Scheme Booklet and Notice of Meetings

Source: RNS
RNS Number : 8422D
ThinkSmart Limited
24 October 2022
 

 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.

 

24 October 2022

 

ThinkSmart Limited

 ("ThinkSmart" or the "Company" which together with its subsidiaries is the "Group")

 

Recommended acquisition of ThinkSmart by Tuscan Equity Pty Ltd ("Bidco") by way of a scheme of arrangement under the Australian Corporations Act 2001 (Cth).

 

 

SCHEME BOOKLET REGISTERED WITH ASIC

PUBLICATION AND POSTING OF SCHEME BOOKLET

AND

NOTICE OF SCHEME MEETINGS AND NOTICE OF AGM

 

On 29 July 2022, ThinkSmart (AIM: TSL) entered into a binding Scheme Implementation Deed with Tuscan Equity Pty Ltd ("Bidco") under which Bidco would acquire the entire issued share capital of ThinkSmart pursuant to a scheme of arrangement under the Australian Corporations Act 2001 (Cth) (the "Scheme").

Scheme Booklet

The Board of ThinkSmart is pleased to announce that the Australian Securities and Exchange Commission has registered its scheme booklet ("Scheme Booklet") in relation to the proposed acquisition of ThinkSmart by Bidco by way of the Scheme.

The Scheme Booklet, which includes information about the Scheme, an independent expert's report prepared by Grant Thornton Corporate Finance Pty Ltd ("Independent Expert"), the notices of the Scheme Meetings and Annual General Meeting, and details of the actions to be taken by ThinkSmart Shareholders, has therefore today been published.

ThinkSmart Shareholders and DI Holders will receive either a hard copy of the Scheme Booklet or access to a URL where the Scheme Booklet can be viewed and downloaded. In addition, ThinkSmart Shareholders will receive a hard copy Proxy Form or access to a portal where proxy instructions for the applicable meeting can be lodged electronically. ThinkSmart DI Holders will receive a hard copy Form of Instruction in respect of the General Scheme Meeting and Annual General Meeting (but not in respect of the Excluded Shareholder Scheme Meeting, as no Excluded Shareholder holds ThinkSmart Depositary Interests).

The Scheme Booklet is available on ThinkSmart's website (subject to any restrictions relating to persons resident in Restricted Jurisdictions) at www.thinksmartworld.com and the full text of the Scheme Booklet is set out in the Additional Information section below.

 

Notice of Scheme Meetings and Notice of AGM

 

ThinkSmart hereby gives notice of the meeting of ThinkSmart Shareholders to consider and vote on the Scheme ("General Scheme Meeting") and the meeting of Excluded Shareholders1 to consider and vote on the Scheme ("Excluded Shareholder Scheme Meeting") ("Scheme Meetings").

The General Scheme Meeting for ThinkSmart Shareholders (excluding the Excluded Shareholders) will be held virtually via the Computershare Virtual Meeting Platform on 16 November 2022, commencing at 5.00pm (Perth time). The Excluded Shareholder Scheme Meeting for Excluded Shareholders will be held virtually via the Computershare Virtual Meeting Platform on 16 November 2022, commencing at 5.30pm (Perth time). If the General Scheme Meeting concludes after 5.30pm (Perth time) on this date, the Excluded Shareholder Scheme Meeting will begin as soon as practicable after the conclusion of the General Scheme Meeting.

ThinkSmart's 2022 Annual General Meeting will also be held virtually via the Computershare Virtual Meeting Platform prior to the Scheme Meetings on 16 November 2022, commencing at 4.00pm (Perth time).

Independent Expert's Report

 

The Independent Expert has concluded that the Scheme is fair and reasonable and therefore in the best interests of ThinkSmart Shareholders (other than the Excluded Shareholders), in the absence of a superior proposal.

 

Independent Board Committee recommendation

 

The ThinkSmart Independent Board Committee ("IBC")2 unanimously recommends that the Scheme Shareholders vote in favour of the Scheme in the absence of a Superior Proposal and subject to the Independent Expert continuing to conclude that the Scheme is in the best interest of ThinkSmart Shareholders (other than the Excluded Shareholders).  Subject to those same qualifications, each member of the IBC intends to vote, or cause to be voted, all of the ThinkSmart shares held or controlled by them in favour of the Scheme at the applicable Scheme Meeting.

 

Action to be taken

 

ThinkSmart Shareholders should carefully read the Scheme Booklet in its entirety before deciding whether or not to vote in relation to the Scheme. 

 

 

Timetable

 

The current expected timetable of principal events for the implementation of the Scheme is set out below and in the Scheme Booklet. If any of the key dates set out in the expected timetable changes, an announcement will be made through a Regulatory Information Service.

 

 

Event

Time and date

 

First Court Date

21 October 2022


Date of this Scheme Booklet

24 October 2022


Latest time and date for receipt of proxy forms or powers of attorney by the ThinkSmart Share Registry for:

·     Annual General Meeting

·     General Scheme Meeting

·     Excluded Shareholder Scheme Meeting

*Refer to the Scheme Booklet for applicable times for ThinkSmart DI Holders

14 November 2022 at 5.30pm (Perth time)*


Time and date for determining eligibility to vote at the Annual General Meeting and the Scheme Meetings

14 November 2022 at 5.30pm (Perth time) for ThinkSmart Shareholders

11 November 2022 at 6.00pm (London time) for ThinkSmart DI Holders


Annual General Meeting

16 November 2022 at 4.00pm (Perth time)


Scheme Meetings:

·     General Scheme Meeting

·     Excluded Shareholder Scheme Meeting*

*If the General Scheme Meeting concludes after 5.30pm (Perth time) on this date, the Excluded Shareholder Scheme Meeting will begin as soon as practicable after the conclusion of the General Scheme Meeting.

16 November 2022 (T) at:

·     5.00pm (Perth time)

·     5.30pm (Perth time)


If the Scheme is approved by the Requisite Majorities

 

Second Court Date

Court hearing to approve the Scheme

22 November 2022


Last day for dealings in, and for the registration of transfer of, ThinkSmart Shares

Last day for repositioning securities between the ThinkSmart Share Register (for Australian shares) and the ThinkSmart DI Register (for UK Depositary Interests)

22 November 2022


Suspension of dealings in ThinkSmart Shares

23 November 2022 at 7.30am (London time)


Effective Date

Court order lodged with ASIC and announcement to AIM

 

23 November 2022


Scheme Record Date

Date for determining entitlements to Scheme Consideration for:

·     ThinkSmart Shareholders

·     ThinkSmart DI Holders

 

25 November 2022 at:

·     5.00pm (Perth time)

·     6.00pm (London time)


Disablement of CREST in respect of ThinkSmart Shares

25 November 2022 at 6.00pm London time


Implementation Date

2 December 2022


Cancellation of admission to trading on AIM of ThinkSmart Shares

5 December 2022 at 7.00am (London time)


Sale of Block Sale Shares

5 December 2022 to 7 December 2022


Payment of Scheme Consideration*

As soon as practicable following the sale of the Block Sale Shares, expected to be approximately 8 Business Days after completion of the sale of the Block Sale Shares


 

All times and dates in the above timetable are references to the time and date in Perth, Australia unless otherwise stated. All such times and dates are subject to change. Certain times and dates are conditional on the approval of the Scheme by ThinkSmart Shareholders and by the Court, and the satisfaction of the other conditions precedent of the Scheme set out in section 4.3 of the Scheme Booklet, including regulatory approval from the UK Financial Conduct Authority. Any changes will be announced by ThinkSmart via the RNS of the LSE.

* For the avoidance of doubt, the value of the Cash Consideration will not be known at the time of cancellation of admission to trading on AIM of ThinkSmart Shares.

 

 

 

Loan Deed

 

The Cash Consideration under the Scheme relates to the net proceeds from the sale of certain Block Shares held by ThinkSmart.

 

If the Scheme becomes Effective, then the Block Sale Shares will be the number of the Block Shares held by ThinkSmart to be sold and will be referable to the proportion of Scheme Shares held by Scheme Shareholders entitled to receive Cash Consideration.

 

Once the Broker sells the Block Sale Shares pursuant to the Broker Agreement it will remit the United States Dollar sale proceeds to an ADI account operated by ThinkSmart. Then, in accordance with the Funds Flow Deed, ThinkSmart and Bidco will be required to comply with the following procedure:

 

1.   ThinkSmart will transfer the United States Dollar sale proceeds to an ADI account operated by Bidco via a loan from ThinkSmart to Bidco (Loan) pursuant to a loan deed to be entered after the Implementation Date (Loan Deed).

2.   Bidco will convert the United States Dollar sale proceeds into Australian Dollars and Pounds Sterling (as applicable).

3.   Bidco will transfer these amounts to two separate trust accounts (one account for Australian Dollars and one account for Pounds Sterling) with an ADI operated by the ThinkSmart Share Registry and held for the benefit of the Scheme Shareholders.

4.   ThinkSmart will instruct Computershare to transfer the Cash Consideration to the Scheme Shareholders entitled to receive Cash Consideration pro rata to their respective holding of ThinkSmart Shares, in accordance with the applicable currency allocations.

 

Step 1 above involves ThinkSmart and Bidco entering into a Loan Deed. Practically, the Loan is required to document the flow of funds from ThinkSmart to Bidco, which are then converted into applicable currencies and transferred into a ThinkSmart Share Registry account (held for the benefit of Scheme Shareholders) before being distributed to Scheme Shareholders entitled to receive the Cash Consideration.

 

The Loan is provided by ThinkSmart (as lender) to Bidco (as borrower) and provides that ThinkSmart may advance funds to Bidco solely for the "permitted purpose", which is defined as complying with Bidco's obligations under the Scheme Implementation Deed. Each advance made under the Loan may incur interest (at a rate to be agreed for each advance, which may be nil), is unsecured and must be repaid on or before the end date to be agreed for that advance.

 

Given that the funds flow described above involves a Loan means that certain additional approvals are required to be obtained from ThinkSmart Shareholders for the Scheme to proceed, being the Financial Assistance Resolution and the Financial Benefit Resolution. These resolutions will be voted on at the Annual General Meeting to be held prior to the Scheme Meetings. Further details of all resolution are set out in full in the Scheme Booklet.

 

Related Party Transaction

 

The Loan Deed constitutes a related party transaction under the AIM Rules for Companies as Bidco is a related party by virtue of being wholly owned and controlled by Ned Montarello, ThinkSmart's Executive Chairman, CEO, founder and (together with the Excluded Shareholders) current 29.4% shareholder.

                                                                                                                      

The Directors of the Company (excluding Ned Montarello) consider, having consulted with the Company's nominated adviser, Canaccord Genuity Limited, that the terms of the Loan are fair and reasonable insofar as the Company's shareholders are concerned.

 

Cancellation and Delisting from AIM

 

It is intended that dealings in ThinkSmart Shares should be suspended shortly prior to the Effective Date, at the time set out in the Scheme Booklet. Subject to the implementation of the Scheme, it is intended that an application will be made to the London Stock Exchange for the cancellation of the admission to trading of the ThinkSmart Shares on AIM, in accordance with Rule 41 of the AIM Rules.

 

If the Scheme is approved by the Court, it is expected that the last day of dealings in, and registration of transfers of, ThinkSmart Shares on AIM will be the Business Day immediately prior to the Effective Date, following which ThinkSmart will make an application to the London Stock Exchange for suspension of dealings in ThinkSmart Shares on AIM with effect by 7.30 a.m. (London time) on the Effective Date.

 

It is intended that the cancellation of admission of the ThinkSmart Shares to trading on AIM will take effect at 7.30 a.m. (London time) on the Business Day following the Implementation Date. In addition, entitlements to ThinkSmart Shares held within the CREST system will be cancelled and share certificates in respect of Scheme Shares will cease to be valid and should, if so requested by ThinkSmart, be sent to ThinkSmart for cancellation.

 

 

Capitalised terms used in this announcement (the "Announcement") shall, unless otherwise defined, have the same meanings as set out in the Scheme Booklet. All references to times in this Announcement are to Perth time, Australia times unless stated otherwise.

 

 

(1)        the term "Excluded Shareholders" has the meaning given to it in the definitions section of the Scheme Booklet. In summary, it means Mr Ned Montarello and the entities he is related to that hold ThinkSmart shares.

(2)        The ThinkSmart Independent Board Committee consists of all directors of ThinkSmart excluding Mr Ned Montarello having regard to his ownership of Bidco.

 

 

Prior to publication the information communicated in this announcement was deemed by the Company to constitute inside information for the purposes of article 7 of the Market Abuse Regulations (EU) No 596/2014 as amended by regulation 11 of the Market Abuse (Amendment) (EU Exit) Regulations No 2019/310 ('MAR'). With the publication of this announcement, this information is now considered to be in the public domain.

 

 

For further information please contact:

 

ThinkSmart Limited

Via Buchanan







Canaccord Genuity Ltd (Nominated Adviser and Broker)

Emma Gabriel

Andrew Potts

Tom Diehl

 

+44 (0)20 7523 8350

 

 

 

 

Buchanan

Giles Stewart

Chris Lane

Toto Berger

 

+44 20 7466 5000

Notes to Editors

 

About ThinkSmart Limited

 

ThinkSmart's roots are as a specialist digital payments platform business. Following the sale of its remaining 10% shareholding in Clearpay in January 2022, the Group holds shares in NYSE listed Block, Inc (NYSE: SQ).  The Group also provides an outsourced call centre customer service and support service to Clearpay and is managing the wind-down of its leasing business.

 

Further information

This announcement is for information purposes only and is not intended to and does not constitute, or form part of, an offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of any securities, or the solicitation of any vote or approval in any jurisdiction, pursuant to the Scheme or otherwise, nor shall there be any sale, issuance or transfer of securities of ThinkSmart in any jurisdiction in contravention of applicable law.  The Scheme will be implemented in accordance with the Scheme Implementation Deed and the Scheme Booklet, which will contain the full terms and conditions of the Scheme including details of how to vote in respect of the Scheme.  Any vote in respect of the Scheme or other response in relation to the Scheme should be made on the basis of the information contained in the Scheme Booklet.  This announcement does not constitute a prospectus, prospectus equivalent document or an exempted document.

If you are in any doubt about the contents of this announcement or the action you should take, you are recommended to seek your own independent financial advice immediately from your stockbroker, bank manager, solicitor, accountant or independent financial adviser.

Overseas shareholders

The release, publication or distribution of this announcement in or into jurisdictions other than Australia or the UK may be restricted by law and therefore any persons who are subject to the law of any jurisdiction other than Australia or the UK should inform themselves of, and observe, any applicable legal or regulatory requirements.  Any failure to comply with such requirements may constitute a violation of the securities laws of any such jurisdiction.  To the fullest extent permitted by applicable law, the companies and persons involved in the Scheme disclaim any responsibility or liability for the violation of such restrictions by any person. This announcement has been prepared in accordance and for the purpose of complying with Australian law, English law, the AIM Rules, the Market Abuse Regulation and the Disclosure Guidance and Transparency Rules and information disclosed may not be the same as that which would have been prepared in accordance with the laws of jurisdictions outside Australia or England.

The availability of the Scheme to ThinkSmart Shareholders who are not resident in and citizens of Australia or the UK may be affected by the laws of the relevant jurisdictions in which they are located or of which they are citizens.  Persons who are not resident in Australia or the UK should inform themselves of, and observe, any applicable legal or regulatory requirements of their jurisdictions.  In particular, the ability of persons who are not resident in Australia or the UK to vote their ThinkSmart Shares with respect to the Scheme at the Scheme Meeting, or to appoint another person as proxy to vote at the Scheme Meeting on their behalf, may be affected by the laws of the relevant jurisdictions in which they are located.  Any failure to comply with the applicable restrictions may constitute a violation of the securities laws of any such jurisdiction.  To the fullest extent permitted by applicable law, the companies and persons involved in the Scheme disclaim any responsibility or liability for the violation of such restrictions by any person.

Forward looking statements

This announcement (including information incorporated by reference in this announcement), oral statements made regarding the Scheme, and other information published by Bidco or ThinkSmart may contain statements which are, or may be deemed to be, "forward-looking statements".  Forward-looking statements are prospective in nature and are not based on historical facts, but rather on current expectations and projections of the management of Bidco and ThinkSmart about future events, and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements.

The forward-looking statements contained in this announcement include statements relating to the expected effects of the Scheme on Bidco and ThinkSmart (including their future prospects, developments and strategies), the expected timing and scope of the Scheme and other statements other than historical facts.  Often, but not always, forward-looking statements can be identified by the use of forward-looking words such as "plans", "expects", "estimates", "forecasts", "intends" or "anticipates", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "should", "would", "might" or "will" be taken, occur or be achieved.  Although Bidco and ThinkSmart believe that the expectations reflected in such forward-looking statements are reasonable, Bidco and ThinkSmart can give no assurance that such expectations will prove to be correct.  By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future.  There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements.

These factors include, but are not limited to: the ability to complete the Scheme; the ability to obtain requisite regulatory and shareholder approvals and the satisfaction of other conditions on the proposed terms and timetable; changes in general economic and business conditions; the behaviour of other market participants; the anticipated benefits from the proposed transaction not being realised as a result of changes in general economic and market conditions; weak, volatile or illiquid capital and/or credit markets; changes in tax rates, interest rate and currency value fluctuations; the degree of competition in the geographic and business areas in which ThinkSmart operates and changes in laws or in supervisory expectations or requirements.  Other unknown or unpredictable factors could cause actual results to differ materially from those in the forward-looking statements.  Such forward-looking statements should therefore be construed in the light of such factors.  Neither Bidco nor ThinkSmart, nor any of their respective associates or directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this announcement will actually occur.  You are cautioned not to place any reliance on these forward-looking statements.  Other than in accordance with their legal or regulatory obligations, neither Bidco nor ThinkSmart is under any obligation, and Bidco and ThinkSmart expressly disclaim any intention or obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 



 

 

 

 

Scheme Booklet

This Scheme Booklet relates to a scheme of arrangement between ThinkSmart Limited and the Scheme Shareholders which, if implemented, will result in Tuscan Equity Pty Ltd, a company wholly owned and controlled by Mr Ned Montarello, ThinkSmart's Executive Chairman and CEO, acquiring all of the Scheme Shares.

The notices for each Scheme Meeting are included in this Scheme Booklet. A proxy form for the Scheme Meetings also accompanies this Scheme Booklet.

The notice for ThinkSmart's 2022 Annual General Meeting is also included in this Scheme Booklet. A proxy form for the Annual General Meeting also accompanies this Scheme Booklet.

 

 

VOTE IN FAVOUR

The Independent Expert has concluded that the Scheme is fair and reasonable and therefore in the best interests of ThinkSmart Shareholders (other than the Excluded Shareholders), in the absence of a Superior Proposal.

The ThinkSmart Independent Board Committee unanimously recommends that you vote in favour of the Scheme, in the absence of a Superior Proposal and subject to the Independent Expert continuing to conclude that the Scheme is in the best interests of ThinkSmart Shareholders (other than the Excluded Shareholders).

 

 

 

 

 

 

This is an important document and requires your immediate attention.

You should read it entirely before deciding whether or not to vote in favour of the Scheme.

If you are in any doubt about how to deal with this document, you should contact your broker or financial, taxation, legal or other professional adviser immediately.

 


Important notices


General

This Scheme Booklet is important and requires your immediate attention. You should read this Scheme Booklet in full before making any decision as to how to vote at the Scheme Meeting applicable to you.

Nature of this Scheme Booklet

This Scheme Booklet includes the explanatory statement for the Scheme required by subsection 412(1) of the Corporations Act.

This Scheme Booklet also includes the explanatory statements required by section 260B(4) of the Corporations Act (in relation to the Financial Assistance Resolution) and section 219(1) of the Corporations Act (in relation to the Financial Benefit Resolution).

This Scheme Booklet does not constitute or contain an offer to ThinkSmart Shareholders, or a solicitation of an offer from ThinkSmart Shareholders, in any jurisdiction. This Scheme Booklet is not a disclosure document required by Chapter 6D of the Corporations Act. Subsection 708(17) of the Corporations Act provides that Chapter 6D of the Corporations Act does not apply in relation to arrangements under Part 5.1 of the Corporations Act approved at a meeting held as a result of an order under subsection 411(1). Instead, ThinkSmart Shareholders asked to vote on an arrangement at such a meeting must be provided with an explanatory statement as referred to above.

ASIC

A copy of this Scheme Booklet has been registered by ASIC for the purposes of subsection 412(6) of the Corporations Act. ASIC has been given the opportunity to comment on this Scheme Booklet in accordance with subsection 411(2) of the Corporations Act. Neither ASIC, nor any of its officers, takes any responsibility for the contents of this Scheme Booklet.

ASIC has been requested to provide a statement, in accordance with paragraph 411(17)(b) of the Corporations Act, that it has no objection to the Scheme. If ASIC provides that statement, it will be produced to the Court at the time of the Court hearings to approve the Scheme.

Important notice associated with Court order under subsection 411(1) of the Corporations Act

The fact that, under subsection 411(1) of the Corporations Act, the Court has ordered that a meeting be convened and has approved the explanatory statement required to accompany the Notice of Scheme Meetings does not mean that the Court:

·      has formed any view as to the merits of the proposed Scheme or as to how ThinkSmart Shareholders should vote (on this matter ThinkSmart Shareholders must reach their own conclusion); or

·      has prepared, or is responsible for the content of, the explanatory statement.

Notice of Scheme Meetings

The Notice of General Scheme Meeting (for ThinkSmart Shareholders who are not Excluded Shareholders) is set out in Annexure 4. The Notice of Excluded Shareholder Scheme Meeting (for Excluded Shareholders) is set out in Annexure 5.

Notice of Annual General Meeting

The Notice of Annual General Meeting is set out in Annexure 6.

Notice of Second Court Hearing

At the Second Court Hearing, the Court will consider whether to approve the Scheme following the vote at the Scheme Meetings. Any ThinkSmart Shareholder may appear at the Second Court Hearing, currently expected to be held at 10.15am (Perth time) on 22 November 2022 at the Federal Court of Australia, Western Australia Registry, Peter Durack Commonwealth Law Building, 1 Victoria Avenue, Perth, Western Australia. Any ThinkSmart Shareholder who wishes to oppose approval of the Scheme at the Second Court Hearing may do so by filing with the Court and serving on ThinkSmart a notice of appearance in the prescribed form together with any affidavit that the ThinkSmart Shareholder proposes to rely on.

No investment advice

This Scheme Booklet has been prepared without reference to the investment objectives, financial and taxation situation or particular needs of any ThinkSmart Shareholder or any other person. The information and recommendations contained in this Scheme Booklet do not constitute, and should not be taken as, financial product advice. The ThinkSmart Independent Board Committee encourages you to seek independent financial and taxation advice before making any investment decision and any decision as to whether or not to vote in favour of the Scheme. This Scheme Booklet should be read in its entirety before making a decision on whether or not to vote in favour of the Scheme. In particular, it is important that you consider the potential risks if the Scheme does not proceed, as set out in section 7, and the views of the Independent Expert set out in the Independent Expert's Report contained in Annexure 1. If you are in doubt as to the course you should follow, you should consult an independent and appropriately licensed and authorised professional adviser immediately.

Forward looking statements

Some of the statements appearing in this Scheme Booklet (including in the Independent Expert's Report) may be in the nature of forward looking statements. Forward looking statements or statements of intent in relation to future events in this Scheme Booklet (including in the Independent Expert's Report) should not be taken to be forecasts or predictions that those events will occur. Forward looking statements generally may be identified by the use of forward looking words such as 'believe', 'aim', 'expect', 'anticipate', 'intending', 'foreseeing', 'likely', 'should', 'planned', 'may', 'estimate', 'potential', or other similar words. Similarly, statements that describe the objectives, plans, goals, intentions or expectations of ThinkSmart or BidCo are or may be forward looking statements. You should be aware that such statements are only opinions and are subject to inherent risks and uncertainties. Those risks and uncertainties include factors and risks specific to ThinkSmart or BidCo and / or the industries in which they operate, as well as general economic conditions, prevailing exchange rates and interest rates and conditions in financial markets.

Actual events or results may differ materially from the events or results expressed or implied in any forward looking statement and deviations are both normal and to be expected. None of ThinkSmart, BidCo, or their respective officers, directors, employees or advisers or any person named in this Scheme Booklet or any person involved in the preparation of this Scheme Booklet makes any representation or warranty (either express or implied) as to the accuracy or likelihood of fulfilment of any forward looking statement, or any events or results expressed or implied in any forward looking statement. Accordingly, you are cautioned not to place undue reliance on those statements.

Any forward looking statements in this Scheme Booklet reflect views held only at the date of this Scheme Booklet. Subject to any continuing obligations under the AIM Rules, UK MAR or the Corporations Act, ThinkSmart and BidCo and their respective officers, directors, employees and advisers, disclaim any obligation or undertaking to distribute after the date of this Scheme Booklet any updates or revisions to any forward looking statements to reflect (a) any change in expectations in relation to such statements; or (b) any change in events, conditions or circumstances on which any such statement is based.

Responsibility statement

ThinkSmart has prepared, and is responsible for, the ThinkSmart Information. Neither BidCo nor any of its subsidiaries, directors, officers, employees or advisers assume any responsibility for the accuracy or completeness of the ThinkSmart Information.

BidCo has prepared, and is responsible for, the BidCo Information. Neither ThinkSmart nor any of its subsidiaries, directors, officers, employees or advisers assume any responsibility for the accuracy or completeness of the BidCo information.

Grant Thornton Corporate Finance Pty Ltd has prepared the Independent Expert's Report (as set out in Annexure 1) and takes responsibility for that report. None of ThinkSmart or BidCo or any of their respective subsidiaries, directors, officers, employees or advisers assume any responsibility for the accuracy or completeness of the information contained in the Independent Expert's Report, except, in the case of ThinkSmart, in relation to the information which it has provided to the Independent Expert.

No consenting party has withdrawn their consent to be named before the date of this Scheme Booklet.

Foreign jurisdictions

The release, publication or distribution of this Scheme Booklet in jurisdictions other than Australia and the UK may be restricted by law or regulation in such other jurisdictions and persons outside of Australia or the UK who come into possession of this Scheme Booklet should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable laws or regulations. ThinkSmart disclaims all liabilities to such persons who contravene these laws.

ThinkSmart Shareholders who are nominees, trustees or custodians are encouraged to seek independent advice as to how they should proceed.

This Scheme Booklet has been prepared in accordance with the laws of Australia and the information contained in this Scheme Booklet may not be the same as that which would have been disclosed if this Scheme Booklet had been prepared in accordance with the laws and regulations of a jurisdiction outside of Australia.

Notice for US investors

The Scheme relates to shares of an AIM-listed Australian company and is proposed to be effected by means of a scheme of arrangement under the laws of Australia. A transaction effected by means of Australian scheme of arrangement is not subject to the tender offer rules or the proxy solicitation rules under the US Securities Exchange Act of 1934, as amended. Accordingly, the Scheme is subject to the disclosure and procedural requirements applicable in Australia to schemes of arrangement (and, to the extent applicable, the AIM Rules, UK MAR and the Corporations Act) which differ from the disclosure and procedural requirements of the United States tender offer and proxy solicitation rules.

The receipt of consideration by a US holder for the transfer of its ThinkSmart Shares pursuant to the Scheme will likely be a taxable transaction for United States federal income tax purposes. Each ThinkSmart Shareholder is urged to consult their own independent professional adviser immediately regarding the tax consequences of the Scheme applicable to them, including under applicable United States state and local, as well as overseas and other, tax laws.

Any financial information relating to ThinkSmart included in this Scheme Booklet has been or shall have been prepared in accordance with accounting standards applicable in Australia and, to the extent applicable, the AIM Rules, UK MAR and the Corporations Act, and may not be comparable to financial information of US companies or companies whose financial statements are prepared in accordance with generally accepted accounting principles in the United States.

It may be difficult for US ThinkSmart Shareholders to enforce their rights or any claims arising out of the US federal securities laws, since ThinkSmart is incorporated in a country other than the United States, and some or all of its officers and directors may be residents of countries other than the United States. US ThinkSmart Shareholders may not be able to sue a non-US company or its officers or directors in a non-US court for violations of US securities laws. Further, it may be difficult to compel a non-US company or non-US residents to subject themselves to a US court's jurisdiction and judgement.

Financial amounts and effects of rounding

All financial amounts in this Scheme Booklet are expressed in Australian currency unless otherwise stated. A number of figures, amounts, percentages, estimates, calculations of value and fractions in the Scheme Booklet are subject to the effect of rounding. Accordingly, any discrepancies between totals in tables or financial statements, or in calculations, graphs or charts are due to rounding. All financial and operational information set out in this Scheme Booklet is current as at the date of this Scheme Booklet, unless otherwise stated.

Charts and diagrams

Any diagrams, charts, graphs or tables appearing in this Scheme Booklet are illustrative only and may not be drawn to scale. Unless stated otherwise, all data contained in diagrams, charts, graphs and tables is based on information available as at the Last Practicable Date.

Timetable and dates

All times and dates referred to in this Scheme Booklet are times and dates in Perth, Australia, unless otherwise indicated. All times and dates relating to the implementation of the Scheme referred to in this Scheme Booklet may change and, among other things, are subject to all necessary approvals from Government Agencies.

External websites

Unless expressly stated otherwise, the content of the ThinkSmart website does not form part of this Scheme Booklet and ThinkSmart Shareholders should not rely on any such content.

Tax consequences of the Scheme

If the Scheme becomes Effective, there will be tax consequences for the Scheme Shareholders which may include tax being payable. For further detail regarding general Australian and UK tax consequences of the Scheme, refer to section 8 of this Scheme Booklet. The tax consequences may vary depending on the nature and characteristics of Scheme Shareholders and their specific circumstances. Accordingly, you should seek professional tax advice in relation to your particular circumstances.

Privacy

ThinkSmart may collect personal information in the process of implementing the Scheme. The type of information that it may collect about you includes your name, contact details and information on your shareholding in ThinkSmart and the names of persons appointed by you to act as a proxy, attorney or corporate representative at the Scheme Meetings as relevant to you. The collection of some of this information is required or authorised by the Corporations Act. The primary purpose of the collection of personal information is to assist ThinkSmart to conduct the Scheme Meetings and implement the Scheme. Without this information, ThinkSmart may be hindered in its ability to issue this Scheme Booklet and implement the Scheme. Personal information of the type described above may be disclosed to the ThinkSmart Share Registry, third party service providers (including print and mail service providers and parties otherwise involved in the conduct of the Scheme Meetings), authorised securities brokers, professional advisers, related bodies corporate of ThinkSmart, Government Agencies, and also where disclosure is otherwise required or allowed by law. ThinkSmart Shareholders who are individuals and the other individuals in respect of whom personal information is collected as outlined above have certain rights to access the personal information collected in relation to them. If you would like to obtain details of the information about you held by the ThinkSmart Share Registry in connection with ThinkSmart Shares, please contact the ThinkSmart Share Registry. ThinkSmart Shareholders who appoint an individual as their proxy, corporate representative or attorney to vote at the Scheme Meetings should ensure that they inform such an individual of the matters outlined above. Further information about how ThinkSmart collects, uses and discloses personal information is contained in ThinkSmart's Privacy Policy located at thinksmartworld.com/privacy.

Date of Scheme Booklet

This Scheme Booklet is dated 24 October 2022.



 



Letter from the Chair of the ThinkSmart Independent Board Committee

Dear fellow ThinkSmart Shareholder,

Proposed acquisition of ThinkSmart Ltd by Tuscan Equity Pty Ltd

On behalf of the ThinkSmart Independent Board Committee, I am pleased to provide you with this Scheme Booklet which contains important information for your consideration about the proposed acquisition of ThinkSmart by Tuscan Equity Pty Ltd (BidCo) by way of a scheme of arrangement under the Australian Corporations Act 2001 (Cth).

Background to the Scheme

On 29 July 2022, ThinkSmart announced that it had entered into a Scheme Implementation Deed with BidCo under which it is proposed that BidCo will acquire all of the shares in ThinkSmart as at the Scheme Record Date.

BidCo is a proprietary company limited by shares that was incorporated in Australia for the purposes of the Scheme and is wholly owned and controlled by Mr Ned Montarello, ThinkSmart's Executive Chairman, CEO, founder and (together with the Excluded Shareholders) current 29.4% shareholder.[1]

As such, an Independent Board Committee comprising all of the directors of ThinkSmart other than Mr Ned Montarello has been established to consider the proposal for the Scheme on behalf of ThinkSmart.

In order for the Scheme to be implemented it must be approved at meetings of ThinkSmart Shareholders and by the Court. The Scheme is also conditional on regulatory approval from the UK Financial Conduct Authority (described further below). In addition, the Scheme is subject to other customary conditions, including the Independent Expert continuing to conclude that the Scheme is in the best interests of ThinkSmart Shareholders (excluding the Excluded Shareholders).

The purpose of this Scheme Booklet is to provide you with information about the Scheme to assist you to determine how to vote on the Scheme at the applicable Scheme Meeting.

Overview of the Scheme

If the Scheme is approved and implemented, ThinkSmart Shareholders entitled to receive the Cash Consideration will receive cash consideration equal to the proceeds realised from the post-Scheme implementation sale on the New York Stock Exchange of the proportion of the 618,750 shares in Block held by ThinkSmart attributable to their fully diluted[2] shareholding in ThinkSmart (net of their proportion of the 0.5% sale fees and other applicable costs, and after conversion of the proceeds from United States Dollars into Pounds Sterling and Australian Dollars as applicable).

Holders of ThinkSmart Depositary Interests will be paid the Cash Consideration in Pounds Sterling, while holders of ThinkSmart Shares who do not hold via ThinkSmart Depositary Interests will receive the Cash Consideration in Australian Dollars but can make an election to receive Pounds Sterling.

The amount of Cash Consideration actually received by Scheme Shareholders will be dependent on both the price of Block Shares at the time of the sale of the Block Sale Shares and the applicable exchange rates at the time of the conversion of the sale proceeds. Therefore, the amount of Cash Consideration received by Scheme Shareholders will not be known until after the Implementation Date and therefore after ThinkSmart Shareholders are required to vote on the Scheme.

Further detail regarding the variability of the Cash Consideration is set out in section 4.1 of this Scheme Booklet.

The following chart shows the price of Block Shares over the time period used by the Independent Expert to value the Cash Consideration (see the Independent Expert Report in Annexure 1 for further details):

The Cash Consideration will be paid to those ThinkSmart Shareholders entitled to receive the Cash Consideration in cash after implementation of the Scheme, which is expected to occur in December 2022.

Whilst the Scheme will result in ThinkSmart Shareholders selling their shareholding in ThinkSmart and no longer having exposure to Block Shares via ThinkSmart, ThinkSmart Shareholders can (if they wish to) make their own arrangements to purchase shares in Block on-market, thereby enabling them to have a direct exposure to Block Shares rather than through a shareholding in ThinkSmart. ThinkSmart Shareholders wishing to make their own arrangements to purchase Block Shares directly should seek their own advice to understand the relevant implications (including tax implications) and should be aware that there may be transaction costs in connection with the purchase of Block Shares on-market.

Shareholders in ThinkSmart will be able to continue to trade ThinkSmart Shares (via the ThinkSmart Depositary Interests) on the Alternative Investment Market of the London Stock Exchange up until suspension of dealings on AIM of ThinkSmart Depositary Interests on the Effective Date.

Excluded Shareholders

The Excluded Shareholders are those ThinkSmart Shareholders who are associated with BidCo and Mr Ned Montarello. Whilst ThinkSmart Shareholders other than Excluded Shareholders will receive the Cash Consideration under the Scheme, the Excluded Shareholders can elect to receive either Cash Consideration or BidCo Shares (or a combination thereof) as consideration for their Scheme Shares. To the extent the Excluded Shareholders elect to receive BidCo Shares, they will retain exposure to ThinkSmart's assets and liabilities after the Scheme is implemented, which are discussed further below.

The Excluded Shareholders will not be permitted to vote at the General Scheme Meeting and will instead vote at a separate Scheme Meeting (being the Excluded Shareholder Scheme Meeting) on a separate Scheme Resolution (being the Excluded Shareholder Scheme Resolution). The reason there are two Scheme Meetings is that the Excluded Shareholders constitute a separate class of members because they are offered different consideration under the Scheme as noted above.

Financial Assistance Resolution and the Financial Benefit Resolution

For the Scheme to proceed, ThinkSmart Shareholders will also need to approve the Financial Assistance Resolution and the Financial Benefit Resolution at ThinkSmart's 2022 Annual General Meeting, which will be held on the same day and prior to the General Scheme Meeting.

The Excluded Shareholders will be excluded from voting on the Financial Assistance Resolution and the Financial Benefit Resolution.

Details of the Financial Assistance Resolution and the Financial Benefit Resolution, including why these resolutions are required, are set out in section 9 of this Scheme Booklet and in the Notice of Annual General Meeting in Annexure 6.

UK Financial Conduct Authority

Furthermore, the Scheme is conditional on, and will not become Effective unless, the UK Financial Conduct Authority provides the necessary approval under the UK Financial Services and Markets Act 2000.

Details of the regulatory approvals that are required to implement the Scheme, including the reasons why a change in control notification has been submitted to the UK Financial Conduct Authority in connection with the Scheme, are set out in sections 4.3 and 7.4(a) of this Scheme Booklet.

ThinkSmart's assets other than the Block Shares

If the Scheme is Effective, following the sale of the Block Sale Shares and payment of the Scheme Consideration, ThinkSmart's assets and operations will comprise:

·                 approximately £2.2 million in cash, noting that the ThinkSmart Group's cash balance as at the Last Practicable Date is approximately £2.8 million;

·                 the remainder of the Block Shares which are not Block Sale Shares;

·                 ThinkSmart's legacy leasing business which is currently subject to a managed wind down process; and

·                 ThinkSmart's business of providing an outsourced call centre customer support service to support the Clearpay business which was previously owned by ThinkSmart.

In relation to these assets and operations, if the Scheme is Effective BidCo currently intends to procure that ThinkSmart:

·                 continues to hold the remaining Block Shares which are not Block Sale Shares and will monitor this holding over time taking into account its own relevant financial objectives and priorities (including rationalisation of the legacy ThinkSmart corporate group);

·                 continues the existing managed wind down process for the legacy leasing business in an orderly manner through to completion; and

·                 continues to provide the outsourced call centre customer support service to the Clearpay business which was previously owned by ThinkSmart, noting that this can be terminated by either Clearpay or ThinkSmart at any time with 3 months' notice.

Where appropriate, BidCo may also arrange the rationalisation of any subsidiaries in the ThinkSmart corporate group which are dormant or otherwise no longer required.

Recommendation of the ThinkSmart Independent Board Committee

The ThinkSmart Independent Board Committee unanimously recommends that ThinkSmart Shareholders vote in favour of the Scheme in the absence of a Superior Proposal and subject to the Independent Expert continuing to conclude that the Scheme is in the best interests of ThinkSmart Shareholders (other than the Excluded Shareholders). Subject to those same qualifications, each member of the ThinkSmart Independent Board Committee intends to vote, or cause to be voted, all the ThinkSmart Shares held or controlled by them in favour of the Scheme at the applicable Scheme Meeting.

Details of the interests of the ThinkSmart Directors (including the members of the ThinkSmart Independent Board Committee) in ThinkSmart are set out in section 10.1 of this Scheme Booklet.

In forming its unanimous recommendation, the ThinkSmart Independent Board Committee carefully considered the following reasons (which are explained in more detail in section 1 of this Scheme Booklet):

·                 The Independent Expert has concluded that the Scheme is fair and reasonable and therefore in the best interests of ThinkSmart Shareholders (other than the Excluded Shareholders), in the absence of a Superior Proposal.

·                 The Scheme facilitates an exit by ThinkSmart Shareholders of their shareholding in ThinkSmart at a price that eliminates the discount to the market value of ThinkSmart's holding in Block Shares at which ThinkSmart Shares have historically traded.

Prior to the announcement of the Scheme on 29 July 2022 on AIM, ThinkSmart Shares traded at an approximate 31% average discount to the market value of its Block shareholding since it received the Block Shares on 1 February 2022.[3] As at the Last Practicable Date, this discount had reduced to approximately 12% since the announcement of the Scheme. The Scheme effectively allows Scheme Shareholders to eliminate the prevailing discount at which ThinkSmart Shares have traded relative to the market value of its Block shareholding and realise value for their interest in the Block Shares (held indirectly via ThinkSmart).

Further detail regarding the variability of the Cash Consideration is set out in section 4.1.

·                 Under the Scheme, ThinkSmart Shareholders entitled to receive Cash Consideration will receive cash consideration equal to their proportion of proceeds realised from the post-Scheme implementation sale on the New York Stock Exchange of the Block Sale Shares (net of their proportion of the 0.5% sale fees and other applicable costs, and after conversion of the proceeds from United States Dollar into Pounds Sterling and Australian Dollars (as applicable)). The Scheme therefore allows ThinkSmart Shareholders to realise value for their ThinkSmart Shares within a relatively short time frame, with payment of the Cash Consideration expected to be made in December 2022.

As announced by ThinkSmart on 13 May 2022, ThinkSmart has been undertaking a strategic review of its Block shareholding and has considered a number of options to maximise shareholder value (which included reviewing BidCo's proposal to acquire all the shares in ThinkSmart as described above). The proposed Scheme is the culmination of that review.

The ThinkSmart Independent Board Committee considers the Scheme to be the preferred commercial mechanism for Scheme Shareholders to exit their investment in ThinkSmart as compared to remaining shareholders of ThinkSmart during the eventual wind down and liquidation of ThinkSmart. In particular, a public company wind down and liquidation process is expected to be a more protracted process than the Scheme that would result in additional costs to ThinkSmart (and indirectly ThinkSmart Shareholders), therefore reducing ThinkSmart's available cash and the value that would be available to ThinkSmart Shareholders.

While the Scheme will not result in ThinkSmart Shareholders realising value for the residual components of the ThinkSmart business (as detailed in section 5.2(b) of this Scheme Booklet) or receiving the cash currently held by ThinkSmart, these assets are considered to be immaterial by the ThinkSmart Independent Board Committee when compared to the value of ThinkSmart's holding in Block Shares. Although ThinkSmart will continue to generate income from its call centre and secondary rentals, the ThinkSmart Independent Board Committee considers these operations lack the scale to cover both operating and corporate costs, such as data storage costs, salaries and property leases and the cash balance would be expected to reduce to cover these costs and likely eventual wind down and liquidation of ThinkSmart. The ThinkSmart Independent Board Committee expects that the costs of maintaining ThinkSmart as a listed entity until completion of the wind down would likely exceed the cash generated from the wind down of its business operations. The ThinkSmart Independent Board Committee therefore considers the Scheme to be the optimal commercial transaction overall.

·                 ThinkSmart Shares currently trade at a discount relative to the market value of its holding in Block Shares. As noted above, prior to the announcement of the Scheme on 29 July 2022, ThinkSmart Shares traded at an approximate 31% average discount to the market value of its Block shareholding since it received the Block Shares on 1 February 2022.[4] As at the Last Practicable Date, this discount had reduced to approximately 12% since the announcement of the Scheme.

If the Scheme does not proceed, and no comparable proposal or Superior Proposal is received by the ThinkSmart Independent Board Committee, then the discount between the price of a ThinkSmart Share and the market value of ThinkSmart's Block holding could increase to a level closer to that observed prior to the announcement of the Scheme. This would likely reduce the ThinkSmart Share price compared to the ThinkSmart Share price as at the Last Practicable Date.

·                 You will not incur any brokerage charges on the transfer of your ThinkSmart Shares to BidCo under the Scheme. However, brokerage will be payable in relation to the sale of the Block Shares - see section 4.1 of this Scheme Booklet for further information. It is possible that such brokerage charges (and, potentially GST/VAT on those charges) would be incurred if you dispose of your ThinkSmart Shares other than under the Scheme.

In determining to unanimously recommend the Scheme, the ThinkSmart Independent Board Committee also considered the disadvantages of the Scheme proceeding, and reasons why you may consider voting against the Scheme, which include the following:

·                 There are a number of risks associated with the Scheme, which are set out in detail in section 7 of this Scheme Booklet. These risks include:

·                 performance risk;

·                 risks relating to the deferred payment of the Cash Consideration, including the uncertainty regarding the price of Block Shares at the time the Block Sale Shares are sold and, in particular, the risk that the Block Share price may fall at any time prior to the sale of the Block Sale Shares; and

·                 risks relating to implementation of the Scheme.

In relation to the performance risk specifically, it is noted that if the Scheme becomes Effective, ThinkSmart Shareholders will transfer their ThinkSmart Shares to BidCo on the Implementation Date. However, ThinkSmart Shareholders entitled to receive Cash Consideration will not receive their Cash Consideration until after the Implementation Date and the amount of Cash Consideration will be determined by the price at which the Block Sale Shares can be sold for following Implementation.

There is therefore a risk that ThinkSmart Shareholders transfer their ThinkSmart Shares to BidCo on the Implementation Date but that BidCo does not pay the Cash Consideration, in breach of its obligations under the Scheme Implementation Deed, Deed Poll and Funds Flow Deed. However, the ThinkSmart Independent Board Committee considers this risk to be theoretical only, because:

·                 it would require BidCo (which is controlled by ThinkSmart's founder and Executive Chairman) to deliberately breach its obligations under the Scheme Implementation Deed, Deed Poll and Funds Flow Deed all of which are legally binding documents which form key elements of the Court supervised process in connection with the Scheme. If, contrary to the ThinkSmart Independent Board Committee's expectation, such a breach did occur, Scheme Shareholders will have an unsecured claim against BidCo under the Deed Poll in relation to the payment of the Cash Consideration; and

·                 as a practical matter, under the terms of the Scheme Implementation Deed, the members of the ThinkSmart Independent Board Committee will remain on the ThinkSmart Board until after the Cash Consideration has been despatched to Scheme Shareholders, and so, the ThinkSmart Independent Board Committee will assist with overseeing the payment of the Cash Consideration to the Scheme Shareholders in accordance with the Scheme.

Further details of this performance risk are set out in section 7.4(b) of this Scheme Booklet.

·                 You may disagree with the ThinkSmart Independent Board Committee's unanimous recommendation and the Independent Expert's conclusion.

·                 You may believe it is in your best interests to maintain your current investment and risk profile, in particular:

·                 you may consider that the price of Block Shares in the future will be higher than the prevailing price at the time of the sale of the Block Sale Shares in connection with the Scheme; and

·                 you may consider that the value of ThinkSmart's legacy leasing business may, in the future, increase above its current value or be greater than the value attributed to it by the Independent Expert (see section 6 of the Independent Expert's Report in Annexure 1).

