SENS – EPE CAPITAL PARTNERS LTD – unaudited interim results for the six months ended 31 December 2018

UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2018

INTRODUCTION
EPE Capital Partners Ltd is an investment holding company, registered and incorporated in Mauritius as a public company.  It is listed on the Johannesburg Stock Exchange (“JSE”) and offers shareholders long-term capital appreciation by making commitments and investments into Funds or Direct Investments that are managed by Ethos Private Equity (Pty) Limited (“Ethos”), providing the Company with largely indirect exposure to a diversified portfolio of unlisted private equity type investments (“Portfolio Companies”). The “Group” refers to the consolidated results of the Company and its subsidiary.

A. INTERIM RESULTS ANNOUNCEMENT

KEY HIGHLIGHTS
– R0.6 billion invested during the period into three new Portfolio Companies, increasing invested capital at 31 December 2018 to R1.3 billion (c.69% of total assets)
– A further two transactions were signed pre 31 December 2018, which, upon completion, will increase invested capital to c.81% of total assets and the underlying exposure to 17 Portfolio Companies
– Group NAVPS increased to R11.16 with total assets at R1.9 billion
– Commitments to Ethos Funds and Direct Investments increased significantly to R3.2 billion

PERFORMANCE REVIEW
Overview
The economic conditions across sub-Saharan Africa have remained mixed in the period since June 2018.

South Africa’s GDP growth has remained muted along with consumer confidence and spending. Whilst there appears to be wide-spread support for the policy initiatives established by Cyril Ramaphosa and the ANC government, there is a recognition that the structural reforms required will take time to bear fruit and positively impact the growth trajectory of the economy.

In contrast, the strong GDP growth rates of some of the other countries in sub-Saharan Africa have provided a strong platform for growth in key sectors of the economy. Enhanced policy certainty has been a key focus for many of these countries, which has resulted in above-average direct foreign investment and corresponding economic growth.

Across its Funds, Ethos has focused on investments in those regions, sectors and companies that have the propensity to benefit from geographic and sector tailwinds.

Despite (or as a result of) the volatility and outlook uncertainty, the number of investable opportunities across the region at reasonable valuations has been significantly higher than average. As one of the few African-based private equity firms with capital to invest, Ethos has assessed a vast number of investment opportunities in the past twelve months. This has resulted in seven transactions across its managed funds totalling R4.1 billion. We believe that investing patiently behind businesses with a sustainable right to win and strong management teams, will deliver long-term value creation for investors. Selecting the right sectors and companies and incentivising and empowering management teams to deliver on the chosen strategy has proven to be a successful strategy for Ethos through many previous cycles. Having the conviction to invest at difficult points in any economic cycle often delivers the best return for investors.

In addition, Ethos has focused much of its efforts on improving the fundamentals of and outlook for its Portfolio Companies and positioning these businesses to benefit from an improved macroeconomic outlook.

Many of the Portfolio Companies have undergone significant financial and operational restructuring in the past year to ensure they are optimally positioned for growth. Some of the Portfolio Companies have undertaken major transformational strategic transactions which have significantly changed their position in their respective markets. The Funds have continued to invest behind value-enhancing strategic projects and follow-on acquisitions to provide the Portfolio Companies with scale and new growth adjacencies.

Three transactions were completed in the period between 30 June and 31 December 2018. Another two transactions have been signed pre December 2018 and are expected to complete in April and May 2019 respectively. Upon completion, Ethos Capital’s invested capital will increase to 81% of the Company’s total assets across 17 portfolio companies. This is a significant milestone for the business and, with a value-weighted average age of the portfolio of only 0.9 years, investors should start to see the benefit of the value-accretive strategies that have been deployed behind the portfolio.

Ethos Mid Market Fund I
Ethos Capital has a R950 million commitment to Ethos Mid Market Fund I (“EMMF I”), which has a committed capital base of R2.5 billion. The Fund has a relatively unique position as a B-BBEE entity and the Fund’s pipeline of transactions continues to be very pleasing.

Since 30 June 2018, EMMF I completed an investment in Gammatek, the largest distributor of mobile device accessories and low-technology consumer products in sub-Saharan Africa, and signed a conditional agreement for a sizeable bolt-on acquisition for Echotel. EMMF I also announced the acquisition of the analytics businesses Wearcheck, Amis and Set Point out of Torre Industries Limited (“Torre”) in November 2018; this acquisition is expected to complete in April 2019. EMMF I’s equity
requirement for the transaction was R235 million, of which Ethos Capital contributed R93 million.

Valuations in the mid market space have remained reasonable and the Fund’s B-BBEE credentials have provided a competitive advantage in sourcing such opportunities.

Ethos Mezzanine Partners Fund 3
The pipeline of opportunities for Ethos Mezzanine Partners Fund 3 (“EMP 3”) remains very strong, with particular application of the mezzanine product to growth opportunities in sub-Saharan Africa for investee companies looking to access growth capital. In August 2018, the Fund made its first investment into Chibuku Products, a FMCG company in Malawi previously owned by SAB Miller. The Fund has a number of potential transactions at an advanced stage of due diligence.

Ethos Fund VI
Ethos Fund VI (“EF VI”) concluded a number of transactions (both new acquisitions and bolt-on investments by the Portfolio Companies) during the period to complete the Fund’s investment programme.

