| Tue 30 Nov 2004, 9:00 | | Cautionary announcement relating to a broad-based |
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Coronation - Cautionary announcement relating to a broad-based BEE staff
transaction
Coronation Fund Managers Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1973/009318/06)
ISIN: ZAE000047353
JSE Share code: CML
(`Coronation` or `the Company`)
Cautionary announcement relating to a broad-based BEE staff transaction
Introduction
Further to the cautionary announcements dated 27 July 2004, 6 September 2004, 18
October 2004 and 16 November 2004, Coronation shareholders are advised that the
Company intends to conclude an agreement in terms of which the Imvula Trust
(`the Trust`) will acquire 10% of Coronation`s business in a transaction valued
at approximately R153 million (`the Transaction`). This represents, by value,
12% of Coronation`s South African operations.
Imvula Trust will acquire shares in the holding company of Coronation`s South
African and International operating subsidiaries, Coronation Investment
Management (Proprietary) Limited (`CIM`), which is wholly owned by Coronation.
The purchase consideration will be externally financed by the Trust and will be
distributed to Coronation shareholders, when possible.
The Transaction signifies an important milestone in the ongoing development and
transformation of the Company, greatly enhancing its growth prospects for the
benefit of shareholders, business partners and staff.
The Transaction will achieve 10% clear, unconditional black direct ownership in,
and corresponding control of, the entire business from the outset. The black
stakeholders will have full voting rights, through the Trustees, on the shares
they acquire and are represented at Coronation executive management level. These
black stakeholders will participate fully in dividend flows from the effective
date and these dividends will partly be utilised to service and redeem the third
party funding.
The Imvula Trust
The broad-based beneficiaries of the Trust constitute all current, and
potentially future, full-time black staff employed by Coronation. The current
beneficiary representatives are Alan Herman, Kagisho Mahura, Hugo Nelson, Sunil
Shah and Kirshni Totaram, who are members of Coronation`s executive management
and/or are senior investment professionals. These individuals will be directors
of Imvula Empowerment Company. At the date of this announcement, full-time black
staff members constitute a total of 51 individuals (44% of the total staff
complement) of whom 55% are black females and 45% black males. `Imvula` means
`rain` and is a symbol of prosperity.
Rationale for the transaction
As one of South Africa`s most successful and innovative fund management
companies, Coronation`s aim is to ensure that broad-based black economic
empowerment (`BEE`) and transformation provide benefits to its business, its
people and the economy. Black participation in the decision making and economic
success of the Company is therefore vital to the future of the business.
The Imvula Trust represents a partnership comprising individuals who are core to
Coronation and who will increasingly shape the future of the business. The
Transaction allows for active, sustainable and meaningful economic participation
in Coronation`s business activities, management and strategic direction.
The Trust will assist in championing transformation within Coronation,
specifically with regard to employment equity, affirmative procurement and in
attracting and retaining high quality black professionals.
Coronation`s approach to BEE
Coronation attributes its success to the strength and diversity of its people.
Our approach to transformation is founded in the knowledge that our people are
our greatest asset. This is clearly reflected in our active pursuit of broad-
based BEE.
A dedicated team comprising senior representatives from across the business is
tasked with the ongoing development and implementation of a sustainable BEE
strategy. Using the Financial Sector Charter as a guideline, our emphasis is
placed in the following key areas:
Employment equity
We follow a strict recruitment and selection process to ensure that our staff
composition, at all levels, reflects the demographics of South Africa. Emphasis
is placed on the recruitment, training and retention of talented professionals.
Our steady progress in this regard is reflected in the number of black people
integral to the success of our business. Executive management black
representation is currently 27% and more than one third of our investment team
is black.
Skills development
To increase the number of black professionals and secure a bright future for the
industry, we believe that effective skills transfer and individual skills
development are vital. Each company`s challenge is to build capacity from within
and not rely on the recruitment of the limited black investment professionals
available. This will enhance the national skills level.
