Integrated annual report 2011 - Microsoft...Integrated annual report 2011 Allied Electronics Corporation Limited – integrated annual report 2011 G a i n i n g m o m e n t u m Scope

Integrated annual report 2011

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Gaining momentum

Scope and boundaries IFC

Group overview

Our 11 strategic themes 1Establishing the strategic themes 2Financial summary 6Financial history 7Six-year review 8Corporate structure 10Our group’s global footprint 12The Altron investment case 13Contribution per subsidiary 13Directorate 14Executive committee 16Group awards 17

Executive reviews

Chairman’s statement 18Chief executive’s review 22Chief financial officer’s report 34Value added statement 41Strategic themes and material issues overview 42

Operational reviews

Review of operations 59GRI index overview 92Board statement regarding the Altron integrated annual report 92UN Global Compact Principles 93UN Global Compact Millennium Development Goals 93GRI content index 94Independent third-party assurance statement 104

Corporate governance

Abridged corporate governance report 106King III index 114

Shareholder analysis 118

Summarised terms of the participating preference shares 121

Remuneration report 122

Reward policy 135

Annual financial statements

Certificate from the company secretaries 143Independent auditor’s report 144Directors’ report 145Report of the Altron audit committee 150Accounting policies 153Associates, other investments and joint ventures – Annexure 1 222Segmental report – Annexure 2 226Company annual financial statements 230

Directorate profile 236

AGM and statement

Letter from the chairman 241Notice of annual general meeting 242AGM explanatory notes 246Form of proxy 251Notes to form of proxy 252Election form 255Corporate data IBC

Allied Electronics Corporation Limited(Incorporated in the Republic of South Africa) (Registration number 1947/024583/06)“Altron” or “the company”

Comparability Note CN1

Altron now uses headcount figures

as at 31 August 2010, as per our

employment equity reports to the

DoL. In previous reports, headcount

figures were as at 28 February (year

end) and therefore these figures are

not comparable for this report.

Comparability Note CN2

Due to scope expansion and a

significant investment in improved

data collection, our consumption data

is not directly comparable with the

prior years.

Scope and boundaries

Altron’s 2011 integrated annual report covers the Altron group’s

material South African operations (listed below) as well as certain

of our foreign operations. Altron’s intention going forward is to

align the sustainability practices of our offshore operations with

the Altron group’s approach so that sustainability is integrated

and managed consistently in all of its operations. Material issues

at foreign operations are identified in the front section of this

report and dealt with in the operational reviews where they apply

for example, many of our offshore operations are now included

in our carbon footprint calculation and foreign business units are

also covered in the human rights and business conduct in foreign

operations sections.

The integrated annual report covers the financial reporting period

from 1 March 2010 to 28 February 2011 and is again published

in two media; in summary form in the printed report, and in more

detail on the Altron website. The integrated annual report reflects

our progress in further integrating sustainability reporting into the

business, in accordance with the King Report on Governance for

South Africa, 2009 (King III). The previous integrated annual report

published in 2010 covered the financial period 1 March 2009 to

28 February 2010.

This report concentrates on the major operations that contribute

most significantly to the Altron group. These include Altech; Altech

Autopage Cellular, Altech Netstar, Altech Technology Concepts,

Altech UEC, Arrow Altech Distribution, Altech IT, Altech West

Africa, Altech Fleetcall, Altech Alcom Matomo, Altech Stream East

Africa, Altech Nupay and Swist Technology Solutions. Bytes; Bytes

Document Solutions, Bytes Management Solutions, Bytes Systems

Integration, Bytes Healthcare Solutions, Bytes Connect, Bytes People

Solutions and Bytes UK. Powertech; Powertech Cables, Powertech

Transformers, Powertech Batteries, Powertech Systems Integrators

and Powertech Industrial.

Headcount numbers, appointments and terminations for the group

are disclosed in this report as at 31 August 2010 to correlate with

the employment equity submissions made to the Department of

Labour (DoL) at that date. This

affects comparability as last year’s

headcount figures were disclosed

at year end and also affects

comparability of indicators derived

from those numbers (for example,

water consumption per employee).

Where numbers are disclosed

which are not directly comparable

to the prior year, this is indicated

with a CN to alert readers to this

fact. Our subsidiary, Altech, has

reported, in their integrated annual report, all of their human capital

figures as at its financial year end, so headcount numbers and

associated ratios disclosed for Altech in this report will not tie back

to those shown in Altech’s integrated annual report.

The scope of Altron’s carbon footprint reporting was considerably

increased to include more business units, joint ventures and

foreign operations than were

surveyed last year. Data

collection methods were also

significantly improved, resulting

in a carbon footprint that while

not directly comparable to

the prior period, represents a

sound baseline against which to

monitor our future progress.

The corporate activity that occurred during the year is laid out in

detail in the directors’ report on pages 145 to 149.

For questions regarding this integrated annual report, contact:Secretarial and administrationAndrew Johnston – Group Company [email protected] 645 3609

Michelle Doyle – Group Executive: Corporate [email protected] 645 3604

page 1

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Consistent integrated direction

11 CORPORATE GOVERNANCE

Our 11 strategic themes

10 BUSINESS CONDUCT IN FOREIGN OPERATIONS9 THE ENVIRONMENT

8 TRANSFORMATION7 HUMAN CAPITAL

6 CUSTOMER RELATIONSHIPS

1 EXTERNAL FACTORS

5 BUSINESS PARTNER RELATIONSHIPS

2 INCOME AND GROWTH

4 PRODUCTS AND SERVICES3 COSTS AND CASH MANAGEMENT

Leading from the top

Altron has 11 strategic themes

Each of these 11 strategic themes is ultimately governed

at board level and each is dealt with by the group’s chief

executive (CE) in the opening sections of this report.

Material issues that have been of particular relevance over

the reporting period are also highlighted in this integrated

annual report. All material issues are reported on in

the body of the report as well as the material issues table.

Corporate responsibility issues for all of the above-

mentioned companies is included in the operational reviews in

this integrated annual report insofar as policy and governance

is concerned. Targets and measurement against indicators are

also reported where these have been reliably established and

verified. These are summarised in the strategic themes and

materials issues table on page 42.

Altron’s 11 strategic themes have been established through

rigorous engagement with the executive management and

boards of the Altron group. The sequence of the strategic

themes listed above does not indicate any order of priority

or importance – all strategic themes are material and are

addressed throughout this report. Not all issues material to

Altron’s sub-holding groups are necessarily material to Altron.

Consequently, only those issues deemed material to Altron

relative to its subsidiaries are addressed in this report.

This integrated annual report does not include the social

or environmental performance of the group’s supply chain

partners, other than those issues pertaining to the dti Codes of

Good Practice (dti CoGP) regarding preferential procurement,

as well as the responsibility of waste and recycling with

contracted partners.

> Quicklink:

This integrated annual report, together with the

detailed corporate responsibility and governance

reports on the Altron website at www.altron.

com have been independently assured under

the AA 1000AS (2008) assurance standard by

SustainabilityServices.

Altron, through its principal subsidiaries, Allied Technologies Limited,

Bytes Technology Group (Pty) Limited and Power Technologies (Pty) Limited,

operates in the telecommunications, multi-media, information technology and

power electronics industries.

Establishing the strategic themes

This overview serves to inform stakeholders on how Altron

arrived at its list of 11 strategic themes and material issues,

these being the most important issues that drive the long-term

success and sustainability of the business.

The case for integrated reporting

Following the recommendations of the King Report on

Governance for South Africa 2009 (King III), the Altron board

now looks beyond the interests of the company and its

shareholders, taking into account the concerns and issues of

its wider stakeholder environment, such as the Integrated

Reporting Committee’s draft Framework for Integrated

Reporting and the Integrated Report, customers, suppliers,

employees and broader society.

Altron understands the importance of balancing long-term

social, environmental and economic interests with the principle

need to maximise the profits of the company. Thus, the single

list of strategic themes describes all the issues concerning both

the company and its stakeholders, and each is governed with

clear lines of accountability from board level down.

Following the materiality principle of the Global Reporting

Initiative (GRI), the 11 strategic themes are subdivided into a

list of some 45 issues. GRI indicators relevant to these issues

have been applied to measure the Altron group’s progress

towards sustainability. In accordance with the ‘apply or explain’

philosophy of King III, this report explains where the group

falls short in applying these indicators, or has used other

methodologies to manage and report on these issues. Systems

are continually being developed to enable the group to further

improve on its application level going forward.

> Quicklink:

See the King III checklist/summary on page 114 of this

integrated annual report.

Governance

The role of the board is to exercise leadership and sound

judgement in directing the company to achieve sustainable

growth and to act in the best interests of the company and

its stakeholders. Ultimate responsibility for the success of the

company lies with Altron’s unitary board and board committees

established to govern each of the specific material issues within

the company’s 11 strategic themes. The governance bodies

accountable for each strategic theme are listed below:

Stakeholder engagement to establish material issues

The realistic expectations and interests of a wide range of

stakeholders inform the strategic themes and issues Altron

deems material to its long-term sustainability. We engage

with our stakeholders in a variety of ways, from structured

surveys, to one-on-one business dealings, to legislative forums.

Important stakeholders that the company engages with

are listed in the table of material issues at the front of this

integrated annual report, with a more detailed description of

stakeholder engagement in the introduction to each strategic

theme and, in most cases, in the discussion of the material

issues themselves. Page or web references to the full report

located on the web allow the reader to obtain more detail

about specific concerns and the company’s response to them.

An overview of our stakeholder engagement follows.

Shareholders and investors

Altron manages a dedicated programme to engage with

analysts, investors and individual shareholders through regular

communication and site visits. Twice a year the group’s results

are presented to the investor community followed by one-

on-one meetings with key investors. Structured feedback

is received annually through an independently conducted

analyst poll. King III places an obligation on companies to raise

shareholders’ and investors’ awareness of business’s role in

achieving a sustainable society. Further to this, the Altron

Strategic themes Governance body

External factors Board, risk management committee, audit committee

Income and growth Board, audit committee

Costs and cash management Board, audit committee

Products and services Board, risk management committee

Business partner relationships Board, risk management committee

Customer relationships Board, risk management committee

Human capital Board, risk management committee, remuneration committee, human capital

committee, transformation committee, nomination committee

Transformation Board, risk management committee, transformation committee, human capital committee

The environment Board, risk management committee

Business conduct in foreign operations Board, risk management committee

Corporate governance Board, risk management committee, audit committee

Altron integrated annual report 2011page 2

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Engagement with investor community on sustainability matters

In November 2010, the Altron group company

secretary engaged with the company’s key investors,

focusing on ethics, reputation, governance and

sustainability. Discussion items included:

> The importance of ethics in an investment decision and how

this is measured

> Specific ethical challenges for the Altron group and how it is

perceived to be performing

> The investor community’s assessment of Altron’s overall

reputation and potential for improvement

> Further environmental and governance issues

All of the key investors responded that ethical

considerations play a significant part in the

investment decision-making process and also noted

that their perception was that Altron was operating

as an ethical company. Key ethical risks to the ICT

sector raised included:

> The award of public sector contracts and tenders in South

Africa and the rest of Africa

> Supply chain threats, especially child labour in the Far East

> Potential anti-competitive behaviour and the threat of

increased regulation

> Higher risk of ethics being compromised in countries into

which the group is expanding (especially in Africa)

Altron’s reputation was perceived to be good among these

investors and last year’s integrated annual report was well

received. Requests included more frequent updates against

the material issues, more discussion in the CFO report on the

capital structure and the company’s attitude towards debt,

clearer targets against goals, and more focus on water and

recycling initiatives including reduction targets around climate

change.

group company secretary, for the second year running,

visited major investors in Pretoria and Cape Town (see

accompanying summary).

Through the representation of the Altron group company

secretary, Altron is one of a few issuer companies

represented on the Committee on Responsible Investing

by Institutional Investors in South Africa (CRISA). As such

the company secretary has an important role to play in

providing input from an issuer company perspective in the

development and finalisation of the Code for Responsible

Investing by Institutional Investors in South Africa, which

aims to take the concepts embodied in the Principles for

Responsible Investing (PRI) to their practical conclusion and

encourages best practice by shareholders, asset managers

and companies alike.

In June 2010, in line with international corporate

governance trends, Altron wrote to its shareholders to

encourage them to publish their voting records from

the AGM, together with reasons or explanations where

necessary. While the suggestion received a mixed

response, we believe it is important for investors to be

transparent about their voting decisions and trust that

the future will bring increased disclosure in this area.

This is believed to be the first such request by a listed

company in South Africa.

In order to refine the company’s reputation and risk-

management strategies, Altron has engaged a corporate

reputation expert to conduct focused engagements with

significant stakeholder groups to establish their material

concerns regarding the group.

> Quicklink:

Further detail regarding this and other forms of

shareholder engagement can be found in the full

governance report at www.altron.com/annual 2011/

corporategovernance.htm

Customers and business partners

We nurture close relationships with our business-to-

business customers and partners, and important issues,

especially those raised by our ‘top ten’ customers, are

monitored by the group alliances manager. Societal issues

are raised in the business-to-consumer environment,

through customer satisfaction surveys, call centre

monitoring and popular customer feedback websites.

Further description of customer engagement is dealt

with under the strategic theme ‘Customer relationships’,

including the specific material issues raised and how we

respond to them.

page 3


Suppliers

Over and above regular engagement with suppliers on a day-

to-day basis, Altron will engage with its major suppliers to

better understand their interaction with the Altron group and

perceptions regarding the group’s reputation. This process will

assess their operations from a UN Global Compact perspective

in terms of, among others, procurement and labour practices.

Ultimately, the Altron group needs to respond to similar

engagements with its customers and as part of the overall

value chain provide a perspective on its compliance to the

UN Global Compact as a signatory.

Employees

We engage with our employees across a range of important

issues, including performance, remuneration and benefits,

shortage of skills, leadership succession, ethics, transformation,

health and safety, environment and HIV/Aids. At certain

operations, engagement takes place partially through unions,

but mostly we engage through structured forums, such

as, among others, the transformation committees and the

employment action teams. These are highly active and raise

a number of concerns and expectations. Ongoing informal

engagement with employees also happens through a number

of channels including Altron’s Profile magazine, focused poster

campaigns, company newsletters, interactive screensavers

and the group-wide intranet. We are increasing our focus

on individual performance reviews in order to enhance our

employees’ career development. Disputes and grievances

are generally settled or resolved through the Council for

Conciliation, Mediation and Arbitration (CCMA) process.

Further detail concerning engagement with employees is

dealt with under the strategic themes ‘Human capital’ and

‘Transformation’, including the specific material issues raised

and how we respond to them.

During the year, the company ran a group-wide interactive

ethics training programme focused on group values, ethics and

appropriate behaviour. Staff on the training signed an ethics

declaration declaring their understanding and commitment to

the Altron code of conduct.

> Quicklink:

More information on the ethics training conducted

is available in the full governance report on the

Altron website at www.altron.com/annual2011/


Government and regulators

Many aspects of our business dealings are regulated by

government or its appointed bodies. Dealings with consumers

are regulated through the Consumer Protection Act 2008

(CPA), which entrenches consumers’ rights to fair value, good

quality and safe products, while protecting against defective or

inferior goods. The Electronic Communications and Transactions

Act 2002 (ECT) and the Protection of Personal Information Bill

(POPI) provide for the protection of electronic information on

individuals held in critical databases, and the National Credit

Act plays an important role in curbing excessive behaviour

in the industry, in particular against irresponsible lending

practices. Behaviour in the marketplace is closely monitored by

the Competition Commission, prompting Altron to implement

ongoing initiatives to guard against possible anti-competitive

behaviour.

In South Africa, dealings with employees are closely prescribed

by a range of legislation, and the company engages with the

Department of Labour (DoL) in a variety of ways, in particular

through the annual submission of employment equity plans.

Altron maintains regular contact with significant industry

regulators, in particular ICASA (the regulator for the South African

communications sector), the Department of Communications,

NERSA (the National Energy Regulator of South Africa) and the

Department of Trade and Industry (dti).

We are also cognisant of the laws and regulations governing

our behaviour in our foreign operations, and monitor closely our

dealings and relationships to ensure we understand local issues

of concern and make a positive impact on society.

Wider society

A number of issues are raised by societal expectations of good

corporate behaviour, and Altron engages actively across a

broad range of channels to ensure the company understands

its impacts and the expectations of different stakeholder

groupings.

> Previously disadvantaged individuals are represented

through the dti Codes of Good Practice (dti CoGP), and Altron

engages with suppliers on preferential procurement, small

businesses on enterprise development, as well as with the

communities and NGOs around the social investments it

makes.

> The environment is represented by proxy stakeholders,

most notably government and the legislative environment,

but also through engagement with international codes and

standards, as well as other stakeholders with an interest in

Altron’s response to environmental concerns.

> Ethics, corruption, fraud and anti-competitive behaviour are

all issues that affect wider society. While government and

the wider legislative environment provide strict guidelines

and laws prescribing corporate behaviour, these and other

issues are often reflected in the media, where corporate

reputation is most exposed.

Establishing the strategic themes continued

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Media

Media channels are critical sources of feedback from society

assisting us in establishing the materiality of the issues

impacting our long-term sustainability. Altron and its

separately listed subsidiaries engage regularly with the media

to guide the companies’ portrayal and assess the overall

perception of the media regarding the Altron group. Altron

tracks its media reputation on a monthly basis to ensure

that the needs of the media and the relevant stakeholders

who consume the various media are satisfied. A key focus

for Altron for the period under review has been to improve

media accessibility to Altron executives and implement a

more proactive approach to media relations.

22%

7%

71%

Altech media perception

Good

Balanced

Poor

Materiality of risks and opportunities facing the Altron groupAside from stakeholder engagement and legal compliance,

Altron’s strategic themes and material issues are also strongly

informed by the company’s ongoing assessment of material

risks and opportunities, i.e. those that have the potential to

impact shareholder value, regardless whether their origin is

financial, operational, environmental, social, or governance

in nature.

> Quicklink:

For a list of the major consolidated risks identified by

the board at the end of the review period, the strategic

sustainability themes they relate to, and management’s

action and progress in response thereto, see the full

corporate governance report at www.altron.com/

annual2011/corporategovernance.htm

The board is satisfied that Altron has made every practical

effort to apply the material aspects of King III.

As a result of our consistent focus on corporate

governance, Altron was for the third year

running awarded a Gold Certificate.

In 2010, the company again engaged Corporate Governance

Accreditation (Pty) Limited (CGA) to independently verify

Altron’s corporate governance procedures and policies. All areas

of governance are covered by the gap analysis, including board

functioning, composition, roles and duties of executive and

non-executive directors, chairmen of the board and committees

and the chief executive (CE); board committee governance; risk

management, internal and external audit; and the full spectrum

of integrated sustainability issues including environmental,

social responsibility, ethics, diversity, B-BBEE and HIV/Aids.

As a signatory to the United Nations Principles of Responsible

Investment, CGA takes cognisance of these guidelines when

reviewing a client’s environmental and social awareness as part

of the integrated sustainability criteria.

We have addressed the governance deficiencies highlighted

in the past relating to stakeholder relations and integrated

sustainability and this year achieved a AAA rating in all 10

categories previously rated. As a result of our consistent focus

on corporate governance, Altron was for the third year running

awarded a Gold Certificate, achieving a score in excess of

80%. This qualified Altron for Platinum Class status – the first

company listed on the JSE Limited to achieve this distinction.

> Quicklink:

For further information regarding the governance

bodies responsible for overseeing Altron’s 11 strategic

themes referred to above, please refer to the full

governance report which is available at www.altron.com/

annual2011/corporategovernance.htm

Independent rating of compliance with corporate governance principles

Altron integrated annual report 2011

Financial summaryfor the year ended 28 February 2011

Group overview

> Good volume growth and market share gains at Bytes with profits increasing substantially

> Pleasing results from Powertech as a result of increased efficiencies and cost control

> Altech experienced difficult trading conditions particularly in East Africa but the second half showed an

improvement over the first half

> Good control over working capital

> Strong balance sheet and cash flow

> Dividend increase of 20% to 108 cents per share, maintaining historical cover but passing on benefit of increased

dividend from Altech

page 6

Financial highlights for the year ended 28 February 2011

R millions

February

2011

February

2010

%

change

Revenue 22 810 22 336 2

Earnings before interest tax depreciation and amortisation (EBITDA) 2 099 1 987 6

EBITDA margin (%) 9.2 8.9

HEPS (cents) 228 198 15

Adjusted diluted HEPS (cents) 243 217 12

Return on net assets (RONA) (%) 20.0 18.3

Cash net of borrowings (75) (464)

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Financial historyfor the year ended 28 February 2011

EBITDAR millions

CAGR = 10.9%

2006 2007 2008 2009 2010 2011

1 2

53

1 7

63

2 2

37

2 2

09

1 9

87

2 0

99

RevenueR millions

CAGR = 10.4%

2006 2007 2008 2009 2010 2011

13

91

3 17

12

6

24

76

8

21

43

1

22

33

6

22

81

0

Dividends per sharecents

CAGR = 6.7%

2006 2007 2008 2009 2010 2011

78

11

8

11

9

15

6

90

10

8

EBITDA margin%

2006 2007 2008 2009 2010 2011

9.0

10

.3

9.0

10

.3

8.9 9

.2

Six-year review


2011R millions

2010R millions

2009R millions

2008R millions

2007R millions

2006R millions

STATEMENT OF COMPREHENSIVE INCOME

Revenue 22 810 22 336 24 768 21 431 17 126 13 913

Operating profit 1 524 1 477 1 799 1 937 1 528 1 040

Financial income 64 87 184 182 132 112

Financial expense (163) (163) (292) (89) (56) (53)

Profit from associates 2 2 3 4 4 32

Capital items (291) (105) (21) (90) (38) (54)

Profit before taxation 1 136 1 298 1 673 1 944 1 570 1 077

Taxation (437) (457) (524) (625) (481) (326)

Profit after taxation 699 841 1 149 1 319 1 089 751

Attributable to non-controlling interests 157 298 314 300 284 257

Attributable to Altron equity holders 542 543 835 1 019 805 494

Headline earnings 719 625 861 1 072 793 529

Dividends paid 284 372 490 331 216 176

BALANCE SHEET

Assets

Property, plant and equipment 2 413 2 436 2 221 1 264 954 905

Intangible assets 2 274 2 754 2 437 1 502 844 773

Associates and other investments 245 275 278 314 254 228

Loans receivable 134 130 — — — —

Rental finance advances 61 44 73 86 77 90

Deferred taxation 202 200 230 196 182 118

Other current assets 5 709 5 433 6 234 5 501 4 526 3 271

Cash and cash equivalents 1 381 1 255 2 108 2 116 1 613 2 152

Total assets 12 419 12 527 13 581 10 979 8 450 7 537

Equity and liabilities

Shareholders’ equity 5 075 4 745 4 873 4 469 3 528 2 931

Non-controlling interests 1 239 1 610 1 427 877 1 218 1 103

Total equity 6 314 6 355 6 300 5 346 4 746 4 034

Non-current loans 830 689 1 157 940 321 297

Current loans 498 949 415 229 65 238

Loans 1 328 1 638 1 572 1 169 386 535

Non-current liabilities 190 305 189 107 68 46

Bank overdraft 128 81 928 33 24 —

Current liabilities 4 459 4 148 4 592 4 324 3 226 2 922

Total equity and liabilities 12 419 12 527 13 581 10 979 8 450 7 537

DefinitionsEarnings – Attributable earnings as disclosed in the statement of comprehensive income.Total assets – Property, plant and equipment, investments and loans together with current assets.Borrowings – All interest-bearing liabilities.Operating assets – Total assets less investments, loans, deferred tax and cash.Capital employed – The total of total equity and borrowings.Operating profit – is stated before capital items.

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2011R millions

2010R millions

2009R millions

2008R millions

2007R millions

2006R millions

RATIOS AND STATISTICS

Earnings

Basic earnings per share (cents) 171.8 172.2 266.0 356.7 287.0 176.4

Headline earnings per share (cents) 227.7 198.4 274.5 375.3 282.8 189.2

Dividend proposed per share (cents) 108.0 90.0 119.0 156.0 118.0 78.0

Headline dividend cover (times) 2.1 2.2 2.3 2.4 2.4 2.4

Ordinary shares in issue (millions)

– at year end 102 102 102 102 94 94

– weighted average 102 102 102 95 94 94

Participating preference shares in issue (millions)

– at year end 214 213 212 210 186 188

– weighted average 214 213 212 191 186 186

Profitability

Operating profit to revenue (%) 6.7 6.6 7.3 9.0 8.9 7.5

EBITDA 2 099 1 987 2 237 2 209 1 763 1 253

EBITDA to revenue (%) 9.2 8.9 9.0 10.3 10.3 9.0

Return on shareholders’ equity (%) 13.6 13.0 18.3 24.7 23.0 18.2

Return on capital employed (%) 19.9 18.5 22.9 29.7 29.8 22.8

Return on operating assets (%) 14.6 13.8 16.6 23.2 23.9 20.6

Return on net assets (%) 20.0 18.3 23.0 30.3 30.5 23.8

Financial

Borrowings ratio (%) 21.0 25.8 25.0 21.9 8.1 13.3

Current ratio 1.4:1 1.3:1 1.4:1 1.7:1 1.9:1 1.9:1

Acid test ratio 0.9:1 0.9:1 1.0:1 1.2:1 1.2:1 1.4:1

Net asset value per share 1 607 1 504 1 550 1 431 1 260 1 040

Shares

Number of shareholders

– ordinary shares 3 085 3 647 3 869 3 316 1 600 1 738

– participating preference shares 6 286 7 081 8 483 8 019 3 848 3 396

Price:earnings ratio (times)

– ordinary shares 11.5 13.1 7.0 13.1 15.8 13.5

– participating preference shares 11.4 11.8 7.0 12.7 14.9 11.9

Market value per share at year end (cents) – ordinary shares 2 620 2 600 1 915 3 700 4 478 2 550

– participating preference shares 2 590 2 350 1 920 3 600 4 200 2 550

Other

Consumer price index (percentage increase) 3.7 5.7 8.6 9.8 5.7 3.9

Production price index (percentage increase) 6.7 3.5 7.3 11.3 11.3 4.7

Number of permanent employees 12 037 12 311 13 407 12 909 11 871 11 874

DefinitionsAcid test – The ratio of current assets excluding inventories to current liabilities.Borrowings ratio – The percentage of borrowings to total equity.Current ratio – The ratio of current assets to current liabilities.Headline dividend cover – Headline earnings per share divided by dividends proposed per share.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 year end.EBITDA – Operating profit before depreciation and amortisation.Return on capital employed – The percentage of operating profit to capital employed.Return on operating assets – The percentage of operating profit 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 profit before tax, excluding finance costs and capital items to net assets.

page 10

Corporate structure Our mission, group structure and nature of business

Our mission

Altron’s mission

> 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 our commitment to the transformation process

of South Africa through broad-based black economic

empowerment initiatives;

> to provide a work environment that attracts, motivates,

rewards 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.

62% shareholding

* Allied Technologies Limited

Telecommunications

Altech Autopage Cellular, Altech Supercall Cellular, Altech Mobile

Direct, Altech Mobile Express – largest independent sales, distribution

and services provider for all the cellular network operators.

Altech Netstar – a leader in stolen vehicle tracking and recovery,

with operations extending into Africa.

Altech Netstar Fleet Solutions – a leading provider of advanced

fleet management systems and services into the commercial and

government markets across southern Africa.

Altech Netstar Traffic – the leading provider of intelligent traffic

information to PND suppliers, government agencies, and mobile

applications.

Altech Fleetcall – the leading commercial ICASA-licensed Radio

Trunking Network operator in South Africa.

Altech Technology Concepts – an internet communication solutions

and broadband IT managed services company.

Multi-media and Electronics

Altech UEC Multi-media, Altech MediaVerge Solutions, Altech Global

Decoder Logistics – design, manufacture and service provision of

satellite, digital terrestrial and IPTV set-top decoders.

Arrow Altech Distribution – largest distributor and supply chain

management of a vast range of high-tech professional electronic

components, products and solutions.

Information Technology

Altech Card Solutions, Altech West Africa, Altech ISIS South Africa

and Altech ISIS France – enterprise-wide integrated middleware

systems and solutions, end-to-end secure payment systems and

solutions, electronic security products and solutions, smartcard

technologies.

Altech NuPay – transaction service provider and switching

company.

Swist Technology Solutions – provider of data integration and

management solutions.

Converged Services

Altech Alcom Matomo and Altech Alcom Radio Distributors

– distributor and design, installation and turnkey project

management of Motorola radio systems and two-way radio

equipment.

Altech Stream Rwanda – a broadband network operator providing

high-speed city-wide fibre and WiFi/WiMax services, linked to the

Altech East Africa regional network.

Kenya Data Networks – a licensed public data network operator

offering backbone, metro and access utilising its fibre, satellite,

Fibre for the Home, WiMax and WiFi network.

Swift Global Kenya – an internet service provider offering IP-based

network, internet solutions and VoIP services. Value-added services

include disaster recovery, off-site back-up, application hosting and

information security.

Altech Infocom (Uganda) – provides internet, connectivity and IT

services, including the design and implementation of virtual private

networks. It offers fibre and fixed wireless broadband access

network connectivity.* Altron and its subsidiary Altech are public companies whose shares

are listed on the JSE Securities Exchange

*


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100% shareholding

Bytes Technology Group (Pty) Limited

Bytes Technology Group South Africa (Bytes SA)

Bytes Document Solutions (incorporating Xerox, LaserCom and NOR

Paper divisions), Bytes Managed Solutions, Bytes Systems Integration,

Bytes Connect, Bytes People Solutions, Bytes Healthcare Solutions

Xerox office and production products and related services, document

management services, digital print bureau services, paper,

consumables, NCR ATM and point-of-sale products, Teradata

datawarehouse solutions, Alcatel-Lucent solutions including LAN-based

telephony, mobile communications, contact and call centre solutions

and services, unified messaging solutions, “break and fix” services,

maintenance and support, remote monitoring of computer facilities,

network and solutions management, Microsoft licensing, workforce

management solutions, network solutions, software sales,

development, implementation and application maintenance, IT

infrastructure products and services, people solutions and training,

transaction switching services, practice management and informatics

solutions for the healthcare industry.

Bytes Technology Group – International Operations

Bytes Technology Group UK (Software Services, Document Solutions),

Bytes Botswana, Bytes Namibia, Bytes Mozambique, Bytes Mauritius

Microsoft licensing, Microsoft certified solution provider, provision of

software asset management solutions, Xerox production and office

products, document and print solutions. Networking solutions and

support. Supply of Xerox and Alcatel-Lucent equipment to 26 African

countries, directly and through a dealer network. Presence established

in Saudi Arabia and Dubai.

100% shareholding

Power Technologies (Pty) Limited

Power Electronics

Aberdare Cables, Alcobre (Portugal), Alcon Marepha, Aberdare Cabos

(Mozambique), Swanib Cables (Namibia), Technology Integrated

Solutions (TIS), Powertech Transformers, Powertech Batteries, Dynamic

Battery Services (UK), Crabtree Electrical Accessories SA, Strike

Technologies, Powertech Calidus, Tridonic, Powertech IST

> Low-, medium- and high-voltage power cables and accessories

> Cable network solutions and services

> Power, transmission and distribution transformers

> Reactors

> Condensor bushings

> NEC/NERs and auxiliary transformers

> Miniature substations

> Medium voltage switchgear

> Automotive batteries (Willard and Sabat) and DC power systems

> Power solutions for mining, transport, utilities and material handling

> Fixed installation electrical wiring accessories

> Retail domestic electrical accessories (adaptors, extension leads,

plug tops)

> Petrol, diesel and battery, back-up power solutions

> Electrical conduit, trunking and fittings

> Commercial and industrial lighting

> Energy-efficient lighting control and control gear, LED solutions

> Electrical power infrastructure telecontrol, protection and SCADA

> Turnkey substations and generator control systems

> Energy management systems, including automated meter reading

(AMR), smart metering, and demand side management (DSM)

> Engineering software for geographic information management

(GIS), strategic asset management (SAM) and operation support

solutions (OSS)

Telecommunications

CBi-electric Aberdare ATC Telecom Cables (including Lambda Cables),

Cables de Comunicaciones (Spain), Battery Technologies, Rentech,

Powertech IST, TIS

> Copper and optical fibre telecommunication cables and accessories

> Optical fibre telecommunication turnkey projects

> Data cable systems

> Solar systems

> Renewable energy solutions

> DC power storage systems

> Access network systems

> Radio solutions

> Operational support software


Although the majority of the Altron group’s

operating companies are located in South

Africa, there are a number of companies

that have representation, branches or other

facilities in other African countries.

Our group’s global footprint

Altech Bytes Powertech

Europe Holding Opco

France Altech Altech Isis

Portugal Powertech Alcobre Conductores Electricos SA

Spain Powertech Cables de ComunicacionesUnited Kingdom Bytes Bytes (UK)United Kingdom Powertech Dynamic Batteries

Middle East Holding Opco

Dubai Bytes Bytes Systems IntegrationSaudi Arabia Bytes Bytes Healthcare Solutions (JV)

Oceania Holding Opco

Australia Altech Altech Global Decoder LogisticsAustralia Altech Altech UEC

Asia Holding Opco

Hong Kong Powertech Powertech AsiaIndia Altech Altech Global Decoder LogisticsIndia Altech Altech UECMalaysia Altech Altech Netstar

Africa Holding Opco

Angola Bytes Bytes Connect

Angola Bytes Bytes Document Solutions

Botswana Bytes Bytes Connect

Botswana Bytes Bytes Managed Solutions

Botswana Bytes Bytes Document Solutions

Botswana Bytes Bytes Systems Integration

Burundi Bytes Bytes Connect

Burundi Bytes Bytes Document Solutions

Central African Republic Bytes Bytes Document Solutions

Democratic Republic of Congo (DRC) Altech Kenya Data Networks

Democratic Republic of Congo (DRC) Bytes Bytes Document Solutions

Ethiopia Bytes Bytes Connect

Ethiopia Bytes Bytes Document Solutions

Ghana Bytes Bytes Connect

Ghana Bytes Bytes Managed Solutions

Kenya Bytes Bytes Connect

Kenya Altech Altech Stream East Africa

Kenya Altech Kenya Data Networks

Kenya Altech Swift Global

Kenya Bytes Bytes Document Solutions

Kenya Bytes Bytes Systems Integration

Kenya Powertech Powertech Transformers

Lesotho Bytes Bytes Connect

Lesotho Bytes Bytes Document Solutions

Lesotho Powertech Crabtree Electrical Accessories

Madagascar Bytes Bytes Document Solutions

Malawi Bytes Bytes Connect

Malawi Bytes Bytes Managed Solutions

Malawi Bytes Bytes Document Solutions

Malawi Bytes Bytes Systems Integration

Mauritius Bytes Bytes Connect

Mauritius Bytes Bytes Managed Solutions

Mauritius Altech Altech Mauritius

Mauritius Bytes Bytes Document Solutions

Mauritius Bytes Bytes Systems Integration

Mozambique Bytes Bytes Connect

Mozambique Bytes Bytes Managed Solutions

Mozambique Bytes Bytes Document Solutions

Mozambique Bytes Bytes Systems Integration

Mozambique Powertech Aberdare Intelec Mozambique

Namibia Bytes Bytes Connect

Namibia Bytes Bytes Managed Solutions

Namibia Bytes Bytes Document Solutions

Namibia Bytes Bytes Systems Integration

Namibia Powertech Powerbat

Namibia Powertech Swanib Cables

Nigeria Bytes Bytes Managed Solutions

Nigeria Altech Altech West Africa

Nigeria Powertech Battery Technologies

Rwanda Altech Altech Stream Rwanda

Rwanda Bytes Bytes Connect

Rwanda Bytes Bytes Document Solutions

Seychelles Bytes Bytes Document Solutions

Swaziland Bytes Bytes Connect

Swaziland Bytes Bytes Document Solutions

Tanzania Altech Kenya Data Networks (JV)

Tanzania Bytes Bytes Document Solutions

Tanzania Bytes Bytes Managed Solutions

Tanzania Bytes Bytes Systems Integration

Tanzania Powertech Battery Technologies

Uganda Altech Infocom

Uganda Bytes Bytes Document Solutions

Uganda Bytes Bytes Managed Solutions

Uganda Bytes Bytes Connect

Zambia Bytes Bytes Connect

Zambia Bytes Bytes Managed Solutions

Zambia Bytes Bytes Document Solutions

Zambia Bytes Bytes Systems Integration

Zimbabwe Bytes Bytes Connect

Zimbabwe Bytes Bytes Document Solutions

Zimbabwe Bytes Bytes Systems Integration

Revenue Operating income

February2011

February2010

Exports Foreign operations

February2011

February2010

Exports and foreign operationsR millions

16

2

1 0

79

99

4 3

63

2

3 7

54

30

8

20.3% of total

21.6% of total

10.6% of total

20.7% of total

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Contribution per subsidiary

The Altron investment caseA summary of our investment proposition

Revenue* EBITDA* Headline earnings*

R millions

42%

27%

31%

R9 651 million R6 067 million R7 114 million

68%

R1 072 million R474 million R539 million

68%

R292 million R208 million R187 million R32 million

Altech

Bytes

Powertech

Corporate and

financial

February 2011 February 2011 February 2011

41%

27%

32%

R9 200 million R5 952 million R7 233 million

February 2010

51%

23%

26%

R1 165 million R393 million R424 million

February 2010

59%20%

21%

41%

29%

4%

26%

R342 million R157 million R97 million R29 million

February 2010

55%25%

4%

16%

*Revenue and EBITDAexcludes corporate

and financial.

> 46 years of proud, South African, family owned history

> Diverse businesses, with products and services extended over the power electronics, telecommunications, multi-media and

information technology industries

> Consistent track record with a 10-year compound annual growth rate of approximately 10% for both revenue and EBITDA

> Constant dividend policy with a 10-year compound annual growth rate of 13.3% on dividends per share

> Lower risk through more than 50% recurring revenue and low gearing

> Strong balance sheet and cash flow and able to take advantage of opportunities as their arise

> Poised for growth particularly in Africa but also other areas globally

> Global footprint, operating in more than 29 countries

> Recognised Corporate Governance and Sustainability record


Directorate

Dr Bill Venter

Myron Berzack

Mike Leeming Norman Adami

Dr Penuell Maduna

Robert Venter

Norbert Claussen Peter Curle

Myron Berzack 62

Joined the Altron board in 1998

> Non-executive director of Altron

> Member of the Altron nomination committee and

remuneration committee

Norbert Claussen 50


> Executive director of Altron

> Chief executive officer of Powertech

> Director of Powertech Transformers, Aberdare Cables,

Powertech Industries and Powertech SA

> Member of the Altron executive committee and risk

management committee

Peter Curle 65

Rejoined the Altron board in 1997


> Executive director of Altech: corporate finance

> Member of the Altron executive committee

Dr Penuell Maduna 58


> Independent non-executive director of Altron

> Chairman of the Altron nomination committee

Dr Bill Venter 76


> Non-executive chairman of Altron, Bytes and Powertech

> Non-executive director of Altech, Bytes (UK)

> Member of the Altron nomination committee and

remuneration committee

Mike Leeming 67


> Lead independent director of Altron

> Chairman of the Altron risk management committee

> Member of the Altron audit committee and nomination

committee

Robert Venter 51


> Chief executive of Altron

> Non-executive director of Altech, Bytes, Powertech and

various other group companies

> Chairman of the Altron executive committee

> Member of the Altron risk management committee

Norman Adami 56



> Member of the Altron audit committee

> Member of the Altron remuneration committee

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Peter Wilmot

Jacob Modise David Redshaw

Alex Smith Craig Venter

Barbara Masekela

Barbara Masekela 69



> Member of the Altron nomination committee

Jacob Modise 44



> Chairman of the Altron remuneration committee


Dawn Mokhobo 62



David Redshaw 69



> Chairman of Bytes UK

Alex Smith 42


> Chief financial officer and financial director of Altron

> Non-executive director of Altech, Bytes, Powertech and

various other group companies



Craig Venter 48


> Chief executive officer of Altech


> Director of Altech Netstar, Altech Autopage Cellular, Kenya

Data Networks, Swift Global (Kenya) and various other

subsidiaries of the Altech group, both local and global



Peter Wilmot 71



> Chairman of the Altron audit committee

> Member of the Altron remuneration committee and risk


Dawn Mokhobo


Executive committee

Norbert Claussen


Rob Abraham

> Chief executive officer of Bytes

Peter Curle

> Executive director: corporate finance

Robert Venter


> Chairman of executive committee

Alex Smith


Seara Macheli-Mkhabela

> Group executive: corporate affairs of Altron

Craig Venter


Seara Macheli-Mkhabela

Rob Abraham

Alex SmithRobert Venter

Norbert Claussen Peter Curle

Craig Venter

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Group awardsas at 28 February 2011

Altron group awards and accreditation received

> Platinum CGA Status – Altron is the first JSE-listed company to achieve Platinum status from Corporate Governance

Accreditation (Pty) Limited (CGA) for corporate governance policies, practices and procedures.

> ACCA SA Best Sustainability Report (Most Improved Report) 2010 – Altron

> Carbon Disclosure Leadership Index Gold Certificate – Altron achieved joint 10th place in South Africa

> Sake24 Financial Advertising Awards Finalist – Altron

> Financial Mail/Empowerdex top empowered company survey 2011, ranked 25th – Altron

> JSE SRI Index – Altron submitted in 2010 (achieves 100% in ESG category)

> 2010 Xerox Middle East and Africa Partner of the Year (MEA) – Bytes Document Solutions

> Metropolitan Oliver Empowerment Awards First Place (ICT Sector) – Bytes

> 2010 Microsoft Partner of the Year (Licensing Solutions, Licence Delivery) – Bytes UK

> Best performing Oracle Approved Centre Award for South Africa – Bytes People Solutions

> Top Women in Business and Government Awards Finalist (Education) – Bytes People Solutions

> 2010 – Cisco Vertical Practice Excellence Partner of the Year – Bytes System Integrations

> NCR Global Circle of Distinction Award – Bytes Managed Solutions

> Financial Mail Top 200 Listed Companies in South Africa in 2010 – Altech included in the list

> Topco Top 500 South Africa’s Best Companies – Altech was included in this list

> Sunday Times’ Top 100 Companies in 2010 – Altech was included in this list

> Rwanda 2010 Business Excellence ICT Award – Altech Stream Rwanda won

> Gold Award Electrobase (Independent Electrical Wholesalers Association) – Aberdare Cables

> Financial Mail/Empowerdex top empowered company survey 2011, ranked 42nd – Altech

The board supports the long-term sustainability

of corporate capital, balanced economic,

social and environmental performance and

due consideration of legitimate stakeholder

involvement.

page 17

page 18

Chairman’s statement


which engulfed the world, but I am confident that our group

is being managed according to stringent contingencies for

differing scenarios over the immediate term. We are also

ensuring that the business is capable of capitalising on

opportunities which are expected to arise once economic

conditions improve.

It is becoming increasingly evident that the rest of the world

is now realising the investment potential of Africa. During

the past year, substantial funds have been directed to our

continent – the new frontier of emerging market investment

and, we too, are looking into one or two possible ways to

expand in this area through acquisition and organic growth.

I was pleased to note recently that South Africa has taken

a prominent place at the BRICS Forum that has been

established to represent the world’s major emerging markets.

South Africa’s inclusion in BRICS is expected to increase

the participation of Brazil, Russia, India and China in South

Africa, thus elevating our economy through their investment.

In addition, we are likely to benefit from their advanced

technology insights and manufacturing skills, providing us

with product-sourcing opportunities and access to their vast

international markets.

Gaining momentum

We were delighted to learn from the Finance Minister’s recent

budget that the SA economic climate is expected to slowly gain

momentum and that a growth rate of 4.4% is being predicted

for the new financial year. In fact, the manufacturing, retail

and service industries are all showing stronger growth and,

while the property market and the building and construction

industries remain strained, consumer confidence is slowly

returning to the market.

Maintaining momentum is a business principle and can best be

described as a series of successes. On the other hand, gaining

momentum is especially important for those corporations

that embrace change. In this regard, it is pleasing to witness

substantial growth in many aspects of our sustainability

endeavours, including: marked progress in our transformation

process; carbon footprint calculation and environmental

programmes; cost-efficiency measures; as well as our expansion

programme into Africa and foreign markets.

Financial position

We continue to successfully execute our strategy of building a

group that will sustain long-term profitable growth while making

a positive impact on the communities in which we operate. Thus,

I am happy to report that, overall, it was a successful year for

our company, our customers and our shareholders as Altron

Introduction

As the chairman of Altron I am delighted to introduce our

group’s second integrated annual report which succinctly

reflects the group’s commitment to sustainability on all levels

as an integral part of our business strategy.

Although the economic environment remains challenging

due to the global economic recession, increased government

spending, particularly on infrastructure, and the easing of

monetary policy, helped to keep our local economy stable. Our

group’s strong presence in a number of industry sectors and

our high level of recurring income helped to reduce the impact

of adverse economic cycles.

Our focus remained firmly on stringent internal cost controls,

effectively allocating capital, and strengthening our portfolio

through bedding down key acquisitions and finalising

divestures. This successful execution assisted us in delivering

pleasing, double-digit earnings growth for the year to February

as well as value to customers, thus positioning Altron to

outperform many of its peers during the coming financial year

and in the future.

We believe the external events of the past three years have

tested and validated our long-term vision and strategy for our

group and brought them into sharper focus. Our results for the

year clearly reflected:

> a better structured business;

> an increased focus on shareholder value;

> a strategy to run healthy core businesses; and

> a dedication to strong execution and a firm commitment to

growing profitable businesses for the future in a sustainable

and responsible manner.

Like most other blue-chip corporations in South Africa, Altron

was not immune to the recent economic and financial turmoil

Dr Bill Venter – Non-executive Chairman

Ex

ecu

tiv

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rev

iew

s

page 19

increased both its revenue and EBITDA, albeit off a lower base to

show healthy double-digit growth in our headline earnings per

share. Despite difficulties in the global environment, the group’s

product and service offerings showed resilience to adverse

conditions, and this is clearly reflected in the improved growth

that was achieved.

Much of this growth was due to significant improvements in

internal efficiencies and stringent cost controls. This process

is likely to continue for some time as the various segments of

the group are being aligned in terms of effective consolidation

and integration.

I am pleased with the progress being achieved against our

group’s stated 11 strategic themes which, among others,

include cost and cash management, products and services,

partner relationships and customer focus, transformation,

human capital and corporate governance. Improvement in

terms of these strategic themes is not only helping to boost

our competitive edge, but is also aimed at sustaining superior

operating results for the long term.

Leadership

Altron remains firmly committed to its customers in terms of

value-added products and services while, overall, the group

performed very well in terms of its cash and cost management

and remained focused on our vision as well as our strategic,

operational and financial goals. In addition, we were both

prudent and opportunistic with capital expenditure and in

allocating capital at a time when many others had to make

major adjustments and sacrifices.

The power of possibility

During my 46 years at Altron, the world has evolved and

changed dramatically, giving rise to a new generation of

consumers who demand goods, services and information

anytime, any where and any way they want. At Altron, we

understand these expectations because we have helped

to create them, especially as our vast networks provide

unprecedented access to the world of communications. Our

commitment to a safe and sustainable environment continues

to increase efficiency and profitability.


The principles recommended in King III are reflected in the

group’s corporate governance practices and structures which

have been reviewed to accommodate organisational changes

and any developments in this area. We believe our overall

corporate governance standards will stand us in good stead to

comply with the recommendations of King III which is already

in effect throughout the Altron group. Altron also encourages

ethical behaviour, accountability and organisational

transparency. We report on our businesses in an open and

candid manner and recently received a platinum award in

recognition of our governance standards.

Sustainability

In celebrating Altron’s 46th anniversary this year, our group

has broadened its scope to include the full spectrum of

corporate sustainability issues, such as broad-based black

economic empowerment, business ethics and assuming

responsibility for the environment.

Our focus remained firmly on stringent internal

cost controls, effectively redeploying capital,

and strengthening our portfolio through

bedding down key acquisitions and divestures.

We firmly believe that in the next decade, the most successful

companies will be those that integrate sustainability into

all elements of their businesses. Not only are we doing it at

Altron, but we are helping our customers and suppliers to do

the same.

Altron won the award for the Best Sustainability – Most

Improved Report at the ACCA South Africa Awards for

Sustainability Reporting in 2010, demonstrating a year-on-

year incremental improvement on our sustainability efforts.

This is an impressive achievement as 51 sustainability

reports, including most of the JSE top 40 listed companies,

were reviewed by the judging panel.

Altron also received a gold certificate at the launch of

the 2010 Carbon Disclosure Project for our high rating

in the Carbon Disclosure Leadership Index for 2010. Our

score of 81% placed us joint 10th among the JSE top 100

companies – an increase of seven places from last year.

This achievement is the result of the dedication of each and

every one of our employees. Our commitment to improving our

carbon footprint through various projects in the group, as well

as our Envirowatch campaign, has played a significant role in

helping Altron become one of the leaders in this field.

We have also launched a number of other inspiring initiatives,

such as our various employee wellness programmes and the

ethical awareness campaign.

page 20

Chairman’s statement continued


general CSI contribution. The group has committed to invest

R14 million towards a R28 million healthcare infrastructure

development as part of a public-private partnership (PPP) in

the Hillbrow precinct. As a result, Johannesburg’s inner city

residential neighbourhood has received a major boost with

maternal and child HIV/Aids and tuberculosis (TB) services.

Altron is now looking ‘beyond 2012’ and beyond mere

compliance with the Codes of Good Practice to making

sustainable change in the area of transformation. Altron’s

greatest challenge remains the shortage of skilled personnel

available in the country, right across the board from artisans

to sales engineers, accountants, design engineers and senior

management.

In order to focus on developing our diverse leadership pipeline, a

human capital council has been formed to drive human capital

development initiatives that include training and development

programmes, active succession planning, innovative recruitment

and retention strategies and an appropriately focused

performance management system. In this regard, our Altron

Young President’s Club’s leadership development programme

continues to develop young executives for senior positions in

our group.

Carbon footprint

For Altron, sustainability means identifying and managing

economic, social and environmental issues across all our

operations. As signatories to the Copenhagen communiqué on

climate change the group is committed to reducing its carbon

footprint. Under the guidance of Altron’s company secretary

and a group of enthusiastic carbon footprint champions,

initiatives and processes have been identified to decrease our

carbon footprint with the aim to become a carbon neutral

company in the short to medium term.

Our overall performance during the past year was achieved

with complete commitment to corporate responsibility using

the highest ethical standards, protecting people and the

environment, and contributing to the communities where we

conduct business. As in prior years, we exceeded our rigorous

goals for employee safety and have set three-year targets to

reduce our carbon footprint. We are committed to monitoring

and reducing the water consumption and waste generated by

the group.

Looking ahead

The past year fully tested the mettle of the Altron group. It

also demonstrated the calibre and commitment of our people

at every level. Through the strong leadership of our chief

executive, Robbie Venter, and his executive committee, the

Transformation

B-BBEE continues to be one of the major business drivers in the

current South African economy and our government should be

commended on developing a policy that fosters opportunity,

encourages growth and enables job creation. However,

poverty, unemployment and lack of critical skills still remain

deeply entrenched in our society. We are working closely with

government to address these challenges, being fully cognisant

that they should remain a priority focus for South Africa to

normalise our transforming society.

I am pleased to see that Altron continued to make enormous

strides in terms of its own B-BBEE targets set out in the Altron

Vision 2012. Among other areas of focus, the Vision 2012

transformation document requires all group companies to be

a level 3 contributor by 2012. Altron is proud that its group

companies have already reached this target and believes this

formalised and unified process has guided the group to success

in this arena.

Leadership skills and technical training are key drivers for our

business and therefore prominent in our people development

initiatives. Our leadership training programmes are now

broad-based, and we are bringing even more vigour to the way

in which we develop our people, while actively nurturing the

company’s distinctive and diverse culture. These initiatives,

together with our ongoing management development

programme, are important in achieving our transformation

goals. I am also pleased with the realignment of our social

investment programme prioritising marginalised communities

and enterprise development to encourage start-up enterprises.

I am pleased to see that Altron continued to

make enormous strides in terms of its own

B-BBEE targets set out in the Altron Vision 2012.

Since we adopted the Altron Vision 2012, we have focused

on empowering black-owned and black women-owned

businesses, and today most of our companies have meaningful

black partnerships. Together, we continue to create wealth

and transfer knowledge. Since 2008, we have invested more

than R81 million in the development of small and medium

businesses that now form part of our production processes.

With regard to social development, Altron continues to provide

education infrastructure and equipment over and above our

Chairman’s statement continued

group is in a strong position to leverage its strengths into new

products and improved service delivery. More importantly, we

have a corporate team able to execute our strategy with agility,

speed and decisiveness, and to drive financial performance and

deliver shareholder value.

With all of our combined efforts, I am optimistic that we can

have a much improved year given that market conditions

and economic activity improve. We do, however, continue to

face many challenges including the continued strengthening

of the rand as well as increasing international competition.

Consequently, we need to continue improving our value

propositions through better service levels and product quality,

while also improving our capacity and skills to remain the

market leader in our chosen markets.

The extensive growth opportunities on the African continent,

combined with the successes we have already achieved in

countries such as Kenya and Nigeria, are exciting. In my opinion,

they are worthy of management’s focus and attention as an

area of growth for our group going forward.

In this regard, Altech is leading the way with its investment

in East Africa which is based on the potential of its African

broadband telecom operation. While this is becoming one of

our core focus areas going forward, we remain acutely aware

of the many challenges associated with running businesses

in Africa.

We also continue to invest in products and technologies

that will enable Altron to take advantage of trends that will

shape the world in coming decades, including rapid growth

in emerging markets, urbanisation and demand for energy-

efficient solutions. But in addition to our investments in

new technologies, our aggressive restructuring efforts have

positioned Altron for long-term growth. Guided by the group’s

values, we operate with the highest standards of integrity and

respect for human rights. We are deeply committed to safe

and efficient operations and to conducting our business in an

environmentally sound manner.

While Altron is pursuing opportunities on the international

front, the core of its operations remains South African-based.

We are fortunate in having board members who are visionary

and who demonstrate a firm commitment to our long-term

goals and success. The quality of their contribution has been

excellent and well received.

Acknowledgement

Altron employees and management have shown remarkable

resilience, determination, perseverance and teamwork over

the past year. Without their valuable contributions, we would

not be where we are today, a people- and customer-centred

organisation and we express our sincere gratitude to them for

their hard work and fine achievements.

With this leadership in place, and with the

loyalty and dedication of our employees, our

group is extremely well positioned to exploit

opportunities as the marketplace improves.

My gratitude goes to my fellow directors for the significant

contribution they have made over the past year. I also thank

our loyal customers, many of whom have supported us for

decades. We are committed to understanding and delivering on

customers’ needs, and it is our objective to improve our ability

to do so.

Finally, thank you to our shareholders. You have believed in our

strategy, even during difficult economic times. Your support

is invaluable. We believe that Altron remains on a stable path,

and we look forward to a positive future.

Despite challenging times, overall I remain enthusiastic about

our group’s growth. Our management teams are more focused

than ever on executing a strategic plan based on three clear

priorities – growth, leverage and returns – designed to improve

stakeholder value. With this leadership in place, and with the

loyalty and dedication of our employees, our group is extremely

well positioned to exploit opportunities as the marketplace

improves.

Dr WP Venter – Non-executive Chairman

May 2011

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Introduction

I am proud to report that the performance of our group

for the year ended 28 February 2011 clearly reflects the

resilience and inherent strength of our underlying businesses,

resulting in EBITDA and headline earnings per share growing

satisfactorily despite depressed market conditions. Based

on an excellent performance from Bytes, and good recovery

off a low base at Powertech, double-digit earnings growth

was achieved, despite a reduced contribution from Altech.

Although conditions remain challenging in a number of our

key markets, our strong financial results reflect the significant

work that has been done in rightsizing our businesses.

In my review of the Altron group and its underlying companies

and operations, I focus on our group’s activities according

to those issues that affect or contribute to the sustainable

development and growth of Altron. These 11 strategic themes

reflect those issues that materially affect our role in the

marketplace, in society and in the biophysical environment,

and thus underpin our growth strategy.

ST: External factors

Market conditions were characterised by continued recovery

in the economy and a broadening of the base of that recovery

during the latter part of the year under review. Nevertheless,

uncertainty remains given the continuing debt problems of

the developed world, high oil prices, continuing conflict in

North Africa and the Middle East, as well as the unknown

effects of the Japanese Tsunami. All these factors create a

somewhat volatile environment.

The information technology market has seen a sustained

increase in spending, particularly in the retail and financial

Chief executive’s review

services sectors and this, along with market share gains, has

impacted positively on our group.

The most publicised area of the economy that is still

experiencing challenging conditions is the building and

construction industry. This situation is due to a combination

of delays in government spending on infrastructure and the

subdued residential and commercial property markets where a

still heavily indebted consumer is reluctant to spend and invest.

Commodity prices have increased steadily through the year

with copper reaching record levels in dollar terms, though

its impact was partially offset by the ongoing strength of

the rand. The strong rand continues to materially negatively

impact our group in terms of the contribution from foreign

operations, the competitiveness of our exports and increased

competition from foreign imports into the local market.

The power infrastructure market remains active and the new

certainty regarding Eskom’s funding is expected to translate

into a more vigorous rollout of their capital expenditure

programmes. The mining industry has been recovering

steadily leading to an increased demand for cables and

industrial batteries. The demand for fibre-optic cables in

South Africa and the rest of Africa offers growth potential for

the group’s joint venture in the telecom cables business.

The telecommunications industry as a whole continues to

develop at a rapid pace creating significant opportunities and

some challenges. The East African market, while even more

dynamic than the South African market, due to its liberalised

regulatory environment, has become a highly competitive

environment. Despite short-term challenges, the dynamic

conditions should promote faster market penetration, thereby

enhancing medium- to long-term prospects.

The recent decision by government to opt for the DVB-T2

technology in the roll-out of Digital Terrestrial Television

(DTT) bodes well for the South African set-top box industry,

as South Africa has a potential market of approximately nine

million units, while the total market in Africa is estimated at

100 million television households.

ST: Income and growth

Altron reported a modest increase in revenue of 2% to

R22.8 billion despite subdued volumes in some markets

and the deflationary effects of rand strength. However,

our group’s earnings before interest, tax, depreciation and

Robert Venter – Chief Executive

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amortisation (EBITDA) increased 6% to R2.1 billion, and

our headline earnings per share increased by 15% to

228 cents per share, reflecting the success of internal

cost control and efficiency programmes. This allowed

us to declare a dividend of 108 cents per share to our

shareholders, a 20% increase compared to the prior year.

While Altech remains Altron’s biggest contributor towards

group revenue and EBITDA, there has been a marked

increase in the contribution from our two wholly owned

subsidiaries, Powertech and Bytes. Altech’s EBITDA

declined during the year under review despite having

recorded sustained growth throughout the toughest part

of the global recession.

Altech increased revenue by 5% to R9.7 billion, but EBITDA

decreased 8% to R1.1 billion, reflecting an EBITDA margin of

11.1%. The company experienced difficult trading conditions,

particularly in East Africa where increased competition in the

form of additional broadband capacity from newly installed

submarine cables caused greater than expected pressure

on pricing levels. The remaining businesses in the Altech

group performed according to expectation with steady

performances from Altech Autopage Cellular and Arrow Altech

Distribution, coupled with excellent results from Altech Netstar

and Altech Card Solutions.

Despite lower revenue levels at Powertech (decreasing

by 2% to R7.1 billion), the group’s cost-cutting and

rationalisation programmes resulted in EBITDA increasing

by 27% to R539 million, reflecting an EBITDA margin of

7.6%. The Powertech Transformers’ business performed

exceptionally well due to increased demand from

municipalities and Eskom. Aberdare Cables’ revenue increased

largely as a result of higher copper prices while increased

EBITDA levels reflected the benefits of the previous year’s

cost reductions in the business. Both Powertech Batteries and

Powertech IST delivered pleasing results.

Higher volumes saw Bytes increase revenue by

2% to R6.1 billion and EBITDA by 21% to R474 million,

reflecting an improved EBITDA margin of 7.8%. Previously

loss-making businesses were turned around while cost-

cutting initiatives and market share gains resulted in

improved profits across the board. Record results were

recorded by Bytes Systems Integration, Bytes Software

Solutions (UK), Bytes Managed Solutions and Bytes

Healthcare Solutions.

Corporate activity

> Altech acquired 100% of Swist Technology Solutions

(Swisttech) for a maximum purchase consideration of

R52 million, of which R30 million was paid up front with

the balance being paid over three years. Swisttech is an

independent software vendor, primarily servicing the

telecommunications industry.

> Altech completed its B-BBEE transaction to dispose of

25.1% of Altech Netstar’s South African operations to a

consortium of Thebe Investment Corporation and Identity

Capital Partners. The total value of the assets involved in this

transaction amounted to R1.5 billion.

Subsequent to the financial year end:

> The conclusion of a 25% plus one share B-BBEE transaction

between Altech and the Southern Palace Group involving

Altech Alcom Matomo, Altech Alcom Radio Distributors and

Altech Fleetcall. The total value of the assets involved in this

transaction amounted to R405 million.

> Altech UEC entered into an agreement with a B-BBEE

consortium led by Power Matla for a 25% plus one share

equity holding of Altech UEC’s African operations. The total

value of the assets involved in this transaction amounted to

R509 million.

> Altech has agreed to acquire the 25% plus one share

equity holding of Pamodzi Investment Holdings in Altech

Information Technologies for R37.5 million with an effective

date still to be determined. Altech will then look to conclude

a transaction with an alternative B-BBEE partner.

Although conditions remain challenging in a

number of our key markets, our strong financial

results reflect the significant work that has

been done in rightsizing our businesses.


ST: Cost and cash management

Cash generated by our operations of R2.1 billion

represents an increase in line with profitability

improvements while cash generated from operating

activities was below prior year levels. The total investment

in working capital amounted to R1.7 billion which was

similar to that for the prior reporting period. The group’s

capital expenditure related predominantly to the Altech

East African operations while there was also some

significant capital expenditure within the Powertech

group. For more detailed discussion on these cost and cash

management issues see the chief financial officer’s report

on page 34.

Having implemented various initiatives throughout our

group, we have succeeded in reducing our cost base

to a minimum which places us in a strong position to

take advantage of a further upswing in the economy.

The turnaround in Altech’s East African businesses is

a focus area with various strategies now in place to

correct previous issues. The restructuring and merger of

some of the Bytes businesses is expected to stimulate

further growth. At Powertech we will continue with our

cost-efficiency initiatives in the year ahead, but I believe

that a recovery of the building and construction sector

is necessary in order for the cable business to return to

acceptable levels of profitability.

ST: Products and services

The breadth and diversity of Altron’s products and

services offering and the various sectors that our

operations service, contribute towards our resilience

and consistent financial performance. This has been

increasingly evident in how our operations were able to

withstand the effects of the recessionary conditions over

the past few years.

The nature of our subsidiary businesses, i.e. tele-

communications, power electronics, multimedia and

information technology, remains dynamic. This obliges us

to constantly innovate and develop or secure cutting-edge

products and services in our relevant markets, especially

Chief executive’s reviewcontinued

Cash generated by our operations of

R2.1 billion represents an increase in line

with profitability improvements while cash

generated from operating activities was below

prior year levels.

Group EBITDA

2006 2007 2008 2009 2010 2011

1 2

53

1 7

63

2 2

37

2 2

09

2 0

99

1 9

87

R millions

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in the advanced technology sectors. During the past financial

year, the Altron group invested over R95 million into research

and development, predominantly at Altech UEC and Powertech

Transformers, while the significant investment in training and

development of our people continued.

New products have been introduced to the local market by

Powertech through its Switchgear range as well as some

innovative product solutions at Crabtree Electrical Accessories

SA. Altech East Africa’s state-of-the-art data centre in Nairobi

represents a significant enhancement of the Altech product

offering to East Africa.

In the coming year we will continue this innovative trend and

also attempt to supplement our technologies from external

sources by way of acquisitions. For example, in the Bytes UK

business we will aim to diversify the product mix through

acquisition in order to reduce our dependence on Xerox and

Microsoft products and more closely replicate our Bytes SA

business.

ST: Business partnerships

Our group’s philosophy to foster and maintain partnerships

with global technology and software leaders not only forms an

integral part of the group’s foundation, but is also part of the

group’s acquisition strategy. The Bytes partnership strategy

focuses on driving business through their ecosystem of

partners via a range of packaged propositions and engagement

models. These partnerships include world-renowned companies

such as Xerox, NCR, Microsoft, Alcatel-Lucent, Cisco, Kronos, HP,

Teradata, MTN, SAP and Oracle, to name just a few.

These sound, strategic partnerships enable our business to

offer customers comprehensive and unique solutions that help

them do great work in an effective and driven environment

which is always at the forefront of global technological

advances.

A highlight for Bytes Document Solutions has been the

renewal of our exclusive agreement with Xerox Corporation

as its authorised distributor in sub-Saharan Africa, effective

on 1 January this year and valid for 10 years. This agreement

enables Bytes Document Solutions to continue to market and

service the complete range of Xerox equipment, software

solutions and services in South Africa and 25 other sub-

Saharan countries.

The renewal of the agreement reflects the trust and excellent

working relationship that has characterised the partnership

between Altron and Xerox, dating back to 1987 when the first

distribution agreement was signed between Dr Bill Venter,

chairman of Altron, and David Kearns, the chairman and CEO

of Xerox Corporation at the time.

The breadth and diversity of Altron’s products

and services offering and the various sectors

that our operations service, contribute

towards our resilience and consistent financial

performance.

ST: Customer relationships

Relationships with our customers are vitally important to us.

In both the business-to-business and business-to-consumer

markets we constantly monitor and survey customer

satisfaction, and managers are incentivised according to

performance. At Altech Autopage Cellular some ambitious

targets have been set for the coming year in order to maintain

and improve on customer service levels while churn rates

remain a challenge that is being rigorously addressed.

Recent legislation, in the form of the new Consumer Protection

Act 2008 (CPA), now regulates the way all consumer-facing

industries deal with their customers. Both Altech Autopage

Cellular and Altech Netstar, the two companies most affected

by this legislation, are responding to the CPA with new

processes and training for all relevant personnel. Furthermore,

we monitor and control access to customer information,

ensuring that their rights and privacy are protected.



ST: Human capital

As at 31 August 20101, the Altron group had a total

of 12 812 employees – 11 039 permanent employees

in South Africa and 998 permanent employees at

international operations1. Almost all of our staff is

permanently employed. Of our total South African staff

complement, 65% are black and 20% are black females

(an increase of 2.2% since 2010).

Overcoming the severe skills shortage in the power and

telecommunications sector is a major focus. Skills audits

have revealed three areas of need: a robust leadership

pipeline, critical technical skills and the need for black female

employees at senior to top management levels. We are aware

of the third National Skills Development Strategy, due to

be implemented through the Sector Education and Training

Authorities (SETA) this year. This will focus on improving the

effectiveness and efficiency of skills development systems,

and may have an impact on our own systems.

> Quicklink:

For a detailed summary of Altron’s workforce

profile visit

www.altron.com/annual 2011/unabridgedaltron.htm

Our human capital management plan addresses succession

planning, performance management, training and

development, recruitment and remuneration. We aim to

attract the right talent and keep employees at all levels

satisfied by offering competitive packages and benefits

such as medical aid, study assistance and performance

bonuses. Altron group employees are subject to the

standard terms and conditions of employment where notice

periods range between 30 and 60 days. For scheduled

workers, Altron is guided by the provisions of the Steel and

Engineering Industries Federation of South Africa (SEIFSA).