Whilst Ethos Capital’s commitment to Ethos Fund VI is relatively small (US$10m), the Company has added to their exposure by making a number of Direct Investments alongside the Fund, including Primedia and Vertice.

Ethos Healthcare Platform
The Ethos Healthcare Platform (“EHP”) has continued to invest behind the buy-and-build strategy for Vertice, a medical technology (“MedTech”) business that it acquired in May 2018. The Company has acquired two complementary MedTech businesses and is in advanced discussions with other acquisition targets to create a market-leading, scaled supplier of high-end medical devices. Ethos Capital has invested R37 million into the platform to date.

Ethos Fund VII
Ethos Fund VII (“EF VII”) is the successor growth buy-out fund for EF VI (which is now fully invested) and had its first close in October 2018.

The Fund completed its first investment into Channel Vas, an airtime credit service provider with operations and contracts with Mobile Network Operators across 28 countries in Africa. In addition, Ethos Capital participated further in Channel Vas, through its investment into the Ethos Direct Investment Partnership (“EDI”).

EF VII also signed an agreement to acquire an investment (alongside EMMF I) into Echotel, to facilitate the company’s acquisition of Gondwana. Gondwana will provide in country presence and a platform across 9 sub-Saharan African countries, which will provide the business with the scale and service offering to compete successfully in the Corporate ISP space across the continent. This investment is expected to close in May 2019.

Ethos Capital has committed R1.25 billion as a first close investor to EF VII.

Ethos Ai Fund I
The Ethos Ai Fund I (“EAiF I”) has been established as a co-investment vehicle which will invest alongside other Ethos Funds in businesses that will benefit from the adoption and implementation of algorithmic decision making. The Fund had its first close in October 2018 and has invested alongside EF VII in Channel Vas, and alongside the EHP in Vertice.

The Fund is exploring a number of interesting data-driven transactions, some of which are at advanced stages.

Ethos Capital has committed R150 million as a first close investor to EAiF I.

Invested NAV
As at 31 December 2018, Ethos Capital had invested 69% of its net asset value (“NAV”).

In addition, binding conditional agreements for two further transactions have been entered into which will result in 81% of the Company’s NAV having been invested.

Post the completion of these transactions, Ethos Capital will have invested in excess of R1.5 billion across a portfolio of 17 private companies with a combined EBITDA of more than R5 billion (excluding the results of the MTN Group).

Underlying NAV performance
At a Group level, the NAVPS increased to R11.16 as at 31 December 2018.

The underlying growth in the portfolio on a consolidated basis has been relatively muted. This has been driven by the underperformance of a number of assets, including MTN Zahkele Futhi, Eazi Access and Twinsaver – which have offset relatively strong performances from the likes of Primedia, Kevro, Eaton Towers and RTT.

The operating environment in South Africa remains challenging. EBITDA across the portfolio remained relatively flat, with the inflationary impact negating many of the cost-optimisation initiatives undertaken by the Portfolio Companies. Subdued investment and construction activity negatively impacted industrial services companies such as Eazi Access and Waco, which managed to maintain and grow market share, albeit in a shrinking construction sector. Subdued consumer demand and pressure
on retailers had an adverse impact on Twinsaver’s business; however, the acquisitions made by the company over the past two years have continued to perform well.

Strong growth was seen across the Portfolio Companies with exposure to sub-Saharan Africa’s growth markets, including Eaton Towers and Channel Vas. The outlook for these companies remains positive and a number of the acquisition opportunities currently being assessed by the various Funds have strong sub-Saharan African presence and opportunities.

Maximising long-term shareholder returns
The objective of the Board of Ethos Capital is to maximise long-term, sustainable returns for investors. As part of that strategy, the Company repurchased to date a total of 9 000 000 shares, representing 5.0% of the Company’s unencumbered issued A Ordinary Shares. The Board is conscious of the prevailing share price discount to NAV and is assessing opportunities to address the discount and maximise value for shareholders.

By nature, private equity is a long-term investment, requiring long-term thinking and a patient strategy. Ethos Capital remains confident of its ability to generate sustainable, market-leading returns – through the cycle – for its investors.

B. PRESENTATION

Ethos Capital will host a webcast presentation at 10h00 am on Tuesday 26 March 2019 covering the results relating to the six months ended 31 December 2018 and the current outlook.   A copy of the presentation will be available for download on the Company’s website at 

https://ethoscapital.mu/investors1/reports-results/ 

Participants should please register in advance for the webcast by clicking on this link:

https://services.choruscall.eu/links/ethos190326.html

Participants who rather want to join telephonically need to click on this link:

http://www.diamondpass.net/2454008

C. REVIEW OF THE INVESTMENT PORTFOLIO AND RETURNS

Group NAV
At 31 December 2018, the Group increased its NAVPS to R11.16. The Group NAV remained largely unchanged at R1.8 billion, with a further R28 million of share buy-backs completed; these shares are held as treasury shares.

The Group’s unlisted investment portfolio increased significantly from R0.7 billion at 30 June 2018 to R1.3 billion at 31 December 2018, representing 69% of the Group’s total assets. Including transactions that are signed but not yet completed, invested capital constitutes 81% of the Group’s total assets.

