performancecondition-linkedLTIinstrument,thevalueoftheDSschemewasincorporatedintothe2017PSaward,whichissubjecttoaTSRperformancecondition.NofurtherawardsundertheDSschemewillbeissuedandexistingawardswillvestunderthetermsonwhichtheywereissued.

Noawardsofthesetwoinstrumentswereissuedin2017.Detailsoftheinstrumentsgrantedduring2017aredisclosedinPart3ofthisreport.



Thevaluepersharethatvestsisthefullvalueoftheshare(thereisnostrikeprice),butthenumberofsharesthatwillvestdependsonwhethertheCompany’sperformanceovertheinterveningthree-yearperiodhasbeenontarget,oranunder-orover-performanceagainstthetarget/ssetattheawarddate.


PERFORMANCE CONDITIONS FOR PS The2017awardmethodologyofvestingwillmeasuretheCompany’scomparativeTSR inrelationtoapeergroupof16companies(includingAECI):

Afrox Astral Aveng

Grindrod TongaatHulett KAPIndustrial

Northam Omnia PPC

Rainbow Reunert Sappi

Barloworld Nampak Pioneer


16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1


350

300

250

200

150

100

50

0

MUL

TIPL

E

TSR POSITION

0 0 0

3050

6080 90

140

100

180

220260

300 300 300

Thispeergroupwasselectedfromaportfolioofcompanies:

› ofsimilarsizetoAECIintermsofmarketcapitalisation,atthetimethepeergroup wasconstituted;

› theyaresimilarlyimpacted,bothnegativelyandpositively,byexternalfactors;and

› theyrepresentessentiallyabalancedportfolioofalternativeinvestmentstoaninvestmentinAECI.

2.5.3 FUTURE POLICY (FROM 2018 ONWARDS)Inresponsetoshareholderfeedback,thefollowingchangeswillbeimplementedin2018andwillapplythereafter.Tobebetteralignedwithmarketbestpracticefrom2018,twonewperformancemeasureswillbeaddedandthemaximumvestingwillbereducedfrom300%to200%.Detailsoftheperformanceconditions,measurement,andvestingfrom2018onwardsareasfollows:


QUANTUM OF AWARDS AllocationsandawardsaregovernedbyAECI’srewardstrategy(paymix)inwhich,interalia,the“targetreward”oflong-termincentivisationissetfordefinedcategoriesofExecutivesandSeniorManagers.

AWARD DATE Tosynchroniseperformanceperiods,theawarddatehasmovedtoApril.


Thevaluepersharethatvestsisthefullvalueoftheshare(thereisnostrikeprice),butthenumberofsharesthatwillvestdependsonwhethertheCompany’sperformanceovertheinterveningthree-yearperiodhasbeenontarget,oranunder-orover-performanceagainstthetarget/ssetattheawarddate.



05.3

PERFORMANCE CONDITIONS FOR PS TheBoardwilldeterminetheperformancecriteriaforeachaward.The2018awardmethodologyofvestingwillmeasuretheCompany’sperformanceagainstthreefinancialmeasures:

Vesting rangeMetric Weight 0% 50% 100% 150% 200%TSR 30% Rank

16–9Rank 8

Rank 6

Rank 4

Rank 1–2

HEPS 40% lessthanCPI

CPI+GDP CPI+GDP+2%

CPI+GDP+3,5%

CPI+GDP+5%ormore

RONA 30% lessthan15%

15% 17% 18,5% 20% ormore

TSRArankinginapeergroupofcompanieswhereperformancebelowthemedianresultsina 0%vestingaward.Rank8torank3haveasetofpredeterminedvestingranges.Thetableaboveisillustrativeofrank8,6and4.TheCompany’scomparativepositionatorabovethemedianisusedtodeterminethefinalvestingpercentage,wherethetoptwopositionsresultina200%vestingaward.

RONAThetargetandbaseRONAwillbesubjecttoadjustmentascorporateactions,such asacquisitionsandmergers,occur.AsapprovedbytheCommittee,theRONAtargetwillfactorinunusualcorporateactionstoensurethatfinanciallysoundbusinessdecisionscontinuetobemade;decisionsotherwisemightadverselyaffecttheRONAperformance.Thus,managementwillcontinuetomaintainalong-termfinancialviewontheCompany’sgrowthandperformance,evenwhilecontinuingtoensurethatanadequatemeasureonreturnisinplaceintheLTIscheme.

HEPS GROWTHCPIiscalculatedonaweightedaverageofthedifferentareasandregionsinwhichAECIoperates,dependentonthelocalcurrency.ThefinalCPIfigureusedinthesecalculations islinkedtothesamemethodologyusedtotranslateforeignincomeintorandterms,and onthesameproportionalbasis.

Furthermore,theHEPStargetandbasewillbeadjustedformajorcorporateactionswhichmayhyper-inflatecurrentperformanceormoderategoodperformance.PreviousHEPSresultshavebeenadjustedtocompensateforthefinancialeffectsof,interalia,thede-riskingoftheCompany’spost-retirementmedicalaidliabilitiesandbulksalesofpropertiesatSomersetWestandModderfontein.ThisalsoconsidersanyrestatementoffinancialaccountsduetoIFRSchanges.Likewise,anyunusualadjustmentswhichtheCommitteewilleitheradd orsubtractfromHEPSwillalsobeincluded.

2.6PACKAGE DESIGN AND PAY MIXThetablebelowoutlinestheon-targetpercentageofGPwhichtheLTIisdesignedtodeliverfortargetperformance.ThesecondcolumnoutlinestheproposedLTIaward,whichisthevalueatawardshould100%oftheawardedunitsultimatelyvest.Thishasbeenadjustedfromprioryears,giventhereductionofmaximumvestingfrom300%to200%.Sinceonlyaproportionofthenumberofunitsawardedareexpectedtoultimatelyvestduetotheperformancevestingconditionsapplied,thefirstcolumn(“target”)representsalowerpercentagethanthemaximum.Ifallthreemeasuresreachtargetperformance,theChiefExecutivewouldreceive100%ofhisGPintheLTIvestingprocessandwouldreceive200%ofhisGPshouldallthreemeasuresachievemaximumstretchperformancelevels.

TITLEMINIMUM(%)

TARGET OF PERCENTAGE OF GP (%)

MAXIMUM LTI PERCENTAGE OF GP AWARD (%)

CE 0 100 200

CFO 0 85 170

EXCO 0 70 140

TheproposedLTIawardisexpressedinexpectedvaluetermsandisbroadlyalignedwithmarketbenchmarksthatAECIobtainedindependently.

Inaddition,theperformanceperiodisamendedtoreflectAECI’sfinancialyearofJanuarytoDecember:

› awardswillbeissuedinAprilandwouldvestthreeyearshence;

› TSRperformancewillbecalculatedfrom1Januaryto31Decemberoverthethree-yearperiod;

› RONAandHEPSwillalsobemeasuredoverthethreefinancialyears.


AECIhasadoptedapaymixpolicythatsupportsthephilosophythattheperformance-basedpayofExecutivesandSeniorManagersshouldformagreaterportionoftheirexpectedtotalcompensationthanGPand,furthermore,thatwithintheperformance-basedpayofthemostsenioremployeestheorientationshouldbetowardsrewarding long-termsustaina-bleperformance(through long-termand/orshare-based incentives),moresothanoperationalperformance(throughannualcashincentives).ThisisparticularlyrelevantatExecutivelevelandfortheManagingDirectorsofGroupbusinesses,wherethefocusisonshareholderreturnsandtheachievementoffinancialtargets.

ThemixoffixedandvariablepayisdesignedtomeetAECI’soperationalneedsandstrategicobjectivesbasedontargetsthatarestretch-ing,verifiableandrelevant.AGroup-widestandardhasbeenadoptedwhilerecognisingthatthedifferentnatureofAECI’sbusinessesrequiresavariedapproachbetweentheseindividualentities.

ThepaymixproportionalityoftheChiefExecu-tivethroughtothatofaSeniorManager isshownintheschematicstotheleft.Threeremunerationscenariosaredemonstrated:belowexpectedperformance,on-targetperfor-manceandaboveexpectedperformance.

STIandLTIoutcomesaresubjecttoextensivereviewthroughtwomechanisms:

1. Performance management reviewEach employee who participates in thevariablepay incentivesparticipates intheAECIperformancemanagementprocess,whichinvolvesabi-annualreviewofsetKPIslinkedtonon-financialkeyobjectivesoftheorganisation.

2. Audit of financials and full-year resultsCompanyfinancialperformance issubjecttoExecutiveCommitteeandRemunerationCommitteereviewbasedonauditedfinancialresults.TheCompanyfactor isdeterminedthrougharobustmodelcalculationlinkedtoHEPSandTPtargetsoverathree-yearperiod.

2.7EXECUTIVEDIRECTORS’ANDEXECUTIVES’ SERVICE CONTRACTSNeither of the Executive Directors hasextendedemploymentcontractsorspecialterminationbenefits.BothExecutiveDirectorshaverestraintsoftradefor12monthsinplace.ServicecontractsofExecutiveDirectorsandotherExecutivesareinaccordancewithAECI’sstandardtermsandconditionsofemploymentandtheirnoticeperiodissixmonths.

In principle, AECI does not offer sign-onbonusesbut, in instanceswereasign-onbonusisincluded,thecontractwillstipulatethattheemployeemustremainemployed

BELOW EXPECTED PERFORMANCE (R THOUSANDS)

6 000

4 000

2 000

0

EXCOHODs CFOMDs CE

GP

ABOVE EXPECTED PERFORMANCE (R THOUSANDS)

25 000

20 000

15 000

10 000

5 000

0

EXCOHODs CFOMDs CE

GP STI LTI

Key: GP = Guaranteed package; STI = Short-term incentive; LTI = Long-term incentive; HODs = Heads of functional departments; MDs = Managing Directors or equivalent of operating entities; EXCO = Executive Committee members; CFO = Chief Financial Officer; CE = Chief Executive

ON-TARGET PERFORMANCE PAY MIX (R THOUSANDS)

15 000

10 000

5 000

0

HODs MDs

GP STI LTI

EXCO CFO CE



05.3

bytheGroupforaperiodofthreeyears.Thesign-onbonus ispaid in instalmentsoverthethree-yearperiodandallpaymentsaresubjecttoclaw-backconditions.

Generally,itisnotAECI’spolicytoofferballoonpaymentsonterminationofservice.Anemployee, evenatExecutivelevel,whoresignsfromtheGroupforfeitsallLTIawardsandwillnotreceiveanSTIpayment.Whereanemployee’sserviceisterminatedthroughthesaleofabusinessornofaultretrenchment,thetermsofthatterminationarenegotiatedandmayincludethecontinuedvestingofpreviousLTIawards.

2.8MINIMUMSHAREHOLDINGGUIDELINEAminimumshareholdingguidelinewillbeadoptedin2018.Intermsofthis,membersoftheExecutiveCommitteewillbeaskedtoholdaspecifiedpercentageoftheirGPinAECIunencumberedordinaryshares,by2022.Thetablebelowoutlinestheproposedpercentagestobeheld,bylevel:

TITLE % OF GP

CE 150

CFO 125

OTHER EXCO MEMBERS 100

2.9NON-EXECUTIVEDIRECTORS’FEES

TERMS OF APPOINTMENTNon-executiveDirectorsdonothaveservicecontracts.Non-executiveDirectorsdonotparticipateinanyoftheCompany’sSTIorLTIschemesandnosharesaregrantedtothem.Non-executiveDirectorsreceiveafixedfeeperannumfortheircontribution,whichiscomprisedofabaseretainerfeepaidmonthlyin12equalinstalmentsand,whereapplicable, acommitteemembershipfee.Meetingattend-ancefeesarepaidatafixedvalue.

Inaddition,theCompanypaysforalltravelandaccommodationexpenses incurredbyDirectorstoattendBoardandcommitteemeetingsandvisitstoCompanybusinesses.

Non-executiveDirectors’feesarearrivedatafteranindependent,annualbenchmarkingexercise commissionedby theExecutiveDirectors.BasedontheCommittee’srecom-mendation,thefeesaretabledforapprovalbyshareholdersattheAGM. Inarrivingattheproposedfee,cognisance is takenofmarketnormsandpracticesaswellastheadditional responsibilitiesplacedonBoardmembersbynewlegislationandcorporategovernanceprinciples.

DetailsoftheemolumentspaidtotheNon- executiveDirectorsin2017aredisclosedinPart3andtheproposedfeesaredisclosedintheNoticeofAGMfor2018commencingonpage197.

2.10NON-BINDING ADVISORY VOTEIntermsoftheJSEListingsRequirementsandtherecommendationsofKingIV,thefollowingwillbeputtoanon-bindingvoteattheAGMofshareholdersoftheCompanyscheduledtotakeplaceon31May2018:

› theRemunerationPolicyasoutlinedinPart2 ofthisreport;and

› theapplicationoftheRemunerationPolicyasoutlinedinPart3.

In theevent thateither thePolicyor theimplementationvotereceive25%ormorevotesagainst, theCommitteecommitstoimplementingthefollowing:

› shareholderswillbeinvitedtoengagewiththeCommitteeregardingtheirconcernsandthereasonsmotivatingthenegativevotingresults;

› individualorcombinedinteractionswillbescheduledtounderstandtheconcernsofshareholders;

› the Committee will aggregate theseresponsesandanalysethemtodeterminewherechangesarenecessaryinthePolicyorinitsimplementation;

› ashareholdercommunicationpackwillbeprepared,highlightingthePolicyorimple-mentationchangesbeingundertakenaswellasreasonsandmotivationforelementswheretheCommitteedeterminesthatnochangeiswarranted;

› shareholderswillthenbeengagedregard-ingthechangesthattheCommitteewillimplement inresponsetothe issuesandconcernsraised.

2.11ORDINARYRESOLUTIONNO8: AMENDMENTTOLONG-TERMINCENTIVE PLANTheCommitteereviewedthetermsoftheAECILTIPPlan(“Plan”)andresolvedtoamendthePlanbythedeletionofparagraph21.3.ThePlan,wasapprovedandadoptedbyshare-holderson28May2012andthisamendmentinvolvestheremovalofparagraph21.3.

Paragraph21.3relatestoaprovisioninthePlanwhich,ineventofaChangeofControl,allowsParticipantstoresignwithinoneyearoftheChangeofControlandretainallprevi-ousawardsundertheScheme.TheDirectorsbelievethattheremovaloftheclauseprotectsshareholderinterestsintheeventofaChangeofControl.

PART 3: IMPLEMENTATION OF POLICY IN 2017

3.1GPADJUSTMENTSTheCommitteereviewedGPforExecutivesandSeniorManagers,asrecommendedbytheChiefExecutive,takingintoconsiderationmarketdataasprovidedbytheDeloitteTopExecutiveRemunerationSurvey2017,marketdatafromPwCRemchannel™,theresultsofExeceval™,individuals’experienceandcurrentlevelsofperformance.

Anaverageincreaseof6,8%wasapprovedbytheCommitteeforExecutives,exceptwheretherehadbeenincreasesinresponsibilities.Inthoseinstances,anincreasehigherthantheaveragewasawarded.

ThebalanceofGroupemployeesinSouthAfricagenerallyreceivedaverageincreasesinlinewiththesameapprovedpercentagebut,onaverage,slightlyhigherincreaseswereawardedattheloweremploymentlevels.Atbargainingunitlevel,a7,5%increasewasagreedundertheauspicesoftheNationalBargainingCouncilfortheChemicalIndustry.ThisincreasewaspassedtoallbargainingunitemployeesinSouthAfricaand,whererequired,anadditionalincreasebetween2%and5%wasprovidedinlinewithagreementsinplacetobringaffectedemployeesinlinewithAECI’sminimumsalary.

3.2SHORT-TERM INCENTIVE OUTCOMESThecash-basedSTIsawardedfor2017werecalculatedonthebasisof2017’sfinancialperformance.

1. Performance management reviewAsstipulatedbypolicy,allemployeeswhoparticipateintheshort-termincentiveschemereviewedtheirperformancerelativetoKPIslinkedtothekeynon-financialobjectivesoftheorganisation.ThisprocessappliedtomembersoftheExecutiveCommitteeandasummaryoftheirKPIsandtheirachievementthereofisoutlinedonpage95.

2. Audit of financials and full-year resultsThefinancialcomponentsoftheSTIbonusattributabletotheGroup’soverallperfor-manceresulted inan2,84timesfinancialperformancemultiplieratGrouplevel.ThiswasbasedontheachievementofHEPSof959centsagainsttheon-targetgrowthinbaseHEPSplusCPIplusGDPplus1%.AECIreachedthedoublingpointbyachievinggrowth inexcessof9%aboveCPIplusGDP(seePart2).

Anadjustmentinrelationtothetransactioncostsforthetwoacquisitionsannouncedin2017wasapprovedandtheadjustmenthasbeenincludedinthebaseforthe2018year.


TARGET HEPS ACHIEVED HEPS

875,18cents 959,00cents

Differing levelsof financialperformancewereachievedbyindividualbusinessesandbusinesssegments.Thus,inthebroaderAECIGroup,SeniorManagersreceivedincentivesbasedonoperatingbusinessperformance.

Thetablesbelowindicatetheactualperfor-mance relative to Company targets andpersonalKPIs,andtheresultantannualcashincentivespaidtotheCE,theCFOandthePrescribedOfficersinthe2017financialyear.

Although external factors precluded theachievementinfullofsomeoftheCompany’sfinancialgrowthtargets, thevalueofthe2017STIpaymentswaslinked indeliblytotheachievementofcoreKPIs inareasthatincludedB-BBEE,safety,collaboration,growthissuesandtherevisionoffinancialcontrols.

Safetyisanon-negotiablestrategicimperativeandtheAECIExecutivesettheexampleindemonstratingitsimportancebyadoptingazeroratingforachievementofthisKPI.AlthoughtheAECIGroup’soverallTRIRimprovedto0,39from0,45intheprioryear,thisimprovementwasovershadowedbyafatality.

ThemanagementandcontroloftheGroup’sworkingcapitalandfreecashflowisincludedinthefinance-relatedKPIsformostExecutives.Performanceinthisregardwasslightlydisap-pointing,resultinginalowerscoreforthem.

ExecutivesandSeniorManagers’variablepayislinkedtothesustainabilityoftheCompanyandadverserisk-takingbehaviourisnotincentivised.Instead,AECIseekstoincentiviseresponsibleandsoundmanagementoftheCompanytoensurefuturegrowthandsustainablerevenueandprofit,inlinewiththeriskappetite.

3.3LTIs AWARDED DURING 2017TheLTIawardsmadeinduring2017,intermsoftheLTIP,wereasperthetableatthebottomofthepage.

3.3.1 PERFORMANCE CONDITIONSTheperformanceconditionthatwillapplytothePSgrantedduring2017istheCompany’scomparativeTSRinrelationtoapeergroupof15companies.ThegraphbelowillustrateshowtheTSRpositionwilldeterminethevalueofthevestingafterthreeyears.

STI VALUES FOR EXECUTIVES AND PRESCRIBED OFFICERS

% OF GP% OF GP FROM KPI

% OF GP FROM COMPANY PERFORMANCE

VALUE (BEFORE TAX) (R THOUSANDS)

MA DYTOR 95 8 87 5198

KM KATHAN 95 8 87 4578

EE LUDICK 96 9 87 3749

MVK MATSHITSE 93 8 85 3167

LTI AWARDS 2017

NO. OF PSMARKET VALUE BASED ON AWARD PRICE (20-DAY VWAP) OF R105,53 (R THOUSANDS) % OF TOTAL GP

MA DYTOR 43766 4619 71

KM KATHAN 35215 3716 64

EE LUDICK 25096 2648 56

MVK MATSHITSE 14476 1528 56


16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1


350

300

250

200

150

100

50

0

MUL

TIPL

E

TSR POSITION

0 0 0

3050

6080 90

140

100

180

220260

300 300 300



05.3

CHIEF EXECUTIVE MA DYTOR

AEL MANAGING DIRECTOR EE LUDICK

CHIEF FINANCIAL OFFICER KM KATHAN

GROUP EXECUTIVE: HUMAN CAPITAL MVK MATSHITSE

Achieved (%) Target (%) Achieved (%) Target (%)

TOTAL

TOTAL TOTAL

82

100

90

100

83

100

75

100

GROWTH (GEOGRAPHIC EXPANSION AND ACQUISITIONS)

OPERATIONAL (EFFICIENCY AND IMPROVEMENT)

GROWTH (GEOGRAPHIC EXPANSION AND ACQUISITIONS)

GROUP (PERFORMANCE MANAGEMENT)

STRATEGY (KEY GROUP INITIATIVES)

GROWTH (GEOGRAPHIC EXPANSION)

STRATEGIC (RESOLUTION OF KEY ISSUES)

STRATEGIC (KEY HUMAN CAPITAL INITIATIVES)

EMPLOYMENT EQUITY (TRANSFORMATION IN LINE WITH DoL AND B-BBEE CODES)

STRATEGIC (RESOLUTION OF KEY ISSUES)



FINANCIAL (WORKING CAPITAL, RONA)


FINANCIAL (WORKING CAPITAL, EVA)

FINANCIAL (WORKING CAPITAL, RONA)

SAFETY (FATALITIES AND TRIR)




24

20

5

5

24

20

20

20

10

10

13

10

11

10

29

40

21

20

32

30

21

20

26

25

27

35

20

20

20

20

27

35

15

O

15

O

TOTAL

Achieved (%) Target (%) Achieved (%) Target (%)

15

O

15

O


3.4LTIVESTINGANDVESTINGOUTCOMES IN 2017

3.4.1 VESTING OF THE 2014 LTI AWARD

3.4.1.1 PERFORMANCE SHARESThePSallocationfrom2014vestedon30June2017.Onthisdate,AECIachievedninthpositioninrelationtoitscomparatorpeergroupof17companies,usingTSRasameasure(seePart2fordetailsonthepeergroup).Intermsoftheperformanceconditioncurveforthe2014award,sixthpositionresulted inamultipleof180%,whichwasappliedtothePSaward.Participants intheschemereceivedtheirallocationsofAECIordinarysharesattheendofJuly,aftertheGroup’sresultsforthehalf-yearended30June2017hadbeenreleased.TheTSRmeasurementwascalculatedandverifiedbyan independentthird-partyprovider.

Thevestingofthe2015PSawardwillfollowthesamemethodologyinrelationtoassessing performanceagainstapeer groupof 17companies, includingtwodelistedentities.ThetableaboveindicatesthefinalvalueofthePSawardedin2014,whichvestedin2017.

3.4.1.2 EGUsThe2014EGUallocationvestedon30June2017andthefirstthirdoftheawardisnowexercisable.Thevalueoftheawardisdeter-minedbythegrowthinHEPSbetweentheissuedateandthevestingdate.TheHEPSvalueislinkedtotheauditedresultsoftheAECIGroup.

3.5ACTUALREMUNERATIONOUTCOMES(SINGLEFIGURE)DetailsofthebasicsalaryandGPpaidtotheExecutiveDirectorsandthePrescribedOfficersaresetoutinthetableonpage97,withthefacevalueofthevestedincentiveschemesincluded.

3.6TABLEOFUNVESTEDAWARDSDisclosureofthenumberofawards,andtheirestimatedvalueswhichwereoutstandingasat31December2017areindicatedonpages98to105.Awardsmadeduring2017andtheirestimatedvalueshavebeenincluded.Thecolumn“vested inyear” indicatestheportionoftheawardwhichvestedandtheactualvalueat thevestingdate.Vestedawardsmaystillbeexercisedbyrecipientsatafuturedateandwillbedisclosedintheannualfinancialstatementsoftheyear inwhichtheywereexercised.

3.7INCREASEINNON-EXECUTIVEDIRECTORS’ FEESAt the AGM scheduled for 31May 2018shareholderswillbeaskedtopassspecialresolutions,totakeeffectfrom31May2018,approvingtheproposedchanges inNon- executiveDirectors’feesbyanaverageof6,0% (in linewith CPI and the increasesawardedtotheExecutiveDirectors)assetout intheNoticeofAGMcommencingonpage197.

Directors’andPrescribedOfficers’holdingsintheCompany’ssecuritiesaredisclosedinnote30tothefinancialstatements.

DetailsoffeespaidtotheNon-executiveDirectorsin2017arealsodisclosedinnote30tothefinancialstatements.

3.8NON-BINDINGADVISORYVOTEIntermsoftheJSEListingsRequirementsandtherecommendationsofKing IV, thefollowingwillbeputtoanon-bindingvoteattheforthcomingAGM:

› theRemunerationPolicyasoutlinedinPart2 ofthisreport;and

› theapplicationoftheRemunerationPolicyasoutlinedinPart3.

In theevent thateither thePolicyor theimplementationvotereceive25%ormorevotesagainst, theCommitteecommitstoengagementsassetoutin2.10onpage93.

PS AWARDED IN 2014 AND VESTED IN 2017NO. OF PS AWARDED (GRANT PRICE = R115,97)

NO. OF ORDINARY SHARES RECEIVED ON VESTING DATE (SETTLED PRICE = R108,43)

VALUE AT VESTING (BEFORE TAX)(R THOUSANDS)

MA DYTOR 17956 32321 3505

KM KATHAN 13724 24703 2679

EE LUDICK 6084 10951 1187

MVK MATSHITSE 6144 11059 1199



05.3

ACTUAL REMUNERATION (SINGLE FIGURE)

Rthousands 2017 2016Change

%

CE — MA DYTORBasicsalary 4 388 4 120 6,50

Benefits 1 008 953

STI 5 198 4 100 26,79

LTI 1 — —

PS 2 3 505 2 344

EGU 3 860 712

DS 4 — 1 030

Other 5 224 585

TOTAL 15 183 13 844 11,01

CFO — KM KATHANBasicsalary 3 917 3 678 6,50

Benefits 897 850

STI 4 578 3 659 24,98

LTI 1 — —

PS 2 2 679 2 175

EGU 3 858 806

DS 4 — 919

Other 5 7 261

TOTAL 12 936 12 348 4,70

AEL MANAGING DIRECTOR — EE LUDICKBasicsalary 3 183 2 989 6,49

Benefits 753 734

STI 3 749 2 963 26,53

LTI 1 — —

PS 2 1 187 495

EGU 3 351 298

DS 4 — 747

Other 5 — —

TOTAL 9 223 8 226 12,11

GROUP EXECUTIVE: HUMAN CAPITAL — MVK MATSHITSEBasicsalary 2 733 2 566 6,51

Benefits 674 639

STI 3 167 2 547 24,34

LTI 1 — —

PS 2 1 199 506

EGU 3 357 305

DS 4 — 641

Other 5 6

TOTAL 8 137 7 204 12,94

1 Restatementofpreviousfigure,whichreflectedtheexerciseofpreviousallocations.2 PSawardedinJuly2014andtheapplicableperformanceperiodendedon30June2017.Thevaluestatedisthepre-taxvalueasat30June2017.3 EGUsawardedin2012,2013,2014vestedintheperformanceperiod,whichendedon30June2017.Valuewasdeterminedbythedifferencebetweenthe

HEPSatthegrantdateandtheHEPSdeterminedforLTIpurposesin2017.4 ValueofDSawardatthegrantdate,asdeterminedbythe20-dayVWAPasat30June2016.5 Inclusiveofencashedleave,clubfeesandexpensesclaimed.


TABLE OF UNVESTED AWARDS

MA DYTOR

EGUs

Rthousands NUMBER OF OUTSTANDING AWARDS VALUE OF OUTSTANDING AWARDS CASH SETTLEMENT

Grant date

Totalaward(no.)

Awardperyear(no.)1

Vestingdate

Lapsingdate

Openingbalance

Vestedintheyear

Closingbalance

Valueofaward

Effectofperformance

Vestedintheyear

Valueofoutstanding

award atyear-end

Valueofaward at

vestingdate2Effectof

performanceSettlement

value

Valueofunexercised

award atyear-end

2012 157 857 52 619 2015 2019 —52 619 2016 2019 — 120 3 48 168 —52 619 2017 2019 52 619 (52619) — — 140 (140) — 140 38 179

2013 393 974 131 325 2016 2020131 325 2017 2020 131 325 (131325) — — 544 (544) — 544 — 544 —131 325 2018 2020 131 325 — 131 325 — 474 474

2014 210 594 70 198 2017 2021 70 198 (70198) — — 175 (175) — 175 — 175 —70 198 2018 2021 70 198 70 198 — 138 13870 198 2019 2021 70 198 70 198 — 138 138

2015 392 862 130 954 2018 2022 130 954 130 954 — 426 426130 954 2019 2022 130 954 130 954 — 426 426130 954 2020 2022 130 954 130 954 — 426 426

2016 258 598 86 199 2019 2023 86 199 86 199 — 203 20386 199 2020 2023 86 199 86 199 — 203 20386 199 2021 2023 86 199 86 199 — 203 203

1 004 924 (254142) 750 782 — 3 495 (860) 2 230 980 87 888 179

1 EGUsvestoverathree-yearperiod.2 TheestimatedvalueoftheEGUsisbasedonHEPSforthesecondhalfof2017.3 Vestedawardssettledinprioryearsandvalueofawardatvestingdate.

PS


Grant date

Award(no.)

Exercisedate

Lapsingdate

Openingbalance

Forfeited/gainedintheyear1

Vestedintheyear

Closingbalance

Valueataward date 2

Effectofshareprice3

Effectofperformance4

Vestedintheyear5

Valueatyear-end

Settlementvalue

2014 17 956 2017 2017 17 956 14 365 32 321 — 2 082 (135) 1 558 3 505 — 3 5052015 27 783 2018 2018 27 783 — 27 783 3 256 (689) (513) — 2 0532016 28 049 2019 2019 28 049 — 28 049 2 434 157 (518) — 2 0732017 43 766 2020 2020 43 766 — 43 766 4 619 (576) (4043) —

117 554 14 365 32 321 99 598 12 391 (1243) (3517) 3 505 4 126 3 505

1 NumberofawardsasdeterminedbyfinalTSRpositioninthevestingyear.2 Valuedeterminedby20-dayVWAPsharepriceattheawarddate.3 PSawardsestimatedvaluesasdeterminedbythe20-dayVWAPat31December2017.4 TheeffectofperformancehasbeendeterminedthroughanestimatedTSRpositionforeachawardasat31December2017.5 Valueofvestedawardasat20-daypre-taxVWAPsharepriceondateofvesting.

DS


Grant date

Award(no.)

Exercisedate

Lapsingdate

Openingbalance

Effectofperformance

Vestedintheyear

Closingbalance

Valueataward date 1

Effectofshareprice2

Effectofperformance

Vestedintheyear

Valueatyear-end

Settlementvalue

2015 8 292 2018 2018 8 292 8 292 972 (206) 7662016 11 870 2019 2019 11 870 11 870 1 030 66 1 097

20 162 — — 20 162 2 002 (139) — — 1 862 —

1 Valuedeterminedby20-dayVWAPsharepriceattheawarddate.2 TheestimatedvalueoftheDSawardswasdeterminedbythe20-dayVWAPsharepriceat31December.



05.3

TABLE OF UNVESTED AWARDS

MA DYTOR

EGUs


Grant date

Totalaward(no.)

Awardperyear(no.)1

Vestingdate

Lapsingdate

Openingbalance

Vestedintheyear

Closingbalance

Valueofaward

Effectofperformance

Vestedintheyear

Valueofoutstanding

award atyear-end

Valueofaward at



value

Valueofunexercised

award atyear-end

2012 157 857 52 619 2015 2019 —52 619 2016 2019 — 120 3 48 168 —52 619 2017 2019 52 619 (52619) — — 140 (140) — 140 38 179

2013 393 974 131 325 2016 2020131 325 2017 2020 131 325 (131325) — — 544 (544) — 544 — 544 —131 325 2018 2020 131 325 — 131 325 — 474 474

2014 210 594 70 198 2017 2021 70 198 (70198) — — 175 (175) — 175 — 175 —70 198 2018 2021 70 198 70 198 — 138 13870 198 2019 2021 70 198 70 198 — 138 138

2015 392 862 130 954 2018 2022 130 954 130 954 — 426 426130 954 2019 2022 130 954 130 954 — 426 426130 954 2020 2022 130 954 130 954 — 426 426

2016 258 598 86 199 2019 2023 86 199 86 199 — 203 20386 199 2020 2023 86 199 86 199 — 203 20386 199 2021 2023 86 199 86 199 — 203 203

1 004 924 (254142) 750 782 — 3 495 (860) 2 230 980 87 888 179

1 EGUsvestoverathree-yearperiod.2 TheestimatedvalueoftheEGUsisbasedonHEPSforthesecondhalfof2017.3 Vestedawardssettledinprioryearsandvalueofawardatvestingdate.

PS


Grant date

Award(no.)

Exercisedate

Lapsingdate

Openingbalance


Vestedintheyear

Closingbalance

Valueataward date 2

Effectofshareprice3


Vestedintheyear5

Valueatyear-end

Settlementvalue

2014 17 956 2017 2017 17 956 14 365 32 321 — 2 082 (135) 1 558 3 505 — 3 5052015 27 783 2018 2018 27 783 — 27 783 3 256 (689) (513) — 2 0532016 28 049 2019 2019 28 049 — 28 049 2 434 157 (518) — 2 0732017 43 766 2020 2020 43 766 — 43 766 4 619 (576) (4043) —

117 554 14 365 32 321 99 598 12 391 (1243) (3517) 3 505 4 126 3 505


DS


Grant date

Award(no.)

Exercisedate

Lapsingdate

Openingbalance

Effectofperformance

Vestedintheyear

Closingbalance

Valueataward date 1

Effectofshareprice2

Effectofperformance

Vestedintheyear

Valueatyear-end

Settlementvalue

2015 8 292 2018 2018 8 292 8 292 972 (206) 7662016 11 870 2019 2019 11 870 11 870 1 030 66 1 097

20 162 — — 20 162 2 002 (139) — — 1 862 —



TABLE OF UNVESTED AWARDS continued

KM KATHAN

EGUs


Grant date

Totalaward(no.)

Awardperyear(no.)1

Vestingdate

Lapsingdate

Openingbalance

Vestedintheyear

Closingbalance

Valueofaward

Effectofperformance

Vestedintheyear

Valueofoutstanding

award atyear-end

Valueofaward at



value

Valueofunexercised

award atyear-end

2012 182 233 60 744 2015 2021 —60 744 2016 2021 —60 744 2017 2021 60 744 (60744) — — 162 (162) — 162 — — 162

2013 443 119 147 706 2016 2022147 706 2017 2022 147 706 (147706) — — 533 (533) — 533 — — 533147 706 2018 2022 147 706 — 147 706 — 533 — 533

2014 195 120 65 040 2017 2023 65 040 (65040) — — 163 (163) 0 163 — — 16365 040 2018 2023 65 040 65 040 — 128 12865 040 2019 2023 65 040 65 040 — 128 128

2015 350 549 116 850 2018 2024 116 850 — 116 850 — 380 380116 850 2019 2024 116 850 116 850 — 380 380116 850 2020 2024 116 850 116 850 — 380 380

2016 230 761 76 920 2019 2025 76 920 — 76 920 — 181 — —76 920 2020 2025 76 920 76 920 — 181 18176 920 2021 2025 76 920 76 920 — 181 181

978 746 (273491) 705 256 — 3 329 (858) 1 929 858 — — 858

1 EGUsvestoverathree-yearperiod.2 TheestimatedvalueoftheEGUsisbasedonbasedonHEPSforthesecondhalfof2017.

PS


Grant date

Award(no.)

Exercisedate

Lapsingdate

Openingbalance


Vestedintheyear

Closingbalance

Valueataward date 2

Effectofshareprice3


Vestedintheyear5

Valueatyear-end

Settlementvalue

2014 13 724 2017 2017 13 724 10 979 24 703 — 1 592 (103) 1 190 2 679 — 2 6792015 20 453 2018 2018 20 453 20 453 2 397 (508) (378) 1 5122016 20 650 2019 2019 20 650 20 650 1 792 116 (382) 1 5262017 35 215 2020 2020 35 215 35 215 3 716 (463) (3253) —

90 042 10 979 24 703 76 318 9 497 (959) (2822) 2 679 3 038 2 679


DS


Grant date

Award(no.)

Exercisedate

Lapsingdate

Openingbalance

Effectofperformance

Vestedintheyear

Closingbalance

Valueataward date 1

Effectofshareprice2

Effectofperformance

Vestedintheyear

Valueatyear-end

Settlementvalue

2015 7 401 2018 2018 7 401 7 401 867 (184) 6842016 10 594 2019 2019 10 594 10 594 919 59 979

17 995 — — 17 995 1 787 (124) — — 1 662 —




05.3


KM KATHAN

EGUs


Grant date

Totalaward(no.)

Awardperyear(no.)1

Vestingdate

Lapsingdate

Openingbalance

Vestedintheyear

Closingbalance

Valueofaward

Effectofperformance

Vestedintheyear

Valueofoutstanding

award atyear-end

Valueofaward at



value

Valueofunexercised

award atyear-end

2012 182 233 60 744 2015 2021 —60 744 2016 2021 —60 744 2017 2021 60 744 (60744) — — 162 (162) — 162 — — 162

2013 443 119 147 706 2016 2022147 706 2017 2022 147 706 (147706) — — 533 (533) — 533 — — 533147 706 2018 2022 147 706 — 147 706 — 533 — 533

2014 195 120 65 040 2017 2023 65 040 (65040) — — 163 (163) 0 163 — — 16365 040 2018 2023 65 040 65 040 — 128 12865 040 2019 2023 65 040 65 040 — 128 128

2015 350 549 116 850 2018 2024 116 850 — 116 850 — 380 380116 850 2019 2024 116 850 116 850 — 380 380116 850 2020 2024 116 850 116 850 — 380 380

2016 230 761 76 920 2019 2025 76 920 — 76 920 — 181 — —76 920 2020 2025 76 920 76 920 — 181 18176 920 2021 2025 76 920 76 920 — 181 181

978 746 (273491) 705 256 — 3 329 (858) 1 929 858 — — 858


PS


Grant date

Award(no.)

Exercisedate

Lapsingdate

Openingbalance


Vestedintheyear

Closingbalance

Valueataward date 2

Effectofshareprice3


Vestedintheyear5

Valueatyear-end

Settlementvalue

2014 13 724 2017 2017 13 724 10 979 24 703 — 1 592 (103) 1 190 2 679 — 2 6792015 20 453 2018 2018 20 453 20 453 2 397 (508) (378) 1 5122016 20 650 2019 2019 20 650 20 650 1 792 116 (382) 1 5262017 35 215 2020 2020 35 215 35 215 3 716 (463) (3253) —

90 042 10 979 24 703 76 318 9 497 (959) (2822) 2 679 3 038 2 679


DS


Grant date

Award(no.)

Exercisedate

Lapsingdate

Openingbalance

Effectofperformance

Vestedintheyear

Closingbalance

Valueataward date 1

Effectofshareprice2

Effectofperformance

Vestedintheyear

Valueatyear-end

Settlementvalue

2015 7 401 2018 2018 7 401 7 401 867 (184) 6842016 10 594 2019 2019 10 594 10 594 919 59 979

17 995 — — 17 995 1 787 (124) — — 1 662 —




EE LUDICK

EGUs


Grant date

Totalaward(no.)

Awardperyear(no.)1

Vestingdate

Lapsingdate

Openingbalance

Vestedintheyear

Closingbalance

Valueofaward

Effectofperformance

Vestedintheyear

Valueofoutstanding

award atyear-end

Valueofaward at



value

Valueofunexercised

award atyear-end

2012 107 340 35 780 2015 2021 —35 780 2016 2021 —35 780 2017 2021 35 780 (35780) — — 96 (96) — 96 — — 96

2013 133 266 44 422 2016 202244 422 2017 2022 44 422 (44422) — — 160 (160) — 160 — — 16044 422 2018 2022 44 422 — 44 422 — 160 160

2014 114 166 38 055 2017 2023 38 055 (38055) — — 95 (95) — 95 — — 9538 055 2018 2023 38 055 38 055 — 75 7538 055 2019 2023 38 055 38 055 — 75 75

2015 243 999 81 333 2018 2024 81 333 81 333 — 264 —81 333 2019 2024 81 333 81 333 — 264 26481 333 2020 2024 81 333 81 333 — 264 264

2016 156 588 52 196 2019 2025 52 196 52 196 — 123 —52 196 2020 2025 52 196 52 196 — 123 12352 196 2021 2025 52 196 52 196 — 123 123

534 985 (118257) 416 728 — 1 822 (351) 839 351 — — 351


PS


Grant date

Award(no.)

Exercisedate

Lapsingdate

Openingbalance


Vestedintheyear

Closingbalance

Valueataward date 2

Effectofshareprice3


Vestedintheyear5

Valueatyear-end

Settlementvalue

2014 6 084 2017 2017 6 084 4 867 10 951 — 706 (46) 528 1 187 — 1 1872015 10 785 2018 2018 10 785 10 785 1 264 (268) (199) 7972016 10 615 2019 2019 10 615 10 615 921 59 (196) 7842017 25 096 2020 2020 25 096 25 096 2 648 (330) (2318) —

52 580 4 867 10 951 46 496 5 539 (584) (2186) 1 187 1 581 1 187


DS


Grant date

Award(no.)

Exercisedate

Lapsingdate

Openingbalance

Effectofperformance

Vestedintheyear

Closingbalance

Valueataward date 1

Effectofshareprice2

Effectofperformance

Vestedintheyear

Valueatyear-end

Settlementvalue

2015 4 995 2018 2018 4 995 4 995 585 (124) 4612016 8 611 2019 2019 8 611 8 611 747 48 795

13 606 — — 13 606 1 333 (76) — — 1 257 —




05.3


EE LUDICK

EGUs


Grant date

Totalaward(no.)

Awardperyear(no.)1

Vestingdate

Lapsingdate

Openingbalance

Vestedintheyear

Closingbalance

Valueofaward

Effectofperformance

Vestedintheyear

Valueofoutstanding

award atyear-end

Valueofaward at



value

Valueofunexercised

award atyear-end

2012 107 340 35 780 2015 2021 —35 780 2016 2021 —35 780 2017 2021 35 780 (35780) — — 96 (96) — 96 — — 96

2013 133 266 44 422 2016 202244 422 2017 2022 44 422 (44422) — — 160 (160) — 160 — — 16044 422 2018 2022 44 422 — 44 422 — 160 160

2014 114 166 38 055 2017 2023 38 055 (38055) — — 95 (95) — 95 — — 9538 055 2018 2023 38 055 38 055 — 75 7538 055 2019 2023 38 055 38 055 — 75 75

2015 243 999 81 333 2018 2024 81 333 81 333 — 264 —81 333 2019 2024 81 333 81 333 — 264 26481 333 2020 2024 81 333 81 333 — 264 264

2016 156 588 52 196 2019 2025 52 196 52 196 — 123 —52 196 2020 2025 52 196 52 196 — 123 12352 196 2021 2025 52 196 52 196 — 123 123

534 985 (118257) 416 728 — 1 822 (351) 839 351 — — 351


PS


Grant date

Award(no.)

Exercisedate

Lapsingdate

Openingbalance


Vestedintheyear

Closingbalance

Valueataward date 2

Effectofshareprice3


Vestedintheyear5

Valueatyear-end

Settlementvalue

2014 6 084 2017 2017 6 084 4 867 10 951 — 706 (46) 528 1 187 — 1 1872015 10 785 2018 2018 10 785 10 785 1 264 (268) (199) 7972016 10 615 2019 2019 10 615 10 615 921 59 (196) 7842017 25 096 2020 2020 25 096 25 096 2 648 (330) (2318) —

52 580 4 867 10 951 46 496 5 539 (584) (2186) 1 187 1 581 1 187


DS


Grant date

Award(no.)

