LIBERTY TWO DEGREES - Withdrawal of cautionary announcement and full terms in relation to the Proposed Transaction

Release Date: 23/07/2018 08:05
Code(s): L2D
 
Wrap Text
Withdrawal of cautionary announcement and full terms in relation to the Proposed Transaction

 LIBERTY TWO DEGREES
 JSE share code: L2D
 ISIN: ZAE000230553
 (Approved as a REIT by the JSE)
 (“CISIP”)

 a portfolio established under the Liberty Two Degrees Scheme, a collective investment scheme in
 property established in terms of the Collective Investment Schemes Control Act, No 45 of 2002, as
 amended (“CISCA”), and managed by STANLIB REIT Fund Managers (RF) Proprietary Limited
 (Registration number: 2007/029492/07) (“SRFM” or the “Manager”)

 LIBERTY TWO DEGREES LIMITED
 Registration number: (2018/388906/06)
 JSE share code: L2D
 ISIN: ZAE000260576
 (“New L2D””)



 ANNOUNCEMENT REGARDING THE FINAL TRANSACTION TERMS RELATING TO THE:

       -    CONVERSION OF THE CISIP TO A CORPORATE REIT, PURSUANT TO WHICH
            EACH UNITHOLDER WILL RECEIVE ONE SHARE IN NEW L2D FOR EVERY UNIT
            HELD AND NEW L2D WILL BE LISTED IN PLACE OF THE CISIP, WHICH WILL BE
            DE-LISTED AND VOLUNTARILY WOUND UP;
       -    INTERNALISATION OF THE MANAGEMENT COMPANY OF THE CISIP, BEING A
            RELATED PARTY TRANSACTION;
       -    RELATED PARTY ACQUISITION OF UNDIVIDED SHARES IN PROPERTIES FROM
            LIBERTY GROUP LIMITED (“LGL”);
       -    CANCELLATION OF THE LGL PUT OPTION; AND
       -    WITHDRAWAL OF CAUTIONARY ANNOUNCEMENTS

1. Introduction

   Unitholders of the CISIP (“Unitholders”) are referred to the cautionary announcements
   released on the Stock Exchange News Service (“SENS”) of the JSE Limited (“JSE”) dated 18
   May 2018 and 29 June 2018 respectively (“the “Cautionary Announcements”), regarding:

   -       the conversion of the CISIP to a Corporate REIT, pursuant to which each Unitholder will
           receive one ordinary share in New L2D (“Share”) for every existing participatory interest in
           the CISIP (“Unit”) held and New L2D will be listed in place of the CISIP, which will be de-
           listed and voluntarily wound up (the “Conversion”);
   -       the internalisation of the management company of the CISIP (the “Internalisation”), being
           a related party transaction;
   -       the related party acquisition of undivided shares in properties (the “Additional Properties”)
           from LGL (the “Acquisition”); and
   -       the cancellation of the LGL put option (the “Put Option”).

   (collectively, the “Proposed Transactions”).

   Unitholders are advised that the board of directors of the Manager (the “Board”) has concluded
   the agreements (the “Contracts”) necessary to proceed with the Proposed Transactions.

   The salient terms of the Proposed Transactions are set out in this announcement. A circular to
   Unitholders (“Circular”) will be posted in due course in line with the timelines provided in
   paragraph 9 below. The Circular sets out the full terms of the Proposed Transactions and
   provides further guidance in respect of the required resolution to be passed by Unitholders to
   approve the Proposed Transactions at a general meeting of Unitholders (“General Meeting”).

   The Internalisation and the Acquisition are being treated as related party transactions in terms of
   the Listings Requirements of the JSE (“Listings Requirements”).

2. Background and rationale

   The CISIP was established in terms of CISCA in October 2016 and listed on the JSE on
   6 December 2016.

