Reunert Limited (JSE:RLO) News - Proposed broad-based black economic empowerment (“BEE”) transaction Reunert Limited (Incorporated in the Republic of South Africa) Registration Number: 1913/004355/06 Share code: RLO ISIN: ZAE000057428 (“Reunert” or the “Company”) PROPOSED BROAD-BASED BLACK ECONOMIC EMPOWERMENT (“BEE”) TRANSACTION 1. INTRODUCTION Reunert shareholders (“Shareholders”) are advised that Reunert, Bargenel Investments Proprietary Limited (“Bargenel”), Rebatona Investment Holdings Proprietary Limited (“Rebatona”), Julopro Proprietary Limited (“Julopro”) and the Rebatona Educational Trust (“Rebatona Trust”), (collectively, the “Parties”) propose to enter into a transaction implementation agreement (“Implementation Agreement”) in terms of which, among others, the Original BEE Transaction (as defined in paragraph 2.1 below) is proposed to be restructured, extended and increased and an employee share ownership programme is proposed to be introduced (the “Proposed BEE Transaction”), as further detailed below. 2. BACKGROUND AND RATIONALE FOR THE PROPOSED BEE TRANSACTION 2.1. In 2007, Reunert implemented a BEE transaction to introduce BEE shareholding at the Reunert level, which resulted in approximately 9.5% of the then issued Reunert ordinary shares (“Reunert Shares”) being indirectly held by the Bahedile Trust, the Cache Trust, the Neapaugra Trust and the Selemo Trust (collectively the “Peotona Parties”), which are the inter vivos trusts established for the benefit of Advocate Noluthando Orleyn, Cheryl Carolus, Wendy Lucas-Bull and the late Dolly Mokgatle and their respective families, and the Rebatona Trust (the “Original BEE Transaction”). The Peotona Parties and the Rebatona Trust hold their interests in Reunert through Rebatona, which holds all of the ordinary shares in Bargenel, which in turn holds the Reunert Shares. At present, Bargenel’s holding of Reunert Shares amounts to approximately 10% of the current Reunert Shares in issue. 2.2. In order to fund the Original BEE Transaction, Bargenel issued ‘A’ redeemable preference shares (“Bargenel A Preference Shares”) to Reunert. Bargenel was required to redeem the Bargenel A Preference Shares on or before the 11th anniversary of the Original BEE Transaction, which period was extended by Reunert for a further 4 years in 2018, in accordance with the terms of the Original BEE Transaction agreements. As a result of this extension, the Bargenel A Preference Shares are required to be redeemed on 6 March 2022. 2.3. For further details regarding the Original BEE Transaction refer to the circular to Shareholders dated 13 December 2006 available on Reunert’s website (https://reunert.com/downloads/reports/2006/Circular-Dec-2006.pdf). 2.4. For a variety of reasons, including a lower than expected economic growth environment, the significant reduction by government in investment in electrical infrastructure over the past years and the material adverse impact of the COVID-19 pandemic on Reunert’s businesses, the envisaged value in relation to the Original BEE Transaction has not materialised. Accordingly, the current market value of the Reunert Shares held by Bargenel, pursuant to the Original BEE Transaction, is not sufficient to cover the outstanding redemption value of the Bargenel A Preference Shares. Additionally, the dividends received by Bargenel from its holding of Reunert Shares were not sufficient to pay all of the preference dividends payable to Reunert as the holder of the Bargenel A Preference Shares (“Bargenel A Preference Dividends”), giving rise to arrear preference dividends pursuant to the terms of the Bargenel A Preference Shares (“Bargenel Arrear Preference Dividends”). As a result, Bargenel does not have sufficient funds available to redeem the Bargenel A Preference Shares and to settle the Bargenel Arrear Preference Dividends. 2.5. With this in mind, Reunert wishes to implement the Proposed BEE Transaction (as contemplated in paragraph 4 below) for the following reasons: 2.5.1. to continue to embrace broad-based inclusive growth and empowerment by providing qualifying Reunert employees with an opportunity to participate in the value of Reunert, thereby strengthening the alignment of their economic interest with those of other Reunert stakeholders and the future success of Reunert; 2.5.2. to continue, through its long-standing relationship with, and support of, the Rebatona Trust, to empower black female youth to obtain a meaningful education and subsequent employment and the relevant training and skills development to succeed in business; and 2.5.3. to strengthen Reunert’s competitive position in its respective product and services markets in South Africa. 