VUNANI LIMITED - Proxy Solicitation & Information Statement 2015

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

The definitions commencing on page 6 of this circular apply mutatis mutandis throughout this circular including this cover page .

If you are in any doubt as to the action you should take, please consult your CSDP, broker, attorney, accountant or other professional adviser .

Action required:

This document is important and should be read with particular attention to page 3 entitled “Action required by Vunani shareholders”, which sets out the action required of them with regard to this circular.
If you have disposed of all your shares in Vunani, then this circular should be forwarded to the purchaser to whom, or the broker, agent or CSDP through whom, you disposed of your shares.

Vunani does not accept any responsibility and will not be held liable for any failure on the part of CSDPs or brokers of dematerialised shareholders to notify such shareholders of the information set out in this circular.

==> picture [213 x 57] intentionally omitted <==

(Incorporated in the Republic of South Africa) (Registration number 1997/020641/06) JSE code: VUN ISIN: ZAE000163382

CIRCULAR TO VUNANI SHAREHOLDERS

regarding the acquisition by Mandlalux, a 70% owned subsidiary of Vunani Capital, of 100% of the issued share capital of Fairheads International for a total consideration of R210 million,

and incorporating:

a notice of general meeting of Vunani shareholders; and

a form of proxy for use by certificated shareholders and “own-name” registered dematerialised shareholders only.

Corporate Adviser

==> picture [94 x 10] intentionally omitted <==

----- Start of picture text -----

Designated Adviser
----- End of picture text -----

==> picture [452 x 11] intentionally omitted <==

----- Start of picture text -----

Legal Adviser to Vunani and competition lawyers Legal Adviser to Fairheads International
----- End of picture text -----

to the Transaction

==> picture [69 x 32] intentionally omitted <==

==> picture [92 x 32] intentionally omitted <==

==> picture [231 x 11] intentionally omitted <==

----- Start of picture text -----

Independent reporting accountants and auditors
----- End of picture text -----

==> picture [88 x 33] intentionally omitted <==

==> picture [100 x 9] intentionally omitted <==

----- Start of picture text -----

Senior Debt Provider
----- End of picture text -----

==> picture [68 x 34] intentionally omitted <==

Date of issue: 26 March 2015

Copies of this circular are available in English only and may be obtained during normal business hours between Thursday, 26 March 2015 and Thursday, 30 April 2015 from the registered office of Vunani and the offices of the Designated Adviser, the Corporate Adviser and the transfer secretaries, the addresses of which are set out in the “Corporate Information and Advisers” section hereof.

CORPORATE INFORMATION AND ADVISERS

INFORMATION RELATING TO VUNANI:

Directors

E G Dube (CEO) A Judin (CFO) N M Anderson Dr XP Guma[#] LI Jacobs[#] (Chairman) B M Khoza J R Macey[#] N S Mazwi[#] SN Mthethwa[#] G Nzalo[#]

Independent reporting accountants and auditors KPMG Inc. (Registration number 1999/021543/21) Registered Accountants and Auditors KPMG Crescent 85 Empire Road Parktown, 2193 (Private Bag 9, Parkview, 2122)

MSC House, 1 Mediterranean Street Foreshore, Cape Town, 8001 (PO Box 4609, Cape Town, 8000)

Executive # Independent non-executive

Company secretary and registered office

A Judin, CA (SA) Vunani House Vunani Office Park 151 Katherine Street Sandown, Sandton, 2196 (PO Box 652419, Benmore, 2010)

Designated Adviser

Grindrod Bank Limited (Registration number 1994/007994/06) 4th Floor, Grindrod Tower 8a Protea Place Sandton, 2196 (PO Box 78011, Sandton, 2146)

Website : http://www.vunanilimited.co.za

Date and place of incorporation

1 December 1997 Pretoria, South Africa

Corporate Adviser

Vunani Corporate Finance (trading as a division of Vunani Capital Proprietary Limited) (Registration number 1998/001469/07) Vunani House Vunani Office Park 151 Katherine Street Sandown, Sandton, 2196 (PO Box 652419, Benmore, 2010)

Transfer secretaries

Computershare Investor Services Proprietary Limited (Registration number 2004/003647/07) Ground Floor 70 Marshall Street Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107)

Legal Adviser to Vunani

Werksmans Inc. (Registration number 1990/007215/21) 155 – 5th Street Sandton, 2196 (Private Bag 10015, Sandton, 2146)

INFORMATION RELATING TO FAIRHEADS INTERNATIONAL

Directors:

R Krepelka (Chairman) P King (Executive director) M Brown (Finance director) T Fairhead (Non-executive director)

Date and place of incorporation: 30 August 1983 Pretoria, South Africa

Registered address:

15th Floor 2 Long Street Cape Town, 8001 (PO Box 4392, Cape Town, 8000)

Legal Adviser to Fairheads International

Edward Nathan Sonnenbergs inc. 150 West Street Sandown Sandton, 2196 (PO Box 783347, Sandton, 2146)

			Page
Corporate Information and Advisers			Inside front cover
Action required by Vunani shareholders			3
Salient dates and times			4
Salient features			5
Definitions			6
Circular to shareholders
1.	Purpose of and reason for the circular		9
2.	The transaction		9
	2.1	Sale of Shares Agreement	9
		2.1.1 Goodwill	10
	2.2	Description of the business conducted by Fairheads International	11
	2.3	Purchase Consideration	11
	2.4	Pre-Effective Date Dividend	12
	2.5	Funding	12
		2.5.1 MTL	12
		2.5.2 Deferred MTL	13
		2.5.3 Covenants	13
		2.5.4 Equity Cure	13
		2.5.5 Maximum exposure to Vunani	14
	2.6	The Sellers	14
		2.6.1 The Sellers and amounts payable to each Seller	14
		2.6.2 Guarantees, restrictions and income tax considerations	14
	2.7	Rationale for the Transaction	15
	2.8	Effective Date	15
	2.9	Conditions Precedent	15
3.	Effect of the transaction on Vunani		16
	3.1	Overview	16
	3.2	_Pro forma_financial effects of the Transaction	16
	3.3	Historical financial information of the Fairheads Group	16
4.	Financial information relating to Vunani		17
	4.1	Responsibility	17
	4.2	Adequacy of capital	17
	4.3	Material changes	17
	4.4	Material borrowings	18

				Page
5.	Information relating to Vunani			19
	5.1	Nature of business		19
	5.2	History		19
	5.3	Directors’ opinion relating to prospects		19
	5.4	Major shareholders		20
	5.5	Material contracts		20
		5.5.1 Vunani Group		20
		5.5.2 Fairheads Group		20
		5.5.3 Other information relating to material contracts		20
	5.6	Litigation		21
6.	Information relating to the directors			21
	6.1	Details		21
	6.2	Remuneration		21
	6.3	Interests in Vunani’s shares		22
	6.4	Interests in transactions		22
	6.5	Service contracts		23
7.	General			23
	7.1	Expenses		23
	7.2	Consents		23
	7.3	Directors’ responsibility		23
8.	Opinion and recommendation			23
9.	General meeting and voting rights			24
	9.1	General meeting		24
	9.2	Voting rights		24
	9.3	Irrevocable undertaking		24
10.	Documents available for inspection			24
Appendix 1: _Pro forma_consolidated financial information of Vunani before and after the Transaction				25
Appendix 2: Independent reporting accountants’ reasonable assurance report on the_pro forma_
		consolidated financial information of Vunani		30
Appendix 3: Historical financial information of the Fairheads Group for the years ended
		28 February 2013 and 28 February 2014		32
		Annexure A		51
		Annexure B		52
Appendix 4: Historical financial information of the Fairheads Group for the six months
		ended 31 August 2014		53
Appendix 5: Independent reporting accountants’ report on the historical financial information
		of the Fairheads Group for the year ended 28 February 2014 and the six months
		ended 31 August 2014		58
Notice of general meeting				60
Form of proxy(for completion by certificated and own-name dematerialised shareholders)			Attached

ACTION REQUIRED BY VUNANI SHAREHOLDERS

If you are in any doubt as to what action to take in regard to this circular, please consult your CSDP, broker, banker, accountant, attorney or other professional adviser immediately.

This circular contains information relating to the Transaction. You should read this circular carefully and decide how you wish to vote on the ordinary resolutions to be proposed at the general meeting.

The general meeting, convened in terms of the notice incorporated in this circular, will be held at Vunani House, Vunani Office Park, 151 Katherine Street, Sandown, Sandton on Thursday, 30 April 2015 at 08:00.

ACTIONS REQUIRED BY CERTIFICATED SHAREHOLDERS AND OWN-NAME DEMATERIALISED

SHAREHOLDERS

If you are a certificated shareholder or an own-name dematerialised shareholder and are unable to attend the general meeting but wish to be represented thereat, you are requested to complete and return the form of proxy attached hereto in respect of the general meeting, in accordance with the instructions therein, and lodge it with, or post it to, so as to reach the transfer secretaries by no later than the Relevant Time. If you are a certificated shareholder or a dematerialised shareholder holding as an own-name shareholder and are unable to attend the general meeting but wish to be represented thereat, and you do not complete and return the form of proxy in respect of the general meeting on the basis of the previous provisions of this paragraph prior to the Relevant Time, you will nevertheless, at any time prior to the commencement of voting on the ordinary resolutions at the general meeting, be entitled to lodge the form of proxy in respect of the general meeting in accordance with the instructions therein, with the chairperson of the general meeting.

ACTIONS REQUIRED BY DEMATERIALISED SHAREHOLDERS OTHER THAN THOSE WITH OWN-NAME REGISTRATION

The CSDP or broker of dematerialised shareholders, other than those with own-name registration, should contact such dematerialised shareholders to ascertain how they wish their votes to be cast at the general meeting and thereafter cast their votes in accordance with those instructions. If such dematerialised shareholders have not been contacted, it is recommended that they contact their CSDP or broker to advise them as to how they wish their vote to be cast.

If you are a dematerialised shareholder other than with own-name registration and wish to attend the general meeting, you should timeously inform your CSDP or broker of your intention to attend and vote at the general meeting or to be represented by proxy thereat in order for your CSDP or broker to issue you with the necessary letter of representation to do so, or you should provide your CSDP or broker timeously with your voting instructions should you not wish to attend the general meeting in person, in order for your nominee to vote in accordance with your instructions at the general meeting.

Vunani does not accept any responsibility and will not be held liable for any failure on the part of the broker or CSDP of a dematerialised shareholder to notify such dematerialised shareholder of the details of this circular.

ELECTRONIC PARTICIPATION

In terms of Vunani’s MOI, the directors have elected not to provide for electronic participation in respect of the general meeting.

IDENTIFICATION OF MEETING PARTICIPANTS

In terms of section 63(1) of the Act, before any person may attend or participate in a shareholders’ meeting, that person must present reasonable satisfactory identification and the person presiding at the meeting must be reasonably satisfied that the right of that person to participate and vote, either as a shareholder, or as a proxy of a shareholder, has been reasonably verified.

SALIENT DATES AND TIMES

	2015
Record date for the distribution of this circular	Friday, 20 March
Circular posted on	Thursday, 26 March
Last day to trade in order to be eligible to participate and vote	at
the general meeting	Friday, 17 April
Record Date (for voting purposes)	Friday, 24 April
Last day to lodge forms of proxy for the general meeting	by 08:00 on Tuesday, 28 April 2014 to the
	Transfer Secretaries or they may be handed
	to the Chairman of the meeting at any time
	prior to the commencement of voting on the
	resolutions tabled at the general meeting
General meeting to be held at 08:00 on	Thursday, 30 April
Results of the general meeting released on SENS on or about	Thursday, 30 April

Notes:

The above dates and times are subject to amendment and any amendment made will be released on SENS.
All times given are South African local times.
Shareholders are reminded that shares in companies listed on the JSE can no longer be bought or sold on that Exchange unless they have been dematerialised onto the Strate system. It is therefore suggested that certificated shareholders of Vunani in the Register should consider dematerialising their Vunani shares and replacing them with electronic records of ownership. In this regard, Vunani shareholders may contact either their own broker or a preferred CSDP, details of which are available from Strate at [email protected] or telephone +27 11 759 5300 or fax +27 11 759 5505.

SALIENT FEATURES

THE TRANSACTION

Background information

In terms of the Sale of Shares Agreement, Mandlalux, a 70% owned subsidiary of Vunani Capital will acquire 100% of the issued share capital of Fairheads International for a total consideration of R210 million. After the implementation of the Sale of Shares Agreement, the remaining 30% of Mandlalux shall be held by Key Management.

Rationale

FBS is a provider of administration services to beneficiary funds and umbrella trusts for retirement funds.

The acquisition of Fairheads International therefore represents an opportunity for Vunani to enter a new market and allows Vunani to grow and diversify its existing service offering within the financial services sector.

Although Fairheads International operates in an industry where Vunani currently has no exposure, Vunani will be able to add value and assist in the growth of Fairheads International via Vunani’s current relationships, empowerment status and client base all of which are anticipated to strengthen Fairheads International’s position in the market and allow it to penetrate into new funds.

Fairheads International’s revenue is annuity in nature and represents an excellent acquisition opportunity for Vunani and its shareholders. It is a leader in its industry and with management remaining significant shareholders, continuity is ensured at Fairheads International post the Transaction.

Irrevocable undertaking

VG, which has a 66.54% shareholding in Vunani, has provided an irrevocable undertaking to vote in favour of the Transaction.

JSE transaction categorisation

The Transaction is categorised as a Category 1 acquisition in terms of the Listings Requirements and is accordingly subject to shareholders’ approval.

DIRECTORS’ RESPONSIBILITY FOR FINANCIAL INFORMATION

The directors are responsible for the financial information set out in this circular.

FINANCIAL EFFECTS

The pro forma financial effects of the Transaction are set out in paragraph 3.2 and Appendix 1 of this circular.

GENERAL MEETING

A general meeting of Vunani shareholders will be held at Vunani House, Vunani Office Park, 151 Katherine Street, Sandown on Thursday, 30 April 2015 at 08:00 for the purpose of considering and, if deemed fit, approving the ordinary resolutions to effect the Transaction, with or without amendment.

COPIES OF THIS CIRCULAR

Copies of this circular, in English, may be obtained during business hours between Thursday, 26 March 2015 and Thursday, 30 April 2015 at the addresses set out in the “Corporate Information and Advisers” section of this circular from:

Vunani;
the Designated Adviser;
the Corporate Adviser; and
the transfer secretaries.

In addition, this circular is available in electronic form Vunani’s website (www.vunanilimited.co.za).

DATE OF INFORMATION PROVIDED

Unless the context clearly indicates otherwise, all information provided in this circular is provided at the Last Practicable Date as defined.

DEFINITIONS

In this circular, unless otherwise stated or the context otherwise indicates, the words in the first column shall have the meanings stated opposite them in the second column and words in the singular shall include the plural and vice versa. Words importing natural persons shall include corporations and associations of persons and an expression denoting any gender shall include the other genders.

