MTN Cover page

 

 

Directors’ report

for the year ended 31 December 2007

The directors have pleasure in submitting their report on the annual financial statements of the Group for the year ended 31 December 2007.

Nature of business

MTN Group Limited (the “Group” or the “Company”) carries on the business of investing in the telecommunications industry through its subsidiary companies, joint ventures and associate companies.

Review of financial results and activities

Review of financial results and the activities of the MTN Group are contained in the reports of the chairman, the Group president and CEO, the Group finance director, the Group chief operating officer and the annual financial statements.

Subsidiary companies

Details of entities in which MTN Group Limited has a direct or indirect interest are set out in Annexures 1 and 2 of the annual financial statements.

Mergers and acquisitions

No material acquisitions or disposals occurred during the year under review.

Material resolutions

Details of special resolutions and other resolutions of a significant nature passed by the Company and its subsidiaries during the year under review requiring disclosure in terms of the Listings Requirements of the JSE are:

  1. To approve an authority for the Company and/or subsidiary of the Company, to acquire shares in the Company;
  2. MTN Nigeria Communications Limited passed special resolutions on 8 November 2007 relating to:
  • Amendment to the memorandum and articles of association of the company to reflect the restructure of the authorised share capital;
  • Amendment of the provision with respect to the voting rights of preference shareholders on a resolution
    (i) Varying the rights attaching to the preference shares or (ii) the winding up of the company;
  • Amendment to the articles of association by the introduction of a new article (Article 59) to reflect the terms of the preference shares issued by the company.

Directorate and Group secretary

During the financial year under review, there were no changes to the MTN Group board of directors.

In accordance with the articles of association of the Company one third of the board is required to retire by rotation at each annual general meeting. Retiring directors are those who have been in office for the longest period since their last re-election and directors who have been appointed between annual general meetings.

Profiles of the directors seeking re-election are contained in the notice of the annual general meeting which forms part of the annual financial statements.

The directors retiring by rotation in terms of the articles of association at the forthcoming annual general meeting are Ms KP Kalyan, Messrs RD Nisbet, JHN Strydom and Sheikh AH Sharbatly. The profiles for directors retiring by rotation can be viewed on the notice to shareholders.

The composition and profiles of the board of directors of the MTN Group appear here.

The Group secretary is Ms SB Mtshali, whose business and postal addresses are:

Business address
216 – 14th Avenue
Fairland
2195
  Postal address
Private Bag 9955
Cresta
2118

Interests of directors and officers

During the year under review, no contracts were entered into in which directors and officers of the Company had an interest which significantly affected the business of the Group. The directors had no interest in any third party or company responsible for managing any of the business activities of the Group. The emoluments and perquisites of executive directors are determined by the Group nominations, remuneration, human resources and corporate governance committee and approved by the board. No long-term service contracts exist between executive directors and the Company, with the exception of the contract of service between the Group president and CEO and the Company, which commenced on 1 July 2002 and terminated on 30 June 2007. Shareholders have, however, approved the renewal of the Group president and CEO’s contract at the annual general meeting held on 13 June 2007 and the new contract will expire on 30 June 2010.

Share capital

Authorised share capital

There was no change in the authorised share capital of the Company during the period under review. The authorised ordinary share capital of the MTN Group is 2,5 billion shares of 0,01 cents each. The following are the movements in the issued ordinary share capital from the beginning of the financial year to the date of this report:

Issued share capital

The issued share capital of the Company was increased during the year by the allotment and issue of shares to employees who exercised share options in terms of the MTN Group Limited Share Option Scheme. The allotments were as follows:

3 171 671
119 820
416 475
200 000
371 974
249 584
  at R9,31
at R12,88
at R13,53
at R16,81
at R27,00
at R40,50

Accordingly, at 31 December 2007, the issued share capital of the Company was R186 480 (December 2006: R186 027) comprising 1 864 797 807 (December 2006: 1 860 268 283) ordinary shares of 0,01 cent each. No treasury shares were held at the date of this report.

Control of unissued share capital

The unissued ordinary shares are the subject of a general authority granted to the directors in terms of section 221 of the Companies Act, 1973 (Act No 61 of 1973) (“the Companies Act”). As this general authority remains valid only until the next annual general meeting, which is to be held on 19 June 2008, members will be asked at that meeting to consider an ordinary resolution placing the said unissued ordinary shares up to a maximum of 10% of the Company’s issued share capital under the control of the directors until the next annual general meeting.

Further details of the authorised and issued shares as well as the share premium for the year ended 31 December 2007 appear in note 17 to the MTN Group annual financial statements.

Acquisition of the Company’s own shares

At the last annual general meeting held on 13 June 2007, shareholders gave the Company or any of its subsidiaries, a general approval in terms of sections 85 and 89 of the Companies Act, by way of special resolution, for the acquisition of its own shares. As this general approval remains valid only until the next annual general meeting, which is to be held on 19 June 2008, members will be asked at that meeting to consider a special resolution to renew this general approval until the next annual general meeting.

Distribution to shareholders

A dividend of 136 cents per share (December 2006: 90 cents per share) amounting to R2,536 million (December 2006: R1,675 million) in respect of the financial year ended 31 December 2007 was declared on Tuesday, 18 March 2008, payable to shareholders registered on Friday, 11 April 2008. The payments of future dividends will depend on the board’s ongoing assessment of the MTN Group’s earnings, financial position, including its cash need, future earnings prospects and other factors.

Shareholders on the South African register who dematerialised their ordinary shares receive payment of their dividends electronically, as provided for by STRATE. For those shareholders who have not yet dematerialised their shareholding in the Company in certificated form, the Company operates an electronic funds transmission service, whereby dividends may be electronically transferred to shareholders’ bank accounts. These shareholders are encouraged to mandate this method of payment for all future dividends.

