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One Group One Goal

Annual Report 2008

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Allied Electronics Corporation Limited(Incorporated in the Republic of South Africa) (Registration number 1947/024583/06)

Financial highlights 1

Corporate structure 2

Key operational performance 4

Key growth drivers for the Altron group 4

Key performance ratios 5

Performance on strategic philosophies 6

Segmental review 8

Office of the Chairman and executive committee

10

Six-year financial review 12

Chairman’s statement 14

Chief executive’s review 18

Operational review 26

Altech 26

Bytes Technology Group 30

Powertech 34

Terminology and abbreviations 38

Sustainability report 2007/8 39

Update on 2007 sustainability targets 42

Management of sustainability 44

Shareholders 48

Customers 52

Partners 55

Employees 59

Transformation 64

Environment 70

Health and safety 80

Apppendix A 84

– Index to issues identified by the JSE SRI

Appendix B 85

– 2007 Environmental Survey (for JSE SRI Index)

Appendix C 89

– GRI content index

Shareholder analysis 90

Altron corporate governance report 95

Remuneration report 108

Financial statements 114

Administration 189

Directorate profile 189

Letter from the chairman 194

Altron notice of annual general meeting 195

Annual general meeting – explanatory notes 199

Form of proxy 201

Corporate date 203

Mission and core values

Altron’s mission is:

to be the leading ICT group offering information technology, telecoms and power electronics products and services to the southern African region and selected international markets;

to maintain our family ownership and preserve the “familiness” culture;

to generate superior financial returns, thereby driving an increase in total shareholder returns above that of our peers and the overall market;

to remain dedicated to technological innovation through internal investment and international partnerships;

to continue being committed to the transformation process of South Africa through broad-based black economic empowerment initiatives;

to provide a work environment that attracts, motivates and retains superior people skills; and

to integrate sustainable development into our business at every level as we realise that our future depends on it.

We will achieve this through a motivated and loyal team that always:

places customer service first;

has mutual trust and respect;

is totally committed to quality, best practice and the improvement of productivity;

adheres to the highest standards of integrity;

aims to achieve excellence in both financial and technological performance; and

takes pride in what we do and in being part of the Altron group.

Through these values we promote:

Environmentalconservation

CorporategovernanceSustainable

development

Transparency

Considering the needs of all

stakeholders

Best businesspractices

Teamwork

AccountabilityInnovation

Customers

COREVALUES

Broad-based black economic empowerment and transformation

Altron website address: www.altron.co.za

AltronAnnual Report 2008

Financial highlights for the year ended 29 February 2008

1

Financial summary

R millions 2008 2007 %

change

Revenue 21 431 17 126 25

EBITDA 2 209 1 763 25

Operating profit 1 937 1 528 27

Operating margin (%) 9.0 8.9

HEPS (cents) 375 283 33

Diluted HEPS (cents) 327 247 33

Adjusted HEPS (cents) 387 286 36

Cash on hand 2 083 1 589

Dividend per share (cents) 156 118 32

Return on equity (%) 24.7 23.0

200820072006200520042003

Market price per share andnet asset value per share (cents)

Market price (ordinary shares)

820 1

105 1

555

2 55

0

4 47

8

3 70

0

Net asset value per share (cents)

3

893

4#453

4#9; 3

5#573

5#; 33

6#693

6#<53

7#7; 3

8#373

8#933

200820072006200520042003

Headline earnings per share (cents)

155.

3

138.

1

161.

7 189.

2

282.

8

375.

3

200820072006200520042003

Revenue (R millions) and operating margin (%)

Revenue

11 3

97

10 0

45 12 2

06 13 9

13

17 1

26

21 4

31

Operating margin

0

5

10

15

20

25

25%Revenue

27%Operating profit

33%Headline earnings per share

33%Diluted headline earnings per share

32%Dividend

R2.1 billionCash on hand


Key operational performance

200820072006200520042003

Revenue by operation (Rm)

4 05

6

4 14

3

5 55

2

6 04

1 6 78

0

8 24

2

3 03

5

2 60

7

2 90

6 3 47

0 4 08

8

5 18

6

4 11

7

3 33

2

3 74

0 4 41

1

6 28

9

8 01

6

Altech Bytes Powertech

200820072006200520042003

Operating profit by operation (Rm)


407

333

491

485

573

664

183

185 22

1 282 32

5 365

267

207 24

7 280

638

914

200820072006200520042003

Headline earnings by operation (Altron’s share) (Rm)


192

170 19

2 214 23

6

288

60 56

73

111

116

170

127

146

142 17

0

415

577

Infrastructurespend

Technologyconvergence

Integration of acquisitions

and launching of new ventures

Globalfootprint

Powertech AltechBytes

AltechBytes

Powertech

AltechBytes

Powertech

A positive medium- to long-term outlook for Altron

Key growth drivers for the Altron group

AltronAnnual Report 2008 5

Key performance ratios

20082007200620052004

Return on capital employed (%)

17.5

21.8

22.8

29.8

29.7

20082007200620052004

Return on operating assets (%)

19.1 19

.8 20.6

23.9

23.2

Return on equity

20082007200620052004

Return on net assets (%)

18.1

22.5 23

.8

30.5

30.3

Financial summary

R millions 2008 2007

Return on capital employed (operating income: debt and equity) 29.7 29.8

Return on equity (attributable income: equity) 24.7 23.0

Return on operating assets 23.2 23.9

Return on net assets 30.3 30.5


Corporate structure

*

62%*

100%

100%

MULTI-MEDIA AND ELECTRONICS

Altech UEC Multi-media Technologies, Media Verge Solutions, 3CTV, Altech Global Decoder Logistics – the design and manufacture of satellite and terrestrial digital set-top decoders.

Altech Arrow Altech Distribution – the distribution of a range of professional electronic components and products.

TELECOMMUNICATIONS AND WIRELESS COMMUNICATIONS

Altech Autopage Cellular, Altech Supercall Cellular, Altech Mobile Direct, Altech Mobile Express – sales, distribution and service provision for cellular network operators. Altech Netstar, Altech Fleet Management Services and ComTech – Stolen Vehicle Recovery and Fleet Management business.

Altech Alcom Matomo and Altech Alcom Radio Distributors – design, installation and project management of Motorola radio systems.

BYTES TECHNOLOGY GROUP SOUTH AFRICA (BYTES SA)

Bytes Document Solutions (BDS), Bytes Specialised Solutions (BSS), Bytes Managed Services (BMS), Bytes Communication Systems (BCS), Bytes Systems Integration (BSI), Bytes Outsource Services (Outsource Services), Bytes People Solutions (People Solutions), Bytes Healthcare Solutions (BHS) – Xerox offi ce products, document management services, NCR ATM products, Teradata database solutions, PABX solutions including LAN-based telephony, mobile communications, call centres, unifi ed messaging solutions and data communications optimisation strategies, desktop services and support, remote monitoring of computer facilities, network and solutions management, software sales,

BYTES TECHNOLOGY GROUP – INTERNATIONAL OPERATIONS

Bytes Technology Group UK – Software Services, Xclusive Solutions, Vantage Business Systems, BTG Botswana, BTG Namibia, BTG Mozambique, BTG Mauritius – Microsoft licensing, Microsoft certifi ed solutions provider, consulting on corporate data strategies and delivery of data storage networks, design and implementation of complex network messaging systems, provision of software asset management solutions, Xerox offi ce products, document and print solutions.

Power solutions for mining, transport, utilities and material handling

Electrical accessories

Lighting control gear

Integrated protection and control equipment for electrical networks

Turnkey substations

Turbine control systems

Energy management systems

Operational support software

POWER ELECTRONICS

Aberdare Cables, Alcobre (Portugal), Swanib Cables (Namibia), Technology Integrated Solutions (TIS), Powertech Transformers, Desta Power Matla, Powertech Batteries, Dynamic (UK), Crabtree Electrical Accessories SA, Strike Technologies, Powertech Calidus, Tridonic.Atco SA, Powertech IST.

Low, medium and high voltage power cables

Cable network solutions and services

Power and distribution transformers

Automotive batteries (Willard and Sabat) and DC power systems

NATURE OF BUSINESS

Altron, through its principal subsidiaries, Allied Technologies Limited, Bytes Technology Group Limited and Power Technologies (Pty) Limited, operates in the telecommunications, power electronics and multi-media and information technology industries.

*JSE listed


INFORMATION TECHNOLOGY

Altech Card Solutions, Altech Cardtronic, Altech NamITech, Integrated Technology Solutions, Altech ISIS and Altech ISIS France – telecommunications middleware, payment systems and solutions, secure solutions and smartcard technologies.

Kenya Data Networks Limited, Swift Global (Kenya) Limited, Infocom Limited and Altech Stream Rwanda Limited – data communications operator, internet service provider and IT service provider.

development, implementation and application maintenance, SAP and Axaptaimplementation, IT infrastructure as well as business application, high-quality training and education solutions, transaction switching services, practice management and informatics solutions to the healthcare industry.

TELECOMMUNICATIONS

CBi-electric Aberdare ATC Telecom Cables (including Lambda Cables), Cables de Comunicaciones (Spain), Battery Technologies, Rentech, Powertech IST, TIS

Copper and optical fi bre telecommunications cables and accessories

Data cable systems, standby power and rectifi er systems, solar systems

Access network systems

Radio solutions

Operational support software

Craig VenterChief Executive Offi cer: Altech

David RedshawChief Executive Offi cer: Bytes Technology Group

Norbert ClaussenChief Executive Offi cer: Powertech

Robert VenterChief Executive: Altron


Strategic philosophy

2007 performance

Future plans

International expansion in niche markets

In 2007 foreign operations and exports grew to 23% of total revenue

Powertech acquired Swanib Cables in Namibia and the 25% it did not own in CdC Zaragoza, Spain

Powertech Transformers established a presence in Kenya

Battery Technologies established a presence in Nigeria and Tanzania

Altech acquired controlling interests in three subsidiaries of the Sameer ICT Group in Kenya and Uganda; rolls out broadband network in Rwanda and invests further in Altech NamITech West Africa

Altech UEC develops subcontract manufacturing capability in Thailand and China

Bytes UK grows revenue by 89% through organic growth and the acquisition of strategic Xerox businesses

Aberdare Hong Kong established

The group’s strategy remains to grow contributions from foreign operations and exports to 25% of revenue

Altech UEC establishing significant presence in Indian market

Altech investigating further opportunities in East Africa

CdC Zaragoza expanding product range and geographic reach

Strategic alliances New partners such as General Electric, Amdocs, Tellabs and Plugpower added through the IST acquisition

Strengthened global relationship with Xerox through UK growth

Extended Vodacom service provider agreement for further five years

Extended Alcatel agreement at Bytes Communication Systems

Key focus on existing alliances such as Xerox, ABB, Tridonic.atco, NCR, Motorola, Arrow Electronics, Weidmann, Kronos, Cisco, Microsoft, Gemalto and build on new alliances gained in 2007

Ownership of intellectual property

rights

Altech invested R120 million in R&D during 2007

IST acquisition brought over 115 engineers and 80 technical people into Powertech

Ongoing intellectual property investment in other group companies

A focus on skills retention through various mechanisms

Annuity revenue Altech has increased its contribution from annuity revenue to approximately 75%

Bytes continued to focus on growing their annuity revenue streams

Altron annuity revenue exceeds 40% of group revenue

The target for the group remains at 50% of its revenue being annuity in nature

Various initiatives to increase annuity revenue at Powertech

Value-added services

Powertech’s strategy of complementing its existing product range with value-added services commenced with the acquisition of IST

Establishment of standby power solutions within Powertech

Powertech’s new ventures in the alternative power supply field are expected to increase revenue

Ongoing pursuit of investment opportunities in this area throughout the Altron group

Broad-based black economic empowerment

JJ Tabane appointed as Group Executive: Corporate Affairs

Altron Transformation Vision 2012 compiled and aligned with dti Codes of Good Practice

Altech IT restructured with Pamodzi

Powertech IST empowered through Izingwe

Powertech Transformers in final stages of concluding BBBEE transaction

Altron improves to number 49 in Financial Mail/Empowerdex survey of leading empowered companies in SA

Altron Transformation Vision 2012 launched, Altron transformation committee (Transcom) will be overseeing the implementation of the Vision 2012 conference resolutions and the implementation of the guidelines in all the areas of the dti Codes of Good Practice

Target for all Altron companies is to be Level 1, 2 or 3 by 2012

All Altron executive managers will have KPAs linked to transformation goals on an annual basis

Transcom will steer various interventions on ownership and management control, employment equity and succession planning

Performance on strategic philosophies


Strategic philosophy 2007 performance Future plans

Superior human capital

Establishment of Altech Academy with over 100 participants

Group bursary scheme gains momentum

Active promotion of Powertech Leadership Process and Altron Young Presidents’ Club

Powertech Transformers winding training centre established

Ongoing commitment to skills development and retention

Qualityof income

Current year revenue growth of 25% contributes to 10-year compound annual growth rate of 15% per annum

Current year headline earnings per share growth of 33% contributes to 10-year compound annual growth rate of 17% per annum

Continued pursuit of strategies for growth

Target is to outperform market and peer group

Market leadership/critical mass

Continued group-wide focus on market leadership includes:

– Powertech disposed of Yelland Control due to weakening market position

– The vertical integration within Bytes Document Solutions to maintain leading market position

– Altron group companies occupy number 1 or number 2 market position in most markets served

Bytes UK is leading Microsoft value-added reseller (VAR) and is now largest Xerox concessionaire in the UK

Altech’s East African broadband acquisitions achieve leading market share in region

Continued focus on investment to maintain leading positions

Strategicalliances

Broad-basedblack economicempowerment

Internationalexpansion in niche markets

Quality ofincome

Superior human capital

Marketleadership/

critical mass

Annuityrevenue

Ownership ofintellectualproperty

rights

Value-addedservices

Investor proposition

Increase shareholder value


Segmental review

Operational presence

Export destinations

EUROPE

Portugal,

France,

Spain

UK

SOUTHERN AFRICA

South Africa, Botswana, Nigeria,

Mauritius, Mozambique, Namibia,

Swaziland, Tanzania, Zambia, Kenya

INDIA

ASIA

Malaysia

AUSTRALIA

Sydney

Revenue (Rm)

2008

Bytes UK

Exports

Rest of Africa

Altech NamITechWest Africa

Aberdare International

Dynamic Batteries

Other158

76987

91

969

702007

927

229

82

1 867

81

1 490

1 194

81

Total:5 024

Total:3 278

Geographic segmentation

Foreign operations and exports grow to 23% of revenue

Bytes expands UK businesses to become leading Xerox concessionaire in the United Kingdom

Powertech increases stake in CdC Zaragoza, Spain to 100%

Altech makes further investment in Altech NamITech West Africa

Powertech purchases Swanib Cables, Namibia

Battery Technologies establishes offi ces in Nigeria and Tanzania

Altech acquires 51% controlling interest in three subsidiaries of the Sameer ICT Group in Kenya

Powertech Transformers establishes offi ce in Kenya and Uganda

Powertech establishes Aberdare Hong Kong offi ce

Altech UEC India established and subcontract manufacturing facilities approved in Thailand and China

Altech rolls out broadband network in Kigali, Rwanda.

– Altech

– Bytes Technology Group

– Powertech

Key:

CHINA

Hong Kong


Revenue2008

Telecommunications

Power electronics and multimedia

Information technology

Eliminations (1%) in 2007

38%

35%

27%

2007

38%

35%

28%

Operating profit*2008

Telecommunications

Power electronics and multimedia

Information technology

Corporate, financial services and eliminations of (1%) in each year

46%

33%

22%

2007

43%

35%

23%

Businesssegmentation

*Operating profi t is stated before capital items.

Altron’s Telecommunications sector currently contributes 35% to Altron’s revenue and 33% towards operating profi t compared to 35% and 35% respectively the previous year, with the majority of the contribution currently being generated in the South African market. While we will continue to strive to grow both the revenue and profi tability of the South African businesses, there are clearly excellent opportunities in Africa, both in terms of our existing businesses and complementary operations that are placed higher up the value chain.

Currently our operations in this sector are dominated by Altech Autopage Cellular and Altech Netstar. These are relatively mature businesses that nevertheless continue to grow strongly, but the real growth opportunities lie in the provision of broadband services. In South Africa we are currently testing Wimax technologies in partnership with Samsung and have recently had our test licence period extended. In the African market we are in the process of setting up a broadband network in Rwanda through Altech Stream and have recently completed the acquisition of a controlling interest in three subsidiaries of the ICT Sameer Group in East Africa, giving us immediate critical mass in that market. These new ventures are expected to contribute strongly in the years to come and further opportunities are being identifi ed and pursued.

The group’s telecoms cable joint venture with Reunert is benefi ting from the liberalisation of the local telecommunications market as a number of operators look to build their own fi xed line networks. Telkom continues to be the largest player in the market but signifi cant orders are starting to fl ow from Neotel, InfraCo, Vodacom and MTN.

The Power Electronics sector maintained its position as the largest contributor to the group’s revenue, accounting for 38%, consistent with the prior year. This sector contributes 46% towards total operating profi t, up from 43% the previous year. In light of increased capital expenditure on infrastructure projects and the escalation in Eskom and municipalities’ demand for products, it is expected that this sector’s contribution could further increase.

The upward revision of Eskom’s fi ve-year rolling forecast for capital expansion is expected to benefi t the group’s power cable and transformer businesses. The power supply issues facing our country have resulted in a substantial increase in demand for alternative power supply solution products, including standby batteries and solar solutions, as well as energy-saving lighting options. The recently acquired IST business has, through its design solutions service, seen an increase in demand for alternative power supply in a number of forms, the most material of which are some gas turbine projects. The group’s cable businesses in the Iberian Peninsula performed above expectations and is expanding its current product range and geographic reach. The focus on infrastructure development, both locally and internationally, is expected to continue in the medium term.

Increased demand from both local and international satellite television operators for set top boxes has resulted in the group outsourcing some production to the Far East. The digitisation of the South African terrestrial television signal presents a signifi cant opportunity and we currently await government’s pronouncements on the technical specifi cations and funding

arrangements of this programme. As the only South African manufacturer of this equipment we are well placed to benefi t from this opportunity.

The Information Technology sector has contributed 27% towards the group’s total revenue compared to 28% in the previous year and its contribution to operating profi t at 22% has decreased compared to 23% last year. The geographical contribution shift is attributed to a signifi cant improvement from the Bytes UK business operations and the fact that local operations are experiencing margin pressure due to competitive market conditions. The strengthening US dollar and euro has impacted on imported products in many of the companies in the group that distribute international products.

We believe this sector is ripe for consolidation and we are currently evaluating two acquisition opportunities.

Our information technology businesses are working closely with our telecommunications businesses that are pursuing broadband opportunities, with a view to creating a very powerful market offering in terms of a full service solution.

Our UK operations in this sector have had a good year and are becoming the leading key players in a relatively fragmented market. Further consolidation opportunities are being pursued in this market.


Office of the Chairman

DR WP (BILL) VENTER

Chairman of Altron

Date of birth: 29 July 1934 (73 years)

“Achieving goals through excellent contribution and commitment.”

RE (ROBERT) VENTER

Chief Executive of Altron

Chairman of Executive Committee

Date of birth: 7 May 1960 (48 years)DR HA (HAROLD) SEREBRO

Senior Altron Executive Director

Date of birth: 12 October 1938 (69 years)


Executive committee

N (NORBERT) CLAUSSEN

Chief Executive Officer of Powertech

Date of birth: 10 December 1960 (47 years)

PMO (PETER) CURLE

Executive Director: Corporate Finance

Date of birth: 19 May 1946 (62 years)

PD (DAVID) REDSHAW

Chief Executive Officer of Bytes

Date of birth: 29 January 1942 (66 years)

CG (CRAIG) VENTER

Chief Executive Officer of Altech

Date of birth: 4 July 1962 (45 years)

ONKGOPOTSE (JJ) TABANE

Group Executive: Corporate Affairs

Date of birth: 30 June 1972 (35 years)

Chief Financial Officer to be appointed.


2008R millions

2007R millions

2006R millions

2005R millions

2004*R millions

2003*R millions

INCOME STATEMENT

Revenue 21 431 17 126 13 913 12 206 10 045 11 397

Operating profit 1 937 1 528 1 040 963 718 909

Financial income 182 132 112 100 145 131

Financial expense (89) (56) (53) (62) (26) (35)

Profit from associates 4 4 32 24 9 19

Capital items (90) (38) (54) (90) (139) 98

Profit before taxation 1 944 1 570 1 077 935 707 1 122

Taxation (625) (481) (326) (339) (255) (269)

Profit after taxation 1 319 1 089 751 596 452 853

Attributable to minority interest 300 284 257 148 148 396

Attributable to Altron equity holders 1 019 805 494 448 304 457

Headline earnings 1 072 793 529 445 379 402

Dividends paid 331 216 176 143 117 100

BALANCE SHEET

Assets

Property, plant and equipment 1 264 954 905 848 671 666

Intangible assets 1 502 844 773 925 462 471

Associates and other investments 314 254 228 453 183 181

Rental finance advances 86 77 90 75 189 286

Deferred taxation 196 182 118 112 113 132

Cash and cash equivalents 2 116 1 613 2 152 1 520 2 004 1 510

Other current assets 5 501 4 526 3 271 3 022 2 447 2 947

Total assets 10 979 8 450 7 537 6 955 6 069 6 193

Equity and liabilities

Shareholders' equity 4 469 3 528 2 931 2 679 2 489 2 283

Minority interest 877 1 218 1 103 964 1 082 1 292

Total equity 5 346 4 746 4 034 3 643 3 571 3 575

Non-current loans 940 321 297 716 277 281

Current loans 229 65 238 59 247 193

Loans 1 169 386 535 775 524 474

Non-current liabilities 107 68 46 83 41 120

Bank overdraft 33 24 — — — —

Current liabilities 4 324 3 226 2 922 2 454 1 933 2 024

Total equity and liabilities 10 979 8 450 7 537 6 955 6 069 6 193

*Not restated for effect of IFRS due to practical constraints.

Six-year financial review


2008 2007 2006 2005 2004* 2003*

RATIOS AND STATISTICS

Earnings

Basic earnings per share (cents) 356.7 287.0 176.4 162.0 111.5 169.9

Headline earnings per share (cents) 375.3 282.8 189.2† 161.7† 138.1† 155.3†

Dividend proposed per share (cents) 156.0 118.0 78.0 63.0 52.0 43.0

Headline dividend cover (times) 2.4 2.4 2.4 2.6 2.7 3.6

Ordinary shares in issue (millions)

– at year end 102 94 94 94 94 94

– weighted average 95 94 94 94 94 94

Participating preference shares in issue (millions)

– at year end 210 186 188 184 180 177

– weighted average 191 186 186 182 179 175

Profitability

Operating profit to revenue (%) 9.0 8.9 7.5 7.9 7.1 8.0

EBITDA (R millions) 2 209 1 763 1 253 1 154 847 1 071

Return on shareholders’ equity (%) 24.7 23.0 18.2 16.8 16.0 14.3

Return on capital employed (%) 29.7 29.8 22.8 21.8 17.5 22.4

Return on operating assets (%) 23.2 23.9 20.6 19.8 19.1 20.8

Return on net assets (%) 30.3 30.5 23.8 22.5 18.1 23.0

Financial

Borrowings ratio (%) 21.9 8.1 13.3 21.3 14.7 13.3

Current ratio 1.7:1 1.9:1 1.9:1 1.9:1 2.0:1 2.0:1

Acid test ratio 1.2:1 1.2:1 1.4:1 1.4:1 1.5:1 1.5:1

Net asset value per share (cents) 1 431.2 1 260.5 1 039.6 962.6 907.0 842.9

Shares

Number of shareholders

– ordinary shares 3 316 1 600 1 738 1 616 1 202 1 058

– participating preference shares 8 019 3 848 3 396 2 916 2 722 2 685

Price:earnings ratio (times)

– ordinary shares 13.1 15.8 13.5 9.6 8.0 5.3

– participating preference shares 12.7 14.9 11.9 9.5 8.1 4.8

Market value per share at year end (cents)

– ordinary shares 3 700 4 478 2 550 1 555 1 105 820

– participating preference shares 3 600 4 200 2 250 1 538 1 125 750

Other

Consumer price index (percentage increase) 9.8 5.7 3.9 2.6 0.7 10.3

Production price index (percentage (decrease)/increase) 11.3 11.3 4.7 2.6 0.5 5.9

Number of permanent employees 12 909 11 871 11 874 11 800 10 712 10 449

†Not restated under Circular 8/2007 – Headline Earnings.

D E F I N I T I O N S

Earnings – Attributable earnings as disclosed

in the income statement.

Borrowings – All interest-bearing liabilities.

Capital employed –The total of fi xed capital

and borrowings.

Operating profi t – is stated before capital

items.

Total assets – Property, plant and equipment,

investments and loans together with current

assets.

Operating assets – Total assets less

investments, loans, deferred tax and cash.

Acid test – The ratio of current assets

excluding inventories to current liabilities.

Current ratio – The ratio of current assets to

current liabilities.

Borrowings ratio – The percentage of

borrowings to total equity.

Headline dividend cover – Headline earnings

per share divided by dividends per share.

D E F I N I T I O N S (continued)

Market value per share – The sellers’ price

quoted by the JSE Limited.

Price: earnings ratio – The market value

per share divided by the headline earnings per

share.

Net asset value per share – Shareholders’

equity divided by the number of shares in issue

at the year end.

EBITDA – Operating profi t before depreciation

and amortisation.

Return on capital employed – The percentage

of operating profi t to capital employed.

Return on operating assets – The percentage

of operating profi t to operating assets.

Return on shareholders’ equity – The

percentage of attributable earnings to

shareholders’ equity, adjusted for net capital

items and translation gains/losses.

Return on net assets – The percentage of

profi t before tax, excluding fi nance costs and

capital items to net assets.


Chairman’s statement

Our technology strategies, in turn, remain

focused on delivering superior performance in

our core businesses and establishing prominent

positions in emerging and transformational

technologies.

Macroeconomic overview

As I write this year’s statement to our

stakeholders, I am mindful of how volatile the

world economy has become.

From highly successful businesses to ordinary

citizens, the fall-out from the current period of

uncertainty will undoubtedly be the cause of

some economic hardship in the months ahead.

It is difficult to believe that only last year I was

able to report confidently about a robust

economy growing at near record levels.

Any short-term comment made now, in such

an uneasy market, is far less certain.

This uncertainty is founded on a number of

factors affecting the markets that we operate

in at this time.

The drop in US interest rates coupled with the

falling US dollar, has meant that all economies

strongly tied to the USA, are finding both trade

volumes and margins negatively affected.

Unfortunately for South Africa, the cost of oil has

been rising faster than the price of the precious

metals we export, resulting in continuous hikes

in fuel and other costs. The net result is an

ever-worsening balance of trade deficit. Our

reliance on oil products – 14% for the average

SA consumer – has prompted interest rate

increases of 400 basis points since June 2006

and this, in turn, has lead to a marked decrease

in consumer discretionary spending.

The most disruptive impact on the South African

economy has been the crisis in terms of

electricity supply. It would be easy to add my

voice to the growing cadre of critics, but there

cannot be any question that the inadequate and

unpredictable supply of electricity is hampering

the exploitation and beneficiation of the very

commodities and precious metals that should be

Introduction

The year under review proved to be one of

significant achievement and excellence for our

group, marked by both continuity and change.

In fact, our results have surpassed anything we

have ever achieved in our 43-year history and our

continued progress is certainly something to be

proud of.

I am pleased to report that the ICT and power

electronics industries remained buoyant and we

once again delivered on our commitment of

strategic growth and operating profit momentum,

as well as further rapid expansion of our

transformation and CSI programmes.

Our improved results have come about largely as

a result of the continuing demand for infrastructural

development by both the public and the private

sectors and, more particularly, from the building

and construction industries. In addition, several

strategic decisions were made regarding the key

markets we are competing in by investing further

in core technologies going forward, while

maintaining prudent financial controls.

During the period under review, we made

significant investments in acquisitions to grow our

product and customer base, while capital

expenditure in plant and equipment reached an

all-time high. As a result, our combined breadth of

products, capabilities, customers, expertise and

applications certainly make Altron a rather unique

group and expanding upon these business

elements has further enhanced our standing as

a technology leader on the African continent. In

addition, we executed our strategy of planned

acquisitions and managed our many businesses

profitably, while advancing several new projects

for future long-term growth and returns.

Despite the numerous challenges which we are

facing in the country at present, such as power

outages, political changes and global financial

market turmoil, our financial performance was

both solid and successful with our revenue and

operating profits continuing to be among the best

in our industry.

Dr Bill Venter

Chairman


CHAIRMAN’SSTATEMENT

CHIEF EXECUTIVE’SREVIEW

OPERATIONALREVIEW

SUSTAINABILITY REPORT

FINANCIAL STATEMENTS

providing a hedge for South Africa against the

rising cost of imports.

I am confident that given the correct incentives,

the innovation for which our country is well known

will find opportunities for growth and profit, while

offering solutions to manage power more

effectively, and generate additional power

through alternative technologies.

In the meantime, to help offset the impact of the

power outages, we have initiated an intensive

energy conservation programme at all of our

operations and are focusing on compiling a

basket of product offerings to support our

companies in what has become a new product

area for Altron.

While we are certainly heading for more

challenging times, particularly in the short term,

I am generally optimistic when looking at the

prospects of our various enterprises. Our

competitive position in all of our businesses

remains strong and we have excellent executives

throughout our group who are managing them

professionally and competently.

We are achieving success not only in South

Africa, but in East and Central Africa (through

Altech’s acquisition of a controlling interest in

three subsidiaries of the Sameer ICT Group), as

well as on the subcontinent, where Altech UEC is

serving the fast-growing pay TV market.

One of the great opportunities for our nation to

work its way through the global economic

slowdown is through investment in sorely needed

infrastructure at home. It is pleasing to note that

despite constraints hampering delivery, the

government and key utilities are showing strong

commitment to such investment, providing a solid

foundation for Powertech’s medium-term growth.

Transformation

An enduring challenge for the South African

economy is the closing of the gap between the

economically privileged sectors of the population

“Our record revenue and operating profits exceeded our expectations, as did our earnings growth and orders on hand. With our healthy cash balance, we are well poised to make meaningful acquisitions, so giving us the opportunity for above-average returns in the years ahead.”


Chairman’s statement continued

development of our own employees through

tertiary study at various universities in SA.

As I contemplate the macroeconomic outlook,

somewhat less buoyant than we have

experienced over the past decade, it would be

easy to be satisfi ed with our strong cash position

of R2 billion, so enabling the group to cope with

adverse economic hardships. I have been with

Altron for the past 43 years and have

experienced any number of economic cycles,

both down and up.

Over this time I have learnt to keep an eye on

the long term, and in this regard it is our function

to position each company within the Altron family

such that it serves the needs of the economy

and of its end consumers while focusing on the

importance of sustainability.

The Altron family places tremendous emphasis

on continual product innovation based on

changing consumer needs. We have a business

that spans a variety of sectors, from power

generation systems to communication networks.

In each area we are constantly exploring ways to

take advantage of changing economic

opportunities and everyone is sharing in this and

making a contribution.

As we soldier on into our new fi nancial year, I am

personally excited by the opportunities that we

are now beginning to exploit even as the

economic sectors we serve, here and abroad,

undergo profound change.

Ideally, we would like to retain our core

competence and focus on the southern African

region whilst seeking to build niche markets

globally where we can add value with the aim of

having around 25% of our revenue coming from

international operations and exports in the

foreseeable future.

Acknowledgements

On behalf of the Altron board, I thank you, our

stakeholders, for your continued support of our

strategic plan to build long-term value and for

enabling the Altron group to become a true

and the relatively poor communities – particularly

those who cannot take advantage

of economic growth opportunities.

Back in 2005 we created our Transformation

Vision 2010, recognising that black economic

transformation, as defi ned by the ICT Charter on

BBBEE, is not only a moral imperative, but

critical to the stability and future prosperity of

the South African economy.

Despite the giant strides we have made

previously, we realise they are but small steps at

the beginning of a long journey towards true

economic integration in our country.

Building on the success of Vision 2010, Altron

is tackling Vision 2012 with similar vigour and

commitment. Internal “stretch” goals have

been set for all the companies in the group,

focusing on the seven main pillars of the

codes, namely ownership, board and

management control, employment equity,

skills development, preferential procurement,

enterprise development and socio-economic

development.

At Altron, we view transformation not only as a

business imperative, but also as an integral part

of our strategic philosophy to unlock value in our

relationships with all stakeholders, from

suppliers and employees to customers and

shareholders.

Towards a sustainable future

One of the most severe impacts on Altron, as on

the economy at large, is the acute shortage of

skilled artisans and technically qualifi ed

personnel. Our country needs to get to work in

developing and protecting its skills base and we

at Altron recognise how key this is for the

sustainable growth of our businesses going

forward.

We are responding to this urgent need in a

number of ways, and I was delighted to be

present at the opening of the Altech Academy

last November, to witness the sizeable

investment we are making in the ongoing




OPERATIONALREVIEW



“The growth opportunities for Altron remain virtually endless and we are both excited and enthusiastic about what the future holds for our group.”

global player. I also thank our customers for the

privilege of helping them reach their goals with

our innovative products and services.

It behoves me to express my sincere appreciation

to our team of highly talented employees

throughout the group for the passion, loyalty and

dedication that they demonstrate every day in

serving our customers and achieving our

business objectives.

I also thank members of the board and the Altron

executive committee for their ongoing advice,

loyalty and support. In this regard, I especially

wish to thank Robbie Venter for his continued

outstanding leadership at the helm of the group

and for continuing to create a strong platform

from which our organisation continues to prosper

and benefi t.

In closing, may I take this opportunity of warmly

welcoming Barbara Masekela to our board as a

non-executive director and congratulating her on

recently being conferred with the Order of Luthuli

in Silver by President Thabo Mbeki.

Prospects

The growth opportunities ahead for Altron remain

virtually endless and we are both excited and

enthusiastic about what the future holds for our

group. While we are fully aware that the

uncertainties in the socio-political and economic

environment at present make it diffi cult to predict

how our businesses will be impacted in the year

ahead, we are certainly looking forward to

another year of achievement and growth.

Dr Bill Venter

Chairman

May 2008


Chief executive’s review

Robert Venter

Chief Executive

We, nevertheless, enter the 2008/2009 fi nancial

year with strong order books, particularly at

Altech and Powertech, and are poised to further

capitalise on the performance of our offshore

operations in the emerging markets of Africa,

Asia and India.

KEY MARKET CONDITIONS

During the period under review, market

sentiment has been negatively impacted by the

power outages resulting from the current energy

crisis, changes in the leadership of the ruling

ANC party and an increase in interest rates and

infl ation. These local market conditions have

been compounded by global market turmoil and

the possibility of a US recession.

The Polokwane ANC conference has sent out

a ripple of uncertainty regarding the country’s

political stability and future and, as with any

change in leadership, there is concern over how

these factors will impact the policies that have

a material impact on South African business.

However, initial observations positively indicate

a continuance of the economic policies that

have allowed our country to grow over the past

years as well as, encouragingly, an open and

transparent channel of communication between

government and the business community. The

increase in the prime rate over the last two years

of 400 basis points from 11% to 15% has been

felt most by the fi nancial, retail and residential

property sectors. And while infl ation linked to a

weaker rand and rising fuel costs continues to

be cause for concern, the commodities market

has been buoyant over the past year, and this

has served to soften the impact to a large

degree.

In spite of these challenges, Altron looks forward

to continued growth from the high base that has

been established. As a fi rmly established player

in the power space through our subsidiary

Powertech, the company is set to benefi t in the

medium term from increased demand for its

products following the disruption of power

supply, and in the longer term from the fact that

The 2007/2008 fi nancial year has been

characterised by fundamental changes to the

underlying market conditions affecting our

economy and the international environment.

Nonetheless, I am pleased to report that

steadfast commitment to our mission and

strategy has again delivered outstanding results

for the Altron group and its stakeholders.

Last year, I highlighted sustainable growth as

the hallmark of Altron’s strategic vision and the

tangible indicator of the success of our

long-term strategy. It is in these uncertain times

that this focus on identifi ed fundamentals bears

fruit – offering us the foundation that will see us

continuing to prosper during the challenging

period we have entered in 2008.

I am proud to report that 2007/2008 revenue

and after-tax profi t exceeded, for the fi rst time,

R20 billion and R1 billion, respectively. More

specifi cally, revenue increased by 25% to

R21.4 billion with headline earnings per share

increasing by 33% to 375 cents per share.

This is an excellent set of results, especially

considering the high base set by our 51%

headline earnings per share growth last year

and confi rms the strategic initiatives put in place

over the last few years and the sustainability of

our business model. During the course of the

year we have continued to invest signifi cantly

both internally and through acquisitions and this

combined with strong operational disciplines has

laid the foundation for our future performance.

Altron’s overriding goal is to deliver increased

value for shareholders over the long term. Going

forward we are determined to uphold this

reputation of value creation, illustrated over the

last 10 years by compound annual growth rates

in revenue of 15%, headline earnings per share

of 17%, net asset value per share of 13% and

dividends of 19%.

As anticipated in last year’s report,

macroeconomic conditions have changed. We

are likely to experience increased pressure on

margins from higher input costs and increased

competition in the tightening world economy.




OPERATIONALREVIEW



Eskom and the municipalities will be planning

to spend signifi cant amounts on power

infrastructure way beyond 2010. Infrastructure

spend, which has become a national imperative

in the lead up to the 2010 Soccer World Cup, is

set to increase and the company can expect to

derive benefi ts from this as well.

The telecommunications market is providing

opportunities and Altech is well positioned in this

regard. Our signifi cant expansion into the African

market provides exciting growth prospects. While

the information technology market remains

competitive locally, there are some exciting

consolidation opportunities that Bytes is

exploring. Internationally, our strategy of

achieving critical mass is bearing fruit which

is expected to continue.

FINANCIAL OVERVIEW

The Altron group’s results for the year ended

29 February 2008 have shown strong growth with

a 33% increase in headline earnings per share

off the high base established in the prior year.

Revenue increased by 25% from R17.1 billion in

the prior year to R21.4 billion, with operating

profi t increasing by 27% from R1.5 billion to

R1.9 billion, refl ecting an increase in the

operating margin to 9%. During the period under

review, the group invested R479 million in

replacement as well as capacity expansion,

mainly focused on the more capital intensive

power electronics sector.

Despite higher trading volumes and increased

raw material prices, the group’s investment in

working capital was well managed during the

year, particularly in respect of the investment in

inventory. Cash fl ow generated from operating

entities increased from R399 million in 2007 to

R1 799 million in 2008, representing a 4.5 fold

increase and this resulted in cash on hand of

R2.1 billion (2007: R1.6 billion) at the year end.

Altron’s return on equity has improved to 24.7%

with our return on net assets and return on

capital employed being maintained at 30.3% and

“I am proud to report that 2007/2008 revenue and after-tax profi t exceeded, for the fi rst time, R20 billion and R1 billion, respectively.”


Altron’s view of sustainable growth

Sustainable growth differs from

market-related growth because it is

driven by a long-term commitment to:

our identifi ed mission and strategy;

continually improve effi ciencies;

grow organically through intelligent

technology partnerships;

invest in our people and our

businesses;

grow by seeking appropriate

acquisitions in our chosen sectors;

and

sustainable growth is underpinned

by values and people and refl ected

in the care we take with our

customers and our commitments – in

equal measure.

Chief executive’s review continued

Altech’s balance sheet remains strong with a net

asset value of 2 026 cents per share and cash

of R1.6 billion. Return on shareholders’ equity for

the year was 25.4% and the dividend declared

by Altech increased by 20%.

Through Altech, Altron’s long-term plan is to

become one of the leading data network

operators and internet service providers in East

and Central Africa. To this end, Altech crowned

the year with the acquisition of a controlling

interest in three companies within Kenya’s Sameer

ICT Group for a maximum purchase consideration

of US$75 million, funded entirely from the cash the

group had accumulated from operations.

Convergence of IT solutions which allows data,

video and voice to be run through internet

protocol networks, as well as the growth in the

African data and internet markets, is expected to

reap signifi cant rewards for Altech in the future.

Altech Netstar Fleet Management Services

introduced new technologies and services to

commercial fl eets and vehicle subscribers. The

acquisition of ComTech, a leading operator

servicing the commercial transport sector,

will strengthen the Altech Netstar Fleet

Management Services’ business through its

complementary product range and customer

base. As a result, Altech Netstar Fleet

Management Services has effectively doubled

in size, with a combined fl eet management

market share in excess of 20%.

In Altech’s multi-media sector the allocation of

licences in satellite television broadcast has

opened up the market, and the substantial

investment in the broadcasting sector is

expected to stimulate growth of the pay

television market and provide consumers with

more choice and diversity of content. Globally,

Altech UEC broadened its customer base

adding Brazil, Mexico, Dubai and Spain to its

high-end market focus during the year.

29.7%, respectively. Altron increased its

dividend by 32%, providing shareholders with

an effective doubling of the dividend over the

last two years.

SUBSIDIARY REVIEW

ALTECH

Altech delivered excellent results with headline

earnings per share growing 23% to 511 cents,

revenue increasing by 22% to R8.2 billion from

R6.8 billion in the prior year and operating profi t

increasing by 17% to R664 million.

Altech Autopage Cellular performed well ahead

of expectations, exceeding both profi tability and

cash fl ow targets. The company increased its

subscriber base by over 115 000 – representing

a 14% growth in new connections during the

year. Altech Netstar also maintained its leading

market share position in the stolen vehicle

recovery market, producing excellent trading

results despite a slowdown in new car sales,

increased interest rates and the introduction of

the National Credit Act.

Altech UEC increased revenue by more than 40%

as a result of its expanding international business

although its operating margin reduced as the

product mix has moved more towards lower-end

product following the success of the PVR in the

prior year as well as the effect of outsourcing of

production to meet demand requirements.

Altech NamITech continues to experience diffi cult

trading conditions with an operating loss being

incurred by its South African operations, though

this was much reduced from last year. As a result,

the goodwill relating to the South African

operations has been fully impaired in this fi nancial

year. The Altech NamITech West Africa operations

continue to perform strongly with the combined

NamITech operations recording a profi t.




OPERATIONALREVIEW



BYTES

Bytes achieved revenue growth of 27% to

R5.2 billion with particularly strong revenue

growth of 89% coming from the international

operations as a result of organic growth and

acquisitions concluded in the past fi nancial year.

A substantial contribution came from a large

contract with the UK’s National Health Service

(NHS). South African revenue growth was more

modest at around 7% in challenging trading

conditions.

Operating profi t improved by 12% from

R325 million to R365 million and headline earnings

improved to R248 million, an increase of

23% compared to the prior year. Normalised

operating margin declined from 8.0% to 7.2% mainly

due to the increasing contribution of the lower-

margin UK businesses to overall revenue. Excluding

the NHS contract, the normalised operating margin

at Bytes would have been 7.8%. Operating margins

within the South African businesses were, on the

whole, maintained while the UK business saw a

marginal increase in their margins as the higher

margin Xerox businesses started to increase their

contribution.

Margin pressures are pervasive in the information

technology sector due to commoditisation of

production by Far East manufacturers, resulting

in increased competition. Two of Bytes’ South

African businesses experienced the adverse

effects of exchange rate movements, delayed

orders and certain temporary supply issues.

However, the Bytes group’s international

businesses showed excellent growth with

increased operating profi ts and a substantially

increased order book. Bytes also acquired a

number of smaller niche bolt-on businesses in

South Africa and the UK and continues to

pursue opportunities to extend its IT portfolio

of service offerings.

The revenue bridge indicates how Altron’s revenue growth for the year was based on a strong performance by all three operations – Altech, Bytes and Powertech.

Altron’s growth in operating profi t was largely driven by the improved profi tability and growth of the Powertech businesses.

Altron’s growth in headline earnings refl ects Powertech’s strong operating result, a good performance by Altech as well as an additional contribution from Bytes following the acquisition of their minorities.

Feb2008

PowertechBytesAltechFeb2007

17 1

57

1 46

2

1 09

8

1 72

7

21 4

44

Revenue bridge* (Rm)

*Excludes corporate and financial services.

Feb2008


1 53

6

91

40

276

Operating profit bridge* (Rm)


1 94

3

Feb2008


Headline earnings bridge* (Rm)

767

52

54

162

1 03

5




base and expands Powertech’s base of key

principals, alliance partners and customers

through IST’s long-standing association with

major South African and international

corporations.

While the power supply interruptions have had

some negative impact on productivity, it has

increased the demand for standby power

solutions, and the IST business plays a key role

in this area through co-generation projects,

demand side management (DSM) and high-end

standby power solutions. Similarly, Powertech

Batteries and the newly established Powertech

Energy Solutions unit have experienced

dramatic growth in demand for standby battery,

solar energy and other power solutions.

The cable business in South Africa compares

favourably with the rest of the world in terms of

delivery and capacity. Aberdare Cables’ mixed

offering of low, medium and high voltage cables

has resulted in a broad customer base each

with different dynamics. Low-voltage cables are,

for instance, supplied through wholesalers with

which the group has long-established

relationships or directly to customers such as

municipalities and Eskom, while medium-voltage

cables are supplied to building contractors in a

market characterised by cyclical demands and

shorter lead times. To meet these demands,

Powertech has expanded its capacity and will

continue to do so by approximately 25% to 30%

over the next three years.

GROWTH DRIVERS

Our most signifi cant growth drivers remain the

increase in national infrastructural spend, the

convergence of technology, the integration of

acquisitions and the launching of new ventures,

as well as the expansion of our global footprint.

Increase in infrastructural spend

The southern African and global markets require

substantial spend to build new capacity and to

maintain existing networks. Powertech has

invested prudently to increase capacity and also

POWERTECH

Powertech again produced an excellent

performance with a 27% increase in revenue to

R8.0 billion on the back of a signifi cant increase

in power infrastructure spend, the continuing

strength of commercial property development

and strong demand from the mining industry.

Operating profi t increased by 43% from

R638 million in the prior year to R914 million,

while the operating margin improved from 10.1%

to 11.4%. This improvement in operating margin

is largely due to stronger trading conditions

driving volume effi ciencies which resulted in

good capacity utilisation and effective cost

management. Powertech’s headline earnings

improved by 39% to R577 million compared to

R415 million in the prior year.

Aberdare Cables’ local operation continues to

perform well, growing revenue by 32% and

improving its operating margin. This growth was

assisted by the inclusion of an additional

11 months of trading from our telecoms joint

venture which contributed R451 million for the

year under review. Aberdare Cables’

international operations exceeded R1 billion in

revenue for the fi rst time and produced

improved operating margins. Powertech

Transformers also benefi ted from the

infrastructure spend, growing revenue in excess

of 22%. Revenue in Powertech Batteries grew

signifi cantly and its operating margin also

improved based on higher volumes. Powertech

Industrial experienced a diffi cult year with import

competition negatively impacting operating

margins, but the rationalisation plans that were

implemented have returned margins to normal

levels.

In line with its strategy to create a signifi cant

service business to complement its existing

marketing and manufacturing businesses,

Powertech acquired the IST Group (Pty) Limited

in a R504 million deal to offer a complete

solution to its customers in chosen markets.

The acquisition also enhances Powertech’s skills




OPERATIONALREVIEW



to improve effi ciencies to best capitalise on this

imperative infrastructure requirement. This

investment is not limited to the power network,

but includes the telecommunications arena as

new fi xed-line network operators build their initial

networks and traditional wireless operators self-

provide their own fi xed-line fi bre systems.

Technology convergence

The concept of technology convergence

culminates in the offering to customers of voice,

data and wireless media services over multiple

distribution channels and devices. In the same

way that the convenience and mobility of the

cellphone revolutionised telecommunications,

so we expect that technology convergence will

offer similar growth opportunities. Our strategy

has been to move up the value chain in order

to provide services at the operator or near

operator level.

By defi nition, technology convergence crosses

various operating boundaries, requiring the

liberalisation of markets for effective competition

and deployment of services. While this has been

slow to materialise in South Africa, we have kept to

our vision of pursuing opportunities that exploit the

convergence arena. Altech has formed a number

of alliances and made acquisitions in the more

liberalised markets of Central and East Africa,

resulting in the formation of the largest IP-based

data and telecommunications business in the

region. The bridgehead thus established paves

the way for exciting growth prospects in these

emerging markets.

The African pay television market is set to double

in the next fi ve years, while in South Africa, new

operators have been licensed for Pay TV. A

further development is that the Digital Migration

Project, which will convert South Africa’s existing

analogue system to a digital signal, is gaining

momentum and is expected to be completed by

2012, presenting opportunities for Altech UEC.

0

3 000

6 000

9 000

12 000

15 000

18 000

21 000

24 000

2008200720062005200420032002200120001999

Revenue (Rm)

10-year CAGR15.2%

0

250

500

750

1 000

1 250

1 500

2008200720062005200420032002200120001999

Net asset value per share (cents)

10-year CAGR13.0%

0

20

40

60

80

100

120

140

160

2008200720062005200420032002200120001999

Dividends per share (cents)

10-year CAGR19.0%

0

50

100

150

200

250

300

350

400

2008200720062005200420032002200120001999

Headline earnings per share (cents)

10-year CAGR17.0%



cost containment. (For details on these and

other sustainability issues, refer to the

sustainability report section on page 40).

Numerous intellectual capital projects across the

group are making headway in developing a

sustainable skills pipeline that will meet our skills

requirements both immediately and in the long

term. These include both external partnerships

with educational institutions, and internal

initiatives such as learnerships, training and

capacity building. The newly established Altech

Academy and other company training centres of

excellence will, for example, provide invaluable

training for our telecoms, IT, cable and

transformer businesses.

Altron remains as committed as ever to bringing

about meaningful transformation to the ICT

industry and the business. Our transformation

focus is ongoing and the group will be offi cially

relaunching its Transformation Vision 2010 in the

form of the updated Transformation Vision 2012

shortly. Vision 2012 will provide the framework

for the achievement of transformation targets up

to the year 2012.

FUTURE PROSPECTS

Looking to the future, the demand outlook for

infrastructure spend continues to be promising,

particularly in light of what is required to alleviate

the recent electricity supply problems. It is

anticipated that Altron will continue to

experience solid growth for the forthcoming year

as a result of these favourable market

conditions. However, this is balanced by gaining

a full appreciation of the signifi cant profi t base

established over recent years and the more

volatile macroeconomic and political

environment.

All these factors provide a solid foundation for

continued strong growth albeit at lower levels

than those achieved in the last two years.

Integration of acquisitions and launching of

new ventures

Altron invested substantially in acquisitions

during 2007/2008 and into 2008/2009 through

purchasing the Bytes minorities, Swanib Cables

in Namibia, Cables de Comunicaciones

Zaragoza, IST, ComTech, certain subsidiaries

within the Sameer ICT Group and ABB’s 50%

equity interest in Powertech Transformers. These

transactions provide substantial opportunities for

growth in our selected markets but require

diligence in integration to release maximum

benefi t. Various start-up ventures in the standby

power fi eld also provide opportunities in markets

not previously served. Within Bytes, two

South African acquisitions which will provide

over R400 million in annual revenue, are in the

fi nal stages of approval.

Global footprint

Our strategy of niche expansion in selected

geographic markets has proved to be

successful with 23% of our revenue now being

derived from international businesses and

exports. This is in line with our medium-term

target of 25%. In addition to our acquisitions in

the UK, Namibia and East Africa, new offi ces for

existing products have been opened in Nigeria,

Kenya, Tanzania, India, Hong Kong and Saudi

Arabia demonstrating the Altron group’s

commitment to globalisation.

SUSTAINABILITY

Sustainability remains a key business driver

throughout the group, and once again we

include, within this annual report, a

comprehensive sustainability report that deals

with the most material sustainability challenges

facing the Altron group. Among the most

signifi cant of these are the skills shortage in the

ICT and engineering sector, transformation and




OPERATIONALREVIEW



ACKNOWLEDGEMENTS

The board would like to express its appreciation

to all of its customers, staff, business partners,

shareholders and other stakeholders for their

contributions and continued support towards the

growth of our group as one of the leading ICT

and power electronics groups in Africa. I, in turn,

would like to thank my executive committee for

the excellent contribution and commitment made

by them in achieving our goals, the chairman for

his ongoing wise counsel and the Altron board

for its continuing support and contribution.

Robert Venter

Chief Executive

Corporate activity

The following signifi cant transactions

and developments have taken place

during 2007/2008:

The acquisition by Powertech of the

electrical engineering operations of

the IST group for R504 million,

effective 1 September 2007;

The acquisition by Altron of the

minority shareholders in Bytes

Technology Group Limited

for R1.4 billion. Bytes was

delisted from the JSE Limited

on 15 January 2008;

The acquisition by Altech of

ComTech for R53 million, effective

1 January 2008;

The purchase by Altron of an

additional 3.7% of Altech for

R187 million at an average price

of R52.14 per share, thereby

increasing its stake in Altech to 62%;

The acquisition by Powertech of local

management’s 25% equity interest in

Cables de Comunicaciones Zaragoza,

effective 1 August 2007 for €8 million;

The acquisition by Powertech of

Swanib Cables in Namibia for

R43 million, effective 1 March 2007.

Post year end:

The acquisition by Altech of 51%

of certain subsidiaries of the Sameer

ICT Group in Kenya for a maximum

consideration of US$75 million,

effective 1 March 2008;

The acquisition by Powertech of the

50% stake it did not own in ABB

Powertech Transformers

from ABB for R320 million,

effective 1 April 2008; and

The disposal by Powertech of

Yelland Control to Omron Europe for

R65 million, effective 1 April 2008.


Operational review – Altech

branches in Durban, Cape Town, Port Elizabeth

and Bloemfontein) and premium service provider

Altech Supercall – have been supplemented by

third-party call centres and distributors for data

products.

Mobile Number Portability continues to generate

a steady migration of “port customers” for the

company. This removal of a long-standing

barrier to open competition for subscribers in

the cellular market has resulted in a net gain of

4 172 subscribers for Altech Autopage Cellular.

The trading environment for Altech Netstar has

been good despite the slowdown in new car

sales, following increased interest rates and the

application of the National Credit Act. The

company maintained its leading market share

position as being South Africa’s largest vehicle

tracking company in the Stolen Vehicle

Recovery market.

The Altech Netstar Fleet Management division

experienced a remarkable growth of 70% in the

commercial fl eets and vehicles subscriber

market due to the introduction of new

technology solutions, which when combined with

the newly acquired ComTech business, will see

Altech Netstar Fleet Management emerge as a

signifi cant player with in excess of 20% market

share at double its current size. It is further

expected that smart technology and high-end

products will augur well for the prospects of this

business going forward. Recognition for Altech’s

commitment to excellence that has kept the

company at the forefront of the market came at

year end when Altech Netstar was awarded the

highest accolade of the Technology Top 100

Awards, namely the 2007 Minister’s Award for

Overall Excellence.

Altech Stream successfully commissioned its

trial Wimax network in Gauteng during the year

under review and it is expected that the Wimax

802 standard will become the dominant wireless

IP delivery technology to exploit opportunities

presented by media convergence over

broadband delivery systems. While liberalisation

in the South African market is proceeding at a

Operating at the intersection of

telecommunications, multi-media and

technology, the Altech group has further

established itself as a service provider with

cutting-edge technology and a solid reputation

for reliable delivery and service during the year

under review. Chief executive offi cer of Altech,

Craig Venter, remarked that it is the group’s

objective to further achieve strategic positions in

its chosen markets globally, while focusing on

the development and ownership of intellectual

property rights and the provision of value-added

products, services and solutions.

Altech’s growth drivers during the period under

review included the leveraging of local market

positions, growing annuity revenue, building an

Internet Protocol (IP) delivery system and

products as a foundation for expansion into

Africa, and exploiting demand in India. Altech

expanded its businesses in closely related areas

such as digital TETRA wireless networks at

Altech Alcom Matomo, digital TV at Altech UEC,

its extensive wireless network technology for

vehicle tracking at Altech Netstar and voice and

data network service provision at Altech

Autopage Cellular.

Telecommunications

Altech Autopage Cellular, the largest

independent cellular services provider in South

Africa, increased its number of new connections

by over 14% in 2007, and continued its steady

growth – it is expected to exceed its interim

target of 1 million subscribers in the next

fi nancial year. The average revenue per user

(ARPU) has also improved compared with the

previous fi nancial year.

Sales of mobile data services through add-on

data bundles and cellular data connections

provided a growing stream of revenue for the

company. The broadband and data subscriber

base now stands at over 41 000 subscribers.

Altech Autopage Cellular’s existing channels to

market – which comprise 150 franchise stores,

the corporate sales force (supported by

Altron shareholding: 62%Revenue R8.2bn ü22%

Operating profi t R664m ü16%

Operating margin 8.4% û8.1%

HEPS 511c ü23%

Cash R1.6bn

ROE 22.3% û25.4%

Headline earningsFeb 2008

27%

Operating profitFeb 2008

34%

RevenueFeb 2008

38%

Altech’s contribution to Altron

Reana Wolmarans, Altech group company secretary.




OPERATIONALREVIEW



Main pictureFrom left: Dr John Carstens, Altech chief fi nancial offi cer, Craig Venter, Altech chief executive offi cer and Peter Curle, Altech executive director: corporate fi nance.

slow pace, opportunities in the rest of Africa are

opening up and Altech has moved quickly to

capitalise on these, gaining bridgeheads in key

African markets. In June 2007, Altech Stream

Rwanda was awarded internet and gateway

licences, as well as a frequency spectrum in the

Wimax bands. Already, the company is installing

a network in Kigali, Rwanda, that will begin

distributing IP-based services over broadband in

the 2008 fi nancial year.

In line with Altech’s strategy to move up the

telecoms value chain and expand its geographic

presence in Africa, controlling interests were

acquired in certain subsidiaries of the Sameer

ICT Group in Kenya (Sameer) for a consideration

of US$75 million. This acquisition, which positions

Altech as the largest data operator in Central and

East Africa, sees Altech acquiring a 51%

controlling interest in Kenya Data Networks

Limited, Swift Global (Kenya) Limited and

Infocom Limited. The business comes with

cutting-edge IP data network infrastructure in the

region, as well as operating licences for Kenya,

Tanzania and Uganda.

Altech Alcom Matomo enhanced its

performance with the completion of the

R540 million contract for the SAPS Gauteng

TETRA Radio System. During the year under

review the company also exported radio systems

into Africa, implemented signifi cant telemetry

system sales and supplied specialised

telecommunications equipment to South African

network operators. With its signifi cant engineering

and project management experience, this

company is well placed to exploit further

opportunities for the provision of similar systems

throughout southern Africa and for the 2010

Soccer World Cup infrastructure projects.

“Focus remains on the development of human capital.”

Wessie van der Westhuizen, Altech chief strategic offi cer.


Johan Klein, Altech group executive: human resources and industrial relations and Natascha Jansen van Vuuren, human resources assistant.

Operational review – Altech continued

with sales of these vouchers in Nigeria growing

from less than 10 million per month in 2006 to

over 100 million per month by the end of 2007.

Product enhancements, including cellular SIM

cards and banking cards, are expected to add

further value to the company’s offerings in the

fi nancial and the telecommunication sectors.

The South African operation has concluded its

rationalisation programme, which consolidated

all manufacturing activities into one facility. This

has resulted in signifi cant cost reductions,

operational effi ciencies and improved economies

of scale.

Altech ISIS, a supplier of turnkey business

support systems in South Africa and Africa, has

fully integrated MobiMaster (renamed Altech

ISIS France), which was acquired in 2006, into

the group’s systems during the fi nancial year

and product integration is progressing as

planned. Existing customers have been retained

and new orders have been received. In addition,

the team in France is investigating a number of

opportunities in the Middle East.

