NETCARE LIMITED — Proxy Solicitation & Information Statement 2015

Jun 22, 2015

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

The definitions and interpretations commencing on page 4 of this circular apply to this circular including this cover page.

Netcare Limited

Incorporated in the Republic of South Africa (Registration number: 1996/008242/06) Share Code: NTC ISIN: ZAE000011953 ("Netcare" or "the Company" or "the Group")

CIRCULAR TO SHAREHOLDERS

relating to:

• restructure of the Netcare BEE transaction in order to simplify the current structure and settle all funding, and in connection therewith:
  • o the specific repurchase, and subsequent cancellation and delisting, of a maximum of 67.0 million and 50.6 million Netcare shares held as treasury shares by PCT Finco and HPFL Finco respectively;
  • o the settlement of current funding liabilities in PCT Finco and HPFL Finco; and
  • o the specific issue of approximately 91.1 million Netcare shares directly to the Trusts,

and including:

• extracts from section 115 of the Companies Act in respect of the approval requirements for the specific repurchase and section 164 of the Companies Act in respect of dissenting shareholders' appraisal rights;
• a notice of general meeting of shareholders; and
• **a form of proxy (**blue) for the general meeting for use by certificated shareholders and dematerialised shareholders with "own name" registration only.

11 June 2015

CORPORATE INFORMATION AND ADVISERS

Company secretary and registered office

Lynelle Bagwandeen Netcare Limited 76 Maude Street (corner West Street) Sandton, 2196 (Private Bag X34, Benmore 2010)

Sponsor

Nedbank Limited (Registration number 1951/000009/06) 3rd Floor, Corporate Place 135 Rivonia Road Sandton, 2196 (PO Box 1144, Johannesburg, 2000)

Legal adviser

Edward Nathan Sonnenbergs Inc. (Registration number 2006/018200/21) 1 North Wharf Square Loop Street Foreshore Cape Town, 8001 (PO Box 2293, Cape Town, 8000)

Financial adviser and transaction sponsor

Rand Merchant Bank (A division of FirstRand Bank Limited) (Registration number 1929/001225/06) 1 Merchant Place Corner Fredman Drive and Rivonia Road Sandton, 2196 (PO Box 786273, Sandton, 2146)

Transfer secretaries

Link Market Services South Africa Proprietary Limited 13th Floor, Rennie House 19 Ameshoff Street Braamfontein, 2001 (PO Box 4844, Johannesburg, 2000)

Independent reporting accountants and auditors

Grant Thornton (Practice number 903485E) Wanderers Office Park 52 Corlett Drive, Illovo Johannesburg, 2196 (Private Bag X28, Benmore, 2010)

Independent expert

BDO Corporate Finance Proprietary Limited (Registration number 1983/002903/07) 22 Wellington Road Parktown (Private Bag X60500, Houghton, 2041) Date of incorporation of Netcare 28 June 1996

Place of incorporation of Netcare South Africa

TABLE OF CONTENTS

	CORPORATE INFORMATION AND ADVISERS	IFC
	ACTION REQUIRED BY NETCARE SHAREHOLDERS	2
	SALIENT DATES AND TIMES	3
	DEFINITIONS AND INTERPRETATION	4
A.	INFORMATION RELATING TO THE TRANSACTION	8
1.	Introduction and purpose of this circular	8
2.	Rationale for the transaction	9
3.	PCT restructure steps	9
3.1	Specific repurchase	10
3.2	Redemption of the redeemable preference shares	10
3.3	Capitalisation of the PCT by PCT Finco	10
3.4	Specific issue	10
3.5	Issue of new units by PCT	10
4.	HPFL restructure steps	11
4.1	Specific repurchase	11
4.2	Redemption of the redeemable preference shares	11
4.3	Capitalisation of the PPT, MCT and HLT by HPFL Finco	11
4.4	Specific issue	12
4.5	Issue of new units by PPT, MCT and HLT	12
5.	Details of the transaction	12
5.1	Terms of the specific repurchase	12
5.2	Terms of the specific issue	12
5.3	Conditions precedent	13
	5.3.1 Specific repurchase	13
	5.3.2 Specific issue	13
5.4	Pro forma financial effects of the transaction	13
6.	General meeting	15
7.	Dissenting shareholders' appraisal rights	15
8.	Directors' opinion and recommendation	16
9.	Estimated expenses in relation to the transaction	16
10.	Exchange control regulations	17
B.	INFORMATION RELATING TO NETCARE	18
1.	Incorporation of Netcare	18
2.	History and nature of business	18
3.	Prospects	18
4.	Trading history of Netcare shares on the JSE	18
5.	Information on the directors and senior management	19
5.1	Directors and senior management	19
5.2	Directors' interests in shares	19
5.3	Directors' remuneration	19
5.4	Directors' interests in transactions	19
6.	Historical financial information on Netcare	19
7.	Material change	19
8.	Authorised and issued shares	20
9.	Alterations to the number of issued Shares	20
10.	Major shareholders	21
11.	Litigation statement	21
12.	Directors' responsibility statement	21
13.	Consents	21
14.	Documents available for inspection	22
	ANNEXURE 1: PRO FORMA FINANCIAL INFORMATION OF NETCARE PURSUANT TO THE TRANSACTION	23
	ANNEXURE 2: INDEPENDENT REPORTING ACCOUNTANTS' REPORT ON THE PRO FORMA
	FINANCIAL INFORMATION	28
	ANNEXURE 3: REPORT OF THE INDEPENDENT EXPERT	30
	ANNEXURE 4: TRADING HISTORY OF NETCARE SHARES ON THE JSE	36
	ANNEXURE 5: INFORMATION ON THE DIRECTORS AND SENIOR MANAGEMENT OF NETCARE AND
ITS MAJOR SUBSIDIARIES37
	ANNEXURE 6: HISTORICAL FINANCIAL INFORMATION OF NETCARE39
ACCOUNTING POLICIES47
NOTICE OF GENERAL MEETING65
ANNEXURE A: EXTRACT FROM SECTIONS 115 AND 164 OF THE COMPANIES ACT69
FORM OF PROXY (FOR USE BY CERTIFICATED SHAREHOLDERS AND "OWN NAME''
DEMATERIALISED SHAREHOLDERS ONLY)75

ACTION REQUIRED BY NETCARE SHAREHOLDERS

This circular is important and requires your immediate attention. Please take careful note of the following provisions regarding the action required by Netcare shareholders. If you are in any doubt as to what action to take, please consult your attorney, broker, CSDP or other professional adviser immediately. If you have disposed of all of your Netcare shares, this circular should be handed to the purchaser of such shares or the attorney, broker, CSDP or other agent who disposed of your Netcare shares for you.

The definitions and interpretations commencing on page 4 of this circular apply to this section.

A general meeting of Netcare shareholders will be held at 10:00 on Friday, 10 July 2015 in the Auditorium, Ground Floor, 76 Maude Street, (corner West Street), Sandton, 2196 to consider and if deemed fit, pass, inter alia, the ordinary and special resolutions required to authorise the implementation of the transaction. A notice convening the general meeting is attached to and forms part of this circular.

Action required by certificated Netcare shareholders

You are entitled to attend, or be represented by proxy, at the general meeting.

If you are unable to attend the general meeting, but wish to be represented thereat, you must complete and return the attached form of proxy (blue), in accordance with the instructions contained therein, to be received by the transfer secretaries, Link Market Services South Africa Proprietary Limited, 13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein, 2001 (PO Box 4844, Johannesburg, 2000), for administrative purposes, by no later than 10:00 on Wednesday, 8 July 2015.

Action required by dematerialised Netcare shareholders

1. If you hold dematerialised Netcare shares other than with "own name" registration:

1.1 Voting at the general meeting

• 1.1.1 Your broker or CSDP should contact you to ascertain how you wish to cast your vote at the general meeting and thereafter cast your vote in accordance with your instructions.
• 1.1.2 If you have not been contacted by your broker or CSDP, it is advisable for you to contact your broker or CSDP and furnish them with your voting instructions.
• 1.1.3 If your broker or CSDP does not obtain voting instructions from you, it will be obliged to vote in accordance with the instructions contained in the custody agreement concluded between you and your broker or CSDP.
• 1.1.4 You must not complete the attached form of proxy.

1.2 Attendance and representation at the general meeting

In accordance with the mandate between you and your broker or CSDP, you must advise your broker or CSDP if you wish to attend the general meeting and your broker or CSDP will issue the necessary letter of representation to you to attend the general meeting.

2. If you hold dematerialised Netcare shares with "own name" registration:

2.1 Voting and attendance at the general meeting

• 2.1.1 You may attend the general meeting in person and may vote at the general meeting.
• 2.1.2 Alternatively, you may appoint a proxy to represent you at the general meeting by completing the attached form of proxy in accordance with the instructions contained therein and returning it to the transfer secretaries, to be received by no later than 10:00 on Wednesday, 8 July 2015.

SALIENT DATES AND TIMES

The definitions and interpretations commencing on page 4 of this circular apply to the "Salient dates and times" section of the circular.

	2015
Record date to determine which shareholders are eligible to receive the circular	Friday, 5 June
Circular posted to Netcare shareholders on	Thursday, 11 June
Last day to trade in order to be eligible to attend and vote at the general meeting on	Friday, 26 June
Voting record date to determine which shareholders are entitled to attend and vote atthe general meeting on	Friday, 3 July
Last day for shareholders to lodge forms of proxy for the general meeting by 10:00 on	Wednesday, 8 July
Last date and time for Netcare shareholders to give written notice to Netcare objectingto the special resolution approving the transaction by 10:00	Friday, 10 July
General meeting to be held at 10:00 on	Friday, 10 July
Results of the general meeting released on SENS on	Friday, 10 July
Results of the general meeting published in the South African press on	Monday, 13 July
Expected date of receipt of compliance certificate from the TRP	Tuesday, 14 July
Expected implementation date of the specific repurchase	Wednesday, 15 July
Expected termination of listing of Netcare shares repurchased on the JSE at thecommencement of trading on or about	Thursday, 16 July
Last day for Netcare to send objecting Netcare shareholders notices of adoption of thespecial resolution approving the specific repurchase	Tuesday, 21 July

Notes:

• 1. The above dates and times are subject to change. Any material changes will be released on SENS and published in the South African press.
• 1. All times quoted in this circular are South African times.
• 1. Netcare shareholders should note that as transaction in shares are settled in the electronic settlement system used by Strate, settlement of trade takes place five business days after such trade. Therefore persons who acquire Netcare shares after the voting last day to trade shall not be eligible to vote at the general meeting.
• 1. If a form of proxy is not received by the time and date shown above or not less than 48 hours before recommencement of any adjourned or postponed meeting, it may be handed to the Chairman of the general meeting not later than ten minutes before the general meeting is due to commence or recommence.
• 1. Shareholders are referred to Annexure A attached to this circular (which contains an extract of section 164 of the Companies Act) regarding appraisal rights accorded to Netcare shareholders.

DEFINITIONS AND INTERPRETATION

In this circular, unless otherwise stated or the context otherwise indicates, the words and expressions in the first column shall have the meanings stated opposite them in the second column and words and expressions in the singular shall include the plural and vice versa, words importing natural persons shall include corporations and associations of persons and vice versa and any reference to one gender shall include the other genders:

"associate"	an associate as defined in terms of the JSE Listings Requirements;
"appraisal rights"	the rights afforded to shareholders in terms of section 164 of the Companies Act, anextract of which is set out in Annexure A of this circular;
"authorised dealer"	a person authorised to deal in foreign exchange as contemplated in the Exchange ControlRegulations;
"BEE"	black economic empowerment as defined in the BEE Act;
"BEE Act"	the Broad-Based Black Economic Empowerment Act, 2003 (Act 53 of 2003), as amended;
"board" or "directors"	the board of directors of Netcare, as at the last practicable date, whose names are set outon page 8 of this circular;
"broker"	any person registered as a broking member (equities) in terms of the rules of the JSE inaccordance with the provisions of the Financial Markets Act;
"business day"	any day other than a Saturday, Sunday or official public holiday in South Africa;
"capital contributions"	the contribution by the Fincos of the remaining proceeds from the specific repurchase tothe Trusts which will enable the Trusts to acquire Netcare shares in terms of the specificissue;
"cent"	South African cent in the official currency of South Africa;
"certificated shareholders"	holders of certificated shares;
"certificated shares"	shares that have not been dematerialised, title to which is represented by a share certificateor other documents of title;
"circular" or "this document"	this document dated 11 June 2015 relating to the transaction, including the annexureshereto, the attached notice of general meeting and, where applicable, the form of proxy(blue);
"Codes"	the Codes of Good Practice on Broad-Based Black Economic Empowerment issued by theMinister of Trade and Industry on 9 February 2007 in terms of section 9 of the BEE Act, asamended;
"Companies Act"	the Companies Act (Act 71 of 2008), as amended;
"conditions precedent"	the conditions precedent to the transaction as set out in paragraph 5.3 of this circular;
"CSDP"	Central Securities Depository Participant, being a "participant" as defined in section 1 ofthe Financial Markets Act and appointed by individual shareholders for the purposes of,and in regard to, dematerialisation in terms of such Act;
"dematerialisation" or"dematerialised"	the process by which securities held in certificated form are converted to or held inelectronic form and uncertificated securities and recorded in a sub-register of securitiesholders by a CSDP, after the documents of title have been validated and cancelled by thetransfer secretaries and captured onto the Strate system by the selected CSDP or broker,and the holding of securities is recorded electronically;
"dematerialised Netcareshareholders" or "dematerialisedshareholders"	holders of dematerialised shares;
"dissenting shareholders"	Netcare shareholders who exercise their appraisal rights in terms of section 164 of theCompanies Act and in respect of whom none of the events set out in section 164(9) of theCompanies Act has occurred;
"documents of title"	share certificates, certified transfer deeds, balance receipts, or any other documents oftitle to shares;
"EPS"	earnings per share;

"Exchange ControlRegulations"	the Exchange Control Regulations, 1961, as amended, promulgated in terms of section 9of the South African Currency and Exchanges Act No 9 of 1933, as amended;
"Financial Markets Act"	the Financial Markets Act (Act 19 of 2012), as amended;
"Finco liabilities"	redeemable preference shares (used to finance the initial share purchase, in terms of theNetcare BEE transaction) of the Fincos held by NHG
"Fincos"	collectively, PCT Finco and HPFL Finco;
"general meeting"	the meeting of Netcare shareholders convened in terms of the notice of general meetingattached to and forming part of this circular to vote on the ordinary and special resolutionsrequired to approve the transaction, which general meeting is expected to take place inthe Auditorium, Ground Floor, 76 Maude Street, (corner West Street), Sandton, 2196 at10:00 on Friday, 10 July 2015;
"the Group"	Netcare Limited and its subsidiaries;
"HLT"	Healthy Lifestyle Trust (Master's Reference No. IT 9387/05), a trust for the benefit organisationsor individuals promoting or involved with sporting or other physical activity and healthylifestyle programs or objectives;
"HLT trustees"	the trustees of the HLT, being Peter Warrener, Stefaan Sithole, Lungile Gcinumzi Mazwai,Daniel Alexander Jordaan and Mahloko Boitumelo Nkosi;
"HPFL Finco"	Netcare Health Partners for Life Finance Company Proprietary Limited (registrationnumber 2000/007632/07), a private company duly incorporated in accordance withthe laws of South Africa which is collectively owned by PPT (70.6%), MCT (17.6%) andHLT (11.8%);
"HPFL restructure"	proposed restructure of the HPFL scheme as detailed in paragraph 4 of the circular andincluding the specific repurchase and specific issue;
"HPFL scheme"	a component of the Netcare BEE transaction, which was implemented through the PPT,MCT, HLT and HPFL Finco;
"IFRS"	International Financial Reporting Standards;
"implementation date"	the third business day after the date of fulfilment or waiver (to the extent legally permissible)of the last of the conditions precedent;
"independent expert" or "BDO"	BDO Corporate Finance Proprietary Limited (registration number 1983/002903/07), acompany duly registered and incorporated under the laws of South Africa, who have beenappointed as the independent expert, as stipulated in the Companies Act, in relation to thespecific repurchase;
"JSE"	JSE Limited (registration number 2005/022939/06), a public company with limited liabilityduly incorporated in accordance with the laws of South Africa and which is licensed tooperate as an exchange under the Financial Markets Act;
"last practicable date"	Friday, 29 May 2015, being the last practicable date prior to the finalisation of this circular;
"Link Market Services"	Link Market Services South Africa Proprietary Limited (registration number 2000/007239/07),a private company duly registered and incorporated with limited liability in accordancewith the laws of South Africa;
"Listings Requirements" or"JSE Listings Requirements"	Listings Requirements of the JSE, as amended from time to time;
"MCT"	Mother & Child Trust (Master's Reference No. IT 9388/05), a trust for the benefit of childrenand women and organisations focusing on their interests and controlled by the MCTtrustees;
"MCT trustees"	the trustees of the MCT, being Peter Warrener, Stefaan Sithole, Lungile Gcinumzi Mazwai,Charmaine Pailman, Sarah Hlekani Masunga, Thuleleni Patience Mzamane and TselisehangBellina Ntjantja Ned;
"memorandum" or "MOI"	the Memorandum of Incorporation of Netcare adopted by a special resolution at theannual general meeting of Netcare held on 8 February 2013;

"NAV"	the net asset value of Netcare calculated as the shareholders equity;
"NAVPS"	NAV divided by ordinary shares in issue net of treasury shares;
"Netcare" or "the Company"	Netcare Limited (registration number 1996/008242/06), a public company duly incorporatedin accordance with the laws of South Africa;
"Netcare BEE transaction"or "BEE transaction"	Netcare's Health Partners for Life broad-based BEE transaction that was implemented in2005, which resulted in the acquisition by the Trusts and Fincos of shares equal toapproximately 10% of the entire issued share capital in Netcare at the time of the BEEtransaction. The current shareholding is approximately 8%;
"NHG"	Netcare Hospital Group Proprietary Limited (registration number 1981/012516/07),a private company duly incorporated in accordance with the laws of South Africa andwholly owned subsidiary of Netcare;
"non-resident"	a person who is not considered to be ordinarily resident in South Africa in terms of theExchange Control Regulations;
"PCT"	Patient Care and Passionate People Trust (Master's Reference No. IT 9389/05), a trust forthe benefit of employees of Netcare and its subsidiaries, including nurses, paramedicsand other care givers and Netcare management and staff;
"PCT Finco"	The Patient Care and Passionate People Finance Company Proprietary Limited (registrationnumber 2005/032342/07), a private company duly incorporated in accordance with thelaws of South Africa and a wholly owned subsidiary of the PCT;
"PCT restructure"	proposed restructure of the PCT scheme as detailed in paragraph 3 of the circular andIncluding the specific repurchase and the specific issue;
"PCT scheme"	a component of the Netcare BEE transaction, which was implemented through the PCTand PCT Finco;
"PCT trustees"	the trustees of the PCT, being Peter Warrener, Stefaan Sithole, Lungile Gcinumzi Mazwai,Reuben Reddy, Mzikayise Tshontyi, Anita Inge Tyldesley and Deidre Dawn Davids;
"PPT"	Physician Partnerships Trust (Master's Reference No. IT 9386/05), a trust for the benefit ofhealthcare professionals;
"PPT trustees"	the trustees of the PPT, being Peter Warrener, Stefaan Sithole, Lungile Gcinumzi Mazwai,Charmaine Pailman and Professor Bongani Mayosi;
"Rand" or "R" or "ZAR"	South African Rand, the official currency of South Africa;
	"Rand Merchant Bank" or "RMB" Rand Merchant Bank (A division of FirstRand Bank Limited (registration number1929/001225/06), a public company duly registered and incorporated with limited liabilityin accordance with the laws of South Africa;
"register"	the register of certificated shareholders maintained by the transfer secretaries and thesub-register of dematerialised shareholders maintained by the relevant CSDPs in terms ofsection 50 of the Companies Act;
"regulations"	the regulations issued pursuant to the Companies Act from time to time;
"repayment of the Fincoliabilities"	the settlement and redemption of the redeemable preference shares (used to finance theinitial share purchase, in terms of the initial BEE transaction) of the Fincos held by NHG,using a portion of the proceeds from the specific repurchase;
"Reporting Accountants andAuditors" or "IndependentReporting Accountants"	Grant Thornton, registered accountants and auditors (practice number 903485E);
"repurchase agreement"	the agreement between Netcare, PCT Finco and HPFL Finco dated 3 June 2015 inrelation to the specific repurchase;
"SENS"	the Stock Exchange News Service of the JSE Limited;
"shares" or "Netcare shares"	listed ordinary shares of 1 cent each in the share capital of Netcare;
"shareholders" or "Netcareshareholders"	holders of shares in Netcare;

"South Africa"	the Republic of South Africa;
"specific issue"	the specific issue for cash, as contemplated in paragraph 5.51 of the ListingsRequirements, of approximately 91 100 000 Netcare shares by Netcare to the Trusts,being non-public shareholders (as defined in paragraph 4.25 to 4.27 of the ListingsRequirements), on the implementation date as set out below:•approximately 50 900 000 Netcare shares at the transaction share price each, tothe PCT;•approximately 28 000 000 Netcare shares at the transaction share price each, tothe PPT;•approximately 7 500 000 Netcare shares at the transaction share price each, to theMCT; and•approximately 4 700 000 Netcare shares at the transaction share price each, tothe HLT.
	The Trusts will collectively subscribe for fewer shares than those repurchased from theFincos under the specific repurchase, given that a portion of the repurchase proceeds willbe used to settle the redeemable preference shares held by NHG, accrued and unpaiddividends, and to settle the sundry liabilities;
"specific repurchase"	the specific repurchase, as contemplated in paragraph 5.69 of the Listings Requirements,of a maximum of 117 600 000 shares by Netcare from the Fincos on the implementationdate as set out below:•a maximum of 67 000 000 Netcare shares at the transaction share price each, fromPCT Finco; and•a maximum of 50 600 000 Netcare shares at the transaction share price each, fromHPFL Finco;
"Strate"	Strate Proprietary Limited (registration number 1998/022246/06), a private company dulyincorporated in accordance with the laws of South Africa which is a registered centralsecurities depository and which is responsible for the electronic settlement system usedby the JSE;
"subscription agreement"	the agreement between Netcare, PCT, PPT, MCT and HLT dated 3 June 2015 in relationto the specific issue;
"Takeover Regulations"	the Takeover Regulations issued in terms of section 120 of the Companies Act, as amended;
"transaction"	collectively, the specific repurchase, repayment of the Finco liabilities, capital contributionsand the specific issue;
"transaction agreements"	collectively, the subscription agreement and the repurchase agreement;
"transaction share price"	the five day VWAP of Netcare shares up to and including the day before the implementationdate, being the pricing reference for the specific repurchase and specific issue;
"transfer secretaries"	Link Market Services;
"TRP"	the Takeover Regulations Panel established in terms of section 196 of the Companies Act;
"Trusts"	collectively, the PCT, the PPT, the MCT and the HLT;
"Trust deeds"	the trust deeds governing the Trusts;
"unit"	a unit created in accordance with the Trust deeds which, when linked to a Netcare share,confers on a beneficiary, the rights, benefits and obligations stipulated in the Trust deeds;
"VAT"	value added tax, payable in terms of the Value-Added Tax Act (Act 89 of 1991), asamended; and
"VWAP"	volume weighted average price.