   The CISIP owns undivided shares in one of South Africa’s leading retail based property portfolios
   with interests in prime assets such as the Sandton City Complex, the Eastgate Complex and
   Melrose Arch. In addition to office properties included in the main retail precincts in its portfolio,
   the CISIP also owns undivided shares in select office properties located in key business nodes
   which are leased to blue-chip anchor tenants. These properties include the Standard Bank
   Centre in Johannesburg, the Liberty Centre in Century City Office Park in Cape Town and the
   Liberty Centre in Umhlanga Ridge in Durban.

   Following the listing of the CISIP on the JSE on 6 December 2016 (the “Listing”), unforeseen
   challenges and changes in market sentiment in relation to the external Manager and any possible
   overhang in the CISIP’s Units resulting from any exercise of the Put Option have, in the Board’s
   view, contributed to frustrating the full achievement of the CISIP’s objectives in the manner
   originally envisaged.

   The Board believes that the Proposed Transactions are in the best interests of Unitholders and
   offers benefits in that the Proposed Transactions will:

       -   eliminate any concern about an overhang in the CISIP’s Units arising from the existence
           of the Put Option;
       -   align the New L2D structure with investor's preference for internalised management as
           is evident in the broader listed REIT sector;
       -   assist in achieving a better correlation between the trading price of New L2D's Shares
           and the net asset value of New L2D's underlying property portfolio;
       -   provide management with an improved ability to transact and grow the portfolio as it
           executes on its investment objectives;
       -   result in the acquisition of an additional stake in a market leading portfolio;
       -   introduce a conservative level of debt to the capital structure of New L2D which will
           assist in reducing New L2D’s weighted average cost of capital over time; and
       -   enable shareholders of New L2D to elect the board of directors of New L2D.

   The Board believes the Proposed Transactions adequately balance the requirement to position
   New L2D for sustainable growth and minimising any potential negative impact on L2D’s
   distribution. The aggregate costs incurred by both L2D and Liberty Holdings Limited (“LHL”) in
   respect of the Proposed Transactions are currently estimated at R23 million (excluding VAT).
   The accounting treatment hereof is still to be finalised and is expected to follow L2D’s
   accounting policy for common control transactions, which accounting policy is currently under
   review. Further details will be set out in the Circular.

3. Mechanics of the Proposed Transactions

   3.1    Conversion from a Collective Investment Scheme in Property to a Corporate REIT

         The CISIP has established two subsidiaries, being New L2D and 2 Degrees Properties
         Proprietary Limited (“Subco”). The only issued shares of New L2D are currently held by the
         CISIP and the only issued shares of Subco is currently held by New L2D.

         In terms of the Conversion and with effect from the Effective Date (expected to be 1 October
         2018):

         3.1.1   the CISIP will dispose of all of its business assets and liabilities (other than the
                 liability in relation to the Final CISIP Distribution (“Final CISIP Distribution”) and
                 assets necessary to settle the Final CISIP Distribution) to Subco in exchange for the
                 assumption by Subco of those liabilities and the issue of Subco shares to the CISIP;

         3.1.2   on the day after the issue of the Subco shares to the CISIP, the CISIP will dispose
                 of all its assets (other than assets necessary to settle the Final CISIP Distribution)
                 in the form of the Subco shares and remaining liabilities (other than the liability in
                 relation to the Final CISIP Distribution) to New L2D in consideration for the
                 assumption by New L2D of those liabilities and the issue of Shares in New L2D; and

         3.1.3   the CISIP will then distribute the Shares in New L2D to Unitholders.

         Unitholders recorded in the CISIP's register on Friday, 28 September 2018 (the “Record
         Date”) will receive one New L2D Share for every one Unit held on the Record Date.

         New L2D has applied to the JSE for a listing by way of an introduction in the Real Estate,
         Diversified REITs sector of the JSE, in terms of the FTSE classification, under the
         abbreviated name: “Liberty 2 Degrees”, JSE share code: L2D and ISIN: ZAE000260576 with
         effect from the commencement of trade on Monday, 1 October 2018.

