THIS CIRCULAR IS IMPORTANT AND REQUIRES …...1 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR...

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THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION The definitions commencing on page 7 of this Circular apply mutatis mutandis throughout this document including this cover page. Shareholders are referred to page 5 of this Circular, which sets out a summary of the action required of Shareholders with regard attendance at the General Meeting, full details of which are set out in this Circular. If you are in any doubt as to the action that you should take, please consult your CSDP, Broker, banker, legal advisor, accountant or other professional advisor immediately. If you have disposed of all of your Shares, this Circular should be forwarded to the purchaser to whom, or the CSDP, Broker, banker or agent, through whom you disposed of such Shares. This Circular is issued in compliance with the Listings Requirements for the purpose of providing information to the public with regard to the Company.

ECSPONENT LIMITED

(Formerly John Daniel Holdings Limited) (Incorporated in the Republic of South Africa)

(Registration number 1998/013215/06) Share code: ECS

ISIN ZAE000179594 (“the Company” or “ECSPONENT”)

CIRCULAR TO ECSPONENT SHAREHOLDERS relating to: - approval of the acquisition of 100% of Escalator Financial Services from a related party; - approval of the acquisition of the business and assets of Sanceda from a deemed related party; - approval of the acquisition of 100% of Ecsponent Botswana from a related party; - approval of the option to convert a related party loan at an issue price of 14 cents per share; - approval of other resolutions to give effect to the Proposals contained in this Circular; and incorporating: – a Notice of General Meeting; – a form of proxy (to be completed by certificated shareholders and dematerialised shareholders

only). The Directors whose names appear on page 3 of this Circular, collectively and individually accept full responsibility for the accuracy of the information given in this Circular and certify that, to the best of their knowledge and belief, there are no facts the omission of which would make any statement in this Circular false or misleading and that they have made all reasonable inquiries to ascertain such facts and that this Circular contains all information required by law and by the Listings Requirements. Arcay Moela, which is regulated in terms of the Listings Requirements, is acting for the Company and the JSE Limited and no one else in relation to the preparation of this Circular and will not be responsible to anyone other than the Company and the JSE in relation to the preparation of this Circular.

Sponsor

Independent Reporting Accountants

Independent Expert

Date of issue: 26 June 2014 This Circular is available in English only. Additional copies of this Circular in its printed format, may be obtained from the registered office of the Company and the Transfer Secretaries during normal business hours on Business Days at the addresses set out in the “Corporate Information and Advisors” section of this Circular from Thursday, 26 June 2014 until Friday, 25 July 2014, both days inclusive.

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CERTAIN FORWARD-LOOKING STATEMENTS

This Circular includes certain “forward-looking information”. All statements other than statements of historical fact are, or are deemed to be, forward-looking statements, including, without limitation those concerning: ECSPONENT’s strategy; the economic outlook for the industry; growth prospects and outlook of ECSPONENT’s operations, individually or in the aggregate; ECSPONENT’s liquidity and capital resources and expenditure; and the outcome and consequences of any pending litigation proceedings. These forward-looking statements are not based on historical facts, but rather reflect ECSPONENT’s current expectations concerning future results and events and generally may be identified by the use of forward-looking words or phrases such as “believe”, “aim”, “expect”, “anticipate”, “intend”, “foresee”, “forecast”, “likely”, “should”, “planned”, “may”, “estimated”, “potential” or similar words and phrases. Similarly, statements that describe ECSPONENT’s objectives, plans or goals are or may be forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause ECSPONENT’s actual results, performance or achievements to differ materially from the anticipated results, performance or achievements expressed or implied by these forward-looking statements. Although ECSPONENT believes that the expectations reflected in these forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Shareholders should review carefully all information, including the pro forma financial statements and the notes to the pro forma financial statements, included in this Circular. The forward-looking statements included in this Circular are made only as of the Last Practicable Date. ECSPONENT undertakes no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this Circular or to reflect the occurrence of unanticipated events. All subsequent written and oral forward-looking statements attributable to ECSPONENT or any person acting on its behalf are qualified by the cautionary statement in this section of the Circular.

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CORPORATE INFORMATION AND ADVISORS

Directors of ECSPONENT Executive TP Gregory (Chief Executive Officer) DP van der Merwe (Group Financial Director) Independent non-executive RJ Connellan (Chairman) KA Rayner BR Topham Non-executive E Engelbrecht

Date of incorporation of ECSPONENT 09 July 1998 Place of incorporation of ECSPONENT Johannesburg, South Africa

Company secretary and registered office Timbavati Business Consultants Acacia House Green Hill Village Office Park Cnr of Nentabos and Botterklapper Street The Willows Pretoria East, 0181 (PO Box 39660, Garsfontein East, 0060)

Auditors and Independent Reporting Accountants AM Smith and Company Inc. (Practice number: 957399) 774 Waterval Road Little Falls, 1724 (Private Bag X2, Strubensvalley, 1735)

Sponsor Arcay Moela Sponsors Proprietary Limited (Registration Number 2006/033725/07) Ground Floor, One Health Building Woodmead North Office Park 54 Maxwell Drive Woodmead, 2157 (PO Box 62397, Marshalltown, 2107)

Transfer Secretaries Link Market Services South Africa (Pty) Limited, Registration Number: 2000/007239/07), 13th Floor, Rennie House, 19 Ameshoff Street, Johannesburg, 2001 (PO Box 4844, Johannesburg, 2000)

Independent Expert Huntrex 299 Proprietary Limited (Trading as Effortless Corporate Finance) Registration number: 2010/004734/07 23 Nicholi Ave Kommetjie, 7975 (PO Box 251, Edgemead, 7407)

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TABLE OF CONTENTS

Page

Certain Forward-Looking Statements 2 Corporate Information and Advisors 3 Action Required by Shareholders 5 Salient Dates and Times 6 Definitions and Interpretations 7 Circular 1. Introduction 12 2. Rationale for a Rights Offer detailed in a separate circular 12 3. Particulars of a Rights Offer 13 4. Acquisitions, Convertible Loans and other Resolutions 14 5. Pro Forma Financial Information 21 6. Estimated expenses in relation to the transactions 25 7. Information on ECSPONENT 25 8. ECSPONENT Group Restructure and other transactions 35 9. Directors’ Responsibility Statement 36 10. Directors’ Opinion and Recommendations 36 11. Exchange Control Regulations 37 12. Consents 37 13. Documents available for inspection 37 Annexures 1 Independent fairness opinion on the Acquisitions 39 2 Independent fairness opinion on the Convertible Loan 42 3 Pro Forma Statement of Financial Position and Statement of profit and loss and other

comprehensive income of ECSPONENT 45 4 Independent Reporting Accountants’ Report on the Pro Forma Financial Information of

ECSPONENT 53 5 Historical Financial Information of Escalator Financial Services for the three periods

ended 31 December 2013 55 6 Independent Reporting Accountants’ Report on the Historical Financial Information of

Escalator Financial Services 71 7 Historical Financial Information of Sanceda for the two years ended 31 December

2013 73 8 Independent Reporting Accountants’ Report on the Historical Financial Information of

Sanceda 87 9 Historical Financial Information of Ecsponent Botswana for the two years ended 31

December 2013 89 10 Independent Reporting Accountants’ Report on the Historical Financial Information of

Ecsponent Botswana 112 11 Details of Material Borrowings, Loans Receivable and Inter-company Transactions 114 12 Details of material contracts and transactions 117 NOTICE OF GENERAL MEETING FORM OF PROXY

Attached

Attached

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ACTION REQUIRED BY SHAREHOLDERS

If you are in any doubt as to what action you should take, you should consult your CSDP, Broker, banker, legal advisor, accountant or other professional advisor immediately. If you have disposed of all of your Shares, this Circular should be forwarded to the purchaser to whom, or the CSDP, Broker, banker or agent, through whom you disposed of such Shares. Action required by holders of Certificated Shares in relation to the General Meeting

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

If you are unable to attend the general meeting, but wish to be represented thereat, you must complete and return the attached form of proxy (white), in accordance with the instruction contained therein, to be received by the transfer secretaries, Link Market Services South Africa (Pty) Limited,(Registration Number: 2000/007239/07), 13th Floor, Rennie House, 19 Ameshoff Street, Johannesburg, 2001 (PO Box 4844, Johannesburg, 2000) by no later than 10h00 on Wednesday, 23 July 2014 or such later date and time which will be released on SENS and published in the press.

Action required by holders of Dematerialised Shares in relation to the General Meeting Own name registration You are entitled to attend, or be represented by proxy, at the general meeting. If you are unable to attend the general meeting, but you wish to be represented thereat, you must complete the attached form of proxy (white), in accordance with the instructions contained therein, to be received by the transfer secretaries, Link Market Services South Africa (Pty) Limited,(Registration Number: 2000/007239/07), 13th Floor, Rennie House, 19 Ameshoff Street, Johannesburg, 2001 (PO Box 4844, Johannesburg, 2000) by no later than 10h00 on Wednesday, 23 July 2014 or such later date and time which will be released on SENS and published in the press. Other than own name registration If your CSDP or broker does not contact you, you are advised to contact your CSDP or broker and provide them with your voting instructions. If your CSDP does not obtain instructions from you, they will be obliged to act in terms of your mandate furnished to them. You are entitled to attend, or be represented, at the general meeting. You must not complete the attached form of proxy (white). You must advise your CSDP or broker timeously if you wish to attend, or be represented at the general meeting. If you do wish to attend or be represented at the general meeting, your CSDP or broker will be required to issue the necessary Letter of Representation to you to enable you to attend or to be represented at the general meeting.

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SALIENT DATES AND TIMES

2014

Record date to determine which shareholders are entitled to receive the Circular

Friday, 20 June

Last day to trade in order to be eligible to vote Friday, 11 July

Record date in order to be eligible to vote Friday, 18 July

Last day for receipt of proxy forms by 10h00 on Wednesday, 23 July

General meeting to be held at 10h00 on Friday, 25 July

Results of general meeting to be published on SENS by Friday, 25 July

Results of the general meeting published in the press and special resolution submitted to CIPC on

Monday, 28 July

Notes: 1. Unless otherwise indicated, all dates and times are South African dates and times. Any changes to the

above dates will published on SENS.

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DEFINITIONS AND INTERPRETATIONS

Throughout this Circular, unless the context indicates otherwise, the words in the column on the left below shall have the meaning stated opposite them in the column on the right below, reference to the singular shall include the plural and vice versa, words denoting one gender include the other and words and expressions denoting natural persons include juristic persons and associations of persons: “Act” or “Companies Act” the South African Companies Act, No 71 of 2008, as amended from time to time;

“Acquisitions”

the potential acquisition by ECSPONENT of 100% in Escalator Financial Services, the business and assets of Sanceda and 100% in Ecsponent Botswana which acquisitions from related parties requires shareholder approval in general meeting in terms of the JSE Listings Requirements, details of which are included in this circular to shareholders;

“Arcay Moela” Arcay Moela Sponsors Proprietary Limited (Registration Number 2006/033725/07), a private company duly registered and incorporated under the laws of South Africa and registered Sponsor to ECSPONENT;

“Board” or “Directors” the board of directors of ECSPONENT as at the date of this Circular;

“Broker” any person registered as a “broking member (equities)” in terms of the Rules of the JSE, issued and published in accordance with the provisions of the FMA;

“Business Day” any day of the week, excluding Saturdays, Sundays and all official South African public holidays;

“Certificated Shareholders” Shareholders who hold Certificated Shares;

“Certificated Shares” Shares which have not yet been dematerialised, title to which is represented by physical Documents of Title;

“control” control means the holding of a beneficial interest equal to or exceeding 35% of the issued Shares of ECSPONENT as specified in terms of Section 123(5) of the Act;

“controlling shareholder” Escalator, which in turn is controlled by Escalator Mauritius;

“CIPC” the South African Companies and Intellectual Property Commission (formerly known as CIPRO);

“Circular” this bound document (together with all annexures), dated 26 June 2014 and incorporating, a Notice of General Meeting and a form of proxy, where applicable;

“Common Monetary Area” collectively, South Africa, the Republic of Namibia and the Kingdoms of Lesotho and Swaziland;

“Companies Regulations” the regulations published by the Minister of Trade and Industry in terms of section 120 and 223 of the Act, and which regulations relate to the functioning of the TRP;

“Convertible Loan” the future loan of up to R55 million that may arise in the event that there is any shortfall in the subscriptions in the intended rights offer, which loan if drawn down upon by the board of directors, will be convertible into shares at the same price of the intended rights offer, at 14 cents per share, which right of conversion is subject to Shareholder approval as detailed in this circular;

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“Cryo-Save N.V.”

Cryo-Save Group N.V. (Registration number 27187482), a public holding company, duly registered and incorporated in accordance with Dutch law, having its registered address at IJsselkade 8, 7201 HB Zutpen, The Netherlands, listed on NYSE Euronext Amsterdam and specialises in harvesting and storing of stem cells and the Joint Venture shareholder in Cryo-Save;

“CSDP” a Central Securities Depository Participant as defined in the FMA and accepted as a participant in terms of the FMA;

“dematerialised” or “dematerialisation”

the process by which paper share certificates are replaced with electronic records of ownership under Strate with a duly appointed CSDP or Broker (as the case may be);

“Dematerialised Shareholders”

Shareholders who hold Dematerialised Shares;

“Dematerialised Shares” Shares which have been Dematerialised, title to which are no longer represented by physical Documents of Title;

“Documents of Title” share certificates, certified transfer deeds, balance receipts, or any other documents of title to Shares;

“Earnings Per Share” or “EPS”

earnings attributable to each Share, calculated by dividing the Company's profit attributable to Shareholders by the weighted average number of issued Shares;

“ECSPONENT” or “the Company”

Ecsponent Limited (formerly Escalator Investments Holdings Limited as temporarily registered at CIPC and formerly John Daniel Holdings Limited), Registration Number 1998/013215/06, a public company duly registered and incorporated under the laws of South Africa and listed on the VCM on the JSE having its registered address at Acacia House, Green Hill Village Office Park, Cnr of Nentabos and Botterklapper Street, The Willows, Pretoria East;

“ECSPONENT Group” or “the Group”

ECSPONENT and its subsidiaries from time to time;

“Ecsponent Credit Services” Ecsponent Credit Services Proprietary Limited, formerly Viscacom Proprietary Limited (Registration Number 2010/015744/07), a private company duly registered and incorporated under the laws of South Africa; having its registered address at 11 Pieter Street, Unit 2 Time Square Office Park, Highveld Techno Park, Eco Park, 0169 and a wholly owned subsidiary of ECSPONENT through Resitbyte Proprietary Limited, the divisional holding company for the ECSPONENT financial services subsidiaries, which is 100% held by ECSPONENT;

“Escalator”

Escalator Capital (RF) Limited (Registration Number 2009/015563/06), a public company duly registered and incorporated in South Africa, having its registered address at Acacia House, Green Hill Village Office Park, Cnr of Nentabos and Botterklapper Street, The Willows, Pretoria East and partial underwriters of the Rights Offer of in the amount of R45 million. Escalator is controlled by Escalator Mauritius, which is in turn controlled by the Holdem Legacy Trust;

“Ecsponent Botswana” Ecsponent Limited, formerly Escalator Investment Holdings Limited (Registration Number CO.2010/7658), a public company duly registered and incorporated under the laws of Botswana, having its registered address at Exponential Building, 6th Floor, Plot 54351, New CBD, Gaborone, Botswana in which ECSPONENT will own 100% pursuant to the Ecsponent Botswana Acquisition;

“Ecsponent Botswana Acquisition”

the acquisition of a 100% interest in Ecsponent Botswana in terms of an agreement dated 5 March 2014 between ECSPONENT and Escalator Mauritius for the acquisition of 100% of the issued share capital and loan accounts in Ecsponent Botswana for a purchase consideration of R5 million, payable through the increase in the shareholder loan from Escalator, which loan will be settled through the Rights Offer;

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“Ecsponent Botswana Vendor”

Escalator Mauritius;

“Escalator Financial Services Acquisition”

the acquisition of 100% of Escalator Financial Services in terms of an agreement dated 5 March 2014 between ECSPONENT and Escalator, with effect from 1 January 2014, for a purchase consideration of R15 million to be settled by way of an increase in the loan account owing to Escalator;

“Escalator Financial Services Vendor”

Escalator;

“Escalator Loan”

the loan advanced to ECSPONENT, which loan is expected to exceed R45 million pursuant to the anticipated approval of the Acquisitions, which loan will be repaid in whole or in part through the Rights Offer by way of issue of Shares to Escalator or its nominees in terms of the Underwriting;

“Escalator Mauritius” Escalator Capital Global Limited (Registration number 106994 C1/GBL), a public company duly registered and incorporated with limited liability in accordance with the laws of Mauritius its main place of business situated at 2nd Floor, Caudan Peninsula, Falcon Street Port Louis, Mauritius, which company is the Ecsponent Botswana Vendor and the controlling shareholder of Escalator, which in turn is controlled by the Holdem Legacy Trust;

“Ecsponent Swaziland” Ecsponent Limited, formerly Escalator Capital Limited (Registration number R7/38733), a public company duly registered and incorporated with limited liability in accordance with the laws of the Kingdom of Swaziland with its main place of business situated at 7 The Gables, Ezulwini, Swaziland, a newly formed company incorporated on 16 July 2013, in which ECSPONENT owns 84.71% pursuant to a subscription for new shares for a consideration of R1 000, with effect from 1 January 2014;

“Escalator Underwriting Agreement”

the Underwriting Agreement between Escalator and ECSPONENT and addenda thereto, dated 15 May 2014, in terms of which Escalator has agreed to underwrite up to R45 million or equivalent to the loan balance owing by ECSPONENT to Escalator;

“Exchange Control Regulations”

the South African Exchange Control Regulations, 1961, as amended, promulgated in terms of section 9 of the South African Currency and Exchanges Act, 1933 (Act 9 of 1933), as amended or replaced from time to time;

“Financial Markets Act” or “FMA”

the South African Financial Markets Act, 2012 (Act 19 of 2012) (formerly the Securities Services Act), as amended or replaced from time to time;

“General Meeting” the General Meeting of ECSPONENT Shareholders to be held on Friday, 25 July 2014 as detailed in the notice of General Meeting attached to this Circular;

“Headline Earnings Per Share” or “HEPS”

Earnings Per Share excluding profits or losses associated with the sale or termination of discontinued operations, fixed assets or related businesses, or from any permanent devaluation or write off of their values, calculated by dividing the Company’s adjusted profit by the weighted average number of issued Shares;

“Holdem Legacy Trust” Holdem Legacy Trust, Trust number IT1981/11), a discretionary trust, the trustees of which are Eune Engelbrecht (a director of ECSPONENT) and Ramona Engelbrecht, ID 781117 0004 082;

“independent shareholders” or “minority shareholders”

holders of any shares in ECSPONENT that entitles them to exercise general voting rights and who/which are independent of an offeror or any related or inter-related person, or person acting in concert with any of them;

“the JSE” JSE Limited (Registration Number 2005/022939/06), a public company duly registered and incorporated under the laws of South Africa and licensed as a securities exchange under the FMA;

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“the King III Report” the King III report, being the King Report on Corporate Governance in South Africa 2009;

“Last Practicable Date” 11 June 2014, being the last practicable date prior to the finalisation of this Circular;

“Lazaron” Salveo Swiss Technologies Limited, formerly Lazaron Biotechnologies (SA) Limited (Registration Number 2004/004630/06), a public company duly registered and incorporated under the laws of South Africa, which is a wholly owned subsidiary of ECSPONENT pursuant to the Lazaron General Offer, having its registered address at Acacia House, Green Hill Village Office Park, Cnr of Nentabos and Botterklapper Street, The Willows, Pretoria East;

“Link Market Services” Link Market Services South Africa (Pty) Limited,(Registration Number: 2000/007239/07), 13th Floor, Rennie House, 19 Ameshoff Street, Johannesburg, 2001 (PO Box 4844, Johannesburg, 2000), a private company duly registered and incorporated under the laws of South Africa;

“Listings Requirements” or “JSE Listings Requirements”

the Listings Requirements of the JSE, as amended from time to time;

“Memorandum of Incorporation” and “MOI”

the current Memorandum of Incorporation of ECSPONENT as at the date of this circular, which MOI was approved by Shareholders on 31 July 2013 and filed by CIPC on 23 December 2013;

“Net Asset Value Per Share” or “NAV Per Share”

shareholders’ equity, as determined by deducting liabilities from assets, divided by the number of Shares in issue;

“Proposals” the proposals in terms of this Circular, comprising, inter alia, the approval of the Acquisitions and the approval of the Convertible Loan;

“Rand” or “R” South African Rand, the official currency of South Africa;

“Ratio of Entitlement” the number of Rights Offer Shares to which Shareholders are entitled in terms of the Rights Offer, being 160.98829 Shares for every 100 Shares held on the Record Date, and/or such proportionate lower number of Shares in respect of a holding of less than 100 Shares as detailed in a separate circular;

“Revised Listing Particulars”

the revised listing particulars of the Company contained in a separate Rights Offer circular, which will be posted to Shareholders in the second quarter of 2014;

“Rights Offer” the renounceable Rights Offer set out in a separate Rights Offer circular to subscribe for Rights Offer Shares at 14 cents per Share in the Ratio of Entitlement;

“Rights Offer Shares” the 715 000 000 Shares which are being offered to Shareholders in terms of the Rights Offer;

“Sanceda” Sanceda Collections Proprietary Limited (Registration number 2010/015747/07), a private company duly registered and incorporated under the laws of South Africa having its registered address at Acacia House, Green Hill Village Office Park, Cnr of Nentabos and Botterklapper Street, The Willows, Pretoria East, which business and assets will be acquired by a subsidiary of ECSPONENT pursuant to the approval of the Sanceda Acquisition, and which shareholder is Escalator Mauritius (100%);

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“Sanceda Acquisition” the acquisition of the assets, leased assets, marks (being patents, trademarks, brands, designs) and goodwill of Sanceda in terms of an agreement dated 5 March 2014 between ECSPONENT and Sanceda, with effect from 1 January 2014, for a purchase consideration of R7 million to be settled by way of the assumption of ongoing liabilities associated with the leased assets and the balance in cash, which cash portion will be funded by Escalator through the Escalator loan account;

“Sanceda Vendor”

Sanceda;

“SENS” the Stock Exchange News Service of the JSE;

“Shares” or “Ordinary Shares”

ordinary shares of no par value in the issued share capital of ECSPONENT;

“Shareholders” the registered holders of Shares;

“SMMEs” small, medium and micro enterprises;

“South Africa” the Republic of South Africa;

“South African Register” means the register of Certificated Shareholders maintained by the Company and the sub-register of Dematerialised Shareholders maintained by the relevant CSDPs in terms of sections 50(1)(b) of the Act;

“Sponsor” Arcay Moela;

“Strate” Strate Limited (Registration Number 1998/022242/06), a public company duly registered and incorporated under the laws of South Africa, which is registered as a central securities depositary and which is responsible for the electronic custody and settlement system on the JSE;

“the TRP” the Takeover Regulation Panel, as established by section 196 of the Act;

“Tangible Net Asset Value Per Share” or “TNAV per share”

Net Asset Value Per Share excluding goodwill and intangible assets;

“Transactions” the transactions proposed in terms of this Circular, comprising the approval of the Acquisitions and the approval of the Convertible Loan;

“Transfer Secretaries” Link Market Services;

“Underwriter” Escalator or its nominee;

“USA” the United States of America;

“VAT” Value-Added Tax;

“VCM” Venture Capital Market list on the JSE;

“Vendors” Escalator, Sanceda and Escalator Mauritius;

“Vinguard Assets”

a going concern, the business that manufactures and distributes the Vinguard Dual Release S02 gas generating sheet for fresh produce and flowers, the disposal of which was approved by Vinguard shareholders on 24 January 2014; and

“Vinguard” Vinguard Limited (Registration Number 2002/026858/06), a public company duly registered and incorporated under the laws of South Africa; having its registered address at Acacia House, Green Hill Village Office Park, Cnr of Nentabos and Botterklapper Street, The Willows, Pretoria East and a subsidiary of ECSPONENT in which ECSPONENT holds 75.87% (remaining shareholding held by minority shareholders).

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ECSPONENT LIMITED



ISIN ZAE000179594 (“the Company” or “Ecsponent”)

CIRCULAR TO ECSPONENT SHAREHOLDERS

1 INTRODUCTION

Shareholders are referred to the announcements released on SENS on 6 November 2013, 20 December 2013, 10 January 2014 and 6 March 2014 in which Shareholders were advised that the Board has resolved to acquire the controlling interests of three companies as detailed in this circular, to raise approximately R100 100 000 through a Rights Offer at 14 cents per share, partially underwritten by Escalator in the amount of R45 million, and to approve a Convertible Loan for the balance of any shortfall in capital raised through the Rights Offer. The Acquisitions, rights offer and Convertible Loan are being undertaken in order to diversify and grow the group’s financial services capabilities, strengthen the Company’s balance sheet, reduce the level of group borrowings and enable the Company and Group to fast track growth objectives through the injection of additional funding. Escalator is an investment holding company, which company has injected loan funding into ECSPONENT to assist with the turnaround and growth of the ECSPONENT Group. Each acquisition is capable of being approved separately and the Acquisitions are not dependent on either the intended Rights Offer nor on approval of the Convertible Loan. The purchase consideration will be satisfied through an increase in the existing shareholder loan from Escalator. If the Rights Offer of R100 100 000 is not fully subscribed, then Escalator has agreed, subject to shareholder approval, to advance a new Convertible Loan to ECSPONENT, for any shortfall in cash raised from the Rights Offer. These funds will be used for further growth opportunities. The purpose of this Circular is to furnish Shareholders with relevant information relating to the proposed Escalator Financial Services Acquisition, the Sanceda Acquisition, the Ecsponent Botswana Acquisition, the approval of a related party Convertible Loan (dependent on the outcome of the Rights Offer). The Circular also details the action required by Shareholders, and the implications thereof, in accordance with the Act and the Listings Requirements.

In addition, a resolution to approve the issue of more than 30% of the issued share capital to facilitate the intended Rights Offer is contained in the notice of general meeting in order to ensure that the Company is able to implement the intended Rights Offer in accordance with the Act. This Circular also provides the rationale and other information on the separate Rights Offer circular as well as a notice of General Meeting to approve the various ordinary and special resolutions as detailed in the notice and this Circular.

2 RATIONALE FOR A RIGHTS OFFER AS DETAILED IN A SEPARATE CIRCULAR

It is the view of the Directors that the recapitalisation of ECSPONENT by way of a Rights Offer is required to enable the ECSPONENT Group to further capitalise the group and to facilitate the future growth of the Group. The working capital requirements of ECSPONENT during the year were facilitated by the Escalator Loan. A separate circular detailing the Rights Offer will be posted to Shareholders in the second quarter of 2014.

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The potential R100 100 000 raised through the Rights Offer of 715 000 000 shares at 14 cents per share, should the Rights Offer be fully subscribed, will be utilised on an approximate basis, as follows:

R45 million to reduce the Escalator Loan by way of capitalisation of the loan through the underwriting by Escalator;

R55 million to settle group trade creditors, to inject additional working capital to fund expansion of the ECSPONENT Group pursuant to the proposed Acquisitions.

3 PARTICULARS OF THE RIGHTS OFFER

A separate Rights Offer circular is being finalised whereby 715 000 000 Shares will be offered for subscription to Shareholders. Qualifying Shareholders will receive rights to subscribe for Rights Offer Shares on the basis of 160.98829 new Shares for every 100 Shares held on the Record Date at the Rights Offer Price. The Rights Offer will raise equity capital of R100 100 000 if it is fully subscribed.

The Rights Offer Price is fixed at 14 cents per Share and will reflect an increase in the stated capital account. The Rights Offer Price also represents a discount of 19.8% to the VWAP of the Shares on the JSE for the 30 days ended 5 November 2013, being 17.46 cents. The board of directors agreed to a slightly discounted Rights Offer price to act as an incentive to ECSPONENT shareholders to follow their Rights. Full details of the Rights Offer, incorporating Revised Listings Particulars, are set out in a separate circular to shareholders to be issued during the second quarter of 2014.

Escalator, which is a related party of ECSPONENT, will be partly underwriting the Rights Offer to the value of its loan account but a minimum of R45 million, which amount is anticipated will be settled by the capitalisation of loans owing by ECSPONENT to Escalator as at 30 June 2014, pursuant to the anticipated separate approval by Shareholders of the Acquisitions at a General Meeting of ECSPONENT Shareholders as detailed in paragraph 4 below.

Should a large number of ECSPONENT shareholders follow their rights and/or apply for large numbers of shares in terms of excess applications allowed, resulting in Escalator not being required to capitalise all or a portion of the R45 million through its underwriting commitment, such cash will be not be used to settle the Escalator loans as the intention is to raise additional cash in order to grow the ECSPONENT group going forward.

It is anticipated that the entire Escalator loan will be capitalised through the underwriting of the Rights Offer, with a minimum amount underwritten of R45 million. To the extent that there is a shortfall in the R100 million rights offer, Escalator will provide additional loan funding, termed the Convertible Loan, and shareholders will be asked to approve the conversion of any loan up to a maximum of R55 million as detailed in paragraph 4.4 below. This final amount can however only be established after the separate approval of the Acquisitions and after the Rights Offer has closed.

The proposed terms of conversion require Shareholder approval as detailed in paragraph 4.4 below and as set out in the Notice of General Meeting attached to this Circular.

Escalator or its nominee may, as a consequence of fulfilling its underwriting obligations of R45 million in relation to the proposed Rights Offer, hold 47.53831% in ECSPONENT in the event that none of the existing Shareholders follow their rights. A mandatory offer will not be required as Escalator is already the controlling Shareholder of ECSPONENT.

The Board has made due and careful enquiry to confirm that Escalator can meet its commitments in terms of the Escalator Underwriting Agreement. It should be noted that R28 232 459 of the underwritten amount has already been advanced to the Company in the form of loans to the Company as at 31 March 2014 and the loan amount due will exceed R45 million by 30 June 2014, pursuant to the approval of the Acquisitions.

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4 ACQUISITIONS, CONVERTIBLE LOAN AND OTHER RESOLUTIONS

4.1 Details of the Escalator Financial Services Acquisition

The Company entered into the Escalator Financial Services Acquisition on 5 March 2014 and was announced on SENS on 6 March 2014 and in the press on 7 March 2014.

4.1.1 Terms for the Escalator Financial Services Acquisition

On 5 March 2014, ECSPONENT entered into an agreement with Escalator for the acquisition of 100% of the issued share capital in and loan accounts against Escalator Financial Services for a purchase consideration of R15 million, payable through the increase in the existing shareholder loan from Escalator, which loan will be settled through the Rights Offer. The Escalator Financial Services Acquisition purchase consideration is expected to result in a transfer of R11.1 million to the common control reserve in terms of ECSPONENT’s merger accounting policy. Escalator Financial Services was established by Escalator and was not purchased by Escalator from a third party in the past three years.

