NATURE OF BUSINESS

Vodacom Group Limited is an investment holding company. Its principal subsidiaries are engaged in the provision of a wide range of communications products and services including but not limited to voice, messaging, broadband and data connectivity and converged services.

FINANCIAL RESULTS

Earnings attributable to equity holders of Vodacom Group Limited for the year ended 31 March 2009 were R6 089.3 million (2008: R7 811.4 million; 2007: R6 342.4 million) representing basic earnings per share of 409.2 cents (2008: 525.0 cents; 2007: 426.3 cents). Full details of the financial position and results of the Group are set out in these consolidated annual financial statements.

DIVIDENDS

The following dividends were declared during the current financial year:

• interim dividend of R3 000.0 million declared on 11 September 2008 and paid on 6 October 2008 to all shareholders registered on 1 October 2008; and
• final dividend of R2 200.0 million declared on 30 January 2009 and paid on 8 April 2009 to all shareholders registered on 1 April 2009.

Following its listing on Monday 18 May 2009, Vodacom Group Limited has adopted a dividend policy that, dependent on results, interim dividends would be paid in December and final dividends in June of each year. Vodacom Group Limited intends to pay so much of its net profit as will be available after retaining such sums and repaying such debts owing to third parties as shall be necessary to meet the requirements reflected in the budget and business plan, taking into account monies required for expansion and other growth opportunities.

SHARE CAPITAL

Full details of the authorised and issued share capital of Vodacom Group Limited are contained in Note 19 of the consolidated annual financial statements. Following the financial year end and conclusion of the implementation of the share sale transaction between Telkom SA Limited and Vodafone Holdings (SA) (Proprietary) Limited, the authorised and issued share capital of Vodacom Group Limited were restructured as follows:

• The 100 000 ordinary shares of R0.01 each in the authorised share capital was subdivided into 14 879 540 000 ordinary shares * with the resulting issued share capital consisting of 1 487 954 000 ordinary shares **.
• The 14 879 540 000 authorised ordinary shares * and 1 487 954 000 issued ordinary shares ** were converted into ordinary shares of no par value.
• 10 879 540 000 ordinary shares of no par value in the authorised share capital of 14 879 540 000 ordinary shares of no par value were cancelled resulting in the authorised share capital comprising of 4 000 000 000 ordinary shares of no par value.
• The authorised and issued share capital is thus illustrated as follows:
  Stated Capital
      Authorised
          4 000 000 000 ordinary shares of no par value
      Issued
          1 487 954 000 ordinary shares of no par value amounting to R100
  

Shareholders approved a special resolution granting a general authority for the repurchase of ordinary shares by Vodacom Group Limited at a general meeting held on 23 February 2009. No ordinary shares have been repurchased in terms of this general authority. Approval will be sought at the forthcoming annual general meeting on 31 July 2009 to renew this general authority.

Share Scheme
The Group wishes to adopt a share scheme known as the "forfeiture share plan" the details of which are more fully set out in the notice of annual general meeting of this annual report. In terms of the share scheme so proposed, approval will be sought from shareholders to allocate 5% of Vodacom Group Limited's current issued share capital representing 74 397 700 ordinary shares to the forfeiture share plan.

* 14 879 540 000 ordinary shares of R0.000000067206378691814397488094390014745 each
** 1 487 954 000 ordinary shares of R0.000000067206378691814397488094390014745 each

SUBSIDIARIES, ASSOCIATE, JOINT VENTURES AND OTHER INVESTMENTS

Particulars of the material subsidiaries of Vodacom Group Limited are provided in Addendum A while particulars of associate companies, joint ventures and other investments are provided in Notes 13, 14 and 47. The attributable interest in the net profit or losses of subsidiaries before eliminations for the year ended 31 March 2009 is as follows:

Broad-based black economic empowerment transaction

In October 2008, the Group finalised a R7.5 billion broad-based black economic empowerment ("BBBEE") transaction where broad-based strategic partners, black business partners, the broad-based black South African public and permanent South African employees of Vodacom Group Limited and any of its wholly owned South African subsidiaries from time to time as well as Vodacom (Proprietary) Limited ("Vodacom SA") and its wholly owned South African subsidiaries including employees of the said entities who on secondment outside of South Africa were given the opportunity to acquire a 6.25% interest in Vodacom SA. Vodacom SA facilitated the BBBEE transaction through a 10% upfront discount of R750.0 million and provided the BBBEE participants with notional vendor finance of R5.85 billion for a period of 7 years. The public offer was approximately three times oversubscribed and the share allotment was therefore pro-rated according to the rules of the scheme. The BBBEE participants invested R900.0 million of unencumbered equity which was used to subscribe for ordinary shares and "A" ordinary shares in Vodacom SA. The transaction was introduced to assist the Group in meeting its empowerment objectives. Refer to Note 20 of the consolidated annual financial statements for further information.

Acquisition of Gateway *

The Group acquired 100% of the carrier services and business network solutions businesses of Gateway Telecommunications SA (Proprietary) Limited effective 30 December 2008 for an enterprise value of approximately $675.0 million plus a make whole payment of $26.4 million on the high yield bond. Gateway was consolidated into the Group’s result from this date. The financial year end of Gateway is 31 December and is in the process of being changed to be in line with the Group’s year end. Refer to Note 34 of the consolidated annual financial statements for further information.

Acquisition of a controlling interest in Storage Technology Services (Proprietary) Limited ("StorTech")

The Group acquired a controlling interest of 51% in StorTech, a managed services company, on 2 February 2009 for a consideration of R138.1 million. StorTech was consolidated into the Group’s result from this date. The financial year end of StorTech is 28 February and is in the process of being changed to be in line with the Group’s year end. Refer to Note 34 of the consolidated annual financial statements for further information.