Exercisedate

Lapsingdate

Openingbalance

Effectofperformance

Vestedintheyear

Closingbalance

Valueataward date 1

Effectofshareprice2

Effectofperformance

Vestedintheyear

Valueatyear-end

Settlementvalue

2015 4 995 2018 2018 4 995 4 995 585 (124) 4612016 8 611 2019 2019 8 611 8 611 747 48 795

13 606 — — 13 606 1 333 (76) — — 1 257 —




MVK MATSHITSE

EGUs


Grant date

Totalaward(no.)

Awardperyear(no.)1

Vestingdate

Lapsingdate

Openingbalance

Vestedintheyear

Closingbalance

Valueofaward

Effectofperformance

Vestedintheyear

Valueofoutstanding

award atyear-end

Valueofaward at



value

Valueofunexercised

award atyear-end

2012 109 668 36 556 2015 2021 —36 556 2016 2021 — 83 3 14 9836 556 2017 2021 36 556 (36556) — — 98 (98) — 98 — 98

2013 136 069 45 356 2016 2022 — — — — — — — 146 3 18 16445 356 2017 2022 45 356 (45356) — — 164 (164) — 164 — 16445 356 2018 2022 45 356 — 45 356 — 164 — 164

2014 115 308 38 436 2017 2023 38 436 (38436) — — 96 (96) — 96 — 9638 436 2018 2023 38 436 38 436 — 76 7638 436 2019 2023 38 436 38 436 — 76 76

2015 219 003 73 001 2018 2024 73 001 — 73 001 — 237 — —73 001 2019 2024 73 001 73 001 — 237 23773 001 2020 2024 73 001 73 001 — 237 237

2016 136 124 45 375 2019 2025 45 375 — 45 375 — 107 — —45 375 2020 2025 45 375 45 375 — 107 10745 375 2021 2025 45 375 45 375 — 107 107

506 954 (120348) 386 606 — 1 704 (357) 790 587 32 — 619

1 EGUsvestoverathree-yearperiod.2 TheestimatedvalueoftheEGUsisbasedonbasedonHEPSforthesecondhalfof2017.3 Valueofawardatdateofvestingin2016.

PS


Grant date

Award(no.)

Exercisedate

Lapsingdate

Openingbalance


Vestedintheyear

Closingbalance

Valueataward date 2

Effectofshareprice3


Vestedintheyear5

Valueatyear-end

Settlementvalue

2014 6 144 2017 2017 6 144 4 915 11 059 — 713 (46) 533 1 199 — 1 1992015 9 680 2018 2018 9 680 9 680 1 134 (240) (179) 7152016 9 228 2019 2019 9 228 9 228 801 52 (170) 6822017 14 476 2020 2020 14 476 14 476 1 528 (190) (1337) —

39 528 4 915 11 059 33 384 4 175 (425) (1154) 1 199 1 397 1 199


DS


Grant date

Award(no.)

Exercisedate

Lapsingdate

Openingbalance

Effectofperformance

Vestedintheyear

Closingbalance

Valueataward date 1

Effectofshareprice2

Effectofperformance

Vestedintheyear

Valueatyear-end

Settlementvalue

2015 5 164 2018 2018 5 164 5 164 605 (128) 4772016 7 392 2019 2019 7 392 7 392 641 41 683

12 556 — — 12 556 1 247 (87) — — 1 160 —




05.3


MVK MATSHITSE

EGUs


Grant date

Totalaward(no.)

Awardperyear(no.)1

Vestingdate

Lapsingdate

Openingbalance

Vestedintheyear

Closingbalance

Valueofaward

Effectofperformance

Vestedintheyear

Valueofoutstanding

award atyear-end

Valueofaward at



value

Valueofunexercised

award atyear-end

2012 109 668 36 556 2015 2021 —36 556 2016 2021 — 83 3 14 9836 556 2017 2021 36 556 (36556) — — 98 (98) — 98 — 98

2013 136 069 45 356 2016 2022 — — — — — — — 146 3 18 16445 356 2017 2022 45 356 (45356) — — 164 (164) — 164 — 16445 356 2018 2022 45 356 — 45 356 — 164 — 164

2014 115 308 38 436 2017 2023 38 436 (38436) — — 96 (96) — 96 — 9638 436 2018 2023 38 436 38 436 — 76 7638 436 2019 2023 38 436 38 436 — 76 76

2015 219 003 73 001 2018 2024 73 001 — 73 001 — 237 — —73 001 2019 2024 73 001 73 001 — 237 23773 001 2020 2024 73 001 73 001 — 237 237

2016 136 124 45 375 2019 2025 45 375 — 45 375 — 107 — —45 375 2020 2025 45 375 45 375 — 107 10745 375 2021 2025 45 375 45 375 — 107 107

506 954 (120348) 386 606 — 1 704 (357) 790 587 32 — 619

1 EGUsvestoverathree-yearperiod.2 TheestimatedvalueoftheEGUsisbasedonbasedonHEPSforthesecondhalfof2017.3 Valueofawardatdateofvestingin2016.

PS


Grant date

Award(no.)

Exercisedate

Lapsingdate

Openingbalance


Vestedintheyear

Closingbalance

Valueataward date 2

Effectofshareprice3


Vestedintheyear5

Valueatyear-end

Settlementvalue

2014 6 144 2017 2017 6 144 4 915 11 059 — 713 (46) 533 1 199 — 1 1992015 9 680 2018 2018 9 680 9 680 1 134 (240) (179) 7152016 9 228 2019 2019 9 228 9 228 801 52 (170) 6822017 14 476 2020 2020 14 476 14 476 1 528 (190) (1337) —

39 528 4 915 11 059 33 384 4 175 (425) (1154) 1 199 1 397 1 199


DS


Grant date

Award(no.)

Exercisedate

Lapsingdate

Openingbalance

Effectofperformance

Vestedintheyear

Closingbalance

Valueataward date 1

Effectofshareprice2

Effectofperformance

Vestedintheyear

Valueatyear-end

Settlementvalue

2015 5 164 2018 2018 5 164 5 164 605 (128) 4772016 7 392 2019 2019 7 392 7 392 641 41 683

12 556 — — 12 556 1 247 (87) — — 1 160 —



DIRECTORS’ REPORT

NATURE OF BUSINESS

PROFILE AND STRATEGYAECI is a South African-based company focused on providing products and services to a broad spectrum of customers in the mining, water treatment, plant and animal health, food and beverage, infrastructure and general industrial sectors. It has regional and international businesses in Africa, Europe, South East Asia, North America and Australia.

The Group now comprises 17 businesses and, at 31 December 2017, it had 6 522 employees. Another 850 permanent employees joined the Group when Schirm became AECI-owned on 30 January 2018 and a further 536 joined from Much Asphalt when this transaction closed on 3 April 2018.

The Group’s strategy is to be the supplier of choice in the markets in which it operates and to continue to grow domestically as well as through ongoing expansion of its footprint in terms of the geographies and markets served. In line with this strategy the five growth pillars are Mining Solutions (AEL Mining Services, Experse and Senmin), Water & Process (ImproChem), Plant & Animal Health (Nulandis and newly acquired Schirm), Food & Beverage (Lake Foods and Southern Canned Products), and Chemicals (Chemfit, Chemical Initiatives, ChemSystems, Industrial Oleochemical Products, SANS Technical Fibers and newly acquired Much Asphalt). Also in this pillar are two joint ventures — Crest Chemicals and Specialty Minerals South Africa.

AECI was registered as a company in South Africa in 1924 and has been listed on the JSE since 1966. At the end of 2017 its market capitalisation was R12,2 billion.

Mining Solutions: the businesses in this pillar provide a mine-to-metal solution for the mining sector internationally. The offering includes surfactants for explosives manufac-ture, commercial explosives, initiating systems and blasting services right through the value chain to chemicals for ore beneficiation and tailings treatment.

Water & Process: ImproChem provides integrated water treatment and process chemicals, and equipment solutions, for a diverse range of applications in Africa. These include, inter alia, public and industrial water, desalination and utilities.

Plant & Animal Health: Nulandis manufac-tures and supplies an extensive range of crop protection products, plant nutrients and services for the agricultural sector in Africa. Schirm, based in Germany, is a contract manufacturer of agrochemicals and fine chemicals with a European and US footprint. It is the largest provider of external agrochemical formulation services in Europe.

Food & Beverage: the businesses in this pillar supply ingredients and commodities to the dairy, beverage, wine, meat, bakery, health and nutrition industries. The other main activity is the manufacture and distribution of a broad range of juice-based products and drinks, including formulated compounds, fruit concentrate blends and emulsions.

Chemicals: these businesses supply chemical raw materials and related services for use across a broad spectrum of customers in the manufacturing, infrastructure and general industrial sectors mainly in South Africa and in other Southern African countries. SANS Technical Fibers is based in the USA.

Acacia Real Estate, the Group’s property division, focuses mainly on managing AECI’s leasing portfolio and on the provision of servic-es at the Umbogintwini Industrial Complex in KwaZulu-Natal.

DIRECTORS’ AND GROUP COMPANY SECRETARY’S INTERESTS IN SHARESAt 31 December 2017, the Directors had direct beneficial interests in the share capital of the Company as set out on the next page. None of the Directors’ associates (as defined in terms of the JSE Listings Requirements) had any interests. The direct beneficial interests of Messrs Dytor and Kathan were unchanged between the end of the financial year, the publication of the annual financial statements and as at the date of the integrated report.

No Non-executive Director has been granted options or shares. The Executive Directors and the Prescribed Officers have been issued long-term incentive benefits as disclosed in note 30 to the financial statements.

GOING-CONCERNThe financial statements have been prepared using appropriate accounting policies, supported by reasonable and prudent judgements and estimates. The Directors are of the opinion that the Company and its subsidiaries, joint ventures and associates have adequate resources to continue as going-concerns in the foreseeable future.

BORROWING POWERSIn terms of its MOI the Company has unlimited borrowing powers.

INDEPENDENT AUDITOROn 7 December 2017 the AECI Board announced that it had resolved in favour of the early adoption of the Independent Regulatory Board for Auditors’ decision in respect of the mandatory rotation of external auditors at least every 10 years. Accordingly, the current external auditor, KPMG Inc., will not be considered for reappointment for the 2018 financial year.

KPMG has been AECI’s auditor for 93 years, during which time the firm has provided a robust, independent and highly competent service to the Group and its shareholders.

On 6 April 2018, Deloitte & Touche was appointed as the new external auditor. On that same date, Mr Patrick Ndlovu was appointed as designated audit partner for the financial year ending 31 December 2018. Shareholders will be given an opportunity to reappoint this auditor at the AGM scheduled to be held on 31 May 2018.

The Directors have pleasure in submitting their report together with the consolidated and separate financial statements for the year ended 31 December 2017. AECI was registered as a company in South Africa in 1924 and has been listed on the JSE since 1966. At the end of 2017 its market capitalisation was R12,2 billion.


05.4DIRECTORS’ REPORT

SHARE CAPITAL AND SHARE PREMIUMTheissuedsharecapitaloftheCompanyis121829083listedordinarysharesofR1each(2016:121829083shares),10117951unlist-edredeemableconvertibleBordinarysharesofnoparvalue(2016:10117951shares)and3000000listed5,5%cumulativepreferencesharesofR2each(2016:3000000shares).

STRATEThedematerialisationoftheCompany’sissuedsharescommencedinJuly2001.Sharesstillinpaperformarenolongergoodfordeliveryandwillneedtobedematerialisedbeforeparticipationinanytransaction.

ShareholdersmaydirectanyenquiriesinthisregardtotheCompany’sTransferSecretariesontelephonenumber+27(0)861100950inSouthAfrica,or+44(0)8708893176intheUnitedKingdom.

DIVIDENDS TO ORDINARY AND PREFERENCE SHAREHOLDERSAninterimordinarycashdividendof138centswasdeclaredon25July2017andwaspaidon4September2017.

Afinalordinarycashdividendof340centswasdeclaredon26February2018andwaspaidon9April2018.

Preferencesharedividendswerepaidon 15June2017andon15December2017.

Seenote25tothefinancialstatementsfordetailsinthisregard.

CHANGES TO THE BOARDThefollowingNon-executiveDirectorsresignedfromtheBoardduringtheyear:

› MrSEngelbrechton28February;

› MrRMWDunneon29May;

› MrRJMKgosanaon29September;and

› MsLLMdaon27November.

MsPGSibiyawasappointedtotheBoardasaNon-executiveDirectorafterthereportingdate,witheffectfrom27February2018.

DIRECTORATE AND SECRETARYDetails of theDirectorateandSecretary oftheCompanyarepublishedelsewhereinthisintegratedreport.

IntermsoftheCompany’sMOIMsZFuphe,MrKMKathan,DrKDKMokheleandAdv RRamashiaretirebyrotationattheforthcom-ingAGMand,beingeligible,offerthemselvesforre-election.

MAJOR SHAREHOLDERSDetailsoftheinterestsofshareholderswhoholdbeneficialinterestsequaltoorinexcessof5%oftheCompany’ssharecapitalareincludedinnote13tothefinancialstatements.

SPECIAL RESOLUTIONSTheCompanypassedthefollowingspecialresolutionsattheAGMheldon29May2017:

1. toapprovetheannualfeespayablebytheCompanytoitsNon-executiveDirectors;

2. togranttheDirectorsageneralauthoritytorepurchasetheCompany’sissuedshares;

3. togrant theDirectorstheauthority tocausetheCompanytoprovidefinancialassistancetoanycompanyorotherlegalentitywhichisrelatedorinter-relatedtotheCompany;and

4. toamendtheCompany’sMOI.

Nospecialresolutionsreferredtoinparagraph8.63(i)oftheJSEListingsRequirementswerepassedbyitssubsidiarycompanies.

MATERIAL CHANGESTherehavebeennomaterialchangesinthefinancialortradingpositionoftheCompanyanditssubsidiariessince31December2017.

DIRECTORS’ AND GROUP COMPANY SECRETARY’S INTERESTS IN SHARES

2017 2016

Numberofshares Direct Indirect Direct Indirect

EXECUTIVE DIRECTORS

MADytor 62 061 0 44 618 0

KM Kathan 63 244 0 49 913 0

125 305 0 94 531 0


SEngelbrecht1 0 0 6 629 600

0 0 6 629 600

TOTAL SHARES 125 305 0 101 160 600

1 Retiredon28February2017.


REGULATORY INTERACTIONTheinvestigationprocessundertakenbytheCompetitionCommissionofSouthAfrica(“theCommission”)in2014,intocollusionbyAkuluMarchon(“Akulu”)andacompetitor,asreported in the intervening years,was concluded.BothpartiesconcludedseparatesettlementagreementswiththeCommission.AkulumadeapaymentofthepenaltyofR13905600on30October2017.AkulualsoagreedtoandimplementedbehaviouralremedieswhichwillbeappliedacrosstheGroup.

Alsoaspreviouslyreportedon14December2015 the Department of EnvironmentalAffairs,jointlywithrepresentativesfromtheCityofJohannesburg,executedasearchandseizureoperationatAEL inModderfontein.TheoperationandensuingallegationsrelatedtoAEL’scompliancewithcertainconditionsofitsairemissionslicence.ThematterwasfinalisedwiththeauthoritiesandAELpaidapenaltyofR8,5million.

The Group is involved in various legalproceedingsand is inconsultationwith itslegalcounsel,assessingtheoutcomeoftheseproceedingsonanongoingbasis.Asproceed-ingsprogress,theGroup’smanagementmakesprovisioninrespectoflegalproceedingswhereappropriate.Litigations,currentorpending,arenotlikelytohaveamaterialadverseeffectontheGroup.

INTERESTS OF DIRECTORS AND OFFICERSDuring2017,nocontractswereenteredintoinwhichDirectorshadaninterestandwhichsignificantlyaffectedthebusinessof theGroup.TheDirectorsandPrescribedOfficershadnointerestsinanythirdpartyorcompanyresponsibleformanaginganyofthebusinessactivitiesoftheGroup.

REMUNERATION AND EMPLOYEE INCENTIVE PARTICIPATION SCHEMESFulldetailsregardingtheremunerationandparticipationintheGroup’slong-termincentiveschemesbytheCompany’sExecutiveDirectorsandPrescribedOfficersaredisclosedinnote30tothefinancialstatements.

DIRECTORS’ RESPONSIBILITY STATEMENTTheDirectorsacceptfull responsibilityfortheaccuracyofthe informationgivenandcertifythat,tothebestoftheirknowledgeandbelief,therearenofactsthathavebeenomittedwhichwouldmakeanystatementfalseormisleading,andthatallreasonableenquiriestoascertainsuchfactshavebeenmade,andthatthisstatementcontainsallinformation requiredby lawand the JSEListingsRequirements.

TheDirectorsacknowledgethattheirrespon-sibilityincludes:

› ensuringthatinternalcontrolsrelevanttothepreparationandfairpresentationofthesefinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror,areappropriatelydesigned,implementedandmaintained;

› selectingandapplyingappropriateaccount-ingpolicies;and

› making accounting estimates that arereasonableinthecircumstances.

TheDirectors’ responsibilityalso includesensuringthatadequateaccountingrecordsandaneffectivesystemofriskmanagementaremaintained.

APPROVAL OF CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTSThe consolidated and separate annualfinancialstatementsoftheCompanywereapproved by the Board of Directors on 27February2018.TheBoardofDirectorssubsequentlyapprovedtheintegratedreport.Thefinancialstatementsandtheintegratedreportweresignedby:

Mark Dytor Mark Kathan ChiefExecutive ChiefFinancialOfficer

Woodmead,Sandton 27February2018


05.4DIRECTORS’ REPORT CONTINUED

SHAREHOLDER ANALYSIS

1. ANALYSIS OF REGISTERED SHAREHOLDERS AND COMPANY SCHEMESSource:J.P.MorganCazenove

REGISTERED SHAREHOLDER SPREADInaccordancewiththeJSEListingsRequirements,thefollowingtableconfirmsthatthespreadofregisteredshareholders,asdetailedintheintegratedreportandaccounts,on29December2017was:

ShareholderspreadNumber

ofholders%oftotal

shareholdersNumberofshares

%ofissuedcapital

1–1000shares 2 730 65,61 796 577 0,65

1001–10000shares 936 22,49 3 001 534 2,46

10001–100000shares 348 8,36 12 432 850 10,21

100001–1000000shares 119 2,86 32 396 334 26,59

1000001sharesandabove 28 0,68 73 201 788 60,09

TOTAL 4 161 100,00 121 829 083 100,00

PUBLIC AND NON-PUBLIC SHAREHOLDINGSWithintheshareholderbase,weareabletoconfirmthesplitbetweenpublicshareholdingsandDirectors/Company-relatedschemesasbeing:

ShareholdertypeNumber

ofholders%oftotal

shareholdersNumberofshares

%ofissuedcapital

Publicshareholders 4 157 99,90 109 819 079 90,14

Non-publicshareholders 4 0,10 12 010 004 9,86

—Treasuryshares 1 0,03 11 884 699 9,76

—Directors/relatedholdings 3 0,07 125 305 0,10

TOTAL 4 161 100,00 121 829 083 100,00

2. SUBSTANTIAL INVESTMENT MANAGEMENT AND BENEFICIAL INTERESTS

SUBSTANTIAL INVESTMENT MANAGEMENT AND BENEFICIAL INTERESTS ABOVE 3%ThroughregularanalysisofSTRATEregisteredholdings,andpursuanttotheprovisionsofsection56oftheCompaniesAct,thefollowingshareholdershelddirectlyandindirectlyequaltoorinexcessof3%oftheissuedsharecapitalasat29December2017:

INVESTMENT MANAGEMENT SHAREHOLDINGS, EXCLUDING TREASURY SHARES

InvestmentmanagerTotalshareholding(numberofshares)

%ofissuedcapital

PublicInvestmentCorporation(“PIC”) 14 584 182 11,97

AllanGray 12 034 261 9,88

KagisoAssetManagement 11 877 477 9,75

PSGAssetManagement 7 364 688 6,05

SanlamInvestmentManagement 6 064 270 4,98

DimensionalFundAdvisors 5 495 847 4,51

CoronationAssetManagement 5 381 219 4,42

OldMutual 4 465 414 3,67

AECICommunityEducationandDevelopmentTrust 4 426 604 3,63

TheVanguardGroup 3 794 488 3,11

TOTAL 75 488 450 61,97


05.5SHAREHOLDER ANALYSIS

2. SUBSTANTIAL INVESTMENT MANAGEMENT AND BENEFICIAL INTERESTS continued

INVESTMENT MANAGEMENT SHAREHOLDING POSITIONS ABOVE 3% WITH 12-MONTH CHANGE

BENEFICIAL SHAREHOLDINGS

BeneficialshareholdingsTotalshareholding(numberofshares)

%ofissuedcapital

GovernmentEmployeesPensionFund(PIC) 16 370 132 13,44

AECICommunityEducationandDevelopmentTrust 4 426 604 3,63

AllanGrayBalancedFunds 3 467 958 2,85

TOTAL 24 264 694 19,92

200

175

150

125

100

75

50

25

0

GOVERNMENT EMPLOYEES

PENSION FUND (PIC)

KAGISO ASSET MANAGEMENT

PSG ASSET MANAGEMENT

SANLAM INVESTMENT MANAGEMENT

DIMENSIONAL FUND

ADVISORS

CORONATION ASSET

MANAGEMENT

OLD MUTUAL AECI COMMUNITY EDUCATION

AND DEVELOPMENT

TRUST

THE VANGUARD

GROUP

ALLAN GRAY

TOTAL SHAREHOLDING(MILLIONS OF SHARES)

HISTORICAL SHAREHOLDING(MILLIONS OF SHARES)

AECI SHARE PRICE OVER THE YEAR(RAND)

14,6 14,4

12,0

9,2

11,912,4

7,4

3,2

6,1

8,1

5,55,0

7,5

5,4

4,5

2,1

4,4 4,43,8 3,5


SHAREHOLDER ANALYSIS CONTINUED

05.5

2. SUBSTANTIAL INVESTMENT MANAGEMENT AND BENEFICIAL INTERESTS continued

BENEFICIAL SHAREHOLDING POSITIONS ABOVE 3% WITH 12-MONTH CHANGE

PREVIOUSLY DISCLOSED HOLDINGS

INVESTMENT MANAGERS NOW HOLDING BELOW 3%

InvestmentmanagerTotalshareholding(numberofshares)

%ofissuedcapital Previous%

BusinessVenturesInvestmentsNo.88 0 0,00 2,88

TOTAL 0 0,00 2,88

BENEFICIAL OWNERS NOW HOLDING BELOW 3%

BeneficialownerTotalshareholding(numberofshares)

%ofissuedcapital Previous%

BusinessVenturesInvestmentsNo.88 0 0,00 2,88

TOTAL 0 0,00 2,88

TOTAL SHAREHOLDING(MILLIONS OF SHARES)

HISTORICAL SHAREHOLDING(MILLIONS OF SHARES)

AECI SHARE PRICE OVER THE YEAR(RAND)

200

175

150

125

100

75

50

25

0

GOVERNMENT EMPLOYEES PENSION FUND (PIC)

AECI COMMUNITY EDUCATION AND DEVELOPMENT

TRUST

ALLAN GRAY BALANCED FUNDS

16,417,3

4,4 4,43,5

2,7


3. GEOGRAPHIC SPLIT OF SHAREHOLDERS

GEOGRAPHIC SPLIT OF INVESTMENT MANAGERS AND COMPANY-RELATED HOLDINGS

RegionTotalshareholding(numberofshares)

%ofissuedcapital

SouthAfrica 79 752 638 65,46

UnitedStatesofAmericaandCanada 17 157 233 14,08

UnitedKingdom 5 974 071 4,90

RestofEurope 1 557 445 1,28

Restoftheworld1 17 387 696 14,28

TOTAL 121 829 083 100,00

GEOGRAPHIC SPLIT OF BENEFICIAL SHAREHOLDERS

RegionTotalshareholding(numberofshares)

%ofissuedcapital

SouthAfrica 81 816 082 67,16

UnitedStatesofAmericaandCanada 17 130 498 14,06

UnitedKingdom 3 025 909 2,48

RestofEurope 4 113 531 3,38

Restoftheworld1 15 743 063 12,92

TOTAL 121 829 083 100,00

1 Representsallshareholdingsexceptthoseintheaboveregions.

4. SHAREHOLDER CATEGORIESAnanalysisofbeneficialshareholdings,supportedbythesection56enquiryprocess,confirmedthefollowingbeneficialshareholdertypes:

BENEFICIAL SHAREHOLDER CATEGORIES

CategoryTotalshareholding(numberofshares)

%ofissuedcapital

Mutualfund 42 277 831 34,70

Pensionfund 40 464 563 33,21

BlackEconomicEmpowerment 5 596 271 4,59

Insurancecompanies 5 562 250 4,57

Privateinvestor 2 406 801 1,98

Tradingposition 1 994 959 1,64

Sovereignwealth 1 225 142 1,01

Exchange-tradedfund 1 059 367 0,87

Custodians 864 448 0,71

Hedgefund 729 669 0,60

University 338 659 0,28

Localauthority 303 630 0,25

Medicalaidscheme 208 490 0,17

Charity 204 900 0,17

Unclassified 28 050 0,02

Other 18 564 053 15,23

TOTAL 121 829 083 100,00


SHAREHOLDER ANALYSIS CONTINUED

05.5

4. SHAREHOLDER CATEGORIES continued

BENEFICIAL SHAREHOLDERS SPLIT BY CATEGORY 1

1 Includescategoriesabove2%only.

5. ANALYSIS OF INVESTMENT STYLES 1

Analysisintoinstitutionalattributesbroadlyindicatesthefollowingsplitofinvestmentapproachwithintheshareholderbase:

1 Includescategoriesabove1%only.

34,70

18,31

33,21

4,59

4,57

1,98

1,641,01

34,70 MUTUAL FUND 33,21 PENSION FUND 4,59 BLACK ECONOMIC EMPOWERMENT 4,57 INSURANCE COMPANIES 1,98 PRIVATE INVESTOR 1,64 TRADING POSITION 1,01 SOVEREIGN WEALTH 18,31 REMAINDER

BENEFICIAL SHAREHOLDERS SPLIT BY CATEGORY(%)

15,71

7,28 26,90

12,33

9,97

2,491,914,59

1,14

26,90 VALUE 17,68 INDEX 15,71 REMAINDER 12,33 GROWTH 10,31 GROWTHEXCL.GROWTHATAREASONABLEPRICE(GARP) 2,03 GARP

9,97 DEEP VALUE 7,28 QUANTITATIVE 4,59 BLACK ECONOMIC EMPOWERMENT 1,91 MULTIPLE 2,49 TRADING POSITION 1,14 RETAIL

ANALYSIS OF INVESTMENT STYLES(%)

17,68


HISTORICAL REVIEWS

ABRIDGED FINANCIAL STATEMENTS

Rmillions 2017 2016 2015 2014 2013

INCOME STATEMENTS 1Revenue 18 482 18 596 18 446 16 903 15 942Local 12 246 12 117 12 085 11 486 10 718Foreign 6 236 6 479 6 361 5 417 5 224Profitfromoperations 1 579 1 335 1 703 1 596 1 398Netfinancingcosts 167 215 187 150 174Tax 429 336 464 368 313

Profitattributabletoordinaryshareholders 950 777 4 1 007 1 096 946

Headlineearnings 1 012 864 4 988 943 885

STATEMENTS OF FINANCIAL POSITIONTotalshareholders’interest 9 356 9 046 9 042 7 803 6 877Deferredtax(net) (302) (273) (95) (366) (300)Netinterest-bearingdebt 424 297 1 179 666 1 741

Capitalemployed 9 478 9 070 10 126 8 103 8 318

Representedby:

Non-currentassetsexcludingdeferredtaxassets 6 970 7 011 7 852 6 606 6 004Netcurrentassets,excludingcash,lessnon-currentprovisions 2 508 2 059 2 274 1 497 2 314

Employmentofcapital 9 478 9 070 10 126 8 103 8 318

STATEMENTS OF CASH FLOWSCashgeneratedbyoperations2 1 757 1 555 1 918 1 723 1 684Changesinworkingcapital (358) 488 (215) 547 (426)Expenditurerelatingtonon-currentprovisions,employeebenefitsandrestructuring (178) (103) (348) (153) (32)Settlementofperformanceshares (44) (22) (94)Netreplacementtomaintainoperations3 (368) (305) (235) 131 (240)

809 1 613 1 026 2 248 986Dividendspaid (497) (435) (838) (378) (336)

312 1 178 188 1 870 650Investmenttoexpandoperations3 (385) (147) (609) (835) (532)Proceedsfromdisposalofbusinesses,investments andjointventure — — — — —

Netcashgenerated/(utilised) (73) 1 031 (421) 1 035 118

Depreciationandamortisationcharges 597 626 590 547 537

COMMITMENTSCapitalexpenditureauthorised 405 233 436 342 746Futurerentalsonproperty,plantandequipmentleased 367 443 331 358 199

772 676 767 700 945

1 Includestheresultsofdiscontinuedoperations.2 Profitfromoperationsplusdepreciationandamortisationofproperty,plantandequipment,investmentpropertyandintangibleassetsandothernon-cashflow

itemsandafterinvestmentincome,netfinancingcostsandtaxespaid.3 Excludesproperty,plantandequipmentofcompaniesacquired.4 Afterlossonsettlementofdefined-benefitpensionfundobligationsandpost-retirementmedicalaidobligationsofR4million.


05.6HISTORICAL REVIEWS

RATIOS AND EMPLOYEE DETAILS2017 2016 2015 2014 2013

PROFITABILITY AND ASSET MANAGEMENTProfitfromoperationstorevenue(%) 8,5 7,2 9,2 9,4 8,8Tradingcashflowtorevenue(%) 11,8 10,5 12,4 12,7 12,1Returnonaveragenetassets(%)1 17,3 14,4 18,1 17,8 16,4Returnoninvestedcapital(%)2 12,5 10,6 13,6 13,6 12,7Returnonaverageordinaryshareholders'interest(%)3 11,2 9,7 11,9 13,0 14,1Networkingcapitaltorevenue(%)4 15,6 12,7 17,2 15,4 19,6Inventorycover(days) 81 76 80 70 76Averagecreditextendedtocustomers(days) 64 57 64 61 64

LIQUIDITYCashinterestcover5 13,4 11,0 12,4 14,6 11,4Interest-bearingdebtlesscashtocashgeneratedbyoperations 0,2 0,1 0,5 0,3 0,8Gearing(%)6 4,5 3,3 13,0 8,5 25,3Currentassetstocurrentliabilities 1,7 1,9 1,4 1,8 1,5

EMPLOYEESNumberofemployeesatyear-end7 6 522 6 630 6 246 6 443 6 279Employeeremuneration(Rmillions) 3 173 3 404 3 352 2 805 2 976Valueaddedperrandofemployeeremuneration(rand) 1,70 1,60 1,69 1,79 1,68

1 Operatingprofitplusinvestmentincomerelatedtoaverageproperty,plant,equipment,investmentproperty,intangibleassets,goodwill,investments,loansreceivable,inventories,accountsreceivableandassetsclassifiedasheldforsalelessaccountspayableandliabilitiesclassifiedasheldforsale.

2 Operatingprofitlesstaxatthestandardrateplusinvestmentincomerelatedtoaverageproperty(excludinglandrevaluation),plant,equipment,investmentproperty,intangibleassets,goodwill,investments,inventories,accountsreceivableandassetsclassifiedasheldforsalelessaccountspayable,liabilitiesclassifiedasheldforsaleandtaxpayable.

3 Headlineearningsrelatedtoaverageordinaryshareholders’interest.4 Excludingbusinessessoldandequity-accountedinvesteesandincludingworkingcapital.5 Ratioofprofitfromoperationsplusdepreciationanddividendsreceivedtonetfinancecostspaid.6 Interest-bearingdebtlesscashasapercentageoftotalshareholders’interest.7 Includesproportionalshareofjointoperationsemployees.

ORDINARY SHARE STATISTICS2017 2016 2015 2014 2013

MARKET PRICE (CENTS PER SHARE)High 10 241 11 000 14 110 13 845 12 857Low 10 000 7 401 8 109 10 600 7 90131December 10 000 10 110 8 866 13 382 12 500Earningsyield(%) 9,6 8,1 10,1 6,3 6,3Dividendyield(%)* 4,8 4,3 4,3 2,5 2,5Dividendcover* 2,0 1,9 2,3 2,5 2,5Inissue(millions) 121,8 121,8 122,3 128,2 128,2Valuetraded(Rmillions) 6 174 7 031 4 501 4 154 5 093Volumetraded(millions) 101,5 75,2 42,0 33,6 47,0Volumetraded(%) 83,3 61,7 34,3 26,2 36,7Marketcapitalisation(Rmillions) 12 183 12 317 10 841 17 161 16 030

ORDINARY SHARE PERFORMANCE (CENTS PER SHARE)Headlineearnings 959 818 894 842 791Dividendsdeclared* 478 435 385 340 315Specialdividenddeclared — — — 375 —Netassetvalue 8 399 8 107 8 092 6 640 5 860

* Theinterimdividendinthecurrentyearandthefinaldividenddeclaredafterthereportingdatehavebeenusedinthecalculation.


DECLARATION BY THE GROUP COMPANY SECRETARY

PREPARATION OF ANNUAL FINANCIAL STATEMENTS

IherebyconfirmthatAECILtdhaslodgedwiththeRegistrarofCompaniesallsuchreturnsinrespectoftheyearunderreviewasarerequiredofapubliccompanyintermsoftheCompaniesAct,andthatallsuchreturnsare,tothebestofmyknowledgeandbelief,true,correctandup-to-date.

Nomini Rapoo GroupCompanySecretary

Woodmead,Sandton 27February2018

TheGroupannualfinancialstatementsandCompanyannualfinancialstatementswerepublishedon27February2018andarefortheyearended31December2017.ThesecomprisetheAuditCommittee’sreporttostakeholders,theDirectors’report,theDeclarationbytheGroupCompanySecretary,theIndependentAuditor’sreport,theBasisofReportingandSignificantAccountingPolicies,andthefinancialstatements.

ThefinancialstatementshavebeenauditedasrequiredbytheCompaniesActandtheirpreparationwassupervisedbytheChiefFinancialOfficer,MrKMKathanCA(SA),AMP(Harvard).


05.7

TO THE SHAREHOLDERS OF AECI LTD

REPORT ON THE AUDIT OF THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

OPINIONWehaveauditedtheconsolidatedandseparatefinancialstatementsofAECILtd(the“GroupandtheCompany”)setoutonpages120to195,whichcomprisethestatementsoffinancialpositionat31December2017,andtheincomestatements,statementsofcomprehensiveincome,statementsofchangesinequityandthestatementsofcashflowsfortheyearthenended,andnotestothefinancialstatementsandthesignificantaccountingpolicies.

Inouropinion,theconsolidatedandseparatefinancialstatementspresentfairly,inallmaterialrespects,theconsolidatedandseparatefinancialpositionofAECILtdat31December2017,anditsconsolidatedandseparatefinancialperformanceandconsolidatedandseparatecashflowsfortheyearthenendedinaccordancewithInternationalFinancialReportingStandardsandtherequirementsoftheCompaniesActofSouthAfrica.

BASIS FOR OPINIONWeconductedourauditinaccordancewithInternationalStandardsonAuditing(“ISAs”).OurresponsibilitiesunderthosestandardsarefurtherdescribedintheAuditor’sResponsibilitiesfortheAuditoftheConsolidatedandSeparateFinancialStatementssectionofourreport.WeareindependentoftheGroupandtheCompany,inaccordancewiththeIndependentRegulatoryBoardforAuditorsCodeofProfessionalConductforRegisteredAuditors(“IRBACode”)andotherindependencerequirementsapplicabletoperformingauditsoffinancialstatementsinSouthAfrica.WehavefulfilledourotherethicalresponsibilitiesinaccordancewiththeIRBACodeandinaccordancewithotherethicalrequirementsapplicabletoperformingauditsinSouthAfrica.TheIRBACodeisconsistentwiththeInternationalEthicsStandardsBoardforAccountantsCodeofEthicsforProfessionalAccountants(PartsAandB).Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforouropinion.

KEY AUDIT MATTERSKeyauditmattersarethosemattersthat,inourprofessionaljudgement,wereofmostsignificanceinourauditoftheconsolidatedandseparatefinancialstatementsforthecurrentperiod.Thesematterswereaddressedinthecontextofourauditoftheconsolidatedandseparatefinancialstatementsasawhole,andinformingouropinionthereon,andwedonotprovideaseparateopiniononthesematters.

Accounting for income taxes and deferred tax assets (relates to the consolidated and separate financial statements). Refer to pages 121 and 123 for the accounting policies applied and notes 9 and 23 to the financial statements.

KEY AUDIT MATTER HOW THE MATTER WAS ADDRESSED IN OUR AUDIT

TheAECIGroupoperatesacrossnumerousgeographicalregionsandisrequiredtocomplywithtaxlegislationinvariousjurisdictions.ThedeterminationoftheGroupandCompany’staxisbasedoninterpretationsappliedintermsoftherespectivetaxlegislationsandmaybesubjecttoperiodicchallengesbytaxauthorities.Thisgivesrisetosignificantjudgementandestimationbeingappliedinaccountingforanyuncertaintaxpositions.

Furthermore,theAECIGroupcarriessignificantdeferredtaxassetsinrespectofdeductibletemporarydifferencesandaccumulatedtaxlossesintheconsolidatedfinancialstatements,amountingtoR395million.Therecognitionofdeferredtaxassetsrequiresmanagementtoapplysignificantjudgementinforecastingfuturetaxableincomeandestimatingtheprobabilityofutilisingtheestimatedtaxlosses.Futuretaxableprofitsareestimatedbasedoneconomicgrowth,interestandinflationratesandmarketconditions.

Giventhesignificantestimationandjudgementinvolved,accountingforincometaxesintheGroupandCompanyanddeferredtaxassetsintheGroupwasconsideredakeyauditmatterinourauditoftheconsolidatedandseparatefinancialstatements.

Ourauditproceduresincluded,amongstothers:

› understandingthenatureoftheuncertaintaxpositionsandhowmanagementhadreachedtheirconclusionsrelatingtotheexposuresidentified.Weevaluatedtheappropriatenessofmanagement’sconclusionsbyinvolvingourtaxspecialists,whoformedpartoftheauditteam.OurevaluationwasperformedbasedonourindepthtaxknowledgeandpastexperienceswithinteractingwithtaxauthoritieswithinthegeographicalregionsthatAECIoperatesinandbyreviewingcorrespondencewiththetaxauthorities;

› evaluatingmanagement’sdeterminationoftheestimatedmannerinwhichthedeferredtaxassetswouldbeutilisedbycomparingtheassessmentmadebymanagementtobusinessplansimplementedandprofitforecastsbasedonourknowledgeofthebusinesseswithintheGroupandtheindustriesinwhichtheyoperate;

› criticallyassessingwhetherprofitforecastsarereasonableinrelationtohistoricaltrends,currentyearperformanceandthefutureplans;and

› assessingtheappropriatenessofthedisclosuresmadeintheconsolidatedandseparatefinancialstatements.

INDEPENDENT AUDITOR’S REPORT


05.8INDEPENDENT AUDITOR’S REPORT

Allocation and impairment of goodwill (relates to consolidated and separate financial statements). Refer to pages 121 and 122 for the accounting policies applied and notes 4 and 31 to the financial statements.

KEY AUDIT MATTER HOW THE MATTER WAS ADDRESSED IN OUR AUDIT

Goodwillisrequiredtobetestedannuallyforimpairmentinterms ofIAS36ImpairmentofAssets.

GiventherealignmentofthebusinessesintermsoftheGroup’sstrategicgrowthpillarsduringtheyear,andtheconsequentre-organisationofthebusinessesandoperatingsegments,managementwererequiredtoassesstheappropriatenessoftheallocationofthegoodwilltocashgeneratingunits(CGUs).

Thecalculationofvalue-in-useaspartofthegoodwillimpairmentassessmentsrequiresthedeterminationandapplicationofkeyassumptionsinrespectof:

› cashflowprojections,whicharebasedonbusinessplansandthelatestpubliclyavailablemarketinformation,includingthevariations intheamountandtimingofthesecashflows;

› discountrates;and

› growthrates.

Giventhesignificanceofthegoodwillamount,thesignificantjudgementinvolvedintheallocationofgoodwilltoappropriate CGUsandthedeterminationofthekeyassumptionsusedin thevalue-in-usecalculations,thiswasconsideredtobeakey auditmatterinourauditoftheconsolidatedandseparate financialstatements.

Ourauditproceduresincluded,amongstothers:

› criticallyassessing,throughtheinvolvementofourtechnicalspecialistswhoformedpartoftheauditteam,whetherthegoodwillallocatedtoCGUswasappropriateintermsoftherelevantaccountingstandardsandbasedonourunderstandingoftherealignmentofthebusinessesintermsoftheGroup’sstrategicgrowthpillars;

› challengingtheassumptionsusedbymanagementintheirvalue-in-usecalculationsby:

» assessingthereasonablenessofcashflowprojections,revenueandprofitgrowthbasedonmanagement’shistoricalforecastingaccuracyandourknowledgeofthebusinesseswithintheGroupandCompanyandtheindustriesinwhichtheyoperate;

» assessingthereasonablenessoftheperpetuitygrowthrates inrelationtoexternalmarketdata;

» assessingthereasonablenessofthediscountratesapplied byindependentlycalculatingtheratesandcomparingtherates tothoseusedbymanagement;and

» subjectingthekeyassumptionstosensitivityanalysestoassesstheimpactonthevalue-in-usecalculations;and

› assessingtheappropriatenessofthedisclosuresmadeintheconsolidatedandseparatefinancialstatements.

OTHER INFORMATIONTheDirectorsareresponsiblefortheother information.Theother informationcomprisestheAuditCommittee’sreporttostakeholders,theDirectors’report,andtheDeclarationbytheGroupCompanySecretaryasrequiredbytheCompaniesActofSouthAfrica,whichweobtainedpriortothedateofthisreport,andtheIntegratedReport,whichisexpectedtobemadeavailabletousafterthatdate.Otherinformationdoesnotincludetheconsolidatedandseparatefinancialstatementsandourauditor’sreportthereon.

Ouropinionontheconsolidatedandseparatefinancialstatementsdoesnotcovertheotherinformationandwedonotexpressanauditopinionoranyformofassuranceconclusionthereon.

Inconnectionwithourauditoftheconsolidatedandseparatefinancialstatements,ourresponsibilityistoreadtheotherinformationand,indoingso,considerwhethertheotherinformationismateriallyinconsistentwiththeconsolidatedandseparatefinancialstatementsorourknowledgeobtainedintheaudit,orotherwiseappearstobemateriallymisstated. If,basedontheworkwehaveperformedontheother informationobtainedpriortothedateofthisauditor’sreport,weconcludethatthereisamaterialmisstatementofthisotherinformation,wearerequiredtoreportthatfact.Wehavenothingtoreportinthisregard.

RESPONSIBILITIES OF THE DIRECTORS FOR THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTSTheDirectorsareresponsibleforthepreparationandfairpresentationoftheconsolidatedandseparatefinancialstatementsinaccordancewithInternationalFinancialReportingStandardsandtherequirementsoftheCompaniesActofSouthAfrica,andforsuchinternalcontrolastheDirectorsdetermineisnecessarytoenablethepreparationofconsolidatedandseparatefinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.

Inpreparingtheconsolidatedandseparatefinancialstatements,theDirectorsareresponsibleforassessingtheGroup’sandtheCompany’sabilitytocontinueasagoingconcern,disclosing,asapplicable,mattersrelatedtogoingconcernandusingthegoingconcernbasisofaccountingunlesstheDirectorsintendeithertoliquidatetheGroupand/ortheCompanyortoceaseoperations,orhavenorealisticalternativebuttodoso.

