Envirotronics

Year End Report

 Chief Executives Statement

The challenges of being a small company, trying to

compete with the titans of international trade, can never
be fully explained but our company has made it through
the ups and downs and the future appears prosperous.
Envirotronics is a young ambitious company made up of
talented energetic employees who’ve been able to turn
a small start up company in to a national production with global
sales capacity. The diverse pool of skills within Envirotronics produces a working
environment rich in innovation but the difference these differences in the staff does
sometimes result in conflict. The challenge is to extract and encourage the ambition
and drive within the employees whilst making executive decisions which may conflict
with the personal opinions of certain staff. In order to maintain an open and free
working environment the management approach is flexible and all decisions are
made in consultation with the staff. This type of decision making is exercised in all
aspects including decisions on salaries. However the final verdict on all matters must
be taken at the executive level in order to ensure a level of conformity within the
company.

This year's key driving product, the Batbox 3000 was a prime example of the
company's abilities. The team managed to produce a product which exceeded all
expectations and successfully completed the project under budget and a week ahead
of schedule. The outstanding work ethic of the team was noted and management has
and will continue to reward the employees for there outstanding service.

The marketing team remains the innovation centre of the company. The team
attacked the difficult task of promoting a product which had a seemingly limited
market head on. There original and often eccentric methodologies has

resulted in a significant increase in the companies bottom line. The team successfully
created a huge market for the product as well as improved the image of the company
in the consumer environment.
 Envirotronics continues to be the sole South African engineering providing products
which are dedicated to environmental needs. The conservation of the world's natural
resources is becoming a major issue which governments around the world are
beginning to take seriously. Sustainable development projects are being
implemented around the world and the service capabilities of Envirotronics are
becoming widely sought after, as we gain increased publicity.

We envision a bright future for our company on a global as well as local level.
Expansion is just around the corner as the interest in our new products reach new
heights on the international market. I would just like to congratulate all members of
this company in contributing to such a successful year and I must say that I wait in
anticipation to see what my team has in store for next year.

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Management Team

Muhammed Simjee

Chief Executive Officer

BScEng; MBA

Dr. Muhammed Simjee was appointed as Chief Executive Officer of Electronics in

late 2005. Educated at the prestigious University of KwaZulu Natal, he graduated
with a Batchelor’s degree in Electronic Engineering. Mr. Simjee spent 3 years as a
junior engineer with Sasol. He had wide experience within South Africa, before being
recruited by Envirotronics as Engineering Manager. He has spent 4 years at
Envirotronics, and has worked his way to Chief Executive.

Mark Joseph

Financial Manager
BScEng; B.Bus.Sc(Finance)

Mark Joseph graduated from the University of KwaZulu Natal as an Electronic

Engineer. After 2 years at Conlog, Mr. Joseph found himself plunged into the world of
commerce when he accepted a post at FirstRand Bank. He joined Envirotronics as a
Senior Accountant in 2004, which preceded his appointment as Financial Manager.
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Nicol Naidoo

Engineering Manager
MScEng; PhD

Nicol Naidoo spent 5 years after his graduation from the University of KwaZulu Natal
as a Junior Engineer at Mondi. Dr. Naidoo spent a further 5 years at the
Massachusetts Institute of Technology as a post-graduate student. Upon completing
his Doctoral research, he took up his position as Engineering Manager at
Envirotronics in 2005.

Seeralin Nayager

Production Manager
MScEng.

4 Mr. Nayager has had extensive experience in the engineering field. He was first
appointed as Junior Engineer at Siemens AG in Germany. After 4 yours at Siemens,
he returned to South Africa as a
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Irisa Govender

Public Relations Officer

BA; B.Comm(Marketing)

Following her graduation from the University of KwaZulu Natal, Ms Govender spent 2
years as a Publicity Officer for Sasol. She proceeded to work as a Public Relations
Officer for a number of companies in Europe, including Nokia, Ford and Texas
Instruments. She returned to South Africa in January 2006, when the opportunity to
join the Public Relations team of Envirotronics was presented to her.

