Demutualisation Of The JSE Securities Exchange South Africa

The rights holders of the JSE Securities Exchange South Africa (“JSE”) approved the demutualisation of the JSE with an overwhelming majority at a special general meeting held, yesterday, 26 May 2005. Subject to obtaining the Financial Services Board’s consent for the demutualisation, the JSE will start a new chapter in its history as JSE Limited, a public company, on 1 July 2005.

The JSE is currently a privately owned and privately funded non-proprietary voluntary association of members with statutory legal personality. In this environment, ownership of the exchange has been inextricably linked with the right to be a member of the exchange. After demutualisation, membership of the exchange will be separated from ownership of the exchange. As a result, any person will be entitled to purchase and hold shares in the JSE and ownership of a JSE share will not be a requirement for membership of the exchange.

To help the visibility, price transparency and liquidity of JSE shares, the JSE intends to facilitate over the counter trade in JSE shares utilising the JSE’s trading system and to settle those trades through STRATE Limited.

On demutualisation, all existing rights holders of the JSE will become shareholders of the JSE and will receive 1 000 JSE shares for each JSE right held on 1 July 2005. JSE shares will then be tradable without restriction, save for a statutory prudential limitation of a 15% shareholding by any shareholder. The JSE Board and the executive management of the JSE will remain unchanged. The operations of the JSE and its contractual relationships will not be affected by the demutualisation.

The proposal to demutualise the JSE followed amendments to the Income Tax Act in terms of which the JSE will lose the tax-exempt status it currently has on 1 July 2005. Once this occurs, the JSE will be taxed as a company. Given this development and that most of the prominent international exchanges have already demutualised, the JSE Board recommended that this would be an opportune time to demutualise the JSE.

Russell Loubser, CEO of the JSE, said “Demutualisation is an exciting milestone in the JSE’s history. It offers the JSE additional capital raising opportunities and will allow us to more easily implement a broad-based BEE ownership strategy. It also lays the foundation for a listing of the JSE and puts us on a par with our international competitors.”

A proposal to list the JSE was not put to right holders, but the JSE Board will periodically review the appropriateness of a listing for the JSE.