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The Specific Issue of Shares, the disposal of Stellenbosch Industrial and the adoption of the Freedom Incentive Plan
Freedom Property Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number: 2012/129186/06)
Share code: FDP
ISIN: ZAE000185260
(“Freedom” or “the Company”)
THE SPECIFIC ISSUE OF SHARES TO SETTLE GUARANTEE SHARE OBLIGATIONS, THE
DISPOSAL OF STELLENBOSCH INDUSTRIAL AND THE ADOPTION OF THE FREEDOM LONG
TERM INCENTIVE PLAN
1. INTRODUCTION
1.1. Specific Issue
Freedom shareholders (“Shareholders”) are hereby advised that Freedom has entered into
agreements with the Christo La Grange Gesins Trust and the Lafras Joubert Gesins Trust
(“Trust Agreements”) in terms of which the Company will, subject to certain conditions
precedent, including Shareholder approval, issue an aggregate of 323 845 455 new
Freedom ordinary shares (“Specific Issue Shares”), representing approximately 31.5% of the
Company’s existing issued ordinary share capital, at an issue price of R0.22 per Specific
Issue Share (“Subscription Price”), as settlement of guarantee share obligations amounting
to R71 246 000, on the terms and conditions set out in paragraph 2 below (“Specific Issue”).
1.2. Disposal of Stellenbosch Industrial
Shareholders are further advised that Freedom, through its wholly-owned subsidiary Passion
Way Props Proprietary Limited (“Passion Way”), has concluded an agreement for the
disposal of the Stellenbosch Industrial property, for a sale consideration of R49 000 000, as
set out in paragraph 3 below (“Disposal”).
1.3. Freedom Long Term Incentive Plan
Shareholders are further advised that the Company wishes to adopt the Freedom Long Term
Incentive Plan (“LTIP”) in the manner contemplated in paragraph 4 below.
2. THE SPECIFIC ISSUE
2.1. Terms of the Specific Issue
In terms of the Trust Agreements, approved by the board of Freedom on 11 August 2015, a
total of 323 845 455 Specific Issue Shares will be issued as follows:
Name of party Nature of relationship Number of Rand value
shares of shares
(collectively “the
Trusts”)
Christo La Grange Current Freedom Shareholder, 214 945 455 R47 288 000
Gesins Trust holding approximately 17.6% of
(“Christo Trust”) Freedom’s existing issued share
capital
Lafras Joubert Current Freedom Shareholder, 108 900 000 R23 958 000
Gesins Trust (“Lafras holding approximately 7.7% of
Trust”) Freedom’s existing issued share
capital
Total 323 845 455 R71 246 000
The Specific Issue Shares to be issued in terms of the Trust Agreements will be Freedom
ordinary shares, which is a class of shares already in issue. The Specific Issue Shares will,
upon issue, rank pari passu with the existing Freedom ordinary shares in issue.
In terms of the Trust Agreements, Freedom has given the subscribers the warranties and
representations that are usual in transactions of this nature.
The Subscription Price represents a premium of approximately 5% to R0.21, being the 30-
day volume weighted average trading price (“VWAP”) of Freedom ordinary shares traded on
the exchange operated by the JSE Limited (“JSE”) over the 30 days up to and including 7
August 2015, the last trading day prior to this announcement.
2.2. Rationale for the Specific Issue
As set out in the Company’s pre-listing statement dated 5 June 2014, Freedom, through its
wholly-owned subsidiary Off Peak Props Proprietary Limited (“Off Peaks”), acquired Kadoma
Investments Proprietary Limited from the Trusts by way of an issue of Freedom ordinary
shares, which included a total of 100 million guarantee shares, in terms of acquisition
agreements dated 8 August 2013 and addenda thereto (“Acquisition Agreements”). In terms
of the Acquisition Agreements, Freedom would be obligated to top-up the value of guarantee
shares sold below R1.00 during the first year from the date of Freedom’s listing on 12 June
2014. As no guarantee shares had been sold during the year ending 15 June 2015, Freedom
reached an agreement with the Trusts that the value of the obligation under the guarantee
shares would effectively total R71 246 000, as set out in paragraph 2.1 above.
In terms of the Acquisition Agreements, the value of the obligations of Freedom under the
top-up on the guarantee shares, as set out above, would amount to a payment of R1 000
000 per month to the Trusts. The Trust Agreements allow for the obligations of Freedom to
be settled, in full and final settlement, by way of the issue of the Specific Issue Shares. As
Freedom requires its cash flow and financial resources to develop its extensive portfolio of
properties, the Company and its board are fully supportive of the Specific Issue.
