Bell Equipment Investor Relations

SUSTAINABILITY REPORT
From annual report for year ended 31 December 2009

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Risk Management and Internal Control	Internal Audit and Internal Control Systems	IT Management
Safety, Health and Environment	Black Economic Empowerment	Employee Relations
People Development	Remuneration

Risk Management and Internal Control

Bell Equipment is committed to managing its business in accordance with sound corporate governance principles, which includes an effective and efficient approach to Enterprise-wide Risk Management. The board is responsible for the governance of Risk Management within Bell Equipment. This is achieved by the use of a board-approved group risk management policy statement and accompanying framework. This policy statement and framework are periodically reviewed and have been made available to all employees. Management is responsible for the process of Risk Management in terms of the abovementioned framework. This encompasses an ongoing systematic and multitiered approach to identifying, assessing, managing and monitoring risks and opportunities on an enterprise-wide basis. This ensures that the individual and joint impact of risks and opportunities on Bell Equipment are considered on a regular basis. Senior managers or ‘risk champions’ periodically carry out a self-assessment of risk. This process identifies critical strategic, operational, financial and compliance exposures and opportunities facing Bell Equipment, and the adequacy and effectiveness of control factors at those levels. The assessment methodology takes into account the impact or severity and probability of occurrence and applies a rating based on the quality of control effectiveness, thereby ranking risks and setting priorities. The identified top risks are elevated to the Bell Equipment Group Executive Committee. All identified material risks, their possible implications for Bell Equipment and management’s action plans to mitigate and manage those risks are reported to the Risk Management and Audit Committee. Where necessary the appropriate Executive Manager is invited to the Risk Management and Audit Committee to provide a comprehensive presentation of the relevant mitigation plans. Bell Equipment’s Commercial Director is responsible for risk management within Bell Equipment. He oversees the process from the perspective of strategic direction, ongoing improvement in methodology and process, and technical assistance. The Risk Management and Audit Committee carry out an independent oversight role of the process. Bell Equipment is insured against various losses. The need for insurance cover is determined on the evaluation of the risk, whether the risk is insurable, cost of cover and Bell Equipment’s propensity to self-insure.

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Internal Audit and Internal Control Systems

Bell Equipment has an internal audit function which covers its global operations. The internal audit function has the full support and cooperation of the board of directors, management and staff. Internal audit personnel have the requisite professional integrity and experience to perform their duties. Internal audit is performed using a risk-based methodology. The annual internal audit rotation plan is developed giving due consideration to the requirements of management and is approved by the Risk Management and Audit Committee. Bell Equipment’s Group Executive Committee and Bell Audit Services Committee are kept fully appraised of the internal audit function’s activities through comprehensive reports that include the internal audit findings, management comments and regular status updates.

There are inherent limitations to the effectiveness of any system of internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even an effective internal control system can provide only reasonable assurance with respect to financial statement preparation and asset safeguarding. Furthermore, the effectiveness of an internal control system can change with circumstances and for this reason this needs to be, and is, reviewed and updated on a regular basis.

Nothing has come to the attention of the directors, or of the internal or external auditors, to indicate that any material breakdown in the functioning of Bell Equipment’s key internal controls and systems occurred during 2009.

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IT Management

Information Systems and Technology is regarded as being strategically important and Bell Equipment has continued to invest in a centralised world-class data centre housing all the core information technology services to the Bell Equipment Group. This investment has resulted in a high level of availability of these services. These information technology services are also supported with a full back-up strategy and Disaster Recovery Plan to ensure business continuity. The IT strategy has focused on the consolidation of services centrally to ensure efficient and effective emphasis on service delivery. Access to the systems and information is well controlled with effective, audited access policies.

Focus also remains on providing new and improved automated business solutions to improve efficiency and productivity. This focus is supported with the IT strategy of integration, consolidation and extendibility and drives all improvement efforts.

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Safety, Health and Environment

Environment
Bell Equipment places environmental responsibility among its core values and recognises the importance of preserving the integrity of the natural heritage. Bell Equipment aims to comply with the environmental regulatory standards of all countries into which it sells its products and services. The board of directors attaches great emphasis on caring for the environment and will ensure transparency in maintaining operations, which are recognised as role models in the earth-moving equipment industry. Bell Equipment’s concern for the environment is subject to continuous review and improvement.

As part of its drive towards sound corporate governance, Bell Equipment is committed to comply with environmental requirements for its Richards Bay factory, German assembly plant and all distribution operations worldwide.