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTSOurobjectivesaretoobtainreasonableassuranceaboutwhethertheconsolidatedandseparatefinancialstatementsasawholearefreefrommaterialmisstatement,whetherduetofraudorerror,andtoissueanauditor’sreportthatincludesouropinion.Reasonableassuranceisahighlevelofassurance,butisnotaguaranteethatanauditconductedinaccordancewithISAswillalwaysdetectamaterialmisstatementwhenitexists.Misstatementscanarisefromfraudorerrorandareconsideredmaterialif,individuallyorintheaggregate,theycouldreasonablybeexpectedtoinfluencetheeconomicdecisionsofuserstakenonthebasisoftheseconsolidatedandseparatefinancialstatements.


INDEPENDENT AUDITOR’S REPORT CONTINUED

05.8

AspartofanauditinaccordancewithISAs,weexerciseprofessionaljudgementandmaintainprofessionalscepticismthroughouttheaudit.

Wealso:

› identifyandassesstherisksofmaterialmisstatementoftheconsolidatedandseparatefinancialstatements,whetherduetofraudorerror,designandperformauditproceduresresponsivetothoserisks,andobtainauditevidencethatissufficientandappropriatetoprovideabasisforouropinion.Theriskofnotdetectingamaterialmisstatementresultingfromfraudishigherthanforoneresultingfromerror,asfraudmayinvolvecollusion,forgery,intentionalomissions,misrepresentations,ortheoverrideofinternalcontrol;

› obtainanunderstandingofinternalcontrolrelevanttotheauditinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheGroup’sandtheCompany’sinternalcontrol;

› evaluatetheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesandrelateddisclosuresmadebytheDirectors;

› concludeontheappropriatenessoftheDirectors’useofthegoingconcernbasisofaccountingand,basedontheauditevidenceobtained,whetheramaterialuncertaintyexistsrelatedtoeventsorconditionsthatmaycastsignificantdoubtontheGroup’sandtheCompany’sabilitytocontinueasagoingconcern.Ifweconcludethatamaterialuncertaintyexists,wearerequiredtodrawattentioninourauditor’sreporttotherelateddisclosuresintheconsolidatedandseparatefinancialstatementsor,ifsuchdisclosuresareinadequate,tomodifyouropinion.Ourconclusionsarebasedontheauditevidenceobtaineduptothedateofourauditor’sreport.However,futureeventsorconditionsmaycausetheGroupand/ortheCompanytoceasetocontinueasagoingconcern;

› evaluatetheoverallpresentation,structureandcontentoftheconsolidatedandseparatefinancialstatements,includingthedisclosures,andwhethertheconsolidatedandseparatefinancialstatementsrepresenttheunderlyingtransactionsandeventsinamannerthatachievesfairpresentation;and

› obtainsufficientappropriateauditevidenceregardingthefinancialinformationoftheentitiesorbusinessactivitiesintheGrouptoexpressanopinionontheconsolidatedfinancialstatements.Weareresponsibleforthedirection,supervisionandperformanceoftheGroupaudit.Weremainsolelyresponsibleforourauditopinion.

WecommunicatewiththeDirectorsregarding,amongothermatters,theplannedscopeandtimingoftheauditandsignificantauditfindings,includinganysignificantdeficienciesininternalcontrolthatweidentifyduringouraudit.

WealsoprovidetheDirectorswithastatementthatwehavecompliedwithrelevantethicalrequirementsregardingindependence,andtocommunicatewiththemallrelationshipsandothermattersthatmayreasonablybethoughttobearonourindependenceand,whereapplicable,relatedsafeguards.

FromthematterscommunicatedwiththeDirectors,wedeterminethosemattersthatwereofmostsignificanceintheauditoftheconsolidatedandseparatefinancialstatementsofthecurrentperiodand,therefore,arethekeyauditmatters.Wedescribethesemattersinourauditor’sreportunlesslaworregulationprecludespublicdisclosureaboutthematterorwhen,inextremelyrarecircumstances,wedeterminethatamattershouldnotbecommunicatedinourreportbecausetheadverseconsequencesofdoingsowouldreasonablybeexpectedtooutweighthepublicinterestbenefitsofsuchcommunication.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTSIntermsoftheIRBARulepublishedinGovernmentGazetteNo.39475of4December2015,wereportthatKPMGInc.hasbeentheauditorofAECILtdfor93years.

KPMG Inc. RegisteredAuditor

Per ML Watson CharteredAccountant(SA) RegisteredAuditor Director

85EmpireRoad,Parktown Johannesburg,2193 27February2018


BASIS OF REPORTING AND SIGNIFICANT ACCOUNTING POLICIES

REPORTING ENTITYAECILtd(“theCompany”)isapubliccompanydomiciledinSouthAfrica.TheaddressoftheCompany’sregisteredofficeistheFirstFloor,AECIPlace,24TheWoodlands,WoodlandsDrive,Woodmead,Sandton.Theconsolidatedfinancialstatementsof theCompanyfortheyearended31December2017comprisetheCompanyanditssubsidiaries(togetherreferredtoas“theGroup”and individuallyas “Groupentities”or “businessentities”)andtheGroup’s interest inassociatesandjointarrangements.TheGroupoperates insixoperatingsegments:MiningSolutions,Water&Process,Plant&AnimalHealth,Food&Beverage,Chemicals,andProperty&Corporate.Refertonote31forfurtherdetails.

BASIS OF PREPARATION

STATEMENT OF COMPLIANCETheGroup financial statements and theCompanyfinancialstatementshavebeenpreparedincompliancewithIFRS,andinter-pretationsofthosestandardsasadoptedbytheIASB,theSAICAFinancialReportingGuides issuedbytheAccountingPracticesCommittee,FinancialPronouncementsasissuedbytheFinancialReportingStandardsCouncil,theJSEListingsRequirementsandinaccordancewiththerequirementsoftheCompaniesAct.

Thefollowingaccountingstandards, inter-pretationsandamendmentstopublishedaccountingstandards,whichare relevanttotheGroupbutnotyeteffective,havenotbeenadoptedinthecurrentyearandwillbeappliedinthereportingperiodinwhichtheybecomeeffective:

› IFRS 9 Financial Instruments — this standardsetsoutrequirementsforrecognis-ingandmeasuringfinancialassets,financialliabilitiesandsomecontractstobuyorsellnon-financialitems.IFRS9replacesIAS39FinancialInstruments.TheGroupadoptedIFRS9witheffectfrom1January2018.

IFRS9containsanewclassificationandmeasurementapproachforfinancialassetsthatreflectsthebusinessmodel inwhichtheassetsaremanagedandtheircashflowcharacteristics.The threeprincipalclassificationcategoriesforfinancialassetsare:measuredatamortisedcost,fairvaluethroughprofitorlossandfairvaluethroughothercomprehensiveincome(“FVOCI”).

BasedontheGroup’spreliminaryassess-ment,theGroupbelievesthatthenewclassi-fication, ifappliedat31December2017,wouldnothavehadasignificant impactonitsaccountingforfinancialassets.TheGroup’savailableforsalefinancialassetswillbedesignatedasFVOCI.

IFRS9replacesthe“incurredloss”modelinIAS39withaforward-looking“expectedcredit loss” (“ECL”)model.TheGroupwillapplythepracticalexpedientinIFRS9tocalculatetheECLontradereceivablesusingaprovisionmatrix.TheGroupisfinalisingitsnewimpairmentmodelsthatwillbeappliedtofinancialassetsmeasuredatamortisedcost(i.e.primarilytradereceivables).

› IFRS 15 Revenue from Contracts with Customers — thisstandard introducesa new revenue recognition model forcontractswithcustomersandestablishesacomprehensiveframeworkfordeterminingwhether,howmuchandwhenrevenueisrecognised.IFRS15alsoincludesextensivenewdisclosurerequirements. It replacesexisting revenue recognition guidance,includingIAS8Revenue,IAS11ConstructionContractsandIFRIC13CustomerLoyaltyProgrammes.TheGroupwilladoptIFRS15from1January2018.

TheGrouphasperformedanextensivegapanalysistodeterminetheimpactofadoptingIFRS15ascomparedtoitscurrentaccount-ingforrevenueunderIAS18.ThenatureoftheGroup’srevenuefromprovidinggoodsandservicestocustomerswas identifiedandstratified intorevenuestreamsafterconsidering:

a) thepromisesmadetocustomersandwhetherthereisasingleperformanceobligationorwhetherthereismorethanoneperformanceobligation;

b) whetherperformanceobligationsidenti-fiedarebundledtogetherorwhethertheyaredistinctlyseparate;and

c) thefrequencyofdeliveryofgoodsandservicestocustomers,andspecificallywhetherthesegoodsandservicesaredeliveredatapointintimeorovertime.

Contracts ineach revenuestreamwereanalysedagainst thefive-step revenuerecognitionmodel in IFRS15and,basedontheimpactassessmentperformed,thefollowinginitialfindingswereidentified:

› certaincontractsincludeasaleofgoodsperformanceobligation,whererevenueisrecognisedatapoint intime,aswellas a technical services performanceobligationwhererevenuewillberequiredtoberecognisedovertime.Thetimingof revenuerecognitionwillbeaffectedbyrecognisingrevenueastwodistinct,separateperformanceobligations;

› variableconsiderationswereidentifiedincertaincontractsthatmayaffectthetrans-actionprice.Thevariabilityarisesfromrebates,discountsandrightofreturns;

› forcertaincontractsrevenueiscurrentlyrecognisedwhenthe relatedrisksandrewardsofownershiptransfer,whenthecustomeruses thegoods.Under IFRS15revenueonthesecontractswillberecognisedwhenthecustomerobtainscontrolofthegoods.This isanticipatedtooccurearlier thanunderthecurrentrecognitioncriteria;and

› costs may be incurred in securing acontractwhichmayneedtobecapitalised.

TheGrouphasyettofinalise itsdecisiononthetransitionmethodtobeappliedandorthepracticalexpedientstobeused, ifelected.TheimpactthattheabovefindingswillhaveontheGroup’sfinancialstatementsiscurrentlybeingfinalised.

› Amendments to IFRS 2 Clarifying share-based payment accounting —currently,there isambiguityoverhowacompanyshouldaccountforcertaintypesofshare-basedpaymentarrangements.The IASBhasrespondedbypublishingamendmentstoIFRS2Share-basedPayments.

Thenew requirements couldaffect theclassificationand/ormeasurementofthesearrangementsand,potentially,thetimingandamountofexpenserecognisedfornewandoutstandingawards.Theamendmentsareeffectiveforannualperiodscommencingonorafter1January2018.AECI’sshare-basedpaymentarrangementswillnotbeaffectedbythechanges.

› IAS 40 Transfers of Investment Property — theIASBhasamendedtherequirementsinIAS40InvestmentPropertyastheyrelatetowhenacompanyshouldtransferapropertyassetto,orfrom,investmentproperty.

Theamendmentsapplyforannualperiodsbeginningonorafter1January2018.AECIwillassesstheirimpactshouldtransactionsofthisnatureoccur.


BASIS OF REPORTING AND SIGNIFICANT ACCOUNTING POLICIES

05.9

› IFRIC 22 Foreign Currency Transactions and Advance Considerations — when a foreigncurrencyconsideration ispaidorreceivedinadvanceoftheitemitrelatesto(whichmaybeanasset,anexpenseorincome), IAS21TheEffectsofChangesinForeignExchangeRates isnotclearonhowtodeterminethetransactiondatefortranslatingtherelateditem.

Thishasresultedindiversityinpracticeregard-ingtheexchangerateusedtotranslatetherelateditem.IFRIC22clarifiesthatthetrans-actiondateisthedateonwhichthecompanyinitiallyrecognisestheprepaymentordeferredincomearisingfromtheadvanceconsideration.Fortransactionsinvolvingmultiplepaymentsorreceipts,eachpaymentorreceiptgivesrisetoaseparatetransactiondate.

Theinterpretationappliesforannualreportingperiodsbeginningonorafter1January2018.

› IFRS 16 Leases —thisstandardintroducesasingle,on-balancesheetleaseaccountingmodelfor lessees.A lesseerecognisesaright-of-useassetrepresentingitsrighttousetheunderlyingassetandaleaseliabilityrepresenting itsobligationtomakeleasepayments.Thereareoptionalexceptionsforshort-termleasesandleasesoflow-valueitems.Lessoraccountingremainssimilartocurrentpractice, i.e. lessorscontinuetoclassifyleasesasfinanceoroperatingleases.IFRS16replacesIAS17Lease,IFRIC4Deter-miningwhetheranArrangementcontainsaLease,SIC15OperatingLeases—IncentivesandSIC27EvaluatingtheSubstanceofTransactionsInvolvingtheLegalFormofaLease.Itincludesmoredisclosuresforbothlesseesandlessors.

TheGroupwilladoptthisstandardwhen it becomes effective. Management isassessingthepotentialimpactofthisnewstandardandstillneedstomakeadecisiononthetransitionmethodtobeappliedaswellasthepracticalexpedientstobeused,ifelected.

› IFRIC 23 Uncertainty over Income Tax Treatments —thisstandardclarifiestheaccountingforincometaxtreatmentsthathaveyettobeacceptedbytaxauthorities.Specifically, IFRIC23providesclarityonhowto incorporatethisuncertainty intothemeasurementoftaxasreportedinthefinancialstatements.

IFRIC23doesnotintroduceanynewdisclo-suresbutreinforcestheneedtocomplywithexistingdisclosurerequirementsabout:

› judgementsmade;

› assumptionsandotherestimatesused;and

› thepotentialimpactofuncertaintiesthatarenotreflected.

IFRIC23appliesforannualperiodsbeginningonorafter1January2019.

BASIS OF MEASUREMENTTheGroupfinancialstatementsandtheCompanyfinancialstatementshavebeenpreparedonthegoing-concernbasisusingthehistoricalcostconvention,exceptforavailable-for-salefinan-cialassets,derivativeinstruments,contingentconsideration,pensionfundemployersurplusaccountsandpost-retirementmedicalaidobligationliabilitieswhicharemeasuredatfairvalue.Equity-settledshare-basedpaymentsaremeasuredatfairvalueatthegrantdate.

FUNCTIONAL AND PRESENTATION CURRENCYTheGroup financial statements and theCompanyfinancialstatementshavebeenprepared in SouthAfrican rand,which istheCompany’sfunctionalcurrency.All thefinancial informationhasbeenroundedtothenearestmillionof rand,exceptwhereotherwisestated.

SIGNIFICANT JUDGEMENTS MADE BY MANAGEMENT AND SOURCES OF ESTIMATION UNCERTAINTYThepreparationofthefinancialstatementsinaccordancewith IFRSrequiresmanage-menttomakejudgements,estimatesandassumptionsthataffecttheapplicationofpoliciesandreportedamountsofassetsandliabilities,incomeandexpenses.Theestimatesandassociatedassumptionsarebasedonhistoricalexperienceandvariousotherfactorsthatarebelievedtobereasonableunderthecircumstances.Actualresultsmaydifferfromtheseestimates.Estimatesandunderlyingassumptionsare reviewedonanongoingbasis.Revisionstoaccountingestimatesarerecognisedintheperiodinwhichestimatesarerevisedandinanyfutureperiodsaffected.

Theaccountingpolicieswhichhavebeenidentified as including assumptions andestimationuncertaintiesthatmayhaveanimpactonthefutureresultsareasfollows:

INCOME AND DEFERRED TAXTheGroupissubjecttoincometaxesinvariousjurisdictionswhichapplydifferenttaxlegis-lationandthecalculationoftheGroup’staxchargeinvolvesadegreeofestimationandjudgement.Deferredtaxassetsarerecognisedtotheextentthatitisprobablethattaxableincomewillbeavailable infutureagainstwhichtheycanbeutilised.Futuretaxableprofitsareestimatedbasedonbusinessplanswhich includeestimatesandassumptionsregardingeconomicgrowth, interestandinflationratesandmarketconditions.

ENVIRONMENTAL REMEDIATIONEstimatingthefuturecostsofenvironmen-tal remediationobligations iscomplexandrequiresmanagementtomakeestimatesandjudgementsbecausemostoftheobligationswillbefulfilled inthefutureand lawsareoftennotclearregardingwhatisrequired.Theresultingprovisionsareinfluencedfurtherbychangingtechnologiesandsocial,political,environmental,safety,businessandstatutoryconsiderations.Asexplainedinnote15tothefinancialstatements,theGrouphastoapplyjudgementindeterminingtheenvironmentalremediationprovision.Theprovisionmayneedtobeadjustedwhendetailedcharacterisationofthelandisperformedorwhentheenduseisdetermined.

ASSET LIVES AND RESIDUAL VALUESProperty,plantandequipment, investmentpropertyandintangibleassetsaredepreciatedoramortisedovertheirestimatedusefullivestakingintoaccountresidualvalues,whereappro-priate.Theactuallivesoftheassetsandresidualvaluesareassessedannuallyandmayvarydependingonanumberoffactors.Inreassess-ingassetlives,factorssuchastechnologicalinnovation,productlifecyclesandmaintenanceprogrammesaretakenintoaccount.Residualvalueassessmentsconsiderissuessuchascurrentmarketconditions,theremainingusefullifeofanassetanddisposalvalues.

POST-RETIREMENT BENEFIT OBLIGATIONSPost-retirementdefinedbenefitsareprovidedforcertainexistingandformeremployees.Actuarialvaluationsarebasedonassumptionswhich includeemployeeturnover,mortality rates, the discount rate, the expectedlong-termrateofreturnofretirementplanassets,healthcare inflationcostsandratesof increase in compensation costs. Thenetpresentvalueofcurrentestimatesforpost-retirementmedicalaidbenefitshasbeendiscountedtoitspresentvalueat9,5%perannum(2016:9,3%),beingtheestimatedinvestmentreturnassumingthe liability isfullyfunded.Medicalcost inflationofCPI+1%perannumhasbeenassumed(2016:CPI+1%).Seenote29tothefinancialstatements.

IMPAIRMENTSAnassetisimpairedwhenitscarryingamountexceedsitsrecoverableamount.Goodwillandintangibleassetswithindefiniteusefullivesaretestedforimpairmentannuallywhileotherassetsaretestedifthereisanindicationthattheymaybe impaired.Theassessmentofrecoverableamountsinvolvestheapplicationof judgementrelatingtothecalculationofvalue-in-use,which isbasedoncashflowprojections,variations in theamountandtimingofthesecashflowsandthediscountrateusedtodeterminethepresentvalueofthosefuturecashflows.


Theseareassessedforeachcashgeneratingunittowhichgoodwillisattributedorforthecashgeneratingunitorassetwhereindicatorsofimpairmenthavebeenassessed.Seenote4 forsignificantassumptionsonvalue-in-useforgoodwill.

CONTINGENT CONSIDERATIONSAnycontingentconsideration ismeasuredatfairvalueatthedateofacquisition.Thecontingentconsiderationisremeasuredatfairvalueateachreportingdateandsubsequentchangesinthefairvalueofthecontingentconsiderationarerecognisedinprofitorloss.Seenote27forthejudgementsapplied indeterminingthefairvalue.

SIGNIFICANT ACCOUNTING POLICIESThesignificantaccountingpoliciesof theGroup,assetoutherein,havebeenappliedconsistentlythroughouttheGroupandareconsistentwiththosefollowedintheprioryearinallmaterial respects.Unlessspecificallystatedotherwise,theCompanyalsoappliesallGroupaccountingpolicies.

BASIS OF CONSOLIDATION

SUBSIDIARIESSubsidiariesarethoseentitiescontrolledbytheCompany.Aninvestorcontrolsaninvesteewhenitisexposed,orhasrights,tovariablereturnsfromitsinvolvementwiththeinvesteeandhastheabilitytoaffectthosereturnsthroughitspowerovertheinvestee.

TheGroupfinancialstatementsincorporatethefinancialstatementsoftheCompanyanditssubsidiaries.Theresultsofsubsidiaries, includingthoseacquiredordisposedofduringtheyear,areincludedfromthedatescontrolcommencedandup to thedates controlceased.Inter-GrouptransactionsandbalancesbetweenGroupentities,aswellasanyunreal-isedincomeandexpenditurearisingfromsuchtransactions,areeliminatedonconsolidation.Non-controllinginterestsinthenetassetsofsubsidiariesareidentifiedseparatelyfromtheGroup’sequitytherein.

Thenon-controllinginterest,whichrepresentsthepresentownership interestsandwouldentitleshareholderstoaproportionateshareoftheentity intheeventof liquidation, ismeasuredatthenon-controlling interest’sproportionalshareoftheacquiree’sidentifi-ablenetassets.Subsequentprofitsorlosses,andeachcomponentofothercomprehensiveincome,areattributed tonon-controlling interestevenifitresultsinthenon-controllinginteresthavingadeficitbalance.Allothercomponentsofnon-controlling interestaremeasuredattheiracquisitiondatefairvalues.

ChangesintheGroup’sinterestinasubsidiarythatdonot result ina lossofcontrolareaccountedforastransactionswithownersin theircapacityasowners.Adjustmentstonon-controlling interestsarebasedonaproportionateamountofthenetassetsofthesubsidiary.Noadjustmentsaremadetogoodwillandnogainorlossisrecognisedintheincomestatement.

Onlossofcontrol,theGroupderecognisestheassetsandliabilitiesofthesubsidiary,anynon-controlling interestsandothercompo-nentsofequityrelatedtothesubsidiary.Anysurplusordeficitarisingonthelossofcontrolis recognised inthe incomestatement. IftheGroupretainsanyinterestintheformersubsidiary, thensuch interest ismeasuredatfairvalueatthedatethatcontrolislost.

Subsequently, that retained interest isaccountedforasanequity-accountedinvesteeorasanavailable-for-saleasset,dependingonthelevelofinfluenceretained.

JOINT ARRANGEMENTSJoint arrangements are those entitiesin respectofwhichthere isacontractualagreementwherebytheGroupandoneormoreotherpartiesundertakeaneconomicactivity,whichissubjecttojointcontrol.

Joint control is the contractually agreedsharingofcontrolofanarrangement,whichexistsonlywhendecisionsabouttherelevantactivitiesrequiretheunanimousconsentofthepartiessharingcontrol.

A jointventure isanarrangementwherebytheparties thathave jointcontrolof thearrangementhaverightstothenetassetsofthearrangement.

Ajointoperationisanarrangementwherebythepartiesthathavejointcontrolofthearrange-menthaverightstotheassets,andobligationsfortheliabilities,relatingtothearrangement.

TheGroup’sparticipationinjointventuresisaccountedforusingtheequitymethod.Jointventuresarerecognisedatcostinitially,whichincludestransactioncosts.Subsequenttoinitialrecognition,theGroupfinancialstate-mentsincludetheGroup’sshareofprofitsorlossesandothercomprehensive incomeoftheequity-accountedinvestees,untilthedateonwhichjointcontrolceases.Animpairmentlossismeasuredbycomparingtherecoverableamountoftheinvestmentwithitscarryingamount.Animpairmentlossisrecognisedintheincomestatementandisreversediftherehasbeenafavourablechangeintheestimatesusedtodeterminetherecoverableamount.TheGroup’sparticipationinjointoperationsisaccountedforbyrecognisingtheGroup’sshareofassets,liabilities,revenueandexpensesonaline-by-linebasis.

WhereaGroupentitytransactswithajointarrangementoftheGroup,unrealisedprofitsareeliminatedtotheextentoftheGroup’sinterestinthejointarrangement.

ASSOCIATESAnassociateisanentityinwhichtheGroupholdsanequityinterest,overwhichtheGrouphassignificant influenceand isneitherasubsidiarynoraninterestinajointarrange-ment.Significant influence isthepowertoparticipateinthefinancialandoperatingpolicydecisionsoftheassociatebutisnotcontrolorjointcontroloverthosepolicies.

Anassociate is recognisedatcost in theCompanyfinancialstatements.

AnassociateisrecognisedatcostinitiallyintheGroup.Post-acquisitionresultsofassociatecompaniesareaccountedfor intheGroupfinancialstatements,usingtheequitymethodofaccountingfromthedatethatsignificantinfluencecommencesuntil thedate thatsignificantinfluenceceases.Animpairmentlossismeasuredbycomparingtherecoverableamountoftheinvestmentwithitscarryingamount.An impairment loss is recognisedinthe incomestatementandisreversediftherehasbeenafavourablechangeintheestimatesusedtodeterminetherecoverableamount.WhereaGroupentitytransactswithanassociateoftheGroup,unrealisedprofitsareeliminatedtotheextentoftheGroup’sinterestintheassociate.

WhentheGroup’sshareoflossesexceedsitsinterestinanequity-accountedinvestee,thecarryingamountofthatinterestisreducedtonilandtherecognitionoffurther lossesisdiscontinued,excepttotheextent thattheGrouphasanobligationtoorhasmadepaymentsonbehalfoftheinvestee.

INVESTMENTS IN SUBSIDIARIESInvestmentsinsubsidiariesintheCompanyfinancialstatementsarerecognisedatcostlessimpairmentlossesandincludetheequitycontributionsofshare-basedpaymentstoemployeesofsubsidiariesaswellas loansowingfromnon-operatingsubsidiaries.

BUSINESS COMBINATIONS AND GOODWILLBusinesscombinationsareaccountedforusingtheacquisitionmethodasattheacquisitiondate,which isthedateonwhichcontrol istransferred to theGroup.Goodwill isnotamortised.Thegoodwillof jointventuresandassociates is included inthecarryingamountoftherelevantequity-accountedinvestee.Goodwillisreviewedforimpairmentatleastannually.


05.9BASIS OF REPORTING AND SIGNIFICANT ACCOUNTING POLICIES CONTINUED

Cashgeneratingunitsrepresentthebusinessoperationsfromwhichthegoodwillaroseatthedateofacquisition.Ondisposalofasubsidiary,jointventureorassociate,theattributableamountofgoodwillisincludedinthedetermi-nationoftheprofitorlossondisposal.

TheGroupmeasuresgoodwillattheacqui-sitiondateas:

› thefairvalueoftheconsiderationtrans-ferred;plus

› therecognisedamountofanynon-controllinginterestsintheacquiree;plus

› ifthebusinesscombinationisachievedinstages,thefairvalueoftheexistingequityinterestintheacquiree;less

› thenetrecognisedamount(generallyfairvalue)ofthe identifiableassetsacquiredandliabilitiesassumed.

If,onabusinesscombination,thefairvalueoftheGroup’sinterestintheidentifiableassetsandliabilitiesexceedsthecostofacquisition,thisexcess,abargainpurchasegain,isrecog-nisedintheincomestatementimmediately.

The consideration transferred does notincludeamountsrelatedtothesettlementofpre-existingrelationships.Suchamountsaregenerallyrecognisedintheincomestatement.

Costsrelatedtotheacquisition,otherthanthoseassociatedwiththe issueofdebtorequitysecurities that theGroup incurs inconnectionwithabusinesscombination,areexpensedasincurred.

Anycontingentconsideration ismeasuredatfairvalueatthedateofacquisition.Thecontingentconsiderationisremeasuredatfairvalueateachreportingdateandsubsequentchangesinthefairvalueofthecontingentconsiderationarerecognisedinthe incomestatement. Change in estimate of thecontingentconsiderationisrecognisedinnetoperatingcostsandchangesasaresultofthetimevalueofmoneyarerecognised ininterestexpense.

DEFERRED TAXAdeferredtaxassetistheamountofincometaxrecoverableinfutureperiodsinrespectofdeductibletemporarydifferences,thecarryforwardofunusedtaxlossesandunusedtaxcredits.Adeferredtaxliabilityistheamountof incometaxpayable infutureperiods inrespectoftaxabletemporarydifferences.

Temporarydifferencesaredifferencesbetweenthecarryingamountsofassetsandliabilitiesforfinancial reportingpurposesandtheirtaxbase.Thetaxbaseofanasset is theamountthatisdeductiblefortaxpurposesiftheeconomicbenefitsfromtheassetaretaxable,oristhecarryingamountoftheassetiftheeconomicbenefitsarenottaxable.

Thetaxbaseofaliabilityisthecarryingamountoftheliabilitylesstheamountdeductibleinrespectofthatliabilityinfutureperiods.

Deferred tax is recognised in respect oftemporarydifferencesbetweenthecarryingvaluesofassetsandliabilitiesforaccountingpurposesandtheircorrespondingvaluesfortaxpurposes.Deferredtaxisalsorecognisedontaxlosses.Nodeferredtaxisrecognisedontemporarydifferencesrelatingtotheinitialrecognitionofgoodwill, the initial recogni-tion(otherthaninabusinesscombination)ofanassetora liabilitytotheextentthatneitheraccountingnortaxprofitisaffectedonacquisition,anddifferencesrelatingtoinvestments insubsidiaries, jointarrange-mentsandassociatestotheextentthattheGroup isabletocontrol thetimingofthereversalofthetemporarydifferencesanditisprobablethattheywillnotreverseintheforeseeablefuture.

Adeferredtaxassetisrecognisedonlytotheextentthatitisprobablethatfuturetaxableprofitswillbeavailableagainstwhichtheassociatedunusedtaxlossesanddeductibletemporarydifferencescanbeutilised.Deferredtaxassetsarereducedtotheextentthatitisno longerprobablethattherelatedtaxbenefitwillberealised.Deferredtaxassetsarereviewedateachreportingdate.

Deferredtaxassetsandliabilitiesareoffsetifthereisalegallyenforceablerighttooffsetcurrenttax liabilitiesandassetsandtheyrelatetoincometaxesleviedbythesametaxauthorityonthesametaxableentity.

Deferred tax assets and liabilities aremeasuredatthetaxratesthatareexpectedtoapplytotheperiodwhentheassetisrealisedortheliabilityissettled,basedontaxrates/lawsthathavebeenenactedorsubstantivelyenactedbytheendofthereportingperiod.

PROPERTY, PLANT AND EQUIPMENTProperty,plantandequipmentismeasuredatcost lessaccumulateddepreciationandaccumulatedimpairmentlosses.Costincludesexpendituredirectlyattributabletotheacqui-sitionofanasset.Thecostofself-constructedassetsincludesthecostofmaterialsanddirectlabourandanyothercostsdirectlyattributabletobringingtheassetintoaworkingconditionforitsintendeduse,aswellasgainsandlossesonqualifyingcashflowhedgesandborrowingcostsattributabletothatasset.Depreciationisprovidedonproperty,plantandequipment(otherthanland)onthestraight-linebasisatrateswhichwillwriteofftheassetsovertheirestimateduseful lives.Assetsunderconstructionarenotdepreciateduntiltheyareavailableforuse.Depreciationmethods,usefullivesandresidualvaluesarereviewedateachreportingdate.

Theestimatedusefullivesareasfollows:

› Property » land unlimited

» buildings 5to50years

› Plant and equipment » plantandequipment 3to30years

» furnitureandfittings 3to15years

» computerequipment 3to10years

» motorvehicles 3to12years

Whensignificantpartsofanitemofproperty,plantandequipmenthavedifferentusefullives,theyareaccountedforasseparateitemsofproperty,plantandequipment.

Gainsandlossesondisposalsofproperty,plant and equipment are determined bycomparingtheproceedsfromdisposalwiththecarryingamountsoftheitemssoldandarerecognisedintheincomestatement.

Specificplantsparesaremeasuredatcostandaredepreciatedovertheestimatedusefullivesoftheplantstowhichtheyrelate.

Thecostofreplacingpartofanitemofproperty, plantandequipment is recognised in thecarryingamountoftheitemifitisprobablethatthefutureeconomicbenefitsembodiedinthepartwillflowtotheGroupanditscostcanbemeasuredreliably.Thecarryingamountofthereplacedpartisderecognised.Thecostofmaintainingproperty,plantandequipmentisrecognisedintheincomestatement.

INVESTMENT PROPERTIESInvestmentpropertiescomprisingproper-ties surplus to the Group’s operationalrequirements,and leasedtothirdparties,aremeasured at cost less accumulateddepreciationandaccumulated impairmentlosses.Landisnotdepreciatedandbuildingsaredepreciatedonastraight-linebasisovertheiruseful livesof20years.Depreciationmethods,usefullivesandresidualvaluesarereviewedateachreportingdate.Anygainorlossondisposal(calculatedasthedifferencebetweenthenetproceedsfromdisposalandthecarryingamount) is recognised intheincomestatement.

Transferstoandfrominvestmentpropertyaremadewhenthereisevidenceofachangeofuse.Transfersaremeasuredatthecarryingamountimmediatelypriortotransferandnochangestothecarryingamountaremadeunlessthechangeinuseresultsinanindica-tionofimpairment.


INTANGIBLE ASSETSIntangibleassetsaremeasuredatcostlessaccumulatedamortisationandaccumulatedimpairment losses. Intangibleassetsarerecognisedifitisprobablethatfutureeconomic benefitswillflowfromtheintangibleassetsandtheircostscanbemeasuredreliably.Subsequentexpenditure iscapitalisedonlywhenitincreasesthefutureeconomicbenefitsembodied inthespecificassettowhich itrelates.Allotherexpenditureisrecognisedintheincomestatementasincurred.

Intangibleassetswithfiniteusefullivesareamortisedonastraight-linebasisovertheirestimateduseful lives. Theamortisationmethodsandestimatedremainingusefullivesarereviewedatleastannually.

Intangibleassetswithindefiniteusefullivesarenotamortisedbutaretestedateachreportingdateforimpairment.

Theestimatedusefullivesareasfollows:

› Customerandmarketing relationships 5to20years

› Patentsandtrademarks 15to20years

› Technicalandlicensing agreements 17years

› Other 3to10years

Intangibleassetsarederecognisedondisposal, orwhennofutureeconomicbenefitsareexpectedfromuse.Gainsor lossesarisingfromderecognitionofan intangibleasset,measuredasthedifferencebetweenthenetdisposalproceedsandthecarryingamountoftheasset,arerecognised inthe incomestatementwhentheassetisderecognised.

INTANGIBLE ASSETS ACQUIRED IN A BUSINESS COMBINATIONIntangible assets acquired in a businesscombination,andrecognisedseparatelyfromgoodwill,arerecognisedinitiallyattheirfairvalueattheacquisitiondate.Subsequently,theseintangibleassetsaremeasuredatcostlessaccumulatedamortisationandaccumu-latedimpairmentlosses,onthesamebasisasintangibleassetsthatareacquiredseparately.

RESEARCH AND DEVELOPMENTResearchcostsareexpensedintheincomestatement in the year inwhich they areincurred.Developmentcostsarereviewedonanongoingbasisandarecapitalised iftheycanbemeasuredreliably,theproductorprocess istechnicallyandcommerciallyfeasible, it isprobablethattheassetwillgeneratefutureeconomicbenefitsandtheGroupintends,andhassufficientresources,tocompletedevelopmentandtouseorselltheasset.Developmentcostsareexpensedintheincomestatementiftheydonotqualifyforcapitalisation.

Ifaprojectisabandonedduringthedevelop-mentstage,thetotalaccumulatedexpenditureiswrittenoffintheincomestatement.

Afterinitialrecognition,developmentcostsarecarriedatcostlessaccumulatedamortisationandaccumulatedimpairmentlosses.

NON-CURRENTASSETSCLASSIFIED AS HELD FOR SALEManagementclassifiesanon-currentasset(ordisposalgroup)asheld for sale if itscarryingamountwillberecoveredprincipallythroughasaletransactionratherthanthroughcontinuinguse.Property,plantandequipmentandintangibleassetsarenotdepreciatedoramortisedoncetheyhavebeenclassifiedasheldforsale.

A non-current asset (or disposal group)classifiedasheldforsaleismeasuredatthelowerofitscarryingamountandfairvaluelesscoststosell.

Anyimpairmentlossonadisposalgroupisallocatedfirsttogoodwillandthentotheremainingassetsandliabilitiesonapro-ratedbasisexceptthatnolossisallocatedtoinven-tories,financialassets,deferredtaxassetsandemployeebenefits,whichcontinuetobemeasuredinaccordancewiththeGroup’saccountingpolicies. Impairment lossesoninitialclassificationasheldforsale,andsubse-quentgainsorlossesonremeasurement,arerecognisedintheincomestatement.Gainsarenotrecognisedinexcessofanycumulativeimpairmentlosses.

IMPAIRMENT

FINANCIAL ASSETSAfinancialassetnotcarriedatfairvaluethroughprofitor loss isassessedateachreportingdatetodeterminewhetherthereisanyobjectiveevidencethatitisimpaired.Afinancialassetisconsideredtobeimpairedifobjectiveevidenceindicatesthatoneormorelosseventsoccurredafterinitialrecognitionoftheassetthathadanegativeeffectontheestimatedfuturecashflowsofthatasset.

Animpairmentlossinrespectofafinancialassetmeasuredatamortisedcostiscalculatedasthedifferencebetweenitscarryingamountandthepresentvalueoftheestimatedfuturecashflows,discountedattheoriginaleffectiveinterestrate.

Individuallysignificantfinancialassetsaretestedforimpairmentonanindividualbasis.Theremainingfinancialassetsareassessedcollectivelyingroupsthatsharesimilarcreditriskcharacteristics.

Allimpairmentlossesarerecognisedintheincomestatement.

Animpairmentlossisreversedifthereversalcanberelatedobjectivelytoaneventoccurringaftertheimpairmentlosswasrecognised.Forfinancialassetsmeasuredatamortisedcost,thereversalisrecognisedintheincomestatement.

NON-FINANCIAL ASSETSThecarryingamountsoftheGroup’snon- financialassets,otherthaninventoriesanddeferredtaxassets,are reviewedateachreportingdatetodeterminewhetherthereisanyindicationofimpairment.Ifthereisanyindicationthatanassetmaybeimpaired,itsrecoverableamount isestimatedtodeter-minetheextentoftheimpairmentloss.Therecoverableamountisthehigherof itsfairvalue,lesscoststosell,anditsvalue-in-use.

Value-in-useisestimatedtakingintoaccountfuturecashflows,forecastmarketconditionsandtheexpectedlivesoftheassets.Animpairmentlossisrecognisedwheneverthecarryingamountofanassetoracashgeneratingunitexceedsitsrecoverableamount.Impairmentlossesarerecognisedintheincomestatement.Subsequenttotherecognitionofanimpairmentloss,thedepreciationchargefortheassetisadjustedtoallocateitsremainingcarryingvalue,lessanyresidualvalue,overitsremainingusefullife.

Impairmentlossesrecognisedinrespectofacashgeneratingunitareallocatedfirsttoreducethecarryingamountofanygoodwillallocatedtothecashgeneratingunitandthentoreducethecarryingamountoftheotherassetsofthecashgeneratingunit.

An impairment loss isreversedonlytotheextentthatthecarryingamountoftheassetorcashgeneratingunitdoesnotexceedthenetcarryingamountthatwouldhavebeendeterminedifnoimpairmentlosshadbeenrecognised.Areversalofanimpairmentlossisrecognisedintheincomestatement.

Goodwillisallocatedtocashgeneratingunitsthatareexpectedtobenefitfromthesynergiesofthebusinesscombination.Goodwillandthecashgeneratingunitstowhichithasbeenallocatedaretestedforimpairmentonanannualbasis,evenifthereisnoindicationofimpairment.Impairmentlossesongoodwillarenotreversed.

INVENTORIESInventoriesofrawandpackagingmaterials,productsandintermediatesandmerchandisearemeasuredatcostusingthefirst-infirst-outmethodortheweightedaveragecostmethod,dependingonthenatureoftheinventoriesortheirusetobusinessesintheGroup.

Thecostoffinishedgoodsandworkinprogresscomprises raw and packaging materials,manufacturingcosts,depreciationandanappropriateallocationofproductionoverheads.Costsmayincludetransfersfromothercompre-hensiveincomeofanygainorlossonqualifyingcashflowhedgesofforeigncurrencypurchases.



Inallcases inventoriesarevaluedat thelowerofcostandnetrealisablevalue.Netrealisablevalueistheestimatedsellingpriceintheordinarycourseofbusiness, lesstheestimatedcostsofcompletionandsellingexpenses,takingintoaccountobsolescence.

PROVISIONSAprovisionisrecognisedwhentheGrouphasapresentlegalorconstructiveobligation,asaresultofpastevents,forwhichitisprobablethatanoutflowofeconomicbenefitswilloccurandwhereareliableestimatecanbemadeoftheamountoftheobligation.Theamountrecognisedasaprovisionisthebestestimateoftheconsiderationrequiredtosettletheobligationatthereportingdate,takingintoaccounttherisksanduncertaintiesassociatedwiththeobligation.Non-currentprovisionsaredeterminedbydiscountingtheexpectedfuturecashflowstotheirpresentvalueatapre-taxratethatreflectscurrentmarketassessmentofthetimevalueofmoney.Theunwindingofthediscountisrecognisedininterestexpense.

Whensomeoralloftheeconomicbenefitsrequiredtosettleaprovisionareexpectedtoberecoveredfromathirdparty,thereceivableisrecognisedasanassetifitisvirtuallycertainthatreimbursementwillbereceivedandtheamountofthereceivablecanbemeasuredreliably.

ENVIRONMENTAL REMEDIATIONAprovisionforenvironmentalremediationisrecognised inaccordancewiththeGroup’senvironmentalpolicyandapplicable legalrequirements.Theadequacyoftheprovisionis reviewedannuallyatthereportingdateagainstchangedcircumstances, legislationandtechnology.

SHARE CAPITALSharecapitalcomprisesordinarysharesandredeemableconvertibleBordinarysharesandisclassifiedasequity.Issuedordinarysharesaremeasuredatthefairvalueoftheproceedsreceivedlessanydirectlyattributableissuecosts.Anamountequaltotheparvalueofthesharesissuedispresentedassharecapital.Theamountbywhichthefairvalueexceedsparvalueispresentedassharepremium.Fornoparvalueshares,thefairvalueispresentedinfullassharecapital.

Shares repurchasedby theCompanyarecancelled immediatelyandaredelistedassoonas ispracticable.Theamountpaid isrecognisedbyreducingthesharecapitalbytheparvalueofsharesrepurchased,withanyexcessreducingthecarryingamountofsharepremiumtotheextentavailable,andthereafterreducingretainedearnings.

PREFERENCE SHARESPreferencesharesaremeasuredathistoricalcost,arecumulativeandareclassifiedasequity.Dividendspaidaredisclosed inthestatementofchangesinequity.

TREASURY SHARESTreasurysharesareCompanysharesheldbyasubsidiaryandbytheAECIEmployeesShareTrust(“EST”)andareexcludedfromthesharesrecognisedasGroupequity.

EARNINGS PER SHARE

BASIC EARNINGS PER SHAREBasicearningspershare iscalculatedbydividingthenetprofitattributabletoequityholdersoftheGroupbytheweightedaveragenumberofordinaryshares in issueduringtheyear.

DILUTED EARNINGS PER SHAREDilutedearningspershare iscalculatedbydividingthenetprofitattributabletoequityholdersoftheGroupbytheweightedaveragenumberofordinarysharesinissue,adjustedfor thedilutiveeffectof thecontingentlyreturnableordinarysharesissuedtotheAECICommunityEducationandDevelopmentTrust(“CEDT”),thepotentialsharesissuedtotheESTandtheperformancesharesissuedaspartoftheGroup’sLong-termIncentivePlan.

REVENUERevenue ismeasuredat thefairvalueofthe consideration received or receivable,being invoicedsalesofgoodsandservicestocustomers,netofreturns,tradediscounts,rebatesandValueAddedTax(“VAT”)andrentalincomefrominvestmentproperties.

Revenueinrespectofgoodsandtherelatedservicessoldisrecognisedwhenthesignificantrisksandrewardsofownershiphavebeentransferredtothepurchaser,whendeliveryhasbeenmadeandtitlehaspassed,whentheamountoftherevenueandtherelatedcostscanbemeasuredreliably,andwhenrecoveryofthesaleconsiderationisprobable.

Revenueinrespectofrentalsreceivedfromleasingactivitiesisrecognisedonastraight-linebasisovertheperiodofthelease,wherefixedescalationclausesapply,andwhenthereisareasonableexpectationthatrecoveryoftheleaserentalisprobable.Wherenofixedescalationclausesareapplicabletoalease,rentalincomeisrecognisedintheperiodinwhichitisduebythelessee.