Netcare Limited

Incorporated in the Republic of South Africa (Registration number: 1996/008242/06) Share Code: NTC ISIN: ZAE000011953 ("Netcare" or "the Company" or "the Group")

CIRCULAR TO NETCARE SHAREHOLDERS

Directors of Netcare

RH Friedland (Group Chief Executive Officer) SJ Vilakazi (Chairman retired – 31 May 2015) KN Gibson (Group Chief Financial Officer) JM Kahn (acting Chairman – 1 June 2015) JM Watts (Chief Executive Officer – GHG) T Brewer

Executive Independent non-executive

APH Jammine MJ Kuscus KD Moroka N Weltman

A. INFORMATION RELATING TO THE TRANSACTION

1. Introduction and purpose of this circular

In the announcement released on SENS on Wednesday, 3 June 2015 and published in the South African press on Thursday, 4 June 2015, Netcare shareholders were advised that Netcare wishes to restructure the Netcare BEE transaction in order to simplify the structures and settle all associated funding liabilities.

Furthermore, reference is made to the Netcare circular dated Thursday, 1 September 2005, regarding the Netcare BEE transaction.

In 2005, Netcare concluded the initial Netcare BEE transaction in terms whereof, inter alia, Netcare issued, in aggregate, 160 million Netcare shares to the Fincos to the benefit of a range of beneficiaries pursuant to a transaction worth R1 billion. The Trusts that are participants to the BEE transaction are the PCT, the PPT, the MCT and the HLT. The BEE transaction was structured to give effect to the following principles:

• broad-based black economic empowerment, which maximises the Group's transformation goals and is aligned with the content of the Codes;
• a cost to shareholders which was in the range considered acceptable for transactions of this nature and which cost should be outweighed by the envisaged medium to long-term commercial and strategic benefits and growth to be derived by the group from the BEE transaction;
• the inclusion of participants who will contribute to the growth of Netcare, through transformation of and recognition of the dedication and contribution to healthcare made by its doctors, nurses and staff;
• from the outset, the Trusts would enjoy, on behalf of their beneficiaries, the full economic value and voting rights in respect of the Netcare shares held by them; and
• economic sustainability, so that the transaction is enduring irrespective of external factors such as the performance of equity markets or fluctuations in interest rates.

The BEE transaction was funded with preference shares. Netcare now wishes to make certain amendments to the Netcare BEE transaction. The increase in the Netcare share price has created an opportunity for the HPFL scheme and the PCT scheme to increase value for future beneficiaries by the repayment of the Finco liabilities (thereby eliminating future funding costs) and by simplifying the current structure. The purpose of this 2015 restructure is to simplify the scheme administration and to settle the scheme debt.

The purpose of this circular is to provide Netcare shareholders with information relating to the transaction and to convene a general meeting at which Netcare shareholders will be requested to vote on the special and ordinary resolutions to approve the transaction.

2. Rationale for the transaction

Netcare established the HPFL scheme and PCT scheme to enhance the promotion of broad based economic participation in the ownership of Netcare by a range of beneficiaries and to achieve a favourable empowerment ownership rating. The restructuring of the schemes in the manner proposed will result in a more cost efficient structure and will enhance the value for future participants by the repayment of the Finco liabilities and by simplifying the current structure.

The specific repurchase mechanism eliminates the possibility of negative share price movements associated with a disposal of Netcare shares in the open market. The capital contribution by the Fincos to the Trusts creates the opportunity for the Trusts to directly own Netcare shares, resulting in a simplified legal structure with associated cost savings.

3. PCT restructure steps

The PCT restructure steps are set out below. For illustrative purposes, all amounts included in the steps below are based on R39.24 per Netcare share, representing the five day VWAP of a Netcare share, as at the last practicable date. The pre-restructure PCT structure is as follows:

3.1 Specific repurchase

Netcare repurchases, by way of a specific repurchase in terms of paragraph 5.69 of the Listings Requirements and section 48 of the Companies Act, a maximum of 67 000 000 Netcare shares from PCT Finco at the transaction share price which, in aggregate, will be an amount of approximately R2.6 billion. These shares will be cancelled, delisted and reinstated as authorised but unissued shares.

The specific repurchase will be concluded at the five day VWAP of Netcare shares up to and including the day before the implementation date transaction share price. The specific repurchase will be funded out of the Group's available cash resources and the available short term credit facilities of the Group.

3.2 Redemption of the redeemable preference shares

PCT Finco uses a portion of the proceeds from the specific repurchase to settle and redeem the redeemable preference shares (used to finance the initial share purchase, in terms of the initial Netcare BEE transaction) held by NHG for approximately R591 million and to distribute the accrued and unpaid dividends of approximately R28 million to NHG.

3.3 Capitalisation of the PCT by PCT Finco

PCT Finco uses the remaining proceeds from the specific repurchase (after making provision for the settlement of other liabilities of PCT Finco (e.g. sundry creditors and taxes)) to declare a dividend to the PCT equal to the value of the allocated portion of the PCT Scheme (and withhold any amount to be withheld in terms of dividend withholding tax) and will use the remainder of the repurchase proceeds to make a capital contribution to the PCT. This will provide the capital to enable the PCT to acquire direct ownership of the Netcare shares. The capital contribution will entitle PCT Finco to the residual capital and income of the PCT after all distributions have been made to beneficiaries and the PCT scheme has fully matured. PCT Finco will also become the residual beneficiary of the PCT in respect of any forfeited trust units.

3.4 Specific issue

PCT uses the dividend and capitalisation proceeds of approximately R2.0 billion to subscribe for, and Netcare shall allot and issue to PCT, by way of a specific issue in terms of paragraph 5.51 of the Listings Requirements, approximately 50 900 000 Netcare shares at the transaction share price. PCT will subscribe for fewer shares than those repurchased from PCT Finco as some of the repurchase proceeds will be used for repayment of PCT Finco's liabilities.

PCT is a non-public shareholder (as defined in paragraphs 4.25 to 4.27 of the Listings Requirements) for purposes of the specific issue as contemplated in paragraph 5.51(b) of the Listings Requirements.

3.5 Issue of new units by PCT

Holders of existing units in the PCT scheme (i.e. the allocated portion of the scheme) will retain their current units and will not be affected by the restructure. The terms and amounts of the new issues will be determined by Netcare's Human Resources department, together with its Remuneration Committee and the PCT trustees. It is not the intention of Netcare to issue all available units in a single issue or at all.

The size of the new award will be determined with reference to the financial implications thereof for Netcare. As at the last practicable date no new allocations have been determined and allocations will be the same as before the Transaction.

4. HPFL restructure steps

The HPFL restructure steps are set out below. For illustrative purposes, all amounts included in the steps below are based on R39.24 per Netcare share, representing the five day VWAP of a Netcare share, as at the last practicable date. The pre-restructure HPFL structure is as follows:

4.1 Specific repurchase

Netcare repurchases, by way of a specific repurchase in terms of paragraph 5.69 of the Listings Requirements and section 48 of the Companies Act, a maximum of 50 600 000 Netcare shares from HPFL Finco at the transaction share price, which in aggregate will be approximately R2.0 billion. These shares will be delisted, cancelled and reinstated as authorised but unissued shares.

The specific repurchase will be concluded at the transaction share price. The specific repurchase will be funded out of the Group's available cash resources and the available short term credit facilities of the Group.

4.2 Redemption of the redeemable preference shares

HPFL Finco uses a portion of the proceeds from the specific repurchase to settle and redeem the redeemable preference shares held by NHG for approximately R265 million and to distribute the accrued and unpaid dividends of approximately R134 million to NHG.

4.3 Capitalisation of the PPT, MCT and HLT by HPFL Finco

HPFL Finco uses the remaining proceeds (after making provision for the settlement of other liabilities of HPFL Finco (e.g. sundry creditors and taxes) to make capital contributions to the PPT, MCT and HLT which will enable them to acquire direct ownership of the Netcare shares. The capital contributions will entitle HPFL Finco to the residual capital of the PPT, MCT and HLT after all distributions have been made to beneficiaries and the PPT, MCT and HLT schemes have fully matured. HPFL Finco will also become the residual beneficiary of the PPT, MCT and HLT in respect of any forfeited units.

4.4 Specific issue

PPT, MCT and HLT use the remaining proceeds of approximately R1.6 billion to subscribe for, and Netcare shall allot and issue to each of the PPT, the HLT and the MCT, by way of a specific issue in terms of paragraph 5.51 of the Listings Requirements, approximately 40 200 000 Netcare shares at the transaction share price. PPT, MCT and HLT will collectively subscribe for fewer shares than those repurchased from HPFL Finco as some of the repurchase proceeds will be used for repayment of HPFL Finco's liabilities. The specific issue will be concluded at the transaction share price.

The PPT is a non-public shareholder (as defined in paragraphs 4.25 to 4.27 of the Listings Requirements) for purposes of the specific issue as contemplated in paragraph 5.51(b) of the Listings Requirements.

4.5 Issue of new units by PPT, MCT and HLT

PPT, MCT and HLT may in future award new units to their beneficiaries. The terms and amounts of any new issues will be determined by Netcare and the trustees of the PPT, HLT and MCT with reference to the specific objectives of the aforesaid three Trusts. It should be noted that it is not the intention to award all the available units to beneficiaries in a single issue or at all. The size of any new award will be determined with reference to the financial implications thereof for Netcare. As at the last practicable date no new allocations have been determined and allocations will be the same as before the Transaction.

5. Details of the transaction

5.1 Terms of the specific repurchase

The board has resolved that Netcare will repurchase, by way of a specific repurchase in terms of paragraph 5.69 of the Listings Requirements, all of the ordinary issued shares in Netcare held by each of PCT Finco and HPFL Finco at the transaction share price. This is an estimated total of approximately R4.6 billion, assuming a transaction share price of R39.24 per Netcare share, representing the 5 day VWAP of a Netcare share, as at the last practicable date.

Pursuant to the specific repurchase, the repurchase shares will be cancelled as issued shares and restored to the status of authorised share capital in Netcare. Application will be made to the JSE for the delisting of the repurchase shares once they have been repurchased and cancelled.

The specific repurchase will be funded out of the Group's available cash resources and the available short term credit facilities of the Group.

The repurchase of shares will be a specific repurchase of shares in terms of paragraph 5.69 of the JSE Listings Requirements and approved in the general meeting.

5.2 Terms of the specific issue

The board has resolved that Netcare will, by way of a specific issue in terms of paragraph 5.51 of the Listings Requirements, issue approximately 91 100 000 shares directly to the Trusts. The specific issue will be at the transaction share price.

The issue of shares will be a specific issue of shares for cash in terms of paragraph 5.51 of the JSE Listings Requirements and approved at the general meeting.

Each of the Trusts is a non-public shareholder (as defined in paragraph 4.25 to 4.27 of the Listings Requirements) for purposes of the specific issue as contemplated in paragraph 5.51(b) of the Listings Requirements.

5.3 Conditions precedent

5.3.1 Specific repurchase

The implementation of the specific repurchase is subject to the fulfilment of the following unfulfilled conditions precedent:

• obtaining the necessary shareholder approval for the specific repurchase;
• a written exemption or compliance certificate from the TRP being obtained in accordance with the provisions of the Companies Act, in terms of whereof, inter alia, the TRP consents to or wholly exempts the Transaction from the application of Part B, Part C and the Takeover Regulations, alternatively, the TRP partially consenting to or exempting the application of the aforesaid provisions, on terms and subject to such conditions as are acceptable to Netcare and the Fincos; and
• the subscription agreement being concluded and becoming unconditional.

5.3.2 Specific issue

The implementation of the specific issue is subject to the fulfilment of the following unfulfilled conditions precedent:

• the repurchase agreement being concluded and becoming unconditional;
• obtaining the necessary board and shareholder approval for the specific issue; and
• deeds of amendment to each of the Trust deeds being concluded and each of the capital contributions contemplated therein being completed and paid.

The terms of the transaction agreements stipulate that all conditions precedent must be fulfilled or waived (as the case may be) by no later than 60 business days after the days of signature of the transaction agreements, whereafter the repurchase shares will be cancelled and delisted.

5.4 Pro forma financial effects of the transaction

The pro forma financial effects of the transaction have been prepared for illustrative purposes only and due to the nature thereof, may not fairly present Netcare's financial position, changes in equity, results of operations or cash flows after completion of the transaction. The pro forma financial effects are the responsibility of the directors and are based on the unaudited, published results for the six months ended 31 March 2015.

The purpose of the pro forma financial effects is to illustrate the impact of the transaction had it been implemented on the dates and on the assumptions set out below. It does not purport to be indicative of what the financial results would have been had the transaction been implemented on a different date.

The pro forma statement of the financial position at 31 March 2015 and statement of comprehensive income for the financial year then ended, the preparation of which is the responsibility of the directors, is set out in Annexure 1. The effect on EPS, diluted and headline EPS, NAV and tangible NAV per share have been reflected below.

The pro forma financial information should be read in conjunction with the Independent Reporting Accountants' report thereon as set out in Annexure 2.

	Unaudited1	Adjustmentsfor thespecificrepurchase	Pro formaafter thespecificrepurchase	Adjustmentsfor thespecificissue	Pro formaafter thetransaction2	% increase/(decreaseas a resultof thetransaction
EPS (cents)3	82.6	–	82.6	(0.3)	82.3	(0.3%)
Diluted EPS (cents)3	80.7	–	80.7	(0.3)	80.4	(0.3%)
Headline EPS (cents)3	81.4	–	81.4	(0.3)	81.1	(0.3%)
Diluted headline EPS (cents)	79.6	–	79.6	(0.3)	79.3	(0.3%)
NAVPS (cents)	927.0	(3.8)	923.3	(0.3)	923.0	(0.4%)
Tangible NAVPS (cents)Weighted average number of	614.4	(3.8)	610.7	(0.3)	610.4	(0.7%)
ordinary shares in issue (million)Diluted weighted average number	1 342	–	1 342	–	1 342	0.0%
of ordinary shares in issue (million)Number of ordinary shares	1 373	–	1 373	–	1 373	0.0%
in issue (million)Number of ordinary shares in issue	1 479	(118)	1 361	91	1 453	(1.8%)
net of treasury shares (million)	1 343	–	1 343	–	1 343	0.0%

Notes:

• 1. Extracted from Netcare's unaudited group results for the six months ended 31 March 2015.
• 1. Represents the pro forma financial effects after the specific repurchase and the specific issue.
• 1. Earnings, headline earnings and diluted earnings per share effects are based on the following principal assumptions:
  • the specific repurchase and the specific issue were effective 1 October 2014;
  • maximum of 117 600 000 shares repurchased in terms of the specific repurchase;
  • approximately 91 100 000 shares issued in terms of the specific issue;
  • a share price of R39.24 per Netcare share, being the five day VWAP to the last practicable date was used to determine the number of shares issued in terms of the specific issue;
  • total estimated transaction costs of R5 million were incurred, which are once off in nature; and
  • taxation accrued at 28%.
• 1. NAV and TNAV effects are based on the following principal assumptions:
  • the specific repurchase and the specific issue were effective 31 March 2015;
  • a reduction in equity as a result of dividend withholding tax calculated at 15% of the value of the dividend of approximately R337 million declared by Finco to the PCT;
  • total estimated transaction costs of R5 million were incurred, which are once off in nature; and
  • taxation thereon at 28%.
• 1. Assuming a five day VWAP of R39.24 per Netcare share, approximately 91 100 000 Netcare Shares will be issued in terms of the specific issue and treated as treasury shares for accounting purposes. Treasury shares are excluded from the calculation of basic and diluted earnings per share.
• 1. For the purpose of calculating "weighted diluted average number of shares in issue":
  • Netcare has assumed a share price of R39.24 per Netcare share, being the Netcare five day VWAP to the last practicable date;
  • Shares in issue in respect of the specific issue do not change the diluted earnings per share as the allocations before and after do not change.
• 1. No additional IFRS 2 expense has been raised as holders of existing units in the scheme will retain their current units and will not be impacted by the restructure. The Trusts intend to apply previously unallocated shares in the scheme to award new and/or additional units in the scheme to staff after the restructuring exercise in line with its stated B-BBEE objectives. The terms and amounts of any new issues will be determined by Netcare Human Resources department, Remuneration Committee and trustees of the Trusts. Therefore, there is no additional charge to the company in accordance with IFRS 2 on the date of the specific issue because at such date new beneficiaries of the Trusts have not been identified when read in conjunction with the definition of "beneficiary" as detailed in IFRS 2.

6. General meeting

A general meeting of Netcare shareholders will be held at 10h00 on Friday, 10 July 2015 in the Auditorium, Ground Floor, 76 Maude Street (corner West Street), Sandton, 2196 to consider, and if deemed fit, to pass, with or without modification, the ordinary and special resolutions required to approve the transaction.

Netcare shareholders are referred to the notice of general meeting for details on the resolutions to be proposed at the general meeting and the "Action required by Netcare shareholders" section of this circular for information on the procedure to be followed by Netcare shareholders in order to exercise their votes at the general meeting.

In terms of section 48 of the Companies Act and paragraph 5.69 of the Listings Requirements, a special resolution of Netcare must be passed by the Netcare shareholders (excluding the Fincos and their associates) in order to implement the specific repurchase.

In terms of the Listings Requirements, the Fincos and their associates in respect of the specific repurchase will be taken into account in determining whether a quorum of Netcare shareholders is present at the general meeting, but such votes shall not be taken into account for quorum purposes and in determining the results of the voting at the general meeting.

In terms of paragraph 5.51 of the Listings Requirements, an ordinary resolution of Netcare must be passed by the Netcare shareholders (excluding the Trusts and their associates) in order to implement the specific issue.

In terms of the Listings Requirements, the Trusts and their associates in relation to the specific issue, will be taken into account in determining whether a quorum of Netcare shareholders is present at the general meeting, but such votes shall not be taken into account for quorum purposes and in determining the results of the voting at the general meeting.

7. Dissenting shareholders' appraisal rights

At any time before the special resolutions in respect of the specific repurchases are to be voted on at the general meeting, a Netcare shareholder may give Netcare written notice in terms of section 164 of the Companies Act objecting to such special resolutions.

Within 10 business days after Netcare has adopted the special resolutions, Netcare must send a notice that the special resolutions have been adopted to each Netcare shareholder who gave the Company written notice of objection and has neither withdrawn that notice nor voted in favour of the special resolutions.

A Netcare shareholder who has given written notice in terms of section 164 of the Companies Act objecting to the special resolutions, voted against them and complied with all of the procedural regulations set out in section 164 of the Companies Act may, if the special resolutions have been adopted, demand in writing within:

• 20 business days after receipt of the notice from Netcare referred to above; or
• if the Netcare shareholder does not receive the notice from the Company referred to above, 20 business days after learning that the special resolutions have been adopted,

that the Company pay that Netcare shareholder the fair value (in terms of and subject to the requirements set out in section 164 of the Companies Act) for all the Netcare shares held by that shareholder. A more detailed explanation of the dissenting shareholders' appraisal rights is contained in Annexure A of this circular.

8. Directors' opinion and recommendation

All directors are deemed to be independent in terms of regulation 108 of the Companies Regulations. The directors have considered the impact of the specific repurchase and are of the opinion that:

• the provisions of section 4 and section 48 of the Companies Act have been complied with;
• Netcare and the Group will be able, in the ordinary course of business, to pay its debts for a period of 12 months after the date of approval of this circular;
• the assets of Netcare and the Group will be in excess of the liabilities of Netcare and the Group for a period of 12 months after the date of approval of this circular;
• the share capital and reserves of Netcare and the Group will be adequate for ordinary business purposes for a period of 12 months after the date of approval of this circular; and
• the working capital of Netcare and the Group will be adequate for ordinary business purposes for a period of 12 months after the date of approval of this circular.

Furthermore, in respect of the specific repurchase:

• in terms of section 46(1)(a)(ii) of the Companies Act, the board has, by resolution, authorised the specific repurchase;
• in terms of section 46(1)(b) of the Companies Act, it reasonably appears that Netcare will satisfy the solvency and liquidity test immediately after completing the specific repurchase; and
• in terms of section 46(1)(c) of the Companies Act and paragraph 5.69(d) of the Listings Requirements, the board has, by resolution, acknowledged that it has applied the solvency and liquidity test, and reasonably concluded that the Company will satisfy the solvency and liquidity test immediately after completing the specific repurchase.

The specific repurchase will amount to a repurchase in excess of 5% of the Netcare shares in issue and, as such, triggers the provisions of section 48(8) (read with section 114 and section 115) of the Companies Act. In the circumstances, a special resolution must be adopted by the Netcare shareholders in order to implement the specific repurchase and Netcare is required to obtain a report from an independent expert concerning the specific repurchase. BDO, in its capacity as the independent expert, has considered the terms and conditions of the specific repurchase and is of the opinion that the terms and conditions of the specific repurchase, as contemplated above, are fair and reasonable to Netcare shareholders. Please refer to the independent expert's report (Annexure 3).

After consideration of the fair and reasonable opinion provided by the independent expert, the directors are of the opinion that the transaction is fair and reasonable insofar as Netcare shareholders are concerned. The directors therefore recommend that the transaction should be approved by Netcare shareholders. The directors intend to vote all shares which they beneficially hold in favour of the transaction.

9. Estimated expenses in relation to the transaction

It is estimated that Netcare's expenses relating to the transaction will amount to approximately R5 000 000, including VAT. These expenses will be paid from available cash resources. The expenses relating to the transaction are detailed below:

Nature of expense	Paid/payable to	ZAR'000
JSE documentation inspection fee	JSE	33
JSE listings fee	JSE	436
Takeover Regulation Panel documentation inspection fee	TRP	200
Printing and publication	Studio 5	91
Circular distribution	South African Post Office	190
Financial adviser and transaction sponsor (in terms of one
combined mandate)	Rand Merchant Bank	3 000
Legal advisers	ENS	800
Independent expert	BDO	150
Reporting accountants and auditors	Grant Thornton	80
Sponsor	Nedbank Capital	20
Total including VAT		5 000

10. Exchange control regulations

The following summary is intended only as a guide and is, therefore, not comprehensive. If shareholders are in any doubt as to the appropriate course of action they are advised to consult their professional advisor.