·                 You may consider that a Superior Proposal could emerge in the future. The ThinkSmart Independent Board Committee is, as at the date of this Scheme Booklet, not aware of, and has not received, any Superior Proposal.

·                 The tax consequences of transferring your ThinkSmart Shares pursuant to the Scheme, specifically the bringing forward of a taxation event, may not be attractive to you.

Further details on these reasons are provided in section 1.2 of this Scheme Booklet.

Independent Expert

The ThinkSmart Independent Board Committee appointed Grant Thornton Corporate Finance Pty Ltd as the Independent Expert to assess the merits of the Scheme. The Independent Expert has concluded that the Scheme is fair and reasonable and therefore in the best interests of ThinkSmart Shareholders (excluding the Excluded Shareholders), in the absence of a Superior Proposal.

A complete copy of the Independent Expert's Report is included as Annexure 1 to this Scheme Booklet.

How to vote

Your vote is important and I encourage you to vote on this significant proposed transaction. ThinkSmart will conduct the Scheme Meetings and Annual General Meeting virtually via the Computershare Virtual Meeting Platform with ThinkSmart Shareholders (and their proxies) being able to cast votes in real time during the Meetings.

For the Scheme to proceed, ThinkSmart Shareholders will need to approve the Scheme Resolutions at the applicable Scheme Meeting and the Financial Assistance Resolution and Financial Benefit Resolution at ThinkSmart's 2022 Annual General Meeting, which will be held prior to the Scheme Meetings. The ThinkSmart Independent Board Committee encourages ThinkSmart Shareholders to vote at both the Annual General Meeting and the applicable Scheme Meeting.

All ThinkSmart Shareholders who would like to have their vote counted must either:

·                 vote by lodging a Proxy Form online at www.investorvote.com.au (Control ID: 181913 (for the Annual General Meeting), 181915 (for the General Scheme Meeting) and 181916 (for the Excluded Shareholder Scheme Meeting)) for the applicable Meeting no later than the times noted in the Key Dates section of this Scheme Booklet. ThinkSmart Shareholders are strongly encouraged to lodge a Proxy Form appointing the Chair of the applicable Meeting as their proxy. ThinkSmart Shareholders can complete the Proxy Form that was enclosed with the Notice of Meeting and Notice and Access Letter to provide specific instructions on how a shareholder's vote is to be cast on each item of business, and the Chair must follow those instructions. Lodgement instructions are set out in the Proxy Form attached to each Notice of Meeting and Notice and Access Letter. If a person other than the Chair is appointed as proxy, the proxy must attend the Meeting via the Computershare Virtual Meeting Platform and vote. The proxy will revert to the Chair in the absence of the appointed proxy holder's attendance at the applicable Meeting; or

·                 participate via the Computershare Virtual Meeting Platform and vote live at the applicable Meeting. The Meetings will be accessible to all ThinkSmart Shareholders (and their proxies) via the Computershare Virtual Meeting Platform, which will allow ThinkSmart Shareholders (and their proxies) to listen to and observe the applicable Meeting and ask questions on the business of the Meeting. ThinkSmart Shareholders (and their proxies) attending via the Computershare Virtual Meeting Platform will be able to participate in the Meetings and vote in real time.

ThinkSmart DI Holders may access the applicable Meetings via the Computershare Virtual Meeting Platform but will not be permitted to vote at the applicable Meeting. For their votes to be counted, ThinkSmart DI Holders must submit their CREST Voting Instruction to ThinkSmart's agent by the required cut-off time set out in section 3.2 of this Scheme Booklet. Alternatively, ThinkSmart DI Holders can vote using the enclosed Form of Instruction as per the instruction set out in section 3.2.

I encourage you to submit a directed proxy vote so that your vote will be counted if for any reason you cannot join the meeting (for example, if there is an issue with your internet connection on the day of the meeting).

The Scheme will only become Effective if it is approved by:

·                 at least 75% of the total number of votes cast on the General Scheme Resolution by ThinkSmart Shareholders (excluding the Excluded Shareholders); and

·                 more than 50% of ThinkSmart Shareholders (excluding the Excluded Shareholders) by number present and voting at the General Scheme Meeting (unless the Court orders otherwise).

The Scheme also requires similar approvals from the Excluded Shareholders on the Excluded Shareholder Scheme Resolution, as explained in section 4.5(b) of this Scheme Booklet.

In addition, the Scheme will only become Effective if the Financial Assistance Resolution and Financial Benefit Resolution are passed at the Annual General Meeting, as set out in section 9 of this Scheme Booklet.

If you wish for the Scheme to proceed, it is important that you vote in favour of the applicable Scheme Resolution at the applicable Scheme Meeting and the Financial Assistance Resolution and Financial Benefit Resolution at the Annual General Meeting.

Further details regarding how to access the Computershare Virtual Meeting Platform and vote are set out in:

·                 the Notice of General Scheme Meeting for ThinkSmart Shareholders who are not Excluded Shareholders, as contained in Annexure 4 of this Scheme Booklet;

·                 the Notice of Excluded Shareholder Scheme Meeting for Excluded Shareholders, as contained in Annexure 5 of this Scheme Booklet; and

·                 the Notice of Annual General Meeting for ThinkSmart Shareholders, as contained in Annexure 6 of this Scheme Booklet.

Further information

This Scheme Booklet sets out important information regarding the Scheme, including the reasons for the ThinkSmart Independent Board Committee's recommendation and the Independent Expert's Report. It also sets out reasons why you may wish to vote against the Scheme, as well as the risks associated with the Scheme (which are set out in section 7 of this Scheme Booklet).

Please read this document carefully and in its entirety as it will assist you in making an informed decision as to how to vote. I would also encourage you to seek independent financial, legal and taxation advice before making any investment decision in relation to your ThinkSmart Shares.

If you have any questions, please contact the ThinkSmart Shareholder Information Line on 1300 528 984 (within Australia) or +61 3 9415 4826 (outside Australia), between 8.30am and 5.00pm (Sydney time), Monday to Friday. ThinkSmart DI Holders can contact the dedicated Depositary Interest Information Line on +44 0207 887 2225 or +44 0800 298 7356 (within the United Kingdom) between 9.00am and 5.00pm (London time), Monday to Friday.

On behalf of the ThinkSmart Independent Board Committee, I would like to take this opportunity to thank you for your ongoing support. I encourage you to vote in favour of the Scheme, which the ThinkSmart Independent Board Committee believes, and the Independent Expert has concluded, is fair and reasonable and therefore in the best interests of ThinkSmart Shareholders (other than the Excluded Shareholders), in the absence of a Superior Proposal.

 

Yours sincerely

 

David Adams

Senior Independent Non-Executive Director

Chair of the ThinkSmart Independent Board Committee



 

Key dates

 

Event

Time and date

First Court Date

21 October 2022

Date of this Scheme Booklet

24 October 2022

Latest time and date for receipt of proxy forms or powers of attorney by the ThinkSmart Share Registry for:

·     Annual General Meeting

·     General Scheme Meeting

·     Excluded Shareholder Scheme Meeting

14 November 2022 at 5.30pm (Perth time)

Time and date for determining eligibility to vote at the Annual General Meeting and the Scheme Meetings

14 November 2022 at 5.30pm (Perth time) for ThinkSmart Shareholders

11 November 2022 at 6.00pm (London time) for ThinkSmart DI Holders

Annual General Meeting

16 November 2022 at 4.00pm (Perth time)

Scheme Meetings:

·     General Scheme Meeting

·     Excluded Shareholder Scheme Meeting*

*If the General Scheme Meeting concludes after 5.30pm (Perth time) on this date, the Excluded Shareholder Scheme Meeting will begin as soon as practicable after the conclusion of the General Scheme Meeting.

16 November 2022 (T) at:

·     5.00pm (Perth time)

·     5.30pm (Perth time)

If the Scheme is approved by the Requisite Majorities

Second Court Date

Court hearing to approve the Scheme

22 November 2022

Last day for dealings in, and for the registration of transfer of, ThinkSmart Shares

Last day for repositioning securities between the ThinkSmart Share Register (for Australian shares) and the ThinkSmart DI Register (for UK Depositary Interests)

22 November 2022

Suspension of dealings in ThinkSmart Shares

23 November 2022 at 7.30am (London time)

Effective Date

Court order lodged with ASIC and announcement to AIM

 

23 November 2022

Scheme Record Date

Date for determining entitlements to Scheme Consideration for:

·     ThinkSmart Shareholders

·     ThinkSmart DI Holders

 

25 November 2022 at:

·     5.00pm (Perth time)

·     6.00pm (London time)

Disablement of CREST in respect of ThinkSmart Shares

25 November 2022 at 6.00pm London time

Implementation Date

2 December 2022

Cancellation of admission to trading on AIM of ThinkSmart Shares

5 December 2022 at 7.00am (London time)

Sale of Block Sale Shares

5 December 2022 to 7 December 2022

Payment of Scheme Consideration*

As soon as practicable following the sale of the Block Sale Shares, expected to be approximately 8 Business Days after completion of the sale of the Block Sale Shares

 

All times and dates in the above timetable are references to the time and date in Perth, Australia unless otherwise stated. All such times and dates are subject to change. Certain times and dates are conditional on the approval of the Scheme by ThinkSmart Shareholders and by the Court, and the satisfaction of the other conditions precedent of the Scheme set out in section 4.3 of this Scheme Booklet, including regulatory approval from the UK Financial Conduct Authority. Any changes will be announced by ThinkSmart via the RNS of the LSE.

* For the avoidance of doubt, the value of the Cash Consideration will not be known at the time of cancellation of admission to trading on AIM of ThinkSmart Shares.



 

1         Key considerations relevant to your vote

1.1         Why you should vote in favour of the Scheme

(a)          The ThinkSmart Independent Board Committee unanimously recommends that you vote in favour of the Scheme, in the absence of a Superior Proposal and subject to the Independent Expert continuing to conclude that the Scheme is in the best interests of ThinkSmart Shareholders (other than the Excluded Shareholders)

The ThinkSmart Independent Board Committee unanimously recommends that ThinkSmart Shareholders vote in favour of the Scheme, in the absence of a Superior Proposal and subject to the Independent Expert continuing to conclude that the Scheme is in the best interests of ThinkSmart Shareholders (other than the Excluded Shareholders).

Subject to those same qualifications, each member of the ThinkSmart Independent Board Committee intends to vote, or cause to be voted, all the ThinkSmart Shares held or controlled by them in favour of the Scheme at the applicable Scheme Meeting. The interests of the Independent Directors in ThinkSmart Shares are set out in section 10.1.

(b)          The Independent Expert has concluded that the Scheme is fair and reasonable and, therefore, in your best interests

The Independent Expert has analysed ThinkSmart's business and, in light of this analysis, the Independent Expert has concluded that the Scheme is fair and reasonable and, therefore, is in the best interests of ThinkSmart Shareholders (other than the Excluded Shareholders), in the absence of a Superior Proposal.

The reasons why the Independent Expert reached these conclusions are set out in the Independent Expert's Report, a copy of which is included in Annexure 1. The ThinkSmart Independent Board Committee encourages you to read this report in its entirety.

(c)          The Scheme allows ThinkSmart Shareholders to realise full value at prevailing market prices for their pro rata interest in Block

The Scheme facilitates an exit by ThinkSmart Shareholders of their shareholding in ThinkSmart at a price that eliminates the discount to the market value of ThinkSmart's holding in Block Shares at which ThinkSmart Shares have historically traded.

Prior to the announcement of the Scheme on 29 July 2022, ThinkSmart Shares traded at an approximate 31% average discount to the market value of its Block shareholding since it received the Block Shares on 1 February 2022.[5] As at the Last Practicable Date, this discount had reduced to approximately 12% since the announcement of the Scheme. The Scheme effectively allows Scheme Shareholders to eliminate the prevailing discount at which ThinkSmart Shares have traded relative to the market value of its Block shareholding and realise value for their interest in the Block Shares (held indirectly via ThinkSmart).

Further detail regarding the variability of the Cash Consideration is set out in section 4.1.

(d)          The Scheme Consideration provides you with cash value for your ThinkSmart Shares, together with an exit opportunity in respect of your ThinkSmart Shares

Under the Scheme, ThinkSmart Shareholders entitled to receive Cash Consideration will receive Cash Consideration equal to their proportion of the proceeds realised from the post-Scheme implementation sale on the New York Stock Exchange of the Block Sale Shares (net of their proportion of the 0.5% sale fees and other applicable costs, and after conversion of the proceeds from United States Dollars into Pounds Sterling and Australian Dollars (as applicable)). The Scheme therefore allows ThinkSmart Shareholders to realise value for their ThinkSmart Shares within a relatively short time frame, with payment of the Cash Consideration to be made as soon as practicable following the sale of the Block Sale Shares (payment expected to occur in December 2022).

As announced by ThinkSmart on 13 May 2022, ThinkSmart has been undertaking a strategic review of its Block shareholding and has considered a number of options to maximise shareholder value (which included reviewing BidCo's proposal to acquire all the shares in ThinkSmart as described above). The proposed Scheme is the culmination of that review.

The ThinkSmart Independent Board Committee considers the Scheme to be the preferred commercial mechanism for Scheme Shareholders to exit their investment in ThinkSmart as compared to remaining shareholders of ThinkSmart during the eventual wind down and liquidation of ThinkSmart. In particular, a public company wind down and liquidation process is expected to be a more protracted process than the Scheme that would result in additional costs to ThinkSmart (and indirectly ThinkSmart Shareholders), therefore reducing ThinkSmart's available cash and the value that would be available to ThinkSmart Shareholders.

While the Scheme will not result in ThinkSmart Shareholders realising value for the residual components of the ThinkSmart business (as detailed in section 5.2(b) of this Scheme Booklet) or receiving the cash currently held by ThinkSmart, the ThinkSmart Independent Board Committee considers that these assets are immaterial when compared to the value of ThinkSmart's holding in Block Shares. Although ThinkSmart will continue to generate income from its call centre and secondary rentals, the ThinkSmart Independent Board Committee considers these operations lack the scale to cover both operating and corporate costs, such as data storage costs, salaries and property leases and the cash balance would be expected to reduce to cover these costs and likely eventual wind down and liquidation of ThinkSmart. The ThinkSmart Independent Board Committee expects that the costs of maintaining ThinkSmart as a listed entity until completion of the wind down would likely exceed the cash generated from the wind down of its business operations. The ThinkSmart Independent Board Committee therefore considers the Scheme to be the optimal commercial transaction overall.

(e)          No Superior Proposal has emerged

Since the proposed Scheme was announced up until the date of this Scheme Booklet, no Superior Proposal has emerged.

The ThinkSmart Independent Board Committee is, as at the date of this Scheme Booklet, not aware of, and has not received, any Superior Proposal.

(f)           The discount of ThinkSmart Shares relative to the market value of its holding in Block Shares is expected to increase if the Scheme does not proceed

ThinkSmart Shares have traded at a discount relative to the market value of its holding in Block Shares. As noted above, prior to the announcement of the Scheme on 29 July 2022, ThinkSmart Shares traded at an approximate 31% average discount to the market value of its Block shareholding since it received the Block Shares on 1 February 2022.[6] As at the Last Practicable Date, this discount had reduced to approximately 12% since the announcement of the Scheme.

If the Scheme does not proceed, and no comparable proposal or Superior Proposal is received by the ThinkSmart Independent Board Committee, then the discount between the price of a ThinkSmart Share and the market value of ThinkSmart's Block holding could increase to a level closer to that observed prior to the announcement of the Scheme. This would likely reduce the ThinkSmart Share price compared to the ThinkSmart Share price as at the Last Practicable Date.

(g)          Brokerage charges will not apply to the transfer of your ThinkSmart Shares to BidCo

You will not incur any brokerage charges on the transfer of your ThinkSmart Shares to BidCo under the Scheme. However, brokerage may be payable in relation to the sale of the Block Shares - see section 4.1 of this Scheme Booklet for further information.

It is possible that such brokerage charges (and, potentially GST/VAT on those charges) would be incurred if you dispose of your ThinkSmart Shares other than under the Scheme.

1.2         Why you may consider voting against the Scheme

(a)          There are a number of risks associated with the Scheme

There are a number of risks associated with the Scheme, which are set out in detail in section 7 of this Scheme Booklet. These risks include the following:

Performance risk: If the Scheme becomes Effective, ThinkSmart Shareholders will transfer their ThinkSmart Shares to BidCo on the Implementation Date. However, ThinkSmart Shareholders entitled to receive Cash Consideration will not receive their Cash Consideration until after the Implementation Date and the amount of Cash Consideration will be determined by the price at which the Block Sale Shares can be sold for following Implementation.

There is therefore a risk that ThinkSmart Shareholders transfer their ThinkSmart Shares to BidCo on the Implementation Date but that BidCo does not pay the Cash Consideration, in breach of its obligations under the Scheme Implementation Deed, Deed Poll and Funds Flow Deed. However, the ThinkSmart Independent Board Committee considers this risk to be theoretical only, because:

·                 it would require BidCo (which is controlled by ThinkSmart's founder and Executive Chairman) to deliberately breach its obligations under the Scheme Implementation Deed, Deed Poll and Funds Flow Deed all of which are legally binding documents which form key elements of the Court supervised process in connection with the Scheme. If, contrary to the ThinkSmart Independent Board Committee's expectation, such a breach did occur, Scheme Shareholders will have an unsecured claim against BidCo under the Deed Poll in relation to the payment of the Cash Consideration and

·                 as a practical matter, under the terms of the Scheme Implementation Deed, the members of the ThinkSmart Independent Board Committee will remain on the ThinkSmart Board until after the Cash Consideration has been despatched to Scheme Shareholders, and so, the ThinkSmart Independent Board Committee will assist with overseeing the payment of the Cash Consideration to the Scheme Shareholders in accordance with the Scheme.

Further details of this risk are set out in section 7.4(b) of this Scheme Booklet.

Risks relating to deferred payment of Cash Consideration: There is a risk that the price of Block Shares falls between the date ThinkSmart Shareholders approve the Scheme and the date the Block Sale Shares are sold, which will directly impact the amount of Cash Consideration received by ThinkSmart Shareholders entitled to receive Cash Consideration. See section 4.1 of this Scheme Booklet for further discussion of how changes in the Block Share price will impact the Cash Consideration. Even if the Scheme does not proceed, for so long as ThinkSmart continues to hold Block Shares, it is likely that any fall in the price of Block Shares would result in a fall in the price of ThinkSmart Shares.

In addition, as the proceeds from the sale of the Block Sale Shares will be converted from United States Dollars to Australian Dollars and Pounds Sterling (as required), the amount of Cash Consideration received by Scheme Shareholders will depend on the applicable exchange rate at the time of conversion.

Further details of this risk are set out in section 7.4(b) of this Scheme Booklet.

Risks relating to implementation the Scheme: The implementation of the Scheme is subject to certain conditions precedent, which are summarised in section 4.3 and are set out in full in clause 3.1 of the Scheme Implementation Deed.

ThinkSmart will only apply to the Court for orders approving the Scheme if each of the conditions precedent (except Court approval of the Scheme) are satisfied or waived (if capable of waiver) prior to 8.00am (Perth time) on the Second Court Date. As such, failure to satisfy or waive, or a delay in satisfying or waiving, any of the conditions precedent may delay or prevent implementation of the Scheme. The failure of a condition precedent to be satisfied or waived (if capable of waiver) may also give rise to a right of either ThinkSmart or BidCo to terminate the Scheme Implementation Deed.

There is a risk that the ThinkSmart Shareholders do not approve the Scheme by the Requisite Majorities or do not approve the Financial Assistance Resolution or Financial Benefit Resolution. There is also a risk that the Court may not, at the final court hearing, approve the Scheme, or may only be willing to approve the Scheme subject to conditions that ThinkSmart and/or BidCo (as applicable) are not prepared to accept. There is also a risk that some or all of the aspects of the ThinkSmart Shareholder and Court approvals required for the Scheme to proceed may be delayed.

There is also a risk that the FCA rejects the change in control notification submitted on behalf of BidCo.

Further details of this risk are set out in section 7.4(a) of this Scheme Booklet.

(b)          You may disagree with the ThinkSmart Independent Board Committee's unanimous recommendation and the Independent Expert's conclusion

Despite the unanimous recommendation of the ThinkSmart Independent Board Committee to vote in favour of the Scheme and the conclusion of the Independent Expert that the Scheme is in the best interests of ThinkSmart Shareholders (other than the Excluded Shareholders) in the absence of a Superior Proposal, you may believe that the Scheme is not in your best interests.

(c)          You may believe it is in your best interests to maintain your current investment and risk profile

You may prefer to keep your ThinkSmart Shares to preserve your investment in an AIM-listed company with the specific characteristics of ThinkSmart.

In particular:

·                 you may consider that the price of Block Shares in the future will be higher than the prevailing price at the time of the sale of the Block Sale Shares in connection with the Scheme; and

·                 you may consider that the value of ThinkSmart's legacy leasing business may, in the future, increase above its current value or be greater than the value attributed to it by the Independent Expert (see section 6 of the Independent Expert's Report in Annexure 1).

Additionally, you may consider that, despite the risk factors relevant to ThinkSmart's potential future operations (including those set out in section 7 of this Scheme Booklet), ThinkSmart may be able to return greater value from its assets by remaining a standalone entity or by seeking alternative corporate transactions in the future. However, as ThinkSmart's primary assets are the Block Shares you could hold a similar investment and risk profile by purchasing shares in Block directly.

You may also consider that it would be difficult to identify or invest in alternative investments that have a similar investment profile to that of ThinkSmart or may incur transaction costs in undertaking any new investment.

(d)          You may believe that there is potential for a Superior Proposal to emerge

You may consider that a Superior Proposal could emerge in the future.

The ThinkSmart Independent Board Committee is, as at the date of this Scheme Booklet, not aware of, and has not received, any Superior Proposal.

(e)          The tax consequences of transferring your ThinkSmart Shares pursuant to the Scheme may not be attractive to you

The tax consequences of the Scheme applicable to you will depend on your personal situation and the circumstances of the Scheme.

If the price of Block Shares does not materially change between the Implementation Date and the sale date for the Block Shares, the Australian and UK tax outcomes of transferring your ThinkSmart Shares pursuant to the Scheme are expected to be broadly in line with an on-market sale of ThinkSmart Shares (see section 8 of this Scheme Booklet for further details).

The Scheme would bring forward a taxation event for Scheme Shareholders, potentially diluting Scheme Shareholders' exposure in the market (e.g. by having lower after-tax proceeds for a direct investment in Block Shares).

ThinkSmart Shareholders should read the tax implications of the Scheme outlined in section 8 of this Scheme Booklet. However, section 8 is general in nature, and ThinkSmart Shareholders should consult with their own independent taxation advisers regarding the tax implications of the Scheme.



 

2         Frequently asked questions

This section 2 answers some frequently asked questions relating to the Scheme. It is not intended to address all relevant issues for ThinkSmart Shareholders. This section 2 should be read together with all other parts of this Scheme Booklet.

Question

Answer

More information

Overview of the Scheme

Why have I received this Scheme Booklet?

This Scheme Booklet has been sent to you because you are a ThinkSmart Shareholder and you are being asked to vote on the Scheme. This Scheme Booklet is intended to help you consider and decide on how to vote on the Scheme at the Scheme Meetings.

Section 4

What is the Scheme?

The Scheme is a scheme of arrangement between ThinkSmart and the Scheme Shareholders.

A "scheme of arrangement" is a statutory procedure in the Corporations Act that is commonly used in transactions in Australia that may result in a change of ownership or control of a company. In addition to requiring Court approval, schemes of arrangement require a shareholder vote in favour of a resolution to implement the scheme of arrangement by the Requisite Majorities.

If the Scheme becomes Effective, BidCo will acquire all of the Scheme Shares for the Scheme Consideration. ThinkSmart will be delisted from AIM and become a wholly owned subsidiary of BidCo.

Section 4 and Annexure 2

BidCo

Who is BidCo?

BidCo is a special purpose Australian proprietary company limited by shares incorporated specifically for the purpose of acquiring the ThinkSmart Shares pursuant to the Scheme.

BidCo is 100% wholly owned by Mr Ned Montarello, the current Executive Chairman and CEO of ThinkSmart.

Section 6

Does BidCo currently hold any ThinkSmart Shares?

As at the date of this Scheme Booklet, BidCo does not hold any ThinkSmart Shares.

As at the Last Practicable Date, Mr Ned Montarello and the other Excluded Shareholders own 31,342,286 ThinkSmart Shares, representing approximately 29.4% of the ThinkSmart Shares.[7]

Section 6

Recommendations and intentions

What do the ThinkSmart Directors recommend?

The ThinkSmart Independent Board Committee unanimously recommends that you vote in favour of the Scheme, in the absence of a Superior Proposal and subject to the Independent Expert continuing to conclude that the Scheme is in the best interests of ThinkSmart Shareholders (excluding the Excluded Shareholders).

The reasons for this recommendation and other relevant considerations are set out in section 1.

In light of the arrangements summarised in section 6.1, Mr Ned Montarello, who is the sole shareholder of BidCo, has recused himself from discussions on the Scheme and abstains from giving a recommendation in respect of how ThinkSmart Shareholders should vote on the Scheme.

Details of the interests of the ThinkSmart Directors (including the members of the ThinkSmart Independent Board Committee) in ThinkSmart are set out in section 10.1 of this Scheme Booklet. ThinkSmart Shareholders should have regard to these details in the context of the recommendation of the ThinkSmart Independent Board Committee which appears through this Scheme Booklet, when considering how to vote on the Scheme.

The ThinkSmart Independent Board Committee encourages you to seek independent legal, financial, taxation or other appropriate professional advice.

Letter from the Chair of the ThinkSmart Independent Board Committee and section 1

What are the intentions of the ThinkSmart Independent Board Committee members?

Each member of the ThinkSmart Independent Board Committee intends to vote, or cause to be voted, all the ThinkSmart Shares held or controlled by them in favour of the Scheme at the applicable Scheme Meeting in the absence of a Superior Proposal and subject to the Independent Expert continuing to conclude that the Scheme is in the best interests of ThinkSmart Shareholders (other than the Excluded Shareholders).

Letter from the Chair of the ThinkSmart Independent Board Committee and section 1.1(a)

What is the conclusion of the Independent Expert?

The Independent Expert has concluded that the Scheme is fair and reasonable and therefore in the best interests of ThinkSmart Shareholders (other than the Excluded Shareholders), in the absence of a Superior Proposal.

A complete copy of the Independent Expert's Report is included as Annexure 1 to this Scheme Booklet.

Annexure 1

What choices do I have as a ThinkSmart Shareholder?

As a ThinkSmart Shareholder who is eligible to vote on the Scheme, you have the following choices in relation to your ThinkSmart Shares:

·     vote in favour of the Scheme at the applicable Scheme Meeting;

·     vote against the Scheme at the applicable Scheme Meeting;

·     sell your ThinkSmart Shares or ThinkSmart Depositary Interests; or

·     do nothing.

Section 4.2

Overview of the Scheme Consideration

What is the Scheme Consideration?

If the Scheme is implemented, ThinkSmart Shareholders (other than the Excluded Shareholders) will receive the Cash Consideration which is equal to the proceeds realised from the post-Scheme implementation sale on the New York Stock Exchange of the proportion of the 618,750 shares in Block held by ThinkSmart attributable to their fully diluted[8] shareholding in ThinkSmart (net of their proportion of the 0.5% sale fees and after conversion into Pounds Sterling and Australian Dollars, as applicable).

The amount of Cash Consideration actually received by Scheme Shareholders will be dependent on both the price of Block Shares at the time of the sale of the Block Sale Shares and the applicable exchange rates at the time of the conversion of the sale proceeds. Therefore, the amount of Cash Consideration received by Scheme Shareholders will not be known until after the Implementation Date and therefore after ThinkSmart Shareholders are required to vote on the Scheme.

If the Scheme is implemented, Excluded Shareholders will receive

·     if an Excluded Shareholder does not make an Election, one new BidCo Share for each ThinkSmart Share held; or

·     if an Excluded Shareholder does make an Election:

-    the Cash Consideration per Scheme Share to which the Election relates; and

-    the Scrip Consideration (being one BidCo share per Scheme Share) for any Scheme Shares to which the Election does not relate.

If an Excluded Shareholder elects to receive Cash Consideration in respect of some or all of its ThinkSmart Shares, the total number of Block Shares to be sold by ThinkSmart will increase by that proportion of ThinkSmart Shares. This means that the Cash Consideration otherwise received by ThinkSmart Shareholders will not be impacted by an Excluded Shareholder electing to receive some or all of their Scheme Consideration as Cash Consideration.

Section 4.1

When and how will I receive my Cash Consideration?

If the Scheme becomes Effective, Scheme Shareholders entitled to receive Cash Consideration will be sent the Cash Consideration as soon as practicable after the Implementation Date once the Block Sale Shares have been sold and the sale proceeds have been received and converted into the applicable currencies.

The Cash Consideration is expected to be sent approximately 8 Business Days after completion of the sale of the Block Sale Shares.

Scheme Shareholders entitled to receive Cash Consideration will be paid the Cash Consideration in Australian Dollars, except for the Depositary Custodian who will be paid the Cash Consideration in Pounds Sterling (meaning that ThinkSmart DI Holders will receive the Cash Consideration in Pounds Sterling).

The Cash Consideration will be paid:

·     For ThinkSmart DI Holders, by way of assured payment obligation directly through the CREST system.

·     For ThinkSmart Shareholders that are not ThinkSmart DI Holders, as follows:

-    where a Scheme Shareholder has validly elected to receive payments from ThinkSmart in Australian Dollars, by electronic funds transfer to their nominated bank account;

-    by the Global Wire Payment Service, if a Scheme Shareholder who resides outside of Australia has elected to receive payments from ThinkSmart electronically in their local currency using the ThinkSmart Share Registry's Global Wire Payment Service; or

-    otherwise, by cheque in Australian Dollars, dispatched by post to the Scheme Shareholder's registered address.

To provide or update your bank account details or Global Wire Payment Instruction, please visit www.computershare.com.au/easyupdate/TSMU.

Section 4.1

Will I have to pay brokerage?

You will not have to pay brokerage on the transfer of your ThinkSmart Shares to BidCo under the Scheme. However, brokerage will be payable in relation to the sale of the Block Shares and the total sale costs for the sale of the Block Shares are expected to be 0.5% of sale proceeds.

Sections 1.1(g) and 4.1

What are the taxation implications of the Scheme?

The taxation implications of the Scheme will depend on your particular circumstances.

Section 8.1 provides a general description of the Australian taxation consequences for Scheme Shareholders, and section 8.2 provides a general description of the United Kingdom taxation consequences for Scheme Shareholders.

You should seek independent professional taxation advice with respect to your particular circumstances.

Section 8

Conditions to the Scheme

Are there any conditions to the Scheme?

Yes. The Scheme is subject to various conditions precedent that must be satisfied or waived (if capable of waiver) in order for the Scheme to be implemented. These conditions are summarised in section 4.3 and are set out in full in clause 3.1 of the Scheme Implementation Deed.

The conditions include customary conditions in schemes of arrangement (such as shareholder approval, Court approval and the Independent Expert continuing to conclude that the Scheme is in the best interest of ThinkSmart Shareholders (other than the Excluded Shareholders)).

As at the date of this Scheme Booklet, the ThinkSmart Independent Board Committee is not aware of any circumstance which would cause any condition to the Scheme not be satisfied or waived (if capable of waiver).

Section 4.3

What is required for the Scheme to become Effective?

The Scheme will become Effective if:

·     the Scheme is approved by the Requisite Majorities of ThinkSmart Shareholders at each of the Scheme Meetings to be held on 16 November 2022;

·     the Financial Assistance Resolution and Financial Benefit Resolution are approved at the Annual General Meeting to be held prior to the Scheme Meetings;

·     the Court approves the Scheme at the Second Court Hearing; and

·     all of the other conditions precedent to the Scheme are satisfied or waived (if capable of waiver).

N/A

Scheme Meetings

When and where will the General Scheme Meeting be held?

The General Scheme Meeting for ThinkSmart Shareholders (excluding the Excluded Shareholders) will be held virtually via the Computershare Virtual Meeting Platform on 16 November 2022, commencing at 5.00pm (Perth time).

Please see the Notice of General Scheme Meeting in Annexure 4 for further details in relation to the conduct of the General Scheme Meeting.

The General Scheme Meeting may be postponed or adjourned. Any such postponement or adjournment will be announced by ThinkSmart.

Annexure 4

When and where will the Excluded Shareholder Scheme Meeting be held?

The Excluded Shareholder Scheme Meeting for Excluded Shareholders will be held virtually via the Computershare Virtual Meeting Platform on 16 November 2022, commencing at 5.30pm (Perth time).

If the General Scheme Meeting concludes after 5.30pm (Perth time) on this date, the Excluded Shareholder Scheme Meeting will begin as soon as practicable after the conclusion of the General Scheme Meeting.

Please see the Notice of Excluded Shareholder Scheme Meeting in Annexure 5 for further details in relation to the conduct of the Excluded Shareholder Scheme Meeting.

The Excluded Shareholder Scheme Meeting may be postponed or adjourned. Any such postponement or adjournment will be announced by ThinkSmart.

Annexure 5

Why are there two Scheme Meetings in relation to the Scheme?

The reason that there are two Scheme Meetings is that the Excluded Shareholders constitute a separate class of members because they are offered different consideration under the Scheme (being the Scrip Consideration, unless an Excluded Shareholder elects otherwise).

This means that the Excluded Shareholders will not be permitted to vote at the General Scheme Meeting and will instead vote at the Excluded Shareholder Scheme Meeting on a separate Scheme Resolution (being the Excluded Shareholder Scheme Resolution).

Section 4.5

What will Scheme Shareholders be asked to vote on at the Scheme Meetings?

At each respective Scheme Meeting, Scheme Shareholders will be asked to vote on whether to approve the Scheme.

Annexure 4 and Annexure 5

What is the ThinkSmart Shareholder approval threshold for the Scheme?

In order to become Effective, the Scheme must be approved by the Requisite Majorities, being:

(a)   in relation to the General Scheme Resolution, a resolution passed by:

·      unless the Court orders otherwise, a majority in number (more than 50%) of ThinkSmart Shareholders (excluding Excluded Shareholders) present and voting at the General Scheme Meeting (either in person or by proxy, attorney or, in the case of corporate ThinkSmart Shareholders, body corporate representative); and

·      at least 75% of the total number of votes cast on the General Scheme Resolution at the General Scheme Meeting by ThinkSmart Shareholders (excluding Excluded Shareholders) present and voting (either in person or by proxy, attorney or, in the case of corporate ThinkSmart Shareholders, body corporate representative); and

(b)   in relation to the Excluded Shareholder Scheme Resolution, a resolution passed by:

·      unless the Court orders otherwise, a majority in number (more than 50%) of Excluded Shareholders present and voting at the Excluded Shareholder Scheme Meeting (either in person or by proxy, attorney or, in the case of corporate Excluded Shareholders, body corporate representative); and

·      at least 75% of the total number of votes cast on the Excluded Shareholder Scheme Resolution at the Excluded Shareholder Scheme Meeting by Excluded Shareholders present and voting (either in person or by proxy, attorney or, in the case of corporate Excluded Shareholders, body corporate representative).

Even if the Scheme is approved by the Requisite Majorities of Scheme Shareholders at the Scheme Meetings, the Scheme is still subject to the approval of the Court.

Section 4.5

Am I entitled to vote at a Scheme Meeting?

ThinkSmart Shareholders who are recorded on the ThinkSmart Share Register at 5.30pm (Perth time) on 14 November 2022 will be entitled to attend and vote at the applicable Scheme Meeting.

ThinkSmart DI Holders who are recorded on the ThinkSmart DI Register at 6.00pm (London time) on 11 November 2022 will be entitled to access the applicable Scheme Meeting but will not vote at the applicable Scheme Meeting (see below).

Annexure 4 and Annexure 5

How can I vote if I can't attend the Scheme Meetings?

ThinkSmart Shareholders who would like to vote but cannot attend the applicable Scheme Meeting can vote by either appointing a proxy or an attorney. They may also vote by appointing a corporate representative if that option is applicable.

ThinkSmart DI Holders will not vote at the applicable Scheme Meeting. ThinkSmart DI Holders may only vote by completing the Form of Instruction for the applicable Meeting in accordance with the instructions on the form and lodging it with the Depositary or by completing CREST Voting Instructions for the applicable Meeting.

Section 3.2(d), Annexure 4 and Annexure 5

When will the results of the Scheme Meetings be known?

The results of each Scheme Meeting will be available as soon as possible after the conclusion of the Scheme Meetings and will be announced by ThinkSmart via the RNS of the LSE once available.

N/A

Is voting compulsory?

Voting is not compulsory. However, the Scheme will only be successful if it is approved by ThinkSmart Shareholders by the Requisite Majorities at each Scheme Meeting, so voting is important and the ThinkSmart Independent Board Committee encourages you to vote.

The ThinkSmart Independent Board Committee unanimously recommends that ThinkSmart Shareholders vote in favour of the Scheme in the absence of a Superior Proposal, and subject to the Independent Expert continuing to conclude that the Scheme is in the best interests of ThinkSmart Shareholders (other than the Excluded Shareholders).

In light of the arrangements summarised in section 6.1, Mr Ned Montarello, who is the sole shareholder of BidCo, has recused himself from discussions on the Scheme and abstains from giving a recommendation in respect of how ThinkSmart Shareholders should vote on the Scheme.

Section 4.5

What happens to my ThinkSmart Shares if I do not vote, or if I vote against the Scheme, and the Scheme becomes effective and is implemented?

If you do not vote, or vote against the Scheme, the Scheme may still be implemented if it is approved by the Requisite Majorities of ThinkSmart Shareholders and the Court. If this occurs, your ThinkSmart Shares will be transferred to BidCo and you will receive the Scheme Consideration even though you did not vote on, or voted against, the Scheme.

Section 4.5(a)

What happens if the Scheme does not become Effective?

If the Scheme is not implemented:

·      ThinkSmart Shareholders will continue to hold ThinkSmart Shares;

·      ThinkSmart Shareholders will not receive the Scheme Consideration;

·      a Reimbursement Fee up to a maximum of $200,000 (excluding GST) may be payable by ThinkSmart to BidCo under certain circumstances. Those circumstances do not include the failure by ThinkSmart Shareholders to approve the Scheme at the Scheme Meetings;

·      ThinkSmart Shareholders will continue to be exposed to the risks associated with Block Shares through their ThinkSmart shareholding, as well as the ongoing wind down of ThinkSmart's business operations and likely eventual liquidation; and

·      ThinkSmart will continue as an AIM-listed entity incurring ongoing listing and corporate costs.

Sections 4.4 and 7.4(c)

Annual General Meeting

When and where will the Annual General Meeting be held?

The 2022 Annual General Meeting will be held virtually via the Computershare Virtual Meeting Platform on 16 November 2022, commencing at 4.00pm (Perth time).

Please see the Notice of Annual General Meeting in Annexure 6 for further details in relation to the conduct of the Annual General Meeting.

The Annual General Meeting may be postponed or adjourned. Any such postponement or adjournment will be announced by ThinkSmart.

Annexure 6

What are the Financial Assistance Resolution and Financial Benefit Resolution being considered at the Annual General Meeting?

ThinkSmart will provide the Loan (as lender) to BidCo (as borrower) as part of the flow of the sale proceeds from the sale of the Block Sale Shares from ThinkSmart to BidCo, following which the proceeds will be converted to Australian Dollars and Pounds Sterling (as required).

By incurring obligations under the Loan Deed (including to provide the Loan) ThinkSmart will be:

·     giving financial assistance to BidCo to acquire ThinkSmart Shares for the purposes of Part 2J.3 of the Corporations Act; and

·     giving a financial benefit to BidCo for the purposes of Chapter 2E of the Corporations Act.

This must be authorised by ThinkSmart Shareholders for the purposes of sections 260A and 208 of the Corporations Act.

ThinkSmart Shareholders need to approve both the Financial Assistance Resolution and the Financial Benefit Resolution, in addition to the Scheme Resolutions, for the Scheme to be implemented.

Section 9

What is the ThinkSmart Shareholder approval threshold for the Financial Assistance Resolution and Financial Benefit Resolution?

The Financial Assistance Resolution must be approved by a special resolution (ie 75% or more) of ThinkSmart Shareholders (with no votes being cast in favour of the resolution by any of BidCo's associates (being Mr Ned Montarello and the Excluded Shareholders)).

The Financial Benefit Resolution needs to be approved by a simple majority (ie more than 50%) of votes cast by ThinkSmart Shareholders. Mr Ned Montarello and the Excluded Shareholders will also be excluded from voting on this resolution under section 224 of the Corporations Act.

ThinkSmart Shareholders need to approve both the Financial Assistance Resolution and the Financial Benefit Resolution, in addition to the Scheme Resolutions, for the Scheme to be implemented.

Section 9 and Annexure 6

Am I entitled to vote at the Annual General Meeting?

ThinkSmart Shareholders who are recorded on the ThinkSmart Share Register at 5.30pm (Perth time) on 14 November 2022 will be entitled to attend and vote at the Annual General Meeting.

ThinkSmart DI Holders who are recorded on the ThinkSmart DI Register at 6.00pm (London time) on 11 November 2022 will be entitled to access the Annual General Meeting but will not vote at the Annual General Meeting (see below).

Section 9 and Annexure 6

How can I vote if I can't attend the Annual General Meeting?

ThinkSmart Shareholders who would like to vote but cannot attend the Annual General Meeting can vote by either appointing a proxy or an attorney. They may also vote by appointing a corporate representative if that option is applicable.

ThinkSmart DI Holders will not vote at the Annual General Meeting. ThinkSmart DI Holders may only vote by completing the Form of Instruction for the Annual General Meeting in accordance with the instructions on the form and lodging it with the Depositary or by completing CREST Voting Instructions for the Annual General Meeting.

Section 9 and Annexure 6

When will the results of the Annual General Meeting be known?

The results of the Annual General Meeting will be available as soon as possible after the conclusion of the Annual General Meeting and will be announced by ThinkSmart once available.

N/A

Is voting compulsory?

Voting is not compulsory. However, the Scheme will only be successful if the Financial Assistance Resolution and Financial Benefit Resolution are approved by ThinkSmart Shareholders, so voting is important and the ThinkSmart Independent Board Committee encourages you to vote.

The ThinkSmart Independent Board Committee unanimously recommends that ThinkSmart Shareholders vote in favour of the Scheme in the absence of a Superior Proposal and subject to the Independent Expert continuing to conclude that the Scheme is in the best interests of ThinkSmart Shareholders (other than the Excluded Shareholders). The ThinkSmart Independent Board Committee also unanimously recommends that ThinkSmart Shareholders vote in favour of the Financial Assistance Resolution and Financial Benefit Resolution at the Annual General Meeting.

Mr Ned Montarello owns and controls BidCo. Accordingly, he does not make any recommendation in relation to the Financial Assistance Resolution or Financial Benefit Resolution.

Sections 4.5 and 9

Do the Financial Assistance Resolution and Financial Benefit Resolution need to be approved for the Scheme to be implemented?

Yes, for the Scheme to be implemented, ThinkSmart Shareholders need to approve both the Financial Assistance Resolution and the Financial Benefit Resolution, in addition to the Scheme Resolutions.

It is therefore important that ThinkSmart Shareholders vote at the Annual General Meeting in addition to the applicable Scheme Meeting.

Section 9

Other questions

What happens if a Competing Proposal is received?

If a Competing Proposal is received, the ThinkSmart Independent Board Committee will carefully consider it.

ThinkSmart must notify BidCo of that Competing Proposal in accordance with the Scheme Implementation Deed.

ThinkSmart Shareholders should note that ThinkSmart has agreed to certain exclusivity provisions in favour of BidCo under the Scheme Implementation Deed that restrict ThinkSmart's ability to participate in negotiations and discussions in relation to a Competing Proposal (subject to certain fiduciary exceptions).

Section 10.4

What is the performance risk associated with the Scheme?

If the Scheme becomes Effective, ThinkSmart Shareholders will transfer their ThinkSmart Shares to BidCo on the Implementation Date. However, ThinkSmart Shareholders entitled to receive Cash Consideration will not receive their Cash Consideration until after the Implementation Date and the amount of Cash Consideration will be determined by the price at which the Block Sale Shares can be sold for following Implementation.

There is therefore a risk that ThinkSmart Shareholders transfer their ThinkSmart Shares to BidCo on the Implementation Date but that BidCo does not pay the Cash Consideration, in breach of its obligations under the Scheme Implementation Deed, Deed Poll and Funds Flow Deed. However, the ThinkSmart Independent Board Committee considers this risk to be theoretical only, because:

·     it would require BidCo (which is controlled by ThinkSmart's founder and Executive Chairman) to deliberately breach its obligations under the Scheme Implementation Deed, Deed Poll and Funds Flow Deed all of which are legally binding documents which form key elements of the Court supervised process in connection with the Scheme. If, contrary to the ThinkSmart Independent Board Committee's expectation, such a breach did occur, Scheme Shareholders will have an unsecured claim against BidCo under the Deed Poll in relation to the payment of the Cash Consideration; and

·     as a practical matter, under the terms of the Scheme Implementation Deed, the members of the ThinkSmart Independent Board Committee will remain on the ThinkSmart Board until after the Cash Consideration has been despatched to Scheme Shareholders, and so, the ThinkSmart Independent Board Committee will assist with overseeing the payment of the Cash Consideration to the Scheme Shareholders in accordance with the Scheme.

Further details of the performance risk are set out in section 7.4(b).

Section 7

What are the other risks associated with the ThinkSmart business?

In considering the Scheme, ThinkSmart Shareholders should be aware that there are a number of risk factors, both general and specifically relating to ThinkSmart, which may affect the future operating and financial performance of ThinkSmart and the price and/or value of ThinkSmart Shares.

If the Scheme proceeds, ThinkSmart Shareholders will receive the Scheme Consideration, will cease to hold ThinkSmart Shares and will also no longer be exposed to such risks.

If the Scheme does not proceed, ThinkSmart Shareholders will continue to hold ThinkSmart Shares and continue to be exposed to risks associated with investment in ThinkSmart.

