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enX GROUP LIMITED - Tax apportionment ratio and cash value for fractional entitlements in respect of the unbundling

Release Date: 12/10/2017 14:15
Code(s): ENX     PDF:  
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Tax apportionment ratio and cash value for fractional entitlements in respect of the unbundling

ENX GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2001/029771/06)
JSE share code: ENX ISIN: ZAE000222253
(“enX”)


TAX APPORTIONMENT RATIO AND CASH VALUE FOR FRACTIONAL ENTITLEMENTS IN RESPECT OF THE UNBUNDLING


1.    INTRODUCTION

      Shareholders are referred to the announcements released on SENS (the last of which announcements was
      released on SENS on 3 October 2014) in respect of the restructure and recapitalisation of eXtract Group
      Limited (“eXtract”) (the “restructure”) and the subsequent unbundling and distribution by enX of
      3 861 041 279 eXtract shares to enX shareholders in the ratio of 21.39799 eXtract shares for every one enX
      share held (the “unbundling”).

      The purpose of this announcement is to advise the holders of enX shares on the unbundling record date, being
      13 October 2017, of:

      -      the apportionment ratio in which the expenditure incurred and the market value of enX shares must be
             apportioned for South African tax purposes between the unbundled eXtract shares and the enX shares
             held at the time of the unbundling; and
      -      the cash value in respect of fractional entitlements in relation to the unbundled eXtract shares.

2.    APPORTIONMENT OF TAX COST

      2.1.   Apportionment tax principle

             enX shareholders must allocate a portion of the expenditure and market value attributable to the enX
             shares held by them to the unbundled eXtract shares received pursuant to the unbundling.

             enX shares held as trading stock

             Any enX shareholder holding enX shares as trading stock will be deemed to acquire its proportional
             number of unbundled eXtract shares as trading stock. The expenditure, of which a portion will be
             allocated to the unbundled eXtract shares, will be the amount originally taken into account by the enX
             shareholder in respect of those enX shares held prior to the unbundling, as contemplated in section 11(a),
             section 22(1), or section 22(2) of the Income Tax Act.

             The expenditure and market value to be allocated to the unbundled eXtract shares will be determined by
             applying the ratio that the market value of the unbundled eXtract shares, as at the end of the day after the
             distribution, bears to the sum of the market value, as at the end of that day, of the unbundled eXtract
             shares and the enX shares.

             The expenditure and market value so allocated to the unbundled eXtract shares will reduce the
             expenditure and market value of the enX shares held by the amount allocated to the unbundled eXtract
             shares. enX shareholders will be deemed to have incurred the expenditure allocated to the unbundled
             eXtract shares on the date on which the expenditure was incurred in respect of the enX shares.

             enX shares held as capital assets:

             Any enX shareholder holding enX shares as capital assets will be deemed to have acquired its
             proportional number of unbundled eXtract shares as capital assets. The expenditure incurred in respect of
             the enX shares, in terms of paragraph 20 of the Eighth Schedule to the Income Tax Act, and the market
             value of the enX shares will be apportioned between the unbundled eXtract shares and the enX shares by
             applying the ratio that the market value of the unbundled eXtract shares, as at the end of the day after that
             distribution, bears to the sum of the market value, as at the end of that day, of the unbundled eXtract
             shares and enX shares. The portion of the expenditure so allocated to the unbundled eXtract shares will
             reduce the base cost of the enX shares held. enX shareholders will be deemed to have incurred any
             expenditure allocated to the unbundled eXtract shares on the date on which the expenditure was incurred
             in respect of the enX shares.

      2.2.   Apportionment ratio

             enX shareholders are hereby advised that the expenditure and market value of their enX shares as referred
             to above must be apportioned in the ratio of 93.42406% to an enX share and 6.57594% to an unbundled
             eXtract share (the “apportionment ratio”).

             The apportionment ratio is based on the closing share price of R15.20 per enX share and the closing share
             price of 5 cents per eXtract share on Wednesday, 11 October 2017.

3.    CASH VALUE FOR FRACTIONAL ENTITLEMENTS

      In implementing the unbundling, enX is required by the JSE to apply the rounding principle that an enX
      shareholder becoming entitled to a fraction of an unbundled eXtract share arising from the unbundling
      (“fractional entitlement”) will be rounded down to the nearest whole number, resulting in the allocation of
      whole unbundled eXtract shares and a cash payment for the fraction (“cash payment”). The cash payment
      results from the sale, on behalf of the enX shareholder, of the fraction of an unbundled eXtract share to which
      the enX shareholder becomes entitled in terms of the unbundling. The value of such cash payment is the volume
      weighted average traded price per eXtract share less 10% on first day of trade after the last day to trade in order
      to participate in the unbundling, being Wednesday, 11 October 2017.
 
      enX shareholders are advised that the value of an eXtract share to be utilised in determining the cash payment
      due to an enX shareholder in respect of any fractional entitlement is 4.50076 cents. In accordance with the JSE
      Listings Requirements, this amount has been determined with reference to the volume weighted average price
      of an eXtract share traded on the JSE on Wednesday, 11 October 2017 5.00084 cents), discounted by 10%.
 
      The receipt of the cash payment may have tax implications for enX shareholders, as this will be treated as a
      dividend and taxed accordingly at a dividends tax rate of 20% (unless an exemption, as set out in South African
      Income Tax legislation, applies), resulting in a net cash payment of 3.60061 cents.

THIS ANNOUNCEMENT IS NOT INTENDED TO BE A COMPLETE ANALYSIS OF THE TAX IMPLICATIONS OF THE UNBUNDLING. IT IS NOT INTENDED 
TO BE, NOR SHOULD IT BE CONSIDERED TO BE, LEGAL OR TAX ADVICE. ENX SHAREHOLDERS ARE ADVISED TO CONSULT THEIR OWN PROFESSIONAL 
TAX ADVISORS ON THE TAXATION CONSEQUENCES OF THE UNBUNDLING IN BOTH SOUTH AFRICA AND THEIR JURISDICTION OF RESIDENCE AND THE
CALCULATION OF THEIR COSTS FOR TAX PURPOSES.

12 October 2017

Corporate advisor and sponsor                                      Legal advisor to enX
Java Capital                                                       enS Africa
Date: 12/10/2017 02:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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