LIBERTY TWO DEGREES - Supplementary Information Announcement

Release Date: 06/08/2018 13:30
Code(s): L2D
 
Wrap Text
Supplementary Information Announcement

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””)


SUPPLEMENTARY INFORMATION ANNOUNCEMENT


  Unitholders of the CISIP (“Unitholders”) are referred to the announcement dated 23 July 2018 regarding:

  -   the conversion of the CISIP to a Corporate REIT, pursuant to which each Unitholder will receive one ordinary
      share in New L2D (“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 existing Put Option between LGL and the CISIP for no consideration

  (collectively, the “Proposed Transactions”).

  Unitholders are further referred to the circular setting out full terms of the Proposed Transactions (“Circular”),
  posted to Unitholders on 30 July 2018. This announcement serves to provide supplementary information and
  clarification (the “Supplementary Information”) in respect of the Proposed Transactions. The Supplementary
  Information is supplemental to, and should be read in conjunction with, the Circular.

  The Supplementary Information includes clarification of the pro forma financial effects as disclosed in the Circular
  in respect of the Acquisition only (and consequential changes thereto) to reflect New L2D's effective interest in
  the Additional Properties acquired. The clarification is in respect of the “Property portfolio revenue” which is
  restated by R11 476 521 to R52 959 145 and in respect of the “Property operating expenses” which is restated
  by R1 483 719 to R12 878 264. The net impact of this restatement is an increase of R9 992 802 in the “Total
  earnings after tax” under the “Acquisition” column and the “After the Proposed Transactions” column respectively.

  The full amended text of the Summarised Pro Forma Financial Effects relating to the Proposed Transactions
  (disclosed as Paragraph 6 of the Circular); the Pro Forma Statement of Comprehensive Income; and the Pro
  Forma Statement of Financial Position (each disclosed in Annexure 1 of the Circular) forms part of this
  Supplementary Information as included below.

  As a result of the clarifications noted above, PWC, the independent auditors, has issued an unqualified review
  report on the special purpose historical financial information of the Acquisition which replaced the report of the
  same title issued by PWC on 24 July 2018. In addition, PWC, the Independent Reporting Accountants, has issued
  an unqualified assurance report on the pro forma financial information as supplemented by this Supplementary
  Information which replaces the report issued on 24 July 2018 as included in Annexure 2 of the Circular. Together,
  the report on the special purpose historical financial information of the Acquisition and the assurance report on
  the pro forma financial information are available for inspection at the registered office of the CISIP, on the CISIP’s
        website at www.liberty2degrees.co.za/investor-information, and at Standard Bank’s office during business hours
        from the date of this announcement up to and including Tuesday, 28 August 2018.

        All other details of the Circular remain unchanged including the Important Dates and Times detailed on page 9 of
        the Circular and the Independent Reporting Accountants’ Report on the Adjustment Column included as Annexure
        3 of the Circular.

        Capitalised terms used in this Supplementary Information bear the same meaning as the capitalised and defined
        terms used in the Circular.

        Summarised Pro Forma Financial Effects relating to the Proposed Transactions

        The table below sets out the summarised pro forma financial effects of the Proposed Transactions, based on
        New L2D’s audited financial information as at its incorporation date being 10 July 2018.

        It should be noted that the summarised pro forma financial effects has been prepared to assist Unitholders in
        assessing the impact of the Proposed Transactions on New L2D.

        The pro forma statement of comprehensive income and the pro forma statement of financial position have been
        prepared to show the financial effects of the Proposed Transactions. The pro forma financial effects are calculated
        for the six months ended 30 June 2018 for the purposes of the consolidated statement of comprehensive income
        and as at 30 June 2018 for the purposes of the consolidated statement of financial position.

        These pro forma financial effects are prepared for illustrative purposes only, to provide information about how the
        Proposed Transactions may have affected the financial information presented by New L2D for the period ended
        30 June 2018. Because of their pro forma nature, they may not provide a fair reflection on New L2D’s financial
        position, changes in equity, results of operations or cash flows after the Proposed Transactions.

