Pivotal shareholders will hold approximately 138.54 Redefine shares and 9.38 shares in Echo Polska Properties N.V. (“EPP”) (“EPP shares”) for every 100 Pivotal shares held prior to implementation of the scheme.

Notwithstanding the delivery to date of above average growth in net asset value, the development focused Pivotal business faces a number of challenges in the current economic environment of stagnant growth and rising interest rates.

Whilst Pivotal’s completed portfolio is expected to continue to perform satisfactorily, development activity and returns flowing therefrom will be under pressure in the short to medium term. Consequently, net asset value growth will be negatively impacted whilst the current economic conditions remain difficult.

As an alternative to the current development orientated structure of Pivotal, the scheme offers Pivotal shareholders the opportunity to convert to a REIT structure and receive Redefine shares and in addition EPP shares from which Pivotal shareholders will benefit due to bi-annual income distributions, exposure to hard currency earnings, enhanced liquidity as well as continued exposure to Pivotal’s existing portfolio of A-grade properties. 

From a Redefine perspective, the scheme is in line with its strategy to diversify, grow and improve the quality of its portfolio and recycle its capital through disposing of non-core assets and replacing them with prime assets. 

The acquisition of Pivotal positions Redefine even more competitively in the commercial property sector in line with its strategic intent to become the landlord of choice in A-grade office space in sought after areas in South Africa. This will be further enhanced by partnering with new co-owners (Abland Proprietary Limited (“Abland”)) in existing co-ownership ventures. 

3. Salient terms of the scheme 3.1. In terms of the scheme, as indivisible components thereof- 

3.1.1. Redefine will, on the first business day after the day on which the scheme becomes legally effective, acquire all of the scheme shares in exchange for the allotment and issue of 460 000 000 Redefine shares (“Redefine consideration”), which translates into an assumed swap ratio of 1.38537 Redefine shares per scheme share. 3.1.2. Pivotal will declare a distribution (“Pivotal EPP distribution”) to scheme participants in an amount equal to the market value of Pivotal’s 31 153 281 EPP shares as at the close of business on the last business day prior to 5 January 2017. Redefine will discharge the obligation of Pivotal to pay the Pivotal EPP distribution resulting in a claim by the scheme participants against Redefine which claim will be settled by Redefine by the delivery of 31 153 281 EPP shares to the scheme participants (which translates into an assumed 0.09382 EPP shares per scheme share) (“EPP consideration”) on or about 5 January 2017 (“EPP transfer date”). 

3.2. In light of a requirement not to have the EPP shares held by public shareholders and freely tradeable in the period immediately after its planned initial public offering and listing of its shares on the JSE, the EPP consideration will be retained by Redefine for a period after the day on which the scheme becomes legally effective and will be settled by the delivery of the EPP consideration to the scheme participants on the EPP transfer date.

3.3. The Redefine consideration and the EPP consideration will be settled by the delivery of Redefine shares and EPP shares respectively to the scheme participants in accordance with the settlement procedures to be set out in the combined circular to Pivotal shareholders (“scheme circular”) and in compliance with the Financial Markets Act, 19 of 2012.

3.4. If the aggregate number of Redefine shares or EPP shares deliverable to a scheme participant yields a decimal result, then the number of EPP shares and/or Redefine shares to be allocated will be rounded in accordance with the rounding convention as set out in the Listings Requirements of the JSE.

3.5. Redefine undertakes not to conduct any capital reductions (including any unbundling of any of its assets to its shareholders) or sub-divisions of its securities or declare any dividends or other distributions, other than as envisaged in paragraph 5.1, unless Redefine and Pivotal have agreed an appropriate amendment to the terms of the scheme in writing.

3.6. Pursuant to the terms of the scheme, risk in and benefit to the –  3.6.1. scheme shares will, on the business day after the scheme becomes legally effective, pass to Redefine; and 3.6.2. Redefine consideration will, on the business day after the scheme becomes legally effective, pass to the scheme participants.  

3.7. Pursuant to the scheme, Redefine will remain the registered and beneficial owner of the 31 153 281 EPP shares to be delivered to the scheme participants until the transfer and registration of such shares into the names of the scheme participants which will be on or about EPP transfer date.

4. Conditions precedent  The implementation of the scheme will be subject to the fulfilment (or waiver, as the case may be) of the following conditions precedent by no later than 30 November 2016, or such later date as Redefine and Pivotal may agree to in writing:

4.1. to the extent required, the counterparties under the debt funding agreements with Pivotal have provided their written consents to the change of control of Pivotal pursuant to the scheme;

4.2. Pivotal has concluded an agreement to dispose of its co-ownership interests to the co-owners of the following property developments, namely West End and Lake View Land, which disposal shall be conditional on the scheme becoming unconditional;

4.3. those parties with a future right or potential right to be issued and/or subscribe for Pivotal shares have agreed amended terms with Pivotal, conditional upon the scheme becoming unconditional, such that those rights are accelerated, and such parties are issued with the requisite number of Pivotal shares, prior to the date on which Pivotal shareholders are required to be reflected in the share register of Pivotal in order to receive the scheme consideration; 

4.4. EPP shares have been listed on the main board of the JSE by way of an inward listing, which is expected to take place in the middle of September 2016 (“EPP listing date”);

4.5. Investec Bank Limited, as provider of debt funding to Pivotal and its subsidiaries in respect of the EPP shares, has provided such consent as may be required in order to give effect to the scheme;

4.6. Redefine has procured from EPP and the remaining shareholders of EPP immediately prior to the inward listing referred to in paragraph 4.4 such written consents and/or waivers of lock-in or other rights they may have in respect of the transfer of the EPP shares held by Redefine and/or one or more of its subsidiaries, in terms of the scheme as further envisaged in paragraph 3.1.2 above; 