An analysis of the movements in the Group’s NAV and NAVPS are detailed below:

The investment portfolio has a value-weighted average hold-period of only 0.9 years with many of the Portfolio Companies in the early stages of their investment period. It is anticipated that growth of the portfolio should increase as the underlying Portfolio Companies start to benefit from the strategic and operational interventions that the management teams are implementing into this relatively “young” portfolio.

Temporary Investments (largely a portfolio of government bonds and liquid NCDs) delivered a net return of 7.1%.

Legal and professional fees of R6.1 million were incurred during the year, predominantly on direct transaction related fees and some Fund establishment fees. Other expenses totalled R5.0 million which included Directors’ emoluments (R2.1 million) and other operating expenses such as audit, listing and administrative costs. The fees payable to Ethos totalled R7.3 million. These include advisory fees on Primary and Direct Investments (R6.7 million), and management fees on Temporary Investments. In addition, R0.7 million was payable to Ashburton Fund Managers Proprietary Limited (“Ashburton”)
for managing the portfolio of Temporary Investments; this was offset against the return on Temporary Investments.

Further details on expenses are provided in note 13 of the Notes to the Condensed Interim Financial Statements.

Investment Portfolio
At 31 December 2018, the investment portfolio and invested capital of the Company consisted of the following Fund and Direct Investments:

(1) Investment in Primedia Group (Proprietary) Ltd
(2) Investment in Kevro Holdings (Proprietary) Limited, held through the Ethos Mid Market Direct Investment Partnership (“EMMF D”)
(3) Investment in Channel Vas Investments Ltd BVI, held through EDI

During a very active first six months of the financial year, the Company invested R0.6 billion into three new underlying Portfolio Companies and participated in further capital calls of existing Funds and Direct Investments.

EMP 3 invested in Chibuku Products, a FMCG company previously owned by SAB Miller and based in Malawi, in August 2018; Ethos Capital’s contribution was R44 million. In October 2018, EMMF I completed its seventh investment, Gammatek, the largest distributor of mobile phone accessories and low-technology components in South Africa. As one of the larger investors in the Fund, Ethos Capital contributed R98 million to this investment.

In addition, Ethos Capital invested a further R24 million into the existing Portfolio Companies of EMMF I and R15 million into EF VI, which included the SoftBev acquisition by The Beverage Company.

The EHP completed a bolt-on acquisition of Haemotec, a complementary business for Vertice in the MedTech space which consolidated its position in this new market. Through its investment in EHP, EF VI and EAiF I, Ethos Capital has to date invested R37 million into the platform.

The largest investment completed during the six-month period, was Channel Vas, an airtime credit service provider with extensive sub-Saharan business. As a first-close investor in EF VII and EAiF I, and through its Direct Investment in EDI, Ethos Capital invested R386 million into this exciting investment opportunity.

Post period-end transactions
An agreement was signed in September 2018 to facilitate the acquisition by Echotel of Gondwana, a pan sub-Saharan African ISP, which will provide Echotel with a broad coverage and product-offering in nine key sub-Saharan countries. Upon completion, which is expected in May 2019, EMMF I and EF VII will invest a combined R270 million (Ethos Capital’s share of invested capital will be R151 million).

In November 2018, it was announced that a consortium, consisting of EMMF I and Apex Partners, has made an offer to acquire and delist Torre. EMMF I is expected to acquire the Torre Analytical Services businesses within the Torre group, including Wearcheck, Set Point and Amis for c.R235 million (Ethos Capital’s contribution will be R93 million).

Including the above two transactions and other further investments into Funds, Ethos Capital’s updated invested capital is over R1.5 billion, c.81% of the Group’s total assets.

Realisations
During the six months to 31 December 2018, the Company received interest and dividend distributions of R8 million, from the underlying investments in Kevro and Primedia.

Underlying Portfolio Companies
The Ethos Funds – making up Ethos Capital’s investment portfolio – invest in a diversified pool of unquoted investments (Portfolio Companies) and provide the Company with largely indirect exposure to the Fund’s underlying investments. At 31 December 2018, the investments, constituting 68.5% of the Group’s total assets, consisted of the following 16 companies:

* Initial acquisition date by Ethos Fund

Portfolio Company contribution and performance
Ethos Capital’s investment portfolio at 31 December 2018 provides exposure to 16 Portfolio Companies that in aggregate (excluding the results of the MTN Group) have sales of over R26 billion and EBITDA of more than R5 billion. The Portfolio Companies span a number of sectors providing diversified portfolio exposure.

Including the acquisitions entered into but not yet completed at 31 December 2018, the contribution of each underlying Portfolio Company and net Temporary Investments to the Company NAV of R1.9 billion is as follows:

* Representing exposure to five smaller Portfolio Companies in EF VI

Commitments
Ethos Capital’s Investment Strategy is to make investment commitments into Funds managed by Ethos, through a combination of Primary, Direct and Secondary Investments, or making commitments to Direct Investments. Ethos Capital made commitments to Ethos Funds during the past six months, thereby almost doubling its commitments by 31 December 2018.

In September 2018, it made respective first close commitments to the core Ethos buy-out Fund, EF VII, of R1.25 billion, and R150 million to EAiF I. In addition, it made a Direct Investment of R100 million into Channel Vas.

