INTEGRATED REPORT // 2015 CONTENTS
ORGANISATIONAL OVERVIEW 4
BOARD OF DIRECTORS 6
CHAIRMAN’S REPORT 8
CHIEF EXECUTIVE’S REPORT 9
SOCIAL AND ETHICS COMMITTEE REPORT 14
SUSTAINABILITY 16
CORPORATE GOVERNANCE REPORT 20
RISK MANAGEMENT 22
REMUNERATION REPORT 24
ANNUAL FINANCIAL STATEMENTS 26
NOTICE OF ANNUAL GENERAL MEETING 68
FORM OF PROXY 75 FUND PROFILE
EQUITES PROPERTY FUND LIMITED is a South African property fund manager and developer focused predominantly on quality industrial assets at the top end of the industrial sector and to a lesser degree office property. The 20 prominent industrial and office properties currently in its portfolio are all in the Western Cape. Major tenants include Simba, Foschini, Execujet, Digistics, Imperial, Puma, UTI (Adidas), Avery Dennison, Courier-IT, Kuehne & Nagel AG, NGK Ceramics, Dole USA and Barloworld. Equites is structured as a Real Estate Investment Trust (REIT) and is internally managed.
INTEGRATED REPORT 2015 // 1 “ THIS REPORT REFLECTS A SOLID BEGINNING FOR A GROUP THAT HAS SET ITS SIGHTS ON MAKING ITS MARK IN THE SOUTH AFRICAN LISTED PROPERTY SPACE.”
LEON CAMPHER CHAIRMAN
18 – 22 MONTREAL, AIRPORT INDUSTRIA, CAPE TOWN (TENANT: COURIER-IT)
2 // INTEGRATED REPORT 2015 INTEGRATED REPORT 2015 // 3 ORGANISATIONAL OVERVIEW
Through the merger of the portfolios of three independent Western Cape-based industrial property developers, Equites Property Fund Limited (“Equites”) successfully listed on the JSE on 18 June 2014.
• Equites owns 17 industrial and 3 office buildings totalling 137,663m2 of gross lettable area • Total portfolio value of R1.4 billion with weighted average escalations of 8.1% • R650 million capital raised through a substantially oversubscribed private placement • Total distributions to shareholders since listing of R69.9 million, exceeding the pre-listing forecast by R3.4 million (5.1%) • The dividend per share of 61,3 cents equals a distribution yield of 8.2% for the 9 months to 28 February 2015, marginally exceeding the pre-listing forecast • A share price growth of 28.5% since listing on 18 June 2014 to the end of the reporting year • A total return to shareholders of more than 36.6% (48.8% on annualised) since listing • Delivery on all forecasted transactions in the pre-listing statement • Post-listing acquisitions totalling R118.8 million were concluded and implemented • R150 million development lease for new The Foschini Group distribution centre in Midrand
SHARE PRICE (CENTS) 18 June 2014 – 28 February 2015
1 300
1 250
1 200
1 150
1 100
1 050
1000
4 // INTEGRATED REPORT 2015 Expiring Monthly 2% 2020 and later Expiring 37% 2016 68.9% 12% Expiring 2017 of gross lettable 10% LEASE EXPIRY PROFILE BY area let to blue REVENUE
Expiring chip tenants. 2018 15%
Vacant, 0.8% Other local Expiring tenants and 2019 sole proprietors, 24% 13,4%
Smaller international and national tenants, 61% 16,9% TENANT PROFILE BY GROSS LETTABLE AREA of lease revenue
Large nationals, expires in 2019 large listed and government, 68,9% and later.
“ Our business is all about consistently delivering on our undertakings and exceeding expectations and we are pleased to confirm that we have achieved all our objectives since listing” EQUITES EXECUTIVE TEAM FROM LEFT TO RIGHT: BRAM GOOSSENS (CFO), ANDREA TAVERNA-TURISAN (CEO), RIAAN GOUS (COO) Andrea Taverna-Turisan (CEO), 12 May 2015
INTEGRATED REPORT 2015 // 5 BOARD OF DIRECTORS
BOARD OF DIRECTORS STANDING: JOHNNY CULLUM, RIAAN GOUS, ANDREA TAVERNA-TURISAN, BRAM GOOSSENS, GIANCARLO LANFRANCHI AND KEVIN DREYER SEATED: NAZEEM KHAN, LEON CAMPHER AND RUTH BENJAMIN-SWALES
Independent non-executive directors
Leon Campher (67) Nazeem Khan (59) Ruth Benjamin-Swales (52) CHAIRMAN BSc (QS) (University of Natal), MAQS, PrQS, A.AArb CA (SA) (University of Cape Town) BEcon (Stellenbosch) Nazeem Khan attended the University of Ruth is currently a senior policy advisor Leon is the CEO of Association for Natal (Durban) where he obtained a at ASISA, where she is responsible as the Savings and Investment South Africa BSc (QS) degree. He has been in the CEO for the ASISA Foundation and the (“ASISA”) and was appointed into profession for the past 35 years and has ASISA Enterprise Development Fund, this role on 1 October 2008. ASISA varied experience in all aspects of property and serves on the ASISA Transformation represents all the life offices, fund development. He is currently a director Board Committee and the Financial managers, mutual funds, fund platforms, of the national firm Bham Tayob Khan Sector Charter Council. and multi managers in South Africa. Matunda (BTKM) Quantity Surveyors with offices throughout South Africa. Ruth is a University of Cape Town Starting in 1973, Leon spent 13 years graduate who qualified as a CA(SA) in with Old Mutual as an investment analyst Nazeem is a non-executive director at 1989. She was an audit partner with and portfolio manager. In 1985 he left Brimstone Investment Corporation Ernst & Young from 2002 to 2012, Old Mutual to form Syfrets Managed Limited and also serves as the chairman where she was responsible for a portfolio Assets where he was portfolio manager of Brimstone Investment Corporation of clients primarily in the education and and CEO. In 1993 Leon left Syfrets and Limited Audit committee. public sectors. Since qualifying, Ruth has was one of the founding members of served her profession on a number of Coronation where he was CEO of councils and boards including SAICA Coronation Fund Managers and Executive and as president of the Independent Director of Coronation Holdings Limited Board for Auditors (IRBA). She has also which was listed on the JSE. served on a number of audit and risk committees in the public sector. Leon serves on the boards of Sun International Limited and Brimstone Investment Corporation Limited.