4.1.2 Business of Escalator Financial Services Escalator Financial Services was incorporated as a private company on 24 April 2006 under the name Tiespro 69 (Pty) Ltd, registration number 2006/012668/07. The name was changed to Escalator Financial Services on 22 November 2011. Escalator Financial Services is registered with the FSB as a Financial Services Provider (licence number 32968) to provide intermediary services between product providers and the public in general. Escalator Financial Services’ main business is the provision of financial services and it has been appointed to act as intermediary between Escalator and the public as Placement Agent. Escalator Financial Services recruits and manages qualified advisors under its FSB licence to market the products under the rules and regulations that are prescribed by the FSB. Advisors who are already registered with the FSB are also to be evaluated to market these products.

4.1.3 Rationale for the Escalator Financial Services Acquisition The ECSPONENT financial services strategy requires access to and control of key elements of the channel to market. FSB regulatory licences are an important component of the roll out of the strategy and the acquisition of Escalator Financial Services provides ECSPONENT with the required licences, skills and infrastructure.

4.1.4 Conditions precedent The Escalator Financial Services Acquisition is subject to normal regulatory approvals as well as ECSPONENT Shareholder approval as contemplated in the JSE Listings Requirements in General Meeting.

4.1.5 Categorisation

In terms of the Listings Requirements, the Escalator Financial Services Vendor is a material Shareholder of ECSPONENT. The Escalator Financial Services Acquisition is therefore categorised as a related party transaction in terms of the Listings Requirements and accordingly requires a fairness opinion by an independent expert as well as ECSPONENT Shareholder approval.

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The Board has appointed Effortless Corporate Finance as the Independent Expert to determine if the terms and conditions of the Escalator Financial Services Acquisition are fair to the ECSPONENT Shareholders, which Independent Expert has concluded that the terms of the Escalator Financial Services Acquisition are fair to Shareholders. The report of the Independent Expert is provided in Annexure 1 to this Circular.

4.1.6 Opinions and recommendations The Board has considered the terms and conditions of the Escalator Financial Services Acquisition, and after taking into account the report of the Independent Expert, is of the opinion that the Escalator Financial Services Acquisition is fair to Shareholders. In addition, the Board has considered the prospects of the Escalator Financial Services business, together with any material information that was relevant thereto and accordingly the Board recommends to Shareholders to vote in favour of the Escalator Financial Services Acquisition. The Board members, who are eligible to vote, intend voting in favour of the relevant resolutions. It is further noted that Escalator, Mr E Engelbrecht as a director of ECSPONENT and Escalator and any of their associates are precluded from voting at the general meeting for the purposes of the Escalator Financial Services Acquisition.

4.1.7 Future prospects

The Escalator Financial Services network has successfully marketed unlisted, prospectus based products. ECSPONENT intends providing listed products and products with enhanced tradability which the directors believe will substantially improve the market acceptance of the product range. It is further the company’s intention to expand the product range, further bolstering the future prospects.

4.1.8 Other salient information regarding Escalator Financial Services The Escalator Financial Services Acquisition requires the approval of shareholders in order for the shares in Escalator Financial Services to transfer to ECSPONENT. Trade receivables in Escalator Financial Services have been ceded to Escalator as security for the loans to Escalator Financial Services. The Escalator Financial Services Vendor has not guaranteed the book debts or assets of Escalator Financial Services. Normal warranties have been given. No liability for accrued taxation arises from the Escalator Financial Services Acquisition Agreement. The 100% shareholding will be transferred to ECSPONENT following shareholder approval of the Escalator Financial Services Acquisition. The 100% shareholding has not been ceded or pledged as at the Last Practicable Date.

4.2 Details of the Sanceda Acquisition

The Company entered into the Sanceda Acquisition on 5 March 2014 and was announced on SENS on 6 March 2014 and in the press on 7 March 2014.

4.2.1 Terms for the Sanceda Acquisition

On 5 March 2014, ECSPONENT entered into an agreement with Sanceda for the acquisition of the business and assets of Sanceda for a purchase consideration of R7 million, payable in cash which will be funded by Escalator by way of an increase in the shareholder loan from Escalator, which loan will be settled through the Rights Offer.

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The Sanceda Acquisition purchase consideration is expected to result in a transfer of R2.3 million to the common control reserve in terms of ECSPONENT’s merger accounting policy. The Sanceda business was established by Sanceda and has not been purchased by Sanceda from a third party in the past three years.

4.2.2 Business of Sanceda Sanceda is a collections agency registered with the National Credit Regulator, which provides for collections on behalf of companies. Collections are call centre based and Sanceda has established the management and infrastructure to collect on a large volume of files concurrently. Sanceda collections expertise includes tracing of defaulters, repayment and contract agreement, debit order and related collection management and legal pursuance of defaulters should this become necessary. Sanceda currently manages a distressed debt portfolio of around R700 million. The bulk of the portfolio is debt books owned by Escalator Asset Management Proprietary Limited, which company is owned by Escalator.

4.2.3 Rationale for the Sanceda Acquisition The ECSPONENT financial services strategy includes the acquisition of debt books and the realisation of value through the efficient collection of the debt. The acquisition of Sanceda provides ECSPONENT with the skills and infrastructure to collect against its own debt books. In addition the debt crisis in South Africa creates the opportunity to expand the collections of third party debt.

4.2.4 Conditions precedent The acquisition is subject to shareholder approval as contemplated in the JSE Listings Requirements in General Meeting.


In terms of the Listings Requirements, the Sanceda Vendor has been deemed a related party to ECSPONENT due to the fact that Sanceda is accustomed to acting in accordance with instructions of Escalator, a material shareholder of ECSPONENT. The Sanceda Acquisition is therefore categorised as a related party transaction in terms of the Listings Requirements and accordingly requires a fairness opinion by an independent expert as well as ECSPONENT shareholder approval.

The Board has appointed Effortless Finance as the Independent Expert to determine if the terms and conditions of the Sanceda Acquisition are fair to the ECSPONENT shareholders, which Independent Expert has concluded that the terms of the Sanceda Acquisition are fair to shareholders. The report of the Independent Expert is provided in Annexure 1 to this Circular.

4.2.6 Opinions and recommendations The Board has considered the terms and conditions of the Sanceda Acquisition, and after taking into account the report of the Independent Expert, is of the opinion that the Sanceda Acquisition is fair to shareholders. In addition, the Board has considered the prospects of the Sanceda business, together with any material information that was relevant thereto and accordingly the Board recommends to shareholders to vote in favour of the Sanceda Acquisition. The Board members, who are eligible to vote, intend voting in favour of the relevant resolutions. It is further noted that Escalator, Mr E Engelbrecht as a director or ECSPONENT and Escalator and any of their associates are precluded from voting at the general meeting for the purposes of the Sanceda Acquisition.

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4.2.7 Future prospects The systems infrastructure of Sanceda will shortly be upgraded to include a sophisticated analytics platform and predictive dialing facilities. These improvements are anticipated to double the throughput of the call center and substantially improve efficiency of the operator.

ECSPONENT intends to utilise certain funds from the rights offer (which has been announced to shareholders and is the subject of a separate circular to shareholders) to acquire additional distressed debt portfolios improving the throughput and profitability of the company.

4.2.8 Other salient information regarding Sanceda The Sanceda Acquisition requires the approval of shareholders in order for the business and assets of Sanceda to be transferred to ECSPONENT. Trade receivables in Sanceda have been ceded to Escalator as security for the loans to Sanceda. The Sanceda Vendor has not guaranteed the book debts or assets of Sanceda. Normal warranties have been given. No liability for accrued taxation arises from the Sanceda Acquisition Agreement.

The business and assets of Sanceda will be transferred to a subsidiary of ECSPONENT following shareholder approval of the Sanceda Acquisition. The balance of the assets of Sanceda have not been ceded or pledged as at the Last Practicable Date.

4.3 Details of the Ecsponent Botswana Acquisition

The Company entered into the Ecsponent Botswana Acquisition on 5 March 2014 and was announced on SENS on 6 March 2013 and in the press on 7 March 2014.

4.3.1 Terms for the Ecsponent Botswana Acquisition

On 5 March 2014, ECSPONENT entered into an agreement with Escalator Mauritius, the majority shareholder in Escalator, for the acquisition of 100% of the issued share capital and loan accounts in Ecsponent Botswana for a purchase consideration of R5 million, payable through the increase in the shareholder loan from Escalator, which loan will be settled through the intended Rights Offer.

The Ecsponent Botswana Acquisition purchase consideration is expected to result in a transfer of R6.2 million to the common control reserve in terms of ECSPONENT’s merger accounting policy.

Ecsponent Botswana has been recently established by Escalator Mauritius and has not been purchased by Escalator Mauritius from a third party in the past three years.

4.3.2 Business of Ecsponent Botswana Ecsponent Botswana is a financial services company which raises capital through the issuance of various classes of preference shares. Subscription is by means of a prospectus issued to qualifying members of the public and institutions.

Ecsponent Botswana provides funding to selected financial services companies whilst also providing secured credit to small, medium and micro enterprises (SMMEs).

4.3.3 Rationale for the Ecsponent Botswana Acquisition Ecsponent Botswana is anticipated to provide high growth and high net returns to stakeholders. The acquisition of the company at a start-up phase provides the opportunity for high returns whilst also providing a channel to market for ECSPONENT products and services into Africa.

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4.3.4 Conditions precedent

The acquisition is subject to Exchange Control approval as well as ECSPONENT shareholder approval as contemplated in the JSE Listings Requirements in General Meeting.


In terms of the Listings Requirements, the Ecsponent Botswana Vendor is an associate of ECSPONENT, being the ultimate indirect controlling shareholder of ECSPONENT. The Ecsponent Botswana Acquisition is therefore categorised as a related party transaction in terms of the Listings Requirements and accordingly requires a fairness opinion by an independent expert as well as ECSPONENT shareholder approval.

The Board has appointed Effortless Corporate Finance as the Independent Expert to determine if the terms and conditions of the Ecsponent Botswana Acquisition are fair to the ECSPONENT shareholders, which Independent Expert has concluded that the terms of the Ecsponent Botswana Acquisition are fair to shareholders. The report of the Independent Expert is provided in Annexure 1 to this Circular.

4.3.6 Opinions and recommendations The Board has considered the terms and conditions of the Ecsponent Botswana Acquisition, and after taking into account the report of the Independent Expert, is of the opinion that the Ecsponent Botswana Acquisition is fair to shareholders. In addition, the Board has considered the prospects of the Ecsponent Botswana business, together with any material information that was relevant thereto and accordingly the Board recommends to shareholders to vote in favour of the Ecsponent Botswana Acquisition. The Board members, who are eligible to vote, intend voting in favour of the relevant resolutions. It is further noted that Escalator Mauritius, Escalator, Mr E Engelbrecht as a director or ECSPONENT and Escalator and any of their associates are precluded from voting at the general meeting for the purposes of the Ecsponent Botswana Acquisition.


The directors anticipate substantial organic growth in respect of the existing business model. In addition the company’s research has identified opportunities in lucrative niche SMME markets. It is the company’s intention to leverage its vendor finance products to maximise these opportunities.

4.3.8 Other salient information regarding Ecsponent Botswana The Ecsponent Botswana Acquisition requires the approval of shareholders in order for the shares in Ecsponent Botswana to transfer to ECSPONENT. Trade receivables in Ecsponent Botswana have been ceded to Escalator as security for the loans to Ecsponent Botswana. The Ecsponent Botswana Vendor has not guaranteed the book debts or assets of Ecsponent Botswana. Normal warranties have been given. No liability for accrued taxation arises from the Ecsponent Botswana Acquisition Agreement. The 100% shareholding will be transferred to ECSPONENT following shareholder approval of the Ecsponent Botswana Acquisition. The shareholding has not been ceded or pledged as at the Last Practicable Date.

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4.4 Convertible Loan

The Company entered into the Convertible Loan agreement on 5 March 2014 and was announced on SENS on 6 March 2014 and in the press on 7 March 2014. The agreement was replaced with a new agreement dated 15 May 2014 and addenda thereto, which removed certain clauses that were deemed unnecessary.

4.4.1 Terms for the Convertible Loan

ECSPONENT entered into an agreement with Escalator for the provision of a Convertible Loan of up to R100 100 000 less the amount raised in terms of the Rights Offer, including the underwritten portion of the Rights Offer. The term of the loan is four years from the date of approval by ECSPONENT shareholders in General Meeting. The loan will be convertible at any time at 14 cents per share (being the Rights Offer share price) for a period of four years following shareholder approval, commencing from the closing date of the Rights Offer. The terms of the loan also provide for the repayment on the loan.

4.4.2 Rationale for the Convertible Loan The intention of Escalator is to ensure that ECSPONENT is adequately funded for anticipated growth pursuant to the Acquisitions. The Acquisitions are not conditional on the Rights Offer nor on the Convertible Loan. To the extent that ECSPONENT shareholders do not follow all their rights in terms of the Rights Offer, Escalator has agreed to provide any shortfall in the capital raising of up to R55 million by way of a Convertible Loan, being the R100 100 000 Rights Offer less the underwritten portion of R45 million. In the event that all Shareholders follow their rights, then the full R100 100 000 will be raised and there will be no need for additional funding by way of the Convertible Loan. The intention of Escalator is to ensure that ECSPONENT is adequately funded for the anticipated growth pursuant to the Acquisitions, To the extent that ECSPONENT shareholders do not follow all their rights in terms of the Rights Offer, Escalator has agreed to provide any shortfall in the capital raising of up to R100 million by way of a Convertible Loan.

4.4.3 Conditions precedent The Convertible Loan will be subject to shareholder approval as contemplated in the JSE Listings Requirements.


In terms of the Listings Requirements, Escalator is a material shareholder of ECSPONENT. In addition, the price at which the Convertible Loan will convert into ordinary shares at a future date in time is at a fixed price of 14 cents per Share. Thus it is not known whether the conversion price will be at a discount or premium to the share price of ECSPONENT at the date of conversion. The Convertible Loan is therefore categorised as a specific issue to a related party in terms of the Listings Requirements and accordingly requires a fairness opinion by an independent expert as well as ECSPONENT shareholder approval.

The Board has appointed Effortless Corporate Finance as the Independent Expert to determine if the terms and conditions of the Convertible Loan are fair to the ECSPONENT shareholders, which Independent Expert has concluded that the terms of the Convertible Loan are fair to shareholders. The report of the Independent Expert is provided in Annexure 2 to this Circular.

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4.4.5 Opinions and recommendations

The Board has considered the terms and conditions of the Convertible Loan, and after taking into account the report of the Independent Expert, is of the opinion that the Convertible Loan is fair to shareholders. In addition, the Board has considered the prospects of the enlarged ECSPONENT group and the additional access to funding through the Convertible Loan, together with any material information that was relevant thereto and accordingly the Board recommends to shareholders to vote in favour of the Convertible Loan. The Board members, who are eligible to vote, intend voting in favour of the relevant resolutions.

It is further noted that Escalator, Mr E Engelbrecht as a director of ECSPONENT and Escalator and any of their associates are precluded from voting at the general meeting for the purposes of the Convertible Loan.


Going forward, it is projected that the financial services business will become the main business of ECSPONENT in the forthcoming year, pursuant to shareholder approval of the Acquisitions. Ecsponent Botswana, whilst small at present, is a business that can grow exponentially depending on the level of funding available. The introduction of R100 million of funding (whether by way of proceeds from the Rights Offer and/or a Convertible Loan) is regarded as an important component to achieve substantial growth going forward.

4.4.6 Other salient information regarding the Convertible Loan

The Convertible Loan will attract an interest rate determined by Escalator with reference to the applicable cost of funding and equity risk premium of ECSPONENT, reviewed and amended on an annual basis. The financial director of the Escalator will notify ECSPONENT in writing of any changes to the interest rate. As at the date of the General Meeting, the interest rate applicable to the Convertible Loan will 24% (twenty four percent) per annum, or as otherwise agreed to and recorded between Escalator and ECSPONENT.

The agreement provides Escalator with normal warranties and cessions of ownership and claims against all its book debts, trading stock and assets as well as fees and commissions up to the amount of all the loans to be advanced to ECSPONENT, in case of default.

ECSPONENT shall not without the prior written consent of Escalator:

create or permit to subsist any security over any of its assets.

sell, transfer or otherwise dispose of any of its assets on terms whereby they are or may be leased to or re-acquired by any other member of the group of companies which the Borrower is a part of;

sell, transfer or otherwise dispose of any receivables on recourse terms;

enter into any arrangement under which money or the benefit of a bank or other account may be applied, set-off or made subject to a combination of accounts; or

enter into any other preferential arrangement having a similar effect, in circumstances where the arrangement or transaction is entered into primarily as a method of raising financial indebtedness or of financing the acquisition of an asset.

4.5 Other resolutions

In accordance with the Act, shareholders are required to approve the issue of more than 30% new shares ahead of the intended Rights Offer, details of which are contained in a separate Rights Offer circular. The Rights Offer is thus conditional on such approval being obtained at a General Meeting.

The resolutions required to give effect to the above are detailed in the attached Notice of General Meeting.

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4.6 Irrevocable undertakings

Irrevocable undertakings to vote in favour of the transactions have been received from more than 50% of the shareholders eligible to vote at the meeting, excluding Escalator which holds 41.70% in ECSPONENT. Details of the irrevocable undertakings received are set out below.

Name of shareholder

Number of shares held

Percentage vote held of

444 131 678 shares

Percentage vote of 258 919 851

shares (excluding Escalator Capital)

Mile Investments 267 (Pty) Ltd 51 000 000 11.48% 19.70% Vanguard Holding (Pty) Ltd 20 000 000 4.50% 7.72% BPB Construction (Pty) Ltd 16 700 000 3.76% 6.44% TP Gregory 16 380 943 3.69% 6.33% KG Evans 13 871 003 3.12% 5.36% Zechron Investments 7 CC 10 522 728 2.37% 4.06% DP Van Der Merwe 10 224 158 2.30% 3.95% ME Scholtz 6 550 500 1.48% 2.52% Blular investment and Management CC 6 150 000 1.39% 2.37% Reinmax Equity CC 4 386 000 0.98% 1.69% C Bullimazza 2 455 538 0.55% 0.94% X Myburgh 2 000 001 0.45% 0.77% KA Rayner 2 000 000 0.45% 0.77% Arcay Client Support (Pty)Ltd 1 695 012 0.38% 0.65% LC Van Niekerk 1 232 143 0.28% 0.48% RJ Connellan 1 142 857 0.26% 0.44% Brat Trust 1 142 857 0.00% 0.44%

167 453 740 37.70% 64.67%

The above number of shares represents 64.67% vote in favour of the resolutions, based on the eligible 58.30% voting rights.

5 PRO FORMA FINANCIAL INFORMATION

The pro forma financial effects have been prepared to illustrate the impact of the proposed Acquisitions on the reported financial information of ECSPONENT for the year ended 31 December 2013, had the proposed Acquisitions occurred on 1 January 2013 for Statement of profit and loss and other comprehensive income purposes and on 31 December 2013 for statement of financial position purposes. The impact of the Convertible Loan has not been shown below as the loan does not exist at the Last Practicable Date. However, Annexure 3 reflects the effect of the rights offer at the minimum underwritten level of R45 million, the introduction of the Convertible Loan at R55 million and the subsequent capitalisation of the Convertible Loan of R55 million to show the combined pro forma effects of the Acquisitions, Convertible Loan and the Rights Offer. The pro forma financial effects have been prepared using accounting policies that comply with IFRS and that are consistent with those applied in the audited results of ECSPONENT for the year ended 31 December 2013.

The pro forma financial effects set out below are the responsibility of ECSPONENT’s directors and have been prepared for illustrative purposes only and because of their nature may not fairly present the financial position, changes in equity, results of operations or cash flows of ECSPONENT after the Rights Offer and the Acquisition. The pro forma financial effects have been prepared in accordance with the Listings Requirements and the Guide on Pro Forma Financial Information issued by The South African Institute of Chartered Accountants. These pro forma financial effects are the responsibility of the Board. The material assumptions on which the pro forma financial effects are based are set out in the notes following the table. In particular, the pro forma financial effects have been prepared on the basis of merger accounting. The ECSPONENT Group applies merger accounting for all its common control transactions which requires that the assets and liabilities of the purchased business be incorporated at the consolidated book value (by the ultimate parent) and the difference between the purchase consideration and the book value of the assets and liabilities be recorded in equity as a common control reserve.

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The financial statements of the purchaser incorporate the combined companies’ results and cash flows as if the companies have always been combined, including the re-presentation of the comparative figures. The pro forma financial effects set out below should be read in conjunction with the report of the Independent Reporting Accountants, which is included as Annexure 4 to this Circular. Pro forma financial effects for the Escalator Financial Services acquisition for the year ended 31 December 2013

Earnings per share information

Before (Note 1)

After Acquisition of 100% in Escalator Financial Services

(A) (Notes 2

to12)

% Change After

A (Note 13)

Attributable earnings/(loss) per ordinary share (cents) 0.478 (0.079) (116%) Headline earnings per share (cents) 0.526 (0.046) (109%) Fully diluted attributable earnings/(loss) per ordinary share (cents) 0.478 (0.079) (116%) Fully diluted weighted headline earnings per share (cents) 0.526 (0.049) (109%) Fully diluted headline earnings per share (cents) 0.526 (0.049) (109%) Net asset value per share (cents) 5.353 2.810 (48%) Net tangible asset value per share (cents) 5.194 2.651 (49%) Fully diluted net asset value per share (cents) 5.353 2.810 (48%) Fully diluted net tangible asset value per share (cents) 5.194 2.651 (49%)

Weighted average shares in issue (000’s) (Notes 1 & 9) 444,132 444,132 0% Fully diluted weighted shares in issue (000’s) (Notes 1 & 9) 444,132 444,132 0% Ordinary shares in issue at year end (000's) (Notes 1 & 9) 444,132 444,132 0% Fully diluted shares in issue (000’s) (Notes 1 & 9) 444,132 444,132 0%

Assumptions 1. The "Before" column is extracted from the ECSPONENT Group`s audited, published results for the

12 months ended 31 December 2013. 2. The related party acquisitions of Escalator Financial Services is deemed to be common control

transactions in terms of IFRS 3, Business Combinations. Common control transactions are specifically excluded from the scope of IFRS 3. The Group has adopted the following accounting policy to account for common control transactions:

“The Group applies merger accounting for all its common control transactions which requires that the assets and liabilities of the purchased business be incorporated at the consolidated book value (by the ultimate parent) and the difference between the purchase consideration and the book value of the assets and liabilities be recorded in equity as a common control reserve. The financial statements of the purchaser incorporate the combined companies’ results and cash flows as if the companies have always been combined, including the re-presentation of the comparative figures.”

3. Column A shows the Acquisition of 100% of the issued capital of Escalator Financial Services for R15 million, which is expected to result in a transfer of R11.1 million to the common control reserve.

4. For Statement of Financial Position purposes, it has been assumed that the transactions occurred on 31 December 2013 and for Statement of Profit and Loss and Other Comprehensive Income purposes it has been assumed that the acquisition occurred on 1 January 2013.

5. The financial information included in the pro forma effects for Escalator Financial Services has been extracted from the audited results for the year ended 31 December 2013.

6. Escalator Financial Services will be classified as a subsidiary of ECSPONENT as a result of the transaction.

7. The purchase price will be funded through an advance on the current Escalator loan facility ("Escalator loan"). The raising fees and interest expense are provided at the current Escalator loan terms.

8. The Escalator Group inter-company loans in the accounts of Escalator Financial Services at the reporting date has been treated as a net repayment / advance in respect of the current Escalator loan to ECSPONENT.

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9. There will be no impact on the issued share capital of ECSPONENT. 10. The Escalator Financial Services Acquisition will have an ongoing effect on ECSPONENT. 11. Transaction costs of R165 606 (being approximately one third of the total costs of the circular for

the three acquisitions of R496 819) pre-tax have been assumed and expensed as acquisition costs. These costs will have a once-off effect on ECSPONENT.

12. Normal taxation calculated at the corporate rate of 28%. 13. The “After” column shows the percentage change between the Before and After columns. Pro forma financial effects for the Ecsponent Botswana acquisition for the year ended 31 December 2013

Earnings per share information Before

(Note 1)

After acquisition of 100% in Ecsponent Botswana

(A) (Note 2 and

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% Change After

A

(Note 13)

Attributable earnings per ordinary share (cents) 0.478 0.271 (43%) Headline earnings per share (cents) 0.526 0.319 (39%) Fully diluted attributable earnings per ordinary share (cents) 0.478 0.271 (43%) Fully diluted weighted headline earnings per share (cents) 0.526 0.319 (39%) Fully diluted headline earnings per share (cents) 0.526 0.319 (39%) Net asset value per share (cents) 5.353 3.911 (27%) Net tangible asset value per share (cents) 5.194 3.752 (28%) Fully diluted net asset value per share (cents) 5.353 3.911 (27%) Fully diluted net tangible asset value per share (cents) 5.194 3.752 (28%)


Assumptions 1. The "Before" column is extracted from the Company`s audited, published results for the year ended

31 December 2013. 2. The related party acquisitions of Escalator Financial Services is deemed to be common control

transactions in terms of IFRS 3, Business Combinations. Common control transactions are specifically excluded from the scope of IFRS 3. The Group has adopted the following accounting policy to account for common control transactions:


3. Column A shows the acquisition of 100% of the issued capital of Ecsponent Botswana for R5 million, which is expected to result in a transfer of R6.2 million to the common control reserve..

4. For Statement of Financial Position purposes, it has been assumed that the transactions occurred on 31 December 2013. For Statement of Profit and Loss and Other Comprehensive Income purposes, it has been assumed that the transactions occurred on 1 January 2013.

5. Ecsponent Botswana will be classified as a subsidiary of ECSPONENT as a result of the transaction.

6. The financial information included in the for forma effects for Ecsponent Botswana has been extracted from the audited financial results for the year ended 31 December 2013.

7. The 31 December 2013 financial statements of Ecsponent Botswana are reported in Pula and the amounts were converted to Rand at an exchange rate of 1.22 Rand to 1 Pula.

8. The purchase price will be funded through an advance on the current Escalator loan facility ("Escalator loan"). The raising fees and interest expense are provided at the current Escalator loan terms.

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9. There is no impact on the issued share capital of ECSPONENT. 10. The Ecsponent Botswana Acquisition will have an ongoing effect on ECSPONENT. 11. Transaction costs of R165 606 (being approximately one third of the total costs of the circular for

the three acquisitions of R496 819) pre-tax have been assumed and expensed as acquisition costs. These costs will have a once-off effect on ECSPONENT.

12. Normal taxation has been calculated at the South African corporate rate of 28% and the Botswana corporate tax rate of 22%, where appropriate.

13. The “After” column shows the percentage change between the Before and After columns. Pro forma financial effects for the Sanceda acquisition for the year ended 31 December 2013

Earnings per share information Before

(Note 1)

Acquisition of Sanceda

going concern

(A) (Notes 2 and

10)

% Change after A

(Note 11)

Attributable earnings/(loss) per ordinary share (cents) 0.478 (0.0862) (280%) Headline earnings per share (cents) 0.526 (0.814) (255%) Fully diluted attributable earnings/(loss) per share (cents) 0.478 (0.862) (280%) Fully diluted weighted headline earnings per share (cents) 0.526 (0.814) (255%) Fully diluted headline earnings per share (cents) 0.526 (0.814) (255%) Net asset value per share (cents) 5.353 4.218 (21%) Net tangible asset value per share (cents) 5.194 4.059 (22%) Fully diluted net asset value per share (cents) 5.353 4.218 (21%) Fully diluted net tangible asset value per share (cents) 5.194 4.059 (22%)


Assumptions 1. The "Before" column is extracted from the ECSPONENT Group`s audited, published results for the

year ended 31 December 2013. 2. The related party acquisitions of Sanceda is deemed to be common control transactions in terms of

IFRS 3, Business Combinations. Common control transactions are specifically excluded from the scope of IFRS 3. The Group has adopted the following accounting policy to account for common control transactions:


3. Column A shows the acquisition of the business of Sanceda for R7 million, which is expected to result in a transfer of R4.9 million to the common control reserve..

4. For Statement of Financial Position purposes, it has been assumed that the transactions occurred on 31 December 2013. For Statement of Profit and Loss and Other Comprehensive Income purposes, it has been assumed that the transactions occurred on 1 January 2013.

5. The financial information included in the pro forma effects for Sanceda represent the assets acquired and liabilities assumed as part of the business acquisition as extracted from the audited financial results for the year ended 31 December 2013

6. The purchase price will be funded through an advance on the current Escalator loan facility ("Escalator loan"). The raising fees and interest expense provided at the current Escalator loan terms.

7. There is no impact on the issued share capital of ECSPONENT. 8. The Sanceda Acquisition will have an ongoing effect on ECSPONENT.

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9. Transaction costs of R165 606 (being approximately one third of the total costs of the circular for the three acquisitions of R495 819) pre-tax have been assumed and expensed as acquisition costs These costs will have a once-off effect on ECSPONENT.

10. Normal taxation calculated at the South African corporate tax rate of 28%. 11. The “After” column shows the percentage change between the Before and After columns.

6 ESTIMATED EXPENSES IN RELATION TO THE TRANSACTIONS

It is estimated that expenses relating to the Acquisitions and the Convertible Loan option as detailed in this Circular will amount to approximately R496 819. These expenses have been paid or will be paid in cash by ECSPONENT and have been included in the pro forma effects detailed in Annexure 3 to this circular. These expenses (excluding VAT) are detailed below.

Nature of expense Paid/payable to R

JSE documentation inspection fee JSE 26 819 Printing, publication and distribution Go 4 100 000 Sponsor Arcay Moela 200 000 Independent Expert Effortless Corporate Finance 100 000 Independent Reporting Accountants AM Smith and Company Inc. 60 000 Transfer Secretaries Link 10 000

Total 496 819

7 INFORMATION ON ECSPONENT

Additional information on ECSPONENT, incorporating the disclosures required by the Listings Requirements, is provided below.

7.1 Background information on the Company

Over the past three years, the Group has taken several strategic steps that the Directors believe have improved the future prospects of the Group. These include:

7.1.1 Expansion of the Group’s biotechnology operations through the conversion of its

Lazaron stem cell harvesting and storage business into the Cryo-Save venture

Lazaron established its leadership in the stem cell harvesting and storage field as the first company to store cord blood stem cells in South Africa. The company was founded in 2005 after the development of its technology at the Stellenbosch University by well-known stem cell researcher, Dr Daniel Barry, and his research team.

The main aim and focus was to develop stem cell-related biotechnologies in South Africa, by leveraging health enhancing knowledge and products into society through careful and ethical use of adult stem cells. This is achieved through collaboration with international consortiums, such as the Asian Pacific Cord Blood Bank Consortium, and overseas collaboration with leading individuals and companies. On 02 June 2011, the Company announced that a memorandum of understanding, with effect from 01 June 2011 to establish a new stem cell bank in South Africa was signed with Cryo-Save N.V.

Cryo-Save N.V. is the leading international family stem cell bank, storing in excess of 250 000 samples from cord blood and umbilical cord tissue for newborns and adipose tissue for adults. There are already several diseases that can be cured by the use of stem cells, and the number of treatments will only increase. Driven by its international business strategy, Cryo-Save NV is now represented in 40 countries on three continents, with ultra-modern processing and storage facilities in Belgium, Germany, Dubai, France and South Africa.

