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Notice of AGM

Proxy

Underpinning the successful operation of the Group is a shared services platform which supports the commitment to continually improve operational efficiency.

Corporate Services

Underpinning the successful operation of the Group is a shared services platform which supports the commitment to continually improve operational efficiency. This covers the strategic disciplines of credit risk management, finance, information technology, business development, investor relations and property.

The past year has been particularly active across all of these areas:

• Outstanding credit risk management enhanced the quality of the debtors book, while the introduction of industry first behavioural scorecards will sustain the customer re-serve base at its current high level of 61% (2004 - 61%).
• The IPO and listing of the Group in October 2004 involved extensive preparation of the prospectus, roadshows to potential investors locally and abroad and managing the transition to a listed environment.
• This was all managed within extremely tight deadlines. At the same time, the finance division was restructured to gear the Group for more intensive corporate reporting.
• While managing the portfolio of 62 properties owned by the Group and the leases on over 400 buildings, the property and development team opened 19 new stores and relocated six.
• The prudent investment in information technology in recent years continues to pay dividends, with an effective balance between centralised head office systems and decentralised systems in stores. Lifestyle Living's systems were successfully integrated in August. The VSAT satellite network ensures that credit applications are approved within eight to 15 seconds, handling over 350 000 applications during the year.

Information technology

After making a substantial financial investment and outsourcing key functions over the past five years to create a leading-edge technology platform which provides convenience and enhances operational efficiency, the Group's systems are stable, current, low cost and scaleable. As a result no major information technology (IT) projects or expenditure are planned for the year ahead.

The Lewis technology strategy is underpinned by five key principles, notably:

• providing cost effective, timely and accurate information systems;
• responding rapidly to the changing needs of the business;
• partnering specialists through outsourcing or insourcing to add business value to the Group;
• adhering to open systems principles; and
• using industry standard, non-proprietary hardware, and as far as possible, software.

In addition to the small in-house strategy and management team responsible for the Group's systems, the maintenance of the software portfolio is outsourced to a team of systems developers from Universal Computer Services (UCS). Maintenance of the branch IT network is outsourced to Unisys and open source Linux software is used at store level. A perpetual upgrade programme ensures that store technology remains current.

The Lewis Communication System (LCS) is an intranet-based system which provides effective communications between the branch network and the head office. Central to LCS is an online product knowledge training facility which tests the product knowledge of store staff. The system is used for store promotions, operational updates, price ticketing and for the archiving of documents, and provides a valuable feedback mechanism from stores to head office.

Transact, an automated credit application processing system, facilitates the application of centralised credit policies and credit scorecards, as well as enabling online bureau enquiries. While the Group uses the international expertise of Experian in the development and maintenance of risk scorecards and credit strategies, it also maintains the required experience and technical skills internally to maintain, adapt and improve the application of the credit management system.

A distributed network enables branches to operate independently of each other and head office. However, the approval process for new credit applications requires real-time connectivity to the credit bureau, which is facilitated through Transact.

In order to prevent downtime, an off-site disaster recovery server is maintained. This disaster recovery site connects to the branch satellite network infrastructure and the credit bureau independently of the live operating environment. The entire Transact system is replicated at the disaster recovery site on a daily basis and can be activated within minutes of a disaster.

A business continuity plan ensures that customer communications (eg account details), supplier communications (supply chain processes) and staff communications (payment processes) are maintained.

Group property and development

The Group property and development team is responsible for the administration of the property portfolio, negotiating lease renewals, sourcing sites for store expansion, managing store openings and refurbishments, co-ordinating store security and handling overall lease administration.

The Company's preferred policy is to lease premises (currently more than 400 properties), allowing it far greater flexibility when locating stores in optimal positions. Furthermore, centralised property procurement drives cost efficiencies.

The Group's store location strategy is key to its success. Lewis has traditionally traded out of stand-alone stores located in main streets and town centres with some representation in shopping centres. Best Electric stores are ideally suited for shopping centres with higher footfall, while the new format Lifestyle Living stores are located in upmarket urban shopping centres frequented by higher income earners.

Investor relations

The Lewis Group has adapted to the challenges of operating in a listed company environment, with the additional statutory and financial reporting, as well as greater regulatory and legislative compliance.

Following the listing of the Group in October 2004, an investor relations policy was adopted. This not only commits the Group to providing accurate, transparent and regular communications to the investment community, but also ensures that information is made available to all shareholders simultaneously in accordance with regulatory guidelines.

In all shareholder communications, the Group aims to present a balanced and understandable assessment of Lewis' position. This is done by adhering to principles of openness and substance over form and striving to address material matters of interest and concern to all stakeholders.

The Group has an appointed sponsor, UBS South Africa, in compliance with the JSE Securities Exchange of South Africa (JSE) Listings Requirements.