FINBOND GROUP LIMITED

Transcription

1 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION The definitions commencing on page 7 of this Circular apply mutatis mutandis throughout this document including this cover page. Holders of Finbond ordinary shares are entitled to participate in the Rights Offer in the same ratio of entitlement in relation to one another. Shareholders are referred to pages 3 to 5 of this Circular, which sets out the action required of them with regard to the Rights Offer, full details of which are set out in this Circular. If you are in any doubt as to the action that you should take, please consult your Broker, CSDP, banker, legal advisor, accountant or other professional advisor immediately. If you have disposed of all of your Finbond Shares, this Circular and the Form of Instruction should be forwarded to the purchaser to whom, or the Broker, CSDP or agent through whom you disposed of your Finbond Shares, except that this Circular and Form of Instruction should not be forwarded or transmitted by you to any person in any territory other than South Africa unless the Rights Offer can lawfully be made to such person or in such territory. The Rights that are represented by Letters of Allocation are valuable and may be renounced or sold on the JSE. Letters of Allocation, which are renounceable can, however, only be traded in dematerialised form. The electronic record for holders of Certificated Shares is being maintained by Link Market Services which has made it possible for holders of Certificated Shares to enjoy the same rights and opportunities as holders of Dematerialised Shares in respect of the Letters of Allocation. Only whole numbers of Finbond Shares will be issued in terms of the Rights Offer. Excess applications will be permitted. The Letter of Allocation to which the Form of Instruction enclosed with this document relates is negotiable and may be sold on the JSE. Shareholders are also referred to page 3 of this Circular which sets out the detailed action required by both Certificated Shareholders and Dematerialised Shareholders. FINBOND GROUP LIMITED (Incorporated in the Republic of South Africa) (Registration number: 2001/015761/06) Share code: FGL ISIN: ZAE ( Finbond or the Company ) CIRCULAR TO FINBOND SHAREHOLDERS regarding: an underwritten renounceable Rights Offer of new Finbond Shares, to be issued at a Subscription Price of 334 cents per Share, in the ratio of Rights Offer Shares for every 100 Finbond Shares held at the close of business on Friday, 26 February 2016, thereby raising R525 million of new capital for the Company; and incorporating: a Form of Instruction in respect of a Letter of Allocation (to be completed by holders of Certificated Shares only). Corporate Advisor and Sponsor Grindrod Bank Legal Advisor MacRobert Attorneys Underwriter Midbrook Lane (Pty) Ltd MIDBROOK LANE (PTY) LTD Date of issue: Monday, 22 February 2016 This Circular is available in English only. Copies of this Circular may be obtained from the registered offices of Finbond, the Corporate Advisors and Sponsor and the Transfer Secretaries whose addresses are set out in the Corporate information and advisors section of this Circular, from Tuesday, 23 February 2016 to Friday, 11 March This Circular will also be available on the Company s website ( from Monday, 22 February A copy of this Circular, together with the Form of Instruction and other requisite documents referred to in section 99(4)(b) of the Companies Act, were approved by the JSE. This Circular is not an invitation to the public to subscribe for Shares, but is issued in compliance with the Listings Requirements for the purpose of providing information to the public with regard to the Company and the Rights Offer. DISCLAIMER The Rights Offer does not constitute an offer in any area of jurisdiction in which it is unlawful to make such an offer and in such circumstances, this Circular and accompanying Form of Instruction are distributed for information purposes only. All transactions arising from the provisions of this Circular and the Form of Instruction shall be governed by and be subject to the laws of South Africa. The Rights Offer may be affected by the laws of the relevant jurisdictions of foreign Shareholders. Such foreign Shareholders should inform themselves about and observe any applicable legal requirements of such jurisdictions in relation to all aspects of this Circular that may affect them, including the Rights Offer. It is the responsibility of any foreign Shareholder to satisfy himself as to the full observation of the laws and regulatory requirements of the relevant jurisdiction in connection with the Rights Offer, including the obtaining of any governmental, exchange control or other consent or the making of any filings which may be required, the compliance with other necessary formalities, the payment of any issue, transfer or other taxes or requisite payments due in such jurisdiction. The Rights Offer is further subject to any other applicable laws and regulations, including the Exchange Control Regulations. Any foreign Shareholder who is in doubt as to his position, including without limitation his tax status, should consult an appropriate independent professional advisor in the relevant jurisdiction without delay.

2 CORPORATE INFORMATION AND ADVISORS Directors Dr van Aardt (Chief Executive Officer) G Sayers (Chief Financial Officer) C van Heerden (Chief Operating Officer) Dr M Motlatla#* (Chairperson) R Emslie#* D Brits#* R Xaba#* Adv N Melville#* Adv J Noeth#* I WilkenJonker# # Nonexecutive * Independent Corporate Advisor and Sponsor Grindrod Bank Limited (Registration number 1994/007994/06) th 4 Floor, Grindrod Tower 8A Protea Place Sandton (PO Box 78011, Sandton, 2146) Underwriter Midbrook Lane (Pty) Ltd The Business Centre Leslie Road Fourways 2191 Company Secretary, Registration Number and Registered Office Mr B Bredenkamp (B.Com (Accounting), LLB, Post Graduate Certificate in Advanced Taxation) (Registration number 2001/015761/06) Bank Forum Building Cnr Veale and Fehrsen Street Nieuw Muckleneuk, Brooklyn Pretoria, 0181 (PO Box 2127, Brooklyn Square, 0075) Website: Date of incorporation: 2 July 2001 Place of Incorporation: Pretoria, South Africa Legal Advisor MacRobert Attorneys MacRobert Building Cnr Justice Mahomed & Jan Shoba Streets Brooklyn Pretoria RSA Transfer Secretaries Link Market Services South Africa (Proprietary) Limited (Registration number 2000/007239/07) th 13 floor, Rennie House 19 Ameshoff Street Braamfontein, 2001 (PO Box 4844, Johannesburg, 2000)