Cryo-Save N.V. and ECSPONENT have successfully established Cryo-Save SA which provides for the harvesting and banking of stem cells from both cord blood as well as cord tissue. This was implemented with the Lazaron shareholder approval granted in December 2011 to sell the Lazaron plant into Cryo-Save. Lazaron retained its existing stem cell bank and associated annuity income. Lazaron has recently changed its name to Salveo Swiss Technologies Limited.

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Cryo-Save SA combines Cryo-Save N.V.’s leading expertise in stem cell processing and storage with ECSPONENT’s local and African market expertise and offers customers the option of storing cord tissue and stem cells from cord blood in South Africa off shore in Europe or splitting the samples and storing at both locations.

7.1.2 Establishment of financial service operations in Ecsponent Credit Services

With effect from 01 July 2011, an agreement providing for the acquisition by ECSPONENT of 100% of the shares in, and claims against, Ecsponent Credit Services was signed for a cash consideration of R100. Ecsponent Credit Services is a micro finance organisation providing financial services to third party company employees and was the first acquisition by ECSPONENT in its Financial Services Division. Ecsponent Credit Services was established in 2010 and has shown exponential growth since its incorporation. The company currently has agreements with six companies with a combined staffing of more than 10 000 employees. At 31 December 2013 Ecsponent Credit Services had over 200 clients and a loan book of R2.6 million. In addition to the unsecured loans Ecsponent Credit Services has acquired distressed debt with a total collectable or R13.4 million at 31 December 2013. The debt collection process is managed via the specialised debt collection call center and legal processes housed in Sanceda

7.1.3 Disposal of the SO2 gas generating sheet business housed in Vinguard

The Group entered into an agreement with Grapetek on 20 December 2013 to dispose of its SO2 gas sheet manufacturing business and related assets of Vinguard, as a going concern. The manufacturing operations were regarded as being non-strategic to the future growth plans of the Group. The Vinguard shareholders approved the going concern disposal in terms of Section 112 of the Companies Act, 2008 in a general meeting held on 24 January 2014, with and the effective date of the transaction determined being 31 January 2014. The purchase consideration comprised R6.3 million for the going concern assets, less the face value of the going concern liabilities plus the value of stock, payable in cash. Net carrying value of the assets and liabilities at 31 December 2013 amounted to R4.0 million.

7.1.4 Prospects

Key elements of the Group’s expansion strategy are;

to acquire businesses which underpin the strategic direction of the Group and in particular in the financial services sector;

to acquire additional businesses which complement the existing business operations; and

to acquire or develop businesses which provide a meaningful contribution to the profitability of the Group

The strategy result is aimed at developing a robust and complementary Group of companies which provide sustainable returns. During the last quarter of 2013 the Company announced the R100 million rights offer which will be partially underwritten by Escalator and the funding agreement with Escalator to cover any shortfall in the proceeds of the rights offer. The Directors have also advised shareholders of the acquisitions contained in this circular in line with the roll out of the Group strategy. These acquisitions’ operations are well positioned to penetrate the markets in their respective countries thereby extending the Groups footprint and revenues.

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7.2 Information on the directors and senior management

7.2.1 Directors

The name, age, qualification, nationality, business address and function of each of the Directors of the Company as at the Last Practicable Date are set out below.

Name and age Business address Function

Holding company directors:

RJ Connellan (68) 2 Larnica Villas 251 Willson Street Fairland Johannesburg, 2195

Independent Non-Executive Chairman

KA Rayner (56) 6 Carmel Place 53 Melrose Street Melrose Estate Johannesburg, 2196

Independent Non-Executive

BR Topham (42) 100A Club Avenue, Waterkloof Ridge Pretoria, 0181

Independent Non-Executive

TP Gregory (54) Acacia House Green Hill Village Office Park Cnr of Nentabos and Botterklapper Street The Willows Pretoria East, 0181

Chief Executive Officer

DP van der Merwe (41)

Acacia House Green Hill Village Office Park Cnr of Nentabos and Botterklapper Street The Willows Pretoria East, 0181

Group Financial Director

E Engelbrecht (37) Acacia House Green Hill Village Office Park Cnr of Nentabos and Botterklapper Street The Willows Pretoria East, 0181

Non-executive director

* All the above mentioned directors are South African.

Profile of directors, subsidiary directors and key management:

Mr Richard John Connellan

Richard is a Fellow of the Institute of Chartered Secretaries & Administrators, a non-broking member of the South African Institute of Stockbrokers, a member of the King III Committee on Corporate Governance (chairman of the takeovers and mergers subcommittee) and until May 2011 a member of the Standing Advisory Committee on Company Law.

Mr Connellan previously worked as assistant manager of Listings at the JSE, as head of corporate finance at Kaplan & Stewart Inc. Stockbrokers, as general manager of the Listings and Equity and Gilt Markets Division of the JSE and has recently retired as Executive Director of the Securities Regulation Panel (now the TRP) which position he held since 1994.

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Mr Keith Alfred Rayner Keith is a South African chartered accountant with a wealth of experience in corporate finance, having started his corporate finance career in 1987. Over the years, he has advised numerous listed companies on most types of corporate finance transactions, and through KAR Presentations, currently advises certain clients on a selective basis. He is CEO of KAR Presentations, an advisory and presentation corporation, which specialises in corporate finance and regulatory advice and presentations. He is, inter alia, a director on the boards of three JSE listed companies (both as an independent non-executive director). Keith is a member of the JSE Issuer Services Advisory Committee and has been actively involved in assisting the JSE Issuer Services Division since 1995 including the rewrite of the JSE Listings Requirements in both 2000 and 2003. He assisted the Securities Regulation Panel (“SRP”) in rewriting the SRP Code in the form of regulations for the new Companies Act, 2008. He was a member of the King III subcommittee which wrote the governance principles for takeovers and mergers in 2009. He is a fellow of the Institute of Directors in South Africa, is a non-broking member of the Institute of Stockbrokers in South Africa, is a member of the Investment Analysts Society, is a past member of the SAMREC / SAMVAL working group, is a past member of the IOD’s CRISA committee and is a past member of the Accounting Practices Committee. Mr Brandon Rodney Topham Brandon is a qualified Chartered Accountant and Attorney of the High Court of South Africa. He holds B Compt (Hons), BProc and LLM degrees. He has numerous other qualifications such as an Advanced Certificate in Taxation and has completed the Alt-X Directors Programme. He is a member of the Institute of Directors in South Africa and is an Associate Member of both the Institute of Chartered Management Accountants (UK) and of the Institute of Chartered Accountants in England & Wales. He is also an admitted Solicitor in England and Wales and a Certified Fraud Examiner (USA).

He completed his articles with BDO and was employed as a manager with Deloitte & Touche Forensic Services after completing his legal articles. He has practiced as a professional business advisor in his own practices since 1998. Brandon has served as a Director of 1Time Holdings Ltd, Breform Ltd and continues to serve on the boards of TeleMasters Holdings Ltd, Seesa (Pty) Ltd, Professional Provident Society Holdings Ltd, Girls Best Friend (Pty) Ltd and a few other smaller companies. As a forensic accountant he has acted as an Inspector for the Financial Services Board and has worked with other regulators and government departments as well as for numerous private companies and attorneys. He is actively involved in numerous community organisations and has a wide business knowledge which will add value to the management of the Company.

Mr Terence Patrick Gregory Terence is an experienced business executive with over 30 years’ experience, with the past 15 years at board level. He has extensive exposure to corporate organisations including Imperial, Afgri and McCarthy and has also developed smaller, entrepreneurial companies. Terence is currently appointed to the board of numerous companies in both executive and non-executive roles.

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Mr Dirk Petrus van der Merwe Dirk is a qualified chartered accountant and a certified information systems auditor. Before joining the Group on 2010 he gained experience in a wide range of industries and organisations during his 14 year career which included 10 years at a big four international accountancy and audit firm. His experience includes financial statement audits and financial reporting for a wide range of entities including publicly traded entities, governance and control assessments, large IT project risk management and exposure to corporate finance disciplines. As required by JSE Listings Requirements 3.84(h), the audit committee has satisfied itself that the financial director has appropriate expertise and experience. Mr Euné Engelbrecht Euné is a director of Escalator, the controlling shareholder of ECSPONENT. Euné was the head of Blue Financial Services Corporate Finance division and was involved in fund-raising at a corporate level heading up the corporate finance team tasked with securing continuous and affordable funding from global private equity funds, investment banks and development funding institutes. He was also responsible for acquisitions and expansion-related activities of the company.

Euné is a non-executive director on the ECSPONENT board.

7.2.2 Directors of major subsidiaries

The names of the Directors of major subsidiaries of the Group are set out below:

Name of subsidiary company Nature of business Directors

Ecsponent Credit Services

Credit services and all related activities

DP van der Merwe (Financial Director) TP Gregory (Non-executive)

Cryo-Save SA Family Stem Cell Bank PA Buuron AP van Tulder CS Daly LF Rehrl DP van der Merwe TP Gregory

Lazaron Research and commercialisation of stem cell technologies

JN Pepler (Chief Executive Officer) LF Rehrl (Marketing Director) DP van der Merwe TP Gregory

Vinguard Manufacture and distribution of sulphur dioxide gas generating sheets

WJ Opperman (Chief Executive Officer) DP van der Merwe TP Gregory JN Pepler

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7.2.3 Qualification, appointment, remuneration and borrowing powers of Directors

The total remuneration, benefits and fees received by Directors and former directors for the year ended 31 December 2013, as extracted from the annual financial statements, were as follows:

Director

Basic Salary

R Bonus

R

Retirement and

Medical contributions

R

Consul- ting fees

R

Fees (for

services as

director) R

Share options

R Total

R

Executive

TP Gregory 1 500 000 - - - - - 1 500 000

DP van der Merwe 1 425 000 - - - - - 1 425 000

Non-executive

BR Topham# - - - - 162 500 - 162 500

RJ Connellan# - - - - 190 000 - 190 000

KA Rayner# - - - - 162 500 - 162 500

E Engelbrecht - - - - - - -

Total 2 925 000 - - - 515 000 - 3 440 000

# - Independent No amounts have been paid for expense allowances, pension fund contributions or any other material benefits. All payments were made by ECSPONENT and no payments are made by any holding company, subsidiary of ECSPONENT, any associates thereof or in any other manner. No other remuneration was paid to Directors by way of management, consulting, technical or other fees, directly or indirectly, including commissions, gains or profit sharing arrangements. The Company has appointed a company secretary on an outsource basis with a monthly retainer of R15 000, excluding VAT. No share based payments were made to any directors during the year ended 31 December 2013.

There will be no variation of directors’ remuneration as a result of the Acquisitions or the Convertible Loan. There have been no fees paid or accrued as payable to a third party in lieu of Directors’ fees. No sums have been paid or agreed to be paid to any new Director, or any company in which the Directors are beneficially interested or to any partnership, syndicate or other association of which the Directors are a member in the three years preceding this Circular to induce him or her to become or qualify him or her as a Director of ECSPONENT. The Company is considering establishing a share incentive scheme by the end of the year which will be detailed in a separate circular to shareholders for approval. More details on this will follow once a proposed share scheme has been prepared.

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7.3 Directors’ interests in securities

The direct and indirect beneficial interests of Directors and their associates in the share capital of the Company at the Last Practicable Date, is set out in the table below:

Shares held Beneficially Held Total Shares Percentage

Name (including associates) Direct Indirect

TP Gregory 16 380 943 - 16 380 943 3.69%

DP van der Merwe 10 224 158 - 10 224 158 2.30%

RJ Connellan 1 142 857 - 1 142 857 0.26%

K Rayner 2 000 000 - 2 000 000 0.45%

B Topham - 1 142 857* 1 142 857 0.26%

E Engelbrecht 4 938 982* 4 938 982 1.11%

Total 29 747 958 6 081 839 35 829 797 8.07%

* held through an associate

No Directors hold an interest in ECSPONENT through any derivative position. There were no changes to the Directors’ interests in the share capital of the Company between 31 December 2013, being the Company’s year-end and the date of posting of this Circular.

7.4 Directors’ interests in transactions and properties

Mr E Engelbrecht has an indirect beneficial interest in the Transactions as he is a shareholder in Escalator, in which he holds 2.67%. Accordingly, Mr E Engelbrecht is precluded from voting on the Acquisitions and the Convertible Loan and has been recused from directors’ resolutions approving these Transactions. Other than as disclosed above, the Directors have not had any material beneficial interests, whether direct or indirect, in transactions including any acquisitions or disposals that were effected during the current or immediately preceding financial year. Further to this, they have had no material beneficial interests in a transaction during an earlier financial year that remain in any respect outstanding or unperformed.

7.5 Directors' service contracts and restraints of trade

None of the Directors has a fixed-term service contract with the Company. Each executive director has entered into an employment contract with which incorporates the normal terms of an employment contract for executive director, including a notice period applicable to termination of employment of three months. None of the executive directors are subject to restraints of trade.

The total remuneration, benefits and fees received by Directors for the year ended 31 December 2013 are disclosed in paragraph 8.3.5 above. A monthly retainer of R15 000, excluding VAT, is payable for outsourced company secretarial services to the Company Secretary. The Company Secretary is not a director of the Company. There are no contractual technical fees payable.

7.6 Other directorships held by Directors

Details of all companies of which the Directors are or have been appointed as directors in the past five years are set out in a separate Rights Offer circular.

7.7 Loans granted to the Directors

As at the Last Practicable Date, no loans had been granted by the ECSPONENT Group to the Directors.

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7.8 Information on the share capital of the Company

7.8.1 Share capital

The table below sets out the ordinary share capital of ECSPONENT at the Last Practicable Date:

R’000

Authorised 1 500 000 000 ordinary shares of no par value - Issued at year end 444 131 678 ordinary shares of no par value 51 374

On 31 July 2013, the authorised and issued share capital was converted to shares of no par value and the authorised share capital was increased to 1 500 000 000 Shares from 1 000 000 000 Shares. The special resolution was registered by CIPC on 23 December 2013. The table below sets out the preference share capital of ECSPONENT at the Last Practicable Date:

R’000

Authorised

1 000 000 000 (one billion) class A, five year, fixed-rate, redeemable, convertible, cumulative, non-voting, non-participating Preference Shares of no par value at an initial issue price of R100.00 per Preference Share in the share capital of the Company at a redemption price of R100.00 per Preference Share, subject to the preferences, rights, limitations and other terms associated with such class set out in Schedule 2 ("Class "A" Preference Shares");

No par value

1 000 000 000 (one billion) class B, five year, zero-rate, redeemable, convertible, non-voting, non-participating Preference Shares of no par value at an initial issue price of R100.00 per Preference Share in the share capital of the Company at a redemption price of R170.00 per Preference Share, subject to the preferences, rights, limitations and other terms associated with such class set out in Schedule 2 ("Class "B" Preference Shares");

No par value

1 000 000 000 (one billion) class C, five year, variable-rate, redeemable, convertible, cumulative, non-voting, non-participating Preference Shares of no par value at an initial issue price of R100.00 per Preference Share in the share capital of the Company at a redemption price of R100.00 per Preference Share, subject to the preferences, rights, limitations and other terms associated with such class set out in Schedule 2 ("Class "C" Preference Shares").

No par value

No preference shares have been issue at the Last Practicable Date. As at the Last Practicable Date, no Shares were held in treasury. There are no other classes of securities listed and no securities of the Company are listed on any stock exchanges, other than the JSE.

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7.8.2 Conversion rights, voting rights, rights to distributions and variation of rights

In accordance with the Memorandum of Incorporation, at a general meeting of the Shareholders, every Shareholder present in person or by proxy shall have one vote on a show of hands, provided that a proxy shall, irrespective of the number of Shareholders he represents, have only one vote. On a poll, every Shareholder present in person or by proxy shall have that proportion of the total votes in the Company equal to the aggregate amount the nominal value of the Shares held by that Shareholder bears to the aggregate of the nominal value of all the Shares issued by the Company. All of the authorised and issued Shares are of the same class, rank pari passu with each other in all respects and are fully paid. Accordingly, no Share has any special right to any dividends, capital or profits. No Share has any preferential voting, exchange or conversion rights. In terms of the Memorandum of Incorporation, the rights attaching to Shares may only be varied by a special resolution passed by the requisite majority of Shareholders at a general meeting.

7.8.3 Alterations to share capital

There have been no share repurchases by ECSPONENT or any of its subsidiaries during the preceding three years. There has been no sub-division or consolidation of Shares (other than as mentioned in paragraph 8.8.1 above) during the three years preceding the date of the issue of this Circular.

7.8.4 Commissions

A raising and corporate advisory fee of 10% (approximately R348 850) was charged on the original Escalator loan origination as detailed in a circular to shareholders dated 26 September 2011. Raising fees are charged by Escalator on all loan funding introduced into the group. No other raising or corporate advisory fees have been charged. Save as disclosed above and in paragraph 3.8 of the Circular, no commissions or consideration, including underwriting commission in respect of the allotment or issue of Shares has been paid in the three years preceding the date of the Circular.

7.8.5 Options or preferential rights in respect of Shares

As at the Last Practicable Date, there were no options or preferential rights attaching in respect of Shares. The Escalator loan has been assumed to be capitalised and settled in full through the underwriting of the Rights Offer. As detailed in this circular, Shareholders will be asked to approve the potential future conversion of a new loan facility of up to R55 million (which will be advanced to ECSPONENT in the event that Shareholders do not fully subscribe for the Rights Offer) at a conversion price of 14 cents per share (being the same price as the Rights Offer), as detailed in paragraph 4.4 of this Circular.

7.8.6 Controlling Shareholders

As at the Last Practicable Date, Escalator is the controlling shareholder in ECSPONENT. Escalator became the controlling shareholder of ECSPONENT pursuant to the underwriting of a rights offer during 2011. Shareholders waived an offer to minorities at a General Meeting held on 17 October 2011. There has been no change in the trading objectives of the company during the past five years.

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7.8.7 Major Shareholders

The major Shareholders, who beneficially held 5% or more of the issued Shares of 444 131 678 as at the Last Practicable Date, are as follows:

Non-Public shareholders Beneficial

Direct Total % Held

Escalator 185 211 827 185 211 827 41.70%

Mile Investments 267 (Pty) Ltd 51 000 000 51 000 000 11.48%

Zechron Investments 7 CC 26 775 245 26 775 245 6.03%

Total 262 987 072 262 987 072 59.21%

7.8.8 Share incentive schemes

The Company has no share incentive scheme in place, however, the Company intends on establishing proposed share incentive scheme terms in due course, which terms will require shareholder approval.

7.9 Litigation statement

As at the Last Practicable Date, there are no legal or arbitration proceedings, including any proceedings that are pending or threatened, of which the Company or its directors are aware, that may have or have had in the recent past, being at least the previous 12 months, a material effect on the group’s financial position. In addition, the directors are not aware of any legal or arbitration proceeding, including proceedings that are pending or threatened in relation to any of the Acquisitions detailed in this circular.

7.10 Corporate governance

The Board has adopted and applied the main principles of the King III Code and Report but has not implemented all principles due to the size of ECSPONENT’s business. Principles not adopted by ECSPONENT are as follows:

Internal audit principles; and

The independent non-executive chairman of the board is also a member of the audit committee but is not the Chairman of the Audit Committee.

The Directors are of the view that tick box compliance with any form of governance principles is not enough in and of itself, and that a commitment to the highest standards of good behaviour and ethical leadership discharged with the utmost good faith is required to ensure continuing value for all stakeholders.

7.11 Irrevocable Undertakings

No irrevocable undertakings have been sought or obtained for any of the resolutions contained in the Notice of General Meeting incorporated in this Circular.

7.12 Working capital statement

It is noted that the Acquisitions are not inter-dependent nor dependent on the Rights Offer or approval of the Convertible Loan. The cost of the Acquisitions will be funded by way of an increase in the existing Escalator shareholder loan. Escalator is the controlling shareholder of ECSPONENT and continues to provide additional funding to the ECSPONENT through its revolving credit facilities as disclosed in Annexure 11. In addition, ECSPONENT is in the process of issuing a Rights Offer circular in which Escalator will capitalize R45 million of its shareholder loan by way of underwriting and make available additional funding, subject to shareholder approval, of any shortfall in the R100 million Rights Offer up to R55 million. Accordingly, the Directors are of the opinion that the working capital available to ECSPONENT and its subsidiaries, post the successful implementation of the Transactions, is sufficient for the company and Group’s present requirements, that is for at least the next 12 months from the date of issue of this Circular.

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7.13 Material changes

Other than the Acquisitions and Convertible Loan as detailed in this Circular and the intended Rights Offer, which is the subject of a separate circular to shareholders that is anticipated to be posted to shareholders in the second quarter of 2014, there have been no material changes in the financial or trading position of ECSPONENT and its subsidiaries between the publication of the Company’s results for the year ended 31 December 2013, which results were released on SENS on 31 March 2014, and the Last Practicable Date. The disposal of the Vinguard assets as approved by Vinguard shareholders on 24 January 2014 has been accounted for as a discontinued operation in the audited results for the year ended 31 December 2013 and the disposal thereof is not regarded as being material to ECSPONENT shareholders. It is noted that, after year end, the Company’s name has been changed on the Johannesburg Stock Exchange from John Daniel Holdings Limited to Ecsponent Limited.

7.14 Material contracts

Other than the Acquisition Agreements and the Convertible Loan detailed in paragraph 4 of this Circular, details of contracts entered into in the past three years are set out in Annexure 14. Other than the Acquisition Agreements and Convertible Loan, which incorporates an underwriting agreement for the intended rights offer, as detailed in this circular, ECSPONENT has not entered into any other material contracts, either verbally or in writing, other than in the ordinary course of business, in the past two financial years.

7.15 Promoters

ECSPONENT has not entered into any promoters’ agreements during the three years preceding the date of issue of this Circular. Accordingly, there were no payments made to promoters within the three years prior to the Last Practicable Date nor are there any promoters’ interests in the securities of ECSPONENT. No payments have been made to any Director, either directly or indirectly, by ECSPONENT or any other person in the three years preceding the date of this Circular to induce him/her to become, or to qualify him/her as a Director or otherwise for services rendered by him/her or by the associate’s company or the associate entity in connection with the promotion or formation of the Company.

7.16 Material borrowings and loans receivable

7.16.1 Loans receivable

Material loans receivable are detailed in Annexure 11 to this Circular. No loans have been made to, or advanced and repaid by, the Directors or any of their associates.

7.16.2 Material inter-company finance

Details of all material inter-company loans as at the Last Practicable Date are set out in Annexure 11 to this Circular.

7.16.3 Material borrowings

Details of all material loans to the ECSPONENT Group at the Last Practicable Date are set out in Annexure 11 to this Circular;

8 ECSPONENT GROUP RESTRUCTURE AND OTHER TRANSACTIONS

As noted in the introduction paragraph 1 above, ECSPONENT is in the process of effecting the following corporate actions in order to facilitate a restructure and expansion of the ECSPONENT Group:

ECSPONENT undertaking a partly underwritten Rights Offer of R100 100 000 as detailed in a separate Circular to ECSPONENT shareholders;

ECSPONENT is acquiring 100% of Escalator Financial Services;

ECSPONENT is acquiring the business and assets of Sanceda;

ECSPONENT is acquiring 100% of Ecsponent Botswana; and

approval of the proposed Convertible Loan from Escalator.

Other than the proposed Acquisitions and Convertible Loan as detailed in paragraph 4 of the Circular, ECSPONENT has completed or is busy with the following smaller transactions.

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8.1 VINGUARD SECTION 112 DISPOSAL

The Vinguard business has historically made losses but had potential as it serves the grape export and other fruit markets which are growing. Vinguard has been funded by ECSPONENT and required additional funding to unlock future potential value.

The ECSPONENT board has disposed of the Vinguard Assets for a sale consideration of R5 million as previously announced on SENS. The Vinguard disposal was approved by Vinguard shareholders in General Meeting on 24 January 2014 and all other conditions precedent have been met.

8.2 ACQUISITION OF ECSPONENT SWAZILAND BY ECSPONENT

ECSPONENT has acquired 84.71% of the issued share capital of Ecsponent Swaziland for R1 000. Ecsponent Swaziland commenced business on 16 July 2013 with the objective that once the Financial Services Regulatory Authority (“FSRA”) within the Kingdom of Swaziland approved the licence as Investment Advisor, that ECSPONENT would subscribed for 593 000 000 shares, constituting 84.71%, in the issued share capital of Ecsponent Swaziland. This licence has been approved.

This acquisition is below 0.25% of the market capitalisation of ECSPONENT and is not defined as a transaction in accordance with the JSE Listings Requirements and does not require a fairness opinion from an Independent Expert. ECSPONENT intends to develop Ecsponent Swaziland in order to establish and grow a presence in Swaziland.

9 DIRECTORS’ RESPONSIBILITY STATEMENT

The Directors, whose names appear on page 4 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 in this Circular false or misleading and that all reasonable enquiries to ascertain such facts have been made and that this Circular contains all information required by law and by the Listings Requirements.

10 DIRECTORS’ OPINION AND RECOMMENDATIONS

Ecsponent Botswana is in a start-up phase and the losses which have been incurred in the business are primarily start-up costs. In addition the business only effectively started trading in the past months and has not yet reached critical mass. However, this company is regarded as being strategic in nature on the road to changing the group into a financial services institution outside the borders of South Africa. Sanceda is a strategic acquisition which will allow the group to collect on its own debt books. This will result in retention of both the collection fees as well as the capital recoupment. Sanceda has been poorly managed to date and requires a systems revamp. Both of these factors are being aggressively addressed as part of the acquisition. Escalator Financial Services is a strategic acquisition which holds the regulatory licences that enables the group to provide financial services in South Africa. In the event that the intended Rights Offer is not fully subscribed, the Directors are of the view that additional funding will be required to expand the financial services of ECSPONENT and thus are of the view that the additional funding through the Convertible Loan, may be required. It being noted that the conversion price of 14 cents per share is the same price at which existing Shareholders will be offered Shares in terms of the Rights Offer. Accordingly, the directors of ECSPONENT are of the opinion that the Proposals are fair insofar as the shareholders (excluding the related party) of ECSPONENT are concerned. The board of directors believe that it is in the best interests of the Company, to the extent required by law and the JSE, to approve the Proposals and accordingly recommend that shareholders vote in favour of the resolutions to be proposed at the General Meeting of shareholders convened by the notice attached to and forming part of this Circular. The ECSPONENT directors intend voting in favour of the resolutions in respect of shares held by them.

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11. EXCHANGE CONTROL REGULATIONS

11.1 The following extract from the Exchange Control Regulations is intended as a guide only and is

therefore not comprehensive. Should there be any doubt in this regard, shareholders should seek advice from appropriate professional advisors.

11.1.1 Emigrants from the Common Monetary Area

For those shareholders holding their shares in certificated form, a “non resident” endorsement will be stamped on every new share certificate or share statement issued to a shareholder who is an emigrant from the Common Monetary Area. The new ordinary share certificate or share statement will be forwarded, at the risk of the shareholder concerned, to the authorised dealer in foreign exchange in South Africa controlling the Shareholders’ blocked assets.

For those Shareholders holding their Shares in dematerialised form, a non resident flag will be enabled in their CSDP account which will be under the control of the Shareholders’ authorised dealer.

11.1.2 All other non residents of the Common Monetary Area For those Shareholders holding their Shares in certificated form, a “non resident” endorsement will be stamped on every New Ordinary Share Certificate or statement issued to a Shareholder whose registered address is outside the Common Monetary Area. The New Ordinary Share Certificate will be forwarded, at the risk of the Shareholder concerned, to the shareholder’s authorised dealer in foreign exchange. Where the Shareholder does not have an authorised dealer in South Africa, the share certificate will be posted, at the risk of such Shareholder and after having been endorsed “non resident”, to the address of such Shareholder reflected in the register of Shareholders on the record date.

For those Shareholders holding the Shares in dematerialised form, a non resident flag will be enabled in their CSDP account, which will be under the control of the Shareholder’s authorised dealer.

12 CONSENTS

Each of the advisors whose names appear in the “Corporate Information and Advisors” section of this Circular have consented and have not, prior to the Last Practicable Date, withdrawn their written consent to the inclusion of their names and, where applicable, reports in the form and context in which they appear in this Circular.

13 DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the registered offices of the Company and Arcay Moela during normal business hours and on Business Days from the date of issue of this Circular up to and including Friday, 25 July 2014:

the MOI of ECSPONENT and each of its subsidiaries; the audited provisional report for the year ended 31 December 2013 and the annual financial

statements of ECSPONENT for the two financial years ended 31 December 2012; a copy of the executive Directors’ service agreements; the fairness reports from the Independent Expert on the Acquisitions and the Convertible Loan; the pro forma Statement of profit and loss and other comprehensive income and statement of

financial position of ECSPONENT; the signed Independent Reporting Accountants’ report on the pro forma financial information of ECSPONENT;

the historical financial information of Escalator Financial Services, Sanceda and Ecsponent Botswana;

the signed Independent Reporting Accountants’ reports on the historical financial information of Escalator Financial Services, Sanceda and Ecsponent Botswana;

written consents of the Sponsor, Independent Expert, Independent Reporting Accountants, and Transfer Secretaries to the inclusion of their names in this Circular in the context and form in which they appear;

the Agreements detailed in this Circular; copies of the irrevocable undertakings; and a signed copy of this Circular.

38

Signed in Johannesburg by or on behalf of all the Directors on 11 June 2014, in terms of powers of attorney granted by the Directors. DP van der Merwe Financial Director

39

ANNEXURE 1

INDEPENDENT FAIRNESS OPINION ON THE ACQUISITIONS

11 June 2014 “The Directors Ecsponent Limited 1st Floor, Acacia House Green Hill Village Office Park On Lynwood Road Cnr Botterklapper and Nentabos Street The Willows Pretoria East, 0043

Sirs OPINION OF THE INDEPENDENT EXPERT ON THE FAIRNESS OF THREE ACQUISITIONS BY ECSPONENT LIMITED (“ECSPONENT”) OF SHARES AND ASSETS FROM A RELATED PARTY, (THE ACQUISITIONS”) INTRODUCTION AND SCOPE ] ECSPONENT has undertaken the following three Acquisitions for which fairness opinions are required in terms of paragraph 10.4 of the Listing Requirements of the JSE Limited (“the JSE”) with regard to the following proposed acquisitions:

The acquisition for R15 million of 100% of the issued share capital of Escalator Financial Services (Pty) Ltd from Escalator Capital Global Limited, the controlling shareholder of Escalator Capital (RF) Limited, a material shareholder of and a related party to ECSPONENT;

The acquisition for R5 million of 100% of the issued share capital of Ecsponent Limited (“Ecsponent Botswana”) from Escalator Capital (RF) Limited, the material shareholder, a related party transaction by ECSPONENT;

The related party acquisition for R7 million of the business and assets of Sanceda Collections (Pty) Ltd, an associate of a material shareholder, Escalator Capital RF Limited and deemed a related party transaction by ECSPONENT,

together “the acquisitions”. The acquisitions form a part of a series of transactions announced on SENS on 6 November 2013 relating to the acquisitions and a rights issue as well as a separate disposal of assets by a subsidiary of ECSPONENT (the “disposal”) to a non-related party to ECSPONENT. The disposal and the rights issue do not require a fairness opinion in terms of the JSE Limited Listings Requirements. In the event that the intended Rights Offer is not fully subscribed then ECSPONENT may elect to draw down of the proposed Convertible Loan from Escalator Capital (RF) Limited, a related party. The shareholders of ECSPONENT are required to approve the potential conversion of the Convertible Loan to share capital in ECSPONENT at a fixed price of 14 cents per ECSPONENT share at a future date in time. This term triggers a second fairness opinion that is part of a second fairness opinion. These independent fairness opinions are required in terms of paragraph 10.4 of the JSE Listings Requirements as the acquisitions are defined as related party transactions in terms of paragraphs 10.1 (b) (i) and the directors of ECSPONENT have appointed Huntrex 299 (Pty) Ltd trading as Effortless Corporate Finance (“ECF”) to provide the required independent fairness opinions in terms of Schedule 5 of the JSE Limited Listings Requirements on the acquisitions. The opinion is given to the ECSPONENT board of directors for the sole purpose of assisting the relevant board in forming and expressing an opinion for the benefit of holders of units in ECSPONENT. DEFINITION OF FAIRNESS In terms of Schedule 5 of the JSE Listings Requirements fairness is primarily based on quantitative issues. The acquisitions will generally be considered to be fair to ECSPONENT shareholders if the purchase price of each acquisition is equal to or less than the fair market value of that acquisition.

