CIRCULAR TO OCTODEC LINKED UNITHOLDERS

Transcription

1 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION The definitions commencing on page 5 of this Circular apply, mutatis mutandis, to this front cover. Action required If you are in any doubt as to what action you should take arising from this Circular, please consult your broker, CSDP, banker, accountant, attorney or other professional advisor immediately. If you have disposed of all your Octodec linked units, please forward this Circular to the purchaser of such linked units or to the broker, CSDP, banker, accountant, attorney or other agent through whom the disposal was effected. Octodec linked unitholders are referred to pages 1 and 2 of this Circular, which sets out the action required by them. (Incorporated in the Republic of South Africa) (Registration number 1956/002868/06) Share code: OCT ISIN: ZAE CIRCULAR TO OCTODEC LINKED UNITHOLDERS Regarding: The Specific Issue of linked units at a price of R19,25 per linked unit for a total cash consideration of R to City Property; and incorporating: A notice convening a General Meeting of shareholders; and A form or proxy (for use by unitholders of certificated linked units and dematerialised linked units with own-name registration only). Investment bank and sponsor Nedbank Capital Legal advisors Tugendhaft Wapnick Banchetti and Partners TUGENDHAFT WAPNICK BANCHETTI AND PARTNERS Independent reporting accountants and auditors Deloitte & Touche Date of issue: Thursday, 14 November 2013

2 CORPORATE INFORMATION AND ADVISORS Company secretary and registered office City Property Administration (Proprietary) Limited (Registration number 1968/010808/07) CPA House 101 du Toit Street Pretoria, 0002 (PO Box 15, Pretoria, 0001) Investment bank and sponsor Nedbank Capital, a division of Nedbank Limited (Registration number 1951/000009/06) 3rd Floor, Corporate Place 135 Rivonia Road Sandown, 2196 (PO Box 1144, Johannesburg, 2000) Independent reporting accountants and auditors Deloitte & Touche (Practice number E) Riverwalk Office Park 41 Matroosberg Street Ashlea Gardens X6, 0081 (PO Box 11007, Hatfield, 0028) Legal advisors Tugendhaft Wapnick Banchetti and Partners (Firm Number 8704) 20th Floor Sandton City Office Towers 5th Street Sandton, 2196 (PO Box , Sandton, 2146) Trustee for debenture holders A Tugendhaft Tugendhaft Wapnick Banchetti and Partners 20th Floor Sandton City Office Towers 5th Street Sandton, 2196 (PO Box , Sandton, 2146) Transfer secretaries Computershare Investor Services (Proprietary) Limited (Registration number 2004/003647/07) Ground Floor 70 Marshall Street Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107)

3 ACTION REQUIRED BY OCTODEC LINKED UNITHOLDERS The definitions commencing on page 5 of this Circular apply mutatis mutandis to this Action required by Octodec linked unitholders section. Please take careful note of the following provisions regarding the action required by Octodec linked unitholders: 1. If you are in any doubt as to what action you should take arising from this Circular, please consult your broker, CSDP, banker, attorney, accountant or other professional advisor immediately. 2. If you have disposed of all of your Octodec linked units, this Circular should be handed to the purchaser of such Octodec linked units or to the broker, CSDP, banker, attorney or other agent through whom the disposal was effected. 3. This Circular contains information relating to the Specific Issue of linked units for cash to City Property. You should carefully read through this Circular and decide how you wish to vote on the resolutions to be proposed at the General Meeting. 4. The General Meeting, convened in terms of the notice incorporated in this Circular, will be held at CPA House, 101 du Toit Street, Pretoria, 0002 on Friday, 6 December 2013 commencing at 12: GENERAL MEETING 5.1 If you hold dematerialised Octodec linked units Own-name registration You are entitled to attend in person, or be represented by proxy, at the General Meeting. If you are unable to attend the General Meeting but wish to be represented thereat, you must complete and return the attached form of proxy, in accordance with the instructions contained therein, to be received by the transfer secretaries as follows, by no later than 12:00 on Wednesday, 4 December Hand deliveries to: Postal deliveries to: Computershare Investor Services Computershare Investor Services (Proprietary) Limited (Proprietary) Limited Ground Floor PO Box Marshall Street Marshalltown, 2107 Johannesburg, Other than own-name registration You are entitled to attend, or be represented by proxy, at the General Meeting. You must advise your CSDP or broker timeously if you wish to attend, or be represented at the General Meeting. If you do wish to attend or be represented at the General Meeting, your CSDP or broker will be required to issue the necessary letter of representation to you to enable you to attend or to be represented at the General Meeting. You must not complete the attached form of proxy (yellow). If your CSDP or broker does not contact you, you are advised to contact your CSDP or broker and provide them with your voting instruction. If your CSDP or broker does not obtain instruction from you, they will be obliged to act in terms of your mandate furnished to them. 1

4 5.2 If you hold certificated Octodec linked units You are entitled to attend, or be represented by proxy, at the General Meeting If you are unable to attend the General Meeting, but wish to be represented thereat, you must complete and return the attached form of proxy (yellow), in accordance with the instructions contained therein, to be received by the transfer secretaries as follows, by no later than 12:00 on Wednesday, 4 December Hand deliveries to: Postal deliveries to: Computershare Investor Services Computershare Investor Services (Proprietary) Limited (Proprietary) Limited Ground Floor PO Box Marshall Street Marshalltown, 2107 Johannesburg,