Results of operations

    Year ended   Year ended
    31 December   31 December
    2007   2006
    Rm   Rm

Aggregate net profits in:        
Subsidiaries   13 259   10 872
Joint ventures   134   63
Associated companies   8   23
    13 401   10 958
Aggregate net losses in:        
Subsidiaries   (2 111)   (192)
Joint ventures   (682)   (156)
    (2 793)   (348)

The financial statements set out fully the financial position, results of operations and cash flows of the Group. Note 1 to the financial statements provides an analysis of the financial results by geographic segment.

Shareholders’ interests

Major shareholders

The following information was extracted from the Company’s share register at 31 December 2007:

    December 2007   December 2006

Nominees holding shares in            
excess of 5% of the issued            
ordinary share capital of the   Number of % of issued   Number of % of issued
Company:   shares share capital   shares share capital
Nedcor Bank Nominees Limited   686 542 027 36,82   717 004 224 38,54
Standard Bank Nominees (Tvl)            
(Proprietary) Limited   575 585 098 30,87   554 492 303 29,81
First National Nominees            
(Proprietary) Limited   308 704 138 16,55   260 115 971 13,98
Spread of ordinary shareholders            
Public   1 437 498 643 77,09   1 432 667 637 77,01
Non-public   427 299 164 22,91   427 600 646 22,99
– Directors of MTN Group Limited            
   and major subsidiaries   645 089 0,03   875 476 0,05
– MTN Group Limited Share            
   Incentive Scheme     12 675
– MTN Uganda Staff Provident Fund   1 500   2 400
- Lombard Odier Darier Hentsch & Cie (M1 Limited)   183 152 564 9,82   183 210 084 9,85
– Newshelf 664 (Proprietary) Limited   243 500 011 13,06   243 500 011 13,09
             
Total issued share capital   1 864 797 807 100,00   1 860 268 283 100,00

Disclosures in accordance with section 140A (8) (a) of the Companies Act and paragraph 8.63 of the JSE Listings Requirements

According to information received by the directors, the following shareholders held shares in excess of 5% of the issued ordinary share capital of the Company:

    December 2007   December 2006

Beneficial shareholders holding   Number of % of issued   Number of % of issued
5% or more   shares share capital   shares share capital
Public Investment Corporation   247 425 249 13,27   244 104 739 13,12
Newshelf 664 (Proprietary) Limited*   243 500 011 13,06   243 500 011 13,09
Lombard Odier Darier Hentsch & Cie            
(M1 Limited)   183 152 564 9,82   183 210 084 9,85

* Further details of the Newshelf 664 shareholding are provided below.

Certain of these shareholdings are partially or wholly included in the nominee companies mentioned above. Apart from this, the Company is not aware of any other party who has a shareholding of 5% or more in the Company.

The MTN Group share option and share appreciation rights schemes

The Company operates share option and share appreciation rights schemes (jointly referred to as “the schemes”) and eligible employees, including executive directors, are able to participate in accordance with the schemes’ rules. The schemes are designed to retain and recognise the contributions of executive directors and eligible staff and to provide additional incentives to contribute to the Company’s continuing growth.

In terms of the Company’s share option scheme, the total number of shares which may be allocated for the purposes of the scheme shall not exceed 5% of the total issued ordinary share capital of the Company from time to time, being 81 799 691 shares approved by shareholders in 2001.

MTN Group Limited Share Option Scheme (“the option scheme”)

The following information is provided in accordance with the provisions of the Option Scheme:

The vesting periods under the schemes are: 20%, 20%, 30% and 30% on the anniversary of the second, third, fourth and fifth years respectively, after the grant date. The strike price is determined as the closing market price for MTN Group Limited shares on the day prior to date of issue.

If the options or appreciation rights remain unexercised after a period of 10 years from the date of grant, they expire. Furthermore, options or appreciation rights are forfeited if the employee leaves the Group before they vest.

Details of the share options outstanding at year-end are:

    December 2007   December 2006
    Number of   Number of
    shares   shares

Options allocated and reserved at beginning of year   11 900 904   17 524 564
Adjustment to prior year closing balance   41 140   1 004 990
Add: Options allocated and reserved during the year    
Less: Options no longer reserved due to participants leaving        
the employ of the Group and the lapsing offers   (465 010)   (981 339)
Less: Options exercised and allotted during the year   (4 530 308)   (5 647 311)
Options allocated at year-end   6 946 726   11 900 904

The market weighted average share price on the dates that share options were exercised during the year was R118,10.

The options outstanding at the end of the year have a weighted average remaining contractual life of six years (December 2006: seven years). During the year ended 31 December 2007, no options were granted. These fair values were calculated using the stochastic model. The inputs into the model were:

    December 2007   December 2006

Weighted average share price for the period   R103,47   R61,82
Weighted average exercise price   R118,10   R65,01
Expected life   4 – 6 years   5 – 7 years
Risk-free rate   8,94% – 10,04%   8,16% – 11,87%
Expected dividend yield   1,11%   1,02%
Expected volatility   32,91% – 34,35%   48,35% – 60,3%

Expected volatility was determined by calculating the historical volatility of the Company’s share price over the previous seven years. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. The expected dividend yield was determined based on historical data.

Options exercised during the year yielded the following proceeds, after transaction costs:

    December 2007   December 2006
    R000   R000

Ordinary share capital – at par   *   *
Share premium   60 181   66 878
Proceeds   60 181   66 878
Fair value, at exercise date, of shares issued   535 032   366 863

*Amount less than R1 million.

Share options outstanding at the end of the year have the following terms:

  December 2007         December 2006    
Number Exercise   Remaining   Number Exercise   Remaining
outstanding price   contractual   outstanding price   contractual
  R   life (years)     R   life (years)

4 008 500 9,31   4,67   7 261 171 9,31   5,67
119 820 12,88   5,00   239 640 12,88   6,00
596 414 13,53   3,75   1 034 819 13,53   4,75
550 000 16,81   5,58   750 000 16,81   6,58
954 076 27,00   5,92   1 447 774 27,00   6,92
717 916 40,50   6,92   1 167 500 40,50   7,92
6 946 726         11 900 904      

MTN Group Share Appreciation Rights Scheme (“the rights scheme”)

The nominations, remuneration, human resources and corporate governance committee on 31 May 2006, considered and approved a share appreciation rights scheme to supersede the existing share option scheme, which was subsequently adopted by the board of directors.