In deciding whether to vote in favour of the Scheme, ThinkSmart Shareholders should read this Scheme Booklet carefully and consider the risk factors set out in section 7, as well as the other information contained in this Scheme Booklet before making any decision in relation to the Scheme.

Section 7

Can I sell my ThinkSmart Shares now?

The Scheme does not preclude you from selling some or all of your ThinkSmart Shares prior to the Effective Date.

ThinkSmart intends to apply to AIM for ThinkSmart Shares to be suspended from trading on AIM from 7.30am (London time) on the Effective Date.

ThinkSmart Shareholders who sell some or all of their ThinkSmart Shares:

·     may receive payment (which may vary from the Scheme Consideration) for the sale of their ThinkSmart Shares sooner than they would receive the Scheme Consideration under the Scheme;

·     may incur a brokerage charge;

·     will not be able to participate in the Scheme or, if one emerges, a Superior Proposal, in respect of those ThinkSmart Shares they have sold; and

·     may be liable for income tax (including capital gains tax) on the disposal of their ThinkSmart Shares (as they also may be under the Scheme - see section 8 for further information).

Section 4.2

If the Scheme is implemented, will ThinkSmart cease trading on AIM?

ThinkSmart intends to apply to AIM for ThinkSmart Shares to be suspended from trading on AIM from 7.30am (London time) on the Effective Date.

ThinkSmart then intends to apply for the cancellation of the admission of ThinkSmart Shares to trading on AIM to occur shortly after the Implementation Date.

N/A

What if I have further questions about the Scheme?

For further information, please contact the ThinkSmart Shareholder Information Line on 1300 528 984 (within Australia) or +61 3 9415 4826 (outside Australia), between 8.30am and 5.00pm (Sydney time), Monday to Friday. ThinkSmart DI Holders can contact the dedicated Depositary Interest Information Line on +44 0207 887 2225 or +44 0800 298 7356 (within the United Kingdom) between 9.00am and 5.00pm (London time), Monday to Friday.

If you are in doubt about anything in this Scheme Booklet, please contact your financial, legal, taxation or other professional adviser immediately.

N/A

 



 

3         What should you do?

3.1         Step 1: Read this Scheme Booklet

You should carefully read this Scheme Booklet in its entirety before deciding whether to vote in favour of the Scheme.

If you have any questions, please contact the ThinkSmart Shareholder Information Line on 1300 528 984 (within Australia) or +61 3 9415 4826 (outside Australia), between 8.30am and 5.00pm (Sydney time), Monday to Friday. ThinkSmart DI Holders can contact the dedicated Depositary Interest Information Line on +44 0207 887 2225 or +44 0800 298 7356 (within the United Kingdom) between 9.00am and 5.00pm (London time), Monday to Friday.

If you are in any doubt as to what you should do, please consult your legal, financial, tax or other professional adviser immediately.

3.2         Step 2: Vote on the Scheme

(a)          Your vote is important

For the Scheme to proceed, it is necessary that the Requisite Majorities of ThinkSmart Shareholders vote in favour of the Scheme.

For the Scheme to proceed, ThinkSmart Shareholders will need to approve the Scheme Resolution at the applicable Scheme Meeting and the Financial Assistance Resolution and the Financial Benefit Resolution at ThinkSmart's 2022 Annual General Meeting, which will be held prior to the Scheme Meetings. The ThinkSmart Independent Board Committee encourages ThinkSmart Shareholders to vote at both the Annual General Meeting and the applicable Scheme Meeting.

(b)          Scheme Meetings and Annual General Meeting

The General Scheme Meeting will be held virtually via the Computershare Virtual Meeting Platform at 5.00pm (Perth time) on 16 November 2022. Details about the General Scheme Meeting are set out in the Notice of General Scheme Meeting contained in Annexure 4.

The Excluded Shareholder Scheme Meeting will be held virtually via the Computershare Virtual Meeting Platform at 5.30pm (Perth time) on 16 November 2022. Details about the Excluded Shareholder Scheme Meeting are set out in the Notice of Excluded Shareholder Scheme Meeting contained in Annexure 5.

If the General Scheme Meeting concludes after 5.30pm (Perth time) on 16 November 2022, the Excluded Shareholder Scheme Meeting will begin as soon as practicable after the conclusion of the General Scheme Meeting. Details about the Excluded Shareholder Scheme Meeting are set out in the Notice of Excluded Shareholder Scheme Meeting contained in Annexure 5.

The Annual General Meeting will be held virtually via the Computershare Virtual Meeting Platform prior to the Scheme Meetings at 4.00pm (Perth time) on 16 November 2022. Details about the Annual General Meeting are set out in the Notice of Annual General Meeting contained in Annexure 6.

(c)          Who is entitled to vote?

ThinkSmart Shareholders registered on the ThinkSmart Share Register at 5.30pm (Perth time) on 14 November 2022, will be entitled to vote at:

·                 the Annual General Meeting;

·                 the General Scheme Meeting, if they are not an Excluded Shareholder; and

·                 the Excluded Shareholder Scheme Meeting, if they are an Excluded Shareholder.

ThinkSmart DI Holders who are recorded on the ThinkSmart DI Register at 6.00pm (London time) on 11 November 2022 will be entitled to vote at the Annual General Meeting and the General Scheme Meeting.

(d)          How to vote?

ThinkSmart Shareholders

You may vote:

·                 in person, by attending the relevant Meeting via the Computershare Virtual Meeting Platform. Details regarding how to access the Computershare Virtual Meeting Platform and vote are set out in:

‒    the Notice of General Scheme Meeting for ThinkSmart Shareholders who are not Excluded Shareholders, as contained in Annexure 4 of this Scheme Booklet;

‒    the Notice of Excluded Shareholder Scheme Meeting for Excluded Shareholders, as contained in Annexure 5 of this Scheme Booklet; and

‒    the Notice of Annual General Meeting for ThinkSmart Shareholders, as contained in Annexure 6 of this Scheme Booklet.

·                 by proxy, by lodging a Scheme Meeting proxy form or Annual General Meeting proxy form online at www.investorvote.com.au (Control ID: 181913 (for the Annual General Meeting), 181915 (for the General Scheme Meeting) and 181916 (for the Excluded Shareholder Scheme Meeting)) or by completing, signing and lodging a proxy form for the relevant Meeting in accordance with the instructions set out on the form. To be valid, your proxy form(s) must be received by the ThinkSmart Share Registry by:

‒    5.30pm (Perth time) on 14 November 2022 for ThinkSmart Shareholders voting by proxy at the Annual General Meeting;

‒    5.30pm (Perth time) on 14 November 2022 for ThinkSmart Shareholders (excluding Excluded Shareholders) voting by proxy at the General Scheme Meeting; or

‒    5.30pm (Perth time) on 14 November 2022 for Excluded Shareholders voting by proxy at the Excluded Shareholder Scheme meeting;

·                 by attorney, by appointing an attorney to attend and vote at the relevant Meeting on your behalf and providing a duly executed power of attorney to the ThinkSmart Share Registry by:

‒    5.30pm (Perth time) on 14 November 2022 for ThinkSmart Shareholders voting by attorney at the Annual General Meeting;

‒    5.30pm (Perth time) on 14 November 2022 for ThinkSmart Shareholders (excluding Excluded Shareholders) voting by attorney at the General Scheme Meeting; or

‒    5.30pm (Perth time) on 14 November 2022 for Excluded Shareholders voting by attorney at the Excluded Shareholder Scheme meeting; or

·                 by corporate representative, in the case of a body corporate which is a ThinkSmart Shareholder, by appointing a corporate representative to attend and vote at the relevant Meeting on behalf of that ThinkSmart Shareholder.

Further details on how to vote are contained in Annexure 4, Annexure 5 and Annexure 6.

ThinkSmart DI Holders

If you are entitled to vote and are a ThinkSmart DI Holder, you can do so only:

·                 by completing the Form of Instruction for the applicable Meeting in accordance with the instructions on the form and lodging it with the Depositary at the following address: Computershare Investor Services plc, The Pavilions, Bridgwater Road, Bristol BS99 6ZY by 11 November 2022 at 9.00 am (London time) for the Annual General Meeting or 10.00am (London time) for the General Scheme Meeting; or

·                 by completing CREST Voting Instructions for the applicable Meeting.

ThinkSmart DI Holders should vote through the Form of Instruction or via the CREST voting service using a CREST Voting Instruction. To be effective, the Form of Instruction or the CREST Voting Instruction for each applicable Meeting must be received by the Depositary no later than 9.00am (London time) for the Annual General Meeting or 10.00am (London time) for the General Scheme Meeting on 11 November 2022.

ThinkSmart DI Holders can access the applicable Meeting virtually via the Computershare Virtual Meeting Platform, but cannot vote at the Meeting. ThinkSmart DI Holders can only vote through the process described above. ThinkSmart DI Holders (or their proxies) should submit a request to ThinkSmart at www.thinksmartworld.com/contact to be provided with a link to the Computershare Virtual Meeting Platform.

Further details on how to vote are contained in Annexure 4, Annexure 5 and Annexure 6.



 

4         Overview of the Scheme

4.1         Overview of Scheme Consideration

Cash Consideration

The Cash Consideration under the Scheme relates to the proceeds from the sale of certain Block Shares held by ThinkSmart.

If the Scheme becomes Effective, then:

·                 the Block Sale Shares will be the number of the Block Shares held by ThinkSmart that will be sold and will be referable to the proportion of Scheme Shares held by Scheme Shareholders entitled to receive Cash Consideration. This will be calculated as: 618,750 (being the total number of Block Shares held by ThinkSmart) multiplied by the total number of Relevant Scheme Shares (being the ThinkSmart Shares held by Scheme Shareholders who are entitled to receive Cash Consideration), and divided by the total number of ThinkSmart Shares on issue at that time, rounded to the nearest whole number of Block Shares;

·                 the Broker irrevocably appointed by ThinkSmart and BidCo will be instructed to sell the Block Sale Shares on-market on the New York Stock Exchange as soon as practicable on the next Trading Day following the Implementation Date (and, in any event, within 3 Trading Days following the Implementation Date)[9]; and

·                 BidCo and ThinkSmart will procure that the proceeds from the sale of the Block Sale Shares (subject to certain adjustments as set out in the definition of Block Sale Share Proceeds - see section 11.1 of this Scheme Booklet) are, as soon as practicable, paid to the Scheme Shareholders entitled to receive Cash Consideration under the Scheme:

‒    pro rata to the relative respective holdings of Relevant Scheme Shares of each Scheme Shareholder entitled to receive Cash Consideration;

‒    in the applicable currencies (see below); and

‒    net of any banking charges or fees (including wire transfer fees or corresponding charges) or charges or fees of a similar nature which are incurred with respect to the payment of the Block Sale Share Proceeds to the relevant Scheme Shareholder entitled to receive Cash Consideration under the Scheme and net of any other amounts (including tax) required by law to be withheld (if applicable).

Where the calculation of the Cash Consideration to be provided to a particular Scheme Shareholder would result in the Scheme Shareholder becoming entitled to a fraction of a cent (or a fraction of a pence, where applicable), the fractional entitlement will be rounded down to the nearest whole cent or pence (as applicable).

Variability of the Cash Consideration

The Cash Consideration to be paid under the Scheme is dependent on:

·                 the price of Block Shares on the New York Stock Exchange as at the date of the sale; and

·                 the applicable currency conversion rates as at the date of the conversion of the sale proceeds from United States Dollars to Pounds Sterling and Australian Dollars (as applicable).

Therefore, the Cash Consideration to be paid under the Scheme will not be known until after the Implementation Date and after the date Scheme Shareholders are asked to vote on the Scheme. Accordingly, the amount of Cash Consideration that is ultimately received by Scheme Shareholders may be more or less than was anticipated by the Scheme Shareholders prior to the Scheme Record Date.

ThinkSmart makes no representation that any sale price received for the Block Sale Shares will be the best price available for Block Shares at the relevant time.

The table below demonstrates how the Cash Consideration received by Scheme Shareholders may vary depending on the average price received for the Block Sale Shares.[10] This table is illustrative only and ThinkSmart does not guarantee that the average price received for the Block Sale Shares will be in the ranges noted below.

Average Block Sale Share price realised (USD)

Indicative Cash Consideration per ThinkSmart Share (GBP)

Indicative Cash Consideration per ThinkSmart Share (AUD)

US$44.74, being a 20% discount to the closing price of Block Shares as at the Last Practicable Date

£0.2266

A$0.4083

US$50.33, being a 10% discount to the closing price of Block Shares as at the Last Practicable Date

£0.2550

A$0.4594

US$55.92, being the closing price of Block Shares as at the Last Practicable Date

£0.2833

A$0.5104

US$61.51, being a 10% premium to the closing price of Block Shares as at the Last Practicable Date

£0.3116

A$0.5615

US$67.10, being a 20% premium to the closing price of Block Shares as at the Last Practicable Date

£0.3399

A$0.6125

 

The following chart shows the price of Block Shares over the time period used by the Independent Expert to value the Cash Consideration (see the Independent Expert Report in Annexure 1 for further details):

Entitlement to Cash Consideration

The Scheme Shareholders entitled to receive Cash Consideration under the Scheme are:

·                 the ThinkSmart Shareholders (excluding the Excluded Shareholders) who hold ThinkSmart Shares at the Scheme Record Date; and

·                 any Excluded Shareholder who holds ThinkSmart Shares at the Scheme Record Date and elects to receive Cash Consideration in accordance with the election procedure below.

Currency conversion

As the Block Sale Shares are traded in United States Dollars on the New York Stock Exchange, the Block Sale Share Proceeds will be received in United States Dollars.

The Block Sale Share Proceeds will therefore be converted from United States Dollars into Australian Dollars and Pounds Sterling (as described below). The Scheme Shareholders will bear all foreign exchange risk and costs in relation to any currency conversion undertaken in connection with the conversion and transfer of the Cash Consideration.

The applicable currency conversion rate will be set at the time the Block Sale Share Proceeds are converted and will be equal to the applicable exchange rate that ThinkSmart receives for the transaction. It is likely that the exchange rate received by ThinkSmart will be different to the exchange rate that is published prior to the Scheme Record Date. Accordingly, the amount of Cash Consideration that is ultimately received by Scheme Shareholders may be more or less than was anticipated by the Scheme Shareholders prior to the Scheme Record Date.

ThinkSmart makes no representation that any exchange rate received will be the best exchange rate available.

Cash Consideration payment currencies

Scheme Shareholders entitled to receive Cash Consideration will be paid the Cash Consideration in Australian Dollars, except for the Depositary Custodian who will be paid the Cash Consideration in Pounds Sterling (meaning that the ThinkSmart DI Holders will receive the Cash Consideration in Pounds Sterling).

ThinkSmart Shareholders who reside outside of Australia may, before the Scheme Record Date, elect to receive payments from ThinkSmart electronically in their local currency using the ThinkSmart Share Registry's Global Wire Payment Service.

Withholding tax

As set out in the Scheme Implementation Deed and the definition of "Block Sale Share Proceeds" in this Scheme Booklet, BidCo is entitled to deduct from the Block Sale Share Proceeds any tax (including withholding) which is required to be remitted to a Government Agency (with such tax excluding any income tax or tax on profits). Such withholding tax, if applicable, would reduce the Cash Consideration received by Scheme Shareholders.

Based on Australian, English and United States tax law applicable as at the date of this Scheme Booklet, neither ThinkSmart nor BidCo expect any such withholding tax to apply to the sale of the Block Sale Shares by ThinkSmart and therefore do not expect there to be any associated reduction in the amount of Cash Consideration to be received by Scheme Shareholders entitled to receive Cash Consideration. However, new law (or changes in the way current law is regulated) may occur between the date of this Scheme Booklet and the time when the Block Sale Shares are sold, which could result in withholding tax applying. To the extent that any such change (or potential change) of law arises, BidCo and ThinkSmart intend to communicate this and the associated impact on the Cash Consideration to ThinkSmart Shareholders via ThinkSmart's website at https://www.thinksmartworld.com.

Payment

The Cash Consideration will be sent to the Scheme Shareholders entitled to receive Cash Consideration as soon as practicable after the Implementation Date once the Block Sale Shares have been sold and the Block Sale Share Proceeds have been received and converted into the applicable currencies. Payment is currently expected to be sent to Scheme Shareholders approximately 8 Business Days after completion of the sale of the Block Sale Shares.

It is important to note that you will only receive the Scheme Consideration (including the Cash Consideration, if applicable) if you are a Scheme Shareholder. You will be a Scheme Shareholder if you hold ThinkSmart Shares at the Scheme Record Date.

The Cash Consideration will be paid:

·                 For ThinkSmart DI Holders, by way of assured payment obligation directly through the CREST system.

·                 For ThinkSmart Shareholders that are not ThinkSmart DI Holders, as follows:

‒    where a Scheme Shareholder has, before the Scheme Record Date, validly elected to receive payments from ThinkSmart in Australian Dollars, by electronic funds transfer to the bank account nominated by the Scheme Shareholder;

‒    by the Global Wire Payment Service, if a Scheme Shareholder who resides outside of Australia has, before the Scheme Record Date, elected to receive payments from ThinkSmart electronically in their local currency using the ThinkSmart Share Registry's Global Wire Payment Service; or

‒    otherwise, by cheque in Australian Dollars, dispatched by post to the Scheme Shareholder's registered address.

To provide or update your bank account details or Global Wire Payment Instruction, please visit www.computershare.com.au/easyupdate/TSMU.

Excluded Shareholders

The Excluded Shareholders are those ThinkSmart Shareholders who are associated with BidCo and Mr Ned Montarello. The Excluded Shareholders can elect to receive either Cash Consideration or BidCo Shares (or a combination thereof) as consideration for their Scheme Shares.

If the Scheme becomes Effective, the Excluded Shareholders will be entitled to receive either:

·                 the Scrip Consideration; or

·                 if an Excluded Shareholder makes an Election:

‒    the Cash Consideration per Scheme Share in respect of that number of Scheme Shares held by the Excluded Shareholder on the Scheme Record Date for which the Excluded Shareholder has made an Election (in an Election Form) to receive the Cash Consideration; and

‒    the Scrip Consideration per Scheme Share in respect of the Scheme Shares held by the Excluded Shareholder on the Scheme Record Date for which the Excluded Shareholder has not made an Election (in an Election Form) to receive the Cash Consideration.

Scrip Consideration

If an Excluded Shareholder is entitled to receive Scrip Consideration under the Scheme, then for each ThinkSmart Share held by the Excluded Shareholder as at the Scheme Record Date for which an Election has not been made, the Scrip Consideration is 1 BidCo Share.

Cash Consideration

To make an Election to receive Cash Consideration, the Excluded Shareholder must complete and sign an Election Form and ensure the Election Form is received by ThinkSmart before the Election Time, being 5:00pm on the fifth Business Day before the date of the Scheme Meetings, or such other date as is agreed in writing between BidCo and ThinkSmart. ThinkSmart will make Election Forms available to each Excluded Shareholder.

If an Excluded Shareholder elects to receive Cash Consideration in respect of some or all of its ThinkSmart Shares, the total number of Block Shares to be sold by ThinkSmart (in accordance with the procedure noted above) will increase by that proportion of ThinkSmart Shares.

ThinkSmart Shareholders will receive the sale proceeds (subject to the adjustments noted above) relating to the proportion of the 618,750 Block Shares held by ThinkSmart attributable to their fully diluted[11] shareholding in ThinkSmart as at the Scheme Record Date. This means that the Cash Consideration otherwise received by ThinkSmart Shareholders will not be impacted by an Excluded Shareholder electing to receive some or all of their Scheme Consideration as Cash Consideration.

4.2         Your choices as a ThinkSmart Shareholder

As a ThinkSmart Shareholder who is eligible to vote at the applicable Scheme Meeting, you have the following choices in relation to your ThinkSmart Shares:

Vote in favour of the Scheme

This is the course of action unanimously recommended by the ThinkSmart Independent Board Committee, in the absence of a Superior Proposal and subject to the Independent Expert continuing to conclude that the Scheme is in the best interest of ThinkSmart Shareholders (other than the Excluded Shareholders).

To follow the ThinkSmart Independent Board Committee's unanimous recommendation, you should:

·                 vote in favour of the Scheme at the applicable Scheme Meeting on 16 November 2022; and

·                 vote in favour of the Financial Assistance Resolution and Financial Benefit Resolution at ThinkSmart's 2022 Annual General Meeting, which will be held prior to the Scheme Meetings.

For a summary of how to vote on the Scheme, please refer to section 3, the Notice of General Scheme Meeting contained in Annexure 4 (for ThinkSmart Shareholders excluding Excluded Shareholders), the Notice of Excluded Shareholder Scheme Meeting contained in Annexure 5 (for Excluded Shareholders) and the Notice of Annual General Meeting contained in Annexure 6.

Vote against the Scheme

If, despite the ThinkSmart Independent Board Committee's unanimous recommendation and the Independent Expert's conclusion that the Scheme is fair and reasonable and therefore in the best interest of ThinkSmart Shareholders (other than the Excluded Shareholders), you do not support the Scheme, you may vote against the Scheme at the applicable Scheme Meeting on 16 November 2022 and against the Financial Assistance Resolution and Financial Benefit Resolution at the Annual General Meeting, which will be held prior to the Scheme Meetings.

However, if all the Conditions Precedent to the Scheme are satisfied or waived (if capable of waiver) and the Scheme becomes Effective and is implemented, the Scheme will bind all Scheme Shareholders, including those who vote against the Scheme Resolution at the applicable Scheme Meeting (and/or those that vote against the Financial Assistance Resolution and Financial Benefit Resolution at the Annual General Meeting) and those who do not vote at all.

As noted in ThinkSmart's RNS announcement dated 29 July 2022, Mr Ned Montarello has confirmed he intends to vote in favour of the Scheme in respect of all the ThinkSmart Shares he holds or controls. Accordingly, the Excluded Shareholder Scheme Resolution is expected to be passed at the Excluded Shareholder Scheme Meeting.

Sell your ThinkSmart Shares or ThinkSmart Depositary Interests

The Scheme does not preclude you from selling some or all of your ThinkSmart Shares prior to the Effective Date.

ThinkSmart intends to apply to AIM for ThinkSmart Shares to be suspended from trading on AIM from 7.30am (London time) on the Effective Date.

ThinkSmart Shareholders who sell some or all of their ThinkSmart Shares:

·                 are likely to receive payment (which may vary from the Scheme Consideration) for the sale of their ThinkSmart Shares sooner than they would receive the Scheme Consideration under the Scheme;

·                 may incur a brokerage charge;

·                 will not be able to participate in the Scheme or, if one emerges, a Superior Proposal, in respect of those ThinkSmart Shares they have sold; and

·                 may be liable for income tax (including capital gains tax) on the disposal of their ThinkSmart Shares (as they also may be under the Scheme - see section 8 for further information).

Do nothing

ThinkSmart Shareholders who elect not to vote at the relevant Scheme Meeting or do not sell their ThinkSmart Shares will:

·                 if the Scheme is implemented - have any ThinkSmart Shares held by them as at the Scheme Record Date transferred to BidCo by operation of the Scheme and receive the Scheme Consideration; or

·                 if the Scheme is not implemented - retain their ThinkSmart Shares.

4.3         Conditions to the Scheme

Implementation of the Scheme is subject to the following outstanding conditions precedent:

(a)          Regulatory approvals: the UK Financial Conduct Authority providing the necessary approvals under the UK Financial Services and Markets Act 2000, and ASIC issuing or providing all relief, waivers, confirmations, exemptions, consents or approvals necessary to implement the Scheme (with such approvals not being revoked before 8.00am on the Second Court Date);

(b)          Shareholder approval: the Requisite Majorities of ThinkSmart Shareholders approve the Scheme at the Scheme Meetings;

(c)          Independent Expert: the Independent Expert does not change its conclusion or withdraw its Independent Expert's Report before 8.00am on the Second Court Date;

(d)          Court approval: the Court approves the Scheme in accordance with section 411(4)(b) of the Corporations Act;

(e)          Financial Assistance Resolution and Financial Benefit Resolution: ThinkSmart Shareholders approve the Financial Assistance Resolution and Financial Benefit Resolution at the Annual General Meeting;

(f)           Restraints: no restraining order, injunction or other order that would prevent or delay the Scheme made by a court of competent jurisdiction or Government Agency is in effect at 8.00am on the Second Court Date;

(g)          No Target Prescribed Occurrence or Target Regulated Event: no Target Prescribed Occurrence or Target Regulated Event (each as defined in the Scheme Implementation Deed) occurs between (and including) 29 July 2022 and 8.00am on the Second Court Date; and

(h)          Sale of Block Shares: ThinkSmart not selling, disposing of or otherwise dealing with any Block Shares (other than in accordance with the Scheme Implementation Deed) between (and including) 29 July 2022 and 8.00am on the Second Court Date.

The Scheme was also subject to the following conditions, which have been satisfied:

(a)          Broker: the Broker having been appointed in accordance with the Scheme Implementation Deed.

The Scheme will not proceed unless all of the conditions precedent to the Scheme are satisfied or waived (as applicable) in accordance with the Scheme Implementation Deed.

As at the date of this Scheme Booklet, none of the Independent Directors or BidCo Directors are aware of any circumstances which would cause any condition precedent not to be satisfied.

4.4         Implications if the Scheme does not become Effective

If the Scheme is not implemented:

·                 ThinkSmart Shareholders will continue to hold ThinkSmart Shares and will be exposed to general risks as well as risks specific to ThinkSmart, including those set out in section 7.

·                 ThinkSmart Shareholders will not receive the Scheme Consideration.

·                 A reimbursement fee of up to $200,000 (excluding GST) may be payable by ThinkSmart to BidCo under certain circumstances. Those circumstances do not include the failure by ThinkSmart Shareholders to approve the Scheme at the Scheme Meetings. Further information on the reimbursement fee is set out in section 10.4(g).

·                 ThinkSmart Shareholders will continue to be exposed to the ThinkSmart business, meaning:

‒    they will continue to have exposure to Block Shares through their ThinkSmart shareholding. The risks associated with Block (including those set out in section 7.2(a) will therefore continue to apply to ThinkSmart Shareholders;

‒    the ThinkSmart Directors will consider alternate opportunities in respect of ThinkSmart's Block Shares, including whether to retain such shareholding or to sell ThinkSmart's Block Shares, and what to do with the proceeds from any such sale. As at the date of this Scheme Booklet, the ThinkSmart Directors have not made any decision regarding ThinkSmart's Block Shares should the Scheme not become Effective; and

‒    they will remain exposed to the ongoing wind down of ThinkSmart's business operations and likely eventual liquidation. This includes the uncertainty relating to the timing of any exit for ThinkSmart Shareholders, if the ThinkSmart Group were to be liquidated following conclusion of the wind down of ThinkSmart's business operations, noting there may also be significant costs involved in a liquidation scenario as well as the time taken to complete the liquidation process before a final distribution of any remaining cash could be made to ThinkSmart Shareholders.

·                 ThinkSmart will have incurred approximately £0.7 million of costs relating to the Scheme.

·                 ThinkSmart will continue as an AIM-listed entity incurring ongoing listing and corporate costs with management continuing to wind down the legacy leasing business and provision of an outsourced call centre customer support service to support the Clearpay business which can be terminated at any time with 3 months' notice.

·                 The ThinkSmart Independent Board Committee expects that the costs of maintaining ThinkSmart as a listed entity until completion of the wind down would likely exceed the cash generated from the wind down of its business operations.

·                 Since the announcement of the Scheme on 29 July 2022, the average discount that ThinkSmart Shares trade to the market value of its Block shareholding has reduced from approximately 31% (for the period between 1 February 2022 (when ThinkSmart first received the Block Shares) and 28 July 2022) to approximately 12% (for the period between 29 July 2022 and the Last Practicable Date).[12] If the Scheme is not implemented, it is likely that the price of a ThinkSmart Share will change such that the discount to the market value of its Block shareholding will increase (subject to any changes to the Block Share price).

4.5         Key steps in the Scheme

(a)          Scheme Meetings and Scheme approval requirements

The Court has ordered ThinkSmart to convene the Scheme Meetings at which ThinkSmart Shareholders will be asked to approve the Scheme.

The terms of the Scheme Resolutions to be considered at the Scheme Meetings are contained in the Notice of General Scheme Meeting in Annexure 4 (for ThinkSmart Shareholders excluding Excluded Shareholders) and the Notice of Excluded Shareholder Scheme Meeting in Annexure 5 (for Excluded Shareholders).

ThinkSmart Shareholders (excluding Excluded Shareholders) are to vote on the General Scheme Resolution at the General Scheme Meeting. Excluded Shareholders are to vote on the Excluded Shareholder Scheme Resolution at the separate Excluded Shareholder Scheme Meeting.

The Scheme will only become Effective and be implemented if:

·                 it is approved by the Requisite Majorities of ThinkSmart Shareholders at each applicable Scheme Meeting;

·                 ThinkSmart Shareholders approve the Financial Assistance Resolution and the Financial Benefit Resolution at ThinkSmart's 2022 Annual General Meeting;

·                 it is approved by the Court at the Second Court Hearing; and

·                 the other conditions precedent to the Scheme outlined in section 4.3 are satisfied or waived (as applicable).

The Requisite Majorities of ThinkSmart Shareholders to approve the Scheme are:

1             in relation to the General Scheme Resolution, a resolution passed by:

‒    unless the Court orders otherwise, a majority in number (more than 50%) of ThinkSmart Shareholders (excluding Excluded Shareholders) present and voting at the General Scheme Meeting (either in person or by proxy, attorney or, in the case of corporate ThinkSmart Shareholders, body corporate representative); and

‒    at least 75% of the total number of votes cast on the General Scheme Resolution at the General Scheme Meeting by ThinkSmart Shareholders (excluding Excluded Shareholders) present and voting (either in person or by proxy, attorney or, in the case of corporate ThinkSmart Shareholders, body corporate representative); and

2             in relation to the Excluded Shareholder Scheme Resolution, a resolution passed by:

‒    unless the Court orders otherwise, a majority in number (more than 50%) of Excluded Shareholders present and voting at the Excluded Shareholder Scheme Meeting (either in person or by proxy, attorney or, in the case of corporate Excluded Shareholders, body corporate representative); and

‒    at least 75% of the total number of votes cast on the Excluded Shareholder Scheme Resolution at the Excluded Shareholder Scheme Meeting by Excluded Shareholders present and voting (either in person or by proxy, attorney or, in the case of corporate Excluded Shareholders, body corporate representative).

The Court has the power to waive the first requirements referred to in paragraphs (1) and (2) above.

The entitlement of ThinkSmart Shareholders to attend and vote at the Scheme Meetings is set out in the Notice of General Scheme Meeting in Annexure 4 (for ThinkSmart Shareholders excluding Excluded Shareholders) and the Notice of Excluded Shareholder Scheme Meeting in Annexure 5 (for Excluded Shareholders).

Details of the Financial Assistance Resolution and the Financial Benefit Resolution are set out in section 9. The entitlement of ThinkSmart Shareholders to attend and vote at the Annual General Meeting is set out in the Notice of Annual General Meeting in Annexure 6.

As at the Last Practicable Date, ThinkSmart DI Holders represent approximately 47% of the ordinary fully paid shares of ThinkSmart. If necessary, ThinkSmart intends to seek a declaration from the Court at the Second Court Date to include the ThinkSmart DI Holders who provide voting instructions to the Depositary Custodian as if they were present at the meeting for the purpose of calculating the majority in number present and voting at the General Scheme Meeting.

The objective in seeking that declaration would be to treat ThinkSmart DI Holders in a way that is consistent with the ThinkSmart Shareholders that do not hold their ThinkSmart Shares via the ThinkSmart Depositary Interests. In the absence of the declaration, the ThinkSmart DI Holders would be represented by one proxy at the applicable Meeting and thus would count as only one ThinkSmart Shareholder for the purpose of calculating the number present and voting at the applicable Meeting.

The granting of such declaration (if sought by ThinkSmart) and the terms of it are at the discretion of the Court.

Voting is not compulsory. However, the ThinkSmart Independent Board Committee unanimously recommends that ThinkSmart Shareholders vote in favour of the Scheme in the absence of a Superior Proposal, and subject to the Independent Expert continuing to conclude that the Scheme is in the best interests of ThinkSmart Shareholders (other than the Excluded Shareholders).

You should be aware that even if you do not vote, or vote against the Scheme, the Scheme may still be implemented if it is approved by the Requisite Majorities of ThinkSmart Shareholders and the Court. If this occurs, your ThinkSmart Shares will be transferred to BidCo and you will receive the Scheme Consideration even though you did not vote on, or voted against, the Scheme.

The results of each Scheme Meeting will be available as soon as possible after the conclusion of the Scheme Meetings and will be announced by ThinkSmart via the RNS of the LSE once available.

(b)          Excluded Shareholders and the Excluded Shareholder Scheme Meeting

The Excluded Shareholders are listed in section 11.1 of this Scheme Booklet. As at the Last Practicable Date, the Excluded Shareholders own 31,342,286 ThinkSmart Shares.

Because the Excluded Shareholders are offered a different form of consideration under the Scheme to all other ThinkSmart Shareholders (see section 4.1 of this Scheme Booklet), their rights under the Scheme differ from those of other ThinkSmart Shareholders under the Scheme such that they constitute a separate class of shareholders for the purposes of voting on the Scheme. This means that the Excluded Shareholders will not be permitted to vote at the General Scheme Meeting and will instead vote at the Excluded Shareholder Scheme Meeting on a separate Scheme Resolution (being the Excluded Shareholder Scheme Resolution).

The Excluded Shareholder Scheme Resolution must be passed at the Excluded Shareholder Scheme Meeting by the Requisite Majorities (of Excluded Shareholders). As noted in ThinkSmart's RNS announcement dated 29 July 2022, Mr Ned Montarello has confirmed he intends to vote in favour of the Scheme in respect of all the ThinkSmart Shares he holds or controls. Accordingly, the Excluded Shareholder Scheme Resolution is expected to be passed at the Excluded Shareholder Scheme Meeting.

In addition, the Excluded Shareholders will not be permitted to vote on the Financial Assistance Resolution and the Financial Benefit Resolution, as set out in section 9 of this Scheme Booklet.

(c)          Court approval of the Scheme

In the event that:

·                 the Scheme is approved by the Requisite Majorities of ThinkSmart Shareholders at each of the Scheme Meetings; and

·                 all other conditions precedent to the Scheme (except Court approval of the Scheme) have been satisfied or waived (as applicable),

then ThinkSmart will apply to the Court for orders approving the Scheme.

Each ThinkSmart Shareholder has the right to appear at the Second Court Hearing.

(d)          Effective Date

If the Court approves the Scheme, the Scheme will become Effective on the Effective Date, being the date an office copy of the Court order from the Second Court Hearing approving the Scheme is lodged with ASIC. ThinkSmart will, on the Scheme becoming Effective, give notice of that event to AIM.

ThinkSmart intends to apply to AIM for ThinkSmart Shares to be suspended from trading on AIM from 7.30am (London time) on the Effective Date.

(e)          Scheme Record Date and entitlement to Scheme Consideration

ThinkSmart Shareholders who are recorded on the ThinkSmart Share Register on the Scheme Record Date (currently expected to be 5.00pm (Perth time) on 25 November 2022 or such other time and date as the parties agree in writing) will be entitled to receive the Scheme Consideration in respect of the ThinkSmart Shares they hold at that time.

ThinkSmart DI Holders who are recorded on the ThinkSmart DI Register on the Scheme Record Date (currently expected to be 6.00pm (London time) on 25 November 2022 or such other time and date as the parties agree in writing) will be entitled to receive the Scheme Consideration in respect of the ThinkSmart Shares their ThinkSmart Depositary Interests relate to at that time.

(1)           Dealings on or prior to the Scheme Record Date

For the purposes of determining which ThinkSmart Shareholders are eligible to participate in the Scheme, dealings in ThinkSmart Shares will be recognised only if:

·                 in the case of dealings of the type to be effected by CREST, the transferee is registered in the ThinkSmart DI Register as the holder of the relevant ThinkSmart Depositary Interests on or before the Scheme Record Date; and

·                 in all other cases, registrable transfer or transmission applications in respect of those dealings, or valid requests in respect of other alterations, are received by the ThinkSmart Share Registry before the Scheme Record Date (and the transferee remains registered as at the Scheme Record Date).

For the purposes of determining entitlements under the Scheme, ThinkSmart will not accept for registration or recognise any transfer or transmission applications in respect of ThinkSmart Shares or ThinkSmart Depositary Interests received after the Scheme Record Date.

(2)           Dealings after the Scheme Record Date

For the purpose of determining entitlements to the Scheme Consideration, ThinkSmart and the Depositary must maintain the ThinkSmart Share Register and ThinkSmart DI Register in its form as at the Scheme Record Date until the Implementation Date. The ThinkSmart Share Register and ThinkSmart DI Register in this form will solely determine entitlements to the Scheme Consideration.

After the Scheme Record Date:

·                 all certificates and statements of holding for ThinkSmart Shares including statements of holding for ThinkSmart Depositary Interests (other than statements of holding in favour of BidCo) will cease to have effect as documents relating to title in respect of such ThinkSmart Shares; and

·                 each entry on the ThinkSmart Share Register or ThinkSmart DI Register (other than entries on the ThinkSmart Share Register in respect of BidCo) will cease to have effect except as evidence of entitlement to the Scheme Consideration in respect of the ThinkSmart Shares relating to that entry.

(f)           Implementation Date

On the Implementation Date, the Scheme Shares will be transferred to BidCo.

(g)          Payment of Scheme Consideration

As described in section 4.1 of this Scheme Booklet, following Implementation of the Scheme, the Broker appointed by ThinkSmart and BidCo, will be instructed to sell the Block Sale Shares on-market on the New York Stock Exchange as soon as practicable on the next Trading Day following the Implementation Date (and, in any event, within 3 Trading Days following the Implementation Date).

BidCo and ThinkSmart will procure that the proceeds from the sale of the Block Sale Share (subject to certain adjustments as set out in the definition of Block Sale Share Proceeds - see section 11.1 of this Scheme Booklet) are, as soon as practicable, paid to the Scheme Shareholders entitled to receive Cash Consideration under the Scheme:

·                 pro rata to the relative respective holdings of Relevant Scheme Shares of each Scheme Shareholder entitled to receive Cash Consideration;

·                 in accordance with the applicable currencies (see section 4.1); and

·                 net of any banking charges or fees (including wire transfer fees or corresponding charges) or charges or fees of a similar nature which are incurred with respect to the payment of the Block Sale Share Proceeds to the relevant Scheme Shareholder entitled to receive Cash Consideration under the Scheme and net of any other amounts (including tax) required by law to be withheld (if applicable).

BidCo is contractually obliged, under the Scheme Implementation Deed, to pay the Scheme Consideration to the Scheme Shareholders.

In addition, as at the date of this Scheme Booklet, a Deed Poll has been entered into by BidCo in favour of the Scheme Shareholders. Under the Deed Poll, BidCo covenants in favour of the Scheme Shareholders to:

·                 provide, or procure the provision of, the Scheme Consideration to each Scheme Shareholder, subject to the Scheme becoming Effective; and

·                 undertake all other actions attributed to BidCo under the Scheme.

The Deed Poll may be relied on and enforced by any Scheme Shareholder in accordance with its terms even though the Scheme Shareholders are not party to it. A copy of the Deed Poll is contained in Annexure 3.

To further support BidCo's obligation to pay the Cash Consideration to Scheme Shareholders, BidCo and ThinkSmart have entered into the following:

·                 Broker Agreement between ThinkSmart, BidCo and the Broker, under which the Broker is irrevocably appointed to sell the Block Sale Shares and is obliged to remit the proceeds back to ThinkSmart; and

·                 Funds Flow Deed between ThinkSmart and BidCo, which sets out the flow of proceeds to ThinkSmart Shareholders once the Block Sale Shares have been sold, including the applicable currency conversions.

4.6         Warranties by Scheme Shareholders

Under the terms of the Scheme, each Scheme Shareholder is taken to have warranted to ThinkSmart and BidCo, and appointed and authorised ThinkSmart as its attorney and agent to warrant to BidCo, on the Implementation Date, that:

·                 all their ThinkSmart Shares (including any rights and entitlements attaching to those shares) which are transferred under the Scheme will, at the date of transfer, be fully paid and free from all mortgages, charges, liens, encumbrances, pledges, security interests (including any 'security interests' within the meaning of section 12 of the Personal Property Securities Act 2009 (Cth)) and interests of third parties of any kind, whether legal or otherwise, and restrictions on transfer of any kind; and

·                 they have full power and capacity to transfer their Scheme Shares to BidCo together with any rights attaching to those shares.

4.7         Cancellation of admission to AIM

ThinkSmart will apply for the cancellation of the admission of ThinkSmart Shares to trading on AIM to occur shortly after the Implementation Date.



 

5         Information about ThinkSmart

5.1         Introduction

ThinkSmart's origins are as a specialist digital payments platform business with operations within retail consumer and business finance.

ThinkSmart was listed on the Australian Securities Exchange on 4 June 2007 and transferred its listing from the ASX to the Alternative Investment Market of the London Stock Exchange in 2016, following the sale of its Australian operations and expansion into the United Kingdom market, in order to better align its listing with its principal place of business.

Over the years, ThinkSmart has had operations in providing point-of-sale lease finance for high-volume small-ticket electronic and commercial equipment in Australia and the United Kingdom, including B2B (business-to-business) and B2C (business-to-consumer) point-of-sale lease finance through its longstanding relationships with retail businesses.

ThinkSmart's current business strategy is to deliver shareholder value through managing its shareholding in Block (see section 5.2 below), while managing the orderly wind down of its legacy leasing business and providing an outsourced call centre customer support service for Clearpay.

Further information on ThinkSmart and its operations is available on its website at https://www.thinksmartworld.com.

5.2         Business overview

(a)          ThinkSmart's shareholding in Block

ThinkSmart currently holds 618,750 shares in Block, Inc., a global fintech company incorporated in Delaware, United States. Block became a public company and Block's Class A Shares were listed on the New York Stock Exchange on 19 November 2015 under the symbol SQ.

Block provides financial services and digital payment solutions to international markets by creating tools that empower businesses, sellers and individuals to participate in the economy. Block provides more than 30 distinct products and services to sellers (together the "seller ecosystem"), while through Block's Cash App, it provides a parallel ecosystem of financial services to support individuals in managing their money (together the "Cash App ecosystem").

Block acquired Afterpay in 2022 and also owns a majority ownership stake in TIDAL, a global music and entertainment platform that seeks to expand Block's purpose of economic empowerment to artists. Block also recently launched TBD, a bitcoin-focused ecosystem established to build an open developer platform with the sole goal of making it easy to create non-custodial, permissionless, and decentralised financial services.

Block's financial model is based on the recurrent use of its tools, attracting transaction-based revenue, subscription and services-based revenue, hardware revenue and bitcoin revenue. Block has a market capitalisation of approximately US$33 billion as at the close of trading on NYSE on the Last Practicable Date.

Clearpay is a "buy now pay later" specialist digital payments platform business developed by ThinkSmart.

In August 2018, the ThinkSmart Group sold 90% of the shares in Clearpay Finance Ltd (ThinkSmart's wholly owned subsidiary which operated the Clearpay business) to Afterpay Ltd for £10.5 million, delivering a profit on sale of £7.9 million. Following the announcement of the intended takeover of Afterpay by Block (at the time named Square, Inc.) in November 2021, which entitled Afterpay to exercise its call option to buy the remaining shares in Clearpay held by ThinkSmart in cash at any time following the change of control, the ThinkSmart Group agreed with Afterpay to sell its remaining 10% shareholding in Clearpay to Afterpay in exchange for 1.65 million shares in Afterpay, subject to ThinkSmart shareholder approval, which was given on 14 January 2022.

ThinkSmart's Afterpay shares were subsequently exchanged for 618,750 shares in Block, following the completion of the takeover of Afterpay by Block, on 1 February 2022. On 1 February 2022 Block Shares had a closing share price on the New York Stock Exchange of US$127.61 which, by the Last Practicable Date, had reduced to US$55.92 in line with the reduction in share prices of global technology stocks.

Since acquiring the Block Shares, ThinkSmart Shares have typically traded at an approximate 31% average discount to the market value of its Block shareholding and have continued to do so after the 1 July 2022 record date for the A$4.4 million (£2.5 million equivalent[13]) capital return and dividend payment which was paid to ThinkSmart shareholders on 15 July 2022. This July 2022 payment to shareholders takes the total capital return and dividend payments by ThinkSmart to its shareholders, since the sale of 90% of Clearpay in August 2018, to A$30.5 million (£16.7 million equivalent[14]).

As announced on 13 May 2022, ThinkSmart has been undertaking a strategic review of its Block shareholding and has considered a number of options to maximise shareholder value (which included reviewing BidCo's proposal to acquire all the shares in ThinkSmart as described above). The proposed Scheme is the culmination of that review.

(b)          ThinkSmart's legacy leasing business and call centre customer support service

ThinkSmart's business operations comprise the legacy leasing business and provision of an outsourced call centre customer support service to support the Clearpay business which can be terminated at any time with three months' notice.

ThinkSmart's legacy leasing business operations are currently in managed wind down following the cessation of new leasing volumes origination in February 2021. As at 30 June 2022, the ThinkSmart Group's finance lease receivables had a gross receivable balance of £0.7 million and an average term outstanding of seven months (with a maximum term outstanding of 28 months).

Whilst the managed wind down has yielded positive cash flows to date, due to the ThinkSmart business' declining revenues associated with the wind down and the fixed costs associated with maintaining an AIM listing and related corporate overhead costs, the ThinkSmart business is now entering a period of being cash flow negative. Following the A$4.4 million (£2.5 million equivalent[15]) capital return and dividend payment on 15 July 2022, the ThinkSmart Group's cash balance as at the Last Practicable Date is approximately £2.8 million and it is expected that this balance will continue to reduce if ThinkSmart remains listed going forward, as a result of ongoing operational and corporate costs exceeding its income, transaction costs relating to the Scheme and the eventual costs of liquidating the ThinkSmart Group.