3. PEOTONA PARTIES EXIT 3.1. Pursuant to the Original BEE Transaction, the Peotona Parties hold an effective indirect interest of approximately 3% of the issued Reunert Shares, through their 30% holding of the issued ordinary shares in Rebatona (“Rebatona Shares”) and Rebatona’s 100% holding of ordinary shares in Bargenel. 3.2. Notwithstanding the long-term beneficial relationship between Reunert and the Peotona Parties since the implementation of the Original BEE Transaction in 2007, the Peotona Parties have confirmed that, for personal reasons, they do not wish to participate in the Proposed BEE Transaction. 3.3. In the circumstances, as a separate transaction from the Proposed BEE Transaction, Rebatona will, prior to the implementation of the Proposed BEE Transaction, repurchase all of the Rebatona Shares held by the Peotona Parties for a total consideration of R9.6 million, funded by Reunert, being 30% of the residual option value of the Original BEE Transaction at the date on which the terms of the transaction were agreed upon (the “Peotona Parties Exit”). 3.4. As described in paragraph 8.1 below, Rebatona is a related party to Reunert. However, the funding to Rebatona, pursuant to the Peotona Parties Exit, falls below the threshold for categorisation in terms of the JSE Limited Listings Requirements (“JSE Listings Requirements”) and therefore the implementation thereof is not subject to Shareholder approval. 4. OVERVIEW OF THE PROPOSED BEE TRANSACTION STEPS It is envisaged that the Proposed BEE Transaction will be implemented, with effect from the first day of the month following the month in which the last of the suspensive conditions (as set out in paragraph 6 below) is fulfilled or, where applicable, waived (“Effective Date”), in accordance with the following steps: 4.1. Reunert will procure the registration and establishment of a trust, to be called The Reunert Employee Share Ownership Trust (“ESOP”). The objective of the ESOP is to, inter alia, facilitate broad-based and meaningful participation in the economy by providing qualifying Reunert employees with the opportunity to effectively participate in the growth of Reunert which will also serve to strengthen the alignment of their economic interest with those of other Reunert stakeholders and the future success of Reunert. 4.2. Bargenel will, inter alia, adopt a new memorandum of incorporation (“MOI”), which will, among other things, extend the term of the Bargenel A Preference Shares by a period of at least 10 years and provide for the payment of Bargenel A Preference Dividends equal to 90% of the Reunert ordinary cash dividends received by Bargenel by virtue of its shareholding in Reunert. This will allow for a trickle dividend equal to 10% of the Reunert ordinary cash dividends received by Bargenel to flow from Bargenel through Rebatona to the shareholders of Rebatona (being the Rebatona Trust and the ESOP, following the issue of Rebatona Shares to the ESOP as described in paragraph 4.7.1 below). 4.3. Reunert will waive its rights to receive the Bargenel Arrear Preference Dividends. It is estimated that, assuming that the Effective Date occurs on 1 March 2022 and the prime rate remains at 7.25%, the Bargenel Arrear Preference Dividends will be approximately R202 million. Bargenel does not have sufficient distributable reserves to satisfy the requirements of section 46 of the Companies Act, No. 71 of 2008 (“Companies Act”) and is therefore not legally able to pay the Bargenel Arrear Preference Dividends. As such, Reunert’s rights to receive the Bargenel Arrear Preference Dividends are currently not enforceable and the waiver contemplated in this step is a waiver of a conditional right. 4.4. Bargenel will repurchase 185 000 Bargenel A Preference Shares from Reunert, for an aggregate amount of R1 850 such that, following the repurchase of these Bargenel A Preference Shares and the waiver contemplated in paragraph 4.3 above, the face value of the remaining issued Bargenel A Preference Shares will approximate the value of the Reunert Shares held by Bargenel (based on a price per Reunert Share of R50.13, being the 30 trading day volume weighted average price (“30-day VWAP”) of a Reunert Share quoted on the securities exchange operated by the JSE Limited (the “JSE”) up to and including 5 November 2021 (“Agreed Transaction Price”)). The transaction steps contemplated in paragraphs 4.2, 4.3 and 4.4 are collectively hereinafter referred to as the “Restructure of the Original BEE Transaction”. 