Share appreciation rights have been granted for qualifying employees of MTN Group Limited. The exercise price of the granted appreciation rights range between R56,83 and R98,50 and represents closing market prices of the MTN Group Limited shares at the date of grant. The appreciation rights are equity settled and exercisable in accordance with the vesting periods outlined below. All rights lapse after a period of 10 years.

Details of grants made during the year and share appreciation rights in issue at year‑end are outlined below:

    Number of rights Strike price

Balance 31 December 2006   6 649 500  
Allocated 31 May 2006   3 036 600 R56,83
Allocated 22 November 2006   3 612 900 R71,00
Adjustment to prior year closing balance   (10 500)  
Adjustment: allocation of 31 May 2006   (19 100) R56,83
Adjustment: allocation of 22 November 2006   8 600 R71,00
Rights allocated during the year   920 900  
2 January 2007   104 600 R85,30
2 April 2007   23 700 R98,50
22 June 2007   792 600 R96,00
Less: Rights no longer reserved due to participants leaving      
the employ of the Group and o er lapsing   (126 800)  
    (96 700) R56,83
    (23 800) R71,00
    (6 300) R96,00
Rights exercised during the year   (496 360)  
    (458 960) R56,83
    (37 400) R71,00
Rights allocated at year-end   6 936 740  

Rights in issue at year-end

                 
  Remaining              
  contractual     Strike   Vesting    
  life (years)   SAR’s price   dates Vesting rights  

Grant date – 31 May 2006 7,08   2 028 440 R56,83   30/11/2007 20% after 18 months 405 688
            30/11/2008 20% after 30 months 405 688
            30/11/2009 30% after 42 months 608 532
            30/11/2010 30% after 54 months 608 532
Grant date – 31 May 2006 8,58   433 400 R56,83   31/05/2008 20% after 24 months 86 680
            31/05/2009 20% after 36 months 86 680
            31/05/2010 30% after 48 months 130 020
            31/05/2011 30% after 60 months 130 020
Grant date – 21 November 2006 8,92   3 560 300 R71,00   21/11/2008 20% after 24 months 712 060
            21/11/2009 20% after 36 months 712 060
            21/11/2010 30% after 48 months 1 068 090
            21/11/2011 30% after 60 months 1 068 090
Grant date – 2 January 2007 9,00   104 600 R85,30   02/01/2009 20% after 24 months 20 920
            02/01/2010 20% after 36 months 20 920
            02/01/2011 30% after 48 months 31 380
            02/01/2012 30% after 60 months 31 380
Grant date – 2 April 2007 9,25   23 700 R98,50   02/04/2008 33% after 12 months 7 900
            02/04/2009 33% after 24 months 7 900
            02/04/2010 34% after 36 months 7 900
Grant date – 22 June 2007 9,47   786 300 R96,00   22/06/2009 20% after 24 months 157 260
            22/06/2010 20% after 36 months 157 260
            22/06/2011 30% after 48 months 235 890
            22/06/2012 30% after 60 months 235 890

The weighted strike price of options granted during the year is R96. 413 588 share appreciation rights (20006: nil) with a strike price of R56,83 were exercisable at year-end.

The weighted average remaining contractual life in respect of the share appreciation rights outstanding at year-end, approximate 8,77 years (2006: 9,71 years).

A valuation has been prepared using the stochastic model to determine the fair value of the share appreciation rights and the expense to be recognised during the year.

The inputs into the stocahstic model were as follows:

  2007

Share price at balance sheet date R128,06
Expected life 1 to 6 years
Risk free rate 8,40% to 10,04%
Expected volatility 33,54% to 35,73%
Dividend yield 1,11%

Expected volatility was determined by calculating the historical volatility of MTN Group Limited’s share price over the previous seven years. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. The expected dividend yield was determined based on historical data.

Shareholders are advised that an ordinary resolution (ordinary resolution number 5) was passed at the annual general meeting held on 13 June 2007, in terms of which the board of directors and the trustees of the MTN Group Share Trust were authorised to accelerate the vesting periods in exceptional circumstances, provided always that the changes do not allow a participant to exercise 100% of the share appreciation rights granted to him/her prior to the expiry of three years from the date of grant. In this regard, shareholders are referred to the table below to note the vesting dates in respect of the Group president and CEO’s share appreciation rights allocated on 21 November 2006 and 2 April 2007 which have been accelerated to align the vesting dates with his service contract.

Equity compensation benefits for executive directors and directors of major subsidiaries

MTN Group Limited share option and share appreciation rights schemes for the year ended 31 December 2007.

  Balance                   Balance            
  as at   Allocated           Exercised   as at            
Director's/ 1 January   during   Offer   Date of   during   31 December   Exercisable   Offer   Exercisable
officer's name 2007   the year   price   allocation   the year   2007   options   price   date
MTN Group                                  
RS Dabengwa                                  
Share options 198 420       R 9,31   02/09/2002   198 420     58 220   R 27,00   01/12/2005
  291 100       R 27,00   01/12/2003       291 100   58 220   R 27,00   01/12/2006
Share appreciation rights 134 800       R 56,83   31/05/2006       134 800   26 960   R 56,83   30/11/2007
  43 400       R 71,00   21/11/2006       43 400   87 330   R 27,00   01/12/2007
                          8 680   R 71,00   21/11/2008
  667 720                   469 300   26 960   R 56,83   30/11/2008
                          87 330   R 27,00   01/12/2008
                          8 680   R 71,00   21/11/2009
                          40 440   R 56,83   30/1 1/2009
                          13 020   R 71,00   21/11/2010
                          40 440   R 56,83   30/11/2010
                          13 020   R 71,00   21/11/2011
PF Nhleko                                  
Share options 1 993 700       R 9,31   02/09/2002       1 993 700   82 740   R 9,31   02/09/2004
Share appreciation rights 516 400       R 71,00   21/11/2006       516 400   477 740   R 9,31   02/09/2005
      23 700   R 98,50   02/04/2007       23 700   716 610   R 9,31   02/09/2006
  2 510 100                   2 533 800   716 610   R 9,31   02/09/2007
                          172 133   R 71,00   21/11/2008
                          7 900   R 98,50   02/04/2008
                          172 133   R 71,00   21/11/2009
                          7 900   R 98,50   02/04/2009
                          172 134   R 71,00   21/11/2010
                          7 900   R 98,50   02/04/2010
RD Nisbet                                  
Share options 561 480       R 9,31   02/09/2002       561 480   280 740   R 9,31   02/09/2006
  51 600       R 27,00   01/12/2003       51 600   12 900   R 27,00   01/12/2006
Share appreciation rights 197 400       R 71,00   21/11/2006       197 400   280 740   R 9,31   02/09/2007
                          19 350   R 27,00   01/12/2007
  810 480                   810 480   19 350   R 27,00   01/12/2008
                          39 480   R 71,00   21/11/2008
                          39 480   R 71,00   21/11/2009
                          59 220   R 71,00   21/11/2010
                          59 220   R 71,00   21/11/2011