All products distributed meet the required European emissions standards and the Bell Equipment Product Development Process is well positioned to ensure that its products will meet the more onerous engine emissions requirements which are to be implemented in Europe and the USA over the next few years.

Bell Equipment has continued its efforts to reduce waste by increasing the use of recyclable materials such as packaging materials, oils and steel offcuts in applications which traditionally generate considerable waste.

Safety
Bell Equipment has attained excellent results from the implementation of a safety management process, based on the highly successful Safety Training Observation Programme (STOP) model, which is aimed at making the workplace and all work processes safe. Bell Equipment works hard to inculcate a safety awareness ethic in all of its employees and others who visit its different sites. To further this end the Bell Equipment Richards Bay factory has seen significant investment in the review of all its legal compliance processes with regard to occupational health and safety. Critically, the review included refresher training for all levels of management and supervision. The enhanced employees’ induction process and the STOP safety programme that has been running for the past three years in Bell Equipment’s manufacturing operations, continue to reduce workplace injuries.

Bell Equipment looks forward to continued reduction in risk throughout its operations as a result of these efforts.

Employee health and wellness
This remains a major focus at Bell Equipment and it remains acutely aware of the HIV/AIDS threat to Bell Equipment employees. Bell Equipment has maintained a comprehensive education and treatment programme as well as voluntary counselling and testing to minimise its spread amongst the workforce and to extend the productive working life and quality of life of employees living with the disease. Bell Equipment is pleased to report that as a result of these ongoing efforts more and more employees are enjoying the benefits of these programmes.

Bell Equipment operates an occupational health clinic at its Richards Bay factory and treats all work-related injuries.

The clinic is headed up by a qualified nursing sister and Bell Equipment has contracted the services of a general medical practitioner to assist in various activities. A regular programme undertaken by the clinic is to offer basic and advanced first-aid training to as many employees as possible. Employees are encouraged to belong to the medical aid scheme to ensure coverage against any form of illness, including HIV/AIDS.

An employee wellness day is held on an annual basis to afford employees an opportunity to undergo a series of medical tests to assist them to understand their health status and therefore manage it appropriately. Bell Equipment undertakes pre-employment medicals for all employees and thereafter on an annual cycle. Exit medicals are also conducted.

Bell Equipment also recognises that employees have many other socio-economic issues which may impact negatively on their work performance and private lives from time to time. Bell Equipment’s Employee Assistance Programme is in place to help those experiencing problems in areas such as coping with disability, substance abuse, family problems, financial management and trauma.

While Bell Equipment’s annual report focuses on the events of the past year, Bell Equipment recognises that being a successful enterprise means that one has to plan for the future. Key to the ongoing success of any business is how it manages its responsibilities to all stakeholders and in particular its employees. Bell Equipment employees are part of the communities in which Bell Equipment operates and it views its socio-economic efforts within these communities as an integral part of improving the quality of life of Bell Equipment’s employees, their families and the members of those communities. Key areas on which Bell Equipment is focusing its efforts are on the creation of decent jobs, education and sponsorship of socio-economic developmental initiatives.

While the global economic environment has had a negative impact on Bell Equipment’s socio-economic programme for the past financial year (2009), the longterm strategy is still to focus on the following key areas:

Educational programmes
School infrastructure
Environmental and sustainability projects
HIV/AIDS programmes
Community sports and recreation

Bell Equipment also believes that for a successful business to continue into the future, it is necessary to reinvest some of its earnings into the communities in which it operates.

Bell Equipment’s employees form part of this community and by helping to improve the community’s standard of living, Bell Equipment is also improving the quality of life for its employees and their families. Bell Equipment focuses its efforts on the key areas of job creation, skills development education, environmental preservation issues, HIV/AIDS, crime prevention and the upliftment of the poorest sector of the communities where Bell Equipment operates. Bell Equipment’s approach, in this regard, has been to empower the communities it operates in to encourage sustainability, well-being and a sense of self-worth.

Bell Equipment will continue to support various fundraising drives and make donations to ease the financial concerns of deserving charities. Bell Equipment remains an active member of the Zululand Chamber of Business Forum and Business Against Crime and works together with other employers and the community in tackling the scourge of HIV/AIDS in the region.