4.7. Pivotal has agreed terms for the disposal of its interest in Abreal, together with the assumption of any associated debt, conditional on the scheme becoming unconditional, to Abland and on terms reasonably acceptable to Redefine, and if required, that Abreal has consented to such disposal (“Abreal sale”) and that the Abreal sale has become unconditional in accordance with its terms, save for the condition requiring that the scheme becomes unconditional;

4.8. Pivotal has procured the acceleration of all accrued rights, and the consequent cash payment in settlement of such accrued rights, conditional upon the scheme becoming unconditional, to participants in terms of Pivotal’s Share Appreciation Rights Plan and Conditional Share Plan;

4.9. Pivotal and Abreal have agreed to the cancellation of the property management agreement entered into between Pivotal and Abreal on or about 15 October 2015, subject to and with effect from the business day on which the scheme becomes legally effective; 

4.10. Pivotal and Redefine enter into an agreement in terms of which those Abreal employees based at Pivotal’s properties and/or who are exclusively dedicated to Pivotal’s properties, will become employees of Redefine in terms of section 197 of the Labour Relations Act, 66 of 1995;

4.11. that certain co-ownership interests in properties identified in the implementation document (“Setso assets”) have been sold to Setso Property Fund Proprietary Limited (“Setso”), and that all rights, title and interest in and to the Setso assets have passed to Setso, on terms and conditions acceptable to Redefine and Pivotal;  

4.12. Pivotal and Setso have entered into a written sale agreement with a third party acceptable to Pivotal and Redefine, through one or more transactions, ultimately to dispose of all of its shares in Setso, on terms and conditions acceptable to Redefine and Pivotal, and that such agreement has been implemented in accordance with its terms;

4.13. the approval of the ordinary and special resolutions set out in the scheme circular, at the meeting of Pivotal shareholders to be convened in connection with the scheme (“the scheme meeting”), required to implement the scheme by the requisite majority of Pivotal shareholders is obtained;

4.14. to the extent required under section 115(3) of the Companies Act, approval of the implementation of the special resolution, as contemplated in section 115(2) of the Companies Act, in terms of which Pivotal shareholders approve the scheme (“scheme resolution”), by the court is obtained and, if applicable, Pivotal not having treated the scheme resolution as a nullity as contemplated in section 115(5)(b) of the Companies Act;

4.15. Pivotal shareholders holding more than 5% of all the issued Pivotal shares not having given, in terms of section 164(3) of the Companies Act, valid notice of objection to the scheme resolution taken at the scheme meeting and those objecting Pivotal shareholders not having voted against the scheme resolution in respect of more than 5% of the issued Pivotal shares at the scheme meeting;

4.16. the receipt of the unconditional approval in writing of the competition authority/ies to the scheme, or if such approval is conditional, such conditions being acceptable to the parties upon whom they are imposed, acting in good faith, but provided that Redefine shall not be bound to accept any condition which requires the disposal of immovable property from the property portfolio of Pivotal which, fairly valued, has an aggregate gross value of more than R1 000 000 000, or the disposal of immovable property from the property portfolio of Redefine which, fairly valued, has an aggregate gross value of more than R1 000 000 000;

4.17. Pivotal has complied with all requirements of section 10 of the Listings Requirements of the JSE in respect of the transactions contemplated in paragraphs 4.2, 4.3, 4.7 and 4.9 above, to the extent applicable; 

4.18. the receipt of all other regulatory approvals for the scheme, including those of the JSE, the South African Reserve Bank and the Takeover Regulation Panel established in terms of section 196 of the Companies Act ("TRP"), having been obtained; and

4.19. the issue of a compliance certificate by the TRP in relation to the scheme in terms of section 121(b) of the Companies Act. 

5. Distributions

5.1. The Redefine consideration will be issued without scheme participants being entitled to participate in the normal income distribution by Redefine on the Redefine shares for the sixmonth distribution period ending 31 August 2016 (“Redefine August distribution”).  

5.2. The scheme shares will be acquired by Redefine on the basis that Pivotal has not declared or paid any distributions in respect of the Pivotal shares since the listing of the Pivotal shares on the JSE, save for the Pivotal distribution referred to in paragraph 3.1.2 above to be effected in terms of the scheme.

5.3. The EPP consideration will be transferred to scheme participants cum the right to any distribution(s) declared by EPP to the EPP shareholders in respect of the period between the EPP listing date and the EPP transfer date. Any distribution so declared will be discharged by Redefine to the scheme participants in cash against receipt of such distribution by Redefine from EPP. An EPP clean-out distribution, in respect of the period between 1 June 2016 and the EPP listing date, will be declared and paid to the shareholders of EPP recorded in EPP’s share register prior to the EPP listing date, and that the EPP shares will be transferred to the scheme participants ex the right to participate in the EPP clean-out distribution.

6. Pro forma earnings and net asset value effects for Pivotal shareholders  

6.1. In terms of Regulation 101(7)(b)(iv) of the Companies Regulations, 2011 (“Companies Regulations”), a firm intention announcement must contain, inter alia, the pro forma earnings and asset value per offeree regulated company security if the offer consideration consists wholly or partly of offeror securities.

6.2. The pro forma financial effects of the scheme for Pivotal shareholders set out below are provided for illustrative purposes only to provide information about how the scheme may have affected the financial performance and financial position of Pivotal, and because of their nature, may not fairly represent the financial performance and financial position of Pivotal after the scheme.

6.3. The table below sets out the pro forma financial effects of the scheme on a Pivotal shareholder based on the results of Pivotal for the year ended 29 February 2016, assuming that the scheme had been implemented on 1 March 2015 for purposes of the statement of comprehensive income and on 29 February 2016 for purposes of the statement of financial position.