3 FORWARDLOOKING STATEMENTS This Circular may contain statements about Finbond that are or may be forwardlooking in nature. All statements, other than statements of historical facts included in this Circular, may be forwardlooking statements. Without limitation, any statements preceded or followed by or that include the words "targets", "plans", "believes", "expects", "aims", "intends", "will", "may", "anticipate", or similar expressions or the negative thereof are forwardlooking statements. Forwardlooking statements include, but are not limited to, statements relating to the following: (i) future capital expenditures, expenses, revenues, economic performance, financial condition, dividend policy, losses and future prospects; (ii) business and management strategies and the expansion and growth of Finbond s operations; and (iii) the effect of Government regulation on Finbond s business. These forwardlooking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Finbond, or industry results, to be materially different from any results, performance or achievements expressed or implied by such forwardlooking statements. These forwardlooking statements are based on numerous assumptions regarding the present and future business strategies of Finbond and the environment in which it will operate in the future. All subsequent oral or written forwardlooking statements attributable to Finbond or any persons acting on their behalf are expressly qualified in their entirety by the cautionary statement above. Finbond expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forwardlooking statements contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based. Forwardlooking statements contained in this Circular have not been reviewed or reported on by the Company s external auditors. 1

4 TABLE OF CONTENTS Corporate information and advisors Forwardlooking statements Action required by Finbond Shareholders in relation to the Rights Offer Important dates and times Definitions and interpretations Circular to Finbond Shareholders 1. Introduction and purpose of this Circular 2. Purpose of the Rights Offer and rationale 3. USA pay day lending features, North American acquisition and growth strategy 4. Nature of the business of Finbond and prospects 5. Particulars of the Rights Offer 6. JSE listings 7. Application of the proceeds from the Rights Offer 8. Share capital 9. Directors 10. Directors responsibility statement 11. Consents 12. Expenses 13. Documents available for inspection Annexure 1 Table of entitlement Annexure 2 Share trading history of Finbond Annexure 3 Information on the Underwriter Form of Instruction (for use by Certificated Shareholders only) Page Inside front cover Enclosed 2

5 ACTION REQUIRED BY FINBOND SHAREHOLDERS The definitions and interpretations commencing on page 7 of this Circular apply, mutatis mutandis, to this information on action required by Finbond shareholders. This Circular contains important information regarding the Rights Offer and matters relating thereto. You should read the Circular carefully and decide if you want to follow your Rights in terms of the Rights Offer. Shareholders should not construe anything in this Circular as legal, business or tax advice. Shareholders who are in any doubt as to what action to take should consult their CSDP, Broker, banker, accountant, attorney or other professional advisor immediately. All holders of Finbond Shares are entitled to participate in the Rights Offer in the same Ratio of Entitlement in relation to one another. If you have disposed of all your Finbond Shares, please forward this document, together with the enclosed Form of Instruction, to the purchaser of such Shares or the Broker, CSDP or other agent through whom you disposed of such Shares. This Circular and Form of Instruction should not be forwarded to any person in any territory other than South Africa unless the Rights Offer can lawfully be made to such person or in such territory. Finbond Shares will only be traded in dematerialised form and holders of Certificated Shares wishing to trade in their Shares will have to Dematerialise their Shares in accordance with the procedures outlined in this Circular. Jurisdiction The distribution of this Circular, the Rights Offer, the Form of Instruction and the transfer of the Rights Offer Shares and/or the Rights to subscribe for the Rights Offer Shares in jurisdictions other than South Africa may be restricted by law and failure to comply with any of those restrictions may constitute a violation of the laws of any such jurisdiction. Neither this Circular, nor any Form of Instruction, may be regarded as an offer in any jurisdiction in which it is illegal to make such an offer. In those circumstances, this Circular and any Form of Instruction are sent for information purposes only. It is the responsibility of any person outside South Africa (including, without limitation, nominees, agents and trustees for such persons) receiving this Circular and wishing to take up Rights under the Rights Offer, to satisfy himself as to the full observance of the applicable laws of any relevant territory, including obtaining any requisite governmental or other consents, observing any other requisite formalities and paying any issue, transfer or other taxes due in such territories. NonResidents The Shares issued in terms of the Rights Offer will not be registered for purposes of the Rights Offer with the Securities and Exchange Commission, Washington, D.C., the Canadian Provincial Securities Commission, or the Australian Securities Commission under the Australian Corporation Law, as amended. Accordingly, the Rights Offer will not be made to or be open for acceptance by persons with registered addresses in the United States of America or any of its territories, dependencies, possessions or commonwealths or in the District of Columbia or in the Dominion of Canada or in the Commonwealth of Australia, its states, territories or possessions. The CSDP or Broker will ensure that where such persons are holding Finbond Shares in dematerialised form that the CSDP or Broker adheres to the above restrictions. Action required by Shareholders of Certificated Shares A Form of Instruction for completion by Qualifying Certificated Shareholders who hold Certificated Shares is enclosed with this Circular and the relevant procedure for participation in the Rights Offer is set out below: Letters of Allocation, which are renounceable, will be created in electronic form with the Transfer Secretaries to afford Qualifying Certificated Shareholders the same rights and opportunities as Qualifying Dematerialised Shareholders in respect of the trading of Letters of Allocation on the JSE; if you are a Qualifying Shareholder holding Certificated Shares and do not wish to subscribe for all of the Rights allocated to you as reflected in the Rights Offer, you may either dispose of or renounce all or part of your Rights Offer Entitlement as follows: if you wish to sell all or part of your Rights Offer Entitlement, you must complete Form A in the enclosed Form of Instruction and return it to the Transfer Secretaries. The Transfer Secretaries will endeavour to procure the sale of Rights on the JSE on your behalf and to remit the net proceeds thereof in accordance with your instructions. In this regard, neither the Transfer Secretaries nor Finbond nor any of its associates will have any obligation or be responsible for any loss or damage whatsoever in relation to or arising from the timing of such sales, the price obtained, or the failure to dispose of such Rights Offer 3