In terms of the Exchange Control Regulations of the Republic of South Africa:

10.1 In the case of certificated shareholders

Any share certificate that may be issued to non-resident shareholders will be endorsed "non-resident". Any new share certificates issued based on emigrant shareholders' ordinary shares controlled in terms of the Exchange Control Regulations will be forwarded to the authorised dealer in foreign exchange controlling their blocked assets. The election by emigrant shareholders for the above purpose must be made through the authorised dealer in foreign exchange controlling their blocked assets. Such new share certificates will be endorsed "non-resident". Dividend payments paid out of the Company's distributable profits due to nonresidents and emigrant shareholders are freely transferable from South Africa. In respect of all non-residents of the common monetary area (collectively, the Republics of South Africa and Namibia and the Kingdoms of Lesotho and Swaziland) the dividend payments due will be sent to the registered address of the shareholder concerned or in accordance with instructions given to the transfer secretaries. In respect of all emigrants, the dividend payments will be sent to the authorised dealer in foreign exchange controlling their blocked assets.

10.2 In the case of dematerialised shareholders

Any ordinary shares issued to emigrant shareholders from the common monetary area will be credited to their blocked shares accounts at the CSDP controlling their blocked portfolios. Any ordinary shares issued to a non-resident of the common monetary area will be credited to such non-residents CSDP or broker account and a "non-resident" annotation will appear in the CSDP or broker register. Any dividend payments paid out of the Company's distributable profits to non-residents and emigrant shareholders from the common monetary area are freely transferable and will be credited to the CSDP or broker controlling their portfolios.

B. INFORMATION RELATING TO NETCARE

1. Incorporation of Netcare

Netcare was incorporated in South Africa in 1996 as a limited liability public company. The Company was listed on the JSE in 1996.

2. History and nature of business

Netcare operates the largest private hospital networks in South Africa and the United Kingdom, and provides comprehensive healthcare services in South Africa. Netcare continues to invest in its capacity and capabilities, and in partnering with the public sector, to support the effective delivery of quality healthcare in the national health systems in which it operates.

Netcare strives to deliver the best clinical outcomes and the best patient experience in the most cost-effective manner, grounded in its unwavering commitment to its values.

Netcare endeavours to treat patients with the utmost dignity and respect, and offers outstanding medical facilities staffed by dedicated and passionate healthcare professionals.

Netcare's people continuously enhance their skills and expertise through its well-respected education and training programmes, and Netcare endavours to partner with doctors and specialists so as to ensure that it remains at the forefront of medical innovation.

3. Prospects

Netcare expects the demand for private healthcare in South Africa to remain strong, which will support its growth over the next few years. The focus on cost containment and optimisation, broad-based quality improvement and superior patient care will continue. The board has adopted an ambitious environmental sustainability strategy to lessen Netcare's dependence on national utilities. The Company expects to extract sustainable cost savings from its energy efficiency projects in the years ahead.

It will take time for the economic recovery in the United Kingdom to become more evident in private healthcare demand, but prospects for growth in this business have improved. Given existing capacity, there is still significant opportunity to increase NHS caseload. Under the leadership of our newly appointed CEO, the management team will seek to drive caseload, increase acuity and rationalise costs, while addressing the challenge of clinical staffing shortages.

Geographic expansion remains a strategic intention for the board. Netcare continues to investigate growth opportunities in other markets that make sense in respect of the Group's competitive advantages and targeted rates of return.

The board anticipates that the Netcare BEE transaction will continue to help to strengthen existing relationships and build new relationships, and importantly, be a meaningful component of Netcare's commitment to transformation in the private healthcare sector.

In the absence of any unforeseen circumstances in the South African and global economies or healthcare regulatory environment, it is considered that the Group's business model is well balanced, sound and on track to continue generating meaningful returns and growth for all stakeholders during the balance of the current financial year.

4. Trading history of Netcare shares on the JSE

A table setting out the price history of the Netcare shares on the JSE has been included in Annexure 4 to this circular.

5. Information on the Directors and senior management

5.1 Directors and senior management

The full names and business addresses of the Directors and senior management of Netcare and its major subsidiaries are set out in Annexure 5 to this circular.

5.2 Directors' interests in shares

The direct and indirect beneficial interests in shares held by all the directors of Netcare (including directors who have resigned in the last 18 months), before the transaction, as at the last practicable date are shown below:

Name of director	Directbeneficial	Indirectbeneficial	Held byassociates	Total	% of issuedshares
Executive
RH Friedland	8 143 342	2 450 181	–	10 593 523	0.72%
KN Gibson	129 382	–	–	129 382	0.01%
Sub-total	8 272 724	2 450 181	–	10 722 905	0.73%
Non-executive
N Weltman	–	–	10 000	10 000	0.00%
Sub-total	–	–	10 000	10 000	0.00%
Total	8 272 724	2 450 181	10 000	10 732 905	0.73%

Notes:

The following changes in directors shareholding in the Company occurred between 30 September 2014 and the last practicable date:

Name	Date oftransaction	Number ofshares	Price	Value oftransaction
RH Friedland	27 March 2015	117	R41.81	R4 891.77
KN Gibson	27 March 2015	368	R41.81	R15 386.08

5.3 Directors' remuneration

The remuneration receivable by any of the directors will not be varied in consequence of the transaction.

5.4 Directors' interests in transactions

No directors of the Group had any interest, direct or indirect, in any transaction which was effected by the Company during the current or immediately preceding financial year or in an earlier year and which remains in any respect outstanding or unperformed.

6. Historical financial information on Netcare

The historical financial information of Netcare for the three years ended 30 September 2014 is set out in Annexure 6.

7. Material change

There has been no material change in the nature of business, financial or trading position of Netcare and its subsidiaries that has occurred since the end of the last financial period for which the audited annual financial statements were published up to the last practicable date.

8. Authorised and issued shares

The authorised and issued share capital of Netcare before and after the transaction is as follows:

	R'million
Authorised share capital2 500 000 000 ordinary shares of 1 cent each	25
10 000 000 variable rate, cumulative, non-redeemable, non-convertible preference shares of50 cents each	5
Issued share capital before the Transaction
1 479 553 333 ordinary shares of 1 cent each	15
Less 141 423 454 treasury shares of 1 cent each	(1)
6 500 000 variable rate, cumulative, non-redeemable, non-convertible preference shares of
50 cents each	3
Share premium	885
Issued share capital after the specific repurchase
1 361 953 333 ordinary shares of 1 cent each	14
Less 23 623 454 treasury shares of 1 cent each	(1)
6 500 000 variable rate, cumulative, non-redeemable, non-convertible preference shares of
50 cents each	3
Share premium	885
Issued share capital after the specific repurchase and the specific issue
1 453 053 333 ordinary shares of 1 cent each	15
Less 116 423 454 treasury shares of 1 cent each	(1)
6 500 000 variable rate, cumulative, non-redeemable, non-convertible preference shares of
50 cents each	3
Share premium	885

(1) Based on an assumed transaction share price of R39.24 per Netcare share.

9. Alterations to the number of issued Shares

The changes to issued Netcare shares during the three financial years ended 30 September 2012, 2013 and 2014 are summarised below:

Changes to issued shares	Number of shares issued and allotted(R'million)
2014
Issued Shares at beginning of year	1 475
Shares issued in terms of the share option scheme	3
Issued Shares at end of year	1 478
2013
Issued Shares at beginning of year	1 458
Shares issued in terms of the share option scheme	17
Issued Shares at end of year	1 475
2012
Issued Shares at beginning of year	1 446
Shares issued in terms of the share option scheme	12
Issued Shares at end of year	1 458

As at the last practicable date, 1 333 307 Netcare shares had been issued after 30 September 2014.

Other than as set out in the table above, there have been no other offers or issues of any securities by Netcare or any of its subsidiaries during the preceding three years.

There have been no share repurchases, consolidations or subdivisions by Netcare and its subsidiaries during the preceding 3 years.

10. Major shareholders

In so far as it is known to the directors, the shareholders, other than directors, that, directly or indirectly, are beneficially interested in 5% or more of the issued share capital of Netcare, together with such shareholders' interests as at the last practicable date, are as follows:

Shareholder	Number ofshares	Percentage ofissued shares
The Public Investment Corporation Limited	232 084 289	15.7
Allan Gray Proprietary Limited	95 564 231	6.5
STANLIB Asset Management Limited	75 010 915	5.1
Total	452 659 435	27.3

In so far as it is known to the directors, Netcare does not have a controlling shareholder.

As at the last practicable date, none of the advisers to Netcare had any material interest in the issued share capital of Netcare.

11. Litigation statement

There are no legal or arbitration proceedings, including any proceedings that are pending or threatened, of which Netcare is aware, that may have or have had in the recent past, being at least the previous 12 months, a material effect on Netcare or any of its subsidiaries' financial position.

12. Directors' responsibility statement

The directors of Netcare, whose names appear on page 8 of this circular, collectively and individually, accept full responsibility for the accuracy of the information given in this circular and certify that, to the best of their knowledge and belief, there are no facts, the omission of which would make any statement in this circular false or misleading and that they have made all reasonable enquiries to ascertain such facts and that this circular contains all information required by the Listings Requirements.

13. Consents

Each of the financial adviser and transaction sponsor, sponsor independent expert, independent reporting accountants and auditors and legal advisers have consented and have not, prior to the last practicable date, withdrawn their written consent to the inclusion of their names and, where applicable, reports in the form and context in which they appear in this circular.

14. Documents available for inspection

Copies of the following documents will be available for inspection at the registered offices of Netcare and the financial adviser and sponsor during normal business hours (excluding Saturdays, Sundays and public holidays) from the date of issue of this circular up to and including the date of the general meeting:

• the Netcare circular dated Thursday, 1 September 2005, regarding the Netcare BEE transaction;
• the MOI of Netcare and its major subsidiaries;
• the audited annual financial statements of Netcare for the three financial years ended 30 September 2012, 2013 and 2014;
• a summary of the directors' service contracts entered into during the last three years;
• the signed independent reporting accountants' report on the unaudited pro forma financial information of Netcare;
• the transaction agreements;
• the signed independent fairness opinion;
• the formal approval letter issued by the TRP in respect of the specific repurchase and this circular;
• the written consents referred to in paragraph 13 above; and
• a signed copy of this circular.

Signed at Sandton by or on behalf of Netcare Limited on 11 June 2015, in terms of a board resolution signed by the directors.

For and on behalf of the board

Netcare Limited

Lynelle Bagwandeen Group Company Secretary and General Counsel

Sandton 11 June 2015

ANNEXURE 1: PRO FORMA FINANCIAL INFORMATION OF NETCARE PURSUANT TO THE TRANSACTION

The pro forma financial information of Netcare below is based on the most recently published results of Netcare for the six months ended 31 March 2015, and was prepared in order to provide the illustrative financial effects of the transaction assuming that the transaction took place on 1 October 2014 for the purposes of the pro forma statement of comprehensive income and on 31 March 2015 for the purposes of the pro forma statement of financial position. The pro forma financial information is based on the assumptions set out below, which include assumptions on the Netcare share price.

The accounting policies of Netcare for the 6 months ended 31 March 2015 have been used in preparing the pro forma financial information.

The pro forma financial information is the responsibility of the directors and was prepared for illustrative purposes only and may not, because of its nature, fairly present Netcare's financial position, changes in equity, and results of its operations or cash flows as at the relevant reporting date. It does not purport to be indicative of what the financial results would have been, had the transaction been implemented on a different date.

The pro forma financial information should be read in conjunction with the Independent Reporting Accountants' report thereon as set out in Annexure 2.

Group income statement and statement of comprehensive income (R million)

	Unaudited1	Adjustmentsfor thespecificrepurchase	Pro formaafter thespecificrepurchase	Adjustmentsfor thespecificissue	Pro formaafter thetransaction2
Revenue	16 304	–	16 304	–	16 304
Cost of sales	(9 213)	–	(9 213)	–	(9 213)
Gross profit	7 091	–	7 091	–	7 091
Other income	217	–	217	–	217
Administrative and other expenses	(5 550)	–	(5 550)	(5)	(5 555)
Operating profit before items
listed below	1 758	–	1 758	(5)	1 753
Impairment of goodwill		–		–
Operating profit	1 758	–	1 758	(5)	1 753
Investment income	125	–	125	–	125
Financial expenses	(309)	–	(309)	–	(309)
Other financial losses – net	(114)	–	(114)	–	(114)
Attributable earnings of associates	47	–	47	–	47
Attributable earnings of joint ventures	20	–	20	–	20
Profit before taxation	1 527	–	1 527	(5)	1 522
Taxation	(426)	–	(426)	1	(425)
Profit for the year	1 101	–	1 101	(4)	1 097
Attributable to:
Owners of the parent	1 111	–	1 111	(4)	1 107
Preference shareholders	24	–	24	–	24
Profit attributable to shareholders	1 135	–	1 135	(4)	1 131
Non-controlling interest	(34)	–	(34)	–	(34)
Total	1 101	–	1 101	(4)	1 097
EPS (cents)	82.6		82.6	(0.3)	82.3
Diluted EPS	80.7		80.7	(0.3)	80.4
Headline EPS (cents)	81.4		81.4	(0.3)	81.1
Diluted headline EPS (cents)	79.6	–	79.6	(0.3)	79.3
Weighted average number of ordinary
shares in issue ('000)Diluted weighted average number of	1 342	–	1 342	–	1 342
ordinary shares in issue ('000)	1 373	–	1 373	–	1 373
Profit for the year	1 101	–	1 101	(4)	1 097
Items that may not subsequently
be reclassified to profit or loss	–	–	–	–	–
Remeasurement of defined benefitobligation	–	–	–	–	–
Actuarial losses on defined benefit
obligations	–	–	–	–	–
Actuarial gains relating to plan assets	–	–	–	–	–
Unrecognised pension surplus	–	–	–	–	–
Future defined benefit pension
scheme provision	–	–	–	–	–
Effect of translation of foreign entities –Deconsolidation of GHG PropertyBusinesses	–	–	–	–	–
Taxation on items that may notsubsequently be reclassified to profit
or loss	–	–	–	–	–

	Unaudited1	Adjustmentsfor thespecificrepurchase	Pro formaafter thespecificrepurchase	Adjustmentsfor thespecificissue	Pro formaafter thetransaction2
Items that may subsequently be
reclassified to profit or loss	(113)	–	(113)	–	(113)
Effect of cash flow hedge accounting	(7)	–	(7)	–	(7)
Amortisation of cash flow hedge reserveChange in the fair value of cash flow	17	–	17	–	17
hedgesReclassification of the cash flow hedge	(25)	–	(25)	–	(25)
accounting reserve	1	–	1	–	1
Effect of translation of foreign entities	(109)	–	(109)	–	(109)
Deconsolidation of GHG PropertyBusinesses	–	–	–	–	–
Other	–	–	–	–	–
Taxation on items that may subsequently bereclassified to profit or loss	3	–	3	–	3
Other comprehensive income for the year	(113)	–	(113)	–	(113)
Total comprehensive income for the year	988	–	988	(4)	984
Attributable to:
Owners of the parent	1 042	–	1 042	(4)	1 038
Preference shareholders	24	–	24	–	24
Non-controlling interest	(78)	–	(78)	–	(78)
	988	–	988	(4)	984

Group income statement and statement of comprehensive income (R million) continued

Notes:

• 1. Extracted from Netcare's condensed unaudited group results for the 6 months ended 31 March 2015.
• 1. Represents the unaudited pro forma financial effects after the specific repurchase and the specific issue.
  • the specific repurchase and the specific issue were effective 1 October 2014;
  • maximum of 117 600 000 shares repurchased in terms of the specific repurchase;
  • approximately 91 100 000 shares issued in terms of the specific issue;
  • a share price of R39.24 per Netcare share, being the five day VWAP to the last practicable date was used to determine the number of shares issued in terms of the specific issue;
  • total estimated transaction costs of R5 million were incurred, which are once off in nature; and
  • taxation accrued at 28%.
• 1. Assuming a five day VWAP of R39.24 per Netcare Share, approximately 91 100 000 Netcare Shares will be issued in terms of the specific issue and treated as treasury shares for accounting purposes. Treasury shares are excluded from the calculation of basic and diluted earnings per share.
• 1. For the purpose of calculating "weighted diluted average number of shares in issue":
  • We have assumed a share price of R39.24 per Netcare share, being the Netcare five day VWAP to the last practicable date;
  • Shares in issue in respect of the specific issue do not change the diluted earnings per share as the allocations before and after do not change.
• 1. No additional IFRS 2 expense has been raised as holders of existing units in the scheme will retain their current units and will not be impacted by the restructure. The Trusts intend to apply previously unallocated shares in the scheme to award new and/or additional units in the scheme to staff and other beneficiaries after the restructuring exercise in line with its stated BBBEE objectives. The terms and amounts of the new issues will be determined by Netcare Human Resources department and Remco. Therefore, there is no additional charge to the company in accordance with IFRS 2 on the date of the specific issue because at such date new beneficiaries of the Trusts have not been identified when read in conjunction with the definition of "beneficiary" as detailed in IFRS 2.

Statement of financial position (R million)

		Adjustmentsfor thespecific	Pro formaafter thespecific	Adjustmentsfor thespecific	Pro formaafter the
	Unaudited1	repurchase	repurchase	issue	transaction2
ASSETS
Non-current assets
Property, plant and equipment	11 677	–	11 677	–	11 677
Goodwill	3 819	–	3 819	–	3 819
Intangible assets	379	–	379	–	379
Equity-accounted companies, loans
and receivables	2 202		2 202		2 202
Financial assets	45	–	45	–	45
Deferred taxation	1 513	–	1 513	–	1 513
Total non-current assets	19 635	–	19 635	–	19 635
Current assets
Loans and receivables	64	–	64	–	64
Inventories	1 088	–	1 088	–	1 088
Trade and other receivables	5 172	–	5 172	–	5 172
Taxation receivable	–	–	–	1	1
Cash and cash equivalents	2 092	(51)	2 041	(5)	2 036
	8 416	(51)	8 365	(4)	8 361
Non-current asset held for sale	8		8		8
Total current assets	8 424	(51)	8 373	(4)	8 369
Total assets	28 059	(51)	28 008	(4)	28 004

		Adjustmentsfor thespecific	Pro formaafter thespecific	Adjustmentsfor thespecific	Pro formaafter the
	Unaudited1	repurchase	repurchase	issue	transaction2
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital and premium	970	(615)	355	3 575	3 930
Treasury shares	(711)	615	(96)	(3 575)	(3 671)
Other reserves	2 522	–	2 522	–	2 522
Retained earnings	6 208	(51)	6 157	(4)	6 153
Equity attributable to owners
of the parent	8 989	(51)	8 938	(4)	8 934
Preference share capital and premium	644	–	644	–	644
Non-controlling interest	2 817	–	2 817	–	2 817
Total shareholders' equity	12 450	(51)	12 399	(4)	12 395
Non-current liabilities		–
Long-term debt	6 026	–	6 026	–	6 026
Financial liabilities	213	–	213	–	213
Post-retirement benefit obligations	269	–	269	–	269
Deferred lease liability	80	–	80	–	80
Deferred taxation	1 502	–	1 502	–	1 502
Provisions	118	–	118	–	118
Total non-current liabilities	8 208	–	8 208	–	8 208
Current liabilities		–
Trade and other payables	5 775	–	5 775	–	5 775
Short-term debt	1 609	–	1 609	–	1 609
Financial liabilities	–	–	–	–	–
Taxation payable	17	–	17	–	17
Bank overdrafts	–	–	–	–	–
Total current liabilities	7 401	–	7 401	–	7 401
Total equity and liabilities	28 059	(51)	28 008	(4)	28 004
NAV per share (cents)	927.0	(3.8)	923.3	(0.3)	923.0
Tangible NAV per share (cents)	614.4	(3.8)	610.7	(0.3)	610.4
Number of ordinary shares in issue ('000)	1 479	(118)	1 361	91	1 453
Number of ordinary shares in issue net of
treasury shares ('000)	1 343	–	1 343	–	1 343

Statement of financial position (R million) continued

Notes:

1. Extracted from Netcare's unaudited group results for the year ended 31 March 2015.

2. Represents the unaudited pro forma financial effects after the specific repurchase and the specific issue based on the following assumptions and adjustments:

• reduction in equity as a result of dividend withholding tax calculated at 15% of the value of the dividend of approximately R337 million declared by Finco to the PCT;

• total estimated transaction costs of R5 million were incurred, which are once off in nature; and

• taxation thereon at 28%.

1. Assuming a five day VWAP of R39.24 per Netcare Share, approximately 91 100 000 Netcare Shares will be issued in terms of the specific issue and treated as treasury shares for accounting purposes.

ANNEXURE 2: INDEPENDENT REPORTING ACCOUNTANTS' REPORT ON THE PRO FORMA FINANCIAL INFORMATION

The Directors Netcare Limited Private Bag X34 Benmore, 2010 South Africa

3 June 2015

Dear Sirs

INDEPENDENT REPORTING ACCOUNTANTS' ASSURANCE REPORT ON THE COMPILATION OF THE PRO FORMA FINANCIAL INFORMATION OF NETCARE LIMITED ("NETCARE OR THE GROUP")

We have completed our assurance engagement to report on the compilation of the pro forma financial information of Netcare by the directors. The pro forma financial information, as set out in Annexure 1 of the circular to be issued by Netcare on or about 11 June 2015 ("the circular"), consists of the pro forma statement of financial position, the pro forma statement of comprehensive income and related notes. The pro forma financial information has been compiled on the basis of the applicable criteria specified in the JSE Limited ("JSE") Listings Requirements.

The pro forma financial information has been compiled by the directors to illustrate the impact of the proposed transactions as described in Sections 3 and 4 of the circular ("the transactions"), on Netcare's financial position as at 31 March 2015, and Netcare's financial performance for the period then ended, as if the transactions had taken place at 31 March 2015 for purposes of the pro forma statement of financial position and at 1 October 2014 for purposes of the pro forma statement of comprehensive income. As part of this process, information about Netcare's financial position has been extracted by the directors from the company's unaudited interim financial information for the period ended 31 March 2015.