X
Shivan R. Singh

Marketing Manager
B.Bus.Sc(Marketing)

Mr. Singh has been at Envirotronics since his graduation from the University of
KwaZulu-Natal. He has spent three years at Envirotronics since his start as an
apprentice on the advertising team.

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 The Engineering Approach

In order to develop any product our design team employs a top down approach.
Working with the given specifications we seek to build on and fine tune these product
requirements. This involves several meetings with clients in order to ascertain
whether or not the project is headed in the right direction. We believe that
understanding the problem is a fundamental key to facilitate the speedy development
of a design that fulfils all client requirements.

Once we have a clear understanding of the problems to be solved our team

brainstorms and puts together possible solutions; we then investigate the feasibility of
each. This would generally involve an estimated costing of the final product as well
looking at whether the design is actually environmentally friendly, non-invasive and
actually meets user requirements. Each feasibility study is then analyzed and our
team of engineers decides ranks the solutions. The best proposed solution is then
pitched to the clients and if it is accepted it is developed further and finally
prototyped. The prototype then undergoes rigorous testing and if it succeeds the
product it taken to the client to allow for independent field tests. Once the client is
satisfied the device is put into production.

We also service our products through their life cycle, ensuring the optimum
functioning of our devices.

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The Batbox 3000

The Batbox 3000 was created to service a need within the Bat conservation
community. There is a growing want for an autonomous, cheap device that is
capable of acquiring data pertaining to the environmental conditions that bats would
find appealing. This would imply that the device must be rugged, robust and yet
portable, as conditions for use could vary from household ceilings to humid caves.

Our product is quite elementary in design and yet offers field researchers with an
optimal solution to their data capturing nightmares. The Batbox 3000 uses a low
power temperature/humidity sensor to take measurements of the environmental
conditions. These readings are taken once every hour; however, only readings that
significantly differ from the previous ones are actually stored; with a minimum of four
readings being saved per day. This method of data capturing ensures that only
salient information is accumulated hence reducing the amount of memory needed. All
data is also time and date stamped to enable researchers to accurately archive all
information. The highlight of the device is that the only human interaction required is
to switch it on, at the bat habitat, and finally when data is to be downloaded. The
different methods of downloading data gave rise to 3 versions of the device, ranging
from USB 2.0, SD cards and even bluetooth. The device can store up to six months
of data and is guaranteed to last for up to 2 years before requiring battery
replacements.
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We at Envirotronics worked hard to develop this cost effective product that can
survive in environments of high humidity levels and temperatures. In an independent
study conducted our product ranked first in overall design, when compared to leading
electronic companies, due its functionality, compactness as well as its cost
effectiveness. We are so confident in out product that we have offered all our clients
a lifetime guarantee on the functionality, unfortunately though batteries are not
included. We strive to take care of our clients and one way in which try to achieve
this is by remaining answerable to our customers for the lifetime of our products.

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 Marketing and Advertising

Objective

For the year just past, the objectives of the Marketing Department were well defined -
to raise the profile of Envirotronics and attract a larger audience to the company's
client base. Through constant communication with existing clients and analysis of
non-clients, the reputation of Envirotronics as one of South Africa's leading
environmental engineering firms is maintained and reinforced.

Overview

Environmental issues affect the Earth in its entirety. As such, the objective of
companies dealing with environmental issues is to bring those issues to as large an
audience as possible.

Envirotronics primarily serves environmental conservation groups, and strives to

maintain a productive working relationship with such organisations. As such, any
request for the production of electronic equipment for use by conservation
organisations is dealt with promptly. Great attention to detail is paid whilst conducting
the necessary feasibility studies and research and development for each new product
for any customer. This attitude towards our clients is practised by all employees,
starting with the Chief Executive and serves to

A Case Study: The Batbox 3000

Marketing of the Batbox 3000

The clientele of Envirotronics has, in the past, been restricted to environmental

conservation organisations. At the request of Bat Conservation International a data
logger called the Batbox 3000 was developed. Market research conducted with
South African bat conservation groups, especially the Bat Interest Group in Durban,
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 showed a great interest in such a product based on specific functionalities of the
product.