4.5. Julopro, a wholly owned subsidiary of Reunert, will sell to Bargenel approximately 5.5 million Reunert Shares (which shares represent approximately 3% of the Reunert Shares in issue) for an aggregate amount of approximately R278.2 million (based on the Agreed Transaction Price) (“Specific Issue of Reunert Shares”). The Reunert Shares held by Julopro are classified as “treasury shares” for purposes of the JSE Listings Requirements, which means that the sale must comply with the JSE Listings Requirements as if it was a fresh issue of Reunert Shares. 4.6. Reunert will subscribe for 278 176 Bargenel A Preference Shares for an aggregate subscription amount of R278.2 million (representing a subscription price of R1 000 per Bargenel A Preference Share) (“Financial Assistance”) to fund the Specific Issue of Reunert Shares. 4.7. Reunert will: 4.7.1. as the founder of the ESOP, contribute R371 to the ESOP, which the ESOP will use to subscribe for 371 Rebatona Shares, equating to a shareholding of approximately 34.6% in Rebatona following the issue of the Rebatona Shares. Through its shareholding in Rebatona, the ESOP will indirectly hold approximately 8.3 million (4.5%) of the Reunert Shares in issue; and 4.7.2. be entitled to contribute, or procure that employer companies of the ESOP beneficiaries contribute, to the ESOP all or a portion of the funds required by the ESOP to settle beneficiaries remaining at the end of the ESOP period, (the contributions referred to in paragraphs 4.7.1 and 4.7.2 are collectively hereinafter referred to as the “ESOP Contributions”). Following the implementation of the steps above, the Rebatona Trust and the ESOP will, in aggregate, indirectly hold approximately 24 million (13%) of the Reunert Shares in issue. 5. DESCRIPTION OF THE PROPOSED BEE TRANSACTION 5.1. PRINCIPLES OF THE PROPOSED BEE TRANSACTION 5.1.1. Reunert, Bargenel, Rebatona, the ESOP and the Rebatona Trust will enter into a relationship agreement, which will regulate the: 5.1.1.1. relationship between Reunert and Rebatona as preference and ordinary shareholders of Bargenel; 5.1.1.2. protection of the BEE status of Rebatona and Bargenel; and 5.1.1.3. preservation and safeguarding of the status of the Rebatona Trust as a broad-based black ownership scheme and the ESOP as an employee share ownership programme in terms of the Codes of Good Practice on BEE published by the Minister of Trade and Industry in terms of the Broad- Based Black Economic Empowerment Act, No. 53 of 2003. 5.1.2. The Reunert Shares held by Bargenel will continue to carry full voting rights and full rights to participate in dividends. 5.1.3. For as long as the ESOP holds Rebatona Shares and Rebatona holds ordinary shares in Bargenel, the ESOP shall be entitled to appoint one director to each of the boards of Rebatona and Bargenel. Furthermore, the ESOP will have the authority and power to exercise, in Bargenel’s name all of the voting rights of its effective shareholding in Reunert (through its shareholding in Rebatona), at any general meeting of Reunert Shareholders at which they are exercisable. 5.1.4. The Rebatona Trust will not be entitled to encumber or dispose of its Rebatona Shares for the period commencing on the Effective Date and terminating on the later of the: 5.1.4.1. date on which the last of the Bargenel A Preference Shares is redeemed; or 5.1.4.2. 10th anniversary of the Effective Date. 5.1.5. In order to provide the ESOP with the funds to settle the beneficiaries of the ESOP at the end of the ESOP period as set out in paragraph 5.2.9 below, Rebatona will repurchase the Rebatona Shares held by the ESOP at the end of the ESOP period for a consideration equal to the total sum of the settlement values due to the beneficiaries of the ESOP as calculated in terms of the ESOP trust deed. In turn Bargenel will be entitled to dispose of sufficient Reunert Shares in order to provide Rebatona with the necessary funds to pay the consideration for the repurchase of the Rebatona Shares held by the ESOP. 5.1.6. Notwithstanding paragraph 5.1.5, Reunert will be entitled, in its sole discretion, to contribute and/ or procure that employer companies of the ESOP beneficiaries contribute, to the ESOP all or a portion of the funds required by the ESOP to settle beneficiaries remaining at the end of the ESOP period, which will reduce the repurchase consideration payable by Rebatona for the repurchase of the Rebatona Shares held by the ESOP as contemplated in paragraph 5.1.5. 