Directors' Responsibility for the Pro Forma Financial Information

The directors are responsible for compiling the pro forma financial information on the basis of the applicable criteria specified in the JSE Listings Requirements and described in Annexure 1 of the circular.

Reporting Accountant's Responsibility

Our responsibility is to express an opinion about whether the pro forma financial information has been compiled, in all material respects, by the directors on the basis specified in the JSE Listings Requirements based on our procedures performed. We conducted our engagement in accordance with the International Standard on Assurance Engagements (ISAE) 3420, Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Circular which is applicable to an engagement of this nature. This standard requires that we comply with ethical requirements and plan and perform our procedures to obtain reasonable assurance about whether the pro forma financial information has been compiled, in all material respects, on the basis specified in the JSE Listings Requirements.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the pro forma financial information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the pro forma financial information.

As the purpose of pro forma financial information included in a circular is solely to illustrate the impact of a significant corporate action or event on unadjusted financial information of the entity as if the corporate action or event had occurred or had been undertaken at an earlier date selected for purposes of the illustration, we do not provide any assurance that the actual outcome of the event or transaction would have been as presented.

A reasonable assurance engagement to report on whether the pro forma financial information has been compiled, in all material respects, on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used in the compilation of the pro forma financial information provides a reasonable basis for presenting the significant effects directly attributable to the corporate action or event, and to obtain sufficient appropriate evidence about whether:

• the related pro forma adjustments give appropriate effect to those criteria; and
• the pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information.

Our procedures selected depend on our judgment, having regard to our understanding of the nature of the Group, the corporate action or event in respect of which the pro forma financial information has been compiled, and other relevant engagement circumstances.

Our engagement also involves evaluating the overall presentation of the pro forma financial information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion, the pro forma financial information has been compiled, in all material respects, on the basis of the applicable criteria specified by the JSE Listings Requirements and described in Annexure 1 of the circular.

Consent

This report on the pro forma financial information is included solely for the information of the Netcare shareholders. We consent to the inclusion of our report on the pro forma financial information, and the references thereto, in the form and context in which they appear in the circular.

Yours faithfully

Grant Thornton Johannesburg

Ryan Stoler Director Practice number 903485E Registered Auditors Chartered Accountants (SA) 52 Corlett Drive Wanderers Office Park Illovo

ANNEXURE 3: REPORT OF THE INDEPENDENT EXPERT

The Directors Netcare Limited 76 Maude Street Cnr West Street Sandton, 2196

3 June 2015

Dear Sirs

REPORT OF THE INDEPENDENT PROFESSIONAL EXPERT TO NETCARE LIMITED REGARDING THE SPECIFIC REPURCHASE OF 4.5% OF ITS ISSUED ORDINARY SHARE CAPITAL FROM THE PATIENT CARE AND PASSIONATE PEOPLE FINANCE COMPANY PROPRIETARY LIMITED AND 3.4% OF ITS ISSUED ORDINARY SHARE CAPITAL FROM NETCARE HEALTH PARTNERS FOR LIFE FINANCE COMPANY PROPRIETARY LIMITED

INTRODUCTION

The board of directors (the "Directors" or the "Board") of Netcare Limited ("Netcare" or "the Company") has resolved to implement a specific repurchase of:

• a maximum of 67 000 000 shares with a par value of 1 cent each in the issued capital of the Company ("Netcare Shares") ("the PCT Finco Repurchase Shares") from the Patient Care and Passionate People Finance Company Proprietary Limited ("PCT Finco") ("the PCT Finco Specific Repurchase"); and
• a maximum of 50 600 000 Netcare Shares ("HPFL Finco Repurchase Shares") from Netcare Health Partners for Life Finance Company Proprietary Limited ("HPFL Finco") ("the HPFL Finco Specific Repurchase"),

(the PCT Finco Specific Repurchase and HPFL Finco Specific Repurchase are collectively "the Specific Repurchase" and the PCT Finco Repurchase Shares and HPFL Finco Repurchase Shares are collectively "the Repurchase Shares").

In 2005, Netcare concluded a black economic empowerment ("BEE") transaction in terms whereof, inter alia, Netcare issued, in aggregate, 160 million shares to PCT Finco and HPFL Finco (collectively "the Fincos") for a range of beneficiaries pursuant to a transaction worth R1 billion. Netcare wishes to restructure the BEE transaction in order to simplify its shareholding structures and settle all associated debt held by PCT Finco and HPFL Finco.

The PCT Finco Specific Repurchase is part of a restructure of the BEE transaction which includes, inter alia:

• PCT Finco utilising a portion of the proceeds from the PCT Finco Specific Repurchase to settle and redeem the redeemable preference shares held by Netcare Hospital Group Proprietary Limited, a wholly owned subsidiary of Netcare, ("NHG") for approximately R591 million and distributing the accrued and unpaid dividends of approximately R28 million to NHG;
• PCT Finco utilising the remaining proceeds from the Specific Repurchase (after making provision for the settlement of other liabilities of PCT Finco (e.g. sundry creditors and taxes)) to make a capital contribution to the Patient Care and Passionate People Trust ("PCT"), which will enable the PCT to acquire direct ownership of Netcare shares in terms of the PCT Specific Issue (as such term is defined below). The capital contribution will entitle PCT Finco to the residual capital of the PCT after all distributions have been made to beneficiaries and the PCT scheme has fully matured. PCT Finco will also become the residual beneficiary of the PCT in respect of any forfeited trust units; and
• PCT utilising the proceeds of the PCT Finco Specific Repurchase to subscribe for Netcare shares (the "PCT Specific Issue").

The HPFL Finco Specific Repurchase is part of a restructure of the BEE transaction which includes, inter alia:

• HPFL Finco utilising a portion of the proceeds from the HPFL Finco Specific Repurchase to settle and redeem the redeemable preference shares held by NHG for approximately R265 million and distributing the accrued and unpaid dividends of approximately R133 million to NHG;
• HPFL Finco utilising the remaining proceeds (after making provision for the settlement of other liabilities of HPFL Finco (e.g. sundry creditors and taxes)) to make capital contributions to each of the Physician Partnership Trust ("PPT"), the Healthy Lifestyle Trust ("HLT") and the Mother & Child Trust ("MCT"), which will enable each of the aforesaid Trusts to acquire direct ownership of Netcare shares in terms of the HPFL Specific Issue (as such term is defined below). The capital contributions will entitle HPFL Finco to the residual capital of the PPT, HLT and MCT after all distributions have been made to beneficiaries and the PPT, the HLT and the MCT schemes have fully matured. HPFL Finco will also become the residual beneficiary of the PPT, HLT and MCT in respect of any forfeited trust units; and

• PPT, HLT and MCT utilising the proceeds of HPFL Finco Specific Repurchase to subscribe for Netcare shares (the "HPFL Specific Issue", which together with the PCT Specific Issue are collectively "the Specific Issue").

Pursuant to the Specific Repurchase, the Repurchase Shares will be cancelled as issued shares and restored to the status of authorised share capital in Netcare. Application will be made to the JSE Limited ("JSE") for the delisting of the Repurchase Shares once they have been repurchased.

It is envisaged that the Specific Repurchase will be implemented on the 3rd (third) business day following the date of fulfilment or waiver (to the extent legally permissible) of the last of certain conditions precedent, or such other date agreed to in writing between Netcare, PCT Finco and HPFL Finco ("implementation date").

The price at which the Specific Repurchase will be concluded shall be based on the five day volume weighted average price ("VWAP") for Netcare on the JSE up to and including the day before the implementation date (the "Repurchase Price").

The total cost to Netcare for the Specific Repurchase will be funded out of the Netcare's available cash resources and the available short term credit facilities.

The Repurchase Price will be settled with intra-day funding which will be settled with the funds raised via the Specific Issue.

As the cost of the Specific Repurchase will be funded from the proceeds of the Specific Issue, the effect of the Specific Repurchase and Specific Issue on Netcare will be neutral. Subsequent to the implementation of the Specific Repurchase, PCT Finco and HPFL Finco will have no direct shareholding in Netcare.

As at the date of this opinion, the share capital of the Company prior to the Specific Repurchase comprises the following:

	R'million
Authorised share capital
2 500 000 000 ordinary shares of 1 cent each	25
10 000 000 variable rate, cumulative, non-redeemable, non-convertible preference shares of
50 cents each	5
Issued share capital before the Transaction
1 479 553 333 ordinary shares of 1 cent each	15
Less 141 423 454 treasury shares of 1 cent each	(1)
6 500 000 variable rate, cumulative, non-redeemable, non-convertible preference shares of
50 cents each	3
Share premium	885

The direct and indirect beneficial interests in shares held by all the directors of Netcare (including directors who have resigned in the last 18 months), before the Specific Repurchase, as at the last practicable date are shown below:

Name of director	Directbeneficial	Indirectbeneficial	Held byassociates	Total	% of issuedshares
Executive
RH Friedland	8 143 342	2 450 181	–	10 593 523	0.72%
KN Gibson	129 382	–	–	129 382	0.01%
Sub-total	8 272 724	2 450 181	–	10 722 905	0.73%
Non-executive
N Weltman	–	–	10 000	10 000	0.00%
Sub-total	–	–	10 000	10 000	0.00%
Total	8 272 724	2 450 181	10 000	10 732 905	0.73%

In accordance with section 114(2) of the Companies Act (No. 71 of 2008), as amended (the "Companies Act"), BDO Corporate Finance Proprietary Limited ("BDO Corporate Finance") has been appointed by the Board to provide independent external advice to the Board regarding the provisions of section 114(4) of the Companies Act (as read with section 48(8)(b) and section 115 of the Companies Act).

Copies of sections 115 and 164 of the Companies Act are included as Annexures to this report of the independent expert.

FAIR AND REASONABLE OPINION REQUIRED

As the Specific Repurchase involves the acquisition by the Company of more than 5% of the Company's ordinary shares in issue, section 48(8)(b) of the Companies Act specifies that the Specific Repurchase is subject to the requirements of sections 114 and 115 of the Companies Act. In terms of section 114(2) of the Companies Act, as read together with Regulation 90 of the Companies Regulations, 2011 (the "Companies Regulations"), the Board must retain an independent expert to compile a report on the Specific Repurchase (the "Opinion"). BDO Corporate Finance has been appointed by the Board to provide the Opinion.

RESPONSIBILITY

Compliance with the Companies Act is the responsibility of the Directors. Our responsibility is to report on the fairness and reasonableness of the terms of the Specific Repurchase.

EXPLANATION AS TO HOW THE TERMS "FAIR" AND "REASONABLE" APPLY IN THE CONTEXT OF THE TRANSACTION

The assessment of the "fairness" of a transaction is primarily based on quantitative considerations. A transaction will generally be considered fair to a company's shareholders if the benefits received by shareholders, as a result of corporate action, are equal to or greater than the value surrendered by a company.

The Specific Repurchase may be said to be fair if the value attributable to the Company and its shareholders post the Specific Repurchase exceeds or is equal to the attributable value prior to the Specific Repurchase or unfair if the attributable value post the Specific Repurchase is less than the attributable value prior to the Specific Repurchase.

An assessment of reasonableness is generally based on factors other than quantitative considerations. Even though the Repurchase Price may differ from the market value of the assets being acquired, a transaction may still be fair and reasonable after considering other significant qualitative factors.

DETAILS AND SOURCES OF INFORMATION

In arriving at our opinion we have relied upon the following principal sources of information:

• The terms and conditions of the Specific Repurchase;
• Annual financial statements of Netcare for the years ended 30 September 2013 and 2014;
• Unaudited financial information of Netcare for the period ended 31 January 2015 including in respect of Netcare's South African Operations (SA Ops) and BMI Healthcare, the operating business forming part of General Healthcare Group in the United Kingdom (UK Ops);
• Unaudited interim results of Netcare for the six months ended 31 March 2015;
• Forecast financial information in respect of Netcare for the year ending 30 September 2015 including in respect of SA Ops and UK Ops;
• Selected analyst's reports covering Netcare;
• Historic and forward revenue, earnings before interest and tax ("EBIT"), earnings before interest, taxation, depreciation and amortisation ("EBITDA") and profit after tax ("PAT") multiples for comparable publicly traded companies. Forward multiples are based on consensus analyst's forecasts as per Thomson Reuters and iNet BFA;
• Discussions with Netcare directors and management and their advisors regarding the rationale for the Specific Repurchase;
• Discussions with Netcare directors and management regarding the historical and forecast financial information of Netcare;
• Discussions with Netcare directors and management on prevailing market, economic, legal and other conditions which may affect underlying value; and
• Publicly available information relating to Netcare and the markets in which the Company operates.

The information above was secured from:

• Directors and management of Netcare and their advisers; and
• Third party sources, including information related to publicly available economic, market and other data which we considered applicable to, or potentially influencing Netcare.

PROCEDURES

In arriving at our opinion we have undertaken the following procedures and taken into account the following factors in evaluating the fairness and reasonableness of the Specific Repurchase:

• Reviewed the terms and conditions of the Specific Repurchase;
• Reviewed the audited and unaudited financial information related to Netcare, as detailed above;
• Reviewed and obtained an understanding from management as to the forecast financial information of Netcare and assessed the achievability thereof by considering historic information as well as macroeconomic and sector-specific data;
• Held discussions with directors of Netcare and their advisors and considered such other matters as we consider necessary, including assessing the prevailing economic and market conditions and trends;
• Compiled a capitalisation of maintainable earnings valuation of SA Ops and UK Ops by using adjusted historical and forecast financial information and applied BDO Corporate Finance's calculated earnings multiples based on market comparables, adjusted for factors specific to Netcare relevant to listed peers to revenue, earnings before interest and tax ("EBIT"), earnings before interest, taxation, depreciation and amortisation ("EBITDA") and profit after tax ("PAT");
• Aggregated the valuations of the SA Ops and UK Ops, as well as net debt for each operation to determine a sum-ofthe-parts ("SOTP") valuation of Netcare;
• Assessed the long-term potential of Netcare;
• Evaluated the relative risks associated with Netcare and the industry in which it operates;
• Reviewed certain publicly available information relating to Netcare and the sector in which the Company operates that we deemed to be relevant, including company announcements and media articles;
• Where relevant, representations made by management and/or directors were corroborated to source documents or independent analytical procedures were performed by us, to examine and understand the industry in which Netcare operates, and to analyse external factors that could influence the businesses of Netcare; and
• Held discussions with the directors and management of Netcare and their advisors as to the long-term strategy and the rationale for the Specific Repurchase and considered such other matters as we considered necessary, including assessing the prevailing economic and market conditions and trends in the sector in which the Company operates.

ASSUMPTIONS

We arrived at our opinion based on the following assumptions:

• That all agreements that are to be entered into in terms of the Specific Repurchase will be legally enforceable;
• That the Specific Repurchase will have the legal, accounting and taxation consequences described in discussions with, and materials furnished to us by representatives and advisers of Netcare; and
• That reliance can be placed on the audited and unaudited financial information of Netcare.

APPROPRIATENESS AND REASONABLENESS OF UNDERLYING INFORMATION AND ASSUMPTIONS

We satisfied ourselves as to the appropriateness and reasonableness of the information and assumptions employed in arriving at our opinion by:

• Conducting analytical reviews on the historical financial results and forecast financial information, such as key ratio and trend analyses; and
• Determining the extent to which representations from management were confirmed by documentary evidence as well as our understanding of Netcare and the economic environment in which it operates.

LIMITING CONDITIONS

This opinion is provided to the Board in connection with and for the purposes of the Specific Repurchase. The opinion does not purport to cater for each individual shareholder's perspective, but rather that of the general body of Netcare shareholders.

Individual shareholders' decisions regarding the Specific Repurchase may be influenced by such shareholders' particular circumstances and accordingly individual shareholders should consult an independent adviser if in any doubt as to the merits or otherwise of the Specific Repurchase.

We have relied upon and assumed the accuracy of the information provided to us in deriving our opinion. Where practical, we have corroborated the reasonableness of the information provided to us for the purpose of our opinion, whether in writing or obtained in discussion with management, by reference to publicly available or independently obtained information. While our work has involved an analysis of, inter alia, the annual financial statements, and other information provided to us, our engagement does not constitute an audit conducted in accordance with generally accepted auditing standards.

Where relevant, forward-looking information of Netcare relates to future events and is based on assumptions that may or may not remain valid for the whole of the forecast period. Consequently, such information cannot be relied upon to the same extent as that derived from audited financial statements for completed accounting periods. We express no opinion as to how closely the actual future results of Netcare will correspond to those projected. We have however compared the forecast financial information to past trends as well as discussing the assumptions inherent therein with management.

We have also assumed that the Specific Repurchase will have the legal consequences described in discussions with, and materials furnished to us by representatives and advisers of Netcare and we express no opinion on such consequences.

Our opinion is based on current economic, regulatory and market as well as other conditions. Subsequent developments may affect the opinion, and we are under no obligation to update, review or re-affirm our opinion based on such developments.

INDEPENDENCE, COMPETENCE AND FEES

We confirm that BDO Corporate Finance meet the requirements as set out in section 114(2) of the Companies Act. We also confirm that we have the necessary qualifications and competence to provide the Opinion.

Furthermore, we confirm that our professional fees of R150 000, payable in cash, are not contingent upon the success of the proposed Specific Repurchase.

VALUATION APPROACH

BDO Corporate Finance performed a valuation of Netcare on a SOTP basis to determine whether the Specific Repurchase represents fair value to the Netcare shareholders. The valuation of SA Ops and UK Ops were performed using the capitalisation of maintainable earnings methodology.

The valuation was performed taking cognisance of risk and other market and industry factors affecting Netcare and its underlying operations.

Key internal value drivers and assumptions to the capitalisation of maintainable earnings valuation included an assessment of non-recurring transactions included in historical results, operating margins and expected future growth in the business. Prevailing market and industry conditions were also considered as key external value drivers in assessing the risk profile of SA Ops and UK Ops as well as an assessment of market-related revenue, EBIT, EBITDA and PAT multiples applicable to comparable publicly traded companies.

We selected a basket of comparable companies with similar operations to SA Ops and UK Ops. Historic and forward multiples were calculated for these comparable companies. Outliers were excluded and a range of market multiples was determined. This range was adjusted for differences between SA Ops and UK Ops and the basket of peers to account for the risk profile of SA Ops and UK Ops relative to the basket of peers.

In addition a sensitivity analysis was performed in respect of the quantum of the adjustment to market multiples to reflect differences in risk profiles.

VALUATION RESULTS

In undertaking the valuation exercise above, we determined a valuation range for of R41.50 to R44.40 with a most likely value of R42.90 per Netcare Share.

The valuation above is provided solely in respect of this Opinion and should not be used for any other purposes.

REASONABLENESS OF THE TRANSACTION

We have assessed the terms of the Specific Repurchase with reference to normal market-related practice. We have found no indication that the Specific Repurchase will have any material adverse effect on the Company or its shareholders and have identified no transaction parameters which could be considered unreasonable to the Company or its shareholders.

OPINION

BDO Corporate Finance has considered the terms and conditions of the Specific Repurchase and, based on and subject to the conditions set out herein, is of the opinion that the terms and conditions of the Specific Repurchase (including, without limitation, the Repurchase Price, provided that same is within the valuation range set out in the paragraph headed "Valuation Results" or below such range), based on quantitative considerations, are fair to Netcare shareholders.

Based on qualitative factors, we are of the opinion that the terms and conditions of the Specific Repurchase (including, without limitation, the Repurchase Price, provided that same is within the valuation range set out in the paragraph headed "Valuation Results" or below such range) are reasonable from the perspective of Netcare shareholders.

Our opinion is necessarily based upon the information available to us up to 29 May 2015, including in respect of the financial information as well as other conditions and circumstances existing and disclosed to us. We have assumed that all conditions precedent, including any material regulatory and other approvals or consents required in connection with the Specific Repurchase have been fulfilled or obtained.

Accordingly, it should be understood that subsequent developments may affect this opinion, which we are under no obligation to update, revise or re-affirm.

This opinion may be included, in whole or in part, in any required regulatory announcement or documentation, including, without limitation, the circular to Netcare shareholders.

