Legal Shield and Herboths Transactions Conduit Capital Limited - - PowerPoint PPT Presentation

Legal Shield and Herboths Transactions

Conduit Capital Limited

Conduit Capital and Constantia Insurance Group entered into two material transactions Herboths Transaction Constantia acquired a property asset in exchange for new shares in Constantia The property is a mixed use development independently valued at ~R1 billion¹ Constantia’s assets increase by ~R1 billion, the seller will own 32.9% of Constantia Recapitalizes Constantia for growth Acquisition of Legal Shield Holdings Conduit will acquire Legal Shield Holdings for R10.4 billion through a reverse listing into Conduit through the issue of new shares Legal Shield shareholder will own 87.3%² of Conduit as the majority shareholder After closing, Conduit will be part of a diversified financial services business with ~R7.5 billion in assets and ~R2.2 billion in equity

Introduction

• 1. Independent valuation performed on behalf Conduit Capital and Constantia
• 2. On the basis all Conduit shareholders take up their rights in terms of the transaction

Acquisition of Herboths

Herboths Transaction Mechanics

Legal Shield Holdings Constantia Insurance Herboths Blick Herboths Blick Herboths Blick Legal Shield Shareholders

32.9% 100% 100%

STEP 1 STEP 3 STEP 2

Benefits of Herboths for Constantia

Constantia Insurance Company’s SCR improves well above the regulatory minimum of 1x

• n completion of the transaction to an estimated 1.82x

Access to capital and resources allows Constantia to consolidate its existing business, grow premium volume, and pursue organic and inorganic growth opportunities

Above financial information has not been reviewed by our auditors

Date SCR as reported Inclusion of Herboths 31 Dec ’19 0.59 1.82

Acquisition of Legal Shield

Legal Shield Acquisition Mechanics

• 1. On the basis all Conduit shareholders take up their rights in terms of the transaction
• 2. Share nomination explained in more detail on next slide

Legal Shield Holdings Legal Shield Shareholders Conduit Capital Conduit Capital Existing Conduit Capital Existing Shareholders Conduit Capital & Legal Shield Holdings

96.5% 9.1%

STEP 1 FINAL OUTCOME STEP 2

100% 12.7%1 87.3%1 Share nomination2

Legal Shield Shareholders

Mechanics & Share Nomination

Conduit will issue 20,874,968,400 shares to Legal Shield at 50 cents per share to the value

• f R10.4 billion (the acquisition price of Legal Shield)

Legal Shield shareholders will nominate 1,974,463,276 of these shares to existing Conduit shareholders in order to preserve value for Conduit The deemed price of the nominated shares to Conduit shareholders is 87 cents per share, the 30-day VWAP less 10% up to 6 December 2019, the day before the first deal was announced (the nomination will be at zero cents) Conduit shareholders stand to benefit to the amount of R1,7 billion in addition to the value of their existing shareholding in Conduit The nomination is believed to be non-taxable but shareholders are advised to seek their

• wn independent tax advice

This deal replaces the deal announced on SENS on 9 December 2019

Mechanics & Share Nomination

Conduit Shareholding Shares % Market Value Conduit Shareholders 764,433,900 382,216,950 Acquisition of LSH LSH Shareholders 20,874,968,400 96.5% 10,437,484,200 Conduit Shareholders 764,433,900 3.5% 382,216,950 Total 21,639,402,300 10,819,701,150 Share Nomination LSH Shareholders 18,900,505,124 87.3% 9,450,252,562 Nominated Conduit Shareholders* 1,974,463,276 9.1% 987,231,638 Conduit Shareholders 764,433,900 3.5% 382,216,950 Total 21,639,402,300 10,819,701,150

* Value at nominated R0.87c per share is 1 717 783 050

Why?

Constantia’s assets, equity and solvency capital increases substantially to support next phase of growth Legal Shield is a diversified financial services business with access to capital, established insurance operations and an exceptional record of value creation Combination allows each business to scale more quickly under the leadership of the Legal Shield team and is expected to create more value than each company on its own path Access to capital and resources allows Constantia to consolidate its existing business, grow premium volume significantly, and pursue new organic and inorganic growth opportunities There are opportunities for the businesses to leverage each other’s skills, assets, and mutually beneficial growth opportunities