“Act”	the Companies Act, 2008 (Act 71 of 2008), as amended, and its Regulations;
“AltX”	Alternative Exchange of the JSE;
“Annual Expenditure”	the expenditure of FBS, as set out in the audited financial statements of FBS for the
	year ended 28 February 2015;
“AUA”	the value of assets (including cash and cash equivalents) under administration by
	members of the Fairheads Group at the relevant date, as at the close of business on
	the day prior to the Effective Date and as at the close of business on the day prior to
	the second anniversary of the Effective Date, as well as the Quarterly AUA on which
	the auditors of the Fairheads Group will provide an assurance report;
“Average AUA”	the sum of the Quarterly AUA for the 8 quarters commencing on the Effective Date
	and ending on the last Business Day immediately prior to the second anniversary of
	the Effective Date, divided by 8;
“broker”	any person registered as a “broking member (equities)” in terms of the Rules of the
	JSE made in accordance with the provisions of the FMA;
“Business Day”	any day other than a Saturday, Sunday or official public holiday in South Africa;
“Cash Consideration”	the First Cash Payment, the Second Cash Payment and the Milestone Payment;
“certificated shareholders”	Vunani shareholders who hold certificated shares;
“certificated shares”	shares represented by a paper share certificate or other physical document of title,
	which shares have not been surrendered for dematerialisation in terms of the Strate
	system and which may no longer be traded on the JSE;
“circular”	this circular, dated 26 March 2015, including the notice of general meeting, the form
	of proxy and the appendices;
“Competition Act”	the Competition Act (No 89 of 1998), as amended;
“Competition Authorities”	the commission established pursuant to Chapter 4, Part A of the Competition Act and/
	or the tribunal established pursuant to Chapter 4, Part B of the Competition Act or the
	appeal court established pursuant to Chapter 4, Part C of the Competition Act, as the
	case may be;
“Conditions Precedent”	the conditions precedent to the Sale of Shares Agreement, including those which are
	detailed in paragraph 2.9;
“Consideration Shares”	ordinary shares of the Purchaser to be issued and allotted to the Group 1 Beneficiaries
	and the Group 2 Beneficiaries as the Share Consideration, each of which, once
	allotted, shall be credited as having been fully paid for by the allottee in question as
	set out in paragraph 2.3.4;
“CSDP”	Central Securities Depository Participant as defined in the FMA appointed by an
	individual shareholder for the purposes of, and in regard to the dematerialisation of
	documents of title for the purposes of incorporation into Strate;
“dematerialisation”	the process by which certificated shares are converted to an electronic form as
	uncertificated shares and recorded in the sub-register of shareholders maintained by
	a CSDP;
“dematerialised shareholders”	holders of Vunani dematerialised shares;
“dematerialised shares”	shares which have been incorporated into Strate and which are no longer evidenced
	by physical documents of title, but the evidence of ownership of which is determined
	electronically and recorded in the sub-register maintained by a CSDP;
“directors” or “board”	the board of directors of Vunani, whose names are set out in the “Corporate Information
	and Advisers” section of this circular;
“Effective Date”	the effective date of the Transaction will be the first Business Day of the calendar
	month immediately following the calendar month during which the fulfilment of the last
	of the Conditions Precedent occurs;
“Existing AUA”	the AUA of the Fairheads Group as at the close of business on the day prior to the
	Effective Date;
“Fairheads Group”	collectively, Fairheads International, Fairheads Services and FBS;

“Fairheads International” or “FIH”	Fairheads International Holdings (SA) Proprietary Limited (Registration number
	1983/009226/07), a private company duly registered and incorporated with limited
	liability in accordance with the laws of South Africa;
“Fairheads Services”	Fairheads Corporate Services Proprietary Limited (Registration number
	1999/025344/07), a private company duly registered and incorporated with limited
	liability in accordance with the laws of South Africa and a wholly subsidiary of
	Fairheads International;
“FBS”	Fairheads Benefit Services Proprietary Limited (Registration number 1992/004041/07),
	a private company duly registered and incorporated with limited liability in accordance
	with the laws of South Africa and a wholly owned subsidiary of Fairheads International;
“First Cash Payment”	a cash payment of R141 million payable to the Sellers on the Effective Date as set out
	in paragraph 2.3.1;
“FMA”	the Financial Markets Act (Act No. 19 of 2012), as amended or replaced from time
	to time;
“Funding Agreements”	the binding agreements entered into with Nedbank Limited (“Nedbank”) to part-
	finance the Cash Consideration as further detailed in paragraph 2.5;
“general meeting”	the general meeting of Vunani shareholders convened, in terms of the notice included
	in this circular, to be held at Vunani House, Vunani Office Park, 151 Katherine Street,
	Sandown on Thursday, 30 April 2015 at 08:00 for the purpose of considering and, if
	deemed fit, passing the ordinary resolutions, with or without amendment;
“Group 1 Beneficiary”	either of R Krepelka (CEO) and M Brown (Financial Director) or both of them collectively
	as the context may indicate;
“Group 2 Beneficiary”	G Gould (Business Development Director), M Vilabril (COO) and/or T Clark (Senior
	Executive) or all of them collectively as the context may indicate;
“Group 3 Beneficiary”	any of the shareholders of Fairheads International set out in paragraph 2.6.1 as Group
	3 Beneficiaries or all of them collectively as the context may indicate;
“IFRS”	International Financial Reporting Standards;
“ independent reporting	KPMG Inc. (Registration number 1999/021543/21), Registered Auditors; Chartered
accountants”	Accountants (SA);
“JSE”	JSE Limited (Registration number 2005/022939/06), a public company duly
	incorporated and registered with limited liability under the company laws of South
	Africa and licensed as an exchange under the FMA;
“Key Management”	the Group 1 Beneficiaries and the Group 2 Beneficiaries (i.e. R Krepelka, M Brown,
	G Gould, M Vilabril and T Clark);
“Last Practicable Date”	Thursday, 19 March 2015, the last practicable date prior to the finalisation of this
	circular;
“Listings Requirements”	the Listings Requirements of the JSE, as amended from time to time;
“Mandlalux MOI”	the amended memorandum of incorporation of Mandlalux;
“ Mandlalux Shareholders	the written shareholders agreement to be concluded between Mandlamart, the
Agreement”	Group 1 Beneficiaries, the Group 2 Beneficiaries and Mandlalux;
“Milestone Payment”	a cash payment of R24 million payable to the Group 1 Beneficiaries and the Group 2
	Beneficiaries in the proportion set out in the Sale of Shares Agreement, subject to the
	conditions as further detailed in paragraph 2.3.3;
“ordinary resolutions”	the ordinary resolutions set out in the notice of general meeting which forms part of
	this circular;
“own name registration”	dematerialised shareholders who have registered their shares in their own name with
	a CSDP in terms of the FMA;
“Pre-Effective Date Dividend”	a dividend to be declared by Fairheads International to the Sellers, prior to the
	Effective Date and further detailed in paragraph 2.4;
“Purchase Consideration”	a total amount of R210 million to be paid in respect of the Transaction, as further set
	out in paragraph 2.3;
“Purchaser” or “Mandlalux”	Mandlalux Proprietary Limited (Registration number 2014/264422/07), a private
	company duly registered and incorporated with limited liability in accordance with the
	laws of South Africa and a subsidiary of Vunani Capital;

“Quarterly AUA” in respect of each three calendar month period, commencing on the Effective Date, the AUA of the members of the Fairheads Group, as determined in respect of that quarter, determined as the AUA on the last Business Day of that quarter, but not an average over that three month period constituting that quarter. The final quarter shall end on the last Business Day of the calendar month immediately prior to the second anniversary of the Effective Date;

“Record Date”	the record date established by the board in terms of section 59 of the Act, by which a
	Vunani shareholder is required to be reflected as such in the Register in order to be
	able to attend, participate and vote at the general meeting;
“Register”	the register of certificated Vunani shareholders maintained by Vunani’s transfer
	secretaries and the sub-register of dematerialised shareholders maintained by the
	relevant CSDPs and Vunani’s register of disclosures in so far as it includes the names
	of persons who hold a beneficial interest in any securities and as such may vote in a
	matter at a meeting of shareholders, as permitted in terms of section 56(9) of the
	Companies Act;
“Regulations”	the regulations in terms of the Act;
“Relevant Time”	48 hours before the time of commencement of the general meeting;
“Sale of Shares Agreement”	the Sale of Shares Agreement, dated 10 March 2015, entered into between the Sellers,
	the Purchaser, Fairheads International and Vunani Capital;
“Second Cash Payment”	a cash payment of R30 million payable to the Sellers on the second anniversary of the
	Effective Date if the Average AUA is equal to or exceeds the Existing AUA, provided
	that if the Average AUA is less than the Existing AUA, the Second Cash Payment shall
	be subject to an adjustment as further detailed in paragraph 2.3.2;
“Sellers”	the holders of the 650 000 ordinary shares in Fairheads International, as further
	detailed in paragraph 2.6.1;
“Sellers Funding Agreements”	the agreements to be entered into between Mandlalux, the Sellers, FIH and FBS which
	will govern how the parties will ensure payment of the Second Cash Payment and the
	Milestone Payment in the event the Deferred MTL (as defined in paragraph 2.5)
	cannot be secured from Nedbank;
“SENS”	Stock Exchange News Service of the JSE;
“Share Consideration”	the portion of the Purchase Consideration comprising the Consideration Shares as set
	out in paragraph 2.3.4;
“Sold Shares”	the 650 000 ordinary shares of Fairheads International held by the Sellers immediately
	prior to the implementation of the Sale of Shares Agreement;
“South Africa”	the Republic of South Africa;
“SPV” or “Mandlamart”	Mandlamart Proprietary Limited (Registration number 2014/264429/07), a private
	company duly registered and incorporated with limited liability in accordance with the
	laws of South Africa and the special purpose vehicle established and wholly owned
	by Vunani Capital to hold 70% of the ordinary shares in the Purchaser;
“Strate”	Strate Proprietary Limited (Registration number 1998/022242/06), a private company
	duly registered and incorporated with limited liability in accordance with the laws of
	South Africa and licensed as a CSDP in terms of the FMA;
“Transaction”	the proposed acquisition by Mandlalux of 100% of the issued share capital of
	Fairheads International, which is subject to approval by Vunani’s shareholders. Vunani
	Capital shall hold 70% of Mandlalux, via the SPV, and Key Management shall hold the
	remaining 30%;
“Transaction Expenses”	the aggregate amount (as at the close of business on the day immediately prior to the
	Effective Date) due and payable by Fairheads International and/or the Sellers as at
	the Effective Date for all invoiced but unpaid fees, costs and expenses incurred in
	connection with the Sale of Shares Agreement;
“transfer secretaries”	Computershare Investor Services Proprietary Limited (Registration number
	2004/003647/07), a private company duly registered and incorporated with limited
	liability in accordance with the laws of South Africa, Ground Floor, 70 Marshall Street,
	Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107);
“VG”	Vunani Group Proprietary Limited (Registration number 2004/006502/07), a private
	company duly registered and incorporated with limited liability in accordance with the
	laws of South Africa and the majority shareholder (66.54%) of Vunani;
“Vunani”	Vunani Limited (Registration number 1997/020641/06), a public company duly
	registered and incorporated with limited liability in accordance with the laws of South
	Africa and whose shares are listed on AltX;
“Vunani Capital”	Vunani Capital Proprietary Limited (Registration number 1998/01469/07), a private
	company duly registered and incorporated with limited liability in accordance with the
	laws of South Africa and a wholly-owned subsidiary of Vunani;
“Vunani Group”	collectively, Vunani, its subsidiaries and any other company which is controlled or
	jointly controlled by it;
“Vunani shareholder”	a holder of shares registered in the Register; and
“Working Capital”	an amount equal to 8/52 of the Annual Expenditure.

==> picture [213 x 58] intentionally omitted <==

(Incorporated in the Republic of South Africa) (Registration number 1997/020641/06) JSE code: VUN ISIN: ZAE000163382

CIRCULAR TO SHAREHOLDERS

1. PURPOSE OF AND REASON FOR THE CIRCULAR

In a SENS announcement, dated 12 March 2015, Vunani shareholders were advised that the Sale of Shares Agreement had been entered into in relation to the Transaction. The Transaction is categorised as a category 1 acquisition in terms of the Listings Requirements and accordingly requires approval by Vunani shareholders.

The purpose of this circular is, inter alia , to furnish Vunani shareholders with all the relevant information relating to the Transaction in accordance with the Listings Requirements and to convene a general meeting of Vunani shareholders in order for them to consider and, if deemed fit, approve, with or without amendment, the ordinary resolutions to effect the Transaction, in terms of the notice of general meeting attached to and forming part of this circular.

2. THE TRANSACTION

2.1 Sale of Shares Agreement

In terms of the Sale of Shares Agreement and as an indivisible transaction:

Mandlalux will purchase 100% of the issued share capital, being the Sold Shares, of Fairheads International for the Purchase Consideration of R210 million; and
Key Management will be issued the Consideration Shares being 30% of the issued share capital of Mandlalux with such Consideration Shares forming part of the Purchase Consideration as detailed in paragraph 2.3.4.

Vunani, via Vunani Capital, established Mandlamart which will hold 70% of the issued share capital of the Purchaser being Mandlalux. The structure of the Transaction is shown below.

==> picture [323 x 260] intentionally omitted <==

----- Start of picture text -----

VUNANI LIMITED
100%
Vunani Capital
100%
Mandlamart Key Management
70% 30%
Funding Ma ndlalux
100%
FIH
100%
FBS
----- End of picture text -----

The structure above includes two special purpose vehicles being Mandlalux and Mandlamart. Mandalux was introduced to allow for the introduction of FBS management into the structure.

Mandlamart was introduced to allow for the future introduction of a strategic investor into the structure without diluting the FBS management. There is no intention at this stage to introduce such strategic investor.

The Sellers will sell the Sold Shares to the Purchaser with effect from the Effective Date:

cum any dividend, distribution and right declared, made or created on or after the Effective Date; but
ex the Pre-Effective Date Dividend including the Interim Dividend; and
free from all encumbrances.

The Sale of Shares Agreement, which is available for inspection as detailed in paragraph 10, contains legal warranties and indemnities which are considered normal in respect of a transaction of this nature.

2.1.1 Goodwill

The acquisition of FIH by Mandlalux is a business combination in Mandlalux.

Goodwill on this business combination in Mandlalux results from the total consideration paid less the net assets acquired (at fair value).

In calculating the goodwill, intangible assets have been recognised in accordance with IFRS 3 Business Combinations . The fair value of these intangible assets is recognised on the business combination and will be amortised over the assets’ useful lives.

Goodwill arises as Fairheads International is not an asset intensive business. It generates large profits off a small asset base, which is primarily by leveraging off economies of scale and technology.

The value of the underlying skills, experience and knowledge of the workforce cannot be recognised as an intangible asset. These skills are a key driver in the business and are instrumental in producing future economic benefits for Fairheads International. Furthermore, historically, large proportions of the profits generated by Fairheads International were distributed either as dividends or incentives to staff members resulting in a low net asset value.

Goodwill arising on the preliminary purchase price allocation in Mandlalux amounts to R112.7 million. Separately identifiable intangible assets amounting to R71.3 million, net of deferred tax of R20.0 million, will be recognised in Mandlalux and amortised over their useful lives.

A control assessment was performed for Vunani’s acquisition of Mandlalux (via Mandlamart) in terms of IFRS 10 Consolidated Financial Statements. An investor would consolidate an investee if it controls the investee. Control exists where an investor:

has power over the relevant activities of the investee;
is exposed to or has the rights to variable returns from its involvement with the investee; and
has the ability to affect those returns through its power over the investee.

All three of these elements are required to be present for an investee to be consolidated.

The memorandum of incorporation and the Mandlalux Shareholders Agreement include provisions that prevent Vunani exercising control over the appointment of key management personnel and making decisions relating to the strategy of the business.

Vunani does have the ability to exercise significant influence over Mandlalux (through Mandlamart) and therefore Vunani will equity account its effective investment into Mandlalux.

2.2 Description of the business conducted by Fairheads International

Fairheads International is an investment holding company. It currently holds two wholly owned subsidiaries, being FBS and Fairheads Services. Fairheads Services is dormant with all of revenue and profit generated from FBS.

FBS is a provider of administration services to beneficiary funds and umbrella trusts for retirement funds and a registered pension funds administrator in terms of section 13B of the Pension Funds Act, 24 of 1956.

Beneficiary funds are typically funds established in order to retain and manage money due as a death benefit under a retirement fund product. Administration services involve managing these monetary funds on behalf of the dependants of deceased retirement fund members.

FBS’ services are provided to some 107 000 dependants with assets under administration of R7.8 billion. The services include the following:

The establishment of a sub-account for each dependant.
The payment of a regular income.
The assessment, processing and payment of requests for financial assistance towards the educational and other needs of dependants (some 75% of payments are education related).
Administering any other general service requests and updating of contact information.
The termination of the sub-account upon the dependant reaching the majority age (or at such later date as instructed by the member).

FBS employs over 270 staff, with the majority working from its Cape Town office. It has consulting and business development offices in Gauteng and Durban.

2.3 Purchase Consideration

The Purchase Consideration in respect of the Sold Shares is as follows:

2.3.1 The First Cash Payment – an amount of R141 million payable on the Effective Date to the Sellers in the proportions set out in the Sale of Shares Agreement.
2.3.2 The Second Cash Payment – a cash payment of a maximum amount of R30 million.

The amount of the Second Cash Payment was conditionally determined on the assumption that the Average AUA as at the close of business on the day prior to the second anniversary of the Effective Date will be equal to or more than the Existing AUA, in which case the Second Cash Payment shall be an amount of R30 million.

However, if the Average AUA as at the close of business on the day prior to the second anniversary of the Effective Date is less than the Existing AUA, then the Second Cash Payment amount of R30 million shall be reduced to an amount (“Adjusted Second Cash Payment Amount”) determined in accordance with the following formula:

A = B multiplied by (C/D)

Where

A = Adjusted Second Cash Payment Amount;

B = R30 million;

C = the Average AUA;

D = the Existing AUA.

2.3.3 The Milestone Payment – a cash amount of R24 million payable to Key Management, subject to those persons comprising Key Management still being shareholders of Mandlalux on the second anniversary of the Effective Date.
2.3.4 The Consideration Shares – constituting 30% of the issued shares of the Purchaser and valued at R15 million to be allotted and issued, on the Effective Date, to Key Management in the proportion set out in the Sale of Shares Agreement and which, once allotted, shall be credited as having been fully paid by the allottee in question.

The Purchase Consideration will be financed as follows:
Mandlalux raising senior debt of	R100 million
Subscription of 70% of the ordinary shares of Mandlalux by Mandlamart*	R35 million
Loan from Mandlamart to Mandlalux**	R6 million
Subtotal (First Cash Payment)	R141 million
The Second Cash Payment will be funded either through senior debt funding	R54 million
or the conversion of that payment into a vendor loan to be settled out of
available cash in Mandlalux
Subscription of 30% of the ordinary shares of Mandlalux by Key Management	R15 million
Total	R210 million

* Cash injected by Vunani Capital into Mandlamart for subscription of shares in Mandlalux. This will be funded from available cash resources.

**Loan from Mandlamart to Mandlalux to assist in funding the First Cash Payment.

2.4 Pre-Effective Date Dividend

2.4.1 The Pre-Effective Date Dividend shall be declared and paid by Fairheads International to the Sellers, which Pre-Effective Date Dividend shall be in the amount calculated as follows:
2.4.1.1 the sum of R2.50 per Sold Share plus dividend withholding tax thereon (“Interim Dividend”); plus
2.4.1.2 an amount, which if paid to the Sellers on the last day of the calendar month immediately preceding the Effective Date, would, immediately following such payment and also taking into account the payment of the Interim Dividend and Transaction Expenses, result in Fairheads International’s consolidated assets exceeding its consolidated liabilities on the last day of the calendar month immediately preceding the Effective Date by an amount equal to the greater of the Working Capital and R15 million.
2.4.2 The Interim Dividend was declared during February 2015 and shall be payable by Fairheads International to the Sellers by no later than 31 March 2015.
2.4.3 The balance of the Pre-Effective Date Dividend referred to in paragraph 2.4.1.2 shall be declared as close as possible to, but before, the Effective Date and payable not less than 45 days after the Effective Date.