At 31 December 2018, the Company’s initial and undrawn commitments respectively, were as follows:

As at 31 December 2018, Ethos Capital had liquid resources of R0.6 billion to meet its outstanding commitments. In addition, the Company has agreed the terms of a four-year revolving credit facility with Rand Merchant Bank (“RMB”) that, if activated, will provide access to c. R0.6 billion of additional resources for the Company.

Share price analysis
Ethos Capital’s share price as at 31 December 2018 was R7.80 which represented a 30% discount to the 31 December 2018 Group NAV. On average over the six-month period, 3.0% of the issued A Ordinary Shares traded per month and the average discount to NAV was c.29%.

As part of its strategy to enhance shareholder value, the Company has continued to repurchase shares which are held in treasury. During the six-months to 31 December 2018, the Company acquired a further 3,600,000 of its shares, bringing the total shares held in treasury to 9,000,000, or 5% of the unencumbered issued A Ordinary shares. The Board will continue to monitor the Company’s share price performance and the discount to NAV and assess ways to optimise long term shareholder
value.

Portfolio Company valuation analysis
The NAV of each Fund is derived from the valuations of the underlying Portfolio Companies which are prepared in accordance with International Private Equity and Venture Capital Guidelines (“IPEV Guidelines”). Valuations are performed quarterly, audited semi-annually and approved by each Fund’s Advisory Boards. The IPEV Guidelines set out best practice where private equity investments are reported on at fair value.

As at 31 December 2018, the Ethos Capital portfolio of investments was valued at a value-weighted average EV/EBITDA multiple of 7.6x. This average EV/EBITDA multiple was at an average discount of 27% compared to the equivalent multiple of the Portfolio Companies’ peer groups. The value-weighted average Net Debt/EBITDA of the portfolio was 1.3x. Including the impact of the post year-end transactions, the EV/EBITDA multiple decreased to 7.5x and the Net Debt/EBITDA multiple
increased to 1.5x.

D. UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS

RESPONSIBILITY
The Board of Directors take full responsibility for the preparation of the unaudited Condensed Interim Financial Statements for the six months ended 31 December 2018 and which were approved by the Board on 25 March 2019.

BASIS OF PREPARATION
These Condensed Interim Financial Statements have been prepared in accordance with and contains the information required by: IAS 34: Interim Financial Reporting; the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee; the Financial Pronouncements as issued by the Financial Reporting Standards Council; the Listings Requirements of the JSE; and the requirements of the Mauritius Companies Act 2001 in so far as applicable to Category 1 Global Business Licensed companies.

The accounting policies applied in the preparation of these Condensed Interim Financial Statements are, where applicable to the prior financial year, consistent in all material respects with those used in the prior financial year and with IFRS.

These Condensed Interim Financial Statements were compiled under the supervision of the Chief Financial Officer, Mr Jean-Pierre van Onselen, CA (SA).

CONDENSED INTERIM FINANCIAL STATEMENTS

CONDENSED STATEMENTS OF FINANCIAL POSITION
AT 31 DECEMBER 2018

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 31 DECEMBER 2018

The above relate to continuing operations as no operations were acquired or discontinued during the period/year.

CONDENSED STATEMENTS OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 31 DECEMBER 2018

CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED 31 DECEMBER 2018

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 DECEMBER 2018

1 General information
EPE Capital Partners Ltd (“Ethos Capital”, or “the Company”, or “the Group”) was registered and incorporated in Mauritius
as a private company on 26 May 2016 under the Mauritian Companies Act 2001, and was converted to a public company on
15 July 2016. The Company is licensed as a Category One Global Business Company by the Financial Services Commission of
Mauritius and is designed to offer shareholders long-term capital appreciation by investing into Funds or Direct
Investments that provide the Group exposure to a diversified portfolio of unlisted private equity type investments.

2 Application of new and revised International Financial Reporting Standards (“IFRS”)
The following new and revised standards and interpretations are relevant to the Group and have been adopted in these Group
(consolidated) and Company Condensed Interim Financial Statements (collectively referred to as “Condensed Interim Financial
Statements”). Their adoption has not had any significant impact on the amounts reported in these Condensed Interim
Financial Statements but may have affected the accounting and disclosure of transactions and arrangements, specifically
IFRS 9 as noted below. These standards are effective for companies with financial year-ends beginning on or after the
effective date as noted for each standard.

Impact of initial application of IFRS 9 Financial Instruments
In the current period, the Group has applied IFRS 9 Financial Instruments (as revised in July 2014) and the related
consequential amendments to other IFRS Standards that are effective for an annual period that begins on or after 1 January 2018.
In accordance with the transition provisions of IFRS 9, the Group has elected not to restate comparative figures.
IFRS 9 introduced new requirements for the classification and measurement of financial assets and details of these new
requirements are described below.

The Company has applied IFRS 9 in accordance with the transition provisions set out in IFRS 9.

(a) Classification and measurement of financial assets
The date of initial application (i.e. the date on which the Group has assessed its existing financial assets in terms of
the requirements of IFRS 9) is 1 July 2018. Accordingly, the Group has applied the requirements of IFRS 9 to instruments
that continue to be recognised as at 1 July 2018 and at this date there were no instruments that had been derecognised.

All recognised financial assets that are within the scope of IFRS 9 are required to be measured subsequently at amortised
cost or fair value on the basis of the entity’s business model for managing the financial assets and the contractual cash
flow characteristics of the financial assets.

