SASOL INZALO AND SASOL KHANYISA FREQUENTLY ASKED QUESTIONS

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Blaise Harrell
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1 SASOL INZALO AND SASOL KHANYISA FREQUENTLY ASKED QUESTIONS 15 November

2 SASOL INZALO AND SASOL KHANYISA QUESTIONS AND ANSWERS TABLE OF CONTENTS Top 10 Sasol Inzalo Questions 6 1. How has Sasol Inzalo performed? 2. What happens if the share price is insufficient to cover the debt when Sasol Inzalo matures? 3. Will Sasol Inzalo be replaced with another transaction once it unwinds? 4. Why doesn t Sasol give participating employees the 850 shares they are expecting to receive? 5. What did Sasol proactively do to have a positive impact on the transaction? 6. Will there be any retrenchments as a result of Sasol Inzalo performance? 7. Will participating employees receive any money once Sasol Inzalo matures? 8. What was the role of the Sasol Inzalo directors and how have they protected shareholders over the years? 9. Why hasn t Sasol communicated about the performance of Sasol Inzalo in the last 9 years? 10. Will I as an employee need to repay anything? 11. When do Sasol Inzalo Public Limited (RF) and Sasol Inzalo Public Funding (Pty) Limited (RF) unwind and what does the term mean? 12. What happened to the money I paid for Sasol Inzalo ordinary share? 13. I learnt through the media that the Inzalo share scheme was abandoned? 14. Is it true that Sasol Inzalo is not going to pay out in May 2018? 15. What will happen with the Inzalo shares in June 2018, will they be sold? 16. What happened to the Sasol Inzalo shares of people who have forfeited them, e.g. bad leavers? 17. Is it true that Sasol Inzalo was administered by a third party? 18. How did employees earn dividends if the scheme was bankrupt? 19. Will there be a dilution of the SOLBE1 shares currently on the market? 20. Why is 18 th May a cut-off date from an employment perspective for the share bonus grant award? What is the significance of this date? Top 10 Sasol Khanyisa Questions How is the Sasol Khanyisa transaction structured and what is the B-BBEE ownership percentage? 2. Who will take part in the Sasol Khanyisa transaction? 3. How are Black people defined in the Sasol Khanyisa Transaction? 4. How many shares or rights to shares will each participant receive? 5. How will Sasol Khanyisa be funded? 6. What is the duration of Sasol Khanyisa? 7. How does Sasol Khanyisa assist in creating net value for its participants? 8. Will employees get dividends under Khanyisa? 9. Is this the best time to do a new B-BBEE transaction given the current low oil price? 10. Why would the new transaction be a success in comparison to the old transaction? 11. How can I buy the Sasol Khanyisa shares when they are ready for the Public to buy? 12. Why would the new transaction be a success in comparison to the old transaction? 2

3 Sasol Inzalo Top How has Sasol Inzalo performed? 2. What happens if the share price is insufficient to cover the debt when Sasol Inzalo matures? 3. Will Sasol Inzalo be replaced with another transaction once it unwinds? 4. Why doesn t Sasol give participating employees the 850 shares they are expecting to receive? 5. What did Sasol proactively do to have a positive impact on the transaction? 6. Will there be any retrenchments as a result of Sasol Inzalo was implemented at a Sasol share price of R366 per share in Since then, the share price has been impacted by high and low oil and commodity prices. Various forms of funding were used to fund the Sasol Inzalo transaction. Sasol Inzalo s success is linked to the Sasol share price. The objective of Sasol Inzalo was to settle funding through the value gained as a result of the growth in the share price. This required a much higher share price to begin to unlock value for participants. As of today, the growth in the share price has not been enough to settle the funding. At the current share price of approximately R400, no net value has been created for Sasol Inzalo participants. In the event that the proceeds from the sale of the Sasol Ordinary Shares held by FundCo, either in the market or by Sasol, is insufficient to repay the outstanding preference share funding to its preference shareholders and any other outstanding debt, Sasol will be obliged to cover this shortfall. Sasol guaranteed the Sasol Inzalo Public Limited (RF) and Sasol Inzalo Groups Limited (RF) loans and will therefore cover the shortfall between the value of the shares and the associated debt in Sasol Inzalo is coming to an end in June 2018, and with Sasol s transformation imperative in mind, Sasol intends, subject to shareholder approval in November 2017, to implement our new B-BBEE ownership structure, Sasol Khanyisa. Sasol employees, who were Inzalo participants, were in most instances given rights to shares. Various forms of funding were used to fund the rights to shares. Over the past nine years, dividends of R were declared in respect of the 850 rights to shares. R was used to partially settle the funding. The other R was paid to participants as dividends. Sasol Inzalo s success is also linked to the Sasol share price. As of today, the growth in the share price has not been enough to settle the funding. At the current share price of approximately R400, for Sasol Inzalo participants, no net value has been created and therefore no shares can be transferred to employees. In 2014, Sasol re-negotiated the interest charge on the debt with funders. As a result, the debt was refinanced and the interest rate reduced, making a significant contribution to reducing Sasol Inzalo s financing costs. No, there will not be retrenchments as a result of the performance or maturity of Sasol Inzalo. 3