         Prior to the Effective Date, the CISIP will declare the Final CISIP Distribution comprising its
         distributable income in respect of the period from 1 July 2018 to the Effective Date.

         Following the implementation of the Conversion, the CISIP will no longer have any assets
         (other than assets necessary to settle the Final CISIP Distribution) and will no longer qualify
         for a listing on the JSE in terms of the Listings Requirements. Accordingly, trading in the
         Units will be suspended on Wednesday, 26 September 2018, the Units will be delisted from
         the Main Board of the JSE on Tuesday, 2 October 2018 and the Unitholders will have no
         rights to receive distributions from the CISIP, other than the Final CISIP Distribution. The
         CISIP will thereafter be liquidated and wound-up voluntarily.

   3.2    Internalisation of the Manager

         Simultaneously with the implementation of the Conversion described in 3.1 above, LHL and
         New L2D have agreed, Pursuant to the Sale of Shares Agreement, that LHL will sell all of
         the issued shares of the Manager to New L2D for R300 million plus interest, which shall be
         paid in cash and will be fully funded by debt.
         The Manager is currently responsible for managing the Liberty Property Portfolio (“LPP”)
         owned by LGL in accordance with an existing asset management agreement. The existing
         asset management agreement has been terminated and a new asset management
         agreement has been entered into between LGL and the Manager which will become
         effective on 1 October 2018. The new asset management agreement will, unless terminated
         earlier, have a duration of 10 years and Subco will earn a management fee equal to 0.3%
         of the value of the LPP assets. In addition, the new asset management agreement will
         provide LGL and New L2D a mutual right to invest jointly in further development or property
         acquisition opportunities valued over R750 million, subject to New L2D owning a minimum
         of a 51% proportion of such opportunities pursued jointly. Should the investment
         management agreement be terminated by LGL in certain circumstances within the first 3
         years, a refund of up to R200 million will become payable by LGL to New L2D.

         Immediately after New L2D has acquired the shares of the Manager, the Manager will
         transfer its entire business and all of its employees to Subco, who will assume the asset
         management function of the LPP.

   3.3   Cancellation of the Put Option

         The Put Option is contained in the existing Relationship Agreement between LGL and the
         CISIP. As part of the Proposed Transactions, the Relationship Agreement will be assigned
         to New L2D and will be re-signed without the Put Option, thereby terminating the Put Option.
         After the deletion of the Put Option, the remainder of the existing Relationship Agreement
         will continue in effect, further details of which will be set out in the Circular. The Put Option
         has no value and accordingly none of LGL, the CISIP or New L2D will pay any consideration
         therefor to any of the others of them, nor will any of them enter into a new agreement with
         any of the others containing a similar Put Option.

   3.4   Acquisition of the Additional Properties

         In terms of the Acquisition, Subco will acquire from LGL, the Additional Properties (as set
         out in paragraph 5 of this announcement) for an aggregate purchase price of R1.2 billion,
         payable in cash and fully funded by debt. The Additional Properties include further
         undivided shares in the existing portfolio as well as undivided shares in certain high quality
         Sandton hospitality assets. The net impact of the Acquisition will serve to enhance the New
         L2D blended portfolio yield whilst further diversifying the portfolio across asset sub-sectors
         within targeted key business nodes.

4. Conditions precedent

    The Proposed Transactions are subject to the fulfilment (or waiver) of the following conditions
    precedent by 30 September 2018, or such later date as may be agreed in writing:

     4.1 the approval by Unitholders of the resolution proposed in the notice of General Meeting;

     4.2 Prudential Authority having approved the implementation of the Proposed Transactions;

     4.3 New L2D and Subco concluding the necessary finance agreements and becoming entitled
         to draw down an amount of not less than R1.5 billion in order to effect payment in terms
         of Internalisation and the Acquisition;

     4.4 third parties whose consents are required for the implementation of the Proposed
     Transactions having provided their consent; and

 4.5 LHL and New L2D confirming that they are satisfied with rulings obtained from the South
     African Revenue Service (SARS) relating to certain aspects of the Proposed
     Transactions, LHL and New L2D do, however, have the discretion to agree to waive this
     condition should they determine that such ruling or part thereof is no longer required, and
     instead rely on a formal tax opinion from Webber Wentzel confirming the anticipated tax
     implications of the Proposed Transactions, which tax opinion has already been issued
     and finalised.