2.5 Funding

As mentioned in paragraph 2.3.4, a portion of the Cash Consideration shall be financed via Senior Debt.

In this regard, the Purchaser has entered into binding agreements with Nedbank to part-finance the Cash Consideration (“Funding Agreements”). In terms of the Funding Agreements, two facilities shall be made available to the Purchaser, namely a medium-term loan facility (“MTL”) and a conditional deferred medium-term loan facility (“Deferred MTL”).

The funds provided in terms of the MTL will only be made available to be drawn down once certain conditions precedent relating to the Funding Agreements have been fulfilled. It is envisioned that these conditions will be fulfilled prior to or on the Effective Date.

2.5.1 MTL

The MTL shall be for an amount of R101 140 000. The loan amount includes a raising fee of R1 140 000 including VAT.

The tenure of the MTL will be up to a maximum term of 60 months, repayable by monthly instalments of capital and interest, provided that the balance outstanding on the facility will be refinanced for a further maximum term of 60 months on the 2nd anniversary of the MTL.

The interest rate applicable to the MTL will be equivalent to the prime rate determined from time to time and charged by Nedbank.

If any agreement entered into between Nedbank and the Purchaser is breached, Nedbank will, in addition to any other rights it may have in law, be entitled to charge default interest on the full outstanding balance of the MTL at the applicable prevailing Nedbank default interest rate (“Default Interest”).

The MTL shall be subject to a cash sweep whereby 100% of cumulative free cash flow after debt service cover requirements, less an amount sufficient to cover regulatory cash holdings and working capital requirements, is to be applied to the early repayment of the capital outstanding until such time as this facility is refinanced.

An early termination fee of 3% plus VAT calculated on the outstanding capital will be applicable if the MTL is re-financed externally and/or there is a buy-out resulting in Nedbank’s loans being terminated early. Should there be early settlement on the capital from internal cash resources there would be no early termination fee.

2.5.2 Deferred MTL

The Deferred MTL shall be for an amount of R54 615 600. The loan amount includes a raising fee of R615 600 including VAT.

The Deferred MTL will be drawn on the 2nd anniversary of the MTL subject to a credit intervention at that time relating to compliance with stated conditions. The Deferred MTL shall be combined with the balance of the MTL and the combined facility will be up to a maximum term of 60 months, repayable by monthly instalments of capital and interest.

The indicative interest rate applicable to the Deferred MTL will be equivalent to 0,5% above the prime rate determined from time to time and charged by Nedbank. The final rate is to be determined at the time of drawdown and will be reflective of the business performance of the Purchaser and market conditions at that time.

If any agreement entered into between Nedbank and the Purchaser is breached, Nedbank will, in addition to any other rights it may have in law, be entitled to charge Default Interest on the full outstanding balance of the Deferred MTL.

50% of cumulative free cash flow after debt service cover requirements, less an amount sufficient to cover regulatory cash holdings and future working capital requirements, is to be applied to the early repayment of the capital outstanding under the Deferred MTL and the refinanced MTL, which are to be combined. These repayments are in addition to and do not replace the regular amortisation requirements.

2.5.3 Covenants

Both the MTL and the Deferred MTL are subject to the following covenants which must be adhered to at all times:

adhered to at all times:
	Feb	Feb	Feb	Feb	Feb
	2016	2017	2018	2019	2020
Cash to Debt service cover to be a
minimum of:
(a) Annual Cash to Debt service cover
– Breach	1.3	1.3	1.3	1.3	1.3
(b) Cumulative Cash to Debt service cover
– Distribution Lock up	Full	Full	2.0	2.0	2.0
Gearing – should not be more than:	2.0	1.3	1.8	1.2	1.0
Interest Coverage – minimum of:	3 times	3 times	3 times	3 times	3 times

2.5.4 Equity Cure

Vunani is required to provide an equity cure of up to R12 million in aggregate.

Should a monthly instalment in terms of the MTL or the Deferred MTL not be paid when due, this will constitute an event of default. At the sole discretion of Nedbank, such nonpayment may be cured by way of an injection of funds (the equity cure), as cash in the form of a shareholders loan, into a ceded call account of the Purchaser, to be utilised solely for purposes of repaying the monthly instalments. This shall apply to all failures by the Purchaser to make payment of monthly instalments when due provided however that the maximum amount to be injected as cash into the ceded account shall not exceed R12 000 000 in aggregate at any given time.

As the Equity Cure, if required to be injected by Vunani, is in the form of a subordinated shareholders loan, there will be no dilution of the Key Management’s shareholding in Mandlalux.

The equity cure is considered to be a financial guarantee contract that has been issued to Nedbank. The fair value of the financial guarantee contract on initial recognition is equivalent to the premium that Vunani would charge to Mandlalux to provide the equity cure, which is zero.

The fair value of the financial guarantee contract subsequent to initial measurement is the present value of the expected future cash outflows as a result of issuing the financial guarantee contract. The expected future cash outflows have been assessed and this has been valued at zero.

The Equity Cure therefore is not expected to impact either the statement of financial position or the statement of comprehensive income as included in the pro forma financial effects presented in Appendix 1.

2.5.5 Maximum exposure to Vunani

The maximum exposure Vunani has in respect of the Transaction is R53 million. This comprises the following:

This comprises the following:
Vunani’sportion of the First Cash Payment	R41 million
Cash portion	R35 million
Loan to the Purchaser	R6 million
EquityCure in terms of the FundingAgreements	R12 million
Total	R53 million

2.6 The Sellers

2.6.1 The Sellers and amounts payable to each Seller

The Sellers and amounts payable to each Seller are as follows:

llers *The Sellers and amounts payable to each Seller* The Sellers and amounts payable to each Seller are as	follows:
	Beneficiary	Amount
Seller	Group	Payable
R Krepelka	Group 1	R32 615 000
M Brown	Group 1	R27 383 600
G Gould	Group 2	R20 308 200
M Vilabril	Group 2	R18 616 400
T Clark	Group 2	R16 922 400
P King	Group 3	R20 770 200
R Cowie	Group 3	R11 907 000
T Fairhead	Group 3	R16 893 000
Trustees for the time being of the Mafuta Family Trust	Group 3	R22 154 400
Z Israel	Group 3	R82 800
N Overmeyer	Group 3	R165 600
A Ebing	Group 3	R6 922 800
A Links	Group 3	R5 538 600
D Hurford	Group 3	R1 413 000
O Moea	Group 3	R1 384 200
J Brown	Group 3	R2 768 400
T Vogler	Group 3	R4 154 400
Total		R210 000 000

None of the Sellers is considered to be a related party as defined in section 10 of the Listings Requirements.

2.6.2 Guarantees, restrictions and income tax considerations

No financial guarantees have been given by the Sellers pursuant to the book debts and/ or other assets. Other warranties which are normal for this type of transaction have been provided.

Key Management will be required to continue their shareholding in the Purchaser for two years following the Effective Date in order to receive their portion of the Milestone Payment. Key Management are restrained from competing with the Fairheads Group for a period of at least two years.

There is no liability for accrued taxation.

No promoter has been involved in the Transaction and no promoter’s fees have been paid in the three years preceding the Last Practicable Date.

None of the directors of Vunani have any interest in Fairheads International and none of the directors/shareholders of Fairheads International have any interest in Vunani.

The address for the beneficial shareholders of Fairheads International is care of that company’s business address, 15th Floor, 2 Long Street, Cape Town.

2.7 Rationale for the Transaction

FBS is a provider of administration services to beneficiary funds and umbrella trusts for retirement funds.

The acquisition of Fairheads International represents an opportunity for Vunani to enter a new market and allows Vunani to grow and diversify its existing service offering within the financial services sector.

2.8 Effective Date

The effective date of the Transaction will be the first Business Day of the calendar month immediately following the calendar month during which the fulfilment of the last of the Conditions Precedent occurs.

2.9 Conditions Precedent

The Transaction is subject, inter alia , to the following Conditions Precedent:

the requisite approval of Vunani shareholders in general meeting;
the Funding Agreements and the Sellers Funding Agreements are entered into in writing and become unconditional according to their terms (save for any condition contained therein which requires the Sale of Shares Agreement to become unconditional);
the shareholders of Mandlalux approving and adopting the Mandlalux MOI and the Mandlalux Shareholders Agreement;
the approval by the Competition Authorities in terms of the Competition Act; and
approval in writing for the implementation of the Sale of Shares Agreement from the Registrar of Pension Funds in accordance with Board Notice 24 of 2002 issued by the Financial Services Board under section 13B of the Pension Funds Act, 24 of 1956.

3. EFFECT OF THE TRANSACTION ON VUNANI

3.1 Overview

The net effect of the Transaction on Vunani will be the acquisition of 70% of the shares in Mandlalux.

3.2 Pro forma financial effects of the Transaction

The pro forma financial effects of the Transaction, for which the directors are responsible, are provided for illustrative purposes only to show the effect thereof on the basic earnings per share (“EPS”), diluted earnings per share (“DEPS”), headline loss per share (“HLPS”) and diluted headline loss per share (“DHLPS”) as if it had taken effect on 1 January 2014 and on net asset value per share (“NAVPS”) and net tangible asset value per share (“NTAVPS”) as if the Transaction had taken effect on 30 June 2014. Because of their nature, the pro forma financial effects may not give a fair presentation of the Vunani Group’s financial position subsequent to the Transaction. The pro forma financial effects have been compiled from the unaudited and unreviewed consolidated financial statements of Vunani for the six months ended 30 June 2014 and the reviewed consolidated financial statements of the Fairheads Group for the six months ended 31 August 2014 and are presented in a manner consistent with the format and accounting policies adopted by Vunani and have been adjusted as described in the notes set out in Appendix 1:

	Unaudited and
	unreviewed
	before the	*Pro forma*
	Transaction	after the
	30 June 2014	Transaction	% change
EPS and DEPS (cents)	68.5	64.1	(6.4)
HLPS AND DHLPS (cents)	(18.4)	(22.8)	(23.9)
NAVPS (cents)	238.9	237.3	(0.7)
NTAVPS (cents)	205.7	204.2	(0.7)
Number of ordinary shares in issue at
period end (’000)	108 415	108 415	–
Weighted average number of shares in
issue at period end (’000)	100 386	100 386	–

The pro forma consolidated statements of financial position and comprehensive income, before and after the Transaction, together with notes regarding the adjustments, are set out in Appendix 1.

The independent reporting accountants’ reasonable assurance report on the pro forma consolidated financial information is set out in Appendix 2.

3.3 Historical financial information of the Fairheads Group

The audited historical financial information of the Fairheads Group for the year ended 28 February 2014 and the reviewed financial information for the six months ended 31 August 2014 is set out in Appendices 3 and 4 and should be read in conjunction with the reporting accountants’ report thereon as set out in Appendix 5.

The independent reporting accountants have provided confirmation to the JSE that they have reviewed this circular and that the content hereof is not contradictory to any information contained in their report on the historical financial information of the Fairheads Group as set out in Appendix 5.

4. FINANCIAL INFORMATION RELATING TO VUNANI

4.1 Responsibility

The financial information set out in this circular is the responsibility of the directors.

4.2 Adequacy of capital

The directors are of the opinion that the working capital available to Vunani and the Vunani Group after the Transaction will be sufficient for the Group’s present requirements, i.e. for at least the next twelve months from the date of issue of this circular, and that:

Vunani and the Vunani Group will be able, in the ordinary course of business, to pay their debts;
assets of Vunani and the Vunani Group will be in excess of the liabilities of Vunani and the Vunani Group. For this purpose, the assets and liabilities should be recognised and measured in accordance with the accounting policies used in the latest audited consolidated annual financial statements;
share capital and reserves of Vunani and the Vunani Group will be adequate for ordinary business purposes; and
working capital of Vunani and the Vunani Group will be adequate for ordinary business purposes.

4.3 Material changes

Other than in respect of the Transaction, no material changes in the financial or trading position of the Vunani Group have taken place since the unaudited financial results for the six months ended 30 June 2014 were published.

Other than in respect of the Transaction, no material changes in the financial or trading position of the Fairheads Group has taken place since the reviewed financial results for the six months ended 31 August 2014 were prepared.

Name of
lenders
Amount
Debt
description
Secured/
unsecured
Repayment
Rate
Security
Conversion
Method
of
payment

Investec Bank
Limited
R6 971 000
Liability payable to Investec
in respect of the investment
income received from
Gidani Proprietary Limited
Unsecured
31 July 2017
N/A
N/A
N/A
Cash
Development
Bank of South
Africa
R26 616 000
Cumulative Debentures
Secured
Semi-annual repayment
Redeemable
30 September 2020
9.09%
Redefine Properties Limited
shares held in Anchor Park 42
Proprietary Limited
N/A
Cash
Force Holding
Limited
R9 000 000
Cumulative redeemable
preference shares in
Verbicept Proprietary Limited
Secured
No fixed repayment terms
0.00%
21 450 000 Workforce Holding
Limited Shares
Force Holding Limited has an
option to purchase the
Workforce Holdings Limited
shares at a discount of 10%
N/A
Cash

5. INFORMATION RELATING TO VUNANI

5.1 Nature of business

Vunani is a majority black-owned and managed diversified financial services group, which operates through the reportable segments as described below, which are the Vunani Group’s strategic business segments. These businesses offer different products and services, are managed separately, requiring different skill, technology and marketing strategies:

Asset management;
Investment banking;
Advisory services;
Investment holdings;
Securities broking;
Properties – investments and developments;
Properties – asset management; and
Group.

Other than in respect of the Transaction, the Vunani Group has not purchased/acquired any material assets during the three years preceding the Last Practicable Date.

5.2 History

Vunani was incorporated on 1 December 1997 under the name Azureco 9 Proprietary Limited. On 11 October 1999, it became a wholly owned subsidiary of African Harvest Limited and changed its name to African Harvest Capital Proprietary Limited (“African Harvest Capital”), specialising in BEE related investments, corporate advisory services, private equity transactions and trading activities.

Vunani was established following a management buyout on 21 October 2004 by the senior executives, Ethan Dube, Butana Khoza and Mark Anderson through Business Venture Investments 855 Proprietary Limited (which changed its name to VG on 16 February 2005), of the entire issued share capital of African Harvest Capital.

Following the management buyout, African Harvest Capital changed its name to Vunani Capital Holdings Proprietary Limited on 16 February 2005 and again to Vunani Limited on 5 November 2007 on which date it was converted to a public company.

There has been no change in the trading objects or the controlling shareholder since Vunani’s listing on the JSE.

5.3 Directors’ opinion relating to prospects

Vunani has embarked on a period of acquisitive and organic growth. This follows several years characterised by debt and corporate restructuring, which has now come to an end. Fairheads International is an extremely well managed business, is a leading supplier in its niche and fits the Vunani acquisition model perfectly. Management will remain significant shareholders post the Transaction and the BEE credentials brought by Vunani will assist in opening up new business opportunities.

Fairheads International is an established business with relationships with clients that have been built over many years and has an ability to generate strong cash flows. It is expected that Fairheads International will become a core business within the Vunani portfolio.

Vunani’s investment partnerships with Anglo American Thermal Coal Proprietary Limited, The Bidvest Group Limited which focuses on African investment opportunities, and its investment in Butsanani Energy Investment Holding Proprietary Limited, are beginning to show how much potential there is in such relationships.

Vunani’s operating businesses are well-placed for growth as they have the capacity to take on new business without incurring further direct expenses. With a renewed focus on BEE across a number of economic sectors, Vunani believes that it is well positioned to take advantage of this in both its investment activities and its operations. The prospects for the Vunani Group after the acquisition of Fairheads International are exciting and senior management are highly motivated to ensure that Vunani’s plans and strategies are implemented.

5.4 Major shareholders

Vunani’s major shareholder will not change as a result of the Transaction.

The controlling shareholder is VG. At the Last Practicable Date, the only shareholders, other than directors, who are beneficially interested, directly in 5% or more of Vunani shares and their holdings are set out below:

are set out below:
Shareholder	Number of shares	% holding
VG	76 308 138	66.54
Mion Holdings Proprietary Limited	6 250 000	5.45

5.5 Material contracts

5.5.1 Vunani Group

No other material contracts, other than the Sale of Shares Agreement dealt with in this circular and the Funding Agreements mentioned in paragraph 2.5, have been entered into (either verbally or in writing) by the Vunani Group during the two years preceding the Last Practicable Date:

The Sale of Shares Agreement is available for inspection as set out in paragraph 10.

5.5.2 Fairheads Group

No other material contracts, other than the Sale of Shares Agreement dealt with in this circular, have been entered into (either verbally or in writing) by the Fairheads Group during the two years preceding the Last Practicable Date.

The Fairheads Group has not concluded any material acquisitions or disposals during the two years preceding the Last Practicable Date.

5.5.3 Other information relating to material contracts

At the Last Practicable Date, no other contracts had been entered into by the Vunani Group or the Fairheads Group at any time, which contain an outstanding obligation or settlement that is material to either group.