Our business units have a number of initiatives in place

that address the skills shortage in our business and sector,

with total spend on training and skills development in

2011 amounting to R64.5 million across the group. In

addition to initiatives at business unit level, our Altron

Young Presidents Club (AYPC) develops young leadership

talent, with programmes available that ultimately result

Employee quota South Africa vsinternational operations1

Total staffcomplement persub-holding company1

92%

8%

South Africa International

Altron corporate Altech Bytes Powertech

as at 31 August 2010 as at 31 August 2010

26%

38%

35%

1%

Demographic of total South Africanworkforce

65

%

64

% 67

%

2011 figures as at 31 August 2010

20

%

18

% 21

%

35

%

36

%

33

%

2009 2010 2011

Black total Black female total White total

1 CN1: Altron now uses headcount figures as at 31 August 2010, as

per our employment equity reports to the DoL. In previous reports,

headcount figures were as at 28 February (year end) and therefore

these figures are not comparable for this report.

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and safety risks are low, being associated with working in an

office environment. We suffered no fatalities during the review

period and lost-time injuries are declining.

HIV/Aids has a direct impact on the well-being of employees,

their families and their communities. An external HIV/Aids

review performed in 2008 established that, while the overall

risk for the Altron group is low, pockets of risk occur, especially

within Powertech. However, subsequent restructuring has

reduced the risk within these operations. We have a group-wide

HIV/Aids policy which provides guidance on understanding,

assessing and responding to HIV/Aids in the workplace. The

policy is reviewed on an annual basis to ensure it remains

compliant with legislation.

ST: Transformation

Altron is committed to the letter and the spirit of broad-

based black economic empowerment (B-BBEE) legislation

and the framework outlined by the Department of Trade

and Industry’s Codes of Good Practice (dti Codes). Our

transformation committee (Transcom) was formed with

a mandate to drive economic transformation and B-BBEE

across the business. Vision 2010, our original B-BBEE

strategy, has since been superseded by Vision 2012,

developed in alignment with the revised dti Codes.

> Quicklink:

For more on these strategies, visit

www.altron.com/vision 2012/index.htm

in a master’s degree (MSc) in the Management of Technology

and Innovation for the participants. It is anticipated that eight

employees will graduate in November 2011.

For more details, refer to the individual business unit reports,

as well as the remuneration report.

The health and safety of our employees is a critical factor in the

health and sustainability of our business. Our manufacturing

operations at Altech and Powertech have the highest health

and safety risks in the group. Apart from these areas, health

Altron’s B-BBEE score (as at 31 August 2010)

Weighting%

2011%

2010%

2009%

Level n/a 3 4 4

Ownership 20 19.60 11.50 11.50

Management and control 10 2.10 3.72 2.60

Employment equity 15 11.90 3.80 5.10

Skills development 15 10.90 15.00 11.90

Preferential procurement 20 16.10 17.56 14.20

Enterprise development 15 15.00 15.00 15.00

Socio-economic development 5 5.00 5.00 5.00

Overall score 100 80.60 71.58 65.30

Staff turnover as a percentage of total headcount

as at 31 August 2010


24

.20

%

17

.50

%

17

.40

%

%


I am delighted to report that Altron again excelled in the

Financial Mail/Empowerdex Top Empowered Companies

in South Africa ratings for 2011. We were rated second

in the General Industrial category out of 100 competing

companies and improved our overall ranking from 34th

to 25th position. The Altron group scored 80.6, a level

3 contribution as verified by Empowerdex. The nine-

point increase over 2010 is largely attributable to the

improvements in equity ownership and employment equity.

Equity ownership of 25% (plus one share) in Altech Netstar

was transferred to Thebe Investment Corporation and

Identity Capital Partners (a female-owned company). Two

further empowerment deals were concluded after year end

as detailed in the sidebar on page 23.

As evidenced from our full score across the group in

enterprise development and socio-economic development,

we have placed much focus on empowering small

businesses within our value chain, in line with phase two

of our transformation strategy which aims to effectively

empower people to provide for themselves.

With most of the group’s targets as set out in its Vision

2012 transformation commitment having already been

met, the group’s transformation strategy called “Beyond

2012” is currently being formulated and will focus on

increasing diversity at leadership levels of the group. A

strategy and related goals and targets on employment

equity for the entire group are also being developed.

Management control presents an ongoing challenge, with

our dti CoGP score decreasing by 1.6 points. This reflects the

extent to which the ICT sector finds it challenging to attract

in particular black females at management level; however,

we will continue to focus on our management development

pipelines in an attempt to improve the management control

numbers.


Number of employees trained

Top management 21 Senior management 162 Professionally qualified and

experienced specialists and mid-management 567

Skilled technical academically qualified workers, junior management, supervisors, foremen,and superintendents 3 159

Semi-skilled and discretionery decision making 932

Unskilled and defined decision making 239

Temporary employees 271

as at 31 August 2010

567

3 159

16221

271

239

932

Total trained: 5 351


Socio-economic development spend as a percent of NPAT %

2.3

0%

1.0

0%

1.6

3%

Breakdown of Altron footprintper operating company (tCO

2e)

Altech Bytes Powertech Altron corporate

18%

10%

0.5%

72%

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ST: Environment

Our present lifestyles already exceed the carrying capacity

of our planet. Business and industry are no exception and

must be held accountable for the natural resources we

consume in the process of creating wealth. Our strategy

is firstly to measure our impact as accurately as possible,

then to set reduction targets and find ways to reduce our

impact through responsible management practices. We

recognise the business opportunities for companies that

can devise solutions to the environmental challenges we

face. Our involvement in the renewable energy industry has

prompted a number of innovations which we are turning

into products and services.

> Quicklink:

Altron also published a group environmental

overview see www.altron.com/environment/index.html

for more detail.

Altron is committed to specific three-

year carbon reduction targets for each

sub-holding company.

In January 2011 we undertook a group-wide workshop

involving top management with the aim of understanding

our environmental risks and opportunities better,

establishing indicators for measuring performance, and

setting carbon reduction targets for improvement. We

worked on measuring our carbon footprint more accurately,

and added further outstanding operations to our scope.

This gives us a more accurate benchmark against which

we can compare future performance.

The Altron group’s total carbon footprint for 2011

is estimated at 247 000 metric tonnes CO2e (2010:

146 220 tCO2e). The significant increase illustrates the

increased accuracy of reporting and scope of measurement.

This year we have introduced an intensity measure in

order to provide a basis for comparison as the business

grows. Currently, our carbon footprint equates to

approximately 19 tonnes CO2e per employee per year

(2010: 10.88 tCO2e per employee).

Breakdown of Altron carbon footprint by emissions source (tCO

2e)

Electricity use Business travel Fuel use

Fleet travel Paper consumption Business travel

13

2 8

50

14

6 2

20

24

6 8

58

2009 2010 2011

2011 emissions per employee by operating company (tCO

2e)

13

5

39

10

Altech Bytes Powertech Altron corporation

Altech Bytes Powertech Altron corporate


Altron was ranked joint 10th out of the JSE Top 100 on

the Carbon Disclosure Leadership Index (CDLI) 2010 for

companies contributing to the Carbon Disclosure Project

(CDP).

As part of our ongoing carbon reduction initiatives, Altron

conducted a group-wide carbon footprint reduction

workshop in January 2011. The workshop resulted in Altron

committing to a specific three-year reduction target for

each of the sub-holding companies.

In comparison with local benchmarks, Altron’s carbon

footprint results lie roughly in the middle of a widely

varying range of results. However, similar international

companies tend to have significantly smaller carbon

footprints than South African companies. Their performance

provides a glimpse of what could be achieved in South

Africa given similar legislative and economic pressures.

Altron is planning to conduct more accurate benchmarking

comparisons in 2012, and will be looking at more

representative industry benchmarks for each of our

sub-holding entities as opposed to benchmarking the group

as a whole.

Altron’s newly launched Envirowatch campaign fostered

employee commitment during the 2011 financial year. In

November 2010, approximately 12 000 people throughout

the group signed a pledge to live greener lives and work

towards reducing carbon emissions and waste, as well

as saving water. The Altron group’s goal is to reduce its

carbon footprint by 3% on average across the group

by the end of the 2014 reporting period. Each business

unit has developed a set of specific reduction targets

(see the business unit reports). The new Envirowatch

website, accessible through the group’s intranet, provides

employees with access to information on important green

and sustainability issues and how to minimise their carbon

footprint by implementing practical steps.


Altron group’s carbon reduction targets

Element

Altron group

%

Average reduction

target per year over

three years%

Electricity usage in kWh of all

facilities/buildings owned and

leased by company. Franchises

are excluded 2.48 0.83

Business road travel in litres of

all business road travel for fleet

vehicles, rental vehicles and

employee-owned vehicles 2.25 0.75

Business road travel in kms

– Where employee travel

allowances were included

(2009/2010) these were

converted at 14 000 km per

employee 0.96 0.32

Paper consumption – kgs 3.02 1.01

International air travel – miles 0.77 0.26

Domestic air travel – miles 1.06 0.35

Fuel use – diesel – litres 0.25 0.08

Fuel use – butane – kgs 1.17 0.39

Fuel use – LPG – kgs 0.33 0.11

Materials used

Mobile handsets – units 460 359 Altech Autopage Cellular

Copper rod – tonnes 26 646 Aberdare Cables

Lead – tonnes 2 77815 644

Aberdare CablesPowertech Batteries

Tracking devices –unit (SVR and Fleet)

37 395 Altech Netstar

Paper – tonnes 22 000

Bytes Document Solutions (incl NOR Paper)

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Other important environmental aspects, such as water use,

pollution and waste, will be receiving increased focus, and a

number of initiatives to address these aspects are already

underway. During the period under review, our operational

companies measured the quantity of waste generated for

the first time. In the current financial year the focus will be

on the disposal of electronic waste, over and above other

waste disposal practices already in place.

All Altron’s operations use water, and although our

data-gathering systems still require refinement, we have

started to measure and track our water usage and aim to

set specific water reduction targets by 2013. In the 2011

financial year, the group reported 98 687 megalitres of

water usage, of which 98 683 megalitres were municipal

water use and only 3.96 megalitres were borehole water.

As this is the first year that data regarding water usage

was collected, we will be working towards gaining a full

understanding of this important issue in more detail in the

next financial year. The aim will be to participate in the CDP

– Water Disclosure Project for 2011.

ST: Business conduct in foreign operations

Altron is a signatory to the United Nations Global Compact

(UNGC) which embodies 10 principles including, among

others, labour, environment, human rights and corruption.

These principles apply globally and by committing to them,

Altron is committing to upholding the rights of people

and communities in all its operations – even in countries

where human and environmental rights are not protected

by local laws.

> Quicklink:

Our human rights policy can be viewed at

www.altron.com/about_policies.asp

Waste management

Sent to landfill

Recycled

Incinerated

0.20%

45%55%

%

Proportion of total waste recycled

%

40

.90

%

49

.50

%

57

.00

%



Altech, in particular, has operations in less regulated and

therefore riskier environments than the remainder of the group.

There is a potential risk, for example, of human rights violations

in operations such as Altech UEC, which sources components

from manufacturers in China. Altron is planning a human

rights survey of foreign operations that have been identified

as having a potential risk, during the 2012 financial year, the

findings of which will feed into further policy developments.

During the period under review, no incidents of human rights

violations, child labour, forced and compulsory labour or

violations of the rights of indigenous peoples occurred in either

our local or international operations.

ST: Corporate governance

Last year we reported on the appointment of Mr Mike Leeming

as lead independent director of the company’s board in August

2009, providing an important point of contact for the greater

investment community and wider stakeholders, should they

have concerns with the running of the company or potential

conflicts of interest.

The Altron group’s increased interaction with shareholders

is intended to provide the investment community with

regular, clear communication and ensure that non-controlling

shareholders fully understand the structures Altron has in

place to protect their rights. During the year under review, for

example, and at the request of certain participating preference

shareholders, Altron’s notice of annual general meeting (AGM)

was circulated to those shareholders prior to the AGM for

comment and input.

Corporate ethics receives attention from the highest level of

management within Altron. I, as chief executive, am ultimately

responsible for implementing the code of ethics and corporate

code of conduct. In the first quarter of 2011 we ran a group-

wide ethics training programme focused on group values, ethics

and appropriate behaviour. The first phase involved nearly

half of all executives and managers (531 staff), and valuable

feedback was gained concerning employees’ consideration and

understanding of ethics in the Altron group. Altogether 62%

of delegates believe that Altron effectively deals with ethics

in the workplace and only 10% are aware of practices in their

operations that they believe to be unethical. Of those who

attended, 506 signed a statement of commitment to Altron’s

code of conduct. This awareness programme will continue under

the guidance of the Ethics Office which will be established in the

second quarter of the 2012 financial year.

We have a zero tolerance attitude towards fraud, bribery and

corruption. Associated vulnerabilities and risks are regularly

reviewed by the Altron risk management committee, especially

in the light of our operations in high-risk countries. We

also closely monitor the company’s involvement in various

government contracts that may require government licensing.

Altron’s anti-corruption and economic crime policy comes into

effect from July 2011, (to align with the UK Bribery Act) setting

out guidance on preventing and dealing with corruption,

fraud and other illegal acts. The total number of fraud,

theft and other dishonesty incidents identified by the group

decreased from 81 in the previous year to 76, while total losses

increased from R7.1 million to R9.5 million, with a net loss of

R5.9 million after recoveries. We also encourage and protect

whistle-blowing through the ‘Tip-off Tim’ anonymous hotline

administered by Deloitte. All contacts are followed up and,

where justified, result in investigations.


page 33

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1. In February 2011, Altron, Altech and the Vodacom Foundation

formed one of South Africa’s largest public-private partnerships

with the Wits Reproductive Health Institute and the Gauteng

Department of Health to spend R28 million on improving health

services in the Hillbrow precinct.

2. The Altron Envirowatch employee commitment campaign was

launched in November 2010 and thousands of employees

throughout the Altron group have pledged to make our group a

carbon-neutral environment. By signing their commitment they

undertook to work together towards the goal to become carbon

neutral. Pictured here is Chief Executive, Robert Venter, signing his

commitment to this campaign.

1

2

>

Outlook

I am optimistic that the current economic conditions are more

conducive to growth now than at any time in the previous

few years. It is my view that our group is well positioned to

take advantage of market opportunities arising during the

coming year. However, I remain cautious in terms of threats

to the macroeconomic environment in the form of looming

inflationary pressures, the after-effects of the Japanese

tsunami, the strength of the rand and the high oil price.

From an operational point of view, Altech will be focusing

on returning its East African operations to previous growth

patterns and enhancing the performance of its strong South

African operations. Bytes is well placed to further benefit from

the expanding corporate IT spend and its recent market share

gains, and I expect this group to grow from its strong base in

the year ahead. Powertech’s prospects are perhaps the most

opaque and challenging as the benefits of the various cost-

reduction programmes have been largely realised during the

year under review and its ability to grow remains dependent

on a recovery in the building and construction industry.

Following the solid growth of the prior year and the work

that has been done on reducing the cost base, our focus will

be on top-line growth and increasing profitability through

a combination of improving local market conditions, efforts

to expand into the African markets and exploring potential

acquisition opportunities.

Following the solid growth of the prior year and

the work that has been done on reducing the

cost base, our focus will be on top-line growth.

Acknowledgements

I would like to express my appreciation to our chairman and

the members of the Altron board, my executive committee,

our staff, customers, business partners, shareholders and all

our other stakeholders for their support during the past year

and for their continued belief in the future sustainability of the

group and its strong underlying businesses.

Robert Venter – Chief Executive

May 2011

Chief financial officer’s report


Introduction

This report is intended to provide additional insight into

the financial performance of the Altron group. The report

addresses two of Altron’s 11 strategic themes as identified

in accordance with the recommendations of King III on

integrated reporting, namely income and growth and

cost and cash management as well as some of the key

financial risks of the Altron group. The report needs to be

read in conjunction with the consolidated annual financial

statements presented on pages 143 to 235 as well as the

chief executive’s review on pages 22 to 33.

The financial year ended 28 February 2011 again reflected

the benefit of our diverse portfolio of businesses which

contributes toward the consistent long-term performance

of the Altron group. Bytes recovered strongly during the

financial year and Powertech delivered a good performance

in challenging market conditions. These factors more than

offset the decline in performance from the Altech group,

resulting in the pleasing overall growth of 15% for the

group at the headline earnings per share level.

Financial performance

The key features of the financial performance of the group

have been covered in some detail in the chief executive’s

review on page 22. As a result, I will focus on some of

the more detailed financial aspects of the performance

reflected in the statement of comprehensive income.

In the current year we have included earnings before

interest, tax, depreciation and amortisation (EBITDA) on

the face of the statement of comprehensive income since

we believe it presents a better reflection of the underlying

trading performance. In assessing the performance of the

businesses internally, we also take into account operating

profit, particularly in respect of our capital-intensive

operations – most of Powertech’s businesses, Altech East

Africa and Altech UEC.

Included in our operating costs are foreign exchange losses of

R36 million, which are substantially lower than the R91 million

we experienced last year. We continue to experience such

losses as a result of the continued strengthening of the rand

against the currencies in which we have exposures. The

reduction in the level of the losses is a reflection of a more

Capital investment

R millions

52

7

121

79126

106

6

17

86

223

75

1

90

2

47

3

1 0

42

28

4

61

9

PPE Intangibles Acquisitions

2011 2010 2009 2008 2007

page 34

Alex Smith – Chief Financial Officer

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page 35

gradual strengthening of the rand during the current year than

was the case in the prior year. How we manage this key risk to the

group is discussed later in this report.

Below the EBITDA line we saw a 12.7% increase in the

depreciation and amortisation charge to R575 million with

similar increases in each of these two types of expenses. Of this

amount, R385 million related to depreciation charges, with the

largest component coming out of Altech, closely followed by

Powertech. Our depreciation charge has grown in recent years

due to substantial capital expenditure investments, primarily

in Altech East Africa and Aberdare Cables. The depreciation

charge in respect of our Bytes businesses is significantly lower

given the low capital intensity of most of those operations.

The R190 million of amortisation charges include R102 million

relating to intangible assets created on acquisitions, the effects

of which were removed in our adjusted headline earnings

calculation. The remaining charge occurred predominantly

in Altech and related to the amortisation of capitalised

research and development costs at Altech UEC as well as the

amortisation of the bandwidth capacity acquired last year on

both Seacom and TEAMS by Altech East Africa.

Capital items for the year increased significantly to

R291 million compared to the prior year’s expense of

R105 million. This predominantly related to the impairment

of goodwill in Altech East Africa of R250 million and in Bytes

Intelleca of R26 million. The impairment in respect of Altech

East Africa reflected the disappointing performance of that

business unit over the past year as a result of pricing pressures

and an increasingly competitive environment. Nevertheless,

we still believe East Africa represents an exciting growth

opportunity for the group in the medium to long term, but the

disruptions of the past year are likely to result in the value

being realised over a longer period of time. Other capital items

included the impairment of various items of property, plant

and equipment in Altech East Africa amounting to R14 million

and the impairment of R11 million of capitalised research and

development costs at Altech UEC as projects became unviable.

These items were offset by around R10 million of capital profits

arising on the disposal of various items of property, plant and

equipment around the group.

The net finance expense for the year increased from R76 million

to R99 million, despite the reduction in borrowings and

lower average interest rates. The increase was caused by an

increased working capital funding requirement within Altech,

which increased their net finance expense by about R40 million

compared to the prior year. Both Bytes and Powertech saw a

marked improvement in their net finance expense due to the

repayment of borrowings.

The taxation charge for the year decreased to R437 million

from R457 million. This represents an effective tax rate of

38.5% compared to the previous year’s rate of 35.2. However,

after adjusting for the secondary tax on companies charge of

R47 million and the R291 million of non-tax deductible capital

items, the underlying effective tax rate is 27.3% compared to

28.6% in the 2010 financial year. This rate is slightly below

the South African corporate tax rate, primarily as a result of

some tax refunds within the Powertech group, the tax holiday

in Altech West Africa and the effects of some accelerated

allowances in respect of research and development. The once-

off nature of the tax refunds is likely to result in the tax rate

moving closer to the statutory rate in the coming years. Our

approach in respect of tax matters remains conservative and

as we do not participate in aggressive tax structures, we expect

our tax rate to be close to the statutory rate going forward.

Financial position

The group’s balance sheet has strengthened over the course

of the year, reflecting the efforts that have gone into cash

management as well as the improved underlying performance

of the group. This is reflected in the R1 per share increase in

the net asset value as well as the reduction in the net borrowed

position to R75 million at year end from R464 million in the

prior year.

The continued strengthening of the rand has also significantly

impacted the balance sheet and has caused the rand value

attributable to the foreign operations to decline further. Each of

the individual line items in the balance sheet has been affected,

but the cumulative effect of R312 million can be seen in the

statement of changes in equity. These foreign currency effects

reduced shareholder’s equity by some 53 cents per share this

year, on top of the 86 cents per share impact of the prior year.

This factor and the goodwill impairments of the current

period have been the primary drivers behind the R510 million

reduction in non-current assets over the year. Property, plant


and equipment remained at similar levels, despite capital

expenditure of R527 million, as this was offset by the

depreciation charge and some R130 million of translation

effects. During the year, some R141 million was spent

on data infrastructure equipment in Altech East Africa,

while the capital expenditure in Powertech primarily

relates to the ongoing rationalisation of Aberdare Cables’

manufacturing facilities. Intangible assets, including

goodwill, reduced by around R500 million owing to the

R276 million of goodwill impairments, R190 million

of amortisation charges and translation effects of

R162 million. These factors were offset by R88 million

of capitalised research and development costs at Altech

UEC as well as R38 million of goodwill arising from the

acquisition of Swist Technology Solutions by Altech.

As indicated in my report last year, our group has continued

to focus on working capital management. The prior year saw

a significant release of cash from working capital from the

rightsizing of the balance sheet and our challenge this year was

to maintain working capital at the same levels. Owing to our

continued focus, the investment in working capital increased

only marginally to just under R1.7 billion, with net working

capital days declining from 18 days to 16 days. This was one of

the factors that enabled the group to slightly increase our cash

balance, despite the significant repayment of borrowings.

In the course of the year, the group repaid R316 million of

borrowings, reducing gross borrowings to R1.3 billion and gross

gearing levels to 21% from around 26% in the prior year. On a

net basis the gearing ratio is a negligible 1.5% and a reflection

of the group’s policy to maintain a strong balance sheet. This

inherent balance sheet strength enables our group to exploit

acquisition opportunities as they arise and conversely protects

the group during periods of tight liquidity. The board’s policy

is that the net gearing ratio should not exceed 25%. While this

level of debt to equity ratio may not be optimal from a purely

financial perspective, we believe that it is appropriate for the

long-term sustainability of the group.

At the balance sheet date, the group had capital

commitments amounting to R163 million, significantly

down on the prior year. I do not anticipate, however, any

significant reduction in capital expenditure across the

group. In fact, there may well be an increase in capital

This inherent balance sheet strength enables our group to exploit acquisition opportunities as they arise and conversely protects the group during periods of tight liquidity.

2011 2010 2009 2008 2007

Movement in foreign currency translation reserve (FCTR) R millions

56

11

0

33

-2

77

-1

68

Movement in FCTR

Chief financial officer’s reportcontinued

page 36

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expenditure as we begin a significant two-year plant and

equipment upgrade at our Pretoria West power transformers

manufacturing facility.

At the year end, the group had no contingent liabilities. I can

also confirm that the information provided in previous reports

has not been restated and that the group has received no

direct financial assistance from government in the current year.

Included at the end of this report is the value added

statement for the year under review. Total value created

has increased by 4.2% to nearly R5.8 billion, with a notable

increase in the value retained in the group for reinvestment.

Corporate social investment has nearly doubled, reflecting our

continued focus on the training and education of our people

and supporting the communities in which we operate.

Key internal initiatives

Cost and cash management

The management of working capital has been one of the key

internal initiatives of the group since the onset of the financial

crisis in late 2008. As can be seen from the graph on working

capital days, I am pleased to report that this continues to be a

well-managed area of the group’s balance sheet.

The year under review saw an increase in inventory days from

43 to 51 as a result of higher inventory holdings at Aberdare

Cables and Bytes Managed Solutions. The inventory build at

Aberdare Cables is primarily as a result of a management

decision to hold larger volumes of high-demand inventory

items in order to better service the market, compounded by

the higher rand value of the copper element in inventories

as copper’s rand value had increased by about 20% year-on-

year. The higher inventory level at Bytes Managed Solutions

was to meet specific orders received from customers.

The funding of these higher inventory levels was effectively

financed by creditors, with creditor days increasing from 81 to

89 days. The two-day reduction in net working capital days

was therefore achieved by reducing debtor days from 56 to

54 during the year. This was achieved through diligent credit

control throughout the group for which all of our operations

must be commended.

This initiative will remain high on our agenda in the coming

year given that it represents a basic financial discipline. The

current net working capital days’ position is at a five-year low

and while we will look to maintain these levels, there may be

a marginal deterioration in the overall position, particularly if

the group starts to achieve meaningful top-line growth.

Capacity alignment

This initiative primarily relates to the Aberdare Cables

operation within Powertech, although it is also given

attention across all Powertech operations. Much of this

work was done during the 2010 financial year, and we have

certainly seen the benefits in the improved profitability of

Aberdare Cables during the year under review. However,

in order to see any significant benefits, the market needs

to recover and volumes increase since we have effectively

lowered the point at which the operational leverage at

Aberdare Cables starts to kick in.

We believe that the capacity alignment exercise has been

largely completed with the internal focus now moving

to improving the productivity and efficiency in the

manufacturing process in order to position ourselves as a

globally competitive low-cost producer.

page 37

200920082007 2010 2011

Working capital

-9

05

1

43

46

48

58

54

56

55

57

53

-8

1

-8

1

-8

9

-8

5

Net working capital days Inventory days

Accounts receivable days Accounts payable days

26

16

21

18

16

Management of the cost base

Our focus on cost control continues throughout the group and

I am pleased to report that we have made good progress in

this regard. Indeed, the significant profitability enhancement

at both Powertech and Bytes was largely achieved through

cost control, since there was no real top-line growth.

In order to assess our progress in this initiative, we have

compared our current cost base with the cost base in the year

ended 28 February 2009. In doing so, we removed material

costs since these are truly variable costs. This leaves us with

a cost base which is mainly made up of employee costs and

selling, general and administration costs. For the Altron group,

this amounted to around R6 billion in 2009.

Our current cost base indicates that we have saved around

R100 million in nominal rand terms compared to 2009.

However, if the 2009 base is adjusted for inflation effects of

around 6% per annum (salary and wage increases have been

slightly higher than this during the period), then the savings

in the cost base amounted to around R800 million in real

terms.

Powertech has led the way in these cost savings given

the dramatic way in which it has been impacted by the

contraction in demand and has achieved around R300 million

of cash savings, which represents around R500 million in real

terms. Bytes has also made significant progress, holding its

cost levels flat, representing a R300 million saving in real

terms. Altech’s expenses have increased over the period, in

line with inflation. However, it must be borne in mind that

Altech has continued to grow through this period, particularly

in respect of the acquisitions of Altech Fleetcall, Altech Nupay,

Altech Technology Concepts and now Swist Technology

Solutions. If this is adjusted for, Altech has also achieved real

savings over the period.

We believe that the work done over the past two years

leaves the group well positioned to exploit any revenue

growth that is achieved. With global competition becoming

an established factor in many of our markets, it is essential

that we continue to focus on costs to successfully position

ourselves as a world-class, low-cost producer and service

provider – this is the best way to protect our business

against the ongoing strength of the rand. With all that has

been achieved over the last two years, there are limited

opportunities for further cost cutting, but we will continue

to strive for cost savings going forward.

Adequacy of the finance function

Our group performs a formal review of the adequacy of the

finance function each year. From this review we are confident

that the finance function is adequately staffed with an

appropriate level of experience. Progress has been made on

some of the areas of weakness identified in the prior year

with the introduction of new personnel and with some of the

new acquisitions becoming more aligned with our control

ethos. The key areas of weakness that have been identified

this year are in some of our African operations and our focus

continues to be on bolstering those finance departments. The

strategy to make use of local finance resources has not been

particularly successful and we are now looking at the use

of South African finance personnel to augment those local

resources and instil the strong control culture of the group.

Post-acquisition reviews

In recent years we have seen a number of goodwill

impairments in respect of acquisitions. While some of this is

due to the timing of purchases in terms of the market cycle,

there is also an element of underperformance compared

to expectations. Given our long history of growth through

acquisition and our plans to continue this growth path, we

will be introducing a post-acquisition review process to assess

acquisitions at various periods after their effective date. This

process will compare actual performance with the forecasts

reviewed during the due-diligence process with a view to

improve our assessment of acquisitions. It will also look into

how we can more rapidly integrate those acquisitions into

the group in terms of culture and in particular the rigour we

expect with regard to internal controls.



page 38

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page 39

Key financial risks

Access to funding

Access to funding has diminished as a risk to the group given

the improved liquidity environment in financial markets as

well as the enhanced strength of the group’s balance sheet.

This was characterised by the successful refinancing of the

R500 million loan that was highlighted in the prior year. We

repaid R100 million of the loan and refinanced R400 million at

rates that were only marginally higher than we paid previously.

Unless there is a substantial economic shock or a significant

new funding requirement, this risk will no longer require

reporting on, although it will remain on our risk registers at

a much reduced residual risk level.

Commodity price movements/foreign exchange movements

Commodity prices and currency risks remain two of the largest

financial risks faced by the group. Particularly in recent months,

we have seen significant volatility in commodity prices and after

the experiences of 2008, this is an area where we are particularly

risk averse. Little has changed in the way we have been managing

these risks over the past few years, which can be summarised as

follows:

> Within our South African operations, short-term foreign

exchange exposures, where there is no natural hedge

available, are hedged immediately through the use of

forward exchange contracts. This is done centrally through

Altron Treasury in order to leverage off our purchasing

power, effectively monitoring, controlling and ensuring

compliance with exchange control regulations. Compliance

is monitored both by internal and external auditors. This

conservative approach to foreign exchange exposures

addresses the risk of a depreciating rand and resultant

possible foreign exchange losses. The group is currently

exploring other hedging instruments that, while still

protecting against the depreciation of the rand, will allow us

to participate in the rand’s current apparent strengthening

bias.

> Our largest exposure to commodity prices relates to copper

utilised in energy cables. With regard to supply into the

formal sector such as Eskom and the municipalities, the

copper price risk is passed on to the customer. However, we

carry the risk of copper price movements in terms of supply

to the informal sector, such as the electrical wholesalers.

Hedging of copper purchases is not an option due to the

way the external market price adjusts to changes in the

copper price. Consequently, risk in this regard is managed

through minimising the length of time between the raw

material purchase and the finished goods sale. The group

is currently exploring ways of better aligning the price of

the raw materials with the price at which it is sold since the

supply and demand dynamics in the cables market has been

disrupting the repricing of copper into that market.

Credit risk on debtors

As discussed earlier in this report, the group has performed

well in managing debtors and as a result the associated

credit risk. Most of this is managed at an operational level,

which has historically been a very successful approach. Debtor

Rand movement

Rand

Mar

-10

Apr-1

0M

ay-1

0

Jun-

10

Jul-1

0Aug

-10

Sept

-10

Oct-1

0Nov

-10

Dec-1

0

Jan-

11Fe

b-11

6

7

8

9

10

11

12

USD/R GBP/R EUR/R

management has been further enhanced this year through

quarterly monitoring by the Altron executive committee of the

top 20 debtors at an Altron, Altech, Bytes and Powertech level

which enables the group to see the full credit risk associated

with a particular large customer, but also to monitor the ageing

profile of significant debtors, thereby ensuring that appropriate

and prompt action is taken in areas where significant risk

is perceived. This practice further embeds the proactive

management of credit risk throughout the group.

Valuation risk on acquisitions

Focusing on acquisitions presents a risk in terms of the price paid

for those acquisitions. We believe that this risk can be effectively

mitigated by applying a disciplined approach to assessing all

opportunities. For this purpose, investment committees are in place

at Altech, Bytes and Powertech with representatives from Altron

sitting on those committees. The prescribed format of presentation

at these committees enables the opportunities to be assessed

in a structured and comprehensive manner from a strategic,

operational and financial perspective.

Key focus

Although we continued to make good progress in terms of some

key internal initiatives, we did not achieve the revenue growth

we were looking for. Revenue growth was primarily constrained

by the impact of rand appreciation (price deflation on imported

equipment) and the continued depressed state of the building

and construction industry. Having grown our earnings this year

primarily through cost savings, it is now necessary to achieve

growth through sustainable revenue growth. While many of our

markets are expected to remain subdued in the short to medium

term, and given the renewed strength of our balance sheet,

selected acquisitions may be considered to provide that growth.

In terms of the finance function, we will focus on further

strengthening this key resource, particularly in our African

operations, thereby maintaining strong controls. We are also

looking to improve the quality and relevance of information

provided to our management teams, with a focus on more

forward-looking information and analysis.

Conclusion

The year under review was challenging, but the benefits of

the internal focus over the past two years were evident in the

improved earnings line as well as a significantly stronger balance

sheet. These internal efforts have been consistently and diligently

pursued throughout the group and the management teams must

be commended in this regard. The Altron group now has a strong

foundation upon which to build the next growth phase.

Alex Smith – Chief financial officer

May 2011



Copper: LME average March 2010 – February 2011 R million

Mar

Apr

May Jun Jul

Aug

Sept Oct

Nov Dec Jan

Feb

Cu-USDCu-Rands

0

2

4

6

8

10

12

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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.

2011

R millions %

2010

R millions %

Revenue from continuing operations 22 810 22 336

Paid to suppliers for material and services (17 123) (16 906)

Value added 5 687 5 430

Income from investments* 66 89

Total value created 5 753 5 519

Value distribution

Employees 3 702 64 3 580 65

Capital providers 628 11 701 13

Finance costs 163 163

Dividends to Altron shareholders 284 372

Dividends to non-controlling shareholders in subsidiaries 181 166

Central and local government 542 9 470 8

Company taxation 432 381

Secondary taxation on companies 58 45

Rates and taxes; licences and levies 40 39

Skills development levy 12 5

Subsidies granted by the government — —

Corporate social investment (CSI)** 101 2 56 1

Reinvested in the group to maintain and develop operations 780 14 712 13

Depreciation and amortisation 575 510

Retained profit 258 171

Deferred taxation (53) 31

5 753 100 5 519 100

Value added ratios

Number of employees*** 12 037 12 311

Revenue per employee (Rand) 1 894 985 1 814 312

Value created per employee (Rand) 477 943 448 298

Corporate social investment – % of profit after tax 8.7% 6.7%

* Income from investments include interest received, dividend income and share of associates’ profits. ** CSI includes education, training and social upliftment projects.*** These are permanent group employees.

Value added statementfor the year ended 28 February 2011

2011 Value add

Employees

Capital providers

Central and local government

CSI

Reinvestment

14%

64%11%

9%

2%

Employees

Capital providers

Central and local government

CSI

Reinvestment

2010 Value add

13%

65%

8%

1%

13%


ST: EXTERNAL FACTORS Stakeholders

Shareholders, employees, suppliers, customers, enterprises, business partners, communities

Performance 2011 2010

Altech Department of Communications has chosen the DVB-T2 standard for DTTIncreased competition in East AfricaICASA interconnect rate glide path introducedA more liberated market, presents opportunities

N/A N/A

Powertech Delays in government infrastructure spendingWeak demand from building and construction sectorOversupply in local power cables marketVodacom and MTN initiative to build their own networks and increasing demand up in AfricaRand strength a double-edged swordRenewal in Eskom’s growth favourable, but within a competitive supplier marketRegional electricity distributors (REDs) discontinuedMining industry recovering steadily

N/A N/A

Bytes Strong competition generallyRetail and financial services markets improvingStrong randUK Coalition Government cutbacksSA commercial printing industry not yet recoveredSeveral African operations increasing in market activity

N/A N/A

ST: INCOME AND GROWTH Stakeholders

> International expansion in niche markets> Annuity income> Quality of earnings> Market leadership/critical mass> Making new acquisitions, new ventures/divestments> Introduction of new products

Shareholders, employees, suppliers, customers, small enterprises


Altech Revenue R9.7 billion R9.2 billionRevenue change 5% 0%EBITDA R1.1 billion R1.17 billionEBITDA margin 11.1% 12.7%

Powertech Revenue R7.1 billion R7.2 billionRevenue change (2%) (25%)EBITDA R539 million R424 millionEBITDA margin 7.6% 5.9%

Bytes Revenue R6.1 billion R6.0 billionRevenue change 2% (1%)EBITDA R474 million R393 millionEBITDA margin 7.8% 6.6%

ST: COSTS AND CASH MANAGEMENT Stakeholders

> Management of the cost base> Management of working capital> Capacity alignment> Access to funding> Adequacy of the finance function> Foreign exchange volatility> Credit risk on debtors

Shareholders, employees, business partners


Altech Capital expenditure R357 million R1 202 billionImpairments R275 million R65 millionEarnings per share (cents) 216 cents 536 cents

Powertech Capital expenditure R167 million R203 million

Bytes Capital expenditure R85 million R52 million

Strategic themes and material issues overview

MI = Material issues

ST = Strategic themes

page 43

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Altron – consolidated overview

Comment and initiatives Goals going forward Page

> DVB-T2 standard is 50% more spectrum-efficient, with more channels possible> Competition should improve overall technology penetration, improving medium-

to long-term prospects> Provision made for the impact of lower interconnect rates

To be addressed in this financial year 60

> Building and construction sector under pressure> Demand for electrical products slowed down> Growth potential in fibre-optic cables> Stabilised copper prices, but strong rand hurts foreign returns and local exports> Increased demand in generating capacity, transmission and distribution networks> Municipal electricity utility market stabilised, opening way for renewed investment> Increased demand for cables and industrial batteries


> Pressure on margins> IT projects at corporate clients resumed> Lower translation earnings from foreign operations, but reducing imported costs> Projects cancelled or postponed> We continuously review implications and prepare for all eventualities> Growth and sales at LaserCom and NOR Paper depressed> Opportunities for production systems and managed print services



Group revenue: R22.8 billion (+2% from 2010)Group EBITDA: R2.1 billion (+6% from 2010). This reflects the success of internal cost control and efficiency programmesHeadline earnings per share increased 15% to 228 cents per share. This resulted in 108 cents per share going to our shareholders (20% increase from 2010)

Comment and initiatives for 2011 Goals going forward Page

> Altech makes the biggest contribution to Altron’s revenue and EBITDA> Altech’s operational income came under pressure and EBITDA decreased by 8%> Difficult trading conditions particularly in East Africa> Altech Autopage Cellular and Arrow Altech Distribution showed a steady performance> Altech Netstar and Altech Card Solutions showed excellent results


> Although revenue decreased, EBITDA increased by 27% due to cost-cutting and rationalisation programmes

> Powertech transformers performed exceptionally well> Powertech Cables, Powertech Batteries and Powertech IST also delivered pleasing results


> Revenue increased due to higher volumes, and EBITDA rose by 21%> Cost-cutting initiatives and market share gains resulted in improved profits across

the board> Bytes Systems Integration, Bytes Software Solutions (UK), Bytes Managed

Solutions and Bytes Healthcare Solutions experienced record years



There was a marginal increase in cash generated. Total investment in working capital was R1.7 billion. R686 million was utilised in investing activities. Debtors days decreased from 56 days to 54 days due to diligent credit control throughout the group. Increase in inventory days from 43 to 51 due to higher inventory holdings at Aberdare Cables and Bytes Managed Solutions.


> Earnings per share dropped mainly due to impairments at Altech Stream East Africa of R250 million

> Altech’s balance sheet continues to show considerable strength> Retail/wholesale split at Swift Global (SGK) and Kenya Data Networks have been

successfully implemented, resulting in a continued positive profitability trend

> Structural changes are planned to optimise the East African operations, and ensure that capital and regulatory (tax and telecoms licensing) approaches are optimised

62

> Recovery of the building and construction sector is necessary in order for the cable business to return to acceptable levels

> Powertech’s cost-efficiency initiatives will continue in the year ahead

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> Bytes remains strongly cash generative> Achieved a higher operating profit based on its improved cash management> Bytes MS, Bytes People Solutions and Bytes UK significantly reduced costs

> Restructuring and merger of some of the Bytes businesses is expected to stimulate growth

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ST: PRODUCTS AND SERVICES Stakeholders

> Ownership of intellectual property> Value-added services> Infrastructure investment> Technological convergence, developments

Communities, customers, micro- and small enterprises, business partners


Altech Altech Autopage Cellular is currently the 4th largest least-cost router operator in SA.Altech Technology Concepts (ATC), an internet service provider (ISP) focusing on SMEs and corporate clients, implemented a new network and managed services which went live in February 2011.Altech Netstar Fleet Solutions grew billable subscriber vehicles by 16%. In conjunction with Altech Alcom Matomo, Altech Fleetcall provided a national voice communication solution to the FIFA 2010 World Cup Organising Committee, and successfully installed and commissioned phase one and phase two of radio communication services to the Gautrain Rapid Rail Link.Altech Alcom Radio Distributors – the wireless broadband product portfolio continues to grow and gain market share in southern Africa. At Altech UEC, local demand for STBs remains firm while exports to Africa, Australia, Middle East, Europe and India are growing steadily. Altech West Africa (AWA) has added manufacturing facilities to initialise and personalise chip-card products for Nigerian telecommunications network operators and financial service providers.

N/A N/A

Powertech The Transformer Design System (TDS) framework at the Powertech transformer business was further refined, stabilised and locked down as a platform for the electrical design functionality for the TDS Alpha Version release.Strike Technologies’ has developed the first NRS049-compliant smart metering solution in South Africa, scheduled for deployment in Eskom’s DSM projects.

N/A N/A

Bytes BDS is implementing a service-oriented architecture (SOA) installation on its Oracle platform to extend its service capabilities and enhance its enterprise-wide functionalities to host third-party applications such as Sales Tracker and Managed Print Services.Bytes MS’s renewal of additional services for the Pick n Pay contract is particularly important to the future of the business. Bytes MS also won a number of significant ATM equipment orders from its long-standing banking customers.Bytes Systems Integration (BSI) owns the IP for its offerings in the provident fund, sales tracing and access control environments.Bytes Connect has developed a risk and governance model that is expected to add significant value to both new and prospective customers.The capacity of Bytes People Solutions skills’ development business unit has been increased in order to accommodate the increased demand.

N/A N/A

Strategic themes and material issues overviewcontinued

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> The effects of lower interconnect rates are likely to impact on Altech Autopage Cellular’s operations.

> Altech Autopage Cellular and Altech Technology Concepts collaborate to take various converged voice and data products and offerings to market.

> ATC built a new network to cater for redundancy and resiliency requirements.> Altech Netstar Fleet Solutions and Altech Alcom Matomo won a number of

provincial government and municipal tenders, with the most significant being the City of Cape Town, for an amount of R65 million.

> Altech UEC – Additional investments have been made in a local manufacturing plant and equipment, and a total of 2.7 million STB units were produced during the year.

> MultiChoice awarded Altech UEC the next generation HD PVR project for their DVB-T2 project for Africa.

> Altech Autopage Cellular has made provision for the impact of lower interconnect rates in the coming financial year, through lowering of the cost base.

> Altech Netstar Fleet Solutions – on the strategic front, product and customer diversification initiatives continue, and the process to transfer the spare ECNS licence to Altech Alcom Matomo has been initiated.

> East Africa offers outstanding long-term opportunities for extending the reach of the Altech group’s services and products beyond southern Africa due to its relatively low levels of penetration.

> South Africa’s imminent digital migration (DTT) programme is expected to generate demand of between eight and nine million standard decoders over the next three years.

> Steady growth is expected at Altech West Africa with the region’s increasing integration into the international banking infrastructure.

63

> TIS continues to be challenged by the entry of cheap competitor products from the Far East. It also experienced a shortage of mechanical cable connectors from Tyco Electronics in the middle of 2010. This caused some challenges in relations with some key customers. The situation has since been rectified and the backlog cleared by midyear.

> Strike Technologies’ new management team is focusing on its metering business in terms of enhanced marketing and exports with some breakthrough orders now being obtained, notably from Johannesburg City Power.

> Powertech expects to gain traction on some of the innovations and new products developed during the year throughout its underlying companies, including the low-cost SPT, switchgear, full-calcium batteries and Itronic.

> The Powertech Battery group is exploring new technology products such as fully sealed and full-calcium technology in its battery offerings.

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> At NOR Paper, the emphasis is increasingly on turnaround speed and efficiency of logistics, and these attributes are becoming competitive advantages.

> With the convergence of mobile, internet and point-of-service channels, new solutions, across multiple industries, are evolving in the self-service arena.

> BHS’s focus on creating new products and services is expected to ensure future earnings growth.

> Original equipment manufacturers (OEMs), such as Microsoft, Dell, HP and Cisco, continue their drive to include services into their offerings as well as have more direct relationships with the users of their product sets. These factors have created challenging relationships with the primary Bytes Connect vendors with whom it competes and partners.

> The Software Services division of Bytes UK is expending significant efforts to diversify from its Microsoft-centric business model, in preparation for Microsoft’s rebate programme coming into effect.

> Through the “Imagine Virtually Anything” initiative, BSI will be able to provide a service that requires lower investment by the customer.

> The MediSwitch business is planning to launch, in conjunction with Mettle Factors (Pty) Limited, a switch-based claims factoring service for healthcare service providers in the near future.

> Med-e-Mass is considering a new patient record system for doctors.

> Virtualisation is also becoming an integral part of Bytes People Solutions’ offering.

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ST: BUSINESS PARTNER RELATIONSHIPS Stakeholders

> Meeting the evolving needs of customers> Maintaining key agency/principal relationships> Maintaining product quality and supply> Pricing risk, foreign direct imports and dumping

Suppliers, small enterprises, customers


Altech A number of new partnerships were formed during the year. N/A N/A

Powertech Powertech Transformer Group has a long-standing technology agreement with ABB and has also concluded an agreement with TMC in Italy.Renewed agreements with Enersys and Eskom.

N/A N/A

Bytes Bytes Document Solutions was awarded the best-performing Xerox distributor in the Middle East and Africa. Bytes Document Solutions renewed its exclusive agreement with Xerox Corporation as its authorised distributor in sub-Saharan Africa, for a further 10 years.Bytes MS has also recently concluded a new exclusive distributor agreement with Fusion.Bytes People Solutions has become a regional partner for a provider of leading-edge supplier courseware development tools, enabling the company to extend its services into Africa.Leading relationships with NCR, Cisco and Alcatel-Lucent.

N/A N/A

ST: CUSTOMER RELATIONSHIPS Stakeholders

> Customer satisfaction> Customer rights and protection> Strategic alliances with certain key customers at Altron to

leverage cross selling.

Customers


MI: CUSTOMER SATISFACTION

Altech Altech Netstar:

Customer satisfaction 78% 76%

Calls answered within 20 seconds 96% 92%

First-call resolution 77% 80%

Churn rate (service terminations) 11.5% 11.2%

Altech Autopage Cellular:

Customer satisfaction 73% 70%

Calls answered within 30 seconds 80% 67%

First-call resolution 78% 69%

Churn rate (service terminations) 18% 16%

Repair turnaround time (days) 19 22

Powertech Powertech undertakes customer surveys regularly. The results are not currently available. — —

Bytes Response to vendor-developed customer surveys. 10% —Percentage of surveyed customers ‘successful and happy’. 87% —

MI: CUSTOMER RIGHTS AND PROTECTION

Altech Percentage customers complying with RICA:

Altech Netstar (see details on page 66) 22% —

Altech Autopage Cellular (as at end February 2011) 87% —Altech Netstar Fleet Solutions 14% —


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Sound, strategic partnerships enable our business to offer customers comprehensive and unique solutions.maintains a number of key strategic, technology-based partnerships with leading international corporations such as ABB, Alcatel-Lucent, Arrow Electronics, Cisco Systems, Datacard, Dell, Eaton, Gemalto, Genesys, HP, IBM, Kronos, Metastorm, Microsoft, Motorola, NCR, NetApp, Oracle, SAP AG, Seacom, Teradata, Tridonic, Tyco, Von Roll Isola, Weidemann, Xerox Corporation and many others.


> New business developments include negotiations with insurance companies to launch their driver monitoring platform in South Africa

> Altech Technology Concepts made significant investments to support expected growth

> Altech Netstar is focusing on insurance telematics.> Altech Technology Concepts will launch a focused

channel partner programme to support expected growth.

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> Powertech Transformers has two reliable suppliers for the 2011/12 financial year offering competitive prices

> Powertech businesses in general maintain good business relationships

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> Bytes Document Solutions continues to improve its market share in South Africa based on its long-standing partnership with the Xerox Corporation

> Bytes MS new partnership complements its services offering to address the needs of the petroleum retail sector

> BSI uses its various partnerships to continuously keep its customers informed of new developments, technologies and upgrades

> The merger of Alcatel-Lucent with Genesys has positively impacted Bytes Connect, as the only partner in Africa that has accreditations and competencies in both companies

> Bytes aims to conclude a new partnership agreement with Affiliated Computer Services (ACS) – a Xerox company.

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Customer base includes both businesses (at all three business units) and consumers (largely confined to Altech). Customer rights and protection issues are most relevant to Altech Netstar and Altech Autopage Cellular, whose clients are the general public, and therefore do not have the legal resources available to protect themselves that our business customers do. The Consumer Protection Act (2008) and the Regulation of Interception of Communications Act (2002) (RICA) both affect our operations going forward.


Altech Netstar:> Restructured customer services department> Full staff needs analysis at call centre> Reskilled all existing staff

Altech Netstar:> 90% in all call centres for call quality assessment

rating> 100% of calls answered in 20 seconds in the

Emergency Call Centre> 80% first-call resolution> 10% churn rate> Above 80% for customer satisfaction levels

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Altech Autopage Cellular:> Churn rose due to disconnections of ‘out of contract subscribers’ and dormant

lines. To improve this, credit scoring has been tightened, collection processes have been improved, and subscriber retention offers implemented

> Projects have been implemented to ensure staff numbers and skills are correct, workload is evenly distributed and productivity is optimal

Altech Autopage Cellular:> Maintain above 65% of calls answered in 30 seconds> Maintain above 75% first-call resolution> Churn rate to reach below 17.1%> Repair turnaround time to reach 15 days> Review customer interface channels> Improve total quality management across pricing

and billing platforms

> Aberdare Cables undertook an extensive customer insight survey during 2009/2010, the results of which displayed a company with a high level of brand loyalty

> Battery Technologies’ customer satisfaction surveys results showed satisfactory to very satisfactory ratings

> To improve service delivery, Aberdare Cables launched a pilot customer programme with Agrinet involving a system that allows the two organisations to converse electronically

> Aberdare Cables and Powertech Batteries will be conducting extensive client satisfaction surveys in the next financial year

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> Bytes companies renewed a number of key contracts > Increase the number of clients responding to the customer surveys

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Altech Netstar:> Raised an objection relating to the proposed Consumer Protection Act (2008)

clauses affecting fixed-term contracts and settlement fees> Trained all employees and fitment centres responsible for implementing RICA

Altech Autopage Cellular:> Centralise Altech Autopage Cellular’s outbound

communications platform with policy governance structures

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Altech Autopage Cellular:> Implemented an operation-wide RICA project to ensure the smoothest possible

process to allow customers to register for RICA


ST: HUMAN CAPITAL Stakeholders

> Employee engagement > Skills attraction, development and retention> Health and safety> HIV/Aids

Employees, Department of Labour, top-brand business partners


MI: EMPLOYMENT ENGAGEMENT

Altech Employees (total) 3 363 4 041SA staff – black 56% 55%

Powertech Employees (total) 4 526 4 593

SA staff – black 75% —

Bytes Employees (total) 4 786 4 713

SA staff – black 63% —

MI: SKILLS ATTRACTION, DEVELOPMENT AND RETENTION

Altech Staff turnover 24% —Training spend R15.3 million R11 millionTraining spend on PDI 53% 42%Average training spend per employee R4 549 R2 722 Average days training 1.06 0.85Altech Academy programmes 312 300Learnerships 55 103Engineers-in-training 12 15Black bursars 43% —

Powertech Staff turnover 17.4% —Training spend R28.7 million R27.7 millionTraining spend on PDI 78% 50%Training spend per employee R6 341 R6 530 Powertech Leadership Programme participants 41 —

Bytes Staff turnover 17.5% 19.8%Training spend R20.5 million R23 millionTraining spend on PDI 60% 67%Training spend per employee R4 283 R4 880 Learnerships 374 —

MI: HEALTH AND SAFETY

Altech Injuries 13 8Lost days Fatalities

2390

1160

Powertech Injuries 111 323

Lost days 775 478Fatalities 0 0

Bytes Injuries 17 31

Lost days 102 72

Fatalities 0 1

MI: HIV/AIDS

Powertech A third party holds HIV/Aids statistics. — —


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Employee numbers up by 20% to 12 812, almost all permanent. Severe skills shortage is a major challenge. More than three-quarters training focus spent on semi-skilled, skilled and academically qualified workers – 4 091 out of a total of 5 351 received training this year. There were no fatalities. HIV/Aids awareness programmes run at Aberdare Cables.


> Commissioned retention survey> Engaged with employees through the Altech Talk and the Profile staff magazines> Conduct annual performance reviews for most of their staff.

Aim to conduct performance reviews for 85% of their staff.

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> Aberdare Cables undertook an employee survey> Engaged with employees through the PowerFlash and the Profile staff magazines> A total of 68% of all employees participated in annual performance reviews

Operations not performing performance reviews for all their staff, should do so in the next two years.

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> Engaged with employees through the Profile staff magazine> Performance reviews were conducted for 100% of Bytes employees

Participate in the ‘Best Company to Work For’ survey. 78

> Commissioned retention survey> Did salary and benchmarking exercise> Finalised policies for performance management, succession planning and

remuneration> Rolled out competency and learning management system

> 50% black bursars in 2012.> 8% staff through Learning Academy.> 21 students supported in their studies.> 2% of salary bill spent on skills development.> 85% of staff to go on formal performance reviews.

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> Powertech Leadership Programme was reviewed and improved> Salaries increased by 7.36% average

> 100% participation in employee performance reviews by 2013.

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> Training spend decreased by 11% due to a shift in the curriculum> Have an active toastmaster’s club> Salaries increased by 5.7% average

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> Department of Labour audit found Altech to be fully compliant with requirements of OHSAS

> Altech UEC maintained ISO 9001:2008 compliance

Achieve ISO 9001:2008 compliance at all manufacturing operations.

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> Third-party health and safety risk assessments were undertaken> Employee injuries down by 66% due to safety training programmes

> Powertech Transformers aims to obtain OHSAS 18001 and ISO 14001 in 2012

> Powertech Transformers aims to reduce disabling injury frequency rate by 25% in 2012

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> Aberdare Cables and Crabtree Electrical Accessories SA run HIV/Aids awareness and training programmes throughout the year, which include voluntary counselling and testing (VCT)

> All medical aid schemes that operate within Powertech provide HIV/Aids counselling, awareness programmes and cover for the illness

Altron will be conducting another group-wide HIV/Aids audit in 2013

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ST: TRANSFORMATION Stakeholders

> Ownership> Management control> Employment equity> Skills development> Preferential procurement> Enterprise development> Socio-economic development

Public at large, government, shareholders, employees, suppliers, small enterprises


Altech B-BBEE level 3 4

Ownership 19.8 —

Management control 2.2 —

Employment equity 5.7 —

Skills development 12.9 —

Preferential procurement 15.6 —

Enterprise development 15 —

Socio-economic development 5 —

Powertech B-BBEE level 3 4

No consolidated scores available for the seven elements of B-BBEE.See page 89 for individual group company scores

Bytes Level 2 3

Ownership 22.8 18.6

Management control 6.8 4.1

Employment equity 11.1 7.1

Skills development 12.2 11.1

Preferential procurement 18.1 16.2

Enterprise development 15 5

Socio-economic development 5 5


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The Altron group scored 80.6, a level 3 contribution. This is almost a nine-point improvement from the 2010 score, largely attributable to the improvements in the equity ownership and employment equity elements of the B-BBEE scorecard. Our best-performing areas are those of employment equity, enterprise development and socio-economic development. Altron was rated second in the General Industrials category out of 100 competing companies and 25th overall (up from 34th) in South Africa in the Financial Mail/Empowerdex Top Empowered Companies in South Africa ratings for 2010.


> Completed empowerment deals to the value of R2.4 billion.> The Altech succession planning committee has approved the succession planning

policy and has a mandate to address this aspect of our transformation challenge. > Made several strategic appointments of EE candidates at various management

levels.> PDI representation among top and senior management has increased since 2009

due to higher levels of staff turnover among white top-level management and a focus on replacement with B-BBEE candidates.

> Implemented learnership programmes. > As at 31 August 2010, 90% of total procurement spend was B-BBEE related. > 3.6% of net profit after tax (NPAT) was spent on enterprise development.> Improved socio-economic development spend from 0.82% NPAT to 2.3% NPAT.> Altech ranked 5th best company in the ICT sector and 42nd overall in the Financial

Mail/Empowerdex Top Empowerment Companies survey 2011.

> Continually searching for B-BBEE partners that will enhance the group’s operating abilities and BEE profile.

> Altech will be focusing on improving its employment equity profile, with a focus on black females.

> Spend of a minimum of 3% of net profit after tax on enterprise development.

> Spend of a minimum of 1% of net profit after tax on socio-economic development.

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> Strongest performing areas include preferential procurement, enterprise development and socio-economic development, while employment equity remains a challenge.

> Purchased a tool to assist with the B-BBEE assessments of all our businesses and more easily obtain our ratings.

> Powertech companies collectively lost two black non-executive directors (one male and one female).

> Battery Technologies leads its competitors in employment equity, exceeding the board, top management and senior management targets in employment equity.

> Succession planning is a key focus area across the business.> 10.7% of NPAT was spent on black skills development (78% of total skills

development spend).> Spent R1.8 billion with preferential procurement suppliers.> 8.6% of NPAT spent on enterprise development initiatives and 1.63% NPAT on

socio-economic development.

> Aiming for all our companies to reach a level 3 status.> Battery Technologies aims to achieve 15% black

female board representation, and 25% in top management.

> Crabtree Electrical Accessories SA to appoint a black female training officer and four black female apprentices in the first half of 2012 financial year.

> The group plans to appoint at least one black female at the senior management level.

> Crabtree Electrical Accessories SA to perform a skills gap analysis which will determine areas for focus in the next few years.

> Battery Technologies aims to increase black supplier spend, with a focus on black female-owned businesses.

> Crabtree Electrical Accessories SA plans to increase its funding to organisations with more than 75% black beneficiaries.

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> Have exceeded our 2012 targets, and achieved the highest score in the ICT industry.

> Management control score increased by 60% due to a number of internal promotions.

> 63% of Bytes employees are black.> Employment equity score increased by 56%.> 60% of training spend went to black skills development.> Reached our target preferential procurement spend of R1.45 billion (74.5% of

overall procurement spend).> 8.7% of NPAT spent on enterprise development initiatives and 1% NPAT on

socio-economic development.

> Aim to expand the ATM initiative into multi-service containers in rural areas and townships.

> 2012 B-BBEE score targets: – Ownership – 22.83 – Management control – 5 – Employment equity – 10 – Skills development – 11 – Preferential procurement – 17 – Enterprise development – 15 – Socio-economic development – 5

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ST: ENVIRONMENT Stakeholders

> Management and policy > Reducing Altron’s carbon footprint> Improving energy efficiency> Responsible use of water> Reducing pollution and harmful emissions> Usage of materials and handling of waste> Responsible management of the product lifecycle

Communities, public at large, government, regulators, industry bodies, customers, suppliers


MI: REDUCING ALTRON’S CARBON FOOTPRINT

Altech Carbon dioxide equivalent tonnes (tCO2e):

Total 43 236 20 732

Scope 1 (Fuel use) 2 320 4 343

Scope 2 (Purchased electricity) 30 632 13 610

Scope 3 (Paper consumption, business travel) 10 285 2 779

Carbon dioxide equivalent tonnes per employee 13 —

Powertech Carbon dioxide equivalent tonnes (tCO2e):

Total 178 170 95 928

Scope 1 (Fuel use) 4 310 —

Scope 2 (Purchased electricity) 172 833 —

Scope 3 (Paper consumption, business travel) 1 027 —

Carbon dioxide equivalent tonnes per employee 39 —

Bytes Carbon dioxide equivalent tonnes (tCO2e):

Total 24 125 28 288Scope 1 (Fuel use) 1 703 —

Scope 2 (Purchased electricity) 18 359 —

Scope 3 (Paper consumption, business travel) 4 063 —Carbon dioxide equivalent tonnes per employee 5 —

MI: IMPROVING ENERGY EFFICIENCY

Altech Total electricity use (MWh) 32 300 13 200

Powertech Total electricity use (MWh) 168 052 81 311

Bytes Total electricity use (MWh) 18 551 18 582


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Altron was ranked joint 10th out of the JSE Top 100 on the 2010 Carbon Disclosure Leadership Index (CDLI) for companies contributing to the Carbon Disclosure Project (CDP). Improvements to the data collection process and calculation methodology for our carbon footprint resulted in a more accurate and representative total emissions measurement. Altron group’s total carbon footprint is estimated at 246 858 metric tonnes carbon dioxide equivalent (tCO

2e). The largest

contribution to total group emissions is our industrial manufacturing business unit, Powertech, at 72% of the total. A group-wide workshop involving top management was undertaken to better understand our environmental risks and opportunities, establish indicators for measuring performance, and set carbon reduction targets. Altron published a group environmental overview (Altron Envirowatch – a better tomorrow starts today), describing the company’s response to environmental risks and opportunities.


> Altech contributes less than 20% of the total Altron group carbon footprint> Comparison against prior periods is difficult due to the significant scope expansion,

but we are confident we now have a comprehensive and accurate baseline off which to measure our future progress

Reduction targets 2011 to 2014:> Electricity usage in kWh (excl franchises) – 2.27%> Business road travel in litres – 0.91%> Business road travel in kms – 1.0%> Paper consumption in kgs – 1.86%> International air travel in miles – 0.80%> Domestic air travel in miles – 0.90%> Fuel use – diesel in litres – 0.27%

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> Powertech contributes in excess of 70% of total Altron group carbon footprint> Comparison against prior periods is difficult due to the significant scope expansion,


Reduction targets 2011 to 2014:> Electricity usage in kWh (excl franchises) – 2.44%> Business road travel in litres – 0.86%> Business road travel in kms – 1.8%> Paper consumption in kgs – 2.93%> International air travel in miles – 1.56%> Domestic air travel in miles – 1.33%> Fuel use – diesel in litres – 0.67%> Fuel use – butane in kgs – 3.50%> Fuel use – LPG in kgs – 1.00%

90

> Bytes contributes 10% of total Altron group carbon footprint> Comparison against prior periods is difficult due to the significant scope

expansion, but we are confident we now have a comprehensive and accurate baseline off which to measure our future progress

Reduction targets 2011 to 2014:> Electricity usage in kWh (excl franchises) – 3.50%> Business road travel in litres – 0.67%> Business road travel in kms – 1.0%> Paper consumption in kgs – 3.63%> Domestic air travel in miles – 1.57%> Fuel use – diesel in litres – 0.33%

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> Electricity use makes up 71% of carbon emissions> Comparison against prior periods is difficult due to the significant scope expansion,


Reduction targets 2011 to 2014:> Electricity usage in kWh (excl franchises) – 2.27%

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> Electricity use makes up 97% of carbon emissions> Comparison against prior periods is difficult due to the significant scope expansion,


> Powertech focuses on energy savings in the areas of buildings, operations, and products and services

> Strike Technologies and Powertech IST Otokon are in the process of deploying electricity metering solutions throughout the group

Reduction targets 2011 to 2014:> Electricity usage in kWh (excl franchises) – 2.44%> Distribution Transformers has an energy survey

planned for their Cape Town premises.> Plan to have full coverage of metering solution across

the group in SA operations

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> Electricity use makes up 76% of carbon emissions.> Bytes Connect – Energy savings have been made by integrating two business units

in one energy-efficient building.> Bytes Managed Solutions and Bytes Connect – 20% energy savings due to

upgrading uninterruptible power supplies.> Comparison against prior periods is difficult due to the significant scope expansion,

but we are confident we now have a comprehensive and accurate baseline off which to measure our future progress.

Reduction targets 2011 to 2014:> Electricity usage in kWh (excl franchises) – 3.8%

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MI: RESPONSIBLE USE OF WATER

Powertech Water use (million m3) 98.5 —

MI: REDUCING POLLUTION AND HARMFUL EMISSIONS

Altech Not measured — —

Powertech Not measured — —

MI: USAGE OF MATERIALS AND HANDLING OF WASTE

Altech Waste recycled (tonnes) 301.4 —

Waste to landfill (tonnes) 434.5 —

Powertech Waste recycled (tonnes) 2 638 —

Waste to landfill (tonnes) 3 593 —

MI: RESPONSIBLE MANAGEMENT OF THE PRODUCT LIFECYCLE

Powertech Not measured — —


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> Powertech Transformers replaced a water-cooled motor system with a closed-loop system, saving 500 000 kilolitres of water.

> Aberdare Cables converted water-intensive manufacturing processes to a closed-loop system.

> All operations will be monitoring and recording water use in the future.

> All operations will be identifying water saving/reduction targets in 2011/2012 for all their material operations.

> Altron will be participating in the CDP Water Disclosure Programme in 2011.

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> Lead content in electronic components has been eliminated in line with European standards and requirements.

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> The company is currently drawing up a new, comprehensive emissions and pollution policy in line with international best business practice, which will go beyond compliance with the National Environmental Management Act: Air Quality Act, No 39 of 2004.

> Powertech Transformers successfully remediated a minor oil spill. > Metal contamination beneath a Willard Batteries premises was discovered and

rectified.

> Aberdare Cables – all companies to be ISO 14001:2004 compliant in 2012 financial year.

> Distribution Transformers (Booysens) – replacing all asbestos roofing, gutters and downpipes, and implementing ISO 14001 and working towards certification.

> Powertech Batteries has committed R2 million to eliminating lead vapour from conventional grid castings.

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> 41% of waste was recycled.> Arrow Altech Distribution recycles approximately 50% of component trays through

a return programme, and approximately 100 kg per year of recycled redundant stock is disposed of with an accredited disposal company.

> Altech Autopage Cellular is investigating a number of proposals and prospective partnerships to handle the recycling of handsets.

> Altech aims to implement a formal recycling programme that aims to monitor and record recycled material where possible.

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> 42% of waste was recycled.> Aberdare Cables now has a waste management standard which was formally

implemented in October 2010.

> Aberdare Cables – Reduce general waste by 5%. – Introduce recycling programmes for GOC and GBU

site by June 2011. – Investigate rubber recycling.> Crabtree Electrical Accessories SA – Identify income opportunities in waste

management and use income to finance sustainability initiatives.

> Powertech Calidus – Identify the alternatives to recycling waste. – Sale of materials considered waste by Powertech to

other companies – market feasibility studies will be done on micro-companies which can assist in this regard.

– Develop an EMS that includes an environmental management plan.

> System Integrators – Reduce paper consumption by 3%.> Willard Batteries – Replace all wooden pallets with plastic ones, can be

recycled and converted back into plastic pellets for creating new products.