6 // INTEGRATED REPORT 2015 Non-independent non-executive directors
Giancarlo Lanfranchi (46) co-developing and acquiring numerous Johnny is also extensively involved in DEPUTY CHAIR properties. Most recently, in a joint renewable energy generation in South DipArch (CPUT) venture with Redefine Properties Limited, Africa and his company, Mulilo the Swish Property Group successfully Renewable Energy Proprietary Limited, Giancarlo is the CEO and founder of the completed a R600 million mixed use has been one of the most successful Swish Property Group, a prominent development (sporting the first players in the renewable energy sector. Western Cape based property Doubletree by Hilton Hotel in Africa), development and investment group which in a previously marginalized area of Cape has successfully implemented brownfield Town, contributing to the revitalization Kevin Dreyer (53) and greenfield developments in excess of of the now popular Woodstock. R2.5 billion over the past 15 years. Kevin runs the development arm of the Giancarlo has a passion for uplifting Cape Town International Airport based undesirable locations and the Swish Johnny Cullum (53) consortium and is also a major share- Property Group has won numerous BEng (Civil) (Stellenbosch), Pr Eng holder in the property portfolio of the NHBRC awards, Swish was also accredited Cape Town International Airport based for the best Brownfield’s re-development Johnny is a qualified Civil Engineer and a consortium. He has substantial knowledge and development initiatives in South partner in CSV Construction, one of the of the Western Cape industrial property Africa in 2007, 2008 and 2009 as well as Western Cape’s biggest diversified civil sector and has negotiated and the CNBC award in 2006 for Best High contracting companies. He has extensive implemented several significant Rise Development in Africa. industrial property knowledge and his transactions in the airport node. property owning companies are the Giancarlo has also built up a prestigious primary landlord in and around the Cape Kevin also owns Automotion Airport portfolio of industrial, retail and Town International Airport. Parking Proprietary Limited, which commercial properties by developing, renders valet parking services at the Cape Town International Airport.
Executive directors
Andrea Taverna-Turisan (46) (CEO) Riaan Gous (49) (COO) Bram Goossens (37) (CFO) BSc (Honours) (Mathematics and Management) BA (Law) LLB (Stellenbosch) BCom (Hons), PGDA (University of Cape Town), CA (SA) (Kings College, London) Riaan graduated with BA (Law) and LLB Bram completed his tertiary education Andrea graduated with a BSc Hons degrees from the University of at the University of Cape Town and degree in Mathematics and Management Stellenbosch after which he joined one completed his articles with PwC in Cape from King’s College, London. He of SA’s leading law firms, Hofmeyr, Town where he was later admitted as a emigrated to South Africa in 1995 and Herbstein Gihwala Inc (now known as partner. During more than 12 years with initially worked as a Commercial Property DLA Cliffe Dekker Hofmeyr Inc). As a PwC he gained wide ranging experience Broker at McCreedy Friedlander in director of the firm Riaan practised in with retail, property and industrial clients, Bellville. He was one of the founding the commercial department with a both in South Africa and internationally. members of Rialto Foods, a food import strong focus on mergers and acquisitions business, in April 1998 and was and property transactions. In 2001 He was responsible for some of PwC’s instrumental in growing this business Riaan joined the Arabella Group as an key clients in the Western Cape including into the Italian food importer of choice executive director where he was Shoprite Holdings Limited. He was also of Woolworths. intimately involved in the development the audit partner for Tradehold Limited – and operational phases of the Arabella a property company listed on the JSE In 2006, Andrea sold his shares in property portfolio. with a portfolio of commercial properties Rialto and started specialising in the in the UK. development of distribution warehouses During 2011, Riaan joined Andrea and for his own account. He formed Chiluan Giancarlo in their property businesses in Holdings Proprietary Limited through anticipation of the Equites listing. During which he developed 6 A-grade this period he also partnered with them distribution facilities all of which now in several property developments and form part of the Equites portfolio. acquisitions.
INTEGRATED REPORT 2015 // 7 CHAIRMAN’S REPORT
“ This report reflects a solid beginning for a group that has set its sights on making its mark in the South African listed property space.”
Leon Campher CHAIRMAN
This inaugural integrated annual report reflects a solid will continue to deliver solid financial results. In this regard, beginning for a group that has set its sights on making its the Board is pursuing a strategy of creating long-term, mark in the South African listed property space. Although sustainable financial success. To achieve this, it is essential there have been many successes during the reporting year, I’d that we invest in vacant land to be able to compete for new like to highlight two of them. developments. Although these investments will take time to translate into yield accretive developments, they will ultimately Successful listing ensure the long-term financial viability of the Group. There is always nervous expectation whenever a new legal entity with no track record announces its intention to list on As a relatively small listed property company, growth is the JSE. In the case of Equites, months of hard work essential if Equites is to achieve economies of scale and culminated in a successful listing with demand for the improved liquidity, which is an important consideration for R650 million capital raised significantly exceeding supply. many investors.
The real work, however, began after the listing and entailed As a result, Management will place a lot of emphasis on the employment of a full staff complement and taking identifying growth opportunities, provided that they will ownership of the 17 individual properties that make up contribute in our quest to create long term shareholder value. the core of the initial business. In this, the Board and Management placed great emphasis on establishing and In closing, I wish to thank our Board of Directors and implementing structures, systems and processes that will Management for their invaluable contribution throuhgout the give the business the best possible chance of success. year. Without your hard work and dedication we would not have achieved so much in such a short time. Equites has had Financial performance a good first year and all of us are committed to growing the Based on the Equites share price at the time of writing this company to its full potential and to deliver long-term report and the financial results contained herein, Equites is set shareholder value. to deliver total returns from listing to the date of this report of approximately 37% to its initial investors. Equally important, we have delivered on all undertakings in the pre-listing statement (“PLS”). Leon Campher CHAIRMAN Although South Africa could face economic headwinds and the possibility of high interest rates, the Board is confident Cape Town that, in the absence of unforeseen external events, Equites 12 May 2015
8 // INTEGRATED REPORT 2014 CHIEF EXECUTIVE’S REPORT
“ We have a very clear vision for Equites: we want to become South Africa’s most successful specialist industrial property fund.”
