2006 - ShareData · introduction of an Operating Executive Committee. The committee's objective is...

2006 MICROmega Holdings Limited

Annual Report

[ Contents ]

32 Corporate Governance

36 Sustainability Report

39 Annual Financial Statements

84 Notice of Annual General Meeting

87 Corporate Information

88 Group Directory

03 Financial Highlights

04 Group Structure

06 Directorate

08 Chairman’s Report

MICROmega Holdings Limited Annual Report 2006

The 2006 Annual Report can be downloaded fromour website www.micromega.co.za

[ 2 ] MICROmega Holdings Limited • Annual Report 2006

10 MICROmega Revenue Management Solutions

12 MICROmega Securities

14 MECS Africa

16 MICROmega Risk Management Services “NOSA”

18 NQA Africa

20 Intermap

22 Sebata

24 BTM Manufacturing

26 Deltec Power Distributors

28 Lubrication Equipment

30 Pro-Fit

Operational Overview

100%Increase in revenue

94%Increase in

attributable profits

86%Increase in attributable

earnings per share

51%Increase in net tangible

asset value per share

77%Increase in headline earnings per share

Financial Highlights

Annual Report 2006 • MICROmega Holdings Limited [ 3 ]

Financial Services Sector


Support Services

Group Structure

MICROmega Revenue Management Solutionsp10

MICROmega Revenue Management Solutions is SouthAfrica’s largest public sector revenue management serviceprovider, responsible for the day-to-day management ofmore than a million commercial and domestic consumers.

MICROmega Securitiesp12

MICROmega Securities is a voice and electronic inter-dealer financial services broker in the over the counter(OTC) wholesale markets. Clients include both domesticand international banks and stockbrokers whilst beingregulated by the SARB, FSB, JSE Securities Exchange andthe Bond Exchange of South Africa (BESA).

MECS Africap14

MECS Africa provides flexible alternative solutions topermanent employment in the construction, engineeringand petrochemical industries. The company operates inWest Africa, South Africa, Australia and the Middle East.

MICROmega Risk Management Services “NOSA”p16

MICROmega Risk Management Services (“NOSA”) providesoccupational health, safety and environmental riskmanagement services. It is the exclusive provider of theNOSA Five Star Grading System, both internationally and inSouth Africa.

NQA Africap18

NQA Africa provides training and third party managementcertification of business sectors comprising of automotive(ISO/TS16949), environmental (ISO14001), occupationalhealth and safety (OHSAS 18001), quality (ISO9001) andfood safety (HACCP).


Group Structure

Information Technology

Automotive Components

Intermap p20

Intermap provides leading edge, innovative and efficientcustomised web-based business information systems forclients in every realm of commerce, industry and govern-ment.

Sebatap22

Sebata provides integrated technology solutions andmulti-disciplinary support services to all spheres ofgovernment, with a primary focus on integrated solutionsfor local government.

BTM Manufacturingp24

BTM Manufacturing is the largest manufacturer ofBullbars™ and the second largest manufacturer of towbarsin South Africa. The company also manufactures rollbars,bumpers and automotive accessories.

Deltec Power Distributorsp26

Deltec Power Distributors is a leading distributor of a widevariety of high quality imported maintenance-freebatteries. Applications of products include UPS, standby,marine and leisure, communications, solar, automotive,trucking, mining and construction.

Lubrication Equipmentp28

Lubrication Equipment is a leading supplier of lubricanttransfer systems in South Africa. The company providescomplete workshop solutions to the motor industry andalso supplies mines, general industry and agriculture.

Pro-Fitp30

Pro-Fit specialises in the supply and distribution of motorvehicle accessories (including air-conditioning, securityand audio) to the aftermarket. Its wide product rangerepresents world-class brands and latest trends in thevehicle accessories industry.


Board of DirectorsI G Morris (Chairman)D M Carson (Non-executive)R C Lewin (Non-executive)E S Mpanza (Non-executive)

Operating Executive CommitteeW E Rosenberg (CEO)D J CaseD H FieldgateP NgakiJ J L StoromJ Vercueil

Directorate

Appointed: 1 June 2004

Prior to Greg’s appointmentas Executive Chairman, heserved as Chief ExecutiveOfficer of MICROmegaHoldings Limited. He has ledthe evolution of the groupfrom a financial servicesbusiness to a broader basedsupport services operation.

Ian Gregory Morris [39]Chairman

Appointed: 1 September 2004

Sibusiso is the GeneralManager: ProjectManagement - Departmentof Transport Gauteng. He hasdiverse financial experiencein the public sector.

Elias Sibusiso Mpanza [45]

Non-executive

Appointed: 18 February 2004

Ross is the founder ofIntermap, and anengineering professional,specialising in informationtechnology. He has extensiveexperience in projectmanagement, consultancyand leads major informationtechnology projects across anumber of market sectors.

Ross Charles Lewin [39]

Non-executive

Appointed: 17 November 2006

Dave is the Chief ExecutiveOfficer of Drinks DispenseServices, a focussed dispenseand refrigeration serviceprovider. He hasconsiderable operationalexpertise in private sectorservice and manufacturingindustry.

David Malcolm Carson [40]

Non-executive

Board of Directors

Operating Executive Committee


Appointed to Operating Executive Committee: 10 October 2006

Wayne has been with the group since its founding in 1998. Hewas originally part of the MICROmega Securities managementteam. He is responsible for the implementation of strategies toensure optimal earnings extraction from group companies.

Wayne EdwardRosenberg

[40]Chief Executive Officer


John successfully established a meter reading company whichwas acquired by MICROmega Holdings Limited in 2004. He wassubsequently appointed as the Chief Executive Officer ofMICROmega Revenue Management Solutions.

Jonas JohnLetlhogonolo Storom

[39]


Doug has 18 years of experience in the local and internationaltemporary and permanent recruitment industry, working mainlyin the engineering and construction sectors. He joined the group18 months ago as Managing Director of MECS Africa.

Douglas HalingFieldgate

[37]


Phakamile is the Chief Executive Officer of Sebata. His careerspans over 15 years in corporate and development finance,management consulting, organisational restructuring andexecutive management in South Africa and the USA.

Phakamile Ngaki[41]


Joe has a strong background in financial management andbroking. His involvement in the industry goes back fifteen yearsduring which time he co-founded SA Money Brokers, now knownas MICROmega Securities.

Anton “Joe” Vercueil[46]


David is a qualified Chartered Accountant. He has been with thegroup since 2006, operating in a dual role as both the groupCompany Secretary and the group Chief Financial Officer. He hasbeen instrumental in developing the group’s reporting, bothinternally and externally to stakeholders.

David John Case[27]


Chairman’s Report

I am pleased to report a 77% growth in headline earnings pershare, a 100% increase in revenue and the resultant 94%growth in attributable profit. The group's balance sheetcontinues to strengthen with an increase of 31% in net assetvalue and an increase of 51% in net tangible asset value.

This performance is a direct result of the strategy adopted bythe board in 2004 to broaden our investment base and topursue opportunities in sectors other than financial services.In essence our philosophy is to offer our shareholders a"public/private" equity opportunity whereby we getoperationally involved from the "centre" to ensure effectiveutilisation of overhead and the optimal extraction of valuefrom our investments. There is a managed balance betweenorganic growth and acquisitions.

During the year under review we did not make anyacquisitions as we wished to ensure that the acquisitionsconcluded during 2004 and 2005 had been properlyintegrated into the group and that we had sufficientmanagement capacity to facilitate further growth. I ampleased to report that the year was well utilised in this respectwith the implementation of robust internal controls andreporting mechanisms. Further policies were introduced and

Chairman’s Report

Greg Morris

Innovation, product development and deliveryremain at the forefront of our successful ability to retain and grow our market share.


Chairman’s Report

adopted in the group that will facilitate our next controlledphase of acquisitive and organic growth.

The board of directors was also reconstituted to enhanceindependence and to improve compliance with soundgovernance practices. This restructure resulted in theintroduction of an Operating Executive Committee. Thecommittee's objective is to implement strategies that ensureoptimal earnings extraction from group companies. Thisprocess is driven by the Group Chief Executive who is not amember of the main board but rather reports to the board onthe economic performance of the group.

The strategy of diversifying our investment portfolio resultedin the group changing sectors on the JSE from the financial tothe support services sector. Our new classification is nowaligned to our day to day activities and affords our sharehol-ders a greater insight into our long-term objective of movingaway from our previous dependency on financial services.

Our business philosophy to acquire well establishedbusinesses with established track records and an identifiableedge in their markets does, from time to time, introducelegacy issues such as the need for transformation andempowerment. We are proud of our abilities to embracetransformation. Our approach is simple yet effective and canbest be described as one that ensures sustainable selfimprovement through the facilitation of annuity incomeopportunities. Our total embracement of employment equityis fundamental to our philosophy and takes initial precedenceover ownership by a few individuals.

The introduction of new businesses carries traditional riskssuch as the ability to retain skills and market share. Furtherand more importantly we are acquiring businesses that havebeen operated by entrepreneurs who have not previouslybeen exposed to the mechanics of a corporate environment.Our success in managing these risks and preserving earningsgeneration is specifically accommodated in the contractualstructure of our acquisitions. The need to generate warrantedafter tax profits and the inclusion of performance basedremuneration schemes has to date proved a successfulformula in ensuring ongoing growth from acquired entities.This structured approach coupled with new businesseshaving greater access to capital and broader markets hasproved successful.

By the time you read this report we will be well into our newfinancial year and given the need for open and frank dialogueit would be fitting to highlight certain activities that have abearing on our stakeholders at large.

During this year (2007) we have acquired a further twoautomotive related businesses namely; LubricationEquipment and Pro-Fit. These acquisitions have once againassisted in broadening our client base and provided a betterlogistics platform from which to leverage supply of productsfrom our BTM Manufacturing and Deltec businesses.

Subsequent to the publication of the 2006 results we haveappointed KPMG as our auditors. We are appreciative of thesupport and service that RW Irish-Alliott Inc. has given us overthe past eight years and thank them for being part of ourgrowth. We were however jointly of the opinion that ourrecent and planned growth would be better facilitated by theappointment of one of the larger auditing firms.

Complementary to our change in auditors we identified theneed for enhanced corporate finance support as we continueto grow by acquisition. This has resulted in the appointmentof Investec Bank Limited as our Sponsoring Brokers. We lookforward to working with Investec as a partner inimplementing our corporate strategy.

We have maintained our policy of ensuring that all ourbusinesses focus on the provision of quality products andservices. Innovation, product development and deliveryremain at the forefront of our successful ability to retain andgrow our market share. Our client base has grownconsiderably over the past twelve months and we are pleasedto report that we are now extending service delivery beyondthe South African borders.

I would like to take this opportunity to thank my fellowdirectors for their loyalty, contribution and support inbuilding MICROmega. As a board we extend our appreciationto all our fellow employees whose hard work, enthusiasm anddedication are critical to our success.

To our shareholders, customers and external stakeholders wecommit to hard work, honesty and integrity in our dealings,and sound corporate governance.

I G MorrisChairman



Mzimkhulu Financial Investments (Pty)

Ltd, a 100% BEE company, owns 50%.

MICROmega Revenue Management Solutions

New contracts include Eskom (Sandton)

and City of Cape Town.

John Storom,Managing Director of MICROmega

Revenue Management Solutions

Leading meter reading company in

South Africa.

MICROmega Revenue Management Solutions (MMRMS),established in 1971, provides revenue management solutionsto local government and the utility industry. The companyreads more than 780 000 meters per month and providesservices in seven of the nine provinces and to 35 localgovernment entities and five utility companies, including:

• Reading and recording of meters• Meter auditing• Account billing and debtors management• Fault monitoring and reporting• Database management• Installation, maintenance and reporting• Disconnection of services• Delivery of notices

MMRMS is committed to transformation. Employmentstrategies emphasise the empowerment of local residents byemploying staff from within the municipal areas whereservices are delivered. 75% of staff are PDI's.

A number of clients have re-awarded contracts for a furthertwo to three years. These include Maluti a Phofung andMoqhaka Municipalities in the Free State, Lesedi and MidvaalMunicipalities in Gauteng. Emfuleni Municipality not only re-awarded the existing Vereeniging area but also addedVanderbijlpark, Sebokeng and Evaton.

Meterman™ (an integrated web-enabled product thatprovides reliable, flexible and functional monitoring andmanagement of meter reading data) was introduced to themarket and by the end of the financial year, 90% of clientshave migrated to the new application. The official launch ofthe full application will take place in the next financial year.

The decline in turnover and resultant earnings from 2004 to2005 was a result of a more competitive market and a strongindicator that the business needed to transform itself to staycompetitive.

These challenges were addressed during 2005 when a majorrestructuring exercise was undertaken. During the sameperiod we undertook the development of our flagshipMeterman™ system and attended to an upgrade on basicinfrastructure.

The results of our investment are now starting to comethrough in the operating margins and the business is startingto enjoy solid market penetration.


MICROmega Revenue Management Solutions

The impact of Meterman™ and the

value it offers, are being recognised in

the market and positive results are

evident in quality contract renewals.

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Operating earnings after tax



MICROmega Securities

Joe Vercueil,Managing Director of


A trade and co-operation agreement

with Tullett Prebon is in place (second

biggest IDB in the world, based in

London and listed on the London Stock

Exchange).

Member of the JSE Securities Exchange,

South African Future Exchange (SAFEX)

and the Bond Exchange of South Africa

(BESA).



MICROmega Securities (MMS), founded in 1991, has been asubsidiary of the group since 1998. Formerly South AfricanMoney Brokers, MMS is an inter dealer broker (IDB) providinga specialist intermediary broking service to commercial banks,investment banks, stock brokers as well as reputable tradingentities in the wholesale financial markets.

The function of an inter dealer broker is to match buyers andsellers for the wholesale trading community. The banks willthen pay a commission to MMS when they use a broker tocomplete a deal. MMS is active in the following financialinstruments:

• Foreign exchange• OTC derivatives• Money market products• Fixed income securities• Financial and agricultural futures

The company is regulated by the South African Reserve Bank(SARB), BESA, JSE Securities Exchange and the FinancialServices Board (FSB).

Client base includes all the banks in South Africa and extendsto banks in the United Kingdom, Europe, Hong Kong, NorthAmerica and Australia.

Short-term objectives include an increase in market share inwholesale markets and to expand into the retail marketsfocusing on currency futures equities and equity derivatives.

The long-term goals are to expand into Africa where a strongdemand for the company's specialist services and knowledgeis prevalent.

Africa, and specifically South Africa, is continuously improvingin stature as a country of dynamic investment opportunities inthe Emerging Market countries. This along with the 2010soccer world cup is constantly gearing towards anenvironment of increased volumes and interest in the SouthAfrican financial markets.

The company's turnover increased by 5.1% in 2006 comparedto 2005, thus cementing the importance, role and value thewholesale financial markets place on an IDB. Turnoverincreased in all financial products offered within the company,

with foreign exchange and bond broking being the majorcontributors. Strategic planning and restructuring ensuredthat margins were maintained even with the increase inturnover.

MMS moved premises to Rosebank in June 2006, and thecompany's policies, vision and structures have placed thecompany in a strong strategic position for the 2007 financialyear.

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MECS Africa

MECS Africa provides a flexible,

alternative solution to permanent

employment in the construction and

engineering arena, focusing specifically

on the mining and petrochemical

industries.

Doug Fieldgate,Managing Director of MECS Africa

During the year under review, the

company supplied over 1 500

non-permanent employees of various

disciplines to the engineering and

construction sectors, both inside and

outside the borders of South Africa.


