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PROPOSED SPECIFIC REPURCHASE OF HCI SHARES

1. INTRODUCTION

HCI has concluded an agreement (“Buy-back Agreement”) with the trustees for the time being of The HCI Foundation (“HCI Foundation”) in terms of which HCI will acquire 2,688,000 HCI shares (“HCI Shares”) from the HCI Foundation (“Buy-back Shares”) (HCI and the HCI Foundation together, “the Parties”), subject to the terms and conditions referred to below, at a price of R140.00 per HCI Share (the “Buy-back Price”) (the “Buy-back Transaction”).

2. RATIONALE FOR THE BUY-BACK TRANSACTION

The HCI Foundation has held its interest in the Company since 2006, primarily as an income generating asset to fund its objectives, being to promote the social, education and community development of previously disadvantaged communities. It has done so through its own education and development programmes and through the support of environmental initiatives. HCI’s progressive dividend policy has, however, resulted in the HCI Foundation seeking alternative methods to fund its objectives. The HCI Foundation has indicated to HCI that it would prefer to dispose of its interest in the Company and use the proceeds thereof to, inter alia, reinvest into instruments that provide higher income returns with which it can fund its underlying corporate social development activities.

HCI considers the Buy-back Transaction, at the Buy-back Price of R140.00 per HCI Share, to be an efficient use of HCI’s excess cash and earnings accretive to HCI shareholders.

3. BUY-BACK TRANSACTION

3.1. Terms of the Buy-back Transaction

HCI has agreed to acquire 2,688,000 HCI Shares from the HCI Foundation for R140.00 per HCI Share and an aggregate purchase consideration of R376,320,000, which shall be settled in cash. The Buy-back Price of R140.00 per share represents a discount of:

– 2.75% to the closing price; and
– 1.53% to the 30 day weighted average trading price (“WATP”);

on 30 March 2017, being the day before the Buy-back Agreement was signed.

In terms of the Share-buy Back Agreement, HCI is entitled to nominate by notice in writing to the HCI Foundation, any person or entity to exercise its rights and fulfil its obligations (or any portion thereof). HCI shall therefore be entitled to nominate one or more nominees to purchase all or any portion of the Buy-back Shares, in HCI’s sole discretion.

3.2. Conditions Precedent

The Buy-back Agreement is subject to the fulfilment or waiver (to the extent legally permissible), of the following conditions precedent prior to 31 August 2017 (or such later date as the Parties agree in writing):

– the shareholders of HCI (excluding the HCI Foundation and its associates) adopting a special resolution authorising HCI, by way of a specific authority, to acquire the Buy-back Shares for the Buy-back Price in accordance with paragraph 5.69 of the Listings Requirements of the JSE (the “Listings Requirements”);

– the JSE granting the requisite approvals in respect of the acquisition by the Company (or its nominee) of the Buy-back Shares, to the extent required in terms of the Listings Requirements;

– the Company’s funders unconditionally approving the terms of the Buy-back Agreement, in accordance with the relevant funding documents, or approving of the terms of the Buy-back Agreement subject to such conditions as are acceptable to the Company;

– the board of directors of the Company adopts the requisite resolutions in accordance with sections 46 and 48 of the Companies Act and the Listings Requirements:

o approving the purchase of the Buy-back Shares in terms of the Buy-backAgreement;

o acknowledging that it has applied the solvency and liquidity test and reasonably concluded that the Company will satisfy the solvency and liquidity test immediately after payment of the Buy-back Price;

o providing that the Buy-back Price will not be applied in reduction of the contributed tax capital of the Company;

– to the extent that the Company nominates a third party to acquire all or a portion of the Buy-back Shares, then the board of directors of such nominee adopts the requisite resolutions
in accordance with the Companies Act and the JSE Listings Requirements (if applicable) approving the purchase of the Buy-back Shares in terms of the Buy-back Agreement;
– the trustees of the HCI Foundation adopting the requisite resolutions approving of the terms of the Buy-back Agreement in accordance with the trust deed of the HCI Foundation.

3.3. Effective Date of the Buy-back Transaction

The acquisition of the Buy-back Shares and the payment of the Buy-back Price in terms of the Buy-back Transaction will take place on the fifth business day after the fulfilment (or waiver in
writing, to the extent legally permissible) of the last of the conditions precedent referred to above, provided that if such date falls within a prohibited period in terms of the Listings
Requirements, the effective date shall be the fifth business day after the end of such prohibited
period (“Effective Date”).

If the Company repurchases the Buy-back Shares and does not nominate another person or entity to purchase such shares, then such repurchased HCI Shares will be cancelled and will revert to authorised but unissued share capital of HCI and their listing terminated on or, as soon as possible after, the Effective Date.

After the Buy-back Transaction, HCI will hold 4,137,994 HCI shares in treasury.

4. FINANCIAL EFFECTS

If HCI repurchases all of the Buy-back Shares, the impact of the Buy-back Transaction on HCI’s financial information will be to decrease cash and cash equivalents by R376,320,000 and reduce
equity by the same amount. The number of HCI Shares in issue will decrease by 2,688,000.

5. FURTHER ANNOUNCEMENTS

A circular, including a notice of general meeting, detailing the terms of the Buy-back Transaction and actions required by shareholders will be posted to shareholders on or about 2 May 2017. It is expected that the general meeting will be held on or about 31 May 2017.

Cape Town

3 April 2017

Sponsor
Investec Bank Limited