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> Powertech is aware of the potential impacts of its products and is trying to determine which points in this cycle pose the most risk to the environment and society

> Powertech’s battery manufacturers reclaim and recycle batteries to ensure that these do not end up in landfills or other more ecologically sensitive areas

91


ST: BUSINESS CONDUCT IN FOREIGN OPERATIONS Stakeholders

> Impact of operations> Human rights

Communities, government, regulators, industry bodies


MI: IMPACT OF OPERATIONS

Altech Number of international staff 361 958Number of digital villages in East Africa 8 8

MI: HUMAN RIGHTS

Altech Percentage suppliers that have undergone human rights screening: East Africa 10% — West Africa 0% —Percentage staff trained: East Africa 5% — West Africa 0% —

ST: CORPORATE GOVERNANCE Stakeholders

> Protection of minority shareholders’ rights > Management of ethics and business conduct


MI: PROTECTION OF MINORITY SHAREHOLDERS’ RIGHTS

Altron Positive feedback received from investor perception surveys and engagement.

MI: MANAGEMENT OF ETHICS AND BUSINESS CONDUCT

Altron 62% of managers on ethics training programme believe that Altron effectively deals with ethics in the workplace. 10% are aware of practices in their operations that they believe to be unethical.


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The Altron group is a signatory to the United Nations Global Compact which upholds the rights of people and communities affected by business operations. Altron is planning a human rights survey for the 2012 financial year which will be rolled out to all relevant foreign operations and their suppliers.


East Africa: > Altech provides local communities with free or very low-cost internet

access via internet hotspots, and delivers free hotspot connectivity to all Kenyan universities and major schools

> 70% of structural and civil works are sourced from local suppliers

69

West Africa:> Spent more than R45.5 million with local suppliers in Nigeria during

the year

> Implemented a human rights policy> We assess our suppliers in areas where there is a high risk of human

rights abuses

> Continue with human rights awareness campaigns 69



> Increased interaction with shareholders to provide regular, clear communication and ensure minority shareholders fully understand structures in place to protect their rights

> Altron’s notice of annual general meeting (AGM) was circulated to certain material shareholders prior to the AGM for comment and input

3

> Ran a group-wide ethics training programme focused on group values, ethics and appropriate behaviour involving half of all executives and managers (531 staff)

> 506 signed a statement of commitment to Altron’s code of conduct

> Ethics Office will be established in the second quarter of the 2012 financial year

> Awareness programme will continue> Establishment of a social and ethics committee during 2011

32

Arrow Altech Distribution, a leading distributor of quality electronic components and modules, offers its customers a complete solution for any designs by representing a broad range of state-of-the-art solutions such as semiconductors, biometrics, batteries, power supplies, solar, lighting (LED), LCD displays, passive, electro-mechanical, protection, computing solutions, frequency control and wireless products.

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Review of operations

ALLIED TECHNOLOGIES LIMITED (ALTECH)

Highlights

> Acquisition of Swisttech (ISV)

> Three empowerment transactions concluded

> Cash-generative business with 84% annuity revenue

> Altech Technology Concepts network now live

> Altech Netstar/OCTO Telematics deal – new market

opportunities

> Data centre in East Africa will provide new revenue stream

> DTT standard finalised

> East Africa remains core focus

> Global and local expansion continues

> Strong focus on margins, cost containment, working

capital and cash flow management

> Succession planning and entrenchment of new management

51% 49%58%42%

Group contribution

RevenueFebruary 2011

EBITDAFebruary 2011

40%

41% 59%

Headline earnings February 2011

Altech Altron group

*

*Listed company

Financial summary

R millionsFebruary

2011February

2010%

change

Revenue 9 651 9 200 5

EBITDA 1 072 1 165 (8)


HEPS (cents) 488 571 (15)

Adjusted diluted headline earnings 515 586 (12)

ROE (%) 22.2 26.1

Cash net of borrowings 54 39

Operational review

Company

February2011

RevenueR millions

%change

February2011

EBITDAR millions

%change

Altech Autopage Cellular 5 855 4.6 296 (4.7)

Altech Netstar 944 7.3 319 12.5

Altech Technology Concepts 48 43 (1) (123)

Altech UEC 1 145 6.1 82 10.7

Arrow Altech Distribution 285 3.8 29 8.8

Information Technology 706 15.7 132 (3.8)

Converged Services – Local 320 (4.1) 67 (3.1)

Converged Services – International 426 (3.2) 132 (38)

Group eliminations (78) 16

Total 9 651 4.9 1 072 (8.2)

page 60

“Continuing adverse global and local economic

conditions, as well as currency volatility factors

affected trading conditions within Altech’s

operations. This was offset by our strong

presence in a variety of industry segments

and our high level of recurring revenue that

provides robust cash flows and reduces the

effects of economic cycles.

The recent empowerment ownership

transactions to the value of more than

R2.4 billion are expected to stimulate business

opportunities through new partnerships and

create platforms for future growth.

The Altech group as a whole continues to

perform well and we are positive for the new

financial year. East Africa remains a core focus

area, our global expansion plans for Altech

Netstar are a priority and we will continue our

emphasis on margin recovery, cost containment

and working capital management.”

– Craig Venter, CEO.

Corporate responsibility highlights

> Altech Autopage Cellular and Altech Netstar have revised

sales procedures to ensure compliance with the Consumer

Protection Act, 2008 (CPA)

> Trainees at the Altech Academy increased from 300 to

312, while the proportion of training spend on previously

disadvantaged individuals increased by 25%

> Altech is a level 3 contributor against the dti’s Codes of

Good Practice

> Preferential procurement spend of R1.64 billion now

exceeds 90% of overall spend

> R5.2 million (2.3% of net profit after tax) invested in

socio-economic development initiatives

> Altech contributes less than 20% of the Altron group’s

total carbon footprint at 43 000 tonnes CO2e

> Altech ranked 5th best company in the ICT sector and

42nd overall in the Financial Mail/Empowerdex Top

Empowerment Companies survey 2011

ALTECH continued

Review of operationscontinued



The telecommunications industry continues to develop at

a rapid pace creating significant opportunities and some

challenges. In South Africa, the reduction in interconnect

rates has affected the least-cost router industry with some

anticipated longer-term impact on voice business. The

increasing importance of data and the further development

and adoption of broadband technologies are, however,

expected to open up new opportunities for Altech.

The decision by the Department of Communications to choose

the DVB-T2 platform is welcomed as it is considered 50%

more spectrum-efficient than the DVB-T and offers more

channels over a single transmission, allowing more content to

be broadcast. The delay in the process has, however, caused

confusion and has impacted the industry negatively.

The East African industry is even more dynamic than the

South African market due to its liberalised regulatory

environment. This, along with the arrival of Bharti in East

Africa, has resulted in a highly competitive environment, which

has seen pricing drop more rapidly and to a greater degree

than had been anticipated. While this creates some challenges

in the short term, it will improve penetration into the market

and should enhance the medium- to long-term prospects.


The financial year ended 28 February 2011 saw

satisfactory results from most of Altech’s operating

companies. The group’s revenue increased by 5%, but

trading conditions for certain subsidiaries were adversely

affected by subdued global and local economic conditions,

as well as currency volatility. Movements in both the

rand and the Kenyan shilling affected export revenue and

revenue from operations outside South Africa.

EBITDA for the financial year was R1 072 million, with an

EBITDA margin of 11.1%. Due to the factors referred to

above, adjusted headline earnings fell to 529 cents per

share (2010: 605 cents). An encouraging factor was that

the second six months of the financial year reflected results

materially better than the first six months.

Altech Autopage Cellular’s revenue increased by 5%

largely due to the growth in value-added services and

prepaid airtime vouchers. Profit before tax of R288 million

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by 13%, primarily in areas of duplicated services in regional

offices. During 2011, Altech also introduced new B-BBEE

partners, Thebe Investments Corporation (Pty) Limited and

Identity Capital Partners (Pty) Limited.

New vehicle sales grew strongly in the second half of the

financial year and this helped Altech Netstar Stolen Vehicle

Recovery (SVR) to increase billable subscriber vehicles to

436 917 (a 7% growth on the prior year’s 409 000). Some

subscribers migrated from SVR to Fleet Management,

reducing growth in SVR but benefiting Fleet Management’s

results. Despite this, SVR showed an increase in revenue and

operating profit. Altech Netstar International’s investigations

into a significant potential acquisition in Latin America were

ultimately terminated by Altech Netstar due to inadequate

prospective returns. The search for international opportunities

continues. Sales through the existing footprint in Africa

remained stable.

Altech UEC experienced a difficult year, but improved its

performance during the second half. Revenue grew 6% to

R1 145 million from R1 079 million in the prior year, but

profitability declined due to a higher proportion of low-end

products in the sales mix as well as some once-off costs

associated with the Indian business. Manufacturing figures

at the Mount Edgecombe plant reflected overall growth.

Arrow Altech Distribution (AAD) continues to perform well

and ahead of to expectations, increasing its revenue and

EBITDA despite the impact of the strong rand on imported

components. Volumes were increased by some 30% and the

gross profit margin was improved. EBITDA margin of 10.1%

was up on last year’s 9.6%. Market share grew to 27%

(2010: 26%).

was down 6% on the prior year (R306 million) and the

EBITDA margin fell to 5.0% (2010: 5.5%). The main cause

of the decrease in profit was the disconnection of various

dormant and high-risk subscribers which incurred penalties

and affected the incentives received from the major networks

during the first half of the year.

Subscriber acquisitions remained strong at 183 960 gross

connections for the period, although slightly down from the

prior year, largely due to the after-effects of organisational

restructuring and difficult trading conditions. The latter

half of the year saw an improvement across all channels.

Active subscribers ended the year at 986 246, marginally up

(1.9%) on last year’s 967 596 with 3.4% growth in contract

subscribers offsetting a 10% decline in prepaid subscribers.

Average revenue per subscriber (ARPU) rose 3% to R384 from

last year’s R372, reversing the declining trend of the last two

years. Data revenue grew strongly and the broadband and data

subscriber base increased 9% to 101 557 (93 362 last year)

with the bulk of the broadband base relating to 3G/HSDPA

customers on the Vodacom and MTN GSM networks.

Mobile termination rate reductions have had some impact on

the company’s results, adversely affecting both revenue and

operating margins, although the group was able to take actions

to mitigate those impacts. Further reductions by the operators

will take place as per the agreed “glide path” over the coming

three years.

The Altech Netstar group achieved revenue growth reflecting

improved new vehicle sales. While EBITDA margins have

improved from prior year levels, the business continues to

face margin pressures. Billable subscriber vehicles grew from

467 963 to 505 358 units (8% growth), reflecting revenue

growth of 7% to R944 million (2010: R880 million). Profit

before tax grew by 13.4% year-on-year and the EBITDA

margin remained stable at 34%. The restructuring concluded

in the latter part of the year reduced the staff complement

The Altech Multi-media Centre in KwaMashu, KwaZulu-Natal, which

was developed in conjunction with non-profit organisation Protec

and the Department of Education for disadvantaged school children

is an example of a public and private relationship that will benefit

some 20 secondary schools. Pictured here is one of the facilitators

at the centre busy with a training session.

>


Altech IT continued its good performance with increased

revenues and EBITDA reported by Altech Isis and Altech

Card Solutions. Revenue grew by 16% to R706 million

(2010: R610 million) and EBITDA was down 4% to R132 million

(2010: R137 million). The company is well-positioned to

generate strong growth in revenue and profit going forward.

The group’s innovative, real-time, converged customer care and

billing solution, supported by its project management, business

analysis and systems integration capabilities, will cement its

position as a reliable and reputable supplier of turnkey business

support systems.

Altech West Africa experienced some challenges as a result

of currency effects and delays in customers placing orders.

However, its product range has been expanded to offer plastic

chip-card products to reduce its dependency on paper products

and future prospects look encouraging in the new product areas.

Altech Fleetcall performed above expectations with revenue

increasing to R66 million and EBITDA rising to R27 million

(9% up on 2010). The 36-month special has been a great

success and has been extended to all customers (given that

while there is a small margin sacrifice in the short term, it

provides longer-term contractual security (three years) as

opposed to the traditional two-month contracts).

Following difficult market conditions, Altech Alcom Matomo’s

revenue dropped 7% to R101 million (2010: R108 million) and

EBITDA declined 17% to R20 million. Customer acquisition in

the SADC has been satisfactory and included a number of key

projects for police services.

Altech Stream East Africa experienced an extremely difficult

year with the Kenyan operations significantly underperforming.

Challenges included SEACOM cable cuts, a reduction in the pricing

of bandwidth in the Kenyan market following the landing of

The East African Marine System (TEAMS) and the East African

Submarine Cable System (EASSy) as well as some local network

issues. In particular, the delays in the switching off of expensive

satellite connectivity, as well as delays in providing funding to the

business in respect of further network expansion, significantly

impacted results. Increased depreciation on completed projects,

combined with depressed revenues, impacting negatively on

trading. The overall market position, however, remains positive

and Altech Kenya Data Networks (KDN) is well-positioned to

capitalise on these opportunities.

Cheap, large-volume international submarine cable connectivity

with East Africa largely replaced the more expensive satellite-

based gateway traffic during the reporting period. The

marketplace effect of increased supply in telecommunications

and data broadband was exacerbated by the entry of new

operators who reduced prices to chase market share. The

increased competition reduced the profitability of East Africa’s

listed companies in these arenas. Recent large and long-term

infrastructure and support contracts with cellular operator Bharti-

Airtel are indicative of the future potential of this market. KDN’s

new data centre in Nairobi started operating after year end and

has already contracted major corporate and public sector clients,

boding well for future profitability and growth.

ST: Costs and cash management

Altech’s year end cash balance amounted to R458 million, with

the group’s balance sheet continuing to show considerable

strength. Impairments of R275 million, mainly in respect of the

carrying value of the group’s East African operations, as well as

certain once-off costs, were incurred during the financial year.

As a result of this, basic earnings per share for the Altech group

amounted to 216 cents (2010: 536 cents) per share.

Altech Autopage Cellular’s process to reduce the overall

annual operating expenditure continues with a number of

initiatives in progress. Ongoing management of operating

expenses remains a key activity.

Cost-cutting initiatives at Altech Netstar have been

undertaken to protect profitability levels, including a reduction

in headcount of 120 people. The operations, customer services,

contracts, telesales, retentions, and switchboard functions were

centralised at the Midrand office.

The new Altech UEC management team is making good

progress on moving the business into the higher value-add

product ranges. The finalisation of the standard for set-top

boxes (STBs) in South Africa bodes well for the operation.

Altech UEC has undertaken a corporate restructuring to

facilitate the introduction of a B-BBEE consortium, led by

Power Matla (Pty) Limited, as ownership partners in Altech

UEC’s African operations, while separating Altech UEC’s other

international operations and intellectual property rights into

a different structure, 100% owned by Altech.

The business process normalisation activities at Altech

Stream East Africa (ASEA) around the eTOM (enhanced

Telecommunications Operating Model v4.0) have largely been

completed and the process of normative embedding, continuous

improvement and refinement have commenced. Positive results

are already visible from this programme. Structural changes are


ALTECH continued

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planned to optimise the structure of the East African operations,

and to ensure that capital and regulatory (tax and telecoms

licensing) approaches are optimised. Profit levels were impacted

by the tough trading conditions, adverse currency movements

and certain once-off costs incurred during the financial year.

Impairments of R250 million were raised, reflecting the impact

of these various developments.

Carrier bandwidth sales were positive and the SEACOM

bandwidth acquired has now been fully utilised. At least

25% of the TEAMS bandwidth capacity held by ASEA has also

been utilised. The second half of the year saw a stabilisation of

bandwidth pricing and some significant new contracts being

signed with, among others, Bharti Airtel. These factors, along

with remedial actions, the completion of the data centre and

the non-recurrence of various once-off costs are expected to

significantly improve the results going forward.

The retail/wholesale split at Swift Global Kenya (SGK) has

been successfully implemented, and SGK is now focusing on the

platinum customer programme. As a result of the split, SGK has

continued its positive profitability trend compared to the

previous three years.

At Altech Kenya Data Networks progress has been made in

addressing working capital issues, with good progress on the

collection of debtors. Technical and operational performance

remains under scrutiny. The technical audit from Alcatel-Lucent

has been completed and is currently guiding the programme to

normalise technical performance.


Altech Autopage Cellular is currently the 4th largest least-

cost router operator in SA and the effects of lower interconnect

rates will likely have a significant impact on its operations.

During the previous year, it was estimated that the reduction

in interconnect rates could potentially reduce revenue by

R10 million to R20 million in the current financial year and

although there was a smaller than anticipated impact on this

year’s performance, provision has been made for a larger

impact in the coming financial year. The company continues to

drive growth in broadband and data while adding new value-

added services. Cooperation with Altech Technology Concepts

provides a platform to take various converged voice and

data products and offerings to market. Channel activities are

underway within both organisations to leverage the products

and solutions developed.

Structural changes are planned to optimise the

structure of the East African operations, and

to ensure that capital and regulatory (tax and

telecoms licensing) approaches are optimised.

Altech Technology Concepts (ATC) operates as an internet

service provider (ISP) focusing on SMEs and corporate clients.

In the second half of the year, the focus was on the

implementation of a new network and managed services which

went live in February 2011. Despite this internal focus, revenue

grew more than 40% to R48 million. A new network was built

to cater for redundancy and resiliency requirements and has

received positive feedback from both the media and customers.

Managed services offered by the group include managed

firewalls, hosted email and managed anti-spam and anti-virus.

Altech Netstar Fleet Solutions grew billable subscriber vehicles

16% to close the year with a base of 68 441. A number of

provincial government and municipal tenders were won, with

the most significant being the City of Cape Town, for an amount

of R65 million over three years, representing 5 000 vehicles.

The full implementation of this project will begin during the first

quarter of the new financial year.

Altech Netstar Traffic experienced a disappointing rate of

take-up of traffic services by the on-selling channels (such

as motor manufacturers, cellular handset manufacturers

and portable navigation device manufacturers), but this is

expected to improve in the coming year. Good progress was

made in developing a media traffic solution that allows traffic

congestion to be visually displayed in 3-D format on TV, and

the company is optimistic of a major TV channel adopting

this product.

Altech Fleetcall expanded and upgraded its network to

improve national coverage and exploit new opportunities.

In conjunction with Altech Alcom Matomo, Altech Fleetcall

provided a national voice communication solution to the

FIFA 2010 World Cup Organising Committee and successfully

installed and commissioned phase one and phase two of radio

communication services to the Gautrain Rapid Rail Link. Altech

Fleetcall is planning the development and deployment of an

overlay digital network infrastructure to increase coverage,

enhance the customer value proposition and assist in exploiting



synergies with other Altech companies. On the strategic front,

product and customer diversification initiatives continue and

the process to transfer the spare ECNS licence to Altech Alcom

Matomo has been initiated.

The Altech Alcom Matomo contract with the FIFA 2010

World Cup Organising Committee to provide digital TETRA

communications interlinked across all stadiums for the duration

of the event proved to be a resounding success benefiting

over 2 000 users. The national power utility awarded buying

contracts for intelligent remote terminal units with an initial

order already fulfilled and the balance of the national rollout

planned across the contract term. Further buying contracts

have been awarded by both the City of Cape Town and

Ekurhuleni Metropolitan Municipality for the supply of TETRA

technology equipment. Promising opportunities are emerging

for other national agencies.

Altech Alcom Radio Distributors’ sales of IP digital radios,

supported by appropriate application software, grew strongly

with various sectors adopting the technology. Software-based

radio applications supported further expansion of the product

range. The wireless broadband product portfolio continues to

grow and gain market share in southern Africa.

Altech East Africa offers outstanding long-term opportunities

for extending the reach of the Altech group’s services and

products beyond southern Africa due to its relatively low levels

of penetration. The three East African marine cable systems,

SEACOM, TEAMS and EASSy, increased broadband capacity

along the East African coastline and opened up countries

such as Kenya, Tanzania, Uganda, Rwanda, Burundi and the

Democratic Republic of Congo (DRC) to the range of digital

services offered by Altech. The submarine cable capacities

complement Altech’s investment in terrestrial fibre networks in

East Africa. KDN has been refocused to participate exclusively in

the carrier market and this has seen a positive market reaction

from the majority of their customers in Kenya.

The leading ISP brand in Uganda, Infocom, is recognised as

a technologically strong service entity, and holds important

telecommunications infrastructure and service licensing

rights. In addition to its existing Wi-Fi and WiMax network

business, Infocom is starting to generate strong revenue from

distributing undersea data cable capacity to Uganda. Altech

Stream Rwanda, a start-up broadband network operator and

ISP, has completed the rollout of an outdoor Wi-Fi network for

consumers and a WiMax network for corporate customers, both

covering most of Kigali, the capital city.

At Altech UEC, the local demand for STBs remains firm while

exports to Africa, Australia, Middle East, Europe and India are

growing steadily. Additional investments have been made

in a local manufacturing plant and equipment and a total

of 2.7 million STB units were produced during the year. The

Australian digital migration project has commenced and UEC

Australia has been contracted to participate, already supplying

60 000 STBs into this market. Global Decoder Logistics, the

company’s after-sales services division, showed strong growth

in both South Africa and Australia.

Altech UEC’s software design, development and services

division, Altech Media Verge, also exceeded expectations for

the year. Maintenance work will decline when older-generation

MultiChoice products are replaced by new high-definition

(HD) PVR products, but this decline will be offset by increased

application development work for the next generation of

electronic programme guide (EPG). Strategically the company

aims to position itself as the digital media solutions division

providing software applications and system integration services

that complement both the Altech UEC STB offering and working

with other broadcast device vendors to expand the addressable

market. During the year under review, its professional services

work for the development of applications and user interface

software at MultiChoice developed significantly and is set to

be further expanded as similar work opens up in Europe and

Australia.

South Africa’s imminent digital terrestrial television (DTT)

migration programme is expected to generate demand of

around nine million standard decoders over the next three

years. Ahead of the DTT programme, Altech UEC has developed

a terrestrial STB and has been participating in trials with

all potential operators. Altech UEC’s shipments of HD PVRs

started in India to Videocon and in Turkey to DigiTurk, with

the expectation of starting a new range of business over the

long term. Altech UEC’s next generation HD PVR project for

MultiChoice was also awarded with delivery commencing in

2011. MultiChoice also awarded Altech UEC their DVB-T2 project

for Africa. This is separate to the main South African DTT

programme and is expected to start deployment in Nigeria in

the second half of 2011.

Altech West Africa (AWA) has added manufacturing facilities

to initialise and personalise chip-card products for Nigerian

telecommunications network operators and financial service

providers. The pipeline for these products already exceeds

3.5 million cards, though delivery has been severely impacted

by certification delays and a worldwide shortage of chip-card

ALTECH continued

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modules. However, steady growth is expected within the region

due to increasing worldwide pressure to integrate into and

comply with the international banking infrastructure.

Altech Nupay has several projects underway to launch new

reconciliation facilities to a broad market sector, as well as

to individuals. This product will also help other entities to

assist their clients with better services and reconciliation

mechanisms. During the year, Altech Nupay launched a range

of co-branded NuCard products that will assist their clients

in leveraging their own infrastructure to offer value-added

products and services.

Swist Technology Solutions (Swisttech) provides data

integration and data management solutions and services,

complementing the products provided by Altech Isis.

The company was acquired by Altech with effect from

1 January 2011 and integration with the group has been

successfully completed.


Altech Netstar expects insurance telematics (the use of

driver behaviour by insurance companies to rate driver risk) to

become established in South Africa, where elementary forms

of driver behaviour products are already being offered. Altech

Netstar recently concluded a deal with OCTO Telematics, the

global leader in insurance telematics, enabling the company

to enter the local market. This development is expected

to bolster the SVR business in years to come as insurance

companies pursue additional services over and above stolen

vehicle recovery.

Altech Netstar International is pursuing a potential green

fields operation in the Middle East with a local design and

manufacturing business partner. In Namibia, the company

secured a contract for 185 Vigil Pro units for Rossing

Uranium. Altech Autopage Cellular launched the Telkom

Mobile Network partnership in the second half of the year.

Altech Technology Concepts made significant investments

to support expected growth and the company is now

well positioned to capitalise on converged voice and data

opportunities. A focused channel partner programme will be

launched during the year to support this drive. The consumer

market will be addressed by Altech Autopage Cellular and

other partners.

South Africa’s imminent digital terrestrial

television (DTT) migration programme is

expected to generate demand of between eight

and nine million standard decoders over the

next three years.

Arrow Altech Distribution has entered into a distribution

agreement for specialist products to service the military

and aerospace market. The transfer of technology was

completed during February 2011 and the full contribution

from this activity is expected to be realised in the new

financial year.


Altech’s operations cover many different markets, both

business to business (B2B) and business to consumer (B2C).

Altech Autopage Cellular and Altech Netstar are the two

operations most exposed to customer service issues and

are also the most materially affected by the new Consumer

Protection Act, 2008 (CPA).

Customer rights and protection

The CPA regulates the way these companies interact with

their customers and how they market their products and

services. Documents and processes have been revised to

ensure compliance with the CPA, especially relating to issues

such as plain language, published terms and conditions,

customer education and communication and refund policies.

In addition, both Altech Netstar and Altech Autopage Cellular

are running initiatives to educate their customers on the CPA.

In terms of customer rights and protection, credit card and

banking details, ID numbers and other customer information

are held electronically and the company aims to ensure that

this information is not stolen, lost or sold to external parties

as per the Electronic Communications and Transactions Act,

2002 (ECT) and the Protection of Personal Information Bill.

Altron’s Information Management (IM) council governs this

issue with clear policies and processes, such as strict access

control limiting employees’ access to sensitive data. The system

does not allow for the downloading of the database and all

documentation is stored off-site with a reputable document

storage company.


The Regulation of Interception of Communications and

Provision of Communication-Related Information Act (RICA)

mandates all cellphone customers to register proof of residence

and identity with their service provider. Customers failing to

comply by 30 June 2011 will lose access to their voice or data

services. The company may also be subject to a fine of 10% of

turnover if it is unable to comply with the Act.

Altech Autopage Cellular has implemented an operation-

wide RICA project, implementing various systems to ensure the

smoothest possible customer registration process. At the financial

year end, 87% of Altech Autopage Cellular customers were RICA-

compliant. Altech Netstar’s customers are not affected by RICA

as Altech Netstar is the customer of the networks and is itself

RICA-compliant.

Customer satisfaction

Altech Netstar

Providing customers with “an exceptional experience through

outstanding service” is a key part of Altech Netstar’s lifestyle

statement. Senior managers drive the message across all

functions in the organisation, highlighting that all employees

are responsible for customer service. Service levels for all call

centres are tracked daily and the performance of all supervisors

and team leaders is measured against targeted service levels.

Training is ongoing and corrective actions are implemented

where necessary.

Customer satisfaction is measured through a survey done

via our interactive voice response system. Overall, customer

satisfaction levels improved marginally during the year and

customers were generally satisfied. In the future, information

gathered during these surveys will also be used to assess/

evaluate the quality of engagement.

We set ourselves a target to consistently answer at least

80% of calls received at our call centres within 20 seconds

and managed to exceed this target again in the current

year – 92% of all calls were answered within our target

time. The number of queries resolved in the first call fell to

77% (2010: 80%) this year and churn rate – the percentage

of customers whose services are terminated – scored

11.5% against our goal of less than 10%.

We strive for the continual improvement of contact centre

performance. To this end, some changes were made in the

period under review. For example, a full analysis of call centre

staff requirements was undertaken and existing staff were

upskilled.

20102009 2011

Customer satisfaction

%

63

70 7

3

We have set ourselves ambitious targets for the coming year to

maintain and improve on our customer service levels.

Altech Autopage Cellular

Every employee – including executives and managers – is held

accountable for customer service and it is an important key

performance indicator on performance reviews.

We determine customers’ key concerns via a number of

channels, including the company website, ICASA and consumer

affairs, as well as through monthly customer satisfaction

surveys. The surveys, which show an improving trend, have

been integrated into the company’s customer management

system. These efforts resulted in 201 127 retentions for the

period against a budget of 187 500. Retention of high ARPU

customers is an area of major focus.

We track our customer service performance internally

through a number of specific metrics. We exceeded our

target of 65% of customer calls answered within 30 seconds,

achieving 80% (2010: 67%) and the number of queries

resolved in the first call also improved. Following customer

feedback, we are working on improving the turnaround time

for handset repairs.

ALTECH continued


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Customer churn remains a major area of focus. Churn

rates were above target at 17.8% (2010: 15.6%) due to

disconnections of out-of-contract subscribers and dormant

lines. Involuntary churn and churn related to affordability

continue to contribute materially. Churn is managed through

tighter credit scoring, increased collection processes and

attractive offers to retain subscribers.

ST: Human capital

Altech has 2 462 employees in South Africa, 361 employees at its

international operations and 540 temporary employees, totalling

3 363 employees. Of this total, 2 823 are permanent staff.

Altogether 56% of our South African staff are black and 26% are

black females. Employee turnover was 24.2%, marginally up on

last year’s 23.8%. The average annual salary increase for the year

was 6.9% (2010: 7.2%).

Attracting, developing and retaining talent, particularly

among the previously disadvantaged, is one of Altech’s

biggest challenges, especially in the context of the global skills

shortages in the Information and Communications Technology

(ICT) sector in which we operate.

In response, we commissioned an employee retention survey,

concluded a salary benchmarking and job mapping exercise,

finalised policies for performance management, succession

planning and remuneration and rolled out a competency and

learning management system.

Altech spent R15.3 million on skills development in

2011 (2010: R11 million) with 53% spent on previously

disadvantaged individuals (2010: 42%). Average training

spend per employee rose to R4 549 (2010: R2 722) and each

employee averaged 1.06 days of training in 2011, compared

to 0.85 in 2010.

Employees on Altech Academy programmes increased from

300 last year to 312 in the current year, and included a

leadership development programme to address the need for new

leadership talent. Learnerships fell from 103 in 2010 to 55 in

2011, partly owing to the timing of new intakes. Our 18-month

engineer-in-training programme continues to flourish with

12 graduates on the programme this year (2010: 15).

In the current year, 43% of participants in our bursary

programme were black. The search continues for suitable

candidates to achieve our target of over 50% previously

disadvantaged individuals in the programme. Other targets

for 2012 include at least 8% of staff in the Altech Academy,

21 students to be supported with their studies, 2% of

salary bill to be spent on skills development, 85% of staff

to undergo formal performance reviews and the rollout

of the Altech Academy to foreign operations. Altech aims

to provide a safe working environment to its staff and to

facilitate the continuing health of its workforce. While the

company’s overall health and safety risk is regarded as

low, the risk rises in our manufacturing operations, Altech

UEC and Altech West Africa. Altech UEC maintained

ISO 9001:2008 compliance and our goal is to achieve

the same level of compliance at all of our manufacturing

operations. Altech Netstar’s externally contracted

helicopter service represents an additional safety risk within

the Altech group. The number of injuries increased from

eight in 2010 to 13, owing to an improved focus on, and

awareness of, injury reporting while the number of lost days

halved from 239 to 116. An audit by the Department of

Labour found the Altech group to be fully compliant with

the requirements of OHASA.

> Quicklink:

For further detail, see

www.altron.com/annual2011/unabridgedAltech.htm

ST: Transformation

Altech embraces its role in helping to drive the transformation

of the economy of South Africa towards a more representative

workforce. The transformation progress of each operation is

measured against the dti Codes of Good Practice (CoGP) and

the total scores amalgamated to show each entity’s level of

contribution. For the first time this year Altech’s B-BBEE status

was externally verified, and it achieved a score of 76.10, a

level 3 contribution against the dti’s CoGP.

The results of the Financial Mail Empowerdex Top

Empowerment Companies in South Africa 2011 Survey were

released in April 2011. The survey aims to objectively measure

the contribution made to broad-based black economic

empowerment (B-BBEE) by companies listed on the JSE Limited.

Overall, Altech achieved 42nd position among the top 100

companies and ranked 5th in the ICT sector. Altech ranked 2nd

overall for skills development, indicating the commitment and

value of the company’s investment in training initiatives for

designated employees through the Altech Academy.


ALTECH continued


B-BBEE score (as at 31 August 2010)

2010

Level 3

Ownership 19.8

Management and control 2.2

Employment equity 5.7

Skills development 12.9

Preferential procurement 15.6

Enterprise development 15.00

Socio-economic development 5.00

Overall score 76.20

Ownership remains a strategic focus area for Altech’s

operations. Thebe Investment Corporation and Identity Capital

Partners have a 25% plus one share in Altech Netstar’s South

African operations contributing to an overall B-BBEE score of

19.8 for equity ownership.

For further information regarding empowerment transactions

concluded by the Altron group after the year end, refer to

page 145 of the directors’ report.

Altech has also agreed to acquire the 25% plus one share

held by Pamodzi Investment Holdings in Altech Information

Technologies and will look to re-empower this business during

the next year.

Altech scored 2.2 for management and control and 5.7 for

employment equity, well below the dti targets of 10 and

15 respectively. The skills shortage in the ICT sector makes

attracting, developing and retaining management talent one

of Altech’s biggest challenges, particularly when seeking to

identify suitably technically skilled black, and especially black

female talent.

Our focus on succession planning, training and development,

and accelerated leadership development programmes will over

time help to improve our performance in this area. Indeed, the

group scored 12.9 for skills development against the dti’s CoGP,

underscoring our commitment to training and development.

The Altech Succession Planning Committee has approved the

succession planning policy and has a mandate to address our

leadership challenge. Likewise, the retention, remuneration and

performance management policies put in place by the human

capital council are designed to attract and retain top black

talent from the external market.

Preferential procurement once again showed a good score

across all Altech operations due to the concerted effort

applied over the last few years. Our dedicated focus on

B-BBEE procurement spend resulted in over 90% of the

company’s overall procurement budget being spent on

B-BBEE suppliers (as at 31 August 2010). Altech achieved

a B-BBEE procurement recognition level of 110%, with a

dti CoGP score of 15.6, making Altech more attractive as a

supplier. At the close of the 2011 financial year, Altech had

spent R1.64 billion on preferential procurement. Altech will

continue to focus on identifying and developing suppliers

that are B-BBEE-owned, especially by black women.

The focus on enterprise development started last year through

Altech’s enterprise development policy and implementation

guidelines, resulting in improved scores across the division.

The company spent 3.6% of net profit after tax on enterprise

development, exceeding the dti target of 3%.

Socio-economic development (SED) has traditionally been a

strong point for Altech, and the company as a whole invested

R5.2 million (2.3% of net profit after tax) in socio-economic

development initiatives, compared to R4.8 million in the prior

year (0.82% of net profit after tax). Altech is continuing to see

the benefit of the central coordination of the SED fund and the

process of the operations forwarding project suggestions to

the SED committee.

> Quicklink:



ST: Environment

While Altech contributes less than 20% of the Altron group’s

total carbon emission, we are committed to employing our

technologies to improve both our impact on the environment

as well as that of society as a whole. We are improving our

measurement and this year also expanded our scope to

include joint ventures and operations outside South Africa. By

far the largest contributor to our carbon footprint is electricity

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usage from Eskom at 70% of our total carbon footprint of

43 236 tonnes CO2e. Three-year targets have been set to

reduce impacts across all our high-impact areas, including

electricity, business travel, paper consumption and fuel usage.

Reinforcing the Powersave@Altron initiative, Altech engages

its employees on environmental issues through regular memos,

poster campaigns, the intranet, and articles in the Altech Talk

and Profile magazines, as well as providing ideas and tips on

how to cut power consumption on the intranet (Alix).

Many of our operations use energy-monitoring devices

developed by one of our sister companies, Strike Technologies

(part of the Powertech group), to enable monitoring of our

current usage patterns as well as the effectiveness of our

energy-saving initiatives.

Water and waste usage is largely confined to the office

environment, where we conduct awareness campaigns

and ongoing training. We dispose of waste responsibly, in

compliance with the National Environmental Management Act:

Waste Act, No 59 of 2008. As of this year, water consumption

and waste management statements are actively monitored

and charted and it is anticipated that reduction targets for

these aspects will be set within the next two years. Altron will

also be participating in the first CDP Water Disclosure Project

submission this year as part of our commitment to manage and

reduce our water consumption throughout the group.

> Quicklink:




Altech’s networks in East Africa provide customers with

significant broadband and mobile access at internationally

competitive prices. To ensure that the local population

benefits from these new services, the company provides local

communities with free or very low-cost internet access via

internet hotspots and delivers free hotspot connectivity to all

Kenyan universities and major schools. Altech has supplied

digital traffic monitoring cameras via the internet to alert

the public in real time to traffic congestion. Eight digital

villages allow community members access to the internet at

dramatically reduced rates and we anticipate the rollout of

more such villages in the coming year.

Local communities benefit from inward investment through the

creation of jobs; 70% of structural and civil works are sourced

from local suppliers in the East African countries into which we

are expanding. While the bulk of the raw materials used by the

Nigerian operation is sourced from international companies,

more than R45 million was spent with local suppliers, including

courier services, delivering and clearing agents, tax consultants,

diesel suppliers and financial services.

Altech’s expanding operations in various developing markets

across the globe may include exposure to suppliers in areas

with high perceived or potential risk for fraud, corruption or

human rights abuse. As a subsidiary of Altron, Altech is a

signatory to the United Nations Global Compact and Altech

is therefore committed to upholding the rights of employees,

whether they are employed directly by Altech or by its

suppliers. This issue affects businesses with operations in

high-risk countries, as well as Altech UEC which sources certain

components from manufacturers in the Far East.

Altech’s human rights policy was implemented in 2010 and

protects the rights of employees, people employed by suppliers

and local communities. The company’s policies on ethics, bribery

and corruption extend to and govern its foreign operations and

these issues are also included in the human rights policy. All

operations have written codes of conduct as well as formalised

complaints procedures that are communicated to all staff and

translated into relevant local languages.

To date, 10% of our suppliers in East Africa have undergone

human rights screening and 5% of employees in East

Africa have received training on human rights policies and

procedures. Rollout of the Altech Human Rights Policy to

relevant staff was completed in the previous year – during

the year under review we conducted ongoing awareness

campaigns through the Altech Talk and Profile magazines

and other communication channels.

> Quicklink:



www.altech.co.za

Power-saving initiatives at Bytes Business Park include perimeter solar panel electric fencing (with back-up battery), E-waste recycling (no landfills allowed), paper recycling, the use of energy-saving globes where possible as well as an indigenous garden requiring little or no water usage. Bytes is planning the installation of regulators for air conditioners in all the blocks that will regulate power usage to keep demand low. It will also include a timer for console units which will save up to 30% per month on electricity costs.

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BYTES TECHNOLOGY

GROUP (PTY) LIMITED (BYTES)

Highlights

> Capitalise on refreshed long-term distributor

relationships (e.g. Xerox and NCR)

> African expansion

> Major clients undergoing IT refurbishment

> New product development

> Leverage current customer base (particularly Retail and

Banking sectors)

> Cross-selling between businesses facilitated by

designated internal function

> Actively progress and conclude suitable acquisitions

29%71%

23%

77%

27%

73%

February 2011 February 2011 February 2011

Group contribution

Revenue EBITDA Headline earnings

Bytes Altron group

Operational review

Company

February2011

RevenueR millions

%change

February2011

EBITDAR millions

%change

Bytes Systems Integration 699 16 43 52

Bytes Managed Solutions 848 (3) 106 54

Bytes Document Solutions (Local and UK) 2 036 (1) 201 16

Bytes Connect 566 (14) 22 (65)

Bytes Healthcare Solutions 193 14 56 15

Bytes People Solutions 86 13 9 42

Bytes International Operations 1 751 1 55 8

Group Eliminations (112) (18)

Total 6 067 2 474 21

Financial summary

R millionsFebruary

2011February

2010%

change

Revenue 6 067 5 952 2

EBITDA 474 393 21


HEPS (cents) 208 157 32

Adjusted diluted headline earnings 219 173 27

ROE (%) 20.3 17.1

Cash net of borrowings 46 (146)

page 72

BYTES continued



“The improved profitability for the year under review is based on good performances across the Bytes group, with record performances by Bytes Systems Integration, Bytes Managed Solutions, Bytes Software Services in the UK and Bytes Healthcare Solutions. Both the Retail ATM business within Bytes Managed Solutions and Bytes Document Solutions UK were returned to profitability contributing to healthy overall growth in operating profits. Going forward we anticipate continued strength in the currency and increased corporate spending on IT. In this environment, further growth will come from our strong commitment to expanding our range of services to our customer base.

In line with the Altron Vision 2012 targets, Bytes has achieved level 2 contribution status against the dti’s Codes of Good Practice with a score of 90.98. We were awarded top position in the South African ICT sector in the 2011 Metropolitan Oliver Top Empowerment Awards, competing against 100 applicants in the sector. A skills audit has confirmed the relevance of the general shortage of technical skills to our own business. In response, we spend over R20 million on training and skills development annually with more than 60% spent on black trainees and 30% on black females.” – Rob Abraham, CEO.


> Achieved top position in the ICT sector in the 2011

Metropolitan Oliver Top Empowerment Awards

> Level 2 contributor against the dti’s Codes of Good

Practice with a score of 90.98

> Kagiso owns 27% of Bytes SA

> 63% of Bytes’ permanent workforce comprises black

employees

> With a spend of over R19 million, Bytes developed

442 black-owned enterprises in 2011

> Bytes contributes 10% of the Altron group’s total carbon

footprint at 25 000 tonnes CO2e


Strong competition and high pressure on margins

continue to be the dominant features of the information

technology market. However, we have experienced a

sustained improvement in activity from corporate clients,

particularly those in the retail and financial services sectors,

while a resumption of IT projects has opened up further

opportunities for the group.

The strong rand continues to weigh on contributions

from foreign operations, conversely reducing landed

costs of imported products at Bytes Document Solutions

amongst others, allowing many of its large customers the

opportunity to replace ageing equipment.

Increased competitiveness in the UK IT market impacted

negatively on margins, while the new coalition

government’s cutbacks resulted in projects being

cancelled or postponed, with decreased overall spend

on software. The UK’s National Health Service presents

both an opportunity and a challenge and management

is continuously reviewing the developments and the

possible implications, ensuring that we are well prepared

and positioned to deal with all eventualities.

The commercial printing industry in South Africa has not

yet recovered and a sense of caution exists with many

corporate customers, suppressing growth and sales at

LaserCom and NOR Paper.

There has been an improvement in activity in the group’s

African operations, and in several territories exciting

opportunities are emerging for production systems and

managed print services, and managed solutions.


Bytes reported excellent results and despite revenue pressure

and the effects of the strong rand, EBITDA improved by

21% from R393 million to R474 million with the EBITDA

margin improving from 6.6% to 7.8%. The improved

profitability is the result of good performances across the

Bytes group, with record performances delivered by Bytes

Systems Integration, Bytes Managed Solutions, Bytes Software

Services in the UK and Bytes Healthcare Solutions. Both the

Retail ATM business within Bytes Managed Solutions and

Bytes Document Solutions UK were returned to profitability.

These factors resulted in headline earnings improving by 32%.

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Bytes has renewed its focus on acquisitions, seeking the correct

opportunities to meet its long-term strategies for growth. We

continue to look for potential acquisitions in southern and East

Africa to grow our business outside South Africa and establish

Bytes as the leading IT company on the African continent.

Bytes Document Solutions (BDS) in South Africa improved

both its revenue and EBITDA despite price deflation caused

by the strong rand. NOR Paper and LaserCom have both

underperformed due to supply problems, management changes

and some loss of market share. Both of these businesses have

been refocused in recent months.

Its African operations continue to make a solid contribution to

revenue and operating income, and the new 10-year distributor

agreement with Xerox will enable the company to build greater

momentum as it expands its footprint in those markets. The

services business was the biggest contributor to the Xerox

operation’s revenue and margins, and recurring revenue

represented some 70% of total revenue. At LaserCom, recurring

revenue from corporate contracts comprised about 90% of total

sales.

Despite the competitive document management market in

South Africa, BDS has managed to improve its market position

during the year to the top five of each equipment category in

which it competes. LaserCom remains the largest variable data

print vendor in this market, while NOR Paper is positioned firmly

among the top three paper merchants in the market.

Bytes Managed Solutions (Bytes MS) reported significantly

improved EBITDA due to strong sales in the financial services

market, as well as the return to profitability of the Retail ATM

business. The managed services division continues to perform

well despite being under constant revenue and margin pressure

from customers, and has won some good long-term contracts

for its NCR products, particularly in the retail space.

Through its strategic alliances with a number of our key

customers, Bytes MS is actively expanding into selected African

countries replicating its local offering. Approximately 70% of its

revenue is generated through recurring revenue streams from

support and service contracts as well as its Retail ATM offering.

Bytes MS has a 65% market share in its selected target

markets and is actively pursuing new markets and industries

while expanding current solutions to new customers in existing

markets.

Bytes Systems Integration (BSI) delivered good results with

significant increases in both revenue and operating profit as

corporate IT spend recovered. In particular, it recently won

some major networking contracts, improving its market share.

Appropriate austerity measures along with determined sales

efforts have helped Bytes Systems Integration deliver a record

performance. Although the Advanced Technology Services

division was the major contributor this year, an improved

performance from Business Solutions along with the Kronos

and Software Design business units resulted in a significantly

improved overall performance.

Some 41% of BSI’s revenue is generated through recurring

work from its support and service contracts as well as its rental

finance offering. With a strong BSI foothold in Africa and the

Middle East, BSI is actively expanding its African footprint into

eastern Africa with strategic key suppliers.

Bytes Healthcare Solutions (BHS) continues to perform ahead

of expectations with double-digit increases in revenue and

operating profit, benefiting from the additional revenue from the

Discovery Health pharmacy business. Bytes Healthcare Solutions,

operating through its two business units, Med-e-Mass and

MediSwitch, continued to deliver an excellent and sustainable

By centralising Altron head office’s IT and Altron’s shared group

application into a “private cloud” within the internet through

our Bytes group, enable users of these services to more easily

access the services from anywhere around the globe and also

enables the introduction of virtualisation, thereby decreasing

more than 13 physical servers and the corresponding saving in

carbon footprint.

>


level of profitability. Operating margin was maintained at a

satisfactory level, further emphasising the benefit of owning

its own intellectual property and having a solid and sustainable

annuity-based business.

Additionally, a new patient record system for doctors has been

acquired by Med-e-Mass in line with the consensus that the

most cost-effective way to enter this emerging market was by

way of acquisition.

Further afield, BHS’s JV in Saudi Arabia, BHS Arabia, is

progressing according to a revised plan and will be re-evaluated

during the coming year. At a strategic level, BHS is focused

on identifying new revenue streams to complement its well-

established and profitable current businesses.

Bytes Connect, the new company formed through the merger

of Bytes Outsource, Bytes Communications and Intelleca,

delivered results in line with expectations with more than

70% of its earnings remaining annuity-based. Following

the restructuring of its Africa channel strategy, specifically

relating to its Alcatel-Lucent business, Bytes Connect is now

focused on increasing its market penetration into sub-

Saharan Africa.

The company remains Alcatel-Lucent’s dominant partner in

South Africa and Africa. The emergence of new competitors

within the telecommunications arena has prompted

diversification towards a more holistic solution for its

customers. The outsource business unit continues to grow and

is expanding its market share. Going forward, Bytes Connect will

continue to seek complementary acquisitions that will bolster

its critical mass and add new value propositions to the market

segments in which it operates.

Bytes People Solutions (BPS) has grown revenue and

has shown a good performance by improving its operating

profit levels by more than 70%. Its strong and long-standing

customer base consists of a number of South African blue-

chip organisations and it has seen revenue from these clients

exceed that of the previous financial year.

Bytes UK had its best year on record improving its revenue

by 12% compared to the previous year, based on a good

performance by both operations. Additionally, profits were

also at a record level reflecting a 40% increase year-on-year.

Although the contribution was impacted by the strength of the

rand its improved performance was predominantly driven by

the return to profitability of the UK BDS business and a record

performance from the Software Services business. Revenue was

further enhanced by £55 million of once-off ’true-up’ sales to

the National Health Service in the Microsoft licensing business.

The Software Services business continues to grow and perform

well and is focused on diversifying away from its dependence

on Microsoft. This aspect has become more critical following

proposed changes in Microsoft’s rebate structures, which are

expected to have adverse effects on the business. BDS UK

continues to face challenging trading conditions, but there are

encouraging signs of an increase in sales. A new management

team has revitalised this business and, following extensive cost

reductions, the business has been returned to profit.

BDS UK’s recurring revenue has been increased to 33% of

revenues from 27% in the prior year. Bytes Software Services

continued with its dominant position as the number one

reseller for Microsoft in the UK, and BDS was also placed first in

the UK as resellers for Xerox in both the office and production

product ranges.

Bytes Namibia and Bytes Botswana have both delivered

results in line with expectations. Bytes has a solid reputation

and track record in these territories with the potential to grow

its African operations through the acquisition of well-managed

IT businesses in Africa.


Bytes remains strongly cash generative, although releasing

cash from working capital was constrained by higher stock

holdings in Bytes MS to meet customer orders as well as

increased inventory in the NOR Paper business. We continue to

drive at improving working capital management, in particular

maximising debtor collections.

While returns from the Bytes finance book (Technology

Acceptances) have been below expectations, the improving

economy is expected to start reducing pressure and bodes well

for the future. Fundamentally the quality of the book remains

of the highest order.


BYTES continued

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BDS’s expense-to-sales ratio decreased from 16.4% in the prior

year to 16.2% and expenses were well controlled in line with a

revenue increase of 1.1%. Net inventory increased by R20 million

due predominantly to a NOR Paper stock purchasing decision

during the year that turned out to have been ill-timed. Movement

of these items is slow, but ongoing.

Bytes MS substantially reduced its costs compared to

the previous year owing to the merger of Bytes Managed

Services and Bytes Specialised Solutions. More than 30% of

its products sales are impacted by forex exposure which is

being hedged through Altron’s treasury department. Supply

chain management and optimal resource deployment is key

to the service excellence provided by Bytes MS. Net trade

receivables increased by 42% mainly owing to large sales

invoices in February 2011. Debtors overdue by 90 days or

more decreased by 53% during the year.

The overall expense ratio in BSI was brought down from

23.5% to 20.8% owing to more effective cost management.

Gross profit percentages also increased from 25.6% to

26.5% owing to better cost structures and management. Net

inventory remained steady, accounts payable decreased by

2.5% while accounts receivables increased by 3.4% against

an increase in revenue of 45%. BSI has decreased its bad

debt provision by 55% and reduced its long-outstanding

debtors significantly.

Bytes Connect has been restructured and the consolidation

of all the Gauteng offices at Bytes Business Park in Midrand is

expected to yield significant operational cost savings. Many of

the duplicated costs have been removed from the organisation.

The last significant area of focus is in financial systems which

are due to be consolidated in the second half of the new

financial year. This final phase should see Bytes Connect reach

an optimal level of overhead expenses.

Bytes Connect’s inventory holding has not significantly

changed year-on-year. Debtor management is satisfactory

although some processes recently adopted by its international

customers remain challenging and have negatively impacted

debtors days. Continuing efforts to refine the new processes

are bearing fruit, but progress is slow. It is expected that the

Outsource, Communications Systems and Intelleca businesses

will, together, leverage a new services-led sales model to its

combined client base, from a more efficient cost structure.

BPS brought expenses down compared to the prior year

through a 22% reduction in administration costs and a 10%

saving in employee overheads (based on a headcount reduction

following a consolidation and restructuring of the business

units). There are no material risks within its debtors book.

It has held debtors of over 60 days to below 7% of its total

debtors book.

Bytes UK managed to contain its overall costs during the

year under review with BDS UK decreasing costs by 10%

owing to a reduction in headcount that took place during

the previous financial year. In terms of capacity alignment,

the 10% increase in the volume of business required

improvements to processes and systems. There was a

considerable improvement in debt collection at BDS UK

with the debtors days decreasing from 56 in the previous

year to 47 in the current year. All customers’ credit ratings

are monitored on an ongoing basis to guard against credit

default in the current difficult economic climate.


BDS’s IP ownership resides in a number of software products

in both its Xerox business and in Lasercom, the variable-data

print operation. At Xerox, the immediate future of document

management resides in managed print and related offerings,

and it has established a software and solutions business to

execute this as a business strategy. LaserCom is focusing on

growing cross-media communications.

BDS is implementing a service-oriented architecture installation

on its Oracle platform to extend its service capabilities and

enhance its enterprise-wide functionalities to host third-party

applications such as Sales Tracker and Managed Print Services

(MPS). The launch of Xerox’s ColorQube technology has been a

great success in SA, owing to its green credentials. Increasingly,

customers are seeking value addition, and the positioning of

its MPS offering in the market holds good promise. At NOR

Paper, the emphasis is increasingly on turnaround speed and

efficiency of logistics, and these attributes are becoming

competitive advantages.

Bytes MS’s renewal of additional services for the Pick n

Pay contract is particularly important to the future of the

business and its relationship with NCR. Managed Solutions

also won a number of significant ATM equipment orders



from its long-standing banking customers. Not only has

this contributed to the year’s results, but it is expected to

make a positive contribution for years to come. Bytes MS

owns pockets of complementary intellectual property and

is seeking to increase this into the future through research

and development, as well as acquisitions. The Bytes MS

operational system will be replaced by Siebel, and this will

be fully integrated into the latest release of Oracle Financials

and Supply Chain. Included in the new system will be a

CRM module and a Business Intelligence module, which will,

among other things, facilitate accurate customer profitability

calculations.

With the convergence of mobile, internet and point-of-service

channels, new solutions across multiple industries are evolving

in the self-service arena. Some recent successes include

intelligent deposit and cash recycling solutions allowing the

banking sector to further automate functions traditionally

performed in physical branches.

BSI owns the IP for its offerings in the retirement fund

administration, sales tracking and access control environments.

This enables the delivery of a complete offering to customers

with the help of its strategic partners and other technically

astute solution providers.

Virtualisation has led to the transformation of data centres and

the Imagine Virtually Anything (IVA) initiative allows customers

to respond faster to changing business requirements thereby

reducing their overall data centre costs. IVA is a shared, unified

architecture that is the foundation for cloud computing and the

realisation of IT as a service. Through this initiative, BSI will be

able to provide a service that requires lower investment by the

customer. As a further benefit, IVA promises green solutions by

consuming less power, cooling and space.

BHS’s focus on creating new products and services is expected

to ensure future earnings growth. The MediSwitch business

is planning a launch, in conjunction with Mettle Factors (Pty)

Limited, a switch-based claims factoring service for healthcare

service providers in the near future. Feasibility studies have

proved this to be a potentially lucrative revenue and profit

stream, albeit that initial take-off is expected to be slow. A

new patient record system for doctors is also being developed

by Med-e-Mass. The most cost-effective way to enter this

emerging market is by way of acquisition and to this end the

company has purchased the IP for a system from the UK as

opposed to developing its own.

With the enhanced role that governance plays in the ICT sector,

Bytes Connect has developed a risk and governance model that

is expected to add significant value to both new and prospective

customers. As the customer requirements have evolved more

towards cloud-based computing, Software as a Service (SaaS)

and Communications as a Service (CaaS), the requirement for

infrastructure investment is expected to rise steadily over the

coming years.

The global ICT landscape is being consolidated through mergers

and acquisitions driven by technology convergence and the flat

markets experienced in different sectors. Original equipment

manufacturers (OEMs) such as Microsoft, Dell, HP and Cisco

continue their drive to include services into their offerings

as well as have more direct relationships with the users of

their product sets. These factors have created challenging

relationships with the primary Bytes Connect vendors with

whom it competes and partners.

One of the key differentiators of BPS is its complementary

service offering which enables it to assist organisations

with skills development planning, the delivery on training

requirements and the management of the process. In this

way it provides a single interface as well as a consistent level

of service. As an education partner to a number of cutting-

edge technology providers, equipment refreshing remains

a key requirement and BPS continues to invest in the latest

technology in order to address this requirement. In addition,

the capacity of its skills development business unit has been

increased in order to accommodate the increased demand for

training services. Virtualisation is also becoming an integral

part of its product offering and with its high-availability

computer laboratory, BPS is well positioned to meet these

requirements.

With changes to Microsoft’s rebate programme coming into

effect in the third quarter of the 2012 financial year, the

Software Services division of Bytes UK is expending significant

efforts to diversify from its Microsoft-centric business model.

Although this will continue to be the core of the business, the

objective is to become less reliant on Microsoft going forward.

Continued investment in Microsoft’s latest technologies

“in-house” is enabling greater productivity and allowing clients

BYTES continued

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to utilise portal technology to place orders directly on the

company without the need for human intervention.


One of Bytes’ key objectives is the continued focus on

securing long-term business relationships with key suppliers.

Bytes aims to conclude a new partnership agreement with

Affiliated Computer Services (ACS), a leading (Xerox-owned)

USD6 billion per annum business process outsourcing company.

It is expected that this will enhance its value propositions in

both the healthcare and public authorities markets.

Recent market surveys indicate that BDS continues to improve

its market share in South Africa based on its long-standing

partnership with the Xerox Corporation. Its exclusive distributor

agreement with Xerox, covering South Africa and 26 other

African countries, was recently renewed for a further 10 years.

This is an important milestone for Bytes as its Xerox business

remains one of its most significant and consistent contributors.

BDS was also awarded the best performing Xerox contributor in

the Middle East and Africa.

Through the Bytes MS partnership with NCR, Bytes has

access to NCR’s research and development as well as keeping

abreast of global trends. NCR continuously evolves its

solution offerings in line with current and future customer

needs. Bytes MS has also recently concluded a new exclusive

distributor agreement with Fusion. This partnership

complements its services offering to address the needs of

the petroleum retail sector.

Its various partnerships enable BSI to keep its customers

informed of new developments, technologies and upgrades.

NetApp and Cisco are key partners in the virtualisation arena

and new discussions have established firmer relationships.

However, some of its vendors tend to liaise directly with its

customers, impacting BSI’s objective of supplying a full cycle

of services.

The merger of Alcatel-Lucent with Genesys has positively

impacted Bytes Connect, it being the only partner in Africa

that has accreditations and competencies in both Alcatel-

Lucent and Genesys that does not offer competitive solutions

into the market space. These factors are expected to see this

partnership flourish.

BPS has maintained all its vendor partnerships and in addition

has become a regional partner for a provider of leading-edge

supplier courseware development tools enabling the company

to extend its service into Africa.


Long-term profitable customer relationships are vital to Bytes’

business. It aims to develop strong partnerships by continually

maintaining high-quality customer service and providing its

customers with world-class managed service solutions. Bytes

monitors its business-to-business (B2B) customer relationships

on an ongoing basis, and has recently launched Bytes News

Bits, a joint venture with IT Web, to engage with clients.

Random third-party surveys of clients indicate good working

relationships. Bytes is looking to increase survey response rates

to improve monitoring of customer satisfaction. With access

to a combined total of more than 20 000 customers, Bytes

has appointed a programme manager to coordinate its efforts

to cross-sell between its various businesses.

Bytes Document Solutions were the proud winners of the Xerox

Middle East and Africa Partner of the Year Award for 2010. This

prestigious award is contested by Xerox distributors in 76 countries

within the Xerox MEA stable against a balanced set of criteria.

Winning the award coincides with the renewal of an exclusive

agreement valid for the next 10 years between Bytes Document

Solutions and Xerox Corporation. Photographed at the official

signing of the agreement and the presentation of the Partner of the

Year Award are (from left) Marcus Childs, Vice-President and

General Manager MEA for Xerox; Herve Tessler, Corporate Vice-

President of the Xerox Developing Markets Operations; Hennie du

Plessis, CEO of Bytes Document Solutions; Robert Venter, Altron CE.

>


BDS’s Xerox business has renewed a number of long-term

contracts with Tier 1 customers, such as the University of the

Free State and Rainbow Farms. Its customer base resides in the

financial, manufacturing and mining sectors, including ABSA

and Anglo Platinum. LaserCom continues to be a key provider

of print solutions to the telecommunications and retail industry

with customers such as Vodacom and Mr Price.

Bytes MS’s full life-cycle services and support offerings

complement strategic product partnerships that provide

customers with complete offerings. These are further

complemented by the Bytes Enterprise Management

Solution supporting its Remote Management and anti-virus

management toolset. Several of its Tier 1 customers in the

retail and banking sectors are investing in a number of

initiatives to update their ageing technologies in order to

expand their business functionality at the point of service.

Based on its track record, geographical presence and

capabilities, Bytes MS is well placed to deliver value in this

process. Its delivery capability has been one of its strengths

in meeting contractual commitments.

The key focus of Bytes MS is to study customer businesses

and to become their trusted advisors. By understanding the

challenges its customers experience, Bytes MS is able to assist

in crafting suitable solutions.

Bytes Connect depends on the research and development of

Alcatel-Lucent and Genesys to meet the evolving needs of its

customer base. The company has developed a mutually agreed

three-year IT roadmap with major customers which enables it

to stay abreast and, in some instances, leapfrog the IT-related

demands of its customers’ evolving business models.

> Quicklink:


www.altron.com/annual2011/unabridgedBytes.htm

ST: Human capital

Employment at Bytes has remained stable with a total staff

complement of 4 786 (4 454 in South Africa and 332 at

foreign operations), and practically the entire complement

is permanently employed. Of our total South African staff

complement, 65% is black, and of this 25% are black females.

During 2010, a skills audit undertaken by Bytes confirmed the

relevance of the general shortage of technical skills to its own

business. In response, Bytes spends over R20 million on training

and skills development annually, at an average training spend per

employee of R4 266. Some 60% of the total was spent on black

training and skills development (2010: 67%), and 30% spent on

black females (2010: 31%). Bytes further trained 374 learners

on the dti mandated learnership programme, exceeding the dti

Codes of Good Practice target by 3.7%. In addition to participating

in the Altech Academy, Bytes offers annual study and bursary

assistance worth R1.5 million for previously disadvantaged and

needy students at South African universities.

At industry level, the third National Skills Development

Strategy, which will be implemented through the Sector

Education and Training Authorities, is being launched in 2011

with the aim of improving the effectiveness and efficiency of

the skills development system.

Employee turnover, now at 17.5%, has been steadily decreasing

(2010: 25.8%) owing to normalisation after the job losses which

occurred from combining several of its Bytes business units.

Despite these job losses, employee headcount has in general

been increasing over the same period. Salaries also increased on

average by 6.5% across Bytes.

We aim to maintain employee satisfaction by offering

competitive packages and benefits such as medical aid, study

assistance and performance bonuses. All our employees receive

annual performance reviews, and this year we introduced


BYTES continued

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an online portal to facilitate employee collaboration and

information sharing, and to enhance the sense of community

in the workforce. In 2012, we will be participating in the 2012

Deloitte ‘Best Company to Work For’ survey for the first time.

> Quicklink:



While health and safety does not pose a significant risk to Bytes,

it is an important part of creating a working environment that

ensures the wellness of all our employees. While the number of

injuries in the past year nearly halved from 31 to 17, lost days

due to injury increased from 72 to 102. There were no fatalities.

Important issues are raised by employees through the various

health and safety committees and identified risks are relayed to

management which escalates these to head office level, and the

board if necessary. During the period under review, we introduced

a new format for our internal and external risk assessments

at our larger branches. This new risk assessment format is

an examination of what in the workplace can cause harm to

people and enables management to weigh up whether enough

precautions have been taken or whether additional actions are

required to prevent harm. Bytes aims to improve the average

percentage of the workforce serving on formal health and safety

committees from 10% to 15% in the coming year.

> Quicklink:



Number of employees trained

Top management 40 Senior management 131 Professionally qualified and

experienced specialists 870 and mid-management

Skilled technical academically qualified workers, junior management, supervisors, foremen and superintendents 367

Semi-skilled and discretionery decision making 25

Unskilled and defined decision making 8

Temporary employees 5

(as at 31 August 2010)

131

870

4025

367

ST: Transformation

Bytes is a champion of broad-based black economic

empowerment (B-BBEE) initiatives within its operations. With

a score of 90.98, it achieved a level 2 contribution against

the dti’s Codes of Good Practice (the Codes) in the ICT sector

in 2010. In acknowledgment of this achievement, Bytes was

also awarded top position in the South African ICT sector in

the 2011 Metropolitan Oliver Top Empowerment Awards,

competing against 100 applicants in the sector.

Equity ownership in Bytes SA is enhanced as a result of Kagiso

owning 27% of the business.

Both the management control and the employment equity

pillars of the Codes present an ongoing challenge. In

particular, the ICT sector struggles to attract black females

at management level. However, Bytes’ succession planning

strategy and management development programmes have

contributed to improving the scores for these two pillars

from 4.09 to 6.78, and from 7.08 to 11.07 respectively, and,

currently, 65% of Bytes’ permanent workforce comprises black

employees. Bytes is observing developments around proposed

changes to the Employment Equity Act to ensure it understands

the potential impacts and is prepared for these.

Bytes Technology Group is the number one

empowered company in the ICT sector in

South Africa.

Out of 100 competing and highly successful

South African ICT businesses, Bytes was awarded

top position in the ICT sector in the 2011

Metropolitan Oliver Top Empowerment Awards.

In the ICT sector, technologies are continually evolving and this

requires consistent upskilling of technical employees. In terms

of the Codes (skills development), Bytes focuses specifically

on the development of black skills, improving its score for this

pillar from 11.09 to 12.17, beyond the dti target of 11 for

2012. Likewise, we exceeded the target of 5% for learnerships,

achieving 8.7%. Of these, 229 were female and 90 disabled.



BYTES continued

With a total procurement spend of over R1.95 billion per

year, Bytes is helping to stimulate small black-owned

businesses in its sector. Supplier performance is critical to

its own performance in this element of the dti scorecard,

and it therefore aims to maintain supportive relationships

with its suppliers. Bytes’ preferential procurement spend

of R1.45 billion equates to approximately 74.5% of its

overall procurement spend, and 12.7% of Altron’s overall

preferential procurement spend. In the period under review,

Bytes’ preferential procurement score improved from 16.15 to

18.13 (exceeding the dti’s 2012 target of 17) as a result

of changes to its purchasing patterns and improvements in

suppliers’ scores.

B-BBEE score (as at 31 August 2010)

2010

Level 2

Ownership 22.8

Management and control 6.8

Employment equity 11.1

Skills development 12.2

Preferential procurement 18.1

Enterprise development 15

Socio-economic development 5

Overall score 90.98

Bytes spent over R19 million on enterprise development

initiatives in the period under review, equating to 8.7% of NPAT,

and exceeding the Codes target of 3%. Bytes help develop

442 black-owned enterprises per year, and this has once again

earned it full points for the enterprise development element

of the dti’s B-BBEE scorecard. The proposed changes to the

enterprise development element of the Codes are constantly

being monitored.

Among its enterprise development initiatives, Bytes ATM is of

particular significance. This initiative is an important element

in the new emerging markets store concept, and forms part

of ABSA’s ‘Banking the unbanked’ programme. Black-owned

stores in previously disadvantaged areas are being equipped

by Bytes with ABSA ATMs throughout South Africa. Not only

does this provide a much-needed service to communities, it also

attracts potential customers and thereby helps to stimulate

more business in the stores. The initiative will be further

expanded in the coming year by installing these machines into

multiservice containers in rural areas and townships across

the country.

Stable and healthy communities sharing in the growth of

the country are good for the whole economy, as well as for

the future sustainability of our businesses. Bytes follows

the Altron strategy of aligning its core technology business

with national social development imperatives. In 2010,

Bytes spent R2.2 million (1% of NPAT) on SED, falling just

short of its R2.4 million target. Nonetheless, the group

achieved a full-points score for this element of the dti’s

B-BBEE scorecard for the period under review.

> Quicklink:



ST: Environment

Bytes contributes only 10% of the Altron group’s total

carbon footprint emissions at 24 125 tonnes CO2e.