Andrea Taverna-Turisan CHIEF EXECUTIVE OFFICER
Introduction Performance The merger of the property portfolios of three independent Exceeding the projection contained in the PLS despite the industrial property developers in the Western Cape enabled many challenges that a merger and listing of this nature Equites to list on the JSE on 18 June 2014. The Equites value bring, Equites’ total shareholder distribution of R69.9 million proposition, which included a high-end industrial property for the nine months since listing exceeded the R66.5 million focus, was well received by the market and the R650 million forecast for the same period by R3.4 million (5.1%). capital raised attracted such a degree of investor attention Distribution per share totalled 61,3 cents, which also that it was oversubscribed several times. exceeded the projected 60,9 cents. The net asset value growth to 1 137 cents per share is indicative of our good Because the amalgamation of the three portfolios resulted in average escalations of 8.1% and yield accretive acquisitions. the creation of a new, separate and independent legal entity, Management’s initial focus was almost entirely on We also concluded and implemented property acquisitions to the following: the value of R118.8 million during the period under review, all – the appointment of a talented and experienced of which were yield accretive. management team capable of handling all aspects of asset and property management relating to the We have retained our strong industrial focus and only three portfolio internally; of our current 20 properties are offices. We will be looking – bedding down the listing process by taking ownership of to dispose of them when the right opportunity arises. Our the property portfolio and implementing the requisite property fundamentals are very sound and 74% of our systems and processes to ensure that the portfolio is industrial leases expire after February 2018. There furthermore managed in a sustainable and profitable manner; are no vacancies in our industrial portfolio. – delivering on the undertakings and financial forecasts contained in the PLS. Funding Despite the listed property sector’s almost single-minded focus Our business is all about consistently delivering on our on distribution growth, we have not been tempted to employ undertakings and exceeding expectations, and we are pleased aggressive, short-term funding strategies to boost profits. As to confirm that we have achieved all the above objectives. a result, we ended the period under review with 79% of our debt being fixed for a five-year period at an all-in current weighted average rate of 8.85%.
INTEGRATED REPORT 2015 // 9 CHIEF EXECUTIVE’S REPORT (CONTINUED)
Given the likelihood of further interest rate increases, Equites Strengths is well positioned to capitalise on opportunities with a loan- to-value ratio of 8.9%, which is a very conservative level of Sound property fundamentals gearing relative to the market. Equites’ key differentiator is the sound property fundamentals of its property portfolio which provide a solid base for growing At year end, we had drawn just R127 million of our in an accretive manner. There is no need to sanitise the portfolio R600 million loan facility with Nedbank Limited. This loan and we have significant opportunities to develop new products accrues favourable funding at prime less 1.6%. for our quality tenant base. Our low loan-to-value ratio also puts us in the invidious position of being able to capitalise on Active cash flow management ensures that surplus cash is opportunities without struggling to raise the necessary funding. transferred daily to this loan facility. Sweeping facilities also ensure that cash retained for operational requirements in Human capital current accounts earns interest at current call rates. The fact that we’re a new business has allowed us to hand- pick a competent and experienced staff complement. We We announced two significant transactions during the latter implemented and inculcated a high-performance culture from part of the period under review. As anticipated in the PLS, we the outset that allows us to empower our staff and concluded a transaction with Dormell Properties 575 Pty (Ltd) encourage them to take ownership to truly make a difference. in terms of which Equites will acquire 14 hectares of prime industrial land next to Cape Town International Airport. It has been proven that employees are highly motivated when Despite a yet to be concluded legal process that may delay its they feel engaged and can see that their efforts are valued. development, if resolved we should be able to unlock We therefore actively seek to foster sound teamwork, developments of approximately R650 million on this land over transparency and accountability in our small team. the next three years. Vision and strategy We were also pleased to announce our first foray into We have a very clear vision for Equites: we want to Gauteng with the conclusion of a transaction in terms of become South Africa’s most successful specialist industrial which we will develop a 22 227m2 distribution warehouse for property fund. The Foschini Group in the prestigious Lords View Industrial Park. The landlord will be a joint venture between Equites and Our experience since listing has shown that it is difficult to the owners of the park. The capital value of the project is acquire individual quality industrial properties on the open approximately R150 million and Equites will own market because the expectations of prospective sellers are approximately 75% of the joint venture. We are excited about invariably so high that they would be detrimental to our fund. this collaboration with the Lord family and look forward to undertaking many more projects with them. During the listing process we communicated to the market that the bulk of our growth would be organic. We remain In addition, we are also close to concluding several convinced that our in-house development expertise will transactions with tenants for the development of new enable us to unlock brown- and greenfields opportunities facilities. The capital value of these projects is approximately at attractive yields. R320 million. We have also noted increased levels of interest from private owners of substantial industrial portfolios who understand our vision and are interested in selling their portfolios into Equites in exchange for shares, much like the founding vendors had done.
10 // INTEGRATED REPORT 2015 It has also become clear that long-term financial success will Acknowledgements depend on the acquisition of strategic parcels of land that will I want to take this opportunity to express my gratitude to the allow us to compete for top tenants who increasingly are Board for its support during this period, especially our chair, looking for newly built, modern, state-of-the-art distribution Leon Campher, for his guidance and advice. warehouse space. This may not always pay off immediately but will reap ample rewards in the medium to long term. The original vendors’ decision to merge their portfolios and entrust the leadership role to me, was a brave one. To the Over the past year we have seen that much of the capital founders of Equites – Giancarlo, Johnny, Kevin and Alex – raised by local property counters has been employed offshore thank you for putting your trust in me to take Equites to the and we are currently investigating the possibility of exposing next level. On a very sad note, I also want to acknowledge Equites to rand hedge opportunities in the UK and Europe. the important role the late Michel Lanfranchi played in this It is important to note that Management has extensive process. I wish he could have been part of the team still and experience in the UK industrial property market. we miss him dearly.
No decision has yet been taken and we will conduct I also want to thank my fellow executives, including Chrystal significant research before deciding whether Grauso for the important contribution she had made before to venture abroad. Bram joined us as CFO, and our entire team for all their hard work and dedication. I know that you are as determined as I Outlook am to grow Equites to its full potential. Equites has successfully bedded down the listing process and delivered a credible first set of annual results. We have low Finally, a big thank you to all our tenants for their support. levels of gearing with a high level of interest-rate hedging. Without you, we would not have a business. Our current portfolio forms a sound basis for our property fundamentals.
