LTIP and ESOP 2014 Forfeitable Share Award

April 2015

Total Remuneration & Performance Management

ESOP Back ground

April 2015

Total Remuneration & Performance Management

3

Eligibility

© Telkom 2013 LTIP & ESOP |

Job Title Grade ESOP Participation

Snr Managers M4/S4 X

Managers M5/S5 X

Supervisory and OPS specialists M6/S6 X

Operational employees OP1/L X

Operational employees OP2/L X

Support staff A X

The following employees will be eligible to participate in the scheme:

Telkom 2013 LTIP & ESOP | 4

Award and Vesting

Award Vesting 1st Vesting 2nd Vesting 3rd

1st - 2013 2016 (100%)

2nd - 2014 2017 (100%)

3rd - 2015 2018 (100%)

Shares will be awarded every year and will vest after three years.

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Performance Vesting Conditions

© Telkom 2013 LTIP & ESOP |

• Performance conditions are measured after three years based on the extent to which performance conditions are met. The date of allotment, issue and transfer of vested shares is the date of the public announcement of the company's financial results for each financial year. This is normally in June.

• The following vesting condition must be achieved in order for shares to be vested: – Net Promoter Score (NPS) The likelihood that a customer would

recommend Telkom as a communications provider. The customer is asked to rate his/her likelihood to recommend Telkom.

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Performance Vesting Conditions - Modifier

© Telkom 2013 LTIP & ESOP |

Performance Condition Weighting Achievement for Vesting

Net Promoter Score (NPS) 100%

> Index Score Index Score < Index Score

100% 50% 0%

Telkom Proprietary Information 7

LTIP and ESOP: 2014 Share Award (Prohibited Period)

• Clause 6.1 of the FSP rules forbid Remco to make any grants in a prohibited period

• Prohibited period is defined as:

– closed period– any period when there exists any matter which constitutes unpublished

price sensitive information in relation to Telkom’s shares

• Telkom’s shares are currently trading under the following restriction:– Telkom and MTN South Africa (“MTN”) are still in discussions regarding the

potential extension of their existing roaming agreement to include bilateral roaming and outsourcing of Telkom’s radio access network

• Restriction was introduced on 6 March 2014

22 September 2014

Telkom Proprietary Information 8

LTIP and ESOP: 2014 Share Award (Prohibited Period)

• Due to the long prohibited period the JSE was approached to give approval for the 2014 award

• JSE approved the 2014 share award

22 September 2014

FSP 9

Recommendation (LTIP and ESOP: 2014 Share Award)

March 2015

Based on the Share Allocation Policy a total number of 4 872 133 forfeitable shares will be awarded to all permanent employees who will be in the service of the company on the award date – 15 April 2015

The following principles will be applied:

• All employees must be in a similar position to the original allocation date in June 2014, if the shares were awarded in normal circumstances at R43.25 VWAP. Therefore, the same number of shares (quantum) will be allocated at the current share price of R76.11 (30 day VWAP of 1 to 31 March 2015).

• Benchmarked face value of share based incentive awards as a percentage of guaranteed package

• Annual guaranteed package of employee on the award date

• The application of management discretion, giving due cognizance to individual performance.

• Overall Company performance for the 2013/14 financial year

Telkom Proprietary Information 10

Performance conditions for the 2014 Share Awards (F2015)

 

Category Performance Condition

Weighting

Target - Rand Value

F2015 F2016 F2017 F2018 F2019

Operational

(30%)

Customer First

Customer Loyalty Measure (CLM) – Telkom Overall Quality (Revenue weighted composite score)

Baseline 58.6 (F2015)

15% 59.9 61.7 63.4 65.2 66.6

Customer experience

TSA 100 Index- Assurance Index- Fulfilment Index

15%Composite Score: 1

Threshold: 0.90

Composite Score: 1

Threshold: 0.90

Composite Score: 1

Threshold: 0.90

Composite Score: 1

Threshold: 0.90

Composite Score: 1

Threshold: 0.90

22 September 2014