Directors’ report

The directors have pleasure in presenting the annual financial statements of Blue Label Telecoms Limited (Blue Label Telecoms or the company) and its subsidiary, associate and joint venture companies (the group) for the year ended 31 May 2009.

Principal activities and strategy

Blue Label Telecoms is a leading distributor of prepaid secure electronic tokens of value and transactional services within emerging and developing economies across its global footprint of touch points. The group's stated strategy is to extend its international footprint of touch points, both organically and acquisitively, to meet the significant demand for the delivery of multiple prepaid products and services through a single distributor, across various delivery mechanisms and via numerous merchants or vendors.

Financial results

The financial statements have been prepared on the goingconcern basis, since the directors have every reason to believe that Blue Label Telecoms and the group have adequate resources in place to continue in operation for the foreseeable future. The annual financial statements for the year ended 31 May 2009 were approved by the board and signed on its behalf on 25 August 2009.

Full details of the financial position and results of the company, the group and its segments are set out in the annual financial statements, and group annual financial statements.

Sidney Ellerine

It is with sadness that the directors note the passing away of Sidney Ellerine on 17 July 2009. Mr Ellerine was involved with the group from its inception and was both a mentor and a partner to the group's executive management. He provided great leadership and direction to the board as well as to executive management and always conducted himself with the utmost integrity and highest regard for the interests of the company.

Subsidiaries, associates and other investments

Particulars of the principal subsidiaries, joint ventures and associates of the Blue Label Telecoms group are provided in note 31 to the annual financial statements.

Acquisitions and disposals

In August 2008 Datacel Direct (Proprietary) Limited (Datacel), established Datacel Data Services (Proprietary) Limited (DDS) as an 81% held subsidiary. DDS is a database accumulator, generating its income from the sale of its data to companies within the group, as well as to outside companies. In addition, Datacel purchased the remaining 20% of the shares in CNS Call Centre (Proprietary) Limited in October 2008.

Ventury Group (Proprietary) Limited disposed of its 51% (fifty-one percent) interest in Iveri Payment Technologies (Proprietary) Limited to ADC IT and Payment Solutions in October 2008. Blue Label Telecoms disposed of its 51% (fifty-one percent) interest in E-Voucha (Proprietary) Limited in November 2008, as well as its 50% interest in Polsa Holdings Limited in March 2009.

Africa Prepaid Services (Proprietary) Limited (APS) (a 72% held subsidiary of the company) entered into an agreement to establish Africa Prepaid Services Nigeria Limited as a 51% held subsidiary in Nigeria in December 2008 . The balance of the shares in the company are held by local Nigerian partners. The company was established to distribute prepaid cellular products including prepaid airtime, starter packs and data cards on behalf of Multilinks Telecommunications Limited, a wholly owned subsidiary of Telkom SA Limited.

Blue Label formed a wholly owned subsidiary in the United States of America (BLT USA Incorporated) in December 2008 as an investment vehicle into VPN (Virtual Prepaid Network). BLT USA Inc acquired 50,01% of VPN for an initial amount of $1 000 and subsequently injected US$5 million into a capital account in its name. The balance of the shares in VPN were held by the KAP Holdings group, its local partner. VPN was established to assist KAP Holdings in converting its physical distribution business of international calling cards into a virtual distribution model through the rollout of point-of-sale devices.

Subsequent to year-end, BLT USA terminated its equity investments in VPN by mutual consent and entered into a technology licence arrangement with the KAP Holdings group. VPN repaid the US$5 million capital invested in the business to BLT USA . The licence agreement allows Blue Label to pursue its efforts to grow a distribution footprint in the USA .

The Prepaid Company (Proprietary) Limited disposed of its 40% interest in The Hub Pretalk (Proprietary) Limited in May 2009.

For further details of acquisitions and disposals during the year, refer to note 24 and note 25 to the annual financial statements.

Share capital

Full details of the authorised, issued and unissued capital of the company at 31 May 2009 are contained in note 14 to the financial statements. There were no shares issued during the financial year ended 31 May 2009.

Forfeitable share plan (share plan)

The group implemented the share plan as approved by the shareholders at the annual general meeting held on 12 November 2008. Particulars relating to the share plan are set out in note 30 to the financial statements.

Dividends

Blue Label Telecoms expects to initiate a dividend policy from the financial year commencing 1 June 2010. It is anticipated that interim dividends will be paid in February and final dividends will be paid in August of each financial year, in the approximate proportion of onethird and two-thirds of the annual dividend, respectively.

Directorate

The following were directors of the company for the year under review:

Directors’ interests

The individual interests declared by directors and officers in the company's share capital as at 31 May 2009, held directly or indirectly were as follows:

*Mr Ellerine passed away on 17 July 2009. His shares are owned by several trusts.

The aggregate interest of the current directors in the capital of the company was as follows:

The beneficial interest held by directors and officers of the company constitutes 32,71% of the issued share capital of the company and the non-beneficial interest represents 0,32% of the issued share capital.

Resolutions

The company passed and registered a special resolution in November 2008, approving the acquisition of the company's shares by the company or any of its subsidiaries.

Except for the aforementioned, no other special resolutions, the nature of which might be significant to shareholders in their appreciation of the state of affairs of the group, were passed by the company or its subsidiaries during the period covered by this annual report.

Secretary

The company secretary is E Viljoen. The business and postal address of the company secretary appear on page 167.

Auditors

PricewaterhouseCoopers Incorporated will continue in office in accordance with section 270 (2) of the Companies Act.