5.2. ESOP 5.2.1. The ESOP will create approximately 8.3 million units (“Units”), which will be allocated equally with effect from the Effective Date in a once-off allocation to the qualifying employees, being all full time, permanent employees of the Reunert group, but specifically excluding: 5.2.1.1. non-executive directors; 5.2.1.2. all employees who are participating in any of the long-term incentive schemes in place at the Reunert group; 5.2.1.3. executive directors and employees participating in any of the short-term incentive schemes in place at the Reunert group; and 5.2.1.4. employees employed by any subsidiary of Reunert that is incorporated or registered outside of South Africa and any company in which Reunert directly or indirectly holds 50% or more of the issued shares, but is not entitled (whether due to the provisions of the company’s memorandum of incorporation, any shareholders’ agreement related to that company, or otherwise) to appoint the majority of the directors of that company or directors who are able to exercise the majority of the votes at meetings of the directors of that company). 5.2.2. Following the allocation of the Units, all qualifying employees who do not reject the allocation will become beneficiaries of the ESOP. 5.2.3. Units are notional and are not property of any nature and have no separate existence. The Units are merely used as a mechanism to establish an ESOP beneficiary’s interest/ rights in the ESOP and represent the vested rights of the beneficiaries to the underlying benefits of the ESOP. 5.2.4. The beneficiaries are required to meet certain employment service requirements set out in the ESOP trust deed. If a beneficiary fails to meet the employee service requirements, then that beneficiary’s Units will lapse and be cancelled and consequently forfeited for no consideration. 5.2.5. The board of trustees of the ESOP will consist of 4 trustees, of whom the beneficiaries will be entitled to elect 2 from amongst themselves with Reunert being entitled to appoint the remaining 2 trustees. 5.2.6. The beneficiaries will be entitled to give directions to the trustees of the ESOP to exercise the ESOP’s voting rights in respect of the underlying portion of the Reunert Shares held by the ESOP at any general meeting of Reunert. 5.2.7. Any dividends received by the ESOP from time to time are vested in the beneficiaries in relation to, and will be distributed and paid to the existing beneficiaries pro rata to, their holding of Units. 5.2.8. The ESOP is a cash settled scheme and beneficiaries will therefore not be entitled to receive Rebatona Shares or Reunert Shares. The cash payment to remaining beneficiaries at the end of the ESOP period will be determined in accordance with a formula that provides for those beneficiaries to participate in the growth of the price of the Reunert Share over the Agreed Transaction Price. 5.2.9. The ESOP will remain in place for a period of at least 5 years. If the value of a Unit (being the 30-day VWAP of the Reunert Share price on the calculation date less the Agreed Transaction Price) as calculated prior to the 5th anniversary of the Effective Date is positive, then the period of the ESOP will terminate and the remaining beneficiaries will be settled in accordance with the terms of the ESOP trust deed. If the value of a Unit is zero or negative at such calculation date, the ESOP period will be extended for another year and the calculation of the Unit value will be repeated. This process will be repeated for a maximum of 3 years from the 5th anniversary of the Effective Date. If the value of a Unit is still not positive at the end of the 8th anniversary of the Effective Date, the ESOP period will expire and the remaining beneficiaries will not be entitled to any payment. 6. SUSPENSIVE CONDITIONS 6.1. The Proposed BEE Transaction is subject to the fulfilment or, where applicable, waiver of, inter alia, the following suspensive conditions: 6.1.1. the agreements pertaining to, inter alia, the Proposed BEE Transaction are entered into and have become unconditional in accordance with their terms; 6.1.2. the ESOP is registered by the Master of the High Court and enters into a deed of adherence in such form and on such terms as Reunert may reasonably require, agreeing to become a party to the Implementation Agreement and to observe, perform and be bound by all the terms and conditions of the Implementation Agreement, to the extent applicable; 6.1.3. Rebatona, as the sole shareholder of Bargenel, passes the necessary special resolutions, required for Bargenel to implement the transactions contemplated in the Implementation Agreement; 6.1.4. the Rebatona Trust, as the sole shareholder of Rebatona, prior to the introduction of the ESOP, passes the necessary special resolutions required for Rebatona to implement the transactions contemplated in the Implementation Agreement; 6.1.5. any and all approvals required from the JSE in connection with the transactions contemplated in the Implementation Agreement are obtained; 6.1.6. Shareholders: 6.1.6.1. approve the Specific Issue of Reunert Shares, in accordance with paragraph 5.51(g) read with paragraph 5.75 of the JSE Listings Requirements; and 6.1.6.2. to the extent necessary, approve, by a special resolution in terms of section 44(3) of the Companies Act, the Financial Assistance; and 6.1.7. Reunert obtains an indicative certificate in relation to the Reunert’s BEE ownership, from an accredited BEE verification agent, done as if the Implementation Agreement has been fully implemented and such certificate is acceptable to Reunert in its sole and absolute discretion. 