4 Sasol Inzalo performance? 7. Will participating employees receive any money once Sasol Inzalo matures? 8. What was the role of the Sasol Inzalo directors and how have they protected shareholders over the years? 9. Why hasn t Sasol communicated about the performance of Sasol Inzalo in the last 9 years? 10. Will I as an employee need to repay anything? Over the past nine years, dividends of R were declared in respect of the rights to shares. R was used to partially settle the funding. The other R was paid to employee participants as dividends. Sasol Inzalo s success is linked to the Sasol share price. As of today, the growth in the share price has not been enough to settle the funding. At the current share price of approximately R400, for Sasol Inzalo participants, no net value has been created and therefore no shares can be transferred to employees. Employees will still receive 50% of declared dividends until Sasol Inzalo ends. Sasol Inzalo directors were appointed to oversee the implementation and governance of the Sasol Inzalo transaction to ensure adequate compliance and monitoring to relevant governance agreements. Sasol Inzalo directors have acted in the best interest of Sasol Inzalo shareholders within the parameters of the relevant governance agreements throughout the transaction. In particular, the Sasol Inzalo directors: o campaigned for the refinancing of the Inzalo Transaction; o ensured that Inzalo shareholders receive true and accurate information on the Inzalo Transaction through financial results publications, as well as presentations at their annual general meetings; and o monitored the financial performance of the Inzalo Transaction. Sasol has covered the cost of directors fees for Sasol Inzalo directors, not the Sasol Inzalo shareholders. There are certain legal constraints on what can be communicated, for example, Sasol cannot make projections with respect to its future share price and it cannot provide financial advice. Employee and Management participants received the annual financial statements of the Sasol Inzalo Employee Scheme and Sasol Inzalo Management Scheme with the yearly notices of beneficiary meetings. Sasol will ensure that Sasol Khanyisa s performance is regularly communicated to participants as the transaction progresses. Participants have no further liabilities towards Sasol Inzalo. 4