        The Directors are responsible for the preparation of the pro forma financial information. The pro forma financial
        information has been prepared using accounting policies that are consistent with IFRS and with the basis on
        which the historical financial information has been prepared in terms of the accounting policies of the CISIP as at
        30 June 2018, as adopted by New L2D. The pro forma financial information has been prepared in accordance
        with the Listings Requirements and the Revised SAICA Guide on Pro Forma Financial Information.

        Set out in the table below is a summary of the pro forma financial effects of the Proposed Transactions. The pro
        forma financial effects are based on the published unaudited interim financial results of the CISIP for the six
        months ended 30 June 2018, the unpublished reviewed interim financial results of SRFM for the six months ended
        30 June 2018, and the reviewed management accounts of the Additional Properties for the six months ended 30
        June 2018. It should be read in conjunction with the Independent Reporting Accountants’ review opinions thereon.

                                                                                                                             After the
                                                              Internali-                                         Transac- Proposed
                              New                                sation      Acquisi-         Debt     Conver-       tion Transac-            %
R’000                       L2D (1)   Subco (1)   CISIP (2)        (3) (6)
                                                                     ,         tion (4)   raised (5)      sion   costs (6)      tions    Change
Distribution per share           –           –      29.39          1.02          4.42        (7.51)         –      (1.43)       25.90    (11.88)
Basic and diluted                –           –      21.50          1.02          4.42        (7.51)         –      (1.43)       18.01    (16.24)
earnings per share
Headline earnings per            –           –      28.86          1.02          4.42        (7.51)         –      (1.43)       25.37    (12.10)
share
Net asset value per share        –           –        9.81       (0.28)              –            –         –      (0.02)        9.51     (3.05)
Net tangible asset value         –           –        9.81       (0.28)              –            –         –      (0.02)        9.51     (3.05)
per share
Weighted average                 –           –    905 792                –           –            –         –           –     905 792         –
number of shares in issue
(’000) (7)
Total number of shares in        –           –    908 443                –           –            –         –           –     908 443         –
issue (’000) (7)

Notes to pro forma financial effects:

1. Pursuant to the Proposed Transactions, the CISIP has acquired New L2D and New L2D has acquired the issued share in Subco (a shelf
    entity with no assets or liabilities other than R100 of share capital and cash). The assets and liabilities of the CISIP (other than the liability in
    relation to the Final CISIP Distribution and assets necessary to settle the Final CISIP Distribution) will be transferred to Subco in exchange
    for the assumption by Subco of those liabilities and the issue of Subco Shares to the CISIP pursuant to the Exchange Agreement. On the
    day after the issue of the Subco Shares to the CISIP, pursuant to the Amalgamation Agreement, 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 distribute all of the issued shares of New L2D to Unitholders, who will receive one New L2D Share for every Unit
    held. The financial statements of New L2D and Subco have been audited by PWC, the independent auditors, and an unqualified opinion has
    been expressed on the respective sets of financial statements.
2. Extracted, without adjustment (except where detailed otherwise in the notes to the pro forma financials set out in this announcement and in
    Annexure 1 of the Circular relating to the Final CISIP Distribution), from the CISIP’s unaudited interim financial statements for the six months
    ended 30 June 2018.
3. Extracted, without adjustment (except where detailed otherwise in the notes to the pro forma financials set out in this announcement and in
    Annexure 1 of the Circular relating to Internalisation adjustments), from SRFM’s reviewed interim financial statements for the six months
    ended 30 June 2018.
4. Extracted, without adjustment (except where detailed otherwise in the notes to the pro forma financials set out in this announcement and in
    Annexure 1 of the Circular relating to the Acquisition), from the reviewed management accounts of the Additional Properties for the six months
    ended 30 June 2018.
5. Represents the adjustment for interest on the R1.5 billion debt used to finance the Internalisation (R300 million) and the Acquisition (R1.2
    billion), calculated on a debt cost inclusive blended all-in rate of 9%. Debt raising costs of R13.5 million will be amortised over the term of the
    debt raised in line with IFRS 9 Financial Instruments, which is included in the all-in blended rate.
6. Represents an aggregate of the estimated costs to be incurred by either New L2D or Subco in respect of the Proposed Transactions which
    are currently estimated at R16.2 million (excluding VAT). Transaction costs of R12.9 million (excluding VAT) will be expensed, R2.4 million
    (excluding VAT) will be capitalised pursuant to the Acquisition and R894 000 will be expensed directly in equity. The treatment of transaction
    costs has been disclosed in the detailed notes to the pro forma financials set out in this announcement and in Annexure 1 of the Circular.
7. Unitholders will receive 1 New L2D Share for every Unit held pursuant to the Amalgamation Agreement. Subject to this issuance, the total
    number of New L2D Shares in issue will not change as a result of the Proposed Transactions, being 908 443 334 New L2D Shares. However,
    New L2D will acquire control over the Incentive Plan and will need to consolidate 2 651 615 allocated New L2D Shares therein, as at the
    Effective Date, and account for such shares as treasury shares. The Incentive Plan shares are all fully issued and rank in full for all dividends
    or other distributions declared, made or paid, however, these are excluded from the calculation of basic, diluted and headline earnings per
    share or the calculation of distribution per share.
8. The Internalisation has been accounted for as a business combination under common control in line with New L2D’s accounting policy.
     Statement of Comprehensive Income
     The pro forma statement of comprehensive income below presents the pro forma effects of the Proposed Transactions on the audited results of New L2D, on the
     assumption that the Proposed Transactions were effective 1 January 2018.

