vision table of contents - sharedata

1 • Financial and operational highlights

2 • Segmental structure

3 • Corporate overview

4 • Board of directors

6 • Chairman’s letter

9 • CEO’s report

14 • Review of operations

18 • Corporate governance

24 • Audit and Risk Committee report

25 • Annual financial statements

106 • Shareholder analysis

108 • Branch details and corporate information

109 • Notice of Annual General Meeting

Attached – Proxy form

Table of contents

Vision

We will build a group that excels in the creation of client, employee and stakeholder value, led by a huge brand and service ethic.

1huge group annual report 2010

Financial and operational highlights

Huge Group’s fi nancial objectives for the period under review included increasing operational effi ciencies and generating higher gross profi t margins within Huge Telecom. Huge Telecom has achieved considerable success in both of these areas and continues to strive for further improvement.

• Basic earnings per share up 25,8%

• Headline earnings per share up 28,3%

• Huge Telecom improved gross margin while gearing up for growth

• Eyeballs Mobile Advertising now majority owned by Huge Group

• Further diversifi cation with launch of Huge Media in January 2010

• Value creation through active share repurchase programme

• Net asset value per share up 7,1% to 251,64 cents per share

• Strategic positioning of Huge Telecom to benefi t from changing regulatory environment

2010 2009 Change (%)

Revenue (Rm) 573,5 608,5 (6)Earnings before interest, taxation, depreciation and amortisation (Rm) 36,9 24,2 53Profi t before taxation (Rm) 8,3 4,3 93Basic earnings per share (cents) 8,58 6,82 26Headline earnings per share (cents) 8,79 6,85 28Return on book value of equity (%) 3,5 3,0 17,5Net asset value per share (cents) 251,64 234,92 7,1

2 huge group annual report 2010

ECNS licensedISO 9001:2008

certifi ed

Digital media owner

A company incorporated in Namibia

Technology provider

Social Responsibility

Telecommunications activities Huge Telecom (Pty) Ltd (“Huge Telecom”), a wholly owned subsidiary of Huge Group and the principal trading operation of the Group, is South Africa’s leading “Managed Telecommunications” company.

TelePassport is the market leader in corporate cost-saving services in Namibia, with a 70% market share.

Media activities Eyeballs (77% owned by Huge Group) is a technology provider whose “Eyeballs” technology consists of a software application to provide advertising on mobile smartphones.

Huge Media’s (100% owned by Huge) strategy is to be a media owner focused on the digital mobile advertising industry. It commenced commercial operation on 20 January 2010.

Corporate responsibility activities Trust vehicle to drive the Group’s Social Responsibility initiatives.

Segmental structure


Corporate overview

The Huge Group is an investment holding company listed on the Alternative Exchange (“AltX”) of the JSE Limited (“JSE”). Its primary objective is to unlock value by identifying business opportunities in any industry where “the sum of the parts will be greater than the whole”.

Unlocking business opportunityThis is achieved by the strategic acquisition and consolidation of leading but independently successful, yet complementary, organisations operating in the same industry. Notions such as “economies of scale”, “bulk purchasing power”, “synergy” and “leverage” permeate the Group’s vision, mission, and strategic objectives.

While the Group has no specifi c industry focus, it has chosen in the short term to concentrate on companies operating in the Information Communication and Technology (“ICT”) industry in Southern Africa. It has by design chosen to do so in order to successfully leverage the intellectual property of its founding members.Following its philosophy of unlocking value, Huge Group’s investment holding activities include maximising the fi nancial position of the Group by optimising the use of cash and derivative based debt and equity instruments.


Kenneth (“Ken”) Delroy Jarvis (53) Lead independent non-executive directorAppointed: 1 September 2008

Ken previously held the position of CIO at the South African Revenue Service (“SARS”) and was responsible for the turnaround of SARS from 2002 to 2006. He started his working career in the mid-1970s and spent a decade with IBM. During his career he worked for a number of well-known companies, including Nedacom, Momentum Life, Nedcor Bank, Amplats, Multichoice and SARS and his experience includes massive project rollouts, consolidation exercises and transformational initiatives. Ken currently runs his own consulting company focusing on executive mentoring and coaching as well as IT strategy and project trouble shooting. He is also involved at a shareholder level in a number of start up IT companies. Ken is a member of the Audit and Risk Committee and Chairman of the Remuneration and Nomination Committee.

Michael (“Mike”) Ronald Beamish (41) Non-executive directorAppointed: 8 December 2009

Mike began his career as a Derivatives Trader with HSBC Securities, holding various contract positions as an analyst, consultant and systems implementer. After two years, he took over the management of the fi rm’s proprietary trading book. He spent a further four years in this position and was promoted to Associate Director. In 2003, Mike started Praesidium Capital Management (Pty) Ltd (“Praesidium”), an asset management company which has three managing partners. Praesidium is a shareholder of Huge Group and Mike is a material shareholder of Huge Group.

Brian Alexander McQueen (66) Independent non-executive directorAppointed: 24 July 2007

Brian McQueen has forty years of experience in sales and general management, gained primarily in the gas and telecommunications industries, and in particular with PABX telephony, radio paging and GSM cellular companies. Brian started his career as a management trainee at Afrox in 1964 and progressed through the ranks to national contracts manager by 1985. He then moved to Infotech in the role of software development manager until 1987 and fulfi lled several roles at STC Business Communications (Alcatel) from 1987 to 1995. In 1995 he joined Autopage Paging, where he was ultimately appointed as managing director of Supercall, a subsidiary of Altech, in 2002. Brian is the Chairman of the Audit and Risk Committee and a member of the Remuneration and Nomination Committee.

Donovan (“Don”) Tredoux (44) Non-executive directorAppointed: 2 August 2008

Don Tredoux has 20 years’ telecommunication experience, most notably in sales and marketing. While at Siemens, he identifi ed and defi ned the opportunity of cellular least cost routing and in 1996 he founded Redwin Communications, which was later acquired in the formation of Orion Cellular (the principal subsidiary of listed Vox Telecom Limited). Don was the managing director and a majority shareholder in Orion for ten years. Throughout his career, Don has played an active and instrumental role in research and development in an effort to further the growth and user experience of different product offerings supplied by the companies with which he has worked.

Stephen (“Steve”) Peter Tredoux (50) Non-executive directorAppointed: 26 March 2008

Steve started his working career as an accountant but moved to general management where he worked in the property management industry and manufacturing. He joined the information technology sector where he was employed by National Data Systems as account director addressing all commercial and support issues for Nedbank. He subsequently joined MTN in 1995, working there until 2006. Over the 11 years with MTN, Steve was instrumental in formalising distribution agreements with the Service Providers, as well as investigating new routes to market, new product sets, and new ways of communicating with customers. When MTN acquired M-Tel, Steve was appointed in an executive sales and advertising capacity. He has considerable experience in sales distribution but is also a master at marketing and product development. Steve is a member of the Audit and Risk Committee and a member of the Remuneration and Nomination Committee.

Board of directors


Anton Daniel Potgieter (41) Executive chairman, BBusSc (Hons – Information systems)Appointed: 2 July 2007

Anton has seventeen years of telecommunications experience in the Southern African market, with extensive experience in all facets of business within an industry which is ever-changing. He started an IT company in 1991, and then founded TelePassport in 1993, which was focused initially on international call-back. In 1997 TelePassport extended its focus into GSM based least cost routing. TelePassport’s annual revenue grew to R350 million by 2006. Potgieter listed TelePassport as Huge Group in 2007, and fulfi lled the role of chief executive offi cer before being appointed as its executive chairman in 2008. Potgieter is a strategist and catalyst, and is responsible for new direction and development within Huge Group. He is an innovator at heart, drives the Group’s investments in new technology and is its brand custodian.

James Charles Herbst (39) Chief executive offi cer, BComm, BAcc, CA(SA), Chartered Financial AnalystAppointed: 1 September 2006

James is a CA with sound experience in corporate fi nance, corporate law, investment banking, and investment management. After completing his articles with Coopers and Lybrand and the Chartered Financial Analyst programme, James worked for Fleming Martin Private Asset Management where he managed full discretionary funds. He left in 2001 to start a private equity business that later culminated in the listing of Level 4 IT Services with its subsequent acquisition of DataPro: now Vox Telecom. Having completed his service contract with DataPro, James went on to pursue corporate fi nance and deal-making with the launch of WRH Corporate Advisors. In July 2007 they acted as corporate advisors to TelePassport, which was reverse-listed into Huge Group. Since his appointment as CEO, James has been instrumental in integrating Huge Group’s two principal telecommunications businesses, which have been combined to form Huge Telecom.

Michelle Allison Meth (35) Group fi nancial director, BCompt, BCom (Honours), CA (SA)Appointed: 1 March 2009

Michelle qualifi ed as a Chartered Accountant (SA) in 2000 after completing articles at Meyer Wilson Marsh (today known as Moore Stephens). She has gained solid fi nancial experience as group fi nancial accountant at Primedia, working on consolidating the fi nancial statements of the Primedia group’s numerous subsidiaries and associates. She subsequently joined Cell C as its executive head of fi nance with responsibility for the seven divisions making up the fi nance function. Michelle joined Huge Group in March 2009 from TMS Group (a wholly owned subsidiary of Bidvest) where she held the position of fi nance director.

Vincent Mokhele Mokholo (37) Executive director, BSc Appointed: 2 July 2007

Vincent has worked in the telecommunications industry for the last 15 years. After graduating in 1995, he joined GSM Cellular where he applied himself across the different business disciplines within the company, developing his professional skills and fi nishing his tenure as the Corporate Account Manager. Vincent joined TelePassport in 1999 to focus on business growth. Vincent was instrumental in developing TelePassport into a successful and growing business: at the helm of a consortium he played a major role in tailoring a BBBEE transaction for TelePassport, which culminated in Mojaho Trading (Pty) Ltd acquiring 30% of the company. He assumed the role of Client Services Director when TelePassport merged with CentraCell (Pty) Ltd to form Huge Telecom, and was responsible for bedding down the operations and service deliverables of the combined entity. Vincent was appointed to the position of Product and Business Development Director in January 2009, and has rejuvenated the Group’s product portfolio, which continues to bring new products on stream.

Manogaran (“Rajen”) Pillay (41) Executive directorAppointed: 26 March 2008

Rajen started his career in 1988 as a technician with Teleboss, a PABX company that became a wholly owned subsidiary of Siltek. Rajen spent 12 years with the company, operating in several roles – including that of technical manager. In 2000, Rajen joined Orion Cellular as Development Manager in the research and development department. He spent four years in R&D and was instrumental in developing LCR products that established Orion as a market leader in LCR technology. Rajen designed and implemented the fi rst locally developed digital LCR solution in South Africa. In 2005, Rajen moved into Orion’s operations division as the National Service Manager, and then later as National Operations Manager. With the sale of Orion to Vox Telecom in 2007, Rajen was promoted to the position of Operations Director, where he was responsible for 100 staff members and an annual turnover approaching R1 billion. Rajen was instrumental in merging two other group companies into Orion in 2007. Rajen currently occupies the role of Managing Director: Huge Business Support, a division of Huge Telecom.


Performance highlightsI am pleased to report positive movements on all our fi nancial indicators and strong overall fi nancial performance for the year. Huge Group has weathered the global fi nancial crisis that started towards the end of 2008 very well. Its rapid operational strengthening is clearly illustrated by comparing the fi nancial performance in the fi rst half to the second half of the fi nancial year. The Group posted a strong turnaround from an after tax loss of R11,0 million at the interim stage, to a profi t of R8,3 million for the full year, underpinned by very respectable profi t of R19,2 million being generated in the second half of the fi nancial year.

The Group’s principal subsidiary remains Huge Telecom. Huge Group has now fully bedded down the acquisition of CentraCell, the benefi ts of which are clear from the strong fi nancial performance in the second half of the year. I noted last year that the principal driver behind Huge Telecom is our CEO James Herbst. In the year under review, he has been instrumental in effecting the turnaround of this subsidiary, and in ensuring that strategically Huge Telecom is ideally positioned to become a major force in the managed telecommunications market. The anticipated regulatory changes in the telecommunications market have been incorporated into Huge Telecom’s strategic planning to ensure that it benefi ts fully from the anticipated market changes.

Eyeballs Mobile Advertising represents the Group’s technology interests. It completed positioning its technology product to be globally applicable and launched its fi rst commercial distributor, Huge Media, in January 2010.

Huge Media, a wholly-owned subsidiary of the Group, was formed to take the Eyeballs technology to market. Huge Media’s initial performance suggests that there is signifi cant potential for this technology.

Huge Media has accumulated 42 000 installed users in just more than six months of operating.

The Group’s 49%-owned associate in Namibia, TelePassport, turned in another solid year of trading, with net profi t exceeding budget by 30%.

Corporate fi nance considerationsThe Group continued its share buy-back programme during the year. We remain confi dent that a Huge Group ordinary share represents an attractive investment, where returns will exceed the Group’s weighted average cost of capital.

The total number of ordinary shares, or exposure to ordinary shares, acquired by the Group up to the date of issue of this annual report is 28 073 048. This represents 25,1% of the total issued ordinary share capital of the Group.

The success of any share buy-back programme can be considered over various periods. Since incorporation, the Group has issued 111 760 000 ordinary shares. These shares were issued at a weighted average price of 212,6 cents per share. Over the same period the Group has repurchased 28 073 048 ordinary shares. These shares were repurchased over a three year period at a weighted average price of 211 cents per share, certainly illustrating the success of the Group’s buy-back programme.

Alternatively, the success of our buy-back programme can be illustrated from the date of listing of Huge Group. 99 646 601 ordinary shares were listed on 8 August 2007 on the JSE Limited. Since 8 August 2007, the Group issued a further 12 113 699 ordinary shares at a weighted average price of 310 cents per share. These shares were repurchased at a weighted average price of 211 cents per share, representing a gain of 99 cents per share.

A year of transformation – this appropriately describes the 2010 fi nancial year, which follows a year of challenges in 2009.

Chairman’s letter

Anton PotgieterExecutive chairman


In looking at Huge Group’s investment activities from a different perspective, the Group issued 70 million shares to acquire TelePassport, another 36,6 million shares to acquire CentraCell, and a further 5 million shares to acquire Eyeballs and launch Huge Media. To date the Group has repurchased 28,1 million ordinary shares, and this is equivalent to repaying 77% of the cost of its investment in CentraCell in less than three years.

Economic conditionsGlobal and local trading conditions remained tight during the 2010 fi nancial year, particularly for clients of Huge Telecom who have suffered the downstream effects of a global economic correction of unprecedented proportions. We believe, however, that the worst is over.

The Soccer World Cup may have temporarily buoyed business in related sectors but we anticipate that these positive spin offs may be short lived. We continue, therefore, to be prudent and to exercise caution in our business dealings.

Regulatory mattersHuge Telecom operates in a regulated industry. The Independent Communications Authority of South Africa (“ICASA”) has taken a more proactive and aggressive stance in the last eighteen months to regulating the affairs of the industry over which it presides – being the telecommunications industry. Enormous pressure has been placed on those operators with established Signifi cant Market Power (“SMP”) to lower wholesale termination rates. This pressure has been exerted with the objective of increasing competition in the hope of lowering communications costs in South Africa, a country which displays relatively low levels of competition, by global standards, in its telecommunications industry. We continue to actively consider the various scenarios, outcomes and impact on Huge Telecom, of a lower termination rate environment. We believe that we have identifi ed appropriate strategies to mitigate the risks to the business model of Huge Telecom that emanate from a lower termination rate environment.

Huge Group Board:Back row, left to right: Rajen Pillay, James Herbst, Ken Jarvis, Anton Potgieter, Don Tredoux, Vincent MokholoFront row, left to right: Michelle Meth, Mike Beamish, Brian McQueen, Steve Tredoux


Chairman’s letter continuedCCCCCChhhhairrmmmmmmaaaaannnnn’s leeeeeeettttttttttter ccccococ ntntininueueueeeeedd

Last year we noted our ongoing discussions with the JSE Limited to resolve a dispute concerning the regulatory treatment of certain SSF trades which were undertaken by the Group on 16 October 2008. The outcome of these discussions has been the posting of a public censure by the JSE Limited on the Group for these trades, with a further requirement that the Group request shareholder ratifi cation of these trades. The shareholder circular pertaining to these matters is expected to be presented to shareholders shortly.

Black Economic EmpowermentSince Huge Group is an investment holding company, the Group continues to place importance on the achievement of BEE initiatives by each subsidiary. Huge Telecom has been tasked with increasing its BEE credentials in the forthcoming fi nancial year with the introduction of a prominent BEE shareholder. In the interim, Huge Telecom continues to focus on other contributors to BEE in an effort to improve its rating.

Governance and King codesI am pleased to report that Huge Group continues to maintain high standards of corporate governance. This is achieved because of the commitment of all directors and staff in the Group. In particular, our non-executive directors provide independent, robust and valuable input into all spheres of the business. As such our governance is continually assessed and appraised by independent third parties.

Our Board and sub-committees are functioning smoothly, with all statutory requirements being fulfi lled. In addition, we make judicious ongoing use of several leading and respected fi rms for advice, primarily for matters relating to legal, compliance and reputation management matters.

We recently conducted a full analysis of our corporate governance in relation to the newly released King III code. We are committed to implementing a closely monitored action plan to comply with the King III code when it is implemented on 28 February 2011.

The Group’s governance is fully detailed in the accompanying Report on Corporate governance.

Future prospectsThe South African managed telecommunications market continues to grow and is rapidly becoming an essential part of the business landscape. Huge Telecom is now ideally positioned to take advantage of this trend and is poised to increase

its market share in the next period. We reaffi rm our strategic positioning that there is signifi cant benefi t in remaining a “manager of all technologies, and an owner of none”. As such, we are committed to our technology agnostic strategy, leaving other players to pursue their aspirations of becoming “alternate telcos”.

Eyeballs Mobile Advertising represents a signifi cant opportunity for Huge Group. Eyeballs has developed an enabling technology that is unrivalled in this segment and which has the potential to become a market leader. In the period under review Eyeballs perfected its technology to commercial readiness and will now focus on growing a strong distribution network.

Huge Media represents an excellent opportunity for Huge Group to benefi t from the Eyeballs technology throughout the value chain. With its “Goodyz” product, Huge Media has the potential to become a signifi cant force in the fl edgling mobile advertising industry, which is only now starting to take shape in South Africa. We believe that Huge Media’s progress to date is encouraging and that it will become a viable and self-funding subsidiary in the forthcoming fi nancial year.

We continue to monitor opportunities to unlock value by participating in industry consolidation, which we believe could start to gain momentum towards the end of 2010.

AppreciationOnce again, I extend my sincere thanks to all our directors and staff without whose ongoing commitment we could not have weathered another diffi cult, but ultimately rewarding year. Our Board has performed admirably and provided extensive support. In particular, I am grateful for the contribution of our Lead Independent Director, Ken Jarvis, whose input, enthusiasm and guidance throughout the year has been invaluable. Our staff at all levels excelled to meet the challenge of turning Huge Telecom into a cohesive and coordinated force in the market. It is often said that a company’s people are its greatest resource, and I can confi rm that at Huge Group this is entirely true – we are building a team that brims with Huge ideas and Huge commitment.

Anton PotgieterExecutive Chairman


Huge Group also continued diversifying its operations with the launch of a new subsidiary, Huge Media, in January 2010.

Huge Group’s objectives for the past six months included improved service delivery as well as increasing operational effi ciencies and generating higher gross profi t margins within Huge Telecom. Huge Telecom achieved considerable success in each of these areas and continues to strive for further improvement.

The focus of the Group for the coming fi nancial year will be to translate the improved operational effi ciencies and higher gross profi t margins achieved by Huge Telecom into increased operating profi t margins at Group level. This will be achieved through further cost optimisation in Huge Telecom as well as revenue generation by Eyeballs and Huge Media.

Operational performanceInvestment holding activitiesHuge Group’s investment holding activities, including treasury management, are mandated to maximise the fi nancial position of the Group in the debt and equity markets using cash and derivative based instruments.

During the period since listing until 28 February 2010 Huge Telecom, being a subsidiary of the Group,

acquired exposure to contracts for difference (over 3 904 579 ordinary shares at a weighted average price of 356,9 cents per share totalling R13,9 million), single stock futures (over 359 200 ordinary shares at a weighted average price of 314,6 cents per share totalling R1,1 million), and ordinary shares (totalling 9 646 926 at a weighted average price of 102,3 cents per share totalling R9,9 million) to be held as treasury shares. During the same period the Group issued 12 113 399 ordinary shares at a weighted average price of 309,7 cents per share totalling R37,5 million, acquired exposure to single stock futures (over 8 045 500 ordinary shares at a weighted average price of 362,0 cents per share totalling R29,1 million), and bought and sold 3 311 546 ordinary shares at a loss of R149 442. On a net basis the Group has repurchased exposure over 9 842 806 ordinary shares at a weighted average price of 169,6 cents per share totalling R16,7 million giving the Group the future prospect of reducing the number of ordinary shares in issue to 89 803 795.

The implied aggregate gain (excluding implied interest gains) achieved from these investment holding activities, which is the difference between the original issue price of 250,0 cents per share and the net acquisition price of 169,6 cents per share, is approximately R7,9 million.

CEO’s report

The successful internal restructuring at Huge Group, in which the operations of TelePassport and CentraCell were merged, together with the focus on operational effi ciencies, treasury management and cost containment, resulted in a marked improvement in Group fi nancial performance in the second half of the year. The turnaround eliminated the loss recorded in the fi rst six months of 2010 and the Group is pleased to report increases in net profi ts and headline earnings per share compared to the previous fi nancial year.

James HerbstChief executive offi cer


On a debt equivalent basis, by treating the issue of shares as an advance of debt and the repurchase of shares as a repayment of debt, and using a time weighted approach at the prime rate of interest, the cumulative total benefi t to shareholders from these investment holding activities is approximately R16,4 million.

Telecommunications activitiesHuge Telecom is the Group’s principal revenue generator. Total turnover generated for the second six months of the year, which is traditionally the slower period of the fi nancial year, amounted to R291,5 million, up 3,4% from R282,0 million in the fi rst half of the fi nancial year. The directors of Huge Telecom believe that the signifi cant investment which it made in new executive and senior management will support a continuation of this positive trend.Huge Telecom reported an 11,8% increase in gross profi t margins, improving from 18,6% to 20,8%. This was achieved primarily through signifi cant improvements in the management of Huge Telecom’s input costs. A revenue assurance department was established to enhance the management of airtime available for sale. As a result airtime lost through expiry was dramatically reduced. The full effect of these benefi ts, which positively impacted the business and gross profi t margins of Huge Telecom in the second half of 2010, will be realised in the 2011 fi nancial year.

Gross profi t for the traditionally slower second six months of the year amounted to R68,4 million which is an increase of 34% from the R51,0 million recorded in the fi rst half of the 2010 fi nancial year. The improvements were a result of the improved management of airtime noted above as well as timing differences on the receipt of connection incentive bonuses.

Media activitiesIn March 2009 Huge Group increased its holding in Eyeballs from 25% to 77%. Eyeballs furthered the development of its proprietary in-application mobile phone advertising technology during the year in support of its technology provider strategy. Eyeballs’ technology has matured signifi cantly during the past two years, and has started generating revenue from sales post year end, having introduced this unique advertising mechanism to South Africa. It is currently available for all Symbian Smartphones (which includes most Nokia phones and several LG, Samsung and Sony Ericsson models), and

BlackBerry support is planned for release in June 2010. Other operating systems will be addressed in due course. This technology was valued at R16,0 million on acquisition of Eyeballs as a subsidiary and is included in intangible assets of the Group.

During the year Huge Media, a wholly owned subsidiary of Huge Group, was established with the intention of taking Eyeballs’ technology to market under the consumer brand name “Goodyz”. Since it commenced commercial operations in January 2010 Huge Media has acquired more than 42 000 installed Goodyz users. Huge Media served 2,29 million user impressions through Goodyz in April 2010 of which 1,53 million were available for advertising impressions, and served approximately 4,5 million impressions in June 2010, of which 3 million will be available for advertising.

Entrenching a performance driven cultureIn support of Huge Group’s commitment to its biggest asset, being its people, the Group has entrenched best practice in human resource management into its operations. These practices sharpen Huge Group’s ability to optimise the employee value proposition, thereby enabling the operations’ ability to attract and retain those specialist skills which are required to deliver continuous services and unlock growth.

Huge Group’s success as a telecommunications and media company is predicated on the quality of its workforce. On the recommendation of the Group’s non-executive directors, a performance management system was implemented in 2010, which spanned each member of the executive management team through to every employee in every operation, and branch, across the Group. The result is the conclusion of an individualised performance management contract for each of the 185 employees. These contracts incorporated the Group’s strategic business objectives: being improved service delivery, increased operational effi ciencies and higher gross profi t margins; as well as the functional responsibilities of each employee.

The implementation of the performance management system enabled the Group to create a detailed skills inventory including mapping critical skills in the business to ensure adequate succession plans and guarantee continuous service delivery. Succession planning has been fully integrated into each

CEO’s report continued


executive and senior management performance management plan thereby minimising the possible negative impact of a highly mobile workforce in the industry.

Having quantifi ed its resources the Group has confi rmed that its resource pool has the ability to support a twofold increase in volumes thereby leveraging further revenue growth without signifi cant additional investments in fi xed costs.

The fi rst quarterly reviews started early in the new fi nancial year. While the initial benefi ts have already materialised further benefi ts are expected to come through in 2011.

Financial performanceThe Group reported net profi t before tax for the second half of the year of R19,2 million, and a net profi t after tax of R13,9 million. The reversal of the fi rst-half loss of R5,8 million resulted in net profi t after tax for the year of R8,1 million.

The Group’s improved profi tability was achieved despite a slight reduction in Group revenue, down to R573,5 million from R608,5 million in 2009.

Basic earnings per share were up 25,8% to 8,58 cents (2009: 6,82 cents), and headline earnings per share were up 28,3% to 8,79 cents (2009: 6,85 cents).

Net asset value per share increased by 7,1% to 251,64 cents per share.

Group operating expenses incurred during the current fi nancial year increased by R25,7 million from R91,3 million to R117,0 million. The following items are notable:• The audit fees for both the 2009 and 2010

fi nancial years were expensed in the current fi nancial year equating to twice the normal audit fee of approximately R1,25 million.

• The non-cash depreciation and amortisation charge for the replacement of property, plant, equipment and intangibles (other than network related assets and routing equipment where the depreciation is expensed as part of cost of sales) increased by R2,6 million. This related primarily to the depreciation of the intangible assets owned by Eyeballs (the Eyeballs technology amounting to R1,6 million) and the intangible assets (computer software) owned by Huge Telecom (amounting to R1,1 million).

• Employment costs increased by R12,2 million from R47,8 million to R60,0 million. Huge Telecom’s fi xed overhead platform has the capacity to support a twofold increase in volumes and accordingly revenue growth now has the potential to further improve operating profi t margins. The increased employment costs were the result of a decision to build a strong foundation capable of supporting signifi cant growth in throughput. This is regarded by the Huge Group directors as an investment in delivering sustainable profi t growth.

• The level of bad debts increased to R20,2 million as the Group focused on the management, analysis and categorisation of the debtors’ book of Huge Telecom and CentraCell. A signifi cant proportion of the debtors written off in 2010 relate to sales or revenue generated in prior fi nancial years for which a provision of R12,7 million was raised. As such the level of bad debts in the current fi nancial year is not indicative of a higher bad debt incidence in Huge Telecom in the current period. Management estimates that a normalised bad debt to revenue ratio of 1% is representative of the inherent risks in a business such as Huge Telecom.

• The Group successfully streamlined its remaining operating expenses, which decreased by R2,5 million from R30,5 million to R28,0 million.

The substantial improvement in Group profi t before tax of R19,2 million, which was achieved in the six months to February 2010 offset the loss of R11,0 million reported after the fi rst six months of the fi nancial year. As a result the Group reported net profi t before taxation of R8,3 million for the full year ended 28 February 2010 refl ecting an increase of 93% from the previous year’s profi t of R4,3 million.

Profi t after tax showed the corresponding effect with net profi t after tax for the second half of the year, amounting to R13,8 million, reversing the loss which was reported at the interim stage of R5,8 million. The Group achieved net profi t after tax for the full year of R8,1 million, which is up 8,5% from the 2009 fi nancial year.

Group net change in fair value of fi nancial instrumentsThe net change in fair value of fi nancial instruments has improved by R29,7 million from a loss of R21,3 million in the prior year to a gain of


R8,4 million. The change is mainly as a result of the release of the vendor loan of R18,2 million to profi t after a cession agreement with J Morelis was successfully concluded by the Group. The loss on SSF and CFD transactions reduced by R15,6 million from R25,6 million in the prior year to R10 million in the current year.

Balance sheet considerationsCash generated from operations during the current fi nancial year amounted to R46,2 million while earnings before interest, taxation, depreciation and amortisation (“EBITDA”) for the current fi nancial year amounted to R36,9 million.

Capital expenditure on property, plant and equipment during the current fi nancial year was reduced by R18,4 million compared to the previous fi nancial year while long-term debt was reduced by R20,9 million during the current fi nancial year.

OutlookIn the next period Huge Group anticipates increasing returns from its investment in Huge Telecom. In addition the Group expects the growth of Huge Media and Eyeballs to contribute to Group returns.

Investor interest in Eyeballs is growing and is indicative of the underlying value of this investment.

Investment holding activitiesAn independent valuation of Huge Group’s shares in May 2010 established a value per share of between 182 cents and 236 cents using the discounted cash fl ow method of valuation. The Group will continue to purchase shares that trade at a discount to its fair value under its general authority to acquire. This general authority is limited to a maximum of 20% of the issued ordinary share capital, and will be utilised by Huge Group in order to unlock long-term value for shareholders.

Telecommunication activitiesHuge Telecom will remain focused on providing a complete spectrum of managed telecommunication services to South African businesses. It has enhanced the profi tability of its recently integrated business. This ensures that Huge Telecom is well positioned to benefi t directly from increased managed services sales once the South African economic recovery gains momentum. In 2010 the division increased its resource pool and strengthened

its information systems to reduce effective input costs per call, and create a solid base for operating margin growth. Huge Telecom has evolved from its roots of least cost routing into a telecommunications service provider delivering effi cient Communications Expense Management.

Huge Telecom continues to monitor developments in the telecommunications industry to ensure that its business model is both optimal and sustainable. Its highly motivated new executive team is focused on managing the business for profi table growth and superior service delivery.

Huge Telecom stands to benefi t from the regulatory reduction in termination rates (interconnect tariffs). ICASA, the telecommunication industry regulator, is exerting pressure on mobile network operators to reduce their termination rates. This led to a reduction from R1,25 per minute to R0,89 on 1 March 2010 with further decreases anticipated in July 2010. ICASA also recently announced its new proposed categorisation rules for network operators. These will put voice over Internet Protocol (VoIP) service providers in the same category as fi xed line network operators. A signifi cant recent development is ICASA’s call for a further reduction in fi xed line termination rates to R0,15 per minute in July 2010. Mobile termination rates are only expected to reduce to R0,65 per minute.

The signifi cant reduction in termination rates for fi xed line networks could pose an imminent threat to those Least Cost Routing (“LCR”) companies in Huge Group’s peer group that invested heavily in recent years to build VoIP infrastructure. While these players may have briefl y enjoyed additional revenue streams on incoming voice traffi c, their investments are at risk of being rendered unprofi table long before their expected breakeven point if the proposed lower fi xed line termination rates come into effect.