5.3         ThinkSmart Board and senior management

(a)          ThinkSmart Board

The ThinkSmart Board comprises the following directors:

Name

Position

Mr Ned Montarello

Executive Chairman

Mr Peter Joshua Thomas Gammell

Independent Non-Executive Director

Mr David Alexander Robertson Adams

Independent Non-Executive Director

Mr Gary Robert Halton

Director

(b)          ThinkSmart senior management

ThinkSmart's senior management comprises the following members:

Name

Position

Mr Ned Montarello

Chief Executive Officer

Mr Gary Robert Halton

Chief Financial Officer

 

5.4         Historical financial information

(a)          Basis of preparation

This section 5.4 sets out a summary of historical financial information in relation to ThinkSmart for the purpose of this Scheme Booklet. The financial information has been derived from ThinkSmart's financial statements for the financial years ended 30 June 2022, 2021 and 2020, which were audited by BDO Audit (WA) Pty Ltd.

The historical financial information of ThinkSmart is presented in an abbreviated form and does not contain all the disclosures, presentation, statements or comparatives that are usually provided in an annual report prepared in accordance with the Corporations Act. ThinkSmart considers that for the purposes of this Scheme Booklet the historical financial information presented in an abbreviated form is more meaningful to ThinkSmart Shareholders.

Further detail on ThinkSmart's financial performance can be found in:

·                 the financial statements for the year ended 30 June 2022 (included in the announcement of the results for the year ended 30 June 2022 released on RNS on 15 September 2022);

·                 the financial statements for the year ended 30 June 2021 (included in the announcement of the results for the year ended 30 June 2021 released on RNS on 14 September 2021); and

·                 the financial statements for the year ended 30 June 2020 (included in the announcement of the results for the year ended 30 June 2020 released on RNS on 17 September 2020),

each of which can be found on ThinkSmart's website (thinksmartworld.com) or the LSE website (londonstockexchange.com).

(b)          Historical consolidated statement of profit & loss and other comprehensive income

 

12 Months to 30 June 2022

£,000

12 Months to 30 June 2021

£,000

12 Months to 30 June 2020

£,000





Revenue

3,269

4,286

6,079

Other revenue

207

62

253

Total revenue

3,476

4,348

6,332





Customer acquisition cost

(74)

(258)

(627)

Cost of inertia assets sold

(166)

(335)

(700)

Other operating expenses

(2,704)

(3,431)

(4,270)

Depreciation and amortisation

(802)

(1,401)

(2,047)

Impairment gains/(losses)

(103)

41

(2)

(Losses)/gains on Financial Instruments

(93,696)

71,267

54,418

Other gains

-

1,450

-

(Loss)/profit before tax

(94,069)

71,681

53,104

Income tax charge

(11)

(17)

(62)

Net (loss)/profit after tax - attributable to owners of the Company

(94,080)

71,664

53,042





Other comprehensive income/(loss)




Items that may be reclassified subsequently to profit or loss, net of income tax:




Foreign currency translation differences for foreign operations

(13)

(43)

146





Total items that may be reclassified subsequently to profit or loss net of income tax

(13)

(43)

146

Other comprehensive income/(loss) for the year, net of income tax

(13)

(43)

146

Total comprehensive (loss)/income for the year attributable to owners of the Company

(94,093)

71,621

53,188

 

(c)          Historical consolidated statement of financial position

 

As at 30 June 2022

£,000

As at 30 June 2021

£,000

As at 30 June 2020

£,000

Current assets

 

 

 

Cash and cash equivalents

5,536

7,067

8,805

Trade receivables

17

55

129

Finance lease receivables

866

38

431

Financial assets at fair value through profit or loss

31,304

-

-

Other current assets

231

380

924

Total current assets

37.954

7,540

10,289

Non-current assets




Finance lease receivables

46

-

15

Plant and equipment

98

302

460

Intangible assets

188

590

1,433

Financial assets at fair value through profit or loss

-

125,000

53,733

Contract assets

-

777

1,430

Other non-current assets

3

2,069

2,147

Total non-current assets

335

128,738

59,218

Total assets

38,289

136,278

69,507

Current liabilities




Trade and other payables

(1,043)

(728)

(1,195)

Lease liabilities

(46)

(103)

(94)

Contract liabilities

(39)

(410)

(648)

Provisions

(167)

(202)

(255)

Total current liabilities

(1,295)

(1,443)

(2,192)

Non-current liabilities




Lease liabilities

-

(46)

(148)

Contract liabilities

-

(332)

(679)

Total non-current liabilities

-

(378)

(827)

Total liabilities

(1,295)

(1,821)

(3,019)

Net assets

36,994

134,457

66,488

 




Equity




Issued capital

7,862

10,413

13,164

Reserves

(2,888)

(2,875)

(2,832)

Accumulated profits

32,020

126,919

56,156

Total equity

36,994

134,457

66,488

 

(d)          Historical consolidated statement of cash flows


12 Months to 30 June 2022

£,000

12 Months to 30 June 2021

£,000

12 Months to 30 June 2020

£,000

Cash Flows from Operating Activities




Receipts from customers

3,152

4,033

4,741

Payments to suppliers and employees

(2,832)

(3,796)

(4,670)

(Payments)/receipts in respect of lease receivables

(746)

511

3,244

Payments from other interest-bearing liabilities, inclusive of related costs

-

-

(2,533)

Interest received

61

65

108

Interest and finance charges paid

(10)

(92)

(380)

Receipts/(payments) from security guarantee

2,021

35

(29)

Income tax (paid)/received

(11)

(17)

478

Other gains receipts

-

1,450

-

Net cash from operating activities

1,635

2,189

959

Cash Flows from Investing Activities




Payments for plant and equipment

(41)

(17)

(398)

Payment for intangible assets - software & contract rights

-

(122)

(111)

Payments for purchase of financial instruments

-

-

(987)

Receipts from sale of financial instruments

-

-

5,376

Net cash (used in)/from investing activities

(41)

(139)

3,880

Cash Flows from Financing Activities




Payment of lease liabilities

(103)

(93)

(114)

Dividends paid

(458)

(901)

(1,135)

Proceeds from share issue net of costs

8

6

-

Return of capital net of costs

(2,559)

(2,757)

(2,047)

Net cash used in financing activities

(3,112)

(3,745)

(3,296)





Net (decrease)/increase in cash and cash equivalents

(1,518)

(1,695)

1,543

Effect of exchange rate fluctuations on cash held

(13)

(43)

163

Cash and cash equivalents at beginning of the financial year

7,067

8,805

7,099

Total cash and cash equivalents at the end of the financial period

5,536

7,067

8,805

Restricted cash and cash equivalents at the end of the financial period

(62)

(60)

(61)

Net available cash and cash equivalents at the end of the financial period

5,474

7,007

8,744

 




 

5.5         Material changes in financial position (since 30 June 2022)

Other than as disclosed in this Scheme Booklet, including in relation to the A$4.4 million (£2.5 million equivalent[16]) capital return and dividend payment which was paid to ThinkSmart shareholders on 15 July 2022 (which reduced ThinkSmart's cash balance accordingly), to the knowledge of the ThinkSmart Directors, there have been no material changes to the financial position of ThinkSmart and the ThinkSmart Group since 30 June 2022.

As ThinkSmart's primary asset is its holding of Block Shares, ThinkSmart's financial position (in particular, its financial assets at fair value) is impacted by changes in the price of Block Shares. ThinkSmart Shareholders should note that the price of Block Shares has traded in a range of US$89.70 and US$51.51 in the period between 30 June 2022 and the Last Practicable Date and has declined from US$61.46 as at 30 June 2022 to US$55.92 as at the Last Practicable Date.

5.6         Capital structure

As at the Last Practicable Date, the capital structure of ThinkSmart was:

Type of security

Number on issue

ThinkSmart Shares

106,587,814 (in respect of which 50,611,736 are held as ThinkSmart Depositary Interests as at the Last Practicable Date).

ThinkSmart Options

1,679,532 expiring 21 December 2026 with an exercise price of 0.1308 Pounds Sterling.

 

Additional details about ThinkSmart's equity incentive plan under which the ThinkSmart Options were issued are set out in section 10.2 of this Scheme Booklet.

5.7         Significant holders in ThinkSmart Shares

As extracted from filings released on the LSE RNS on or before the Last Practicable Date, the following persons are significant holders of ThinkSmart Shares:

 

Significant holder

Number of ThinkSmart Shares

Voting power in ThinkSmart

Mr Ned Montarello (together with the Excluded Shareholders)

31,342,286

29.40%

Mr Peter Gammell

12,582,572

11.80%

London and Capital Asset Management Ltd

3,309,685

3.11%

 

Note: The table above displays beneficial holdings, which may be held through nominee accounts.

5.8         Publicly available information about ThinkSmart

ThinkSmart is subject to the AIM Rules and UK MAR and, as such, is subject to regular reporting and disclosure obligations. These reporting and disclosure requirements include, subject to some exceptions, a requirement on ThinkSmart to disclose information without delay concerning its financial condition, sphere of activity, performance of its business or its expectations of its performance (or other 'inside information' of a precise nature) that would be likely to have a significant effect on the price of ThinkSmart Shares.

In addition, as a company incorporated in Australia, ThinkSmart is required to lodge various documents with ASIC. Copies of documents lodged with ASIC by ThinkSmart may be obtained from an ASIC office.

ThinkSmart Shareholders may obtain a copy of ThinkSmart's financial statements for the year ended 30 June 2022 from the LSE website (londonstockexchange.com), from ThinkSmart's website (thinksmartworld.com) or by calling the ThinkSmart Shareholder Information Line on 1300 528 984 (within Australia) or +61 3 9415 4826 (outside Australia), between 8.30am and 5.00pm (Sydney time), Monday to Friday. ThinkSmart DI Holders can contact the dedicated Depositary Interest Information Line on +44 0207 887 2225 or +44 0800 298 7356 (within the United Kingdom) between 9.00am and 5.00pm (London time), Monday to Friday.



 

6         Information about BidCo

This section 6 has been prepared by, and is the responsibility of, BidCo.

This section 6 contains information relating to BidCo and outlines how BidCo is funding the Scheme Consideration. It also includes an explanation of BidCo's intentions regarding ThinkSmart under the Transaction.

Although BidCo believes that the statements regarding its intentions concerning future events in this section 6 have been made on a reasonable basis, no assurance can be given that such intentions will not change in the future.

6.1         Overview of BidCo and BidCo ownership structure

BidCo is a special purpose Australian proprietary company limited by shares incorporated specifically for the purpose of acquiring the ThinkSmart Shares pursuant to the Scheme.

As a special purpose Australian proprietary company, BidCo does not have any assets other than nominal paid up capital. Similarly, BidCo does not have any liabilities other than its obligations under the Scheme Implementation Deed, Deed Poll and Funds Flow Deed.

As referred to in section 6.3 below, BidCo will be satisfying its obligation to pay the Cash Consideration to Scheme Shareholders by the post-Scheme implementation sale on the New York Stock Exchange of the Block Sale Shares held by ThinkSmart (net of their proportion of sale fees and after conversion into Pounds Sterling and Australian dollars (as applicable)). In order to facilitate the sale, BidCo has agreed under the Scheme Implementation Deed that the members of the ThinkSmart Independent Board Committee will remain on the ThinkSmart Board until after the Cash Consideration has been despatched to Scheme Shareholders. Accordingly, the ThinkSmart Independent Board Committee will assist with overseeing the payment of the Cash Consideration to the Scheme Shareholders in accordance with the Scheme.

BidCo is 100% wholly owned and controlled by Mr Ned Montarello, the Executive Chairman and CEO of ThinkSmart.

The BidCo Board currently comprises the following directors:

·                 Mr Ned Montarello;

·                 Mr Adam Montarello; and

·                 Mr Scott Montarello.

It is not currently intended that the BidCo Board will be reconstituted as part of the Transaction.

The rights and liabilities attaching to BidCo Shares issued as Scheme Consideration for Excluded Shareholders under the Scheme are contained in the constitution of BidCo and are subject to the Corporations Act. The form of the constitution of BidCo is customary for an Australian proprietary company limited by shares.

6.2         Rationale for proposing Scheme

BidCo's rationale for proposing the Scheme is to:

·                 provide for a commercial outcome that would enable ThinkSmart Shareholders to exit their investment in ThinkSmart as compared to them remaining shareholders during the eventual wind down and liquidation of ThinkSmart;

·                 delist ThinkSmart to enable the wind down of its legacy operations to be effected in a more cost-effective manner; and

·                 provide Mr Ned Montarello and the other Excluded Shareholders an opportunity to continue to have exposure to the residual Block Shares held by ThinkSmart following implementation of the Scheme.

6.3         Funding of the Scheme Consideration

Under the Scheme, BidCo will acquire 100% of the ThinkSmart Shares, including the shares owned by the Excluded Shareholders.

In exchange, Scheme Shareholders entitled to receive Cash Consideration will receive the Cash Consideration which will be funded entirely by the post-Scheme implementation sale on the New York Stock Exchange of the Block Sale Shares held by ThinkSmart (net of their proportion of sale fees and after conversion into Pounds Sterling and Australian Dollars (as applicable)).

Under the Scheme, BidCo will also acquire all of the ThinkSmart Shares held by the Excluded Shareholders in exchange for issuing BidCo Shares to the Excluded Shareholders, or if an Excluded Shareholder so elects, part or all of its ThinkSmart Shares may be acquired by BidCo for Cash Consideration, in which case the Excluded Shareholder will receive the same Cash Consideration as the other Scheme Shareholders (to be funded by a proportionate increase in the number of Block Shares that will be sold by ThinkSmart post-Scheme implementation sale, as instructed by BidCo).

6.4         Interest in ThinkSmart Shares

As at the date of this Scheme Booklet, BidCo does not hold any ThinkSmart Shares.

As at the date of this Scheme Booklet, Mr Ned Montarello and the other Excluded Shareholders hold the following ThinkSmart Shares and ThinkSmart Options:

Excluded Shareholder

Number of ThinkSmart Shares

Number of ThinkSmart Options

Mr Ned Montarello

1,078,253

1,073,863

Mr Ned Montarello as trustee for the Montarello Investment Trust

27,021,956

0

Ms Kimberly Montarello

1,680

0

Ms Kimberly Montarello & Mr Ned Montarello as trustees for the Adam Montarello Trust

1,200

0

Ms Kimberly Montarello & Mr Ned Montarello as trustees for the Scott Montarello Trust

1,200

0

Ms Kimberly Montarello & Mr Ned Montarello as trustees for the Montarello Superannuation Fund

3,237,997

0

 

6.5         BidCo's intentions

(a)          Introduction

If the Scheme is implemented, BidCo will become the holder of all ThinkSmart Shares on the Implementation Date and, accordingly, ThinkSmart will become a wholly-owned subsidiary of BidCo on that date.

This section 6.5 sets out BidCo's current intention only with respect to ThinkSmart and is based on the information relating to ThinkSmart and the general business environment which is known to BidCo at the date of this Scheme Booklet.

Accordingly, the statements set out in this section 6.5 are statements of present intention only and may change as new information becomes available or as circumstances change.

(b)          ThinkSmart's cancellation from AIM

As noted in section 4.7, ThinkSmart will apply for the cancellation of the admission of ThinkSmart Shares to trading on AIM to occur shortly after the Implementation Date. BidCo intends to continue that process to the extent it has not been completed prior to the Implementation Date.

(c)          Board of Directors

If the Scheme becomes Effective, the ThinkSmart Board will be reconstituted following the despatch of the Scheme Consideration to Scheme Shareholders.

BidCo's current intention is that, following payment of the Scheme Consideration to Scheme Shareholders, the ThinkSmart Board will comprise:

·                 Mr Ned Montarello;

·                 Mr Adam Montarello; and

·                 Mr Scott Montarello.

BidCo's current intention is that there will be no change to the directors of ThinkSmart's Subsidiaries. This means that Mr Ned Montarello and Mr Gary Halton will be the directors of all of ThinkSmart's Subsidiaries, other than Mr Keith Jones who will also be a director of ThinkSmart Europe Limited and Mr Ned Montarello who will be the sole director of ThinkSmart LTI Pty Limited.

(d)          Assets and operations

Following implementation of the Scheme, ThinkSmart will be controlled by Mr Ned Montarello (who owns 100% of the shares in BidCo).

Following payment of the Scheme Consideration by BidCo to satisfy its obligations under the Scheme, ThinkSmart's assets and operations will comprise:

·                 approximately £2.2 million in cash, noting that the ThinkSmart Group's cash balance as at the Last Practicable Date is approximately £2.8 million;

·                 the remainder of the Block Shares which are not Block Sale Shares;

·                 ThinkSmart's legacy leasing business which is currently subject to a managed wind down process; and

·                 ThinkSmart's business of providing an outsourced call centre customer support service to support the Clearpay business which was previously owned by ThinkSmart.

Following implementation of the Scheme, BidCo currently intends to procure that ThinkSmart:

·                 continues to hold the remaining Block Shares which are not Block Sale Shares and will monitor this holding over time taking into account its own relevant financial objectives and priorities (including rationalisation of the legacy ThinkSmart corporate group);

·                 continues the existing managed wind down process for the legacy leasing business in an orderly manner through to completion; and

·                 continues to provide the outsourced call centre customer support service to the Clearpay business which was previously owned by ThinkSmart, noting that this can be terminated by either Clearpay or ThinkSmart at any time with 3 months' notice.

Where appropriate, BidCo may also arrange the rationalisation of any subsidiaries in the ThinkSmart corporate group which are dormant or otherwise no longer required.

(e)          Employees

It is not expected that implementation of the Scheme will have any immediate impact on the employees of ThinkSmart (other than the changes to the directors of ThinkSmart and its Subsidiaries as detailed in section 6.5(c)).

As noted in section 6.5(d), ThinkSmart's legacy leasing business is already in the process of a managed wind-down.

The provision of the outsourced call centre customer support service to Clearpay can be terminated by either Clearpay or ThinkSmart at any time with 3 months' notice. BidCo will continue to monitor and review the personnel requirements of ThinkSmart in this context.

6.6         Additional information

(a)          Dealing in ThinkSmart Shares in previous four months

Neither BidCo nor its Associates have provided or agreed to provide any consideration for any BidCo Shares under any transaction or agreement during the period of four months before the date of this Scheme Booklet, except for the Scheme Consideration which BidCo has agreed to provide under the Scheme.

(b)          Benefits to ThinkSmart Shareholders

During the four months before the date of this Scheme Booklet, none of BidCo or its Associates have given, or offered to give or agreed to give a benefit to another person where the benefit was likely to induce the other person or an Associate to:

(1)           vote in favour of the Scheme; or

(2)           dispose of Scheme Shares,

where the benefit was not offered to all ThinkSmart Shareholders.

(c)          Benefits to current ThinkSmart officers

Other than as disclosed in this Scheme Booklet, none of BidCo or any of its Associates will be making any payment or giving any benefit to any current director, secretary or executive officer of ThinkSmart or any of its related bodies corporate as compensation or consideration for, or otherwise in connection with, their resignation from their respective offices if the Scheme is implemented.

(d)          No other material information

Except as otherwise disclosed in this Scheme Booklet, there is no other BidCo Information that is material to the making of a decision in relation to the Scheme by ThinkSmart Shareholders, being BidCo Information that is within the knowledge of the directors of BidCo, at the date of this Scheme Booklet, which has not previously been disclosed to ThinkSmart Shareholders.

7         Risks

7.1         Introduction

In considering the Scheme, ThinkSmart Shareholders should be aware that there are a number of risk factors, both general and specifically relating to ThinkSmart, which may affect the future operating and financial performance of ThinkSmart and the price and/or value of ThinkSmart Shares.

If the Scheme proceeds, ThinkSmart Shareholders will receive the Scheme Consideration, will cease to hold ThinkSmart Shares and will also no longer be exposed to the risks set out in this section 7 (and other risks to which ThinkSmart may be exposed).

If the Scheme does not proceed, ThinkSmart Shareholders will continue to hold ThinkSmart Shares and continue to be exposed to risks associated with an investment in ThinkSmart.

In deciding whether to vote in favour of the Scheme, ThinkSmart Shareholders should read this Scheme Booklet carefully and consider the following risk factors. These risk factors do not take into account the individual investment objectives, financial situation, position or particular needs of ThinkSmart Shareholders. In addition, this section 7 is a summary only and does not purport to list every risk that may be associated with an investment in ThinkSmart now or in the future. There also may be additional risks and uncertainties not currently known to ThinkSmart which may have a material adverse effect on ThinkSmart's assets and liabilities, financial position, profits and prospects and the ability to make future distributions to ThinkSmart Shareholders, and the price and/or value of ThinkSmart Shares.

Whilst the ThinkSmart Independent Board Committee unanimously recommends that ThinkSmart Shareholders vote in favour of the Scheme in the absence of a Superior Proposal and subject to the Independent Expert continuing to conclude that the Scheme is in the best interests of ThinkSmart Shareholders (other than the Excluded Shareholders), ThinkSmart Shareholders are encouraged to make their own independent assessment as to whether to vote in favour of the Scheme.

7.2         Specific risks relating to the business and operations of ThinkSmart

There are a range of business-specific risks associated with your current investment in ThinkSmart Shares, as set out below.

You will only continue to be exposed to these risks if the Scheme does not proceed and you retain your investment in ThinkSmart Shares. While ThinkSmart has in place what it considers are appropriate policies and procedures to help manage these risks, there is no guarantee that ThinkSmart will be able to manage these risks completely. Furthermore, certain aspects of these risks (or ThinkSmart's ability to respond to and manage them) may be partly or wholly outside of ThinkSmart's control.

(a)          Risks associated with Block Shares

ThinkSmart's main asset is its holding of 618,750 Block Shares.

Block is a global fintech company incorporated in Delaware. Block's Class A Shares are listed on NYSE under the symbol SQ. Block has a market capitalisation of approximately US$33 billion as at the close of trading on NYSE on the Last Practicable Date. There is no public trading market for Block Class B Shares.

Founded in 2009, Block builds tools that aim to empower businesses and individuals to participate in the economy. Sellers use Block to reach buyers online and in person, manage their business, and access financing. Individuals use Block's Cash App to spend, send, store, and invest money. Block owns a majority ownership stake in TIDAL, a global music and entertainment platform that expands Block's purpose of economic empowerment to artists. Block also recently launched TBD, a bitcoin-focused business established to build an open developer platform with the sole goal of making it easy to create non-custodial, permissionless, and decentralised financial services.

Block has offices in the United States, Canada, Japan, Australia, Ireland, Spain, Norway, and the United Kingdom.

Section 5.2 of this Scheme Booklet explains the background to ThinkSmart becoming a holder of Block Shares.

The effect of ThinkSmart's main asset being shares in Block is that the trading price of ThinkSmart Shares is correlated to the price of Block Shares. This also means that the various risks associated with a holding in Block Shares apply to holders of ThinkSmart Shares. Broadly, these risks include:

·                 business and industry risks, including Block's ability to maintain, protect and enhance its brand, and Block's ability to retain existing sellers and customers, attract new sellers and customers, and increase sales to both new and existing sellers and customers;

·                 operational risks, including real or perceived improper or unauthorised use of, disclosure of, or access to sensitive data, and real or perceived security breaches or incidents or human error in administering Block's software, hardware, and systems;

·                 economic financial and tax risks, including a deterioration of general macroeconomic conditions and the ongoing COVID-19 pandemic and measures intended to prevent its spread;

·                 legal, regulatory and compliance risk, including extensive regulation and oversight in a variety of Block's areas of business, and complex and evolving regulations and oversight related to privacy and data breaches; and

·                 risks related to ownership of Block's common stock, including the dual class structure of Block's common stock, and volatility of the market price of Block's Class A common stock.

Further detail of the risks associated with a holding in Block Shares can be found in:

·                 Block's Annual Report (SEC Form 10-K) for the year ended 31 December 2021, filed with the SEC on 24 February 2022; and

·                 Block's Quarterly Report (SEC Form 10-Q) for the quarter ended 30 June 2022, filed with the SEC on 4 August 2022.

Block's SEC filings are available to the public at the SEC's website at www.sec.gov and at Block's website at www.block.xyz.

(b)          Costs associated with managed wind down

As noted in section 5.2, ThinkSmart's legacy leasing business operations are currently in managed wind down following the cessation of new leasing volumes origination in February 2021. As at 30 June 2022, the ThinkSmart Group's finance lease receivables had a gross receivable balance of £0.7 million and an average term outstanding of seven months (with a maximum term outstanding of 28 months).

Whilst the managed wind down has yielded positive cash flows to date, due to the ThinkSmart business' declining revenues associated with the wind down and the fixed costs associated with maintaining an AIM listing and related corporate overhead cost, the ThinkSmart business is now entering a period of being cash flow negative.

Following the A$4.4 million (£2.5 million equivalent[17]) capital return and dividend payment on 15 July 2022, the ThinkSmart Group's cash balance as at the Last Practicable Date is approximately £2.8 million and the ThinkSmart Independent Board Committee expects that this balance will continue to reduce as a result of ongoing operational and corporate costs exceeding its income, transaction costs relating to the Scheme and the eventual costs of liquidating the ThinkSmart Group.

(c)          Risk of default or fraud by customers

The credit quality of previously accepted customers and the potential for payment defaults has an impact on ThinkSmart's financial performance through impairment. Historic robust credit checking and collection processes combined with development of ThinkSmart's intellectual property capability in this area assist in managing and mitigating this risk, but there is a risk that deteriorating UK macroeconomic conditions (including rising inflation, supply shortages, rising cost of living, high energy prices and tightening monetary policy) may increase the likelihood of payment defaults in relation to ThinkSmart's remaining receivables from its legacy leasing business (which is now in wind down).

(d)          Clearpay support contract

Following the sale of Clearpay to Afterpay (now Block), ThinkSmart continues to provide an outsourced call centre customer support service to support the Clearpay business. Under this arrangement, ThinkSmart currently generates approximately £0.9 million in annual revenue.

This contract can be terminated for convenience at any time by either party with 3 months' notice. Accordingly, there is a risk that this contract may be terminated by Block (eg if Block establishes its own customer support service for Clearpay), which would negatively impact ThinkSmart's future cash flow.

(e)          COVID-19

Thanks to operating in a less affected sector of the economy, robust business continuity processes, proactive management and timely access to government support, ThinkSmart has so far been only minimally impacted by COVID-19.

Prior to the outbreak of COVID-19, ThinkSmart already had in place a robust risk management structure which has been augmented by the adoption of a specific COVID-19 risk assessment and associated updates to operating procedures. In line with UK government guidance, ThinkSmart facilitated remote working for all staff and supported a safe working environment with a focus on staff health and wellbeing. ThinkSmart has in place adequate measures to mitigate the impact of COVID-19 on the wind down of its business.

(f)           Changes in government policies

Government policies (of both the UK and Australia) are subject to review and change on a periodic basis. Such changes are likely to be beyond the control of ThinkSmart and may adversely affect its operating and financial performance. At present, ThinkSmart is not aware of any reviews or changes that would materially affect its business.

(g)          The consumer credit industry is subject to extensive regulation, and companies operating in this sector are generally required to obtain authorisation from the FCA

The industry in which ThinkSmart operates is subject to a range of legislation and regulation. The FCA is the regulatory body responsible for the consumer credit industry in the UK. ThinkSmart's activities are regulated by a regulatory framework based on a combination of the Financial Services and Markets Act 2000 and its secondary legislation, the provisions of the Consumer Credit Act 1974 and the FCA Rules. The volume and demands of regulation, and the regulatory scrutiny have increased since the transfer of regulatory powers from the UK Office of Fair Trading to the FCA in 2014. Further regulation in the form of a new regime referred to as Consumer Duty is currently being implemented in the UK, which focuses on enhancing overall consumer protection but will further increase the regulatory demands on consumer credit providers.

(h)          Dependency on information technology

ThinkSmart relies on information technology in relation to its lease contracts and benefits from software developed for this purpose. The successful operation of ThinkSmart's business depends on maintaining the integrity of its computer, communication and information technology systems. These systems and operations are vulnerable to damage, breakdown or interruption from events which are beyond ThinkSmart's control, such as fire, flood and other natural disasters; power loss or telecommunications or data network failures; improper or negligent operation of systems by employees, or unauthorised physical or electronic access; and interruptions to internet system integrity. Whilst ThinkSmart's legacy leasing business is in wind down, any such damage or interruption could cause significant disruption to the operations of ThinkSmart, its ability to trade and its reputation.

(i)           Key personnel risk

ThinkSmart's continued success has depended on its ability to retain current key members of the senior management team, with their experience and knowledge of the business. While ThinkSmart endeavours to retain key management personnel, there can be no guarantee that its key management personnel will continue in their employment. Any loss of key members of the senior management team would disrupt ThinkSmart's operations and may also have a material adverse effect on ThinkSmart's ability to conduct an orderly wind down.

7.3         General risks relating to the business and operations of ThinkSmart

ThinkSmart is exposed to a number of general risks that could materially adversely affect its assets and liabilities, financial position, profits, prospects and potential to make further distributions to ThinkSmart Shareholders, and the price and/or value of ThinkSmart Shares. General risks that may impact on ThinkSmart or the market for ThinkSmart Shares include:

·                 changes in general business, industry cycles and economic conditions including inflation, interest rates, exchange rates, employment rates and consumer demand;

·                 natural disasters, catastrophes and disease or pandemic (including the outbreak, escalation or any impact of, or recovery from, COVID-19 or any COVID-19 Measures) and other macroeconomic occurrences, including but not limited to geopolitical events such as outbreak of hostilities, acts of terrorism and declarations of war;

·                 changes to government policy, legislation or regulation, both domestic and global, which may restrict or otherwise impact the business operations and activities of ThinkSmart;

·                 variations in recommendations by securities analysts and brokers;

·                 changes in investor sentiment and perceptions, market fluctuations and overall performance of the international stock markets;

·                 the operating and trading price performance of other comparable listed and unlisted entities;

·                 changes to accounting standards and reporting standards;

·                 changes to the current tax regime;

·                 claims, litigation, industry complaints, regulatory investigations and other disputes, which may be with or without merit, giving rise to, among other things, costs of defending and resolving such disputes, heightened public scrutiny and potential reputational harm;

·                 general operational and business risks; and

·                 other risks and uncertainties which may not currently be known to ThinkSmart.

Some of these factors could affect the value of ThinkSmart regardless of ThinkSmart's underlying operating performance.

7.4         Risks relating to the Scheme

(a)          Risks relating to implementing the Scheme

The implementation of the Scheme is subject to certain conditions precedent, which are summarised in section 4.3 and are set out in full in clause 3.1 of the Scheme Implementation Deed.

ThinkSmart will only apply to the Court for orders approving the Scheme if each of the conditions precedent (except Court approval of the Scheme) are satisfied or waived (if capable of waiver) prior to 8.00am (Perth time) on the Second Court Date. As such, failure to satisfy or waive, or a delay in satisfying or waiving, any of the conditions precedent may delay or prevent implementation of the Scheme. The failure of a condition precedent to be satisfied or waived (if capable of waiver) may also give rise to a right of either ThinkSmart or BidCo to terminate the Scheme Implementation Deed.

There is a risk that the ThinkSmart Shareholders do not approve the Scheme by the Requisite Majorities or do not approve the Financial Assistance Resolution or Financial Benefit Resolution. There is also a risk that the Court may not, at the final court hearing, approve the Scheme, or may only be willing to approve the Scheme subject to conditions that ThinkSmart and/or BidCo (as applicable) are not prepared to accept. There is also a risk that some or all of the aspects of the ThinkSmart Shareholder and Court approvals required for the Scheme to proceed may be delayed.

There is also a risk that the FCA rejects the change in control notification submitted on behalf of BidCo. This notification to the FCA is required because BidCo, by virtue of it acquiring all the ThinkSmart Shares, will become a controller of RentSmart Limited (an FCA regulated company in the ThinkSmart Group). Under Part 12 of the UK's Financial Services and Markets Act 2000, prospective controllers of a regulated business must seek approval from the FCA before acquiring control over a business that is authorised by the FCA. Failure to gain such prior approval is a criminal offence. If the FCA rejects BidCo's change in control notification, it could prevent implementation of the Scheme.

(b)          Risks relating to deferred payment of Cash Consideration

If the Scheme becomes Effective, ThinkSmart Shareholders will transfer their ThinkSmart Shares to BidCo on the Implementation Date. However, ThinkSmart Shareholders entitled to receive Cash Consideration will not receive their Cash Consideration until after the Implementation Date and the amount of Cash Consideration will be determined by the price at which the Block Sale Shares can be sold for following Implementation.

This means that the exact amount of Cash Consideration to be received by each ThinkSmart Shareholder will not be known until after the Implementation Date (and therefore after ThinkSmart Shareholders are required to vote on the Scheme). There is a risk that the price of Block Shares falls between the date ThinkSmart Shareholders approve the Scheme and the date the Block Sale Shares are sold, which will directly impact the amount of Cash Consideration received. In addition, as the proceeds from the sale of the Block Sale Shares will be converted from United States Dollars to Australian Dollars and Pounds Sterling (in accordance with section 4.1 of this Scheme Booklet), the amount of Cash Consideration received by Scheme Shareholders will depend on the applicable exchange rate at the time of conversion.

ThinkSmart makes no representation that either the sale price of Block Shares or any exchange rate received will be the best price or rate available.

As noted in section 4.1 of this Scheme Booklet, if the Scheme becomes Effective, the Broker appointed by ThinkSmart and BidCo will sell the Block Sale Shares on-market on the New York Stock Exchange as soon as practicable on the next Trading Day following the Implementation Date (and, in any event, within 3 Trading Days following the Implementation Date). There is a risk that, at the proposed time of sale, Block Shares are suspended from trading or otherwise unable to be traded on market (for example, due to an outage of the New York Stock Exchange as a result of an emergency event). This may result in the sale of the Block Sale Shares being delayed.

There may also be tax implications for Australian tax resident non-corporate ThinkSmart Shareholders who have held their ThinkSmart Shares for more than 12 months if any material Block Share price movement occurs between the Implementation Date and the date the Cash Consideration is received by Scheme Shareholders. See section 8 of this Scheme Booklet for further details.

In exchange for being transferred the ThinkSmart Shares on the Implementation Date, BidCo has agreed in the Scheme Implementation Deed and Deed Poll to undertake certain steps so that the Block Sale Shares will be sold in accordance with section 4.1 of this Scheme Booklet and the Scheme Implementation Deed. The proceeds from this sale will be used to fund the Cash Consideration.

To further support the obligation to pay the Cash Consideration to ThinkSmart Shareholders, BidCo and ThinkSmart have entered into the following contracts:

·                 Broker Agreement with the Broker, under which the Broker is irrevocably appointed to sell the Block Sale Shares and is obliged to remit the proceeds back to ThinkSmart; and

·                 Funds Flow Deed, which sets out the flow of proceeds to ThinkSmart Shareholders once the Block Sale Shares have been sold, including the applicable currency conversions.

ThinkSmart Shareholders should note the performance risk which may arise in relation BidCo failing to pay the Cash Consideration (which would be in breach of its obligations under the Scheme Implementation Deed, Deed Poll and Funds Flow Deed) in circumstances where Scheme Shareholders will have already transferred their Scheme Shares to BidCo on the Implementation Date and where there is no other security being provided by BidCo in relation to the payment of the Cash Consideration. In such circumstances, Scheme Shareholders will have an unsecured claim against BidCo under the Deed Poll in relation to the payment of the Cash Consideration.

In addition, as a practical matter, under the terms of the Scheme Implementation Deed, the members of the ThinkSmart Independent Board Committee will remain on the ThinkSmart Board until after the Cash Consideration has been despatched to Scheme Shareholders, and so, the ThinkSmart Independent Board Committee will assist with overseeing the payment of the Cash Consideration to the Scheme Shareholders in accordance with the Scheme.

(c)          Implications for ThinkSmart and ThinkSmart Shareholders if the Scheme is not implemented

If the Scheme does not become Effective and is not implemented, ThinkSmart Shareholders will not receive the Scheme Consideration and ThinkSmart will continue, in the absence of a Superior Proposal, to operate as a standalone entity and remain listed on AIM.

Unless ThinkSmart Shareholders choose to sell their ThinkSmart Shares or ThinkSmart Depositary Interests, ThinkSmart Shareholders will continue to hold ThinkSmart Shares and be exposed to both the risks (including those set out in this section 7) and potential future benefits in retaining exposure to ThinkSmart's business and assets.

The ThinkSmart Share price will also remain subject to market volatility and may fall in absence of a Superior Proposal.

(d)          Implications for ThinkSmart and ThinkSmart Shareholders if the Scheme is implemented

If the Scheme becomes Effective and is implemented, Scheme Shareholders (other than Excluded Shareholders receiving Scrip Consideration) will cease to hold ThinkSmart Shares and will forgo any benefits that may result from being a ThinkSmart Shareholder.

This will mean that Scheme Shareholders will not participate in the future performance of ThinkSmart or retain any exposure to ThinkSmart's business or assets or have the potential to share in the value that could be generated by ThinkSmart in the future. However, there is no guarantee as to ThinkSmart's future performance, or its future share price performance, as is the case with all investments.

ThinkSmart Shareholders may also consider that it would be difficult to identify or invest in alternative investments that have a similar investment profit to that of ThinkSmart, or may incur transaction costs in undertaking any new investment. In this respect, however, ThinkSmart notes that ThinkSmart Shareholders could make a direct investment in Block Shares to retain economic exposure to ThinkSmart's main asset.

(e)          Tax consequences for Scheme Shareholders

If the Scheme becomes Effective, there will be tax consequences for the Scheme Shareholders which may include tax being payable.

For further detail regarding the general tax consequences of the Scheme, refer to section 8 of this Scheme Booklet. It is noted that if the Block Share price does not materially change between the Implementation Date and the sale date for the Block Shares, then practically the Cash Consideration under the Scheme is expected to have similar Australian and UK tax consequences to an on-market sale for Australian and UK tax resident Scheme Shareholders respectively. However, the tax consequences may vary depending on the nature and characteristics of Scheme Shareholders and their specific circumstances. Accordingly, you should seek professional tax advice in relation to your particular circumstances.

 


8         Tax implications

8.1         Australian tax considerations

This section provides a general overview of the Australian income tax, stamp duty and GST consequences for Scheme Shareholders who transfer their Scheme Shares to BidCo under the Scheme. The comments in this section are based on the Australian taxation and duty laws (including established interpretations of those laws) as at the date of this Scheme Booklet, which may change.

This section is general in nature and is not intended to be an authoritative or a complete statement of the Australian taxation and duty laws and should not be relied upon as taxation advice. It should be noted that the Australian taxation and duty laws are complex, and the Scheme Shareholders' own circumstances will affect the taxation outcomes of the transfer of the Scheme Shares to BidCo under the Scheme. It is therefore recommended that Scheme Shareholders seek independent professional advice, having regard to their own specific circumstances, in considering the Scheme.

The categories of the Scheme Shareholders considered in this summary are limited to individuals, complying superannuation entities and certain companies, trusts or partnerships, each of whom holds their shares on capital account. This section is also limited to Australian income tax, GST and stamp duty. This summary does not cover any non-Australian taxes or duties.

This summary does not consider the consequences for the Scheme Shareholders who are insurance companies, banks, investors that hold their shares on revenue account or carry on a business of trading in shares, or the Scheme Shareholders who are exempt from Australian tax.

This summary also does not cover the consequences for the Scheme Shareholders who are subject to Division 230 of the Income Tax Assessment Act 1997 (the Taxation of Financial Arrangements or "TOFA" regime). Both resident and non-resident Scheme Shareholders should seek professional advice to determine if Scheme Shares are held in this capacity (and the corresponding income tax implications should this apply).

This summary also does not cover the consequences for holders of ThinkSmart Options under ThinkSmart's equity incentive plan. Such holders of ThinkSmart Options should seek professional advice regarding the tax impacts of holding, converting and/or disposing of the options.

It is noted that ThinkSmart will not seek an ATO Class Ruling in respect of the Scheme transaction. ThinkSmart strongly recommends all ThinkSmart Shareholders seek independent tax advice regarding the tax implications of the Scheme to them, based on their particular profile and circumstances and the terms of the Scheme.

This section 8.1 has been prepared by Deloitte Tax Services Pty Ltd. Deloitte Tax Services Pty Ltd is not licensed under Chapter 7 of the Corporations Act to provide financial product advice. Taxation issues, such as those covered by section 8.1 of this Scheme Booklet, are only some of the matters you need to consider when making a decision about a financial product. You should consider taking advice from someone who holds Australian Financial Services Licence before making such a decision.

(a)          Taxation of Share disposals - Australian tax resident

Capital gains tax (CGT)

Australian tax resident Scheme Shareholders who hold their Scheme Shares on capital account will be required to consider the impact of the CGT provisions in respect of the disposal of their Scheme Shares.

Where the capital proceeds received on the disposal of the Scheme Shares exceeds the CGT cost base of those Scheme Shares, Australian tax resident Scheme Shareholders will derive a capital gain. Conversely, Australian tax resident Scheme Shareholders may recognise a capital loss on the disposal of Scheme Shares where the capital proceeds received on disposal are less than the reduced CGT cost base of the Scheme Shares.

Cost base / reduced cost base

The cost base and reduced cost base of the Scheme Shares should generally include the amount paid to acquire the Scheme Shares and the market value of any property given to acquire the Scheme Shares, plus amongst other things, incidental costs associated with of the acquisition and disposal of the Scheme Shares (for example, brokerage fees and stamp duty). This amount may be reduced as a result of receiving non-assessable distributions from ThinkSmart, such as previous returns of capital.

Capital proceeds - Cash Consideration

The capital proceeds should be equal to the market value of the right to the deferred Cash Consideration (determined on the Implementation Date of the Scheme). The difference between this amount and a Scheme Shareholder's cost base / reduced cost base for their Scheme Shares should equal the capital gain / loss on disposal.

The market value of the deferred Cash Consideration referred to above should then form part of the cost base / reduced cost base of the deferred Cash Consideration 'right' for income tax purposes. The difference between this amount and the Cash Consideration ultimately received should realise a further capital gain / loss.

Scheme Shareholders may wish to adopt a practical position that the market value of the deferred Cash Consideration on the Implementation Date of the Scheme is equal to the Cash Consideration ultimately received given the circumstances of the Scheme (e.g. as the Block Sale Shares are to be sold on market shortly after the Implementation Date of the Scheme).

If the Block Share price does not materially change between Implementation Date of the Scheme and the sale date for the Block Sale Shares, then practically the Scheme Cash Consideration outcome should be similar to an on-market sale for Australian tax resident Scheme Shareholders.

In the event the market value of the Block Sale Shares changes materially between the Implementation Date and the sale date for the Block Sale Shares, there may be additional complexities in calculating net capital gains / losses, particularly in respect of the application of any CGT discounts.

Net capital gain / loss

All capital gains and losses recognised by an Australian tax resident Scheme Shareholder for an income year are aggregated. To the extent that a net gain exists, such a Scheme Shareholder should be able to reduce the net gain by any amount of unapplied net capital losses or revenue losses carried forward from previous income years (provided the relevant loss recoupment tests are satisfied) or current year revenue or capital losses. Any remaining net gain (after the application of any carried forward tax losses or current year revenue losses) will then be required to be included in the Australian tax resident Scheme Shareholder's assessable income (subject to comments below in relation to the availability of the CGT discount concession) and taxable at the Scheme Shareholder's applicable rate of tax. Where a net capital loss is recognised, the loss should only be deductible against capital gains and are capable of being carried forward indefinitely, provided the relevant loss recoupment tests are satisfied. Scheme Shareholders should seek independent tax advice in relation to the future utilisation of capital losses.

CGT discount

Non-corporate Scheme Shareholders may be entitled to a concession which discounts the amount of capital gain that is assessed. In respect of the disposal of Scheme Shares, broadly, the concession is available where the Scheme Shares have been held for 12 months or more prior to disposal. The concession results in a 50% reduction in the assessable amount of a capital gain for an individual Scheme Shareholder and a one third reduction of a capital gain for an Australian tax resident complying superannuation entity Scheme Shareholder (including generally where a flow through trust or partnership distributes to such shareholders), after offsetting any current or carried forward losses. The concession is not available to corporate Scheme Shareholders (including those deemed to be companies).

In relation to trusts or partnerships including limited partnerships, the rules surrounding capital gains and the CGT discount are complex, but the benefit of the CGT discount may flow through to relevant beneficiaries or partners, subject to certain requirements being satisfied. Scheme Shareholders who are trustees are recommended to seek their own independent advice on how the CGT discount provisions will apply to them and the trust's beneficiaries.

For completeness, it is noted that capital gains arising in respect of the deferred Cash Consideration 'right' for income tax purposes should not be eligible for the CGT discount given the 'right' will not have been held for the requisite period (given the right will be extinguished shortly after the Implementation Date of the Scheme).

"Look-through earnout" rules

The above comments have been prepared on the basis that the "look-through earnout" rules do not apply to the deferred Cash Consideration for a particular Scheme Shareholder. These rules effectively treat the cash consideration received as the capital proceeds for the CGT event and ignore any income tax impact of the deferred Cash Consideration 'right'.

The application of the "look-through earnout" rules is complex and contains various requirements. For example, the requirements include that the Scheme Shares are 'active assets' of the Scheme Shareholder just before the relevant CGT event happened to the Scheme Shares. While a detailed analysis has not been undertaken by ThinkSmart on the applicability of the "look-through earnout" rules to the deferred Cash Consideration, having regard to the circumstances of ThinkSmart, it is unlikely that the rules will apply to Scheme Shareholders who hold less than 20% of the shares of ThinkSmart. Notwithstanding, if the Block Share price does not materially change between the Implementation Date of the Scheme and the sale date for the Block Shares, then practically the impact of the "look-through earnout" rules applying or not applying to a particular Scheme Shareholder should not be material.

Scheme Shareholders are advised to seek independent professional advice regarding the application of the "look through earnout" rules having regard to their individual circumstances and the circumstances of the Scheme / ThinkSmart.

Foreign (non-Australian dollar) currency

Australian income tax calculations generally need to be done in Australian dollars (unless an applicable and valid non-Australian dollar functional currency election is in place). Therefore, non-Australian dollar amounts generally need to be translated into Australian dollars at an appropriate exchange rate as outlined in Australian tax law and guidance.

To the extent that amounts relevant to the calculation of capital gains / losses on the disposal of Scheme Shares by Scheme Shareholders are denominated in non-Australian dollars (e.g. in Pounds Sterling for shares bought on AIM and / or in Pounds Sterling for Scheme Shareholders who receive the Cash Consideration in Pounds Sterling), Scheme Shareholders will generally be required to translate those amount into Australian dollars at an appropriate exchange rate to determine the amount of capital gains / losses for Australian income tax purposes. Scheme Shareholders are advised to seek independent professional advice regarding the foreign currency Australian income tax implications having regard to their individual circumstances.