At the Last Practicable Date, Vunani had not entered into any agreements relating to the payment of technical, administration or secretarial fees nor is it a party to any material restraint of trade payments, or any agreements in terms of the payment of royalties.

There are no restrictive funding arrangements in respect of either the Vunani Group or the Fairheads Group, other than the Funding Agreements. The restrictions in the Funding Agreements include the following and shall only apply whilst Mandlalux is indebted to Nedbank:

There may not be any change in the shareholding in Mandlalux, which in aggregate exceeds 5% without the prior written consent of Nedbank, which consent will not be unreasonably withheld;
Nedbank will hold first right of refusal to external funding, which will not be unreasonably withheld taking into account that Nedbank shall endeavour to provide such funding at commercially competitive terms, conditions and pricing;
Any distribution to Mandlalux shareholders other than salaries, bonuses and suretyships considered normal for duties performed and in line with historical payments, or payment of interest on shareholders’ loans, will only be allowed in any year if the cash-to-debtservice cover after such payment(s) and any cash sweep does not decrease below the stipulated distribution lockup covenant included in paragraph 2.5.3; and
Mandlalux may not, unless written permission is received from Nedbank whose approval will not be unreasonably withheld, other than in the ordinary course of business:
sell, cede, assign, delegate, transfer, make over or otherwise encumber or alienate any part of their assets to any financial institution whatsoever, or third party other than Nedbank;
increase its level of indebtedness other than in terms of the Funding Agreements;

− offer and/or issue any security of whatsoever nature to or in favour of any third parties, whether contingent or otherwise, until the facilities as detailed in the Funding Agreements have been repaid in full; and/or

withdraw loan funds, create debit loan accounts or reduce its share capital until Nedbank has been repaid in full or as governed in terms of approval of the Funding Agreements.

5.6 Litigation

There are no legal or arbitration proceedings, including proceedings that are pending or threatened, of which Vunani is aware, that may have or have had, in the 12-month period preceding the date of this circular, a material effect on the financial position of the Vunani Group or the Fairheads Group.

6. INFORMATION RELATING TO THE DIRECTORS

6.1 Details

The names of the directors are set out in the “Corporate Information and Advisers” section. The directors will not change as a result of the Transaction. Mr SN Mthethwa was appointed, as an independent non-executive, to the board with effect from 19 November 2014.

6.2 Remuneration

The remuneration and benefits paid to the directors by Vunani in respect of the year ended 31 December 2013 were as follows:

					Current
			Provident		year share-
			fund and		based
	Directors’	Basic	medical aid		payments
	fees	salary	contributions	Bonus	expense*	Total
Executive	R’000	R’000	R’000	R’000	R’000	R’000
EG Dube	–	3 085	296	2 517	381	6 279
NM Anderson	–	1 950	208	1 607	243	4 008
CE Chimombe-
Munyoro**	–	1 251	270	–	177	1 698
BM Khoza	–	2 005	273	1 696	256	4 230
A Judin	–	1 199	199	1 013	179	2 590
Independent non-
executive
WC Ross (Chairman)**	250	–	–	–	–	250
Dr XP Guma	50	–	–	–	–	50
JR Macey	130	–	–	–	–	130
NS Mazwi	100	–	–	–	–	100
G Nzalo	130	–	–	–	–	130
	660	9 490	1 246	6 833	1 236	19 465

This expense represents the IFRS 2 costs for the year for the Vunani Limited Share Incentive Scheme (“Share Incentive Scheme”). *Subsequently resigned.

There will be no variation in the remuneration receivable by any of the directors as a consequence of the Transaction.

There are no sums paid by way of expense allowances or any commissions, gain or profit-sharing arrangements payable to any of the directors of Vunani.

No management, consulting, technical or other fees, directly or indirectly, including payments to management companies have been paid to any of the Vunani directors.

On 29 June 2011 (prior to the consolidation of Vunani’s shares), the following directors accepted offers of shares at 6 cents per share (equivalent to R3 per share post consolidation) in terms of the Share Incentive Scheme:

Name of director	Number of shares	Total value
EG Dube	15 275 000	R916 500
BM Khoza	10 291 667	R617 500
NM Anderson	9 750 000	R585 000
A Judin	8 500 000	R510 000

On 28 December 2012, the following directors accepted offers of shares at 148 cents per share in terms of the Vunani Share Incentive Scheme:

Name of director	Number of shares	Total value
EG Dube	344 680	R510 126
NM Anderson	220 009	R325 613
BM Khoza	232 231	R343 702
A Judin	142 507	R210 910

In terms of the Share Incentive Scheme, once the shares are paid for, the directors will be entitled to the release thereof after the following expiry periods:

1 year after the acceptance date, in respect of 20% of the shares or part thereof;
2 years after the acceptance date, in respect of a further 25% of the shares or part thereof;
3 years after the acceptance date, in respect of a further 25% of the shares of part thereof; and
4 years after the acceptance date, in respect of a further 30% of the shares, or the balance thereof.

At the Last Practicable Date, there were no other rights given to any of the Vunani directors which have had the same or a similar effect in respect of providing a right to subscribe for shares.

6.3 Interests in Vunani’s shares

The holding company of Vunani is VG. The executive directors of Vunani hold the majority of the ordinary shares in VG through their family trusts as follows:

ordinary shares in VG through their family trusts as follows:
Shareholder	%
End Trust (Dube family trust)	31
Mabone Trust (Khoza family trust)	19
Nicam Trust(Anderson familytrust)	19

The directors’ shareholdings in Vunani will not change as a result of the Transaction. The beneficial, direct and indirect interests of the directors and their associates in Vunani’s shares at the Last Practicable Date are set out below:

Practicable Date are set out below:
	Direct	Indirect
Name	’000	’000	%
EG Dube and associates(1)	–	23 441	20
BM Khoza and associates(2)	–	14 620	13
NM Anderson and associates(3)	–	14 635	13
A Judin	86	–	*
	86	52 696	46

*Less than 1%

Interest held through the END Trust.
Interest held through the Mabone Trust.
Interest held through the Nicam Trust.

There have been no changes in the directors’ interest between the financial year ended 31 December 2013 and the Last Practicable Date.

6.4 Interests in transactions

The directors of the Vunani Group do not have any interest in any transaction, direct or indirect, which is material to the business of Vunani, which was effected during the current or immediately

preceding financial year or during an earlier financial year that remains in any respect outstanding or unperformed.

6.5 Service contracts

There are no service contracts in respect of the non-executive directors. The executive directors have service contracts with Vunani terminable upon one month’s written notice. The executive directors do not have fixed term contracts. The service contracts contain such terms as are usual for contracts of this nature and the terms relating to their remuneration.

7. GENERAL

7.1 Expenses

No preliminary expenses were incurred during the past three years by the Vunani Group or the Fairheads Group.

At the Last Practicable Date, the following estimated expenses of R1 659 034 were provided for by Vunani and Fairheads International in respect of the Transaction:

Vunani and Fairheads International in respect of the Transaction:
	Rand
Circular drafting fees – Independent Consultant	50 000
Designated Adviser fees – Grindrod Bank Limited	75 000
Independent reporting accountants’ fees – KPMG Inc.	345 000
Legal advice – Werksmans Inc	500 000
Printing costs – Ince Proprietary Limited	65 000
Competition Commission Merger Notification Fee	100 000
Legal advice – Edward Nathan Sonnenbergs inc.	500 000
Documentation inspection fees (JSE)	24 034
Total	1 659 034

7.2 Consents

Each of Vunani’s advisers namely Vunani Corporate Finance, KPMG Inc., Werksmans Inc., Computer Services Proprietary Limited and the Legal Adviser to Fairheads International have consented in writing to act in the capacities stated and to their names appearing in this circular and have undertaken not to withdraw such consents prior to the issue of this circular.

The independent reporting accountants have given and have not withdrawn their consent to the inclusion of their reports in the form and context in which they are included in this circular.

7.3 Directors’ responsibility

The directors of Vunani, whose names appear in the “Corporate Information and Advisers” section 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 that have been omitted which would make any statement false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that this circular contains all the information required by law and the Listings Requirements.

8. OPINION AND RECOMMENDATION

The board is of the opinion that the Transaction is in the best interests of Vunani shareholders and unanimously recommends that Vunani shareholders vote in favour of the ordinary resolutions at the general meeting.

Each of the directors who holds Vunani shares and is permitted to vote intends to vote his Vunani shares in favour of the ordinary resolutions as set out in the notice of general meeting.

9. GENERAL MEETING AND VOTING RIGHTS

9.1 General meeting

The general meeting is scheduled to be held at Vunani House, Vunani Office Park, 151 Katherine Street, Sandown, Sandton, at 08:00 on Thursday, 30 April 2015 for the purposes of considering and if deemed fit, passing with or without modification, some or all of the ordinary resolutions.

A notice convening the general meeting to approve the Transaction and a form of proxy, for use by registered certificated shareholders and dematerialised shareholders with own-name registration who are unable to attend the general meeting, form part of this circular.

A resolution relating to the ratification of the appointment of Mr SN Mthethwa as an independent non-executive director is also included in the notice of general meeting.

Shareholders are referred to the “Action required by Vunani shareholders” section of this circular, which contains information as to the action they need to take in regard to the general meeting.

9.2 Voting rights

In terms of the Listings Requirements, the votes of any shares held by the Share Incentive Scheme will not be taken into account in determining the results of voting on ordinary resolution number 1 tabled at the general meeting.

The relevant ordinary resolutions to be tabled at the general meeting relating to the Transaction are subject to a simple majority being cast in favour thereof, subject to the above.

9.3 Irrevocable undertaking

VG, which holds 76 308 138 (66.54%) shares in Vunani, has provided Vunani with an irrevocable undertaking to vote in favour of the Transaction at the general meeting.

10. DOCUMENTS AVAILABLE FOR INSPECTION

The following documents, or copies thereof, will be available for inspection during normal business hours at Vunani’s registered office, from the date of issue of this circular, up to and including the date of the general meeting:

the MOI of Vunani and its subsidiaries;
the Sale of Shares Agreement;
the audited financial statements of Vunani for the three financial years ended 31 December 2013 and the unaudited financial results for the six months ended 30 June 2014;
the audited financial statements of the Fairheads Group for the year ended 28 February 2014 and the reviewed financial results for the six months ended 31 August 2014;
the independent reporting accountants’ reasonable assurance report on the pro forma financial information relating to the Transaction, the text of which is included in this circular as Appendix 2;
the independent reporting accountants’ report on the historical financial information of the Fairheads Group, the text of which is included in this circular as Appendix 5;
directors’ service contracts;
a signed copy of the irrevocable undertaking;
the advisers’ letters of consent; and
a signed copy of this circular.

Signed at Sandton on 19 March 2015 on behalf of the directors in terms of a directors’ round robin resolution by:

A Judin

APPENDIX 1

PRO FORMA CONSOLIDATED FINANCIAL INFORMATION OF VUNANI BEFORE AND AFTER THE TRANSACTION

The pro forma consolidated statements of financial position and comprehensive income for the six months ended 30 June 2014 before and after the Transaction and presented in a manner consistent with the format and accounting policies adopted by Vunani, are set out overleaf. The pro forma consolidated financial information is the responsibility of the directors of Vunani and has been prepared for illustrative purposes only, in order to provide information about the financial position and results of Vunani assuming the Transaction had been implemented at 30 June 2014 for statement of financial position purposes and with effect from 1 January 2014 for statement of comprehensive income purposes. Due to its nature, the pro forma consolidated financial information may not give a fair reflection of the Vunani’s financial position subsequent to the Transaction.

Pro forma consolidated statement of financial position at 30 June 2014

	Unaudited
	and
	unreviewed
	before the	Investment		*Pro forma*
	Transaction	in Mandlalux	Transaction	after the	Net
	30 June 2014	by Vunani	costs	Transaction	movement
Figures in R’000s	Column 1	Column 2	Column 3	Column 4	Column 5
ASSETS
Non-current assets
Property, plant
and equipment	6 622			6 622	–
Goodwill	34 123			34 123	–
Investment and loans
to associates	14 126	41 000		55 126	41 000
Other investments	101 019			101 019	–
Deferred tax asset	41 868			41 868	–
Other non-current assets	28 331			28 331	–
Other intangible assets	1 839			1 839	–
Total non-current assets	227 928	41 000	–	268 928	41 000
Current assets
Other investments	9 611			9 611	–
Other current assets	3 399			3 399	–
Taxation prepaid	1 123			1 123	–
Trade and other receivables	46 347			46 347	–
Accounts receivable from
trading activities	317 037			317 037	–
Trading securities	1 407			1 407	–
Cash and cash equivalents	71 207	(41 000)	(1 659)	28 548	(42 659)
Total current assets	450 131	(41 000)	(1 659)	407 472	(42 659)
Total assets	678 059	–	(1 659)	676 400	(1 659)
EQUITY
Share capital and share
premium	599 479			599 479	–
Other reserves	10 650			10 650	–
Accumulated loss	(351 174)		(1 659)	(352 833)	(1 659)
Equity attributable to equity
holders of Vunani	258 955	–	(1 659)	257 296	(1 659)
Non-controlling interest	(1 505)		–	(1 505)	–
Total equity	257 450	–	(1 659)	255 791	(1 659)

	Unaudited
	and
	unreviewed
	before the	Investment		*Pro forma*
	Transaction	in Mandlalux	Transaction	after the	Net
	30 June 2014	by Vunani	costs	Transaction	movement
Figures in R’000s	Column 1	Column 2	Column 3	Column 4	Column 5
LIABILITIES
Non-current liabilities
Other financial liabilities	45 932			45 932	–
Deferred tax liabilities	6 763			6 763	–
Total non-current liabilities	52 695	–	–	52 695	–
Current liabilities
Other financial liabilities	3 201			3 201	–
Non-current liabilities held
for sale	–			–	–
Taxation payable	17 161			17 161	–
Trade and other payables	30 346			30 346	–
Trading securities	–			–	–
Accounts payable from
trading activities	317 201			317 201	–
Bank overdraft	5			5	–
Total current liabilities	367 914	–	–	367 914	–
Total liabilities	420 609	–	–	420 609	–
Total equity and liabilities	678 059	–	(1 659)	676 400	(1 659)
Shares in issue	108 415	108 415
NAV per share	238.9	237.3
TNAV per share	205.7	(204.2)

Notes:

All values presented in R’000.
The information presented assumed that the Transaction’s effective date is 30 June 2014.
The information presented in column 1 has been extracted from Vunani’s unaudited and unreviewed condensed consolidated results for the six months ended 30 June 2014.
The adjustments in column 2 represent Vunani’s investment in and loans to Mandlamart. Vunani Capital does not have the ability to control Mandlalux, but does have significant influence, and therefore the investment is treated as an associate as discussed in paragraph 2.1 of the circular. Vunani Capital will subscribe for 70% of the shares in Mandlalux for R35 000 and advance R6 000 in the form of a long-term loan as described in paragraph 2.3.4 of the circular.
Column 3 represents the effect of the Transaction Expenses payable.
The Transaction will have a continuing effect as illustrated above with the exception of the transaction costs.