WBS Holdings (Proprietary) Limited ("WBS")

On 1 October 2008 the Group exercised its call option to acquire an additional 14.9% of WBS. This increased the Group’s overall interest in WBS to 24.9%. Refer to Note 14 of the consolidated annual financial statements for further information.

CAPITAL EXPENDITURE AND COMMITMENTS

Details of the Group’s capital expenditure and commitments are set out in Notes 37 and 38 of the consolidated annual financial statements.

SPECIAL RESOLUTIONS

The following special resolutions were passed by subsidiary companies during the year under review:

Vodacom (Proprietary) Limited

YeboYethu Limited

DIRECTORATE AND SECRETARY

The following movements in the directorate and secretary were recorded during the year under review:

In terms of Vodacom Group Limited’s articles of association Messrs M Lundal, JCG Maclaurin, TA Boardman, RAW Schellekens, MP Moyo, M Joseph and Mesdames P Malabie and TM Mokgosi-Mwantembe having been appointed since the last annual general meeting retire at the forthcoming annual general meeting to be held on 31 July 2009.

In terms of the articles of association, Mr PJ Uys retires by rotation.

All retiring directors are eligible and available for re-election. Their profiles appear on page 22 of this annual report.

As at date of this report, the directors of Vodacom Group Limited were as follows:

Independent non-executive
MP Moyo (Chairman), TA Boardman, P Malabie and TM Mokgosi-Mwantembe.

Non-executive
M Lundal, JCG Maclaurin, M Joseph, RAW Schellekens and RC Snow.

Executive
PJ Uys (Chief Executive Officer), MS Aziz Joosub and J van der Watt (Acting Chief Financial Officer).

INTEREST OF DIRECTORS

As at date of listing, the current directors of Vodacom Group Limited held direct and indirect beneficial interests in 690 shares of its issued ordinary shares (2008: Nil; 2007: Nil). Details of the ordinary shares held per director are set out below:

Subsequent to listing and at date of this report, MP Moyo increased his indirect benefit holdings to 2 415 ordinary shares.

Funding requirements

The Group increased its interest bearing debt during the current financial year as follows:

• The Group obtained a rand denominated term loan in the amount of R3 000.0 million from Absa Capital, a division of Absa Bank Limited. The loan is for a term of one year and was used as bridge funding for the acquisition of Gateway.
• The Group entered into a syndicated loan with various banks and institutions for R6 450.0 million. The funding will be utilised to refinance existing short-term debt, as well as for capital expenditure.

Refer to Note 23 of the consolidated annual financial statements for further information.

Electronic Communications Act No. 36 of 2006 ("ECA")

The Independent Communications Authority of South Africa ("ICASA") finalised the licence conversion process and issued converted licences for Individual Electronic Communications Services ("I-ECS") and Independent Electronic Communications Network Services ("I-ECNS") to all qualifying licensees under the ECA. The Group has been issued with two sets of I-ECS and I-ECNS licences, one set converted from the Value Added Network Services ("VANS") licences and the other from the Mobile Cellular Telecommunications Services ("MCTS") licence. The licences confer the same rights for the category of licences as provided for under the ECA. The MCTS converted licences do, to a considerable extent, grandfather most provisions from the MCTS licence with the following key issues outstanding:

• Finalisation of the licence fee regulations as required under the EAC.
• No additional Universal Service Obligations ("USOs") have been imposed on the Group as part of the conversion process, however the Group is required to continue to maintain the previously implemented USOs under the converted licence pending the review of all USOs by ICASA and the Universal Service and Access Agency of South Africa ("USAASA"). The old disparities remain as new I-ECNS, converting from VANS have no USOs imposed on them. It is anticipated that the outcome of the review will result in parity between all similarly licenced entities.
• Provisions that might have a negative financial impact on the Group are the provision prohibiting charging for itemised billing, which will have a substantial impact on the Group’s revenue, and the penalties and fines subscribed are substantial.

The above requirements are set out in terms of the Regulations on Standard Terms and Conditions for Licensees which came into effect on 19 January 2009. ICASA has indicated that the contentious provisions under the regulations, as mentioned above, will be reviewed. The Group is in consultation with Senior Counsel to ensure the Group’s rights in this regard are protected.

Events subsequent to year end

The directors are not aware of any matter or circumstance arising since the end of the financial year, not otherwise dealt with in the consolidated annual financial statements, which significantly affects the financial position of the company as at 31 March 2009 or the results of its operations or cash flows for the year then ended, other than those disclosed in Note 41 of the consolidated annual financial statements.

AUDIT COMMITTEE

In terms of section 270A(f) of the Companies Act, 1973, as amended ("the Act"), the Group audit committee has discharged all of those functions delegated to in terms of the Group audit committee charter, the Act and the JSE Listings Requirements:

• the audit committee met on 5 occasions to review, inter alia, the year end and interim results of the Group as well as consider regulatory and accounting standards compliance;
• considered and satisfied itself that the external auditors are independent and determined the external fees for financial year 2009/2010 and nominated the external auditors for appointment for financial years 2009 and 2010;
• confirmed the non-audit services which the external auditors performed during the year under review;
• ensured that the audit committee complied with the membership criteria specified in the Act;
• confirmed the internal audit plan for the next 3 years;
• held separate meetings with management and the external auditors to discuss any reserved matters; and
• considered the appropriateness and experience of the Acting Chief Financial Officer as required by the Listings Requirements of the JSE Limited.

Further detail to the role of the audit committee can be found on page 97 of this annual report.

CORPORATE ADMINISTRATION

The auditors’ and secretary’s business and postal address appear on the corporate administration sheet attached as Addendum B to the annual report.