Trans Hex Group Limited and its directors have accepted and are fully committed to the following seven commonly accepted characteristics of good corporate governance in accordance with the King II Report: discipline, transparency, independence, accountability, responsibility, fairness and social responsibility. The directors believe that the company has in all material respects complied with the Code of Corporate Practices and Conduct as set out in the King II Committee Report and comment as follows:

BOARD OF DIRECTORS
The group has a unitary board structure. The board meets on a quarterly basis, retains full and effective control over the group and monitors the executive management. The board itself takes key decisions to ensure it retains proper direction and control of the group, strategic issues, the business plan, acquisitions, disposals and other major contracts and commitments, group policies and stakeholder reporting.

The roles of the chairman and chief executive officer do not vest in the same person and the chairman is a non-executive director. The chairman and chief executive officer provide leadership and guidance to the group and encourage proper deliberation of all matters requiring its attention, with optimum input from the other directors.
There is a clear division of responsibility at board level to ensure a balance of power and authority such that no one individual has unfettered power of decision-making.
 
The board has five non-executive and two independent non-executive directors who are appointed for specific terms. Reappointment is not automatic. Such appointments are formal and transparent and a matter for the board as a whole. There are two executive directors on the board.
 
During the year under review, the board met five times. The board schedules to meet at least once every quarter. All the members attended all the meetings with the exception of E de la H Hertzog on 29 June 2007 (extraordinary meeting).
 
The extraordinary meeting was called at short notice. Dr Hertzog was unable to attend due to overseas business commitments. Mr Falck acted as Dr Hertzog’s nominee during the meeting.
 
A number of standing committees of the board have been established. These committees operate with written terms of reference and comprise, in the main, of non-executive directors. The chairman of each committee is a non-executive director.
 
REMUNERATION COMMITTEE
The members of the remuneration committee are:

Edwin de la H Hertzog (chairman) - (non-executive director)
Niel Hoogenhout - (independent non-executive director) (Retired 1 August 2008)
Bernard van Rooyen - (non-executive director)
 
The chief executive officer attends meetings of the remuneration committee, but does not participate in any discussion or decisions regarding his own remuneration.
 
The remuneration committee reviews and approves the remuneration and terms of employment of executive directors and senior employees of the group. The remuneration committee has satisfied its responsibilities during the year in compliance with its terms of reference.
 
The remuneration committee met on four occasions during the year. A quorum was present at each of these meetings.
 
Non-executive directors do not have service contracts. The remuneration paid to executive and non-executive directors of the group is disclosed in total in note 19 to the annual financial statements.
 
AUDIT AND RISK COMMITTEE
The members of the audit and risk committee are:

Alwyn Martin (chairman) - (independent non-executive director)
Dennis Falck - (non-executive director) (Retired 15 September 2008)
Niel Hoogenhout - (independent non-executive director) (Retired 1 August 2008)
Bernard van Rooyen - (non-executive director)
 
Both the internal and external auditors have unrestricted access to the audit and risk committee, which ensures that their independence is in no way impaired. Meetings are held regularly and are attended by representatives of the external and internal auditors. The managing director and the financial director attend as representatives of the group’s management.
 
The audit and risk committee deals with issues relating to risk management, the internal and external audit, including accounting policies and financial reporting, health, safety and environmental management, the safeguarding of assets, and internal control within the mandate given by the board. The audit and risk committee has satisfied its responsibilities during the year in compliance with its terms of reference.
 
The audit and risk committee met on four occasions during the year and all the members attended the meetings.
 
The group has a group risk management committee (GRMC) and each major operation has an operational sub­committee. This includes Trans Hex Angola which has monthly operational risk meetings and maintains its own risk register for the Angolan investments. The GRMC reports to the audit and risk committee on all risk management issues and ensures compliance with the ongoing process of identifying, evaluating and managing significant risks.
 
The group risk register is regularly reviewed and updated by the GRMC. Corrective actions and preventive measures are taken and thereafter closely monitored. Any significant risk that is new to the group is reported via the GRMC to the audit and risk committee.
 
Employees are obliged to report incidents and “near misses” which are captured in an electronic incident reporting system which was introduced during 2005. All incidents and “near misses” are investigated by management and corrective action is implemented and recorded before the close off of any incidents. All incidents are trended by type, area, cost and location.
 
Risk management is a key focus area at operational level, with risk management as a fixed agenda point in all meetings. It is at this level that strategies and procedures are set within the policy, programmes are executed and performance reporting is conducted.
 
The board, through the audit and risk committee, is responsible for the total process of risk management as well as for forming its own opinion on the effectiveness of the process. Management is accountable to the board for designing, implementing and monitoring the process of risk management and integrating it into the day-to-day activities of the company. The risk management policy and mandate has been approved by the board.
 
INTERNAL CONTROL
The group maintains adequate accounting records and effective systems of internal control and risk management over financial reporting and the safeguarding of assets against unauthorised acquisition, use or disposition.
 
These systems are designed to provide reasonable assurance to the company’s management and board of directors regarding the preparation of reliable published financial statements. They include a documented and tested organisational structure and division of responsibility and established policies and procedures, including a code of conduct to foster a strong ethical climate, all of which are communicated to all personnel.
 
Internal auditors monitor the operation of the internal control systems, report findings and make recommendations to manage­ment and the board of directors. Corrective actions are taken to address control deficiencies and opportunities for improving the system are constantly sought. The board, operating through its audit and risk committee, supervises the financial reporting process.
 
The group assessed its internal control system as at 31 March 2008 in relation to the criteria for effective internal control over financial reporting. Based on its assessment, the group is satisfied that its systems met those criteria.
 
PROFESSIONAL ADVICE
All directors have access to the advice and services of the group company secretary who is responsible to the board for ensuring procedures are followed. All directors are entitled to seek independent professional advice about the affairs of the group and have unrestricted access to company records.
 
MANAGEMENT REPORTING
The group has comprehensive management reporting disciplines in place, which include the preparation of annual budgets by all operating units. Monthly results and the financial status of operating units are reported against approved budgets and compared to the prior year. Profit projections and forecast cash flows are updated monthly while working capital and borrowing levels are monitored on an ongoing basis.
 
EMPLOYER/EMPLOYEE RELATIONS
The group uses a variety of participative structures to deal with issues affecting employees directly and materially. These include collective bargaining mechanisms, structures to drive productivity improvements, safety committees and other participative forums. These structures, set up with trade unions and other employee representatives, are designed to achieve good employer/employee relations through effective sharing of relevant information, consultation and the early identification and resolution of conflict.
 
EQUAL OPPORTUNITIES
The group believes in creating a stimulating work environment whereby employees enjoy equal rights. Actions taken to bring about changes necessary to reflect the composition of the South African population include identifying and removing all discriminatory provisions. All new appointments are made in full compliance with the company’s enhanced employment equity targets.
 
SHARE TRANSACTIONS BY DIRECTORS AND SENIOR PERSONNEL
According to group policy, directors and senior personnel are required to adhere to the code of conduct with regard to dealing in shares of the group during periods of price sensitivity.
 
CODE OF CONDUCT AND CODE OF ETHICS
The group is committed to the highest standards of integrity, behaviour and ethics in dealing with all stakeholders. The directors have implemented controls to monitor that the values, behaviour and ethics, as outlined in the company’s corporate charter and code of ethics, are being adhered to.
 
A confidential reporting mechanism is in place where employees are assured of anonymity when reporting matters relating to diamond theft, fraud and other crime within the company.