                                                                                                                                                                                                        After the
                                                                                                                                                                                                       Proposed
                                                                 New                                             Internalisa-          Acquisition -                                   Transaction Transactions -
     R’000                                                      L2D (1)       Subco (1)         CISIP (2)             tion (3)           restated (5)   Debt raised (6)   Conversion       costs (7)    restated
     Property portfolio revenue                                         –               –       417 213                          –           52 959                  –            –               –           470 172
     Rental and related income                                          –               –       422 056                          –           52 959                  –            –               –           475 015
     Adjustment for the straight-lining of operating income             –               –        (4 843)                         –                                   –            –               –            (4 843)
     Property operating expenses                                        –               –     (144 425)                          –          (12 878)                 –            –               –       (157 303)
     Net rental and related income                                      –               –       272 788                          –           40 081                  –            –               –           312 869
     Administration expenses                                            –               –        (2 985)                         –                 –                                              –            (2 985)
     Net property income                                                –               –       269 803                          –           40 081                  –            –               –           309 884
     Asset Management fee                                               –               –       (14 565)        14 565      (3a) (4)               –                              –               –                 –
     Profit from operations                                             –               –       255 238               14 565                 40 081                  –            –               –           309 884
     Net interest income                                                –               –          6 148                         –                 –          (68 055)            –               –           (61 907)
     interest income                                                    –               –          6 148                         –                 –                 –            –               –              6 148
     Interest expense                                                   –               –              –                         –                 –          (68 055)            –               –           (68 055)
     Dividends received on financial instruments                        –               –               –                  –                       –                 –            –               –                 –
     Asset Management fee income (3.a)                                  –               –               –             35 578                       –                 –            –               –            35 578
     Other administration expenses (3.a)                                –               –               –            (40 883)                      –                 –            –         (12 910)          (53 793)
     Loss on disposal of financial instruments                          –               –        (4 153)                          –                –                 –            –               –            (4 153)
     Profit before fair value adjustments                               –               –       257 233                9 260                 40 081           (68 055)            –         (12 910)          225 609
                                                                        –               –       (62 499)                         –                 –                 –            –               –           (62 499)
     Net fair value adjustments on investment properties                –               –       (67 342)                          –                –                 –            –               –           (67 342)
     Adjustment for straight-lining of operating lease                  –               –          4 843                          –                –                 –            –               –              4 843
     income
     Fair value adjustments on equity instrument                        –               –                                         –                –                 –            –               –                 –
     Total earnings before tax                                          –               –       194 734                9 260                 40 081           (68 055)            –         (12 910)          163 110
     Income tax expense                                                 –               –               –                         –                –                 –            –               –                 –
     Total earnings after tax                                           –               –       194 734                9 260                 40 081           (68 055)            –         (12 910)          163 110