  Balance                   Balance            
  as at   Allocated           Exercised   as at            
Director's/ 1 January   during   Officer   Date of   during   31 December   Exercisable   Officer   Exercisable
officer's name 2007   the year   price   allocation   the year   2007   options   price   date
MTN major subsidiaries                                  
AR Bing                                  
Share options 7 290       R9,31   02/09/2002       7 290   7 290   R9,31   02/09/2007
  33 350       R40,50   01/12/2004   6 670   26 680   3 240   R56,83   30/11/2007
Share appreciation rights 16 200       R56,83   31/05/2006       16 200   6 670   R40,50   01/12/2007
  3 200       R71,00   21/11/2006       3 200   640   R71,00   21/11/2008
      21 100   R96,00   22/06/2007       21 100   3 240   R56,83   30/11/2008
  60 040                   74 470   10 005   R40,50   01/12/2008
                          4 220   R96,00   22/06/2009
                          640   R71,00   21/11/2009
                          4 860   R56,83   30/11/2009
                          10 005   R40,50   01/12/2009
                          4 220   R96,00   22/06/2010
                          960   R71,00   21/11/2010
                          4 860   R56,83   30/11/2010
                          6 330   R96,00   22/06/2011
                          960   R71,00   21/11/2011
                          6 330   R96,00   22/06/2012
Z Bulbulia                                  
Share options 60 720       R13,53   28/09/2001       60 720   18 480   R9,31   02/09/2004
  92 400       R9,31   02/09/2002       92 400   15 180   R13,53   28/09/2004
  24 700       R27,00   01/12/2003       24 700   18 480   R9,31   02/09/2005
Share appreciation rights 64 600       R56,83   31/05/2006       64 600   22 770   R13,53   28/09/2005
                          4 940   R27,00   01/12/2005
  242 420                   242 420   27 720   R9,31   02/09/2006
                          22 770   R13,53   28/09/2006
                          4 940   R27,00   01/12/2006
                          27 720   R9,31   02/09/2007
                          12 920   R56,83   30/11/2007
                          7 410   R27,00   01/12/2007
                          12 920   R56,83   30/11/2008
                          7 410   R27,00   01/12/2008
                          19 380   R56,83   30/11/2009
                          19 380   R56,83   30/11/2010
SL Botha                                  
Share options 750 000       R16,81   07/07/2003   200 000   550 000   262 138   R16,81   07/07/2007
Share appreciation rights     155 900   R96,00   22/06/2007       155 900   287 862   R16,81   07/07/2008
  750 000                   705 900   31 180   R96,00   22/06/2009
                          31 180   R96,00   22/06/2010
                          46 770   R96,00   22/06/2011
                          46 770   R96,00   22/06/2012
C de Faria                                  
Share appreciation rights 348 600       R71,00   21/11/2006       348 600   69 720   R71,00   21/11/2008
                          69 720   R71,00   21/11/2009
                          104 580   R71,00   21/11/2010
                          104 580   R71,00   21/11/2011

  Balance                   Balance            
  as at   Allocated           Exercised   as at            
Director's/ 1 January   during   Officer   Date of   during   31 December   Exercisable   Offier   Exercisable
officer's name 2007   the year   price   allocation   the year   2007   options   price   date
A Farroukh                                  
Share appreciation rights 277 900       R71,00   21/11/2006       277 900   55 580   R71,00   21/11/2008
                          55 580   R71,00   21/11/2009
                          83 370   R71,00   21/11/2010
                          83 370   R71,00   21/11/2011
BG Gouldie                                  
Share options 22 050       R13,53   28/09/2001   22 050       3 060   R56,83   30/11/2007
  82 810       R40,50   01/12/2004   33 124   49 686   9 580   R71,00   21/11/2008
Share appreciation rights 15 300       R56,83   31/05/2006       15 300   3 060   R56,83   30/11/2008
  47 900       R71,00   21/11/2006       47 900   24 843   R40,50   01/12/2008
  168 060                   112 886   9 580   R71,00   21/11/2009
                          4 590   R56,83   30/11/2009
Resigned as a director                                  
of subsidiary company                                  
during 2007                         24 843   R40,50   01/12/2009
                          14 370   R71,00   21/11/2010
                          4 590   R56,83   30/11/2010
                          14 370   R71,00   21/11/2011
SB Mtshali                                  
Share appreciation rights 53 000       R56,83   31/05/2006       53 000   10 600   R56,83   31/05/2008
                          10 600   R56,83   31/05/2009
                          15 900   R56,83   31/05/2010
                          15 900   R56,83   31/05/2011
PD Norman                                  
Share options 330 080       R9,31   02/09/2002   30 000   300 080   135 050   R9,31   02/09/2006
  33 900       R40,50   01/12/2004       33 900   6 780   R40,50   01/12/2006
Share appreciation rights 45 700       R56,83   31/05/2006       45 700   165 030   R9,31   02/09/2007
  72 100       R71,00   21/11/2006       72 100   9 140   R56,83   30/11/2007
  481 780                   451 780   6 780   R40,50   01/12/2007
                          14 420   R71,00   21/11/2008
                          9 140   R56,83   30/11/2008
                          10 170   R40,50   01/12/2008
                          14 420   R71,00   21/11/2009
                          13 710   R56,83   30/11/2009
                          10 170   R40,50   01/12/2009
                          21 630   R71,00   21/11/2010
                          13 710   R56,83   30/11/2010
                          21 630   R71,00   21/11/2011
KW Pienaar                                  
Share options 372 360       R9,31   02/09/2002   372 360       9 330   R40,50   01/12/2008
  31 100       R40,50   01/12/2004   12 440   18 660   9 330   R40,50   01/12/2009
Share appreciation rights 103 800       R71,00   21/11/2006       103 800   20 760   R71,00   21/11/2008
  507 260                   122 460   20 760   R71,00   21/11/2009
                          31 140   R71,00   21/11/2010
                          31 140   R71,00   21/11/2011
J Ramadan                                  
Share appreciation rights 348 600       R71,00   21/11/2006       348 600   69 720   R71,00   21/11/2008
  348 600                   348 600   69 720   R71,00   21/11/2009
                          104 580   R71,00   21/11/2010
                          104 580   R71,00   21/11/2011