6 Entitlement. Please note that the last day to trade Letters of Allocation is on Friday, 4 March 2016, and must be received by the Transfer Secretaries by no later than 12:00 on Friday, 11 March 2016; and if you wish to renounce your Rights Offer Entitlement in favour of any named Renouncee, you must complete Form B in the enclosed Form of Instruction, and the Renouncee must complete Form C in the enclosed Form of Instruction and return it to the Transfer Secretaries, to be received by no later than 12:00 on Friday, 11 March 2016, together with a bankguaranteed cheque or bank draft for the appropriate amount. If you are a Qualifying Shareholder holding Certificated Shares and wish to subscribe for all or part of your Rights Offer Entitlement in terms of the enclosed Rights Offer, you must complete the enclosed Form of Instruction in accordance with the instructions contained therein and lodge it, together with the amount due in Rand, with the Transfer Secretaries as follows: By hand to: Finbond Group Limited Rights offer c/o Link Market Services South Africa (Proprietary) Limited th 13 Floor, Rennie House, 19 Ameshoff Street, Braamfontein, 2001 By post to: Finbond Group Limited Rights offer c/o Link Market Services South Africa (Proprietary) Limited PO Box 4844, Johannesburg, 2000 so as to be received by the Transfer Secretaries by no later than 12:00 on Friday, 11 March You are permitted to apply for additional Rights Offer Shares over and above your entitlement. If you wish to apply for excess Rights Offer Shares you must complete the enclosed Form of Instruction in accordance with the instructions contained therein and lodge it, together with the amount due in Rand, with the Transfer Secretaries as above, so as to be received by the Transfer Secretaries by no later than 12:00 on Friday, 11 March If you are a Qualifying Shareholder holding Certificated Shares, after subscribing for any of the Rights Offer Shares that you have been allocated, you will receive such shares in Certificated Form. Accordingly, you will only be able to trade your Rights Offer Shares once they have been dematerialised. If you are a Renouncee you may elect to receive your Rights Offer Shares in dematerialised form by providing the information requested in respect of your CSDP or Broker in Form C in the enclosed Form of Instruction. If the required documentation and payment has not been received in accordance with the instructions contained in the enclosed Form of Instruction (either from the Qualifying Shareholders or from any person in whose favour the Rights have been renounced) by 12:00 on Friday, 11 March 2016, then the Rights to those unsubscribed Shares will be deemed to have been declined and the Rights Offer Entitlement will lapse. Action required by holders of Dematerialised Shares If you are a Qualifying Shareholder and have Dematerialised your Finbond Shares, you will not receive a printed Form of Instruction and you should receive notification from your CSDP or Broker regarding the Rights to which you are entitled in terms of the Rights Offer. Your CSDP or Broker will credit your account with the number of rights to which you are entitled and will contact you to ascertain: whether you wish to follow your Rights in terms of the Rights Offer and, if so, in respect of how many Rights Offer Shares; and if you do not follow all or any of your Rights: whether you wish to sell your Rights and, if so, how many Rights you wish to sell; or whether you wish to renounce your Rights and, if so, how many Rights and in favour of whom you wish to renounce those Rights; or whether you wish your Rights to lapse. CSDPs effect payment in respect of Dematerialised Shareholders on a delivery versus payment basis. If you are a Qualifying Shareholder holding Dematerialised Shares and wish to follow your Rights in respect of the Rights Offer, you are required to notify your duly appointed CSDP or Broker of your acceptance of the Rights Offer in the manner and time stipulated in the Custody Agreement governing the relationship between yourself and your CSDP or Broker. If you are not contacted, you should contact your CSDP or Broker and provide them with your instructions. If your CSDP or Broker does not obtain instructions from you, they are obliged to act in terms of the mandate granted to them by you, or if the mandate is silent in this regard, not to subscribe for Finbond Shares in terms of the Rights Offer. 4

7 Neither Finbond nor any of its associates take responsibility nor will they be held liable for any failure on the part of any CSDP or Broker to notify you of the Rights Offer and/or to obtain instructions from you to subscribe for the Rights Offer Shares and/or to sell the Rights allocated. You are permitted to apply for additional Rights Offer Shares over and above your entitlement. If you wish to apply for excess Rights Offer Shares you should instruct your CSDP or Broker as to the number of excess Rights Offer Shares for which you wish to apply. CSDPs effect payment in respect of Dematerialised Shareholders on a delivery versus payment basis. You must ensure that you have sufficient funds in your account to settle the aggregate Rights Offer Price payable in respect of the Rights Offer Shares for which you wish to subscribe. 5