FOREIGN CURRENCIES

FOREIGN CURRENCY TRANSLATIONSTransactionsinforeigncurrenciesaretranslated intothefunctionalcurrenciesofeachentityintheGroupattheratesofexchangerulingonthedatesofthetransactions.Monetaryassetsandliabilitiesdenominatedinforeigncurren-ciesaretranslatedattheratesofexchangerulingatthereportingdate.Non-monetaryassetsandliabilitiesdenominatedinforeigncurrenciesthataremeasuredatfairvaluearetranslatedintothefunctionalcurrencyoftheentityconcernedattheratesofexchangerulingatthedatesofthetransactions.

Gainsorlossesarisingonexchangedifferencesarerecognisedintheincomestatement.Costsassociatedwithforwardcovercontractslinkedtoborrowingsareincludedinfinancingcosts.

FOREIGN OPERATIONSThefinancialstatementsofforeignoperationsintheGrouparetranslatedintoSouthAfricanrandasfollows:

› assets,includinggoodwill,andliabilitiesattheratesofexchangerulingatthereportingdate;

› income,expenditureandcashflowitemsattheweightedaveragerateofexchangeduringtheaccountingperiod;and

› equityathistoricalrates.

Differencesarisingontranslationarerecog-nisedinothercomprehensiveincomeandarepresentedintheforeigncurrencytranslationreserveinreserves.WhentheGroupdisposesofonlypartofitsinterestinasubsidiarythatincludesaforeignoperation,whileretainingcontrol,therelevantportionofthecumulativeforeigncurrencytranslationreserveisrecog-nisedinnon-controllinginterest.Differencesarisingfromamonetaryitemreceivablefromorpayabletoaforeignoperation,thesettle-mentofwhichisneitherplannednorlikelyintheforeseeablefuture,areconsideredpartofanetinvestmentinaforeignoperationandarerecognisedinothercomprehensiveincomeintheforeigncurrencytranslationreserve.WhentheGroupdisposesofitsentireinterestinaforeignoperationorpartiallydisposesofasubsidiary, resulting in lossofcontrol,allforeigncurrencytranslationdifferencesarereclassifiedtoprofitorloss.

FINANCIAL INSTRUMENTSFinancialinstrumentsarerecognisedatfairvalueinitially.Directlyattributabletransactioncostsareincludedintheamountrecognisedonlywhenchangesinfairvaluearenotsubse-quentlyrecognisedintheincomestatement.Subsequenttoinitialrecognition,theseinstru-mentsaremeasuredassetoutasfollowsinrespectofderivativeandnon-derivativefinancialinstruments.


OFFSETIfalegallyenforceablerightcurrentlyexiststosetoffrecognisedamountsoffinancialassetsandfinancial liabilities,whichare indeterminablemonetaryamounts,andtheGroupintendseithertosettleonanetbasisor realisetheassetandsettlethe liabilitysimultaneously,therelevantfinancialassetsandfinancialliabilitiesareoffset.

NON-DERIVATIVE FINANCIAL INSTRUMENTSNon-derivativefinancialinstrumentscompriseinvestmentsinequitysecurities,thepensionfundemployersurplusaccounts (“ESAs”)inthedefined-contributionplans, loanstoandfromsubsidiaries,accountsreceivable, cash, loans and borrowings, loans fromjointventures,contingentconsiderationandaccountspayable.

TheGrouprecognisesloansandreceivablesonthedateonwhichtheyareoriginated.AllotherfinancialinstrumentsarerecognisedonthedateonwhichtheGroupbecomesapartytothecontractualprovisionsoftheinstrument.

TheGroupderecognisesafinancialassetwhen the contractual rights to the cashflowsfromtheassetexpire,or it transferstherightsto receivethecontractualcashflowsonthefinancialasset inatransac-tioninwhichsubstantivelyalltherisksandrewardsofownershipofthefinancialassetaretransferred.Any interest intransferredfinancialassetsthatiscreatedorretainedbytheGroupisrecognisedasaseparateassetorliability.TheGroupderecognisesafinancialliabilitywhenitscontractualobligationsaredischarged,cancelledorexpire.

INVESTMENTSMoneymarketinvestmentsareclassifiedasfinancialassetsatfairvaluethroughprofitorloss.Allchangesinfairvaluearerecognisedintheincomestatement.Fairvalueisdeterminedusinganobservablemarketvalue.

Investmentsinequitysecuritiesareclassifiedasavailableforsalefinancialassetsandaremeasuredatfairvaluewithanygainsorlossesrecognisedinothercomprehensiveincome,alongwiththeassociateddeferredtax.Wherethefairvaluecannotbemeasuredreliably,theseinstrumentsarecarriedatcost.Whentheseassetsarederecognised,thegainorlossaccumulatedinothercomprehensiveincomeisreclassifiedtoprofitorloss.

ACCOUNTS RECEIVABLEAccounts receivable are measured atamortisedcostusingtheeffective interestmethod,lessanyimpairmentlosses.

CASHCashismeasuredatamortisedcost.

LOANS TO SUBSIDIARIES, JOINT ARRANGEMENTS AND ASSOCIATESLoansbytheCompanytosubsidiaries,jointarrangementsandassociatesaremeasuredatamortisedcostusingtheeffectiveinterestmethod,lessanyimpairmentlosses.

FINANCIAL LIABILITIESFinancialliabilities,includingborrowingsandaccountspayable,aremeasuredatamortisedcostusingtheeffectiveinterestmethod.

FINANCE COSTSInterestisrecognisedintheincomestatementintheperiodinwhichitisincurred.

DERIVATIVE FINANCIAL INSTRUMENTSTheGroupusesderivativefinancial instru-mentsincludingcurrencyswaps,forwardrateagreementsandforwardexchangecontractstomanageitsexposuretoforeignexchangeriskarisingfromoperational,financingandinvestmentactivities.TheGroupdoesnotholdorissuederivativefinancialinstrumentsfortradingpurposes.

DERIVATIVE INSTRUMENTSDerivative instrumentsarerecognisedandmeasuredatfairvaluewithchangesinfairvaluebeingincludedintheincomestatement,otherthanderivativesdesignatedascashflowhedges.

HEDGE ACCOUNTINGIfafairvaluehedgemeetstheconditionsforhedgeaccounting,anygainorlossonthehedgeditemattributabletothehedgedriskisincludedinthecarryingamountofthehedgeditemandrecognisedintheincomestatement.

Ifacashflowhedgemeetstheconditionsfor hedgeaccounting, theportionof thegainorlossonthehedginginstrumentthatisdeterminedtobeaneffectivehedge isrecognised inothercomprehensive incomeandthe ineffectiveportion isrecognisedintheincomestatement.

Ifaneffectivehedgeofaforecasttransactionsubsequently results intherecognitionofafinancialassetorafinancial liability, theassociatedgains or losses recognised inothercomprehensiveincomearetransferred totheincomestatementinthesameperiod inwhich theassetor liabilityaffects theincomestatement.

If the hedge of a forecast transactionsubsequentlyresultsintherecognitionofanon- financialassetorliability,theassociatedgainsorlossesrecognisedinothercomprehensiveincomeareincludedintheinitialmeasurementofthecostoftheassetorliability.

Hedge accounting is discontinued on aprospectivebasiswhenthehedgenolongermeetsthehedgeaccountingcriteria(includingwhenthehedgebecomesineffective),whenthehedgeinstrumentissold,terminatedorexercised,when,forcashflowhedges,theforecasttransaction isno longerexpectedtooccur,orwhenthehedgedesignation isrevoked.Anycumulativegainorlossonthehedginginstrumentforaforecasttransactionisretainedinothercomprehensiveincomeuntilthetransactionoccurs,unlessthetransactionisnolongerexpectedtooccurinwhichcaseitistransferredtotheincomestatement.

INVESTMENT INCOMEInterestincomeisrecognisedintheincomestatementasitaccruesanditismeasuredusingtheeffectiveinterestmethod.Dividendincomefrominvestmentsisrecognisedintheincomestatementwhentheshareholders’righttoreceivepaymenthasbeenestablished.

LEASES

FINANCE LEASESLeasesthattransfersubstantivelyall therisksandrewardsofownershipareclassifiedasfinanceleases.Assetsacquiredintermsoffinanceleasesarecapitalisedattheloweroffairvalueandthepresentvalueoftheminimumleasepaymentsattheinceptionoftheleaseanddepreciatedovertheestimatedusefullifeoftheassetortheleaseterm,ifshorter.Leasepaymentsareallocatedusingtheeffective interestmethodtodeterminetheleasefinancecost,whichisrecognisedintheincomestatementovertheleaseperiod,andthecapitalrepayment,whichreducesthefinanceleaseliabilitytothelessor.

OPERATING LEASESAllother leasesareclassifiedasoperatingleases. Paymentsmadeunder operatingleasesare chargedagainst incomeonastraight-linebasisovertheperiodofthelease.

EMPLOYEE BENEFITS

SHORT-TERM EMPLOYEE BENEFITSThecostofallshort-termemployeebenefitsisrecognisedintheincomestatementduringtheperiod inwhichtheemployeerenderstherelatedservice.Accrualsforemployeeentitlementstosalaries,performancebonusesandannual leaverepresenttheamountoftheGroup’spresentobligationasa resultofemployees’servicesprovideduptothereportingdate.Accrualsarecalculatedatundiscountedamountsbasedon currentsalaryrates.



RETIREMENT BENEFITSTheGroupprovidesdefined-contributionanddefined-benefitfundsforitsemployees,theassetsofwhichareheldinseparatefunds.ThesefundsarefinancedbypaymentsfromemployeesandtheGroup,takingaccountoftherecommendationsofindependentactuaries.

DEFINED-CONTRIBUTION PLANSAdefined-contributionplanisapost-retire-mentbenefitplanunderwhichanentitypaysfixedcontributionsintoaseparateentityandwillhavenolegalorconstructiveobligationtopayfurtheramounts.Obligationsforcontri-butionstodefined-contributionpensionplansarerecognisedintheincomestatementastherelatedserviceisprovided.

TheGroup’stwodefined-contributionplansbothhaveESAswhichwerecreatedthroughtransfersfromtheESAsintheAECIPensionFund(adefined-benefitplan).TheseESAscanonlybeutilisedinaccordancewiththeallowedusesasdefinedbythePensionFundsAct,No.24of1956,asamended(“theAct”).

TheESAsinthedefined-contributionplansarerecognisedasfinancialassetsandaremeasuredatfairvaluewithallchangesinfairvaluebeingrecognisedintheincomestatement.

TheESAshavebeenutilisedtofundaportionoftheemployercontributionmadeonbehalfofmemberstothesefunds.TheESAsareinvestedinmoneymarketassetsandearnareturnonthisinvestment.TheESAoftheAECIDefinedContributionPensionFundmayalso increaseasa resultof theunvestedretirementbenefitequalisationtarget(“RBET”),transferredwhenemployeesleavethefundbeforebecomingentitledtothatportionoftheRBET(seenote29).

DEFINED-BENEFIT PLANSAdefined-benefitplanisapost-retirementbenefitplanother thanadefined-contri-butionplan.

The Group’s net obligation in respect ofdefined-benefitplansiscalculatedseparatelyforeachplanbyestimatingtheamountoffuturebenefitthatemployeeshaveearnedinreturnfortheirservicesinthecurrentandpriorperiods; thatbenefit isdiscountedtodetermineitspresentvalue.Anyunrecognisedpastservicecostsandthefairvalueofanyplanassetsarededucted.Thediscountrateistheyieldatthereportingdateonsuitablecorporatebondsthathavematuritydatesapproximating the terms of the Group’sobligationsandaredenominatedinrandasthebenefitsareexpectedtobepaidinrand.

Actuarialvaluationsareconductedannuallyandinterimadjustmentstothosevaluationsaremadeatthereportingdate.

The calculation is performedby qualifiedactuariesusingtheprojectedunitcreditmethod.

WhenthecalculationresultsinabenefittotheGrouptherecognisedassetislimitedtoamountscreditedtotheESAs,inaccordancewiththeAct,wherethisdoesnotexceedthetotalofanyunrecognisedpastservicecostsandthepresentvalueofeconomicbenefitsavailableintheformofanyfuturerefundsfromtheplanorreductionsinfuturecontri-butionstotheplan.Tocalculatethepresentvalueofeconomicbenefits,considerationisgiventoanyminimumfundingrequire-mentsthatapplytoanyplanintheGroup.AneconomicbenefitisavailabletotheGroupifitisrealisableduringthelifeoftheplanoronsettlementoftheplanliabilities.

Thedefined-benefitcostrecognised intheincome statement includes the currentservicecostandthenetinterestonthenetdefined-benefitliability(asset).Netinterest expense (income) is the interest on thenetdefined-benefit liability (asset)at thebeginningof theperiod,calculatedusingthediscount rateused in theprioryear’sactuarialvaluation.The interesttakes intoaccountchangesinthenetdefined-benefitliability(asset)duringtheyearasaresultofcontributionsandbenefitpayments.

Thedefined-benefitcostrelatingtoactuarialgainsandlosses,whichincludethereturnonplanassets(excludingthe interest incomerecognised in the incomestatement)andtheeffectoftheassetceiling(excludingtheinterestcost)andanychanges inactuarialassumptions or experience adjustments,are remeasurementsandare recognisedimmediatelyinothercomprehensiveincome.

DEFINED-BENEFIT POST-RETIREMENT MEDICAL AID OBLIGATIONSTheGroupprovidesdefined-benefitpost- retirementhealthcarebenefitstocertainofitsretireesandeligibleemployees.TheGroup’snetobligationiscalculatedbyestimatingtheamountoffuturebenefitthatemployeeshaveearnedinreturnfortheirserviceinthecurrentandpriorperiods;thatbenefitisdiscountedtodetermineitspresentvalue.Thediscountrate is theyieldat the reportingdateonsuitablecorporatebondsthathavematuritydatesapproximatingthetermsoftheGroup’sobligationsandaredenominatedinrandasthebenefitsareexpectedtobepaidinrand.

Actuarialvaluationsareconductedannuallybyaqualifiedactuaryandthecalculationisperformedusingtheprojectedunitcreditmethod.

Thedefined-benefitcostrecognised intheincome statement includes the currentservicecostandthenetinterestonthenetdefined-benefitliability(asset).

Netinterestexpense(income)istheinterestonthenetdefined-benefit liabilityat thebeginningoftheperiod,calculatedusingthediscountrateusedintheprioryear’sactuarialvaluation.The interesttakes intoaccountchanges inthenetdefined-benefit liabilityduringtheyearasaresultofcontributionsandbenefitpayments.

Thedefined-benefitcostrelatingtoactuarialgainsandlosses,whichincludethereturnonplanassets(excludingthe interest incomerecognised in the incomestatement)andanychanges inactuarialassumptionsorexperienceadjustments,areremeasurementsandare recognised immediately inothercomprehensiveincome.

Gains or losses on the settlement of adefined-benefitplanarerecognised intheincome statement when the settlementoccurs.Thegainor lossonsettlement isdeterminedasfollows:

› thenetdefined-benefitliabilityisremeas-uredatthedateofthesettlementasifnosettlementhasoccurred;

› thegainorlossonsettlementisthendeter-minedasthedifferencebetweenthecarryingamount(presentvalueofthedefined-benefitobligation)beingsettledandthesettlementprice,includinganyplanassetstransferredandanypaymentsmadedirectlybytheGroupinconnectionwiththesettlement.

Forthepurposeofdeterminingthevalueofplanassetstransferred,AECIusesonlythevalueoftherecognisedplanassets(aslimitedbytheassetceiling).Unrecognisedsurpluses,whichincludethosenotallocatedtoanESAorwhichwerenototherwiseavailableforusebyAECI,arenottakenintoaccount.

TheGrouprecognisesgainsandlossesonthesettlementofadefined-benefitplanwhenthesettlementoccurs.

TERMINATION BENEFITSTerminationbenefitsarerecognisedattheearlier ofwhen theGroup canno longerwithdrawfromtheofferofthosebenefitsorwhentheGrouprecognisescostsofrestruc-turing.Ifthebenefitsarepayablemorethan12monthsafterthereportingdate,theyarediscountedtotheirpresentvalue.

OTHER LONG-TERM EMPLOYEE BENEFITSTheGroup’sobligationinrespectoflong-termemployeebenefits istheamountoffuturebenefitthatemployeeshaveearnedinreturnfortheirserviceinthecurrentandpriorperiods.Thatbenefit isdiscountedtodetermine itspresentvalue.Remeasurementsarerecog-nisedintheincomestatementintheperiodinwhichtheyarise.


SHARE-BASEDPAYMENTSTheGrouphasequity-settledandcash-settledshare-basedcompensationplans.

CASH-SETTLED SHARE-BASED SCHEME (BENEFIT AND RETENTION UNITS)ThisschemeallowsseniorGroupemployeestoparticipate intheperformanceofAECI’sordinaryshareprice, in returnforservicesrendered,throughthepaymentofcashincen-tiveswhicharebasedonthemarketpriceofAECIordinaryshares.Theseshareappreciationrightsarerecognisedasaliabilityatfairvalueateachreportingdate, inthestatementoffinancialposition,untilthedateofsettlement.ThefairvalueoftheserightsisdeterminedateachreportingdateandtheunrecognisedcostisamortisedintheincomestatementasanemployeecostovertheperiodthatemployeesprovideservicestotheGroup.

EQUITY-SETTLED SHARE-BASED SCHEMESTheESTequity-settledshare-basedschemeawardscertainemployeesBordinaryshareswhichwillbeconvertedtoordinarysharesaftera10-year lock-inperiodbasedonapredeterminedawardformula.

Senioremployeesareawardedperformanceshares. Performance shares are awardsthatentitlecertainemployees to receiveordinarysharesaftera three-year lock-inperiodbasedon theperformanceof theCompany’sordinarysharepricerelativetoapeergroupoflistedcompanies.

Suchequity-settledshare-basedpaymentsaremeasuredatfairvalueatthedateofthegrant.

Thefairvaluedeterminedatthegrantoftheequity-settledshare-basedpaymentsischargedasanemployeecost,withacorre-spondingincreaseinequity,onastraight-linebasis over theperiod that theemployeebecomes unconditionally entitled to theshares,basedonmanagement’sestimationof thesharesthatwillvestandadjustedfor effects of non-market based vestingconditions.On settlement,where sharesarerepurchased inthemarket, thecost isrecognisedasachangeintheshare-basedpaymentreserve.

INCOME TAXIncometaxcomprisescurrentanddeferredtax. Incometaxexpense is recognised intheincomestatementexcepttotheextentthatitrelatestoabusinesscombinationoritemsrecogniseddirectly inequityorothercomprehensiveincome.

Currenttax istheexpectedtaxpayableonthetaxable incomefortheyear,usingtaxratesenactedorsubstantivelyenactedatthereportingdate,andanyadjustmenttotaxpayableinrespectofprioryears.

DIVIDENDSDividendsarerecognisedasaliabilitywhendeclaredandareincludedinthestatementofchangesinequity.

Dividendswithholdingtaxisleviedonnon-exemptshareholders.Asthistaxisleviedontheshare-holdersandnottheCompany,itisnotincludedinthetaxexpenserecognisedintheincomestatementorinothercomprehensiveincome.

SEGMENT REPORTINGAnoperatingsegmentisacomponentoftheGroupthatengages inbusinessactivitiesfromwhichitmayearnrevenuesandincurexpenses,includingrevenuesandexpensesthatrelatetotransactionswithanyoftheGroup’sothercomponents.TheoperatingresultsofallsegmentsarereviewedmonthlybytheAECIExecutiveCommitteetomakedecisionsabout resourcestobeallocatedtothemandtoassesstheirperformances.

Inter-segmenttransactionsareconcludedontermsthatarenomoreandnolessfavourablethantransactionswithunrelatedexternalparties.

TheGroupreportsonitssegmentsbasedonthenatureoftheproductsorservicesoffered,asfollows:

› Mining Solutions —thebusinessesinthissegmentprovideamine-to-metalsolutionfortheminingsector internationally.Theoffering includescommercialexplosives,initiatingsystemsandblastingservicesrightthroughthevaluechaintochemicalsfororebeneficiationandtailingstreatment;

› Water & Process —providesintegratedwatertreatmentandprocesschemicals,andequipmentsolutions,foradiverserangeofapplicationsinAfrica.Theseinclude,interalia,publicandindustrialwater,desalinationandutilities;

› Plant & Animal Health —manufacturerandsupplierofanextensiverangeofcropprotectionproducts,plantnutrientsandservicesfortheagriculturalsectorinAfrica;

› Food & Beverage —thebusinessesinthissegmentsupplyingredientsandcommoditiestothedairy,beverage,wine,meat,bakery,healthandnutrition industries.Theothermainactivityisthemanufactureanddistribu-tionofabroadrangeofjuice-basedproductsanddrinks,includingformulatedcompounds,fruitconcentrateblendsandemulsions;

› Chemicals —supplyofspecialtychemicalrawmaterialsandrelatedservicesforuseacrossabroadspectrumofcustomersinthemanufacturingandgeneralindustrialsectors;

› Property & Corporate —mainlyproper-ty leasingandmanagement intheoffice,industrialandretailsectors,andcorporatefunctionsincludingthetreasury.

Segmentreporting isbasedonIFRSandisrepresentativeoftheinternalstructureusedformanagementreporting.



GROUP COMPANY

Rmillions Note 2017 2016 2017 2016

ASSETSNON-CURRENT ASSETS 7 365 7 538 8 657 7 338

Property,plantandequipment 1 3 965 3 990 519 539

Investmentproperty 2 216 140 247 60

Intangibleassets 3 188 211 4 —

Goodwill 4 1 524 1 541 754 903

Pensionfundemployersurplusaccounts 29 487 583 487 583

Investmentinsubsidiaries 5 6 125 4 814

Loanstosubsidiaries 5 367 400

Investmentinjointventures 6 274 327 28 28

Investmentinassociates 7 199 194 24 —

Otherinvestments 8 117 25 102 11

Deferredtax 9 395 527 — —

CURRENT ASSETS 8 606 8 282 5 830 5 791

Inventories 10 3 355 3 174 1 235 1 180

Accountsreceivable 11 3 793 3 342 1 503 1 452

Otherinvestments 8 155 190 78 118

Assetsclassifiedasheldforsale 12 — 60 — —

Loanstosubsidiaries 5 2 846 2 719

Taxreceivable 97 51 43 —

Cash 1 206 1 465 125 322

TOTAL ASSETS 15 971 15 820 14 487 13 129

EQUITY AND LIABILITIESORDINARY CAPITAL AND RESERVES 9 234 8 913 3 728 2 522

Sharecapitalandsharepremium 13 110 110 128 128

Reserves 1 102 1 280 225 196

Retainedearnings 8 022 7 523 3 375 2 198

PREFERENCE SHARE CAPITAL 13 6 6 6 6

SHAREHOLDERS' EQUITY 9 240 8 919 3 734 2 528

NON-CONTROLLING INTEREST 33 116 127

TOTAL EQUITY 9 356 9 046 3 734 2 528

NON-CURRENT LIABILITIES 1 614 2 324 2 171 2 695

Deferredtax 9 93 254 18 21

Loansfromsubsidiaries 5 703 676

Non-currentborrowings 14 1 100 1 600 1 100 1 600

Contingentconsideration 29 58 29 58

Non-currentprovisionsandemployeebenefits 15 392 412 321 340

CURRENT LIABILITIES 5 001 4 450 8 582 7 906

Accountspayable 16 4 272 4 148 2 122 2 370

Currentborrowings 17 530 162 530 8

Loansfromjointventures 6 130 75 178 118

Loansfromsubsidiaries 5 5 752 5 404

Taxpayable 69 65 — 6

TOTAL LIABILITIES 6 615 6 774 10 753 10 601

TOTAL EQUITY AND LIABILITIES 15 971 15 820 14 487 13 129


STATEMENTS OF FINANCIAL POSITIONAT 31 DECEMBER 2017

GROUP COMPANY

Rmillions Note 2017 2016 2017 2016

REVENUE 18 18 482 18 596 5 716 5 919

Netoperatingcosts 19 (16903) (17261) (5616) (5711)

OPERATING PROFIT 1 579 1 335 100 208

Shareofprofitofequity-accountedinvestees,netoftax 6, 7 — 28

PROFIT FROM OPERATIONS AND EQUITY-ACCOUNTED INVESTEES 1 579 1 363 100 208

Dividendsreceived 28 1 864 —

Netfinancecosts (167) (215) (279) (265)

Interestexpense 21 (202) (270) (444) (434)

Interestreceived 22 35 55 165 169

PROFIT/(LOSS) BEFORE TAX 1 412 1 148 1 685 (57)

Tax(expense)/credit 23 (429) (336) 12 69

PROFIT FOR THE YEAR 983 812 1 697 12

ATTRIBUTABLE TO:Ordinaryshareholders 950 777 1 694 9

Preferenceshareholders 3 3 3 3

Non-controllinginterest 30 32

983 812 1 697 12

PER ORDINARY SHARE (CENTS):—Basicearnings 24 900 735

—Dilutedbasicearnings 24 859 720

—Headlineearnings 24 959 818

—Dilutedheadlineearnings 24 915 800

—Ordinarydividendspaid 25 438 395

—Ordinarydividendsdeclaredafterthereportingdate 25 340 300


INCOME STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2017

GROUP COMPANY

Rmillions 2017 2016 2017 2016

PROFIT FOR THE YEAR 983 812 1 697 12

OTHER COMPREHENSIVE INCOME NET OF TAX: (205) (379) 11 22

Itemsthatmaybereclassifiedsubsequentlytoprofitorloss: (239) (392)

—Foreigncurrencyloantranslationdifferences (58) (96)

—Foreignoperationstranslationdifferences (177) (293)

—Effectiveportionofcashflowhedges (4) (3)

Taxeffectonitemsthatmaybereclassifiedsubsequently toprofitorloss: 23 13

—Foreigncurrencyloantranslationdifferences 23 13

Itemsthatmaynotbereclassifiedsubsequentlytoprofitorloss: 15 (1) 15 (1)

—Remeasurementofdefined-benefitobligations — (20) — (20)

—Remeasurementofpost-retirementmedicalaidobligations 15 19 15 19

Taxeffectsonitemsthatmaynotbereclassifiedsubsequently toprofitorloss: (4) 1 (4) 23

—Remeasurementofdefined-benefitobligations — 6 — 6

—Remeasurementofpost-retirementmedicalaidobligations (4) (5) (4) 17

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 778 433 1 708 34

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: Ordinaryshareholders 752 405 1 705 31

Preferenceshareholders 3 3 3 3

Non-controllinginterest 23 25

778 433 1 708 34


STATEMENTS OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2017

Rmillions

Ordinarysharecapital

Totalordinarycapital

Foreigncurrency

translationreserve

Share-basedpaymentreserve

Otherreserves

Totalother

reservesRetainedearnings Total

Non-controlling

interest

Preferencesharecapital

Totalequity

GROUPBALANCE AT 1 JANUARY 2016 110 110 1 455 150 150 — 1 605 7 217 8 932 104 6 9 042 TOTAL COMPREHENSIVE INCOME FOR THE YEAR (369) (3) (372) 777 405 25 3 433

Remeasurementofdefined-benefitobligations (20) (20) (20)Deferredtaxonremeasurementofdefined-benefitobligations 6 6 6 Remeasurementofpost-retirementmedicalaidobligations 19 19 19 Deferredtaxonremeasurementofpost-retirementmedicalaidobligations (5) (5) (5)Cashflowhedgefairvalueadjustments (3) (3) (3) (3)Foreigncurrencyloantranslationdifferences (96) (96) (96) (96)Deferredtaxonforeigncurrencyloantranslationdifferences 13 13 13 13 Foreignoperationstranslationdifferences (286) (286) (286) (7) (293)Profitfortheyear 777 777 32 3 812

TRANSACTIONS WITH OWNERS 45 45 2 47 (471) (424) (2) (3) (429)

Transferbetweenreserves 2 2 (2) — — Dividendspaid (430) (430) (2) (3) (435)Share-basedpaymentreserve 67 67 67 67 67 Settlementcostofperformanceshares (22) (22) (22) (22) (22)Sharesrepurchased (39) (39) (39)

BALANCE AT 31 DECEMBER 2016 110 110 1 086 195 (1) 1 280 7 523 8 913 127 6 9 046

TOTAL COMPREHENSIVE INCOME FOR THE YEAR (205) (4) (209) 961 752 23 3 778

Remeasurementofpost-retirementmedicalaidobligations 15 15 15 Deferredtaxonremeasurementofpost-retirementmedicalaidobligations (4) (4) (4)Cashflowhedgefairvalueadjustments (4) (4) (4) (4)Foreigncurrencyloantranslationdifferences (58) (58) (58) (58)Deferredtaxonforeigncurrencyloantranslationdifferences 23 23 23 23 Foreignoperationstranslationdifferences (170) (170) (170) (7) (177)Profitfortheyear 950 950 30 3 983


Changeinownershippercentage 2 2 15 17 (17) — Dividendspaid (477) (477) (17) (3) (497)Share-basedpaymentreserve 73 73 73 73 73 Settlementcostofperformanceshares (44) (44) (44) (44) (44)

BALANCE AT 31 DECEMBER 2017 110 110 883 224 (5) 1 102 8 022 9 234 116 6 9 356

FOREIGN CURRENCY TRANSLATION RESERVETheforeigncurrencytranslationreservecomprisesalltheGroup’sforeignexchangedifferencesfromthetranslationofthefinancialstatementsofforeignoperations,aswellasfromthetranslationofmonetaryitemsreceivablefromorpayabletoaforeignoperationforwhichsettlementisneitherplannednorlikelytooccurintheforeseeablefuture.

SHARE-BASED PAYMENT RESERVETheshare-basedpaymentreservecomprisestheaccumulatedshare-basedpaymentsoverthevestingperiodsoftheunderlyinginstruments.Oncealltheinstrumentshavevested,thereservewillbetransferredtoretainedearnings.

OTHER RESERVESThereserveforeffectivecashflowhedges.


STATEMENTS OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2017

Rmillions



Foreigncurrency

translationreserve


Otherreserves

Totalother


Non-controlling

interest


Totalequity

GROUPBALANCE AT 1 JANUARY 2016 110 110 1 455 150 150 — 1 605 7 217 8 932 104 6 9 042 TOTAL COMPREHENSIVE INCOME FOR THE YEAR (369) (3) (372) 777 405 25 3 433

Remeasurementofdefined-benefitobligations (20) (20) (20)Deferredtaxonremeasurementofdefined-benefitobligations 6 6 6 Remeasurementofpost-retirementmedicalaidobligations 19 19 19 Deferredtaxonremeasurementofpost-retirementmedicalaidobligations (5) (5) (5)Cashflowhedgefairvalueadjustments (3) (3) (3) (3)Foreigncurrencyloantranslationdifferences (96) (96) (96) (96)Deferredtaxonforeigncurrencyloantranslationdifferences 13 13 13 13 Foreignoperationstranslationdifferences (286) (286) (286) (7) (293)Profitfortheyear 777 777 32 3 812


Transferbetweenreserves 2 2 (2) — — Dividendspaid (430) (430) (2) (3) (435)Share-basedpaymentreserve 67 67 67 67 67 Settlementcostofperformanceshares (22) (22) (22) (22) (22)Sharesrepurchased (39) (39) (39)

BALANCE AT 31 DECEMBER 2016 110 110 1 086 195 (1) 1 280 7 523 8 913 127 6 9 046

TOTAL COMPREHENSIVE INCOME FOR THE YEAR (205) (4) (209) 961 752 23 3 778

Remeasurementofpost-retirementmedicalaidobligations 15 15 15 Deferredtaxonremeasurementofpost-retirementmedicalaidobligations (4) (4) (4)Cashflowhedgefairvalueadjustments (4) (4) (4) (4)Foreigncurrencyloantranslationdifferences (58) (58) (58) (58)Deferredtaxonforeigncurrencyloantranslationdifferences 23 23 23 23 Foreignoperationstranslationdifferences (170) (170) (170) (7) (177)Profitfortheyear 950 950 30 3 983


Changeinownershippercentage 2 2 15 17 (17) — Dividendspaid (477) (477) (17) (3) (497)Share-basedpaymentreserve 73 73 73 73 73 Settlementcostofperformanceshares (44) (44) (44) (44) (44)

BALANCE AT 31 DECEMBER 2017 110 110 883 224 (5) 1 102 8 022 9 234 116 6 9 356

FOREIGN CURRENCY TRANSLATION RESERVETheforeigncurrencytranslationreservecomprisesalltheGroup’sforeignexchangedifferencesfromthetranslationofthefinancialstatementsofforeignoperations,aswellasfromthetranslationofmonetaryitemsreceivablefromorpayabletoaforeignoperationforwhichsettlementisneitherplannednorlikelytooccurintheforeseeablefuture.

SHARE-BASED PAYMENT RESERVETheshare-basedpaymentreservecomprisestheaccumulatedshare-basedpaymentsoverthevestingperiodsoftheunderlyinginstruments.Oncealltheinstrumentshavevested,thereservewillbetransferredtoretainedearnings.

OTHER RESERVESThereserveforeffectivecashflowhedges.


Rmillions


Sharepremium



Totalother



Totalequity

COMPANYBALANCE AT 1 JANUARY 2016 122 45 167 151 151 2 644 2 962 6 2 968TOTAL COMPREHENSIVE INCOME FOR THE YEAR 31 31 3 34

Remeasurementofdefined-benefitobligations (20) (20) (20)Deferredtaxonremeasurementofdefined-benefitobligations 6 6 6 Remeasurementofpost-retirementmedicalaidobligations 19 19 19 Deferredtaxonremeasurementofpost-retirementmedicalaidobligations 17 17 17 Profitfortheyear 9 9 3 12

TRANSACTIONS WITH OWNERS (39) (39) 45 45 (477) (471) (3) (474)

Dividendspaid (477) (477) (3) (480)Share-basedpaymentreserve 67 67 67 67Settlementcostforperformanceshares (22) (22) (22) (22)Sharesrepurchased (39) (39) (39) (39)

BALANCE AT 31 DECEMBER 2016 122 6 128 196 196 2 198 2 522 6 2 528

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 1 705 1 705 3 1 708

Remeasurementofpost-retirementmedicalaidobligations 15 15 15Deferredtaxonremeasurementofpost-retirementmedicalaidobligations (4) (4) (4)Profitfortheyear 1 694 1 694 3 1 697

TRANSACTIONS WITH OWNERS 29 29 (528) (499) (3) (502)

Dividendspaid (528) (528) (3) (531)Share-basedpaymentreserve 73 73 73 73Settlementcostofperformanceshares (44) (44) (44) (44)



STATEMENTS OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2017 CONTINUED

Rmillions


Sharepremium



Totalother



Totalequity

COMPANYBALANCE AT 1 JANUARY 2016 122 45 167 151 151 2 644 2 962 6 2 968TOTAL COMPREHENSIVE INCOME FOR THE YEAR 31 31 3 34

Remeasurementofdefined-benefitobligations (20) (20) (20)Deferredtaxonremeasurementofdefined-benefitobligations 6 6 6 Remeasurementofpost-retirementmedicalaidobligations 19 19 19 Deferredtaxonremeasurementofpost-retirementmedicalaidobligations 17 17 17 Profitfortheyear 9 9 3 12

TRANSACTIONS WITH OWNERS (39) (39) 45 45 (477) (471) (3) (474)

Dividendspaid (477) (477) (3) (480)Share-basedpaymentreserve 67 67 67 67Settlementcostforperformanceshares (22) (22) (22) (22)Sharesrepurchased (39) (39) (39) (39)


TOTAL COMPREHENSIVE INCOME FOR THE YEAR 1 705 1 705 3 1 708

Remeasurementofpost-retirementmedicalaidobligations 15 15 15Deferredtaxonremeasurementofpost-retirementmedicalaidobligations (4) (4) (4)Profitfortheyear 1 694 1 694 3 1 697

TRANSACTIONS WITH OWNERS 29 29 (528) (499) (3) (502)

Dividendspaid (528) (528) (3) (531)Share-basedpaymentreserve 73 73 73 73Settlementcostofperformanceshares (44) (44) (44) (44)



GROUP COMPANY

Rmillions Note 2017 2016 2017 2016

CASH GENERATED BY OPERATIONS i 2 350 2 328 401 516

Dividendsreceived 55 46 — —

Interestpaid (202) (238) (444) (402)

Interestreceived 35 55 165 169

Taxpaid ii (481) (636) (43) (92)

Changesinworkingcapital iii (358) 488 (270) 84

Cashflowsrelatingtodefined-benefitcosts (101) (27) (101) (27)

Cashflowsrelatingtonon-currentprovisionsandemployeebenefits (77) (76) (37) (61)

CASH AVAILABLE FROM OPERATING ACTIVITIES 1 221 1 940 (329) 187

Dividendspaid iv (497) (435) (531) (480)

CASH FLOWS FROM OPERATING ACTIVITIES 724 1 505 (860) (293)

CASH FLOWS FROM INVESTING ACTIVITIES (753) (491) 627 2 343

Netreplacementtomaintainoperations (368) (305) (25) (96)

Replacementof —property,plant andequipment (416) (319) (57) (98)

Proceedsfromdisposalofassetsclassifiedasheldforsaleandrecognitionofinvestmentinassociate 12 30 — 30 —

Proceedsfromdisposalofproperty,plantandequipmentandintangibleassets 18 14 2 2

Investmentstoexpandoperations (385) (186) 652 2 439

Acquisitionof —property,plant andequipment (210) (175) (56) (80)

—intangibleassets — (4) (4) —

—investmentproperty (78) (4) (190) (4)

—investments (94) (5) (85) (1)

Loanswith —associatesand otherinvestments (3) 2 (2) —

—subsidiaries 989 2 524

Saleofbusiness v (2) —

NET CASH GENERATED/(UTILISED) BEFORE FINANCING ACTIVITIES (29) 1 014 (235) 2 050

CASH FLOWS FROM FINANCING ACTIVITIES (121) (1532) 38 (2051)

Non-currentborrowings —raised — 1 100 — 1 100

Currentborrowings —raised 250 10 250 8

—repaid (382) (2620) (228) (3144)

Loanswithjointventures 55 39 60 46

Buy-outofnon-controllinginterest 33 (11) —

Proceedsfromdisposaltonon-controllinginterest 33 11 —

Sharesrepurchased — (39) — (39)

Settlementofperformanceshares (44) (22) (44) (22)

DECREASE IN CASH (150) (518) (197) (1)

Cashatthebeginningoftheyear 1 465 2 114 322 323

Translationlossoncash (109) (131)

CASH AT THE END OF THE YEAR 1 206 1 465 125 322


STATEMENTS OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2017

GROUP COMPANY

Rmillions 2017 2016 2017 2016

i. CASH GENERATED BY OPERATIONSProfitfromoperations 1 579 1 335 100 208

Adjustedfornon-cashmovements:

Defined-benefitanddefined-contributioncosts 56 194 56 192

Depreciationandamortisation 597 626 80 84

Share-basedpaymentexpense 73 67 32 24

Impairmentofgoodwill 3 28 130 —

Impairmentofproperty,plantandequipment 10 54 — —

Non-currentprovisionsandemployeebenefits 69 49 32 26

(Surplus)/lossondisposalofproperty,plantandequipment (8) 9 — —

Lossondisposalofinvestmentinassociatecompany 2 — 2 —

Gainonreassessmentofcontingentconsideration (31) (34) (31) (18)

2 350 2 328 401 516

ii. TAX PAIDOwingatthebeginningoftheyear (14) (151) (6) (54)

Chargefortheyear (439) (499) 6 (44)

(Receivable)/owingattheendoftheyear (28) 14 (43) 6

(481) (636) (43) (92)

iii. CHANGES IN WORKING CAPITAL(Increase)/decreaseininventories (194) 173 (141) 6

(Increase)/decreaseinaccountsreceivable (452) 513 (131) (53)

Increase/(decrease)inaccountspayable 313 (62) 44 178

(333) 624 (228) 131

Translationdifferencesandother (25) (136) (42) (47)

(358) 488 (270) 84

iv. DIVIDENDS PAIDPaidduringtheyear(seenote25) (480) (433) (531) (480)

Paidtonon-controllinginterest (17) (2)

(497) (435) (531) (480)

v. SALE OF BUSINESSOn1August2017,AECIdisposedofitsExpersedivisionatbookvaluetoAECIMiningSolutionsLtd,whichispartoftheMiningSolutionsoperatingsegment.Thistransactionwaspartoftherealignment oftheGroup’sbusinessesintermsofitsreportablesegments.

Thefollowingtablesummarisestherecognisedamountsofassetsandliabilitiesdisposedofatthetransactiondate:

Property,plantandequipment(seenote1) 69 —

Non-currentandemployeebenefitprovisions(seenote15) (6) —

Goodwill(seenote4) 19 —

Inventories 71 —

Accountsreceivable 76 —

Accountspayable (100) —

Other (9) —

Netassetsdisposedof(excludingcash) 120 —

Exchangedforinvestmentinsubsidiary (122) —

NET CASH DISPOSED OF (2) —


NOTES TO THE STATEMENTS OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2017

1. PROPERTY, PLANT AND EQUIPMENT

GROUP

Rmillions PropertyPlantandequipment

Furnitureandfittings

Computerequipment

Motorvehicles

Underconstruction Total

2017COST 1 291 6 210 132 399 584 444 9 060

Atthebeginningoftheyear 1 237 5 951 125 354 611 420 8 698 Additions 58 324 11 52 25 156 626 Disposals (2) (36) (6) (7) (14) (9) (74)Transfers 10 75 4 5 4 (98) — Transfersfrominventories — 24 — — — — 24 Translationdifferences (12) (128) (2) (5) (42) (25) (214)

ACCUMULATED DEPRECIATION AND IMPAIRMENT 480 3 752 79 318 466 5 095

Atthebeginningoftheyear 429 3 455 84 289 451 4 708 Disposals (1) (31) (13) (6) (13) (64)Transfersfrominventories — 9 — — — 9 Impairmentfortheyear — 10 — — — 10 Depreciationfortheyear 59 404 10 40 59 572 Translationdifferences (7) (95) (2) (5) (31) (140)

CARRYING AMOUNT 811 2 458 53 81 118 444 3 965

2016COST 1 237 5 951 125 354 611 420 8 698

Atthebeginningoftheyear 1 194 5 911 114 347 648 468 8 682

Additions 4 31 2 5 11 441 494

Disposals (10) (128) (4) (12) (26) (3) (183)

Transfers 74 297 15 17 29 (432) —

Transferstoassetsclassifiedasheldforsale — (1) — — — — (1)

Translationdifferences (25) (159) (2) (3) (51) (54) (294)

ACCUMULATED DEPRECIATION AND IMPAIRMENT 429 3 455 84 289 451 4 708

Atthebeginningoftheyear 390 3 211 79 265 441 4 386

Disposals (6) (115) (4) (12) (24) (161)

Impairmentfortheyear — 54 — — — 54

Depreciationfortheyear 57 420 11 40 69 597

Translationdifferences (12) (115) (2) (4) (35) (168)

CARRYING AMOUNT 808 2 496 41 65 160 420 3 990

IMPAIRMENT ASSESSMENTDuringtheyeartheDirectorsperformedadetailedimpairmentassessmentinrespectoftheproperty,plantandequipmentofoperationsinMozambiqueincludedintheMiningSolutionsoperatingsegment.Therecoverableamountinrespectofeachcashgeneratingunitwasestimatedbasedonthegreaterofitsvalueinuseandfairvaluelesscostsofdisposal.

Asaresult,adecisionwastakentoimpairtheassetsinMozambiquefollowingunsuccessfulattemptstosecurethenecessaryexplosiveslicences inthatcountry.AnimpairmentlossofR10millionwasrecognisedontheassets,whichrepresentedtheirnetbookvalue.


