Remuneration Report

REMUNERATION AND NOMINATION COMMITTEE (“REMUNERATION COMMITTEE”)

The Board has delegated responsibility for the remuneration policy to the Remuneration Committee. The role of the Remuneration Committee is to establish general policies and specifically the overall principles that determine the remuneration of the Group's executive directors. In compiling this report, the committee has taken into account the provisions and recommendations outlined in the King II Report.

The Remuneration Committee operates in terms of defined terms in the Remuneration Committee Charter, which has been approved by the Board.

The composition of the Remuneration Committee during the 2006 financial year was as follows:

• L Boyd                       (Chairman until 16 August 2005)
• C S Seabrooke          (Chairman from 16 August 2005)
• N J Temple

The Chief Executive Officer and the Group Finance Director may be invited to attend meetings of the Remuneration Committee but neither may take part in any discussions regarding their own remuneration. External advisers are used to provide information and advice as required.

REMUNERATION PHILOSOPHY

The Remuneration Committee operates a framework of policies, within which it has set the remuneration package for each executive director.

The overall strategy of the Remuneration Committee is to ensure that executive directors and senior managers are rewarded for their contribution to the Group's operating and financial performance at levels which take account of the international IT industry, market and country benchmarks. In order to promote a common interest with shareholders, performance linked share-based incentives are considered to be an important element of executive incentive policy.

The basic objective of the policies is that the executive directors should receive remuneration which is appropriate to their scale of responsibility and performance and which will attract, motivate and retain individuals of the necessary calibre. The underlying philosophy of the Remuneration Committee is to provide base pay at median levels by comparison with relevant comparator companies and to provide the potential for upper quartile earnings when corporate and individual performance justify it. In the application of its policy, the Remuneration Committee has regard to the necessity of being competitive in the different parts of the world in which the Group operates, particularly the US and the UK.

SUMMARY OF REMUNERATION

The remuneration of the executive directors currently consists of three main ingredients designed to balance long- and shortterm objectives: a base salary, annual bonus plan with performance targets and long-term incentives in the form of sharebased incentive schemes (also with performance targets). The last two elements are designed to encourage and reward superior performance and to align the interests of the executive directors as closely as possible with the interests of shareholders. In addition to these main ingredients, the executive directors also receive retirement and other benefits as outlined below.

BASE SALARY

The base salary of the executive directors is subject to annual review and is set with reference to external market data relating to comparable international companies based in the US and the UK. Individual performance is also taken into consideration.

ANNUAL BONUS PLAN

All executive directors are eligible to participate in an annual bonus plan based on the achievement of short-term performance targets set for each executive director. These targets include measures of corporate performance (HEPS, PBT and operating cash flow), share price performance, divisional objectives (where applicable) and the achievement of individual objectives. These targets are reviewed annually by the Remuneration Committee with the Chief Executive Officer. The bonus will not normally exceed 100% of the base salary.

OTHER BENEFITS

Executive directors are entitled to pensions, the provision of car allowances or a fully-maintained car, medical insurance and death and disability insurance. The total value of benefits received by each director is shown on page 57.

From 1 November 2004, the Group contributes an amount of 12,5% of the executive directors' base salary and bonus for J P Montanana and D B Pfaff towards retirement funding contributions, with the individuals contributing 2,5% of their salary and bonus.

SHARE OPTION SCHEMES

The Group operates a number of share-based incentive schemes in which both executives and staff participate as follows:

• Datatec Limited Share Appreciation Right Scheme 2005
• Datatec Limited Long-Term Incentive Plan 2005
• Datatec Limited Deferred Bonus Plan 2005
• The Datatec Share Option Scheme
• Westcon Group, Inc. Share Incentive Plan
• Westcon Group, Inc. Performance Target Plan
• The Logicalis Group Senior Management Share Option Scheme
• The Logicalis Group Cash Settled Share Appreciation Right Scheme 2005
• The Analysys Mason Group Performance Warrants and Shadow Option Schemes

THE DATATEC LIMITED SHARE APPRECIATION RIGHT SCHEME 2005 (“SARS”)

Eligible employees will receive annual grants of Share Appreciation Rights (SARs), which are rights to receive shares equal to the value of the difference between the exercise price and the grant price less income tax payable on such difference.