MTN Group Limited share option and share appreciation rights schemes for the year ended 31 December 2006

  Balance                   Balance            
  as at   Allocated           Exercised   as at            
Director's/ 1 January   during   Offier   Date of   during   31 December   Exercisable   Offier   Exercisable
officer's name 2006   the year   price   allocation   the year   2006   options   price   date
MTN Group                                  
RS Dabengwa                                  
Share options 198 420       R9,31   02/09/2002       198 420   58 220   R27,00   01/12/2005
  291 100       R27,00   01/12/2003       291 100   99 210   R9,31   02/09/2006
Share appreciation rights     134 800   R56,83   31/05/2006       134 800   58 220   R27,00   01/12/2006
      43 400   R71,00   21/11/2006       43 400   99 210   R9,31   02/09/2007
                          26 960   R56,83   30/11/2007
  489 520                   667 720   87 330   R27,00   01/12/2007
                          8 680   R71,00   21/11/2008
                          26 960   R56,83   30/11/2008
                          87 330   R27,00   01/12/2008
                          8 680   R71,00   21/11/2009
                          40 440   R56,83   30/11/2009
                          13 020   R71,00   21/11/2010
                          40 440   R56,83   30/11/2010
                          13 020   R71,00   21/11/2011
PF Nhleko                                  
Share options 1 993 700       R9,31   02/09/2002       1 993 700   82 740   R9,31   02/09/2004
Share appreciation rights     516 400   R71,00   21/11/2006       516 400   477 740   R9,31   02/09/2005
  1 993 700                   2 510 100   716 610   R9,31   02/09/2006
                          716 610   R9,31   02/09/2007
                          103 280   R71,00   21/11/2008
                          103 280   R71,00   21/11/2009
                          154 920   R71,00   21/11/2010
                          154 920   R71,00   21/11/2011
RD Nisbet                                  
Share options 748 640       R9,31   02/09/2002   187 160   561 480   280 740   R9,31   02/09/2006
  64 500       R27,00   01/12/2003   12 900   51 600   12 900   R27,00   01/12/2006
Share appreciation rights     197 400   R71,00   21/11/2006       197 400   280 740   R9,31   02/09/2007
  813 140                   810 480   19 350   R27,00   01/12/2007
                          19 350   R27,00   01/12/2008
                          39 480   R71,00   21/11/2008
                          39 480   R71,00   21/11/2009
                          59 220   R71,00   21/11/2010
                          59 220   R71,00   21/11/2011

  Balance                   Balance            
  as at   Allocated           Exercised   as at            
Director's/ 1 January   during   Officer   Date of   during   31 December   Exercisable   Office   Exercisable
officer's name 2006   the year   price   allocation   the year   2006   options   price   date
MTN major                                  
subsidiaries                                  
AR Bing                                  
Share options 19 440       R9,31   02/09/2002   12 150   7 290   6 670   R40,50   01/12/2006
  33 350       R40,50   01/12/2004       33 350   7 290   R9,31   02/09/2007
Share appreciation rights     16 200   R56,83   31/05/2006       16 200   3 240   R56,83   30/11/2007
      3 200   R71,00   21/11/2006       3 200   6 670   R40,50   01/12/2007
  52 790                   60 040   640   R71,00   21/11/2008
                          3 240   R56,83   30/11/2008
                          10 005   R40,50   01/12/2008
                          640   R71,00   21/11/2009
                          4 860   R56,83   30/11/2009
                          10 005   R40,50   01/12/2009
                          960   R71,00   21/11/2010
                          4 860   R56,83   30/11/2010
                          960   R71,00   21/11/2011
Z Bulbulia                                  
Share options 75 900       R13,53   28/09/2001   15 180   60 720   18 480   R9,31   02/09/2004
  92 400       R9,31   02/09/2002       92 400   15 180   R13,53   28/09/2004
  24 700       R27,00   01/12/2003       24 700   18 480   R9,31   02/09/2005
Share appreciation rights     64 600   R56,83   31/05/2006       64 600   22 770   R13,53   28/09/2005
  193 000                   242 420   4 940   R27,00   01/12/2005
                          27 720   R9,31   02/09/2006
                          22 770   R13,53   28/09/2006
                          4 940   R27,00   01/12/2006
                          27 720   R9,31   02/09/2007
                          12 920   R56,83   30/11/2007
                          7 410   R27,00   01/12/2007
                          12 920   R56,83   30/11/2008
                          7 410   R27,00   01/12/2008
                          19 380   R56,83   30/11/2009
                          19 380   R56,83   30/11/2010
SL Botha                                  
Share options 859 540       R16,81   07/07/2003   109 540   750 000   174 276   R16,81   07/07/2006
                          287 862   R16,81   07/07/2007
                          287 862   R16,81   07/07/2008
I Charnley                                  
Share options 100 000       R13,53   28/09/2001   100 000       105 780   R9,31   28/09/2004
  528 900       R9,31   02/09/2002       528 900   105 780   R9,31   28/09/2005
Share appreciation rights     174 300   R56,83   31/05/2006       174 300   158 670   R9,31   02/09/2006
      69 400   R71,00   21/11/2006       69 400   158 670   R9,31   02/09/2007
  628 900                   772 600   34 860   R56,83   30/11/2007
                          13 880   R71,00   21/11/2008
                          34 860   R56,83   30/11/2008
                          13 880   R71,00   21/11/2009
                          52 290   R56,83   30/11/2009
                          20 820   R71,00   21/11/2010
                          52 290   R56,83   30/11/2010
                          20 820   R71.00   21/11/2011
C de Faria                                  
Share appreciation rights     348 600   R71,00   21/11/2006       348 600   69 720   R71,00   21/11/2008
                          69 720   R71,00   21/11/2009
                          104 580   R71,00   21/11/2010
                          104 580   R71,00   21/11/2011

