CBI-ELECTRIC The electrical engineering division CBI-electric had a completely different year compared to the previous year. It went from boom to bust in literally 60 days, starting in August 2008. Volumes declined by between 40% and 60% and credit is due to the operational management who responded quickly and decisively in limiting the damage. Revenues declined by 25% to R2 952 million. To compound the issue, the copper price was extremely volatile and losses amounted to R52 million. Overall operating profit reduced by 42% to R393 million. A notable exception to the above was our joint venture in the manufacturing of telecommunications cables. Revenue increased by 3% and operating profit by 18%, based on the relatively strong demand for copper telecommunications cables. Fibre optic cable sales were subdued. The steady, but sure, substitution of copper in the local loop with wireless access will, in time, erode the copper business. Fibre, in contrast, is in healthy demand, but subject to severe pricing pressures. Other opportunities are being explored in order to add value to the cables that we supply and thus maintain growth. Current delays in the roll-out of long-haul fibre routes might impact on the 2010 results. In the low-voltage business, the market for residential and commercial property circuit breakers declined by 36%, while the strong rand exerted pressure on prices. Industrial and mining breakers suffered from the cancellation or deferment of capital projects by industry and the mining houses. Profitability of exports reduced significantly as a result of the exchange rate. To the extent possible, steps have been taken to improve profitability, positioning the company for growth should demand increase and/or the rand weaken. The energy cable business experienced a similar drastic decline in demand while being subject to an extremely volatile copper price in rand terms. Our capability to manufacture, install and commission high-voltage cables has stood us in good stead. A second line has been commissioned to manufacture high-voltage cable. Timely training has ensured that we have sufficient resources to meet all installation requirements. Medium- and low-voltage cables are in low demand and likely to remain so for the time being. Again, profitability next year should be significantly better at current volumes.

Our capital investment programme is being maintained to ensure that we have the capacity to respond to increased demand if necessary. New product lines are being added to our cable, low- and medium-voltage operations.

The new venture into medium voltage has grown three-fold during the past year. We have supplied 16 power transformers and have delivered the first of our innovative medium-voltage switchgear panels. A few years ago, we were not active in those areas. Today, we have a business with good products, an evergrowing base of blue-chip customers and the potential to develop the business into a sizeable income-generating unit.

Prospects

Looking forward, it is our view that the economy has stabilised, although we do not expect any meaningful recovery in the short term. Actions taken to adjust to the lower volumes of the past year should have a positive impact on earnings.

Governance, sustainability and social responsibility

In line with requirements of the King III code on corporate governance an executive remuneration policy, as well as a report by the audit and risk committee, is included.

Our social investment initiative with the Reunert College provided more than 80 black matriculants the opportunity to gain a highlevel matric in Mathematics, Science, Accounting and English, thus paving the way for them to pursue a tertiary qualification. Since inception, we have assisted close to 800 students of whom about 450 have entered university. Our training philosophy is that there are no shortcuts and that what we offer must have a lasting effect. There is no substitute for a first-class education and experience. We endeavour to provide both.

We are conscious of the environment and the need to protect it. Our operations are clean and environmentally friendly to the fullest extent possible. We have an initiative that is evaluating alternative sources of energy.

Appreciation and closing

Mr Martin Shaw retired as chairman in May of this year. After three years of exemplary leadership and many more as a member of our board, he has reached the mandatory retirement age and will leave us in February 2010. We would like to thank him for his dedication and friendship and wish him well. We are pleased to welcome Ms Kholeka Mzondeki and Mr Rynhardt van Rooyen as independent non-executive directors to the board as from 1 November 2009. They will both serve as members of the audit and risk committee.

We say a big thank you to the members of our board and all our employees. It was not an easy year. Your experience and commitment was a source of inspiration. To our customers, both in South Africa and overseas, we collectively express our appreciation for your support and assure you of our ongoing endeavours to meet your requirements.

Trevor Munday Chairman	Gerrit Pretorius Chief executive
Sandton 17 November 2009