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Black Economic Empowerment

Bell Equipment’s commitment to transformation was evidenced in October 2008, when both its major South African subsidiaries, Bell Equipment Company SA (Pty) Limited (BECSA) and Bell Equipment Sales SA Limited (BESSA) were rated by a BEE verification agency against the full scorecard covering ownership, management diversity, employment equity, skills development, preferential procurement, enterprise and socio-economic development. BECSA was rated as a level 7 contributor whilst BESSA was recently rated a level 4 contributor and 100% of its customers’ purchases rank as BEE expenditure.

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Employee Relations

Bell Equipment has a stable and committed workforce.

Many employees have long service records with Bell Equipment and have shown their preparedness to go the extra mile in order to serve its customers. Due to difficult trading conditions throughout 2009, Bell Equipment unfortunately has had to right-size the headcount of its workforce to a level that is suited to current market conditions and to ensure the sustainability of Bell Equipment. The unions were consulted in line with the provisions of the Labour Relations Act and the process culminated in the conclusion of a collective agreement on the layoffs with certain employee stakeholders.

	%	%
Union membership statistics	2009	2008
NUMSA	25	31
Solidarity UASA	193	30 2
Non-union employees Non-union employees part of	38	25
MEIBC collective bargaining unit	15	12

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People Development

Bell Equipment regards its people as a valuable resource and does not tolerate discrimination of any kind, whether on the grounds of gender, race, sexual orientation, background or religious beliefs. Bell Equipment has identified the required skills to run its business successfully on an ongoing basis and will recruit people who meet these needs either immediately or after appropriate training and skills development. Bell Equipment also believes in ensuring that its employees are given the opportunity to develop these skills and the opportunity to use them.

Bell Equipment is aware of its obligation to employees coming from previously disadvantaged backgrounds and the negative impact this has had on their opportunities and career advancement. A transformation forum has been created with the view of allowing employees to make inputs with regard to employment equity issues and accelerating changes within Bell Equipment.

Bell Equipment is justifiably proud of its record in training artisans and technical professionals to ensure that it maintains the ability to develop innovative products and services for the benefit of its customers. Bell Equipment also takes pride in its apprenticeship scheme, being the largest South African employer in the earthmoving equipment industry to have such a programme. During 2009, Bell Equipment took in 28 new apprentices, the majority of whom come from previously disadvantaged groups. Bell Equipment diligently manages their progress to becoming fully-fl edged artisans.

Bell Equipment’s programmes have produced people who have proved themselves in diverse roles around the world and who have developed into leading roleplayers on its strong executive and senior management teams.

Bell Equipment runs several in-house and externallyresourced development programmes to facilitate on-thejob training and offers a study assistance programme whereby employees are encouraged to further their tertiary qualifications (at no cost to themselves should they apply themselves to their studies and pass their examinations).

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Remuneration

Bell Equipment operates in a highly competitive market where key skills and technical know-how are critical to the success of Bell Equipment. Bell Equipment seeks to reward employees fairly and in line with the market in similar industries and in this regard the services of a reputable consulting firm are engaged from time to time to ensure an objective salary structure and equity within Bell Equipment.

The Remuneration Committee oversees and makes recommendations to the board on matters such as salary increases and employee benefits in consultation with the Chief Executive and Bell Equipment’s management.

Bell Equipment remunerates its executive directors based on reliable benchmarking data and seeks to achieve market-related cost to employer packages that are a combination of basic salaries augmented by incentives provided that Bell Equipment achieves set returns on shareholders’ funds. Although Bell Equipment has a range of incentive schemes structured to reward performance and to align the interests of senior management with the interests of shareholders, the difficult trading conditions during 2009 have resulted in these incentive schemes not yielding any incentive payments to employees and executive directors during the year.

In determining the salary increases of executives and the payment of incentives, the Nominations and Remuneration Committee evaluates the performance of each executive against the achievement of predetermined objectives. Although there have not been any increases in remuneration offered to staff in 2009 as a result of the difficult trading conditions, Bell Equipment’s long-term objective is still to ensure that market-related and fair compensation is paid to employees in order for key skills to be retained.

The performance of the Chief Executive is evaluated annually by the independent Chairman of the Nominations and Remuneration Committee in order to determine his salary package for the ensuing year. Likewise, the Chief Executive conducts an annual review of the performance of all senior executives, including the Chairman of the board in respect of his executive functions. There were no increases in the remuneration of the Chief Executive and the Chairman in 2009 and they, along with many other employees, have agreed to reductions in remuneration to assist Bell Equipment during 2009. The remuneration of these executives and other executive directors are detailed in the annual financial statements on page 93.

Bell Equipment does not have long-term service contracts with any of its executives. Normal notice periods apply as stated in all letters of appointment.

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