5 TABLE OF CONTENTS The definitions commencing on page 5 of this Circular apply mutatis mutandis to this table of contents. Page CORPORATE INFORMATION AND ADVISORS inside front cover ACTION REQUIRED BY OCTODEC LINKED UNITHOLDERS 1 IMPORTANT DATES AND TIMES 4 DEFINITIONS 5 CIRCULAR TO OCTODEC LINKED UNITHOLDERS 1. Introduction 8 2. Purpose of this Circular 9 3. Details relating to the Specific Issue of units for cash 9 4. Details relating to Octodec and its shareholders 9 5. Letters of support Major linked unitholders Material changes Material contracts Pro forma financial information relating to the Specific Issue Linked unit capital Trading history of Octodec linked units Directors and directors interests Governing law Litigation statement Directors responsibility statement General Meeting Corporate governance Exchange Control Regulations Expenses relating to the Specific Issue Consents Documents available for inspection 17 Annexure 1: Pro forma financial information 18 Annexure 2: Independent reporting accountants report on the pro forma financial information 23 Annexure 3: Octodec trading history on the JSE 25 Annexure 4: Corporate governance 27 Annexure 5: Letters of support received in favour of the Specific Issue 35 NOTICE OF GENERAL ME ETING 36 FORM OF PROXY (YELLOW) attached 3

6 IMPORTANT DATES AND TIMES The definitions commencing on page 5 of this Circular apply mutatis mutandis to this Important dates and times section. Record date to determine which shareholders are eligible to receive the Circular Circular posted to shareholders Last day to trade in order to be recorded in the register on the voting record date Record date for voting Form of proxy to be received by 12:00 General Meeting to be held at 12:00 Results of the General Meeting to be released on SENS 2013 Friday, 8 November Thursday, 14 November Friday, 22 November Friday, 29 November Wednesday, 4 December Friday, 6 December Friday, 6 December Notes: 1. All times indicated in this circular are South African times. 2. These dates and times are subject to amendment. Any such amendment will be released on SENS. 3. This circular is available in English only. Copies may be obtained from the registered offices of Octodec and Nedbank Capital at the address set out in the Corporate information and advisors section of this circular from Thursday, 14 November 2013 until the General Meeting, and on the Company website from Thursday, 14 November

7 DEFINITIONS In this circular and the annexures and form attached hereto, unless otherwise stated or clearly indicated by the context, the words in the first column have the meanings stated opposite them in the second column, words in the singular include the plural and vice versa, words importing one gender include the other genders and references to a natural person include references to a juristic person and vice versa: board or directors the board of directors of Octodec, comprising, as at the date of this circular, the directors reflected in paragraph 12 of this circular; cents South African cents, the official currency of South Africa; certificated Octodec linked unit(s) certificated Octodec linked unitholder(s) Circular City Property Common Monetary Area Companies Act Companies Regulations CSDP Deloitte & Touche or independent reporting accountants dematerialisation dematerialised Octodec linked unit(s) Octodec linked unit(s), represented by a linked unit certificate(s) or other physical document(s) of title, which has not been surrendered for dematerialisation in terms of the requirements of Strate; Octodec linked unitholder(s) holding certificated Octodec linked units; this bound circular, dated Thursday, 14 November 2013 including all annexures and attachments hereto; City Property Administration (Proprietary) Limited (Registration number 1968/010808/07), a private company registered and incorporated in South Africa, wholly owned by the Wapnick Family, as well as being the company secretary, property and asset management company for Octodec; South Africa, the Republic of Namibia and the Kingdoms of Lesotho and Swaziland; the Companies Act, 2008 (No 71 of 2008), as amended; the Companies Regulations, 2011 in terms of the Companies Act; a Central Securities Depository Participant, appointed by individual Octodec linked unitholder(s) for the purpose of, and in regard to, dematerialisation in terms of the Financial Markets Act; Deloitte & Touche (Practice number E), the reporting accountants and auditors to Octodec; the process by which Octodec linked unit(s) held by certificated Octodec linked unitholder(s) are converted or held in electronic form as dematerialised Octodec linked unit(s) and recorded in the sub-register; Octodec linked unit(s) which have been dematerialised through a CSDP or broker and are held on the sub-register; dematerialised Octodec linked unitholder(s) those Octodec linked unitholder(s) that have dematerialised their Octodec linked unit(s) through a CSDP; document(s) of title valid linked unit certificate(s), and/or certified transfer deed(s), and/or balance receipt(s), or any other document(s) of title to Octodec linked units; Exchange Control Regulations the Exchange Control Regulations, 1961, as amended, promulgated in terms of section 9 of the Currency Exchanges Act, 1933 (Act 9 of 1933), as amended; Financial Markets Act the Financial Markets Act, 2012 (No 19 of 2012); General Meeting the general meeting of Octodec linked unitholders to be held at the registered office, commencing at 12:00 on Friday, 6 December 2013 to consider and, if deemed appropriate, to approve the Resolutions as more fully set out in the notice of general meeting attached to the Circular; group Octodec, its subsidiaries and its associates; 5

