ECSPONENT LIMITED - Investment into preference shares issued by VSS Financial Services (Pty) Ltd

Investment into preference shares issued by VSS Financial Services (Pty) Ltd

ECSPONENT LIMITED
Incorporated in the Republic of South Africa
Registration number: 1998/013215/06
JSE Code: ECS - ISIN: ZAE000179594
(“Ecsponent”)

INVESTMENT INTO PREFERENCE SHARES ISSUED BY VSS FINANCIAL SERVICES PROPRIETARY LIMITED


1.    INTRODUCTION AND CLASSIFICATION OF THE TRANSACTION

      The board of directors of Ecsponent (“the Board”) hereby advises shareholders that the Company has resolved
      to invest up to R100 million in cumulative perpetual preference shares (“Preference Shares”) issued by VSS
      Financial Services Proprietary Limited (“VSS”) (“the Transaction”).

      The Company expects to invest into the Preference Shares in tranches, the first of which will be R30 million
      and is expected to be completed on or about today, 3 January 2018.

2.    RATIONALE FOR THE TRANSACTION

      One of the Company’s strategic directives is the investment into private equity investments. The Board has
      identified VSS as a value-adding investment. The anticipated dividend yield on the investment will further
      enhance Ecsponent’s after tax returns.

3.    OVERVIEW OF VSS

      VSS is 100% held by MyBucks SA Proprietary Limited (“MyBucks”). VSS currently provides group information
      technology and related administrative services to the MyBucks group of companies and is the entity through
      which the MyBucks group undertakes its information technology development.

      VSS invested significantly in developing its service offering which has resulted in the company securing
      profitable contracts during 2017. VSS will be rebranded as a financial technology (“Fintech”) entity, geared
      toward the provision of artificial intelligence and information technology support services to both the
      MyBucks group and the Ecsponent group, as well as to external Fintech related entities, such as mobile
      network operators and smaller financial services groups.


4.    FINANCIAL INFORMATION OF VSS

      VSS reported net loss after tax of R17 million for the financial year ended 30 June 2017, and net deficit of R15
      million as at 30 June 2017, being the latest financial year-end of VSS.

      The above financial information is based on the audited historic financial information of VSS, calculated in
      accordance with International Financial Reporting Standards and the Companies Act of South Africa.


5.   KEY TERMS OF THE TRANSACTION

     The terms of the Preference Shares may not be modified, altered, varied, added to or abrogated without the
     prior written consent of the holders of the Preference Shares. Key terms of the Preference Shares are as
     summarised below.

     5.1.     Dividends
     Each Preference Shares will entitle the holder to share in a preferential dividend, determined at the sole
     discretion of the board of directors of VSS (“VSS Board”), after taking into account the distributable profits,
     budget and cash flows of VSS, and subject to the terms and conditions as determined by the VSS Board.

     5.2.     Ranking
     Any payment due to holders of Preferences Shares will rank in priority to any payment due to any other class
     of shares of VSS.

     5.3.     Redemption
     Preference Shares may be redeemed or converted into any other class of shares in VSS at the option of VSS,
     as determined by the VSS Board.

     5.4.     Voting rights
     Holders of Preference Shares are entitled to vote on any resolution which is proposed which affects the rights
     and privileges attached to the Preference Shares or interest of the holder of Preference Shares, including:

     -       the creation or allotment of further classes of shares in VSS which rank in some or all respects pari
             passu or in priority to the Preference Shares;
     -       the winding-up of VSS or commencement of business rescue proceedings;
     -       the reduction of VSS’ capital or a change in the dividend policy of VSS;
     -       the authorisation of any event which requires the consent of holders of the Preference Shares in terms
             of the VSS Memorandum of Incorporation or any variation of any matter in respect of which the
             holders of Preference Shares have previously given consent;
     -       the entering into any transaction by VSS contemplated in Chapter 5 of the Companies Act of 2008;
     -       any other resolution proposed in terms of which Preference Shares are entitled to vote in terms of the
             VSS Memorandum of Incorporation.

     At any meeting where Preference Shareholders are entitled to vote, upon a poll, the holder of a Preference
     Share will be entitled to 1 (one) vote for every Preference Share held.


6.   CONDITIONS PRECEDENT

     The Transaction is not subject to any conditions precedent.

7.   EFFECTIVE DATE

      The effective date of the Transaction is expected to be on or about today, 3 January 2018, which is when the
      first tranche of investment in Preference Shares will be made.

8.    CATEGORISATION OF THE TRANSACTION

      Based on the maximum investment value of R100 million, the Transaction is a Category 2 transaction in terms
      of the JSE Listings Requirements and accordingly is not subject to approval of shareholders by the Company.



Pretoria
3 January 2018

Sponsor and Corporate Advisor
Questco Corporate Advisory Proprietary Limited

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