ThinkSmart Depositary Interests

For those Scheme Shareholders that hold their shares via ThinkSmart Depositary Interests and on capital account, the CGT outcomes depend on whether the Scheme Shareholder is 'absolutely entitled' to the shares / rights they have a beneficial interest in via their ThinkSmart Depositary Interests. Where the holders of ThinkSmart Depositary Interests are so 'absolutely entitled', the CGT consequences should generally be attributable to the underlying Scheme Shareholders.

Scheme Shareholders that hold their shares via ThinkSmart Depositary Interests are strongly advised to obtain their own professional advice regarding whether they are 'absolutely entitled' via their ThinkSmart Depositary Interests and the income tax implications of receiving the Scheme Consideration via their ThinkSmart Depositary Interests, based on their own specific circumstances (including the nature of their ThinkSmart Depositary Interest facility), and the circumstances of the Scheme.

Scheme Shareholders are also directed to consider Class Ruling 2017/10 "Income tax: ThinkSmart Limited - delisting from ASX and shares converted into Depositary Interests", which outlines certain Australian income tax implications of holding shares via ThinkSmart Depositary Interests.

Rollover relief

For Excluded Shareholders that receive Scheme Consideration in the form of Scrip Consideration, their capital proceeds should include the market value of that Scrip Consideration. Very broadly, the Australian income tax legislation allows the deferral of capital gains where shares are exchanged for shares, and other relevant requirements are satisfied. If Excluded Shareholders that receive Scheme Consideration in the form of Scrip Consideration derive a capital gain from such disposal, they should consider the applicability of the CGT rollover rules (including whether the requirements of the rollover provisions are satisfied).

For completeness, it is noted that the only Scheme Shareholder that may be eligible for CGT rollover are the Excluded Shareholders (i.e. Mr Ned Montarello and his relevant associated persons / entities) as they are the only Scheme Shareholders that can receive Scrip Consideration.

(b)          Taxation of share disposals - non-Australian tax residents

Non-Australian tax resident Scheme Shareholders who hold their Scheme Shares on capital account should not generally be subject to the Australian CGT regime upon disposal of their Scheme Shares except in limited circumstances, for example where the Scheme Shares relate to a business carried on by the foreign resident through a permanent establishment in Australia or where the Scheme Shares are "indirect Australian real property interests". The Scheme Shares should be indirect Australian real property interests to the extent that, broadly, the following two requirements are satisfied:

·                 ThinkSmart is considered "land rich" for Australian income tax purposes (i.e., greater than 50% of the market value of the ThinkSmart's underlying assets is principally derived from Australian real property or certain interests in relation to Australian minerals); and

·                 the non-resident Scheme Shareholder has an associate inclusive interest of at least 10% in the ThinkSmart (either at the time of disposal or throughout a 12-month period that began no earlier than 24 months before the disposal).

Non-resident Scheme Shareholders will need to determine if the above requirements are met at the time of disposal of their Scheme Shares.

Notwithstanding the above, it is noted that ThinkSmart should not be considered "land rich" for Australian income tax purposes given its asset composition.

Non-Australian resident investors who hold Scheme Shares on revenue account should seek separate independent professional advice.

(c)          Foreign resident capital gains withholding tax (FRCGW)

Rules can apply to the disposal of certain taxable Australian property, whereby, a 12.5% nonfinal withholding tax may be applied. Where applicable, the withholding obligation would be with BidCo as purchaser.

The majority of the assets in ThinkSmart should not be considered real property situated in Australia and the Scheme Shares should accordingly not constitute an indirect Australian real property interest. Therefore, FRCGW should not apply to disposal of the Scheme Shares. BidCo has confirmed that it will not apply FRCGW to its acquisition of the Scheme Shares.

(d)          Stamp duty

No stamp duty should be payable by Scheme Shareholders on the disposal of Scheme Shares, or on receipt of the Cash Consideration or Scrip Consideration.

(e)          Goods and services tax (GST)

GST is not applicable to the disposal of Scheme Shares or the receipt of the Cash Consideration or Scrip Consideration. The ability of Scheme Shareholders to recover any GST incurred as an input tax credit in relation to costs associated with the Scheme (such as costs relating to professional advice obtained by Scheme Shareholders regarding the Scheme) would vary according to individual circumstances and as such this should be reviewed by Scheme Shareholders prior to making any claim.

8.2         UK tax considerations

Disclaimer

This section 8.2 has been prepared by KPMG LLP and provides a general overview of the UK capital gains tax consequences for a hypothetical individual Scheme Shareholder who is a UK resident and UK domiciled for tax purposes who transfer their Scheme Shares to BidCo under the Scheme. The comments in this section are based on the UK taxation laws (including established interpretations of those laws) as at the date of the Scheme Booklet, which may change.

This section is general in nature and is not intended to be an authoritative or a complete statement of the UK taxation laws. It should be noted that the UK taxation laws are complex, and the Scheme Shareholders' own circumstances will affect the taxation outcomes of the transfer of the Scheme Shares to BidCo under the Scheme. It is therefore recommended that Scheme Shareholders seek independent professional advice, having regard to their own specific circumstances, in considering the Scheme.

The categories of the Scheme Shareholders considered in this summary are limited to UK tax resident and domiciled individuals and certain trusts, each of whom holds their shares on capital account. This section is also limited to UK capital gains tax for a UK tax resident and domiciled individual. This summary does not cover any other taxes or duties.

This summary also does not cover the consequences for holders of ThinkSmart Options under ThinkSmart's equity incentive plan. Such holders of ThinkSmart Options should seek professional advice regarding the tax impacts of holding, converting and/or disposing of the options. The summary does not include the tax implications in respect of any corporate, fund or trust shareholders, or any non-UK resident and non-UK domiciled individual shareholders. For the avoidance of doubt, the advice does not consider the tax implications for UK resident individual shareholders that hold their shares through an Individual Savings Account (ISA), pension fund, trust arrangement or through any other form of tax-advantaged arrangement, for example but not limited to an Enterprise Investment Scheme (EIS), Venture Capital Trust (VCT) or other non-tax advantaged share plan.

ThinkSmart strongly recommends all ThinkSmart Shareholders seek independent tax advice regarding the tax implications of the Scheme to them, based on their particular profile and circumstances and the terms of the Scheme.

Capital gains tax (CGT)

Overview

The sale of the ThinkSmart Shares pursuant to the Scheme will be subject to UK capital gains tax. CGT is payable on the chargeable gain on disposal after taking into account any other available reliefs such as capital losses. The chargeable gain will be the disposal proceeds, less the base cost and any allowable incidental costs of acquisition and disposal (such as legal fees, stamp duty).

CGT on gains arising on the disposal of shares is currently charged at a rate of 10 per cent where the individual's taxable income and gains are within the basic rate band (£50,270 in 2022/23). Where any chargeable gains or part of any chargeable gain exceed the basic rate band when aggregated with income then CGT will be charged at 20 per cent.

For trustees and personal representatives of deceased persons, CGT on gains in excess of the current annual exempt amount will be charged at a flat rate of 20 per cent.

Annual exemption

UK resident taxpayers are entitled to a capital gains tax annual exemption which is currently £12,300 per tax year. This means that the first £12,300 of capital gains per year are tax free.

The annual exemption may be applied in the most beneficial way i.e. may be utilised against gains subject to the 20 per cent rate of CGT in preference to those subject to the 10 per cent rate.

Base cost

The base cost will be the original cost of the ThinkSmart Shares. If the shares were acquired for cash, this will simply be the amount paid plus any allowable acquisition costs (see below).

If the shares were obtained by other means, for example via a share for share exchange, the base cost may be the amount paid for the original shares which were exchanged. Any shareholders who received their shares other than a direct acquisition for cash should seek separate tax advice for their circumstances.

Allowable costs

Costs which are directly attributable to the acquisition or disposal of the ThinkSmart Shares are allowable for CGT purposes. Allowable costs would include items such as stamp duty paid on acquisition or legal or professional fees incurred wholly and exclusively for the purpose of the purchase or sale.

Professional fees which are not directly attributable to the sale, such as general investment advice or the management of a portfolio are not allowed to be deducted in the computation of the gain.



 

9         Financial Assistance Resolution and Financial Benefit Resolution

9.1         Background to Loan and Loan Deed

As noted in section 4.1, the Cash Consideration under the Scheme relates to the proceeds from the sale of the Block Sale Shares.

Once the Broker sells the Block Sale Shares pursuant to the Broker Agreement it will remit the United States Dollar sale proceeds to an ADI account operated by ThinkSmart.

Then, in accordance with the Funds Flow Deed, ThinkSmart and BidCo will be required to comply with the following procedure:

1            ThinkSmart will transfer the United States Dollar sale proceeds to an ADI account operated by BidCo via a loan from ThinkSmart to BidCo (Loan) pursuant to a loan deed to be entered after the Implementation Date (Loan Deed).

2            BidCo will convert the United States Dollar sale proceeds into Australian Dollars and Pounds Sterling (as applicable).

3            BidCo will transfer these amounts to two separate trust accounts (one account for Australian Dollars and one account for Pounds Sterling) with an ADI operated by the ThinkSmart Share Registry and held for the benefit of the Scheme Shareholders.

4            ThinkSmart will instruct Computershare to transfer the Cash Consideration to the Scheme Shareholders entitled to receive Cash Consideration pro rata to their respective holding of ThinkSmart Shares, in accordance with the applicable currency allocations.

Step 1 above involves ThinkSmart and BidCo entering into a Loan Deed. Practically, the Loan is required to document the flow of funds from ThinkSmart to BidCo, which are then converted into applicable currencies and transferred into a ThinkSmart Share Registry account (held for the benefit of Scheme Shareholders) before being distributed to Scheme Shareholders entitled to receive the Cash Consideration.

The Loan is provided by ThinkSmart (as lender) to BidCo (as borrower) and provides that ThinkSmart may advance funds to BidCo solely for the "permitted purpose", which is defined as complying with BidCo's obligations under the Scheme Implementation Deed. Each advance made under the Loan may incur interest (at a rate to be agreed for each advance, which may be nil), is unsecured and must be repaid on or before the end date to be agreed for that advance.

There are no establishment costs to BidCo associated with the Loan Deed and, as such, BidCo will not incur any establishment costs by utilising the Loan rather than external finance.

As ThinkSmart will be wholly owned by BidCo at the time of the Loan, the Loan will represent an intercompany loan between a parent and its subsidiary.

For the reasons noted in sections 9.2 and 9.3 below, the fact that the funds flow described above involves a Loan means that certain additional approvals are required to be obtained from ThinkSmart Shareholders for the Scheme to proceed, being the Financial Assistance Resolution and the Financial Benefit Resolution. These resolutions will be voted on at the Annual General Meeting to be held prior to the Scheme Meetings. The ThinkSmart Independent Board Committee encourages ThinkSmart Shareholders to vote at both the Annual General Meeting and the applicable Scheme Meeting.

9.2         Financial Assistance Resolution

This Scheme Booklet constitutes an explanatory statement in respect of the Financial Assistance Resolution for the purposes of section 260B(4) of the Corporations Act and contains all material information known to the ThinkSmart Independent Board Committee that could reasonably be required by ThinkSmart Shareholders in deciding how to vote on the Financial Assistance Resolution (other than information that would be unreasonable to require the ThinkSmart Independent Board Committee to disclose because such information has previously been disclosed to ThinkSmart Shareholders).

Reason for the Financial Assistance Resolution

As BidCo will use the proceeds from the Loan to fund the Cash Consideration, ThinkSmart will financially assist BidCo's acquisition of ThinkSmart Shares under the Scheme.

Section 260A of the Corporations Act prohibits ThinkSmart from financially assisting BidCo to acquire ThinkSmart Shares unless:

·                 giving the financial assistance does not materially prejudice the interests of ThinkSmart or ThinkSmart Shareholders, or ThinkSmart's ability to pay its creditors;

·                 the assistance is approved by a special resolution passed at a general meeting of ThinkSmart under section 260B of the Corporations Act; or

·                 the assistance is exempted under section 260C of the Corporations Act.

None of the exemptions in section 260C of the Corporations Act apply in these circumstances.

The ThinkSmart Independent Board Committee does not consider that the provision of the Loan will materially prejudice the interests of ThinkSmart or its shareholders, or its ability to pay its creditors. Specifically, the ThinkSmart Independent Board Committee considers that:

·                 the interests of ThinkSmart Shareholders will not be prejudiced because the Loan will only be provided after the Scheme becomes Effective; and

·                 the interests of ThinkSmart creditors will not be prejudiced because ThinkSmart will continue to maintain a net cash balance sufficient to meet its liabilities as and when they are due and payable, taking into account:

‒    the potential timing of ThinkSmart's current receivables and payables;

‒    the levels of operating cash inflows expected to be generated by ThinkSmart's legacy business;

‒    the expected working capital requirements associated with ThinkSmart's legacy business; and

‒    ThinkSmart's ability to access funds from external financiers (if required).

Notwithstanding this, the ThinkSmart Independent Board Committee considers it appropriate to seek the approval of ThinkSmart Shareholders under section 260B(1) of the Corporations Act to authorise entry into the Loan Deed and the provision of the Loan, each as described in section 9.1.

A summary of the ThinkSmart historic financial information is set out in section 5.4.

Additional information regarding the Financial Assistance Resolution

·                 Lodgement of Notice of Annual General Meeting with ASIC: A copy of the Notice of Annual General Meeting set out in Annexure 6 proposing the Financial Assistance Resolution (together with this Scheme Booklet) was lodged with ASIC before being sent to ThinkSmart Shareholders, as required by section 260B(5) of the Corporations Act.

·                 Lodgement of special resolutions: If the Financial Assistance Resolution is passed:

‒    ThinkSmart will lodge with ASIC a notice in the prescribed form stating that the Financial Assistance Resolution has been approved at least 14 days before providing the Loan, as required by section 260B(6) of the Corporations Act; and

‒    a copy of the Financial Assistance Resolution will be lodged with ASIC within 14 days after being passed, as required by section 260B(7) of the Corporations Act.

9.3         Financial Benefit Resolution

This Scheme Booklet constitutes an explanatory statement in respect of the Financial Benefit Resolution for the purposes of section 219 of the Corporations Act and contains all of the information required by that section.

Reason for the Financial Benefit Resolution

By providing the Loan on the terms described in section 9.1, ThinkSmart will be giving a financial benefit to BidCo. The financial benefit includes the benefit to BidCo of there being no establishment costs associated with the Loan Deed.

BidCo is a related party of ThinkSmart for the purposes of section 228(4) of the Corporations Act because it is an entity controlled by a director of ThinkSmart (Mr Ned Montarello).

Chapter 2E of the Corporations Act prohibits ThinkSmart from providing a financial benefit to BidCo, unless:

·                 ThinkSmart Shareholders approve the giving of the financial benefit in advance; or

·                 the financial benefit falls within one of the exemptions in Division 2 of Chapter 2E of the Corporations Act.

None of the exemptions set out in Division 2 of Chapter 2E of the Corporations Act apply in these circumstances (except section 214 of the Corporations Act). In relation to section 214 of the Corporations Act, while ThinkSmart will be a closely held subsidiary of BidCo (as defined in that section) at the time of the Loan, the ThinkSmart Independent Board Committee considers it appropriate to seek the Financial Benefit Resolution simultaneously with the Financial Assistance Resolution.

Additional information regarding the Financial Benefit Resolution

·                 No adverse effect on ThinkSmart Shareholders: The ThinkSmart Independent Board Committee considers that the risks for ThinkSmart Shareholders associated with the Loan are minimal because the Loan will only be provided after the Scheme becomes Effective. At this point in time, BidCo will own all of the ThinkSmart Shares and the ThinkSmart Shareholders will be beneficially entitled to the Scheme Consideration. Accordingly, the provision of the Loan will not affect ThinkSmart Shareholders from a commercial or economic perspective.

·                 Interest of the Independent Directors: The Financial Benefit Resolution is required to implement the Scheme and the Independent Directors therefore recommend that ThinkSmart Shareholders vote in favour of the Financial Benefit Resolution. The Independent Directors do not have any interest in the outcome of the Financial Benefit Resolution, other than their interest in the Scheme and the ThinkSmart Shares set out in section 10.1.

·                 Interest of Mr Ned Montarello: Mr Ned Montarello has an interest in the outcome of the Financial Benefit Resolution as he owns and controls BidCo. The Excluded Shareholders will therefore be excluded from voting on the Financial Benefit Resolution.

·                 Other impacts: As the financial benefit will only be provided after the Scheme has become Effective, the provision of the Loan does not give rise to any opportunity costs, taxation consequences or benefits foregone that affect the ThinkSmart Shareholders' investment in ThinkSmart. In addition, for the reasons set out in section 9.1 of this Scheme Booklet, the ThinkSmart Independent Board Committee does not consider that the provision of the Loan will materially prejudice ThinkSmart's ability to pay its creditors.

·                 Lodgement of Notice of Annual General Meeting with ASIC: A copy of the Notice of Annual General Meeting set out in Annexure 6 proposing the Financial Benefit Resolution (together with this Scheme Booklet) was lodged with ASIC before being sent to ThinkSmart Shareholders, as required by section 218(1) of the Corporations Act.

9.4         Additional information regarding both the Financial Assistance Resolution and the Financial Benefit Resolution

Directors' recommendation

Each of the Financial Assistance Resolution and Financial Benefit Resolution are required to be approved by ThinkSmart Shareholders to implement the Scheme.

The ThinkSmart Independent Board Committee unanimously recommends that ThinkSmart Shareholders vote in favour of the Scheme in the absence of a Superior Proposal and subject to the Independent Expert continuing to conclude that the Scheme is in the best interests of ThinkSmart Shareholders (other than the Excluded Shareholders). The ThinkSmart Independent Board Committee also recommends that ThinkSmart Shareholders vote in favour of the Financial Assistance Resolution and Financial Benefit Resolution at the Annual General Meeting.

Section 1 sets out the reasons why the ThinkSmart Independent Board Committee support the Scheme.

Mr Ned Montarello owns and controls BidCo. Accordingly, he does not make any recommendation in relation to the Financial Assistance Resolution or Financial Benefit Resolution.

Approval and voting exclusions

Pursuant to section 260B(1) of the Corporations Act, the Financial Assistance Resolution must be approved by a special resolution (ie 75% or more) of ThinkSmart Shareholders (with no votes being cast in favour of the resolution by Bid and any of BidCo's associates (being the Excluded Shareholders)).

The Financial Benefit Resolution needs to be approved by a simple majority (ie more than 50%) of votes cast by ThinkSmart Shareholders. The Excluded Shareholders will also be excluded from voting on this resolution under section 224 of the Corporations Act.

For the Scheme to be implemented, ThinkSmart Shareholders need to approve both the Financial Assistance Resolution and the Financial Benefit Resolution, in addition to the Scheme Resolutions. It is therefore important that ThinkSmart Shareholders vote at the Annual General Meeting in addition to the applicable Scheme Meeting.

In accordance with the Corporations Act, ThinkSmart will disregard any votes cast in favour of the Financial Assistance Resolution and Financial Benefit Resolution by any Excluded Shareholder.



 

10       Additional information

10.1       Interests of ThinkSmart Directors in ThinkSmart Shares

As at the Last Practicable Date, the ThinkSmart Directors have the following Relevant Interests in ThinkSmart Shares:

ThinkSmart Director

Number of ThinkSmart Shares

Mr Ned Montarello

31,342,286

Mr Peter Gammell

12,582,572 (in respect of which 2,500,000 are held as ThinkSmart Depositary Interests as at the Last Practicable Date)

Mr David Adams

100,000 (all of which are held as ThinkSmart Depositary Interests as at the Last Practicable Date)

Mr Gary Halton

0

 

In addition, Mr Ned Montarello holds 1,073,863 and Mr Gary Halton holds 470,659 ThinkSmart Options under ThinkSmart's equity incentive plan, each of which expire on 21 December 2026 and have an exercise price of £0.1308. See section 10.2 of this Scheme Booklet for further detail.

No ThinkSmart Director acquired or disposed of a Relevant Interest in any ThinkSmart Shares during the four months before the date of this Scheme Booklet.

10.2       ThinkSmart equity incentive arrangements

As detailed in ThinkSmart's annual report for the year ended 30 June 2022, ThinkSmart operates a long term incentive plan (LTIP) under which ThinkSmart Options are offered to senior management. Each ThinkSmart Option is convertible to one Share in ThinkSmart subject to the satisfaction of certain conditions. All 1,679,532 ThinkSmart Options on issue are no longer subject to any vesting conditions and are presently exercisable at an exercise price of £0.1308.

The LTIP provides that the ThinkSmart Board may, where it considers it likely that the Court will approve the Scheme, request that the holders of ThinkSmart Options give an exercise notice in advance of the Court approving the Scheme in respect of any ThinkSmart Options held. If a holder of ThinkSmart Options does not give such exercise notice, then the ThinkSmart Options held by that holder will automatically lapse on the Court approving the Scheme.

Accordingly, after the date of this Scheme Booklet, the ThinkSmart Board will issue a notice to each holder of ThinkSmart Options requesting that, if they wish to exercise any of their ThinkSmart Options in advance of the Scheme, they give the exercise notice described above.

As at the Last Practicable Date, no ThinkSmart Options have been exercised and the ThinkSmart Options on issue are as set out above.

10.3       Other benefits and agreements

(a)          Interests of ThinkSmart Directors in BidCo securities

Mr Ned Montarello holds 100% of the shares in BidCo.

No other ThinkSmart Director has a Relevant Interest in any securities in BidCo. Nor have they acquired or disposed of a Relevant Interest in any securities in BidCo during the four months before the date of this Scheme Booklet.

(b)          Interests of ThinkSmart Directors in contracts with BidCo

No ThinkSmart Director has any interest in any contract entered into by BidCo, or any of its related bodies corporate.

(c)          Benefits in connection with retirement from office

There is no payment or other benefit that is proposed to be made or given to any director, secretary or executive officer of ThinkSmart (or any of its related bodies corporate) as compensation for the loss of, or consideration for or in connection with his or her retirement from, office in ThinkSmart (or any of its related bodies corporate) in connection with the Scheme.

(d)          Benefits from BidCo

No ThinkSmart Director has agreed to receive, or is entitled to receive, any benefit from BidCo, or any of its related bodies corporate, which is conditional on, or is related to, the Scheme.

(e)          Agreements connected with or conditional on the Scheme

Other than as disclosed in this section 10, there are no agreements or arrangements made between any ThinkSmart Director and any other person in connection with, or conditional on, the outcome of the Scheme.

10.4       Scheme Implementation Deed

(a)          Introduction

On 29 July 2022, ThinkSmart and BidCo entered into the Scheme Implementation Deed, which governs the conduct of the Scheme.

A summary of the key terms of the Scheme Implementation Deed is set out below. A full copy of the Scheme Implementation Deed was released on ThinkSmart's website on 29 July 2022 and can be obtained from www.thinksmartworld.com.

(b)          Conditions precedent

The conditions precedent are outlined in section 4.3.

(c)          ThinkSmart Independent Board Committee recommendation (clause 5.7)

The Scheme Implementation Deed requires ThinkSmart to use its reasonable endeavours to procure that each Independent Director does not change or withdraw their recommendation or intention to vote in favour of the Scheme subject to:

·                 the Independent Expert concluding that the Scheme is in the best interests of ThinkSmart Shareholders (other than the Excluded Shareholders);

·                 there being no Superior Proposal; and

·                 the ThinkSmart Independent Board Committee not determining that, by virtue of the director's duties of its members, it is required to change, withdraw or modify its recommendation.

(d)          Conduct of business (clause 5.5)

The Scheme Implementation Deed requires that ThinkSmart carry on its business and operations in the ordinary course.

In addition, ThinkSmart must also:

·                 not enter into new lines of business;

·                 ensure no 'Target Prescribed Occurrence' (as defined in Schedule 1 of the Scheme Implementation Deed) occurs; and

·                 make reasonable efforts to maintain and preserve its relationships with Government Agencies.

However, ThinkSmart will be able to take any actions:

·                 fairly disclosed in public documents prior to the date of the Scheme Implementation Deed;

·                 agreed to in writing by BidCo; or

·                 required or permitted by law, the Scheme Implementation Deed or the Scheme.

(e)          Representations and warranties (clause 7)

The Scheme Implementation Deed contains customary representations and warranties given by each of ThinkSmart and BidCo to each other.

These representations and warranties are set out in Schedule 2 (in the case of BidCo) and Schedule 3 (in the case of ThinkSmart) of the Scheme Implementation Deed.

(f)           Exclusivity (clause 11)

The Scheme Implementation Deed contains the following customary exclusivity provisions:

·                 no shop provisions, providing that, during the Exclusivity Period, ThinkSmart must not solicit, invite, encourage or initiate any inquiry, expression of interest, offer, proposal, discussion or other communication which would reasonably be expected to encourage or lead to the making of, an actual, proposed or potential Competing Proposal;

·                 no talk provisions, providing that, during the Exclusivity Period, ThinkSmart must not engage with potential bidders or negotiate or enter into an actual, proposed or potential Competing Proposal (provided that the no talk provision does not apply if the ThinkSmart Independent Board Committee determines that (after consultation with its advisers) such proposal could reasonably be expected to become a Superior Proposal and that (after receiving written legal advice) complying with the provision would be reasonably likely to constitute a breach of their fiduciary or statutory duties);

·                 no due diligence provisions, providing that, during the Exclusivity Period, ThinkSmart must not disclose any non-public information to potential bidders in connection with, or with a view of obtaining, or which would reasonably be expected to lead to, an actual, proposed or potential Competing Proposal (subject to the fiduciary out described above);

·                 notification right for BidCo during the Exclusivity Period if ThinkSmart becomes aware of any discussions, proposals or provision of information in connection with an actual, proposed or potential Competing Proposal (subject to the fiduciary out described above) - BidCo must be notified as soon as possible and in any event within 48 hours; and

·                 a 3 Business Day matching right period in favour of BidCo whereby the ThinkSmart Independent Board Committee cannot accept or recommend a Competing Proposal unless:

‒    in acting in good faith and in satisfaction of their fiduciary duties, they determine that the Competing Proposal is a, or would be, or would be reasonably likely to be, an actual, proposed or potential, Superior Proposal;

‒    ThinkSmart has provided the material terms of the Competing Proposal to BidCo, including the identity of the party making the proposal; and

‒    ThinkSmart has given BidCo at least 3 Business Days to provide a matching or superior counterproposal and BidCo has not announced or formally proposed a matching or superior proposal by the expiry of that period.

If the ThinkSmart Independent Board Committee considers BidCo's counterproposal to be a matching or superior proposal, then ThinkSmart and BidCo must use their best endeavours to agree amendments to the Scheme Implementation Deed to implement the counterproposal.

(g)          Reimbursement fee (clause 12)

The Scheme Implementation Deed contains a reimbursement fee to reimburse BidCo for its actual out-of-pocket costs incurred in pursuing the Scheme, up to a maximum of $200,000 (excluding GST), which will be triggered if:

·                 during the Exclusivity Period, any member of the ThinkSmart Independent Board Committee changes their recommendation in relation to the Scheme, except as a result of:

‒    the Independent Expert concluding that the Scheme is not in the best interests of ThinkSmart Shareholders;

‒    a Court or Government Agency requiring a change to the recommendation; or

‒    ThinkSmart being entitled to terminate the Scheme Implementation Deed for material breach;

·                 a Competing Proposal is announced during the Exclusivity Period and, within 12 months of the date of such announcement, the third party completes a Competing Proposal (of a kind referred to in paragraphs 2, 3 or 4 of the definition of Competing Proposal set out in the Glossary in section 11 of this Scheme Booklet) or the third party acquires a Relevant Interest in more than 50% of ThinkSmart Shares under a transaction that is or has become wholly unconditional or otherwise acquires control of ThinkSmart; or

·                 BidCo terminates the Scheme Implementation Deed following a material breach by ThinkSmart, including of ThinkSmart's representations and warranties.

(h)          Termination (clause 13)

Each of ThinkSmart and BidCo may terminate the Scheme Implementation Deed:

·                 for material breach of the Scheme Implementation Deed or where the other party has breached a representation or warranty that is material in the context of the Scheme taken as a whole, and the breach is not remedied within a specified period;

·                 if, any time before 8.00am on the Second Court Date, the Court or another Government Agency has taken any action permanently restraining or otherwise prohibiting or preventing the Transaction, or has refused to do anything necessary to permit the Transaction to be implemented by the 'End Date' (being 29 January 2023), and the action or refusal has become final and cannot be appealed or reviewed;

·                 for failure of a condition precedent to the Scheme (as outlined in section 4.3);

·                 if the Scheme is not Effective by the 'End Date' (being 29 January 2023); or

·                 if ThinkSmart's Shareholders have not agreed to the Scheme at the Scheme Meetings by the Requisite Majorities.

10.5       Other material agreements

BidCo and ThinkSmart have entered into the following contracts:

·                 Broker Agreement between ThinkSmart, BidCo and the Broker. Under the Broker Agreement the Broker is irrevocably appointed to sell the Block Sale Shares and is obliged to remit the proceeds back to ThinkSmart. In exchange ThinkSmart must pay the Broker a fee of 0.5% of the gross sale proceeds. The Broker must sell the Block Sale Shares on-market on the New York Stock Exchange as soon as practicable on the next Trading Day following the Implementation Date (and, in any event, within 3 Trading Days following the Implementation Date) in the ordinary course of trading on the New York Stock Exchange at such prices in United States Dollars and at such times as the Broker sees fit, and on such other terms as the Broker determines in good faith, with the objective of achieving the best price for the Block Sale Shares that is reasonably obtainable at the time of the relevant sale.

·                 Funds Flow Deed between ThinkSmart and BidCo. Under the Funds Flow Deed, ThinkSmart and BidCo agree to execute the funds flow described in section 9.1 of this Scheme Booklet.

BidCo and ThinkSmart also intend to enter into the Loan Deed, as described in section 9.1 of this Scheme Booklet.

10.6       Consents, disclosures and fees

(a)          Consents

This Scheme Booklet contains statements made by, or statements said to be based on statements made by:

·                 BidCo in respect of the BidCo Information only;

·                 Deloitte Tax Services Pty Ltd in respect of section 8.1;

·                 KPMG LLP in respect of section 8.2; and

·                 Grant Thornton Corporate Finance Pty Ltd as the Independent Expert.

Each of those persons named above has consented to the inclusion of each statement it has made in the form and context in which the statements appear and has not withdrawn that consent at the date of this Scheme Booklet.

The following parties have given and have not, before the time of registration of this Scheme Booklet with ASIC, withdrawn their consent to be named in this Scheme Booklet in the form and context in which they are named:

·                 Deloitte Tax Services Pty Ltd as Australian tax adviser to ThinkSmart;

·                 KPMG LLP as UK tax adviser to ThinkSmart;

·                 Grant Thornton Corporate Finance Pty Ltd as the Independent Expert;

·                 Herbert Smith Freehills as Australian legal adviser to ThinkSmart;

·                 Shoosmiths LLP as UK legal adviser to ThinkSmart; and

·                 Computershare Investor Services Pty Limited as the ThinkSmart Share Registry.

(b)          Disclosures and responsibility

Each person named in section 10.6(a):

·                 has not authorised or caused the issue of this Scheme Booklet;

·                 does not make, or purport to make, any statement in this Scheme Booklet or any statement on which a statement in this Scheme Booklet is based, other than:

‒    BidCo in respect of the BidCo Information only;

‒    Deloitte Tax Services Pty Ltd in respect of section 8.1 only;

‒    KPMG LLP in respect of section 8.2 only; and

‒    Grant Thornton Corporate Finance Pty Ltd in respect of the Independent Expert's Report only; and

·                 to the maximum extent permitted by law, expressly disclaims all liability in respect of, makes no representation regarding, and takes no responsibility for, any part of this Scheme Booklet other than a reference to its name and the statement (if any) included in this Scheme Booklet with the consent of that party as specified in this section 10.6(b).

(c)          Fees

The fees set out in this section 10.6(c) only relate to fees paid or payable by ThinkSmart in connection with the Transaction and the preparation of this Scheme Booklet. As at the Last Practicable Date, such fees include amounts paid or payable to:

·                 Deloitte Tax Services Pty Ltd for acting as Australian tax adviser to ThinkSmart of up to approximately $190,000 (excluding GST);

·                 KPMG LLP for acting as UK tax adviser to ThinkSmart of up to approximately $17,000 (excluding VAT);

·                 Grant Thornton Corporate Finance Pty Ltd for acting as the Independent Expert of up to approximately $70,000 (excluding GST);

·                 Herbert Smith Freehills for acting as Australian legal adviser to ThinkSmart of up to approximately $570,000 (excluding GST);

·                 Shoosmiths LLP for acting as UK legal adviser to ThinkSmart of up to approximately $51,000 (excluding VAT); and

·                 Computershare Investor Services Pty Limited for acting as the ThinkSmart Share Registry of up to approximately $17,000 (excluding GST).

In aggregate, if the Scheme is implemented, ThinkSmart expects to pay approximately $1.25 million (excluding GST) in transaction costs. In aggregate, if the Scheme is not implemented, ThinkSmart expects to pay approximately $1 million (excluding GST) in transaction costs.

10.7       Regulatory relief

Paragraph 8302(d) of Part 3 of Schedule 8 of the Corporations Regulations 2001 (Cth) requires this Scheme Booklet to set out particulars of any payment or benefit proposed to be made or given to any director, secretary or executive officer of ThinkSmart or a Related Body Corporate (each a Relevant Person) as compensation for loss of office in ThinkSmart or a Related Body Corporate or as conditions for or in connection with his or her retirement from office in ThinkSmart or a Related Body Corporate.

ASIC has granted ThinkSmart relief from this requirement on the basis that ThinkSmart is not required to set out in this Scheme Booklet the particulars of any payments or benefits which may be made or given to a Relevant Person in relation to their loss of office, or retirement from office, unless:

·                 the Relevant Person will lose office or retire from office as a consequence of, or in connection with, the Scheme; or

·                 the amount of any payment or benefit which may be made to the Relevant Person upon their loss of office or retirement from office may be materially affected by the Scheme.

10.8       No unacceptable circumstances

The ThinkSmart Independent Board Committee believes that the Scheme does not involve any circumstances in relation to the affairs of ThinkSmart that could reasonably be characterised as constituting 'unacceptable circumstances' for the purposes of section 657A of the Corporations Act.

10.9       No other material information

Except as disclosed elsewhere in this Scheme Booklet, so far as the ThinkSmart Independent Board Committee is aware, there is no other information that is:

·                 material to the making of a decision by an ThinkSmart Shareholder whether or not to vote in favour of the Scheme; and

·                 known to any ThinkSmart Director at the date of lodging this Scheme Booklet with ASIC for registration,

which has not previously been disclosed to ThinkSmart Shareholders.

10.10    Supplementary disclosure

ThinkSmart will issue a supplementary document to this Scheme Booklet if it becomes aware of any of the following between the date of this Scheme Booklet and the Second Court Date:

·                 a material statement in this Scheme Booklet is false or misleading in a material respect;

·                 a material omission from this Scheme Booklet;

·                 a significant change affecting a matter included in this Scheme Booklet; or

·                 a significant new matter has arisen and it would have been required to be included in this Scheme Booklet if it had arisen before the date of this Scheme Booklet.

Depending on the nature and timing of the changed circumstances, and subject to obtaining any relevant approvals, ThinkSmart may circulate and publish any supplementary document by:

·                 making an RNS announcement;

·                 placing an advertisement in a prominently published newspaper which is circulated generally throughout Australia;

·                 posting the supplementary document to ThinkSmart Shareholders at their address shown on the ThinkSmart Share Register; and/or

·                 posting a statement on ThinkSmart's website at www.thinksmartworld.com,

as ThinkSmart, in its absolute discretion, considers appropriate.

ASIC will be provided with an opportunity to review and comment on any supplementary documents prior to their issue by ThinkSmart.



 

11       Glossary

11.1       Definitions

In this Scheme Booklet, unless the context otherwise appears, the following terms have the meanings shown below:

Afterpay

Afterpay Limited ACN 618 280 649.

AIM

the Alternative Investment Market of the London Stock Exchange.

AIM Rules

the rules for companies whose securities are admitted to trading on AIM, as published by the London Stock Exchange from time to time.

Annual General Meeting

the 2022 annual general meeting of ThinkSmart Shareholders.

ASIC

the Australian Securities and Investments Commission.

ASX

the Australian Securities Exchange.

Associate

has the meaning set out in section 12 of the Corporations Act, as if subsection 12(1) of the Corporations Act included a reference to this deed and ThinkSmart was the designated body.

ATO

the Australian Taxation Office.

Authorisations

any approval, licence, consent, authority or permit.

BidCo

Tuscan Equity Pty Ltd ACN 661 151 560.

BidCo Board

the board of directors of BidCo.

BidCo Director

a member of the BidCo Board.

BidCo Group

BidCo, its Related Bodies Corporate and Mr Ned Montarello and a reference to a BidCo Group Member is to any one of them.

BidCo Information

the information regarding the BidCo Group contained in the following sections of this Scheme Booklet:

1    the response to the question "Who is BidCo" in section 2;

2    the third bullet point in the section headed "Cash Consideration" in section 4.1 (to the extent it pertains to statements made by BidCo);

3    the section headed "Withholding tax" in section 4.1 (to the extent it pertains to statements made by BidCo);

4    the statement in section 4.3 that, as at the date of this Scheme Booklet, none of the BidCo Directors are aware of any circumstances which would cause any condition precedent not to be satisfied;

5    section 4.5(g) (to the extent it pertains to statements made by BidCo);

6    the entire content of section 6.

7    section 9 (to the extent it pertains to statements made by BidCo); and

8    the list of "Excluded Shareholder" in section 11.

For the avoidance of doubt, the BidCo Information excludes the ThinkSmart Information and the Independent Expert's Report and any description of the taxation effect of the Transaction on Scheme Shareholders prepared by an external adviser to ThinkSmart.

BidCo Shares

fully paid ordinary shares in the capital of BidCo and BidCo Share means any one of them.

Block

Block, Inc. a publicly traded company on the New York Stock Exchange (ticker symbol "SQ").

Block Shares

Class A shares in Block.

Block Sale Shares

that number of the Block Shares held by ThinkSmart as at the date of the Scheme Implementation Deed that is equal to 618,750 multiplied by the total number of Relevant Scheme Shares and divided by the total number of ThinkSmart Shares, rounded to the nearest whole number of Block Shares.

Block Sale Share Proceeds

1    the proceeds from the sale of the Block Sale Shares pursuant to clause 5.4 of the Scheme Implementation Deed; less

2    any applicable brokerage, foreign exchange or banking charges or fees (including wire transfer fees or corresponding charges) or charges or fees of a similar nature which are incurred with respect to the sale of the Block Sale Shares and the deposit of the proceeds of sale into the bank account referred to in clause 5.4 of the Scheme Implementation Deed; plus

3    any dividend, return of capital or other payment paid to ThinkSmart with respect to the Block Sale Shares between the date of this deed and the date the Cash Consideration is paid pursuant to clause 5.4 of the Scheme Implementation Deed; less

4    any tax (including withholding) which is required to be remitted by ThinkSmart (or a party acting on behalf of ThinkSmart or a party to the sale of the Block Sale Shares) to a Government Agency, from the proceeds of sale of the Block Sale Shares (to the extent not already reflected in the proceeds) which, for the avoidance of doubt, excludes any income tax or tax on profits; less

5    any net tax payable by ThinkSmart in respect of any amount referred to in paragraph 3 of this definition.

Broker

the share broker appointed for the purposes of clause 5.4 of the Scheme Implementation Deed under the Broker Agreement, being Canaccord Genuity Limited.

Broker Agreement

the broker agreement described in section 10.5 of this Scheme Booklet.

Business Day

a day that is not a Saturday, Sunday or a public holiday or bank holiday in Perth, Western Australia.

Cash Consideration

the cash consideration described in section 4.1 of this Scheme Booklet.

Clearpay

Clearpay Finance Ltd (UK company number 05198026).

Competing Proposal

any proposal, offer, expression of interest, agreement, arrangement or transaction, which, if entered into or completed in accordance with its terms, would result in a Third Party (either alone or together with any Associate):

1    directly or indirectly acquiring or having the right to acquire (a) a Relevant Interest in; (b) a legal, beneficial or economic interest (including by way of an equity swap, contract for difference or similar transaction or arrangement) in; or (c) control of, 15% or more of the ThinkSmart Shares;

2    acquiring Control of ThinkSmart or any material Subsidiary of ThinkSmart;

3    directly or indirectly acquiring or becoming the holder of, or otherwise acquiring or having a right to acquire, a legal, beneficial or economic interest in, or control of, all or a substantial part of ThinkSmart's business or assets or the business or assets of the ThinkSmart Group;

4    otherwise directly or indirectly acquiring or merging, or being involved in an amalgamation or reconstruction (as those terms are used in s413(1) of the Corporations Act), with ThinkSmart or a material Subsidiary of ThinkSmart; or

5    require ThinkSmart to abandon, or otherwise fail to proceed with, the Transaction,

whether by way of takeover bid, members' or creditors' scheme of arrangement, reverse takeover, shareholder approved acquisition, capital reduction, buy back, sale or purchase of shares, other securities or assets, assignment of assets and liabilities, incorporated or unincorporated joint venture, dual-listed company (or other synthetic merger), deed of company arrangement, any debt for equity arrangement, recapitalisation, refinancing or other transaction or arrangement.

For the avoidance of doubt, each successive material modification or variation of any proposal, agreement, arrangement or transaction in relation to a Competing Proposal will constitute a new Competing Proposal.

Control

has the meaning given in section 50AA of the Corporations Act.

Corporations Act

the Corporations Act 2001 (Cth), as modified or varied by ASIC.

Court

the Federal Court Australia or such other court of competent jurisdiction under the Corporations Act agreed to in writing by BidCo and ThinkSmart.

COVID-19

SARS-CoV-2 or COVID-19, and any evolutions or mutations thereof (including any subsequent waves or outbreaks thereof).

COVID-19 Measures

any quarantine, "shelter in place", "stay at home", lockdown, workforce reduction, social distancing, shutdown, closure, sequester, safety or similar laws, rules, regulations, directives, guidelines or recommendations promulgated by any Government Agency in connection with or in response to COVID-19.

CREST

the relevant system (as defined in the CREST Regulations) in respect of which Euroclear is the Operator (as defined in the CREST Regulations) in accordance with which securities may be held and transferred in uncertificated form.

CREST Regulations

the UK Uncertificated Securities Regulations 2001 (SI 2001 No. 3755).

CREST Voting Instruction

a message which is sent using CREST.

Deed Poll

a deed poll in the form of Annexure 3 under which BidCo covenants in favour of the Scheme Shareholders to perform the obligations attributed to BidCo under the Scheme.

Depositary

Computershare Investor Services plc.

Depositary Custodian

Computershare Clearing Pty Limited ACN 063 826 228.

Effective

when used in relation to the Scheme, the coming into effect, under subsection 411(10) of the Corporations Act, of the order of the Court made under paragraph 411(4)(b) of the Corporations Act in relation to the Scheme.

Effective Date

the date on which the Scheme becomes Effective, currently expected to be 23 November 2022.

Election

an election by an Excluded Shareholder to receive their Scheme Consideration either:

1    in the form of Scrip Consideration in respect of all Scheme Shares held by that Excluded Shareholder on the Scheme Record Date; or

2    in the form of Cash Consideration for a number of the Scheme Shares held by that Excluded Shareholder on the Scheme Record Date and in the form of Scrip Consideration in respect of the remaining Scheme Shares held by that Excluded Shareholder on the Scheme Record Date,

made in accordance with clause 4.4 of the Scheme Implementation Deed and otherwise in accordance with the Scheme.

Election Form

a form issued by or on behalf of ThinkSmart for the purposes of an Excluded Shareholder making an Election, in a form agreed to by ThinkSmart and BidCo.

Election Time

5.00pm on the fifth Business Day before the date of the Scheme Meetings, or such other date as is agreed in writing between BidCo and ThinkSmart.

Euroclear

Euroclear UK & International Limited.

Excluded Shareholder

 

any ThinkSmart Shareholder who is (or becomes under clause 5.3(m) of the Scheme Implementation Deed) a member of the BidCo Group or any ThinkSmart Shareholder who holds any ThinkSmart Shares on behalf of, or for the benefit of, any member of the BidCo Group and does not hold BidCo Shares on behalf of, or for the benefit of, any other person, being as at the date of this deed:

1    Mr Ned Montarello;

2    Mr Ned Montarello as trustee for the Montarello Investment Trust;

3    Kimberly Montarello;

4    Kimberly Montarello & Mr Ned Montarello as trustees for the Adam Montarello Trust;

5    Kimberly Montarello & Mr Ned Montarello as trustees for the Scott Montarello Trust; and

6    Kimberly Montarello & Mr Ned Montarello as trustees for the Montarello Superannuation Fund.

Excluded Shareholder Scheme Meeting

the meeting of Excluded Shareholders ordered by the Court to be convened under section 411(1) of the Corporations Act.

Excluded Shareholder Scheme Resolution

the resolution to approve the Scheme to be voted on at the Excluded Shareholder Scheme Meeting, as set out in the Notice of Excluded Shareholder Scheme Meeting.

Exclusivity Period

the period from and including the date of the Scheme Implementation Deed (being 29 July 2022) to the earlier of:

1    the date of termination of the Scheme Implementation Deed;

2    the 'End Date' (being 29 January 2023); and

3    the Effective Date.

Financial Assistance Resolution

the resolution to approve the financial assistance to be given by ThinkSmart to BidCo in connection with the Scheme under the Loan Deed, as described in section 9 of this Scheme Booklet.

Financial Benefit Resolution

the resolution to approve the financial benefit to be given by ThinkSmart to BidCo in connection with the Scheme under the Loan Deed, as described in section 9 of this Scheme Booklet.

First Court Date

the first day on which an application made to the Court for an order under subsection 411(1) of the Corporations Act convening the Scheme Meeting is heard, or, if the application is adjourned or subject to appeal for any reason, the day on which the adjourned application is heard.

Form of Instruction

the form of instruction that provides for ThinkSmart DI Holders to instruct the Depositary Custodian how to vote at the General Scheme Meeting and which accompanies the version of the Scheme Booklet to be dispatched to each ThinkSmart DI Holder.

Funds Flow Deed

the funds flow deed described in section 10.5 of this Scheme Booklet.