     It is noted that the Financial Sector Conduct Authority has already approved the implementation
     of the Conversion, subject to Unitholders voting in favour of the Proposed Transactions at the
     General Meeting (which must be quorate).

      5. Details of the Additional Properties to be acquired by Subco

                                                                                                       Existing
                                                                                                                    Additional
                                                                          Weighted                   Undivided                     Purchase
                                                                                                                    Undivided
                                                                           Average      Rentable       Share of                     Price (R)      100% Property     Independent
                                                                                                                  Shares to be
No.     Property Name      Registered Location               Sub Sector     Rental    Area (GLA)    CISIP being                   payable in    Valuation as at 30   External
                                                                                                                  Acquired by
                                                                            per m2            m2    acquired by                           the    September 2018      Property Valuer
                                                                                                                  Subco in the
                                                                             (R/m2)                Subco in the                  Acquisition1
                                                                                                                   Acquisition
                                                                                                      Exchange
        Liberty Centre
        Head Office        Erf 6281 Montague Gardens         Office and                                                                                              Rode &
1                                                                              169        19 188        31.00%          2.30%      9 377 053          408 400 000
        (Montague          Century Boulevard, Century City   mixed use                                                                                               Associates
        Gardens)
                           Located on an unregistered
        Liberty Centre
                           portion of Erf 2429 Umhlanga
        Head Office                                          Office and                                                                                              Rode &
2                          Rocks                                               165        20 352        31.00%          2.30%      5 983 497          260 600 000
        (Umhlanga                                            mixed use                                                                                               Associates
                           21 Aurora Drive, Umhlanga
        Rocks)
                           Ridge
                           Located on an unregistered
        Umhlanga
                           portion of Erf 2429 Umhlanga      Office and                                                                                              Rode &
3       Ridge Office                                                           106        20 352        31.00%          2.30%      3 292 530          143 400 000
                           Rocks                             mixed use                                                                                               Associates
        Park
                           2 Park Lane, Umhlanga Ridge