Yours faithfully

N Lazanakis Director

BDO Corporate Finance Proprietary Limited

22 Wellington Road Parktown 2193

ANNEXURE 4: TRADING HISTORY OF NETCARE SHARES ON THE JSE

The trading history of Netcare shares on the JSE is set out below:

Source: I-Net Bridge

ANNEXURE 5: INFORMATION ON THE DIRECTORS AND SENIOR MANAGEMENT OF NETCARE AND ITS MAJOR SUBSIDIARIES

DIRECTORS OF NETCARE

Richard Friedland

Keith Gibson

Jill Watts

SJ Vilakazi

Meyer Kahn

Thevendrie Brewer

Azar Jammine

Martin Kuscus

Kgomotso Moroka

Norman Weltman

Position Group Chief Executive Officer Business address 76 Maude Street (corner West Street), Sandton, 2196

Position Group Chief Financial Officer Business address 76 Maude Street (corner West Street), Sandton, 2196

Position Chief Executive Officer – GHG Business address 76 Maude Street (corner West Street), Sandton, 2196

Position Chairman and non-executive director – retired 31 May 2015 Business address 76 Maude Street (corner West Street), Sandton, 2196

Position Acting Chairman and non-executive director – effective 1 June 2015 Business address 76 Maude Street (corner West Street), Sandton, 2196

Position Non-executive director Business address 76 Maude Street (corner West Street), Sandton, 2196

Position Non-executive director Business address 76 Maude Street (corner West Street), Sandton, 2196

Position Non-executive director Business address 76 Maude Street (corner West Street), Sandton, 2196

Position Non-executive director Business address 76 Maude Street (corner West Street), Sandton, 2196

Position Non-executive director Business address 76 Maude Street (corner West Street), Sandton, 2196

SENIOR MANAGEMENT – SOUTH AFRICA

Melanie Da Costa Position Director – Strategy and Health Policy Business address 76 Maude Street (corner West Street), Sandton, 2196

Travis Dewing Position Chief Information Officer Business address 76 Maude Street (corner West Street), Sandton, 2196

Tumi Nkosi Position Director – Business Development and Corporate Affairs Business address 76 Maude Street (corner West Street), Sandton, 2196

Dena van den Bergh

Position Director – Quality Leadership Business address 76 Maude Street (corner West Street), Sandton, 2196

Peter Warrener

Position Group Human Resources Director Business address 76 Maude Street (corner West Street), Sandton, 2196 Lynelle Bagwandeen Position Group Company Secretary and General Counsel Business address 76 Maude Street (corner West Street), Sandton, 2196

Charmaine Pailman Position Managing Director – Primary Care Business address 76 Maude Street (corner West Street), Sandton, 2196

Jacques du Plessis

Position Managing Director – Hospitals Business address 76 Maude Street (corner West Street), Sandton, 2196

Noeleen Phillipson

Position Managing Director – Netcare 911 and Oncology Business address 76 Maude Street (corner West Street), Sandton, 2196

SENIOR MANAGEMENT – UNITED KINGDOM

Jill Watts Position Chief Executive Officer – GHG Business address 3 Paris Garden, Southwark, London, SE1 8ND

Richard Evans Position Managing Director Hospitals Business address 3 Paris Garden, Southwark, London, SE1 8ND

Martin Johnson

Position Managing Director – Commercial, Business Improvement, Technology and Infrastructure Business address 3 Paris Garden, Southwark, London, SE1 8ND

Catherine Vickery

Position General Counsel and Company Secretary Business address 3 Paris Garden, Southwark, London, SE1 8ND

38

ANNEXURE 6: HISTORICAL FINANCIAL INFORMATION OF NETCARE

Group statement of financial position

at 30 September

Rm	2014	2013	2012
ASSETS
Non-current assets
Property, plant and equipment	11 504	10 401	27 678
Goodwill	3 879	3 466	5 099
Intangible assets	437	389	327
Investment in joint ventures	76	62
Investment in associated companies	602	628	486
Investments and loans	1 337	956	646
Financial assets – Derivative financial instruments	45	72
Deferred taxation	1 419	1 218	2 730
Total non-current assets	19 299	17 192	36 966
Current assets
Investments and loans	26	34	80
Financial assets – Derivative financial instruments			9
Inventories	987	912	817
Taxation receivable	5	17	25
Accounts receivable	4 688	4 033	3 419
Cash and cash equivalents	1 712	1 620	2 906
Total current assets	7 418	6 616	7 256
Total assets	26 717	23 808	44 222
EQUITY AND LIABILITIESCapital and reservesOrdinary share capital and premiumTreasury sharesOther reserves	962(735)2 560	934(766)2 146	720(654)509
Retained earnings	5 859	4 846	427
Ordinary shareholders' equity	8 646	7 160	1 002
Preference share capital and premium	644	644	644
Minority interest	2 882	2 611	(2 666)
Total shareholders' equity	12 172	10 415	(1 020)
Non-current liabilities
Long-term debt	4 939	5 290	27 015
Financial liability – Derivative financial instruments	97	8	7 433
Post-retirement benefit obligations	260	229	213
Deferred lease liability	74	70	63
Deferred taxation	1 360	1 129	3 530
Provisions	138	97	61
Total non-current liabilities	6 868	6 823	38 315
Current liabilities
Accounts payable	5 726	5 066	4 342
Financial liability – Derivative financial instruments	3	–
Short-term debt	1 739	1 140	1 938
Taxation payable	203	247	210
Bank overdrafts	6	117	437
Total current liabilities	7 677	6 570	6 927
Total equity and liabilities	26 717	23 808	44 222

Group income statement

					for the year ended 30 September
--	--	--	--	--	---------------------------------

Rm	2014	2013	2012
Revenue	31 783	27 382	25 174
Cost of sales	(18 227)	(15 568)	(14 567)
Gross profit	13 556	11 814	10 607
Other income	350	306	288
Administrative and other expenses	(10 653)	(9 123)	(17 856)
Operating profit before items below	3 253	2 997	(6 961)
Profit on disposal of investments	–	3 257	–
Operating profit	3 253	6 254	(6 961)
Financial income	213	288	235
Financial expenses	(564)	(754)	(5 030)
Other losses – net	(80)	(187)
Attributable earnings of associates	75	89	27
Profit before taxation	2 897	5 690	(11 729)
Taxation	(801)	(640)	2 016
Profit for the period	2 096	5 050	(9 300)
Attributable to:
Ordinary shareholders	2 107	5 044	(4 235)
Preference shareholders	46	47	46
Minority interest	(57)	(41)	(5 111)
	2 096	5 050	(9 300)

Group statement of comprehensive income

for the year ended 30 September

Rm	2014	2013	2012
(Loss)/profit for the yearItems that may not subsequently be reclassified to profit or loss	2 096(13)	5 050239	(9 300)1
Remeasurement of defined benefit obligationEffect of translation of foreign entities – Deconsolidation of GHG	(18)	(43)	(11)
Property BusinessesTaxation on items that may not subsequently be reclassified to	–	274
profit or loss	5	8	12
Items that may subsequently be reclassified to profit or loss	694	3 560	1 171
Effect of cash flow hedge accounting	(39)	3 108	1 246
Deconsolidation of GHG Property Businesses	–	2 473	–
Amortisation of the cash flow hedge reserve	–	–	(19)
Change in the fair value of cash flow hedges	(39)	177	(38)
Reclassification of the cash flow hedge accounting reserve	–	458	1,303
Effect of translation of foreign entities	732	521	311
Deconsolidation of GHG Property Businesses	–	310
Other	732	211	(386)
Taxation on items that may subsequently be reclassified to profit or loss	1	(69)
Other comprehensive income for the year	681	3 799	1 172
Total comprehensive income for the year	2 777	8 849	(8 128)
Attributable to:
Owners of the parent	2 469	7 139	(3 602)
Preference shareholders	46	47	46
Non-controlling interest	262	1 663	(4 572)
	2 777	8 849	(8 128)

Group statement of changes in equity for the year ended 30 September

	Ordinarysharecapital	Ordinarysharepremium	Treasuryshares	Capitalredemptionreserve	Cash flowhedgeaccountingreserve	Employeesharetrustreserve
Balance at 30 September 2011	15	600	(714)	276	(2 091)	31
Shares issued during the year	–	105	–	–	–	–
Sale of treasury sharesCapital gains tax attributable to the	–	–	60	–	–	–
sale of treasury sharesShare-based payments reserve	–	–	–	–	–	–
movementsDeferred tax arising on cash settled	–	–	–	–	–	–
share based paymentsCapital gains tax on capital	–	–	–	–	–	–
distributions in BEE trusts	–	–	–	–	–	–
Preference dividends paid	–	–	–	–	–	–
Dividends paidDistributions to beneficiaries of the	–	–	–	–	–	–
HPFL Trusts	–	–	–	–	–	–
Change in shareholding of subsidiary	–	–	–	–	–	–
Other reserve movementsIncrease in equity interest in	–	–	–	142	–	–
subsidiariesTotal comprehensive income	–	–	–	–	–	–
for the year	–	–	–	–	456	–
Balance at 30 September 2012	15	705	(654)	418	(1 635)	31

shareholder'sequity–––––––	Noncontrollinginterest1 886	Preferencesharecapital andpremium644	Equityattributableto ownersof theparent	Retainedearnings	Sharebasedpayment	Netinvestmenthedging	Investment	Foreign
					reserve	reserve	fair valuereserve	currencytranslationreserve
			5 155	5 537	188	(98)	299	1 111
		–	105	–	–	–	–	–
		–	129	69	–	–	–	–
		–	(12)	(12)	–	–	–	–
		–	22	–	22	–	–	–
		–	31	31	–	–	–	–
		–	(12)	(12)	–	–	–	–
		–	(46)	(46)	–	–	–	–
	(4)	–	(694)	(694)	–	–	–	–
–		–	(83)	(83)	–	–	–	–
	13	–	8	8	–	–	–	–
–		–	–	(135)	–	–	(6)	–
	11	–	(45)	(45)	–	–	–	–
(8 128)	(4 572)	–	(3 556)	(4 191)	–	–	–	179
(2 678)(1 032)		644	1 002	427	210	(98)	293	1 290

Group statement of changes in equity continued for the year ended 30 September

	Ordinarysharecapital	Ordinarysharepremium	Treasuryshares	Capitalredemptionreserve	Cash flowhedgeaccountingreserve	Employeesharetrustreserve
Shares issued during the year	–	214	(120)	–	–	–
Capital reduction	–	–	–	–	–	–
Sale of treasury shares	–	–	8	–	–	–
Capital gains tax attributable to the
sale of treasury shares	–	–	–	–	–	–
Share-based payments reserve
movements	–	–	–	–	–	–
Tax arising on cash settled share
based payments	–	–	–	–	–	–
Capital gains tax relating to FSP
recognised in equity	–	–	–	–	–	–
Preference dividends paid	–	–	–	–	–	–
Dividends paid	–	–	–	–	–	–
Distributions to beneficiaries of the
HPFL Trusts	–	–	–	–	–	–
Dividends tax	–	–	–	–	–	–
Change in shareholding of subsidiary	–	–	–	–	–	–
Other reserve movements	–	–	–	(418)	–	–
Increase in equity interest in
subsidiaries	–	–	–	–	(6)	1
NRC – IFRS11 non-controlling interest	–	–	–	–	–	–
Deconsolidation of PropCo	–	–	–	–	–	–
Total comprehensive income
for the year	–	–	–	–	1 641	–
Balance at 30 September 2013	15	919	(766)	–	–	32
Shares issued during the year	–	28	–	–	–	–
Sale of treasury shares	–	–	31	–	–	–
Capital gains tax attributable to the
sale of treasury shares	–	–	–	–	–	–
Share-based payments reserve
movements	–	–	–	–	–	–
Tax arising on share based payments	–	–	–	–	–	–
Capital gains tax relating to FSP
recognised in equity	–	–	–	–	–	–
Preference dividends paid	–	–	–	–	–	–
Dividends paid	–	–	–	–	–	–
Distributions to beneficiaries
of the HPFL Trusts	–	–	–	–	–	–
Dividend tax	–	–	–	–	–	–
Income tax on capital contribution	–	–	–	–	–	–
Change in shareholding of subsidiary	–	–	–	–	–	–
Total comprehensive income
for the year	–	–	–	–	(19)	–
Balance at 30 September 2014	15	947	(735)	–	(19)	32

Foreigncurrencytranslationreserve	Investmentfair valuereserve	Netinvestmenthedgingreserve	Sharebasedpaymentreserve	Retainedearnings	Equityattributableto ownersof theparent	Preferencesharecapital andpremium	Noncontrollinginterest	Totalshareholder'sequity
–	–	–	–	–	94	–	–	94
–	–	–	–	–	–	–	–	–
–	–	–	–	28	36	–	–	36
–	–	–	–	(6)	(6)	–	–	(6)
–	–	–	36	–	36	–	–	36
–	–	–	–	30	30	–	–	30
–	–	–	–	(1)	(1)	–	–	(1)
–	–	–	–	–	–	(47)	–	(47)
–	–	–	–	(813)	(813)	–	(3)	(816)
–	–	–	–	(66)	(66)	–	–	(66)
–	–	–	–	(8)	(8)	–	–	(8)
–	–	–	–	(7)	(7)	–	(1)	(8)
–	(203)	98	–	523	–	–	–	–
37	–	–	–	(34)	(2)	–	(167)	(169)
–	–	–	–	–	–	–	(5)	(5)
–	–	–	–	(274)	(274)	–	3 797	3 523
451	–	–	–	5 047	7 139	47	1 668	8 854
1 778	90	–	246	4 846	7 160	644	2 611	10 415
–	–	–	–	–	28	–	–	28
–	–	–	–	90	121	–	–	121
–	–	–	–	(21)	(21)	–	–	(21)
–	–	–	37	–	37	–	–	37
–	–	–	2	17	19	–	–	19
–	–	–	–	(1)	(1)	–	–	(1)
–	–	–	–	–	–	(46)	–	(46)
–	–	–	–	(973)	(973)	–	(3)	(976)
–	–	–	–	(154)	(154)	–	–	(154)
–	–	–	–	(14)	(14)	–	–	(14)
–	–	–	–	–	–	–	–	–
–	–	–	–	(25)	(25)	–	12	(13)
394	–	–	–	2 094	2 469	46	262	2 777
2 172	90	–	285	5 859	8 646	644	2 882	12 172

Group statement of cash flows

for the year ended 30 September

Cash flows from operating activitiesCash received from customers31 45627 19725 401Cash paid to suppliers and employees(27 074)(23 407)(20 208)Cash generated from operations4 3823 7905 193Interest paid(545)(812)(1 976)Taxation paid(822)(725)(740)
Ordinary dividends paid by subsidiaries(3)(3)(720)
Ordinary dividends paid(973)(788)(694)
Ordinary dividends paid by subsidiaries––(4)
Preference dividends paid(46)(47)(46)
Distributions to beneficiaries of the HPFL trusts(154)(66)(43)
Net cash from operating activities1 8391 3491 690
Cash flows from investing activities
Purchase of property, plant and equipment(1 902)(1 350)(1 365)
Proceeds on disposal of property, plant and equipment
and intangible assets801552
Additions to intangible assets(43)(37)(30)
Proceeds from financial assets–5
(Decrease)/increase in investments and loans(103)316(522)
Interest received96244162
Dividends received1824
Proceeds from disposal of businesses46–309
Acquisition of business(19)–
Increase in equity interest in subsidiaries–(172)(32)
Net cash from investing activities(1 827)(955)(1 426)
Cash flows from financing activities
Proceeds from issue of ordinary shares2894105
Proceeds on disposal of treasury shares12136129
Acquisition of non-controlling interests(4)–
Long-term debt repaid(614)(297)565
Short-term debt raised/(repaid)535(1 065)(503)
Settlement of derivatives–(120)
Net cash from financing activities66(1 352)296
Net increase/(decrease) in cash and cash equivalents78(958)560
Translation effects on cash and cash equivalents of foreign entities125148131
Cash and cash equivalents at the beginning of the year1 5032 4111 805
Cash and cash equivalents of businesses deconsolidated–(98)(27)
Cash and cash equivalents at the end of the year1 7061 5032 469
Consisting of:
Cash on hand and balances with banks1 7121 6202 906
Short-term money market borrowings and bank overdrafts(6)(117)(437)
1 7061 5032 469

ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of these annual financial statements are set out below:

1. Basis of preparation

The Group and Company annual financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), including all interpretations applicable to companies reporting under IFRS, as issued by the International Accounting Standards Board (IASB), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the requirements of the South African Companies Act No 71 of 2008 and the JSE Listings Requirements.

The accounting policies adopted are consistent in all material respects with those applied for the year ended 30 September 2013, unless expressly stated otherwise as changes in accounting policy. No standards were adopted before the effective date during the financial reporting period ended 30 September 2014.

The preparation of the financial statements, in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the annual financial statements are disclosed in note 29 of the accounting policies.

The financial statements are presented in South African Rand (ZAR), the functional currency of the Group and Company and all amounts are rounded to the nearest million, except when otherwise indicated. They are prepared on the historical cost basis, except for the following material items included in the statement of financial position that are measured as described below:

• Derivative financial instruments and financial assets at fair value through profit or loss are measured at fair value; and
• Post-retirement benefit obligations are measured in terms of the projected unit credit method.

1.1 Accounting policy elections

The Group has made the following accounting policy elections permitted in terms of IFRS:

• Property, plant and equipment is accounted for using the cost model (accounting policy 7); and
• Inventories comprising medical consumables are valued on a first-in first-out basis and other inventories are valued at average cost and written down with regard to their age and condition (accounting policy 16).

The Company has made the following accounting policy election permitted in terms of IFRS:

• The Company's investments in associates, joint ventures and subsidiaries are accounted for at cost less impairment if necessary (accounting policy 3).

2. Changes in accounting policy

The following new, revised and amended standards have been applied for the first time in the current financial period and affect the Group's reported financial performance and/or position:

• IFRS 10: Consolidated Financial Statements

IFRS 10 establishes a single control model that applies to all entities, including special purpose entities, by revising the definition of control. The new standard replaces SIC 12: Consolidation – Special Purpose Entities and the portion of IAS 27: Consolidated and Separate Financial Statements that addresses consolidated financial statements.

The Group assessed its various investees and concluded that control does exist for all current subsidiaries with the exception of the Cell Captive investment. Accordingly, it continues to consolidate all current subsidiaries with the exception of the Cell Captive, which it accounts for as an investment and is measured in accordance with IAS 39: Financial Instruments: Recognition and Measurement.

The impact of the application of IFRS 10 on the Group's financial results is disclosed in note 2, and the comparative period ended 30 September 2013 has been restated. No restatement was performed for earlier periods as the effect was not considered material to the Group, and management does not consider the ability of users of these financial statements to make decisions to be impaired in any way as a result of this exclusion.

2. Changes in accounting policy continued

• IFRS 11: Joint Arrangements

IFRS 11 established that a joint arrangement is an arrangement of which two or more parties have joint control. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. Control is first assessed in accordance with the definition of control in IFRS 10.

In accordance with IFRS 11, the Group reviewed and assessed its level of control over its joint venture investments and concluded that the Group has a right to the net assets of the arrangements, rather than rights to the assets and obligations for the liabilities. The investments have therefore been classified as joint ventures under IFRS 11 and require the application of the equity method of accounting for joint ventures. The Group previously proportionately consolidated its share of the assets, liabilities, income and expenses of joint ventures on a line-by-line basis in its financial statements.

In order to transition to the equity method, the investments in joint ventures were recognised and measured using the carrying amounts of the assets and liabilities, including any attributable goodwill, which had previously been proportionately consolidated at 1 October 2012. The investment was thereafter adjusted for the Group's subsequent share of profit or loss and movements in other comprehensive income, less dividends, as well as changes in loans.

The Group's share of the profit or loss of joint ventures is recognised as a single line item in profit or loss under the equity method.

The change from proportionate consolidation to equity accounting resulted in a change in individual asset, liability, income, expense and cash flow line items with no impact on equity and profit attributable to owners of the parent.

• The Group income statement recognises attributable earnings of joint ventures in attributable earnings of associates and joint ventures. The Group's proportionate share of the income and expenses of joint ventures has been removed from the individual line items. There has been no impact on other comprehensive income.
• The Group statement of financial position now includes the investment in joint ventures in equity-accounted companies and loans and receivables, in accordance with the equity method. The Group's proportionate share of the assets and liabilities of joint ventures has been removed from the individual line items.
• The Group statement of cash flows includes dividends received from joint ventures together with dividends received from associates reflected under investing activities. The loans advanced or repaid are also included in investing activities. The Group's proportionate share of the cash flows of joint ventures has been removed from the individual line items.
• The Group segment report now includes attributable earnings of joint ventures together with earnings from associates. The Group's proportionate share of the income and expenses of joint ventures has been removed from the individual line items.
• The impact of the application of IFRS 11 on the Group's financial results is disclosed in note 2, and the comparative period ended 30 September 2013 has been restated. No restatement was performed for earlier periods as the effect was not considered material to the Group, and management does not consider the ability of users of these financial statements to make decisions to be impaired in any way as a result of this exclusion.

• IFRS 12: Disclosure of Interests in Other Entities

IFRS 12 requires extensive disclosures relating to an entity's interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities. The new standard requires disclosure of information to assist users of the financial statements to evaluate the nature of, and risks associated with, its interests in other entities and the effect of those interests on its financial position, financial performance and cash flows.

• IFRS 13: Fair Value Measurement

IFRS 13 defines fair value, establishes a single source framework for fair value measurement and sets out disclosure requirements for fair value measurements. IFRS 13 does not introduce new requirements to measure assets or liabilities at fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted by IFRS. The adoption of this standard has resulted in additional disclosure for the Group.

• IAS 19: Employee Benefits (Amendments)

IAS 19 (Revised) impacts the measurement of the defined benefit pension plan in the United Kingdom and related disclosures. The most significant change is the requirement that all actuarial gains and losses are recognised immediately in other comprehensive income, thereby eliminating the corridor method. The Group is not affected by this change as actuarial gains and losses have previously been recognised in other comprehensive income.

The Group is, however, impacted by the new requirement to calculate interest on the net defined benefit liability/ asset. The Group has a defined benefit pension scheme with plan assets. Under the previous version of IAS 19, the financing cost recognised in profit or loss consisted of the interest cost on the defined benefit obligation and the expected return on plan assets. Following application of the amendments to IAS 19, the Group has calculated the interest based on the net liability and expected return on plan assets is now recognised in other comprehensive income.

The impact of the application of IAS 19 (revised) on the Group's financial results is disclosed in note 2, and the comparative period ended 30 September 2013 has been restated. No restatement was performed for earlier periods as the effect was not considered material to the Group, and management does not consider the ability of users of these financial statements to make decisions to be impaired in any way as a result of this exclusion.

The following new, revised and amended standards implemented for the first time in the current year financial statements, mainly affect presentation and disclosure:

• Amendment to IAS 27: Separate Financial Statements

The amended standard remains largely unchanged from the previous standard for the Company accounts. The amendments contain the accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when an entity prepares separate financial statements.

• Amendment to IAS 28: Investments in Associates and Joint Ventures

The amended standard prescribes the accounting for investments in associates and sets out the requirements for the application of the equity method when accounting for investments in associates and joint ventures.

• Amendment to IAS 36: Impairment of Assets

The amended standard requires the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal. In addition, if the recoverable amount was measured based on the present value technique, disclosure is required of the discount rates used in the current and previous measurements. The amended standard should be applied in conjunction with IFRS 13.

• Amendment to IAS 39: Financial Instruments: Recognition and Measurement

The standard was amended in June 2013 to include guidance on novation of derivative financial instruments. Under the amendments hedge accounting will not be discontinued if a hedging derivative is novated, provided certain criteria are met.

3. Basis of consolidation of financial results

Subsidiaries

The Group financial statements consolidate those of the parent company and all of its subsidiaries as of 30 September 2014.

Control is determined where the Company has all of the following elements:

• power over the investee;
• exposure, or rights, to variable returns from its involvement with the investee; and
• the ability to use its power over the investee to affect the amount of the investor's returns.

The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. These may relate to, inter alia, changes in shareholding due to a sale/acquisition of shares; a change in the rights of the Company due to the rights held by other shareholders becoming substantive; or a shift in fiduciary duties of directors to manage the business in the best interests of its creditors.

Subsidiaries are consolidated from the date on which control elements are achieved by the Group and are no longer consolidated from the date that control ceases. The acquisition method of accounting is used to account for the acquisition of subsidiaries in accordance with the Group's accounting policy for business combinations.

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies.

Non-controlling interests represent the portion of a subsidiary's profit or loss and net assets that is not held by the Group. Total comprehensive income or loss is attributed to non-controlling interests even if this results in the noncontrolling interests having a deficit balance.

Where the Group decreases its controlling interest in a subsidiary without losing control, the partial disposal is recognised as an equity transaction. The difference between the proceeds and the carrying value of the share of net assets disposed of is recognised directly in the statement of changes in equity and no adjustment is made to the carrying amount of goodwill.