Electricity use is our primary impact, making up over 76%

of our total carbon emissions, and is therefore where we are

able to make the biggest impact. Leadership is incentivised

to reduce energy usage and has introduced a number

of savings initiatives including more effective office and

computer systems, such as uninterruptible power supplies

at Bytes MS and Bytes Connect. Operating divisions have

committed to three-year reduction targets for the following

elements of its carbon footprint: electricity, business road

travel, paper consumption, domestic and international

air travel, and fuel usage. A major focus going forward is

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the more accurate tracking and measurement of energy

usage and implementing solutions to minimise its carbon

footprint.

Bytes manages waste responsibly and uses electronic

document storage systems to reduce the quantity of office

paper used. New documents are electronically stored,

and existing documents are being converted to electronic

documents for storage – these are also core services

offered to Bytes clients. By being conscious of waste and

consumption of resources, Bytes raises the awareness

across all good corporate citizenship arenas, and builds

pride and loyalty among its employees. We aim to have all

sites monitored and to manage waste products and water

consumption responsibly by the end of 2012.

> Quicklink:




As a provider of ICT services and solutions, Bytes impacts

positively on the communities in which it operates by providing

employment and stimulating the local economy. It ensures

that all employees are hired locally unless required skills are

unavailable. Currently Bytes employs 332 people across four

African countries and the UK, and endeavours to procure

supplies locally. Its foreign operations in the UK are highly

regulated, thus reducing the risks of doing business. Bytes’

African operations are less regulated and require more vigilant

management. It remains aware of perceived and potential risks

at all operations, including fraud, corruption and human rights

violations. Group-wide policies in this regard are implemented

and monitored.

> Quicklink:



Carbon emission reduction targets for 2015

Average reduction target over three years

ElementTotal

%2011/12

%2012/13

%2014/15

%

Electricity usage in KWh of all facilities/buildings owned and leased

by company. Franchisees are excluded. 3.51 1.17 1.17 1.17

Business road travel in litres of all business road travel for fleet

vehicles, rental vehicles and employee-owned vehicles 0.66 0.22 0.22 0.22

Business road travel in kms – Where employee travel allowances

were included (2009/2010) these were converted at 14 000 km

per employee 1.00 0.33 0.34 0.33

Paper consumption – kgs 3.63 1.21 1.21 1.21

International air travel – miles 0.00 0.00 0.00 0.00

Domestic air travel – miles 1.56 0.52 0.52 0.52

Fuel use – diesel – litres 0.33 0.11 0.11 0.11

The new Aberdare Cables consolidated site at Elandsfontein offers a number of benefits in terms of cost savings, lower emissions and the integration of product manufacture, focused single-site IT infrastructure, the elimination of “duplicated” services in terms of perceptions, technical, testing and laboratory services, security, SHEQ and procurement. The consolidation further implies reduced material and product handling, reduced headcount costs, lower distribution costs, improved inventory control, lower maintenance costs and improved loss control to name but a few.

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POWER TECHNOLOGIES (PTY)

LIMITED (POWERTECH)

Prospects

> Recovery in building and construction sector

> Resources sector continues to improve

> Batteries business to expand into OEM market

> Africa expansion progresses

> New sizable contracts won

> Drive value-added services

> Traction in new products launched

40%

26%

74%

26%

74%

31%69%

Group contribution

RevenueFebruary 2011

EBITDAFebruary 2011

Headline earnings February 2011

Powertech Altron group

Financial summary

R millionsFebruary

2011February

2010%

change

Revenue 7 114 7 233 (2)

EBITDA 539 424 27

EBITDA margin (%) 7.6% 5.9%

HEPS (cents) 187 97 93

Adjusted diluted headline earnings 207 123 68

ROE (%) 7.5 4.1

Cash net of borrowings (279) (501)

Operational review

Company

February2011

RevenueR millions

%change

February2011

EBITDAR millions

%change

Powertech Cables 3 904 10 162 43

Powertech Transformers 1 305 (27) 211 43

Powertech Batteries 892 (6) 89 13

Powertech Industrial 494 (6) 27 (9)

Powertech System Integrators 740 26 60 31

Group Eliminations (221) (10)

Total 7 114 (2) 539 27

page 84

POWERTECH continued




The building and construction sectors remain under

pressure due to a combination of capacity overhang

and availability of funds. Consumers are still relatively

overextended and the recession has put further pressure

on households and smaller businesses. Lower interest rates

have not yet roused the housing market, nor rekindled

demand in the building and construction industry.

Significantly slower demand for electrical products,

combined with an oversupply in an extremely price-

sensitive local power cables market, has resulted in

prices and therefore margins remaining under pressure.

This situation is further aggravated by the increased

involvement of international competitors in our local

markets and a trend towards using turnkey solution

providers rather than purchasing off contracts in the formal

sector. The increased demand for fibre-optic cables in South

Africa and the rest of Africa, however, offers some growth

potential for the group’s telecom cables joint venture.

The strength of the rand has been a double-edged sword.

While the strong rand offset the increasing international

price of copper (which has reached record levels in US dollar

terms), it continues to impact negatively on contributions

from foreign operations, the competitiveness of our exports

and increases competition from foreign imports.

The power infrastructure market remains active with

promising demand, but characterised by intensified

competition from foreign competitors. Eskom’s increased

funding certainty is expected to translate into a more

vigorous rollout of its capital expenditure programmes and

the reactivation of its many delayed projects. Upgrading of

generating capacity, transmission and distribution networks

has shown a consequent increase, and municipalities are

continuing their consistent spend on infrastructure upgrades.

The decision by Cabinet at the end of 2010 to discontinue the

regional electricity distributors (REDS) is expected to bring

greater certainty to municipal electricity utilities and enable

Eskom and municipalities to reinvest in the maintenance and

refurbishment of existing electrical distribution networks as

well as the expansion of new ones.

The mining industry has been recovering steadily due

to higher commodity prices and this, together with

required repurchasing, has increased demand for cables

and industrial batteries. Despite the strong rand, the

automotive battery industry remains healthy with curtailed

activity from importers in the short term. Trading conditions

in many sub-Saharan African countries remain tough

“Our group achieved improved profitability

despite a reduction in revenue levels due to

depressed demand levels, particularly in the

building and construction sectors. Excellent

performances from the power transformers,

cables and battery businesses based largely

on cost-reduction efforts, enabled an overall

EBITDA margin improvement from 5.9% to

7.6%. Our Alcobre business in Portugal and

Cables de Comunicaciones in Spain experienced

muted trading conditions owing to the

significant economic difficulties in Europe.

Our operational focus, remains on improving

our manufacturing efficiency, developing new

products and our advancement into Africa.

In terms of transformation, an audit by

Empowerdex assessed Powertech as a level 3

contributor. Availability of skilled resources and

technical capability and capacity continue to

impact recruiting and retaining of key resources.”

– Norbert Claussen, CEO


> Of our total South African staff complement, 75% are

black and 11% are black females

> Training spend on previously disadvantaged individuals

increased by more than 50% to almost 78% of the total

training budget of R28.7 million

> The number of lost-time injuries fell by two thirds from

the prior year, and no fatalities were recorded

> Powertech is a level 3 contributor against the dti’s

Codes of Good Practice

> R18 million (8.6% of NPAT) spent on enterprise

development, almost three times the dti Codes target

of 3%

> Being the manufacturing arm of Altron, Powertech

contributes over 70% of the Altron group’s total carbon

footprint at 178 170 tonnes CO2e

> Powertech IST Otokon has pioneered a service collecting

and analysing consumption data for energy-intensive

industries

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with ‘pricing’ being the major decision-making factor for the

awarding of most tenders.

The telecoms market in East and West Africa for rectifiers and

battery systems improved marginally, although the conversion

to actual orders remains slow. The decision by mobile telecom

operators such as Vodacom and MTN to build their own fibre-

optic cable networks to link their base stations and switching

centres has opened up opportunities for the sale of fibre-optic

cable accessories and turnkey projects. Low-cost foreign

suppliers have entered this market in the wake of Bharti Airtel’s

presence in Africa.

The UK replacement battery market is relatively depressed

after the buoyant winter demand, but the advent of summer

should see a healthy demand restored in the leisure battery

market.


Powertech achieved improved profitability despite a reduction

in revenue levels compared to the prior year. The 2% reduction

in revenue is predominantly owing to the non-recurrence

of certain imported and traded product revenue in the

transformers business. An excellent performance from the

power transformers business, as well as improved profitability

in the cables and battery businesses mainly due to cost-

reduction efforts, resulted in an improvement in the overall

EBITDA margin from 5.9% to 7.6%. Headline earnings improved

by 93% (from R97 million in the prior year to R187 million)

further enhanced by lower interest and amortisation costs as

well as a lower effective tax rate.

Powertech Cables has seen a 10% increase in revenue for the

year ended 28 February 2011. This increase is primarily due to

the higher commodity prices; volumes have remained static in

the face of strong competition in the market. EBITDA improved

by 43% from R113 million to R162 million. While Powertech’s

international cable operation, Swanib Cables, performed well

above expectations, Cables de Comunicaciones in Spain was

weighed down in the second half owing to extremely difficult

market conditions and the curtailment of public infrastructure

spending on the high speed train network.

Powertech Transformers experienced a decrease in revenue,

primarily owing to the non-recurrence of the imported product

revenue sourced directly from its technology principal ABB

Ludvika, but EBITDA increased owing to efficiency gains and a

favourable product mix, resulting in an increase of 43% from

R148 million to R211 million. The outstanding performance

achieved by the power transformer operation and distribution

transformer operation in Cape Town was offset by the

distribution transformer operation in Johannesburg where

the impact of the recession in the building and construction

industry continued.

Overall, Powertech Batteries delivered a steady performance

with revenue increasing by 6% and EBITDA by 13%. The

lower growth rate can mainly be ascribed to poor demand

and margin pressures experienced by Battery Technologies

operating in the telecommunications market. Rentech,

Powertech’s solar system business, maintained the expected

level of contribution to the group in terms of revenue and

operating profit.

Within Powertech System Integrators (SI), four of the five

divisions of Powertech IST, namely Data, Energy, Otokon

and Telecoms, met expectations – indeed Data significantly

outperformed due to the large Eskom mobility contract. The

Industrial division experienced tough market conditions marked

by ongoing project delays, but remained profitable due to

the Northam Platinum Electrostatic Precipitator Project. TIS

struggled with its projects division which experienced a project

delay, while the Energy and Telecoms divisions performed

according to expectations.

SI improved its revenue by 26%, while EBITDA improved by

31%. Management is placing strong focus on minimising

the effects of the ongoing delays in capital project approvals

in order to grow revenues and improve profitability. The

improvement in the Services group’s results and a pipeline of

additional capital projects now under consideration reflects

renewed confidence in the economy and bodes well for the

future growth of these operations.

Powertech Industrial reported a decline of 6% in revenue

mainly due to reduced demand for standby power systems,

but its operating profit remained stable owing to tight cost

management. Having completed its restructuring, Crabtree

Electrical Accessories SA has exceeded its profit target despite

a decrease in revenue levels. Strike Technologies also saw a

decrease in revenue and operating profit owing to reduced

income from the Goldfields project compared to the prior year.

Strike Technologies’ Powertech Energy Solutions (PES) business

has now been restructured and merged with the electrical

insulation materials business. Powertech Calidus continues

to struggle with depressed revenues and squeezed margins

impacting on profit.

Tridonic has been repositioned into a more sophisticated

lighting systems business and has stabilised its performance

in line with lower volumes and margins and has delivered a

reasonable performance in very tight market conditions.



POWERTECH continued


Powertech’s cash generation has been consistent, mainly due

to cost controls and working capital management. Working

capital saw an improvement in debtors collections and

creditors. Inventory was increased to balance stock availability

and improve sales, services and delivery at Aberdare Cables.

The improvements in revenue can mainly be ascribed to the

increase in copper prices while increased profit can mainly

be attributed to cost-reduction measures. Foreign exchange

losses impacting the income statement decreased due to a

more stable rand situation. Powertech has experienced no

major bad debts due to efficient credit control measures. The

restructure, including retrenchments, has been completed in

most operations.

At Aberdare Cables, order intake has remained sluggish

and was underpinned by a more cautious approach towards

copper stockholding of many customers. The order book

has marginally recovered, with orders, sales and inventories

tracking each other, and the factories closely tracking demand.

The Aberdare Cables debtors book continues to receive a high

level of executive scrutiny and remained well controlled.

Going forward, the cable business will remain focused on

customers through improved availability and delivery, as well

as balanced retention of market share. It is Aberdare Cables’

goal to keep factories loaded at 80 hours per week, thereby

improving capacity utilisation and material yield. Overhead cost

reduction and continued working capital management remain a

priority to improve profitability and cash flow.

Powertech Transformers’ factory outputs have improved

significantly, but are still not meeting our high expectations.

Performance is now steady and items such as on-time delivery

and test failure rates are stable at reasonable levels, but

remain closely monitored and still require a reduction to meet

our expectations. These improvements are being recognised by

customers and are evident in increased tender enquiries and

the awarding of generation transformer contracts.

Powertech Batteries experienced steady demand from the

automotive market and some improvement in the mining

sector. Working capital was well controlled with debtors at

54 days, while the increase in inventories was offset by higher

creditors.

Cash generated at Powertech IST from operating activities

was R37 million. Working capital showed improvement and

inventories amounted to R10 million at year end, carried by

the Telecom and Energy divisions. IST management is placing

strong focus on minimising the effects of the ongoing delays

in capital projects approvals in order to improve the level of

revenue recognition.

Technology Integrated Solutions (TIS) has been restructured

under a new managing director and has returned to

profitability. In terms of intellectual property, it holds a number

of patents for resins that are used in sealing cable joints. These

patents have enabled TIS to maintain a healthy share of the

cable joint market as was evident in the good performance

delivered by the TIS Energy business.


Powertech expects to exploit certain of the innovations and new

products developed during the year throughout its underlying

companies, including new transformer designs Switchgear, Full

Calcium Batteries and Itronic, a home automation system. The

PT Switchgear Air Insulated Medium Voltage 22K-12 series is a

range of products that will be marketed to customers such as

municipalities, Eskom and the mining industry.

Powertech Batteries is exploring new technology products

such as fully sealed and full calcium technology in its batteries

offerings.

The products received from TIS’s original equipment

manufacturers are of a high quality, and the local TIS

assembly process follows strict quality standards. TIS has

experienced a shortage of mechanical cable connectors from

Tyco Electronics (now TE Connectivity) in the middle of 2010

owing to manufacturing constraints at the Tyco Electronics

factory in Ottobrun, Germany. This caused significant strain on

relations with certain key customers. The situation has since

been rectified and the backlog cleared. TIS continues to be

challenged by the entry of cheap competitor products from the

Far East, but it manages this through the reliability and brand

status of the Tyco Raychem range of cable accessories that it

offers to the market. The company also provides training in

cable jointing technologies for utilities and their installation

and maintenance personnel and contractors, thus improving

the reliability of electrical networks. This service also enhances

the credibility of TIS and improves the sales of cable joints.

Strike Technologies’ new management team is focusing on its

metering business in terms of enhanced marketing and exports

with some breakthrough orders now being obtained, notably

from Johannesburg City Power. The company has developed the

first NRS049-compliant smart meter in South Africa, scheduled

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for deployment in Eskom’s DSM projects. In this regard, a rebate

programme has been developed to swop out E3 meters for new

Enermax+ meters to stimulate purchases on new meters to

create a larger footprint.

With numerous new products launched during the prior year

in the electrical accessories market, Crabtree works hard to

remain a frontrunner in the innovation race. One example

is the Vetro range of switches, sockets and communication

outlets with glass cover plates. Another innovative product

from Crabtree is the Slimline compact plug top. This three-pin

plug and socket design is more convenient than the traditional

three-pin plug and boasts an impressive array of safety

features.

Tridonics’ use of lighting energy management systems and

its LEDs for lighting is regarded as a major revolution in the

lighting industry.

Aberdare Cables has long-standing and constructive

relationships with its key customers such as Eskom, the

municipalities, Anglo Platinum and Impala Platinum, as well as

a major wholesaler in South Africa.


Powertech Transformers has a long-standing technology

agreement with ABB and has also concluded an agreement

with TMC in Italy for the sourcing of dry type transformers. It

focuses on maintaining a sound working relationship with its

B-BBEE partner Power Matla.

It also has various long-term agreements in place to ensure

the reliable supply of key material such as copper, core steel,

oil, insulation and mild steel. Great strides have been made

in securing a back-up supplier for mild steel plate resulting in

Powertech Transformers now having two reliable suppliers for

the 2011/12 financial year offering competitive prices. Site

Installation contractors were appointed, and for the first time

multiple contractors are available to offer additional capacity

as and when required.

At Powertech IST they have close relationships with General

Electric in terms of technology, software and product support;

with IBM in terms of the Maximo asset management software;

with Ventyx in terms of the mobile workforce management

technology, with Motorola for hardware for its mobility contract

with Eskom; with Babcock & Wilcox in terms of ESP technology;

with Tellabs for access networks and with Altergy and

Plugpower in terms of fuel cell technology.

TIS has maintained good relationships with the OEMs it

represents in the SA market. These include Tyco Electronics,

Infinera and GE Kellman.

Powertech Batteries has undertaken a factory output

and efficiency project with Renoir to incorporate world-

class processes into their manufacturing regime. Battery

Technologies is in the process of renewing its agency

agreement with Eaton on the rectifier product and on the

industrial battery side it is working closely with world leader,

Enersys. Tridonic receives excellent support from its shareholder

in Austria.


Powertech’s mission statement describes the importance

the group places on meeting its customers’ requirements

responsibly, honestly and with integrity. Customer needs are at

the forefront of all strategic decisions, and the group monitors

these business-to-business (B2B) relationships continually.

Satisfaction is ensured through developing customer service

skills among its staff and building strong and reliable

vendor and partner relationships. In addition, Powertech has

taken cognisance of the requirements of the new Consumer

Protection Act 2008 (CPA) and the consequences this has for

its businesses.

Where identified, specific customer needs are catered for;

Aberdare Cables, has recently initiated a pilot customer

communication programme with Agrinet, which aims to

improve service while saving time and manpower. Informal

customer relationship building exercises are also undertaken.

These reveal a high level of brand loyalty among the company’s

customers.

Products are continually assessed and improved as an

operational requirement. All Powertech businesses comply with

OHSAS 18001, requiring that the health and safety impacts

of our products are assessed annually by a third party. Risk

assessments are undertaken three-yearly or when required.

Extensive client satisfaction surveys will be undertaken at two

of Powertech’s operational companies in the next financial year.

In general, the aim is to maintain above-average performance

with regard to quality, awareness, availability and technical

back-up, while also improving performance in service delivery

and availability.

> Quicklink:


www.altron.com/annual2011/unabridgedPowertech.htm



ST: Human capital

After experiencing job losses in the previous financial year,

employment has remained relatively stable this year.

Powertech has 4 526 employees – 305 at international

operations and 4 221 in South Africa. Of our total South African

staff complement, 75% are black and 11% are black females.

A skills audit undertaken at Powertech during 2010 highlighted

a need for more black females, particularly at senior

management, top management, and apprenticeship levels.

More robust leadership pipelines as well as an intensified focus

on skills development among previously disadvantaged groups

are required. To address these issues Powertech spent a total

of R28.7 million on skills development – a R1 million increase

from the previous year. This equates to an average training

spend per employee of R6 341. Almost 78% of this was spent

on black trainees (2010: 50%). In 2010, 1 609 black males,

237 black females, 26 disabled males and 25 disabled females

were trained.

Number of employees trained in the 2011 financial year (total spend R28.7 million)

Top management

Senior management

Professionally qualified and

experienced specialists

and mid-management

Skilled technical academically

qualified workers, jonior

management, supervisors,

foremen and superintendents

Semi-skilled and discretionery

decision making

Unskilled and defined

decision-making

Temporary employees

10%

59%

3%

0%

7%

20%

1%

Powertech’s employees are offered a range of skills development

programmes at all levels. These include the group-wide Altech

Academy and the Powertech Development Process (PDP),

previously known as the Powertech Leadership Programme in

conjunction with the Gordon Institute of Business Science (GIBS).

This programme has been restructured into three tiers (including

an executive development component).

At industry level, the third National Skills Development

Strategy, which will be implemented through the Sector

Education and Training Authorities, is being launched in 2011

with the aim of improving the effectiveness and efficiency of

the skills development system.

A total of 68% of all employees participated in an annual

performance review, including all employees at Aberdare

Cables, Powertech Transformers, Powertech industrial,

93% at Powertech System Integrators and 21% at

Powertech Batteries. Salaries increased on average by

7.8% across the group this year.

Employee turnover was 17.4% in 2011. Aberdare Cables

has implemented a 12-month call-back policy on retrenched

staff, which means that if a vacancy becomes available, the

retrenched staff member will be given priority in terms of

applying for the position.

> Quicklink:



Health and safety is an important aspect for a business with

a large heavy-manufacturing component, and Powertech

takes the health and safety of its employees very seriously.

Health and safety committees, procedures and health and

safety representatives are active across all our operating

companies. Most of the major manufacturing sites are

OHSAS 18001-accredited, and employees are given training

according to the health and safety risks that their job

description poses. Each one of the operations has an onsite

occupational health clinic which is used predominantly by

factory employees. All staff are represented on formal joint

management-worker health and safety committees and trade

unions (of which almost 50% of Powertech staff are members)

and are kept informed about health and safety issues at

Powertech throughout the year.

The number of lost-time injuries is only one-third that of the

previous year (111 versus 323). This can be attributed to

an aggressive safety training programme conducted at all

manufacturing operations. Occupational diseases more than

doubled from nine to 25 over the same period. No fatalities

were experienced.

POWERTECH continued

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Powertech operational companies B-BBEE scores (as at 31 August 2010)

Equity ownership

Manage-ment

control

Employ-ment

equity

Skills develop-

ment

Preferential pro-

curement

Enterprise develop-

ment

Socio-economic develop-

ment

Aberdare Cables 18.50 5.5 7.48 14.7 11.29 15 5

Powertech Transformers 14.8 4.87 4.87 10.21 19.45 15 5

Willard and SABAT Batteries 0.00 1.11 2.42 4.47 14.71 4 5

Battery Technologies 21.62 7.83 12.63 15.00 17.48 13.07 5

Crabtree Electrical Accessories SA 0.00 0.00 2.09 2.20 17.78 15 5

Powertech Calidus 11.00 5.00 7.00 2.90 17.80 15 5

Strike Technologies 0.00 2.00 6.07 6.16 4.09 11.40 0.91

Powertech IST 17.92 3.58 3.51 10.29 17.97 15 5

TIS 17.92 3.89 4.03 4.50 19.22 15 5

Aberdare Cables intends to reduce the number of lost-time

injuries to zero by implementing an updated health and safety

training programme for new and existing employees. This

will include an assessment of competency and a behavioural

safety component. Powertech is currently in the process of

implementing health and safety issues as a key performance

indicator for all Powertech employees.

> Quicklink:



ST: Transformation

Powertech was recently rated by Empowerdex as a level 3

broad-based black economic empowerment (B-BBEE) contributor

in terms of the dti’s Codes of Good Practice (the Codes). Its

strongest performing areas include preferential procurement,

enterprise development and socio-economic development, while

employment equity remains a challenge across the industry.

‘Transformation climate’ assessments will be undertaken

across certain of the operating companies in the coming

year. This will assist in assessing what is required to improve

Powertech’s B-BBEE ratings. The current target is for all

Powertech companies to reach a level 3 status.

Powertech has completed its ownership structure at the

operating companies’ level, where its empowerment partners

such as Izingwe Capital holds 27% of Aberdare Cables and

25.1% of Powertech System Integrators. Power Matla holds

20% of Powertech Transformers, while Kagiso Venture holds

25.1% of Powertech Batteries.

The management and control element of B-BBEE remains a

challenge, as does employment equity. Powertech undertook

research during the 2010 financial year which showed that

the industrial sector as a whole has not managed to attract

black female or disabled representation in ownership and

management. Currently, black employees represent 36% of top

management and 24% of senior management. Powertech’s

succession management plan aims to improve on this by



providing talented black staff with leadership training and

development. Powertech is observing developments around

the proposed changes to the Employment Equity Act to

ensure it understands the potential impacts and is prepared

for these changes and the consequent requirements.

All companies in the Powertech group have reinforced their

major skills development drives, in line with the Altron group

transformation strategy. Skills gap analyses have been

undertaken in order to craft a skills development strategy

that adequately addresses the group’s needs. Most of the

operational companies made improvements in the skills

development element of the dti Codes in the period under

review. In particular, Battery Technologies achieved full points

for skills development. Powertech spent 78% of total training

spend on developing black employees.

Considering how much Powertech spends on materials and

services, it can make a pronounced difference to small black-

owned businesses through preferential procurement. In the

period under review, Powertech spent over R1.8 billion with

preferential procurement suppliers. It aims to develop a

supportive relationship, guiding suppliers to perform better

and using B-BBEE performance as a selection criterion when

appointing new suppliers.

Enterprise development is one of Powertech’s strongest

performing areas with a number of our operating companies

achieving full points for this element of the dti Scorecard. It

invests resources in facilitating the growth of small suppliers in

a number of ways, including by providing start-up black-owned

businesses with shorter payment periods. It also outsources the

management of a number of its own services to black-owned

small and medium enterprises (SMEs). Powertech has spent over

R18 million on enterprise development projects in the period

under review. This equates to 8.6% of NPAT, almost three times

the dti Codes target of 3%.

As a group, Powertech generally scores full points for the socio-

economic development (SED) element of the dti Scorecard.

It aims to contribute to the SED of South Africa, not merely

through handouts, but in ways that stimulate the economy

and make strategic sense to the business. The group spent

R3.43 million on a number of community development and

skills development initiatives in the period under review

(1.63% of NPAT).

> Quicklink:



ST: Environment

Powertech, as an industrial manufacturing group of companies,

has the largest impact on the environment out of all the Altron

group companies. With a carbon footprint of 178 170 metric

tonnes carbon dioxide equivalent (tonnes CO2e), Powertech

contributes over 70% of the Altron group’s total carbon

emissions. Over the past year, Powertech has improved its

data-capturing processes and hence the accuracy of its carbon

footprint measures. Powertech is now sufficiently confident in

our measurements to be able to implement a set of reduction

targets for electricity, business road travel, paper consumption,

domestic and international air travel fuel usage.

Electricity consumption is the primary carbon emitter,

being responsible for 97% of the total carbon emissions.

In addition to the Altron group’s Powersave@Altron and

Envirowatch campaigns, Powertech companies have a number

of initiatives in place to address energy efficiency. It is the

aim to improve the efficiency of buildings, equipment and

operations, e.g. Strike Technologies has started monitoring

its building electricity and also prints double-sided to cut down

on the use of paper, and Powertech also developed products

and services to help its customers improve their own

energy efficiency. Of particular significance, Powertech IST

Otokon has developed a system for collecting and analysing

consumption data, e.g. energy or water consumption. This is

used at most energy-intensive industries in the industrial,

mining and utility sectors in South Africa. Powertech IST

Otokon has also partnered with Eskom on its transmission

metering schemes, and has completed numerous Demand

Side Management (DSM) projects which allow the energy

provider to influence the electricity usage patterns of

electricity consumers in the drive towards energy efficiency.

Powertech IST Industrial division provides turnkey

engineering solutions in the area of environmental pollution

control such as off:gas filtration, fuel:gas cleaning and

industrial water purification for large mining and power

utility industries.

Water use is carefully managed throughout Powertech’s

manufacturing sites and conservation efforts include the

replacement of water-cooled motor systems with closed-loop

systems and the recycling of water. Powertech consistently

POWERTECH continued

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looks for ways to save on any materials including power and

water through recycling and reuse of water. Issues such as

water pollution are continually monitored, and management

actions are in place to mitigate any potential effects on the

environment. Powertech for the first time reported on its water

use and will continue to do so in the future.

Pollution from polychlorinated biphenyls (PCBs) and heavy

metals such as lead are of particular concern and these are

carefully monitored in the high-risk areas of Powertech. Full

life-cycle responsibility is taken for lead batteries; these are

collected and fully recycled. Asbestos, air and noise pollution,

although not as significant as CO2 pollution, are also carefully

monitored and managed.

In general, Powertech tries to determine which points in the

product life cycle pose the most risk to the environment

and society. In addition, many of our companies apply

the ‘cradle-to-grave’ principle and foster a culture of

waste minimisation and recycling at every stage. Waste

management processes are well established, and hazardous

waste disposal meets the Department of Water Affairs and

Forestry (DWAF) minimum requirements. During the period

under review, Powertech measured the quantity of waste

it generated for the first time. Out of a total waste amount

of approximately 6 243 tonnes, 3 593 tonnes was sent to

municipal landfill (almost 58%). Just over 12 tonnes (0.2%)

was incinerated and the rest was recycled.

> Quicklink:




As a power and telecommunications infrastructure provider,

Powertech’s products provide benefit to local communities. It

does not employ expatriates in its international operations – all

employees are local and it procures required materials locally,

where available. The impact of the operations are therefore

positive in terms of providing employment and stimulating the

economy. Powertech ensures that human rights practices are

upheld in all its foreign operations. Currently Powertech is in

the process of establishing what the human rights practices are

for all its relevant suppliers and distributors in these countries.

Where problem areas are identified, these will be appropriately

addressed.

> Quicklink:



11

2

1. Strike Technologies launched its Enermax Plus Energy and

demand meters to bulk electricity users in the industrial and

commercial sector. Strike is the only local developer and

manufacturer of three-phase energy and demand meters to help

large electricity-using manufacturers and corporate companies to

reduce energy consumption and costs. In conjunction with its

sister company, Powertech IST Otokon, data from the meters is

uploaded into Automated Meter Reading (ARM) Systems, thereby

enabling customers to manage and reduce energy utility costs.

2. Powertech, through its solar power supply company, Rentech, is a

supplier to Senseseven for the solar-powered traffic light project

which is sponsored by companies in the Johannesburg area. The

solar-powered traffic intersection at Grayston Drive and Sandton

Drive was recently installed.

>


Altron reports its sustainability progress using the Global

Reporting Initiative’s (GRI) G3 Guidelines to provide

stakeholders with a consistent and comparable view of the

company’s sustainability performance. The guidelines are

structured into three sections:

1. Profile disclosures (42) focusing on the company’s

strategy and profile to set the overall context for

understanding our organisational performance.

2. Management approach disclosures (6) providing

more information as to how the organisation addresses

a given set of topics to provide context for understanding

performance in that area.

3. Sustainability performance indicators (79) prompting

comparable information on the economic, environmental

and social performance of the organisation.

The Altron 2011 integrated annual report addresses all

42 profile disclosures, all six management approach disclosures

and over 20 sustainability performance indicators, including

at least one from each of the indicator categories. For a

comprehensive GRI Index table, including our responses to

each of the 127 indicators, refer to page 94. The report has

GRI index overview

Board statement regarding the Altron integrated annual report


also been externally assured and therefore qualifies for GRI

Application Level B+.

Altron became a signatory to the United Nations Global

Compact (UNGC) in December 2009, signifying the company’s

commitment to upholding the 10 principles enshrined in the

compact. These principles uphold, among others, respect for

human rights, labour rights, environmental protection and

anti-corruption and are listed in full at the end of the GRI Index.

Within the GRI Index the principles are matched to the GRI

performance indicators.

Where relevant, Altron also aspires to assist in South Africa’s

attempts to meet the eight UN Millennium Development Goals.

This report serves to represent Altron’s second annual

Communication on Progress (COP) report, using the GRI Index

table to identify the specific disclosure responses that are

relevant to the 10 UNGC principles.

> Quicklink:

Our first COP report submitted in 2010 can be viewed at

www.unglobalcompact.org/COPs/detail.10140

The board of directors (board) of Allied Electronics Corporation Limited acknowledges its responsibility to ensure the integrity of

the integrated annual report. The board has accordingly applied its mind to the integrated annual report and to the best of its

knowledge and belief the integrated annual report addresses all material issues, and presents fairly the integrated performance

of the organisation and its impacts. The integrated annual report has been prepared in line with best practice pursuant to

the recommendations of the King III Code (principle 9.1). The board authorised the integrated annual report for release on

31 May 2011.

Dr WP Venter – Chairman Robert Venter – Chief executive

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page 93

UN Global Compact Principles

UN Global Compact Millennium Development Goals

1. Support and respect the protection of international human

rights within their sphere of influence.

2. Make sure their own corporations are not complicit in

human rights abuses.

3. Freedom of association and the effective recognition of the

right to collective bargaining.

4. The elimination of all forms of forced and compulsory

labour.

5. The effective abolition of child labour.

6. The elimination of discrimination in respect of employment

and occupation.

7. Support a precautionary approach to environmental

challenges.

8. Undertake initiatives to promote greater environmental

responsibility.

9. Encourage the development and diffusion of

environmentally friendly technologies.

10. Work against corruption in all its forms, including extortion

and bribery.

1. Eradicate extreme poverty and hunger.

2. Achieve universal primary education.

3. Promote gender equality and empower women.

4. Reduce child mortality.

5. Improve maternal health.

6. Combat HIV/Aids, malaria and other diseases.

7. Ensure environmental sustainability.

8. Develop a global partnership for development.

Visit www.unglobalcompact.org for more details.

GRI content index

page 94 Altron integrated annual report 2011Altron integrated annual report 2011

GRI Indicators

UN Global Compact Principle* Description Reported Reference

Page Reference

PROFILE DISCLOSURE

1.1 Statement from the most senior decision-maker of the organisation.

Fully Chairman’s statement (IAR) 18 – 21

1.2 Description of key impacts, risks, and opportunities.

Fully Strategic themes and material issues overview; Chief executives review (IAR)

42 – 57; 22 –33

2.1 Name of the organisation. Fully Front cover; Throughout (IAR) FC; IFC

2.2 Primary brands, products, and/or services.

Fully Inside front cover; Corporate structure (IAR)

IFC; 10 – 11

2.3 Operational structure of the organisation, including main divisions, operating companies, subsidiaries, and joint ventures.

Fully Corporate structure; Our group’s global footprint

10 – 11; 12

2.4 Location of organisation’s headquarters.

Fully Corporate data (IAR) IBC

2.5 Number of countries where the organisation operates, and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report.

Fully Our group’s global footprint (IAR) 12

2.6 Nature of ownership and legal form. Fully Shareholder analysis; Scope and Boundaries; Corporate structure

118 – 121; IFC; 10 – 11

2.7 Markets served (including geographic breakdown, sectors served, and types of customers/beneficiaries).

Fully Corporate structure (IAR) 10 – 11

2.8 Scale of the reporting organisation. Fully Six-year review; Chief executive’s review; Value-added statement (IAR)

8 – 9; 22 – 33; 41

2.9 Significant changes during the reporting period regarding size, structure, or ownership.

Fully Chief executive’s review; Directors’ report (IAR)

22 – 33; 145 – 149

2.1 Awards received in the reporting period.

Fully Group awards (IAR) 17

3.1 Reporting period (e.g., fiscal/calendar year) for information provided.

Fully Scope and boundaries (IAR) IFC

3.2 Date of most recent previous report Fully Scope and boundaries (IAR) IFC

3.3 Reporting cycle (annual, biennial, etc.) Fully Scope and boundaries (IAR) IFC

3.4 Contact point for questions regarding the report or its contents.

Fully Contact details (IAR) IFC

3.5 Process for defining report content. Fully Establishing the strategic themes (IAR)

2 – 5

3.6 Boundary of the report (e.g., countries, divisions, subsidiaries, leased facilities, joint ventures, suppliers).


3.7 State any specific limitations on the scope or boundary of the report.


3.8 Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced operations, and other entities that can significantly affect comparability from period to period and/or between organisations.


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GRI Indicators


Page Reference

3.9 Data measurement techniques and the bases of calculations, including assumptions and techniques underlying estimations applied to the compilation of the indicators and other information in the report. Explain any decisions not to apply, or to substantially diverge from, the GRI indicator protocols.

Fully Chief executive’s review (IAR) 22 – 33

3.1 Explanation of the effect of any re-statements of information provided in earlier reports, and the reasons for such re-statement (e.g. mergers/acquisitions, change of base years/periods, nature of business, measurement methods).

Fully Scope and boundaries, No restatements of information provided (IAR)

IFC

3.11 Significant changes from previous reporting periods in the scope, boundary, or measurement methods applied in the report.


3.12 Table identifying the location of the Standard Disclosures in the report.

Fully GRI content index (IAR) 94 – 103

3.13 Policy and current practice with regard to seeking external assurance for the report.

Fully Scope and boundaries; GRI Index overview; Independent third-party assurance statement (IAR)

IFC; 92; 104 – 105

4.1 Governance structure of the organisation, including committees under the highest governance body responsible for specific tasks, such as setting strategy or organisational oversight.

Fully Establishing the strategic themes; Abridged corporate governance report (IAR)

2 – 5; 106 – 113

4.2 Indicate whether the chair of the highest governance body is also an executive officer.

Fully Evolution of Altron’s leadership (web)

www.altron.com/annual2011/corporategovernance.htm

4.3 For organisations that have a unitary board structure, state the number of members of the highest governance body that are independent and/or non-executive members.

Fully Abridged corporate governance report (IAR)

106 – 113

4.4 Mechanisms for shareholders and employees to provide recommendations or direction to the highest governance body.

Fully Establishing the strategic themes (IAR); Employee engagement (web)

2 – 5; 4www.altron.com/annual2011/unabridgedAltron.htm

4.5 Linkage between compensation for members of the highest governance body, senior managers, and executives (including departure arrangements), and the organisation’s performance (including social and environmental performance).

Fully Remuneration report (IAR) 122 – 134

4.6 Processes in place for the highest governance body to ensure conflicts of interest are avoided.

Fully Division of responsibilities at the head of Altron; Conflicts of interest (web)


page 96

GRI content indexcontinued

Altron integrated annual report 2011Altron integrated annual report 2011

GRI Indicators


Page Reference

4.7 Process for determining the qualifications and expertise of the members of the highest governance body for guiding the organisation’s strategy on economic, environmental, and social topics.

Partially Directorate; Executive committee (IAR); Nomination committee (web)

14 – 15; 16www.altron.com/annual2011/corporategovernance.htm

4.8 Internally developed statements of mission or values, codes of conduct, and principles relevant to economic, environmental, and social performance and the status of their implementation.

Fully Corporate structure (IAR) 10 – 11

4.9 Procedures of the highest governance body for overseeing the organisation’s identification and management of economic, environmental, and social performance, including relevant risks and opportunities, and adherence or compliance with internationally agreed standards, codes of conduct, and principles.

Fully Establishing the strategic themes; (IAR); Transformation committee (web)

2 – 5www.altron.com/annual2011/corporategovernance.htm

4.10 Processes for evaluating the highest governance body’s own performance, particularly with respect to economic, environmental, and social performance.

Fully Establishing the strategic themes; Abridged corporate governance report (IAR)

2 – 5; 106 – 113

4.11 Explanation of whether and how the precautionary approach or principle is addressed by the organisation.

Fully Risk management committee (IAR); Material risks and opportunities facing the Altron group (web)

111www.altron.com/annual2011/corporategovernance.htm

4.12 Externally developed economic, environmental, and social charters, principles, or other initiatives to which the organisation subscribes or endorses.

Fully GRI index overview; Abridged corporate governance report (IAR)

92; 106 – 113

4.13 Memberships in associations (such as industry associations) and/or national/international advocacy organisations in which the organisation: * Has positions in governance bodies; * Participates in projects or committees; * Provides substantive funding beyond routine membership dues; or * Views membership as strategic.

Fully Establishing the strategic themes (IAR); Memberships (web)

2 – 5www.altron.com/annual2011/corporategovernance.htm

4.14 List of stakeholder groups engaged by the organisation.

Fully Strategic themes and material issues overview; Establishing the strategic themes (IAR)

42 – 57; 2 – 5

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

Partially Unabridged Corporate Governance Report (web)


4.16 Approaches to stakeholder engagement, including frequency of engagement by type and by stakeholder group.

Fully Establishing the strategic themes (IAR)

2 – 5

4.17 Key topics and concerns that have been raised through stakeholder engagement, and how the organisation has responded to those key topics and concerns, including through its reporting.

Partially Unabridged Corporate Governance Report (web)


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DISCLOSURES ON MANAGEMENT APPROACH

DMA EC Economic performanceMarket presenceIndirect economic impacts

Fully Throughout (web) www.altron.com/annual2011/unabridgedAltron.htm

DMA EN MaterialsEnergyWaterBiodiversityEmissions, effluents and wasteProducts and servicesComplianceTransportOverall


DMA LA EmploymentLabour/Management relationsOccupational health and safetyTraining and educationDiversity and equal opportunityEqual remuneration for women and men


DMA HR Investment and procurement practicesNon-discriminationFreedom of association and collective bargainingChild labourPrevention of forced and compulsory labourSecurity practicesIndigenous rightsAssessment Remediation


DMA SO Local communitiesCorruptionPublic policyAnti-competitive behaviourCompliance


DMA PR Customer health and safetyProduct and service labellingMarketing communicationsCustomer privacyCompliance


STANDARD DISCLOSURES PART III: Performance Indicators

EC1 Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings, and payments to capital providers and governments.

Fully Six-year review; Value added statement; Reviews of operations (IAR)

8 – 9; 41; 59 – 91

EC2 7 Financial implications and other risks and opportunities for the organisation’s activities due to climate change.

Not reported

Information not currently available

N/A

EC3 Coverage of the organisation’s defined benefit plan obligations.

Partially Notes to the annual financial statements (Note 16)

197 – 199

EC4 Significant financial assistance received from government.

Fully GRI; No financial assistance received from government

97

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Altron integrated annual report 2011Altron integrated annual report 2011

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EC5 1 Range of ratios of standard entry level wage compared to local minimum wage at significant locations of operation.

Not reported


N/A

EC6 Policy, practices, and proportion of spending on locally-based suppliers at significant locations of operation.

Fully Transformation; Preferential procurement; Enterprise development (web)

www.altron.com/annual2011/unabridgedAltron.htm

EC7 6 Procedures for local hiring and proportion of senior management hired from the local community at significant locations of operation.

Fully Employment equity (web) www.altron.com/annual2011/unabridgedAltron.htm

EC8 Development and impact of infrastructure investments and services provided primarily for public benefit through commercial, in-kind, or pro bono engagement.

Partially Socio-economic development in unabridged operational reviews, Business conduct in foreign operations (Altech unabridged review) (web)

www.altron.com/annual2011/unabridgedAltron.htm, www.altron.com/annual2011/unabridgedBytes.htm, www.altron.com/annual2011/unabridgedPowertech.htm, www.altron.com/annual2011/unabridgedAltech.htm

EC9 Understanding and describing significant indirect economic impacts, including the extent of impacts.

Not reported


N/A

EN1 8 Materials used by weight or volume. Partially Chief executive’s review (IAR) 30

EN2 8, 9 Percentage of materials used that are recycled input materials.

Partially Chief executive’s review; percentage of waste recycled is disclosed, not percentage of materials used (IAR)

31

EN3 8 Direct energy consumption by primary energy source.

Partially Chief executive’s review (IAR) 30

EN4 8 Indirect energy consumption by primary source.

Fully Environmental unabridged operational reviews (web)

www.altron.com/annual2011/unabridgedAltron.htm, www.altron.com/annual2011/unabridgedBytes.htm, www.altron.com/annual2011/unabridgedPowertech.htm, www.altron.com/annual2011/unabridgedAltech.htm

EN5 8, 9 Energy saved due to conservation and efficiency improvements.

Not reported

Energy savings not yet available N/A

EN6 8, 9 Initiatives to provide energy-efficient or renewable energy based products and services, and reductions in energy requirements as a result of these initiatives.

Partially GRI; Powertech IST Otokon and Strike Technologies offer solutions for collecting and analysing consumption data (water, electricity). Consequent reductions in energy requirements are not currently measured

98

EN7 8, 9 Initiatives to reduce indirect energy consumption and reductions achieved.

Partially Initiatives listed in sub-holding environmental sections. Reductions achieved not yet tracked. (web)

www.altron.com/annual2011/unabridgedBytes.htm, www.altron.com/annual2011/unabridgedAltech.htm, www.altron.com/annual2011/unabridgedPowertech.htm

EN8 8 Total water withdrawal by source. Fully Chief executive’s review (IAR); Responsible use of water (web)

31www.altron.com/annual2011/ unabridgedAltron.htm

EN9 8 Water sources significantly affected by withdrawal of water.

Not reported

Original source of municipal water supplies not tracked

N/A

EN10 8, 9 Percentage and total volume of water recycled and reused.

Not reported

Not currently available N/A

EN11 8 Location and size of land owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas.

Fully GRI; No operations in or adjacent to protected areas or areas of high biodiversity

98

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EN12 8 Description of significant impacts of activities, products, and services on biodiversity in protected areas and areas of high biodiversity value outside protected areas.


99 www.altron.com/sustainability/biodiversity.pdf

EN13 8 Habitats protected or restored. Fully GRI; No operations in or adjacent to protected areas or areas of high biodiversity


EN14 8 Strategies, current actions, and future plans for managing impacts on biodiversity.

Fully GRI; Potential biodiversity impacts will be evaluated if and when Altron acquires new operations or moves to alternative sites


EN15 8 Number of IUCN Red List species and national conservation list species with habitats in areas affected by operations, by level of extinction risk.



EN16 8 Total direct and indirect greenhouse gas emissions by weight.

Fully Chief executive’s review (IAR) Environmental unabridged operational review (web)

31 www.altron.com/annual2011/unabridgedAltron.htm

EN17 8 Other relevant indirect greenhouse gas emissions by weight.

Not reported


EN18 7, 8, 9 Initiatives to reduce greenhouse gas emissions and reductions achieved.

Partially Initiatives listed (Reducing Altron’s carbon footprint) reductions achieved not yet tracked, abridged operational review (IAR); environmental unabridged operational reviews (web)

59 – 91 www.altron.com/annual2011/unabridgedAltron.htm, www.altron.com/annual2011/unabridgedAltech.htm, www.altron.com/annual2011/unabridgedPowertech.htm www.altron.com/annual2011/unabridgedBytes.htm

EN19 8 Emissions of ozone-depleting substances by weight.

Not reported

Altron does not produce material quantities of ozone-depleting substances

N/A

EN20 8 NOx, SOx, and other significant air emissions by type and weight.

Not reported

Altech UEC produces negligible levels of SOx, NOx and other air emissions

N/A

EN21 8 Total water discharge by quality and destination.

Not reported


EN22 8 Total weight of waste by type and disposal method.

Fully Usage of materials and handling waste, abridged operational reviews (IAR); environmental unabridged operational reviews (web)

59 – 91www.altron.com/annual2011/unabridgedAltron.htm, www.altron.com/annual2011/unabridgedAltech.htm, www.altron.com/annual2011/unabridgedPowertech.htm www.altron.com/annual2011/unabridgedBytes.htm

EN23 8 Total number and volume of significant spills.

Fully No significant spills occurred during the year under review; GRI

99

EN24 8 Weight of transported, imported, exported, or treated waste deemed hazardous under the terms of the Basel Convention Annex I, II, III, and VIII, and percentage of transported waste shipped internationally.

Fully GRI; Altron does not transport, import, export or treat hazardous waste (web)


EN25 8 Identity, size, protected status, and biodiversity value of water bodies and related habitats significantly affected by the reporting organisation’s discharges of water and runoff.


99

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EN26 7, 8, 9 Initiatives to mitigate environmental impacts of products and services, and extent of impact mitigation.

Partially GRI; Responsible management of the product lifestyle. Extent of impact mitigation not currently measured

100 www.altron.com/annual2011/unabridgedAltron.htm, www.altron.com/annual2011/unabridgedAltech.htm, www.altron.com/annual2011/unabridgedPowertech.htm www.altron.com/annual2011/unabridgedBytes.htm

EN27 8, 9 Percentage of products sold and their packaging materials that are reclaimed by category.

Partially Environmental unabridged operational reviews (web); Responsible management of the product lifestyle (reported for Altech and Powertech only)

www.altron.com/annual2011/unabridgedAltech.htm, www.altron.com/annual2011/unabridgedBytes.htm, www.altron.com/annual2011/unabridgedPowertech.htm

EN28 8 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations.

Fully GRI; No significant fines and non-monetary sanctions for non-compliance with environmental laws and regulations in the year under review

100

EN29 8 Significant environmental impacts of transporting products and other goods and materials used for the organisation’s operations, and transporting members of the workforce.

Fully GRI; No significant impacts of transporting products, goods and materials and members of the workforce outside of that reported in the carbon footprint

100

EN30 7, 8, 9 Total environmental protection expenditures and investments by type.

Not reported

GRI; Minor spills at Powertech Transformers and Willard Batteries. Costs not quantified

100

LA1 Total workforce by employment type, employment contract, and region.

Fully Human capital (web) www.altron.com/annual2011/unabridgedAltech.htm, www.altron.com/annual2011/unabridgedBytes.htm, www.altron.com/annual2011/unabridgedPowertech.htm

LA2 6 Total number and rate of employee turnover by age group, gender, and region.

Fully Chief executive’s review (Human capital) IAR; unabridged operational reviews (web)

27www.altron.com/annual2011/unabridgedAltech.htm, www.altron.com/annual2011/unabridgedBytes.htm, www.altron.com/annual2011/unabridgedPowertech.htm

LA3 Benefits provided to full-time employees that are not provided to temporary or part-time employees, by major operations.

Partially Chief executive’s review; benefits listed, not provided by operation (IAR)

26

LA4 1, 3 Percentage of employees covered by collective bargaining agreements.

Fully Reported at operational levels in unabridged operational reviews (web)

www.altron.com/annual2011/unabridgedAltech.htm, www.altron.com/annual2011/unabridgedBytes.htm, www.altron.com/annual2011/unabridgedPowertech.htm

LA5 3 Minimum notice period(s) regarding significant operational changes, including whether it is specified in collective agreements.

Not reported


N/A

LA6 1 Percentage of total workforce represented in formal joint management-worker health and safety committees that help monitor and advise on occupational health and safety programmes.

Fully Abridged operational reviews (IAR); unabridged operational review (web); Health and Safety representatives elected across all businesses, so 100% of workforce represented.

59 – 91 www.altron.com/annual2011/unabridgedAltech.htm, www.altron.com/annual2011/unabridgedBytes.htm, www.altron.com/annual2011/unabridgedPowertech.htm


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LA7 1 Rates of injury, occupational diseases, lost days, and absenteeism, and number of work-related fatalities by region.

Partially Abridged operational review (IAR); unabridged operational reviews (web); injuries, occupational diseases, lost days and fatalities reported at operational level.Absenteeism reported for Altech only.

59 – 91 www.altron.com/annual2011/unabridgedAltech.htm, www.altron.com/annual2011/unabridgedBytes.htm, www.altron.com/annual2011/unabridgedPowertech.htm

LA8 1 Education, training, counselling, prevention, and risk-control programmes in place to assist workforce members, their families, or community members regarding serious diseases.

Fully Reported in unabridged operational reviews (web)

www.altron.com/annual2011/unabridgedAltron.htm, www.altron.com/annual2011/unabridgedAltech.htm, www.altron.com/annual2011/unabridgedBytes.htm www.altron.com/annual2011/unabridgedPowertech.htm

LA9 1 Health and safety topics covered in formal agreements with trade unions.

Not reported

Not available N/A

LA10 Average hours of training per year per employee by employee category.

Not reported

Not available N/A

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

Partially Chief executive’s review (IAR) Human capital; Skills attractions, development and retention; Skills development; unabridged operational reviews (web)

22 www.altron.com/annual2011/unabridgedAltron.htm, www.altron.com/annual2011/unabridgedAltech.htm, www.altron.com/annual2011/unabridgedBytes.htm www.altron.com/annual2011/unabridgedPowertech.htm

LA12 Percentage of employees receiving regular performance and career development reviews.

Fully Abridged operational review (IAR); unabridged operational reviews (web)

www.altron.com/annual2011/unabridgedAltron.htm, www.altron.com/annual2011/unabridgedAltech.htm, www.altron.com/annual2011/unabridgedBytes.htm www.altron.com/annual2011/unabridgedPowertech.htm

LA13 1, 6 Composition of governance bodies and breakdown of employees per category according to gender, age group, minority group membership, and other indicators of diversity.

Partially Directorate; Executive committee; Chief executive’s review (IAR); Human capital in unabridged operational review (web)(Age groups and regions not disclosed)

14 – 16; 22 – 33 www.altron.com/annual2011/unabridgedAltron.htm, www.altron.com/annual2011/unabridgedBytes.htm, www.altron.com/annual2011/unabridgedPowertech.htm, www.altron.com/annual2011/unabridgedAltech.htm

LA14 1, 6 Ratio of basic salary of men to women by employee category.

Partially Reported for Powertech and Altech (full web reports)

www.altron.com/annual2011/unabridgedAltech.htm, www.altron.com/annual2011/unabridgedPowertech.htm

HR1 1, 2, 3, 4, 5, 6

Percentage and total number of significant investment agreements that include human rights clauses or that have undergone human rights screening.

Not reported

Not available N/A

HR2 1, 2, 3, 4, 5, 6

Percentage of significant suppliers and contractors that have undergone screening on human rights and actions taken.

Not reported

Altron is planning a human rights survey of foreign operations that have been identified as a potential risk during the 2012 financial year.

N/A

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HR3 1, 2, 3, 4, 5, 6

Total hours of employee training on policies and procedures concerning aspects of human rights that are relevant to operations, including the percentage of employees trained.

Not reported

Not available N/A

HR4 1, 2, 6 Total number of incidents of discrimination and actions taken.

Fully GRI; No incidents of discrimination reported during the period under review

102

HR5 1, 2, 3 Operations identified in which the right to exercise freedom of association and collective bargaining may be at significant risk, and actions taken to support these rights.

Fully GRI; No operations identified in which the right to exercise freedom of association and collective bargaining may be at significant risk

102

HR6 1, 2, 5 Operations identified as having significant risk for incidents of child labour, and measures taken to contribute to the elimination of child labour.

Fully Chief executive’s review (IAR); Human rights and fair labour practices (web)

22 – 33www.altron.com/annual2011/unabridgedAltron.htm,

HR7 1, 2, 4 Operations identified as having significant risk for incidents of forced or compulsory labour, and measures to contribute to the elimination of forced or compulsory labour.

Fully Chief executive’s review (IAR); Human rights and fair labour practices (web)

22 – 33www.altron.com/annual2011/unabridgedAltron.htm

HR8 1, 2 Percentage of security personnel trained in the organisation’s policies or procedures concerning aspects of human rights that are relevant to operations.

Not reported

Not available N/A

HR9 1, 2 Total number of incidents of violations involving rights of indigenous people and actions taken.

Fully No incidents of violations involving rights of indigenous people reported in the period under review (web)

www.altron.com/annual2011/unabridgedAltron.htm

SO1 10 Nature, scope, and effectiveness of any programmes and practices that assess and manage the impacts of operations on communities, including entering, operating, and exiting.

Not reported

Not available N/A

SO2 Percentage and total number of business units analysed for risks related to corruption.

Not reported

Not available N/A

SO3 10 Percentage of employees trained in organisation’s anti-corruption policies and procedures.

Not reported

Not available N/A

SO4 10 Actions taken in response to incidents of corruption.

Fully GRI content index; Chief executive’s review (IAR); unabridged operational reviews (web)

94 – 103; 22 – 23 www.altron.com/annual2011/corporategovernance.htm

SO5 1, 2, 3, 4, 5, 6, 7, 8, 9, 10

Public policy positions and participation in public policy development and lobbying.

Not reported

Not reported Not applicable

SO6 10 Total value of financial and in-kind contributions to political parties, politicians, and related institutions by country.

Fully Online governance report (web) www.altron.com/annual2011/corporategovernance.htm

SO7 Total number of legal actions for anti-competitive behaviour, anti-trust, and monopoly practices and their outcomes.

Fully Legal report (web) www.altron.com/annual2011/corporategovernance.htm


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SO8 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with laws and regulations.

Fully GRI; There were no significant fines and non-monetary sanctions for non-compliance with laws and regulations during the year under review (web)

103www.altron.com/annual2011/corporategovernance.htm

PR1 1 Life cycle stages in which health and safety impacts of products and services are assessed for improvement, and percentage of significant products and services categories subject to such procedures.

Partially Reported for Powertech (Customer rights and protection) (web)

www.altron.com/annual2011/unabridgedAltron.htm, www.altron.com/annual2011/unabridgedPowertech.htm

PR2 Total number of incidents of non-compliance with regulations and voluntary codes concerning health and safety impacts of products and services during their life cycle, by type of outcomes.

Fully GRI; No incidents of non-compliance with regulations and voluntary codes concerning health and safety impacts of products and services during the year under review

103

PR3 Type of product and service information required by procedures and percentage of significant products and services subject to such information requirements.

Not reported

Not available N/A

PR4 8 Total number of incidents of non-compliance with regulations and voluntary codes concerning product and service information and labelling, by type of outcomes.

Fully GRI; No incidents of non-compliance with regulations and voluntary codes concerning product and service information and labelling were reported during the year under review

103

PR5 Practices related to customer satisfaction, including results of surveys measuring customer satisfaction.

Fully Strategic themes and material issues overview; Operational reviews (IAR); Customer relationships (web)

42 –57; 59 – 91www.altron.com/annual2011/unabridgedAltron.htm

PR6 Programmes for adherence to laws, standards, and voluntary codes related to marketing communications, including advertising, promotion, and sponsorship.

Not reported

Not available N/A

PR7 Total number of incidents of non-compliance with regulations and voluntary codes concerning marketing communications, including advertising, promotion, and sponsorship by type of outcomes.

Fully GRI; No incidents of non-compliance with regulations and voluntary codes concerning marketing communications, including advertising, promotion, and sponsorship were reported during the year under review

103

PR8 1 Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data.

Fully GRI; No substantiated complaints regarding breaches of customer privacy and losses of customer data were received during the year under review


PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services.

Fully GRI; No significant fines for non-compliance with laws and regulations concerning the provision and use of products and services were incurred during the year under review

103

IAR = Integrated Annual ReportFC = Front Cover, IFC = Inside Front Cover, BC = Back Cover, IBC = Inside Back CoverThe unabridged Altech Operational Review is available at: www.altron.com/annual2011/unabridgedAltech.htmThe unabridged Powertech Operational Review is available at: www.altron.com/annual2011/unabridgedPowertech.htmThe unabridged Bytes Operational Review is available at: www.altron.com/annual2011/unabridgedBytes.htmThe unabridged Altron Group Operational Review is available at: www.altron.com/annual2011/unabridgedAltron.htmThe unabridged Altron Corporate Governance Report is available at: www.altron.com/annual2011/corporategovernance.htm


Independent third-party assurance statement


To the board and stakeholders of Allied Electronics

Corporation Limited (Altron)

SustainabilityServices.co.za (SS) was commissioned by Altron

to provide independent third-party assurance (ITPA) over

the sustainability content within the corporate responsibility

section of Altron’s 2011 integrated annual report (the

’report’, covering the period 1 March 2010 to 28 February

2011). The assurance team comprised primarily Michael H.

Rea, our principal sustainability assurance practitioner, with

12 years’ experience in environmental and social performance

measurement, including sustainability reporting and assurance.

AccountAbility AA1000AS (revised, 2008)

To the best of our ability and significant experience in

sustainability report assurance, this engagement has been

managed in accordance with AccountAbility’s AA1000AS

(2008) assurance standard, where the format of the

engagement was structured to meet the AA1000AS

Type I (Moderate) requirements.

Independence

During the past year, SS assisted Altron with the development

of its first UN Global Compact Communication on Progress

(COP), but has not been responsible for the preparation of any

part of this report, nor has SS undertaken any commissions for

Altron that would conflict with our independence. Responsibility

for producing this report was the responsibility of Altron and its

sustainability reporting advisers, primarily Trialogue. Thus SS

is, and remains, an independent assurer over the content and

processes pertaining to this report.

Assurance objectives

The objectives of the assurance process was to provide Altron’s

stakeholders an independent ’moderate level assurance’

opinion on whether:

> the sustainability content within the corporate responsibility

section of Altron’s integrated annual report, in its printed

format, adheres to the AA1000AS (2008) principles of

Inclusivity, Materiality and Responsiveness;

> the sustainability content within the corporate responsibility

section of Altron’s integrated annual report, in its printed

format, meets the Global Reporting Initiative (GRI) G3

guidelines Application Level B reporting requirements;

> Altron has adequately responded to the ’Apply or Explain’

requirements of the 60 elements of the King Code of

Corporate Governance (King III); and

> Altron employs adequate ethics policies, procedures and

controls throughout its operations.

Assurance approach and limitations

The process used in arriving at this assurance statement is

based on AccountAbility’s AA1000AS (2008) guidance, the

GRI’s G3 Application Level requirements, as well as other best

practices in sustainability reporting assurance. Our approach

to assurance included the following:

> A review of sustainability measurement and reporting

procedures at the Altron group’s head offices to determine

the context and content of sustainability management by

the company.

> A review of the information and/or data collection, collation

and reporting procedures undertaken by Altron, and the

report’s authors, to define the content of the report by

looking at materiality of issues included in the report,

stakeholder engagement responses to issues identified,

determination of sustainability context and coverage of

material issues.

> A review of the approach of management to addressing

topics discussed, including King III compliance and ethics,

in the report.

> A review of drafts of the report for any significant errors

and/or anomalies.

> A confirmation that the requisite number of GRI G3

indicators had been covered in the report.

The process was limited to the content and assertions made

within the corporate responsibility section of Altron’s printed

integrated annual report for the period under review and

supplementary reports, and did not extend to a comprehensive

analysis of the accuracy, reliability, completeness and/

or consistency of the data presented by Altron. Rather,

sustainability data presented within the report was subjected

to a series of reasonability tests during proof editing. The

process was further limited to reviewing policies and procedures

for ethics, governance and stakeholder engagements, and did

not extend to the physical engagement of any stakeholders to

arrive at our assurance opinion.

Findings

Based on our review of the report, as well as the processes

employed to collect and collate information reported herein, it

is our assertion that:

> Altron adequately adheres to the Accountability AA1000APS

principles of Inclusivity, Materiality and Responsiveness,

although room for improvement exists with respect to

stakeholder engagement.

> The integrated annual report adequately meets the GRI

G3’s requirements for Application Level B (responses to

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all required indicators, as well as no fewer than 20 Core

indicators, with at least one from each of economic,

environment, human rights, labour, society and product

responsibility). However, it was found that the reporting of

performance against some GRI G3 indicators continues to

require either data quality improvements, or further detail

in disclosure.

> Although significant improvements have been made with

respect to sustainability data management systems and

processes during the reporting period, Altron’s GRI-based

sustainability reporting practices continue to require

improvement within the group. Consistency of definitions

and/or reporting expectations may differ between Altech,

Bytes and Powertech, leading to possible differences in data

presented for key sustainability indicators within the report

(e.g., Human Resource data).

> Altron has reasonably responded to the ’Apply or Explain’

requirements of the 60 elements of King III, identifying

areas where Altron has fully or partially adhered to each

recommendation, and offering explanations of where Altron

has not yet applied specific recommendations, or where

improvement might be expected in the future.

> Altron employs adequate ethics policies, procedures and

controls throughout its operations – including whistle-

blowing facilities – to ensure that all employees are informed

of their obligations and responsibilities, as well as to identify

and address allegations of fraud, theft and/or corruption.

Conclusions and recommendations

Based on the information reviewed via desk research and

management interviews, SustainabilityServices.co.za is

confident that this report provides a comprehensive and

balanced account of Altron’s environmental, safety and

social performance for the period under review. The data

presented is based on a systematic process and we are

satisfied that the reported performance data accurately

represents Altron’s current ability to manage and/or report

on its environmental, safety and social performance, while

meeting the AA1000AS (2008) principles of Inclusivity,

Materiality and Responsiveness. Altron’s King III compliance

self-assessment adequately reflects its adherence to the

60 King III recommendations. Altron deploys comprehensive

ethics policies, procedures and information updates to

manage potential ethical lapses within the group. Moreover,

and although the quality or quantity of data of some GRI G3

indicators can be improved, this report appears to meet the

GRI G3’s requirements for Application Level B (B+ with this

assurance engagement).

However, the following recommendations have been identified:

> With respect to adherence to AccountAbility’s AA1000APS

principle of Inclusivity, Altron should continue to ensure

that stakeholder engagement progresses towards the active

inclusion of all significant stakeholders, and that a regular

review of stakeholders tests for completeness and relevance.

Altron’s King III compliance self-assessment

adequately reflects its adherence to the 60

King III recommendations.

> With respect to adherence to AccountAbility’s AA1000APS

principle of Responsiveness, Altron should continue to

ensure that feedback to stakeholders on sustainability

matters occurs in line with King III’s recommendations for

’Integrated Reporting’, such that all presentations of results

– including interim results – include a reasonable discourse

regarding Altron’s most material sustainability issues.

> Based on issues identified with respect to possible data

inconsistencies between divisions of the group, Altron should

consider extending its reporting cycle to accommodate for

assurance over interim (i.e., quarters 1 through 3) and year-

end data, in line with the expectations of AccountAbility’s

AA1000AS (Type II) assurance model in its 2012 report.

> Having successfully addressed the requirements of GRI G3

Application Level B, it is our recommendation that Altron

review its sustainability reporting processes in order to meet

the GRI’s G3 Application Level A reporting requirements.

For more information about the assurance process employed to

assess the corporate responsibility section within Altron’s 2011

annual report, email [email protected].

Michael Rea

SustainabilityServices.co.za

26 May 2011

Johannesburg


Abridged corporate governance report


Altron – abridged corporate governance report

The board acknowledges that Altron’s shareholders are the true

owners of the company and that management’s role vis-à-vis

the company is that of a trustee on behalf of shareholders. The

company’s approach to corporate governance seeks to balance

conformance with governance principles while generating

superior performance to justify shareholders’ investments.

It also has an essential oversight function.

The 2009 King Report on Corporate Governance for South

Africa (King III) brought a maturing of the board’s approach

to governance. This approach involved Altron looking beyond

the interests of the company’s directors and shareholders

to take into account the concerns and issues of its wider

stakeholder community, which includes customers, suppliers,

employees, custodians of environmental concerns, investors

and communities. These concerns are then used to inform

our strategy and ensure that we balance long-term social,

environmental and economic interests with the primary

requirement to maximise the profits of the company.

As a direct result of our early adoption of the principles

embodied in King III, we were not only able to produce

one of the country’s first truly integrated annual reports,

but were materially compliant with King III at the date of

implementation. This year the integration of sustainability

matters in the business strategy of the organisation progressed

further with the appointment of a senior group sustainability

manager and the formation of a dedicated sustainability

department to, among others, drive the appreciation of non-

financial issues, including without limitation environmental,

social and governance issues, across the group.

Altron follows the principles of good governance set out in the

Global Reporting Initiative (GRI) guidelines and once again

has been included in the JSE SRI index for 2010. We also

engaged in several other governance initiatives as a result of

our commitment to sustainability. We are signatories to the

UN Global Compact, The Copenhagen Communiqué (climate

change) and have also been admitted to the Shariah Index,

thereby including a group of investors that would otherwise

have been excluded. Where the assessment of the directors

is that recommended practices are not in the best interests

of Altron, this report follows King III in explaining the reasons

for an alternative approach to governance. A King III checklist

is included at the back of this abridged corporate governance

report.

Given that this is an integrated report, we aim to deal with

each important aspect of governance only once, where it best

applies.