                           Erf 1247 Marshalltown and
                           Remainder of Erf 558 Selby,
                                                             Office and                                                                                              Rode &
4       Standard Bank      Johannesburg                                         97        92 789        15.50%          1.15%     12 263 184        1 068 200 000
                                                             mixed use                                                                                               Associates
                           3, 5 and 6 Simmonds Street,
                           Johannesburg
                           Erven 1 & 2 Oospoort, Erven 3 &
                           4 Oospoort Extension 1 &
                           Portions 1050, 1051,1052
                           and1056 of Farm 90
        Eastgate                                                                                                                                                     Jones Lang
5                          Elandsfontein, IR                 Retail            412       145 240        31.00%          2.30%    198 952 418        8 665 000 000
        Complex                                                                                                                                                      Lasalle IP, Inc.
                           43 Bradford Road,
                           Bedfordview,
                           Johannesburg
                           Gauteng Province
                           Erf 10143 Pietermaritzburg
        Liberty Midlands   Sanctuary Road                                                                                                                            Jones Lang
6                                                            Retail            278        55 973        31.00%          2.30%     58 135 894        2 532 000 000
        Mall               Pietermaritzburg                                                                                                                          Lasalle IP, Inc.
                           Kwa-Zulu Natal
                                                                                                     Existing
                                                                                                                  Additional
                                                                        Weighted                   Undivided                     Purchase
                                                                                                                  Undivided
                                                                         Average      Rentable       Share of                     Price (R)      100% Property     Independent
                                                                                                                Shares to be
No.   Property Name     Registered Location                Sub Sector     Rental    Area (GLA)    CISIP being                   payable in    Valuation as at 30   External
                                                                                                                Acquired by
                                                                          per m2            m2    acquired by                           the    September 2018      Property Valuer
                                                                                                                Subco in the
                                                                           (R/m2)                Subco in the                  Acquisition1
                                                                                                                 Acquisition
                                                                                                    Exchange
                        Erf 59229 Mitchells Plain
      Liberty           Corner of A Z Berman Drive,
      Promenade         Morgenster Road & 11th Avenue                                                                                                              Jones Lang
7                                                          Retail            176        73 400        31.00%          2.30%     36 943 386        1 609 000 000
      Shopping          Mitchells Plain                                                                                                                            Lasalle IP, Inc.
      Centre            Cape Town
                        Western Cape
                        Portion 7 of Erf 575 and Erf 548
                        Sandown Ext. 49
                        Portion 688 of the Farm
                        Zandfontein 42 IR
      Nelson Mandela                                                                                                                                               Jones Lang
8                       Erf 239 Sandhurst Ext. 3           Retail            372        38 795        31.00%          2.30%     42 155 411        1 836 000 000
      Square                                                                                                                                                       Lasalle IP, Inc.
                        5th Street
                        Sandton
                        Johannesburg
                        Gauteng Province
                        Erf 242 & Erf 247 Sandhurst Ext.
                        3
                        Erf 590 Sandown Ext. 38
                        Erf 602 Sandown Ext. 4
                        Portion 724 of the Farm
      Sandton City      Zandfontein 42 IR                                                                                                                          Jones Lang
9                                                          Retail            454       199 140        23.25%          1.72%    235 085 299       13 651 600 000
      Complex           bounded by Rivonia Road, 5th                                                                                                               Lasalle IP, Inc.
                        Street, Alice Lane and Sandton
                        Drive
                        Sandton
                        Johannesburg
                        Gauteng Province
                                                                                                                                                                   Mills Fitchet
10    Melrose Arch      Erf 181 Melrose North              Retail            264       199 216         7.75%          0.57%     42 577 539        7 417 540 000    Magnus Penny &
                                                                                                                                                                   Wolffs
                        Portion 2 & Portion 3 of Erf 1                                                                                                             Rode &
11    Botshabelo Mall                                      Retail            104        20 390        21.70%          1.61%      4 658 403          289 840 000
                        Botshabelo-H                                                                                                                               Associates

      John Ross Eco     Portions 18 – 22 & Portions 25 –
                                                                                                                                                                   Rode &
12    Junction -        35 & Portions 37 – 50 of Erf       Industrial         62         7 060        31.00%          2.30%      1 499 777           65 320 000
                                                                                                                                                                   Associates
      Tangawizi         11451 Richards Bay
                                                                                                     Existing
                                                                                                                  Additional
                                                                        Weighted                   Undivided                     Purchase
                                                                                                                  Undivided
                                                                         Average      Rentable       Share of                     Price (R)      100% Property     Independent
                                                                                                                Shares to be
No.   Property Name    Registered Location                Sub Sector      Rental    Area (GLA)    CISIP being                   payable in    Valuation as at 30   External
                                                                                                                Acquired by
                                                                          per m2            m2    acquired by                           the    September 2018      Property Valuer
                                                                                                                Subco in the
                                                                           (R/m2)                Subco in the                  Acquisition1
                                                                                                                 Acquisition
                                                                                                    Exchange
      John Ross Eco    Portions 18 – 22 & Portions 25 –
                                                                                                                                                                   Rode &
13    Junction –       35 & Portions 37 – 50 of Erf       Vacant land           -            -        31.00%          2.30%      3 543 029          154 310 000
                                                                                                                                                                   Associates
      Estate2          11451 Richards Bay