MECS Africa

Formed in 1981, MECS Africa is one of the longest standingagencies operating in this niche market out of South Africa atthe moment,which is a testament to the company's marketorientated focus. MICROmega acquired MECS Africa on the1st of October 2005.

Through its associate in Angola (Petrolmecs Lda), MECS Africawas involved in the design, fabrication and installation ofvarious pieces of critical equipment such as accommodationmodules and containerised valve repair workshops. MECSAfrica is actively involved in the training of personnel bothlocally and in Angola in accordance with the company'scorporate vision to uplift and supplement the industries itservices.

Projects successfully implemented by MECS Africa include theTank Repair Project in Angola (repairs to the hull of the FPSOKuito) for Single Buoy Moorings, and various Sasol Technologyprojects globally.

MECS Africa's organic growth during the past year wasdirectly linked to the demand that was placed on thecompany's existing clients to service and supply the bullishenergy and commodity sectors, as well as growing our clientbases both locally and internationally. The increase of 64% inoperating earnings was largely attributable to increasedoperations in Angola which accounted for 30% of grossturnover for the year. Weakening of the Rand against the USDollar continues to support this market and providesinvaluable links to international clients operating in the oiland gas industries.

The introduction of a procurement division within thecompany has increased exposure to clients offshore andpromises to offer sustainable revenue streams in the future.Various sole agency supply agreements have been securedwhich will support this operation.

Permanent placement personnel sourcing agreements havebeen finalised for the burgeoning Australian mining marketwhich will supplement the 2007 operations in addition towidening the company's exposure in this market.

Upcoming capital investments pre-2010 provide rich sourcesof revenue in the South African marketplace for constructionand engineering projects and MECS Africa has committed toincreasing turnover with local clients linked to these projects.

MECS Africa supplies skilled personnel

to projects in the following countries:

South Africa, Namibia, Angola, Ghana,

Democratic Republic of Congo, Nigeria,

Zambia and Botswana.

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MICROmega Risk Management Services “NOSA”

Duncan Carlisle,Managing Director of MICROmega Risk Management Services “NOSA”

NOSA Auditing products include the

internationally acclaimed NOSA Five

Star and NOSA Integrated Five Star

systems. The systems monitor

compliance to both the Occupational

Health and Safety Act and international

best practice and have ensured a

healthier and safer working

environment for thousands of

employees.

NOSA is the largest provider of occupational riskmanagement services in Southern Africa and providesauditing, training and consulting services to an extensiveclient base. Formed in 1951, NOSA has been instrumental atreducing injuries and fatalities in the mining and generalindustry sectors and has made a significant contribution tothe South African economy.

Given the changing legislative environment in South Africa,the demand for occupational health and safety services isexpected to grow exponentially and NOSA is well positionedto benefit from this growth given its extensive product rangeand regional presence. NOSA operates through three keydivisions namely NOSA Auditing, NOSA Training and NOSAConsulting with each division leveraging off the other.

NOSA Auditing currently conducts some 700 audits perannum and accounted for 40% of NOSA's revenue in 2006.Growth in NOSA Auditing revenue will be driven by anincreased demand for health and safety systems both locallyand internationally.

NOSA Training offers occupational health, safety andenvironmental training courses and has full accreditation withthe Health and Welfare SETA.

Revenue from training is expected to increase by a further50% in 2007, with the increase underpinned by three largerecently secured contracts, coupled with the increase in thenumber of NOSA Training Academies.

NOSA Consulting assists companies with the implementationof health, safety, environmental and quality systems, includingthe NOSA Five Star systems and the ISO standards. AlthoughNOSA Consulting accounted for a relatively small 5% of thecompany's revenue it plays an important role in ensuring thatNOSA remains a one-stop shop to its client base.

Although NOSA was formed in 1951, the company wentthrough a restructuring in May 2005. Accordingly, the 2005results were for a 7 month trading period and are thereforenot comparable with 2006. Notwithstanding this, on anannualised basis, NOSA's turnover increased by nearly 80%when compared to 2005, with the increase largely attributedto the positive response by the NOSA client base around therestructuring of the company in 2005.

Revenue growth in 2007 is expected to be relatively high andwill be driven by organic growth in South Africa, along withthe increased demand for NOSA services internationally.Furthermore, the continued development of new auditingand training products by the R&D Team ensures that NOSAremains ahead of both its competitors and clients in thedynamic and ever changing SHEQ environment.


The Safety Management Training

Course "SAMTRAC" is widely recognised

in industry as the leading training

course for safety, health and

environmental practitioners and is one

of the thirty training courses offered by

NOSA. NOSA Training remains the key

income driver accounting for 55% of

total revenue.

MICROmega Risk Management Services “NOSA”

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NQA Africa


NQA Africa provides certification

services to business sectors including:

• Automotive (ISO/TS 16949)

• Environmental (ISO 14001)

• Occupational Health and Safety

(OHSAS 18001)

• Quality (ISO 9001)

• Food Safety (HACCP)Mike Timberlake,

Chairman of NQA Africa


NQA Africa

NQA Africa was established in 2001 as a division of NOSA.Following the purchase of NOSA by MICROmega in 2005, anew agreement was negotiated with NQA UK. Services areoffered across the following industry categories: Chemical,Mining, FMCG, Defense, Hospitality and Leisure, Manufacturingand Agriculture.

Accreditation of NQA Africa's management systems is viaUKAS (United Kingdoms Accreditation Service). Clients areaudited on an annual basis for compliance against strictinternationally recognised business protocols.

Training programmes for auditors and employees responsiblefor maintaining the systems are conducted. Training servicesare offered out of MICROmega Professional Risk Solutions(MPRS), the training arm of NOSA. All auditors and trainers areaccredited through NQA UK and MPRS.

NQA's representation around the world is made up of NQAInc, the US based company, NQA UK and their agenciesagreements around the world. In Southern Africa, NQA Africahas issued 178 certificates.

Outside of South Africa, the company has clients in Kenya,Malawi, Tanzania, Swaziland, Lesotho and Namibia. OtherNQA agencies around the world make use of NQA Africa'sservices and staff where they lack the skills of qualifiedauditors.

During the year under review a solid staff and resource basewas developed. The company is now positioned to capitaliseon qualified staff and an improved after sales service.Through its association with NOSA, NQA Africa is positioningitself to offer integrated audits, completing the chain of a one-stop shop for clients looking for consulting, auditing, trainingand certification.

NQA Africa's results for the period under review are includedunder NOSA. Revenue is expected to grow relativelyaggressively during 2007, given the demand for ISOcertification in Africa. In addition, this will be further driven byNQA Africa's national footprint and international recognition.

NQA Africa jointly owns the IP for

OHSAS 18001 and ISO 14001 training

material, with the training arm of NQA

UK, JPD.

NQA has issued 18 500 certifications

globally in 52 countries and has

representation on every continent.

NQA Africa has the license to issue

certification in Africa, Australia and

New Zealand. The previous agreement

with NQA UK covered 12 sub Saharan

African countries. This region has now

been increased to include the rest of the

African continent.

During the past financial year UKAS,

through SANAS, carried out its annual

surveillance audit on NQA Africa and

no major findings were raised.


Intermap


Nkululeko Luthuli,Managing Director of Intermap

The company offers software and

business services, including:

• Programme and project

management

• Business and application support

(GIS and DIMSTM)

• Application hosting, networking and

IT support

• Application development and

integration

• Application and technical training

• Customer support

Intermap is a leading enterprise software company serving arange of commerce, industry and government clients. Thecompany was founded in 1998 and acquired by MICROmegaon the 1st of January 2004.

Highlights for the year under review include theimplementation and rollout of DIMSTM (District InformationManagement System) to all 10 district municipalities inKwaZulu-Natal, securing of new DIMSTM clients in otherprovinces, an international project management softwarecontract for a district municipality in New Zealand, growingthe number of commercial and custom development clients,and extending the range of software products and services.

Objectives for 2007 include the development of aninformation management system for the Lesotho WaterSector (European Union funded project), the roll-out of aproject management solution for the KwaZulu-NatalDepartment of Transport, the release of a new DIMSTM version,WebEasy 2 and InProcess workflow modelling andmanagement system.

The growth in revenue of the company can be attributed tothe successful roll-out of DIMSTM throughout all districtmunicipalities in KwaZulu-Natal together with an increasednumber of clients both locally and internationally. Futureproducts are already in development and some significantcontracts have been awarded that will ensure that thebusiness goes from strength to strength.

Intermap IssueManager is a

comprehensive tracking and

management solution for customer

queries, service requests and

maintenance activities.


Intermap

Intermap DIMSTM enables

municipalities to effectively manage

and report on IDP (integrated

development plan) projects in a

powerful way.

Intermap WebEasy is a powerful tool

that enables users to manage their own

websites and intranets.

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Intermap TimeTrax is an

application for the management

and tracking of resource and time

allocation against defined projects

and activities.


Sebata


Phakamile Ngaki,Chief Executive Officer of Sebata

Sebata won a multi-year tender from

the City of Johannesburg Metropolitan

Municipality to supply the City of

Johannesburg with specially

constructed multi-purpose mobile

facilities for use as community facilities

in some of the City of Johannesburg's

under-serviced areas.


Sebata

Sebata provides integrated technology solutions, enterprisemanagement systems and multi-disciplinary professionalserves to municipalities, public entities, Government and theprivate sector. The company's customer footprint spans allprovinces in South Africa, Lesotho, Namibia and Zimbabwe.Sebata is the second largest (measured by number ofcustomers) provider of municipal financial management andbilling systems in South Africa, and the largest by far inNamibia.

The company successfully implemented the planned upgradeand migration of a number of customers from Sebata's oldmunicipal financial management and billing system (Finstel)to the new generation, Microsoft Windows based SebataFMS.The following customers were successfully upgraded andmigrated: Amajuba District Municipality in KwaZulu-NatalProvince, Bela-Bela Municipality in Limpopo Province, andDelmas Municipality, Pixley-ka-Seme Municipality, and ThabaChweu Municipality in Mpumalanga Province. Towards theend of 2006, Sebata secured orders to upgrade and migrateNokeng-Tsa-Taemane Municipality, Ba-Phalaborwa Munici-pality, Albert Luthuli Municipality and Greater LetabaMunicipality.

Other successful implementations included a payroll systemupgrade at Greater Letaba Municipality, and a pre-paidvending system upgrade at Ba-Phalaborwa Municipality, bothmunicipalities situated in Limpopo Province.

The company's integrated customer support solution,SebataConnect, is a Virtual Private Network (VPN) framework,which facilitates the implementation and use of a direct highspeed broadband connection between Sebata offices andthose of customers. SebataConnect enables the execution ofremote troubleshooting and resolution, deployment ofsoftware executables and upgrade patches, monitoring ofday-to-day system utilisation, and offsite data backup. Duringthe year under review, SebataConnect was implemented atMaluti-a-Phofung Municipality, Pixley-ka-Seme Municipality,Kgalagadi District Municipality, Mookgophong Municipalityand Delmas Municipality. Further contracts were secured toimplement at Thaba Chweu Municipality, Bela-Bela Munici-pality and Nokeng-Tsa-Taemane Municipality.

The year under review saw the successful negotiation of athree-year Memorandum of Understanding with the national

Department of Provincial and Local Government (DPLG). Thisinvolves the engagement of Sebata as the DPLG's nationalpartner assigned with the responsibility of implementing acomprehensive Municipal Recovery Programme across alldesignated municipalities throughout South Africa.

Sebata has successfully consolidated and simplified supportinfrastructure and resources, enhanced innovation capability,and thus delivered greater value to customers. As aconsequence of the introduction of MICROmega as asignificant shareholder of Sebata on 1 December 2004, theperformance of the company over the past two years reflectsa significant turnaround which was underpinned by profoundtransformation from an owner-managed business into a moreefficient, profitable and robust business. Going forward, thecompany continues to exploit all manifest offensive anddefensive synergies and growth opportunities within itstarget niche market.

The Municipal Recovery

Programme was conceptualised by

Sebata for execution within the

framework of the DPLG's broader

Project Consolidate Programme,

which involves the provision of

comprehensive and targeted

technical/operational support and

capacity building to approximately

140 municipalities throughout

South Africa.

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BTM Manufacturing


The company is an approved OE

(Original Equipment) manufacturer,

direct and national parts distribution

supplier to the majority of South African

vehicle manufacturers and importers.Clive Finkelstein,

Managing Director of BTM Manufacturing

BTM Manufacturing is the largest manufacturer of BullbarsTM

and the second largest manufacturer of towbars in SouthAfrica. The company also manufactures rollbars, bumpers,side steps and automotive accessories. BTM Manufacturingwas founded in 1978 and acquired by MICROmega on the 1stof October 2005.

BTM Manufacturing has factory capacity, distribution outletsand overall experience to meet every requirement that theSouthern African Motor Industry demands. When developingand designing a product, the company relies on simplicity andease of fitment without ever compromising on aesthetics,reliability, safety and strength.

In order to further ensure products and service of the highestquality, BTM Manufacturing is affiliated with DQS, aninternationally recognised and highly respected registrar ofmanagement systems. The company takes pride in its ISO9001/2000 certification and is one of very few accessoriesmanufacturers that are SANS 1505 accredited. All BTMManufacturing's towbars are manufactured to comply withthe SANS 1505 standard.

During the year under review, the company initiated andimplemented a plant optimisation programme to increaseproductivity while minimising the handling of productsduring the production process. New CNC (ComputerNumerical Control) machinery was installed. Manufacturingprocesses were optimised to ensure increased productioncapacity, reduced lead-times and improved product-mixflexibility without increasing the labour content.

BTM Manufacturing recorded a substantial growth in salesduring the year which was a result of an increased productrange and a larger client base. Extensive research anddevelopment is continually performed to ensure that thecompany can keep up with the trends in the automotivemarket. The plant upgrade that was undertaken during theyear has enabled the company to be a in a position to meetthe expected future demand for products.


BTM Manufacturing

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Product innovation, manufacturing

efficiencies and a policy of continuous

improvement sets BTM Manufacturing

apart from its competitors in

the Automotive Accessories

Manufacturing Sector.


Deltec Power Distributors


Deltec remains a leading distributor

of high quality imported sealed and

semi-sealed maintenance-free batteries.

Clive Guest,General Manager of




Deltec Power Distributors (Deltec) is a leading distributor of awide range of high quality imported maintenance-freebatteries, such as VB Batteries (France), Varta (Germany),Johnson Controls (USA) and Global (Korea). Deltec wasfounded in 1979 and acquired by MICROmega on 1 October2004.

Applications of Deltec's products include UPS, standby,marine and leisure, communications, solar, automotive,trucking, mining and construction.

Historically, Delphi has been the long-standing supplier toDeltec, however Varta, which is the largest automotive batterymanufacturer in Europe, recently took operational control ofseveral Delphi factories. This, coupled with the fact that Vartais owned by Johnson Controls, the largest automotive batterymanufacturer in North America, has afforded Deltec thebenefit of introducing a much wider range of products to theSouthern Africa market. Deltec's product range is furthersupported by internationally certified quality and environ-mental standards with excellent local and internationaltechnical support and local customer service levels.

Deltec reported a significant improvement in its resultsduring the year under review, with a 56% rise in turnover. Therise was largely fuelled by increased sales penetration to bothexisting customers and further expansion of its distributorbase. The improvement in the results was further augmentedby the introduction of the 'Global' and 'Varta Promotive'ranges of batteries. A natural strengthening of supplierrelationships has occurred on the back of the growth levelsachieved.

Deltec will continue to aggressively target sales growth on theback of an expansion of its national footprint, the launch ofthe 'Varta Blue Dynamic' and 'Optima' battery ranges in early2007 and further investment in the required operational andsupport structures.