Huge Telecom’s strategic decision not to adopt a VoIP-dominated business model has meant that its economic viability will not be affected by these possible changes.

Huge Telecom welcomes lower termination rates on the basis that lower communication costs will drive down input costs, increase demand, and deliver growth in the voice traffi c generated by Huge Telecom clients.

CEO’s report continued


In the year ahead Huge Telecom will focus on introducing alternative revenue streams that complement its business. It will also pursue opportunities to increase its client base to enhance capacity utilisation and further improve gross and operating profi t margins.

Media activitiesEyeballs is exploring partnerships to deploy its offerings in the international market after having established the commercial viability of its product set in South Africa. This start-up business is well placed to achieve breakeven profi tability in the year ahead.

Huge Media is on track to achieve critical mass of its growing recipient base in the South African mobile advertising market, which will confi rm its commercial viability in the year ahead.

James HerbstChief Executive Offi cer


Review of operations

Laying a solid foundationIn 2010 Huge Telecom’s focus turned to bedding down the merger of TelePassport and CentraCell, integrating two distinctly different business cultures, and birthing a new empowered culture with greater accountability. To this end the management team was restructured, which included the reallocation of portfolios to leverage the individual strengths of team members, and the appointment of new senior skills. Huge Telecom was also divisionalised along functional business lines during the year to enable focused and autonomous business units. The following divisions were established:• Huge Business Partners (Dealer Channel);• Huge Business Solutions (Direct Sales);• Huge Business Support (Operations and

Technical); and• Huge Centralised Services, which includes

Human Resources, Marketing, Finance, Information Services and Commercial functions.

Each division has clearly defi ned deliverables, which are driven by the divisional managing directors. The refocused organisational structure has resulted in a more effi cient and streamlined operation, which is already paying dividends.

Internal structures and the processes were also strengthened to drive economies of scale inherent in Huge Telecom’s base of 6 500 clients, which range from multinational companies to small and medium enterprises. The following enhancements were made:• In the fi nancial department centralised debtor and

procurement functions were established.

• A commercial department was formed to dedicate attention to revenue assurance and the management of airtime available for sale. It has already delivered a signifi cant reduction in airtime lost through expiry.

• The Group’s Information Services resources were consolidated into a centralised Information Services department. Under the leadership of a new director the department formalised its services and implemented succession plans to ensure service continuity at all times. Information Services is viewed as a strategic enabler to the business operations.

• The human resources function was instrumental in the implementation of standardised employment contracts for all employees to further cement the unifi ed culture. These standards align with the Group-wide performance management methodology, which was implemented during the year.

• The formation of a product and business development team enabled Huge Telecom to revamp its existing product portfolio, and introduce new managed telecommunication products: including Connexus, a converged VoIP product, and Convergis: a communication expense management solution.

Strong fi nancial recoveryHuge Telecom’s internal focus and restructuring contributed to the strong margin recovery, which was achieved in the second half of the fi nancial year and despite the tight business environment imposed by the ongoing economic recession in South Africa.

The division staged a strong fi nancial turnaround in 2010 as a result of completing the integration of its two telecommunications businesses TelePassport and CentraCell to form Huge Telecom.


While the overall market was not conducive to selling products and services to new name clients, Huge Telecom’s renewed external focus and its recent investment to build sales capacity paid off. This client facing focus enabled the division to retain its loyal client base. It also successfully defended market share in the second six months of the fi nancial year as it benefi ted from the evolving calling patterns in South Africa, which are shifting towards mobile. As a result Huge Telecom was able to report a slight increase in revenue in the second half from a higher average revenue per client, which offset the impact of declining retail call rates during the year.

Geared for growthHuge Telecom’s fi rst annual sales conference was attended by all business partners and sales staff, and was used as the platform to launch the latest value added products as well as the new incentive structures. The management team also conducted nationwide road shows to communicate the growth strategy and extended product offering to all employees, business partners and selected clients.

ConclusionWith its strengthened internal structures and extended range of products Huge Telecom has entrenched its leadership in the managed telecommunications sector. It has the capacity to support increased volumes, which will be unlocked by an economic recovery as well as a renewed focus on driving sales.

Managed voice solutions still comprises the majority of Huge Telecom’s revenue base. Huge Telecom has a strong platform to cross sell its diversifi ed managed telecommunications products to existing clients. Product development is key to the division’s growth strategy, which is to provide its target markets with end-to-end telecommunications requirements.

Huge Telecom’s relationships with all the major suppliers, and its signifi cant purchasing power, guarantee attractive procurement terms, the highest service levels and extensive functionality. The Group brings this critical mass to bear by passing on the value and cost-savings to its clients. Huge Telecom will continue to leverage its capability and extensive capacity to drive growth, by enhancing utilisation and unlocking further margin improvements in the year ahead.

Huge Telecom Board:Back row, left to right: Rajen Pillay (MD: Huge Business Support), Dion Willis (MD: Huge Business Solutions), Anton Potgieter (Non-executive Chairman), James Herbst (Chief Executive Offi cer), Amil de Moura (IT Director), Vincent Mokholo (Product & Business Development Director) Front row, left to right: Michelle Meth (Financial Director), Greg Wright (MD: Huge Business Partners), Bennie Vorster (Commercial Director), Eugene Volschenk (HR Director), Geovanna Sutherland (Regional Director, KwaZulu Natal)


Review of operations continued

The past fi nancial year has seen enormous progress in the development of the Group’s media activities. Having put in place a fi rm foundation, this segment of the business is now set to become a signifi cant contributor to the Group’s future performance.

A year of positioningEyeballs Mobile AdvertisingThe most notable aspect of Eyeballs’ performance in the 2010 fi nancial year has been its move from a development start-up to a fully functioning technology provider.

Eyeballs has developed and owns the proprietary interest and patents in a unique technology developed to display advertisements on mobile smartphones when the phone is used to make or receive calls and when messages come in or are sent.

Huge Group increased its stake in Eyeballs from 25% to 77% in March 2009.

Eyeballs spent the fi rst half of the year under review enhancing its “Eyeballs” technology, by adding functionality which allows for its easy commercialisation, as well as an enhanced user experience. User experience is a critical factor for the success of the product, as it determines whether or not a user will allow Eyeballs into their “personal space” (ie. onto their mobile phone).

In the second half of the fi nancial year, Eyeballs appointed its fi rst commercial distributor, Huge Media, which started commercial operations in January 2010. It is important to note that Eyeballs’ relationship with Huge Media is not exclusive, and Eyeballs plans to appoint further Distributors globally over time.

Eyeballs is expected to start contributing positively to the Group’s performance in the next period based on the growth of Huge Media’s Goodyz product since its launch and the anticipated appointment of further distributors of its “Eyeballs” technology.

Huge MediaHuge Media is a wholly owned subsidiary of Huge Group, which was formed during the year under review as a vehicle to “take the Eyeballs technology to market”.

There is a clear distinction between Eyeballs and Huge Media, both strategically and logically: Eyeballs is a technology provider dedicated to developing, refi ning and maintaining the Eyeballs technology, as a service to its distributors, initially in South Africa and internationally as new agreements are negotiated. Huge Media is a distributor of the Eyeballs technology, and is therefore classifi ed in industry terms as a media owner that owns and is growing and maintaining a media channel, which it vends to advertisers in the form of advertising space.

Huge Media commenced commercial operations by going live in the South African market on 20 January 2010, with a rebranded – so-called “skinned” or

“white-labelled” version of the Eyeballs technology called “Goodyz – free stuff for your phone”. The basic business model is that Goodyz provides free, advertiser-funded mobile phone content including ringtones, wallpapers, games and music to its users. Users are incentivised to install and run Goodyz, and


to view advertisements, which fund the cost of the content provided to the user in a ratio of one item for every two advertisements which are viewed. The free content is tailored to match the user’s profi le and preferences.

Goodyz’ performance in terms of user acquisition exceeded the Group’s initial projections, confi rming the validity of the business model and indicating the imminent success of the new media division.

Huge Media is rapidly accumulating valuable knowledge in the mobile advertising space, both in South Africa and worldwide, which is set to deliver cumulative cost effi ciencies in its user acquisition processes.

Huge Media had accumulated more than 42 000 Goodyz user installations by the end of June 2010, serving 4 485 392 confi rmed impressions to this user base in the calendar month of June. At the rate of two thirds of impressions being devoted to advertising, this represents a monthly saleable inventory of 2 990 261 advertising impressions available to Huge Media, and represents an attractive and sustainable annuity revenue stream.

In the 2011 fi nancial year, Huge Media will focus on extending its reach in selected other countries, initially focusing on English-speaking regions and deploying a global e-commerce based advertiser portal based on international standards and best practice.

Huge Media Board: James Herbst, Anton Potgieter

Goodyz cumulative recipient installations

2010

/06/

19

2010

/05/

20

2010

/04/

20

2010

/03/

21

2010

/02/

19

2010

/01/

20

2010

/07/

19

0

10 000

20 000

30 000

40 000

50 000

Huge Media – cost per recipient installation (cents)

Aug

ust

July

June

May

Ap

ril

Mar

ch

Sep

tem

ber

0.00

10.00

20.00

30.00

40.00

50.00

60.00


Compliance statementThe Board members, management and employees of Huge Group fully support and are committed to compliance with, and applying best practice in terms of, the JSE Limited’s Listings Requirements and the King II Report on Corporate Governance, in terms of which its shareholders and stakeholders are assured that the Group is being managed ethically and in compliance with legislation and best practices. The Board of Huge Group further confi rms its commitment to the seven principles of corporate governance: namely discipline, transparency, independence, accountability, responsibility, fairness and social responsibility, as advocated in the second King Report on Corporate Governance.

Board of directorsThe Board of directors of Huge Group comprises four executive and fi ve non-executive directors, two of which are independent non-executive directors. All of the current non-executive directors are of suffi cient standing that their views carry signifi cant weight in the Board’s decisions. All of the current directors have attended the Director’s Induction Programme as stipulated by the JSE Listings Requirements.

The Board is chaired by an executive chairperson. While the second King Report on Corporate Governance recommends a non-executive chairperson, for AltX listed companies this is not a mandatory requirement for compliance. Nevertheless, the Board takes cognisance of this recommendation, and is committed to rectifying this during the next reporting period.

The roles of Chairperson and Chief Executive Offi cer are separated, in line with best practice. The Chairman provides objective leadership to the Board of directors, presides over Board and shareholder meetings, and ensures the smooth functioning and governmental compliance of the Board. The Chief Executive Offi cer leads the Executive Committee in the running of the business, and coordinates proposals developed by members of the Executive Committee for consideration by the Board.

The Board is responsible for:• the formulation and adoption of Group strategy;• risk management, including reputational risk

management;

• acquisition and divesting policies;• corporate fi nance decisions;• relations with stakeholders;• internal controls to protect stakeholder wealth; and• corporate governance.

Audit and Risk CommitteeThe Board makes use of a combined Audit and Risk Committee comprising: Mr BA McQueen (chairperson), who is an independent non-executive director, Mr KD Jarvis, who is a lead independent non-executive director and Mr SP Tredoux, who became a non-executive director on 12 August 2009. Previously the AltX requirements stipulated that a member of the Company’s Designated Advisor be considered a member of the Audit and Risk Committee. Since 1 April 2010 however, this requirement has changed. The Designated Advisor is no longer required to be a member of the Audit and Risk Committee but is still required to attend its meetings. Mrs J Williams and Mrs MJ Krastanov represent Arcay Moela Sponsors (Pty) Ltd, which is the Designated Advisor to the Company, and they attend the Audit and Risk Committee meetings convened by the Company. The Audit and Risk Committee meets at least twice during any given fi nancial year. The Company Secretary is also in attendance at the meetings of the Audit and Risk Committee.

The functions of the Committee include the following:• monitor corporate risk assessment processes;• review internal control systems;• review external audit reports to ensure that where

major defi ciencies or breakdown in controls and procedures have been identifi ed appropriate and prompt remedial action is instituted;

• review the nomination, appointment, independence, performance and remuneration of the external auditor;

• review theft and fraud, and monitor procedures designed to ensure that the Group’s fraud control plans are being implemented;

• review and monitor compliance with taxation responsibilities, legal, regulatory and industry code responsibilities; and

• review and monitor compliance with Group policies and thereby promote an ethical business culture.

The objective of the Audit and Risk Committee is to assist the Board in discharging its duties relating to the safeguarding of assets, the

Corporate governance


operation of adequate systems of internal control, the establishment of control processes and the preparation of accurate fi nancial reports and statements in compliance with all applicable legal requirements and accounting standards. These responsibilities include the review of the full year’s fi nancial statements prior to submission to the Board; the Committee thereby ensures that the annual fi nancial statements of Huge Group and its subsidiary companies are a true and fair presentation of the fi nancial position of the Group at every year-end. On an annual basis, in terms of the AltX requirements, the members of the Audit and Risk Committee consider the expertise and experience of the fi nancial director to satisfy themselves of the fi nancial director’s capabilities.

The Committee’s responsibilities also include reviewing the scope, quality, independence and objectivity of the statutory audit, ensuring the integrity of the Group’s accounting and fi nancial reporting system, evaluating the effectiveness of the management functions of the Group and ensuring that appropriate systems are in place for monitoring risk, fi nancial control, compliance with the law and codes of conduct and promoting the overall effectiveness of corporate governance within the Group.

The external auditors are invited to attend the Committee meetings and have unrestricted access to both the Committee members and its chairperson. The Committee advises the Board and recommends the appointment of the external auditors, the handling of non-audit functions by the auditors and fees in respect of non-audit services. The current auditors of the Company are KPMG Inc.

The combined Audit and Risk Committee is responsible for ensuring that all risks associated with the Group’s operations are effectively managed in support of the creation and preservation of stakeholder value.

The Group has not as yet established an Internal Audit function. Currently the Internal Audit function of the Group is carried out by both the fi nancial and revenue assurance departments of the Company’s principal subsidiary. The Committee is of the opinion that the management and employees in these

departments have the necessary skills in fi nance and internal controls. The need for an Internal Audit function is continually considered to determine if the function should be outsourced or if additional skills should be employed to perform this function.

Remuneration and Nomination CommitteeThe establishment of a Remuneration Committee is not mandatory under the AltX Listing Requirements. However, in line with the best practices of corporate governance, Huge Group has a combined Remuneration and Nomination Committee in place. This Committee comprises: Mr KD Jarvis as chairperson, Mr BA McQueen and recently Mr SP Tredoux, who are non-executive directors, and Mr AD Potgieter and Mr JC Herbst, who are executive directors. Notwithstanding that there are executive directors represented on the Committee, the composition of the Committee is nevertheless considered appropriate by the Board. This is so because a nominations committee is responsible for the appointment of directors who are either non-executive or employed executives.

The Committee makes recommendations to the Board concerning the Group’s framework for executive remuneration. The Committee also establishes a transparent procedure, policy and approach for the determination of remuneration packages for directors and senior executives, taking cognisance of market-related packages, skill and experience. The Committee strives to ensure that levels of remuneration are suffi cient to attract and retain executives for the organisation, and that the levels of remuneration in place are in line with both industry standards and best practice.

From a nominations perspective, the Committee makes recommendations to the Board on all new Board appointments. The Committee is responsible for considering the balance and effectiveness of the Board; in addition, it identifi es the skills and individuals who might best be able to provide them. The Committee is a mechanism for ensuring that the Board remains effective and focused.

The Committee meets when necessary, but at least once a year, and such meetings normally coincide with the Board meetings.The fi nancial statements include the details of


the executive and the non-executive directors’ remuneration and other benefi ts in accordance with the requirements of the Companies Act, Act 61 of 1973, as amended and the JSE Limited’s Listings Requirements.

Board and Committee meetings and attendanceThe Board meet when it is deemed necessary, but at least six times a year. Proper advance notice of meetings is given to all directors, and all directors receive comprehensive and properly collated Board packs, containing all relevant documents, in good time in order to make informed decisions.

Corporate governance continued

Board meetings Attendance/Total number % of BoardDirector/Position of Board meetings held meetings attended

AD PotgieterExecutive chairman 10/11 91%

JC Herbst CEO 11/11 100%

MA MethGroup Financial Director 11/11 100%

KD Jarvis Lead independent non-executive director 11/11 100%

BA McQueen Independent non-executive director 11/11 100%

D TredouxNon-executive director 8/11 73%

SP TredouxNon-executive director 11/11 100%

VM MokholoExecutive director 11/11 100%

M PillayExecutive director 10/11 91%

M BeamishNon-executive director 3/4 75%

Committee meetings Attendance/ % of Attendance/ % of Audit Total number Remuneration Total number and Risk of Remuneration and Nomination of Audit and Committee and Nomination Committee Risk Committee meetings Committee meetingsDirector/Position meetings held attended meetings held attended

KD Jarvis Non-executive director 5/7 71% 4/4 100%

BA McQueen Non-executive director 7/7 100% 4/4 100%

SP TredouxNon-executive director 2/3 67% 2/2 100%

Arcay Moela SponsorsDesignated advisor 7/7 100% – –

Tof an

m


The register of interests of directors in contracts, kept in terms of Section 234 of the Companies Act, No 61 of 1973 (as amended), is available to members of the public on request.

The interests (direct and indirect) of directors and offi cers in the Company’s securities as at 12 August 2010 are shown in the table below. Refer to page 37 of the annual fi nancial statements for directors’ shareholding as at 28 February 2010.

Director Direct Indirect Total %

AD Potgieter 5 163 400 7 164 325 12 327 725 11,03JC Herbst 151 257 9 765 600 9 916 857 8,87MR Beamish 8 477 544 – 8 477 544 7,59VM Mokholo 344 549 2 526 069 2 870 618 2,57D Tredoux 656 100 – 656 100 0,58MA Meth 344 549 – 344 549 0,31SP Tredoux 146 510 – 146 510 0,13

TOTAL 31,39

Executive Committee (“EXCO”)The Executive Committee of the Group’s principal subsidiary assists the Chief Executive Offi cer, to whom the daily running of the Group’s principal subsidiary Huge Telecom has been delegated, to effi ciently and effectively manage Huge Telecom and to implement the strategic plans approved by the Board.

The Committee consists of the Chief Executive Offi cer, the Managing Director: Huge Business Solutions, the Managing Director: Huge Business Partners, the Managing Director: Huge Business Support, the Financial Director, the Commercial and Revenue Assurance Director, the Information Services Director, the Human Resources Director and the Product and Development Director. They are assisted by various management committees. The main objective of these committees is to assist the Chief Executive Offi cer to guide and control the overall direction of the business and to act as a medium of communication and coordination between the various business units. Direct reporting and feedback is given to the Board of directors. Executive Committee meetings are held weekly.

Accounting and controlsThe external auditors, KPMG Inc, are responsible for reporting on whether the fi nancial statements are fairly presented in conformity with International Financial Reporting Standards. The external auditors offer reasonable, but not absolute, assurance on the accuracy of fi nancial disclosures. The preparation of the fi nancial statements is the responsibility of the directors. The Audit Committee sets the principles for recommending the use of the external auditors for non-audit services.

The Board has established controls and procedures: 1) to ensure the accuracy and integrity of the accounting records; 2) to provide reasonable assurance that assets are safeguarded from loss or unauthorised use; 3) to ensure that the fi nancial statements may be relied upon; 4) for maintaining accountability for assets and liabilities; and 5) for preparing the fi nancial statements. The Board acknowledges the continued growth of the Group over the past year and the need to rigorously review the adequacy of the accounting and internal controls and will thus as far as it is possible implement the recommendations of the external auditors.

To this end, additional head offi ce accounting skills have subsequently been employed.

Employee development and employment equityThe Group strives to promote a culture that provides all employees with opportunities to advance their careers. The Group upholds and supports the objectives of the Employment Equity Act, Act No. 55 of 1993, and has an established Employment Equity Plan, which is effective in its main operating subsidiary, Huge Telecom. The Group furthermore strives to provide a secure, healthy and participative social and working environment for its staff and associates. The Group upholds and supports the objectives of the Employment Equity Act. Huge Group has implemented various initiatives that provide opportunities for all levels of staff, and in so doing continues to strengthen its positioning as an employer of choice, whilst at the same time enhancing its participation in making South Africa more locally competitive. The Group’s employment policies are designed to provide equal opportunities, without discrimination, to all employees.


Closed and prohibited periodsThe Company enforces a restricted period for dealing in its shares. Any dealings in shares by any director or senior personnel is disallowed by the Board from the time that the reporting period has elapsed to the time that results are released and at any time when such individuals are aware of un-published price sensitive information, whether the Company is trading under cautionary announcement as a result of such information or not.

Company SecretaryThe Company Secretary is required to provide the members of the Board with guidance and advice regarding their responsibilities, duties and powers and to ensure that the Board is aware of all legislation relevant to or affecting the affairs of the Company. The Company Secretary is required to ensure that the Company complies with all applicable legislation regarding the affairs of the Company, including the necessary recording of meetings of the Board, Board committees and General Meetings of shareholders of the Company and for ensuring that proper procedures are followed in all Board matters. The directors have unfettered access to the Company Secretary.

Transfer offi ceComputershare Investor Services (Pty) Ltd acts as transfer secretaries to the Company.

Designated AdvisorArcay Moela Sponsors (Pty) Ltd acts as Designated Advisor to the Company, in line with the AltX Listings Requirements.

Code of ConductThe Group has a formal Code of Conduct, which incorporates a Code of Ethics. The Code of Ethics applies throughout the Group and ensures that best business practices are applied on a consistent basis. The Code of Ethics is distributed to all employees of the Group and prescribes the ethical standards required of employees in their interaction with one another and all stakeholders.

In adhering to its Code of Ethics, the Board is guided by the following broad principles:• Businesses should operate and compete in

accordance with the principles of free enterprise;• Free enterprise is constrained by the observance

of relevant legislation and generally accepted principles regarding ethical behaviour in business;

• Ethical behaviour is predicated on the concept of utmost good faith and characterised by integrity, reliability and a commitment to avoid harm;

• Business activities will benefi t all participants through a fair exchange of value or satisfaction of needs; and

• Equivalent standards of ethical behaviour are expected from individuals and companies with whom business is conducted.

Sustainability reportingThe Group is committed to high moral, ethical and legal standards and expects all representatives of the Group to act in accordance with the highest standards of personal and professional integrity in all aspects of their activities and to comply with all applicable laws, regulations and the Group’s policies.

The Board believes that the Group has adhered to the ethical standards during the year under review.Sustainability highlights for the year under review include:

Employees• The Group has a dedicated Human

Resources department which ensures a leading employee value proposition in support of the Group’s objective of retaining and attracting telecommunications and general business skills. A major Group objective met during the year under review was the implementation of performance management principles across the organisation to entrench a performance driven and accountable culture at all levels. Performance management contracts were formalised with all of the Group’s 185 employees during the year and the fi rst cycle of reviews commenced towards the end of the fi nancial year. The process also enabled the establishment of documented succession plans to support the long-term economic sustainability of the Group. A process to re-evaluate the Group’s employee benefi ts is in progress to support its ability to retain its top talent, and scarce skills.

• In line with its commitment to achieve a market leading value proposition, the Group implemented an employee wellness programme in the second half of the fi nancial year, including health awareness campaigns, basic health screening and a fi tness programme.

• Given the specialist nature of the Group’s business activities, training and development of staff is an ongoing priority of the Human Resources department. More than 60% of the Group’s employees attended formal training courses during

Corporate governance continued


the year, which included 14 in-house courses and 16 external training interventions, mostly focused on product specifi c training. Monthly employee induction courses are conducted in-house. Specialist managed telecommunications training was developed by a senior employee of the Group, which includes an introductory module through to advanced training. This training ensures that the Group’s client-facing, technical staff provide high quality and consistent services. The course is conducted quarterly and is also available to the Group’s partners and dealers. The courses culminate in a formal examination process which guarantees the quality of technicians’ expertise.

Environmental• The Group recognises that even though its

products and services are classifi ed as having a low environmental impact, it has a responsibility to minimise the impact of its business activities on the environment.

• While the Group is committed to moving towards a paperless offi ce environment, it realises that the reality is still some way off. All waste paper generated at its offi ces is collected for recycling.

• The Group’s fax to email service which was launched in January 2010 is used internally; as well as by almost 400 companies and 1 200 users throughout South Africa. Through its use of Fax2Email, customers and employees reduce their own environmental impact by not printing each facsimile document.

Social responsibilityThe Group’s commitment to the wellbeing of the community is evidenced by the existence of Huge Charity, which is a trust established in June 2008 to drive all corporate social investment initiatives. Huge Charity concluded some very meaningful charitable activities during the current fi nancial year:• In the Huge Wide Ride, the Group sponsored

a 2 100 kilometre long cycle ride by a primary school headmaster from Elgin to raise funds for a pupil of the school who required urgent surgery to correct a rare condition. The benefi ciary of the R160 000 raised, Roxy Sutton, suffers from the rare Crouzonodermoskeletal syndrome, which affects the way her cranial and facial bones grow. Her case is one of only 18 documented cases worldwide.

• The Group also made ad hoc donations during the year to a number of charities including Habitat for Humanity, local church communities and facilitated fund raising to help the family of an employee affected by a serious illness.

• Employees of the Group also donated their time by assisting the underprivileged.

CommunicationHuge Group is committed to ongoing and effective communication with its stakeholders. It subscribes to a policy of open and timeous communication in line with the requirements and guidelines of the JSE Limited and the principles of good corporate governance. Communication to the public and to shareholders embodies the principles of balanced reporting, clarity and openness. Positive and negative aspects of both fi nancial and non-fi nancial information are provided. The Board encourages shareholders to attend its forthcoming Annual General Meeting, the notice of which is contained in this Annual Report. This provides shareholders the opportunity to ask questions of the Board.

DisclosureThe Annual Report deals adequately with disclosures pertaining to the fi nancial statements, auditors’ responsibility, directors’ responsibility, accounting records, internal control, risk management, accounting policies, adherence to accounting standards, going-concern issues and adherence to codes of governance as well as the JSE Listings Requirements.


The Audit and Risk Committee for the year under review included the following non-executive directors as members:

Mr BA McQueen (Chairman)Independent non-executive directorMr KD Jarvis (Member)Lead Independent non-executive directorMr SP Tredoux (Member)Non-executive director

In addition, in accordance with the JSE Listings Requirements, Mrs MJ Krastanov was also a member of the Audit and Risk Committee and represents the Designated Advisor. As of 1 April 2010, the JSE no longer requires the Designated Advisor to be a member of an audit committee. Further appointments to the Audit and Risk Committee will be considered in the forthcoming year pursuant to an intended reconstitution of the Board of directors.

Statement of Audit and Risk Committee responsibilities for the year ended 28 February 2010The role of the Audit and Risk Committee is to assist the Board of directors by performing an objective and independent review of the functioning of the organisation’s fi nance and accounting control mechanisms. It exercises its functions through close liaison and communication with corporate management and the external auditors. The Committee met seven times during the 2010 fi nancial year.

The Committee is guided by its terms of reference, dealing with membership, structure and levels of authority and has the following responsibilities:

• ensuring compliance with applicable legislation and the requirements of regulatory authorities;

• nominating for appointment a registered auditor who, in the opinion of the Audit Committee, is independent of the Company;

• considering matters relating to fi nancial accounting, accounting policies, reporting and disclosure;

• considering internal and external audit policy including determination of fees and terms of engagement;

• considering the activities, scope, adequacy, and effectiveness of the Internal Audit function and audit plans;

• considering the expertise and experience of the fi nancial director;

• reviewing and approving the external audit plans, fi ndings, reports, fees and determining and approving any non-audit services that the auditor may provide to the Company;

• ensuring compliance with the Code of Corporate Practices and Conduct; and

• ensuring compliance with the Company’s code of ethics.

The Audit and Risk Committee addressed its responsibilities properly in terms of the charter during the 2010 fi nancial year. One of these responsibilities was the assessment of the independence of the auditor. The Committee is satisfi ed that the auditor was independent of the Company. No changes to the charter were adopted during the 2010 fi nancial year. In addition, the Committee has established a policy and procedures with regard to use of the external auditors for non-audit services. The Committee is also satisfi ed as to the expertise and experience of the fi nancial director.

With regard to an Internal Audit function, the Company has not presently established an Internal Audit function. Due to the historical nature of the Company’s legal structure, its assets and its size and stage of the development, an Internal Audit function was not considered necessary. Since the Company’s listing the need for an Internal Audit function is continually assessed.

Management has reviewed the fi nancial statements with the members of the Audit and Risk Committee. The Committee has also reviewed them without management or external auditors being present. The appropriateness of the accounting policies was discussed with the external auditors. The Committee considers the fi nancial statements of Huge Group to be a fair presentation of its fi nancial position on 28 February 2010, its fi nancial performance for the year ending 28 February 2010, the changes in equity and cash fl ows for the period then ended, in accordance with International Financial Reporting Standards and the Companies Act.

Brian Alexander McQueenChairman of the Audit and Risk Committee

Audit and Risk Committee report


26 • Directors’ responsibilities and approval

27 • Report of the independent auditor

28 • Declaration by Group Secretary

29 • Directors’ report

42 • Statements of fi nancial position

43 • Statements of fi nancial performance

44 • Statements of comprehensive income

45 • Statements of changes in equity

47 • Statements of cash fl ows

48 • Accounting policies

62 • Notes to the consolidated fi nancial statements

106 • Shareholder analysis

Table of contents

Annual fi nancial statements


Directors’ responsibilities and approval

The directors are required in terms of the Companies Act of South Africa to maintain adequate accounting records; and the directors are responsible for the content and integrity of the annual fi nancial statements and group annual fi nancial statements, and related fi nancial information included in this report. The directors are responsible to ensure that the consolidated fi nancial statements fairly present the state of affairs of the Company and the Group as at the end of the fi nancial year, and the fi nancial performance and cash fl ows for the period then ended, in conformity with International Financial Reporting Standards. The external auditorsare engaged to express an independent opinion on the consolidated and separate fi nancial statements.

The consolidated and separate fi nancial statements are prepared in accordance with International Financial Reporting Standards and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgments and estimates.

The directors acknowledge that they are ultimately responsible for the system of internal fi nancial control established by the Company and the Group, and place considerable importance on maintaining a strong control environment. To enable the directors to meet these responsibilities, the Board sets standards for internal control aimed at reducing the risk of error or loss in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defi ned framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the Group and all employees are required to maintain the highest ethical standards in ensuring the Group’s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the Group is on identifying, assessing, managing and monitoring all known forms of risk across the Group. While operating risk cannot be fully eliminated, the Group endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints.

The directors are of the opinion, based on the information and explanations given by management, that the system of internal control provides reasonable assurance that the fi nancial records may be relied on for the preparation of the consolidated and separate fi nancial statements. However, any system of internal fi nancial control can provide only reasonable, and not absolute, assurance against material misstatement or loss.

The directors have reviewed the Company’s and the Group’s cash fl ow forecast for the year to 28 February 2011 and, in light of this review and the current fi nancial position, they are satisfi ed that the Company and Group has, or has access to, adequate resources to continue as a going concern for the foreseeable future.

The external auditor is responsible for reporting on whether the consolidated and separate fi nancial statements are fairly presented in accordance with the applicable fi nancial reporting framework.