      John Ross Eco    Portions 18 – 22 & Portions 25 –
                                                                                                                                                                   Rode &
14    Junction -       35 & Portions 37 – 50 of Erf       Hospital           183        13 809        21.70%          1.61%      6 243 294          388 450 000
                                                                                                                                                                   Associates
      Melomed          11451 Richards Bay

                       Erf 596 Sandown Extension 38
                       bounded by Maude Street, 5th
      Sandton          Street, Alice Lane and West
                                                          Hotel and                                                                                                Jones Lang
15    Convention       Street                                                146        57 910         0.00%         24.98%    154 423 886          618 300 000
                                                          conference                                                                                               Lasalle IP, Inc.
      Centre3          Sandton
                       Johannesburg
                       Gauteng Province
                       Erf 596 Sandown Extension 38
                       bounded by Maude Street, 5th
                       Street, Alice Lane and West
      Garden Court                                        Hotel and                                                                                                Jones Lang
16                     Street                                                263        17 757         0.00%         24.98%    199 601 269          799 186 369
      Sandton Hotel3                                      conference                                                                                               Lasalle IP, Inc.
                       Sandton
                       Johannesburg
                       Gauteng Province
                                                                                                               Existing
                                                                                                                              Additional
                                                                             Weighted                        Undivided                         Purchase
                                                                                                                              Undivided
                                                                              Average        Rentable          Share of                         Price (R)       100% Property     Independent
                                                                                                                            Shares to be
No.   Property Name      Registered Location                Sub Sector         Rental      Area (GLA)       CISIP being                       payable in     Valuation as at 30   External
                                                                                                                            Acquired by
                                                                               per m2              m2       acquired by                               the     September 2018      Property Valuer
                                                                                                                            Subco in the
                                                                                (R/m2)                     Subco in the                      Acquisition1
                                                                                                                             Acquisition
                                                                                                              Exchange
                         InterContinental Sandton
                         Towers Hotel
                         Erf 596 Sandown Extension 38
                         bounded by Maude Street, 5th
                         Street, Alice Lane and West
                         Street

                         Sandton Sun Hotel
      Sandton Sun
                         Erf 242 & Erf 247 Sandhurst Ext.
      Hotel and
                         3                                  Hotel and                                                                                                             Jones Lang
17    InterContinental                                                               52         64 674            0.00%          24.98%       143 010 274          572 600 876
                         Erf 590 Sandown Ext. 38            conference                                                                                                            Lasalle IP, Inc.
      Sandton Towers
                         Erf 602 Sandown Ext. 4
      Hotel3
                         Portion 724 of the Farm
                         Zandfontein 42 IR
                         bounded by Rivonia Road, 5th
                         Street, Alice Lane and Sandton
                         Drive
                         Sandton
                         Johannesburg
                         Gauteng Province
                         Erf 596 Sandown Extension 38
                         bounded by Maude Street, 5th
                         Street, Alice Lane and West
      Virgin Active &                                                                                                                                                             Jones Lang
18                       Street                             Other                  167           3 406            0.00%          24.98%        22 053 419            88 300 000
      Parkade4                                                                                                                                                                    Lasalle IP, Inc.
                         Sandton
                         Johannesburg
                         Gauteng Province
      Hotel operations
19    net working        -                                  Other                     -               -           0.00%          24.98%        20 200 435            80 880 811   -
      capital

      Total                                                                                  1 049 451                                      1 200 000 000       40 648 928 056


      Notes:
          1.     Purchase price represents the percentage of the LPP acquired from LGL
          2.     John Ross Eco Junction – Estate is vacant land and as such has no weighted average rental or GLA
          3.     Weighted average rentals for hotels calculated based on gross income which does not reflect management agreements the hotels are subject to with Tsogo Sun
          4.     Virgin Active & Parkade GLA figure excludes Parkade as Parkade does not have an allocated GLA but rather a number of parking bays
          5.     The effective date of the acquisitions is 1 October 2018

6. Financial information

   As mentioned above, New L2D will purchase the shares of the Manager from LHL for R300 million
   plus interest and Subco will also acquire the Additional Properties from LGL for a consideration value
   of R1.2 billion pursuant to the Acquisition. The consideration for the Internalisation and the Acquisition
   will be fully funded by debt.