Following the communication with the conservation groups, the Batbox 3000 was
found to be a product which would be of use to bat conservation groups. However as
the product is a data logger, with temperature and humidity sensing capabilities, it
may also be used in other fields of conservation. Bat conservationists wished to
monitor the conditions in which bats live in roofs of houses and lofts so ideally the
product would have to be compact and power efficient.

A study of competitors' products showed that customers felt that bat data loggers
were typically bulky and expensive. Thus in the design of our product we strived to
eliminate these customer concerns.

Even though our product retails much cheaper than most of our competitor's, in must
be noted that there is no compromise on the quality of our product. The Batbox is
packed with easy-to-use technology, like Bluetooth, designed to make data
acquisition and transfer as easy as possible.

100

80

60
Temperature Sensing
40 Humidity Sensing
Motion Sensing
20

0
Bat Groups Weather Other Overall
Groups Groups

The above graph shows exactly what features were preferred by our regular
customers. It is noted that the overall want for temperature and humidity sensing
capabilities far out-weighed that for motion sensing. It was thus decided to exclude
motion sensing from the cheaper versions of the Batbox, but include it in the top-of-
the-range BK133 version.

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 90
80
70
60 Size
50 Weight
40 Bluetooth
30 SD Card
20 USB
10
0
Bat Groups Weather Groups Other Groups Overall

The above graph shows more about the user-friendliness features that the clients
wish for. The most important factors were size, weight and a USB port for data
transfer. All three products in the Batbox range were thus made compact and light.
Furthermore, all three include a USB port for data downloads. The lesser factors,
such as SD Card and Bluetooth were incorporated on certain models only.

Bat conservation organisations felt that they would be best suited with a device that
had both Bluetooth and motion sensing. As a result, the top-of-the-range Batbox
3000 BK133 has both of these features.

Advertising of the Batbox 3000

Envirotronics' customers are those individuals and groups that are actively involved
in conservation efforts. The Envirotronics marketing campaign is centred on
encouraging more and more people to join conservation groups or to participate in
environmental upliftment events. To attract more individuals, the public perception of
conservation has to be changed. In order to achieve this, Envirotronics launched a
vibrant and humorous advertising campaign.

The advertising campaign for our flagship product, the Batbox 3000, featured a
series of short video advertisements alluding to the presence of a new and exciting
product. A new advertisement was broadcasted every week until the launch date,
when a longer, more in-depth advertisement detailing exactly what the Batbox 3000
does was shown. The advertisement gave rise to our mascot, "Johnny the Bat". In
order to ensure the retention of current customers, printed advertisements were
4 placed in magazines and newspapers.
 Due to the popularity of the Johnny the Bat, it made advertising sense to use him as
an advertising tool, and so he was sent out and around the campuses of Durban's
tertiary education institutions to raise the profile of the product.

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 Finance

Key Figures

Envirotronics has achieved sustainable success on a global scale. At present, our

innovation local industry comprises of approximately 50 employees (full-time),
hundreds of customers and a number of international partners and suppliers.

Financial Highlights
In South African Rands 2005 2004
New orders 1 640 040 1 760 105
Sales 1 620 558 1 730 804
Net income
Excluding a gain on sales of shares 1 200 125 1 100 250
Gain on sales of shares - 9 220
Total net income 1 200 125 1 109 470
Net cash provided by operating activities 1 050 321 1 250 198
Net cash used in investing activities (680 939) (712 410)
Research and development expenses 1 158 946 2 765 235
Shareholders' equity (September 30) 17 858 17 714
Employees (September 30) 953 286 882 501
Fiscal year: October 1 - September 30

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 Sales by Region

Adjusted for currency effects and portfolio activities, sales declined 3.8% in fiscal
2005. They totaled R 1.2 million in South Africa, R 1.4 million in the U.S. and R 0.8
million in Asia-Pacific. At R 0.68 million, sales in North America were below the prior-
year figure of R 1.9 million, primarily as a result of currency effects.

