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Directors’ report

 
To the members of Allied Electronics Corporation Limited

The directors have pleasure in submitting the annual financial statements of the Altron group for the year ended 29 February 2008.

NATURE OF BUSINESS
Altron is an investment holding company. Its principal subsidiaries, Allied Technologies Limited (Altech), Power Technologies (Pty) Limited (Powertech) and Bytes Technology Group Limited (Bytes), are invested in the power electronics, telecommunications, multi-media and information technology industries.
 
FINANCIAL RESULTS
Group attributable earnings for the year ended 29 February 2008 were R1 019 million (2007: R805 million), representing earnings per share of 357 cents (2007: 287 cents). Headline earnings per share were at 375 cents (2007: 283 cents).

Full details of the financial position and results of the Altron group are set out in these financial statements.

DIVIDENDS
The following dividends were declared in respect of the year ended 29 February 2008:

It remains policy to declare dividends annually at the time of announcing the Altron group’s results in May of each year.

SUBSIDIARIES, ASSOCIATE COMPANIES AND OTHER INVESTMENTS
Particulars of the principal subsidiaries of the Altron group are given on the notes to the financial statements while particulars of the associate companies, joint ventures and other investments are provided in Annexure 1.

The attributable interest of the group in the income and losses of its subsidiaries for the year ended 29 February 2008 is:

The attributable interest of the group in the income and losses of its subsidiaries for the year ended 29 February 2008

ACQUISITION OF 0.82% OF BYTES ORDINARY SHARES
During the period under review and prior to the Bytes scheme of arrangement, Altron took advantage of several opportunities to purchase 0.82% of the issued share capital of Bytes on the open market at a cost of R21.9 million.
 
ACQUISITION OF 3.71% OF ALTECH ORDINARY SHARES
During the period under review, Altron took advantage of several opportunities to purchase 3.71% of the issued share capital of Altech on the open market at a cost of R186.5 million.
 
BYTES SCHEME OF ARRANGEMENT
On 11 December 2007, the High Court sanctioned the Bytes scheme of arrangement whereby Altron acquired 42.3% of the ordinary share capital of Bytes that Altron and its subsidiaries did not already own from all shareholders of Bytes other than the Altron group in accordance with and as contemplated by the Securities Regulation Code on Takeovers and Mergers. In settlement of the Bytes scheme consideration, Altron issued 8 495 016 Altron ordinary shares and 22 110 410 Altron participating preference shares as consideration for the Bytes ordinary shares. The listing of Bytes on the JSE Limited was terminated on 15 January 2008.
 
IST GROUP
On 22 August 2007, the Competition Tribunal unconditionally approved the acquisition of the IST Group (Pty) Limited by Powertech for a purchase consideration totalling R504 million. The five IST divisions acquired by Powertech were Energy, Otokon, Data, Telecom and Industrial. The Defence and Nuclear divisions were excluded from the acquisition.
 
CABLES DE COMUNICACIONES ZARAGOZA
During the period under review, Powertech acquired the 25% minority shareholder interest in Cables de Comunicaciones Zaragoza for an amount of 17.6 million (approximately R74.2 million) from the company’s management in Spain. A further 11 million was received by the minority shareholders as a dividend. Cables de Comunicaciones Zaragoza is a manufacturer of copper telecommunications, instrumentation and railway signalling cables serving the Spanish and European markets.
 
COMTECH (PTY) LIMITED
On 27 June 2007, Altech concluded an agreement to acquire fleet management company ComTech (Pty) Limited for Altech Netstar Fleet Management Services for a purchase consideration of up to R74.2 million. The Competition Authorities unconditionally approved this acquisition on 1 January 2008.
 
SAMEER ICT GROUP
On 1 March 2008, Altech acquired a controlling interest in three subsidiaries of Kenya’s Sameer ICT Group for US$75 million. The transaction sees Altech acquire a 51% controlling interest in Kenya Data Networks Limited, Swift Global (Kenya) Limited and Infocom Limited.
 
ABB POWERTECH TRANSFORMERS
On 26 March 2008, the Competition Tribunal unconditionally approved the acquisition by Powertech of the 50% shareholding that it did not already own in its joint venture company, ABB Powertech Transformers, from ABB South Africa for a purchase consideration of R320 million.
 
SHARE CAPITAL
Full details of the authorised, issued and unissued capital of the company at 29 February 2008 are contained in note 10 to the financial statements.
 
Share schemes
Particulars relating to the Altron Group Share Incentive Trust and The Allied Electronics Corporation Limited Share Trust are set out in note 10 to the financial statements. At the date of this report, a total of 4 847 855 ordinary shares and 7 584 445 participating preference shares remain reserved for the purposes of the company’s employee share schemes.
 