5 Sasol Khanyisa Top How is the Sasol Khanyisa transaction structured and what is the B-BBEE ownership percentage? 2. Who will take part in the Sasol Khanyisa transaction? 3. How are Black people defined in the Sasol Khanyisa Transaction? 4. How many shares or rights to shares will each participant receive? If approved by Sasol shareholders, Sasol Khanyisa will ultimately achieve at least 25% B-BBEE ownership credentials in Sasol South Africa (SSA) (taking into account the holding of the Foundation in Sasol), for a period of up to ten years and thereafter via the Sasol Group SOLBE1 shareholding on an ongoing basis. The eligible participants will comprise (to be finalised on implementation): o Eligible Sasol employees (~10% of SSA); o Existing Sasol Inzalo Public and Groups shareholders; (~10% indirectly of SSA); and o Existing Black Sasol shareholders that trade on the empowerment segment of the JSE (~2%). The definition of Black people is contained in the B-BBEE Act, which currently means Africans, Coloureds and Indians who are citizens of South Africa - o by birth or descent or o who became citizens of South Africa by naturalisation before 27 April 1994; o on or after 27 April 1994 and who would have been entitled to acquire citizenship by naturalisation prior to that date. Sasol Inzalo Public Cash Participants At the unwind of Sasol Inzalo, existing Sasol Inzalo Public (SOLBE1) Paid-up shareholders will have the opportunity to either remain within the empowerment segment of the JSE, or receive Sasol ordinary shares (SOL). If you decide not to participate in Sasol Khanyisa and NOT remain on the empowerment segment of the JSE, at the end of Sasol Inzalo, your SOLBE1 shares will automatically become Sasol ordinary shares (SOL) and you will: o receive SOL shares o not participate in Sasol Khanyisa; and o not receive any additional shares. However, should you decide to remain within the empowerment segment of the JSE; you will: o receive one bonus SOLBE1 share for every four o SOLBE1 shares owned; After this election, you become eligible to participate in Khanyisa, then: receive one Sasol Khanyisa Public share for every one SOLBE1 share held, funded in full by debt provided by Sasol; and in addition, receive, a further SOLBE1 share, at no cost to you, for every 10 Khanyisa Public shares Sasol Inzalo Groups and Public (funded) will be invited to participate in Sasol Khanyisa Public, and will receive: o 1 Sasol Khanyisa Public share for every Sasol Inzalo share held, funded in full by debt provided by Sasol, 5

6 o 1 SOLBE1 share for every 10 Khanyisa Public shares, that are immediately tradeable, also at no cost to you Employee Participants Sasol employees participating in Sasol Inzalo trusts: o who are actively employed at the inception of Sasol Khanyisa; o will each receive, at no cost to the employee, vested rights in SOL or SOLBE1 shares to the value of R (once off share award); o this will be subject to tax when vesting takes place; o which will give full ownership in 3 years time (2021), provided that an employee is still in the employ of Sasol; o which will be tradeable once ownership transfers in 2021; and o dividends will be paid to employees, when declared, during this period. Black employee participants will be given: o rights to shares in Sasol South Africa that will be held in a trust, o these rights will be exchanged for an equivalent value of Sasol shares listed on the empowerment segment of the JSE at the end of the 10-year period or earlier if the debt is repaid before then (SOLBE1), and o be subject to tax when vesting takes place. The value of these rights to shares will only be determined when Sasol Khanyisa ends. To give you an indication at current value: o These rights to shares amount to approximately R per qualifying employee on inception, and are funded in full by debt provided by Sasol. o This R funding will however be paid off using a majority of the dividends declared by Sasol South Africa over the 10-year period 5. How will Sasol Khanyisa be funded? 6. What is the duration of Sasol Khanyisa? 7. How does Sasol Khanyisa assist in creating net value Sasol Khanyisa will be fully vendor funded by Sasol i.e. no third-party funding. As a result, there will no external funding, and no cash flows out of Sasol For eligible Inzalo participants who are still employed at the time that we implement Khanyisa, rights to shares will vest after three years. For Black participants, all rights to shares will be exchanged for Sasol shares listed on the empowerment segment of the JSE at the earlier of 10-years or full debt repayment. This value-for-value exchange to SOLBE1 shares trading on the JSE Empowerment Segment should assist in ensuring that 25% of SSA remains empowered. SOLBE1 can only be traded amongst Black participants, so even when existing SOLBE1 shareholders sell their shares, SSA will still be able to track and retain its required 25% B- BBEE ownership credentials. The initial step is to grant participants a shareholding in Sasol s South African businesses (except Sasol Oil and Sasol Mining, 6