At Altech Card Solutions, substantial growth

was experienced in card personalisation

solutions and in its switching division. During the

year under review it was awarded the Thales

eSecurity distributorship for the supply of

cryptographic solutions to the banking and

government sectors and signifi cant orders were

received for EFTPOS terminals from the fi nancial

sector.

Altech Alcom Radio Distributors, a leading

distributor of Motorola two-way radio products in

southern Africa via a network of authorised

dealers, recorded satisfactory results and

achieved signifi cant sales of the Motorola

Canopy broadband range of products which

provide robust network IP-based digital radio

links for digital networks.

Multi-media and Electronics

In foreign markets, and India in particular,

Altech UEC, manufacturer and service provider

of set-top-box decoders and associated

software, recorded good results for the year,

proving that sustained investment in the

development of advanced set-top-box products

and associated software is bearing fruit, even

as consumer spending comes under pressure.

Altech UEC is well positioned in India to

capitalise on a market that is expected to

surpass the entire African market within one

year. Altech UEC has concluded contractual

agreements with two of the major broadcasting

networks in India. These are being serviced from

subcontracted manufacturing facilities in South

East Asia. It is expected that the Digital

Migration Project, which will convert South

Africa’s existing analogue system to digital, will

offer further opportunities for Altech UEC as it is

scheduled for completion by 2012.

Arrow Altech Distribution has enjoyed solid

growth during the year under review with several

new product suppliers being added, allowing

the offering of new products into new markets.

Information Technology

In Nigeria, the growth of Altech NamITech West

Africa, provider of GSM and CDMA cellular SIM

cards, prepaid vouchers, and non-secure and

secure cards for retail and banking, including

EMV smart cards and magstripe cards, has

proceeded at an astounding pace over the prior

year. From starting out as a new entrant only

three years ago, the company has become

Africa’s leading provider of prepaid vouchers

Anton de Wet, Altech group fi nancial manager and Tebalo Langa, Altech group assistant company secretary.

Johan Gellatly, Altech group executive: information technology.




OPERATIONALREVIEW



“It is Altech’s objective to further achieve strategic positions in its chosen markets globally.”

Andy Baker, Altech chief operating offi cer.

Graham Passmoor, Altech group executive: wireless communications.

Steve Sidley, Altech chief technology offi cer.


space but also in other areas complementary to

the group’s activities.

Bytes Document Solutions

Notwithstanding tough business conditions,

Bytes Document Solutions (BDS) once again

performed strongly. Both its Xerox businesses

and its “non-Xerox” businesses have been

restructured during the year under review and

delivered better than expected results. Xerox

Global Services, the direct equipment sales

division, fuelled by large account roll-outs

together with its long-standing customers such

as Absa, Nedcor, Unisa and SITA, contributed

to substantial growth in revenue. It is also

noteworthy that BDS has secured three new

signifi cant customers, namely Mondi, SAA and

SARS during the year and it is expected that this

division will deliver signifi cant contributions on

the back of its increased customer base.

The Production Systems division contributed

signifi cantly, with a profi t improvement of

44% based on good results from the Igen3

printing, continuous feed and light production

black/white and colour divisions, while its direct

and indirect sales, dealers and concessionaires

also generated increased revenue. The volumes

within the Offi ce Supplies division improved and

its new management team delivered record

revenue growth. In order to improve the cost

base of Laser Facilities and to diversify its

product offering, the business of Mailing

Facilities (a long-standing on-site supplier) as

well as Papergeni, predominantly an envelope

manufacturer, were acquired. This forms part of

BDS’s objective to grow its “non-Xerox” centric

business, a strategy which is expected to assist

overall growth in the future.

Bytes Managed Services

As a focused workspace management and

IT equipment maintenance business, Bytes

Managed Services (BMS) leverages off its

90 service points and 1 100 service focused

staff throughout southern Africa, supporting over

600 000 OEM devices under warranty and over

350 000 devices on maintenance contracts.

Despite margin pressures and the challenge to

deliver measurable value to customers and

stakeholders, BMS recorded an exceptional

The information technology sector has

experienced stronger local spend due to current

levels of company profi tability, and a need to

address its approach in terms of its technology

service offering. This has resulted to some

degree in improved demand for Bytes products

and services, though it continues to be a highly

competitive marketplace, especially in South

Africa. David Redshaw, chief executive offi cer

of Bytes Technology Group, remarked that while

the group’s South African IT businesses

experienced margin pressure during the period

under review, due in part to adverse exchange

rate movements and strong competition, its

international businesses showed excellent

growth.

Bytes UK

Bytes UK recorded an outstanding performance

in terms of revenue with its operating profi t

increasing by 63% for the year.

The Software Services business, which provides

large volume software licensing contracts from

vendors such as, among others, Microsoft, Citrix,

Adobe, IBM and Symantec, signed over 500

new customer contracts during the year, the

most notable of which was the £41 million

contract to supply Microsoft software to the

National Health Service (NHS). The NHS

contract runs over three years which secures

similar annual revenue over the medium term.

Other notable contracts for the year included

Tesco, Network Rail, Logica CMG and a renewal

of the BBC contract. Bytes is now regarded as

the leading Microsoft LAR (Large Account

Reseller) in the UK, a position which further

entrenches it as a key Microsoft partner.

The UK’s Xerox business performed

satisfactorily for its fi rst full year of trading

following the two acquisitions made in the prior

year. Notwithstanding this, plans are in place to

further improve the operating margin at these

businesses in the year ahead. This has

confi rmed that the group’s strategy of

expanding its presence in the UK and moreover

diversifying its operations within its sphere of

competence is starting to bear fruit. Prospects

for future growth at Bytes UK are based on both

organic growth and further acquisitions. These

are expected to occur not only in the Xerox

Operational review – Bytes Technology Group


16%


19%

RevenueFeb 2008

Bytes contribution to Altron

24%




HEPS R248m ü23%

Cash R176m

ROE 30.4% û30.7%

Neil Murphy, managing director: Bytes UK.




OPERATIONALREVIEW



Main picture

David Redshaw, Bytes chief executive offi cer and Peter Riskowitz, Bytes chief fi nancial offi cer.

performance. It is BMS’s strategy to increase its

market share within its current support offering

while at the same time expanding its business to

include new and complementary services to both

existing and new customers. The business is well

positioned to take full advantage of the IT

support environment and is expected to grow its

market share by pursuing new industries and

expanding its service offering.

Bytes Healthcare Solutions

The year under review has seen Bytes

Healthcare Solutions (BHS) (formerly DHS)

grow revenue by 11% over the prior year, despite

a market in which medical scheme membership

experienced limited growth. The acquisition of

Mastermed, which included some 1 000 medical

practice customers, has added to revenue and

profi t for the year, and its integration into the

Med-e-Mass business was successfully

completed. Medical claim volumes processed by

Digital Healthcare Switch grew by about 8% over

the previous period and averaged 5.8 million

transactions per month.

The company’s new switching platform, which

includes a redesign of its core claims processing

system, was commissioned and will allow the

company to launch new services to its customer

base and to medical schemes. The system’s

improved scaleability and its change

management features are expected to

signifi cantly improve fl exibility in respect of

responding to the often rapidly changing

requirements of the healthcare industry. The

company’s objectives for the following year are

centred around the pursuit of off-shore business

opportunities, among others in the Middle East,

the launch of new switching products and an

expansion into fi nancial transaction processing.

Bytes Systems Integration

In its third year as a cohesive division, Bytes

Systems Integration (BSI) delivered satisfactory

growth and continued to grow its market share.

During the year under review, BSI, in association

with MTN Networks, expanded BytesNet, a 2nd tier

“Bytes international businesses showed excellent growth.”

Douglas Ramaphosa, managing director: Bytes Specialised Solutions.


Operational review – Bytes Technology Group continued

Bytes Outsource Services

Bytes Outsource Services (BOS) recorded a

solid performance and has successfully

extended all its support agreements due for

renewal during the year. New business growth

from its existing client base bears testimony to

professional service standards and sound

relationships with clients. In keeping with its

strategy, the Shared Services business unit has

seen satisfying growth with the addition of a

number of corporate clients as well as the

Department of Public Enterprises as its fi rst

major client in the public sector. Partnerships

with Telkom, Getronics and the Altron group

companies, as well as general market

conditions, continue to present exciting

opportunities for further sustainable growth.

Bytes Communication Systems

Bytes Communication Systems (BCS), a

supplier of state-of-the-art communication

solutions and value-added services in the ICT

sector, recorded a healthy operating profi t

improvement for the year under review.

Benefi ting from its renewed business strategy

to deliver various value-added services, BCS

secured a number of new clients in the mining,

local government, hotel, retail and education

sectors.

BCS was also awarded a contract by

Anglo Platinum which is geared to yield further

business with the extension of additional

value-added services such as multi-media in

the contact centre environment. In addition, its

contract with Alcatel-Lucent as a premium

business partner in South Africa was renewed.

The business is also continuing to expand into

the rest of Africa, delivering robust Alcatel-

Lucent solutions throughout the continent. The

year ahead will see the company broaden its

range by adding further multi-media, voice and

speech recognition solutions to its current

basket of offerings.

Bytes People Solutions

Bytes People Solutions (BPS) is the group’s

internationally accredited education, training,

skills development and people consulting arm.

As an industry leader, BPS has built a credible

track record over more than a decade by

Telco services provider of video, voice, data,

security and hosting facilities, with many new

corporate client subscribers. The Microsoft

Dynamics (formerly Axapta) ERP practice

established in the prior year, has also won

signifi cant new accounts and is progressively

becoming recognised as a market leader. The

Microsoft Licensing business continued to expand

and deliver solid profi ts. As a market leader in

South Africa for Business Objects (BO), BSI, also a

major SAP partner and a supplier of business

intelligence, stands to benefi t substantially from

SAP AG’s acquisition of BO.

BSI experienced various challenges as a result of

the increasing shortage of key skills in the

workplace, particularly at the high-end of the

software consulting market. This trend is expected

to continue over the coming months. Focus will

remain on curbing the knock-on costs of

recruitment and the replacement of staff at

increasing salaries, often against fi xed-priced

customer contracts.

Bytes Specialised Solutions

Bytes Specialised Solutions (BSS) is the

exclusive distributor for NCR and Teradata

solutions in South Africa and selected

neighbouring countries. The company markets,

services and supports various points of service

and enterprise-wide information solutions. The

diffi cult conditions experienced by BSS during the

year under review were largely due to external

factors which included large contracts being

postponed or cancelled as well as operational

constraints experienced by certain of its key

customers.

Despite this diffi cult operating environment, the

company successfully implemented the Teradata

Customer Relationship Management Solution at

Standard Bank, thereby making it the fi rst bank in

Africa to have implemented a sophisticated

event-based marketing solution. BSS, in

partnership with Nedbank, also successfully rolled

out the Nedbank Self Service application

software project.

Future prospects look promising with NCR’s newly

released ATM self-service platform strengthening

the value proposition in BSS’s Retail ATM division.

New intelligent deposit, electronic shelf labelling

and self-checkout solutions will be aggressively

marketed during the period ahead.

Hennie du Plessis, managing director: Bytes Healthcare Solutions.

Deidre Le Hanie, managing director: Bytes Managed Services.

Andrew Holden, managing director: Bytes Outsource Services.




OPERATIONALREVIEW



providing innovative human capital resource

solutions and services to a large number of

blue-chip companies throughout southern Africa.

Continued focus on sustainable growth and

profi tability yielded a satisfactory performance

during the year, with solid margins and growth in

both revenue and profi t. Furthermore, the annuity

revenue portion of its business grew to more than

75% of total revenue.

“Improved demand experienced for Bytes products and services.”

George Isaacson, managing director: Bytes Communication Systems.

Rob Abraham, managing director: Bytes Document Solutions.

Rob Griggs, managing director: Bytes Systems Integration.

Dr Madelise Grobler, managing director: Bytes People Solutions.


Operational review – Powertech

Powertech IST Telecom is active in access

network turnkey solutions and the power

back-up systems market, and is also starting

to show success in growing its value-added

telecommunications services. Ongoing focus on

servicing the network roll-outs by the telecoms

industry in South Africa and sub-Saharan Africa

offers new opportunities. Powertech IST

Industrial successfully realigned its business

into the air and water pollution control

environment over the past number of years.

These include large projects with companies

such as Highveld Steel and Lafarge and,

together with the environmental protection trends

and requirements, is expected to position itself

in terms of offering new solutions in power

generation and large industries. The business

also won its fi rst large contract in Africa for

refurbishment of electrostatic precipitator

installations in Mali. TIS experienced a much-

improved performance for the period under

review showing growth on both its top and

bottom line. The acute skills shortages, position

this division well to offer its engineering and

installation services into the electrical and the

telecommunications networks for the years

ahead.

Powertech Cables

Aberdare Cables once again delivered

exceptional results for the year with the

strongest contribution from its local power

cables operation. The offshore cable operations

in the Iberian Peninsula, Alcobre and Cables de

Comunicaciones Zaragoza, delivered

particularly satisfactory results, while newly

acquired Swanib Cables, the largest cables

and electrical distributor in Namibia, made a

very positive contribution in its debut year to

Aberdare Cables’ earnings. The joint-venture

operation between Aberdare Cables and

CBi-electric, CBi-electric Aberdare ATC

Telecoms Cables’ delivered a profi table

performance in its fi rst full year contributing to

Powertech Cables’ results. Aberdare Intelec in

Mozambique also delivered a good performance

for the year.

Powertech has shown signifi cant growth over the

past two years and is now operating off a

signifi cantly higher base than it was three years

ago. This growth has been predominantly due to

the increased infrastructure spend, the

continuing strength of commercial property

development and strong demand from the

mining industry. Norbert Claussen, chief

executive offi cer of Powertech, said that it was

the group’s strategy to create a signifi cant

service business to complement its existing

marketing and manufacturing businesses, and

consequently the group has acquired the

electrical and mechanical engineering

businesses of the IST Group (Pty) Limited for

R504 million, effective 1 September 2007.

Powertech System Integrators

Powertech purchased the IST Group (Pty)

Limited (excluding its defence and nuclear

divisions) during the year under review. The fi ve

IST divisions acquired were Energy, Otokon,

Data, Telecom and Industrial, and in

the six-month period for which it was included

in the Powertech numbers, the operation

met expectations.

Powertech IST Energy experienced a strong

year particularly as a result of the current

energy crisis, as well as the expansion of the

business from tele-control and protection

systems to turnkey substations and turbine

control systems. Powertech IST Otokon

opportunities in energy metering and demand-

side management were predominantly based on

Eskom’s usage reduction programmes where its

main customers include the large energy users

in the mining and industrial sectors. It is

expected that Powertech IST Otokon’s role in the

co-generation projects at large power users will

begin translating into opportunities in the year

ahead. Powertech IST Data is active in

providing operational software solutions to

utilities and industry, including asset

management, geographic information and

workforce management software systems. The

growth in the infrastructure asset base is

expected to offer new prospects to the division.

Seara Macheli-Mkhabela, Powertech group executive: corporate affairs.




HEPS R577m ü39%

Cash R336m

ROE 21.3% û25.4%


54%


47%

RevenueFeb 2008

Powertech contribution to Altron

38%




OPERATIONALREVIEW



Main picture

From left: Harry Coetzee, Aberdare Cables’ chief executive offi cer, Hannes Visagie, chief executive offi cer: Powertech System Integrators and Norbert Claussen, Powertech chief executive offi cer.

The demand for electrical cable remained strong

throughout the year and Aberdare Cables’ local

manufacturing and distribution facilities were able

to effectively capitalise on major projects and

gained an increased level of market share in the

building and construction market due to its

service capabilities and capacity. It is expected

that these market conditions will remain favourable

in the commercial and industrial building sector,

although the National Credit Act and recent hikes

in interest rates are expected to place a

dampener on the residential housing market.

Material and metal prices, particularly copper,

continued to rise during the year impacting on

the value of inventories and associated

stockholding costs, although a strong focus on

inventory management offset the impact by year

end. The operations have continued to invest in

capacity in their manufacturing facilities and

these investments have, to date, matched the

rising demand. Further investments in capacity

will be made over the next number of years.


Powertech Transformers’ good performance

refl ected a 23% increase in revenue with

particularly good performance from the

distribution transformer operation, Desta Power

Matla. Due to the growth in revenue, as well as

some operational challenges, working capital has

increased during the year. It is anticipated,

however, that by maintaining and improving

on-time delivery and increasing capacity through

enhanced productivity and the securing of raw

materials, working capital will be reduced going

forward.

Elizabeth Defi llo, Powertech group company secretary and Ronnie Krüger, Powertech group executive: supply chain management.

“Powertech has shown signifi cant growth over the past two years and is now operating off a signifi cantly higher base than three years ago.”


Operational review – Powertech continued

by Eskom’s load-shedding activities in the fi rst

quarter of 2008 presented exciting opportunities

for Rentech. These opportunities, which include

the solar powering of traffi c lights, standby power

solutions and solar hot water systems, are

expected to lift demand for autonomous power

systems.

Powertech Industrial

Crabtree Electrical Accessories SA,

Powertech Industrial’s largest business,

managed to maintain its market share by

focusing on the reduction of manufacturing

costs resulting in low-cost strategic production

units. These actions resulted in once-off

restructuring expenses which suppressed its

profi ts during the year but are expected to yield

signifi cant savings going forward. The company

continued to develop new products and entered

the standby power market supplying domestic

diesel generator systems.

Powertech Calidus experienced extremely

diffi cult conditions and was under pressure

during the year under review, although the

corrective action taken in terms of certain

management changes resulted in a turnaround

in the second half of the year. Further

management intervention is, however, required

to allow the operation to achieve its full potential.

Yelland Control delivered a solid performance

and achieved growth of over 20% in all key

areas for the year under review. It was

subsequently sold to its principal Omron in a

transaction that became effective on 1 April 2008.

Strike Technologies enjoyed an exceptionally

good year, growing its revenue by 27%

compared to the prior year. The company

completed the launch of its new electricity meter

and continued the development of new

earth-leakage relays which will be launched in

the new fi nancial year. A new service division,

Powertech Energy Solutions, an initiative to

provide turnkey energy management services to

medium and large enterprises, was established

in partnership with a British fi rm, PS2.

The strong order books of both Powertech

Transformers and Desta Power Matla over the

past year indicate that the demand for power

infrastructure is expected to continue over the

medium term. The strong demand is, however,

attracting outside competition, resulting in

increased competition particularly in the

distribution transformer market. Input costs due

to substantial increases in raw material prices,

such as core steel, mild steel, copper and

transformer oil, continue to impact prices offered

to customers. These same factors, combined

with worldwide short supply and high demand,

create challenges in ensuring availability of

materials to manufacture transformers.

Powertech Batteries

Powertech Batteries recorded good growth

compared to the prior year within its Automotive

and Industrial businesses (incorporating the

Willard and Sabat brands), and succeeded in

gaining additional market share in the

replacement market. The good results achieved

in its UK operation further enhanced the

automotive division’s performance. The Industrial

business’s results were supported by strong

demand from the mining and the materials

handling sectors. This is expected to continue in

the new fi nancial year. Battery Technologies’

performance remained steady despite limited

business from Nigeria impacting its growth

performance. This was partially offset with

prospects from its East African operation, which

was established during the second half of the

year. This operation remains strong and it is

expected to deliver a positive contribution going

forward. In addition, as a result of the power

crisis in the fi rst quarter of 2008, some

prospects for its domestic UPS systems have

exceeded expectations and are also expected

to have a favourable effect on the business.

Rentech felt the effects of reduced demand in

the telecoms industry due to a change in

technology, initiated by the operation, from rigid

to fl exible solar panels, that curbs the theft rate

of the rigid panels. The power outages caused

Vusi Sidinile, managing director: Desta Power Matla.

Tshepo Molope, managing director: Battery Technologies.

Herb Chikwanda, chief executive offi cer, Powertech IST.




OPERATIONALREVIEW



Tridonic.Atco SA experienced and operated in

an extremely competitive market for the year

under review, with limited opportunity for growth.

However, it had a stable year, marginally

improving its performance. Due to the size of its

contribution this had a minimal impact on the

Powertech results.

Leon Viljoen, chief executive offi cer: Powertech Transformers, Kevin Burger, chief executive offi cer: Powertech Batteries and Pierre Nothard, chief executive offi cer: Powertech Industrial.

Regula Niehus, Powertech communications manager, Peter Riley, Powertech group executive and Neil Kayton, Powertech chief fi nancial offi cer.

“It is Powertech’s strategy to build a signifi cant service business to complement its current offering.”

38AltronAnnual Report 2008

Terminology and abbreviations used in this report

AAD: Arrow Altech Distribution

ABET: Adult Basic Education and Training

ACS: Altech Card Solutions

Altech: Allied Technologies Limited

Altron: Allied Electronics Corporation Limited

AsgiSA: Accelerated Share Growth Initiative of South Africa

BBBEE: Broad-based black economic empowerment

BDS: Bytes Document Solutions

BSS: Bytes Specialised Solutions

Bytes: Bytes Technology Group Limited

Calidus: Powertech Calidus

CDP: Carbon Disclosure Project

CE: Chief Executive

CEO: Chief Executive Officer

CERs: Certified Emission Reductions

CGA: Corporate Governance Accreditation (Pty) Limited

CoGP: Codes of Good Practice

Crabtree: Crabtree Electrical Accessories SA

CSI: Corporate Social Investment

DPM: Desta Power Matla

dti: Department of Trade and Industry

EE: Employment Equity

GHGs: Greenhouse gases

GRI: Global Reporting Initiative

H&S: Health and Safety

HDIs: Historically disadvantaged individuals

HR: Human Resources

ICASA: Independent Communication Authority of South Africa

Jipsa: Joint Initiative on Priority Skills Acquisition

JSE SRI: JSE Limited Social Responsibility Investment index

KAP: Knowledge, Attitudes and Practices

King II: King Report on Corporate Governance for South Africa – 2002

LSE: London Stock Exchange

OHASA: Occupational Health and Safety Act

Powertech: Power Technologies (Pty) Limited

Powertech IST: Powertech Integrators of System Technology (Powertech)

Rentech: Renergy Technologies

RoHS: Restriction of Hazardous Substances

SABS: South African Bureau of Standards

SENS: Securities Exchange News Service

SMMEs: Small, Medium and Micro Enterprises

Strike: Strike Technologies

UNFCC: United Nations Framework Convention on Climate Change

Altron sustainability report 2007/8

Introduction 40Boundaries of reporting

Standards used

Material issues summary table

Update on 2007 targets

Management of sustainability 44Altron’s sustainability philosophy

Arriving at our most material issues

Economic impact by size and value contribution

The value added statement

Management of sustainability

ISSUE: Integration of corporate ethics

Compliance monitoring

Bribery and corruption

Risk and crisis management

Shareholders 48Relationship to the annual report

Engagement with shareholders

Independent report on analyst poll

Corporate Governance Accreditation

ISSUE: Altron’s treatment of minority investors

Independence of the chairman

ISSUE: Transformation at ownership level

Customers 52Introduction

ISSUE: Customer service

ISSUE: Meeting the evolving needs of customers

ISSUE: Liberalisation of the telecommunications market

ISSUE: Expansion of customer base

Partners 55Management of partner relationships

ISSUE: Securing continuity of supply

ISSUE: Foreign direct imports and dumping

ISSUE: Mergers and acquisitions

ISSUE: Transformation through preferential procurement

Employees 59Management of employee relationships

ISSUE: Skills attraction and retention

ISSUE: Employment equity

ISSUE: Transformation through skills development

Transformation – Vision 2012 64ISSUE: Socio-economic development

ISSUE: Enterprise development

Environment 70Material issues identified

Systems to manage our environmental impact

ISSUE: Climate change

ISSUE: Compliance with legislation

ISSUE: Pollution and emissions

ISSUE: Energy use and efficiency

ISSUE: Environmental impact of products and services

Health and Safety 80ISSUE: Internal health and safety

ISSUE: HIV/Aids

Appendices 84A: Index to issues identified by the JSE SRI

B: 2007 Environmental Survey for the JSE SRI Index

C: GRI content index to G3 indicators

One Group One Goal

Sustainability Report 2008


This report does not cover all of the

Altron group’s operations. Instead it

concentrates on the major operations that

contribute the most substantial portion of

Altron’s business. They include Altech,

Altech Card Solutions (ACS), Altech UEC,

Arrow Altech Distribution (AAD), Altech

Netstar, Altech NamITech, Altech Isis,

Altech Autopage Cellular, Altech Alcom

Matomo, Bytes, Bytes Systems Integration

(BSI), Bytes Document Solutions (BDS),

Bytes Specialised Solutions (BSS),

Powertech Transformers, Desta Power

Matla (DPM), Aberdare Cables, Crabtree

Electrical Accessories SA (Crabtree),

Strike Technologies (Strike), Powertech

Batteries, Battery Technologies, Renergy

Technologies (Rentech) and Powertech

Calidus (Calidus).

Guidelines and standards consulted for

the compilation of this report included:

the King Report on Corporate

Governance for South Africa – 2002

(King II), forming the basis of Altron’s

self-evaluation independently certifi ed

by Corporate Governance

Accreditation (Pty) Limited (CGA);

the JSE SRI (JSE Limited Social

Responsibility Investment) Index;

the Global Reporting Initiative’s (GRI)

guidelines and indicators (G3 edition);

and

the dti CoGP.

Introduction

Allied Electronics Corporation Limited

(Altron or the company) is an investment

holding company. Its principal

subsidiaries are Allied Technologies

Limited (Altech), Bytes Technology Group

Limited (Bytes) and Power Technologies

(Pty) Limited (Powertech).

During the year under review, Altron

acquired the balance of shares that it

did not already own from the minority

shareholders of Bytes. Further information

regarding corporate activity is contained

in the CE review of the annual report

(see page 18).

Boundaries of reporting

Unless otherwise disclosed, this report

covers the South African operations of

Altron and its subsidiaries for the full

fi nancial reporting year from 1 March

2007 to 29 February 2008. The previous

Sustainability Report was published in the

2007 annual report. While issues such as

governance, code of conduct, ethics,

engagement with employees, suppliers,

customers, joint-venture partners,

regulatory bodies, etc. in other countries

are managed in the same way and

according to the same principles as at

Altron and its South African subsidiaries,

sustainability performance in foreign

countries is not covered in this report.

With respect to its suppliers and the dti

Codes of Good Practice (dti CoGP), the

Altron group monitors preferential

procurement and the stewardship of

waste and recycling with contracted

partners. But apart from these issues,

the report does not cover the social or

environmental performance of our supply

chain partners.

Altech Netstar: Technology Top

100 Award for Excellence in the

Management of Innovation

Prof Roy Marcus of the Da Vinci Institute; Mr Bernie Bowers, Chief Technology Offi cer of Altech Netstar and Minister of Science and Technology Mr Mosibudi Mangena.




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Awards received in the reporting period

Altech Limited: Technology Top 100

Award for Excellence in the

Management of Technology,

Innovation and People (for Altech

Academy)

Altech Card Solutions: Datacard’s

President Club Award for Sales

Excellence

Altech UEC: 2007 Winner – Proudly

South African Innovator Award

Altech UEC, Altech NamITech and

Altech Netstar: 2007 Technology

Top 100 Award: Qualifi er

Bytes Systems Integration’s

Process Management and Control:

Southern Africa Top System

Integrator Award

Bytes (UK): Microsoft Worldwide

Software Asset Management

Partner of the Year award

Xerox’s Erasable Paper lauded by

TIME magazine: November 2007

Table of material issues

Material issue Stakeholders affected Page No.

Integration of corporate ethics Shareholders, employees, customers, suppliers, regulatory bodies 46

Altron’s treatment of minority investors Minority investors, regulatory bodies 50

Transformation at ownership level Shareholders and all stakeholders in the value added statement, including government 51

Customer service Customers, shareholders, employees 52

Meeting the evolving needs of customers

Customers, shareholders, employees53

Liberalisation of the telecommunications market

Shareholders and all stakeholders in the value added statement, including government 53

Expansion of customer base Shareholders, customers, employees 54

Securing continuity of supply Suppliers, customers, shareholders 55

Foreign direct imports and dumping Suppliers, customers, shareholders, government 56

Mergers and acquisitions Suppliers, customers, shareholders 56

Transformation through preferential procurement

Historically disadvantaged suppliers and all stakeholders in the value added statement, government 57

Skills attraction, development and retention

Employees, candidate employees, shareholders, government 59

Employment equity Historically disadvantaged employees and all stakeholders in the value added statement, government 61

Transformation through skills development

Employees, candidate employees, shareholders, government 63

Socio-economic development Communities that relate to Altron and society at large, government 66

Enterprise development Historically disadvantaged businesses and all stakeholders in the value added statement, government 68

Climate change All stakeholders to the business 71

Compliance with environmental legislation

All stakeholders to the business and government73

Pollution and emissions All stakeholders to the business 76

Energy use and effi ciency All stakeholders to the business 77

Environmental impact of products and services

All stakeholders to the business78

Internal health and safety Employees 80

HIV/Aids Employees and their families and communities related to Altron 82

Contact for questions regarding this report:

Corporate Communications Secretarial and administration

Salomé Brown Andrew Johnston

Group Executive: Corporate Communications Group Company Secretary

[email protected] [email protected]

011 645 3604 011 645 3609


Section Assertion/Targets Update page

BBBEE Ongoing BBBEE ratings of subsidiaries and group companies

All group companies and subsidiaries have been set BBBEE targets in line with Vision 2012. Performance measured and evaluated against these targets monthly at Altech, Bytes and Powertech.

65

Increase in preferential procurement and enterprise development

This is a key priority of Vision 2012 which is being driven in all group companies. Group-wide results indicate an increase in both areas, with all eight Bytes companies outperforming the group average. At Altech seven companies outperformed the group average with three companies facing challenges to reach group targets.

57 – 58,

65,

68 – 69

Human Resources

Increase the number of black people in senior management positions

Bytes increased its black management numbers by 4.36% during the year from 26.26% in 2006 to 30.65% in 2007. At Altech two companies outperformed the group average with eight companies facing challenges to reach group targets.

61 – 62

Increased spend on development of priority skills as identified and required in the various businesses and a national level, as required by the codes

Altech has granted bursaries to black candidates in BSc Electronics and Computer Science, both of which are critical skills to the industry, the business and on a national level. The company implemented plans to increase its learnership programme for black people. The newly formed Altech Academy will be hugely instrumental in increasing internal employee development and training for critical skills with an overall increase of 15% on skills development spend. Bytes has an extensive disabled learnership training programme, the numbers for which increased further in 2007. Powertech has a number of Training programmes to upskill historically disadvantaged individuals (HDIs) in the critical skills of engineering, electrical design and winders.

59 – 60,

63

The formalisation and implementation of performance and career development review systems, where these are not as yet in place

Aberdare’s performance management system and succession planning system are in place and are conducted bi-annually. They form part of Aberdare’s overall human capital development strategy and also form an important component of Aberdare’s retention strategy. All results are reported on and analysed at the highest levels. The on-time and in-full completion of these two systems are part of every manager’s human capital measures. A talent management programme, including an accelerated leadership development programme has been established to ensure Altech grows the depth of its talent pool throughout the group and to build additional capacity for technical as well as leadership skills.

60, 67

Increasing the number of quantitative human resources performance indicators

HR performance indicators have been added to measure the following issues:

BBBEE

headcount according to the dti CoGP on BBBEE

on BBBEE

achieving EE Targets

Compliance in terms of statutory reporting (employment equity/skills development).

59

Corporate Social Investment

Altron aims to develop a more comprehensive database for capturing the CSI spend in all our various operations for reporting purposes going forward

The new Everest system has been implemented and Trialogue captured all the data into this system for the 2007 Social Report. Updating of the system will occur annually.

66 – 68

Update on 2007 sustainability targets


Section Assertion/Targets Update page

Health and Safety: Certification

Plans are under way at Aberdare to obtain certification at the Standford Road, Pietermaritzburg and Gauteng operations

Aberdare is in the process of developing the management systems for ISO 18001 at Standford Road and Pietermaritzburg (target date for certification being June 2009), and ISO 14001 at the Gauteng operation (target date being March 2009).

74

At Powertech Batteries, implementation of ISO 18001 will commence in the 2nd half of 2007

This did not commence due to a five-month industrial action strike. To commence in 2008.

80

DPM’s Cape Town operation is scheduled for an ISO 18001 certification audit in May 2007

DPM’s Cape Town operation has obtained ISO 18001 certification. To receive SABS certificate on 22 May 2008.

74, 80

Health and Safety: HIV/Aids

Make investments where the greatest reduction in infection can be gained

Working in conjunction with Aurum Institute of Health Research, a not-for-profit public benefit organisation that conducts research and supports companies in assessing and mitigating the impact of HIV/Aids, Altron has developed a phased approach to managing this impact, that will consist of both a study of the actual prevalence and impact of HIV and Aids on its business, and assessing the effect of HIV on key suppliers and market groups. This project commenced in March 2007 and Altron has reported on the preliminary results of this assessment in this report.

82 – 83

Implement the most effective interventions As above. 82 – 83

Focus our available resources such as CSI on HIV/Aids, particularly where it affects our markets, future employees and potential suppliers

Various CSI projects benefit people suffering from the effects of HIV/Aids. Interventions are not exclusively focused on the market environment.

66, 67, 83

Provide guidance at Altron group level to operations in terms of policy and practices for addressing HIV/Aids

The current study in partnership with Aurum Institute will result in guiding policy.

82 – 83

Health and Safety: General

The formulation and implementation of a group level health and safety policy to provide guidance and ensure uniformity

Group level SHE policy not yet in place. Policies at the operational level have been formulated and put in place.

80

Pursue ISO 18001 certification of operations, specifically Aberdare Cables, Powertech Batteries and DPM Booysens

This is being pursued in all of these operations. Some of the divisions received accreditation during the year and those outstanding are due for completion in 2009.

80

Report results of HIV/Aids prevalence study across the group, as well as its key suppliers and market groups

The Aurum Institute assessment and preliminary findings have been disclosed in this report.

82 – 83

Environment: Certification

Altech UEC aims to have its operations ISO 14001 certified during 2007

Altech UEC is currently in the process of updating the system to become ISO 14001 compliant.

70 – 71, 74

Certification of Altech NamlTech’s Linbro Park site is in progress, with certification due by January 2008

The Linbro Park facility was recertified as ISO 9001/2000 compliant in December 2007.

70 – 71, 74

Aberdare’s Gauteng operations will be ISO 14001 certified in July 2007

This was deferred to March 2009. 70 – 71, 74

Environment: Performance

Continue to pursue ISO certification of operations

Various operations have been pursuing and achieving various ISO certifications during the year.

70 – 71, 74

Develop a position paper regarding the group’s response to the challenges of climate change

Climate change position paper adopted in the first quarter of 2008.

71

Pursue emission reduction targets in operations, where applicable

This is being carried out in various operations and departments.

75 – 77, 86, 88

Explore collaborations with suppliers and business partners around recycling

This is being carried out at specific operations and departments.

79, 87



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2008

11%

57%

13%

1%

18%

2007

10%

60%

13%

17%

Capital providers

Employees

Central and local government

CSI

Reinvested in the group to maintain anddevelop operations

Issues within this section

Integration of corporate ethics

Value added statement

The measure of the value created by the group is the amount of value added by its diverse

manufacturing, distribution and other activities to the cost of raw materials, products and services

purchased. This statement shows the total value created and how it was distributed.

2008R millions %

2007R millions %

Revenue from continuing operations 21 431 17 126

Paid to suppliers for material and services (16 299) (12 707)

Value added 5 132 4 419

Income from investments* 186 136

Total value created 5 318 4 555

Value distribution

Employees 3 053 57 2 736 60

Capital providers 584 11 445 10

Finance costs 89 56

Dividends to Altron shareholders 331 216

Dividends to minority shareholders in subsidiaries 164 173

Central and local government 688 13 606 13

Company taxation 591 493

Secondary taxation on companies 54 58

Rates and taxes; licences and levies 33 34

Skills development levy 10 27

Subsidies granted by the government — (6)

Corporate social investment (CSI)** 53 1 14 —

Reinvested in the group to maintain and develop operations 940 18 754 17

Depreciation and amortisation 272 235

Retained profi t 688 589

Deferred taxation (20) (70)

5 318 100 4 555 100

Value added ratios

Number of employees*** 12 909 11 871

Revenue per employee (Rand) 1 660 160 1 442 675

Value created per employee (Rand) 411 961 383 708

Corporate social investment – % of profi t after tax 4.0 1.3

*Income from investments include interest received, dividend income and share of associates’ profi ts.

**CSI includes education, training and social upliftment projects.

***These are permanent group employees.




OPERATIONALREVIEW



based in South Africa and in over 20 foreign

countries including among others the

African continent, the United Kingdom, the

Iberian Peninsula, France and Australasia.

Considering the diversifi ed nature of our

business, we recognise that the Altron group

of companies has a range of impacts on

society and the environment ranging from the

exploitation of resources in the supply chain

to the responsible stewardship of our

products in the marketplace. For the purposes

of this report we have chosen to categorise

our material issues in three broad sections:

Business stakeholders – shareholders,

customers, suppliers, partners and

employees

Transformation – the seven issues (dti

CoGP) relating to broad-based black

economic empowerment (BBBEE)

Environment

This classifi cation encompasses all the major

stakeholder groups with which the company

engages in a format that facilitates the easy

interrogation of information pertinent to

readers from any specifi c stakeholder group.

The full list of material issues are contained in

the table on page 41.


Issues that can be applied broadly across the

Altron group, such as transformation and

corporate governance, are dealt with centrally

at group level. Other issues, such as specifi c

environmental impacts, are managed directly

by the operations concerned, although in all

cases, ultimate leadership and responsibility

vests with the leadership of Altron.

The link between operational management

and board responsibility when it comes to

sustainability issues is achieved through

regular appraisal by the Altron risk

management committee in conjunction with

the relevant responsible body, be it internal

audit, secretarial, legal, the transformation

committee, executive committee, etc. This

Altron’s sustainability philosophy

In our annual report we have emphasised the

importance of sustainable growth and our

long-term commitment to our business

relationships. In this sustainability report, we set

out to explore these relationships more closely,

understand the impacts we have on the

environment and the stakeholder groups we

interface with, and report fairly and transparently

on the most material issues that we have

identifi ed as being important to the long-term

survival and success of our business.

Arriving at our most material issues

Altron is a diversifi ed business operating in

the power electronics, telecommunications,

multi-media and information technology

industries:

Multi-media designs and manufactures

among others satellite and terrestrial

digital set-top decoders.

Telecommunications sells, distributes and

services cellular network operators and

designs, instals and manages Motorola

radio systems and operates in data

distribution as an operator and

manufactures telecom copper and fi bre

optic cables.

The IT division deals with telecommunications

middleware, payment systems and solutions,

secure solutions and smartcard technologies

and the full integrated spectrum of IT

products, solutions and services.

Economic impact by size and value

contribution

Altron has an employee complement of

11 586 permanent employees in South Africa.

Of these 2 535 employees are in Altech,

5 000 employees are in Powertech, 3 968 are

employed by Bytes and 83 at corporate.

(Worldwide, the Altron group has 14 217

employees including non-permanent workers.)

The Altron group has an annual revenue in

excess of R21 billion and has operations


Management of sustainability continued

which includes the corporate code of

conduct, is made available to every

employee joining the Altron group and forms

part of their terms and conditions of

employment. This sets out the high risk areas

which employees should be aware of in their

business dealings for and on behalf of the

Altron group.

Employee training occurs regularly through

poster and marketing campaigns and there

is a continuous drive to enforce the code of

ethics throughout the Altron group. In-house

magazines and publications frequently make

reference to the code of ethics.

The code of ethics was reviewed in 2007

and the code of conduct in February 2008 by

the Altron audit committee (see governance

report).

Compliance monitoring

Altron is committed to managing

whistleblowing, fraud reports and other

concerns over ethics in a non-discriminatory

and confi dential fashion, through a secure

communication channel for employees to seek

advice or voice concerns. The Altron group

recently engaged Deloitte Tip-Offs Anonymous

to manage an independent and confi dential

fraud and theft hotline. This has been widely

communicated to staff members both in terms

of poster campaigns, training sessions, and

in-house magazines and publications.

Monitoring compliance with ethical practices

takes place both through the external and

independent fraud and theft hotline managed

by Deloitte and fi ltered through the Altron

internal audit department and relevant

subholding group security offi cers.

Bribery and corruption

Altron is aware of the detrimental effects that

bribery and corruption have on the security of

the business environment and takes proactive

measures to counter this threat. Contained

within Altron’s corporate code of conduct (see

structure ensures that the appropriate steps

and processes are put in place to mitigate

against the risks associated with these

issues. All these risks are consolidated at the

Altron risk management committee level and

reported to both the Altron audit committee

and board for noting and/or action.

Evaluation of the fi nancial implications of

sustainability challenges, risks and

opportunities is the purview of the Altron risk

management committee. The head of Altron

legal reports into this committee as an invitee

and detailed legal reports are tabled at the

meeting. Likewise the transformation

committee chairman reports into the risk

management committee and tables the Altron

group’s compliance with EE and BBBEE

requirements. The risk management

committee chairman is a member of the

Altron audit committee and provides

feedback to the audit committee in terms of

any material risks and potential liabilities to

the Altron group which may require the

making of provisions, or the tabling of

contingent liabilities in the balance sheet.

The chairmen of both the Altron audit and

risk management committees are required to

table the fi ndings of these committee

meetings at the board meeting following the

previous committee meetings. Minutes of

these committee meetings are also tabled

with the board packs. All material issues are

brought to the attention of the Altron board

and relevant remedial action plans put in

place, as necessary.

Material issue

Integration of corporate ethics

As highlighted in the corporate governance

report (see page 95) the integration of

corporate ethics is an important and material

issue that receives the highest levels of

stewardship at Altron. The Altron chief

executive is responsible for implementing the

code of ethics. The Altron policy manual,

Standards for operating in other countries

Where group companies operate in

other countries, such as Altech in

France, Nigeria, Kenya and Uganda,

Bytes in the UK, Mozambique,

Botswana, Namibia and Mauritius, and

Powertech in Mozambique, Namibia,

Nigeria, Tanzania, Kenya, Spain,

Portugal and UK, the same level of

honesty and ethical conduct in all

dealings with stakeholders is required.

Altron maintains standard operating

procedures applicable to South Africa

in foreign territories while being

cognisant of local differences. Bribery

and corruption is not tolerated under

any circumstances.

Ethics campaign in 2007

During 2007, a dedicated marketing

and poster campaign, endorsed by

the CE, was conducted throughout the

Altron group to ensure that the group’s

ethics were made visible and

understood. The company’s code of

ethics was highlighted in brochures,

poster campaigns and posted on the

group intranet. Specifi c issues were

highlighted in the audit committee

evaluation and corporate ethics have

been marked as an action item at

future audit committee meetings to

ascertain to what extent ethics are

driven and monitored throughout the

group by executive management.




OPERATIONALREVIEW



Risk and crisis management

Altron makes use of a variety of instruments

to offset the risk of crises that could befall the

company, impact on operations, or cause

signifi cant loss. These include: insurance,

self-insurance, disaster recovery and business

continuity planning. The company has

insurance cover for:

product liability;

key managerial staff/directors;

acts of terrorism;

loss of data;

natural disasters;

theft, including theft of infrastructure; and

director liability (including environmental

liability and professional indemnity).

Business continuity plans are in place should

the systems and networks go down or be lost.

Furthermore, disaster recovery plans are in

place in the manufacturing operations should

a factory be burnt down or production be

hindered in any way. This includes incidents

such as civil unrest or rioting, fl ood, fi re,

prolonged strike or terrorism.

For further details on Altron’s risks and how

we manage them, refer to the corporate

governance report.

http://www.altron.co.za/about_governance.

asp) is our policy towards bribery and

corruption, and we make it clear to all parties

that the company adopts a zero tolerance

approach towards the same. This policy

applies to all operations within the Altron

group.

Guidance on the level of sanctions to be

applied in the event of a violation of the policy

is dealt with in terms of the Altron policy

manual, in terms of general staff information

notices, and through poster and marketing

campaigns dealing with the Altron group’s

ethics and the Deloitte Tip-Offs Anonymous

hotline. Regular updates by the Altron legal

department are also provided, which deal with

prevailing legislation in terms of bribery and

corruption.

Among the systems Altron has in place is the

due diligence process, conducted before the

acquisition of businesses or the establishment

of joint ventures by the relevant legal and

secretarial departments. Likewise, due

diligence in evaluating prospective

contractors and suppliers is facilitated

through the Altron group purchasing and

export council.

The company’s vulnerability and exposure to

bribery is regularly assessed at Altron risk

management committee meetings. We are

aware that we operate in countries identifi ed

as presenting a high risk environment for

bribery and corruption, including Kenya,

Lesotho, Mozambique, Nigeria and Uganda.

Likewise, we are involved in various

government contracts that may require

government licensing.

Incidences of criminal activity reported and

dealt with by the Altron group during the

period under review are detailed in the

corporate governance report on page 102.

Janica Nhlapo shows the number to dial for Deloitte’s Tip-Offs Anonymous hotline.


Engagement with shareholders

Certain forms of communication with

shareholders, investors and analysts offer

opportunities for two-way interaction – the

essence of engagement is reported in the

corporate governance report on page 107.

Independent report on investment

analyst poll

Aside from these forms of proactive

engagement, Altron has also sought to

obtain structured feedback from analysts –

representing the majority of shares outside

of the Venter family holding – on its

performance. To this end, Altron engaged

an independent fi rm (College Hill) to

conduct an analyst poll on the company

during 2007, following the release of the

company’s annual results. Analysts were

asked to rate Altron in terms of its quality of

management, leadership, strategy, earnings

growth potential, sustainability of earnings,

liquidity, dividend policy, cost controls,

corporate governance and investor

communications. The comments were

non-attributable to encourage frank

comment.

Relationship to the annual report

The annual report, of which this

sustainability report is a subsection, reports

on the company’s performance to

shareholders and investors, while offering an

appraisal of the company’s future ability to

continue generating returns on shareholders’

equity. The responsible stewardship of the

company is dealt with in the corporate

governance report (see pages 95 to 107).

Subject areas listed in that report include:

compliance with King II;

the board – leadership, role, transparency,

effectiveness and meetings;

strategy and policy over operational

activities of the Altron group (executive

committee);

responsible stewardship of the

company’s fi nances (audit committee);

safeguarding assets, preventing and

detecting error and fraud, reporting

controls (audit committee);

risk management (risk management

committee);

fair remuneration of the Altron group’s

directors and senior executives

(remuneration committee);

appointments to the board and

succession planning (nomination

committee);

planning and guidance with respect to

transformation (transformation

committee);

code of conduct (audit committee);

ethics (corporate governance);

communication with shareholders and

investors; and

share dealings.

Shareholders


Altron’s treatment of minority investors

Transformation at ownership level

Robert Venter, CE of Altron presenting to the investor community.




OPERATIONALREVIEW



Summary of analyst feedback to investor-related questions

Issue Analyst perceptions Company response

Impression of the annual results for 2006/2007

Altron results were good, with a strong contribution from Powertech. Results impressed analysts and were ahead of expectations.

See Altron chief executive’s review, pages 18 to 19.

Key investor issues facing the company

Surplus cash on the Altech/Altron balance sheet

Altech crowned the year with the acquisition of a controlling interest in three subsidiaries of Kenya’s Sameer ICT Group for approximately R650 million, funded entirely from the surplus cash in hand. Powertech concluded the acquisition of the 50% of Powertech Transformers it did not own from ABB for R320 million.

The multiple entry points to the Altron group

Altron made an offer to buy out minorities at both Bytes and Altech. Bytes’ offer accepted, Altech’s rejected.

The maturation of the Altech Autopage Cellular market placing pressure on margins

The company has signifi cantly leveraged its national sales footprint during the year by adding a number of third-party call centres and distributors for data products.

The impact of the copper price on margins when the copper price declines

This risk is mitigated by contract clauses with major customers which adjust prices for metal and other input fl uctuations.

Execution risks to deliver on strategy

Powertech not having suffi cient capacity to meet rising demand

Acquisition of IST Group for R504 million.

Capacity expansion in Powertech operations are signifi cant and ongoing (see 2008 year end presentation on website (www.altron.co.za) and Powertech operational review on pages 34 to 37.

The capital structure of the company

Discomfort with the dual share structure and the different values attached to these instruments because of different voting rights, raising concerns that minorities may be prejudiced in the future. Merging Altron and Altech was mooted as an option to simplify the Altron group structure and bring surplus cash to the centre to be dealt with more directly.

Minority rights – see discussion further in this section.

Group structure – see attempted buyout of minorities above.


Integrated sustainability – issues relating

to corporate ethics.

Altron’s response to the issue of corporate

ethics is detailed both in the corporate

governance report (see page 106), as well as

within the sustainability section of this report

(see page 46). Altron’s response to the

treatment of minority investors is dealt with

hereunder.

Material issue

Altron’s treatment of minority investors

Altron is aware of the concerns of minority

shareholders. These concerns arise mainly as

a result of the company being a business that

is largely family owned and are thus systemic.

Nevertheless, we believe the company has

shown good faith by its actions and

Summary of analyst feedback to investor-related questions (continued)

Issue Analyst perceptions Company response

Family control The control of the Venter family is generally regarded as value-enhancing with particular reference to their long-term investment focus and conservative capital management style, though cash build-up at Altech was regarded as an urgent matter to resolve.

See discussion supporting Altron’s sustainable growth strategy in the CE’s review, page 24.

Key investor issues – see subsection above.

Impressions of management and disclosure

Altron’s commitment to thorough disclosure and dynamic, open and transparent investor relations is complimented and appreciated. There are no material disclosure issues. Altron management enjoys the respect and confi dence of the market.

Altron will continue its commitment to positively engage with shareholders.

Certain sectors of the investor community criticised Altech’s management for not addressing the surplus cash issue in a satisfactory manner.

The surplus cash issue has been partially addressed (see above). Communication is being addressed in this regard.

Transformation issues Some analysts believe structuring BBBEE at the operating level is more cumbersome and even convoluted compared to a single entry at the Altron level.

Developing anchor BBBEE partners at Altech, Bytes and Powertech is considered to be more enhancing given the diverse spread of products across the Altron group coupled with customer preference to have empowerment at the operating company level.

Shareholders continued

Corporate Governance Accreditation

CGA provides a formal certifi cation of

conformance with the good corporate

governance practices as recommended by

King II and the Code and Guidelines published

by the King Committee. The independent

certifi cation provided by CGA validates the

self-evaluation score achieved by the company

utilising a software questionnaire that

measures the implementation of the King II

Codes and Guidelines.

Overall, Altron scored exceptionally high, being

placed in the Silver class at 79%. Two general

areas were identifi ed for attention:

Stakeholder relationships – the disclosure

of voting issues by institutional investors

and their ability to infl uence corporate

strategy.




OPERATIONALREVIEW



The company endeavours to engage large

institutional minority shareholders prior to

annual general meetings on resolutions that

it proposes passing, in order to get feedback

and comment. Any objections and material

concerns made by these minority

shareholders are also taken into

consideration and efforts made to

accommodate these wherever possible.

Material issue

Transformation at ownership level

ABB South Africa, part of the global power and

automation group, and Powertech are keenly

aware of and acknowledge South Africa’s need

for broad-based black economic empowerment

at all levels of society. To facilitate the inclusion

of an empowerment partner, ABB took the

decision to sell its 50% stake in Powertech

Transformers to Powertech. Powertech, in turn,

has agreed to sell 25.1% to black economic

empowerment investors. Discussions with

BBBEE partners, already involved in Powertech

companies, are progressing and a further

announcement will be made as soon as these

negotiations have been fi nalised. Unconditional

approval has been received from the

Competition Tribunal for the acquisition by

Powertech of ABB’s 50% of Powertech

Transformers for R320 million, effective

1 April 2008.

governance policies to invite the infl uence

of minority shareholders on its material affairs.

Taking the subissues in turn:

Disclosure of voting by institutional investors

– While this is not a legal requirement in

South Africa (as opposed to the

requirements of the LSE), we do in all of our

minutes of general meetings, as well as in

the AGM minutes, disclose how shareholders

voted in respect of each resolution. These

minutes are available to shareholders at any

time. We do not, however, publish on SENS

how each specifi c institution voted in respect

of resolutions.

The ability of minority shareholders to

infl uence corporate strategy – The failed

scheme of arrangement to acquire the

outstanding shares held by minorities in

Altech illustrates Altron’s approach to its

engagement with all its stakeholders. Altron

took the decision not to vote its shareholding

(in which the family has a majority interest) in

respect of the Altech offer, despite there

being no legal impediment to doing so.

Minority shareholders were able to exercise

their rights and managed to block the

scheme, thereby infl uencing Altron’s

corporate strategy. On the other hand, Bytes

shareholders voted in favour of Altron’s

proposal. Bytes delisted in January 2008 and

became a 100%-owned subsidiary of Altron.

Altron also took steps to ensure parties with

vested interests recused themselves from

making decisions on behalf of minority

shareholders in respect of both schemes.

Altech and Bytes formed board sub-

committees consisting only of independent

directors and the respective company chief

executive offi cers (CEOs). These directors

were advised by their respective fi nancial

advisors and took their decisions on the

Altron offer to their respective boards.

Continued commitment from ABB

ABB has confi rmed its continued

commitment to the African market

and has signed a long-term tech-

nology agreement with Powertech

to support the realignment to

promote transformation. This will

allow the transformer company to

maintain its leadership position

through full access to ABB’s

leading technology for power

transf ormers ranging from 20 MVA

to 795 MVA. Powertech Trans-

formers is the only transformer

company that manufactures almost

the entire range of power

transformers in sub-Saharan Africa.


Altech Netstar places a strong emphasis on customer service.

company. Considering the different market

environments pertaining to different business

avenues, each company manages customer

service in its own unique way.

POWERTECH

During 2007, Powertech Transformers

improved its test failure rate to its best level

yet since that company started measuring it

in 1998, while the on-time delivery rate was

close to 100% by the end of the year. DPM’s

on-time delivery rate is currently at 80%.

ALTECH

Altech Netstar places a strong emphasis on

customer service; the managing director (MD)

receives daily performance statistics and monthly

reports highlighting service trends. His offi ce

deals with customer complaints while divisional

managers are held personally accountable for

service standards within their departments.

Altech Netstar achieved outstanding customer

service levels during 2007: 90% of calls were

answered within 20 seconds, compared with a

call centre norm of 80% in 20 seconds. This is a

radical improvement on the previous year, where

customer service levels were at 30% of calls

answered within 20 seconds.

Altech Autopage Cellular increased the number

of staff and developed new procedures and

systems to service customers more effi ciently.

An independent customer survey commissioned

by ACS showed a total service rating of between

80% and 90%, signifi cantly higher than other

companies ranked (which scored between 60%

and 80%) on the same survey by the same

independent organisation.

BYTES

A signifi cant portion of Bytes’ business is

based on service-related offerings and the

provision of professional solutions and technical

support. Customer service levels and the

customer service feedback loop are critical to

Bytes’ business, and in this regard the various

Introduction

Customers infl uence the business of every

operation in the Altron group. By listening to

customer concerns, meeting customer needs,

ensuring outstanding customer service and

following a philosophy of ongoing product

innovation, the company ensures its ongoing

sustainability in the many markets in which it

operates.

The most signifi cant customer issues facing the

Altron group include:

the continuing drive to enhance customer

service;

the importance of meeting evolving customer

demands through the development of new

technologies and innovations;

the liberalisation of the telecommunications

market; and

the need to expand our customer base.

Depending on the Altron subsidiary and the type

of product or service on offer, these customers

are either end-consumers or business-to-business

customers. Different material issues affect these

differing business relationships. For example,

customer service may be more material to a

company such as Altech Netstar, which supplies

products for both businesses and end-consumers,

while other Altron group companies in the

business-to-business space may have more of

a need to expand their customer base.

The company’s responses to these issues are

therefore largely dealt with on an individual

company basis, and specifi c responses noted

in the sections that follow are not necessarily

applicable to the Altron group as a whole.

Material issue

Customer service

In an increasingly competitive business

environment, customer service is often the

difference between success and failure. Enhancing

customer service that retains existing customers

and secures new customers can have a direct

impact on the long-term sustainability of a

Customers


Customer service

Meeting the evolving needs of customers

Liberalisation of the telecommunications market

Expansion of customer base




OPERATIONALREVIEW



An amount of R110 million has been earmarked

to upgrade the automotive manufacturing

facility and a further R30 million will be spent

on upgrading the industrial manufacturing

facility.

Altech Netstar developed the new VBU 505 fl eet

management product which enables insurance

companies to monitor customer driver behaviour

at a very competitive price. At present Altech

Netstar instals around 800 units per month. Other

new products which were launched in 2008

include the Guardian personal tracking unit and

the Boomerang mobile vehicle unit.

Material issue

Liberalisation of the

telecommunications market

The convergence of voice and data over

broadband Internet Protocol (IP) networks is

creating a whole new realm for the creation of

new products and services that greatly increase

customers’ convenience and functionality. In

2007, Altech Stream, in partnership with Samsung

Electronics, successfully commissioned its trial

network in Gauteng based on the test WiMax

802.16e licence awarded earlier in the year by

ICASA. The network is focused on the wireless

delivery of triple play services, including video

streaming, internet access and voice-over IP to

both PCs as well as new-generation handsets.

Considering that the WiMax 802 standard is now

widely expected to emerge as the dominant

wireless IP delivery technology, we are confi dent

that this initiative will exploit to the full the

opportunities presented by media convergence

over broadband delivery systems.

Altech believes that deregulation will encourage

competition in the industry, to the benefi t of the

most advanced and nimble service providers,

to the ultimate benefi t of consumers. While

liberalisation in the South African market is

proceeding at a slow pace, opportunities in the

rest of Africa are opening up and Altech has

gained bridgeheads in key African markets in

this regard. In June 2007, Altech Stream

operations conduct regular customer

satisfaction surveys. This provides among

others an understanding of customers’

perception of adherence to service level

agreements and highlights problem areas and

matters requiring attention. Proper and direct

customer feedback follows.

Call centres are present in most of the

operations throughout the Bytes group. Several

hundred of Bytes’ employees are engaged in

this function where they interface with customers

on a daily basis. Response times, percentage of

‘dropped calls’ and the like are regularly

measured and benchmarked against industry

standards.

Material issue

Meeting the evolving needs of

customers

Outlining the issue

As new technologies are made available,

customer expectations soon adapt to the new

standards and the demand for the latest

innovations rapidly makes itself felt. In this

evolving arena, technology companies such as

Altron need to ensure that they remain at the

forefront of the latest technological product

developments and innovations in order to retain

their competitive edge.

Addressing the challenge

For certain companies within the Altron group

this issue is of key importance. These

companies have placed a strong emphasis on

continuously improving their technology in order

to be able to meet the evolving needs and

expectations of customers.

Battery technology is changing rapidly and

Powertech Batteries has experienced an

increasing demand to supply products that

comply with the latest technical specifi cations.

The unreliability of Eskom power has also

created new opportunities for the business to

supply backup power, standby battery and solar

power solutions.


Customers continued

access to new customers, particularly in the

retail market. Battery Technologies and

Rentech broadened their customer base,

both locally and in sub-Saharan Africa with

the establishment of operations in Lagos

(Nigeria) and Dar-Es-Salaam (Tanzania).

Some of Battery Technologies’ new customer

relationships include those with Celtel in

sub-Saharan Africa and Tedelex in South

Africa, while Rentech has grown its customer

base to the point that it now depends on a

single customer for less than 50% of its

business. Powertech IST’s new line of

business allows it to offer turnkey solutions to

a more diverse group of customers,

including those in its co-generation business.