General Scheme Meeting

the meeting of ThinkSmart Shareholders (excluding the Excluded Shareholders) ordered by the Court to be convened under section 411(1) of the Corporations Act.

General Scheme Resolution

the resolution to approve the Scheme to be voted on at the General Scheme Meeting, as set out in the Notice of General Scheme Meeting.

Government Agency

any foreign or Australian government or governmental, semi-governmental, administrative, fiscal or judicial body, department, commission, authority, tribunal, agency or entity (including any stock or other securities exchange), or any minister of the Crown in right of the Commonwealth of Australia or any State, and any other federal, state, provincial, or local government, whether foreign or Australian.

GST

goods and services tax or similar value added tax levied or imposed in Australia under the GST Law or otherwise on a supply.

GST Act

the A New Tax System (Goods and Services Tax) Act 1999 (Cth).

GST Law

has the same meaning as in the GST Act.

HMRC

the United Kingdom government department, His Majesty's Revenue and Customs.

Implementation Date

the fifth Business Day after the Scheme Record Date, or such other date after the Scheme Record Date as ThinkSmart and BidCo agree in writing, currently expected to be 2 December 2022.

Independent Director

each of David Adams, Peter Gammell and Gary Halton.

Independent Director ThinkSmart Share

any ThinkSmart Share held by or on behalf of an Independent Director.

Independent Expert

Grant Thornton Corporate Finance Pty Ltd ACN 003 265 987, the independent expert in respect of the Scheme appointed by ThinkSmart.

Independent Expert's Report

the report issued by the Independent Expert in connection with the Scheme, as set out in Annexure 1.

Insolvency Event

in relation to an entity:

1    the entity resolving that it be wound up or a court making an order for the winding up or dissolution of the entity (other than where the order is set aside within 14 days);

2    a liquidator, provisional liquidator, administrator, receiver, receiver and manager or other insolvency official being appointed to the entity or in relation to the whole, or a substantial part, of its assets;

3    the entity executing a deed of company arrangement;

4    the entity ceasing, or threatening to cease to, carry on substantially all the business conducted by it as at the date of the Scheme Implementation Deed;

5    the entity is or becomes unable to pay its debts when they fall due within the meaning of the Corporations Act (or, if appropriate, legislation of its place of incorporation); or

6    the entity being deregistered as a company or otherwise dissolved,

or any other like event, matter or circumstance occurring in relation to an entity in another jurisdiction.

Last Practicable Date

17 October 2022.

Loan

has the meaning given in section 9.1.

Loan Deed

has the meaning given in section 9.1.

LSE

the London Stock Exchange.

Meetings

the Scheme Meetings and the Annual General Meeting.

Mr Ned Montarello

Natale ('Ned') Ronald Montarello.

Notice of Annual General Meeting

the notice in relation to the Annual General Meeting set out in Annexure 6.

Notice of Excluded Shareholder Scheme Meeting

the notice in relation to the Excluded Shareholder Scheme Meeting set out in Annexure 5.

Notice of General Scheme Meeting

the notice in relation to the General Scheme Meeting set out in Annexure 4.

Notice of Scheme Meetings

both the Notice of General Scheme Meeting and the Notice of Excluded Shareholder Scheme Meeting.

Reimbursement Fee

the actual out-of-pocket costs of BidCo in pursuing the Transaction, up to a maximum of $200,000 (excluding GST).

Related Bodies Corporate

has the meaning set out in section 50 of the Corporations Act.

Relevant Interest

has the meaning given in sections 608 and 609 of the Corporations Act.

Relevant Scheme Shares

the aggregate of:

1    all Scheme Shares held by Scheme Shareholders who are not Excluded Shareholders; and

2    all Scheme Shares in respect of which an Excluded Shareholder has made an Election to receive Cash Consideration.

Requisite Majorities

1    in relation to the General Scheme Resolution, a resolution passed by:

-    unless the Court orders otherwise, a majority in number (more than 50%) of ThinkSmart Shareholders (excluding Excluded Shareholders) present and voting at the General Scheme Meeting (either in person or by proxy, attorney or, in the case of corporate ThinkSmart Shareholders, body corporate representative); and

-    at least 75% of the total number of votes cast on the General Scheme Resolution at the General Scheme Meeting by ThinkSmart Shareholders (excluding Excluded Shareholders) present and voting (either in person or by proxy, attorney or, in the case of corporate ThinkSmart Shareholders, body corporate representative); and

2    in relation to the Excluded Shareholder Scheme Resolution, a resolution passed by:

-    unless the Court orders otherwise, a majority in number (more than 50%) of Excluded Shareholders present and voting at the Excluded Shareholder Scheme Meeting (either in person or by proxy, attorney or, in the case of corporate Excluded Shareholders, body corporate representative); and

-    at least 75% of the total number of votes cast on the Excluded Shareholder Scheme Resolution at the Excluded Shareholder Scheme Meeting by Excluded Shareholders present and voting (either in person or by proxy, attorney or, in the case of corporate Excluded Shareholders, body corporate representative).

RNS

a regulatory information service approved by the UK Financial Conduct Authority for the distribution to the pubic of regulatory announcements and included within the list maintained on the UK Financial Conduct Authority's website.

Scheme

the scheme of arrangement under Part 5.1 of the Corporations Act between ThinkSmart and the Scheme Shareholders, the form of which is attached as Annexure 2, subject to any alterations or conditions made or required by the Court under subsection 411(6) of the Corporations Act and agreed to in writing by BidCo and ThinkSmart.

Scheme Booklet

this document being the explanatory statement in respect of the Scheme, which has been prepared by ThinkSmart in accordance with section 412 of the Corporations Act.

Scheme Consideration

the consideration to be provided to each Scheme Shareholder for the transfer to BidCo of each Scheme Share, being for each ThinkSmart Share held by a Scheme Shareholder as at the Scheme Record Date, as determined in accordance with clauses 4.5 and 4.6 of the Scheme Implementation Deed and section 4.1 of this Scheme Booklet.

Scheme Implementation Deed

the Scheme Implementation Deed dated 29 July 2022 between ThinkSmart and BidCo, as amended from time to time.

Scheme Meetings

both of the General Scheme Meeting and the Excluded Shareholder Scheme Meeting, and Scheme Meeting means either or both of them (as the context requires), and includes any meeting convened following any adjournment or postponement of that meeting.

Scheme Record Date

the time and date for determining entitlements to receive the Scheme Consideration, being the second Business Day after the Effective Date, currently expected to be 5.00pm (Perth time) on 25 November 2022 for ThinkSmart Shareholders and 6.00pm (London time) on 25 November 2022 for ThinkSmart DI Holders, or such other time and date as ThinkSmart and BidCo agree in writing.

Scheme Resolution

the resolutions to approve the Scheme to be voted on at the Scheme Meetings, as set out in the Notice of General Scheme Meeting and the Notice of Excluded Shareholder Scheme Meeting, and Scheme Resolution means either or both of them (as the context requires).

Scheme Shareholder

a holder of ThinkSmart Shares recorded in the ThinkSmart Share Register as at the Scheme Record Date.

Scheme Shares

all ThinkSmart Shares held by the Scheme Shareholders as at the Scheme Record Date.

Scrip Consideration

one new BidCo Share for each Scheme Share.

SEC

the United States Securities and Exchange Commission.

Second Court Date

the first day on which an application made to the Court for an order under paragraph 411(4)(b) of the Corporations Act approving the Scheme is heard, currently expected to be 22 November 2022, or, if the application is adjourned or subject to appeal for any reason, the day on which the adjourned application or appeal is heard.

Second Court Hearing

the hearing of the application made to the Court for an order pursuant to section 411(4)(b) of the Corporations Act approving the Scheme.

Subsidiary

has the meaning given in Division 6 of Part 1.2 of the Corporations Act.

Superior Proposal

 

a bona fide Competing Proposal:

1    of the kind referred to in any of paragraphs 2, 3, 4 or 5 of the definition of Competing Proposal; and

2    not resulting from a breach by ThinkSmart of any of its obligations under clause 11 of the Scheme Implementation Deed,

that the ThinkSmart Independent Board Committee, acting in the best interests of the ThinkSmart Group and in good faith, and after receiving written advice from its external legal and financial advisers, determines:

 

3    is reasonably capable of being valued and completed in a reasonable timeframe in accordance with its terms; and

 

 

4    would, if completed substantially in accordance with its terms, be more favourable to ThinkSmart Shareholders (as a whole) than the Transaction (and, if applicable, than the Transaction as amended or varied following application of the matching right set out in clause 11.4 of the Scheme Implementation Deed),

in each case taking into account all terms and conditions and other aspects of the Competing Proposal (including any timing considerations, any conditions precedent, the identity, reputation and financial condition of the proponent, all relevant legal, financial, regulatory or other matters affecting the probability of the Competing Proposal being completed) and of the Transaction.

ThinkSmart

ThinkSmart Limited ACN 092 319 698.

ThinkSmart Board

the board of directors of ThinkSmart and a ThinkSmart Board Member means any director of ThinkSmart comprising part of the ThinkSmart Board.

ThinkSmart Depositary Interest

a depositary interest issued by the Depositary representing one fully paid ThinkSmart Share.

ThinkSmart DI Holder

the holder of a ThinkSmart Depositary Interest.

ThinkSmart DI Register

the register of ThinkSmart DI Holders maintained by ThinkSmart.

ThinkSmart Director

a member of the ThinkSmart Board.

ThinkSmart Group

ThinkSmart and each of its Subsidiaries, and a reference to a ThinkSmart Group Member or a member of the ThinkSmart Group is to ThinkSmart or any of its Subsidiaries.

ThinkSmart Independent Board Committee

the independent board committee established by ThinkSmart Board to consider and implement the Transaction, which comprises all ThinkSmart Board Members other than Mr Ned Montarello.

ThinkSmart Information

the information contained in this Scheme Booklet, other than:

1    section 8 of this Scheme Booklet

2    the BidCo Information; and

3    the Independent Expert's Report.

ThinkSmart Option

the options to subscribe for ThinkSmart Shares (on a one for one basis), as described in section 5.6 and 10.2 of this Scheme Booklet.

ThinkSmart Share

a fully paid ordinary share in the capital of ThinkSmart.

ThinkSmart Shareholder

each person who is registered as the holder of a ThinkSmart Share in the ThinkSmart Share Register and, as the context permits, includes a ThinkSmart DI Holder.

ThinkSmart Share Register

the register of members of ThinkSmart maintained in accordance with the Corporations Act.

ThinkSmart Share Registry

Computershare Investor Services Pty Limited ACN 078 279 277.

Third Party

a person other than BidCo, its Related Bodies Corporate and its Associates.

Transaction

the acquisition of the Scheme Shares by BidCo through implementation of the Scheme in accordance with the terms of the Scheme Implementation Deed.

UK

the United Kingdom.

UK MAR

the UK Market Abuse Regulation, which is the retained UK law version of the EU Market Abuse Regulation (596/2014) pursuant to the European Union (Withdrawal) Act 2018.

VAT

the United Kingdom's value added tax.

VWAP

volume weighted average price.

 

11.2       Interpretation

In this Scheme Booklet, unless expressly stated or the context otherwise appears:

(a)          words and phrases have the same meaning (if any) given to them in the Corporations Act;

(b)          words importing a gender include any gender;

(c)          words importing the singular include the plural and vice versa;

(d)          an expression importing a natural person includes any company, partnership, joint venture, association, corporation or other body corporate and vice versa;

(e)          a reference to a section or annexure is a reference to a section of and an annexure to this Scheme Booklet as relevant;

(f)           a reference to any statute, regulation, proclamation, ordinance or by law includes all statutes, regulations, proclamations, ordinances, or by laws amending, varying, consolidating or replacing it and a reference to a statute includes all regulations, proclamations, ordinances and by laws issued under that statute;

(g)          headings and bold type are for convenience only and do not affect the interpretation of this Scheme Booklet;

(h)          a reference to time is a reference to time in Perth, Australia;

(i)           a reference to writing includes facsimile transmissions; and

(j)           a reference to dollars, $, cents, ¢ and currency is a reference to the lawful currency of the Commonwealth of Australia.

 

 


Annexure 1

Independent Expert's Report

 

 

 

ThinkSmart Limited

Independent Expert's Report and Financial Services Guide

24 October 2022

 




The Independent Directors

ThinkSmart Limited

531 Hay Street

SUBIACO WA 6008

 




Dear Independent Directors

Independent Expert's Report and Financial Services Guide

Introduction

ThinkSmart Limited ("ThinkSmart" or the "Company") is an AIM-listed financial services company with a market capitalisation of £27.2 million[18] as at 14th October 2022, whose main asset is 618,750 shares in New York Stock Exchange ("NYSE") listed Block, Inc ("Block") ("Block Shares"). In addition to holding the Block Shares, the Company operates a legacy leasing business ("Leasing Business") and an outsourced call centre customer support service ("Call Centre Business") for Clearpay Finance Limited, the UK operations of Afterpay Limited ("Afterpay").

Tuscan Equity Pty Ltd ("Bidco") is an Australian private company, wholly-owned by Natale Ronald Montarello ("Mr. Montarello") ThinkSmart's Executive Chairman, CEO, founder and significant shareholder who has, along with his related entities, an interest in 29.4% of ThinkSmart shares (29.94% on a fully diluted basis including all vested but currently unexercised share options).

Between the 1st February 2022 and 28th July 2022, ThinkSmart has traded at an average 31%[19] discount to the market value of the Block Shares with minimum discount of 11% on the 16th June 2022 and maximum discount of 48% on the 25th February 2022. This discount has persisted despite the Company paying a £2.5 million capital return and dividend payment to shareholders on 15 July 2022.

In order to try and bridge this gap, ThinkSmart undertook a strategic review of its business, assets and operations, including its Block shareholding, and considered a number of commercial strategic options. To assist its assessment, the Company engaged with advisers in relation to the commercial options under consideration.

Following the Strategic Review, on 29th July 2022 ThinkSmart announced that it had entered into a Scheme Implementation Deed with Bidco, under which Bidco will acquire 100% of the ordinary shares in ThinkSmart ("ThinkSmart Shares") that it does not already owned via a Scheme of Arrangement ("the Scheme") based on the following terms:

·      ThinkSmart shareholders not associated with Mr. Montarello and his related entities ("Non-Associated Securityholders") will receive a cash consideration ("Cash Consideration") equal to the proceeds realised from the post-Scheme implementation sale of Block Shares attributable to their shareholding in ThinkSmart (net of their proportion of sale fees, expected to be approximately 0.5% of gross proceeds and net of any other amount (including tax) required to be withheld by law). Sale fees include brokerage fees, wire transfer fees, foreign exchange fees and other banking fees.

·      Depositary interest holders will receive the Cash Consideration in Pounds Sterling and holders of ThinkSmart Shares that do not hold via depositary interests will receive the Cash Consideration in Australian Dollars unless they reside outside Australia in which case they can elect to receive the Cash Consideration in their local currency. ThinkSmart shareholders will bear the foreign exchange risk of converting the proceeds from the sale of Block Shares from US Dollars.

·      The relevant number of Block Shares will be sold on the New York Stock Exchange ("NYSE") as soon as practically possible (and in any case within three trading days) following the implementation date of the Scheme. The Implementation date of the Scheme ("Implementation Date") is expected to be c. 10 trading days after the date shareholders meet to vote on the Scheme ("Scheme Meetings"). ThinkSmart shareholders will receive the Cash Consideration as soon as practically possible following the sale of the Block Shares.

·      Bidco will acquire all of the ThinkSmart Shares held by Mr. Montarello and his related entities in exchange for either Bidco shares or if they so elect, part or all of their shares in ThinkSmart may be acquired by Bidco for the Cash Consideration, funded by a proportionate increase in the number of Block Shares that will be sold by ThinkSmart post-Scheme implementation.

As Bidco is wholly-owned by Mr. Montarello, and he is ThinkSmart's Executive Chairman, CEO, founder and substantial shareholder, ThinkSmart has established an Independent Board Committee comprising all of the directors of ThinkSmart other than Mr. Montarello, to consider the Scheme on behalf of ThinkSmart and the Non-Associated Securityholders.

The Scheme is subject to the terms and conditions discussed in section 1 of this IER.

Subject to no superior proposal emerging, and an Independent Expert concluding and continuing to conclude that the Scheme is in the best interest of ThinkSmart Non-Associated Securityholders ("Securityholders"), the Independent Directors of ThinkSmart have unanimously recommended that Non-Associated Securityholders vote in favour of the Scheme and each Independent Director intends to vote in favour the ThinkSmart Shares held or controlled by them.

Purpose of the report

The Independent Directors have requested that Grant Thornton Corporate Finance prepare an IER stating whether the Scheme is in the best interests of ThinkSmart's Non-Associated Securityholders for the purposes of Section 411 of the Corporations Act. When preparing this IER, Grant Thornton Corporate Finance had regard to the Australian Securities Investment Commission's ("ASIC") Regulatory Guide 111 Contents of expert reports ("RG 111") and Regulatory Guide 112 Independence of experts ("RG 112"). The IER also includes other information and disclosures as required by ASIC.

Summary of opinion

Grant Thornton Corporate Finance has concluded that the Scheme is FAIR AND REASONABLE and hence in the BEST INTERESTS of the Non-Associated Securityholders.

In forming our opinion, Grant Thornton Corporate Finance has considered whether the Scheme is fair and reasonable to the ThinkSmart Non-Associated Securityholders and other quantitative and qualitative considerations.

Fairness Assessment

In forming our opinion in relation to the fairness of the Scheme, Grant Thornton Corporate Finance has compared the fair market value of ThinkSmart Shares on a control basis before the Scheme with the fair market value of Cash Consideration. However, the Cash Consideration for the Scheme will not be known until after the Scheme is implemented and will depend on the price of Block Shares on the date they are sold, which is expected to occur within 3 trading days following the Implementation Date. The amount of Cash Consideration will also depend on the applicable exchange rate achieved for the conversion of the US Dollar sale proceeds to Pounds Sterling and Australian Dollars. Furthermore, our assessed value of ThinkSmart Shares before the Scheme and the value of the Cash Consideration are both primarily driven by the same price of Block Shares. Any increase or decrease in the price of Block Shares or applicable exchange rates would result in a substantially equal adjustment to the fair market value of ThinkSmart Shares and of the Cash Consideration. Accordingly, for the purpose of our fairness assessment we have had regard to the recent trading prices of Block Shares and recent exchange rates to form our fairness opinion.

The following table summarises our fairness assessment in Pounds Sterling, ThinkSmart's functional and reporting currency.

Source: GTCF Calculations

 

The Cash Consideration is within and substantially in line with our assessed valuation range of ThinkSmart Shares before the Scheme and on a control basis. Accordingly, we conclude the Cash Consideration is FAIR to the Non-Associated Securityholders.

Since the Grant Thornton fair market value of ThinkSmart is dependent on the post-Scheme implementation sale of Block on the New York Stock Exchange, we have sensitised the fair market value of ThinkSmart using different Block Shares prices and USDGBP exchange rates. The sensitivity analysis is presented in the table below.

Source: GTCF, S&P Global

Although the fair market value of ThinkSmart is dependent on the post-Scheme implementation sale of Block on the New York Stock Exchange, it does not impact our fairness assessment since the Cash Consideration will be impacted to the same extent.

Valuation assessment of ThinkSmart based on the Net Realisable Value ("NRV") approach

In forming our opinion on the value of ThinkSmart, Grant Thornton has relied on the orderly realisation of assets approach having regard to the latest available balance sheet as at 30th June 2022, the board approved budget for the next two years and the share price of Block on the NYSE. We note the following:

·      Market value of financial assets - ThinkSmart's 618,750 shares in Block are valued by having regard to its traded price on the NYSE.  Due to volatility in the Block shares, Grant Thornton has used 5 and 10-day VWAP as of the 14th October 2022 to determine the value of ThinkSmart's investment. We have also assumed transaction costs of 0.5%. 

·      Remaining legacy business - ThinkSmart generates income from a call centre supporting Clearpay operations in the UK, primary and secondary rentals on electronic equipment and insurance on equipment under finance lease. ThinkSmart ceased writing new leases to new customers as of February 2021, hence this business is in wind-down mode. Grant Thornton has performed a discounted cash flow of the remaining cash flow streams over the next two years to determine the value of the legacy business. These cash flows include costs associated with winding down the business and transaction costs associated with the Scheme. Since our valuation is based on a 100% and control basis, Grant Thornton has excluded ThinkSmart listing costs. Grant Thornton has also performed a high case scenario, based on a ThinkSmart budget and forecasts conducted in February 2022 and a low case scenario assuming lower income and higher costs as the macro-economic outlook (and assumptions upon which the budget was based), has deteriorated since February 2022.

·      Value of the software - ThinkSmart continues to use its proprietary SmartCheck software which has the ability to manage electronic payments from point-of-sale through the entire lease cycle. It is also a credit decision making tool. We have considered the value of ThinkSmart's software by having regard to its development costs, book value and market conditions in the technology and Buy-Now-Pay-Later ("BNPL") sectors.

·      Liquidation costs - ThinkSmart expects to incur costs of c. £500,000 to liquidate its 5 active UK companies. This is based on a high-level estimate, due to the early stage in the process.  Costs associated with liquidation include correspondence with tax authorities to lodge returns and obtain tax clearance, distribution of any remaining assets to the shareholders and deregistration of the company.

·      Cash - ThinkSmart had a net cash balance of c. £5.5 million on 30 June 2022. We have adjusted this balance for a post year-end return to shareholders of £2.5 million and income from an Employee Share Option Scheme ("ESOP") being exercised. Grant Thornton has also deducted contingency cash required to run the business over the next two years for any unexpected liabilities such as indemnity claims which have not been captured in ThinkSmart budget or Grant Thornton's valuation or in the event cash flow generation is weaker than expected.

ThinkSmart shareholders should be aware that our assessment of the value per ThinkSmart Share should not be considered to reflect the price at which ThinkSmart Shares may be exchanged if the Scheme is not implemented. The price at which ThinkSmart Shares will ultimately trade depends on a range of factors.  However, if the Scheme is not approved, ThinkSmart's discount to its value in Block shares is likely to widen closer to the average discount seen between 1st February 2022 and 28th July 2022 of 31%.

Valuation Assessment of the Cash Consideration

The Cash Consideration for ThinkSmart Shares will be determined when its 618,750 shares in Block are sold on the NYSE and the US Dollar sale proceeds converted to Pounds Sterling and Australian Dollars as applicable. This disposal of Block Shares will take place over a maximum of three trading days from the Implementation Date, and c. 11 to 13 trading days after the Scheme Meetings which are expected to take place on 11th November 2022. ThinkSmart shareholders entitled to receive the Cash Consideration, will receive the Cash Consideration as soon as practically possible following the sale of the Block Shares, prior to which the sales proceeds will have been converted from US Dollars to Pounds Sterling or Australian Dollars, as applicable. Therefore, ThinkSmart shareholders entitled to receive the Cash Consideration, will assume currency risk over that period.

In assessing the Cash Consideration for ThinkSmart Shares, Grant Thornton has selected a price range based on a 5-day and 10-day VWAP ending 14th October 2022 of US$54.97 and US$56.82 respectively. Transaction costs of 0.5% have been deducted from the realisable value. The resulting value is converted into Pounds Sterling and Australian Dollars at the 5 and 10-day average exchange rates of US$/UK£ 0.8967 and US$/A$ 1.577 and divided by the number of fully diluted shares in issue. In the following table we present our calculations. We note that under the Scheme, income tax positions including capital gains tax will be for the account of Bidco and ThinkSmart, and will not impact the Cash Consideration received by ThinkSmart shareholders, entitled to receive the Cash Consideration.

Source:GTCF, S&P Global

Under the Scheme, the Cash Consideration will be unknown until the post-Scheme implementation sale of certain Block Shares on the New York Stock Exchange and the US Dollar sale proceeds are converted to Pounds Sterling and Australian Dollars as applicable. Therefore, the Cash Consideration may be higher or lower than the Grant Thornton assessed Cash Consideration.

In the following table, we present the impact of different Block Share prices (after transaction costs) and the USDGBP exchange rates the Cash Consideration.

 

 

 

 

Source: GTCF, S&P Global

Since our valuation of ThinkSmart and the Cash Consideration assume the same share prices and exchange rates, movements in these prices will not change our view of whether the Scheme is fair or not.

Reasonableness Assessment                      

RG111 establishes that the offer is reasonable if it is fair. It might also be reasonable if, despite being not fair, there are sufficient reasons for the security holders to accept the offer in the absence of any superior proposal. In assessing the reasonableness of the Offer, we have considered the following advantages, disadvantages and other factors.

Advantages

In accordance with ASIC RG111, a transaction is fair if it is also reasonable. Notwithstanding that we have concluded that the Scheme is fair, we have also considered the following likely advantages, disadvantages and other factors.

Unlocking the discount to market value of Block Shares

In August 2018, ThinkSmart sold 90% of Clearpay, it's UK BNPL offering to Afterpay for £10.5 million. Following the announcement of the intended takeover of Afterpay by Block (previously Square) in November 2021, Afterpay was entitled to exercise a call option on the remaining 10% in Clearpay due to a change in control. ThinkSmart agreed to sell this remaining shareholding in exchange for 1.65 million shares in Afterpay, subject to ThinkSmart Shareholder approval, which was obtained on 14 January 2022. ThinkSmart's Afterpay Shares were subsequently exchanged for 618,750 shares in Block, following the completion of the takeover of Afterpay by Block, on 1 February 2022.

ThinkSmart's investment in Block is by far the biggest contributor to ThinkSmart's fair value. However, since ThinkSmart received these shares, its market capitalisation has traded at a significant discount to the market value of its investment in Block. In the following chart, we present this discount from the 1st February 2022 to the 28th July 2022, the day preceding the announcement of the Scheme.

·  ThinkSmart discount to market value of its investment in Block (1 February 2022 - 28th July 2022)

 

 

 

 

 

 

 

 

 

Source: S&P Global, GTCF

Up to 28th July 2022, the average discount was 31%. The average discount declined to 13% following ThinkSmart entering into a Scheme Implementation Deed on the 29th July 2022.

If the Scheme is approved, ThinkSmart shareholders entitled to receive the Cash Consideration under the Scheme, will receive the net proceeds after transaction costs from the sale of Block Shares, unlocking the remaining discount and allowing shareholders to realise the full value of their investment in Block.

Although Block Shares are likely to be sold well below their 2021 highs of US$280 per share, ThinkSmart shareholders will be entitled to make their own arrangements to re-invest in Block with proceeds from the Cash Consideration if they desire to do so.

Premium for control

A premium for control is applicable when the acquisition of control of a company or business would give rise to benefits such as the ability to realise synergies, access cash flows, access tax benefits and control of the Board of Directors of the company.

The assessed Cash Consideration represents a premium to ThinkSmart's trading price before the announcement of the Scheme as summarised below:

·      Between 20% to 24% based on the 1-day VWAP of £0.234 of ThinkSmart on 28 July 2022.

·      Between 19% to 23% based on the 1-month VWAP of £0.235 of ThinkSmart on 28 July 2022.

·      Between 14% to 18% based on the 2-month VWAP of £0.246 of ThinkSmart on 28 July 2022.

This premium for control will not be available to ThinkSmart shareholders in the absence of the Scheme. The level of control premium is higher than that typically observed for control transactions occurring in Australia of between 20% and 40%.

·   Legacy business is not viable on a stand-alone basis

·   ThinkSmart's legacy business generates income from primary and secondary rentals as well as a call centre in the UK to support Clearpay. Primary rentals are generated from finance lease term contracts, while secondary rentals are generated from customers selecting to rent their IT equipment at the end of the minimum lease term. The finance lease book is expected to unwind by June 2023. Although ThinkSmart will continue to generate income from its call centre and secondary rentals, these operations lack the scale to cover both operating and corporate costs, such as data storage costs, salaries and property leases. Grant Thornton has assessed the value of the legacy business by discounting the remaining cash flows as it winds down assuming two scenarios. The high scenario is based on the budget but excludes listing costs as our valuation is assessed on a control basis. Our low scenario takes a more conservative view on income and costs due to a deterioration in macro-economic conditions in the UK since the budget was compiled. In the absence of the Scheme, it is possible that significant resources will be absorbed by the legacy business without financial benefits for the shareholders.



 

·   Non-associated shareholders will not take on risk associated with finance leasing book or any potential indemnity claims

·   ThinkSmart's gross finance receivables were valued at £1.036 million at the end of June 2022. After allowances for bad debt of £124,000, equivalent to 12% of gross finance receivables, the net finance receivables were £912,000 at the end of June 2022.

·   We note that macro-economic conditions characterised by higher inflation and rising interest rates have deteriorated in the UK. For example, CPI including housing costs in July 2022 increased by 8.8% fueled by the outbreak of war in Ukraine and a tight labour market. Furthermore, interest rates in the UK have risen from 0.25% to 1.75% within six months. This could place pressure on household disposable income, affecting small businesses and consumers ability to repay their leases. If the scheme is implemented, Non-Associated Securityholders will not bear risks associated with the quality of the finance receivables book. 

Additionally, if the Scheme is implemented, Non-Associated Securityholders will no longer be exposed to indemnity claim risk which arises under the UK's Direct Debit Guarantee Scheme. This protects consumers with direct debits in the event of an error in debit order based on an incorrect information, dates or amounts. Although banks should only allow the claim where an error has been made, in ThinkSmart's experience, banks have refunded all claims leaving ThinkSmart with the responsibility to reclaim amounts that were refunded in error, the cost of which is uneconomical. This risk has escalated with rising inflation and interest rates in the UK and has not been captured in our valuation assessment of ThinkSmart.

Cash certainty

Under a Strategic Review, ThinkSmart considered a number of commercial strategic options regarding the business, assets and operations of ThinkSmart. The Scheme, the culmination of this process, allows shareholders to realise their full value of ThinkSmart in cash, rather than wait for the wind-down and liquidation which may be a protracted process with a potentially worse outcome for shareholders, if cash flows do not materialise as expected

ThinkSmart shareholders will be able to re-invest directly in Block using their Cash Consideration

Although ThinkSmart is selling its shareholding in Block, ThinkSmart shareholders can directly invest in Block using the after-tax proceeds of the Cash Consideration if they desire to do so, allowing for direct control over their investment.

Disadvantages

·   Legacy business may generate more income than expected

·   Although unlikely, the legacy business may generate more income than expected due to secondary rentals increasing at a faster than expected rate or costs growing at a slower than expected rate. ThinkSmart also operates a call centre in the UK to support Clearpay (Block's BNPL operation in the UK formerly owned by Afterpay) for which it receives a margin contribution to overheads. This may continue operating until ThinkSmart is wound-down, in the absence of either party cancelling their agreement, which can be done with three-months notice.

·   ThinkSmart may not require all its contingency cash

In determining ThinkSmart's net cash position, Grant Thornton has deducted contingency cash for any potential liabilities such as indemnity claims which have not been captured in either ThinkSmart's budget or Grant Thornton's fair market value of ThinkSmart. Contingency cash may also be needed if budgeted and projected cash flows are weaker than expected. However, any contingency cash not required in the wind-down and liquidation of ThinkSmart, will not accrue to ThinkSmart Non-Associated Securityholders. On the flip side, Non-Associated Securityholders will not be taking the risk of any additional contingency cash requirements.

·   Block shares have weakened and are likely to be sold at prices well below the 12-month high

·   Block's share price peaked at US$280 per share in August 2021, significantly higher than the 5 and 10-day VWAP ending 14th October 2022 of US$54.97 and US$56.82 respectively.. Block Shares are likely to be sold at prices materially lower than 12-month highs, however, shareholders can re-invest in Block with the Cash Consideration if they desire to do so.

Other factors

Directors' recommendations and intentions

The ThinkSmart Independent Board Committee unanimously recommends that ThinkSmart shareholders vote in favour of the Scheme in the absence of a Superior Proposal and subject to the Independent Expert continuing to conclude that the Scheme is in the best interests of ThinkSmart shareholders (other than the excluded shareholders).

Subject to those same qualifications, each member of the ThinkSmart Independent Board Committee intends to vote, or cause to be voted, all the ThinkSmart Shares held or controlled by them in favour of the Scheme at the applicable Scheme Meeting.

Reasonableness conclusion

In our opinion, the advantages outweigh the disadvantages as set out above and on this basis, it is our opinion that the Scheme is REASONABLE to the Non-Associated Securityholders.

Overall conclusion

After considering the abovementioned quantitative and qualitative factors, Grant Thornton Corporate Finance has concluded that the Scheme is FAIR AND REASONABLE to the Non-Associated Securityholders.

Other matters

Grant Thornton Corporate Finance has prepared a Financial Services Guide in accordance with the Corporations Act. The Financial Services Guide is set out in the following section.

The decision of whether or not to vote in favour of the Scheme is a matter for each ThinkSmart Securityholder to decide based on their own views of the value of ThinkSmart and expectations about future market conditions, performance, risk profile and investment strategy. If ThinkSmart Securityholders are in doubt about the action they should take in relation to the Scheme, they should seek their own professional advice.

Yours faithfully
GRANT THORNTON CORPORATE FINANCE PTY LTD

 

                                                                                                                                                       

ANDREA DE CIAN                                                                                JANNAYA JAMES
Director                                                                                                                      Director

 


24 October 2022

Financial Services Guide

Grant Thornton Corporate Finance Pty Ltd

Grant Thornton Corporate Finance carries on a business, and has a registered office, at Level 17, 383 Kent Street, Sydney NSW 2000. Grant Thornton Corporate Finance holds Australian Financial Services Licence No 247140 authorising it to provide financial product advice in relation to securities and superannuation funds to wholesale and retail clients.

Grant Thornton Corporate Finance has been engaged by ThinkSmart to provide general financial product advice in the form of an independent expert's report in relation to the Scheme. This report is included in ThinkSmart's Scheme booklet.

Financial Services Guide

This Financial Services Guide ("FSG") has been prepared in accordance with the Corporations Act, 2001 and provides important information to help retail clients make a decision as to their use of general financial product advice in a report, the services we offer, information about us, our dispute resolution process and how we are remunerated.

General financial product advice

In our report we provide general financial product advice. The advice in our report does not take into account your personal objectives, financial situation or needs.

Grant Thornton Corporate Finance does not accept instructions from retail clients. Grant Thornton Corporate Finance provides no financial services directly to retail clients and receives no remuneration from retail clients for financial services. Grant Thornton Corporate Finance does not provide any personal retail financial product advice directly to retail investors nor does it provide market-related advice directly to retail investors.

Remuneration

When providing the IER, Grant Thornton Corporate Finance's client is ThinkSmart. Grant Thornton Corporate Finance receives its remuneration from ThinkSmart. In respect of the IER, Grant Thornton Corporate Finance will receive from ThinkSmart a fee of A$70,000 (plus GST), which is based on commercial rates plus reimbursement of out-of-pocket expenses for the preparation of the IER. Our directors and employees providing financial services receive an annual salary, a performance bonus or profit share depending on their level of seniority.

Except for the fees referred to above, no related body corporate of Grant Thornton Corporate Finance, or any of the directors or employees of Grant Thornton Corporate Finance or any of those related bodies or any associate receives any other remuneration or other benefit attributable to the preparation of and provision of this report.

Independence

Grant Thornton Corporate Finance is required to be independent of ThinkSmart and Bidco in order to provide this report. The guidelines for independence in the preparation of independent expert's reports are set out in Regulatory Guide 112 Independence of expert issued by ASIC. The following information in relation to the independence of Grant Thornton Corporate Finance is stated below.

"Grant Thornton Corporate Finance and its related entities do not have at the date of this report, and have not had within the previous two years, any shareholding in or other relationship with ThinkSmart or Bidco (and associated entities) that could reasonably be regarded as capable of affecting its ability to provide an unbiased opinion in relation to the Scheme.

Grant Thornton Corporate Finance has no involvement with, or interest in the outcome of the transaction, other than the preparation of this report.

Grant Thornton Corporate Finance will receive a fee based on commercial rates for the preparation of this report. This fee is not contingent on the outcome of the Scheme. Grant Thornton Corporate Finance's out of pocket expenses in relation to the preparation of the report will be reimbursed. Grant Thornton Corporate Finance will receive no other benefit for the preparation of this report.

Grant Thornton Corporate Finance considers itself to be independent in terms of Regulatory Guide 112 "Independence of expert" issued by the ASIC."

Complaints process

Grant Thornton Corporate Finance has an internal complaint handling mechanism and is a member of the Financial Ombudsman Service (membership no. 11800). All complaints must be in writing and addressed to the Chief Executive Officer at Grant Thornton Corporate Finance. We will endeavour to resolve all complaints within 30 days of receiving the complaint. If the complaint has not been satisfactorily ThinkSmart with, the complaint can be referred to the Financial Ombudsman Service who can be contacted at:

Financial Ombudsman Service Limited
GPO Box 3
Melbourne, VIC 3001
Telephone: 1800 367 287

Grant Thornton Corporate Finance is only responsible for this report and FSG. Complaints or questions about the General Meeting should not be directed to Grant Thornton Corporate Finance. Grant Thornton Corporate Finance will not respond in any way that might involve any provision of financial product advice to any retail investor.

Compensation arrangements

Grant Thornton Corporate Finance has professional indemnity insurance cover under its professional indemnity insurance policy. This policy meets the compensation arrangement requirements of section 912B of the Corporations Act, 2001. 


 

Contents

                                                                                                                                                                                   Page

1       Overview of the Proposed Scheme

2       Purpose and scope of the report

3       Industry Overview

4       Profile of ThinkSmart

5       Valuation methodologies

6       Valuation assessment of ThinkSmart

7       Valuation assessment of the Cash Consideration

8       Sources of information, disclaimer and consents

Appendix A - Valuation methodologies

Appendix B - WACC

Appendix C - Glossary

 


1     Overview of the Proposed Scheme

On the 29th July 2022, ThinkSmart announced it had entered into a binding Scheme Implementation Deed with Bidco, an Australian incorporated company, wholly owned by Ned Montarello the founder, Chairman and significant shareholder who has an interest in 29.4% of ThinkSmart Shares.  As part of the Scheme, Bidco will acquire all the shares in ThinkSmart for:

·      A Cash Consideration equivalent to the US dollar proceeds from the sale of the relevant number of ThinkSmart's shares in Block. This will be executed on the NYSE, between one to three trading days after the implementation of the Scheme.

·      Net of transaction costs, estimated to be approximately 0.5% of the value of the shares, and

·      Converted from US dollars into either Pounds Sterling and Australian Dollars, as applicable. Shareholders who own ThinkSmart via Depository Interest will receive the Cash Consideration in Pounds Sterling. All other shareholders will receive the Cash Consideration in Australian Dollars, unless they reside outside Australia in which case they can elect to receive the Cash Consideration in their local currency.

Following the sale of the shares on the NYSE, the proceeds will be remitted to an account with an approved depository institution, operated by ThinkSmart. Thereafter, ThinkSmart will transfer the US Dollar proceeds to an approved depositary institution account of Bidco. Bidco will then convert the US Dollar proceeds to Australian Dollars and Pounds Sterling before transferring the funds to two separate trust accounts in the name of ThinkSmart (as trustee for the Scheme shareholders) operated by Computershare for onwards payment to the ThinkSmart shareholders entitled to receive the Cash Consideration. This could take approximately two weeks exposing ThinkSmart shareholders entitled to receive the Cash Consideration to currency movements over that period.

The Scheme is subject to a number of conditions including:

·      Approval being obtained from the Financial Conduct Authority to the extent necessary under the Financial Services and Markets Act 2000.

·      ThinkSmart Non-Associated Securityholders approving the Scheme by the requisite majorities at the Scheme Meeting (requiring approval of a simple majority in number of the ThinkSmart Non-Associated Securityholders voting and approval of the ThinkSmart Non-Associated Securityholders who represent at least 75% of the total votes cast at the Scheme Meeting).

·      Court approval in relation to the Scheme.

·      No prescribed occurrences or regulated events (each as defined in the Scheme Implementation Deed) occurring in relation to ThinkSmart.

The Scheme Implementation Deed also includes certain exclusivity arrangements in respect of ThinkSmart, which are subject to customary fiduciary exceptions.

1.1   Tax consequences

Once the Scheme is implemented, Block Shares will be sold by ThinkSmart at the direction of Bidco after the Scheme Implementation Date when ThinkSmart is a wholly-owned subsidiary of Bidco. The income tax implications of the sale of Block Shares will not affect the Cash Consideration and will be for the account of ThinkSmart and Bidco.

ThinkSmart shareholders entitled to receive the Cash Consideration will be required to consider the income tax implications, including capital gains tax implications, in respect of receiving the Cash Consideration, with the Cash Consideration taken into account in determining the sale proceeds for tax purposes.

 

 

2     Purpose and scope of the report

2.1   Purpose

Schemes under section 411 of the Corporations Act

Schemes under section 411 of the Corporations Act 2001 regulates scheme of arrangements between companies and their members. Part 3 of Schedule 8 of the Corporations Regulations 2001 (Cth) ("Corporations Regulations") prescribes information to be sent to Securityholders and creditors in relation to members' and creditors' scheme of arrangement pursuant to Section 411 of the Corporations Act.

Part 3 of Schedule 8 of the Corporations Regulations requires an independent expert's report in relation to a scheme to be prepared when a party to that scheme has a shareholding greater than 30% in the company subject to the scheme, or where any of its directors are also directors of the company subject to the scheme. In those circumstances, the independent expert's report must state whether a scheme of arrangement is in the best interests of Securityholders and state reasons for that opinion. Even where there is no requirement for an independent expert's report, documentation for a scheme of arrangement typically includes an independent expert's report.

2.2   Basis of assessment

In forming our opinion, Grant Thornton Corporate Finance has had regard to relevant Regulatory Guides issued by the ASIC, including RG 111, Regulatory Guide 60 Scheme of Arrangement ("RG60") and RG 112. The IER will also include other information and disclosures as required by ASIC. We note that neither the Corporations Act nor the Corporations Regulations define the term "in the best interests of members".

RG 111 establishes certain guidelines in respect of independent expert's reports prepared for the purposes of the Corporations Act. RG111 is framed largely in relation to reports prepared pursuant to Section 640 of the Corporations Act and comments on the meaning of "fair and reasonable" in the context of a takeover offer. Pursuant to RG111, an offer is "fair" if the value of the offer price or consideration is equal to or greater than the value of the securities that are subject of the offer. A comparison must be made assuming 100% ownership of the target company. RG111 considers an offer to be "reasonable" if it is fair. An offer may also be reasonable if, despite not being "fair" but after considering other significant factors, Securityholders should accept the offer in the absence of any higher bid before the close of the offer.

RG111 also requires an independent expert report prepared for a change of control transaction implemented by way of a scheme to undertake substantially the same analysis as for a takeover bid (i.e. fair and reasonable analysis). Whilst the analysis is substantially the same, the opinion of the expert should be whether or not the proposed scheme is "in the best interests of the members of the company". If an expert were to conclude that a scheme was "fair and reasonable" if it was in the form of a takeover bid, it will also conclude that the proposed scheme is "in the best interests of the members of the company".

In our opinion, the most appropriate way to evaluate the fairness of the Scheme is to compare the fair market value of ThinkSmart on a control basis with the Cash Consideration being the net proceeds on the disposal of Block Shares which we estimate to be between A$ 54.0 million and A$ 55.2 million assuming a 5 and 10-day VWAP as of 14th October 2022. In considering whether the Scheme is reasonable for Securityholders, we have considered a number of factors, including:

·      Whether the Scheme is fair.

·      The implications to Securityholders if the Scheme is not approved.

·      Other likely advantages and disadvantages associated with the Scheme.

·      Other costs and risks associated with the Scheme that could potentially affect Securityholders.

2.3   Independence

Prior to accepting this engagement, Grant Thornton Corporate Finance (a 100% subsidiary of Grant Thornton Australia Limited) considered its independence with respect to the proposed Scheme ("Proposed Scheme") with reference to the ASIC Regulatory Guide 112 "Independence of Expert's Reports".  

Grant Thornton Corporate Finance has no involvement with, or interest in, the outcome of the Scheme other than that of an independent expert. Grant Thornton Corporate Finance is entitled to receive a fee based on commercial rates and including reimbursement of out-of-pocket expenses for the preparation of this report.

Except for these fees, Grant Thornton Corporate Finance will not be entitled to any other pecuniary or other benefit, whether direct or indirect, in connection with the issuing of this report. The payment of this fee is in no way contingent upon the success or failure of the Proposed Scheme.

2.4   Consent and other matters

Our report is to be read in conjunction with the Scheme Booklet dated on or around the 18th October 2022 in which this report is included, and is prepared for the exclusive purpose of assisting the Non-Associated Securityholders in their consideration of the Scheme. This report should not be used for any other purpose. Grant Thornton Corporate Finance consents to the issue of this report in its form and context and consents to its inclusion in the Scheme Booklet.

This report constitutes general financial product advice only and in undertaking our assessment, we have considered the likely impact of the Scheme to the Non-Associated Securityholders as a whole. We have not considered the potential impact of the Scheme on individual Non-Associated Security holders. Individual security holders have different financial circumstances and it is neither practicable nor possible to consider the implications of the Scheme on individual Securityholders.

The decision of whether or not to approve the Scheme is a matter for each Non-Associated Securityholder based on their own views of the value of ThinkSmart and expectations about future market conditions, ThinkSmart's performance, risk profile and investment strategy. If the Non-Associated Security holders are in doubt about the action they should take in relation to the Proposed Scheme, they should seek their own professional advice.

3     Industry Overview

Since all of ThinkSmart's assessed value is made up of Block, our industry overview focuses on sector to which the company is exposed; the global payments market.

Block is a fintech company that enables sellers to accept card payments and provides reporting and analytics, and next-day settlement. The company also provides a Cash App, which enables consumers to transfer, spend and store money. Effective 31 January 2022, Block acquired Afterpay, an Australian listed BNPL player that allows retailers to offer customers the ability to buy goods and services online and in-store on a Buy-Now, Pay Later basis.

Shifting Global Payments Methods

Global payment preferences whether at the point-on-sale (POS) or online, are shifting away from cash and credit cards towards alternative payment systems such digital wallets and BNPL. Alternative payment methods (to cash and cards) comprised c.63% of 2021 e-commerce transaction value and c. 35% of 2021 POS spend. In the following chart, we present global e-commerce payment methods in 2021 and expected methods in 2025. 

·   Global e-commerce payment methods

Source: Worldpay, the Global Payments report 2022

In the next chart, we present global POS payment methods in 2021 and expected in 2025.