7 for its participants? 8. Will participants get dividends under Khanyisa? 9. Is this the best time to do a new B-BBEE transaction given the current low oil price? 10. Why would the new transaction be a success in comparison to the old transaction? both of which are separately empowered). Sasol South Africa houses our Synfuels, chemicals and gas businesses, which are our most cash generative entities, placing Sasol Khanyisa close to the cash flows of the businesses as possible, i.e. at operating asset level. This gives Sasol more control over the management of Sasol Khanyisa s debt. This is one of the key lessons learned from our analysis of B- BBEE transactions in South Africa and will create net value to the extent that vendor financing can be repaid within 10 years (as per base case assumptions). Subsequent to this, participants will exchange their shareholdings for value equivalent shareholdings in Sasol Limited s SOLBE1 shares, thereby allowing for monetisation of their shareholding without compromising Sasol s B-BBEE credentials. For eligible employee participants who receive the R share grant, the dividends on this share grant will be paid until 2021, subject to taxation, when this scheme matures. On the 10-year transaction, the majority (97.5%) of the dividends declared will be used to settle the funding. The remaining 2.5% will be the trickle dividend due to shareholders. The necessary administration costs will berecovered from the 2.5% trickle dividend of unallocated shares. The Inzalo transaction had an empowerment period of 10 years that will come to an end in The Inzalo transaction does not create net value for its shareholders at the current share price resulting in Sasol not achieving its ownership sub-minimums under the new DTI Codes. A new transaction is thus critical and must be implemented in 2018 to achieve sub-minimum requirements and to achieve Sasol s overall transformation objective of at least a Level 4 contributor status by FY20. There are advantages to implementing the transaction in a low oil price scenario as the enterprise value based on forward looking discounted cash flow is currently significantly reduced due to lower macro-economic assumptions which allows for a more affordable buy-in by BEE participants on a vendor funded basis. This will allow for a greater probability of repayment of vendor funding. The shares issued to incentivize Inzalo shareholders to participate in Khanyisa will be issued at a lower share price and thus have a smaller underlying IFRS2 charge. Many of the larger B-BBEE transactions in South Africa have been considered and Sasol has designed Sasol Khanyisa to incorporate what is believed to be the most appropriate and best features to enable successful transformation. Sasol Inzalo s success is linked to the Sasol share price. Whereas Sasol Khanyisa will not rely on share price growth for debt settlement and net value creation. Net value creation is more sustainable with no reliance on 7

8 share price growth for debt settlement. The upfront unencumbered issue of SOLBE1 shares for no consideration to Sasol Inzalo participants creates immediate net value. Sasol Khanyisa will own an effective shareholding in Sasol South Africa, a subsidiary of Sasol Limited. The value of Sasol Khanyisa shares will therefore not be linked to Sasol Limited, but to Sasol South Africa, a cash-generating asset which is known for its operational stability which is also Sasol s largest operating entity. Sasol Khanyisa has a simpler structure than Sasol Inzalo i.e. equal share rights for all qualifying employees and Sasol Inzalo Groups and Sasol Inzalo Public participants will be housed into only one entity namely Sasol Khanyisa Public. Various forms of funding were used to fund the Sasol Inzalo transaction with very high interest rates (fixed) at a time. Sasol Khanyisa is vendor financed (funded by Sasol), which means there will be no cash flowing out of Sasol and the absence of third-party debt allows for more flexibility. No capital is required from participants. Components of Sasol Khanyisa allow for evergreen recognition and participants can monetise their shareholding without impacting Sasol s B-BBEE credentials. 11. How can I buy the Sasol Khanyisa shares when they are ready for the Public to buy? The Sasol Khanyisa empowerment structure is only available to previous Sasol Inzalo participants and not open to the public. Sasol Khanyisa shares will only be allocated to you if you already have Sasol Inzalo (ESOP, Public or Groups) shares or Sasol BEE ordinary (SOLBE1) shares when the offer period opens in February Before then, SOLBE1 shares and Sasol Inzalo Public (SIPBEE) shares can be bought either through a registered Financial Services Broker or you can contact Computershare. You need to have acquired these SOLBE1 shares by 6 February 2018 and for SIPBEE shares, by 3 April 2018 to be eligible for the Khanyisa shares as well as the bonus share award. Computershare s contact details are as follows: Telephone no: address: sasolinzalo@computershare.co.za 8

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SASOL KHANYISA QUESTIONS AND ANSWERS

SASOL KHANYISA QUESTIONS AND ANSWERS 1 Sasol Khanyisa Frequently Asked Questions 1. How is the Sasol Khanyisa transaction structured and what is the B-BBEE ownership percentage? 2. Who will take part in