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Deltec has nearly 30 years experience

in the battery industry, with long

standing relationships with reputable

customers such as Tyco International,

Bell Equipment, BAE Land Systems

and Cummins Diesel.

These relationships have been built

on Deltec's proven track record on

the delivery and service of high

quality products.


Lubrication Equipment


Bruce Carolin,Managing Director

of Lubrication Equipment

The company provides complete

workshop solutions to the motor

industry and also supplies mines,

general industry and agriculture.

Lubrication Equipment is a leading supplier of lubricanttransfer systems in South Africa. Established in 1962, thecompany has over the years gained extensive experience inthe supply and installation of lubrication, garage and relatedequipment. Long recognised as a pioneer in the field oflubrication and workshop solutions, the secret to LubricationEquipment's success in this market is two-fold: its technicalprowess and its agencies. MICROmega acquired the companyeffective 1 March 2007.

Lubrication Equipment has the resources to devise andimplement the ideal lubrication and workshop solution onbehalf of its customers. Its diverse portfolio of agenciesrepresents the crème de la crème of players within thisspecialised field from around the globe and includes Alemite,Samoa, Snap-Tite Inc. Bijur/Delimon, De-Sta-Co, Airtec,Reelcraft, Hennig, Badger Meter Europa GmbH, Vacula/CejnTools, Metalsinter Filtros, Cim-Tek Filtration, G.E. Adams andCompany and Heinz Gerstmeyer Nachf A.G.

Operating earnings increased by 69% on the back of a 9%increase in turnover. This was due to a concerted drive tocontrol overheads and not give away margin on increasedsales. New product ranges were introduced that gave higherreturns than sales of historic goods. These new product rangescomplemented our existing ranges and company structure,thereby negating extra expenses in getting them to market.

A determined effort was made to offer value-added servicesto our existing customers and to penetrate further theexisting target market by engaging potential customers. Thecampaign proved to be successful and will be continuedthroughout 2007.

Revenue growth is expected to continue in 2007, due toincreasing vehicle sales and the resulting need to erect andupdate workshops to support this growth. The company willcontinue to target markets that it does not presently serve,and to introduce products in its existing market that can addvalue without incurring arduous working capital.


Lubrication Equipment

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The company's vast and ever expanding

product range includes everything from

grease nipples to sophisticated

centralised lubrication systems.

Lubrication Equipment also specialises

in turnkey workshop solutions and

supplies a comprehensive range of

garage equipment, including hoists. This

equipment is supplied, installed and

maintained on a national basis through

a network of dedicated regional

distributors.


Its growing market share is attributed

to volume purchasing (bulk buying) as

well as an ever-increasing supplier base,

ensuring a competitive product range

that represents world-class brands and

latest trends in the vehicle accessories

industry.

Pro-Fit


Dave Wright,Managing Director of Pro-Fit

Pro-Fit has recently

been approved by

KIA Motors SA as a

Parts and Accessory

Supplier. This allows

the company to

further expand its

footprint among

motor dealers.


Pro-Fit was initially started as a platform of informationamongst fitment centres in 1966. With the success of themodel a private company Automobile Radio DealersAssociation 1989 (Pty) Ltd T/a Pro-Fit was formed in 1989. Thecompany was acquired by MICROmega effective 1 January2007.

Pro-Fit specialises in the supply and distribution of motorvehicle accessories to the aftermarket. The company's coredisciplines are:

• Vehicle air-conditioning (Dunair brand)• Vehicle security (mechanical and electronic)• Car audio and entertainment

Pro-Fit has distribution agreements in place with most of thequality brands in car audio, including Panasonic, Sony andPioneer. These products are warehoused in four brancheslocated in Cape Town, Durban, Johannesburg and PortElizabeth. From there, products are distributed to fitmentcentres and motor dealers across South Africa, Zambia,Swaziland and Namibia.

2006/2007 will see Pro-Fit further expand its product offeringinto the parts and accessory supply chain for the aftermarketdivisions of motor manufacturers. This move will comple-ment supply lines that have historically been aimed at theretail fitment centre level.

Turnaround in the company's net profit is as a result ofstreamlining stock controls as well as improved debtormanagement. This coupled with an increased turnover hasallowed Pro-Fit to improve its profitability.

Pro-Fit

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The company has recently

established an advantageous

business relationship with the

Digicore group for the aftermarket

fitment of the C-Track recovery

systems. This move secures a firm

position in the vehicle recovery and

management industry.


Corporate Governance

OverviewMICROmega Holdings Limited (MICROmega) strives tocomply with internationally accepted standards of corporategovernance to safeguard the interests of the company and allits stakeholders. The board acknowledges the relationshipbetween sound governance, company profitability and long-term equity performance.

The group endorses the Code of Corporate Practices andConduct contained in the King Committee Report onCorporate Governance (King II) and remains committed toachieving the highest standards of corporate governance.

The directors believe that MICROmega complies with theprinciples and spirit of King II and the provisions of the




Listings Requirements of the JSE Limited. However,governance structures and processes are regularly reviewedto take into account changes within the group and bestpractices in the corporate governance arena.

Board of DirectorsThe board of MICROmega meets regularly to evaluateperformance, assess risk and review the strategic direction ofthe group. All executive directors retain full and effectivecontrol over the affairs of the company and monitormanagement.

Board ResponsibilitiesThe board has a formal, documented charter which confirmsthat the directors retain overall responsibility and account-ability for:• developing and adopting strategic plans;• monitoring operational performance and management;• ensuring effective risk management and internal controls;• selection, orientation and evaluation of directors;• legislative and regulatory compliance;• approval of annual financial statements;• timely and transparent reporting to shareholders; and • the ongoing sustainability of the business.

A clear division of responsibility is embedded in the boardcharter. The board has delegated authority to the chiefexecutive and senior management for the implementation of the strategy and the ongoing management of the business. The directors are informed of progress throughboth regular reporting at board meetings and ongoingcommunications.

CompositionThe composition of the board ensures that a range of skills

and knowledge are available to advise on and implement keydecisions to ensure that it retains proper direction and controlof the company.

The board as a whole is involved in the process of nomination,selection and the appointment of directors. The directors areselected on the basis of their skill, knowledge, businessacumen and contribution to the company.

The board currently comprises one executive director,Mr I G Morris (Chairman) and three non-executive directors,Mr E S Mpanza, Mr R C Lewin and Mr D M Carson.

The board was restructured during the year, details of whichare provided in the report of the directors on page 44.

During the reporting period since the approval of the 2005audited group results, the board met four times, the followingbeing the dates, major items on the agenda and the numberof attending directors.

Directors' attendance at meetingsExecutiveI G Morris (Chairman) 4 out of 4W E Rosenberg 2 out of 2A Vercueil 2 out of 2J Storom 1 out of 2

Non-executiveE S Mpanza 3 out of 4P H Seabi 0 out of 1R C Lewin 2 out of 4D M Carson 1 out of 2

Date AgendaAttendanceby Directors

24 May 2006

Approval of the annualreport for the 2005financial year.

6

23 August 2006

Report on group andsubsidiary results for thesix months ended 30 June2006.Approval of Directors and Officers cover for the board.

4

13 December2006

Approval of theappointment of Mr D M Carson and of therestructuring of the board.Feedback on the formatand workings of theOperating ExecutiveCommittee.

3

6 March 2007

Approval of the abridgedfinancial statements forthe year ended 31 December 2007

2

Board committeesTo assist the board in discharging its collective responsibilitiesfor corporate governance, several committees have beenestablished to which certain of the board's responsibilitieshave been delegated. These committees all have specificterms of reference and are accountable to the board.

The committees comprise directors who have a blend of skillsand experience and other qualities appropriate to their roles.

Board committees currently in place are:

Audit committeeThe audit committee has been delegated powers by theboard. These powers clearly set out the responsibilities andauthority together with the structures and processes of thecommittee. During the year under review the auditcommittee has addressed its responsibilities and kept theboard fully informed of the proceedings of the riskassessment and management by the audit committee.

The primary objective of the audit committee is to promotethe overall effectiveness and adequacy of internal controlswithin the group. Its objectives include:• ensuring the integrity of the group's accounting and

financial reporting systems;• ensuring the appropriate systems are in place for

monitoring risk, financial control and compliance with thelaw and codes of conduct;

• evaluating the effectiveness of the risk and compliancemanagement functions in the group;

• maintaining transparent appropriate relationships withexternal auditors;

• reviewing the scope and quality of statutory audits andthe independence and objectivity of the auditors;

• reviewing interim and annual financial statements beforeapproval by the board;

• reviewing reports from external auditors;• approval of audit fees.

The audit committee comprises the members of the board of directors and meets at least four times a year. Attendanceby senior management and the external auditors is byinvitation.

External auditThe group's external auditors are RW Irish-Alliott Inc. (RWI) and the report of the independent auditors is included onpage 42.

The group has a formal policy on the provision of non-auditservices by the external auditors. The policy also requires RWIto satisfy the audit committee that the delivery of non-auditservices does not compromise the independence of theauditors.

During the year RWI received an amount of R167 510 for non-audit services relating to secretarial and taxation services,equating to 15.62 % of the total fees paid to the externalauditors (refer to note 19 on page 74).



Employment equityThe group takes pride in and is committed to providingfulfilling work opportunities and to creating a workplace inwhich individuals of ability can develop rewarding careers atall levels, regardless of their background, religion, race or gender.

EthicsThe board of directors and the management of the group arecommitted to exercising and maintaining high ethicalstandards.

A culture of high ethical integrity standards has beendeveloped and flourishes amongst all levels of employeesand directors. Honesty and integrity covers the interactiverelationships between the company, its directors andemployees and between themselves and outside stake-holders, customers, shareholders and the society at large.

Directors contracts of employmentNo director has a contract of employment in excess of aperiod of three years.

Shareholders communicationThe board of directors is committed to continuedimprovement of communication with shareholders. VunaniCorporate Finance, the company's sponsor, continues to helpand improve all levels of communication.



Remuneration committee The remuneration committee is responsible for determiningthe terms of employment and remuneration of the group'sexecutive directors and senior management; this includesassessment of specific rewards. The committee ensures thatthe group remunerates and incentivises senior managementfairly, taking all circumstances into account. The committee isfurther responsible for the remuneration strategy for thegroup as approved by the board.

The primary functions of the remuneration committee are to:• establish a remuneration policy which is aligned with the

group's strategy and performance goals;• review remuneration policies, employee share incentive

schemes, performance bonuses and service contracts;• approve the remuneration of the executive directors and

senior management;• propose fees for non-executive directors, which are tabled

for shareholder approval at the annual general meeting;and

• determine the award of share options to executives andstaff.

Internal control systemThe group maintains systems of internal control over thefinancial reporting and for the safeguarding of assets (againstunauthorised acquisition, use or disposal). These systems aredesigned to provide reasonable assurance to the group'smanagement and board of directors that reliable financialinformation is produced.

Corrective action is taken to address and control deficienciesin control systems, as and when these are identified.

There are inherent limitations to the effectiveness of any system of internal control, including the possibility of human error and circumvention or overriding of controls. Accordingly, even an effective internal controlsystem can provide only reasonable assurance with respect to financial statement preparation and safeguardingassets.

Nothing has come to the attention of the directors to indicate that any material breakdown in the functioning ofthe group's key internal controls and systems occurred during2006.

Risk managementThe group's audit committee is responsible for addressing all operational and financial risk issues, together with riskfunding.

Going concernAfter making due inquiries, the directors are satisfied that thegroup has adequate resources available to continue tooperate for the foreseeable future, there is no reason tobelieve that the group will not continue in operation for theforthcoming year. The annual financial statements presentedon pages 43 to 83 have accordingly been prepared on a goingconcern basis.


Sustainability Report


MICROmega is committed to practising good corporatecitizenship and recognises the need to balance short-termprofitability targets and generating returns to shareholderswith the longer term sustainability needs of the business andthe broader society.

MICROmega has adopted triple bottom line reporting for thefirst time. As this is the first reporting period comparativefigures have not been presented.

Stakeholders are defined by the Global Reporting Initiative(GRI) as, "entities or individuals that can reasonably beexpected to be significantly affected by the organisation's



activities, products, and/or services; and whose actions canreasonably be expected to affect the ability of theorganisation to successfully implement its strategies andachieve its objectives."

Primary stakeholders of the group are shareholders,customers, employees and communities served by theMICROmega Social Responsibility Fund.

ShareholdersThe group continues to engage with shareholders on aregular basis. General communication with shareholders isundertaken via, the website (www.micromega.co.za); theAnnual Report; the Annual General Meeting and through theuse of the JSE's Stock Exchange News Service (SENS).

In addition to this media interviews and roadshows duringthe year assisted in getting more information about thecompany out into the market as a whole and directly topotential investors.

Communications are designed to give the reader insight intoboth the individual businesses of the group and theopportunities and challenges that the group is faced with.

The group continues to communicate regularly with theirsponsoring brokers to ensure that MICROmega is in theforefront of reporting to shareholders and the market ingeneral.

CustomersMICROmega keeps striving to improve the quality of servicesand goods to its customers whilst maintaining existingrelationships with them. The group has customers across allcontinents as follows:

In order to continually offer optimal products to itscustomers, the group continues to innovate and investigate new opportunities. Through this constantimprovement the group is in a position to both benefit their customers and improve market share across allindustries.

Employees MICROmega is an equitable group with regard to thedemographics of the employees that are in employment.When new appointments are undertaken the requirements ofthe individual industry charters are taken into account.

The demographics of the group at the 2006 financial year endare as follows:

At the end of the financial year 66% of the staff werehistorically disadvantaged individuals. Of the total staffcomplement 28% were female.

31st December2006

31st December2005

Classification Male Female Male Female

White 136 84 140 78

African 307 83 266 70

Coloured 14 8 10 7

Indian 9 3 3 3

Total 466 178 419 158

Continent Number of Customers

Africa

South Africa 5 082

Angola 8

Botswana 13

Kenya 3

Lesotho 3

Malawi 6

Mozambique 2

Namibia 55

Swaziland 17

Tanzania 6

Uganda 1

Zambia 5

Zimbabwe 16

Europe 12

North America 1

South America 2

Asia 3

Australia 1

Total 5 236


Staff movements during the year:

The above movements reflect a staff turnover of 15%.

The group is committed to improving the skills and educationof the staff by sending them on training courses presented byaccredited trainers. The total spend on staff training duringthe 2006 financial year was R435 000.

CommunitiesThe MICROmega Social Responsibility Fund was set up tobenefit the communities that the group operate in.

Use of the MICROmega Social Responsibility Fund has notbeen isolated to specific charities but rather smallercontributions have been made to a widespread number ofcharities. Charities are identified according to a number ofcriteria, some of which are, the regions that they service; howthey benefit the communities; the reputation of the charityand the proposed utilisation of the donation.

MICROmega places a high value on the education and well-being of today's youth and affording them theopportunity to progress into the world as well-roundedindividuals. To achieve this, use of the fund has not beenlimited to charities only but in addition, educational facilitiesalso received funding from MICROmega.

Wherever possible in providing services in outlying regionswhere MICROmega does not have an existing physicalpresence, partnerships have been formed with local entitiesto provide services whilst increasing the economic capacity ofthese regions.

The continued development of the communities isimperative to MICROmega and the group realises theirresponsibilities and role to be played in this development. Itis a role that MICROmega cherishes and the group is happy tobe making a difference.