8 IPS IPS Investments (Proprietary) Limited (Registration number 2004/014568/07), a private company registered and incorporated in South Africa, with Premium and Octodec as 40% shareholders each and City Property as a 20% shareholder; JSE the stock exchange operated by the JSE Limited (Registration number 2005/022939/06), a public company registered and incorporated in South Africa, licensed as an exchange under the Financial Markets Act; King III King Report on Governance for South Africa 2009 and the King Code of Governance Principles; last practicable date the last practicable date prior to the finalisation of this circular, being Thursday, 7 November 2013; legal advisor or TWB Tugendhaft Wapnick Banchetti and Partners attorneys, the legal advisors to Octodec; linked unit certificates linked unit certificates or other documents of title; linked unitholder commitments the written irrevocable commitments provided by certain linked unitholders in terms of which those linked unitholders have undertaken, subject to certain conditions, to vote in favour of the Resolutions; Listings Requirements the Listings Requirements of the JSE, as amended from time to time; Merger the possible merger of Octodec and Premium; NAV net asset value; Nedbank Capital Nedbank Capital, a division of Nedbank Limited (Registration number 1951/000009/06), a public company incorporated and registered in South Africa; the investment bank, corporate advisor and sponsor to Octodec; own-name dematerialised linked unitholders those Octodec linked unitholder(s) that have dematerialised their Octodec linked unit(s) through a CSDP and have instructed the CSDP to hold their linked unit(s) in their own name on the sub-register; Octodec or the company Octodec Investments Limited (Registration number 1956/002868/06), a public company registered and incorporated in South Africa, all the linked units of which are listed on the JSE; Octodec debentures unsecured, variable rate debentures issued by Octodec with a nominal value of 209 cents each; Octodec linked unit(s) or linked unit(s) Octodec shares irrevocably linked to Octodec debentures in the ratio of one Octodec share to one Octodec debenture, trading as linked units on the JSE; Octodec linked unitholder(s) or holders of Octodec linked units; linked unitholder(s) Octodec shares Octodec shares having a par value of 1 cent each in the issued share capital of Octodec; Ordinary Resolution the ordinary resolution to be passed at the General Meeting by at least a 75% majority of linked unitholders entitled to vote to authorise and approve the issue of linked units with an aggregate price of R , issued at a price of R19,25 per linked unit, to City Property in terms of sections 65(8) of the Companies Act and Section 5(51)(g) the Listings Requirements; Premium Premium Properties Limited (Registration number 1994/003601/06), a public company registered and incorporated in South Africa, all the linked units of which are listed on the JSE; prime overdraft rate the publicly quoted basic interest rate per annum ruling from time to time at which Nedbank lends on overdraft to its best grade customers on an unsecured basis, compounded monthly in arrear; Rand or R South African Rand, the official currency of South Africa; 6

9 register Registered Office Registrar or Registrar of Companies REIT Repurchase Agreement Resolutions SENS Special Resolution Specific Issue the collective register of certificated Octodec linked unitholders and the sub-register maintained by the relevant CSDPs in terms of sections 91A and 105, respectively, of the Companies Act; the registered office of Octodec being CPA House, 101 du Toit Street, Pretoria, 0002; the Registrar of Companies in South Africa; the Taxation Laws Amendment Act (No. 22 of 2012) containing section 25BB Real Estate Investment Trusts tax dispensation; the agreement entered into by Octodec, Premium, City Property and IPS dated 28 October 2013 regarding the Specific Repurchase of City Property s shareholding in IPS; the ordinary resolution and special resolution to be approved by the requisite majority of unitholders at the General Meeting, for the Specific Issue; the Stock Exchange News Service of the JSE; the special resolution to be passed at the General Meeting to authorise and approve the issue of linked units with an aggregate price of R , issued at a price of R19,25 per linked unit, comprising approximately 8,4% of Octodec s issued ordinary linked units in terms of section 41(1)b of the Companies Act; the proposed Specific Issue of Octodec linked units at R19,25 per linked unit, for a total cash consideration of R to City Property; Specific Repurchase the specific repurchase by IPS of City Property s shares in IPS for a cash consideration of R and the repayment of City Property s shareholder loan in IPS of R ; Strate the share settlement and clearing system utilised by the JSE for all share transactions concluded on the JSE, managed by Strate Limited (Registration number 1998/022242/06), a public company registered and incorporated under the laws of South Africa; South Africa the Republic of South Africa; sub-register the sub-register(s) of dematerialised Octodec linked unitholders maintained by Octodec in terms of the Companies Act and administered by the CSDP in electronic form; Subscription Agreement the agreement entered into by Octodec and City Property, dated 28 October 2013 regarding the issue of Octodec shares for cash to City Property; TNAV tangible net asset value; transfer secretaries or Computershare Computershare Investor Services (Proprietary) Limited (Registration number 2004/003647/07), a private company registered and incorporated in South Africa and the transfer secretaries to Octodec; transaction collectively, the Specific Repurchase and Specific Issue; VAT Value-added Tax, as provided for and defined in the VAT Act; VAT Act the Value-added-Tax Act, 1991 (No 89 of 1991) VWAP volume weighted average price; and Wapnick Family collectively, Jeffrey Wapnick, Sharon Wapnick and persons related or interrelated to them as defined by section 2 of the Companies Act. 7