   The indicative interest rate quoted for the total consideration of R1.5 billion plus costs, based on a
   weighted average term of three years, is a blended all-in fixed interest rate of 9%.

   The Proposed Transactions will result in once off transaction costs of approximately R23 million
   (shared between L2D and LHL), which will be allocated to the Internalisation, Acquisition and the
   Conversion in accordance with their relevance and accounted for accordingly.

   The expected net effect of the Proposed Transactions on the CISIP’s earnings per unit, headline
   earnings per unit, net asset value (“NAV”) per unit and distribution per unit for the six months ended
   30 June 2018 (“Interim Results”) (as set out in its Interim Results announcement released on SENS
   on 23 July 2018 and prepared in line with International Financial Reporting Standards (“IFRS”)), is
   set out in the Circular together with a reporting accountants’ report thereon.

   Based on its unaudited Interim Results, SRFM’s NAV as at 30 June 2018 is R32.6 million while the
   value of the Additional Properties is as presented in paragraph 5 above. The profit before tax
   attributable to SRFM for the period ended 30 June 2018 is R9.1 million, which includes transaction
   cost accruals of R6.7 million in relation to the Proposed Transactions. The blended yield from the
   Additional Properties acquired is expected to be 7.8%.

   After the Effective Date, the capital adequacy reserves ("CAR") required to be held by the Manager
   in terms of CISCA as a result of the reduced scope of the Manager's functions will be reduced. It is
   anticipated that the CAR after the Effective Date will be approximately R600 000.

7. Related party considerations

    As LGL is a material Unitholder in the CISIP and LHL is the sole shareholder of the Manager, the
    Internalisation, the Acquisition and the cancellation of the Put Option are, from the CISIP's
    perspective, being treated as related party transactions in terms of the Listings Requirements. As a
    related party, LGL (and associates) will be excluded from voting on the resolution to approve the
    Proposed Transactions.

    Accordingly, the Board hereby confirms that it is of the opinion that the Internalisation, the Acquisition
    and the cancellation of the Put Option are fair insofar as Unitholders are concerned. This decision
    was reached having had due regard to the fairness opinion in respect of the Internalisation and the
    cancellation of the Put Option from the independent expert, Ernst & Young, which is set out in the
    Circular, as well as the independent property valuation reports from the independent property valuers
    in respect of each of the properties acquired pursuant to the Acquisition and which will be made
    available on the CISIP’s website at www.liberty2degrees.co.za/investor-information on the issue
    date of the Circular.

8. Corporate governance

    8.1 The directors of SRFM have also been appointed as the directors of New L2D. In addition, the
        following appointments will be made to the board of directors of New L2D, effective
        1 August 2018:

         -   Mr Brian Azizollahoff as independent non-executive director and lead independent director;
             and
         -   Ms Zaida Adams as independent non-executive director.

    8.2 Details of the board of directors of New L2D (and Subco) following the above appointments, will
        be as follows:

         Angus Band (non-executive chairman)
         Wolf Cesman (independent non-executive director)
         Lynette Ntuli (independent non-executive director)
         Brian Azizollahoff (independent non-executive director and lead independent)
         Zaida Adams (independent non-executive director)
         Amelia Beattie (chief executive officer)
         José Snyders (financial director)

    8.3 These appointments ensure that the board is fully compliant in terms of King IV as well as
        Listings Requirements.

    8.4 It is furthermore the intention of New L2D to appoint Mr David Munro, the chief executive officer
        of LHL, to the board of directors of New L2D following the implementation of the Proposed
        Transactions and to appoint an additional independent director in order to maintain compliance
        with the Listings Requirements and the Property Sector Charter requirements.