Altech: Throughout the Altech businesses

new customer bases are being pursued.

ACS is, for instance, working with local

in-country partners to develop new markets

in Africa, including Nigeria, Kenya and

Tanzania, while Altech Isis has identifi ed new

markets in the broadband space and it is

currently enhancing its products to capture

this potential. AAD has invested in technical

marketing skills and has engaged a business

development specialist to grow market

segments in the telesales division. Altech

UEC secured signifi cant contracts to supply

television set-top boxes into India and has

leveraged its African presence.

Bytes: While there is a greater or lesser

degree of dependence on certain customers

in specifi c operations, the single largest

customer in the aggregate in the normal

course represents less than 5% of total

group revenue. The top 10 customers

constitute approximately 28% of total group

revenue, while the top 20 represent

some 35%.

Rwanda Limited was awarded internet and

gateway licences, as well as a frequency

spectrum in the WiMax bands. Already, Altech

is installing a network in Kigali that will begin

distributing IP-based services over broadband

in the last quarter of 2008. The acquisition of

controlling interests in Kenya Data Networks

Limited (KDN), Swift Global (Kenya) Limited and

Infocom Limited has added markets in the

central African region to Altech’s portfolio.

Material issue

Expansion of customer base

Altron is continually looking for ways to expand

its customer base, not only to increase its

profi tability and market share, but also to

mitigate any potential risk posed by the loss of

a key contract or the possible reduction in

demand from an important customer.

As such, the company has formulated and rolled

out strategies to investigate, develop and grow

new customers at Altech, Bytes and Powertech.

Interventions differ depending on the nature of

the company’s business and the type of

customers required to ensure ongoing

sustainability:

Powertech: Powertech Transformers is

currently building and growing its

relationship with utility providers and

municipalities throughout sub-Saharan Africa

and opened offi ces in Kenya during the year.

Aberdare Cables has penetrated both the

formal and informal sector with cable sales

and has experienced an increase in its

formal customer stream. During the year

under review Aberdare Cables established

Aberdare Asia, operating out of offi ces in

Hong Kong. Powertech Industrial’s Crabtree

and Calidus operations expanded and

diversifi ed their product ranges to allow them

Strategic partners

Altech

Bytes

Powertech




OPERATIONALREVIEW



Partners

The fi rst of these relates to Altron’s ability to

provide its customers with reliable, timely and

consistent service. Any disruption of supply on

Altron’s side could severely impact the customer’s

business, leaving a gap wide open for the

competitor to take market share away from the

Altron group. For these reasons it is imperative

that the operations within Altron secure sound

supplier arrangements with more than one

supplier.

Supply of materials

Powertech Transformers is reliant on imported

resources for a high percentage of inputs such as

copper, core steel, transformer oil and insulation,

the availability of which is of the utmost

importance to the long-term sustainability of this

company. In order to mitigate the risk of being

dependent on one supplier only, Powertech

Transformers continually investigates alternative

sources for these raw materials and negotiates

supply contracts with reliable new suppliers.

For example, during the latter part of 2007

Powertech Transformers assessed a potential new

supplier of copper strip and is currently

negotiating a long-term supply agreement.

A second international supplier of transformer oil

is currently marketing its products in South Africa

and has been approved by both Powertech

Transformers and its major customer, Eskom.

Powertech Transformers has a year-long contract

in place with two suppliers of core steel and will

negotiate new contracts during the second and

third quarters of 2008. Powertech as a group has

also incorporated selected production processes

into its own operations in order to reduce its

dependency on certain suppliers.

Altech Netstar is exposed through its dependence

on imported components. When manufacturers

make changes to these parts, Altech Netstar

has to make related design changes without

interrupting its own manufacturing process. To

mitigate this risk and ensure that it is up to speed

with any planned component changes, Altech

Netstar’s technology team meets with suppliers

and manufacturers on a monthly basis.

Partners form an integral part of the success of

Altron and its group companies, helping to ensure

that the company has access to the raw materials,

services, technology and resources required to

deliver high-quality products. In addition, partners

play an important role in helping the company to

meet its transformation targets in terms of the dti

CoGP relating to enterprise development and

preferential procurement.

The most material issues relating to partners that

affect the Altron group differ from one operation to

the next, but there are certain issues that are

common to all businesses within Altron. These

include:

securing continuity of supply of materials and

resources critical to businesses’ operation;

mitigating the effect of foreign direct imports

and ‘dumping’ into the markets in which the

businesses operate;

global mergers and acquisitions affecting

supply; and

transformation through enterprise development

and preferential procurement.

Management of partner relationships

The Altron group has a purchasing and export

council responsible for assessing all aspects of

procurement throughout the group. The export

council takes into consideration aspects such as

the procurement criteria specifi ed in the dti CoGP,

BBBEE legal requirements, local and foreign

content issues as well as any other risks which

may be appropriate and which are reported to the

Altron risk management committee.

How we manage our relationships with our partners

at the level of the material issues identifi ed is

described in each of the subsections that follow.

Material issue

Securing continuity of supply

Outlining the issue

The issue of securing continuity of supply can be

further divided into two key areas, namely the

supply of materials and the supply of energy.

Securing continuity of supply

Foreign direct imports and dumping

Mergers and acquisitions

Transformation through preferential procurement

New markets derived from better partnerships

Altech UEC implemented a four-

pronged strategy to ensure

sustainability in a global market,

which includes:

capping local manufacturing

volumes;

increasing automation to

improve effi ciency and quality;

engaging with contracted

manufacturers; and

establishing an offshore

sourcing and logistics hub for

procurement and supply chain

fl exibility.

During the year, Altech UEC

designed, developed and

produced a prototype of a brand

new product in cooperation with

new offshore partners. The hybrid

digital video recorder project was

completed in a record time, and

cost less than 60% of what it would

have cost were it to have been

conducted with local partners.

Altech UEC won a signifi cant

export order for the product just

two weeks later.


Partners continued

Supply of energy

As a supplier of electric cables to every sector

of the economy, Aberdare Cables is signifi cantly

affected by the current disruption in energy

supply.

Government’s proposed electricity rationing

programme will cut usage by 10% in the

industrial sector, thereby affecting Aberdare

Cables’ most important customers. This

electricity supply rationing could also result in

Aberdare Cables’ customers reducing their

number of projects and developments, the

consequence of which could be a reduced

demand for a number of cable voltages and

designs.

The electricity crisis received immediate and

high-level attention from all senior members of

Aberdare Cables’ customers team. With its

extensive local and branch network, the

company is well positioned to provide clients

and manufacturing units with assistance and

up-to-date information on the electricity supply.

Although Eskom’s capital expansion programme

is taking shape, it has predicted a limited

electricity supply over the next fi ve years.

Aberdare Cables is in the process of developing

meaningful indicators to measure its

effectiveness during this diffi cult period.

Material issue

Foreign direct imports and dumping

As a local company Altron is committed to the

development of the South African economy and

supports the government’s AsgiSA (Accelerated

Shared Growth Initiative of South Africa), Jipsa

(Joint Initiative on Priority Skills Acquisition) and

Millennium Development goals. It does not

support grey imports or the practice of

‘dumping’. Subsidies, questionable supply chain

stewardship and economies of scale often result

in such foreign direct imports being sold at a

much lower cost than is currently available on

the local market, an issue which adversely

affects Altron subsidiaries operating in this

environment.

POWERTECH

The threat of low-cost imports to DPM’s market

share is signifi cant. Unit manufacturing and

input material costs in Brazil, Russia, India and

China (BRIC) are lower than in South Africa. In

addition, certain local market conditions such as

skills shortages and unreliable power supply

have the potential to negatively affect DPM’s

competitiveness when compared to these

foreign countries.

DPM plans to visit trade shows in BRIC countries

to gather information on best practices. They

also share knowledge and experience gained

with other Altron purchasing managers.

Powertech Industrial’s Crabtree business is

heavily dependent on its wholesaler distribution

channel. This company is engaged in cost-

reduction initiatives in its manufacturing

processes that include the relocation of certain

assembly operations to Lesotho. It is also

redesigning certain products to reduce their

material cost.

ALTECH

Examples in the Altech group of combating risk

include ACS improving its service and quality

while investigating ways to reduce the cost of

card manufacture and AAD highlighting its key

differentiators through a vigorous customer

engagement process. These include the fact

that it obtains quality products directly from the

original source; can offer supply chain and

value-added solutions; is registered as

Restriction of Hazardous Substances (RoHS)

compliant; and that its components are fully

traceable. AAD also engages in sourcing

lower-cost components and quality fi nished

products in order to remain competitive.

Material issue

Mergers and acquisitions

Relationships with partners and suppliers can be

adversely affected if the ownership of partner

companies changes as a result of mergers or

acquisitions. Such events are outside of Altron’s

Power saving = Cost saving

Bytes Document Solutions (BDS), the

Xerox operation has experienced fi rst

hand how saving energy can translate

directly into cost savings for the

company. Three years ago, BDS

started to instal ECG (electronic

control gear) lighting throughout its

main building. While the old lighting

system used four fl uorescent tubes,

the new one only uses three but it

provides more light. This has allowed

BDS to dispose of 25% of its existing

lights, and has resulted in cost savings

which more than covers the initial

investment in the new system.

In addition, the initial lighting audit

carried out on the new system gave

an 18 000 hour guarantee on the

fl uorescent tubes and a 50 000 hour

guarantee on the electronic control

gear. To date, virtually none of the

tubes or ECG’s have failed, meaning

further savings for BDS on labour,

lamp and ballast costs.

BDS light switches have, for the past

10 years, also been equipped with

timers and override switches. The

timers switch the lights off auto-

matically at the end of the working

day and anyone wishing to work late

simply has to use the override switch

to turn the lights back on. This has

resulted in further signifi cant energy

and cost savings.

Altron power saving initiative

Mindful of its responsibility to save

energy, the Altron group has

implemented Powersave@Altron, a

group-wide energy-saving project,

aimed at creating awareness, action

and saleable solutions. See this report,

under the environment section on

page 77 for more detail.




OPERATIONALREVIEW



control but they can affect agreements that were

in place before the merger or acquisition took

place. New owner companies often have

long-established relationships with different

suppliers, partners and customers, some of

which could be in competition in the market and

better positioned to meet the new needs of the

customer rather than Altron or its subsidiaries. In

such situations, having the best product offering

and the latest technology at the most competitive

rate becomes more critical than ever.

POWERTECH

Powertech IST experienced two such incidents

during 2007. The company developed

opportunities at Telkom and Neotel with the

Cramer operational software suite, negotiating

a position as the local value-added reseller for

USA-based Cramer in South Africa. However,

Cramer was then acquired by Amdocs, an

Israeli-based company that has representation

in South Africa. Fortunately, Powertech IST was

able to reach a negotiated settlement whereby it

can continue to offer its services to Telkom via

the Amdocs local entity, ASAJE, and remain the

local supplier of Cramer to Neotel.

Powertech IST also developed opportunities at

Eskom and many other smaller industrial clients

as the local value-added reseller of the MAXIMO

asset management software suite from MRO,

another USA-based company. MAXIMO was

acquired by IBM which has representation in

South Africa. However, the local IBM entity

fortunately does not have MAXIMO skills and it

was agreed that Powertech IST would continue

to be a value-added reseller for the product.

Material issue

Transformation through preferential

procurement

Altron recognises the power of preferential

procurement and the development of small to

medium black-owned enterprises to bring about

meaningful transformation within the company

and the broader ICT industry. The issue of

preferential procurement has a direct bearing on

Power supply crisis – risks and opportunities for Altron

Opportunities

Increased demand for backup power, gensets, battery systems and solar systems

Co-generation opportunities for alternative power supplies/sources

Demand-side management systems and products to reduce consumption

Upgrade of substations and network investment in infrastructure.

Risks

Production interruptions

Slower demand due to reduced new development activity and lower GDP

International perceptions

Effect of electricity increases on infl ation and therefore the macro economy.

Ronel Eksteen, Bytes Business Park facilities manager and Kleinbooi Mashiye, assistant, at the solar powered security fence at Bytes Business Park.


Partners continued

Pambili Document Solutions is an enterprise development company in the BDS supply chain.

Training at Bytes People Solutions.

POWERTECH

DPM recently underwent an Empowerdex

evaluation and was awarded a Level 3

contributor (AA rating), which represents a

signifi cant improvement from the Level 5 rating

attained in an earlier evaluation. DPM’s affi rmative

procurement is currently at 13.66% but it is

actively working towards meeting the Altron

target of 30% for 2009. As DPM’s own system for

extracting BBBEE information on suppliers is

onerous and prone to error, in future DPM will

utilise Altron’s Everest system to extract this

information.

As part of its strategic preferential procurement

objectives, each Powertech IST divisional head

has the responsibility not only to select suitable

BBBEE suppliers for local procurement, but also

to assist current suppliers in achieving the

targets set out by the dti. Unfortunately the nature

of Powertech IST’s business is such that a large

portion of its equipment needs to be imported

and, as such, it monitors its preferential

procurement performance based on local

procurement according to the discretionary

procurement principle. Based on this

measurement, Powertech IST currently spends

around 12% of its procurement budget on

BBBEE companies and the objective is to

increase this to 25% in the next two years.

BYTES

Bytes scores particularly high when it comes

to preferential procurement. Over 50% of

its R1.2 billion procurement spend is on

empowerment purchases, the majority of which

are sustainable in the long term. With the advent

of the new dti CoGP, Bytes has evaluated its

BBBEE position and set tough fi ve-year targets

(see table) and will focus particularly on increasing

procurement from black female-owned SMMEs.

the long-term sustainability of Altron’s operations.

As part of the broader transformation agenda,

preferential procurement guided by the Altron

group’s internal charter, Transformation Vision

2012, which acts as a blueprint for achieving set

targets for sustainable transformation across all

of the dti CoGP. In developing the framework,

Altron has considered national guidelines,

sectoral empowerment charters and

applicable legislation.

No business can survive without access to

customers and in the past it has been particularly

diffi cult for small black-owned businesses to

break into the corporate market. Large

companies often have onerous procurement

procedures that make it extremely diffi cult for

new businesses with little experience to get onto

preferred supplier lists. By reducing the barriers

to entry, preferential procurement by large

companies such as Altron plays a vital role in

helping these businesses to gain access to large

customers that will help them to grow.

ALTECH

During the year under review Altech Netstar

spent 66% of its procurement spend with

black-owned small, medium and micro

enterprises (SMMEs). During the year ahead it

will concentrate on procuring goods and services

from more black female-owned suppliers

wherever possible.

ACS uses BBBEE-rated suppliers wherever

possible, and makes extensive use of Altron’s

Everest Supplier Rating List, which monitors the

BBBEE status of supplier companies to the Altron

group on a monthly basis. Similarly, AAD

continually assesses the BBBEE status of its

suppliers and replaces non-compliant companies

with those that are compliant.

Bytes 2006 Score 2007 Score 2008 Target

Procurement 7.5 11.9 15

Enterprise development 10 15 15




OPERATIONALREVIEW



Employees

Material issue

Skills attraction, development and

retention

Outlining the issue

The skills shortage facing South Africa has

affected the ICT sector particularly hard. It

is exacerbated by the high demand for

such skills within the ICT sector which

means that, in addition to fi nding new

talent, companies are fi nding it increasingly

diffi cult to retain the skilled people they

already employ.

This issue is also addressed through the Altron

nomination committee, the remuneration

committee, the transformation committee and

the HR committees. See corporate governance

report, page 95.

A variety of solutions

Altron recognises the complex nature of the

skills shortage problem and is therefore

committed to addressing the challenge on a

number of fronts. Interventions across the

Altron group companies include programmes

aimed at retaining talented staff, attracting

new talent from outside the Altron group and

developing potential talent from within. In

addition, the Altron chief executive takes an

active interest in the country’s skills shortage

and drives certain skills development

initiatives that will benefi t not only Altron,

but the ICT and power electronics sectors

as well.

Skills training and development at

Powertech

The Powertech Leadership Process aims at

developing future leaders from the middle and

upper management level, thereby ensuring

leadership succession planning. The Powertech

IST Human Capital Development Programme

includes schools outreach, university bursary

and internal employee development

components.

Skills attraction, retention and development

as well as employment equity (EE) are material

employee issues common across all Altron

subsidiaries.

As such, Altron’s various operations have

invested in a number of initiatives aimed at

developing critical skills, transforming the

organisation from the inside through skills

development targeted at historically

disadvantaged groups, and attracting and

retaining black employees to meet EE targets.

Management of employee relationships

Dedicated human resources (HR) divisions

operate throughout the Altron group.

The Altron group policy manual regulates

the employment of all employees as well

as prevailing legislation such as the

Employment Equity Act, Skills Development

Act, The Labour Relations Act as well as

other broad-based BEE Acts.

At Aberdare Cables, which employs about

half of Powertech’s total staff complement, all

hourly paid employees are covered by

collective bargaining agreements such as:

Schedule F of the Main Agreement for the

Iron Steel and Metallurgical Industry; and

through a Centralised Bargaining

Forum (CBF).

Some 60% of all employees at Aberdare Cables

are members of a trade union, but more

specifi cally, 80% of all hourly paid employees

are members of a trade union. At all Altron

companies, the most senior corporate manager

responsible for employee relations and union

negotiations is a member of the executive team.

Disciplinary and grievance procedures are in

place and set out in the group-wide Altron policy

manual. These are communicated to all

employees when they are employed.

The nature of our engagement with our

employees depends on the specifi c issue

concerned and is described in more detail in

the sections that follow.


Skills attraction and retention

Employment equity


Powertech – Aberdare Cables

Number of strike days for 2006/7

was 5

Financial cost of industrial action

was R1 million


as a result, Altech Netstar has employed

a training manager to head up a skills

development division, reporting directly to

the management committee. During the

year, Altech Netstar commissioned

independent consultants to conduct an

analysis of training facilities and

procedures. One area for improvement

highlighted by this analysis has resulted in

a new training strategy, launched in line

with best practices, that will be rolled out

during 2008. The company also plans to

conduct a staff satisfaction survey, the

fi ndings of which will be used to implement

changes to boost morale, reduce staff

turnover and increase performance.

Management and succession planning at

Altech Autopage Cellular

Altech Autopage Cellular offers staff study

loans to encourage them to further their

education and skills training, and during the

year nominated 40 of its employees to

attend courses at the Altech Academy.

It also held various leadership and

management development courses,

including Management for Greatness and

The Nine Conversations in Leadership.

Succession planning has been identifi ed as

an area for improvement and Altech

Autopage Cellular will focus its attention on

this issue during the 2008 fi nancial year.

Bytes

The Bytes group also carried out critical

skills remuneration adjustments during the

year under review. This forms an important

part of Bytes’s ongoing skills retention

strategy. Surveys of market trends in

remuneration are carried out on a regular

basis and where they show Bytes to be

below-average in certain areas pertaining

to key skills, Bytes makes the necessary

adjustments.

Powertech Transformers has invested in

programmes to develop and train electrical

designers and transformer winders, two of

its key resources. An in-house winding

training centre established in 2007 has

seen trainee winders complete 273

windings to date, while Powertech

Transformers has also appointed a number

of technology engineers-in-training, junior

designers, trainees and mechanical

engineers-in-training, all of whom will

embark on a comprehensive experiential

training programme early in 2008. From

2009 Powertech Transformers plans to

recruit fi ve electrical designer trainees

each year.

Powertech Batteries has also established

learnerships and graduate trainee

programmes in order to address the skills

shortage issue. While these initiatives

focus on the important development of

managerial talent, Powertech Batteries

recognises the need to develop skills at the

level of the shop fl oor as well.

Rewarding skills at Altech

Altech conducts independent salary

benchmarking surveys and where necessary

makes adjustments to ensure that it is able to

motivate and retain key skills. The Altech

group prioritises the retention of its core skills

by benchmarking salaries with the market’s

upper percentile earnings bracket.

Responding to staff surveys at Altech

Netstar

The call centre-based industry in which

Altech Netstar operates is characterised by

a high staff turnover rate and the company

has embarked on a number of initiatives

to curb this trend and retain key skills.

Information gathered during exit-interviews

revealed that staff were looking for

increased development opportunities and,

Employees continuedThe Altech Academy – a new standard for skills development

During the year under review Altech

made signifi cant progress in its skills

development strategy with the

establishment of a fully accredited

education facility for employees.

Known as the Altech Academy, the

facility’s courses will be tailored to

meet the specifi c skills requirements

of the company. It will initially be

administered through the Da Vinci

Institute for Technology Management,

a higher education institution that

focuses on post-graduate business

management studies, but the

company aims to develop further

partnerships with other institutions and

universities for specialised

programmes.

The Academy offers courses on four

levels:

Foundation programmes range

from personal development to

training in job-specifi c skills to

provide a foundation on which

employees will be able to build

their careers.

Practical general management

programmes that help employees

to fi ll in the gaps in their knowledge

and expertise.

Senior- and middle-management

development programmes provide

formal education and training.

Executive development

programmes expose executives to

new concepts and tools based on

a global view of business.

The Academy will also play an

important role in establishing

Altech as a preferred employer,

providing evidence to prospective

employees of the commitment

Altech has to invest in the

development of its people.




OPERATIONALREVIEW



Material issue

Employment equity

All Altron group companies have set targets

for EE in line with those outlined by the dti

CoGP. Although most companies within

the Altron group score relatively high on

EE targets within the lower occupational

levels, there is room for improvement at

middle and senior-management levels.

Internal skills development initiatives aimed

at historically disadvantaged employees

(discussed in the next section) go a long

way towards helping the company achieve

EE targets, but they are not the only

strategy employed. The group actively

recruits historically disadvantaged

individuals (HDIs) externally as well and

reports monthly at management committee

meetings on EE as part of the broader

transformation issue

As part of the EE plan submitted to the

Department of Labour annually, Altech

Netstar has committed to improving its

EE scores, particularly at the senior and

top management levels where the current

percentages are very low. Altech Netstar’s

recruitment policy highlights the importance

of employing black men and women, both

able-bodied and those with disabilities, who

meet the requirement as specifi ed in the

job description. The introduction of a

succession and career planning policy with

clear targets linked to EE goals will boost

Altech Netstar’s ability to meet future

EE targets. At Altech Autopage Cellular,

the lower occupational levels are well

represented in terms of EE but the higher

levels within the organisation remain a

challenge. Altech Autopage Cellular is

actively sourcing disabled EE candidates

through its affi liation with Bytes and has

appointed a recruitment agency that

specialises in disabled placements to its

preferred supplier list.

Prof Ray Marcus (chairman of the Da Vinci Institute) and Johan Klein (Altech’s executive for HR and the Altech Academy’s director of studies).

The production of workforce diversity is central to employment equity.


Altron group workforce (SA)

Male Female

TotalSA

work-force

% blackrepre-

sen-tation

%female

blackrepre-

sen-tation

Abled Disabled* Abled Disabled

African Coloured Indian White African Coloured Indian White African Coloured Indian White African Coloured Indian White

Senior top management — — — 2 — — — — — — — 1 — — — — 3 — —

Other top management 8 5 3 82 — — — 6 2 — 1 6 — — — — 113 16.81 2.65

Senior management 12 16 23 286 — — — 1 8 6 8 51 — — — — 411 17.76 5.35

Middle management – professionally qualifi ed and specialists 176 205 124 919 1 1 2 7 65 38 67 307 1 — 1 2 1 916 35.54 8.98

Junior management – academic qualifi ed and skilled technicians 1 165 544 441 1 275 19 5 2 9 488 224 292 710 3 — 1 3 5 181 61.46 19.46

Semi-skilled and discretionary decision-making 1 278 309 62 111 18 8 — 2 362 125 65 192 10 1 — 3 2 546 87.90 22.11

Unskilled and defi ned decision-making 843 84 64 28 10 2 — 1 280 34 56 13 1 — — — 1 416 97.03 26.20

Total permanent workforce 3 482 1 163 717 2 703 48 16 4 26 1 205 427 489 1 280 15 1 2 8 11 586 65.33 18.46

*Disabled – as per defi nition in the Disability Act

This report should be the same as your EEA2 Report as far as possible. If it is not, you need to be able to justifi y the differences to the verifi cation agency.

Table refl ecting total Altron group employee complement

Altech Bytes Powertech Corporate Total

Permanent South African 2 535 3 968 5 000 83 11 586

Non-permanent 985 223 100 — 1 308

Total SA operations 3 520 4 191 5 100 83 12 894

Offshore operations 691 243 389 — 1 323

Total Altron group 4 211 4 434 5 489 83 14 217

Employees continued




OPERATIONALREVIEW



ALTECH

Altech UEC invested R1.4 million in staff training and development initiatives during the year, which were attended by 465 black males and 140 black females. It granted three bursaries to black males and plans to develop more learnerships for black supervisors and foremen in its Durban and Randburg manufacturing plants.

AAD meets 100% of its semi- and unskilled EE targets for HDIs but only 20% of the approximately 600 graduates it requires for more senior levels will come from HDI groups. AAD therefore uses a combination of internal training and external recruitment and has implemented junior management level learnerships to develop HDI employees for possible promotion into middle management in the medium to long term.

Altech Netstar places emphasis on succession planning for senior positions, identifying and developing suitable HDI candidates from its existing talent pool.

Altech Autopage Cellular is considering employing a group of disabled black learners who have completed call centre learnerships at Bytes.

Altech Isis introduced a learnership programme and enrolled 10 new black female tertiary students.

BYTES

Bytes People Solutions has been at the forefront of disabled learnership training in the industry, training 100 disabled learners since 2004. Since this company completed its fi rst end-user computing learnership for people with disabilities, it went on to develop the skills of a second group and is already interviewing candidates for a third intake. Upon completion of the learnership, candidates receive an NQF 3 qualifi cation in End User Computing, which makes them fully computer literate in various Microsoft applications and ideal candidates for administrative positions.

Bytes collaborates with Altech and Powertech to secure workplace experience for as many learners as possible as this increases their employability. To date, approximately 75% of the fi rst learner group have been employed permanently or on fi xed-term contracts, either within the Bytes group or with external companies. Bytes People Solutions, for example, employs three learners from this group in ERP, Finance and Skills Development. The qualifi ed learnerships have helped to triple the amount of disabled employees in this company, thus ensuring far greater compliance with BBBEE legislation and the Employment Equity Act.

Material issue


Meeting EE targets is a vital part of internal transformation. However, the general skills shortage within the ICT and power electronics industries presents signifi cant challenges to meeting these targets through external recruitment alone, which is why Altron has placed such a high level of importance on internal skills development among historically disadvantaged employee groups. At a group level, the Altron Secretariat provides 6 to 12 months’ worth of practical training to talented black company secretarial students through its cadet scheme, while the corporate communications department offers similar learnerships that provide graduates with on-the-job experience. The Altron group also runs an Adult Basic Education and Training (ABET) Scheme for HDIs and, during the year, employees engaged in this programme completed a course and were awarded certifi cates in basic mathematics.

Aside from the dti CoGP, Altron complies with the relevant South African legislation pertaining to skills development and training. The Altron group has an Altron management services HR committee which coordinates and oversees the following activities:

Policies on employee training and development which are reviewed regularly and made available through periodic updates with employees.

The HR departments at the company’s various subsidiaries coordinate all employee training and development.

Relevant submissions made to the Department of Manpower from time to time.

The spend on skills development is as follows

Spend on skills learning programmes

Legal entity R000

Altron Corporate 279 506

Bytes 17 500 000

Altech 10 384 742

Powertech 35 079 246

Altron group 63 243 494

POWERTECH

DPM, spent 93% of its total R1.5 million on training HDIs and aligned its training programmes with the principles of the Learning Programme Matrix. The number of delegates participating in occupationally directed learning programmes almost doubled from 2007 to 2008 and DPM currently spends 2.59% of payroll on skills development, well ahead of the Altron group target of 1% for 2010.

A committee to drive change

Powertech Transformers’ equity and

development committee oversees

the combined issues of equality

and development, fostering a spirit

of consultation between employees

and the company, particularly in

respect of education and training

programmes. Through the equity

and development policy document,

it provides direction and guidance

on meeting the organisation’s

targets, while providing additional

input on social economic

development, qualifying small

enterprises and exempted micro

enterprises.

Powertech Transformers’ winding training centre in Pretoria.

Bytes People Solutions’ training centre at Midrand.


Indirect empowerment – promoting the

ownership of sustainable black

enterprises by giving preference to

black suppliers in procurement, and by

actively helping black enterprises

through training, coaching, mentoring,

fi nancial and non-fi nancial support, as

well as improving the quality of life in

disadvantaged communities; and

Human resource and organisational

development – prioritising the refl ection

of the country’s demographic reality

throughout our entire group by

appointing, promoting, developing and

retaining black people, with emphasis

on women, people with disabilities and

the unemployed in the form of

learnerships.

A policy to take us forward

Altron’s commitment to BBBEE was initially

outlined in the Transformation Vision 2010

policy manual published in 2005. However,

following the achievement of our goals laid

out in that document, and the release of the

revised dti CoGP in February 2007, Altron

updated Vision 2010 to incorporate the

latest changes.

The implementation of BBBEE within the

Altron group is now driven by an updated

policy manual, namely Transformation

Vision 2012, which sets out the guidelines

and targets for transformation across all

Altron subsidiaries up to 2012. Altron’s

transformation strategy is founded on an

unwavering commitment to achieve a

workforce that is representative of the

demographics of the country, matching

available skills and business imperatives.

Recognising that sustainable changes take

time to implement, the company aims

initially to achieve a minimum compliance

level of at least a level 3 contributor, with

the ultimate goal of becoming a Level 1

contributor.

Extending our vision to 2012

Transformation is one of Altron’s key focus areas

and is driven by the company’s top leadership.

As a proud South African corporate citizen,

Altron is committed to playing a role in bringing

about meaningful transformation throughout the

Altron group and in the industry in which it

operates. Having embraced the principles of

transformation in the early 1990s, it remains ever

mindful of its responsibility to bring about

upliftment of historically disadvantaged

members of the community and to pave the way

for all racial groups to play a meaningful role in

the economy.

Altron welcomes the dti CoGP, gazetted in 2007,

which provide corporate citizens with guidance

and uniform measurement rules for BBBEE.

Beyond compliance

Altron believes that the survival of businesses in

South Africa will be determined by how well they

are able to adapt to the necessary socio-

economic changes currently taking place and,

apart from acknowledging the sound social and

economic reasons for implementing BBBEE, it

therefore views transformation as a business

imperative. The company recognises the many

business opportunities and benefi ts to be

derived from the increased participation of black

people in the country’s mainstream economy as

well as the ICT and power electronics sectors.

It also believes that its contribution to BBBEE will

only be sustainable if it is linked to strategic

growth areas. Therefore, by reconciling its

growth targets with the policy objectives of

BBBEE, the company will continue to facilitate

South Africa’s economic transformation through:

Direct empowerment – increasing the level of

black ownership of businesses and other

fi nancial assets, as well as raising the extent

to which black people, especially women,

youth, workers, rural communities and the

disabled, control enterprises;

Transformation


Socio-economic development

Enterprise development

Founded in 1996 by a group of

leading black professionals, Pamodzi

Investment Holdings (Pty) Limited is a

multibillion-rand investment company

seeking to become a strategic black

equity partner of leading businesses

in key South African industries.

Pamodzi has built a solid reputation in

the private equity industry by bringing

strategic value to organisations and

generating high returns for all

stakeholders through commercial

astuteness and entrepreneurial

acumen.

Izingwe is an empowerment group that

has matured to become a signifi cant

investor in mining, engineering,

infrastructure development and

logistics. It is an active and long-term

shareholder in Powertech that makes

focused and value enhancing

interventions in its underlying

investments. Izingwe’s strategic

partnerships with leading companies

are critical to its investment strategy.

Our anchor partnerships with Pamodzi

within Altech, Kagiso within Bytes and

Izingwe within Powertech continue to

add signifi cant value along with the

contributions of our other

empowerment partners.




OPERATIONALREVIEW



Transformation activities

Work is already under way across the Altron

group to build on the foundation of Vision 2010

and work towards the achievement of the goals

set out in the Vision 2012 document. Among the

activities being undertaken and plans for the

future, are the following:

Target setting

During the fi rst quarter of 2008, Transcom

started working with all companies in the Altron

group to translate Vision 2012 into actual

transformation targets with guidelines.

Interactions took the form of a series of round

table consultations with transformation

champions to help determine fi ve-year targets

on all areas of the dti CoGP. The executive

committee of Altron has approved realistic

targets for the various executives in the Altron

group ranging from Level 3 to Level 1 by 2012.

BBBEE performance will form part of the Altron

group’s ongoing performance management

indicators.

Consultation

Given the strategic importance of BBBEE

initiatives in the Altron group, whose successful

implementation depends on the resources within

Altron, the company recognises the importance

of engaging its internal stakeholders on the

issue of transformation. A change management

survey will be conducted by Transcom’s HR

subcommittee during 2008 to identify any

potential internal stumbling blocks to the

transformation process.

Adoption of Vision 2012

The transformation conference agreed on the

transformation path and targets going forward

and proposed certain resolutions to be adopted

by the Altron group in achieving these targets.

Subsequent to the conference, these resolutions

together with the Vision 2012, were approved

and adopted by the Altron executive committee

and the Altron board.

A committee to drive change

During 2007, the transformation committee

(Transcom) was reconstituted and a working group

appointed to steer the Altron group towards the

achievement of these targets and to coordinate the

initiatives of all group companies into a coherent

group BBBEE strategy.

Reporting to the Altron executive committee and

ultimately to the board, Transcom comprises

members of senior management and staff from

across the Altron group’s companies and is chaired

by Mr Onkgopotse Tabane, Group Executive:

Corporate Affairs. Various subcommittees have

been focused to oversee the implementation of all

dti CoGP. Its role is to accelerate the launch and

implementation of the Transformation Vision 2012

(Vision 2012), and has the following mandate

endorsed by the Altron executive committee:

promoting economic transformation in order to

enable meaningful participation of black people

in the economy;

achieving a substantial change in the racial

composition of ownership and management

structures and in the skilled occupations of

existing and new businesses;

increasing the extent to which communities,

employees, co-operatives and other collective

businesses own and manage existing and new

businesses and increasing their access to

economic activities, infrastructure and skills

training;

increasing the extent to which black women

own and manage existing and new businesses,

and increasing their access to economic

activities, infrastructure and skills training;

increasing employment of black disabled

employees;

promoting investment programmes that lead to

broad-based and meaningful participation in

the economy by black people in order to

achieve sustainable development and general

prosperity; and

empowering rural and local communities by

enabling them to gain access to economic

activities, land infrastructure, ownership and skills.

From a shareholder perspective,

Bytes SA has successfully

partnered with Kagiso, a respected

and reputable broad-based

empowerment group, which

currently owns 27% of Bytes SA.

Founded in 1993, Kagiso was

formed to fi nance and manage

grassroots projects aimed at

empowering women, the young and

the disabled of the country. Today

Kagiso remains one of the most

highly regarded NGOs in South

Africa, mainly because of its

working partnerships with civil

society, government and other

NGOs. Kagiso plays an active role

on the board of Bytes SA.

Altron’s Transcom under the chairmanship of Onkgopotse (JJ) Tabane is steering the group towards achieving its BBBEE targets.


which is championed by a CSI subcommittee,

established as part of the Transcom.

Altron’s goal is to spend 1% of net profi t after

tax on CSI, but in doing so to take into account

company performance. This benchmark fi gure

includes both fi nancial as well as non-fi nancial

contributions to projects.

Projects are evaluated annually by means of

feedback from the benefi ciaries on the

progress and benefi ts of the project, on-site

visits, collection of relevant statistics and

formal research. After each project is

completed, it undergoes an evaluation and

audit in order to determine its impact and

long-term sustainability. In all such audits,

Altron places an emphasis on quantifying the

cash and in-kind contributions to projects.

CSI focus areas

Altron has divided its CSI spend into focus

areas that are informed by a value system that

incorporates the following principles:

CSI must be aligned with the vision and

mission of the business.

The company must ensure that its CSI

practitioners follow a professional

approach.

Training of these practitioners is essential

and is carried out both internally through

the CSI committee of the Transcom, and

externally through attendance of

conferences and workshops.

Projects which receive funding must ideally

be aligned with the core business of the

company.

CSI projects must be implemented in such

a way as to ensure that the benefi ciaries

are able to sustain the ongoing viability of

the project, ie in terms of training and

through ongoing support and guidance.

Focus areas are also aligned with certain

national development imperatives as

highlighted by government.

Training and communication

One of Transcom’s key priorities for 2008 is

transformation education, communication and

knowledge sharing in the form of workshops

and seminars for various BBBEE practitioners

handling various dti CoGP codes in order to:

create a knowledge community of

practitioners in the Altron group;

develop proposals/draft resolutions to be

considered and adopted by group

leadership regarding the implementation of

the imperatives of Vision 2012 and to share

best practice with each other as well as other

companies in the industry;

motivate and help each other to fi nd practical

solutions to everyday problems in the

implementation of transformation goals; and

monitor the implementation of Vision 2012.

Conclusion

Transforming Altron is not a matter of complying

with legislation, but playing our part in ensuring

the domestic economy grows meaningfully and

sustainably. In ensuring that we meet our Vision

2012 goals, BBBEE will henceforth form part of

our ongoing performance management,

thus integrating it into business planning and

performance measurement.

Material issue

Socio-economic development

Altron recognises its responsibility as a

corporate citizen towards its stakeholders and

the communities within which it operates.

Corporate Social Investment (CSI), incorporating

Socio-Economic Development (SED) as per the

dti CoGP, is a major cornerstone of good

corporate citizenship and forms an integral part

of the Altron group’s BBBEE, transformation,

corporate accountability and governance

programme.

In line with Vision 2012, the principles of

BBBEE and the dti CoGP have been taken into

account in the development of a CSI policy,

Transformation continuedAltron’s CSI Policy

Funding communities that are directly

involved with the Altron group’s

operations

Using a consultative approach and

facilitating sustainable wealth creation

and self-suffi ciency

Facilitating sustainable wealth creation

and self-suffi ciency

Managing the impact of the group’s

relations with the community and

environment

Measuring the effectiveness and

sustainability of CSI projects and

partnerships

Conducting CSI in a responsible and

innovative manner that benefi ts both

benefi ciary and donor




OPERATIONALREVIEW



Job creation

Altron’s initiatives in job creation are divided into

two areas – those that fall under enterprise

development and preferential procurement as

part of the company’s supply chain, and those

that fall outside of the supply chain and which

are aimed at helping people to become

self-sustainable. It is this latter group to which

CSI funds are channelled.

Important projects in this focus area include the

Orion Wood Workshop and the Tshwane

Leadership Foundation. With the help of support

from Altron, the Orion Wood Workshop provides

disabled individuals with skills that allow them to

earn an independent living. Tshwane Leadership

Foundation also benefi ts one of society’s more

vulnerable groups through its outreach

programme to young girls and women who have

fallen victim to child traffi cking and prostitution.

With the help of support in operational costs

and capacity building, the foundation provides

the victims with life and vocational skills training

and the important opportunity of exposure to job

creation initiatives.

Community development and support

South Africa’s disadvantaged communities face

multiple challenges that result from poverty,

unemployment, crime and lack of infrastructure.

HIV/Aids poses a particular challenge, leaving

terminally ill patients in need of care, orphaned

children in need of food and shelter and families

in need of welfare assistance.

Altron’s Community Development and Support

portfolio is divided into:

health and social welfare – including primary

healthcare and welfare projects and

community Aids awareness programmes

aligned to government programmes; and

support for security and public safety

programmes – including training of

volunteers working at police stations,

providing equipment or outreach

programmes.

Underpinned by these principles, Altron’s

fi ve key social investment areas are:

Education and training;

Job creation outside the company

value chain;

Community development and support;

Conservation and environment; and

Arts, culture and sport.

Within each of these areas, the company

has selected various sub-categories that

form a logical fi t with its business.

Education and training

Education remains one of the biggest

challenges facing South Africa and is an

area where corporate investors can make

an enormous difference. The shortage of

such skills is underpinned by the poor

performance of high school learners in the

subjects of maths and science and the

associated lack of qualifi ed educators of

these subjects. This issue has been

highlighted by government as a key national

development imperative and one to which

Altron has paid particular attention in its

CSI programmes.

Education and training projects include

those that focus on:

the development of technology and

IT skills;

electronics and multimedia;

various engineering disciplines;

maths and science;

building and equipping of schools;

outreach programmes;

ABET; and

intern mentoring.

Skills development on the other hand

includes programmes that are aimed at

improving skills levels in communities with

the objective of assisting people in earning

a living and becoming self-suffi cient.

Arts and culture flagship project: East Rand School of the Arts

Battery Technologies provides

ongoing support to the East Rand

School of Arts (ERSA), where

learners’ progress was severely

hampered by a lack of basic

equipment that was critical to their

learning. By providing equipment,

materials, consumables and

infrastructure, the company has

contributed to the school’s

improved matric pass rate from

13.3% in 2003 to 75% in 2006.

Flagship project: Bridging the Digital Divide

Recognising the importance of

bridging the digital divide, Altron

has rolled out state-of-the-art multi-

media centres at schools in the

Western Cape, Gauteng and

KwaZulu-Natal. The project tracks

the pass rate of learners in each

school over time to establish

performance and the holistic nature

of these interventions ensures

that Altron’s investment has the

maximum possible impact and is

sustainable in the long term.


Transformation continued

Flagship project: Urban greening

Powertech Batteries has partnered with schools in disadvantaged communities to plant thousands of trees in their communities during national Arbour Week. These trees also help to offset the damaging effect of carbon emissions which contribute to global warming.

enterprises which will deliver sustainable

employment and growth in the ICT and

electronic services sector.

ALTECH

Altech Netstar executes monthly payments to

its black-owned fi tment centres in the middle

of the month. Furthermore it plans to set up

a task team in 2008 to investigate further

enterprise development opportunities and the

possibility of introducing black female-owned

fi tment centres. Altech Autopage Cellular is

currently in the process of identifying partners

whose turnover is less than R5 million as this

qualifi es them automatically as Level 4

contributors. Once classifi ed, Altech Autopage

Cellular can begin allocating distribution and

channel development costs towards the

development of these qualifying enterprises. In

addition, Altech Autopage Cellular will

commence identifying all black-owned and

empowered SMMEs and begin processing

more favourable payment terms for them.

ACS has been using the services of Katlego

Global Logistics, a 100% black-owned

company, for all freighting and forwarding

requirements for the past fi ve years. ACS also

ensures that Katlego’s invoices are paid within

a 15- instead of 30-day period, as suggested

by the dti, as this assists the SMME with cash

fl ow and thereby contributes to its long-term

sustainability.

POWERTECH

Powertech Transformers helped develop

Mdluli Sharp offi ce business, by investing

management time, training and equipment, and

assisting with various operating costs. In

Gauteng, DPM sources critical sub-assemblies

and raw materials such as radiators and tanks

from Ikusasa and Thaleka and paper-covered

copper wire from Matla Wire Systems.

Powertech IST has embarked on developing

small ESCOs (energy services companies)

through the transfer of skills.

Conservation and the environment

With environmental concerns and global warming

playing an increasing role in policy-making

throughout the world, Altron recognises its

responsibility to ensure that environmentally

sensitive areas are conserved and that all South

Africans benefi t from the rich natural heritage that

is inherent to the country. Altron’s involvement

within its Conservation CSI portfolio includes:

environmental awareness and clean-up

projects;

support of conservation initiatives and

organisations carrying out important

conservation work such as the World Wildlife

Fund and the De Wildt Cheetah programme;

and

disaster relief programmes during times of

fl ood and drought.

Arts, culture and sport

Arts, culture and sport play an important role in

creating hope among disadvantaged

communities, sustaining ideas and nurturing

leadership skills, particularly among young

people. Sport provides children with a healthy

pastime that keeps them occupied after school

and fosters the development of tolerance,

teamwork and discipline, while arts and culture

help to preserve and express South Africa’s rich

cultural heritage.

Recognising the important role that arts, culture

and sport have to play in developing a well-

rounded child, Altron supports various

developmental programmes that help to train and

nurture new talent and teams from historically

disadvantaged communities. The company

selects projects on the basis of their ability to

affi rm and promote all aspects of South African

culture, artistic expression and sporting codes.

Material issue

Enterprise development

Altron is committed to investing in the

development of small to medium black-owned

Bytes enterprise development programme

BSS has a strong enterprise

development programme that includes

helping ABSA with its rural and

township-based “banking the

unbanked” Mzansi programme. This

programme is expected to deliver

4 000 kiosk-based ABSA support

services to the unbanked population,

thereby meeting the 2010 targets

in the Financial Sector Charter.

A signifi cant portion of these kiosks

will have ATMs supplied and serviced

by BSS. The company is also involved

in the provision of some 2 000 ZOC

(Zionist Church/Orlando Pirates/Kaiser

Chiefs) containers into townships and

communities countrywide, which will

contain ATMs supplied and serviced

by BSS. Empowerdex has confi rmed

that all of these activities qualify as

enterprise development initiatives

and equate to around R12.5 million

per annum spend on enterprise

development. This equates to 6.8%

of the 2006/2007 net profi t after tax,

giving Bytes the full 15 points in terms

of the dti CoGP.




OPERATIONALREVIEW



BYTES

Bytes regards the placement of automatic teller

machines (ATMs’) and ATM service delivery to

the unbanked market as a key differentiator in its

enterprise development strategy. Bytes has

helped to accelerate the development and

sustainability of 109 small black enterprises by

introducing ATMs into their businesses and

providing fi nancial and operational support. This

innovative project also makes a signifi cant

contribution towards “banking the unbanked” as

required in the Financial Sector Charter, and

supports the banking sector’s Mzansi

programme.

BDS has for many years engaged in various

enterprise development initiatives that remain

ongoing and are valued in excess of 3% of net

profi t after tax each year. These include:

The outsourcing of previously in-house

business services, including gardening,

canteen and security services, to BBBEE

companies. BDS not only awards contracts

to these suppliers but also assists them with

rental, telephones, water and lights, and

ongoing training expenses.

Internal transfer of skills and ongoing training

to former employees who have been

provided the opportunity to start their own

small enterprises.

Since 1999 BDS has helped to develop

12 BBBEE business partners who sell and

maintain Xerox equipment as resellers.

Establishing BBBEE joint venture companies

with black partners, to support specifi c

sectors of the BDS market.

Supporting academic research

The Bill Venter/Altron Literary Award dates back 19 years and helps to promote research in tertiary

education that is published in a book form. It is presented annually to tertiary education recipients

who have made an outstanding contribution to research, and alternates between contributions to

the humanities and natural sciences each year. This award, prized as much for its signifi cant

monetary value as for its prestige, went to Prof Norman Owen-Smith of the University of the

Witwatersrand in 2007 for his book entitled Adaptive Herbivore Ecology.

Sports Flagship Project: FIFFA Kids Tournament

Altech Autopage Cellular has an ongoing investment in providing hundreds of young soccer players from underprivileged communities with new soccer kit. Its sponsorship of the FIFFA (Football Inspired Foundation For Africa) Kids Tournament gives South African children the opportunity to compete against soccer teams from around the world.

R245 000

R5 916 800

R1 538 400

R6 225 170

Community development and support

Sports, arts and culture

Environment

Education

CSI SpendCSI spend per focus area 2007


Environment

conveniently grouped them into fi ve focus

areas:

Climate change.

The need to comply with environmental

legislation, offshore standards, regulatory

environment and protocols.

Pollution and emissions.

Energy usage and reduction of peak

demand.

Environmental impact of products and

services.

Systems to manage our environmental

impact

At the level of each of Altron’s operations, key

environmental aspects of each operation have

been identifi ed and their impacts have been

evaluated. All signifi cant aspects and impacts

are identifi ed and logged in the ‘aspect

register’ kept available for this purpose at each

relevant operational site. The information is

then converted into a structured database for

evaluation and reporting.

Measurable objectives and targets are

established annually at management level, and

set out in the Environmental Management

System (EMS) documented at each relevant site,

as per ISO 14001. The EMS documents

including full procedures, records and work

instructions, provide a record for the annual

audit of our environmental performance. For the

purposes of internal reporting and management

review, regular environmental internal audit/risk

assessments are conducted and a management

review meeting is held monthly. While most of

Altron’s wholly owned subsidiaries do report on

quantitative data for key environmental impacts,

there is as yet no central database where this

data and performance against targets is

collected and collated. The Altron group is

currently extending its information management

system, Everest, to facilitate group management

of our environmental impact.

No environmental auditing/screening of

suppliers/contractors is done by the

Altron operates in sectors that were traditionally

regarded as having a low impact on climate

change. Recent research has shown, however,

that the digital technology industry, for example,

is responsible for 2% of global CO2 emissions,

the same share as the airline industry. Recent

evidence has also shown that businesses across

all sectors are exposed to the risks and

opportunities of climate change.

Locally and internationally, increasing costs of

energy are creating a strong business case for

energy savings. The need for sustainable energy

supply and energy effi ciency provides Altron

with a unique opportunity to market products,

services and the corporate brand in a carbon

constrained economy.

Altron has complied in all material aspects to all

relevant environmental legislation and there are

no fi nes, convictions or material clean-ups

necessary or outstanding.

Material issues identifi ed

Altron is committed to understanding its impact

on the environment, the associated risks its

operations pose to the environment and the

related economic opportunities that may be

exploited. The fi rst step is to understand the

material issues facing the company with regard

to the environment. Guidance in identifying

these has come historically from a number of

sources, including:

the legal and regulatory frameworks existing

in South Africa and other areas of jurisdiction

over the company’s operations;

the ISO 14001 standard for environmental

management systems;

the GRI’s G3 indicators;

the JSE’s SRI Index; and

independently commissioned reports,

such as MS Alexander and Associates’

compliance report for Altron group

operations.

While the frameworks above would indicate

a multitude of issues, the company has


Climate change

Compliance with legislation

Pollution and emissions

Energy use and effi ciency

Environmental impact of products and services




OPERATIONALREVIEW



investors, calls for disclosure of investment-

related information concerning the risks and

opportunities due to climate change, and

Altron is among the list of companies around

the world targeted by this project. Company-

specifi c risks and opportunities are:

Physical risks – increased occurrences

of storms and fl oods or the devaluation

of land as a result of climate change is

expected to have a direct physical

impact on the company.

Regulatory risks – companies are

experiencing a sharp increase in both

traditional legislation, such as permits

and energy-effi ciency requirements for

products and processes; and market-

based regulation, such as carbon taxes,

emissions-trading schemes and fuel

tariffs. These risks have particular

implications for large capital outlays on

projects with long life times.

Reputational risks – the perception that

a company may be failing to address

climate-change risks can cause a drop

in consumer confi dence and brand

value.

Litigation risks – although currently not

a major risk, increasing stakeholder

pressure increases the risk of litigation.

Economic opportunities – Altron can

benefi t directly not only from the sale of

products and services in the energy

effi ciency arena (assisted by the rising

cost in energy), but also from the various

carbon markets that have been created

worldwide, including the World Bank’s

carbon credit trading guarantee and the

United Nations Framework Convention

on Climate Change’s (UNFCC) Clean

Delivery Mechanism that awards tradable

credits for certifi ed emission reductions

(CERs) related to projects specifi cally

undertaken in developing nations that

reduce carbon-related emissions.

company at this time. However, the two main

suppliers (Fry’s Metals and Chemical

Initiatives) of raw materials to Powertech

Batteries are both ISO 14001 accredited.

Other suppliers, although not ISO 14001

accredited, are required to provide a written

commitment to the relevant operations that

they will conduct their business in an

environmentally friendly manner.

The various Altron group environmental

policies are displayed on internal notice

boards and are available on the relevant

operations’ websites. Training has been

provided for all key personnel who are

involved with the implementation and

maintenance of the EMS. Selected

employees have been trained as

environmental auditors and all employees

and contractors receive induction training,

which includes elements of the environment.

Material issue

Climate change

Recognising the gravity of the issue of

climate change, Altron commissioned

PricewaterhouseCoopers to assist the

company in drafting a climate change

position paper to guide the Altron group’s

response to the issue.

This paper was tabled at the Altron risk

management committee meeting on

30 April 2008. The climate change position

paper sets out how Altron is responding

to the challenge of climate change. This

includes a commitment to reducing energy

consumption and GHG emissions and

efforts to fi nding alternatives to the current

reliance on fossil fuels in the company’s

products and services. A summary of this

paper follows:

Identifying risks associated with

climate change

The Carbon Disclosure Project (CDP), an

international initiative backed by institutional

What is climate change?

Climate change can be defi ned as

the destabilisation of the earth’s

climate system caused by an

increase in the concentration of

atmospheric greenhouse gases

(GHGs). The earth’s atmosphere

contains GHGs, which trap a

certain amount of short-wave

radiation from the sun and

re-radiate it back to earth. In

essence, these gases act like a

blanket, and keep the earth at a

stable temperature. However, it is

now widely believed that human

activities have caused an increase

in these GHGs, and consequently

an increase in global warming.

Jack

Hoc

hfel

d


reduce emissions. This represents a real

opportunity to generate further income as

a CDM project.

Certain Powertech companies are well

positioned to address the needs of a future

carbon-constrained economy. Divisions

such as Rentech (solar panels) and

Crabtree (home automation solutions) can

market their products as energy effi cient

and low in carbon content, and increase

revenue and sales.

ALTECH

Altech’s major emissions arise from

production (Altech UEC and Altech

NamITech), service solutions in the form of

electricity consumption at call centres and

servers, and transport and logistics, which

are currently dependent on fossil fuel.

Altech is planning to carry out an

investigation into the climate change risks,

major GHG emission sources and

opportunities for developing low-carbon,

energy-effi cient products within the Altech

group in both the manufacturing and

service lines of business.

BYTES

Bytes acknowledges that although it is not

a manufacturing company, it is a high

energy consumer through both electricity

consumption (from servers, offi ces and call

centres), and fossil fuels (from back-up

energy generation, distribution networks

and travel). While energy effi ciency

products are already being implemented,

Bytes acknowledges that further

opportunities exist to improve on its

energy-effi ciency, especially in the data

centre environment.

Bytes has a strong association with

Xerox, being the largest reseller of Xerox

products in the UK and the exclusive

agent in South Africa and southern Africa.

Current status

Although Altron would not be regarded as

a signifi cant contributor to climate change

in terms of direct GHGs, the company

acknowledges that its normal business

activities consume signifi cant amounts of

energy, thereby contributing to increasing

levels of atmospheric GHGs.

There are signifi cant sources of greenhouse

gas emissions, such as in the specifi c

manufacturing lines in the Altron group, that

represent both a risk and an opportunity in

terms of climate change. Furthermore, as a

leading supplier of products and services

to the power industry, Powertech is ideally

positioned to leverage off the growing

demand for low-carbon, energy-effi cient,

products.

POWERTECH

Sulphur hexafl uoride (SF6) identifi ed in the

production process at Powertech Batteries,

as well as in Powertech Transformers, has

a global warming potential 23 900 times

that of CO2 and consequently is regarded

as a major source of greenhouse gas for

Powertech. But by eliminating leaks and

removing/reusing SF6 before maintenance

and decommissioning, Powertech can

avoid signifi cant GHG emissions, the basis

of a profi table Clean Development

Mechanism (CDM) project.

Powertech Transformers is the most

advanced Altron subsidiary in terms of

responding to climate change and has

reported on its GHG emissions, implemented

energy saving targets, and has embedded

energy effi ciency in its products and services.

They have recognised that climate change

is both a risk and an opportunity and have

responded to this by promoting energy-

effi cient products. Furthermore, Powertech

Transformers is assessing the switch from coal

to natural gas for its boiler burner to further

Environment continued

Commitment to the Global Compact

The Global Compact brings

companies together with UN

agencies, labour and civil

society to advance social and

environmental principles. As a

signatory to the Global Compact,

Altron commits to aligning its

operations and strategies with 10

universally accepted principles in

the areas of human rights, labour,

the environment and anti-

corruption.




OPERATIONALREVIEW



Bytes is a high energy consumer of electricity from servers, offi ces and call centres.

The recommendations received include:

determining the carbon footprint (GHG

inventory) for the Altron group of companies;

identifying and assessing carbon risks and

opportunities;

developing an Altron group climate change

strategy;

establishing feasible emission reduction

targets and potential carbon-trading

initiatives; and

maintaining an internal GHG reporting

system and subsequently improving external

reporting of emissions on a continuous basis.

Altron’s response to the issue of climate change

will be reviewed at board level and an

appropriate board member will be assigned

responsibility to investigate and progress the

continuation of this initiative.

Material issue

Compliance with environmental

legislation, offshore standards,

regulatory environment, protocols

Compliance with various environmental protocols

and standards is in many instances not only a

legal obligation, but is also a useful way for

companies to benchmark their environmental

performance against best practices and world

trends. Altron group companies comply with

environmental legislation where applicable and

in many instances have been proactive about

commissioning independent external

environmental audits on operations that have

a potentially high environmental impact. Such

audits go a long way towards helping these

Altron group companies to identify potential

problem areas and take the necessary steps

to rectify any issues.

While Xerox has already certifi ed its GHG

emissions, set reduction targets and

contributed regularly to the CDP, it does not

report on emissions associated with Bytes.

Bytes itself does not quantify or report on

its GHG emissions.

The way forward

Altron acknowledges the signifi cance of

climate change and the causes thereof

through industry’s production and

consumption of fossil fuels, primarily to

produce energy, but resulting in the

emission of GHGs, leading to climate

change.

Altron believes that climate change is

signifi cant both globally and locally and

fully supports the intentions of international

agreements such as the United Nations

Framework Convention on Climate Change.

Altron acknowledges and believes that a

strategy to address the issue of climate

change cannot be seen in isolation and

must be integrated with the sustainable

development strategies of the Altron group

as a whole. Altron acknowledges that in

order to understand its impact on climate

change effectively, and to assess the

opportunities for carbon trading realistically,

a baseline quantifi cation of its GHG

emissions (carbon footprint) should be

developed. Altron will work towards

ensuring that the carbon footprint is

developed at its operating companies.

A long-term carbon management strategy

will consequently be developed in response

to and in association with the carbon

footprint assessment of the Altron group.



Name ISO 9001: 2000 ISO 14001 Other

AAD Certifi ed Compliant but not accredited as it handles no hazardous substances

ROHS compliant (the European standard for removal of harmful substances)

Altech NamITech Certifi ed. Compliant with Europay MasterCard, Visa, as well as Verisign specs and standards

All scrap metals are being disposed of to third parties under controlled and compliant conditions

—

Altech Netstar — — 70% of components received lead-free

Altech UEC Certifi ed System had been updated for ISO 14001 compliance. Audit is being awaited

ROHS compliant

WEEE compliant

Aberdare Cables Certifi ed Standford Road (Port Elizabeth) and Pietermaritzburg operations – ISO 14001 certifi ed.

Gauteng operation in process of implementing ISO 14001 – target date March 2009

BASEC/ISO 9001 compliant


Certifi ed Certifi ed ISO 18001 certifi ed

DPM Cape Town Certifi ed Certifi ed ISO 18001 certifi ed

DPM Booysens Certifi ed — —

Powertech Batteries Certifi ed Certifi ed Ford Q1, VDA 6.1 and TS 16949s (motor vehicle industry standards)

Crabtree Certifi ed Expected end of 2010 —

Battery Technologies Certifi ed Expected end of 2010 SONCAP approved for exports to Nigeria


Certifi ed — —


Certifi ed — —




OPERATIONALREVIEW



Overall, both companies’ rating was satisfactory,

indicating that although some control

weaknesses were identifi ed which require

minor improvements, such weaknesses, taken

together or independently, do not signifi cantly

impair the overall system of internal control.