The consolidated and separate fi nancial statements set out on pages 29 to 105, which have been prepared on the going concern basis, were approved by the Board of directors on 28 May 2010 and were signed on its behalf by:

James Charles Herbst Michelle Allison Meth


Report of the independent auditor

To the members of Huge Group Limited

Report on the fi nancial statementsWe have audited the annual fi nancial statements and Group annual fi nancial statements of Huge Group Limited, which comprise the statements of fi nancial position as at 28 February 2010, and the statements of fi nancial performance, statement of comprehensive income, statement of changes in equity and statement of cash fl ows for the year then ended, and a summary of signifi cant accounting policies and other explanatory notes, and the directors’ report, as set out on page 29 to 105.

Directors’ responsibility for the fi nancial statementsThe directors are responsible for the preparation and fair presentation of these fi nancial statements in accordance with International Financial Reporting Standards and in the manner required by the Companies Act of South Africa. This responsibility includes:

– designing, implementing and maintaining internal control relevant to the preparation and fair presentation of fi nancial statements that are free from material misstatement, whether due to fraud or error;

– selecting and applying appropriate accounting policies; and

– making accounting estimates that are reasonable in the circumstances.

Auditors’ responsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the fi nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the fi nancial statements.

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the annual fi nancial statements and Group annual fi nancial statements present fairly, in all material respects, the fi nancial position of Huge Group Limited at 28 February 2010, and its consolidated and separate fi nancial performance and consolidated and separate cash fl ows for the year then ended in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act of South Africa.

Report on other legal and regulatory requirementsIn accordance with our responsibilities in terms of section 44(2) and 44(3) of the Auditing Profession Act, we report that we have identifi ed a reportable irregularity in terms of the Auditing Profession Act, and have reported such matter to the Independent Regulatory Board for Auditors. The matter pertaining to the reportable irregularity has been described in the directors’ report to the fi nancial statements.

KPMG Inc.Per C SwartChartered Accountant (SA)Registered AuditorDirector

28 May 2010


In the capacity as Group Secretary, we hereby certify that the Group has lodged with the Registrar of Companies for the fi nancial period ended 28 February 2010, all such returns as are required of a public company in terms of the Companies Act, and that all such returns are true, correct and up to date.

Arcay Client Support (Pty) Ltd

28 May 2010

Declaration by Group Secretary


Directors’ report

The directors submit their report for the year ended 28 February 2010.

1. Main business and operationsThe Group is engaged in managed services focused on telecommunication spend to a wide customer base ranging from large corporate to small and medium enterprises, which services include cellular least cost routing, international least cost routing and call traffi c management services, and operates principally within the borders of South Africa.

2. Financial resultsThe Company is incorporated in South Africa. The results are presented in Rand which is the functional currency of the Company. The fi nancial position and the fi nancial performance of the Company and the Group are fully set out in the attached fi nancial statements.

3. Going concernThe Group is solvent and liquid with the exception of Huge Media (Pty) Ltd and Eyeballs Mobile Advertising (Pty) Ltd which are in net defi cit positions. The loans between Huge Media (Pty) Ltd, Eyeballs Mobile Advertising (Pty) Ltd and Huge Group Ltd have been subordinated so that these entities are able to settle their debts as they fall due.

The impact of the lower interconnection fees on the businesses of Huge Telecom (Pty) Ltd and CentraCell (Pty) Ltd has been mitigated by various strategies employed and to be employed by Huge Telecom (Pty) Ltd and CentraCell (Pty) Ltd.

Huge Group Limited and its subsidiary companies have complied with covenants made in loan agreements entered into between the Company, its subsidiary companies and its founders. The current credit facilities of the Company and its subsidiary companies are suffi cient to meet the ongoing needs of the respective companies.

Taking into consideration the above and future cashfl ow projections of the Group, the directors believe that the Group will be a going concern in the year ahead and they will continue to adopt the going concern basis in preparing the annual fi nancial statements.

4. Events after the reporting periodSave for the matter disclosed below, the directors are not aware of any matter or circumstance arising since the end of the fi nancial year. The directors confi rm that the mobile network operators have recently mooted the reduction of connection incentive bonuses, and that these suggestions have been made post the approval of the annual fi nancial statements, but before the issue thereof.

The possible reduction of connection incentive bonuses payable by the mobile network operators to Huge Telecom (Pty) Ltd will not, in the opinion of the directors, affect the going concern nature of the business. Various strategies have been identifi ed to mitigate the risk of a reduction of connection incentive bonuses.

5. Name changesDuring the year Huge Media (Pty) Ltd, a subsidiary company, had a name change from Lashka 12 (Pty) Ltd.


Directors’ report continued

6. Authorised and issued share capitalThere were no changes in the authorised or issued share capital of the Company during the year under review. At 28 February 2010, the issued share capital of the Company was 111 760 000 (2009: 111 760 000 ) shares of 0,01 cents each.

7. The ordinary shares of the Company acquired by the Company and GroupThe Company has continued to acquire its own shares under the general authority granted to the directors at the annual general meetings.

Date of issue of shares are set out below: Price per Value ofDate of issue Number of shares share (cents) transaction (R)

8 August 2007 (353 399) 250,00 (883 498,00)5 March 2008 (6 760 000) 320,00 (21 632 000,00)25 August 2008 (5 000 000) 300,00 (15 000 000,00)

The dates of acquisition of shares are set out below: Price per Value ofDate of issue Number of shares share (cents) transaction (R)

Purchaser/(Seller) – Huge Group28 October 2008 9 400 250,00 23 500,0028 October 2008 100 275,00 275,0028 October 2008 100 290,00 290,0028 October 2008 100 300,00 300,0030 October 2008 4 900 275,00 13 475,0030 October 2008 100 300,00 300,005 November 2008 600 275,00 1 650,005 November 2008 100 300,00 300,0011 November 2008 5 000 280,00 14 000,0011 November 2008 5 000 274,00 13 700,0011 November 2008 5 000 272,00 13 600,004 December 2008 2 656 131 120,75 3 207 278,185 December 2008 600 000 122,38 734 280,008 December 2008 5 000 129,00 6 450,0011 December 2008 1 000 150,00 1 500,0011 December 2008 9 115 150,00 13 672,5012 December 2008 5 000 125,00 6 250,0012 December 2008 4 900 130,00 6 370,0029 May 2009* (3 311 546) 118,00 (3 907 624,28)

– 149 566,40

* Transfer from Huge Group Limited to Huge Telecom (Pty) Ltd


7. The ordinary shares of the Company acquired by the Company and Group (continued) Price per Value ofDate of issue Number of shares share (cents) transaction (R)

Purchaser/(Seller) – Huge Telecom2 January 2009 1 028 500 139,80 1 437 843,006 January 2009 893 000 145,00 1 294 850,006 January 2009 (500 000) 140,00 (700 000,00)7 January 2009 28 000 150,00 42 000,007 January 2009 8 500 154,00 13 090,007 January 2009 13 500 155,00 20 925,007 January 2009 16 800 160,00 26 880,008 January 2009 30 000 160,00 48 000,008 January 2009 5 000 170,00 8 500,009 January 2009 (5 000) 169,00 (8 450,00)9 January 2009 (15 000) 170,00 (25 500,00)9 January 2009 38 500 170,00 65 450,009 January 2009 30 000 175,00 52 500,009 January 2009 29 400 179,00 52 626,009 January 2009 30 000 180,00 54 000,0012 January 2009 5 990 185,00 11 081,5012 January 2009 10 010 189,00 18 918,9013 January 2009 32 600 190,00 61 940,0013 January 2009 3 500 195,00 6 825,0021 January 2009 1 150 165,00 1 897,5021 January 2009 3 700 175,00 6 475,0028 January 2009 5 000 160,00 8 000,0030 January 2009 10 000 155,00 15 500,0030 January 2009 215 791 138,00 297 791,5813 February 2009 2 000 160,00 3 200,0013 February 2009 283 793 158,40 449 528,1116 February 2009 2 000 160,00 3 200,00 17 February 2009 42 137 139,00 58 570,4324 February 2009 14 820 140,00 20 748,0026 February 2009 10 000 140,00 14 000,0026 February 2009 4 694 155,00 7 275,7026 February 2009 3 306 160,00 5 289,603 March 2009 2 000 154,00 3 080,003 March 2009 8 000 154,00 12 320,003 March 2009 42 060 149,15 62 732,499 March 2009 # 2 000 150,00 3 000,0016 March 2009 # 43 154 120,00 51 784,8016 March 2009 # 35 000 120,00 42 000,0016 March 2009 # 17 500 120,00 21 000,0016 March 2009 # 4 346 120,00 5 215,2019 March 2009 # 150 890 133,00 200 683,7029 May 2009 * 3 311 546 118,00 3 907 624,289 July 2009 4 234 95,00 4 022,304 December 2009 166 666 49,94 83 233,007 December 2009 88 070 55,94 49 226,368 December 2009 10 000 56,00 5 600,009 December 2009 1 924 689 50,00 962 344,5011 December 2009 127 384 60,00 76 430,4014 December 2009 85 000 65,00 55 250,00



7. The ordinary shares of the Company acquired by the Company and Group (continued)Purchaser/(Seller) – Huge Telecom (continued) Price per Value ofDate of issue Number of shares share (cents) transaction (R)

15 December 2009 171 300 64,30 110 145,9020 January 2010 120 000 65,00 78 000,0021 January 2010 430 000 65,00 279 500,001 February 2010 55 000 72,00 39 600,001 February 2010 1 250 74,00 925,001 February 2010 75 000 75,00 56 250,002 February 2010 130 000 75,00 97 500,003 February 2010 16 792 79,00 13 265,683 February 2010 343 354 80,00 274 683,20

9 646 926 9 868 412,13

# This was an obligation to repurchase the delta on the derivate contracts, which agreement was concluded prior to

entering the closed period.

* Transfer from Huge Group Limited to Huge Telecom (Pty) Ltd

The Company listed on the Alternative Exchange of the Johannesburg Stock Exchange (“JSE”) on 8 August 2007. In terms of its prospectus dated 1 August 2007 the Company privately placed 50 000 000 ordinary shares of 0,01 cents each at an issue price of 250 cents per share, increasing the number of ordinary shares in issue to 99 646 601.

8. The derivative contracts acquiredSSF contracts acquired by Huge Telecom (Pty) Ltd

Initial and cumulative margin per Number Spot underlying Value of of SSF price per reference nominal Initial contracts underlying instrument exposure margin acquired/ reference lodged/ acquired/ Gearing/ posted/ (disposed) instrument (returned) (reduced) (de-gearing) (refunded)Transaction date (in hundreds) (cents) (cents) (R) (R) (R)

27 June 2008 1 061,00 330,58 45,00 350 745,38 303 000,38 47 745,0030 June 2008 500,00 330,00 45,00 165 000,00 142 500,00 22 500,001 July 2008 933,00 344,00 45,00 320 952,00 278 967,00 41 985,002 July 2008 250,00 370,00 45,00 92 500,00 81 250,00 11 250,009 September 2008 (2 035,00) (400,90) (45,00) (815 831,50) (724 256,50) (91 575,00)16 September 2008 613,00 362,00 45,00 221 906,00 194 321,00 27 585,0026 September 2008 800,00 362,00 45,00 289 600,00 253 600,00 36 000,007 October 2008 1 200,00 343,00 45,00 411 600,00 357 600,00 54 000,0010 October 2008 250,00 344,00 40,00 86 000,00 76 000,00 10 000,0013 October 2008 20,00 370,00 40,00 7 400,00 6 600,00 800,00

3 592,00 1 129 871,88 969 581,88 160 290,00


8. The derivative contracts acquired (continued)CFDs acquired by Huge Telecom (Pty) Ltd

Initial and cumulative margin per Spot price underlying Value of Number of per reference nominal Initial CFD contracts underlying instrument exposure margin acquired/ reference lodged/ acquired/ Gearing/ posted/ (disposed) instrument (returned) (reduced) (de-gearing) (refunded)Transaction date (in hundreds) (cents) (cents) (R) (R) (R)

10 July 2008 50,00 360,00 118,50 18 000,00 12 075,00 5 925,0014 July 2008 60,00 360,00 118,50 21 600,00 14 490,00 7 110,0016 July 2008 4,00 360,00 118,50 1 440,00 966,00 474,0017 July 2008 8,00 364,00 118,50 2 912,00 1 964,00 948,0023 July 2008 2 303,25 362,50 638,94 834 929,75 584 105,82 250 823,9324 July 2008 6 204,60 362,75 78,00 2 250 705,20 1 766 746,39 483 958,8130 July 2008 638,94 360,00 77,00 230 018,40 180 820,02 49 198,3831 July 2008 7 500,00 360,00 73,00 2 700 000,00 2 152 500,00 547 500,001 August 2008 600,00 360,00 72,00 216 000,00 172 800,00 43 200,006 August 2008 69,82 330,00 72,00 23 040,60 18 013,56 5 027,0411 August 2008 183,18 330,00 71,60 60 449,40 47 333,71 13 115,6920 August 2008 500,00 320,00 71,60 160 000,00 124 200,00 35 800,0029 August 2008 1 250,00 343,00 68,00 428 750,00 343 750,00 85 000,0030 September 2008 93,00 350,00 77,80 32 550,00 25 314,60 7 235,402 October 2008 3 560,00 360,00 74,00 1 281 600,00 1 018 160,00 263 440,003 October 2008 300,00 356,00 74,00 106 800,00 84 600,00 22 200,006 October 2008 15 721,00 354,00 70,00 5 565 234,00 4 464 764,00 1 100 470,00

39 045,79 13 934 029,35 11 012 603,10 2 921 426,25

The SSF transaction undertaken by CompanyOn 15 October 2008, the Relevant Directors (James Charles Herbst and Anton Daniel Potgieter) were directly and indirectly requested by Watermark Securities (Pty) Ltd (“Watermark”), in writing, to lodge additional margin equal to 250% of the initial margin set by the South African Futures Exchange (“SAFEX”) in respect of certain SSF contracts held by them over the ordinary shares of the Company, as additional security.

The Relevant Directors refused to lodge the additional margin of 250% requested by Watermark on the basis that Watermark was not entitled to request such additional margin of 250%.

In terms of the mandates signed directly and indirectly between Watermark and the Relevant Directors, Watermark was only entitled to request additional margin equal to 100% of the initial margin set by SAFEX on any SSF positions held directly and indirectly by the Relevant Directors.

On the morning of 16 October 2008, Watermark placed the Relevant Directors in default of their purported direct and indirect obligations and traded to transfer 80 455 SSF contracts over the ordinary shares of the Company held by the Relevant Directors from the accounts held directly and indirectly by the Relevant Directors to the proprietary account of Watermark.



8. The derivative contracts acquired (continued)On the afternoon of 16 October 2008, Watermark contacted the Company (represented by Mr Anton Potgieter) and agreed to sell 80 455 SSFs over the ordinary shares of the Company to the Company. The details related to these SSF contracts are presented below:

Initial and cumulative margin per Number Spot underlying Value of of SSF price per reference nominal Initial contracts underlying instrument exposure margin acquired/ reference lodged/ acquired/ Gearing/ posted/ (disposed) instrument (returned) (reduced) (de-gearing) (refunded)Transaction date (in hundreds) (cents) (cents) (R) (R) (R)

16 October 2008 80 455,00 362,00 45,00 29 124 710,00 25 504 235,00 3 620 475,00

On 9 April 2009, after protracted correspondence in this regard between the Company and the JSE, the Company received a letter from the JSE stating that the purchase by the Company of the SSF contracts from Watermark on 16 October 2008 had been ruled a related party transaction, requiring shareholder approval.

The Board of directors of the Company has procured extensive legal and other advice on the ruling of the JSE and is of the opinion that the JSE’s ruling is incorrect. Notwithstanding the existence of this advice, and the fact that:• the directors of the Company were authorised to effect a repurchase of up to 20% of the authorised

share capital of the Company by virtue of a general authority granted to the directors by special resolutions of shareholders passed at the annual general meetings of the Company held on 7 July 2007 and 22 September 2008;

• Section 10.6(c) of the Listings Requirements provides that a transaction is not regarded as a related party transaction if the transaction is one where both of the percentage ratios referred to in section 9.6 of the Listings Requirements are equal to or less than 0,25%. Section 21.11(a) of the Listings Requirements amends the ratio stipulated in section 9.6 of the Listings Requirements in respect of companies listed on the Alternative Exchange of the JSE to 10%;

• the ratio relating to the SSF transaction in terms of section 10.6(c) of the Listings Requirements is 7,2%;

• the SSF transaction is a “derivative transaction” envisaged in section 5.82 of the Listings Requirements, the Board of directors of the Company has decided that it is in the best interests of the Company not to engage in further debate with the JSE, but rather to comply with the JSE’s request to ask shareholders of the Company, to the extent required by law, to ratify the SSF transaction.

9. Acquisition by the Company of single stock futures (“SSF”), contracts for difference (“CFD”) and its own sharesOn 7 November 2008 the JSE directed a letter (the “7 November 2008 Letter”) to the Company recording the JSE’s decision (the “7 November 2008 Decision”) in respect of an investigation conducted by the JSE into the acquisition by the Company, on 16 October 2008, of 80 455 SSF contracts. In the 7 November 2008 Letter the JSE decided that “the company’s purchase of the SSF’s constitute a specifi c repurchase of the Company’s securities as defi ned in section 5.69 of the JSE’s Listings Requirements, that this transaction was concluded with a related party”.

In response to the 7 November 2008 Letter, the Company is preparing a circular regarding the transactions.


9. Acquisition by the Company of single stock futures (“SSF”), contracts for difference (“CFD”) and its own shares (continued)In terms of a SENS announcement dated 16 March 2009 shareholders of the company were advised that:• on 16 October 2008 the company purchased 80 455 SSFs, representing 8 045 500 shares in the

company, at a spot price of 362 cents per underlying share;• the purchase of either SSFs or CFDs was authorised by a resolution of the board of directors of the

company, which was passed on 11 June 2008;• Watermark was mandated to acquire CFDs and SSFs on behalf of the company;• the future price approximated the market price of the company’s securities at the date of entering into

the derivative contracts;• the purchase of the SSFs was from Watermark following the prior close out of the Relevant Directors’

SSF positions, as announced on SENS on 17 October 2008;• pursuant to a ruling by the JSE, and following representations by the company to the contrary, the JSE

held that the purchase of the SSFs constituted a repurchase of the company’s shares from a related party as defi ned in section 5.69 of the JSE Listings Requirements, and was therefore in contravention of the JSE Listings Requirements;

• accordingly, the company was advised that a circular to shareholders must be issued and shareholder approval for the future specifi c repurchase of the underlying securities be obtained;

• the SSFs were acquired utilising internal cash fl ows of the group.

The SSF contracts acquired by the Company from Watermark on 16 October 2008 followed the close out by Watermark, and the transfer by Watermark to its proprietary account, of 80 455 SSF contracts held directly and indirectly by the Relevant Directors. The price at which the SSF contracts were acquired by the Company was a reference price of 362 cents per share. The futures price of the SSF contracts was made up of 40 227 SSF contracts at 370,7 cents per share and 40 228 SSF contracts at 371,7 cents per share.

The resolution passed by the Board of directors of the Company on 11 June 2008 granted authority to Mr Bennie Vorster to open SSF and CFD accounts in the name of the Company and Huge Telecom (Pty) Ltd (“Huge Telecom”).

The resolution passed by the Board of directors of the Company on 11 June 2008 granted authority to Mr Anton Potgieter and Mr Vincent Mokholo to give instructions in relation to the SSF and CFD accounts.

Watermark was verbally mandated to acquire SSFs and CFDs on behalf of the Company on the instruction of Mr Anton Potgieter and Mr Vincent Mokholo.

The 80 455 SSF contracts were acquired in accordance with a resolution of the Company’s directors on 11 June 2008 approving the purchase by the Company of SSF contracts and CFDs in order to acquire exposure over the ordinary shares in the Company, limited to a maximum exposure equivalent to 20% of the issued ordinary share capital of the Company. The internal reference price for transactions related to the ordinary shares of the Company (including SSF contracts and CFDs) was set at 362 cents per share.

This reference price of 362 cents per share was based on the proposed acquisition of 5 000 000 ordinary shares in the Company at a price of 362 cents per share from Praesidium Capital Management (Pty) Ltd and the proposed acquisition of 8 050 205 ordinary shares in the Company at a price of 362 cents per share from Independent Securities (Pty) Ltd on 3 July 2008, which proposed acquisitions subsequently lapsed.



9. Acquisition by the Company of single stock futures (“SSF”), contracts for difference (“CFD”) and its own shares (continued)A valuation of the Company by Arcay Private Financial Services (Pty) Ltd was commissioned by the directors in May 2008 (and fi nalised on 20 August 2008), which determined a value range for the ordinary shares of the Company materially in excess of 362 cents per share, confi rming that the ordinary shares in the Company appeared undervalued relative to the intrinsic value of the Company, and providing support for the internal reference price of 362 cents per share.

As at 16 October 2008, the 30 and 60 day volume weighted average price (“VWAP”) of the ordinary shares of the Company was 356 cents per share and 350 cents per share, respectively. The directors considered the 30 and 60 day VWAP as providing additional support for the internal reference price of 362 cents per share.

On 7 July 2007 and 22 September 2008 the shareholders of the Company passed special resolutions giving the directors of the Company a general authority to repurchase up to a maximum of 20% of the Company’s ordinary shares in issue.

Due to the provisions of Section 85 of the Companies Act, Act 61 of 1973, as amended (“the Act”), the Company was unable to acquire its own ordinary shares by using debt and the Company did not have suffi cient cash reserves to effect a signifi cant repurchase of its own ordinary shares in accordance with Section 85 of the Act. On 11 June 2008 the directors resolved, as an alternative, to acquire SSFs and CFDs over the ordinary shares of the Company in order to effectively fi x the price at which the Company could acquire its own ordinary shares at some future date.

Following this resolution on 11 June 2008, Watermark was given various instructions by certain duly authorised directors of the Company to purchase CFDs and SSFs giving the Company exposure over its own ordinary shares at a maximum reference price of 362 cents per share and limited to a maximum exposure equivalent to 20% of the issued ordinary share capital of the Company.

The nature of the position created by the SSF transaction as at 16 October 2008 is that, notwithstanding the intrinsic value of the Company, market price fl uctuations in the Company’s ordinary shares would result in one of the following scenarios:• an increase in the market price of the underlying ordinary shares of the Company would make

any proposed repurchase of the ordinary shares underlying the SSF contracts more expensive to shareholders of the Company, but would result in a mark-to-market gain on the SSF transaction on ultimate expiry that would largely offset the relatively more expensive proposed ordinary share repurchase; or

• a decrease in the market price of the underlying ordinary shares of the Company would make the proposed repurchase of the ordinary shares underlying the SSF contracts cheaper to shareholders of the Company, but would result in a mark-to-market loss on the SSF transaction on ultimate expiry that would largely offset the relatively less expensive proposed ordinary share repurchase.

The SSF contracts and the CFDs, in the opinion of the directors, can be viewed as having been entered into as an economic hedge or de facto cash fl ow hedge against movements in the spot price of the underlying ordinary shares of the Company, given the proposed acquisition by the Company of the underlying ordinary shares in the Company at some future date and the volatility in the spot price thereof.

10. Borrowing limitationsIn terms of the Articles of Association of the Company, the directors may exercise all the powers of the Company to borrow money, as they consider appropriate.

11. Non-current assetsDuring March 2010 the Group commissioned an independent valuation of its land and buildings in Cape Town, known as units 6 and 8 Doncaster Offi ce Park. The valuation was performed by Holgate Property Services who confi rmed that the carrying value of the land and buildings is at a fair value of R5 524 999.


12. DirectorsThe directors of the Company during the year and to the date of this report are as follows:

Name ChangesJames Charles Herbst Anton Daniel Potgieter Brian Alexander McQueen Donovan Tredoux Kenneth Delroy JarvisManogaran Pillay Resigned 4 August 2010Michelle Allison Meth Appointed 1 March 2009Stephen Peter TredouxVincent Mokhele MokholoMichael Ronald Beamish Appointed 8 December 2009

Stephen Peter Tredoux resigned as an executive director and was appointed non-executive director on 12 August 2009.

13. Directors’ interest in contractsThe register of interest of directors in contracts held in terms of Section 234 of the Companies Act, is available to the public on request at the Company’s registered address.

14. Interest in subsidiariesName of subsidiary % shareholdingCentraCell (Pty) Ltd 100Huge Telecom (Pty) Ltd 100Huge Cellular (Pty) Ltd (Dormant) 100Eyeballs Mobile Advertising (Pty) Ltd 77Huge Media (Pty) Ltd 100

15. Profi t/(loss) for the yearThe attributable interest of the Group in the net (losses)/ profi t after taxation of the subsidiaries was:

Figures in Rand 2010 2009

CentraCell (Pty) Ltd (1 244 358) 27 508 833Huge Telecom (Pty) Ltd (3 730 196) (9 703 603)Huge Cellular (Pty) Ltd – –Eyeballs Mobile Advertising (Pty) Ltd (4 178 926) –Huge Media (Pty) Ltd (1 612 954) –

(10 766 434) 17 805 230

16. Directors’ interest in share capital2010Directors’ interest in share capital (number of shares) Direct Indirect Total %

James Charles Herbst 151 257 9 765 600 9 916 857 8,87Anton Daniel Potgieter 5 163 400 7 164 325 12 327 725 11,03Vincent Mokhele Mokholo 292 000 2 526 069 2 818 069 2,52Stephen Peter Tredoux 146 510 – 146 510 0,13Donovan Tredoux 676 100 – 676 100 0,61Michelle Allison Meth 292 000 – 292 000 0,26Manogaran Pillay 292 000 – 292 000 0,26Michael Ronald Beamish 8 477 544 – 8 477 544 7,59

15 490 811 19 455 994 34 946 805 31,27



16. Directors’ interest in share capital (continued)Ordinary share dealings during the fi nancial year(number of shares) Bought Sold

James Charles Herbst via Pacifi c Breeze Trading 417 (Pty) Ltd 997 266 –Vincent Mokhele Mokholo 292 000 –Stephen Peter Tredoux 111 510 –Michelle Allison Meth 292 000 –Manogaran Pillay 292 000 –Michael Ronald Beamish 5 677 576 –

7 662 352 –

Single stock future dealings during the fi nancial year (number of contracts) Bought Sold

James Charles Herbst via Eagle Creek Investments223 (Pty) Ltd – 9 972

Post year-end and up until the date of this report MA Meth, M Pillay and VM Mokholo each purchased 52 549 shares and D Tredoux sold 20 000 shares.

2009Directors’ interest in share capital (number of shares) Direct Indirect Total %

James Charles Herbst 151 257 9 765 600 9 916 857 8,87Anton Daniel Potgieter 5 134 400 7 164 325 12 298 725 11,00Vincent Mokhele Mokholo – 2 526 069 2 526 069 2,26Julian Arie Morelis 28 000 – 28 000 0,03Stephen Peter Tredoux 35 000 – 35 000 0,03Donovan Tredoux 676 100 – 676 100 0,60

6 024 757 19 455 994 25 480 751 22,79

Ordinary share dealings during the fi nancial year(number of shares) Bought Sold

Donovan Tredoux 73 000 – James Charles Herbst – 2 001 000James Charles Herbst via Pacifi c Breeze Trading 417 (Pty) Ltd 1 000 –Vincent Mokhele Mokholo held via Mojaho Trading 4 001 000 4 000 000Anton Daniel Potgieter 5 136 400 – Anton Daniel Potgieter held via Luigi’s Trust – 5 000 000Stephen Peter Tredoux 35 000 – Julian Arie Morelis 3 932 000 3 904 000

13 178 400 14 905 000

Single stock futures dealing during the fi nancial year (number of contracts) Bought Sold

James Charles Herbst – 4 657James Charles Herbst via Eagle Creek Investments 223 (Pty) Ltd 40 000 33 000James Charles Herbst via Pacifi c Breeze Trading 417 (Pty) Ltd 40 450 40 450Vincent Mokhele Mokholo held via Mojaho Trading (Pty) Ltd 40 000 40 000Anton Daniel Potgieter 50 000 90 000Julian Arie Morelis 10 000 10 000

180 450 218 107


16. Directors’ interest in share capital (continued)Post year end and up until the date of the 2009 report the only trades by directors have been by James Charles Herbst via Eagle Creek Investments 223 (Pty) Ltd. These trades have been the conversion of single stock futures back into equity. The number of shares traded is 333 333 and 330 600 respectively.

17. Special resolutionsA special resolution was passed on 27 November 2009 granting the Company a general authority to acquire its ordinary shares.

18. AuditorsKPMG Inc was appointed to offi ce in accordance with Section 270(2) of the Companies Act. Horwath Leventon Boner were the prior year auditors.

19. Secretary and registered offi ceThe secretary of the Company is Arcay Client Support (Pty) Ltd, who were appointed on 10 September 2008.

Business addressBlock 2Woodlands Drive Offi ce Park5 Woodlands DriveWoodmeadJohannesburg2191

Postal address PO Box 16876Dowerglen1612

20. DividendsNo dividends were declared or paid to shareholders during the year.

21. Litigation with Mr Julian Arie MorelisOn or about 6 July 2009 Julian Arie Morelis, a former director of the Company, and one of the vendors of CentraCell (Pty) Ltd, which Company was acquired by Huge Group Limited during 2008, issued summons against Huge Group Limited, claiming R4 500 000 plus interest thereon from 19 December 2007 to date of payment. The claim related to a restraint of trade agreement that Mr Morelis alleged he concluded with Huge Group Limited. Huge Group Limited disputed the claim.

The legal dispute between Julian Arie Morelis and Huge Group Limited has been settled post year end and all court actions instituted have been withdrawn.

22. Legal and regulatory requirementsThe directors refer to the auditor’s report and more particularly to the paragraph on “Other legal and regulatory requirements”.

In terms of section 44(2) and 44(3) of the Auditing Profession Act, 26 of 2005 (the “Auditing Profession Act”) the auditors have a duty to report to the shareholders of the Company where they have identifi ed unlawful acts or omissions committed by persons responsible for the management of the Company, which constitute reportable irregularities in terms of the Auditing Profession Act.

The auditors have submitted a report in terms of section 45 of the Auditing Profession Act to the Independent Regulatory Board of Auditors (“IRBA”) stating that they have reason to believe that a reportable irregularity has taken place in relation to the acquisition by the Company of 80 455 single stock futures contracts (“SSF contracts”) over ordinary shares of the Company on 16 October 2008 (the “Relevant Transaction”).



22. Legal and regulatory requirements (continued)The auditors have advised the directors that a reportable irregularity is defi ned by the Auditing Profession Act as any unlawful act or omission by any person responsible for management of an entity which:a) has caused, or is likely to cause, material fi nancial loss to the entity, its creditors, shareholders or

investors; or b) is fraudulent or amounts to theft; orc) represents a material breach of fi duciary duty owed by such person to the entity or any partner,

member, shareholder, creditor or investor of the entity under any law applying to the entity or the management thereof.

The directors of the Company are required in terms of the provisions of the Auditing Profession Act to report back to the auditors as to whether:a) no reportable irregularity has/is taking place; orb) the suspected reportable irregularity is no longer taking place and adequate steps have been taken

for the prevention or recovery of any loss as a result thereof; orc) the reportable irregularity is still occurring.