Opening Balance 577

Appointments 152

Resignations (59)

Dismissals (11)

Expiry of Contract (6)

Retrenchment (3)

Death (6)

Closing Balance 644



[ Financial Contents ]

MICROmega HOLDINGS LIMITED AND ITS SUBSIDIARY COMPANIES(Registration number 1998/003821/06)

40 Salient Features

41 Director’s Approval

42 Report of the Independent Auditors

43 Report of the Directors

46 Balance Sheet

47 Income Statement

48 Statement of Changes in Equity

50 Cash Flow Statement

51 Notes to the Financial Statements

82 Segment Report

83 Shareholder Information

Annual Financial Statements for the year ended 31 December 2006



Salient Features

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Director’s Approval

Director’s Approval

The financial statements which appear on pages 43 to 83 were approved by the board of directors on 31 March 2007 and signedon their behalf by:

Mr I G Morris Mr D M CarsonChairman Non-executive

Certification by Company Secretary

In accordance with the provisions of section 268G (d) of the Companies Act 1973 (the Act), I certify that, in respect of the yearended 31 December 2006, the Company has lodged with the Registrar of Companies all returns prescribed by the Act and that allsuch returns are true, correct and up to date.

D J CaseCompany Secretary

31 March 2007



Report of the Independent Auditors to the Shareholders of MICROmega Holdings Limited

and its Subsidiary Companies

We have audited the annual financial statements and group annual financial statements of MICROmega Holdings Limited, whichcomprise the director's report, the balance sheet as at 31 December 2006, the income statement, the statement of changes inequity and cash flow statement for the year then ended, a summary of significant accounting policies and other explanatory notes,as set out on pages 43 to 81.

Directors’ responsibility for the financial statementsThe company's directors are responsible for the preparation and fair presentation of these annual financial statements inaccordance with International Financial Reporting Standards, and in the manner required by the Companies Act of South Africa,1973. This responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fairpresentation of annual financial statements that are free from material misstatement, whether due to fraud or error; selecting andapplying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ responsibilityOur responsibility is to express an opinion on these annual financial statements based on our audit. We conducted our audit inaccordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance whether the annual financial statements are free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual financialstatements. The procedures selected depend on the auditors' judgement, including the assessment of the risks of materialmisstatement of the annual financial statements, whether due to fraud or error. In making those risk assessments, the auditorconsiders internal controls relevant to the entity's preparation and fair presentation of the annual financial statements in order todesign audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entity's internal controls. An audit also includes evaluating the appropriateness of accounting policies usedand the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of theannual financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the annual financial statements present fairly, in all material respects, the financial position of the company and thegroup as of 31 December 2006, and of its financial performance and its cash flows for the year then ended in accordance withInternational Financial Reporting Standards, and in the manner required by the Companies Act of South Africa, 1973.

R W IRISH - ALLIOTT INC.Registered Auditors

31 March 2007

Fern Glen, Fernridge Office Park5 Hunter Street, Ferndale, 2194

Report of the Independent Auditors



Report of the Directors

The directors present their report for the year ended 31 December 2006. This report forms part of the audited financial statements.

1. General reviewThe group's business and operations and the results thereof are clearly reflected in the attached financial statements.

2. Nature of the businessThe group provides the following services and products:• Financial services sector

- Inter-dealer financial services broking in the over the counter wholesale markets- Revenue management solutions to local government and the utility industry

• Support services sector- Employment outsourcing services in the engineering and construction industries- Occupational health and safety services including auditing, training and consulting

• Information technology sector- Web based software and information visualisation solutions- Integrated technology applications for local governments

• Automotive components sector- Manufacturer and distribution of automotive components- Importation and distribution of power supply solutions

These services are provided globally and extend across a diverse client base, inclusive of both the private and public sectors.

3. Statements of responsibilityThe directors are responsible for the maintenance of adequate accounting records and the preparation and integrity of thefinancial statements and related information. The external auditors are responsible for independently auditing andreporting on the fair presentation of financial statements in conformity with International Auditing Standards. The financialstatements have been prepared in accordance with International Financial Reporting Standards and in the manner requiredby the Companies Act, 1973.

The directors are also responsible for the group's system of internal financial control. These are designed to providereasonable, but not absolute, assurance as to the reliability of the financial statements, and to adequately safeguard, verifyand maintain accountability of assets, and to prevent and detect misstatement and loss. Nothing has come to the attentionof the directors to indicate that any material breakdown in the functioning of these controls, procedures and systems hasoccurred during the year under review.

The financial statements have been prepared on the going concern basis, since the directors have every reason to believethat the group has adequate resources in place to continue in operation for the foreseeable future.

4. DividendsNo dividends were declared or recommended during the year.

5. Share capitalThe changes in the issued share capital of the group during the year under review are as follows:

On 17 January 2006, 60 140 shares of 1 cent each were issued at a premium of 249 cents per share for the finders fee of thebrokers of the purchase agreement of MECS Africa (Proprietary) Limited.

On 5 March 2006, 2 500 000 shares of 1 cent each were issued at a premium of 299 cents per share pursuant to theacquisition of BTM Manufacturing (Proprietary) Limited.



Report of the Directors (continued)

On 20 March 2006, 223 000 shares of 1 cent each were issued at a premium of 369 cents per share to the vendors of Intermap(Proprietary) Limited upon meeting profit warranties in terms of the purchase agreement.

On 31 May 2006, 627 303 shares of 1 cent each were issued at a premium of 179 cents per share to the vendors ofMICROmega (Proprietary) Limited upon meeting profit warranties in terms of the purchase agreement.

On 1 August 2006, 7 859 shares of 1 cent each were issued at a premium of 331 cents per share to staff of a subsidiarycompany as performance bonuses.

On 1 August 2006, 1 140 200 shares of 1 cent each were issued at a premium of 44 cents per share in terms of theMICROmega Share Incentive Scheme.

On 16 August 2006, 51 040 shares of 1 cent each were issued at a premium of 369 cents per share to the vendors of Intermap(Proprietary) Limited upon meeting profit warranties in terms of the purchase agreement.

On 7 December 2006, 280 000 shares of 1 cent each were issued at a premium of 179 cents per share to the vendors ofMICROmega (Proprietary) Limited upon meeting profit warranties in terms of the purchase agreement.

On 7 December 2006, 175 000 shares of 1 cent each were issued at a premium of 229 cents per share to the vendors of MECSAfrica (Proprietary) Limited upon meeting profit warranties in terms of the purchase agreement.

During the year the company repurchased 1 643 874 treasury shares on the open market at an average premium of 360cents to be utilised to settle future vendor payments.

6. Property, plant and equipmentThe changes in the property, plant and equipment during the year or any changes in the policy relating to their use are setout in the attached financial statements and do not, in our opinion, require further comments.

7. Events subsequent to the year endThere have been no facts or circumstances of a material nature that have occurred between the accounting date and thedate of this report.

8. DirectorsThe directors of the group during the accounting period and up to the date of this report were as follows:

Mr I G Morris ChairmanMr W E Rosenberg Chief Executive Officer Resigned 10 October 2006Mr E S Mpanza Non-executiveMr P H Seabi Non-executive Resigned 1 June 2006Mr R C Lewin Non-executiveMr J J L Storom Executive Resigned 10 October 2006Mr A Vercueil Executive Resigned 10 October 2006Mr D M Carson Non-executive Appointed 17 November 2006

The board had resolved that the most appropriate structure under which the group can continue to grow its operations andoptimise earnings extraction was to differentiate the role of the main board from that of the operations. In this regard thegroup established an internal operating board that is chaired by the Group Chief Executive Officer, W E Rosenberg. Theoperating board is responsible for optimising earnings growth from current operations whilst the main board directsstrategy and focuses on governance matters.



Report of the Directors (continued)

The operating board will be constituted by executive directors from group companies. Consequently, those executivedirectors that were on the main board, that are operationally responsible for activities in group companies relinquished theirresponsibilities on the main board and were appointed to the operating board.

Further the main board had been re-constituted so that three of the four members are non-executive, thereby enhancingthe board's independence and delivering on our commitment to comply with sound corporate governance standards.

9. Company secretaryThe company secretary of the group is D J Case, whose business and postal addresses are:Block C, Chislehurston Office Park Private Bag X996619 Impala Road SandtonChislehurston 2146 Sandton2196

10. Subsidiary and associated companies

Number of Percentage Shares Due by/(to)shares in issue holding at cost subsidiaries

% R'000 R'000

MICROmega Securities (Proprietary) Limited and its subsidiary companies 5 000 000 100 88 555 9 346

MICROmega Treasury Solutions (Proprietary) Limited 943 100 - 6 654MICROmega Revenue Management Solutions

(Proprietary) Limited and its subsidiary companies 100 50 3 141 9 687MICROmega Investments (Proprietary) Limited 13 500 100 92 475MICROmega Investment Portfolio (Proprietary) Limited 13 500 100 92 475SA Meter Reading Services (Proprietary) Limited 100 100 180 (1)Intermap (Proprietary) Limited 100 50 5 500 (3 327)Deltec Power Distributors (Proprietary) Limited 100 100 14 788 3 605Sebata Municipal Solutions (Proprietary) Limited and

its subsidiary companies 392 74 8 000 (4 290)MICROmega National Certification Authority

(Proprietary) Limited 120 100 - 6 874MICROmega Professional Risk Solutions (Proprietary) Limited 120 100 - 1 619MICROmega Sustainable Management Solutions

(Proprietary) Limited 120 100 - -MICROmega Quality Assurance (Proprietary) Limited 100 100 - -MECS Africa (Proprietary) Limited and its associate 4 500 100 4 663 5 533Swazi Occupational Safety & Health (Proprietary) Limited 100 100 500 (71)BTM Manufacturing (Proprietary) Limited 100 100 18 164 4 316Tiseletso Investments (Proprietary) Limited 100 - - 14 846

143 675 55 741



Group Company2006 2005 2006 2005

Notes R'000 R'000 R'000 R'000

ASSETS

Non-current assets 93 802 83 814 232 234 225 933

Property, plant and equipment 3 24 252 17 965 497 548Intangible assets 4 51 700 47 743 1 000 -Deferred taxation 5 7 510 10 586 11 233 13 989Investment in subsidiaries 6 - - 143 675 142 975Investment in associates 7 622 482 - -Long-term investments 8 6 020 2 815 5 595 2 449Loans receivable 9 3 698 4 223 3 638 4 166Amounts owing by group companies 10 - - 66 596 61 806

Current assets 122 371 98 475 2 534 1 142

Accounts receivable 48 412 40 586 883 654Inventories 11 18 298 11 635 - -Bank and cash 12 55 661 46 254 1 651 488

Total assets 216 173 182 289 234 768 227 075

EQUITY AND LIABILITIES

Capital and reserves 150 242 110 624 206 621 179 838

Share capital 13 187 913 182 652 185 442 174 249Non-distributable reserves 7 826 6 444 - -Accumulated (loss) / profit (48 570) (78 472) 21 179 5 589Minority interests 3 073 - - -

Non-current liabilities 10 994 15 087 16 760 25 618

Amounts owing to group companies 14 - - 10 855 16 637Borrowings 15 5 089 3 876 - -Deferred vendor payments 16 5 905 11 211 5 905 8 981

Current liabilities 54 937 56 578 11 387 21 619

Accounts payable 35 490 27 837 3 946 2 616Derivative financial instruments 108 - - -Provisions 17 1 625 1 325 - -Current portion of borrowings 15 2 699 1 912 - -Current portion of deferred vendor payments 16 8 621 19 003 7 441 19 003Taxation 6 394 6 501 - -

Total equity and liabilities 216 173 182 289 234 768 227 075

Net asset value per share (cents) 155.97 119.07 214.50 193.57Net tangible asset value per share (cents) 102.30 67.68 214.50 193.57Total ordinary shares in issue ('000) 13 96 326 92 905 96 326 92 905

Balance Sheetat 31 December 2006



Income Statementfor the year ended 31 December 2006

Group Company2006 2005 2006 2005

Notes R'000 R'000 R'000 R'000

Revenue 18 318 417 159 339 13 303 3 446Cost of sales (162 977) (47 999) - -

Gross profit 155 440 111 340 13 303 3 446Other income 3 524 31 171 1 29 362Operating costs (117 516) (124 176) (9218) (36 028)

Operating profit/(loss) 19 41 448 18 335 4 086 (3 220)Investment income 20 4 390 3 894 14 446 16 900Finance costs 21 (837) (504) (186) (83)Income from associates 140 48 - -

Profit before taxation 45 141 21 773 18 346 13 597Taxation 22 (14 158) (6 440) (2 756) (425)

Profit after taxation 30 983 15 333 15 590 13 172Minority interest (1 081) 109 - -

Profit attributable to ordinary shareholders 29 902 15 442 15 590 13 172

Reconciliation of headline earningsImpairment of goodwill - 561 - -Loss / (profit) on disposal of property,

plant and equipment 65 - (1) -Capital profit on sale of subsidiaries - (24 910) - (25 101)Impairment of loan 1 797 26 120 1 797 26 120

Headline earnings 31 764 17 213 17 386 14 191

Headline earnings per share (cents) 23 33.45 18.86 18.31 15.55Earnings per share (cents) 23 31.49 16.92 16.42 14.43Fully diluted earnings per share (cents) 23 30.89 16.40 16.11 13.99Weighted average shares in issue ('000) 23 94 971 91 253 94 971 91 253Diluted weighted average shares in issue ('000) 23 96 786 94 154 96 786 94 154Total ordinary shares in issue ('000) 13 96 326 92 905 96 326 92 905



Share Share Revaluation Share-based Minority Accumulatedcapital premium reserve payments interests loss TotalR'000 R'000 R'000 R'000 R'000 R'000 R'000

GROUP

Previously reported balance at 01 January 2005 887 175 737 714 2 654 109 (101 027) 79 074

Correction of error (refer note 2) 6 961 6 961

Restated balance 887 175 737 714 2 654 109 (94 066) 86 035Net profit for the year 15 442 15 442Minority interest in net profit

for the year (109) (109)Change in estimate 152 152Issue of share capital 42 6 004 6 046Share issue costs (18) (18)Revaluation of property,

plant and equipment 669 669Employee share options

value of services provided 2 407 2 407

Previously reported balance at 01 January 2006 929 181 723 1 383 5 061 (85 433) 103 663

Correction of error (refer note 2) 6 961 6 961

Restated balance 929 181 723 1 383 5 061 (78 472) 110 624Net profit for the year 29 902 29 902Movement in minority interests

on restructuring 1 992 1 992Minority interest in net profit

for the year 1 081 1 081Issue of share capital 51 11 188 11 239Share issue costs (46) (46)Treasury shares repurchased (17) (5 915) (5 932)Revaluation of property,

plant and equipment 452 452Realisation of non-distributable

reserve (42) (42)Employee share options

value of services provided 972 972

Balance at 31 December 2006 963 186 950 1 793 6 033 3 073 (48 570) 150 242

Statement of Changes in Equityfor the year ended 31 December 2006



Share Share Accumulatedcapital premium loss TotalR'000 R'000 R'000 R'000

COMPANY

Previously reported balance at 01 January 2005 887 167 334 (14 544) 153 677Correction of error (refer note 2) 6 961 6 961

Restated balance 887 167 334 (7 583) 160 638Net profit for the year 13 172 13 172Issue of share capital 42 6 004 6 046Share issue costs (18) (18)

Previously reported balance at 01 January 2006 929 173 320 (1 372) 172 877Correction of error (refer note 2) 6 961 6 961

Restated balance 929 173 320 5 589 179 838Net profit for the year 15 590 15 590Issue of share capital 51 11 188 11 239Share issue costs (46) (46)

Balance at 31 December 2006 980 184 462 21 179 206 621

Statement of Changes in Equity (continued)for the year ended 31 December 2006

Cash Flow Statementfor the year ended 31 December 2006



Group Company2006 2005 2006 2005

Notes R'000 R'000 R'000 R'000

Cash flows from operating activities 33 036 15 409 21 758 15 873

Cash generated by operating activities 29.1 40 608 13 603 7 498 (944)Investment income 4 382 3 889 4 446 3 900Finance costs (837) (504) (186) (83)Dividends received 148 53 10 000 13 000Taxation paid 29.2 (11 265) (1 632) - -

Cash flows from investing activities (13 625) (6 479) (5 004) 3 803

Expenditure to maintain operating capacityProperty, plant and equipment acquired (9 176) (4 769) (167) (323)Intangible assets acquired (2 371) (2 455) (1 000) -Proceeds of disposals of property, plant and equipment 450 118 9 -Proceeds of disposals of other intangible assets 406 329 - -

Expenditure for expansionSubsidiaries acquired/disposed 29.3 - 2 246 (700) 4 126Investment in associates (140) (48) - -Investments acquired/disposed (2 794) (1 900) (3 146) -

Cash flows from financing activities (10 004) (8 598) (15 591) (27 634)

Loans raised / (repaid) 2 000 1 125 - -Loans (granted) / repaid (1 577) (25 805) (1 574) (25 810)Deferred vendor payments raised / (repaid) (4 496) 16 082 (3 445) 16 432Group company loans raised / (repaid) - - (5 782) 3 489Group company loans (granted) / repaid - - (4 790) (21 745)Treasury shares repurchased (5 931) - - -

(Decrease)/increase in bank and cash 9 407 332 1 163 (7 958)Bank and cash at beginning of the year 46 254 45 922 488 8 446

Bank and cash at end of the year 55 661 46 254 1 651 488



1. Presentation of Annual Financial StatementsThe annual financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS)adopted by the International Accounting Standards Board (IASB). The annual financial statements have been prepared onthe historical cost basis except for the revaluation of certain property, plant and equipment and that derivative financialinstruments and financial instruments designated at fair value through profit or loss are stated at their fair value. The annualfinancial statements incorporate the principal accounting policies set out below.

