PINNACLE HOLDINGS LIMITED - Pinnacle board of directors (the Board) resolves to pursue a broad- based black economic empowerment transaction

Pinnacle board of directors (“the Board”) resolves to pursue a broad- based black economic empowerment transaction

PINNACLE HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1986/000334/06)
JSE code: PNC ISIN: ZAE000184149
("Pinnacle" or “the Company” or “the Group”)

PINNACLE BOARD OF DIRECTORS (“THE BOARD”) RESOLVES TO PURSUE A BROAD-
BASED BLACK ECONOMIC EMPOWERMENT TRANSACTION

Introduction and rationale
The Board is pleased to announce that it has resolved to pursue a
Broad-Based   Black   Economic  Empowerment  (“B-BBEE”)   ownership
transaction through its wholly-owned subsidiary DCT Holdings
Proprietary Limited (“DCT Holdings”) in terms of which it is
anticipated that a B-BBEE partner will subscribe for 29,9% of the
ordinary issued shares (“B-BBEE Shares”) in DCT Holdings (“Proposed
B-BBEE Transaction”).

The Proposed B-BBEE Transaction includes a group restructuring to
simplify Pinnacle’s current group structure, align its group
structure with its strategy and consolidate its main South African
operating assets under DCT Holdings to facilitate the implementation
of the Proposed B-BBEE Transaction (“Group Restructure”).

The Proposed B-BBEE Transaction has been structured to meet the
following objectives:
-  pursue real and sustainable empowerment aimed at empowering
   previously disadvantaged stakeholders with a focus on broad-based
   groupings;
-  create a sustainable and non-complex funding structure which is
   not reliant on external bank funding, share price appreciation or
   dividend payments;
-  materially improve DCT Holdings and its subsidiaries’ (“DCT
   Holdings Group”) B-BBEE ownership credentials;
-  complement existing B-BBEE initiatives; and
-  preserve existing value for current shareholders.

Identity of the B-BBEE partner and its beneficiaries
It is anticipated that a broad-based trust (“the Pinnacle Foundation
Trust”), through a wholly-owned subsidiary (“The Pinnacle Foundation
(RF) Proprietary Limited”), will act as the B-BBEE partner to the
Proposed B-BBEE Transaction.

Pinnacle will act as founder (“Founder”) for the establishment of
the Pinnacle Foundation Trust. The Founder will be responsible for
the appointment of the relevant trustees of which at least 50% will
be independent from the Founder, at least 50% will be black people
and at least 25% will be black women.

The beneficiaries of the Pinnacle Foundation Trust will include
amongst others persons and/or entities and/or institutions and/or
initiatives falling in one or more or all of the following
categories:

  - any primary, secondary      and   tertiary   schools   and/or   any
    education initiatives;

  - any initiatives that may include the donation of equipment
    applied in the ICT sectors, infrastructure related projects
    (including but not limited to repairs to schools/buildings),
    provision of sporting facilities, cash and time donations to
    identified charities, communities, sport clubs, healthcare
    providers, general food or nutrition provision, general welfare
    organisations aimed at the betterment of communities identified
    (including but not limited to clean-up projects, general
    upliftment projects, healthcare improvements);

  - emerging entrepreneurs and/or emerging suppliers directly or
    indirectly in the ICT sector, and any entities or institutions
    or initiatives established for the benefit of such persons;

  - DCT Holdings’ workers and their families, and any entities or
    institutions or initiatives established for the benefit of such
    persons;

  - any potential future employee of the Pinnacle Group seeking to
    further his/her education; and

  - any other individual/s or group/s of people or entity/ies
    forming part of, or that operate for an educational or other
    public benefit purpose within the communities in which the DCT
    Holdings Group operates, or of which its employees are members,

     provided that, in line with the applicable B-BBEE legislation,
     100% of distributions to further the Pinnacle Foundation
     Trust’s objectives will be used to benefit black people of which
     100% of all such distributions will be expended directly for
     the benefit of black women for the first 3 (three) financial
     years of the Pinnacle Foundation Trust’s existence whereafter
     at least 40% of such distributions will be expended directly
     for the benefit of black women.