  Balance                   Balance            
  as at   Allocated           Exercised   as at            
Director's/ 1 January   during   Officer   Date of   during   31 December   Exercisable   Officer   Exercisable
officer's name 2006   the year   price   allocation   the year   2006   options   price   date
A Farroukh                                  
Share appreciation rights     277 900   R71,00   21/11/2006       277 900   55 580   R71,00   21/11/2008
                          55 580   R71,00   21/11/2009
                          83 370   R71,00   21/11/2010
                          83 370   R71,00   21/11/2011
BG Gouldie                                  
Share options 22 050       R13,53   28/09/2001       22 050   22 050   R13,53   28/09/2006
  82 810       R40,50   01/12/2004       82 810   16 562   R40,50   01/12/2006
Share appreciation rights     15 300   R56,83   31/05/2006       15 300   3 060   R56,83   30/11/2007
      47 900   R71,00   21/11/2006       47 900   16 562   R40,50   01/12/2007
  104 860                   168 060   9 580   R71,00   21/11/2008
                          3 060   R56,83   30/11/2008
                          24 843   R40,50   01/12/2008
                          9 580   R71,00   21/11/2009
                          4 590   R56,83   30/11/2009
                          24 843   R40,50   01/12/2009
                          14 370   R71,00   21/11/2010
                          4 590   R56,83   30/11/2010
                          14 370   R71,00   21/11/2011
SB Mtshali                                  
Share appreciation rights     53 000   R56,83   31/05/2006       53 000   10 600   R56,83   31/05/2008
                          10 600   R56,83   31/05/2009
                          15 900   R56,83   31/05/2010
                          15 900   R56,83   31/05/2011
PD Norman                                  
Share options 440 080       R9,31   02/09/2002   110 000   330 080   20   R9,31   02/09/2005
  33 900       R40,50   01/12/2004       33 900   165 030   R9,31   02/09/2006
Share appreciation rights     45 700   R56,83   31/05/2006       45 700   6 780   R40,50   01/12/2006
      72 100   R71,00   21/11/2006       72 100   165 030   R9,31   02/09/2007
  473 980                   481 780   9 140   R56,83   30/11/2007
                          6 780   R40,50   01/12/2007
                          10 170   R40,50   01/12/2008
                          14 420   R71,00   21/11/2008
                          9 140   R56,83   30/11/2008
                          10 170   R40,50   01/12/2009
                          14 420   R71,00   21/11/2009
                          13 710   R56,83   30/11/2009
                          21 630   R71,00   21/11/2010
                          13 710   R56,83   30/11/2010
                          21 630   R71.00   21/11/2011
KW Pienaar                                  
Share options 496 480       R9,31   02/09/2002   124 120   372 360   186 180   R9,31   02/09/2006
  31 100       R40,50   01/12/2004       31 100   6 220   R40,50   01/12/2006
Share appreciation rights     103 800   R71,00   21/11/2006       103 800   186 180   R9,31   02/09/2007
  527 580                   507 260   6 220   R40,50   01/12/2007
                          20 760   R71,00   21/11/2008
                          9 330   R40,50   01/12/2008
                          20 760   R71,00   21/11/2009
                          9 330   R40,50   01/12/2009
                          31 140   R71,00   21/11/2010
                          31 140   R71,00   21/11/2011

Directors’ shareholdings

The interests of the directors and alternate directors in the ordinary shares of the Company were as follows:

  Beneficial Non-beneficial
Director December 2007 December 2006 December 2007 December 2006

DDB Band 14 023 14 023
RD Nisbet 611 066 611 066
Z Bulbulia (major 10 000 10 000
subsidiary director)        
PD Norman (major 10 000 10 000
subsidiary director)        

Directors’ share dealings

Shares traded by directors for the year ended 31 December 2007

Directors of MTN Group and        
major subsidiaries   Shares sold Price obtained Date of sale
         
PD Norman   30 000 R133,06 29/11/2007
RS Dabengwa   198 420 R131,65 05/12/2007
KW Pienaar   180 000 R131,65 05/12/2007
BG Gouldie   38 612 R92,90 27/06/2007
    16 562 R131,65 05/12/2007
SL Botha   200 000 R131,65 05/12/2007

The trades reflected above were in respect of shares exercised under the MTN Group Limited Share Appreciation Rights scheme ("SARs") and share option scheme.

Shareholders are referred to the Integrated Business Report for the year ended 31 December 2006, in which it was disclosed that Mr PF Nhleko entered into a forward purchase contract with a commercial bank on 24 May 2006 whereby 4 150 000 MTN Group shares would be acquired at a forward price of R63,97 per share on an 18‑month term basis.

On 3 April 2007, Mr PF Nhleko entered into a zero cost collar on 935 000 of the 4 150 000 forward purchased MTN shares. The put option was purchased at a strike price of R98,27 per share and the call option sold at a strike price of R113,69 in respect of the 935 000 forward purchased MTN shares. The expiry date thereof was 26 November 2007.