> Quicklink:

The full corporate governance report is available

on Altron’s website at www.altron.com/annual2011/


The Altron board

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 are set

out in its charter. This charter was last updated in February

2011 and is aligned with the recommendations set out in King

III. It forms the basis of the board’s responsibilities and duties.

Consistent with the company’s board charter, Altron has

a unitary board, constituted to both lead and control the

company. Of the 15 serving directors, 10 are non-executive

directors, of whom seven are independent (i.e. 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). Five are executive

directors. Four of the independent non-executive directors are

black directors, two of whom are women.

In accordance with King III and the JSE Listings Requirements,

the roles of chairman and chief executive have been separated.

At the February 2011 nomination committee and board

meetings a full review of the board was conducted to ensure

that its composition remains appropriate. The review concluded

that the board’s size, diversity and demographics make it

effective.

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Board meetings and attendance

Five board meetings and two strategy sessions were held

during the past financial year. The accompanying table details

the attendance by each director at board meetings held during

the year under review:

Board

Director2010May

2010Jun#

2010Aug

2010Oct

2011Feb

Dr WP Venter o

RE Venter

NJ Adami

MC Berzack *

N Claussen

PMO Curle

MJ Leeming +

Dr PM Maduna

BJM Masekela

JRD Modise * o

DNM Mokhobo

PD Redshaw

AMR Smith

CG Venter

PL Wilmot +

Submitted apologies and was granted a leave of absence in terms of the company’s memorandum of incorporation.

# Special board meeting.* Recused himself from the meeting due to a conflict of interest.+ Participated by way of teleconference.o Could not attend due to incapacitation and hospitalisation.

Board committees

The board has established several committees on which

non-executive directors play an active and pivotal role. All

committees, except the executive committee, are chaired by an

independent non-executive director who attends the annual

general meeting in order to respond to shareholder queries.

The various committee mandates and terms of reference are

available from the Altron secretariat on request.

Members of each committee, except the audit and executive

committees, 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.

As the audit committee is a statutory committee under the new

Companies Act (and in terms of the recommendations set out

in King III), shareholders are required to elect the members of

this committee at each Altron annual general meeting.

Executive committee

The executive committee 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.

The board has established several committees

on which non-executive directors play an

active and pivotal role. All committees, except

the executive committee, are chaired by an

independent non-executive director who

attends the annual general meeting in order to

respond to shareholder queries.

> Members – Messrs Robert Venter (chairman), Norbert

Claussen, Peter Curle, Alex Smith, Craig Venter, Robert

Abraham and Seara Macheli-Mkhabela.

> Composition and proceedings – The committee meets

monthly with additional meetings convened as and when

necessary.

> Purpose – The purpose of the committee is to assist the

Altron chief executive in the performance of his duties,

including:

– the development and implementation of strategy,

operational plans, policies, procedures and budgets;

– the monitoring of operating and financial performance;

– the assessment and control of risk;

– the prioritisation and allocation of resources; and

– monitoring competitive forces in each area of operation.


Abridged corporate governance report continued


Audit committee

> Members – Messrs Peter Wilmot, Norman Adami, Mike

Leeming and Jacob Modise.

> Composition and proceedings – Alex Smith (chief financial

officer) and Robert Venter (chief executive) attend

committee meetings by invitation, but do not have a vote.

The external auditor and the head of internal audit attend

meetings by invitation. The committee meets periodically

with the group’s external and internal auditors and Altron’s

executive management. At the year-end audit committee

meeting the chairman ensures that senior management

and the external auditors as well as internal audit are able

to report back to the committee chairman and members on

the audit process both candidly and independently of each

other. The internal and external auditors have unlimited

access to the chairman of the committee. The internal audit

department reports directly to the chairman of the audit

committee and is also responsible to the chief financial

officer on routine day-to-day matters.

The external auditor and head of internal audit attend Altron’s

annual general meeting to answer any queries raised by

shareholders.

Three meetings are scheduled annually, with special meetings

called as and when required. The committee met three times

during the year under review.

> Role – The committee has written terms of reference and its

responsibilities include, among others:

– overseeing integrated reporting (i.e. the integrity of the

integrated annual report, the financial statements and

the disclosure of sustainability for consistency with the

financial information);

– recommending engaging an external assurance provider

on material sustainability issues;

– considering the need, if appropriate, to issue reviewed

interim results;

– reviewing summarised information and engaging the

external auditor to provide assurance on summarised

financial information;

– ensuring there is a combined assurance approach for

assurance activities to address all significant risks;

– monitoring the relationship between external assurance

providers and the company;

– reviewing annually and satisfying itself on the group’s

finance function and disclosing such in the integrated

annual report;

– overseeing internal audit (including the appointment/

dismissal and performance management of the head of

internal audit, approving the internal audit plan, assessing

internal audit performance and ensuring internal audit is

properly resourced with sufficient budget);

– recommending the external auditor appointment and

overseeing the external audit process (nomination, terms

of engagement, remuneration, monitoring independence,

defining non-audit services and preapproval of non-

audit services, be informed of reportable irregularities,

and review quality and effectiveness of external audit

process);

– reporting internally to the board and externally to

shareholders on:

> the discharge of its statutory duties;

> independence of external auditor;

> financial statements and accounting practices;

> effectiveness of the internal financial controls;

> its role, composition, meetings and activities;

> recommending the integrated annual report for

approval by the board;

– overseeing financial reporting risks, internal financial

controls, fraud and IT risks as they relate to financial

reporting;

– reviewing half-year and annual financial statements

before submission to the board; and

– addressing the section 269, 270A and 300A requirements

set out in the previous Companies Act of 1973 (as

amended), as pertains to Bytes and Powertech.

At its February 2011 meeting, the audit committee also

addressed the following additional responsibilities as set out in

King III and the JSE Listings Requirements:

– Evaluated and confirmed the independence of the internal

audit function.

– Reviewed the findings of the evaluation of the internal

audit function.

– Noted and approved the appointment of

SustainabilityServices, an external assurance provider,

to provide assurance over material elements of the

sustainability section of the integrated annual report.

– Reviewed the expertise, resources and experience of the

Altron group’s finance capability and agreed an action

plan in respect of those areas of the group where the

finance skills and/or procedures are inadequate.

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> Satisfied itself that management regularly monitors

compliance with Altron’s code of conduct and approved

amendments to the code of conduct to align with the

corporate compliance policy and the declaration of interest

policy.

> Approved the reportable irregularities policy for Altron.

> Evaluated the appropriateness of the expertise and

experience of Altron’s financial director.

Attendance at meetings

Audit

Members (and invitees)2010

Apr2010

Oct2011

Feb

PL Wilmot

NJ Adami

MJ Leeming

JRD Modise + O

RE Venter ¹ ¹ ¹

RJ Abraham ¹ ¹ ¹

N Claussen ¹ ¹ ¹

AMR Smith ¹ ¹ ¹

CG Venter 1 1 1


1 Attends by invitation and is not a member of the audit committee.* Recused himself from the meeting due to a conflict of interest+ Participated by way of teleconference.o Could not attend due to incapacitation and hospitalisation.

> Quicklink:

For more information regarding the activities of

the audit committee, please refer to the audit

committee report which appears on pages 150 to

152 of the annual financial statements, as well

as the full corporate governance report on

Altron’s website at www.altron.com/annual2011/


Abridged statement of internal control

The board acknowledges its overall responsibility for the

Altron group’s system of internal controls. This includes the

establishment of an appropriate control environment and

framework, as well as reviewing the effectiveness, adequacy

and integrity of this system.

The Altron group has in place an ongoing process for

identifying, evaluating, monitoring and managing the principal

risks affecting the achievement of its business objectives.

This process has been in place for the year ended 28 February

2011, and up to the date of the approval of the annual

financial statements for that year. In addition, this process is

embedded into the Altron group’s culture, people, processes

and structures.

The Altron group has in place an ongoing

process for identifying, evaluating, monitoring

and managing the principal risks affecting the

achievement of its business objectives.

The internal audit department monitors compliance with

policies and procedures and reviews the effectiveness of the

internal control environment. Significant findings in respect of

non-compliance with policies and procedures, or weaknesses

in internal controls are highlighted in their reports, brought to

the attention of management and reported to the Altron audit

committee.

Audits are carried out on all significant operating units. The

frequency of an audit is determined by the assessment of risk

which includes, but is not limited to, the results of the previous

audit review, operational financial contribution, and changes

in key staff and systems. High-risk operations are audited

annually, medium-risk sites once every 18 months, and low-

risk sites once every three years. The audits are conducted

in accordance with the International Standards for the

Professional Practice of Internal Auditing.

The Altron internal audit department has reviewed this

statement of internal control for the financial year ended

28 February 2011 and has reported to the Altron audit

committee that all internal control weaknesses identified

during the course of its audit assignments for the financial year

ended 28 February 2011 have been or are being addressed

and that none of the weaknesses have resulted in any material

losses, contingencies or uncertainties that would require

disclosure in the Altron integrated annual report.

> Quicklink:

The full text of this statement can be found in the full

corporate governance report on Altron’s website at



Internal audit

Two special reviews were conducted during the prior year.

These relate to an Altron business continuity review as well as

an Altron group risk review that was performed in line with the

Altron Information Management Council’s request.

Altogether 92 audits were planned for the year, of which

13 were deferred due to operational constraints and 14 are

still in progress at the date of this report. Of the 65 audits

concluded, 15 received a “Good” rating, 36 were rated

“Satisfactory”, 12 identified “Corrective Action Required” and

two were rated as “Deficient”.

The two deficient ratings for the financial systems reviews

relate to the newly acquired operations of Altech Fleetcall and

Altech Technology Concepts where the standards of internal

controls were not aligned to Altron group requirements. Control

deficiencies were noted throughout most of the financial

cycles that were subject to review. Management is committed

to ensuring that the audit findings raised are addressed and

rectified as a matter of urgency to ensure proper compliance

with Altron group policies and accounting standards. The Altron

internal audit department has planned a further audit of both

these operations during the 2012 financial year.

All of the deferred reviews were agreed with the respective

audit and financial review and risk committees and will be

audited in the 2012 financial year.

> Quicklink:

Full details of the activities of internal audit are

available in the full corporate governance report on

Altron’s website at www.altron.com/CR report.

Internal review of audit function

During the year under review, an internal evaluation of the

effectiveness of the internal audit function was conducted.

Participants canvassed in the evaluation included members of

the Altron audit committee, management, external and internal

audit. Altogether 12 of the 13 people invited to participate

answered the evaluation in full. The evaluation covered seven

aspects and the overall conclusion was that the internal audit

department was functioning well.

External review of audit function

Following the requirement to have an external quality

assurance review at least once every five years, a second

review of the Altron internal audit function was conducted in

September 2010.

The review evaluated:

> how the existing internal audit framework enables Altron’s

internal audit department to effectively comply with the IIA

Standards; and

> the extent to which Altron’s internal audit practices are

aligned with stakeholders’ needs and expectations.

The review involved surveys and interviews with line

management, internal audit, the Altron chief executive and

financial director, the external audit partner and the chairman

of the Altron audit committee. Three project files were

reviewed as well as the internal audit process, procedures and

documentation.

Of the four areas marked for improvement and reported on in

2005, three were fully addressed and one partially addressed.

Areas for improvement identified in the year under review

related to:

> retention of evidence on working paper files in terms of

management’s agreement and acceptance of engagement

objectives and scope;

> retention of all client communications on working paper files

including minutes of meetings and any other form of client

communications; and

> continuous monitoring of the adequacy of documentation

of work performed in the electronic working paper files by

internal audit supervisors, with periodic review by the head

of internal audit.

The review indicated that the Altron internal audit department

“Generally Conforms” to the IIA Standards and concluded

that “Internal Audit is well respected and has the appropriate

authority through the organisation as was evident from the

stakeholder interviews. Internal audit is perceived to be a

business partner adding value to the organisation”.

> Quicklink:

The full text of this review can be found in the full





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Remuneration committee

> Members – Messrs Jacob Modise, Norman Adami, Myron

Berzack, Dr Bill Venter and Peter Wilmot.

> Composition – The committee comprises a majority of

independent non-executive directors. Robert Venter (chief

executive) has right of attendance at committee meetings

and Alex Smith (chief financial officer) attends by invitation.

No executives participate in discussions on their own

remuneration and benefits and neither do they have a vote at

meetings. Two meetings are scheduled annually with special

meetings called as required. The committee met twice during

the year under review.

> Role – In consultation with executive management, this

committee ensures that, among others, the group’s directors

and senior executives are fairly rewarded for their individual

contributions to overall performance and in line with the

Altron remuneration policies. Remuneration

Members (and invitees)2010May

2011Feb

JRD Modise

NJ Adami

MC Berzack

Dr WP Venter

PL Wilmot

RE Venter 1 1

AMR Smith 2 2

Submitted apologies and was granted a leave of absence in terms of

the company’s memorandum of incorporation.1 Has right of attendance but is not a member of the remuneration

committee.2 Attends by invitation and is not a member of the remuneration

committee.

> Quicklink:

For further details on the remuneration of Altron’s

executive and non-executive directors, as well as

Altron’s remuneration philosophy and policies, see the

remuneration report and reward strategy policy on

pages 122 to 142 of this integrated annual report. The

full text of this review can be found in the full corporate

governance report on Altron’s website at www.altron.

com/annual2011/corporategovernance.htm

Risk management committee

> Members – Messrs Mike Leeming (chairman), Peter Wilmot,

Norbert Claussen, Robert Abraham, Seara Macheli-Mkhabela,

Alex Smith, Craig Venter and Robert Venter.

> Composition and proceedings – The committee has two

scheduled meetings each year and met twice during the year

under review.

> Role – To ensure that adequate processes are in place to

identify risks prevalent in all of the group’s businesses and to

review their impact, assess the probability of occurrence and

monitor 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’.

The range of risks considered by the risk management

committee is guided by the 11 strategic sustainability themes

and material issues, covering not only operational and financial

issues, but also economic, environmental and social impacts

and opportunities. Management deliberates on the residual risk

exposure to determine its acceptability. If the risk is adjudged

as too high, an action plan that stipulates the responsible

person, required action and timeframe is put in place to reduce

the level of risk to a more acceptable level.


Risk


Apr2011

Oct

MJ Leeming

N Claussen

S Macheli-Mkhabela

AMR Smith

RE Venter

CG Venter

PL Wilmot

RJ Abraham


Altron integrated annual report 2011page 112 Altron integrated annual report 2011


Nomination committee

> Members – Dr Penuell Maduna (chairman), Messrs Myron

Berzack, Mike Leeming, Barbara Masekela and Dr Bill Venter.

> Composition and proceedings –This committee comprises a

majority of independent, non-executive directors. In line with

corporate governance best practice, the committee is chaired

by an independent non-executive director, as opposed

to the non-executive chairman of Altron, Dr Bill Venter, in

light of the Venter family’s interest and close involvement

in the company and its operations. Mr Robert Venter (chief

executive) has right of attendance at committee meetings,

but has no vote. The committee generally meets as and

when required although there is a standing meeting which

is held in February of each year. The committee met twice

during the year under review.

Directors are appointed in a transparent and formal

procedure governed by the mandate and terms of reference

of the nomination committee as well as by the Altron board

charter. The mandate and terms of reference was updated

in February this year to, among others, further align with the

recommendations of King III. It also introduced the nine-year

independence evaluations of the non-executive directors and

the re-election every year of non-executive directors who

have turned 70. A director’s skills, knowledge, experience in

relevant sectors, qualifications, availability, number of external

board appointments and what they bring to the diversity of

the board are among the issues considered in the selection

process, examined against the backdrop of Altron’s strategies.

The chairman of the board, Dr Bill Venter, is appointed annually

by the board, after formal evaluation by the nomination

committee.

> Role – The committee is responsible for, among others,

identifying and evaluating suitable candidates for

appointment to the board, as well as succession planning.

This is vital to the development of a diverse leadership at

Altron, representative of all race groups and in accordance

with both the spirit of and the targets set out in the dti

Codes of Good Practice. Employment equity at middle and

senior management levels remains a key challenge across

the Altron group. The activities of this committee form an

integral part of Transformation Vision 2012 by identifying

and developing leadership talent.

Specific areas of responsibility include:

> monitoring of succession planning;

> review of performance of Altron’s non-executive chairman;

> proposed changes, if any, to the Altron board and its

material committees;

> evaluating the proposed re-election of Altron directors who

retire by rotation;

> evaluating the proposed election/re-election of members

of the Altron board committees (excluding the audit

committee);

> nominating members of the Altron audit committee for

election by shareholders; and

> review of the Altron nomination committee mandate and

terms of reference for alignment with King III.


Nomination


Jun2011

Feb

Dr PM Maduna

MC Berzack

MJ Leeming

BJM Masekela

Dr WP Venter

RE Venter 1 1


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

> Quicklink:

For further details on the nomination committee,

as well as Altron’s human capital council, see the full



Transformation committee

> Members – This is a sub-committee of the Altron executive

committee, led by the Altron group executive for corporate

affairs. Members are transformation champions from each

sub-holding group, including Altron group representatives.

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> Composition and proceedings – The transformation

committee was established in 2005 to drive economic

transformation and broad-based black economic

empowerment across the Altron group. The primary

objective of the committee this year is to focus on increasing

the levels of diversity at leadership levels throughout the

group. To this end, the committee has started creating

a strategy, goals and targets on employment equity for

the entire group to be implemented beyond the Altron

Transformation Vision 2012.

> Role – Transformation Vision 2012 lays out the Altron

group’s strategic transformation objectives and is aligned

with the dti Codes of Good Practice (“the Codes”). The

committee’s mandate is to develop a transformation

strategy and ensure consistent execution thereof throughout

all the group companies.

Despite ongoing uncertainty on the industry sector charters,

the Altron transformation committee is engaged in several

projects, namely:

> establishing a five-year transformation strategy which goes

beyond compliance to the Codes and legislation towards

a transformation strategy aligned to Altron’s business

strategy and government developmental growth goals;

> auditing the entire Altron group’s employment equity status

at management levels in order to set targets over a period of

five years;

> implementing group-wide economic and social development

projects in communities we do business, an example of such

is the Public Private Partnership wherein Altron contributed

R14 million to establish facilities for healthcare in mother

and child; and

> creating wealth and jobs by concluding empowerment

transactions valued at over R2.4 billion.

Company secretary

To enable the board to function effectively, all directors have

full and timely access to all information that may be necessary

for them to properly discharge their duties and obligations. This

includes information such as agenda items for board meetings,

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.

Counsel and guidance is provided to the board on their powers

and duties, individually and collectively, by the group company

secretary who is also responsible for the development of

director training. All new directors are appropriately inducted to

the Altron group by the group company secretary and sponsor,

which includes a briefing on their fiduciary and statutory

duties and responsibilities (including without limitation the JSE

Listings Requirements), as well as two- to three-day induction

visits to group operations around South Africa.

The group company secretary is not a director of any of the

Altron group’s operations and accordingly maintains an arm’s

length relationship with the board and its directors.

In addition to reporting to the chief executive and having a

direct channel of communication to the chairman, the group

company secretary meets with the chairman before each board

and general meeting to prepare for and discuss important

issues and agree on the agenda. Furthermore, the group

company secretary assists the chairman of the board and

committee chairmen in the drafting of yearly work plans.

The Altron group company secretary is responsible for the

functions specified in the Companies Act of 2008 (the Act).

All meetings of shareholders, directors and board sub-committees

are properly recorded as per the requirements of the Act. The

removal of the group company secretary would be a matter for

the board as a whole.

The Altron group company secretary is an active member of

the accounting and auditing task force of the King Committee

responsible for the drafting of King III and is therefore

well versed in most aspects of corporate governance. This

involvement has helped Altron and its board to stay at the

cutting edge of best practices and procedures in the field of

corporate governance. He is also an active member of CRISA

and was recently appointed as a director of the Corporate

Lawyers Association of South Africa.

Donations to political parties

The Altron code of conduct is now aligned with the corporate

compliance policy and anti-corruption and economic crime

policy and all donations to political parties have to be approved

by shareholders. During the year under review, Altron did not

make any donations to political parties.


King III index

ApplyPartially

apply

Under review/

do not apply

ETHICAL LEADERSHIP AND CORPORATE CITIZENSHIP

Effective leadership based on an ethical foundation

Responsible corporate citizen

Effective management of company’s ethics

Assurance statement on ethics in integrated annual report

BOARDS AND DIRECTORS

The board is the focal point for and custodian of corporate governance

Strategy, risk, performance and sustainability are inseparable

Directors act in the best interests of the company

The chairman of the board is an independent non-executive director 1

Framework for the delegation of authority has been established

The board comprises a balance of power, with a majority of non-executive directors who are independent

Directors are appointed through a formal process

Formal induction and ongoing training of directors is conducted

The board is assisted by a competent, suitably qualified and experienced company secretary

Regular performance evaluations of the board, its committees and the individual directors 2

Appointment of well-structured committees and oversight of key functions

An agreed governance framework between the group and its subsidiary boards is in place

Directors and executives are fairly and responsibly remunerated

Remuneration of directors and senior executives is disclosed

The company’s remuneration policy is approved by its shareholders

INTERNAL AUDIT

Effective risk-based internal audit

Written assessment of the effectiveness of the company’s system of internal controls and risk management

Internal audit is strategically positioned to achieve its objectives

AUDIT COMMITTEE

Effective and independent

Suitably skilled and experienced independent non-executive directors

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ApplyPartially

apply

Under review/

do not apply

Chaired by an independent non-executive director

Oversees integrated reporting

A combined assurance model is applied to improve efficiency in assurance activities 3

Satisfies itself of the expertise, resources and experience of the company’s finance function

Oversees internal audit

Integral to the risk management process

Oversees the external audit process

Reports to the board and shareholders on how it has discharged its duties

COMPLIANCE WITH LAWS, CODES, RULES AND STANDARDS

The board ensures that the company complies with relevant laws

The board and directors have a working understanding of the relevance and implications of non-compliance

Compliance risk forms an integral part of the company’s risk management process

The board has delegated to management the implementation of an effective compliance framework and processes

GOVERNING STAKEHOLDER RELATIONSHIPS

Appreciation that stakeholders’ perceptions affect a company’s reputation

Management proactively deals with stakeholder relationships

There is an appropriate balance between its various stakeholder groupings

Equitable treatment of stakeholders

Transparent and effective communication to stakeholders

Disputes are resolved effectively and timeously


ApplyPartially

apply

Under review/

do not apply

THE GOVERNANCE OF INFORMATION TECHNOLOGY

The board is responsible for information technology (IT) governance

IT is aligned with the performance and sustainability objectives of the company

Management is responsible for the implementation of an IT governance framework

The board monitors and evaluates significant IT investments and expenditure 4

IT is an integral part of the company’s risk management

IT assets are managed effectively 5

The risk management committee and audit committee assist the board in carrying out its IT responsibilities

THE GOVERNANCE OF RISK

The board is responsible for the governance of risk and setting levels of risk tolerance

The risk management committee assists the board in carrying out its risk responsibilities

The board delegates the process of risk management to management

The board ensures that risk assessments and monitoring is performed on a continual basis

Frameworks and methodologies are implemented to increase the probability of anticipating unpredictable risks

Management implements appropriate risk responses

The board receives assurance on the effectiveness of the risk management process

Sufficient risk disclosure to stakeholders

INTEGRATED REPORTING AND DISCLOSURE

Ensures the integrity of the company’s integrated annual report

Sustainability reporting and disclosure is integrated with the company’s financial reporting

Sustainability reporting and disclosure is independently assured

King III indexcontinued

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Note Explanation Further reading

1 Altron’s chairman, Dr WP Venter is classified as a non-executive chairman given his

material shareholding in Altron.

As per the recommendations of King III, Altron has appointed a lead independent

director to compensate for the lack of an independent non-executive chairman, as well

as ensured that the composition of non-executive directors on its board exceeds the

number of executive directors.

For further information

regarding the role of the

chairman please see the

unabridged Corporate

Governance Report which can

be found on www.altron.com/annual2011/corporategovernance.htm

2 Performance evaluations of the board and its committees takes place every other year

as opposed to annually as recommended by King III. The board is satisfied that

evaluations every other year as opposed to annually is appropriate for the business.

Evaluations regarding the performance of individual executive directors takes place

annually, once during remuneration increase and performance bonus award periods

and the other prior to the AGM regarding the re-election of directors.

Evaluations regarding the performance of individual non-executive directors takes

place annually (in respect of those standing for re-election at the AGM) and every

other year for the remainder (part of the board and committee evaluations).

See the unabridged Corporate


be found on www.altron.com/annual2011/


for further information in

this regard.

3 The Altron board and audit committee are committed to providing independent

assurance on both financial and non-financial aspects of the business.

In line with King III, the audit committee has appointed the most appropriate service

providers to meet the audit and assurance requirements of Altron’s financial

performance (our external auditor), as well as our sustainability matters

(SustainabilityServices). Each service provider has been mandated to provide

assurance over aspects of our business, based on their specific expertise and

experience.

Altron is not in favour of the common interpretations of the combined assurance

approach advocated by King III due to the inherent conflicts of interest of having the

external auditor provide assurance on both the financial and non-financial aspects of

the business. Rather, Altron is committed to combining the services of two separate

assurance providers, each assessing our reporting to stakeholders in parallel processes,

to offer the greatest level of comfort over the accuracy and completeness of the

information we provide.






this regard.

4 Policy and processes to standardise management and measurement of IT investments

and expenditure are in the process of being developed by the IM Council. IT

investments are however currently managed the same way other capital investments

are managed within the group. All applicable material investments are approved by

the Altron board as part of a standard capital expenditure authorisation process.






this regard.

5 The IM Council is currently looking at processes to assist in determining how

information assets can be identified, managed and measured. Once this process is

defined, information asset management will be included in committee and board

reports. An information asset management policy is however in place from a risk

perspective and compliance with these policies is assessed and reported on as part

of the IT risk management process.






this regard.


Shareholder analysis

Altron shareholder analysis – compiled by VACO Stakeholder Intelligence utilising the company’s transfer secretaries’ records as at 25 February 2011

Number of shareholdings %

Number ofshares %

Shareholder spread – ordinary shares

1 – 500 shares 1 130 36.64 267 866 0.25

501 – 1 000 shares 613 19.87 501 918 0.47

1 001 – 5 000 shares 923 29.92 2 264 299 2.14

5 001 – 10 000 shares 175 5.67 1 309 396 1.25

10 001 – 50 000 shares 159 5.15 3 472 021 3.29

50 001 – 100 000 shares 25 0.81 1 861 625 1.76

Over 100 000 shares 60 1.94 95 992 006 90.84

3 085 100 105 669 131 100

Distribution of shareholders – ordinary shares

Banks 21 0.68 1 389 626 1.32

Close corporations 61 1.98 106 465 0.10

Endowment funds 24 0.78 262 993 0.25

Holding company 1 0.03 50 630 527 47.91

Individuals 2 213 71.73 13 716 897 12.98

Insurance companies 23 0.75 3 163 767 2.99

Investment companies 17 0.55 786 450 0.74

Medical aid schemes 8 0.26 5 092 0.00

Mutual funds 99 3.21 11 155 399 10.56

Nominees and trusts 424 13.74 1 553 556 1.47

Other corporations 27 0.88 27 475 0.03

Private companies 87 2.82 1 178 231 1.12

Public companies 8 0.26 72 578 0.07

Repurchased shares 1 0.03 3 246 469 3.07

Retirement funds 71 2.30 18 373 606 17.39

3 085 100 105 669 131 100

Stock exchange performance during the past six years

2011 2010

OrdinaryParticipating

preference OrdinaryParticipating

preference

Market value per share (cents)

– at year end 2 620 2 590 2 600 2 350

– highest 3 100 3 001 3 100 2 879

– lowest 2 213 2 265 1 530 1 487

Number of shares traded (000) 18 931 72 771 23 814 88 015

Value of shares traded (R’000) 492 831 1 875 387 585 069 2 121 315

Total volume traded as % of total issued shares 17.92 30.18 22.54 36.57

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2009 2008 2007 2006

OrdinaryParticipating




preference

1 950 1 920 3 700 3 600 4 478 4 200 2 550 2 250

4 390 4 240 5 600 5 100 5 000 4 500 2 610 2 350

1 830 1 775 3 500 3 320 2 350 2 100 1 460 1 385

18 506 96 723 14 496 89 796 9 023 68 696 20 079 49 069

616 580 2 928 417 654 634 3 866 991 271 172 1 965 779 398 947 903 016

17.51 40.36 13.72 37.8 9.28 32.2 20.7 23.1


Number ofshares %

Shareholder spread – participating preference shares

1 – 500 shares 3 821 60.78 556 412 0.23

501 – 1 000 shares 712 11.33 544 846 0.22

1 001 – 5 000 shares 1 024 16.29 2 402 813 1.00

5 001 – 10 000 shares 191 3.04 1 460 283 0.61

10 001 – 50 000 shares 261 4.15 6 318 092 2.62

50 001 – 100 000 shares 76 1.21 5 399 219 2.24

Over 100 000 shares 201 3.20 224 479 104 93.08

6 286 100 241 160 769 100

Distribution of shareholders – participating

preference shares

Banks 40 0.64 5 121 836 2.12

Close corporations 65 1.03 85 475 0.03

Endowment funds 29 0.46 668 945 0.28

Individuals 5 097 81.09 7 083 743 2.94

Insurance companies 40 0.64 48 876 029 20.27

Investment companies 26 0.41 2 122 465 0.88

Medical aid schemes 18 0.29 1 131 379 0.47

Mutual funds 146 2.32 62 403 685 25.88

Nominees and trusts 513 8.16 5 527 199 2.29

Other corporations 39 0.62 52 900 0.02

Private companies 95 1.51 6 608 687 2.74

Public companies 8 0.13 18 870 0.01


Retirement funds 168 2.67 73 755 543 30.58

6 286 100 241 160 769 100


Shareholder analysiscontinued

Shareholder spread as at 25 February 2011

Ordinary shares Participating preference shares


Number of shares %


Number of shares %

Public 3 079 99.81 43 091 708 40.78 6 276 99.84 206 882 130 85.80

Non-public 6 0.19 62 577 423 59.22 10 0.16 34 278 639 14.20

Beneficial shareholders holding 2% or more of the company’s listed ordinary shares as at 25 February 2011

Number of shares %

Venter WP 59 324 597 56.14

Government Employees Pension Fund 15 293 931 14.47

Old Mutual 4 099 126 3.89

Altron Finance (Pty) Limited 3 246 469 3.07

ABSA 2 199 385 2.08

Beneficial shareholders holding 2% or more of the company’s listed participating preference shares as at 25 February 2011

Number of shares %

Old Mutual 44 872 249 18.61



Sanlam 18 474 096 7.66

Investment Solutions 14 012 980 5.81

Nedbank Group 6 622 936 2.75

Venter WP 6 231 184 2.58

Metropolitan 5 713 753 2.37

page 121

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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/her bears to the

aggregate nominal value of all the shares in Altron.

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.


Remuneration report

Remuneration committee – composition and terms of

engagement

The remuneration committee (“the committee”) is a sub-

committee of the board of directors and comprises five

non-executive directors, the majority of whom, and including

its chairman, are independent. Meetings of the committee are

held at least twice per annum and additional meetings are held

when deemed necessary.

Current members of the committee are:

> Jacob Modise (chairman) – Independent non-executive

director

> Norman Adami – Independent non-executive director

> Myron Berzack – Non-executive director

> Dr Bill Venter – Non-executive director and chairman of

Altron

> Peter Wilmot – Independent non-executive director.

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 quorum for decisions of the committee

is any two independent members present.

The committee complies with the King III Code of Governance

Principles for South Africa and the board considers its

composition to be appropriate in terms of the necessary blend

of knowledge, skill and experience of its members.

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 is

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. At the

Altron nomination committee and board meetings held during

February 2011, the board, upon the recommendation of the

nomination committee, agreed to reappoint Jacob Modise as

the chairman of the committee for a further two-year period

with effect from 1 February 2011. This decision followed a

rigorous review by the nomination committee and board of not

only Jacob Modise’s performance, but also any factors which

could impair his independence.

The Altron group company secretary, Andrew Johnston,

attends all meetings of the committee as secretary. The

chief executive has right of attendance at meetings unless

deemed inappropriate and the chief financial officer is invited

when necessary to discuss the remuneration of executive

directors and senior management. No member of management

irrespective of their position, is allowed to take part in

discussions regarding their own remuneration nor are they

present in the meetings when such decisions are taken.

Mike Leeming, lead independent director of Altron, is invited to

attend the February meeting to comment on the non-executive

chairman of the board’s performance during the period under

review and to proffer a recommendation on any increases to

his remuneration.

The committee met twice during the year. Attendance at

meetings was as follows:

Remuneration committee

(Members (and invitees))2010April

2011February

JRD Modise

NJ Adami

MC Berzack

Dr WP Venter

PL Wilmot

RE Venter1

AMR Smith2

Submitted apologies and was granted a leave of absence in terms of

the company memorandum of incorporation.1 Has right of attendance but is not a member of the committee.2 Attends by invitation and is not a member of the committee.

Remuneration committee – role and responsibilities

The committee chairman reports formally to the board on

its proceedings and deliberations after each meeting of the

committee and attends the annual general meeting to respond

to any questions from shareholders regarding the committee’s

areas of responsibility.

The responsibilities of the committee are in accordance with

its mandate and terms of reference as set by the board, and

include, among others:

> assisting the board in its responsibility for setting and

administering remuneration policies in the Altron group’s

long-term interests;

> recommending remuneration policies for all levels in the

Altron group, but especially the remuneration of Altron

executive directors and senior executives of the company

including the Altron group company secretary;

page 123

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> advising on the remuneration of non-executive directors;

> proposing remuneration policies that aim to set appropriate

remuneration levels to attract, motivate, reward and retain the

calibre of directors and executives required to run the Altron

group successfully, whilst at the same time, linking remuneration

to individual performance, and aligning the executive directors

and executive managements’ interests with those of the

shareholders and with the strategy of the company;

> reviewing and recommending to the board all proposals

for executive share-based and other short- and long-term

incentive schemes across the Altron group;

> determining targets for any performance-related pay

schemes operated by the company and requesting the

board, when required, to seek shareholder approval for

any share-based and other long-term incentive schemes/

arrangements;

> determining on an annual basis, within the terms of the

agreed policies, the total remuneration package of each

Altron executive director including, where appropriate, their

total cost of employment (TCOE) packages plus annual

increases, short-term performance bonuses and long-term

(share-based) incentives;

> determining the employment contracts for the company’s

executive directors and other members of executive

management, with appropriate notice periods;

> determining such packages and arrangements, giving due

regard to the remuneration guidelines of the King III Report

on Corporate Governance for South Africa, as well as the JSE

Limited Listings Requirements;

> reviewing the terms of reference, minutes and the

activities of the remuneration and nomination committees

of Altron’s major subsidiaries, as well as noting and

confirming their chief executive officer’s annual TCOE

increases, short-term performance bonuses and long-term

incentives; and

> ensuring that the annual remuneration report, forming part

of the integrated annual report, provides a sufficient level

of disclosure to comply with King III, or to explain where the

principles have not been applied.

The committee has liaised with the board in relation to the

preparation of the remuneration report to shareholders and

requests a non-binding advisory vote by shareholders on the

remuneration policy as set out in the Altron reward strategy

document (included after this remuneration report) at the

annual general meeting of the company and/or on any required

resolutions.

The terms of reference were amended during the course of

the year to ensure further alignment with the requirements of

King III.

> Quicklink:

The terms of reference of the committee are available

on the Altron website at www.altron.com

The board considered the extent to which its remuneration

report complies with King III’s requirements and upon

recommendation by the committee has taken steps to enhance

its disclosure in this regard. The committee (and the board)

have satisfied themselves that the remuneration principles

recommended in King III have generally been complied with by

Altron during the period under review.

The top three earners who are not executive directors of Altron

were identified in terms of the total earnings for the year under

review, including their TCOE packages, the short-term incentive

bonuses awarded for the 2010/2011 financial year and the

fair value of the long-term incentives awarded. Disclosure has

been made on an anonymous basis, as the top three earners

may differ from year to year due to earning differentials and

the fair value of long-term incentives granted upon promotion

or appointment.

Remuneration committee – self-evaluation

As has been previously communicated to shareholders the

committee conducts a self-assessment exercise into its

effectiveness every other year as opposed to annually which

is the recommendation set out in King III. The members of

the committee believe than an evaluation every other year

as opposed to annually is appropriate given the size of the

committee and the period of time which it ordinarily takes

to complete these exercises (which are detailed, rigorous

and extend over several months) before having to embark

on the following self assessment exercise. The previous self

assessment exercise took place in 2009 (as reported on in

Altron’s 2010 remuneration report), with the following exercise

planned for 2011. During these self assessment exercises,

members are provided with an opportunity to identify areas

of weakness (and strength) regarding the committee’s

functioning and to implement and adopt appropriate remedial

measures to address these weaknesses.

Following these exercises in the past, 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, reward and

retain senior executives of Altron, and that it has established

a formal and transparent set of policies and procedures for

determining executive director remuneration.


Remuneration reportcontinued

Areas for improvement that were identified in 2009, and which

have subsequently been addressed and implemented, include:

> pension fund and medical aid benefits and group life cover are

now regularly discussed and debated at committee meetings;

> the committee agreed that directors’ and officers’

insurance covers are more appropriately dealt with at

risk management committee meetings rather than at

remuneration committee meetings;

> members of the committee and board are kept informed

of remuneration best practices and recent trends in

remuneration practices. The committee also receives

frequent articles and updates on, among others, policy and

practices affecting non-executive directors’ remuneration

and remuneration committee best practices, including

the governance thereof. In both 2010 and 2011, Mabili

Reward was invited to present at the February meetings of

the committee, on international remuneration trends and

practices; and

> the need to continue to focus on succession planning

throughout the Altron group resulted in a diligent exercise

conducted at both Altron and each of its sub-holdings

to identify at least two potential successors for each key

executive and senior manager position throughout the Altron

group. In addition members of the Altron Young Presidents

Club, Altech Academy and Powertech Leadership Programme

plus previously disadvantaged employees of the Altron group

are integrated into these succession plans and appropriate

career paths and development training needs identified and

implemented for these individuals. This process is reviewed

bi-annually and has been made a standing item on each

nomination committee meeting agenda.

Remuneration committee – 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 remuneration consultants include, among

others, Mabili Reward, 21st Century Business and Pay Solutions

and PE Corporate Services SA (Pty) Limited. In addition,

the committee frequently reviews remuneration trends

and 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.

Except for proffering advice and guidance on remuneration-

related matters none of the aforementioned remuneration

consultants have any other connection with or interest

(whether economic, financial or otherwise) in Altron.

Reward strategy, intent and principles

Altron is committed to a reward philosophy that prevails

throughout the Altron group, and one which focuses on

rewarding consistent and sustainable individual and corporate

performance.

Altron’s approach towards remuneration aims to ensure that

an appropriate balance is achieved between the interests of

shareholders, the operational and strategic requirements of

the Altron group and providing attractive and appropriate

remuneration packages to executives. The remuneration

practices of the Altron group have been structured to be

competitive in the rapidly evolving industry in which it operates

and to ensure that the group can attract, motivate, reward and

retain high-calibre people, with above-average industry ability

and leadership potential, needed to effectively run Altron and

its subsidiary companies.

Among the primary objectives of the reward strategy are

the need to reinforce, encourage and promote superior

performance, to direct employees’ energies and activities

towards key business goals, to achieve the most effective

returns (employee productivity) for total employee spend, to

address diverse employee needs across differing cultures, and

overall to enhance the simplicity, transparency and credibility

of executive remuneration.

Altron has adopted an integrated approach to reward

strategy, encompassing a balanced design in which all reward

components are aligned to the strategic direction and business

– specific value drivers of Altron, and fully integrated into other

management processes.

In this context, Altron is committed to maintaining guaranteed

pay levels on a total cost to employer basis that reflect an

individual’s worth to Altron, a performance management

system that serves both to differentiate individual and/or

team performance and incentives that recognise and reward,

where appropriate, both operational performance and strategic

performance in a volatile business environment.

In 2011 Altron will be tabling its reward strategy document,

which includes Altron’s reward philosophy and remuneration

policies and practices, at the annual general meeting to enable

shareholders to express their views on the policies adopted

and on their implementation. This will take place by way of a

non-binding advisory vote. A copy of Altron’s reward strategy

document can be found at the end of this remuneration report

on page 135.

page 125

Executive remuneration policies

Altron’s executive remuneration policies are designed, within

the framework of Altron’s reward strategy, to attract, motivate,

reward and retain the calibre of executives needed to run Altron

and its subsidiaries successfully, while aligning their interests

with those of shareholders (over the short, medium and long

term) and the strategy of the company. The guiding strategy is

to ensure that executive directors are fairly rewarded for their

individual contribution to the Altron 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 policies conform to the best practice guidelines

contained in the King III Report on Corporate Governance

for South Africa, and international guidelines such as those

contained in, among others, the Association of British

Insurers (ABI) Guidelines on Executive Remuneration Policies

and Practices.

Policy on guaranteed pay

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

total cost of employment (TCOE) philosophy for all salaried

employees (which incorporates base pay, car allowance,

pension, medical aid and other optional benefits) as opposed

to the cash package approach adopted in prior years. TCOE

packages do not include annual cash incentives or long-term

share-based incentives. In essence this means that salary and

bonus increases expressed as a percentage are based on TCOE

as opposed to the cash element only.

Guaranteed packages within the Altron group are structured

to be in line with the median of the market but with the

proviso that for key talent, both professional and executive,

a positioning closer to or at the upper-quartile level of peer

companies is required.

Altron operates in a fast-moving and highly technological

sector where highly skilled employees are a must to have, and

yet are usually extremely mobile and sought after, both locally

and offshore. At the coal face of the market with cutting-

edge technologies, skilled and experienced talent is extremely

difficult to come by, and even more difficult to motivate, reward

and retain. This is even more the case for experienced executive

talent. Hence Altron adopts a selective policy of positioning

professional and key talent packages between the median and

upper-quartile level of the market, and executive talent at the

upper-quartile level of the market.

Policy on performance management

Altron has a formal framework for performance management

that is linked to and supports the annual cash incentive

schemes. The various subsidiaries have tailor-made

performance scorecards that utilise various measuring

instruments to measure group, company, team and individual

performance.

The performance scorecards and the assessment process also

provide a vehicle to establish and comment on developmental

plans for the individual. Approximately 82.5% of Altron group

salaried employees, including all executive and management

employees receive regular performance and career

development reviews. These occur at least twice per annum:

typically at salary increase and bonus time (February – April),

when the senior management and executives’ key performance

indicators are reviewed. Thereafter, usually once per annum,

the Altron executive committee will review the succession plans

for the Altron group, including reviewing career paths, training

needs, and likely timing.

For executives and senior management, performance is

linked to strategic delivery and defined financial targets set

each year, and also the company’s social and environmental

performance.

Policy on pay mix

Altron has adopted a pay mix policy that supports the

philosophy that the performance-based pay of senior

executives should form a greater portion of their expected

total compensation than guaranteed pay, and furthermore

that, within performance-based pay an appropriate

balance should be targeted between rewarding long term

sustainable performance (through long term and/or share-

based incentives), and rewarding operational performance

(through annual cash incentives).

The mix of fixed and variable pay is thus designed to meet

Altron’s operational needs and strategic objectives, based

on targets that are stretching, verifiable and relevant. An

Altron standard has been adopted for the Altron group, whilst

recognising that the different nature of the three major

divisions within Altron may require a differential approach

between them.

For illustrative purposes the pay mix proportionality of the

chief executive officer and of a senior executive is shown in the

schematics over the page.

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It should be borne in mind, however, that in practice the mix

will vary as annual cash incentives may be less than targeted,

or greater than targeted should “super” financial performance

above that targeted occur. Similarly the rewards from share-

based incentives will vary from year to year depending on

vesting and exercise patterns, and the impact on share price

performance of not only company performance but also

external factors, such as market sentiment, interest rates,

commodity prices and exchange rates.

Policy on annual incentive bonuses

There are various annual incentive schemes operating within

Altron, tailor-made to specific parts of the Altron group. They

incentivise various categories of staff, and are reviewed

regularly to ensure they remain appropriate.

Altron executive committee members participate in an annual

performance 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

committee which satisfies itself that the performance criteria

utilised are relevant, stretching and designed to enhance

shareholder value. The committee approves bonuses for

executives before their payment.

Group and subsidiary financial performance targets include:

> adjusted, diluted headline earnings per share growth;

> return on operating assets; and

> return on equity.

A discretionary element includes specific key performance

areas for each executive to attain.

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;

> succession planning and talent management – identifying

and attracting new and skilled/semi-skilled talent into the

business and maximising existing talent, all while being

mindful of succession planning throughout the Altron group

and managing the transformation agenda;

> social and environmental performance – ensuring that the

Altron group operates as an exemplary corporate citizen in all

its activities and makes a positive contribution to society; and

> retention of key staff and executives – recognising that

rewards alone are incomplete in promoting the retention of

key staff, and that leadership and motivation must also play

an essential role.

During February 2009, the committee resolved that going

forward 70% of the executive committee members’ annual

performance bonuses will be based on the attainment of

financial objectives, with 30% relating to the achievement

by each member of certain predetermined key performance

indicators, including the achievement of predetermined broad-

based black economic empowerment for each executive’s area

of responsibility. During the 2011/2012 financial year these

predetermined key performance indicators will now also include

carbon emission reduction targets for each executive’s area of

responsibility.

Chief executive officer Senior executive

42%29%

29%

Guaranteed package On target cash incentive Expected value share plan

46%

27%

27%

Policy on long-term, share-based incentives

Previous share-based incentives

Altron in the past offered share-based incentives initially

(1986), in terms of the Allied Electronics Corporation Limited

Share Trust, and later (2002) in terms of the Altron Group

Share Incentive Trust. In terms of these two schemes share

options and, later, conditional rights (performance vesting

share appreciation rights) were offered and awarded.

Periodic awards were made to participants, with vesting

occurring in equal thirds on the 3rd, 4th and 5th anniversaries

of the award. Participants could elect to delay exercise until the

page 127

10th anniversary in the case of the share options (awarded

prior to 2002) and the 6th anniversary in the case of share

options (awarded after 2002) and conditional rights.

During 2009, the committee, in conjunction with remuneration

consultants engaged in an exercise to review Altron’s share-

based incentives and Altron received shareholder approval

to replace these two schemes with the implementation of a

hybrid share incentive which contains share appreciation rights,

performance shares and bonus shares elements.

Accordingly, no offers or awards of share options or conditional

rights were made during the year under review, nor are any

further offers or awards of these instruments anticipated.

However both of the aforementioned schemes will continue to

run their courses: unvested and unexercised rights in terms of

these schemes still remain and are herein reported.

Altron 2009 Share Plan

The areas which the committee focused on in designing the

new share incentive plan, the Altron 2009 Share Plan, included

the following:

> Ensuring that a significant proportion of executives’

remuneration is oriented towards corporate and individual

performance, thereby aligning their interests with those of

the shareholders.

> Recognising that no single, stand-alone design will allow

Altron to remain competitive in share-based incentives,

reward long-term sustainable company performance,

act as a retention tool and ensure that participants

share a significant level of personal risk along with the

shareholders.

> Limiting the effects of dilution of shareholders’ equity and

on the participation of individuals in the plan.

> Moving from an approach in which offers are made only

periodically with occasional top-ups, to one in which offers

are made annually, and are thus less influenced by timing

and volatility issues.

> Measuring the performance criteria over a period of three

to six years in order to motivate participants to achieve

sustained improvements in financial performance.

The salient features of the Altron 2009 Share Plan are detailed

below:

> Executives, selected senior managers and key employees of

the Altron group will be offered any of:

– allocations of share appreciation rights;

– awards of performance shares; and

– grants of bonus shares.

> Share appreciation rights element

– The share appreciation rights element retains the

essential characteristics of the previously implemented

conditional rights scheme embodied in the Altron Group

Share Incentive Trust, but allocations in terms of this

scheme are now displaced to a lower level with greater

emphasis being placed on the performance shares and

bonus shares elements.

– Executives, selected senior managers and/or key

employees of Altron, Bytes and Powertech (but

excluding Altech which has its own plan) receive Altron

participating preference shares based on the value of the

share appreciation rights, when time and performance

conditions/underpins, predetermined by the board, have

been met.

– Currently a performance underpin tied to the compound

annual growth rate in headline earnings per share, has

been specified along the following lines:

> three-year average HEPS growth >15% – 100% of

allocation vests;

> three-year average HEPS growth >10% <15% – 83.3%

of allocation vests;

> three-year average HEPS growth <10% – 66.7% of

allocation vests.

– Annual conditional allocations of share appreciation

rights are made that will be available to be settled in

equal tranches on the 3rd, 4th and 5th anniversaries but

need not be exercised until the 6th anniversary, at which

time they must be exercised or they will lapse. On each

vesting date, the Altron board will review the extent to

which the performance conditions/underpins have been

fulfilled or not, in order to determine the number of share

appreciation rights that will vest.

– On exercise, the value accruing to participants will be the

full appreciation of Altron’s participating preference share

price from the allocation date, which value will be settled

in Altron participating preference shares of equivalent

value.

> Performance shares element

– The performance shares scheme closely aligns the

interests of shareholders and participants by rewarding

superior shareholder and financial performance in the

future, and by encouraging participants to build up a

shareholding in Altron.

– Annual conditional awards of full value Altron

participating preference shares are made to executives,

selected senior managers and/or key employees of the

Altron group (but excluding Altech which has its own

plan). The participating preference shares will vest after

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a three-year period subject to the company meeting a

combination of challenging performance measures over

the intervening period.

– The performance measures have been selected by the

committee to foster the creation of shareholder value

and to reward participants for their achievements,

after adjusting for the effects of the macroeconomic

environment. 50% of the award is based on the

following:

1. Comparative total shareholder return in relation to a peer

group of 19 mid – and large-cap listed companies in the

sectors which the Altron group operates.

i. if the performance of Altron over the full three-year

performance is in the upper quartile, then three times

the targeted award will vest;

ii. if the performance of Altron over the full three-year

performance is at the median, then the targeted award

will vest;

iii. if the performance of Altron over the full three-year

performance is in the lower quartile, then the award will

not vest and;

iv. for performances between these points a pro-rated

vesting will result

and the remaining 50% is based on:

2. The average annual growth rate in diluted headline earnings

per share in relation to the consumer price index (CPI);

i. if the average annual growth rate over the three-year

period is at CPI plus 17% or above, then three times the

targeted award will vest;

ii. if the average annual growth rate over the three-year

period is at CPI plus 7%, then the targeted award will

vest;

iii. if the average annual growth rate over the three-year

period is at CPI or less, then the award will not vest; and

iv. for performances between these points a pro-rated

vesting will result.

– The peer group of 19 mid and large cap listed companies

in the industrial sector referred to above comprises the

following:

Company Company

ARB Jasco

Aveng Massmart

Barloworld Murray & Roberts

Bidvest Net1 UEPS

Business Connexion PPC

Datacentrix Reunert

Digicore Sappi

Gijima AST South Ocean

Hudaco Vodacom

Imperial

> Bonus shares element

– The bonus shares scheme provides for share-based

retention of those executives, senior managers and/or key

employees who through their performance on an annual

basis have demonstrated their value to the company,

and further encourages these participants to build up a

shareholding in Altron.

– Annually, executives, selected senior managers and/

or key employees of the Altron group (but excluding

Altech which has its own plan) receive a grant of full-

value Altron participating preference shares that match,

according to a specified ratio, a portion of the annual

performance bonus/cash incentive accruing to these

employees. These participating preference shares will be

settled to participants after three years provided that

they are still in the employ of the Altron group, and

– Although there are no other performance vesting

criteria associated with bonus shares, their grant to any

individual is linked to the annual performance bonus/cash

incentive earned in the financial year preceding the grant:

a minimum level of performance will be required, and the

value granted will match according to a prescribed ratio,

the value of bonus earned.

page 129

> Any executive, senior manager and/or key employee

of Altron, Bytes and Powertech may be selected by the

committee to participate in the Altron 2009 Share Plan. It

is envisaged that the aforesaid persons will receive on an

annual basis, allocations in terms of the share appreciation

rights and/or awards of performance shares and/or grants

of bonus shares.

> Although all allocations/awards/grants are governed by set

policy, the committee may apply its discretion in making extra-

policy awards of performance shares and grants of bonus shares

to high performers and key talent when this is warranted.

> The aggregate number of Altron participating preference

shares which may be acquired by all participants under the

Altron 2009 Share Plan will not exceed 12 000 000 (twelve

million) Altron participating preference shares. This equates

to approximately 5% of the issued participating preference

share capital of Altron.

> The aggregate number of Altron participating preference

shares which may be acquired by any one participant under

the Altron 2009 Share Plan will not exceed 2.3 million

(two million three hundred thousand) Altron participating

preference shares. This equates to approximately 1.0% of

the issued participating preference share capital of Altron.

> Included in the total IFRS 2 charge for the year, as

disclosed in note 10.9 to the financial statements is

an amount of R0.7 million in respect of the current

allocation. The annual charge for the current year’s

allocation will be R8.9 million.

Share scheme compliance

Altron has a duly appointed compliance officer who

administers each of Altron’s share-based incentive schemes as

contemplated in section 144A of the Companies Act of 1973

(as amended), which has been superseded by section 97 of the

new Companies Act of 2008.

The committee has satisfied itself that the compliance officer

has complied in all material respects with those obligations

required of this function as was set out in section 144A

(3) of the previous Companies Act of 1973, (as amended)

and with those contained in Schedule 14 of the JSE Listings

Requirements.

Policy on service contracts, executive employment contracts

and severance arrangements

No non-executive director has an employment contract with

Altron although non-executive directors have, since 2006, on

joining Altron, been required to conclude service contracts

with the company which set out the duties and responsibilities

expected of them as non-executive directors.

The chief executive and executive directors are appointed

to the board based on their ability to contribute expertise

and experience appropriate to achieving the Altron group’s

objectives as a growing global business.

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 relevant laws,

group policy prevents any director from being compensated for

loss of office. Executive directors are required to retire from the

Altron group and the board at the age of 63, unless requested

by the board to extend his or her term.

In line with the remuneration guidelines of King III, none of the

executive directors have extended employment contracts or

special termination benefits or balloon payments, and although

the nature of Altron’s business requires the use of restraints of

trade, none are linked to any restraint payment.

As a general guideline, Altron’s policy when terminating the

services of an individual for operational reasons is to pay

a severance package which is not less than the minimum

prescribed by law at the relevant time. Altron aims to apply this

policy to all employees, including Altron executive directors, but

it is subject to negotiation in special circumstances.

The appointment and re-election dates of executive directors are outlined below:

Executive directorsEmployment date in the

group of companiesDate first appointed

to the boardDate last re-elected

as a directorDate due for

re-election

RE Venter 1 November 1990 15 May 1997 14 July 2009 July 2012

N Claussen 1 March 1996 12 October 2005 14 July 2009 July 2012

PMO Curle 1 April 1997 1 April 1997 14 July 2009 July 2012

AMR Smith 1 January 2006 1 August 2008 14 July 2009 July 2012

CG Venter 1 November 1988 15 May 1997 15 July 2008 15 July 2011

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In terms of Altron’s memorandum of incorporation, one-third of

the serving directors shall retire at the annual general meeting

of the company or, if the total number of serving directors who

shall retire does not constitute a multiple of three, the number

of directors who shall retire shall be the number, adjusted

upwards, that is the closest to one-third. Directors who are

appointed or reappointed during the year shall retire at the

annual general meeting and are eligible for re-election.

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 133.

None of the non-executive directors of Altron contributed to

any group pension fund during 2010. With the exception of

Dr Bill Venter and David Redshaw, both of whom were previous

employees and executive directors of the Altron group and who

currently draw a pension each month, none of the other non-

executive directors had any accrued pension fund benefits in

the Altron Group Pension Fund at 28 February 2011.

At its meeting held in February 2011, the committee assessed

the levels of funding and benefits of the Altron Group Pension

Fund and Medical Aid Scheme and satisfied itself that both

were solvent and did not pose a risk to any of the Altron

group’s employees or retirees.

The committee did, however, note that the Altron Medical

Aid had experienced a difficult year in terms of the high level

of claims experienced, which had negatively impacted its

statutory reserves. Accordingly, the committee endorsed both

the employer’s and the trustees’ actions to address the future

sustainability of the medical aid. This included reinstating

compulsory membership for all new employees joining the

Altron group above a certain income threshold, higher than

inflation contribution increases and a realignment of benefit

structures to contain costs. The committee will continue to

monitor the effect of these interventions on the medical aid

at future meetings.

Other benefits

In addition to the benefits already described as part of

their TCOE packages, executive directors, as well as all other

employees, also receive a death-in-service benefit. No ex-

gratia payments, deferred awards of any nature, or restraint

payments were made during the review period.

Non-executive chairman’s remuneration

With effect from 1 March 2009, Dr Bill Venter’s role at Altron

changed from being a fulltime chairman to a non-executive

chairman.

In terms of his service contract concluded with the company on

27 February 2009, Dr Venter’s responsibilities include chairing

the Altron, Bytes, Bytes SA and Powertech boards, as well as

serving as a non-executive director on the boards of Altech

and Bytes UK. Dr Venter also chairs the Altron chairman’s

committee, and is a member of the Altron remuneration

committee and Altron nomination committee. He does not

serve as a director on or trustee of any outside companies

or trusts, with the exception of the Venter family’s private

companies and trusts.

In addition to the aforegoing, Dr Venter does not receive any

short-term or long-term share-based incentives from the Altron

group and neither does he receive additional non-executive

director remuneration from the sub-holding companies to his

all inclusive remuneration which he receives from Altron in

consideration for preparing for and attending meetings of the

aforesaid boards and committees which he sits on throughout

the Altron group.

The committee benchmarks the chairman’s remuneration

on an annual basis and engages independent external

remuneration consultants to perform this exercise. The

committee is comfortable, taking all factors into consideration,

that the all inclusive remuneration paid to Dr Bill Venter by the

Altron group is reasonable, having regard to, among others,

the fact that many non-executive chairmen in South Africa

serve on multiple boards and committees and receive annual

remuneration equal to or exceeding the total remuneration

paid to Altron’s non-executive chairman.

Non-executive directors’ remuneration

The board applies principles of good corporate governance

relating to directors’ remuneration and also keeps abreast

of changing trends. Governance of directors’ remuneration is

undertaken by the committee.

Non-executive directors are appointed to the Altron board

based on their ability to contribute competence, insight and

experience appropriate to assisting the Altron group to achieve

its objectives. Non-executive directors receive remuneration

for services on boards and board committees. With effect from

1 September 2009, the board resolved that non-executive

directors’ remuneration will in future be split between an

annual retainer and an attendance component.

page 131

Altron non-executive directors do not receive bonuses or

long-term share-based incentives 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.

No arrangement exists for emoluments in respect of loss of

office.

The annual remuneration payable to non-executive directors

for the 12-month period commencing on 1 September 2010

was approved by 98% of Altron’s ordinary shareholders which

voted at the annual general meeting held on 14 July 2010 and

thereafter implemented.

The board recommends the remuneration payable

to the chairman, lead independent director and non-

executive directors for approval by the shareholders.

Proposals for remuneration are prepared by management,

for consideration by the committee and the board.

Consideration is given to the increased responsibility

placed on non-executive directors due to burdensome legal

and regulatory requirements and the commensurate risk

assumed. Benchmarking information (measured against

the median) of companies of similar size and complexity

and the projected inflation rate over the period are factors

considered when reviewing the annual remuneration. The

revised remuneration of the non-executive directors will be

submitted to the shareholders for approval at the annual

general meeting (AGM) to be held on 15 July 2011 and

implemented with effect from 1 September 2011 once

shareholder approval has been obtained.

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

that this should be:

> market related (having regard to the factors listed above

plus the 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 pays for all travel and accommodation expenses incurred

by directors to attend board and committee meetings as well

as visits to company sites and businesses. These expenses,

refunded to the non-executive directors, are governed by

a formal travel and expenses policy approved by the board

during the prior financial year. During the period under review,

the actual travel and other expenses incurred by Altron’s non-

executive directors in attending relevant Altron group board

and committee meetings equalled R224 000.

Remuneration for acting as a non-executive director and member of the various board committees for the 12-month period

commencing 1 September 2010 was approved as follows:

2010

Annual

remuneration

Annual

retainer

Attendance

remuneration/

Meeting

Altron chairman R3 762 500¹

Altron lead independent director R120 000 R25 600²

Altron board member R75 000 R16 000³

Altron audit committee chairman R70 000 R20 000

Altron audit committee member R34 000 R10 000

Altron remuneration committee chairman R38 000 R16 500

Altron remuneration committee member R30 000 R7 500

Altron risk management committee chairman R38 000 R16 500

Altron risk management committee member R24 000 R7 500

Altron nomination committee chairman R45 0004 R15 000

Altron nomination committee member R14 000 R3 000

¹ The chairman’s remuneration is on an all-inclusive basis. This includes his remuneration for serving on the various Altron, Altech, Bytes and Powertech boards, both locally and offshore, as well as his remuneration for acting as a member of the Altron remuneration and nomination committees. The Chairman does not serve on the boards of any companies, public or private, external to the Altron group and the Venter family.

² The remuneration payable to the lead independent director is in substitution for the board remuneration payable to other non-executive directors. Notwithstanding the aforegoing, the lead independent director will be entitled to the same attendance remuneration per meeting payable to the other non-executive directors, in respect of any special board meetings which he attends.

³ The same remuneration is payable to those board members who attend special board meetings.4 The nomination committee has historically only met once per annum.

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Components of employment costs

GROUP

2011Rm

2010Rm

2009Rm

2008Rm

2007Rm

Employee remuneration (including directors’ remuneration)

Salaries and wages 3 473 3 320 3 328 2 840 2 435

Share-based payments – equity settled (note 9.9) 14 16 23 22 20

Share-based payments – cash settled (note 9.9) — 2 (8) 24 40

Retirement and provident funds 215 242 190 167 172

Medical aid — — — — 61

Disclosure of directors’ emoluments

R’000Non-executive directors Subsidiaries Altron

2011Total

2010Total

Remuneration for services as directors

NJ Adami — 215 215 180

MC Berzack — 196 196 175

MJ Leeming (Lead independent director) 70 338 408 308

Dr PM Maduna — 225 225 175

BTM Masekela — 135 135 136

JRD Modise — 235 235 230

DNM Mokhobo — 120 120 123

PD Redshaw — 150 150 —

Dr WP Venter (Chairman)# 173 3 458 3 631 3 500

PL Wilmot 79 325 404 365

322 5 397 5 719 5 192

#Remuneration inclusive of all board and sub-committee roles throughout the Altron group.


page 133

R’000

Full time directors

Basic

Salary

Performance

related

bonuses

(Accrued)

Share

option

expense# Allowances

Defined

contribution

pension

payments

Other

benefits2011Total

Executive

RE Venter 5 742 2 032 1 099 108 823 — 9 804

AMR Smith 2 372 721 308 78 311 — 3 790

CG Venter 4 812 1 201 1 088 262 641 — 8 004

PMO Curle 2 534 586 186 127 356 — 3 789

N Claussen 2 829 1 005 301 198 423 — 4 756

18 289 5 545 2 982 773 2 554 — 30 143

Full time directorsBasic

Salary

Performancerelated

bonuses(Accrued)

Shareoption

expense# Allowances

Definedcontribution

pensionpayments

Otherbenefits

2010Total

Executive

Dr HA Serebro+ 657 — — 50 — — 707

RE Venter 4 895 1 880 2 040 108 755 — 9 678

AMR Smith 2 188 676 182 108 272 — 3 426

CG Venter 4 351 1 655 1 553 262 582 — 8 403

PD Redshaw++ 3 409 1 123 1 079 — 500 264 6 375

PMO Curle 2 315 746 664 127 327 — 4 179

N Claussen 2 685 605 867 198 403 — 4 758

20 500 6 685 6 385 853 2 839 264 37 526

Three highest paid employees

Basic

Salary

Performance

related

bonuses

(Accrued)

Share

option

expense# Allowances

Defined

contribution

pension

payments

2011

Total

Employee 1 2 501 2 169 504 — 599 5 773

Employee 2 2 235 475 323 120 587 3 740

Employee 3 2 351 261 218 96 253 3 179

#IFRS 2 income statement expense in respect of options granted to directors.+Resigned 1 August 2009.++Retired 1 March 2010.

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Long-term share-based incentives

Directors Entity

Allocation

date

Strike

price

Balance

1 Mar 10 Awarded Lapsed Exercised

Exercise

date

Net

Gains

R’000s

Exercise

price

Balance

28 Feb 11Expiry

date

CG Venter Altech CRI 15/12/2005 50,99 112 368 18 765 93 603 2010/12/15 1 210 63,92 — Dec 11

Altech CRI 22/11/2006 57,75 35 850 2 993 14 932 2010/12/14 82 63,25 17 925 Nov 12

Altech CRI 20/02/2008 49,00 94 092 5 238 26 126 2011/05/06 381 63,60 62 728 Feb 14

Altech SAR 24/07/2009 56,20 27 733 27 733 Jul 15

Altech PS 24/07/2009 n/a 20 337 20 337 Jul 12

Altech BS 24/07/2009 n/a 21 632 21 632 Jul 12

Altech SAR 11/01/2010 57,00 30 078 30 078 Nov 16

Altech PS 11/01/2010 n/a 22 057 22 057 Nov 13

Altech BS 11/01/2010 n/a 11 612 11 612 Nov 13

AMR Smith Altron CRI 09/02/2006 22,50 58 400 6 483 51 917 Feb 12

Altron CRI 22/11/2006 30,75 1 508 167 1 341 Nov 12

Altron CRI 26/02/2008 35,00 32 766 3 638 29 128 Feb 14

Altron SAR 02/12/2009 25,50 23 162 23 162 Dec 15

Altron PS 02/12/2009 n/a 17 120 17 120 Dec 12

Altron BS 02/12/2009 n/a 8 404 8 404 Dec 12

Altron SAR 14/01/2010 26,61 23 861 23 861 Jan 16

Altron PS 14/01/2010 n/a 17 636 17 636 Jan 13

Altron BS 14/01/2010 n/a 7 876 7 876 Jan 13

N Claussen Altron CRI 09/02/2006 22,50 466 190 51 799 414 391 Feb 12

Altron CRI 22/11/2006 30,75 151 560 16 840 134 720 Nov 12

Altron CRI 28/02/2008 35,50 46 295 5 139 41 156 Feb 14

Altron SAR 02/12/2009 25,50 29 637 29 637 Dec 15

Altron PS 02/12/2009 n/a 21 905 21 905 Dec 12

Altron BS 02/12/2009 n/a 7 071 7 071 Dec 12

Altron SAR 14/01/2010 26,61 29 820 29 820 Jan 16

Altron PS 14/01/2010 n/a 22 041 22 041 Jan 13

Altron BS 14/01/2010 n/a 7 048 7 048 Jan 13

PMO Curle Altech CRI 15/12/2005 50,99 73 154 12 217 60 937 2010/12/15 788 63,92 — Dec 11

Altech CRI 22/11/2006 57,75 13 488 1 126 5 618 2010/12/14 31 63,25 6 744 Nov 12

Altech SAR 24/07/2009 56,20 14 778 14 778 Jul 15

Altech PS 24/07/2009 n/a 7 882 7 882 Jul 12

Altech BS 24/07/2009 n/a 8 512 8 512 Jul 12

RE Venter Altron CRI 09/02/2006 22,50 837 360 92 947 744 413 Feb 12

Altron CRI 22/11/2006 30,75 156 186 17 337 138 849 Nov 12

Altron CRI 25/02/2008 35,00 381 457 42 342 339 115 Feb 14

Altron SAR 02/12/2009 25,50 55 213 55 213 Dec 15

Altron PS 02/12/2009 n/a 48 012 48 012 Dec 12

Altron BS 02/12/2009 n/a 23 114 23 114 Dec 12

Altron SAR 14/01/2010 26,61 57 672 57 672 Jan 16

Altron PS 14/01/2010 n/a 50 150 50 150 Jan 13

Altron BS 14/01/2010 n/a 21 904 21 904 Jan 13

CRI – conditional rights, SAR – share appreciation rights, PS – performance shares (free shares), BS – bonus shares (free shares)Conditional rights and share appreciation rights are net settled and are subject to performance conditions. Exercised amounts related to conditional rights and not the number of shares traded. Where performance conditions have not been met, a portion of the award lapses.

page 135

Reward policy

ALLIED ELECTRONICS

CORPORATION LIMITED

THE ALTRON REWARD STRATEGY

Preamble

This Altron reward strategy documents the current reward

provisions throughout Altron, Bytes and Powertech. Note,

Altech is excluded, despite being owned 62% by Altron, on the

basis that it is an independent listed company in its own right.