10 (Incorporated in the Republic of South Africa) (Registration number 1956/002868/06) Share code: OCT ISIN: ZAE Directors S Wapnick (Non-executive chairman)* DP Cohen (Lead independent director) # JP Wapnick (Managing director)^ AK Stein (Financial director)^ GH Kemp # MZ Pollack* PJ Strydom # * Non-executive director # Independent non-executive director ^ Executive director CIRCULAR TO OCTODEC LINKED UNITHOLDERS 1. INTRODUCTION Octodec and Premium each hold 40% of the issued share capital of IPS whilst City Property holds the remaining 20%. Octodec, Premium, IPS and City Property have entered into the Repurchase Agreement, relating to the Specific Repurchase by IPS of City Property s shares in IPS for a cash consideration of R and the repayment of City Property s shareholder loan in IPS of R Following the Specific Repurchase, Octodec and Premium s shareholdings in IPS will increase to 50% each. Octodec currently accounts for IPS as a 40% held associate and will continue to account for IPS, after the Specific Issue, as a 50% held associate. Pursuant to the Specific Repurchase, Octodec has entered into the Subscription Agreement with City Property in terms of which Octodec will issue linked units to City Property in exchange for a cash consideration of R subject to the fulfilment of the conditions precedent in paragraph 3.2. The linked units will be issued at a price of R19,25 per linked unit, which represents the 30-day VWAP of Octodec linked units for the 30 trading days ended 25 October 2013 (the issue price ). The issue price represents a 15,6% discount to Octodec s NAV adjusted for deferred tax at the IPS associate level as at 31 August 2013 ( the adjusted NAV ). The discount applied to the adjusted NAV in respect of the Specific Issue is equivalent to the discount applied to the adjusted NAV of IPS in respect of the Specific Repurchase. The adjusted NAV has been used to determine the discount applicable on both the Specific Repurchase and the Specific Issue so as to provide Octodec, Premium and City Property with the benefits that will accrue to IPS shareholders in the event IPS becomes a REIT, pursuant to the Merger. The linked units to be issued will be of the same class as the linked units already in issue and will be issued to City Property which is a non-public linked unitholder as defined by the Listings Requirements. Details of the Repurchase Agreement and Subscription Agreement were published in an announcement released on SENS on Wednesday, 30 October

11 Octodec has received letters of support from linked unitholders in favour of the Specific Issue, representing 36,02% of Octodec s issued linked unit capital entitled to vote at the General Meeting. Details of the linked unitholders who have provided letters of support are presented in Annexure 5 to this circular. 2. PURPOSE OF THIS CIRCULAR The purpose of this circular is to provide Octodec linked unitholders with relevant information relating to the Specific Issue, in order for Octodec linked unitholders to make an informed decision as to whether or not to vote in favour of the Resolutions to be proposed at the General Meeting. 3. DETAILS RELATING TO THE SPECIFIC ISSUE OF UNITS FOR CASH 3.1 Rationale Pursuant to the introduction of the REIT legislation, Octodec and Premium are considering a possible merger. In anticipation of the Merger, and in order to simplify their existing corporate structures, City Property has agreed to dispose of its shareholding in IPS. The Wapnick Family, being the shareholders of City Property, would like to maintain their investment indirectly in IPS and as such, have agreed to the Specific Repurchase and Specific Issue subject to the Subscription Agreement. The Specific Repurchase will be funded by way of an interest-free loan being granted to IPS by its shareholders, Octodec and Premium, in equal proportions. The capital raised by Octodec as a result of the Specific Issue, will be utilised partially to repay debt in the short term as well as to fund future acquisitions and redevelopment opportunities. 3.2 Conditions precedent to the Specific Issue In terms of the Subscription Agreement, the Specific Issue, is subject to the fulfilment of the following conditions precedent, inter alia: the approval of the Specific Issue by the linked unitholders of Octodec in General Meeting, in terms of an Ordinary Resolution being passed by at least a 75% majority as required by section 5.51(g) of the Listings Requirements and section 65(8) of the Companies Act; the approval of the Specific Issue by special resolution of the linked unitholders of the Octodec in the General Meeting, by at least a 75% majority, in terms of section 41(1)(b) of the Companies Act; and the conclusion of the Share Repurchase Agreement and the fulfilment of all the conditions to which that agreement may be subject, apart from any which may refer to the conclusion of the Subscription Agreement. The Wapnick Family and their associates are precluded from voting on the above resolutions. 3.3 Board s opinion on Specific Repurchase and Specific Issue The board is of the opinion that both the Specific Repurchase and the Specific Issue are fair insofar as the linked unitholders of Octodec are concerned as the discount applied to the Specific Repurchase has been applied to the Specific Issue. 4. DETAILS RELATING TO OCTODEC AND ITS SHAREHOLDERS 4.1 Information on Octodec Octodec, which has been granted REIT status by the JSE, is listed in the Real Estate Holdings sector on the JSE with a market capitalisation of R2,3 billion as at the last practicable date. Octodec was incorporated on 8 November 1956 in Pretoria, South Africa. The total gross value of Octodec s property investment portfolio as at 31 August 2013 was R4 billion. The portfolio comprises office, retail, industrial and residential properties with a gross lettable area of m 2 which included 111 properties at 31 August 2013, a 14,2% investment in Premium and a 40% investment in IPS. 9