                                                                                                                                                                                                  After the
                                                                                                                                                                                                 Proposed
                                                               New                                          Internalisa-         Acquisition -                                   Transaction Transactions -
     R’000                                                    L2D (1)       Subco (1)       CISIP (2)            tion (3)          restated (5) Debt raised (6)     Conversion       costs (7)    restated
     Headline earnings reconciliation
     Total earnings after tax                                           –               –         194 734            9 260           40 081         (68 055)               –         (12 910)         163 110
     Net fair value adjustments on investment
                                                                 –               –          62 499                 –               –                –               –                –          62 499
     properties
     Loss on disposal of financial instruments                          –               –            4 153                –               –                –               –                –           4 153
     Headline earnings (8)                                                                        261 386            9 260           40 081         (68 055)               –         (12 910)         229 762
     Basic and diluted earnings per unit
     Basic earnings per unit (cents) (8)                                –               –            21.50            1.02             4.42           (7.51)               –           (1.43)           18.01
     Fully diluted earnings per unit (cents)   (8)
                                                                        –               –            21.50            1.02             4.42           (7.51)               –           (1.43)           18.01
     Headline earnings per share (cents)   (8)
                                                                        –               –            28.86            1.02             4.42           (7.51)               –           (1.43)           25.37

         Notes and assumptions to the pro forma effects on the Statement of Comprehensive Income:
          1.   Pursuant to the Proposed Transactions, the CISIP has acquired New L2D and New L2D has acquired Subco. The assets and liabilities of the CISIP will be transferred to Subco in exchange for Subco
               shares pursuant to the Exchange Agreement. Thereafter, the CISIP will transfer all of its assets and liabilities, being shares in Subco, to New L2D in accordance with the Amalgamation Agreement
               and distribute all of the issued shares of New L2D to Unitholders, who will receive one share for every Unit held. The Interim financial statements of New L2D and Subco have been audited by PWC,
               the independent auditors, and unqualified opinions have been expressed on the respective sets of financial statements.
          2.   Extracted, without adjustment, from the CISIP’s 30 June 2018 published unaudited interim financial statements.
          3.   Extracted, without adjustment (except as detailed below), from SRFM’s 30 June 2018 reviewed interim financial statements. A review has been conducted by PWC, the independent auditors, in
               relation to the interim financial statements of SRFM for the period ended 30 June 2018. The table below sets out the adjustments made to the Statement of Comprehensive Income of SRFM for the
               purposes of presenting the pro forma Statement of Comprehensive Income for New L2D:
                                                                                                                                                                                          Pro forma
                                                                                                                                                                                        acquired by
                    R’000                                                                                                                       SRFM          Adjustments                 New L2D
                    Total asset management fee income (c)                                                                                       50 014             (14 436)                  35 578
                    Asset management fee (a)                                                                                                    46 440             (14 436)                  32 004
                    Sundry income                                                                                                                1 040                   –                    1 040
                    Interest income                                                                                                              2 534                   –                    2 534
                    Operating expenses (7)                                                                                                     (40 883)                  –                  (40 883)
                    Asset management fee saving (a) (4)                                                                                              –              14 565                   14 565
                    Operating profit (b)                                                                                                         9 131                 129                    9 260
                    Finance expense                                                                                                                  –                   –                        –
                    Profit before taxation                                                                                                       9 131                 129                    9 260
                    Taxation (e)                                                                                                                (2 620)              2 620                        –
                    Net profit for the year                                                                                                      6 511               2 749                    9 260
                    Other comprehensive income                                                                                                       –                   –                        –
                    Total comprehensive income                                                                                                   6 511               2 749                    9 260
             a)    The adjustment for R14.4 million of asset management fees represents fees paid by the CISIP to SRFM for the period ended 30 June 2018. Such asset management fees will not be payable by the
                   CISIP following the implementation of the Internalisation.
             b)    The difference between the asset management fee adjustment above and the saving by the CISIP of R129 000 is due to VAT that the CISIP was not allowed to claim on the asset management fees
                   incurred. This amount reverses on consolidation of the CISIP.
             c)    The R35.6 million pro forma total asset management fee income represents the asset management fee charged to the Liberty Property Portfolio by SRFM, sundry income and interest income earned
                   by SRFM which will continue to be payable to Subco in accordance with the terms and conditions of the New Asset Management Agreement.
             d)    No adjustment has been made to the R4.6 million expense recognised by SRFM in respect of the cash settled share incentive scheme expense as a result of the change to an equity settled scheme,
                   included within operating expenses.
             e)    SRFM incurred an income tax expense of R2.6 million for the period ended 30 June 2018. Pursuant to the Proposed Transactions, Subco will acquire the business of SRFM in terms of the Sale of
                   Business Agreement which will include all of its assets and liabilities (and associated deferred tax assets thereto). Subco will qualify as a controlled company in terms of section 25BB of the Income
                   Tax Act and consequently, the profits of SRFM’s business will not be subject to income tax to the extent that such profits are paid by Subco as a qualifying distribution in accordance with section
                   25BB of the Income Tax Act. Subco is expecting to comply with the requirements of section 25BB of the Income Tax Act and to pay all of its distributable income in the form of a qualifying distribution
                   to New L2D and subsequently, New L2D will pay such qualifying distribution to Shareholders. The pro forma income tax expense for SRFM was consequently adjusted to zero.
     4.   Represents the adjustment for R14.5 million asset management fees paid by the CISIP to SRFM for the period ended 30 June 2018. Such asset management fees will not be payable by the CISIP following
          the implementation of the Internalisation.
     5.   Represents the property income and expenses from the Additional Properties acquired pursuant to the Acquisition. The figures are extracted, without adjustment from the management accounts of the
          Additional Properties for the six months ended 30 June 2018, which have been reviewed by PwC, the independent auditors.
     6.   Represents the adjustment for interest on R1.5 billion of debt used to finance the Internalisation and the Acquisition Considerations, calculated on a cost inclusive blended all-in rate of 9%. Anticipated debt
          raising costs of R13.5 million will be amortised over the term of the debt in line with IFRS 9 Financial Instruments, which is included in the all-in blended rate.
     7.   Represents the adjustment for an estimated R12.9 million (excluding VAT) of once-off transaction costs to be incurred by both New L2D and Subco in respect of the Proposed Transactions post 1 July 2018.
          In addition, once-off costs of R6.8 million (excluding VAT) associated with the Proposed Transactions have already been incurred and expensed within SRFM’s results for the six months to 30 June 2018.
          The transaction costs are expensed in line with New L2D’s accounting policy for common control transactions.
     8.   Calculation is based on the weighted average number of New L2D Shares outstanding equal to 905 791 719 (after excluding 2 651 615 Incentive Plan shares). The Incentive Plan shares rank in full for all
          dividends and distributions. The basic and diluted earnings per share including the Incentive Plan shares are both 17.95 cents per share after the Proposed Transactions.
     9.   Save for transaction costs, all adjustments are expected to have a continuing effect.