Notwithstanding this, the reward strategies of Altron as the

holding company and Altech are essentially aligned.

This document provides a best practice context and framework,

a set of principles, and a number of guidelines, all of which will

guide HR practitioners in the finalisation of a coherent and

cohesive set of reward policies for the Altron group.

Each company forming part of the Altron group may have

its own unique set of reward policies, tailored to its own

operational requirements, and owned and administered by its

respective HR department. However, all policies should conform

to the principles and guidelines set out in this reward strategy

document.

1. Introduction

This reward strategy includes a number of components,

namely:

> remuneration governance;

> reward philosophy and strategic objectives;

> reward strategy design principles;

> pay mix;

> guaranteed pay;

> performance management;

> annual performance bonuses;

> long-term (share-based) incentives;

> non-executive directors’ remuneration;

> service contracts and severance arrangements; and

> committee decisions required annually

Each of these is discussed in more detail on the following

pages.

2. Remuneration governance

Committees to address remuneration governance within

Altron and its major non-listed subsidiaries are constituted

at the following levels:

> the Altron remuneration committee (a sub-committee

of the Altron board);

> the Bytes remuneration and nomination committee

(a sub-committee of the Bytes board); and

> the Powertech remuneration and nomination committee

(a sub-committee of the Powertech board).

Henceforth the above committees will be referred to

throughout this document, individually and/or collectively,

as the “committee”, and Altron and its major non-listed

subsidiaries will be referred to, individually and collectively,

as “the company”. In this reward strategy document,

“major non-listed subsidiaries” refers to Bytes and

Powertech.

The responsibilities of the committee are in accordance

with its mandate and terms of reference which include,

among others, the following provisions:

> assisting the board in its responsibility for setting and

administering remuneration policies in the company’s

long-term interests;

> recommending remuneration policies for all levels in the

company, but especially the remuneration of executive

directors and senior managers, including the company

secretary;

> advising on the remuneration of non-executive

directors;

> in proposing remuneration policies, aim to set

appropriate remuneration levels to attract, motivate,

reward and retain the calibre of directors and

executives required to run the company successfully,

while at the same time, linking remuneration to

individual performance, and aligning the executive

directors and executive management’s interests with

those of the shareholders and with the strategy of the

company;

> reviewing and recommending to the company’s board

all proposals for executive share-based and other short-

and long-term incentive schemes;

> determining targets for any performance-related pay

schemes operated by the company and requesting the

board, when required, to seek shareholder approval

for any share-based and other long-term incentive

schemes/arrangements;

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Reward policy continued

> within the terms of the agreed policies, determining on

an annual basis the total remuneration package of each

executive director including, where appropriate, their

total cost of employment (TCOE) packages plus annual

increases, short-term performance bonuses and long-

term (share-based) incentives;

> determining the employment contracts for the

company’s executive directors and other members of

executive management, with appropriate notice periods;

and

> determining such packages and arrangements, giving

due regard to the remuneration guidelines of the King III

Report on Corporate Governance for South Africa, as

well as the JSE Limited Listings Requirements.

Each of the committees is autonomous, has its own terms

of reference, and conducts its own meetings, but is still

essentially presided over and is guided by the Altron

reward strategy.

The Altron remuneration committee reviews the minutes

and the activities of the committees of its major

subsidiaries, as well as noting and confirming their chief

executive officers’ and other executives’ annual increases,

short-term performance bonuses and long-term (share-

based) incentives.

3. Reward philosophy and strategic objectives

The company is committed to a reward philosophy that

prevails throughout the Altron group, and one which

focuses on rewarding consistent and sustainable individual

and corporate performance.

The company’s approach towards remuneration aims to

ensure that an appropriate balance is achieved between:

> the interests of shareholders;

> operational and strategic requirements; and

> providing attractive and appropriate remuneration

packages to executives, management and employees.

The remuneration practices of the company have been

structured to be competitive in the rapidly evolving

industry in which it operates and to ensure that the

company can attract, motivate, reward and retain high-

calibre people, with above-average industry ability and the

leadership potential to effectively run the company.

Among the primary objectives of the reward strategy are

the needs to:

> reinforce, encourage and promote superior performance;

> direct employees’ energies and activities towards key

business goals;

> achieve the most effective returns (employee

productivity) for total employee spend;

> address diverse employee needs across differing

cultures; and

> enhance overall the simplicity, transparency and

credibility of all executive remuneration.

4. Reward strategy design principles

The company’s remuneration policies are designed, within

the framework of this reward strategy, to ensure that:

> employees are fairly rewarded for their individual

contribution to the company’s operating and financial

performance in line with its corporate objectives and

business strategy; and

> rewards are generally aligned with industry and market

benchmarks.

The remuneration policies conform in all material respects

to the best practice guidelines contained in the King III

Report on Corporate Governance for South Africa, and

international guidelines such as those contained in, inter

alia, the Association of British Insurers (ABI) Guidelines

on Executive Remuneration Policies and Practices and

the International Corporate Governance Network (ICGN)

Remuneration Guidelines.

The principles that reflect and drive the Altron reward

strategy are as follows:

> competitive pay levels: the company is committed to

paying remuneration packages that are competitive in

the sectors in which it operates, and the general market

where appropriate;

> pay for performance: remuneration practices will reward

high-performing employees for the contribution they

make to the company and/or towards the Altron group;

> cost management: the company will manage the total

cost of employment for all employees;

> holistic approach: the company chooses to adopt an

integrated approach to reward strategy, encompassing

a balanced design and pay mix that includes all of the

following components:

– guaranteed pay

– performance management

– annual incentive pay rewarding both business

performance and individual/team performance

– share-based incentives for key executives, managers,

key talent and scarce skills

– non-financial rewards and recognition

page 137

> regular revision: the company recognises that, in its

current strategic environment, this reward strategy

and each of its components are dynamic and should

be revisited regularly to ensure that the company

keeps pace with market practices, and its evolving

organisational context and objectives; and

> communication: the company is committed to ensuring

that all stakeholders are aware of its reward strategy.

In the document that follows, these principles have been

utilised to design a set of guidelines for each component of

the Altron reward strategy.

5. Guidelines on pay mix

Pay mix is defined as the balance targeted between the

major components of remuneration, namely:

> guaranteed pay – total cost of employment (TCOE)

> variable pay

– short-term incentives in the form of annual

performance bonuses; and

– long-term share-based incentives (expected value).

Pay mix – TCOE, APB and LTI

Recommended pay mixGuaranteed pay (TCOE)

Annual performance bonus (APB) – On-target bonus (OTB)

Group CE 70%/140%

Altech CEO 65%/110%

Bytes and Powertech CEOs and group CFO 60%/120%

Altech corporate finance director 55%/90%

Altron corporate executives (including group company secretary) and Altech, Bytes and Powertech executive committees 50%/100%

1st line operational executives 35%/Max

Long-term share-based incentive (LTI) (expected reward)

Group CE 70%

Altech, Bytes and Powertech CEOs and group CFO 60%

Altron corporate executives (including group company secretary) 50%

Altech, Bytes and Powertech executive committees 40%

1st line operational executives 15%

The company has adopted a pay mix policy that

supports the philosophy that the performance-based

pay of (particularly) senior employees should form a

significant portion of their expected total compensation,

and furthermore that, within performance-based pay,

an appropriate balance should be targeted between

rewarding long-term sustainable performance (through

long-term and/or share-based incentives), and rewarding

operational performance (through annual performance

bonuses).

The mix of fixed and variable pay is thus designed to meet

the company’s operational needs and strategic objectives,

based on targets that are stretching, verifiable and

relevant. An Altron group standard has been adopted for

the company, while recognising that the different nature of

the major non-listed subsidiaries and Altech may require a

differential approach between them.

The pay mix for junior management levels will vary in

accordance with market benchmarks and operational

context. However, guidelines have been set for executives

and senior management, and are tabled below.

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It should be borne in mind that in practice the pay mix will

vary from that shown on the previous page.

> annual performance bonuses may be less than targeted,

or greater than targeted should “super” financial

performance above that targeted occur.

> similarly, the rewards from long-term share-based

incentives will vary from year to year depending on

vesting and exercise patterns, and the impact on share

price performance of not only company performance but

also external factors, such as market sentiment, interest

rates, commodity prices and exchange rates.

6. Guidelines on guaranteed pay

The total employment cost in the Altron group, of

which guaranteed pay is the major component, forms a

significant portion of total operating costs. It is therefore

imperative that guaranteed pay is managed efficiently

and wisely. To achieve effective cost management, the

company manages guaranteed pay levels using total

cost of employment (TCOE), which incorporates base pay,

car allowance, pension, medical aid and other optional

benefits, as opposed to the cash package approach

adopted in prior years. This policy has been adopted to

ensure that the cost of the remuneration package paid

to employees is controlled by the company, and does not

include open-ended liabilities where the cost of a benefit

is determined either by levels of utilisation or by external

pricing factors.

The company operates in a number of fast-moving

and technology-oriented sectors in which highly skilled

employees are a must to have, and yet are usually

extremely mobile and sought after, both locally and

overseas. At the coal face of a market with cutting-edge

technologies, skilled and experienced talent is extremely

difficult to come by, and even more difficult to motivate,

reward and retain. This is even more the case for

experienced executive talent. Hence the company adopts a

selective policy of positioning professional and key talent

packages between the median and upper-quartile level of

the market, and executive talent at the upper-quartile level

of the market.

The company clearly identifies and positions itself against

the organisations or companies from which skills are

acquired, or to which skills are lost. It compares itself to

the general market, as published annually in a number

of surveys, but looks also to compare its remuneration of

technical skills to technology sector surveys where such

exist. Additionally, the pay levels of top executive positions

in the company may be benchmarked against national

market executive remuneration surveys.

Benchmark levels of pay in the target market(s) will be

calculated as at January/February of each year. General

adjustments to guaranteed pay levels will be reviewed and

adjustments made effective from 1 March each year.

The company’s annual increase process will be performed

during January/February each year. Increases are

determined by the committee in conjunction with executive

management and takes into consideration, among

others, the following factors, namely market-related TCOE

increases, individual performance, the performance of the

company, and other relevant economic indicators. Overall

increases will typically reflect the market benchmark

increases, with individual increases varying according to an

assessment of individual performance/worth.

7. Guidelines on performance management

Other than at executive level, the company generally

does not have a formal framework for performance

management that is directly linked to either increases

in TCOE, or to annual performance bonuses. However,

performance management and assessment is practised

informally through the offices of the CEO/CFO of each

company, and addresses company performance, personal

achievement of KPIs, and delivery of key strategic

imperatives.

For executives, specific key performance areas and

stretch targets for each executive to attain are set by the

relevant CEO and confirmed by the committee. These key

performance indicators include responsibility for, among

others:

> company strategy – driving and implementing it,

monitoring progress and ensuring all executives and

employees are aligned to it;

> performance management – instilling a performance

and culture, consistent with the Altron group culture of

’familiness’;

> growth – driving the growth strategy into new market

segments and geographical areas;

> succession planning and talent management –

identifying new and skilled/talent to be brought into

the business and maximising existing talent, all while

being mindful of succession planning throughout the

group, and managing the transformation agenda and

employment equity targets;

page 139

> social and environmental performance – ensuring that

the company operates as an exemplary corporate citizen

in all its activities and makes a positive contribution to

society; and

> retention of key staff and executives – recognising that

rewards alone are incomplete in promoting the retention

of key staff, and that leadership and motivation must

also play an essential role.

8. Guidelines on annual performance bonuses

It is a general principle that all annual performance

bonuses are discretionary and no individual has any right

to be paid an annual performance bonus.

The company’s various executive committee members

and the Altron company secretary participate in an annual

performance bonus plan that rewards the achievement

of, where applicable, group and subsidiary company

financial performance, as well as strategic and personal

performance objectives agreed with the Altron chief

executive, or subsidiary CEOs as the case may be. All

objectives are approved beforehand by the committee

which satisfies itself that the performance criteria

utilised are relevant, stretching and designed to enhance

shareholder value. The committee approves annual

performance bonuses for executives before their payment.

Altron and its major non-listed subsidiaries’ financial

performance targets are set periodically by the board and

presently include:

> adjusted, diluted headline earnings per share growth;

> return on operating assets; and

> return on equity.

During February 2009, the committee resolved that

going forward 70% of an executive committee member’s

performance bonus will be based on financial objectives,

with 30% relating to the attainment of specific key

performance areas and stretch targets, set by the relevant

CEO, with between 10% to 20% of the 30% assigned

to the achievement of predetermined broad-based

black economic empowerment targets for his area of

responsibility.

Below executive level, annual performance bonuses for

senior and middle management and key talent are entirely

discretionary and are paid out at various levels ranging

from 35% to 8.33% (depending on experience, role/

status level) of TCOE, only if the targeted group and/or

subsidiary financial performance targets have been met.

In this regard, the mix between final performance targets

and specific key performance indicators in determining

these bonus levels is left to the discretion of operational

management.

9. Guidelines on long-term (share-based) incentive

schemes

Previous long-term share-based incentives

The company in the past offered share-based incentives

to executives and selected senior management initially in

terms of the 1986 Allied Electronics Corporation Limited

Share Trust, and later in terms of the 2002 Altron Group

Share Incentive Trust. In terms of these two schemes,

share options and, later, conditional rights (performance

vesting share appreciation rights) were offered and

awarded.

Periodic awards were made to participants, with vesting

occurring in equal tranches of one-third each on the 3rd,

4th and 5th anniversaries of the award. Participants could

elect to delay exercise until the 10th anniversary in the

case of the share options (awarded prior to 2002) and

the 6th anniversary in the case of share options (awarded

after 2002) and conditional rights.

In 2009, the company replaced these two schemes with a

hybrid share incentive which contains share appreciation

rights, performance shares and bonus shares elements.

As a result, no offers or awards of share options or

conditional rights are now made. However, both of the

aforementioned, schemes will continue to run their courses,

and unvested and unexercised rights in terms of these

schemes still remain until exercised or lapsed.

The Altron 2009 Share Plan

The principles underlying the Altron 2009 Share Plan

include the following:

> ensuring that a significant proportion of executives’

remuneration is oriented towards corporate and

individual performance, thereby aligning their interests

with the shareholders;

> recognising that no single, stand-alone design will allow

the company to remain competitive in share-based

incentives, reward long-term sustainable company

performance, act as a retention tool and ensure that

participants share a significant level of personal risk

along with the shareholders;

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> limiting the effects of dilution of shareholders’ equity

due to the participation of individuals in the plan;

> moving from an approach in which allocations, awards

and/or grants are made only periodically with occasional

top-ups, to one in which allocations, awards and/or

grants are made annually, and are thus less influenced

by timing and market volatility issues; and

> measuring the performance criteria over a period of

three years in order to motivate participants to achieve

sustained improvements in financial performance.

The guidelines of the Altron 2009 Share Plan are detailed

below:

> Executives, selected senior managers and key employees

of the company will be offered on an annual basis any

one or a mix of:

allocations of share appreciation rights;

awards of performance shares; and

grants of bonus shares.

> Share appreciation rights element

– the share appreciation rights element retains

the essential characteristics of the previously

implemented conditional rights scheme embodied

in The Altron Group Share Incentive Trust, but

allocations in terms of this new scheme are now

displaced to a lower level with greater emphasis

being placed on the performance share and bonus

share elements;

– annual conditional allocations of share appreciation

rights are made that will be available to be settled in

equal tranches on the 3rd, 4th and 5th anniversaries

but need not be exercised until the 6th anniversary,

at which time they must be exercised or they will

lapse. On each vesting date, the Altron board

will review the extent to which the performance

conditions/underpins have been fulfilled or not, in

order to determine the number of share appreciation

rights that will vest;

– on exercise, the value accruing to participants will

be the full appreciation of Altron’s participating

preference share price, which value will be settled in

Altron participating preference shares of equivalent

value; and

– the performance conditions/underpins will reflect

what, in the prevailing conditions at the time of the

award, would be regarded as a minimum acceptable

performance over the vesting period; there would be

an element of stretch in the performance conditions

to achieve full vesting, but this would be generally

regarded as reasonably attainable with a good

performance.

> Performance shares element

– the performance shares element closely aligns

the interests of shareholders and participants,

by rewarding superior shareholder and financial

performance in the future;

– annual conditional awards of full value participating

preference shares are made to executives, selected

senior managers and/or key employees of the

company. The participating preference shares will

vest after a three-year period subject to the company

meeting a combination of challenging performance

measures over the intervening period; and

– the performance measures associated with each

award of performance shares will be selected by the

committee to foster the creation of shareholder value

and to reward participants for their achievements,

after eliminating the effects of the macro-economic

environment;

– the performance metrics will be one of, or a weighted

combination of:

> financial targets (earnings growth, return on

capital);

> comparative financial or share performance

against a comparator group of companies or in

relation to a financial index; and

> operational targets.

– for each performance metric, the following

thresholds/targets will be defined:

> threshold level: should performance over the

three-year vesting period be no better than this

prescribed level then none of the award will vest.

The threshold level, should be that performance

which would be generally regarded as mediocre

under the prevailing circumstances;

> target level: should performance over the three-

year vesting period equal this prescribed level, then

the full award will vest. The target level should

be generally regarded as attainable with a good,

“stretch” performance;

> maximum level: should performance over the

three-year vesting period equal or better this

prescribed level, then three times the full award

will vest. The maximum level should be generally

regarded as an aspirational target reflecting a

truly excellent performance;

> any performances between these threshold/target

levels will result in a pro-rated vesting; and

page 141

– the performance metrics and/or their weightings

and/or their thresholds/targets may be varied for

different awards, but they will not vary for any one

award once it has been made.

> Bonus shares element

– The bonus shares element provides for share-based

retention of those executives, senior managers and/

or key employees who through their performance on

an annual basis have demonstrated their value to the

company.

– Annually, executives, selected senior managers and/

or key employees of the company receive a grant

of full value Altron participating preference shares

that match, according to a specified ratio, a portion

of the annual performance bonus accruing to these

employees. These participating preference shares will

be settled to participants after three years provided

that they are still in the employ of the company or

the Altron group.

– Although there are no other performance vesting

criteria associated with bonus shares, their grant to

any individual is linked to the performance bonus

earned in the financial year preceding the grant:

a minimum level of performance will be required,

and the value granted will match according to a

prescribed ratio of the value of bonus earned.

> Any executive, senior manager and/or key employee

of the company may be selected by the committee to

participate in the Altron 2009 Share Plan. It is envisaged

that participants will receive, on an annual basis,

allocations in terms of the share appreciation rights

and/or awards of performance shares and/or grants of

bonus shares.

> Although all allocations/awards/grants are governed

by set policy, the committee may apply its discretion

in making extra-policy awards of performance shares

and grants of bonus shares to high performers and key

talent, when this is warranted.

> Combination of share plan elements

It is intended that the combined, weighted

implementation of the above long-term incentive

elements will allow the company to remain competitive

in long-term share-based incentives, reward long-term

sustainable company performance, act as a retention

tool, and ensure that executives share a significant level

of personal risk with the company’s shareholders.

10. Guidelines on non-executive directors’ remuneration

The company’s policy on remuneration for non-executive

directors is that this should be:

> market related (having regard to the median

remuneration paid and number of meetings attended

by non-executive directors of companies of similar size

and structure to the company and operating in similar

sectors); and

> not linked to Altron’s share price or the company’s

performance.

The committee takes cognisance of market norms and

practices, as well as the additional responsibilities placed

on board members by new legislation and corporate

governance principles.

The remuneration of non-executive directors is

recommended by the committee, confirmed by the

executive director component of the company’s board,

and approved in advance by shareholders at the annual

general meeting. Remuneration for the financial year

going forward is reviewed by the committee and board

in February and approved by shareholders at the annual

general meeting held during or about July.

The company pays for all travel and accommodation

expenses incurred by directors to attend board and

committee meetings as well as visits to company sites and

businesses. These expenses refunded to the non-executive

directors are governed by a formal travel and expenses

policy approved by the Altron board.

11. Guidelines on service contracts and severance

arrangements

No non-executive director has an employment contract

with the company although non-executive directors are

required to conclude service agreements with the company

upon their joining the Altron group which sets out the

duties and responsibilities expected of them as non-

executive directors.

Executive directors are subject to the company’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 2008, company policy prevents any

director from being compensated for loss of office.

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page 142 Altron integrated annual report 2011


In line with the remuneration guidelines of King III, none

of the executive directors have extended employment

contracts or special termination benefits or balloon

payments, and although the nature of the company’s

business requires the use of restraints of trade, none are

linked to any restraint payment.

As a general guideline, the company’s policy when

terminating the services of an individual for operational

reasons is to pay a severance package which is not less

than the minimum prescribed by law at the relevant time.

The company aims to apply this policy to all employees,

including the Altron group executive directors, but it is

subject to negotiation in special circumstances.

12. Committee decisions required annually

The following are some of the decisions needed to be

made by the committee and the Altron board and those of

its major non-listed subsidiaries on an annual basis with

regard to the reward strategy:

> any adjustments to this reward strategy document;

> annual TCOE increases, having regard to, among others:

– the overall financial performance of Altron and its

major non-listed subsidiaries;

– anticipated inflation;

– anticipated package increases in the technology

markets and the national market;

– trends in industry; and

– those factors referred to in section 6 above;

> guaranteed pay levels of all executives;

> assessing whether or not the prescribed performance

criteria have been achieved by the company and for key

individuals;

> company, financial, strategic and operational targets for

the year ahead;

> awards/allocations/grants in general and specifically

for the top executives in terms of the Altron 2009 Share

Plan; and

> the policy to be adopted for establishing fair market

value in terms of the allocation prices, vesting prices and

exercise prices for share appreciation rights.

page 143

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Annual financial statementsfor the year ended 28 February 2011

Certificate from the company secretaries 143

Independent auditor’s report 144

Directors’ report 145

Report of the Altron audit committee 150

Accounting policies 153

Balance sheet 164

Statement of comprehensive income 165

Statement of changes in equity 166

Statement of cash flows 168

Property, plant and equipment 169

Intangible assets, including goodwill 170

Associates and other investments 173

Rental finance advances 173

Deferred taxation 175

Inventories 176

Trade and other receivables, including derivatives 177

Cash and cash equivalents 179

Share capital and premium 179

Reserves 186

B-BBEE transactions 187

Loans 189

Empowerment funding obligation 195

Provisions 195

Trade and other payables, including derivatives 196

Retirement benefit plans 197

Deferred income 199

Revenue 199

Operating profit before capital items 200

Capital items 201

Financial income 201

Financial expense 201

Share of profits from associates 202

Taxation 202

Earnings per share 203

Dividends proposed 206

Commitments 206

Financial risk management 207

Related-party transactions 214

Judgements made by management 215

Standards and interpretations in issue but not yet effective 216

Cash generated by operations 218

Dividends received from associates and other investments 218

Taxation paid 218

Acquisition of subsidiaries 219

Proceeds on disposal of subsidiary 219

Proceeds on disposal of property, plant and equipment 220

Other investing activities 220

Subsidiaries’ equity contributions from non-controlling interests 220

Acquisition of subsidiaries 220

Associates, other investments and joint ventures – Annexure 1 222

Segmental report – Annexure 2 226

Allied Electronics Corporation Limited 230

Certificate from the company secretaries

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

1973, (as amended), we certify that, to the best of our

knowledge and belief, the company has lodged with the

erstwhile Registrar of Companies for the financial year ended

28 February 2011, all such returns as are required of a public

company in terms of the aforesaid Act, and that all such

returns are true, correct and up to date.

Altron Management Services (Pty) Limited

Secretaries

Andrew Johnston – Group Company Secretary

3 May 2011

Andrew Johnston


ANNUAL FINANCIAL STATEMENTS

Independent auditor’s report

To the shareholders 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

28 February 2011 and the statements of comprehensive

income, changes in equity and cash flows 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, as set out on

pages 145 to 149 and pages 153 to 235.

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, and for

such internal control as the directors determine is necessary

to enable the preparation of financial statements that are free

from material misstatement, whether due to fraud or error.

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

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 28 February

2011, 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 NH Southon KPMG Crescent

Chartered Accountant (SA) 85 Empire Road

Director Parktown

Johannesburg

3 May 2011

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Directors’ reportfor the year ended 28 February 2011

To the shareholders of Allied Electronics Corporation Limited

The directors have pleasure in submitting the annual financial

statements of the Altron group for the year ended 28 February

2011.

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 (Pty) Limited (Bytes), are invested in the power

electronics, telecommunications, multi-media and information

technology industries.

Financial results

Group attributable earnings for the year ended 28 February

2011 were R542 million (2010: R543 million), representing

earnings per share of 172 cents (2010: 172 cents). Headline

earnings per share were at 228 cents (2010: 198 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 28 February 2011:

> Ordinary dividend No 63 of 108 cents per share

(2010: 90 cents).

> Participating preference dividend No 17 of 108 cents

per share (2010: 90 cents).

It remains Altron’s policy to declare dividends annually at the

time of announcing the 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 233, while particulars of the associate

companies, joint ventures and other investments are provided

in Annexure 1 on page 222.

The attributable interest of the group in the profits and losses

of its subsidiaries for the year ended 28 February 2011 is:

2011R millions

2010R millions

Aggregate amount of profit after taxation 1 074 1 079

Aggregate amount of losses after taxation 375 238

Corporate activity during the year

Swist Technology Solutions

Effective 1 January 2011, Altech acquired the entire issued

share capital of Swist Technology Solutions for a maximum

purchase consideration of R52 million, of which R30 million was

paid up front in cash with the balance being payable over three

years, subject to the achievement of specific and agreed profit

targets. Swist Technology Solutions is an independent software

vendor focusing on infrastructure and integration services,

mobility services and software development, and is a major

billing software vendor in the South African market.

Altech Netstar

Effective 1 December 2010, Altech Netstar implemented a broad-

based black economic empowerment transaction whereby Thebe

Investment Corporation and Identity Capital Partners acquired

a combined 25% plus one share equity shareholding in Altech

Netstar’s South African operations. The total value of the assets

involved in this transaction was R1.5 billion. Altech Netstar’s

international business and intellectual property rights have been

wholly retained by Altech.

Corporate activity after balance sheet date

Altech

In March 2011, Altech entered into an agreement in respect

of a broad-based black economic empowerment transaction

whereby the Southern Palace Group of Companies acquired an

effective 25% plus one share equity holding in a new company,

which had been constituted as the holding company of the

South African operations of Altech Alcom Matomo, Altech

Alcom Radio Distributors and Altech Fleetcall. The value of the

assets concerned amounted to R405 million.

Altech UEC

In March 2011, Altech entered into an agreement in respect of a

broad-based black economic empowerment transaction whereby

a consortium led by Power Matla acquired an effective 25%

plus one share equity holding in Altech UEC’s African operations.

The total value of the assets involved in this transaction was

R509 million. Altech UEC’s international business and intellectual

property rights have been wholly retained by Altech.

Altech Information Technologies

Altech has agreed to acquire the 25% plus one share equity

holding of Pamodzi Investment Holdings in Altech Information

Technologies, for a purchase consideration of R37.5 million,

with an effective date still to be determined.



Directors’ report continued

for the year ended 28 February 2011

Share schemes

Particulars relating to the Altron Group Share Incentive Trust,

the Allied Electronics Corporation Limited Share Trust and the

Altron 2009 Share Plan are set out in note 9 to the financial

statements.

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

and 25 811 377 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 previous

Companies Act, 1973, as amended, and which authority remains

valid only until the next annual general meeting which will be

held on Friday, 15 July 2011. At that meeting, shareholders will

be asked to place 5% of the unissued ordinary shares and 5% of

the unissued 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.

Directorate

Appointments

Nil

Retirements

Nil

In terms of the company’s articles of association,

Dr WP Venter, Dr PM Maduna and Messrs MC Berzack,

BJM Masekela, PL Wilmot and CG Venter retire by rotation.

All the retiring directors are eligible and available for re-

election. Their profiles appear on page 236 to 240 of this


Secretaries

Altron Management Services (Pty) Limited acts as secretaries

to the company. The secretaries’ business and postal addresses

appear on the inside back cover of this integrated annual report.

Segment reporting

Segment information is included in this integrated annual

report as part of the operational reviews and shareholders are

referred to annexure 2 on pages 226 to 229 of this integrated

annual report.

Attributable headline earnings contributions to Altron were as

follows:

2011R millions

2010R millions

Altech 292 342

Bytes 208 157

Powertech 187 97

Corporate and financial services 32 29

Directors’ interests

At 28 February 2011, the present directors of the company

held direct and indirect interests, including family interests, in

59 330 954 of the company’s issued ordinary shares (2010:

59 981 054 ordinary shares) and 6 574 626 of the company’s

issued participating preference shares (2010: 6 577 191).

Details of shares held per individual director are listed below.

A total of 2 366 676 participating preference share options,

conditional rights, share appreciation rights, performance

shares and bonus shares are allocated to directors in terms

of the company’s employee share schemes.

2011 Direct beneficial Direct non-beneficial

Name of director Ordinary sharesParticipating

preference shares Ordinary sharesParticipating

preference shares

Dr WP Venter 8 694 070 — — —

RE Venter — 90 732 — —

MC Berzack — 232 690 — —

PD Redshaw — 8 713 — —

MJ Leeming 2 500 — — —

PL Wilmot — 3 971 — —

page 147

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Indirect beneficial Indirect non-beneficial



preference shares

Dr WP Venter 31 263 527 34 055 19 367 000* 6 197 129*

MC Berzack 1 357 — — —

MJ Leeming 2 500 1 307 — —

PL Wilmot — 6 029 — —

* Non-executive chairman and director, Dr WP Venter, and his family and related trusts, are the controlling shareholders of the company.

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

2010 Direct beneficial Direct non-beneficial



preference shares

Dr WP Venter 8 694 070 — — —

RE Venter — 90 732 — —

MC Berzack — 232 690 — —

PD Redshaw — 8 713 — —

Dr HA Serebro 627 600 1 555 — —

MJ Leeming 2 500 — — —

PL Wilmot — 3 971 — —

Indirect beneficial Indirect non-beneficial



preference shares

Dr WP Venter 31 263 527 34 055 19 367 000* 6 197 129*

MC Berzack 1 357 — — —

Dr HA Serebro 22 500 1 010 — —

MJ Leeming 2 500 1 307 — —

PL Wilmot — 6 029 — —

* Non-executive chairman and director, Dr WP Venter, and his family and related trusts, are the controlling shareholders of the company.

Public and non-public shareholders

Ordinary sharesNumber of

shareholdings %Number of

shares %

Non-public shareholders 6 0.19 62 577 423 59.22

Directors and associates of the company 5 0.16 59 330 954 56.15


Public shareholders 3 079 99.81 43 091 708 40.78

Totals 3 085 100 105 669 131 100



Directors’ report continued


Altron shareholder spread – compiled by VACO Stakeholder Intelligence utilising the company’s transfer secretaries’ records as at

25 February 2011

Participating preference sharesNumber of

shareholdings %Number of

shares %

Non-public shareholders 10 0.16 34 278 639 14.20

Directors and associates of the company 8 0.13 6 574 626 2.71


Public shareholders 6 276 99.84 206 882 130 85.80

Totals 6 286 100 241 160 769 100

Material shareholdersNumber of

shares %

Beneficial shareholders (excluding directors) holding 5% or more of the company’s listed ordinary shares as at 25 February 2011 were the following:


Beneficial shareholders (excluding directors) holding 5% or more of the company’s listed participating preference shares as at 25 February 2011 were the following:

Old Mutual 44 872 249 18.61



Sanlam 18 474 096 7.66

Investment Solutions 14 012 980 5.81

Special resolutions

The company passed and registered one special resolution on

6 August 2010, 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 16 August 2010, approving the acquisition by

Altech or any of its subsidiaries of Altech’s shares.

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



The board endorses the contents of the King Report on

Governance for South Africa, 2009, as well as the King Code

of Governance Principles for South Africa 2009 (the Code)

and has satisfied itself that Altron has complied throughout

the period in all material aspects with the Code and the

Listings Requirements of the JSE. The corporate governance

report is set out on pages 106 to 117 of this integrated

annual report.

Directors’ emoluments

The individual directors’ emoluments paid in respect of the

financial period under review are contained in the remuneration

report on pages 131 to 134 of this integrated annual report.

page 149

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Borrowing powers

In terms of the memorandum of incorporation, Altron has

unlimited borrowing powers. At 28 February 2011, unutilised

borrowing facilities amounted to R2 543 million (2010:

R2 827 million).

Approval of the annual financial statements

The directors are responsible for the preparation and fair

presentation of the group annual financial statements and

annual financial statements of Allied Electronics Corporation

Limited, comprising the balance sheets at 28 February 2011

and the statements of comprehensive income, changes in

equity and cash flows 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, in accordance with International

Financial Reporting Standards, and in a manner required by the

Companies Act of South Africa.

The directors are also responsible for such internal control

as the directors determine is necessary to enable the

preparation of financial statements that are free from

material misstatement, whether due to fraud or error, and for

maintaining adequate accounting records and an effective

system of risk management as well as the preparation of

the supplementary schedules included in these financial

statements.

The directors have made an assessment of the ability of the

company and its subsidiaries to continue as going concerns and

have no reason to believe that the businesses will not be going

concerns in the year ahead.

The auditor is responsible for reporting on whether the

group annual financial statements and separate company

annual financial statements are fairly presented in accordance

with the applicable financial reporting framework.

The annual financial statements for the year ended

28 February 2011 which appear on pages 145 to 235 of this

integrated annual report were approved by the board and

signed on its behalf on 3 May 2011.

For: Allied Electronics Corporation Limited

Dr WP Venter – Non-executive Chairman

RE Venter – Chief Executive

AMR Smith – Chief Financial Officer

3 May 2011



Report of the Altron audit committee

We are pleased to present our report for the financial year

ended 28 February 2011.

Audit committee mandate and terms of reference

The Altron audit committee (the committee) has adopted

a formal mandate and terms of reference that has been

approved by the board of directors. The committee has

conducted its affairs in compliance with this mandate

and terms of reference and has discharged its

responsibilities contained therein. The mandate and terms

of reference is available on the company’s website at

http://www.altron.com and is also available on request.

Audit committee members and attendance at meetings

The committee consists of four independent, non-executive

directors and meets at least three times per annum as per the

committee mandate and terms of reference.

The Altron chief executive, finance director, sub-holding group

chief executive officers, head of internal audit, external auditor

and other assurance providers (Altron tax manager and

finance manager) attend meetings by invitation.

During the year under review three meetings were held.

Name of member30 April

20101 October

201024 February

2011

PL WilmotCA (SA)Year appointed: 2002 as chairman Present Present Present

NJ AdamiBBusSci (Hons) (UCT); MBA (Wits)Year appointed: 2009 Present Absent* Present

MJ LeemingBCom (Rhodes); MCom (Wits); FIBSA, FCMA; AMP (Harvard)Year appointed: 2003 Present Present Present

JRD ModiseBCom (Wits); BAcc (Wits); CA (SA); MBA (Wits); AMP (Samford); AMP (Harvard)Year appointed: 2004 Present# Absent*† Absent*

* Apologies.

† Mr Modise was incapacitated in hospital and accordingly was

unable to attend this meeting.# Participated via teleconference.

During the review period, the Altron board, in conjunction

with the committee, reappointed Mr Wilmot as the

chairman of the committee for a further period of one year

with effect from 14 May 2011. This appointment was

subject to shareholders re-electing Mr Wilmot as a member

of the committee at Altron’s annual general meeting to be

held on 15 July 2011 and followed a rigorous review by the

board of not only Mr Wilmot’s performance, but also any

factors which could impair or appear to impair, his

independence.

Roles and responsibilities

The committee’s roles and responsibilities include its statutory

duties as per the previous Companies Act of 1973 (as

amended) and the responsibilities assigned to it by the board.

Statutory duties

In the conduct of its duties, the committee has performed

the following statutory duties:

> Nominated for appointment as external auditor of the

company, KPMG Inc., a registered auditor which, in the

opinion of the committee, is independent of the company.

> Determined the fees to be paid to the external auditor and

the terms of engagement.

> Ensured that the appointment of the external auditor

complies with the previous Companies Act of 1973

(as amended) and any other legislation relating to the

appointment of auditors.

> Determined the nature and extent of those non-audit

services that the external auditor may provide to the

company (and the Altron group).

> Preapproved any proposed agreement with the external

auditor for the provision of non-audit services to the

company (and the Altron group).

> Discharged those statutory obligations of an audit

committee as prescribed by section 270A of the previous

Companies Act of 1973 (as amended) acting in its capacity

as the appointed audit committee of Bytes and Powertech.

page 151

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External auditor

The committee has satisfied itself that the external auditor,

KPMG Inc., was independent of the company, as set out in

section 270A (5) of the previous Companies Act of 1973

(as amended), which includes consideration of compliance

with criteria relating to independence or conflicts of interest

as prescribed by the Independent Regulatory Board for

Auditors. Requisite assurance was sought and provided by

the external auditor that internal governance processes

within KPMG Inc. support and demonstrate their claim to

independence.

The committee, in consultation with executive management,

agreed to the engagement letter, terms, audit plan and

budgeted audit fees for the 2010/2011 year.

There is a formal written policy and procedure (incorporating

an authority matrix) that governs the process whereby the

external auditor is considered for non-audit-related services.

The committee approved the terms of the written policy for

the provision of non-audit services by the external auditor,

and approved the nature and extent of non-audit services

that the external auditor may provide.

The committee has nominated, for approval at the annual

general meeting, KPMG Inc. as the external auditor and

Mr NH Southon as the designated auditor, for the 2011/2012

financial year. It has further satisfied itself that the audit firm

and designated auditor are accredited to appear on the JSE

List of Accredited Auditors. Furthermore, the committee has

satisfied itself that the audit firms of Altron’s major

subsidiaries (KPMG Inc. and PKF (Jhb) Inc) are accredited to

appear on the JSE List of Accredited Auditors and that the

designated auditors are not disqualified from acting as such.

Internal financial controls

Based on the results of the formal documented review of the

design, implementation and effectiveness of the Altron group’s

system of internal financial controls conducted by the internal

audit function during the 2010/2011 financial year and, in

addition, considering information and explanations given by

management plus discussions held with the external auditor

on the results of their audit, the committee is of the opinion

that the Altron group’s system of internal financial controls

is effective and forms a basis for the preparation of reliable

financial statements.

Financial statements (including accounting practices)

The committee has reviewed the financial statements of the

company and the Altron group and is satisfied that they

comply with International Financial Reporting Standards.

Going concern

The committee reviewed a documented assessment by

management of the going-concern premise of the company

and the Altron group before concluding to the board that the

company, as well as the Altron group, will be a going concern

for the foreseeable future.

Expertise and experience of financial director and finance

function

The committee has satisfied itself that the financial director

of Altron has appropriate expertise and experience.

The committee has considered, and has satisfied itself of the

overall appropriateness of the expertise and adequacy of

resources of the Altron group’s finance function and experience

of the senior members of management responsible for the

financial function. Some weaknesses were identified in certain

recently acquired operations, but management has committed

itself to ensuring that these weaknesses are addressed as a

matter of priority and, where necessary, has seconded financial

skills and experience to these operations.

Duties assigned by the board

The committee fulfils an oversight role regarding the

company’s integrated annual report and the reporting process,

including the system of internal financial control. It is

responsible for ensuring that the Altron group’s internal audit

function is independent and has the necessary resources,

standing and authority within the organisation to enable it to

effectively discharge its duties. Furthermore, the committee

oversees cooperation between the internal and external

auditors, and serves as a link between the board of directors

and these functions.



During the year under review, the committee met with the

external auditor and with the head of internal audit without

management being present.

The committee is satisfied that it has complied with its legal,

regulatory and other responsibilities.

Risk management

The board has assigned oversight of the company’s (including

the Altron group’s) risk management function to the risk

management committee. The chairman of the committee

attends the risk management committee meetings as an ex

officio member to ensure that information relevant to these

committees is shared regularly. The committee fulfils an

oversight role regarding financial reporting risks, internal

financial controls, fraud risk as it relates to financial reporting

and information technology risks as they relate to financial

reporting.

Internal audit

The committee annually considers and has recommended the

internal audit charter for approval by the board. The internal

audit function’s annual audit plan was approved by the

committee.

The internal audit function resides within the Altron corporate

office and has responsibility for reviewing and providing

assurance on the adequacy of the internal control environment

across all of the Altron group’s operations. The head of internal

audit is responsible for reporting the findings of the internal

audit work against the agreed internal audit plan to the

committee on a regular basis.

The head of internal audit has direct access to the committee,

primarily through its chairman.

During 2010, an external peer review was conducted by

PricewaterhouseCoopers Inc. on the effectiveness of the

company’s internal audit function. The review indicated that

the Altron internal audit department “Generally Conforms” to

the International Standards for the Professional Practice of

Internal Auditing. The “Generally Conforms” rating is the

highest rating that can be achieved.

Whistle-blowing

The committee is satisfied that instances of whistle-blowing

were appropriately dealt with during the period under review.

Sustainability reporting

The committee recommended to the board the appointment

of SustainabilityServices, an external assurance provider,

to perform an assurance engagement on key sustainability

performance indicators included in the integrated annual

report. The committee determined the scope of this assurance

engagement and satisfied itself as to the independence and

competency of the external assurance provider.

The committee considered the company’s sustainability

information as disclosed in the integrated annual report and

has assessed its consistency with operational and other

information known to committee members, and for

consistency with the annual financial statements. The

committee discussed the sustainability information with

management and the chairman of the risk management

committee, and has considered the conclusions of the

external assurance provider. The committee is satisfied that

the sustainability information is reliable and consistent with

the financial results.

Recommendation of the integrated annual report for

approval by the board

The committee recommended the integrated annual report

for approval by the board of directors on 25 May 2011.

PL Wilmot – Chairman

3 May 2011

Report of the Altron audit committee continued

page 153

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Accounting policiesas at 28 February 2011

Allied Electronics Corporation Limited (the company) is a

South African registered company. The consolidated financial

statements of the company for the year ended 28 February

2011 comprise the company and its subsidiaries (together

referred to as the “group”) and the group’s interests 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 and the AC 500 series.

Basis of preparation

The annual financial statements are prepared in millions

of South African rands, which is the company’s functional

currency, on a historical-cost basis, except for the following

assets and liabilities which are stated at fair value:

> Derivative financial instruments

> Financial instruments 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 the 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 31.

The accounting policies set out below have been applied

consistently to the periods presented in these consolidated

financial statements, other than the changes in accounting

policy relating to the accounting for business combinations

and accounting for acquisitions of non-controlling interests

as detailed below:

Accounting for business combinations

From 1 March 2010, the group has applied IFRS 3 – Business

Combinations (2008) in accounting for business combinations.

The change in accounting policy has been applied prospectively

and has no material impact on earnings per share.

For acquisitions on or after 1 March 2010, the group measures

goodwill at the acquisition date as:

> the fair value of consideration transferred; plus

> the recognised amount of any non-controlling interests in

the acquiree; plus

> if the business combination is achieved in stages, the fair

value of the existing equity interest in the acquiree; less

> the net recognised amount (generally fair value) of the

identifiable assets acquired and liabilities assumed.

When the excess is negative, a bargain purchase gain is

recognised immediately in profit or loss.

The consideration transferred does not include amounts related

to the settlement of pre-existing relationships. Such amounts

are generally recognised in profit or loss.

Costs related to the acquisition, other than those associated

with the issue of debt or equity securities, that the group incurs

in connection with a business combination are expensed as

incurred.

Accounting for acquisitions of non-controlling interests

From 1 March 2010, the group has applied IAS 27 –

Consolidated and Separate Financial Statements (2008) in

accounting for non-controlling interests. The section of the

revised standard dealing with the accounting for the increase

or decrease of non-controlling interests is consistent with the

current accounting policy for the group.



Accounting policies continued

as at 28 February 2011

Losses applicable to non-controlling interests in a subsidiary

are now allocated to the non-controlling interest even if

doing so causes the non-controlling interests to have a deficit

balance. The change in accounting policy has been applied

prospectively.

The group’s 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

over the financial and operating policies. 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.

Goodwill

All business combinations are accounted for by applying

the “acquisition method”. Goodwill represents amounts

arising on the acquisition of subsidiaries, associates and joint

ventures.

Goodwill is measured at cost less accumulated impairment

losses, is allocated to cash-generating units and is tested

annually for impairment.

In respect of equity-accounted investees, the carrying amount of

goodwill is included in the carrying amount of the investment.

Negative goodwill arising on an acquisition is recognised

immediately in profit or loss.

Premiums and discounts arising on purchases from, or sales

to, non-controlling interests in subsidiaries

Any increases or 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 purchases of

equity instruments from, or sales of equity instruments to,

non-controlling interests are recognised directly in the equity

of the parent shareholder.

page 155

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Broad-based black economic empowerment (B-BBEE)

transactions

B-BBEE 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 B-BBEE 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, call deposits

and cash floats. 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.

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.

Capital items relate to “separately identifiable re-

measurements” (not adjusted for related taxation and

related non-controlling interests) other than “included re-

measurements” specifically included in headline earnings as

defined in “Circular 3/2009 – Headline earnings”.

Employee benefits

Short-term employee benefits

The cost of all short-term employee benefits are 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. While 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

recognised in profit or loss 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.

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

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:

Interest-bearing borrowings

Subsequent to initial recognition, interest-bearing borrowings

are measured at amortised cost with any difference between

initial fair value and redemption value being recognised in

profit or loss over the period of the borrowings using the

effective interest method.

Investments

Investments held-for-trading are classified as current assets

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

recognised in profit or loss.

Other investments held by the group are classified as available-

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

gain or loss recognised directly in other comprehensive income,

except for impairment losses and, in the case of available-for-

sale debt instruments, foreign exchange gains or losses, which

are recognised in profit or loss. When these investments are

disposed of, the cumulative gain or loss previously recognised

directly in other comprehensive income is recognised and

presented within profit or loss as a capital item.

Where these investments are interest-bearing, interest

calculated using the effective interest method is recognised

in profit or loss.

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 financial 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, interest rate swaps and metal future contracts.

Derivatives are recognised initially at fair value; attributable

transaction costs are recognised in profit or loss when incurred.

Subsequent to initial recognition, derivatives are measured at

fair value through profit or loss. 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

profit or loss, the effective part of any gain or loss on the

derivative financial instrument is recognised directly in other

comprehensive income in the cash flow hedging reserve. Any

ineffective portion of changes in the fair value of the derivative

is recognised immediately in profit or loss.

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 other

comprehensive income up to the transaction date is adjusted

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against the initial measurement of the asset or liability. For

other cash flow hedges, the cumulative amount is recognised

in profit or loss in the period when the commitment or forecast

transaction affects profit or loss.

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 other

comprehensive income 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 profit or loss.

Where a derivative financial instrument is used to economically

hedge the foreign exchange exposure of a recognised monetary

asset or liability and is not designated in a hedge relationship

that qualifies for hedge accounting, no hedge accounting is

applied and any gain or loss on the hedging instrument is


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.

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.

Financial income and expense

Financial income comprises interest income on funds invested,

dividend income and changes in the fair value of financial

assets at fair value through profit or loss, and gains on hedging

instruments that are recognised in profit or loss. Interest income

is recognised as it accrues in profit or loss, using the effective

interest method. Dividend income is recognised in profit or loss on

the date that the group’s right to receive payment is established,

which in the case of listed securities is the ex-dividend date.

Financial expenses comprise interest expense on borrowings,

unwinding of the discount on provisions and other interest-free

liabilities, changes in the fair value of financial assets at fair

value through profit or loss, impairment losses recognised on

financial assets, and losses on hedging instruments that are


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 dates of the transactions. Monetary assets and

liabilities denominated in foreign currencies at the reporting date

are translated to the functional currency at the exchange rates

ruling at that date. Gains or losses on translation are recognised

in profit or loss. Non-monetary items in a foreign currency that

are measured in terms of historical cost are translated using the

exchange rate at the date of the transaction.

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 reporting date. The revenues and expenses of

foreign operations are translated to South African rands at

rates approximating the foreign exchange rates ruling at the

dates of the transactions.

Foreign exchange differences arising on translation are

recognised directly in other comprehensive income – the foreign

currency translation reserve. The foreign currency translation

reserve applicable to a foreign operation is released to profit or

loss 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 or whenever there is

an indication that the asset may be impaired.

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 pretax

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 profit or loss 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 profit or

loss 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.

The group considers the need for the impairment of trade

receivables at both a specific asset and collective level. All

individually significant receivables are assessed for specific

impairment. All individually significant receivables found not

to be specifically impaired are then collectively assessed for

any impairment that has been incurred but not yet identified.

Receivables that are not individually significant are collectively

assessed for impairment by grouping together receivables with

similar risk characteristics.

In assessing collective impairment the group uses historical

trends of the probability of default, timing of recoveries and the

amount of loss incurred, adjusted for management’s judgement

as to whether current economic and credit conditions are such

that the actual losses are likely to be greater or lesser than

suggested by historical trends.

An impairment loss in respect of a financial asset measured

at amortised cost is calculated as the difference between its

carrying amount and the present value of the estimated future

cash flows discounted at the asset’s original effective interest

rate. Impairment losses are recognised in profit or loss and

reflected in an allowance account against receivables. When

a subsequent event causes the amount of impairment loss to

decrease, the decrease in impairment loss is reversed through

profit or loss.

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

financial asset has been recognised in other comprehensive

income and there is objective evidence that the asset is

impaired, the cumulative loss that has been recognised in

other comprehensive income is recognised in profit or loss even

though the financial asset has not been derecognised. The

amount of the cumulative loss that is recognised in profit or

loss is the difference between the acquisition cost and current

fair value, less any impairment loss on that financial asset

previously recognised in profit or loss.

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 equity security classified

as available-for-sale is not reversed through profit or loss. An

impairment loss in respect of goodwill is not reversed.

Intangible assets

Goodwill

Refer to “Basis of consolidation” on page 154.

Data capacity indefeasible rights of use (IRUs)

The group recognises an intangible asset arising from the

contractual and unconditional indefeasible right of use (IRU) of

specified data capacity on identifiable cable networks for a term

that substantially coincides with the estimated economic and

technological useful life of the underlying network.

The intangible asset is measured at cost less accumulated

amortisation and accumulated impairment losses. The

estimated useful life is determined to be the shorter of

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management’s estimate of the economic and technological

useful life of the underlying network or the contractual term

of the underlying IRU agreement.

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.

Capitalised development expenditure is measured 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, which

have finite useful lives, are measured 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 recognised in profit or loss on a straight-line

basis over the estimated useful lives of intangible assets

from the date they are available for use unless such lives

are indefinite.

The estimated useful lives for the current and comparative

periods are as follows:

> Data capacity indefeasible rights of use 15 to 20 years

> Trade names, designs, patents

and trademarks 3 to 10 years

> Customer relationships 1 to 10 years

> Distribution rights and licence indefinite life

agreements

> Proprietary software 2 to 3 years

Amortisation methods, useful lives and residual values are

reviewed at each financial year end and adjusted if appropriate.

Inventories

Inventories are measured at the lower of cost and net

realisable value taking into account market conditions and

technological changes. Cost is determined on the first-in

first-out and weighted 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.

Investments in subsidiaries

Investments in subsidiaries are measured at cost, less

accumulated impairment losses.

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 profit or loss 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 statement of comprehensive income

and statement of cash flow are restated as if the operation has

been discontinued from the start of the comparative period.

Leases

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 recognised in

profit or loss on a straight-line basis over the period of the lease.

Finance leases

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 recognised in profit or loss over

the lease period, and the capital repayment, which reduces the

liability to the lessor.

Property, plant and equipment

Owned assets

Property, plant and equipment are measured 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.

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 profit or loss

as an expense when incurred.

Depreciation

Depreciation is recognised in profit or loss 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 machinery 3 to 20 years

> Furniture and equipment 5 to 20 years

> Data infrastructure 8 to 15 years

> Motor vehicles 4 to 8 years

> IT equipment and software 2 to 8 years

> Leasehold improvements shorter of lease period

or useful life of asset

The depreciation methods, useful lives and residual values are

reassessed annually and adjusted if appropriate.

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

equipment are included as capital items in profit or loss.

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 be

required to settle the obligation, 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

pretax discount rate that reflects current market assessments

of the time value of money and, where appropriate, the risks

specific to the liability.

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Warranties and fault rectification

A provision for warranties and fault rectification is recognised

when the underlying products or services are sold. The provision

is based on historical warranty and fault rectification data,

claims made and a weighting of all possible outcomes against

their associated probabilities.

Retrenchments and restructuring

A provision for retrenchments and 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 deferred delivery shares

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 deferred

delivery shares 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 in the past. 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 reporting date and at settlement date. Any changes in

the fair value of the liability are recognised as employees’

remuneration in profit or loss.

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, as it receives the benefit of the services rendered

and has no obligation to settle the award.

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. 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.

B-BBEE transactions

Where goods or services are considered to have been received

from B-BBEE 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, there is no

continuing management involvement with the goods and the

amount of revenue can be measured reliably.

Revenue from services rendered is recognised in profit or loss

in proportion to the stage of completion of the transaction at

reporting date.

Revenue from operating lease arrangements are recognised

in profit and loss on a straight-line basis over the term of the

lease.

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.

Participating preference share capital

Participating 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.

Participating 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 profit or loss 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.

Taxation

Income tax expense comprises current and deferred tax. Income

tax expense is recognised in profit or loss except to the extent

that it relates to items recognised in other comprehensive income,

in which case it is recognised in other comprehensive income.

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 reporting date, and

any adjustment of tax payable for previous years.

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Deferred tax

Deferred tax is recognised 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 foreseeable 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 profit or loss, 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 reviewed at

each reporting date and 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 B-BBEE transactions

that have not yet met the applicable accounting recognition

criteria.

Operating segments

An operating segment is a component of the group that

engages in business activities from which it may earn

revenues and incur expenses, including revenues and expenses

that relate to transactions with any of the group’s other

components. The group determines and presents operating

segments based on the information that is internally provided

to the group’s chief executive (CE), who is the group’s chief

operating decision-maker.

An operating segment’s operating results are reviewed

regularly by the CE to make decisions about resources to

be allocated to the segment and assess its performance,

and for which discrete financial information is available.

Segment results that are reported to the CE include items

directly attributable to a segment as well as those that can

be allocated on a reasonable basis.



GROUP

Notes

2011

R millions

2010

R millions

ASSETS

Non-current assets 5 329 5 839

Property, plant and equipment 1 2 413 2 436

Intangible assets, including goodwill 2 2 274 2 754

Associates 3 10 10

Other investments 3 235 265

Rental finance advances 4 61 44

Loans receivable 7 134 130

Deferred taxation 5 202 200

Current assets 7 090 6 688

Inventories 6 2 336 1 998

Trade and other receivables, including derivatives 7 3 373 3 435

Cash and cash equivalents 8 1 381 1 255

Total assets 12 419 12 527

EQUITY AND LIABILITIES

Total equity 6 314 6 355

Altron equity holders 5 075 4 745

Non-controlling interests 1 239 1 610

Non-current liabilities 1 020 994

Loans 12 758 600

Empowerment funding obligation 13 72 89

Provisions 14 23 34

Deferred income 17 46 96

Deferred taxation 5 121 175

Current liabilities 5 085 5 178

Loans 12 481 937

Empowerment funding obligation 13 17 12

Bank overdrafts 8 128 81

Provisions 14 164 166

Trade and other payables, including derivatives 15 4 049 3 808

Taxation payable 246 174

Total equity and liabilities 12 419 12 527

Net asset value per share (cents) 1 607 1 504

Balance sheetas at 28 February 2011

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GROUP

Notes

2011

R millions

2010

R millions

Revenue 18 22 810 22 336

Operating costs before capital items (20 711) (20 349)

Material and services consumed (17 009) (16 769)

Employees’ remuneration 19.3 (3 702) (3 580)

Earnings before interest, taxation, depreciation and amortisation 2 099 1 987

Depreciation and amortisation (575) (510)

Operating profit before capital items 19 1 524 1 477

Capital items 20 (291) (105)

Result from operating activities 1 233 1 372

Financial income 21 64 87

Financial expense 22 (163) (163)

Share of profit from associates 23 2 2

Profit before taxation 1 136 1 298

Taxation 24 (437) (457)

Profit for the year 699 841

Other comprehensive income

Foreign currency translation differences in respect of foreign operations (312) (432)

Effective portion of changes in the fair value of cash flow hedges 9 10

Fair value adjustment on available-for-sale investments — (2)

Release of foreign currency translation surplus on disposal — (3)

Income tax on other comprehensive income (2) (2)

Other comprehensive income for the year, net of taxation (305) (429)

Total comprehensive income for the year 394 412

Profit attributable to:

Non-controlling interests 157 298

Altron equity holders 542 543

Profit for the year 699 841

Total comprehensive income attributable to:


Altron equity holders 381 275

Total comprehensive income for the year 394 412

Basic earnings per share (cents) 25 172 172

Diluted basic earnings per share (cents) 25 168 169

Dividends per share (cents) – paid 90 119

– proposed 26 108 90

Statement of comprehensive incomefor the year ended 28 February 2011



Attributable to Altron equity holders

GROUP

Sharecapital and

premium(note 9)

R millions

Treasuryshares

(note 9)R millions

Foreigncurrency

translationreserve

(note 10)R millions

Premium/discount on

non-controllingequity

transactions(note 10)

R millions

Balance at 28 February 2009 2 228 (299) 217 (1 383)

Total comprehensive income for the period

Profit for the period — — — —


Foreign currency translation differences in respect of foreign

operations — — (271) —

Effective portion of changes in the fair value of cash flow hedges — — — —

Fair value adjustment on available-for-sale investments — — — —

Change in statutory reserves of foreign subsidiaries — — (3) —

Release of foreign currency translation surplus on disposal — — (3) —

Total other comprehensive income — — (277) —

Total comprehensive income for the period — — (277) —

Transactions with owners, recorded directly in equity

Contributions by and distributions to owners

Dividends to equity holders — — — —

Issue of share capital 8 — — 12

Share-based payment transactions — — — —

Total contributions by and distributions to owners 8 — — 12

Changes in ownership interests in subsidiaries

Change in ownership following subscription

for additional share capital and dilutions — — — (67)

Acquisition of non-controlling interests — — — (4)

Non-controlling interest on acquisition of subsidiaries — — — —

Non-controlling interest on disposal of subsidiaries — — — —

Total changes in ownership interests in subsidiaries — — — (71)

Total transactions with owners 8 — — (59)

Balance at 28 February 2010 2 236 (299) (60) (1 442)

Total comprehensive income for the period

Profit for the period — — — —


Foreign currency translation differences in respect of foreign

operations — — (168) —

Effective portion of changes in the fair value of cash flow hedges — — — —

Total other comprehensive income — — (168) —

Total comprehensive income for the period — — (168) —

Transactions with owners, recorded directly in equity

Contributions by and distributions to owners

Dividends to equity holders — — — —

Issue of share capital 5 — — —

Share-based payment transactions — — — —

Total contributions by and distributions to owners 5 — — —

Changes in ownership interests in subsidiaries

Introduction of non-controlling interest — — — 214

Total changes in ownership interests in subsidiaries — — — 214

Total transactions with owners 5 — — 214

Balance at 28 February 2011 2 241 (299) (228) (1 228)

Statement of changes in equityfor the year ended 28 February 2011

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Attributable to Altron equity holders

Cash flowhedgingreserve

(note 10)R millions

Share-basedpayments

reserve(note 10)

R millions

Statutoryreserves(note 10)

R millions

Fair valuereserve

(note 10)R millions

Retained earnings(note 10)

R millionsTotal

R millions

Non-controlling

interestsR millions

Totalequity

R millions

(15) 58 68 79 3 920 4 873 1 427 6 300

— — — — 543 543 298 841

— — — — — (271) (161) (432)

8 — — — — 8 — 8

— — — (2) — (2) — (2)

— — 27 — (24) — — —

— — — — — (3) — (3)

8 — 27 (2) (24) (268) (161) (429)

8 — 27 (2) 519 275 137 412

— — — — (372) (372) (166) (538)

— — — — — 20 26 46

— 20 — — — 20 3 23

— 20 — — (372) (332) (137) (469)

— — — — — (67) 185 118

— — — — — (4) (2) (6)

— — — — — — 1 1

— — — — — — (1) (1)

— — — — — (71) 183 112

— 20 — — (372) (403) 46 (357)

(7) 78 95 77 4 067 4 745 1 610 6 355

— — — — 542 542 157 699

— — — — — (168) (144) (312)

7 — — — — 7 — 7

7 — — — — (161) (144) (305)

7 — — — 542 381 13 394

— — — — (284) (284) (181) (465)

— — — — — 5 4 9

— 14 — — — 14 7 21

— 14 — — (284) (265) (170) (435)

— — — — — 214 (214) —

— — — — — 214 (214) —

— 14 — — (284) (51) (384) (435)

— 92 95 77 4 325 5 075 1 239 6 314



GROUP

Notes

2011

R millions

2010

R millions

CASH FLOWS FROM OPERATING ACTIVITIES 1 077 1 290

Cash generated by operations 33 2 057 2 417

Interest received 64 88

Dividends received 34 2 16

Interest paid (162) (171)

Taxation paid 35 (419) (522)

Cash available from operating activities 1 542 1 828

Dividends paid

– to Altron equity holders (284) (372)

– to non-controlling interests (181) (166)

CASH FLOWS UTILISED IN INVESTING ACTIVITIES (686) (1 239)

Acquisition of subsidiaries 36 (79) (284)

Proceeds on disposal of subsidiary 37 — 82

Proceeds on disposal of property, plant and equipment 38 31 85

Net repayment of rental finance advances (3) —

Acquisition of intangible assets (121) (373)

Acquisition of property, plant and equipment (527) (733)

Other investing activities 39 13 (16)

CASH FLOWS APPLIED IN FINANCING ACTIVITIES (307) (18)

Loans repaid (316) (156)

Proceeds on share issue 9 46

Subsidiaries’ equity contributions from non-controlling interests 40 — 92

INCREASE IN NET CASH AND CASH EQUIVALENTS 84 33

Net cash and cash equivalents at the beginning of the year 1 174 1 180

Effect of exchange rate fluctuations on cash held (5) (39)

NET CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 8 1 253 1 174

Statement of cash flowsfor the year ended 28 February 2011

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Notes to the annual financial statementsfor the year ended 28 February 2011

Land

and

buildings

R millions

Plant and

machinery

R millions

Data

infrastructure,

motor

vehicles,

furniture and

equipment

R millions

IT equipment

and software

R millions

Total

R millions

1. PROPERTY, PLANT AND EQUIPMENT

Cost

Balance at 28 February 2009 527 2 152 1 137 712 4 528

Additions at cost 14 344 293 100 751

Arising on business combinations — 22 6 7 35

Disposals (12) (91) (37) (33) (173)

Disposals of subsidiaries (1) — (2) — (3)

Reclassifications — 10 (7) (3) —

Translation of foreign operations (27) (130) (127) (19) (303)


Additions at cost 55 204 183 85 527

Disposals (11) (34) (30) (30) (105)

Reclassifications 16 89 (2) 33 136



Accumulated depreciation and

impairment losses

Balance at 28 February 2009 141 1 352 306 508 2 307

Depreciation for the year 17 156 86 87 346

Disposals (8) (57) (9) (26) (100)

Disposals of subsidiaries — — (1) — (1)

Reclassifications — (15) (9) 24 —



Depreciation for the year 18 168 103 96 385

Impairments — — 14 — 14

Disposals (6) (29) (20) (29) (84)

Reclassifications 5 95 50 (14) 136



Carrying amount at 28 February 2009 386 800 831 204 2 221





Notes to the annual financial statements continued


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 12) as follows:

2011

R millions

2010

R millions

Finance leases 50 102

Secured bank loans 222 332

272 434

Assets under construction

Included in the cost of assets are the following items of capital work in progress:

Buildings — 12

Plant and machinery 109 220

IT equipment and software 8 46

Data infrastructure and other equipment 26 507

143 785

Useful lives

Useful lives are reflected under accounting policies on page 160.

Goodwill

R millions

Customer

relation-

ships

R millions

Trade

names,

designs,

patents and

trademarks

R millions

Proprietary

software,

distribution

rights

and licence

agreements

R millions

Data

capacity-

indefeasible

rights of

use (IRUs)

R millions

Total

R millions

2. INTANGIBLE ASSETS, INCLUDING GOODWILL

Cost

Balance at 28 February 2009 2 107 284 482 43 — 2 916

Additions at cost — — 16 — — 16

Development costs capitalised — — 110 — — 110

Disposals — — — — (70) (70)

Data capacity-IRUs acquired — — — — 610 610

Arising on business combinations 109 — 62 — — 171

Disposals of subsidiaries and joint ventures (2) (4) — — — (6)

Translation of foreign operations (180) (5) (32) — 3 (214)


Additions at cost — — 17 2 14 33

Development costs capitalised — — 88 — — 88

Arising on business combinations 38 — — — — 38

Translation of foreign operations (68) — (22) — (76) (166)


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Goodwill

R millions

Customer

relation-

ships

R millions

Trade

names,

designs,

patents and

trademarks

R millions

Proprietary

software,

distribution

rights

and licence

agreements

R millions

Data

capacity-

indefeasible

rights of

use (IRUs)

R millions

Total

R millions

2. INTANGIBLE ASSETS, INCLUDING GOODWILL

(continued)

Accumulated amortisation and

impairment losses

Balance at 28 February 2009 240 107 117 15 — 250

Amortisation for the year — 52 100 4 8 164

Impairment losses 75 — 66 — — 141

Disposals of subsidiaries — (2) — — — (2)

Translation of foreign operations — (3) — — — (3)

Balance at 28 February 2010 315 154 283 19 8 779

Amortisation for the year — 45 116 3 26 190

Impairment losses 276 — 11 — — 287

Translation of foreign operations — — (2) — (2) (4)


Carrying amount at 28 February 2009 1 867 177 365 28 — 2 437

Carrying amount at 28 February 2010 1 719 121 355 24 535 2 754

Carrying amount at 28 February 2011 1 413 76 313 23 449 2 274

Data capacity-indefeasible rights of use (IRUs)

Data capacity IRUs acquired on the Seacom and TEAMS cable networks have been capitalised in accordance with the group

accounting policy. Excess capacity disposed of back to the original vendor in the prior year has been derecognised in

proportion to the original cost.

Distribution rights and licence agreements

The group owns the rights to distribute Xerox equipment in 25 (2010 – 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, which agreement was renewed for a further 10-year period, effective 1 January 2011. 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 calculated

weighted average cost of capital of 17.98% (2010: 17.64%). In determining the future cash flows, management uses the

earnings before interest and tax calculated based on approved budgeted revenue and actual achieved operating margins

to be derived from this asset in the first year, and this is escalated for the next four years by the anticipated CPI of 5%

(2010: 10%). The group’s budgeted profit has historically been in line with actual performance.

