Update regarding the acquisition of Tsogo’s casino precincts HOSPITALITY PROPERTY FUND LIMITED (Incorporated in the Republic of South Africa) (Registration number 2005/014211/06) JSE share code: HPB ISIN: ZAE000214656 Company code: HPAI (Approved as a REIT by the JSE) ("Hospitality" or the "company") UPDATE REGARDING THE ACQUISITION OF TSOGO'S CASINO PRECINCTS 1. ADDENDUM TO THE SUBSCRIPTION AGREEMENT 1.1. Shareholders are referred to the announcement released on SENS on 9 July 2018 (the "terms announcement") advising shareholders that Hospitality and its wholly-owned subsidiary Merway have entered into a subscription agreement with Tsogo and its wholly-owned subsidiaries for the acquisition of a portfolio of seven mixed-use casino precincts for an agreed aggregate purchase consideration of R23.0 billion. Unless otherwise stated, the terms defined in the terms announcement, where read in this announcement, bear the same meanings as in the terms announcement. 1.2. Shareholders are advised that Hospitality has entered into an addendum to the subscription agreement with Tsogo in terms of which: 1.2.1. Tsogo has undertaken to Hospitality to distribute its entire holding of Hospitality shares (including the Hospitality shares it already holds, as well as the subscription shares which are to be transferred by the vendors to Tsogo) to the shareholders of Tsogo, pro rata to their respective Tsogo shareholdings at such time (the "unbundling"), provided that the internal restructuring (defined below) has been implemented. The unbundling will occur in two tranches as follows: 1.2.1.1. a distribution in specie of 918 069 783 Hospitality shares, in the ratio of 0.86316 Hospitality shares for every ordinary share in Tsogo held at such time, such that Tsogo’s interest in Hospitality post this distribution will be 35%; and 1.2.1.2. an unbundling in terms of section 46 of the Income Tax Act of the remaining 620 284 782 Hospitality shares then held by Tsogo, in the ratio of 0.58318 Hospitality shares for every ordinary share in Tsogo held at such time; 1.2.2. Tsogo has undertaken to Hospitality that the vendors will transfer to Tsogo all the Hospitality shares held by them following the implementation of the transaction, as soon as practically possible after the effective date, but in any event within 45 days of the effective date; and 1.2.3. Hospitality has undertaken to Tsogo to effect an internal restructuring whereby beneficial ownership of the casino portfolio and the existing hotel portfolio will be vested in HPF Properties Proprietary Limited ("HPF Properties") as soon as practically possible after the effective date, but in any event within 45 days after the effective date (the "internal restructuring"). The internal restructuring will include an amalgamation of Cassava and Listed Investments with HPF Properties in terms of section 44 of the Income Tax Act. 1.3. The following conditions precedent to the subscription agreement have been inserted and/or amended: 1.3.1. to the extent necessary, Tsogo obtaining the requisite approvals of the JSE for the implementation of the transaction; 1.3.2. to the extent necessary, Hospitality obtaining the requisite approvals of the JSE for the implementation of the transaction; 1.3.3. the unbundling being authorised by the directors of Tsogo (acting through the independent board) in accordance with section 46(1)(a)(ii) of the Companies Act, and the JSE Listings Requirements, noting that it reasonably appears that Tsogo will satisfy the solvency and liquidity test immediately after completing the proposed distribution as contemplated in section 46(1)(b) of the Companies Act; 1.3.4. the disposal of the greater part of Tsogo’s assets by way of the unbundling being approved by the requisite majority of Tsogo shareholders in terms of section 112 and 115 of the Companies Act; 1.3.5. the TRP issuing a compliance certificate in respect of the unbundling; and 1.3.6. during the time period prescribed in section 164(7) of the Companies Act, appraisal rights in terms of section 164 of the Companies Act are not exercised by dissenting Tsogo shareholders holding more than 1% of the entire issued share capital of Tsogo at such time (or such higher percentage as the board of Tsogo may determine). 1.4. Save as stated above, there have been no other material changes to the terms and conditions precedent contained in the terms announcement. 2. FORECAST FINANCIAL INFORMATION Set out below are extracts from the profit forecast of the casino precincts (the "forecast") for the one month ending 31 March 2019 and year ending 31 March 2020 (the "forecast period"). The forecast has been updated due to the amendment of the anticipated effective date from 1 January 2019 to 1 March 2019. The forecast, including the assumptions on which it is based and the financial information from which it is prepared, is the responsibility of the Hospitality board. The forecast has been prepared on the assumption that the transaction will be effective from 1 March 2019 and on the basis that the forecast includes forecast results for the duration of the forecast period. The forecast has not been reviewed or reported on by independent reporting accountants. The forecast has been prepared in accordance with Hospitality's accounting policies, which are in compliance with International Financial Reporting Standards. Forecast for the Forecast for the 1 month ending year ending Notes 31 March 2019 31 March 2020 Revenue 1 162 007 2 031 572 Operating costs - - Operating profit 162 007 2 031 572 Finance costs 4 (58 780) (697 483) Transaction costs (17 220) - Net profit before tax 86 007 1 334 089 Taxation - - Net profit after tax 86 007 1 334 089 Reconciliation of profit and earnings available for distribution Profit after tax 86 007 1 334 089 Transaction costs 17 220 - Earnings available for distribution 103 227 1 334 089 1. All rental income is contracted. Rental income has been forecast based on the agreed initial rental per the rental aggregation agreement and escalated on 1 April 2019 at 4.50%, which is an assumption of the annual inflation rate for March 2019. 2. There will be no unforeseen economic factors that will affect the lessee’s ability to meet its commitments in terms of the lease agreement. 3. No fair value adjustments are assumed. 4. Finance costs comprises interest incurred on the R8.1 billion of new debt facilities, and the amortisation of upfront debt fees. The weighted average interest rate on the new facilities is expected to be c.8.54%. 3. DISTRIBUTION OF CIRCULAR AND NOTICE OF GENERAL MEETING Shareholders are further advised that a circular containing all the relevant information relating to the transaction and the unbundling is expected to be issued on or about 21 September 2018. Further announcements will be released on SENS in due course. 7 September 2018 Corporate advisor and sponsor to Hospitality Java Capital Legal advisors to Hospitality enSAfrica Independent Expert MAZARS Independent reporting accountant PWC Date: 07/09/2018 05:05:00 Produced by the JSE SENS Department. 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