40

SOURCE DOCUMENTATION AND INFORMATION CONSIDERED We have considered all the following prescribed information that is relevant to the value of the ordinary shares in ECSPONENT and the acquisitions in formulating our opinion:

Information on the acquisitions and ECSPONENT, including the history, the nature of business, services, key customers, industry and competitors;

SENS announcements and agreements relating to the acquisitions;

The audited annual financial statements including the annual report of ECSPONENT for the past three years and the acquisitions for the last two years;

The acquisitions budgets for 2013 and 2014;

The acquisitions management accounts;

Discussions with the executive directors of ECSPONENT;

The details relating to the acquisitions;

Discussions with management of ECSPONENT, including discussions regarding the rationale for and the perceived benefits to be obtained from the acquisitions;

Operating costs and capital expenditure.

The key value drivers and assumptions of the valuation include:

Historical trading;

Margins and operating costs;

Growth in revenue;

Competition;

Valuations of assets and liabilities;

Current market trends relating to the local and world economy, the availability of credit, and employment levels;

Tax; and

Working capital, cash and capital expenditure requirements. PROCEDURES In arriving at our opinion, we have, inter alia:

Prepared valuations on ECSPONENT and each acquisition in accordance with generally accepted valuation approaches and methods. We have prepared the valuation of the operating assets using a Discounted Cash Flow Model. As corroborating evidence we reviewed the reasonability of the forward PE ratios;

Reviewed the terms of the acquisitions;

Considered information made available by and from discussions held with the management of ECSPONENT;

Considered the rationale for the acquisitions;

Considered the valuation of the acquisitions that we prepared; and

Conducted appropriate sensitivity analysis given a reasonable range of key assumptions on the valuations mentioned above.

In respect of the acquisition agreements, it is our understanding that the price was negotiated at arm’s length. Key assumptions used are:

Growth in revenue for 2013 and 2014 is in terms of the budgets and forecasts prepared by management of ECSPONENT. The growth in revenue for Escalator Financial Services (Pty) Ltd declines for the six years to 2019, and for example it drops from 8.4% in 2013 to 2.4% in 2014. The growth rate in revenue for Ecsponent Botswana (Pty) Ltd and Escalator Financial Services (Pty) Ltd is exponential in the 2014, 2015 and 2016 years and tapers down below 10%;

We have used a fair rate of return of between 20.3% and 24.2% for the acquisitions;

Margins and working capital required are in line with those achieved in the past.

The valuations are very sensitive to these key assumptions. The following sensitivity analysis illustrates how sensitive the inputs are. If we increase the growth rate in revenue by 10% and reduce the fair rate of return by 10% this increases our valuations by up to 48%. If we decrease the growth rate in revenue by 10% and increase the fair rate of return by 10% this drops our valuations by up to 32%.

41

APPROPRIATENESS AND REASONABLENESS OF UNDERLYING INFORMATION AND ASSUMPTIONS We satisfied ourselves as to the appropriateness and reasonableness of the information and assumptions employed in arriving at our opinion by:

Considering the historical trends of such information and assumptions;

Comparing and corroborating such information and assumptions with external sources of information, if such information is available; and

Determining the extent to which representations from the senior employee and other industry experts were confirmed by documentary evidence as well as our understanding of the economic environment.

We have relied upon the accuracy of information provided to us or otherwise reviewed by us, for the purpose of these opinions, whether in writing or obtained in discussion with the executive directors of ECSPONENT. We have relied on the audit reports and reviewed the information for reasonableness and consistency. We express no opinion on this information. INDEPENDENCE, COMPETANCE AND LIMITING CONDITIONS We confirm that ECF has no independence issues relating to directorships, employment, owning units, management and fees earned in ECSPONENT or related parties. We confirm that ECF and the directors responsible for this assignment have the necessary competencies relating to internal control systems, quality control, experience and qualifications. We confirm that we have no financial interest and no relationship in ECSPONENT, the acquisitions or related parties. Furthermore, we confirm that our professional fees are not contingent upon the success of the acquisitions and amount to R100 000. We confirm that the scope of our procedures and work performed were not subject to any limiting conditions. Our opinion is based upon the market, regulatory and trading conditions as they currently exist and can only be evaluated as at the date of this report. It should be understood that subsequent developments may affect our opinion, which we are under no obligation to update, revise or re-affirm. The effect of the acquisitions on individual shareholders of ECSPONENT may vary depending on their particular circumstances. We suggest that shareholders should consult an independent advisor if they are in any doubt as to the effect of the acquisitions, considering their personal circumstances. OPINIONS We have evaluated the acquisition for R15 million of 100% of the issued share capital of Escalator Financial Services (Pty) Ltd from Escalator Capital Global Limited, the controlling shareholder of Escalator Capital (RF) Limited and have found that the acquisitions is fair. We have evaluated the acquisition for R5 million of 100% of the issued share capital of Ecsponent Botswana (Pty) Ltd from Escalator Capital (RF) Limited and have found that the acquisitions is fair. We have evaluated the related party acquisition for R7 million of the business and assets of Sanceda Collections (Pty) Ltd and have found that the acquisitions is fair. CONSENT We consent that this opinion may be included, in whole or in part, in any required regulatory announcement or documentation such as a circular. Yours faithfully PAUL AUSTIN Huntrex 299 Proprietary Limited (Trading as Effortless Corporate Finance) Registration number: 2010/004734/07 23 Nicholi Ave Kommetjie

42

ANNEXURE 2

INDEPENDENT FAIRNESS OPINION ON THE CONVERTIBLE LOAN

11 June 2014 “The Directors Ecsponent Limited 1st Floor, Acacia House Green Hill Village Office Park On Lynwood Road Cnr Botterklapper and Nentabos Street The Willows Pretoria East 0043 Sirs FAIRNESS OPINION OF THE INDEPENDENT EXPERT ON THE FAIRNESS OF THE OPTION GRANTED TO A RELATED TO CONVERT A POTENTIAL LOAN TO SHARES AT 14 CENTS IN ECSPONENT LIMITED (“ECSPONENT”) (“THE OPTION”) INTRODUCTION AND SCOPE On SENS on 6 November 2013 ECSPONENT announced a series of transactions with Escalator Capital (RF) Limited, a related party. These transactions include acquisitions from the related party (“the Acquisitions”), a rights issue to raise R100 100 000, the repayment of a loan from the related party and an underwriting agreement. The series of acquisitions are the subject of a separate fairness opinion. This Fairness opinion arises because a shortfall on subscriptions by ECSPONENT shareholder could potentially result in a loan by ECSPONENT from the related party and the shareholders of ECSPONENT are required to approve the option to convert a future loan to share capital in ECSPONENT at a fixed price of 14 cents per ECSPONENT share (the “option”). This term triggers a second fairness opinion that forms the basis of this fairness opinion. This independent fairness opinion is required in terms of paragraph 5.53(b)(i) and (ii) and Section 10 of the JSE Listings Requirements as the discount to the market price per share at the time of exercise of the option is not known at the Last Practicable Date and the option is being given to the controlling shareholder, which is defined as a related party in terms of paragraphs 10.1(b)(i) of the JSE Listings Requirements. The directors of ECSPONENT have appointed Huntrex 299 (Pty) Ltd trading as Effortless Corporate Finance (“ECF”) to provide the required independent fairness opinion in terms of Schedule 5 of the JSE Limited Listings Requirements on the option. The opinion is given to the ECSPONENT board of directors for the sole purpose of assisting the relevant board in forming and expressing an opinion for the benefit of holders of units in ECSPONENT. DEFINITION OF FAIRNESS In terms of Schedule 5 of the JSE Listings Requirements fairness is primarily based on quantitative issues. The granting of the option is a term in favour of the related party and will generally be considered to be fair to ECSPONENT shareholders if all the benefits of ECSPONENT receiving the funds from the related party are higher or equal to all the repayment terms that include the option benefits.

In formulating our opinion on the fairness of the transaction we measure the value of the benefits of receiving the loan against value of the terms of repaying the loan. In this process we quantify the value of all the terms including the value of the option. SOURCE DOCUMENTATION AND INFORMATION CONSIDERED We have considered all the following prescribed information that is relevant to the value of the ordinary shares in ECSPONENT, the acquisitions and the value of the option in formulating our opinion:

Information on the acquisitions and ECSPONENT, including the history, the nature of business, services, key customers, industry and competitors;

The context of how the funds will be utilised to fund the working capital needs to grow the acquisitions;

The cost of the existing funds of ECSPONENT;

Other funding options for ECSPONENT;

SENS announcements and agreements relating to the option;

43

Unit price, the volume of trading and statistics of ECSPONENT on the JSE;

The audited annual financial statements including the annual report of ECSPONENT for the last three years;

Discussions with the executive directors of ECSPONENT;

Discussions with management of ECSPONENT, including discussions regarding the rationale for and the perceived benefits to be obtained from the Convertible Loan and the associated option;

The share price of ECSPONENT, the option price, the timing of the option; and

Statistics on ECSPONENT indicating the standard deviation and volatility of ECSPONENT share price. PROCEDURES We reviewed the source documentation, information considered, procedures and opinion in Annexure 1 to establish the context of the granting of the option. We considered the:

Context of the transaction, for example the cost of existing funding and other funding options available to ECSPONENT;

Rationale for the transaction and the purpose of how the convertible loan will be utilized in providing working capital;

Terms of the convertible loan; and

The costs of the loan, for example the cost of granting the option.

The benefits of the convertible loan, for example if the loan is converted interest would be eliminated and the Balance Sheet would be strengthened. In respect of the option agreement and other agreements with the related party, it is our understanding that the price was negotiated at arm’s length. We weighed up all the benefits and risks of the transaction for both parties against each other.

For ECSPONENT they are:

Receipt of say R55 000 000;

The interest on the loan;

The repayment of the loan in cash or in issue of shares;

The benefits of the option exercise, eg they no longer have to pay interest; and

Alternatives forms of borrowing.

For the related party they are:

Payment of R55 000 000 to ECSPONENT;

Upfront credit risk that ECSPONENT cannot pay and will not succeed;

Receipt of interest;

Repayment by ECSPONENT; and

Benefits of utilising the option.

We reviewed the context, the need for capital in ECSPONENT, the opportunities in ECSPONENT to utilise the

funds profitably in its acquisitions and rationale for the loan and the option

We did value ECSPONENT before the transactions, we valued the acquisitions, and we reviewed the entire transaction. This does indicate the value of ECSPONENT after the transaction. We have not run a hypothetical DCF valuation model on ECSPONENT after the entire set of transactions. We used the Black-Scholes options pricing model to calculate the value of the option. Key value drivers assumptions are:

Option price,

Share price,

Term of the option; and

Volatility of the ECSPONENT share.

44

APPROPRIATENESS AND REASONABLENESS OF UNDERLYING INFORMATION AND ASSUMPTIONS We satisfied ourselves as to the appropriateness and reasonableness of the information and assumptions employed in arriving at our opinion by:

Considering the historical trends of such information and assumptions;

Comparing and corroborating such information and assumptions with external sources of information; and

Determining the extent to which representations from the senior employee and other industry experts were confirmed by documentary evidence as well as our understanding of the economic environment.

We have relied upon the accuracy of information provided to us or otherwise reviewed by us, for the purpose of these opinions, whether in writing or obtained in discussion with the executive directors of ECSPONENT. We have relied on the audit reports and reviewed the information for reasonableness and consistency. We express no opinion on this information. INDEPENDENCE, COMPETANCE AND LIMITING CONDITIONS We confirm that ECF has no independence issues relating to directorships, employment, owning units, management and fees earned in ECSPONENT or related parties. We confirm that ECF and the directors responsible for this assignment have the necessary competencies relating to internal control systems, quality control, experience and qualifications. We confirm that we have no financial interest and no relationship in ECSPONENT, the option or related parties. Furthermore, we confirm that our professional fees are not contingent upon the success of the option and amount to R100 000. We confirm that the scope of our procedures and work performed were not subject to any limiting conditions. Our opinion is based upon the market, regulatory and trading conditions as they currently exist and can only be evaluated as at the date of this report. It should be understood that subsequent developments may affect our opinion, which we are under no obligation to update, revise or re-affirm. The effect of the option on individual shareholders of ECSPONENT may vary depending on their particular circumstances. We suggest that shareholders should consult an independent advisor if they are in any doubt as to the effect of the option, considering their personal circumstances. OPINION We have evaluated the option and have found that the option is fair to the shareholders of ECSPONENT. It relates to a separate potential loan and it is also fair irrespective of whether the acquisitions take place. CONSENT We consent that this opinion may be included, in whole or in part, in any required regulatory announcement or documentation such as a circular. Yours faithfully PAUL AUSTIN Huntrex 299 Proprietary Limited (Trading as Effortless Corporate Finance) Registration number: 2010/004734/07 23 Nicholi Ave Kommetjie”

45

ANNEXURE 3

PRO FORMA STATEMENT OF FINANCIAL POSITION AND STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME FOR ECSPONENT

The pro forma statement of financial position at 31 December 2013 and statement of profit and loss and other comprehensive income for the year ended 31 December 2013 are set out below. The pro forma statement of financial position and statement of profit and loss and other comprehensive income have been prepared for illustrative purposes only to provide information on how the proposed Acquisitions and proposed Convertible Loan might have impacted on the financial position and results of the Group. In addition, the impact of the intended Rights Offer has been reflected to show the full potential effect of the restructuring of the ECSPONENT group as the Rights Offer, after approval of the Acquisitions, will result in R45 million of the Escalator shareholder loan being capitalised to Stated Capital. The pro forma effects of the potential Convertible Loan have not been shown as the loan has not yet been provided to the Company and may not be required in the event that the Rights Offer is fully subscribed. Because of their nature, the pro forma statement of financial position and statement of profit and loss and other comprehensive income may not be a fair reflection of the Group’s financial position after the Acquisitions, the Convertible Loan and the Rights Offer, nor of its future earnings, cash flow or changes in equity. The pro forma statement of financial position and statement of profit and loss and other comprehensive income as set out below should be read in conjunction with the report of the Independent Reporting Accountants which is included as Annexure 4 to this Circular. The Directors are responsible for the preparation of the pro forma statement of financial position and statement of profit and loss and other comprehensive income.

46

Statement of Financial Position as at 31 December 2013

Group Balance Sheets

Audited 31 Dec

2013

(1)

Material

post balance

sheet event –

Disposal of Vinguard

(3)

After Disposal

of Vinguard

(3)

Acquisition of 100%

of Escalator Financial Services

(4)

After the acquisition

of 100% in

Escalator Financial Services

(4)

Acquisition of the

Sanceda going

concern (5)


of the Sanceda

going concern

(5)

Acquisition of 100%

in Escalator Botswana

(6)

After the 100%

Acquisition in Escalator

Botswana (6)

R100m Rights

Offer (8)

After R100m Rights

Offer (8)

Introduction of R55m

Convertible Loan

(9)

After R55m Convertible

Loan (9)

Conversion of R55m

Convertible Loan at 14 cents

(10)

Combined pro forma

effects (10)

R’000 R’000 R‘000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000

ASSETS

Non-current assets 30 226 - 30 226 1 743 31 969 1 904 33 873 3 070 36 943 - 36 943 - 36 943 - 36 943

Property, plant and equipment 4 716

-

4 716 393 5 109 678 5 787 604 6 391 - 6 391 - 6 391 - 6 391

Intangible assets 706 - 706 - 706 - 706 - 706 - 706 - 706 - 706

Deferred taxation 11 138 - 11 138 1 350 12 488 - 12 488 366 12 854 - 12 854 - 12 854 - 12 854 Other financial assets 13 666 - 13 666

13 666 1 226 14 892 2 100 16 992

16 992 - 16 992 - 16 992

Current assets 30 472 (4 046) 26 426 87 26 513 58 26 571 964 27 535 - 27 535 39 061 66 596 - 66 596

Inventories 1 721 - 1 721 - 1 721 - 1 721 - 1 721 - 1 721 - 1 721 - 1 721 Trade and other receivables 23 820 - 23 820 16 23 836 6 23 842 103 23 945 - 23 945 - 23 945 - 23 945

Loans - - - - - - - 1 000 1 000 - 1 000 - 1 000 - 1 000 Assets of disposal group classified as held for sale 4 046 (4 046) - - - - - - - - - - - - - Cash and cash equivalents 885 - 885 71 956 52 1 008 (139) 869 - 869 39 061 39 930 - 39 930

Total assets 60 698 (4 046) 56 652 1 830 58 482 1 962 60 444 4 034 64 478 - 64 478 39 061 103 539 - 103 539

47

Statement of Financial Position as at 31 December 2013 (continued)

Group Balance Sheets

Audited 31 Dec

2013 (1)

Material post

balance sheet

event – Disposal of

Vinguard (3)

After Disposal of

Vinguard (3)

Acquisition of 100% of Escalator Financial Services

(4)

After the acquisition of 100% in Escalator Financial Services

(4)

Acquisition of the

Sanceda going

concern (5)


of the Sanceda

going concern

(5)

Acquisition of 100% in Ecsponent Botswana

(6)

After the 100%

acquisition in

Ecsponent Botswana

(6)

R45m Rights

Offer (minimum)

(7, 87)

After R45m

Rights Offer

(minimum) (7, 8)

Introduction of

R55m Convertible

Loan (9)

After R55m

Convertible Loan

(9)

Conversion of

R55m Convertible

Loan at 14 cents

(10)

Combined pro forma

effects (10)

EQUITY AND LIABILITIES

R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000

Capital and reserves 22 533 1 825 24 358 (11 295) 13 063 (5 038) 8 025 (6 462) 1 563 44 500 46 063 - 46 063 55 000 101 063

Stated capital 55 227 - 55 227 - 55 227 - 55 227 - 55 227 44 500 99 727 - 99 727 55 000 154 727

NDR 3 842 - 3 842 - 3 842 - 3 842 - 3 842 - 3 842 - 3 842 - 3 842 Common control reserve (note 2) - - - (11 129) (11 129) (4 872) (16 001) (6 239) (22 240) - (22 240) - (22 240) - (22 240)

Retained earnings (35 296) 1 385 (33 911) (166) (34 077) (166) (34 243) (166) (34 409) - (34 409) - (34 409) - (34 409) Non-controlling interest (1 240) 440 (800) - (800) - (800) (57) (857) - (857) - (857) - (857) Non-current liabilities 19 566 (4 571) 14 995 11 523 26 518 7 000 33 518 5 000 38 518 37 321) 1 197 55 000 56 197 (55 000) 768 Interest bearing borrowings 18 798 (5 000) 13 798 11 523 25 321 7 000 32 321 5 000 37 321 (37 321) - 55 000 55 000 (55 000) -

Deferred taxation 768

768 - 768 - 768 - 768 768 768

Current liabilities 18 599 (1 300) 17 299 1 602 18 901 - 18 901 5 496 24 397 (7 179) 22 218 (15 939) 1 279 - 1 279 Other financial liabilities 5 035 - 5 035 - 5 035 - 5 035 5 098 10 133 (7 179) 2 954 (2 954) - - - Trade and other payables 12 285 (1 300) 10 985 1 602 12 587 - 12 587 398 12 985 - 14 985 (12 985) - - - Revenue received in advance 1 112 - 1 112 - 1 112 - 1 112 - 1 112 - 1 112 - 1 112 - 1 112

Provisions 167 - 167 - 167 - 167 - 167 - 167 - 167 - 167 Total equity and liabilities 60 698 (4 046) 56 652 1 830 58 482 1 962 60 444 4 034 64 478 - 64 478 39 061 103 539 - 1

Net asset value per share (cents) 5.353 5 665

3 121 1 987 0.545 6 129 - 6.129 8.793

Net tangible asset value per share 5.194 5.506

2.962 1.828 0.386 6.037 - 6.037 8.732

Number of shares in issue (‘000) 444,132 -

444,132 - 444,132 - 444,132 321 429 765 561 - 765 561 393 571 1 159 132

48

Notes to pro forma statement of financial position 1. The information presented in column 1 has been extracted from the audited financial information as

published on SENS for the year ended 31 December 2013. 2. The related party acquisitions of Escalator Financial Services, Sanceda and Ecsponent Botswana are

deemed to be common control transactions in terms of IFRS 3, Business Combinations. Common control transactions are specifically excluded from the scope of IFRS 3. The Group has adopted the following accounting policy to account for common control transactions:

“The Group applies merger accounting for all its common control transactions which requires that the assets and liabilities of the purchased business be incorporated at the consolidated book value (by the ultimate parent) and the difference between the purchase consideration and the book value of the assets and liabilities be recorded in equity as a common control reserve. The financial statements of the purchaser incorporate the combined companies’ results and cash flows as if the companies have always been combined, including the re-presentation of the comparative figures”

3. The shareholders of Vinguard Limited approved the disposal of the gas sheet division in a general meeting held on 24 January 2014, in terms of Section 112 of the Companies Act, 2008. The effective date of the transaction was determined as 31 January 2014 subsequent to the 31 December 2013 financial period. The consideration comprised R6.3 million for the going concern assets paid in cash

4. The acquisition of 100% of Escalator Financial Services has been accounted for at a purchase consideration of R15.0 million, which is expected to result in a transfer of R11.1 million to the common control reserve in terms of ECSPONENT’s merger accounting policy. The information has been extracted from the audited annual financial statements of Escalator Financial Services for the year ended 31 December 2013 without adjustment. The acquisition is considered to have a once-off effect on the statement of financial position of ECSPONENT.

5. The acquisition of the business and assets of Sanceda has been accounted for at a purchase consideration of R7.0 million. The Sanceda Acquisition purchase consideration is expected to result in a transfer of R2.3 million to the common control reserve in terms of ECSPONENT’s merger accounting policy. The information has been extracted from the audited annual financial statements of Sanceda for the year ended 31 December 2013 without adjustment. The acquisition is considered to have a once-off effect on the statement of financial position of ECSPONENT.

6. The acquisition of the business and assets of Ecsponent Botswana has been accounted for at a purchase consideration of R5.0 million. The Ecsponent Botswana acquisition purchase consideration is expected to result in a transfer of R6.2 million to the common control reserve in terms of ECSPONENT’s merger accounting policy. The information has been extracted from the audited annual financial statements of Ecsponent Botswana for the year ended 31 December 2013 without adjustment, other than converting the financial information reported in Botswana Pula to South African Rand. The acquisition is considered to have a once-off effect on the statement of financial position of ECSPONENT.

7. Whilst not a corporate action as detailed in the circular, ECSPONENT is busy with a Rights Offer in the amount of R100 100 000, details of which will be included in a separate Rights Offer circular. The Rights Offer is partly underwritten by Escalator and will result in the capitalisation of approximately R45 million of the existing loan account with Escalator as well as settlement of other liabilities. The Rights Offer is assumed to be at the minimum subscription level of R45.0 million. The increase in issued capital and equity will have a continuing effect on the calculation of the earnings per share. The increased capital raised will have a once off effect on the statement of financial position.

8. The “Pro Forma financial effects after ECSPONENT R45.0 million Rights Offer” column for statement of financial position purposes assumes the Rights Offer Proceeds of R45.0 million were received in cash as at 31 December 2013, net of costs, and were assumed to be applied to settling interest bearing borrowings of R42.3 million and other financial liabilities of R2.2 million. The rights offer proceeds will have a once off effect on the statement of financial position. The settlement of interest bearing liabilities with the proceeds of the rights offer will have a continuing effect on the Statement of profit and loss and other comprehensive income.

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9. The introduction of a Convertible Loan of R55.0 million has been assumed to be received and applied to settle the balance of other financial liabilities of R7.9 million and trade and other payables of R14.3 million with the balance of approximately R32.8 million being applied to cash and cash equivalents. The incurring of interest bearing liabilities will have a continuing effect on the Statement of Financial Position in the event that the Convertible Loan is not capitalised. The option is held by Escalator and not ECSPONENT and it will not have a cost or value in ECSPONENT’S accounts. The conversion terms do, however, potentially impact the classification of the loan from Escalator to be disclosed either as debt or an equity instrument. The agreement, however, allows ECSPONENT’S management to make repayment decisions at the end of the term as well as repayments during the term. It also has a specific clause which prevents Escalator from instructing ECSPONENT to increase the loan should Escalator obtain control of ECSPONENT. The disclosure as debt in the pro-forma figures is therefore appropriate.

10. The Convertible Loan of R55.0 million is assumed to be settled through the issue of ECSPONENT shares at 14 cents per share. It is further assumed that the fair value of the ECSPONENT shares at the conversion date will be 14 cents a share equal to the conversion price. The settlement of interest bearing liabilities through the capitalisation of the Convertible Loan will have a once-off effect on the Statement of Financial Position.

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Statement of Profit and Loss and Other Comprehensive Income for the year ended 31 December 2013

Audited

31 December

2013 (1)

Material

post balance

sheet event –

Disposal of Vinguard

(3)

After Disposal

of Vinguard

(3)

Acquisition of 100%

of Escalator Financial Services

(3, 6)

After the

Acquisition of 100% in Escalator Financial Services

(3)

Acquisition of

Sanceda (4, 65)

After acquisition of Sanceda

(4)

Acquisition of 100% in Escalator Botswana

(5, 6)

After 100%

acquisition in Escalator

Botswana (5)

R45m

Rights Offer (7, 8)

After Rights

Offer (7, 8)

Intro- duction

of R55m Convertible

Loan (11, 12)

Pro forma

effects after

R55m Con

vertible Loan

(12)

Con- version

of R55m Con-

vertible Loan at

14 cents (11, 13)

Combined pro

forma effects

(13) R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000

Revenue 37 317 - 37 317 7,974 45 291 7,638 52 929 244 53 173 - 53 173 - 53 173 - 53 173

Cost of sales (8 215) - (8 215) (7 371) (15 586) (1 500) (17 086) (286) (17 372) - (17 372) - (17 372) - (17 372)

Gross profit 29 102 - 29 102 603 29 705 6 138 35 843 (42) 35 801 - 35 801 - 35 801 - 35 801

Other income 75 2 254 2 329 76 2 405 - 2 405 - 2 405 - 2 405 - 2 405 - 2 405

Operating expenses (21 206) - (21 206)

(21 206) (11 514) (31 720) - (32 720) - (32 720) - (32 720) - (32 720) Operating profit/(loss) 7 971 2 254 10 225 679 10 904 (5 376) 5 528 (42) 5 486 - 5 486 - 5 486 - 5 486 Circular costs (Note 10) - - - (166) (166) (166) (332) (166) (498) - (498) - (498) - (498) Operating profit/(loss) 7 971 2 254 10 225 513 10 738 (5 542) 5 196 (208) 4 988 - 4 988 - 4 988 - 4 988 Net finance charges (notes 6, 8) (1 818) 720 (1 098) (3 764) *4 862) (2 660) (7 522) (1 579) (9 101) (9 245) 144 (13 200) (13 056) 13 200 144 Net profit/(loss) before taxation 6 153 2 974 9 127 (3 251) 5 876 (8 202) (2 326) (1 787) (4 113) 9 245 5 132 (13 200) (8 068) 13 200 5 132

Taxation (Note 11) (1 725) 776 (2 900) 2 250 (650) 808 158 (2 589) (2 431) 3 696 1 265 (3 696) (2 431) Net profit/(loss) for the period 4 428 1 023 5 451 (2 475) 2 976 (5 952) (2 976) (979) (3 955) 6 656 2 701 (9 504) (6 803) 9 504 2 701 Loss from discontinued operations- (3 395) 3 395 - - - - - - - - - - - - - Non-controlling interest (note 9) 1 092 (1 433) (341) - (341) - (341) 58 (283) - (283) - (283) - (283) Net profit/(loss) attributable to ordinary shareholders 2 125 2 985 5 110 (2 475) 2 635 (5 952) (3 317) (921) (4 238) 6 656 (418) (9 504) (7 086) 9 504 2 418 Calculation of headline earnings

Net profit/(loss) for the period 2 125 2 985 5 110 (2 475) 2 635 (5 952) (3 317) (921) (4 238) 6 656 2 418 (9 504) (7 086) 9 504 2 418

IFRS 5 Discontinued operations 63 - (1 385) - (1 385) - (1 385) - (1 385) - (1 385) - (1 385)

IAS 16 Loss on impairment of PPE 63 - 63 - 63 - 63 - 63 - 63 - 63 - 63 IAS 16 (Profit)/ Loss on disposal of PPE 147 - 147 (76) 71 - 71 - 71 - 71 - 71 - 71

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Headline earnings / (loss) for the period 2 335 1 600 3 935 (2 551) 1 384 (5 952) (4 568) (921) (5 489) 6 656 1 167 (9 504) (8 337) 9 504 1 167

Earnings (loss) per share (cents) 0.478 1.151 0.593 (0.747) (0.954) (0.316) (0.926) (0.209) Headline earnings(loss) per share (cents) 0.526 0.886 0.312 (1.029) (1.236) (0.152) (1.089) (0.101) Number of shares in issue (‘000) 444,132 - 444,132 - 444,132 - 444,132 - 444,132 321 429 765 561 - 765 561 393 571 1 159 132

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Notes to the pro forma Statement of Profit and Loss and Other Comprehensive Income 1. The information has been extracted from the audited financial information as published on SENS for the

year ended 31 December 2013. 2. The shareholders of Vinguard Limited approved the disposal of the gas sheet division in a general

meeting held on 24 January 2014, in terms of Section 112 of the Companies Act, 2008. The effective date of the transaction was determined as 31 January 2014 subsequent to the 31 December 2013 financial period. The consideration comprised R6.3 million for the going concern assets paid in cash.

3. The acquisition of 100% of Escalator Financial Services has been accounted for assuming the consolidation of the results for the 12 month year ended 31 December 2013 as though the acquisition occurred on 1 January 2013. The information has been extracted from the audited annual financial statements of Escalator Financial Services for the year ended 31 December 2013 without adjustment. The acquisition is considered to have an on-going effect on the Statement of profit and loss and other comprehensive income of ECSPONENT.