Pro forma consolidated statement of comprehensive income for the six months ended 30 June 2014

	Unaudited	Accounting
	and	for the
	unreviewed	equity
	before the	accounted		*Pro forma*
	Transaction	earnings of	Transaction	after the
	30 June 2014	Mandlalux	costs	Transaction
Figures in R’000s	Column 1	Column 2	Column 3	Column 4
CONTINUING OPERATIONS
Revenue	53 977		–	53 977
Other income	2 128		–	2 128
Investment income	12 207		–	12 207
Interest received from investments	1 401		–	1 401
Profit on disposal of assets	(75)		–	(75)
Fair value adjustments and impairments	(13 165)		–	(13 165)
Operatingexpenses	(67 137)		(1 659)	(68 796)
Results from operating activities	(10 664)	–	(1 659)	(12 323)
Finance income	3 445			3 445
Finance costs	(1 323)		–	(1 323)
Net finance income	2 122	–	–	2 122
Results from operating activities after
net finance cost	(8 542)	–	(1 659)	(10 201)
Income from associates
(net of income tax)	114	(2 737)	–	(2 623)
Loss before income tax	(8 428)	(2 737)	(1 659)	(12 824)
Income tax expense	(707)		–	(707)
Loss from continuing operations	(9 135)	(2 737)	(1 659)	(13 531)
DISCONTINUED OPERATIONS
Profit from discontinued operations
(net of taxation)
Profit for theperiod	90 700	–	–	90 700
	81 565	(2 737)	(1 659)	77 169
OTHER COMPREHENSIVE INCOME
Exchange differences on translating
foreign operations	30			30
TOTAL COMPREHENSIVE INCOME
FOR THE PERIOD	81 595	(2 737)	(1 659)	77 199
Profit/(loss) for the period
attributable to:
Equity holders of Vunani Limited	68 764	(2 737)	(1 659)	64 368
Non-controlling interest	12 801	–	–	12 801
	81 565	(2 737)	(1 659)	77 169
Total comprehensive income
attributable to:
Equity holders of Vunani Limited	68 773	(2 737)	(1 659)	64 377
Non-controlling interest	12 822	–	–	12 822
	81 595	(2 737)	(1 659)	77 199

Figures in R’000s	Unaudited and unreviewed before the Transaction 30 June 2014 Column 1 Accounting for the Equity accounted earnings of Mandlalux Column 2 Transaction costs Column 3 *Pro forma* after the Transaction Column 4
Basic and diluted earnings per share (cents) Basic and diluted (loss)/earnings per share from continuing operations (cents) Basic and diluted (loss)/earnings per share from discontinued operations (cents) Basic and diluted headline (loss)/ earnings per share (cents) Basic and diluted headline (loss)/ earnings per share from continuing operations (cents) Basic and diluted headline (loss)/ earnings per share from discontinued operations (cents) Number of shares in issue at the end of the period (000s) Weighted average number of shares in issue at the end of the period (000s)	68.5 (2.7) (1.7) 64.1
	(8.7) (2.7) (1.7) (13.1) 77.2 – – 77.2
	(18.4) (2.7) (1.7) (22.8)
	(10.1) (2.7) (1.7) (14.5) (8.3) – – (8.3)
	108 415 108 415 100 386 100 386

Notes:

All values presented in R’000.
The information presented assumes that the Transaction’s effective date is 1 January 2014.
The information presented in column 1 has been extracted from Vunani’s unaudited and unreviewed condensed consolidated results for the six months ended 30 June 2014.
The adjustment reflected in column 2 represents Vunani’s portion of Mandlalux’s earnings after it has acquired the investment in Fairheads International. Vunani will equity account its investment as described in paragraph 2.1 of the circular. The value is arrived at as follows:

Fairheads International’s profit after tax for the six month period ended 31 August 2014 as per Appendix 3 Interest charge on the medium term loan facility provided by Nedbank after taking into account the tax effect of R1 266 Release of deemed interest to profit or loss on the present value of the Second Cash Payment after taking into account the tax effect of R344 Amortisation of intangible assets after taking into account the tax effect of R1 065 Purchase Consideration adjustment in terms of IFRS Mandlalux’s adjusted profit (loss) tax for the period Vunani Capital’s equity accounted earnings calculated at 70%	8 970 (3 256) (885) (2 739) (6 000)
	(3 910)
	(2 737)

Fairheads International’s profit after tax for the six month period ended 31 August 2014 as per Appendix 3
Interest charge on the medium term loan facility provided by Nedbank after taking into account the tax
effect of R1 266
Release of deemed interest to profit or loss on the present value of the Second Cash Payment after taking
into account the tax effect of R344
Amortisation of intangible assets after taking into account the tax effect of R1 065
Purchase Consideration adjustment in terms of IFRS
Mandlalux’s adjusted profit (loss) tax for the period
Vunani Capital’s equity accounted earnings calculated at 70%

8 970
(3 256)
(885)
(2 739)
(6 000)

(3 910)

(2 737)

Column 3 represents transaction costs of R1 659 incurred as a result of the Transaction.
The Transaction will have a continuing effect as illustrated above, with the exception of the transaction costs.

APPENDIX 2

INDEPENDENT REPORTING ACCOUNTANTS’ REASONABLE ASSURANCE REPORT ON THE PRO FORMA CONSOLIDATED FINANCIAL INFORMATION OF VUNANI

The Directors Vunani Limited PO Box 652419 Benmore 2010

19 March 2015

Dear Sirs

REPORT ON THE COMPILATION OF PRO FORMA FINANCIAL INFORMATION

The definitions commencing on page 6 of the circular apply mutatis mutandis to this report. We have completed our assurance engagement to report (“Report”) on the compilation of the pro forma net asset value, net tangible asset value, earnings, diluted earnings, headline earnings and diluted headline earnings per share and the statements of financial position and comprehensive income and the related notes, including a reconciliation showing all of the pro forma adjustments to the share capital, reserves and other equity items relating to Vunani Limited (“Vunani”) set out in paragraph 3.2 and Appendix 1 of the circular to be issued by Vunani on or about 26 March 2015, (collectively “ Pro forma Financial Information”).

The Pro forma Financial Information has been compiled by the directors of Vunani to illustrate the impact of the acquisition of Fairheads International Holdings (SA) Proprietary Limited (“Transaction”) on Vunani’s financial position.

As part of this process, Vunani’s statements of financial position and comprehensive income have been extracted by the directors of Vunani from its unaudited condensed interim financial results for the six months ended 30 June 2014 (“Published Financial Information”).

In addition, the directors of Vunani have calculated the net asset value, net tangible asset value, earnings, diluted earnings, headline earnings and diluted headline earnings per share as at 30 June 2014 based on financial information extracted from the Published Financial Information.

Directors’ responsibility for the Pro forma Financial Information

The directors of Vunani are responsible for compiling the Pro forma Financial Information on the basis of the applicable criteria as detailed in paragraphs 8.15 to 8.33 of the Listings Requirements of the JSE Limited and the SAICA Guide on Pro forma Financial Information, revised and issued in September 2012 (“Applicable Criteria”).

Reporting Accountants’ 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 of Vunani on the basis of the Applicable Criteria, 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 Prospectus, issued by the International Auditing and Assurance Standards Board. This standard requires that the reporting accountants comply with ethical requirements and plan and perform procedures to obtain reasonable assurance about whether the directors of Vunani have complied, in all material respects, with the Pro forma Financial Information on the basis of the Applicable Criteria.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any Published 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 Published Financial Information used in compiling the Pro forma Financial Information.

The purpose of Pro forma Financial Information included in the circular is solely to illustrate the impact of the Transaction on the unadjusted Published Financial Information as if the Transaction had been undertaken on 30 June 2014 for purposes of the net asset value and net tangible asset value per share and the statement of financial position, and at 1 January 2014 for purposes of the earnings, diluted earnings, headline earnings and diluted headlines earnings per share and the statement of comprehensive income. Accordingly, we do not provide any assurance that the actual outcome of the Transaction, subsequent to its implementation, will be as presented in the Pro forma Financial Information.

A reasonable assurance engagement to report on whether the Pro forma Financial Information has been properly compiled, in all material respects, on the basis of the Applicable Criteria involves performing procedures to assess whether the Applicable Criteria used by the directors of Vunani in the compilation of the Pro forma Financial Information provides a reasonable basis for presenting the significant effects directly attributable to the Transaction and to obtain sufficient appropriate evidence about whether:

The related pro forma adjustments give appropriate effect to the Applicable Criteria; and
The Pro forma Financial Information reflects the proper application of those pro forma adjustments to the unadjusted Published Financial Information.

The procedures selected depend on the reporting accountants’ judgment, having regard to the reporting accountants understanding of the nature of Vunani and the Transaction in respect of which the Pro forma Financial Information has been compiled and other relevant engagement circumstances.

The 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.

Consent

We consent to the inclusion of this report and the references thereto, in the form and context in which they appear in the circular. Furthermore we confirm that we will not withdraw our consent prior to the issue of the circular.

Yours faithfully

KPMG Inc.

Registered Auditors

Per G PARKER

Chartered Accountant (SA) Registered Auditor Director

(Private Bag 9, Parkview, 2122)

APPENDIX 3

HISTORICAL FINANCIAL INFORMATION OF THE FAIRHEADS GROUP FOR THE YEARS ENDED 28 FEBRUARY 2013 AND 28 FEBRUARY 2014

Basis of preparation

The statements of financial position, comprehensive income, changes in equity and cash flows and the accounting policies and notes for the year ended 28 February 2013 (included for illustrative purposes only) and 28 February 2014 have been extracted, without adjustment (with the exception of the reconciliation of headline earning, net asset value, headline earnings, diluted headline earnings and tangible net asset value per share), from the audited financial information of the Fairheads Group for the year ended 28 February 2014. The financial statements of the Fairheads Group for the year ended 28 February 2014 were reported on, without qualification, by KPMG Inc.

The historical information relating to the Fairheads Group has been prepared in accordance with IFRS and in terms of the Fairheads Group current accounting policies.

Commentary

FBS, the main operating subsidiary of Fairheads International, is an independent service provider of beneficiary funds and umbrella trusts for retirement funds. FBS offers a unique combination of benefit services, based on its core service of administration. A client can administer their own beneficiary funds, or they can choose to participate in FBS’ proprietary funds. The Fairheads brand has been developed through a steadfast commitment to integrity.

Review of activities

The Fairheads Group carries on the business of an investment holding company. The nature of the business of its subsidiaries is set out in Annexure B.

The Fairheads Group made a net profit after taxation of R16 968 390 (2013: R17 192 360) for the year under review. The results for the year are clearly set out in the financial statements and require no further comment.

Share capital

There were no changes in the authorised or issued share capital during the year. During the prior year the company reduced its current issued share capital by acquiring 191 750 of its ordinary no par value shares.

Dividend

Dividends totalling R Nil (2013: R7 055 852) were declared and paid during the year.

Property, plant and equipment

There has been no change in the nature of use of property, plant and equipment.

Segmental reporting

No segmental report has been presented as management view the business as one segment.

STATEMENTS OF FINANCIAL POSITION

at 28 February 2014

STATEMENTS OF FINANCIAL POSITION at 28 February2014
Rand Note	Audited 2014 Audited 2013
ASSETS Non-current assets Fixed assets 3 Loans receivable 4 Deferred tax asset 8 Current assets Trade and other receivables 9 Loans receivable 4 Taxation receivable Cash and cash equivalents 7	19 683 914 16 538 212
	2 171 197 3 052 975 9 293 061 12 557 490 8 219 656 927 747
	60 213 863 58 648 057
	21 617 786 16 162 627 4 167 295 3 175 772 – 106 661 34 428 782 39 202 997

Total assets	79 897 777 75 186 269
EQUITY AND LIABILITIES Equity Share capital 10 Non-distributable reserves Retained income Non-current liabilities Finance lease liabilities 11 Current liabilities Trade and other payables 12 Current portion of finance lease liabilities 11 Taxation payable Cash and cash equivalents 7	25 133 493 8 165 103
	3 819 111 3 819 111 (149 421) (149 421) 21 463 803 4 495 413
	574 771 826 349
	574 771 826 349
	54 189 513 66 194 817
	36 769 721 48 949 259 991 730 1 366 656 6 562 931 41 277 9 865 131 15 837 625

Total liabilities	54 764 284 67 021 166
Total equity and liabilities	79 897 777 75 186 269
Net asset value per share (Rand) Net tangible asset value per share (Rand) Weighted average number of shares in issue	38.67 12.56 38.67 12.56 650 000 650 000

STATEMENTS OF COMPREHENSIVE INCOME

for the year ended 28 February 2014

STATEMENTS OF COMPREHENSIVE INCOME for the year ended 28 February 2014
		Audited	Audited
Rand	Note	2014	2013
Revenue	2.4	145 649 427	141 075 295
Income received from insurance claim		3 763 395	–
Operating costs		(126 599 678)	(118 245 136)
Profit from operations		22 813 144	22 830 159
Finance costs		(596 071)	(256 187)
Gain on investment in subsidiary disposed of		–	716 484
Profit on disposal of fixed assets		8 498	1 746
Investment income		1 853 603	2 718 718
Fair value adjustment of staff loans		(559 762)	(2 127 583)
Profit before taxation	13	23 519 412	23 883 337
Income tax expense	14	(6 551 022)	(6 690 977)
Profit for the year		16 968 390	17 192 360
Other comprehensive income
Items that will be reclassified subsequently
to profit or loss
Realisation of revaluation-reserve		–	(1 042 075)
Revaluation of available-for-sale investments		–	377 500
Deferred tax on revaluation		–	(70 396)
Non-distributable reserve realised on disposal of subsidiary		–	(26 955)
Other comprehensive loss net of tax		–	(761 926)
Total comprehensive income for the year		–	16 430 434
Profit attributable to:
Owners of the Company		16 968 390	17 192 360
Total comprehensive income attributable to:
Owners of the Company		16 968 390	16 430 434
Earnings per share (cents)		26.11	26.45
Headline earnings per share (cents)		26.09	26.44
Weighted average number of shares in issue		650 000	650 000

STATEMENTS OF CHANGES IN EQUITY

for the year ended 28 February 2014

for theyear ended 28 February2014
Group	Share capital R Non-dis- tributable reserves R Retained income R Revaluation reserves R Total R**
Balance at 1 March 2012 Profit for the year Other comprehensive income Non-distributable reserve realised on disposal of subsidiary Revaluation of available-for-sale investments Deferred tax on revaluation Revaluation reserve realised	4 945 749 (122 466) 19 908 527 734 971 25 466 781
	– – 17 192 360 – 17 192 360
	– (26 955) – – (26 955) – – – 377 500 377 500 – – – (70 396) (70 396) – – – (1 042 075) (1 042 075)
Other comprehensive income	– (26 955) – (734 971) (761 926)
Total comprehensive income for the year	– (26 955) 17 192 360 (734 971) 16 430 434
Transactions with owners recorded directly in equity Acquisition of shares Dividends declared	(1 126 638) – (25 549 622) – (26 676 260) – – (7 055 852) – (7 055 852)
Balance at 28 February 2013	3 819 111 (149 421) 4 495 413 – 8 165 103
Balance at 1 March 2013 Profit for the year Total comprehensive income for the year	3 819 111 (149 421) 4 495 413 – 8 165 103
	– – 16 968 390 – 16 968 390
	– – 16 968 390 – 16 968 390
Balance at 28 February 2014	3 819 111 (149 421) 21 463 803 – 25 133 493

*Refer to note 24 for the restatement of comparatives note.

STATEMENT OF CASH FLOWS

for the year ended 28 February 2014

STATEMENT OF CASH FLOWS for the year ended 28 February 2014
	Audited Audited
Note	2014 R 2013 R
Cash flows from operating activities Cash generated from operations 18.1 Interest received Finance costs Dividend paid Taxation paid 18.2 Securities tax paid 18.2 Secondary tax on companies paid 18.2
	7 545 451 43 742 136 887 001 1 437 774 (596 071) (256 187) – (32 605 474) (7 214 616) (6 830 094) – (25 094) – (210 438)
Net cash inflow from operating activities Cash flows from investing activities Replacement of equipment 18.3 Proceeds from disposal of equipment Cash flow on disposal of subsidiary Proceeds on disposal of subsidiary Proceeds from disposal of investments	621 765 5 252 623
	(360 964) (442 303) 14 940 5 140 – (2 003 516) – 2 399 240 – 2 631 521
Net cash (outflow)/inflow from investing activities Cash flows from financing activities	(346 024) 2 590 082
Increase/(decrease) in borrowings 18.4 Acquisition of shares	922 538 (15 059 833) – (1 126 638)
Net cash inflow/(outflow) from financing activities	922 538 (16 186 471)
Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year	1 198 279 (8 343 766) 23 365 372 31 709 138
Cash and cash equivalents at end of year 7	24 563 651 23 365 372

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 28 February 2014

1. GENERAL INFORMATION

Fairheads International Holdings (SA) Proprietary Limited was incorporated on 30 August 1983. The main business of the company is to operate solely as an investment holding company.

2. SIGNIFICANT ACCOUNTING POLICIES

2.1 Statement of compliance

These financial statements are prepared in accordance with International Financial Reporting Standards (IFRS), and the requirements of the Companies Act of South Africa.

2.2 Basis of preparation

The financial statements are prepared on the historical cost basis, except as indicated below, and are presented in Rand, which is the group’s functional currency. The company is in compliance with the group’s policies. Accounting policies are consistent with prior year.

2.3 Basis of consolidation

Investment in subsidiaries

Subsidiaries are entities controlled by the group. The group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases. The consolidated financial statements incorporate the assets, liabilities and results of the operations of the company and all its subsidiaries. The results of subsidiaries acquired or disposed of during a financial year are included from the effective dates of acquisition or to the effective dates of disposal, as appropriate.

Transactions eliminated on consolidation

Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup transactions are eliminated in preparing the consolidated financial statements.

2.4 Revenue

Revenue represents management fees, commissions and administration fees. Revenue is recognised at the fair value of the consideration received or receivable and excludes value added tax. Revenue is recognised on the date when the service is rendered and when no uncertainty exists as to the collectability of the amounts outstanding.

2.5 Investment income

Interest is earned on cash and cash equivalents and loans receivable. Income is recognised in profit or loss as it accrues, using the effective interest method.

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

2.6 Tax

Tax expense comprises current and deferred tax. Income tax is recognised in the statements of comprehensive income except to the extent that it relates to items recognised directly in other comprehensive income.

Current tax is the expected tax payable or receivable calculated on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment of tax payable in respect of previous years.

2.6 Tax (continued)

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax base. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities using tax rates enacted or substantively enacted at the reporting date. Deferred tax is charged to the statement of comprehensive income except to the extent that it relates to a transaction that is recognised directly in other comprehensive income.

A deferred tax liability is recognised for all taxable temporary differences, except to the extent that the deferred tax liability arises from:

the initial recognition of goodwill, or
the initial recognition of an asset or liability in a transaction which
is not a business combination; and
at the time of the transaction, affects neither accounting nor taxable profit or loss.

Deferred tax assets and liabilities are offset and the net position reported, provided that offsetting would be allowed in future tax assessments.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the associated unused tax losses and deductible temporary differences can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Additional income taxes that arise from the distribution of dividends (dividend withholding tax) are recognised at the same time as the liability to pay the related dividend.

2.7 Employee benefits

Short-term employee benefits

The cost of all short-term employee benefits is recognised during the period in which the employee renders the related service.

The accruals for employee entitlements to wages, salaries, annual leave represent the amount for which the group has a present obligation to pay as a result of employees’ services provided to the reporting date. The accruals have been calculated at undiscounted amounts based on current wage and salary rates.

Retirement benefits

Certain of the company’s subsidiaries contribute to defined contribution retirement funds. Contributions are based on current service and current salary and are charged against income as incurred.

