The reserve represents amounts paid by Telkom to Rossal No 65 Proprietary Limited and Acajou Investments Proprietary Limited, subsidiaries for the acquisition of Telkom’s shares to be utilised in terms of the Telkom Conditional Share Plan.

The Telkom Conditional Share Plan was closed in June 2010. The future use of the remaining shares is subject to management review.

At 31 March 2013, 2,046,528 (2012: 2,046,528) and 8,143,556 (2012: 8,143,556) ordinary shares in Telkom, with a fair value of R31 million (2012: R49 million) and R122 million (2012: R195 million) are held as treasury shares by its subsidiaries Rossal No 65 Proprietary Limited and Acajou Investments Proprietary Limited, respectively (refer to note 12).

Although the treasury shares are held by a separate subsidiary, the value is shown as a separate reserve at Company level.