8 IMPORTANT DATES AND TIMES The definitions and interpretations commencing on page 7 of this Circular apply mutatis mutandis to this section Rights Offer Declaration and Finalisation Data announcement released on SENS Friday, 12 February Last day to trade in Finbond Shares in order to participate in the Rights Offer (cum entitlement) Listing of and trading in the Letters of Allocation on the JSE under JSE code FGLN and ISIN ZAE commences at 09:00 Finbond Shares commence trading exrights on the JSE at 09:00 Circular (and Form of Instruction) posted to (Certificated) Shareholders Record Date for the Rights Offer for purposes of determining the Finbond Shareholders entitled to participate in the Rights Offer at the close of business on Rights Offer opens at 09:00 Certificated Shareholders will have their Letters of Allocation credited to an electronic account held at the Transfer Secretaries Dematerialised Shareholders will have their Letters of Allocation credited to their accounts held at their CSDP or broker Last day for trading Letters of Allocation on the JSE Listing of Rights Offer Shares and trading therein on the JSE commences at 09:00 Rights Offer closes at 12:00. Payment to be made and Form of Instruction lodged by Certificated Shareholders at the Transfer Secretaries Record Date for Letters of Allocation Rights Offer Shares issued and posted to Shareholders in certificated form on or about CSDP or Broker accounts in respect of Dematerialised Shareholders will be updated with Rights Offer Shares and debited with any payments due Results of Rights Offer announced on SENS In respect of successful excess applications (if applicable), Rights Offer Shares issued to Qualifying Dematerialised Shareholders and or Share certificates posted to Qualifying Certificated Shareholders on or about In respect of unsuccessful excess applications (if applicable), refund payments made to Certificated Shareholders on or about Friday, 19 February Monday, 22 February Monday, 22 February Tuesday, 23 February Friday, 26 February Monday, 29 February Monday, 29 February Monday, 29 February Friday, 4 March Monday, 7 March Friday, 11 March Friday, 11 March Monday, 14 March Monday, 14 March Monday, 14 March Wednesday, 16 March Wednesday, 16 March Notes: All references to dates and times are to local dates and times in South Africa. Holders of Dematerialised Finbond Shares are required to notify their CSDP or Broker of the action they wish to take in respect of the Rights Offer in the manner and by the time stipulated in the agreement governing the relationship between the Dematerialised Shareholder and his CSDP or Broker. Finbond Share certificates may not be dematerialised or rematerialised between Monday, 22 February 2016 and Friday, 26 February 2016, both days inclusive. CSDPs effect payment in respect of holders of Dematerialised Rights Offer Shares on a delivery versus payment basis. Dematerialised Shareholders will have their accounts at their CSDP or Broker automatically credited with their Rights and Certificated Shareholders will have their Rights credited to an account at the Transfer Secretaries. Rights Offer Share certificates to be issued in terms of the Rights Offer will be posted to persons entitled thereto, by registered post, at the risk of the Certificated Shareholders concerned. 6

9 DEFINITIONS AND INTERPRETATIONS Throughout this Circular and the annexures hereto, unless the context indicates otherwise, the words in the column on the left below shall have the meaning stated opposite them in the column on the right below, reference to the singular shall include the plural and vice versa, words denoting one gender include the other and words and expressions denoting natural persons include juristic persons and associations of persons: Act or Companies Act Finbond Securities Board or Directors Broker or Stockbroker Business Day Canadian Dollar or CAD$ Certificated Shareholders Certificated Shares Circular Commission or CIPC Common Monetary Area Corporate Advisor and Sponsor or Grindrod Bank CSDP Custody Agreement Dematerialisation Dematerialised Shareholders Dematerialised Shares the Companies Act 2008, (Act No. 71 of 2008), as amended; Finbond Securities (Pty) Ltd, (Registration number 1998/023394/07), a private company incorporated in accordance with the laws of South Africa and a 100% subsidiary of Finbond; the board of directors of Finbond, as set out in paragraph 9 of this Circular; any person registered as a broking member (equities) in terms of the rules of the JSE and in accordance with the provisions of the Financial Markets Act; any day of the week, excluding Saturdays, Sundays and all official public holidays in South Africa; the official currency of Canada; Shareholders who hold Certificated Shares; Shares that have not been Dematerialised, the title to which is represented by a physical document of title; this bound document, dated Monday, 22 February 2016, including the annexures hereto; in terms of the Companies Act, 2008 (Act No. 71 of 2008), as amended, it shall mean the Companies and Intellectual Property Commission, the official custodian of the legal status of companies, close corporations, cooperatives and intellectual property rights and a member of the Department of Trade and Industry of South Africa; South Africa, the Republic of Namibia and the Kingdoms of Swaziland and Lesotho constitute a single monetary area known as the Common Monetary Area. There are no exchange control restrictions between these countries and similar exchange control measures are applied by each country in respect of all countries outside the CMA; Grindrod Bank Limited (Registration number 1994/00794/06), a public company incorporated and registered in South Africa, the corporate advisor and sponsor to Finbond; Central Securities Depository Participant, being a participant as defined in section 1 of the Financial Markets Act; the agreement which regulates that relationship between the CSDP or Broker and each beneficial holder of Dematerialised Shares; process by which certificated Shares are converted or held in electronic form as uncertificated Shares and recorded in the subregister of Shareholders maintained by a CSDP; Shareholders who hold Dematerialised Shares; Shares that have been Dematerialised in accordance with Strate and which shareholding is recorded electronically; 7