The accounting policies have been applied consistently by the Group entities.

These accounting policies are consistent with the previous period.

1.1 Significant accounting judgements and estimatesIn preparing the annual financial statements, management is required to make estimates and assumptions that affectthe amounts represented in the annual financial statements and related disclosures. Use of available information andthe application of judgement is inherent in the formation of estimates. Actual results in the future could differ fromthese estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates arerecognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of therevision and future periods if the revision affects both current and future periods.

The use of estimates have been noted in the individual accounting policies.

1.2 Property, plant and equipmentThe cost of an item of property, plant and equipment is recognised as an asset when:• it is probable that future economic benefits associated with the item will flow to the company; and• the cost of the item can be measured reliably.

Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costsincurred subsequently to add to, replace part of, or service it. If a replacement cost is recognised in the carryingamount of an item of property, plant and equipment, the carrying amount of the replaced part is derecognised.

Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses. Thedepreciation charge for each period is recognised in profit or loss unless it is included in the carrying amount ofanother asset.

Depreciation is calculated on the straight line method to write off the cost of each asset, or the revalued amounts, totheir residual values over their estimated useful lives as follows:• Plant and equipment 5 years• Motor vehicles 5 years• Furniture and fittings 6 - 10 years• Office equipment 5 - 10 years• Computer equipment 3 years• Computer software 3 years• Leasehold improvements Over the period of the lease

The residual value and the useful life of each asset are reviewed at each financial period end.

The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profit or losswhen the item is derecognised. The gain or loss arising from the derecognition of an item of property, plant andequipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of theitem.

Notes to the Financial Statements



Following initial recognition at cost, land and buildings are carried at a revalued amount, which is the fair value at thedate of revaluation. Land is not depreciated as it is deemed to have an indefinite useful life. Buildings have not beendepreciated as the estimated residual values exceed the revalued amount. Valuations are performed frequentlyenough to ensure that the fair value of a revalued asset does not differ materially from its carrying value.

Any revaluation surplus is credited to the asset revaluation reserve included in the equity section of the balance sheet,except to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss, inwhich case the increase is recognised in profit or loss. A revaluation deficit is recognised in profit or loss, except that adeficit directly offsetting a previous surplus on the same asset is directly offset against the surplus in the assetrevaluation reserve. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred toretained earnings.

1.3 GoodwillOn a business combination, the net fair value of the identifiable assets, liabilities and contingent liabilities is assessedand adjustments are made to bring the accounting policies of businesses acquired into alignment with those of thegroup. The excess of the price paid over the group's interest in the fair value of identifiable net assets acquired isincluded in intangible assets as goodwill.

Goodwill is not amortised but is tested for impairment annually, or more frequently if events or changes incircumstances indicate that the carrying value may be impaired, and it is subsequently carried at cost less accumulatedimpairment losses.

The excess of the company's interest in the net fair value of the identifiable assets, liabilities and contingent liabilitiesover the cost of the business combination is immediately recognised in profit or loss.

Internally generated goodwill is not recognised as an asset.

1.4 Intangible assetsAn intangible asset is recognised when:• it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity;

and• the cost of the asset can be measured reliably.

Intangible assets are initially recognised at cost.

Expenditure on research is recognised as an expense when it is incurred.

An intangible asset arising from development is recognised when:• it is technically feasible to complete the asset so that it will be available for use or sale; and• there is an intention to complete and use or sell it; and• there is an ability to use or sell it; and• it will generate probable future economic benefits; and• there are available technical, financial and other resources to complete the development and to use or sell the

asset; and• the expenditure attributable to the asset during its development can be measured reliably.

Intangible assets are carried at cost less any accumulated amortisation and any impairment losses.

An intangible asset is regarded as having an indefinite useful life when, based on all relevant factors, there is noforeseeable limit to the period over which the asset is expected to generate net cash inflows. Amortisation is notprovided for these intangible assets. For all other intangible assets amortisation is provided on a straight line basisover their useful life.

Notes to the Financial Statements (continued)



The amortisation period and the amortisation method for intangible assets are reviewed regularly.

Reassessing the useful life of an intangible asset with a definite useful life after it was classified as indefinite is anindicator that the asset may be impaired. As a result the asset is tested for impairment and the remaining carryingamount is amortised over its useful life.

Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance are notrecognised as intangible assets.

1.5 SubsidiariesThe consolidated financial statements comprise the financial statements of MICROmega Holdings Limited and itssubsidiaries as at 31 December each year. The financial statements of the subsidiaries are prepared for the samereporting year as the parent company, using consistent accounting policies.

All intragroup balances, transactions, income and expenses are eliminated on consolidation.

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the group obtains control, andcontinue to be consolidated until the date that such control ceases.

On acquisition, the assets and liabilities and contingent liabilities are measured at their fair values at the date ofacquisition. Any excess of the cost of the acquisition over the fair values of the identifiable net assets acquired isrecognised as goodwill. Any deficiency of the cost of the acquisition below the values of the identifiable net assetsacquired is credited directly to profit and loss in the period of acquisition. The interest of minority shareholders isstated as the minority's proportion of the fair values of the assets and liabilities recognised. Subsequently, any lossesapplicable to the minority interest in excess of the minority interest are allocated against the interests of the holdingcompany.

1.6 AssociatesAn associate is a company over which the group has the ability to exercise significant influence over the financial andoperating policies and which is neither a subsidiary nor a joint venture.

The group’s investments in associates are accounted for using the equity method of accounting.

Under the equity method, the investment in an associate is carried in the balance sheet at cost plus post acquisitionchanges in the group's share of net assets of the associate, less any impairment in value. The income statement reflectsthe share of the results of operations of the associate.

The company's investments in its associates are accounted for at cost less impairment losses.

1.7 Financial instrumentsInitial recognitionThe group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financialliability or an equity instrument in accordance with the substance of the contractual arrangement.

Financial assets and financial liabilities are recognised on the group's balance sheet when the group becomes party tothe contractual provisions of the instrument.

Loans payable and receivableThese include loans to holding companies, fellow subsidiaries, subsidiaries, joint ventures and associates and arerecognised initially at fair value plus direct transaction costs.




Subsequently these loans are measured at amortised cost using the effective interest rate method, less any impairmentloss recognised to reflect irrecoverable amounts.

On loans receivable an impairment loss is recognised in profit or loss when there is objective evidence that it isimpaired. The impairment is measured as the difference between the investment's carrying amount and the presentvalue of estimated future cash flows discounted at the effective interest rate computed at initial recognition.

Impairment losses are reversed in subsequent periods when an increase in the investment's recoverable amount canbe related objectively to an event occurring after the impairment was recognised, subject to the restriction that thecarrying amount of the investment at the date the impairment is reversed shall not exceed what the amortised costwould have been had the impairment not been recognised.

Trade and other receivablesTrade and other receivables are measured at initial recognition at fair value, and are subsequently measured atamortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amountsare recognised in profit or loss when there is objective evidence that the asset is impaired. The allowance recognisedis measured as the difference between the asset's carrying amount and the present value of estimated future cashflows discounted at the effective interest rate computed at initial recognition.

Trade and other payablesTrade and other payables are initially measured at fair value, and are subsequently measured at amortised cost, usingthe effective interest rate method.

Cash and cash equivalentsCash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquidinvestments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changesin value. These are initially and subsequently recorded at fair value.

Bank overdraft and borrowingsBank overdrafts and borrowings are initially measured at fair value, and are subsequently measured at amortised cost,using the effective interest rate method

InvestmentsInvestments, which are recognised at fair value through profit or loss, are measured initially and subsequently at fairvalue, gains and losses arising from changes in fair value are included in profit or loss for the period.

DerivativesDerivative financial instruments, consisting of foreign exchange contracts, are initially measured at fair value on thecontract date, and are re-measured to fair value at subsequent reporting dates.

Changes in the fair value of derivative financial instruments are recognised in profit or loss as they arise.

1.8 TaxCurrent tax assets and liabilitiesCurrent tax for current and prior periods are, to the extent unpaid, recognised as liabilities. If the amount already paidin respect of current and prior periods exceeds the amount due for those periods, the excess is recognised as an asset.

Current tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to(recovered from) the tax authorities, using the tax rates that have been enacted or substantively enacted by thebalance sheet date.




Deferred tax assets and liabilitiesA deferred tax liability is recognised for all taxable temporary differences, except to the extent that the deferred taxliability arises from:• the initial recognition of goodwill; or• the initial recognition of an asset or liability in a transaction which:

- is not a business combination; and- at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).

A deferred tax liability is recognised for all taxable temporary differences associated with investments in subsidiaries,branches and associates, and interests in joint ventures, except to the extent that both of the following conditions aresatisfied:• the initial recognition of an asset or liability in a parent, investor or venturer is able to control the timing of the

reversal of the temporary difference; and• it is probable that the temporary difference will not reverse in the foreseeable future.

A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxableprofit will be available against which the deductible temporary difference can be utilised, unless the deferred tax assetarises from the initial recognition of an asset or liability in a transaction that:• is not a business combination; and• at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).

A deferred tax asset is recognised for all deductible temporary differences arising from investments in subsidiaries,branches and associates, and interests in joint ventures, to the extent that it is probable that:• the temporary difference will reverse in the foreseeable future; and• taxable profit will be available against which the temporary difference can be utilised.

A deferred tax asset is recognised for the carry forward of unused tax losses to the extent that it is probable that futuretaxable profit will be available against which the unused tax losses can be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the assetis realised or the liability is settled, based on tax rates that have been enacted or substantively enacted by the balancesheet date.

Tax expensesCurrent and deferred taxes are recognised as income or an expense and included in profit or loss for the period, exceptto the extent that the tax arises from:• a transaction or event which is recognised, in the same or a different period, directly in equity, or• a business combination.

1.9 LeasesA lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. Alease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental toownership.

Finance leases - lesseeFinance leases are recognised as assets and liabilities in the balance sheet at amounts equal to the fair value of theleased property or, if lower, the present value of the minimum lease payments. The corresponding liability to the lessoris included in the balance sheet as a finance lease obligation.

The lease payments are apportioned between the finance charge and reduction of the outstanding liability.Thefinance charge is allocated to each period during the lease term so as to produce a constant periodic rate of lease onthe remaining balance of the liability.




Operating leases - lesseeOperating lease payments are recognised as an expense on a straight-line basis over the lease term. The differencebetween the amounts recognised as an expense and the contractual payments are recognised as an operating leaseliability.

1.10 InventoriesInventories other than long-term contracts in progress, are stated at the lower of cost and net realisable value. Cost iscalculated on a weighted average basis. Cost includes transport and handling costs. In the case of manufacturedproducts and work in progress, cost includes all direct expenditure and production overheads based on the normallevel of activity.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs ofcompletion and the estimated costs necessary to make the sale.

Where necessary, provision is made for obsolete, slow-moving and defective inventories.

1.11 Impairment of assetsThe group assesses at each balance sheet date whether there is any indication that an asset may be impaired. If anysuch indication exists, the group estimates the recoverable amount of the asset.

Irrespective of whether there is any indication of impairment, the group also:• tests intangible assets with an indefinite useful life or intangible assets not yet available for use for impairment

annually by comparing its carrying amount with its recoverable amount. This impairment test is performedduring the annual period and at the same time every period.

• tests goodwill acquired in a business combination for impairment annually.

If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset.If it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash-generating unit to which the asset belongs is determined. The recoverable amount of an asset or a cash-generatingunit is the higher of its fair value less costs to sell and its value in use. If the recoverable amount of an asset is less thanits carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is animpairment loss.

An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognisedimmediately in profit or loss. Any impairment loss of a revalued asset is treated as a revaluation decrease.

An entity assesses at each reporting date whether there is any indication that an impairment loss recognised in priorperiods for assets other than goodwill may no longer exist or may have decreased. If any such indication exists, therecoverable amounts of those assets are estimated.

The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss doesnot exceed the carrying amount that would have been determined had no impairment loss been recognised for theasset in prior periods.

A reversal of an impairment loss of assets carried at cost less accumulated depreciation or amortisation other thangoodwill is recognised immediately in profit or loss. Any reversal of an impairment loss of a revalued asset is treatedas a revaluation increase.

1.12 Treasury sharesShares in the company, held by its subsidiaries are classified in the group's equity as treasury shares. These shares aretreated as a deduction from the issued and weighted average number of shares. The cost price of the shares isrecognised as a deduction from total equity.




No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the group's own equityinstruments.

1.13 Share-based paymentsThe group has an employee share trust for the granting of non-transferable options to employees.

For equity settled share options, the services received from employees are measured by reference to the fair value ofthe share options. The fair value is calculated at grant date, and subsequently at each reporting date and at the dateof final settlement, using the intrinsic value method. The fair value of the share options is recognised in theconsolidated income statement, together with a corresponding increase in shareholders' equity, on a straight line basisover the vesting period, based on an estimate of the number of options that will eventually vest.

1.14 Employee benefitsShort-term employee benefitsThe cost of short-term employee benefits are recognised in the period in which the service is rendered and are notdiscounted.

The expected cost of compensated absences is recognised as an expense as the employees render services thatincrease their entitlement or, in the case of non-accumulating absences, when the absence occurs.

The expected cost of profit sharing and bonus payments is recognised as an expense when there is a legal orconstructive obligation to make such payments as a result of past performance.

Defined contribution plansPayments to defined contribution retirement benefit plans are charged as an expense as they fall due.

1.15 Provisions and contingenciesProvisions are recognised when:• the group has a present obligation as a result of a past event;• it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation;

and• a reliable estimate can be made of the obligation.

The amount of a provision is the present value of the expenditure expected to be required to settle the obligation.

Provisions are not recognised for future operating losses.

If an entity has a contract that is onerous, the present obligation under the contract shall be recognised and measuredas a provision.