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017

1. PROPERTY, PLANT AND EQUIPMENT continued

COMPANY

Rmillions PropertyPlantandequipment

Furnitureandfittings

Computerequipment

Motorvehicles

Underconstruction Total

2017COST 52 855 24 59 26 130 1 146

Atthebeginningoftheyear 62 853 26 75 29 146 1 191 Additions 1 77 2 3 1 29 113 Disposalsthroughsale ofbusiness (10) (106) (2) (17) (1) (9) (145)Transfersfrominventories — 24 — — — — 24 Disposals (1) (22) (2) (3) (3) (6) (37)Transfers — 29 — 1 — (30) —

ACCUMULATED DEPRECIATION AND IMPAIRMENT 33 512 18 49 15 627

Atthebeginningoftheyear 30 523 26 57 16 652 Disposalsthroughsale ofbusiness (1) (59) (2) (13) (1) (76)Transfersfrominventories 9 — — — 9 Disposals (1) (21) (7) (3) (3) (35)Depreciationfortheyear 5 60 1 8 3 77

CARRYING AMOUNT 19 343 6 10 11 130 519

2016COST 62 853 26 75 29 146 1 191


Additions 3 38 2 3 7 125 178

Disposals (3) (97) (2) (8) (6) — (116)

Transfers 1 60 — 3 2 (66) —

ACCUMULATED DEPRECIATION AND IMPAIRMENT 30 523 26 57 16 652

Atthebeginningoftheyear 27 558 25 54 19 683

Disposals (3) (95) (2) (8) (6) (114)

Depreciationfortheyear 6 60 3 11 3 83

CARRYING AMOUNT 32 330 — 18 13 146 539

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 CONTINUED


2. INVESTMENT PROPERTYGROUP COMPANY

Rmillions 2017 2016 2017 2016

COST 241 163 271 81

Atthebeginningoftheyear 163 159 81 77

Additions 78 4 190 4

ACCUMULATED DEPRECIATION 25 23 24 21


Depreciationfortheyear 2 1 3 1

CARRYING AMOUNT 216 140 247 60

ADDITIONAL INFORMATIONFairvalue 1, 2 809 731 1 571 1 367

Rentalandserviceincomefrominvestmentproperty 300 398 339 322

Directoperatingexpenses—relatingtorentalandserviceincome (298) (301) (298) (301)

Directoperatingexpenses—thatdidnotgeneraterentalincome (4) (20) (2) (4)

1 ThefairvaluemeasurementforalloftheinvestmentpropertieshasbeencategorisedasaLevel3fairvalue,basedontheinputsofthevaluationtechniquesused.2 ThefairvalueintheGroupislowerthanthefairvalueintheCompanybecausecertainpropertiesbecomeowner-occupiedonconsolidation.

TheCompanyleasesproperty,officesandindustrialsitestoexternalcustomersaswellastoitssubsidiarycompaniesunderoperatingleases.Theleaseperiodsarebetweenoneandfiveyears,withmostleaseshavingathree-yearterm,withannualrentalescalationsbetween6%and8%. At31December2017,thegrosslettableareaoftheofficeandindustrialbuildingswas177133m2(2016:151722m2).Revenue fromtheinvestmentpropertyalsoincludesamountsrelatedtotheprovisionofsteam,water,effluentmanagement,railservicesandbulkelectricity,mainlyattheUmbogintwiniIndustrialComplex.

MEASUREMENT OF FAIR VALUES

FAIR VALUE HIERARCHYThefairvalueofinvestmentpropertyisdeterminedbyanexternalindependentpropertyvaluationexpert,havingappropriaterecognisedprofessionalqualificationsandrecentexperienceinthelocationandcategoryofthepropertybeingvalued,onathree-yearcycleasperGrouppolicy.Intheprioryear,suchafairvalueofinvestmentpropertywasthusdetermined.Inthecurrentyearanassessmentofthekeyassumptionswasperformedbymanagementandnosignificantchangestothekeyassumptionswereidentified.

Thefairvaluefortheinvestmentpropertyhasbeensplitintoitscomponents.FairvaluemeasurementforbuildingsandlandhasbeencategorisedasaLevel3fairvaluebasedontheinputsofthevaluationtechniqueused.



2. INVESTMENT PROPERTY continued

UNOBSERVABLE INPUTSAnumberofvaluationtechniqueswereused,dependingontheoptimallikelyuseoftheproperty.Thefollowingtablesummarisesthevaluationtechniquesusedinmeasuringthefairvalueofinvestmentproperty,aswellasthesignificantunobservableinputsconsidered:

VALUATION TECHNIQUE SIGNIFICANT UNOBSERVABLE INPUTS

INTER-RELATIONSHIP BETWEEN KEY UNOBSERVABLE INPUTS AND FAIR VALUE MEASUREMENT

Thecomparablesalesapproachwasused tovaluevacantland.

Thevaluationmodelwasbasedonsalesofcomparablepropertiesinthesurroundingarea,whichwereanalysedtoprovideanestimateofthevalueforthepropertywithadjustmentsmadefordifferingcharacteristics.

Thecomparabletransactionswereanalysedintermsoftheiruseandthepurchasepriceadjustedforvariancesinthequalityofthespace.Thispurchasepricewasthendividedbythelandsizetodetermineavalueratepersquaremetrewhichwasappliedtothelandinordertoderiveafairvalue.

Comparablesalesforparcelsofraw,unservicedorrezonedandfullyservicedland.

ThelandvaluedatModderfonteinandUmbogintwiniiszonedforbusinessuseandispartiallyservicedbutitisnotimmediatelysub-divisibleanddevelopable.

Therefore,afairvaluepersquaremetrehadtobederivedwithreferencetoacomparableunzonedandunservicedparceloflandbutenhancedbytheperceivedvalueofinstalledservicesandzoning.

Theenhancedfairvalueratepersquaremetrehasadirectinfluenceonfairvalue.

VALUATION TECHNIQUE SIGNIFICANT UNOBSERVABLE INPUTS

INTER-RELATIONSHIP BETWEEN KEY UNOBSERVABLE INPUTS AND FAIR VALUE MEASUREMENT

Theincomeapproachwasusedtovalue thebuildings.

Thevaluationmodelwasbasedondiscountedcashflowsincorporatingtheleaseobligations,includingescalations,totermination.Atleaseexpiry,anewleaseisassumedandthecommencingrentalisassumedtobethecurrentgrossmarketrentalescalatedatanappropriategrowthrate.

Thepresentvalueofthefuturecashflowswasaddedtothepresentvalueofthehypotheticalexitvalue,beingthehypotheticalnetannualincomecapitalisedintoperpetuityatanappropriatemarket-relatedrate.

Thediscountandexitcapitalisationratesweredeterminedbyreferencetocomparablesales,appropriatesurveyspreparedbyindustryprofessionals,benchmarkingagainstothercomparablevaluations,andafterconsultationwithexperiencedandinformedpeopleinthepropertyindustryincludingothervaluers,brokers,managersandinvestors.

› Capitalisationrate: 10,5%–14,0%

› Vacancyrateforofficespace: 10,0%–30,0%

› Vacancyrateforindustrialspace: 10,0%–30,0%

› Operatingexpensesforallbuildings: R21,00/m2–R26,30/m2

Theestimatedfairvaluewouldincrease/(decrease)if:

› thecapitalisationratewerelower/(higher);

› thevacancyrateforofficespacewerelower/(higher);

› thevacancyrateforindustrialspacewerelower/(higher);

› theoperatingexpensesforallbuildingswerelower/(higher).



3. INTANGIBLE ASSETS

GROUP

Rmillions

Customerandmarketing

relationshipsPatents andtrademarks

Technicalandlicensingagreements Other Total

2017COST 134 21 138 18 311

Atthebeginningoftheyear 134 21 138 18 311

ACCUMULATED AMORTISATION AND IMPAIRMENT 46 11 51 15 123

Atthebeginningoftheyear 32 9 44 15 100 Amortisationfortheyear 14 2 7 — 23

CARRYING AMOUNT 88 10 87 3 188

2016COST 134 21 138 18 311


Additions — — — 4 4

Disposals — (1) — — (1)

Transferstoassetsclassifiedasheldforsale — (24) — — (24)

ACCUMULATED AMORTISATION AND IMPAIRMENT 32 9 44 15 100


Transferstoassetsclassifiedasheldforsale — (3) — — (3)

Amortisationfortheyear 14 3 8 3 28

CARRYING AMOUNT 102 12 94 3 211

COMPANY

Rmillions

Customerandmarketing

relationshipsPatents andtrademarks

Technicalandlicensingagreements Other Total

2017COST — 4 — — 4

Additions — 4 — — 4

CARRYING AMOUNT — 4 — — 4



4. GOODWILLGROUP COMPANY

Rmillions 2017 2016 2017 2016

COST 1 662 1 711 936 1 011


Disposalsthroughsaleofbusiness (1) — (19) —

Writtenoff (35) — (56) —

Transferstoassetsclassifiedasheldforsale — (27) — —

Translationdifferences (13) 6 — —

ACCUMULATED IMPAIRMENT LOSSES 138 170 182 108


Writtenoff (35) — (56) —

Impairmentchargefortheyear 3 28 130 —

CARRYING AMOUNT 1 524 1 541 754 903

GoodwillisallocatedtocashgeneratingunitsbasedontheGroup’soperatingsegmentsasfollows:

MiningSolutions 467 467 — 149

Water&Process 349 349 — —

Plant&AnimalHealth 190 204 100 100

Food&Beverage 198 198 62 62

Chemicals 320 323 592 592

CARRYING AMOUNT 1 524 1 541 754 903

IMPAIRMENT OF GOODWILLGoodwillistestedforimpairmentbycalculatingthevalue-in-useofthecashgeneratingunit(“CGU”)orunitstowhichthegoodwillisallocated.ThegoodwillintheoperatingsegmentscomprisesindividualCGUs,eachofwhichhasbeentestedforimpairment.

Giventherealignmentoftheoperatingsegments(seenote31),thegoodwillhasbeenreallocatedappropriatelytotherestatedoperatingsegments.

Value-in-usewasdeterminedbydiscountingthefuturecashflowsexpectedtobegeneratedfromthecontinuinguseoftheCGUandwasbasedonthefollowingkeyassumptions:

› cashflowswereprojectedbasedonactualoperatingresultsandthebusinessplanforaperiodofatleastfiveyears;

› apre-taxdiscountrateofbetween12%and18%(2016:12%and18%)wasappliedindeterminingtherecoverableamountoftheCGUs.ThediscountratewasestimatedbasedontheGroup’sweightedaveragecostofcapital,adjustedfortheriskprofileapplicabletoeachCGU;

› thekeyassumptionsappliedbymanagementinarrivingatthebusinessplanwerebasedonthelatestpubliclyavailablemarketinformation;and

› terminalvaluegrowthratesbetween2%and3%(2016:2%and10%)wereapplied.Thiswasbasedonsustainableearningsandaconservativegrowthmodel.

Areasonablypossiblechangeintheassumptionsusedtocalculatethevalue-in-useisnotlikelytocausetherecoverableamounttofallbelowthecarryingvalueoftheremainingCGUs.

IMPAIRMENTS DURING THE YEARDuringtheyear,theCompanyreassessedthecompositionofitsCGUssubsequenttothedisposaloftheExpersedivision.ThisresultedinanimpairmentlossofR130millionbeingrecognisedinrespectofdivisionalgoodwillintheCompany.Giventhatthegoodwilltowhichthisimpairmentrelateswaseliminatedonconsolidation,theimpairmentwasreversedforGrouppurposes.



5. INVESTMENT IN SUBSIDIARIES AND LOANS WITH SUBSIDIARIES

COMPANY

Rmillions 2017 2016

Unlistedshares(seenote32) 5 706 4 717

Atcost 5 757 4 768

Lessimpairmentlosses (51) (51)

Non-currentloanstosubsidiaries 419 97

Amountsowing 1 419 108

Lessimpairmentlosses — (11)

Investmentinsubsidiaries 6 125 4 814

Non-currentloansfromsubsidiaries 1 (703) (676)

NET INVESTMENT IN SUBSIDIARIES 5 422 4 138

Interest-bearingnon-currentloanstosubsidiaries 367 400

Interest-bearingcurrentloanstosubsidiaries 2 2 846 2 719

INTEREST-BEARING LOANS TO SUBSIDIARIES 3 213 3 119

Interest-bearingcurrentloansfromsubsidiaries (5752) (5404)

INTEREST-BEARING LOANS FROM SUBSIDIARIES (5752) (5404)

NET LOANS WITH SUBSIDIARIES (SEE NOTE 32) (2823) (2864)

1 OtherloansprovidedbyandtotheCompanyarenotexpectedtoberepaidwithin12monthsandareclassifiedasnon-current.2 BusinessentitiesarefundedthroughthecentraltreasuryoftheCompanyandsuchloansareclassifiedascurrent.

Theloanswithnon-operatingbusinessentitiesareconsideredpartofthenetinvestmentinthoseentitiesandbearnointerest.

Allsignificantsubsidiaries’financialinformationincludedinthefinancialstatementsispreparedasatthereportingdateoftheparent.

Impairmentassessmentsoninvestmentsinunlistedsharesofdormantentitiesweremadewithreferencetothenetassetvalueofthoseentities.Wherethisresultedinthevalueoftheinvestmenthavingarecoverableamountlowerthanthecarryingvalue,theinvestmentswereimpaired.

Impairmentassessmentsoninvestmentsinandloanstosubsidiarycompaniesweremadewithreferencetothenetassetvalue,futurebusinessplansandcashflowforecastsofthosecompanies.Wherethisresultedinthevalueoftheinvestmenthavingarecoverableamountlowerthanthecarryingvalue,theinvestmentswereimpaired.

Loansbearinterestatmarket-relatedvariablerates,areunsecuredandhavenofixedtermsofrepayment.

6. INVESTMENT IN JOINT VENTURES AND LOANS WITH JOINT VENTURESGROUP COMPANY

Rmillions 2017 2016 2017 2016

Interest-bearingcurrentloansfromjointventures (130) (75) (178) (118)

LOANS FROM JOINT VENTURES (130) (75) (178) (118)

INTERESTS IN JOINT VENTURESTheGroup’sshareofprofitintheequity-accountedinvesteesfortheyearwasR1million(2016:R60million).

In2017theGroupreceiveddividendsofR55millionfromitsequity-accountedinvestees(2016:R46million).

CrestChemicals(“Crest”)isajointventurewiththeBrenntagAGGroup.CrestrepresentsseveralinternationalmanufacturersofspecialtyandcommoditychemicalproductsanddistributesthesetoalargenumberofindustriesinSouthernAfrica.Itssixdivisionsservicethefollowingkeymarkets:food,paintsandcoatings,pharmaceuticalsandpersonalcare,miningandwatertreatment,surfactantsandgeneralindustry.

DuringtheyearCrest,whichis50%ownedbytheGroupandtreatedasanequity-accountedinvestee,lostakeycustomerthatcompromisedthefutureofCrest’scausticsodabusiness.TheDirectorsperformedadetailedimpairmentassessmentinrespectoftheCGUtowhichthelostbusinessrelated,resultinginanimpairmentlossbeingrecognisedbyCrest.



6. INVESTMENT IN JOINT VENTURES AND LOANS WITH JOINT VENTURES continued

ThenetimpactofthisontheGroupwasareductionintheshareofprofitsreceivedfromtheequity-accountedinvesteeinanamountofR54million.

SpecialtyMineralsSouthAfrica(“SMSA”)isajointventurewithSpecialtyMineralsInc.,awholly-ownedsubsidiaryofMineralsTechnologiesInc.whichisagloballeaderinprecipitatedcalciumcarbonatetechnology.Accordingly,SMSAhasaccesstothemostup-to-datetechnologyandtechnicalservices.Thecompany’sproductsareusedasavalue-addingfillermaterialinthemanufactureofcopygradepaperinSouthAfrica.

TheGrouphasaresidualinterestinthenetassetsofCrestandSMSAandthustheyareclassifiedasjointventures.

NoneoftheGroup’sequity-accountedinvesteesarepubliclylistedentitiesand,therefore,theydonothavepublishedpricequotations.

Summarisedfinancialinformationfortheequity-accountedinvesteeswasasfollows:

STATEMENTS OF FINANCIAL POSITIONRmillions Crest SMSA Total

2017OWNERSHIP (%) 50 50

Currentassetsexcludingcashandcashequivalents 733 22 755 Cashandcashequivalents 16 104 120 Non-currentassets 150 19 169

TOTAL ASSETS 899 145 1 044

Tradeandotherpayables 425 26 451 Non-currentliabilities 20 3 23

TOTAL LIABILITIES 445 29 474

Non-controllinginterest 22 — 22

NET ASSETS 432 116 548

Group’sshareofnetassets 216 58 274

CARRYING AMOUNT 216 58 274

2016OWNERSHIP (%) 50 50

Currentassetsexcludingcashandcashequivalents 637 24 661

Cashandcashequivalents 61 121 182

Non-currentassets 270 10 280

TOTAL ASSETS 968 155 1 123

Tradeandotherpayables 352 40 392

Non-currentliabilities 45 3 48

TOTAL LIABILITIES 397 43 440

Non-controllinginterest 29 — 29


Group’sshareofnetassets 271 56 327

CARRYING AMOUNT 271 56 327




INCOME STATEMENTS

Rmillions Crest SMSA Total

2017OWNERSHIP (%) 50 50

Revenue 1 710 149 1 859 Netoperatingcostsexcludingdepreciationandamortisation (1637) (93) (1730)Depreciationandamortisation (16) (2) (18)Impairmentofgoodwill (9) — (9)Impairmentofintangibleassets (98) — (98)Interestexpense (1) — (1)Interestreceived 4 5 9 Taxexpense/(credit) 9 (17) (8)Non-controllinginterest (2) — (2)

(LOSS)/PROFIT (40) 42 2

Group’sshareof(loss)/profit (20) 21 1

2016OWNERSHIP (%) 50 50

Revenue 1 917 166 2 083

Netoperatingcostsexcludingdepreciationandamortisation (1802) (102) (1904)

Depreciationandamortisation (11) (1) (12)

Interestexpense (4) — (4)

Interestreceived 7 4 11

Taxexpense (31) (19) (50)

Non-controllinginterest (4) — (4)

PROFIT 72 48 120

Group’sshareofprofit 36 24 60

INTERESTS IN JOINT OPERATIONS

COMPANY

Rmillions 2017 2016

Unlistedsharesatamortisedcost 28 28

DetNetisajointventurewithDynoNobel,asubsidiaryofIncitecPivotLtd.DetNetisrepresentedgloballybybothAELMiningServicesandDynoNobel,thusprovidingglobalaccessandsupportforallitsproducts.TheGrouphasrightstotheassetsandobligationsfortheliabilitiesofDetNetandthusitisclassifiedasajointoperation.

PERCENTAGE HELD BY AECI

Ownership(%) 2017 2016

DetNetSouthAfrica(Pty)Ltd 50 50




GROUP’S SHARE OF INCOME STATEMENT

Rmillions 2017 2016

OWNERSHIP (%) 50 50

Revenue 166 121

Netoperatingcostsexcludingdepreciationandamortisation (153) (116)

Depreciationandamortisation (2) (2)

Interestreceived 3 3

Taxexpense (2) (1)

PROFIT 12 5

GROUP’S SHARE OF FINANCIAL POSITION

Rmillions 2017 2016

OWNERSHIP (%) 50 50

Currentassetsexcludingcashandcashequivalents 89 82

Cashandcashequivalents 9 6

Non-currentassets 21 21

TOTAL ASSETS 119 109

Tradeandotherpayables 24 24

Non-currentliabilities 1 1

TOTAL LIABILITIES 25 25

NET ASSETS 94 84

7. INVESTMENT IN ASSOCIATES

GROUP

GROUP COMPANY

Rmillions 2017 2016 2017 2016

UNLISTED SHARES AT COST 289 273 24 —

Atthebeginningoftheyear 273 273 — —

Acquisitions 24 — 24 —

Disposals (8) — — —

POST-ACQUISITION RETAINED EARNINGS (90) (79)

Balanceatthebeginningoftheyear (79) (23)

Translationdifferences (10) (24)

Currentyear'sshareofnetlossesofassociatecompanies (1) (32)

TOTAL INVESTMENT IN ASSOCIATES 199 194 24 —



7. INVESTMENT IN ASSOCIATES continued

TheGrouphasa42,6%interestinPTBlackBearResourcesIndonesia(“BBRI”).BBRIisanIndonesiancompanyandhasbuiltanammoniumnitrateplantwhichsuppliesammoniumnitratesolutiontotheregion,therebyimprovingAECIMiningSolutions’supplychain.BBRIisastrategicinvestmentforthatsegmentasitenableslocalsupplytoreplaceimportsintothismarket.

TheGrouphasa49%interestinCloverPride(Pty)Ltd(“CloverPride”),aSouthAfricanmanufacturerandimporterofoliveoils,extravirginoliveoils,balsamicvinegarsandrelatedproducts(seenote12).TheinvestmentinCloverPrideiscarriedatcostbytheCompany.

Rmillions BBRICloverPride Total

2017OWNERSHIP (%) 42,6 49,0

STATEMENT OF FINANCIAL POSITIONCurrentassets 93 38 131 Non-currentassets 331 43 374 Currentliabilities (87) (13) (100)Non-currentliabilities (126) (11) (137)

NET ASSETS (100%) 211 57 268

CARRYING AMOUNT OF INTEREST IN ASSOCIATE 170 29 199

Rmillions BBRI Total

2016OWNERSHIP (%) 42,6

STATEMENT OF FINANCIAL POSITIONCurrentassets 90 90

Non-currentassets 391 391

Currentliabilities (80) (80)

Non-currentliabilities (174) (174)

NET ASSETS (100%) 227 227

CARRYING AMOUNT OF INTEREST IN ASSOCIATE 176 176

INCOME STATEMENT

Rmillions BBRICloverPride Total

2017OWNERSHIP (%) 42,6 49,0

Revenue 179 99 278 Netoperatingcostsexcludingdepreciationandamortisation (147) (86) (233)Depreciationandamortisation (32) — (32)Interestexpense (13) (1) (14)Interestreceived 2 — 2 Taxexpense (1) (3) (4)

(LOSS)/PROFIT (12) 9 (3)

GROUP SHARE OF (LOSSES)/PROFITS (5) 4 (1)



7. INVESTMENT IN ASSOCIATES continued

INCOME STATEMENTRmillions BBRI Total

2016OWNERSHIP (%) 42,6

Revenue 170 170

Netoperatingcostsexcludingdepreciationandamortisation (149) (149)

Depreciationandamortisation (51) (51)

Interestexpense (20) (20)

Interestreceived 1 1

Taxexpense (26) (26)

LOSS (75) (75)

GROUP SHARE OF LOSS (32) (32)

8. OTHER INVESTMENTSGROUP COMPANY

Rmillions 2017 2016 2017 2016

NON-CURRENT INVESTMENTSEquityinstruments 91 6 89 4

Unlistedshares 1 87 2 85 —

Capitalcontributions 4 4 4 4

Loansandreceivables 26 19 13 7

OTHER NON-CURRENT INVESTMENTS 117 25 102 11

CURRENT INVESTMENTS 155 190 78 118

Moneymarketinvestment 2 77 72 — —

Employersurplusaccounts 3 78 118 78 118

OTHER CURRENT INVESTMENTS 155 190 78 118

1 InJuly2017AECIinvestedUS$5million(R65million)inOriginMaterials(“Origin”),astart-upcompanybasedinCalifornia,USA,thathaspioneeredthedevelopmentofbio-basedchemicalswhichcanbeprocessedintoalargenumberofproductsforapplicationinglobalmarkets.OriginisconsideredtobeaLevel3available-for-salefinancialasset.TheGrouphasappliedtheIAS39exemption(paragraph46c)andcarriestheinvestmentatcost.IncludedintheunlistedsharesisaR22millioninvestmentintheGoodChemistryFund,whichisalsoconsideredtobeaLevel3available-for-salefinancialasset.

2 ThemoneymarketinvestmentisaninvestmentinacollectiveinvestmentschemewithInvestecBankLtd.TheinvestmentisconsideredtobeaLevel1financialassetanditscarryingvalue,therefore,wasthesameasitsfairvalueatthereportingdate.

3 EmployersurplusaccountsincludethesurplusesfromtheAECIDefinedContributionPensionFundandtheAECIEmployeesProvidentFund.TheinvestmentisconsideredtobeaLevel1financialassetanditscarryingvalue,therefore,wasthesameasitsfairvalueatthereportingdate.Seenote29forfurtherinformationinthisregard.



9. DEFERRED TAXGROUP COMPANY

Rmillions 2017 2016 2017 2016

Atthebeginningoftheyear 273 95 (21) (153)

Recognisedintheincomestatement

—normalactivities 3 163 6 113

—ratechange 7 Recognisedinothercomprehensiveincome

—foreigncurrencyloantranslationdifferences 23 13 — —

—defined-benefitobligations — 6 — 6

—post-retirementmedicalaidobligations (4) (5) (4) 17

Other — 1 1 (4)

AT THE END OF THE YEAR 302 273 (18) (21)

Analysisbymajortemporarydifferences:

Property,plantandequipment (391) (520) (37) (39)

Provisionsanddeferredincome 361 436 192 254

Pensionfundemployersurplusaccounts (158) (196) (158) (196)

Deferredforeignexchangedifferences (53) (69) (28) (39)

Computedtaxlosses 524 641 13 —

Other 19 (19) — (1)

302 273 (18) (21)

Comprising:

Deferredtaxassets 395 527 — —

Deferredtaxliabilities (93) (254) (18) (21)

302 273 (18) (21)

DeferredtaxassetsofR395million(2016:R527million)wererecognisedtotheextentthatitisprobablethattaxableincomewillbeavailableinfutureagainstwhichtheycanbeutilised.Futuretaxableprofitswereestimatedbasedonbusinessplanswhichincludeestimatesandassumptionsregardingeconomicgrowth,interestandinflationratesandmarketconditions.

10. INVENTORIESGROUP COMPANY

Rmillions 2017 2016 2017 2016

Rawandpackagingmaterials 1 114 1 023 308 252

Inprogress 25 16 7 7

Finishedgoodsandmerchandise 1 970 1 917 906 900

Consumablestores 182 152 — —

Sparesandother 64 66 14 21

3 355 3 174 1 235 1 180

INCOME STATEMENTCostofinventoriesrecognisedasanexpense 10 548 10 737 3 932 3 994

Lossesandwrite-downofinventories 6 8 4 6

Inventoryadjustments 3 (39) 21 19



11. ACCOUNTS RECEIVABLEGROUP COMPANY

Rmillions 2017 2016 2017 2016

Trade 3 226 2 915 1 072 1 011

Pre-payments 153 85 29 28

VAT 204 121 104 66

Other 152 164 62 57

Forwardexchangecontracts 43 12 7 3

Subsidiariesandjointventures 15 45 229 287

3 793 3 342 1 503 1 452

Tradereceivablesareexposedtocreditriskasdescribedinnote27.

GROUP COMPANY

Rmillions 2017 2016 2017 2016

Themaximumexposuretocreditriskfortradereceivables at31Decemberbygeographicregionwas:

SouthAfrica 2 134 1 894 1 005 960

RestofAfrica 867 767 58 32

NorthAmerica 39 36 1 —

SouthAmerica 19 16 — 1

Asia 67 78 4 10

Australia 59 79 1 2

Europe 41 45 3 6

3 226 2 915 1 072 1 011

Theageingofgrosstradereceivablesat31Decemberwas:

Notpastdue 2 390 2 190 916 845

Pastdue0to30days 597 470 111 95

Pastdue30to90days 125 124 22 33

Pastduemorethan90days 263 316 39 62

GROSS TRADE RECEIVABLES 3 375 3 100 1 088 1 035

Theageingofimpairmentallowancesinrespectoftradereceivablesat31Decemberwas:

Notpastdue (2) (14) (1) (11)

Pastdue0to30days — (2) — (1)

Pastdue30to90days (1) (7) — (1)

Pastduemorethan90days (146) (162) (15) (11)

TOTAL IMPAIRMENT ALLOWANCES (149) (185) (16) (24)

NET TRADE RECEIVABLES 3 226 2 915 1 072 1 011

IMPAIRMENT ALLOWANCES OF TRADE RECEIVABLESAtthebeginningoftheyear (185) (171) (24) (29)

Additionalimpairmentallowancesrecognisedduringtheyear (55) (26) (6) (3)

Impairmentallowancesreversedduringtheyear 79 5 2 1

Impairmentallowancesappliedtotradereceivables deemedirrecoverable 12 7 12 7

AT THE END OF THE YEAR (149) (185) (16) (24)

Impairmentallowancesinrespectoftradereceivablesarerecognisedwithreferencetotheageingoftradereceivablesthatarepastdue,paymentsreceivedafterthereportingdate,thepaymenthistoryofthespecificcustomerandthelengthoftherelationshipwiththatcustomer,aswellasobjectiveevidencerelatingtotheeconomicenvironment,thecreditstatusofthecustomerandthemarketinwhichthecustomeroperates.



12. ASSETS CLASSIFIED AS HELD FOR SALE

ThedisposalofOlivePride,abusinessthatwaspartoftheFood&Beverageoperatingsegmentandwhichwasclassifiedasheldforsaleat31December2016,wascompletedon1April2017.Theassetsdisposedofweretransferredinitiallytoaseparatelegalentity,CloverPride,thatwaswholly-ownedbytheGroupthroughitssubsidiarySouthernCannedProducts(Pty)Ltd.Subsequenttothetransferoftheassets, theinterestinCloverPridewasdistributedtotheCompanyasadividendinspecie.TheshareholdinginCloverPridewasthenreducedthroughthesaleofa51%staketoCloverS.A.(Pty)LtdforatotalconsiderationofR30million.

TheGroup’sremaining49%stakeinCloverPrideistreatedasanequity-accountedinvesteeintermsofIAS28InvestmentsinAssociates andJointVentures,anditispartoftheFood&Beverageoperatingsegment(seenote7).

Thesaleagreementprovidedforcontinuedtradingbythebusinessthroughoutthedisposalprocess,resultinginmovementsinitsheld-for-saleassetvaluesbetweenthepriorreportingdateandthedateofdisposal.

Thecarryingamountoftotalassetssoldwas:

GROUP

Rmillions2016

At 31 Dec2017

Movements2017

At1Apr

Goodwill 27 1 28 Property,plantandequipment 1 — 1 Intangibleassets 21 — 21 Inventory 11 (3) 8

ASSETS CLASSIFIED AS HELD FOR SALE 60 (2) 58

Exchangedfor:

—tradeloanswithassociate 4 —investmentinassociate 24 Proceedsondisposal 30

SURPLUS/(SHORTFALL) ON DISPOSAL —

COMPANYRmillions 2017

Dividendinspeciereceived—100%interestinCloverPride 58 Disposalof51%interestinCloverPride (30)

Residualinvestment 28 Comprisedof:

—tradeloanswithassociate 4 —investmentinassociate 24

SURPLUS/(SHORTFALL) ON DISPOSAL —

Noassetsordisposalgroupswereclassifiedasheldforsaleatthereportingdate.



13. SHARE CAPITAL AND SHARE PREMIUMNUMBER OF SHARES GROUP COMPANY

Rmillions 2017 2016 2017 2016 2017 2016

ORDINARY SHARESAuthorised

OrdinarysharesofR1each 180 000 000 180 000 000 180 180 180 180

Bordinarysharesofnoparvalue 10 117 951 10 117 951

LISTED ORDINARY SHARES AT THE BEGINNING AND END OF THE YEARAtthebeginningoftheyear

Group 109 944 384 110 386 596 110 110

Company 121 829 083 122 271 295 122 122

Repurchasedduringtheyear

Group — (442212) — —

Company — (442212) — —

Attheendoftheyear

Group 109 944 384 109 944 384 110 110

Company 121 829 083 121 829 083 122 122

UNLISTED REDEEMABLE CONVERTIBLE B ORDINARY SHARES AT THE BEGINNING AND END OF THE YEARCompany 10 117 951 10 117 951

Sharepremiumlessshareissueexpenses — — 6 6

Atthebeginningoftheyear — — 6 45

Sharesrepurchased — — — (39)

Totalordinaryshares

Group 109 944 384 109 944 384 110 110

Company 131 947 034 131 947 034 128 128

Noparvaluetreasurysharesheldbyconsolidatedtrust 10 117 951 10 117 951

Parvaluetreasurysharesheldbya subsidiarycompany 11 884 699 11 884 699

Totaltreasuryshares 22 002 650 22 002 650

LISTED PREFERENCE SHARESAuthorisedandissued

5,5%cumulativesharesofR2each 3 000 000 3 000 000 6 6 6 6



13. SHARE CAPITAL AND SHARE PREMIUM continued

IntermsoftheCompany’sMOI,allpaymentsofdividendsonthepreferencesharesandallpaymentstobemadeinrespectofthepreferencesharesintheeventofliquidationshallbemadeinpoundsterlingandcalculatedasthoughtheshareswereonepoundsterling.Thecapitalrepaymenttopreferenceshareholdersintheeventofliquidationislimitedto3150000poundsterling(1,05poundsterlingpershare).

Otherthantreasuryshares,thefollowingbeneficialshareholdersheld5%ormoreoftheCompany’slistedordinarysharesat31December:

Numberofshares

%ofissuedordinaryshares

BENEFICIAL SHAREHOLDERPublicInvestmentCorporation 14 584 182 12,0

AllanGray 12 034 261 9,9

KagisoAssetManagement 11 877 477 9,8

PSGAssetManagement 7 364 688 6,1

CAPITAL MANAGEMENTTheBoardofDirectors’policyistomaintainastrongcapitalbasesoastomaintaininvestorandmarketconfidenceandtosustainfuturedevelopmentofthebusiness.TheBoardofDirectorsmonitorsthespreadofshareholders,thelevelofdividendstoordinaryshareholdersandreturnoncapital.Returnoncapitalisdefinedasprofitfromoperationsplusinvestmentincomerelatedtoaverageproperty,plantandequipment,investmentproperty,intangibleassets,goodwill,investments,inventories,accountsreceivableandassetsclassifiedasheldforsalelessaccountspayable.Therearenoexternallyimposedcapitalrequirements.

14. NON-CURRENT BORROWINGS

GROUP COMPANY

RmillionsWeightedclosinginterestrate(%) 2017 2016 2017 2016

UNSECUREDLOCALLoans:

Inceptiondateandsettlementdate:

2015to2018 8,71 500 500 500 500

2016to2021 8,95 1 100 1 100 1 100 1 100

FOREIGNLoans—USdollar — — 8 — 8

Loans—USdollar — — 152 — —

SECUREDLOCALLoans—other — — 2 — —

1 600 1 762 1 600 1 608

Currentportion(seenote17) (500) (162) (500) (8)

CARRYING AMOUNT 1 100 1 600 1 100 1 600

SUMMARY OF REPAYMENTSRmillions Year Local Total

GROUP2018 500 500

2021 1 100 1 100

TOTAL REPAYMENTS 1 600 1 600

COMPANY2018 500 500

2021 1 100 1 100

TOTAL REPAYMENTS 1 600 1 600



15. NON-CURRENT PROVISIONS AND EMPLOYEE BENEFITSGROUP COMPANY

Rmillions 2017 2016 2017 2016

ENVIRONMENTAL REMEDIATIONAtthebeginningoftheyear 165 162 104 119

Paidduringtheyear (27) (4) (1) —

Chargedtonetoperatingcostsduringtheyear

—Additionalprovisionmade 31 19 6 —

—Reversalofprovision — (31) — (15)

Amountclaimablefromexternalthirdparty — 19 — —

Translationdifferences (2) — — —

167 165 109 104

Currentportionincludedinaccountspayable(seenote16) (12) (19) — —

AT THE END OF THE YEAR 155 146 109 104

EARNINGS-BASED INCENTIVE SCHEMEAtthebeginningoftheyear 67 103 63 97

Paidduringtheyear (26) (54) (24) (51)


—Additionalprovisionmade 4 46 4 43

—Reversalofprovision (8) (28) (8) (26)

37 67 35 63

Currentportionincludedinaccountspayable(seenote16) (37) (67) (35) (63)

AT THE END OF THE YEAR — — — —

EARNINGS-GROWTH INCENTIVE SCHEMEAtthebeginningoftheyear 108 88 48 39


Disposalthroughsaleofbusiness — — (6) —



—Reversalofprovision (4) (9) (2) (4)

119 108 53 48



CASH-SETTLED SHARE-BASED INCENTIVE SCHEMEAtthebeginningoftheyear 38 33 38 33




45 38 45 38



POST-RETIREMENT MEDICAL AID OBLIGATIONSActuarialvaluationofobligations(seenote29) 185 207 185 207


TOTAL NON-CURRENT PROVISIONS 392 412 321 340

ENVIRONMENTAL REMEDIATIONTheenvironmentalremediationprovisionisbasedontheGroup’senvironmentalpolicyandobligationsintermsoflegislationtoremediateland.TheexpenditureisexpectedtobeincurredasandwhentheGroupislegallyrequiredtodoso,dependingonenduse.Whendetailedcharacterisationofthelandisperformed,theprovisionmayneedtobeadjusted.Theprovisionisbasedontheassumptionthattheend-usewillbeforindustrialpurposes.



15. NON-CURRENT PROVISIONS AND EMPLOYEE BENEFITS continued

EARNINGS-BASED, EARNINGS-GROWTH AND CASH-SETTLED SHARE-BASED INCENTIVE SCHEMES Theearnings-basedincentivescheme,earnings-growthincentiveschemeandcash-settledshare-basedincentiveschemeprovisionsrepresentthepresentvalueofobligationstoemployeeswhohavebeengrantedunitsintermsoftheincentiveschemes(seenote29).

TheamountpayabledependsonemployeesmeetingthevestingconditionspertainingtotheirperiodofemploymentaswellastheearningsoftheGrouportheCompany’ssharepriceperformanceduringthelifeoftheunits.

POST-RETIREMENT MEDICAL AID OBLIGATIONSDetailsofthenatureofthepost-retirementmedicalaidobligationsprovisionarecontainedinnote29.Thecostswillbeincurredoverthelifetimeofalleligibleemployeesandwillvarydependingonexpectedlives,changestosalaryinflation,healthcarecostsanddiscountrates.

Assumptionsusedtodeterminetheobligationsarealsodetailedinnote29.

16. ACCOUNTS PAYABLEGROUP COMPANY

Rmillions 2017 2016 2017 2016

Trade 3 016 2 759 1 367 1 357

Payroll-relatedaccruals 547 497 199 216

Otherpayables 1 412 617 270 413

Forwardexchangecontracts 109 52 58 21

VAT 11 34 — —

Subsidiariesandjointventures 16 16 122 243

4 111 3 975 2 016 2 250

Currentportionofnon-currentprovisions(seenote15) 161 173 106 120

4 272 4 148 2 122 2 370

1 In2016,anamountofR172millionincludedinotherpayablesrelatedtothesettlementofpost-retirementmedicalaidobligationstopensioners.Therewasnocorrespondingamountinthecurrentyear.

17. CURRENT BORROWINGSGROUP COMPANY

Rmillions 2017 2016 2017 2016

Currentportionofnon-currentborrowings(seenote15) 500 162 500 8

Unsecuredinterest-bearingshort-termborrowings 30 — 30 —

530 162 530 8

BorrowingsofR220millionwereraisedinAugust2017throughtheplacementofseniorunsecurednotesundertheGroup’sDomesticMediumTermNoteprogramme.Theseborrowingsweresettledbeforethereportingdate.

18. REVENUEGROUP COMPANY

Rmillions 2017 2016 2017 2016

Saleofgoodsandrelatedservices 18 182 18 198 4 990 5 082

Leasingandrelatedservices 300 398 288 290

Salestosubsidiarycompanies 387 515

Leasingandrelatedservicestosubsidiarycompanies 51 32

18 482 18 596 5 716 5 919

Local 12 246 12 117 5 022 5 080

Foreign 6 236 6 479 256 292

Subsidiarycompanies 438 547

18 482 18 596 5 716 5 919



19. NET OPERATING COSTSGROUP COMPANY

Rmillions 2017 2016 2017 2016

Costofsales 12 263 12 561 4 604 4 704

Sellinganddistributionexpenses 1 735 1 708 429 371

Administrativeexpenses 2 905 2 992 583 636

NET OPERATING COSTS 16 903 17 261 5 616 5 711

Netoperatingcostshavebeenarrivedataftertakingintoaccount:

Auditor'sremuneration 27 25 8 5

—Auditfees 19 19 5 4

—Otherservices 8 6 3 1

Depreciationandamortisation 597 626 80 84

—Property,plantandequipment 572 597 77 83

—Investmentproperty 2 1 3 1

—Intangibleassets 23 28 — —

Foreignexchangegains (223) (346) — —

—Realised (122) (265) — —

—Unrealised (101) (81) — —

Foreignexchangelosses 268 433 55 67

—Realised 192 319 6 5

—Unrealised 76 114 49 62

Impairmentofgoodwill 3 28 130 —

Impairmentofproperty,plantandequipment 10 54 — —

Increaseinnon-currentprovisionsandemployeebenefits 69 49 32 26

—Environmentalremediation 31 (12) 6 (15)

—Earnings-basedincentivescheme (4) 18 (4) 17

—Earnings-growthincentivescheme 31 34 19 15

—Cash-settledshare-basedincentivescheme 11 9 11 9

Operatingleasecosts 173 189 33 36

Researchanddevelopmentexpenditure 50 52 — —

Gainonreassessmentofcontingentconsideration 31 34 31 18

Lossondisposalofinvestmentinassociatecompany 2 — 2 —

(Surplus)/lossondisposalofproperty,plantandequipment (8) 9 — —

Totalsalariesandotherstaffcosts 3 246 3 277 739 889

—Salariesandotherstaffcosts 3 173 3 210 707 865

—ESTshare-basedpayment 19 24 3 4

—Performanceshare-basedpayment 54 43 29 20

Lossonsettlementincludedindefined-benefitcosts(seenote29) 4 149 4 147

—Post-retirementmedicalaidobligations 4 149 4 147



20. SHARE-BASED PAYMENTS

AECI EMPLOYEES SHARE TRUST (“EST”)GROUP COMPANY

Rmillions 2017 2016 2017 2016

Equity-settledshare-basedpayment 19 24 19 24

—Recognisedinprofitfromoperations 19 24 3 4

—Investmentinsubsidiariesandjointventures 16 20

On9February2012,theCompanycreatedandissued10117951redeemableconvertibleAECIBordinarysharesofnoparvalue.TheESTsubscribedforthesesharesfornocashconsideration.TheESTwillholdthesharesonbehalfofitsbeneficiariesforaperiodof10years.ThebeneficiariesarepermanentemployeeswhodonotparticipateinanyoftheGroup’sexistinglong-termincentiveschemesandBlackManagerswhowereemployedasat9February2012intheGroup’sSouthAfricanoperations,andanyotheremployeesandBlackManagerswhoareemployedsubsequentlyandgrantedallocationsbytheAECIExecutiveCommittee.

Aninitialallocationof7569669shareswasmade.ThenumberofsharesforBlackManagerswasdeterminedonthebasisofannualbasicsalarydividedbytheissuepriceofR75,82.Thenumberofsharesfortheremainingeligibleemployeeswas1022AECIBordinarysharesperemployeeplus102AECIBordinarysharesforeveryyearofcompletedserviceuptoamaximumof10years,asindicatedinthefollowingtable:

NUMBER OF YEARS OFCOMPLETEDSERVICE

TOTAL NUMBEROFSHARESALLOCATED

Lessthan1 1 022

1 1 124

2 1 226

3 1 328

4 1 430

5 1 532

6 1 634

7 1 736

8 1 838

9 1 940

10 2 042

Thesharesareunlisted,nottransferableorsaleable,havethesamevotingrightsasAECIordinarysharesandanydividenddeclaredonthe Bordinarysharesmaynotexceedthedividenddeclaredontheordinaryshares.

Attheendofthe10-yearlock-inperiod,thesharesallocatedtobeneficiarieswillbedistributedinaccordancewiththeESTdistributionformula.TheseentitlementshareswillthenbeconvertedtoAECIordinarysharesandtheremainderoftheBordinaryshareswillberedeemedfornoconsideration.AnyshareswhichhavenotbeenallocatedtoemployeeswillbedistributedtotheAECICommunityEducationandDevelopmentTrust.