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 Investments in Research and Development

In fiscal 2005, Envirotronics invested R 3.5 million in research and development. We

have nearly 100 R&D employees across Southern Africa. Their activities focus on all
major markets that are undergoing dynamic economic and technological
development.

Most of our R&D output flow into environmental projects, information &
communications, and certain control technologies. Embedded software is becoming
an increasingly vital role in our products and systems, performing a growing range of
functions.

Our R&D activities generate customer value by serving as an access point for
innovative products, systems and services. We aim to set the bar in as many sectors
as possible. Critical success factors include leadership in key strategic technologies,
systematic innovation planning, a strong patent portfolio and optimized innovation
processes.

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 Our innovative strength derives from the knowledge, commitment and creativity of
our researchers and employees around the world, who are the backbone of our
GLOBAL NETWORK OF INNOVATION.

Upcoming Developments

With Environmental-related projects being the major focus of our developments, the
main design that was given the highest priority for fiscal 2006 is: The BATBOX 3000,
which will be launched in March in the South African market.

The proposed budget for The BATBOX 3000 is as follows:

Budget Proposal – BATBOX 3000

In South African Rands
Orders 100 000
Sales (excluding gain in shares) 65 000
Net income 80 000
Net cash provided by operating activities 30 000
Net cash provided by investing activities 50 000
Research and development expenses 45 000

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Economic Growth

The Envirotronics economic policy aims to create the preconditions under which
economic growth and employment will start to rise. In 2005 the crucial challenge was
safeguarding the preconditions for economic growth in the longer term and thus the
financial base of the organization.

The reform to company and capital taxation that was introduced at the beginning of
2005 produced the following results:

Reduced the corporate income tax rate by three percentage points

Stimulated investment and growth

Increased the scope for improving employment

The growth in employment was promoted by private investment in the research and
development unit. The growth in technology funding was strengthened by creating
new skills and improving business skills along the entire innovation chain. The
Company had used the set budget of R500 000 for the year to obtain new
equipment, advertising and extension to the current building which is used for
research.

In November 2005, Envirotronics became a division of Schneider Electronics.

Schneider Electronics in an international electronic company which combines its
distinctive qualities and innovative thinking and technological perfection. The merge
resulted in the construction of a second Envirotronics branch in Cape Town. In
February 2006, the new branch officially opened and created jobs for 20 people.
 Giving Back to the Community

Our company believes that it is our duty as part of this country to contribute to the up-
lifting of its society. We have initiated many projects that focus mainly on the
development of youth of the country.

The main project launched this year was the awarding of scholarships to 10 scholars.
These students come from various disadvantaged communities and they each
displayed a desire to gain further tertiary education, after high school. We plan to
support these students even in their pursuit of a degree. One of the compulsory
requirements made for the awarding of the scholarships, though, was that every
holiday the students would have to work at a nature reserve, prescribed by us.
Naturally, we would pay for accommodation, transport etc but the objective being to
expose children to the abundance of wildlife and the need to conserve. We plan to
expand this project and take on more students every year. The objective of this
project is to give children the opportunity the better their lives as well as cultivate an
appreciation and respect for the environment.

Envirotronics also held a competition for schools with the prize being 30 brand new
computers. The schools were required to create a sculpture reflecting a problem
threatening the environment. The sculpture was to be made out of waste materials
and could be as large as the school desired. The competition was won by New West
Secondary whose innovation surpassed all our expectations. Within the entire
Newlands and Kwa Mashu area we also started a major recycling drive in which
members of our company personally went around to various schools and presented
the need to recycle. We then had recycle bins installed at these schools to give the
schools a start on how to recycle. Three bins were provided to each school; one for
paper, one for glass and finally one for plastic. The schools in general took well to
this idea and we are monitoring the progress of this project closely. We hope to be
able to reach more schools in this manner and later move on to educating the adults
in the disadvantaged communities.

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 These are only a few of the numerous projects that we have but these have both
been the major drives for the year. We are proud to report that all our students are
doing excellently at school with two out of four matriculating in the top 10% of the
country will all four heading on to university.

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Contents