Contingent assets and contingent liabilities are not recognised, but disclosed in the notes to the annual financialstatements if necessary.

1.16 RevenueRevenue from the sale of goods is recognised when all the following conditions have been satisfied:• the group has transferred to the buyer the significant risks and rewards of ownership of the goods;• the group retains neither continuing managerial involvement to the degree usually associated with ownership

nor effective control over the goods sold;• the amount of revenue can be measured reliably;• it is probable that the economic benefits associated with the transaction will flow to the group; and• the costs incurred or to be incurred in respect of the transaction can be measured reliably.




When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associatedwith the transaction is recognised by reference to the stage of completion of the transaction at the balance sheet date.The outcome of a transaction can be estimated reliably when all the following conditions are satisfied:• the amount of revenue can be measured reliably;• it is probable that the economic benefits associated with the transaction will flow to the group;• the stage of completion of the transaction at the balance sheet date can be measured reliably; and• the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.

Contract revenue comprises:• the initial amount of revenue agreed in the contract; and• variations in contract work, claims and incentive payments:

- to the extent that it is probable that they will result in revenue; and- they are capable of being reliably measured.

Revenue is measured at the fair value of the consideration received or receivable and represents the amountsreceivable for goods and services provided in the normal course of business, net of trade discounts and volumerebates, and value added tax.

Interest is recognised, in profit or loss, using the effective interest rate method.

Dividends are recognised, in profit or loss, when the company's right to receive payment has been established.

1.17 Cost of salesWhen inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in whichthe related revenue is recognised. The amount of any write-down of inventories to net realisable value and all lossesof inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversalof any write-down of inventories, arising from an increase in net realisable value, is recognised as a reduction in theexpense in the period in which the reversal occurs.

The related cost of providing services recognised as revenue in the current period is included in cost of sales.

Contract costs comprise:• costs that relate directly to the specific contract;• costs that are attributable to contract activity in general and can be allocated to the contract; and• such other costs as are specifically chargeable to the customer under the terms of the contract.

1.18 Borrowing costsBorrowing costs are recognised as an expense in the period in which they are incurred.

1.19 Translation of foreign currenciesForeign currency transactionsA foreign currency transaction is recorded, on initial recognition in Rands, by applying to the foreign currency amountthe spot exchange rate between the functional currency and the foreign currency at the date of the transaction.

At each balance sheet date:• foreign currency monetary items are translated using the closing rate;• non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the

exchange rate at the date of the transaction; and• non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates

at the date when the fair value was determined.




Exchange differences arising on the settlement of monetary items or on translating monetary items at rates differentfrom those at which they were translated on initial recognition during the period or in previous annual financialstatements are recognised in profit or loss in the period in which they arise.

1.20 Segmental ReportingSegment information is reported using the accounting policies adopted by the group. Business segments are basedon core business activities. This forms the basis of the primary segmental analysis. No secondary geographicalsegmental analysis has been included as geographical location does not play a significant role in the group'soperations and thus this information will not be beneficial.

Segment revenueSegment revenue represents the gross value of goods and services invoiced excluding value added taxation, which isdirectly attributable and reasonably allocated to each business segment.

Investment income is included in the segment where the business activity holding the investment is situated.

Segment resultsSegment results equals segment revenue less segment expenses before any adjustment to minority interests.

Segment assets and liabilitiesSegment assets and liabilities include direct and reasonable allocatable operating assets, investments in associates andliabilities.

2. Correction of error

Gross Taxation NetR'000 R'000 R'000

GROUPDuring the current financial year MICROmega Holdings Limited received finaltax assessments for prior periods. These assessments resulted in a differencefrom the carried forward assessed loss which resulted in a change to thedeferred tax asset.

6 961 - 6 961

COMPANYDuring the current financial year the company received final tax assessmentsfor prior periods. These assessments resulted in a difference from the carriedforward assessed loss which resulted in a change to the deferred tax asset.

6 961 - 6 961




3. Property, plant and equipment

2006 2005Cost / Accumulated Carrying Cost / Accumulated Carrying

Valuation depreciation value Valuation depreciation valueR'000 R'000 R'000 R'000 R'000 R'000

GROUP

Owned assetsLand and buildings 5 380 - 5 380 4 595 - 4 595Plant and equipment 10 305 1 842 8 463 7 821 1 404 6 417Motor vehicles 5 897 1 210 4 687 4 553 1 004 3 549Furniture and fittings 4 243 2 784 1 459 4 014 2 798 1 216Office equipment 4 467 3 820 647 4 219 3 553 666Computer equipment 9 819 6 757 3 062 8 852 7 424 1 428Computer software 294 87 207 183 170 13Leasehold improvements 858 511 347 719 638 81

41 263 17 011 24 252 34 956 16 991 17 965

The carrying amounts of property, plant and equipment can be reconciled as follows:

Carrying value Carrying at beginning value at

of year Additions Revaluations Disposals Depreciation end of yearR'000 R'000 R'000 R'000 R'000 R'000

2006

Owned assetsLand and buildings 4 595 257 528 - - 5 380Plant and equipment 6 417 2 616 - (32) (538) 8 463Motor vehicles 3 549 2 251 - (467) (646) 4 687Furniture and fittings 1 216 643 - (1) (399) 1 459Office equipment 666 292 - (3) (308) 647Computer equipment 1 428 2 500 - (27) (839) 3 062Computer software 13 259 - - (65) 207Leasehold improvements 81 358 - (12) (80) 347

17 965 9 176 528 (542) (2 875) 24 252

Certain property, plant and equipment is encumbered as stated in note 15.




3. Property, plant and equipment (continued)

2006 2005Accumulated Carrying Accumulated Carrying

Cost depreciation value Cost depreciation valueR'000 R'000 R'000 R'000 R'000 R'000

COMPANY

Owned assetsMotor vehicles 100 28 72 47 17 30Furniture and fittings 464 351 113 462 305 157Office equipment 321 222 99 310 178 132Computer equipment 758 612 146 698 517 181Leasehold improvements 471 404 67 440 392 48

2 114 1 617 497 1 957 1 409 548

The carrying amounts of property, plant and equipment can be reconciled as follows:

Carrying value Carrying at beginning value at

of year Additions Revaluations Disposals Depreciation end of yearR'000 R'000 R'000 R'000 R'000 R'000

2006

Owned assetsMotor vehicles 30 53 - - (11) 72Furniture and fittings 157 2 - - (46) 113Office equipment 132 11 - - (44) 99Computer equipment 181 70 - (8) (97) 146Leasehold improvements 48 31 - - (12) 67

548 167 - (8) (210) 497




3. Property, plant and equipment (continued)

Group Company2006 2005 2006 2005R'000 R'000 R'000 R'000

Land and buildings comprise:

Land and buildings situated on Erf 581 and Erf 582, ElsburgExtension 1, Registration Division I.R. the province of Gauteng. 3 000 3 000 - -

At cost - 2001 911 911 - -Additions at cost - 2004 294 294 - -

- 2005 292 292 - -Revaluations - 2004 835 835 - -

- 2005 668 668 - -

The land and buildings are jointly owned by MICROmegaInvestments (Proprietary) Limited and MICROmegaInvestment Portfolio (Proprietary) Limited.

Erf 30366 Kimberley, the province of the Northern Cape. 880 277 - -

At cost - 2005 277 277 - -Additions at cost - 2006 222 - - -Revaluation - 2006 381 - - -

The effective date of the revaluation was 31 December2006. Valuations were performed by an independentvaluer, Seeff Properties.

Factory and office buildings situated on remaining Erf 140 Wynberg township. 1 500 1 318 - -

At cost - 2005 1 203 1 203 - -Additions at cost - 2006 34 - - -Revaluations - 2005 115 115 - -

- 2006 148 - - -

The effective date of the revaluation was 31 December2006. The valuation was performed by A.T. Watkins(Proprietary) Limited T/a Watprop Industrial & CommercialProperty Consultants.

Total 5 380 4 595 - -




4. Intangible assets

2006 2005Cost / Accumulated Carrying Cost / Accumulated Carrying

Valuation impairment value Valuation impairment valueR'000 R'000 R'000 R'000 R'000 R'000

GROUP

Goodwill 33 348 561 32 787 30 641 561 30 080Trademarks 3 000 - 3 000 3 000 - 3 000Software development costs 4 913 - 4 913 4 663 - 4 663Intellectual property 7 500 - 7 500 6 500 - 6 500Customer lists 3 500 - 3 500 3 500 - 3 500

52 261 561 51 700 48 304 561 47 743

The carrying amounts of other intangible assets can be reconciled as follows:

Carrying value Restructuring Carrying at beginning of sub- value at

of year Additions sidiaries Disposals Impairments end of yearR'000 R'000 R'000 R'000 R'000 R'000

2006

Owned assetsGoodwill 30 080 936 1 992 (221) - 32 787Trademarks 3 000 - - - - 3 000Software development costs 4 663 435 - (185) - 4 913Intellectual property 6 500 1 000 - - - 7 500Customer lists 3 500 - - - - 3 500

47 743 2 371 1 992 (406) - 51 700

2006 2005Accumulated Carrying Accumulated Carrying

Cost impairment value Cost impairment valueR'000 R'000 R'000 R'000 R'000 R'000

COMPANY

Intellectual property 1 000 - 1 000 - - -

1 000 - 1 000 - - -




4. Intangible assets (continued)

The carrying amounts of other intangible assets can be reconciled as follows:

Carrying value Restructuring Carrying at beginning of sub- value at

of year Additions sidiaries Disposals Impairments end of yearR'000 R'000 R'000 R'000 R'000 R'000

2006

Intellectual property - 1 000 - - - 1 000

- 1 000 - - - 1 000

5. Deferred taxation


Deferred tax assets

Balance at beginning of year 15 916 16 022 13 989 14 414Movements during year attributable to:- Temporary differences (2 958) 257 (2 756) (152)- Change in rate of tax - (301) - (273)- Other 462 (62) - -

Balance at end of year 13 420 15 916 11 233 13 989

The balance comprises:- Capital allowances 4 847 4 420 4 744 4 144- Provisions 2 084 1 651 - -- Assessed losses 6 489 9 845 6 489 9 845

13 420 15 916 11 233 13 989

Deferred tax liabilities

Balance at beginning of year (5 330) (230) - -Movements during year attributable to:- Temporary differences (423) (43) - -- Acquisition of subsidiary (157) (4 869) - -- IFRS adjustments to property, plant and equipment - (188) - -

Balance at end of year (5 910) (5 330) - -

The balance comprises:- Capital allowances (991) (520) - -- Intangible assets (5 014) (4 869) - -- Provisions 95 59 - -

(5 910) (5 330) - -

Total 7 510 10 586 11 233 13 989

Deferred tax assets and liabilities are only offset when the income tax relates to the same legal entity or fiscal authority orthey intend to settle the assets and liabilities on a net basis.




6. Investment in subsidiaries


Shares at cost - - 143 675 142 975

7. Investment in associates

Associate companies at fair value 622 482 - -

Associate companiesEquity accounted

GCM Meter Reading Services (Proprietary) Limited

50% interest in the unlisted shares of GCM Meter ReadingServices (Proprietary) Limited, a company involved inmeter reading services.

Carrying value of investment:Shares at cost 1 1 - -Retained earnings since acquisition 132 124 - -

133 125 - -

Summary financial information of GCM Meter ReadingServices (Proprietary) Limited

AssetsCurrent assets 469 364 - -

469 364 - -

Equity and liabilitiesEquity and reserves 416 288 - -Current liabilities 53 76 - -

469 364 - -

Net profit before tax 16 25 - -




7. Investment in associates (continued)


Petrolmecs LDA

49% interest in the unlisted shares of Petrolmecs LDA, acompany incorporated in Angola.

Carrying value of investment:Shares at cost 319 319 - -Retained earnings since acquisition 169 38 - -

488 357 - -

Summary financial information of Petrolmecs LDA

AssetsNon-current assets 721 308 - -Current assets 8 823 3 513 - -

9 544 3 821 - -

Equity and liabilitiesEquity and reserves 388 134 - -Non-current liabilities 371 - - -Current liabilities 8 785 3 687 - -

9 544 3 821 - -

Net profit before tax 268 77 - -




8. Investments


Listed shares 245 186 - -Unlisted investments 5 775 2 629 5 595 2 449

6 020 2 815 5 595 2 449

The group held the following investments:

Number of ordinary shares2006 2005 2006 2005

Listed sharesSanlam Limited 4 011 4 011 - -Scharrig Mining Limited 2 000 - - -JSE Limited 10 000 10 000 - -

Fair value of unlisted investmentsR'000 R'000 R'000 R'000

Unlisted investmentsBond Exchange Seat 180 180 - -Foreign investments - - - -Local investments 5 595 2 449 5 595 2 449

5 775 2 629 5 595 2 449

Local investments include administrative and legal costs incurred in the establishment of the group's risk managementbusinesses (trading as NOSA).




9. Loans receivable


Lwanelerato (Proprietary) Limited 497 1 025 497 1 025G K K Berner - 57 - -Rivoni Investments (Proprietary) Limited 60 - - -Mzimkhulu Financial Investments (Proprietary) Limited 35 793 33 691 35 793 33 691Provision for impairment of loan receivable -

Mzimkhulu Financial Investments (Proprietary) Limited (32 652) ( 30 550) (32 652) (30 550)

3 698 4 223 3 638 4 166

Less: Current portion included in current portion of loans receivable - - - -

3 698 4 223 3 638 4 166

The loan to Lwanelerato (Proprietary) Limited is unsecured, bears no interest and has no fixed terms of repayment.

The loan to G K K Berner was unsecured, bore no interest and had no fixed terms of repayment.

The loan to Rivoni Investments (Proprietary) Limited is unsecured, bears no interest and has no fixed terms of repayment.

The loan to Mzimkhulu Financial Investments (Proprietary) Limited is secured by a deed of pledge of 50% of the issued sharecapital of MICROmega Revenue Management Solutions (Proprietary) Limited, and bears interest at the prime overdraft rateof FirstRand Bank Limited. The loan is repayable in full by 31 December 2011.




10. Amounts owing by group companies


BTM Manufacturing (Proprietary) Limited - - 4 316 2 036Deltec Power Distributors (Proprietary) Limited - - 3 605 -G2 Properties (Proprietary) Limited - - - 350MECS (Africa) (Proprietary) Limited - - 5 533 2 000MICROmega Investments (Proprietary) Limited - - 475 475MICROmega Investment Portfolio (Proprietary) Limited - - 475 475MICROmega National Certification Authority (Proprietary) Limited - - 6 874 3 754MICROmega Professional Risk Solutions (Proprietary) Limited - - 1 619 503MICROmega Revenue Management Services (Proprietary) Limited - - 9 687 16 396MICROmega Sustainable Management Solutions (Proprietary) Limited - - - 201MICROmega Treasury Solutions (Proprietary) Limited - - 6 654 3 816MICROmega Quality Assurance (Proprietary) Limited - - - 6SA Meter Reading Services (Proprietary) Limited - - - 114Sebata Municipal Solutions (Proprietary) Limited - - 15 -Swazi Occupational Safety and Health (Proprietary) Limited - - - 31Tiseletso Investments (Proprietary) Limited - - 14 846 13 512TTSA Securities (Proprietary) Limited - - 12 497 18 137

- - 66 596 61 806

The loan to MECS (Africa) (Proprietary) Limited has been ceded to FirstRand Bank Limited as security for facilities granted toMECS (Africa) (Proprietary) Limited.

The loan to MICROmega Professional Risk Solutions (Proprietary) Limited has been subordinated in favour of other creditorsuntil such time as their assets, fairly valued, exceed their liabilities.