Statement of Financial Position
The pro forma statement of financial position below presents the effects of the Proposed Transactions on New L2D on the assumption that the Proposed Transactions were
effective on 30 June 2018 and that New L2D was incorporated on that date.

                                                                                                                                                                             After the
                                                                                          Internalis-    Acquisition     Debt raised                     Transaction        Proposed
    R`000                                      New L2D (1)     Subco (1)      CISIP (2)      ation (3)             (4)            (6)
                                                                                                                                        Conversion (7)       costs (8)   Transactions
    ASSETS
    Non-current assets                                  –             –     8 705 235          1 102       1 200 000               –                –           2 384       9 908 721
    Investment properties                               –             –     8 656 908              –     1 200 000(5)              –                –           2 384       9 859 292
    Investment properties under development             –             –        48 327              –               –               –                –               –          48 327
    Property, plant & equipment                         –             –             –          1 102               –               –                –               –           1 102
    Other assets                                        –             –             –              –               –               –                –               –               –


    Current assets                                      –             –       299 234         74 927                –              –                –         (3 279)         370 883
    Trade and other receivables                         –             –       163 408         11 266                –              –                –               –         174 674
    Financial instruments                               –             –       132 831         59 186                –              –                –               –         192 017
    Tax receivable                                      –             –             -          2 079                –              –                –               –           2 079
    Loan to STANLIB Asset Management                    –             –             -            385                –              –                –               –             385
    Cash and cash equivalents                           –             –         2 995          2 011                –              –                –         (3 279)           1 727