When the Group loses control of a subsidiary, all the assets, liabilities and non-controlling interests are derecognised at their carrying values. Any equity interest retained in the former subsidiary is recognised at its fair value at the date control is lost, with the resulting gain or loss recognised in profit or loss.

In the Company's financial statements, investments in subsidiaries are stated at cost less any impairment losses.

Investment in associated companies and joint ventures

An associate is an entity over which the Group has significant influence, and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

Joint control involves the contractually agreed sharing of control, and arrangements subject to joint control are classified as either a joint venture (representing a share of net assets and equity accounted) or a joint operation (representing rights to assets and obligations for liabilities, accounted for accordingly).

The financial performance, assets and liabilities of associates and joint ventures are incorporated in these financial statements using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for under IFRS 5: Non-Current Assets Held for Sale and Discontinued Operations. Under the equity method of accounting, investments in associates and joint ventures are initially recognised at cost and adjusted for post-acquisition changes in the Group's share of net assets of the associate or joint venture, less any impairment in the value of individual investments. Losses of an associate or joint venture in excess of the Group's investment in that associate or joint venture (which includes any long-term interests that, in substance, form part of the Group's net investment in the associate or joint venture) are not recognised, unless the Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture.

Any excess of the cost of acquisition over the Group's share of the net fair value of identifiable assets, liabilities and contingent liabilities of the associate or joint venture recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of that investment. Any excess of the Group's share of the fair value of the net identifiable assets and contingent liabilities of the entity acquired, over the cost of acquisition is recognised immediately in profit or loss.

Where the Group transacts with an associate or joint venture of the Group, profits and losses are eliminated to the extent of the Group's interest in the relevant associate.

When the Group loses significant influence over the associate or joint control of the joint venture, any retained investment is measured at fair value with any consequential gain or loss recognised in profit or loss.

4. Business combinations

Initial recognition and measurement

All business combinations are accounted for by applying the acquisition method. The cost of the business combination is the fair value at the date of exchange of the assets given, liabilities incurred or assumed, and equity instruments issued by the Group, in exchange for control of the acquiree as defined by IFRS 10. Costs directly attributable to the business combination are expensed as incurred, except the costs to issue debt which are amortised as part of the effective interest and costs to issue equity which are included in equity. Identifiable assets acquired and liabilities and contingent liabilities that meet the recognition conditions of IFRS 3: Business Combinations are measured initially at their fair values, except for non-current assets (or disposal company) that are classified as held-for-sale in accordance with IFRS 5: Non-current Assets Held-for-Sale and Discontinued Operations, which are recognised at fair value less costs to sell, at the acquisition date, irrespective of the extent of any noncontrolling interest.

Contingent consideration is included in the cost of the business combination at fair value determined at the date of acquisition. Subsequent changes to the assets, liabilities or equity which arise as a result of the contingent consideration are not effected against goodwill, unless they are valid measurement period adjustments.

The interest of non-controlling shareholders may be measured either at fair value or at the non-controlling interest's proportionate share of the acquiree's identifiable net assets. The choice of measurement basis is made on an acquisition-by-acquisition basis.

When a business combination is achieved in stages, the Group's previously held interests in the acquired entity are re-measured to fair value on the date the Group attains control and the resulting gain or loss is recognised in profit or loss. Where the previously held interest was classified as an available-for-sale financial asset, the cumulative fair value adjustments recognised previously in other comprehensive income and accumulated in equity are recognised in profit or loss as a reclassification adjustment.

Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum of a) fair value of consideration transferred, b) the recognised amount of any non-controlling interest in the acquire and c) acquisition-date fair value of any existing equity interest in the acquiree, over the acquisition-date fair values of identifiable net assets.

The excess of the fair value of the net identifiable assets and contingent liabilities of the entity acquired over the cost of acquisition results in a gain on bargain purchase which is recognised immediately in profit or loss.

Subsequent measurement

If the initial accounting for business combinations has been determined provisionally, then these provisional amounts are adjusted during the measurement period to reflect new information obtained about facts and circumstances that existed as of the date of acquisition that, if known, would have affected the amounts initially recognised.

The measurement period is the period from the date of acquisition to the date the Group obtains complete information about facts and circumstances that existed as of the acquisition date, subject to a maximum period of one year.

5. Goodwill

Initial recognition and measurement

Goodwill represents the future economic benefits arising from a business combination that are not individually identified and separately recognised. See note 5 for information on how goodwill is initially determined.

Subsequent measurement

Goodwill is subsequently measured at cost less any accumulated impairment.

Derecognition

When goodwill forms part of a cash-generating unit and part of that cash-generating unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation in determining the gain or loss on disposal of the operation. Goodwill disposed of in this manner is measured on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

Impairment

For the purposes of impairment testing, goodwill is allocated to each of the Group's cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill is allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period. Refer to note 5 to the Group annual financial statements for a description of impairment testing procedures.

6. Non-current assets held for sale and discontinued operations

Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their carrying amount and their fair value less costs to sell and are presented separately in the statement of financial position. Non-current assets (and disposal groups) are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use.

The conditions are regarded as met only when it is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Non-current assets held for sale are classified as held for sale from the date these conditions are met and are measured at the lower of their carrying amount and their fair value less costs to sell. However, some assets held for sale, such as financial assets or deferred tax assets, continue to be measured in accordance with the Group's relevant accounting policy for those assets. Any resulting impairment is reported through profit or loss.

On classification as held for sale, the assets are no longer depreciated and comparative amounts are not adjusted.

Discontinued operations are classified as held for sale. Discontinued operations are either a separate major line of business or geographical area of operations that have been sold or are part of a single coordinated plan to be disposed of, or a subsidiary acquired exclusively with a view to sell. Once an operation has been identified as discontinued, or is reclassified as continuing, the comparative information is represented.

7. Property, plant and equipment

Property plant and equipment are recognised if it is probable that future economic benefits will flow to the entity from the assets and the costs of the assets can be reliably measured.

Property, plant and equipment are stated at acquisition cost, including any costs directly attributable to bringing the assets to the location and condition necessary for them to be capable of operating in the manner intended by management, less accumulated depreciation and any impairment losses. Land is not depreciated.

Where an item comprises major components with different useful lives, these components are accounted for as separate items.

Property, plant and equipment are depreciated to estimated residual value on a straight-line basis over their expected useful lives. The depreciation method, estimated remaining useful lives and residual values are reviewed annually.

The assumptions regarding estimated useful lives for the 2014 financial year were as follows:

Land	Indefinite
Buildings	4 – 75 years
Leasehold improvements	Shorter of the lease term and the building's useful life
Computer equipment	1 – 20 years
Furniture and equipment	1 – 16 years
Medical equipment	1 – 12 years
Motor vehicles	5 years
Aircraft	Useful life based on the number of hours used
Plant and machinery	1 – 20 years

Assets under construction are not depreciated.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. However, when there is no reasonable certainty that ownership will be obtained by the end of the lease term, assets are depreciated over the shorter of the lease term and their useful lives.

The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

8. Intangible assets

Intangible assets are recognised if it is probable that future economic benefits will flow to the entity from the assets and the costs of the assets can be reliably measured.

Intangible assets are stated at cost less accumulated amortisation and accumulated impairment losses.

Intangible assets are amortised on a straight-line basis over their estimated useful lives. Amortisation has been included within operating profit.

The assumptions regarding estimated useful lives for the 2014 financial year were as follows:

Management contracts	Over contract period
Computer software – purchased	2 – 6 years
Computer software – other	20 years
Development expenditure	Over contract period
Other	4 years

Management contracts comprise the fair value of contracts with third parties to operate hospital facilities.

Computer software – other, is software that requires modification or further development and is amortised from the date that it is brought into use. Costs associated with maintaining computer software programmes or development expenditure that does not meet the recognition criteria are recognised as an expense.

Development expenditure comprises the capitalisation of bid costs incurred in mobilising management contracts which have gained preferred bidder status. All costs incurred in the preparation of bids are expensed in the income statement up to the point where the contract is virtually certain and the contract has then gained preferred bidder status. Bid costs incurred after this point are capitalised to the intangible asset.

The gain or loss arising on the disposal or retirement of intangible assets is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in profit or loss.

9. Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets that take necessarily take a substantial period of time (longer than one year) to prepare for their intended use or sale, are capitalised to the cost of those assets until such time as the assets are substantially ready for their intended use or sale.

Borrowings are recognised initially at fair value, net of transaction costs incurred.

Borrowings are subsequently stated at amortised cost using the effective interest rate method.

All other borrowing costs are expensed in the period in which they are incurred.

10. Financial instruments

Initial recognition and measurement

Financial assets and financial liabilities are recognised on the Group's statement of financial position when the Group becomes a party to the contractual provisions of the instrument.

Financial instruments are initially measured at fair value plus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs directly attributable to the acquisition or issue of the financial asset or financial liability. Subsequent to initial recognition, financial instruments are measured as set out below.

Derecognition of financial assets and liabilities

Financial assets are derecognised where:

• The contractual rights to receive cash flows from the asset have expired; or
• The Group has transferred the financial asset and substantially all the risks and rewards of ownership.

Financial liabilities are derecognised when the relevant obligation has either been discharged or cancelled or it has expired.

Fair value

Fair value represents the current market value where a regulated market exists. Otherwise fair value is determined utilising appropriate valuation methodology including discounted cash flow models. If fair values cannot be measured reliably, the financial asset is valued at cost less accumulated impairment.

Amortised cost

Amortised cost is calculated using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to the net carrying amount of the instrument. All fees, transaction costs and other premiums or discounts are included in the calculation.

Trade and other receivables

Trade and other receivables are classified as loans and receivables and are subsequently measured at amortised cost less allowances for doubtful debts.

Individually significant receivables are considered for impairment when objective evidence is received that a specific counterparty will default. Receivables that are not considered to be individually impaired are reviewed for impairment in groups, which are determined by reference to the type and region of counterparty and other available features of shared credit risk characteristics. The percentage of the write-down is then based on recent historical counterparty default rates for each identified group. Impairment of these assets is expensed in profit or loss. The carrying amount of the asset is reduced through the use of an allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

Cash and cash equivalents

Cash and cash equivalents are stated at carrying value which is deemed to be fair value. In the statement of cash flows, bank overdrafts are offset against cash and cash equivalents.

Financial liabilities and equity instruments

Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangement entered into and the definitions of a financial liability and an equity instrument in IFRS.

An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.

Financial liabilities, other than derivative instruments, are subsequently recognised at amortised cost, comprising original debt less principal payments and amortisations.

The accounting policies adopted for specific financial liabilities and equity instruments are set out below.

Compound instruments

The component parts of compound instruments are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangement.

At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. This amount is accounted for as a liability on an amortised cost basis until extinguished upon conversion or the maturity date of the instrument.

The equity component is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognised and included in equity, net of income tax effects, and is not subsequently remeasured.

Trade payables

Trade and other payables are initially measured at fair value and are subsequently measured at amortised cost, using the effective interest rate method.

Fair value hierarchy

Financial instruments measured at fair value are grouped into the following levels based on the significance of the inputs used in determining fair value:

• Level 1: Fair value is derived from quoted prices (unadjusted) in active markets for identical instruments.
• Level 2: Fair value is derived through the use of valuation techniques based on observable inputs, either directly or indirectly.
• Level 3: Fair value is derived through the use of valuation techniques using inputs not based on observable market data.

11. Derivative financial instruments and hedge accounting

Derivative financial instruments are initially and subsequently recognised at fair value, with changes in fair value being included in profit or loss other than derivatives designated as cash flow hedges.

A derivative instrument needs to meet the following criteria to be designated as a hedging instrument:

• The hedge transaction is expected to be highly effective in achieving offsetting changes in fair value or cash flows attributable to the hedged risk;
• The effectiveness of the hedge can be reliably measured throughout the duration of the hedge;
• There is adequate documentation of the hedging relationship at the inception of the hedge; and
• For cash flow hedges, the forecast transaction that is the subject of the hedge must be highly probable.

The Group designates certain derivatives as cash flow hedges, which hedge the exposure to variability in cash flows that are either attributable to a particular risk associated with a recognised asset or liability or a forecast transaction that could affect profit or loss. The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in other comprehensive income and the ineffective portion is recognised in profit or loss. Further details of derivative financial instruments are disclosed in note 34 to the Group annual financial statements.

11. Derivative financial instruments and hedge accounting continued

If an effective hedge of a forecast transaction subsequently results in the recognition of a financial asset or financial liability, the gains or losses recognised in other comprehensive income are reclassified from equity to profit or loss and presented as a reclassification adjustment within other comprehensive income in the same period in which the asset or liability affects profit or loss.

If a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability, the associated gains or losses that had previously been recognised in other comprehensive income are included in the initial measurement of the acquisition cost or other carrying amount of the asset or liability.

Hedge accounting is discontinued on a prospective basis when the hedge no longer meets the hedge accounting criteria (including when it becomes ineffective), when the hedge is sold, terminated or exercised, when, for cash flow hedges, the forecast transaction is no longer expected to occur or when the hedge designation is revoked.

Any cumulative gain or loss on the hedging instrument for a forecast transaction is retained in equity until the transaction occurs, unless the transaction is no longer expected to occur, in which case it is transferred to profit or loss for the period.

12. Set-off

Financial assets and liabilities are set-off and the net amount reported in the statement of financial position when there is a legally enforceable right to set-off the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

13. Impairment of tangible and intangible assets excluding goodwill

At each year-end reporting date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value-in-use. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset, or cash-generating unit, is estimated to be less than its carrying amount, the carrying amount of the asset, or cash-generating unit, is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

Where an impairment loss subsequently reverses, the carrying amount of the asset, or cash-generating unit, is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

14. Insurance contracts

Contracts under which the Group accepts significant risk from other parties by indemnifying that party against uncertain future costs are classified as insurance contracts. The contracts issued compensate the other party for medical and emergency service expenses incurred.

Recognition and measurement

Capitation premiums

The Group receives premiums from medical aid schemes/members in return for underwriting the cost of providing medical or emergency services. These premiums are recognised as revenue before the deduction of any brokerage, commissions or similar costs.

Provision for outstanding claims

All claims assessed but not yet paid are accrued for in full.

Claims incurred but not reported (IBNR) liability

Claims arising from insured events that occurred within the accounting period, but which have not yet been received or reported to the Group within the period are provided for. The IBNR liability is estimated by independent actuarial consultants using statistical methods. The IBNR liability is based on assessed claim patterns as these patterns are more stable than claims paid patterns. Claims IBNR estimates are arrived at by using independent actuarial assessments of the claims based on the chain-ladder method of forecasting claims development patterns.

Re-insurance contracts held

Contracts entered into with re-insurers, under which compensation for specified losses meet the classification requirements for insurance contracts, are accounted for as re-insurance contracts. Re-insurance contracts are entered into for calendar years, coinciding with the term of the insurance contracts entered into with other parties. Re-insurance premiums and any associated recoveries are accounted for monthly in profit or loss. Amounts recoverable from or payable to the re-insurer are measured consistently in terms of each re-insurance contract and are classified as trade and other receivables or financial liabilities respectively.

15. Financial guarantee contracts

The Group regards financial guarantee contracts as insurance contracts and uses accounting applicable to insurance contracts. Details regarding financial guarantees issued are disclosed under contingent liabilities in note 32 to the Group annual financial statements.

16. Inventories

Inventories, comprising medical consumables are valued at the lower of cost and net realisable value on a first-infirst-out basis. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

Other consumables, including crockery, cutlery, linen and soft furnishings, are valued at average cost and written down with regard to their age and condition.

Write-downs to net realisable value and inventory losses are expensed in the period in which the write-downs or losses occur.

17. Ordinary and preference share capital and premium

Issued ordinary and preference share capital and premium are stated as the amount of the proceeds received less directly attributable issue costs.

18. Treasury shares

Treasury shares held by subsidiary companies are deducted from share capital and premium on consolidation. These shares are not included in the number of shares in issue for purposes of calculating earnings per share and certain other performance ratios.

19. Provisions

Provisions represent liabilities of uncertain timing or amount. Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, for which it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made.

Provisions are measured at the present value of expected future expenditure required to settle an obligation and discounted using a pre-tax market related rate which is adjusted for the risks associated with the obligation.

20. Foreign currency translation

Items included in the financial results of each entity are measured using the functional currency of that entity. The consolidated financial results are presented in South African Rands, which is Netcare's functional and presentation currency.

Foreign currency transactions

Income and expenditure transactions are translated into the functional currency of the entity at the exchange rate at the transaction date. Monetary assets and liabilities are translated into the functional currency of the entity at the exchange rate prevailing at the end of the reporting period. Foreign exchange gains and losses resulting from the translation and settlement of monetary assets and liabilities are charged to profit or loss, except when they relate to cash flow hedging activities in which case these gains and losses are recognised in other comprehensive income and included in the cash flow hedge accounting reserve in equity.

Non-monetary items are translated at year-end and are measured at historical cost, except for non-monetary items measured at fair value which are translated using the exchange rate at the date when fair value was determined.

Foreign operations

The financial results of all entities that have a functional currency different from the presentation currency of their parent entity are translated into the presentation currency. Income and expenditure transactions of foreign operations are translated at the average exchange rate for the period. All assets and liabilities, including fair value adjustments arising on acquisition, are translated at the exchange rate prevailing at the reporting date. Differences arising on translation are recognised in other comprehensive income and included in the foreign currency translation reserve in equity.

On consolidation, differences arising from the translation of the net investment in a foreign operation are recognised in other comprehensive income and included in the foreign currency translation reserve in equity.

On disposal of part or all of the investment, the proportionate share of the related cumulative gains and losses previously recognised in the foreign currency translation reserve in equity are included in determining the profit or loss on disposal of that investment charged to profit or loss.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the exchange rate prevailing at the end of the reporting period.

21. Taxation

The tax expense consists of current South African and foreign tax, deferred tax and secondary tax on companies (prior to 1 April 2012).

Current South African and foreign tax

The current tax charge is the expected tax payable on the taxable income for the period. The tax rates and tax laws used to compute this amount are those that are enacted or substantively enacted by the reporting date.

Deferred tax

The provision for deferred tax assets and liabilities reflects the tax consequences that would follow from the expected recovery or settlement of the carrying amount of the Group's assets and liabilities.

Deferred tax is provided using the liability method, for all temporary differences at the reporting date between the tax bases of assets or liabilities and their respective carrying amounts.

A deferred tax liability is recognised for all taxable temporary differences associated with investments in subsidiaries, joint ventures and associates, except to the extent that both of the following conditions are satisfied: (i) the parent or investor is able to control the timing of the reversal of the temporary difference and (ii) it is probable that the temporary difference will not reverse in the foreseeable future. No deferred tax liability is recognised on temporary differences caused by the initial recognition of goodwill.

A deferred tax asset is recognised where it is probable that, in the foreseeable future, taxable profits will be available against which the deferred tax asset can be realised. Neither a deferred tax asset nor liability is recognised where it arises from a transaction that is not part of a business combination, and, at the time of the transaction, has not impacted accounting or taxable profit or loss. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax assets to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date.

Current and deferred tax relating to items recognised in other comprehensive income and equity are recognised in other comprehensive income and equity respectively.

Deferred tax assets and deferred tax liabilities are offset if the Group has a legally enforceable right to set-off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

22. Leasing

Finance leases

Leases of assets where the Group assumes substantially all the benefits and risks of ownership are classified as finance leases. Finance leases are capitalised at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments and are depreciated at appropriate rates over the shorter of the estimated useful lives of the assets or the lease period. A corresponding amount is recognised as a finance lease liability. Finance lease payments are allocated using the effective interest rate method, between the finance charge and the capital repayment.

Operating leases

Leases of assets where the Group does not assume substantially all the benefits and risks of ownership are classified as operating leases. Payments made in respect of operating leases with a fixed escalation clause are charged to profit or loss on a straight-line basis over the lease term. All other lease payments are expensed as they occur. Minimum rentals due after year-end are reflected under commitments.

23. Revenue recognition

Revenue

Revenue is recognised at the fair value of the consideration received or receivable net of indirect taxes and trade discounts, when the significant risks and rewards of ownership have been transferred or services have been rendered. Revenue comprises the amount charged for accommodation, theatre fees and medical consumables. Revenue within the Group is eliminated on consolidation.

Revenue from charges to patients is recognised when the service giving rise to this revenue is rendered.

Revenue arising from administration fees is recognised on the accrual basis in accordance with the substance of the relevant agreements.

Other income

Rental income from operating leases is recognised as it is earned over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.

Dividends are recognised when the shareholders' right to receive payment is established.

Interest is recognised on a time proportion basis, taking account of the principal outstanding and the effective rate over the period to maturity, when it is determined that such income will accrue to the Group.

24. Cost of sales

Cost of sales includes the costs of inventories, employee and other related costs that are directly attributable to the provision of services. Inventory write-downs are included in cost of sales when recognised. Trade discounts, settlement discounts and similar costs are deducted in determining cost of sales.

25. Employee benefits

Short-term employee benefits

Remuneration to employees is recognised in profit or loss as services are rendered and employees become entitled to the remuneration and the Group has an unavoidable obligation to make payment.

Post-employment benefits – Defined contribution pension plans

Contributions to defined contribution plans are recognised in profit or loss.

Post-employment benefits – Defined benefit pension plans

The Group's obligation in respect of defined benefit pension plans is actuarially calculated by deducting the fair value of the plan assets from the gross obligation for post-retirement benefits. The gross obligation is determined by estimating the future benefit attributable to employees in return for services rendered to date.

The future benefit is discounted using the discount rate to determine its present value. Independent actuaries perform this calculation annually using the projected unit credit method.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in other comprehensive income, with the exception of gains or losses arising from changes in the benefits regarding past services, which are recognised in profit or loss.

Past services costs are recognised immediately in profit and loss.

Where the plan assets exceed the gross obligation, the asset recognised is limited to the total of unrecognised net actuarial losses, unrecognised past service costs related to the improvements of the defined benefit pension plan and the present value of any future refunds from the plan or reductions in future contributions to the plan.

Post-employment benefits – Medical funds

The Group provides post-retirement benefits to certain of its retirees in South Africa only. Employees who joined the employment of the Group prior to 1 November 2004 are entitled to a post-retirement medical aid subsidy. Due to previous employment benefits offered, the Group has honoured its contractual commitment in respect of postretirement medical obligations before the change in policy.

The future benefit is discounted to determine its present value. Independent actuaries perform this calculation every two years for the Group, using the projected unit credit method.

Actuarial gains and losses are recognised in other comprehensive income.