4. The acquisition of the business and assets of Sanceda has been accounted for has been accounted for assuming the consolidation of the results for the 12 month period ended 31 December 2013 as though the acquisition occurred on 1 January 2013. The information has been extracted from the audited annual financial statements of Sanceda for the year ended 31 December 2013 without adjustment. The acquisition is considered to have an on-going effect on the Statement of profit and loss and other comprehensive income of ECSPONENT.

5. The acquisition of the business and assets of Ecsponent Botswana has been accounted for has been accounted for assuming the consolidation of the results for the 12 month year ended 31 December 2013 as though the acquisition occurred on 1 January 2013. The information has been extracted from the audited annual financial statements of Ecsponent Botswana for the year ended 31 December 2013 without adjustment. The acquisition is considered to have an on-going effect on the Statement of profit and loss and other comprehensive income of ECSPONENT.

6. The acquisitions will be financed through the existing Escalator facility at the current loan terms. It was assumed that the purchase consideration funded via the facility remained in place throughout the 12 months to 31 December 2013 and additional funding costs of R7.4 million provided. (Escalator Financial Services R3.6 million, Sanceda R2.2 million and Ecsponent Botswana R1.6 million)

7. Whilst not a corporate action as detailed in the circular, ECSPONENT is busy with a Rights Offer in the amount of R100 100 000, details of which will be included in a separate Rights Offer circular. The Rights Offer is partly underwritten by Escalator and will result in the capitalisation of approximately R45 million of the existing loan account with Escalator as well as other liabilities. Accordingly it has been assumed that ECSPONENT would not incur any interest on the loan from Escalator with effect from 1 January 2013. The interest adjustment has been extracted from the actual interest charged for the 12 months ended 31 December 2013.

8. The “Pro Forma financial effects after ECSPONENT R100 million Rights Offer” column assumes that the R100 million Rights Offer proceeds were received at the beginning of the period for statement of profit and loss and other comprehensive income purposes and that the interest and loan transaction fees savings were realised over the period. The saving includes the assumed interest provided for in the pro forma results of the individual acquisitions, refer notes 2 to 5 above. The interest saving will have a continuing effect whilst the loan transaction fees will have a once off effect. The interest saving and transaction costs would impact the holding company's Statement of profit and loss and other comprehensive income only and therefore no non-controlling shareholder adjustment would arise.

9. The interest saving and transaction costs would impact the holding company's Statement of profit and loss and other comprehensive income only and therefore no non-controlling shareholder adjustment would arise.

10. Transaction costs in relation to the Circular of R496 819 excluding VAT have been assumed. These costs will have a once off effect on ECSPONENT The costs of the circular have been assumed to be incurred directly with the three acquisitions detailed in notes 3, 4 and 5 above as well as the Convertible Loan in note 11 below.

11. Notional taxation at a rate of 28% has been assumed where appropriate. 12. The introduction of a Convertible Loan of R55 million has been assumed to be received at the beginning

of the period and assumed to attract an interest rate of 24% as per the signed agreement. The incurring of interest bearing liabilities will have a continuing effect on the Statement of profit and loss and other comprehensive income in the event that the Convertible Loan is not capitalised. The option is held by Escalator and not ECSPONENT and it will not have a cost or value in ECSPONENT’S accounts;

13. The Convertible Loan of R55 million is assumed to be capitalised through the issue of ECSPONENT shares at 14 cents per share. The settlement of interest bearing liabilities through the capitalisation of the Convertible Loan will have a continuing effect on the Statement of profit and loss and other comprehensive income.

53

ANNEXURE 4

INDEPENDENT REPORTING ACCOUNTANTS REPORT ON THE COMPILATION OF THE PRO FORMA FINANCIAL INFORMATION OF ECSPONENT

“11 June 2014 The Directors Ecsponent Limited Acacia House Green Hill Village Office Park Cnr of Nentabos and Botterklapper Street The Willows Pretoria East, 0181 Dear Sirs REPORT ON THE COMPILATION OF PRO FORMA FINANCIAL INFORMATION INCLUDED IN A CIRCULAR We have completed our assurance engagement to report on the compilation of pro forma financial information of Ecsponent Limited by the directors. The pro forma financial information, as set out in Annexure 3 of the circular, consists of the statement of financial position and Statement of profit and loss and other comprehensive income and related notes. The pro forma financial information has been compiled on the basis of the applicable criteria specified in the JSE Limited (JSE) Listings Requirements. The pro forma financial information has been compiled by the directors to illustrate the impact of the corporate action or event, described in Paragraph 5 / Annexure 3, on the company’s financial position as at 31 December 2013, and the company’s financial performance for the period then ended, as if the corporate action or event had taken place at 1 January 2013 and for the period then ended. As part of this process, information about the company’s financial position and financial performance has been extracted by the directors from the company’s financial statements for the year ended 31 December 2013, on which an auditor’s report was issued on 27 March 2014. Directors’ Responsibility for the Pro Forma Financial Information The directors are responsible for compiling the pro forma financial information on the basis of the applicable criteria specified in the JSE Listings Requirements and described in Paragraph 4 / Annexure 3. Reporting Accountant’s Responsibility Our responsibility is to express an opinion about whether the pro forma financial information has been compiled, in all material respects, by the directors on the basis specified in the JSE Listings Requirements based on our procedures performed. We conducted our engagement in accordance with the International Standard on Assurance Engagements (ISAE) 3420, Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus which is applicable to an engagement of this nature. This standard requires that we comply with ethical requirements and plan and perform our procedures to obtain reasonable assurance about whether the pro forma financial information has been compiled, in all material respects, on the basis specified in the JSE Listings Requirements. For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the pro forma financial information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the pro forma financial information.

54

As the purpose of pro forma financial information included in a circular is solely to illustrate the impact of a significant corporate action or event on unadjusted financial information of the entity as if the corporate action or event had occurred or had been undertaken at an earlier date selected for purposes of the illustration, we do not provide any assurance that the actual outcome of the event or transaction at 31 December 2013 would have been as presented. A reasonable assurance engagement to report on whether the pro forma financial information has been compiled, in all material respects, on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used in the compilation of the pro forma financial information provides a reasonable basis for presenting the significant effects directly attributable to the corporate action or event, and to obtain sufficient appropriate evidence about whether:

The related pro forma adjustments give appropriate effect to those criteria; and

The pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information.

Our procedures selected depend on our judgment, having regard to our understanding of the nature of the company, the corporate action or event in respect of which the pro forma financial information has been compiled, and other relevant engagement circumstances. Our engagement also involves evaluating the overall presentation of the pro forma financial information. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion Opinion In our opinion, the pro forma financial information has been compiled, in all material respects, on the basis of the applicable criteria specified by the JSE Listings Requirements and described in Paragraph 4 / Annexure 3. Yours faithfully AM Smith and Company Inc. Partner: AM Smith Registered Auditor (Practise nr: 957399) 774 Waterval Road Little Falls 1724 (Private Bag X2, Strubensvalley, 1735)”

55

ANNEXURE 5

HISTORICAL FINANCIAL INFORMATION OF ESCALATOR FINANCIAL SERVICES FOR THE THREE PERIODS ENDED 31 DECEMBER 2013

The information is taken from the audited annual financial statements of Escalator Financial Services which were prepared in the manner required by the Companies Act and in accordance with IFRS. The information is the responsibility of the directors of ECSPONENT. AM Smith and Company Inc. has been the auditor to Escalator Financial Services since 2012 and has reported on the financial statements for the past three period without modifying the audit opinion. The audit report on the historical financial information has been prepared by AM Smith and Company Inc. and is contained in Annexure 6 to this circular. There are no facts or circumstances that are material to an appreciation of the state of affairs, financial position, changes in equity, results of operations and cash flows other than as disclosed in this circular. 1. Nature of Business

Escalator Financial Services (Proprietary) Limited was incorporated in South Africa with interests in the Financial services industry. The company operates in South Africa. There have been no material changes to the nature of the company's business from the prior year.

2. Review of financial results and activities The annual financial statements have been prepared in accordance with International Financial Reporting Standards and the requirements of the Companies Act 71 of 2008. The accounting policies have been applied consistently compared to the prior year. Full details of the financial position, results of operations and cash flows of the company are set out in these annual financial statements.

3. Share Capital There were no changes in the authorised or issued share capital of the company during the period under review.

4. Dividends The company's dividend policy is to consider an interim and a final dividend in respect of each financial year. At its discretion, the directors may consider a special dividend, where appropriate. Depending on the perceived need to retain funds for expansion or operating purposes, the directors may pass on the payment of dividends. Given the current state of the global economic environment, the directors believes that it would be more appropriate for the company to conserve cash and maintain adequate debt headroom to ensure that the company is best placed to withstand any prolonged adverse economic conditions. Therefore the directors have resolved not to declare a dividend for the financial year ended 31 December 2013.

5. Directors The directors in office at the date of this report are as follows:

Name Office Designation

E Engelbrecht Chairperson Executive A Hay Chief Executive Officer Executive HJ Ansara Chief Operating Officer Executive

There have been no changes to the authorised or issued share capital during the year under review.

6. Holding company

The company's holding company is Escalator Capital (RF) Limited which holds 100% (2012: 100%) of the company's equity. Escalator Capital (RF) Limited is incorporated in South Africa.

7. Special resolutions No special resolutions, the nature of which might be significant to the shareholder in their appreciation of the state of affairs of the company were made by the company during the period covered by this report.

56

8. Events after the reporting period The directors are not aware of any material event which occurred after the reporting date and up to the date of this report.

9. Going concern

The directors believe that the company has adequate financial resources to continue in operation for the foreseeable future and accordingly the annual financial statements have been prepared on a going concern basis. The directors have satisfied themselves that the company is in a sound financial position and that it has access to sufficient borrowing facilities to meet its foreseeable cash requirements. The directors are not aware of any new material changes that may adversely impact the company. The directors are also not aware of any material non-compliance with statutory or regulatory requirements or of any pending changes to legislation which may affect the company.

10. Auditors

AM Smith and Company Inc. continued in office as auditors for the company for 2013. At the AGM, the shareholder will be requested to reappoint AM Smith and Company Inc as the independent external auditors of the company and to confirm Mr AM Smith as the designated lead audit partner for the 2014 financial year

11. Secretary

The secretary of the company is Ecsponent Administrators (Pty) Limited. Statement of Financial Position as at 31 December 2013

Figures in Rand

Note(s)

31 Dec 2013

31 Dec 2012

29 Feb 2012

Assets Non-Current Assets Property, plant and equipment 3 393 240 514 690 610 303 Deferred tax 6 1 349 449 1 592 606 1 913256

1 742 689 2 107 296 2 523 559 Current Assets Loans to group companies 4 3 476 839 7 465 151 7 968 247 Trade and other receivables 7 - 76 000 - Pre payments 15 987 - Cash and cash equivalents 8 237 148 199 876 245 559

3 729 974 7 741 027 8 213 806 Total Assets 5 472 663 9 848 32 10 737 365

Equity and Liabilities Equity Share capital 9 12 077 442 12 077 442 12 077 442 Accumulated loss (8 206 520) (8 516 594) (9 140 552)

3 870 922 3 560 848 2 936 890

Liabilities Current Liabilities Loans from group companies 4 - 3 306 139 5 676 898 Trade and other payables 10 1 601 741 2 981 336 2 123 576

1 601 741 6 287 475 7 800 474

Total Equity and Liabilities 5 472 663 9 848 323 10 737 364

Per share information: Net asset value (Rand) 38 709 35 608 29 369 Net tangible asset value (Rand) 38 709 35 608 29 369

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Statement of profit and loss and other comprehensive income

12 months 10 months 12 months ended ended ended Figures in Rand

Note(s)

31 Dec 2013

31 Dec 2012

29 Feb 2012

Revenue 12 7 974 210 4 991 690 5 666 594 Other income 75 789 132 925 - Operating expenses (7 371 248) (4 063 346) (5 398 120) Operating profit 13 678 751 1 061 269 268 474 Investment revenue 14 6 853 6 194 (2 373) Finance costs 15 (132 373) (122 855) (123 636) Profit before taxation 553 231 944 608 142 465 Taxation 16 (243 157) (320 650) (123 767) Profit for the period 310 074 623 958 18 698 Other comprehensive income - - - Total comprehensive income for the period

310 074 623 958 18 698

Per share information Earnings per share (Rand) 3 101 6 240 187 Headline earnings per share (Rand) 3 101 6 240 187 Dividend per share (Rand) - - -

Statement of Changes in Equity

Figures in Rand Share

capital Share

premium Total share

capital Accumulated

loss Total

equity

Balance at 01 March 2011 100 12 077 342 12 077 442 (9 159 250) 2 918 192 Profit for the 10 months - - - 18 698 18 698 Other comprehensive income - - - - - Total comprehensive income for the 10 months

- - - 18 698 18 698

Balance at 01 March 2012 100 12 077 342 12 077 442 (9 140 552) 2 936 890 Profit for the 10 months - - - 623 958 623 958 Other comprehensive income - - - - - Total comprehensive income for the 10 months

- - - 623 958 623 958

Balance at 31 December 2012 100 12 077 342 12 077 442 (8 516 594) 3 560 848 Profit for the year - - - 310 074 310 074 Other comprehensive income - - - - - Total comprehensive income for the year

- - - 310 074 310 074

Balance at 31 December 2013 100 12 077 342 12 077 442 (8 206 520)) 3 870 922 Note(s) 9 9 9

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Statement of Cash Flows

12 months 10 months 12 months ended ended ended 31 Dec 31 Dec 29 Feb Figures in Rand Note(s) 2013 2012 2012

Cash flows from operating activities

Cash generated from (used in) operations 17 (477 661) 2 025 151 452 296 Interest income 6 853 6 194 (2 373) Finance costs (132 373) (122 855) (123 636) Net cash from operating activities (603 181) 1 908 490 326 287

Cash flows from investing activities

Purchase of property, plant and equipment 3 (265 017) (177 430) (427 430) Sale of property, plant and equipment 3 222 699 90 920 - Loans to group companies repaid 682 173 - 220 679 Loans advanced to group companies - (1 867 663) -

Net cash from investing activities 639 855 (1 954 173) (206 751)

Cash flows from financing activities

Movement in loans to directors, managers and employees - 125 655

Total cash for the period 36 374 (45 683) 245 191

Cash at the beginning of the period 199 876 245 559 366

Total cash at end of the period 8 236 550 199 876 245 557

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1. Presentation of Annual Financial Statements

The annual financial statements have been prepared in accordance with International Financial Reporting Standards, and the Companies Act of South Africa, 71 of 2008. The annual financial statements have been prepared on the historical cost basis, except for the measurement of certain financial instruments at fair value, and incorporate the principal accounting policies set out below. They are presented in South African Rands. These accounting policies are consistent with the previous period.

1.1 Significant judgements and sources of estimation uncertainty In preparing the annual financial statements, management is required to make estimates and assumptions that affect the amounts represented in the audited financial statements and related disclosures. Use of available information and the application of judgement is inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the annual financial statements. Significant judgements include: Trade receivable, Held to maturity investments and Loans and receivables The company assesses its trade receivables, held to maturity investments and loans and receivables for impairment at the end of each reporting period. In determining whether an impairment loss should be recorded in profit or loss, the company makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a financial asset. The impairment for trade receivables, held to maturity investments and loans and receivables is calculated on a portfolio basis, based on historical loss ratios, adjusted for national and industry-specific economic conditions and other indicators present at the reporting date that correlate with defaults on the portfolio. These annual loss ratios are applied to loan balances in the portfolio and scaled to the estimated loss emergence period. Impairment testing The recoverable amounts of cash-generating units and individual assets have been determined based on the higher of value-in-use calculations and fair values less costs to sell. These calculations require the use of estimates and assumptions. It is reasonably possible that the key assumption may change which may then impact our estimations and may then require a material adjustment to the carrying value of goodwill and tangible assets. The company reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. In addition, goodwill is tested on an annual basis for impairment. Assets are grouped at the lowest level for which identifiable cash flows are largely independent of cash flows of other assets and liabilities. If there are indications that impairment may have occurred, estimates are prepared of expected future cash flows for each group of assets. Expected future cash flows used to determine the value in use of goodwill and tangible assets are inherently uncertain and could materially change over time. Taxation Judgement is required in determining the provision for income taxes due to the complexity of legislation. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The company recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. The company recognises the net future tax benefit related to deferred income tax assets to the extent that it is probable that the deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability of deferred income tax assets requires the company to make significant estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the company to realise the net deferred tax assets recorded at the end of the reporting period could be impacted.

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1.2 Property, plant and equipment

The cost of an item of property, plant and equipment is recognised as an asset when: it is probable that future economic benefits associated with the item will flow to the company; and the cost of the item can be measured reliably. Property, plant and equipment is initially measured at cost Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently to add to, replace part of, or service it. If a replacement cost is recognised in the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced part is derecognised. Property, plant and equipment are depreciated on the straight line basis over their expected useful lives to their estimated residual value. Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses. The useful lives of items of property, plant and equipment have been assessed as follows:

Item Average useful life

Furniture and fixtures 6 years Motor vehicles 5 years Office equipment 6 years IT equipment 3 years

The residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting period. If the expectations differ from previous estimates, the change is accounted for as a change in accounting estimate. The depreciation charge for each period is recognised in profit or loss unless it is included in the carrying amount of another asset. The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profit or loss when the item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.

1.3 Financial instruments Initial recognition and measurement Financial instruments are recognised initially when the company becomes a party to the contractual provisions of the instruments. The company classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement. Financial instruments are measured initially at fair value, except for equity investments for which a fair value is not determinable, which are measured at cost and are classified as available-for-sale financial assets. For financial instruments which are not at fair value through profit or loss, transaction costs are included in the initial measurement of the instrument. Transaction costs on financial instruments at fair value through profit or loss are recognised in profit or loss. Regular way purchases of financial assets are accounted for at trade date.

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Subsequent measurement Financial instruments at fair value through profit or loss are subsequently measured at fair value, with gains and losses arising from changes in fair value being included in profit or loss for the period. Net gains or losses on the financial instruments at fair value through profit or loss include dividends and interest. Loans and receivables are subsequently measured at amortised cost, using the effective interest method, less accumulated impairment losses. Financial liabilities at amortised cost are subsequently measured at amortised cost, using the effective interest method. Derecognition Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the company has transferred substantially all risks and rewards of ownership. Fair value determination The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the company establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models making maximum use of market inputs and relying as little as possible on entity-specific inputs. Loans to (from) group companies These include loans to and from holding companies, fellow subsidiaries, subsidiaries, joint ventures and associates and are recognised initially at fair value plus direct transaction costs. Loans to group companies are classified as loans and receivables. Loans from group companies are classified as financial liabilities measured at amortised cost. Loans to shareholders, directors, managers and employees These financial assets are classified as loans and receivables. Trade and other receivables Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is impaired. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The allowance recognised is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in profit or loss within operating expenses. When a trade receivable is uncollectable, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against operating expenses in profit or loss.

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Trade and other receivables are classified as loans and receivables. Trade and other payables Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These are initially and subsequently recorded at fair value. Bank overdraft and borrowings Bank overdrafts and borrowings are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the company’s accounting policy for borrowing costs.

1.4 Tax Current tax assets and liabilities Current tax for current and prior periods is, to the extent unpaid, recognised as a liability. If the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess is recognised as an asset. Current tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (recovered from) the tax authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Deferred tax assets and liabilities A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised. A deferred tax asset is not recognised when it arises from the initial recognition of an asset or liability in a transaction at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss). Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Tax expenses Current and deferred taxes are recognised as income or an expense and included in profit or loss for the period, except to the extent that the tax arises from: a transaction or event which is recognised, in the same or a different period, to other comprehensive

income, or a business combination. Current tax and deferred taxes are charged or credited to other comprehensive income if the tax relates to items that are credited or charged, in the same or a different period, to other comprehensive income. Current tax and deferred taxes are charged or credited directly to equity if the tax relates to items that are credited or charged, in the same or a different period, directly in equity.

1.5 Impairment of assets The company assesses at each end of the reporting period whether there is any indication that an asset may be impaired. If any such indication exists, the company estimates the recoverable amount of the asset. Irrespective of whether there is any indication of impairment, the company also: tests intangible assets with an indefinite useful life or intangible assets not yet available for use for

impairment annually by comparing its carrying amount with its recoverable amount. This impairment test is performed during the annual period and at the same time every period.

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If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash-generating unit to which the asset belongs is determined. The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use. If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss. An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately in profit or loss. Any impairment loss of a revalued asset is treated as a revaluation decrease. The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods. A reversal of an impairment loss of assets carried at cost less accumulated depreciation or amortisation other than goodwill is recognised immediately in profit or loss. Any reversal of an impairment loss of a revalued asset is treated as a revaluation increase.

1.6 Share capital and equity An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.

1.7 Employee benefits

Short-term employee benefits The cost of short-term employee benefits, (those payable within 12 months after the service is rendered, such as paid vacation leave and sick leave, bonuses, and non-monetary benefits such as medical care), are recognised in the period in which the service is rendered and are not discounted. The expected cost of compensated absences is recognised as an expense as the employees render services that increase their entitlement or, in the case of non-accumulating absences, when the absence occurs. The expected cost of profit sharing and bonus payments is recognised as an expense when there is a legal or constructive obligation to make such payments as a result of past performance.

1.8 Revenue When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction is recognised by reference to the stage of completion of the transaction at the end of the reporting period. The outcome of a transaction can be estimated reliably when all the following conditions are satisfied: the amount of revenue can be measured reliably; it is probable that the economic benefits associated with the transaction will flow to the company; the stage of completion of the transaction at the end of the reporting period can be measured reliably;

and the costs incurred for the transaction and the costs to complete the transaction can be measured

reliably. When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue shall be recognised only to the extent of the expenses recognised that are recoverable.

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Interest is recognised, in profit or loss, using the effective interest rate method.

Figures in Rand Dec 2012

Feb 2012

2. New Standards and Interpretations

2.1 Standards and interpretations effective and adopted in the current year

In the current year, the company has adopted the following standards and interpretations that are effective for the current financial year and that are relevant to its operations:

Standard/ Interpretation:

Effective date: Years

beginning on or after

Expected

impact:

IFRS 13 Fair Value Measurement 01 January 2013 No material impact

IAS 1 Presentation of Financial Statements 01 July 2012 No material impact

Disclosures – Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7)

01 January 2013 No material impact

IFRS 1 – Annual Improvements for 2009 – 2011 cycle 01 January 2013 No material impact

IAS 1 – Annual Improvements for 2009 – 2011 cycle 01 January 2013 No material impact



2.2 Standards and interpretations not yet effective

The company has chosen not to early adopt the following standards and interpretations, which have been published and are mandatory for the company’s accounting periods beginning on or after 01 January 2014 or later periods:

Standard/ Interpretation:

Effective date: Years

beginning on or after

Expected

impact:

IFRS 9 Financial Instruments 01 January 2015 No material impact Offsetting Financial Assets and Financial Liabilities

(Amendments to IAS 32) 01 January 2014 No material impact

IAS 36 – Recoverable Amount Disclosures for Non-Financial Assets

01 January 2014 No material impact

3. Property, plant and equipment

2013 2012 Cost Accumulated

depreciation Carrying

value Cost Accumulated

depreciation Carrying

value

Furniture and fixtures

82 188

(48 650)

33 538

156 388

(65 840)

90 548

Motor vehicles 250 000 (71 125) 178 875 120 000 (16 670) 103 330 Office equipment 91 178 (38 472) 52 706 109 178 (31 024) 78 154 IT equipment 507 165 (379 044) 128 121 518 854 (276 196) 242 658

Total 930 531 (537 291) 393 240 904 420 (389 730) 514 690

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Reconciliation of property, plant and equipment – December 2013

Opening

balance

Additions

Disposals

Depreciation

Total

Furniture and fixtures 90 548 - (34 752) (22 258) 33 538 Motor vehicles 103 330 130 000 - (54 455) 178 875 Office equipment 78 154 - (8 248) (17 200) 52 706 IT equipment 242 658 135 017 (103 910) (145 644) 128 121

514 690 265 017 (146 910) (239 557) 393 240

Reconciliation of property, plant and equipment – December 2012

Opening

balance

Additions

Depreciation

Total

Furniture and fixtures 133 342 4 500 (25 570) 112 272

Motor vehicles - 80 000 (6 668) 73 332

Office equipment 32 042 73 402 (12 123) 93 321

IT equipment 160 325 269 528 (98 475) 331 378

325 709 427 430 (142 836) 610 303

A register containing the information required by Regulation 25(3) of the Companies Regulations, 2011 is available for inspection at the registered office of the company.

4. Loans to (from) group companies Holding company

Dec 2013

Dec 2012

Feb 2012

Escalator Capital (RF) Ltd The loan is unsecured and interest free. The company has an unconditional right to defer settlement of the loan for 12 months.

3 476 839 (3 303 139) (4 887 736)

Fellow subsidiaries Escalator Administrators (Pty) Ltd The loan is unsecured, interest free and no fixed terms of repayment

- 4 912 802 6 080 221

Escalator Asset Management (Pty) Ltd The loan is unsecured, interest free and has no fixed terms of repayment.

- 2 552 349 1 319 543

Escalator Business Finance (Pty) Ltd The loan is unsecured, interest free and has no fixed terms of repayment.

- (3 000) -

- 7 462 151 7 399 764

Non-current assets - - 1 319 543 Current assets 3 476 839 7 465 151 6 080 221 Current liabilities - (3 306 139) (4 887 736)

3 476 839 4 159 012 2 512 028

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Credit quality of loans to group companies The credit quality of loans to group companies that are neither past due nor impaired can be assessed by reference to reference to historical information about counterparty default rates. The maximum exposure to credit risk at the reporting date is the fair value of each class loan mentioned above. The company does not hold any collateral as security.

5. Financial assets by category The accounting policies for financial instruments have been applied to the line items below:

December 2013 Loans and

receivables

Total

Loans to group companies 3 476 8391 3 476 839 Cash and cash equivalents 237 148 237 148 Pre payments 15 987 15 987

3 729 974 3 729 974

December 2012 Loans and

receivables

Total

Loans to group companies 5 165 151 5 165 151 Trade and other receivable 76 000 76 000 Cash and cash equivalents 199 876 199 876

5 441 027 5 441 027

February 2012

Loans and

Receivables

Total

Loans to group companies 7 326 814 7 326 814 Cash and cash equivalents 245 559 245 559

7 572 373 7 752 373

6. Deferred tax

Deferred tax asset

Tax losses available for set off against future tax income 1 349 449 1 592 606 2 037 023

Deferred tax asset 1 349 449 1 592 606 2 037 023

Reconciliation of deferred tax asset / (liability) At beginning of year 1 592 606 1 913 256 2 297 882 Decrease) in tax loss available for set off against future taxable income

(243 157)

(320 650)

(260 859)

1 349 449 1 592 606 2 037 023

7. Trade and other receivables

Trade receivables - 76 000 -

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8. Cash and cash equivalents Cash and cash equivalents consist of:

Cash on hand - - 149 Bank balances 237 148 199 876 217

237 148 199 876 366

9. Share capital

Authorised 10 000 000 Ordinary shares of R0.00001 each 100 100 100

Issued Ordinary 100 100 100 Share premium 12 077 342 12 077 342 12 077 342

12 077 442 12 077 442 12 077 442

10. Trade and other payables

Trade payables 1 - 112 400 VAT 962 966 2 577 485 1 991 500 Other payables 638 774 403 851 19 677

1 601 741 2 981 336 2 082 590

11. Financial liabilities by category

The accounting policies for financial instruments have been applied to the line items below:

December 2013 Financial liabilities

at amortised cost

Total

Trade and other payables 1 601 741 1 601 741

December 2012 Financial liabilities

at amortised cost

Total

Loans from group companies 3 306 139 3 306 139 Trade and other payables 2 013 2 013

3 308 152 3 308 152

February 2012 Financial

liabilities at amortised

cost

Total

Loans from group companies (5 676 898) (5 676 898) Trade and other payables (112 400) (112 400)

(5 789 298) (5 789 298)

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12. Revenue

Dec 2013

Dec 2012

Feb 2012

Fees 7 974 210 4 991 690 6 738 202

13. Operating profit

Operating profit for the year is stated after accounting for the following: Profit on sale of property, plant and equipment 75 789 36 593 - Depreciation on property, plant and equipment 238 959 218 716 58 896 Employee costs 5 445 209 1 978 532 3 395 232

14. Investment revenue

Interest revenue Bank 6 853 6 194 28 Loans to directors managers and employees - (3 675) 13 573

6 853 (2 373) 13 601

15. Finance costs

Trade and other payables - - 10 Bank 46 42 42 359 Late payment of tax 132 327 122 813 21 667

132 373 122 855 64 036

16. Taxation

Major components of the tax expense Deferred Arising from previously unrecognised tax loss / tax credit / temporary difference

243 157 320 650 260 859

Reconciliation of the tax expense Reconciliation between accounting profit and tax expense. Accounting profit 553 231 944 608 875 161 Tax at the applicable tax rate of 28% (2012: 28%) 154 905 264 490 245 045 Tax effect of adjustments on taxable income Accounting profit 88 252 56 160 6 067 Legal fees - 33 450 9 747

243 157 320 650 260 859

No provision has been made for 2013 tax as the company has no taxable income. The estimated tax loss available for set off against future taxable income is R4 819 462 (2012 : R5 687 877)

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17. Cash generated from operations

Profit before taxation 553 231 944 608 875 161 Adjustments for: Depreciation and amortisation 238 959 218 716 58 896 Profit on sale of assets (75 789) (36 593) - Interest received – investment (6 853) (6 194) (13 601) Finance costs 132 373 122 855 64 036 Other non-cash items 27 692 Changes in working capital: Trade and other receivables 76 000 (76 000) - Pre payments (15 987) - Trade and other payables (1 379 595) 857 759 1 742 640

(477 661) 2 025 151 2 754 824

18. Related parties

Relationships

Holding company Escalator Capital (RF) Ltd Fellow subsidiaries Escalator Asset Management (Pty) Ltd

Escalator Administrators (Pty) Ltd Escalator Business Finance (Pty) Ltd

Related party balances

Dec 2013

Dec 2012

Feb 2012

Loan accounts - Owing (to) by related parties Escalator Capital (RF) Ltd 3 476 839 (3 303 139) (4 897 736) Escalator Asset Management (Pty) Ltd - 2 552 349 6 080 221 Escalator Administrators (Pty) Ltd - 4 912 802 1 319 543 Escalator Business Finance (Pty) Ltd - (3 000) -

Related party transactions Administration fees paid to (received from) related parties

Escalator Capital (RF) Ltd - (4 991 690) (1 753 155) Escalator Asset Management (Pty) Ltd - - (2 472 960) Escalator Administrators (Pty) Ltd - 300 000 (2 512 085) Compensation to directors and other key management

Short-term employee benefits 538 390 440 000 -

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19. Directors' emoluments

December 2013 Emoluments Commission Total

Executive A Hay 240 000 778 013 1 018 013

December 2012

Emoluments

Pension paid or

Receivable

Total

A Hay 448 390 90 000 538 390

February 2012

Emoluments

Total

A Hay 440 000 440 000

20. Risk management

Capital risk management The company's objectives when managing capital are to safeguard the company's ability to continue as a going concern in order to provide returns for shareholder and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The capital structure of the company consists of debt, which includes the borrowings (excluding derivative financial liabilities) disclosed in notes 4 cash and cash equivalents disclosed in note 9, and equity as disclosed in the statement of financial position.

