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SBK
SBK
Standard Bank - Selection Of Regional Business And Community Groupings As
Participants In The Black Ownership Initiative In Standard Bank
Standard Bank Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1969/017128/06)
Share code: SBK Namibian share code: SNB
ISIN: ZAE000038873
("Standard Bank" or "the Company")
SELECTION OF REGIONAL BUSINESS AND COMMUNITY GROUPINGS AS PARTICIPANTS IN THE
BLACK OWNERSHIP INITIATIVE IN STANDARD BANK
1. INTRODUCTION
On 15 July 2004, Standard Bank announced a transaction involving the
acquisition of an effective 10% interest in its South African banking
operations by a broad-based grouping of black entities ("the black ownership
initiative"). The black ownership initiative participants comprised the
following:
black strategic partners, being Safika Holdings (Proprietary) Limited and
Shanduka Group (Proprietary) Limited, which together acquired approximately
40.2 million shares in the issued ordinary share capital of Standard Bank
("Standard Bank ordinary shares");
trusts formed for the benefit of current, as well as future, black employees
of Standard Bank as defined in the Financial Sector Charter ("the Charter")
("the black employees"), which collectively acquired approximately 40.2
million Standard Bank ordinary shares; and
a trust formed for the benefit of regional business and community groupings
("Tutuwa Community Trust"), which acquired approximately 20.1 million
Standard Bank ordinary shares.
The black ownership initiative was approved by the ordinary shareholders of
Standard Bank in general meeting on 13 September 2004 and implemented on 4
October 2004. While the strategic partners and the black employees received the
participation rights in the entities that own the Standard Bank ordinary shares
immediately following the black ownership initiative becoming unconditional,
the participation rights relating to the Standard Bank ordinary shares due to
the regional business and community groupings were retained in the Tutuwa
Community Trust as such beneficiary groupings had not yet been identified.
Standard Bank wishes to announce that it is now embarking on a process to
identify and select the regional business and community groupings that will be
the beneficiaries of the 20.1 million Standard Bank ordinary shares owned by
the Tutuwa Community Trust. A decision has been made to allocate the
participation rights in the Tutuwa Community Trust in accordance with the
following split:
50% to regional businesses that are owned and controlled by black people (as
defined in the Charter) operating in the small and medium sized enterprises
("SME") sector ("the regional business component"); and
50% to community development groupings whose activities benefit black people
("the community development component").
2. THE TUTUWA COMMUNITY TRUST
The Tutuwa Community Trust effectively owns, through its ownership of all of
the ordinary shares of a company ("CommCo"), 20.1 million Standard Bank
ordinary shares. The trustees of the Tutuwa Community Trust for the time being
are directors of Bowman Gilfillan Inc ("the Trustees"). It is envisaged that
upon the allocation of participating rights to the Tutuwa Community Trust to
the regional business and community groupings the trustees will be
reconstituted and beneficiaries will have the opportunity to participate in the
election of new trustees.
Standard Bank provided the funding to CommCo, by way of preference shares, to
acquire the Standard Bank ordinary shares owned by it and a shareholders"
agreement was entered into between the Tutuwa Community Trust, CommCo and
Standard Bank to govern the relationship between the parties.
2.1 Indicative value and terms of the preference shares
The 20.1 million Standard Bank ordinary shares effectively held by Tutuwa
Community Trust were valued at approximately R1.52 billion based on the
closing share price of Standard Bank on the JSE Limited on 31 December 2005
of R75.81. CommCo received preference funding of approximately R814 million
from Standard Bank to acquire the 20.1 million Standard Bank ordinary
shares at a price of R40.50 per share and, as such, CommCo has a preference
share obligation of approximately R814 million to Standard Bank. The value of
the effective interest owned by Tutuwa Community Trust is therefore estimated
at approximately R710 million. The term of the preference shares is 20 years.
All dividends paid to CommCo in respect of the Standard Bank ordinary shares it
holds, less the costs necessary for the administrative functions of the Tutuwa
Community Trust, are used to pay the preference dividend and to redeem the
preference shares.
