PINNACLE HOLDINGS LIMITED - Pinnacle concludes its broad-based black economic empowerment transaction

Pinnacle concludes its 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 CONCLUDES   ITS   BROAD-BASED   BLACK   ECONOMIC   EMPOWERMENT
TRANSACTION

Introduction
Shareholders are referred to the announcement on SENS on 27 June
2016 (“First Announcement”). Unless indicated otherwise below, the
defined terms in the First Announcement shall bear the same
meaning in this announcement.

In terms of the First Announcement, shareholders were inter alia
advised that:
- the Board resolved to pursue a B-BBEE ownership transaction,
   which includes a group restructure through its wholly-owned
   subsidiary DCT Holdings (“Group Restructure”) prior to the
   implementation of the Proposed B-BBEE Transaction (“B-BBEE
   Transaction”); and
- a broad-based trust to be known as the Pinnacle Foundation
   Trust will, through its wholly-owned subsidiary being the
   Pinnacle Foundation (RF) Proprietary Limited, act as the B-BBEE
   partner to the B-BBEE Transaction and will subscribe for 29,9%
   of the ordinary issued shares in DCT Holdings (“B-BBEE
   Shares”).

Conclusion of transaction agreements and fulfilment of conditions
precedent
Further to the above, the Board is pleased to advise that:
- Pinnacle acted as founder (“Founder”) for the establishment of
   the Pinnacle Foundation Trust and that the Pinnacle Foundation
   Trust has been duly established and registered at the Master’s
   Office with registration number IT 001920/2016(T) (“Pinnacle
   Foundation Trust”);
- Pinnacle Foundation (RF) Proprietary Limited has been duly
   incorporated with the Companies and Intellectual Property
   Commission (“CIPC”) with registration number 2016/307601/07
   (“Pinnacle Foundation (RF) Proprietary Limited”);
- Confirmation was received from CIPC that DCT Holdings has
   adopted a new memorandum of incorporation which was required to
   facilitate the Preference Share Subscription and the B-BBEE
   Subscription as detailed below; and
- the appropriate agreements relating to the Group Restructure,
  the Preference Share Subscription and the B-BBEE Subscription
  were duly concluded and have become unconditional.

Objectives
The 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
The Pinnacle Foundation Trust through its wholly owned subsidiary,
Pinnacle Foundation RF Proprietary Limited, will act as the B-BBEE
partner.

In terms of the trust deed of the Pinnacle Foundation Trust, the
Founder is responsible for the appointment of the relevant
trustees of which at least 50% are to be independent from the
Founder, at least 50% are to be black people and at least 25% are
to 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 B-BBEE Transaction
In order to facilitate the B-BBEE Transaction and as part of the
Group Restructure, Pinnacle consolidated its South African
operating assets under DCT Holdings prior to the implementation of
the B-BBEE Transaction.

Prior to the B-BBEE Subscription and in order to retain existing
value for Pinnacle shareholders as well as 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:
- Pinnacle    subscribed    for   29 000   (twenty   nine   thousand)
   cumulative   redeemable    non-participating   preference   shares
   (“Preference Shares”) in DCT Holdings for a subscription price
   of R100 000 (one hundred thousand Rand) per Preference Share
   which attracts a dividend yield of prime plus 3% (“Preference
   Share Subscription”);
- the board of directors of DCT Holdings declared a special
   distribution    to    Pinnacle    in   the    gross    amount   of
   R2 460 925 134.82 (two billion four hundred and sixty million
  nine hundred and twenty five thousand one hundred and thirty
  four Rand and eighty two cents) (“Special Distribution”) which
  comprised:
   - a dividend in the amount of R2 410 446 236.82 (two billion
      four hundred and ten million four hundred and forty six
      thousand two hundred and thirty six Rand and eighty two
      cents) declared by DCT Holdings to Pinnacle; and
   - a distribution, being a return of capital, in the amount of
      R50 478 898.00 (fifty million four hundred and seventy eight
      thousand eight hundred and ninety eight Rand) made by DCT
      Holdings to Pinnacle which was made out of the “contributed
      tax capital” (as such term is defined in section 1 of the
      Income Tax Act, 58 of 1962) of DCT Holdings;
- Pinnacle and DCT Holdings agreed to make payment of and
  discharge their respective payment obligations by setting off
  the obligations against each other; and
- The existing inter-group loan accounts between DCT Holdings and
  Pinnacle Treasury (“Pinnacle Treasury Loan”) and Pinnacle
  Treasury and Pinnacle were settled.

The Special Distribution Amount effectively represents the equity
market value of DCT Holdings net of the Pinnacle Treasury Loan and
other existing debt of DCT Holdings.

Accordingly, subsequent to the Preference Share Subscription and
the Special Distribution, Pinnacle Foundation (RF) Proprietary
Limited (on behalf of the Pinnacle Foundation Trust) concluded a
subscription agreement with DCT Holdings with effect from 2 August
2016 in terms of which it subscribed for the B-BBEE Shares, i.e.
ordinary shares in DCT Holdings representing 29,9% of the total
issued ordinary share capital in DCT Holdings, for a nominal
subscription amount of R211 (two hundred and eleven Rand) (“B-BBEE
Subscription”).

As the B-BBEE Subscription is not subject to the fulfilment of any
conditions precedent, the B-BBEE Subscription is therefore fully
effective and Pinnacle Foundation (RF) Proprietary Limited (on
behalf of the Pinnacle Foundation Trust) holds an immediate,
unencumbered 29,9% ownership in the issued ordinary share capital
of the DCT Holdings Group.

Financial effects of the B-BBEE Transaction
Any distributions by the Pinnacle Foundation Trust to its
beneficiaries shall be included in the consolidated earnings of
Pinnacle for the purposes of calculating basic earnings per share
(“EPS”) 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   B-BBEE
Transaction on the current earnings.

Pinnacle will consolidate the 29,9% ordinary shares indirectly
held by the Pinnacle Foundation Trust given that, as the Founder,
it has the responsibility to appoint the trustees.

The Preference Share Subscription and Special Distribution will
eliminate on the consolidation of Pinnacle as these are inter-
group transactions.

Midrand
2 August 2016

Corporate Advisor and    Transaction   Sponsor:   Pallidus   Capital
Proprietary Limited

Attorneys: VDMA
Attorneys: Tugendhaft Wapnick Banchetti and Partners (TWB)
Tax Advisor: Edward Nathan Sonnenbergs Incorporated (ENS)

Date: 02/08/2016 02:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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