Specifically:
– Debt instruments that are held within a business model whose objective is to collect the contractual cash flows,
and that have contractual cash flows that are solely payments of principal and interest on the principal amount
outstanding, are measured subsequently at amortised cost;
– All other debt investments and equity investments are measured subsequently at fair value through profit or loss (“FVTPL”).

The Directors of the Group reviewed and assessed the Group’s existing financial assets as at 1 July 2018 based on the facts
and circumstances that existed at that date and concluded that the initial application of IFRS 9 has had the following
impact on the Group’s financial assets as regards their classification and measurement:

– There is no change in the measurement of the Group’s investments in Fund Limited Partnerships and equity instruments
including equity loans (loans to underlying Portfolio Companies) that are held for trading and do not meet the
contractual cash flows test; those instruments were and continue to be measured at FVTPL. There are no adjustments to the
carrying amount of investments at the date of transition.

However, there were some changes to the presentation of the financial assets in the Condensed Statements of Financial
Position, Condensed Statements of Comprehensive Income and Notes to the Condensed Interim Financial Statements.

On the basis that financial instruments are measured subsequently at fair value through profit and loss, the disclosure in
the Condensed Statements of Financial Position, Condensed Statements of Comprehensive Income and Notes to the Condensed
Interim Financial Statements except as set out above, will not require any changes.

The standards issued but not yet effective for the financial year ending on 30 June 2019 that are relevant to the Group and
not implemented early, are the following:

The Directors anticipate that these amendments will be applied in the Annual and Interim Financial Statements for the
annual periods beginning on or after the respective dates as indicated above. The Directors have not yet assessed the
potential impact of the adoption of these amendments.

3 Significant accounting policies

3.1 Basis of preparation
These Condensed Interim Financial Statements have been prepared in accordance with, and contain the information required
by: IAS 34: Interim Financial Reporting; the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee; the Financial Pronouncements as issued by the Financial Reporting Standards Council; the Listings Requirements
of the JSE; and the requirements of the Mauritius Companies Act 2001 in so far as applicable to Category 1 Global Business
Licensed companies.

The accounting policies applied in the preparation of these Condensed Interim Financial Statements are, where applicable to
the prior financial year, consistent in all material respects with those used in the prior financial year and with IFRS.

The Condensed Interim Financial Statements have been prepared under the historical cost basis except for financial
instruments and investments which are measured at fair value.

The Directors believe the Group has adequate resources to settle its obligations as and when they become due, therefore
these Condensed Interim Financial Statements have been prepared on the going concern basis.

These Condensed Interim Financial Statements were compiled under the supervision of the Chief Financial Officer, Mr Jean-
Pierre van Onselen, CA (SA), and were approved by the Board on 25 March 2019.

3.2 Basis of consolidation
The Group (consolidated) Condensed Interim Financial Statements incorporate the financial statements of the Company and its
subsidiaries.

The Group (consolidated) Condensed Interim Financial Statements incorporate the financial statements of the Company and
entities controlled by the Company. Control is achieved when the Company:
– has power over the entity;
– is exposed, or has rights, to variable returns from its involvement with the entity; and
– has the ability to use its power to affect its returns.

Subsidiaries are entities, including unincorporated entities, controlled by the Group. The Group controls an entity when it
has power over and is exposed to, or has rights to, variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity. The financial statements of subsidiaries are
consolidated from the date on which the Group acquires control, up to the date that control ceases.

When the Company has less than a majority of the voting rights of a subsidiary, it has power over the subsidiary when the
voting rights are sufficient to give it the practical ability to direct the relevant activities of the subsidiary
unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company’s voting
rights in a subsidiary are sufficient to give it power, including:
– the size of the Company’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;
– potential voting rights held by the Company, other vote holders or other parties;
– rights arising from other contractual arrangements; and
– any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to
direct the relevant activities at the time that decisions need to be made, including voting patterns at previous
shareholders’ meetings.

Profit or loss and each component of other comprehensive income are attributed to the owners of the Group and to the non-
controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Group and to the non-
controlling interests even if this results in the non-controlling interests having a deficit balance.
There were no intercompany transactions and/or balances between the group companies that otherwise needed to be eliminated
on consolidation.

3.3 Critical judgement and accounting estimates: valuation of investments
The basis of valuation of all investments is fair value. Fair value is determined as of the end of each quarter. All
investments are valued in accordance with IFRS and the International Private Equity and Venture Capital (“IPEV”) Valuation
Guidelines.

As stated above, the Group’s investments mainly comprise drawn commitments into Funds, which in turn invests in Portfolio
Companies in which the Group has an indirect interest.

The General Partners of these Funds provide quarterly NAV statements as calculated from the Investment Advisor’s
valuations, which the Directors of the Group use to determine the fair value of a Fund. The Investment Advisor’s valuations
as prepared in December, are audited annually by its auditor and, its valuations as prepared in June, are audited by the
Group’s auditor.

The Investment Advisor determines the individual fair value of each Fund’s underlying Portfolio Companies and the Fund’s
NAV at the end of each quarter and the June and December valuations and NAV are approved by its Board of Advisors. The
policy of the Investment Advisor to determine the fair value of the Portfolio Companies, which is in accordance with the
IPEV Valuation Guidelines, is noted below.