In order to maintain or adjust the capital structure, the company may adjust the amount of dividends paid to shareholder, return capital to shareholder, issue new shares or sell assets to reduce debt. There are no externally imposed capital requirements. There have been no changes to what the entity manages as capital, the strategy for capital maintenance or externally imposed capital requirements from the previous year.

Liquidity risk The company’s risk to liquidity is a result of the funds available to cover future commitments. The company manages liquidity risk through an ongoing review of future commitments and credit facilities. Interest rate risk As the company has no significant interest-bearing assets, the company’s income and operating cash flows are substantially independent of changes in market interest rates. Credit risk Credit risk consists mainly of cash deposits, cash equivalents, derivative financial instruments and trade debtors. The company only deposits cash with major banks with high quality credit standing and limits exposure to any one counter-party

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ANNEXURE 6

INDEPENDENT REPORTING ACCOUNTANTS’ REPORT ON THE HISTORICAL FINANCIAL INFORMATION OF ESCALATOR FINANCIAL SERVICES

“11 June 2014 The Directors John Daniels Holdings Limited 1st Floor, Bushwillow House Green Hill Village Office Park Cnr Botterklapper and Nentabos Street The Willows Pretoria Dear Sirs REPORT OF THE INDEPENDENT REPORTING ACCOUNTANTS ON THE CONSOLIDATED HISTORICAL FINANCIAL INFORMATION AT 31 DECEMBER 2013 IN RESPECT OF ESCALATOR FINANCIAL SERVICES (PTY) LTD (“Escalator Financial Services”) 1. INTRODUCTION

At your request and for the purposes of proposed acquisition by Ecsponent Limited (“ECSPONENT”) of the entire issued share capital of Escalator Financial Services (Pty) Ltd (“Escalator Financial Services” or “the Company”)) from a related party in terms of which ECSPONENT will acquire all of the shares in issue at a consideration of R15 million. We present our report on the historical financial information of Escalator Financial Services, which comprise the statement of financial position as at 31 December 2013, the Statement of profit and loss and other comprehensive income, the statement of changes in equity and cash flow statement for the year then ended as set out in Annexure 5 of the circular, in compliance with the Listing Requirements of the JSE Limited (“JSE Listings Requirements”).

2. RESPONSIBILITY AND PURPOSE OF REPORT

The directors of ECSPONENT are responsible for the compilation, contents and preparation of the circular and for the accuracy of the information contained therein. The directors of ECSPONENT are responsible for the financial information to which this report on the historical financial information of the company relates, and from which the report has been prepared. Our responsibility is to express an opinion on the historical financial information included as Annexure 5 of this circular.

At your request, and for the purpose of the circular to ECSPONENT shareholders to be dated on or about 18 June 2014, we present our report on the historical financial information of Escalator Financial Services, presented in Annexure 5 to the circular.

3. SCOPE

We have audited the financial information of Escalator Financial Services for the year ended 31 December 2013, the ten months ended 31 December 2012 and the year ended 28 February 2012.

4. SCOPE OF 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 annual financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual financial statements.

72

The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the annual 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 annual 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 the directors, as well as evaluating the overall presentation of the annual financial statements.

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

14. OPINION

In our opinion, the historical financial information of Escalator Financial Services for the year ended 31 December 2013, 31 December 2012 and 28 February 2012 as reported in Annexure 5 fairly presents, in all material respects, the financial position as of that date, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards, the Companies Act in South Africa and the JSE Listing Requirements.

6. CONSENT

We consent to the inclusion of this report to the shareholders of ECSPONENT. Yours faithfully AM Smith and Company Inc. Chartered Accountants (SA) Registered Auditors 774 Waterval Road Little Falls 1724”

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ANNEXURE 7

HISTORICAL FINANCIAL INFORMATION OF SANCEDA FOR THE TWO YEARS ENDED 31 DECEMBER 2013

The information is taken from the audited annual financial statements of Sanceda which were prepared in the manner required by the Companies Act and in accordance with IFRS. The information is the responsibility of the directors of ECSPONENT. AM Smith and Company Inc. has been appointed as the auditor for the years ended 31 December 2013 and 31 December 2012 from commencement of trading and has reported on the financial statements for both years with a modified audit opinion which details an emphasis of matter relating to the going concern of Sanceda due to the liabilities of Sanceda exceeding its assets, noting the directors’ statement on going concern in note 3. below. The company was not audited prior to this date and has only been operating for two years. The audit report on the historical financial information has been prepared by AM Smith and Company Inc. and is contained in Annexure 8 to this circular. There are no facts or circumstances that are material to an appreciation of the state of affairs, financial position, changes in equity, results of operations and cash flows other than as disclosed in this circular. 1. Incorporation

The company was incorporated on 27 July 2010 and obtained its certificate to commence business on the same day.

2. Review of Activities Main business and operations The company is engaged in debt recovery and debtor tracing across all markets throughout Southern Africa. There has been no material change in the nature of the business from date of incorporation. The operating results and state of affairs of the company are fully set out in the attached financial statements and do not in our opinion require any further comment.

3. Going Concern

We draw attention to the fact that at 31 December 2013, the company had accumulated losses of R (5 343 499) and that the company's total liabilities exceed its assets by R (5 342 499). The financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business. The ability of the company to continue as a going concern is dependent on a number of factors. The most significant of these is that the directors continue to procure funding for the ongoing operations for the company and that the company has obtained a letter of support from its holding company Escalator Namibia (Pty) Ltd and will remain in force for so long as it takes to restore the solvency of the company. The fact that the total liabilities exceed the assets has not hindered the company's ability to pay its debts as they become due in the normal course of business.

4. Events after the reporting period

The directors are not aware of any matter or circumstance arising since the end of the financial year that

has a material impact on the financial statements.

5. Authorised and issued share capital

There were no changes in the authorised or issued share capital of the company during the year under review.

6. Directors The directors of the company during the year and to the date of this report are as follows:

Name Nationality

Isabel Engelbrecht South Africa

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7. Secretary

The secretary of the company is Ecsponent Administrators (Pty) Ltd.

8. Holding company The company's holding company is Escalator Namibia (Pty) Ltd incorporated in Namibia.

9. Auditors AM Smith and Company will continue in office in accordance with section 90 of the Companies Act 71 of 2008


Figures in Rand Note(s) 2013 2012

Assets Non-Current Assets Property, plant and equipment 2 678 404 694 573 Other financial assets 3 2 889 966 2 180 988 Deferred tax 4 2 078 029 447 351

5 646 399 3 322 912

Current Assets Trade and other receivables 5 663 222 6 000 Cash and cash equivalents 6 218 449 7 348

881 671 13 348

Total Assets 6 528 070 3 336 260

Equity and Liabilities Equity Share capital 7 1 000 1 000 Accumulated loss (5 343 499) (1 150 331)

(5 342 499) (1 149 331)

Liabilities Non-Current Liabilities Other financial liabilities 8 11 001 310 2 914 586 Current Liabilities Trade and other payables 9 794 259 1 571 005 Provisions 75 000 -

869 259 1 571 005 Total Liabilities 11 870 569 4 485 591

Total Equity and Liabilities 6 528 070 3 336 260

Per share information: Net asset value (Rand) (5 342) (1 149) Net tangible asset value (Rand) (5 342) (1 149)

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Revenue 11 7 639 150 2 442 024 Cost of sales 12 (1 500 000) -

Gross profit 6 139 150 2 442 024 Operating expenses (11 513 592) (3 747 132)

Operating loss 13 (5 374 442) (1 305 108) Investment revenue 14 2 228 238 Finance costs 15 (451 632) (292 812)

Loss before taxation (5 823 846) (1 597 682) Taxation 16 1 630 678 447 351

Loss for the year (4 193 168) (1 150 331) Other comprehensive income - -

Total comprehensive loss for the year (4 193 168) (1 150 331) Per share information Loss per share (Rand) (4 193) (1 150) Headline loss per share (Rand) (4 193) (1 150) Dividend per share (Rand) - -


Figures in Rand Share

capital Accumulated

loss Total

equity

Loss for the year - (1 150 331) (1 150 331)

Issue of shares 1 000 - 1 000

Balance at 01 January 2013 1 000 (1 150 331) (1 149 331)

Loss for the year - (4 193 168) (4 193 168)

Balance at 31 December 2013 1 000 (5 343 499) (5 342 499)

Note(s) 7

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Statement of Cash Flows



Cash used in operations 17 (6 587 086) 333 786 Interest income 2 228 238 Finance costs (451 632) (292 812)

Net cash from operating activities (7 036 490) 41 212

Cash flows from investing activities Purchase of property, plant and equipment 2 (138 105) (768 462) Sale of property, plant and equipment 2 7 950 - Loans advanced (708 978) (2 180 988)

Net cash from investing activities (839 133) (2 949 450)

Cash flows from financing activities Proceeds on share issue

7

-

1 000

Proceeds from other financial liabilities 8 086 724 2 914 586

Net cash from financing activities 8 086 724 2 915 586

Total cash movement for the year 211 101 7 348 Cash at the beginning of the year 7 348 -

Total cash at end of the year 6 218 449 7 348

Accounting Policies

1. Presentation of Financial Statements

The financial statements have been prepared in accordance with International Financial Reporting Standards, and the Companies Act 71 of 2008. The financial statements have been prepared on the historical cost basis, except for the measurement of certain financial instruments at fair value, and incorporate the principal accounting policies set out below. They are presented in South African Rands.

These accounting policies are consistent with the previous period.

1.1 Significant judgements and sources of estimation uncertainty

In preparing the financial statements, management is required to make estimates and assumptions that affect the amounts represented in the financial statements and related disclosures. Use of available information and the application of judgement is inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the financial statements. Significant judgements include:

Trade receivables and loans and receivables

The company assesses its trade receivables and loans and receivables for impairment at the end of each reporting period. In determining whether an impairment loss should be recorded in profit or loss, the company makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a financial asset.

The impairment for trade receivables and loans and receivables is calculated on a portfolio basis, based on historical loss ratios, adjusted for national and industry-specific economic conditions and other indicators present at the reporting date that correlate with defaults on the portfolio. These annual loss ratios are applied to loan balances in the portfolio and scaled to the estimated loss emergence period.

Fair value estimation

The fair value of financial instruments traded in active markets (such as trading and available-for-sale securities) is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the company is the current bid price.

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The fair value of financial instruments that are not traded in an active market (for example, over the counter derivatives) is determined by using valuation techniques. The company uses a variety of methods and makes assumptions that are based on market conditions existing at the end of each reporting period. Quoted market prices or dealer quotes for similar instruments are used for long-term debt. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward foreign exchange contracts is determined using quoted forward exchange rates at the end of the reporting period. The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the company for similar financial instruments.

Impairment testing

The recoverable amounts of cash-generating units and individual assets have been determined based on the higher of value-in-use calculations and fair values less costs to sell. These calculations require the use of estimates and assumptions. It is reasonably possible that the key assumptions may change which may then impact our estimations and may then require a material adjustment to the carrying value of goodwill and tangible assets.

Taxation

Judgement is required in determining the provision for income taxes due to the complexity of legislation. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The company recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. The company recognises the net future tax benefit related to deferred income tax assets to the extent that it is probable that the deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability of deferred income tax assets requires the company to make significant estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the company to realise the net deferred tax assets recorded at the end of the reporting period could be impacted.


The cost of an item of property, plant and equipment is recognised as an asset when:

it is probable that future economic benefits associated with the item will flow to the company; and

the cost of the item can be measured reliably. Property, plant and equipment is initially measured at cost. Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently to add to, replace part of, or service it. If a replacement cost is recognised in the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced part is derecognised. Property, plant and equipment are depreciated on the straight line basis over their expected useful lives to their estimated residual value. Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses. The useful lives of items of property, plant and equipment have been assessed as follows:


Furniture and fixtures 6 IT equipment 3 Shop fittings 3

The residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting period. If the expectations differ from previous estimates, the change is accounted for as a change in accounting estimate. The depreciation charge for each period is recognised in profit or loss unless it is included in the carrying amount of another asset. The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profit or loss when the item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.

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1.3 Financial instruments

Initial recognition and measurement

Financial instruments are recognised initially when the company becomes a party to the contractual provisions of the instruments. The company classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement. Financial instruments are measured initially at fair value, except for equity investments for which a fair value is not determinable, which are measured at cost and are classified as available-for-sale financial assets. For financial instruments which are not at fair value through profit or loss, transaction costs are included in the initial measurement of the instrument. Transaction costs on financial instruments at fair value through profit or loss are recognised in profit or loss.

Subsequent measurement

Financial instruments at fair value through profit or loss are subsequently measured at fair value, with gains and losses arising from changes in fair value being included in profit or loss for the period. Net gains or losses on the financial instruments at fair value through profit or loss. Dividend income is recognised in profit or loss as part of other income when the company's right to receive payment is established. Loans and receivables are subsequently measured at amortised cost, using the effective interest method, less accumulated impairment losses. Financial liabilities at amortised cost are subsequently measured at amortised cost, using the effective interest method.

Fair value determination

The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the company establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models making maximum use of market inputs and relying as little as possible on entity-specific inputs.

Impairment of financial assets

At each reporting date the company assesses all financial assets, other than those at fair value through profit or loss, to determine whether there is objective evidence that a financial asset or group of financial assets has been impaired. For amounts due to the company, significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy and default of payments are all considered indicators of impairment. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered an indicator of impairment. If any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognised in profit or loss - is removed from equity as a reclassification adjustment to other comprehensive income and recognised in profit or loss. Impairment losses are recognised in profit or loss. Impairment losses are reversed when an increase in the financial asset's recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the financial asset at the date that the impairment is reversed shall not exceed what the carrying amount would have been had the impairment not been recognised. Reversals of impairment losses are recognised in profit or loss except for equity investments classified as available-for-sale. Impairment losses are also not subsequently reversed for available-for-sale equity investments which are held at cost because fair value was not determinable.

79

Where financial assets are impaired through use of an allowance account, the amount of the loss is recognised in profit or loss within operating expenses. When such assets are written off, the write off is made against the relevant allowance account. Subsequent recoveries of amounts previously written off are credited against operating expenses.

Loans to shareholders, directors, managers and employees

These financial assets are classified as loans and receivables.

Trade and other receivables

Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is impaired. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The allowance recognised is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in profit or loss within operating expenses. When a trade receivable is uncollectable, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against operating expenses in profit or loss. Trade and other receivables are classified as loans and receivables.

Trade and other payables

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

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These are initially and subsequently recorded at fair value.

1.4 Tax

Current tax assets and liabilities

Current tax for current and prior periods is, to the extent unpaid, recognised as a liability. If the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess is recognised as an asset.

Current tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (recovered from) the tax authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax asset

A deferred tax asset is recognised for the carry forward of unused tax losses to the extent that it is probable that future taxable profit will be available against which the unused tax losses can be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Tax expenses

Current and deferred taxes are recognised as income or an expense and included in profit or loss for the period, except to the extent that the tax arises from:

a transaction or event which is recognised, in the same or a different period, to other comprehensive income, or

a business combination.

Current tax and deferred taxes are charged or credited to other comprehensive income if the tax relates to items that are credited or charged, in the same or a different period, to other comprehensive income. Current tax and deferred taxes are charged or credited directly to equity if the tax relates to items that are credited or charged, in the same or a different period, directly in equity.

1.5 Leases

A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.

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Operating leases – lessee

Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference between the amounts recognised as an expense and the contractual payments are recognised as an operating lease asset. This liability is not discounted.

Any contingent rents are expensed in the period they are incurred.

1.6 Impairment of assets

The company assesses at each end of the reporting period whether there is any indication that an asset may be impaired. If any such indication exists, the company estimates the recoverable amount of the asset. If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash-generating unit to which the asset belongs is determined. The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use. If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss. An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately in profit or loss. Any impairment loss of a revalued asset is treated as a revaluation decrease. An entity assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods for assets other than goodwill may no longer exist or may have decreased. If any such indication exists, the recoverable amounts of those assets are estimated. A reversal of an impairment loss of assets carried at cost less accumulated depreciation or amortisation other than goodwill is recognised immediately in profit or loss. Any reversal of an impairment loss of a revalued asset is treated as a revaluation increase.

1.7 Share capital and equity

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


Short-term employee benefits

The cost of short-term employee benefits, (those payable within 12 months after the service is rendered, such as paid vacation leave and sick leave, bonuses, and non-monetary benefits such as medical care), are recognised in the period in which the service is rendered and are not discounted.

The expected cost of compensated absences is recognised as an expense as the employees render services that increase their entitlement or, in the case of non-accumulating absences, when the absence occurs. The expected cost of profit sharing and bonus payments is recognised as an expense when there is a legal or constructive obligation to make such payments as a result of past performance.

1.9 Revenue

Revenue is measured at the fair value of the consideration received or receivable and represents the amounts receivable for goods and services provided in the normal course of business, net of trade discounts and volume rebates, and value added tax. Interest is recognised, in profit or loss, using the effective interest rate method.

1.10 Cost of sales

The related cost of providing services recognised as revenue in the current period is included in cost of sales.

1.11 Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset until such time as the asset is ready for its intended use. The amount of borrowing costs eligible for capitalisation is determined as follows:

Actual borrowing costs on funds specifically borrowed for the purpose of obtaining a qualifying asset less any temporary investment of those borrowings.

Weighted average of the borrowing costs applicable to the entity on funds generally borrowed for the purpose of obtaining a qualifying asset. The borrowing costs capitalised do not exceed the total borrowing costs incurred.

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The capitalisation of borrowing costs commences when:

expenditures for the asset have occurred;

borrowing costs have been incurred, and

activities that are necessary to prepare the asset for its intended use or sale are in progress.

Capitalisation is suspended during extended periods in which active development is interrupted. Capitalisation ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete. All other borrowing costs are recognised as an expense in the period in which they are incurred.


2013 2012

Cost

Accumulated depreciation

Carrying value

Cost


Carrying value

Furniture and fixtures 185 108 (121 543) 63 565 176 808 (87 230) 89 578 IT equipment 767 869 (652 449) 115 420 663 800 (596 866) 66 934 Shop fittings 555 847 (56 428) 499 419 538 061 - 538 061

Total 1 508 824 (830 420) 678 404 1 378 669 (684 096) 694 573

Reconciliation of property, plant and equipment – 2013

Opening balance

Additions

Disposals

Depreciation

Total

Furniture and fixtures 89 578 16 250 (7 950) (34 313) 63 565 IT equipment 66 934 104 069 - (55 583) 115 420 Shop fittings 538 061 17 786 - (56 428) 499 419

694 573 138 105 (7 950) (146 324) 678 404

Reconciliation of property, plant and equipment – 2012

Opening balance

Additions

Additions through

business combinations

Depreciation

Total

Furniture and fixtures - 38 425 62 313 (11 160) 89 578 IT equipment - - 129 663 (62 729) 66 934 Leasehold improvements - 538 061 - - 538 061

- 576 486 191 976 (73 889) 694 573

A register containing the information required by Regulation 25(3) of the Companies Regulations, 2011 is available for inspection at the registered office of the company.

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3. Other financial assets

Figures in Rand 2013 2012

Loans and receivables Ecsponent Limited The loan is unsecured, interest free with no fixed terms of repayment.

-

836 809

Virtual Shared Services (Pty) Ltd The loan is unsecured, interest free with no fixed terms of repayment.

-

81 912

Quandrox (Proprietary) Limited The loan is unsecured, interest free with no fixed terms of repayment.

1 664 428

1 198 702

Truworths Standard Bank Account The loan is unsecured, interest free with no fixed terms of repayment.

1 025 538

63 565

U Bank (Pty) Ltd The loan is unsecured, interest free with no fixed terms of repayment.

200 000

-

2 889 966 2 180 988

Non-current assets

Loans and receivables 2 889 966 2 180 988

Fair values of loans and receivables

Loans and receivables 2 889 966 2 180 988

4. Deferred tax asset

Tax losses available for set off against future taxable income 2 078 029 447 351

Reconciliation of deferred tax asset

At beginning of the year 447 351 - Increase in tax losses available for set off against future taxable income 1 630 678 447 351

2 078 029 447 351

Recognition of deferred tax asset

An entity shall disclose the amount of a deferred tax asset and the nature of the evidence supporting its recognition, when:

the utilisation of the deferred tax asset is dependent on future taxable profits in excess of the profits arising from the reversal of existing taxable temporary differences; and

the entity has suffered a loss in either the current or preceding period in the tax jurisdiction to which the deferred tax asset relates.

The deferred tax asset is a result of set up costs as the entity has been operating for two years now. The director believes that the company will make future taxable profits which can be utilised against the assessed loss.


Trade receivables 641 972 - Deposits 6 000 6 000 Other receivables - Sanceda Collections Services (Pty) Ltd 15 250 -

663 222 6 000

6. Cash and cash equivalents

Cash and cash equivalents consist of: Cash on hand 122 22 Bank balances 218 327 7 326

218 449 7 348

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7. Share capital

Authorised

1 000 Ordinary shares of R1 each 1 000 1 000

Issued

Ordinary 1 000 1 000

8. Other financial liabilities

Held at amortised cost

Escalator Business Finance Limited The loan is unsecured, interest free with no fixed terms of repayment.

5 823 583

2 914 586

Escalator Asset Management (Pty) Ltd The loan is unsecured, interest free with no fixed terms of repayments

4 258 361

-

ECSPONENT Limited The loan is unsecured, interest free with no fixed terms of repayment.

919 366

-

11 001 310 2 914 586

Non-current liabilities

At amortised cost 11 001 310 2 914 586


Trade payables 292 855 1 392 635 VAT 78 389 12 074 Other payables 32 478 166 296 Payroll accruals 390 537 -

794 259 1 571 005

Fair value of trade and other payables Trade payables 794 259 1 571 005

10. Financial liabilities by category

The accounting policies for financial instruments have been applied to the line items below:

2013

Financial liabilities at

amortised cost

Total

Other financial liabilities 11 001 310 11 001 310 Trade and other payables 794 259 794 259

11 795 569 11 795 569

2012


amortised cost

Total

Other financial liabilities 2 914 586 2 914 586 Trade and other payables 1 571 005 1 571 005

4 485 591 4 485 591

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11. Revenues

Collections 7 617 861 2 442 024 Collections - U Bank 21 289 -

7 639 150 2 442 024

12. Cost of sales

Rendering of services

Management fees 1 500 000 -

13. Operating loss

Operating loss for the year is stated after accounting for the following: Operating lease charges

Premises

Contractual amounts 820 484 -

Equipment

Contractual amounts 154 538 -

975 022 -

Depreciation on property, plant and equipment 146 324 73 889 Employee costs 5 673 856 1 499 390

14. Investment revenue

Interest revenue

Bank 2 228 238

15. Finance costs

Bank 847 220

Late payment of tax 12 906 -

Interest paid - Escalator Business Finance Limited 437 879 292 592

451 632 292 812

16. Taxation Deferred

Arising from unrecognised tax loss (1 630 678) (447 351)

No provision has been made for 2013 tax as the company has no taxable income. The estimated tax loss available for set off against future taxable income is R5 813 650 (2012: R1 597 683).

17. Cash used in operations

Loss before taxation (5 823 846) (1 597 682) Adjustments for:

Depreciation and amortisation 146 324 73 889 Interest received (2 228) (238) Finance costs 451 632 292 812 Movement in provisions 75 000 - Changes in working capital:

Trade and other receivables (657 222) (6 000) Trade and other payables (776 746) 1 571 005

(6 587 086) 333 786

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18. Commitments

Operating leases – as lessee (expense)

Operating lease payments represent rentals payable by the company for certain of its office properties. Leases are negotiated for an average term of three years and rentals are fixed for an average of three years. No contingent rent is payable.

19. Related parties

` Relationships Holding company Escalator Namibia (Pty) Ltd

20. Director's emoluments

Executive 2013

Emoluments Total

Isabel Engelbrecht 240 000 240 000

2012

Emoluments Total

Isabel Engelbrecht 74 510 74 510

21. Risk management

Capital risk management

The company's objectives when managing capital are to safeguard the company's ability to continue as a going concern in order to provide returns for shareholder and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The capital structure of the company consists of debt, which includes the borrowings (excluding derivative financial liabilities) disclosed in notes 8 cash and cash equivalents disclosed in note 6, and equity as disclosed in the statement of financial position. In order to maintain or adjust the capital structure, the company may adjust the amount of dividends paid to shareholder, return capital to shareholder, issue new shares or sell assets to reduce debt. There are no externally imposed capital requirements. There have been no changes to what the entity manages as capital, the strategy for capital maintenance or externally imposed capital requirements from the previous year.

Financial risk management

The company’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk.

Liquidity risk

The company’s risk to liquidity is a result of the funds available to cover future commitments. The company manages liquidity risk through an ongoing review of future commitments and credit facilities. The table below analyses the company’s financial liabilities and net-settled derivative financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

At 31 December 2013

Less than 1 year

Over 5 years

Borrowings - 11 001 310 Trade and other payables 794 259 - Provisions 75 000 -

At 31 December 2012

Less than 1 year

Over 5 years

Borrowings - 2 914 586 Trade and other payables 1 571 005 -

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Interest rate risk

As the company has no significant interest-bearing assets, the company’s income and operating cash flows are substantially independent of changes in market interest rates.

Credit risk

Credit risk consists mainly of cash deposits, cash equivalents, derivative financial instruments and trade debtors. The company only deposits cash with major banks with high quality credit standing and limits exposure to any one counter-party. Trade receivables comprise a widespread customer base. Management evaluated credit risk relating to customers on an ongoing basis. If customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, risk control assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board. The utilisation of credit limits is regularly monitored. Sales to retail customers are settled in cash or using major credit cards.

Credit guarantee insurance is purchased when deemed appropriate. Financial assets exposed to credit risk at year end were as follows:

Financial instrument

2013

2012

Cash and cash equivalent 218 449 7 348 Other financial assets 2 889 966 2 180 988 Trade and other receivables 657 222 -

22. Going concern

We draw attention to the fact that at 31 December 2013, the company had accumulated losses of R (5 343 499) and that the company's total liabilities exceed its assets by R (5 342 499). The financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business. The ability of the company to continue as a going concern is dependent on a number of factors. The most significant of these is that the director continue to procure funding for the ongoing operations for the company and that the holding company, Escalator Namibia, (Pty) Ltd has provided a letter of financial support and will remain in force for so long as it takes to restore the solvency of the company.

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ANNEXURE 8

INDEPENDENT REPORTING ACCOUNTANTS’ REPORT ON THE HISTORICAL FINANCIAL INFORMATION OF SANCEDA

“11 June 2014 The Directors John Daniels Holdings Limited 1st Floor, Bushwillow House Green Hill Village Office Park Cnr Botterklapper and Nentabos Street The Willows Pretoria Dear Sirs REPORT OF THE INDEPENDENT REPORTING ACCOUNTANTS ON THE CONSOLIDATED HISTORICAL FINANCIAL INFORMATION AT 31 DECEMBER 2013 IN RESPECT OF SANCEDA (PTY) LTD (“SANCEDA”) 1. INTRODUCTION

At your request and for the purposes of proposed acquisition by Ecsponent Limited (“ECSPONENT”) of the business and assets of Sanceda (Pty) Ltd (“Sanceda” or “the Company”)) from a deemed related party in terms of which ECSPONENT will acquire the business and assets for a consideration of R7 million. We present our report on the historical financial information of Sanceda, which comprise the statement of financial position as at 31 December 2013, the Statement of profit and loss and other comprehensive income, the statement of changes in equity and cash flow statement for the year then ended as set out in Annexure 7 of the circular, in compliance with the Listing Requirements of the JSE Limited (“JSE Listings Requirements”).


The directors of ECSPONENT are responsible for the compilation, contents and preparation of the circular and for the accuracy of the information contained therein. The directors of ECSPONENT are responsible for the financial information to which this report on the historical financial information of the company relates, and from which the report has been prepared. Our responsibility is to express an opinion on the historical financial information included as Annexure 7 of this circular. At your request, and for the purpose of the circular to ECSPONENT shareholders to be dated on or about 18 June 2014, we present our report on the historical financial information of Sanceda, presented in Annexure 7 to the circular.

3. SCOPE

We have audited the financial information of Sanceda for the years ended 31 December 2013 and 31 December 2012.

4. SCOPE OF 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 annual financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the annual 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 annual 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.

88

An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the annual financial statements.


5. OPINION

In our opinion, the historical financial information of Sanceda for the years ended 31 December 2013 and 31 December 2012 as reported in Annexure 7 fairly presents, in all material respects, the financial position as of that date, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards, the Companies Act in South Africa and the JSE Listing Requirements.

6. EMPHASIS OF MATTER Without qualifying our opinion, we draw attention to note 22 to the financial statements which indicates that the company incurred a net loss of R4 078 009 for the year ended 31 December 2013 and, as at that date, the company’s total liabilities exceeded its total assets by R5 228 241. The note 22 also indicates that these conditions, along with other matters, indicate the existence of a material uncertainty which may cast significant doubt on the company’s ability to continue as a going concern.

17. CONSENT


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ANNEXURE 9

HISTORICAL FINANCIAL INFORMATION OF ECSPONENT BOTSWANA FOR THE TWO YEARS ENDED 31 DECEMBER 2013

The information is taken from the audited annual financial statements of Ecsponent Botswana which were prepared in the manner required by the Companies Act of Botswana and in accordance with IFRS. The information is the responsibility of the directors of ECSPONENT. AM Smith and Company Inc. has been appointed as the auditors for the years ended 31 December 2013 and 31 December 2012 and has reported on the financial statements with a modified audit opinion which details an emphasis of matter relating to the going concern of Ecsponent Botswana due to the liabilities of Ecsponent Botswana exceeding its assets, noting the directors’ statement on going concern in note 10. below. The audit report on the historical financial information has been prepared by AM Smith and Company Inc. and is contained in Annexure 10 to this circular. There are no facts or circumstances that are material to an appreciation of the state of affairs, financial position, changes in equity, results of operations and cash flows other than as disclosed in this circular. 1. Incorporation

The company was incorporated on 18 August 2010 and obtained its certificate to commence business on the same day.

2. Nature of business Escalator Investment Holdings Limited and its subsidiaries were incorporated in Botswana with interests in the Financial services industry. The activities of the group are undertaken through the company and its principal subsidiaries. The group operates in South Africa, rest of Africa and Europe. There have been no material changes to the nature of the group's business from the prior year and to the date of this report.

3. Review of financial results and activities

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards and the requirements of the Companies Act of Botswana. The accounting policies have been applied consistently compared to the prior year.

Full details of the financial position, results of operations and cash flows of the group are set out in these consolidated financial statements.

4. Share Capital

There were no changes in the authorised or issued share capital of the company during the period under review.

4. Dividends

No dividends have been declared during the two years ended 31 December 2013.