·   Global POS payment methods

Source: Worldpay, the Global Payments report 2022

Mobile wallet usage is increasing across markets. In 2021, it increased 21% year-on-year ("yoy") to 28.6% of global POS transactions, equivalent to over US$13.3 trillion. Some of the world's largest technology companies have entered this market and popular mobile wallets include Google Pay, Apple Pay and Block's CashApp.

BNPL is also growing globally, accounting for 2.9% of global e-commerce transaction values in 2021 and c.1% of POS transactions globally. In the US, one of the fastest growing BNPL markets, BNPL is expected to account for 9% of the payments market by 2025, equivalent to US$180 billion. BNPL is led globally by Klarna, Afterpay (acquired by Block), PayPal and smaller competitors such as Zip, Sezzle and Affirm. Furthermore, some of the traditional financial services and technology companies are also offering products on a BNPL basis.

Recent Challenges in BNPL

Although the BNPL sector is growing globally, competition has also intensified from existing BNPL players diversifying geographically and global technology and financial services companies like Paypal, Mastercard and Apple offering similar instalment-type products. This, at a time when the sector has not yet achieved the scale to break-even. For example, Klarna, Europe's largest BNPL provider reported 1H FY22 results on 31st August 2022 with losses increasing to SEK6.2 billion (US$577 million) from SEK1.4billion ($130million) in the previously comparable period.[20] This was due to rapid international expansion, higher credit losses and increasing staff costs. Klarna has recently reduced its global headcount by 10%.[21]

Furthermore, the deterioration in macro-economic conditions in major markets like the US, UK, Europe and Australia has raised the risk of a slowdown in consumer spending and rising bad debts, extending the pathway to profitability for the BNPL sector. Since March 2022, the United States Federal Reserve has raised interest rates from 0.25% to 2.5% and has signalled the potential for further increases in an attempt to slowdown inflation to its target 2%. In July 2022, US CPI rose by a slower than expected 8.5% compared with 9.1% in the previous month.

Share prices of global fintech companies and BNPL in particular, have underperformed major indexes. In the following chart, we present the performance of Block and Block's peers, indexed to one on 1 February 2022, the date on which ThinkSmart received the shares.

·   Block and its peers indexed to 1 on the 1st February 2022

 

 

 

 

 

 

 

 

 

 

Source: S&P Globa

Since the 1st February 2022, Block's share price has declined 60%. Over the same period, competitors Paypal and Shopify declined 54% and 74% respectively while BNPL players Sezzle and Affirm declined 81% and 74% respectively. Although markets over this period were weak, for example, the Nasdaq Composite Index and S&P500 declined by 28% and 21% respectively, Block and its peers underperformed. 

Regulatory oversight of BNPL

Presently there is significant debate around whether or not the BNPL sector should be regulated in a similar way to banks and other financial institutions. Regulators across the globe have been showing a growing interest in the BNPL industry and there has been increased scrutiny of industry participants' compliance with regulatory requirements. Consequently, there is a risk that new or modified laws, regulations or regulatory guidance will be introduced which may adversely affect industry profitability and take-up of BNPL.

4     Profile of ThinkSmart

ThinkSmart's business is made up of an investment in NYSE listed Block, a consumer leasing business which has been in wind-down since February 2021, and a call centre which provides support to Clearpay in the UK. It's listed investment is by far its largest asset. As at June 2022, ThinkSmart's Total and Net Assets were £38.3 million (A$67.6 million) and £37.0 million (A$65.1 million) respectively of which its investment in Block was valued at £31.3 million (A$55.7 million) at that date.

4.1   Investment in Block

Between 2017 and 2018, ThinkSmart developed and launched Clearpay, one of the first BNPL operators in the UK. Clearpay provided a POS credit software solution allowing customers to purchase products for up to £450 and spread the cost over three instalments.

On 23 August 2018, ThinkSmart sold 90% of Clearpay to Afterpay, in exchange for 1,000,000 Afterpay Shares, equivalent to £10,570,000 or (A$18,550,000 using an Afterpay share price of A$18.55 at the time and a GBPAUD exchange rate of 0.57). These shares were sold within two years. ThinkSmart's remaining 10% shareholding in Clearpay contained a call option for Afterpay to buy the remaining shareholding in Clearpay, under various conditions, including a change in control. Although this option was exercisable following Square's (later renamed Block) takeover of Afterpay first announced in November 2021, a separate agreement was entered into between ThinkSmart and Afterpay for the remaining 10% of Clearpay. As a result of this agreement, ThinkSmart received 1.65 million shares in Afterpay, which were subsequently exchanged for 618,750 shares in Block, following the completion of the Afterpay takeover by Block, on 1 February 2022. 

Since ThinkSmart received its Block Shares, its shares have consistently traded at a discount to the market value of its Block shareholding. In the following chart, we present the market value of ThinkSmart's shares in Block, compared with ThinkSmart's market capitalisation.

·   Market value of ThinkSmart's investment Block vs ThinkSmart market capitalisation[22]

Source: S&P Global

Between 1 February 2022 and 29 July 2022, the date the Scheme was announced, ThinkSmart's market value has been £14.6 million lower, on average, compared to the market value of its Block shares. This is equivalent to a 31% average discount. The minimum discount over this period was 11% on the 16th June 2022 and the maximum discount was 48% on the 25th February 2022. Following the announcement of the Scheme, the discount narrowed to an average 13%. In the following chart, we present the discount of ThinkSmart's market value to the market value of its shares in Block from the 1st of February 2022 to the 28th July 2022, the date preceding the Scheme announcement.

·   ThinkSmart's discounted market value to its investment in Block

 

Source: S&P Global

Unlocking this discount is the primary rationale for the Scheme. We note, the discount has narrowed since the announcement of the Scheme. 

4.2   Remaining operations

ThinkSmart's operations comprise a legacy electronics equipment leasing business and a provision of an outsourced call centre to Clearpay (now part of Block). ThinkSmart will continue to service its existing customers, collect lease receivables, inertia and insurance revenue on its leases. 

In FY22, ThinkSmart generated revenue of £3.5 million. In the following chart, we present a breakdown of FY22 revenue per division.

·   Breakdown of FY22 revenue

 

Source: ThinkSmart

4.2.1   Call Centre

ThinkSmart provides a customer support call centre service to Clearpay, now owned by Block. It has been operational since mid-FY19. The call centre, located in the United Kingdom employs c.20 people and generates revenue based on a cost plus model. The contract can be terminated by either ThinkSmart or Block with three months-notice. 

Theoretically, this operation may continue and even grow as Clearpay gains traction in the UK, however, Clearpay makes use of other outsourced call centres therefore there is no guarantee that greater resources will be allocated to the ThinkSmart operated call centre. Furthermore, ThinkSmart's call centre revenues declined in FY22 by 2.3% to £843,000, notwithstanding Clearpay's ongoing growth over the same period. From a ThinkSmart perspective, the call centre may not be viable on a stand-alone basis as it does not have the scale to cover support services and corporate costs such as finance and IT.

4.2.2  Leasing Business

Primary leasing legacy business

In 2018, ThinkSmart entered into an exclusive 3-year agreement with Carphone Warehouse, its sole retail partner, allowing consumers to lease electronic equipment over a period of up to four years. However, over the term of the agreement, the volume and value of new leases written per year declined due to a lack of marketing from Carphone Warehouse. In November 2019, ThinkSmart began legal proceedings against Carphone Warehouse due to this lack of marketing which resulted  in a further slowdown in ThinkSmart's leasing volumes and commissions. This culminated in a settlement agreement of £1.45 million and ThinkSmart ceasing to write leases to new customers as of February 2021. Although the business is in wind-up mode, ThinkSmart continues to service the existing customer base. In the following chart, we present the volume of new leases written per year from FY18.

 

·   Value of new business (UK£)                                                      Number of new contracts

 

 

 

 

 

 

 


 

Source: ThinkSmart

In FY18, the value and volume of new leases written by ThinkSmart was £13.3 million and 17,800 (new customers) at contract value of £750 per contract. In FY22, no new lease contracts were written.

Up until January 2022, lease funding was provided by third party funders. ThinkSmart took a commission for brokering the lease and was required to repurchase leases that were 91 days or more in arrears. In January 2022, ThinkSmart acquired the leasing receivables book from its remaining funder, Secure Trust Bank ("STB") as it was already taking on the credit risk. As at June 2022, the net receivables book was valued at £912,000 which included a provision for bad debts of £124,000. The receivables book has an average outstanding term of 7 months and a maximum term outstanding of 28 months. Prior to the 31 January 2022, lease receivables under management were recognised on the Balance Sheet as Deposits Held with Funders and Contract Assets. As at 30 June 2021, these were £2.6 million.

Secondary rentals/extended rental period

Once the minimum term contract between the funder (ThinkSmart since January 2022) and the end customer expires, the asset becomes the property of ThinkSmart and any extended rental income is payable to the Company and recognised when rent is received. Approximately 50% of customers continue renting the equipment, while the remainder terminate the contract and either return or buy the equipment. This rental stream will continue until customers cancel the rental or debit order or five years after the end of the primary leasing activities. In a small number of cases, customers have instituted indemnity claims. This arises under the UK's Direct Debit Guarantee Scheme which protects consumers with direct debits in the event of an error in debit order based on an incorrect information, dates or amounts. Although banks should only allow the claim where an error has been made, in ThinkSmart's experience, banks have refunded all claims leaving ThinkSmart with the responsibility to reclaim the funds that were refunded in error. This risk has escalated with rising inflation and interest rates in the UK and has not been captured in our valuation assessment of ThinkSmart.

Inertia income

At the end of the extended rental period any proceeds on disposal of the asset are recognised at the point of disposal. In FY22, this accounted for 11% of total revenue or £396,000.

4.2.3   Ancillary Services

Insurance on electronic equipment

Lease customers are required to have insurance in respect of their leased equipment. If these customers did not make independent insurance arrangements, ThinkSmart arranged insurance and collected the premiums on their behalf, receiving a commission from the insurer for doing so. The insurance runs for the term of the primary lease agreement, hence, is expected to end within two years as the remaining lease book winds-down. 

4.2.4   Intellectual Property

ThinkSmart's equipment lease offering has been enabled by its proprietary SmartCheck technology, a digital payment platform and credit decision making tool used both at the point of sale and through the lease payment cycle. The credit underwriting technology uses a combination of credit scoring and credit bureau reports as well as electronic identity verification and a review of an applicant's details against a fraud database.

The software was also used to develop Clearpay, however, following the sale of Clearpay to Afterpay, ThinkSmart as well as its directors were required to sign non-compete restrictions with Afterpay preventing them from providing interest free loans or deferred payment terms to consumers at the point of sale from retailers, either online or instore and repayable over a period of less than 12 months. These restrictions remain in place for a period of two years after the sale of Clearpay, or January 2024 and apply anywhere in the world.

4.3   Financial information

4.3.1   Financial performance

The table below illustrates ThinkSmart's audited consolidated statements of comprehensive income from FY19 to FY22.

 

  Sources: Company Reports

With regard to financial performance, we note the following:

·      Between FY19 and FY22, revenue declined by 20% to £3.5 million as the business winds down. Other than Outsourced Services, whose business is dependent on growth in Clearpay, revenue from all divisions has declined since FY19.

·      Finance lease income increased by 234% in FY22 due to the acquisition of the finance lease book from STB in February 2022. Prior to this, ThinkSmart earned Commission Income on the value of the book as STB was the lessor. As of 2HFY22, ThinkSmart will no longer earned Commission Income.

·      In FY19, gains on financial instruments represents realised gains from the sale of 875,000 Afterpay Shares between 24 August 2018 and July 2019, as well as unrealised gains on the remaining 125,000 Afterpay Shares still held. In FY20, gains on financial instruments arose from realised gains on the sale of the remaining 125,000 as well as unrealised gains on its remaining 10% in Clearpay. In FY22, unrealised losses arose from ThinkSmart's 10% in Clearpay. On 14 January 2022, the Group exchanged its 10% holding in Clearpay for 1,650,000 shares in Afterpay which were subsequently exchanged for 618,750 shares in Block on 1 February 2022 as a result of the acquisition of Afterpay by Block.

4.3.2   Financial position

In the table below is the consolidated statement of financial position of ThinkSmart for FY19, FY20, FY21 and FY22. 

Sources: Company reports

With regard to the financial position, we note the following:

·      ThinkSmart's cash balance at the end of June 2022 was £5.5 million. Following a £2.5 million (A$4.4 million) capital return and dividend payment on 15 July 2022, its cash balance has reduced to approximately £3 million.

·      Finance lease receivables increased in FY22 following the acquisition of the finance lease book from STB. 

·      Other current assets relate mainly to prepayments and accrued income.

4.3.3   Cashflow Statement

In the table below is the consolidated cash flow statement of ThinkSmart for FY19, FY20, FY21 and FY22.

  Sources: Company reports

With respect to its cash flows, we note the following:

·      Between FY19 and FY22, ThinkSmart returned £14.6 million to shareholders either as a dividend of return of capital.

·      In FY19 and FY20, interest received and payments from other liabilities relates to the bank loans from STB and Santander Bank to finance various mobile phone leases that were repaid.

·      On 31 January 2022 the Group purchased the portfolio of leases held by STB for £1.2m. The £630,000 reflects the purchase price of the book offset to some extent by rentals associated with the book to the 30 June 2022. This transaction resulted in STB releasing the £2 million credit support balance held in relation to the finance book, reflected in "Payments received from security guarantees" in FY22.

4.4   Capital Structure

At the date of this report, ThinkSmart had the following securities on issue:

·       106,587,814 ordinary shares, and

·       1,679,532 in-the-money options expiring 21 December 2026 with an exercise price of £0.1308

4.4.1   Share price movements

Our analysis of the daily movements in ThinkSmart's share price and volume for the period from 27 July2020 to 14th October 2022 is set out below.

·   ThinkSmart - historical share trading price and volume

Source: S&P Global

The following table illustrates the key events from July 2020 to August 2022, which may have impacted the share price and volume movements shown above.

 

·   The monthly share price performance of ThinkSmart from July 2021 to September 2022 and the weekly share price performance of ThinkSmart over the last 16 weeks is summarised below.

4.4.2   Securityholders

We have set out below the top 10 relevant Securityholders of ThinkSmart as at 30 June 2022.

·       In most cases, individual shareholdings are held in nominee accounts.

·       In total, directors Ned Montarello (and his associated entities) and Peter Gammell (and his associated entities) currently own 29.4% and 11.8% respectively and London&Capital Asset Management owns 3.1%.

 

 

 

 

 

5     Valuation methodologies

5.1   Introduction

As part of assessing whether or not the Scheme is fair to the Non-Associated Security holders, Grant Thornton Corporate Finance has assessed the fair market value of ThinkSmart between A$61.8 million and A$66.0 million on a 100% and fully diluted basis or A$0.57 and A$0.61 per share. This is equivalent to £36.4 million and £38.9 million or £0.34 and £0.36 per share.

In each case, Grant Thornton Corporate Finance has assessed value using the concept of fair market value. Fair market value is commonly defined as:

"the price that would be negotiated in an open and unrestricted market between a knowledgeable, willing but not anxious buyer and a knowledgeable, willing but not anxious seller acting at arm's length."

Fair market value excludes any special value. Special value is the value that may accrue to a particular purchaser. In a competitive bidding situation, potential purchasers may be prepared to pay part, or all, of the special value that they expect to realise from the acquisition to the seller.

We note, RG111 requires the fairness assessment to be made assuming 100% ownership of the target company and irrespective of whether the consideration offered is scrip or cash and without consideration of the percentage holding of the offeror or its associates in the target company.

5.2   Valuation methodologies

RG 111 outlines the appropriate methodologies that a valuer should generally consider when valuing assets or securities for the purposes of, amongst other things, approval of an issue of shares using item 7 of s611 of the Corporations Act, share buy-backs, selective capital reductions, scheme of arrangements, takeovers and prospectuses. These include:

·      Discounted cash flow ("DCF") method and the estimated realisable value of any surplus assets.

·      Application of earnings multiples to the estimated future maintainable earnings or cash flows of the entity, added to the estimated realisable value of any surplus assets.

·      Amount available for distribution to security holders on an orderly realisation of assets (NAV method).

·      Quoted price for listed securities, when there is a liquid and active market.

·      Any recent genuine offers received by the target for any business units or assets as a basis for valuation of those business units or assets.

Further details on these methodologies are set out in Appendix A to this report. Each of these methodologies is appropriate in certain circumstances.

RG111 does not prescribe the above methodologies as the method(s) that an expert should use in preparing their report. The decision as to which methodology to use lies with the expert based on the expert's skill and judgement and after considering the unique circumstances of the entity or asset being valued. In general, an expert would have regard to valuation theory, the accepted and most common market practice in valuing the entity or asset in question and the availability of relevant information.

5.3   Selected valuation methods

5.3.1   Valuation of ThinkSmart

We have adopted the Net Realisable Value ("NRV Method") to value 100% of the issued capital in ThinkSmart for the purpose of this report. We have assumed it would take two years to complete the orderly realisation. When applying this approach, the resulting value represents 100% of the value of the ThinkSmart and includes a premium for control as required by RG 111. In our valuation assessment, we have included an allowance for the liquidation costs which includes correspondence with tax authorities, the distribution of any remaining assets to the shareholders and steps to deregister the Company. 

Various components of the company have been valued using different methodologies:

·      Quoted Security Price Method: The current or recent listed market prices of Block provides an accurate representation of the current fair value of ThinkSmart's investment holdings. Consequently, the assessment of net realisable assets is generally considered the most appropriate method for the valuation of companies of this type.

·      DCF: Due to a reasonable degree of predictability in the ThinkSmart's remaining cash flow streams, we have relied on a DCF to value ThinkSmart's remaining cash flow streams.

For the purpose of this report, we have based our valuation on the FY22 financial results, which is also the most recent financial position of ThinkSmart made available to us. Grant Thornton has also relied on a board approved budget for FY23 and forecasts for FY24 to value the remaining legacy operations.

5.3.2   Valuation of the Cash Consideration

Grant Thornton has also considered the value of the Cash Consideration, dependent on the sales price of Block using the Quoted Security Price Method, in which we compare the Cash Consideration payable to the fair market value of ThinkSmart derived using the NRV method.

 

 

 

6     Valuation assessment of ThinkSmart

As discussed in Section 5.3.1, we have used the NRV method to value ThinkSmart.

6.1 NRV Method

When applying this approach, we have included an allowance for liquidation costs associated with the orderly realisation of ThinkSmart. The following table sets out the valuation assessment of ThinkSmart based on the NRV method.

 Source: GTCF, S&P Global

6.1.1       Market value of ThinkSmart's investment in Block

Block is listed on the NYSE, but before relying on the trading price in accordance with the requirements of RG 111, we have considered the listed securities' depth, liquidity, and whether or not the market value is likely to represent the underlying value of Block Shares.

Liquidity analysis

In accordance with the requirements of RG111, we have analysed the liquidity of Block Shares by considering the trading volume from March 2021 to September 2022 as a percentage of the total shares outstanding as well as free float shares outstanding, as outlined in the table below:



With regard to the above analysis, we note that:

The level of free float in Block is c. 88.8%. From March 2021 to August 2022, c. 66.4% of the free float shares were traded on average per month. 

The number of Block Shares owned by ThinkSmart represents 0.2% of average monthly volumes traded and 6.7% of average daily volumes traded. This suggests there are sufficient volumes traded to sell the shares within three trading days.

In the absence of a takeover or alternative transactions, the trading prices represent the value at which Block Shares can be sold.

Block provides updates to the market on a regular monthly basis with information regarding the investment strategy and its performance. It is also well covering by stock broking analysts. As a result, the stock price reflects all available information.

Where a company's stock is not heavily traded or is relatively illiquid, the market typically observes a difference between the 'bid' and 'ask' price for the stock as there may be a difference in opinion between the buyer and seller on the value of the stock. The graph below shows the bid ask spread for Block.

Block - Bid/Ask Spread Source: S&P Global and GTCF analysis.

As shown in the graph above, the historical difference between the bid and ask price has been consistently low, with an average of 0.024% over the past 12 months.

Based on the analysis above, we conclude that there is sufficient liquidity in Block Shares to use the trading price as best representation of value.

Valuation assessment of Block based on trading price

·   Due to the volatility in Block Shares, ThinkSmart's investment in Block has been valued using a range of prices based on a 5 and 10-day VWAP ending 14th October 2022 of US$54.97 and US$56.82 respectively. Transaction costs of 0.5% have been deducted from the realisable value reflecting ThinkSmart's strategy to dispose of its investment. The resulting value is converted into Pounds Sterling and Australian Dollars at the 5 and 10-day average exchange rates of US$/UK£ 0.8967 and US$/A$ 1.577.

In the following chart, we present the share price of Block since 1 February 2022.

Block share price (US$) (1st February 2022 to 14th October 2022)

 Source: S&P Global

We note the following about Block Shares since 1 February 2022:

·      Block's share price has ranged from a high of US$ 149.00 to a low of US$51.45. It's share price over the period has declined by 60%.

·      The Nasdaq over the same period has declined 28%.

Set out below is a summary of Block's VWAP at various intervals over the past nine months.

 

Sources: S&P Global and GTCF analysis.

 

We note the following:

·      Block's VWAP has trended lower over the past nine months. Weakness in the technology sector is broad based and the technology heavy Nasdaq Composite is down 28% YTD.

·      Block's share price has had a wide range over the past nine months, with a high of US$ 149 and a low of US$ 51.45 highlighting the volatility in the price.

Grant Thornton believes it appropriate to use the recent VWAP to assess the Cash Consideration due to the proximity to the Implementation Date, making it the best estimate for the sales price of Block Shares.  However, given the volatility in Block Shares, Grant Thornton has selected a range based on the 5 and 10-day VWAP of US$14th October 2022 of US$54.97 and US$56.82 respectively.

In the following table, we present the market value of ThinkSmart's investment in Block.

 Source: ThinkSmart, GTCF

6.1.2       Value of legacy business

As ThinkSmart's legacy business winds down, it will continue to generate primary rentals from its finance leases, insurance brokerage fees, secondary rentals generated after the primary lease term ends (if contracts are not cancelled), and income from a call centre that supports Clearpay. It will also incur operating costs, and headcount and property lease redundancies associated with winding down the business. 

Grant Thornton has generated a discounted cashflow using a board approved budget in FY23 and management forecasts in FY24. In determining a valuation range for the legacy business, Grant Thornton has performed a low scenario where secondary rentals are lower than expected. Furthermore, the ThinkSmart budget upon which our discounted cash flow is based, assumed an FY23 and FY24 UK inflation rate of 5% and 3% respectively which appears low compared to the latest reported data. Accordingly, in our low case scenario, we have assumed an uplift in operating costs by 3% including wages, headcount and IT and storage costs in both FY23 and FY24. 

ThinkSmart plans to continue winding down its legacy operations while remaining listed. For the purposes of our valuation, and in accordance with ASIC RG111, Grant Thornton has considered the valuation on a 100% basis and therefore removed the listing costs. 

·       Legacy leasing business -  This comprises the primary and secondary leasing business. The largest contributor to revenue in FY23 and FY24 is secondary rentals which contribute c.36% and 78% respectively. Although customers can continue renting their IT equipment at the end of the finance lease for a period of up to five years, they have the right to cancel their rental at any time. Secondary rentals may theoretically continue beyond June 2024, however, they can only continue for a maximum of five years after the finance lease has ended. Furthermore, the business is not viable on a stand-alone basis beyond FY23 as it lacks the scale to cover corporate costs.

The finance lease book associated with primary leases, with a book value of £912,000 as at end of June 2022, is expected to wind down by June 2024. Income will be generated through primary rentals and asset sale income.  

·       Call Centre Business -  The ThinkSmart budget assumes the call centre which provides support to Clearpay will continue until June 2023. Theoretically the call centre may not terminate at end of FY23 however it is unlikely to continue in perpetuity, as the contract can be terminated within three months by either party. Furthermore, it is not viable on a stand-alone basis as it lacks the scale to cover corporate costs. 

·      Costs - The largest cash costs are corporate overheads, a large portion of which is IT costs related to storing customer data, which is required for five years after the finance lease has ended. Included in corporate costs are transaction costs of c. £750,000 incurred to execute the Scheme, irrespective of whether it is approved or not. It also includes operational headcount.

·      Working capital - This mostly represents trade payables which will be repaid over the two-year period.

·      Discount rate  -  The cash flows discussed above are discounted at a WACC of 15% which is discussed in greater detail in Appendix B.

In the following table, we present the results of our discounted cashflow.

6.1.3       Value of the Proprietary Software

ThinkSmart uses proprietary software, SmartCheck to operate its leasing business. This software was also used to develop Clearpay, although Afterpay replaced SmartCheck with its own software within a year of acquiring Clearpay. Grant Thornton has considered the value of the IP which does not form part of the Cash Consideration.

ThinkSmart began developing SmartCheck in 2016 and between FY17 and FY22, incurred costs of £1.76 million. In the table below, we present annual and cumulative software and systems development costs incurred by ThinkSmart to develop SmartCheck.

 Source: GTCF

·   We note the following with respect to the SmartCheck:

·      There have been limited upgrades in the software over the past two years with 6% of total development costs incurred in FY21 and no investment in FY22. Approximately 87% of development costs were incurred between FY17 and FY19, suggesting the core technology is at least three years old. Hence, a potential purchaser, if any, is likely to incur significant costs upgrading the technology.

·      The book value of the technology at the 30 June 2022 was UK£ 95,000; almost fully amortized.

·      Over the past six years, ThinkSmart has attempted to sell the platform. Although there was one serious suitor, the transaction did not proceed due to concerns that regulation of BNPL would become more rigorous and negatively impact profitability and take-up of the product.

·      Market values of technology stocks and BNPL in particular have worsened over the past 12-months due to the following non-exhaustive reasons:

-        Deteriorating macro-economic conditions characterised by higher inflation and rising interest rates. In the US and the UK for example, the annual inflation rate in July 2022 increased by 8.5% and 8.8% (CPI including housing costs) respectively fueled by the outbreak of war in Ukraine and a tight labour market. In the US, the Fed Funds rate has risen from 0.25% to 2.5% within six months while in the UK 0.25% to 1.75% within a year. In addition to pressure on household disposable income and spending as a result of higher interest rates, they have also negatively impacted equity valuations due to the opportunity cost of holding them. 

-        Some technology companies, like online retailers and streaming services, that benefited from the Covid-19 lock-downs are experiencing slow-downs as people return to work and travel.  For example, stocks like Netflix and Amazon have declined c. 68% and 44% from their respective 2021 highs.

-        Competitive BNPL environment characterised by numerous smaller players many of which remain unprofitable. Furthermore, there has also been a trend for BNPL players to cease geographic expansions and focus on domestic markets to improve profitability. For example, Openpay shut down its US and UK operations in calendar year 2022 to focus on profitability in Australia. And ZIP cancelled its plans to acquire Sezzle in May 2022 which would have given it a footprint in the US market. In the following table we highlight the profitability of key players in the sector over the last 12 months.

Source: S&P Global

Based on the above analysis, we are of the opinion that the software has nil value to a pool of potential purchasers.

6.1.4       Net cash

In the following table, we present a breakdown of ThinkSmart's net cash position.

Source:GTCF

ThinkSmart's net cash balance includes the following:

Note 1 This relates to lease liabilities on the balance sheet as at 30 June 2022.

Note 2 Reflects cash on the balance sheet as at 30 June 2022.

Note 3 -  On the 19th July 2022, ThinkSmart returned cash to shareholders in the form of a special dividend and a capital return. In total, this amounted to £2,500,000. Since it was payable after year-end, it has been deducted from balance sheet cash as at 30 June 2022.

Note 4 This reflects cash from ESOP's being exercised. ThinkSmart has 1,679,532 in-the-money options with an exercise price of £0.1308. Although expiring 21 December 2026, they can be exercised at any time as they have fully vested.

Note 5 - Grant Thornton has also deducted contingency cash required to run the business over the next two years as the business does not generate sufficient cash to cover all its costs, for any unexpected liabilities such as indemnity claims which have not been captured in ThinkSmart valuation and in the event actual income is lower than expected.

7     Valuation assessment of the Cash Consideration

If the Scheme proceeds, ThinkSmart shareholders entitled to receive the Cash Consideration will sell all of their ThinkSmart Shares to Bidco and receive the Cash Consideration based on the proceeds generated from the sale of Block Shares on the NYSE less transaction costs of 0.5%, converted to the relevant currencies as soon as practically possible.

Since the Cash Consideration is valued in the same way as the market value of ThinkSmart's investment in Block, please refer to Section 6.1.1 for liquidity and share price analysis of Block.

In the following chart, we present the Block share price with the selected price range used to value the Cash Consideration. Refer to the Executive Summary for further details. 

Block trading price and GT selected price range


Source: S&P Global and GTCF analysis.


 

8     Sources of information, disclaimer and consents

8.1   Sources of information

In preparing this report Grant Thornton Corporate Finance has used various sources of information, including:

·      ThinkSmart and AIM announcements

·      ThinkSmart's historical financial performance and position

·      Other publicly available information

·      IBISWorld Report

·      S&P Capital IQ

·      Discussions with Management

·      Other materials provided by Management

8.2   Qualifications and independence

Grant Thornton Corporate Finance Pty Ltd holds Australian Financial Service Licence number 247140 under the Corporations Act and its authorised representatives are qualified to provide this report.

Grant Thornton Corporate Finance provides a full range of corporate finance services and has advised on numerous takeovers, corporate valuations, acquisitions, and restructures. Prior to accepting this engagement, Grant Thornton Corporate Finance considered its independence with respect to ThinkSmart and all other parties involved in the Proposed Scheme with reference to the ASIC Regulatory Guide 112 "Independence of expert" and APES 110 "Code of Ethics for Professional Accountants" issued by the Accounting Professional and Ethical Standard Board. We have concluded that there are no conflicts of interest with respect to ThinkSmart and all other parties involved in the Scheme.

Grant Thornton Corporate Finance and its related entities do not have at the date of this report, and have not had within the previous two years, any shareholding in or other relationship with ThinkSmart or its associated entities that could reasonably be regarded as capable of affecting its ability to provide an unbiased opinion in relation to the Proposed Scheme.

Grant Thornton Corporate Finance has no involvement with, or interest in the outcome of the Proposed Scheme, other than the preparation of this report.

Grant Thornton Corporate Finance will receive a fee based on commercial rates for the preparation of this report. This fee is not contingent on the outcome of the Proposed Scheme. Grant Thornton Corporate Finance's out of pocket expenses in relation to the preparation of the report will be reimbursed. Grant Thornton Corporate Finance will receive no other benefit for the preparation of this report.

8.3   Limitations and reliance on information

This report and opinion is based on economic, market and other conditions prevailing at the date of this report. Such conditions can change significantly over relatively short periods of time.

Grant Thornton Corporate Finance has prepared this report on the basis of financial and other information provided by ThinkSmart and publicly available information. Grant Thornton Corporate Finance has considered and relied upon this information. Grant Thornton Corporate Finance has no reason to believe that any information supplied was false or that any material information has been withheld. Grant Thornton Corporate Finance has evaluated the information provided by ThinkSmart and other experts through inquiry, analysis and review, and nothing has come to our attention to indicate the information provided was materially misstated or would not afford reasonable grounds upon which to base our report. Nothing in this report should be taken to imply that Grant Thornton Corporate Finance has audited any information supplied to us, or has in any way carried out an audit on the books of accounts or other records of ThinkSmart.

Grant Thornton Corporate Finance, its affiliated companies and their respective officers and employees, who may be involved in or in any way associated with the performance of services contemplated by our engagement letter, disclaim all responsibility for ThinkSmart's failure to inform us of any changes to any information and/or material which impacts upon the services we have agreed to provide. ThinkSmart must take all necessary steps to immediately correct any announcement, communication or document issued which contains, refers to, or is based upon such information.

This report has been prepared to assist the Non-Associated Securityholders in relation to the Scheme. This report should not be used for any other purpose. In particular, it is not intended that this report should be used for any purpose other than as an expression of Grant Thornton Corporate Finance's opinion as to whether the Scheme is fair and reasonable to the Non-Associated Securityholders.

8.4   Consents

Grant Thornton Corporate Finance consents to the issuing of this report in the form and context in which it is included in the Scheme Booklet to be sent to ThinkSmart Securityholders. Neither the whole nor part of this report nor any reference thereto may be included in or with or attached to any other document, resolution, letter or statement without the prior written consent of Grant Thornton Corporate Finance as to the form and content in which it appears.


·  Appendix A - Valuation methodologies

Discounted future cash flows

An analysis of the net present value of forecast cash flows or DCF is a valuation technique based on the premise that the value of the business is the present value of its future cash flows. This technique is particularly suited to a business with a finite life. In applying this method, the expected level of future cash flows are discounted by an appropriate discount rate based on the weighted average cost of capital. The cost of equity capital, being a component of the WACC, is estimated using the Capital Asset Pricing Model.

Predicting future cash flows is a complex exercise requiring assumptions as to the future direction of the company, growth rates, operating and capital expenditure and numerous other factors. An application of this method generally requires cash flow forecasts for a minimum of five years.

Capitalisation of future maintainable earnings

The capitalisation of future maintainable earnings multiplied by appropriate earnings multiple is a suitable valuation method for businesses that are expected to trade profitably into the foreseeable future. Maintainable earnings are the assessed sustainable profits that can be derived by a company's business and excludes any abnormal or "one off" profits or losses.

This approach involves a review of the multiples at which shares in listed companies in the same industry sector trade on the share market. These multiples give an indication of the price payable by portfolio investors for the acquisition of a parcel shareholding in the company.

Orderly realisation of assets

The amount that would be distributed to Securityholders on an orderly realisation of assets is based on the assumption that a company is liquidated with the funds realised from the sale of its assets, after payment of all liabilities, including realisation costs and taxation charges that arise, being distributed to Securityholders.

Market value of quoted securities

Market value is the price per issued share as quoted on the ASX or other recognised securities exchange. The share market price would, prima facie, constitute the market value of the shares of a publicly traded company, although such market price usually reflects the price paid for a minority holding or small parcel of shares, and does not reflect the market value offering control to the acquirer.

Comparable market transactions

The comparable transactions method is the value of similar assets established through comparative transactions to which is added the realisable value of surplus assets. The comparable transactions method uses similar or comparative transactions to establish a value for the current transaction.

Comparable transactions methodology involves applying multiples extracted from the market transaction price of similar assets to the equivalent assets and earnings of the company. The risk attached to this valuation methodology is that in many cases, the relevant transactions contain features that are unique to that transaction and it is often difficult to establish sufficient detail of all the material factors that contributed to the transaction price.



 

·  Appendix B - WACC

Introduction

The discount rates were determined using the WACC formula. The WACC represents the average of the rates of return required by providers of debt and equity capital to compensate for the time value of money and the perceived risk or uncertainty of the cash flows, weighted in proportion to the market value of the debt and equity capital provided. However, we note that the selection of an appropriate discount rate is ultimately a matter of professional judgment.

Under a classical tax system, the nominal WACC is calculated as follows:

Where:

·      Re = the required rate of return on equity capital;

·      E = the market value of equity capital;

·      D = the market value of debt capital;

·      Rd = the required rate of return on debt capital; and

·      t = the statutory corporate tax rate.

Required rate of return on equity capital

We have used the CAPM, which is commonly used by practitioners, to calculate the required return on equity capital.

The CAPM assumes that an investor holds a large portfolio comprising risk-free and risky investments. The total risk of an investment comprises systematic risk and unsystematic risk. Systematic risk is the variability in an investment's expected return that relates to general movements in capital markets (such as the share market) while unsystematic risk is the variability that relates to matters that are unsystematic to the investment being valued.

The CAPM assumes that unsystematic risk can be avoided by holding investments as part of a large and well-diversified portfolio and that the investor will only require a rate of return sufficient to compensate for the additional, non-diversifiable systematic risk that the investment brings to the portfolio. Diversification cannot eliminate the systematic risk due to economy-wide factors that are assumed to affect all securities in a similar fashion.

Accordingly, whilst investors can eliminate unsystematic risk by diversifying their portfolio, they will seek to be compensated for the non-diversifiable systematic risk by way of a risk premium on the expected return. The extent of this compensation depends on the extent to which the company's returns are correlated with the market as a whole. The greater the systematic risk faced by investors, the larger the required return on capital will be demanded by investors.

The systematic risk is measured by the investment's beta. The beta is a measure of the co-variance of the expected returns of the investment with the expected returns on a hypothetical portfolio comprising all investments in the market - it is a measure of the investment's relative risk.

A risk-free investment has a beta of zero and the market portfolio has a beta of one. The greater the systematic risk of an investment the higher the beta of the investment.

The CAPM assumes that the return required by an investor in respect of an investment will be a combination of the risk-free rate of return and a premium for systematic risk, which is measured by multiplying the beta of the investment by the return earned on the market portfolio in excess of the risk-free rate.

Under the CAPM, the required nominal rate of return on equity (Re) is estimated as follows:

Where:

·   Rf = risk free rate

·   βe = expected equity beta of the investment

·   (Rm - Rf) = market risk premium

Risk-free rate - 2.5%

In the absence of an official risk-free rate, the yield on government bonds is commonly used as a proxy. Accordingly, we have observed the yield on the 5-year UK Government bond over several intervals from a period of 5 trading days to 10 trading years. We have selected a short-dated bond to reflect the fact that ThinkSmart is winding down its legacy business within two to four years. The following table sets out the average yield on 5-year UK Government Bond over the last 10 years.

Given the current volatility in the global financial markets, the impact of Ukraine war on energy prices and inflation, rising interest rates, expectations of further rate rises as well as rising government bond yields, we have placed more emphasis on the average risk free rate observed over the past 5-10 trading days. Our adopted risk-free rate is 2.5%. 

Market risk premium - 6.0%

The market risk premium represents the additional return an investor expects to receive to compensate for additional risk associated with investing in equities as opposed to assets on which a risk-free rate of return is earned. However, given the inherent high volatility of realised rates of return, especially for equities, the market risk premium can only be meaningfully estimated over long periods of time. In this regard, Grant Thornton studies of the historical risk premium over periods of 20 to 80 years suggest a risk premium between 5.5% and 6.0% for the Australia markets.

For the purpose of the WACC assessment, Grant Thornton Corporate Finance has adopted a market risk premium of 6.0%.

Company specific risk premium - 1%

 

The specific risk premium represents the additional return an investor expects to receive to compensate for country, size and project related risk not reflected in the beta of observed comparable companies. When applying the specific risk premium of 1.0%, we have considered the risk associated with the following factors:

·   ThinkSmart's legacy business is winding down

 

We note that the selection of the specific risk premium involves a certain level of professional judgement and as a result, the total specific risk premium is not fully quantifiable with analytical data.

Equity beta - 2.2

The beta measures the expected relative risk of the equity in a company. The choice of the beta requires judgement and necessarily involves subjective assessment as it is subject to measurement issues and a high degree of variation.

An equity beta includes the effect of gearing on equity returns and reflects the riskiness of returns to equity holders. However, an asset beta excludes the impact of gearing and reflects the riskiness of returns on the asset, rather than returns to equity holders. Asset betas can be compared across asset classes independent of the impact of the financial structure adopted by the owners of the business.

Equity betas are typically calculated from historical data. These are then used as a proxy for the future which assumes that the relative risk of the past will continue into the future. Therefore, there is no right equity beta and it is important not to simply apply historical equity betas when calculating the cost of equity. For the purpose of the report, we have had regard to the observed betas (equity betas) of listed companies in comparable sectors in the US and Australia. We note these stocks have been volatile. 

 

Source: S&P Global and GTCF calculations

 

It should be noted that the above betas are drawn from the actual and observed historical relationship between risk and returns. From these actual results, the expected relationship is estimated generally on the basis of extrapolating past results. Despite the arbitrary nature of the calculations it is important to assess their commercial reasonableness. That is to assess how closely the observed relationship is likely to deviate from the expected relationship.

Consequently, while measured equity betas of the listed comparable companies provide useful benchmarks against which the equity beta used in estimating the cost of equity, the selection of an unsystematic equity beta requires a level of judgement.

The asset betas of the selected companies are calculated by adjusting the equity betas for the effect of gearing to obtain an estimate of the business risk of the comparable companies, a process commonly referred as de-gearing. We have then recalculated the equity beta based on an assumed 'optimal' capital structure deemed appropriate for the business (regearing). This is a subjective exercise, which carries a significant possibility of estimation error.

We used the following formula to undertake the de-gearing and regearing exercise:

Where:

·      βe = Equity beta

·      βa = Asset beta

·      t = corporate tax rate

The betas are de-geared using the average historical gearing levels of those respective companies over several years. We note that most comparable companies had net cash positions. We then re-geared based on a gearing ratio of 11% debt.

Cost of debt - 5.0% - 6.0%

Grant Thornton Corporate Finance has adopted a cost of debt between 5.0% and 6.0% on a pre-tax basis, reflecting a credit spread of between 2.5% and 3.5% above the Risk Free Rate.

Capital Structure

The appropriate level of gearing that is utilised in determining WACC for a particular company should be the "target" gearing ratio, rather than the actual level of gearing, which may fluctuate over the life of a company. The target or optimal gearing level can therefore be derived based on the trade-off theory which stipulates that the target level of gearing for a project is one at which the present value of the tax benefits from the deductibility of interest are offset by present value of costs of financial distress. For the purpose of the valuation, Grant Thornton Corporate Finance has adopted a capital structure based on 85% equity.

Tax rate - 19%

For the purpose of our WACC assessment we have assumed the UK corporate tax rate of 19%.

Discount rate summary

 

In the following table we present our WACC assessment.

 

 

The WACC is relatively high, mainly due to the Beta of 2.2. For the purposes of our valuation, we have used a WACC of 15%.



 

·  Appendix C - Glossary

 

 

 

 

 

 


Annexure 2

Scheme of Arrangement

Please see the Scheme Booklet on the ThinkSmart website at www.thinksmartworld.com for the Scheme of Arrangement.

 


Annexure 3

Deed Poll

Please see the Scheme Booklet on the ThinkSmart website at www.thinksmartworld.com for the Deed Poll.

 


Annexure 4

Notice of General Scheme Meeting

ThinkSmart Limited ACN 092 319 698

Notice of General Scheme Meeting (Notice)

Notice is hereby given that, by an order of the Federal Court of Australia pursuant to section 411(1) of the Corporations Act, a meeting of shareholders of ThinkSmart Limited (ThinkSmart) (excluding the Excluded Shareholders) (General Scheme Meeting) will be held virtually via the Computershare Virtual Meeting Platform on 16 November 2022, commencing at 5.00pm (Perth time).

ThinkSmart will conduct the General Scheme Meeting via the Computershare Virtual Meeting Platform with ThinkSmart Shareholders (and their proxies, attorneys or corporate representatives) being able to cast their vote in real time during the General Scheme Meeting.

In accordance with section 411(4)(a) of the Corporations Act, for the Scheme to be effective, the resolution below must be passed by:

·                 at least 75% of the total number of votes cast on the General Scheme Resolution by ThinkSmart Shareholders (excluding the Excluded Shareholders); and

·                 more than 50% of ThinkSmart Shareholders (excluding the Excluded Shareholders) present and voting at the General Scheme Meeting (unless the Court orders otherwise).

The voting will be conducted on a poll.

Purpose of the General Scheme Meeting

The purpose of the General Scheme Meeting is for ThinkSmart Shareholders (excluding the Excluded Shareholders) to consider and, if thought fit, to agree to the Scheme.

A copy of the Scheme and a copy of the explanatory statement required by section 412 of the Corporations Act in relation to the Scheme are contained in the Scheme Booklet, of which this notice forms part. Additional information about the General Scheme Meeting is set out in the explanatory notes that accompany and form part of this notice. Capitalised terms used but not defined in this Notice have the defined meanings set out in section 11 of the Scheme Booklet, unless the context otherwise requires.

General Scheme Resolution

The General Scheme Meeting will be asked to consider and, if thought fit, pass (with or without amendment) the General Scheme Resolution as follows:

"That, pursuant to and in accordance with the provisions of section 411 of the Corporations Act 2001 (Cth), the scheme of arrangement proposed between ThinkSmart Limited and the holders of its fully paid ordinary shares, as contained in and more particularly described in the scheme booklet of which the notice convening this meeting forms part, is approved, with or without alterations or conditions as approved by the Federal Court of Australia to which ThinkSmart Limited and Tuscan Equity Pty Ltd agree."

General Scheme Meeting format

To participate in the virtual General Scheme Meeting via the Computershare Virtual Meeting Platform, you can log in by entering the following URL on your computer, tablet or smartphone: https://meetnow.global/M7GFCPV.

Online registration will open 30 minutes before the meeting. To make the registration process quicker, please have your SRN/HIN and registered postcode or country code ready.

Proxyholders will need to contact Computershare prior to the General Scheme Meeting to obtain their login details.

To participate in the Meeting online, follow the instructions below.

(a)          Click on 'Join Meeting Now'.

(b)          Enter your SRN/HIN. Proxyholders will need to contact Computershare on +61 3 9415 4024 one hour prior to the Meeting to obtain their login details.

(c)          Enter your postcode registered to your holding if you are an Australian securityholder. If you are an overseas securityholder select the country of your registered holding from the drop down list.

(d)          Accept the Terms and Conditions and 'Click Continue'.

ThinkSmart DI Holders may access the General Scheme Meeting via the Computershare Virtual Meeting Platform but will not be permitted to vote at the General Scheme Meeting. For their votes to be counted, ThinkSmart DI Holders must submit their CREST Voting Instruction to Computershare Investor Services plc by no later than 10.00am (London time) on 11 November 2022. Alternatively, ThinkSmart DI Holders can vote using the enclosed Form of Instruction as per the instruction set out below.

Further details on how to participate in the General Scheme Meeting are set out in the explanatory notes that accompany and form part of this Notice.

All ThinkSmart Shareholders (other than Excluded Shareholders) are strongly encouraged to sign and return the Proxy Form to ThinkSmart prior to the General Scheme Meeting in accordance with the instructions thereon.

 

Dated 24 October 2022

By order of the Court and the ThinkSmart Independent Board Committee


 

sign here


 



  Company Secretary



print name

  KERIN WILLIAMS



 



 

Explanatory notes

1         General

This Notice and the General Scheme Resolution should be read in conjunction with the Scheme Booklet of which this Notice forms part. The Scheme Booklet contains important information to assist you in determining how to vote on the General Scheme Resolution.