Procurement
Coronation`s procurement policy strongly reflects BEE as the central criterion
as we believe that preferential procurement is where transformation will have
the greatest impact; providing real opportunity for the redistribution of
wealth. By exerting influence on our suppliers to enhance their BEE credentials,
and they in turn on their suppliers, we create a cycle of enhanced economic
activity and wealth creation. This process is gaining momentum and is on course
to achieving true redistribution of wealth in a sustainable and developmental
manner. Coronation is committed to raising the percentage of procurement from
BEE accredited companies. In support of this, we conduct regular audits of
existing and potential supplier credentials.
Enterprise development
Since 1993, Coronation has been instrumental in developing a number of new
corporate initiatives which have contributed to the transformation and
development of skills in the South African asset management industry. Our most
notable successes are the establishment and development of the investment
management and unit trust companies of African Harvest during its initial years;
the establishment of Namibia Asset Management (Pty) Limited and Namibia Unit
Trust Managers Limited in 1997; and, in early 2002, the formation of a
partnership with Kagiso Trust Investments, with the establishment of the
quantitative investment management company, Kagiso Asset Management.
Corporate social investment
At Coronation, social investment is more than just making donations to needy
causes. It is about empowering individuals and uplifting communities by
establishing sustainable projects which will result in meaningful community and
national economic upliftment.
Historically, our corporate social investment programmes have focused on
developing human and intellectual capital. We have however identified that by
channelling a greater proportion of our funding to the development of
entrepreneurship across the communities of South Africa, we believe we can make
a meaningful and leveraged difference. In mid-2004, Coronation partnered with
the South African Institute for Entrepreneurship to develop an entrepreneurial
training module, Coronation`s Growing Entrepreneurs Programme, to impart the
necessary skills that will create much needed jobs and assist in further
alleviating poverty.
The transaction
The Transaction will involve the creation of Imvula Empowerment Company, a
company wholly-owned by the Trust, which will issue preference shares to third
party financiers to raise R153 million. Imvula Empowerment Company will advance
these funds to the Trust, which will acquire 10% of CIM`s ordinary share
capital. The acquisition consideration of R153 million corresponds to a
Coronation listed share price of 400 cents per share.
The Trust`s board of Trustees, who will be black and independent in the
majority, will nominate beneficiaries who will have a vested interest in the
underlying shares held by the Trust. The final selection of, and allocations to,
the beneficiaries of the Trust will be determined by the Trust`s board of
independent black trustees, based on recommendations from Coronation`s board of
directors.
Coronation will have an option to purchase the CIM shares from the Trust, to be
settled by way of newly issued Coronation shares of corresponding value, subject
to the approval of shareholders. This option may be exercised at the end of 10
years from the effective date of the Transaction, or on earlier redemption of
the preference share funding of Imvula Empowerment Company, at which time the
beneficiaries would receive a distribution of Coronation shares from the Trust.
The Transaction is conditional on the completion of all relevant agreements, the
securing of funding and the approvals of relevant regulatory authorities. The
Transaction is expected to become effective before the end of 2004.
A further announcement will be published once third party funding arrangements
are finalised. Such announcement will provide further details of the
Transaction, including the financial effects and expected economic cost of the
Transaction, which cost is anticipated to be comparable to BEE transactions
announced to date in the financial services sector.
Information on CIM
CIM is a wholly-owned subsidiary of Coronation Fund Managers Ltd and is the
holding company of the operating businesses, Coronation Asset Management
(Proprietary) Limited, Coronation Management Company Limited, Coronation Life
Assurance Company Limited, and the international businesses Coronation Fund
Managers (Ireland) Limited and Coronation International Limited.
Shareholders are referred to the paid ad to be published tomorrow for a
diagrammatic representation of the transaction structure once the Transaction is
effective.
Further cautionary announcement
Shareholders are advised to continue exercising caution when dealing in the
Company`s securities until the publication of the announcement referred to
above.
Gavan Ryan Thys du Toit Derek McDonald
Chairman Chief Executive Officer Company Secretary
Cape Town
30 November 2004
Sponsor
Deutsche Securities (SA) (Pty) Ltd
Date: 30/11/2004 07:00:14 AM
Produced by the JSE SENS Department