5. Directorate The directors in office at the date of this report are as follows: Directors Office Designation

B Ndaba Chief Executive Officer Executive E Engelbrecht Chairperson Executive A Heunes Dr A Hay

There have been no changes to the Directorate for the year under review.

90


There was no change in the nature of the property, plant and equipment of the group or in the policy regarding their use. At 31 December 2013 the group's investment in property, plant and equipment amounted to P494 611 (2012: P -), of which P514 179 (2012: P -) was added in the current year through additions

7. Interests in subsidiaries Details of material interests in the subsidiary company are presented in the consolidated financial statements in notes 3. The interest of the group in the profits and losses of its subsidiary for the year ended 31 December 2013 is as follows:

Company 2013 P

Subsidiaries

Total losses before income tax (121 537) Total tax 26 738

(94 799)

The group acquired 50% interest in Sure Choice (Pty) Ltd during the current year for a consideration of P500. Sure Choice (Pty) Ltd operates in the financial services industry.

8. Holding company

The group's holding company is Escalator Capital Group Limited which holds 100% (2012: 100%) of the group's equity. Escalator Capital Group Limited is incorporated in Mauritius.

9. Events after the reporting period

The directors are not aware of any material event which occurred after the reporting date and up to the date of this report.

10. Going concern

The directors believe that the group has adequate financial resources to continue in operation for the foreseeable future and accordingly the consolidated financial statements have been prepared on a going concern basis. The directors have satisfied themselves that the group is in a sound financial position and that it has access to sufficient borrowing facilities to meet its foreseeable cash requirements. The directors are not aware of any new material changes that may adversely impact the group. The directors are also not aware of any material non-compliance with statutory or regulatory requirements or of any pending changes to legislation which may affect the group.

11. Auditors AM Smith & Co Inc. continued in office as auditors for the company and its subsidiaries for 2013. At the AGM, the shareholder will be requested to reappoint AM Smith & Co Inc. as the independent external auditors of the company and to confirm Mr AM Smith as the designated lead audit partner for the 2014 financial year.

12. Secretary

The company secretary is Kingsway (Pty) Limited (Jethro Kamutsi).Escalator Administrators (Pty) Limited

91


Notes(s)

Group 2013

P

Group 2012

P

Company 2013

P

Company 2012

P

Assets Non-Current Assets Property, plant and equipment 2 494 611 - 305 676 - Investments in subsidiaries 3 - - 500 - Loans to shareholders 4 - 1 493 - 1 493 Other financial assets 5 1 721 573 (10 383) 1 721 573 (10 383) Deferred tax 6 300 019 - 273 281 -

2 516 203 (8 890) 2 301 030 (8 890)

Current Assets Other financial assets 5 820 000 - 820 000 - Trade and other receivables 7 84 546 - 37 815 - Cash and cash equivalents 8 21 674 - 21 586 -

926 220 - 879 401 -

Total Assets 3 442 423 (8 890) 3 180 431 (8 890)

Equity and Liabilities Equity Equity Attributable to Equity Holders of Parent

Share capital 9 1 000 1 000 1 000 1 000 Accumulated loss (1 016 305) (9 891) (968 905) (9 891) (1 015 305) (8 891) (967 905) (8 891)

Non-controlling interest (46 899) - - - (1 062 204) (8 891) (967 905) (8 891) Liabilities Non-Current Liabilities Loans from shareholders 4 290 318 - 290 318 - Other financial liabilities 10 3 888 302 - 3 752 445 -

4 178 620 - 4 042 763 - Current Liabilities Trade and other payables 11 326 007 1 105 573 1

Total Liabilities 4 504 627 1 4 148 336 1

Total Equity and Liabilities 3 442 423 (8 890) 3 180 431 (8 890)

Per share information: Net asset value (Pula) 1 015 8.9 Net tangible asset value (Pula) 1 015 8.9

92


Notes(s)

Group 2013

P

Group 2012

P

Company 2013

P

Company 2012

P

Revenue 12 200 010 - 200 010 - Cost of sales 13 (234 282) - (234 282) -

Gross loss (34 272) - (34 272) - Operating expenses (1 319 289) (9 891) (1 198 023) (9 891)

Operating loss 14 (1 353 561) (9 891) (1 232 295) (9 891) Finance costs 15 (271) - - -

Loss before taxation (1 353 832) (9 891) (1 232 295) (9 891) Taxation 16 300 019 - 273 281 -

Loss for the year (1 053 813) (9 891) (959 014) (9 891) Other comprehensive income - - - -

Total comprehensive loss for the year (1 053 813) (9 891) (959 014) (9 891)

Total comprehensive loss attributable to: Owners of the parent (1 053 813) (9 891) (959 014) (9 891)

Loss attributable to : Owners of the parent (1 006 414) (9 891) (959 014) (9 891) Non-controlling interest - Continuing operations (47 399) - - -

(1 053 813) (9 891) (959 014) (9 891)

Per share information Loss per share (Pula) 1 054 9.89 Headline loss per share (Pula) 1 054 9.89 Dividend per share (Pula) - -


Share capital

Accumulated loss

Total Attributable

to equity

holders of the group

Non- Controlling

interest Total

equity

P P P P P

Group Balance at 01 January 2012 1 000 - 1 000 - 1 000

Loss for the year - (9 891) (9 891) - (9 891)

Balance at 01 January 2013 1 000 (9 891) (8 891) - (8 891)

Loss for the year - (1 006 414) (1 006 414) (47 399) (1 053 813)

Non-controlling interest in equity - - - 500 500

Balance at 31 December 2013 1 000 (1 016 305) (1 015 305) (46 899) (1 062 204)

Note(s) 9

93

Share capital

Accumulated loss

Total Attributable

to equity holders of the group

Non- Controlling

interest

Total equity

P P P P P

Company Balance at 01 January 2012 1 000 - 1 000 - 1 000

Loss for the year - (9 891) (9 891) - (9 891)

Balance at 01 January 2013 1 000 (9 891) (8 891) - (8 891)

Loss for the year - (959 014) (959 014) - (959 014)

Balance at 31 December 2013 1 000 (968 905) (967 905) - (967 905)

Note(s) 9

Statement of Cash Flows Group Company 2013 2012 2013 2012

Note(s) P P P P


Cash used in operations 17 (1 092 533) (9 890) (1 144 970) (9 890)

Finance costs (271) - - -

Net cash from operating activities (1 092 804) (9 890) (1 144 970) (9 890)

Cash flows from investing activities

Purchase of property, plant and equipment 2 (514 179) - (325 244) -

Acquisition of subsidiary 19 - - (500) -

Loans (advanced) / received (2 551 956) 10 383 (2 551 956) 10 383

Increase in minority interest 500 - - -

Net cash from investing activities (3 065 635) 10 383 (2 877 700) 10 383

Cash fl ows fr om fi nanci ng acti viti es

Cash flows from financing activities

Proceeds from other financial liabilities

3 888 302

-

3 752 445

-

Proceeds from / (advance to) shareholders 291 811 (493) 291 811 (493)

Net cash from financing activities 4 180 113 (493) 4 044 256 (493)

Total cash movement for the year 21 674 - 21 586 -

Total cash at end of the year 8 21 674 - 21 586 -

94

Accounting Policies 1. Presentation of Financial Statements

The financial statements have been prepared in accordance with International Financial Reporting Standards, and the Companies Act of Botswana. The financial statements have been prepared on the historical cost basis, except for the measurement of certain financial instruments at fair value, and incorporate the principal accounting policies set out below. They are presented in Botswana Pula.

These accounting policies are consistent with the previous period.

1.1 Consolidation Basis of consolidation

The consolidated financial statements incorporate the financial statements of the group and all investees which are controlled by the group. The group has control of an investee when it has power over the investee; it is exposed to or has rights to variable returns from involvement with the investee; and it has the ability to use its power over the investee to affect the amount of the investor's returns. The results of subsidiaries are included in the consolidated financial statements from the effective date of acquisition to the effective date of disposal. Adjustments are made when necessary to the financial statements of subsidiaries to bring their accounting policies in line with those of the group. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. Non-controlling interests in the net assets of consolidated subsidiaries are identified and recognised separately from the group's interest therein, and are recognised within equity. Losses of subsidiaries attributable to non-controlling interests are allocated to the non-controlling interest even if this results in a debit balance being recognised for non-controlling interest. Transactions which result in changes in ownership levels, where the group has control of the subsidiary both before and after the transaction are regarded as equity transaction and are recognised directly in the statement of changes in equity. The difference between the fair value of consideration paid or received and the movement in non-controlling interest for such transactions is recognised in equity attributable to the owners of the parent. Where a subsidiary is disposed of and a non-controlling shareholding is retained, the remaining investment is measured to fair value with the adjustment to fair value recognised in profit or loss as part of the gain or loss on disposal of the controlling interest.


The cost of an item of property, plant and equipment is recognised as an asset when:

it is probable that future economic benefits associated with the item will flow to the company; and

the cost of the item can be measured reliably.

Property, plant and equipment is initially measured at cost. Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently to add to, replace part of, or service it. If a replacement cost is recognised in the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced part is derecognised. Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses which is carried at revalued amount being the fair value at the date of revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Property, plant and equipment is carried at revalued amount, being the fair value at the date of revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. When an item of property, plant and equipment is revalued, any accumulated depreciation at the date of the revaluation is restated proportionately with the change in the gross carrying amount of the asset so that the carrying amount of the asset after revaluation equals its revalued amount. The revaluation surplus in equity related to a specific item of property, plant and equipment is transferred directly to retained earnings when the asset is derecognised.

95

Property, plant and equipment are depreciated on the straight line basis over their expected useful lives to their estimated residual value. Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses. The useful lives of items of property, plant and equipment have been assessed as follows:


Furniture and fixtures 5 years IT equipment 3 years Leasehold improvements 5 years

The residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting period. If the expectations differ from previous estimates, the change is accounted for as a change in accounting estimate. The depreciation charge for each period is recognised in profit or loss unless it is included in the carrying amount of another asset. The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profit or loss when the item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item. Assets which the (company/group) holds for rentals to others and subsequently routinely sell as part of the ordinary course of activities, are transferred to inventories when the rentals end and the assets are available-for-sale. These assets are not accounted for as non-current assets held for sale. Proceeds from sales of these assets are recognised as revenue. All cash flows on these assets are included in cash flows from operating activities in the cash flow statement.

1.3 Interests in subsidiaries

Company financial statements

In the company’s separate financial statements, investments in subsidiaries are carried at cost less any accumulated impairment.

The cost of an investment in a subsidiary is the aggregate of

the fair value, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the company; plus

any costs directly attributable to the purchase of the subsidiary.

An adjustment to the cost of a business combination contingent on future events is included in the cost of the combination if the adjustment is probable and can be measured reliably.

1.4 Financial instruments Initial recognition and measurement

Financial instruments are recognised initially when the group becomes a party to the contractual provisions of the instruments. The group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement. Financial instruments are measured initially at fair value, except for equity investments for which a fair value is not determinable, which are measured at cost and are classified as available-for-sale financial assets. For financial instruments which are not at fair value through profit or loss, transaction costs are included in the initial measurement of the instrument.

Subsequent measurement

Financial instruments at fair value through profit or loss are subsequently measured at fair value, with gains and losses arising from changes in fair value being included in profit or loss for the period. Net gains or losses on the financial instruments at fair value through profit or loss for the period. Dividend income is recognised in profit or loss as part of other income when the group's right to receive payment is established. Loans and receivables are subsequently measured at amortised cost, using the effective interest method, less accumulated impairment losses. Financial liabilities at amortised cost are subsequently measured at amortised cost, using the effective interest method.

96

Fair value determination

The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models making maximum use of market inputs and relying as little as possible on entity-specific inputs.

Impairment of financial assets

At each reporting date the group assesses all financial assets, other than those at fair value through profit or loss, to determine whether there is objective evidence that a financial asset or group of financial assets has been impaired. For amounts due to the group, significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy and default of payments are all considered indicators of impairment. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered an indicator of impairment. If any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognised in profit or loss - is removed from equity as a reclassification adjustment to other comprehensive income and recognised in profit or loss. Impairment losses are recognised in profit or loss. Impairment losses are reversed when an increase in the financial asset's recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the financial asset at the date that the impairment is reversed shall not exceed what the carrying amount would have been had the impairment not been recognised. Reversals of impairment losses are recognised in profit or loss except for equity investments classified as available-for-sale. Where financial assets are impaired through use of an allowance account, the amount of the loss is recognised in profit or loss within operating expenses. When such assets are written off, the write off is made against the relevant allowance account. Subsequent recoveries of amounts previously written off are credited against operating expenses.

Loans to / (from) group companies

These include loans to and from holding companies, fellow subsidiaries, subsidiaries, joint ventures and associates and are recognised initially at fair value plus direct transaction costs. Loans to group companies are classified as loans and receivables. Loans from group companies are classified as financial liabilities measured at amortised cost.

Loans to shareholders, directors, managers and employees

These financial assets are classified as loans and receivables.

Trade and other receivables

Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is impaired. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The allowance recognised is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in profit or loss within operating expenses. When a trade receivable is uncollectable, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against operating expenses in profit or loss. Trade and other receivables are classified as loans and receivables.

Trade and other payables

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

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These are initially and subsequently recorded at fair value.

97

Bank overdraft and borrowings

Bank overdrafts and borrowings are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the group’s accounting policy for borrowing costs.

1.5 Tax

Current tax assets and liabilities

Current tax for current and prior periods is, to the extent unpaid, recognised as a liability. If the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess is recognised as an asset. Current tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (recovered from) the tax authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax assets and liabilities

A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised. A deferred tax asset is not recognised when it arises from the initial recognition of an asset or liability in a transaction at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss). A deferred tax asset is recognised for the carry forward of unused tax losses to the extent that it is probable that future taxable profit will be available against which the unused tax losses can be utilised.

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

Tax expenses

Current and deferred taxes are recognised as income or an expense and included in profit or loss for the period, except to the extent that the tax arises from:

a transaction or event which is recognised, in the same or a different period, to other comprehensive income, or

a business combination.

Current tax and deferred taxes are charged or credited to other comprehensive income if the tax relates to items that are credited or charged, in the same or a different period, to other comprehensive income. Current tax and deferred taxes are charged or credited directly to equity if the tax relates to items that are credited or charged, in the same or a different period, directly in equity.

1.6 Leases

A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.

Operating leases – lessee

Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference between the amounts recognised as an expense and the contractual payments are recognised as an operating lease asset. This liability is not discounted.

1.7 Impairment of assets

The group assesses at each end of the reporting period whether there is any indication that an asset may be impaired. If any such indication exists, the group estimates the recoverable amount of the asset. Irrespective of whether there is any indication of impairment, the group also:

tests intangible assets with an indefinite useful life or intangible assets not yet available for use for impairment annually by comparing its carrying amount with its recoverable amount. This impairment test is performed during the annual period and at the same time every period.

tests goodwill acquired in a business combination for impairment annually.

If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash-generating unit to which the asset belongs is determined.

98

The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use. If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss. An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately in profit or loss. Any impairment loss of a revalued asset is treated as a revaluation decrease. An entity assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods for assets other than goodwill may no longer exist or may have decreased. If any such indication exists, the recoverable amounts of those assets are estimated. The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods. A reversal of an impairment loss of assets carried at cost less accumulated depreciation or amortisation other than goodwill is recognised immediately in profit or loss. Any reversal of an impairment loss of a revalued asset is treated as a revaluation increase.

1.8 Share capital and equity

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

Ordinary shares are classified as equity. Mandatorily redeemable preference shares are classified as liabilities.


Short-term employee benefits

The cost of short-term employee benefits, (those payable within 12 months after the service is rendered, such as paid vacation leave and sick leave, bonuses, and non-monetary benefits such as medical care), are recognised in the period in which the service is rendered and are not discounted. The expected cost of compensated absences is recognised as an expense as the employees render services that increase their entitlement or, in the case of non-accumulating absences, when the absence occurs. The expected cost of profit sharing and bonus payments is recognised as an expense when there is a legal or constructive obligation to make such payments as a result of past performance.

1.10 Revenue

When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction is recognised by reference to the stage of completion of the transaction at the end of the reporting period. The outcome of a transaction can be estimated reliably when all the following conditions are satisfied:

the amount of revenue can be measured reliably;

it is probable that the economic benefits associated with the transaction will flow to the group;

the stage of completion of the transaction at the end of the reporting period can be measured reliably; and

the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.

When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue shall be recognised only to the extent of the expenses recognised that are recoverable. Service revenue is recognised by reference to the stage of completion of the transaction at the end of the reporting period. Contract revenue comprises:

the initial amount of revenue agreed in the contract; and

variations in contract work, claims and incentive payments: - to the extent that it is probable that they will result in revenue; and - they are capable of being reliably measured.

Revenue is measured at the fair value of the consideration received or receivable and represents the amounts receivable for goods and services provided in the normal course of business, net of trade discounts and volume rebates, and value added tax. Interest is recognised, in profit or loss, using the effective interest rate method. Royalties are recognised on the accrual basis in accordance with the substance of the relevant agreements.

99

Dividends are recognised, in profit or loss, when the company’s right to receive payment has been established. Service fees included in the price of the product are recognised as revenue over the period during which the service is performed.

1.11 Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset until such time as the asset is ready for its intended use. The amount of borrowing costs eligible for capitalisation is determined as follows:

Actual borrowing costs on funds specifically borrowed for the purpose of obtaining a qualifying asset less any temporary investment of those borrowings.

Weighted average of the borrowing costs applicable to the entity on funds generally borrowed for the purpose of obtaining a qualifying asset. The borrowing costs capitalised do not exceed the total borrowing costs incurred.

The capitalisation of borrowing costs commences when:

expenditures for the asset have occurred;

borrowing costs have been incurred, and

activities that are necessary to prepare the asset for its intended use or sale are in progress.

Capitalisation is suspended during extended periods in which active development is interrupted.

Capitalisation ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete.

All other borrowing costs are recognised as an expense in the period in which they are incurred.

100

Notes to the Financial Statements

Group Company

2013 2012 2013 2012

P P P P


Group 2013 2012

Cost


Carrying value

Cost


Carrying value

Furniture and fixtures 101 347 (6 426) 94 921 - - - IT equipment 142 852 (2 746) 140 106 - - - Leasehold improvements 269 980 (10 396) 259 584 - - -

Total 514 179 (19 568) 494 611 - - -

Company 2013 2012

Cost Accumulated depreciation

Carrying value

Cost Accumulated depreciation

Carrying value

Furniture and fixtures 101 347 (6 426) 94 921 - - - IT equipment 25 592 (2 746) 22 846 - - - Leasehold improvements 198 305 (10 396) 187 909 - - -

Total 325 244 (19 568) 305 676 - - -

Reconciliation of property, plant and equipment - Group 2013

Opening balance

Additions

Depreciation

Total

Furniture and fixtures - 101 347 (6 426) 94 921 IT equipment - 142 852 (2 746) 140 106 Leasehold improvements - 269 980 (10 396) 259 584

- 514 179 (19 568) 494 611

Reconciliation of property, plant and equipment - Company 2013

Opening balance

Additions

Depreciation

Total

Furniture and fixtures - 101 347 (6 426) 94 921 IT equipment - 25 592 (2 746) 22 846 Leasehold improvements - 198 305 (10 396) 187 909

- 325 244 (19 568) 305 676

3. Interests in subsidiaries including consolidated structured entities

The following table lists the entities which are controlled directly by the company, and the carrying amounts of the investments in the company's separate financial statements.

Name of company

Held by

% voting Power

2013

% voting Power

2012

% Holding

2013

% Holding

2012

Carrying Amount

2013

Carrying Amount

2012

Sure Choice (Pty) Ltd 50.00% -% 50.00% -% 500 -

4. Loans to (from) shareholders

Escalator Global Capital Finance Limited The loan is unsecured, interest free with no fixed terms of repayment.

(290 318)

1 493

(290 318)

1 493 Non-current assets - 1 493 - 1 493 Non-current liabilities (290 318) - (290 318) - (290 318) 1 493 (290 318) 1 493

101


Group Company

2013 2012 2013 2012

P P P P

5. Other financial assets

Loans and receivables

Capital Alliance (Proprietary) Limited The loan is unsecured, interest free with no fixed terms of repayment.

1 286 662

(10 383)

1 286 662

(10 383) Investors CO (Proprietary) Limited The loan is unsecured, interest free with no fixed terms of repayment.

434 911

-

434 911

- Get Bucks (Proprietary) Limited The loan is unsecured, interest free with no fixed terms of repayment.

820 000

-

820 000

-

2 541 573 (10 383) 2 541 573 (10 383)

Non-current assets

Loans and receivables 1 721 573 (10 383) 1 721 573 (10 383) Current assets

Loans and receivables 820 000 - 820 000 -

2 541 573 (10 383) 2 541 573 (10 383) Fair values of loans and receivables

Loans and receivables 2 541 573 10 383 2 541 573 10 383 Trade and other receivables 84 545 - 37 815 - Cash and cash equivalents 21 674 - 21 586 -

6. Deferred tax

Deferred tax asset 300 019 - 273 281 -

Reconciliation of deferred tax asset

Increase in tax loss available for set off against future taxable income

297 843 - 271 105 -

Prior year tax loss not raised 2 176 - 2 176 -

300 019 - 273 281 -

Recognition of deferred tax asset

An entity shall disclose the amount of a deferred tax asset and the nature of the evidence supporting its recognition, when:

the utilisation of the deferred tax asset is dependent on future taxable profits in excess of the profits arising from the reversal of existing taxable temporary differences; and

the entity has suffered a loss in either the current or preceding period in the tax jurisdiction to which the deferred tax asset relates.

The group and company is in the process of starting up operations. This is the second year of operation. The directors believe that the company will make future taxable profits to utilise against the deferred tax asset.


Trade receivables 1 000 - - - Deposits 55 235 - 37 815 - VAT 28 311 - - -

84 546 - 37 815 -

Fair value of trade and other receivables

Trade and other receivables 84 545 - 37 815 -

8. Cash and cash equivalents

Cash and cash equivalents consist of: Cash on hand 762 - 762 - Bank balances 20 912 - 20 824 -

21 674 - 21 586 -

102


Group Company

2013 2012 2013 2012

P P P P

9. Share capital

Authorised

1 000 Ordinary shares of P1 each 1 000 1 000 1 000 1 000 Issued

Ordinary 1 000 1 000 1 000 1 000 10. Other financial liabilities

Held at amortised cost

Capital Alliance (Proprietary) Limited The loan is unsecured, interest free with no fixed terms of repayment.

135 857 - - -

Class A Redeemable preference shares Five Year Income Provider - 15% interest

2 414 000 - 2 414 000 -

Class B Redeemable preference shares Five Year Capital Growth Provider - 100%

1 338 445 - 1 338 445 -

3 888 302 - 3 752 445 -

Non-current liabilities

At amortised cost 3 888 302 - 3 752 445 -


Trade payables 263 481 1 75 372 1 Accrued expense - Dividends and interest 42 146 - 9 821 - Accrued expense - Salaries 14 000 - 14 000 - Accrued expense - Withholding tax 6 380 - 6 380 -

326 007 1 105 573 1

Fair value of trade and other payables

Trade payables 263 480 - 75 372 - Accruals 62 526 - 30 201 -

12. Revenue

Interest received 200 010 - 200 010 -

13. Cost of sales

Rendering of services

Class A - Redeemable preference shares interest 61 837 - 61 837 - Class B - Redeemable preference shares interest 88 445 - 88 445 - Commission paid 84 000 - 84 000 -

234 282 - 234 282 -

14. Operating loss

Operating loss for the year is stated after accounting for the following: Operating lease charges

Premises Contractual amounts 225 693 - 162 013 -

Equipment Contractual amounts 2 321 - 867 -

228 014 - 162 880 -

Depreciation on property, plant and equipment 19 568 - 19 568 - Employee costs 137 000 - 96 400 -

103


Group Company

2013 2012 2013 2012

P P P P

15. Finance costs

Bank 271 - - -

16. Taxation

Major components of the tax income

Deferred

Arising from unrecognised tax losses (300 019) - (273 281) - No provision has been made for 2013 tax as the group and company has no taxable income. The estimated tax loss available for set off against future taxable income is P1 353 832 (2012: P9 891) and company P1 232 295 (2012: P9 891).

17. Cash used in operations

Loss before taxation (1 353 832) (9 891) (1 232 295) (9 891) Adjustments for:

Depreciation and amortisation 19 568 - 19 568 - Finance costs 271 - - - Changes in working capital:

Trade and other receivables (84 546) - (37 815) - Trade and other payables 326 006 1 105 572 1

(1 092 533) (9 890) (1 144 970) (9 890) 18. Investment in subsidiary

Sure Choice (Proprietary) Limited

On the group acquired 50% of the voting equity interest of Sure Choice (Proprietary) Limited which resulted in the group obtaining control over Sure Choice (Proprietary) Limited. Sure Choice (Proprietary) Limited is principally involved in the Financial Services industry.

19. Movement in investments (incl subs, JVs & Assoc)

Fair value of assets acquired

Equity - 500 ordinary shares in Sure Choice (Pty) Ltd

- - (500) -

Consideration paid

Increase in loan from Sure Choice (Pty) Ltd - - 500 -

Net cash outflow on acquisition

Cash acquired - - (500) - 20. Commitments

Operating leases – as lessee (expense)

Minimum lease payments due

- within one year 379 134 - 183 000 - - in second to fifth year inclusive 684 827 - 324 450 -

1 063 961 - 507 450 -

Operating lease payments represent rentals payable by the group for certain of its office properties. Leases are negotiated for an average term of three years and rentals are fixed but linked to inflation for the three year period. No contingent rent is payable.

104


Group Company

2013 2012 2013 2012

P P P P

21. Related parties

` Relationships Holding company Escalator Capital Group Limited Related party balances

Loan accounts - Owing (to) by related parties

Escalator Capital Group Limited (290 318) 1 493 (290 318) 1 493 22. Directors' emoluments

No emoluments were paid to the directors or any individuals holding a prescribed office during the year.

105

Notes to the Financial Statements 23. Categories of financial instruments

Note(s)

Financial assets at fair value

through profit or

loss

Debt Instruments at amortised

cost


amortised cost

Equity and non-financial

assets and liabilities

Total

Categories of financial instruments - Group - 2013

Assets

Non-Current Assets

Property, plant and equipment 2 - - - 494 611 494 611 Other financial assets 5 - - - 1 721 573 1 721 573 Deferred tax 6 - - - 300 019 300 019

Current Assets

Other financial assets 5 - - - 820 000 820 000 Trade and other receivables 7 56 235 - - 28 311 84 546 Cash and cash equivalents 8 21 674 - - - 21 674

77 909 - - 848 311 926 220

Total Assets 77 909 - - 3 364 514 3 442 423

Note(s)

Financial

assets at fair value

through profit or loss


cost


amortised cost



Total

Equity and Liabilities Equity Equity Attributable to Equity Holders of Parent: Share capital 9 - - - 1 000 1 000 Retained income 9 - - - (1 016 305) (1 016 305)

- - - (1 015 305) (1 015 305) Non-controlling interest - - - (46 899) (46 899)

Total Equity - - - (1 062 204) (1 062 204)

106


Note(s)

Financial




cost


amortised cost



Total

Liabilities Non-Current Liabilities Loans from shareholders 4 - - 290 318 - 290 318 Other financial liabilities 10 - - 3 888 302 - 3 888 302

- - 4 178 620 - 4 178 620 Current Liabilities Trade and other payables 11 - - 326 006 - 326 006

Total Liabilities - - 4 504 626 - 4 504 626

Total Equity and Liabilities

Categories of financial instruments - Group - 2012

Assets Non-Current Assets Loans to shareholders 4 1 493 - - - 1 493 Other financial assets 5 - - (10 383) - (10 383)

1 493 - (10 383) - (8 890)

Total Assets 1 493 - (10 383) - (8 890)

107


Note(s)

Financial




cost


amortised cost



Total

Equity and Liabilities Equity Equity Attributable to Equity Holders of Parent: Share capital 9 - - - 1 000 1 000 Retained income 9 - - - (9 891) (9 891)

- - - (8 891) (8 891) Total Equity - - - (8 891) (8 891)

Total Equity and Liabilities - - - (8 891) (8 891)

Categories of financial instruments - Company - 2013

Assets Non-Current Assets Property, plant and equipment 2 - - - 305 676 305 676 Investments in subsidiaries 3 - - - 500 500 Other financial assets 5 1 721 573 - - - 1 721 573 Deferred tax 6 - - - 273 281 273 281

1 721 573 - - 579 457 2 301 030

108


Note(s)





Debt instruments at

amortised cost

Financial

liabilities at amortised cost

Equity and non-financial assets

and liabilities

Total

Current Assets Other financial assets 5 - 820 000 - - - 820 000 Trade and other receivables 7 - 37 815 - - - 37 815 Cash and cash equivalents 8 21 586 21 586 - - - 21 586

21 586 879 401 - - - 879 401

Total Assets 21 586 2 600 974 - - 579 457 3 180 431

Equity and Liabilities Equity Equity Attributable to Equity Holders of Parent: Share capital 9 - - - - 1 000 1 000

Total Equity - - - - 1 000 1 000

Liabilities Non-Current Liabilities Loans from shareholders 4 - - - 290 318 - 290 318 Other financial liabilities 10 - - - 3 752 445 - 3 752 445

- - - 4 042 763 - 4 042 763

109


Note(s)






cost

Financial

liabilities at amortised cost

Equity and non-financial assets

and liabilities

Total

Current Liabilities Trade and other payables 11 - - - 105 573 - 105 573

Total Liabilities - - - 4 148 336 - 4 148 336

Total Equity and Liabilities - - - 4 148 336 1 000 4 149 336

Categories of financial instruments - Company - 2012

Assets Non-Current Assets Loans to shareholders 4 - 1 493 - - - 1 493 Other financial assets 5 - - - (10 383) - (10 383)

- 1 493 - (10 383) - (8 890)

Total Assets 1 493 - (10 383) - (8 890)

Equity and Liabilities Equity Equity Attributable to Equity Holders of Parent: Share capital 9 - - - - 1 000 1 000 Retained income 9 - - - - (968 905) (968 905)

- - - (967 905) (967 905)

Total Equity - - - - (967 905) (967 905)

Total Equity and Liabilities - - - - (967 905) (967 905)

110


Group Company

2013 2012 2013 2012

P P P P

24. Risk management

Capital risk management

The group's objectives when managing capital are to safeguard the group's ability to continue as a going concern in order to provide returns for shareholder and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The capital structure of the group consists of debt, which includes the borrowings (excluding derivative financial liabilities) disclosed in notes 4 & 10 cash and cash equivalents disclosed in note 8, and equity as disclosed in the statement of financial position. In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholder, return capital to shareholder, issue new shares or sell assets to reduce debt. There are no externally imposed capital requirements. There have been no changes to what the entity manages as capital, the strategy for capital maintenance or externally imposed capital requirements from the previous year.

Financial risk management

The group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk.