10 Documents of Title EFT Exchange Control Regulations Finalisation Date Financial Markets Act Finbond or Company or Group Finbond Shareholders or Shareholders Finbond Shares or Shares Form of Instruction JSE KRI Last Practicable Date Legal Advisor Letters of Allocation or LA s Link Market Services or Transfer Secretaries Listings Requirements valid Share certificates, certified transfer deeds, balance receipts or any other documents of title acceptable to Finbond in respect of a certificated Share; electronic fund transfers; the Exchange Control Regulations, 1961, as amended, promulgated in terms of section 9 of the South African Currency and Exchanges Act No. 9 of 1933, as amended; the date on which the Rights Offer and its details become irrevocable, being Friday, 12 February 2016, i.e. no further finalisation changes to any of the finalisation information can be made by Finbond and the Rights Offer can only be cancelled; Financial Market Act, 2012 (Act No. 19 of 2012), as amended; Finbond Group Limited (Registration number 2001/015761/06), a public company incorporated in accordance with the laws of South Africa, the ordinary shares of which are listed on the main board of the exchange operated by the JSE, and its Subsidiaries, referred to collectively; all registered holders of Finbond Shares; the ordinary shares in the capital of the Company of cent each; the enclosed form of instruction in respect of a Letter of Allocation reflecting the Rights of Certificated Shareholders, and on which Certificated Shareholders must indicate to the Transfer Secretaries, whether they wish to take up, renounce or sell all or part of the Rights Offer Entitlement; JSE Limited (Registration number 2005/022939/06), a public company incorporated in accordance with the laws of South Africa, which is licensed to operate as an exchange under the Financial Markets Act; Kings Reign Investments (Proprietary) Limited, (Registration number 1998/024624/07), a private company duly incorporated in accordance with the laws of South Africa, of which Dr. W. van Aardt (the Chief Executive Officer of Finbond Group Limited) was the founder, and of which Dr. W van Aardt is a Director and the Van Aardt Family Trust is the ultimate beneficial shareholder with 100% shareholding in Kings Reign Investments (Pty) Ltd. Dr. W van Aardt is the settlor of the Van Aardt Family Trust. 8 February 2016, the last practicable date prior to the finalisation of this Circular; MacRobert Attorneys (Incorporated No. 1978/004694/21) of MacRobert Building, cnr Justice Mahomed & Jan Shoba Streets, Brooklyn, Pretoria, RSA. a renounceable (nil paid) letter of allocation in electronic form relating to the Rights Offer, conferring a right on the holder to subscribe for Rights Offer Shares in terms of the Rights Offer; Link Market Services South Africa Proprietary Limited (Registration number 2000/007239/07), a private company incorporated in accordance with the laws of South Africa, being the Transfer Secretaries of Finbond; the Listings Requirements of the JSE; 8

11 MOI Net 1 North America Qualifying Shareholder Rand or R or ZAR or cents Ratio of Entitlement Record Date for Letters of Allocation Record Date for the Rights Offer Register Renouncee Rights or Rights Offer Entitlement Rights Offer the Rights Offer Shares SENS South Africa or SA State Strate Subscription Price Subsidiary the memorandum of incorporation of Finbond; Net 1 Finance Holdings (Proprietary) Limited, (Registration number 1998/020801/07), a private limited liability company duly incorporated in accordance with the laws of South Africa, owned by NET1 U.E.P.S. Technologies Inc. and a 26.5% shareholder of Finbond; The United States of America and Canada; a registered holder of Finbond Shares on the Register of Shareholders on the Record Date for the Rights Offer and which does not have its registered address in any jurisdiction in which it would be unlawful to make the Rights Offer; South African Rand and cents, the official currency of South Africa; the number of Rights Offer Shares to which Qualifying Shareholders are entitled to subscribe for in terms of the Rights Offer, being shares for every 100 Finbond Shares held on the Record Date for the Rights Offer; the last day for Shareholders to be recorded in the Register in order for Shareholders and/or their Renouncees to be entitled to subscribe for the Rights Offer Shares, being the close of business on Friday, 11 March 2016; the last day for Shareholders to be recorded in the Register in order to participate in the Rights Offer, being the close of business on Friday, 26 February 2016; register of Shareholders, including all subregisters; the person in whose favour a Shareholder, who has received a Letter of Allocation, has renounced their Rights Offer Entitlement; a Shareholder s entitlement to subscribe for new Shares in accordance with the Ratio of Entitlement; the underwritten renounceable Rights Offer by Finbond to its Shareholders in terms of which Shareholders are entitled to subscribe for the Rights Offer Shares at the Subscription Price in accordance with the Ratio of Entitlement; the Finbond Shares, which are the subject of the Rights Offer; Stock Exchange News Service of the JSE; Republic of South Africa; one of the 50 states of the United States of America; Strate (Pty) Limited (Registration number 1998/022242/07), a private company incorporated in accordance with the laws of South Africa which is a registered central securities depository in terms of the Financial Markets Act, which manages the electronic clearing and settlement system for transactions that take place on the JSE and offmarket trades; 334 cents per Rights Offer Share, payable on subscription for the Rights Offer Shares; a subsidiary of Finbond as defined in the Companies Act; 9