Vesting of the SAR is subject to performance conditions. The duration and specific nature of the performance conditions and performance period are stated in the letter of grant. The condition that was imposed for the initial grant of SARs is that HEPS must increase by two per cent per annum above inflation over a three-year performance period. Retesting of the performance conditions is permitted on the first and second anniversary of the end of the performance period (i.e. years 4 and 5). For the initial SAR awards, a pro-forma HEPS base of 15 US cents was implemented, as opposed to the actual HEPS base of 4 US cents. Therefore HEPS growth of US Dollar CPI plus 6% over a three-year period will be applied to a base HEPS of 15 US cents, before the SARs will vest.

After vesting, the SAR will become exercisable. Upon exercise by a participant, the Company will settle the value of the difference between the exercise price and the grant price, less income tax, by delivering shares. SARs not exercised within the period specified in the letter of grant, will lapse. 579 228 SARs with a grant price of R13,76 and a life of seven years were issued to five eligible employees on 16 August 2005.

Refer to the limits for the SARS below.

THE DATATEC LIMITED LONG-TERM INCENTIVE PLAN 2005 (“LTIP”)

Eligible employees will receive annual grants of conditional awards.

The conditional awards will vest after the performance period if, and to the extent that the performance conditions have been satisfied. The duration and specifics of the performance condition and performance period are stated in the letter of grant. The intended performance period is three years. The performance condition that was imposed for the first year that the plan
was introduced related to the Company Total Shareholder Return (“TSR”) over a three-year period, relative to the TSR of an international peer group. No retesting of the performance condition will be allowed.

The performance condition will determine if, and to what extent, the conditional award will vest. Upon vesting of the conditional award the Company will procure the delivery of shares to settle the after tax value of the vested portion of the award. The conditional awards which do not vest at the end of the three-year performance period will lapse.

518 310 conditional awards were granted to five eligible employees on 16 August 2005.

The TSR for the purposes of the LTIP is defined to be the compound annual growth rat (“CAGR”) on a portfolio of Company ordinary shares purchased on 28 February 2005, holding the shares, and reinvesting the dividends received from the portfolio in Company shares, until 28 February 2008, and then selling the portfolio on that day. The TSR calculation will be performed using the Company daily ZAR TSR Index, as provided by Datastream (a UK-based information provider), on the nearest trading day following 28 February 2005 and the nearest trading day following 28 February 2008, and computing the CAGR between these values.

This TSR will be smoothed by computing the TSR in the same manner for the three-year period following each trading day for the six months preceding 28 February 2005.

Subject to the Participant remaining in the employment of the Group for the LTIP minimum employment period, if the TSR over the LTIP performance period:

• ranks within the upper quartile of the peer group, then the whole LTIP award, which is subject to the TSR condition will become unconditional and will vest;
• ranks at the median TSR of the peer group, then 30% of the LTIP award will become unconditional and will vest. The remainder of the LTIP award subject to the TSR condition will lapse and will be of no further force or effect;
• ranks less than the upper quartile of the peer group and ranks greater than the median of the peer group, then the percentage of the LTIP award, subject to the TSR condition, which becomes unconditional and will vest, will be linearly apportioned as the ranking of the TSR increases. The remainder of the LTIP award, subject to the TSR condition will lapse and will be of no further force or effect;
• ranks less than the median TSR of the peer group then the whole of the LTIP award, subject to the TSR condition will lapse and will be of no force or effect whatsoever.

Refer to the limits for the LTIP below

THE DATATEC LIMITED DEFERRED BONUS PLAN 2005 (“DBP”)

Eligible employees will be permitted to use a portion of the after tax component of their annual bonus to acquire shares (“pledged shares”). A matching award will be made to the participant after a three year pledge period on the condition that he/she remains in the employment of the Company and retains the pledged shares over the period.

The participant remains the full owner of the pledged shares for the duration of the pledge period and will enjoy all shareholder rights in respect of the pledged shares. Pledged shares can be withdrawn from the pledge at any stage, but the matching award is forfeited in this case.

135 300 pledged shares were acquired by two eligible employees on 18 August 2005.

Refer to the limits for the DBP below.

LIMITS TO THE SARS, LTIP AND DBP

The aggregate number of shares which may be allocated under the SARS, the LTIP and the DBP will be limited to 5% of Datatec’s ordinary shares in issue from time to time. This limit of 5% would apply to the SARS, the LTIP and the DBP only and not to options historically issued under the Datatec Share Option Scheme.