The transactions were contractually up for renewal at the end of November 2007 and on 29 November 2007 the transaction was restructured. The put option was purchased at a strike price of R131,87 per share and the call option sold at a strike price of R171,97 in respect of the full 4 150 000 forward purchased MTN shares.

Furthermore, Mr PF Nhleko entered into another separate and independent 15‑month term contract with a commercial bank on 28 December 2007 to acquire 15 893 822 shares at a call strike price of R133,21 per share and sold calls at R195 per share. This trade was financed through a forward sale of 2 610 000 shares at R149,63 per share.

Directors’ interests in the MTN Group held through Newshelf 664 (Proprietary) Limited (“Newshelf 664”)

Newshelf 664 (Proprietary) Limited (“Newshelf 664”) owns 243,5 million MTN Group shares (equivalent to 13,06% (December 2006: 16,6%) of the issued capital of the MTN Group). Newshelf 664 exercises the voting rights in respect of such shares. These shares were acquired from Transnet Limited (“Transnet”) at an average price of R13,90 per share between December 2002 and March 2003.

Newshelf 664’s ordinary shares are held by the Alpine Trust (“the Trust”) for the benefit of eligible permanent staff employed by MTN Group Limited and its South African subsidiaries as well as eligible senior staff members of its African operations. This is expected to benefit approximately 2 300 eligible employees. Such benefits vest over the six year funding period commencing in 2003 but will only be distributed when all obligations of Newshelf 664, including all debt and equity related funding obligations to certain financing institutions, have been met, and thereafter in accordance with the terms of the trust deed. This is anticipated to occur after 31 December 2008.

The Trust’s main objective is the advancement of black economic empowerment. In this regard, the Trust aims, inter alia, to allocate 75% of participation ratios to beneficiaries who are empowerment participants.

The Trust has six trustees, two of whom are directors of the MTN Group, namely PF Nhleko and RS Dabengwa. Ms I Charnley, also an executive of the MTN Group until June 2007, has retained her position as a trustee. The other trustees, being W Lucas-Bull, PM Jenkins (Chairperson) and Z Sithole, are independent. Furthermore, all the directors of Newshelf 664 have been appointed by the Trust, such directors being PF Nhleko, I Charnley, RD Nisbet and RS Dabengwa (jointly, “the Newshelf 664 Directors”). The Newshelf 664 Directors are also included among the eligible MTN employees who are beneficiaries of the Trust. Consequently, the interests of the Newshelf 664 Directors in respect of the MTN Group shares held by Newshelf 664 are:

  • As a result of being trustees of the Trust, PF Nhleko and RS Dabengwa, together with the other trustees, have an indirect, non-beneficial interest in the MTN Group shares which are currently held by Newshelf 664.
  • As a result of being directors of Newshelf 664, the Newshelf 664 Directors have an indirect, beneficial interest in respect of the voting rights pertaining to the MTN Group shares which are currently held by Newshelf 664.
  • As a result of being beneficiaries of the Trust, the Newshelf 664 Directors have an indirect, beneficial interest in the MTN Group shares which are currently held by Newshelf 664. This beneficial interest is in the form of rights to participate in a predetermined ratio (“the participation ratio”) in the net assets of the Trust which result from the distribution by Newshelf 664 of the remaining amount and/or assets (if any) which may arise once all of Newshelf 664’s obligations have been met, including settlement of all funding. Certain of the financial institutions who funded the acquisition of the MTN Group shares also participate in the growth in value of the MTN Group Limited shares. The participation ratios of each of the Newshelf 664 Directors, who are currently also executive directors of MTN Group Limited are:

    – PF Nhleko 7,9270% (2006: 7,9270%)
    – RS Dabengwa 5,5869% (2006: 5,5869%)
    – RD Nisbet 5,5869% (2006: 5,5869%)

Subject to the terms and conditions of the trust deed, the rights to participate will vest in the above persons in equal tranches of approximately 16,67% per annum for six years on the condition that, in the event that any such person is not in the employment of the MTN Group at the end of the six-year period (by reason of voluntary termination or dismissal), he or she will only be entitled to that percentage of the rights to participate which will have vested prior to such director leaving the employment of the MTN Group.


In addition, the Newshelf 664 Directors have exercised an option to participate in 0,23% of the economic benefits attaching to the “B” class redeemable preference shares and the “B” class participating preference shares held by the Public Investment Corporation (“PIC”), as funders to Newshelf 664, for which option the Newshelf 664 Directors jointly paid an amount of R5 million. The capital acquisition consideration paid by each Newshelf 664 Director was:

– PF Nhleko R1 612 577
– I Charnley R1 129 141
– RS Dabengwa R1 129 141
– RD Nisbet R1 129 141
Total R5 000 000

The Newshelf 664 Directors thus have an indirect beneficial interest in the MTN Group Limited shares acquired by Newshelf 664 to the extent that the proceeds of such shares (dividends and capital) are required to service and settle the preference share funding provided by the PIC, but only to the extent of the proportion that their funding of the preference shares bears to the total PIC funding.

Directors' emoluments and related payments for the year ended 31 December 2007

            Retire-                
    Directors’       ment   Other       Share    
          Date   fees   Salaries   benefits   benefits   Bonuses   options   Total
       appointed   R000   R000   R000   R000   R000   R000   R000

Executive directors                              
PF Nhleko 01/06/01       5 971   514   414   9 358     16 527
RS Dabengwa 01/10/01       3 472   445   177   3 225   24 200   31 519
RD Nisbet 01/10/01       2 943   377   154   3 425     6 899
Sub-total executive directors         12 386   1 336   745   16 008   24 200   54 945
Non-executive directors                              
DDB Band 01/10/01   649                       649
KP Kalyan** 13/06/06   1 648                       1 648
MJN Njeke 13/06/06   680                       680
MC Ramaphosa 01/10/01   859                       859
MA Ramphele 13/06/06   320                       320
AT Mikati **+ 17/07/06   2 132                       2 132
ARH Sharbatly* 13/06/06   815                       815
AF van Biljon 01/11/02   736                       736
JHN Strydom 11/03/04   617                       617
J van Rooyen 17/07/06   859                       859
PL Woicke 13/06/06   1 262                       1 262
Sub-total                              
Non-executive directors     10 577                       10 577
Total     10 557   12 386   1 336   745   16 008   24 200   65 522

* The director's emoluments have been provided for but have not been paid as yet.
**The fees have been paid in euro but have been converted to rand for consistency.
+ Fees are paid to M1 Limited.