2.2 The shareholders" agreement
The Tutuwa Community Trust and CommCo entered into a shareholders" agreement
with Standard Bank, which agreement, read with the articles of association of
CommCo, regulates the relationship between Standard Bank (as preference
shareholder) and the Tutuwa Community Trust (as ordinary shareholder) and,
insofar as possible, ensures the continued compliance by the Tutuwa Community
Trust with the direct ownership requirements of the Charter.
The shareholders" agreement provides that, unless it has Standard Bank"s
consent, the Tutuwa Community Trust will not be entitled to dispose of its
interest in CommCo, and neither it nor CommCo will be entitled to dispose
of the interest in Standard Bank, until the expiry of the lock-in period (which
could be in 2011, depending on when the Charter Council ownership review takes
place, but the final date of which will be midnight on 31 December 2014).
Furthermore, until the end of the lock-in period, the Tutuwa Community Trust
has undertaken that CommCo will remain a "black company", as defined in the
Charter.
It is therefore important that the potential participants in the Tutuwa
Community Trust"s Standard Bank ordinary shares are made aware of the fact that
although they will be allocated the participation rights in the Tutuwa
Community Trust and be able to vote, through the Tutuwa Community Trust, the
underlying Standard Bank ordinary shares in general meetings from the outset,
the Standard Bank ordinary shares will remain locked in CommCo until the
Charter ownership requirements are met, the earliest date that this can occur
being 31 December 2011, if the Charter Council ownership review takes place. In
addition, during this lock-in period the holders of participation rights in the
Tutuwa Community Trust will be required to remain more than 50% owned and
controlled by black people who are citizens of South Africa, as per the
requirements of the Charter.
3. BENEFICIARIES OF THE TUTUWA COMMUNITY TRUST
As outlined in paragraph 1 above, the Tutuwa Community Trust was formed for the
benefit of regional business and community groupings. Participants in the
Tutuwa Community Trust will comprise two groupings that are beneficiaries to
the regional business component and the community development component
respectively.
3.1 Regional business component
The development of entrepreneurial enterprises among black people is critical
for economic development in South Africa and it needs to be supported by both
the public and the private sector. The nurturing of entrepreneurial activity is
one of the key elements that could enhance the creation of sustainable economic
growth in South Africa. In addition, job creation is an issue that is of
national priority for the continued stability of the democratic process in South
Africa. As such, the Trustees and Standard Bank have made a conscious decision
that in the identification and selection of SMEs that will participate as
beneficiaries to the Tutuwa Community Trust, creation of sustainable employment
will be a criteria upon which emphasis is placed, i.e. the SMEs that will be
favourably considered are those that, inter alia, contribute directly to the
alleviation of unemployment on a sustainable basis. In this regard, the primary
qualifying criteria for application will relate to black ownership and to
employment, as set out in the first two bullet points in paragraph 4.1 below.
3.2 Community development component
Standard Bank has for many years followed a black empowerment strategy aimed
at, inter alia, social development programmes that are primarily directed at
developing and empowering previously disadvantaged communities. The Trustees
acknowledge the importance of this strategy and, consequently, the community
development component of the participation rights to the Tutuwa Community Trust
will be supporting this strategy.
4. SELECTION PROCESS - REGIONAL BUSINESS COMPONENT
The Trustees have appointed SizweNtsaluba VSP ("SizweNtsaluba") to assist with
the process of developing a transparent and equitable selection criteria to be
used in the selection of participants for the regional business component.
4.1 Qualifying criteria
It is envisaged that the selection process will target operational SMEs in all
the nine provinces of South Africa on an equitable manner. To this extent, a
provincial equitable share formula developed by the Financial and Fiscal
Commission ("FFC") will be used in the selection process to determine the
number of selected participants in each province relative to the other
provinces. The FFC is a statutory institution that is a permanent expert
commission with a constitutionally defined structure, set of generic
responsibilities and institutional processes, dealing with intergovernmental
fiscal relations in South Africa. Its mission is to act as an independent and
impartial statutory institution, giving advice and making recommendations to
parliament, provincial legislatures, and other relevant authorities or organs
of state, on matters affecting intergovernmental fiscal relations.
As such Standard Bank believes that the FFC formula is a reliable tool that can
be used in carrying out equitable distributions to provinces.
This formula will be used as a base to determine the number of participants in
each province relative to the other provinces. Of the total number of SMEs
selected to participate in the black ownership initiative, the table below
shows the approximate percentage allocated to each province in accordance with
this formula.