ThenumberofsharestobedistributedandavailableforconversiontoAECIordinaryshareswillbedeterminedinaccordancewiththeESTdistributionformula:

A=B×{1-[(C-E+F+X)÷D]}

AisthenumberofthevestedBordinarysharestowhichanESTbeneficiaryisentitled,providedthatfractionsarisingwillberounded tothenearestwholenumber.IfAiszero,therewillbenodistributionandtheremainingvestedsharesnotdistributedwillberedeemed fornoconsideration.

Bisthetotalnumberofsharesvestedinbeneficiariesattheterminationdate.

CisR75,82beingtheissueprice,increasedbytherateof85%oftheprimeratecompoundedmonthlyinarrearsduringtheESTterm.

DistheVolumeWeightedAveragePrice(“VWAP”)ofanAECIordinaryshareforthehigherofthe30or60tradingdaysendingatthe closeoftradingontheESTterminationdate.

EisanamountequaltothedistributionswhichwouldhavebeenpaidonthevestedshareshadtheybeenAECIordinarysharesinstead ofBordinarysharesandasthoughtheyhadbeenheldfrom9February2012.

FisanamountequaltothedividendsandanyotherpaymentsanddistributionswhichhaveactuallybeenpaidinrespectofBordinarysharesovertheESTterm.

XisanamountequaltotheaggregateadministrationcostsoftheESTpaidbytheGroupovertheESTtermdividedbythetotalnumber ofBordinarysharesheldbytheEST.



20. SHARE-BASED PAYMENTS continued

Ashare-basedpaymentexpenseisrecognisedasanequity-settledshare-basedpaymentinprofitfromoperations,withacorrespondingcredittoashare-basedpaymentreserve,andwillberecognisedoverthevestingperiodoftheshareswithreferencetothefairvalueoftheequityinstrumentsgranted.Thevestingperiodisbasedonaforfeitureprofileasfollows:

PERCENTAGEOFBORDINARY SHARES TO BE FORFEITED %

Lessthan3years 100

3butlessthan4years 80




Morethan7years —

ThefairvalueoftheequityinstrumentswasdeterminedusingaMonteCarlooptionpricingapproachtosimulatethefuturesharepriceoftheCompany’slistedsharesovertheperiodofthetransaction.Theapproachinvolvesalargenumberofsimulationsofthepricecalculatedattheendoftheterm,discountedtopresentvalueusingarisk-freerate.Thepresentvalueofallsimulationsisaveragedtodeterminethefairvalueoftheequityinstrument.

Theinputsforthemodel,basedonmarketconditionsatthegrantdate,andfairvaluedeterminedwere:

FIRSTALLOCATION

SECONDALLOCATION

THIRDALLOCATION

FOURTHALLOCATION

FIFTHALLOCATION

MarketpriceoftheCompany'slistedsharesatthegrantdate(rand) 88,89 80,95 116,76 120,59 91,00

Issueprice(rand) 1 75,82 75,82 75,82 75,82 75,82

Risk-freeinterestrates SouthAfricanrandzeroswapscurve

Primerates SouthAfricanrandprimecurve

Dividendyield Basedon10%offorecastdividends

Grant date 30Apr2012 01 Oct 2012 1Sep2013 1Sep2014 31 Mar 2016

Terminationdate 9Feb2022 9Feb2022 9Feb2022 9Feb2022 9Feb2022

Hurdleprice(rand) 2 216,26 199,75 222,35 203,25 104,00

Sharepricevolatility(%perannum) 3 24,70 22,50 22,00 23,93 22,77

Vestingdates 7years,inaccordancewiththeforfeitureprofileabove

Numberofsimulations 50 000 50 000 50 000 50 000 500 000

Fairvalueofequityinstrument(rand) 18,54 12,27 29,64 32,81 8,08

Numberofsharesallocated 7 569 669 509 102 560 978 710 562 1 897 590

1 TheissuepricewascalculatedasthehigheroftheVWAPforthe30or60tradingdaysendedatthecloseofbusinesson7October2011,beingtheFridaypriortothesignaturedateoftheESTsubscriptionagreementasdeterminedbytherules.

2 Theissuepriceincreasedbytherateof85%oftheprimeratecompoundedmonthlyinarrearsoverthe10-yearESTterm.3 Volatilitywasmeasuredusingthedailyhistoricvolatilityequallyweightedoveraperiodof10years,beingequivalenttotheESTterm.

NUMBER OF SHARES

2017 2016

EST SHARE ALLOCATIONNumberofsharesissuedtotheEST 10 117 951 10 117 951

Numberofsharesallocatedtobeneficiaries (11247901) (11247901)

Numberofsharesforfeited 1 415 541 1 469 612

UNALLOCATED POOL SHARES 285 591 339 662

TheESTisconsolidatedintheGroupinlinewithIFRS10ConsolidatedFinancialStatements,giventhattheAECIExecutiveCommitteecontrolsanddeterminesthenumberofsharesallocatedtobeneficiaries.TheBordinarysharesaretreatedastreasuryshares.AnydividendsreceivedbytheESTwillbeeliminatedtogetherwiththedividendpaidbytheCompanyintheGroupresults.

Bordinarysharesforfeitedreturntothepoolofunallocatedsharesandareavailableforreallocation.In2016,certainshareswererecordedasforfeitedbutitwassubsequentlydeterminedthattheyhadnotbeen.Asaresult,thenumberofsharesforfeitedreducedin2017asthebeneficiariesaffectedwerereinstated.




AECI PERFORMANCE SHARES (“PS”)GROUP COMPANY

Rmillions 2017 2016 2017 2016

Equity-settledshare-basedpayment 54 43 54 43

—Recognisedinprofitfromoperations 54 43 29 20

—Investmentinsubsidiariesandjointventures 25 23

NUMBER OF SHARES

2017 2016

SHARE ALLOCATIONNumberofPSallocatedatthebeginningoftheyear 915 714 838 575

NumberofPSallocatedtobeneficiariesduringtheyear 675 369 388 290

NumberofPSexercisedduringtheyear (222942) (259505)

NumberofPSforfeitedduringtheyear — (51646)

TOTAL PS ALLOCATED AS AT 31 DECEMBER 1 368 141 915 714

TheAECILong-termIncentivePlan(“LTIP”)wasapprovedbyshareholdersin2012.Thepurposeoftheplanistoattract,retain,motivateandrewardExecutivesandManagerswhoareabletoinfluencetheperformanceofAECIanditssubsidiariesonabasiswhichalignstheirinterestswiththoseoftheGroup.

AnnualconditionalawardsofPSwillbeallocatedtoExecutivesandSeniorManagers.PSwillvestonthethirdanniversaryoftheirawardtotheextentthattheCompanyhasmetspecificperformancecriteriaovertheinterveningperiod.Essentiallythevaluepersharethatvestsisthefullvalue,butthenumberofsharesthatwillvestwilldependonwhethertheCompany’sperformanceovertheinterveningthree-yearperiodhasbeenontarget,oranunder-orover-performanceagainstthetarget(s)setattheawarddate.ThePSdonothaveanissueprice.

ThemethodologyofvestingwilltargettheCompany’scomparativetotalshareholderreturn(“TSR”)inrelationtoapeergroupofcompanies.Since2016apeergroupof16JSE-listedcompanies(includingAECI)hasbeenusedtodetermineAECI’srelativeperformance.From2018itisproposedthatvestingperformancemeasurementswillincludeameasureonreturnonaveragenetassetsandgrowthofHEPSoverthethree-yearvestingperiod.

ThefairvalueofthePSwasdeterminedusingaMonteCarlooptionpricingapproachtosimulatethefuturesharepriceoftheCompany’slistedsharesandthoseofthepeercompanies,andtheircorrelationstooneanother.Theapproachinvolvesalargenumberofsimulationsofthesharepricesusingthespotsharepricesonthegrantdate,aswellasrisk-freeinterestratesandvolatilitiesforthedifferentsharesasinputs.AstheTSRcalculationrequiresthesimulationofanumberofcorrelatedrandomvariables,thecorrelationsbetweenthesharepricereturnsofAECIandthepeercompaniesareincorporatedintothevaluation.ForeachoutcomeoftheAECIandpeercompanies’shareprices,theTSRwillbecalculated,incorporatingthehistoricalTSRindices.AvestingpercentageforthePSwillbedeterminedinaccordancewiththepre-definedrankingrules.TheproductofthisvestingpercentageandthesimulatedAECIsharepricewillprovidethefairvalueofthePSforeachsimulation.ThepresentvalueofallsimulationswasaveragedtodeterminethefairvalueofthePS.

Theinputsforthemodel,basedonmarketconditionsatthegrantdate,andfairvaluedeterminedwereasfollows:

THIRDALLOCATION

FOURTHALLOCATION

FIFTHALLOCATION

SIXTHALLOCATION

MarketpriceofAECI'slistedsharesatthegrant date(rand) 123,55 95,20 83,00 106,28

Risk-freeinterestrates SouthAfricanrandzeroswapscurve

Primerates SouthAfricanrandprimecurve

Dividendyield Basedonforecastdividends

Grant date 31 Oct 2014 31 Oct 2015 30 Jun 2016 30 Jun 2017

Vestingdate 30 Jun 2017 30 Jun 2018 30 Jun 2019 30 Jun 2020

AECIsharepricevolatility(%perannum) 21,17 21,84 24,33 24,96

Fairvalueofequityinstrument(rand) 195,21 102,95 108,51 199,46

NumberofPSallocated 260 702 336 182 388 290 675 369




ThethirdallocationwasapprovedinOctober2014resultinginagrantdateof31October2014,thoughtheawarddatewas30June2014. Theperformanceperiodwasfrom1June2014to1June2017.ThefourthallocationwasapprovedinOctober2015resultinginagrantdate of31October2015,thoughtheawarddatewas30June2015.Theperformanceperiodisfrom1June2015to1June2018.ThefifthallocationwasapprovedinJune2016resultinginagrantdateof30June2016.Theperformanceperiodisfrom1June2016to1June2019.ThesixthallocationwasapprovedinJune2017resultinginagrantdateof30June2017.Theperformanceperiodisfrom1June2017to1June2020.

ThethirdallocationofPSvestedon30June2017.Theperformanceperiodforthoseshareswascompletedon1June2017andAECIachieved sixthpositioninthepeergroup,withthetotalnumberofallocatedsharesvesting.ThenumberofPSgrantedtoeligibleemployeeswas260702 with37760shareshavingbeenforfeitedpriortovesting.Thisresultedin222942ordinarysharesvestingtoeligibleemployees.AECIcontractedwithAviorCapitalMarkets(Pty)Ltd(“Avior”)topurchasethesharesontheJSELtdandtodeliverthemtoeligibleemployeesonthevestingdate.AviorpurchasedthesharesatacostofR44millionandthissettlementwasrecognisedintheshare-basedpaymentreserve.Aviorfacilitatedthetransferorsaleofsharesasdesiredbyeligibleemployees.ThesharesweresettledinequitybyAECIandthefacilitationoffurthertransactionsonthevestedsharesdoesnotalterthenatureofthescheme.

21. INTEREST EXPENSEGROUP COMPANY

Rmillions 2017 2016 2017 2016

Non-currentborrowings (148) (162) (148) (162)

Currentborrowings (52) (102) (47) (90)

Subsidiarycompaniesandjointventures (247) (176)

Unwindingofdiscountoncontingentconsideration (2) (6) (2) (6)

(202) (270) (444) (434)

22. INTEREST RECEIVEDGROUP COMPANY

Rmillions 2017 2016 2017 2016

Subsidiarycompaniesandjointventures — 4 146 145


35 55 165 169



23. TAX (EXPENSE)/CREDITGROUP COMPANY

Rmillions 2017 2016 2017 2016

Currenttax (451) (515) — (69)

SouthAfricanandforeignnormaltax (415) (475) — (69)

Foreignwithholdingtaxes (36) (40) — —

Deferredtax 23 142 6 85

SouthAfricanandforeigndeferredtax 16 142 6 85

Deferredtaxratechange 7 — — —

(428) (373) 6 16

Adjustmentforprioryears (1) 37 6 53

SouthAfricanandforeignnormaltax 12 16 6 25

Deferredtax (13) 21 — 28

(429) (336) 12 69

Analysisofdeferredtaxchargebymajortemporarydifferences:

Property,plantandequipment 119 52 (9) 5

Provisionsanddeferredincome (17) (38) (21) (25)

Pensionfundemployersurplusaccounts 11 73 11 73

Deferredforeignexchangedifferences 47 24 11 32

Computedtaxlosses(utilised)/raised (141) 20 13 —

Changeinrate 7 — — —

Other (3) 11 1 —

23 142 6 85

Adjustmentforprioryears (13) 21 — 28

10 163 6 113

Computedtaxlosses

Utilisedtoreducedeferredtaxorcreatedeferredtaxassets (503) 73 46 —

Lossesonwhichnodeferredtaxassetswereraisedbecause ofuncertaintyregardingtheirutilisation 30 78 — —

(473) 151 46 —

GROUP COMPANY

% 2017 2016 2017 2016

Reconciliationoftaxratecomputedinrelationtoprofitbeforetax:

Effectiverate 30,4 29,3 (0,7) 121,1

Capitalandnon-taxablereceipts 6,5 3,6 31,8 (12,0)

Non-deductibleexpenses (10,7) (7,3) (6,5) 26,9

Foreignwithholdingtaxes (2,6) (3,5) — —

Adjustmentforprioryears (0,1) 3,2 0,4 (93,0)

Settlementofperformanceshares 0,9 (0,5) 0,4 (5,7)

Securitiestransfertax — — — 0,2

Taxratechange 0,5 — — —

Other 3,1 3,2 2,6 (9,5)

SOUTH AFRICAN STANDARD RATE 28,0 28,0 28,0 28,0



24. EARNINGS PER SHARE

GROUP

Rmillions 2017 2016

HEADLINE EARNINGS ARE DERIVED FROM:Profitattributabletoordinaryshareholders 950 777

Impairmentofgoodwill 1 3 28

Impairmentofproperty,plantandequipment—net 10 42

Impairmentofproperty,plantandequipment—gross 2 10 54

Taxeffectsofimpairmentsofproperty,plantandequipment — (12)

Impairmentsrecognisedbyequity-accountedinvestees—net 40 —

Impairmentsrecognisedbyequity-accountedinvestees—gross 2 54 —

Taxeffectofimpairmentsrecognisedbyequity-accountedinvestees (14) —

Foreigncurrencytranslationdifferencesreclassifiedonnetinvestmentsinforeignoperations—net 13 11

Foreigncurrencytranslationdifferencesreclassifiedonnetinvestmentsinforeignoperations—gross 2 18 17

Taxeffectontranslationdifferencesreclassifiedonnetinvestmentsinforeignoperations (5) (6)

Lossondisposalofequity-accountedinvestee 1,2 2 —

(Surplus)/lossondisposalofproperty,plantandequipment—net (6) 6

(Surplus)/lossondisposalofproperty,plantandequipment—gross 2 (8) 9

Taxeffectsofdisposalofproperty,plantandequipment 2 (3)

HEADLINE EARNINGS 1 012 864

1 Theremeasurementshadnotaxeffect.2 Theremeasurementshadnonon-controllinginteresteffect.

GROUP

2017 2016

EARNINGS PER ORDINARY SHAREBasic(cents) 900 735

Headline(cents) 959 818

Weightedaveragenumberofordinarysharesinissue 131 947 034 132 389 246

WeightedaveragenumberofordinarysharesheldbytheconsolidatedEST (10117951) (10117951)

WeightedaveragenumberofcontingentlyreturnableordinarysharesheldbytheCEDT (4426604) (4426604)

Weightedaveragenumberofsharesheldbyaconsolidatedsubsidiary (11884699) (11884699)

Weightedaveragenumberofsharesrepurchasedduringtheyear — (297018)

WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES FOR BASIC AND HEADLINE EARNINGS PER SHARE 105 517 780 105 662 974

Basicandheadlineearningspersharehavebeencalculatedontheprofitattributabletoordinaryshareholdersandheadlineearnings,respectively,forthefinancialyearasshownaboveandontheweightedaveragenumberofordinarysharesinissueof105517780,netoftreasuryshares(2016:105662974).



24. EARNINGS PER SHARE continued

GROUP

Cents 2017 2016

DILUTED EARNINGS PER ORDINARY SHARE Basic 859 720

Headline 915 800

TheBordinarysharesissuedtotheESTin2012,whichmaybeconvertedtoordinaryshares,thecontingentlyreturnablesharesissuedtotheCEDTin2012andthePSallocationsarealldilutivepotentialordinaryshares.Thedilutiveeffectisbasedonthenumberofordinarysharesthatareexpectedtobeissuedinfuture.Takingthesedilutivepotentialordinarysharesintoaccount,dilutedEPSanddilutedHEPShavebeencalculatedontheprofitattributabletoordinaryshareholdersandheadlineearnings,respectively,forthefinancialyearasshownaboveandonaweightedaveragenumberofsharesof110548653(2016:107967723).AECI’saveragesharepricesincethebeginningofthefinancialyear,usedinthedeterminationofpotentiallydilutiveordinaryshares,wasR104,22(2016:R93,99).Theotherpotentialordinarysharesdonothaveanexerciseprice.

GROUP

Cents 2017 2016

RECONCILIATION OF THE WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES FOR DILUTED EARNINGS PER SHARE:Weightedaveragenumberofordinaryshares 105 517 780 105 662 974

Dilutiveadjustmentforpotentialordinaryshares 5 030 873 2 304 749

WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES FOR DILUTED EARNINGS PER SHARE 110 548 653 107 967 723

25. DIVIDENDSGROUP COMPANY

Rmillions 2017 2016 2017 2016

ORDINARY

Finalfortheprioryear:No.166of300cents(2016:260cents) paidon10April2017 324 282 360 313

Interimforthecurrentyear:No.167of138cents(2016:135cents)paidon4September2017 150 148 165 164

Totalordinarydividendspaid:438cents(2016:395cents) 474 430 525 477

PREFERENCENos.158and159paidon15June2017and15December2017respectively 3 3 3 3

ESTAdividendof35centspersharewasdeclaredin2016andpaid inthecurrentyear 3 — 3 —

480 433 531 480

ProposedfinaldividendNo.168fortheyearended31December2017of340cents(2016:300cents)persharepayableon9April2018 374 330 414 365

374 330 414 365

Dividendsaresubjecttowithholdingtaxinthehandsoftheshareholders.

TheCompanyalsodeclaredadividendof84cents(2016:35cents)ontheBordinarysharesheldbytheEST,whichispayablein2018.



26. COMMITMENTS AND CONTINGENT LIABILITIES

COMMITMENTS

GROUP COMPANY

Rmillions 2017 2016 2017 2016

Capitalcommitmentsauthorised 405 233 14 30

Contractedfor 119 62 12 20

Notcontractedfor 286 171 2 10

Acquisitionsauthorisedandcontractedfor 4 173 — 2 272 —

TheGrouphasenteredintoanagreementwithCapitalworksPrivateEquity,MICInvestmentHoldings(Pty)LtdandtheMuchAsphaltmanagementteamtoacquire100%oftheissuedsharecapitalinMuchAsphalt,foratotalconsiderationofR2,272billionwhichispayableincash,subjecttotheconditionsprecedentbeingfulfilled.

AfterthereportingdateAECI(Mauritius)Ltd,awholly-ownedsubsidiaryofAECI,acquired100%ofthesharecapitalinSchirmGmbHandshareholderloanclaimsfromImperialChemicalLogisticsGmbH,awholly-ownedsubsidiaryofImperialHoldingsLtd.Thetransactionwasconcludedon17January2018andpaymentwasmadeon30January2018(seenote34).

Theexpenditurewillbefinancedfromfundsonhandandinternallygenerated,supplementedbyborrowingsagainstfacilitiesavailabletotheGroup.

GROUP COMPANY

Rmillions 2017 2016 2017 2016

Futurerentalsonleasedproperty,plantandequipment 367 443 2 18

Payablewithin1year 116 123 2 9

Payablebetween1and5years 224 263 — 9

Payablethereafter 27 57 — —

TheGroup’sleasingarrangementsrelateprimarilytopropertyandvehiclesandtheleaseperiodsrangefromthreetosixyears.CertainofthepropertieshaverenewaloptionsattheoptionofeitherthelessorortheGroup.

CONTINGENT LIABILITIESTheinvestigationprocessundertakenbytheCompetitionCommissionofSouthAfrica(“theCommission”)in2014,intocollusionbyAkuluMarchon(“Akulu”)andacompetitor,wasconcluded.BoththesepartiesconcludedseparatesettlementagreementswiththeCommission.AkulumadeapaymentofthepenaltyofR13905600on30October2017.AkulualsoagreedtoandimplementedbehaviouralremedieswhichwillbeappliedacrosstheGroup.

TheGroupisinvolvedinvariouslegalproceedingsandisinconsultationwithitslegalcounsel,assessingtheoutcomeoftheseproceedings,onanongoingbasis.Asproceedingsprogress,theGroup’smanagementmakesprovisioninrespectoflegalproceedingswhereappropriate.Litigations,currentorpending,arenotlikelytohaveamaterialadverseeffectontheGroup.



27. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

TheGroupfinancesitsoperationsbyacombinationofretainedprofits,currentborrowings,non-currentborrowingsandfinancialinstrumentsdenominatedinbothrandandforeigncurrencies.TheGroupalsoentersintoderivativetransactionstomanagethecurrencyandinterestraterisksarisingfromitsoperations.

TheGroupraisesnon-currentandcurrentborrowingscentrallyandon-lendstoitsbusinessentitiesatmarket-relatedinterestrates.TheGroupborrowsinboththelocalandinternationaldebtmarketsinrandandforeigncurrencies.Itusesderivatives,whereappropriate,togeneratethedesiredeffectivecurrencyandinterestrateprofile.Thederivativesusedforthispurposeareprincipallyforwardforeigncurrencycontracts,cross-currencyswaps,forwardrateagreements,interestrateswapsandinterestratecapsandfloors.

TheGroupdoesnotwriteinterestrateorcurrencyoptionsandonlypurchasescurrencyoptionswhentheseareconsideredtoofferacost-effectivealternativetoforwardforeignexchangecontracts.ItisGrouppolicythatnofinancialinstrumentsbepurchasedorsoldunlesstheyrelatetounderlyingcommercialtransactions.

ThemainrisksarisinginthenormalcourseofbusinessfromtheGroup’sfinancialinstrumentsarecurrency,interestrate,liquidity,creditandequitypricerisk.ThisnotepresentsinformationabouttheGroup’sexposuretotheserisksandtheGroup’sobjectives,policiesandprocessesformeasuringandmanagingthem.Furtherquantitativedisclosuresareincludedwithotherrelevantnotesasindicated.

TheBoardofDirectorsisresponsiblefortheriskmanagementactivitiesintheGroup.TheGroup’sriskmanagementpoliciesareestablishedtoidentifyandanalysetherisksfacedbytheGroup,tosetappropriaterisklimitsandcontrols,andtomonitorrisksandadherencetolimits.RiskmanagementpoliciesandsystemsarereviewedregularlytoreflectchangesinmarketconditionsandtheGroup’sactivities.TheInternalAuditfunctionundertakesbothregularandadhocreviewsofriskmanagementcontrolsandprocedures,theresultsofwhicharereportedtotheRiskCommittee.TheRiskCommitteeoverseeshowmanagementmonitorscompliancewiththeGroup’sriskmanagementpoliciesandproceduresandreviewstheadequacyoftheriskmanagementframeworkinrelationtotherisksfacedbytheGroup.

CATEGORIES OF FINANCIAL INSTRUMENTS AND FAIR VALUES

CARRYING AMOUNT FAIR VALUE

Rmillions 2017 2016 2017 2016

GROUPFINANCIAL ASSETSAvailable-for-salefinancialassets 1 87 2

—Unlistedshares—Level3 87 2

Financialassetsatfairvaluethroughprofitorloss 198 202 198 202

—Forwardexchangecontracts—Level2 43 12 43 12

—Moneymarketinvestmentincollectiveinvestment scheme—Level1 77 72 77 72

—Employersurplusaccounts—Level1 78 118 78 118


—Accountsreceivable 2 3 393 3 124

—Cash 3 1 206 1 465

—Loansreceivable 3 — —

—Loansandreceivablesrelatingtootherinvestments 3 26 19

4 910 4 812

FINANCIAL LIABILITIESFinancialliabilitiesnotmeasuredatfairvalue (5204) (5229)

—Accountspayable 2 (3444) (3392)

—Loansfromjointventures 3 (130) (75)

—Borrowings4 (1630) (1762)

Financialliabilitiesatfairvaluethroughprofitorloss (138) (110) (138) (110)

—Forwardexchangecontracts—Level2 (109) (52) (109) (52)

—Contingentconsideration—Level3 (29) (58) (29) (58)

(5342) (5339)



27. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT continued

CATEGORIES OF FINANCIAL INSTRUMENTS AND FAIR VALUES

CARRYING AMOUNT FAIR VALUE

Rmillions 2017 2016 2017 2016

COMPANYFINANCIAL ASSETSAvailable-for-salefinancialassets 1 85 —

—Unlistedshares—Level3 85 —

Financialassetsatfairvaluethroughprofitorloss 85 121 85 121

—Forwardexchangecontracts—Level2 7 3 7 3

—Employersurplusaccounts—Level1 78 118 78 118

Loansandreceivablesnotmeasuredatfairvalue 5 133 4 900

—Accountsreceivable 2 1 363 1 355

—Cash 3 125 322

—Non-currentloanstosubsidiaries 3 786 497

—Currentloanstosubsidiaries 3 2 846 2 719

—Loansandreceivablesrelatingtootherinvestments 3 13 7

5 303 5 021

FINANCIAL LIABILITIESFinancialliabilitiesatfairvaluethroughprofitorloss (87) (79) (87) (79)

—Forwardexchangecontracts—Level2 (58) (21) (58) (21)

—Contingentconsideration—Level3 (29) (58) (29) (58)

Financialliabilitiesnotmeasuredatfairvalue (10022) (9819)

—Accountspayable 2 (1759) (2013)

—Borrowings4 (1630) (1608)

—Loansfromjointventures 3 (178) (118)

—Non-currentloansfromsubsidiaries 3 (703) (676)

—Currentloansfromsubsidiaries 3 (5752) (5404)

(10109) (9898)

1 Itemsareclassifiedasavailable-for-salefinancialassetswhentheyarenotclassifiedinanothercategoryorwhenspecificallydesignatedassuch.TheGrouphasappliedtheIAS39exemption(paragraph46c)andcarriestheinvestmentsatcost.

2 Thefairvalueforfinancialinstrumentssuchasshort-termreceivablesandpayableshavenotbeendisclosedbecausetheircarryingamountsareareasonableapproximationoffairvalue.

3 Thefairvaluewouldnotbemateriallydifferenttothecarryingamounts.4 Thefairvaluesoftheinterest-bearingborrowingshavenotbeendisclosedastheyarenotmateriallydifferentfromthecarryingamounts.

FAIR VALUE OF FINANCIAL INSTRUMENTSThecarryingamountsoffinancialinstrumentsareeitheratfairvaluebasedonmethodsandassumptionsfordeterminingthefairvalue, oratvalueswhichapproximatefairvaluebasedonthenatureormaturityperiodofthefinancialinstrument.Fairvaluemeasurementscan beclassifiedintothreelevels,basedontheobservabilityandsignificanceoftheinputsusedinmakingthemeasurement:

› Level1:quotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilities;

› Level2:inputsotherthanquotedpricesincludedinLevel1thatareobservablefortheassetorliability,eitherdirectly(i.e.asprices) orindirectly(i.e.derivedfromprices);and

› Level3:inputsfortheassetorliabilitythatarenotbasedonobservablemarketdata(unobservableinputs).

Thefairvaluesforforwardexchangecontractsarebasedonquotesfrombrokers.Similarcontractsaretradedinanactivemarketandthequotesreflecttheactualtransactionsonsimilarinstruments.Thefairvalueofthemoneymarketinvestmentinacollectiveinvestmentschemeandtheemployersurplusaccountsisbasedonquotedmarketprices(seenote8).Thefairvalueofthecontingentconsiderationiscalculatedusingdiscountedcashflows.Thevaluationmodelconsidersthepresentvalueoftheexpectedfuturepayment,discountedusingarisk-adjusteddiscountrateof7,5%(2016:8,1%).Theexpectedpaymentisdeterminedbyconsideringthepossiblescenariosofforecastearningsbeforeinterest,tax,depreciationandamortisation(“EBITDA”),theamounttobepaidundereachscenarioandtheprobabilityofeachscenario.




MARKET RISKMarketriskistheriskthatchangesinmarketprices,suchasforeignexchangeratesandinterestrates,willaffecttheGroup’sincomeand thevalueofitsfinancialinstruments.Theobjectiveofmarketriskmanagementistomanageandcontrolexposureswithinacceptablelimits.

(A) CURRENCY RISKWherepossible,theGroup’snon-SouthAfricanoperationsmatchtheirassetsandliabilitiesinthesamecurrencytoavoidunnecessarycurrencyexposures.However,forwardcurrencymarketsdonotexistinsomeofthecountriesinwhichtheGroupoperates.

Currencyriskarisesasaresultofsaleandpurchasetransactions,cashandborrowingsincurrenciesotherthanrand.ThecurrenciesgivingrisetocurrencyriskaremainlyeuroandUSdollar.Currencyexposuresaremanagedusingappropriateexposuremanagementtechniques.

Themanagementofeachbusinessentityistaskedwithmanagingtheforeigncurrencyexposuresarisinginitsownentityinconsultation withthecentraltreasury.Allmaterialpurchasesandsalesinforeigncurrenciesaretransactedthroughthecentraltreasury.

HEDGE ACCOUNTING

FAIR VALUE HEDGESFairvaluehedgeshavebeenrecognisedforthenetexposuretotradinginforeigncurrency.ForwardexchangecontractshavebeendesignatedashedginginstrumentsinrespectofamountsdenominatedineuroandUSdollars.

GROUP COMPANY

Rmillions 2017 2016 2017 2016

Randvalueofthehedginginstrument,basedonthecontractrates 522 720 468 468

Profitonthehedginginstrumentsrecognisedintheincomestatement 66 20 30 14

CASH FLOW HEDGESTheGrouphashedgeditsforeigncurrencyexposureonimportsofrawmaterialsbyenteringintoforwardexchangecontractsforthepurchasecommitments.

GROUP COMPANY

Rmillions 2017 2016 2017 2016

Valueofhedginginstruments,basedonthecontractrates 73 43 48 19

Thecashflowsrelatingtothehedginginstrumentswilloccurin2018andwillnotaffecttheincomestatementifthehedgeiseffectiveastheamountrecognisedinothercomprehensiveincomewillberemovedfromothercomprehensiveincomeandrecognisedintheinitialcostoftheitemsofplantandequipmentandinventory.

GROUP COMPANY

Rmillions 2017 2016 2017 2016

Amountrecogniseddirectlyinothercomprehensiveincome fortheyearinrespectofthecashflowhedges 4 3 — —

EXPOSURE TO CURRENCY RISKTheGroup’sexposuretoforeigncurrencyriskat31Decemberwas:

2017 2016

Rmillions EuroUS

dollar Other EuroUS

dollar Other

Cash 11 21 19 1 90 52

Tradereceivables 48 185 22 29 241 119

Interest-bearingliabilities — (30) — — (8) (2)

Tradepayables (132) (426) (55) (193) (395) (188)

Grossexposure (73) (250) (14) (163) (72) (19)

Forwardexchangecontracts 187 467 (59) 313 488 (38)

NET EXPOSURE 114 217 (73) 150 416 (57)




TheCompany’sexposuretoforeigncurrencyriskat31Decemberwas:

2017 2016

Rmillions EuroUS

dollar Other EuroUS

dollar Other

Cash 1 1 — 2 24 1

Tradereceivables 2 80 — 6 55 3

Loanstosubsidiaries — 363 — — 400 —

Interest-bearingliabilities — (30) — — (8) —

Tradepayables (75) (283) (1) (79) (262) (2)

Grossexposure (72) 131 (1) (71) 209 2

Forwardexchangecontracts 118 395 3 102 389 (4)

NET EXPOSURE 46 526 2 31 598 (2)

Thefollowingsignificantexchangeratesappliedduringtheyear:

CLOSING RATE AVERAGE RATE

Rand 2017 2016 2017 2016

Euro 14,75 14,52 15,04 16,29

USdollar 12,31 13,73 13,31 14,72

SENSITIVITY ANALYSISBasedontheGroup’snetexposuretocurrencyrisk,a10%strengtheningoftherandat31Decemberwouldhavedecreasedequityandprofitbytheamountsshownbelow,assumingallothervariablesremainedconstant:

GROUP COMPANY

Rmillions 2017 2016 2017 2016

Equity (66) (94) (54) (60)

Profitfortheyearbeforetax (33) (57) (54) (60)

(B) INTEREST RATE RISKTheGroupborrowsextensivelyinbothlocalandoffshoremarketstominimiseitsborrowingcostsinrandterms.

Exposuretointerestrateriskonborrowingsandreceivablesismanagedonaproactivebasis.Dependingonmarketconditions,theGroupmakesappropriateuseofforwardrateagreements,interestrateswapsandinterestratecapsandfloorstogeneratethedesiredinterestrateprofileandtomanageexposuretointerestratefluctuations.Notargetlevelsofexposurearemaintained.

Theinterestrateriskprofileoffinancialliabilitiesat31Decemberwas:

TOTALFLOATING RATE

FINANCIAL LIABILITIESFIXED RATE

FINANCIAL LIABILITIES

Rmillions 2017 2016 2017 2016 2017 2016

GROUPRand

—Current 530 2 530 2 — —

—Non-current 1 100 1 600 1 100 1 600 — —

Other

—Current — 160 — 152 — 8

1 630 1 762 1 630 1 754 — 8

Loansfromjointventures 130 75 130 75 — —

TOTAL 1 760 1 837 1 760 1 829 — 8




TOTALFLOATING RATE

FINANCIAL LIABILITIESFIXED RATE

FINANCIAL LIABILITIES

Rmillions 2017 2016 2017 2016 2017 2016

COMPANYRand

—Current 530 — 530 — — —

—Non-current 1 100 1 600 1 100 1 600 — —

Other

—Current — 8 — — 8

1 630 1 608 1 630 1 600 — 8

Loansfromjointventures 178 118 178 118 — —

Loansfromsubsidiaries 5 752 5 404 5 752 5 404 — —

TOTAL 7 560 7 130 7 560 7 122 — 8

SENSITIVITY ANALYSISBasedontheGroup’sandCompany’sexposuretointerestraterisk,a50basispointincreaseininterestratesat31Decemberwouldnothavehadasignificanteffectonprofitorloss,orequity.

LIQUIDITY RISKSLiquidityriskistheriskthattheGroupwillnotbeabletomeetitsfinancialobligationsastheyfalldue.TheGroupmanagesliquidityriskthroughthemanagementofworkingcapitalandcashflows.Abalancebetweencontinuityoffundingandflexibilityismaintainedthroughtheuseofborrowingsfromarangeofinstitutions,withvaryingdebtmaturities.

i. MATURITY PROFILE OF FINANCIAL LIABILITIES AT 31 DECEMBER

GROUP

RmillionsCarryingamount

Contractualcashflows

Within1year

1to2years

2to5years

2017FINANCIAL LIABILITIESUnsecuredborrowings 1 654 2 009 684 98 1 226

—Capital 1 630 1 630 530 — 1 100—Interestaccrued 1 24 379 154 98 126

Loansfromjointventures 130 130 130 — —Tradeandotherpayables 3 420 3 420 3 420 — —Contingentconsideration 29 29 — 29 —DERIVATIVE FINANCIAL LIABILITIESForwardexchangecontracts

—inflows (43) (1239) (1239) — ——outflows 109 644 644 — —

TOTAL FINANCIAL LIABILITIES 5 299 4 993 3 639 127 1 226

PERCENTAGE PROFILE (%) 100 73 3 25

1 Interestisbasedontheclosingrateat31Decemberandtherepaymentdatesoftheborrowings.




GROUP



Within1year

1to2years

2to5years

2016FINANCIAL LIABILITIESSecurednon-currentborrowings 2 2 2 — —

Unsecuredborrowings 1 786 2 301 333 635 1 333

—Capital 1 760 1 760 160 500 1 100

—Interestaccrued 1 26 541 173 135 233

Loansfromjointventures 75 75 75 — —

Tradeandotherpayables 3 366 3 366 3 366 — —

Contingentconsideration 58 58 — — 58

DERIVATIVE FINANCIAL LIABILITIESForwardexchangecontracts

—inflows (12) (1263) (1263) — —

—outflows 52 499 499 — —



COMPANY



Within1year

1to2years

2to5years


—Capital 1 630 1 630 530 — 1 100—Interestaccrued 1 24 379 154 98 126

Loansfromjointventures 178 178 178 — —Non-currentloansfromsubsidiaries 703 703 — — 703Currentloansfromsubsidiaries 5 752 5 752 5 752 — —Tradeandotherpayables 1 735 1 735 1 735 — —Contingentconsideration 29 29 — 29 —DERIVATIVE FINANCIAL LIABILITIESForwardexchangecontracts

—inflows (7) (602) (602) — ——outflows 58 86 86 — —







COMPANY



Within1year

1to2years

2to5years


—Capital 1 608 1 608 8 500 1 100

—Interestaccrued 1 26 541 173 135 233

Loansfromjointventures 118 118 118 — —

Non-currentloansfromsubsidiaries 676 676 — — 676

Currentloansfromsubsidiaries 5 404 5 404 5 404 — —

Tradeandotherpayables 1 987 1 987 1 987 — —

Contingentconsideration 58 58 — — 58

DERIVATIVE FINANCIAL LIABILITIESForwardexchangecontracts

—inflows (3) (586) (586) — —

—outflows 21 99 99 — —




TheCompany’sliquidityriskismanagedthroughshort-termborrowingfacilitiesfromwhichfundingisdrawndownasandwhenrequired. Inaddition,therepaymentofloansfromsubsidiariesiscontrolledbytheCompanyastheseloansdonothavefixedrepaymentterms, andrepaymentcanbedeferredifneeded.

ii. BORROWING FACILITIESTheGroupensuresthatadequateborrowingfacilitiesareinplace.TheGroupmaintainsapolicyofensuringthatexpectedpeakcashflowsoverthenext12monthsarecomfortablyexceededbyexistingfacilitiesinordertopreserveoperationalflexibility.

SomeoftheGroup’sloanagreementscontainfinancialcovenants.Asintheprioryear,theGroupcompliedwithallsuchcovenants.

CREDIT RISKSCreditrisksariseoncash,investmentsandaccountsreceivable.Theriskoncashismanagedbyinvestingwithfinanciallysoundinstitutionsonlyandbysettingprudentexposurelimitsforeachinstitution.Theriskarisingontradereceivablesismanagedthroughnormalcreditpoliciesusingcreditlimits,continualreviewandexceptionreporting.Theexposuretocreditriskrelatingtotradereceivablesisdecentralised,witheachoperatingbusinessentitymanagingitsowncreditcontrolproceduresbecauseoftheGroup’sdiversifiedcustomerbase.Adequateallowanceismadeforimpairmentlosses.

Detailsofthecarryingamountsandexposuretocreditriskoftradereceivables,aswellasimpairmentsrecognised,arecontainedinnote11.

Atthereportingdate,themaximumexposuretocreditriskisrepresentedbythecarryingamountofeachfinancialasset.



28. RELATED PARTY INFORMATIONThesubsidiariesoftheGroupareidentifiedinnote32,jointventuresinnote6andassociatecompaniesinnote7.

Alltransactionsandbalanceswiththeserelatedpartieshavebeeneliminatedinaccordancewith,andtotheextentrequiredby,IFRS10ConsolidatedFinancialStatements,IFRS11JointArrangementsandIAS28InvestmentsinAssociatesandJointVentures.

Nodividendswerereceivedfromassociatecompanies(2016:nil).

TransactionswithDirectorsaredisclosedinnote30.

Transactionswithrelatedpartiesareconcludedontermsthatarenomoreandnolessfavourablethantransactionswithunrelatedexternalparties.

COMPANY

Rmillions 2017 2016

TRANSACTIONS THAT TOOK PLACE WITH RELATED PARTIES OF THE COMPANY WERE:LeasingincomeandsalesbytheCompanyto—Subsidiaries 438 547 SalestotheCompanyby—Subsidiaries 106 55 —Jointventures 67 45 DividendsreceivedbytheCompanyfrom—Subsidiaries 1 864 —InterestreceivedbytheCompanyfrom—Subsidiaries 146 141 —Jointventures — 4 InterestpaidbytheCompanyto—Subsidiaries 239 168 —Jointventures 8 8 RentalofpremisestotheCompanyby—Subsidiaries 34 33 SecretarialandadministrationfeespaidtotheCompanyby—Subsidiaries 163 91 —Jointventures 8 6 OUTSTANDING BALANCES WITH RELATED PARTIES OF THE COMPANY AT 31 DECEMBER WERE (SEE NOTES 5 AND 6):LoanamountsowingtotheCompanyby—Subsidiaries 3 632 3 216 LoanamountsowingbytheCompanyto—Subsidiaries 6 455 6 080 —Jointventures 178 118

GROUP

Rmillions 2017 2016

KEY MANAGEMENT PERSONNEL COMPENSATION:—short-termemployeebenefits 64 54

—post-retirementbenefits 3 3

—otherlong-termbenefits 6 4

73 61

AccountsreceivablefromandpayabletorelatedpartiesoftheGroupandtheCompanyaredisclosedinnotes11and16.Loanswithjointsventuresaredisclosedinnote6.

KeymanagementpersonnelaretheDirectors,PrescribedOfficersandManagingDirectorsorequivalentofoperatingbusinessentities.

ThekeymanagementpersonnelcompensationaboverelatestotheManagingDirectororequivalentandexcludesDirectors’andPrescribedOfficers’remunerationwhichissetoutinnote30.



29. EMPLOYEE BENEFITS

RETIREMENT BENEFITSTheGroupprovidesretirementbenefitsforallitspermanentemployeesbymeansofanindependentdefined-contributionpensionfundandanindependentdefined-contributionprovidentfund.TheGrouphastwolegacydefined-benefitpensionfundsofwhichonlyonehasactivemembers,twootherlegacydefined-benefitfundswhichhavenoactivemembersandasmallnumberofpensioners.Onlythelattertwolegacyfundshavebeenconvertedtodefined-contributionfunds.Offershavebeenmadetomemberstoconverttheothertwofundsand theconversionprocessisongoing.

Followingthesettlementofthedefined-benefitliabilitiesforthemajorityoftheactivemembers,deferredpensionersandpensioners(collectivelyreferredtoas“members”)oftheAECIPensionFund(“APF”)andallmembersoftheAECISupplementaryPensionFund(“ASPF”),theliabilitiesofthe22remainingdeferredpensionersand20ofthe24remainingpensionersoftheAPFweresettledthroughtransferstoexternalpensionfunds,theAECIDefinedContributionPensionFund(“ADCPF”)oroutsourcedtoSanlam.Theliabilitiesandassetsfortheremainingmembershavenotyetbeenaccountedforasasettlementbuttheassetvaluestobesettledweresetasidein2015withan assetlimitationbeingappliedtoreduceAECI’srecognisedassettotheamountintheESA.

InOctober2016,theGroupmadeofferstomembersofitsremainingdefined-benefitfunds.ThesearetheAECIEmployeesPensionFund(“AEPF”),whichhasover1683membersbutonlysevenactiveemployees,andtheDuluxEmployeesPensionFund(“DEPF”),whichhas68pensionermembers.Becausethesurplusesinbothfundsaresignificantlyhigherthantheirliabilities,itwaspossibletooffermemberssignificantenhancements.TherequiredruleamendmentsofthefundshavebeenapprovedbytheRegistrarofPensionFunds(“Registrar”)andmorethan75%ofthemembersofeachfundhaveacceptedtheoffersmadetothem.In2018,thetransferapplicationswillbepreparedandsubmittedtotheRegistrar.TheactiveemployeesweretransferredtotheADCPFfrom1December2016andarenowcontributingmembersofthisfundinanticipationoftheconversion.