    Total assets                                        –             –     9 004 469         76 029       1 200 000               –                –           (894)      10 279 604
    LIABILITIES
    Non-current liabilities                             –             –              –              –               –      1 500 000                –               –       1 500 000
    Interest bearing debt                               –             –              –              –               –      1 500 000                –               –       1 500 000
    Other liabilities                                   –             –              –              –               –              –                –               –               –


    Current liabilities                                 –             –       116 378         33 048                –              –                –         12 910          162 337
    Trade and other payables                            –             –       116 378         26 004                –              –                –         12 910          155 292
    Employee benefits liability                         –             –             –              –                –              –                –              –                –
    Loan from Liberty Holdings                          –             –             –          7 045                –              –                –              –            7 045
    Current taxation payable                            –             –             –              –                –              –                –              –                –
    Loan from STANLIB Asset Management                  –             –             –              –                –              –                –              –                –

    Total liabilities                                   –             –       116 378         33 048                –      1 500 000                –         12 910        1 662 337


    Participatory units` capital and reserve
    Capital                                             –             –     8 668 950                               –              –          224 141               –       8 888 091
    Retained surplus                                    –             –       266 188                               –              –        (266 188)        (13,804)         (13 805)
    Share-based payment reserve (3, c)                  –             –              -        17 730                –              –                –               –           17 730
    Non-distributable reserve                           –             –       (42 047)     (274 750)                –              –           42 047               –       (274 750)
    Total unitholder / shareholder funds (7)            –             –     8 888 091      (257 019)                –              –                 -       (13 804)       8 617 267
    Total unitholder / shareholder funds and            –             –     9 004 469      (223 971)                –      1 500 000                –           (894)      10 279 604
liabilities
NAV per unit / share (excludes deferred tax) (9)                     –                 –              9.81            (0.28)                 –                 –                 –            (0.02)              9.51
NTAV per unit / share (excludes deferred tax) (9)                    –                 –              9.81            (0.28)                 –                 –                 –            (0.02)              9.51

Notes and assumptions to the pro forma effects on the Statement of Financial Position:
1.   Pursuant to the Proposed Transactions, the CISIP has acquired New L2D and New L2D has acquired Subco. The assets and liabilities of the CISIP will be transferred to Subco in exchange for Subco Shares
     pursuant to the Exchange Agreement. Thereafter, the CISIP will transfer all of its assets and liabilities, being Subco Shares, to New L2D in accordance with the Amalgamation Agreement and distribute all of
     the New L2D Shares to Unitholders, who will receive one New L2D Share for every Unit held. The interim financial statements of New L2D and Subco have been audited by PWC, the independent auditors,
     and unqualified opinions have been expressed on the respective sets of financial statements.
2.   Extracted, without adjustment, from the CISIP’s 30 June 2018 unaudited interim financial statements.
3.   Extracted, without adjustment (except as detailed below), from SRFM’s 30 June 2018 reviewed interim financial statements. SRFM’s interim financial statements have been reviewed by PWC, the independent
     auditors. The Internalisation is to be accounted for as a business combination under common control. The table below sets out the assets and liabilities that would be assumed by New L2D from acquiring
     SRFM and the adjustments made thereto:


                                                                                                                                                                                    Pro forma
                                                                                                                                                                              acquired by New
                Acquired assets and liabilities                                                                                              SRFM           Adjustments                   L2D
                Non-current assets                                                                                                            6 067                 (4 965)               1 102
                Property, plant & equipment                                                                                                   1 102                       -               1 102
                Deferred tax (a)                                                                                                              4 965                 (4 965)                   -
                Current assets                                                                                                              77 289                  (2 362)              74 927
                Trade and other receivables (b)                                                                                             13 628                  (2 362)              11 266
                Tax receivable                                                                                                               2 079                        -               2 079
                Cash and cash equivalents                                                                                                    2 011                        -               2 011
                Financial instruments                                                                                                       59 186                        -              59 186
                Loan to Stanlib Asset Management                                                                                               385                        -                 385