Initially, and for a limited period after the acquisition date of an investment, the “Price of Recent Investment” method is
generally used. At each reporting date after the initial acquisition date, an assessment is made as to whether subsequent
changes or events necessitate a change in the fair value of the investment. If so, an “Earnings multiple” methodology is
generally applied, although other methods are available and might be considered more appropriate.

In terms of the ‘Earnings multiple’ method, an appropriate and reasonable valuation multiple is applied to the maintainable
earnings of the investment. For each investment an “Earnings before interest tax depreciation and amortisation” (“EBITDA”) or
an “Earnings before interest after tax” (“EBIAT”) multiple is generally considered appropriate to determine the enterprise
value for the investment. In deriving a reasonable valuation multiple, the Investment Manager develops a benchmark
multiple, generally with reference to the multiples of comparable publicly traded companies adjusted for finance costs
(i.e. multiples have been de-geared). The benchmark multiple is further adjusted for points of difference relating to risk
profile (geographic, operational, financial, liquidity factors, and growth prospects).

Maintainable earnings are typically based on historical earnings figures that are considered to be appropriate and
relevant. Once an enterprise value has been determined, it is adjusted for surplus assets, excess liabilities, and
financial instruments ranking ahead of the Fund’s investments. The resultant attributable enterprise value is then
apportioned to all investors, included in the Fund’s investments, based on their respective participation in each
underlying security of the Portfolio Company.

Although best judgement is used in determining the fair value of these investments, there are inherent limitations in any
valuation technique involving securities of the type in which the Funds invests. Therefore, the fair values presented
herein may not be indicative of the amount the Funds could realise in a current transaction.

3.4 Net asset value per share
The Group calculates and presents the Group and Company’s NAV per share (“NAVPS”), which is not required in terms of IFRS
or the JSE Listings Requirements. The Board is of the view that given the nature of the Group’s business, the sustainability
of the NAV and NAVPS, and the growth thereon over a longer period of time is considered the most appropriate measurement of
the Group’s financial performance.

In calculating the NAVPS, the Group and Company’s NAV, as presented on the Statements of Financial Position, is divided by
the number of shares as disclosed in note 15.2. For the purposes of the NAVPS calculation, the number of shares issued is
calculated as the number of shares in issue at the end of the period/year less treasury shares and less the notionally
encumbered shares.

4 Restatement
The auditors assessed that Black Hawk Private Equity (Proprietary) Limited (“Black Hawk”) is, in accordance with IFRS10,
under the control of the Company and that it should be treated as a subsidiary of the Company and thereby Group
(consolidated) financial statements need to be prepared. This assessment was only made in the June 2018 financial year,
resulting in the restatement of the 31 December 2017 Group comparative numbers as none were previously prepared. The
30 June 2018 comparative numbers have previously been restated. The Company’s potential exposure in respect of the guarantee
provided is already recognised as a contingent liability in the Condensed Interim Financial Statements and its comparative
numbers are therefore unchanged.

Careful consideration should be given to the above treatment and disclosure as it does not reflect the true commercial
exposure and potential loss of the Company if a mandatory repayment is triggered under the RMB facility. As is envisaged by
the legal arrangements between the Company and Black Hawk, upon a mandatory repayment event or the maturity of the
facility, the secured shares will most likely be sold with the proceeds used to repay the facility with no upside to the
Company; any shortfall will have to be funded by the Company which will result in a loss to it, and hence it is unlikely
that this transaction can enhance the Company’s NAVPS.

Further details in respect of the restatement are provided in note 4 of the Notes to the Annual Financial Statements as at
30 June 2018.

The impact of the restatement on the respective statements as at 31 December 2017 is detailed below:

4.1 Restatement impact on Group Statements of Financial Position

4.2 Restatement impact on Group Statements of Comprehensive Income

4.3 Restatement impact on Group Statements of Cash flows

5 Unlisted investments at fair value

The Group obtains exposure to and has indirect interests in a diversified pool of unquoted investments (“Portfolio Companies”)
by investing into Fund Limited Partnerships (“Funds”), managed by Ethos Private Equity (Pty) Limited (“Ethos”), that typically
have a ten-year life-cycle. The Group becomes a Limited Partner of the Fund and the investments are made through commitments into
the Funds. Alternatively, the Group can also make direct commitments to invest into Portfolio Companies alongside the Funds.

At 31 December 2018, the Group had the following investments:

(1) Ethos Mid Market Fund I (B) Partnership
(2) Ethos Fund VII (B) Partnership
(3) Ethos Mid Market Direct Investment Partnership
(4) Ethos Fund VI (Jersey) LP
(5) Ethos Direct Investment Partnership
(6) Ethos Ai Fund I (B) Partnership
(7) Ethos Mezzanine Partners 3 (B) Partnership
(8) Ethos Healthcare (A) Partnership

At 31 December 2018, the underlying investments of the above Funds (Portfolio Companies) constituting 68.5% of the total
assets consisted of the following 16 unlisted companies:

Further details on the investment portfolio and the underlying Portfolio Companies are provided in the ‘Performance Review’
section on page 4 of the Interim Report as at 31 December 2018.

6 Money market investments at fair value

The money market investments, or Temporary Investments, are managed by Ashburton Fund Managers Proprietary Limited (“Ashburton”)
under a discretionary investment management agreement dated 28 July 2016. These investments are currently invested in money market
instruments that consist of a combination of floating rate notes, negotiable certificates of deposit (“NCD”) and treasury bills.