Development costs capitalised

Development costs on designs capitalised with a carrying value of R24 million (2010: R46 million) have not yet been

brought into use. Impairment tests were conducted on the carrying values based on forecast contributory cash flows

on the underlying products.





2. INTANGIBLE ASSETS, INCLUDING GOODWILL (continued)

Impairment tests for cash-generating units containing goodwill

The following units have significant carrying amounts of goodwill:

2011

R millions

2010

R millions

Altech West Africa 234 247

Bytes Document Solutions 135 135

CS Holdings 107 107

Bytes Healthcare Solutions 64 64

Bytes Document Solutions UK 27 28

ComTech 30 30

Powertech IST 388 388

Swanib Cables 24 24

Kenya Data Networks, Swift Global (Kenya) and Infocom 86 387

Intelleca — 26

NOR Paper 60 60

Powertech Transformers 69 69

Altech Fleetcall 33 31

Altech Nupay 48 48

Altech Technology Concepts 25 30

Swist Technology Solutions 38 —

Multiple units without significant goodwill 45 45

1 413 1 719

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.

For the purpose of impairment testing, goodwill is allocated to the operating divisions which represent the lowest level

within the group at which the goodwill is monitored for internal management purposes. The impairment tests are prepared

on the basis of forecast profits generated by the underlying cash-generating units.

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 to the cost structure based on business plans.

Discount rates used in the discounted cash flow models are calculated using the principles of the capital asset pricing

model, taking account of current market conditions.

The resulting weighted average cost of capital is then compared to industry and regional averages to ensure

reasonableness. Weighted average cost of capital rates used for the purposes of impairment tests ranged between 7% and

21% (2010: 11% and 18%) at year end. Perpetuity growth rates applied ranged between 2% and 7% (2010: 2% and 5%),

depending on the territory in which the business operates.

Impairment losses

The carrying amounts of the Intelleca and Altech East Africa business units were determined to be higher than their

recoverable amounts, based on value-in-use, and impairment losses of R26 million and R250 million respectively were

recognised, which was fully allocated to goodwill.

Capitalised development costs amounting to R11 million (2010: R65 million) on designs of products that were terminated

or discontinued were impaired during the year.

Useful lives

Useful lives are reflected under accounting policies on page 159.

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GROUP

2011

R millions

2010

R millions

3. ASSOCIATES AND OTHER INVESTMENTS

Associates 10 10

Other investments

Non-current loans receivable at amortised cost

Participation loan to Technologies Acceptances Receivables (Pty) Limited 206 219

Non-current available-for-sale investments at fair value

Preference shares in Technology Acceptances Receivables (Pty) Limited 26 26

Investment in Izingwe Aberdare Cables Investments (Pty) Limited 1 1

Izingwe Aberdare Cables Investments (Pty) Limited – cash on deposit 2 19

235 265

Refer to Annexure 1 for details.

4. RENTAL FINANCE ADVANCES

Assets at amortised cost

Present value of minimum lease payments receivable 104 101

Less: Current portion (note 7) (43) (57)

Non-current finance lease receivable 61 44

Liabilities at amortised cost (included under loans)

Present value of minimum lease payments payable (note 12) 104 101

Less: Current portion (note 12) (43) (57)

Non-current finance lease liability 61 44

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 five years and bear interest at rates linked to the prime bank

overdraft rate. The loans are secured by the underlying equipment sold.

The relationship between gross investment in the lease at the balance sheet date,

and the present value of 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 104 101

Interest receivable 23 16

Future minimum lease payments receivable 127 117





4. RENTAL FINANCE ADVANCES (continued)GROUP

2011

Future

minimum

lease

payments

R millions

2011

Present

value of

minimum

lease

payments

R millions

2010

Future

minimum

lease

payments

R millions

2010

Present

value of

minimum

lease

payments

R millions

Non-derivative financial liabilities

Finance lease liabilities are payable as follows:

Less than 1 year 50 43 67 57

Between 1 and 5 years 77 61 50 44

127 104 117 101

GROUP

2011

R millions

2010

R millions

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 104 101

The maximum exposure to, and concentration of, credit risk for finance lease assets at the reporting date by type of

customer was:

GROUP

2011

R millions

2010

R millions

Parastatals/government 47 43

Corporates 56 58

SMMEs 1 —

104 101

The maximum exposure to, and concentration of, credit risk for finance lease

assets at the reporting date by geographical region was:

South Africa 104 101

All customers are subjected to stringent credit vetting. It is our experience that only large corporates and parastatal/

government departments 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 balance sheet date was 27.74%

(2010: 14.52%) of the total lease book. This is significantly higher than the historical average delinquency ratio of the

lease book and is as a result of two customers being in excess of their terms. The delinquency is as a result of operational

issues within the two customers and specific plans are in place to recover the full outstanding balances on these accounts.

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 18 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 (2010: Rnil).

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4. RENTAL FINANCE ADVANCES (continued)

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:

GROUP

Carrying

amount

R millions

Contractual

cash flows

R millions

6 months

or less

R millions

6 – 12

months

R millions

1 – 2 years

R millions

2 – 5 years

R millions

28 February 2011


Finance lease assets 104 127 30 20 31 46


Finance lease liabilities (104) (127) (30) (20) (31) (46)

28 February 2010


Finance leases assets 101 117 36 31 29 21


Finance lease liabilities (101) (117) (36) (31) (29) (21)

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.

GROUP

2011

R millions

2010

R millions

5. DEFERRED TAXATION

5.1 Deferred taxation movement

Balance at the beginning of the year (25) (66)

Recognised in profit or loss (53) 31

Charged directly in equity — (3)

Acquisitions and disposals of subsidiaries — 21

Translation differences (3) (8)

Balance at the end of the year (81) (25)





GROUP

2011

R millions

2010

R millions

5. DEFERRED TAXATION (continued)

5.2 Deferred taxation balances

Attributable to the following temporary differences recognised at the normal taxation

rate in South Africa of 28% (2010: 28%) or the normal tax rate for foreign

jurisdictions, unless otherwise indicated:

Property, plant and equipment 88 100

Intangible assets 69 110

Construction work in progress (2) (8)

Prepaid expenditure 8 14

Receipts in advance (15) (21)

Receivables (15) (8)

Contract allowances 13 9

Provisions, accruals and allowances (111) (133)

Tax losses (102) (86)

Investments and other 2 5

Share scheme recharge liabilities (6) (8)

Fair value adjustments (at 14%) 1 1

Secondary tax credits (at 10%) (11) —

(81) (25)

The above balance comprises:

Deferred taxation liabilities 121 175

Deferred taxation assets (202) (200)

(81) (25)

Taxation losses

Estimated taxation losses available for set-off against future taxable income 570 423

Applied to reduce deferred taxation (361) (306)

209 117

6. INVENTORIES

Raw materials 820 785

Work in progress 433 357

Finished goods 878 702

Merchandise 174 126

Consumable stores 31 28

2 336 1 998

Inventories carried at cost 2 180 1 820

Inventories carried at net realisable value 156 178

2 336 1 998

page 177

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GROUP

2011

R millions

2010

R millions

7. TRADE AND OTHER RECEIVABLES, INCLUDING DERIVATIVES

Gross trade receivables 3 109 3 088

Less: Allowance for impairment losses (134) (143)

Less: Other allowances (93) (56)

Current portion of rental finance advances (note 4) 43 57

Derivative assets at fair value: used for hedging 10 6

Prepayments 121 90

Loans receivable arising on data capacity IRUs granted/disposed of 97 190

Deposits 30 25

Other receivables 324 308

3 507 3 565

Non-current 134 130

Current 3 373 3 435

3 507 3 565


Gross trade receivables represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

Gross trade receivables 3 109 3 088

The maximum exposure to credit risk for gross trade receivables at the reporting date by type of customer was:

GROUP

2011

R millions

2010

R millions

Parastatals/government 455 563

Corporates 1 843 1 805

SMMEs 562 549

Individuals 249 171

3 109 3 088

The group generally deals with the larger corporates who have a sound credit standing. Collaterals are generally not held for blue chip companies as their payment history does not require it, but collateral is obtained for other entities, or in certain cases credit risk insurance cover, 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 at least annually.

The maximum exposure to credit risk for gross trade receivables at the reporting date by geographical region was:

South Africa 2 175 2 062

Rest of Africa 335 396

Europe 442 491

Rest of world 157 139

3 109 3 088

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.





7. TRADE AND OTHER RECEIVABLES, INCLUDING DERIVATIVES (continued)

Impairment losses

The following table illustrates the relationship between aged debt and the impairment allowance:

GROUP

2011

Gross

R millions

2011

Impairment

allowance

R millions

2010

Gross

R millions

2010

Impairment

allowance

R millions

Not past due 2 202 (6) 2 382 (6)

Past due 0 – 30 days 350 (2) 315 (5)

Past due 31 – 120 days 225 (18) 196 (44)

Past due 121 – 365 days 189 (41) 106 (27)

Past due 365 + days 143 (67) 89 (61)

3 109 (134) 3 088 (143)

Listings of overdue customer balances are reviewed monthly and reviewed against their credit terms/limits.

Customers 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:

GROUP

2011

R millions

2010

R millions

Balance at the beginning of the year 143 168

Impairment loss recognised 58 68

Allowance utilised (67) (93)

Balance as at the end of the year 134 143

Currency risk

Currency risk positions are reflected in note 29.

Derivative assets at fair value

Derivative assets at fair value include:

Forward exchange contracts used for hedging

– Fair value hedge 10 4

– Cash flow hedge — 1

Commodity forward contracts — 1

Credit risk on derivative assets 10 6

The group limits its exposure to credit risk by only entering into forward contracts with counterparties that have a sound

credit rating.

Given these high credit ratings, management does not expect any counterparty to fail to meet its obligations.

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7. TRADE AND OTHER RECEIVABLES, INCLUDING DERIVATIVES (continued)

Loans receivable arising on data capacity IRUs granted/disposed of

GROUP

2011

Future

minimum IRU

instalments

R millions

2011

Present

value of

minimum IRU

instalments

R millions

2010

Future

minimum IRU

instalments

R millions

2010

Present

value of

minimum IRU

instalments

R millions

Less than one year 42 42 77 60

Between one and five years 56 55 133 130

98 97 210 190

There were no instalments in arrears or default indicators at year end and accordingly there was no impairment allowance.

GROUP

2011

R millions

2010

R millions

8. CASH AND CASH EQUIVALENTS

Cash at banks 1 248 1 138

Cash floats 133 117

1 381 1 255

Bank overdrafts (128) (81)

Net cash and cash equivalents per the statement of cash flows 1 253 1 174

Credit risk

The group limits its credit risk exposure by investing only with financial institutions that have a sound credit rating.

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 29.

GROUP AND COMPANY

2011Number

of shares

2010

Number

of shares2011

R millions

2010

R millions

9. SHARE CAPITAL AND PREMIUM

9.1 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



GROUP AND COMPANY

2011

Number

of shares

2010

Number

of shares

2011

R millions

2010

R millions

9. SHARE CAPITAL AND PREMIUM (continued)

9.2 Issued

Ordinary shares

In issue 105 669 131 105 669 131 2 2

Less: Own shares acquired by subsidiary (3 246 469) (3 246 469)

Net ordinary shares 102 422 662 102 422 662

Participating preference shares

In issue at the beginning of the year 240 694 679 239 657 739 — —

Issued in terms of share schemes 468 293 1 036 940

In issue at the end of the year 241 162 972 240 694 679 — —

Less: Own shares acquired by subsidiary (27 704 013) (27 704 013)

Net participating preference shares 213 458 959 212 990 666

Total number of shares in issue at the end of the

year, net of own shares acquired 315 881 621 315 413 328

9.3 Share premium

Balance at the beginning of the year 2 234 2 226

Share premium arising from the issue of shares in terms of share schemes 5 8

Balance at the end of the year 2 239 2 234

9.4 Total issued share capital and premium 2 241 2 236

9.5 Treasury shares

Ordinary and participating preference shares acquired by subsidiary at cost 299 299

GROUP AND COMPANY

2011

Number of

shares

2010

Number of

shares

9.6 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 136 983 014 136 983 014

141 830 869 141 830 869


Shares reserved to meet the requirements of:

Conditional Rights Scheme 7 043 888 9 127 481

Allied Electronics Corporation Share Trust 4 260 43 456

Altron Group Share Incentive Trust 173 898 325 448

Share appreciation rights 3 443 861 1 936 823

Performance share awards 441 418 229 210

Bonus share grants 893 420 453 909

Shares reserved for allocation under employee share schemes 25 811 377 26 164 088

Shares under the control of the directors until the forthcoming annual general meeting 221 024 906 221 024 906

258 837 028 259 305 321

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.



page 181

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9.6 Unissued (continued)

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 121).

Treasury shares

The directors will seek to obtain a general authority to repurchase shares of the company not exceeding 5% of the

company’s ordinary and/or participating preference issued share capital in any one financial year at the next annual

general meeting.

9.7 Employee share options – participating preference shares

Conditional

Rights

Scheme

Allied

Electronics

Corporation

Share Trust

Altron

Group

Share

Incentive

Trust

Share

apprecia-

tion rights

Per-

formance

share

awards

Bonus

share

grants

Total share

options

Number of options allocated

at 28 February 2009 10 285 152 338 008 1 176 065 — — — 11 799 225

Number of options granted — — — 1 936 823 229 210 453 909 2 619 942

Number of options lapsed/

forfeited/reinstated (511 326) — (26 783) — — — (538 109)

Number of options

exercised (646 345) (294 552) (823 834) — — — (1 764 731)

Number of options

allocated at

28 February 2010 9 127 481 43 456 325 448 1 936 823 229 210 453 909 12 116 327

Number of options granted — — — 1 641 053 224 607 468 330 2 333 990

Number of options lapsed/

forfeited/reinstated (1 726 878) (7 488) 21 783 (134 015) (12 399) (28 819) (1 887 816)

Number of options

exercised (356 715) (31 708) (173 333) — — — (561 756)

Number of options allocated at 28 February 2011 7 043 888 4 260 173 898 3 443 861 441 418 893 420 12 000 745

Of the 561 756 (2010: 1 764 731) options exercised, 356 715 (2010: 646 345) relate to conditional rights exercised.

Conditional rights are net settled and as a result only 55 901 (2010: 125 905) shares were issued in satisfaction of those

conditional rights. 207 351 options were exercised at the end of the prior year and the resulting shares were listed during

the current financial year.




9.8 The Altron Group Share Incentive Trust, Allied Electronics Corporation Share Trust, the Conditional Rights Scheme and

the Altron 2009 Share Plan

The details of options outstanding at the financial year end are as follows:

Date

granted

Exercise

price per

share

Allied

Electronics

Corporation

Share Trust

Altron

Group

Share

Incentive

Trust

Conditional

Rights

Scheme

Share

appreciation

rights

Per-

formance

share

awards

Bonus

share

grants

10 April 2001 R7.00 4 260

The following options are subject to IFRS 2:

9 February 2006 R22.50 1 974 909

13 June 2006 R23.50 137 334

23 November 2006 R30.75 533 779

14 January 2008 R12.80 173 898

14 January 2008 R26.54 1 358 745

4 February 2008 R36.10 403 330

25 February 2008 R35.00 448 625

27 February 2008 R35.00 1 344 054

28 February 2008 R35.50 714 322

28 July 2008 R34.50 88 790

11 February 2009 R21.50 40 000

1 December 2009 R0.00 425 090

1 December 2009 R0.00 216 811

1 December 2009 R25.50 1 802 808

14 January 2011 R26.61 1 641 053

14 January 2011 R0.00 224 607

14 January 2011 R0.00 468 330

4 260 173 898 7 043 888 3 443 861 441 418 893 420

Terms of schemes

Allied Electronics Corporation Share Trust

The Allied Electronics Corporation Share Trust is a 10-year scheme and is currently in run-off where the last of the options

so granted are exercisable in May 2011. It had a vesting period of three years from initial date of grant before the options

could be exercised.

Altron Group Share Incentive Trust

The Altron Group Share Incentive Trust was a six-year scheme and is currently in run-off. The vesting period was three years

from initial date of grant whereafter the options could be exercised in equal tranches over a three-year period.

The Conditional Rights Scheme

Under the Conditional Rights Scheme, participants were 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. This scheme is currently in run-off.



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9.8 The Altron Group Share Incentive Trust, Allied Electronics Corporation Share Trust, the Conditional Rights Scheme and

the Altron 2009 Share Plan (continued)

Altron 2009 Share Plan

The new share plan was approved by the shareholders in the general meeting on 11 May 2009. It comprises three elements

as follows:

Share appreciation rights

These grant participants rights to acquire shares subject to meeting future performance vesting conditions. Vesting occurs

in equal tranches over a three-year period commencing on the third anniversary of the grant, subject to meeting the vesting

conditions.

Performance share awards

Performance shares award participants with shares subject to meeting future performance vesting conditions. These rights

vest and are exercised three years from the award date to the extent that the performance criteria have been met. Up

to three times the number of rights may be awarded in shares. The full value of all the vested performance shares will be

settled to the participants in shares as the exercise price is Rnil per share.

Bonus share grants

The bonus share scheme is a three-year scheme. The vesting period is three years from the initial date of the grant provided

that the participants are still in the employ of the company.

Participants will receive a grant that match, according to a specified ratio, a portion of the participants’ annual performance bonus.

The full value of the vested bonus shares will be settled to the participants in shares as the exercise price per share is Rnil per share.

Please refer to the remuneration report for more details of the schemes and options held by directors.

9.9 Share-based payments

The number and weighted average exercise prices of share options accounted for under IFRS 2 are as follows:

Weighted average

exercise priceRand2011

Numberof options

(000s)2011

Weighted average

exercise priceRand2010

Numberof options

(000s)2010

Altech

Outstanding at the beginning of the year 50.59 1 908 50.79 2 939

Forfeited during the year 49.54 (609) 52.22 (1 350)

Exercised during the year 44.07 (84) 45.10 (487)

Granted during the year 57.00 737 56.20 806

Outstanding at the end of the year 53.62 1 952 50.59 1 908

Exercisable at the end of the year 325 682

The weighted average market price on exercised options was R64.88 (2010: R63.84).

Exercise prices on outstanding options at the end of the period ranged from Rnil to R57.75 (2010: Rnil to R57.75).

The weighted average remaining period to vesting on outstanding options at the end of the period was 33 months

(2010: 23 months).




9.9 Share-based payments (continued)

Weighted

average

exercise price

Rand

2011

Number

of options

(000s)

2011

Weighted

average

exercise price

Rand

2010

Number

of options

(000s)

2010

Altron

Outstanding at the beginning of the year 27.00 12 073 27.08 11 456

Options lapsed/forfeited/reinstated 29.81 (1 881) 22.96 (538)

Exercised during the year 19.63 (530) 11.86 (1 465)

Granted during the year 18.71 2 334 18.85 2 620

Outstanding at the end of the year 24.89 11 996 27.00 12 073

Exercisable at the end of the year 5 332 3 160

The weighted average market price on exercised options was R26.90 (2010: R26.43).

Exercise prices on outstanding options at the end of the period ranged from Rnil to R36.10 (2010: Rnil to R36.10).

The weighted average remaining period to vesting on outstanding options at the end of the period was 20 months

(2010: 23 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 for all

options except for the performance share options which are valued using the Monte Carlo valuation model. Up until 2007,

options were assumed to be exercised midway between the vesting date and the expiry date. Subsequently, evidence

indicated 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 options granted to key management and senior employees. Bonus and

performance share awards vest entirely and are exercised after three years.



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9.9 Share-based payments (continued)

Fair value and assumptions of outstanding share options

Fair value at grant date:

Bonus and

performance

shares

Altech

Share

appreciation

rights

Altech

Share

appreciation

rights

Altron

Bonus and

performance

shares

Altron

2011

Fair value at grant date (Rand) 47.61 9.28 7.08 – 8.64 24.04

Share price (Rand) 57.00 57.00 26.61 26.61

Exercise price (Rand) — 57.00 26.61 —

Expected volatility (%) 21.22 21.22 34.97 – 36.19 36.19

Option life (years) 3 3 – 5 3 – 5 3

Dividend yield (%) 6.00 6.00 3.38 3.38

Risk-free interest rate (%) 7.15 7.15 7.53 7.53

2010

Fair value at grant date (Rand) 49.1 13.77 6.12 – 6.71 22.17

Share price (Rand) 56.20 56.20 25.50 25.50

Exercise price (Rand) — 56.20 25.50 —

Expected volatility (%) 30.00 30.00 30.20 – 34.66 34.66

Option life (years) 3 3 – 5 3 – 5 3

Dividend yield (%) 4.50 4.50 4.67 4.67

Risk-free interest rate (%) 5.14 5.14 8.06 – 8.23 8.06

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.

The new share appreciation rights scheme includes both a service condition and a non-market performance condition.

The performance share awards include a service condition, non-market performance and a market condition.

The non-market performance conditions are not taken into account in the grant date fair value measurement of the service

received. The market condition on the performance share awards is fair valued with reference to the expected mean total

shareholder return performance.

GROUP

2011

R millions

2010

R millions

Employee expenses

Equity-settled share schemes 14 16

Cash-settled share appreciation rights — 2

Total expense recognised as employee costs 14 18



GROUP

2011

R millions

2010

R millions

10. RESERVES

10.1 Retained earnings 4 325 4 067

Are distributable and would be subject to secondary tax on companies.

10.2 Foreign currency translation reserve (228) (60)

Comprises all foreign exchange differences arising from the translation of the financial

statements of foreign operations.

10.3 Premium/discount on non-controlling equity transactions (1 228) (1 442)

Comprises the premium or discount on the subsequent purchase or sale of equity

instruments in existing subsidiaries where there is no resulting change in control.

10.4 Cash flow hedging reserve — (7)

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.

10.5 Share-based payments reserve 92 78

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.

10.6 Statutory reserves 95 95

Comprises the capital redemption reserve funds as well as legal reserves of a foreign

subsidiary.

10.7 Fair value reserve 77 77

Comprises the cumulative net change in the fair value of available-for-sale investments,

net of deferred taxation, until the investment is derecognised and the fair value

adjustment of non-controlling equity instruments in business combinations achieved in

stages.

Total reserves 3 133 2 808



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11. B-BBEE TRANSACTIONS

The group has entered into the following material B-BBEE transactions:

11.1 Powertech group – Aberdare Cables (Pty) Limited (Aberdare) – Izingwe Aberdare Cables Investments (Pty) Limited

(Izingwe Aberdare Cables)

In 2004, 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 which only fall away

when the preference shares have been fully repaid.

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 to note 13).

During a previous financial year, Powertech acquired a 10% equity interest in Izingwe Aberdare Cables for R1.3 million

following the exit of one of the B-BBEE consortium shareholders (refer to Annexure 1). A diluted headline earnings

adjustment of R9 million (2010: R3 million) has been calculated based on the recognition of the net 27% (90% of 30%)

non-controlling interest with settlement of the outstanding purchase price of R87 million (comprising the empowerment

funding obligation net of excess cash deposits of R2 million) adjusted for the dilutive effect of the option price at the

Aberdare level (refer to note 25.4).

11.2 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% non-

controlling interest has been fully recognised as there are no conditional terms to their ownership of the shares. As

Powertech SA incurred losses in previous years, there was no attribution of the cumulative loss to the non-controlling

interest in previous years.

However, with the adoption of IAS 27 – Consolidated and Separate Financial Statements (2008) by the group in the current

year, losses were attributed to the non-controlling interests in the current year.

11.3 Powertech group – Powertech Transformers (Pty) Limited (Powertech Transformers) – Power Matla (Pty) Limited

(Power Matla)

Power Matla previously owned a 25.1% stake in Desta Power Matla (Pty) Limited, with the remaining 74.9% being owned

by Powertech Transformers. Following Powertech’s acquisition of the 50% stake in Powertech Transformers previously

owned by ABB, Power Matla moved its shareholding up to the Powertech Transformers level. Effective 1 March 2009, Power

Matla swapped its 25.1% stake in Desta Power Matla for a 16.77% stake in Powertech Transformers, based on market

valuations of both entities.

At the same time, Power Matla acquired a further 3.23% stake in Powertech Transformers for R25 million, thereby

increasing their stake to 20%. Since the transactions were completed at fair value and settled in cash, no IFRS 2 charge

arose and the transaction and the relevant non-controlling interests have been fully recognised.



11. B-BBEE TRANSACTIONS (continued)

11.4 Bytes group – Bytes Technology Group South Africa (Pty) Limited (Bytes SA) – Kagiso Strategic Investments

(Pty) Limited (Kagiso)

In 2004, Bytes entered into an agreement with Kagiso to dispose of 5% of its equity interest in Bytes SA for a cash

consideration fully funded by Kagiso and granted an option to Kagiso to acquire a further 22% equity interest in Bytes

SA for R198 million. On 1 July 2009, Kagiso exercised its option over the 22% equity interest, following which Bytes

SA performed a capital reduction of R198 million. This reduced the funding obligation associated with the exercise to

R154 million, which was met through the issue of perpetual, non-cumulative preference shares to a financial institution,

secured by a put option provided by Altron to the financial institution.

At a Bytes level the non-controlling interests are fully recognised, however, at an Altron group level the special-purpose

vehicle in which the 22% equity interest is housed is consolidated in accordance with SIC 12 – Consolidation of Special-

Purpose Entities. However, because there is no obligation to declare dividends or capital repayments on the preference

shares, these are classified as equity and therefore as non-controlling interests in the group accounts. Under accounting

rules, the quantum of non-controlling interest recognised is the greater of 22% of Bytes SA’s net asset value or the

outstanding preference share capital and dividend receivable. In the current year the former was greater and so the full

non-controlling interest of R220 million (2010: limited to outstanding preference share capital and dividend receivable of

R159 million) has been recognised. While the preference share obligation was recognised as the non-controlling interest,

the earnings attributable to non-controlling interests were limited to the dividend receivable on the preference shares for

the year, being R4 million for the four months in the current year during which the outstanding preference share capital

and dividend receivable were greater than the 22% of Bytes SA’s net asset value (2010: R12 million for the 12 months).

This resulted in R11 million of Bytes SA headline earnings and R11 million of Bytes SA earnings (after capital items) being

re-recognised as earnings attributable to equity holders at the Altron group level, during the first four months of the

financial year. For the remaining eight months of the year the non-controlling interest was allocated their full 22% share

of earnings and headline earnings. The put option is valued at each balance sheet date and is reflected as a R0.1 million

(2010: R0.4 million) derivative liability on the balance sheet at 28 February 2011.

11.5 Altech group – Altech Netstar Group (Pty) Limited – Thebe Investment Corporation (Pty) Limited and Identity Capital

Partners (Pty) Limited

In December 2010, the Altech group entered into an empowerment transaction where Thebe Investment Corporation (Pty)

Limited and Identity Capital Partners (Pty) Limited acquired a 25% plus one share shareholding in the Altech Netstar group.

The transaction as announced in the 2010 annual report as a post-balance sheet event was restructured to enable vendor

funding for the empowerment shareholders. This 25.1% non-controlling interest has been fully recognised as there are no

conditional terms to their ownership of the shares. The related IFRS 2 charge accounted for in profit and loss in the current

financial year was R7 million. As part of the vendor funding arrangement, Altech Netstar declared a dividend equal to the

fair value of the Netstar businesses to Altech. As a result, the B-BBEE partners paid no consideration for the 25.1% stake,

however, the entity in which they invested had negative equity amounting to R1.38 billion. In line with group accounting

policies and IAS 27, this resulted in a premium on the introduction of the non-controlling interest which was recognised

directly in equity.



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GROUP

2011R millions

2010 R millions

12. LOANS

12.1 Non-current loans

Loans at amortised cost

Rental finance liabilities (note 4) 104 101

Finance lease liabilities 59 100

Secured bank loans 77 112

Secured vendor loans 89 122

Unsecured bank loans 612 672

Data capacity IRU outstanding consideration 193 363

Deferred purchase considerations 20 54

Loans from non-controlling interests 85 13

1 239 1 537

Less: Payable within one year shown as current loans (481) (937)

Total non-current loans 758 600

12.2 Current loans

Current portion of loans at amortised cost

Current portion of rental finance liabilities (note 4) 43 57

Current portion of finance lease liabilities 28 36

Current portion of secured bank loans 52 53

Current portion of secured vendor loans 44 21

Current portion of unsecured bank loans 210 582

Current portion of data capacity IRU outstanding consideration 94 134

Current portion of deferred purchase considerations 10 54

Current portion of long-term loans 481 937





12. LOANS (continued)

Terms and debt repayment schedule

The terms and conditions of outstanding loans were as follows:

28 February 2011 28 February 2010

CurrencyNominal interest rate

Year of maturity

Face valueR millions

Carrying value

R millionsFace valueR millions

Carrying value

R millions

Secured

Rental finance

liabilities ZAR 8.9% – 24.56% 2017 127 104 117 101

Finance lease liabilities ZAR Linked to prime 2014 69 59 120 100

Secured bank loans ZAR 9.0% 2016 40 28 34 34

Secured bank loans ZAR Prime – 1.75% 2012 40 34 70 64

Secured bank loans KES 14.0% 2011 — — 7 7

Secured bank loans NGN Nigerian prime 2013 15 15 7 7

Secured vendor loan EUR EURIBOR + 2% 2013 31 31 41 41

Secured vendor loan EUR EURIBOR + 1% 2013 58 58 81 81

Unsecured

Unsecured bank loans EUR EURIBOR + 0.75% 2012 33 33 18 18

Unsecured bank loans ZAR JIBAR + 1.75% 2013 100 100 — —

Unsecured bank loans ZAR JIBAR + 1.5% 2012 300 300 500 500



Unsecured bank loans ZAR JIBAR + 1.75% 2012 100 100 — —

Unsecured bank loans USD 90 days LIBOR + 5% 2011 2 2 — —

Loans from non-

controlling interests ZAR 9.0% 2013 9 9 13 13

Loans from non-

controlling interests USD Interest free No fixed term 76 76 — —

Data capacity

IRU outstanding

consideration USD 2%* 2014 195 193 376 363

Deferred purchase

consideration ZAR 10%* 2011 22 20 54 54

1 294 1 239 1 592 1 537

*Historical imputed discount rate.

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Security

Bank loans are secured by property, plant and equipment with a book value of R222 million (2010: R332 million) and

current assets with a book value of R6 million (2010: R121 million).

Finance lease liabilities are secured by equipment with a book value of R50 million (2010: R102 million).

Rental finance liabilities are matched by reciprocal rental finance receivables (refer to note 4).


Future minimum

lease payments R millions

Present value of minimum


Future minimum


Present value of minimum


Finance lease liabilities

Finance lease liabilities are payable as follows:


Between 1 – 5 years 40 31 72 61

69 59 120 100

Data capacity IRU outstanding consideration

Data capacity IRU outstanding consideration is

payable as follows:


Between 1 – 5 years 101 99 242 229

195 193 376 363






Liquidity risk

The following are the contractual maturities of financial liabilities, including interest payments and excluding the impact of

netting agreements:

28 February 2011 Currency

Carryingamount

R millions

Contrac-tual

cash flowsR 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

Non-derivative

financial liabilities

Rental finance

liabilities ZAR 104 127 30 20 31 46 —

Finance leases ZAR 59 69 14 15 28 12 —

Secured bank loan ZAR 28 35 3 3 12 17 —

Secured bank loan ZAR 34 34 17 17 — — —

Secured bank loan NGN 15 15 12 3 — — —

Secured vendor loan EUR 31 37 4 16 11 6 —

Secured vendor loan EUR 58 68 8 29 20 11 —

Unsecured bank loan ZAR 100 120 4 4 8 104 —

Unsecured bank loan EUR 33 33 33 — — — —

Unsecured bank loan ZAR 300 333 11 11 311 — —

Unsecured bank loan ZAR 38 40 20 20 — — —



Unsecured bank loan USD 2 3 1 2 — — —

Data capacity

IRU outstanding

consideration USD 193 195 — 87 65 43 —

Loans from non-

controlling interests USD 76 — — — — — —

Loans from non-

controlling interests ZAR 9 11 — 4 3 4 —

Deferred purchase

consideration ZAR 20 22 10 — 2 10 —

1 239 1 289 284 268 486 251 —

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28 February 2010 Currency

Carrying

amount

R millions

Contrac-

tual

cash flows

R millions

6 months

or less

R millions

6 – 12

months

R millions

1 – 2

years

R millions

2 – 5

years

R millions

More than

5 years

R millions

Non-derivative

financial liabilities

Rental finance

liabilities ZAR 101 117 36 31 29 21 —

Finance leases ZAR 100 120 24 24 41 31 —

Secured bank loan ZAR 34 44 1 1 12 19 11

Secured bank loan ZAR 64 70 17 17 36 — —

Secured bank loan NGN 7 7 7 — — — —

Secured bank loan KES 7 8 — 8 — — —

Secured vendor loan EUR 41 49 — 12 12 25 —

Secured vendor loan EUR 81 91 — 22 22 47 —


Unsecured bank loan EUR 18 18 18 — — — —

Unsecured bank loan ZAR — — — — — — —



Data capacity

IRU outstanding

consideration USD 363 376 — 134 134 108 —

Deferred purchase

consideration ZAR 54 60 30 30 — — —

Loans from non-

controlling interests ZAR 13 19 — — 8 11 —

1 537 1 669 188 833 375 262 11






Interest rate risk

Profile

At the balance sheet date the interest rate profile of the group’s interest-bearing loans was:Carrying amount

2011R millions

2010R millions

Variable-rate instruments

Financial liabilities

ZAR 802 952

NGN 15 7

Euro 122 141

KES — 7

USD 2 —

941 1 107

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 currency rates, remain constant. The analysis is performed on the same basis for 2010.

Profit or loss

100 bp increase

100 bp decrease

28 February 2011

Variable-rate loans (9) 9

28 February 2010

Variable-rate loans (11) 11

Currency risk

The principal and interest on certain borrowings is denominated in currencies that match the functional currencies of the

underlying operations of the group, including USD, euro and NGN. Accordingly, currency risk does not arise from these

financial instruments.

Currency risk positions on borrowings that do not match the functional currencies of the underlying operations of the group,

primarily euro-denominated borrowings in Altech East Africa, are reflected in note 29.

2011R millions

2010 R millions

Borrowing facilities

In terms of the articles of association, the borrowing powers of the group are unlimited.

Unutilised banking facilities 2 543 2 827

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2011R millions

2010 R millions

13. EMPOWERMENT FUNDING OBLIGATION

At amortised cost

Opening balance 101 112

Interest accrued 9 9

Repayments (21) (20)

89 101

Current portion (17) (12)

72 89

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

Contrac-tual cash

flowsR 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

28 February 2011 Rand 89 104 11 14 30 49 —

28 February 2010 Rand 101 125 10 11 25 79 —

Interest rate risk

The dividends on the preference shares bear an indicative dividend rate of 9.61% (2010: 9.61%). This interest rate has

been fixed for the period of the funding and is not subject to variation as market rates alter.

14. PROVISIONS

Contractlosses

R millions

Retrench-ments and

restructuring costs

R millions

Warrantiesand fault

rectificationR millions

Post- retirementmedical aid

benefitsR millions

TotalR millions

Non-current provisions — — 25 9 34

Current portion included in current liabilities 44 20 102 — 166

Total provisions at 28 February 2010 44 20 127 9 200

Provisions raised during the year 18 — 11 — 29

Provisions utilised/released during the year (3) (15) (23) (1) (42)

Total provisions at 28 February 2011 59 5 115 8 187

Non-current provisions — — 15 8 23

Current provision included in current liabilities 59 5 100 — 164

59 5 115 8 187

Refer to accounting policies for a description of provisions.





2011R millions

2010 R millions

15. TRADE AND OTHER PAYABLES, INCLUDING DERIVATIVES

Trade payables 3 481 3 228

Derivative liability at fair value: used for hedging 23 35

Payroll liabilities 162 136

VAT accrual 28 15

Deferred income (note 17) 9 5

Receipts in advance 346 389

4 049 3 808

(a) Trade payables

Management of liquidity risk

The group has negotiated favourable credit terms with suppliers, which enables 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 29).

Interest rate risk

The group has no material exposure to interest rate 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.

Estimate of when revenues are expected to be earned on these receipts:

Carrying

amounts

R millions

6 months

or less

R millions

6 – 12

months

R millions

1 – 2 years

R millions

2 – 5 years

R millions

28 February 2011 346 255 60 26 5

28 February 2010 389 323 36 21 9

2011R millions

2010 R millions

(c) Derivative liability at fair value

Derivative liability at fair value includes:

Forward exchange contracts used for fair value hedging 22 26

Interest rate swaps used for cash flow hedging — 8

Commodity forward contracts 1 1

23 35

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16. 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% (2010: 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 R185 million (2010: R200 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 R30 million (2010: R42 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. Furthermore, upon retirement, any member 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, are 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.

Defined benefit plans

2011R millions

2010 R millions

16.1 Value of obligations

Fair value of plan assets 3 183 2 881

Present value of funded obligations (3 131) (2 826)

Surplus 52 55

Unrecognised actuarial gains (55) (62)

Liability recognised in the balance sheet (3) (7)

16.2 Components of current year expense

Current service cost (73) (61)

Interest cost (240) (222)

Expected return on plan assets (limited by paragraph 58) 258 217

(55) (66)

16.3 Reconciliation of unrecognised actuarial (gain)/loss

Unrecognised actuarial (gain)/loss at the beginning of the year (62) 180

Actuarial loss on liabilities 165 95

Actuarial gain on assets (158) (337)

Unrecognised actuarial gain at the end of the year (55) (62)





16. RETIREMENT BENEFIT PLANS (continued)

Defined benefit plans (continued)

2011R millions

2010 R millions

16.4 Reconciliation of defined benefit obligation

Projected defined benefit obligation at the beginning of the year 2 826 2 615

Service cost 73 61

Interest cost 240 222

Benefits paid (233) (205)

Employee contributions to defined contribution fund credits subject to defined

benefit underpin 11 11

Transfers from defined contribution fund 49 27

Actuarial loss 165 95

Defined benefit obligation at the end of the year 3 131 2 826

16.5 Reconciliation of fair value of plan assets

Assets at market value at the beginning of the year 2 881 2 435

Expected return on assets 258 217

Contributions due 70 70

Benefits paid (233) (205)

Transfers from defined contribution fund 49 27

Actuarial gain 158 337

3 183 2 881

Plan assets comprise:

Local equities (%) 43 61

Bonds (%) 31 18

International equities (%) 16 21

Cash and other (%) 10 —

16.6 Expected 2012 expense

Service cost 73

Interest cost 266

Expected return on assets (284)

Paragraph 58 limit 16

Net periodic defined benefit pension expense 71

In performing the actuarial calculation, the fund credits of defined contribution members with minimum benefits have been

presented as part of the defined benefit asset and liability analysis presented above in order to better reflect the defined

benefit effects of such arrangements. The comparative actuarial analysis was performed on the same basis.

Unrecognised actuarial gains/losses were within the 10% corridor margin and accordingly no amortisation of the loss

has been recognised. The Pension Funds Act, 1956, as amended, and the rules of the fund preclude the group from

accessing the benefit of any surplus assets without the specific consent of the trustees of the fund in the form of employer

contribution holidays. Accordingly, the surplus was not recognised on the group’s balance sheet.

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16. RETIREMENT BENEFIT PLANS (continued)

Defined benefit plans (continued)

2011%

2010%

16.7 Principal actuarial assumptions

Discount rate 8.90 8.90

Inflation rate 5.40 5.40

Salary increase rate 6.40 6.40

Expected return on assets 9.08 8.85

Pension increase allowance 3.71 3.71

Actual return on the Altron Group Pension Fund 15.50 24.00

16.8 Historical information

2011R millions

2010

R millions

2009

R millions

2008

R millions

2007

R millions

Fair value of plan assets 3 183 2 881 2 435 2 228 2 084

Present value of funded obligations (3 131) (2 826) (2 615) (2 101) (1 983)

Actuarial gain/(loss) on plan assets 158 337 (1 092) 45 300

Actuarial (loss)/gain on liabilities (165) (95) 780 39 (730)

17. DEFERRED INCOME

Deferred income consists of the unconditional proceeds arising from contractual indefeasible rights of use (IRUs)

of specified data capacity on cable networks owned by the group granted to third parties for a specified term.

The IRU proceeds are recognised as income on a straight-line basis over the term of the underlying IRU contract.

2011R millions

2010

R millions

Deferred income from IRUs granted on owned networks 55 101

Current portion (note 15) (9) (5)

Non-current portion 46 96

Certain terms of the underlying IRU contract were renegotiated in the current year.

18. REVENUE

Goods sold 14 111 13 868

Services rendered 8 617 8 401

Rental finance income 82 67

22 810 22 336





GROUP

2011

R millions

2010

R millions

19. OPERATING PROFIT BEFORE CAPITAL ITEMS

Is stated after taking account of the following items:

19.1 Auditors’ remuneration

Audit fees 28 31

Fees for other services 2 2

30 33

19.2 Directors’ remuneration

Refer to remuneration report on pages 131 to 134 30 37

19.3 Employee remuneration (including directors’ remuneration)

Salaries and wages 3 473 3 320

Share-based payments – equity settled (note 9.9) 14 16

Share-based payments – cash settled (note 9.9) — 2

Retirement and provident funds 215 242

3 702 3 580

19.4 Fees paid

Managerial fees 37 45

Technical, consultancy and administration 193 142

230 187

19.5 Foreign exchange losses/(gains)

Gains (94) (71)

Losses 120 128

Forward exchange contracts fair value adjustments 10 34

36 91

Being:

Realised 29 59

Unrealised 7 32

19.6 Net (decrease)/increase in provisions (note 14) (13) 17

19.7 Operating lease charges

Property 198 166

Plant, equipment and vehicles 44 50

Effect of straight-lining of leases 1 (1)

243 215

19.8 Research and development expenditure 95 81

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GROUP

2011

R millions

2010

R millions

20. CAPITAL ITEMS

Impairment of goodwill (276) (75)

Impairment of intangibles (11) (66)

Net gain on disposal of property, plant and equipment 10 12

Impairment of property, plant and equipment (14) —

Release of foreign currency translation surplus on disposal — 3

Net loss on disposal of businesses (note 37) — (2)

Gain on disposal of intangible assets — 23

(291) (105)

21. FINANCIAL INCOME

Recognised in profit or loss

Interest income on financial assets carried at amortised cost 64 84

Dividend income on available-for-sale financial assets — 3

64 87

Recognised directly in equity

Net effective portion of change in fair value of cash flow hedges 9 8

9 8

Recognised in:

Hedging reserve 9 8

9 8

22. FINANCIAL EXPENSE

Recognised in profit or loss

Interest expense on financial liabilities measured at amortised cost 163 150

Change in fair value of cash flow hedges transferred from equity — 13

163 163

Recognised directly in equity

Net change in fair value of available-for-sale financial assets — 2

Foreign currency translation differences in respect of foreign operations 312 432

Release of foreign currency translation surplus on disposal — 3

312 437

Recognised in:

Fair value reserve — 2

Translation reserve 168 274


312 437





GROUP

2011

R millions

2010

R millions

23. SHARE OF PROFITS FROM ASSOCIATES

Attributable earnings 2 2

24. TAXATION

24.1 Taxation charge

Current year

– normal tax 451 422

– deferred tax (39) 5

– capital gains tax — 3

Adjustment to prior years

– normal tax (19) (44)


390 401

Secondary tax on companies

– normal tax 58 45


Income tax expense 437 457

24.2 Reconciliation of effective tax rate % %

South African normal tax rate 28.0 28.0

Adjusted for:

Disallowable expenditure 4.2 3.7

Goodwill impaired and adjusted 6.8 1.6

Non-taxable income (1.2) (1.7)

Capital gains tax rate differential — (0.2)

Foreign tax rate differential (0.2) (0.7)

Withholding tax credits not allowed 1.1 —

Income from associates (0.1) —

Temporary differences and tax losses not recognised 0.1 2.5

Utilisation of tax losses (1.9) —

Temporary differences recognised in tax holiday jurisdiction (0.5) —

Prior year adjustments (1.9) (2.2)

6.4 3.0

Secondary tax on companies 4.1 4.3

Net increase 10.5 7.3

Effective tax rate 38.5 35.3

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25. EARNINGS PER SHARE

25.1 Reconciliation between earnings and headline earnings

GROUP

2011 2010

GrossR millions

Net of tax and non-

controlling interest

R millionsGross

R millions

Net of tax and non-

controlling interest

R millions

Earnings attributable to Altron equity holders 542 543

Adjustments for:

Impairment of goodwill 276 172 75 75

Release of foreign currency translation surplus on disposal — — (3) (3)

Impairment of intangibles 11 5 66 29

Net loss on disposal of businesses — — 2 1

Gain on disposal of intangibles — — (23) (9)

Net gain on disposal of property, plant and equipment (10) (6) (12) (11)

Impairment of property, plant and equipment 14 6 — —

Headline earnings 719 625

Headline earnings per share (cents) 228 198

GROUP

2011Number of

shares

2010 Number of

shares

25.2 Reconciliation of weighted average number of shares

Issued shares at the beginning of the year (ordinary and participating preference shares) 346 363 810 345 326 870

Effect of own shares held at the beginning of the year (30 950 482) (30 950 482)

Effect of shares issued in March 207 351 —

Effect of shares issued in May 41 539 —

Effect of shares issued in June 69 277 386 008

Effect of shares issued in July — 95 275

Effect of shares issued in August 26 849 60 963

Effect of shares issued in September 10 504 —

Effect of shares issued in November 8 716 —

Effect of shares issued in December 625 —

Effect of shares issued in January — 33 984

Effect of shares issued in February 129 —

Weighted average number of shares 315 778 318 314 952 618





GROUP

2011Number of

shares

2010 Number of

shares

25. EARNINGS PER SHARE (continued)

25.3 Reconciliation between number of shares used for earnings per share

and diluted earnings per share

Weighted average number of shares 315 778 318 314 952 618

Dilutive options 1 219 114 616 197

Weighted average number of shares (diluted) 316 997 432 315 568 815

R millions R millions

25.4 Reconciliation between earnings attributable to Altron equity holders

and fully diluted earnings are as follows:

Earnings attributable to Altron equity holders 542 543

Dilutive earnings attributable to B-BBEE non-controlling interests in subsidiaries (9) (5)

Additional earnings attributable to dilutive options at subsidiary level (3) (8)

Non-controlling interest in adjustments 1 3

Fully diluted earnings 531 533

25.5 Reconciliation between headline earnings attributable to Altron equity holders and fully diluted headline earnings

GROUP

2011 2010

GrossR millions

Net of tax and non-controlling

interestsR millions

GrossR millions


interestsR millions


Dilutive earnings attributable to B-BBEE

non-controlling interests in subsidiaries (9) (9) (3) (3)

Additional earnings attributable to dilutive

options at subsidiary level (6) (4) (8) (5)

Fully diluted headline earnings 706 617

Diluted headline earnings per share (cents) 223 196

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25. EARNINGS PER SHARE (continued)

25.6 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:

GROUP

2011 2010

GrossR millions


interestsR millions

GrossR millions


interestsR millions


Amortisation of intangibles arising on business

combinations 102 59 111 68

Expenses associated with B-BBEE transaction 4 2 — —

IFRS 2 charge on B-BBEE transaction 7 3 — —

783 693

Adjusted headline earnings per share (cents) 248 220

25.7 Reconciliation between diluted headline earnings

and adjusted diluted headline earnings

Diluted headline earnings 706 617

Amortisation of intangibles arising on business

combinations 102 59 111 68

Expenses associated with B-BBEE transaction 4 2 — —

IFRS 2 charge on B-BBEE transaction 7 3 — —

770 685

Adjusted diluted headline earnings per share

(cents) 243 217

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 that have a dilutive

effect.

Fully diluted earnings and diluted headline earnings have been calculated in accordance with the methodology prescribed

in IAS 33 – Earnings per Share on the basis that:

– the recognition of the deferred sale of a 30% interest in Aberdare Cables to the Izingwe Consortium based on the

assumption that the outstanding purchase price will be settled in cash for R87 million (comprising the empowerment

funding obligation net of excess cash deposits of R2 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; and

– the earnings effect of dilutive options at Allied Technologies Limited level.





GROUP

2011

R millions

2010

R millions

26. DIVIDENDS PROPOSED

Ordinary dividend number 63 of 108 cents (2010: 90 cents per share) 111 92

Preference dividend number 17 of 108 cents (2010: 90 cents per share) 230 192

341 284

27. COMMITMENTS

27.1 Capital expenditure

Contracts for capital expenditure not provided for in the financial statements 112 207

Capital expenditure authorised but not contracted for 51 123

163 330

This expenditure will be incurred in the ensuing year and will be financed from existing cash resources.

27.2 Amounts outstanding under operating lease agreements

At the balance sheet date the group had outstanding commitments under non-cancellable operating leases, which fall due as follows:

Within one year

Property 156 131


217 190

One to five years

Property 336 226


440 308

Thereafter

Property 120 285

Total 777 783

28. POST-BALANCE SHEET EVENTS

28.1 Altech Converged Services group empowerment transaction

In March 2011, the Altech group signed agreements to sell 25% plus one share of its interest in Altech Alcom Matomo

(Pty) Limited, Altech Alcom Radio Distributors (Pty) Limited and Altech Fleetcall (Pty) Limited to Southern Palace Group

of Companies (Pty) Limited.

28.2 Altech UEC group empowerment transaction

In March 2011, the Altech group signed agreements to sell 25% plus one share of its interest in UEC’s African entities

to Power Matla (Pty) Limited, Empower a Thousand (Pty) Limited and Epiworx Investment (Pty) Limited.

28.3 Altech Information Technologies repurchase of empowerment shareholding

The Altech group has agreed to acquire the 25% plus one share equity holding of Pamodzi Investment Holdings (Pty)

Limited in Altech Information Technologies (Pty) Limited for R37.5 million with an effective date still to be determined.

The Altech group will then look to conclude a transaction with an alternative B-BBEE partner.

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29. 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.

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.

29.1 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), Swedish krona (SEK) and euros (EUR). 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 exchange risks. Transactions which create foreign currency cash flows are hedged

with forward exchange contracts.

Speculative use of financial instruments or derivatives is not permitted and none has occurred during any periods

presented.

The Group’s exposure to foreign currency risk was as follows:

28 February 2011

Foreign amount

28 February 2010

Foreign amount

SEK

Millions

GBP

Millions

EUR

Millions

USD

Millions

SEK

Millions

GBP

Millions

EUR

Millions

USD

Millions

Trade and other receivables — — 1 31 4 — 4 35

Cash and cash equivalents 2 — 4 12 9 — 2 5

Loans — — (11) (8) — (4) (12) —

Trade and other payables (9) (7) (7) (62) (6) (9) (13) (58)

Gross balance sheet exposure (7) (7) (13) (27) 7 (13) (19) (18)

Forecast transactions (6) — (3) (26) (6) — (1) (6)

Gross exposure (13) (7) (16) (53) 1 (13) (20) (24)

Forward exchange contracts 9 7 15 39 7 13 11 49

Net exposure (4) — (1) (14) 8 — (9) 25





29. FINANCIAL RISK MANAGEMENT (continued)

29.1 Foreign currency risk

The following significant exchange rates were used for the conversions of foreign operations and transactional balances:

2011 2010

Average

rate

Closing

rate

Average

rate

Closing

rate

British pound 11.21 11.40 12.76 11.80

Euro 9.55 9.68 11.32 10.55

US dollar 7.26 7.01 8.05 7.74

Nigerian naira 0.05 0.05 0.05 0.05

Swedish krona 1.02 1.11 1.08 1.09

Kenyan shilling 0.09 0.09 0.10 0.10

Sensitivity analysis

A 1% strengthening/weakening in the rand against the following currencies at 28 February 2011 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 2010.

The movement in other currencies are not material to the business and consequently are not elaborated on any further.

Profit or

loss

strengthening

R millions

Profit or

loss

weakening

R millions

28 February 2011

British pound — —

Euro 0.1 (0.1)

US dollar 1.0 (1.0)

Swedish krona 0.0 (0.0)

28 February 2010

British pound — —

Euro 0.9 (0.9)

US dollar (1.9) 1.9

Swedish krona (0.1) 0.1

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29.2 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)

2011 2010

Foreign amount Millions

Rand amount Millions

Foreign

amount

Millions

Rand

amount

Millions

British pounds 7.3 82.1 13.0 167.1

US dollars 37.6 266.5 48.8 383.5

Euros 14.8 145.0 10.8 119.5

Swedish krona 9.0 9.7 6.9 7.7

Australian dollars (3.4) (23.7) — —

New Zealand dollars — — 0.1 0.5

Swiss francs 0.5 3.9 3.7 27.4

483.5 705.7

Comprising foreign exchange contracts:

– to pay 757.5 860.0

– to receive (274.0) (154.3)

483.5 705.7

Value of contracts at mark-to-market 471.5 684.7

Derivative asset at fair value (refer to note 7) 10 5

Derivative liability at fair value (refer to note 15) (22) (26)

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 69 76

– to receive — —

69 76






29.3 Commodity contracts

Commodity forward contracts are entered into to hedge the variability in the price of forecast raw material purchases in

respect of copper, aluminium and lead.

29.4 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 13)

and the fixed for floating rate swap arrangement which concluded during the year referred to below:

Cash flow hedge

An interest rate swap was entered into on 3 November 2008, which ran until 3 September 2010. Variable interest was

swapped for fixed interest on R500 million of the unsecured R500 million bank loan (refer to note 12). The group hedged

its interest rate risk on the bank loan by swapping the three-month JIBAR (variable rate) with a 10.51% fixed rate. The fair

value of the interest rate swap at year end was Rnil (2010: R8 million liability). A net amount of Rnil (2010: R6 million)

has been recognised in equity as a deferred hedging loss.

Fair value sensitivity analysis

A decrease of 100 basis points on the three-month JIBAR rate at the balance sheet date would have increased the fair

value liability by Rnil million (2010: R2 million) and decreased equity by the same amount before tax. An increase of

100 basis points would have had an equal but opposite effect.

Liquidity analysis

The following table indicates the periods in which the cash flows associated with derivatives that are cash flow hedges are

expected to occur and impact profit or loss.

Carrying

amount

Expected

cash flows

6 months

or less

6 – 12

months 1 – 2 years

Interest rate swap 2011 — — — — —

Interest rate swap 2010 8 8 8 — —

29.5 Credit risk

Credit 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 loans receivable, trade and other receivables, rental finance

advances, commodity and foreign exchange 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 are 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 historical trends, adjusted for current economic conditions.

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29.5 Credit risk (continued)

Cash and cash equivalents

The group limits its exposure to credit risk by only investing in liquid investments and only with counterparties that have

a sound credit rating.

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 28 February 2011, no third-

party guarantees were outstanding (2010: none).

29.6 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 671 million overdraft facility that is unsecured. Interest payable is linked to the prime interest rate.

29.7 Fair values

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.

Available-for-sale investments

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.

Trade and other receivables/payables

The fair value of trade and other receivables/payables is estimated as the present value of future cash flows, discounted

at the market rate of interest at the reporting date.

Foreign currency contracts

The fair value of foreign currency 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 swap contracts

The fair value of interest rate swaps is based on discounted estimated future cash flows based on the terms and maturity

of the contract and using market interest rates for a similar instrument at the reporting 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:

2011 2010

Loans and borrowings 8.9% 8.5%






29.7 Fair values (continued)

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 amount

R millions

Fair value

R millions

Carrying amount

R millions

Fair value

R millions

Assets and liabilities at fair value

Non-current available-for-sale investments at fair value 29 29 46 46

Derivative assets at fair value: used for hedging 10 10 6 6

Derivative liability at fair value: used for hedging (23) (23) (35) (35)

16 16 17 17

Assets and liabilities at amortised cost

Rental finance advances 61 61 44 44

Trade and other receivables 3 363 3 363 3 429 3 429

Cash and cash equivalents 1 381 1 381 1 255 1 255

Non-current loans receivable at amortised cost 340 340 349 349

Loans (1 239) (1 239) (1 537) (1 537)

Empowerment funding obligation (89) (97) (101) (111)

Bank overdrafts (128) (128) (81) (81)

Trade and other payables (4 026) (4 026) (3 773) (3 773)

(337) (345) (415) (425)

The following table presents the group’s assets and liabilities that are measured at fair value at 28 February 2011.

The different levels have been defined as follows:

Level 1 quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2 inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e. derived from prices)

Level 3 inputs for the asset or liability that are not based on observable market data (unobservable inputs)

Level 1 Level 2 Level 3 Total

28 February 2011

Available-for-sale financial assets 2 — 27 29

Derivative financial assets — 10 — 10

Derivative financial liabilities — (23) — (23)

2 (13) 27 16

28 February 2010

Available-for-sale financial assets — — 46 46

Derivative financial assets — 6 — 6

Derivative financial liabilities — (35) — (35)

— (29) 46 17

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

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29.8 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 non-controlling

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 2011 was 13.6% (2010: 13.0%).

Altron’s share capital consists of 105.7 million ordinary shares and 241.2 million participating preference shares.

Management does not make any distinction between the two types of equity in managing the capital of the company.

The group utilises a share scheme, as approved by the shareholders, as a long-term retention mechanism for senior

executives and other key employees. The six components, which are disclosed fully in note 9 of the financial statements,

each contain a performance element so that the interests of existing shareholders and management are aligned. Awards

under this scheme are in accordance with a total remuneration strategy and are approved by the board’s remuneration

committee.

The group does not have a defined share buy-back plan, but does from time to time purchase its shares in 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 9) 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 R489 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 9 for a quantitative summary of authorised and issued capital.





30. RELATED-PARTY TRANSACTIONS

The group has a related-party relationship with its subsidiaries (see note 2, page 233), associates and joint ventures (see Annexure 1) and with its directors (see pages 236 to 240) and key management personnel (refer below). All these transactions occur on an arm’s length basis.

2011 R millions

2010 R millions

30.1 Associates and joint ventures

Sale of goods and services to joint venture 1 2

Sale of goods and services to associates 64 45

Services received from joint ventures 2 —

Dividends received from joint ventures 40 —

Dividends received from associate 1 1

30.2 Directors

Details relating to directors’ emoluments and shareholdings in the company are disclosed in the remuneration report on pages 132 to 134 and in the directors’ report on page 146.

30.3 Key management personnel

Key management personnel are defined as directors of the company and its principal subsidiary companies, Allied Technologies Limited, Bytes Technology Group (Pty) Limited and Power Technologies (Pty) Limited.

The key management personnel compensations were as follows:

Short-term employee benefits, including salaries and bonuses 63 54

Post-employment benefits 6 6

Equity compensation benefits 7 8

76 68

30.4 ShareholdersThe principal shareholders of the company are detailed in the analyses of shareholders on pages 118 to 120 of the annual report.

Directors’ shareholdings are detailed in the directors’ report on page 146.

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31. JUDGEMENTS MADE BY MANAGEMENT

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 business.

Asset useful lives and residual values

The useful lives and residual values of property, plant, equipment and intangible assets are reviewed at each reporting

date based on current utilisation, prospects and market conditions.

The useful life of the rights to distribute Xerox equipment in 25 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.

Business combination purchase price allocations

On completion of an acquisition, management undertakes a full purchase price allocation exercise. Tangible assets and

liabilities and contingent liabilities are fair valued. The business is reviewed and types of intangible assets are identified.

These are then valued according to established valuation techniques applicable to the type of intangible asset. Any excess

of the purchase price over the value of the business as determined above is allocated to goodwill. Independent external

consultants are utilised on the larger acquisitions.

Impairment of assets

The impairment of goodwill is tested at least annually. The discounted cash flow valuation model is used on the basis of

value in use. Future expected cash flows are based on management forecasts, typically over a three-year period, and

thereafter a reasonable rate of growth is applied based on current market conditions. Discount rates used are calculated

using the principles of the capital asset pricing model based on current market conditions. The resulting weighted average

cost of capital is compared to industry and regional averages to ensure reasonableness. Property, plant and equipment as

well as intangible assets are considered for impairment when conditions indicate that impairment may be necessary. These

conditions include 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 16). 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 available-for-sale investments

The investment in TAR (refer Annexure 1) has been designated as an available-for-sale financial asset and as such has

been fair valued using the discounted cash flow method.

Valuation of financial instruments

In note 29.7 a detailed analysis is given of the fair value methodologies applied.





32. 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

28 February 2011.

These include the following standards and interpretations that are applicable to the business of the Group, and have not

been applied in preparing these consolidated financial statements.

IFRIC 19 – Extinguishing Financial Liabilities with Equity Instruments

The amendment is effective for the group for the year ending 28 February 2012 with restatement of comparatives

required.

IFRIC 19 addresses the accounting treatment for the extinguishment of financial liabilities with equity instruments. Equity

instruments issued to a creditor to extinguish all or part of a financial liability would represent “consideration paid”. The

equity instruments will be measured on initial measurement at their fair value, unless such fair value cannot be reliably

measured, in which case the fair value of the financial liability will be used. The difference between the carrying amount of

the financial liability (or part thereof) extinguished and the initial measurement amount of the equity instruments shall be


The interpretation is not expected to impact the group's results.

IAS 24 – Related-party Disclosure

The revised statement is effective for the group for the year ending 28 February 2012, with restatement of comparatives

required.

IAS 24 (revised) addresses the disclosure requirements in respect of related parties, with the main changes relating to the

definition of a related party and disclosure requirements by government-related entities. The definition of a related party

has been amended with the result that a number of new related-party relationships have been identified. Government-

related entities will be exempted from presenting certain related-party disclosures, although information concerning the

nature of the relationship and details of any significant balances and transactions will still be required.

Management has not assessed the impact of the revision in detail but does not expect any significant impact on the

financial results.

IFRIC 14 and IAS 19 – The Limit on Defined Benefit Assets, Minimum Funding Requirements and their Interaction

The revised statement is effective for the group for the year ending 28 February 2012 with restatement of comparatives

required.

The amendments to IFRIC 14 address the accounting treatment for prepayments made when there is a minimum funding

requirement.

Under the amended IFRIC 14 (AC 447), an asset would be recognised in respect of such a prepayment made to the defined

benefit pension plan, on the basis that the entity has a future economic benefit from the prepayment.

The statement is not expected to impact the group’s results significantly.

IFRS 9 (2009) – Financial Instruments

The revised statement is effective for the group for the year ending 28 February 2014 with restatement of comparatives

required subject to transitional provisions.

IFRS 9 addresses the initial measurement and classification of financial assets and will replace the relevant sections of

IAS 39. Under IFRS 9 there are two options in respect of classification of financial assets, namely, financial assets measured

at amortised cost or at fair value. Financial assets are measured at amortised cost when the business model is to hold

assets in order to collect contractual cash flows and when they give rise to cash flows that are solely payments of principal

and interest on the principal outstanding. All other financial assets are measured at fair value. Embedded derivatives are

no longer separated from hybrid contracts that have a financial asset host.

The amendment is not expected to impact the group’s results significantly.

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32. STANDARDS AND INTERPRETATIONS IN ISSUE BUT NOT YET EFFECTIVE (continued)

IFRS 9 (2010) – Financial instruments

IFRS 9 (2010) addresses both financial assets and financial liabilities and is effective for the group for the year ending

28 February 2014, with restatement of comparatives required subject to transitional provisions.

IFRS 9 (2010) incorporates the guidance in IAS 39 dealing with fair value measurement, derivatives embedded in host

contracts that are not financial assets, and the requirements of IFRIC 9 – Reassessment of Embedded Derivatives.

Under IFRS 9 (2010), the classification and measurement requirements of financial liabilities are the same as per IAS 39,

barring the following two aspects:

The fair value option

Fair value changes for financial liabilities (other than financial guarantees and loan commitments) designated at fair value

through profit or loss, attributable to the changes in the credit risk of the liability will be presented in other comprehensive

income. The remaining change is recognised in profit or loss. However, if the requirement creates or enlarges an accounting

mismatch in profit or loss, then the whole fair value change is presented in profit or loss. The determination as to whether

such presentation would create or enlarge an accounting mismatch is made on initial recognition and is not subsequently

reassessed.

Certain derivatives linked to unquoted equity instruments

Under IFRS 9 (2010), derivative liabilities that are linked to and must be settled by delivery of an unquoted equity

instrument whose fair value cannot be reliably measured, are measured at fair value.

Management has not assessed the impact of the revision in detail but does not expect any significant impact on the

financial results.

IFRS 7 – Disclosures – Transfers of financial assets

In terms of the amendment to this standard, effective for the group for the year ending 28 February 2013, additional

disclosure will be provided regarding transfers of financial assets that are:

> not derecognised in their entirety; and

> derecognised in their entirety but for which the Altron group retains continuing involvement.

The amendment is not expected to impact the group results significantly.

IASB 2010 annual improvement project

The 2010 IASB annual improvements project was published on 6 May 2010 with the amendments to IFRS embodied

therein being effective for the group for the year ended 28 February 2012. The improvement project contains

11 amendments to six standards and one interpretation. Management has not yet assessed the impact of the

improvements in detail but does not expect a significant impact on the group’s results following the implementation

of applicable improvements.





GROUP

2011R millions

2010

R millions

33. CASH GENERATED BY OPERATIONS

Operating profit before capital items 1 524 1 477

Adjustments for:

Depreciation and amortisation 575 510

Movement in provisions and other non-cash movements 15 46

Cash generated before movements in working capital 2 114 2 033

(Increase)/decrease in inventories (356) 354

(Increase)/decrease in trade and other receivables (7) 370

Increase/(decrease) in trade and other payables 306 (340)

2 057 2 417

34. DIVIDENDS RECEIVED FROM ASSOCIATES AND OTHER INVESTMENTS

Dividends receivable at the beginning of the year 1 13

Attributable income in profit or loss 2 4

Dividends receivable at the end of the year (1) (1)

2 16

35. TAXATION PAID

Amounts unpaid at the beginning of the year (174) (266)

Amounts recognised in profit or loss (490) (426)

Amounts acquired in business combinations (1) (4)

Amounts unpaid at the end of the year 246 174

(419) (522)

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GROUP

2011R millions

2010

R millions

36. ACQUISITION OF SUBSIDIARIES

Property, plant and equipment — (35)

Intangibles – fair value adjustment — (62)

Inventories — (2)

Trade and other receivables (9) (20)

Trade and other payables 1 17

Deferred tax — 21

Net cash (5) (7)

Taxation 1 4

Interest on deferred payment terms (2) —

Goodwill arising on acquisition (38) (109)

Purchase consideration (52) (193)

Non-controlling interest on acquisition — 1

Less: Unrealised interest on deferred payment items 2 —

Less: Deferred purchase consideration 20 54

Cash paid (30) (138)

Less: Cash acquired 5 7

Add: Deferred purchase consideration at the beginning of the year (54) (153)

(79) (284)

Refer to note 41 for details of acquisitions.