Liquidity risk

The group’s risk to liquidity is a result of the funds available to cover future commitments. The group manages liquidity risk through an ongoing review of future commitments and credit facilities. Group

At 31 December 2013 Less than 1 year

Over 5 years

Borrowings - 4 178 620 Trade and other payables 326 007 -

Company


Over 5 years

Borrowings - 4 042 763 Trade and other payables 105 573 -


Trade and other payables 1

Interest rate risk

The group’s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the group to cash flow interest rate risk. Borrowings issued at fixed rates expose the group to fair value interest rate risk.

Credit risk

Credit risk consists mainly of cash deposits, cash equivalents, derivative financial instruments and trade debtors. The group only deposits cash with major banks with high quality credit standing and limits exposure to any one counter-party. Trade receivables comprise a widespread customer base. Management evaluated credit risk relating to customers on an ongoing basis. If customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, risk control assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board. The utilisation of credit limits is regularly monitored. Sales to retail customers are settled in cash or using major credit cards. Credit guarantee insurance is purchased when deemed appropriate. Financial assets exposed to credit risk at year end were as follows:

Financial instrument Group 2013

Group 2012

Company 2013

Company 2012

Trade and other receivables 84 546 - 37 815 - Cash and cash equivalents 21 674 - 21 586 - Other financial assets 2 541 573 - 2 541 573 - Loan to shareholder - - 1 493 -

111

25. Going concern

We draw attention to the fact that at 31 December 2013, the company had accumulated losses of P (968 905) (2012:P9 891) and that the company's total liabilities exceed its assets by P (967 905) (2012: P8 891). The financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business. The ability of the company to continue as a going concern is dependent on a number of factors. The most significant of these is that the directors continue to procure funding for the ongoing operations for the company and that the holding company, Escalator Capital Global Limited has provided a letter of financial support to the company and will remain in force for long as it takes to restore the solvency of the company.

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ANNEXURE 10

INDEPENDENT REPORTING ACCOUNTANTS’ REPORT ON THE HISTORICAL FINANCIAL INFORMATION OF ECSPONENT BOTSWANA

“11 June 2014 The Directors John Daniels Holdings Limited 1st Floor, Bushwillow House Green Hill Village Office Park Cnr Botterklapper and Nentabos Street The Willows Pretoria Dear Sirs REPORT OF THE INDEPENDENT REPORTING ACCOUNTANTS ON THE CONSOLIDATED HISTORICAL FINANCIAL INFORMATION AT 31 DECEMBER 2013 IN RESPECT OF ESCALATOR INVESTMENT HOLDINGS LIMITED (“Ecsponent Botswana”) 1. INTRODUCTION

At your request and for the purposes of proposed acquisition by Ecsponent Limited (“ECSPONENT”) of the entire issued share capital of Escalator Investment Holdings Limited (“Ecsponent Botswana” or “the Company”)) from a related party in terms of which ECSPONENT will acquire all of the shares in issue at a consideration of R5 million. We present our report on the historical financial information of Ecsponent Botswana, which comprise the statement of financial position as at 31 December 2013, the Statement of profit and loss and other comprehensive income, the statement of changes in equity and cash flow statement for the year then ended as set out in Annexure 9 of the circular, in compliance with the Listing Requirements of the JSE Limited (“JSE Listings Requirements”).


The directors of ECSPONENT are responsible for the compilation, contents and preparation of the circular and for the accuracy of the information contained therein. The directors of ECSPONENT are responsible for the financial information to which this report on the historical financial information of the company relates, and from which the report has been prepared. Our responsibility is to express an opinion on the historical financial information included as Annexure 9 of this circular.]

At your request, and for the purpose of the circular to ECSPONENT shareholders to be dated on or about 18 June 2014, we present our report on the historical financial information of Ecsponent Botswana, presented in Annexure 9 to the circular.

3. SCOPE

We have audited the financial information of Ecsponent Botswana for the years ended 31December 2013 and 31 December 2012.

4. SCOPE OF 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 annual financial statements are free from material misstatement.

113

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the annual 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 annual 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 the directors, as well as evaluating the overall presentation of the annual financial statements.


5. OPINION

In our opinion, the historical financial information of Ecsponent Botswana for the years ended 31 December 2013 and 31 December 2012 as reported in Annexure 9 fairly presents, in all material respects, the financial position as of that date, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards, the Companies Act in Botswana and the JSE Listing Requirements.

6. EMPHASIS OF MATTER

Without qualifying our opinion, we draw attention to note 25 to the financial statements which indicates that the group incurred a net loss of P1,053,813 for the year ended 31 December 2013 and, as at that date, the group’s total liabilities exceeded its total assets by P1,015,305. The note 25 also indicates that these conditions, along with other matters, indicate the existence of a material uncertainty which may cast significant doubt on the company’s ability to continue as a going concern.

7. CONSENT


114

ANNEXURE 11

DETAILS OF MATERIAL BORROWINGS, LOANS RECEIVABLE AND INTER-COMPANY TRANSACTIONS

At the Last Practicable Date and including the Acquisitions included in the Circular but excluding the underwriting or application of funds from the intended Rights Offer, ECSPONENT had the following material borrowings and inter-company loans: Loans payable and inter company loans

Borrower

Lender

Amount payable/

(receivable) R’000s

Secured/ Unsecured

Date advanced

Repayment terms

Interest rate

Loans payable

ECSPONENT Escalator 12 876 Secured Revolving loan facility

Each loan tranche is

repayable after 48 months

18.0%

ECSPONENT Escalator 5 922 Secured Revolving loan facility


repayable after 48 months.

12.5%

Cryo-Save SA (Pty) Ltd

Cryo-Save AG 2 444 Unsecured Revolving loan facility

The loan has no terms and is

repayable on demand.

0.0%


Cryo-Save Labs

1 858 Unsecured Revolving loan facility



0.0%


Cryo-Save NV 513 Unsecured Revolving loan facility



EURIBOR plus

1%


Cryo-Save NV 120 Unsecured Revolving loan facility



0.0%

Arising from the total Acquisition consideration: ECSPONENT (assumed to arise for the purchase consideration of the Acquisitions)

Escalator 27 000 Convertible loan

Secured

On date of approval of

the Acquisitions

at the General Meeting

detailed in this notice


repayable after 48 months.

24.0%

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Borrower

Lender

Amount payable/


Secured/ Unsecured

Date advanced

Repayment terms

Interest rate

Inter company loans

Lazaron ECSPONENT 1 160 Unsecured Revolving loan

facility



18.0%

The above mentioned loans arose as a result of the following: Escalator loan to ECSPONENT Escalator funded and continues to fund the on-going working capital requirements of the Group. It is expected that the Escalator loan will be repaid in full through the Rights Offer. Any new loan facility will be subject to convertibility terms which terms require shareholder approval in terms of this circular. Other inter-company loans The inter-company loans arose through normal group funding requirements. ECSPONENT loan to Vinguard

Borrower

Lender

Amount payable/


Secured/ Unsecured

Date advanced

Repayment terms

Interest rate

Vinguard ECSPONENT (16 149)

Unsecured Revolving loan facility

Repayment at the discretion of

ECSPONENT directors

18.0%

Vinguard ECSPONENT (10 937) Unsecured Revolving loan facility

balance prior to

group re-structure

agreement with

Escalator

Repayment at the discretion of the

ECSPONENT directors

0.0%

ECSPONENT loan to Escalator Credit Services

Escalator Credit Services (Pty) Ltd

ECSPONENT

(17 373)

Unsecured Revolving loan facility



15.0%

ECSPONENT loan to Cryo-Save SA


ECSPONENT (2 715) Unsecured Revolving working

capital facility

Repayment at the discretion of the

ECSPONENT directors subject to

the funding agreement with Cryo-Save NV

0.0%

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Loans arising pursuant to the Acquisitions in the new acquired subsidiaries:

Borrower Lender

Amount payable/

(receivable) R

Secured/ Unsecured

Date advanced

Repayment terms

Interest rate

Ecsponent Botswana

Escalator Global

290 318

Unsecured 01/10.2012 Revolving loan facility. No fixed

terms of repayment

0%


Escalator 1 644 919 Unsecured 31/03/2010 Repayable on demand

0%

Ecsponent Administrators (Pty) Ltd


(4 603 092) Unsecured 31/03/2010 Repayable on demand

0%

Escalator Asset Management (Pty) Ltd


(535 252) Unsecured 30/06/2010 Repayable on demand

0%


Escalator Business Finance

26 586 Unsecured 12/12/2011 Repayable on demand

0%

Sanceda ECSPONENT 919 366 Unsecured 30/09/2012 Repayable on demand

0%

All the above loans with Escalator will transfer into the Escalator loan facility with ECSPONENT pursuant to the approval of the Acquisitions. There are no debentures in issue or convertible loans as at the Last Practicable Date. There is no loan capital outstanding at the Last Practicable Date. Loans receivable from third parties

Entity

Lender

Amount

R

Repayment

terms

Security Interest

rate Inception

date Period of loan

Secured N/A N/A N/A N/A N/A N/A N/A

Loans receivable from related parties Unsecured

Entity

Lender

Amount

Repayment terms

Interest free

Inception date

Period of loan

N/A N/A N/A N/A N/A N/A N/A

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ANNEXURE 12

DETAILS OF MATERIAL CONTRACTS AND TRANSACTIONS

Other than the Acquisition Agreements and the Convertible Loan as detailed in paragprah 4 to this Circular, the Company has entered into the following material contracts other than in the ordinary course of business within the past three years prior to the date of this circular 1. RIGHTS OFFER 2011

During September 2011, the Company offered 214 285 714 ECSPONENT Shares to Shareholders to receive rights to subscribe for Rights Offer Shares on the basis of 135.92293 new Shares for every 100 Shares held on the Record Date at the Rights Offer Price. The Rights Offer raised equity capital of R15 million.

2. GENERAL OFFER AND ACQUISITION OF 100% IN LAZARON

A separate circular was posted to Lazaron shareholders on 22 October 2011 to approve, inter alia, a Lazaron rights offer partly underwritten by ECSPONENT and a Section 112 disposal of the Lazaron Assets to ECSPONENT (which in turn were be sold to the Cryo-Save joint venture). Lazaron retained the existing customer contracts and associated revenue streams. Once the Lazaron rights offer was concluded, ECSPONENT made a General Offer to the Lazaron minorities in order to acquire a 100% shareholding in Lazaron. The General Offer from ECSPONENT, which effectively was a further acquisition by ECSPONENT, to Lazaron shareholders was in the ratio of 1 ECSPONENT share for every 5 Lazaron shares held at an issue price of 7 cents per ECSPONENT share.

3. ESTABLISHMENT OF CRYO-SAVE SA

Lazaron established its leadership in this field as the first company to store cord blood stem cells in South Africa. The company was founded in 2005 after the development of its technology at the Stellenbosch University by well-known stem cell researcher, Dr Daniel Barry, and his research team.

The main aim and focus was to develop stem cell-related biotechnologies in South Africa, by leveraging health enhancing knowledge and products into society through careful and ethical use of adult stem cells. This is done through collaboration with international consortiums, such as the Asian Pacific Cord Blood Bank Consortium, and overseas collaboration with leading individuals and companies. With effect from 01 June 2011, ECSPONENT established a new stem cell bank in South Africa with Cryo-Save N.V. Cryo-Save NV is the leading international family stem cell bank, already stores 250 000 samples from cord blood and umbilical cord tissue for newborns and adipose tissue for adults. There are already several diseases that can be cured by the use of stem cells, and the number of treatments will only increase. Driven by its international business strategy, Cryo-Save N.V. is now represented in 40 countries on three continents, with ultra-modern processing and storage facilities in Belgium, Germany, Dubai, France and South Africa.

Cryo-Save N.V. and ECSPONENT established a Cryo-Save SA which provides for the harvesting and banking of stem cells from both cord blood as well as cord tissue, and also contains the sales and marketing operations. Cryo-Save’s leading expertise in stem cell processing and storage with ECSPONENT’s local and African market expertise and offers customers the option of storing cord tissue and stem cells from cord blood in South Africa or off shore in Belgium.

118

4. DISPOSAL OF CERTAIN VINGUARD ASSETS

The ECSPONENT board signed an agreement with Grapetek Proprietary Limited on 30 October 2013 and addenda thereto dated 20 December 2013 for the disposal of a portion of the business and assets of Vinguard for a sale consideration of R5 million in cash as previously announced on SENS. The Vinguard disposal was approved by Vinguard shareholders in General Meeting on 24 January 2014 but did not require approval by ECSPONENT shareholders.

5. ACQUISITION OF GRAYPAGES

On 3 March 2014, ECSPONENT entered into an agreement with the shareholders of Graypages for the acquisition of 86% of the issued share capital in Graypages for a subscription consideration of Zambian Kwacha 2 150 000, payable in cash. ECSPONENT has further committed to provide further additional expansion loan funding of Zambian Kwacha 3 million. The Graypages subscription consideration is expected to result in no goodwill arising after the purchase price allocation to tangible and intangible assets. Graypages has been established by the shareholders of Graypages and has not been purchased by those shareholders from a third party in the past three years. Graypages is licenced to operate as a Financial Institution under the Banking and Financial Services Act in Zambia to carry out credit facilities, linkage banking, in-country transfers and savings. Graypages is anticipated to provide high growth and high net returns to stakeholders. The acquisition of an 86% interest in the company provides the opportunity for high returns whilst also providing a channel to market for ECSPONENT products and services into Zambia. The acquisition is subject to a due diligence review as well as regulatory approval, Exchange Control approval and ECSPONENT board approval. The Graypages’ current shareholders are not related to ECSPONENT. The directors anticipate substantial organic growth in respect of the existing business model. In addition, the company’s research has identified opportunities in lucrative niche SMME markets. It is the company’s intention to leverage its vendor finance products to maximize these opportunities. The Graypages Acquisition does require the approval of regulatory authorities and the ECSPONENT board of directors in order for the shares in Graypages to transfer to ECSPONENT. Normal warranties have been given. ECSPONENT will take management control of Graypages and change the name to reflect the group’s corporate identity.

119

ECSPONENT LIMITED




Directors RJ Connellan (Chairman)*# KA Rayner*# TP Gregory (Chief Executive Director) BP Topham*# DP van der Merwe (Financial Director) E Engelbrecht*

*Non-executive #Independent

NOTICE OF GENERAL MEETING OF THE SHAREHOLDERS OF THE COMPANY

Notice is hereby given that the general meeting of shareholders of the company will be held at Acacia House, Green Hill Village Office Park, Cnr of Nentabos and Botterklapper Street, The Willows, Pretoria East, 0181, at 10h00 on Friday, 25 July 2014 to consider, and if deemed fit, to pass, with or without modifications, the resolutions set out below. Electronic Participation in the General Meeting Please note that the Company intends to make provisions for shareholders of the Company, or their proxies, to participate in the general meeting by way of electronic communication. Should you wish to participate in the general meeting by way of electronic communication, you will need to contact the Company at +27 12 809 3599 by Wednesday, 23 July 2014, so that the Company can provide for a teleconference dial-in facility. Please ensure that if you are participating in the meeting via teleconference that the voting proxies be sent through to the transfer secretaries, namely Link Market Services South Africa (Pty) Limited, (Registration Number: 2000/007239/07), 13th Floor, Rennie House, 19 Ameshoff Street, Johannesburg, 2001 (PO Box 4844, Johannesburg, 2000) to be received by no later than 10h00 on Wednesday, 23 July 2014. The board of directors of the Company has determined that the record date for the purpose of determining which shareholders of the Company are entitled to receive notice of this general meeting is Friday, 20 June 2014 and the record date for purposes of determining which shareholders of the Company are entitled to participate in and vote at the general meeting is Friday, 18 July 2014. Accordingly, only shareholders who are registered in the register of members of the Company on Friday, 18 July 2014 will be entitled to participate in and vote at the general meeting. 1. Ordinary resolution number 1 – Approval of a related party acquisition of Escalator Financial

Services

“RESOLVED THAT the acquisition of 100% in Escalator Financial Services Proprietary Limited for a purchase consideration of R15 million from Escalator Capital (RF) Limited (“Escalator), a related party to ECSPONENT, to be settled through the increase in the loan account with Escalator, be and is hereby approved”

This ordinary resolution requires a vote of 50% plus one vote of Shareholders present and eligible to vote at the general meeting. In accordance with the JSE Listings Requirements, Escalator, E Engelbrecht and any of their associates are precluded from voting on this resolution.

120

Explanatory Note: In accordance with the JSE Listings Requirements, shareholders are required to approve an acquisition from a related party and a fairness opinion is required from an independent expert is required. Shareholders are referred to Annexure 1 for the fairness report from the independent expert.

2. Ordinary resolution number 2 – Approval of a related party acquisition of the business and

assets of Sanceda

“RESOLVED THAT the acquisition of the business and assets of Sanceda for a purchase consideration of R7 million from Sanceda Collections Proprietary Limited, deemed a related party to ECSPONENT, to be settled through the increase in the loan account with Escalator, be and is hereby approved”

This ordinary resolution requires a vote of 50% plus one vote of Shareholders present and eligible to vote at the general meeting. In accordance with the JSE Listings Requirements, Sanceda, Escalator, E Engelbrecht and any of their associates are precluded from voting on this resolution.

Explanatory Note: In accordance with the JSE Listings Requirements, shareholders are required to approve an acquisition from a related party and a fairness opinion is required from an independent expert is required. Shareholders are referred to Annexure 1 for the fairness report from the independent expert.

3. Ordinary resolution number 3 – Approval of a related party acquisition of Ecsponent Botswana

“RESOLVED THAT the acquisition of 100% of Escalator Investments Holdings Limited (“Ecsponent Botswana”) for a purchase consideration of R5 million from Escalator Capital Global Limited, a related party to ECSPONENT, to be settled through the increase in the loan account with Escalator, be and is hereby approved” This ordinary resolution requires a vote of 50% plus one vote of Shareholders present and eligible to vote at the general meeting. In accordance with the JSE Listings Requirements, Escalator, E Engelbrecht and any of their associates are precluded from voting on this resolution. Explanatory Note: In accordance with the JSE Listings Requirements, shareholders are required to approve an acquisition from a related party and a fairness opinion is required from an independent expert is required. Shareholders are referred to Annexure 1 for the fairness report from the independent expert.

4. Ordinary resolution number 4 – Approval of an option to convert a shareholder loan of up to

R55 million at 14 cents per share

“RESOLVED THAT the option to convert a loan to be advanced from Escalator Capital (RF) Limited, a related party to ECSPONENT, of up to R55 million at a conversion price of 14 cents per share, which option to convert may be exercised at any time for a period of four years commencing from the closing date of the Rights Offer, be and is hereby approved” In accordance with the JSE Listings Requirements, this ordinary resolution requires a vote of 75% plus one vote of Shareholders present and eligible to vote at the general meeting. In accordance with the JSE Listings Requirements, Escalator, E Engelbrecht and any of their associates are precluded from voting on this resolution. Explanatory Note: In accordance with the JSE Listings Requirements, shareholders are required to approve a future specific issue of shares for cash to a related party and a fairness opinion is required from an independent expert is required. Shareholders are referred to Annexure 2 for the fairness report from the independent expert.

121

5. Special resolution number 1 – Approval to issue more than 30% new shares in anticipation of

an intended Rights Offer

“RESOLVED THAT the issue of up to 715 000 000 shares at 14 cents per share which voting power of shares, as a result of the Rights Offer will exceed 30% of the voting power of all the shares held by shareholders immediately before the Rights Offer, be and is hereby approved."

Explanatory Note: In terms of Section 41(3) of the Act, shareholders are required to approve, by special resolution, any issue of shares which shares equal or exceed 30% of the voting power of all shares held. The issue of shares is required for the Rights Offer as announced on SENS and as detailed in a separate circular to shareholders, which number of shares to be issued will be determined once the Rights Offer has been closed, which issue of shares may potentially exceed 30% of the voting power of all shares held. This resolution requires the approval of 75% of shareholders present and eligible to vote at the meeting.

6. Ordinary Resolution number 5 – Enabling resolution “RESOLVED THAT, any director of the Company and/or the Company Secretary be and hereby is authorised to do all such things and sign all such documents as may be necessary for, or incidental to, the implementation of all ordinary and special resolutions above.” Explanatory Note: This resolution requires a 50% plus one vote of shareholders present or represented by proxy in order to be passed and enables the Directors and/or Company Secretary to sign the relevant documentation in order to give effect to the resolutions proposed in this notice of General Meeting.

Voting and Proxies Certificated shareholders and authorised shareholders with “own name” registration

If you are unable to attend the general meeting of ECSPONENT shareholders to be held at 10h00 on Friday, 25 July 2014, at Acacia House, Green Hill Village Office Park, Cnr of Nentabos and Botterklapper Street, The Willows, Pretoria East, 0181, and wish to be represented thereat, you should complete and return the attached form of proxy in accordance with the instructions contained therein and lodge it with, or post it to, the transfer secretaries, namely Link Market Services South Africa (Pty) Limited,(Registration Number: 2000/007239/07), 13th Floor, Rennie House, 19 Ameshoff Street, Johannesburg, 2001 (PO Box 4844, Johannesburg, 2000) so as to be received by them by no later than 10h00 on Wednesday, 23 July 2014. Dematerialised shareholders, other than those with “own name” registration If you hold shares in ECSPONENT through a CSDP or broker and do not have an “own name” registration, you must timeously advise your CSDP or broker of your intention to attend and vote at the general meeting or be represented by proxy thereat in order for your CSDP or broker to provide you with the necessary Letter of Representation to do so, or should you not wish to attend the general meeting in person, you must timeously provide your CSDP or broker with your voting instruction in order for the CSDP or broker to vote in accordance with your instruction at the general meeting.

Shares held by a share trust or share incentive scheme and any unlisted shares will not be taken account of for purposes of voting on any of the resolutions set out in this notice of general meeting. Each shareholder, whether present in person or represented by proxy, is entitled to attend and vote at the general meeting. On a show of hands every shareholder who is present in person or by proxy shall have one vote, and, on a poll, every shareholder present in person or by proxy shall have one vote for each share held by him/her.

122

A form of proxy (white) which sets out the relevant instructions for use is attached for those members who wish to be represented at the general meeting of members. Duly completed forms of proxy must be lodged with the transfer secretaries of the company to be received by not later than 10h00 on Wednesday, 23 July 2014. By order of the Board DP van der Merwe Company Secretary Date: 11 June 2014

123

ECSPONENT LIMITED




FORM OF PROXY (for use by certificated and own name authorised shareholders only)

For use by certificated and “own name” registered authorised shareholders of the Company (“shareholders”) at the General Meeting of ECSPONENT to be held at 10h00 on Friday, 25 July 2014 at Acacia House, Green Hill Village Office Park, Cnr of Nentabos and Botterklapper Street, The Willows, Pretoria East, 0181 (“the general meeting”). I/We (please print) ____________________________________________________________ of (address) _____________________________________________________________being the holder/s of __________________________ ordinary shares of no par value in ECSPONENT, appoint (see note 1): 1. _______________________________________________________ or failing him,

2. _______________________________________________________ or failing him,

3. the chairperson of the general meeting,

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

Number of votes

For Against Abstain

Ordinary Resolution Number 1 – Approval of a related party acquisition of Escalator Financial Services

Ordinary Resolution Number 2 – Approval of a related party acquisition of the business and assets of Sanceda

Ordinary Resolution Number 3 – Approval of a related party acquisition of Ecsponent Botswana

Ordinary Resolution Number 4 – Approval of an option to convert a shareholder loan of up to R55 million at 14 cents per share

Special resolution number 1 – Approval to issue more than 30% new shares in anticipation of an intended Rights Offer

Ordinary Resolution number 5 – Enabling resolution

124

Signed at ______________________________ on _________________________________ 2014 Signature________________________Assisted by me (where applicable) ______________________ Name______________________Capacity_____________________Signature__________________ Telephone number ( ) __________________________ Cellphone number________________________

125

1. This form is for use by certificated shareholders and dematerialised shareholders with "own-name" registration whose shares are registered in their own names on the record date and who wish to appoint another person to represent them at the meeting. If duly authorised, companies and other corporate bodies who are shareholders having shares registered in their own names may appoint a proxy using this form, or may appoint a representative in accordance with the last paragraph below. Other shareholders should not use this form. All beneficial holders who have dematerialised their shares through a Central Securities Depository Participant ("CSDP") or broker, and do not have their shares registered in their own name, must provide the CSDP or broker with their voting instructions. Alternatively, if they wish to attend the Meeting in person, they should request the CSDP or broker to provide them with a letter of representation in terms of the custody agreement entered into between the beneficial owner and the CSDP or broker.

2. This proxy form will not be effective unless received at the Transfer Secretaries offices, by not later than Wednesday, 23 July 2014 at 10h00.

3. This proxy shall apply to all the ordinary shares registered in the name of shareholders at the record

date unless a lesser number of shares are inserted.

4. A shareholder may appoint one person as his proxy by inserting the name of such proxy in the space provided. Any such proxy need not be a shareholder of the company. If the name of the proxy is not inserted, the chairman of the meeting will be appointed as proxy. If more than one name is inserted, then the person whose name appears first on the form of proxy and who is present at the meeting will be entitled to act as proxy to the exclusion of any persons whose names follow. The proxy appointed in this proxy form may delegate the authority given to him in this proxy by delivering to the company, in the manner required by these instructions, a further proxy form which has been completed in a manner consistent with the authority given to the proxy of this proxy form.

5. Unless revoked, the appointment of proxy in terms of this proxy form remains valid until the end of the

meeting even if the meeting or a part thereof is postponed or adjourned.

6. If 6.1 a shareholder does not indicate on this instrument that the proxy is to vote in favour of or against

or to abstain from voting on any resolution; or 6.2 the shareholder gives contrary instructions in relation to any matter; or 6.3 any additional resolution/s which are properly put before the Meeting; or 6.4 any resolution listed in the proxy form is modified or amended, the proxy shall be entitled to vote or abstain from voting, as he thinks fit, in relation to that resolution or matter. If, however, the shareholder has provided further written instructions which accompany this form and which indicate how the proxy should vote or abstain from voting in any of the circumstances referred to in 6.1 to 6.4, then the proxy shall comply with those instructions.

7. If this proxy is signed by a person (signatory) on behalf of the shareholder, whether in terms of a power of attorney or otherwise, then this proxy form will not be effective unless:

7.1 it is accompanied by a certified copy of the authority given by the shareholder to the signatory; or 7.2 the Company has already received a certified copy of that authority.

8. The chairman of the meeting may, at his discretion, accept or reject any proxy form or other written

appointment of a proxy which is received by the chairman prior to the time when the meeting deals with a resolution or matter to which the appointment of the proxy relates, even if that appointment of a proxy has not been completed and/or received in accordance with these instructions. However, the chairman shall not accept any such appointment of a proxy unless the chairman is satisfied that it reflects the intention of the shareholder appointing the proxy.

9. Any alterations made in this form of proxy must be initialled by the authorised signatory/ies.

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10. This proxy form is revoked if the shareholder who granted the proxy:

10.1 delivers a copy of the revocation instrument to the company and to the proxy or proxies

concerned, so that it is received by the company by not later than Wednesday, 23 July 2014 at 10h00; or

10.2 appoints a later, inconsistent appointment of proxy for the Meeting; or 10.3 attends the Meeting in person.

11. If duly authorised, companies and other corporate bodies who are shareholders of the company having

shares registered in their own name may, instead of completing this proxy form, appoint a representative to represent them and exercise all of their rights at the meeting by giving written notice of the appointment of that representative. This notice will not be effective at the meeting unless it is accompanied by a duly certified copy of the resolution/s or other authorities in terms of which that representative is appointed and is received at the company's registered office, not later than Wednesday, 23 July 2014 at 10h00.

Summary of rights established by section 58 of the Companies Act, 71 of 2008 ("Companies Act"), as required in terms of subsection 58(8)(b)(i) 1. A shareholder may at any time appoint any individual, including a non-shareholder of the company, as a

proxy to participate in, speak and vote at a shareholders' meeting on his or her behalf (section 58(1)(a)), or to give or withhold consent on behalf of the shareholder to a decision in terms of section 60 (shareholders acting other than at a meeting) (section 58(1)(b)).

2. A proxy appointment must be in writing, dated and signed by the shareholder, and remains valid for one

year after the date on which it was signed or any longer or shorter period expressly set out in the appointment, unless it is revoked in terms of paragraph 6.3 or expires earlier in terms of paragraph 6 below (section 58(2)).

3. A shareholder 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 the shareholder (section 58(3)(a)). 4. A proxy may delegate his or her authority to act on behalf of the shareholder to another person, subject

to any restriction set out in the instrument appointing the proxy ("proxy instrument") (section 58(3)(b)). 5. A copy of the proxy instrument must be delivered to the company, or to any other person acting on

behalf of the company, before the proxy exercises any rights of the shareholder at a shareholders' meeting (section 58(3)(c)) and in terms of the memorandum of incorporation ("MOI") of the company at least 48 hours before the meeting commences.

6. Irrespective of the form of instrument used to appoint a proxy:

the appointment is suspended at any time and to the extent that the shareholder chooses to act directly and in person in the exercise of any rights as a shareholder (section 58)4)(a)); the appointment is revocable unless the proxy appointment expressly states otherwise (section 58(4)(b)); and if the appointment is revocable, a shareholder may revoke the proxy appointment by cancelling it in writing or by making a later, inconsistent appointment of a proxy, and delivering a copy of the revocation instrument to the proxy and to the Company (section 58(4)(c)).

7. The revocation of a proxy appointment constitutes a complete and final cancellation of the proxy's

authority to act on behalf of the shareholder as of the later of the date stated in the revocation instrument, if any, or the date on which the revocation instrument was delivered as contemplated in paragraph 6.3 above (section 58(5)).

8. If the proxy instrument has been delivered to a company, as long as that appointment remains in effect,

any notice required by the Companies Act or the company's MOI to be delivered by the company to the shareholder must be delivered by the company to the shareholder (section 58(6)(a)), or the proxy or proxies, if the shareholder has directed the company to do so in writing and paid any reasonable fee charged by the company for doing so (section 58(6)(b)).

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9. A proxy is entitled to exercise, or abstain from exercising, any voting right of the shareholder without direction, except to the extent that the MOI or proxy instrument provides otherwise (section 58(7)).

10. If a company issues an invitation to shareholders to appoint one or more persons named by the

company as a proxy, or supplies a form of proxy instrument:

the invitation must be sent to every shareholder entitled to notice of the meeting at which the proxy is intended to be exercised (section 58(8)(a)); the invitation or form of proxy instrument supplied by the company must:

10.1.1 bear a reasonably prominent summary of the rights established in section 58 of the

Companies Act (section 58(8)(b)(i)); 10.1.2 contain adequate blank space, immediately preceding the name(s) of any person(s) named in

it, to enable a shareholder to write the name, and if desired, an alternative name of a proxy chosen by the shareholder (section 58(8)(b)(ii)); and

10.1.3 provide adequate space for the shareholder to indicate whether the appointed proxy is to vote in favour of or against any resolution(s) to be put at the meeting, or is to abstain from voting (section 58(8)(b)(iii));

the company must not require that the proxy appointment be made irrevocable (section 58(8)(c)); and the proxy appointment remains valid only until the end of the meeting at which it was intended to be used, subject to paragraph 7 above (section 58(8)(d)).

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