General authority to issue shares
The remaining unissued ordinary shares and participating preference shares are the subject of a general authority granted to the directors in terms of section 221 of the Companies Act, 1973, as amended, and which authority remains valid only until the next annual general meeting which will be held on Tuesday, 15 July 2008. At that meeting, shareholders will be asked to place 10% of the unissued ordinary and participating preference shares under the control of the directors. Shareholders will also be asked to waive their pre-emptive rights in favour of the directors to allot and issue ordinary and/or participating preference shares for cash as and when suitable circumstances arise.
 
DIRECTORATE

Directorate

In terms of the company’s articles of association, Messrs BJM Masekela, MJ Leeming, MC Berzack, CG Venter and Dr PM Maduna retire by rotation. All the retiring directors are eligible and available for re-election. Their profiles appear here.

SECRETARIES
Altron Management Services (Pty) Limited act as secretaries to the company. The secretaries’ business and postal addresses appear here.
 
SEGMENTAL REPORTING
Segmental information is included in this annual report as part of the operational reviews and shareholders are referred to Annexure 2. Headline earnings contributions to Altron were as follows:

Directorate

DIRECTORS’ INTERESTS
At 29 February 2008, the present directors of the company held direct and indirect interests, including family interests, in 60 035 576 of the company’s issued ordinary shares (2007: 59 881 073 ordinary shares) and 23 432 336 of the company’s issued participating preference shares (2007: 34 486 558). Details of shares held per individual director are listed below. A total of 3 979 280 participating preference share options and conditional rights are allocated to directors in terms of the company’s employee share schemes.

Directorate

RESOLUTIONS
The company passed and registered one special resolution on 8 August 2007, approving the acquisition by the company or any of its subsidiaries of the company’s shares.

At subsidiary level, Altech passed and registered one special resolution on 18 July 2007, approving the acquisition by Altech or any of its subsidiaries of Altech’s shares.

At subsidiary level, Powertech passed and registered one special resolution on 18 October 2007, adopting new articles of association.

Except for the above, no other special resolutions, the nature of which might be significant to shareholders in their appreciation of the state of affairs of the Altron group, were passed by the company or its subsidiaries during the period covered by this annual report.

AUDIT COMMITTEE
In terms of section 270 A(f) of the Corporate Laws Amendment Act of 2006 (“the Act”), the Altron audit committee has discharged all of those functions delegated to it in terms of the Altron audit committee mandate and terms of reference, and ascribed to it in terms of the Act.

During the period under review, the Altron audit committee:

a) met on three separate occasions to review inter alia the year-end and interim results of the Altron group, as well as to consider regulatory and accounting standard compliance insofar as the same pertained to the audit committee and the Altron group respectively;

b) considered and satisfied itself that the external auditors are independent auditors (see page 101 of the annual report), determined the external auditors’ fees for the 2007/8 financial year and nominated the external auditors for appointment for the financial year ending 28 February 2009;

c) determined the non-audit-related services which the external auditors are permitted to provide to Altron and revised the policy for the use of the external auditors for non-audit-related services. This included preapproving all non-audit-related service agreements concluded between Altron and the external auditors;

d) confirmed the internal audit charter and the audit plan for the 2007/8 financial year;

e) ensured that the audit committee complied with the membership criteria specified in the Act;

f) reviewed the Altron group’s code of conduct and recommended changes thereto to the Altron board; and

g) held separate meetings with management and the external auditors to discuss any problems and reservations arising from the year-end audit and any related matters which management and the external auditors wished to discuss.

For further details in this regard, shareholders are referred to in the Altron corporate governance report.

APPROVAL OF THE ANNUAL FINANCIAL STATEMENTS
The annual financial statements set out in this annual report have been prepared in accordance with International Financial Reporting Standards and are based on appropriate accounting policies, which are supported by reasonable and prudent judgements and estimates.

The directors of the company are responsible for the preparation of the annual financial statements and related financial information that fairly presents the state of affairs and the results of the company and the Altron group.

The directors’ responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of these financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. The directors’ responsibilities also include maintaining adequate accounting records and an effective system of risk management.

These financial statements have been prepared on the going- concern basis, since the directors have every reason to believe that the company and the Altron group have adequate resources in place to continue in operation for the foreseeable future. The auditors have concurred with the directors’ going- concern statement.

The auditors are responsible for reporting on whether the group annual financial statements and separate parent annual financial statements are fairly presented in accordance with the applicable financial reporting framework.

The annual financial statements for the year ended 29 February 2008 which appear on from the directors's report through to the notes to the financial statements were approved by the board and signed on its behalf on 5 May 2008.

For: Allied Electronics Corporation Limited


Dr WP Venter
Chairman


RE Venter
Chief executive