Although South Africa is experiencing several economic Andrea Taverna-Turisan challenges and further interest-rate hikes are predicted, the CHIEF EXECUTIVE OFFICER listed-property sector is expected to achieve distribution growth of between 7% and 8% over the next year. We are Cape Town confident that Equites’ distribution growth will be closer to 12 May 2015 the 8% than the 7% mark, provided there are no unexpectedly higher interest-rate increases or other unforeseen external events.
INTEGRATED REPORT 2015 // 11 “ WE HAVE A VERY CLEAR VISION FOR EQUITES: WE WANT TO BECOME SOUTH AFRICA’S MOST SUCCESSFUL SPECIALIST INDUSTRIAL
PROPERTY FUND.”
ANDREA TAVERNA-TURISAN CHIEF EXECUTIVE OFFICER
VANGUARD DRIVE, PHILLIPI (TENANT: UTI)
12 // INTEGRATED REPORT 2015 CHAPTER TITLE
INTEGRATED REPORT 2015 // 13 SOCIAL AND ETHICS COMMITTEE REPORT
“ As the Group grows its asset base and employee component, the monitoring of its levels of compliance with the relevant social, ethical and legal requirements and best practice codes will play an ever greater part in its long-term viability.”
EQUITES TEAM STANDING: SHARON DAKA, OLIVIA VELEM, GARY MASOMBUKA, MELANIE BROWN, BELINDA ORTMAN-LEBONA SEATED: RIAAN GOUS, ANDREA TAVERNA-TURISAN, BRAM GOOSSENS, HILDA GROVÉ
14 // INTEGRATED REPORT 2015 Since listing on the JSE, the Group has sought to align its – oversee the monitoring of the Company’s labour and business with the principles outlined in the King Report on employment practices; Corporate Governance in South Africa (2009), the criteria of – review the adequacy and effectiveness of the Company’s the JSE’s Socially Responsibility Investing Index as well as the engagement and interaction with its stakeholders; requirements relating to social and ethics committees as set – consider substantive national and international regulatory out in the Companies Act, 2008 (Act No.71 of 2008). developments as well as practice in the fields of social and ethics management; A Social and Ethics Committee (“the Committee”) was duly – review and approve the policy and strategy pertaining to established as a committee of the Board consisting of the Company’s programme of corporate social Giancarlo Lanfranchi (Chairman), Kevin Dreyer and Riaan investment; and Gous. Both Messrs Lanfranchi and Dreyer are non-executive – determine clearly articulated ethical standards (the Code directors of the Company. of Ethics) and ensure that the company takes measures to adhere to them in all aspects of the business, thus Terms of reference achieving a sustainable corporate culture in the Group. The duties and responsibilities of the Committee are set out in a formal terms of reference document which has been Meetings approved by the Committee and the Board of Directors. The terms of reference of the Committee provide for biannual meetings. In addition to the requirements as set out under The main duties of the Committee are to: “Terms of reference”, the Committee’s focus has been to – review and approve the policy, strategy and structure to establish a significant enterprise development project with a manage social and ethics issues in the company; Cape Town-based black entrepreneur, Mr Munier Damon. – oversee the monitoring, assessment and measurement Over the past six months, the Executive has helped Mr Damon of the Company’s standing in terms of: to set up his own construction company, Damon@Sons • The 10 principles set out in the United Nations Construction, which currently supplies construction services to Global Compact Equites at several of its buildings. Damon@Sons employs 10 • The Organisation for Economic Co-operation and previously disadvantaged South Africans. Development (OECD) recommendations regarding corruption detailed on www.oecd.org Conclusion • The Employment Equity Act, 1998 (Act No. 55 No substantive non-compliance with legislation and of 1998) regulations or non-adherence with the codes of best practice • The Broad-based Black Economic Empowerment Act, relating to the areas within the mandate of the Committee 2003 (Act No. 53 of 2003) has been brought to its attention during the period under review. – oversee the monitoring, assessment and measurement of the Company’s activities relating to good corporate The Committee recognises that, as the Group grows its asset citizenship, including the Company’s promotion of base and employee component, the monitoring of its levels of equality, prevention of unfair discrimination, addressing compliance with the relevant social, ethical and legal of corruption, contribution to development of the requirements and best practice codes will play an ever greater communities in which its activities are predominantly part in its long-term viability. marketed, and record-keeping of sponsorships, donations and charitable giving; – oversee the monitoring, assessment and measurement of the Company’s activities relating to the environment and Giancarlo Lanfranchi health and public safety; CHAIR: SOCIAL AND ETHICS COMMITTEE – oversee the monitoring, assessment and measurement of the Company’s consumer relationships, including the Cape Town Company’s advertising, public relations and compliance 12 May 2015 with consumer protection laws to ensure that the Company adheres to its values;
INTEGRATED REPORT 2015 // 15 SUSTAINABILITY
“ One of the advantages of being a new business is that it comes with the opportunity to hand-pick a competent and experienced team.“
The World Council for Economic Development (WCED) Human capital defines sustainable development as “development that meets One of the advantages of being a new business is that it the need of the present without compromising the ability of comes with the opportunity to hand-pick a competent and future generations to meet their own needs”. In commerce, it experienced team. There is no doubt that a large part of is often defined with reference to the “triple bottom line”, a any company’s success is linked to the quality of its people. measure that takes financial, social and environmental factors In order to achieve the Group’s vision, a highly skilled and into consideration. diverse team is essential. We are confident that we have employed a team with the talent and ability to take the Equites’ first integrated annual report contains substantial Company to the next level. information on the financial performance of the Group, among which the following considerations that support the It is the responsibility of the Board to ensure that our Board’s view that the business of Equites is in sound financial employees feel engaged, motivated and appreciated. To this health and therefore is sustainable: end, the Company has implemented the following: – REIT legislation prohibits gearing levels that exceed a – Our Group was founded by entrepreneurs, all of whom 60% loan-to-value ratio. At the end of the period under are still very much involved with it. This entrepreneurial review, Equites had a loan-to-value ratio of 8.9%; spirit remains one of our key building blocks. To nurture – Equites has sound property fundamentals with quality, the same spirit in our people, we implemented a high- financially successful tenants, minimal vacancies and performance culture where we seek to empower our long-dated leases; and staff and encourage them to take ownership and make – The Company has a R600 million loan facility a difference; with Nedbank Limited, of which it has drawn – Each member of the team has been assigned very specific just R127 million. key performance areas that are continuously managed and reviewed; In view of the above, this review will focus mainly on the – It has been proven that employees are highly motivated other two factors that are equally important in measuring when they feel engaged and realise that their efforts are sustainability, that is the Company’s impact on people valued. Therefore we actively seek to foster sound and the environment. teamwork, transparency and accountability; – We currently employ nine people, five of whom are from previously disadvantaged backgrounds. We subscribe to the principle that diversity is essential for creating a strong, vibrant and successful enterprise. Our recruitment philosophy is to employ the best person for the job with preference being given to previously disadvantaged candidates; and – Five of our team members are women and we will continue to be mindful of the importance of gender representation as we grow our staff.