Key fi ndings from the report include suggestions

that Calidus obtain an ISO 14001 certifi cation by

the end of 2009, a recommendation which the

company has plans to carry out. (Details of the

fi ndings pertaining to Crabtree are dealt with

alongside under Pollution and Emissions.)

Powertech Batteries has identifi ed lead

exposure and contamination, acid exposure

and electricity consumption as its most

material environmental issues. Lead acid

batteries contain sulphuric acid and

aggressive and toxic substances which are

harmful to the environment and to the health of

people who are subject to high levels of

exposure. In order to mitigate the risks relating

to lead, Powertech Batteries ensures that

environmental reports are regularly obtained

from independent assessment consultants.

Reporting on environmental issues is given the

highest level of importance. Powertech

Batteries’ policy with regard to lead is to

minimise the exposure of the same to the

environment, its employees and incidental or

casual contact. Its policy in regard to acid is to

prevent low pH contamination of the

environment and humans. Our policy in regard

to electricity consumption is to reduce our

costs to the fullest extent possible.

Battery Technologies is in the process of

pursuing ISO 18001 accreditation and it is

expected that Powertech Batteries Port Elizabeth

will have achieved accreditation by the end of

January 2009. Those sites that are not

ISO 18001-certifi ed and low-impact sites, are

controlled by local management with oversight

through frequent reports conducted by

independent assessment authorities. These sites

are, however, ISO 9001 accredited.

POWERTECH

Powertech Transformers commissioned external

audits by accredited bodies during the year

and is both ISO 14001 and ISO 18001-certifi ed.

The company also has a third-party certifi ed

ISO 14001 EMS in place for Pretoria West.

DPM’s Cape Town operation is also third-party

ISO 14001 certifi ed and management regularly

reviews any issues raised by the Altron internal

audit function, external audit groups and

customer audits. Due to space constraints and

the condition of equipment, DPM’s management

does not believe it will be possible for the

company’s Booysen’s operation to obtain

ISO 14001 certifi cation and thus proposes to

relocate the operation to a new, more suitable

site that will comply with the ISO standards.

During 2007, Calidus and Crabtree

commissioned MS Alexander and Associates,

an independent consulting fi rm, to conduct an

environmental compliance report on both

operations. These reports established:

whether the companies have successfully

identifi ed any pertinent environmental risks;

whether such risks are being successfully

addressed;

whether environmental management systems

are in place; and

The overall status and rating of the

operations compared to both local and

international standards.

The report covered the full ambit of

environmental issues including noise pollution,

ISO 14001, executive policy statement, legal

permits, international agreements and

protocols, hazardous substances, chemicals

used/stored, emissions to the atmosphere,

rehabilitation (remediation of property), waste,

illumination, complaints or criminal charges,

water, toxic waste and radio active

substances, major hazardous installations

(MHi), dust, fi re spread, PCBs, clean-up

costs, sustainability, and emergency planning.

Energy solutions at Strike

Powertech Energy Solutions (PES),

a division of Strike, provides

standby power solutions in the form

of diesel generators. It recently

secured a R113 million contract to

supply 45MW of energy to a large

mining house.


Jose Simoes, Business Development Manager (left), and Derick Deyzel, Divisional Executive of Retail ATM (right), from Bytes Specialised Solutions with the UPS system.


equipment and oils. The PCB leakages from

DPM’s transformer storage tanks into the soil

occurred prior to the chemicals being banned.

However, DPM has worked closely with the

Department of Water Affairs to monitor and

manage the situation. DPM has also sampled oil,

well and groundwater samples at its other

premises in order to determine if similar

leakages may have occurred.

The comprehensiveness of this monitoring

and management programme is evident in the

fact that DPM was granted its ISO 14001

accreditation.

Heavy metal plume at DPM’s Booysens plant

The Booysens plant underwent a similar study

and although there was no evidence of any

PCBs in the ground samples, heavy metals were

detected. These are thought to be more related

to mining activities than transformer operations

but management has adopted a proposal to

monitor the movement of the plume at the plant.

Transformer oil spillages

From time to time each plant has minor

transformer oil spillages but these are of no

major signifi cance. Each such incidence is

recorded and preventative measures taken.

Oil seepage plume at Powertech Calidus

The MS Alexander & Associates

environmental compliance report carried out

at Calidus highlighted the fact that there has

been gradual seepage of oil on the ground

workshop area, leading to a plume of about

3 metres in diameter. This is not a major spill

but still requires clean-up, which Calidus is

attending to. The report further suggested

that Calidus educate all supervisors and

managers on how to safely clean and contain

spillages and plans are in place to train all

employees about the impact of spillages, on

the environment and on human lives. Calidus

has also made budgetary plans to purchase

additional spill kits.

ALTECH

To comply with European Community

requirements, including RoHS and Waste

Electrical and Electronic Equipment (WEEE)

directives, Altech UEC had eliminated all lead

and harmful substances used in its production

processes.

Material issue

Pollution and emissions

Pollutions and emissions are identifi ed through

the environmental auditing processes that

Altron has in place at operations that display a

high exposure to these risks. Data on the most

pertinent risks is collected annually in order to

measure the trends in our performance over

time. The current results, compared with

previous years’ performance, are tabulated in

table E.16 of the 2007 environmental survey

conducted for our submission to the JSE SRI

Index (see Appendix C on page 89).

A summary of pollutions and emissions, as well

as the company’s response to them follows:

DPM’s shot-blasting plant

In its tanks manufacturing division, DPM’s

shot-blasting plant is fi tted with separating

equipment to minimise emissions to the

atmosphere while the emissions from zinc

spraying fumes and dust are trapped using a

water curtain. At the tank cleaning facility, acid

is neutralised and discharged only once it

meets the standards set out by the Department

of Water Affairs. Any areas where oil fi lling of

transformers takes place are adequately

insulated to avoid oil penetration.

Polychlorinated biphenyls (PCBs) at DPM’s

Cape Town premises

During the certifi cation audit for ISO 14001

accreditation, polychlorinated biphenyls (PCBs)

were discovered in the ground soil system of its

Cape Town premises. PCBs are oil-like chemicals

and before their toxic nature was discovered,

they were widely used as insulation in electrical

Bytes partners with Absa to turn crisis into opportunity

Retail ATM, a division of Bytes

Specialised Solutions, responsible for

placement and management of Retail

ATMs for Absa, transformed a

signifi cant business risk into a new

stream of revenue. During an eight-

month pilot, the company developed

a power supply unit that is driven

by specially designed batteries

developed by Battery Technologies in

the Powertech group. These batteries

provide an uptime far exceeding

normal battery packs and similar

conventional UPS systems.




OPERATIONALREVIEW



eliminated by a change in processes for

which Powertech Batteries has committed

R50 million.

Sulphuric acid seepage risk at Powertech

Batteries

At Powertech Batteries an epoxy fl oor coating,

which is a mixture of ‘silicone sand’ and a

sealant, is applied in the charge room areas

as well as in other areas where smaller

quantities of sulphuric acid are used. The

coating prevents any seepage into the

subterranean soil and water and is either

completely stripped off once a year (during

shutdown) or carefully repaired where the

coating has been breached.

Material issue

Energy usage and effi ciency

Energy usage and effi ciency is identifi ed

through the environmental auditing processes

at Powertech and measured separately at

each of its operations. Data is collected

annually in order to measure the trends in

performance over time. The current results,

compared with previous years’ performance,

are tabulated in table E.13 of the 2007

environmental survey conducted for our

submission to the JSE SRI index (see

Appendix C on page 89). A summary of our

initiatives to reduce our energy usage and

increase the overall energy effi ciency

throughout Altron follows:

Powersave@Altron: Meeting our

collective responsibility to save

energy

Altron recognises that every South African

stakeholder, from big industry and corporates

to small companies and individuals, has the

responsibility to save energy and reduce the

demand on power. As such, the Altron group

has implemented Powersave@Altron, a

group-wide energy-saving awareness

programme.

Heavy metal seepage at Crabtree in Wadeville

At Crabtree in Wadeville, the MS Alexander &

Associates environmental compliance report

found that lead powder, containing lead

stearate, tribasic lead sulphate and kulubrite,

is seeping from the waste disposal skip into

the stormwater system when it rains. Better

storage will help to solve the problem, which

is currently being caused by the skip being

over-full and Crabtree has taken immediate

action to dispose of the waste in a less

haphazard manner. The lead waste is also

being removed to an area away from the

stormwater drain system. Crabtree is in the

process of implementing systems to have

drain sampling conducted on a regular basis,

which will enable it to immediately identify and

control any future seepage of any kind into

the stormwater system.

Sulphuric acid emissions and pollution risks at

Powertech Batteries

Powertech Batteries uses two hazardous

substances, sulphuric acid and lead, during

the manufacture of lead acid batteries. The

handling of the acid causes continual minor

spillages which if not correctly controlled can

detrimentally affect the environment by

polluting the soil and subterranean water

systems under the concrete fl oor. Sulphuric

acid vapour emissions and lead seepage are

also environmentally detrimental. Recognising

its responsibility to mitigate such risks,

Powertech Batteries spent R130 000 on

upgrading the scrubber systems at its battery

factories in Port Elizabeth, which will reduce

sulphuric acid atmospheric emission.

Lead oxide dust and lead vapour at Powertech

Batteries

Lead oxide dust is being extracted into bag

houses following a R1.6 million capital

expenditure on automotive dust extraction at

the plant. There are plans for lead vapour

from conventional grid casting to be

Rentech combats theft of solar units

Theft of solar units has been a

considerable obstacle to their

expansion in South Africa. Rentech

has now harnessed international

technology from its supply partner

Uni-Solar, to produce solar modules

designed to be glued to a surface

in such a way that an attempt to

remove a unit will damage it

irreparably. Telkom is using these

modules, sticking up to four at a

time onto a metal backing sheet,

which means that if thieves want to

make off with the solar modules,

they need to be geared up to move

a unit that is 2.8m long and 1.6m

wide and can weigh up to 60kg.

State-of-the-art technology stores

the energy produced by the solar

modules in a maintenance-free

battery through a maximum power

point tracking charge controller.

some of these units are being used

to power traffi c lights during

periods of load-shedding.

Solar powered traffi c lights at intersections in Johannesburg supplied by Rentech.



Material issue

Environmental impact of products and

services

Altron is in the interesting position that it markets

products and services that have both a positive

and negative impact on the environment,

presenting the Altron group with both risks and

opportunities. Waste is identifi ed through the

environmental auditing processes at Powertech,

and a number of indicators have been identifi ed

that relate to this issue. These are measured

separately at each of the company’s operations.

Data is collected annually in order to measure

the trends in our performance over time. The

current results, compared with previous years’

performance are tabulated in table E.14 of the

2007 environmental survey conducted for our

submission to the JSE SRI Index (see

Appendix C on page 89). A summary of our

initiatives to reduce our waste and improve

recycling or recovery throughout Altron follows:

POWERTECH

Powertech IST provides products and solutions

that contribute towards sustainable development

and sound environmental management. These

include off-gas fi ltration, fl ue gas cleaning,

process gas conditioning and compressed air

and other gaseous processes in the fl uid

systems sphere. Other solutions include the

treatment of industrial water to remove pollutants

which render the water suitable for re-use as

industrial or potable water.

Products and services from Powertech IST

Otokon

Powertech IST Otokon has expertise in energy

management and has fl ourished as a market

leader in providing demand-side management

services, with specialisation in process and

production rescheduling, compressed air and

cooling systems, industrial and residential hot

water control, co-generation and heat recovery

and motor systems. This company also plays a

key role in helping Eskom fi nding solutions to

decrease energy demands.

Reporting to the risk management committee,

a task team steered by Altron’s CE and other

key executives and members of senior

management, has determined three

objectives:

To create power-saving awareness among

all staff members.

To motivate and activate Altron group

companies to have their businesses

audited and the necessary energy-

effi cient changes applied in order to save

on their electricity costs and in this way to

qualify for Eskom’s rebate programme.

To create a basket of energy-saving

solutions which will be marketed internally

and externally.

In addition to the group-wide energy-saving

initiatives, Altron subsidiary companies are

making their own contribution to the reduction

of energy consumption.

POWERTECH

Powertech Transformers has replaced all its

factory lights with more energy effi cient

lighting, while Powertech IST has committed

to reducing power consumption by 15% –

20% and has embarked on a programme to

retro-fi t its entire premises with electronic

ballasts for its fl uorescent lights and to install

motion sensors that will ensure lights are

switched off automatically if nobody is

present in the building.

Powertech Batteries has invested R2 million

in the installation of power factor correction

equipment at its Port Elizabeth factory, which

has resulted in signifi cant reduced peak

consumption and the power factor rating has

increased from 0.7 to a new level of 0.9.

ALTECH

All of the Altech operations have invested in

additional standby generating capacity to

reduce their respective dependency on

Eskom power.

Hydrogen Fuel Cell System by Powertech IST

Powertech IST introduces the

GenCore 5 kW Fuel Cell System to

southern Africa from Plugpower Inc in

the USA. Over 500 of the GenCore

Fuel Cell systems are currently in the

fi eld in the United States, Turkey, the

United Kingdom, Asia, Europe and

over 40 systems in South Africa.

Installations are providing back-up

power for telecommunication networks

(fi xed line and wireless) and industrial

uninterruptible power supply

applications.

A fuel cell is an electrochemical

device, with virtually no moving parts,

that converts chemical energy directly

into electricity. Heat and pure water

are the only by-products. It produces

silent and clean direct current

electricity, like a battery. The inputs

required are hydrogen and air, while

the environmentally friendly outputs

are electrical power, heat and water.

There is no noise, no vibration and no

pollution.




OPERATIONALREVIEW



ALTECH

Altech UEC’s packaging material waste is

recycled through a service provided by

Mondi, while steel waste is collected for

recycling by the Reclamation Group.

Hazardous waste is disposed of through

Wastetech, which issues Altech UEC with

certifi cates of safe disposal. Altech UEC

recycles its plastic waste and, in compliance

with European standards (RoHS and WEEE),

also recycles 66% of all decoders (such

fi gures are weight-determined).

Altech NamITech is in the process of

conducting a pilot project, issuing 10 000

corn-based biodegradable cards to one of its

major banking customers for evaluation and

approval, in order to establish potential

usability and market acceptance by their

client base. At ACS, any waste material that

cannot be recycled is disposed of using

specialist waste disposal companies

compliant with environmental best practices.

Recycling and saving water at Powertech

Batteries

In the past year, Powertech Batteries has

focused on recycling and water-saving

initiatives. It conducted a feasibility study on

water bath charging in its industrial plant, which

could result in a saving of 66 kilolitres of water

per day. The study on lead oxide waste paste

and water in the industrial battery plant has

been completed and a system of paste

recovery, which prevents wastage and further

treatment of lead oxide, has been devised. The

lead oxide is used in a damp waste format in the

downstream process, which reduces paste

wastage, water wastage and effl uent

neutralisation wastage by some 80% to 90%.

Wooden pallets which are subject to high

degrees of waste contamination are being

phased out in favour of reusable plastic pallets,

and Powertech Batteries has achieved a

conversion rate of approximately 25% in this

regard.

Around 160 tonnes of Powertech Batteries’ lead

waste is reclaimed and recycled while its liquid

effl uent is treated and discharged into the

municipal sewer. About 80 bags of personal

protective equipment are sent to landfi ll per

month with a licensed hazardous waste

contractor. Plastic is reclaimed and recycled

and all plastic wrapping and contaminated

wooden pallets are treated as hazardous waste

and disposed of accordingly. Powertech

Batteries’ scrap collection rates are at an all-time

high, with 100% of the scrap in respect of sales

concluded during the months of December

2007 and January 2008 being collected.

This rate of collection is monitored by SABMA

(South African Batteries Manufacturing

Association) which reports that this is the

highest achievement among all international

battery manufacturers.

Scrap battery recycling at Powertech Batteries, through its Willard brand

Powertech Batteries has embarked

on a scrap battery recycling

programme to raise funds for

planting indigenous trees in

disadvantaged communities.

Working in partnership with Food

and Trees for Africa, Powertech

Batteries is therefore not only

helping to offset its carbon footprint

by planting trees that naturally

reduce carbon dioxide in the

atmosphere and therefore control

global warming, but is also uplifting

local communities through urban

greening. The lead-acid batteries

are recycled in a multi-phase

process that creates lead ingots

from the lead grids and oxide

and plastic pellets from the

plastic parts. Old battery acid is

processed and treated to become

either water which is released into

the sewerage system, or sodium

sulphate, and odourless white

powder used in laundry detergent,

glass and textile manufacturing.


Health and safety

aspects are monitored during monthly

safety inspections.

Employees play an active role in H&S in

the Altron group and SHE is an indicator

on every employee scorecard. H&S

representatives are appointed from the

workforce and all employees participate

in risk assessment via safety meetings

and mission-directed work-team

meetings, which form part of a monthly

SHE committee meeting. Security

personnel are contracted to guard access

to the Altron group premises and provide

protection of personnel and assets. There

is also security on all manufacturing

operations which includes CCTV

monitoring.

In addition, employees and their family

members who have been affected by

crime have access to counselling, where

required, through the employee

assistance programme. Powertech

Transformers has introduced the

Employee Wellness Programme run by

Procare which provides a service to

employees including those affected by

crime, while clinics and healthcare

departments are on hand at Aberdare

Cables to assist employees and refer

them to specialist support agencies

where necessary.

Altron’s internal audit department, in

conjunction with independent consultants,

MS Alexander & Associates, reports back to

the relevant risk management committees

on H&S risks throughout the Altron group.

POWERTECH

During 2007, Powertech Transformers

achieved one million man-hours without

a single lost-time injury. This company

(including DPM) has ISO 18001

certifi cation and all operations have H&S

committees in place, which champion the

broad spectrum of internal H&S matters.

Material issue

Internal Health and Safety

Altron takes the Health and Safety (H&S) of

all its employees very seriously, with the

CEO of each of the operations taking

ultimate responsibility for this issue. It is

guided by an internal H&S policy that covers

the entire Altron group. Each operation

within the Altron group complies with

the Occupational Health and Safety

Act (OHASA).

Management of H&S at Altron

Altron’s H&S systems include

comprehensive training, targets, risk

identifi cation, monitoring of performance

indicators, employee representation and

access to counselling. H&S is integrated

into line management responsibility as

part of their key performance areas. Line

and senior managers are appointed in

terms of section 16 of the OHASA Act.

Staff receive H&S training which

includes representation training, hazard

identifi cation and incident investigation.

A safety induction programme is targeted

at new employees and the company

conducts ongoing general safety

awareness training. Each year, fi rst-aiders

and fi re fi ghters are trained and Safety,

Health and Environment (SHE)

representatives appointed and trained.

Selected employees have been trained

as auditors in preparation for the

implementation of the ISO 18001 System.

The entire Powertech Batteries operation

will be assessed prior to the implementation

of ISO 18001 in October 2007.

The Altron group conducts regular

monitoring of key H&S performance

indicators (KPIs) which include frequency

rate, reportable injury-free frequency rate

and an occupational clinic report. The

engineering manager monitors the SHE

manager’s KPIs bi-annually and all safety


Internal health and safety

HIV/Aids

Targets for H&S improvements

Maintain compliance through safety

audits and periodic safety inspections.

Internal and external audits, SHE

meetings and inspections.

A target of October / November

2008 has been set for full certifi cation

of the OHASA 18001 H&S System

(Powertech Batteries).

Incident rate, body part injuries,

implementing ISO 18001 by

March 2006 (Aberdare Cables).

Performance data for OHASA

CompanyAnnual DIFR

Annualsick rate

No of fatalities

Bytes Communica-tion Systems

Zero ±15% 1 (heat attack – not at work)

Bytes Corporate Services

None 29 man days

None

Bytes Document Solutions

None 4 563.5 man days (Jan to Dec 2007)

None

Bytes Healthcare Solutions

None 963 man days

None


None 3 637.5 man days (Jan to Dec 2007)

5 (4 car accidents and1 heart attack)


None 31% None




OPERATIONALREVIEW



potential biological effects of lead are

constantly monitored, and Powertech

Batteries has a range of additional

investigations which are conducted when

lead is suspected of causing ill health.

Education and counselling sessions

ensure that employees are thoroughly

familiar with the sources of lead in the

workplace, the potential dangers of

exposure and the importance of

biological monitoring and medical

surveillance. Precautionary measures are

emphasised, including the use of

personal protective equipment and

adherence to environmental,

housekeeping and personal hygiene

practices. In addition, meticulous training

is conducted on disposing of waste

material containing lead and cleaning

sites at which lead or material containing

lead has been used, handled or

processed. Powertech Batteries’ SHE

manager conducts regular rotational visits

and assists in the upgrading of any

non-compliant operations.

ALTECH

Apart from Altech UEC and Altech

NamITech, most of Altech’s other

operations pose a relatively low H&S risk

due to the fact that they are not

manufacturing in nature. However, Altech

still lists employee H&S as a key priority.

H&S committees with nominated

representatives and trained on-site

fi rst-aiders champion employee H&S

issues. Altron conducts regular H&S

audits on Altech and the Altech group

companies receive regular visits from the

Altech Risk Manager. All new employees

receive induction training which includes

an H&S component.

During the year Altech UEC trained fi ve

new fi rst-aid practitioners, using externally

accredited training contractors. This

increases the number of qualifi ed fi rst-

During the year, SABS conducted H&S

audits and no signifi cant issues were

raised.

At DPM, internal safety auditors and the

Altron internal audit department carried

out H&S audits. These highlighted the fact

that the Booysens plant is conducting

shot blasting, zinc spraying and painting

activities in areas not conducive for these

processes, an issue that will be rectifi ed

with the relocation to new premises.

DPM communicates to employees

regularly on SHE matters through briefi ng

sessions given by supervisors, various

training sessions given by the SHEQ

department and general communication

by plant general managers during

business briefi ng sessions.

Crabtree has identifi ed certain areas

where noise levels are over 85dB. These

are clearly demarcated and Crabtree

enforces the use of personal protective

equipment (PPE) in all such areas

to protect employees from damage

to hearing and hearing loss.

At Powertech Batteries, hazardous

substances such as lead and

sulphuric acid are present in varying

concentrations. Powertech Batteries has

developed rigorous procedures for

monitoring blood-lead levels in those

employees who are exposed to lead while

working. These include annual tests in

non-lead areas to monthly monitoring of

employees working in lead areas. If an

employee’s blood-lead level exceeds

legal limits, explicit mitigation steps are

immediately instituted. These include

removing the affected worker from the

lead area, investigating the possible

source and notifying the appropriate

co-workers and safety representatives.

No employees are returned to the lead

area until their blood-lead levels are well

below the stipulated threshold. The

Performance

H&S performance at Aberdare Cables

Disabilityinjury

frequency rate Sick rate

PMB 1.5% 3%

PE 3.03% 3.3%

Gauteng 0% 3.21%

Greenhills 0% —

Edenvale 0% .014%

H&S performance at Powertech

Per-formance data

Total No of workers

2006/2007

2005/2006

Annual disabling injury rate

3 294 (Powertech factory workers) 0.9 1.2

Annual sickness rate

3 294 (Powertech factory workers) 4.2 3.6

No of fatalities 0 0

Employee educational and counselling sessions form part of induction processes.


Health and safety continued

Material issue

HIV/Aids

Addressing direct impacts of HIV/Aids

While previously relying on government

published HIV/Aids statistics to gauge the

impact of HIV/Aids on its businesses, Altron has

come to recognise the necessity of conducting

an in depth study of prevalence rates across its

diverse operations. Whereas in the past,

operations have had ad hoc policies and

programmes in place including voluntary

counselling and testing, Altron aims to provide

guidance at group level to operations in terms of

policy and practices for addressing HIV/Aids,

and has consequently embarked on a major

study of the impact of HIV/Aids across all its

operations.

Working in conjunction with Aurum Institute of

Health Research, a not-for-profi t public benefi t

organisation that conducts research and

supports companies in assessing and mitigating

the impact of HIV/Aids, Altron is developing a

phased approach to managing this impact that

will consist of both a study of the actual

prevalence and impact of HIV and Aids on its

business, and assessing the effect of HIV on key

suppliers and market groups.

This project commenced in March 2007 and

made the following fi ndings and

recommendations in 2008:

Findings:

– Prevalence in Altron is estimated between

5% and 11%.

– Economic impact is predicted to vary

between 0.4% of payroll in Bytes to 1,1% in

Powertech.

– The direct risks in Altron are manageable

and HIV does not currently pose a direct

threat to the business operations in any of

the three sub-holding groups.

– The most signifi cant risks are likely to take

the form of supply chain disruptions, loss

of skilled individuals and HIV risks in

customer bases.

aiders to 25 and there are plans to increase the

number of employees trained in fi re-fi ghting to 47.

At Altech NamITech, an occupational doctor and

nursing sister have been contracted to provide

on-site services to employees, including HIV and

Aids support services.

At Altech Netstar, the key occupational H&S risk

area is the helicopter recovery service. In June

2007, a helicopter crashed on take-off and the air

tracker sustained severe injures that required

more than 60 days off duty. In all such incidents a

full enquiry is carried out in accordance with fl ight

safety legislation to establish the cause of the

accident and counselling provided for affected

employees. In November 2007, there was an

accident in which two people were injured but no

deaths were reported.

In April 2008, an accident occurred at the Rand

Airport in which both the pilot and air tracker were

killed. Investigations into the cause of the accident

are still under way. While the responsibility for

these incidents lies with the subcontracted

company, National Airways Corporation (NAC),

Altech Netstar nonetheless views these incidents

and ongoing safety with utmost concern. All pilots

are currently undergoing competency tests

administered by an independent authority.

Altech Autopage Cellular uses external suppliers

to train and provide information sessions to staff

on H&S issues. Audits are carried out on a regular

basis, the most recent of which was conducted on

the company’s older building. While the results of

this audit are still pending, Altech Autopage

Cellular has embarked on a revamp of the

building and the completion of a new building has

gone a long way to rectifying staff overcrowding

issues at the old site.

Altech’s operations subscribe to all OHASA H&S

requirements and have monthly safety committee

meetings where all issues are discussed, minutes

taken and decisions acted upon.

Air response agreement

Altech Netstar has entered into an air

response agreement with the National

Airways Corporation (Pty) Limited

(NAC) in terms of which they provide

a 24 hour airborne reaction service.

NAC provides the pilots and aircrafts

to Altech Netstar and bears full

responsibility for the safety of the

aircraft and crew, despite Altech

Netstar branding.




OPERATIONALREVIEW



education and awareness effort. This was

done by way of a workshop with senior

management during which the origins,

magnitude and projected outcome of the

epidemic were discussed. Future efforts

were discussed and decided upon.

The training of peer educators by Epicentre

and the provision of training kits followed

this workshop.

Initiatives


The occupational health clinic at Powertech

Transformers follows international safe work

standards to prevent transmission,

including a needlestick protocol as well as

antiretrovirals (ARVs) on site. This goes for

the fi rst aiders as well. Powertech

Transformers has an ongoing education

programme that displays posters and other

training aids around the worksite. This

programme culminates on 1 December

each year with a voluntary counselling and

testing campaign. The peer educators that

were trained three years ago will be

retrained in 2008.

Medical, nursing and counselling services

are available on certain sites. Medical aids

have established disease management

programmes and provide ARVs and

prophylactic drugs. Immune boosting

meals called e-pap are provided by various

subsidiary companies.

Sponsoring community-based care

Altron sponsors the publication of an

annual Aids guide for distribution across

the country. Altron also provides an annual

sponsorship to SA Medical Foundation

and Somerset Hospital for treatment, care

and support. See also The Altron Group In

Social and Enterprise Development Report

on the Altron website www.altron.co.za.

Recommendations: Altron should:

– undertake an evaluation of its

suppliers to ensure that adequate

systems are in place to ensure that

there are no disruptions, particularly

at Powertech;

– assess higher risk units situated in

provinces such as Gauteng and

KwaZulu-Natal;

– formulate a comprehensive HIV/Aids

policy to be adopted across the Altron

group; and

– monitor absenteeism rates as this can

highlight increasing prevalence and

identify individuals who may benefi t

from a wellness programme or other

intervention.

Altron is formulating a response based on

these fi ndings and recommendations, but

will also be informed by international best

practice and the dti CoGP. Local guidelines

studied include NEDLAC, Anglo American,

Goldfi elds, and other leading employers in

heavy industry.

Awareness

Various operations have established

HIV/Aids committees represented by

management, unions and the workforce.

Activities predominantly focus on education

and awareness programmes. A Knowledge,

Attitudes and Practices (KAP) survey was

performed by the National Institute

Community Development and Management,

an external service provider in conjunction

with the Sociology Department of the VISTA

University. The fi ndings were presented to

the workforce and played a signifi cant role

in raising awareness. Further education and

awareness efforts were focused to address

the gaps identifi ed by the KAP survey.

A second external service provider,

Epicentre, was contracted to add to the


Appendix A

Index to issues identified by the JSE SRI

Social, environmental and other ethical (SEE) issues/risks Relevance and significance

Reference in report

Compliance with impending or potential laws/regulations

Relevant and significant. Legal compliance and risks are reported on bi-annually at both the Altron risk management and audit committee levels. Detailed reports setting out all litigation at Altron, Altech, Bytes and Powertech group levels are tabled at these meetings. A report evidencing such legal compliance and litigation matters is available on request.

46 – 47,95 – 96,

100, 103 – 105

Product quality/recall Relevant and significant. Comprehensive quality assurance programmes and certifications are in place throughout the Altron group to ensure that the risk of a product recall is mitigated. Insurances are in place to cover the group in the event that a recall is necessary.

Product-related litigation Relevant but not significant. n/a

Reputation issues linked to supply chains

Relevant but not significant. The number of retail goods supplied by the Altron group is minimal.

n/a

Reputation issues linked to NGO/community campaigns

Not applicable. n/a

Reputation issues linked to human rights

Not applicable. n/a

Bribery/corruption Relevant and significant. Our approach is detailed in the corporate code of conduct as contained in the Altron policy manual. The same standards applied to South Africa apply to our foreign operations.

46 – 47

Occupational health and safety Relevant and significant. We are guided by the regulations prescribed in terms of OHASA.

80 – 82

Attraction and retention of skilled/key employees

Relevant and significant. The loss of key skills throughout the Altron group has been identified as a material risk.

59 – 60

Impact on workforce of HIV/Aids

Relevant but not significant. An independent study has been conducted by the Aurum Institute of Health on the prevalence and incidence of HIV/Aids on the Altron group. See the commentary under HIV/Aids.

82 – 83

Risk of major negative environmental events

Relevant and significant. These risks are separately reported on by an independent consultant MS Alexander & Associates and detailed reports provided at risk management committee meetings as well as via the Altron internal audit department. ISO14001 systems are in place throughout the Altron group and corrective and remedial action plans frequently implemented to obviate against any environmental degradation.

70 – 77

Risks or opportunities from future carbon emissions restrictions

Relevant but not significant. A position paper has been drafted by PricewaterhouseCoopers addressing these issues from an Altron group perspective.

71 – 73

Risks or opportunities from developing sustainable products/processes

Relevant and significant. See Altron Products and Services Guide at www.altron.co.za

See Sustainability report 39 – 84

In respect of social, environmental and other ethical (SEE) challenges, risks and opportunities, Altron monitors potential liabilities and

takes appropriate action to mitigate against these risks. As and when liabilities occur, these are addressed at the appropriate forums

and in the appropriate manner ie in annual financial statements, risk management committee reports, etc and the necessary and

appropriate disclosures made to shareholders either in terms of the media or the annual report.




OPERATIONALREVIEW



2007 Environmental Survey (for JSE SRI Index)

E12. ECO-EFFICIENCY

The following data can be used as denominators to produce eco-efficiency ratios (GRI 2.8). This data relates to the same operations as

the data on energy, waste emissions, etc. requested in the next tables E13 – E16. Data has been included for the last three reporting

years for the companies in the Altron group with the highest environmental impact.

Company-wide Units 2004/5 2005/6 2006/7

Volume of production or services Aberdare Cables – copper tonnes 34 000 38 000 48 000

Powertech Transformers – MVA 4 557 6 983 6 055

Altech – decoders/set-top boxes 595 000 723 000 853 000

Number of FTE (full-time equivalents)

Calidus 102 114 113

Floor space area Aberdare Cables – m2 112 000 112 000 112 000

Powertech Transformers – m2 47 500 47 500 47 500

Calidus – m2 7 500 7 500 7 500

Altech N/C N/C N/C

Turnover Aberdare Cables – Rm 1 400 1 800 3 100

Calidus – R’000 80 107 87 717 106 823

Operations covered Units 2004/5 2005/6 2006/7

Volume of production or services Powertech Batteries – battery cells 1 602 175 1 577 293 1 505 843

Number of FTE (full-time equivalents)

Powertech Batteries520 537 516

Floor space area Powertech Batteries – m2 55 669 55 669 55 669

Turnover Powertech Batteries – R’000 454 035 466 278 492 771

Appendix B


Appendix B continued

E13. ENERGY DATA

The table below contains absolute figures for different divisions separately, particularly where denominators are in different units.

GRI ref. Indicator Units % coverage 20004/05 2005/6 2006/7 Target

EN3 Energy use Powertech Batteries – KWh 53 418 610 39 331 437

Aberdare Cables – MWh 44 240 51 071 57 904

Powertech Transformers – GJ 100 68 771 68 715 69 119

DPM – kg 561 708 400 000

Calidus – KWh 100 85 000 91 000 105 000 100 000

Altech – KWh 100 250 000 475 000 306 250 Rationalise with

ISO 14001 in 2nd quarter

of 2008

EN8 CO2 (tonnes) Powertech

Batteries – Tonnes 45 642.35 32 085.03

Powertech Transformers – Tonnes 100 3 088 3 072 3 004

EN30 Other




OPERATIONALREVIEW



E14. WASTE DATA

Data is provided in the form of absolute figures as well as percentages of product. Different divisions are listed separately, noting the

specific units of the denominators.

GRI ref. Indicator Units % coverage 2004/5 2005/6 2006/7 Target

EN11 Waste generation (total tonnes)

Aberdare Cables – Tonnes 100 100 6 800 9 300

Powertech Transformers – Tonnes 100 2 999

DPM – kg 6 000 4 000

Calidus – Tonnes 100 266 294 326 290

Altech – Tonnes 100 1100 1180 2007: +/- 1400

=/- 1200 rationalise in Q2 of 2008

with ISO 14001

to landfill (%) Aberdare Cables 40 39 39 35

Altech 20 25 20 300 200

to incineration (%) Altech 10 15 10 0 10

to energy recovery (%)

EN11 recycled or reused (%)

Powertech Batteries – kg 3 550 266 3 686 333 3 330 290

Aberdare Cables – % 30 31 33 38

DPM – kg 12 500

Altech 70 65 70 85 90

EN31 Hazardous waste generation

Aberdare Cables – Tonnes 15 14 13 10

Powertech Transformers – Tonnes 144

DPM – Tonnes 2 500 1 500

Other Aberdare Cables – Tonnes 15 16 15 15


Appendix B continued

E15. WATER USE DATA

Data is listed for the different divisions separately, noting changes to the units of denominators for the different activities.

GRI ref. Indicator Units % Coverage 20004/05 2005/6 2006/7 Target

EN5 Water consumption (m3)1

Powertech Batteries – m3 174 521 124 447

Aberdare Cables – Megalitres 100 251 234 248 255

Powertech Transformers – m3 100 24 705 28 357 29 342

Altech – k

1 760 1 880 20 312

Looking at savings as

part of ISO

DPM – k 12 756

Calidus – k 100 9 215 9 777 15 574 15 000

Other

1Sum of all freshwater used, excluding cooling water.

E16. AIR EMISSION DATA

GRI ref. Indicator Units % Coverage 20004/05 2005/6 2006/7 Target

EN10 NOx Powertech Batteries – Tonnes 174.51 120.80

Altech – Tonnes n/a n/a n/a n/a n/a

SOx Powertech Batteries – Tonnes 372.32 257.73

Altech n/a n/a n/a n/a n/a

EN9; EN30

VOC Powertech Transformers – Tonnes 100 27 37 44

Altech – litres 200 0 0 0

Particulate matter Powertech Batteries – Tonnes 14 270.87 9 878.44

Other




OPERATIONALREVIEW



Appendix C – GRI content index

Altron is self declaring a C-level of application. The following table lists the GRI indicators that apply.

G3 Indicator Description Page/s

Str

ateg

y

1. Statement from senior decision-maker about the relevance and importance of sustainability to Altron, the overall vision and strategy for the short term, medium term and long term particularly with regard to managing the key challenges associated with economic, environmental and social performance

16, 20 – 24

Org

anis

atio

nal p

rofil

e

2.1 Name of the organisation 2

2.2 Primary products, brands, and/or services 2 – 3

2.3 Operational structure of the organisation 2 – 3

2.4 Head office location IBC (203)

2.5 Number of countries where Altron operates, and names of countries with major operations relevant to the sustainability issues covered in this report

8 – 9

2.6 Nature of ownership and legal form 2 – 3

2.7 Markets served 2 – 3

2.8 Scale of reporting organisation including: number of employees net sales total capitalisation broken down in terms of debt and equity quantity of products or services provided

6212 – 13, 44, 12912 – 13160

2.9 Significant changes in the reporting organisation during period under review N/A

2.10 Awards received during the reporting period 41

Rep

ort s

cope

and

bou

ndar

y

3.1 Reporting period 40

3.2 Date of most recent previous report 40

3.3 Reporting cycle 40

3.4 Contact details for further information about this report 41

3.5 Process for: determining materiality process for prioritising topics in the report identifying stakeholders expected to use this report

45

3.6 Report boundary 40

3.7 Limitations on the scope or boundary of the report 40

3.8 Basis for reporting on joint ventures, subsidiaries, leased facilities and outsourced operations 40

3.12 GRI table 89

Gov

erna

nce

4.1 Governance structure of the organisation 95 – 107

4.2 Indicate whether the chairman is also an executive officer, and if so, reasons for this arrangement 97

4.3 Number of independent and/or non-executive members 97

4.4 Mechanisms for shareholders and employees to provide recommendations or direction to the board 51, 107

4.14 List of stakeholder groups engaged by the organisation 45

4.15 Basis for identification and selection of stakeholders with whom to engage 45

Per

form

ance

indi

cato

rs

EC1 Direct economic value generated and distribution, including revenue, operating cost, employee compensation, donation and other community investments, retained earnings and payments to capital providers and governments

44 – 45

EC7 Procedures for local hiring and proportion of senior management hired from the local community 61, 105

EN10 Percentage and total volume of water recycled and reused 88

EN23 Total number and volume of significant spills 70

EN26 Initiatives to mitigate environmental impacts of products and services and extent of impact mitigation 70 – 73, 78 – 79

EN30 Total environmental protection expenditures and investments by type n/a

LA3 Benefits provided to full-time employees that are not provided to part-time or temporary employees 110 – 111

LA7 Rates of injury, occupational diseases, lost days, absenteeism and fatalities 80, 81, 82

LA8 Education, training, counselling, prevention and risk-control programmes in place to assist workforce members, their families or community members, regarding serious diseases

81, 82

LA11 Programmes for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings

59, 60, 63

LA13 Composition of governance bodies in terms of diversity and breakdown of employees per category according to gender and other relevant indicators of diversity

62


Altron shareholder analysis – compiled by Verify Solutions utilising the company’s transfer secretaries’ records as at 29 February 2008

Shareholder spread – ordinary shares

Number ofshareholdings % Number of shares %

1 – 500 shares 1 234 37.21 279 986 0.26

501 – 1 000 shares 613 18.49 502 605 0.48

1 001 – 5 000 shares 970 29.25 2 380 803 2.25

5 001 – 10 000 shares 178 5.37 1 344 221 1.27

10 001 – 50 000 shares 213 6.42 5 010 093 4.74

50 001 – 100 000 shares 42 1.27 3 055 750 2.89

Over 100 000 shares 66 1.99 93 095 673 88.11

3 316 100.00 105 669 131 100.00

Distribution of shareholders – ordinary shares


Banks 38 1.15 2 068 867 1.96

Close corporations 51 1.54 77 376 0.07

Endowment funds 20 0.60 345 698 0.33

Holding company 1 0.03 50 630 527 47.91

Individuals 2 363 71.26 13 551 123 12.82

Insurance companies 20 0.60 4 373 057 4.14

Investment companies 21 0.63 4 691 681 4.44

Medical aid schemes 9 0.27 77 294 0.07

Mutual funds 120 3.62 9 855 918 9.33

Nominees and trusts 413 12.46 2 788 851 2.64

Other corporations 47 1.42 205 983 0.20

Private companies 82 2.47 1 245 589 1.18

Public companies 8 0.24 55 340 0.05

Repurchased shares 1 0.03 3 246 469 3.07

Retirement funds 122 3.68 12 455 358 11.79

3 316 100.00 105 669 131 100.00

Shareholder analysis




OPERATIONALREVIEW



Shareholder spread – participating preference shares


1 – 500 shares 4 421 55.13 662 934 0.28

501 – 1 000 shares 971 12.11 750 658 0.32

1 001 – 5 000 shares 1 591 19.84 3 684 743 1.55

5 001 – 10 000 shares 321 4.00 2 360 659 0.99

10 001 – 50 000 shares 405 5.05 9 422 132 3.97

50 001 – 100 000 shares 97 1.21 6 793 920 2.86

Over 100 000 shares 213 2.66 213 863 231 90.03

8 019 100.00 237 538 277 100.00

Distribution of shareholders – participating preference shares


Banks 56 0.70 11 831 359 4.98

Close corporations 90 1.12 182 146 0.08

Endowment funds 51 0.64 778 863 0.33

Holding company 1 0.01 16 775 627 7.06

Individuals 6 291 78.45 15 900 311 6.69

Insurance companies 46 0.57 17 352 759 7.30

Investment companies 39 0.49 22 846 812 9.62

Medical aid schemes 14 0.17 533 182 0.22

Mutual funds 221 2.76 57 173 871 24.07

Nominees and trusts 758 9.45 9 019 033 3.80

Other corporations 53 0.66 274 885 0.12

Private companies 148 1.85 1 054 727 0.44

Public companies 9 0.11 41 870 0.02

Repurchased shares 2 0.03 27 698 875 11.66

Retirement funds 240 2.99 56 073 957 23.61

8 019 100.00 237 538 277 100.00


Shareholder analysis continued

Stock exchange performance during the past six years

2008 2007 2006 2005 2004 2003

Ordi-nary

Partici-pating

pre-ference

Ordi-nary

Partici-pating

pre-ference

Ordi-nary

Partici-pating

pre-ference

Ordi-nary

Partici-pating

pre-ference

Ordi-nary

Partici-pating

pre-ference

Ordi-nary

Partici-pating

pre-ference

Market value per share (cents)

– at year end 3 700 3 600 4 478 4 200 2 550 2 250 1 555 1 538 1 105 1 125 820 750

– highest 5 600 5 100 5 000 4 500 2 610 2 350 1 725 1 665 1 150 1 150 900 890

– lowest 3 500 3 320 2 350 2 100 1 460 1 385 1 100 1 099 740 680 740 720

Number of shares traded (000s) 14 496 89 796 9 023 68 696 20 079 49 069 18 879 49 903 6 634 23 504 7 604 22 980

Value of shares traded (R’000) 654 634 3 866 991 271 172 1 965 779 398 947 903 016 254 339 649 083 61 880 19 927 61 542 179 560

Total volume traded as % of total issued shares 13.72 37.8 9.28 32.2 20.7 23.1 19.4 23.9 6.8 11.5 7.8 11.4

Shareholder spread

Ordinary shares Participating preference shares

Numberof share-holdings %

Numberof shares %

Numberof share-holdings %

Numberof shares %

Public 3 307 99.73 42 387 086 40.12 8 007 99.86 186 412 344 78.48

Non-public 9 0.27 63 282 045 59.88 12 0.14 51 125 933 21.52




OPERATIONALREVIEW



Major shareholders holding 2% or more of the company’s listed ordinary shares as at 29 February 2008

Numberof shares %

Biltron (Pty) Limited 50 630 527 47.91

Venter, WP 8 694 070 8.23

Public Investment Corporation 7 411 052 7.01

Old Mutual 5 013 247 4.74

Altron Finance (Pty) Limited 3 246 469 3.07

Liberty Group 2 942 411 2.78

Investment Solutions 2 233 692 2.11

Major shareholders holding 2% or more of the company’s listed participating preference shares as at 29 February 2008

Numberof shares %

Public Investment Corporation 28 911 738 12.17

Altron Finance (Pty) Limited 27 698 875 11.66

Old Mutual 22 514 038 9.48

Biltron (Pty) Limited 16 775 627 7.06

Liberty Group 14 697 698 6.19

Nedbank Group 13 196 553 5.55

Investment Solutions 9 091 604 3.83

Sanlam 8 969 539 3.78

Venter, WP 6 246 731 2.63

Investec 5 232 303 2.20


Shareholder analysis continued

Holders of participating preference shares are entitled to

receive financial statements, notices of general meetings

and other reports issued by Altron from time to time.

No resolution for the voluntary winding up of Altron or the

creation of shares ranking in priority to or pari passu with the

participating preference shares may be passed, unless the

participating preference shareholders have given their prior

consent thereto at a separate class meeting of the

participating preference shareholders.

Bonus or capitalisation awards


participate in any bonus or capitalisation issues or other offer

of securities made to the holders of the ordinary shares on

the basis that, in respect of each participating preference

share so held, the holder thereof will be offered or entitled to

receive such number of participating preference shares or

like securities having the same voting rights as the particular

preference shares on a basis and terms relative to each

ordinary share.

Distribution of assets


participate in any offer or distribution of assets made by

Altron to ordinary shareholders. The offer or distribution in

terms thereof in respect of each participating preference

share shall be on the basis and terms relative to each

ordinary share.

Winding up

Holders of participating preference shares are entitled on

winding up to receive out of the surplus assets in priority to

the holders of the ordinary shares, payment of the nominal

value per participating preference share. Thereafter, once the

ordinary shares have received a distribution of the equivalent

nominal value per participating preference share, each

participating preference share shall rank equally with the

ordinary shares in any surplus then remaining.

Variation of rights

The rights attaching to the participating preference shares

may be varied only with the prior consent thereto at a

separate class meeting of the participating preference

shareholders.

Summarised terms of the participating

preference shares

Altron has two securities listed on the JSE Limited (JSE),

namely ordinary shares and participating preference shares.

The ordinary and participating preference shares, other than in

respect of voting, rank pari passu for earnings and dividends.

The participating preference shares have been classified by the

JSE Limited as an “N” share, due to their lower voting rights.

Accordingly, both classes of shares must be taken into account

when determining the market capitalisation of Altron. The terms

of the participating preference shares are summarised below:

Par value (nominal value)

The participating preference shares have a par value of

0.01 cent per share while the ordinary shares have a par value

of 2 cents per share.

Earnings and dividends

The participating preference shares rank pari passu with the

ordinary shares in terms of earnings and dividends.

Voting

Holders of participating preference shares may attend general

meetings of the company but may only vote in the following

circumstances:

Where no dividend on the participating preference shares in

respect of any financial year has been declared and paid

within six months of the end of the financial year.

Upon the winding up of Altron.

The resolution before the meeting involves the disposal

of the whole or substantially the whole of the undertaking

of the company or the whole or the greater part of the

assets of the company.

The resolution before the meeting directly affects the rights

attaching to the participating preference shares.

Where dividends remain in arrears and unpaid for more

than six months.

Otherwise in accordance with Altron’s articles of association.

In such circumstances, a holder of the participating preference

shares will be entitled on a poll, to that proportion of the total

votes of Altron which the aggregate of the nominal value of the

participating preference shares held by him bears to the

aggregate nominal value of all the shares in Altron.




OPERATIONALREVIEW



Altron corporate governance report

communication to stakeholders on non-financial issues, and our

endeavours to influence suppliers and contractors to improve

their own non-financial performance. We are also pleased to

have improved our ranking (from 33 to 28) and overall score

in the second annual Accountability Rating, which assesses

South African companies’ sustainability practices across

the dimensions of strategy, governance, performance

management, stakeholder engagement and public disclosure.

In 2007 Bytes, our wholly owned subsidiary was voted best

annual report in its sector, acknowledging that company’s

strong management and reporting standards.

Compliance

The requirement to uphold the principles of discipline,

independence, responsibility, fairness, social responsibility,

transparency and accountability of directors to all stakeholders

is entrenched in Altron’s internal controls and policy procedures

governing corporate conduct. In assessing the practices and

conduct of the group, two factors have been balanced:

Entrepreneurial freedom to take business risks and

initiatives leading to superior levels of performance and

return on shareholders’ investment.

Conforming to corporate governance standards, which can

impose constraints on management.

Within these guidelines the board has provided entrepreneurial

leadership to the company within a framework of prudent and

effective controls which enables risk to be assessed and

managed.

Independent rating of compliance with King II

The board is satisfied that Altron has made every practical

effort to comply with all material aspects of King II during the

review period, and these are reviewed regularly to incorporate

changes and developments in this field. Following the internal

self-assessment conducted by Altron in 2006 as to its levels of

compliance with corporate governance principles and

standards, the company engaged Corporate Governance

Accreditation (Pty) Limited (CGA) in 2007 to provide an

independent corporate governance rating and accreditation of

Altron and Bytes. This was successfully completed in 2007,

resulting in Altron and Bytes becoming the first companies in

South Africa to be independently accredited by CGA, and the

only companies on the JSE to be independently rated.

Introduction

From its humble beginnings as a small family owned

electronics firm with five employees in 1965, Altron has grown

to become Africa’s leading diversified high-technology group.

It now has an annual turnover exceeding R21 billion, maintains

a strong balance sheet, and has more than 14 000 employees

in over 150 companies and associates on five continents.

Notwithstanding this exponential growth, Altron has remained

a family-centric business with a strong culture of kinship. In

fact, the group’s success is attributable, in large measure, to

the commitment that has come from family ownership and the

personal passion and business continuity this has brought.

But our growth and success has required more than this:

meticulous attention to detail, careful cost control, and prudent

stewardship of our capital have all helped create value. At the

same time, our flexibility and ability to innovate keep us at the

leading edge of technology.

Despite strong family ties and our bias towards

entrepreneurship and action, the Altron group ensures that

it implements prudent and transparent corporate governance

procedures, in line with leading practice both locally and

abroad. We are also committed to ensuring that the interests

of Altron’s management are aligned with those of all its

shareholders, and are acutely aware of the need to be

accountable to and to communicate more fully with a far

broader range of our stakeholders in society.

To this end, our corporate governance report now provides

a more detailed account of both the financial and the range of

non-financial risks to which the group is exposed. We have also

embraced a number of management processes that reflect our

commitment to an integrated view of environmental, social and

economic considerations that affect, or are affected by, our

businesses. Accordingly, since 2005 we have been augmenting

and improving the information contained in our sustainability

report, to better reflect the Global Reporting Initiative’s

recommendations on sustainability reporting, as well as our

unique operating context in South Africa.

Our ongoing commitment and improvement in respect of

triple-bottom-line issues is reflected in two broad-based

measures of sustainability performance in South Africa.

Since 2004, when Altron first qualified for the JSE’s Social

Responsibility Investment (SRI) Index, we have incrementally

improved our performance and ranking in terms of our


Altron corporate governance report continued

Approach

Leadership

The board supports the long-term sustainability of corporate

capital, balanced economic, social and environmental

performance and due consideration of legitimate stakeholder

involvement. The detailed responsibilities of the board, as set

out in its charter (initially approved in April 2002 and revised

and adopted by the board annually since February 2006),

include the duty to:

exercise objective, informed judgement on the business

affairs of the group;

determine and monitor the implementation of strategic plans

and financial, environmental and social objectives;

ensure that a system of policies and procedures is in place

and maintained and that suitable governance structures

exist to ensure the efficient and prudent stewardship of

the group;

ensure Altron complies in all material respects with all

relevant laws, regulations and codes of practice;

review and evaluate business risks regularly and ensure

comprehensive, appropriate internal controls are in place;

define levels of authority, reserving specific powers for itself

and delegating other matters to the chief executive;

continually monitor the exercise of delegated authority;

ensure an appropriate balance of power and authority on

the board so that no one person or block of persons has

unfettered power; and

identify and monitor non-financial aspects relevant to the

company’s business and ensure that the company acts

responsibly towards stakeholders with a legitimate interest

in its affairs.

Accountability

The board takes overall responsibility for the success of the

company. Its role is to exercise leadership and sound

judgement in directing the company to achieve sustainable

growth and to act in the best interests of stakeholders.

Results of independent rating of Altron and Bytes

The CGA-led concept has now been accepted by the

Institute of Directors. Further uptake will see the

development of a governance index. CGA is a world-first,

combining an internal tool with an external verification

process, thus enabling a board and its office bearers to be

fully informed of their responsibilities and duties. It also

provides a transparent window to all shareholders and is a

unique platform for full corporate governance accreditation.

All areas of governance are covered by the gap analysis

including, board functions, composition, roles and duties;

duties and responsibilities of executive and non-executive

directors, chairmen and CEOs; board committee

governance; risk management, internal and external audit;

and the full spectrum of integrated sustainability issues

including environmental, social responsibility, ethics,

diversity, BBBEE and HIV/Aids issues.

Altron obtained a result of 79% placing it at the top end

of the Silver Awards scale (between 65% and 80%) while

Bytes achieved a result of 67% thereby also attaining

Silver status.

Particular areas that the report highlighted as requiring

attention were:

Stakeholder relationships – The disclosure of voting issues

by institutional investors and their ability to influence

corporate strategy.

Integrated sustainability: – In order of priority, the main area

of weakness identified was that of issues relating to

corporate ethics.

In response to the CGA process, Altron has run a check on all

the items that were noted in the exception report. The two

issues noted above are dealt with in the sustainability report

included in this document (see pages 51 and 45 to 46

respectively). The company is satisfied that no material issues

were identified, and those that were have, for the most part,

been dealt with since the report. Altron will again be audited

by CGA in June/July 2008 to ascertain to what extent it has

improved upon its corporate governance structures and

processes.




OPERATIONALREVIEW



Particular areas of responsibility for the chairman include

strategic planning, relationships with principals, government

and customers, group economic empowerment, corporate

relations, top-level contact with regulatory bodies, and advice

and guidance on local and overseas acquisitions.

This level of involvement by the chairman is considered

essential by the board, given the intrinsic knowledge and

experience the chairman brings to bear in the effective running

of the board and guidance to the operational team. The

chairman’s duties are governed by a formal board-approved

mandate regulating the terms of reference of his office, and

this is reviewed from time to time when appropriate.

Operational management of the group is the responsibility of

the chief executive, Robert Venter. His responsibilities include,

among others, developing and recommending to the board a

long-term strategy and vision for the organisation that will

generate satisfactory stakeholder value, developing and

recommending to the board annual business plans and

budgets that support the organisation’s long-term strategy,

and managing the affairs of the organisation in accordance

with its values and objectives, as well as the general policies

and specific decisions of the board.

3. Directors

The non-executive directors bring value and insight to the

board. They are individuals of high calibre and integrity and

provide a depth of wisdom based on knowledge and

experience on a wide range of issues. The composition of the

board ensures a balance of power and authority, and negates

individual dominance in decision-making processes.

The non-executive directors have no fixed term of appointment

and no service contracts with Altron. Letters of appointment

confirm the terms of their service. Their fees are independent

of the group’s financial performance and they receive no share

options or bonuses.

Executive directors are bound by the standard terms and

conditions of employment for all Altron employees where their

notice periods are short-term, not exceeding 60 days. Directors

are subject to retirement by rotation and re-election by

shareholders at least once every three years under article 16 of

the articles of association. In this regard the Altron nomination

committee is active in annually assessing the performance of

those directors standing for re-election and makes formal

recommendations to the board and shareholders in this regard.

Transparency

Full and timeous disclosure of information to stakeholders is

prescribed by various policies governing communication and

conduct with stakeholders. During 2006 a formal disclosure

policy was approved by the Altron board (and subsequently

updated in February 2008), which regulates the nature, content

and timing of all disclosures of price-sensitive and non-price-

sensitive information to the investment community and

stakeholders.

Board structure and related matters

The board’s charter sets out its role, composition, materiality

levels, delegation of authority, proceedings at meetings,

director induction as well as composition and role of board

committees. The board charter is reviewed annually to ensure

its continued compliance with local and international best

practices and changes to the South African regulatory

environment.

1. Composition

Consistent with the company’s board charter, Altron has a unitary

board, constituted to both lead and control the company. Of the

14 serving directors, six are independent non-executive directors

(ie directors that are independent of management and free from

any business or other relationship which could materially interfere

with the exercise of their independent judgement), one is

non-executive and seven are executive directors. During the

period under review Ms Barbara Masekela was appointed as an

independent non-executive director to the Altron board and

Ms Diane Radley resigned as chief financial officer to take up the

position of Group Finance Director of Old Mutual SA (Pty) Limited.

2. Chairman and chief executive

In line with best practice, the roles of chairman and chief

executive are separate. The board is led by Dr Bill Venter,

founder and former chief executive of the group.

The chairman presides over meetings of the board, guiding the

integrity and effectiveness of the board governance process.

This includes ensuring that no individual dominates the

discussion, that relevant discussion takes place, that the

opinions of all directors relevant to the subject under

discussion are solicited and freely expressed and that board

discussions lead to appropriate decisions.



Board and director responsibilities – members interact highly

effectively, board acts in a cohesive and responsible

manner. Policies are regularly reviewed and updated.

The chief executive is articulate, attentive and responsive,

while the other board members are competent and available

when needed for advice.

Board culture and relationships – there is a sense of

collegiality, minority views are respected and senior

management shows sufficient courtesy to the board.

Similar to the board evaluation, Altron’s board conducted a

committee evaluation (an exercise over and above the

self-evaluation exercises conducted by each of the committees

earlier in the year). Responses indicated that the various

committees function effectively with regard to competency,

teamwork, governance and reporting. Areas of weakness

included the paucity of independent non-executive directors

and black female appointees. Also of concern is the Altron

audit committee’s oversight of the subholding companies’

(both public and private) audit committees which can affect the

Altron financial performance. As a result of the recent

enactment of the Corporate Laws Amendment Act, the Altron

audit committee resolved to assume the role and

responsibilities of the Bytes and Powertech audit committees

with the latter companies establishing financial review and risk

management committees which will report in at both the

subholding company and at the Altron audit committee level.

The areas of non-compliance identified by the board are

receiving attention and where appropriate have been remedied.

5. Company secretary

All directors have access to the advice and services of the

group company secretary who is responsible to the board for

ensuring compliance with procedures and applicable statutes

and regulations. To enable the board to function effectively, all

directors have full and timely access to all information that may

be relevant to the proper discharge of their duties and

obligations. This includes information such as corporate

announcements, investor communications and any other

developments which may affect Altron or its operations.

The office of the group company secretary is responsible for

facilitating this access.

To avoid conflicts of interest, board members must disclose

their interests in material contracts involving the group,

including shareholdings in Altron as well as any other

directorships. Board members must recuse themselves when

participation in deliberations or decision-making processes

could in any way be affected by vested interests.

4. Effectiveness of the board

The board evaluates its own effectiveness at least every two

years or more often if required by board changes, and

underwent a self-evaluation exercise in 2007. The self-

evaluation, completed by all 14 board members, examined six

areas, the findings of which can be summarised as follows:

Strategy and planning – generally believed to be clear,

understandable and appropriate for the markets in which

the group operates. Strategic planning has improved with

more interaction between executive and non-executive

directors. One suggestion was to focus more on direction

and less on ‘financials’, and for the chief executive’s report

to review key strategic issues.