At 31 December 2018, the following range of interest rates was applicable to the respective categories of money market instruments,
from which the accrued income at 31 December 2018 was derived:

7 Issued capital

During the period, the Company purchased 3,600,000 of its A Ordinary shares at an average price of R7.80 per share. These
shares are currently held in treasury. As set out in note 4 of the Notes to the Annual Financial Statements as at 30 June
2018, the 13.5 million secured shares that are legally owned by Black Hawk and pledged as security are treated as treasury
shares of the Group at their par value of R10 per share.

8 Borrowings

The Group has exposure to RMB via a R105 million five year non-recourse loan facility (plus any outstanding interest
thereon) issued by RMB to Black Hawk, expiring on 29 July 2021. The above amount represents the current outstanding balance
on the facility, including any accrued interest charges to 31 December 2018. Interest currently accrues at a rate that is
based on JIBAR plus a 1% margin, and the interest is intended to be rolled-up and settled with the capital amount
outstanding upon the maturity of the loan or an earlier repayment event.

9 Other financial liabilities

The Group has loan amounts repayable to the two Black Hawk shareholders of R15,000,000 each, which were used to acquire
some of the secured shares pledged in favour of the Company in respect of the guarantee provided to RMB. Any unrealised or
realised losses incurred by the Group, up to an amount of R30,000,000 representing the par value of above loans, are
recoverable and is therefore charged against the loans payable and treated as a reimbursement of losses suffered by the
Group in the Group Statement of Comprehensive Income.

10 Changes in fair value of investments through profit and loss

11 Investment income

12 Net fair value losses

13 Profit before tax

Profit before tax has been arrived at after charging:

13.1 Investment-related fees

14 Capital commitments and contingent liabilities

Capital commitments

(1) First close commitment of R1.25 billion to Ethos Fund VII (B) Partnership on 1 October 2018
(2) Final commitment of R950 million to Ethos Mid Market Fund I (B) Partnership on 7 June 2018
(3) First close commitment of R250 million to Ethos Mezzanine Partners 3 (B) Partnership on 16 May 2018
(4) First close commitment of R150 million to Ethos Ai Fund I (B) Partnership on 1 October 2018
(5) Commitment of $10 million (R138 million) to Ethos Fund VI (Jersey) LP on 18 November 2016
(6) Final commitment of R100 million to Ethos Direct Investment Partnership on 2 October 2018
(7) R171 million commitment to invest in Primedia Holdings Pty Ltd on 20 September 2017
(8) R38 million commitment to Ethos Healthcare (A) Partnership; first commitment made on 16 May 2018

As detailed in note 4 of the Notes to the Annual Financial Statements as at 30 June 2018, the Company has provided a
guarantee against a R105 million five year non-recourse loan facility (plus any outstanding interest thereon) issued by RMB
to Black Hawk, expiring on 29 July 2021. The above amount represents the current outstanding balance on the facility,
including any accrued interest charges to 31 December 2018. Interest currently accrues at a rate that is based on JIBAR
plus a 1% margin, and the interest is intended to be rolled-up and settled with the capital amount outstanding upon the
maturity of the loan or an earlier repayment event.

As security against the above guarantee, Black Hawk has pledged 13.5 million shares in favour of the Company, which was
valued at R105,300,000 at 31 December 2018. In the event that a mandatory repayment under the RMB facility was triggered at
30 June 2018, an implied shortfall would have resulted in a loss to the Company of R22,573,000 a decrease in the NAVPS of
13.0 cents. The guarantee has been recognised as a contingent liability in the Condensed Interim Financial Statements of
the Company and the above implied contingent loss has not been recognised in the Condensed Interim Financial Statements of
the Company.

15 Earnings and net asset value per share
As reflected in note 7, the Company issued 187,500,000 A Ordinary shares, 7,500,000 of which were issued to the EPE Trust
and are currently notionally encumbered. Until these shares are released from their encumbrance (through the notional
performance participation), the Company has an irrevocable right and option to acquire the notionally encumbered A Ordinary
shares at a repurchase price of R0.01 per share, being each share’s fair value, and then to apply for the delisting of such
shares acquired. The holders of these shares are therefore restricted from selling the shares to any party other than the
Company and obtaining or sharing in any economic benefit derived from the shares, until they are released from their
encumbrance.

Given the restrictions the encumbered shares place on the holder and the probability of the shares being delisted unless
certain contingent conditions are met, they are excluded from the calculations to determine the earnings, headline earnings
and net asset value per share respectively. The calculations below therefore reflect the earnings, headline earnings and
net asset value attributable to the unrestricted A ordinary shareholders.

15.1 Earnings and headline earnings per share

15.2 Basic Net Asset Value per share

16 Financial risk factors and instruments

16.1 Overview
This note presents information about the Group’s exposure to each of the below mentioned risks, the Group’s objectives,
policies and processes for measuring and managing risk and the Group’s management of capital.

The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management
framework. The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to
set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems
are reviewed regularly to reflect changes in market conditions and the products offered.

Through the Group’s activities, it is exposed to a variety of risks that could result in changes to the net asset value or
its performance.