16 // INTEGRATED REPORT 2015 In order to attract and retain the right people, we have The first greenfield development to be undertaken by Equites implemented a remuneration system made up of a fixed will be situated in the Lords View Industrial Park in Midrand, salary, short-term incentive and long-term share-based Johannesburg and has been planned as an environmentally incentive for all employees. Ultimately, the Company is friendly, eco-sensitive industrial logistics facility. It will make seeking to align its interests with those of its staff so that all use of the latest developments in green township staff will benefit accordingly as the Group creates value for development and will have landscaped central stormwater its shareholders. attenuation ponds, relieving tenants from having to do this themselves. These functional ponds will form the green lung We are also currently investigating the important matter of of the development with running tracks, benches and other how best to help our staff develop to their full potential. In facilities for staff to enjoy. this regard, we are also working to optimise staff retention in the Group as good candidates with the right skills are in short Moreover, negotiations for the development of an on-site supply and recruiting new employees is time-consuming, municipal solid waste plant are at an advanced stage. Once costly and often detrimental to the business. built, it will make available 20MVA of electricity, which could be made available to tenants. The carbon emissions from this Environmental impact and health and safety plant would be equivalent to that of six cars. Equites is committed to creating a safe and healthy workplace and reducing the environmental footprint of our business. In the course of the coming financial year, we will work to reduce energy consumption at our buildings and are in the The founders of the Group all strived to develop in an process of exploring photovoltaic technology and other environmentally sustainable manner and we will embrace this energy-efficient methods to curtail electricity consumption philosophy as we develop new products. In this regard, we and costs. will include the principles of environmental best practice in our briefs to our development team and ensure that they are incorporated into the final design.
INTEGRATED REPORT 2015 // 17 CHAPTER TITLE
“ AS THE GROUP GROWS ITS ASSET BASE AND EMPLOYEE COMPONENT, THE MONITORING OF ITS LEVELS OF COMPLIANCE WITH THE RELEVANT SOCIAL, ETHICAL AND LEGAL REQUIREMENTS AND BEST PRACTICE CODES WILL PLAY AN EVER GREATER PART IN ITS LONG-TERM VIABILITY.”
GIANCARLO LANFRANCHI CHAIR: SOCIAL AND ETHICS COMMITTEE
TOWER ROAD, AIRPORT INDUSTRIA, CAPE TOWN (TENANT: KUEHNE & NAGEL)
18 // INTEGRATED REPORT 2015 CHAPTER TITLE
INTEGRATED REPORT 2015 // 19 CORPORATE GOVERNANCE REPORT
“ The members of the Board have diverse qualifications and experience, which enable them to contribute meaningfully to the management of the Group.”
The Board is committed to upholding sound ethical standards Chairman and chief executive officer and applying the principles of good corporate governance. The The roles of the chairman of the Board and the chief Company has therefore applied the King Code on Corporate executive officer are separated and clearly defined. Governance for South Africa (“King III”) in full and, as required by the JSE, a full register of King III compliance (including, in The chief executive officer Andrea Taverna-Turisan, is instances of non-compliance an explanation therefor) is responsible for the day-to-day management of the Group and available at the Company’s website, www.equites.co.za. implementation of the strategy and objectives adopted by the Board. He is assisted by the other two executive directors and Board of Directors senior staff members. The Board consists of nine directors, six non-executive and three executive directors. Of the non-executive directors, three The chairman of the Board, Leon Campher, is an independent are independent and three are representatives of the founding non-executive director and responsible for managing the vendor shareholders. All the executive directors have service relationship between the Board, the chief executive officer contracts with six-month notice periods. and the various Board committees. He sets the agendas for the Board meetings and ensures that adequate time is The members of the Board have diverse qualifications and devoted to developing the Group’s strategy. experience, which enable them to contribute meaningfully to the Management of the Group.
A third of the non-executive directors must resign and stand for re-election at each annual general meeting (“AGM”).
All Board appointments are motivated by the Nomination Committee in terms of its formal terms of reference and are subject to Board and shareholders approval.
The Board meets at least four times a year but will meet more often if circumstances demand it. The table below sets out the Board meetings held during the reporting period and the attendance at each.
28/04/2014 06/05/2014 19/09/2014 01/10/2014 26/11/2014 Director Leon Campher b b b b b Nazeem Khan b b b b b Ruth Benjamin-Swales b b b b b Giancarlo Lanfranchi b b ć ć b Kevin Dreyer b b ć b b Johnny Cullum b b b ć b Andrea Taverna-Turisan b b b b b Riaan Gous b b b b b Chrystal Grauso b b x x x Bram Goossens x x b b b
b Attended ć Absent with apologies x Not a director at the time 20 // INTEGRATED REPORT 2015 Board committees Remuneration Committee The Board acknowledges that overall responsibility for The Remuneration Committee is chaired by Nazeem Khan, an managing the Group rests with the Board as a whole. To independent non-executive director, and works to ensure that assist it with fulfilling its responsibilities, the Board has the Group adopts a remuneration policy that is fair and appointed the following sub-committees: transparent, and attracts and retains executive talent that will contribute to the achievement of the Group’s objectives. Audit and Risk Committee The primary responsibility of the Audit and Risk Committee is Nomination Committee to assist the Board in overseeing integrated reporting and The Chairman of the Board, Leon Campher, also chairs the ensuring the financial integrity of the Annual Financial Nomination Committee, which assists with the appointment Statements and other financial reports. The Committee is of directors. chaired by Ruth Benjamin-Swales, an independent non- executive director, whose previous experience, especially as Social and Ethics Committee audit partner at Ernst & Young, makes her ideally suited for The Social and Ethics Committee is a statutory committee that this responsibility. monitors compliance with labour legislation and the Group’s corporate social responsibilities. The Committee is chaired by Giancarlo Lanfranchi, a non-executive director. Composition of committees The membership of the Board committees are as follows: Audit and Risk Committee Remuneration Committee Nomination Committee Social and Ethics Committee
Ruth Benjamin-Swales (Chair) Nazeem Khan (Chair) Leon Campher (Chair) Giancarlo Lanfranchi (Chair) Leon Campher Leon Campher Nazeem Khan Kevin Dreyer Nazeem Khan Ruth Benjamin-Swales Ruth Benjamin-Swales Riaan Gous
Attendance of Board committee meetings Committee Audit and risk Nomination Remuneration 01/10/2014 26/11/2014 06/05/2014 26/11/2014 06/05/2014 26/11/2014
Director Leon Campher b b b b b b Nazeem Khan b b b b b b Ruth Benjamin-Swales b b b b b b
b Attended
Conflicts of interest and directors’ Company secretary personal interests Riaan Gous was appointed company secretary on Directors are required to declare their personal financial 1 December 2014. The Board is satisfied with his experience interests and those of related persons in contracts with the and qualifications to act in this capacity. He is an executive Group. A register in this regard is maintained and reviewed at director of the Company and several subsidiaries in the each Board meeting. Group too. The Board is satisfied that despite this, he has the expertise to carry out the role of company secretary and Directors are asked to recuse themselves from any discussions ensure that the Board maintains good corporate governance and decisions where they have a material financial interest. at all times.