Salient features of the Proposed B-BBEE Transaction
In order to facilitate the Proposed B-BBEE Transaction and as part
of the Group Restructure, Pinnacle will consolidate its South African
operating assets under DCT Holdings prior to the implementation of
the Proposed B-BBEE Transaction.

In order to retain existing value for Pinnacle shareholders and to
enable Pinnacle Foundation (RF) Proprietary Limited (on behalf of
the Pinnacle Foundation Trust) to subscribe for the B-BBEE shares
at a nominal value (“B-BBEE Subscription”), it is anticipated that
prior to the B-BBEE Subscription:

   - Pinnacle will, subject to the declaration of the Special
     Distribution (as defined below), subscribe for cumulative
     redeemable non-participating preference shares in DCT Holdings
     equal to the market value of the DCT Holdings Group (“Market
     Value”) plus such an amount required for purposes of settling
     the existing inter-group loan account (“Pinnacle Treasury
     Loan”) between DCT Holdings and Pinnacle Treasury (“Preference
     Share Subscription”);
   - DCT Holdings will declare a special distribution (“Special
     Distribution”) to Pinnacle equal to the Market Value, payment
     of which will be made subject to the successful implementation
     of the Preference Share Subscription; and
   - the Pinnacle Treasury Loan followed by the loan account between
     Pinnacle Treasury and Pinnacle (“Inter-Group Loans”) will be
     settled.

Pursuant to the Preference Share Subscription coupled with the
Special Distribution and the settlement of the Inter-Group Loans,
Pinnacle Foundation (RF) Proprietary Limited, will then be able to
subscribe for 29,9% of the ordinary shares in DCT Holdings for a
nominal amount.

As Pinnacle Foundation (RF) Proprietary Limited will not need to
raise its own acquisition funding it will result in an additional,
immediate and unencumbered black ownership of 29,9% of the DCT
Holdings Group which, taken together with the current flow-through
black ownership contribution received from Pinnacle, is expected to
result in an overall effective black ownership of the DCT Holdings
Group in excess of 51% and black women ownership representation in
excess of 30%.

Conditions to the Proposed B-BBEE Transaction
The appropriate subscription agreements are expected to be concluded
as soon as:
  - the Pinnacle Foundation Trust has been duly established;
  - Pinnacle Foundation (RF) Proprietary Limited has been duly
    incorporated; and
  - DCT Holdings has adopted a new memorandum of incorporation
    (which is required to facilitate the Preference Share
    Subscription and the B-BBEE Subscription).

Shareholders will be informed once the B-BBEE Subscription agreement
has been concluded. Pinnacle expects to conclude the Proposed B-BBEE
Transaction during July 2016.

Financial effects of the Proposed B-BBEE Transaction
Any distributions by the Pinnacle Foundation Trust to its
beneficiaries will be included in the consolidated earnings of
Pinnacle for the purposes of calculating basic earnings per share
in terms of IAS 33 Earnings Per Share. Other than fees paid to the
professional advisors and related transaction costs, there will be
no further impact on EPS or HEPS in the consolidated financial
statements of Pinnacle arising from the Proposed B-BBEE Transaction
on the current earnings.

Conclusion
Following the Board’s decision to pursue the Proposed B-BBEE
Transaction, Mr Pierre Spies, Joint Chief Executive Officer of
Pinnacle, said:

“In line with its BEE Transformation Plan (the “Plan”), Pinnacle has
been carefully evaluating its black ownership, more specifically its
focus on black women (“black ownership”). Not only does the Proposed
B-BBEE Transaction now largely address the black ownership
objectives of the Plan, but it also achieves the realisation of our
commitment towards 51% black ownership in DCT Holdings. The Proposed
B-BBEE Transaction is testimony that Pinnacle continues to drive
transformation across all the various elements as contained in the
Plan and, when executed, should contribute towards bringing about
further transformation in the ICT Sector.”

Midrand
27 June 2016

Corporate Advisor and     Transaction   Sponsor:   Pallidus   Capital
Proprietary Limited

Attorneys: VDMA
Attorneys: Tugendhaft Wapnick Banchetti and Partners (TWB)

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