Board structure and role – generally satisfied with spread of

talent, effective performance and involvement in major

business decisions. While delineation of roles was found to

be clear, a recommendation for consideration is the possible

reduction of executive representation on the main board,

while increasing the non-executive component, preferably

with independent non-executive directors. Further

recommendations included appointing additional black

directors to the board and ensuring a well-articulated

succession planning policy for the chairman and the

remaining executive directors.

Meeting processes – found to be excellent, effective and

professional. Of concern is the overload of statutory and

governance issues, resulting in less time available for

business.

Performance monitoring – generally believed that financial,

business and compliance systems are in place and

regularly monitored. There is a clear understanding of

Altron’s business risk, although an annual debate at board

level around risk as distinct from at a risk management

committee level would be valuable.




OPERATIONALREVIEW



director of the JSE and several other listed entities presented a

seminar to the group’s directors entitled “Leisurenet – lessons

to be learnt”.

The group company secretary is responsible for the functions

specified in section 268(G) of the Companies Act, of 1973

(as amended) (the Act). All meetings of shareholders,

directors, and board sub-committees are properly recorded as

per the requirements of section 242 of the Act. The removal of

the group company secretary would be a matter for the board

as a whole.

6. Board meetings

A minimum of four board meetings and two strategic sessions

are scheduled per financial year. Additional board meetings

may be convened when necessary. Four board meetings and

two strategy sessions were held during the past financial year.

The accompanying table details the attendance by each

director at board and strategic meetings during the year

under review:

All directors, executive and non-executive, may liaise with the

group company secretary on agenda items for board meetings.

Where appropriate, the directors may also consult with

independent professionals and advisors, at Altron’s expense.

The group company secretary provides counsel and guidance

to the board, individually and collectively, on their powers and

duties. He is also responsible for the development of director

training. All new directors are appropriately inducted to Altron

by the group company secretary and sponsor, which includes a

briefing on their fiduciary and statutory duties (including without

limitation the JSE Listings Requirements) and responsibilities as

well as two- to three-day induction visits to group operations

around South Africa. In addition, ongoing support and

resources are provided to directors in order to enable them to

extend and refresh their skills, knowledge and understanding

of the group. Professional development and training is provided

through regular updates on changes and proposed changes in

laws and regulations affecting the group or its businesses and

professional and skills training. During 2007, Nigel Payne a

Attendance at meetings

Director

Board Strategy

2007 2008 2007

May Aug Oct Feb Aug Nov

Dr WP Venter (chairman) ¸ ¸ ¸ ¸ —3 ¸

RE Venter ¸ ¸ ¸ ¸ ¸ ¸

MC Berzack ¸ ¸ ˚ ¸ —3 ¸

N Claussen ¸ ¸ ¸ ¸ ¸ ¸

PMO Curle ¸ ¸ ¸ ¸ ¸ ¸

MJ Lamberti ¸ ¸ ¸ ˚ —3 ¸

MJ Leeming ¸ ¸ ¸ ¸ —3 ¸

Dr PM Maduna ¸ ¸ ¸ ¸ —3 ¸

BJM Masekela —1 —1 —1 ¸ —1 —1

JRD Modise ¸ ¸2 ¸ ¸ —3 ¸

PD Redshaw ¸ ¸ ¸ ¸ ¸ ¸

Dr HA Serebro ¸ ¸ ¸ ¸ —3 ˚

CG Venter ˚ ¸ ˚ ¸ ¸ ¸

PL Wilmot ¸ ¸ ¸ ¸ —3 ¸

˚ Submitted apologies and was granted a leave of absence in terms of the company’s articles of association.1 Appointed to the Altron board on 1 February 2008.2 Participated by way of teleconference.3 This strategy session excludes the non-executive director component of the board including the office of the chairman.



– performing any internal audit or internal audit outsourcing

services for Altron or any of its relevant subsidiaries;

– performing any valuations on any business assets of

Altron, or any of its relevant subsidiaries, for which the

external auditors will be required to subsequently issue

an audit opinion;

– the provision of corporate finance advice, assistance or

services to Altron or any of its relevant subsidiaries;

– providing any legal or information technology (design or

implementation) consulting services to Altron or any of its

relevant subsidiaries; and

– conducting any due diligence exercises for and on behalf

of Altron or any of Altron’s relevant subsidiaries which

utilise Altron’s external auditors for audit-related services.

The permitted and/or qualified non-audit-related services

which the external auditors are permitted to render to Altron

include:

– tax compliance services in relation to and for and on

behalf of Altron;

– assurance-related work, but excluding implementation

consulting work which results in an impairment of the

external auditors’ independence, and

– opinion work not relating to or associated with any of the

prohibited services referred to above;

provided, however, that the Altron audit committee must

preapprove any proposed contract with the external

auditors for the provision of such permitted and/or qualified

non-audit related services to Altron and provided further that

these permitted and/or qualified non-audit related services

do not exceed 10% of the total Altron group audit fee

agreed by the Altron audit committee for the financial year

in question.

Services rendered by the external auditors during the period

under review, and preapproved by the audit committee

(within the financial parameters prescribed by the

committee), comprised mainly compliance and other

assurance-based engagements, including opinion work not

relating to, or associated with, any of the prohibited services

referred to above.

Role – the committee has written terms of reference and its

responsibilities include among others:

– considering and nominating to the board, the appointment

and/or termination of the external auditors, including their

independence and objectivity;

7. Board committees

The board has established several committees in which

non-executive directors play an active and pivotal role.

All committees operate under board-approved terms of

reference which, with the exception of the executive

committee’s terms of reference, were reviewed and updated

in May 2007 to further align them with best practice. All

committees, except the executive committee, are chaired by

an independent non-executive director who also attends the

annual general meeting to respond to stakeholder queries.

Members of each committee, except the executive committee,

are re-elected every year at the first board meeting following

the annual general meeting. The chairmen of the committees

are, in conjunction with the board, elected by the members of

each committee and hold office for not more than five

consecutive years, unless sound reasons cause the nomination

committee and the board to determine otherwise.

7.1 Executive committee

Members – Robert Venter (chairman), Craig Venter,

David Redshaw, Norbert Claussen, Peter Curle and

Onkgopotse Tabane. The chief financial officer is also a

member of this committee, but this position is currently

vacant. The executive structure appears on page 10 to 11.

Composition and proceedings – the committee meets monthly

with additional meetings convened as and when necessary.

Role – it is responsible for the operational activities of

the group, developing strategy and policy proposals for

consideration by the board and implementing the board’s

directives. It has a properly-constituted mandate and terms

of reference which is reviewed from time to time.

7.2 Audit committee

Members – Peter Wilmot (chairman), Mark Lamberti,

Mike Leeming and Jacob Modise.

Composition and proceedings – both the chief financial

officer and Robert Venter (chief executive) are required to

attend committee meetings. The committee meets

periodically with the group’s external and internal auditors

and Altron’s executive management. It also determines and

carefully monitors the use of the external auditors for

non-audit related services, and is guided by a formal policy

that precludes the external auditors from providing services

which would impair audit independence. Prohibited services

include:




OPERATIONALREVIEW



made recommendations to Altron’s subholding companies’

audit committees regarding their composition with specific

reference to the proposals contained in the Corporate Laws

Amendment Act.

External auditors attend meetings by invitation. At the year-end

audit committee meeting the chairman ensures that senior

management and the external auditors are able to report back

to the committee chairman on the audit process both candidly

and independently of each other.

Three meetings are scheduled annually, with special meetings

called as required. The committee met three times during the

year under review.


Members (and invitees)

Audit

2007 2008

May Oct Feb

PL Wilmot (chairman) ¸ ¸ ¸

MJ Lamberti ˚ ¸ ¸

MJ Leeming ¸ ¸ ¸

JRD Modise ¸ ¸ ˚

N Claussen ¸1 ¸1 ¸1

PD Redshaw ˚1 ˚1 ˚1

CG Venter ˚1 ˚1 ¸1

RE Venter ¸1 ¸1 ¸1

˚ Submitted apologies and was granted a leave of absence in terms of the company’s articles of association.

1 Attends by invitation and is not a member of the audit committee.

The internal and external auditors have unlimited access to

the chairman of the committee. The internal audit department

reports directly to the audit committee and is accountable to

the chief financial officer on day-to-day matters.

The external auditors and the head of internal audit attend

Altron’s annual general meeting to answer any queries raised

by stakeholders.

Reappointment of independent auditors

At an Altron audit committee meeting held on 28 February

2008, the committee considered the independence of the

external auditors KPMG Inc in accordance with section 270A

of the Corporate Laws Amendment Act. In assessing the

independence of the external auditors, the audit committee

satisfied itself that KPMG Inc:

– determining the audit fee of the external auditors;

– considering and setting mandatory term limits on the period

the lead audit partner of the external auditors may serve

the company;

– confirming internal audit’s charter and audit plan;

– determining with the external auditors the nature and scope

of the audit and ensuring coordination where more than one

firm is involved;

– reviewing the risk areas of the company’s operations to be

covered in the scope of internal and external audits; and

– reviewing interim and annual financial statements before

submission to the board focusing on:

– any changes in accounting policies and practices

– major judgemental areas

– significant adjustments arising from the audit

– the going-concern statement

– compliance with accounting standards

– compliance with stock exchange and statutory

requirements

– reliability and accuracy of the financial information

provided by management and to other users of financial

information

– discussing any problems and reservations arising from the

year end audit and any related matters that the external

auditors may wish to discuss.

Self-assessment exercise

Following the self-assessment exercise conducted in 2007, the

recommendations whereof were reported on in the 2007 annual

report, the audit committee has:

convened a third audit committee meeting annually to update

members on changes in accounting standards and other

emerging issues such as, among others, the audit committee

and auditor requirements prescribed in the Corporate Laws

Amendment Act and the proposed Companies Bill;

endorsed management’s decision to appoint Deloitte Tip-Offs

Anonymous – a dedicated and independent whistleblowing

programme, which has proved successful to date;

reviewed the proposed amended Altron group code of

conduct, as well as satisfied itself that executive management

regularly monitors compliance with the code;

endorsed management’s decision to implement Project

Everest, which has had the effect of measuring the group’s

financial performance in real time and against budgets; and



An internal fraud hotline has enabled Altron associates and

employees to anonymously report suspected irregularities and

has proved an effective tool over the last four years. Throughout

the group, reported fraud remained at six incidents over the

reporting period, but representing a threefold increase in net

loss (net of recovery) to nearly R1.2 million compared to the

previous year. Incidents of theft reduced from 77 to 59, but the

net loss almost doubled to R3 million for the year compared

to the 2007 financial year. An aggressive drive to reinforce

our code of conduct and the ethics of the group has been

launched. In addition, from 1 March 2007, the Deloitte Tip-Offs

Anonymous independent hotline was introduced, which further

strengthened the group’s internal controls.

Altron tracks the number of crimes committed against the group

by outside parties, including hijackings and break-ins. During the

year under review, hijackings increased from one in the previous

year to seven, break-ins increased from four to six, while armed

robberies increased from seven incidents in the previous year

to 11. The total net loss from all incidents (internal and external)

doubled to

R5 million compared to the previous year.

As reported previously, PricewaterhouseCoopers had in 2005

performed an independent assessment of the effectiveness of

the Altron internal audit department, finding it to comply with

the Standards for the Professional Practice of Internal Auditing

as issued by the Institute of Internal Auditors and highly

commending it on its professionalism.

7.3 Remuneration committee

Members – Jacob Modise (chairman), Myron Berzack,

Peter Wilmot, Mark Lamberti and Dr Bill Venter.

Composition and proceedings – the committee comprises a

majority of independent non-executive directors.

Robert Venter (chief executive) has right of attendance at

committee meetings and the chief financial officer attends by

invitation. No executives participate in discussions on their

own remuneration and benefits. Two meetings are scheduled

annually with special meetings called as required. The

committee met twice during the year under review.

Role – this committee, in consultation with executive

management, ensures that the group’s directors and

senior executives are fairly rewarded for their individual

contributions to overall performance and are inline with

the Altron remuneration philosophy.

does not hold a financial interest (either directly or indirectly)

in Altron;

does not hold a position, either directly, or indirectly, that

gives the right or responsibility to exert significant influence

over the financial or accounting policies of Altron;

is not economically dependent on Altron, having specific

regard to the quantum of the audit fees paid by Altron and

its subholding companies to KPMG Inc during the period

under review in relation to its total fee base;

does not provide consulting or non-audit services to Altron or

its subholding companies which fall outside of the permitted or

qualified non-audit-related services as specified in the policy

for the use of the external auditors for non-audit-related

services and which could compromise the external auditors’

independence (see page 119 of the financial statements); and

including the individual registered auditors who undertake

the audit, do not have personal or business relationships of

immediate family, close relatives, partners, either directly or

indirectly, with Altron and its subholding companies.

Accordingly, the Altron audit committee is satisfied that

KPMG Inc is independent as contemplated by South African

independence laws and the applicable rules of the

International Federation of Accountants (IFAC), and nominated

the reappointment of KPMG Inc as registered auditors for the

2008/9 financial year. On 29 February 2008, the Altron board,

subject to shareholder approval, re-appointed KPMG Inc and

Mr MCA Hoffman, as the independent registered audit firm and

individual registered auditor of Altron respectively.

Internal controls and internal audit

Internal controls comprise methods and procedures adopted by

management to assist in achieving the objectives of

safeguarding assets, preventing and detecting error and fraud,

ensuring the accuracy and completeness of accounting records

and preparing reliable financial statements. The group’s

approach is detailed in the directors’ report on page 119

dealing with the approval of annual financial statements.

The internal audit function serves management and the board

by performing independent evaluations of the adequacy and

effectiveness of group companies’ controls, financial reporting

mechanisms and records, information systems and operations

and provides additional assurance on safeguarding group

assets and financial information.




OPERATIONALREVIEW



7.4 Risk management committee

Members – Mike Leeming (chairman), Norbert Claussen,

David Redshaw, Dr Harold Serebro, Onkgopotse Tabane,

Craig Venter, Robert Venter and Peter Wilmot.

Composition and proceedings – the committee has two

scheduled meetings each year and met twice during the

year under review.

Role – As the objective of risk management is to identify,

assess, manage and monitor risks to which the business

is exposed, Altron’s selected approach involves identifying

strategic risks, reviewing their impact, assessing the

probability of occurrence and monitoring the perceived

effectiveness of existing controls.

In understanding the risk universe, both the impact and

probability of risk are ranked on a nine-point scale: from

‘catastrophic’ to ‘negligible’ in relation to the impact and from

‘negligible’ to ‘confidently expected’ for probability. Inherent

risk is ranked similarly to the impact of risk while control

effectiveness is measured as either ‘good’, ‘satisfactory’,

‘corrective action required’ or ‘deficient’.

Depending on the value of the residual risk exposure,

management will then decide on its acceptability. If considered

high, an action plan – stipulating the responsible person,

required action and timeframe – will be put in place to reduce

the level of risk to a more acceptable level.

Self-evaluation exercise

The risk management committee conducted a self-evaluation

exercise during 2007. The committee believes that its

composition, frequency of meetings and authority are adequate

and that it operates in an atmosphere of openness and trust. It

identified increased monitoring of environmental risks and

opportunities, as well as the formulation of a group policy

regarding health and safety, as areas to be addressed going

forward. Its recommendation to establish an independent fraud

hotline has been addressed through the implementation of the

Deloitte Tip-Offs Anonymous fraud hotline.

Areas addressed consequent to the evaluation, included:

increased the number of independent assurers the group

engages with to verify risks ie:

– MS Alexander & Associates and

PricewaterhouseCoopers – environmental

– CGA – Corporate Governance

– Aurum Institute for Health Research – HIV/Aids

– Empowerdex – BBBEE

Self-assessment exercise

During 2007, the committee conducted a self-assessment

exercise to review its functioning and effectiveness.

The committee is satisfied that it has provided adequate

disclosure to shareholders, determined remuneration levels that

are sufficient to attract, motivate and retain senior executives of

Altron, and that performance-related elements of remuneration

constitute a large proportion of total remuneration packages.

Areas for improvement identified through the self-evaluation

included ongoing training on remuneration best practices and

trends to assist the committee in dealing with and negotiating

increasingly complex, performance-driven reward packages.

The committee will also continue to address succession

planning throughout the group in the next financial year.

In making improvements, the committee has:

satisfied itself that the remuneration packages of its senior

executives are market related. Several independent

consultants are used to benchmark these packages;

confirmed that the levels of funding of the Altron Group

Pension Fund and Altron Medical Aid are adequate

and appropriate;

agreed that non-executive directors should not be awarded

share options as this could compromise their independence

vis-à-vis the company;

reconsidered the methodology of payment of non-executive

directors’ fees by looking at introducing an attendance fee

component as opposed to solely a retainer; and

reconstituted the committee so that a majority of its

members are now independent non-executive directors.



Remuneration

2007 2008

May Feb

JRD Modise (chairman) ¸ ¸

MC Berzack ¸ ¸

MJ Lamberti —2 ¸

Dr WP Venter ¸ ¸

PL Wilmot ¸ ¸

RE Venter ¸1 ¸1

1 Has right of attendance but is not a member of the audit committee.2 Appointed to the Altron remuneration committee on 8 August 2007.

For further details on the remuneration of Altron’s executives

see the remuneration report on page 108.



Several of the risks identified in the list above are described in

detail in the sustainability report, included within the pages of

this document. Those not dealt with in the sustainability report

are summarised hereunder:

Eskom’s electricity supply constraints

The group has been preparing for standby power in many of

its businesses over the last few years and the necessary

alternative power supplies have, for the most part, been

installed. At the same time the power crisis has created

opportunities and resulted in demand from businesses for

standby power solutions. In this regard the newly acquired IST

business in Powertech and Powertech Batteries, as well as the

newly established Powertech Energy Solutions business, have

played a major role in providing alternative power solutions with

meaningful orders received to date.

This risk is dealt with more comprehensively in the sustainability

report.

Human capital

The exodus and shortage of key skills within the South African

economy has necessitated the group initiating several projects

to attract, motivate and retain key skills. Again, this risk is dealt

with more comprehensively in the sustainability report.

Performance of sub-holding companies

In recent years, the Altron group has been growing off an

extremely high profit base which has placed pressure on the

group going forward in terms of growing its businesses

organically. As a result thereof, this has necessitated the group

considering strategic acquisition opportunities in order to

sustain the high profit base. Key acquisitions concluded

recently include among others a controlling interest in three

subsidiaries of the Sameer ICT Group within Altech, IST Group

(Pty) Limited and ABB’s 50% stake in Powertech Transformers

within Powertech and several acquisitions within the

Bytes group.

RSA dependency versus offshore exposure

The group has mitigated against its high dependency on the

South African economy by pursuing a policy of offshore

expansion into niche sectors where the group has extensive

experience. To this end, Bytes and Altech have concluded a

number of offshore acquisitions, while the group’s export

performance is driven by a dedicated export council.

bolstered the internal audit department to now include

production and environmental audits, as well as statutory

audits on the secretarial records;

improved and drafted guidelines on business and IT

continuity including where the responsibilities lie;

established a reputable independent fraud hotline with

Deloitte; and

adequately reported to stakeholders on the group’s material

risks as contained in the 2007 Altron annual report.



Risk

2007

April Oct

MJ Leeming (chairman) ¸ ¸

PL Wilmot ¸ ¸

N Claussen ¸ ¸

OJJ Tabane —1 —1

PD Redshaw ¸ ˚

Dr HA Serebro ¸ ¸

CG Venter ¸ ¸

RE Venter ¸ ˚

˚ Submitted apologies and was granted a leave of absence in terms of the company’s articles of association.

1 Appointment to the risk management committee on 1 March 2008.

Material risks and opportunities facing the group

Altron defines material risks and opportunities as those that

have the potential to impact on shareholder value. The major

consolidated risks identified by the board during the review

period included:

Eskom’s electricity supply constraints and load shedding;

human capital ie skills shortages in certain areas of the

business;

performance of subholding companies and future growth

opportunities;

RSA dependency versus offshore exposure;

management structures;

progress in relation to broad-based black economic

empowerment;

dependence on Powertech/Aberdare Cables;

capacity constraints;

security of supply of key raw materials; and

political risk.




OPERATIONALREVIEW



to capacity constraints in being able to deliver the end product

or services to the customer within the specified deadlines.

The group has combated this risk by investing heavily in

increasing capacity in recent years, particularly within its

manufacturing operations, including developing and

retaining key skills as referred to under the section entitled

human capital above.

Security of supply of raw materials

This risk is particularly relevant to the Powertech group of

companies. Powertech mitigates this risk by developing

relationships with key suppliers, identifying alternative sources

of supply as well as continuously improving its supply chain

management, logistics and distribution network. Powertech has

also ensured its costs are controlled in its manufacturing

processes to enable it to remain competitive.

Political risk

South Africa is currently in a period of political transition.

The uncertainty which inevitably accompanies change is in

itself an operational risk for the group’s businesses, particularly

with regard to relationships with offshore principals and

suppliers, as well as general confidence in the country’s

economy.

7.5 Nomination committee

Members – Dr Penuell Maduna (chairman), Myron Berzack,

Mike Leeming and Dr Bill Venter.

Composition and proceedings – The committee comprises

a majority of non-executive directors and was established

during the 2004/5 reporting period. Robert Venter (chief

executive) has right of attendance at committee meetings.

There is no formal meeting schedule for this committee,

which meets as and when required. The committee met

once during the year under review.

The appointment of directors is a transparent and formal

procedure governed by the nomination committee’s

mandate and terms of reference as well as by the Altron

board charter. Factors influencing the selection process

include skills, knowledge and qualifications: these are

examined against the backdrop of Altron’s strategies.

Availability, number of external board appointments,

diversity, demographics and experience in relevant

sectors are also considered.

The group has set a target of generating 25% of its revenue

offshore, either through exports or its international operations.

During 2007, offshore revenue accounted for approximately

23% of the group’s total revenue, which translated to an

operating profit (excluding exports) of approximately

R211 million (11%).

Management structures

One of the risks posed to the group is the lack of depth of

resources at the senior management level. Aside from placing

pressure on the incumbents, the risk to the group is the

probability of the incumbent failing to identify business,

strategic or financial risks as a result of not having two sets

of eyes to cast over the respective area of responsibility.

The group is mindful of this risk and the succession planning

policy has been designed around addressing this facet of the

business.

Broad-based black economic empowerment

The need to comply with among others the dti’s Codes of Good

Practice has become a business and economic imperative for

conducting business in South Africa. This section is dealt with

more comprehensively in the accompanying sustainability

report.

Dependence on Powertech

During the past two financial years, the Powertech group has

been responsible for contributing in excess of approximately

50% of Altron’s profits. The board has identified this as being a

risk to the sustainability of the group, given among others the

cyclical nature of businesses within particular sectors. This risk

has to some extent been mitigated against by concluding

certain key acquisitions throughout the group during the period

under review. These have included inter alia the acquisition by

Altech of a controlling interest in three subsidiaries of the

Sameer ICT Group in Kenya and the acquisition by Powertech

of the IST Group (Pty) Limited and ABB’s 50% shareholding in

Powertech Transformers.

Capacity constraints

With risk comes opportunities and the Altron group has been

instrumental in capitalising on opportunities in depressed and

underdeveloped markets. However, this has placed pressure

on the group to deliver products and services in real time and

according to stringent deadlines. In turn this has translated



whether or not they comply with the Codes including

suggesting corrective actions;

– aligning the Altron Transformation Vision 2012 document with

the Codes as well as with relevant sectoral charters; and

– determining a strategy and road map for future

compliance by the group with the Codes and other

broad-based black economic empowerment legislation.

While the company is guided by this legislation, it has set

itself its own internal strategic transformation goals, which

it believes best serve the future sustainability of the Altron

group.

CORPORATE CODE OF CONDUCT

The Altron code of conduct is endorsed and guided by the

boards of Altron, Altech, Bytes and Powertech and commits all

employees to the highest standards of behaviour. The code

sets out the expected behaviour of all employees in their

dealings with the group’s stakeholders. A detailed code of

conduct forms part of the Altron group policy manual and

outlines Altron’s ethos. All employees are required to maintain

the highest ethical standards in ensuring that the group’s

business practices are conducted in a manner which in all

reasonable circumstances is beyond reproach.

This code was reviewed by the Altron audit committee in

February 2008 and was amended to bring the same in line with

best business and corporate governance practices.

ETHICS CAMPAIGN

During 2006/7 Altron launched a prominent group-wide

campaign designed to re-emphasise and facilitate

understanding of the ethical values that underpin the Altron

code of conduct. The campaign emphasised that each and

every employee has a responsibility to report any unethical

behaviour of which they become aware, regardless of who is

perpetrating it. In order to protect individuals, and with the

agreement of the Altron audit committee, Altron contracted

Deloitte Tip-Offs Anonymous to provide an independent hotline

through which anyone in the group can report unethical

behaviour.

With the full and visible support of the Altron executive

committee, the corporate communications team rolled out full

details of this service through poster campaigns, brochures

Role – The committee is responsible for identifying and

evaluating suitable potential candidates for appointment to

the board as well as succession planning. It does not have

the authority to appoint directors, which is a board function.

A formal succession planning policy has been finalised and

is being implemented throughout the group. The committee

also makes recommendations to the board on the suitability

of directors due to retire by rotation being put forward for

re-election at the annual general meeting.



Nomination

2007

August

Dr PM Maduna (chairman) ¸

MC Berzack ¸

MJ Leeming ¸

Dr WP Venter ¸

RE Venter ¸¹

1 Has right of attendance but is not a member of the nomination committee.

7.6 Transformation committee

Members – this is a subcommittee of the Altron executive

committee. Transformation champions representing each

subholding group sit on the Altron transformation committee.

Composition and proceedings – the transformation

committee was established five years ago and has

continued to drive economic transformation and broad-

based black economic empowerment across the group.

Role – following the successful transition from Vision 2010 to

Vision 2012, whereby the blueprint for transformation within

Altron was updated to include the new dti Codes of Good

Practice (the Codes) into the company’s strategic

transformation objectives, the committee’s mandate has

been extended to develop a practical implementation plan

and guidance manuals to ensure uniform application of the

empowerment vision across the group.

Despite the ongoing uncertainty at government level between

the validity of the industry sector charters and the Codes, the

committee nonetheless is engaged in several projects, namely:

– auditing the entire group’s operations to determine




OPERATIONALREVIEW



Altron recognises the importance of shareholder attendance at

annual general meetings. We believe this presents an important

opportunity for shareholders – institutional and individual – to

raise issues and participate in discussions relating to items in

the notice of meeting. Every effort is made to encourage this

attendance and participation which includes a personal

invitation from the chairman to each shareholder in the annual

report to attend the annual general meeting.

During the period under review, Altron engaged an

independent firm to conduct an analyst poll on the company.

Analysts were asked to rate Altron in terms of its quality of

management, leadership, strategy, earnings growth potential,

sustainability of earnings, liquidity, dividend policy, cost

controls, corporate governance and investor communications.

A detailed account of the results of this research is contained in

the Stakeholder Engagement section on page 49.

SHARE DEALINGS

Altron and its subholdings have approved written policies on

directors’ dealings in securities. These require all relevant

directors who wish to deal in Altron or its subholdings’

securities to obtain prior written clearance from any two of the

following senior executives – the chairman, chief executive or

chief financial officer. The same restriction applies to the group

company secretary. The chairman requires prior written

clearance from the non-executive chairman of the Altron audit

committee and group company secretary.

The group operates closed periods as defined in the JSE’s

Listings Requirements. These periods are communicated to

directors, officers and employees in the group policy manual and

a specific policy for directors. In addition, special electronic and

printed notices advise staff of imminent closed periods. During

these periods, the group’s directors (including associates),

officers and employees may not deal in the securities of Altron or

Altech as the case may be. Additional closed periods are

enforced, when required, in terms of corporate activities.

and training sessions. The reporting line is an important tool in

both monitoring and stamping out unethical behaviour in the

group and has been set up in line with current best practices in

this field.

COMMUNICATING WITH SHAREHOLDERS AND INVESTORS

The importance of clear and direct communication with

shareholders and analysts is crucial as we enter a drive to

sustain our growth, in raising their understanding of the group’s

strategy, operational and financial performance, management

and prospects.

Altron has a dedicated programme for facilitating regular

communication between the executive management team and

a wide range of institutions and investors. This includes among

others providing timeous, accurate announcements and

circulars to shareholders in accordance with the JSE Listings

Requirements. In addition, regular contact with domestic and

international institutional shareholders and analysts is

maintained through investor road shows, presentations and

liaison with major shareholders. Altron’s proactive investor

relations programme furthermore includes the following

activities over the financial year:

Annual site visits to group companies where presentations

are delivered to analysts and fund managers by managing

directors of operations throughout the group. In 2007 an

analyst presentation was held at Bytes in Midrand and visits

were undertaken to other group subsidiaries.

Our management team hosts, together with our sponsor

Investec, bi-annual presentations in Cape Town and

Johannesburg to afford fund managers an opportunity to

interact with management.

During the year the management team undertakes UK

roadshows to present to potential international investors.

Our chief executive and chief financial officer also attend

various conferences, both locally and in the UK, where they

address or interact with potential investors.

In addition to our investor relations website, we ensure

ongoing communication regarding pertinent performance

through regular e-mail communication.

Regular one on one meetings are held with analysts by our

chief executive and chief financial officer in order to assist

analysts with strategic and financial aspects of the

business.


Remuneration report

These policies and practices are regularly reviewed. Altron

keeps abreast of and is guided by international best practice

benchmarks with regard to executive remuneration (such as

those contained in, among others, the Association of British

Insurers (ABI) Guidelines on Executive Remuneration Policies

and Practices).

Membership

The remuneration committee is comprised mostly of

independent non-executive directors and is chaired by

Jacob Modise (independent non-executive). Other members

are Mark Lamberti, Myron Berzack, Peter Wilmot and Altron

chairman, Dr Bill Venter. The latter appointment is consistent

with the changes made to the 2003 Combined Code (UK)

which allows the chairman of the company to sit on the

remuneration committee.

The chief executive has right of attendance at meetings unless

deemed inappropriate and the chief financial officer attends

meetings by invitation, but neither participates in discussions

on their own remuneration.

The group company secretary, Andrew Johnston, acts as

secretary to the remuneration committee.

Terms of engagement – chairman and other non-executive

director members

The board annually assesses the composition of the committee

to ensure that it continues to operate effectively, and on the

recommendation of the nomination committee re-elects

members at the first board meeting following the annual

general meeting. The chairman of the committee is appointed

by the members of the committee in conjunction with the board

and holds office for five consecutive years whereafter he/she is

obliged to step down from the position unless the board

believes it appropriate for the chairman to remain in office

beyond his/her initial term.

The current chairman, Jacob Modise, was appointed as

chairman of this committee on 1 February 2006.

Composition and proceedings

The committee meets bi-annually, unless additional meetings

are required. During the review period, the committee met

twice.

Remuneration report

Altron’s approach towards remuneration aims to ensure that an

appropriate balance is achieved between the interests of

shareholders and providing attractive and appropriate

remuneration packages to executives. The remuneration

practices of the group have been structured to be competitive

in the rapidly evolving industry in which we operate and to

ensure that the group can attract, motivate and retain the high

calibre of people with above industry average ability and

leadership potential needed to effectively run the group and its

subsidiary companies.

With effect from 1 March 2007, the Altron group adopted a total

cost of employment (TCOE) philosophy for all salaried

employees as opposed to the cash package approach

adopted in prior years. In essence this means that salary and

bonus increases expressed as a percentage are based on

TCOE as opposed to the cash element only.

REMUNERATION PHILOSOPHY AND POLICIES

Altron’s philosophy is to set appropriate remuneration levels

to attract, retain and motivate the calibre of directors and

executives needed to run the group and its subsidiaries

successfully, while aligning their interests with those of

shareholders over the short, medium and long term. The

overall philosophy is to ensure that executive directors are

fairly rewarded for their individual contribution to the group’s

operating and financial performance in line with its corporate

objectives and business strategy, and that this reward is

aligned with industry and market benchmarks.

The group policy for each executive director prescribes a

remuneration package based on TCOE. This is made up of a

cash portion, an ability to earn a cash bonus, long-term

incentives through participation in share incentive schemes

or similar instruments, pension contributions, medical aid

benefits and optional benefits.

The objective is to establish a level of guaranteed pay that is

competitive with the upper quartile level for similar

companies. The variable element, in particular the short-term

incentives, is intended to provide superior general pay

opportunities based on overall corporate performance, as

well as individual reward for individual performance.

Long-term incentives have been based on multiples of TCOE

and are structured to align with shareholders’ interests.




OPERATIONALREVIEW



Areas for improvement identified as a result of the 2007/8

self-evaluation included the need for ongoing training on

remuneration best practices and trends. With the ever-

changing dynamics of the global economy and shifting

employee expectations, training will assist the committee in

dealing with and negotiating increasingly complex,

performance-driven reward packages. During the review period

the committee were regularly appraised on recent trends

regarding senior executive pay practices and received frequent

articles and updates on, among others, policy and practice

affecting non-executive directors’ remuneration, international

remuneration trends and practices and remuneration

committees, including the governance thereof.

A further consideration identified by the remuneration

committee as a result of the self-evaluation exercise conducted

in 2007, included the need to continue to focus on succession

planning throughout the group. During the review period a

formal policy on succession planning was adopted by the

board, and a diligent exercise conducted at both Altron and

each of its subholdings to identify at least two potential

successors for each key executive and senior manager position

throughout the group. This process is reviewed bi-annually and

has been made a standing item on each nomination committee

meeting agenda.

Service contracts

Executive directors are subject to Altron’s standard terms and

conditions of employment where notice periods are between

30 and 60 days. In line with the provisions of the Companies

Act of 1973 (as amended), group policy prevents any director

from being compensated for loss of office.

Advisors

The committee regularly consults with a range of external

independent advisors on market information and remuneration

trends as well as other advice necessary to fulfil its

responsibilities. These include among others, 21st Century

Business and Pay Solutions, The Hay Group, and PE Corporate

Services SA (Pty) Limited. In addition, the committee frequently

reviews remuneration and board best practice reports

published by Spencer Stuart and PricewaterhouseCoopers. It

also considers the views of the chief executive, Robert Venter,

on the remuneration and performance of his colleagues on the

Altron executive committee.

Executive directors’ salaries

The remuneration committee reviewed and revised the TCOE

packages of executive directors at its meeting in February

Role

The committee operates under a board-approved mandate and

terms of reference, updated in the prior period and aimed at:

ensuring that Altron’s directors and senior executives are

fairly rewarded for their individual contributions to group

performance. Packages are structured to be competitive

with the upper-quartile level of peer companies and market

benchmarks, in order to attract, motivate and retain the high

calibre of skilled professionals the group requires to ensure

its continued success, and to compete both locally and

internationally;

ensuring that Altron’s remuneration strategies and

packages, including short- and long-term incentive plans,

are based on performance and are appropriately

competitive;

recommending the level of non-executive directors’ fees to

the board, after receiving input from the executive directors

and market surveys, for ultimate approval by shareholders;

balancing the interests of shareholders with the financial

and commercial viability of the group; and

scrutinising all other benefits and other financial

arrangements to ensure they are justified, market-related

and disclosed in a transparent manner.

Altron’s listed subsidiary, Altech has its own remuneration

committee which reviews and recommends remuneration and

related awards for its executive directors and senior

management, to the Altech board and within the parameters of

group policies. Remuneration packages of those executives of

Altech, Bytes and Powertech who are also members of the

Altron executive committee, are, once determined at the

subholding level, submitted to the Altron remuneration

committee for noting and confirmation.

Self-evaluation

During the period under review, the committee resolved to

conduct self-assessment exercises into its effectiveness every

other year as opposed to annually.

The committee believes it has provided adequate disclosure to

shareholders, characterised by substance over form. It is

satisfied that performance-related elements of remuneration

constitute a large proportion of total remuneration packages,

that the remuneration levels determined by the committee are

sufficient to attract, motivate and retain senior executives of

Altron, and that it has established a formal and transparent

policy and procedure for determining executive director

remuneration.


Remuneration report continued

TCOE. Other executive directors and executive committee

members may earn between 45% – 65% of their TCOE.

Group and subsidiary financial performance targets include:

headline earnings per share growth;

return on net assets;

return on equity; and

cash generation.

These targets vary according to individual company needs. In

all cases, 60% of the bonus is based on financial objectives

with the balance relating to strategic and personal

performance, benchmarked against identified and

predetermined key performance indicators.

These key performance indicators include responsibility for,

among others:

Group strategy – driving and implementing it, monitoring

progress and ensuring all executives are aligned to it;

Performance management – instilling a performance and

“familiness” culture;

Growth – driving the growth strategy into new market

segments and geographical areas; and

Succession planning and talent management – identifying

new and skilled/semi-skilled talent for the business and

maximising existing talent, all while being mindful of

succession planning throughout the group and managing

the transformation agenda.

During February 2008, the remuneration committee resolved

that in respect of the 2008/9 financial year 70% of the executive

committee members’ performance bonuses will be based on

financial objectives, with 30% relating to the attainment by each

member of certain predetermined key performance indicators.

It is envisaged that between 10% – 20% of the 30%

discretionary component will be assigned to the achievement

of predetermined broad-based black economic empowerment

targets for each executive’s area of responsibility.

At its meeting in May 2007, the remuneration committee

reviewed the performance of executives participating in the

bonus plan against their agreed targets. Within these

parameters, and subject to meeting the noted criteria, bonuses

were approved. Performance measures are stringently

monitored and penalties imposed in cases where targets

are missed.

Share option schemes

As a vehicle for linking reward to executive performance over

the longer term, Altron’s share option scheme grants options to

all senior employees within Altron, Bytes and Powertech. Grants

2008. The packages of executive directors were compared to a

market information survey on companies of similar size and

structure and adjusted to reflect levels compared to the

upper-quartile segment of the survey.

Altron follows the provisions of the King Code of Corporate

Practices and Conduct relating to executive directors’

remuneration, and is further guided by the ABI Guidelines on

Executive Remuneration Policies and Practices. The

overarching principles that the remuneration committee has

applied during 2007 towards executive remuneration, and

those which it intends to continue applying, are as follows:

To ensure remuneration drives the overall key business

strategies and create a strong, performance-orientated

environment, so as to align the interests of management

with the interests of shareholders.

To provide a competitive remuneration package in the

upper-quartile of the market taking into account appropriate

benchmarks such as market rates of executives of

companies of a similar size and scope to attract, motivate

and retain the exceptional quality individuals the group

requires to sustain its growth.

To use such benchmarks and comparisons with caution,

recognising the risk of an upward ratchet of remuneration

levels with no corresponding improvement in performance.

To make a significant percentage of potential maximum

reward conditional on both short-term and long-term

performance. These rewards include an annual bonus plan

and share-based incentives, ie conditional rights, in order to

align the executive directors’ interests closely with those of

the shareholders.

To establish an appropriate balance between fixed and

variable remuneration which is based on targets that are

relevant, verifiable and stretching.

To take into account pay and employment conditions

elsewhere in the group, especially in setting annual salary

increases.

To actively seek to understand shareholder preferences as

it pertains to remuneration and disclosure thereof.

Annual incentive plans

Executive directors and Altron executive committee members

participate in an annual bonus plan that rewards the

achievement of group and subsidiary financial performance, as

well as strategic and personal performance objectives agreed

with the Altron chief executive. All objectives are approved

beforehand by the remuneration committee. Under this plan,

the chief executive may earn a bonus of up to 75% of his




OPERATIONALREVIEW



Fund and Altron Medical Aid and satisfied itself that both were

solvent and did not pose a risk to any of the group’s employees

or retirees.

Other benefits

In addition to the benefits which executive directors receive as

part of their TCOE packages, they also receive a death-in-

service benefit.

Non-executive directors’ fees

The fees of non-executive directors are recommended by the

remuneration committee, confirmed by the executive director

component of the Altron board, and approved by shareholders

at the annual general meeting. Fees for the 2007/8 financial

year were reviewed and revised in February 2007, with the

basic annual non-executive director fee set at R105 000.

Altron’s policy on remuneration for non-executive directors is

that this should be:

fee based;

market related (having regard to fees paid and number of

meetings attended by non-executive directors of companies

of similar size and structure to Altron and operating in

similar sectors); and

not linked to share price or Altron performance.

Altron non-executive directors do not receive bonuses or share

options, recognising that this can create potential conflicts of

interest which can impair the independence which non-

executive directors are expected to bring to bear in decision-

making by the board.

Annual fees for membership of the various committees for the

review period were:

Audit committee:

– chairman

– member

R72 500

R34 000

Nomination committee:

– chairman

– member

R13 000

R13 000

Remuneration committee:

– chairman

– member

R55 000

R34 000

Risk management committee:

– chairman

– member

R55 000

R27 500

have historically been made annually to maintain an overall cap

of 8.5 x base salary for the chief executive and 6.5 – 7.5 x

base salary for Altron executive committee members. As a

result of adopting TCOE, the aforesaid multiples have been

reduced to 7 x TCOE for the chief executive and 5.3 – 6.4 x

TCOE for Altron executive committee members. Share options

and conditional rights granted under the current scheme may

be exercised after three years and vest in equal tranches in

years 3, 4 and 5. These options and conditional rights lapse

after a six-year period. The share option scheme includes

options granted under a previous scheme which is in run-off

and has an expiry period of no later than 2012. Additional

options or conditional rights, based on both corporate and

individual performance, may be granted annually to ensure that

the multiple of TCOE parameter reflects increases in TCOE.

The salient features of the conditional rights scheme include

awarding eligible participants’ rights to acquire shares subject

to meeting future vesting conditions. Each conditional right will

have an award price equal to the closing price of a share on

the day preceding the award of that conditional right. The

vesting conditions attaching to conditional rights will be

specified in advance, and the conditional rights only vest based

on meeting the vesting conditions, namely the achievement of

preset performance targets. These targets relate to headline

earnings per share growth.

The quantum of shares that can be acquired may vary,

depending on the extent to which performance targets are met.

If a participant ceases to be an employee as a result of his

resignation or dismissal on the grounds of misconduct, poor

performance or breach of his employment contract, all

conditional rights (both vested and unvested) awarded to the

participant will lapse with immediate effect.

Pensions

During the year, the relevant group companies made

contributions for executive directors to the Altron group pension

fund. The rate of contribution is 12%, based on the pensionable

salary of these individuals. The value of contributions for each

executive director appears in the summary of directors’

emoluments on page 112.

None of the non-executive directors of Altron contributed to

any group pension fund during 2007 or had any accrued

pension fund benefits in the Altron Group Pension Fund at

29 February 2008.

At its meeting in February 2008, the remuneration committee

assessed the levels of funding of the Altron Group Pension


Remuneration report continued

DISCLOSURE OF DIRECTORS’ EMOLUMENTS

Non-executive directors Subsidiaries Altron

2008 Total

R’000

2007Total

R’000

Fees for services as directors

MC Berzack 152 152 137

MJ Leeming 207 207 187

MJ Lamberti 159 159 125

JRD Modise 194 194 175

Dr PM Maduna 118 118 107

DC Mpofu — — 50

BJM Masekela 9 9 —

PL Wilmot 353 239 592 520

353 1 078 1 431 1 301

R’000

Full-time directorsBasic salary

Perform-ance

related bonuses

(Accrued)

Share option

expense#

Allow-ances

Definedcontri-bution

pensionpayments

Otherbenefits

2008Total

Chairman

Dr WP Venter 3 409 — — 120 — 1 648 5 177

Executive

Dr HA Serebro 1 181 — — 91 — — 1 272

RE Venter 4 439 4 331 1 682 108 609 — 11 169

DC Radley 2 723 — 876 140 381 — 4 120

CG Venter 3 407 2 659 1 409 262 459 — 8 196

PD Redshaw 2 930 2 288 2 003 — 424 192 7 837

PMO Curle 1 849 1 232 860 127 264 — 4 332

N Claussen 2 275 2 100 1 037 198 332 — 5 942

22 213 12 610 7 867 1 046 2 469 1 840 48 045

R’000

Full-time directorsBasic salary

Perform-ance

related bonuses

(Accrued)

Share option

expense#

Allow-ances

Definedcontri-bution

pensionpayments

Otherbenefits

2007Total

Chairman

Dr WP Venter 3 249 — — 120 — 1 947 5 316

Executive

Dr HA Serebro 1 158 — — 90 — 8 1 256

RE Venter 3 714 2 875 1 472 120 446 156 8 783

DC Radley 2 411 1 645 783 120 289 25 5 273

CG Venter 2 845 2 020 1 275 262 341 185 6 928

PD Redshaw 2 663 1 832 1 222 — 320 176 6 213

PMO Curle 1 687 998 815 127 202 56 3 885

N Claussen 1 941 1 506 802 198 233 23 4 703

19 668 10 876 6 369 1 037 1 831 2 576 42 357

#IFRS 2 income statement expense in respect of options granted to directors.




OPERATIONALREVIEW



DIRECTORS’ OPTIONS

EntityPurchase

dateStrikeprice

Balance1 Mar2007 Awarded Lapsed Exercised

Exercisedate

NetgainsR’000

Exerciseprice

Balance29 Feb

2008Expiry

date

CG Venter Altech 18/4/2000 12.80 53 178 53 178 24/4/2007 2 951 68.30 — Apr 10

Altech 14/3/2002 20.35 37 734 37 734 9/5/2007 1 814 68.43 — Mar 08

Altech 31/8/2004 32.25 63 500 63 500 Aug 10Altech CRI 15/12/2005 50.99 337 100 337 100 Dec 11Altech CRI 22/11/2006 57.75 53 775 53 775 Nov 12Altech CRI 21/1/2008 49.00 94 092 94 092 Feb 14

DC Radley Altron 1/10/2002 7.25 625 267 625 267

22/6/2007and

3/12/2007 23 743 45.22 — Oct 12

Altron 27/7/2004 11.20 134 100 89 400 44 700 31/7/2007 1 551 45.90 — Jul 10Altron CRI 9/2/2006 22.50 477 520 477 520 — Feb 12Altron CRI 22/11/2006 30.75 67 338 67 338 — Nov 12

N Claussen Altron 1/10/2002 7.25 19 600 19 600 Oct 12

Altron 27/7/2004 11.20 115 100 115 100 Jul 10Altron CRI 9/2/2006 22.50 466 190 466 190 Feb 12Altron CRI 22/11/2006 30.75 151 560 151 560 Nov 12Altron CRI 28/2/2008 35.50 46 295 46 295 Feb 14

PD Redshaw Bytes 14/8/2000 4.50 646 843 646 843 5/8/2007 7 115 15.50 — Aug 07

Bytes 26/9/2001 2.90 166 667 166 667 — Sep 08

Altron 14/1/2008 6.66 72 609 Conversion 72 609 Sep 08

Bytes 10/10/2002 3.85 100 000 100 000 — Oct 09

Altron 14/1/2008 8.84 43 565 Conversion 43 565 Oct 09

Bytes 20/8/2004 5.58 477 100 477 100 — Aug 11

Altron 14/1/2008 12.80 207 849 Conversion 207 849 Aug 11Bytes CRI 15/2/2006 11.56 1 234 000 1 234 000 — Feb 12Altron CRI 14/1/2008 26.54 537 592 Conversion 537 592 Feb 12Altron CRI 27/2/2008 35.00 281 500 281 500 Feb 14

PMO Curle Altech 14/3/2002 20.35 3 334 3 334 23/5/2007 159 68.00 — Mar 08

Altech 31/8/2004 32.25 40 000 40 000 Aug 10Altech CRI 15/12/2005 50.99 219 460 219 460 Dec 11Altech CRI 22/11/2006 57.75 20 232 20 232 Nov 12

RE Venter Altron 28/6/2000 4.85 534 650 117 900

31/7/2008and

25/1/2008 4 378 41.98 416 750 Jun 10

Altron 1/10/2002 7.25 90 734 90 734

21/6/2007 and

25/1/2008 3 338 44.04 — Oct 12

Altron 27/7/2004 11.20 368 500 122 833 25/1/2008 3 504 39.73 245 667 Jul 10Altron CRI 9/2/2006 22.50 837 360 837 360 Feb 12Altron CRI 22/11/2006 30.75 156 186 156 186 Nov 12Altron CRI 25/2/2008 35.00 381 457 381 457 Feb 14

CRI – conditional rights.

* PD Redshaw’s Bytes share options and conditional rights were converted to Altron participating preference share options and conditional rights as a result of the Bytes scheme of arrangement. These were converted in accordance with the swap ratio of 0.43565.


Financial statements

In terms of section 268G(d) of the Companies Act, 1973, as

amended, we certify that, to the best of our knowledge and

belief, the company has lodged with the Registrar of

Companies for the financial year ended 29 February 2008,

all such returns as are required of a public company in terms

of the Companies Act, 1973, as amended, and that all such

returns are true, correct and up to date.

Altron Management Services (Pty) Limited

Secretaries

per: Andrew Johnston

Group Company Secretary

5 May 2008

Certificate from the company secretaries

Certificate from the company secretaries 114

Independent auditor’s report 115

Directors’ report 116

Accounting policies 120

Balance sheet 128

Income statement 129

Statement of changes in equity 130

Cash flow statement 132

Property, plant and equipment 133

Intangible assets, including goodwill 134

Associates and other investments 136

Rental finance advances 137

Deferred taxation 139

Inventories 140

Trade and other receivables, including derivatives

140

Assets and liabilities classified as held-for-sale

142

Cash and cash equivalents 142

Share capital and premium 143

Reserves 149

BBBEE transactions 150

Loans 151

Empowerment funding obligation 154

Provisions 155

Trade and other payables, including derivatives

155

Retirement benefit plans 156

Acquisition of subsidiaries 158

Revenue 160

Operating profit before capital items 160

Capital items 161

Financial income 161

Financial expense 162

Share of profit from associates 162

Taxation 162

Earnings per share 163

Dividends proposed 165

Commitments and contingent liabilities 165

Post balance sheet events 166

Financial risk management 166

Related party transactions 171

Judgements made by management 172

Standards and interpretations in issue but not yet effective

172

Notes to the cash flow statement 174

Associates, other investments and joint ventures Annexure 1

Segment information Annexure 2

Allied Electronics Corporation Limited 184



OPERATIONALREVIEW



115Altron

Annual Report 2008

and fair presentation of the financial statements in order

to design audit procedures that are appropriate in the

circumstances, but not for the purpose of expressing an

opinion on the effectiveness of the entity’s internal control.

An audit also includes evaluating the appropriateness of

accounting policies used and the reasonableness of

accounting estimates made by management, as well as

evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is

sufficient and appropriate to provide a basis for our audit

opinion.

Opinion

In our opinion, these financial statements present fairly, in all

material respects, the consolidated and separate financial

position of Allied Electronics Corporation Limited at 29 February

2008, and its consolidated and separate financial performance

and consolidated and separate cash flows for the year then

ended in accordance with International Financial Reporting

Standards, and in the manner required by the Companies

Act of South Africa.

KPMG Inc.

Registered Auditor

per MCA Hoffman

Chartered Accountant (SA)

Registered Auditor

Director

85 Empire Road

Parktown, South Africa

5 May 2008

To the members of Allied Electronics Corporation Limited

We have audited the group annual financial statements and the

annual financial statements of Allied Electronics Corporation

Limited, which comprise the balance sheets at 29 February

2008, and the income statements, the statements of changes in

equity and cash flow statements for the year then ended, and

the notes to the financial statements, which include a summary

of significant accounting policies and other explanatory notes,

and the directors’ report set out on pages 116 to 188.

Directors’ responsibility for the financial statements

The company’s directors are responsible for the preparation

and fair presentation of these financial statements in

accordance with International Financial Reporting Standards

and in the manner required by the Companies Act of South

Africa. This responsibility includes: designing, implementing

and maintaining internal control relevant to the preparation and

fair presentation of financial statements that are free from

material misstatement, whether due to fraud or error; selecting

and applying appropriate accounting policies; and making

accounting estimates that are reasonable in the circumstances.

Auditor’s responsibility

Our responsibility is to express an opinion on these financial

statements based on our audit. We conducted our audit in

accordance with International Standards on Auditing. Those

standards require that we comply with ethical requirements and

plan and perform the audit to obtain reasonable assurance

whether the financial statements are free from material

misstatement.

An audit involves performing procedures to obtain audit

evidence about the amounts and disclosures in the financial

statements. The procedures selected depend on the auditor’s

judgement, including the assessment of the risks of material

misstatement of the financial statements, whether due to fraud

or error. In making those risk assessments, the auditor

considers internal control relevant to the entity’s preparation

Independent auditor’s report


Directors’ report

To the members of Allied Electronics Corporation Limited

The directors have pleasure in submitting the annual

financial statements of the Altron group for the year ended

29 February 2008.

NATURE OF BUSINESS

Altron is an investment holding company. Its principal

subsidiaries, Allied Technologies Limited (Altech), Power

Technologies (Pty) Limited (Powertech) and Bytes Technology

Group Limited (Bytes), are invested in the power electronics,

telecommunications, multi-media and information technology

industries.

FINANCIAL RESULTS

Group attributable earnings for the year ended 29 February

2008 were R1 019 million (2007: R805 million), representing

earnings per share of 357 cents (2007: 287 cents). Headline

earnings per share were at 375 cents (2007: 283 cents).

Full details of the financial position and results of the Altron

group are set out in these financial statements.

DIVIDENDS

The following dividends were declared in respect of the year

ended 29 February 2008:

Ordinary dividend number 60 of 156 cents per share

(2007: 118 cents).

Participating preference dividend number 14 of 156 cents

per share (2007: 118 cents).

It remains policy to declare dividends annually at the time of

announcing the Altron group’s results in May of each year.

SUBSIDIARIES, ASSOCIATE COMPANIES AND OTHER

INVESTMENTS

Particulars of the principal subsidiaries of the Altron group are

given on page 187 while particulars of the associate

companies, joint ventures and other investments are provided

in Annexure 1 on page 176.

The attributable interest of the group in the income and losses

of its subsidiaries for the year ended 29 February 2008 is:

2008R million

2007R million

Aggregate amount of profit after taxation 1 401 1 186

Aggregate amount of losses after taxation 84 97

ACQUISITION OF 0.82% OF BYTES ORDINARY SHARES

During the period under review and prior to the Bytes

scheme of arrangement, Altron took advantage of several

opportunities to purchase 0.82% of the issued share

capital of Bytes on the open market at a cost of

R21.9 million.

ACQUISITION OF 3.71% OF ALTECH ORDINARY

SHARES

During the period under review, Altron took advantage of

several opportunities to purchase 3.71% of the issued

share capital of Altech on the open market at a cost of

R186.5 million.

BYTES SCHEME OF ARRANGEMENT

On 11 December 2007, the High Court sanctioned the

Bytes scheme of arrangement whereby Altron acquired

42.3% of the ordinary share capital of Bytes that Altron

and its subsidiaries did not already own from all

shareholders of Bytes other than the Altron group in

accordance with and as contemplated by the Securities

Regulation Code on Takeovers and Mergers. In settlement

of the Bytes scheme consideration, Altron issued

8 495 016 Altron ordinary shares and 22 110 410 Altron

participating preference shares as consideration for the

Bytes ordinary shares. The listing of Bytes on the JSE

Limited was terminated on 15 January 2008.

IST GROUP

On 22 August 2007, the Competition Tribunal unconditionally

approved the acquisition of the IST Group (Pty) Limited by

Powertech for a purchase consideration totalling

R504 million. The five IST divisions acquired by Powertech

were Energy, Otokon, Data, Telecom and Industrial. The

Defence and Nuclear divisions were excluded from the

acquisition.

CABLES DE COMUNICACIONES ZARAGOZA

During the period under review, Powertech acquired the

25% minority shareholder interest in Cables de

Comunicaciones Zaragoza for an amount of 17.6 million

(approximately R74.2 million) from the company’s

management in Spain. A further 11 million was received by

the minority shareholders as a dividend. Cables de

Comunicaciones Zaragoza is a manufacturer of copper

telecommunications, instrumentation and railway signalling

cables serving the Spanish and European markets.




OPERATIONALREVIEW



DIRECTORATE

Appointments

1 February 2008 Ms BJM Masekela

Resignations

29 February 2008 Ms DC Radley

In terms of the company’s articles of association, Messrs

BJM Masekela, MJ Leeming, MC Berzack, CG Venter and

Dr PM Maduna retire by rotation. All the retiring directors are

eligible and available for re-election. Their profiles appear on

pages 189 to 193.

SECRETARIES

Altron Management Services (Pty) Limited act as secretaries to

the company. The secretaries’ business and postal addresses

appear on the inside back cover of this annual report

(page 203).

SEGMENTAL REPORTING

Segmental information is included in this annual report as part

of the operational reviews and shareholders are referred to

Annexure 2 on page 180 .

Headline earnings contributions to Altron were as follows:

2008R million

2007R million

Altech 288 236

Bytes 170 116

Powertech 577 415

Corporate 37 26

DIRECTORS’ INTERESTS

At 29 February 2008, the present directors of the company held

direct and indirect interests, including family interests, in

60 035 576 of the company’s issued ordinary shares

(2007: 59 881 073 ordinary shares) and 23 432 336 of the

company’s issued participating preference shares

(2007: 34 486 558). Details of shares held per individual

director are listed below. A total of 3 979 280 participating

preference share options and conditional rights are allocated to

directors in terms of the company’s employee share schemes.

COMTECH (PTY) LIMITED

On 27 June 2007, Altech concluded an agreement to acquire

fleet management company ComTech (Pty) Limited for Altech

Netstar Fleet Management Services for a purchase

consideration of up to R74.2 million. The Competition

Authorities unconditionally approved this acquisition on

1 January 2008.

SAMEER ICT GROUP

On 1 March 2008, Altech acquired a controlling interest in three

subsidiaries of Kenya’s Sameer ICT Group for

US$75 million. The transaction sees Altech acquire a 51%

controlling interest in Kenya Data Networks Limited, Swift

Global (Kenya) Limited and Infocom Limited.

ABB POWERTECH TRANSFORMERS

On 26 March 2008, the Competition Tribunal unconditionally

approved the acquisition by Powertech of the 50%

shareholding that it did not already own in its joint venture

company, ABB Powertech Transformers, from ABB South Africa

for a purchase consideration of R320 million.

SHARE CAPITAL

Full details of the authorised, issued and unissued capital of the

company at 29 February 2008 are contained in note 10 to the

financial statements.

Share schemes

Particulars relating to the Altron Group Share Incentive Trust

and The Allied Electronics Corporation Limited Share Trust are

set out in note 10 to the financial statements.

At the date of this report, a total of 4 847 855 ordinary shares

and 7 584 445 participating preference shares remain reserved

for the purposes of the company’s employee share schemes.

General authority to issue shares

The remaining unissued ordinary shares and participating

preference shares are the subject of a general authority

granted to the directors in terms of section 221 of the

Companies Act, 1973, as amended, and which authority

remains valid only until the next annual general meeting which

will be held on Tuesday, 15 July 2008. At that meeting,

shareholders will be asked to place 10% of the unissued

ordinary and participating preference shares under the control

of the directors. Shareholders will also be asked to waive their

pre-emptive rights in favour of the directors to allot and issue

ordinary and/or participating preference shares for cash as and

when suitable circumstances arise.


Directors’ report continued

2008

Direct beneficial Direct non-beneficial

Name of director Ordinary sharesParticipating

preference shares Ordinary sharesParticipating

preference shares

Dr WP Venter 8 694 070 6 246 731 — —

RE Venter — 90 732 — —

MC Berzack — 302 690 — —

PD Redshaw — 8 713† — —

Dr HA Serebro 627 600 1 555 — —

PL Wilmot — 3 971† — —

MJ Leeming 2 500 — — —

Indirect beneficial Indirect non-beneficial



preference shares

Dr WP Venter 31 263 527 34 055 19 367 000* 16 741 572*

Dr HA Serebro 8 379 1 010 — —

MJ Leeming 2 500 1 307† — —

MJ Lamberti — — 70 000 —

† Messrs Redshaw, Wilmot and Leeming obtained Altron participating preference shares in accordance with the Bytes scheme of arrangement, sanctioned by the High Court on 11 December 2007.