INTEGRATED REPORT 2015 // 21 RISK MANAGEMENT
“ Risk management is an integral part of the Group’s strategic management and is essential for attaining substantial and satisfactory growth.”
With the assistance of the Audit and Risk Committee, the The Group employs a risk management framework which Board has adopted a risk management policy to mitigate is overseen by the Audit and Risk Committee and has an identified risks to the Group to acceptable levels. The policy, ongoing responsibility to monitor its risk which is in line with industry practice, specifically prohibits the management processes by: Group from entering into any derivative transactions that fall – Identifying risk factors that may have a material impact outside the ordinary course of the Group’s business as on its operations required by the JSE. – Formulating a mitigating response for each area of impact Risk management is an integral part of the Group’s strategic – Monitoring progress against set targets management and is essential for attaining substantial and – Reviewing identified risks on an ongoing basis and revise satisfactory growth of the net asset value of the Group, which responses accordingly. will in turn translate into sustainable distribution growth.
The table below summarises the key risk factors that were identified and how they have been mitigated Risk factor Areas of impact Response Status Macro-economic – Access to capital – Conservative loan-to-value – Current LTV is 8.9% and environment (“LTV”) target of 40% and there are substantial maintenance of adequate undrawn facilities banking facilities
– Interest-rate risk – Hedging target of 80% – R100 million of debt of R127 million is fixed for five years
– Tenant defaults – Focus on blue-chip tenants – 69% of gross lettable area and generic buildings (“GLA”) is leased by large listed national or international tenants
Deterioration in property – Fair value of – Focus on A-grade industrial – 87.2% of GLA is industrial values or specific areas investment property property in prime nodes and mostly A-grade properties – Ability to attract – Focus on blue-chip tenants new tenants and long leases – 77% of leases runs for more than three years
22 // INTEGRATED REPORT 2015 Risk factor Areas of impact Response Status Rapid increase in utility – Pressure on tenants for – Investigating use of – Feasibility studies for costs, especially property recovered utilities renewable energy sources photovoltaic installations taxes and electricity and energy-saving in progress technology – New development in Lord’s View Industrial Park in Midrand has a planned waste-to-energy facility
– Pressure on profitability for – Focus on industrial tenants – 87.2% of lettable space non-recovered costs with fully recovered leases comprises industrial tenants with fully recovered leases
Tenant default – Sustainability of revenue – Implementing a credit – No bad debts after listing and distribution vetting process and giving preference to blue- chip tenants – Vacancies – Total vacancies only 0.8% – Active client engagement of GLA (0% of industrial and regular review and 6.6% of office space) of arrears Retention of key staff – Loss of key staff will impact – Implementing long-term as – First share awards in terms the Group’s ability to well as short-term incentive of the long-term incentive achieve its objectives schemes scheme made during the current year
– A short-term bonus scheme has been implemented
Gradual or sudden – Buildings destroyed by acts – Ensuring that adequate – Comprehensive commercial destruction of property of God insurance cover is insurance is in place and a maintained full insurance replacement valuation is currently underway to ensure adequate cover
– Properties not properly – Ensuring that properties are – An operational property maintained and deteriorate maintained continuously team has been employed over time and a detailed maintenance schedule drafted
Compliance with laws – Penalties, operational risk – Employing suitably skilled – Executives and staff are and regulations from non-compliance with and experienced staff considered more than legislation and executives adequately qualified and experienced
– Sanctions and risks – Engaging outside specialists – Corporate advisors and associated with non- with appropriate skills auditors are very compliance with JSE experienced in listed- regulations – Adequate internal and property companies external training – Employees regularly attend conferences and relevant training
INTEGRATED REPORT 2015 // 23 REMUNERATION REPORT
“ Having highly skilled and motivated executives are considered key to achieving its long-term objectives and maximising stakeholder value.”
This report sets out the Group’s remuneration policy, including Remuneration policy short-term and long-term incentives, and how it has been The Group’s guiding philosophy is to attract and retain high- implemented in the current year. calibre, appropriately skilled and experienced executives. Having highly skilled and motivated executives are considered Remuneration Committee key to achieving its long-term objectives and maximising In line with best practice set out in King III, the Group’s stakeholder value. Ensuring management and shareholder Remuneration Committee is appointed by the Board of alignment through meaningful equity participation is Directors and has the delegated authority, in accordance with considered integral to this. Executive remuneration should its terms of reference, to review and make decisions regarding also be fair and reasonable while being in line with the the Group’s remuneration policies and the implementation Company’s and individual’s performance as well as thereof. The terms of reference were formally adopted by the market trends. Board during the current reporting period and the three committee members that were appointed are: Benchmarking and pay mix – Nazeem Khan (Chairman) To ensure that the Group’s total remuneration packages and – Leon Campher pay mix are appropriate for the market in which it operates, – Ruth Benjamin-Swales external benchmarking was undertaken during the reporting year. Executives’ remuneration was balanced between total All three members of the Committee are independent guaranteed pay (“TGP”), STI and LTI. To encourage retention non-executive directors and they met twice in the current and align executives’ interests with those of other reporting period. Other members of the Board and external shareholders, the LTI was set at more than 30% of the consultants may attend the meetings by invitation. remuneration mix and set out in the table below:
The Committee appointed an external reward consultant, Equites pay mix PricewaterhouseCoopers Inc., to assist with the formulation 100% and implementation of the Group’s remuneration policy. 80% 35% 35% 32%
The Committee fulfilled the following main duties in the 60% 20% 24% 22% reporting period: 40% – The review and formulation of the Group’s remuneration 20% 41% 43% 49% policy, which encompasses the recruitment, retention and termination of senior executives’ services 0% CEO CFO Executive directors – Approval of the overall pay mix for executive directors, including long-term incentives (“LTI”) and short-term TGP STI LTI incentives (“STI”) – Approval of the Group’s LTI as a conditional share plan Total guaranteed pay (“CSP”) and the related performance and service TGP consists of the guaranteed cash salary and benefits, vesting conditions and is determined by the scope of the role, performance – Approval of a short-term bonus scheme and the related and experience. These amounts were benchmarked during performance metrics the reporting year and will be reviewed on an annual basis by – Approval of non-executive directors’ emoluments and the Remuneration Committee. The TGP paid to the executive increases for the next reporting period directors in the reporting period is detailed in note 19.4 to – Approval of executive directors’ guaranteed pay the Annual Financial Statements (page 59 of the and increases integrated report).