2.3. Conditions Precedent for the Specific Issue
The Trust Agreements are subject to the fulfilment of the following remaining conditions
precedent in relation to the Specific Issue, by the specified dates, that:–
2.3.1. by no later than 17h00 on 31 October 2015, the Shareholders of Freedom approve
the Specific Issue; and
2.3.2. by no later than 17h00 on 14 August 2015, the trustees for the time being of the
Lafras Trust approve the terms of the Trust Agreements.
2.4. Approvals required for the Specific Issue
2.4.1. The Christo Trust is currently a material Shareholder of Freedom. While the Lafras
Trust is not a material Shareholder or related party, the Company will not be in a
position to issue new shares under a general authority to issue shares for cash
until a new resolution is passed at the Company’s Annual General Meeting
scheduled for 28 August 2015 and is therefore proceeding in terms of the Listings
Requirements of the JSE (“JSE Listings Requirements”) and Companies Act
Regulations of 2011 relating to the specific issue of shares. The Specific Issue will
not be issued to the Trusts at a discount to the 30-day VWAP and consequently
the board is not required to provide an opinion from an independent expert
confirming that the Specific Issue is fair insofar as Shareholders of Freedom are
concerned.
2.4.2. The Specific Issue is subject to ordinary resolutions of Freedom Shareholders, to
be passed with a 75% majority of the votes cast at a general meeting of
Shareholders convened to specifically authorise the Specific Issue in terms of the
JSE Listings Requirements (“General Meeting”).
2.4.3. As the Specific Issue relates to the issue of shares constituting more than 30% of
the voting power of all the shares of that class, as contemplated in section 41(3) of
the Companies Act, No. 71 of 2008, as amended (“the Companies Act”), the
Specific Issue is subject to a special resolution passed by Shareholders with a
75% majority.
2.4.4. The Trusts, and its associates, will be precluded from voting at the General
Meeting on the resolutions in relation to the Specific Issue to the extent that they
already hold Freedom ordinary shares.
2.4.5. The approvals of all relevant regulatory bodies, including any approvals required in
terms of the JSE Listings Requirements in respect of the Specific Issue, are
obtained.
2.5. Pro forma financial effects of the Specific Issue
The table below illustrates the pro forma financial effects of the Specific Issue based on the
published results for the year ended 28 February 2015. The preparation of the pro forma
financial effects is the responsibility of the directors of Freedom. The pro forma financial
effects have been prepared for illustrative purposes only to provide information on how the
Specific Issue may have impacted Freedom’s results and financial position and, due to the
nature thereof, may not give a fair reflection of Freedom’s results and financial position.
The pro forma financial information has been compiled using accounting policies that comply
with IFRS and that are consistent with those applied in the audited consolidated annual
financial statements of Freedom for the year ended 28 February 2015. These figures are not
audited in themselves. The pro forma figures are presented in a manner consistent with both
the format and accounting policies adopted in the historical financial information and
adjustments have been quantified on the same basis as would normally be calculated in
preparing financial statements.
Before the Specific After the Change
Specific Issue Issue Specific issue %
Gross number of shares 1 027 029 031 323 845 455 1 350 874 486 32
in issue
Weighted average 889 037 602 323 845 455 1 212 883 057 36
number of shares in issue
Basic and diluted 58.61 (15.65) 42.96 (27)
earnings per share
(cents)
Headline and diluted 1.49 (0.40) 1.09 (27)
earnings per share
(cents)
Net asset value per share 130.45 (19.99) 110.46 (15)
(cents)
Net tangible asset value 130.45 (19.99) 110.46 (15)
per share (cents)
Notes and assumptions:
1. The pro forma Statement of Comprehensive Income figures illustrate the possible
financial effects as if the Specific Issue had taken place on 1 March 2014.
2. The pro forma Statement of Financial Position figures have been based on the
assumption that the Specific Issue had taken place on 28 February 2015.
3. The “Before the Specific Issue” column is based on the published audited financial
information of Freedom for the year ended 28 February 2015.
4. The “Specific Issue” column relates to the issue of the Specific Issue Shares, being
323 845 455 new Freedom ordinary shares for cash at a price of R0.22 per Specific
Issue Share, representing a 5% premium to the 30-day VWAP of Freedom ordinary
shares traded on the exchange operated by the JSE over the 30 days up to and
including 7 August 2015, being the last trading day prior to this announcement.
5. The “After Specific Issue” column indicates the pro forma financial information of the
Specific Issue.
6. Once-off transaction costs of R500,000 have been estimated to be incurred in respect of
the Specific Issue. These exclude VAT and have been assumed to be non-tax
deductible. The costs will be charged to share premium in terms of IAS 32.37.