2.8 Fixed assets

Owned equipment is stated at historical cost less accumulated depreciation and impairment losses.

Computer equipment acquired by way of finance leases is stated at an amount equal to the lower of its fair value and the present value of the future minimum lease payments at the inception of the lease, less accumulated depreciation and impairment losses.

Depreciation is provided on the straight-line basis, over the estimated useful lives of the assets.

The current estimated useful lives are as follows:

The current estimated useful lives are as follows:
Equipment and furniture	5 – 10 years
Computer equipment	3 years
Office refurbishments	3 years
Motor vehicles and office equipment	5 years

The depreciation methods, useful lives and residual values, if not insignificant, are reassessed annually. No impairment losses have been recognised on the group’s equipment in the current and prior periods.

2.8 Fixed assets (continued)

The group recognises in the carrying amount of an item of equipment, the cost of replacing part of such an item if it is probable that the future economic benefits embodied in the item will flow to the group and the cost of the item can be measured reliably.

Gains/(losses) on the disposal of equipment are credited/(charged) to profit or loss. The gain/(loss) is the difference between the net disposal proceeds and the carrying amount of the asset.

2.9 Financial instruments

Recognition and derecognition of financial instruments

Financial assets and liabilities are recognised when, and only when the group becomes a party to the contractual provisions of the particular instrument.

The group derecognises a financial asset when and only when the contractual rights to the cash flows arising from the financial asset have expired or been forfeited by the group, or it transfers the financial asset including substantially all the risks and rewards of ownership of the asset and no longer retains control of the asset.

A financial liability is derecognised when and only when the liability is extinguished, that is, when the obligation specified in the contract is discharged, cancelled or has expired.

The difference between the carrying amount of a financial liability (or part thereof) extinguished or transferred to another party and consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in the statement of comprehensive income.

Loans and trade receivables

Loans and trade receivables originated by the group are stated at amortised cost less impairment losses.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances held with banks and are measured at fair value as level 1 per the fair value hierarchy.

Financial liabilities

Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principal payments and amortisations.

Fair value hierarchy

Fair values are determined according to the following hierarchy based on the requirements in IFRS 13 Fair Value Measurement:

Level 1 – unadjusted quoted market prices: financial assets and liabilities with quoted prices for identical instruments in active markets that the scheme can access at measurement date.
Level 2 – valuation techniques using observable inputs: quoted prices (other than those included in level 1) for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are less than active and financial assets and liabilities valued using models where all significant inputs are observable directly or indirectly to market data.
Level 3 – valuation techniques using significant unobservable inputs: financial assets and liabilities valued using valuation techniques where one or more inputs are unobservable and have a significant effect on the instrument’s valuation. The best evidence of fair value is a quoted price in an active market. In the event that the market for a financial asset or liability is not active, a valuation technique is used.

The judgement as to whether a market is active may include, for example, consideration of factors such as the magnitude and frequency of trading activity, the availability of prices and the size of bid/offer spreads. In inactive markets, obtaining assurance that the transaction price provides evidence of fair value or determining the adjustments to transaction prices that are necessary to measure the fair value of the asset or liability requires additional work during the valuation process.

2.10 Impairment

The carrying amounts of the group’s assets, other than deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.

For goodwill, intangible assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each reporting date.

An impairment loss is recognised whenever the carrying amount of an asset, or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in profit or loss.

Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units (group of units) and then, to reduce the carrying amount of the other assets in the unit (group of units) on a pro-rated basis.

The recoverable amount of the group’s receivables carried at amortised cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate. Receivables with a short duration are not discounted where the effects of discounting will be immaterial.

The recoverable amount of other assets is the greater of their net selling price 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. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss in respect of goodwill is not reversed.

2.11 Finance leases

Finance leases

Leases in terms of which the group assumes substantially all the risks and rewards of ownership are classified as finance leases. Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Operating leases

Leases where the lessor retains the risks and rewards of ownership of the underlying asset are classified as operating leases. Payments made under operating leases are recognised in profit or loss on a straight-line basis over the period of the lease.

2.12 Provisions

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 economic benefits will occur, and where a reliable estimate can be made of the amount of the obligation.

Future operating costs or losses are not provided for.

2.13 Investments in subsidiaries

The company has chosen to carry investments in subsidiaries at cost.

2.14 New and forthcoming requirements

Standards and interpretations that have been adopted in the group’s 2014 financial statements

IAS 1 Presentation of Items of Other Comprehensive Income (effective for years commencing on or after 1 July 2012) – this amendment requires that an entity present separately the items of other comprehensive income (OCI) that would be reclassified to profit or loss in the future if certain conditions are met from those that would never be reclassified to profit or loss; and change the title of the statement of comprehensive income to the statement of profit or loss and other comprehensive income. However, an entity is still allowed to use other titles. This standard’s adoption had no impact on the 2014 financial statements.

2.14 New and forthcoming requirements (continued)

IAS 27 Separate Financial Statements (2011) supersedes IAS 27 (2008) and is effective for yearends commencing on or after 1 January 2013. IAS 27 (2011) carries forward the existing accounting and disclosure requirements for separate financial statements, with some minor clarifications. This standard’s adoption had no impact on the 2014 financial statements.

IFRS 10 Consolidated Financial Statements (effective from 1 January 2013) – this standard introduces a new approach to determining which investees should be consolidated and provides a single model to be applied in the control analysis for all investees. An investor controls an investee when it is exposed or has rights to variable returns from its involvement with that investee, it has the ability to affect those returns through its power over that investee and there is a link between power and returns. Control is reassessed as facts and circumstances change. IFRS 10 supersedes IAS 27 (2008) and SIC-12 Consolidation – Special Purpose Entities . IFRS 10 has been adopted for the first time for the year ended 28 February 2014. This standard’s adoption had no impact on the 2014 financial statements.

IFRS 13 adopted by the group for the first time for its financial reporting period ended 28 February 2014. IFRS 13 introduces a single source of guidance on fair value measurement for both financial and non-financial assets and liabilities by defining fair value, establishing a framework for measuring fair value and setting out disclosures requirements for fair value measurements. No retrospective adjustment of financial or non-financial assets and liabilities was required. No significant changes were required.

Future amendments not early adopted in the 2014 financial statements

IFRS 9 Financial Instruments (effective for financial periods commencing 1 January 2018) On 24 July 2014 the IASB issued the final IFRS 9 Financial Instruments Standard , which replaces earlier versions of IFRS 9 and completes the IASB’s project to replace IAS 39 Financial Instruments: Recognition and Measurement.

This standard will have an impact on the group, which will include changes in the measurement basis of the group’s financial assets to amortised cost, fair value through other comprehensive income or fair value through profit or loss. Even though these measurement categories are similar to IAS 39, the criteria for classification into these categories are significantly different. In addition, the IFRS 9 impairment model has been changed from an “incurred loss” model from IAS 39 to an “expected credit loss” model, which is expected to increase the provision for bad debts recognised in the group. The impact has not yet been assessed.

3. FIXED ASSETS

	2014	2013
	R	R
As per Annexure A
Cost	15 709 460	14 878 986
Accumulated depreciation	(13 538 263)	(11 826 011)
	2 171 197	3 052 975
Equipment is encumbered as per note 11.

4. LOANS RECEIVABLE

LOANS RECEIVABLE
	2014	2013
	R	R
Staff loans
Current	3 671 268	2 673 269
Non-current	9 293 061	12 557 490
	12 964 329	15 230 759
These loans are to staff for the acquisition of shares in the
holding company, have been discounted and are repayable
by 31 August 2018.
Other current loans receivable	496 027	502 503
	13 460 356	15 733 262
Non-current	9 293 061	12 557 490
Current	4 167 295	3 175 772
	13 460 356	15 733 262

5. INVESTMENT IN SUBSIDIARIES

The following companies are subsidiaries of the Fairheads Group, details of which are set out in Annexure B:

Fairheads Corporate Services Proprietary Limited
Fairheads Benefit Services Proprietary Limited

6. LOANS TO/(FROM) SUBSIDIARIES

	2014	2013
	R	R
*Non-current*
Loans to subsidiaries	–	–
Loans from subsidiaries	–	–
	–	–

Loans are unsecured, interest free and are repayable by mutual arrangement.

7. CASH AND CASH EQUIVALENTS

	2014	2013
	R	R
Current accounts	7 441 823	19 499 841
Call account	15 500 000	8 216 197
Fixed deposit	11 486 959	11 486 959
	34 428 782	39 202 997
Current account – bank overdraft	(9 865 131)	(15 837 625)

Fairheads Benefit Services Proprietary Limited has given a guarantee over the overdraft facility amounting to R20 000 000 (2013: R20 000 000).

8. DEFERRED TAX

DEFERRED TAX
	2014 R 2013 R
Balance at beginning of year Current year temporary differences	927 747 703 534 7 291 909 224 213
– Credited to profit or loss – Charged to other income	7 291 909 294 610 – (70 397)
Balance at end of year	8 219 656 927 747
Comprising – Accrued leave pay – Tax on unutilised tax losses – Operating leases – Accrued bonus	693 906 517 624 437 513 334 039 41 677 76 084 7 046 560 –
	8 219 656 927 747
Deferred tax asset	8 219 656 927 747
Unrecognised deferred tax assets Estimated tax losses available for utilisation against future taxable income Recognised as deferred tax assets	369 550 – (369 550) –
Unrecognised estimated tax losses carried forward not accounted for in deferred tax	– –
Estimated capital tax losses available for utilisation against future taxable income	1 791 287 1 791 287
Recognised as deferred tax assets	(1 791 287) (1 791 287)
Unrecognised estimated tax losses carried forward not accounted for in deferred tax	– –

9. TRADE AND OTHER RECEIVABLES

	2014	2013
	R	R
Accrued income	16 649 669	16 013 819
Insurance claim receivable	3 763 395	–
Other receivables	1 204 722	148 808
	21 617 786	16 162 627

10. SHARE CAPITAL

SHARE CAPITAL
	2014	2013
	R	R
*Authorised*
1 500 000 Ordinary shares of no par value
*Issued*
650 000 Ordinary shares of no par value
Share capital	3 819 111	3 819 111

10. SHARE CAPITAL (continued)

Persons who hold a beneficial interest equal to or in excess of 5% of its issued ordinary no par value shares are:

	2014	2013
	%	%
Mafuta Family Trust	12.3	12.3
R Krepelka	10.8	10.8
P King	11.5	11.5
M Brown	11.5	11.5
T Fairhead	9.4	9.4
G Gould	9.2	9.2
M Vilabril	8.5	8.5
T Clark	7.7	7.7
R Cowie	6.6	6.6

11. FINANCE LEASE LIABILITIES

FINANCE LEASE LIABILITIES
	2014	2013
	R	R
Secured liabilities	1 566 501	2 193 005
Secured in terms of instalment sale agreements over motor
vehicles, computer equipment and furniture having a book value of
R1 505 619 (2013: R2 268 352). The average effective rate of
interest is linked to the prime bank overdraft rate and the liability is
repayable in monthly instalments R114 323 (2013: R157 632)
inclusive of finance charges.
Amounts payable within one year included under current liabilities	(991 730)	(1 366 656)
	574 771	826 349

Finance lease liabilities are repayable as follows:

	Minimum
	lease
	payments	Interest	Principal
	R	R	R
2014
In less than one year	1 063 998	72 268	991 730
Between one and three years	616 667	41 896	574 771
	1 680 665	114 164	1 566 501
2013
In less than one year	1 458 437	91 781	1 366 656
Between one and three years	882 215	55 866	826 349
	2 340 652	147 647	2 193 005

There are no lease commitments in excess of three years.

12. TRADE AND OTHER PAYABLES

TRADE AND OTHER PAYABLES
	2014	2013
	R	R
Accrued expenses	29 106 487	26 156 167
Insurance proceeds payable	3 201 547	–
Other payables	4 461 687	22 793 092
	36 769 721	48 949 259

13. PROFIT BEFORE TAXATION

is arrived at after taking into account:

PROFIT BEFORE TAXATION is arrived at after taking into account:
	2014	2013
	R	R
Expenditure
Auditors’ remuneration
– Audit fee – current year	217 736	205 409
– other	1 405 700	7 500
Depreciation	1 960 164	2 370 024
Finance charges on instalment sales	149 701	236 772
Finance costs – interest paid – other	446 370	19 415
Fair value adjustment	559 762	2 127 583
Operating lease charges	5 418 076	5 424 475
Staff costs (excluding directors’ emoluments)	65 543 186	57 900 011
Directors’ emoluments (for services as directors)	194 700	220 582
Directors’ emoluments (for other services)	29 005 630	27 875 280

14. INCOME TAX EXPENSE

INCOME TAX EXPENSE
	2014	2013
	R	R
*South African normal taxation*
– Current	13 842 931	6 631 805
– Deferred	(7 291 909)	73 269
*Capital gains taxation*
– Deferred	–	(334 039)
Securities tax	–	109 504
Secondary tax on companies	–	210 438
Total taxation	6 551 022	6 690 977
	2014	2013
Reconciliation of tax rate	%	%
Current year’s charge as a percentage of profit before taxation	27.9	28.0
Exempt income	1.1	3.1
Capital gains tax	–	1.4
Disallowed expenditure	(1.6)	(3.8)
Secondary tax on companies	–	(0.9)
Securities tax	–	(0.4)
Tax allowances	0.6	0.6
Standard tax rate	28.0	28.0

15. COMMITMENTS

COMMITMENTS
	2014	2013
	R	R
Future operating lease charges for premises
Payable within one year	4 819 033	4 009 396
Payable between one and five years	8 417 927	934 708
	13 236 960	4 944 104

16. RETIREMENT BENEFITS

Substantially all the group’s employees are members of the Alexander Forbes Retirement Fund, a defined Provident Fund contribution plan governed by the Pension Funds Act in South Africa. Of the group’s employees, 278 (2013: 263) are members of the fund, whose aggregate share of the fund amounted to R32 337 966 (2013: R24 891 731). The companies within the group contribute the total cost of defined benefits so provided. In terms of the manner in which these funds are structured, the funds’ liabilities cannot exceed their assets.

17. RELATED PARTY TRANSACTIONS

The company enters into related party transactions with its subsidiaries, its associate and with key management personnel, who comprise the directors. Material related party balances are disclosed separately in the financial statements.

Controlled entities

Details of the company’s subsidiaries are disclosed in Annexure B.

Key management personnel

The company’s key management personnel comprise its executive and non-executive directors.

Directors’ emoluments for the financial year are disclosed in note 13.

There were no material transactions with key management personnel or their families during the current or previous year other than remuneration for services rendered.

Amounts due from/(to) related parties are disclosed in Annexure B to the financial statements.

18. NOTES TO THE STATEMENT OF CASH FLOWS

18.1 Cash generated from operations

18.1	Cash generated from operations
18.2		2014 R 2013 R
	Profit before taxation Adjustment for:	23 519 412 23 883 337 1 660 736 (810 737)
	Depreciation Interest received Gains on disposal of investments Gain on disposal of equipment Finance costs Gain on investment in subsidiary disposed of	1 960 164 2 370 024 (887 001) (1 437 774) – (1 280 944) (8 498) (1 746) 596 071 256 187 – (716 484)
	Operating profit before working capital changes Working capital changes:	25 180 148 23 072 600 (17 634 697) 20 669 536
	(Increase)/decrease in trade and other receivables (Decrease)/increase in trade and other payables	(2 253 612) 1 346 072 (15 381 085) 19 323 464
	Cash generated from operations	7 545 451 43 742 136
	Taxation paid Taxation prepaid/(outstanding) at beginning of year Taxation charge Taxation unpaid/(prepaid) at end of year	65 384 (48 494) (13 842 931) (6 951 748) 6 562 931 (65 384)
	Taxation paid Made up of:	(7 214 616) (7 065 626)
	– Normal tax – Securities tax – Secondary tax on companies	(7 214 616) (6 830 094) – (25 094) – (210 438)

18. NOTES TO THE STATEMENT OF CASH FLOWS (continued)

18.3 Acquisition of equipment

S TO THE STATEMENT OF CASH FLOWS (continued) Acquisition of equipment
	2014	2013
	R	R
Cost of fixed assets acquired during the year	1 084 828	1 093 819
Acquired by means of instalment sale agreements	(723 864)	(651 516)
	360 964	442 303

18.4 Increase/(decrease) in borrowings

Increase/(decrease) in borrowings
	2014	2013
	R	R
(Decrease)/increase in long-term borrowings	(251 578)	670 120
Decrease/(increase) in long-term lendings	3 264 429	(12 557 490)
Decrease in short-term borrowings	(1 098 790)	(1 075 843)
Increase in short-term lendings	(991 523)	(2 096 620)
	922 538	(15 059 833)

19. ESTIMATES AND JUDGEMENTS

The preparation of the financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

No critical estimates and judgements have been made for the 2013 and 2014 financial years.

20. FINANCIAL RISK MANAGEMENT

20.1 Overview

The group has exposure to the following risks from its use of financial instruments:

credit risk
liquidity risk
market risk

The directors have overall responsibility for the establishment and monitoring of the group’s risk management policies and procedures which have been established to identify and analyse the risks faced by the group to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and procedures are reviewed regularly to reflect changes in market conditions and the group’s activities.

20.2 Credit risk

Credit risk is the risk of financial loss to the group if a counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the group’s receivables from clients.

The group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. There is no significant concentration of unsecured credit risk.