The loan to MICROmega Revenue Management Services (Proprietary) Limited has been ceded, to an amount of R9 686 982,to FirstRand Bank Limited as security for facilities granted to MICROmega Revenue Management Services (Proprietary)Limited.

The loan to Tiseletso Investments (Proprietary) Limited is secured by a deed of pledge for 100% of the issued share capitalof Tiseletso Investments (Proprietary) Limited, bears interest at a rate of 2% below prime and is repayable in full on 30 April2009. This loan has been subordinated in favour of other creditors until such time as the company's assets, fairly valued,exceed its liabilities.

The loan to TTSA Securities (Proprietary) Limited is unsecured, bears interest at the call account rate and is repayable at thediscretion of the Board of Directors.

The remaining loans are unsecured and bear interest at rates determined periodically at the discretion of the Board ofDirectors. The loans are repayable at the discretion of the Board of Directors.




11. Inventories


The amounts attributable to the different categories are as follows:Raw materials 2 479 1 447 - -Consumables 190 30 - -Work in progress 1 483 224 - -Merchandise 10 623 7 263 - -Goods in transit 3 523 2 671 - -

18 298 11 635 - -

12. Bank and cash

Included in bank and cash for the group are amounts which have been ceded as follows:

MICROmega Securities (Proprietary) Limited and its subsidiary companies• Fixed deposits held with FirstRand Bank Limited amounting to R630 000 have been ceded as security for the facilities

granted to the company.• An amount of R3 000 000 on call has been ceded to Rand Merchant Bank as security against a broking facility.• An amount of R1 000 000 on call has been ceded to ABSA Corporate & Merchant Bank Limited as security against a

broking facility.• A guarantee to the amount of R100 000 has been given to FirstRand Bank Limited as security for facilities.• A letter of suretyship in favour of FirstRand Bank Limited to the amount of R10 000 for the facilities granted.

MICROmega Revenue Management Solutions (Proprietary) Limited and its subsidiary companies• Loan account to the amount of R9 686 982 owing to MICROmega Holdings Limited has been ceded to FirstRand Bank

Limited for security of facilities.

Sebata Municipal Solutions (Proprietary) Limited and its subsidiary companies• Trade accounts receivable have been ceded for banking facilities granted. This facility was not used during the

financial year.

MECS (Africa) (Proprietary) Limited• The call account, to the amount of R2 000 000, has been ceded to FirstRand Bank Limited for banking facilities granted.

BTM Manufacturing (Proprietary) Limited• Trade accounts receivable have been ceded for banking facilities granted. This facility had not been taken up at year

end.




13. Share capital


Authorised- 200 000 000 (2005: 100 000 000) ordinary shares

of 1 cent each 2 000 1 000 2 000 1 000

Issued- 97 969 569 (2005: 92 905 027) ordinary shares of

1 cent each 980 929 980 929- 1 653 674 (2005: -) ordinary shares of 1 cent each

held in treasury (17) - - -- Share premium 186 950 181 723 184 462 173 320

187 913 182 652 185 442 174 249

The directors are authorised, until the forthcoming annualgeneral meeting, to dispose of the unissued shares for anypurpose and upon such terms and conditions as theydeem fit, subject to the provision of sections 221 and 222of the Companies Act and the requirements of the JSELimited.

14. Amounts owing to group companies

B&B Software (Proprietary) Limited - - 4 305 1 200Deltec Power Distributors (Proprietary) Limited - - - 6 708Intermap (Proprietary) Limited - - 3 327 2 679SA International Capital & Market Brokers (Proprietary) Limited - - 3 151 6 050SA Meter Reading Services (Proprietary) Limited - - 1 -Swazi Occupational Safety & Health (Proprietary) Limited - - 71 -

- - 10 855 16 637

The loan from Intermap (Proprietary) Limited is unsecured, bears interest at the ruling call deposit rate of Standard BankLimited and has no fixed terms of repayment.

The remaining loans are unsecured, bear no interest and are repayable at the discretion of the Board of Directors.




15. Borrowings


Instalment sale liabilitiesLiabilities under instalment sale agreements repayableover periods from two to five years at effective interestrates ranging from prime lending rate less 1.5% to primelending rate plus 4% per annum. Secured by property,plant and equipment with a carrying value of R6 711 861(2005: R2 448 842)

5 187 2 309 - -

Finance lease liabilityLiability under a finance lease agreement repayable over 5years at an effective interest rate of prime lending rate plus 1.5% per annum. Secured by property, plant andequipment with a carrying value of R100 260

123 - - -

Unsecured liabilityUnsecured liability to South African Revenue Servicesbearing interest at 10.5% per annum, repayable in monthlyinstalments of R98 486

2 153 3 241 - -

Mortgage bondLoan bearing interest at prime rate per annum secured bymortgage over Erf 30366 Kimberley and repayable inmonthly instalments of approximately R3 000 per month

325 184 - -Loans from directors of subsidiaries - 54 - -

7 788 5 788 - -

Less: Current portion included in current portion of borrowings (2 699) (1 912) - -

5 089 3 876 - -




16. Deferred vendor payments


The amount due to vendors represents the balance of thepurchase consideration owing in respect of acquisitions.The loans are settled through the issue of shares and cashresources upon achievement of profit warranties

14 526 30 214 13 346 27 984

14 526 30 214 13 346 27 984

Less: Current portion included in current portion of borrowings (8 621) (19 003) (7 441) (19 003)

5 905 11 211 5 905 8 981

Amounts to be settled:Through the issue of shares 10 846 21 684 10 846 21 684Through the distribution of cash resources 3 680 8 530 2 500 6 300

14 526 30 214 13 346 27 984

17. Provisions

UnusedCarrying amounts Carrying

amount at Used reversed amountbeginning Additional during during at end

of year provisions the year the year of yearR'000 R'000 R'000 R'000 R'000

GROUP

Provision for deal difference 1 000 - - - 1 000Provision for labour disputes - 300 - - 300Provision for loyalty payments 325 - - - 325

1 325 300 - - 1 625

Deal differenceThe group makes provision for deal differences to cover the group on unmatched trades that may occur.

Labour disputesThe provision relates to legal action instituted against the company by 37 ex-employees. The company lost the initial casebut has appealed against the findings.

Loyalty paymentsThe group makes provision for accumulated payments due to specific employees in terms of loyalty payments whichbecome payable after five years from the 2004 financial year.




18. Gross revenue

Gross revenue comprises turnover, which excludes value added tax and represents the invoiced value of goods and servicessupplied.

19. Operating profit/(loss)


Operating profit/(loss) is stated after:

IncomeIncome from subsidiaries - - 12 063 15 281

- Dividends - - 10 000 13 000- Interest - - 2 063 2 281

Profit on disposal of property, plant and equipment - 50 1 -Profit on disposal of subsidiaries - 29 359 - 29 359Profit on foreign exchange * 602 740 - -

Fair value movements- Investments 411 98 - -

ExpenditureAuditors' remuneration 1 072 837 386 315

- Audit fee 830 699 317 225- Prior year (over)/under provision 75 5 62 -- Other services 167 133 7 90

Depreciation- Property, plant and equipment 2 875 1 882 210 168

Impairment losses 2 102 31 111 2 102 30 550

- Intangible assets - 561 - -- Loans receivable 2 102 30 550 2 102 30 550

Lease rentals 5 274 2 973 2 21

- Premises 4 646 2 812 2 21- Motor vehicles - 73 - -- Equipment 628 88 - -

Loss on disposals of property, plant and equipment 92 - - -Research and development 208 141 - -Share-based payments 972 2 407 - -

* Foreign exchange differences arise on the importation of goods and the revaluation of trade debtors and creditors.




20. Investment income


Interest income- Interest received 4 382 3 889 2 383 1 619- Interest received from subsidiaries - - 2 063 2 281

4 382 3 889 4 446 3 900

Dividend income- Dividends received from listed companies 8 5 - -- Dividends received from subsidiaries - - 10 000 13 000

8 5 10 000 13 000

4 390 3 894 14 446 16 900

21. Finance costs

Long-term loans 329 357 185 82Instalment sale liabilities 395 87 - -Bank overdrafts 113 60 1 1

837 504 186 83




22. Taxation


South African normal tax- Current tax 11 084 6 259 - -- Deferred tax

Current year 3 000 181 2 756 425- Prior year adjustments 74 - - -

Tax for the year 14 158 6 440 2 756 425

Reconciliation of rate of tax % % % %South African normal tax rate 29.00 29.00 29.00 29.00

Adjusted for:Disallowable expenditure 0.68 0.20 - 0.20Exempt income (0.01) (1.10) (18.72) (27.70)Utilisation of assessed losses (0.23) (0.7) 1.10 (34.00)Prior year adjustment 0.22 (3.00) - 3.20Investment and other allowances 0.35 - - -Impairment charges and other capital losses 1.35 5.20 3.64 32.40

Net increase/(decrease) 2.36 0.60 (13.98) (25.90)

Effective rate 31.36 29.60 15.02 3.10

23. Earnings per ordinary share

GroupThe calculation of earnings per ordinary share of 31.49 cents (2005: 16.92 cents) is based on the earnings attributable toordinary shareholders of R29 901 971 (2005: R15 442 561) and a weighted average of 94 971 048 (2005: 91 253 064) ordinaryshares in issue throughout the year.

The calculation of diluted earnings per ordinary share of 30.89 cents (2005: 16.11 cents) is based on earnings attributable toordinary shareholders of R29 901 971 (2005: R15 442 561) and a diluted weighted average of 96 785 688 (2005: 94 154 277)ordinary shares in issue throughout the year.

Reconciliation between weighted average ordinary shares and diluted weighted average ordinary shares:

2006 2005

Weighted average ordinary shares 94 971 048 91 253 064Share options 1 731 695 2 643 282Shares to be issued for acquisition of subsidiaries 82 945 257 931

Weighted average diluted ordinary shares 96 785 688 94 154 277

The calculation of headline earnings per share of 33.45 cents (2005: 18.86 cents) is based on headline earnings of R31 764 655 (2005: R17 213 619) and a weighted average of 94 971 048 (2005: 91 253 064) ordinary shares in issuethroughout the year.




23. Earnings per ordinary share (continued)

Reconciliation between earnings and headline earnings:

Profitbefore Minority Exceptional Net profit

taxation Taxation interest item 2006 2005R'000 R'000 R'000 R'000 R'000 R'000

Per the financial statements 45 141 (14 158) (1 081) - 29 902 15 442Impairment of goodwill - - - - - 561Capital loss on disposal of

property, plant and equipment 92 (27) - - 65 -Capital profit on sale of subsidiaries - - - - - (24 910)Impairment of loan 2 102 (305) - - 1 797 26 120

47 335 (14 490) (1 081) - 31 764 17 213

CompanyThe calculation of earnings per ordinary share of 16.42 cents (2005: 14.43 cents) is based on earnings attributable to ordinaryshareholders of R15 590 093 (2005: R13 171 972) and a weighted average of 94 971 048 (2005: 91 253 064) ordinary sharesin issue throughout the year.

The calculation of diluted earnings per ordinary share of 16.11 cents (2005: 13.99 cents) is based on earnings attributable toordinary shareholders of R15 590 093 (2005: R13 171 972) and a diluted weighted average of 96 785 688 (2005: 94 154 277)ordinary shares in issue throughout the year.

Reconciliation between weighted average ordinary shares and diluted weighted average ordinary shares:

2006 2005

Weighted average ordinary shares 94 971 048 91 253 064Share options 1 731 695 2 643 282Shares to be issued for acquisition of subsidiaries 82 945 257 931

Weighted average diluted ordinary shares 96 785 688 94 154 277

The calculation of headline earnings per share of 18.31 cents (2005: 15.55 cents) is based on headline earnings of R17 386 883 (2005: R14 190 434) and a weighted average of 94 971 048 (2005: 91 253 064) ordinary shares in issuethroughout the year.




23. Earnings per ordinary share (continued)

Reconciliation between earnings and headline earnings:

Profitbefore Minority Exceptional Net profit

taxation Taxation interest item 2006 2005R'000 R'000 R'000 R'000 R'000 R'000

Per the financial statements 18 346 (2 756) - - 15 590 13 172Capital profit on disposal of

property, plant and equipment (1) - - - (1) -Capital profit on sale of subsidiaries - - - - - (25 101)Provision for impairment of loan 2 102 (305) - - 1 797 26 120

20 447 (3 061) - - 17 386 14 191

24. Directors emoluments

Emoluments paid to directors by holding and subsidiary companies for the financial year under review:

Basic Provident Medical Directors Total Total salary Allowances Bonuses fund aid fees 2006 2005R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000

I G Morris 840 120 - - - - 960 960R C Lewin - - 270 - - 6 276 28E S Mpanza - - - - - 15 15 12D M Carson - - - - - 3 3 -W E Rosenberg 577 117 - 116 35 - 845 974P H Seabi - - - - - 3 3 18J J L Storom 301 26 - - 2 - 329 616A Vercueil 485 113 - 95 26 - 719 1 187

2 203 376 270 211 63 27 3 150 3 795

25. Contingent liabilities

Contingent liability of 30% of the after tax profit exceeding R900 000 of B&B Software (Proprietary) Limited, payable to theprevious vendor of the company.




26. The MICROmega Share Incentive Trust

The following options have been granted in terms of MICROmega Share Incentive Trust to employees over the next five yearsand are still outstanding:

Number of ordinary sharesGroup Group Company Company2006 2005 2006 2005

Options granted at beginning of year 3 824 559 5 878 995 3 824 559 5 878 995Movement during year:- New options granted during the year 75 000 255 000 75 000 255 000- Options exercised during the year (1 118 682) (1 528 741) (1 118 682) (1 528 741)- Options expired during the year (560 606) (780 695) (560 606) (780 695)

Options granted at end of year 2 220 271 3 824 559 2 220 271 3 824 559

Comprising:Share options available at an issue price of R 0.45 per share 666 771 1 883 059 666 771 1 883 059Share options available at an issue price of R 0.85 per share 808 100 967 100 808 100 967 100Share options available at an issue price of R 0.90 per share 250 000 295 000 250 000 295 000Share options available at an issue price of R 1.00 per share 395 000 555 000 395 000 555 000Share options available at an issue price of R 2.00 per share 100 400 124 400 100 400 124 400

2 220 271 3 824 559 2 220 271 3 824 559

27. Commitments


Operating lease commitmentsThe future minimum lease payments under non-cancelable

operating leases are as follows:

Premises and office equipment

Not later than 1 year 4 144 3 131 - -Later than 1 year and not later than 5 years 8 320 7 730 - -

12 464 10 861 - -

28. Comparative figures

In order to comply with IAS 37 effective 1 January 2006, provision for leave pay which was disclosed under provisions inthe prior year has been recognised in trade payables in the current year.




29. Notes to the cash flow statement


29.1 Cash generated by operating activities

Net profit before taxation 45 141 21 773 18 346 13 597Adjustments for:Depreciation and amortisation 2 875 1 882 210 168Impairment losses 2 102 31 111 2 102 30 550Investment income (4 382) (3 894) (14 446) (16 900)Finance costs 837 504 186 83Movement in derivative financial instruments 108 - - -Movement in provisions 300 100 - -Profit on disposals of property, plant and equipment 92 (50) (1) -(Profit)/loss on disposals of investments - (111) - -Profit on disposals of subsidiaries and associates - (29 359) - (29 359)Fair value adjustment to investments (411) (98) - -Equity accounted profit of associate (140) - - -Movement on non-distributable reserve 930 2 407 - -

47 452 24 265 6 397 (1 861)

Movements in working capitalIncrease in inventories (6 663) (804) - -(Increase)/decrease in accounts receivable (7 826) (5 573) (229) (507)(Decrease)/increase in accounts payable 7 645 (4 285) 1 330 1 424

40 608 13 603 7 498 (944)

29.2 Reconciliation of taxation paid during year

Charge in income statement (14 158) (6 440) (2 756) (425)Adjustment for deferred tax 3 000 181 2 756 425Movement in taxation balance (107) 4 627 - -

Payments made (11 265) (1 632) - -





29.3 Acquisition/disposal of subsidiary


During the current year the group was restructured as follows:

1 January 200626% of the issued share capital of G2 Properties (Limited) wassold in exchange for 25% of the issued share capital of SebataMunicipal Solutions (Proprietary) Limited. The transaction hadno effect on profit or loss within the group.