The main risks the Group is exposed to which could result in changes to the net asset value or its performance are: capital
risk; valuation risk; market risk (comprising currency risk, interest rate risk and equity price risk); credit risk; and
liquidity risk.

These risks are detailed in note 26 of the Notes to the Annual Financial Statements as at 30 June 2018.

16.2 Fair value classification of investments
Financial assets and liabilities carried at fair value need to be classified within the appropriate level of hierarchy on
which their fair values are based. The information below sets out the different levels as well as the classification of the
Group’s assets and liabilities where appropriate.

Investments trading in active markets and deriving their fair value from quoted market prices of identical assets are
classified within level 1. These prices provide the most reliable fair value classification and the Group does not need to
adjust the quoted prices to measure the fair value of investments. The quoted market price used for investments held by the
Group is the current bid price.

Investments trading in markets not considered to be active and deriving their fair value from observable inputs other than
quoted prices included within level 1 are classified within level 2. These inputs need to be directly or indirectly
observable for the investment and can include: quoted market prices for similar assets in active or non-active markets;
observable inputs other than quoted prices; and inputs derived or corroborated by observable market date. The Group’s money
market investments will typically be classified within level 2.

Level 3 classification applies to investments where observable inputs are not available for the asset to determine its fair
value. Unobservable inputs are used to measure fair value where relevant observable inputs are not available. The unlisted
investments in Fund limited partnerships and/or Direct Investments are within this level.

The financial assets and liabilities measured at fair value in the Statements of Financial Position can be condensed as
follows within the fair value hierarchy:

Group and Company

During the period/year, there were no transfers of assets from level 1 to level 2 or 3, level 2 to level 1 or 3 and level 3
to level 1 or 2.

The following table presents the movement in level 3 assets during the year by class of financial instrument:

The Board of Directors has approved the valuation method for level 3 investments as set out in the accounting policies. The
valuation techniques used and the inputs available to determine the fair value of each investment, are detailed in note 5
of the Notes to the Annual Financial Statements as at 30 June 2018. The inputs available to the Investment Advisor to
determine the valuation of the underlying portfolio companies, from which the NAV of the Funds are derived, are mainly the
maintainable earnings of the relevant companies and valuation multiples that are derived from the public markets.

The main inputs available to the Investment Advisor to determine the valuation on a case-by-case basis for each of the
underlying Portfolio Companies, from which the NAV of the Funds are derived, are: maintainable earnings, trading multiples
and capital structures. Earnings, for instance EBITDA, can be based on budgeted EBITDA, most recent or historic reported
EBITDA, last-twelve-months EBITDA or EBITDA adjusted to a normalised earnings level.

Trading multiples are determined by identifying comparable public companies based on for instance, their industry, size,
growth stage, revenue generation, and strategy. Once a public company’s trading multiple is calculated, the Investment
Advisor can then adjust the multiple for considerations such as illiquidity, capital structure and other differences
between the public company and the Portfolio Company, based on company specific facts and differences. The Investment
Advisor can also, in addition to the original transaction multiples, consider recent private transactions in similar
securities as the Portfolio Company or third-party transactions, and adjust the trading multiples as deemed appropriate.

The capital structure of each Portfolio Company determines the ranking or distribution waterfall of how the fair value is,
firstly allocated to each type of security, and secondly to each holder of such securities, for example taking into
consideration preferred rights or incentive schemes upon an exit scenario, possible earn-out payments etc. Other subjective
inputs to use might be based on the Investment Advisor’s assessment of the quality of earnings, third party external debt,
comparability differences and probability of default.

All these numerical and subjective inputs are recorded and maintained, for each Portfolio Company, in a valuation model
designed and updated by the Investment Advisor. The Board of Directors has not direct access or input to these valuation
models or the subjective assessments that were considered in deriving at the fair value and is not reasonably available to
the Board. All these inputs and considerations are largely interdependent and subjective, and the models are highly complex
for an outside party to manage. Therefore, it is not reasonable, and potentially misleading, for the Board to determine and
present to the shareholders of the Group a sensitivity analysis of the potential impact on changes to one or more of the
underlying inputs to fair value.

17 Events after the reporting period
There have been no material events after the reporting date that would require disclosure or adjustment to the Interim
Financial Statements for the six months ended 31 December 2018.

CORPORATE INFORMATION

Directors
Yvonne Stillhart (Chairperson)
Derek Prout-Jones
Kevin Allagapen
Michael Pfaff
Yuvraj Juwaheer

Senior Advisors (Officers)
Jean-Pierre van Onselen (CFO)
Peter Hayward-Butt (CEO)

Investment Advisor
Ethos Private Equity (Pty) Limited
35 Fricker Road
Illovo
Johannesburg, 2196

Company Secretary and Registered Office
Ocorian (Mauritius) Ltd
6th Floor, Tower A,
1 Cybercity
Ebene
Mauritius

Auditors – Deloitte
Level 7, Standard Chartered Tower
19 Cybercity
Ebene
Mauritius

Deloitte
20 Woodlands Drive
Woodmead
Sandton
Johannesburg, 2196

Listing
JSE Limited
Abbreviated name: ETHOSCAP
JSE code: EPE
Sector: Financials – Speciality Finance

Transfer Secretary
Computershare Investor Services Proprietary Limited
Rosebank Towers
15 Biermann Avenue
Rosebank
Johannesburg, 2196