Having regard to the information currently available to the directors of the Company, no reportable irregularity has, or is, taking place for the reasons set out below.

It is apparent from the content of the auditors’ letter to IRBA that the foundation for their contention that a reportable irregularity has taken place is the decisions of the JSE Limited (the “JSE”) in relation to the Relevant Transaction as refl ected in the letters from the JSE to two directors of the Company (the “Relevant Directors”) dated 9 April 2009 (the “9 April 2009 Letter”) and 9 October 2009(the “9 October 2009 Letter”) respectively.

In the 9 April 2009 letter the JSE recorded its decision as follows:“6. The JSE has decided that the actions of the Directors amount to a material breach of their fi duciary

duties towards the Company and its shareholders. Section 3.62 of the JSE Listings Requirements stipulates that directors are bound by and must comply with the JSE’s Listings Requirements in their capacities as directors, and in their personal capacities.

7. The Directors’ actions in respect of the Company’s acquisition of the SSF positions resulted in the breach of the JSE’s Listings Requirements by Huge as communicated in our letter of 12 February 2009 in that:

(i) the Company’s acquisition of the Directors’ SSF positions constitutes a specifi c repurchase of the Company’s securities as defi ned in section 5.69 of the JSE’s Listings Requirements and

(ii) the Company’s acquisition of the SSF positions is a transaction with a related party.(iii) In these circumstances, the JSE decided that the Company’s acquisition of the SSF positions

amounts to a contravention of section 5.69 of the JSE Listings Requirements and of section 85 of the Companies Act.”

In the 9 October 2009 letter the JSE recorded its decision as follows:“6. The JSE has considered all the facts and information at its disposal and has decided to impose a

public censure on the Directors as well as a fi ne of R5 million on each of the Directors as a result of the Directors’ actions in respect of Huge’s purchase of the SSF positions that have resulted in the breach of section 5.69 of the Listings Requirements by Huge and the Directors in that:

(i) the Company’s acquisition of the Directors’ SSF positions constitutes a specifi c repurchase of the Company’s securities as defi ned in section 5.69 of the JSE’s Listings Requirements;

(ii) the Company’s acquisition of the SSF positions was a transaction with a related party; and(iii) the Directors’ actions caused the Company to be in breach of the peremptory provisions of the Listings

Requirements in respect of a specifi c repurchase of the Company’s securities from related parties.”

It is apparent ex facie the 9 April 2009 Letter and the 9 October 2009 Letter that the JSE did not make any express fi nding of an unlawful act or omission by the Relevant Directors (as persons responsible for the management of the Company) which:a) has caused, or is likely to cause, material fi nancial loss to the Company or its creditors, shareholders

or investors; or b) is fraudulent or amounts to theft.

Having regard to the decisions set out in the 9 April 2009 Letter and the 9 October 2009 Letter (the “Relevant Decisions”) there is consequently no basis to suggest that a reportable irregularity has occurred within the defi nition of that term described above.


22. Legal and regulatory requirements (continued)It is correct that in the 9 April 2009 Letter the JSE made a fi nding of a breach by the Relevant Directors of their fi duciary duties towards the Company and its shareholders. The Company has been advised by its legal representatives that the fi nding that the Relevant Directors have breached fi duciary duties to the shareholders of the Company has no legal foundation, since the Company’s legal representatives have confi rmed that at common law the directors of the Company owe fi duciary duties to the Company only and not to its shareholders. It will be noted that no reference was made by the JSE to a fi nding of a breach of fi duciary duties when imposing sanctions on the Relevant Directors in the 9 October 2009 Letter and in the ambit of the fi ndings of the JSE is therefore a matter of debate.

Even if it is correct that the JSE has made a decision that the Relevant Directors have acted in breach of their fi duciary duties to the Company (which is not admitted) then the Company is advised by its legal representatives that such decision is not fi nal. This is apparent from section 1.3 of the Listings Requirements of the JSE (the “Listings Requirements”) which states inter alia as follows:

“Where the JSE exercises its discretion in terms of these Listings Requirements, it shall use its sole discretion and, subject to the provisions of paragraphs 1.4 and 1.5 below, judicial review and the appeal provisions in SSA, its ruling shall be fi nal.” (emphasis added)

The reference in section 1.3 of the Listings Requirements to “SSA” is to the Securities Services Act, No. 36 of 2004 (the “Securities Services Act”).

The directors of the Company confi rm that the Relevant Directors have lodged an appeal (the “Appeal”) against the Relevant Decisions (including the fi nding of a breach by the Relevant Directors of their fi duciary duties to the Company) in terms of section 111 of the Securities Services Act as read with regulation 2 of the Regulations published in terms of section 26B(19) of the Financial Services Board Act, 97 of 1990. The Appeal is predicated inter alia on the grounds that:1. the JSE has no jurisdiction to make a fi nding that the Relevant Directors breached their fi duciary

duties to the Company;2. the fi nding that the Relevant Directors breached their fi duciary duties to the Company is based on

factual conclusions that have no proper evidentiary foundation and are incorrect; and3. the JSE was incorrect in fi nding that the Relevant Directors have breached their fi duciary duties to

the Company.

In their Notice of Appeal the Relevant Directors seek inter alia an order that the Relevant Decisions (including the fi nding of a breach by the Relevant Directors of their fi duciary duties to the Company) be set aside.

The Company has been advised by its legal representatives that the Appeal will be adjudicated upon by an Appeal Panel constituted by the Financial Services Board on a future date to be determined by the Financial Services Board. At present therefore the status of the matter is that the 9 April 2009 Decision and the 9 October 2009 Decision are provisional decisions of the JSE which are sub judice in that they are the subject of pending litigation, which may be set aside by the Appeal Panel. In the result the JSE has not to date made any fi nal decision of a breach by the Relevant Directors of any of their fi duciary duties to the Company and there is consequently currently no proper basis to conclude that a reportable irregularity has taken place within the defi nition of that term contemplated above. In the result the directors confi rm that, having regard to the information currently available to the directors of the Company, no reportable irregularity has, or is, taking place. The directors undertake, however, to furnish a further report to the shareholders of the Company once the Appeal process has been fi nalised.

23. Acquisition of subsidiaryThe Group acquired an additional 52% of Eyeballs Mobile Advertising (Pty) Ltd with effect from 7 March 2009 for R520,00. The Group originally acquired 25% of the Company for R6 000 000 on 9 May 2008. Eyeballs Mobile Advertising (Pty) Ltd was consolidated into the Group’s result from 7 March 2009.

The acquisition resulted in the recognition of intangible assets (Eyeballs technology) of R16 054 297. (Refer note 5 and 45.)

24. Impairment of goodwillThe goodwill arose on the acquisition of Huge Telecom (Pty) Ltd and CentraCell (Pty) Ltd in 2008. A value in use calculation was done to test for the impairment of goodwill. No impairment was identifi ed. Refer to note 4 for further information on the valuation and sensitivity analysis thereon.


Group Company

Figures in Rand Note 2010 2009 2010 2009

AssetsNon-current assets Property, plant and equipment 3 43 573 867 59 627 060 – –Goodwill 4 215 153 482 215 153 482 – –Intangible assets 5 22 106 583 1 284 009 – –Investments in subsidiaries 6 – – 241 099 437 235 099 237Investment in joint venture 7 540 291 822 941 – –Investments in associates 8 2 390 672 7 941 638 – 6 000 000Loans to subsidiary companies 9 – – 13 459 517 –Loans to associate companies 10 – 5 000 000 – 5 000 000Investments 11 389 409 263 347 389 409 263 347Deferred tax 12 9 497 797 9 652 736 2 820 237 3 209 561

293 652 101 299 745 213 257 768 600 249 572 145

Current assetsInventory 13 14 825 421 28 720 935 – –Loans to subsidiary companies 9 – – – 19 982 674Loans to associate companies 10 1 637 478 1 096 064 – 1 096 064Current tax receivable 2 488 386 188 505 982 888 –Trade and other receivables 15 108 069 904 93 494 129 8 001 346 5 817 586Loans receivable 14 – 28 300 – –Cash and cash equivalents 16 11 430 271 13 785 142 4 034 395 2 831 895

138 451 460 137 313 075 13 018 629 29 728 219

Total assets 432 103 561 437 058 288 270 787 229 279 300 364

Equity and liabilitiesEquityEquity attributable to equity holders of parentShare capital 17 10 211 10 617 11 176 11 176Share premium 17 226 429 430 228 822 358 236 577 236 236 577 236Reserves 18 1 215 038 296 467 – –Retained earnings/(accumulated loss) 29 306 901 20 278 042 983 465 (17 229 244)

256 961 580 249 407 484 237 571 877 219 359 168Non-controlling interest 721 499 – – –

257 683 079 249 407 484 237 571 877 219 359 168

LiabilitiesNon-current liabilities Loans from shareholders 19 – 17 035 070 – 16 835 070Other fi nancial liabilities 20 – 1 516 202 – –Finance lease obligations 21 4 171 704 9 484 917 – –Deferred tax 12 3 885 162 – – –

8 056 866 28 036 189 – 16 835 070

Current liabilities Loans from subsidiary companies 9 – – 21 979 052 14 238 395Loans from associate companies 10 2 208 308 – – –Loans from shareholders 19 8 973 884 – 8 856 926 –Other fi nancial liabilities 20 2 606 254 25 702 334 1 800 000 20 000 000Current tax payable 314 140 3 393 310 – 3 393 310Finance lease obligations 21 5 199 529 4 534 184 – –Trade and other payables 22 147 046 549 125 969 835 564 422 5 459 469Shareholders for dividends 14 952 14 952 14 952 14 952

166 363 616 159 614 615 33 215 352 43 106 126

Total liabilities 174 420 482 187 650 804 33 215 352 59 941 196

Total equity and liabilities 432 103 561 437 058 288 270 787 229 279 300 364

Statements of fi nancial positionfor the year ended 28 February 2010


Group Company


Revenue 23 573 516 182 608 539 826 – –Cost of sales (454 020 187) (495 467 018) – –

Gross profi t 119 495 995 113 072 808 – –Other income 24 830 975 1 600 600 7 936 854 9 318 985Operating expenses (117 045 158) (91 343 741) (5 616 273) (7 680 203)

Operating profi t 25 3 281 812 23 329 667 2 320 581 1 638 782Investment income 26 4 485 384 7 522 771 6 905 335 2 239 802Net change in fair value of fi nancial instruments 27 8 360 236 (21 305 364) 11 590 398 (12 995 086)Income from equity accounted investments 28 166 284 1 324 279 – –Finance costs 29 (8 038 923) (6 527 694) (2 214 281) (1 590 996)

Profi t/(loss) before income tax 8 254 793 4 343 659 18 602 033 (10 707 498)Income tax expense 30 (187 087) 3 093 560 (389 324) 1 867 481

Profi t/(loss) for the year 8 067 706 7 437 219 18 212 709 (8 840 017)

Profi t/(loss) for the year attributable to:Owners of the Company 9 028 859 7 437 219 Non-controlling interest (961 153) –

8 067 706 7 437 219

Earnings per shareBasic earnings per share 31 8,58 6,82Diluted basic earnings per share 31 8,58 6,82

Statements of fi nancial performance for the year ended 28 February 2010


Statements of comprehensive incomefor the year ended 28 February 2010

Group Company


Profi t/(loss) for the year 8 067 706 7 437 219 18 212 709 (8 840 017)Other comprehensive incomeGains on property revaluation 797 044 – – –Taxation related to components of othercomprehensive income (537 865) 72 424 – –

Other comprehensive income for the year net of taxation 34 259 179 72 424 – –

Total comprehensive income/(loss) for the year 8 326 885 7 509 643 18 212 709 (8 840 017)

Total comprehensive income/(loss) for the year attributable to:Owners of the Company 9 288 038 7 509 643 18 212 709 (8 840 017)Non-controlling interest (961 153) – – –

Total comprehensive income/(loss) for the year 8 326 885 7 509 643 18 212 709 (8 840 017)


Statements of changes in equityfor the year ended 28 February 2010

To

tal

Ret

aine

d at

trib

utab

le

ea

rnin

gs/

to e

quity

Tota

l

Sha

re

(a

ccu-

ho

lder

s of

N

on-

Sha

re

Sha

re

shar

e R

eval

uatio

n op

tion

Tota

l m

ulat

ed

the

Gro

up/

cont

rollin

g T

otal

Figu

res

in R

and

capi

tal

prem

ium

ca

pita

l re

serv

e re

serv

e

rese

rves

lo

ss)

Com

pany

in

tere

st

equi

ty

Gro

upB

alan

ce a

t 28

Feb

ruar

y 20

08

10 6

76

221

577

736

221

588

412

224

043

– 22

4 04

3 26

252

023

24

8 06

4 47

8 –

248

064

478

Tota

l com

preh

ensi

ve in

com

e fo

r th

e ye

ar

– –

– 72

424

–

72 4

24

7 43

7 21

9 7

509

643

– 7

509

643

Cha

nges

in e

qui

tyIs

sue

of s

hare

s 50

0 14

999

500

15

000

000

–

– –

– 15

000

000

–

15 0

00 0

00P

urch

ase

of o

wn

shar

es

(559

) (7

754

878

) (7

755

437

) –

– –

– (7

755

437

) –

(7 7

55

437)

Div

iden

ds

– –

– –

– –

(13

411

200)

(1

3 41

1 20

0)

– (1

3 41

1 20

0)

Tota

l cha

nges

(5

9)

7 24

4 62

2 7

244

563

72 4

24

– 72

424

(5

973

981

) 1

343

006

– 1

343

006

Bal

ance

at

29 F

ebru

ary

2009

10

617

22

8 82

2 35

8 22

8 83

2 97

5 29

6 46

7 –

296

467

20 2

78 0

42

249

407

484

– 24

9 40

7 48

4To

tal c

ompr

ehen

sive

inco

me/

(loss

) for

the

year

–

– –

259

179

– 25

9 17

9 9

028

859

9 28

8 03

8 (9

61 1

53)

8 32

6 88

5C

hang

es in

eq

uity

Pur

chas

e of

ow

n sh

ares

(4

06)

(2 3

92 9

28)

(2 3

93 3

34)

– –

– –

(2 3

93 3

34)

– (2

393

33

4)E

yeba

lls M

obile

Adv

ertis

ing

(Pty

) Ltd

–

Sha

re o

ptio

n –

– –

– 65

9 39

2 65

9 39

2 –

659

392

– 65

9 39

2B

usin

ess

com

bina

tions

–

– –

– –

– –

– 1

682

652

1 68

2 65

2

Tota

l cha

nges

(4

06)

(2 3

92 9

28)

(2 3

93 3

34)

259

179

659

392

918

571

9 02

8 85

9 7

554

096

721

499

8 27

5 59

5

Bal

ance

at

28 F

ebru

ary

2010

10

211

22

6 42

9 43

0 22

6 43

9 64

1 55

5 64

6 65

9 39

2 1

215

038

29 3

06 9

01

256

961

580

721

499

257

683

079

Not

e 17

17

18 a

nd 3

4 18


Statements of changes in equity continued

for the year ended 28 February 2010

To

tal

R

etai

ned

attr

ibut

able

ea

rnin

gs/

to e

quity

Tota

l (a

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s of

Sha

re

Sha

re

shar

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ed

the

grou

p/

Tota

lFi

gure

s in

Ran

d ca

pita

l pr

emiu

m

capi

tal

loss

) co

mpa

ny

equi

ty

Co

mp

any

Bal

ance

at

28 F

ebru

ary

2008

10

676

22

1 57

7 73

6 22

1 58

8 41

2 5

021

973

226

610

385

26 6

10 3

85To

tal c

ompr

ehen

sive

loss

for

the

year

–

– –

(8 8

40 0

17)

(8 8

40 0

17)

(8 8

40

017)

Cha

nges

in e

quity

Issu

e of

sha

res

500

14 9

99 5

00

15 0

00 0

00

– 15

000

000

15

000

000

Div

iden

ds

– –

– (1

3 41

1 20

0)

(13

411

200)

(1

3 41

1 20

0)

Tota

l cha

nges

50

0 14

999

500

15

000

000

(2

2 25

1 21

7)

(7 2

51 2

17)

(7 2

51

217)

Bal

ance

at

29 F

ebru

ary

2009

11

176

23

6 57

7 23

6 23

6 58

8 41

2 (1

7 22

9 24

4)

219

359

168

219

359

168

Tota

l com

preh

ensi

ve in

com

e fo

r th

e ye

ar

– –

– 18

212

709

18

212

709

18

212

709

Tota

l cha

nges

–

– –

18 2

12 7

09

18 2

12 7

09

18 2

12 7

09

Bal

ance

at

28 F

ebru

ary

2010

11

176

23

6 57

7 23

6 23

6 58

8 41

2 98

3 46

5 23

7 57

1 87

7 23

7 57

1 87

7

Not

e 17

17


Statements of cash fl owsfor the year ended 28 February 2010

Group Company


Cash fl ows from operating activitiesCash receipts from customers 638 045 645 705 720 879 – –Cash paid to suppliers and employees (591 842 464) (651 354 058) (4 759 789) 6 716 384

Cash generated from/(used in) operations 35 46 203 181 54 366 821 (4 759 789) 6 716 384Interest income 2 705 384 6 205 310 6 905 335 2 239 802Dividends received 1 780 000 1 317 461 – –Finance costs (8 038 923) (6 527 694) (2 214 281) (1 590 996)Taxation paid 36 (5 483 371) (3 567 094) (4 376 198) –Derivative variation margin call payments 44 (9 988 382) (25 567 876) (6 758 220) (17 257 588)

Net cash infl ow/(outfl ow) from operating activities 27 177 889 26 226 928 (11 203 153) (9 892 398)

Cash fl ows from investing activitiesPurchase of property, plant and equipment to maintain operations 3 (3 028 275) (21 407 810) – –Sale of property, plant and equipment 3 279 691 223 891 – –Purchase of intangible assets 5 (5 255 748) (867 828) – –Sale of intangible assets 5 109 563 – – –Loans to Group companies (541 414) – (205 195) (26 078 738)Loans from Group companies 2 208 308 – 20 565 073 14 238 395Loans advanced – (6 124 364) – –Investments sold/(acquired) 23 919 (6 135 010) 23 919 (6 135 010)

Net cash (outfl ow)/infl ow from investing activities (6 203 956) (34 311 121) 20 383 797 (17 975 353)

Cash fl ows from fi nancing activitiesProceeds on share issue 17 – 15 000 000 – 15 000 000Reduction of share capital or buy-back of shares 17 (2 393 334) (7 755 437) – –Loan from shareholders – 3 111 772 – 8 973 123Repayment of shareholders’ loan (8 061 186) – (7 978 144) –Finance lease payments (4 647 868) – – –(Repayment of)/proceeds from otherfi nancial liabilities (8 267 764) 5 030 601 – 20 000 000Dividends paid 37 – (13 396 248) – (13 396 248)

Net cash (outfl ow)/infl ow from fi nancing activities (23 370 152) 1 990 688 (7 978 144) 30 576 875

(Decrease)/increase in cash and cash equivalents (2 396 219) (6 093 505) 1 202 500 2 709 124Cash and cash equivalents acquired 45 41 348 – – –Cash and cash equivalents at beginning of the year 13 785 142 19 878 647 2 831 895 122 771

Cash and cash equivalents at end of the year 16 11 430 271 13 785 142 4 034 395 2 831 895


Accounting policiesfor the year ended 28 February 2010

1. Presentation of consolidated fi nancial statementsThe consolidated fi nancial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), its interpretations adopted by the Independent Accounting Standards Board and the Companies Act of South Africa. The consolidated fi nancial statements have been prepared on the historical cost basis, except for certain items of property, plant and equipment carried at revalued amounts and certain fi nancial instruments carried at fair value, and incorporate the principal accounting policies set out below. They are presented in South African Rands which is the functional currency of the Company.

These accounting policies are consistent with the previous period, other than those refl ected in note 2.

1.1 Consolidation Basis of consolidation These consolidated fi nancial statements incorporate the fi nancial statements of the Group, all of its

subsidiaries and equity accounted associates and joint ventures.

Subsidiaries Subsidiaries are all entities over which the Group has the power to control the fi nancial and

operating policies. Control is achieved where the Group has the power to govern the fi nancial and operating policies of an entity so as to obtain benefi ts from its activities.

The results of subsidiaries acquired or disposed of during the period are included in the consolidated statement of fi nancial performance from the effective date of acquisition or up to the effective date of disposal.

Where necessary, adjustments are made to the fi nancial statements of subsidiaries to bring their accounting policies into line with those used by the Group.

All intra Group transactions, balances, income and expenses are eliminated in full on consolidation. Unrealised losses are also eliminated, but only to the extent that they do not represent an impairment.

In the Company’s separate annual fi nancial statements, investments in subsidiaries are carried at cost less any accumulated impairment.

The cost of an investment in a subsidiary is the aggregate of: • the fair value, at the date of exchange, of assets given, liabilities incurred or assumed, and equity

instruments issued by the Company; plus • any costs directly attributable to the purchase of the subsidiary.

An adjustment to the cost of a business combination contingent on future events is included in the cost of the combination if the adjustment is probable and can be measured reliably.

Associates Associates are all entities over which the Group has signifi cant infl uence but not control, generally

accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. The Group’s investment in associates includes goodwill (net of any accumulated impairment loss) identifi ed on acquisition.

The Group’s share of its associates’ post-acquisition profi ts or losses is recognised in the statement of fi nancial performance, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payment on behalf of the associate.


1. Presentation of consolidated fi nancial statements (continued) 1.1 Consolidation (continued) Associates (continued)

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associate. Unrealised losses are also eliminated to the extent of the Group’s interest in the associate unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.

Joint venture The Group’s interest in its joint venture is accounted for using the equity method of accounting

whereby an interest in jointly controlled entities is initially recorded at cost and adjusted thereafter for post-acquisition changes in the Group’s share of net assets of the joint venture. The statement of fi nancial performance refl ects the Group’s share of the results of operations of the joint venture.

A listing of the Group’s principal subsidiaries, joint venture and associates is set out in notes 6, 7 and 8 of the fi nancial statements.

Business combinations Acquisitions of subsidiaries and businesses are accounted for using the purchase method. The

purchase method involves the recognition of the acquirer’s identifi able assets and liabilities, including contingent liabilities, regardless of whether they were recorded in the fi nancial statements prior to acquisition. On initial recognition, the assets and liabilities of the acquired subsidiaries are included in the consolidated statement of fi nancial position at their fair values, which are also used as the bases for subsequent measurement in accordance with the Group’s accounting policies.

Goodwill Goodwill arising on the acquisition of a subsidiary, associate or joint venture represents the excess

of the cost of acquisition over the Group’s interest in the net fair value of the identifi able assets, liabilities and contingent liabilities at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill is not amortised but is subject to an annual impairment test or more frequently if events or changes in circumstances indicate that the carrying amount may be impaired.

If the cost of acquisition is less than the net assets of the subsidiary acquired, the difference is recognised directly in the statement of fi nancial performance. Goodwill on the acquisition of subsidiaries is included in “goodwill” in the statement of fi nancial position. Goodwill on acquisitions of associates and joint ventures is included in “investments in associates”, and “investments in joint ventures” respectively.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. Impairment is determined by assessing the recoverable amount of the cash-generating unit to which goodwill relates. Where the recoverable amount of the cash-generating unit is less than the carrying amount an impairment is recognised.

Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

1.2 Signifi cant judgements and sources of estimation uncertainty The preparation of fi nancial statements in conformity with IFRS requires the use of certain critical

accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the fi nancial statements and the reported amounts of revenues and expenses during the reporting period based on management’s best knowledge of current events and actions. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.


1. Presentation of consolidated fi nancial statements (continued) 1.2 Signifi cant judgements and sources of estimation uncertainty (continued)

Areas involving a high degree of judgement or complexity, or areas where assumptions and estimates are signifi cant to the Group fi nancial statements are:

Determination of impairment of goodwill The Group determines annually whether goodwill has been subject to impairment. This requires an

estimation of the value in use of the cash-generating units to which goodwill is allocated. Estimating the value in use requires the Group to make an estimate of the expected future cash fl ows from the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash fl ows. Goodwill impairments cannot be reversed. Based on the calculations performed, there are no indications that an impairment of goodwill is required at year end.

Allowance for slow moving, damaged and obsolete stock

An allowance for impairment of inventories is raised on airtime inventory that is deemed likely to expire before usage. The impairment allowance is based on historic usage, airtime expiry dates, and management’s judgement of the future usage expected.

Impairments of trade receivables An allowance for impairment of trade receivables is raised on trade receivables that are deemed to

contain a collection risk. The impairment allowance is based on an assessment of the extent to which specifi c customers have defaulted on payments already due and an assessment of their ability to make payments based on their current fi nancial position. Actual write offs may vary signifi cantly from the impairment allowance depending on any changes in the customers’ fi nancial condition.

Taxation Management’s judgement is exercised when determining the probability of future taxable profi ts,

which will determine whether deferred tax assets should be recognised or derecognised. The utilisation of deferred tax assets will depend on whether it is possible to generate suffi cient taxable income, taking into account any legal restrictions on the life and on the nature of the asset. When deciding whether to recognise unutilised taxation credits, management needs to determine the extent to which future taxable income is likely to be earned and be available for future set-off. Estimates of future taxable income are based on forecast cash fl ows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash fl ows and taxable income differ signifi cantly from estimates, the ability of the Company to realise the net deferred tax assets recorded at the reporting date could be impacted. In the event that the assessment of future payments and future utilisation changes, the change is recognised in the statement of fi nancial performance as a prior year under or over provision.

Deferred tax is provided for on the fair value adjustments of land and buildings based on the expected manner of recovery, i.e. sale or use. This manner of recovery affects the rate used to determine the deferred tax liability.

Judgement is required in determining the provision for income taxes due to the complexity of legislation. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Company recognises liabilities for anticipated tax issues based on estimates of whether additional taxes will be due. Where the fi nal tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

Property, plant and equipment The useful lives of property, plant and equipment are based on management estimation.

Management considers the impact of changes in technology and customer service requirements, expected physical wear and tear, expected usage of the asset and any legal or similar limits on the use of the asset to determine the period over which an item of property, plant and equipment is expected to be available for use by the Group. The estimation of residual values of assets is also based on management’s judgement whether the assets will be sold, the costs of such disposal and what the expected condition of these assets is likely to be at the time of their disposal.

Accounting policies continued



1. Presentation of consolidated fi nancial statements (continued) 1.2 Signifi cant judgements and sources of estimation uncertainty (continued) Determination of impairment on property, plant and equipment

Management is required to make judgements concerning the cause, timing and amount of impairment of such assets. In the identifi cation of impairment indicators, management considers the impact of changes in the current market conditions, technological obsolescence, physical damage, cost of capital and other circumstances that could indicate that impairment exists. Management’s judgment is also required when assessing whether a previously recognised impairment loss should be reversed.

Where impairment indicators exist, determination of the recoverable amount requires management to make assumptions to determine the fair value less costs to sell and value in use. Fair value less costs to sell is based on the best information available to management that refl ects the amount that the Group could obtain, at statement of fi nancial position date, from the disposal of the asset in an arm’s length transaction between knowledgeable, willing parties after deducting the costs of disposal, such as stamp duties, legal costs or costs of removing the asset etc. Key assumptions on which management has based its determination of value in use include projected revenues, gross margins, capital expenditure, expected customer bases and market share.

Determination of impairment of investment in associate company and joint venture

Management is required to make judgements concerning the cause, timing and amount of impairment of such assets. In the identifi cation of impairment indicators, management considers the impact of changes in current market conditions affecting the value of the investment. Consideration also needs to be given to the underlying sustainability and growth of the business conducted by the associate and joint venture and which may give an indication of whether or not impairment in the value of the investment is required. Management’s judgement is also required when assessing whether a previously recognised impairment loss should be reversed.

Where impairment indicators exist, determination of the recoverable amount requires management to make assumptions to determine the fair value less costs to sell and value in use. Fair value less costs to sell is based on the best information available to management that refl ects the amount that the Group could obtain, at statement of fi nancial position date, from the disposal of the asset in an arm’s length transaction between knowledgeable, willing parties after deducting the costs of disposal, such as stamp duties or legal costs. Key assumptions on which management has based its determination of value in use include projected revenues, gross margins, capital expenditure, expected customer bases and market share.

1.3 Foreign currencies Functional and presentation currency

Items included in the fi nancial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated fi nancial statements are presented in Rand, which is the Group’s functional and presentation currency.

Transactions and balances Foreign currency transactions are recorded at the exchange rate ruling on the transaction date.

Foreign monetary currency assets and liabilities are brought into account at the rates or exchange ruling at the fi nancial year end.

Non-monetary assets and liabilities denominated in foreign currencies are translated at the rates of exchange ruling on the later of acquisition or revaluation dates. Foreign currency gains and losses are included in operating profi t.


1. Presentation of consolidated fi nancial statements (continued) 1.4 Property, plant and equipment

Property, plant and equipment are initially recorded at cost, being the purchase cost plus any cost to prepare the assets for their intended use. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefi ts associated with the item will fl ow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of fi nancial performance during the fi nancial period in which they are incurred.

Property, plant and equipment (excluding land and buildings) are subsequently carried at cost less accumulated depreciation and any accumulated impairment losses. Property, plant and equipment, with the exception of land, are depreciated on the straight-line basis over each asset’s estimated useful life. Land is not depreciated as it is deemed to have an indefi nite life. Each part of an item of property, plant and equipment with a cost that is signifi cant in relation to the total cost of the item shall be depreciated separately.

When an item of property, plant and equipment is revalued, any accumulated depreciation at the date of the revaluation is restated proportionately with the change in the gross carrying amount of the asset so that the carrying amount of the asset after revaluation equals its revalued amount.

Any increase in an asset’s carrying amount, as a result of a revaluation, is recognised to other comprehensive income and accumulated in the revaluation surplus in equity. The increase is recognised in profi t or loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in profi t or loss.

Any decrease in an asset’s carrying amount, as a result of a revaluation, is recognised in profi t or loss in the current period. The decrease is recognised in other comprehensive income to the extent of any credit balance existing in the revaluation surplus in respect of that asset. The decrease recognised in other comprehensive income reduces the amount accumulated in the revaluation surplus in equity.

The revaluation surplus in equity related to a specifi c item of property, plant and equipment is transferred directly to retained earnings when the asset is derecognised.

Depreciation is calculated on the straight-line basis to write off the cost of the assets to their residual values over their estimated useful lives as follows:

Item Average useful life Buildings 20 years Leasehold improvements Period of lease Furniture and fi xtures 5 years Motor vehicles 4 years Offi ce equipment 3 years IT equipment – Non-server equipment 3 years IT equipment – Server equipment 5 years Router equipment 6 years

The residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting period. If the expectations differ from previous estimates, the change is accounted for as a change in accounting estimate.

The depreciation charge for each period is recognised in profi t or loss.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefi ts are expected from its use or disposal. The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profi t or loss when the item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.

Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down to its recoverable amount.




1. Presentation of consolidated fi nancial statements (continued)1.5 Intangible assets Intangible assets acquired separately are measured on initial recognition at cost. The cost of

intangible assets acquired in a business combination is the fair value as at the date of acquisition. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is charged to the statement of fi nancial performance in the year in which the cost is incurred. The development costs that are capitalised are tested for impairment when there are indicators of impairment.

The useful lives of intangible assets are assessed to be either fi nite or indefi nite.