6.2. The condition referred to in paragraph 6.1.7 above is for the benefit of Reunert and may therefore be waived by Reunert. 7. SPECIFIC ISSUE OF REUNERT SHARES 7.1. The Specific Issue of Reunert Shares will constitute a specific issue of shares, in terms of paragraph 5.51(g) read with paragraph 5.75 of the JSE Listings Requirements. 7.2. Implementation of the Specific Issue of Reunert Shares is subject to, inter alia, Shareholders adopting an ordinary resolution, passed by achieving a 75% majority of the votes cast on the resolution, excluding Bargenel and Julopro, in accordance with paragraph 5.51(g) of the JSE Listings Requirements. 7.3. Furthermore, Bargenel is a material shareholder of Reunert, in terms of the JSE Listings Requirements, and is therefore deemed to be a related party to Reunert, in terms of paragraph 10.1(b)(i) of the JSE Listings Requirements. In terms of the JSE Guidance Letter (dated 11 November 2010), a fairness opinion is required in respect of the Specific Issue of Reunert Shares as a result of the Financial Assistance. 8. SMALL RELATED PARTY TRANSACTIONS 8.1. Rebatona, as the holding company of Bargenel is an associate of Bargenel as contemplated in the JSE Listings Requirements. Accordingly, in addition to Bargenel, Rebatona is also deemed to be a related party to Reunert in terms of paragraph 10.1(b)(vii) as read with 10.1(b)(i) of the JSE Listings Requirements. 8.2. The Restructure of the Original BEE Transaction pertain to a series of agreements to be entered into between Reunert and Bargenel as contemplated in paragraphs 4.2, 4.3 and 4.4 above. 8.2.1. As described in paragraph 7.3 above, Bargenel is a related party to Reunert. Accordingly, the Restructure of the Original BEE Transaction is considered to be a transaction with a related party. 8.2.2. The aggregated percentage ratio of the Restructure of the Original BEE Transaction is 3.2% (based on Reunert’s market capitalisation, including empowerment shares, but excluding treasury shares, as at 18 November 2021, being R9 535.6 million). Accordingly, the Restructure of the Original BEE Transaction is categorised as a “small related party transaction”, in terms of paragraph 10.7 of the JSE Listings Requirements. The categorisation calculation of the Restructure of the Original BEE Transaction is based on an estimate of the applicable fair value of the embedded option held by the Rebatona Trust as at 18 November 2021, being R309.8 million. 8.3. The ESOP Contributions pertain to a series of transactions to be entered into between Rebatona and Reunert. 8.3.1. As described in paragraph 8.1 above Rebatona is a related party to Reunert. Accordingly, the agreements in respect of the ESOP Contributions are deemed to be agreements with a related party. 8.3.2. As a result of the aggregation of Reunert’s funding to Rebatona pursuant to the Peotona Parties’ Exit, together with the ESOP Contributions, the aggregated percentage ratio of the ESOP Contributions is 1% (based on Reunert’s market capitalisation, including empowerment shares, but excluding treasury shares, as at 18 November 2021, being R9 535.6 million). Accordingly, the ESOP Contributions are categorised as a “small related party transaction”, in terms of paragraph 10.7 as read with paragraph 10.8 of the JSE Listings Requirements. The categorisation calculation of the ESOP Contributions is based on an estimate of the applicable fair value of the embedded option held by the ESOP as at 18 November 2021, being R99.3 million. 8.4. In terms of paragraph 10.7 of the JSE Listings Requirements, the Restructure of the Original BEE Transaction and the ESOP Contributions are not subject to Shareholder approval, provided that an independent professional expert confirms that the terms of these transactions are fair in so far as the Shareholders are concerned. 9. FAIRNESS OPINION 9.1. Reunert has appointed BDO Corporate Finance Proprietary Limited (“Independent Expert”) to opine on the fairness of the Specific Issue of Reunert Shares, the Restructure of the Original BEE Transaction and the ESOP Contributions. A copy of the Independent Expert’s report will be included in the Circular (as defined in paragraph 11 below). 