Unless otherwise defined, terms used in this Notice have the same meaning as set out in the Glossary in section 11 of the Scheme Booklet.

2         Chair

The Court has directed that Mr David Adams is to act as Chair of the General Scheme Meeting and that if they are unable or unwilling to act, Mr Peter Gammell is to act as Chair of the General Scheme Meeting.

3         Voting

The ThinkSmart Independent Board Committee recommends that you vote in favour of the General Scheme Resolution. Each member of the ThinkSmart Independent Board Committee intends to vote, or cause to be voted, all ThinkSmart Shares owned or controlled by them in favour of the General Scheme Resolution.

4         Required Voting Majority

For the proposed Scheme to be binding in accordance with section 411 of the Corporations Act, the General Scheme Resolution must be passed by:

·                 at least 75% of the total number of votes cast on the General Scheme Resolution by ThinkSmart Shareholders (excluding the Excluded Shareholders); and

·                 more than 50% of ThinkSmart Shareholders (excluding the Excluded Shareholders) by number present and voting at the General Scheme Meeting (unless the Court orders otherwise).

5         Court approval

In accordance with section 411(4)(b) of the Corporations Act, to become effective, the Scheme must be approved by the order of the Court. If the General Scheme Resolution set out in this Notice is agreed to by the required majorities set out above and the conditions set out in the Scheme are satisfied or waived (where capable of waiver), ThinkSmart will apply to the Court for the necessary orders to give effect to the Scheme.

In order for the Scheme to become effective, it must be approved by the Court and an office copy of the orders of the Court approving the Scheme must be lodged with ASIC.

6         Determination of entitlement to participate and vote

It has been determined that under regulation 7.11.37 of the Corporations Regulations 2001 (Cth), for the purposes of the General Scheme Meeting:

·                 ThinkSmart Shares will be taken to be held by the persons who are recorded as the registered holders of those shares in the ThinkSmart Share Register at 5.30pm (Perth time) on 14 November 2022; and

·                 ThinkSmart Depositary Interests will be taken to be held by the persons who are recorded as the registered holders of those ThinkSmart Depositary Interests in the ThinkSmart DI Register at 6.00pm (London time) on 11 November 2022.

7         Voting via proxy, attorney or corporate representative

7.1         Proxies

A Proxy Form is attached to the Notice. This is to be used by ThinkSmart Shareholders (excluding the Excluded Shareholders) if they wish to appoint a representative (a 'proxy') to vote in their place. All ThinkSmart Shareholders (excluding the Excluded Shareholders) are strongly encouraged to sign and return the Proxy Form to ThinkSmart prior to the General Scheme Meeting in accordance with the instructions thereon. Lodgement of a Proxy Form will not preclude a ThinkSmart Shareholder from attending and voting at the General Scheme Meeting virtually.

Please note that:

(a)          a ThinkSmart Shareholder entitled to attend and vote at the General Scheme Meeting is entitled to appoint a proxy;

(b)          a proxy need not be a shareholder of ThinkSmart and can either be an individual or body corporate; and

(c)          a ThinkSmart Shareholder entitled to cast two or more votes at the General Scheme Meeting may appoint two proxies and may specify the proportion or number of votes each proxy is appointed to exercise, but where the proportion or number is not specified, each proxy may exercise half of the votes.

If a ThinkSmart Shareholder appoints a body corporate as a proxy, that body corporate will need to ensure that it appoints an individual as its corporate representative to exercise its powers at the General Scheme Meeting, in accordance with section 250D of the Corporations Act.

The enclosed Proxy Form provides further details on appointing proxies and lodging Proxy Forms. A Proxy Form accompanies this Notice and to be effective must be received by the ThinkSmart Share Registry by no later than 5.30pm (Perth time) on 14 November 2022.

7.2         Attorney

ThinkSmart Shareholders entitled to vote may appoint not more than two attorneys to participate in and vote at the General Scheme Meeting on their behalf. An attorney need not be a ThinkSmart Shareholder and will have the right to vote and also to speak at the General Scheme Meeting.

A power of attorney appointing an attorney to participate in and vote at the General Scheme Meeting must be duly executed by the ThinkSmart Shareholder and must specify the name of the ThinkSmart Shareholder, the company (that is, ThinkSmart), and the attorney, and also specify the meeting(s) at which the appointment may be used. The appointment may be a standing one.

If two attorneys are appointed, each attorney may be appointed to represent a specified number or proportion of your votes. If no such number or proportion is specified, each attorney may exercise half of your votes.

A power of attorney, or a certified copy of such power of attorney, should be received by the ThinkSmart Share Registry before 5.30pm (Perth time) on 14 November 2022. If you have not already lodged the power of attorney with the Share Registry, please attach a certified photocopy of the power of attorney to the Proxy Form when you return it.

A single appointed attorney wishing to participate in and vote at the General Scheme Meeting via the Computershare Virtual Meeting Platform will require the appointing ThinkSmart Shareholder's name and postcode and the SRN/HIN of the shareholding in order to access the Computershare Virtual Meeting Platform.

If two attorneys are appointed, each must contact the ThinkSmart Shareholder Information Line on 1800 528 984 (within Australia) or +61 3 9415 4826 (outside Australia), between 8.30am and 5.00pm (Sydney time), Monday to Friday to organise voting and online platform access arrangements.

7.3         Corporate Representative

A corporation that is a ThinkSmart Shareholder, or that has been appointed as a proxy, must appoint an individual to act as its corporate representative at the General Scheme Meeting.

A validly appointed corporate representative wishing to participate in and vote at the General Scheme Meeting via the Computershare Virtual Meeting Platform will require the appointing ThinkSmart Shareholder's name and postcode and the SRN/HIN of the shareholding in order to access the Computershare Virtual Meeting Platform.

8         United Kingdom (Crest Voting Instruction)

ThinkSmart DI Holders in CREST may transmit voting instructions by utilising the CREST voting service in accordance with the procedures described in the CREST Manual. CREST personal members or other CREST sponsored members, and those CREST members who have appointed a voting service provider, should refer to their CREST sponsor or voting service provider, who will be able to take appropriate action on their behalf. In order for instructions made using the CREST voting service to be valid, the appropriate CREST message (a "CREST Voting Instruction") must be properly authenticated in accordance with Euroclear's specifications and must contain the information required for such instructions, as described in the CREST Manual (available via www.euroclear.com/CREST).

To be effective, the CREST Voting Instruction must be transmitted so as to be received by ThinkSmart's agent (3RA50) no later than 10.00am (London time) on 11 November 2022. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the CREST Voting Instruction by the CREST applications host) from which the ThinkSmart's agent is able to retrieve the CREST Voting Instruction by enquiry to CREST in the manner prescribed by CREST. ThinkSmart DI Holders in CREST and, where applicable, their CREST sponsors or voting service providers should note that Euroclear does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the transmission of CREST Voting Instructions. It is the responsibility of the ThinkSmart DI Holder concerned to take (or, if the ThinkSmart DI Holder is a CREST personal member or sponsored member or has appointed a voting service provider, to procure that the CREST sponsor or voting service provider takes) such action as shall be necessary to ensure that a CREST Voting Instruction is transmitted by means of the CREST voting service by any particular time.

In this connection, ThinkSmart DI Holders and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.

9         United Kingdom (Form of Instruction)

ThinkSmart DI Holders are invited to access the virtual General Scheme Meeting via the Computershare Virtual Meeting Platform but are not entitled to vote at the General Scheme Meeting. In order to have votes cast at the General Scheme Meeting on their behalf, ThinkSmart DI Holders must complete, sign and return the Forms of Instruction forwarded to them along with the Notice to ThinkSmart's agent, Computershare Investor Services plc, by 10.00am (London time) on 11 November 2022.

ThinkSmart DI Holders (or their proxies) should submit a request to ThinkSmart at www.thinksmartworld.com/contact to be provided with a link to the Computershare Virtual Meeting Platform.

10       Jointly held ThinkSmart Shares

If the ThinkSmart Shares are jointly held, each of the joint shareholders is entitled to vote. However, if more than one shareholder votes in respect of jointly held ThinkSmart Shares, only the vote of the shareholder whose name appears first on the ThinkSmart Share Register will be counted.

11       Accessing the General Scheme Meeting

To participate in the virtual General Scheme Meeting via the Computershare Virtual Meeting Platform, you can log in by entering the following URL on your computer, tablet or smartphone: https://meetnow.global/M7GFCPV.

Online registration will open 30 minutes before the meeting. To make the registration process quicker, please have your SRN/HIN and registered postcode or country code ready.

Proxyholders will need to contact Computershare prior to the General Scheme Meeting to obtain their login details.

To participate in the Meeting online, follow the instructions below.

(a)          Click on 'Join Meeting Now'.

(b)          Enter your SRN/HIN. Proxyholders will need to contact Computershare on +61 3 9415 4024 one hour prior to the Meeting to obtain their login details.

(c)          Enter your postcode registered to your holding if you are an Australian securityholder. If you are an overseas securityholder select the country of your registered holding from the drop down list.

(d)          Accept the Terms and Conditions and 'Click Continue'.

ThinkSmart DI Holders may access the General Scheme Meeting via the Computershare Virtual Meeting Platform but will not be permitted to vote at the General Scheme Meeting. ThinkSmart DI Holders (or their proxies) should submit a request to ThinkSmart at www.thinksmartworld.com/contact to be provided with a link to the Computershare Virtual Meeting Platform.

ThinkSmart Shareholders and ThinkSmart DI Holders will be able to listen to the Chair of the General Scheme Meeting and others, and view presentation slides, live and in real-time. ThinkSmart Shareholders will also have the ability to ask questions via the Computershare Virtual Meeting Platform, to speak and ask questions via telephone, and hear all of the discussions that occur at the General Scheme Meeting, subject to the connectivity of their devices. In order to ensure an orderly meeting, the Chair will have authority to make rules (including rules regarding the time permitted for each shareholder to ask questions). The Chair will explain such rules at the commencement of the General Scheme Meeting.

ThinkSmart Shareholders seeking to speak or ask questions via telephone please follow the instructions written below the broadcast on the Computershare Virtual Meeting Platform.

Only ThinkSmart Shareholders will be able to vote online at the General Scheme Meeting. To participate and vote using the Computershare Virtual Meeting Platform:

·                 ThinkSmart Shareholders will need their SRN/HIN (which is shown on their holding statement or proxy form) and their postcode (or country code if outside Australia) for verification purposes;

·                 proxyholders will need to contact the ThinkSmart Share Registry in the hour before the start of the General Scheme Meeting on +61 3 9415 4024 to obtain a unique email invitation link to enter the Computershare Virtual Meeting Platform; and

·                 attorneys and corporate representatives can log in to the Computershare Virtual Meeting Platform using the SRN/HIN of the shareholding and postcode of the relevant ThinkSmart Shareholder.

ThinkSmart Shareholders entitled to vote at the General Scheme Meeting will be able to vote between the commencement of the General Scheme Meeting and the closure of voting as announced by the Chair during the General Scheme Meeting.

Registration via the Computershare Virtual Meeting Platform will open one hour prior to the scheduled start time of the General Scheme Meeting. Logging into the Computershare Virtual Meeting Platform at least 15 minutes prior to the start time is recommended for ThinkSmart Shareholders and ThinkSmart DI Holders.

12       Proxy voting by the chair of the General Scheme Meeting

If the Chair of the General Scheme Meeting is a proxy, either by appointment or default, and the appointment does not provide any voting directions on the proxy form, by signing and returning the proxy form, the ThinkSmart Shareholder will be expressly authorising the Chair of the General Scheme Meeting to cast their vote on the General Scheme Resolution as the Chair of the General Scheme Meeting sees fit.

The Chair of the General Scheme Meeting intends to vote undirected proxies in favour of the General Scheme Resolution, in the absence of a Superior Proposal and subject to the Independent Expert continuing to conclude that the Scheme is fair and reasonable and in the best interests of ThinkSmart Shareholders (other than the Excluded Shareholders).

 


Annexure 5

Notice of Excluded Shareholder Scheme Meeting

ThinkSmart Limited ACN 092 319 698

Notice of Excluded Shareholder Scheme Meeting (Notice)

Notice is hereby given that, by an order of the Federal Court of Australia pursuant to section 411(1) of the Corporations Act, a meeting of Excluded Shareholders of ThinkSmart Limited (ThinkSmart) (Excluded Shareholder Scheme Meeting) will be held virtually via the Computershare Virtual Meeting Platform on 16 November 2022, commencing at 5.30pm (Perth time). If the General Scheme Meeting concludes after 5.30pm (Perth time) on this date, the Excluded Shareholder Scheme Meeting will begin as soon as practicable after the conclusion of the General Scheme Meeting.

ThinkSmart will conduct the Excluded Shareholders Scheme Meeting via the Computershare Virtual Meeting Platform with Excluded Shareholders (and their proxies, attorneys or corporate representatives) being able to cast their vote in real time during the Excluded Shareholder Scheme Meeting.

In accordance with section 411(4)(a) of the Corporations Act, for the Scheme to be effective, the resolution below must be passed by:

·                 at least 75% of the total number of votes cast on the Excluded Shareholder Scheme Resolution by Excluded Shareholders; and

·                 more than 50% of Excluded Shareholders present and voting at the Excluded Shareholder Scheme Meeting (unless the Court orders otherwise).

The voting will be conducted on a poll.

Purpose of the Excluded Shareholder Scheme Meeting

The purpose of the Excluded Shareholders Scheme Meeting is for Excluded Shareholders to consider and, if thought fit, to agree to the Scheme.

A copy of the Scheme and a copy of the explanatory statement required by section 412 of the Corporations Act in relation to the Scheme are contained in the Scheme Booklet, of which this notice forms part. Additional information about the Excluded Shareholder Scheme Meeting is set out in the explanatory notes that accompany and form part of this notice. Capitalised terms used but not defined in this Notice have the defined meanings set out in section 11 of the Scheme Booklet, unless the context otherwise requires.

Excluded Shareholder Scheme Resolution

The Excluded Shareholder Scheme Meeting will be asked to consider and, if thought fit, pass (with or without amendment) the Excluded Shareholder Scheme Resolution as follows:

"That, pursuant to and in accordance with the provisions of section 411 of the Corporations Act 2001 (Cth), the scheme of arrangement proposed between ThinkSmart Limited and the holders of its fully paid ordinary shares, as contained in and more particularly described in the scheme booklet of which the notice convening this meeting forms part, is approved, with or without alterations or conditions as approved by the Federal Court of Australia to which ThinkSmart Limited and Tuscan Equity Pty Ltd agree."

Excluded Shareholders Scheme Meeting format

To access the Excluded Shareholder Scheme Meeting and participate and vote via the Computershare Virtual Meeting Platform, Excluded Shareholders (or their proxies) will need to use the meeting link provided on their proxy form.

Further details on how to participate in the Excluded Shareholder Scheme Meeting are set out in the explanatory notes that accompany and form part of this Notice.

All Excluded Shareholders are strongly encouraged to sign and return the Proxy Form to ThinkSmart prior to the Excluded Shareholder Scheme Meeting in accordance with the instructions thereon.

 

Dated 24 October 2022

By order of the Court and the ThinkSmart Independent Board Committee


 

sign here


 



  Company Secretary



print name

  KERIN WILLIAMS

 


 



 

Explanatory notes

1         General

This Notice and the Excluded Shareholder Scheme Resolution should be read in conjunction with the Scheme Booklet of which this Notice forms part. The Scheme Booklet contains important information to assist you in determining how to vote on the Excluded Shareholder Scheme Resolution.

Unless otherwise defined, terms used in this Notice have the same meaning as set out in the Glossary in section 11 of the Scheme Booklet.

2         Chair

The Court has directed that Mr David Adams is to act as Chair of the Excluded Shareholder Scheme Meeting and that if they are unable or unwilling to act, Mr Peter Gammell is to act as Chair of the Excluded Shareholder Scheme Meeting.

3         Voting

The ThinkSmart Independent Board Committee recommends that you vote in favour of the Excluded Shareholder Scheme Resolution. No member of the ThinkSmart Independent Board Committee is an Excluded Shareholder and therefore will not vote on the Excluded Shareholder Scheme Resolution. However each member of the ThinkSmart Independent Board Committee intends to vote, or cause to be voted, all ThinkSmart Shares owned or controlled by them in favour of the General Scheme Resolution.

4         Required Voting Majority

For the proposed Scheme to be binding in accordance with section 411 of the Corporations Act, the Excluded Shareholder Scheme Resolution must be passed by:

·                 at least 75% of the total number of votes cast on the Excluded Shareholder Scheme Resolution by Excluded Shareholders; and

·                 more than 50% of Excluded Shareholders by number present and voting at the Excluded Shareholder Scheme Meeting (unless the Court orders otherwise).

5         Court approval

In accordance with section 411(4)(b) of the Corporations Act, to become effective, the Scheme must be approved by the order of the Court. If the Excluded Shareholder Scheme Resolution set out in this Notice is agreed to by the required majorities set out above and the conditions set out in the Scheme are satisfied or waived (where capable of waiver), ThinkSmart will apply to the Court for the necessary orders to give effect to the Scheme.

In order for the Scheme to become effective, it must be approved by the Court and an office copy of the orders of the Court approving the Scheme must be lodged with ASIC.

6         Determination of entitlement to participate and vote

It has been determined that under regulation 7.11.37 of the Corporations Regulations 2001 (Cth), for the purposes of the Excluded Shareholder Scheme Meeting, ThinkSmart Shares will be taken to be held by the persons who are recorded as the registered holders of those shares in the ThinkSmart Share Register at 5.30pm (Perth time) on 14 November 2022.

7         Voting via proxy, attorney or corporate representative

7.1         Proxies

A Proxy Form is attached to the Notice. This is to be used by Excluded Shareholders if they wish to appoint a representative (a 'proxy') to vote in their place. All Excluded Shareholders are strongly encouraged to sign and return the Proxy Form to ThinkSmart prior to the Excluded Shareholder Scheme Meeting in accordance with the instructions thereon. Lodgement of a Proxy Form will not preclude an Excluded Shareholder from attending and voting at the Excluded Shareholder Scheme Meeting virtually.

Please note that:

(a)          an Excluded Shareholder entitled to attend and vote at the Excluded Shareholder Scheme Meeting is entitled to appoint a proxy;

(b)          a proxy need not be a shareholder of ThinkSmart and can either be an individual or body corporate; and

(c)          an Excluded Shareholder entitled to cast two or more votes at the Excluded Shareholder Scheme Meeting may appoint two proxies and may specify the proportion or number of votes each proxy is appointed to exercise, but where the proportion or number is not specified, each proxy may exercise half of the votes.

If an Excluded Shareholder appoints a body corporate as a proxy, that body corporate will need to ensure that it appoints an individual as its corporate representative to exercise its powers at the Excluded Shareholder Scheme Meeting, in accordance with section 250D of the Corporations Act.

The enclosed Proxy Form provides further details on appointing proxies and lodging Proxy Forms. A Proxy Form accompanies this Notice and to be effective must be received by the ThinkSmart Share Registry by no later than 5.30pm (Perth time) on 14 November 2022.

7.2         Attorney

Excluded Shareholders entitled to vote may appoint not more than two attorneys to participate in and vote at the Excluded Shareholder Scheme Meeting on their behalf. An attorney need not be a ThinkSmart Shareholder and will have the right to vote and also to speak at the Excluded Shareholder Scheme Meeting.

A power of attorney appointing an attorney to participate in and vote at the Excluded Shareholder Scheme Meeting must be duly executed by the Excluded Shareholder and must specify the name of the Excluded Shareholder, the company (that is, ThinkSmart), and the attorney, and also specify the meeting(s) at which the appointment may be used. The appointment may be a standing one.

If two attorneys are appointed, each attorney may be appointed to represent a specified number or proportion of your votes. If no such number or proportion is specified, each attorney may exercise half of your votes.

A power of attorney, or a certified copy of such power of attorney, should be received by the ThinkSmart Share Registry before 5.30pm (Perth time) on 14 November 2022. If you have not already lodged the power of attorney with the Share Registry, please attach a certified photocopy of the power of attorney to the Proxy Form when you return it.

A single appointed attorney wishing to participate in and vote at the Excluded Shareholder Scheme Meeting via the Computershare Virtual Meeting Platform will require the appointing Excluded Shareholder's name and postcode and the SRN/HIN of the shareholding in order to access the Computershare Virtual Meeting Platform.

If two attorneys are appointed, each must contact the ThinkSmart Shareholder Information Line on 1800 528 984 (within Australia) or +61 3 9415 4826 (outside Australia), between 8.30am and 5.00pm (Sydney time), Monday to Friday to organise voting and online platform access arrangements.

7.3         Corporate Representative

A corporation that is an Excluded Shareholder, or that has been appointed as a proxy, must appoint an individual to act as its corporate representative at the Excluded Shareholder Scheme Meeting.

A validly appointed corporate representative wishing to participate in and vote at the Excluded Shareholder Scheme Meeting via the Computershare Virtual Meeting Platform will require the appointing Excluded Shareholder's name and postcode and the SRN/HIN of the shareholding in order to access the Computershare Virtual Meeting Platform.

8         Jointly held ThinkSmart Shares

If the ThinkSmart Shares are jointly held, each of the joint shareholders is entitled to vote. However, if more than one shareholder votes in respect of jointly held ThinkSmart Shares, only the vote of the shareholder whose name appears first on the ThinkSmart Share Register will be counted.

9         Accessing the Excluded Shareholder Scheme Meeting

To access the Excluded Shareholder Scheme Meeting and participate and vote via the Computershare Virtual Meeting Platform, Excluded Shareholders (or their proxies) will need to use the meeting link provided by the ThinkSmart Share Registry. Excluded Shareholders will need a desktop or mobile / tablet device with internet access to do so.

Excluded Shareholders will be able to listen to the Chair of the Excluded Shareholders Scheme Meeting and others, and view presentation slides, live and in real-time. Excluded Shareholders will also have the ability to ask questions via the Computershare Virtual Meeting Platform, to speak and ask questions via telephone, and hear all of the discussions that occur at the Excluded Shareholder Scheme Meeting, subject to the connectivity of their devices. In order to ensure an orderly meeting, the Chair will have authority to make rules (including rules regarding the time permitted for each shareholder to ask questions). The Chair will explain such rules at the commencement of the Excluded Shareholder Scheme Meeting.

Excluded Shareholders seeking to speak or ask questions via telephone please follow the instructions written below the broadcast on the Computershare Virtual Meeting Platform.

To participate and vote using the Computershare Virtual Meeting Platform:

·                 Excluded Shareholders will need their SRN/HIN (which is shown on their holding statement or proxy form) and their postcode (or country code if outside Australia) for verification purposes;

·                 proxyholders will need to contact the ThinkSmart Share Registry in the hour before the start of the Excluded Shareholder Scheme Meeting on +61 3 9415 4024 to obtain a unique email invitation link to enter the Computershare Virtual Meeting Platform; and

·                 attorneys and corporate representatives can log in to the Computershare Virtual Meeting Platform using the SRN/HIN of the shareholding and postcode of the relevant Excluded Shareholder.

Excluded Shareholders entitled to vote at the Excluded Shareholder Scheme Meeting will be able to vote between the commencement of the Excluded Shareholder Scheme Meeting and the closure of voting as announced by the Chair during the Excluded Shareholders Scheme Meeting.

Registration via the Computershare Virtual Meeting Platform will open one hour prior to the scheduled start time of the Excluded Shareholder Scheme Meeting. Logging into the Computershare Virtual Meeting Platform at least 15 minutes prior to the start time is recommended for Excluded Shareholders.

10       Proxy voting by the chair of the Excluded Shareholder Scheme Meeting

If the Chair of the Excluded Shareholder Scheme Meeting is a proxy, either by appointment or default, and the appointment does not provide any voting directions on the proxy form, by signing and returning the proxy form, the Excluded Shareholder will be expressly authorising the chair of the Excluded Shareholder Scheme Meeting to cast their vote on the Excluded Shareholder Scheme Resolution as the Chair of the Excluded Shareholder Scheme Meeting sees fit.

The Chair of the Excluded Shareholder Scheme Meeting intends to vote undirected proxies in favour of the Excluded Shareholder Scheme Resolution, in the absence of a Superior Proposal and subject to the Independent Expert continuing to conclude that the Scheme is fair and reasonable and in the best interests of ThinkSmart Shareholders (excluding the Excluded Shareholders).

 


Annexure 6

Notice of Annual General Meeting

ThinkSmart Limited ACN 092 319 698

Notice of Annual General Meeting (Notice)

Notice is hereby given that the 2022 Annual General Meeting of ThinkSmart Limited (the "Company") ("Meeting") will be held virtually via the Computershare Virtual Meeting Platform on 16 November 2022, commencing at 4.00pm (Perth time).

ThinkSmart will conduct the Annual General Meeting via the Computershare Virtual Meeting Platform with ThinkSmart Shareholders (and their proxies, attorneys or corporate representatives) being able to cast their vote in real time during the Annual General Meeting.

Additional information about the Annual General Meeting is set out in the explanatory notes that accompany and form part of this Notice. Capitalised terms used but not defined in this Notice have the defined meanings set out in section 11 of the Scheme Booklet, unless the context otherwise requires.

In addition, the Scheme Booklet accompanying this Notice of Annual General Meeting constitutes the explanatory statement for the purposes of sections 260B(4) and 219(1) of the Corporations Act in relation to the Financial Assistance Resolution and Financial Benefit Resolution.

The 2022 Annual Report is available on the Company's website: www.thinksmartworld.com.

 

Business

1            Financial Reporting

To receive and consider the financial report of the Company and the consolidated entity (the "Group") and the reports of the directors and the auditors for the financial year ended 30 June 2022. There is no vote on this item.

2            Resolution 1 - Retirement and Re-election of Director - Mr Gary Halton

To consider and, if thought fit, pass the following resolution as an ordinary resolution:

"That Mr Gary Halton, being a director of the Company who retires in accordance with rule 8.1(d) and 8.1(e) of the Company's Constitution, and being eligible, is re-elected as a director of the Company."

3            Resolution 2 - Financial Assistance Resolution - required for Scheme to become Effective

To consider and, if thought fit, pass the following resolution as a special resolution:

"That, subject to and conditional upon:

·                 approval of the Scheme by the Requisite Majorities of ThinkSmart Shareholders and Excluded Shareholders at the Scheme Meetings; and

·                 the Scheme becoming Effective,

for the purposes of section 260A(1)(b) of the Corporations Act and for all other purposes, approval is given for any financial assistance to be given by ThinkSmart (and its Subsidiaries) to BidCo in connection with the acquisition by BidCo of the Scheme Shares pursuant to the Scheme and the entry into, and performance of, the Loan Deed described in further detail in the Scheme Booklet which accompanies this Notice of Annual General Meeting."

4            Resolution 3 - Financial Benefit Resolution - required for Scheme to become Effective

To consider and, if thought fit, pass the following resolution as an ordinary resolution:

 "That, subject to and conditional upon:

·                 approval of the Scheme by the Requisite Majorities of ThinkSmart Shareholders and Excluded Shareholders at the Scheme Meetings; and

·                 the Scheme becoming Effective,

for the purposes of section 208(1)(a) of the Corporations Act and for all other purposes, approval is given for any financial benefit to be given by ThinkSmart (and its Subsidiaries) to BidCo in connection with the acquisition by BidCo of the Scheme Shares pursuant to the Scheme and the entry into, and performance of, the Loan Deed described in further detail in the Scheme Booklet which accompanies this Notice of Annual General Meeting."

 

In accordance with the Corporations Act, and as set out in section 9 of the Scheme Booklet, ThinkSmart will disregard any votes cast in favour of Resolution 2 and Resolution 3 by any Excluded Shareholder.

 

Annual General Meeting format

To participate in the virtual Annual General Meeting via the Computershare Virtual Meeting Platform, you can log in by entering the following URL on your computer, tablet or smartphone: https://meetnow.global/ MQVYS9U.

Online registration will open 30 minutes before the meeting. To make the registration process quicker, please have your SRN/HIN and registered postcode or country code ready.

Proxyholders will need to contact Computershare prior to the Annual General Meeting to obtain their login details.

To participate in the Meeting online, follow the instructions below.

(a)          Click on 'Join Meeting Now'.

(b)          Enter your SRN/HIN. Proxyholders will need to contact Computershare on +61 3 9415 4024 one hour prior to the Meeting to obtain their login details.

(c)          Enter your postcode registered to your holding if you are an Australian securityholder. If you are an overseas securityholder select the country of your registered holding from the drop down list.

(d)          Accept the Terms and Conditions and 'Click Continue'.

ThinkSmart DI Holders may access the Annual General Meeting via the Computershare Virtual Meeting Platform but will not be permitted to vote at the Annual General Meeting. For their votes to be counted, ThinkSmart DI Holders must submit their CREST Voting Instruction to Computershare Investor Services plc by no later than 9.00am (London time) on 11 November 2022. Alternatively, ThinkSmart DI Holders can vote using the enclosed Form of Instruction as per the instruction set out below.

Further details on how to participate in the Annual General Meeting are set out in the explanatory notes that accompany and form part of this Notice.

All ThinkSmart Shareholders are strongly encouraged to sign and return the Proxy Form to ThinkSmart prior to the Annual General Meeting in accordance with the instructions thereon.

 

Dated 24 October 2022


 

sign here


 



  Company Secretary



print name

  KERIN WILLIAMS



 



 

Explanatory notes

1         General

This Notice and the resolutions should be read in conjunction with the Scheme Booklet. The Scheme Booklet contains important information to assist you in determining how to vote on the Financial Assistance Resolution and Financial Benefit Resolution.

Unless otherwise defined, terms used in this Notice have the same meaning as set out in the Glossary in section 11 of the Scheme Booklet.

Financial Statements and Reporting

The Corporations Act requires:

·                 the reports of the directors and auditors; and

·                 the annual financial report, including the financial statements of the Company for the year ended 30 June 2022,

to be laid before the Annual General Meeting. Neither the Corporations Act nor the Company's Constitution requires a vote of ThinkSmart Shareholders on the reports or statements. However, ThinkSmart Shareholders will be given reasonable opportunity to raise questions or make comments on the financial affairs of ThinkSmart at the Annual General Meeting.

Also, a reasonable opportunity will be given to members as a whole at the Annual General Meeting to ask ThinkSmart's auditor questions relevant to the conduct of the audit, the preparation and content of the auditor's report, the accounting policies adopted by ThinkSmart in relation to the preparation of the financial statements and the independence of the auditor in relation to the conduct of the audit.

Resolution 1 - Re-election of Director - Mr Gary Halton

The Company's Constitution provides that at every Annual General Meeting after excluding: (1) a director who is managing director; (2) a director appointed by the directors under rule 8.1 (b) and standing for election, one third of the remaining directors (rounded down to the nearest whole number) must retire from office. ThinkSmart's Constitution further provides that no director who is not the managing director may hold office without re-election beyond the third Annual General Meeting following the meeting at which the director was elected or last elected.

As Mr Halton was last re-elected at ThinkSmart's 2019 Annual General Meeting, Mr Halton retires from office with effect from the end of the Annual General Meeting and, being eligible, offers himself for re-election.

A brief description of the candidate follows:

Mr Gary Halton was appointed to the Board on Admission to London AIM and has been Chief Financial Officer of the ThinkSmart Group since 2008 when he joined the ThinkSmart Group. Between October 2012 and January 2014, Gary acted as interim Managing Director of the ThinkSmart Group.

Prior to joining the ThinkSmart Group, Gary held several senior positions, including Head of Finance Services and Head of Group Taxation, with De Vere Group plc. Gary is a qualified chartered accountant and a chartered tax advisor, with over 20 years post-qualification experience, having qualified with Ernst & Young, and then a subsequent senior manager role with PricewaterhouseCoopers.

The ThinkSmart directors (other than Mr Halton) recommend that ThinkSmart Shareholders vote in favour of Resolution 1. Mr Halton, who has an interest in the outcome of Resolution 1, declines to make a recommendation.

Resolution 2 - Financial Assistance Resolution and
Resolution 3 - Financial Benefit Resolution
(each required to be approved for the Scheme to become Effective)

For the Scheme to proceed, ThinkSmart Shareholders will need to approve the Financial Assistance Resolution and the Financial Benefit Resolution at ThinkSmart's Annual General Meeting.

The Scheme Booklet contains important information to assist you in determining how to vote on the Financial Assistance Resolution and Financial Benefit Resolution, including the information prescribed by sections 260B(4) and 219 of the Corporations Act. In particular, section 9 of the Scheme Booklet (among other things):

·                 contains the key information prescribed by the Corporations Act; and

·                 explains the nature of the financial assistance and the financial benefit to be given by ThinkSmart to BidCo and, in each case, why this requires approval of ThinkSmart Shareholders.

The ThinkSmart Independent Board Committee strongly encourages ThinkSmart Shareholders to read the Scheme Booklet in its entirety before deciding whether or not to vote in favour of the Financial Assistance Resolution or Financial Benefit Resolution.

The ThinkSmart Independent Board Committee recommends that ThinkSmart Shareholders vote in favour of the Financial Assistance Resolution and Financial Benefit Resolution at the Annual General Meeting. Mr Ned Montarello owns and controls BidCo. Accordingly, he does not make any recommendation in relation to the Financial Assistance Resolution or Financial Benefit Resolution.

In accordance with the Corporations Act, and as set out in section 9 of the Scheme Booklet, ThinkSmart will disregard any votes cast in favour of the Financial Assistance Resolution and Financial Benefit Resolution by any Excluded Shareholder.

2         Chair

Mr David Adams will act as Chair of the Annual General Meeting and if they are unable or unwilling to act, Mr Peter Gammell is to act as Chair of the Annual General Meeting.

3         Determination of entitlement to participate and vote

It has been determined that under regulation 7.11.37 of the Corporations Regulations 2001 (Cth), for the purposes of the Annual General Meeting:

·                 ThinkSmart Shares will be taken to be held by the persons who are recorded as the registered holders of those shares in the ThinkSmart Share Register at 5.30pm (Perth time) on 14 November 2022; and

·                 ThinkSmart Depositary Interests will be taken to be held by the persons who are recorded as the registered holders of those ThinkSmart Depositary Interests in the ThinkSmart DI Register at 6.00pm (London time) on 11 November 2022.

4         Voting via proxy, attorney or corporate representative

4.1         Proxies

A Proxy Form is attached to the Notice. This is to be used by ThinkSmart Shareholders if they wish to appoint a representative (a 'proxy') to vote in their place. All ThinkSmart Shareholders are strongly encouraged to sign and return the Proxy Form to ThinkSmart prior to the Annual General Meeting in accordance with the instructions thereon. Lodgement of a Proxy Form will not preclude a ThinkSmart Shareholder from attending and voting at the Annual General Meeting virtually.

Please note that:

(a)          a ThinkSmart Shareholder entitled to attend and vote at the Annual General Meeting is entitled to appoint a proxy;

(b)          a proxy need not be a shareholder of ThinkSmart and can either be an individual or body corporate; and

(c)          a ThinkSmart Shareholder entitled to cast two or more votes at the Annual General Meeting may appoint two proxies and may specify the proportion or number of votes each proxy is appointed to exercise, but where the proportion or number is not specified, each proxy may exercise half of the votes.

If a ThinkSmart Shareholder appoints a body corporate as a proxy, that body corporate will need to ensure that it appoints an individual as its corporate representative to exercise its powers at the Annual General Meeting, in accordance with section 250D of the Corporations Act.

The enclosed Proxy Form provides further details on appointing proxies and lodging Proxy Forms. A Proxy Form accompanies this Notice and to be effective must be received by the ThinkSmart Share Registry by no later than 5.30pm (Perth time) on 14 November 2022.

4.2         Attorney

ThinkSmart Shareholders entitled to vote may appoint not more than two attorneys to participate in and vote at the Annual General Meeting on their behalf. An attorney need not be a ThinkSmart Shareholder and will have the right to vote and also to speak at the Annual General Meeting.

A power of attorney appointing an attorney to participate in and vote at the Annual General Meeting must be duly executed by the ThinkSmart Shareholder and must specify the name of the ThinkSmart Shareholder, the company (that is, ThinkSmart), and the attorney, and also specify the meeting(s) at which the appointment may be used. The appointment may be a standing one.

If two attorneys are appointed, each attorney may be appointed to represent a specified number or proportion of your votes. If no such number or proportion is specified, each attorney may exercise half of your votes.

A power of attorney, or a certified copy of such power of attorney, should be received by the ThinkSmart Share Registry before 5.30pm on 14 November 2022. If you have not already lodged the power of attorney with the Share Registry, please attach a certified photocopy of the power of attorney to the Proxy Form when you return it.

A single appointed attorney wishing to participate in and vote at the Annual General Meeting via the Computershare Virtual Meeting Platform will require the appointing ThinkSmart Shareholder's name and postcode and the SRN/HIN of the shareholding in order to access the Computershare Virtual Meeting Platform.

If two attorneys are appointed, each must contact the ThinkSmart Shareholder Information Line on 1800 528 984 (within Australia) or +61 3 9415 4826 (outside Australia), between 8.30am and 5.00pm (Sydney time), Monday to Friday to organise voting and online platform access arrangements.

4.3         Corporate Representative

A corporation that is a ThinkSmart Shareholder, or that has been appointed as a proxy, must appoint an individual to act as its corporate representative at the Annual General Meeting.

A validly appointed corporate representative wishing to participate in and vote at the Annual General Meeting via the Computershare Virtual Meeting Platform will require the appointing ThinkSmart Shareholder's name and postcode and the SRN/HIN of the shareholding in order to access the Computershare Virtual Meeting Platform.

5         United Kingdom (Crest Voting Instruction)

ThinkSmart DI Holders in CREST may transmit voting instructions by utilising the CREST voting service in accordance with the procedures described in the CREST Manual. CREST personal members or other CREST sponsored members, and those CREST members who have appointed a voting service provider, should refer to their CREST sponsor or voting service provider, who will be able to take appropriate action on their behalf. In order for instructions made using the CREST voting service to be valid, the appropriate CREST message (a "CREST Voting Instruction") must be properly authenticated in accordance with Euroclear's specifications and must contain the information required for such instructions, as described in the CREST Manual (available via www.euroclear.com/CREST).

To be effective, the CREST Voting Instruction must be transmitted so as to be received by ThinkSmart's agent (3RA50) no later than 9.00am (London time) on 11 November 2022. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the CREST Voting Instruction by the CREST applications host) from which the ThinkSmart's agent is able to retrieve the CREST Voting Instruction by enquiry to CREST in the manner prescribed by CREST. ThinkSmart DI Holders in CREST and, where applicable, their CREST sponsors or voting service providers should note that Euroclear does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the transmission of CREST Voting Instructions. It is the responsibility of the ThinkSmart DI Holder concerned to take (or, if the ThinkSmart DI Holder is a CREST personal member or sponsored member or has appointed a voting service provider, to procure that the CREST sponsor or voting service provider takes) such action as shall be necessary to ensure that a CREST Voting Instruction is transmitted by means of the CREST voting service by any particular time.

In this connection, ThinkSmart DI Holders and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.

6         United Kingdom (Form of Instruction)

ThinkSmart DI Holders are invited to access the virtual Annual General Meeting via the Computershare Virtual Meeting Platform but are not entitled to vote at the Annual General Meeting. In order to have votes cast at the Annual General Meeting on their behalf, ThinkSmart DI Holders must complete, sign and return the Forms of Instruction forwarded to them along with the Notice to ThinkSmart's agent, Computershare Investor Services plc, by 9.00am (London time) on 11 November 2022.

ThinkSmart DI Holders (or their proxies) should submit a request to ThinkSmart at www.thinksmartworld.com/contact to be provided with a link to the Computershare Virtual Meeting Platform.

7         Jointly held ThinkSmart Shares

If the ThinkSmart Shares are jointly held, each of the joint shareholders is entitled to vote. However, if more than one shareholder votes in respect of jointly held ThinkSmart Shares, only the vote of the shareholder whose name appears first on the ThinkSmart Share Register will be counted.

8         Accessing the Annual General Meeting

To participate in the virtual Annual General Meeting via the Computershare Virtual Meeting Platform, you can log in by entering on your computer, tablet or smartphone the following URL: https://meetnow.global/ MQVYS9U.

Online registration will open 30 minutes before the meeting. To make the registration process quicker, please have your SRN/HIN and registered postcode or country code ready.

Proxyholders will need to contact Computershare prior to the Annual General Meeting to obtain their login details.

To participate in the Meeting online follow the instructions below.

(a)          Click on 'Join Meeting Now'.

(b)          Enter your SRN/HIN. Proxyholders will need to contact Computershare on +61 3 9415 4024 one hour prior to the Meeting to obtain their login details.

(c)          Enter your postcode registered to your holding if you are an Australian securityholder. If you are an overseas securityholder select the country of your registered holding from the drop down list.

(d)          Accept the Terms and Conditions and 'Click Continue'.

ThinkSmart DI Holders may access the Annual General Meeting via the Computershare Virtual Meeting Platform but will not be permitted to vote at the Annual General Meeting. ThinkSmart DI Holders (or their proxies) should submit a request to ThinkSmart at www.thinksmartworld.com/contact to be provided with a link to the Computershare Virtual Meeting Platform.

ThinkSmart Shareholders and ThinkSmart DI Holders will be able to listen to the Chair of the Annual General Meeting and others, and view presentation slides, live and in real-time. ThinkSmart Shareholders will also have the ability to ask questions via the Computershare Virtual Meeting Platform, to speak and ask questions via telephone, and hear all of the discussions that occur at the Annual General Meeting, subject to the connectivity of their devices. In order to ensure an orderly meeting, the Chair will have authority to make rules (including rules regarding the time permitted for each shareholder to ask questions). The Chair will explain such rules at the commencement of the Annual General Meeting.

ThinkSmart Shareholders seeking to speak or ask questions via telephone please follow the instructions written below the broadcast on the Computershare Virtual Meeting Platform.

Only ThinkSmart Shareholders will be able to vote online at the Annual General Meeting. To participate and vote using the Computershare Virtual Meeting Platform:

·                 ThinkSmart Shareholders will need their SRN/HIN (which is shown on their holding statement or proxy form) and their postcode (or country code if outside Australia) for verification purposes;

·                 proxyholders will need to contact the ThinkSmart Share Registry in the hour before the start of the Annual General Meeting on +61 3 9415 4024 to obtain a unique email invitation link to enter the Computershare Virtual Meeting Platform; and

·                 attorneys and corporate representatives can log in to the Computershare Virtual Meeting Platform using the SRN/HIN of the shareholding and postcode of the relevant ThinkSmart Shareholder.

ThinkSmart Shareholders entitled to vote at the Annual General Meeting will be able to vote between the commencement of the Annual General Meeting and the closure of voting as announced by the Chair during the Annual General Meeting.

Registration via the Computershare Virtual Meeting Platform will open one hour prior to the scheduled start time of the Annual General Meeting. Logging into the Computershare Virtual Meeting Platform at least 15 minutes prior to the start time is recommended for ThinkSmart Shareholders and ThinkSmart DI Holders.

9         Proxy voting by the chair of the Annual General Meeting

If the Chair of the Annual General Meeting is a proxy, either by appointment or default, and the appointment does not provide any voting directions on the proxy form, by signing and returning the proxy form, the ThinkSmart Shareholder will be expressly authorising the Chair of the Annual General Meeting to cast their vote on the General Scheme Resolution as the Chair of the Annual General Meeting sees fit.

The Chair of the Annual General Meeting intends to vote undirected proxies in favour of the resolutions.


Corporate directory

ThinkSmart Limited

Suite 5, 531 Hay Street

Subiaco WA 6008

 

 

Australian legal adviser

Herbert Smith Freehills

QV1 Building, Level 36, 250 St Georges Terrace

Perth WA 6000

 

 

UK legal adviser

Shoosmiths LLP

The XYZ Building, 2 Hardman Boulevard

Spinningfields Manchester M3 3AZ

 

 

Independent Expert

Grant Thornton Corporate Finance Pty Ltd

Australian Financial Services Licence No. 247140

Tower 5, Level 22, 727 Collins Street

Docklands VIC 3008

 

 

ThinkSmart Share Registry

Computershare Investor Services Pty Limited

452 Johnston Street

Abbotsford VIC 3067



[1] 29.94% on a fully diluted basis including all vested but currently unexercised share options.

[2] Assumes all 1,679,532 ThinkSmart Options are exercised.

[3] See pages 1, 7 and 23 of the Independent Expert's Report contained in Annexure 1 for details.

[4] See pages 1, 7 and 23 of the Independent Expert's Report contained in Annexure 1 for details.

[5] See pages 1, 7 and 23 of the Independent Expert's Report contained in Annexure 1 for details.

[6] See pages 1, 7 and 23 of the Independent Expert's Report contained in Annexure 1 for details.

[7] 29.94% on a fully diluted basis including all vested but currently unexercised share options.

[8] Assumes all 1,679,532 ThinkSmart Options are exercised.

[9] The sale of the Block Sale Shares is not underwritten by the Broker or any other person.

[10] Assumes total sale costs of 0.5% of sale proceeds, a USD:GBP exchange rate of 1.1225 USD : 1 GBP, a USD:AUD exchange rate of 0.623 USD : 1 AUD (being the applicable exchange rates as at the Last Practicable Date) and 108,267,346 ThinkSmart Shares on issue following the expected exercise of all vested ThinkSmart Options prior to the implementation of the Scheme.

[11] Assumes all 1,679,532 ThinkSmart Options are exercised.

[12] See pages 1, 7 and 23 of the Independent Expert's Report contained in Annexure 1 for details.

[13] Using an exchange rate of 1.76 AUD: 1 GBP as at 15 July 2022.

[14] Using exchange rate of 1.83 AUD: 1 GBP being the average for the various payment dates.

[15] Using an exchange rate of 1.76 AUD: 1 GBP as at 15 July 2022.

[16] Using an exchange rate of 1.76 AUD: 1 GBP as at 15 July 2022.

[17]Using exchange rate of 1.76 AUD: 1 GBP

[18] Based on 106,587,814 shares on issue and a closing share price of £0.31.

[19] From the period 1 February 2022, when ThinkSmart received its Block shares, up to the 29th July 2022, the date on which the Scheme was announced. Calculation is based on closing prices.

[20] https://www.klarna.com/assets/sites/15/2022/08/30191346/Klarna-Bank-AB_Interim-Report-2022_EN.pdf

[21] https://www.cnbc.com/2022/05/23/klarna-to-lay-off-10percent-of-its-workforce-.html

[22] These are calculated using closing prices

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