An allowance for impairment is established based on management’s estimate of identified incurred losses in respect of specific receivables.

20. FINANCIAL RISK MANAGEMENT (continued)

20.2 Credit risk (continued)

Reputable financial institutions are used for investing and cash handling purposes. The credit ratings in terms of Fitch for RMB, Standard Bank and Nedbank are F1+.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

	2014	2013
	R	R
Trade and other receivables	21 617 786	16 162 627
Loans receivable	4 167 295	15 733 262
Cash and cash equivalents	34 428 782	39 202 997
	60 213 863	71 098 886

Included in trade and other receivables is accrued fee income for R17 211 517 (2013: R16 013 819). The trade and other receivables balances at 28 February 2014 and 28 February 2013 are not past due nor impaired.

20.3 Liquidity risk

Liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due. The group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due under normal stressed conditions, without incurring unacceptable losses or risking damage to the group’s reputation.

The following are contractual maturities of financial liabilities, including interest payments and excluding the impact of netting agreements.

	Carrying	Contractual	Within	2 – 5
	amount	cash flows	1 year	years
	R	R	R	R
28 February 2014
Non-derivative financial liabilities
Financial leases	1 566 501	1 680 665	1 063 998	616 667
Trade and other payables	36 536 074	36 536 074	36 536 074	–
Bank overdraft	9 865 131	9 865 131	9 865 131	–
	47 967 706	48 081 870	47 465 203	616 667
28 February 2013
Non-derivative financial liabilities
Financial leases	2 193 005	2 340 652	1 458 437	882 815
Trade and other payables	48 949 259	48 949 259	48 949 259	–
Bank overdraft	15 837 625	15 837 625	5 837 625	10 000 000
	66 979 889	67 127 536	56 245 321	10 882 815

20.4 Market risk

Market risk is the risk that changes in market prices such as foreign exchange rates, interest rates and equity prices will affect the group’s income. The group is not significantly exposed to market risks.

Interest rate risk

The group finances its operations through a combination of retained reserves, credit from suppliers and group loans. At year end the group’s only exposure to interest rates relates to the interest bearing finance lease liabilities priced at a variable market related interest rate.

20.5 Capital management

The policy of the directors is to maintain a strong capital base so as to maintain market confidence and to sustain future development of the business. There were no changes in the group’s approach to capital management during the year.

20. FINANCIAL RISK MANAGEMENT (continued)

20.6 Fair values

The group’s financial instruments consist mainly of cash at bank and cash equivalents, trade and other receivables and trade and other payables.

The estimated net fair value at which financial instruments are carried on the statement of financial position at 28 February 2014 have been determined using available market information and appropriate valuation methodologies, but are not necessarily indicative of the amounts that the group could realise in the normal course of business.

21. GOING CONCERN

The directors of the company have considered the net current liability of the company at year end and are satisfied by the forecast future cash flows of the company’s operating activities that it will be able to pay its debts as they become due in the ordinary course of business for the next 12 months period.

22. FINANCIAL ASSETS AND FINANCIAL LIABILITIES

Accounting classifications and fair values

The table below sets out the group’s classification of each class of financial assets and liabilities, and their fair values. Non-financial instruments have been included for completeness.

	Designated
	at fair value
	through	Loans		Non-	Total
	profit or	and	Financial	financial	carrying
28 February 2014	loss	receivables	liability	instruments	amount
Assets
Cash and cash equivalents	34 428 782	–	–	–	34 428 782
Trade and other receivables	–	21 617 786	–	–	21 617 786
Fixed assets	–	–	–	2 171 197	2 171 197
Deferred tax asset	–	–	–	8 219 656	8 219 656
Loans receivable	–	13 460 356	–	–	13 460 356
	34 428 782	35 078 142	–	10 390 853	79 897 777
Liabilities
Finance lease liabilities	–	–	1 566 501	–	1 566 501
Trade and other payables	–	–	36 769 721	–	36 769 721
Tax payable	–	–	–	6 562 931	6 562 931
Cash and cash equivalents	–	–	9 865 131	–	9 865 131
	–	–	48 201 353	6 562 931	54 764 284
28 February 2013
Assets
Cash and cash equivalents	39 202 997	–	–	–	39 202 997
Trade and other receivables	–	16 162 627	–	–	16 162 627
Tax receivable	–	–	–	106 661	106 661
Fixed assets	–	–	–	3 052 975	3 052 975
Deferred tax asset	–	–	–	927 747	927 747
Loans receivable	–	15 733 262	–	–	15 733 262
	39 202 997	31 895 889	–	4 087 383	75 186 269
Liabilities
Finance lease liabilities	–	–	2 193 005	–	2 193 005
Trade and other payables	–	–	48 949 259	–	48 949 259
Tax payable	–	–	–	41 277	41 277
Cash and cash equivalents	–	–	15 837 625	–	15 837 625
	–	–	66 979 889	41 277	67 021 166

23. EVENTS AFTER THE REPORTING PERIOD

Subsequent to year end the group’s insurer paid the claim for the loss suffered by certain beneficiaries due to identity theft that resulted in payments made to unauthorised beneficiaries. Thereafter the insurance proceeds of R3 763 395 were paid to the affected beneficiaries.

24. RESTATEMENT OF COMPARATIVES

The group accounts have been restated for 2012.

A third group statement of financial position has been prepared as a result of the restatement of R149 421 which was incorrectly recognised as goodwill as opposed to non-distributable. The transaction related to the holding company purchasing the remaining 1.38% minority interest in Fairheads Benefit Services Proprietary Limited (subsidiary of the company), which resulted in a transaction between equity holders.

The effect of the restatement on the statement of financial position is summarised below:

2012

2012
Decrease in goodwill	(R149	421)
Decrease in non-distributable reserves	(R149	421)

25. RECONCILIATION OF HEADLINE EARNINGS

RECONCILIATION OF HEADLINE EARNINGS
	2014	2013
	R	R
Profit after tax	16 968 390	17 192 360
Profit on disposal of equipment	(8 498)	(1 746)
Taxation effect	1 570	323
Headline earnings	16 961 462	17 190 937

26. SEGMENTAL REPORTING

No segmental report has been provided as management view the business as one segment.

Net book value	2014 R	16 600 641 859 1 405 065 107 673	2 171 197	2013 27 803 852 813 2 073 167 99 192	3 052 975
Accumulated depreciation	Opening Disposals Depreciation Business combinations Closing	122 769 – 28 368 – 151 137 3 711 436 (36 400) 422 182 – 4 097 218 4 551 852 (211 512) 1 450 829 – 5 791 169 3 439 954 – 58 785 – 3 498 739	11 826 011 (247 912) 1 960 164 – 13 538 263	379 970 – 30 115 (287 316) 122 769 3 499 865 (1 111) 612 890 (400 208) 3 711 436 3 832 256 (284 520) 1 624 906 (620 790) 4 551 852 4 189 003 – 102 113 (851 162) 3 439 954	11 901 094 (285 631) 2 370 024 (2 159 476) 11 826 011
Cost	2014 Opening Additions Disposals Business combinations Closing	Motor vehicles 150 572 17 165 – – 167 737 Furniture and fittings 4 564 249 217 670 (42 842) – 4 739 077 Computer equipment 6 625 019 782 727 (211 512) – 7 196 234 Office refurbishments 3 539 146 67 266 – – 3 606 412	14 878 986 1 084 828 (254 354) – 15 709 460	2013 Motor vehicles 437 888 – – (287 316) 150 572 Furniture and fittings 5 014 445 116 003 (1 125) (565 074) 4 564 249 Computer equipment 6 782 988 865 913 (287 900) (735 982) 6 625 019 Office refurbishments 4 278 405 111 903 – (851 162) 3 539 146	16 513 726 1 093 819 (289 025) (2 439 534) 14 878 986

Interest in subsidiaries and associates	Proportion held Shares at cost less amounts written off Indebtedness owing (to)/by holding company	2014 2013 2014 2013 2014 2013	100% 100% 100 100 100 100 100% 100% 932 610 932 610 (1 096 473) (23 950 000)	932 610 932 610 (1 096 373) (23 949 900)	Notes: 2014 R 2013 R Aggregate profit 17 606 672 17 710 017
Issued capital 2014 2013			100 100 1 014 1 014
Name of company Nature of business Class of Shares			Subsidiaries Fairheads Corporate Services Proprietary Limited Administration Services Ordinary Fairheads Benefit Services Proprietary Limited Administration Services Ordinary

APPENDIX 4

HISTORICAL FINANCIAL INFORMATION OF THE FAIRHEADS GROUP FOR THE SIX MONTHS ENDED 31 AUGUST 2014

BASIS OF PREPARATION

The condensed interim financial information for the six months ended 31 August 2014 has been prepared and presented in accordance with the requirements of International Financial Reporting Standard IAS 34 Interim Financial Reporting and the South African Companies Act, No 71 of 2008, as amended.

In preparing these condensed interim financial information, management makes use of judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

The accounting policies applied in the presentation of the condensed interim financial information, which complies with International Financial Reporting Standards, are consistent with those applied for the year ended 28 February 2014. The condensed interim financial information has been presented on the historical cost basis and are presented in Rand, which is the Fairhead’s Grou ~~p is f~~ unctional and presentation currency.

It is the Fairheads Group policy not to prepare notes on interim review periods.

COMMENTARY

The Fairheads Group results for the six months ended 31 August 2014 are satisfactory and it is expected to continue trading profitably during the second half of the year.

Review of activities

The Fairheads Group carries on the business of an investment holding company.

The Fairheads Group made a net profit after taxation of R8 969 859 for the six months under review. The results for the six months are clearly set out in the financial statements and require no further comment.

Share capital

There were no changes in the authorised or issued share capital during the six months.

Dividend

Dividends totaling Rnil (2013: R0) were declared and paid during the six months.

Subsequent events

Subsequent to the financial six month period ended 31 August 2014 the Fairheads Group:

Declared a dividend of R2.50 per share excluding dividends withholding tax on 17 September 2014 which was subsequently paid on 25 September 2014.
Declared a dividend of R2.50 per share excluding dividends withholding tax on 19 November 2014 which was subsequently paid on 25 November 2014.

CONDENSED STATEMENT OF FINANCIAL POSITION

at 31 August 2014

Rand	Reviewed six months ended 31 August 2014
ASSETS Non-current assets Fixed assets Loans receivable Deferred tax asset Current assets Trade and other receivables Loans receivable Taxation receivable Cash and cash equivalents	15 555 893
	2 232 557 8 550 567 4 772 769
	45 544 390
	14 527 132 3 418 235 3 715 264 23 883 759

Total assets	61 100 283
EQUITY AND LIABILITIES Equity Share capital Non-distributable reserves Retained income Non-current liabilities Finance lease liabilities Current liabilities Trade and other payables Bonus provision Current portion of finance lease liabilities Taxation payable Cash and cash equivalents Total liabilities	34 103 352
	3 819 111 (149 421) 30 433 662
	790 381
	790 381
	26 206 550
	8 131 518 12 161 425 999 708 – 4 913 899
	26 996 931
Total equity and liabilities	61 100 283
Net asset value per share (Rand) Net tangible asset value per share (Rand) Weighted average number of shares in issue	52.47 52.47 650 000

CONDENSED STATEMENT OF COMPREHENSIVE INCOME

for the six months ended 31 August 2014

	Reviewed
	six months
	ended
Rand	31 August 2014
Revenue	73 011 877
Income received from insurance claim	552 379
Operating costs	(61 932 736)
Operating profit	11 631 520
Fair value adjustment	–
Profit on disposal of fixed assets	26 584
Finance costs	(249 400)
Finance income	1 008 042
Profit before taxation	12 416 746
Income tax – normal and deferred	(3 446 887)
Profit after taxation	8 969 859
Other comprehensive income	–
Total comprehensive income for the period	8 969 859
Earnings per share (cents)	13.80
Headline earnings per share (cents)	13.77
Weighted average number of shares in issue	650 000
Reconciliation of headline earnings
	Six months
	ended
	31 August 2014
	R
Profit after tax	8 969 859
Profit on disposal of equipment	26 584
Taxation effect	4 913
Headline earnings	8 948 188

CONDENSED STATEMENT OF CHANGES IN EQUITY

for the six months ended 31 August 2014

Group Rand	Share capital R Non- distributable reserves R Retained income R Total R
Balance at 1 March 2013 Profit for the year Total comprehensive income for the year	3 819 111 (149 421) 4 495 413 8 165 103
	– – 16 968 390 16 968 390
	– – 16 968 390 16 968 390
Balance at 28 February 2014	3 819 111 (149 421) 21 463 803 25 133 493
Balance at 1 March 2014 Profit for the six months ended 31 August 2014 Total comprehensive income for the year	3 819 111 (149 421) 21 463 803 25 133 493
	– – 8 969 859 8 969 859
	– – 8 969 859 8 969 859
Balance at 31 August 2014	3 819 111 (149 421) 30 433 662 34 103 352

CONDENSED STATEMENT OF CASH FLOWS

for the six months ended 31 August 2014

Rand	Reviewed six months ended 31 August 2014
Profit before taxation Adjusted for: Non-cash items Net finance income Cash generated by trading operations Change in working capital	12 416 746 419 383
	759 837 (340 454)
	12 836 129 (9 386 124)
Cash generated from operations Net finance income Taxation paid	3 450 005 340 454 (10 278 195)
Cash flows from operating activities Cash flows from investing activities Acquisition of equipment Proceeds on disposal of equipment Cash generated from financing activities Increase in borrowings	(6 487 736) (58 154)
	(87 499) 29 345
	952 099
	952 099

Decrease in cash and cash equivalents Cash and cash equivalents at beginning of period	(5 593 791) 24 563 651
Cash and cash equivalents at end of period	18 969 860

APPENDIX 5

INDEPENDENT REPORTING ACCOUNTANTS’ REPORT ON THE HISTORICAL FINANCIAL INFORMATION OF THE FAIRHEADS GROUP FOR THE YEAR ENDED 28 FEBRUARY 2014 AND THE SIX MONTHS ENDED 31 AUGUST 2014

The Directors Vunani Limited PO Box 652419 Benmore 2010

19 March 2015

Dear Sirs,

INDEPENDENT REPORTING ACCOUNTANTS’ REPORT ON THE REPORT OF HISTORICAL FINANCIAL INFORMATION OF THE FAIRHEADS GROUP

The definitions commencing on page 6 of this circular apply mutatis mutandis to this report.

At your request, we present our Independent Reporting Accountants’ report on the Report of Historical Financial Information of the Fairheads Group for the year ended 28 February 2014 (“Historical Financial Information”), for the purposes of complying with the Listings Requirements and for inclusion in the circular dated on or about 19 March 2015.

Our independent reporting accountants’ report on the report of Historical Financial Information comprises a review report in respect of the six months ended 31 August 2014 and an audit report in respect of the year ended 28 February 2014.

KPMG Inc. are the independent reporting accountants and auditors in respect of the Historical Financial Information.

RESPONSIBILITY OF THE DIRECTORS

The directors of Vunani Limited are responsible for the compilation, contents and preparation of the circular in accordance with the Listings Requirements and the Companies Act. The directors of the Fairheads Group are responsible for preparing the Historical Financial Information in accordance with the requirements of the Listing Requirements, as set out in the basis of preparation paragraph and included in Appendices 3 and 4 to the circular. The directors of the Fairheads Group and Vunani Limited are responsible for such internal control as the directors determine is necessary to enable the preparation of the circular and Historical Financial Information that are free from material misstatement, whether due to fraud or error.

RESPONSIBILITY OF THE INDEPENDENT REPORTING ACCOUNTANT

Our responsibility is to express a review conclusion on the Historical Financial Information for the six months ended 31 August 2014 and an audit opinion on the Historical Financial Information for the year ended 28 February 2014 based on work performed.

HISTORICAL FINANCIAL INFORMATION FOR THE YEAR ENDED 28 FEBRUARY 2014

We have audited the Historical Financial Information for the year ended 28 February 2014 attached as Appendix 3 to the circular prepared in accordance with the International Financial Reporting Standards and the requirements of the Companies Act of South Africa.

Responsibility of the independent reporting accountant for the audit

Our responsibility is to express an opinion on the Historical Financial Information based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

Opinion

In our opinion, the Historical Financial Information, included in the circular presents fairly, in all material respects, the financial position of the Fairheads Group at 28 February 2014 and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa.

HISTORICAL FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED 31 AUGUST 2014

We have reviewed the Historical Financial Information for the six months ended 31 August 2014 attached as Appendix 4 to the circular.

Scope of our review

We conducted our review of the Historical Financial Information in accordance with International Standard on Review Engagements [ISRE 2410: Review of Interim Financial Information Performed by the Independent Auditor of the Entity]. A review of financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the Historical Financial Information for the six months ended 31 August 2014 included in the circular does not fairly present, in all material respects, the financial position of the Fairheads Group at 31 August 2014 and its financial performance and cash flows for the period then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa.

KPMG Inc.

Registered Auditor

Per LM September Chartered Accountant (SA) Registered Auditor Director

MSC House 1 Mediterranean Street Foreshore, 8001 (PO Box 4609, Cape Town, 8000)

==> picture [213 x 58] intentionally omitted <==

(Incorporated in the Republic of South Africa) (Registration number 1997/020641/06) JSE code: VUN ISIN: ZAE000163382 (“Vunani” or “the company”)

NOTICE OF GENERAL MEETING

DETAILS OF GENERAL MEETING

Notice is hereby given that a general meeting of shareholders of the company will be held at the company’s offices, Vunani House, Vunani Office Park, 151 Katherine Street, Sandown, Sandton at 08:00 on Thursday, 30 April 2015, for the purpose of considering and, if deemed fit, passing, with or without modification, the ordinary resolutions set out below, in the manner required by the Companies Act, 2008 (Act 71 of 2008), as amended (the “Companies Act”).