10. PRO FORMA FINANCIAL EFFECTS OF THE PROPOSED BEE TRANSACTION 10.1. The table below sets out the unreviewed and unaudited pro forma financial effects of the Proposed BEE Transaction on, inter alia, Reunert’s net asset value (“NAV”) per share, tangible NAV per share, basic earnings per share (“EPS”), diluted EPS, headline EPS (“HEPS”) and diluted HEPS based on the preliminary reviewed condensed consolidated financial statements of Reunert for the year ended 30 September 2021, as published on SENS on 23 November 2021. 10.2. The unreviewed and unaudited pro forma financial effects have been presented for illustrative purposes only, to provide information on how the Proposed BEE Transaction may have affected the results and financial position of Reunert. Due to its nature, the unreviewed and unaudited pro forma financial effects may not fairly represent Reunert’s financial position, changes in equity, results of operations or cash flows post the implementation of the Proposed BEE Transaction. 10.3. The unreviewed and unaudited pro forma financial effect on the EPS, diluted EPS, HEPS and diluted HEPS is presented as if the Proposed BEE Transaction was effective 1 October 2020 and the unreviewed and unaudited pro forma financial effect on the NAV per share and tangible NAV per share is presented as if the Proposed BEE Transaction is effected as at 30 September 2021. 10.4. The unreviewed and unaudited pro forma financial effects, including the assumptions on which they are based and the financial information from which they have been prepared, is the responsibility of the board of directors of Reunert and have not been reviewed or reported on by the independent reporting accountant or independent auditor. 10.5. The unreviewed and unaudited pro forma financial effects have been prepared in accordance with the JSE Listings Requirements, the Guide on Pro Forma Financial Information issued by SAICA and Reunert’s accounting policies, which are in compliance with the international financial reporting standards (IFRS). PRO FORMA FINANCIAL EFFECTS OF THE PROPOSED BEE TRANSACTION Specific Issue Restructure of of Reunert the Original Shares and BEE Financial ESOP Transaction Proposed BEE Before Transaction Assistance Contributions Costs Transaction After (A) (B) (C) (D) (A + B + C + D) (1) (2,3,4,8) (2,3,5) (2,3,6,8) (7,8) (2 to 8) (1 to 8) EPS (cents) (9) 483 (2) - (11) (6) (19) 464 Diluted EPS (cents) (9) 481 (2) - (11) (6) (19) 462 HEPS (cents) (9) 478 (2) - (11) (6) (19) 459 Diluted HEPS (cents) (9) 476 (2) - (11) (6) (19) 457 NAV per share (cents) (10) 4 199 - - - (6) (6) 4 193 Tangible NAV per share (cents) (11) 3 335 - - - (6) (6) 3 329 Weighted average number of shares (million) 160.7 - - - - - 160.7 Weighted average diluted number of shares (million) 161.4 - - - - - 161.4 Net number of ordinary shares in issue (million) (5) 159.4 - - - - - 159.4 Notes: 1. The "Before" column is based on the published preliminary reviewed condensed consolidated financial statements of Reunert for the year ended 30 September 2021, as released on SENS on 23 November 2021. There are no other material transactions subsequent to the financial year ended 30 September 2021, which require adjustment to the unreviewed and unaudited pro forma financial information. 2. The Proposed BEE Transaction (as contemplated in the transaction steps described in paragraphs 4.1 to 4.7 above) entails, inter alia, (i) the Restructure of the Original BEE Transaction; (ii) the Specific Issue of Reunert Shares; (iii) the Financial Assistance; and (iv) the introduction of the ESOP. For purposes of determining the unreviewed and unaudited pro forma financial effects of the Proposed BEE Transaction, the Specific Issue of Reunert Shares and the Financial Assistance have been combined. 3. It was concluded that Bargenel, Rebatona, the Rebatona Trust and the ESOP will be consolidated by Reunert based on the outcome of the assessment of control relating to the ESOP and reassessment of control in relation to Bargenel, Rebatona and Rebatona Trust performed in accordance with IFRS 10, Consolidated Financial Statements. 4. Due to the Rebatona Trust being consolidated, any bursaries awarded by the Rebatona Trust are regarded as the cost of the Restructure of the Original BEE Transaction and are expensed. For purposes of the calculation of EPS, diluted EPS, HEPS and diluted HEPS, it was assumed that the total trickle dividend of R 4.1 million to be received by the Rebatona Trust will be awarded as bursaries and therefore expensed. The bursaries to be awarded by the Rebatona Trust (expenses) are conditional upon Reunert ordinary dividends being declared. These expenses have been assumed to be non-deductible for tax purposes. For purposes of the calculation of NAV per share and Tangible NAV per share, the Restructure of the Original BEE Transaction will have no impact on the consolidated Reunert financial position on the Effective Date (assumed for this purpose to be 30 September 2021). 