Equity compensation benefits – Netcare Share Incentive Scheme

The Group grants share options to certain employees under the Netcare Share Incentive Scheme. The fair value of the employee services received in exchange for the grant of options is recognised as an expense with a corresponding increase in equity. The total amount to be expensed over the vesting period is determined with reference to the fair value of the options granted on grant date and is expensed on a straight-line basis over the vesting period. The fair value is determined by using the Trinomial model and the assumptions used to determine the fair value are detailed in note 37 to the Group annual financial statements.

Equity compensation benefits – Health Partners for Life

The beneficiaries of the Health Partners for Life trusts hold trust units which entitle them to the economic benefits of a specified number of Netcare shares over a vesting period. The total amount to be expensed over the vesting period is determined with reference to the fair value of the units at grant date and is expensed on a straight-line basis over the vesting period. The fair value is determined by using the Trinomial model and the assumptions used to determine the fair value are detailed in note 37 to the Group annual financial statements.

Equity compensation benefits – Forfeitable Share Plan

The Group awards forfeitable shares to certain employees subject to performance (performance shares) and retention (retention shares) conditions. The total amount to be expensed over the vesting period is determined with reference to the fair value of the units at grant date and is expensed on a straight-line basis over the vesting period. The fair value is determined by using the weighted average traded share price on grant date and the assumptions to determine the fair value are detailed in note 37 to the Group annual financial statements. For the performance shares, the probability of achieving the performance condition is used to determine the expense in each reporting period. Vesting conditions, including performance conditions, are taken into account by adjusting the number of forfeitable shares so that, ultimately, the amount recognised for services received as consideration for the forfeitable shares granted shall be based on the number of forfeitable shares that eventually vest.

Cash-settled compensation benefits – Executive leveraged bonus scheme

The Group grants phantom share options to certain employees under the executive leveraged bonus scheme. The scheme allows certain employees to participate in the performance of the Netcare share price, in return for services provided, through the payment of cash incentives which are based on the market price of the Netcare share. The fair value is expensed over the vesting period with recognition of a corresponding liability. The liability is remeasured at each reporting date up to and including the settlement date with changes in fair value recognised in profit or loss. The fair value is determined using the Black-Scholes option pricing model.

26. Segment information

The Group's identification of segments and the measurement of segment results is based on the Group's internal reporting to management. The segments have been identified according to the geographic regions in which the business operates and the nature of their respective products and services. Refer to note 1 to the Group annual financial statements for details on the Group's operating segments.

The accounting policies applied by the segments are the same as the Group's accounting policies, unless otherwise indicated in note 1 to the Group annual financial statements. Certain expenses, earnings from associates and joint ventures, financial income and expenses and income tax are not disclosed for all segments, consistent with the disclosure to management.

27. Employee benefit trust

Cash held on behalf of employees within the Group's employee benefit trusts is consolidated in accordance with IFRS 10: Consolidated Financial Statements. This is included within the Employee Share Trust Reserve in the statement of changes in equity.

28. Distributions paid to shareholders

Distributions are recorded in the period in which the distribution is declared and approved by the Company's Board. All transactions with owners of the parent are recorded separately within equity.

29. Significant judgements, accounting estimates and assumptions

The Group prepares its financial statements in accordance with IFRS which requires management to make judgements, accounting estimates and assumptions that affect the reported income, expenses, assets, liabilities and disclosure of contingent assets and liabilities. Use of available information and the application of judgement and assumptions are inherent in the formation of estimates. The actual results could differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised.

The following accounting policies have been identified as involving particularly complex or subjective judgements, assumptions or assessments during the year:

Impairment of non-financial assets

Goodwill is considered for impairment annually. Property, plant and equipment and intangible assets are considered for impairment if there is any reason to believe that impairment may be necessary. Factors taken into consideration include the economic viability of the asset itself and where it is a component of a larger cash-generating unit, the viability of the unit.

The recoverable amounts are determined by projecting the future cash flows expected to be generated by the assets, taking into account market conditions and the expected useful lives of the assets. The present value of these cash flows is determined using an appropriate discount rate.

Where appropriate, the fair value of assets less cost to sell is used in the impairment assessment. For property assets, this is determined using an estimate of fair market value taking into account advice from an external professional valuator. Key judgements in determining the fair market value include the fair market rental amount and the effective yield.

The higher of fair value less costs to sell or value-in-use is compared to the carrying value of the asset (or related CGU) and, if lower, the assets are impaired to that value.

Refer to note 5 to the Group annual financial statements for more details on the assumptions applied in the annual impairment test for goodwill.

Estimation of useful lives and residual values

Property, plant and equipment are depreciated over their useful lives taking into account residual values, where appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In re-assessing asset lives, factors such as technological innovation, product life cycles and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining lives of the assets and projected disposal values. Refer to accounting policy 7 which sets out the estimated useful lives of property, plant and equipment.

Intangible assets are amortised on a straight-line basis over their estimated useful lives. The amortisation methods and remaining useful lives are reviewed at least annually. The estimation of the useful lives of intangible assets is based on historic performance as well as expectations about future use and therefore requires a significant degree of judgement. Refer to accounting policy 8 which sets out the estimated useful lives of intangible assets.

Deferred taxation assets

Deferred tax assets are recognised to the extent it is probable that taxable income will be available in future against which they can be utilised. Future taxable profits are estimated based on business plans which include estimates and assumptions regarding economic growth, interest, inflation rates, taxation rates and competitive forces.

Fair value of share-based payments

The fair value of options granted in terms of the Netcare Share Incentive Scheme and the trust units issued in terms of the Health Partners for Life initiative are determined using the Trinomial model. The fair value of forfeitable shares granted in terms of the Forfeitable Share Plan is determined by using the weighted average traded share price on grant date. The fair value of the phantom share options granted in terms of the executive leveraged bonus scheme is determined using the Black-Scholes option pricing model. Additional details regarding the assumptions used to value the share options and trust units are detailed in note 37 to the Group annual financial statements.

Valuation of financial instruments

The valuation of derivative financial instruments is based on the market situation at the reporting date. The value of the derivative instruments fluctuates on a daily basis and the actual amounts realised may differ materially from their value at the reporting date. The fair value of the inflation and interest rate swaps is calculated based on a discounted cash flow model using a number of key assumptions.

The valuation of the UK RPI swaps takes into account management's expectation of the future cash flows attributable to this swap. Refer to note 34 to the Group annual financial statements for further details of the judgements and assumptions applied.

The fair value of the European style call options is calculated using the Black-Scholes option pricing model.

Hedge accounting and reclassification of reserves

Hedge accounting is discontinued when the hedging relationship no longer qualifies for hedge accounting. One of the criteria which must be satisfied to qualify for hedge accounting is that the forecast hedged transaction must be considered highly probable. In assessing whether the interest rate swaps qualify for hedge accounting management must make a judgement on whether the hedged interest payments on the debt are considered highly probable for the duration of the swap.

If the hedge is no longer considered effective, then consideration must be given as to whether movements in the fair value of the swap previously taken to reserves through the statement of comprehensive income, must be reclassified to the income statement. To do this, management must make a judgement on whether the hedged interest payments on the debt are considered more likely than not to occur. To the extent that any of these underlying hedged cash flows are not considered more likely than not to occur, then a portion of the hedge reserve must be reclassified to the income statement.

The valuation of the UK interest rate and RPI swaps and the application of hedge accounting involves significant judgement as they are based on a view of likely future events, although there can be no certainty as to how the events will actually unfold.

Refer to note 34 to the Group annual financial statements for further details of the judgements and assumptions regarding hedge accounting.

Post-employment benefit obligations

Post-retirement defined benefits are provided for certain existing and former employees. Actuarial valuations are based on assumptions which include employee turnover, mortality rates, the discount rate, the expected long-term rate of return on retirement plan assets, healthcare inflation cost and rates of increase in compensation costs. Additional details of the valuation method and assumptions used are provided in note 18 to the Group annual financial statements.

Incurred but not reported (IBNR) liability

Judgement is required in estimating the IBNR liability. The IBNR liability is calculated using the chain-ladder method which involves the selection of estimated claims development factors based on historical patterns in order to forecast future claims. Refer to note 22 to the Group annual financial statements for further details.

29. Significant judgements, accounting estimates and assumptions continued

Control over an investee

Under IFRS 10, an investor is considered to control an investee if all of the factors below are satisfied. The application of judgement is typically required in making these assessments:

• The investor has power over the investee, i.e. the investor has existing rights that give it the ability to direct the relevant activities;
• The investor has exposure, or rights to variable returns from its involvement with the investee; and
• The investor has the ability to use its power over the investee to affect the amount of the investor's returns.

The Group assesses its control of an investee at the time of its initial investment and again if changes in facts and circumstances affect one or more of the control factors listed above. In assessing whether the Group has control over an investee, consideration is given to many factors including shareholding; voting rights and their impact on the Group's ability to direct the management, operations and returns of the investee; contractual obligations; minority shareholder rights and whether these are protective or substantive in nature; and the financial position of the investee.

Accounting for GHG PropCo 1 as an associate:

The GHG PropCo 1 entities (collectively referred to as GHG PropCo 1) are classified as associates even though the Group owns an effective interest of 50%. An assessment was undertaken to determine if the Group has control over the entities, as defined in IFRS 10. GHG PropCo 1 has a debt facility of £1.5 billion with an original maturity date of 15 October 2013. Given the prevailing interest rate environment, the interest rate swap executed by GHG PropCo 1 in 2006 is materially out-of-the-money. As a result, GHG PropCo 1's liabilities exceed its assets and its board of directors is currently engaged in discussions with the lender group regarding a restructuring of the debt facility. The fiduciary duties of the GHG PropCo 1 directors have changed such that they are required to manage the business in the best interests of its creditors and Netcare is not able to materially impact the prospects of the business. Therefore, management has concluded that Netcare is not able to govern the financial and operating policies of GHG PropCo 1 and these entities are not consolidated in the Group financial statements. However, the Group does have representation on the GHG PropCo 1 board of directors, and is therefore considered to have significant influence over the GHG PropCo 1 entities.

Accounting for GHG PropCo 2 as an associate:

The GHG PropCo 2 entities (collectively referred to as GHG PropCo 2) are classified as associates even though the Group owns an effective interest of 56%. An assessment was undertaken to determine if the Group has control over the entities, as defined in IFRS 10. The cumulative effects of a number of factors led management to conclude that Netcare is not able to govern the financial and operating policies of GHG PropCo 2, including the rights of the lender and the statutory, contractual and legal rights of GHG PropCo 2's other shareholders. However, the Group does have representation on the GHG PropCo 2 board of directors, and is therefore considered to have significant influence over the GHG PropCo 2 entities.

Accounting for Netcare Unitas Linac Joint Venture Proprietary Limited (Unitas Linac) as a joint venture:

During the year, the Group disposed of 12% of its interest in Unitas Linac, reducing its interest to 50%. Unitas Linac was previously accounted for as a subsidiary as the Group had control over the entity. Subsequent to the disposal the Group examined its control position. Based on the updated shareholders' agreement and discussions with management, and given that Netcare no longer possesses a majority vote and that the remaining shareholders could be expected to exercise their votes collectively, the Group has concluded that it does not have power over the investee, but rather joint control. The investment is therefore accounted for as a joint venture, with effect from 1 April 2014.

Notes to the Group annual financial statements

The notes to the Group annual financial statements are available on Netcare's website, www.netcareinvestor.co.za.

Netcare Limited

Incorporated in the Republic of South Africa (Registration number: 1996/008242/06) Share Code: NTC ISIN: ZAE000011953 ("Netcare" or "the Company" or "the Group")

NOTICE OF GENERAL MEETING

Unless otherwise apparent from the context, the definitions and interpretations commencing on page 4 of the circular to which this notice of general meeting is attached apply to this notice of general meeting.

Notice is hereby given that a general meeting of Netcare shareholders will be held at 10:00am on Friday, 10 July 2015 in the Auditorium, Ground Floor, 76 Maude Street (corner West Street), Sandton, 2196 for the purpose of considering and, if deemed fit, passing, with or without modification, the ordinary and special resolutions set out in this notice.

Special resolution number 1 – Specific authority for the repurchase of shares by the Company from The Patient Care and Passionate People Finance Company Proprietary Limited

Resolved that, the Company be and is hereby authorised, by way of a specific authority, in terms of section 48 of the Companies Act, paragraph 5.69(b) of the Listings Requirements and the MOI of the Company, to acquire a maximum of 67 000 000 Netcare shares ("PCT Finco Repurchase Shares") from The Patient Care and Passionate People Finance Company Proprietary Limited ("PCT Finco") for a purchase consideration calculated by multiplying the number of PCT Finco Repurchase Shares by the five day volume weighted average price of a Netcare share up to and including the day before the implementation date ("VWAP").

Note: For purposes of this Special Resolution Number 1, please refer to Annexure A to this notice of General Meeting for a copy of section 115 and section 164 of the Companies Act.

The reason for and effect of special resolution number 1 is, subject to the fulfilment and/or waiver of certain conditions precedent to the specific repurchase, to authorise the Company, by way of a specific authority, to implement a repurchase, in terms of the Listings Requirements and the Companies Act, of the PCT Finco Repurchase Shares from PCT Finco for a purchase consideration calculated by multiplying the number of PCT Finco Repurchase Shares by the VWAP. The aforesaid repurchased shares will be cancelled and returned to the status of authorised but unissued shares.

The percentage of voting rights required for special resolution number 1 to be adopted is at least 75% (seventy five percent) of the voting rights exercised on the resolution, excluding the votes of PCT Finco and its associates.

The directors have considered the effect of the specific repurchase and are of the opinion that the provisions of section 4 and section 48 of the Companies Act have been complied with, and:

• in terms of section 46(1)(a)(ii) of the Companies Act, the board has, by resolution, authorised the specific repurchase;
• in terms of section 46(1)(b) of the Companies Act, it reasonably appears that the Company will satisfy the solvency and liquidity test as contemplated in section 4 of the Companies Act ("solvency and liquidity test") immediately after completing the specific repurchase; and
• in terms of section 46(1)(c) of the Companies Act and paragraph 5.69(d) of the Listings Requirements, the board has, by resolution, acknowledged that it has applied the solvency and liquidity test, and reasonably concluded that the Company will satisfy the solvency and liquidity test immediately after completing the specific repurchase.

Special resolution number 2 – Specific authority for the repurchase of shares by the Company from Netcare Health Partners for Life Finance Company Proprietary Limited

Resolved that, the Company be and is hereby authorised, by way of a specific authority, in terms of section 48 of the Companies Act, paragraph 5.69(b) of the Listings Requirements and the MOI of the Company, to acquire a maximum of 50 600 000 Netcare shares ("HPFL Finco Repurchase Shares") from Netcare Health Partners for Life Finance Company Proprietary Limited ("HPFL Finco") for a purchase consideration calculated by multiplying the number of HPFL Finco Repurchase Shares by the VWAP.

Note: For purposes of this Special Resolution Number 2, please refer to Annexure A to this notice of General Meeting for a copy of section 115 and section 164 of the Companies Act.

The reason for and effect of special resolution number 2 is, subject to the fulfilment and/or waiver of certain conditions precedent to the specific repurchase, to authorise the Company, by way of a specific authority, to implement a repurchase, in terms of the Listings Requirements and the Companies Act, of the HPFL Finco Repurchase Shares from HPFL Finco, for a purchase consideration calculated by multiplying the number of HPFL Finco Repurchase Shares by the VWAP. The aforesaid repurchased shares will be cancelled and returned to the status of authorised but unissued shares.

The percentage of voting rights required for special resolution number 2 to be adopted is at least 75% (seventy five percent) of the voting rights exercised on the resolution, excluding the votes of HPFL Finco and its associates.

The directors have considered the effect of the specific repurchase and are of the opinion that the provisions of section 4 and section 48 of the Companies Act have been complied with, and:

• in terms of section 46(1)(a)(ii) of the Companies Act, the board has, by resolution, authorised the specific repurchase;
• in terms of section 46(1)(b) of the Companies Act, it reasonably appears that the Company will satisfy the solvency and liquidity test immediately after completing the specific repurchase; and
• in terms of section 46(1)(c) of the Companies Act and paragraph 5.69(d) of the Listings Requirements, the board has, by resolution, acknowledged that it has applied the solvency and liquidity test, and reasonably concluded that the Company will satisfy the solvency and liquidity test immediately after completing the specific repurchase.

Ordinary resolution number 1 – Specific issue of shares by the Company to the trustees for the time being of the Patient Care and Passionate People Trust

Resolved that, in accordance with paragraph 5.51(g) of the Listings Requirements and the MOI, the Company be and is hereby authorised, by way of a specific authority, to allot and issue approximately 50 900 000 Netcare shares ("PCT Subscription Shares") to the trustees for the time being of the Patient Care and Passionate People Trust ("PCT") for a subscription price calculated by multiplying the number of PCT Subscription Shares by the VWAP.

The reason for and effect of ordinary resolution number 1 is to authorise the Company, by way of a specific authority, to allot and issue the PCT Subscription Shares to PCT.

PCT is a non-public shareholder (as defined in paragraph 4.25 to 4.27 of the Listings Requirements) for purposes of the specific issue as contemplated in paragraph 5.51(b) of the Listings Requirements.

The percentage of voting rights that will be required for this ordinary resolution to be adopted is at least 75% (seventy five percent) of the votes exercised on the resolution excluding the votes of PCT and its associates.

Ordinary resolution number 2 – Specific issue of shares by the Company to the trustees for the time being of the Physician Partnerships Trust

Resolved that, in accordance with paragraph 5.51(g) of the Listings Requirements and the MOI, the Company be and is hereby authorised, by way of a specific authority, to allot and issue approximately 28 000 000 Netcare shares ("PPT Subscription Shares") to the trustees for the time being of the Physician Partnerships Trust ("PPT") for a subscription price calculated by multiplying the number of PPT Subscription Shares by the VWAP.

The reason for and effect of ordinary resolution number 2 is to authorise the Company, by way of a specific authority, to allot and issue the PPT Subscription Shares to PPT.

PPT is a non-public shareholder (as defined in paragraph 4.25 to 4.27 of the Listings Requirements) for purposes of the specific issue as contemplated in paragraph 5.51(b) of the Listings Requirements.

The percentage of voting rights that will be required for this ordinary resolution to be adopted is at least 75% (seventy five percent) of the votes exercised on the resolution excluding the votes of PPT and its associates.

Ordinary resolution number 3 – Specific issue of shares by the Company to the trustees for the time being of the Healthy Lifestyle Trust

Resolved that, in accordance with paragraph 5.51(g) of the Listings Requirements and the MOI, the Company be and is hereby authorised, by way of a specific authority, to allot and issue approximately 4 700 000 Netcare shares ("HLT Subscription Shares") to the trustees for the time being of the Healthy Lifestyle Trust ("HLT") for a subscription price calculated by multiplying the number of HLT Subscription Shares by the VWAP.

The reason for and effect of ordinary resolution number 3 is to authorise the Company, by way of a specific authority, to allot and issue the HLT Subscription Shares to HLT.

The percentage of voting rights that will be required for this ordinary resolution to be adopted is at least 75% (seventy five percent) of the votes exercised on the resolution excluding the votes of HLT and its associates.

Ordinary resolution number 4 – Specific issue of shares by the Company to the trustees for the time being of the Mother & Child Trust

Resolved that, in accordance with paragraph 5.51(g) of the Listings Requirements and the MOI, the Company be and is hereby authorised, by way of a specific authority, to allot and issue a maximum of 7 500 000 Netcare shares ("MCT Subscription Shares") to the trustees for the time being of the Mother & Child Trust ("MCT") for a subscription price calculated by multiplying the number of MCT Subscription Shares by the VWAP.

The reason for and effect of ordinary resolution number 4 is to authorise the Company, by way of a specific authority, to allot and issue the MCT Subscription Shares to MCT.

The percentage of voting rights that will be required for this ordinary resolution to be adopted is at least 75% (seventy five percent) of the votes exercised on the resolution, excluding the votes of MCT and its associates.

Ordinary resolution number 5 – Authority for directors to sign and act

Resolved that, any one of the directors or the secretary of the Company be and is hereby authorised to do all such things, sign all documents (including any agreements and/or company forms) and take all such actions as they consider necessary to give effect to and implement the abovementioned resolutions on behalf of the Company. Insofar as such signature or acts occurred before the adoption of this resolution, such signature and/or acts are hereby ratified.

The reason for and effect of ordinary resolution number 5 is to authorise a director of the Company or the secretary of the Company to do all things and sign all such documents as may be necessary to, inter alia, give effect to the above resolutions, and to ratify any acts which occurred prior to the adoption of this resolution.

The percentage of voting rights that will be required for this ordinary resolution to be adopted is more than 50% (fifty percent) of the votes exercised on the resolution.

NOTES TO THE NOTICE OF GENERAL MEETING

Record date

The record date in terms of section 59 of the Companies Act for shareholders to be recorded on the Register in order to:

• receive notice of the general meeting is Friday, 5 June 2015; and
• attend, participate in and vote at the general meeting, is Friday, 3 July 2015 and accordingly, the last day to trade in order to be eligible to vote at the general meeting is Friday, 26 June 2015.

Voting and proxies

Shareholders are reminded that:

• a shareholder entitled to attend and vote at the general meeting is entitled to appoint a proxy (or more than one proxy) to attend, participate in and vote at the general meeting in place of the shareholder, and shareholders are referred to the attached form of proxy;
• a proxy need not also be a shareholder of the Company; and
• in terms of section 63(1) of the Companies Act, any person attending or participating in a meeting of shareholders must present reasonably satisfactory identification and the person presiding at the general meeting must be reasonably satisfied that the right of any person to participate in and vote (whether as shareholder or as proxy for a shareholder) has been reasonably verified.

Certificated shareholders and dematerialised shareholders with "own name" registration who are unable to attend the general meeting and who wish to be represented at the meeting, must complete and return the attached form of proxy in accordance with the instructions contained therein, so as to be received by the Transfer Secretaries, Link Market Services South Africa (Pty) Limited, 13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein, 2001 (PO Box 4844, Johannesburg, 2000) by no later than 10:00 on Wednesday, 8 July 2015 or handed to the chairperson of the general meeting before the appointed proxy exercises any of the relevant shareholder's rights at the general meeting (or any adjournment of the general meeting).

Dematerialised shareholders without "own name" registration who wish to attend the general meeting in person should request their CSDP or broker to provide them with the necessary letter of representation in accordance with the relevant custody agreement. Dematerialised shareholders without "own name" registration who do not wish to attend the general meeting but wish to be represented at the general meeting must advise their CSDP or broker, of their voting instructions. Such shareholders should contact their CSDP or broker with regard to the cut-off time for their voting instructions.