12 Underwriter Underwriting Agreement United States of America or USA USA Dollar or US$ Midbrook Lane (Pty) Ltd (Registration number 2011/112842/07), a company duly registered and incorporated in accordance with the laws of South Africa; The underwriting agreement entered into between Finbond Group Limited and Midbrook Lane (Pty) Ltd in terms of which Midbrook Lane (Pty) Ltd will underwrite R of the rights issue in return for a fee of 2.5%; and in terms of which KRI irrevocably committed to follow R of their rights and Net 1 irrevocably committed to follow 100% of their rights. The United States of America comprising 50 states and the federal District of Columbia; United States of America Dollar and cents, the official currency of the United States of America; and ValueAdded Tax. 10

13 FINBOND GROUP LIMITED (Incorporated in the Republic of South Africa) (Registration number: 2001/015761/06) Share code: FGL ISIN: ZAE ( Finbond or the Company ) CIRCULAR TO FINBOND SHAREHOLDERS 1. INTRODUCTION AND PURPOSE OF THIS CIRCULAR 2. It was announced on SENS on Friday, 12 February 2016 that Finbond intends to raise an amount of R525 million from its Shareholders by way of an underwritten renounceable Rights Offer. In terms of the Rights Offer, new Finbond Shares of cent each in the authorised but unissued share capital of the Company, will be offered for subscription to Finbond Shareholders recorded in the register at the close of trade on Friday, 26 February 2016 who will receive Rights to subscribe for Rights Offer Shares on the basis of Rights Offer Shares for every 100 Finbond Shares held, for subscription at 334 cents per Rights Offer Share. Only whole numbers of Shares will be issued and Finbond Shareholders will be entitled to a rounded number of Shares, as set out in paragraph 5.5, once the Ratio has been applied. The JSE has agreed to the listing of the Rights Offer Shares and the purpose of this Circular is to furnish Finbond shareholders with relevant information relating to the Rights Offer, the action required and the implications thereof, in accordance with the Companies Act and the Listings Requirements. PURPOSE OF THE RIGHTS OFFER AND RATIONALE Finbond has embarked on an earnings enhancing growth strategy of establishing a business presence in the North American pay day lending (shortterm lending) market through acquisitions and subsequent organic growth of a number of pay day lenders in North America that specialise in the advancement of shortterm credit. The initial phase of this strategy will be through the acquisition of 4 North American pay day lending businesses in the United States of America and Canada that will give Finbond a branch network of 91 branches in North America and Canada of which 85 will be in the United States of America ( USA ) and 6 in Canada. Following these acquisitions approximately 40% 50% of Finbond s Net Earnings will be denominated in US$ within 12 months of the effective date and the intention is to grow US$ earnings to approximately 70% 80% of net earnings in 3 to 5 years. The purpose of the Rights Offer is to provide Finbond with capital in the amount of R525 million to enable it to conclude the initial North American acquisitions and for general working capital, funding and future growth. The rationale for the North American acquisitions inter alia includes: Earnings enhancing growth; Significant growth and consolidation opportunity in the North American pay day lending industry; Organic growth in Finbond s core 30 day or pay day lending competency; Diversification of Country and Political Risk; Effective ZAR hedge. Approximately 40% 50% of earnings will be in hard currency 12 months after the North American acquisitions; Economies of scale; Teaming up with existing owners/managers with years experience in operating pay day lending businesses in North America; Unique opportunity for South Africa s largest shortterm micro lender to enter the USA pay day lending market. 11

14 3. USA PAY DAY LENDING FEATURES, NORTH AMERICAN ACQUISITIONS AND GROWTH STRATEGY 3.1 Key features of the USA pay day lending market in the USA 1 US$38.5 billion dollars (R616 billion) in loans granted per year. 2 US$46 billion industry (R736 billion) in revenues across the industry. 3 Estimated pay day lending stores million North American households use pay day loans annually. A typical pay day loan is US$300 borrowed over a 21 day period. Various similarities between the South African 30 day micro credit industry and the USA pay day lending industry. 3.2 Pay day lending regulation in the USA market Consumer Financial Protection Bureau formed in Pay day lending in North America is regulated on a State by State basis. 27 States authorise unrestricted pay day lending. 9 States authorise some form of term lending. Only 14 States and the District of Columbia heavily regulate and limit personal lending. USA and Canada regulation is significantly more favourable than micro lending regulation in South 4 Africa. When considering the current regulatory environment in South Africa in comparison to that of the USA and Canada, Finbond is well positioned to cope with current and future USA and Canadian regulation USA pay day lending customer demographics Majority of customers earn between US$ and US$ per annum. 90% have a high school diploma or better. 54% have some college qualification or degree. 100% have steady incomes and 100% have checking accounts. 88% of customers believe it is a useful product. 89% of customers were satisfied with their last transaction. 3.4 The North American acquisitions As stated above, Finbond has embarked upon an earnings enhancing growth strategy in terms of which Finbond will enter and expand its shortterm lending business into the North American pay day lending (shortterm lending) market. The initial phase of this strategy will be through the acquisition of 4 North American pay day lending businesses in the United States of America and Canada that will give Finbond a branch network of 91 branches in North America and Canada of which 85 will be in the United States of America ( USA ) and 6 in Canada. To this end the Company has concluded 4 unrelated acquisition agreements on Tuesday, 2 February 2016, following the required internal authorities being granted, as announced on SENS on Friday, 5 February 2016: an agreement to acquire all of the Shares and Shareholder s claims in TV Profile LLC trading as American Cash Advance Pay day Cash Loans with its 41 branches in Louisiana and Mississippi, USA ( the American Cash Advance Acquisition ); an agreement to acquire all claims in the unincorporated business carried on under the name Cash Shop with its 6 branches in Canada ( the Cash Shop Canada Acquisition ); an agreement to acquire the Shares and Shareholder s claims in Cash in a Flash Advertising USA Inc. trading as Cash in a Flash and Xtra Cash with its 8 branches in Indiana, USA ( the Cash in a Flash Acquisition ); and an agreement to acquire 50% of the Shares and Shareholders claims in Cashback LLC trading as Cashback pay day Advance, Cashback Loans and Cashback with its 37 branches (and in the process of expanding by a further 5 branches) in Southern California, USA ( the Cashback Acquisition ); (collectively, the Acquisitions ). 1 ERLC. 28 May Facts About pay day Lending. [Online]: daylending 2 WSJ. 4 Jan Wall Street Journal. [online]: dayloans CFSA. Community Financial Services Association of America. [Online]: dayadvanceindustry.aspx 4 Pew Charitable Trust [Online]: dayloanregulationandusagerates 5 CFSA. Customer Demographics. [Online]: dayadvanceindustry/customerdemographics.aspx 12