* Chairman and director, Dr WP Venter, through his family and related trusts, is the controlling shareholder of the company.

At the date of this report, these interests remain unchanged.

2007

Direct beneficial Direct non-beneficial



preference shares

Dr WP Venter 8 660 236 8 577 217 — —

MC Berzack — 401 332 — —

Dr HA Serebro 514 300 1 555 — —


RE Venter — 45 366 — —

Indirect beneficial Indirect non-beneficial



preference shares

Dr WP Venter 31 263 527 8 718 506 19 367 000* 16 741 572*

Dr HA Serebro 1 010 1 010 — —


MJ Lamberti — — 70 000 —

* Chairman and director, Dr WP Venter, through his family and related trusts, is the controlling shareholder of the company.




OPERATIONALREVIEW



For further details in this regard, shareholders are referred to

page 100 of the annual report.

APPROVAL OF THE ANNUAL FINANCIAL STATEMENTS

The annual financial statements set out in this annual report

have been prepared in accordance with International Financial

Reporting Standards and are based on appropriate accounting

policies, which are supported by reasonable and prudent

judgements and estimates.

The directors of the company are responsible for the

preparation of the annual financial statements and related

financial information that fairly presents the state of affairs and

the results of the company and the Altron group.

The directors’ responsibility includes: designing, implementing

and maintaining internal control relevant to the preparation and

fair presentation of these financial statements that are free from

material misstatement, whether due to fraud or error; selecting

and applying appropriate accounting policies; and making

accounting estimates that are reasonable in the circumstances.

The directors’ responsibilities also include maintaining

adequate accounting records and an effective system of risk

management.

These financial statements have been prepared on the going-

concern basis, since the directors have every reason to believe

that the company and the Altron group have adequate

resources in place to continue in operation for the foreseeable

future. The auditors have concurred with the directors’ going-

concern statement.

The auditors are responsible for reporting on whether the group

annual financial statements and separate parent annual

financial statements are fairly presented in accordance with the

applicable financial reporting framework.

The annual financial statements for the year ended 29 February

2008 which appear on pages 116 to 188 were approved by the

board and signed on its behalf on 5 May 2008.

For: Allied Electronics Corporation Limited

Dr WP Venter

Chairman

RE Venter

Chief executive

RESOLUTIONS

The company passed and registered one special resolution on

8 August 2007, approving the acquisition by the company or

any of its subsidiaries of the company’s shares.

At subsidiary level, Altech passed and registered one special

resolution on 18 July 2007, approving the acquisition by Altech

or any of its subsidiaries of Altech’s shares.

At subsidiary level, Powertech passed and registered one

special resolution on 18 October 2007, adopting new articles

of association.

Except for the above, no other special resolutions, the nature of

which might be significant to shareholders in their appreciation

of the state of affairs of the Altron group, were passed by the

company or its subsidiaries during the period covered by this

annual report.

AUDIT COMMITTEE

In terms of section 270 A(f) of the Corporate Laws Amendment

Act of 2006 (“the Act”), the Altron audit committee has

discharged all of those functions delegated to it in terms of the

Altron audit committee mandate and terms of reference, and

ascribed to it in terms of the Act.

During the period under review, the Altron audit committee:

a) met on three separate occasions to review inter alia the

year-end and interim results of the Altron group, as well as

to consider regulatory and accounting standard compliance

insofar as the same pertained to the audit committee and

the Altron group respectively;

b) considered and satisfied itself that the external auditors are

independent auditors (see page 101 of the annual report),

determined the external auditors’ fees for the 2007/8

financial year and nominated the external auditors for

appointment for the financial year ending 28 February 2009;

c) determined the non-audit-related services which the

external auditors are permitted to provide to Altron and

revised the policy for the use of the external auditors for

non-audit-related services. This included preapproving all

non-audit-related service agreements concluded between

Altron and the external auditors;

d) confirmed the internal audit charter and the audit plan for

the 2007/8 financial year;

e) ensured that the audit committee complied with the

membership criteria specified in the Act;

f) reviewed the Altron group’s code of conduct and

recommended changes thereto to the Altron board; and

g) held separate meetings with management and the external

auditors to discuss any problems and reservations arising

from the year-end audit and any related matters which

management and the external auditors wished to discuss.


Accounting policies

Allied Electronics Corporation Limited (the company) is a

South African registered company. The consolidated financial

statements of the company for the year ended 29 February

2008 comprise the company and its subsidiaries (together

referred to as the “group”) and the group’s interest in

associates and jointly controlled entities.

STATEMENT OF COMPLIANCE

The consolidated financial statements have been prepared in

accordance with International Financial Reporting Standards

(IFRS), the interpretations adopted by the International

Accounting Standards Board (IASB) and the requirements of

the South African Companies Act.

BASIS OF PREPARATION

The annual financial statements are prepared in millions

of South African rands on the historical cost basis, except

for the following assets and liabilities which are stated at fair

value:

Derivative financial instruments

Investments classified as available-for-sale.

Non-current assets and liabilities and disposal groups

held-for-sale are stated at the lower of carrying amount and fair

value less costs to sell.

The preparation of financial statements in conformity with IFRS

requires management to make judgements, estimates and

assumptions that may affect the application of accounting

policies and reported amounts of assets, liabilities, income and

expenses. The estimates and associated assumptions are

based on historical experience and various other factors that

are believed to be reasonable under the circumstances, the

results of which form the basis of making the judgements about

carrying values of assets and liabilities that are not readily

apparent from other sources. Actual results may differ from

these estimates.

The estimates and underlying assumptions are reviewed on

an ongoing basis. Revisions to accounting estimates are

recognised in the period in which the estimate is revised if the

revision only affects that period, or in the period of the revision

and future periods if the revision affects both current and future

periods. Judgements made by management in the application

of IFRS that have a significant effect on the financial statements

and estimates with a significant risk of material adjustment in

the next year are discussed in note 32.

The accounting policies set out below have been applied

consistently to the periods presented in these consolidated

financial statements.

The accounting policies have been applied consistently by all

group entities.

BASIS OF CONSOLIDATION

Subsidiaries

Subsidiaries are those entities over which the group has the

power to, directly or indirectly, exercise control over the financial

and operating policies, so as to obtain benefits from their

activities.

In assessing control, potential voting rights that presently are

exercisable are taken into account.

The financial statements of subsidiaries are included in the

consolidated financial statements from the date that control

commences until the date that control ceases.

Associates

An investment in an associate is an investment in a company in

which the group exercises significant influence but not control.

The equity method of accounting for associates is adopted in

the group financial statements. In applying the equity method,

account is taken of the group’s share of accumulated retained

earnings and movements in reserves from the effective date on

which the enterprise became an associate and up to the

effective date of disposal.

Goodwill arising on the acquisition of associates is included in

the carrying amount of the associate and is treated in

accordance with the group’s accounting policy for goodwill.

Dividends received from associates are deducted from the

carrying value of the investment. Where the group’s share of

losses of an associate exceeds the carrying amount of the

associate, the associate is carried at no value. Additional losses

are only recognised to the extent that the group has incurred

obligations or made payments on behalf of the associate.

Joint ventures

Joint ventures are those enterprises over which the group

exercises joint control in terms of a contractual agreement.

Joint ventures are proportionately consolidated, whereby the

group’s share of the joint venture’s assets, liabilities, income,

expenses and cash flows are combined with similar items, on

a line-by-line basis, in the group’s financial statements from the

date the joint control commences until the date the joint control

ceases.

Eliminations on consolidation

Intragroup balances and transactions, and any unrealised

gains or losses arising from intragroup transactions, are

eliminated in preparing the consolidated financial statements.

Unrealised gains arising from transactions with associates and

joint ventures are eliminated to the extent of the group’s interest

in these enterprises. Unrealised losses on transactions with

associates and joint ventures are eliminated in the same way as

unrealised gains except that they are only eliminated to the

extent that there is no evidence of impairment.




OPERATIONALREVIEW



Goodwill

All business combinations are accounted for by applying the

“purchase method”. Goodwill represents amounts arising on

the acquisition of subsidiaries, associates and joint ventures. In

respect of business combinations that have occurred since the

IFRS transition date, 1 March 2004, goodwill represents the

difference between the cost of the acquisition and the fair

value of the identifiable assets, liabilities and contingent

liabilities acquired.

The group made an election in terms of IFRS 1 that in respect

of acquisitions prior to 1 March 2004, goodwill is included on

the basis of its deemed cost, which represents the amount

recorded under previous SA GAAP on 1 March 2004.

Goodwill is measured at cost less accumulated impairment losses.

Goodwill is allocated to cash-generating units and is tested

annually for impairment.

Negative goodwill arising on an acquisition is recognised

directly in the income statement.

Premiums and discounts arising on subsequent purchases from,

or sales to, minority interests in subsidiaries

Any increases and decreases in ownership interests in

subsidiaries without a change in control, are recognised as

equity transactions in the group financial statements.

Accordingly, any premiums or discounts on subsequent

purchases of equity instruments from, or sales of equity

instruments to, minority interests are recognised directly in the

equity of the parent shareholder.

Broad-based black economic empowerment (BBBEE) transactions

BBBEE transactions involving the disposal or issue of equity

interests in subsidiaries are only recognised when the

accounting recognition criteria have been met. Although

economic and legal ownership of such instruments may have

transferred to the BBBEE partner, the derecognition of such

equity interest sold or recognition of equity instruments issued

in the underlying subsidiary by the parent shareholder is

postponed until the accounting recognition criteria have been

satisfied. A dilution in the earnings attributable to the parent

shareholders (in the interim period) is adjusted for in the diluted

earnings per share calculation by an appropriate adjustment to

the earnings used in such calculation.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise cash balances and call

deposits. Bank overdrafts that are repayable on demand and

form an integral part of the group’s cash management are

included as a component of cash and cash equivalents for the

purposes of the cash flow statement. Cash and cash

equivalents are measured at amortised cost in the balance

sheet.

CAPITALISATION OF BORROWING COSTS

Interest on borrowings to finance the construction of assets

that require a substantial period of time to prepare them for

sale or use, is capitalised up to the date that the assets are

substantially complete.

CAPITAL ITEMS

Capital items are items of income and expense relating to the

acquisition, disposal or impairment of property, plant and

equipment, investments, subsidiaries and intangible assets.

EMPLOYEE BENEFITS

Short-term employee benefits

The cost of all short-term employee benefits is recognised

during the period in which the employee renders the related

service. The accruals for employee entitlements to salaries,

performance bonuses and annual leave represent the amounts

which the group has a present obligation to pay as a result of

the employee’s services provided. The accruals have been

calculated at undiscounted amounts based on current salary

levels.

Retirement benefits

The majority of the group’s employees are members of the

Altron Group Pension Fund and Altron Group Provident Fund,

which are defined contribution funds.

After the acquisition of subsidiaries, certain employees

remained members of their previous funds. A number of these

are defined benefit plans. These industry-managed retirement

benefit schemes are dealt with as defined contribution plans as

the group’s obligations under the schemes are equivalent to

those arising in a defined contribution plan.

The group’s contributions to defined contribution funds are

charged to the income statement in the year they are incurred.

Defined benefit obligations

Certain members of the Altron Group Pension Fund who were

members prior to 1 September 1996 are entitled to a minimum

benefit equal to the previously provided defined benefit

pension.

The projected unit credit method is used to determine the

present value of these defined benefit obligations, the related

service cost and, where applicable, the past-service cost.

The fair value of plan assets is deducted from the present

value of the defined benefit obligation to the extent permitted

by IAS 19 – Employee benefits. Past-service costs are

recognised as an expense on a straight-line basis over the

average period until the benefits become vested. Past-service

costs which are already vested, are expensed immediately.


Accounting policies continued

Actuarial gains and losses are recognised as income or

expense if the net cumulative unrecognised actuarial gains or

losses at the end of the previous financial year exceeded the

greater of:

10% of the present value of the defined benefit obligation

at that date before deducting plan assets; and

10% of the fair value of the plan assets at that date.

The amount recognised is the excess determined above,

divided by the expected average remaining working lives of

the employees participating in the plan.

When the calculation results in a benefit to the group, the

recognised asset is limited to the net total of any unrecognised

past-service cost and the present value of any future refunds

from the plan or reductions in future contributions to the plan.

Post-retirement medical aid benefits

The group has an obligation to provide post-retirement medical

aid benefits to certain eligible employees and pensioners. This

obligation has been provided for in full.

FINANCIAL INSTRUMENTS

Measurement

Non derivative financial instruments are initially measured at fair

value, which includes transaction costs, except for those items

carried at fair value through profit or loss, when the group

becomes a party to the contractual arrangements as set out

below. Subsequent to initial recognition these instruments are

measured as set out below.

Derecognition

Financial assets are derecognised if the group’s contractual

rights to the cash flows from the financial assets expire or if the

group transfers the financial assets to another party without

retaining control or substantially all risks and rewards of the

asset.

Financial liabilities are derecognised if the group’s obligations

specified in the contract expire or are discharged or cancelled.

Interest-bearing borrowings

Subsequent to initial recognition, interest-bearing borrowings are

stated at amortised cost with any difference between cost and

redemption value being recognised in the income statement over

the period of the borrowings on an effective interest basis.

Investments

Investments held-for-trading are classified as current assets

and are stated at fair value, with any resultant gain or loss

recognised in the income statement.

Other investments held by the group are classified as being

available-for-sale and are stated at fair value, with any resultant

gain or loss recognised directly in equity, except for impairment

losses and, in the case of monetary items, foreign exchange

gains or losses, which are recognised in the income statement.

When these investments are disposed of, the cumulative gain or

loss previously recognised directly in equity is recognised in

the income statement as a capital item. Where these

investments are interest-bearing, interest calculated using the

effective interest method is recognised in the income

statement.

Trade and other receivables/payables

Trade and other receivables/payables originated by the group

are stated at amortised cost less impairment losses on

receivables.

Derivative instruments

The group uses derivative financial instruments to manage its

exposure to foreign exchange and commodity price risks

arising from operational, financing and investment activities.

The group does not hold or issue derivative financial

instruments for trading purposes.

Derivative financial instruments comprise foreign exchange

contracts and metal future contracts. Derivatives are initially

measured at fair value and attributable transaction costs are

recognised in profit or loss when incurred. Subsequent to initial

recognition they are measured at fair value. Fair value adjustments

are recognised in the income statement. Fair value is determined

by comparing the contracted forward rate to the present value of

the current forward rate of an equivalent contract with the same

maturity date. However, where derivatives qualify for hedge

accounting, recognition of any resultant gain or loss depends on

the nature of the item being hedged.

Hedging

Where a derivative financial instrument is designated as a

hedge of the variability in cash flows attributable to a particular

risk associated with a recognised asset or liability, a firm

commitment if it is a hedge of foreign exchange risk, or a

highly probable forecast transaction that could affect the

income statement, the effective part of any gain or loss on the

derivative financial instrument is recognised directly in equity in

the cash flow hedging reserve. Any ineffective portion of

changes in the fair value of the derivative is recognised

immediately in the income statement.

When the hedged firm commitment or forecast transaction results

in the recognition of a non-financial asset or a non-financial

liability, the cumulative amount recognised in equity up to the

transaction date is adjusted against the initial measurement of the

asset or liability. For other cash flow hedges, the cumulative

amount recognised in equity is recognised in the income

statement in the period when the commitment or forecast

transaction affects the income statement.




OPERATIONALREVIEW



Where the hedging instrument or hedge relationship is

terminated but the hedged transaction is still expected to occur,

the cumulative unrealised gain or loss remains in equity and is

recognised in accordance with the above policy when the

underlying transaction occurs. If the hedged transaction is no

longer expected to occur, then hedge accounting is discontinued

and the cumulative unrealised gain or loss is immediately

recognised in the income statement.

Where a derivative financial instrument is used to economically

hedge the foreign exchange exposure of a recognised monetary

asset or liability, no hedge accounting is applied and any gain or

loss on the hedging instrument is recognised in the income

statement.

Offset

Financial assets and financial liabilities are offset and the net

amount reported in the balance sheet when the company has a

legally enforceable right to set off the recognised amounts, and

intends either to settle on a net basis, or to realise the asset and

settle the liability simultaneously.

FOREIGN CURRENCIES

Foreign currency transactions

Foreign currency transactions are converted to the respective

functional currencies of group entities at the rates of exchange

ruling at the date of transaction. Monetary assets and liabilities

denominated in foreign currencies at the balance sheet date are

translated to the functional currency at the rates ruling at that

date. Gains or losses on translation are recognised in the income

statement.

Financial statements of foreign operations

The assets and liabilities of all foreign operations, including goodwill

and fair value adjustments arising on acquisition, are translated to

South African rands at foreign exchange rates ruling at the balance

sheet date. The revenues and expenses of foreign operations are

translated to South African rands at rates approximating the foreign

exchange rates ruling at the date of the transactions.

Foreign exchange differences arising on translation are recognised

directly in a separate component of equity – the foreign currency

translation reserve. The foreign currency translation reserve

applicable to a foreign operation is released to the income statement

as a capital item upon disposal of that foreign operation.

IMPAIRMENT OF ASSETS

The carrying amounts of the group’s assets are reviewed at least

annually to determine whether there is any indication of

impairment. If there is an indication that an asset may be

impaired, its recoverable amount is estimated.

For goodwill, intangible assets that have an indefinite useful life

and intangible assets that are not yet available for use, the

recoverable amount is estimated annually.

The recoverable amount is the higher of an asset’s fair value

less costs to sell and its value in use.

In assessing value in use, the expected future cash flows from

the asset are discounted to their present value using a pre-tax

discount rate that reflects current market assessments of the

time value of money and the risks specific to the asset. An

impairment loss is recognised in the income statement whenever

the carrying amount of an asset exceeds its recoverable amount.

For an asset that does not generate cash inflows that are

largely independent of those from other assets the recoverable

amount is determined for the cash-generating unit to which the

asset belongs. An impairment loss is recognised in the income

statement whenever the carrying amount of the cash-

generating unit exceeds its recoverable amount. Impairment

losses recognised in respect of cash-generating units are

allocated first to reduce the carrying amount of any goodwill

allocated to the cash-generating units and then, to reduce the

carrying amount of other assets in the unit on a pro rata basis.

When a decline in the fair value of an available-for-sale financial

asset has been recognised directly in equity and there is objective

evidence that the asset is impaired, the cumulative loss that has

been recognised directly in equity is recognised in the income

statement even though the financial asset has not been

derecognised. The amount of the cumulative loss that is

recognised in the income statement is the difference between the

acquisition cost and current fair value, less any impairment loss on

that financial asset previously recognised in the income statement.

Reversal of impairment

A previously recognised impairment loss is reversed if there is an

indication that the impairment loss no longer exists and the

recoverable amount increases as a result of a change in the

estimates used to determine the recoverable amount, but not to an

amount higher than the carrying amount that would have been

determined (net of depreciation or amortisation) had no impairment

loss been recognised in prior years, except as detailed below.

An impairment loss in respect of an investment in an equity

instrument classified as available-for-sale is not reversed

through the income statement. An impairment loss in respect

of goodwill is not reversed.

INTANGIBLE ASSETS

Goodwill

Refer to “Basis of consolidation” above.

Research and development

Expenditure on research activities, undertaken with the

prospect of gaining new scientific or technical knowledge

and understanding, is recognised as an expense as incurred.

Expenditure on development activities, whereby research

findings are applied to a plan or design for the production of

new or substantially improved products and processes, is



capitalised if development costs can be measured reliably, the

product or process is technically and commercially feasible,

future economic benefits are probable and the group intends to

and has sufficient resources to complete development and to

use or sell the asset.

The expenditure capitalised includes the cost of materials,

direct labour and an appropriate proportion of overheads.

These items are stated at cost less accumulated amortisation

and impairment losses. Other development expenditure is

recognised as an expense as incurred.

Other intangible assets

Other intangible assets that are acquired by the group are

stated at cost less accumulated amortisation and impairment

losses.

Subsequent expenditure

Subsequent expenditure on capitalised intangible assets is

capitalised only when it increases the future economic benefits

embodied in the specific asset to which it relates. All other

expenditure is expensed as incurred.

Amortisation

Amortisation is charged to the income statement on a straight-

line basis over the estimated useful lives of intangible assets

unless such lives are indefinite.

Other intangible assets are amortised from the date they are

available for use. The estimated useful lives for the current and

comparative periods are as follows:

Trade names, patents and trademarks 5 to 10 years

Customer relationships 2 to 6 years

Distribution rights and licence agreements indefinite life

Proprietary software 3 years

INVENTORIES

Inventories are measured at the lower of cost and net realisable

value taking account of market conditions and technology

changes. Cost is determined on the first-in first-out and average

cost methods. Work and contracts in progress and finished

goods include direct costs and an appropriate portion of

attributable overhead expenditure based on normal production

capacity. Net realisable value is the estimated selling price in

the ordinary course of business, less the estimated costs of

completion and selling expenses.

NON-CURRENT ASSETS HELD-FOR-SALE AND

DISCONTINUED OPERATIONS

Non-current assets are classified as held-for-sale if their

carrying amount will be recovered principally through a sale

transaction, not through continuing use. These assets may be

a component of an entity, a disposal group or an individual

non-current asset. Upon initial classification as held-for-sale,

non-current assets and disposal groups are recognised at the

lower of carrying amount and fair value less costs to sell. Any

impairment losses arising are recognised in the income

statement as capital items.

A discontinued operation is a component of the group’s

business that represents a separate major line of business or

geographical area of operations or a subsidiary acquired

exclusively with a view to resale. Classification as a

discontinued operation occurs upon the earlier of disposal or

when the operation meets the criteria to be classified as

held-for-sale. When an operation is classified as a discontinued

operation, the comparative income statement and cash flow

statement are restated as if the operation has been

discontinued from the start of the comparative period.

OPERATING LEASES

Leases where the lessor retains the risks and rewards of

ownership of the underlying asset are classified as operating

leases. Payments made under operating leases are charged

against income on a straight-line basis over the period of the

lease.

PROPERTY, PLANT AND EQUIPMENT

Owned assets

Property, plant and equipment are stated at cost less

accumulated depreciation and impairment losses. When

components of an item of property, plant and equipment have

different useful lives, those components are accounted for as

separate items of property, plant and equipment.

Purchased software that is integral to the functionality of the

related equipment is capitalised as part of that equipment.

Leased assets

Leases that transfer substantially all the risks and rewards of

ownership of the underlying asset to the group are classified

as finance leases. Assets acquired in terms of finance leases

are capitalised at the lower of fair value and the present value

of the minimum lease payments at inception of the lease, and

depreciated over the shorter of the estimated useful life of the

asset or the lease term if there is no reasonable certainty that

the group will obtain ownership at the end of the lease term.

The capital element of future obligations under the leases is

included as a liability in the balance sheet. Lease payments are

allocated using the effective interest method to determine the

lease finance cost, which is charged against income over the

lease period, and the capital repayment, which reduces the

liability to the lessor.




OPERATIONALREVIEW



Subsequent costs

The group recognises in the carrying amount of an item of

property, plant and equipment the cost of replacing part of

such an item when the cost is incurred, if it is probable that

additional future economic benefits embodied within the item

will flow to the group and the cost of such item can be

measured reliably. All other costs are recognised in the income

statement as an expense when incurred.

Depreciation

Depreciation is charged to the income statement for each

category of assets on a straight-line basis over their expected

useful lives to estimated residual values. Land is not

depreciated.

The estimated useful lives for the current and comparative

periods are as follows:

Buildings 20 to 50 years

Plant and equipment 3 to 20 years

Furniture and fittings 5 to 20 years

Motor vehicles 4 to 8 years

Software and IT systems 2 to 8 years

Leasehold improvements over period of lease

The depreciation methods, useful lives and residual values are

reassessed annually.

Gains and losses arising on the disposal of property, plant and

equipment are included as capital items in the income

statement.

PROVISIONS

General

Provisions are recognised when the group has a present legal

or constructive obligation as a result of past events, for which it

is probable that an outflow of economic benefits will occur, and

where a reliable estimate can be made of the amount of the

obligation. Provisions are determined by discounting the

expected future cash flows at a pre-tax discount rate that

reflects current market assessments of the time value of money

and, where appropriate, the risks specific to the liability.

Warranties

A provision for warranties is recognised when the underlying

products or services are sold. The provision is based on

historical warranty data and a weighting of all possible

outcomes against their associated probabilities.

Restructuring

A provision for restructuring is recognised when the group has

approved a detailed and formal restructuring plan, and the

restructuring either has commenced or has been announced

publicly. Future operating costs are not provided for.

Onerous contracts

A provision for onerous contracts is recognised when the

expected benefits to be derived by the group from a contract

are lower than the unavoidable cost of meeting the obligations

under the contract.

The provision is measured at the present value of the lower of

the expected costs of terminating the contract and the

expected net cost of continuing with the contract. Before a

provision is established, the group recognises any impairment

loss on the assets associated with that contract.

SHARE-BASED PAYMENT TRANSACTIONS

Equity settled

The fair value of share options and conditional rights granted

to employees is recognised as an employee expense with a

corresponding increase in equity. The fair value is measured

at grant date and expensed over the period during which the

employees are required to provide services in order to become

unconditionally entitled to the equity instruments. The fair value

of the instruments granted is measured using generally

accepted valuation techniques, taking into account the terms

and conditions upon which the instruments are granted. The

amount recognised as an expense is adjusted to reflect the

actual number of share options and conditional rights that

vest except where forfeiture is only due to share prices not

achieving the threshold for vesting. This accounting policy

has been applied to all equity instruments granted after

7 November 2002 that had not yet vested at 1 January 2005.

Cash settled

Share-linked instruments have been granted to certain

employees in the group. The fair value of the amount payable

to the employee is recognised as an expense with a

corresponding increase in liabilities. The fair value is initially

measured at grant date and expensed over the period during

which the employees are required to provide services in order

to become unconditionally entitled to payment. The fair value

of the instruments granted is measured using generally

accepted valuation techniques, taking into account the terms

and conditions upon which the instruments are granted. The

liability is remeasured at each balance sheet date and at

settlement date. Any changes in the fair value of the liability

are recognised as employees’ remuneration in the income

statement.

Group share-based payment transactions

Transactions in which a parent grants rights to its equity

instruments directly to the employees of its subsidiaries are



classified as equity settled in the financial statements of the

subsidiary, provided the share-based payment is classified as

equity settled in the consolidated financial statements of the

parent.

The subsidiary recognises the services acquired with the

share-based payment as an expense and recognises a

corresponding increase in equity for a capital contribution from

the parent for those services acquired. The parent recognises

in equity the equity-settled share-based payment and

recognises a corresponding increase in the investment in

subsidiary.

A recharge arrangement exists whereby the subsidiary is

required to fund the difference between the exercise price on

the share options and the market price of the share at the time

of exercising the option. The recharge arrangement is

accounted for separately from the underlying equity-settled

share-based payment upon initial recognition, as follows:

The subsidiary recognises a recharge liability and a

corresponding adjustment against equity for the capital

contribution recognised in respect of the share-based

payment.

The parent recognises a recharge asset and a

corresponding adjustment to the carrying amount of the

investment in the subsidiary.

Subsequent to initial recognition the recharge arrangement is

remeasured at fair value at each subsequent reporting date

until settlement date to the extent vested. Where the recharge

amount recognised is greater than the initial capital contribution

recognised by the subsidiary in respect of the share-based

payment, the excess is recognised as a net capital distribution

to the parent. The amount of the recharge in excess of the

capital contribution recognised as an increase in the investment

in subsidiary is deferred and recognised as dividend income

by the parent when settled by the subsidiary.

BBBEE transactions

Where goods or services are considered to have been received

from BBBEE partners as consideration for equity instruments of

the group, these transactions are accounted for as share-based

payment transactions, even when the entity cannot specifically

identify the goods or services received. This accounting policy

is applicable to equity instruments that had not vested by

1 January 2005 (as above).

RENTAL FINANCE ADVANCES

Rental finance advances to customers are supported by

finance leases and are stated at the outstanding capital

balances. The income earned is computed at the interest rates

inherent in each contract, applied to the capital balance

outstanding under such contract and is included in revenue.

REVENUE

Revenue from the sale of goods is measured at the fair value

of the consideration received or receivable, net of returns and

allowances, trade discounts, volume rebates and value-added

tax.

Revenue is recognised when the significant risks and rewards

have been transferred to the buyer, recovery of the

consideration is probable, the associated costs and possible

return of goods can be estimated reliably and there is no

continuing management involvement in the goods.

Revenue from services rendered is recognised in profit or loss

in proportion to the stage of completion of the transaction at

reporting date.

Dividends are recognised when the group’s right to receive the

revenue is established.

Interest revenue is recognised on a time apportionment basis

that takes into account the effective yield on the investment.

SHARE CAPITAL

Ordinary shares

Ordinary shares are classified as equity. Incremental costs

directly attributable to the issue of ordinary shares and share

options are recognised as a deduction from equity, net of any

tax effects.

Preference share capital

Preference share capital is classified as equity if it is non-

redeemable and any dividends are discretionary, or is

redeemable but only at the company’s option. Dividends on

preference share capital classified as equity are recognised

as distributions within equity.

Preference share capital is classified as a liability if it is

redeemable on a specific date or at the option of the

shareholders or if dividend payments are not discretionary.

Dividends thereon are recognised in the income statement

as interest expense.

Repurchase of share capital

When share capital recognised as equity is repurchased, the

amount of the consideration paid, including directly attributable

costs, is recognised as a deduction from equity. Repurchased

shares held by subsidiaries are classified as treasury shares

and presented as a deduction from total equity.

SEGMENTAL REPORTING

A segment is a distinguishable component of the group that is

engaged in either providing related products or services

(business segment), or in producing products or undertaking

service activities within a particular economic environment

(geographical segments), which is subject to risks and rewards




OPERATIONALREVIEW



that are different from those of other segments. The primary

basis for reporting segment information is business segments

and the secondary basis is by significant geographical region,

which is based on the location of assets. The basis of segment

reporting is representative of the internal structure used for

management reporting.

Segment results include revenue and expenses directly

attributable to a segment whether from external transactions or

from transactions with other group segments.

Segment assets and liabilities comprise those operating assets

and liabilities that are directly attributable to the segment or can

be allocated to the segment on a reasonable basis.

TAXATION

Income tax expense comprises current and deferred tax.

Income tax expense is recognised in the income statement

except to the extent that it relates to items recognised directly

in equity, in which case it is recognised in equity.

Current tax

Current tax comprises tax payable calculated on the basis of

the expected taxable income for the year, using the tax rates

enacted or substantively enacted at the balance sheet date,

and any adjustment of tax payable for previous years.

Deferred tax

Deferred tax is recognised using the balance sheet method,

based on temporary differences. Temporary differences are

differences between the carrying amounts of assets and

liabilities for financial reporting purposes and their tax values.

Deferred tax is not recognised for the following temporary

differences: the initial recognition of goodwill, the initial

recognition of assets or liabilities in a transaction that is not a

business combination and that affect neither accounting nor

taxable profit, and differences relating to investments in

subsidiaries and joint ventures to the extent that they will not

reverse in the forseeable future.

The amount of deferred tax provided is based on the expected

manner of realisation or settlement of the carrying amount of

assets and liabilities using tax rates enacted or substantively

enacted at the balance sheet date. The effect on deferred tax

of any changes in tax rates is recognised in the income

statement, except to the extent that it relates to items previously

charged or credited directly to equity.

A deferred tax asset is recognised to the extent that it is

probable that future taxable profits will be available against

which the unused tax losses and deductible temporary

differences can be utilised. Deferred tax assets are reduced to

the extent that it is no longer probable that the related tax

benefit will be realised.

Secondary tax on companies

Secondary tax on companies (STC) is recognised in the year

dividends are declared, net of dividends received. A deferred

tax asset is recognised on unutilised STC credits when it is

probable that such unused STC credits will be utilised in the

future.

EARNINGS PER SHARE

The group presents basic and diluted earnings per share (EPS)

data for its ordinary shares and participating preference

shares. Basic EPS is calculated by dividing the profit or loss

attributable to ordinary and participating preference

shareholders of the company by the weighted average number

of ordinary and participating preference shares outstanding

during the period. Diluted EPS is determined by adjusting the

profit or loss attributable to ordinary shareholders and the

weighted average number of ordinary and participating

preference shares outstanding for the effects of all dilutive

potential ordinary and participating preference shares, which

comprise share options granted to employees and BBBEE

transactions that have not yet met the applicable accounting

recognition criteria.w


Balance sheet at 29 February 2008

GROUP

Notes2008

R millions2007

R millions

ASSETS

Non-current assets 3 362 2 311

Property, plant and equipment 1 1 264 954

Intangible assets, including goodwill 2 1 502 844

Associates 3 20 15

Other investments 3 294 239

Rental finance advances 4 86 77

Deferred taxation 5 196 182

Current assets 7 617 6 139

Inventories 6 2 130 2 013

Trade and other receivables, including derivatives 7 3 371 2 494

Assets classified as held-for-sale 8 — 19

Cash and cash equivalents 9 2 116 1 613

Total assets 10 979 8 450

EQUITY AND LIABILITIES

Total equity 5 346 4 746

Altron equity holders 4 469 3 528

Minority interest 877 1 218

Non-current liabilities 1 047 389

Loans 13 784 149

Empowerment funding obligation 14 156 172

Provisions 15 24 38

Deferred taxation 5 83 30

Current liabilities 4 586 3 315

Loans 13 213 65

Empowerment funding obligation 14 16 —

Bank overdraft 9 33 24

Provisions 15 81 66

Trade and other payables, including derivatives 16 3 903 2 940

Liabilities classified as held-for-sale 8 — 15

Taxation payable 340 205

Total equity and liabilities 10 979 8 450

Net asset value per share (cents) 1 431 1 261




OPERATIONALREVIEW



GROUP

Notes2008

R millions2007

R millions

REVENUE 19 21 431 17 126

Operating costs before capital items (19 494) (15 598)

Material and services consumed (16 053) (11 917)

Employees’ remuneration 20.3 (3 053) (2 728)

Depreciation and amortisation (272) (235)

Net change in inventories (116) (718)

Operating profit before capital items 20 1 937 1 528

Capital items 21 (90) (38)

Result from operating activities 1 847 1 490

Financial income 22 182 132

Financial expense 23 (89) (56)

Share of profit from associates 24 4 4

Profit before taxation 1 944 1 570

Taxation 25 (625) (481)

Profit for the year 1 319 1 089

Attributable to:

Minority interest 300 284

Altron equity holders 1 019 805

Basic earnings per share (cents) 26 357 287

Diluted basic earnings per share (cents) 26 310 250

Dividends per share (cents) – paid 118 78

– proposed 27 156 118

Income statement for the year ended 29 February 2008


Attributable to Altron equity holders

GROUP

Sharecapital and

premium(note 10)

R millions

Treasuryshares

(note 10)R millions

Foreign currency

translation reserve

(note 11)R millions

Premium/ discount on

minorityequity

transactions(note 11)

R millions

Balance at 28 February 2006 827 (222) 18 (92)

Recognised income and expense

Profit for the year — — — —

Foreign currency translation differences — — 56 —

Cash flow hedging reserve — — — —

Fair value adjustments — — — —

Transactions with shareholders

Dividends — — — —

Issue of share capital 8 — — —

Share-based payments — — — —

Changes in shareholding of subsidiaries — — — (1)

Purchase of own shares — (77) — —

Balance at 28 February 2007 835 (299) 74 (93)

Recognised income and expense

Profit for the year — — — —

Foreign currency translation differences — — 106 —

Release of foreign currency translation deficits on disposal — — 4 —

Cash flow hedging reserve — — — —

Fair value adjustments — — — —

Transactions with shareholders

Dividends — — — —

Issue of share capital 1 375 — — —

Share-based payments — — — —

Changes in shareholding of subsidiaries — — — (1 262)

Balance at 29 February 2008 2 210 (299) 184 (1 355)

Statement of changes in equity for the year ended 29 February 2008




OPERATIONALREVIEW



Attributable to Altron equity holders

Cash flow hedging reserve(note 11)

R millions

Share-based

payments reserve(note 11)

R millions

Statutory reserves (note 11)

R millions

Fair value reserve

(note 11)R millions

Retained earnings (note 11)

R millionsTotal

R millions

Minority interest

R millions

Totalequity

R millions

(3) 3 9 34 2 357 2 931 1 103 4 034

— — — — 805 805 284 1 089

— — — — — 56 15 71

3 — — — — 3 2 5

— — — 1 — 1 1 2

— — — — (216) (216) (173) (389)

— — — — — 8 — 8

— 18 — — — 18 5 23

— — — — — (1) (19) (20)

— — — — — (77) — (77)

— 21 9 35 2 946 3 528 1 218 4 746

— — — — 1 019 1 019 300 1 319

— — — — — 106 27 133

— — — — — 4 3 7

(1) — — — — (1) — (1)

— — — 8 — 8 — 8

— — — — (331) (331) (164) (495)

— — — — — 1 375 — 1 375

— 23 — — — 23 5 28

— — — — — (1 262) (512) (1 774)

(1) 44 9 43 3 634 4 469 877 5 346


GROUP

Notes2008

R millions2007

R millions

CASH FLOWS FROM OPERATING ACTIVITIES 1 304 10

Cash generated by operations 34 2 220 799

Interest received 160 114

Dividends received 35 28 55

Interest paid (72) (38)

Taxation paid 36 (537) (531)

Cash available from operating activities 1 799 399

Dividends paid

– to Altron equity holders (331) (216)

– to minority interest (164) (173)

CASH FLOWS UTILISED IN INVESTING ACTIVITIES (1 532) (467)

Acquisition of subsidiaries and joint venture 37 (619) (86)

Proceeds on disposal of subsidiary 38 4 —

Proceeds on disposal of property, plant and equipment 39 27 27

Net (advance)/repayment of rental finance advances (1) 19

Acquisition of property, plant, equipment and intangibles (479) (240)

Other investing activities 40 (464) (187)

CASH FLOWS FROM FINANCING ACTIVITIES 704 (120)

Loans raised/(repaid) 692 (149)

Proceeds on share issue 12 8

Subsidiaries’ equity contributions from minorities 41 — 21

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 476 (577)

Cash and cash equivalents at the beginning of the year 1 589 2 152

Effect of foreign exchange translation on cash balances 18 14

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 9 2 083 1 589

Cash flow statement for the year ended 29 February 2008




OPERATIONALREVIEW



Notes to the group financial statements for the year ended 29 February 2008

Land Plant Motor vehicles,

and and furniture and IT equipment

buildings machinery equipment and software Total

R millions R millions R millions R millions R millions

1. PROPERTY, PLANT AND EQUIPMENT

Cost

Balance at 28 February 2006 218 1 565 287 575 2 645

Additions at cost 14 75 81 53 223

Arising on business combinations 3 — 7 — 10

Arising on acquisition of joint venture 32 25 1 — 58

Disposals (9) (148) (54) (65) (276)

Transfer to assets held-for-sale (1) (4) (1) (1) (7)

Transfer to intangible assets — — — (24) (24)

Translation 64 38 42 (1) 143


Additions at cost 38 296 30 109 473

Arising on business combinations 57 10 20 21 108

Disposals (7) (60) (29) (79) (175)

Translation 18 93 5 8 124


Depreciation and impairment losses


Depreciation for the year 12 77 52 75 216

Impairment losses — 5 — — 5

Arising on business combinations 1 — 4 — 5

Disposals (1) (135) (35) (57) (228)

Transfer to assets held-for-sale (1) (3) (1) — (5)

Transfer to intangible assets — — — (23) (23)

Translation 33 77 (8) 6 108


Depreciation for the year 12 102 42 76 232

Arising on business combinations 1 2 13 18 34

Disposals (1) (64) (16) (69) (150)

Translation 12 81 4 7 104


Carrying amount at 28 February 2006 161 472 109 163 905

Carrying amount at 28 February 2007 220 437 173 124 954

Carrying amount at 29 February 2008 302 655 156 151 1 264



continued

2008 2007

R millions R millions

1. PROPERTY, PLANT AND EQUIPMENT (continued)

Land and buildings

Details of land and buildings are available, on request, for inspection at the registered office of the company.

Encumbered assets

Certain property, plant and equipment, included in the above amounts, is encumbered as security for finance leases and secured bank loans (refer to note 13) as follows:

Finance leases 14 21

Secured bank loans 189 —

203 21

Assets under construction

Included in the cost of assets are the following items of capital work in progress:

Plant and machinery 186 43

IT equipment and software 17 12

Other equipment 3 11

206 66

Impairment losses

The impairment losses relate to the assets of businesses closed during the previous year.

Useful lives

Useful lives are reflected under accounting policies on page 125.

GoodwillCustomer

relationships

Trade names,patents andtrademarks

Distribution rights

and licenceagreements

Proprietarysoftware Total

R millions R millions R millions R millions R millions R millions

2. INTANGIBLE ASSETS, INCLUDING GOODWILL

Cost

Balance at 28 February 2006 1 008 26 8 24 6 1 072

Additions at cost — — 11 2 — 13

Development costs capitalised — — — — 4 4

Transfer from property, plant and equipment — — 24 — — 24

Adjustments (19) — — — — (19)

Arising on business combinations and joint ventures 86 17 18 — — 121

Translation 12 — 5 — — 17


Additions at cost — — 4 — — 4

Development costs capitalised — — — — 2 2

Disposals (267) — — — — (267)

Arising on business combinations 506 91 105 — 5 707

Adjustments 2 — — — — 2

Translation 66 2 4 — — 72




continued



OPERATIONALREVIEW



GoodwillCustomer

relationships

Trade names,patents andtrademarks

Distribution rights

and licenceagreements

Proprietarysoftware Total


2. INTANGIBLE ASSETS, INCLUDING GOODWILL (continued)

Amortisation and impairment losses

Balance at 28 February 2006 281 9 3 4 2 299

Amortisation for the year — 12 6 — 1 19

Impairment losses 50 — — — — 50

Transfer from property, plant and equipment — — 23 — — 23

Translation — — (3) — — (3)


Amortisation for the year — 24 12 — 4 40

Impairment losses 86 — — — — 86

Disposals (267) — — — — (267)

Translation — 2 1 — — 3




Carrying amount at 29 February 2008 1 244 89 137 22 10 1 502

Adjustments to goodwill

A reduction of goodwill was made in the prior year in respect of tax losses and deductible temporary differences realised or recognised as deferred tax assets after the acquisition of a subsidiary that did not meet the recognition criteria of a deferred tax asset at acquisition. In the current year a portion of the tax losses was disallowed giving rise to a reduction in the recognised deferred tax asset of R2 million and a contra adjustment to goodwill.

Distribution rights and licence agreements

The group owns the rights to distribute Xerox equipment in 24 African territories. It paid an initial fee to acquire these rights. These distribution rights within Bytes Document Solutions are considered to have indefinite useful lives as these rights will automatically be renewed at no further cost upon the renewal of the group’s South African distribution agreement. Intangible assets with an indefinite useful life are tested for impairment annually and whenever there is an indication that the asset may be impaired. The cash flows emanating from this asset are discounted to their present value using the Bytes group’s weighted average cost of capital of 15% (2007:15%). In determining the future cash flows, management uses the approved budgeted profit after tax in year one to be derived from this asset and this is escalated for the next four years by the anticipated CPIX of 6% (2007: 5%). The group’s budgeted profit has historically been in line with actual performance.

Proprietary software

The Bytes group is replacing its existing healthcare switching technology with enhanced technology and has capitalised R2 million of its development cost in the current year (2007: R4 million). The new technology was commissioned in the current year and no further costs will be incurred on the development of this technology.

Through the acquisition of IST, software utilised in the demand-side management business, to the value of R3.5 million, was recognised as an intangible asset in accordance with IFRS 3.



continued

2008 2007


2. INTANGIBLE ASSETS, INCLUDING GOODWILL (continued)

Impairment tests for cash-generating units containing goodwill

The following units have significant carrying amounts of goodwill:

Altech NamITech 306 332

Bytes Document Solutions 135 135

CS Holdings 107 105

Bytes Healthcare Solutions 64 64

Xclusive Solutions 44 40

Vantage Business Systems 30 28

ComTech 18 —

IST 448 —

Swanib Cables 24 —

Multiple units without significant goodwill 68 52

1 244 756

Description of impairment tests and key assumptions

Impairment tests are conducted on an annual basis using a discounted cash flow valuation model on the basis of value-in-use.

The impairment tests are prepared on the basis of forecast profits generated by the cash-generating unit. Management forecasts typically cover a three-year period and thereafter a reasonable rate of growth is applied based on current market conditions. In assessing future cash flows management has used assumptions relating to the growth in the units’ market potential, new market opportunities as well as changes in manufacturing costs based on business plans. Discount rates used in the discounted cash flow models are based on price-earnings ratios of similar businesses in the same sector and of generally similar size.

Impairment losses

In view of the trading loss incurred by Altech NamITech South Africa, the directors concluded that the remaining carrying value of goodwill of R86 million attributable to these operations be fully impaired.

Useful lives

Useful lives are reflected under accounting policies on page 124.

GROUP

2008 2007


3. ASSOCIATES AND OTHER INVESTMENTS

Associates 20 15

Other investments

Non-current loans receivable at amortised cost

Participation loan to Fintech Receivables 1 (Pty) Limited 27 27

Participation loan to Technology Acceptances Receivables (Pty) Limited 192 152

Non-current available-for-sale investments at fair value

Preference shares in Fintech Receivables 1 (Pty) Limited 36 36

Preference shares in Technology Acceptances Receivables (Pty) Limited 26 23

Investment in Izingwe Aberdare Cables Investments (Pty) Limited 1 1

Izingwe Aberdare Cables Investments (Pty) Limited – cash on deposit 12 —

294 239

Refer to Annexure 1 on page 176 for details.



continued



OPERATIONALREVIEW



GROUP

2008 2007


4. RENTAL FINANCE ADVANCES

Assets at amortised cost

Present value of minimum lease payments receivable 128 127

Less: Current portion (note 7) (42) (50)

Non-current finance lease asset 86 77

Liabilities at amortised cost (included under loans)

Present value of minimum lease payments payable (note 13) 128 114

Less: Current portion (note 13) (42) (37)

Non-current finance lease liability 86 77

Group entities sell certain document processing equipment to third parties on a finance lease basis. The lease asset arising is in turn financed by a reciprocal lease agreement with financial institutions.

The underlying loans receivable and payable are settled in monthly instalments over periods of up to six years and bear interest at rates linked to the prime overdraft rate. The loans are secured by the underlying equipment sold.

The relationship between the gross investment in the lease at the balance sheet date, and the present value of the minimum lease payments receivable at the balance sheet date, is as follows:

Non-derivative financial assets

Finance lease assets

Present value of minimum lease payments receivable 128 127

Interest receivable 29 23

Future minimum lease payments receivable 157 150

2008 Future

minimumlease

paymentsR millions

2008 Present value

of minimum lease

paymentsR millions

2007 Future

minimumlease

paymentsR millions

2007 Present value

of minimum lease

paymentsR millions

Non-derivative financial liabilities

Finance lease liabilities are payable as follows:

Less than 1 year 58 42 41 37

Between 1 and 5 years 99 86 96 77

157 128 137 114



continued

2008 2007


4. RENTAL FINANCE ADVANCES (continued)

Exposure to credit risk

The carrying amount of finance lease assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

Finance lease assets 128 127

The maximum exposure to, and concentration of, credit risk for finance lease assets at the reporting date by type of customer was:

2008 2007

Gross Gross


Parastatals/government 28 30

Corporates 97 95

SMMEs 3 2

128 127

The maximum exposure to, and concentration of, credit risk for finance lease assets at the reporting date by geographical region was:

South Africa 128 127

All customers are subjected to stringent credit vetting. It is our experience that only large corporates avail themselves of the document outsourcing services rendered by the group and hence there is a reduced risk of default. Lease payments are due 30 days after invoice. The percentage of delinquent leases at the balance sheet date was 3.27% of the total lease book. This compares to the historical average delinquency ratio of 4.44% of the lease book. In the event of a default on lease receivable payments the exposure to financial loss to the group is limited as the equipment is repossessed and resold.

In the 16 years that the group has been operating the document outsource model it has not incurred losses on default/ delinquency as the capital amount has always been recovered upon resale of the equipment. Accordingly no impairment allowance is maintained (2007: Rnil).

Exposure to liquidity risk

The following are the contractual maturities of finance lease assets and liabilities, including interest payments and excluding the impact of netting agreements:

29 February 2008Non-derivative financial assets

Carryingamount

Contractual cashflows

6 monthsor less

6 –12 months

1 – 2 years

2 – 5 years

Finance lease assets 128 157 29 29 50 49


Finance lease liabilities (128) (157) (29) (29) (50) (49)

28 February 2007Non-derivative financial assets

Carryingamount


6 monthsor less

6 – 12 months

1 – 2 years

2 – 5 years

Finance lease assets 127 150 28 28 46 48


Finance lease liabilities (114) (137) (21) (20) (40) (56)



continued



OPERATIONALREVIEW



4. RENTAL FINANCE ADVANCES (continued)

Exposure to interest rate risk

All finance leases are entered into on a back-to-back basis with financial institutions. The interest rate payable to financial institutions on the finance lease liability is equal to the rate being charged to the customer on the finance lease asset. These rates are automatically adjusted as and when the prime overdraft rate is amended. Accordingly the group does not have any exposure to interest rate risk as a result of these arrangements.

2008 2007


5. DEFERRED TAXATION

5.1 Deferred tax movement

Balance at the beginning of the year (152) (97)

Charged to the income statement (20) (70)

Charged directly in equity (2) (5)

Transfer to assets held-for-sale — 1

Acquisitions and disposals of subsidiaries 61 20

Translation differences — (1)

Balance at the end of the year (113) (152)

5.2 Deferred tax balances

Attributable to the following temporary differences recognised at the normal tax rate in South Africa of 28% (2007: 29%) or the normal tax rate for foreign jurisdictions, unless otherwise indicated:

Property, plant and equipment 67 67

Intangible assets 26 2

Construction work in progress 7 —

Prepaid expenditure 10 7

Receipts in advance (37) (25)

Receivables (11) (9)

Contract allowances 11 1

Provisions, accruals and allowances (106) (89)

Tax losses (73) (70)

Investments and other (9) (22)

Share scheme recharge liabilities 17 —

Fair value adjustments (at 14%) (2007: 14.5%) (7) 6

Secondary tax credits (at 10%) (8) (20)

(113) (152)

The above balance comprises:

Deferred tax liabilities 83 30

Deferred tax assets (196) (182)

(113) (152)

Tax losses

Estimated tax losses available for set-off against future taxable income 277 362

Applied to reduce deferred tax (260) (244)

17 118

Attributable to minority interest — (2)

17 116



continued

2008 2007


6. INVENTORIES

Raw materials 749 639

Work in progress 278 316

Finished goods 875 849

Merchandise 189 180

Consumable stores 39 29

2 130 2 013

Inventories carried at cost 1 936 1 549

Inventories carried at net realisable value 194 464

2 130 2 013

7. TRADE AND OTHER RECEIVABLES, INCLUDING DERIVATIVES

Gross trade receivables 3 189 2 433

Less: Allowance for impairment losses (115) (96)

Less: Other allowances (77) (37)

Current portion of rental finance advances (note 4) 42 50

Derivative assets at fair value: used for hedging 54 11

Prepayments 47 35

Other receivables 231 98

3 371 2 494

Exposure to credit risk

Gross trade receivables represents the maximum credit exposure. The maximum

exposure to credit risk at the reporting date was:

Gross trade receivables 3 189 2 433

The maximum exposure to credit risk for gross trade receivables at the reporting date by type of customer was:

2008 2007

Gross Gross

Parastatals/government 429 297

Corporates 1 996 1 480

SMMEs 526 503

Individuals 238 153

3 189 2 433

The group’s exposure to parastatals and government has increased in the last year, primarily as a result of the increased infrastructural spend of these bodies. This is not expected to increase the group’s credit risk profile.

The group generally deals with the larger corporates who have a sound credit standing. Collateral is generally not held for blue-chip companies as their payment history does not warrant it, but collateral is obtained for other entities as security where possible.

Credit risk in respect of corporates and SMMEs is controlled through the use of credit vetting agencies and the setting of credit limits by experienced personnel. Credit limits are typically reviewed annually.

The increase in the group’s exposure to individuals is a reflection of the growth in the group’s consumer businesses, principally Altech Autopage Cellular and Altech Netstar. Credit risk increases in this area as interest rates go up, but this is closely monitored by management.



continued



OPERATIONALREVIEW



7. TRADE AND OTHER RECEIVABLES, INCLUDING DERIVATIVES (continued)

The maximum exposure to credit risk for gross trade receivables at the reporting date by geographical region was:

2008 2007

Gross Gross


South Africa 2 179 1 621

Rest of Africa 211 197

Europe 634 535

Rest of world 165 80

3 189 2 433

Most of the receivables outside of South Africa are in respect of our international operations who are experienced in managing their own local credit risk. As regards cross-border trade, credit risk is managed through the use of letters of credit and credit insurance as considered necessary.

Impairment losses

The following table illustrates the relationship between aged debt and the impairment allowance:

2008 2007

2008 Impairment 2007 Impairment

Gross allowance Gross allowance

R millions R millions R millions R millions

Not past due 2 514 (3) 1 865 (1)

Past due 0 – 30 days 271 (1) 263 (6)

Past due 31 – 120 days 249 (24) 185 (20)

Past due 121 – 365 days 87 (22) 72 (22)

Past due 365+ days 68 (65) 48 (47)

3 189 (115) 2 433 (96)

Listings of overdue customer balances are reviewed monthly and reviewed against their credit terms/limits. Any customer exceeding their credit terms/limits must settle their overdue balances before any further credit is extended. Appropriate action is taken to recover long overdue debts.

The movement in the impairment allowance in respect of trade receivables during the year was as follows:

2008R millions

2007R millions

Balance at the beginning of the year 96 129

Impairment loss recognised 69 8

Allowance utilised (50) (41)

Balance at the end of the year 115 96

Currency risk

Currency risk positions are reflected in note 30.

Derivative assets at fair value

Derivative assets at fair value include:

Forward exchange contracts used for hedging

– Fair value hedge 48 6

Commodity forward contracts 6 5

54 11



continued

2008 2007


7. TRADE AND OTHER RECEIVABLES, INCLUDING DERIVATIVES (continued)

Credit risk on derivative assets

The group limits its exposure to credit risk by only entering into forward contracts with counterparties that have a credit rating of at least A1 from Standard and Poor’s. Given these high credit ratings, management does not expect any counterparty to fail to meet its obligations.

8. ASSETS AND LIABILITIES CLASSIFIED AS HELD-FOR-SALE

On 24 October 2006 the decision to sell the group’s shareholding in Plato Computer Services Limited was taken and the operation was subsequently sold (refer to note 38). This operation did not constitute a discontinued operation.

Assets classified as held-for-sale

Property, plant and equipment — 2

Deferred taxation — 1

Inventories — 1

Trade and other receivables — 15

— 19

Liabilities classified as held-for-sale

Trade and other payables — 9

Bank overdraft — 6

— 15

9. CASH AND CASH EQUIVALENTS

Cash at bank 1 638 1 110

Cash on deposit 478 503

2 116 1 613

Bank overdraft (33) (24)

Net cash and cash equivalents per the cash flow statement 2 083 1 589

Credit risk

The group limits its credit risk exposure by investing only with financial institutions that have a minimum short-term

Standard and Poor’s rating of A1. Management monitors these financial institutions’ ratings on an active basis.

Management does not expect any counterparty to fail to meet its obligations.

Interest risk

The group limits its interest risk by managing the term of its deposits to coincide with possible changes to interest rates as determined by the Monetary Policy Committee of the South African Reserve Bank.

Currency risk

Currency risk positions are reflected in note 30.



continued



OPERATIONALREVIEW



GROUP AND COMPANY

2008 2007 2008 2007

Number Number

of shares of shares R millions R millions

10. SHARE CAPITAL AND PREMIUM

10.1 Authorised

Ordinary shares of 2 cents each 247 500 000 247 500 000 5 5

Participating preference shares

of 0.01 cent each 500 000 000 500 000 000 — —

5 5

10.2 Issued

Ordinary shares

In issue at the beginning of the year 97 174 115 97 174 115 2 2

Issued in terms of scheme of arrangement with Bytes shareholders 8 495 016 — — —

In issue at the end of the year 105 669 131 97 174 115 2 2

Less: Own shares acquired by subsidiary (3 246 469) (3 246 469)

Net ordinary shares 102 422 662 93 927 646


In issue at the beginning of the year 213 654 725 212 322 502 — —

Issued in terms of share schemes 1 773 142 1 332 223 — —

Issued in terms of scheme of arrangement with Bytes shareholders 22 110 410 — — —

In issue at the end of the year 237 538 277 213 654 725 — —

Less: Own shares acquired by subsidiary (27 698 875) (27 698 875)

Net participating preference shares 209 839 402 185 955 850

Total number of shares in issue at the end of the year, net of own shares acquired 312 262 064 279 883 496

10.3 Share premium

Balance at the beginning of the year 833 825

Share premium arising from issue of shares in terms of:

– Share schemes 12 8

– Scheme of arrangement with Bytes shareholders 1 363 —

Balance at the end of the year 2 208 833

The issue price of shares issued in satisfaction of the scheme of arrangement with Bytes shareholders was measured in accordance with the market value of such shares on the effective date of the transaction in December 2007.

10.4 Total issued share capital and premium 2 210 835



continued

2008 2007

Number of Number of

shares shares

10. SHARE CAPITAL AND PREMIUM (continued)

10.5 Unissued

Ordinary shares

Shares reserved for allocation under employee share schemes 4 847 855 4 847 855

Shares under the control of the directors until the forthcoming annual general meeting 136 983 014 145 478 030

141 830 869 150 325 885


Shares reserved to meet the requirements of:

Allied Electronics Corporation Limited Share Trust 1 169 506 1 835 480

Altron Group Share Incentive Trust 2 375 374 2 933 085

Conditional Rights Scheme 11 039 018 5 432 472

Shares reserved for allocation under employee share schemes 7 584 445 14 458 257

Shares under the control of the directors until the forthcoming annual general meeting 240 293 380 261 685 981

262 461 723 286 345 275

Shares reserved for allocation under employee share schemes that were approved at a previous general meeting of the members are reflected in the table above.

Terms of equity shares

Ordinary shares

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the company.


Holders of participating preference shares rank pari passu with the ordinary shares with regard to entitlement to dividends and the company’s residual assets. The shares have limited and diluted voting rights only in specific and limited circumstances (refer to page 94).

Treasury shares

The directors have a general authority to repurchase shares of the company not exceeding 20% of the company’s ordinary and/or participating preference issued share capital in any one financial year effective until the next annual general meeting.



continued



OPERATIONALREVIEW



Conditional Rights

Scheme

Allied Electronics Corporation

Limited Share Trust

Altron Group Share

Incentive Trust Total share

options


10.6 Employee share options – participating preference shares

Number of options allocated at 28 February 2006 4 243 940 2 399 162 3 845 773 10 488 875

Number of options granted 1 240 352 — — 1 240 352

Number of options lapsed/forfeited/ reinstated (51 820) (54 708) (89 439) (195 967)

Number of options exercised — (508 974) (823 249) (1 332 223)


Options converted as a result of the Bytes scheme of arrangement 2 406 545 — 1 042 170 3 448 715

Number of options granted 4 491 435 — — 4 491 435

Number of options lapsed/forfeited/ reinstated (890 447) (38 648) (137 243) (1 066 338)

Number of options exercised (400 987) (627 326) (1 462 638) (2 490 951)


Of the 2 490 951 options exercised, 400 987 relate to conditional rights exercised. Conditional rights are net settled and as a result only 104 776 shares were issued in satisfaction of those conditional rights. A further 421 598 of the exercised share options had not been issued and listed at the year end and so are not included in issued share capital at that date.



continued


10.7 The Altron Group Share Incentive Trust, Allied Electronics Corporation Limited Share Trust and the Conditional Rights Scheme.