The face value of the grants made to an employee in any financial year under the SARS should not exceed 80% of his/her base salary at the date of the offer.

The face value of the grants made to an employee in any financial year under the LTIP should not exceed 80% of his/her base salary at the date of the offer.

The face value of the matching shares in any financial year made under an award to an employee under the DBP may not exceed 30% of his/her base salary at the date of the offer.

THE DATATEC SHARE OPTION SCHEME (“THE DATATEC SCHEME”)

Since the implementation of the SARS, LTIP and DBP on 16 August 2005, no new options have been granted under the Datatec Scheme. Options previously granted in terms of the Datatec Scheme will run their course in terms of the rules of the Scheme. Options were granted to employees and directors of Group companies at a price equal to the 30-day closing market price prior to the date of such grant (always subject to a minimum price of 200 cents).

The number of options available in terms of the Datatec Scheme amounts to 15% of the issued share capital (21 953 920 shares at 28 February 2006), with the maximum number of share options available to any one participant being limited to 1,5% of the issued share capital (2 195 392 shares as at 28 February 2006). Options vest over a period of four years from the date on which the option is granted at the rate of 25% per annum at each anniversary of the date of grant. Options are eligible to be exercised within ten years of being granted, unless such option lapses through the death or termination of employment of the option holder.

As at 28 February 2006, 7 465 983 (2005: 5 741 266) share options had been exercised since the original grants and 7 722 245 (2005: 9 608 737) share options had been granted but not yet exercised as follows:

WESTCON GROUP, INC. SHARE INCENTIVE PLAN (THE “PLAN”)

The Plan was adopted by the Westcon board of directors on 10 January 2001 and approved by the Westcon shareholders on 31 January 2001. The Plan, as amended and restated in July 2002, provides for grants of incentive share options and nonqualified share options for the purchase of up to 23 300 shares of Westcon common shares to employees, directors (other than directors who serve on the compensation committee), consultants and other advisors to Westcon. The Plan, as amended and restated in June 2005, also provides grants of share appreciation rights. Westcon’s board of directors has authorised the
compensation committee to administer the Plan. The compensation committee determines the exercise price, the vesting period of, and the period in which to exercise, the share options or share appreciation rights. The exercise price of a share option is equal to at least the fair market value of a Westcon ordinary share on the date of grant. Share options and share appreciation rights granted under the Plan are generally exercisable for twelve months after termination of employment due to death or total disability, and for three months after other terminations of employment. All share options expire ten years
from the date of grant. The share appreciation rights, as currently issued, expire six years from the date of grant.

As of 28 February 2006, share options to purchase an aggregate of 8 713 ordinary shares and share appreciation rights of 7 178 shares were outstanding. 7 409 shares were available for future grant.

The Plan provides that in the event of a merger, consolidation, or sale of, all or substantially all of the assets of Westcon, or upon a dividend or other distribution, recapitalisation, share split or other similar corporate transaction, as more fully described in the Plan, the compensation committee may adjust:

• the number and type of shares (or other securities) that may be issued upon the exercise of share options and share appreciation rights yet to be granted;
• the exercise price per share to be paid for each outstanding grant; and
• the number and type of shares (or other securities) covered by each outstanding grant.

The Westcon board of directors may suspend, amend or terminate the Plan at any time. However, unless approved by a majority of Westcon shareholders, no amendment will increase the total number of shares. In addition, no termination of the Plan or action by the Westcon board of directors in amending or suspending the Plan will affect or impair the rights of an option holder under any share option or share appreciation right previously granted.

WESTCON GROUP, INC. PERFORMANCE TARGET PLAN (“PTP”)

The PTP is a long-term bonus plan, for which annual EBITDA targets are set. To the extent that Westcon overachieves these targets, 50% of the excess then forms part of the plan, with a cap at $3 million. Bonuses are paid over the subsequent three years following the end of a financial year. The PTP is limited to 50 employees that do not receive Westcon share appreciation rights.