37. PROCEEDS ON DISPOSAL OF SUBSIDIARY

Property, plant and equipment — 2

Goodwill and intangible assets — 4

Inventories — 2

Trade and other receivables — 5

Trade and other payables — (3)

Net loans — (5)

Net cash — 1

Assets classified as held-for-sale — 107

Liabilities classified as held-for-sale — (28)

Non-controlling interest — (1)

— 84

Loss on disposal — (2)

Proceeds on disposal — 82



GROUP

2011R millions

2010

R millions

38. PROCEEDS ON DISPOSAL OF

Property, plant and equipment

Carrying amount 21 73

Surplus on disposal 10 12

Proceeds on disposal 31 85

39. OTHER INVESTING ACTIVITIES

Acquisition of additional shares in existing subsidiaries — (6)

Net decrease/(increase) of loans to associates and other investments 13 (10)

13 (16)

40. SUBSIDIARIES' EQUITY CONTRIBUTIONS FROM NON-CONTROLLING INTERESTS

Capital introduced by non-controlling interests — 118

Subscription shares to be allocated – opening balance — (26)

Subscription shares to be allocated – closing balance — —

— 92

41. ACQUISITION OF SUBSIDIARIES

Acquisition of 100% interest in Swist Technology Solutions (Pty) Limited (Swisttech)The Altech group acquired 100% of the issued share capital of Swist Technology Solutions (Pty) Limited with effect from1 January 2011. The maximum purchase price is R52 million, payable in cash. The purchase price is payable as follows:

> First tranche: R30 million (Paid in December 2010)

> Second tranche: R10 million

> Third tranche: R2 million

> Fourth tranche: R10 million

The second, third and fourth tranches will be paid in terms of an earn-out mechanism over three years based on after-tax profit targets for the financial years ending February 2011, 2012 and 2013 being achieved.

The acquired business contributed revenues of R4 million and net profit after tax of R1 million to the group.

If the acquisition had occurred on 1 March 2010, group revenue and net profit after tax before allocations would have increased by R19 million and R6 million respectively.

These amounts have been calculated using the group’s accounting policies.



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41. ACQUISITION OF SUBSIDIARIES (continued)

Swisttech is an independent software vendor focusing on infrastructure and integration services, mobile services and software development and is a major billing software vendor in the South African market.

The acquiree’s balance sheet at the date of acquisition was as follows:

Recognised values

R millions

Fair value adjustments

R millions

Carrying amount

R millions

Trade and other receivables 9 — 9

Trade and other payables (1) — (1)

Taxation (1) — (1)

Cash and cash equivalents 5 — 5

Total net assets on acquisition 12 — 12

Goodwill on acquisition 38

Interest on deferred payment terms 2

Total consideration 52

Less: Cash and cash equivalents in subsidiary acquired (5)

Less: Deferred purchase consideration (20)

Less: Unrealised interest on deferred payment terms (2)

Net cash outflow on acquisition 25

The purchase price allocation for this acquisition will be performed during the 2012 financial year, which will identify any separately identifiable intangible assets and determine the quantum of any goodwill.



Associates, other investments and joint ventures Annexure 1

Altron-controlled

interest

Investment at cost less

amounts written off

2011

%

2010

%

2011

R millions

2010

R millions

ASSOCIATE COMPANIES

– Unlisted

Bytes Healthcare Solutions international operations 50.0 50.0 1 1

Alcon Marepha (Pty) Limited 49.9 49.9 1 1

2 2

Directors’ valuation based on a price-earnings ratio relevant to the sector within which the associates operate.

Investments

at fair value

OTHER INVESTMENTS

– Unlisted

Technologies Acceptances Receivables (Pty) Limited (preference share) (TAR) 25 25

Izingwe Aberdare Cables Investments (Pty) Limited 10.0 10.0 1 1

Izingwe Aberdare Cables Investments (Pty) Limited – cash on deposit 2 19

Total 28 45

The fair value of TAR is determined using the discounted cash flow method over a seven-year period using discount rates of

18.5% (2010: 18.0%). The directors’ valuation is equal to the fair value.

The TAR loans are repayable when cash is available in accordance with a prescribed priority of payments.

The carrying value of the investment in Izingwe Aberdare Cables Investments (Pty) Limited has not been reflected at fair value as

the group is precluded from fair valuing the equity of the underlying subsidiary.

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 13).


The maximum exposure to credit risk for loans receivable at the balance sheet date was R206 million (2010: R219 million).

TAR is 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 risk

The TAR participation loan notes earn a minimum interest rate of JIBAR plus 2.5% and a maximum interest rate of prime plus 6%.

JOINT VENTURES

2011

%

2010

%

Tridonic SA 50.0 50.0

CBi electric Aberdare ATC Telecom Cables 50.0 50.0

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Attributable share of

retained income Indebtedness

Total

investment

2011

R millions

2010

R millions

2011

R millions

2010

R millions

2011

R millions

2010

R millions

— — — — 1 1

9 9 (1) (1) 9 9

9 9 (1) (1) 10 10

11 11

Dividend

receivable Indebtedness

Total

Investment

1 1 206 219 232 245

— — — — 1 1

— — — — 2 19

1 1 206 219 235 265

235 265



Associates, other investments and joint ventures Annexure 1 continued

INFORMATION IN RESPECT OF INTEREST IN JOINT VENTURES, ASSOCIATES AND TAR

Joint ventures* Associates* TAR

2011R millions

2010

R millions2011

R millions

2010

R millions2011

R millions

2010

R millions

ABRIDGED BALANCE SHEETS

Non-current assets 212 218 17 18 707 747

Current assets (excluding cash) 191 205 13 1 85 78

Cash and cash equivalents 92 127 14 6 58 65

Current liabilities (68) (76) (20) (7) (60) (59)

Non-current liabilities (27) (27) (5) — (777) (824)

Equity 400 447 19 18 13 7

ABRIDGED STATEMENTS OF COMPREHENSIVE

INCOME

Revenue 649 676 99 87 87 82

Expenditure (585) (598) (93) (81) (79) (79)

Profit before tax 64 78 6 6 8 3

Taxation (26) (25) (2) (2) (2) (1)

Profit for the year 38 53 4 4 6 2

Other comprehensive income — — — — — —

Total comprehensive income for the period 38 53 4 4 6 2

* Joint ventures and associates figures are stated at 100% of the respective entity’s balance sheets and statements of comprehensive income.

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NATURE OF BUSINESS

Bytes Healthcare Solutions international operations

Provides healthcare, IT and eCommerce solutions in Saudi Arabia and Namibia.

Alcon Marepha (Pty) Limited

Manufacturer of medium-voltage power cable.

TAR

Securitisation vehicle used to house leases predominantly 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 11.1).

Tridonic SA

Distributor of lighting control gear. Tridonic SA is a 50% joint venture with Tridonic (Austria).

CBi electric Aberdare ATC Telecom Cables

A telecom cable manufacturing joint venture with Reunert.



Segmental reportAnnexure 2

SEGMENT ANALYSIS

The segment information has been prepared in accordance with IFRS 8 – Operating Segments (IFRS 8) which defines the requirements for the disclosure of financial information of an entity’s operating segments.

The standard requires segmentation based on the group’s internal organisation and reporting of revenue and operating income based upon internal accounting presentation.

In identifying its operating segments, management generally follows the group’s product and service lines.

Each of these operating segments is managed separately as each of these service lines requires different technologies and other resources as well as marketing approaches.

Prior to the implementation of IFRS 8, segments were identified by reference to the dominant source and nature of the group’s risks and returns with results reported based on the IFRS accounting policies used in the financial statements.

The measurement policies the group uses for segment reporting under IFRS 8 are the same as those used in its financial statements, except that certain items are not included in arriving at the operating profit of the operating segments (amortisation of intangibles arising on business combinations).

The group operates a number of different operating segments primarily within the telecommunications, multi-media and electronics and information technology sectors.

The group is organised into three subgroup’s namely Altech, Bytes and Powertech together with Altron Corporate Services. Reportable segments have been classified according to subgroup affiliation and other operating segments not meeting the quantitative thresholds are reported as “Other segments” by subgroup for reference purposes.

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The following summary describes the operations and related products and services in each of the group’s reportable segments:

Powertech Cables group Manufacturing of medium- and low-voltage power cables, data cable systems, metallic cables and accessories operating in South Africa, its neighbouring countries and the Iberian peninsula.

Powertech Transformers group Manufacturing of power and distribution transformers.

Other Powertech segments Includes the manufacturing and distribution of automotive batteries and DC power systems, lighting control gear, electrical accessories, standby power and rectifier systems, solar systems as well as diversified engineering solution businesses.

Bytes Technology Group UK Software Systems integration, Microsoft-certified solutions provider in the United Kingdom.

Bytes Document Solutions group Distributor of Xerox products and services.

Other Bytes segments Includes Premier business partner and South African distributor of Alcatel voice communication and data solutions. Exclusive South African distributor of NCR products for ATMs and a provider of data warehousing, CRM services and support. Managed services and repairs for PC workspace products. Classroom and e-learning systems for IT professional training. IT and business process outsourcing services. Networking, hardware, software, storage, services, software integration, SAP and management consulting, Microsoft-certified solutions provider. Delivery of transaction switching services, practice management and informatics solutions to the healthcare industry.

Altech Autopage Cellular Sales, distribution and services provision for cellular network operations.

Altech UEC group Design and manufacture of satellite and terrestrial digital set-top box decoders.

Altech Netstar Stolen vehicle recovery and fleet management business.

Converged Services (International) Full service, data communications carrier in East Africa.

Other Altech segments Includes the design, installation and project management of Motorola radio systems, telecommunications middleware, payment systems and solutions, secure solutions and smartcard technologies as well as distribution of a range of professional electronic components and products.



Segmental report continued

Annexure 2 continued

Revenue Operating profit

2011

R millions

2010

R millions

Growth Cur/Pyr

%

2011

R millions

Operating

margin %

Powertech Cables group 3 904 3 546 10 88 2.3

Powertech Transformers group 1 305 1 779 (27) 190 14.6

Other Powertech segments 1 905 1 908 — 114 6.0

Powertech group 7 114 7 233 (2) 392 5.5

Bytes Technology Group UK Software 1 664 1 645 1 45 2.7

Bytes Document Solutions group 2 036 2 065 (1) 178 8.7

Other Bytes segments 2 367 2 242 6 174 7.4

Bytes group 6 067 5 952 2 397 6.5

Altech Autopage Cellular 5 855 5 597 5 280 4.8

Altech UEC group 1 145 1 079 6 — —

Altech Netstar 944 880 7 289 30.6

Converged Services (International) 426 488 (13) 32 7.5

Other Altech segments 1 281 1 156 11 225 17.6

Altech group 9 651 9 200 5 826 8.6

Corporate and financial services 46 36 28 11 23.9

Intersegment revenue (68) (85)

Altron group 22 810 22 336 2 1 626 7.1

Revenue/operating profit from segments below the quantitative thresholds are attributable to smaller operating segments of the Altron group.

None of these segments have met any of the quantitative thresholds for determining reportable segments for the reportable periods.

Quantitative thresholds have been calculated based on totals for the Altron group and not per subgroup.

Intersegment revenues represent transactions between reportable segments. The price is set on an arm’s length basis which is eliminated on consolidation.

Segment operating profit can be reconciled to group operating profit

before capital items as follows:

2011

R millions

2010

R millions

Segment operating profit 1 626 1 588

Reconciling items:

Amortisation of intangibles arising on business combinations (102) (111)

Group operating profit before capital items 1 524 1 477

Geographic information

Revenue from external customers

South Africa 18 173 17 462

Rest of Africa 1 755 1 875

Europe 2 617 2 733

North America 16 43

South America 10 16

Australasia 139 90

Middle East 24 67

Asia 76 50

22 810 22 336

The revenue information above is based on the location of the customer.

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Operating profit Depreciation

2010

R millions

Operating

margin % Growth Cur/Pyr

2011

R millions

2010

R millions Growth Cur/Pyr

54 1.5 63 (74) (60) 23

131 7.4 45 (22) (17) 29

114 6.0 — (52) (47) 11

299 4.1 31 (148) (124) 19

46 2.8 (2) (2) (3) (33)

155 7.5 15 (22) (22) —

110 4.9 58 (53) (57) (7)

311 5.2 28 (77) (82) (6)

296 5.3 (5) (16) (14) 14

5 0.5 (100) (20) (25) (20)

269 30.6 7 (16) (14) 14

154 31.6 (79) (72) (50) 44

249 21.5 (10) (34) (36) (6)

973 10.6 (15) (158) (139) 14

5 13.9 120 (2) (1) 100

1 588 7.1 2 (385) (346) 11


COMPANY ANNUAL FINANCIAL STATEMENTS

Balance sheetas at 28 February 2011

Statement of comprehensive income for the year ended 28 February 2011

COMPANY

Notes

2011

R’000

2010

R’000

ASSETS

Non-current assets 3 189 847 3 188 731

Investment in subsidiaries 2 2 681 050 2 661 600

Amount receivable from subsidiary 2 500 000 500 000

Group share scheme recharge receivable 7 8 797 27 131

Current assets 235 654 290 293

Trade and other receivables 170 160

Amounts receivable from subsidiaries 2 235 142 289 748

Cash and cash equivalents 342 385

Total assets 3 425 501 3 479 024

EQUITY AND LIABILITIES

Shareholders’ equity 3 016 913 2 965 607

Non-current liabilities

Loans 3 400 000 —

Current liabilities 8 588 513 417

Trade and other payables 1 374 1 027

Current portion of loans 3 6 754 510 341

Derivative liability 5 75 421

Taxation payable 385 1 628

Total equity and liabilities 3 425 501 3 479 024

COMPANY

Notes

2011

R’000

2010

R’000

Operating expenditure (533) (897)

Interest income on financial assets carried at amortised cost 44 268 52 872

Interest expense on financial liabilities measured at amortised cost (39 321) (48 253)

Change in fair value of derivative liability 5 346 1 354

Impairment of investment in subsidiaries (346) —

Dividends received from subsidiaries 349 839 466 227

Profit before taxation 354 253 471 303

Taxation 6 (1 413) (1 062)

Profit for the year 352 840 470 241

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Statement of changes in equityfor the year ended 28 February 2011

COMPANY

Ordinary

share

capital

(Note 4)

R’000

Preference

share

capital

(Note 4)

R’000

Share

premium

(Note 4)

R’000

Share-based

payment

reserve

R’000

Retained

earnings

R’000

Total

equity

R’000

Balance at 28 February 2009 2 113 24 2 226 181 46 078 615 845 2 890 241

Total comprehensive income for the year

Profit for the year — — — — 470 241 470 241

Total comprehensive income for the year — — — — 470 241 470 241

Transactions with owners, recorded

directly in equity

Share-based payments — — — 8 046 — 8 046

Dividends paid — — — — (411 747) (411 747)

Shares issued — — 8 212 — — 8 212

Unclaimed dividends written back — — — — 614 614

Total transactions with owners — — 8 212 8 046 (411 133) (394 875)


Total comprehensive income for the year

Profit for the year — — — — 352 840 352 840

Total comprehensive income for the year — — — — 352 840 352 840

Transactions with owners, recorded

directly in equity

Share-based payments — — — 6 476 — 6 476

Dividends paid — — — — (312 053) (312 053)

Shares issued — — 4 043 — — 4 043

Total transactions with owners — — 4 043 6 476 (312 053) (301 534)



Statement of cash flows for the year ended 28 February 2011

COMPANY

Notes

2011

R’000

2010

R’000

CASH FLOWS FROM OPERATING ACTIVITIES 90 900 52 713

Cash utilised by operations (533) (897)

Interest received 46 099 59 900

Interest paid (42 908) (55 124)

Dividends received 349 839 466 227

Changes in working capital 337 (410)

Non-cash movements — 614

Movement of loan with subsidiaries 52 775 (4 837)

Cash available from operating activities 405 609 465 473

Dividends paid (312 053) (411 747)

Taxation paid 8 (2 656) (1 013)

CASH FLOWS FROM/(APPLIED IN) INVESTING ACTIVITIES 5 014 (10 541)

Cash inflow/(outflow) on decrease/(increase) of investment in subsidiaries 5 014 (10 541)

CASH APPLIED IN FINANCING ACTIVITIES (95 957) (41 788)

Proceeds on issue of shares 4 043 8 212

Loan repaid (100 000) (50 000)

(DECREASE)/INCREASE IN NET CASH AND CASH EQUIVALENTS (43) 384

Cash and cash equivalents at the beginning of the year 385 1

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 342 385


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Notes to the financial statementsfor the year ended 28 February 2011

1. ACCOUNTING POLICIES

Please refer to the group accounting policies on pages 153 to 163.

2. INTEREST IN SUBSIDIARIES

Effective holdingShares at cost less

amounts written off Indebtedness

Issued capitalR millions

2011%

2010%

2011R’000

2010R’000

2011R’000

2010R’000

Allied Technologies Limited 1 62 62 235 095 235 095 — —

Bytes Technology Group (Pty) Limited 737 100 100 2 016 937 2 016 937 — —

Power Technologies (Pty) Limited 3 100 100 260 410 260 410 509 716 511 547

Altron Finance (Pty) Limited – ordinary shares — 100 100 235 235 225 426 278 201

Altron Finance (Pty) Limited – preference shares 100 100 121 509 121 509 — —

Investment in subsidiaries – share-based payments 46 789 26 993 — —

Venopt (Pty) Limited * * 75 421 — —

2 681 050 2 661 600 735 142 789 748

Less: Current portion disclosed as current assets 235 142 289 748

Non-current loans receivable 500 000 500 000

Notes:

The 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.

* Special-purpose entity owning 22% of Bytes Technology Group South Africa (Pty) Limited and beneficially owned by Kagiso Strategic

Investments (Pty) Limited. The entity is recognised as a subsidiary of the company by virtue of the put option issued in favour of a

financial institution in respect of the preference share capital funding of the entity (refer to note 5).

COMPANY

2011R’000

2010R’000

3. LOANS

Unsecured bank loans 406 754 510 341

Current portion reflected as current liabilities (6 754) (510 341)

Non-current loans 400 000 —

The loans bear interest at the rates of JIBAR + 1.5% to JIBAR + 1.75% payable quarterly in arrears.

4. SHARE CAPITAL AND PREMIUM

Please refer to the group note 9 on pages 179 and 180.


Notes to the financial statements continued


COMPANY

2011R’000

2010R’000

5. DERIVATIVE LIABILITY

Fair value at inception recognised as investment in subsidiary 421 421

Fair value adjustment recognised in profit or loss in prior periods — 1 354

Fair value adjustment recognised in profit or loss in the current year (346) (1 354)

Fair value at year end 75 421

In terms of the Bytes B-BBEE transaction with Kagiso, Altron was required to write a put option to the financial institution in respect of the perpetual non-cumulative preference shares issued by Venopt (refer to group note 11.4 on page 187). The put option was initially recognised at fair value on the date that it was written. Subsequent to initial recognition, Altron measures the put option at its fair value at each balance sheet date and recognises the resulting fair value adjustment in profit or loss. The fair value of the put option is determined at each balance sheet date using a European option-pricing model. The fair value assumptions utilised in the valuation of the option were as follows:

2011At balance sheet date

2010At balance sheet date

On initial recognition

Underlying preference share value including dividends receivable R155 million R160 million R154 million

Risk-free interest rate (%) 7.38 8.37 9.54

Option life (years) 2.34 3.34 5

Dividend yield 70% of prime 70% of prime 70% of prime

Expected volatility (%) 35 30 28

The value of the put option changes in response to an underlying variable namely, the value of the preference shares, which is impacted by the value of the Bytes SA shares held by Venopt.

COMPANY

2011R’000

2010R’000

6. TAXATION

Current taxation 1 413 1 291

Current taxation prior year adjustment — (229)

1 413 1 062

Reconciliation of rate of taxation% %

South African normal taxation rate 28.0 28.0

Non-taxable income (27.7) (27.8)

Non-deductible expenses 0.1 0.1

Prior year adjustment — (0.1)

Effective taxation rate 0.4 0.2


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COMPANY

2011R’000

2010R’000

7. GROUP SHARE-BASED PAYMENTS

Details of employee share options granted by the company are reflected in group notes 9.6 to 9.8 on pages 180 to 183.

Options granted under the “Conditional Rights Scheme” and “Altron 2009 Share Plan” 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 8 797 27 131

Cumulative equity-settled charge recognised by subsidiaries and receivable per balance sheet 8 797 27 131

The fair value of the share appreciation rights, the conditional rights and the bonus share awards at grant date are determined based on the Black-Scholes model. The fair value of the performance awards is determined based on the Monte Carlo valuation model. The fair value of the liability is remeasured at each balance sheet date and at settlement date. The model inputs at 28 February 2011 were as follows:

Share price (Rand) 25.90 23.50

Exercise price (Rand) 0 – 36.10 0 – 36.10

Terms (years) 0.23 – 4.88 0.41 – 5

Volatility (%) 15 to 35 32 to 42

Dividend yield (%) 3.47 5.06

Risk-free interest rate (%) 7.4 – 8.4 8.06

8. TAXATION PAID

Taxation payable at the beginning of the year 1 628 1 579

Recognised in profit or loss 1 413 1 062

Taxation payable at the end of the year (385) (1 628)

2 656 1 013

9. RELATED PARTIES

The company has a related-party relationship with its subsidiaries (see note 2)

Dividends

The company received dividends from subsidiaries 349 839 466 227

Interest

The company received interest from subsidiaries 44 268 52 872

Shareholders

The principal shareholders of the company are detailed in the analysis of shareholders on pages 118 to 120 of the annual report.

Directors

The company has a related-party relationship with its directors (see note 19 of the group financial statements).

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. See note 29 on page 207.


Directorate profile

DR WP (BILL) VENTER

Date of birth: 29 July 1934 (76)

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); C Eng (UK); MI.E.E (UK)

A UK-qualified chartered engineer and founder of Altron, through Allied Electric in 1965 and recipient of the

Order of Meritorious Service (Gold) (OMSG), as awarded by the State President of South Africa for his lengthy

and significant contribution to South Africa’s electronics industry.

Titles:

> Non-executive chairman of Altron, Bytes and Powertech

> Non-executive director of Altron, Altech, Bytes, Bytes (UK) and Powertech, former chairman of the CSIR, and past director

of AMIC Limited and Nedcor Bank Limited

> Former member of the State President’s Economic Advisory Board

> Member of the Altron nomination committee and remuneration committee

Experience: Some 46 years devoted to entrepreneurial endeavours and initiatives in the electronics, telecommunications

and power electrical industries, both in South Africa and offshore, firstly as design engineer, then marketing manager at

STC (SA) and thereafter chief executive and latterly as non-executive 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.

Awarded the Sunday Times Lifetime Achievement Award in 2006, and the Minister’s Technology Top 100 Lifetime Achiever

Award in 2009, in recognition of his significant contribution to technology development in South Africa.

Joined the Altron board in 1980.

MJ (MIKE) LEEMING

Date of birth: 26 October 1943 (67)

Qualifications: BCom (Rhodes); MCom (Wits); FIBSA, FCMA; AMP (Harvard)

Titles:

> Lead independent director of Altron

> Chairman of the Altron risk management committee

> Member of the Altron audit committee and nomination committee

Experience: Retired banker and a director of AECI Limited, Imperial Holdings Limited, Real Africa Holdings Limited and

Woolworths Holdings Limited.


RE (ROBERT) VENTER

Date of birth: 7 May 1960 (51)

Qualifications: BSc (Econ) (UCLA); MBA (UCLA) Dean’s List

Titles:


> Non-executive director of Altech, Bytes and Powertech and various other group companies

> 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 to 1990).

21 years’ experience in senior management positions in the Altron group (1990 to current), including chief executive officer of

Aberdare Cables (1993 to 1996), chief executive officer of Powertech (1996 to 2001) before joining Altron as chief executive

(2001 to current).


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NJ (NORMAN) ADAMI

Date of birth: 12 August 1954 (56)

Qualifications: BBusSci (Hons) (UCT); MBA (Wits)

Titles:



> Member of the Altron remuneration committee

Experience: Norman is a South African-based senior executive with more than 15 years’ experience as a chief executive officer/

managing director of leading consumer product operations in the United States of America, South Africa, Africa and Latin

America.

Norman’s experience as a chief executive officer/managing director includes three key assignments:

> Managing director, South African Breweries (1994 to 2003, Johannesburg)

> President and chief executive officer, Miller Brewing Company (2003 to 2006, Milwaukee)

> President and chief executive officer, SAB Miller Americas (2006 to 2007)

He is currently the chairman and managing director of SAB Limited in South Africa, a position which he assumed on 10 October

2008.

Previous board memberships include, among others, ABI (SA), SAB Limited, SAB Plc (London), Miller Brewing Co, SAB Miller Central

America (Honduras, El Salvador, Puerto Rico, Panama)/SAB Miller South America (Columbia, Peru, Ecuador).


MC (MYRON) BERZACK


Titles:


> Member of the Altron nomination committee and remuneration committee

Experience: 41 years’ experience in the cable manufacturing industry and 19 years’ experience in the electrical distribution

industry. Myron is the chairman of Voltex Holdings, the chief executive of Bid Industrial & Commercial Products, as well as an

executive director of the Bidvest Group Limited and numerous subsidiaries thereof. He is also a non-executive director of

Amalgamated Appliance Holdings Limited.


N (NORBERT) CLAUSSEN

Date of birth: 10 December 1960 (50)

Qualifications: BEng (Stellenbosch); MEng (UP); MBA (UCT); PrEng (ECSA)

Titles:



> Director of Powertech Transformers, Aberdare Cables, Powertech Industries and Powertech SA

> 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.



Directorate profile continued

PMO (PETER) CURLE


Qualifications: MA (Oxon)

Titles:


> Executive director of Altech: Corporate Finance

> Member of the Altron executive committee

Experience: 41 years in merchant banking/corporate finance activities in South Africa and internationally.

Rejoined the Altron group in 1997, having previously served as an executive director from 1983 to 1986.

DR PM (PENUELL) MADUNA

Date of birth: 29 December 1952 (58)

Qualifications: Bluris (Unisa); LLB (Zimbabwe); LLM (Wits); HDip Tax Law (Wits); LLD (Unisa)

Titles:


> Chairman of the Altron nomination committee

Experience: Former member of the ANC’s Constitutional Committee and National Executive Committee, former Deputy Minister

of the Department of Home Affairs (1994 to 1996) and former Minister of the Departments of Minerals and Energy (1996 to

1999) and Justice and Constitutional Development (1999 to 2004).

Attorney, notary and conveyancer. Visiting Scholar of Constitutional Law at Columbia University Law School (New York).

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 adviser of Sasol Limited. He is also the deputy chairman of Sasol Oil (Pty) Limited.


BJM (BARBARA) MASEKELA


Qualifications: BA (cum laude) (Ohio University)

Titles:


> Member of the Altron nomination committee

Experience: Lectured at Rutgers University USA 1972 to 1982 as Assistant Professor of English Literature.

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.

Barbara continues to serve as a trustee of the Nelson Mandela Children’s Fund.

Previous board memberships include the Standard Bank of South Africa, the SABC and the International Marketing Council.


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JRD (JACOB) MODISE

Date of birth: 9 September 1966 (44)

Qualifications: BCom (Wits); BAcc (Wits); CA(SA); MBA (Wits); AMP (Samford); AMP (Harvard)

Titles:


> Chairman of the Altron remuneration committee


Experience: Currently chief executive officer of the Road Accident Fund and chairman of Batsomi Investment Holdings Limited.

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.

Major directorships include Eskom Holdings Limited, Thales SA and ARB Electrical Wholesalers (Pty) Limited. Serves as a trustee of

the Nelson Mandela Children’s Fund.

Member of the South African Institute of Chartered Accountants and Association of Black Accountants of South Africa.

Previous board memberships include MTN, M-Net, MultiChoice, The Premier Group and Tsogo Casino.


DNM (DAWN) MOKHOBO

Date of birth: 30 October 1948 (62)

Qualifications: BA (SocSci), UNIN; Programme in Strategic Transformation, Graduate School of Business (Stellenbosch)

Titles:


Experience: Dawn is one of South Africa’s leading managers and businesswomen, with a highly successful and pioneering career

spanning the public, private and parastatal sectors. Her talents and accomplishments were recognised in particular by her

appointment as the first black woman to the management board of Eskom, as executive director in charge of growth and

development.

Prior to this, Dawn worked as a senior manager and senior general manager (human resources) for Eskom and as senior divisional

health education manager for the Anglo American Corporation.

Dawn’s talents and achievements have been widely recognised and acclaimed both locally and offshore. In 1993, she received the

prestigious South African Businesswoman of the Year award. In 1994, she was honoured with an invitation to serve as one of the

independent electoral commissioners who supervised the country’s first democratic elections. In 1995, she was invited by the

Minister of Safety and Security to serve as chairman of the high-powered promotions committee for the South African Police

Service. In 1996, Dawn was nominated as the chairman of UN Special Committee of Experts appointed to address the global issue

of women and senior economic decision-making.

Her board memberships include Engen Limited, Massmart Holdings Limited, Sabvest Limited, Wesizwe Platinum Limited and

Partnership Investments (Pty) Limited.


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Directorate profile continued

PD (DAVID) REDSHAW

Date of birth: 29 January 1942 (69)

Qualifications: BA (Hons) (Birmingham); ACMA

Titles:


> Chairman of Bytes UK

Experience: 45 years in senior financial and general management positions.


AMR (ALEX) SMITH

Date of birth: 12 January 1969 (42)

Qualifications: Bachelor of Law (Honours) (Edinburgh); CA

Titles:


> Non-executive director of Altech, Bytes, Powertech and various other group companies

> Member of the Altron executive committee and risk management committee

Experience: 14 years of experience in the accounting profession with PricewaterhouseCoopers, both in the UK and South Africa.

Initially involved in auditing, later spending eight years in the transaction services/corporate finance fields.

Five years of financial management experience with the Altron group.

Alex is a member of the Institute of Chartered Accountants of Scotland.


CG (CRAIG) VENTER


Qualifications: BA (Econ) (UCLA); BA (Psychology) (UCLA); MBA (USC); MSc (Mgmt Science) (USC)

Titles:



> Director of Altech Netstar, Altech Autopage Cellular, Kenya Data Networks, Swift Global (Kenya) and various other subsidiaries

of the Altech group, both local and global

> Chairman of Altech’s executive committee, Altech Autopage Holdings, Arrow Altech Holdings, Altech Alcom Matomo, Altech UEC

Multi-media and Altech Information Technologies, Altech NuPay and the Altech Academy

> Member of Altron’s executive committee and risk management committee, as well as Altech’s business risk committee

> Member of the world-wide Young Presidents’ Organisation (YPO)

> Board member of the Ministry of Science and Technology’s Technology Innovation Agency (TIA)

Experience: 22 years in senior management positions in the Altech group.


PL (PETER) WILMOT

Date of birth: 13 March 1940 (71)

Qualifications: CA(SA)

Titles:


> Chairman of the Altron audit committee

> Member of the Altron remuneration committee and risk management committee

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 former

director of Brait S.A., Edgars Consolidated Stores Limited, Allied Technologies Limited and Bytes Technology Group Limited.


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Letter from the chairman

Altron House

4 Sherborne Road

Parktown

2193

27 May 2011

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 Friday, 15 July 2011 at 09:30 in The Altron Boardroom, 5 Winchester Road, Parktown. If you are

unable to attend, please arrange to vote by proxy in accordance with the instructions on the proxy form.

For the first time in our group’s history, Altron will be making provision for its shareholders or their proxies to participate in the

annual general meeting by way of electronic communication. For further details in this regard, please refer to Altron’s notice of

annual general meeting (page 245).

The board recognises the importance of its shareholders’ presence at the annual general meeting. This is an opportunity for

shareholders to participate in discussions 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 auditor and head of internal audit will be present

to respond to questions from shareholders.

The notice of meeting, which is set out on pages 242 to 245 of the integrated 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 – Non-executive Chairman


Notice of annual general meeting

Allied Electronics Corporation Limited

Incorporated in the Republic of South Africa

(Registration number 1947/024583/06)

(Share code: ATN) (lSlN: ZAE000029658)

(Share code: ATNP) (ISIN: ZAE000029666)

(“Altron” or “the company”)

Notice is hereby given to shareholders recorded in the

company’s securities register on 8 June 2011, that the sixty-

fifth annual general meeting of the shareholders of Altron

will be held in The Altron Boardroom, 5 Winchester Road,

Parktown, Johannesburg, on Friday, 15 July 2011 at 09:30, to

(i) deal with such business as may lawfully be dealt with at

the meeting and (ii) consider and, if deemed fit, pass, with or

without modification, the ordinary and special resolutions set

out hereunder in the manner required by the Companies Act,

71 of 2008, as amended (“the Act”), as read with the Listings

Requirements of the JSE Limited (“JSE Listings Requirements”)

on which exchange the company’s ordinary and participating

preference shares are listed, which meeting is to be participated

in and voted at by shareholders as at the record date of

Thursday, 7 July 2011.

Kindly note that meeting participants (including shareholders and proxies) are required to provide reasonably satisfactory identification before being entitled to attend or participate in a shareholders’ meeting. Forms of identification include valid identity documents, driver’s licences and passports.

When reading the resolutions below, please refer to the

explanatory notes for the resolutions on pages 246 to 250.

1. Presentation of annual financial statements

The consolidated audited annual financial statements

of the company and its subsidiaries (as approved by the

board of directors of the company), incorporating the

external auditor, audit committee and directors’ reports for

the year ended 28 February 2011, have been distributed

as required and will be presented.

The complete annual financial statements are set out on

pages 145 to 235 of this integrated annual report.

2. Ordinary resolution number 1: Re-election of directors

To re-elect, by way of a series of votes, each of which is on

the candidacy of a single individual to fill a single vacancy,

the following directors retiring, in terms of article 16(1) of

the company’s memorandum of incorporation, and who,

being eligible, have offered themselves for re-election:

2.1 Dr WP Venter

2.2 Mr MC Berzack

2.3 Dr PM Maduna

2.4 Ms BJM Masekela

2.5 Mr PL Wilmot

2.6 Mr CG Venter

Brief biographies in respect of each director offering himself/

herself for re-election are contained on pages 236 to 240 of

this integrated annual report.

3. Ordinary resolution number 2: Reappointment of

external auditor

That upon the recommendation of the current Altron audit

committee, KPMG Inc. be reappointed as the independent

registered auditor of the company until the conclusion of

the next annual general meeting.

4. Ordinary resolution number 3: Election of audit

committee members

That shareholders elect, each by way of a separate vote,

the following independent, non-executive directors, as

members of the Altron audit committee, with effect from

the end of this annual general meeting:

4.1 Mr PL Wilmot*

4.2 Mr NJ Adami

4.3 Mr MJ Leeming

4.4 Mr JRD Modise

* Subject to his re-election as a director pursuant to ordinary resolution number 1.

Brief biographies of those independent non-executive directors

offering themselves for election as members of the Altron

audit committee are enclosed in the report of the Altron

audit committee contained on pages 150 to 152 of this

integrated annual report, as well as in the explanatory notes

accompanying this notice of annual general meeting.

5. Ordinary resolution number 4: Endorsement of Altron

remuneration policy

That shareholders endorse, by way of a non-binding

advisory vote, the company’s remuneration policy

(excluding the remuneration of the non-executive directors

and the members of board committees for their services as

directors and members of committees), as set out in this

integrated annual report on pages 135 to 142.

6. Ordinary resolution number 5: General authority to

directors to allot and issue authorised but unissued

ordinary and participating preference shares

That as required by and subject to the memorandum of

incorporation and the requirements of the Act and the JSE

Listings Requirements, the directors be authorised, as they

in their discretion think fit, to allot and issue the unissued

ordinary and/or participating preference shares of the

company, subject to the following:

> the authority shall be valid until the date of the next

annual general meeting of the company, provided it

shall not extend beyond 15 months from the date of

this annual general meeting;

> issues in terms of this authority will not, in any financial

year, in aggregate, exceed 5% of the number of ordinary

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shares in the company’s issued ordinary share capital as

at 28 February 2011;

> issues in terms of this authority will not, in any financial

year, in aggregate, exceed 5% of the number of

participating preference shares in the company’s issued

participating preference share capital as at 28 February

2011, provided that this limitation will not apply to the

issue of participating preference shares in terms of any

Altron group 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 5%

threshold has been reached, any participating

preference shares issued in terms of the rules of any

such 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 such share incentive scheme shall not

be subject to limitation, other than in terms of the

rules applicable to that scheme.

7. Ordinary resolution number 6: General authority to

issue shares for cash

That subject to renewal of the general authority proposed

in terms of ordinary resolution number 5 above and 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, on

the following basis:

> any such issue of shares shall be to public shareholders

as defined by the JSE Listings Requirements and not to

related parties;

> this authority shall only be valid until the next annual

general meeting of the company, provided it shall not

extend beyond 15 months from the date of this annual

general meeting;

> a paid press announcement giving details, including the

impact on net asset value and earnings per 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 of shares (excluding issues of shares

exercised in terms of any Altron group share incentive

scheme) in any one financial year, shall not, in

aggregate, exceed 5% of the number of shares of any

class of the company’s issued share capital; and

> 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.

8. Special resolution number 1: General authority to

acquire (repurchase) shares

That the company and/or any subsidiary of the company

is hereby authorised, by way of a general authority, from

time to time, to acquire ordinary and/or participating

preference shares in the share capital of the company from

any person in accordance with the requirements of Altron’s

memorandum of incorporation, the Act and the JSE Listings

Requirements, provided 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 earlier

of the company’s next annual general meeting or the

variation or revocation of such general authority by

special resolution at any subsequent general meeting of

the company, provided that it shall not extend beyond

15 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 5% of the company’s ordinary

and/or 5% of its 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 acquisition of

such ordinary and/or participating preference shares;

> the company has been given authority by its

memorandum of incorporation;

> the board of directors authorises the acquisition, the

company passes the solvency and liquidity test and

that from the time that the test is done, there are

no material changes to the financial position of the

company;

> at any point in time, the company and/or its subsidiaries

may only appoint one agent to effect any such

acquisition;


Notice of annual general meeting continued

> the company and/or its subsidiaries undertaking

that they will not enter the market to so acquire the

company’s shares 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; and

> the company and/or its subsidiaries not acquiring 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.

9. Special resolution number 2: Remuneration of non-

executive directors

That in terms of article 15.6 of the company’s

memorandum of incorporation, the remuneration payable

to the non-executive directors for the 12-month period

commencing on 1 September 2011, be set as follows:

Proposedannual

remunerationR

Proposedannual

retainerR

Proposedattendance

remuneration/meeting

R

Altron chairman R4 025 8751

Altron lead independent director R144 000 R28 8002

Altron board member R90 000 R18 0003

Altron audit committee chairman R75 000 R23 000

Altron audit committee member R37 000 R11 500

Altron remuneration committee chairman R40 000 R18 500

Altron remuneration committee member R30 000 R7 500

Altron risk management committee chairman R50 000 R20 000

Altron risk management committee member R27 000 R10 000

Altron nomination committee chairman R45 0004 R16 500

Altron nomination committee member R20 000 R7 000

¹ The chairman’s remuneration is on an all-inclusive basis. This includes his

remuneration for serving on the various Altron, Altech, Bytes and

Powertech boards, both locally and offshore, as well as his remuneration

for acting as a member of the Altron remuneration and nomination

committees. The chairman does not serve on the boards of any

companies, public or private, external to the Altron group and the Venter

family.

² The remuneration payable to the lead independent director is in

substitution for the board remuneration payable to other non-executive

directors. Notwithstanding the aforegoing, the lead independent director

will be entitled to the same attendance remuneration per meeting

payable to the other non-executive directors, in respect of any special

board meetings which he attends.

³ The same remuneration is payable to those board members who attend

special board meetings.4 The nomination committee has historically only met once per annum.

10. Special resolution number 3: Financial assistance to

directors, prescribed officers, employee share scheme

beneficiaries and related or interrelated companies and

corporations

That the board of directors of the company may, to the

extent required by and subject to sections 44 and 45 of

the Act and the requirements (if applicable) of the:

i) company’s memorandum of incorporation; and

ii) JSE Listings Requirements,

authorise the company to provide direct or indirect

financial assistance to a director or prescribed officer of

the company or of a related or interrelated company,

or to a related or interrelated company or corporation,

or to a member of a related or interrelated corporation,

or to any beneficiary participating in any Altron group

share incentive scheme, or to a person related to any

such company, corporation, director, prescribed officer,

beneficiary or member, provided that no such financial

assistance may be provided at any time in terms of this

authority after the expiry of two years from the date of

the adoption of this special resolution number 3.

11. Special resolution number 4: Adoption of amended

memorandum of incorporation

That the memorandum of incorporation of the company

adopted by shareholders on 11 May 2009 be hereby

substituted by the adoption of an amended memorandum

of incorporation, which has been initialled by the

chairman of the annual general meeting for purposes of

identification.

The salient features of the amended memorandum of

incorporation have been included in the explanatory notes

to this notice of annual general meeting. The complete

memorandum of incorporation, as amended, will lie

for inspection at the company’s registered office from

8 June 2011 to 15 July 2011.

page 245

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Voting and proxies

In terms of the Act, no voting rights attaching to the treasury

shares held by Altron Finance (Pty) Limited, a subsidiary of the

company, may be exercised.

Ordinary and participating preference shareholders holding

their shares in certificated form or in dematerialised form with

“own name” registration are entitled to attend and speak at

the annual general meeting and, with the exception of special

resolutions numbers 1, 3 and 4 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 holding

dematerialised shares in their own name, or who hold shares

that are not dematerialised, who are entitled to attend and

vote at the meeting may appoint one or more proxies to

attend, speak and, in respect of the applicable resolution/s,

vote in their stead. A proxy does not have to be a shareholder

of the company. The appointment of a proxy will not preclude

the shareholder who appointed that proxy from attending

the annual general meeting and participating and, where

applicable, voting in person thereat to the exclusion of any such

proxy. A form of proxy for use at the meeting is attached.

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 that 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.

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.

It is requested that 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 Thursday, 14 July 2011.

Please note that the company intends to make provision

for shareholders of the company, or their proxies, who are

entitled to attend thereat, to participate in the annual general

meeting by way of electronic communication. In this regard, the

company intends making video-conferencing facilities available

at the following locations:

> The Altron Boardroom, 5 Winchester Road, Parktown,

Johannesburg; and

> Bytes Systems Integration Boardroom, 4th Floor, The Park,

Park Road, Pinelands, Cape Town.

Should you wish to participate in the annual general meeting

by way of electronic communication as aforesaid, you,

or your proxy, will be required to attend at either of the

abovementioned locations on the date of the annual general

meeting. The abovementioned locations will be linked to

each other by means of a real-time video feed on the date of,

and from the time of commencement of, the annual general

meeting. The real-time video feed will enable all persons to

participate electronically in the annual general meeting in

this manner and to communicate concurrently with each

other without an intermediary, and to participate reasonably

effectively in the annual general meeting. The cost of the video

conferencing facilities described will be for the account of the

company.

By order of the board

Altron Management Services (Pty) Limited – Secretaries

per: AG Johnston – Group Company Secretary

31 May 2011

Transfer secretaries

Computershare Investor Services (Pty) Limited

70 Marshall Street

Johannesburg, 2001

(PO Box 61051, Marshalltown, 2107)


AGM explanatory notes

1. Re-election of directors

In accordance with the company’s memorandum of

incorporation, one-third of the directors are required to retire

at each annual general meeting and may offer themselves

for re-election. Drs WP Venter and PM Maduna, and Messrs

MC Berzack, BJM Masekela, PL Wilmot and CG Venter retire

from the board in accordance with article 16.1 of the

company’s memorandum of incorporation.

A brief biography in respect of each director offering himself/

herself for re-election is contained on pages 236 to 240 of


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 the 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 nomination committee of the company

has conducted a rigorous assessment of the performance

of each of the retiring directors and has reviewed the

skills, knowledge, experience, diversity and demographics

represented on the board. The nomination committee has

satisfied itself that none of the independent non-executive

directors’ independence of character and judgement has

in any way been affected or impaired by their length of

service on the board. Having received the results of these

assessments and reviews, the board is satisfied that each of

the directors standing for re-election, performance continues

to be effective and demonstrates commitment to their roles.

Accordingly, the board recommends to shareholders the

re-election of each of the retiring directors referred to in

ordinary resolution number 1, by way of a series of votes,

each of which is on the candidacy of a single individual to fill

a single vacancy, as required under section 68(2) of the Act.

2. Reappointment of external auditor

KPMG Inc. has indicated its willingness to continue in

office and ordinary resolution number 2 proposes the

reappointment of that firm as the company’s external

auditor until the conclusion of the next annual general

meeting.

At an Altron audit committee meeting held on

24 February 2011, the committee considered the

independence of the external auditor KPMG Inc., in

accordance with section 270A of the Companies Act, 1973,

(as amended) which has since been superseded by the Act.

In assessing the independence of the external auditor, 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 sub-holding companies to KPMG Inc. during the

financial year under review in relation to its total fee base;

> does not provide consulting or non-audit-related services

to Altron or its sub-holding companies which fall outside

the permitted or qualified non-audit-related services

as specified in the policy for the use of the external

auditor for non-audit-related services and which could

compromise or impair the external auditors’ independence

(see audit committee report on page 150); and

> including the individual registered auditor who undertakes

the audit, does not have personal or business relationships

of immediate family, close relatives, partners or retired

partners, either directly or indirectly, with Altron or its sub-

holding companies.

Accordingly, the Altron audit committee was 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

auditor for the 2011/2012 financial year. On 25 February

2011, the Altron board, subject to shareholder approval as

required in terms of section 90(1) of the Act, reappointed

KPMG Inc. and Mr NH Southon as the independent

registered audit firm and individual registered auditor of

Altron respectively.

Furthermore, the Altron audit committee has, in terms of

paragraph 3.86 of the JSE Listings Requirements, considered

and satisfied itself that KPMG Inc., the reporting accountant

page 247

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and individual auditor are accredited to appear on the JSE

List of Accredited Auditors, in compliance with section 22 of

the JSE Listings Requirements.

3. Election of audit committee members

In terms of section 94(2) of the Act, the audit committee

is no longer a committee of the board, but a committee

elected by the shareholders at each annual general meeting.

Chapter 3 of the King Report on Governance for South Africa

2009 (King III) likewise requires the shareholders of a public

company to elect the members of an audit committee at

each annual general meeting. In accordance therewith the

nomination committee should present shareholders with

suitable candidates for election as audit committee members.

In terms of the Companies Regulations, at least one-third

of the members of the company’s audit committee at

any particular time must have academic qualifications,

or experience, in economics, law, corporate governance,

finance, accounting, commerce, industry, public affairs or

human resource management. As can be seen from the CVs

of the proposed members, they have experience in audit,

accounting, economics, commerce and general industry,

among others.

At a meeting of the nomination committee held on

23 February 2011, the committee satisfied itself that,

among others, the independent, non-executive directors

offering themselves for election as members of the Altron

audit committee:

> are independent non-executive directors as contemplated

in King III and the JSE Listings Requirements;

> are suitably qualified and experienced for audit committee

membership (see the report of the audit committee which

appears on pages 150 to 152 of this integrated annual

report);

> have an understanding of integrated annual reporting

(including financial reporting), internal financial controls,

external and internal audit processes, risk management,

sustainability issues and the governance processes

(including information technology governance) within

the company;

> collectively possess skills which are appropriate to the

company’s size and circumstances, as well as its industry;

> have an understanding of International Financial

Reporting Standards, South African Statements of

Generally Accepted Accounting Practice and other

financial and sustainability reporting standards,

regulations and guidelines applicable to the company; and

> adequately keep up to date with key developments

affecting their required skills set.

For further details regarding the performance of the audit

committee during the period under review, please refer

to the report of the audit committee which appears on

pages 150 to 152 of this integrated annual report.

4. Altron remuneration policy

Chapter 2 of King III, dealing with boards and directors,

requires companies to every year table their remuneration

policy to shareholders for a non-binding advisory vote at

the annual general meeting. This vote enables shareholders

to express their views on the remuneration policies adopted

in the remuneration of executive directors and on their

implementation.

Altron’s remuneration policy, which is titled “The Altron

Reward Strategy”, is contained on pages 135 to 142 of

this integrated annual report. The remuneration policy

deals with, among others, Altron’s approach towards

remuneration governance, reward philosophy and strategy

and guidelines on the various components making up

the remuneration packages of Altron group employees

including the remuneration arrangements in place for the

non-executive directors.

Ordinary resolution number 4 is of an advisory nature only

and failure to pass this resolution will therefore not have

any legal consequences relating to existing arrangements.

However, the board will take the outcome of the vote into

consideration when considering the company’s remuneration

policy in the remuneration of executive directors.

5. General authority to directors to allot and issue authorised

but unissued ordinary and participating preference shares

and general authority to issue shares for cash

In terms of the company’s memorandum of incorporation,

read with the JSE Listings Requirements, the shareholders may

authorise the directors to allot and issue the authorised but

unissued shares, as the directors in their discretion think fit.

In terms of the JSE Listings Requirements, when shares are

issued for cash (or the extinction of a liability, obligation or

commitment, restraint or settlement of expenses), among

others, the shareholders have to authorise the issue.

The existing general authorities granted by the shareholders

at the previous annual general meeting, held on 14 July

2010, will expire at the annual general meeting to be held on


AGM explanatory notes continued

15 July 2011, unless renewed. The authorities will be subject

to the Act and the JSE Listings Requirements. The aggregate

number of ordinary and participating preference shares able

to be allotted and issued in terms of these authorities are

limited as set out in the respective resolutions.

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. General authority to acquire (repurchase) shares

The reason for and effect of this special resolution is to grant

the company and its subsidiaries a general authority to

facilitate the acquisition by the company and/or its

subsidiaries of the company’s own shares, which general

authority shall be valid until the earlier of the next annual

general meeting of the company or the variation or revocation

of such general authority by special resolution at any

subsequent general meeting of the company, provided that

this general authority shall not extend beyond 15 months

from the date of the passing of this special resolution

number 1. Any decision by the directors, after considering the

effect of an acquisition of up to 5% of the company’s issued

ordinary and/or 5% of its participating preference shares, as

the case may be, to use the general authority to acquire shares

of the company will be taken with regard to the prevailing

market conditions and other factors and provided that, after

such acquisition, the directors are of the opinion that:

> the company and its subsidiaries will be able to pay their

debts in the ordinary course of business;

> recognised and measured in accordance with the

accounting policies used in the latest audited annual

group financial statements, the assets of the company

and its subsidiaries will exceed the liabilities of the

company and its subsidiaries;

> the share capital and reserves of the company and its

subsidiaries will be adequate for the purposes of the

business of the company and its subsidiaries; and

> the working capital of the company and its subsidiaries

will be adequate for the purposes of the business of the

company and its subsidiaries,

for the period of 12 months after the date of the notice of

the annual general meeting.

The company will ensure that its sponsor will provide the

necessary letter on the adequacy of the working capital

in terms of the JSE Listings Requirements, prior to the

commencement of any purchase of the company’s shares

on the open market.

The JSE Listings Requirements require, in terms of section

11.26, the following disclosures, which appear in this

integrated annual report:

> Directors and management – refer to pages 236 to 240 of


> Major shareholders – refer to page 148 of this integrated

annual report.

> Directors’ interests in securities – refer to pages 146 and

147 of this integrated annual report.

> Share capital of the company – refer to page 179 of this


Litigation statement

In terms of paragraph 11.26 of the JSE Listings

Requirements, the directors, whose names appear on

pages 236 to 240 of this integrated annual report of which

the notice of annual general meeting 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 months, a material

effect on the Altron group’s financial position.

Directors’ responsibility statement

The directors, whose names appear on pages 236 to 240 of

this integrated 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

integrated annual report, there have been no material

changes in the financial or trading position of the company

and its subsidiaries since the date of signature of the audit

report and up to the date of the notice of annual general

meeting.

The directors have no specific intention, at present, for the

company or its subsidiaries to acquire 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.

page 249

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 of its subsidiaries to

be in a position to acquire the shares issued by the company

through the order book of the JSE, should the market

conditions, tax dispensation and price justify such an action.

7. Remuneration of non-executive directors

In terms of section 66(8) – (9) of the Act, which took effect

on 1 May 2011, remuneration may only be paid to directors,

for their service as directors, in accordance with a special

resolution approved by the shareholders within the previous

two years and if not prohibited in terms of a company’s

memorandum of incorporation.

Special resolution number 2 is required to obtain the

approval of the company, in general meeting, of the revised

remuneration payable to the non-executive directors for the

12-month period commencing with effect from 1 September

2011. Increases in remuneration are only implemented after

formal approval by shareholders.

This resolution is recommended by the company’s board of

directors. Full particulars of all remuneration of non-executive

directors for their services as directors, paid during the past

year, as well as the process followed by the remuneration

committee in recommending the remuneration of non-

executive directors for their service as directors, are contained

on pages 122 to 142 of this integrated annual report.

Altron’s remuneration committee is satisfied, having

engaged external remuneration consultants to review the

non-executive directors’ remuneration, these are relative to

the median remuneration paid to non-executive directors of

other similar-sized public listed companies in South Africa for

their service as directors.

8. Financial assistance to directors, prescribed officers,

employee share scheme beneficiaries and related or

interrelated companies and corporations

Notwithstanding the title of section 45 of the Act, being

“Loans or other financial assistance to directors”, on a proper

interpretation, the body of the section may also apply to

financial assistance provided by a company to related or

interrelated companies and corporations, including, among

others, its subsidiaries, for any purpose.

Furthermore, section 44 of the Act may also apply to the

financial assistance so provided by a company to related

or interrelated companies, in the event that the financial

assistance is provided for the purpose of, or in connection

with, the subscription of any option, or any securities, issued

or to be issued by the company or a related or interrelated

company, or for the purchase of any securities of the

company or a related or interrelated company.

Both sections 44 and 45 of the Act provide, among others,

that the particular financial assistance must be provided

only pursuant to a special resolution of the shareholders,

adopted within the previous two years, which approved such

assistance either for the specific recipient, or generally for

a category of potential recipients, and the specific recipient

falls within that category and the board of directors must be

satisfied that:

(a) immediately after providing the financial assistance, the

company would satisfy the solvency and liquidity test;

and

(b) the terms under which the financial assistance is

proposed to be given are fair and reasonable to the

company.

When the need previously arose, the company had to provide

loans to and guarantees to loans or other obligations of

subsidiaries and was not precluded from doing so in terms

of its articles of association or in terms of the Companies

Act, 1973 (as amended). The company would like the

ability to provide financial assistance, if necessary, also

in other circumstances, in accordance with section 45 of

the Act. Furthermore, it may be necessary or desirous for

the company to provide financial assistance to related or

interrelated companies and corporations to subscribe for

options or securities or purchase securities of the company

or another company related or interrelated to it. Under the

Act, the company will, however, require the special resolution

referred to above to be adopted. In the circumstances

and in order to, among others, ensure that the company’s

subsidiaries and other related and interrelated companies

and corporations have access to financing and/or financial

backing from the company (as opposed to banks), it is

necessary to obtain the approval of shareholders, as set out

in special resolution number 3.

Sections 44 and 45 contain exemptions in respect of

employee share schemes that satisfy the requirements of

section 97 of the Act. To the extent that any Altron group

share incentive scheme does not satisfy such requirements,

financial assistance (as contemplated in sections 44 and 45)

to be provided under any such scheme will, among others,

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also require approval by special resolution. Accordingly,

special resolution number 3 authorises financial assistance

to any of the company’s directors or prescribed officers (or

any person related to any of them or to any company or

corporation related or interrelated to them), or to any other

person who is a beneficiary of any of the Altron group share

incentive schemes, in order to facilitate their participation in

any such scheme that does not satisfy the requirements of

section 97 of the Act.

9. Adoption of amended memorandum of incorporation

The company’s existing memorandum of incorporation

(formerly its articles of association) was adopted by

shareholders at a general meeting of shareholders held on

11 May 2009. Since then, certain corporate governance

requirements and market-related conditions emerged

which have warranted the board amending the company’s

memorandum of incorporation. Accordingly, it has been

considered appropriate to adopt an amended memorandum

of incorporation that incorporates these changes.

Salient features of the amended memorandum of

incorporation

The following changes are contained in the amended

memorandum of incorporation of the company:

> The inclusion of a new article 9.2 – Odd-lot offers

This amendment to the memorandum of incorporation

is to provide a mechanism to facilitate the reduction

in the number of registered shareholders holding in

aggregate less than 100 shares (or such higher number as

determined and/or agreed by the JSE as amounting to an

odd lot) in the company, in an equitable manner.

> The amendment to article 16.1 – Rotation of directors

This amendment is to provide for the retirement by

rotation at any annual general meeting of:

– any directors (executive or non-executive) who have

reached the age of 70 years or older, in order that

the board and nomination committee may consider

their continuation (or not) in service as a director,

pursuant where to a person considered to be suitable to

continue service on the board could be proposed to the

shareholders for re-election as a director; and

– the retirement of a director who has held office for an

aggregate period of nine years since his first election

or appointment, in order to enable the board and the

nomination committee to conduct an assessment of

his independence from the company that could be

published to shareholders for their consideration if

the decision is reached to put the director forward for

re-election.

> The amendment to article 36 – Dividend cheques

In recent years, Altron has noted a significant increase in

attempted cheque fraud relating to the payment of low-

value dividend cheques. This is particularly so regarding

dividend cheques drawn in favour of shareholders who

have not yet dematerialised their scrip.

The amendment to article 36 is accordingly aimed at

limiting and/or preventing the fraudulent dealing in

low-value cheques. In future, all entitlements payable to

shareholders who hold shares in certificated form or who

have not yet complied with the applicable requirements

to effect payment electronically, will not be paid their

dividends by way of a cheque (unless otherwise requested

in writing), but will have their dividends suppressed

and retained in the company’s unclaimed dividend or

distribution (entitlement) account, whereafter it may

be claimed by the shareholder in accordance with the

memorandum of incorporation and by submitting a

written claim in the form prescribed by the directors.

The complete memorandum of incorporation, as amended,

will lie for inspection at the company’s registered office from

8 June 2011 to 15 July 2011.

Save for ordinary resolution number 6, which requires the

approval of a 75% majority of the votes cast by shareholders

present or represented by proxy at the annual general

meeting in terms of the JSE Listings Requirements, all

other ordinary resolutions will, in terms of the Act, require

the support of more than 50% of the voting rights of

shareholders exercised thereon, to be approved.

In order for special resolution number 1 to be approved,

the support of at least 75% of the votes cast by all

equity securities holders present or represented by proxy

at the annual general meeting convened to approve

such resolution, is required in terms of the JSE Listings

Requirements. The remaining special resolutions will, in

terms of the Act, require the support of at least 75% of the

total voting rights exercised thereon at the meeting, to be

approved.

AGM explanatory notes continued

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Form of proxy

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-FIFTH ANNUAL GENERAL MEETING TO BE HELD IN THE ALTRON BOARDROOM, 5 WINCHESTER ROAD, PARKTOWN, JOHANNESBURG, ON FRIDAY, 15 JULY 2011 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,

2. 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-fifth annual general meeting of the company which will be held on Friday, 15 July 2011 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. Ordinary resolution number 1: Re-election of directors1.1 Dr WP Venter1.2 Mr MC Berzack1.3 Dr PM Maduna1.4 Ms BJM Masekela 1.5 Mr PL Wilmot1.6 Mr CG Venter

2. Ordinary resolution number 2: Reappointment of external auditor

3. Ordinary resolution number 3: Election of audit committee3.1 Mr PL Wilmot 3.2 Mr NJ Adami3.3 Mr MJ Leeming3.4 Mr JRD Modise

4. Ordinary resolution number 4: Endorsement of Altron remuneration policy

5. Ordinary resolution number 5: General authority of directors to allot and issue authorised but unissued ordinary and participating preference shares

6. Ordinary resolution number 6: General authority to issue shares for cash

7. Special resolution number 1: General authority to acquire (repurchase) shares

8. Special resolution number 2: Remuneration of non-executive directors

9. Special resolution number 3: Financial assistance to directors, prescribed officers, employee share scheme beneficiaries and related and interrelated companies and corporations

10. Special resolution number 4: Adoption of amended memorandum of incorporation

Please indicate with an “X” in the appropriate spaces provided above how you wish your vote to be cast. If no indication is given, the proxy will be entitled to vote or abstain as he/she deems fit.

Signed at on 2011

Signature

Assisted by me (where applicable)


1. An ordinary shareholder holding dematerialised shares by “own name” registration, or who holds shares that are not

dematerialised, may insert the name of a proxy or the names of two alternative proxies of the ordinary shareholder’s choice

in the space provided, with or without deleting “the chairman of the annual general meeting”. The person whose name stands

first on the proxy form and who is present at the annual general meeting will be entitled to act as proxy to the exclusion of

those whose names follow. Should a proxy not be specified, this will be exercised by the chairman of the annual general

meeting. A proxy need not be a shareholder of the company.

2. An ordinary shareholder is entitled to one vote on a show of hands and, on a poll, to that proportion of the total votes in the

company which the aggregate amount of the nominal value of the shares held by him/her bears to the aggregate amount of

the nominal value of all the shares (i.e. both ordinary and participating preference shares) issued by the company. 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 “X” in the appropriate box indicates the maximum number of votes exercisable by

that shareholder. Failure to comply with the above will be deemed to authorise the proxy to vote or to abstain from voting at

the annual general meeting as he/she deems fit in respect of the entire shareholder’s votes exercisable thereat. An ordinary

shareholder or his/her 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. The completion and lodging of this proxy form will not preclude the relevant shareholder from attending the annual general

meeting and speaking and voting in person thereat instead of any proxy appointed in terms hereof.

5. 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.

6. The chairman of the annual general meeting may reject or accept any proxy form which is completed and/or received other

than in compliance with these notes.

7. A proxy may not delegate his/her authority to act on behalf of the shareholder, to another person.

8. It is requested that 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 Thursday, 14 July 2011 at 09:30.

ADDITIONAL FORMS OF PROXY ARE AVAILABLE FROM THE TRANSFER SECRETARIES ON REQUEST.

Notes to form of proxy

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Form of proxy


(Incorporated in the Republic of South Africa)

(Registration number 1947/024583/06) (Share code: ATNP) (ISIN: ZAE000029666)


FORM OF PROXY FOR THE SIXTY-FIFTH ANNUAL GENERAL MEETING TO BE HELD IN THE ALTRON BOARDROOM, 5 WINCHESTER

ROAD, PARKTOWN, JOHANNESBURG, ON FRIDAY, 15 JULY 2011 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 (address)

being the registered holder(s) of participating preference shares in the capital of the company do

hereby appoint:

1. or failing him/her

2. 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-fifth annual

general meeting of the company which will be held on Friday, 15 July 2011 at 09:30 and at any adjournment thereof, for the

purpose of considering and, if deemed fit, passing, with or without modification, the special resolutions to be proposed thereat,

other than special resolution number 2, and to vote for and/or against the relevant special resolutions 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-fifth 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 acquire (repurchase) shares

2. Special resolution number 3: Financial assistance to directors, prescribed officers, employee share scheme beneficiaries and related or interrelated companies and corporations

3. Special resolution number 4: Adoption of amended memorandum of incorporation

Signed at on 2011

Signature



Notes to form of proxy

1. A participating preference shareholder holding dematerialised shares by “own name” registration, or who holds shares that are not dematerialised, 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, with or without deleting “the chairman of the annual general meeting”. The person whose name stands first on the proxy form and who is present at the general meeting will be entitled to act as proxy to the exclusion of those whose names follow. Should a proxy not be specified, this will be exercised by the chairman of the annual general meeting. A proxy need not be a shareholder of the company.

2. A participating preference shareholder or his/her proxy is entitled to attendance at the annual general meeting, and to speak but not vote thereat (except in respect of special resolutions numbers 1, 3 and 4) in terms of the company’s memorandum of incorporation. A participating preference shareholder is entitled to one vote on a show of hands and, 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 (i.e. both ordinary and participating preference shares) in the company. A participating preference shareholder’s instructions to the proxy must be indicated by inserting the relevant number of votes exercisable by the participating preference shareholder in the appropriate box(es). An “X” in the appropriate box indicates the maximum number of votes exercisable by that shareholder. Failure to comply with the above will be deemed to authorise the proxy to vote or to abstain from voting at the annual general meeting (but only on special resolutions numbers 1, 3 and 4) as he/she/it deems fit in respect of the entire shareholder’s votes exercisable thereat. A participating preference shareholder or his/her proxy is not obliged to use all the votes exercisable by the participating preference 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 participating preference shareholder.

3. If any participating preference shareholder does not indicate on this instrument that his/her proxy is to vote in favour of or against special resolutions numbers 1, 3 and 4, 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 in respect of which a participating preference shareholder is entitled to vote, the proxy shall be entitled to vote as he/she thinks fit.

4. The completion and lodging of this proxy form will not preclude the relevant shareholder from attending the annual general meeting and speaking and, where applicable, voting in person thereat instead of any proxy appointed in terms hereof.

5. 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.

6. The chairman of the annual general meeting may reject or accept any proxy form which is completed and/or received other than in compliance with these notes.

7. A proxy may not delegate his/her authority to act on behalf of the shareholder, to another person.

8. It is requested that 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 Thursday, 14 July 2011 at 09:30.

ADDITIONAL FORMS OF PROXY ARE AVAILABLE FROM THE TRANSFER SECRETARIES ON REQUEST.

page 255

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Election form


(Incorporated in the Republic of South Africa)

(Registration number 1947/024583/06)

(Share code: ATN) (lSlN: ZAE000029658)

(Share code: ATNP) (ISIN: ZAE000029666)


To:The DirectorsAllied Electronics Corporation Limited

I/We, the undersigned

(please print)

of address

being the registered holder(s) of:

ordinary shares in the capital of the company and/or

participating preference shares in the capital of the company

do hereby elect to receive any documents or notices from Altron, by electronic post, to the extent that the company is permitted to so distribute any notices, documents, records or statements in terms of the Companies Act, No 71 of 2008, as amended, and any and every other statute, ordinance, regulation or rule in force from time to time, including the JSE Listings Requirements, concerning companies and affecting Altron.

I/We hereby furnish the following email address and/or fax number for such electronic communication:

Email address

Fax number

Any written amendment or withdrawal of any such notice of consent by me/us, shall only take effect if signed by me/us and received by the company.

Signed at on 2011

Signature


Please complete, detach and return this election form to Altron’s transfer secretaries, Computershare Investor Services

(Pty) Limited, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107) or by telefax to

+27 (11) 688 5248.

Corporate data

SHAREHOLDERS’ DIARY

Financial year end 28 February 2011

Annual general meeting Friday, 15 July 2011

Reports and financial statements

Preliminary report and

dividend announcement (published) Tuesday, 3 May 2011

Annual financial statements

(mailed to shareholders) June 2011

Interim reports October 2011

Dividends

The following dividends are hereby declared for the year ended

28 February 2011:

> Ordinary dividend number 63 of 108 cents per share

(2010: 90 cents).

> Participating preference dividend number 17 of 108 cents

per share (2010: 90 cents).

The above dividends are payable as follows:

Last day of trading to qualify

for and participate in the dividend

(cum dividend): Friday, 24 June 2011

Trading ex dividend commences Monday, 27 June 2011

Record date Friday, 1 July 2011

Dividend payment date

(electronic and certificated) Monday, 4 July 2011

Dividend cheques in payment of these dividends to certificated

shareholders will be posted to shareholders on or about

Monday, 4 July 2011. 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, 4 July 2011.

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, 24 June 2011. Share certificates may not be

dematerialised or rematerialised from Monday, 27 June 2011

to Friday, 1 July 2011, both days inclusive.

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


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

CURRENCY

To facilitate the interpretation of this report by readers not

familiar with the South African rand, we provide the following

conversion guide:

At 28 February 2011 one rand was equal to:

2011 2010

£ 0.0877 0.0847

US$ 0.1426 0.1292

Euro 0.1033 0.0948

Yen 11.6632 11.4875

BASTION GRAPHICS

Altron House

4 Sherborne Road

Parktown, 2193

(PO Box 981, Houghton, 2041)

South Africa

Telephone:

National 011 645 3600


www.altron.com

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