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Petra Diamonds Limited Sustainability Report 201214STRATEGY AND GOVERNANCEStrategy and GovernanceDeveloping our approach continuedHSSE Committee continuedto the Board and meets formally at least twice a year, or more as required. As it was formed part way through the financial year, only one meeting was held in FY 2012.During FY 2012, the Committee began a process of reviewing existing sustainability policies across the Group, prior to the development of a series of strategic policies to ensure consistent and improving standards across all our operations. A number of new Group policies are now being developed to further improve on the existing polices in place and these are expected to provide consistency of standards across all Petra operations.The Committee is also leading a progressive improvement in our reporting of sustainability matters in order to increase transparency and disclosure in line with evolving best practice and reflecting the growing maturity of the Company. As part of this process we have this year set out a number of KPIs for sustainability reporting. In some cases, comparative data from previous years for selected KPIs was unavailable, either because this is the first year Petra has collected data or because of significant improvements to the methods for collecting data implemented during FY 2012.Risk managementThe Board is responsible for the Group's system of internal control and for reviewing its effectiveness. The Group has not established a separate Risk Committee. Instead, the Board, as part of its usual role and through direct involvement in the management of the Group's operations, ensures risks are identified, assessed and appropriately managed. The sustainability risks considered to be most material to the Group are categorised in the areas of Health and Safety, Governance and Ethics, Community Relations, Employees and Environment - see the schematic on page 16 which sets out the sustainability areas considered to be most material to the Group.Incidents or infringements are classified as minor, moderate or major. Major incidents are those which are deemed material to the Group's performance as a whole. Should such a major incident occur, then there is a clear line of communication to ensure that the matter is reported to the highest governance body immediately, as follows:RemunerationPetra's remuneration packages are weighted towards performance pay linked to Petra's strategic goals and targets, including matters pertaining to sustainability, and take into account best practice developments applied in a manner which is appropriate for Petra's industry and specific circumstances.OUR STRATEGIC OBJECTIVESPERFORMANCE MEASURES FOR INCENTIVESHow does Petra's remuneration strategy link with its corporate strategy?INCREASE OUTPUTOPTIMISE RECOVERIESDRIVE EFFICIENCIESFOCUS ON PRODUCTIONSteadily growing annual productionImproving operating marginsCulture of effective cost controlMAXIMISE RETURNSProduction$ Project delivery and carat production are at the core of Petra's strategy. These measures are therefore fully embedded in the performance measurement framework.Expansion project delivery$ Progress is measured as part of the short-term bonus, and the long-term share awards include stretching targets supporting Petra's long-term ambitions.Profit and costs$ Petra remains focuses on managing costs and profitability. Profit and cost measures form part of the annual bonus metrics.HSSE$ Health, safety, social and environment measures are explicitly included as part of the annual bonus framework, reflecting Petra's commitment to corporate responsibility.Total shareholder return$ Share awards are linked to value created for shareholders by measuring both relative and absolute total shareholder return ("TSR").FOCUS ON SAFETY AND SUSTAINABILITYSITEPERSONNEL SENIOR MANAGEMENTEXECUTIVETEAMTHEBOARD

Petra Diamonds Limited Sustainability Report 201215STRATEGY AND GOVERNANCEStrategy and GovernanceDeveloping our approach continuedStakeholder engagementWe are committed to ensuring that all stakeholders are made aware of the Company's current and future operations and recognise the benefits which result from such operations. We are in the process of developing an overarching Stakeholder Engagement Policy in order to ensure consistent standards are applied across the Group.All of our operations have a defined Stakeholder Engagement Plan in place, which is supported by Community Development Programmes. This includes our exploration operations, as Petra Diamonds Botswana's policies on Communication and Consultation are clearly spelt out in its HSEC Policy Document. Site stakeholder engagement plans contain clearly defined processes for the identification of key stakeholders, the regular and effective communication with such stakeholders, as well as the mechanisms for stakeholders to raise complaints or grievances with the Company. We are committed to ongoing engagement and meet with a wide range of stakeholders on a regular basis.Stakeholders we engage with include:$ employees and trade unions;$ contractors;$ local communities and their representatives;$ local, regional and national Governments;$ regulators;$ suppliers;$ customers;$ joint-venture partners;$ non-Governmental organisations;$ shareholders;$ analysts; and$ the media.Issues raised during the stakeholder engagement process in FY 2012 included:$ unemployment in the region and local recruitment issues;$ poverty alleviation in the communities around the mines;$ mine closure and legacy issues;$ skills development programmes for employees; and$ lack of community health services in the area local to Finsch mine.We have taken steps to include these issues in the Company's programmes and community projects wherever possible and elevated matters to relevant Government departments and organisations where appropriate. All operations focus on engaging with local community representatives to report on the progress of projects, which can then be communicated back to the community.Policies and standardsPetra's policies on issues relating to sustainability operate at three distinct levels: strategic; group; and operational. Care is taken to ensure that these policies and related procedures are vertically as well as horizontally integrated. Although Petra has to date recorded a creditable sustainability performance, as evidenced by the information disclosed in the Sustainability Reports from our last three financial years, we are now undertaking a process to standardise the approach to key issues across our operations. We believe this process has the potential to improve performance by raising standards towards best practice and enabling the sharing of operational efficiencies.We are currently revising our Group Code of Ethical Conduct, which will set out Petra's expectations of employees in regards to areas such as appropriate conduct in the workplace and fraud prevention, as well as including new and revised recommendations on key areas such as human rights, whistle-blowing and anti-bribery policies. Once the new Code of Ethical Conduct is available, it will be made public on the Group's website.The revised Code of Ethical Conduct will become an intrinsic part of our employee/contractor induction and training on key ethical matters, and will complement the comprehensive anti-bribery policies and procedures that the Company is in the process of updating in FY 2013.During FY 2012 we developed and implemented a Group Environmental Policy and Strategy which covers all of our operations as well as a Health and Safety Strategy which covers our South African operations. In addition, we began the development of a Group Stakeholder Engagement Policy which we expect to roll out across our operations in due course.Petra complies with all relevant laws and regulations in the countries in which it operates and was not subject to any legal actions or fines during FY 2012.STRATEGICCode of Ethical Conduct - revised code under developmentStakeholder Engagement Policy - under developmentGROUPGroup Environment Strategy and Policy - in place Group Health and Safety strategy - in place Group Training and Development Policy - in placeOPERATIONALSite level Environment Management Plans - in placeSite-level Health and Safety plans - in placeSite level Stakeholder Engagement Plans - in placePOLICY HIERARCHY (INDICATIVE)