3. DISPOSAL OF STELLENBOSCH INDUSTRIAL
3.1. Introduction
The Stellenbosch Industrial property (“Property”) was acquired by the Company through
Passion Way in terms of agreements concluded on 31 October 2013 for an amount of R49
725 500 (including allocated acquisition costs). Freedom, through Passion Way, has
concluded an agreement (“Sale Agreement”) to dispose of the Property to K2014120563
Proprietary Limited, registration number 2014/120563/07 (“the Purchaser”), for a sale
consideration of R49 000 000 (“the Disposal”). The Disposal is zero rated for VAT purposes
as both the Purchaser and Passion Way are VAT registered and the transaction relates to
the sale of a going concern, as contemplated in section 11(1)(e) of the Value Added Tax Act,
No. 89 of 1991. The effective date of the Disposal is the date of registration of transfer of the
Property into the name of the Purchaser in the relevant deeds office, which is expected to
take place on or about 31 October 2015.
3.2. Property details
The Property is immovable property located at George Blake Street, Stellenbosch, Western
Cape. The following detail is applicable to the Property:
Title deed number T25726/2014 (Erf 15719 Stellenbosch)
Sector Light Industrial
Gross Lettable Area 8 287m²
Weighted average rental per m² R39.00
Purchase price R49 725 500
Valuation of Property (i) R59 500 000
Rental Income (ii) R4 300 000
Notes:
i. The Property was valued by JS Bosman (M.I.V) (SA), an external independent
valuer, effective 28 February 2015.
ii. Approximate gross rental income generated by the Property for the year ended 28
February 2015, being the only income generating asset owned by Passion Way.
3.3. Disposal proceeds & rationale
The proceeds of the Disposal, being R49 000 000, excluding VAT, are payable in cash on
registration of transfer of the Property into the name of the Purchaser in the relevant deeds
office. Commission of R1 470 000 is payable by the Purchaser. The net proceeds of the
Disposal will be used to settle the existing bond on the Property and the remaining proceeds
will be applied to specific approved future developments within the Group..
In line with the Company’s stated short to medium term strategy, the current focus is to
develop its residential properties, including Tweefontein Residential, Montana, Gevonden
and Tubatse Homes, details of which are contained in Freedom’s Integrated Report for the
year ended 28 February 2015 and available on the Company’s website at
www.freedompropertyfund.com.
3.4. Suspensive condition
The Sale Agreement is subject to the suspensive condition that the Purchaser secures
funding of R31 000 000 within 45 days of the date of acceptance of the offer by Freedom,
being 6 August 2015.
3.5. Warranties
The Company and the Purchaser have provided each other warranties that are standard to a
transaction of this nature.
3.6. Categorisation of Disposal in terms of the JSE Listings Requirements
The Disposal is classified as a category 2 transaction in terms of the JSE Listings
Requirements. The JSE does not require the approval of shareholders for a category 2
transaction.
3.7. Financial information
The net asset value contribution of the Property to the Company was approximately
R39 000 000 as at 28 February 2015, taking into account the outstanding amount owing on
the bond and the fair value adjustment on the asset. The Property, through Passion Way,
contributed approximately R2 000 000 to the Groups net income for the year ended 28
February 2015.
4. FREEDOM LONG TERM INCENTIVE PLAN (“LTIP”)
4.1. Object and purpose of the LTIP
The object and purpose of the LTIP is to:
4.1.1. incentivise Freedom’s top executive team to meet strategic long term objectives that
will help deliver value to Shareholders;
4.1.2. achieve alignment between Freedom’s top executive team’s remuneration and the
interests of the Shareholders of Freedom; and
4.1.3. act as an attraction and retention mechanism in a market where highly skilled
people are in high demand.
4.2. Approvals required for the LTIP
4.2.1 In terms of the JSE Listings Requirements, the ordinary resolution adopting the LTIP
requires a 75% majority of the votes cast in favour of such resolution by all
Shareholders present or represented by proxy at the General Meeting, excluding all
the votes attaching to all equity securities owned or controlled by persons who are
existing participants in the Scheme, and may be impacted by the changes.
4.2.2 As the LTIP will require the issue of shares to a director, future director, prescribed
officer or future prescribed officer of the Company, as contemplated in section
41(1)(a) of the Companies Act, the LTIP is subject to a special resolution passed by
Shareholders with a 75% majority.
5. DOCUMENTATION AND SALIENT DATES
A circular to Shareholders incorporating the terms of the Specific Issue, the adoption of the LTIP
and a notice convening the General Meeting is being prepared and will be posted to Shareholders
on or around 30 September 2015.
Johannesburg
11 August 2015
Sponsor
PSG Capital
Corporate Advisor
Base Capital
Date: 11/08/2015 04:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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