12 The property portfolio consists mainly of multi-tenanted buildings, as well as properties with turnaround potential, situated predominantly in Pretoria and Johannesburg in areas which are regarded as areas of high growth. Octodec has made solid progress in growing its property portfolio, notably in the central business districts of Johannesburg and Pretoria, and delivering on its strategy of upgrading and redeveloping its properties and thereby improving the quality of its portfolio. The company intends to continue to expand its portfolio and will selectively invest in properties that provide long-term sustainability and profitability. It will continue with refurbishments, redevelopments and upgrades. Octodec s property and asset management functions have been contracted to City Property, one of South Africa s leading property asset management companies. The company s proactive approach to managing assets to enhance value creation has been a key feature over the last few years. This approach will continue to benefit the future performance of the company. 4.2 Prospects The domestic economy remains relatively weak in many sectors. It is anticipated that conditions will remain challenging for at least 2013 and early Octodec intends to continue with its disciplined approach to growth, focusing on maximising the quality of its portfolio through selective redevelopments and upgrades, combined with a proactive letting strategy. Octodec will continue to concentrate on fundamentals in the year ahead by minimising vacancies, maintaining quality tenants, ensuring the integrity of its income stream, and continuing to improve the quality of its properties in line with its stated strategy. 5. LETTERS OF SUPPORT Linked unitholders holding or controlling, directly and indirectly, of Octodec linked units, comprising approximately 36,02% of the Octodec linked units in issue and able to vote at the General Meeting, as at the last practicable date, have provided letters of support to vote in favour of the Specific Issue. Details of the linked unitholders who have provided such letters of support are presented in Annexure 5 to the circular. 6. MAJOR LINKED UNITHOLDERS As at the last practicable date, insofar as is known to Octodec, one linked unitholder who, other than directors, is beneficially interested, directly or indirectly, in 5% or more of the issued linked unit capital of Octodec, is detailed below: Before Specific Issue Shares held Beneficial unitholder Direct interest Indirect interest Total interest Shareholding (%) 1 STANLIB ,65 1 Based on Octodec issued linked units After Specific Issue Shares held Beneficial unitholder Direct interest Indirect interest Total interest Shareholding (%) 1 STANLIB ,43 1 Based on Octodec issued linked units 7. MATERIAL CHANGES There have been no material changes in Octodec and its group s financial or trading positions since the publishing of the reviewed annual financial results released on SENS on Wednesday, 23 October

13 8. MATERIAL CONTRACTS Save for the agreements set out in this circular, Octodec has entered into no material arrangements, undertakings or agreements, other than in the ordinary course of business within the last two years, as at the last practicable date. Octodec has not entered into a material arrangement containing an obligation or settlement that is material to the Company or its subsidiaries, other than in the ordinary course of business, as at the last practicable date. 9. PRO FORMA FINANCIAL INFORMATION RELATING TO THE SPECIFIC ISSUE Based on Octodec s published reviewed results for the year ended 31 August 2013, the pro forma financial effects of the Specific Issue are set out below. These financial effects are prepared for illustrative purposes only, and, because of their nature, may not provide a fair presentation of Octodec s financial position, changes in equity, results of operations, cash flow or the effect and impact of the Specific Issue. The financial effects are the responsibility of the directors. Details Before transaction: reviewed 31 August 2013 Effects of: Loan advanced to IPS Effects of: Additional IPS income Effects of: Issue of new linked units After transaction: 31 August 2013 Earnings per linked unit (cents) 511,14 (6,82) 11,12 17,76 493,13 Diluted earnings per linked unit (cents) 511,14 (6,82) 11,12 17,76 493,13 Headline earnings per linked unit (cents) 163,68 (6,82) 6,08 12,49 162,77 Diluted headline earnings per linked unit (cents) 163,68 (6,82) 6,08 12,49 162,77 NAV (cents) 2 233,32 (0,92) 148, ,58 TNAV (cents) 2 233,32 (0,92) 148, ,58 Weighted average number of linked units in issue Number of linked units in issue Details of the pro forma financial effects as well as the related notes and assumptions for the Specific Issue on Octodec s reviewed results for the year ended 31 August 2013, are contained in Annexure 1 to this circular. 10. LINKED UNIT CAPITAL As at the last practicable date, the authorised and issued share capital and debentures of Octodec were as follows: Before Specific Issue Current R 000 Authorised share capital Ordinary shares: shares with a par value of 1 cent each Issued share capital Ordinary shares: shares with a par value of 1 cent each Share premium Debentures and premium Issued: unsecured variable debentures of 209 cents each As at the last practicable date, no Octodec linked units were held in treasury. Octodec has not issued any linked units in the previous three years. 11

14 After Specific Issue Current R 000 Authorised share capital Ordinary shares: shares with a par value of 1 cent each Issued share capital Ordinary shares: shares with a par value of 1 cent each Share premium Debentures and premium Issued: unsecured variable debentures of 209 cents each TRADING HISTORY OF OCTODEC LINKED UNITS The linked unit price history of Octodec linked units on the JSE is set out in Annexure 3 to this circular. 12. DIRECTORS AND DIRECTORS INTERESTS 12.1 Directors details The names, qualifications, ages, nationality, business addresses and functions of the directors of Octodec are set out below. All directors are South African. Name and age Nationality Business address Function S Wapnick (50) BA LLB (cum laude) DP Cohen (62) AEP (UNISA) JP Wapnick (53) BCom AK Stein (46) CA(SA) South African South African South African South African GH Kemp (58) South African MSc Mining Engineering; DPLR (UNISA); and MDP (UNISA) MZ Pollack (66) CA(SA) PJ Strydom (65) CA(SA) Tugendhaft Wapnick Banchetti and Partners 20th Floor Sandton Office Towers 5th Street Sandton 2196 Ground Floor 89 Bute Lane FedGroup Towers Sandton 2196 CPA House 101 du Toit Street Pretoria 0002 CPA House 101 du Toit Street Pretoria Side Street Hermanus 7200 South African Suite 101 Ist Floor 192 Oxford Road Illovo 2196 South African 237 Acacia Road Northcliff Extension Non-executive chairman Lead independent director Managing director Financial director Independent non-executive director Non-executive director Independent non-executive director 12