Province % of total selected participants
Eastern Cape 17%
Free State 7%
Gauteng 16%
KwaZulu Natal 21%
Limpopo 13%
Mpumalanga 7%
Northern Cape 2%
North West 8%
Western Cape 9%
Total 100%
The selection process sets qualifying criteria that the applicant SME needs
to satisfy before it can submit an application for consideration. The SME needs
to:
be more than 50% owned and controlled by black people who are citizens of
South Africa;
have had at least 10 employees on a permanent basis for the duration of 2005
and continue to have at least 10 permanent employees until the date of
application;
have an annual turnover ranging from R500 000 per annum to maximum R20
million per annum in its most recent financial year;
be able to demonstrate that it has conducted business from at least 1
January 2003 until the date of application;
be registered in and conduct business primarily in South Africa;
if it is not incorporated, be prepared to incorporate within a period of six
months from the date of being advised that its application is successful; and
be a taxpayer in good standing with the South African Revenue Service.
In determining the above criteria, it is the intention of the Trustees, in
consultation with Standard Bank, that the applicant SME should have a
sustainable business model, given that the benefits of the black ownership
initiative will only be available to the selected participants in the long term.
Those SMEs that are appointed as beneficiaries of the Tutuwa Community Trust
will be subject to the terms of the trust deed, which requires, inter alia, that
beneficiaries remain black owned and continue to conduct business until the
expiry of the loan and lock-in period referred to in paragraph 2.2 above.
4.2 Application process
SMEs that meet the above qualifying criteria and are interested in being
considered for participation in the black ownership initiative should collect
applications forms from their nearest Standard Bank branch, the Tutuwa web page
on the Standard Bank website (www.standardbank.co.za), by sending an e-mail to
the following e-mail address: tutuwa@sizwentsaluba.co.za, or by contacting the
Tutuwa Call Centre on 0861 TUTUWA (0861 88 88 92). The process is open to any
qualifying SME, as the applicants do not need to be clients of Standard Bank.
The application form will contain detailed instructions on the application
process and the rules of participation.
Applications must be submitted directly to SizweNtsaluba, by hand or by
ordinary or registered post, on or before the close of business (16:00) on 31
March 2006. Applications will not be accepted at any Standard Bank branch.
All qualifying applications received will be assessed by SizweNtsaluba and
receive a score. The unsuccessful applicants will be notified by post, e-mail
or sms.
4.3 Allocation process
The aim is to select a total of approximately 250 SMEs throughout the country
in order to make the interest in the underlying number of Standard Bank
ordinary shares allocated to each entity meaningful to the recipient.
Applications will be assessed on a per province basis, meaning that an
application will only be assessed and compared to other applications from the
same province. The number of successful applicants in each province will be
determined by using the FFC formula referred to in paragraph 4.1 above. For the
avoidance of doubt, an application that meets the qualifying criteria will not
automatically be selected to participate in the Tutuwa Community Trust -
instead, applications that have the highest scores in each province will take
priority. The scoring process has been weighted to encourage SMEs in rural
areas where unemployment is at its highest, and to encourage the participation
of black women in SMEs. Once selected by the Trustees, in consultation with
Standard Bank, each applicant SME will receive the same number of Standard Bank
ordinary shares, irrespective of its total points score.
The outcome of the process will be published in the press on or about 14 June
2006.
5. SELECTION PROCESS - COMMUNITY DEVELOPMENT COMPONENT
The selection process for the community development component is currently
being evaluated by the Trustees in consultation with Standard Bank. An
announcement on this process will follow by June 2006.
6. TIME LINE - REGIONAL BUSINESS COMPONENT
The following is the envisaged time line of the regional business process:
Application process opens at 09:00 on 19 January 2006
Application process closes at 16:00 on 31 March 2006
Final audit of applications begins during the week
commencing on 3 April 2006
The outcome of the process is announced in the press on
or about 14 June 2006
Johannesburg
19 January 2006
Investment bank and joint sponsor
Standard Bank
Legal adviser
Bowman Gilfillan Attorneys
Independent lead sponsor
Deutsche Securities
Independent consultant
SizweNtsaluba VSP
Date: 19/01/2006 08:30:11 AM Produced by the JSE SENS Department