THE LOGICALIS GROUP SENIOR MANAGEMENT SHARE OPTION SCHEME (“THE LOGICALIS SCHEME”)

As noted in previous Annual Reports, an executive incentive scheme was in place in Logicalis in the form of share options granted by an Employee Benefit Trust established on 5 November 2002 and administered by independent trustees in Jersey. The Logicalis Scheme reached its long-stop date of 31 December 2005 and was settled in accordance with the scheme rules under pre-determined procedures. The only variation from the pre-determined settlement procedure was that, rather than receiving Datatec shares in settlement, the beneficiaries opted to receive cash in compensation for the cancellation of their options.

Under the settlement, a total of $5,4 million was paid in January 2006 to 26 beneficiaries, holding 4 850 000 options in compensation for the cancellation of the options.

THE LOGICALIS GROUP CASH-SETTLED SHARE APPRECIATION RIGHT SCHEME 2005 (“THE LOGICALIS SAR SCHEME”)

During the year under review, a new executive incentive scheme to replace the Logicalis Scheme was established in the form of a cash-settled share appreciation right (“SAR”) scheme.

Under the terms of the Logicalis SAR Scheme, SARs are issued annually to senior managers. The scheme is cash-settled which requires an annual valuation of Logicalis to mark the liability to the valuation share price and to establish both a grant price for new awards and the exercise price for vested SARs. 50% of the SARs vest after 24 months and the remainder after 36 months. All rights lapse if not exercised by the end of the fifth year. There are certain headline earnings performance conditions which govern the vesting of each award.

During the year the first annual grant of SARs under the Logicalis SAR Scheme was made with an effective grant date of 1 July 2005. 1 250 000 SARs were granted to senior managers at a grant price of $2,095 per SAR.

THE ANALYSYS MASON GROUP PERFORMANCE WARRANTS SCHEME

A performance warrant scheme is in place which after a vesting period of four years will pay a cash bonus based on the growth in the Analysys Mason share price during this period. Warrants amounting to an equivalent value of a maximum of 1,25% of Analysys Mason’s equity could be issued annually.

During the 2006 financial year, 25 000 performance warrants have been issued (equivalent to 1,25% of equity) at a price of
£18,00 per share. These warrants have been issued to 28 management shareholders as an additional retention instrument. It is envisaged that these performance warrants will be cash-settled and not converted to ordinary shares.

THE ANALYSYS MASON GROUP SHADOW OPTION SCHEME

A shadow option scheme is in place which after a vesting period of four years will pay a cash bonus based on the growth in the Analysys Mason share price during this period. Options amounting to an equivalent value of a maximum of 1,25% of Analysys Mason’s equity could be issued annually.

During the 2006 financial year, 12 500 shadow options have been issued (equivalent to 0,625% of equity) at a price of £18,00 per share, bringing the total in issue to 25 000. These options have been issued to a senior group of 30 employees
as an incentive to remain with the company through a period when significant growth in shareholder value is expected. It is envisaged that these shadow options will be cash-settled and not converted to ordinary shares.

NON-EXECUTIVE DIRECTORS

L Boyd is the Group’s independent non-executive Chairman and received total fees of $88 000 during the 2006 financial year, including committee fees.

Each other non-executive director is paid a base fee of $44 000 per annum. Non-executive directors who are members of a committee of the Board are paid an additional sum of $5 500 per annum in respect of each committee of which they are members.

In addition, non-executive directors also receive fees if they are members of the audit committees or on the boards of subsidiary companies.

The remuneration of the non-executive directors is subject to ratification at the Annual General Meeting.

The Board is recommending a change in the structure of non-executive director remuneration to link it directly to the work performed in the various functions. The following fee structure is proposed:

• Chairman of the Board – $90 000
• Non-executive director’s fee – $45 000
• Chairman of the Audit, Compliance and Risk Committee – $25 000
• Chairman of the Remuneration Committee – $12 500
• Members of the Audit, Compliance and Risk Committee – $12 500
• Members of the Remuneration Committee – $10 000
• Trustees of Datatec trusts – $5 000

Please refer to the Notice to Members on page 119.

EXTERNAL APPOINTMENTS

Subject to the approval of the Board, executive directors are permitted to hold a directorship in one non-Group listed company and to retain the fees payable from this appointment.

DIRECTORS' SERVICE CONTRACTS

In order to properly reflect their spread of responsibilities, J P Montanana and D B Pfaff have contracts with Datatec International Holdings and Datatec Limited. Other than as set out here, the employment contracts of all executive directors are terminable at six months’ notice by either party.