15 12.2 Directors abridged curricula vitae S Wapnick Sharon Wapnick is an attorney and senior partner of Tugendhaft Wapnick Banchetti and Partners. Sharon has extensive experience in the property industry as well as in property legal matters. She has served as a nonexecutive director of Octodec and Premium since 1994 and was appointed chairman of both companies in Sharon holds other directorships of unlisted companies including IPS. Sharon chairs the nominations committee and is a member of the risk and social and ethics committee and the remuneration committee. DP Cohen Derek Pedoe Cohen is the lead independent director of Octodec and also serves on boards of other companies, including Premium and IPS. He has many years of experience in banking and finance. He provides consultancy services with a specific focus on mergers, acquisitions and corporate finance-related issues. He is a member of the audit, risk, social and ethics, remuneration and nomination committees. JP Wapnick Jeffrey Percy Wapnick is managing director of Octodec and is responsible for the effective management of the group with a strong emphasis on the upgrades and development of properties. He is also the managing director of Premium and holds various other directorships of unlisted companies, including IPS and City Property where he is the managing director. He is a member of the risk committee. AK Stein Anthony Kevin Stein is the financial director of Octodec. He is also the financial director of Premium. Anthony is responsible for the overall financial management of City Property and is also the Treasurer of the SA REIT Association. He is a member of the risk committee. GH Kemp Gerard Hendrik Kemp is currently the CEO of Kaouat Iron Limited, a division of Transafrika Resources. He is the former CEO of Pamodzi Resources Fund and prior to that Director of Business Development (Resources) at Rand Merchant Bank (RMB), Head of Investment Banking and Head of Equities Research at BoE Merchant Bank and BoE Securities, respectively. Gerard is also an independent non-executive director of Village Main Reef Limited, Keaton Energy Holdings Limited, Premium and IPS. He is a member of the audit, risk, social and ethics, remuneration and nomination committees. MZ Pollack Myron Zadwell Pollack is a non-executive director of Octodec. Myron has considerable experience in the property industry. He also serves on the boards of Premium and IPS. He is a member of the audit, risk, social and ethics, remunerations and nomination committees. PJ Strydom Petrus Jacobus Strydom, has 43 years of experience in external auditing, special investigations and all disciplines of risk management, and serves on other boards of companies including Premium and IPS. He is the chairman of the audit, risk, social and ethics and remuneration committees. He is a member of the nomination committee Directors fees There will be no variation to the directors remuneration pursuant to the Specific Issue Directors interests in Octodec linked units As at 31 August 2013, the aggregate interests of directors and their associates in Octodec linked units were as follows: 13

16 Beneficial Beneficial Non-beneficial % Direct Indirect Indirect Total 1 Total MJ Holmes ,1 MZ Pollack ,9 AK Stein ,3 JP Wapnick ,3 S Wapnick ,3 1 Based on linked units in issue 2 Retired 4 September ,9 There have been no changes in directors shareholdings between 31 August 2013 and the last practicable date. Pursuant to the Specific Issue, the aggregate interests of directors, their associates and directors who have resigned in the last 18 months, in Octodec linked units will be as follows: Beneficial Beneficial Non-beneficial % Direct Indirect Indirect Total 1 Total MJ Holmes MZ Pollack AK Stein JP Wapnick S Wapnick Based on linked units in issue 2 Retired 4 September Directors interests in transactions Except as set out below, the directors have no, direct or indirect, beneficial interests in the transactions effected by the company during the current, preceding, or during any prior financial year which are outstanding or unperformed : Octodec and City Property entered into a property and asset management agreement effective from 1 July 2011 for a period of seven years; the directors, JP Wapnick and S Wapnick, are material shareholders of City Property. Pursuant to the Specific Issue, both JP Wapnick and S Wapnick s interests in Octodec will increase as set out above. 13. GOVERNING LAW This circular will be governed by and construed in accordance with the laws of South Africa and shall be subject to the exclusive jurisdiction of the South African Courts. 14. LITIGATION STATEMENT To the best of their knowledge and belief, the directors, whose names appear on paragraph 12 of this circular, are not aware of any legal or arbitration proceedings, including any such proceedings that are pending or threatened, that may have, or have in the previous 12 months, had a material effect on the group s financial position. 15. DIRECTORS RESPONSIBILITY STATEMENT The directors of Octodec, whose names are set out in paragraph 12 of this circular, collectively and individually, accept full responsibility for the accuracy of the information given and certify that, to the best of their knowledge and belief, there are no facts that have been omitted which would make any statement false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that the Circular contains all information required by law and the Listings Requirements. 14