Intangible assets with fi nite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired.

The amortisation period and the amortisation method for an intangible asset with a fi nite useful life are reviewed at least at each fi nancial year end. The amortisation expense on intangible assets with fi nite lives is recognised in the statement of fi nancial performance.

Intangible assets with indefi nite lives are tested for impairment annually either individually or at the cash-generating unit level. Such intangibles are not amortised. The useful life of an intangible asset with an indefi nite life is reviewed annually to determine whether indefi nite life assessment continues to be supportable. If not, the change in the useful life assessment from indefi nite to fi nite is made on a prospective basis.

Research and development cost Costs incurred on development projects are recognised as intangible assets when the following

criteria are fulfi lled: • it is technically feasible to complete the intangible asset and that it will be available for use or sale; • management intends to complete the intangible asset and use or sell it; • there is an ability to use or sell the intangible asset; • it can be demonstrated how the intangible asset will generate probable future economic benefi ts; • adequate technical, fi nancial and other resources to complete the development and to use or sell

the intangible asset are available; and • the expenditure attributable to the intangible asset during its development can be reliably

measured.

Research expenditure is recognised as an expense as incurred. Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Direct costs include the product development employee costs and an appropriate portion of relevant overheads. Costs associated with the maintenance of existing products and expenditure on the concept and design of possible new or improved products is written off in the year in which it is incurred.

Following the initial recognition of the development expenditure, the cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete and the asset is available for use. It is amortised over the period of expected future benefi t. During the period of development, the asset is tested for impairment annually. Impairment tests are carried out on intangible assets that are not yet available for use annually or more frequently when an indication of impairment arises during the reporting year.


1. Presentation of consolidated fi nancial statements (continued) 1.5 Intangible assets (continued)

Amortisation of intangible assets is calculated using the straight line method to allocate the cost over the estimated useful life as follows:

Item Useful life Patents, trademarks and other rights 5 years Computer software, internally generated 3 years Computer software purchased 3 years Customer base 2 years Eyeballs technology 10 years

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying value of the asset and are recognised in the statement of fi nancial performance when the asset is derecognised.

1.6 Financial instruments Classifi cation

The Group classifi es fi nancial assets and fi nancial liabilities into the following categories:

Description of asset/liability Classifi cation Investments Fair value through profi t and loss Trade and other receivables Loans and receivables Loans receivable Loans and receivables Cash and cash equivalents Loans and receivables Trade and other payables Other liabilities Derivatives Fair value through profi t and loss Other fi nancial liabilities Other liabilities Loans payable Other liabilities

Initial recognition and measurement Financial instruments recognised on the statement of fi nancial position include investments in

shares, trade and other receivables, loans receivable, cash and cash equivalents, non-current and current liabilities, trade and other payables. All fi nancial instruments are initially measured at cost.

Financial instruments designated as available-for-sale in subsidiary Investments in the Group’s shares held by subsidiaries are categorised as available-for-sale fi nancial

assets in the subsidiaries’ separate fi nancial statements. Available-for-sale fi nancial assets are those non-derivative fi nancial assets that are designated as available-for-sale or are not classifi ed in any of the other categories or held to maturity investments. After initial recognition available-for-sale fi nancial assets are measured at fair value with gains and losses being recognised in the statement of comprehensive income. When the investment is derecognised the cumulative gain or loss in other comprehensive income is transferred to the statement of fi nancial performance. Investment in Group shares is refl ected as treasury shares in the Group.

Trade and other receivables and loans receivable Trade and other receivables and loans receivable are categorised as loans and receivables. These

include loans to holding companies, fellow subsidiaries, subsidiaries, joint ventures and associates and are recognised initially at fair value plus direct transaction costs. Subsequently these loans are measured at amortised cost using the effective interest rate method, less any impairment loss recognised to refl ect irrecoverable amounts. These instruments are non-derivative fi nancial assets with fi xed or determinable payments that are not quoted in an active market.

Cash and cash equivalents Cash and cash equivalents are categorised as loans and receivables and are carried at amortised

cost.




1. Presentation of consolidated fi nancial statements (continued) 1.6 Financial instruments (continued) Derivatives and investments

Derivative fi nancial instruments and investments are classifi ed as fi nancial assets or liabilities. Derivates are recognised initially at fair value on the date the derivative contract is entered into and are subsequently remeasured at fair value.

Derivatives over the Company’s own equity instruments and investments in shares are classifi ed as held for trading through profi t and loss. When the contracts expire and the Company takes delivery of its own equity instruments, the derivative contracts will be reclassifi ed to equity.

Variation margin call payments are offset against derivatives over the Company’s own equity as the Group has fully funded the derivative liability and has no access, or control over the variation margin call account. The Group will have access to the cash when the Group’s share price increases.

Trade and other payables, loans payable and other fi nancial liabilities All fi nancial liabilities are recognised on the date at which the Group becomes party to the

contractual provisions of the instrument.

Such fi nancial liabilities include trade and other payables, loans and other payables and bank overdrafts. These fi nancial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition these fi nancial liabilities are measured at amortised cost using the effective interest method.

Financial assets and liabilities are offset and the net amount presented in the statement of fi nancial position when, and only when the Group has a legal right to offset the amounts and intends to settle on a net basis to realise the asset and settle the liability simultaneously.

Loans payable and other fi nancial liabilities are classifi ed as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the report date.

Derecognition Derecognition of fi nancial instruments occurs when the Group no longer controls the contractual

rights or the obligation has been extinguished, which is normally the case when the instrument is sold, or all the cash fl ows attributable to the instrument are passed through to an independent third party.

All fi nancial assets except for those at fair value through profi t or loss are subject to review for impairment at least at each reporting date. Financial assets are impaired when there is any objective evidence that a fi nancial asset or a group of fi nancial assets is impaired.

Different criteria to determine impairment are applied for each category of fi nancial assets, which are described below in note 1.11.

All income and expenses relating to fi nancial assets that are recognised in profi t or loss are presented within fi nance cost, fi nance income or fi nancial items except impairment of trade receivables which is presented within other expenses.

1.7 Income tax Income tax expense recognised in profi t or loss comprises the sum of deferred taxation and current

taxation not recognised in other comprehensive income or directly in equity.

Current taxation Current income tax assets and liabilities for the current and prior periods are measured at the

amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the statement of fi nancial position date.


1. Presentation of consolidated fi nancial statements (continued) 1.7 Income tax (continued) Current taxation (continued)

Current income tax relating to items recognised directly in equity is recognised in equity and not in the statement of fi nancial performance.

Deferred taxation Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply

to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the statement of fi nancial position date. Provision is made for deferred tax on the revaluation of property, plant and equipment and on adjustments on business acquisitions. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities.

Deferred tax for the period is charged to the statement of fi nancial performance except to the extent that it relates to a transaction that is recognised directly in equity, or a business combination that is an acquisition. The effect on deferred tax of any changes in the tax rates is recognised in the statement of fi nancial performance, except to the extent that it relates to items previously charged or credited directly to equity. Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off tax assets against tax liabilities and deferred income taxes relate to the same taxable entity and the same taxation authority.

A deferred tax asset relating to deductible temporary differences is recognised for all deductible

differences to the extent that it is probable that future taxable profi ts will be available against which the associated unused tax losses and deductible temporary differences can be utilised. The carrying amount of deferred tax assets are reviewed at each statement of fi nancial position date and are reduced to the extent that it is no longer probable that the related tax benefi t will be realised.

Secondary tax on companies South African companies are subject to a dual corporate tax system, one part of the tax being

levied on the taxable income and the other, a secondary tax on companies (“STC”) on distributed income. Currently STC is not a withholding tax on shareholders but a tax on companies.

The tax effect of dividends is recognised when the liability to pay the dividend is recognised. The STC liability is reduced by dividends received during the dividend cycle, and where dividends received exceed dividends declared within a cycle, there is no liability to pay STC. The potential tax benefi t related to excess dividends received is carried forward to the next dividend cycle. Deferred tax assets are recognised in respect of unutilised STC credits to the extent that it is probable that the Group will declare future dividends to utilise such secondary tax credits.

Where dividends declared exceed the dividends received during a cycle, secondary tax is payable at the current STC rate. Secondary tax is a charge to profi t or loss, and is recognised in the taxation charge in the statement of fi nancial performance in the same period as the related dividend is accrued as a liability.

1.8 Leased assets A lease is classifi ed as a fi nance lease if it transfers substantially all the risks and rewards incidental

to ownership. A lease is classifi ed as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.

Finance leases – lessee Finance leases are recognised as assets and liabilities in the statements of fi nancial position at

amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statements of fi nancial position as a fi nance lease obligation. Each lease payment is allocated between the liability and fi nance charges using the effective interest rate. Finance costs are charged to the statement of fi nancial performance over the lease period.




1. Presentation of consolidated fi nancial statements (continued) 1.8 Leased assets (continued) Finance leases – lessee (continued)

The capitalised asset is depreciated over the shorter of the useful life of the asset or the lease term to its residual value.

Operating leases – lessee Operating lease payments are recognised as an expense on a straight-line basis over the lease

term. The difference between the amounts recognised as an expense and the contractual payments are recognised as an operating lease liability. This liability is not discounted.

1.9 Inventories

Inventories consist of airtime purchased from service providers.

Inventories are measured at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. The cost of inventories comprises of all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

The cost of decrease/(increase) in inventories is assigned using the weighted average cost formula. The same cost formula is used for all inventories having a similar nature and use to the entity.

When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs.

The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

1.10 Cash and cash equivalents Cash and cash equivalents comprise cash on hand and single stock futures call account together

with other short-term highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignifi cant risk of changes in value.

1.11 Impairment of assets Impairment of non-fi nancial assets

The Group evaluates the carrying value of assets with fi nite useful lives when events and circumstances indicate that the carrying value may not be recoverable. Irrespective of whether there is indication of impairment, the Group tests goodwill acquired in business combinations for impairment annually. This impairment test is performed during the initial period and annually thereafter. Intangible assets not yet available for use are tested annually for impairment.

An impairment loss is recognised in the statement of fi nancial performance when the carrying amount of an asset exceeds its recoverable amount. An asset’s recoverable amount is the higher of the fair value less cost to sell (the amount obtainable from the sale of an asset in an arm’s length transaction between knowledgeable willing parties), or its value in use. Value in use is the present value of estimated future cash fl ows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. The estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifi able cash fl ows.


1. Presentation of consolidated fi nancial statements (continued) 1.11 Impairment of assets (continued) Impairment of non-fi nancial assets (continued)

An impairment loss recognised for an asset, other than goodwill, in prior years is reversed if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised and the recoverable amount exceeds the new carrying amount. The reversal of the impairment is limited to the carrying amount that would have been determined (net of depreciation or amortisation) had no impairment loss been recognised in prior years. The reversal of such an impairment loss is recognised in the statement of fi nancial performance in the same line item as the original impairment charge.

Impairment of fi nancial assets The Group assesses at each statement of fi nancial position date whether a fi nancial asset or group

of fi nancial assets is impaired.

If there is objective evidence that an impairment loss on assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash fl ows (excluding future expected credit losses that have not been incurred) discounted at the fi nancial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced through use of an allowance account. The amount of the loss shall be recognised in the statement of fi nancial performance.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. Any subsequent reversal of an impairment loss is recognised in the statement of fi nancial performance.

In relation to trade receivables, an allowance for impairment is made when there is objective evidence (such as the probability of insolvency or signifi cant fi nancial diffi culties of the debtor detected through payment history) that the Group will not be able to collect all of the amounts due under the original terms of the invoice. The carrying amount of the receivable is reduced through useof an allowance account. Impaired debts are derecognised when they are assessed as uncollectible.

1.12 Share capital and equity Share capital represents the nominal value of shares that have been issued.

Share premium includes any premiums received on issue of share capital and premiums paid on repurchase of share capital. Any transaction cost associated with the issuing of shares is deducted from share premium, net of any related income tax benefi t.

The revaluation reserve within equity comprises gains and losses due to the revaluation of property, plant and equipment net of any deferred tax effect.

Retained earnings include all current and prior period retained profi ts.

Dividend distributions payable to equity shareholders are included in other liabilities when the dividends have been approved in a general meeting prior to the reporting date.

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.

Treasury shares Shares in Huge Group Limited held by the subsidiaries are treated as treasury shares. These shares

are treated as a deduction from the issued and weighted average numbers of shares and the cost price of the shares are deducted from share capital and share premium in the statement of fi nancial position on consolidation. Dividends received on treasury shares are eliminated on consolidation.




1. Presentation of consolidated fi nancial statements (continued) 1.13 Fair value estimation

The best evidence of fair value on initial recognition is the transaction price, unless the fair value is evidenced by comparison with other observable current market transactions in the same instrument or based on discounted cash fl ow models and option pricing valuation techniques whose variables include only data from observable markets. Subsequent to initial recognition, the fair values of quoted fi nancial assets are based on current bid prices. If the market for a fi nancial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques.

These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash fl ow analysis, and option pricing models refi ned to refl ect the issuer’s specifi c circumstances.

1.14 Provisions and contingencies Provisions are recognised when: • the Group has a present obligation as a result of a past event; • it is probable that an outfl ow of resources embodying economic benefi ts will be required to settle

the obligation; and • a reliable estimate can be made of the obligation.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that refl ects current market assessments of the time value of money and the risks specifi c to the obligation. The increase in the provision due to the passage of time is recognised as an interest expense.

Where possible outfl ows of economic resources, as a result of present obligations, is considered improbable or remote, no liability is recognised.

Possible infl ow of economic benefi ts to the Group that do not yet meet the recognition criteria of an asset are considered contingent assets.

Contingent assets and contingent liabilities are not recognised. They are disclosed in the notes.

1.15 Employee benefi ts Short-term employee benefi ts

The cost of short-term employee benefi ts (those payable within 12 months after the service is rendered, such as paid vacation leave and sick leave, bonuses, and non-monetary benefi ts such as medical care) are recognised in the period in which the service is rendered and are not discounted.

The expected cost of compensated absences is recognised as an expense as the employees render services that increase their entitlement or, in the case of non-accumulating absences, when the absence occurs.

The expected cost of profi t sharing and bonus payments is recognised as an expense when there is a legal or constructive obligation to make such payments as a result of past performance.

Defi ned contribution plans A defi ned contribution plan is one under which the Group pays a fi xed percentage of employees’

remuneration as contributions into a separate entity (a fund), and will have no further legal or constructive obligations to pay additional contributions if the fund does not hold suffi cient assets to pay all employee benefi ts relating to employee service in the current and prior periods. Contributions to defi ned contribution plans in respect of services rendered during a period are recognised as an employee benefi t expense when they are due. The Group does not have any defi ned benefi t plans.


1. Presentation of consolidated fi nancial statements (continued) 1.15 Employee benefi ts (continued) Share-based payments transactions

The grant date fair value of share-based payments awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees unconditionally became entitled to the awards. The amount recognised as an expense is adjusted to refl ect the number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that do meet the related service and non-market performance conditions at the vesting date. For share-based payments awards with non-vesting conditions, the grant fair value of the share-based payment is measured to refl ect such conditions and there is no true-up for differences between expected and actual outcomes.

The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash, is recognised as an expense with a corresponding increase in liabilities, over the period that the employees unconditionally become entitled to payment. The liability is remeasured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognised as personnel expense in profi t or loss.

Share-based payment arrangements in which the Group received goods or services as consideration for its own equity instruments are accounted for as equity-settled share-based payment transactions, regardless of how the equity instruments are obtained by the Group.

1.16 Segment reporting Previously operating segments were determined and presented in accordance with IAS 14 –

Segment Reporting whereby the segment reporting was done by geographical area. As of 1 March 2009 the Group determines and presents operating segments based on the information that internally is provided to the CEO, who is the Group’s chief operating decision maker. The change in accounting policy is due to the adoption of IFRS 8 – Operating Segments.

Comparative segment information has been re-presented in conformity with the transitional requirements of such standard.

An operating segment is a component of the Group that engages in business activities from which it may earn revenue and incur expenses, including revenue and expenses that relate to transactions with any of the Group’s other components. An operating segment’s results are reviewed regularly by the CEO to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete fi nancial information is available.

1.17 Revenue Revenue from the sale of goods is recognised when all the following conditions have been satisfi ed: • the Group has transferred to the buyer the signifi cant risks and rewards of ownership of the

goods; • the Group retains neither continuing managerial involvement to the degree usually associated

with ownership nor effective control over the goods sold; • the amount of revenue can be measured reliably; • it is probable that the economic benefi ts associated with the transaction will fl ow to the Group;

and • the costs incurred or to be incurred in respect of the transaction can be measured reliably.

When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction is recognised by reference to the stage of completion of the transaction at the end of the reporting period. The outcome of a transaction can be estimated reliably when all the following conditions are satisfi ed:

• the amount of revenue can be measured reliably; • it is probable that the economic benefi ts associated with the transaction will fl ow to the Group; • the stage of completion of the transaction at the end of the reporting period can be measured

reliably; and • the costs incurred for the transaction and the costs to complete the transaction can be measured

reliably.




1. Presentation of consolidated fi nancial statements (continued) 1.17 Revenue (continued)

When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue shall be recognised only to the extent of the expenses recognised that are recoverable.

Service revenue is recognised by reference to the stage of completion of the transaction at the end of the reporting period. Stage of completion is determined by services performed to date as a percentage of total services to be performed.

Connection incentive bonus revenue is awarded by service providers for all new, ported and renewed contracts. Contracts are for periods of 24 months. Revenue is recognised on a new contract activation, on port and on renewal instructions. No provision is raised against the connection incentive revenue for early cancellations as the Group does not have a history of cancelling lines that are still within contract.

Revenue is measured at the fair value of the consideration received or receivable and represents the amounts receivable for goods and services provided in the normal course of business, net of trade discounts and volume rebates, and value added tax. Service fees included in the price of the product are recognised as revenue over the period during which the service is performed.

1.18 Investment income Investment income includes fi nance and dividend income.

Finance income is recognised on an accrual basis using the effective interest method.

Dividend income, other than those from investments in associates, are recognised at the time that the right to receive payment is established.

1.19 Cost of sales

When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised.

The related cost of providing services recognised as revenue in the current period is included in cost of sales.

1.20 Finance costs Finance costs that are directly attributable to the acquisition, construction or production of a

qualifying asset, form part of the cost of that asset and may no longer be expensed. Other fi nance costs are recognised as an expense.

1.21 Dividend payable Dividends payable and STC thereon is recognised in the period in which such dividends are

declared.

1.22 Earnings per share The Group presents basic and diluted earnings per share (“EPS”) data for its ordinary shares. Basic

EPS is calculated by dividing the profi t or loss attributable to ordinary shareholders of the Group by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profi t or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise convertible notes and share options granted to employees.


Notes to the consolidated fi nancial statementsfor the year ended 28 February 2010

2. Changes in accounting policy The consolidated fi nancial statements have been prepared in accordance with International Financial

Reporting Standards on a basis consistent with the prior year except for the adoption of the following standards:

IFRS 8 – Determination and Presentation of Operating Segments As of 1 March 2009 the Group determines and presents operating segments based on the information

that internally is provided to the CEO, who is the Group’s chief operating decision maker. The change in accounting policy is due to the adoption of IFRS 8 – Operating Segments. Previously operating segments were determined and presented in accordance with IAS 14 – Segment Reporting. The new accounting policy in respect of operating segment disclosures is presented as follows:

An operating segment is a component of the Group that engages in business activities from which it may earn revenue and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. An operating segment’s operating results are reviewed regularly by the CEO to make decisions about resources to be allocated to the segment and assess its performance for which discrete fi nancial information is available.

Comparative segment information has been reclassifi ed in conformity with the transitional requirements of such standards. Since the change in accounting policy only impacts presentation and disclosure aspects, there is no impact on earnings per share.

Only one segment report is presented to the CEO. This segment report includes details of the various revenue lines for the Group.

IFRS 2 – Share-based Payments As a result of the 10% share option issued to Nathan Lewin, a shareholder and employee in a subsidiary

company, the Group has adopted the share-based payment accounting policy. (Refer note 1.15.)

IAS 27 (Amended) – Consolidated and Separate Financial Statements The Group has early adopted this standard as a result of the additional 52% acquisition in Eyeballs Mobile

Advertising (Pty) Ltd. Control has been gained and as such the net identifi able assets of the subsidiary as well as the non-controlling interest and negative goodwill has been recognised. (Refer note 45.)

IFRS 3 (Revised) – Business Combinations The Group has early adopted this standard as a result of the additional 52% acquisition in Eyeballs Mobile

Advertising (Pty) Ltd. Non-controlling interest has been calculated at their proportionate share of the fair value of the net identifi able assets. All previous interests were remeasured and fair value adjustments recognised in profi t and loss.


3. Property, plant and equipment 2010 2009 Accumulated Accumulated depreciation depreciation Cost/ and Carrying Cost/ and Carrying Figures in Rand valuation impairment amount valuation impairment amount

Group Land 2 171 871 – 2 171 871 1 979 018 – 1 979 018 Buildings 3 353 128 – 3 353 128 3 055 382 (111 740) 2 943 642 Furniture and fi xtures 1 089 115 (788 565) 300 550 984 070 (570 310) 413 760 Motor vehicles 1 874 077 (1 008 293) 865 784 1 874 077 (554 489) 1 319 588 Offi ce equipment 2 490 141 (1 832 196) 657 945 2 629 955 (1 510 595) 1 119 360 IT equipment 11 094 935 (8 194 261) 2 900 674 10 669 368 (6 954 769) 3 714 599 Leasehold improvements 717 041 (309 325) 407 716 497 575 (149 096) 348 479 Router equipment 97 767 493 (64 851 294) 32 916 199 99 432 982 (51 644 368) 47 788 614

Total 120 557 801 (76 983 934) 43 573 867 121 122 427 (61 495 367) 59 627 060

Reconciliation of movement in property, plant and equipment Additions Opening through carrying business Figures in Rand amount Additions combinations Disposals

Group 2010 Land 1 979 018 – – – Buildings 2 943 642 18 461 – – Furniture and fi xtures 413 760 15 709 3 732 – Motor vehicles 1 319 588 – – – Offi ce equipment 1 119 360 167 564 3 037 – IT equipment 3 714 599 596 611 348 002 (31 415) Leasehold improvements 348 479 244 657 – – Router equipment 47 788 614 1 985 273 – (189 882)

59 627 060 3 028 275 354 771 (221 297)

Note 45 Transfers to Closing intangible carrying Figures in Rand assets Revaluations Depreciation amount

Group 2010 Land – 192 853 – 2 171 871 Buildings – 604 191 (213 166) 3 353 128 Furniture and fi xtures 25 – (132 676) 300 550 Motor vehicles – – (453 804) 865 784 Offi ce equipment (115 273) – (516 743) 657 945 IT equipment (120 853) – (1 606 270) 2 900 674 Leasehold improvements (22 687) – (162 733) 407 716 Router equipment 161 933 – (16 829 739) 32 916 199

(96 855) 797 044 (19 915 131) 43 573 867

Note 5


Notes to the consolidated fi nancial statements continued


3. Property, plant and equipment (continued) Reconciliation of movement in property, plant and equipment

Opening Closing carrying carrying Figures in Rand amount Additions Disposals Depreciation amount

Group 2009 Land 1 979 018 – – – 1 979 018 Buildings 3 055 382 – – (111 740) 2 943 642 Furniture and fi xtures 494 305 174 716 (11 308) (243 953) 413 760 Motor vehicles 878 152 1 001 032 (117 519) (442 077) 1 319 588 Offi ce equipment 756 864 834 727 – (472 231) 1 119 360 IT equipment 3 123 525 2 469 341 (2 775) (1 875 492) 3 714 599 Leasehold improvements 235 670 221 012 – (108 203) 348 479 Router equipment 46 763 824 16 706 982 (132 414) (15 549 778) 47 788 614

57 286 740 21 407 810 (264 016) (18 803 474) 59 627 060

Group Company

Figures in Rand 2010 2009 2010 2009

Pledged as security Land and buildings 5 524 999 4 922 660 – – The registration of a general covering

bond in favour of First National Bank for the amount of R4 000 000 over Units 6 and 8, Doncaster Offi ce Park, situated in Kenilworth in the Western Cape, together with a cession of short-term insurance

over the said property. (Refer to note 16.) Motor vehicles 699 684 1 038 403 – – Eleven light commercial vehicles serve

as security for the instalment sale agreements with Wesbank.

Motor vehicles 166 100 228 538 – – Two light commercial vehicles serve as

security for instalment sale agreements with McCarthy.

Assets subject to fi nance leases Router equipment under fi nance lease 3 228 350 4 052 846 – – IT equipment under fi nance lease 1 092 840 1 481 419 – – Generator under fi nance lease 34 870 78 440 – – Revaluations of land and buildings Erf 534, Doncaster Offi ce Park Land and buildings consist of an offi ce

building situated in the municipality of Kenilworth, Cape Town under Title Deed No SK2204/2003S

– Purchase price on acquisition of subsidiary held 4 810 357 4 810 357 – – – Revaluation since purchase 1 021 087 224 043 – – – Accumulated depreciation (111 740) – – – – Depreciation (213 166) (111 740) – – – Additions since purchase 18 461 – – –

5 524 999 4 922 660 – –


3. Property, plant and equipment (continued) Land and buildings are revalued independently at regular intervals.

The effective date of the revaluation was 8 March 2010. The valuation was performed by an independent valuer, Mr Dave Holgate, a Professional Associated Property Valuer, of Holgate Property Services (Pty) Ltd.

The valuation was performed using the income capitalisation method, and the following assumptions were used: Vacancy of 1,5%, rate per square metre of R72,50 and area of 692 square metres.

The carrying amount of the revalued assets under the cost model would have been:

Figures in Rand Land Buildings Total

Acquired through business combinations 1 878 272 2 932 085 4 810 357 Additions – 18 461 18 461 Accumulated depreciation – (376 000) (376 000)

Carrying amount 1 878 272 2 574 546 4 452 818

4. Goodwill 2010 2009 Accumulated Carrying Accumulated Carrying Cost impairment amount Cost impairment amount

Goodwill 215 153 482 – 215 153 482 215 153 482 – 215 153 482 The goodwill arose on the acquisition of Huge Telecom (Pty) Ltd and CentraCell (Pty) Ltd in 2008. These

businesses are measured and viewed as one single cash-generating unit (“CGU”). Goodwill is tested for impairment annually. During the fi nancial year and prior year the Group assessed the recoverable amount of goodwill and

determined that no impairment of goodwill was required. The recoverable amount or value in use was determined by discounting the future cash fl ows generated

from the continuing use of the cash-generating unit. The valuation for 2009 was undertaken by Michael Roderick Gahagan CA (SA), BCom (Honours) (Rhodes

University). Mr Gahagan is a professional expert and Chief Executive Offi cer of Arcay Private Financial Services (Pty) Ltd. Mr Gahagan is a specialist valuator in the telecommunications market.

The valuation for 2010 was undertaken by Moore Stephens Corporate Finance. Assumptions used in

computing value in use were as follows: • Revenue at an average growth rate of 5 – 7 percent for the year 2011 – 2015; • Operating cost margins remain constant; • A pre-tax discount rate of 23,63%. While the value in use calculation indicates no impairment at year end, the calculation is particularly

sensitive to the following inputs (assuming all others remain constant): • An increase in the weighted average cost of capital by 1,9% would result in an impairment loss of

R5,2 million; • A decrease in the forecast profi ts by 1% will result in an impairment loss of R5,8 million; and • A decrease of 2,64% in the expected revenue growth rates over the fi ve year forecast period will result

in an impairment loss of R62,6 million.




5. Intangible assets 2010 2009 Accumulated Accumulated amortisation amortisation Cost/ and Carrying Cost/ and Carrying Figures in Rand valuation impairment amount valuation impairment amount

Group Patents, trademarks and other rights 144 525 – 144 525 – – – Computer software internally generated 5 335 580 (174 804) 5 160 776 – – – Computer software purchased 4 343 323 (2 649 550) 1 693 773 2 679 838 (1 395 829) 1 284 009 Customer base and patent 1 112 937 (454 295) 658 642 – – - Eyeballs technology 16 054 297 (1 605 430) 14 448 867 – – –

Total 26 990 662 (4 884 079) 22 106 583 2 679 838 (1 395 829) 1 284 009

Reconciliation of movement in intangible assets Additions Transfers through from Opening business property, Closing Figures carrying combi- plant and Amor- carrying in Rand amount Additions nations Disposals equipment tisation amount

Group 2010 Patents, trademarks, and other rights – 47 232 97 293 – – – 144 525 Computer software, internally generated – 2 243 330 2 457 450 – 634 800 (174 804) 5 160 776 Computer software purchased 1 284 009 1 852 247 332 743 (109 563) (537 945) (1 127 718) 1 693 773 Customer base and patent – 1 112 939 – – – (454 297) 658 642 Eyeballs technology – – 16 054 297 – – (1 605 430) 14 448 867

1 284 009 5 255 748 18 941 783 (109 563) 96 855 (3 362 249) 22 106 583

Note 45 3

Reconciliation of movements in intangible assets Opening Closing carrying carrying Figures in Rand amount Additions Amortisation amount

Group 2009 Computer software purchased 1 101 653 867 828 (685 472) 1 284 009


6. Investments in subsidiaries Percentage Percentage Carrying Carrying holding holding amount amount Name of company Held by 2010 2009 2010 2009

Eyeballs Mobile Advertising Huge Group (Pty) Ltd Limited 77 25 6 000 000 – CentraCell (Pty) Ltd Huge Group Limited 100 100 107 100 453 107 100 453 Huge Telecom (Pty) Ltd Huge Group Limited 100 100 127 998 784 127 998 784 Huge Media (Pty) Ltd Huge Group Limited 100 – 100 – Huge Cellular (Pty) Ltd Huge Group Limited 100 – 100 –

241 099 437 235 099 237

Group Company

Figures in Rand 2010 2009 2010 2009

Eyeballs Mobile Advertising (Pty) Ltd Shares – – 6 000 000 –

– – 6 000 000 –

CentraCell (Pty) Ltd Shares – – 69 411 943 69 411 943 Equity advance – – 37 688 510 37 688 510

– – 107 100 453 107 100 453

Huge Telecom (Pty) Ltd Shares – – 113 343 478 113 343 478 Equity advance – – 14 655 306 14 655 306

– – 127 998 784 127 998 784

Huge Media (Pty) Ltd Shares – – 100 –

– – 100 –

Huge Cellular (Pty) Ltd Shares – – 100 –

– – 100 –

No impairment losses have been identifi ed in the current year (2009: Rnil). The value in use of the subsidiaries exceed their carrying values.

All the rights, and interest to 30% of the issued share capital of CentraCell (Pty) Ltd and 30% of the issued share capital of Huge Telecom (Pty) Ltd are pledged and ceded as continuing general covering collateral security for the payment and performance of the obligations of the Huge Group Limited to Vodacom (Pty) Ltd.

The investment in Eyeballs Mobile Advertising (Pty) Ltd was previously refl ected as an investment in associate. (Refer note 8.)




7. Investment in joint venture Percentage Percentage Carrying Carrying Listed/ holding holding amount amount Name of company unlisted 2010 2009 2010 2009

Gonondo Telecom (Pty) Ltd Unlisted 50 50 540 291 822 941

The carrying amount of the joint venture is shown net of impairment losses.