24 // INTEGRATED REPORT 2015 After careful consideration, the Remuneration Committee The STI due to the executive directors for this reporting period has approved a 6% aggregate increase in TGP for the next is detailed in note 19.4 to the Annual Financial Statements financial year. (page 59 of the integrated report).
Short-term incentives Long-term incentives The Group has adopted a multiplier-based STI plan The CSP is designed to attract, retain and reward executives incorporating business and individual modifiers. Multiplier STIs, through the annual and ad-hoc awarding of conditional which are calculated as a percentage of TGP, are in line with shares. It will allow executive directors to share in the success best practice trends, as a multiplicative approach allows for both of the Company and be incentivised to deliver the business Company financial objectives and individual (as well as strategic strategy of Equites over the long-term as well as create objectives) to be considered in the determination of bonuses. alignment between key employees and shareholders.
As a start-up it is important that certain strategic growth To balance retention and reward objectives, 40% of CSP objectives are met. Incentivising executives to achieve strategic awards are subject to a three-year service condition and 60% objectives is therefore supported by the individual modifier in to a three-year service condition as well as business and the bonus formula. STIs are payable annually after being personal performance conditions. approved by the Remuneration Committee and the release of the audited financial results on which the financial modifiers are based.
Details of awards made during the year are as follows: Name Grant date Issue price Number of shares Andrea Taverna-Turisan 29 October 2014 R10.65 110 404 Riaan Gous 29 October 2014 R10.65 66 911 Bram Goossens 29 October 2014 R10.65 51 756 Management other than directors 29 October 2014 R10.65 6 103 Total conditional shares awarded and balance at year end 235 174
Non-executive directors’ emoluments Non-executive directors do not have employment contracts and do not receive any benefits associated with permanent employment. Their fees as directors are determined as a base fee and the attendance fee is based on their Board and committee obligations. The fees paid to executive directors in the reporting period are detailed in note 19.3 to the Annual Financial Statements (page 59 of the integrated report).
The proposed fees for the next financial year is as follows: Role Base fee Attendance fee Chairperson of the Board R165 000 R20 000 Board member R100 000 R10 000 Chairperson of sub-committee — R12 500 Member of sub-committee — R10 000 Based on the current planned meeting schedule, the above fees total R1.198 million for the coming reporting period. The proposed fees will be tabled for approval by shareholders as required by the Companies Act, 2008 (Act No. 71 of 2008), as amended) at the Group’s annual general meeting to be held on 21 July 2015.
Nazeem Khan CHAIR: REMUNERATION COMMITTEE
Cape Town 12 May 2015
INTEGRATED REPORT 2015 // 25 ANNUAL FINANCIAL STATEMENTS
EXECUJET COMPLEX, CAPE TOWN INTERNATIONAL AIRPORT.
26 // INTEGRATED REPORT 2015 CONTENTS
DIRECTOR’S RESPONSIBILITY FOR THE ANNUAL FINANCIAL STATEMENTS 28
DECLARATION BY THE COMPANY SECRETARY 28
AUDIT AND RISK COMMITTEE REPORT 29
DIRECTORS’ REPORT 31
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF EQUITES PROPERTY FUND LIMITED 33
STATEMENT OF FINANCIAL POSITION 34
STATEMENT OF COMPREHENSIVE INCOME 35
STATEMENT OF CASH FLOWS 36
STATEMENT OF CHANGES IN EQUITY 37
ACCOUNTING POLICIES 38
NOTES TO THE ANNUAL FINANCIAL STATEMENTS 44
The annual financial statements for the year ended February 2015 have been audited by Moore Stephens Cape Town Inc., in compliance with the applicable requirements of the Companies Act, 2008. The audited annual financial statements were prepared by Mr B Goossens, CA(SA).
INTEGRATED REPORT 2015 // 27 DIRECTOR’S RESPONSIBILITY
Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2015
The Company’s directors are responsible for the preparation and fair presentation of the consolidated annual financial statements and separate parent annual financial statements, comprising the statements of financial position at 28 February 2015 and the statements of comprehensive income, changes in equity and cash flows for the year ending on that date; the notes to the annual financial statements, which include a summary of significant accounting policies and other explanatory notes; and the directors’ report compiled in accordance with International Financial Reporting Standards (“IFRS”), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the JSE Listings Requirements and the regulations of the South African Companies Act, No. 71 of 2008.
The directors’ responsibility includes designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of these financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. The directors’ responsibility also includes maintaining adequate accounting records and an effective risk management system.
The directors have made an assessment of the Group and the Company’s ability to continue as a going concern and have no reason to believe that the business will not continue as a going concern in the year ahead.
The auditor is responsible for reporting on whether the annual financial statements are fairly presented in accordance with the applicable financial reporting framework.
The consolidated annual financial statements and separate parent annual financial statements of Equites Property Fund Limited were approved by the Board of Directors on 12 May 2015 and are signed on its behalf by:
Leon Campher Andrea Taverna-Turisan CHAIRMAN CHIEF EXECUTIVE OFFICER
DECLARATION BY THE COMPANY SECRETARY
In my capacity as company secretary, I hereby confirm, in terms of the Companies Act, No. 71 of 2008 that, for the year ended 28 February 2015, the Company has lodged all such returns as are required of a public company in terms of the Act with the Companies and Intellectual Property Commission and that all such returns are true, correct and up to date.