17 16. GENERAL MEETING 16.1 Notice of General Meeting A notice convening a General Meeting of Octodec linked unitholders is attached to this circular. The General Meeting will be held at the registered office at 12:00 on Friday, 6 December 2013 to consider and, if deemed fit, to pass the Special Resolution and Ordinary Resolution. Before any Octodec linked unitholder may attend or participate in the General Meeting, the linked unitholder must present reasonably satisfactory identification and Octodec must be reasonably satisfied that the right of the linked unitholder to participated and vote, either as a linked unitholder or as a proxy for a linked unitholder has been reasonably verified. Electronic participation Should any linked unitholder of the company wish to participate in the General Meeting by way of electronic participation, that linked unitholder shall be obliged to make application in writing (including details as to how the linked unitholder or its representative can be contacted) to so participate, to the transfer secretaries, Computershare, Ground Floor, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107) at the applicable address set out below, at least five business days prior to the General Meeting. Linked unitholders who wish to participate in the General Meeting by dialling in must note that they will not be able to vote electronically. Should such linked unitholders wish to have their votes counted at the General Meeting, they are welcome to cast their votes via representation at the General Meeting either by proxy or by letter of representation, as provided for in this notice of General Meeting. The costs of accessing any means of electronic participation provided by the company will be borne by the linked unitholder so accessing the electronic participation. The company cannot be held liable for any loss, damage, penalty or claim arising in any way from the use of the telecommunication facility whether or not as a result of any act or omission on the part of the company or anyone else. If you have dematerialised Octodec linked units Own-name registration You are entitled to attend, or be represented by proxy, at the General Meeting. If you are unable to attend the General Meeting but wish to be presented thereat, you must complete and return the attached form of proxy (yellow), in accordance with the instructions contained therein, to be received by the transfer secretaries, Computershare, Ground Floor, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107) by no later than 12:00 Wednesday, 4 December Other than own-name registration If your CSDP or broker does not contact you, you are advised to contact your CSDP or broker and provide them with your voting instructions. If your CSDP or broker does not obtain instructions from you, they will be obliged to act in terms of your mandate furnished to them. You are entitled to attend, or to be represented by proxy, at the General Meeting. You must not, however complete the attached form of proxy (yellow). You must advise your CSDP or broker timeously if you wish to attend, or be represented at the General Meeting. If you do wish to attend or be represented at the General Meeting, your CSDP or broker will be required to issue the necessary letter of representation to you to enable you to attend or be represented thereat. If you hold certificated Octodec linked units You are entitled to attend, or be represented by proxy, at the General Meeting. If you are unable to attend the General Meeting, but wish to be represented thereat, you must complete and return the attached form of proxy (yellow), in accordance with the instructions contained therein, to be received by transfer secretaries, Computershare, Ground Floor, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107) by no later than 12:00 Wednesday, 4 December Shareholder approval The authorisation and approval of Octodec linked unit holders present or represented by proxy at the General Meeting and entitled to vote shall be required as follows: 15

18 the issue of linked units in terms of the Specific Issue is subject to the approval by way of the ordinary resolution by at least 75% of the voting rights of the Octodec linked unitholders exercised on the resolutions in terms of section 5(51)(g) of the Listings Requirements and section 65(8) of the Companies Act; and the issue of linked units in terms of the Specific Issue is subject to the approval by way of the Special Resolution by at least 75% of the voting rights of the Octodec linked unitholders exercised on the Resolutions in terms of section 41(1)(b) of the Companies Act Voting rights All issued Octodec linked units rank pari passu with each other. Every Octodec linked unit holder present or represented by proxy shall have one vote on a show of hands, and on a poll, one vote for every Octodec linked unit held. The Wapnick Family and their associates will not be taken into account in determining the results of the voting at the General Meeting in relation to the ordinary resolution and the special resolution Quorum The Wapnick Family and their associates unitholding in Octodec will be taken into account in determining the quorum at the General Meeting. 17. CORPORATE GOVERNANCE The board recognises that good corporate governance is vital to the sustainable growth of Octodec and is committed to the highest level of corporate governance, integrity and ethics. The board supports and substantially complies with the principles of effective corporate governance as set out in King III. The board acknowledges its statutory, regulatory and ethical responsibilities as set out in the Companies Act and the Listings Requirements. Octodec s corporate governance structures and procedures as well as its Code of Conduct and Ethics are detailed in Annexure 4 to this circular. 18. EXCHANGE CONTROL REGULATIONS 18.1 Certificated linked unitholders In the case of certificated linked unitholders whose registered addresses are outside the Common Monetary Area or where the linked unit certificates are restrictively endorsed in terms of the South African Exchange Control Regulations, the following will apply: Non-residents who are emigrants from the Common Monetary Area Linked unit certificates will be restrictively endorsed non-resident in terms of the Exchange Control Regulations and will be sent to the linked unitholders authorised dealer in foreign exchange in South Africa controlling his blocked assets All other non-residents Linked unit certificates will be restrictively endorsed non-resident in terms of the Exchange Control Regulations Dematerialised linked unitholders With regard to dematerialised linked unitholders whose registered addresses are outside the Common Monetary Area, their linked units will be annotated in the Company s relevant sub-register as non-resident and statements will be restrictively endorsed in terms of those regulations. 16