The details of rights outstanding at the financial year end are as follows:

Options and deferred delivery shares outstanding

at 29 February 2008

Date granted Exercise price

per share

Allied Electronics Corporation

LimitedShare Trust

Altron GroupShare

Incentive Trust Conditional

Rights Scheme

20 December 1996 R4.80 5006 March 1997 R5.05 3 600 12 January 1998 R8.30 20 000 15 September 1998 R3.49 296 328 26 January 1999 R4.70 39 400 5 March 1999 R5.25 201 404 30 May 2000 R5.00 95 572 28 June 2000 R4.85 475 462 10 April 2001 R7.00 17 040 7 June 2002 R7.40 20 200 1 October 2002 R7.25 418 225

The following options are subject to IFRS 2:1 April 2003 R7.00 13 668 11 December 2003 R10.00 10 000 27 July 2004 R11.20 947 168 9 February 2006 R22.50 3 420 830 13 June 2006 R23.50 412 000 23 November 2006 R30.75 709 194 14 January 2008 R6.66 218 771* 14 January 2008 R7.64 69 992* 14 January 2008 R7.80 21 783 14 January 2008 R8.84 43 565* 14 January 2008 R12.80 632 202 14 January 2008 R26.54 2 005 559 4 February 2008 R36.10 716 919 25 February 2008 R35.00 754 438 27 February 2008 R35.00 2 122 300 28 February 2008 R35.50 897 778

1 169 506 2 375 374 11 039 018

The awards dated 14 January 2008 are in respect of the conversion of Bytes share options into Altron participating preference share options in accordance with the terms of the Bytes scheme of arrangement. Existing share options were converted using the swap ratio of 0.43565 Altron participating preference shares for each Bytes ordinary share. The awards marked with the asterix represent old awards not subject to IFRS 2.

Terms of schemes

Allied Electronics Corporation Limited Share Trust

The Allied Electronics Corporation Limited Share Trust is a 10-year scheme and is currently in run-off where the last of the options so granted are exercisable in March 2012. It has a vesting period of three years from initial date of grant before the options may be exercised.

Altron Group Share Incentive Trust

The Altron Group Share Incentive Trust is a six-year scheme. The vesting period is three years from initial date of grant whereafter the options may be exercised in equal tranches over a three-year period.

The Conditional Rights Scheme

Under the Conditional Rights Scheme, participants are granted rights to acquire shares subject to meeting future performance vesting conditions. Vesting of conditional rights occurs in equal tranches over a three-year period commencing on the third anniversary of the granting of the conditional rights, subject to meeting the vesting conditions.

Please refer to the remuneration report on page 113 for details of options held by directors.



continued



OPERATIONALREVIEW



Weighted average

exercise priceRand2008

Numberof options

(000s)2008

Weighted average

exercise priceRand2007

Numberof options

(000s)2007


10.8 Share-based payments

The number and weighted average exercise prices of share options accounted for under IFRS 2 are as follows:

Altech

Outstanding at the beginning of the year 50.39 3 312 48.07 2 649

Forfeited during the year 52.72 (352) 49.45 (120)

Exercised during the year 34.21 (53) 30.00 (10)

Granted during the year 50.28 497 57.75 793

Outstanding at the end of the year 50.39 3 404 50.39 3 312

Exercisable at the end of the year 100 —

The weighted average market price on exercised options was R71.40 (2007: R60.60).

Exercise prices on outstanding options at the end of the year ranged from R30.00 to R66.00 (2007: R30.00 to R57.75).

The weighted average remaining period to vesting on outstanding options at the end of the year was 27 months (2007: 34 months).

Bytes




Transferred to the Altron scheme 10.27 (7 025) — —

Outstanding at the end of the year — 10.06 7 881

Exercisable at the end of the year — 1 340


Exercise prices on outstanding options at the end of the previous year was R3.40 to R11.56.

In accordance with the scheme of arrangement with Bytes shareholders all outstanding options were transferred and converted to the Altron share option schemes.

Altron




Transferred and converted from the Bytes scheme 23.57 3 061 — —

Granted during the year 35.28 4 491 28.34 1 240

Outstanding at the end of the year 26.78 12 664 21.27 6 787

Exercisable at the end of the year 1 245 17



continued


10.8 Share-based payments (continued)


Exercise prices on outstanding options at the end of the year ranged from R7.00 to R36.10 (2007: R7.00 to R30.75).

The weighted average remaining period to vesting on outstanding options at the end of the year was 30 months (2007: 33 months).

Share options granted before 7 November 2002 or vested before 1 January 2005 have not been accounted for under IFRS 2 in accordance with the provisions in IFRS 1 and IFRS 2.

The fair value of services received in return for share options granted is measured by reference to the fair value of the share options granted. The estimate of the fair value of the services received is measured using the Black-Scholes model. Up until the current year options were assumed to be exercised midway between the vesting date and the expiry date. Evidence now indicates that most options are exercised on or shortly after the vesting date and the assumptions have been adjusted accordingly.

There is no difference between the conditions of the options granted to key management and senior employees. All awards are made up of three equal tranches, which vest three, four and five years after grant date.

Fair value of share options and assumptions

Fair value at grant date:

2008

Conditional rights Altech Altron

Fair value at grant date (Rand) 10.12 to 12.04 7.83 to 10.08

Share price (Rand) 49.00 35.00 to 36.10

Exercise price (Rand) 49.00 35.00 to 36.10

Expected volatility 25.0% to 26.3% 21.3% to 24.2%

Option life (years) 3 to 5 3 to 5

Dividend yield 4.90% 3.27% to 3.37%

Risk-free interest rate 9.38% 9.32% to 9.46%

2007

Conditional rights Altech Altron Altron

Fair value at grant date (Rand) 13.88 to 15.37 5.27 to 5.86 8.14 to 8.83

Share price (Rand) 57.75 23.50 30.75

Exercise price (Rand) 57.75 23.50 30.75

Expected volatility 22.6% to 23.8% 19.4% to 19.9% 20.5% to 21.7%

Option life (years) 4.5 to 5.5 4.5 to 5.5 4.5 to 5.5

Dividend yield 3.62% 3.32% 2.54%

Risk-free interest rate 8.17% 7.95% 8.17%

The expected volatility is based on the historic volatility over a similar period to the option life, adjusted for once-off events in the historic volatility and for any expected changes to future volatility due to publicly available information.

Share options granted in periods prior to the 2006 financial year had a service condition attached. The new conditional rights scheme implemented in the 2006 financial year includes both a service condition and a non-market performance condition. The non-market performance condition is not taken into account in the grant date fair value measurement of the services received. There are no market conditions associated with any of the share option grants.

Employee expensesGROUP

2008 2007


Share options granted between 7 November 2002 and 28 February 2006 1 3

Conditional rights granted subsequently 21 17

Expense arising from share appreciation rights granted 24 40

Total expense recognised as employee costs 46 60

Total carrying amount of cash-settled transaction liabilities 31 46



continued



OPERATIONALREVIEW




10.8 Share-based payments (continued)

The fair value of the share appreciation rights at grant date is determined using the Black-Scholes model. The fair value of the liability is remeasured at each balance sheet date and at settlement date. The model inputs at 29 February 2008 were as follows:

Altech Altech Altron Altron

2008 2007 2008 2007

Share price (Rand) 50.75 65.70 36.00 42.00

Exercise price (Rand) 32.25 32.25 11.20 and 12.80 11.20

Term (years) 0.4 to 1.4 0.4 to 2.4 0.4 to 1.4 0.4 to 2.4

Volatility 31% to 44% 11.9% to 23.1% 24% to 27% 15.1% to 25.7%

Dividend yield 4.73% 3.13% 3.28% 1.86%

Risk-free interest rate 9.60% 7.99% 9.60% 7.99%

2008 2007


10.9 Share-based payments expense arising on BBBEE transactions 3 —

Arising on the acquisition of 25.1% of IST by Izingwe – refer to note 12.3.

GROUP

2008 2007

11. RESERVES R millions R millions

11.1 Retained earnings 3 634 2 946

Are distributable and would be subject to secondary tax on companies.

11.2 Foreign currency translation reserve 184 74

Comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations.

11.3 Premium/discount on minority equity transactions (1 355) (93)

Comprises the premium or discount on the subsequent purchase or sale of equity instruments in existing subsidiaries.

11.4 Cash flow hedging reserve (1) —

Comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments relating to hedged transactions that have not yet occurred.

11.5 Share-based payments reserve 44 21

Comprises the net fair value of equity instruments granted to employees under share schemes expensed net of tax credits on deductible recharges in excess of expenses recognised.

11.6 Statutory reserves 9 9

Comprises the capital redemption reserve funds as well as legal reserves of a foreign subsidiary.

11.7 Fair value reserve 43 35

Comprises the cumulative net change in the fair value of available-for-sale investments, net of deferred taxation, until the investment is derecognised.

Total reserves 2 558 2 992



continued

12. BBBEE TRANSACTIONS

The group has entered into the following material BBBEE transactions:

12.1 Altech group – Altech Information Technology (Pty) Limited (Altech IT) – Pamodzi Investment Holdings (Pty) Limited (Pamodzi)

During the year under review the Altech group restructured its information technology businesses and simultaneously restructured the related BBBEE holdings.

Pamodzi disposed of its 25.01% interest in Altech Data (Pty) Limited (Altech Data) and its 28% interest in Altech NamITech Holdings Limited for R49 million. The businesses of Altech Data (Altech Card Solutions and Altech ISIS) were then sold into NamITech South Africa (Pty) Limited and the name of the company changed to Altech Information Technology (Pty) Limited. Pamodzi then acquired 25.01% of the issued share capital in Altech IT for R19 million, which equated to 25.01% of the net asset value of the company at that date. Since the transaction was completed at fair value and settled in cash, no IFRS 2 charge arose and the transaction and the relevant minorities have been fully recognised. The net R30 million paid to Pamodzi has been reflected as a transaction with minorities, directly in equity.

12.2 Powertech group – Aberdare Cables (Pty) Limited (Aberdare) – Izingwe Aberdare Cables Investments (Pty) Limited (Izingwe Aberdare Cables)

Powertech entered into an agreement with Izingwe Aberdare Cables to dispose of 30% of its equity interest and shareholders’ loans in Aberdare. The purchase price was funded by redeemable preference shares issued to a financial institution. The financing arrangement includes certain put and call options to Altron and Powertech and includes a number of terms and conditions that need to be maintained or fulfilled before the risks attached to repayment of the loan fully transfer to Izingwe Aberdare Cables.

Although the rewards of ownership have fully vested in Izingwe Aberdare Cables, due to the requirements of the current accounting framework, the recognition of the disposal has been deferred in the financial statements until the obligation to repay the funding has been fully transferred to Izingwe. The funding obligation is consequently reflected as a liability of the group (refer note 14).

During the previous financial year Powertech acquired a 10% equity interest in Izingwe Aberdare Cables for R1.3 million following the exit of one of the BBBEE consortium shareholders (refer to Annexure 1). A diluted headline earnings adjustment of R81 million (2007: R61 million) has been calculated based on the recognition of the net 27% (90% of 30%) minority interest and the settlement of the outstanding purchase price of R160 million (comprising the empowerment funding obligation net of excess cash deposits of R12 million) adjusted for the dilutive effect of the option price at the Aberdare level (refer to note 26.4).

12.3 Powertech group – Powertech SA (Pty) Limited (Powertech SA) – Izingwe Investment Holdings (Pty) Limited (Izingwe)

Following the acquisition of IST by the Powertech group, the business of IST was sold to Powertech SA with the full purchase price being funded by borrowings. Izingwe acquired 25.1% of Powertech SA for an amount equal to the net asset value at that date. This 25.1% minority interest has been fully recognised as there are no conditional terms to their ownership of the shares. However, as Powertech SA incurred a loss for the current period there was no attribution of the loss to the minority interest.

A valuation was performed on the fair value of the shares acquired by Izingwe, and a charge of R3.1 million has been recognised in the group income statement in accordance with AC 503 and IFRS 2 (refer to note 20.4).

12.4 Bytes group – Bytes Technology Group South Africa (Pty) Limited (Bytes SA) – Kagiso Strategic Investments (Pty) Limited (Kagiso)

Bytes entered into an agreement with Kagiso to effectively dispose of 5% of its equity interest in Bytes SA for a cash consideration fully funded by Kagiso. In addition, Kagiso was granted options to acquire a further 22% equity interest in Bytes SA for R198 million. In the interim period Kagiso is entitled to 27% of the voting rights of the total issued share capital of Bytes SA in respect of the ordinary shares acquired and class B non-participative shares held by them. The class B shares are cancellable upon Kagiso exercising its options.

A diluted headline earnings adjustment amounting to R33 million (2007: R26 million) has been calculated based on the profit that would be attributable to the additional 22% shareholding adjusted for the dilutive effect of the option price at the Bytes SA level (refer to note 26.4).



continued



OPERATIONALREVIEW



2008 2007


13. LOANS

13.1 Non-current loans

Interest-bearing loans at amortised cost

Rental finance liabilities (note 4) 128 114

Finance lease liabilities 14 18

Secured bank loans 146 50

Loans from minority shareholders 23 30

Unsecured bank loans 634 —

Deferred purchase considerations 9 —

Loan from joint-venture partner 29 —

Non-interest-bearing loans at amortised cost

Spanish Government loans 14 2

997 214

Less: Payable within one year, shown as current loans (213) (65)

Total non-current loans 784 149

13.2 Current loans

Current portion of interest-bearing loans at amortised cost

Current portion of rental finance liabilities 42 37

Current portion of finance lease liabilities 11 8

Current portion of secured bank loans 36 19

Current portion of unsecured bank loans 77 —

Current portion of deferred purchase considerations 4 —

Current portion of loan from joint-venture partner 29 —

Current portion of non-interest-bearing loans at amortised cost

Current portion of Spanish Government loans 14 1

Current portion of long-term loans 213 65



continued

13. LOANS (continued)

Terms and debt repayment schedule

The terms and conditions of outstanding loans were as follows:

29 February 2008 28 February 2007

Currency

Nominalinterest

rateYear of

maturity

Face value

R millions

Carrying value

R millions

Face value

R millions

Carrying value

R millions

Secured

Rental finance liabilities ZARLinked to

prime Various 157 128 137 114

Finance lease liabilities ZARLinked to

prime Various 15 14 19 18

Secured bank loan ZAR 13.3% 2017 37 37 — —

Secured bank loan ZAR 12.0% 2011 28 28 — —

Secured bank loan NGN 18.0% 2011 81 81 — —

Unsecured

Unsecured bank loan GBP 6.6% 2008 50 50 — —

Unsecured bank loan GBP 7.7% 2015 34 34 50 50

Unsecured bank loan ZAR 12.0% 2010 550 550 — —

Loans from minority shareholders ZAR 12.3%

No fixed term 23 23 30 30

Spanish Government loan EUR 0.0% 2008 14 14 2 2

Loan from joint venture partner ZAR 14.5% 2008 29 29 — —

Deferred purchase considerations ZAR 11.4% 2010 9 9 — —

1 027 997 238 214

Security

Bank loans are secured by property, plant and equipment with a book value of R189 million (2007: Rnil ) and current assets with a book value of R101 million (2007: Rnil).

Finance lease liabilities are secured by property, plant and equipment with a book value of R14 million (2007: R21 million).

Rental finance liabilities are matched by reciprocal rental finance receivables (refer to note 4).



continued



OPERATIONALREVIEW




Liquidity risk

The following are the contractual maturities of financial liabilities, including interest payments and excluding the impact of netting agreements:

29 February 2008 Currency

Carryingamount

R millions

Con-tractual

cashflows

R millions

6 monthsor less

R millions

6 –12 months

R millions

1 – 2 years

R millions

2 – 5 years

R millions

More than

5 yearsR millions


Rental finance liabilities ZAR 128 157 29 29 50 49 —

Finance lease liabilities ZAR 14 15 8 6 1 — —

Secured bank loan ZAR 65 101 4 6 17 60 14

Secured bank loan NGN 81 87 36 — 42 9 —

Unsecured bank loans GBP 84 85 64 14 7 — —

Unsecured bank loan ZAR 550 715 33 33 66 583 —

Loans from minority shareholders ZAR 23 26 — 3 3 20 —

Spanish Government loan EUR 14 14 7 7 — — —

Loan from joint-venture partner ZAR 29 32 17 15 — — —

Deferred purchase considerations ZAR 9 11 — 6 5 — —

997 1 243 198 119 191 721 14

28 February 2007 Currency

Carryingamount

R millions

Con-tractual

cashflows

R millions

6 monthsor less

R millions

6 – 12 months

R millions

1 –2 years

R millions

2 – 5 years

R millions

More than5 years

R millions


Rental finance liabilities ZAR 114 137 21 20 40 56 —

Finance lease liabilities ZAR 18 19 5 5 9 — —

Unsecured bank loan GBP 50 55 8 14 33 — —

Loans from minority shareholders ZAR 30 35 — 10 3 22 —

Spanish Government loan EUR 2 2 1 1 — — —

214 248 35 50 85 78 —



continued


Interest rate risk

Profile

At the reporting date, the interest rate profile of the group’s interest-bearing loans was:

Carrying amount

2008 2007


Variable-rate instruments

Financial liabilities ZAR 818 162

GBP 84 50

NGN 81 —

983 212

Cash flow sensitivity analysis for variable-rate instruments

A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) profit or loss by the amounts shown below for a period of one year compounded monthly. This analysis assumes that all other variables, in particular foreign exchange rates, remain constant. The analysis is performed on the same basis for 2007.

Profit or loss

100 bp increase R millions

100 bp decrease R millions

Effect

29 February 2008

Variable-rate loans (10) 10

28 February 2007

Variable-rate loans (2) 2

Currency risk

The principal and interest on borrowings is denominated in currencies that match the functional currencies of the underlying operations of the group, primarily GBP, but also Euro and NGN. Accordingly currency risk does not arise from these financial instruments.

2008 2007

Borrowing facilitiesR millions R millions

In terms of the articles of association, the borrowing powers of the group are unlimited.

Unutilised banking facilities 2 418 2 871

14. EMPOWERMENT FUNDING OBLIGATION

At amortised cost

Opening balance 172 173

Interest accrued 16 16

Repayments (16) (15)

Capital costs adjustment — (2)

172 172

Current portion (16) —

156 172



continued



OPERATIONALREVIEW



14. EMPOWERMENT FUNDING OBLIGATION (continued)

Liquidity risk

The following are the contractual maturities of the empowerment funding obligation liability, including interest payments and excluding the impact of netting agreements:

Currency

Carryingamount

R millions


R millions

6 monthsor less

R millions

6 –12 months

R millions

1 –2 years

R millions

2 – 5 years

R millions

More than5 years

R millions

29 February 2008 Rand 172 235 12 13 28 111 71

28 February 2007 Rand 172 251 8 8 25 95 115

Interest rate risk

The dividends on the preference shares bear an indicative dividend rate of 9.61% (2007: 9.61%). This interest rate has been fixed for the period of the funding and is not subject to variation as market rates alter.

Warranties Post retirement

and contract medical aid

losses benefits Total

R millions R millions R millions

15. PROVISIONS

Long-term provisions 28 10 38

Current portion included in current liabilities 66 — 66

Total provisions at 28 February 2007 94 10 104

Provisions raised during the year 53 1 54

Provisions utilised during the year (53) — (53)

Total provisions at 29 February 2008 94 11 105

Long-term provisions 13 11 24

Current portion included in current liabilities 81 — 81

94 11 105

Refer to accounting policies for a description of provisions.

2008 2007


16. TRADE AND OTHER PAYABLES, INCLUDING DERIVATIVES

Trade payables 3 280 2 490

Derivative liability at fair value: used for hedging 35 27

Payroll liabilities 176 161

Vat accrual 69 45

Receipts in advance 343 217

3 903 2 940



continued

16. TRADE AND OTHER PAYABLES, INCLUDING DERIVATIVES (continued)

(a) Trade payables

Management of liquidity risk

The group has negotiated favourable credit terms with suppliers, which enable the group to utilise its operating cash flow to full effect. The suppliers’ age-analysis is reviewed by management on a regular basis to ensure that credit terms are adhered to and suppliers are paid when due.

The group utilises multiple credit terms, most of which are less than one year.

Currency risk

Most amounts owed in foreign currency are covered by foreign exchange contracts, (refer to note 30).

Interest rate risk

The group has no material exposure to interest risk as there are no suppliers that charge interest.

(b) Receipts in advance

Revenue on receipts in advance is recognised as and when the goods are delivered or the services are rendered. Until the revenue recognition criteria are met these amounts remain payable to the respective customers.

6 monthsor less

R millions

6 –12 months

R millions

1 – 2 years

R millions

2 – 5 years

R millions

More than5 years

R millions

Estimate of when revenues are expected to be earned on these receipts: 156 146 25 16 —

(c) Derivative liability at fair value 2008 2007


Derivative liability at fair value includes:

Forward exchange contracts used for fair value hedging 10 4

Commodity forward contracts 25 23

35 27

17. RETIREMENT BENEFIT PLANS

Defined contribution plans

The majority of the group’s employees are members of the Altron Group Pension Fund which is a defined contribution fund and is governed by the Pension Funds Act, 1956, as amended. The contribution rate of the employers is 10% (2007: 10%), calculated on the pensionable emoluments of members.

Additionally the group provides retirement benefits for certain of its employees through the Altron Group Provident Fund. The fund is a defined contribution fund and is governed by the Pension Funds Act, 1956, as amended. Contributions to the fund comprise between 8% and 20% of pensionable emoluments.

The group’s contribution to these funds amounted to R125 million (2007: R124 million).

Multi-employer plans

Post acquisition of subsidiaries, certain employees remained members of their previous funds. A number of these are defined benefit plans. These industry managed retirement benefit schemes are dealt with as defined contribution plans as the group’s obligations under the schemes are equivalent to those arising in a defined contribution plan.

The group’s contribution to these other funds amounted to R42 million (2007: R48 million).

Defined benefit plans

Members of the Altron Group Pension Fund who were members prior to 1 September 1996 are entitled to a minimum benefit equal to the previously provided defined benefit pension. Upon retirement, members of the Altron Group Pension Fund can purchase a defined benefit pension from the fund. The base pension and subsequent increases granted, based on weighted average investment returns on funds, is guaranteed by the pension fund.

The benefit plans disclosed below are only in respect of members with minimum entitlement benefits and retirees with purchased defined benefit pensions.

During the previous financial year the post-retirement medical assistance portion of the defined benefit plans was settled by transfer of entitlements with an enhancement to the applicable member’s defined contribution funds.



continued



OPERATIONALREVIEW



2008 2007


17. RETIREMENT BENEFIT PLANS (continued)

Defined benefit plans

17.1 Value of obligations

Fair value of plan assets 2 228 2 084

Present value of funded obligations (2 101) (1 983)

Surplus at year end (including unrecognised actuarial gains) 127 101

Unrecognised due to paragraph 58 limit (127) (101)

Asset recognised on the balance sheet — —

17.2 Components of income statement expense

Current service cost 70 90

Interest cost 154 93

Settlement cost of medical assistance reserve — 24

Contributions to underlying defined contribution plan funding and expected return on plan assets (limited by paragraph 58) (213) (166)

Income statement expense 11 41

17.3 Reconciliation of the net asset recognised on the balance sheet

Amount recognised at the beginning of the year — —

Unrecognised due to paragraph 58 limit at the beginning of the year 101 538

Net expense recognised in the income statement (11) (41)

Contributions (net of contribution holiday) 11 41

Current year movement on unrecognised asset due to paragraph 58 limit 26 (437)

Net asset at the end of the year 127 101

Unrecognised due to paragraph 58 limit at the end of the year (127) (101)

Amount recognised at the end of the year — —

17.4 Reconciliation of fair value of plan assets

Assets at fair market value at the beginning of the year 2 084 1 809

Expected return on assets 223 159

Contributions (net of contribution holiday) 11 41

Benefits paid (67) (50)

Actuarial (loss)/gain (including fund transfers and defined contribution plan contributions) (23) 300

Settlement cost – medical assistance — (175)

Assets at fair market value at the end of the year 2 228 2 084

17.5 Reconciliation of defined benefit obligation

Defined benefit obligation at the beginning of the year 1 983 1 271

Service cost 70 90

Interest cost 154 93

Actuarial (gain)/loss (39) 730

Benefits paid (67) (50)

Settlement cost – medical assistance — (151)

Defined benefit obligation at the end of the year 2 101 1 983



continued

R millions

17. RETIREMENT BENEFIT PLANS (continued)

17.6 Expected 2009 contributions

Service cost 76

Interest cost 176

Expected return on assets (227)

Paragraph 58 limitations —

25

IAS 19 – Employee Benefits paragraph 58 only allows an asset to be recognised on the group’s balance sheet to the extent that economic benefits are available to the group in the form of refunds or reductions in future contributions.

The Pension Funds Act, 1956, as amended, precludes the group from accessing the asset in 17.1 above without specific consent from the trustees of the fund in the form of employer contribution holidays. Accordingly the surplus has not been recognised on the group’s balance sheet.

The group was granted a contribution holiday on the defined contribution plan for the six months ended 31 October 2007 in lieu of the surpluses accumulated on the defined benefit plans (2007: six months to 28 February 2007). The contribution holiday was made available to all participating group employer companies.

2008 2007

17.7 Principal actuarial assumptions

Discount rate 8.50% 8.00%

Inflation rate 5.25% 5.00%

Salary increase rate 6.25% 6.00%

Expected return on assets 10.50% 11.00%

Pension increase allowance 5.25% 5.00%

Actual return on the Altron Group Pension Fund 13.27% 29.40%

18. ACQUISITION OF SUBSIDIARIES

IST

With effect from 3 September 2007, Powertech acquired 100% of IST for a cash consideration of R504 million. IST is a technology and solutions-driven business that offers engineering solutions to its customers in the power utilities, telecoms, mining and material processing industries. In the year to 29 February 2008, IST contributed R248 million to revenue and a loss after tax of R20 million after the amortisation of intangibles and interest charges following the gearing introduced. If the acquisition had taken place on 1 March 2007, IST would have contributed revenue of R454 million and a loss after tax of R39 million for the year to 29 February 2008. In determining these amounts, management has used the group’s accounting policies and adjusted for the interest cost associated with the borrowings introduced as well as the amortisation charges, net of tax, assuming that the fair value adjustments and gearing had taken place on 1 March 2007.

Fair value of assets acquired

Carrying Fair value Recognised

values adjustments values


Non-current assets 64 133 197

Current assets 124 — 124

Non-current liabilities (93) (39) (132)

Current liabilities (133) — (133)

Net identifiable assets and liabilities (38) 94 56

Goodwill on acquisition 448

Total consideration 504

Less: Cash balances acquired (6)

Consideration paid in cash 498



continued



OPERATIONALREVIEW



18. ACQUISITION OF SUBSIDIARIES (continued)

The recognised values were determined based on the requirements of the applicable IFRSs immediately before the acquisition. The fair value adjustments made relate to intangible assets identified on acquisition. In determining their fair values, the group applied discount rates of between 15.6% and 16.1% to the relevant forecast cash flows.

Goodwill arising was attributed to factors that did not meet the recognition criteria for intangible assets at the date of acquisition, being primarily the skills and knowledge of the personnel of the business.

The following other acquisitions were made during the year:

Date of acquisition

Purchase consideration

R millions

A controlling 50% interest in East Rand Document Solutions (Xerox dealership) March 2007 6

The entire shareholding in Mastermed (Switching technology) March 2007 10

The entire shareholding in Swanib Cables (Power Cable distributor) March 2007 43

The business of Mailing Facilities (Mailing services) June 2007 8

The entire shareholding in Netstar’s Rustenburg franchise (Onseller of Netstar services) August 2007 11

The entire shareholding of Papergeni (Envelope manufacturer) December 2007 5

The entire shareholding in ComTech (Fleet management services) January 2008 53

Total cost of shares, assets and liabilities 136

In the year to 29 February 2008, these acquisitions contributed R207 million to revenue and R18 million to the consolidated profit after tax. If the acquisitions had taken place on 1 March 2007, the acquired businesses would have contributed revenue of R298 million and profit after tax of R17 million for the year to 29 February 2008. In determining these amounts, management has used the group’s accounting policies and adjusted for amortisation charges, net of tax, assuming that the fair value adjustments had occurred on 1 March 2007.

Fair value of assets acquired

The above acquisitions had the following effect on the group’s assets and liabilities:

Carrying Fair value Recognised

values adjustments values


Non-current assets 13 64 77

Current assets 74 — 74

Non-current liabilities — (15) (15)

Current liabilities (58) — (58)

Net identifiable assets and liabilities 29 49 78

Goodwill on acquisition 58

Total consideration 136

Less: Deferred purchase consideration (9)

Less: Cash balances acquired (6)

Total cash consideration 121

The recognised values were determined based on the requirements of the applicable IFRSs immediately before the acquisition. The fair value adjustments made relate to intangible assets identified on acquisition. In determining their fair values, the group applied discount rates appropriate to each business to the relevant cash flows.

Goodwill arising was attributed to factors that did not meet the recognition criteria for intangible assets at the date of acquisition, being primarily the skills and knowledge of the personnel and relative market share of the businesses acquired.



continued

GROUP

2008 2007


19. REVENUE

Goods sold 14 950 11 539

Services rendered 6 451 5 540

Rental finance income 30 47

21 431 17 126

20. OPERATING PROFIT BEFORE CAPITAL ITEMS

Is stated after taking account of the following items:

20.1 Auditors’ remuneration

Audit fees 24 21

Fees for other services 3 1

27 22

20.2 Directors’ remuneration

Refer to remuneration report on page 112 49 44

20.3 Employee remuneration (including directors’ remuneration)

Salaries and wages 2 840 2 435

Share-based payments – equity settled (note 10.8) 22 20

Share-based payments – cash settled (note 10.8) 24 40

Retirement and provident funds 167 172

Medical aid and other — 61

3 053 2 728

20.4 Share-based payments expense arising on BBBEE transactions (note 10.9) 3 —

20.5 Fees paid

Managerial fees 24 18

Technical, consultancy and administration 127 93

151 111

20.6 Foreign exchange gains/(losses)

Gains 97 135

Losses (63) (73)

Forward exchange contracts – fair value adjustments 30 3

64 65

Being:

Realised 52 56

Unrealised 12 9

20.7 Net increase in provisions 1 24



continued



OPERATIONALREVIEW



GROUP

2008 2007


20. OPERATING PROFIT BEFORE CAPITAL ITEMS (continued)

20.8 Operating lease charges

Property 118 114

Plant, equipment and vehicles 38 25

Additional cost of straight-lining of leases 7 2

163 141

20.9 Research and development expenditure 128 114

(Comparative restated according to current definition of research and development expenditure)

21. CAPITAL ITEMS

Impairment of goodwill (86) (50)

Goodwill adjustment on reversal/(utilisation) of at acquisition tax losses 2 (19)

Foreign currency translation reserve released on disposal (7) —

Net (loss)/gain on disposal of businesses (1) 8

Net gain on disposal of property, plant and equipment 2 1

Net gain on disposal of property, plant and equipment and intangibles to the joint venture — 32

Impairment of property, plant and equipment — (5)

Fair value adjustment of assets held-for-sale — (6)

Profit on disposal of investments — 1

(90) (38)

22. FINANCIAL INCOME

Recognised in profit or loss

Interest income on financial assets carried at amortised cost 160 114

Dividend income on available-for-sale financial assets 22 18

182 132

Recognised directly in equity

Net change in fair value of available-for-sale financial assets 8 2

Fair value of cash flow hedges transferred to profit or loss — 5

Foreign currency translation differences in respect of foreign operations 133 71

141 78

Recognised in:

Fair value reserve 8 1

Hedging reserve — 3

Translation reserve 106 56

Minority interest 27 18

141 78



continued

GROUP

2008 2007


23. FINANCIAL EXPENSE

Recognised in profit or loss

Interest expense on financial liabilities measured at amortised cost 89 56

89 56

Recognised directly in equity

Fair value of cash flow hedges transferred to profit or loss 1 —

Recognised in hedging reserve 1 —

24. SHARE OF PROFITS FROM ASSOCIATES

Attributable earnings 4 4

25. TAXATION

25.1 Taxation charge

Current tax

– current year 591 497

Deferred tax

– current year (25) (73)

– change in rate of taxation 4 —

Adjustment to prior years

– current tax — (4)

– deferred tax (4) 12

566 432

Secondary tax on companies

– current tax 54 58

– deferred tax 5 (9)

625 481

25.2 Reconciliation of rate of taxation % %

South African normal tax rate 29.0 29.0

Adjusted for:

Disallowable expenditure 1.0 0.8

Goodwill impaired and adjusted 1.4 1.3

Non-taxable income (2.1) (3.0)

Utilisation of previously unrecognised tax losses — (1.0)

Income from associates (0.1) (0.1)

Change in rate of taxation 0.2 —

Prior year adjustments (0.2) 0.5

0.2 (1.5)

Secondary tax on companies 3.0 3.1

Net increase 3.2 1.6

Effective tax rate 32.2 30.6



continued



OPERATIONALREVIEW



GROUP

2008 2008 2007 2007

GrossR millions

Net of taxand minorities

R millionsGross

R millions

Net of taxand minorities

R millions

26. EARNINGS PER SHARE

26.1 Reconciliation between earnings and headline earnings

Earnings attributable to Altron equity holders 1 019 805

Adjustments for:

Impairment of goodwill 86 50 50 29

Goodwill adjustment on utilisation of at acquisition tax losses (2) (2) 19 11

Deferred tax assets reversed on at acquisition tax losses — 2 — (9)

Foreign currency translation reserve released on disposal 7 4 — —

Net loss/(gain) on disposal of businesses 1 1 (8) (10)

Net gain on disposal of property, plant and equipment (2) (2) (1) (1)

Net gain on disposal of property, plant and equipment and intangibles to the joint venture — — (32) (36)

Impairment of property, plant and equipment — — 5 2

Fair value adjustment of assets held-for-sale — — 6 3

Profit on disposal of investments — — (1) (1)

Headline earnings 1 072 793

Headline earnings per share (cents) 375 283*

* The determination of headline earnings for the year ended 28 February 2007 has been restated following the issue of Circular 08/2007 on Headline Earnings. The income statement impact of the deferred taxation assets subsequently raised on tax losses not previously recognised in business combinations has now been excluded from headline earnings in accordance with the new circular.

GROUP

2008 2007

Number of shares

Number of shares

26.2 Reconciliation of weighted average number of shares

Issued shares at the beginning of the year (ordinary and participating preference shares) 310 828 840 309 496 617

Effect of own shares held at the beginning of the year (30 945 344) (27 556 961)

Effect of shares issued in March — 1 403

Effect of shares issued in June 393 923 24 058

Effect of shares issued/own shares acquired in August 209 830 (522 236)

Effect of shares issued/own shares acquired in November — (861 131)

Effect of shares issued/own shares acquired in December 143 083 (105 569)

Effect of shares issued/own shares acquired in January 5 017 283 (77 674)

Effect of shares issued/own shares acquired in February 12 422 (40 313)

Weighted average number of shares 285 660 037 280 358 194



continued

GROUP

2008 2007

Number of shares

Number of shares

26. EARNINGS PER SHARE (continued)

26.3 Reconciliation between number of shares used for earnings per share and diluted earnings per share

Weighted average number of shares 285 660 037 280 358 194

Dilutive options 3 153 490 6 264 393

Weighted average number of shares (diluted) 288 813 527 286 622 587

26.4 Reconciliation between earnings attributable to Altron equity holders and fully diluted earnings R millions R millions

Earnings attributable to Altron equity holders 1 019 805

Additional earnings attributable to BBBEE minorities in subsidiaries (118) (87)

Additional earnings attributable to dilutive options at subsidiary level (14) (21)

Minority interest in adjustments 7 20

Fully diluted earnings 894 717

GROUP

2008 2007

Net of tax Net of tax

Gross and minorities Gross and minorities


26.5 Reconciliation between headline earnings attributable to Altron equity holders and fully diluted headline earnings


Additional earnings attributable to BBBEE minorities in subsidiaries (118) (116) (82) (69)

Additional earnings attributable to dilutive options at subsidiary level (17) (11) (26) (15)

Fully diluted headline earnings 945 709

Diluted headline earnings per share (cents) 327 247

26.6 Reconciliation between headline earnings and adjusted headline earnings

Adjusted headline earnings have been presented to demonstrate the impact of some once-off events and accounting charges on the headline earnings of the group. Headline earnings are reconciled to adjusted headline earnings as follows:


Amortisation of intangibles 40 22 19 8

Expenses associated with proposed purchase of minorities in subsidiaries 13 9 — —

IFRS 2 charge on BBBEE transactions 3 3 — —

Fully diluted headline earnings 1 106 801

Adjusted headline earnings per share (cents) 387 286



continued



OPERATIONALREVIEW



26. EARNINGS PER SHARE (continued)

Basic earnings per share is calculated by dividing the earnings attributable to Altron equity holders by the weighted average number of ordinary and participating preference shares in issue during the year.

Basic headline earnings per share is calculated by dividing headline earnings by the weighted average number of ordinary and participating preference shares in issue during the year.

For diluted earnings per share the weighted average number of shares is adjusted to assume conversion of all outstanding share options under the employee share option schemes, net of proceeds received on those options.

Fully diluted earnings and diluted headline earnings have been calculated in accordance with IAS 33 – Earnings per share on the basis that:

– Kagiso Strategic Investments (Pty) Limited exercised its full option on 22% of the shares in Bytes Technology Group South Africa (Pty) Limited, adjusted for the dilutive effect of the option price at the Bytes Technology Group SA level.

– The recognition of the deferred sale of a 30% interest in Aberdare Cables to the Izingwe Consortium based on the assumption that the purchase price will be settled in cash of R160 million (comprising the empowerment funding obligation net of excess cash deposits of R12 million), adjusted for the dilutive effect of the option price at the Aberdare level and after taking into account the 10% investment in the Izingwe Consortium by Power Technologies (Pty) Limited.

– The earnings effect of dilutive options at Allied Technologies Limited level.

GROUP

2008 2007


27. DIVIDENDS PROPOSED

Ordinary dividend number 60 of 156 cents (2007: 118 cents per share) 160 111

Preference dividend number 14 of 156 cents (2007: 118 cents per share) 327 220

487 331

28. COMMITMENTS AND CONTINGENT LIABILITIES

COMMITMENTS

28.1 Capital expenditure

Contracts for capital expenditure not provided for in the financial statements 64 18

Capital expenditure authorised but not contracted for 47 43

111 61

This expenditure will be incurred in the ensuing year and will be financed from existing cash resources.Group companies have entered into contracts for certain business combinations that were effective after year end (refer to note 29).

28.2 Amounts outstanding under operating lease agreementsAt the balance sheet date the group had outstanding commitments under non-cancellable operating leases, which fall due as follows:

Within one year

Property 117 96


171 131

One to five years

Property 324 286


350 308

Thereafter

Property 104 151

Total 625 590

CONTINGENT LIABILITIES

Surety provided in respect of the liability of a Bytes Document Solutions dealer for its debt to a financing house — 6



continued

29. POST-BALANCE SHEET EVENTS

Acquisition of 51% controlling interest in certain East African companies

With effect from 1 March 2008 Altech acquired a 51% controlling interest in the following entities that are involved in the provision of broadband and related services in Kenya, Uganda and Tanzania:

– Kenya Data Networks Limited, a full service data communications carrier, for US$68 million.

– Swift Global (Kenya) Limited, an internet service provider in Kenya that utilises gateway and network capacity provided by Kenya Data Networks, for US$5 million.

– Infocom Limited, a provider of internet and IT services in Uganda, for US$2 million.

Of the total purchase price of US$75 million, an amount of US$10 million is held in escrow as a deferred purchase consideration, dependent on the achievement of a combined profit after tax of at least US$11.7 million for the year ending 31 December 2008. This amount will be reduced proportionately to any shortfall on the warranted profit after tax.

Following the transaction, the shareholders injected a further US$20 million into the three companies in proportion to their shareholdings. As a result, Altech has injected a further US$10.2 million to fund expansion of the businesses.

The acquirees’ combined balance sheet at the date of acquisition is as follows:

Carrying

amount

R millions

Non-current assets 261

Current assets 119

Non-current liabilities —

Current liabilities (124)

Net identifiable assets and liabilities 256

Acquisition of the 50% of ABB Powertech Transformers not already owned by Powertech

With effect from 1 April 2008, Powertech acquired the remaining 50% of ABB Powertech Transformers (Pty) Limited that it did not already own for R320 million.

ABB Powertech Transformers manufactures distribution transformers, which it supplies primarily to Eskom and the municipalities.

Analysis of the balance sheet amounts acquired is as follows:

Carrying

amount

R millions

Non-current assets 42

Current assets 190

Non-current liabilities (1)

Current liabilities (90)

Net identifiable assets and liabilities 141

The purchase price allocations for each of these acquisitions will be performed during the 2009 financial year, which will identify the fair value of all assets and liabilities and any recognisable intangible assets with the balance being recorded as goodwill.

30. FINANCIAL RISK MANAGEMENT

Exposure to currency, interest rate, liquidity and credit risk arises in the normal course of the group’s business.

This note presents information about the group’s exposure to each of the above risks, the group’s objectives, policies and processes for measuring and managing risk, and the group’s management of capital. Further quantitative disclosures are included throughout these consolidated financial statements.

The board of directors has overall responsibility for the establishment and oversight of the group’s risk management framework. The board has established the risk management committee, which is responsible for developing and monitoring the group’s risk management policies. The committee reports regularly to the board of directors on its activities.



continued



OPERATIONALREVIEW



30. FINANCIAL RISK MANAGEMENT (continued)

The group’s risk management policies are established to identify and analyse the risks faced by the group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the group’s activities.

30.1 Foreign currency risk

Foreign exchange contracts are used as a means of reducing exposure to fluctuations in foreign exchange rates.

The group incurs currency risk as a result of transactions which are denominated in a currency other than the group entities’ functional currency in respect of purchases, sales and borrowings. The currencies giving rise to currency risk in which the group primarily deals are British pounds (GBP), US dollars (USD) and euros. The group entities hedge payables, receivables and borrowings denominated in foreign currencies.

The settlement of these transactions takes place within a normal business cycle. The group has clearly defined policies for the management of foreign currency risks. Transactions which create foreign currency cash flows are hedged with forward exchange contracts. No uncovered foreign exchange commitments exist at balance sheet date. Speculative use of financial instruments or derivatives is not permitted and no such use occurred during any of the periods presented.

The group’s exposure to foreign currency risk was as follows:


Foreign amount Foreign amount

GBP Euro USD GBP Euro USD

Millions Millions Millions Millions Millions Millions

Other investments — 2 1 — — —

Trade and other receivables — 7 12 2 2 7

Cash and cash equivalents — 2 5 — 1 4

Trade and other payables (10) (47) (23) (9) (16) (17)

Gross balance sheet exposure (10) (36) (5) (7) (13) (6)

Forward exchange contracts 10 38 15 8 14 11

Net exposure — 2 10 1 1 5

2008 2007

The following significant exchange rates were used for the conversion of foreign operations and transactional balances:

Averagerate

Closingrate

Averagerate

Closingrate

British pound 14.21 15.58 13.09 14.26

Euro 9.94 11.78 8.88 9.58

US dollar 7.10 7.84 6.97 7.26

Sensitivity analysis

A 1% strengthening/weakening in the rand against the net exposure to the following currencies at 29 February 2008 would have increased/(decreased) profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2007.

The exposure to other currencies is not material to the business and consequently is not elaborated on any further.

Profit or Profit or

loss loss

strengthening weakening

29 February 2008 Millions Millions

British pound — —

Euro (0.2) 0.2

US dollar (0.8) 0.8

28 February 2007

British pound (0.1) 0.1

Euro (0.1) 0.1

US dollar (0.4) 0.4



continued


30.2 Foreign exchange contracts

The principal or contract amounts of the foreign exchange contracts for trade payables, receivables and borrowings, including forecast transactions, at balance sheet date were:

Net foreign exchange contracts to pay/(receive)

2008 2007

Foreign Rand Foreign Rand

amount amount amount amount

Millions Millions Millions Millions

British pounds 10.4 148.6 8.3 117.1

US dollars 38.4 289.1 13.5 98.0

Euros 14.5 151.8 11.2 107.1

Swedish krona 24.8 28.5 9.4 9.9

New Zealand dollars — — — 0.2

Swiss francs 1.8 11.8 0.3 2.1

Japanese yen 5.1 0.4 2.0 0.1

630.2 334.5

Comprising foreign exchange contracts:

– to pay 958.3 762.1

– to receive (328.1) (427.6)

630.2 334.5

Value of contracts at mark-to-market 668.4 336.5

Derivative asset at fair value (refer to note 7) 48 6

Derivative liability at fair value (refer to note 16) (10) (4)

Contracts in respect of forecast transactions

The group has entered into certain forward exchange contracts, included above, which do not relate to specific items appearing on the balance sheet, but were entered into to cover foreign commitments not yet due. The contracts will be utilised for purposes of inventory procurement during the following year.

– to pay 110 68

– to receive — —

110 68

30.3 Commodity contracts

Commodity forward contracts are entered into to hedge the variability in the price of forecast raw material purchases including copper, aluminium and lead.

30.4 Interest rate risk

Financial assets and liabilities that are sensitive to interest rate risk are cash and cash equivalents, bank overdrafts, loans receivable/payable, and rental finance advances/liabilities. The interest rates applicable to these financial instruments are on a floating basis in line with those currently available in the market.

The group has no fixed rate financial assets or liabilities except for the empowerment funding obligation (refer to note 14).



continued



OPERATIONALREVIEW




30.5 Credit riskCredit risk is the risk of financial loss to the group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the group’s trade receivables, rental finance advances, commodity and foreign exchange forward contracts and cash and cash equivalents.Management has a credit risk policy in place and the exposure to credit risk is monitored on an ongoing basis.Credit evaluations are performed on all customers requiring credit over a certain amount. Credit guarantee insurance is taken where considered appropriate.The maximum exposure to credit risk is represented by the carrying value of each financial asset in the balance sheet.The group has no significant concentration of credit risk, with exposure spread over a large number of customers.The maximum exposure to credit risk arising from derivative financial instruments is the contractual amounts receivable in respect of foreign exchange contracts.The group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified, based on the historical trends, adjusted for current economic conditions.

Cash and cash equivalentsThe group limits its exposure to credit risk by only investing in liquid investments and only with counterparties that have a credit rating of at least A1 from Standard and Poor’s. Given these high credit ratings, management does not expect any counterparty to fail to meet its obligations.Deposits and cash balances are all maintained at reputable financial institutions. Cash management is performed by a central corporate treasury.

Guarantees

The group’s policy is to provide financial guarantees only to wholly owned subsidiaries. At 29 February 2008 no third-party guarantees were outstanding (2007: none).

30.6 Liquidity risk

Liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due.

The group’s approach to managing liquidity risk is to ensure that sufficient liquidity is available to meet its liabilities when due.

The group ensures it has sufficient cash on demand or access to facilities to meet expected operational expenses for the next 12 months, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. The group maintains the following lines of credit:

– R2 418 million of borrowing facilities that are unsecured. Interest payable is linked to the prime interest rate.

30.7 Fair values

Fair values versus carrying amounts

The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet are as follows:


Carrying Fair Carrying Fair

amount value amount value


Non-current loans receivable at amortised cost 219 219 179 179

Non-current available-for-sale investments at fair value 75 75 60 60

Rental finance advances 86 86 77 77

Trade and other receivables 3 317 3 317 2 483 2 483

Assets classified as held-for-sale — — 15 15

Derivative assets at fair value: used for hedging 54 54 11 11

Cash and cash equivalents 2 116 2 116 1 613 1 613

Loans (997) (997) (214) (214)

Empowerment funding obligation (172) (157) (172) (157)

Bank overdraft (33) (33) (24) (24)

Trade and other payables (3 868) (3 868) (2 913) (2 913)

Derivative liability at fair value: used for hedging (35) (35) (27) (27)

Liabilities classified as held-for-sale — — (15) (15)

762 777 1 073 1 088



continued


30.7 Fair values (continued)

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Cash and short-term investments

The carrying amount approximates fair value because of the short maturity of those instruments.

Investment securities and trading account assets

The fair values of some investments are estimated based on quoted market prices for those or similar investments. Unlisted equity investments are fair valued based on directors’ valuations using the discounted cash flow method.

Loan receivables/payables

Interest-bearing borrowings and receivables are generally at interest rates in line with those currently available in the market on a floating rate basis, and therefore the fair value of these financial assets and liabilities closely approximates their carrying values. Fixed interest rate instruments are fair valued based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.

Foreign exchange contracts

The fair value of foreign exchange contracts (used for hedging purposes) are marked-to-market by comparing the contracted forward rate to the present value of the current forward rate of an equivalent contract with the same maturity date.

Interest rate used for determining fair value

The interest rates used to discount estimated cash flows, where applicable, are based on the government yield curve at the reporting date plus an adequate constant credit spread, and were as follows:

2008 2007

Loans and borrowings 13% 11%

30.8 Capital management

The board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain the future development of the business. The board of directors monitors both the demographic spread of shareholders and the return on capital, capital being defined as total shareholders’ equity, excluding minority interests. The board of directors monitors and approves the level of dividends to shareholders.

The board seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position. The board has a policy in place that the group’s net debt (borrowings less cash and cash equivalents) does not exceed 25% of total equity. The group’s target is to achieve a return on shareholders’ equity of between 20% and 25%. The return in 2008 was 24.7% (2007: 23.0%).

Altron’s share capital consists of 105.7 million ordinary shares and 237.5 million participating preference shares. Management does not make any distinction between the two types of equity in managing the capital of the company.

During the year ended 29 February 2008, Altron acquired the balance of the Bytes shares it did not already own in exchange for 8.5 million ordinary shares and 22.1 million participating preference shares, thereby increasing the share capital and premium of the group by R1.4 billion. However, the transaction only increased the capital base of the company by some R328 million as the excess of the consideration over the net asset value acquired was taken as a debit to equity in accordance with the group’s accounting policy.

The group utilises share options in the form of conditional rights as a long term retention mechanism for senior executives and other key employees. The conditional rights are linked to the headline earnings performance of the group so that the interests of existing shareholders and management are aligned. The award of conditional rights is in accordance with a matrix and is approved by the board’s remuneration committee.



continued



OPERATIONALREVIEW




30.8 Capital management (continued)

The group does not have a defined share buy-back plan, but does from time to time purchase its shares on the market; the timing of these purchases depends on market prices. Shares acquired are either held as treasury shares or would be cancelled on repurchase. The group currently holds approximately 31 million treasury shares (see note 10) and there are restrictions on the rights of these shares under the JSE Listings Requirements. The group has a general authority in place to acquire up to 20% of the company’s issued share capital in any one financial year, which expires at the next annual general meeting, but adheres to a 10% limit on its holding of treasury shares.

Altron’s capital management is partially restricted by covenants given to lenders in respect of some borrowing obligations. In respect of borrowings totalling R710 million, the group’s net debt to EBITDA ratio is limited to two times, while tangible net asset value cannot reduce below R2 billion. In the event that these parameters were exceeded the lenders would be able to require immediate repayment.

There were no changes in the group’s approach to capital management during the year.

Refer to note 10 for a quantitative summary of authorised and issued capital.

31. RELATED-PARTY TRANSACTIONS

The group has a related-party relationship with its subsidiaries (see note 3 of the company’s financial statements on page 187), associates and joint ventures (see Annexure 1) and with its directors (see page 108) and key management personnel (refer below). 2008 2007


31.1 Associates and joint ventures

Sale of goods and services to joint ventures 36 33

Services received from associates 20 20

Interest earned from joint ventures 1 —

Management fees earned from joint ventures 2 —

31.2 Directors

Details relating to directors’ emoluments and shareholdings in the company are disclosed in the remuneration report on page 112 and in the directors’ report on page 118.

31.3 Key management personnel

Key management personnel are defined as directors of the company and its principal subsidiary companies, Allied Technologies Limited, Bytes Technology Group Limited and Power Technologies (Pty) Limited.

The key management personnel compensations were as follows:

Short-term employee benefits, including salaries and bonuses 51 48

Post-employment benefits 3 3

Equity compensation benefits 9 6

63 57

31.4 Shareholders

The principal shareholders of the company are detailed in the analyses of shareholders on pages 90 to 93 of the annual report.

Directors’ shareholdings are detailed in the directors’ report on page 118.



continued

32. JUDGEMENTS MADE BY MANAGEMENT

In preparing financial statements in conformity with IFRS, estimates and assumptions that affect the reported amounts and related disclosures are as follows:

Deferred tax assets

Deferred tax assets have been raised at year end on income tax losses and temporary differences in certain subsidiaries based on current profit forecasts for the businesses.

Asset lives and residual values

The useful lives and residual values of property, plant, equipment and intangible assets are reassessed annually based on current utilisation, prospects and market conditions.

The useful life of the rights to distribute Xerox equipment in 24 African territories is considered to be indefinite as these rights will automatically be renewed at no further cost upon the renewal of the group’s South African distribution agreement.

Impairment of assets

The impairment of goodwill is tested at least annually. Property, plant and equipment, as well as intangible assets, are considered for impairment when conditions indicate that impairment may be necessary. These conditions include the economic conditions of the operating unit as well as the viability of the asset itself.

The discounted cash flow method is used, taking into account future expected cash flows, market conditions and the expected useful lives of the assets.

Post-employment benefit obligations

Post-retirement defined benefits are provided for certain existing and former employees (see note 17).

The actuarial valuation method used to value the obligations is the projected unit method. The assumptions used include a discount rate, inflation rate, salary increase rate, expected rate of return on assets and a pension increase allowance.

Fair value of investments available-for-sale

The investments in FR1 and TAR (refer to Annexure 1) have been designated as available-for-sale financial assets and as such have been fair valued using the discounted cash flow method.

Valuation of financial instruments

In note 30.7 a detailed analysis is given of the fair value methodologies applied.

33. STANDARDS AND INTERPRETATIONS IN ISSUE BUT NOT YET EFFECTIVE

A number of new standards, amendments to standards and interpretations are not yet effective for the year ended 29 February 2008 and have not been applied in preparing these financial statements.

IFRS 2 amendment – Share-based Payments – Vesting Conditions and Cancellations

The amendments to the standard are effective for the group for the year ending 28 February 2010. The amendments to IFRS 2 clarify that vesting conditions are service conditions and performance conditions only. Other features of a share-based payment agreement should be treated as non-vesting conditions and should be included in the grant date fair value of the share-based payment. It also specifies that cancellations by parties other than the entity should be accounted for in the same way as cancellations by the entity. This amendment is not expected to impact the group’s results significantly.

IFRS 3 – Business Combinations

The amendments to the standard are effective for the group for the year ending 28 February 2011.

The principal amendments to IFRS 3 include:

– the requirement to expense all acquisition-related costs;

– recognition of fair value gains and losses in the income statement on interests in an acquiree at the time at which control is lost;

– recognition of all increases and decreases in ownership interests over an acquiree within equity while control is held;

– the option to recognise any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the net identifiable assets of the entity acquired;

– restriction of adjustments to the initial measurement of contingent considerations on a business combination, with subsequent measurement of such items being recognised in the income statement; and

– the requirement at acquisition to reclassify and redesignate all contractual arrangements, excluding leases and insurance contracts.

The amendments are expected to affect the group’s accounting for business combinations that arise after the date on which the amendments are adopted.

The effect on the financial statements will be a function of the number and value of any business combinations transacted after the effective date.

IFRS 8 – Operating Segments

This standard is effective for the group for the year ending 28 February 2010, with the restatement of comparatives required.

Segment reporting will be made based on the components of the entity that management monitors in making decisions about operating matters.



continued



OPERATIONALREVIEW



33. STANDARDS AND INTERPRETATIONS IN ISSUE BUT NOT YET EFFECTIVE (continued)

IFRS 8 – Operating Segments (continued)

Such components (operating segments) would be identified on the basis of internal reports that the entity’s chief operating decision-maker reviews regularly in allocating resources to segments and in assessing their performance. Operating segments would become reportable based on threshold tests relating to revenues, results and assets. The statement also requires more qualitative disclosures such as the types of products and services offered by each segment, geographical areas covered and major customers.

IAS 1 – Presentation of Financial Statements

The revised IAS 1 supersedes the 2003 version of IAS 1 and is effective for the group for the year ending 28 February 2010. The main change in the revised IAS 1 is the requirement to present all non-owner changes in equity in either:

– a single statement of comprehensive income which includes income statement line items; or

– a statement of comprehensive income which includes only non-owner equity changes. In addition, an income statement is also disclosed.

A statement of financial position, preferred term for “balance sheet”, also has to be presented at the beginning of the comparative period when the entity restates the comparatives as a result of a change in accounting policy, the correction of an error, or the reclassification of items in the financial statements. The revised IAS 1 will not impact the results of the group but will impact the format of the income statement and statement of changes in equity.

IAS 23 – Borrowing costs

This revision is effective for the group for the year ending 28 February 2010. IAS 23 Revised eliminates the option of immediate recognition as an expense of borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset.

The group’s current policy is to capitalise borrowing costs attributable to the acquisition, construction or production of a qualifying asset and as such this revision is not anticipated to have a material effect on the group’s results.

IAS 27 – Consolidated and Separate Financial Statements

The amendments to the standard are effective for the group for the year ending 28 February 2011.

The amendments to IAS 27 require changes in a parent’s ownership interest in a subsidiary that does not result in a loss of control to be accounted for within equity as transactions with owners in their capacity as owners. At the time at which control is lost, a parent shall derecognise all assets, liabilities and non-controlling interest at their carrying amounts. Any retained interest in the former subsidiary is recognised at its fair value at the date control is lost. A gain or loss on the loss of control is recognised in profit or loss. The revised standard also requires an entity to attribute its share of total comprehensive income to the non-controlling interest even if this results in the non-controlling interest having a deficit balance.

The effect on the financial statements will be a function of the number and value of transactions that result in the loss of control over subsidiaries after the implementation of the new standard.

IAS 32 and IAS 1 amendments – Financial Instruments: Preparation and IAS 1 Presentation of Financial Statements – Puttable Financial Instruments and Obligations Arising on Liquidation

The amendments to the standards are effective for the group for the year ending 28 February 2010.

The amendment to IAS 32 requires the classification of certain puttable financial instruments and financial instruments that impose on the issuer an obligation to deliver a pro rata share of the entity only on liquidation as equity. The amendment sets out specific criteria that are to be met to present the instruments as equity together with related disclosure requirements. This amendment is not expected to have a significant impact on the group’s results.

IFRIC 12 – Service Concession Arrangements

The interpretation is effective for the year ending 28 February 2009.

Service concessions are contractual service arrangements whereby a government or other public sector entity grants contracts for the supply of public services such as roads, airports, prison, energy and water supply distribution facilities to private sector operators. This interpretation provides guidance on how service concession operators should apply existing IFRS to account for the obligations they undertake and the rights they receive in service concession arrangements. This standard is not applicable to the business of the group.