    8.5 New L2D will ensure that the provisions of the memorandum of incorporation of any of its
        subsidiaries does not frustrate it from compliance with the Listings Requirements.

9. Salient dates of the Proposed Transactions

    The salient dates and times in relation to the Proposed Transactions are set out below:

                                                                                                2018
      Record date to be entitled to receive this Circular                                 Friday, 20 July
      Full terms of the Proposed Transactions and notice of General                     Monday, 23 July
      Meeting released on SENS
      Full terms of the Proposed Transactions and notice of General                    Tuesday, 24 July
      Meeting published in the press
      Circular posted to Unitholders and made available   at                              Friday, 27 July
      www.liberty2degrees.co.za/investor-information
     Last day to trade to be recorded in the CISIP register in order to                    Tuesday, 21 August
     be eligible to vote at the General Meeting
     Record date in order to be eligible to participate in and vote at the                    Friday, 24 August
     General Meeting
     Latest date of receipt of forms of proxies in respect of the General                   Monday, 27 August
     Meeting by 12:00
     General Meeting to be held at 12:00                                                   Tuesday, 28 August
     Results of General Meeting and finalisation information in respect                    Tuesday, 28 August
     of the Proposed Transactions released on SENS
     Results of General Meeting and finalisation information in respect                Wednesday, 29 August
     of the Proposed Transactions published in the press
     Finalisation information in respect of the Final CISIP Distribution               Monday, 17 September
     released on SENS
     Last day to trade to be recorded in the CISIP register in order to                Tuesday, 25 September
     be eligible to receive the Final CISIP Distribution
     Last day to trade to be recorded in the CISIP register in order to                Tuesday, 25 September
     be eligible to receive New L2D Shares on the Effective Date
     Ex-dividend date in respect of the Final CISIP Distribution                   Wednesday, 26 September
     Units suspended from trading                                                  Wednesday, 26 September
     Commencement of trading in New L2D Share Entitlements                         Wednesday, 26 September
     Record date in order to be eligible to receive the Final CISIP                      Friday, 28 September
     Distribution
     Effective Date                                                                         Monday, 1 October
     Trading in New L2D Shares with the JSE share code: L2D and                             Monday, 1 October
     ISIN: ZAE000260576 commences
     New L2D shares issued to Unitholders pursuant to the Proposed                          Monday, 1 October
     Transactions
     Accounts at CSDP or broker updated in respect of dematerialised                        Monday, 1 October
     Shareholders
     Delisting of Units from the JSE                                                       Tuesday, 2 October
     Payment of Final CISIP Distribution                                                     Friday, 12 October

Notes:
1.   All references to dates and times are to local dates and times in South Africa. These dates and times are subject
     to amendment. Any such amendment will be released on SENS and in the press.
2.   If the Proposed Transactions become unconditional, Units may not be traded after Thursday, 27 September 2018.

 10. Notice of General Meeting

         Unitholders are hereby advised that the Circular, containing full details of the Proposed Transactions
         and a notice of the General Meeting, will be posted to Unitholders on Friday, 27 July 2018 and also
         be made available on the CISIP’s website at www.liberty2degrees.co.za/investor-information.

11. Withdrawal of cautionary announcements

   As the full details of the Proposed Transactions have been set out in this announcement, Unitholders
   no longer need to exercise caution when dealing in their Units.

Johannesburg
23 July 2018

Financial Advisor and Transaction Sponsor
The Standard Bank of South Africa Limited

Independent sponsor
Questco Corporate Advisory Proprietary Limited

Legal Advisers to Liberty Two Degrees
Allen & Overy (South Africa) LLP

Transaction Attorneys and Tax Advisors
Webber Wentzel

Independent Reporting Accountants and Auditors
PricewaterhouseCoopers Inc.

Independent Expert
Ernst & Young Advisory Services Proprietary Limited

Investor Relations
Gareth Rees
Contact number: 011 448 6804

Date: 23/07/2018 08:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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