AECItransferredassetsfromtheESAoftheAPFtotheESAoftheASPF(R8million)andtothatoftheAECIEmployeesProvidentFund(“AEPrF”)(R41million)duringtheyear.TheESAoftheAEPrFhasbeenutilisedtotakeacontinuedcontributionholiday.TheADCPFESAisalsobeingutilisedforthispurpose.

INFORMATION PERTAINING TO THE AEPF AND THE DEPFAstherelevanttransferapplicationshaveyettobesubmittedtotheRegistrar,thefundsaretreatedasongoingdefined-benefitfunds.

Memberswererequiredtopayacontributionof6%ofpensionableearnings,withtheemployer’scontributionbeing9%ofpensionableearnings.

Membersareentitledtoreceiveanannualpension,atpensionableageof65years,calculatedas1/53multipliedbythenumberofyearsofcontinuousservicemultipliedbyaverageannualpensionableemolumentsoverthelasttwoyearsofmembership.

Memberswithatleastfiveyearsofpensionableservicemayelecttoretirewithin10yearsofpensionableage,basedonpensionableserviceuptoretirementage,reducedby0,25%foreachmonththatactualretirementageislessthan62years.

Ill-healthretirementpensionbecomespayablefromthedateofill-heathretirementbasedonthesamebenefit,withpensionableservicebeingbasedontheservicethatcouldhavebeenserveduntilnormalretirementandpensionableemolumentscalculatedatthedateofill-healthretirement.

Intheeventofdeath,thefundspayapensionof50%oftheamountthatwasbeingreceivedatthedateoftheprincipalmember’sdeath,fromthedateofdeath,toqualifyingbeneficiaries.

AllfundsaregovernedbythePensionFundAct,No.24of1956,asamended(“theAct”).TheActprovidesthatanyactuarialsurplusinanyfundbelongstothefundandthattheonlyportionoftheassetsofthefundsthatmaybeutilisedby,orforthebenefitof,theemployerareanycreditbalancesintheESA,unlessspecifiedotherwiseinthefund’srules.TheESAinthefundsrepresenttheassetceiling.

TheassetsofthefundsareunderthecontroloftheTrusteesoftherespectivefunds.Regulation28oftheActlimitstheamountandextenttowhichthefundsmayinvestinparticularclassesofassets.TheTrustees’investmentstrategiesarealignedwiththenatureofthefunds’liabilitiesandtheachievementofadequatereturnstoensurethatthoseobligationscanbesettledwhentheyaredue.TheassetsareinvestedinsegregatedorpooledinvestmentswithaspreadofassetclassesincludingSouthAfricanequities,bonds,propertyandcash, aswellasforeignequitiesandbonds.Thedefined-benefitfundsexposetheGrouptoactuarialriskssuchaslongevityrisks,interestrate riskandmarket(investment)risk.

Defined-benefitfundsareactuariallyvaluedeveryyearusingtheprojectedunitcreditmethodofvaluationbyindependentfirmsofconsultingactuaries,whilefordefined-contributionfundsnovaluationsarerequired.



29. EMPLOYEE BENEFITS continued

TheGrouphasthefollowingESAs:

GROUP AND COMPANY

Rmillions 2017 2016

NON-CURRENT 487 583

AECIPensionFund(“APF”) 468 572

AECIEmployeesPensionFund(“AEPF”) 11 10

AECISupplementaryPensionFund(“ASPF”) 7 —

DuluxEmployeesPensionfund(“DEPF”) 1 1

CURRENT — CLASSIFIED AS A FINANCIAL ASSET AT FAIR VALUE THROUGH PROFIT OR LOSS (SEE NOTE 8) 78 118

AECIEmployeesProvidentFund(“AEPrF”) 26 46

AECIDefinedContributionPensionFund(“ADCPF”) 52 72

565 701

PENSION FUNDS’ ESAs

RmillionsADCPF

2017AEPrF2017

Total2017

Atthebeginningoftheyear 72 46 118 S15EtransferfromtheAPF — 41 41 Contributionholiday (61) (65) (126)Unvestedretirementbenefitequalisationtarget 36 — 36 Investmentreturn 5 4 9

AT THE END OF THE YEAR 52 26 78




Thefinancialinformationofthedefined-benefitfundshasbeendisaggregatedeventhoughtheplanshavesimilarrisksduetothesettlementsthattookplaceduringtheyear.

Basedoninterimvaluationsbythefunds’actuaries,thedefined-benefitfunds’financialpositionsat31Decemberwere:

GROUP AND COMPANY

RmillionsAPF

2017ASPF2017

AEPF2017

DEPF2017

Total2017

Total2016

FAIR VALUE OF PLAN ASSETS 985 7 834 39 1 865 2 059

Atthebeginningoftheyear 1 147 — 870 41 2 058 2 630

Interestincome 100 — 83 4 187 228

Returnonplanassetsbelowinterestincome (23) — (84) (5) (112) (93)

S15Etransfers (49) 8 — — (41) (362)

SettlementofPRMAliability (101) — — — (101) (14)

Benefitspaid (1) — (35) (1) (37) (49)

Assetstransferredonsettlement (88) (1) — — (89) (281)

PRESENT ACTUARIAL VALUE OF DEFINED-BENEFIT OBLIGATIONS (4) — (377) (13) (394) (482)

Atthebeginningoftheyear (63) — (406) (13) (482) (577)

Currentservicecost — — — — — —

Interestexpense (2) — (38) (1) (41) (51)

Benefitspaid 1 — 35 1 37 49

Actuarialgain/(loss)fromchangesin financialassumptions 2 — 17 1 20 (22)

Actuarialgain/(loss)onexperience 7 — 15 (1) 21 (3)

Presentvalueofliabilitiessettled 51 — — — 51 122

ASSET CEILING (513) — (446) (25) (984) (993)

Atthebeginningoftheyear (512) — (454) (27) (993) (1130)

Interestcost (51) — (45) (2) (98) (120)

Effectsofsettlement 37 — — — 37 159

Changeineffectoftheassetceiling 13 — 53 4 70 98

PENSION FUNDS’ ESA 468 7 11 1 487 583

Thefairvalueofthefunds’planassetsat31December2017comprisedbonds(5%;2016:6%),cash(52%;2016:47%)andinsurancepolicies(43%;2016:45%).Thefairvalueofthefunds’planassetsat31December2017didnotcompriseanyequityinstruments(2016:2%).

Thefairvalueofthefunds’planassetsdidnotincludeanyAECIshares.

Allassetsofthefundsareheldininstrumentsthathavequotedmarketpricesinactivemarkets.TheAPFholdstheassetsinacombinationofsegregatedandpooledportfolios.TheAEPFandDEPFhavelinkedpoliciesandinsurancepolicieswithOldMutualandCoronationanddonotowntheunderlyinginstruments.Theassetallocationsarederivedfromthestrategicassetallocationofthelinkedandcashpolicies.

Principalactuarialassumptionsappliedat31Decemberinthevaluationswere:

% 2017 2016

Discountrate 10,23 9,67 Expectedreturnonplanassets 10,23 9,67 Futurepriceinflation 6,32 6,46 Expectedsalaryincreases 7,82 7,96 Futurepensionincreases 5,69 5,81




SENSITIVITY ANALYSIS

GROUP AND COMPANY

31DecDiscountrate+1%

Discountrate-1%

Mortalityrates

Forachangeinsignificantactuarialassumptions:

Presentactuarialvalueofdefined-benefitobligations(Rmillions) (394) (366) (426) (407)

Changeinliability(%) (7,0) 8,1 3,4

Thesensitivitywasdeterminedbykeepingallotherassumptionsconstantexceptforachangeinthediscountrate,upfrom10,23%to11,23%anddownfrom10,23%to9,23%.Thepost-retirementmortalityrateswereadjustedfromPA(90)minustwoyearstoPA(90)minusthreeyears.

ActualcashcontributionsmadebytheGrouptotheAEPFarefixedatarateof9%ofpensionableemoluments,paidmonthly.Theexcesscontributionsabove9%requiredtomeetthecostoftheaccrualofactivemembers’benefitsoverthenextyeararecalculatedannuallyinthefunds’statutoryvaluations.TheexcesscontributionsarerecoveredfromtheESAofthefund.Theremainingfundsnolongerhaveanyactivemembersandnoemployercontributionsarerequired.

ThetotalR135millioncostrecognisedintheincomestatement(2016:R116million)inrespectofthedefined-contributionfundsrepresentscontributionspayablebytheGroupatratesspecifiedintherulesoftheschemes.ThesecontributionswerepaidfromtheESAofthedefined-contributionfundsasacontributionholiday(R118million)andincash(R17million).

Amountsrecognisedintheincomestatementinrespectofthedefined-benefitobligationswere:

GROUP AND COMPANY

RmillionsAPF

2017AEPF2017

DEPF2017

Total2017

Total2016

Interestcost (2) (38) (1) (41) (51)

Expectedreturnonplanassets 100 83 4 187 228

Changeineffectoftheassetceiling (51) (45) (2) (98) (120)

Fairvalueofassetstransferredonsettlement (88) — — (88) (281)

Liabilitiesextinguished 51 — — 51 122

Assetceilingutilised 37 — — 37 159

RECOGNISED IN THE INCOME STATEMENT 47 — 1 48 57

Remeasurementsrecognisedinothercomprehensiveincomeinrespectofthedefined-benefitobligationswere:

Actuarialgain/(loss)onfinancialassumptions 2 17 1 20 (22)

Actuarialgain/(loss)onexperience 7 15 (1) 21 (3)

Actualreturninexcessofexpectedinterestincome (23) (84) (5) (112) (93)

Changeintheeffectoftheassetceiling 13 53 4 70 98

RECOGNISED IN OTHER COMPREHENSIVE INCOME (1) 1 (1) — (20)




POST-RETIREMENT MEDICAL AID (“PRMA”) BENEFITSTheGroupprovidesmedicalaidbenefitsforallitspermanentemployeesdomiciledinSouthAfrica,principallyviatheAECIMedicalAidSociety.Historically,qualifyingemployeesweregrantedasubsidyontheirmedicalaidcontributionsafterretirement.Theobligationoftheemployertocontinuetosubsidisemedicalaidcontributionsafterretirementisnolongeraconditionofemploymentfornewemployeesandhasnotbeenofferedsince1January2002.

Thesubsidyisaportionoftherequiredmedicalaidcontributionsofparticipatingmembersinaratiobetween3,0%and66,7%ofthetotalcontribution,dependingoneachemployee’sdateofemploymentintheGroup.Themedicalaidfundisliabletopaymedicalclaimsintermsofitsrulesandtheriskinrespectoftheliabilityrelatestotheincreaseincontributionlevelsrequiredbythemedicalaidfund.TheGroupdoesnothaveanyspecificobligationtothemedicalaidfund.

In2016,AECImadeasecondalternativebenefitoffertoretiredemployeesentitledtoaPRMAsubsidy.The371pensionerswhoacceptedtheofferwerederecognisedfromtheliabilityin2016.Thederecognitionwastreatedasasettlementofthedefined-benefitobligation.Thecostsofthesettlement,togetherwiththereductionintheliability,wererecognisedintheincomestatementwiththeanticipatedcostsbeingaccruedat31December2016.Thecostofthesettlementcomprisedtwocomponents.ThefirstcomponentwasanamountoftheAPFESAtobetransferredviasection14transfertoMomentumforthoseeligiblepensionerswhoweremembersoftheAPFandacceptedtheoffer.ThesecondcomponentrelatedtopensionerswhowerenotmembersoftheAPFandthisamountwaspaidincashtopurchaseannuitiesforthosepensioners.TheamountsaccruedforthesettlementwereR95millionandR77million,respectively.ThecorrespondingliabilitiesdeterminedandderecognisedwereR85millionandR73million,respectively,resultinginanetcostofR13millionin2016.TheassetstransferredfromtheAPFESAtoMomentumin2017amountedtoR101million.TheannuitieswerepurchasedforR83millioninJanuary2017.TheliabilitiesrelatedtothosesettlementswereR89millionandR78million,respectively.ThetotalsettlementcostwasR17millionandthisresultedinafurtherlossofR4millionbeingrecognisedintheincomestatementin2017.

Basedoninterimvaluationsbytheactuaries,thefundedstatusofthePRMAobligationsat31Decemberwas:

GROUP COMPANY

Rmillions 2017 2016 2017 2016

Presentactuarialvalueofdefined-benefitobligations (185) (207) (185) (207)

Atthebeginningoftheyear (207) (481) (207) (479)

Currentservicecost (1) (3) (1) (3)

Interestcost (18) (42) (18) (42)

Benefitspaid 19 27 19 27

Liabilitiessettled 7 273 7 271

Netactuarialgains 15 19 15 19

NET PRMA LIABILITY (185) (207) (185) (207)

PrincipalactuarialassumptionsforthePRMAobligationswere:

GROUP

% 2017 2016

Annualincreaseinhealthcarecosts CPI + 1 CPI+1

Discountrate 9,50 9,30

HealthcarecostinflationwasestimatedbasedonCPI,withtheresultthatthepercentagesusedinthevaluationwere:

%

2018/2019 6,42019/2020 6,02020/2021 6,02021andlater 8,4

Estimatedemployer’scontributionsinrespectofPRMAobligationsforthecomingyear:Group—R16million;Company—R16million,representingthesubsidiesfortheremainingeligiblepensioners.




AmountsrecognisedintheincomestatementinrespectofthePRMAobligationswere:

GROUP COMPANY

Rmillions 2017 2016 2017 2016

Currentservicecost (1) (3) (1) (3)

Interestcost (18) (42) (18) (42)

Lossonsettlementofobligationforcertainpensioners (4) (149) (4) (147)

Liabilitiessettled 7 273 7 271

Costofannuitiesaccrued(seenote16) 172 (172) 172 (172)

Costofannuitiespaidincash (82) — (82) —

Defined-contributionfunds’ESAtransferredtomembers’ fundaccounts — (236) — (232)

AEPFESAtransferredtomembers'pensionfundaccounts — (3) — (3)

CostofannuitiestransferredfromAPF (101) (11) (101) (11)

RECOGNISED IN THE INCOME STATEMENT (23) (194) (23) (192)

Remeasurementsrecognisedinothercomprehensiveincome inrespectofPRMAobligations:

Actuarialgain 15 19 15 19

RECOGNISED IN OTHER COMPREHENSIVE INCOME 15 19 15 19

SENSITIVITY ANALYSIS

31DecDiscountrate+1%

Discountrate-1%

Futureinflation+1%

Futureinflation-1%

Forachangeinsignificantactuarialassumptions:

Presentactuarialvalueofobligations(Rmillions) (185) (169) (205) (204) (169)

Changeinliability(%) (8,9) 10,6 10,2 (8,7)

Currentservicecostfor2018(Rmillions) 1 1 1 1 1

Changeincurrentservicecost(%) — — 13,1 (22,4)

Interestcostfor2018(Rmillions) 18 18 18 19 15

Changeininterestcost(%) — — 5,7 (13,3)

CASH-SETTLED SHARE-BASED SCHEME (“BENEFIT UNITS”)TheGroupoffersbenefitunits,withoutpayment,tothoseemployeesoftheCompanyoritssubsidiarycompanieswhotheBoardofDirectors,initsabsolutediscretion,considersplayaroleinthemanagementoftheCompanyoritssubsidiarycompaniesandcontributetotheirgrowthandprofitability.

ThebenefitonrealisationofabenefitunitiscalculatedbasedontheAECIsharepriceatitsexercisedateafterdeductingtheissuepriceofthatunit,andissettledincash.

Participantsareentitledtoexercisetheirunitsasfollows:

After2years—upto20%oftheunits




Ifaunitisnotexercisedwithin10yearsfromthedatesuchaunitwasgranted,itwilllapse.

Ifaparticipantretiresonpension,orotherwiseleavestheemployoftheGrouporoneofitssubsidiarycompaniesforareasonapprovedbytheBoardofDirectors,theparticipantshallneverthelesscontinuetohavethesamerightsandobligationsundertheschemeinrespectoftheparticipant’sunitsasiftheparticipanthadremainedintheemployoftheGroup.

Intheeventthattheparticipantceasestobeanemployeeotherwisethanasaresultofdeath,retirementonpensionorotherreasonsapprovedbytheBoardofDirectors,anyunitnotyetexercisedwilllapse.

Thebenefitunitswereissuedforthefirsttimein2005.




Detailsofbenefitunitsat31Decemberwere:

NUMBER OF UNITS

Expirydate Grant dateIssueprice

(Rand) Granted Exercised Forfeited Outstanding

February2017 March2007 70,90 199 725 161 450 38 275 —

February2018 March2008 67,25 184 550 88 620 42 130 53 800

February2019 March2009 43,42 382 650 162 054 45 150 175 446

February2020 March2010 59,80 399 316 159 316 41 412 198 588

February2021 March2011 83,82 447 640 141 279 67 858 238 503

1 613 881 712 719 234 825 666 337

GROUP COMPANY

Rmillions 2017 2016 2017 2016

Cash-settledshare-basedpaymenttransactionsrecognised intheincomestatement 3 4 3 4

Totalcarryingamountofcash-settledshare-basedtransactionliabilities(seenote15) 32 33 32 33

Totalintrinsicvalueofvestedcash-settledshare-basedtransactionliabilities 24 28 24 28

DEFERRED SHARES FOR EXECUTIVES AND SENIOR MANAGERS (“DS”)TheGroupoffersDS,withoutpayment,tothoseemployeesoftheCompanyoritssubsidiarycompanieswhotheBoardofDirectors,initsabsolutediscretion,considersplayasignificantroleinthemanagementoftheCompanyorsubsidiarycompaniesandcontributetotheirgrowthandprofitability.

ThebenefitonrealisationofaDSiscalculatedbasedontheAECIsharepriceattheexercisedate,afterdeductingtheissuepriceofthatunit,andissettledincash.

Vestingwilltakeplaceonthethirdanniversaryoftheallocation(ortheclosestworkingday).

IfaparticipantleavestheemployoftheGrouporoneofitssubsidiarycompaniesforanyreasononorbeforethevestingdate,anyunitsgrantedwilllapse.

TheDSwereissuedin2016.

DetailsofDSat31Decemberwere:

NUMBER OF UNITS

Expirydate Grant date Granted Exercised Forfeited Outstanding

July2018 January2016 81 532 — 2 362 79 170

July2019 August2016 137 874 — 6 333 131 541

219 406 — 8 695 210 711

GROUP COMPANY

Rmillions 2017 2016 2017 2016

Cash-settledshare-basedpaymenttransactionsrecognised intheincomestatement 8 5 8 5

Totalcarryingamountofcash-settledshare-basedtransactionliabilities(seenote15) 13 5 13 5

Totalintrinsicvalueofvestedcash-settledshare-basedtransactionliabilities 21 23 21 23




EARNINGS-BASED INCENTIVE SCHEMES (“EBIS UNITS”)TheGroupoffersEBISunits,withoutpayment,tothoseemployeesoftheCompanyoritssubsidiarycompanieswhotheBoardofDirectors,initsabsolutediscretion,considersplayasignificantroleinthemanagementoftheCompanyoritssubsidiarycompaniesandcontributetotheirgrowthandprofitability.

ThebenefitonrealisationofanEBISunitiscalculatedonanearningsnumber,similartoHEPSoftheGroup,aspublishedateveryreportingdateoftheGroup,afterdeductingtheissuepriceofthatunit.


FOR UNITS ISSUED FROM 2010After3years—upto33,3%oftheunits

After4years—upto66,6%oftheunits


FOR UNITS ISSUED PRIOR TO 2010After2years—upto20%oftheunits




Ifaunitisnotexercisedwithin10yearsfromthedatesuchunitwasgranted,itwilllapse.

Ifaparticipantretiresonpension,orotherwiseleavestheemployoftheGrouporoneofitssubsidiarycompaniesforareasonapproved bytheBoardofDirectors,theparticipantshallneverthelesscontinuetohavethesamerightsandobligationsundertheschemeinrespect oftheparticipant’sunitsasiftheparticipanthadremainedintheemployoftheGroup.

Intheeventthattheparticipantceasestobeanemployeeotherwisethanasaresultofdeath,retirementonpensionorotherreasonsapprovedbytheBoardofDirectors,anyunitsnotyetexercisedwilllapse.

DetailsofEBISunitsat31Decemberwere:

NUMBER OF UNITS



February2017 March2007 5,42 6 137 100 4 973 290 1 163 810 —

February2018 March2008 5,12 5 417 800 3 825 300 969 400 623 100

February2019 March2009 5,96 6 258 700 4 888 980 525 600 844 120

February2020 March2010 3,34 18 594 101 14 441 375 2 160 878 1 991 848

February2021 March2011 5,84 17 643 920 11 253 293 2 655 770 3 734 857

54 051 621 39 382 238 7 475 458 7 193 925

ChemicalServicesLtd(“CSL”)(asubsidiaryoftheGroup)offeredEBISunits,withoutpayment,tothoseemployeesofCSLoritssubsidiarycompanieswhotheformerCSLBoardofDirectors,initsabsolutediscretion,consideredplayedasignificantroleinthemanagementofCSLoritssubsidiarycompaniesandcontributedtotheirgrowthandprofitability.

ThebenefitonrealisationofaCSLEBISunitiscalculatedbasedonanearningsnumber,similartoHEPSoftheGroupaspublishedateveryreportingdateoftheGroup,afterdeductingtheissuepriceofthatunit.






Ifaunitisnotexercisedwithin10yearsfromthedatesuchunitwasgranted,itwilllapse.

Ifaparticipantretiresonpension,orotherwiseleavestheemployoftheGrouporoneofitssubsidiarycompaniesforareasonapprovedbytheBoardofDirectors,theparticipantshallneverthelesscontinuetohaverightsundertheschemeinrespectoftheparticipant’sunitsasiftheparticipanthadremainedintheemployoftheGroup.





DetailsofCSLEBISunitsat31Decemberwere:

NUMBER OF UNITS



February2018 March2008 4,77 8 224 600 5 925 880 1 903 000 395 720

February2019 March2009 7,37 5 820 000 3 316 200 1 590 800 913 000

14 044 600 9 242 080 3 493 800 1 308 720

GROUP COMPANY

Rmillions 2017 2016 2017 2016

TotalcarryingamountofEBISliabilities(seenote15) 37 103 35 97

EARNINGS-GROWTH INCENTIVE SCHEME (“EG UNITS”)TheGroupoffersEGunits,withoutpayment,tothoseemployeesoftheCompanyoritssubsidiarycompanieswhotheBoardofDirectors, initsabsolutediscretion,considersplayasignificantroleinthemanagementoftheCompanyoritssubsidiarycompaniesandcontribute totheirgrowthandprofitability.

Onsettlement,thevalueaccruingtoparticipantswillbetheirshareofthefullappreciationintheGroup’sHEPS.





Ifaunitisnotexercisedwithinsevenyearsfromthedatesuchunitwasgranted,itwilllapse.

Ifaparticipantretiresonpension,orotherwiseleavestheemployoftheGrouporoneofitssubsidiarycompaniesforareasonapprovedbytheBoardofDirectors,theparticipantshallneverthelesscontinuetohaverightsandobligationsundertheschemeinrespectoftheparticipant’sunitsasiftheparticipanthadremainedintheemployoftheGroup.


TheEGunitswereissuedforthefirsttimein2012.

DetailsofEGunitsat31Decemberwere:

NUMBER OF UNITS



November2019 November2012 7,21 15 067 761 5 621 414 2 991 014 6 455 333

June2020 June2013 6,27 19 361 771 5 459 474 3 057 561 10 844 736

June2021 June2014 7,91 13 833 744 1 381 541 1 987 541 10 464 662

June2022 June2015 6,63 10 532 462 — 855 948 9 676 514

June2023 June2016 7,53 8 097 793 — 243 130 7 854 663

66 893 531 12 462 429 9 135 194 45 295 908

GROUP COMPANY

Rmillions 2017 2016 2017 2016

TotalcarryingamountofEGunitsliabilities(seenote15) 119 108 53 48



30. DIRECTORS’ AND PRESCRIBED OFFICERS’ REMUNERATION AND INTERESTS

INTEREST OF DIRECTORS AND PRESCRIBED OFFICERS IN THE SHARE CAPITAL OF THE COMPANYTheaggregatebeneficialholdingsoftheDirectorsandPrescribedOfficersoftheCompanyintheissuedordinarysharesoftheCompany at31Decemberwere:

NUMBER OF SHARES

2017Direct

2017Indirect

2016Direct

2016Indirect

EXECUTIVE DIRECTORSMADytor 62 061 — 44 618 —

KM Kathan 63 244 — 49 913 —

125 305 — 94 531 —

NON-EXECUTIVE DIRECTORSSEngelbrecht1 — — 6 629 600

— — 6 629 600

125 305 — 101 160 600

1 Retiredon28February2017.

NeitherEELudicknorMVKMatshitse,theCompany’sPrescribedOfficers,hadanybeneficialholdingsineitheroftheyearspresented.

TherehasbeennochangeintheaggregatebeneficialholdingsoftheDirectorsandPrescribedOfficersoftheCompanybetweenyear-end,thedateofissuingthefinancialstatementsandthedateoftheintegratedreport.

NON-EXECUTIVE DIRECTORS’ REMUNERATION

RthousandsDirectors’

fees

Chairman/Committee

feesAttendance

fees2017Total

2016Total

GWDempster(appointedon31January2016) 230 363 259 852 564

RMWDunne(retiredon29May2017) 93 221 70 384 973

SEngelbrecht(retiredon28February2017) — 222 30 252 1 439

ZFuphe 230 126 103 459 428

GGomwe 230 329 269 828 607

RMKgosana(appointedon1September2016,resignedon29September2017) 171 73 62 306 135

LLMda(resignedon27November2017) 230 63 51 344 348

KDKMokhele(appointedon1March2016) 133 1 099 208 1 440 289

AJMorgan 230 414 238 882 791

LMNyhonyha(resignedon31December2016) — — — — 621

RRamashia 230 253 237 720 658

1 777 3 163 1 527 6 467 6 853



30. DIRECTORS’ AND PRESCRIBED OFFICERS’ REMUNERATION AND INTERESTS continued

EXECUTIVE DIRECTORS’ REMUNERATION

RthousandsMA

DytorKM

Kathan Total

2017Basicsalary 4 388 3 917 8 305 Bonusandperformance-relatedpayments1 5 198 4 578 9 776 Expenseallowances,medicalaidandinsurancecontributions 635 522 1 157 Leavepay 169 — 169 Retirementfundcontributions 428 382 810 Totalcash-settledshare-basedpaymentsandotherlong-termbenefits 1 002 — 1 002

Benefitunitpayments2 114 — 114 EGunitpayments3 888 — 888

Pre-taxbenefitofPSvested 3 505 2 679 6 184

Aggregateremuneration 15 325 12 078 27 403 Pre-taxbenefitofPSvested (3505) (2679) (6184)

AGGREGATE REMUNERATION PAID BY THE COMPANY 11 820 9 399 21 219

1 Bonusandperformance-relatedamountsareinrespectofthecurrentyear’sperformancebutarepaidinthefollowingyear.2 MADytorexercised3500benefitunitswhichgeneratedabenefitofR113575beforetax.3 MADytorexercised254139EGunitswhichgeneratedabenefitofR887552beforetax.

RthousandsMA

DytorKM

Kathan Total

2016Basicsalary 4 120 3 678 7 798

Bonusandperformance-relatedpayments1 4 100 3 659 7 759

Expenseallowances,medicalaidandinsurancecontributions 551 491 1 042

Leavepay 585 261 846

Retirementfundcontributions 402 359 761

Totalcash-settledshare-basedpaymentsandotherlong-termbenefits 3 025 6 594 9 619

Benefitunitpayments 166 — 166

EBISunitpayments 1 523 5 841 7 364

CSLEBISunitspayments 793 — 793

EGunitpayments 543 753 1 296

Pre-taxbenefitofPSvested 2 344 2 175 4 519

Aggregateremuneration 15 127 17 217 32 344

Pre-taxbenefitofPSvested (2344) (2175) (4519)

AGGREGATE REMUNERATION PAID BY THE COMPANY 12 783 15 042 27 825

1 Bonusandperformance-relatedamountsareinrespectofthecurrentyear’sperformancebutarepaidinthefollowingyear.




PRESCRIBED OFFICERS’ REMUNERATION 1

RthousandsEE

LudickMVK

Matshitse Total

2017Basicsalary 3 183 2 733 5 916 Bonusandperformance-relatedpayments2 3 749 3 167 6 916 Expenseallowances,medicalaidandinsurancecontributions 443 414 857 Retirementfundcontributions 310 266 576 Pre-taxbenefitofPSvested 1 187 1 199 2 386

Aggregateremuneration 8 872 7 779 16 651 Pre-taxbenefitofPSvested (1187) (1199) (2386)Aggregateremunerationpaidbysubsidiaries (7685) — (7685)

AGGREGATE REMUNERATION PAID BY THE COMPANY — 6 580 6 580

2016Basicsalary 2 989 2 566 5 555

Bonusandperformance-relatedpayments2 2 963 2 547 5 510

Expenseallowances,medicalaidandinsurancecontributions 443 389 832

Retirementfundcontributions 291 250 541

Totalcash-settledshare-basedpaymentsandotherlong-termbenefits 1 908 64 1 972

Earnings-basedincentiveschemepayments 1 163 — 1 163

CSLEBISunitspayments 439 — 439

EGunitpayments 306 64 370

Pre-taxbenefitofPSvested 496 506 1 002

Aggregateremuneration 9 090 6 322 15 412

Pre-taxbenefitofPSvested (496) (506) (1002)

Aggregateremunerationpaidbysubsidiaries (8594) — (8594)

AGGREGATE REMUNERATION PAID BY THE COMPANY — 5 816 5 816

1 MembersoftheAECIExecutiveCommitteeexercisegeneralcontroloverthemanagementofthebusinessandactivitiesoftheCompany.Therearenootherpersonswhoexercisesuchcontroloverthebusinessorasignificantportionthereof.Accordingly,theAECIExecutiveCommitteemembersaretheCompany’sPrescribedOfficers.

2 Bonusandperformance-relatedamountsareinrespectofthecurrentyear’sperformancebutarepaidinthefollowingyear.3 NocompensationwaspaidtoanyDirector,PrescribedOfficer,pastDirectorsorpastPrescribedOfficersforlossofoffice.4 TherewerenootherpensionspaidbytheCompanytoanyDirectors,PrescribedOfficers,pastDirectorsorpastPrescribedOfficersoftheCompany.

AGGREGATE REMUNERATION

Rthousands 2017 2016

Non-executiveDirectors 6 467 6 853

ExecutiveDirectors 27 403 32 344

PrescribedOfficers 16 651 15 412

50 521 54 609




LONG-TERM INCENTIVE SCHEMESCertainDirectorsandPrescribedOfficershaveoutstandingshareoptionsandlong-termincentiveunitsunderthelong-termincentiveschemesasdescribedinnote29.

CASH-SETTLED SHARE-BASED SCHEME (“BENEFIT UNITS”)IncludedinbenefitunitswerethefollowingunitsgrantedtoDirectorsandPrescribedOfficers:

NUMBER OF UNITS

Grant dateIssueprice

(Rand) Granted ExercisedLapsedorforfeited Outstanding

MADytor March2007 70,90 3 500 3 500 — —

March2008 67,25 4 250 — — 4 250

March2009 43,42 7 910 — — 7 910

March2010 59,80 7 600 — — 7 600

March2011 83,82 6 600 — — 6 600

KM Kathan March2009 43,42 59 700 — — 59 700

March2010 59,80 47 320 — — 47 320

March2011 83,82 18 100 — — 18 100

EELudick March2011 83,82 5 100 — — 5 100

160 080 3 500 — 156 580

MovementsinthenumberofbenefitunitsheldbyDirectorsandPrescribedOfficerswere:

NUMBER OF UNITS

2017 2016

Outstandingatthebeginningoftheyear 160 080 164 380

Exercisedduringtheyear (3500) (4300)

OUTSTANDING AT THE END OF THE YEAR 156 580 160 080

MADytorexercised3500benefitunitswhichgeneratedabenefitofR113575beforetax.

NoneoftheotherDirectorsorPrescribedOfficersexercisedanybenefitunitsinthecurrentyear.




EARNINGS-GROWTH INCENTIVE SCHEMES (“EG UNITS”)IncludedinEGunitswerethefollowingunitsgrantedtoDirectorsandPrescribedOfficers:

NUMBER OF UNITS



MADytor November2012 7,21 157 857 105 236 — 52 621

June2013 6,27 393 974 262 648 — 131 326

June2014 7,91 210 594 70 197 — 140 397

June2015 6,63 392 862 — — 392 862

June2016 7,53 258 598 — — 258 598

KM Kathan November2012 7,21 182 233 121 488 — 60 745

June2013 6,27 443 119 147 706 — 295 413

June2014 7,91 195 120 — — 195 120

June2015 6,63 350 549 — — 350 549

June2016 7,53 230 761 — — 230 761

EELudick November2012 7,21 107 340 71 558 — 35 782

June2013 6,27 133 266 44 421 — 88 845

June2014 7,91 114 166 — — 114 166

June2015 6,63 243 999 — — 243 999

June2016 7,53 156 588 — — 156 588

MVKMatshitse November2012 7,21 109 668 36 555 — 73 113

June2013 6,27 136 069 — — 136 069

June2014 7,91 115 308 — — 115 308

June2015 6,63 219 003 — — 219 003

June2016 7,53 136 124 — — 136 124

4 287 198 859 809 — 3 427 389

MovementsinthenumberofEGunitsheldbyDirectorsandPrescribedOfficerswereasfollows:

NUMBER OF UNITS

Rmillions 2017 2016

Outstandingatthebeginningoftheyear 3 681 528 3 505 127

Issuedduringtheyear — 782 071

Exercisedduringtheyear (254139) (605670)

OUTSTANDING AT THE END OF THE YEAR 3 427 389 3 681 528

DuringtheyearMADytorexercised254139EGunitswhichgeneratedabenefitofR887552beforetax.

NoneoftheotherDirectorsorPrescribedOfficersexercisedanyEGunitsinthecurrentyear.




DEFERRED SHARES FOR EXECUTIVES AND SENIOR MANAGERS (“DS”)IncludedinDSwerethefollowingunitsgrantedtoDirectorsandPrescribedOfficers:

NUMBER OF UNITS



MADytor January2016 96,82 8 292 — — 8 292

August2016 96,82 11 870 — — 11 870

KM Kathan January2016 96,82 7 401 — — 7 401

August2016 96,82 10 594 — — 10 594

EELudick January2016 96,82 4 995 — — 4 995

August2016 96,82 8 611 — — 8 611

MVKMatshitse January2016 96,82 5 164 — — 5 164

August2016 96,82 7 392 — — 7 392

64 319 — — 64 319

MovementsinthenumberofDSheldbyDirectorsandPrescribedOfficerswereasfollows:

NUMBER OF UNITS

2017 2016

Outstandingatthebeginningoftheyear 64 319 —

Issuedduringtheyear — 64 319


AECI PERFORMANCE SHARES (“PS”)IncludedinPSwerethefollowinggrantedtoDirectorsandPrescribedOfficers:

NUMBER OF PS

Grant date Granted Vested1Lapsedorforfeited Outstanding

MADytor June2014 17 956 17 956 — —

June2015 27 783 — — 27 783

June2016 28 049 — — 28 049

June2017 43 766 — — 43 766

KM Kathan June2014 13 724 13 724 — —

June2015 20 453 — — 20 453

June2016 20 650 — — 20 650

June2017 35 215 — — 35 215

EELudick June2014 6 084 6 084 — —

June2015 10 785 — — 10 785

June2016 10 615 — — 10 615

June2017 25 096 — — 25 096

MVKMatshitse June2014 6 144 6 144 — —

June2015 9 680 — — 9 680

June2016 9 228 — — 9 228

June2017 14 476 — — 14 476

299 704 43 908 — 255 796

1 Thepre-taxbenefitsgeneratedbyPSvestedinDirectorsandPrescribedOfficerswere: MADytor: R3504576 KMKathan: R2678554 EELudick: R1187420 MVKMatshitse: R1199131




MovementsinthenumberofPSheldbyDirectorsandPrescribedOfficerswere:

NUMBER OF UNITS

2017 2016

Outstandingatthebeginningoftheyear 181 151 179 101

Issuedduringtheyear 118 553 68 542

Vestedduringtheyear (43908) (66492)


31. OPERATING SEGMENTS

BASIS OF SEGMENTATIONIn2014,AECIreviseditsstrategyanddevelopedkeygrowthpillars.TheGroup’sbusinesseshavebeenalignedintermsofthesepillarsandinternalreportingwasalteredtoreflectthisrealignment.Thepillars,whicharetheGroup’sreportablesegments,aredescribedbelow.Businessesinthepillarsofferdifferingproductsandservices,andaremanagedseparatelybecausetheyrequiredifferenttechnologyandmarketingstrategies.

REPORTABLE SEGMENTS OPERATIONS

MiningSolutions Thebusinessesinthispillarprovideamine-to-metalsolutionfortheminingsectorinternationally. Theofferingincludescommercialexplosives,initiatingsystemsandblastingservicesrightthrough thevaluechaintochemicalsfororebeneficiationandtailingstreatment.

Water&Process Providesintegratedwatertreatmentandprocesschemicals,andequipmentsolutions,foradiverse rangeofapplicationsinAfrica.Theseinclude,interalia,publicandindustrialwater,desalination andutilities.

Plant&AnimalHealth Manufacturerandsupplierofanextensiverangeofcropprotectionproducts,plantnutrientsandservicesfortheagriculturalsectorinAfrica.

Food&Beverage Thebusinessesinthispillarsupplyingredientsandcommoditiestothedairy,beverage,wine,meat,bakery,healthandnutritionindustries.Theothermainactivityisthemanufactureanddistribution ofabroadrangeofjuice-basedproductsanddrinks,includingformulatedcompounds,fruitconcentrateblendsandemulsions.

Chemicals Supplyofchemicalrawmaterialsandrelatedservicesforuseacrossabroadspectrumofcustomers inthemanufacturingandgeneralindustrialsectors.

Property&Corporate Mainlypropertyleasingandmanagementintheoffice,industrialandretailsectors,andthecorporatecentrefunctionsincludingthetreasury.

Therearevaryinglevelsofintegrationbetweenthesegments.Thisincludestransfersofrawmaterialsandfinishedgoods,andpropertymanagementservices.Inter-segmentpricingisdeterminedontermsthatarenomoreandnolessfavourablethantransactionswithunrelatedexternalparties.



31. OPERATING SEGMENTS continued

INFORMATION RELATED TO REPORTABLE SEGMENTSInformationrelatingtoeachreportablesegmentissetoutbelow.Segmentalprofitfromoperationsisusedtomeasureperformancebecausemanagementbelievesthatthisinformationisthemostrelevantinevaluatingtheresultsoftherespectivesegmentsrelativetootherentitiesthatoperateinthesameindustries.Thecomparativefiguresfor2016havebeenrestatedtoreflecttherevisedoperatingsegments.

EXTERNAL REVENUE INTER-SEGMENT REVENUE TOTAL SEGMENT REVENUE

Rmillions 2017Restated

2016 2017Restated

2016 2017Restated

2016

MiningSolutions 9 643 9 856 75 82 9 718 9 938

Water&Process 1 409 1 368 45 40 1 454 1 408

Plant&AnimalHealth 2 479 2 496 64 44 2 543 2 540

Food&Beverage 1 190 1 121 5 1 1 195 1 122

Chemicals 3 445 3 427 119 121 3 564 3 548

Property&Corporate 316 328 90 82 406 410

Inter-segment — — (398) (370) (398) (370)

18 482 18 596 — — 18 482 18 596

PROFIT/(LOSS) FROM OPERATIONS

DEPRECIATION AND AMORTISATION IMPAIRMENTS


2016 2017Restated

2016 2017Restated

2016

MiningSolutions 1 097 911 424 437 10 54

Water&Process 182 159 50 53 — —

Plant&AnimalHealth 133 172 12 10 — —

Food&Beverage 64 13 15 17 — 28

Chemicals 365 394 71 82 3 —

Property&Corporate (262) (314) 25 27 — —

1 579 1 335 597 626 13 82

OPERATING ASSETS OPERATING LIABILITIES CAPITAL EXPENDITURE


2016 2017Restated

2016 2017Restated

2016

MiningSolutions 6 308 6 216 1 730 1 557 435 298

Water&Process 1 228 1 150 277 218 21 8

Plant&AnimalHealth 1 664 1 558 1 089 1 087 64 29

Food&Beverage 819 862 259 252 11 14

Chemicals 2 244 2 117 798 693 42 78

Property&Corporate 778 555 150 341 131 75

13 041 12 458 4 303 4 148 704 502

Operatingassetscompriseproperty,plantandequipment,investmentproperty,intangibleassets,goodwill,inventories,accountsreceivableandassetsclassifiedasheldforsale.Operatingliabilitiescompriseaccountspayable.



32. PRINCIPAL SUBSIDIARIESISSUEDSHARE

CAPITALEFFECTIVE

SHAREHOLDING

INTEREST OFAECI LTD #SHARES

INTEREST OFAECI LTD #

LOANS TO/(FROM)

2017Number

ofshares2017

%2016

%2017

Rmillions2016

Rmillions2017

Rmillions2016

Rmillions

HOLDING COMPANIESDIRECTLY HELDAECIInternational(Ireland)Ltd 1 100 100 — — 4 5

AECITreasuryHoldings(Pty)Ltd 100 100 100 — — (31) 21

AfricanExplosivesInternationalLtd1 1 307 100 100 — — — —

INSURANCEDIRECTLY HELDAECICaptiveInsuranceCompanyLtd 810 000 100 100 11 11 (67) (48)

MINING SOLUTIONSDIRECTLY HELDAECIMiningSolutionsLtd 400 000 000 100 100 4 438 3 468 1 266 953

INDIRECTLY HELDAECIAustralia(Pty)Ltd 13 700 000 100 100 — — — —

AECIGhanaLtd 1 000 000 100 100 — — — —

AECI(Mauritius)Ltd 866 100 100 — — — —

AECIMiningandChemicalServicesNamibia(Pty)Ltd 100 100 100 — — — —

AECIMiningandChemicalServices(Chile)Ltda 2 100 100 — — — —

AELBurkinaSARL2 100 000 100 100 — — — —

AELDRCSPRL3 10 000 100 100 — — — —

AELMaliSARL 8 659 100 100 — — — —

AELMorocco 2 500 100 100 — — — —

AELZambiaplc 25 508 250 75 80 — — — —

AELMiningServicesLtd++ 100 100 100 — — (409) (352)

AfricanExplosives(Botswana)Ltd 3 100 100 — — — —

AfricanExplosivesHoldings(Pty)Ltd 4 331 278 100 100 — — (853) (735)

AfricanExplosives(Tanzania)Ltd 26 100 100 — — — —

ExtractiveTechnologies(Pty)Ltd* 100 100 100 — — — —

SenminInternational(Pty)Ltd* 8 008 500 100 100 — — — (353)

PTAELIndonesia 1 150 100 100 — — — —

WATER & PROCESSINDIRECTLY HELDBlendtech(Pty)Ltd 1 800 100 50 — — (35) (20)

ImproChem(Pty)Ltd 4 000 100 100 — — (38) 52

# Costlessimpairments.+ TradingasanagentonbehalfofAECILtd.++ TradingasanagentonbehalfofAECIMiningSolutionsLtd.* Intheprocessofbeingderegistered.