19 19. EXPENSES RELATING TO THE SPECIFIC ISSUE The expenses relating to the Specific Issue are estimated at approximately R1,1 million and comprise: Description R (including VAT) Legal fees payable to TWB Investment bank and sponsor fees payable to Nedbank Capital JSE Limited documentation fee JSE Limited linked unit listing fees Transfer secretaries fees payable to Computershare Independent reporting accountants fees payable to Deloitte & Touche Printing, publication, distribution and advertising expenses Total No preliminary expenses have been incurred in the prior three years. 20. CONSENTS Nedbank Capital, Deloitte & Touche, TWB and Computershare have provided their written consents to act in the capacity stated, and to their names being used in this circular and none of them have withdrawn their consents prior to the posting of this circular. 21. DOCUMENTS AVAILABLE FOR INSPECTION Copies of the following documents will be available for inspection by Octodec linked unitholders at the registered address of both Octodec and Nedbank Capital from Thursday, 14 November 2013 up to and including the day of the General Meeting, during normal business hours: the memorandum of incorporation of Octodec; the memoranda of incorporation of Octodec s subsidiaries; the management agreement with City Property; the Repurchase Agreement; the Subscription Agreement; a copy of each of the irrevocable linked unitholder commitments; the audited annual financial statements of Octodec for the two years ended 31 August 2012 and 2011; the reviewed annual financial statements of Octodec for the year ended 31 August 2013; the signed independent reporting accountants report on the pro forma financial effects; the written consents of Nedbank, Deloitte & Touche, TWB and Computershare to the inclusion of their names in this circular in the context and form in which they appear; Octodec s debenture trust deed including all addenda and supplemental deeds thereto; and a signed copy of this Circular. By order of the board AK Stein Financial director 14 November

20 ANNEXURE 1: PRO FORMA FINANCIAL INFORMATION Based on Octodec s published reviewed annual results for the year ended 31 August 2013, the effects on the pro forma consolidated statement of financial position and statement of comprehensive income of the Specific Repurchase and the Specific Issue on Octodec s reported earnings per linked unit, headline earnings per linked unit, NAV and TNAV are set out below. The pro forma consolidated statement of financial position and statement of comprehensive income of Octodec have been presented for illustrative purposes only, and because of their natures, may not fairly present Octodec s financial position, changes in equity, results of operations or cash flows after the Specific Issue of linked units for cash. It has been assumed for purposes of the pro forma consolidated statement of financial position that the Specific Repurchase and Specific Issue occurred with effect from 31 August 2013 and for the pro forma statement of comprehensive income that the Specific Repurchase and Specific Issue occurred on 1 September The directors of Octodec are responsible for the preparation of the pro forma consolidated statement of financial position and statement of comprehensive income. The pro forma financial statements are prepared on the same basis as the annual reviewed financial statements using the accounting policies applied therein. PRO FORMA STATEMENT OF FINANCIAL POSITION OF OCTODEC AFTER THE SPECIFIC ISSUE Before R 000 transaction: reviewed 31 August Effect of: Loan advance to IPS Effect of: Additional IPS income Effect of: Issue of new linked units After transaction: 31 August 2013 ASSETS Non-current assets (992) Investment properties Operating lease assets Plant and equipment Lease costs capitalised Listed investment Investment in associate (992) Derivative financial instruments Current assets Total assets (992) EQUITY AND LIABILITIES Share capital and reserves (992) Share capital and premium Non-distributable reserves (992) Distributable reserves Non-current liabilities (864) Debentures capital and premium Interest-bearing borrowings ( ) Deferred taxation Current liabilities Non-interest-bearing borrowings Interest-bearing borrowings Linked unitholders for distribution Total equity and liabilities (992)

21 PRO FORMA STATEMENT OF FINANCIAL POSITION OF OCTODEC AFTER THE SPECIFIC ISSUE continued R 000 Before transaction: reviewed 31 August Effect of: Loan advance to IPS Effect of: Additional IPS income Effect of: Issue of new linked units After transaction: 31 August 2013 Loan to property investment value ratio (%) 35,94 33,03 NAV per linked units (cents) 2 233,32 (0,92) 148, ,58 TNAV per linked units (cents) 2 233,32 (0,92) 148, ,58 Weighted average number of linked units in issue Number of linked units in issue Notes and assumptions: 1. The Before transaction: reviewed 31 August 2013 column has been extracted without adjustment from the published reviewed provisional results of Octodec at 31 August Investment in associate and interest-bearing borrowings have been adjusted to include the advance of an interestfree loan to IPS to fund half of the City Property share buyback consideration, at a cost of borrowing to Octodec of 8,4% per annum. The interest rate of 8,4% per annum is based on the current weighted average cost of Octodec s borrowings. 3. Ordinary share capital and premium have been adjusted to include the costs relating to the new issue of linked units, amounting to R Debentures and premium have been adjusted to include the share of costs relating to the new issue of debentures, amounting to R Interest-bearing borrowings have been adjusted to include the cash received of R as a result of the Specific Issue of linked units, after provision for costs amounting to R , as the proceeds will initially be used to repay debt. 6. Investment in associate and non-distributable reserves ha ve been adjusted to equity account the movement in the reserves of IPS as a result of Octodec having a 50% interest in IPS. 7. There are no other post-balance sheet events which require adjustments to the pro forma financial effects. 8. The pro forma statement of financial position is prepared on the basis that the transaction occurred on 31 August