Directors’ emoluments and related payments for the year ended 31 December 2006

                Retire-                
        Directors'       ment   Other       Share    
          Date   Date   fees   Salaries   benefits   benefits   Bonuses   options   Total
       appointed   resigned   R000   R000   R000   R000   R000   R000   R000

Executive directors                                  
PF Nhleko 01/06/01           4 905   422   222   8 488     14 037
SL Botha* 07/07/03   13/06/06       1 095   140   17       1 252
I Charnley* 01/08/01   13/06/06       1 020   134   62     4 778   5 994
RS Dabengwa 01/10/01           3 066   453   6 469**   3 737   #   13 725
RD Nisbet 01/10/01           2 683   344   214   3 500   10 274   17 015
Sub-total executive                                  
directors             12 769   1 493   6 984   15 725   15 052   52 023
Non-executive                                  
directors                                  
DDB Band 01/10/01       676                       676
KP Kalyan 13/06/06       762                       762
MJN Njeke 13/06/06       274                       274
MC Ramaphosa 01/10/01       955                       955
MA Ramphele 13/06/06       229                       229
AT Mikati***+ 17/07/06       494                       494
ARH Sharbatly*** 13/06/06       617                       617
AF van Biljon 01/11/02       770                       770
JHN Strydom 11/03/04       642                       642
J van Rooyen 17/07/06       337                       337
PL Woicke 13/06/06       834                       834
Ex director at                                  
13 June 2006                                  
ZNA Cindi 13/06/06       238                       238
PL Heinamann 13/06/06       456                       456
MA Moses (Transnet Ltd) 13/06/06       183                       183
Sub-total                                  
non-executive                                  
directors         7 467                       7 467
Total executive and                                  
non-executive directors         7 467   12 769   1 493   6 984   15 725   15 052   59 490

* Executive directors up to 13 June 2006 and the directors’ emoluments represent the pro-rated portion of their annual remuneration.
** Includes expatriate payment of R6,406 million.
***The directors’ emoluments have been provided for but have not been paid to the directors as yet.
# Excludes R3 246 which was a prior year correction.
+ Fees are paid to M1 Limited.

Performance bonuses

Performance bonuses for executive directors are linked to operational and financial value drivers pertaining to business performance against budget for individual operations and the MTN Group as a whole. These value drivers are determined by the board every year in respect of the next financial year. Each executive director’s performance bonus is conditional upon achievement of their specific value drivers and key performance indicators, which are structured to retain a balance between the performance of entities for which they are directly responsible, and that of the Group. In order to align incentive awards with the performance to which they relate. The bonuses above reflect the amounts accrued in respect of each year and not the amounts paid in that year. The bonuses are determined by the Group nominations, remuneration, human resources and corporate governance committee, and are approved by the board.

Property, plant and equipment

There were no changes in the nature of property, plant and equipment nor in the policy regarding their use during the financial period under review.

American depository receipt facility

A sponsored American depository receipt (ADR) facility has been established. This ADR facility is sponsored by the Bank of New York and details of the administrators are reflected under the administration page.

Borrowing powers

In terms of the articles of association of the Company, the borrowing powers of the Company are unlimited, however, all borrowings by the MTN Group are subject to limitations expressed in the treasury policy of the MTN Group. The details of borrowings appear in note 19 of the annual financial statements.

Post balance sheet events

Broadening of the Nigerian shareholder base in MTN Nigeria Communications Limited

Subsequent to year‑end, Nigerian individuals and key institutions acquired a 9,45% interest in MTN Nigeria Communications Limited from MTN, acting through its wholly owned subsidiary, MTN International (Mauritius) Limited, and other shareholders in MTN Nigeria Communications Limited, pursuant to a private placement.

The main rationale for the transaction is to achieve MTN’s stated intention of broadening the ownership of MTN Nigeria Communications Limited among Nigerian citizens and institutions and to reaffirm
MTN‘s commitment of enabling greater Nigerian representation in MTN Nigeria Communications Limited.

MTN disposed of an overall equity interest of 5,96% in MTN Nigeria Communications Limited as part of the private placement for a consideration of USD594,50 million, thereby reducing its interest in MTN Nigeria Communications Limited to 76,08%. The allocation date for the private placement was 8 February 2008 and share transfers were effected on 18 February 2008.

MTN Côte d’ Ivoire put option

The MTN Côte d’ Ivoire put option amounting to R474 million (2006: R480 million) was cancelled subsequent to year‑end for non-consideration. Upon cancellation, the outstanding balance was transferred to equity.

Going concern

The directors have reviewed the MTN Group’s budget and cash flow forecast for the year to 31 December 2008. On the basis of this review, and in the light of the current financial position and existing borrowing facilities, the directors are satisfied that the MTN Group has access to adequate resources to continue in operational existence for the foreseeable future and is a going concern and have continued to adopt the going concern basis in preparing the financial statements.

Auditors

PricewaterhouseCoopers Inc. and SizweNtsaluba vsp will continue in office as joint auditors in accordance with section 270(2) of the Companies Act.

Change in tax rate

The Company is regarded as a tax resident in South Africa by the South African Revenue Services (SARS) and as such is subject to tax on its worldwide income in South Africa (note 6). On 20 February 2008 the South African Minister of Finance announced a change in the corporate tax rate from 29% to 28%. This change is effective for financial years ending on any date between 1 April 2008 and 31 March 2009.