The record date in terms of section 59 of the Companies Act for shareholders to be recorded in the Register in order to be able to attend, participate and vote at the general meeting is Friday, 24 April 2015.

ORDINARY RESOLUTION NUMBER 1

“RESOLVED as an ordinary resolution that the Sale of Shares Agreement, dated 10 March 2015, entered into between the Sellers (i.e. the shareholders of Fairheads International Holdings (SA) Proprietary Limited), Mandlalux Proprietary Limited (Mandlalux), Fairheads International Holdings (SA) Limited (“Fairheads International”) and Vunani Capital Proprietary Limited in terms of which Mandlalux will purchase the entire issued share capital of Fairheads International for a total consideration of R210 million, as more fully described in the circular to shareholders containing this notice of general meeting of which this ordinary resolution number 1 forms part, a signed copy of which agreement, initialled by the chairman of this meeting for identification purposes, and tabled at this meeting, be and is hereby ratified and approved.”

ORDINARY RESOLUTION NUMBER 2

“RESOLVED as an ordinary resolution that the appointment of Mr Sithembiso Nkululeko Mthethwa as an independent non-executive director of the company, with effect from 19 November 2014, be and is hereby ratified.”

ORDINARY RESOLUTION NUMBER 3

“RESOLVED as an ordinary resolution that any director of the company be, and hereby is authorised, on behalf of the company, to do or cause to be done, all such things, and to sign all such documentation as may be necessary or requisite so as to give effect to and implement the ordinary resolutions to be considered at the general meeting at which this ordinary resolution will be proposed and considered.”

THRESHOLD FOR RESOLUTION APPROVAL

For the ordinary resolutions set out above to be approved by shareholders, each resolution must be supported by more than 50% of the voting rights exercised on the resolution concerned.

RECORD DATE

The circular of which this notice of general meeting forms part has been distributed to all certificated holders registered as such on Friday, 20 March 2015, and to those dematerialised beneficial holders of Vunani shares registered as such at the aforementioned date, who have elected to receive the aforesaid circular, and all other beneficial shareholders of Vunani as at the aforementioned date who have elected to receive the aforesaid circular.

VOTING AND PROXIES

In terms of the Listings Requirements of the JSE, the votes relating to any shares held by the Vunani Limited Share Incentive Scheme will not be taken into account in determining the results of voting on ordinary resolution number 1 tabled at this general meeting.

Shareholders who have not dematerialised their shares or who have dematerialised their shares with “ownname” registration, and who are entitled to attend and vote at the general meeting, are entitled to appoint one or more proxies to attend, speak and vote in their stead. A proxy need not be a shareholder and shall be entitled to vote on a show of hands or poll. It is requested that forms of proxy be forwarded so as to reach the transfer secretaries no later than the Relevant Time. If shareholders who have not dematerialised their shares or who have dematerialised their shares with “own-name” registration, and who are entitled to attend and vote at the general meeting do not deliver forms of proxy to the transfer secretaries by the Relevant Time, such shareholders will nevertheless at any time prior to the commencement of the voting on the ordinary resolutions at the general meeting be entitled to lodge the form of proxy in respect of the general meeting, in accordance with the instructions therein with the chairperson of the general meeting. Forms of proxy must only be completed by shareholders who have not dematerialised their shares or who have dematerialised their shares with “own-name” registration.

On a show of hands, every shareholder present in person or represented by proxy and entitled to vote shall have only one vote irrespective of the number of shares such member holds. On a poll, every shareholder present in person or represented by proxy and entitled to vote shall be entitled to one vote for every share held or represented by that shareholder. On a poll taken at any such meeting a shareholder entitled to more than one vote need not, if he votes, use all of his votes, or cast all the votes he uses in the same way.

Shareholders who have dematerialised their shares, other than those shareholders who have dematerialised their shares with own-name registration, should contact their CSDP or broker in the manner and time stipulated in the agreement entered into between them and their CSDP or broker:

to furnish them with their voting instructions; or
in the event that they wish to attend the general meeting, to obtain the necessary Letter of Representation to do so.

FURTHER INFORMATION

A person attending the general meeting in person must present reasonably satisfactory identification. The chairperson of the general meeting must be reasonably satisfied that the right of a person to participate and vote at the general meeting, either as a shareholder, beneficial shareholder or as a proxy for a shareholder, has been verified.

By order of the Board

EG Dube

Chief Executive Officer

Johannesburg 26 March 2015

Registered office

Vunani House Vunani Office Park 151 Katherine Street Sandown, Sandton, 2196 (PO Box 652419, Benmore, 2010)

Transfer secretaries

Computershare Investor Services Proprietary Limited (Registration number 2004/003647/07) Ground Floor 70 Marshall Street Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107)

PRINTED BY INCE (PTY) LTD

REF. JOB007127

==> picture [213 x 58] intentionally omitted <==

(Incorporated in the Republic of South Africa) (Registration number 1997/020641/06) JSE code: VUN ISIN: ZAE000163382 (“the company”)

FORM OF PROXY

To be completed by registered certificated shareholders and dematerialised shareholders with own-name registration only.

For use in respect of the general meeting to be held at the company’s offices, Vunani House, Vunani Office Park, 151 Katherine Street, Sandown, Sandton on Thursday, 30 April 2015 at 08:00.

Ordinary shareholders who have dematerialised their shares with a CSDP or broker, other than with ownname registration, must arrange with the CSDP or broker concerned to provide them with the necessary Letter of Representation to attend the general meeting or the ordinary shareholders concerned must instruct their CSDP or broker as to how they wish to vote in this regard. This must be done in terms of the agreement entered into between the shareholder and the CSDP or broker concerned.

I/We (full name in BLOCK LETTERS)

of (address)
Telephone (work)	Telephone (home) Mobile
Email address:
being the holder(s) of		ordinary shares in the company, appoint (see note 1):
		or failing him/her,
		or failing him/her,

the chairman of the general meeting,

as my/our proxy to act on my/our behalf at the general meeting which is to be held for the purpose of considering and, if deemed fit, passing, with or without modification, the ordinary resolutions to be proposed thereat and at any adjournment thereof and to vote for or against the ordinary resolutions or to abstain from voting in respect of the ordinary shares registered in my/our name/s, in accordance with the following instructions (see note 2):

instructions (see note 2):

	Number of votes (one vote per ordinary share)
	For	Against	Abstain
Ordinary resolution number 1– approval of the acquisition of Fairheads International
Ordinary resolution number 2– ratification of the appointment of Mr SN Mthethwa as an independent non-executive director
Ordinary resolution number 3– directors’ authority

(Please indicate instructions to proxy in the space provided above by the insertion therein of the relevant number of votes exercisable).

Each shareholder is entitled to appoint one or more proxies (who need not be a shareholder of the company) to attend, speak, and on a poll, vote in place of that shareholder at the general meeting.

Signed at	on	2015
Signature(s)
Capacity

Please read the notes on the reverse side hereof.

Notes:

A member may insert the name of a proxy or the names of two alternate proxies of the member’s choice in the space(s) provided, with or without deleting “the chairman of the general meeting”. The person whose name stands first on the form of proxy and who is present at the general meeting will be entitled to act as proxy to the exclusion of those whose names follow.
A member should insert an “X” in the relevant space according to how he wishes his votes to be cast. However, if a member wishes to cast a vote in respect of a lesser number of ordinary shares than he owns in the company, he should insert the number of ordinary shares held in respect of which he wishes to vote. Failure to comply with the above will be deemed to authorise the proxy to vote or to abstain from voting at the general meeting as he deems fit in respect of all of the member’s votes exercisable at the general meeting. A member is not obliged to exercise all of his votes, but the total of the votes cast and abstentions recorded may not exceed the total number of the votes exercisable by the member.
The completion and lodging of this form of proxy will not preclude the relevant member from attending the general meeting and speaking and voting in person to the exclusion of any proxy appointed in terms hereof, should such member wish to so do.
The chairman 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.
Shareholders who have dematerialised their shares with a CSDP or broker, other than with own-name registration, must arrange with the CSDP or broker concerned to provide them with the necessary Letter of Representation to attend the general meeting or the ordinary shareholders concerned must instruct their CSDP or broker as to how they wish to vote in this regard. This must be done in terms of the agreement entered into between the shareholder and the CSDP or broker concerned.
Any alteration to this form of proxy, other than the deletion of alternatives, must be signed, not initialled, by the signatory/ies.
Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity (e.g. on behalf of a company, close corporation, trust, pension fund, deceased estate, etc.) must be attached to this form of proxy, unless previously recorded by the company or waived by the chairman of the general meeting.
A minor must be assisted by his/her parent or guardian, unless the relevant documents establishing his/her capacity are produced or have been recorded by the company.
Where there are joint holders of shares:
9.1 any one holder may sign the form of proxy; and
9.2 the vote of the senior joint holder who tenders a vote, as determined by the order in which the names stand in the company’s register of members, will be accepted.
To be valid, the completed forms of proxy must either (a) be lodged so as to reach the transfer secretaries by no later than the Relevant Time; or (b) be lodged with the chairperson of the general meeting prior to the general meeting so as to reach him by no later than immediately prior to the commencement of voting on the ordinary resolutions to be tabled at the general meeting.
The proxy appointment is revocable by the shareholders giving written notice of the cancellation to the company prior to the general meeting or any adjournment thereof. The revocation of the proxy appointment constitutes a complete and final cancellation of the proxy’s authority to act on behalf of the shareholders as of the later of: (i) the date stated in the written notice, if any; or (ii) the date on which the written notice was delivered as aforesaid.
If the instrument appointing a proxy or proxies has been delivered to the company, any notice that is required by the Act or the Memorandum of Incorporation to be delivered by the company to shareholders must (as long as the proxy appointment remains in effect) be delivered by the company to: (i) the shareholder; or (ii) the proxy or proxies of the shareholder has directed the company to do so, in writing and pay it any reasonable fee charged by the company for doing so.

Summary of the rights established in terms of section 58 of the Companies Act, 71 of 2008 (“Act”)

For purposes of this summary, “shareholder” shall have the meaning ascribed thereto in the Act.

At any time, a shareholder of a company is entitled to appoint an individual, including an individual who is not a shareholder of that company, as a proxy, to participate in, and speak and vote at, a shareholders meeting on behalf of the shareholder, or give or withhold written consent on behalf of such shareholder in relation to an decision contemplated in section 60 of the Act.
A proxy appointment must be in writing, dated and signed by the relevant shareholder, and such proxy appointment remains valid for one year after the date upon which the proxy was signed, or any longer or shorter period expressly set out in the appointment, unless it is revoked in a manner contemplated in section 58(4)(c) of the Act or expires earlier as contemplated in section 58(8)(d) of the Act.
Except to the extent that the Memorandum of Incorporation of a company provides otherwise –
3.1. a shareholder of the relevant company may appoint two or more persons concurrently as proxies, and may appoint more than one proxy to exercise voting rights attached to different securities held by such shareholder;
3.2. a proxy may delegate his authority to act on behalf of a shareholder to another person, subject to any restriction set out in the instrument appointing the proxy; and
3.3. a copy of the instrument appointing a proxy must be delivered to the relevant company, or to any other person on behalf of the relevant company, before the proxy exercises any rights of the shareholder at a shareholders meeting.
Irrespective of the form of instrument used to appoint a proxy, the appointment of the proxy is suspended at any time and to the extent that the shareholder who appointed that proxy chooses to act directly and in person in the exercise of any rights as a shareholder of the relevant company.
Unless the proxy appointment expressly states otherwise, the appointment of a proxy is revocable. If the appointment of a proxy is revocable, a shareholder may revoke the proxy appointment by cancelling it in writing, or making a later inconsistent appointment of a proxy, and delivering a copy of the revocation instrument to the proxy and the company.
The revocation of a proxy appointment constitutes a complete and final cancellation of the proxy’s authority to act on behalf of the relevant shareholder as of the later of the date: (a) stated in the revocation instrument, if any; or (b) upon which the revocation instrument is delivered to the proxy and the relevant company as required in section 58(4)(c)(ii) of the Act.

If the instrument appointing a proxy or proxies has been delivered to the relevant company, as long as that appointment remains in effect, any notice that is required by the Act or the relevant company’s Memorandum of Incorporation to be delivered by such company to the shareholder, must be delivered by such company to the shareholder, or to the proxy or proxies, if the shareholder has directed the relevant company to do so in writing and paid any reasonable fee charged by the company for doing so.

A proxy is entitled to exercise, or abstain from exercising, any voting right of the relevant shareholder without direction, except to the extent that the Memorandum of Incorporation, or the instrument appointing the proxy provide otherwise.

If a company issues an invitation to shareholders to appoint one or more persons named by such company as a proxy, or supplies a form of instrument for appointing a proxy:
9.1. such invitation must be sent to every shareholder who is entitled to notice of the meeting at which the proxy is intended to be exercised;
9.2. the invitation, or form of instrument supplied by the relevant company, must: (a) bear a reasonably prominent summary of the rights established in section 58 of the Act; (b) contain adequate blank space, immediately preceding the name or names of any person or persons named in it, to enable a shareholder to write in the name and, if so desired, an alternative name of a proxy chosen by such shareholder; and (c) provide adequate space for the shareholder to indicate whether the appointed proxy is to vote in favour or against the applicable resolution/s to be put at the relevant meeting, or is to abstain from voting;
9.3. the company must not require that the proxy appointment be made irrevocable; and
9.4. the proxy appointment remains valid only until the end of the relevant meeting at which it was intended to be used, unless revoked as contemplated in section 58(5) of the Act.

AI assistant

VUNANI LIMITED — Proxy Solicitation & Information Statement 2015

48847_rns_2015-03-31_7c752747-e147-4f4d-a498-5c6fb23a7efa.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

Action required:

CIRCULAR TO VUNANI SHAREHOLDERS

regarding the acquisition by Mandlalux, a 70% owned subsidiary of Vunani Capital, of 100% of the issued share capital of Fairheads International for a total consideration of R210 million,

a notice of general meeting of Vunani shareholders; and

a form of proxy for use by certificated shareholders and “own-name” registered dematerialised shareholders only.

Corporate Adviser

Date of issue: 26 March 2015

CORPORATE INFORMATION AND ADVISERS

INFORMATION RELATING TO VUNANI:

Directors

Company secretary and registered office

Designated Adviser

Date and place of incorporation

Corporate Adviser

Transfer secretaries

Legal Adviser to Vunani

INFORMATION RELATING TO FAIRHEADS INTERNATIONAL

Directors:

Registered address:

Legal Adviser to Fairheads International

TABLE OF CONTENTS

ACTION REQUIRED BY VUNANI SHAREHOLDERS

If you are in any doubt as to what action to take in regard to this circular, please consult your CSDP, broker, banker, accountant, attorney or other professional adviser immediately.

ACTIONS REQUIRED BY CERTIFICATED SHAREHOLDERS AND OWN-NAME DEMATERIALISED

SHAREHOLDERS

ACTIONS REQUIRED BY DEMATERIALISED SHAREHOLDERS OTHER THAN THOSE WITH OWN-NAME REGISTRATION

Vunani does not accept any responsibility and will not be held liable for any failure on the part of the broker or CSDP of a dematerialised shareholder to notify such dematerialised shareholder of the details of this circular.

ELECTRONIC PARTICIPATION

IDENTIFICATION OF MEETING PARTICIPANTS

SALIENT DATES AND TIMES

Notes:

SALIENT FEATURES

THE TRANSACTION

Background information

Rationale

Irrevocable undertaking

JSE transaction categorisation

DIRECTORS’ RESPONSIBILITY FOR FINANCIAL INFORMATION

FINANCIAL EFFECTS

GENERAL MEETING

COPIES OF THIS CIRCULAR

DATE OF INFORMATION PROVIDED

DEFINITIONS

CIRCULAR TO SHAREHOLDERS

1. PURPOSE OF AND REASON FOR THE CIRCULAR

2. THE TRANSACTION

2.1 Sale of Shares Agreement

2.1.1 Goodwill

2.2 Description of the business conducted by Fairheads International

2.3 Purchase Consideration

2.4 Pre-Effective Date Dividend

2.5 Funding

2.5.1 MTL

2.5.2 Deferred MTL

2.5.3 Covenants

2.5.4 Equity Cure

2.5.5 Maximum exposure to Vunani

2.6 The Sellers

2.6.1 The Sellers and amounts payable to each Seller

2.6.2 Guarantees, restrictions and income tax considerations

2.7 Rationale for the Transaction

2.8 Effective Date

2.9 Conditions Precedent

3. EFFECT OF THE TRANSACTION ON VUNANI

3.1 Overview

3.2 Pro forma financial effects of the Transaction

3.3 Historical financial information of the Fairheads Group

4. FINANCIAL INFORMATION RELATING TO VUNANI

4.1 Responsibility

4.2 Adequacy of capital

4.3 Material changes

5. INFORMATION RELATING TO VUNANI

5.1 Nature of business

5.2 History

5.3 Directors’ opinion relating to prospects

5.4 Major shareholders

VUNANI LIMITED Proxy Solicitation & Information Statement 2015