Acquisition of Herboths

Farm Herboths Development

Source: Trustco Group Holdings 2019 Integrated Annual Report

Herboths Development

Herboths Blick Township measures 2,766 hectares Herboths is situated 21 kilometres east of Windhoek and contains 1,660 hectares of sellable land earmarked for future development Herboths has been zoned for township development Future revenue from this project is estimated at R28.7 billion¹ The development is similar to Waterfall in Midrand, South Africa - mixed use small city

• 1. Trustco Integrated Annual Report 2019

Farm Herboths Development

Source: Trustco Property Brochure

Acquisition of Legal Shield

Legal Shield Holdings

Legal Shield Holdings is a subsidiary of the Trustco Group and the holding company of a diversified set of financial services businesses Legal Shield Holdings owns Trustco Life and Trustco Insurance, Trustco Bank, Institute of Open Learning (“IoL”), Trustco Finance, Trustco Capital and Trustco Properties Trustco Properties is the largest private land developer in Namibia and has generated over R2.8 billion in revenues and R2.1 billion in profits excluding fair value gains¹ Trustco Bank is one of only two domestic Namibian banks Trustco Finance and IoL are the largest private distance learnings institutions in Namibia Trustco Life and Trustco Insurance are two of the largest insurers in Namibia²

• 1. Extracted from Trustco audited financial statements and internal analysis
• 2. By policyholder numbers

More on Legal Shield

For further detail on Legal Shield Holdings and its subsidiaries please consult Volume 2 and Volume 4 of the Trustco 2019 Integrated Annual Report at the following link: https://www.tgh.na/iar-2019-financial/

Conclusion

The transactions directly increases Constantia’s capital by ~R1 billion and indirectly ensures that Constantia becomes part of a diversified financial services company with ~R7.5 billion in assets and ~R2.2 billion in equity Trustco Group Holdings, the major shareholder of Legal Shield, becomes the major shareholder and long-term partner of Conduit and Constantia Constantia’s investment portfolio is diversified ensuring long-term sustainable access to capital The merger with Legal Shield allows Conduit to continue on its growth path under the leadership of entrepreneurial and highly successful business-minded owners

Appendix

Legal Shield Existing Property Developments

Source: Trustco Group Holdings 2019 Integrated Annual Report

Trustco Properties Existing Developments¹

Lafrenz: Acquired for R1 per square metre Selling for R1,850 per square metre Cumulative sales –R1.1 billion Cumulative profits – R549 million (excl. fair value gains) Percent completed – 28% Elisenheim: Acquired for R29 per square metre Selling for R1,650 per square metre Cumulative sales – R1.7 billion Cumulative profits – R446 million (excl. fair value gains) Percent completed – 10%

• 1. Trustco Integrated Annual Reports

Trustco Properties Existing Developments

The Lafrenz development is on the northern

• utskirts
• f

Windhoek, approximately seven kilometers from the city centre. The industrial development is a natural westward expansion of the already established Lafrenz industrial area, consisting

• f

two recently established townships named Lafrenz Extensions 2 and 3

Source: Trustco 2019 Integrated Annual Report Volume 2

Trustco Properties Existing Developments

Source: Trustco presentation

Trustco Properties Existing Developments

The Elisenheim Estate has an estimated 1,090 households accommodated,

• r

approximately 3,815 residents. Ultimately this development will be home to over 4,000 households.

Source: Trustco 2019 Integrated Annual Report Volume 2

Trustco Properties Existing Developments

Source: Trustco presentation

Trustco Properties Existing Developments

Source: Trustco presentation

Trustco Bank

Trustco Bank is one of only two domestic banks in Namibia Trustco Bank has a capital adequacy of 70% compared to the regulatory minimum of 15% The bank offers mortgage loans, SME financing, personal loans and transaction accounts

Source: Trustco Integrated Annual Report 2019

Trustco Insurance

Trustco Life and Trustco Insurance are two of the largest insurers in Namibia with over 282,000 insured members Provide life insurance, legal insurance, credit life insurance, funeral cover, disability cover, medical cover and loss of income insurance The combined ratio is an average of 68% over the last six years Return on equity is 30%

Source: Trustco Integrated Annual Reports

Trustco Finance and IoL

Trustco Finance and Institute of Open Learning are the largest private distance learning institutions in Namibia Trustco Finance provides loans to IoL students for tuition and study equipment More than 80% of loans qualify for payroll deduction Extremely low bad debts and attractive net interest margin Current loan book of N$550 million with capacity to grow to N$1 billion

Source: Trustco Integrated Annual Reports

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