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FGL - Finbond Group Limited - Proposed Rights Offer and Withdrawal of Cautionary

Release Date: 09/12/2011 16:15
Code(s): FGL
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FGL - Finbond Group Limited - Proposed Rights Offer and Withdrawal of Cautionary Finbond Group Limited (Incorporated in the Republic of South Africa) (Registration number: 2001/015761/06) Share code: FGL ISIN: ZAE000138095 ("Finbond" or "the Company") PROPOSED RIGHTS OFFER AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT 1. INTRODUCTION AND TERMS OF THE RIGHTS OFFER Shareholders are advised that the Board of Directors of Finbond are proposing a capital raising of approximately R20 million by way of a rights offer ("the rights offer"). In terms of the rights offer, 200 000 000 new Finbond ordinary shares of 0.0001 cents each, in the authorised but unissued share capital of the Company ("the rights offer shares"), will be offered for subscription to Finbond shareholders who will receive rights to subscribe for the rights offer shares on the basis of 52 rights offer shares for every 100 Finbond ordinary shares held, at 10 cents per rights offer share. The rights offer price represents a discount of 16.0% to the 30 trading day volume weighted average price of Finbond shares up to and including 8 December 2011. 2. RATIONALE FOR THE RIGHTS OFFER The rationale for the rights offer is to raise funds to meet maturing debt obligations and to grow Finbond`s Micro Finance debtors` book. In order to meet maturing debt obligations in December 2011 and January 2012, Finbond`s two largest shareholders Kings Reign Investments (Proprietary) Limited ("KRI") (39.2% shareholding)and Net 1 Finance Holdings (Proprietary) Limited ("Net 1") (22,2% shareholding) have agreed to advance R12 million in new shareholders` loans to Finbond, in addition to an existing shareholder`s loan of R8 million from KRI, on condition that Finbond proposes a rights offer to all shareholders at 10 cents per share and that these shareholders` loans be utilised by KRI and Net 1 in following their commitments to Finbond in respect of the rights offer, as detailed below. KRI and Net 1 will follow their rights by converting their shareholders loans to shares. Instead of subscribing for cash, they will instruct the Company to debit their loan accounts and credit share capital. The rights offer allows all shareholders registered as such on the record date an equal opportunity to participate in the capital raising on a pari passu basis. 3. IRREVOCABLE UNDERTAKINGS AND UNDERWRITING KRI and Net 1 have irrevocably committed to follow their rights, through the conversion of their respective shareholders` loans into shares, in an approximate amount of R12 million. KRI and Net 1 have further committed to underwrite in full and in proportion to their existing shareholdings, the balance of the rights offer through the capitalisation of the balance of their shareholders` loans of R8 million. No underwriting fee will be applicable. 4. EXCESS APPLICATIONS Finbond shareholders will be permitted to apply for new Finbond shares in excess of their entitlement. Should there be excess rights offer shares available for allocation, these will be allocated to applicants in a manner viewed as equitable in terms of the Listing Requirements of the JSE. 5. UNAUDITED PRO FORMA FINANCIAL EFFECTS 5.1 The preparation of the unaudited pro forma financial effects is the responsibility of the directors of Finbond. 5.2 The table below sets out the unaudited pro forma financial effects of the rights issue. The unaudited pro forma financial effects are prepared for illustrative purposes only and may not fairly represent Finbond`s results, financial position and changes in equity after the rights issue. For the purposes of the pro forma financial effects, it has been assumed that the rights issue took place with effect from 1 March 2011 for the statement of comprehensive income and 31 August 2011 for the statement of financial position. Circular"). 3. SCHEME CONSIDERATION 3.1 The Scheme Consideration will be calculated based on the relative calculated tangible net asset values per ordinary share ("Calculated TNAV") of Blackstar and Mvela Group as at 11 January 2012, for the purposes of which: 3.1.1 the listed investments of Blackstar and Mvela Group (including their indirect interests in The Bidvest Group Limited and ABSA Group Limited ("ABSA") respectively) will be deemed to be valued
at the volume weighted average price at which such investments traded on the Johannesburg Stock Exchange ("JSE") for the 15 business days preceding 11 January 2012; 3.1.2 the unlisted investments in Blackstar will be deemed to be valued at the value used in arriving at the indicative Share Consideration in paragraph 3.5 below (which was based on the principles and methodologies used by Blackstar in its most recent audited annual report and accounts).
3.2 The Cash Consideration shall be an amount equivalent to a 5% discount to the Calculated TNAV of Mvela Group as at 11 January 2012 unless that amount: 3.2.1 is less than R3.07, in which case the Cash Consideration will be R3.07; 3.2.2 is more than R3.75, in which case the Cash Consideration will be R3.75. 3.3 The Share Consideration shall be calculated by applying a 5% premium to the Calculated TNAV of the Mvela Group and a 10% discount to the calculated TNAV of Blackstar (and dividing the adjusted Mvela Group TNAV by the adjusted Blackstar TNAV to arrive at a swap ratio) provided that if the swap ratio: 3.3.1 is less than 0.303 ordinary shares in Blackstar ("Blackstar Shares") per Target Share, the Share Consideration will be 0.303 Blackstar Shares per Target Share; 3.3.2 is more than 0.371 Blackstar Shares per Target Share, the Share Consideration will be 0.371 Blackstar Shares per Target Share. 3.4 The Scheme Consideration will be announced to Mvela Group Shareholders on SENS and in the press as soon as possible after it has been calculated. The aforementioned announcement will also contain the pro forma financial effects of the Scheme. Any dispute in relation to the calculation of the Scheme Consideration will be referred for determination by an independent corporate financier operating in the Republic of South Africa. 3.5 An Indicative Scheme Consideration has been calculated as at 5 December 2011. As at that date, the Calculated TNAV`s of Blackstar and Mvela Group were ZAR12.43 and ZAR3.59 respectively, with the result that: 3.5.1 the Indicative Cash Consideration as at 5 December 2011 would have been ZAR3.41 (a 5% discount to Mvela Group`s TNAV of ZAR3.59 per Mvela Group ordinary share at that date), provided that a Mvela Group shareholder`s ability to receive this amount is
limited by the maximum Cash Consideration as set out in paragraph 3.6 below; and 3.5.2 the Indicative Share Consideration as at 5 December 2011 would have been 0.337 Blackstar Shares for each Target Share disposed
of in terms of the Scheme (based on a 5% premium to Mvela Group`s Calculated TNAV and a 10% discount to the Blackstar Calculated TNAV at that date). 3.6 As set out above, the Cash Consideration is limited to R800 million. Accordingly, if all Mvela Group Shareholders elect to receive the Cash Consideration, then Mvela Group Shareholders will receive a maximum of R1.51 per Target Share in cash (equivalent to 44% of the Scheme

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