15 Following the acquisitions Finbond will have a branch network of 91 branches in North America and Canada of which 85 will be in the United States of America s states of California, Louisiana, Mississippi and Indiana and 6 in Canada s Ontario Province. 3.5 Growth Strategy It is the intention to significantly expand Finbond s North American business over the next 3 to 5 years both through organic growth and acquisitions. High levels of fragmentation in the North American Pay Day Lending industry will precipitate industry consolidation. This will present opportunities for Finbond to grow its business through strategic acquisitions. It is the intention to acquire between 50 and 100 USA pay day lending stores per year in states with favourable regulation over the next 5 years. 3.6 Salient details regarding the North American acquisitions Each of the American Cash Advance Acquisition, the Cashback Acquisition and the Cash Shop Acquisition are categorised as Category 2 transactions in terms of the JSE Limited Listings Requirements. The Cash in a Flash Acquisition detailed above is not categorised in terms of the JSE Limited Listings Requirements American Cash Advance Acquisition Nature of business American Cash Advance specialises in offering shortterm pay day lending products directly to customers via 41 branch locations in Louisiana and Mississippi, USA. The business started in 2001 with only one store and has grown from strength to strength ever since. Currently the business grants more than US$39 million (R624 million) in loans annually. Salient features The salient features of the American Cash Advance Acquisition are as follows: The purchase consideration payable by Finbond to the vendor is US$8 million. The vendor provided a profit warranty to achieve a net profit before tax ( NPBT ) of US$2 million. 50% of the purchase consideration set out above will be payable on the effective date of the transaction in cash. The balance of the purchase consideration, being US$4 million, will be paid to the vendors in cash following the determination of the NPBT of the subject of the transaction for the 12month period ended 28 February For every US$1 by which NPBT for this period differs from the US$2 million profit warranty, the payment of US$4 million will be adjusted up or down, as the case may be, by US$4 for every US$1 that it deviates from the warranted profit. The maximum adjustment to this payment, either up or down, will be US$4 million. 13

16 The vendor in respect of the American Cash Advance Acquisition is Paul Angelette. The effective date of the American Cash Advance Acquisition is 1 March The net asset value and net after tax profit of the subject of the transaction amounted to US$2.01 million and US$1.3 million respectively, based on unaudited results for the 12 months ended 31 December Conditions precedent The American Cash Advance Acquisition remains subject to the following conditions precedent: The unconditional approval of the transaction by the Finbond Board which is subject to a successful Rights Offer. Finbond securing all regulatory and exchange control approvals that are required The Cash Shop Canada Acquisition Nature of business Cash Shop, based in Ontario Canada, was started by the current owners in Cash Shop specialises in pay day lending conducting business mainly in Ontario, Canada. Cash Shop currently has 6 stores on corporate level, which are the subject of this transaction, advancing more than US$7 million (approximately R112 million) in loans annually, as well as 22 more franchised stores throughout the province of Ontario. Salient features The purchase consideration payable by Finbond to the vendor is CAD$6.5 million. The vendor provided a profit warranty to achieve a NPBT of CAD$1 million. CAD$2.75 million of the purchase consideration set out above will be payable on the effective date of the transaction in cash. The balance of the purchase consideration, being CAD$3.75 million, will be paid to the vendors in cash following the determination of the NPBT of the subject of the transaction for the 12month period ended 28 February For every CAD$1 by which NPBT for this period differs from CAD$1 million, the amount of CAD$3.75 million will be adjusted up or down, as the case may be, by CAD$5.50. The maximum adjustment to this payment of CAD$2.75 million, either up or down, will be CAD$2.75 million. The vendor in respect of the Cash Shop Acquisition is Ontario Incorporated. The effective date of the Cash Shop Acquisition is 1 March The net asset value and net after tax profit of the subject of the transaction amounted to CAD$ and CAD$ respectively, based on unaudited results for the 12 months ended 31 December Conditions precedent The Cash Shop Acquisition remains subject to the following conditions precedent: The unconditional approval of the transaction by the Finbond Board which is subject to a successful Rights Offer. Finbond securing all regulatory and exchange control approvals that are required The Cash in a Flash Acquisition Nature of business Cash in a Flash was founded by the current owner in September of The business specialises in shortterm pay day lending operating via 8 customer facing stores in Indiana, USA granting more than US$2.5 million (R40 million) in loans annually. Salient features The salient features of the Cash in a Flash Acquisition are as follows: The purchase consideration payable by Finbond to the vendor is US$1.2 million. The vendor provided a profit warranty to achieve a net profit after tax ( NPAT ) of US$ % of the purchase consideration set out above will be payable on the effective date of the transaction in cash. The balance of the purchase consideration, being US$ , will be paid to the vendor in cash following the determination of the NPAT of the subject of the transaction for the 12 month period ended 28 February For every US$1 by which NPAT for this period differs from US$ , this payment of US$ will be adjusted up or down, as the case may be, by US$4. The maximum adjustment to this payment of US$ , either up or down, will be US$