5. Due to Bargenel being consolidated by Reunert as described in note 3 above, the Specific Issue of Reunert Shares and Financial Assistance have no impact on the consolidated results of Reunert. The Reunert Shares held by Bargenel, including the Specific Issue of Reunert Shares, will continue to be classified as treasury shares for accounting purposes and will also be excluded from the weighted average number of shares in issue. The net number of ordinary shares in issue is net of empowerment and treasury shares. 6. The ESOP is classified as a cash-settled share-based payment in terms of IFRS2: Share-based Payment. The share-based payment has been determined using the Monte Carlo technique. There will be an expense debited to the Statement of Comprehensive Income over the most probable period that services will be rendered by the beneficiaries of the ESOP (being qualifying employees) with a corresponding credit to the share-based payment liability on the Statement of Financial Position. The total IFRS2 charge in relation to the ESOP has been calculated at R89.7 million taking into consideration an estimated attrition rate of 8.41% per annum. The annual charge to the Reunert Statement of Comprehensive Income over a period of 5 years is estimated at R17.9 million per annum, which impacts the calculation of EPS, diluted EPS, HEPS and diluted HEPS. For purposes of the NAV per share and Tangible NAV per share, the ESOP Contributions will have no impact on the consolidated Reunert financial position on the Effective Date (assumed for this purpose to be 30 September 2021). 7. For purposes of the calculation of EPS, diluted EPS, HEPS, diluted HEPS, NAV per share and tangible NAV per share, the Transaction Costs are estimated at approximately R9.0 million and have, or will be, expensed in relation to the Proposed BEE Transaction and will result in a reduction of available cash resources. These costs are once-off and have been assumed to be non-deductible for tax purposes. 8. The reduction in interest income, which is mainly due to the reduction in available cash resources as result of the transaction costs incurred and the trickle dividend flowing to the beneficiaries of the Rebatona Trust and the ESOP is not material (less than R1 million) for purposes of calculating the EPS, diluted EPS, HEPS and diluted HEPS. The reduction in interest was calculated using a rate of 4.3%, being the annual average money market rate. This reduction will have a continuing impact and is assumed to reduce taxable income. For purposes of the NAV per share and tangible NAV per share, the reduction of interest income will have no impact on the consolidated Reunert financial position on the Effective Date (assumed for this purpose to be 30 September 2021). 9. The EPS, diluted EPS, HEPS and diluted HEPS "After" the Proposed BEE Transactions are based on the implementation of the Proposed BEE Transaction occurring on 1 October 2020. 10. NAV is calculated as equity attributable to the equity holders of Reunert. NAV per share is calculated as NAV divided by the net number of ordinary shares in issue. The NAV per share “After” is based on the implementation of the Proposed BEE Transaction occurring on 30 September 2021. 11. Tangible NAV is calculated as equity attributable to the equity holders of Reunert less the value of goodwill and other intangible assets. Tangible NAV per share is calculated as tangible NAV divided by the net number of ordinary shares in issue. The tangible NAV per share “After” is based on the implementation of the Proposed BEE Transaction occurring on 30 September 2021. 11. CIRCULAR A circular setting out the full terms and conditions of the Proposed BEE Transaction and including a notice convening a general meeting of Shareholders (“General Meeting”), (“Circular”) will be posted to Shareholders in due course. 12. GENERAL MEETING AND OTHER IMPORTANT INFORMATION The General Meeting is planned for 15 February 2022. Further details relating to the Proposed BEE Transaction and the General Meeting, and the related salient dates and times will be published on SENS in due course. Johannesburg 23 November 2021 Financial Advisor: Investec Bank Limited JSE Equity Sponsor: One Capital Sponsor Services Proprietary Limited Legal Advisor to Reunert: Bowman Gilfillan Inc. Independent Expert: BDO Corporate Finance Proprietary Limited Independent Reporting Accountant and Independent Auditor Deloitte & Touche Date: 23-11-2021 01:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.