AllcompaniesareincorporatedintheRepublicofSouthAfricaexceptforthosewhosecountryofincorporationisindicatedbytheirregisteredcompanyname,andthoseannotatedasfollows:1.UnitedKingdom2.BurkinaFaso3.DemocraticRepublicofCongo.



32. PRINCIPAL SUBSIDIARIES continued

ISSUEDSHARE

CAPITALEFFECTIVE

SHAREHOLDING

INTEREST OFAECI LTD #SHARES

INTEREST OFAECI LTD #

LOANS TO/(FROM)

2017Number

ofshares2017

%2016

%2017

Rmillions2016

Rmillions2017

Rmillions2016

Rmillions

PLANT & ANIMAL HEALTHDIRECTLY HELDBiocult(Pty)Ltd 5 000 100 100 17 17 9 4

INDIRECTLY HELDFarmersOrganisationLtd4 240 100 100 — — 2 —

OtherPlant&AnimalHealthsubsidiaries — (36)FOOD & BEVERAGEDIRECTLY HELDAfoodable(Pty)Ltd 100 100 100 16 16 36 30

SouthernCannedProducts(Pty)Ltd 100 000 100 100 241 241 183 130

INDIRECTLY HELDCobito(Pty)Ltd 300 100 100 — — — —

LakeInternationalTechnologies(Pty)Ltd+ 13 395 100 100 — — — (2)

CHEMICALSDIRECTLY HELDChemicalServicesLtd 83 127 950 100 100 818 818 (1824) (1527)

SANSFibersInc.5 100 100 100 — 363 395

SANSFibres(Pty)Ltd+ 17 979 433 100 100 8 8 (126) (126)

INDIRECTLY HELDAkuluMarchon(Pty)Ltd 410 000 100 100 — — — Chemfit(Pty)Ltd 4 000 100 100 — — (48) (48)

ChemfitFineChemicals(Pty)Ltd 1 000 90 90 — — (29) (11)

ChemicalInitiatives(Pty)Ltd+ 1 100 100 — — — —

ChemserveSystems(Pty)Ltd+ 625 000 100 100 — — — —

IndustrialOleochemicalProducts(Pty)Ltd+ 4 001 100 100 — — — —

SANSTechnicalFibersLLC5 — 100 100 — — — —

Otherchemicalsubsidiaries — — (321) (360)

PROPERTYAcaciaRealEstate(Pty)Ltd 1 000 100 100 — — (276) (280)

PaardevleiProperties(Pty)Ltd 1 100 100 — — (319) (320)

Otherpropertysubsidiaries — — 3 2 (264) (260)

OTHER 154 136 (10) (12)

5 706 4 717 (2823) (2864)

# Costlessimpairments.+ TradingasanagentonbehalfofAECILtd.

AllcompaniesareincorporatedintheRepublicofSouthAfricaexceptforthosewhosecountryofincorporationisindicatedbytheirregisteredcompanyname,andthoseannotatedasfollows:4.Malawi5.UnitedStatesofAmerica.



33. NON-CONTROLLING INTERESTThefollowingtablesummarisestheinformationrelatingtoeachoftheGroup’ssubsidiariesthathasmaterialnon-controllinginterest:

RmillionsAEL

Zambia BlendtechChemfitFineChemicals Other Total

2017NON-CONTROLLING INTEREST (%) 25 10

Non-currentassets 62 63 Currentassets 337 119 Non-currentliabilities (15) (7)Currentliabilities (48) (35)

NET ASSETS 336 140

Carryingamountofnon-controllinginterest 84 14 18 116 Revenue (722) (147) (319)Profit (88) (12) (16)

PROFIT FOR THE YEAR ALLOCATED TO NON-CONTROLLING INTEREST (21) (4) (2) (3) (30)

Othercomprehensiveincome 28 — — — 28

OTHER COMPREHENSIVE INCOME ALLOCATED TO NON-CONTROLLING INTEREST 7 — — — 7

TOTAL COMPREHENSIVE INCOME ALLOCATED TO NON-CONTROLLING INTEREST (14) (4) (2) (3) (23)

Cashflowsfromoperatingactivities (14) 18 Cashflowsfrominvestingactivities — — Cashflowsfromfinancingactivities 5 (18)

Increase/(decrease)incash (9) — Cashatthebeginningoftheyear 157 — Translationlossoncash (15) —

CASH AT THE END OF THE YEAR 133 —



33. NON-CONTROLLING INTEREST continued

RmillionsAEL

Zambia BlendtechChemfitFineChemicals Other Total

2016NON-CONTROLLING INTEREST (%) 20 50 10

Non-currentassets 63 17 64

Currentassets 373 43 105

Non-currentliabilities (14) — (8)

Currentliabilities (72) (2) (37)


Carryingamountofnon-controllinginterest 70 29 12 16 127

Revenue (705) (206) (282)

Profit (85) (23) (15)

PROFIT FOR THE YEAR ALLOCATED TO NON-CONTROLLING INTEREST (17) (11) (1) (3) (32)

Othercomprehensiveincome — — — — —

OTHER COMPREHENSIVE INCOME ALLOCATED TO NON-CONTROLLING INTEREST 7 — — — 7

TOTAL COMPREHENSIVE INCOME ALLOCATED TO NON-CONTROLLING INTEREST (10) (11) (1) (3) (25)

Cashflowsfromoperatingactivities 83 31 20

Cashflowsfrominvestingactivities 3 2 2

Cashflowsfromfinancingactivities 8 (29) (47)

Increase in cash 94 4 (25)

Cashatthebeginningoftheyear 71 4 25

Translationlossoncash (8) — —

CASH AT THE END OF THE YEAR 157 8 —

ACQUISITION OF NON-CONTROLLING INTERESTOn31October2017,theGroupacquiredtheremaining50%interestinBlendtech(Pty)Ltd(“Blendtech”)forR11millionincash,increasingitsownershipfrom50%to100%.ThecarryingamountofBlendtech’snetassetsintheGroup’sconsolidatedfinancialstatementsonthedateoftheacquisitionwasR68million.TheGrouprecognisedadecreaseinnon-controllinginterestofR34millionandanincreaseinretainedearningsofR23millionattributabletochangesintheCompany’sownershipinterestinBlendtech.

Rmillions 2017

Carryingamountofnon-controllinginterestacquired(R68millionx50%) 34 Considerationpaidtonon-controllinginterest (11)

IncreaseinequityattributabletoordinaryshareholdersoftheGroup 23

DISPOSAL OF NON-CONTROLLING INTERESTOn25March2017,theGroupdisposedofa5%interestinAELZambiaplc(“AELZambia”)forR11millionincash,decreasingitsownershipfrom80%to75%.TheeffectiverateatwhichtheGroup’sownershipwasreducedwas6,25%,being5%of80%.ThecarryingamountofAELZambia’snetassetsintheGroup’sconsolidatedfinancialstatementsonthedateofthedisposalwasR282million.TheGrouprecognisedanincreaseinnon-controllinginterestofR17million,adecreaseinretainedearningsofR8millionandanincreaseintheforeigncurrencytranslationreserveofR2millionattributabletochangesintheCompany’sownershipinterestinAELZambia.

Rmillions 2017

Carryingamountofnon-controllinginterestacquired(R282millionx6,25%) (17)Considerationpaidbynon-controllinginterest 11

DecreaseinequityattributabletoordinaryshareholdersoftheGroup (6)



34. EVENTS AFTER THE REPORTING DATE

GROUPAECI(Mauritius)Limited,awholly-ownedsubsidiaryofAECI,acquired100%ofthesharecapitalinSchirmGmbHandshareholderloanclaimsfromImperialChemicalLogisticsGmbH(“ICL”),awholly-ownedsubsidiaryofImperialHoldingsLtd.Theeffectivedateofthistransactionwas30January2018.Aspartoftheacquisition,SchirmGmbHacquiredthecontractmanufacturingservicebusinessofICL,andapropertyinWolfenbüttel,Germany(collectively,“Schirm”).On17January2018,allconditionsprecedenttothetransactionhadbeenfulfilledandthetransactionbecameunconditional.ThefinancialresultsofSchirmwillbeconsolidatedfromtheeffectivedateaspartoftheGroup’sPlant&AnimalHealthsegment.HoweverSchirmwilloperateasastand-aloneentity.

Thepurchaseconsiderationofthetransactionwas€128,4million(R1,901billion),subjecttocertainadjustmentsbasedontheclosingaccounts,andwassettledincashontheeffectivedate.

AECIalreadyhaswell-establishedbusinessesinAfrica,SouthEastAsia,theUSAandAustralia.DomesticandinternationalgrowthinMiningSolutions,Water&Process,Plant&AnimalHealth,Food&Beverage,andChemicalsisastrategicfocus.TheacquisitionofSchirmisinlinewiththeCompany’sinternationalexpansionstrategyasSchirmisamarketleaderintheprovisionofformulationservicesforagrochemicalsinEurope;ithaslong-standingcustomerrelationshipswithitsblue-chipcustomerbase;ithasinvestedsubstantiallyincapitalexpenditureoverthepasttwoyearsanditisexpectedthatthisinvestmentwillenablesignificantrevenuegrowthaswellascostefficiencies.Furthermore,therearepotentialsynergiesassociatedwiththeextensionofSchirm’smanufacturingexpertisetoAECIaswellasexpansionandsupplychainopportunitiesfortheGroup’sexistingPlant&AnimalHealthpillar.ThisincludesopportunitiesforAECItoreplacesomeoftherawmaterialsitcurrentlyimportsfromthirdparties;enhancedgeographicandproductdiversityforAECI’swiderChemicalsportfolio;synergisticbenefitsassociatedwithdifferingseasonaldemandcyclesinthenorthernandsouthernhemispheres;andcurrencydiversificationforAECI.

Theinitialaccountingforthebusinesscombinationhasnotbeencompletedand,asaresult,itwasimpracticableforcertainIFRS3BusinessCombinationsdisclosurestobemade.

TheGrouphasenteredintoanagreementwithCapitalworksPrivateEquity,MICInvestmentHoldings(Pty)LtdandtheMuchAsphaltmanagementteamtoacquire100%oftheissuedsharecapitalinMuchAsphalt,foratotalconsiderationofR2,272billionwhichispayableincash,subjecttotheconditionsprecedentbeingfulfilled.

Apartfromtheabove,noothereventsafterthereportingdateoccurredthatmaygiverisetofurtherdisclosuresorreportedfigures.



2018 CALENDAR

2017FINALORDINARYDIVIDENDNO.168

DECLARATION DATE 26FEBRUARY

LAST DATE TO TRADE CUM DIVIDEND 3APRIL

EX DIVIDEND TRADE 4APRIL

RECORD DATE 6APRIL

PAYMENT DATE 9APRIL

5,5%PREFERENCESHARESDIVIDENDNO.160

DECLARATION DATE 22MAY

LAST DATE TO TRADE CUM DIVIDEND 5JUNE

EX DIVIDEND TRADE 6JUNE

RECORD DATE 8JUNE

PAYMENT DATE 15JUNE

94TH ANNUAL GENERAL MEETING 31MAY

2018INTERIMORDINARYDIVIDENDNO.169

DECLARATION DATE 24JULY

LAST DATE TO TRADE CUM DIVIDEND 28AUGUST

EX DIVIDEND TRADE 29AUGUST

RECORD DATE 31AUGUST

PAYMENT DATE 3SEPTEMBER

2018 INTERIM FINANCIAL RESULTS RELEASED 25JULY

5,5%PREFERENCESHARESDIVIDENDNO.161

DECLARATION DATE 20NOVEMBER

LAST DATE TO TRADE CUM DIVIDEND 4DECEMBER

EX DIVIDEND TRADE 5DECEMBER

RECORD DATE 7DECEMBER

PAYMENT DATE 14DECEMBER

FINANCIALYEAR-END 31DECEMBER

2018 FINANCIAL RESULTS RELEASED FEBRUARY2019

2018 INTEGRATED REPORT AND AFS POSTED APRIL2019


2018 CALENDAR

05.10

NOTICE OF ANNUAL GENERAL MEETING (“AGM” OR “THE MEETING”)

AECI Ltd(“AECI”or“theCompany”or“theGroup”)

IncorporatedintheRepublicofSouthAfrica

(RegistrationNumber1924/002590/06)

JSESharecode:AFE ISINNo.ZAE000000220

NOTICE OF MEETINGNoticeisherebygiventhatthe94thAGMofshareholdersoftheCompanywillbeheldon theGround Floor, AECI Place, 24 TheWoodlands,WoodlandsDrive,Woodmead,SandtononThursday,31May2018at09h00.

PURPOSE OF MEETINGThepurposeofthismeetingisto:

› present the Directors’ report and theauditedannualfinancialstatementsoftheCompanyandtheGroupfortheyearended31December2017;

› presenttheAuditCommittee’sreport;

› presenttheSocialandEthicsCommittee’sreport;

› consideranymattersraisedbyshareholders;and

› considerandifdeemedfittopass,withorwithoutmodification, theresolutionssetoutbelow.

ORDINARY RESOLUTION NUMBER 1

ADOPTION OF ANNUAL FINANCIAL STATEMENTSResolvedthattheauditedannualfinancialstatementsoftheCompanyandtheGroupfor theyearended31December2017bereceivedandadopted.


REAPPOINTMENT OF INDEPENDENT AUDITORResolvedthat,upontherecommendationofthecurrentAuditCommittee,Deloitte&TouchebereappointedastheindependentregisteredauditoroftheCompanyandMrPatrickNdlovubereappointedasthedesignatedindividualauditpartner,toundertaketheauditduringthefinancialyearending31December2018.

ORDINARY RESOLUTIONS NUMBERS 3.1 TO 3.3

RE-ELECTIONOFNON-EXECUTIVEDIRECTORSResolvedthatthefollowingNon-executiveDirectorswhoare retiring in termsof theCompany’sMemorandumof Incorporation(“MOI”)andwho,beingeligible,bere-elected:

3.1 MsZFuphe

3.2 DrKDKMokhele

3.3 AdvRRamashia

AbriefcurriculumvitaeofeachoftheDirectorsstandingforre-electionisprovidedonpages14to16oftheintegratedreportofwhichthisNoticeformspart.

Eachoftheordinaryresolutions3.1to3.3willbeconsideredbywayofaseparatevote.


APPOINTMENT OF A NON-EXECUTIVEDIRECTORResolvedthatMsPGSibiya,whowasappointedon27February2018,beappointedintermsoftheMOI.

AbriefcurriculumvitaeofMsSibiyaisprovidedonpage17oftheintegratedreportofwhichthisNoticeformspart.


RE-ELECTIONOF AN EXECUTIVE DIRECTORResolvedthatMrKMKathan,whoisretiringintermsoftheCompany’sMOIandwho,beingeligible,bere-elected.

AbriefcurriculumvitaeofMrKathanisprovided onpage16oftheintegratedreportofwhichthisNoticeformspart.

ORDINARY RESOLUTIONS NUMBERS 6.1 TO 6.3

ELECTION OF AUDIT COMMITTEE MEMBERSResolved that the following IndependentNon-executiveDirectorsoftheCompanybeappointedasmembersoftheAuditCommitteeuntilthenextAGM:

6.1 MrGWDempster

6.2 MrGGomwe

6.3 MrAJMorgan

6.4 MsPGSibiya

A brief curriculum vitae of each of theIndependentNon-executiveDirectorsofferingthemselvesforelectionasmembersoftheAuditCommittee isprovidedonpages14and15oftheintegratedreportofwhichthisNoticeformspart.

Eachoftheordinaryresolutions6.1to6.4willbeconsideredbywayofaseparatevote.

ORDINARY RESOLUTION NUMBER 7.1 AND 7.2

REMUNERATION POLICY7.1 Resolved to endorse, by way of a

non-bindingadvisoryvote,theCompa-ny’sRemunerationPolicyassetoutintheintegratedreportofwhichthisNoticeformspart,asfollows:Remunerationofemployees:pages83to93.Remunera-tionofDirectors:page93.

7.2 Resolved to endorse, by way of anon-bindingadvisoryvote,theimplemen-tationoftheCompany’sRemunerationPolicyassetoutonpages84to93intheintegratedreportofwhichthisNoticeformspart.

Eachoftheordinaryresolutions7.1and7.2willbeconsideredbywayofaseparatevote.


NOTICE OF ANNUAL GENERAL MEETING

05.11


AMENDMENT OF THE COMPANY’S LONG-TERMINCENTIVEPLANResolved that theCompany’s Long-termIncentive Plan (“Plan”), as approvedandadoptedbyshareholderson28May2012,beandisherebyamendedbythedeletionofparagraph21.3thereof.

Paragraph21.3relatestoaprovisioninthePlanwhich,ineventofaChangeofControl,allowsParticipantstoresignwithinoneyearoftheChangeofControlandretainallprevi-ousawardsundertheScheme.TheDirectorsbelievethattheremovaloftheclauseprotectsshareholderinterestsintheeventofaChangeofControl.

ThefullPlandocumentisavailableforinspec-tionduringnormalbusinesshoursatAECI’sregisteredoffice,fromthedateof issueofthisNotice.

IntermsoftheJSEListingsRequirements,75%ofthevotescastbyshareholderspresentorrepresentedbyproxyattheAGMmustbecastinfavourofthisordinaryresolutionNumber8forittobeapproved.

SPECIAL RESOLUTIONS NUMBERS 1.1 TO 1.7

DIRECTORS’ FEESResolvedthattheannualfeespayablebytheCompanytoitsNon-executiveDirectors,witheffectfrom29May2018,beapprovedassetoutinthetableabove.

EXPLANATORY NOTESection66(9)oftheCompaniesActNo.71of2008,asamended(“CompaniesAct”)requiresthatacompanymaypaytoitsDirectors,fortheirservicesasDirectors,onlyinaccordancewithaspecialresolutionapprovedbyshare-holderswithintheprevioustwoyears.

Thereasonforandeffectofspecialresolutionsnumbers1.1to1.7istogranttheCompanytheauthoritytopayfeesorremunerationtoitsNon-executiveDirectorsfortheirservicesasDirectors.

Eachofthespecialresolutionsnumbers1.1to1.7willbeconsideredbywayofaseparatevote.

SPECIAL RESOLUTION NUMBER 2

GENERAL AUTHORITY TO REPURCHASE SHARESResolvedthattheCompanybeandisherebygrantedageneralauthorityauthorisingtheacquisitionbytheCompanyoritssubsidiariesofshares issuedbytheCompany,onsuchtermsandconditionsandinsuchamountsastheDirectorsoftheCompanymayfromtimetotimedeemfit,andintermsofsection48(8)oftheCompaniesAct,theCompany’sMOIandtheJSEListingsRequirementsprovidedthat:

› subjecttosection48oftheCompaniesAct,thegeneralauthoritytorepurchaseislimitedtoamaximumof5%intheaggregate,inanyonefinancialyear,oftheCompany’sissuedsharecapitalatthebeginningofthefinancialyear,providedthatthenumberofsharespurchasedandheldbyorforthebenefitofasubsidiaryorsubsidiariesoftheCompany,takentogether,shallnotexceed10%intheaggregateofthenumberofissuedsharesintheCompany;

› thisgeneralauthorityshallonlybevaliduntiltheCompany’snextAGM,providedthatitshallnotextendbeyond15monthsfromthedateofadoptionofthisspecialresolution;

› aresolutionhasbeenpassedbytheBoardofDirectors(“theBoard”)confirmingthattheBoardhasauthorisedthegeneralrepurchase,thattheCompanypassedthesolvencyandliquiditytestandthatsincethetestwasdonetherehavebeennomaterialchangestothefinancialpositionoftheCompany;

› repurchasesmaynotbemadeatapricegreater than 10% above the weightedaverageofthemarketvalueoftheordinarysharesforthefivebusinessdaysimmediatelyprecedingthedateonwhichthetransactioniseffected.TheJSEshouldbeconsultedforarulingiftheCompany’ssecuritieshavenottradedinsuchafivebusinessdayperiod;

› anysuchgeneralrepurchaseissubjecttoexchangecontrolregulationsandapprovalatthatpointintime;

› therepurchaseofsecuritieswillbeeffectedthroughtheorderbookoperatedbytheJSE’stradingsystemanddonewithoutanypriorunderstandingorarrangementbetweentheCompanyandthecounter-party(reportedtradesareprohibited);

› atanypointintime,acompanymayonlyappointoneagenttoeffectanyrepurchasesonthatcompany’sbehalf;

› an announcement giving such detailsasmayberequired in termsof theJSEListingsRequirementsbereleasedwhentheCompanyhascumulativelyrepurchased3%oftheinitialnumberoftherelevantclassofsharesinissueasatthetimethisresolutionispassed(“initialnumber”)andforeach3%inaggregateoftheinitialnumberofthatclassacquiredthereafter;

DIRECTORS’ FEESRandperannum Current Proposed

BOARD1.1 Chairman 1 218 470 1 291 578

1.2 Non-executiveDirectors 235 320 249 439

AUDIT COMMITTEE1.3 Chairman 200 022 212 023

1.4 Members 100 064 106 068

OTHER BOARD COMMITTEES1.5 Chairman 129 532 137 304

1.6 Members 64 766 68 652

1.7 Meetingattendancefee 10 750 11 400


NOTICE OF ANNUAL GENERAL MEETING CONTINUED

05.11

› theCompanyor itssubsidiariesmaynotrepurchasesecuritiesduringaprohibited period as defined in the JSE ListingsRequirementsunlesstheyhave inplacearepurchaseprogrammewherethedatesandquantitiesofsecuritiestobetradedduringtherelevantperiodarefixed(notsubjecttoanyvariation)andfulldetailsoftheprogrammehavebeendisclosedtotheJSE,inwriting,priortothecommencementoftheprohibitedperiod.TheCompanyoritssubsidiarieshaveinstructedanindependentthirdparty,whichmakes its investmentdecisions in relation to the Company’ssecuritiesindependentlyof,anduninfluencedby,theCompanyor itssubsidiaries,priortothecommencementoftheprohibitedperiodtoexecutetherepurchaseprogrammesubmittedtotheJSE.

EXPLANATORY NOTEAtthepresenttime,theDirectorshavenospecificintentionwithregardtotheutilisationofthisauthority,whichwillonlybeusedifthecircumstancesareappropriate.

TheCompany’sDirectorsundertakethattheywillnoteffectanysuchrepurchaseswhilethegeneralauthorityisvalid,unless:

(i) theGroupwillbeable, in theordinarycourseofbusiness,topayitsdebtsforaperiodof12monthsfollowingthedateofthegeneralrepurchase;

(ii) theassetsoftheCompanyandtheGroupwillexceedtheliabilitiesoftheCompanyandtheGroupforaperiodof12monthsfollowingthedateofthegeneralrepur-chase.Forthispurpose,theassetsandliabilitiesarerecognisedandmeasuredinaccordancewiththeaccountingpoliciesappliedintheCompany’slatestauditedannualGroupfinancialstatements;

(iii)theCompanyandtheGroupwillhaveadequatesharecapitalandreservesforordinarybusinesspurposesforaperiodof12monthsfollowingthedateofthegeneralrepurchase;and

(iv)theworkingcapitaloftheCompanyandtheGroupwillbeadequateforordinarybusinesspurposesforaperiodof12monthsfollow-ingthedateofthegeneralrepurchase.

Thereasonforandeffectofspecialresolutionnumber2istogranttheCompanyageneralauthority to facilitate the acquisition oftheCompany’sownshares,whichgeneralauthorityshallbevaliduntiltheearlierofthenextAGMoftheCompanyorthevariationor revocationofsuchgeneralauthoritybyspecialresolutionbyanysubsequentGeneralMeetingoftheCompany,providedthatthisgeneralauthorityshallnotextendbeyond15monthsfromthedateofadoptionofthisspecialresolution.

SuchgeneralauthoritywillprovidetheDirec-torswithflexibilitytoeffectarepurchaseoftheCompany’sshares,should itbe intheinterestsoftheCompanytodosoatanytimewhilethegeneralauthorityisinforce.

SPECIAL RESOLUTION NUMBER 3

FINANCIAL ASSISTANCE TO RELATEDORINTER-RELATEDCOMPANYResolvedthat,intermsofandsubjecttotheprovisionsofsection45oftheCompaniesAct,theDirectorsoftheCompanybeandtheyareherebyauthorisedandempoweredtocausetheCompanytoprovideanydirectorindirectfinancialassistancetoanycompanyorotherlegalentitywhichisrelatedorinter-relatedtotheCompany.

EXPLANATORY NOTEOnaregularbasis,andintheordinarycourseof business, the Company provides loanfinancing,guaranteesandothersupporttotherelatedandinter-relatedcompaniesorlegalentitiesintheGroup.Section45(2)oftheCompaniesActempowerstheBoardofacompanytoprovidedirectorindirectfinan-cialassistancetoarelatedor inter-relatedcompanyorcorporation.However,section45(3)oftheCompaniesActprovidesthattheBoardofacompanymayonlyauthoriseanyfinancialassistancecontemplatedinsection45(2)thereofpursuanttoaspecialresolutionoftheshareholdersofthecompanyadoptedwithintheprevioustwoyears.

TheBoardundertakesthat:

(i) itwillnotadoptaresolutiontoauthorisesuch financial assistance, unless it issatisfiedthat:

› immediatelyafterprovidingthefinancialassistance,theCompanywouldsatisfythesolvencyandliquiditytestascontem-platedintheCompaniesAct;and

› the termsunderwhich the financialassistanceisproposedtobegivenarefairandreasonabletotheCompany;and

(ii) writtennoticeofanysuchresolutionbytheBoardshallbegiventoallshareholdersof theCompanyandany tradeunionrepresentingitsemployees:

› within10businessdaysaftertheBoardadoptedtheresolutionifthetotalvalueofthefinancialassistancecontemplatedin that resolution, togetherwithanyprevious such resolution during thefinancialyear,exceedsone-tenthof1%oftheCompany’snetworthatthetimeoftheresolution;or

› within30businessdaysaftertheendofthefinancialyear,inanyothercase.

Thereasonforandeffectofspecialresolutionnumber3 is togrant theDirectorsof theCompanytheauthoritytocausetheCompanytoprovidefinancialassistancetoanycompanyorotherlegalentitywhichisrelatedorinter- relatedtotheCompany.

RECORD DATETheBoardhas,intermsofsection59(1)(a)oftheCompaniesAct,settherecorddate,forthepurposeofdeterminingwhichsharehold-ersoftheCompanyareentitledtoreceiveNoticeoftheAGMasbeingFriday,20April2018andhas,intermsofsection59(1)(b)oftheCompaniesAct,settherecorddate,forpurposesofdeterminingwhichshareholdersoftheCompanyareentitledtoparticipateinandvoteattheAGM,asbeingFriday,25May2018.Accordingly,thelastdaytotradeinordertoberegistered intheregisterofshareholdersoftheCompanyandthereforeeligibletoparticipateinandvoteattheAGMisTuesday,22May2018.


APPROVALS REQUIRED FOR RESOLUTIONSOrdinaryresolutionsnumbers1to7containedinthisNoticeofAGMrequiretheapprovalbymorethan50%ofthevotesexercisedontheresolutionsbyshareholderspresentorrepresentedbyproxyattheAGM,subjecttotheprovisionsoftheCompaniesAct,theMOIoftheCompanyandtheJSEListingsRequirements.

Ordinary resolutionnumber8andspecialresolutionsnumbers1to3containedinthisNoticeofAGMrequiretheapprovalbyatleast75%ofthevotesexercisedontheresolutionsbyshareholderspresentor representedbyproxyattheAGM,subjecttotheprovisionsoftheCompaniesAct,theMOIoftheCompanyandtheJSEListingsRequirements.

GENERAL INFORMATIONThefollowingadditionalinformationappearselsewhereintheintegratedreportofwhichthisNoticeformspart:

(i) MajorshareholdersoftheCompany(refertotheshareholderanalysiscommencingonpage109);

(ii) SharecapitaloftheCompany(refertotheDirectors’reportcommencingonpage106).

NO MATERIAL CHANGES TO REPORTTherehavebeennomaterialchangesinthefinancialortradingpositionoftheCompanyanditssubsidiariessincethedateofsignatureoftheIndependentAuditor’sreportandthedateofthisNotice.

DIRECTORS’ RESPONSIBILITY STATEMENTTheDirectorswhosenamesappearonpages14to17intheintegratedreportofwhichthisNoticeformspartcollectivelyandindividuallyacceptfullresponsibilityfortheaccuracyofthe informationcontained intheseresolu-tionsandcertifythat, tothebestof theirknowledgeandbelief, therearenofactsthathavebeenomittedwhichwouldmake

anystatementfalseormisleading,andthatall reasonableenquiriestoascertainsuchfactshavebeenmadeandtheseresolutionscontainallinformationrequiredbytheJSEListingsRequirements.

VOTING AND PROXIESShareholdersortheirproxiesmayparticipateintheAGMbywayofateleconferencecalland,iftheywishtodoso:

› shouldmakeapplicationbyemail totheGroupCompanySecretary([email protected]) by no later than 09h00 onTuesday,29May2018inorderfortheGroupCompanySecretarytoprovidetheshare-holderorsuchshareholder’srepresentativewithdetailsastohowtoaccesstheAGMfortelephonicparticipation;

› thecostsofenablingashareholdertoaccesstheAGMfortelephonicparticipationwillbebornebytheshareholdersoaccessingtheAGM;

› shareholdersareadvisedthataccessingtheAGMbywayoftelephonicparticipationwillnotentitleashareholdertovoteattheAGM;and

› shouldashareholderwishtovoteattheAGM,suchshareholdermaydosobyattend-ingandvotingattheAGMeitherinpersonorbyproxy.

Shareholderswhohavenotdematerialisedtheir sharesorwhohavedematerialisedtheirshareswith “ownname” registrationareentitledtoattendandvoteattheAGMandareentitledtoappointaproxyorproxies(forwhichpurposeaformofproxyisincluded)toattend,speakandvoteintheirstead.ThepersonsoappointedneednotbeashareholderoftheCompany.

Formsofproxymustbe lodgedwith theCompany’sTransferSecretaries,Computer-shareInvestorServices(Pty)Ltd,RosebankTowers,15BiermannAvenue,Rosebank,2196,orpostedtotheTransferSecretariesatPOBox61051,Marshalltown,2107,oremailedtoproxy@computershare.co.za.AnyformsofproxynotreceivedinadvancemustbehandedtotheChairmanoftheAGMimmediatelypriortotheAGM.

Proxy formsmust only be completed byshareholderswhohavenotdematerialisedtheirsharesorwhohavedematerialisedtheirshareswith“ownname”registration.

AllresolutionsshallbedecidedonapollandeveryshareholderoftheCompanyshallhaveonevoteforeveryshareheldintheCompanybysuchshareholder.

Shareholderswhohavedematerialisedtheirshares,otherthanthoseshareholderswhohavedematerialisedtheirshareswith“ownname”registration,mustcontacttheirCentralSecuritiesDepositoryParticipant(“CSDP”)orstockbrokerinthemannerandtimestipulatedintheiragreement:

› tofurnishtheirCSDPorstockbrokerwiththeirvotinginstructions;and

› intheeventthattheywishtoattendtheAGM,toobtainthenecessaryauthoritytodosowithaletterofrepresentationintermsofthecustodyagreement.Suchletterofrepresentationmustbe lodgedwiththeCompany’sTransferSecretaries,Computer-shareInvestorServices(Pty)Ltd,RosebankTowers,15BiermannAvenue,Rosebank,2196,orpostedtotheTransferSecretariesatPOBox61051,Marshalltown,2107,[email protected].

AllparticipantsattheAGMwillberequiredtoprovideidentificationreasonablysatisfactorytotheChairmanoftheAGM(whichmaytaketheformofavalididentitydocument,driver’slicenceorpassport,forexample).

ByorderoftheBoard

Nomini Rapoo GroupCompanySecretary



NOTICE OF ANNUAL GENERAL MEETING CONTINUED

05.11

Thisproxyformrelatestothe94thAnnualGeneralMeeting(“AGM”)tobeheldonThursday,31May2018at09h00ontheGroundFloor,AECIPlace, 24TheWoodlands,WoodlandsDrive,Woodmead,Sandton,forusebyregisteredholdersofcertificatedordinarysharesintheCompanyandtheholdersofdematerialisedordinarysharesinthecapitaloftheCompanyin“ownname”form.Therecorddate,intermsofsection59(1)(a)oftheCompaniesAct,forthepurposeofdeterminingwhichshareholdersoftheCompanyareentitledtoreceiveNoticeoftheAGMhasbeensetforFriday,20April2018.Therecorddate,intermsofsection59(1)(b)oftheCompaniesAct,forthepurposeofdeterminingwhichshareholdersoftheCompanyareentitledtoparticipateinandvoteattheAGM,hasbeensetforFriday,25May2018.Accordingly,thelastdaytotradeinordertoberegisteredintheregisterofshareholdersoftheCompanyandthereforeeligibletoparticipateinandvoteattheAGMisTuesday,22May2018.HoldersofordinarysharesintheCompany(whethercertificatedordematerialised)throughanomineemustnotcompletethisformofproxybutshouldtimeouslyinformthatnominee,or,ifapplicable,theirCentralSecuritiesDepositoryParticipant(“CSDP”)orstockbrokeroftheirintentiontoattendtheAGMandrequestsuchnominee,CSDPorstockbrokertoissuethemwiththenecessaryauthorisationtoattendorprovidesuchnominee,CSDPorstockbrokerwiththeirvotinginstructionsshouldtheynotwishtoattendtheAGMinpersonbutwishtoberepresentedthereat.

I/We(Pleaseprintname/sinfull)

of(address)

Telephone(work) (home/cellular)

beingtheregisteredholder/sof ordinarysharesintheCompany,doherebyappoint

1.

2.orfailinghim/her

3.orfailinghim/hertheChairmanoftheAGM,asmy/ourproxytoactforme/usandonmy/ourbehalfattheAGMwhichwillbeheldforthepurposeofconsideringandifdeemedfitpassing,withorwithoutmodification,theordinaryandspecialresolutionstobeproposedthereatandatanyadjournmentthereof;andtovoteforand/oragainsttheordinaryandspecialresolutionsand/orabstainfromvotinginrespectoftheordinarysharesregisteredinmy/ourname/s,inaccordancewiththefollowinginstructions:(Pleaseindicatewithan“X”intheappropriatespacesbelowhowyouwishyourvotestobecast.)Unlessotherwiseinstructed,my/ourproxymayvoteasshe/hethinksfit.

Number of votes: For Against Abstain

Ordinary resolution No. 1 Adoptionofannualfinancialstatements

Ordinary resolution No. 2 Reappointmentofindependentauditor

Ordinary resolution No. 3 Re-electionofNon-executiveDirectors

3.1 MsZFuphe

3.2 MrKDKMokhele

3.3 AdvRRamashia

Ordinary resolution No. 4 AppointmentofaNon-executiveDirector

Ordinary resolution No. 5 Re-electionofanExecutiveDirector

Ordinary resolution No. 6 ElectionofAuditCommitteemembers

6.1 MrGWDempster

6.2 MrGGomwe

6.3 MrAJMorgan

6.4 MsPGSibiya

Ordinary resolution No. 7 RemunerationPolicy

7.1 RemunerationPolicy

7.2 ImplementationofRemunerationPolicy

Ordinary resolution No. 8 AmendmentoftheLTIP

Special resolution No. 1 Directors’fees

1.1 Board:Chairman

1.2 Board:Non-executiveDirectors

1.3 AuditCommittee:Chairman

1.4 AuditCommittee:members

1.5 OtherBoardCommittees:Chairman

1.6 OtherBoardCommittees:members

1.7 Meetingattendancefee

Special resolution No. 2 Generalauthoritytorepurchaseshares

Special resolution No. 3 Financialassistancetorelatedorinter-relatedcompany

Signedat onthis dayof 2018

Signature

Assistedby(ifapplicable)PleasereadthenotesonthereversesideofthisFormofProxy.

FORM OF PROXYAECI Ltd (“AECIor“theCompany”or“theGroup”) IncorporatedintheRepublicofSouthAfrica (RegistrationNumber:1924/002590/06) JSESharecode:AFE ISINNo.AE000000220(“theCompany”)


05.12FORM OF PROXY

1. AshareholderentitledtoattendandvoteattheAGMmay,atanytime,appointanyindividual,includinganindividualwhoisnotashareholderoftheCompany,asaproxyto,amongstotherthings,partici-patein,andspeakandvoteattheAGMonbehalfoftheshareholder.SatisfactoryidentificationmustbepresentedbyanypersonwishingtoattendtheAGM,assetoutintheNotice.

2. EveryshareholderpresentinpersonorbyproxyandentitledtovoteattheAGMoftheCompanyshall,onapoll,beentitledtoonevoteinrespectofeachordinaryshareheldbyher/him.

3. Ashareholdermayinsertthenameofaproxyorthenamesoftwoalternativeproxiesoftheshareholder’schoiceinthespace/sprovidedoverleaf,withorwithoutdeleting“theChairmanoftheAGM”,butanysuchdeletionmustbeinitialledbytheshareholder.Shouldthisspacebeleftblank,theChairmanoftheAGMwillexercisetheproxy.ThepersonwhosenameappearsfirstontheproxyformandwhoispresentattheAGMwillbeentitledtoactasproxytotheexclusionofthosewhosenamesfollow.

4. Ashareholder’svotinginstructionstotheproxymustbeindicatedbytheinsertionofthenumberofvotesexercisablebythat shareholder in the appropriatespacesprovidedoverleaf.FailuretodososhallbedeemedtoauthorisetheproxytovoteortoabstainfromvotingattheAGMasshe/hethinksfit inrespectofalltheshareholder’sexercisablevotes.Ashareholderorher/hisproxy isnotobligedtouseallthevotesexercisablebyher/hisproxy,butthetotalnumberofvotescast,orthoseinrespectofwhichabstentionisrecorded,maynotexceedthetotalnumberofvotesexercisablebytheshareholderorbyher/hisproxy.

5. Aminormustbeassistedbyher/hisparentorguardianunlesstherelevantdocumentsestablishingher/his legalcapacityareproducedorhavebeenregisteredbytheTransferSecretaries.

6. Therecorddate,intermsofsection59(1)(a)oftheCompaniesAct,forthepurposeofdeterminingwhichshareholdersoftheCompanyareentitledtoreceiveNoticeof theAGMhasbeenset for Friday, 20April2018.Therecorddate,intermsofsection59(1)(b)oftheCompanies

Act, for the purpose of determiningwhichshareholdersoftheCompanyareentitledtoparticipateinandvoteattheAGM,hasbeensetforFriday,25May2018.Accordingly,thelastdaytotradeinordertoberegisteredintheregisterofshareholdersoftheCompanyandthereforeeligibletoparticipate inandvoteattheAGMisTuesday,22May2018.

7. Formsofproxymustbe lodgedwithtotheCompany’sTransferSecretaries,ComputershareInvestorServices(Pty)Ltd, Rosebank Towers, 15BiermannAvenue, Rosebank, 2196, or postedtotheTransferSecretariesatPOBox61051,Marshalltown,2107,oremailedtoproxy@computershare.co.za.AnyformsofproxynotreceivedinadvancemustbehandedtotheChairmanoftheAGMimmediatelypriortotheAGM.

8. Documentaryevidenceestablishingtheauthorityofapersonsigningthisformofproxyinarepresentativecapacitymustbeattachedtothisformofproxyunlesspreviously recorded by the TransferSecretariesorwaivedbytheChairmanoftheAGM.

9. Thisformofproxy istobecompletedonlybythoseshareholderswhoeitherstillholdshares inacertificatedform,orwhosesharesarerecorded intheir“ownname” inelectronicform inthesub-register.

10. Shareholders whose dematerialisedsharesareheldinthenameofanomineeandwishtoattendtheAGMmustcontacttheir Central Securities DepositoryParticipant(“CSDP”)orstockbrokerwhowill furnishthemwiththenecessaryletterofauthoritytoattendtheAGM.Alternatively,theyhavetoinstructtheirCSDPorstockbrokerastohowtheywishtovote.ThishastobedoneintermsoftheagreementbetweentheshareholderandtheCSDPorthestockbroker.

11. Shareholderswhowishtoattendandvote at the AGMmust ensure thattheir letters of authority from theirCSDPorstockbrokerare lodgedwiththeCompany’sTransferSecretaries,ComputershareInvestorServices(Pty)Ltd, Rosebank Towers, 15 BiermanAvenue,Rosebank,2196, or postedtotheTransferSecretariesatPOBox61051,Marshalltown,2017,[email protected].

12. ThecompletionandlodgingofthisformofproxyshallnotprecludetherelevantshareholderfromattendingtheAGMandspeakingandvotinginpersonthereattotheexclusionofanyproxyappointedintermshereof,shouldsuchshareholderwishtodoso.

13. Thecompletionofanyblankspacesoverleafneednotbeinitialled.Anyalter-ationsorcorrectionstothisformofproxymustbeinitialledbythesignatory/ies.

14. TheChairmanoftheAGMmayacceptanyformofproxywhich iscompletedother than inaccordancewith theseinstructions provided that she/he issatisfiedastothemanner inwhichashareholderwishestovote.

15. Aproxymaydelegatetheproxy’sauthor-itytoactonbehalfoftheshareholdertoanotherperson.

16. Aproxyappointment issuspendedatany timeand to theextent that theshareholderchoosestoactdirectlyandinpersonintheexerciseofanyrightsasashareholder.

17. Aproxyappointmentmustbeinwriting,datedandsignedbytheshareholder,andremainsvalidonlyuntiltheendofthemeetingatwhichitwasintendedtobeused,unlesstheproxyappointment isrevoked,inwhichcasetheproxyappoint-mentwillbecancelledwitheffectfromsuchrevocation.

18. Theappointmentofaproxyintermsofthisformofproxyisrevocableintermsoftheprovisionsofsection58(4)(c)readwithsection58(5)oftheCompaniesAct and, accordingly, a shareholdermayrevoketheproxyappointmentbycancellingitinwriting,ormakingalaterinconsistentappointmentofaproxy,anddeliveringacopyoftherevocationinstru-menttotheproxyandtotheCompany.

19. Therevocationofaproxyappointmentconstitutesacompleteandfinalcancel-lationof theproxy’sauthority toactonbehalfoftheshareholderasofthelaterofthedatestatedintherevocationinstrument,ifany,orthedateonwhichtherevocationinstrumentisdeliveredintermsof17above.

NOTES TO THE FORM OF PROXY


05.13NOTES TO THE FORM OF PROXY

ADMINISTRATION

GROUP COMPANY SECRETARY AND REGISTERED OFFICEENRapoo

FirstFloor

AECIPlace

24TheWoodlands

WoodlandsDrive

Woodmead

Sandton

(nopostaldeliveriestothisaddress)

POSTAL ADDRESSPrivateBagX21

GalloManor

2052

Telephone:+27(0)118068700

Telefax:+27(0)118068701

E-mail:[email protected]

WEB ADDRESSwww.aeci.co.za

LONDON SECRETARYStJames’sCorporateServicesLtd

Suite31,SecondFloor

107Cheapside

LondonEC2V6DN

England

TRANSFER SECRETARIES ComputershareInvestorServices(Pty)Ltd

RosebankTowers

15BiermannAvenue

Rosebank

2196

POBox61051

Marshalltown

2107

SouthAfrica

and

ComputershareInvestorServicesplc

POBox82

ThePavilions

BridgwaterRoad

BristolBS997NH

England

AUDITORKPMGInc.(to6April2018)

Deloitte&Touche(from6April2018)

PRIMARY TRANSACTIONAL AND FUNDING BANKSAbsaBankLtd

FirstNationalBankofSouthernAfricaLtd

NedbankLtd

TheStandardBankofSouthAfricaLtd

SOUTH AFRICAN SPONSORRandMerchantBank

(AdivisionofFirstRandBankLimited)

1MerchantPlace

CornerRivoniaRoadandFredmanDrive

Sandton

2196


ADMINISTRATION

05.14

sigil design bureau

www.sigil.co.za

Documents

AECI Ltd | Integrated Report and Annual Financial