Group Company

Figures in Rand 2010 2009 2010 2009

The movement in the carrying amount is as follows: Gonondo Telecom (Pty) Ltd Opening carrying amount of investment in joint venture 822 941 136 249 – – Share of earnings (282 650) 686 692 – –

Closing carrying amount of investment in joint venture 540 291 822 941 – –

Share of earnings is made up as follows: Profi t from joint venture 517 350 1 086 692 – – Dividends received (800 000) (400 000) – –

Closing carrying amount of investment in joint venture (282 650) 686 692 – –

Summary of Group’s interest in joint venture

Statement of fi nancial position Non-current assets 426 464 398 925 Current assets 973 852 2 270 419 Non-current liabilities 221 403 125 885 Current liabilities 98 331 498 653

Statement of fi nancial performance – 12 months Revenue 2 631 568 3 645 554 Expenses (1 012 232) (634 036) Investment revenue 29 961 36 719 Income tax expense (614 496) (923 506)

Statement of cash fl ows – 12 months Cash generated by operating activities 1 388 887 2 107 243 Cash fl ows from investing activities (49 517) (26 276) Cash fl ows from fi nancing activities (1 600 000) 549 900


8. Investments in associates

Percentage Percentage Carrying Carrying Listed/ holding holding amount amount Name of company unlisted 2010 2009 2010 2009

TelePassport Communications (Pty) Ltd Unlisted 49 49 2 332 732 1 941 638 Managed Voice Solutions (Pty) Ltd Unlisted 33 33 57 940 – Eyeballs Mobile Advertising (Pty) Ltd Unlisted 77 25 – 6 000 000

2 390 672 7 941 638

The carrying amounts of associates are shown net of impairment losses.

Group Company

Figures in Rand 2010 2009 2010 2009

The movement in the carrying amount is as follows: TelePassport Communications (Pty) Ltd – incorporated in Namibia Opening carrying amount of investment 1 941 638 1 304 051 – – Share of earnings 391 094 637 587 – –

Closing carrying amount of investment 2 332 732 1 941 638 – –

Share of earnings from associate is made up as follows: Profi t from associate 1 371 094 1 555 048 – – Dividend received (980 000) (917 461) – –

Profi t from associate 391 094 637 587 – –

Managed Voice Solutions (Pty) Ltd Opening carrying amount of investment – – – – Share of earnings 57 940 – – –

Closing carrying value of investment 57 940 – – –

Share of earnings from associate is made up as follows: Profi t from associate 57 940 – – –

Closing carrying value of investment 57 940 – – –




Group

Figures in Rand 2010 2009

8. Investments in associates (continued) Summary of group’s interest in associate – TelePassport Communications (Pty) Ltd Statement of fi nancial position Non-current assets 1 710 463 2 011 662 Current assets 8 370 637 7 207 968 Non-current liabilities 352 921 390 811 Current liabilities 4 967 504 4 866 294 Statement of fi nancial performance – 12 months Revenue 30 284 948 30 515 859 Expenses (23 433 740) (27 618 725) Investment revenue 174 859 212 626 Income tax expense (1 446 269) (1 029 093) Statement of cash fl ow – 12 months Cash fl ows generated by operating activities (76 488) 1 313 891 Cash generated from investing activities (607 818) (840 717) Summary of Group’s interest in associate – Managed Voice Solutions (Pty) Ltd Statement of fi nancial position Non-current assets 3 504 776 – Current assets 1 246 473 – Non-current liabilities 4 443 249 – Current liabilities 164 938 – Statement of fi nancial performance – 15 months Revenue 6 909 486 – Expenses (6 926 847) – Other income 217 423 – Income tax expense 57 000 – Statement of cash fl ow – 15 months Cash fl ows generated by operating activities (105 758) – Cash fl ows generated from investing activities (3 614 307) – Cash generated from fi nancing activities 4 443 249 –

Managed Voice Solutions (Pty) Ltd issued its fi rst set of fi nancial statements for the fi fteen month period ended 28 February 2010.

Eyeballs Mobile Advertising (Pty) Ltd A further 52% was purchased in Eyeballs Mobile Advertising (Pty) Ltd during the year. The investment is

now shown as a subsidiary. (Refer note 6 and 45.)


Group Company

Figures in Rand 2010 2009 2010 2009

9. Loans to/(from) subsidiary companies Subsidiaries Huge Media (Pty) Ltd – – 1 216 121 – The loan is unsecured, bears no interest

and has no fi xed terms of repayment. The loan has been subordinated.

Huge Telecom (Pty) Ltd – – (12 020 418) 19 982 674 The loan is unsecured, bears interest at

prime and has no fi xed terms of repayment. Huge Group Limited has ceded and pledged its rights, title and interest in loan to FirstRand Bank Limited. (Refer note 16.)

CentraCell (Pty) Ltd – – (9 958 534) (14 238 395) The loan is unsecured, bears interest

at prime and has no fi xed terms of repayment. The loan is immediately repayable on the granting of any order, whether provisional or fi nal, placing CentraCell (Pty) Ltd in liquidation or under judicial management as a result of the proceedings launched by a third party.

Huge Cellular (Pty) Ltd – – (100) – The loan is unsecured, bears no interest

and has no fi xed terms of repayment.

Eyeballs Mobile Advertising (Pty) Ltd – – 12 243 396 – The loan is unsecured, bears interest

at prime and has no fi xed terms of repayment. The loan is subordinated to the Consumer Group (Pty) Ltd. (Refer note 20.)

– – (8 519 535) 5 744 279

Non-current assets – – 13 459 517 – Current assets – – – 19 982 674 Current liabilities – – (21 979 052) (14 238 395)

– – (8 519 535) 5 744 279




Group Company

Figures in Rand 2010 2009 2010 2009

10. Loan to/(from) associate companies Managed Voice Solutions (Pty) Ltd 1 637 478 1 096 064 – 1 096 064 The loan is unsecured, bears interest

at prime and has no fi xed terms of repayment.

TelePassport Communications (Pty) Ltd (2 208 308) – – – The loan is unsecured, bears no interest

and is repayable in the next 12 months.

Eyeballs Mobile Advertising (Pty) Ltd – 5 000 000 – 5 000 000 The loan is unsecured, bears interest

at prime and has no fi xed terms of repayment.

(570 830) 6 096 064 – 6 096 064

Non-current assets – 5 000 000 – 5 000 000 Current assets 1 637 478 1 096 064 – 1 096 064 Current liabilities (2 208 308) – – –

(570 830) 6 096 064 – 6 096 064

11. Investments Non-current assets At fair value through profi t or loss – held for trading Spescom Limited 389 409 263 347 389 409 263 347


Group Company

Figures in Rand 2010 2009 2010 2009

12. Deferred tax Deferred tax asset Deferred tax asset 9 497 797 9 652 736 2 820 237 3 209 561 Deferred tax liability (3 885 162) – – –

5 612 635 9 652 736 2 820 237 3 209 561

Reconciliation of deferred tax asset Opening carrying amount 9 652 736 4 773 675 3 209 561 – Included in income tax expense (82 767) 4 806 637 (389 324) 3 209 561 Included in other comprehensive income 537 865 72 424 – – Acquisition of subsidiary (4 495 203) – – –

Closing carrying amount 5 612 635 9 652 736 2 820 237 3 209 561

Deferred taxation is made up of the following: Tax losses available for set-off against future taxable income 9 058 614 7 979 292 2 086 018 3 339 062 Prepaid expenses (527 740) (633 490) – – Provision for doubtful debt 2 487 515 2 677 711 – – Provision for leave pay 444 136 361 733 – – Revaluation of land and buildings (158 995) (696 861) – – Finance leases (51 174) 1 143 273 – – Operating leases 91 000 64 649 – – Restraint of trade 1 477 226 397 111 709 333 (196 000) Property, plant and equipment and intangibles (3 565 049) (2 145 547) – – Prepaid income 326 550 438 366 – – Fair value adjustments – Spescom Limited 76 235 66 499 24 886 66 499 Intangible assets – intellectual property

on Eyeballs Mobile Advertising (Pty) Ltd acquisition (4 045 683) – – –

5 612 635 9 652 736 2 820 237 3 209 561

Deferred tax assets have not been recognised in respect of tax losses of R7 763 465 for Eyeballs Mobile Advertising (Pty) Ltd and R1 604 890 for Huge Media (Pty) Ltd due to the uncertainties of whether future taxable profi ts will be available against which the Group can utilise these benefi ts.

13. Inventory Airtime 16 435 275 32 169 509 – –

Airtime 16 435 275 32 169 509 – – Obsolescence provision (1 609 854) (3 448 574) – –

14 825 421 28 720 935 – –

Inventories that relate to certain service providers are written down to net realisable value, as the stock expires between one and six months.




Group Company

Figures in Rand 2010 2009 2010 2009

14. Loans receivable Huge Charity Trust – 28 300 – –

The Huge Charity loan has been written off during the year.

15. Trade and other receivables Trade receivables 90 055 052 68 210 662 – – Watermark securities 90 109 274 220 24 119 – Prepayments 1 666 821 7 884 467 – 63 925 Deposits 2 318 521 3 067 865 – – VAT 1 180 395 – – – Accrued income 1 337 167 1 674 859 – – Single stock futures – initial margin deposit 2 941 645 6 134 730 2 815 925 5 631 850 Contracts for difference – initial margin deposit 3 318 892 6 247 326 – – Webber Wentzel – Julian Morelis 5 161 302 – 5 161 302 121 811

108 069 904 93 494 129 8 001 346 5 817 586

Trade receivables have been ceded as security for two facilities as listed below: • Huge Telecom (Pty) Ltd has ceded, as security all its rights, title and interest in and to the Huge

Telecom (Pty) Ltd book debts in favour of FirstRand Bank Limited. • Huge Telecom (Pty) Ltd reversionary book debt was ceded as security for the Nedbank loan. The

Nedbank loan has been repaid during 2010 and the cession has lapsed. • CentraCell (Pty) Ltd had ceded, as security, all its rights, title and interest in and to the CentraCell book

debts in favour of Nedbank Limited during 2009, until the loan was repaid.

Facilities utilised at year end: • FirstRand Bank Limited facility amounted to R2 569 598 (2009: Rnil) • Nedbank loan amounted to Rnil (2009: R7 218 535).

The Webber Wentzel – Julian Morelis receivable is funds held in a trust relating to the Julian Morelis restraint of trade legal matter. Refer to directors’ report. The amount has been released post year end.


Group Company

Figures in Rand 2010 2009 2010 2009

16. Cash and cash equivalents Cash and cash equivalents consist of: Cash on hand 1 880 9 406 – 960 Bank balances 11 428 391 13 775 736 4 034 395 2 830 935

11 430 271 13 785 142 4 034 395 2 831 895 The overdraft facility of Huge Telecom (Pty) Ltd is secured as follows: • Unlimited surety by Huge Group Limited • Unlimited surety by CentraCell (Pty) Ltd • Subordination of the loan between Huge Group Limited and Huge Telecom (Pty) Ltd (Refer note 9) • Subordination of James Charles Herbst shareholder loan in Huge Group Limited (Refer note 19) • Subordination of Anton Daniel Potgieter shareholder loan in Huge Group Limited (Refer note 19) • Subordination by Julian Arie Morelis of his loan account held in Huge Group Limited • Limited surety in the amount of R5 000 000 given by Anton Daniel Potgieter. It is noted in the

subordination agreement that repayments of Anton Daniel Potgieter’s loan may be made in monthly instalments not exceeding R300 000 (Refer note 19)

• Limited surety in the amount of R5 000 000 given by James Charles Herbst (Refer note 19) • The registration of a general covering bond in favour of FirstRand Bank Limited for the amount of

R4 000 000 over Units 6 and 8, Doncaster Offi ce Park, situated in Kenilworth in the Western Cape, together with a cession of short-term insurance over the said property (Refer note 2)

• Cession of all its rights, title and interest in and to the Huge Telecom (Pty) Ltd book debts.

In addition to the security, the Company may not acquire any further interest bearing debt without the bank’s permission; and the Company may not, without the bank’s written consent, encumber any of its assets or pay dividends.

Facility available at year end: R20 000 000.

The facility was reviewed at 15 April 2010 with no changes to the facility or the terms. The overdraft facility is payable on demand by FirstRand Bank Limited.




Group Company

Figures in Rand 2010 2009 2010 2009

17. Share capital Authorised 1 000 000 000 ordinary shares of R0,0001 each 100 000 100 000 100 000 100 000

Share Share Share Share capital premium capital premium

Issued Opening carrying value 1 March 2007 100 – 100 – Share issue on 2 July 2007 860 – 860 – Share issue on 31 July 2007 4 004 75 047 330 4 004 75 047 330 Share issue on 31 July 2007 2 050 51 246 250 2 050 51 246 250 Share issue on 31 July 2007 2 950 73 748 750 2 950 73 748 750 Share issue on 7 August 2007 36 883 462 36 883 462 Share issue to CentraCell Vendors 676 21 631 324 676 21 631 324 Listing expenses against share premium – (979 380) – (979 380)

Closing carrying amount 28 February 2008 10 676 221 577 736 10 676 221 577 736 Share issue 26 June 2008 500 14 999 500 500 14 999 500 Share repurchases (559) (7 754 878) – –

Closing carrying amount 29 February 2009 10 617 228 822 358 11 176 236 577 236 Share repurchases (406) (2 392 928) – –

Closing carrying amount at 28 February 2010 10 211 226 429 430 11 176 236 577 236

Group Company

Figures in Rand 2010 2009 2010 2009

Issued shares 111 760 000 shares of R0,0001 each 11 176 11 176 11 176 11 176 Treasury shares (965) (559) – –

10 211 10 617 11 176 11 176

Share premium On issue of shares 237 556 616 237 556 616 237 556 616 237 556 616 Less share issue cost (979 380) (979 380) (979 380) (979 380) Treasury shares (10 147 806) (7 754 878) – –

226 429 430 228 822 358 236 577 236 236 577 236

Treasury shares Purchased in 2009 559 7 754 878 – – Purchased in 2010 406 2 392 928 – –

965 10 147 806 – –


Group Company

Figures in Rand 2010 2009 2010 2009

18. Reserves Revaluation reserve Opening carrying amount 296 467 224 043 – – Net movement on revaluation of land and buildings (Refer note 3 for further information on land and buildings revaluation) 259 179 72 424 – –

555 646 296 467 – –

Share option reserve Eyeballs Mobile Advertising (Pty) Ltd option 659 392 – – –

659 392 – – –

Closing carrying amount 1 215 038 296 467 – –

The Eyeballs Mobile Advertising (Pty) Ltd option (“Eyeballs option”) is an option granted to Nathan Lewin, an employee, whereby Nathan Lewin may acquire from Huge Group 10 000 (effectively 10%) ordinary shares in the issued share capital in Eyeballs Mobile Advertising (Pty) Ltd by paying the option strike price of R137,50 per share. The option is exercisable at any point from the date of grant, i.e. 1 March 2009 to close of business on 1 March 2012 (i.e. three years), after which the Eyeballs option will lapse.

The binomial model was used to value the fair value for the Eyeballs option, as at 1 March 2009. The value is R65,94 per option, amounting to a total valuation of R659 392. This is treated as an equity-settled transaction.

The following assumptions were used: • Option life of three years (1 March 2009 until 1 March 2012) • Risk free interest rate 8,07% • Volatility of 50%




Group Company

Figures in Rand 2010 2009 2010 2009

19. Loans from shareholders James Charles Herbst (1 400 201) (1 207 372) (1 383 243) (1 107 372) Anton Daniel Potgieter (7 573 683) (10 983 957) (7 473 683) (10 883 957) Mojaho Trading (Pty) Ltd – (4 843 741) – (4 843 741) The loans bear interest at prime plus 4% (2009: prime plus 4%). The loans are repayable on or before

31 December 2010. Both the loans are subordinated to FirstRand Bank Limited as disclosed in note 16. The shareholders’ loans cannot be repaid without the consent of FirstRand Bank Limited. Both Anton Daniel Potgieter and James Charles Herbst have provided suretyships of R5 000 000 each to FirstRand Bank Limited. (Refer note 16.) The suretyship will only be considered for release when the Group’s consolidated equity as defi ned by the bank exceeds R32 000 000.

The subordination agreement allows repayment of Anton Daniel Potgieter’s loan in monthly instalments not exceeding R300 000. (Refer note 16.)

(8 973 884) (17 035 070) (8 856 926) (16 835 070)

Non-current liabilities – (17 035 070) – (16 835 070) Current liabilities (8 973 884) – (8 856 926) –

(8 973 884) (17 035 070) (8 856 926) (16 835 070)


Group Company

Figures in Rand 2010 2009 2010 2009

19. Loans from shareholders (continued) James Charles Herbst Opening carrying amount 1 207 372 3 380 131 1 107 372 2 361 947 Advances 1 582 585 11 601 729 1 418 564 11 601 729 Repayments (1 301 446) (15 177 417) (1 078 784) (13 870 332) Interest (reversed)/paid (88 310) 1 402 929 (63 909) 1 014 028


Anton Daniel Potgieter Opening carrying amount 10 983 957 3 045 781 10 883 957 – Transfer of balance from subsidiary company – – – 2 945 781 Advances – 8 350 690 – – Transfer of advances from subsidiary company – – – 8 350 690 Repayments (5 045 598) (1 539 608) (5 045 598) – Transfer of repayments from subsidiary company – – – (1 539 608) Interest paid 1 635 324 1 127 094 1 635 324 217 189 Transfer of interest from loan from subsidiary company – – – 909 905


Mojaho Trading (Pty) Ltd Opening carrying amount 4 843 741 2 067 192 4 843 741 – Transfer balance from subsidiary company – – – 2 067 192 Advances – 2 752 973 – – Transfer of advances from subsidiary companies – – – 2 752 973 Repayments (5 448 194) (653 715) (5 448 194) – Transfer of repayments from subsidiary companies – – – (653 715) Interest paid 604 453 677 291 604 453 – Transfer of interest with balance of loan from subsidiary company – – – 677 291

Closing carrying amount – 4 843 741 – 4 843 741




Group Company

Figures in Rand 2010 2009 2010 2009

20. Other fi nancial liabilities Vendor loan from Julian Arie Morelis 1 800 000 20 000 000 1 800 000 20 000 000 The loan is unsecured, does not bear

interest and has no fi xed repayment terms. The loan is under the control of the directors. The loan was repaid post year end. (Refer to note 16.)R18 200 000 of the loan was ceded to the Company on 26 February 2010. The remaining loan balance was paid post year end. The movement in the Vendor loan is recognised in the statement of fi nancial position. (Refer note 27.)

Nedbank Limited – 7 218 536 – – The loan is secured, bears interest at prime plus 2% per annum. The loan was repayable in monthly instalments of R499 699. The loan was repaid during the year. Consumer Group (Pty) Ltd – Development loan 279 728 – – – The loan is unsecured and bears

interest at prime. The loan is repayable in four monthly instalments from 1 September 2010. (Refer note 9.)

The 59 Kloofnek Trust – Development loan 87 823 – – – The Benson Trust – Development loan 87 823 – – – The Nash Lewin Trust – Development loan 87 823 – – – The loans are unsecured, bear interest

at prime and have no fi xed terms of repayment. The loans are subordinated in favour of the Consumer Group (Pty) Ltd.

Consumer Group (Pty) Ltd 68 099 – – – Nash Lewin Trust 64 986 – – – The 59 Kloofnek Trust 64 986 – – – The Benson Trust 64 986 – – – The loans are unsecured, bear no interest and have no fi xed terms of repayment.

806 254 7 218 536 – –

2 606 254 27 218 536 1 800 000 20 000 000

Non-current liabilities – 1 516 202 – – Current liabilities 2 606 254 25 702 334 1 800 000 20 000 000

2 606 254 27 218 536 1 800 000 20 000 000


Group Company

Figures in Rand 2010 2009 2010 2009

21. Finance lease obligations Minimum lease payments due – within one year 6 157 407 6 413 161 – – – in second to fi fth year inclusive 4 515 810 11 135 877 – –

10 673 217 17 549 038 – – Less: future fi nance charges (1 301 984) (3 529 937) – –

Present value of minimum lease payments 9 371 233 14 019 101 – –

Present value of minimum lease payments due – within one year 5 199 529 4 534 184 – – – in second to fi fth year inclusive 4 171 704 9 484 917 – –

9 371 233 14 019 101 – –

Non-current liabilities 4 171 704 9 484 917 – – Current liabilities 5 199 529 4 534 184 – –

9 371 233 14 019 101 – –

The Group leases certain assets under fi nance leases. The average lease term is 48 months and the rate of borrowing is variable. Interest rates are linked to prime at the contract date. Monthly instalments are R513 117 (2009: R534 430) inclusive of interest.

The Group’s obligations under fi nance leases are secured by the lessor’s charge over the leased assets. (Refer note 3.)

22. Trade and other payables Trade payables 124 418 756 114 803 748 152 464 3 573 139 Amounts received in advance 10 132 500 1 565 591 – – VAT 1 159 066 3 523 296 111 958 1 304 658 Payroll accruals 3 088 691 4 668 015 – – Accrued subscriptions 5 381 379 – – – Watermark Securities (Pty) Ltd – 236 893 – 236 893 Accrued audit fees 1 434 475 – 300 000 – Operating lease payables 325 000 230 888 – – Deposits received 1 007 294 596 625 – – Penalties and interest 99 388 344 779 – 344 779

147 046 549 125 969 835 564 422 5 459 469


Group Company

Figures in Rand 2010 2009 2010 2009

23. Revenue Rendering of services 508 743 912 549 625 799 – – Marketing incentive bonus 7 216 320 4 376 914 – – Connection incentive bonus 57 555 950 54 537 113 – –

573 516 182 608 539 826 – –

24. Other income Network support fees 771 018 861 013 – – Management fees paid by related parties – – 7 935 291 9 318 985 Commissions received – 39 403 – – Profi t on sale of property, plant and equipment 58 394 – – – Profi t on sale of investment – Spescom Limited 1 563 – 1 563 – Bad debt recovered – 9 803 – – Sundry income – 690 381 – –

830 975 1 600 600 7 936 854 9 318 985

25. Operating profi t Operating profi t for the year is stated after accounting for the following: Amortisation on intangible assets 3 362 249 685 472 – – Audit fees 2 446 115 935 850 696 046 547 496 Bad debt written off 21 084 590 876 507 – – Depreciation on property, plant and equipment 19 915 131 18 803 474 – – (Decrease)/increase in doubtful debt provision (905 694) 7 381 304 – – Employee costs 60 032 641 47 829 070 3 027 552 399 000 Inventory obsolescence 1 838 720 (11 077 726) – – Legal expenses 2 914 152 2 083 602 2 347 288 1 976 492 Loss on exchange differences 8 668 18 907 – – Loss on sale of associate – Eyeball Mobile Advertising (Pty) Ltd 6 000 000 – – – Negative goodwill on acquisition of subsidiary (5 633 227) – – – Operating lease charges 4 458 428 2 858 024 – – Research and development 18 082 – – – Restraint of trade 3 667 055 4 341 909 – – Share-based payment 659 392 – – –




Group Company

Figures in Rand 2010 2009 2010 2009

26. Investment income Dividend income Joint venture – local 800 000 400 000 – – Associates – foreign 980 000 917 461 – –

1 780 000 1 317 461 – –

Interest income Bank – 875 356 – – Interest on trade receivables 1 355 426 5 329 954 – – Other interest received from Group companies 1 349 958 – 6 905 335 2 239 802

2 705 384 6 205 310 6 905 335 2 239 802

4 485 384 7 522 771 6 905 335 2 239 802

27. Net change in fair value of fi nancial instruments Fair value loss on single stock futures (7 059 948) (17 881 163) (6 758 220) (17 257 588) Fair value loss on contracts for difference (2 928 434) (7 686 703) – – Fair value (gain)/loss on Spescom Limited 148 618 (237 498) 148 618 (237 498) Fair value gain on Vendor loan 18 200 000 4 500 000 18 200 000 4 500 000

8 360 236 (21 305 364) 11 590 398 (12 995 086)

28. Income from equity accounted investments Share of earnings net of dividends received 166 284 1 324 279 – –

29. Finance costs Loans from shareholders (2 327 907) (3 207 314) (2 175 868) (1 231 217) Borrowings – Nedbank loan (592 448) (508 975) – – Trade and other payables (672 474) – – – Bank (1 858 916) (2 298 526) – – South African Revenue Service (535 169) 496 198 (38 413) (344 779) FirstRand Bank Limited (395 991) – – – Finance leases (1 656 018) (1 009 077) – (15 000)

(8 038 923) (6 527 694) (2 214 281) (1 590 996)


Group Company

Figures in Rand 2010 2009 2010 2009

30. Income tax expense Major components of the income tax expense Current taxation Local income tax 55 320 334 248 – – Secondary tax on companies – 1 342 080 – 1 342 080 Foreign tax 49 000 36 750 – –

104 320 1 713 078 – 1 342 080

Deferred taxation Current year 902 928 (9 374 444) 1 642 369 (3 209 561) Prior year (over)/under provision (820 161) 4 567 806 (1 253 045) –

Movement 82 767 (4 806 638) 389 324 (3 209 561)

187 087 (3 093 560) 389 324 (1 867 481)

Reconciliation of the tax expense Reconciliation between applicable tax rate and average effective tax rate. Applicable tax rate (%) 28,00 28,00 28,00 28,00 Exempt income (8,52) (24,68) – (0,90) Tax loss used – – – 2,87 Foreign tax rates 0,59 0,85 – – Capital gains (32,11) – (14,53) – Assessed loss not utilised 19,65 – – – Disallowed expenditure 5,96 – 0,58 – Secondary tax on companies – 30,89 – (12,53) Change in estimate relating to prior year (11,30) (106,29) (11,96) –

2,27 (71,23) 2,09 17,44

Assessed losses available for set off against future taxable income Huge Telecom (Pty) Ltd 22 007 479 16 101 598 – – CentraCell (Pty) Ltd 2 895 650 470 656 – – Huge Group Limited 7 450 062 11 925 220 – –

32 353 191 28 497 474 – –




Group Company

Figures in Rand 2010 2009 2010 2009

31. Earnings and headline earnings per share Earnings – basic 9 028 859 7 437 218 – – Adjusted for: (Profi t)/loss on disposal of property, plant and equipment (58 394) 40 125 – – Loss on disposal of associate 6 000 000 – – – Negative goodwill on acquisition of subsidiary (5 633 227) – – – Taxation (86 346) – – –

Earnings – headline 9 250 892 7 477 343 – – Weighted average number of ordinary shares (basic and headline) 105 199 296 109 089 000 Earnings per share 8,58 6,82 – – Headline earnings per share 8,79 6,85 – – Diluted earnings per share 8,58 6,82 – – Diluted headline earnings per share 8,79 6,85 – –

There are no dilutive instruments.

32. Auditors’ remuneration Fees – Horwath Leventon Boner 1 011 915 935 850 396 046 547 496 Fees – KPMG Inc 1 434 200 – 300 000 –

2 446 115 935 850 696 046 547 496

33. Operating lease Minimum lease payments due – within one year 5 269 084 2 087 440 – – – in second to fi fth year 3 773 081 3 094 648 – –

9 042 165 5 182 088 – –

Operating lease payments represent rentals payable by the Group for certain of its offi ce properties and offi ce equipment. Leases are negotiated for an average term of fi ve years and rentals are fi xed for an average of three years. No contingent rent is payable.

Network lease commitments – within one year 160 486 818 152 269 811 – – – in second year 71 404 844 50 977 837 – –

231 891 662 203 247 648 – –

Network lease commitments represent subscriber agreements payable by the Group for access to networks and includes a limited amount of free minutes each month. Contracts are signed for 24 months.