All the non-executive directors have letters of appointment with Datatec and/or Datatec International Holdings. Under these contracts, non-executive directors retire in accordance with the Articles of Association of the Company, which is every three years. Retiring directors may offer themselves for re-election.

DIRECTORS’ EMOLUMENTS

The following tables set out an analysis of the pre-tax remuneration, including bonuses, for individual directors who held office during the financial years ended 28 February 2006 and 28 February 2005. The Remuneration Committee has approved the executive directors’ emoluments. The external auditors have independently confirmed the emoluments disclosed below.
Please refer to page 60 for details of directors’ share-based incentive awards.

$395 814 of the emoluments referred to above have been paid by Datatec Limited and $2 686 688 have been paid by subsidiaries of Datatec Limited.

*Fees as directors and committee fees

* The Remuneration Committee agreed that $99 126 be paid to J P Montanana in respect of accrued leave, over a period of three years. The third payment of $33 042 was paid to him during the 2005 financial year. This amount is not included in the table of emoluments above.

$374 912 of the emoluments referred to above have been paid by Datatec Limited and $2 026 365 have been paid by subsidiaries of Datatec Limited.

A M Smith resigned as a Datatec director with effect from 3 March 2005. His emoluments for the three days to 3 March 2005 have not been included in the table above.

DIRECTORS' SHARE INTERESTS

The interests of directors who held office at 28 February 2006 in ordinary shares of the Company were as follows:

On 28 February 2005, J P Montanana purchased 800 000 one-year American call options with a strike price of R9,48 at a premium of R2,59 per option and 300 000 three-year American call options with a strike price of R9,48 per option at a premium of R4,32 per option.

On 24 January 2006, JP Montanana sold 200 000 of the one-year American call options and exercised 264 264 of these options. On 27 January 2006 he exercised the remaining 335 736 one-year American call options.

Since 28 February 2006 to the date of this Report, the following changes to the directors’ share interests occurred:

• J P Montanana purchased 50 000 additional shares (indirect beneficial);
• D B Pfaff purchased 20 600 additional shares (indirect beneficial).

These shares were purchased in the market in terms of the DBP, utilising a specified portion of executives’ annual bonuses, and will be held in trust and are pledged until the three year vesting date when the Company will make an equal matching award.

DIRECTORS' SHARE–BASED INCENTIVES
Directors holding office at 28 February 2006 held the following Datatec share options (under the Datatec Scheme):

	Grant  date	Options held  at beginning  of year	Granted  during  the year	Exercised during the year	Price (ZAR)	Options held at    year-end
J P Montanana	2000-12-11	200 000	–	–	35.46	200 000
	2001-12-10	700 000	–	–	10.96	700 000
	2002-11-21	404 369	–	(202 000)	7.44	202 369
	2003-11-24	350 000	–	–	8.88	350 000
	2004-12-10	350 000	–	–	9.69	350 000
	Total	2 004 369	–	(202 000)		1 802 369
D B Pfaff	2001-12-10	200 000	–	–	10.96	200 000
	2002-11-21	312 639	–	–	7.44	312 639
	2003-11-24	175 000	–	–	8.88	175 000
	2004-12-10	175 000	–	–	9.69
	Total	862 639	–	–		862 639
C S Seabrooke	1997-10-29	40 000	–	–	14.25	40 000
	2002-03-14	80 000	–	–	18.06	80 000
	Total	120 000	–	–		120 000
	Total	2 987 008	–	(202 000)		2 785 008

Directors holding office at 28 February 2006 held the following share appreciation rights (under the SARS):

	Grant  date	Options held  at beginning  of year	Granted  during  the year	Exercised during the year	Price (ZAR)	Awards held at    year-end
J P Montanana	2005-08-16	–	330 669	–	13.76	330 669
D B Pfaff	2005-08-16	–	132 267	–	13.76	132 267
	Total	–	462 936	–		462 936

Directors holding office at 28 February 2006 held the following conditional awards (under the LTIP):   

	Grant  date	Awards held  at beginning  of year	Granted  during  the year	Vested during the year	Conditional awards held  at year end
J P Montanana	2005-08-16	–	330 669	–	330 669
D B Pfaff	2005-08-16	–	99 201	–	99 201
	Total	–	429 870	–	429 870