During the prior year the group disposed of the followinginterests in a subsidiary:

1 January 200550% of the issued share capital of MICROmega RevenueManagement Solutions (Proprietary) Limited.

During the prior year the company acquired the followingcompanies:

1 October 2005The entire issued share capital of MECS (Africa) (Proprietary)Limited.

1 November 2005The entire issued share capital of BTM Manufacturing(Proprietary) Limited.

The entire issued share capital of Swazi Occupational Safety &Health (Proprietary) Limited.

Property, plant and equipment - (7 370) - -Intangible assets - (13 000) - -Deferred taxation - 4 869 - -Other investments - (319) - -Inventory - (6 272) - -Trade receivables - (14 760) - -Bank and cash - 104 - -Borrowings - 4 346 - -Trade and other payables - 11 764 - -Taxation - 1 476 - -Minority interest (1 992) - - -

Assets (acquired)/disposed (1 992) (19 162) - -Goodwill/(profit on sale) 1 992 1 507 - -

(Purchase consideration)/sale proceeds - (17 655) - -Less: Bank and cash - (104) - -Less: Paid by issue of shares - 8 750 - -Less: Amounts to be paid based on profit targets - 11 255 - -

Total proceeds on (acquisition)/disposal - 2 246 - -



Business Segments Financial Support Information Automotive Consoli-services services technology Component Elimination dated

R'000 R'000 R'000 R'000 R'000 R'000

Segment RevenueExternal revenue 67 410 129 783 42 874 80 146 (1 796) 318 417

Segment Result 12 324 8 063 9 143 12 896 ( 978) 41 448 Investment income 2 919 1 026 1 123 1 569 (2 247) 4 390 Finance costs (1 375) ( 640) ( 371) ( 698) 2 247 ( 837) Income from associates 9 131 - - - 140

Profit before taxation 13 877 8 580 9 895 13 767 ( 978) 45 141 Taxation (4 199) (2 611) (3 079) (4 240) ( 29) (14 158) Minority interest - - (1 081) - - (1 081)

Profit after taxation and minorities 9 678 5 969 5 735 9 527 (1 007) 29 902

Contribution to earnings per segment 9 678 5 969 5 735 9 527 (1 007) 29 902 Loss / (profit) on disposal of

property, plant and equipment 53 ( 7) 8 11 - 65 Impairment of loan receivable - - - - 1 797 1 797

Contribution to headline earnings per segment 9 731 5 962 5 743 9 538 790 31 764

Segment Assets & LiabilitiesSegment assets 92 168 30 572 27 667 41 266 (35 332) 156 341 Intangible assets 1 921 69 6 496 - 43 214 51 700 Investment in associates 133 489 - - - 622 Deferred taxation 890 398 177 ( 337) 6 382 7 510

Total Assets 95 112 31 528 34 340 40 929 14 264 216 173

Segment Liabilities 73 964 25 478 8 563 20 007 (62 081) 65 931

Additional InformationCapital expenditure 3 396 1 197 899 3 518 166 9 176 Depreciation 1 254 252 365 897 107 2 875

Segment Report



Shareholder Information

Analysis of the share register at 31 December 2006

Non-public & public shareholders Number of sharesPercentage of share capital

Non-public shareholders

Drenk Services Limited 52 801 921 53.90%

Subsidiary companies 1 345 039 1.37%

Directors (Direct & indirect beneficial interest) 1 146 458 1.17%

Directors - Subsidiary companies (Direct & indirect beneficial interest) 2 496 682 2.55%

Trustee of The MICROmega Share Incentive Scheme 193 705 0.20%

Total non-public shareholders 57 983 805 59.19%

Total public shareholders 39 985 764 40.81%

Total 97 969 569 100.00%

Major shareholders Number of sharesPercentage of share capital

Drenk Services Limited 52 801 921 53.90%

HSBC Investment Management 22 069 382 22.53%

Engima Holdings Limited 3 000 000 3.06%

TTSA Securities (Proprietary) Limited 1 345 039 1.37%

Nedbank Capital Markets 1 240 000 1.27%

Ross Lewin Family Trust 1 073 000 1.10%

Director's shareholding2006 2005

Direct Indirect Direct Indirect

I G Morris (Chairman) - 15 890 - 15 890

R C Lewin 32 568 1 073 000 32 568 1 600 000

D M Carson 25 000 - 25 000 -

There was no change in these shareholdings to the date of the notice of the annual general meeting

Portfolio sizeNumber of

shareholdersPercentage ofshareholders

Number of shares Percentage of share

capital

1 to 50 000 1 079 95.15% 3 437 942 3.51%

50 001 to 250 000 30 2.65% 3 474 779 3.55%

Over 250 000 25 2.20% 91 056 848 92.94%

1 134 100% 97 969 569 100.00%



MICROmega HOLDINGS LIMITED(Incorporated in the Republic of South Africa)

(Registration number 1998/003821/06)(Share code: MMG ISIN: ZAE000034435)

("Micromega" or "the Company")

Notice of Annual General Meeting

NOTICE is hereby given that the annual general meeting of shareholders of MICROmega Holdings Limited will be held in theboardroom, Block C Chislehurston Office Park, 19 Impala Road, Chislehurston, Sandton at 10h00 on Friday, 27 July 2007 for thepurpose of considering, and if deemed fit, passing, with or without modification, the following ordinary resolutions.

The conditions precedent to each of the resolutions becoming effective are:• each of the resolutions set out below is passed in their current form or any modified form approved by the meeting.

ORDINARY RESOLUTION NUMBER 1To receive and adopt the Annual Financial Statements for the year ended 31 December 2006, together with the reports of directorsand auditors.

ORDINARY RESOLUTION NUMBER 2To re-elect Messrs I G Morris, R C Lewin, E S Mpanza and D M Carson as directors, who are eligible and offer themselves for re-election.

ORDINARY RESOLUTION NUMBER 3To re-appoint KPMG Inc. as auditors and to authorise the directors to determine the remuneration of the auditors.

ORDINARY RESOLUTION NUMBER 4To authorise the remuneration committee to determine the remuneration of the directors.

SPECIAL BUSINESSTo consider and if deemed fit to pass the following special and ordinary resolutions:

ORDINARY RESOLUTION NUMBER 5"RESOLVED THAT the entire authorised but unissued share capital of the company, from time to time, be placed under the controlof the directors of the company until the next annual general meeting with the authority to allot and issue all or part thereof intheir discretion, subject to Sections 221 and 222 of the Companies Act 61, of 1973, as amended, and in terms of the ListingRequirements of the JSE Limited."

ORDINARY RESOLUTION NUMBER 6"RESOLVED THAT in terms of the Listing Requirements of the JSE Limited (JSE), the directors are hereby authorised to be givengeneral authority to allot and issue unissued ordinary shares in the company for cash as and when suitable situations arise, subjectto the following conditions:

1. that this authority shall only be valid until the next annual general meeting but shall not extend beyond 15 months;2. that the shares may only be issued to public shareholders as defined by paragraph 4.26 of the Listing Requirements of the JSE

and not to related parties;3. that a paid press announcement giving full details, including the impact on net asset value and earnings per share be

published after any issue representing, on a cumulative basis within one financial year, 5% or more of the number of shares inissue prior to the issue concerned;

4. that the issues in the aggregate in any one financial year shall not exceed 15% of the number of shares of the company's issuedordinary share capital;

Notice of Annual General Meeting



5. that in determining the price at which an issue of shares will be made in terms of this authority, the maximum discount shallbe 10% of the weighted average traded price of the shares on the JSE, as determined over 30 business days prior to the datethe price of the issue is determined or agreed by the directors."

The approval of a 75% majority of the votes cast by the shareholders present or represented by proxy at this meeting is requiredfor this ordinary resolution to become effective.

SPECIAL RESOLUTION NUMBER 1"RESOLVED THAT the directors of the company be and they hereby are authorised by a way of general authority contemplated inSections 85 and 89 of the Companies Act, 61 of 1973, as amended (the Act), up to and including the date of the following annualgeneral meeting, to approve the repurchase by the company of its own shares, but subject to the provisions of the Act and the JSELimited (JSE) Listing Requirements and provided that:1. the general authority shall only be valid until the next annual general meeting, but in any event shall not extend beyond

15 months from the date of this resolution;2. any such acquisition of ordinary shares shall be effected through the order book operated by the JSE trading system and done

without any prior understanding or arrangement;3. authorisation has been given by the company's Articles of Association;4. the general authority to repurchase be limited to a maximum of 20% of the company's issued share capital in any financial year;5. repurchases shall not be made at a price of more than 10% above the weighted average of the market value at which such

ordinary shares are traded on the JSE for the five business days immediately preceding the date on which the transaction isagreed;

6. an announcement will be published as soon as the company has acquired ordinary shares constituting, on a cumulative basis,3% of the number of ordinary shares in issue at the time the general authority is granted, which announcement shall containfull details of such acquisition;

7. the repurchase shall be implemented on the JSE ("Open Market"), but subject to the company's sponsor having furnished theJSE with prior, written confirmation of the company's working capital adequacy.

The directors of MICROmega Holdings Limited have no specific intention, at present, for the company to repurchase any of itsshares but consider such a general authority should be put in place should an opportunity present itself to do so during the yearwhich is in the best interests of the company and its shareholders.

The directors are of the opinion, after considering the effect of such maximum repurchase of shares, that for a period of 12 monthsfollowing the decision to use this authority:1. the company and the group will be able, in the ordinary course of business, to pay its debts;2. the assets of the company and group, fairly valued in accordance with International Financial Reporting Standards, will be in

excess of the liabilities of the company;3. the company and the group will have adequate capital and reserves for purposes of their business for the foreseeable future;

and4. the working capital of the company and the group will be adequate.

Disclosure in terms of section 11.26 of the JSE Limited (JSE) listing RequirementsThe JSE Listing Requirements require the following disclosures, which appear elsewhere in the Annual Report of which this noticeforms part, as set out below:

Directors page 44Major shareholders page 83Director's interests in securities page 83Share capital of the company page 71

Material changesOther than the facts and developments reported on in the annual report, there have been no material changes in the affairs orfinancial position of MICROmega Holdings Limited and its subsidiaries since the date of signature of the audit report and up to thedate of this notice.

Notice of Annual General Meeting (continued)



Director's responsibility statementThe directors, whose names are provided on page 44 of the annual report, collectively and individually accept full responsibilityfor the accuracy of the information pertaining to this special resolution and certify that to the best of their knowledge and beliefno facts have been omitted, which would make any statement false or misleading and that all reasonable enquiries to ascertainsuch facts have been made and that the special resolution contains all information required by law and the JSE ListingRequirements.

Litigation statementIn terms of section 11.26 of the JSE Listing Requirements, the directors, whose names are provided on page 44 of the annual reportof which this notice forms part, are not aware of any legal or arbitration proceedings, including proceedings pending orthreatened, that may have or have had in the recent past, being at least the previous 12 months, a material effect on the group'sfinancial position.

PROXY VOTING PROCEDURESIn terms of the Companies Act (Act 61 of 1973) as amended, any member entitled to attend and vote at the above meeting mayappoint one or more persons as proxy, to attend and speak and vote in his stead. A proxy need not be a member of the company.Forms of proxy must be deposited at the office of the transfer secretaries not later than 48 hours before the time fixed for themeeting (excluding Saturdays, Sundays and public holidays).

If your MICROmega shares have been dematerialised and are held in a nominee account, then your Central Securities DepositoryParticipant ("CSDP") or broker, as the case may be, should contact you to ascertain how you wish to cast your vote at the annualgeneral meeting and thereafter cast your vote in accordance with your instructions. If you have not been contacted it would beadvisable for you to contact your CSDP or broker, as the case may be, and furnish them with your instructions. If your CSDP orbroker, as the case may be, does not obtain instructions from you, they will be obliged to act in terms of your mandate furnishedto them, or if the mandate is silent in this regard to abstain from voting. Dematerialised shareholders whose shares are held in anominee account must not complete the attached form of proxy.

Unless you advise your CSDP or broker timeously, in terms of the agreement between yourself and your CSDP or broker, by thecut-off time advised by them that you wish to attend the annual general meeting or send a proxy to represent you at the annualgeneral meeting, your CSDP or broker will assume you do not wish to attend the annual general meeting or send a proxy. If youwish to attend the annual general meeting, your CSDP or broker will issue the necessary letter of authority to you to attend theannual general meeting.

Shareholders who have dematerialised their shares through a CSDP or broker, other than "own name" registered dematerialisedshareholders, who wish to attend the annual general meeting, must request their CSDP or broker to issue them with a letter ofrepresentation, or they must provide the CSDP or broker with their voting instructions in terms of the relevant custodyagreement/mandate entered into between them and the CSDP or broker.

By order of the board

D J CaseCompany Secretary31 March 2007

Notice of Annual General Meeting (continued)

Registration Number 1998/003821/06

Registered OfficeBlock C, Chislehurston Office Park19 Impala RoadChislehurstonSandton2196South Africa

Telephone and Fax NumberTelephone: 011 783 4000Fax: 011 783 2992E-mail: [email protected]: www.micromega.co.za

DirectorsMr I G Morris (Chairman)Mr R C LewinMr E S MpanzaMr D M Carson

SponsorInvestec Bank Limited100 Grayston DriveSandown2196

PO Box 785700Sandton 2146South Africa

Transfer SecretariesComputershare Investor Services 2004 (Proprietary) Limited70 Marshall StreetJohannesburg2001

PO Box 61051Marshalltown2107South Africa

AuditorsKPMG Inc.KPMG Crescent85 Empire RoadParktown2193

Private Bag X9Parkview2122

Company SecretaryMr D J CaseBlock C, Chislehurston Office Park19 Impala RoadChislehurstonSandton2196South Africa

Private Bag X9966Sandton2146Telephone: 011 783 4000Fax: 011 783 2992

Corporate Information as at 30 June 2007



MICROmega Revenue Management Solutions John Storom, Chief Executive OfficerTelephone: 011 827 3455

MICROmega SecuritiesJoe Vercueil, Managing DirectorTelephone: 011 277 5300

Financial Services Sector

IntermapNkululeko Luthuli, Managing DirectorTelephone: 033 345 6981

SebataPhakamile Ngaki, Chief Executive OfficerTelephone: 012 682 9800

Information Technology

BTM Manufacturing Clive Finkelstein, Managing DirectorTelephone: 016 362 0311

Deltec Power DistributorsClive Guest, General ManagerTelephone: 011 786 4911

Lubrication EquipmentBruce Carolin, General ManagerTelephone: 011 493 8235

Pro-FitDave Wright, General ManagerTelephone: 021 593 3233

Automotive Components

Group Directory

MECS AfricaDoug Fieldgate, Chief Executive Officer Telephone: 011 883 1106

MICROmega Risk Management Services (“NOSA”)Duncan Carlisle, Managing DirectorTelephone: 012 683 0200

NQA AfricaMike Timberlake, ChairmanTelephone: 012 683 0200

Support Services

Gecko C

omm

unications 012 683 0231

MICROmega Holdings Limited

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