17 The vendor in respect of the Cash in a Flash Acquisition is Rick Matijevich. The effective date of the Cash in a Flash Acquisition is 1 March The net asset value and net after tax profit of the subject of the transaction amounted to US$ and US$ respectively, based on unaudited results for the 12 months ended 31 December Conditions precedent The Cash in a Flash Acquisition remains subject to the following conditions precedent: The unconditional approval of the transaction by the Finbond Board which is subject to a successful Rights Offer. Finbond securing all regulatory and exchange control approvals that are required Cashback Acquisition Nature of business Cashback started doing business in 2003, with a focus on shortterm pay day lending in San Bernardino, California USA. Since then, Cashback has grown to 37 locations throughout southern California and is currently expanding its branch network by a adding a further 5 locations. Cashback grants loans to the value of US$75 million (R1.2 billion) annually. Salient features The salient features of the Cashback Acquisition are as follows: The purchase consideration payable by Finbond to the vendors is US$8 million for 50% of the shares in the business. The vendor provided a profit warranty to achieve an earnings before interest, taxation, depreciation and amortisation ( EBITDA ) of US$3.2 million for the year ending 28 February % of the purchase consideration set out above will be payable on the effective date of the transaction in cash. The balance of the purchase consideration, being US$4 million, will be paid to the vendors in cash following the determination of the EBITDA of the subject of the transaction for the 12 month period ended 28 February For every US$1 by which EBITDA for this period differs from US$3.2 million, this payment of US$3.2 million will be adjusted up or down, as the case may be, by US$5. The maximum adjustment to this payment of US$4 million, either up or down, will be US$4 million. The vendors in respect of the Cashback Acquisition are Treasure Box Lp, Oh Ten Management LLC and Franklin Otten in respect of 45.54% of the equity, with the balance being acquired from 43 other entities and individuals each of which individually owns less than 5% of the equity. The effective date of the Cashback Acquisition is 1 March The net asset value and net after tax profit of the subject of the transaction amounted to US$8.5 million and US$1.7 million respectively, based on unaudited results for the 12 months ended 31 December Conditions precedent The Cashback Advance Acquisition remains subject to the following conditions precedent: The unconditional approval of the transaction by the Finbond Board which is subject to a successful Rights Offer. Finbond securing all regulatory and exchange control approvals that are required. 15

18 4. NATURE OF THE BUSINESS OF FINBOND AND PROSPECTS 4.1 Nature of business Finbond is a leading South African financial services institution that specialises in the design and delivery of unique value and solution based shortterm credit solutions tailored around borrower requirements rather than institutionalised policies and practices. Finbond conducts its business through 2 major divisions focussed on: ShortTerm Micro Credit Products; and Investment and Savings Products ShortTerm Micro Credit Products are currently offered nationally in South Africa to the underbanked and underserved market of more than 40% of the adult population in South Africa actively seeking credit solutions but remaining largely unattended and underserviced due to the traditional banks concentration on the higher income brackets of the population. Finbond s Micro Credit division currently operates nationally through 342 branches in South Africa. For the 12 months ended 28 February 2015 Finbond granted loans of R765.7 million and received cash payments of R1.07 billion from clients. 100% of customer payments are collected via advanced direct debit orders. Finbond s ShortTerm Micro Credit division is the largest provider of 30day loans in South Africa with a market share of approximately 24%. Through the strategic acquisitions Finbond is expanding its ShortTerm Micro Credit Product division into the North American pay day lending market through partnering with existing pay day lending stores with solid track records of success and healthy cash generative shortterm debtors books. Following the strategic acquisitions, Finbond s North American ShortTerm Micro Credit Division will be advancing approximately US$130 million (R2.1 billion) per annum. The rationale for the North American acquisitions inter alia includes: Earnings enhancing growth; Significant growth and consolidation opportunity in the North American pay day lending industry. Organic growth in Finbond s core 30 day or pay day lending competency; Diversification of Country and Political Risk; Effective ZAR hedge. Approximately 40% 50% of earnings will be in hard currency 12 months after the North American acquisitions; Economies of scale; Teaming up with existing owners/managers with years experience in operating pay day lending businesses in North America; Unique opportunity for South Africa s largest shortterm micro lender to enter the USA pay day lending market. Following the expansion to North America, Finbond will also offer pay day loans and related products in the USA through 85 branches in the USA and 6 branches in Canada. Finbond commenced trading in 2003, was listed on the main board of the exchange operated by the JSE in 2007 and received its mutual banking licence from the South African Reserve Bank in Finbond s management team has a long and successful track record within the banking, shortterm micro finance and financial services sectors. This, combined with welldeveloped systems, uniquely branded product offerings, advanced information technology and a welltrained staff complement, provide Finbond with a sound platform for future growth. 4.2 Prospects As an expert shortterm micro lender, which successfully managed through adverse regulatory changes and market conditions in South Africa over the past 14 years, Finbond is wellpositioned to take advantage of the opportunities arising from the introduction of new regulations in the North American pay day lending market Finbond is currently preparing itself to undergo a period of rapid expansion in order to gain significant market share in the North American pay day lending market. 16