Figures in Rand Gross Tax Net

34. Other comprehensive income Components of other comprehensive income Group – 2010 Movements on revaluation of land and buildings Gains on property revaluation 797 044 (537 865) 259 179

Components of other comprehensive income Group – 2009 Movements on revaluation Income tax relating to revaluation of land and buildings 72 424

Group Company

Figures in Rand 2010 2009 2010 2009

35. Cash generated from/(used in) operations Profi t before taxation 8 254 793 4 343 659 18 602 033 (10 707 498) Adjustments for: Depreciation and amortisation 23 277 378 19 488 948 – – (Profi t)/loss on sale of property plant and equipment (58 394) 40 125 – – (Profi t) on sale of investment – Spescom Limited (1 563) – (1 563) – Income from equity-accounted

investments (166 284) (1 324 279) – – Dividends received (1 780 000) (1 317 461) – – Interest received (2 705 384) (6 205 310) (6 905 335) (2 239 802) Finance costs 8 038 923 6 527 694 2 214 281 1 590 996 Fair value adjustments (Refer note 27) (8 360 236) 21 305 364 (11 590 398) 12 995 086 Share-based payment 659 392 – – – At acquisition revaluation adjustment (1 075 832) – – – Fair value adjustment on vendor loan – 4 500 000 – 4 500 000 Net bargain purchase price – Eyeballs Mobile Advertising (Pty) Ltd 366 773 – – – Loan written off – Huge Charity 28 000 – – – Changes in working capital: Decrease/(increase) in inventories 13 895 514 (22 256 426) – – Increase in trade and other receivables (14 575 775) (7 064 891) (2 183 760) (4 817 586) Increase/(decrease) in trade and other payables 21 076 714 36 329 398 (4 895 047) 5 395 188 Decrease in at acquisition trade receivables 1 091 – – – Decrease in at acquisition trade payables (672 229) – – –

46 203 181 54 366 821 (4 759 789) 6 716 384




Group Company

Figures in Rand 2010 2009 2010 2009

36. Income tax paid Payable at beginning of the year (3 204 805) (5 058 821) (3 393 310) (2 051 230) Current tax for the year recognised in profi t or loss (104 320) (1 713 078) – (1 342 080) (Receivable)/ payable at end of the year (2 174 246) 3 204 805 (982 888) 3 393 310

(5 483 371) (3 567 094) (4 376 198) –

37. Dividends paid Balance at beginning of the year (14 952) – (14 952) – Dividend declared – (13 411 200) – (13 411 200) Balance at end of the year 14 952 14 952 14 952 14 952

– (13 396 248) – (13 396 248)

38. Related parties Relationships Subsidiaries Huge Telecom (Pty) Ltd Huge Media (Pty) Ltd CentraCell (Pty) Ltd Eyeballs Mobile Advertising (Pty) Ltd Huge Cellular (Pty) Ltd

Joint ventures Gonondo Communications (Pty) Ltd Associates TelePassport Communications (Pty) Ltd (a Namibian company) Managed Voice Solutions (Pty) Ltd Entities controlled by directors Mojaho Trading (Pty) Ltd Accknowledge (Pty) Ltd Pacifi c Breeze Trading 417 (Pty) Ltd Eagle Creek investment 223 (Pty) Ltd Jika Africa Consulting (Pty) Ltd Shareholders The Headland partnership Broker Proprietary (Pty) Ltd Easy Nominees (Pty) Ltd Mojaho Trading (Pty) Ltd Tetragona Nominees (Pty) Ltd Praesidium Capital Management (Pty) Ltd Luigi’s Trust Shareholders and directors James Charles Herbst Vincent Mohele Mokholo Anton Daniel Potgieter Manogaran Pillay Stephen Peter Tredoux Michael Ronald Beamish Michelle Allison Meth Donovan Tredoux Julian Arie Morelis


Group Company

Figures in Rand 2010 2009 2010 2009

38. Related parties (continued) Related party balances Loan accounts – Owing (to) by related parties Anton Daniel Potgieter (7 573 683) (10 983 957) (7 473 683) (10 883 957) James Charles Herbst (1 400 201) (1 207 372) (1 383 243) (1 107 372) Mojaho Trading (Pty) Ltd – (4 843 741) – (4 843 741) Vendor loan from Julian Arie Morelis (1 800 000) (20 000 000) (1 800 000) (20 000 000) Huge Charity Trust – 28 300 – – CentraCell (Pty) Ltd – – (9 958 534) (14 238 395) Huge Telecom (Pty) Ltd – – (12 020 418) 19 982 674 Huge Media (Pty) Ltd – – 1 216 121 – Eyeballs Mobile Advertising (Pty) Ltd – 5 000 000 12 243 396 5 000 000 TelePassport Communications (Pty) Ltd (Namibia) (2 208 308) – – – Managed Voice Solutions (Pty) Ltd 1 637 478 1 096 064 – 1 096 064 Huge Cellular (Pty) Ltd – – (100) – Amounts included in trade receivables (trade payables) regarding related parties Gonondo Telecom (Pty) Ltd (481 113) (1 405 299) – – Managed Voice Solutions (Pty) Ltd (134 159) – – – Investment in associate TelePassport Communications (Pty) Ltd (Namibia) 2 332 732 1 941 638 – – Managed Voice Solutions (Pty) Ltd 57 940 – – – Eyeballs Mobile Advertising (Pty) Ltd – 6 000 000 – 6 000 000

Investment in joint venture Gonondo Telecom (Pty) Ltd 540 291 822 941 – – Investment in subsidiaries Huge Telecom (Pty) Ltd – – 127 998 784 127 988 784 CentraCell (Pty) Ltd – – 107 100 453 107 100 453 Huge Media (Pty) Ltd – – 100 – Huge Cellular (Pty) Ltd – – 100 – Eyeballs Mobile Advertising (Pty) Ltd – – 6 000 000 – Related party transactions Interest paid to (received from) related parties Anton Daniel Potgieter 1 635 324 1 127 094 1 635 324 217 189 James Charles Herbst (88 130) 1 402 929 (63 909) 1 014 028 CentraCell (Pty) Ltd – – (2 816 168) – Huge Telecom (Pty) Ltd – – (2 461 331) – Eyeballs Mobile Advertising (Pty) Ltd – – (707 178) – Mojaho Trading (Pty) Ltd 604 453 677 291 604 453 – Managed Voice Solutions (Pty) Ltd (129 337) – – –




Group Company

Figures in Rand 2010 2009 2010 2009

38. Related parties (continued) Purchases from/(sales to) related parties Gonondo Telecom (Pty) Ltd 2 631 568 – – – Gonondo Telecom (Pty) Ltd (237 511) – – – Jika Africa Consulting (Pty) Ltd 68 250 – 31 750 – Managed Voice Solutions (Pty) Ltd (17 569) – – – Accknowledge Systems (Pty) Ltd 309 986 – – – Network support fees received from related parties TelePassport Communications (Pty) Ltd (Namibia) (771 018) (861 013) – – Management fees received from related parties CentraCell (Pty) Ltd – – (1 666 974) (3 118 985) Huge Telecom (Pty) Ltd – – (5 858 344) (6 200 000) Eyeballs Mobile Advertising (Pty) Ltd – – (229 804) – Huge Media (Pty) Ltd – – (180 169) – Dividends received from related parties Gonondo Telecom (Pty) Ltd (800 000) (400 000) – – TelePassport Communications (Pty) Ltd (Namibia) (980 000) (917 461) – – Share of earnings Gonondo Telecom (Pty) Ltd 282 650 (686 692) – – TelePassport Communications (Pty) Ltd (Namibia) (391 094) (637 587) – – Managed Voice Solutions (Pty) Ltd (57 940) – – – Fair value adjustments Single stock futures 7 059 948 17 881 163 6 758 220 17 257 588 Contracts for difference 2 928 434 7 686 703 – – Commission paid to related party Managed Voice Solutions (Pty) Ltd 2 714 077 – – –


39. Related party – Single stock future contract purchases In terms of a resolution of the Board of directors of Huge Group Limited passed on 11 June 2008,

the Board of directors of Huge Group Limited approved the opening of single stock future (“SSF”) and contract for difference (“CFD”) accounts with Watermark Securities and Nedbank.

In terms of a resolution of the Board of directors of Huge Group Limited passed at a Board meeting held on 8 July 2008, the Board of directors of Huge Group Limited resolved to acquire up to 20% of the ordinary shares of Huge Group Limited in issue by making use of cash, SSFs and CFDs.

On 16 October 2008, in terms of the Derivative Rules of the JSE Limited, and in particular the contract specifi cations for SSFs over the ordinary shares of Huge Group Limited held by Eagle Creek Investments 223 (Pty) Ltd (being an investment trading company wholly owned by Mr James Charles Herbst) and Mr Anton Daniel Potgieter, Eagle Creek and Mr Potgieter were dispossessed of 40 455 and 40 000 SSF contracts respectively by Watermark Securities (Pty) Ltd on the basis of refusing to lodge a unilateral increase in the initial margin of 250% imposed on the accounts held by Mr James Charles Herbst and Mr Anton Daniel Potgieter.

On 16 October 2008 and in terms of the resolutions of the Board of directors of Huge Group Limited passed on 11 June 2008 and 8 July 2008, Huge Group Limited acquired 80 455 SSF contracts from Watermark Securities. The spot price of the SSF contracts was R3,62 per contract of which Huge Group was required to pay initial margin and variation margin based on the underlying share price movements.




40. Directors’ emoluments Per- Basic formance Provident Figures in Rand salary bonus Medical aid fund Total

Executive 2010 James Charles Herbst 1 314 607 – 16 435 100 188 1 431 230 Anton Daniel Potgieter 1 541 891 – 32 040 150 307 1 724 238 Vincent Mokhele Mokholo 1 027 953 250 000 – 84 627 1 362 580 Manogaran Pillay 975 002 338 737 – 79 500 1 393 239 Stephen Peter Tredoux# 456 024 58 431 – 43 352 557 807 Michelle Allison Meth 913 184 319 000 – 85 318 1 317 502

6 228 661 966 168 48 475 543 292 7 786 596

2009 James Charles Herbst 1 082 861 – – 123 444 1 206 305 Anton Daniel Potgieter 1 420 071 – 24 242 158 387 1 602 700 Vincent Mokhele Mokholo 989 728 – – 122 804 1 112 532 Manogaran Pillay 991 018 – – 35 387 1 026 405 Stephen Peter Tredoux 970 581 – – 43 841 1 014 422 Rhammes Mogamad Nordien$ 564 444 – 16 614 80 520 661 578 Julian Arie Morelis^ 798 925 – 31 464 21 547 851 936

6 817 628 – 72 320 585 930 7 475 878

Non-executive 2010 Brian Alexander McQueen – – – 410 000 410 000 Kenneth Delroy Jarvis – – – 370 000 370 000 Donovan Tredoux – – – 220 000 220 000 Stephen Peter Tredoux# – – – 145 000 145 000 Michael Ronald Beamish@ – – – 100 000 100 000

– – – 1 245 000 1 245 000

2009 Brian Alexander McQueen – – – 165 000 165 000 Kenneth Delroy Jarvis – – – 54 000 54 000 Donovan Tredoux – – – 80 000 80 000 Fentse Emmanuel Lediga* – – – 100 000 100 000

– – – 399 000 399 000

# Stephen Peter Tredoux resigned as director of Huge Telecom (Pty) Ltd on 12 August 2009 and was appointed as

a non-executive director to the Board of Huge Group Limited on 12 August 2009.

@ Michael Ronald Beamish was appointed as non-executive on 9 December 2009.

$ Rhammes Mogamad Nordien resigned as director on 26 March 2008.

^ Julian Arie Morelis resigned as director on 10 February 2009.

* Fentse Emmanuel Lediga resigned as director on 10 February 2009.


41. Comparative fi gures Comparative information has been restated to provide more accurate presentation and disclosure as

required by IFRS. There has been no material impact on the statement of fi nancial position or statement of fi nancial performance.

42. Risk management The Group is exposed to various risks in relation to fi nancial instruments. The Group’s fi nancial assets and

fi nancial liabilities by category are summarised in the accounting policies for fi nancial instruments. The main types of risk are market risk, credit risk, liquidity risk and operational risk.

The Group’s management of risk is co-ordinated in close co-operation with the Board of directors and the Audit and Risk Committee.

The Board of directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board has established the Audit and Risk Committee, which is responsible for developing and monitoring the Group’s risk management policies. The committee reports regularly to the Board of directors on its activities.

The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to refl ect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Group Audit and Risk Committee oversees how management monitors compliance with the Group’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.

The Group’s focus is on actively securing the Group’s short- and medium-term cash fl ows by minimising exposure to risk. Long-term fi nancial investments are managed to generate lasting returns.

The most signifi cant risks to which the Group is exposed are described below. The Group is exposed to market risk through its use of fi nancial instruments and specifi cally to price risk, interest rate risk and to a lesser extent currency risk, which results from both its operating and investing activities.

42.1 Capital risk management The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a

going concern in order to provide returns for shareholders and benefi ts for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

The capital structure of the Group consists of debt, which includes the borrowings (excluding derivative fi nancial liabilities) disclosed in notes 9, 10, 19, 21 and 20, cash and cash equivalents disclosed in note 16, and equity as disclosed in the statements of fi nancial position.




Group Company

Figures in Rand 2010 2009 2010 2009

42. Risk management (continued) 42.1 Capital risk management (continued) Capital for the reporting period under review is summarised as follows: Total equity 257 683 078 249 407 483 – – Restricted shareholder loans 8 973 884 17 035 070 – – Cash and cash equivalents (11 430 271) (13 785 142) – –

Capital 255 226 691 252 657 411 – –

Shareholder restricted loans 8 973 884 17 035 070 – – Finance lease obligations 9 371 233 14 019 101 – – Other fi nancial liabilities 2 606 254 25 702 334 – – Equity 257 683 078 249 407 483 – –

Overall fi nancing 278 634 449 306 163 988 – –

Capital to overall fi nancing ratio 0,91 0,82 – –

42.2 Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates

and equity prices will affect the Group’s income or the value of its holdings in fi nancial instruments. The objective of market risk management is to manage and control market risk exposure within acceptable parameters, while optimising the return.

The Group is exposed to market risk in respect of listed equity shares and derivatives as a result of the investment in Spescom Limited and the investment in single stock future contracts and contracts for difference over its own equity.

42.2.1 Price risk For the listed shares and derivatives, an average volatility of 47% (2009: 60%) has been

observed during 2010. If the quoted share price for these shares and derivatives increased or decreased by that amount, profi t and equity would have changed by R7 000 000 (2009: R29 000 000). The shares in Spescom Limited are classifi ed as held for trading with fair value movement through profi t and loss.

The investments in listed equity security and derivative instruments (including single stock futures and contracts for difference) are considered strategic investments whose main objective is to provide the Company with various options. These options include but are not limited to the option to acquire one’s own equity shares in the future, an alternative way of raising cash, the creation of a hedge against an increasing share price, taking advantage of the difference between cost of equity and cost of debt without an initial cash outlay.


42. Risk management (continued) 42.2 Market risk (continued) 42.2.2 Interest rate risk The Group’s interest rate risk arises from long-term borrowings. Borrowings issued at

variable rates expose the Group to cash fl ow and interest rate risk.

At 28 February 2010, if interest rates on Rand-denominated borrowings had been 1% higher/lower with all other variables held constant, post-tax profi t for the year would have been R391 512 (2009: R329 000) lower/higher, mainly as a result of higher/lower interest expense on fl oating rate borrowings.

Group Company

Figures in Rand 2010 2009 2010 2009

Variable rate instruments Financial assets Loans to associate companies 1 637 478 1 096 064 – 1 096 064 Cash and cash equivalents 11 430 271 13 785 142 4 034 395 2 831 895 Financial liabilities Loans from shareholders (8 973 884) (17 035 070) (8 856 926) (16 835 070) Other fi nancial liabilities (806 254) (7 218 536) – – Finance leases (9 371 233) (14 019 101) – –

(6 083 622) (23 391 501) (4 822 531) (12 907 111)

42.2.3 Currency risk Most of the Group’s transactions are carried out in Rands. Exposures to currency exchange

rates arise from the Group’s overseas purchases of international voice termination, which are predominantly in US dollars (USD) and Euros and the network support fees received from its related party in Namibia.

The Group does not enter into forward exchange contracts to mitigate the exposure to foreign currency risk on the Group’s foreign purchases as the value of the purchases is limited and immaterial. Should the value of the purchases increase signifi cantly forward exchange contracts will be used to mitigate the risks.

Group Company

Figures in Rand 2010 2009 2010 2009

Foreign currency exposure at the end of the reporting period Current assets Trade receivables – Euro 82 044 103 660 – –

Liabilities Trade payables – USD 32 010 – – –

A sensitivity analysis on the exchange rate increasing or decreasing was not performed as the changes would be immaterial.




42. Risk management (continued) 42.3 Credit risk Credit risk is the risk of fi nancial loss to the Group if a customer or counterparty to a fi nancial

instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and investment securities.

The Group’s exposure to credit risk is infl uenced mainly by the individual characteristics of each customer.

Credit risk is managed on a group basis.

Financial assets exposed to credit risk at year end were as follows: Group Company

Figures in Rand 2010 2009 2010 2009

Financial instrument Investment – Spescom Limited 389 409 263 347 389 409 263 347 Loans to associate companies 1 637 478 1 096 064 – 1 096 064 Loans receivables – 28 300 – – Trade receivables 90 055 052 68 210 662 – – Single stock futures 2 941 645 6 134 730 2 815 925 5 631 880 Contracts for difference 3 318 892 6 247 326 – – Cash and cash equivalents 11 428 391 13 775 736 – –

The Group continuously monitors default of customers and other counterparties, identifi ed either individually or as a group and incorporates this information into its credit risk controls.

External credit ratings and/or reports on customers and counterparties are obtained and used. The Group’s policy is to deal only with suitably creditworthy counterparties. Average debtors terms is 60 days. Interest is charged on overdue accounts.

The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables and investments. The main components of this allowance are a specifi c loss component that relates to individually signifi cant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identifi ed. The collective loss allowance is determined based on the historical data of payment statistics for similar fi nancial assets.


42. Risk management (continued) 42.3 Credit risk (continued) Trade receivables Impairment after allowance impairment Figures in Rand Gross (incl VAT) allowance

2010 Not past due 76 698 443 – 76 698 443 Past due 30 days 5 457 180 (786 097) 4 671 083 Past due 60 days 2 294 875 (144 845) 2 150 030 Past due 90 days 1 956 704 (533 801) 1 422 903 Past due 120+ days 15 493 158 (10 380 565) 5 112 593

101 900 360 (11 845 308) 90 055 052

2009 Not past due 58 655 837 – 58 655 837 Past due 30 days 4 691 946 (1 255 714) 3 436 232 Past due 60 days 2 545 709 (632 615) 1 913 094 Past due 90 days 1 633 250 (1 432 675) 200 575 Past due 120+ days 13 434 922 (9 429 998) 4 004 924

80 961 664 (12 751 002) 68 210 662

The Group’s management considers that all the above fi nancial assets that are not impaired or past due for each of the reporting dates under review are of good credit quality.

Group Company

Figures in Rand 2010 2009 2010 2009

Impairment allowance Opening balance 12 751 002 4 569 209 – – (Decrease)/increase in impairment allowance (905 694) 8 181 793 – –

11 845 308 12 751 002 – –

The decrease and increase of the impairment allowance has been included in operating expenses in the statement of fi nancial performance.

The Group is not exposed to any signifi cant credit risk for any single counterparty or any group of counterparties having similar characteristics. Trade receivables consist of a large number of customers in various industries and geographical areas.

The credit risk for cash and cash equivalents and initial margin deposits on single stock futures and contracts for difference are considered negligible, since the counterparties are reputable banks with high quality credit ratings.




42. Risk management (continued) 42.4 Liquidity risk Prudent liquidity risk management implies maintaining suffi cient cash and marketable securities,

the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, the Group maintains fl exibility in funding by maintaining availability under committed credit lines.

The Group’s risk to liquidity is a result of the funds available to cover future commitments. The Group manages liquidity risk through an ongoing review of future commitments and credit facilities.

The Group manages its liquidity needs by carefully monitoring scheduled debt servicing payments for long-term fi nancial liabilities as well as forecast cash infl ows and outfl ows due in day-to-day business. Liquidity needs are monitored in various time bands, on a day-to-day and week-to-week basis as well as on the basis of a rolling 30-day projection. Long-term liquidity needs for a 180 day and a 360 day lookout period are identifi ed monthly. Net cash requirements are compared to available borrowing facilities in order to determine headroom or any shortfalls. This analysis shows if available borrowing facilities are expected to be suffi cient over the lookout period.

In order to meet its liquidity requirement for 30 day periods the Group maintains cash balances. Funding for long-term liquidity needs is additionally secured by an adequate amount of committed credit facilities and the ability to sell long-term fi nancial assets.

Within six Six to Two to Later than Figures in Rand months 12 months fi ve years fi ve years

Group Maturities are summarised as follows for 2010: Trade and other payables 147 046 549 – – – Finance lease obligations 3 078 703 3 078 703 4 515 810 – Other fi nancial liabilities – 806 254 – – Vendor loan 1 800 000 – – – Loans from associates – 2 208 308 – – Loans from shareholders – 8 973 884 – –

Maturities are summarised as follows for 2009: Trade and other payables 125 969 835 – – – Finance lease obligations 3 206 581 3 206 581 11 135 877 – Nedbank term loan 2 998 196 2 998 195 1 222 144 – Other fi nancial liabilities – – 1 516 202 –

The above amounts refl ect the contractual cash fl ows. The restricted shareholder loans amounting to R17 035 070 in 2009 and Vendor loan to Julian Arie Morelis amounting to R20 000 000 in 2009 are not included above as there were no fi xed terms of repayment in the prior year.

Within six Six to Two to Later than Figures in Rand months 12 months fi ve years fi ve years

Company Maturities are summarised as follows for 2010: Trade and other payables 564 422 – – – Vendor loan 1 800 000 – – – Loans from shareholders – 8 856 926 – –

Maturities are summarised as follows for 2009: Trade and other payables 5 459 469 – – –

The above amounts refl ect the contractual cash fl ows. The loans from subsidiary companies are not included in 2009 or 2010 as they have no fi xed terms of repayment. The vendor loan of R20 000 000 and restricted shareholder’s loan are R16 835 070 is not included in 2009 as there was no fi xed terms of repayment in the prior year.


42. Risk management (continued) 42.5 Classes of fi nancial liabilities Group Company

Carrying Carrying amount Fair value amount Fair value Figures in Rand 2010 2010 2010 2010

Vendor loan from Julian Arie Morelis 1 800 000 1 800 000 1 800 000 1 800 000 Loans from shareholder 8 973 884 8 973 884 8 856 926 8 856 926 Trade and other payables 147 046 549 147 046 549 564 422 564 422 Finance lease obligations 9 371 233 9 371 233 – – Loans from associates and subsidiaries 2 208 308 2 208 308 21 979 052 21 979 052 Other fi nancial liabilities 806 254 806 254 – –

Carrying Carrying amount Fair value amount Fair value Figures in Rand 2009 2009 2009 2009

Vendor loan from Julian Arie Morelis 20 000 000 20 000 000 20 000 000 20 000 000 Loans from shareholder 17 035 070 17 035 070 16 835 070 16 835 070 Trade and other payables 125 969 835 125 969 835 5 459 469 5 459 469 Finance lease obligations 14 019 101 14 019 101 – – Nedbank loan 7 218 536 7 218 536 – – Loans from subsidiaries – – 14 238 395 14 238 395

Figures in Rand 2010 2009 2010 2009

42.6 Classes of fi nancial assets Held for trading Investments – Spescom Limited 389 409 263 347 389 409 263 347 Single stock futures 2 941 645 6 134 730 2 815 925 5 631 880 Contract for differences 3 318 892 6 247 326 – -

6 649 946 12 645 403 3 205 334 5 895 227

Loans and receivables Trade and other receivables 90 055 052 68 210 662 – – Loans to associate companies 1 637 478 1 096 064 – 1 096 064 Cash and cash equivalents 11 430 271 13 785 142 4 043 395 2 831 895 Loans receivable – 28 300 – –

103 122 801 83 120 168 4 043 395 3 927 959

The carrying value approximates the fair value of the above classes of fi nancial assets.




42. Risk management (continued) 42.7 Valuation method of held for trading fi nancial assets The table below analyses the fi nancial instruments by valuation method. The different levels are

defi ned as follows: • Level 1: quoted prices in active markets for identical assets or liabilities • Level 2: inputs other than quoted prices included within level 1 that are observed for the asset

or liability.

Figures in Rand Level 1 Level 2 Total

2010 Investments 389 409 – 389 409 Single stock futures – 2 941 645 2 941 645 Contracts for difference – 3 318 892 3 318 892

389 409 6 260 537 6 649 946

2009 Investments 263 347 – 263 347 Single stock futures – 6 134 730 6 134 730 Contracts for difference – 6 247 326 6 247 326

263 347 12 382 056 12 645 403

42.8 Operational risk Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated

with the Group’s processes, personnel, technology and infrastructure and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour. Operational risks arise from all of the Group’s operations.

The Group’s objective is to manage operational risk so as to balance the avoidance of fi nancial

losses and damage to the Group’s reputation with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity.

The primary responsibility for the development and implementation of controls to address operational risks is assigned to senior management within each business unit. This responsibility is supported by the development of overall group standards for the management of operational risk in the following areas:

• requirements for appropriate segregation of duties, including the independent authorisation of transactions;

• requirements for the reconciliation and monitoring of transactions; • compliance with regulatory and other legal requirements; • documentation of controls and procedures; • requirements for the periodic assessment of operational risks faced, and the adequacy of

controls and procedures to address the risks identifi ed; • requirements for the reporting of operational losses and proposed remedial action • development of contingency plans; • training and professional development; • ethical and business standards; and • risk mitigation, including insurance where this is effective.


43. Fair value of fi nancial instruments All fi nancial instruments have been recognised in the statement of fi nancial position, except for variation

margin call payments and derivative liability which have been offset and disclosed in note 44. There is no material difference between their fair values and carrying values.

The carrying amounts of trade and other receivables, loans receivable, bank and cash, current and non-current liabilities, trade and other payables, derivative assets and liabilities reported in the statement of fi nancial position approximated their fair value.

Group Company

Figures in Rand 2010 2009 2010 2009

44. Derivative instrument set off Cumulative mark to the market on single stock futures (24 941 111) (17 881 163) (6 758 220) (17 257 588) Cumulative mark to the market on contract for difference (10 615 137) (7 686 703) – –

Cumulative mark to the market losses on derivatives (35 556 248) (25 567 866) (6 758 220) (17 257 588)

Funded by variation margin deposits Held by Standard Bank 24 941 111 17 881 163 6 758 220 17 257 588 Held by Nedbank Limited 10 615 137 7 686 703 – –

Variation margin call payments for the year 35 556 248 25 567 866 6 758 220 17 257 588

Variation margin call payments have been offset against derivative liabilities as the Group has the legal right to offset and intends to offset upon expiry of the contract. Therefore no amounts are refl ected on the statement of fi nancial position.

Initial margin call deposits on the single stock futures contracts and contracts for difference contracts have been shown in accounts receivable as deposits.




45. Acquisition of subsidiaries Eyeballs Huge Mobile Huge Figures in Rand Cellular Advertising Media Total

2010 Property, plant and equipment – 354 771 – 354 771 Intangible assets – 18 941 783 – 18 941 783 Deferred tax – (4 495 203) – (4 495 203) Trade receivables 100 891 100 1 091 Cash and cash equivalents – 41 348 – 41 348 Other fi nancial liabilities – (6 855 482) – (6 855 482) Trade and other payables – (672 229) – (672 229)

Fair value of net assets 100 7 315 879 100 7 316 079 Non-controlling interest – (1 682 652) – (1 682 652) Consideration paid (100) – (100) (200)

Bargain purchase price (negative goodwill) – 5 633 227 – 5 633 227

The acquisition of Huge Media (Pty) Ltd, Huge Cellular (Pty) Ltd and Eyeballs Mobile Advertising (Pty) Ltd during 2010 have been accounted for as per the accounting policy on IFRS 3 – Business Combinations. The profi ts of these entities have been included in these results as from the acquisition date, which as per IFRS 3 is regarded as the date when the effective control has been established. The acquisition dates for Huge Media (Pty) Ltd, Huge Cellular (Pty) Ltd and Eyeballs Mobile Advertising (Pty) Ltd have been established as 1 October 2009, 18 February 2008 and 7 March 2009 respectively.

The cost of the investment in Huge Media (Pty) Ltd and Huge Cellular (Pty) Ltd is R100 respectively. The

fair value of the intangible assets (including intellectual property) has been determined using the value in use calculation.

The value in use calculation was determined based on discounting the future cash fl ows generated from the cash-generating unit.

The valuation was undertaken by Moore Stephens Corporate Finance. Assumptions used in computing value in use were as follows:

• Revenue at an average growth rate of 10% for year 2010 to 2015 thereafter 4,5%; • Operating cost increasing in initial years to breakeven point, then remaining fairly constant; and • A pretax discount rate of 23,77%.


Group Company

Figures in Rand 2010 2009 2010 2009

46. Segmental reporting Revenue by operating segment Airtime 496 657 976 537 611 683 – – Connection incentive bonus 57 555 950 54 537 113 – – Marketing incentive 7 216 320 4 376 914 – – Telephone managed services 3 469 679 2 189 503 – – SMS services 5 082 880 5 988 865 – – International airtime 2 492 624 2 670 150 – – Hardware rental and sales 1 040 753 1 165 598 – –

573 516 182 608 539 826 – –

The directors have considered the implications of IFRS 8 – Operating Segments and are of the opinion that the current operations of the Group are substantially similar to one another and the risk and return of these operations are likewise similar. Resource allocation and management of the current operations are performed on an aggregated basis and as such the Group is considered to be a single aggregated business.

The lines of revenue are disclosed separately to the chief operating decision maker, the Group’s CEO, and are therefore reported as such in terms of IFRS 8.

Eyeballs Mobile Advertising (Pty) Ltd and Huge Media (Pty) Ltd are still in the start-up phase of their business and as such no revenue is reported.

The revenue lines are indicative of the products and services the Group provides. These products and services are distributed countrywide to all customers with no geographical differentiation. Refer to note 42 for the details and information of the Group’s major customer’s. The Group’s major suppliers are Vodacom, MTN, Orion, ITalk and Cell C.

47. New Standards and Interpretations 47.1 Standards and Interpretations effective and adopted in the current year In the current year, the Group has adopted the following Standards and Interpretations that are

effective for the current fi nancial year and that are relevant to its operations:

IFRS 8 – Operating Segments IFRS 8 (AC 145) replaces IAS 14 (AC 115) – Segment Reporting. The new standard requires a

‘management approach’, under which segment information is presented on the same basis as that used for internal reporting purposes.

The effective date of the standard is for years beginning on or after 1 January 2009.

The Group has adopted the standard for the fi rst time in the 2010 consolidated fi nancial statements. The impact of the standard is set out in note 2 Changes in Accounting Policy.

IFRS 2 Amendment: IFRS 2 – Share-based Payment: Vesting Conditions and Cancellations The amendment clarifi es that vesting conditions are only performance conditions or service

conditions. All other conditions are non-vesting conditions. Non-vesting conditions are accounted for in the same manner as market conditions. It further clarifi es that if either party can choose not to satisfy a non-vesting condition, then the arrangement is treated as a cancellation upon non-fulfi lment of that condition.

The effective date of the amendment is for years beginning on or after 1 January 2009.

The Group has adopted the amendment for the fi rst time in the 2010 consolidated fi nancial statements. The impact of the amendment is set out in note 2 Changes in Accounting Policy.




47. New Standards and Interpretations (continued) 47.1 Standards and Interpretations effective and adopted in the current year (continued) IAS 27 (Amended) – Consolidated and Separate Financial Statements The revisions require: • Losses of the subsidiary to be allocated to non-controlling interest, even if they result in the non-

controlling interest being a debit balance. • Changes in level of control without loss of control to be accounted for as equity transactions,

without any gain or loss being recognised or any remeasurement of goodwill. • When there is a change in the level of control without losing control, the group is prohibited from

making reclassifi cation adjustments. • When control is lost, the net identifi able assets of the subsidiary as well as non-controlling interest

and goodwill are to be derecognised. Any remaining investment is remeasured to fair value at the date on which control is lost, and a gain or loss on loss of control is recognised in profi t or loss.

The effective date of the amendment is for years beginning on or after 1 July 2009.

The Group has early adopted the standard for the fi rst time in the 2010 consolidated fi nancial statements. The impact of the standard is set out in note 2 Changes in Accounting Policy.

IFRS 3 (Revised) – Business Combinations The revisions to IFRS 3 (AC 140) – Business Combinations require: • Acquisition costs to be expensed. • Non-controlling interest to either be calculated at fair value or at their proportionate share of the

net identifi able assets of the acquiree. • Contingent consideration to be included in the cost of the business combination without further

adjustment to goodwill, apart from measurement period adjustments. • All previous interests in the acquiree to be remeasured to fair value at acquisition date when

control is achieved in stages, and for the fair value adjustments to be recognised in profi t or loss. • Goodwill to be measured as the difference between the acquisition date fair value of

consideration paid, non-controlling interest and fair value of previous shareholding and the fair value of the net identifi able assets of the acquiree.

• The acquirer to reassess, at acquisition date, the classifi cation of the net identifi able assets of the acquiree, except for leases and insurance contracts.

• Contingent liabilities of the acquiree to only be included in the net identifi able assets when there is a present obligation with respect to the contingent liability.

The effective date of the standard is for years beginning on or after 1 July 2009.

The Group has early adopted the standard for the fi rst time in the 2010 consolidated fi nancial statements. The impact of the standard is set out in note 2 Changes in Accounting Policy.


48. Standards and interpretations not yet effective At the date of authorisation of the fi nancial statements of Huge Group Limited (“the Group”) for the year

ended 28 February 2010, the following Standards and Interpretations were in issue but not yet effective:

Standard/Interpretation Effective date

IAS 24 (AC 126) (revised) Related Party Disclosures Annual periods beginning on or after 1 January 2011* IAS 39 (AC 133) amendment Eligible Hedged Items Annual periods beginning on or after 1 July 2009*

There are 15 individual Improvements to International Amendments are effective amendments to 12 standards Financial Reporting Standards for annual periods beginning 2009 on or after 1 January 2010,

or for annual periods beginning on or after 1 July 2009*

IFRS 2 (AC 139) Group Cash-settled Annual periods beginning Share-based Payment on or after 1 January 2010* IFRS 9 (AC 146) Financial Instruments Annual periods beginning on or after 1 January 2013* IFRIC 19 (AC 452) Extinguishing Financial Annual periods beginning Liabilities with Equity Instruments on or after 1 July 2010*

Improvements IFRS 5 (AC 142) Improvements to IFRSs 2008 Annual periods beginning – Amendments to IFRS 5 – on or after 1 July 2009* Non-current Assets Held for Sale and Discontinued Operations

IFRS 1 (AC 138) revised First-time Adoption of International Annual periods beginning Financial Reporting Standards on or after 1 July 2009*

IFRS 1 (AC 138) amendment Additional Exemptions for Annual periods beginning First-time Adopters on or after 1 January 2010*

IFRS 1 (AC 138) amendment First-time Adoption of International Annual periods beginning Financial Reporting Standards on or after 1 July 2010*

IFRIC 17 (AC 450) Distribution of Non-cash Annual periods beginning Assets to Owners on or after 1 July 2009*

*All Standards and Interpretations will be adopted at their effective date.

