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A BRIEF SUMMARY OF:

HIGHVELD SYNDICATIONS 15 - 22 LIMITED

(as PREVIOUSLY Promoted by PICKVEST/PIC)

THE BUSINESS RESCUE PLAN

OR

LIQUIDATION


IT IS BROUGHT TO THE READERS ATTENTION THAT THIS DOCUMENT IS A SUMMARY OF THE PROPOSED BUSINESS RESCUE PLAN AND FINALY THE WRITERS OPINION THEREOF. THE READER MUST NOT INTERPRET THIS DOCUMENT AS FINANCIAL ADVICE!!


THE READER MUST NOT BASE HIS DECISION WHEN VOTING, ON THE CONTENT OF THIS DOCUMENT ONLY. INVESTORS ARE SPECIFICALLY URGED TO READ THE BUSINESS RESCUE DOCUMENT THAT WAS SUBMITTED TO DTI.


THE PURPOSE OF THIS DOCUMENT IS MERELY TO PROVIDE THE INVESTOR WITH A BRIEF SUMMARY OF THE BUSINESS RESCUE PLAN VERSUS THE IMPACT OF LITIGATION THAT WILL EVENTUALY LEAD TO LIQUIDATION.


Introduction:


Investors invested their hard earned money over the past thirteen years in the Highveld Syndications know as HFS 1 to 22. Most of the investors are elderly retired people who do not have a second opportunity to earn a descent income to cover their monthly expenses.


HFS 1 to 14 was sold to Zephan (Zelpy) leaving investors with a reasonable profit and fair return. Currently HFS 15 to 18 have ownership of their properties while HFS 19 to 22 does not, because of a dispute of R883 million alleged short payment by Bosman and Visser (the company that sold the properties to the Highveld Syndications) to Zephan.   


Investors and advisors were unaware of the fact that the transfer of the properties of HFS 19 and 22 did not proceed as planned because of the dispute as mentioned above.


Since April 2011 investors received lower interest payments despite the fact that there are head lease agreements in place on HFS 18 to 21. This raised questions by investors and advisors decided to establish a forum in the Eastern Cape, Western Cape, Bloemfontein and Gauteng to investigate this matter.


The Highveld Syndication Companies were placed under business rescue by the Directors in September because of an application for liquidation against HFS 19. Hans Klopper was appointed as the Business Rescue Practitioner. He appointed a creditors committee to assist him with the investigations of the current status of the HFS Companies, their financial positions and the contracts between the HFS Companies, Bosman & Visser and Zephan.


The investigations concluded that the Investors and Advisors must accept the Companies are in severe financial difficulty. There is no liquidity and the only options currently available are:


1.) Restructure the property portfolios of HFS 15 to 22 in a new Company known  as Orthotouch, or


2.) Litigation against the parties involved, which will eventually lead to liquidation to recover investor’s capital.



The Business Rescue Plan (Orthotouch):


i) All the properties will be transferred into the company know as Orthotouch.

ii) The term of the portfolio will be for another five years.

iii) Nic Georgiou will transfer additional properties to the value R1,547,615,103.00 to Orthotouch. (R500 million will be unencumbered).

iv) This will increase the current market value of the total portfolio from R2,598,013,798.00 to R4,145,628,901.00.

v) Repayment of the bonds registered over the properties will be the responsibility of Nic Georgiou and his related companies.

vi) If properties are sold to improve the portfolio, the funds may only be utilized within Orthotouch.

vii) The portfolio will pay interest to investors at a rate of 6% p.a. escalating with 0.25% p.a. over the next five years.

viii) Investors will be allowed to appoint two Directors on the board of Orthotouch.

ix) The HFS Companies will take cession of the shares in Orthotouch as security for the total loan of R4,603,150,000.00 to Orthotouch.

x) Nic Georgiou Trust and Zephan will jointly and severely bind themselves as sureties and co-principle debtors with Orthotouch.

xi) All claims by the HFS Companies are ceded to Orthotouch. The cession shall however lapse if Orthotouch breaches any obligation of Orthotouch in terms of the agreement, and not rectify such breach within 30 days after being called upon by the Syndication Companies to rectify such breach.

xii) Investors will receive payment of their capital on the fifth anniversary of this agreement.

xiii) The value of Investors investments in HFS 22 will increase to R1 billion.They will receive the option to take monthly income as per point (vii), or 40% capital growth at the end of year five.   



Liquidation:


The current estimate is that if the Companies are liquidated, the process would take approximately two years and Investors will receive the following dividends:


i) HFS 15 a dividend of 37.08 cents in the rand

ii) HFS 16 a dividend of 35.39 cents in the rand

iii) HFS 17 a dividend of 60.01 cents in the rand

iv) HFS 18 a dividend of 60.89 cents in the rand

v) HFS 19 a dividend of 4.01 cents in the rand

vi) HFS 20 a dividend of 3.40 cents in the rand

vii) HFS 21 a dividend of 1.97 cents in the rand

viii) HFS 22 a dividend of 17.61 cents in the rand


However in the event of a successful recovery of 100% of the claims against Bosman & Visser the estimated liquidation scenario would be as follows:


ix) HFS 19 a dividend of 74.50 cents in the rand

x) HFS 20 a dividend of 73.90 cents in the rand

xi) HFS 21 a dividend of 72.77 cents in the rand

xii) HFS 22 a dividend of 88.28 cents in the rand


This scenario will require complete success with all litigation and will take at least 5 to 7 years taking into consideration the time that it takes to be successful with litigation of this nature to the Highest Court of Appeal.


Conclusion:


The choice that every investor will have to consider is: To vote in favor of, or against the Orthotouch transaction.


In favour of:


The current Orthotouch transaction has been improved from the original agreement initiated in March 2011. It is definitely not the first prize for investors, but under the current circumstances the best option available, given the fact that most of the investors are retired and dependent on the income of their capital to pay their monthly expenses.


It will give the investors a second chance to recover their capital at the end of a five years term. We must accept that the only way to create a win, win scenario is to negotiate an agreement that is possible to achieve.


If the parties to this agreement do not deliver on the agreed conditions of Orthotouch, the investors will still have the option to litigate. At this stage the best options seems to be to manage this process over the next five years and at least stand a change to recover losses and repay investors in full.

Against:


Litigation is a costly exercise not even to mention the time it will take to recover investor’s capital. It will mean that investors will no longer receive monthly interest payments and have no guarantee as to the ultimate recovery of their capital.

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