Electronic participation

Should any shareholder (or a representative or proxy for a shareholder) wish to participate in the general meeting by way of electronic participation, that shareholder should make an application in writing (including details as to how the shareholder or its representative (including its proxy) can be contacted) to participate, to the transfer secretaries at their address below, to be received by the transfer secretaries by at least the record date (i.e. Friday, 3 July 2015) in order for the transfer secretaries to arrange for the shareholder (or its representative or proxy) to provide reasonable satisfactory identification and for the transfer secretaries to provide the shareholder (or its representative or proxy) with details as to how to access the general meeting by means of electronic participation. The proposed mechanism of electronic participation will be through telephone. Details will be provided by the transfer secretaries upon receipt of the written application and reasonable satisfactory identification. The shareholder will be billed separately by their telephone service providers for the telephone call to participate in the general meeting and must submit their voting proxies to the transfer secretaries in accordance with the instructions above. Shareholders participating electronically will not be able to vote electronically and must follow the standard voting arrangements indicated above.

The Company reserves the right not to provide for electronic participation at the general meeting in the event that it determines that it is not practical to do so, or an insufficient number of shareholders (or their representatives or proxies) request to so participate.

By order of the board

11 June 2015

ANNEXURE A: EXTRACT FROM SECTIONS 115 AND 164 OF THE COMPANIES ACT

115. Required approval for transactions contemplated in Part.

• (1) Despite section 65, and any provision of a company's Memorandum of Incorporation, or any resolution adopted by its board or holders of its securities, to the contrary, a company may not dispose of, or give effect to an agreement or series of agreements to dispose of, all or the greater part of its assets or undertaking, implement an amalgamation or a merger, or implement a scheme of arrangement, unless:
  • (a) the disposal, amalgamation or merger, or scheme of arrangement:
• (i) has been approved in terms of this section; or
• (ii) is pursuant to or contemplated in an approved business rescue plan for that company, in terms of Chapter 6; and
  • (b) to the extent that Parts B and C of this Chapter, and the Takeover Regulations, apply to a company that proposes to:
• (i) dispose of all or the greater part of its assets or undertaking;
• (ii) amalgamate or merge with another company; or
• (iii) implement a scheme of arrangement,

the Panel has issued a compliance certificate in respect of the transaction, in terms of section 119 (4) (b), or exempted the transaction in terms of section 119 (6).

• (2) A proposed transaction contemplated in subsection (1) must be approved:

  • (a) by a special resolution adopted by persons entitled to exercise voting rights on such a matter, at a meeting called for that purpose and at which sufficient persons are present to exercise, in aggregate, at least 25% of all of the voting rights that are entitled to be exercised on that matter, or any higher percentage as may be required by the company's Memorandum of Incorporation, as contemplated in section 64 (2); and
  • (b) by a special resolution, also adopted in the manner required by paragraph (a), by the shareholders of the company's holding company if any, if:

• (i) the holding company is a company or an external company;

• (ii) the proposed transaction concerns a disposal of all or the greater part of the assets or undertaking of the subsidiary; and

• (iii) having regard to the consolidated financial statements of the holding company, the disposal by the subsidiary constitutes a disposal of all or the greater part of the assets or undertaking of the holding company; and

  • (c) by the court, to the extent required in the circumstances and manner contemplated in subsections (3) to (6).

• (3) Despite a resolution having been adopted as contemplated in subsections (2) (a) and (b), a company may not proceed to implement that resolution without the approval of a court if:

  • (a) the resolution was opposed by at least 15% of the voting rights that were exercised on that resolution and, within five business days after the vote, any person who voted against the resolution requires the company to seek court approval; or
  • (b) the court, on an application within 10 business days after the vote by any person who voted against the resolution, grants that person leave, in terms of subsection (6), to apply to a court for a review of the transaction in accordance with subsection (7).

• (4) For the purposes of subsections (2) and (3), any voting rights controlled by an acquiring party, a person related to an acquiring party, or a person acting in concert with either of them, must not be included in calculating the percentage of voting rights:

  • (a) required to be present, or actually present, in determining whether the applicable quorum requirements are satisfied; or
  • (b) required to be voted in support of a resolution, or actually voted in support of the resolution.

• (4A) In subsection (4), "act in concert" has the meaning set out in section 117 (1) (b).

• (5) If a resolution requires approval by a court as contemplated in terms of subsection (3) (a), the company must either: (a) within 10 business days after the vote, apply to the court for approval, and bear the costs of that application;

  • or
  • (b) treat the resolution as a nullity.

• (6) On an application contemplated in subsection (3) (b), the court may grant leave only if it is satisfied that the applicant: (a) is acting in good faith;

  • (b) appears prepared and able to sustain the proceedings; and
  • (c) has alleged facts which, if proved, would support an order in terms of subsection (7).

• (7) On reviewing a resolution that is the subject of an application in terms of subsection (5) (a), or after granting leave in terms of subsection (6), the court may set aside the resolution only if:

  • (a) the resolution is manifestly unfair to any class of holders of the company's securities; or
  • (b) the vote was materially tainted by conflict of interest, inadequate disclosure, failure to comply with the Act, the Memorandum of Incorporation or any applicable rules of the company, or other significant and material procedural irregularity.

• (8) The holder of any voting rights in a company is entitled to seek relief in terms of section 164 if that person:

  • (a) notified the company in advance of the intention to oppose a special resolution contemplated in this section; and
  • (b) was present at the meeting and voted against that special resolution.

• (9) If a transaction contemplated in this Part has been approved, any person to whom assets are, or an undertaking is, to be transferred, may apply to a court for an order to effect:

  • (a) the transfer of the whole or any part of the undertaking, assets and liabilities of a company contemplated in that transaction;
  • (b) the allotment and appropriation of any shares or similar interests to be allotted or appropriated as a consequence of the transaction;
  • (c) the transfer of shares from one person to another;
  • (d) the dissolution, without winding-up, of a company, as contemplated in the transaction;
  • (e) incidental, consequential and supplemental matters that are necessary for the effectiveness and completion of the transaction; or
  • (f) any other relief that may be necessary or appropriate to give effect to, and properly implement, the amalgamation or merger.

164. Dissenting shareholders appraisal rights:

• (1) This section does not apply in any circumstances relating to a transaction, agreement or offer pursuant to a business rescue plan that was approved by shareholders of a company, in terms of section 152.
• (2) If a company has given notice to shareholders of a meeting to consider adopting a resolution to:
  • (a) amend its Memorandum of Incorporation by altering the preferences, rights, limitations or other terms of any class of its shares in any manner materially adverse to the rights or interests of holders of that class of shares, as contemplated in section 37 (8); or
  • (b) enter into a transaction contemplated in section 112, 113, or 114,

that notice must include a statement informing shareholders of their rights under this section.

• (3) At any time before a resolution referred to in subsection (2) is to be voted on, a dissenting shareholder may give the company a written notice objecting to the resolution.

• (4) Within 10 business days after a company has adopted a resolution contemplated in this section, the company must send a notice that the resolution has been adopted to each shareholder who:

  • (a) gave the company a written notice of objection in terms of subsection (3); and
  • (b) has neither:

• (i) withdrawn that notice; or

• (ii) voted in support of the resolution.

• (5) A shareholder may demand that the company pay the shareholder the fair value for all of the shares of the company held by that person if:

  • (a) the shareholder:

• (i) sent the company a notice of objection, subject to subsection (6); and

• (ii) in the case of an amendment to the company's Memorandum of Incorporation, holds shares of a class that is materially and adversely affected by the amendment;

  • (b) the company has adopted the resolution contemplated in subsection (2); and

• (c) the shareholder:

• (i) voted against that resolution; and

• (ii) has complied with all of the procedural requirements of this section.

• (6) The requirement of subsection (5) (a) (i) does not apply if the company failed to give notice of the meeting, or failed to include in that notice a statement of the shareholders rights under this section.

• (7) A shareholder who satisfies the requirements of subsection (5) may make a demand contemplated in that subsection by delivering a written notice to the company within:

  • (a) 20 business days after receiving a notice under subsection (4); or
  • (b) if the shareholder does not receive a notice under subsection (4), within 20 business days after learning that the resolution has been adopted.

• (8) A demand delivered in terms of subsections (5) to (7) must also be delivered to the Panel, and must state:

  • (a) the shareholder's name and address;
  • (b) the number and class of shares in respect of which the shareholder seeks payment; and
  • (c) a demand for payment of the fair value of those shares.

• (9) A shareholder who has sent a demand in terms of subsections (5) to (8) has no further rights in respect of those shares, other than to be paid their fair value, unless:

  • (a) the shareholder withdraws that demand before the company makes an offer under subsection (11), or allows an offer made by the company to lapse, as contemplated in subsection (12) (b);
  • (b) the company fails to make an offer in accordance with subsection (11) and the shareholder withdraws the demand; or
  • (c) the company, by a subsequent special resolution, revokes the adopted resolution that gave rise to the shareholder's rights under this section.

• (10) If any of the events contemplated in subsection (9) occur, all of the shareholder's rights in respect of the shares are reinstated without interruption.

• (11) Within five business days after the later of:

  • (a) the day on which the action approved by the resolution is effective;
  • (b) the last day for the receipt of demands in terms of subsection (7) (a); or
  • (c) the day the company received a demand as contemplated in subsection (7) (b), if applicable, the company must send to each shareholder who has sent such a demand a written offer to pay an amount considered by the company's directors to be the fair value of the relevant shares, subject to subsection (16), accompanied by a statement showing how that value was determined.

• (12) Every offer made under subsection (11):

  • (a) in respect of shares of the same class or series must be on the same terms; and
  • (b) lapses if it has not been accepted within 30 business days after it was made.

• (13) If a shareholder accepts an offer made under subsection (12):

  • (a) the shareholder must either in the case of:

• (i) shares evidenced by certificates, tender the relevant share certificates to the company or the company's transfer agent; or

• (ii) uncertificated shares, take the steps required in terms of section 53 to direct the transfer of those shares to the company or the company's transfer agent; and

  • (b) the company must pay that shareholder the agreed amount within 10 business days after the shareholder accepted the offer and:

• (i) tendered the share certificates; or

• (ii) directed the transfer to the company of uncertificated shares.

• (14) A shareholder who has made a demand in terms of subsections (5) to (8) may apply to a court to determine a fair value in respect of the shares that were the subject of that demand, and an order requiring the company to pay the shareholder the fair value so determined, if the company has:

  • (a) failed to make an offer under subsection (11); or
  • (b) made an offer that the shareholder considers to be inadequate, and that offer has not lapsed.

• (15) On an application to the court under subsection (14):

  • (a) all dissenting shareholders who have not accepted an offer from the company as at the date of the application must be joined as parties and are bound by the decision of the court;
  • (b) the company must notify each affected dissenting shareholder of the date, place and consequences of the application and of their right to participate in the court proceedings; and
  • (c) the court:

• (i) may determine whether any other person is a dissenting shareholder who should be joined as a party;

• (ii) must determine a fair value in respect of the shares of all dissenting shareholders, subject to subsection (16);

• (iii) in its discretion may:

• (aa) appoint one or more appraisers to assist it in determining the fair value in respect of the shares; or

• (bb) allow a reasonable rate of interest on the amount payable to each dissenting shareholder from the date the action approved by the resolution is effective, until the date of payment;

• (iv) may make an appropriate order of costs, having regard to any offer made by the company, and the final determination of the fair value by the court; and

• (v) must make an order requiring:

• (aa) the dissenting shareholders to either withdraw their respective demands or to comply with subsection (13) (a); and

• (bb) the company to pay the fair value in respect of their shares to each dissenting shareholder who complies with subsection (13) (a), subject to any conditions the court considers necessary to ensure that the company fulfils its obligations under this section.

• (15A) At any time before the court has made an order contemplated in subsection (15) (c) (v), a dissenting shareholder may accept the offer made by the company in terms of subsection (11), in which case:

  • (a) that shareholder must comply with the requirements of subsection 13 (a); and
  • (b) the company must comply with the requirements of subsection 13 (b).

• (16) The fair value in respect of any shares must be determined as at the date on which, and time immediately before, the company adopted the resolution that gave rise to a shareholder's rights under this section.

• (17) If there are reasonable grounds to believe that compliance by a company with subsection (13) (b), or with a court order in terms of subsection (15) (c) (v) (bb), would result in the company being unable to pays its debts as they fall due and payable for the ensuing 12 months:

  • (a) the company may apply to a court for an order varying the company's obligations in terms of the relevant subsection; and
  • (b) the court may make an order that:

• (i) is just and equitable, having regard to the financial circumstances of the company; and

• (ii) ensures that the person to whom the company owes money in terms of this section is paid at the earliest possible date compatible with the company satisfying its other financial obligations as they fall due and payable.

• (18) If the resolution that gave rise to a shareholder's rights under this section authorised the company to amalgamate or merge with one or more other companies, such that the company whose shares are the subject of a demand in terms of this section has ceased to exist, the obligations of that company under this section are obligations of the successor to that company resulting from the amalgamation or merger.

• (19) For greater certainty, the making of a demand, tendering of shares and payment by a company to a shareholder in terms of this section do not constitute a distribution by the company, or an acquisition of its shares by the company within the meaning of section 48, and therefore are not subject to:

  • (a) the provisions of that section; or
  • (b) the application by the company of the solvency and liquidity test set out in section 4.

• (20) Except to the extent:

  • (a) expressly provided in this section; or
  • (b) that the Panel rules otherwise in a particular case,

a payment by a company to a shareholder in terms of this section does not obligate any person to make a comparable offer under section 125 to any other person.

Netcare Limited

Incorporated in the Republic of South Africa (Registration number: 1996/008242/06) Share Code: NTC ISIN: ZAE000011953 ("Netcare" or "the Company" or "the Group")

FORM OF PROXY (FOR USE BY CERTIFICATED SHAREHOLDERS AND "OWN NAME'' DEMATERIALISED SHAREHOLDERS ONLY)

The definitions and interpretations commencing on page 4 of the circular to which this form of proxy is enclosed apply to this form of proxy.

For use by certificated shareholders and dematerialised shareholders with "own name" registration only, at the general meeting of shareholders of the Company to be held at 10:00 on Friday, 10 July 2015 in the Auditorium, Ground Floor, 76 Maude Street, (corner West Street), Sandton, 2196.

Dematerialised shareholders without "own name'' registration must not use this form of proxy. Dematerialised shareholders who wish to attend the general meeting in person must inform their CSDP or broker of their intention to attend the general meeting and request their CSDP or Broker to issue them with the necessary letter of representation to attend the general meeting in person and vote or, should they not wish to attend the general meeting in person, provide their CSDP or Broker with their voting instructions.

Forms of proxy must be completed and delivered to the Company's transfer secretaries, by not later than 10:00 on Wednesday, 8 July 2015. Thereafter, forms of proxy may be handed to the chairperson of the general meeting at any time before the appointed proxy exercises any of the shareholder rights at the general meeting.

of …………………………………………………………………………………………………………………………………………………………(address)Telephone number () ……………………………………… Cellphone number ………………………………………………………………E-mail address …………………………………………………………………………………………………………………………………………being the holder(s) of …………………………………………………………………………… Netcare shares, do hereby appoint (see note):	1.2.	………………………………………………………………………………………………………………………………… or failing him/her;………………………………………………………………………………………………………………………………… or failing him/her;
I/We …………………………………………………………………………………………………………………………………………………………	(Full name in BLOCK LETTERS)

3. the chairperson of the general meeting,

as my/our proxy to attend, speak and vote on my/our behalf at the general meeting (or any adjournment thereof) I/We desire to vote as follows:

	Insert number of votes(one vote per Netcare share)
	For	Against	Abstain
Special resolution number 1Specific repurchase from PCT Finco
Special resolution number 2Specific repurchase from HPFL Finco
Ordinary resolution number 1Specific issue of shares to the PCT
Ordinary resolution number 2Specific issue of shares to the PCT
Ordinary resolution number 3Specific issue of shares to the HLT
Ordinary resolution number 4Specific issue of shares to the MCT
Ordinary resolution number 5Authority for directors to sign and act
Signed at ………………………………………………… on ……………………….………….……………………….…….……………… 2015
Signature ……………………………………………………………………………………………………………………… Authority of signatory
Telephone number () …………………………………………………………. Cellphone number …………………………….………………
to be assisted by …………………………………………………………………………………………………………………. (where applicable)

Please read the following summary of the rights contained in section 58 of the Companies Act and the following notes to this form of proxy.

SUMMARY OF RIGHTS CONTAINED IN SECTION 58 OF THE COMPANIES ACT

In terms of section 58 of the Companies Act:

• a shareholder of a company may, at any time and in accordance with the provisions of section 58 of the Companies Act, appoint any individual (including an individual who is not a Shareholder) as a proxy to participate in, and speak and vote at, a shareholders' meeting on behalf of such shareholder;
• a proxy may delegate her or his authority to act on behalf of a shareholder to another person, subject to any restriction set out in the instrument appointing such proxy (see note 12 below);
• irrespective of the form of instrument used to appoint a proxy, the appointment of a proxy is suspended at any time and to the extent that the relevant shareholder chooses to act directly and in person in the exercise of any of such shareholder's rights as a shareholder (see note 6 below);
• any appointment by a shareholder of a proxy is revocable, unless the form of instrument used to appoint such proxy states otherwise;
• if an appointment of a proxy is revocable, a shareholder may revoke the proxy appointment by (i) cancelling it in writing, or making a later inconsistent appointment of a proxy and (ii) delivering a copy of the revocation instrument to the proxy and to the relevant company;
• a proxy appointed by a shareholder is entitled to exercise, or abstain from exercising, any voting right of such shareholder without direction, except to the extent that the relevant company's memorandum of incorporation, or the instrument appointing the proxy, provides otherwise (see note 3 below);
• if the instrument appointing a proxy or proxies has been delivered by a shareholder to a company, then, for so long as that appointment remains in effect, any notice that is required in terms of the Companies Act or such company's Memorandum of Incorporation to be delivered to a shareholder must be delivered by such company to:
  • o the relevant shareholder; or
  • o the proxy or proxies, if the relevant shareholder has: (i) directed such company to do so, in writing and (ii) paid any reasonable fee charged by such company for doing so; and
• if a company issues an invitation to its shareholders to appoint one or more persons named by the company as a proxy, or supplies a form of proxy instrument:
  • o the invitation must be sent to every shareholder entitled to notice of the meeting at which the proxy is intended to be exercised; o the invitation or form of proxy instrument supplied by the company must:
• bear a reasonably prominent summary of the rights established in section 58 of the Companies Act;
• contain adequate blank space, immediately preceding the name(s) of any person(s) named in it, to enable a shareholder to write the name and, if desired, an alternative name of a proxy chosen by the shareholder; and
• provide adequate space for the shareholder to indicate whether the appointed proxy is to vote in favour of or against any resolution(s) to be put at the meeting, or is to abstain from voting;
  • o the Company must not require that the proxy appointment be made irrevocable; and
  • o the proxy appointment remains valid only until the end of the meeting at which it was intended to be used, subject to the above.

Notes to the form of proxy:

1. The form of proxy must only be used by certificated shareholders or dematerialised shareholders with "own name'' registration.

• 1. Each shareholder entitled to attend and vote at the general meeting may appoint one or more persons as proxies to attend, participate in and vote at the general meeting in the place of the shareholder. A proxy need not be a shareholder.
• 1. A shareholder is entitled to one vote on a show of hands and, on a poll, one vote in respect of each share held. A shareholder's instructions to the proxy must be indicated by inserting the relevant number of votes exercisable by the shareholder on a poll in the appropriate box(es). Failure to comply with this will be deemed to authorise the proxy to vote or to abstain from voting at the general meeting as he/she deems fit in respect of all the shareholder's votes. Further, should any further resolution(s) or any amendment(s) which may properly be put before the general meeting be proposed, the proxy shall be entitled to vote as he/she thinks fit.
• 1. A vote given in terms of an instrument of proxy shall be valid in relation to the general meeting notwithstanding the death of the person granting it, or the revocation of the proxy, or the transfer of the Netcare shares in respect of which the vote is given, unless notification in writing of such death, revocation or transfer shall have been received by the Company or the transfer secretaries before the commencement of the general meeting or adjourned general meeting at which the proxy is used.
• 1. The chairperson of the general meeting may reject or accept any form of proxy which is completed and/or received other than in compliance with these notes.
• 1. The completion and lodging of this form of proxy will not preclude the relevant shareholder from attending the general meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof, should such shareholder wish to do so.
• 1. Documentary evidence establishing the authority of a person signing the form of proxy in a representative capacity must be attached to this form of proxy, unless previously recorded by the Company or unless this requirement is waived by the chairperson of the general meeting.
• 1. A minor or any other person under legal incapacity must be assisted by his/her parent or guardian, as applicable, unless the relevant documents establishing her/her capacity are produced or have been registered by the Company.
• 1. Where there are joint holders of ordinary shares:
  • (i) any one holder may sign the form of proxy;
  • (ii) the vote(s) of the senior shareholders (for that purpose seniority will be determined by the order in which the names of shareholders appear on the Register) who tenders a vote (whether in person or by proxy) will be accepted to the exclusion of the vote(s) of the other joint shareholder(s).
• 1. Forms of proxy should be delivered or mailed to Link Market Services South Africa (Pty) Limited as follows:

Hand deliveries to:	Postal deliveries to:
Link Market Services South Africa (Pty) Limited	Link Market Services South Africa (Pty) Limited
13th Floor, Rennie House	PO Box 4844
19 Ameshoff StreetBraamfontein, 2001	Johannesburg, 2000

to be received by no later than 10:00 on Wednesday, 8 July 2015 (or 48 hours before any adjournment of the general meeting which date, if necessary, will be notified in the press). Any form of proxy not returned to Link Market Services South Africa (Pty) Limited by such time may be handed to the chairperson of the general meeting any time before the appointed proxy exercises any of the shareholder's rights at the general meeting (or any adjournment thereof).

1. Any alteration or correction made to this form of proxy, other than the deletion of alternatives, must be initialled by the signatory/ies.

2. Any proxy appointed pursuant to this form of proxy may not delegate his/her authority to act on behalf of the relevant shareholder.

• 1. In terms of section 58 of the Companies Act, unless revoked, an appointment of a proxy pursuant to this form of proxy remains valid only until the end of the general meeting or any adjournment of the general meeting.
• 1. If the general meeting is adjourned or postponed, valid forms of proxy submitted for the initial general meeting will remain valid in respect of any adjournment or postponement of the general meeting.