                Total assets                                                                                                                83 355                  (7 326)              76 029
                Non-current liabilities                                                                                                          -                        -                   -
                Current liabilities                                                                                                         50 779                 (17 730)              33 048
                Trade and other payables                                                                                                    26 004                                       26 004
                Employee benefits liability (c)                                                                                             17 730                 (17 730)                   -
                Loan from Liberty Holdings                                                                                                   7 045                        -               7 045
                Current taxation payable                                                                                                         -                        -                   -
                Loan from STANLIB Asset Management                                                                                               -                        -                   -
                Share Based Payment Reserve (c)                                                                                                    -                17 730               17 730
                Net assets value acquired                                                                                                   32 576                  (7 326)              25 250
                Consideration                                                                                                              300 000                        -             300 000
                Common control adjustment                                                                                                (267 424)                  (7 326)           (274 750)


        a)    In terms of the Sale of Business Agreement, SRFM will transfer its business, which will include all of its assets and liabilities (and associated deferred tax assets thereto) to Subco. Subco will be a
              controlled company in terms of section 25BB of the Income Tax Act and consequently, having paid out its net profits in the form of a qualifying distribution as expected, will not pay income tax on its
              net profits. As such, the deferred tax asset is unlikely to be realised in Subco and is therefore derecognised.
        b)    Represents the adjustment for one month’s asset management fees owing to SRFM as payable by the CISIP. Such asset management fees will not be payable by the CISIP following the
              implementation of the Proposed Transactions.
        c)    Represents an adjustment for the change in the employee share-based payments from being a cash settled scheme to an equity settled scheme that will be controlled and administered by New
              L2D. For the purposes of these pro forma financial effects, it is assumed that the valuation of the cash settled share-based payment is unadjusted as a result of the change to an equity settled
              scheme.
4.   Extracted, without adjustment, from the management accounts of the Additional Properties which have been reviewed by PWC, the independent auditors, as at 30 June 2018.
5.   Pursuant to the Acquisition, Subco will acquire the Additional Properties for R1.2 billion which reflects their independent market value as at 30 September 2018. The Additional Properties will be accounted
     for at fair value in accordance with IAS 40 Investment Properties.
6.   Represents the adjustment for the debt of R1.5 billion used to finance the Internalisation Consideration (R300 million) and the Acquisition Consideration (R1.2 billion). The blended all-in rate of 9% incorporates
     the amortisation of R13.5 million of debt fundraising costs in accordance with IFRS 9 Financial Instruments.
7.   Represents the reversal of reserves within CISIP into Capital.
        a)    Pursuant to the Exchange Agreement, the CISIP will transfer all of its assets and liabilities (other than the liability in relation to the 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 908 443 334 Subco Shares. The adjustment reflects the new capital balance that would
              have been raised as at 30 June 2018 via the issue of 908 443 334 Subco Shares to the CISIP. No adjustment to the pro forma financial information is made in respect of the Final CISIP Distribution.
        b)    Pursuant to the Amalgamation Agreement, the CISIP will transfer all of its assets (other than assets necessary to settle the Final CISIP Distribution), being 908 443 334 Subco Shares and remaining
              liabilities (other than the liability in relation to the Final CISIP Distribution), to New L2D, in consideration for the issue by New L2D of 908 443 333 New L2D Shares to the CISIP. The adjustment
              reflects the new capital balance that would have been raised as at 30 June 2018 via the issue by New L2D of 908 443 334 New L2D Shares to the CISIP. No adjustment to the pro forma financial
              statements is made for the Final CISIP Distribution.
8.   Estimated once-off transaction costs in relation to the Acquisition of R2.4 million (excluding VAT) will be capitalised to the cost of the Additional Properties in line with the requirements of IAS 40 Investment
     Properties, with such costs paid in cash. Further once-off transaction costs of R12.9 million (excluding VAT) will be expensed as incurred with R894 000 being expensed directly through equity. Once-off
     costs of R6.8 million (excluding VAT) associated with the Proposed Transactions have already been incurred and expensed within SRFM’s results for the six months to 30 June 2018. The transaction costs
     are treated in line with New L2D’s accounting policy for common control transactions.
9.   Calculation is based on the pro forma New L2D Shares outstanding equal to 905 791 719 (after excluding Incentive Plan shares of 2 651 615). The Incentive Plan shares rank in full for all dividends and
     distributions. The NAV and TNAV per share including the Incentive Plan shares are both R9.49 after the Proposed Transactions.

Johannesburg
6 August 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

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