IFRS 5, IFRS 1, IAS 39 and IFRIC 17 are not applicable to the business of the Group and will therefore have no impact on future fi nancial statements. The directors are of the opinion that the impact of the application of the remaining Standards and Interpretations will be as follows:




48. Standards and interpretations not yet effective (continued) IAS 24 (AC 126) (revised) IAS 24 (AC 126) (revised) will be adopted by the Group for the fi rst time for its fi nancial reporting period

ending 28 February 2011. The standard will be applied retrospectively.

IAS 24 (AC 126) (revised) addresses the disclosure requirements in respect of related parties, with the main changes relating to the defi nition of a related party and disclosure requirements by government-related entities.

Under IAS 24 (AC 126) (revised) the defi nition of a related party has been amended with the result that a number of new related party relationships may be identifi ed.

IFRS 2 (AC 139) amendment – Group Cash-settled Share-based Payment The amendments to IFRS 2 (AC 139) will be adopted by the Group for the fi rst time for its fi nancial

reporting period ending 28 February 2011.

The amendments expand the scope of IFRS 2 (AC 139) to include group cash-settled share-based payments. Arrangements that are settled in cash or other assets based on the price or value of the Group or another Group entity’s equity instruments should be accounted for as share-based payments.

An entity that receives the goods or services will be required to account for the share-based payment in its separate fi nancial statements, even if it has no obligation to settle the transaction. This group will classify the share-based payments as equity-settled if it has an obligation to transfer its own equity instruments or if it does not have an obligation to settle the transaction. Any other share-based payment will be classifi ed as cash-settled.

The entity that has the obligation to settle the transaction will account for the arrangement as equity-settled if it has to settle in its own equity instruments. Any other settlement arrangement will be accounted for as cash-settled.

IFRS 9 (AC 146) IFRS 9 (AC 146) will be adopted by the Group for the fi rst time for its fi nancial reporting period ending

28 February 2011. The standard will be applied retrospectively, subject to transitional provisions.

IFRS 9 (AC 146) addresses the initial measurement and classifi cation of fi nancial assets and will replace the relevant sections of IAS 39 (AC 133).

Under IFRS 9 (AC 146) there are two options in respect of classifi cation of fi nancial assets, namely, fi nancial assets measured at amortised cost or at fair value. Financial assets are measured at amortised cost when the business model is to hold assets in order to collect contractual cash fl ows and when they give rise to cash fl ows that are solely payments of principal and interest on the principal outstanding. All other fi nancial assets are measured at fair value.

Embedded derivatives are no longer separated from hybrid contracts that have a fi nancial asset host. The impact on the fi nancial statements for the Group has not yet been estimated.

IFRIC 19 (AC 452) IFRIC 19 (AC 452) will be adopted by the Group for the fi rst time for its fi nancial reporting period ending

31 March 2012. The standard will be applied retrospectively.

IFRIC 19 (AC 452) addresses the accounting treatment for the extinguishment of fi nancial liabilities with equity instruments. Under IFRIC 19 (AC 452), equity instruments issued to a creditor to extinguish all or part of a fi nancial liability would represent “consideration paid”. The equity instruments will be measured on initial measurement at their fair value, unless such fair value cannot be reliably measured, in which case the fair value of the fi nancial liability will be used. The difference between the carrying amount of the fi nancial liability (or part thereof) extinguished and the initial measurement amount of the equity instruments shall be recognised in profi t or loss.


Number of Number of Percentage2010 shareholders shares shareholding

Shareholder analysis Public 404 34 588 754 30,95Non-public 35 77 171 246 69,05

439 111 760 000 100

Number of Number of shareholders shares

Non-public Directors of Huge Group Limited or any of its subsidiaries 19 17 570 811Associate of directors 14 37 586 212Holding greater than 10% 1 12 367 325Treasury shares 1 9 646 926

35 77 171 274

Number Percentage of shares holding

Major shareholdersBenefi cial holderSMK Genomineerde (Pty) Ltd 12 367 325 11,00Mojaho Trading (Pty) Ltd* 12 630 343 11,30Huge Telecom (Pty) Ltd 9 646 926 8,60Broker Proprietary (Pty) Ltd@ 8 462 746 7,60Huge Group Limited Trust Account# 7 248 725 6,50The Walkie Talkie Trust$ 7 020 564 6,30Pacifi c Breeze Trading (Pty) Ltd% 6 432 200 5,80Peregrine Equities (Pty) Ltd^ 6 171 643 5,50 Michael Ronald Beamish 5 647 210 5,10

75 627 682 67,70

* M Mokholo is a 20% shareholder in Mojaho Trading (Pty) Ltd@ Holder of underlying shares to the SSFs held by Huge# 7 164 325 shares held on behalf of Luigi’s Trust$ Benefi ciaries are DJ Frankel and JE Hare% Non benefi cial holding JC Herbst^ Held on behalf of MR Beamish and Praesidium

Shareholder analysisfor the year ended 28 February 2010


Number of Number of Percentage2009 shareholders shares shareholding

Shareholder analysis Public 382 54 418 056 48,69Non-public 19 57 341 944 51,30

401 111 760 000 100,00

Number of Number shareholders of shares

Non-public Directors of Huge Group Limited or any of its subsidiaries 11 33 340 491Associates of directors 6 6 131 757Holding greater than 10% 1 12 309 279Treasury shares 1 5 560 417

19 57 341 944

Number of Percentage shares holding

Major shareholdersBenefi cial holderMojaho Trading (Pty) Ltd* 12 630 343 11,30Syfret Securities (Pty) Ltd@ 12 309 279 11,01Luigi’s Trust# 7 164 325 6,41The Walkie Talkie Trust$ 7 020 564 6,00Syfrets Securities (Pty) Ltd 6 327 449 5,66

45 451 960 40,38

* VM Mkholo is a 20% shareholder in Mojaho Trading (Pty) Ltd@ Shares held on behalf of Huge Telecom (Pty) Ltd# Anton Daniel Potgieter is benefi ciary of Luigi’s Trust$ Benefi ciaries are DJ Frankel and JE Hare


Branch details and corporate information

Offi cesNational Tel: 0860 03 04 03

JohannesburgPostal: PO Box 1585, Kelvin, 2054Physical: Block 1, Woodlands Drive Offi ce Park5 Woodlands Drive, Woodmead, 2192Tel: 011 603 6000

Cape TownPostal: PO Box 36446, Glosderry, 7702Physical: Units 6&8, Doncaster Offi ce ParkPunters Way, Kenilworth Park, 7708Tel: 021 673 1000

DurbanPostal: PO Box 2786, Westway Offi ce Park, 3635Physical: No. 1, The Crescent, Westway Offi ce ParkWestville, 3629Tel: 031 279 6700

Port ElizabethPostal: PO Box 34795, Newton Park, 6055Physical: 51 Shirley Street, Newton Park, 6045Tel: 041 365 6765

Company SecretaryArcay Client Support (Pty) Ltd(Registration number 1998/025284/07)Arcay House II, 3 Annerley Road, ParktownJohannesburg, 2193PO Box 62397, Marshalltown, 2107

Corporate adviserManhattan Equity Corporate Finance (Pty) Limited(Registration number 2000/0011991/07)43 Saxon Road, Sandhurst, 2196PO Box 55376, Northlands, 2116

Reporting accountantsHorwath Leveton Boner(Practice number 903787)3rd Floor, 72 Grayston Drive, SandownJohannesburg, 2196PO Box 652550, Benmore, 2010

AttorneysDeneys Reitz(Registration number 1984/003385/21)82 Maude Street, Sandton, 2196PO Box 784903, Sandton, 2146

External auditorsKPMG Inc.(Practice number 900133)KPMG Crescent85 Empire RoadParktown2193

Private Bag 9Parkview2122

Designated advisorsArcay Moela Sponsors (Pty) Ltd(Registration number 2006/033725/07)Arcay House II, 3 Annerley Road, ParktownJohannesburg, 2193PO Box 62397, Marshalltown, 2107

Registered offi cesBlock 2, Woodlands Drive Offi ce Park5 Woodlands DriveWoodmead, Johannesburg, 2191PO Box 1585, Kelvin, 2054


Notice of Annual General Meeting of the shareholders of the Company

Notice is hereby given that the annual general meeting (“the annual general meeting”) of shareholders of the company will be held in the boardroom, Second Floor, Block 2, Woodlands Drive Offi ce Park, 5 Woodlands Drive, Woodmead, Johannesburg, South Africa, 2191, at 10h00 on Friday, 1 October 2010, to consider and, if deemed fi t, to pass, with or without modifi cation, the following special and ordinary resolutions:

Special resolution number 1 – general authority to acquire shares in the Company“RESOLVED THAT the general authority granted to the Company, or a subsidiary of the Company, to acquire ordinary shares in the issued share capital of the Company, in terms of sections 85(2), 85(3) and 89 of the Companies Act, Act 61 of 1973, as amended (“the Act”), and in terms of the Listings Requirements (“the Listings Requirements”) of the JSE Limited (“the JSE”), providing that:• authorisation thereto being given by the articles of association of the Company; and• any such acquisition of ordinary shares be implemented on the open market of the JSE; and• the general authority only be valid until the Company’s next annual general meeting, providing further

that the general authority shall not extend beyond 15 months from the date of the passing of this special resolution; and

• an announcement be published on SENS as soon as the Company has acquired ordinary shares constituting, on a cumulative basis, 3% of the number of ordinary shares in issue prior to the acquisition, and containing full details of such acquisitions; and

• acquisitions in the aggregate in any one fi nancial year may not exceed 20% of the Company’s ordinary issued share capital; and

• acquisitions in the aggregate from the date of passing of this special resolution may not exceed 20% of the Company’s ordinary issued share capital at the date of passing of this special resolution; and

• in determining the price at which ordinary shares issued by the Company are acquired by it in terms of this general authority, the maximum premium at which such ordinary shares may be acquired will be 10% of the weighted average of the market value at which such ordinary shares are traded on the JSE, as determined over the fi ve trading days immediately preceding the date of acquisition of such ordinary shares by the Company;

• at any point in time, the Company will only appoint one agent to effect any acquisition(s) on the Company’s behalf; and

• the Company or its subsidiaries will not acquire securities during a prohibited period in accordance with JSE Listings Requirements

be and is hereby approved.”

Reason and effect of special resolution number 1In accordance with article 28.13 of the articles of association of the Company, the Company may acquire shares issued by itself or by its holding company. The reason for this special resolution number 1 is to grant the Company a general authority, in terms of the Act, for the acquisition by the Company or any of its subsidiaries of shares issued by the Company or its holding company, which authority shall be valid until the earlier of the next annual general meeting of the Company or the variation or revocation of such general authority by special resolution by any subsequent general meeting of the Company, provided that the general authority shall not extend beyond 15 (fi fteen) months from the date of the annual general meeting. The passing and registration of this special resolution will have the effect of authorising the Company or any of its subsidiaries to acquire shares issued by the Company or its holding company. The following additional information, some of which may appear elsewhere in the Annual Report of which this notice forms part, is provided in terms of the JSE Listings Requirements and for purposes of this general authority:• Directors and management – the directors and management of the Company and set out on pages 4 and 5

of the Annual Report and on page 114 of this notice of annual general meeting;• Major shareholders – the major shareholders of the Company are set out on page 106 of the Annual Report;

HUGE GROUP LIMITED(Incorporated in the Republic of South Africa)(Registration number 2006/023587/06)(“Huge” or “the Company”)Share code: HUG ISIN: ZAE000102042


• Directors’ interests in ordinary shares – the directors’ interests in the ordinary shares of the Company are set out on page 37 of the Annual Report;

• Share capital of the Company – the share capital of the Company is set out on page 76 of the Annual Report.

Litigation statementThe directors, whose names are set out on page 4 and 5 of the Annual Report of which this notice forms part, are not aware of any legal or arbitration proceedings, including proceedings that are pending or threatened, that may have or have had in the recent past, being at least the previous 12 (twelve) months, a material effect on the fi nancial position of the Company or its subsidiaries.

Directors’ responsibility statementThe directors, whose names are set out on page 4 and 5 of the Annual Report of which this notice forms part, collectively and individually accept full responsibility for the accuracy of the information pertaining to this special resolution and certify that, to the best of their knowledge and belief, there are no facts that have been omitted which would make any statement false or misleading and that all reasonable enquiries to ascertain such facts have been made and that this special resolution contains all information.

Material changesOther than the facts and developments reported on in the Annual Report of which this notice forms part, there have been no material changes in the affairs or fi nancial position of the Company and its subsidiaries since the date of signature of the audit report and up to the date of this notice.

Statement by the Board of directors of the Company Pursuant to, and in terms of, the JSE Listings Requirements, the Board of directors of the Company hereby states that:(a) the intention of the directors of the Company is to utilise the general authority to acquire shares in the

share capital of the Company if, at some future date, the cash resources of the Company are in excess of its requirements or there are other good grounds for so doing. In this regard, the Board of directors will take account of, inter alia: an appropriate capitalisation structure for the Company, the long-term cash needs of the Company, and the interests of the Company.

(b) in determining the basis on which the Company intends to acquire its securities, the maximum number of securities to be acquired, and the date on which such acquisitions will take place, the directors of the Company will ensure that:

• the Company and its subsidiaries will, after the acquisitions, be able to pay their debts as they become due in the ordinary course of business for the 12 (twelve) months that follow after the date of notice of the annual general meeting; and

• the consolidated assets of the Company and its subsidiaries, fairly valued and recognised and measured in accordance with the accounting policies used in the latest audited fi nancial statements, will, after the acquisitions, be in excess of the consolidated liabilities of the Company and its subsidiaries for the 12 (twelve) months that follow after the date of this notice of annual general meeting; and

• the issued share capital and reserves of the Company and its subsidiaries will, after the acquisitions, be adequate for the ordinary business purposes of the Company and its subsidiaries for the 12 (twelve) months that follow after the date of notice of the annual general meeting; and

• the working capital available to the Company and its subsidiaries will, after the acquisitions, be suffi cient for the ordinary business requirements of the Company and its subsidiaries for the 12 (twelve) months that follow after the date of this notice of annual general meeting.

Explanatory note for special resolution number 1:In accordance with article 28.13 of the articles of association of the Company, the Company may acquire shares issued by itself or by its holding company. Shareholders are requested to approve the general authority to acquire shares in the event that the Board of directors deems this necessary or in the best interests of shareholders.

Notice of Annual General Meeting of the shareholders of the Company continued


Ordinary resolution number 1 – adoption of the annual fi nancial statements“RESOLVED THAT the consideration and adoption of the annual fi nancial statements of the Company and its subsidiaries for the period ended 28 February 2010, together with the directors’ and auditors’ reports referring to these annual fi nancial statements, be and is hereby approved.”

Explanatory note for ordinary resolution number 1:In accordance with article 139 of the articles of association of the Company the Board of directors must, at each annual general meeting of the Company, present for consideration and adoption the audited annual fi nancial statements together with the reports of the directors and auditors.

Ordinary resolution number 2 – confi rmation of interim appointment of a director (Mr Michael Ronald Beamish)“RESOLVED THAT the interim appointment of Mr MR Beamish as a director of the Company which came into effect on 08 December 2009 be and is hereby approved.”

Mr MR Beamish’s curriculum vitae is set out on page 4 of the Annual Report and on page 114 of this notice of annual general meeting.

Explanatory note for ordinary resolution number 2:In accordance with article 87 of the articles of association of the Company the interim appointment of directors is required to be confi rmed at the next annual general meeting of the Company.

Ordinary resolution number 3 – retirement and re-election of a director (Mr Anton Daniel Potgieter)“RESOLVED THAT Mr AD Potgieter, who retires in accordance with the provisions of the Company’s articles of association, but being eligible offers himself for re-election, be and hereby is re-elected as a director of the Company.”

Mr AD Potgieter’s curriculum vitae is set out on page 5 of the Annual Report and on page 114 of this notice of annual general meeting.

Ordinary resolution number 4 – retirement and re-election of a director (Mr Vincent Mokhele Mokholo)“RESOLVED THAT Mr VM Mokholo, who retires in accordance with the provisions of the Company’s articles of association, but being eligible offers himself for re-election, be and hereby is re-elected as a director of the Company.”

Mr VM Mokholo’s curriculum vitae is set out on page 5 of the Annual Report and on page 114 of this notice of annual general meeting.

Ordinary resolution number 5 – retirement and re-election of a director (Mr Brian Alexander McQueen)“RESOLVED THAT Mr BA McQueen, who retires in accordance with the provisions of the Company’s articles of association, but being eligible offers himself for re-election, be and hereby is re-elected as a director of the Company.”

Mr BA McQueen’s curriculum vitae is set out on page 4 of the Annual Report and on page 114 of this notice of annual general meeting.

Explanatory note for ordinary resolutions numbered 3, 4 and 5:In accordance with article 84.1 of the articles of association of the Company one-third of the directors are required to retire at each meeting; every director who retires may offer himself or herself for re-election. In terms of article 83 of the articles of association of the Company the Managing Director, during the period of his service contract, is not taken into account when determining which directors are to retire by rotation.


Ordinary resolution number 6 – appointment of auditors“RESOLVED THAT the appointment of KPMG and Charmaine Swart as auditors to the Company be and is hereby approved.”

Ordinary resolution number 7 – approval of the remuneration of the auditors“RESOLVED THAT the remuneration of the auditors as set out in the Annual Report for the period ended 28 February 2010 be and is hereby approved.”

Explanatory note for ordinary resolutions numbered 6 and 7:In accordance with article 132 the auditors to the Company shall be appointed in accordance with the Act. KPMG have indicated their willingness to continue as the Company’s auditors until the next annual general meeting. The Group Audit Committee has satisfi ed itself as to the independence of KPMG. The Group Audit Committee has the power in terms of the Corporate Laws Amendment Act, 2006 to approve the remuneration of the external auditors. The remuneration and non-audit fees paid to the auditors during the period ended 28 February 2010 is set out on page 85 of the Annual Report.

Ordinary resolution number 8 – approval of the remuneration of the non-executive directors“RESOLVED THAT the remuneration payable to the non-executive directors for the fi nancial year commencing 1 March 2010 be and is hereby approved as follows:

Proposed remuneration Category effective 27 November 2010

Chairman R20 000 per meetingBoard Member R20 000 per meetingAudit and Risk Committee Chairman R20 000 per meetingAudit and Risk Committee Member R20 000 per meeting Remuneration and Nomination Committee Chairman R20 000 per meetingRemuneration and Nomination Committee Member R20 000 per meeting

Explanatory note for ordinary resolution number 8:In accordance with article 57 of the articles of association of the Company the members are required to determine the remuneration payable to the directors of the Company. The fees paid to directors during the period ended 28 February 2010 is set out on page 91 of the Annual Report.

Ordinary resolution number 9 – the placing of the unissued shares of the Company under the control of the Board of directors“RESOLVED THAT the unissued ordinary shares in the share capital of the Company be placed at the disposal, and under the control, of the Board of directors of the Company until the next annual general meeting and that the Company and the Board of directors be and hereby are authorised and empowered to allot, issue and otherwise dispose of such shares, on terms and conditions and at such times as the Board of directors in its discretion deems fi t, subject to sections 221 and 222 of the Act and the JSE Listings Requirements.”

Explanatory note for ordinary resolution number 9:Shareholders are requested to approve the placing of unissued shares under the control of the Board of directors in order to facilitate potential acquisitions or issues of shares for cash.

Ordinary resolution number 10 – general authority to allot and issue shares for cash“RESOLVED THAT, subject to the approval of 75% of the members present in person and by proxy and entitled to vote at the meeting, excluding the controlling shareholders of the Company and the Company’s Designated Advisor, the Board of directors of the Company be and hereby are authorised by way of general authority to allot and issue all or any of the authorised but unissued shares in the share capital of the Company as they in their discretion deem fi t, subject to the following limitations:• this authority shall not endure beyond the next annual general meeting of the Company nor shall it endure

beyond 15 months from the date of the annual general meeting that is the subject matter of this notice;



• there will be no restrictions in regard to the persons to whom the shares may be issued, provided that such shares are to be issued to public shareholders (as defi ned by the JSE Limited (“JSE”) in its Listings Requirements) and not to related parties;

• upon any issue of shares which, together with prior issues during any fi nancial year, will constitute 5% or more of the number of shares of the class in issue, the Company shall by way of an announcement on the Securities Exchange News Service (“SENS”) give full details thereof, including the effect on net asset value of the Company and earnings per share;

• the aggregate issue of a class of shares already in issue in any fi nancial year will not exceed 15% of the number of that class of shares (including securities which are compulsorily convertible into shares of that class); and

• the maximum discount at which shares may be issued is 10% of the weighted average traded price of the Company’s shares over the 30 business days prior to the date that the price of the issue is determined or agreed by the Board of directors of the issuer.”

Explanatory note for ordinary resolution number 10:Shareholders are requested to approve the general authority to issue shares for cash in the event that the Board of directors deems this necessary.

Ordinary resolution number 11 – incumbency“RESOLVED THAT the authority granted to any director of the Company to sign all documents and to do all things as may be necessary for, or incidental to, the implementation of each resolution of the annual general meeting be and is hereby approved.”

VotingEach shareholder, whether present in person or represented by proxy, is entitled to attend and vote at the annual general meeting. On a show of hands, every shareholder who is present in person or by proxy shall have one vote, and on a poll every shareholder present in person or by proxy shall have one vote for each share held by him/her.

ProxiesCertifi cated shareholders and dematerialised shareholders with “own name” registration

If you are unable to attend the annual general meeting of Huge shareholders to be held in the boardroom, Second Floor, Block 2, Woodlands Drive Offi ce Park, 5 Woodlands Drive, Woodmead, Johannesburg, South Africa, 2191, at 10h00 on Friday, 1 October 2010, and wish to be represented thereat, you should complete and return the attached form of proxy in accordance with the instructions contained therein and lodge it with, or post it to, the transfer secretaries, namely Computershare Investor Services (Pty) Ltd, Ground Floor, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107) so as to be received by them by no later than 10h00 on Wednesday, 29 September 2010.

Dematerialised shareholders, other than those with “own name” registration

If you are a dematerialised shareholder of Huge other than with “own name” registration, do not use this form. Dematerialised shareholders of Huge must contact their appointed CSDP or broker in terms of the custody agreement entered into between the dematerialised shareholder and the CSDP or broker to communicate their voting instructions and these instructions must be communicated by the CSDP or broker to the transfer secretaries by no later than 10h00 on Wednesday, 29 September 2010. If the CSDP or broker, as the case may be, does not obtain instructions from such dematerialised shareholders of Huge, they will be obliged to act in terms of the mandate furnished to them, or if the mandate is silent in this regard, abstain from voting. Should you wish to attend the general meeting or send a proxy to represent you, you must inform your CSDP or broker timeously and request your CSDP or broker to issue you with the necessary Letter of Representation to attend the meeting and vote thereat.


BY ORDER OF THE BOARDArcay Client Support (Pty) Ltd(Registration Number: 1998/025284/07)Company SecretaryDate: 22 August 2010

Brief curriculum vitae of directors are set out below:

Mr MR BeamishMike began his career as a Derivatives Trader with HSBC Securities, holding various contract positions as an analyst, consultant and systems implementer. After two years, he took over the management of the fi rm’s proprietary trading book. He spent a further four years in this position and was promoted to Associate Director. In 2003, Mike started Praesidium Capital Management (Pty) Ltd (“Praesidium”), an asset management company which has three managing partners. Praesidium is a shareholder of Huge Group and Mike is a material shareholder of Huge Group.

Mr AD PotgieterAnton has seventeen years of telecommunications experience in the Southern African market, with extensive experience in all facets of business within an industry which is ever-changing. He started an IT company in 1991, and then founded TelePassport in 1993, which was focused initially on international call-back. In 1997 TelePassport extended its focus into GSM based least cost routing. TelePassport’s annual revenue grew to R350 million by 2006. Potgieter listed TelePassport as Huge Group in 2007, and fulfi lled the role of chief executive offi cer before being appointed as its executive chairman in 2008. Potgieter is a strategist and catalyst, and is responsible for new direction and development within Huge Group. He is an innovator at heart, drives the Group’s investments in new technology and is its brand custodian.

Mr VM MokholoVincent has worked in the telecommunications industry for the last 15 years. After graduating in 1995, he joined GSM Cellular where he applied himself across the different business disciplines within the company, developing his professional skills and fi nishing his tenure as the Corporate Account Manager. Vincent joined TelePassport in 1999 to focus on business growth. Vincent was instrumental in developing TelePassport into a successful and growing business: at the helm of a consortium he played a major role in tailoring a BBBEE transaction for TelePassport, which culminated in Mojaho Trading (Pty) Ltd acquiring 30% of the company. He assumed the role of Client Services Director when TelePassport merged with CentraCell (Pty) Ltd to form Huge Telecom, and was responsible for bedding down the operations and service deliverables of the combined entity. Vincent was appointed to the position of Product and Business Development Director in January 2009, and has rejuvenated the Group’s product portfolio, which continues to bring new products on stream.

Mr BA McQueenBrian McQueen has forty years of experience in sales and general management, gained primarily in the gas and telecommunications industries, and in particular with PABX telephony, radio paging and GSM cellular companies. Brian started his career as a management trainee at Afrox in 1964 and progressed through the ranks to national contracts manager by 1985. He then moved to Infotech in the role of software development manager until 1987 and fulfi lled several roles at STC Business Communications (Alcatel) from 1987 to 1995. In 1995 he joined Autopage Paging, where he was ultimately appointed as managing director of Supercall, a subsidiary of Altech, in 2002. Brian is the Chairman of the Audit and Risk Committee and a member of the Nomination and Remuneration Committee.


huge group annual report 2010

Proxy form

HUGE GROUP LIMITED(Incorporated in the Republic of South Africa)(Registration number 2006/023587/06)(“Huge” or “the Company”)Share code: HUG ISIN: ZAE000102042

For use by certifi cated and “own name” registered dematerialised shareholders of the Company (“shareholders”) at the annual general meeting of Huge to be held in the boardroom, Second Floor, Block 2, Woodlands Drive Offi ce Park, 5 Woodlands Drive, Woodmead, Johannesburg, South Africa, 2191, at 10h00 on Friday, 1 October 2010 (“the annual general meeting”).

I/We (please print)

of (address)

being the holder/s of ordinary shares of 0,01 cent each in Huge, appoint (see note 1):

1. or failing him,

2. or failing him,

3. the chairperson of the annual general meeting,

as my/our proxy to act for me/us and on my/our behalf at the annual general meeting which will be held for the purpose of considering, and if deemed fi t passing, with or without modifi cation, the resolutions to be proposed thereat and at any adjournment thereof; and to vote for and/or against the resolutions and/or abstain from voting in respect of the ordinary shares registered in my/our name/s, in accordance with the following instructions (see note 2):

Number of votes

For Against Abstain

Special resolution number 1 – general authority to acquire shares in the Company

Ordinary resolution number 1 – adoption of the annual fi nancial statements

Ordinary resolution number 2 – confi rmation of interim appointment of a director (MR Beamish)

Ordinary resolution number 3 – retirement and re-election of a director (AD Potgieter)

Ordinary resolution number 4 – retirement and re-election of a director (VM Mokholo)

Ordinary resolution number 5 – retirement and re-election of a director (BA McQueen)

Ordinary resolution number 6 – appointment of auditors

Ordinary resolution number 7 – approval of the remuneration of the auditors

Ordinary resolution number 8 – approval of the remuneration of the non-executive directors

Ordinary resolution number 9 – the placing of the unissued shares of the Company under the control of the Board of directors

Ordinary resolution number 10 – general authority to allot and issue shares for cash

Ordinary resolution 11 – incumbency

Signed at on 2010

Signature

Assisted by me (where applicable)

Name Capacity Signature

Certifi cated shareholders and dematerialised shareholders with “own name” registrationIf you are a certifi cated shareholder or have dematerialised your shares with “own name” registration and you are unable to attend the annual general meeting of Huge shareholders to be held in the boardroom, Second Floor, Block 2, Woodlands Drive Offi ce Park, 5 Woodlands Drive, Woodmead, Johannesburg, South Africa, 2191, at 10h00 on Friday, 1 October 2010, and wish to be represented thereat, you must complete and return this form of proxy in accordance with the instructions contained herein and lodge it with, or post it to, the transfer secretaries, namely Computershare Investor Services (Pty) Ltd, Ground Floor, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107), so as to be received by them no later than 10h00 on Wednesday, 29 September 2010.

Dematerialised shareholders other than those with “own name” registrationIf you hold dematerialised shares in Huge through a CSDP or broker other than with an “own name” registration, you must timeously advise your CSDP or broker of your intention to attend and vote at the annual general meeting or be represented by proxy thereat, in order for your CSDP or broker to provide you with the necessary authorisation to do so, or should you not wish to attend the annual general meeting in person, you must timeously provide your CSDP or broker with your voting instruction in order for the CSDP or broker to vote in accordance with your instruction at the annual general meeting.

huge group annual report 2010

1. Each member is entitled to appoint one or more proxies (who need not be a member of the Company) to attend, speak and, on a poll, vote in place of that member at the annual general meeting.

2. A member may insert the name of a proxy or the names of two alternative proxies of the member’s choice in the space provided, with or without deleting “the chairman of the annual general meeting”. The person whose name stands fi rst on the form of proxy and who is present at the annual general meeting will be entitled to act as proxy to the exclusion of those whose names follow.

3. A member’s instructions to the proxy must be indicated by the insertion of the relevant number of votes exercisable by that member in the appropriate box/es provided. Failure to comply with the above will be deemed to authorise the chairperson of the annual general meeting, if he/she is the authorised proxy, to vote in favour of the ordinary resolutions at the annual general meeting, or any other proxy to vote or to abstain from voting at the annual general meeting as he/she deems fi t, in respect of all the member’s votes exercisable thereat.

4. A member or his/her proxy is not obliged to vote in respect of all the ordinary shares held or represented by him/her but the total number of votes for or against the resolutions and in respect of which any abstention is recorded may not exceed the total number of votes to which the member/holder or his/her proxy is entitled.

5. Forms of proxy must be lodged with the transfer secretaries of the Company by not later than 10h00 on Wednesday, 29 September 2010.

6. The completion and lodging of this form of proxy will not preclude the relevant member from attending the annual general meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof, should such member wish to do so.

7. Any alterations or corrections to this form of proxy must be initialled by the signatory/ies.

8. Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity must be attached to this form of proxy unless previously recorded by the Company’s transfer offi ce or waived by the chairperson of the annual general meeting.

9. The chairperson of the annual general meeting may reject or accept any proxy form which is completed and/or received other than in accordance with these instructions and notes, provided that he/she is satisfi ed as to the manner in which a member wishes to vote.

Notes to the form of proxy

vision table of contents - sharedata

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