IFRIC 13 – Customer Loyalty Programmes

This interpretation is effective for the group for the year ending 28 February 2010.

The interpretation addresses the recognition and measurement of obligations to provide customers with free or discounted goods or services if and when they choose to redeem their loyalty award credits. The interpretation requires entities to allocate some of the proceeds of the initial sale to the award credits and recognise these proceeds as revenue only when the obligations have been fulfilled. They may fulfil their obligations by supplying awards themselves, or engaging and paying a third party to do so. This interpretation is not expected to impact the group’s results significantly.

IFRIC 14 – IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction

This interpretation is effective for the group for the year ending 28 February 2009.

IFRIC 14 provides a clearer interpretation of the amount of a pension fund surplus that can be recognised as an asset. The availability of a refund of surplus or a reduction in future contributions (economic benefits) is determined based on the terms and conditions of the plan and any relevant statutory requirements.

Any changes in the defined benefit asset will be recognised immediately in profit or loss. The impact of this interpretation has not yet been assessed.



continued

GROUP

2008 2007


34. CASH GENERATED BY OPERATIONS

Operating profit before capital items 1 937 1 528

Adjustments for:

Depreciation and amortisation 272 235

Proceeds on closure of operations — 10

Movement in provisions and other non-cash movements 15 24

Cash generated before movements in working capital 2 224 1 797

Increase in inventories (38) (686)

Increase in trade and other receivables (736) (442)

Increase in trade and other payables 770 130

2 220 799

35. DIVIDENDS RECEIVED FROM ASSOCIATES AND OTHER INVESTMENTS

Dividends receivable at the beginning of the year 19 56

Attributable income per the income statement 22 18

Dividends receivable at the end of the year (13) (19)

28 55

36. TAXATION PAID

Amounts unpaid at the beginning of the year (205) (187)

Amounts charged to the income statement (645) (551)

Translation differences 2 2

Amounts acquired in business combinations (29) —

Amounts unpaid at the end of the year 340 205

(537) (531)

37. ACQUISITION OF SUBSIDIARIES AND JOINT VENTURE

Property, plant and equipment (74) (63)

Intangibles – fair value adjustment (201) (35)

Inventories (59) (13)

Trade and other receivables (127) (40)

Trade and other payables 167 41

Deferred tax 61 20

Net loans 82 —

Net cash (12) 2

Taxation 29 —

Goodwill arising on acquisition (506) (86)

(640) (174)

Costs — (1)

Less: Deferred purchase consideration 9 37

Less: Disposal of property, plant and equipment to joint venture — 22

Less: Surplus on disposal of property, plant and equipment to joint venture — 32

Cash paid (631) (84)

Less: Cash acquired 12 (2)

(619) (86)

Refer to note 18 for details of acquisitions.



continued



OPERATIONALREVIEW



2008 2007


38. PROCEEDS ON DISPOSAL OF SUBSIDIARY

Assets classified as held-for-sale 19 —

Liabilities classified as held-for-sale (15) —

4 —

Loss on disposal — —

Proceeds on disposal 4 —

39. PROCEEDS ON DISPOSAL OF PROPERTY, PLANT AND EQUIPMENT

Carrying amount 25 48

Less: Assets disposed of to joint venture — (22)

25 26

Surplus on disposal 2 1

Proceeds on disposal 27 27

40. OTHER INVESTING ACTIVITIES

Acquisition of additional shares in existing subsidiaries (411) (53)

Net increase of loans to associates and other investments (52) (56)

Increase in investment in associates (1) (1)

Acquisition of treasury shares in Altron — (77)

(464) (187)

41. SUBSIDIARIES’ EQUITY CONTRIBUTIONS FROM MINORITIES

Proceeds on shares issued in subsidiaries — 14

Capital introduced by minorities — 7

— 21


Altron controlledinterest

2008 2007

% %

ASSOCIATE COMPANIES– UnlistedAeromaritime International Management Services (Pty) Limited 50.0 50.0 Bytes Healthcare Solutions international operations 50.0 — Namibian Cables (Pty) Limited 27.1 — Alcon Marepha (Pty) Limited 49.9 49.9

Directors’ valuation based on a price-earnings ratio relevant to the sector within which the associates operate.

OTHER INVESTMENTS

– UnlistedFintech Receivables 1 (Pty) Limited (preference share) (FR1)Technologies Acceptances Receivables (Pty) Limited (preference share) (TAR)Izingwe Aberdare Cables Investments (Pty) Limited 10.0 10.0 Izingwe Aberdare Cables Investments (Pty) Limited – cash on deposit

Total

Fair value of FR1 and TAR is determined using the discounted cash flow method over a five to seven year period using discount rates of 13.0% to 20.0% (2007: 9.4% to 15.4%). The directors’ valuation is equal to the fair value.

The carrying value of the investment in Izingwe Aberdare Cables Investments (Pty) Limited has not been reflected at fair value as accounting standards precluded the fair valuing of the equity of the underlying subsidiary.

The FRI and TAR loans are repayable when cash is available in accordance with a prescribed priority of payments.Cash on deposit held by Izingwe Aberdare Cables Investments (Pty) Limited can only be accessed for scheduled repayments of the empowerment funding obligation (refer to note 14).

Exposure to credit riskThe maximum exposure to credit risk for loans receivable at the balance sheet date was R223 million (2007: R183 million).TAR and FR1 are exposed to the risk of customers defaulting on their lease rental payments.All customers are credit vetted, credit is only extended to customers in accordance with the stipulations of the securitisation vehicle, and is effectively secured by the underlying assets. Bad debt experience is in line with expectations given the nature of the book.

Exposure to interest rate riskThe TAR participation loan notes earn a minimum interest rate of JIBAR plus 2.5% and a maximum interest rate of prime plus 6%. The FR1 participation loan earns interest at 15% with a variable return up to a maximum of 20%.

2008 2007JOINT VENTURES % %

ABB Powertech Transformers 50.0 50.0 Tridonic.Atco SA 50.0 50.0 CBi electric Aberdare ATC Telecom Cables 50.0 50.0

Annexure 1 Associates, other investments and joint ventures




OPERATIONALREVIEW



Investment at cost lessamounts written off

Attributable share of retained income Indebtedness

Totalinvestment

2008 2007 2008 2007 2008 2007 2008 2007

R millions R millions R millions R millions R millions R millions R millions R millions

— — 6 5 — — 6 5 1 — — — — — 1 — — — — — 3 — 3 — 1 1 8 5 1 4 10 10

2 1 14 10 4 4 20 15

23 25

Investmentsat fair value

Preference dividendreceivable Indebtedness

Totalinvestment

24 18 12 18 27 27 63 63 25 22 1 1 192 152 218 175 1 1 — — — — 1 1

12 — — — — — 12 —

62 41 13 19 219 179 294 239

294 239


Annexure 1 continued

Information in respect of interest in joint ventures, associates, FR1 and TAR

Joint ventures Associates FR1 and TAR

2008 2007 2008 2007 2008 2007


ABRIDGED BALANCE SHEETS

Non-current assets 375 366 14 10 719 650

Current assets (excluding cash) 908 637 44 27 67 23

Cash and cash equivalents 326 65 17 17 76 134

Current liabilities (768) (408) (41) (29) (53) (37)

Non-current liabilities (63) (50) (4) (4) (799) (751)

Equity 778 610 30 21 10 19

ABRIDGED INCOME STATEMENTS

Revenue 2 274 1 165 110 94 134 234

Expenditure (2 033) (1 007) (96) (83) (102) (208)

Profit before tax 241 158 14 11 32 26

Taxation (73) (45) ( 4) (4) (11) (13)

Profit for the year 168 113 10 7 21 13




OPERATIONALREVIEW



NATURE OF BUSINESS

Aeromaritime International Management Services (Pty) Limited

Provides services of clearing for both imports and exports, international forwarding on both seafreight and airfreight, local and national

freight distribution and cross-border roadfreight to neighbouring countries in Africa.

Bytes Healthcare Solutions international operations

Provides healthcare IT and eCommerce solutions in Saudi Arabia and Namibia.

Namibian Cables

Distributor of telecom accessories and medium voltage power cables.

Alcon Marepha (Pty) Limited

Manufacturer of medium voltage power cable.

FR1 and TAR

Securitisation vehicles used to house leases predominately related to equipment sold by the group.

Izingwe Aberdare Cables Investments (Pty) Limited

Investment holding company with a 30% equity interest in Aberdare Cables (Pty) Limited (refer to note 12.2).

ABB Powertech Transformers

Manufacturer of power and distribution transformers. ABB Powertech is a 50% joint venture with ABB Sub-Sahara.

Tridonic.Atco SA

Distributor of lighting control gear. Tridonic.Atco SA is a 50% joint venture with Tridonic (Austria).

CBi electric Aberdare ATC Telecom Cables

A telecom cable manufacturing joint venture with Reunert.


Annexure 2Segment information – Income statement

Consolidated2008 2007


BUSINESS SEGMENTATIONREVENUE Goods sold 14 950 11 539 Services rendered 6 451 5 540 Rental finance income 30 47 Inter segment revenue — —

Total segment revenue 21 431 17 126 Expenditure (19 222) (15 363) Depreciation and amortisation (272) (235)

Segment operating profit/(loss) 1 937 1 528 Financial income 182 132 Financial expense (89) (56) Share of profit from associates 4 4

Profit before taxation and capital items 2 034 1 608

GEOGRAPHIC SEGMENTATIONRevenue by market 21 431 17 126

South Africa 16 519 13 918 Rest of Africa 1 219 849 Europe 3 095 2 020 Rest of world 598 339

Segment operating profit by location 1 937 1 528

South Africa 1 602 1 371 Rest of Africa 135 54 Europe 185 94 Rest of world 15 9

Segment revenue and expenses

Revenue and expenses that are directly attributable to segments are allocated to those segments. Those that are not directly attributable to segments are allocated on a reasonable basis.

Inter segment transfers

Segment revenue, segment expenses and segment results include transfers between business segments and between geographical segments.

These transfers are eliminated on consolidation.




OPERATIONALREVIEW



TelecommunicationsMulti-media

and ElectronicsInformationTechnology

Corporateand eliminations

2008 2007 2008 2007 2008 2007 2008 2007R millions R millions R millions R millions R millions R millions R millions R millions

3 081 2 420 8 013 6 377 3 881 2 793 (25) (51) 4 351 3 545 80 80 2 020 1 915 — —

— — — — 16 27 14 20 30 7 65 77 — 6 (95) (90)

7 462 5 972 8 158 6 534 5 917 4 741 (106) (121) (6 772) (5 405) (7 167) (5 786) (5 401) (4 285) 118 113

(49) (28) (104) (97) (98) (106) (21) (4)

641 539 887 651 418 350 (9) (12) 96 57 9 10 69 54 8 11

(60) (5) (27) (29) (66) (73) 64 51 — — 4 2 — — — 2

677 591 873 634 421 331 63 52

7 462 5 972 8 158 6 534 5 917 4 741 (106) (121)

6 685 5 297 6 271 5 394 3 669 3 348 (106) (121) 122 54 736 392 361 403 — — 597 564 640 469 1 858 987 — — 58 57 511 279 29 3 — —

641 539 887 651 418 350 (9) (12)

570 490 750 595 291 298 (9) (12) 8 7 59 30 68 17 — —

59 40 67 19 59 35 — — 4 2 11 7 — — — —


Consolidated2008 2007


BUSINESS SEGMENTATIONASSETS Property, plant and equipment 1 264 954 Intangible assets 1 502 844 Associates and other investments 314 254 Rental finance advances 86 77 Inventories 2 130 2 013 Trade and other receivables 3 371 2 513

Operating assets 8 667 6 655

Deferred tax assets 196 182 Cash and cash equivalents 2 116 1 613

Total assets per balance sheet 10 979 8 450

LIABILITIES Trade and other payables 3 903 2 955 Provisions 105 104

Non-interest-bearing liabilities 4 008 3 059

Non-current loans 940 321 Current loans 229 65 Bank overdraft 33 24 Taxation payable 340 205 Deferred tax liabilities 83 30

Total liabilities per balance sheet 5 633 3 704

GEOGRAPHIC SEGMENTATIONOperating assets 8 667 6 655

South Africa 7 341 5 880 Rest of Africa 235 167 Europe 1 066 597 Rest of world 25 11

Non-interest-bearing liabilities 4 008 3 059

South Africa 3 209 2 512 Rest of Africa 208 51 Europe 572 489 Rest of world 19 7

Capital expenditure 479 240

South Africa 431 213 Rest of Africa 29 20 Europe 17 7 Rest of world 2 —

Segment assets and liabilitiesSegment assets include operating assets used by a segment and consist principally of trade and other receivables, assets held-for-sale, inventories, investments, property, plant and equipment and intangible assets net of related allowances and provisions. While most such assets can be directly attributable to individual segments, the carrying amount of certain assets used jointly by two or more segments is allocated to the segments on a reasonable basis.Segment liabilities include all operating liabilities and consist principally of trade and other payables, provisions and liabilities held-for-sale.

Annexure 2 Segment information – Balance sheet




OPERATIONALREVIEW



TelecommunicationsMulti-media

and ElectronicsInformationTechnology

Corporateand eliminations

2008 2007 2008 2007 2008 2007 2008 2007R millions R millions R millions R millions R millions R millions R millions R millions

277 193 632 445 297 274 58 42 671 39 38 21 793 783 — 1

— — 14 11 221 115 79 128 — — — — 85 77 1 —

296 192 1 501 1 565 333 258 — (2) 967 576 1 363 1 091 1 014 807 27 39

2 211 1 000 3 548 3 133 2 743 2 314 165 208

1 281 1 001 1 329 864 1 280 1 030 13 60 1 9 72 61 22 29 10 5

1 282 1 010 1 401 925 1 302 1 059 23 65

2 211 1 000 3 548 3 133 2 743 2 314 165 208

1 825 643 3 250 2 905 2 101 2 124 165 208 — — 8 — 227 167 — —

386 357 265 217 415 23 — — — — 25 11 — — — —

1 282 1 010 1 401 925 1 302 1 059 23 65

1 119 793 1 164 857 903 797 23 65 — — 91 — 117 51 — —

163 217 127 61 282 211 — — — — 19 7 — — — —

44 48 317 92 112 91 6 9

43 45 312 90 70 69 6 9 — — — — 29 20 — — 1 3 3 2 13 2 — — — — 2 — — — — —


COMPANY

Notes2008

R’0002007

R’000

ASSETS

Non-current assets 3 189 461 1 049 103

Property 2 — 50

Investment in subsidiaries 3 2 614 297 1 042 837

Amount receivable from subsidiary 3 550 000 —

Group share scheme recharge receivable 7 25 164 6 216

Current assets 229 116 389 077

Amounts receivable from subsidiaries 3 228 926 389 077

Cash at bank 190 —

Total assets 3 418 577 1 438 180

EQUITY AND LIABILITIES

Shareholders’ equity 2 849 366 1 437 542

Non-current liabilities

Loans 4 550 000 —

Current liabilities 19 211 638

Accounts payable 2 926 615

Current portion of loans 4 16 132 —

Taxation payable 153 23

Total equity and liabilities 3 418 577 1 438 180

Balance sheet at 29 February 2008




OPERATIONALREVIEW



COMPANY

Notes2008

R’0002007

R’000

Operating expenditure (540) (223)

Interest income on financial assets measured at amortised cost 34 119 —

Interest expense on financial liabilities measured at amortised cost (31 371) —

Dividends received from subsidiaries 383 265 290 993

Net gain on disposal of property 801 —

Profit before taxation 386 274 290 770

Taxation 6 (796) —

Profit for the year 385 478 290 770

Income statement for the year ended 29 February 2008

Statement of changes in equity for the year ended 29 February 2008

R’000

Ordinary share

capital(Note 5)

Preferenceshare

capital(Note 5)

Sharepremium

(Note 5)

Share-basedpayment reserve

Retainedearnings

Totalequity

Balance at 28 February 2006 1 943 21 825 071 1 410 544 331 1 372 776

Profit for the year — — — — 290 770 290 770

Share-based payments — — — 7 096 — 7 096

Dividends paid — — — — (241 536) (241 536)

Share issue — — 8 436 — — 8 436

Balance at 28 February 2007 1 943 21 833 507 8 506 593 565 1 437 542

Profit for the year — — — — 385 478 385 478

Share-based payments — — — 19 251 — 19 251

Dividends paid — — — — (367 451) (367 451)

Share issue 170 3 1 374 373 — — 1 374 546

Balance at 29 February 2008 2 113 24 2 207 880 27 757 611 592 2 849 366


COMPANY

Notes2008

R’0002007

R’000

Operating activities 196 801 16 841

Cash utilised by operations (540) (223)

Interest received 16 646 —

Interest paid (15 239) —

Dividends received 383 265 290 993

Changes in working capital 2 311 119

Proceeds on disposal of property 851 —

Movement in loans with subsidiaries 177 624 (32 512)

Cash available from operating activities 564 918 258 377

Dividends paid 8 (367 451) (241 536)

Taxation paid (666) —

Investing activities (758 402) (25 374)

Cash outflow on increase of investment in subsidiaries (208 402) (25 374)

Loan advanced to subsidiary (550 000) —

Financing activities 561 791 8 436

Proceeds on issue of shares 11 791 8 436

Loan raised 550 000 —

Cash resources

Net cash generated/(utilised) 190 (97)

Cash and cash equivalents at the beginning of the year — 97

Cash and cash equivalents at the end of the year 190 —

.

Cash flow statement for the year ended 29 February 2008




OPERATIONALREVIEW



COMPANY

2008R’000

2007R’000

1. ACCOUNTING POLICIES

Please refer to the group accounting policies on pages 120 to 127.

2. PROPERTY — 50

The property was disposed of during the year and consisted of stand portions 331 and 51 of farm, Turffontein 961R.

3. INTEREST IN SUBSIDIARIES

Issued Effective holding

Shares at costless amounts

written off Indebtedness

capital 2008 2007 2008 2007 2008 2007

R millions % % R’000 R’000 R’000 R’000

Allied Technologies Limited 3 62 57 223 225 48 541 — — Bytes Technology Group Limited 737 100 58 2 016 863 620 390 — —Power Technologies (Pty) Limited 411 100 100 249 869 249 869 567 473 — Altron Finance (Pty) Limited – ordinary shares — 100 100 235 235 211 453 389 077Altron Finance (Pty) Limited – preference shares — — — 121 509 121 509 — — Investment in subsidiaries – share-based payments 2 593 2 290 — —

Other 3 100 100 3 3 — —

2 614 297 1 042 837 778 926 389 077

Less: Current portion disclosed as current assets 228 926 389 077

Non-current loans 550 000 —

NotesThe above details are given in respect of interests in subsidiaries, where material. A full list of South African subsidiaries is available on request, at the registered office of the company. All subsidiaries are incorporated in South Africa.

2008 2007

R’000 R’000

4. LOANS

Unsecured bank loans at amortised cost 566 132 —

Current portion reflected as current liabilities (16 132) —

Non-current loans 550 000 —

The loan bears interest at the rate of JIBAR + 0.95% payable quarterly in arrears and the capital amount is repayable on 2 September 2010.

5. SHARE CAPITAL AND PREMIUM

Please refer to the group note 10 on page 143.

6. TAXATION

Current tax 796 —

Reconciliation of rate of taxation

% %

South African normal tax rate 29.0 29.0

Non-taxable income (28.8) (29.0)

Effective tax rate 0.2 —

Notes to the financial statements for the year ended 29 February 2008


Notes to the financial statements for the year ended 29 February 2008 continued

COMPANY

2008R’000

2007R’000

6. TAXATION (continued)

Unutilised STC credits amounting to R22.2 million (2007: R79.2 million) have not been recognised as deferred tax assets at 10% in the absence of a change to the existing dividend policy of the group, that would give rise to the utilisation of the STC credits.

7. GROUP SHARE-BASED PAYMENTS

Details of employee share options granted by the company are reflected in group notes 10.6 to 10.8 on pages 145 to 149. Options granted under the conditional rights scheme are subject to a recharge arrangement with participating subsidiaries upon exercise of the options by employees of those companies and have been accounted for as follows:

Group share scheme recharge receivable at fair value 45 333 20 096

Deferred group share scheme recharge pending settlement (20 169) (13 880)

Cumulative equity-settled charge recognised by subsidiaries and receivable per balance sheet 25 164 6 216

The fair value of the recharge receivable under the conditional rights scheme is determined using the Black-Scholes model. The fair value of the receivable is remeasured at each balance sheet date and at settlement date. The model inputs were as follows:

Share price (Rand) 36.00 42.00

Exercise price (Rand) 22.50 to 30.75 22.50 to 30.75

Terms (years) 0.95 to 3.73 3.5 to 5.2

Volatility 23.35% to 26.97% 20.54% to 23.50%

Dividend yield 3.28% 1.86%

Risk-free interest rate 9.6% 7.99%

8. TAXATION PAID

Taxation payable at the beginning of the year 23 23

Charge per income statement 796 —

Taxation payable at the end of the year (153) (23)

666 —

9. RELATED PARTIES

The company has a related-party relationship with its subsidiaries (refer to note 3).

Dividends

The company received dividends from subsidiaries 383 265 290 993

Interest

The company received interest from subsidiaries 34 119 —

Shareholders

The principal shareholders of the company are detailed in the analyses of shareholders on pages 90 to 93 of the annual report.

Directors

The company has a related-party relationship with its directors (refer to note 20 of the group accounts). Directors’ interests are disclosed in the directors’ report.

10. FINANCIAL RISK MANAGEMENT

Financial risk management and related disclosures have been dealt with in the group financial statements.




OPERATIONALREVIEW

SUSTAINABILITY REPORT ADMINISTRATION

Directorate profi le

DR WP (BILL) VENTER

Date of birth: 29 July 1934

Qualifications: DPhil (Bus Man) (UJ); MPhil (Bus Man) (UJ – cum

laude); MBA (Wales); DCom (hc) (UP, UFS and UPE); DSc (Eng)

(hc) (Natal); DEng (hc) (Wits); CEng (UK)

A UK chartered engineer and founder of Altron, through Allied

Electric in 1965 and recipient of the Order of Meritorious Service

(Gold), as awarded by the State President of South Africa for his

signifi cant contribution to South Africa’s electronics industry.

Titles: Chairman of Altron and Bytes

Director of Altech, Bytes and Powertech, former chairman of the CSIR, and past director of AMIC Limited and

Nedcor Bank Limited

Member of the Altron nomination committee and remuneration committee

Experience: Some 43 years devoted to entrepreneurial endeavours and initiatives in the electronics, telecommunications and power

electrical industries, both in South Africa and offshore, fi rstly as design engineer then marketing manager at STC (SA) and thereafter

chief executive and latterly as chairman of the Altron group.

Dr Venter has played an important role in developing the South African electronics and electrical industry into the key component of the

national economy that it is today. He is a Trustee of The Nelson Mandela Children’s Fund and a member of the Finance Committee.

Awarded the Sunday Times Lifetime Achievement Award in 2006 in recognition of his signifi cant contribution to South Africa and the

business community.

Joined the Altron board in 1980.

RE (ROBERT) VENTER

Date of birth: 7 May 1960

Qualifications: BSc (Econ) (UCLA); MBA (UCLA) Dean’s List

Titles: Chief executive of Altron

Director of Altech, Bytes, Powertech, Zetex plc

(formerly Telemetrix plc) and various other group

companies

Chairman of Aberdare Cables

Chairman of the Altron executive committee

Member of the Altron risk management committee

Experience: Four years’ merchant banking experience in the United States, the latter part as Vice-President, Bear Stearns and Co. Inc

(1987 – 1990).

18 years’ experience in senior management positions in the Altron group (1990 – current), including chief executive offi cer of Aberdare

Cables (1993 – 1996), chief executive offi cer of Powertech (1996 – 2001) before joining Altron as chief executive (2001 – current).



Directorate profile continued

MC (MYRON) BERZACK


Titles: Non-executive director of Altron

Chairman of Voltex Holdings

Executive director of The Bidvest Group Limited and

numerous subsidiaries thereof

Member of the Altron nomination committee and

remuneration committee

Experience: 37 years’ experience in the cable manufacturing

industry, 16 years’ experience in the electrical distribution industry.


N (NORBERT) CLAUSSEN

Date of birth: 10 December 1960

Qualifications: BEng (Stellenbosch); MEng (UP); MBA (UCT);

PrEng (ECSA)

Titles: Executive director of Altron

Chief executive officer of Powertech

Director of ABB Powertech Transformers, Aberdare

Cables and Powertech Industries

Member of the Altron executive committee and risk

management committee

Experience: Joined the Altron group in 1996 as the chief executive officer of Willard Batteries which expanded over five years to

become the Powertech Battery Group, comprising Willard Batteries, Dynamic Batteries, SABAT Batteries and Battery Technologies.

In March 2001, was appointed chief executive officer of Powertech. Since 1989, he has been a registered professional engineer with

the Engineering Council of South Africa.


PMO (PETER) CURLE


Qualifications: MA (Oxon)


Executive director of Altech: Corporate Finance

Member of the Altron executive committee

Experience: 38 years in merchant banking/corporate finance

activities in South Africa and internationally.

Rejoined the Altron group in 1997, having previously served the

group in a senior executive capacity from 1979 to 1986.





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MJ (MARK) LAMBERTI

Date of birth: 4 August 1950

Qualifications: BCom (Wits); MBA (Wits); PPL (Harvard)

Titles: Independent non-executive director of Altron

Member of the Altron audit committee and remuneration

committee

Experience: In 1988 was appointed Managing Director of Makro. With

the successfully repositioned Makro as a base, he founded Massmart

in 1990 as a vehicle for multichain growth in food, liquor and general

merchandise distribution. Massmart was listed on the JSE Limited on 4 July 2000.

In 1984, Mark won the IMM Raymond Ackerman Marketing Director of the year award. In 2001 he was the winner of the Ernst & Young

South Africa’s Best Entrepreneur Award and was one of 22 finalists in the 2001 Ernst & Young World Entrepreneur competition.

Mark was also the 2001 winner of the Institute of Marketing Management’s Marketer of the Year award and in 2004 was named the

Italian – South African Businessman of the Year by the Italian South African Chamber of Commerce.

Currently the chairman of Massmart Holdings Limited and a non-executive director of Telkom SA limited.


MJ (MIKE) LEEMING

Date of birth: 26 October 1943

Qualifications: BCom (Rhodes); MCom (Wits); FIBSA (Wits);

FCMA; AMP (Harvard)


Chairman of the Altron risk management committee

Member of the Altron audit and nomination committees

Experience: Retired banker and a director of AECI Limited, Imperial

Holdings Limited, Real Africa Holdings Limited and Woolworths

Holdings Limited.


DR PM (PENUELL) MADUNA

Date of birth: 29 December 1952

Qualifications: Bluris (Unisa); LLB (Zimbabwe); LLM (Wits);

HDip Tax Law (Wits); LLD (Unisa)


Chairman of the Altron nomination committee

Experience: Former Deputy Minister of the Department of Home

Affairs (1994 – 1996) and former Minister of the Departments of

Minerals and Energy (1996 – 1999) and Justice and Constitutional

Development (1999 – 2004).

Attorney, notary and conveyancer. Visiting Scholar of Constitutional Law at Columbia University Law School (New York). Founder

member of the ANC’s Constitutional Committee.

Currently an active partner at Bowman Gilfillan Attorneys as well as a member of the executive committee at Bowman Gilfillan Attorneys

and a senior special advisor of Sasol Limited.



Directorate profile continued

BJM (BARBARA) MASEKELA


Qualifications: BA (cum laude) (Ohio University)


Experience: Spent most of her life as a political activist working with

the ANC Observer Mission to the United Nations in New York and as

Secretary for Arts and Culture in Zambia. She was elected to the

National Executive Committee of the ANC, while serving as Nelson

Mandela’s Chief of Staff until 1994.

In 1995, Barbara was appointed as Ambassador to France and UNESCO. She subsequently joined the private sector and became

executive director for corporate communications and a member of the De Beers Consolidated Mines Board.

In 2003, President Mbeki appointed her Ambassador to the United States of America.

She continues to serve as a trustee of the Nelson Mandela Children’s Fund and is a board member of the MTN SA Foundation.

Previous board memberships include the Standard Bank of South Africa and the International Marketing Council.


JRD (JACOB) MODISE

Date of birth: 9 September 1966

Qualifications: BCom (Wits); BAcc (Wits); CA(SA); MBA (Wits);

AMP (Samford); AMP (Harvard)


Chairman of the Altron remuneration committee

Member of the Altron audit committee

Executive chairman of Batsomi Investments (Pty) Limited

Experience: Past Chief Operating Officer of Johnnic Holdings Limited.

Prior to that he held various senior financial executive positions at Eskom, Teljoy and JCI. Qualified as a Chartered Accountant while

serving his articles at Deloitte & Touche.

Current board member of Independent Regulatory Board of Auditors (IRBA), Blue IQ Holdings Limited and Eskom Holdings Limited

and finance and audit committee of the Development Bank of South Africa. Serves on the Advisory Board of the Nelson Mandela

Children’s Fund and is chief executive officer of the Road Accident Fund.

Member of the South African Institute of Chartered Accountants and Association of Black Accountants of South Africa.

Previous board memberships include MTN and M-Net.


PD (DAVID) REDSHAW

Date of birth: 29 January 1942

Qualifications: BA (Hons) (Birmingham); ACMA


Chief executive officer of Bytes

Non-executive director of Bytes UK

Member of the Altron executive committee and risk


Experience: 43 years in senior financial and general management

positions.





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DR HA (HAROLD) SEREBRO

Date of birth: 12 October 1938

Qualifications: MBBCh (Wits); MD (Rand); FCRP (Canada);

FACP (USA); PhD (Economics) (hc) (UFS)

Titles: Senior Altron executive director

Director of Altech

Chairman of the Altron group Purchasing and Export

Councils

Member of the Altron risk management committee

Trustee of the State President Empowerment Award Programme and of the Duke of Edinburgh Trust

Experience: 26 years in the electronics industry with the Altron group.


CG (CRAIG) VENTER


Qualifications: BSc (Econ) (UCLA); BA (Psychology) (UCLA);

MBA (USC); MSc (Mgmt Science) (USC)

Titles: Chief executive officer of Altech

Executive director of Altron

Director of Altech Netstar, Altech Autopage Cellular and

various other wholly owned subsidiaries of Altech

Chairman of Altech’s executive committee, Altech

Autopage Holdings, Arrow Altech Holdings, Altech Alcom

Matomo, Altech Netstar Fleet Management Services, Altech UEC Multi-Media and Altech Information Technologies

A member of the Altron executive committee and Altron risk management committee

A member of the worldwide Young Presidents’ Organisation (YPO)

Experience: 19 years in senior management positions in the Altech group.


PL (PETER) WILMOT

Date of birth: 13 March 1940

Qualifications: CA(SA)


Chairman of the Altron audit committee

Member of the Altron remuneration committee and risk


Experience: Past deputy chairman of The Standards Advisory

Council of the International Accounting Standards Board, past

chairman of the SA Accounting Practices Board, past chairman of

SAICA and past chairman of Deloitte & Touche. He is a director of Brait and a former director of Edgars Consolidated Stores Limited,

Allied Technologies Limited and Bytes Technology Group Limited.



Altron House

4 Sherborne Road

Parktown

2193

30 May 2008

Dear Shareholder

ALLIED ELECTRONICS CORPORATION LIMITED (Altron) ANNUAL GENERAL MEETING

On behalf of the board of directors of Altron, I have pleasure in extending an invitation to you to attend Altron’s annual general meeting,

which will be held on Tuesday, 15 July 2008 at 09:30 in the Boardroom, Altech Corporate Offices, 79 Central Street, Houghton. If you

are unable to attend, please arrange to vote by proxy in accordance with the instructions on the proxy form.

The board recognises the importance of its shareholders’ presence at the annual general meeting. This is an opportunity for

shareholders to participate in discussion relating to items included in the notice of meeting. In addition, the chairmen of board-

appointed committees, senior members of management, as well as the external auditors will be present to respond to questions from

shareholders.

The notice of meeting, which is set out on pages 195 to 198 of the annual report, is accompanied by explanatory notes setting out the

effects of all proposed resolutions included in the notice.

I look forward to your presence at the meeting.

Yours faithfully

Dr Bill Venter

Chairman

Letter from the chairman




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Notice is hereby given that the sixty-second annual general

meeting of the shareholders of Altron will be held in the

Boardroom, Altech Corporate Offices, 79 Central Street,

Houghton, Johannesburg, on Tuesday, 15 July 2008 at

09:30 to conduct the following business:

1. To receive, consider and adopt the annual financial

statements of the company and of the Altron group for

the year ended 29 February 2008.

2. To re-elect directors in accordance with the provisions

of the company’s articles of association.

Ms BJM Masekela, having been appointed as a director

by the board during the year is required to retire.

Messrs MJ Leeming, MC Berzack, CG Venter and

Dr PM Maduna are required to retire by rotation.

All retiring directors are eligible and have offered

themselves for re-election respectively.

An abbreviated curriculum vitae in respect of each

director offering himself/herself for re-election is

contained on pages 189 to 193 of this annual report.

3. To re-appoint Messrs KPMG Inc as independent

registered auditors of the company, to authorise the

directors to fix the remuneration of the auditors for the

past year’s audit as reflected in note 20.1 of the annual

financial statements and to note that the individual

registered auditor who will undertake the audit during

the financial year ending 28 February 2009 is

Mr MCA Hoffman.

As special business, to consider and, if deemed fit, pass

with or without modification the following resolutions that

numbered 4 as a special resolution and those, numbered

5, 6, 7 and 8 as ordinary resolutions.

4. SPECIAL RESOLUTION NUMBER 1: GENERAL

AUTHORITY TO REPURCHASE SHARES

That the company or any of its subsidiaries be and they

are hereby authorised, by way of a general approval, to

acquire ordinary and/or participating preference shares

issued by the company, in terms of sections 85 and 89

of the Companies Act, No 61 of 1973, as amended (the

Companies Act), and in terms of the JSE Limited (the

JSE) Listings Requirements, being that:

any such acquisition of ordinary and/or participating

preference shares shall be effected through the

order book operated by the JSE trading system and

done without any prior understanding or

arrangement with the counterparty;

this general authority shall be valid until the

company’s next annual general meeting, provided

that it shall not extend beyond 15 (fifteen) months

from the date of passing of this special resolution

number 1;

an announcement will be published as soon as the

company or any of its subsidiaries have acquired

ordinary and/or participating preference shares

constituting, on a cumulative basis, 3% of the

number of ordinary and/or participating preference

shares in issue and for each 3% in aggregate of the

initial number acquired thereafter, in compliance with

paragraph 11.27 of the JSE Listings Requirements;

acquisitions of shares in aggregate in any one

financial year may not exceed 20% of the company’s

ordinary and/or participating preference issued

share capital, as the case may be, as at the date of

passing of this special resolution number 1;

ordinary and/or participating preference shares may

not be acquired at a price greater than 10% above

the weighted average of the market value at which

such ordinary and/or participating preference shares

are traded on the JSE as determined over the five

business days immediately preceding the date of

repurchase of such ordinary and/or participating

preference shares;

the company has been given authority by its articles

of association;

at any point in time, the company and/or its

subsidiaries may only appoint one agent to effect

any repurchase;

Altron notice of annual general meeting

Allied Electronics Corporation LimitedIncorporated in the Republic of South Africa(Registration number 1947/024583/06)(Share code: ATN) (ISIN: ZAE000029658)(Share code: ATNP) (ISIN: ZAE000029666)

(“Altron” or “the company”)


Altron notice of annual general meeting continued

Litigation statement

In terms of paragraph 11.26 of the JSE Listings Requirements,

the directors, whose names appear on pages 189 to 193 of

this annual report of which this notice forms part, are not

aware of any legal or arbitration proceedings that are pending

or threatened, that may have or had in the recent past, being

at least the previous 12 (twelve) months, a material effect on

the Altron group’s financial position.

Directors’ responsibility statement

The directors, whose names appear on pages 189 to 193 of

this annual report, collectively and individually accept full

responsibility for the accuracy of the information pertaining to

this special resolution and certify that, to the best of their

knowledge and belief, there are no facts that have been

omitted which would make any statements false or misleading,

and that all reasonable enquiries to ascertain such facts have

been made and that this special resolution contains all

information required by law and the JSE Listings Requirements.

Material changes

Other than the facts and developments reported on in this

annual report, there have been no material changes in the

affairs or financial position of the company and its subsidiaries

since the date of signature of the audit report and up to the

date of this notice.

The reason for and effect of this special resolution is to grant

the directors of the company or its subsidiaries a general

authority in terms of the Companies Act and the JSE Listings

Requirements for the repurchase by the company or a

subsidiary of the company, of the company’s shares.

The directors have no specific intention, at present, for the

company or its subsidiaries to repurchase any of the

company’s shares but consider that such a general authority

should be put in place should an opportunity present itself to

do so during the year which is in the best interests of the

company and its shareholders.

5. ORDINARY RESOLUTION NUMBER 1: CONTROL OF

AUTHORISED BUT UNISSUED SHARES

That the general authority granted to directors to allot and

issue the unissued ordinary and participating preference

shares of the company be renewed subject to the following

limitations:

The authority shall be valid until the date of the next

annual general meeting of the company, provided it shall

not extend beyond 15 (fifteen) months from the date of

this annual general meeting.

the company and/or its subsidiaries undertaking that

they will not enter the market to repurchase the

company’s securities until the company’s sponsor

has provided written confirmation to the JSE

regarding the adequacy of the company’s working

capital in accordance with Schedule 25 of the JSE

Listings Requirements;

the company remaining in compliance with the

shareholder spread requirements of the JSE Listings

Requirements; and

the company and/or its subsidiaries not repurchasing

any shares during a prohibited period, as defined in

the JSE Listings Requirements unless a repurchase

programme is in place, where dates and quantities

of shares to be traded during the prohibited period

are fixed and full details of the programme have

been disclosed in an announcement over the

Securities Exchange News Service (SENS) prior to

the commencement of the prohibited period.

Before entering the market to effect the general

repurchase, the directors, having considered the effects of

the repurchase of the maximum number of ordinary and/or

participating preference shares in terms of the aforegoing

general authority, will ensure that for a period of 12 (twelve)

months after the date of the notice of annual general

meeting:

the company and the Altron group will be able, in the

ordinary course of business, to pay its debts;

the consolidated assets of the company and the Altron

group, fairly valued in accordance with International

Financial Reporting Standards, will exceed the liabilities

of the company and the Altron group;

the company and the Altron group’s ordinary and/or

participating preference share capital, reserves and

working capital will be adequate for ordinary business

purposes; and

the working capital of the company and the Altron

group will be adequate for the purposes of the business

of the company and the Altron group.

The following additional information, some of which may

appear elsewhere in the annual report of which this notice

forms part, is provided in terms of the JSE Listings

Requirements for purposes of the general authority:

directors and management – pages 189 to 193

major beneficial shareholders – page 93

directors’ interests in shares – page 118

share capital of the company – page 143




OPERATIONALREVIEW


share, will be published at the time of any such

allotment and issue of shares representing, on a

cumulative basis within one year, 5% or more of the

number of shares of that class in issue prior to any

such issues.

That issues in the aggregate in any one financial year

shall not exceed 10% of the number of shares of any

class of the company’s issued share capital less any

shares that may be issued during the financial year

arising from the exercise of share options in the

normal course.

That, in determining the price at which an

allotment and issue of shares will be made in

terms of this authority, the maximum discount

permitted will be 10% of the weighted average

traded price of the class of shares to be issued

over the 30 days prior to the date that the price

of issue is determined or agreed by the directors

of the company.

In terms of the JSE Listings Requirements, the

approval of 75% majority of the votes cast by

shareholders present or represented by proxy at this

annual general meeting will be required for this

authority to become effective.

7. ORDINARY RESOLUTION NUMBER 3: FEES OF

NON-EXECUTIVE DIRECTORS

That with effect from 1 March 2008 and in terms of

article 15.6 of the company’s articles of association,

the fees payable to the non-executive directors be set

as follows:

a) A board member, R115 000 per annum.

b) The audit committee chairman, R80 000

per annum.

c) An audit committee member, R37 500 per annum.

d) The remuneration committee chairman, R60 000

per annum.

e) A remuneration committee member, R37 500

per annum.

f) The risk management committee chairman,

R60 000 per annum.

g) A risk management committee member, R30 000

per annum.

h) The nomination committee chairman, R60 000

per annum.

i) A nomination committee member, R14 500

per annum.

Issues in terms of this authority will not, in any financial

year, in aggregate exceed 10% of the number of

ordinary shares in the company’s issued share capital

as at 29 February 2008.

Issues in terms of this authority will not, in any

financial year, in aggregate exceed 10% of

participating preference shares in the company’s

issued participating preference share capital as at

29 February 2008, provided that this limitation will not

apply to the issue of participating preference shares

in terms of any share incentive scheme and,

accordingly:

– in calculating the number of participating

preference shares issued in any financial year for

the purpose of determining whether the

aforementioned 10% threshold has been reached,

any participating preference shares issued in terms

of the rules of any share incentive scheme shall not

be included in that calculation; and

– the number of participating preference shares

which directors are authorised to allot and issue in

terms of the rules of any share incentive scheme

shall not be subject to limitation other than in terms

of the rules applicable to that scheme;

Issues in terms of this authority shall be subject to

the provisions of the Companies Act, and the JSE

Listings Requirements.

6. ORDINARY RESOLUTION NUMBER 2: GENERAL

AUTHORITY TO ISSUE SHARES FOR CASH

That subject to renewal of the general authority

proposed in terms of ordinary resolution number 1

above and in terms of the JSE Listings Requirements,

shareholders grant the directors a general authority for

the allotment and issue of ordinary and/or participating

preference shares in the capital of the company for cash

as and when suitable situations arise, subject to the

following limitations:

Any issue of securities shall be to public

shareholders as defined by the JSE Listings

Requirements.

This authority shall only be valid until the next annual

general meeting of the company but shall not endure

beyond the period of 15 (fifteen) months from the

date set down for the sixty-second annual general

meeting.

A paid press announcement giving details, including

the impact on net asset value and earnings per


Altron notice of annual general meeting continued

Shareholders holding dematerialised shares in their own

name, or who hold shares that are not dematerialised, and

who are unable to attend the annual general meeting and

wish to be represented thereat, must complete the relevant

form of proxy attached in accordance with the instructions

therein and lodge it with, or mail it to, the transfer

secretaries.

Forms of proxy should be forwarded to reach the

company’s transfer secretaries at the address given below

by not later than 09:30 on Monday, 14 July 2008.

The completion of a form of proxy will not preclude a

shareholder from attending the annual general meeting.

By order of the board

Altron Management Services (Pty) Limited

Secretaries

per: AG Johnston

Group Company Secretary

30 May 2008

TRANSFER SECRETARIES

Computershare Investor Services (Pty) Limited

70 Marshall Street

Johannesburg, 2001

(PO Box 61051, Marshalltown, 2107)

8. ORDINARY RESOLUTION NUMBER 4: SIGNATURE

OF DOCUMENTS

That any one director or the secretary of the company

be and is hereby authorised to do all such things and

sign all documents and take all such action as they

consider necessary to implement the resolutions set

out in the notice convening this annual general

meeting at which this ordinary resolution will be

considered.

VOTING AND PROXIES

Ordinary and participating preference shareholders are

entitled to attend and speak at the annual general meeting

and, with the exception of special resolution number 1

where both ordinary and participating preference

shareholders are entitled to vote, only ordinary

shareholders are entitled to vote in respect of the

remaining resolutions.

Ordinary and participating preference shareholders may

appoint a proxy to attend, speak and, in respect of the

applicable resolution/s, vote in their stead. Shareholders

holding dematerialised shares but not in their own name

must furnish their Central Securities Depository Participant

(CSDP) or broker with their instructions for voting at the

annual general meeting should they wish to vote. If your

CSDP or broker, as the case may be, does not obtain

instructions from you, it will be obliged to act in terms of

your mandate furnished to it, or if the mandate is silent in

this regard, to complete the relevant form of proxy

attached. Unless you advise your CSDP or broker, in terms

of the agreement between you and your CSDP or broker by

the cut-off time stipulated therein, that you wish to attend

the annual general meeting or send a proxy to represent

you at the annual general meeting, your CSDP or broker will

assume you do not wish to attend the annual general

meeting or send a proxy. If you wish to attend the annual

general meeting or send a proxy, you must request your

CSDP or broker to issue the necessary letter of

representation to you.




OPERATIONALREVIEW


Annual general meeting – explanatory notes

3. REAPPOINTMENT OF INDEPENDENT AUDITORS

KPMG Inc has indicated its willingness to continue in

office and resolution 3 proposes among others the

reappointment of that firm as the company’s auditors

until the next annual general meeting.

At an Altron audit committee meeting held on

28 February 2008, the committee considered the

independence of the external auditors KPMG Inc in

accordance with section 270A of the Corporate Laws

Amendment Act. In assessing the independence of the

external auditors, the audit committee satisfied itself that

KPMG Inc:

does not hold a financial interest (either directly or

indirectly) in Altron;

does not hold a position, either directly or indirectly,

that gives the right or responsibility to exert

significant influence over the financial or accounting

policies of Altron;

is not economically dependent on Altron, having

specific regard to the quantum of the audit fees paid

by Altron and its subholding companies to KPMG Inc

during the period under review in relation to its total

fee base;

does not provide consulting or non-audit-related

services to Altron or its subholding companies which

fall outside of the permitted or qualified non-audit-

related services as specified in the policy for the use

of the external auditors for non-audit related services

and which could compromise or impair the external

auditors’ independence (see page 119 of the

directors report; and

including the individual registered auditors who

undertake the audit, do not have personal or

business relationships of immediate family, close

relatives, partners or retired partners, either directly

or indirectly, with Altron and its subholding

companies.

Accordingly, the Altron audit committee is satisfied that

KPMG Inc is independent as contemplated by the South

African independence laws and the applicable rules of

the International Federation of Accountants (IFAC) and

nominated the reappointment of KPMG Inc as registered

auditors for the 2008/9 financial year. On 29 February

2008, the Altron board, subject to shareholder approval,

reappointed KPMG Inc and Mr MCA Hoffman as the

independent registered audit firm and individual

registered auditor of Altron respectively.

1. ADOPTION OF ANNUAL FINANCIAL STATEMENTS

At the annual general meeting, the directors must

present the annual financial statements for the year

ended 29 February 2008 to shareholders, together with

the reports of the directors and the auditors. These are

contained within the annual report.

2. RE-ELECTION OF DIRECTORS

In accordance with the company’s articles of

association, one third of the directors are required to

retire at each annual general meeting and may offer

themselves for re-election. In addition, any person

appointed to the board of directors is similarly required

to retire and is eligible for re-election at the next annual

general meeting. Ms BJM Masekela retires from the

board in accordance with article 15.3 of the company’s

articles of association and Messrs MJ Leeming,

MC Berzack, CG Venter and Dr PM Maduna retire by

rotation at the annual general meeting in accordance

with article 16.1 of the company’s articles of association.

An abbreviated curriculum vitae in respect of each

director offering himself/herself for re-election is

contained on pages 189 to 193 of this annual report.

The board of directors of the company has reviewed the

composition of the board against corporate governance

and transformation requirements and has recommended

the re-election of the directors listed above. It is the view

of the board that re-election of the candidates referred

to above would enable the company to:

responsibly maintain a mixture of business skills and

experience relevant to the company and balance the

requirements of transformation, continuity and

succession planning; and

comply with corporate governance requirements in

respect of matters such as the balance of executive,

non-executive and independent directors on the

board.

In addition, the performance of retiring directors was

formally evaluated. This process culminated in the

company’s board, on the recommendation of the Altron

nomination committee, considering whether the retiring

directors should be recommended for re-election.

Having considered the inputs of the Altron nomination

committee, the board recommends the re-election of the

retiring directors.


Annual general meeting – explanatory notes continued

4. SPECIAL RESOLUTION NUMBER 1: GENERAL

AUTHORITY TO REPURCHASE SHARES

The effect of special resolution number 1 and the reason

therefore is to grant the company or any of its

subsidiaries a general approval in terms of the

Companies Act, No 61 of 1973, as amended (the

Companies Act), for the acquisition by the company or

any of its subsidiaries of the company’s shares, which

general approval shall be valid until the earlier of such

next annual general meeting of the company or its

variation or revocation of such general authority by

special resolution at any subsequent general meeting of

the company, provided that the general authority shall

not extend beyond 15 months from the date of this

annual general meeting.

The directors are of the opinion that it would be in the

best interests of the company to extend such general

authority and thereby allow the company or any

subsidiary of the company to be in a position to

repurchase the securities issued by the company

through the order book of the JSE, should the market

conditions and price justify such an action.

5. ORDINARY RESOLUTIONS NUMBERS 1 AND 2:

CONTROL OF AUTHORISED BUT UNISSUED

SHARES AND GENERAL AUTHORITY TO ISSUE

SHARES FOR CASH

In terms of sections 221 and 222 of the Companies Act

the shareholders have to approve the placement of the

unissued shares under the control of the directors. The

existing authorities granted by the shareholders at the

previous annual general meeting on 13 July 2007 expire

at the following annual general meeting unless renewed.

The authorities will be subject to the Companies Act and

the JSE Listings Requirements. Ordinary resolution

number 1 requires a 50% majority of the votes cast by

shareholders present or represented by proxy at this

annual general meeting.

Ordinary resolution number 2 requires the approval of a

75% majority of the votes cast by shareholders present

or represented by proxy at this annual general meeting

in order for this ordinary resolution to become effective.

The directors consider it advantageous to renew these

authorities to enable the company to take advantage of

any business opportunity that may arise in future.

6. FEES OF NON-EXECUTIVE DIRECTORS

Shareholders are requested to approve the fees payable

to the company’s non-executive directors with effect

from 1 March 2008.

This resolution is recommended by the company’s

board of directors. Full particulars of all fees for the past

year as well as the process followed by the

remuneration committee in recommending board fees

are contained on pages 108 to 112 of this report.




OPERATIONALREVIEW


ADMINISTRATION

Allied Electronics Corporation Limited(Incorporated in the Republic of South Africa) (Registration number 1947/024583/06) (Share code: ATN) (ISIN: ZAE000029658)


FORM OF PROXY FOR THE SIXTY-SECOND ANNUAL GENERAL MEETING TO BE HELD IN THE BOARDROOM, ALTECH CORPORATE OFFICES, 79 CENTRAL STREET, HOUGHTON, JOHANNESBURG, ON TUESDAY, 15 JULY 2008 AT 09:30 – FOR USE BY CERTIFICATED ORDINARY SHAREHOLDERS AND DEMATERIALISED ORDINARY SHAREHOLDERS WITH OWN NAME REGISTRATION ONLY

Holders of dematerialised ordinary shares other than “own name” registration must inform their CSDP or broker of their intention to attend the annual general meeting and request their CSDP to issue them with the necessary authorisation to attend the annual general meeting in person or provide their CSDP or broker with their voting instructions should they not wish to attend the annual general meeting in person but wish to be represented thereat.

I/We(PLEASE PRINT)

of address

being the registered holder(s) of ordinary shares in the capital of the company do hereby appoint

1. or failing him/her,


the chairman of the annual general meeting as my/our proxy to act for me/us and on my/our behalf at the sixty-second annual general meeting of the company which will be held on Tuesday, 15 July 2008 at 09:30 for the purpose of considering and, if deemed fit, passing, with or without modification, the resolutions to be proposed thereat and at any adjournment thereof, and to vote for and/or against the resolutions and/or abstain from voting in respect of the shares registered in my/our name/s, in accordance with the following instructions:

NUMBER OF ORDINARY SHARES

For Against Abstain

1. Adoption of annual financial statements

2. Re-election of directors 2.1 Ms BJM Masekela

2.2 Mr MJ Leeming

2.3 Mr MC Berzack

2.4 Mr CG Venter

2.5 Dr PM Maduna

3. Reappointment of independent auditors

4. Special resolution number 1: General authority to repurchase shares

5. Ordinary resolution number 1: Control of authorised but unissued shares

6. Ordinary resolution number 2: General authority to issue shares for cash

7. Ordinary resolution number 3: Fees of non-executive directors

8. Ordinary resolution number 4: Signature of documents

Signed at on 2008

Signature

Assisted by me (where applicable)

Notes

1. An ordinary shareholder may insert the name of a proxy or the names of two alternative proxies of the ordinary shareholder’s choice in the space provided and any such proxy need not be a shareholder of the company. Should a proxy not be specified, this will be exercised by the chairman of the annual general meeting.

2. An ordinary shareholder is entitled to one vote on a show of hands and, on a poll, one vote in respect of each ordinary share held. An ordinary shareholder’s instructions to the proxy must be indicated by inserting the relevant number of votes exercisable by the ordinary shareholder in the appropriate box(es). An ordinary shareholder or his proxy is not obliged to use all the votes exercisable by the ordinary shareholder, or to cast all those votes exercised in the same way, but the total of the votes cast and in respect whereof abstention is recorded may not exceed the total of the votes exercisable by the ordinary shareholder.

3. If any ordinary shareholder does not indicate on this instrument that his/her proxy is to vote in favour of or against any resolution or to abstain from voting, or give contradictory instructions, or should any further resolution(s) or any amendment(s) which may be properly put before the annual general meeting be proposed, the proxy shall be entitled to vote as he/she thinks fit.

4. Documentary evidence establishing the authority of a person signing the proxy form in a representative capacity must be attached to this form, unless previously recorded by the company or waived by the chairman of the annual general meeting.

5. This proxy form should be completed and returned to the company’s transfer secretaries, Computershare Investor Services (Pty) Limited, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107), so as to reach them by not later than Monday, 14 July 2008 at 09:30.

ADDITIONAL FORMS OF PROXY ARE AVAILABLE FROM THE TRANSFER SECRETARIES ON REQUEST.


FORM OF PROXY FOR THE SIXTY-SECOND ANNUAL GENERAL MEETING TO BE HELD IN THE BOARDROOM, ALTECH CORPORATE OFFICES, 79 CENTRAL STREET, HOUGHTON, JOHANNESBURG, ON TUESDAY, 15 JULY 2008 AT 09:30 – FOR USE BY CERTIFICATED PARTICIPATING PREFERENCE SHAREHOLDERS AND DEMATERIALISED PARTICIPATING PREFERENCE SHAREHOLDERS WITH OWN NAME REGISTRATION ONLY

Holders of dematerialised participating preference shares other than “own name” registration must inform their CSDP or broker of their intention to attend the annual general meeting and request their CSDP or broker to issue them with the necessary authorisation to attend the annual general meeting in person.

I/We(PLEASE PRINT)

of

being the holder(s) of participating preference shares in the capital of the company do hereby appoint



the chairman of the annual general meeting as my/our proxy to act for me/us and on my/our behalf at the sixty-second annual general meeting of the company which will be held on Tuesday, 15 July 2008 at 09:30 and at any adjournment thereof, for the purpose of considering and, if deemed fit, passing, with or without modification the special resolution to be proposed thereat and to vote for and/or against the special resolution and/or abstain from voting in respect of the shares registered in my/our name/s, in accordance with the following instructions and otherwise to attend and speak for me/us at the sixty-second annual general meeting of the company and at any adjournment thereof.

NUMBER OF PARTICIPATING PREFERENCE SHARES

For Against Abstain

1. Special resolution number 1: General authority to repurchase shares

Signed at on 2008

Signature

Assisted by me (where applicable)

Notes

1. A participating preference shareholder may insert the name of a proxy or the names of two alternative proxies of the participating preference shareholder’s choice in the space provided and any such proxy need not be a shareholder of the company. Should a proxy not be specified, this will be exercised by the chairman of the annual general meeting.

2. A participating preference shareholder or his proxy is entitled to attendance at the annual general meeting, and to speak but not vote thereat (excepting in respect of special resolution number 1) in terms of the company’s articles of association. A participating preference shareholder will be entitled on a poll, to that proportion of the total votes of the company which the aggregate of the nominal value of the participating preference shares held by him/her bears to the aggregate nominal value of all the shares, both ordinary and participating preference shares, in the company.

3. If a participating preference shareholder does not indicate on this instrument that his/her proxy is to vote in favour of or against special resolution number 1, or any amendment thereto, or to abstain from voting, or give contradictory instructions, the proxy shall be entitled to vote as he/she thinks fit.

4. Documentary evidence establishing the authority of a person signing the proxy form in a representative capacity must be attached to this form, unless previously recorded by the company or waived by the chairman of the annual general meeting.

5. This proxy form should be completed and returned to the company’s transfer secretaries, Computershare Investor Services (Pty) Limited, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107), so as to reach them by not later than Monday, 14 July 2008 at 09:30.

Allied Electronics Corporation Limited(Incorporated in the Republic of South Africa) (Registration number 1947/024583/06) (Share code: ATNP) (ISIN: ZAE000029666)


ADDITIONAL FORMS OF PROXY ARE AVAILABLE FROM THE TRANSFER SECRETARIES ON REQUEST.



OPERATIONALREVIEW


AltechAnnual Report 2008 2038TH PROOF – ALTRON

Corporate data

CURRENCY

To facilitate the interpretation of this report by readers not

familiar with the South African rand, we provide the following

conversion guide.

At 29 February 2008 one rand was equal to:

2008 2007

£ 0.06417 0.07013

US$ 0.1275 0.1378

Euro 0.0849 0.1043

Yen 13.31 16.42

ADMINISTRATION

Business, secretaries and registered address

Altron House

4 Sherborne Road

Parktown, 2193

(PO Box 981, Houghton, 2041)

South Africa

Telephone: National (011) 645-3600

International 27 11 645-3600

Telefax: (011) 482-6489

Transfer secretaries

Computershare Investor Services (Pty) Limited

70 Marshall Street

Johannesburg, 2001

(PO Box 61051, Marshalltown, 2107)

South Africa

Telephone: National (011) 370-5000

International 27 11 370-5000

Telefax: (011) 370-5271/2

Auditors

KPMG Inc

Bankers

ABSA Bank Limited

FNB Corporate Bank (a division of FirstRand Bank Limited)

Nedbank, a division of Nedcor Bank Limited

The Standard Bank of South Africa Limited

Sponsor

Investec Bank

SHAREHOLDERS’ DIARY

Financial year-end Friday, 29 February 2008

Annual general meeting Tuesday, 15 July 2008

Reports and financial statements

Preliminary reports and dividend

announcements (published) Tuesday, 6 May 2008

Annual financial statements

(mailed to shareholders) June 2008

Interim reports October 2008

Dividends

The following dividends are hereby declared for the year

ended 29 February 2008:

Ordinary dividend number 60 of 156 cents per share

(2007: 118 cents).

Participating preference dividend number 14 of 156 cents

per share (2007: 118 cents).

The above dividends are payable as follows:

Last day of trading to qualify for

and participate in the dividend

(cum dividend) Friday, 20 June 2008

Trading ex dividend commences Monday, 23 June 2008

Record date Friday, 27 June 2008

Dividend payment date

(electronic and certificated) Monday, 30 June 2008

Dividend cheques in payment of these dividends to certificated

shareholders will be posted to shareholders on or about

Monday, 30 June 2008. Electronic payment to certificated

shareholders will be undertaken simultaneously.

Shareholders who have dematerialised their share certificates

will have their accounts at their Central Securities Depository

Participant or broker credited on Monday, 30 June 2008.

In the case of certificated shareholders, notice of any change

of address of shareholders must reach the transfer secretaries,

Computershare Investor Services (Pty) Limited, on or before

Friday, 20 June 2008. Share certificates may not be

dematerialised or rematerialised from Monday, 23 June 2008

to Friday, 27 June 2008, both days inclusive.

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