Riaan Gous COMPANY SECRETARY
28 // INTEGRATED REPORT 2015 AUDIT AND RISK COMMITTEE REPORT
The Audit and Risk Committee (the “audit committee”) takes pleasure in presenting its report for the financial year ended 28 February 2015.
1. Terms of reference 2. Members of the audit committee, attendance The audit committee is a formal committee of the Board of meetings and evaluation and has adopted written terms of reference. These terms The audit committee comprises the three independent of reference include the statutory requirements of the non-executive directors as detailed in the corporate Companies Act, No. 71 of 2008, as amended (“the Act”), governance report and is chaired by Ruth Benjamin- the recommendations of the King Code on Governance Swales. Meetings and attendance are also detailed in the (“King III”) and certain responsibilities delegated by corporate governance report. The executive directors as the Board. well as the external auditors attended audit committee meetings by invitation. The main responsibilities of the audit committee include: – Reviewing the ongoing effectiveness of the internal The terms of reference require an annual evaluation of financial controls the performance of the audit committee and its members – Reviewing the interim and preliminary results, the as well confirmation of the members’ independence in annual financial statements and other content in the terms of King III and the Act. The outcome of this integrated report, and making a formal evaluation and confirmation was satisfactory. recommendation to the Board to adopt the same – Ensuring compliance with IFRS and the relevant 3. External auditors requirements of the Act and the JSE with respect to The audit committee nominated Moore Stephens financial reporting Cape Town Inc. as external auditors for the current year, – Overseeing the appointment and independence of having satisfied itself that they are independent of the the external auditors and reviewing their external Company. The audit committee noted Adéle Smit as the audit reports designated auditor and confirmed that both she and – Determining a policy for the provision of non-audit Moore Stephens Cape Town Inc. are accredited with the services by the external auditors JSE Limited as required. – Monitoring the risk management framework adopted by the Group and reviewing any risk The audit committee approved the terms of the auditors’ management reports in this regard engagement letter, their audit plan and budgeted audit – Reviewing management’s assessment of the fees for the audit of the annual financial statements for Company and Group to continue as a going concern the year ended 28 February 2015.
The audit committee confirms that it has fulfilled all its The audit committee adopted a formal framework for the statutory obligations as well as its terms of reference for pre-approval of allowable non-audit services above the period under review. certain pre-determined thresholds.
4. Internal audit The audit committee has satisfied itself that the size and complexity of the Company does not warrant an internal audit function.
INTEGRATED REPORT 2015 // 29 AUDIT AND RISK COMMITTEE REPORT (CONTINUED)
Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2015
5. Financial director In terms of JSE Listings Requirement paragraph 3.84 (h), the audit committee has considered the expertise and experience of the financial director, Bram Goossens, and is satisfied that they are appropriate for his role.
6. Internal financial controls The audit committee oversaw the implementation of a combined assurance model and the external auditors and management reported to it as to the efficacy of the Group’s internal financial controls. The audit committee reviewed these and other available reports regarding the Group’s risk management framework and confirms that no material breakdown of internal financial controls was identified during the current financial year.
7. Approval of annual financial statements The audit committee confirms that it formally recommended the adoption of the Group and separate annual financial statements to the Board of Directors.
Ruth Benjamin-Swales CHAIR: AUDIT AND RISK COMMITTEE
Cape Town 12 May 2015
30 // INTEGRATED REPORT 2015 DIRECTORS’ REPORT
1. Nature of business 4. Borrowings Equites Property Fund Limited listed as a Real Estate The Company has unlimited borrowing powers in terms Investment Trust (“REIT”) on the Johannesburg Stock of the Memorandum of Incorporation (“MOI”) but the Exchange (“JSE”) on 18 June 2014 and its main business is Group has maintained its debt levels below 60% of its the investment in and development of commercial gross asset value due to JSE requirements for REITs. properties that are predominantly in the industrial sector. The Group is also subject to a 50% loan-to-value covenant on its bank borrowings. The Group’s overall The Company carries out its business directly and through debt was R127 million at the reporting date as detailed a number of subsidiaries (collectively referred to as the in note 14 to the annual financial statements. “Group”). All income-producing properties are currently in the Western Cape. 5. Stated capital The authorised shares of the Company consist of 2. Subsidiaries 2 000 000 000 (two billion) shares of no par value. The Company has the following subsidiaries, all of which are property investment companies: The issued shares increased from 100 shares of no par – Applemint Properties 93 (Pty) Ltd value in the prior year to 114 410 255 shares of no par – Dormell Properties 711 (Pty) Ltd value at the end of the current year. All movements in – Equites Lords View Development (Pty) Ltd issued shares are detailed in note 12 to the – Galt Property One (Pty) Ltd financial statements. – Galt Property Two (Pty) Ltd – Kovacs Investments 715 (Pty) Ltd 6. Distribution to shareholders – Nascispan (Pty) Ltd The Board of Directors declared an interim dividend – Prop for list (Pty) Ltd (dividend number 1) of R23.1 million on 10 October – Swish Property Seven (Pty) Ltd 2014, which was paid on 10 November 2014. A final dividend (dividend number 2) of R46.8 million was The Company holds 100% of the ordinary shares and declared on 12 May 2015, bringing the total dividend associated voting rights in all of its subsidiaries. relating to the nine months ending 28 February 2015 to R69.9 million. 3. Financial results As fully described in the Company’s pre-listing statement, The total distribution for the nine months ended the Company acquired certain subsidiaries with effect 28 February 2015 of R69.9 million is R3.4 million (5.1%) from 1 March 2014 (pre-listing) and the results for the year higher than the R66.5 million projected in the Company’s ending 28 February 2015 therefore, reflect the trading pre-listing statement for the same period. activity of these subsidiaries from this date. All retained profits for the period 1 March 2014 to 31 May 2014 were Salient dates for dividend number 2 are as follows: declared to the previous shareholders of these subsidiaries 2015 as a “clean-out distribution” and the financial results for Declaration date 12 May the three months till 31 May 2014 are therefore of lesser impor tance for the purposes of evaluating the financial Finalisation date 22 May performance of the Group for the year ending Last day to trade cum dividend 29 May 28 February 2015. Shares trade ex dividend 1 June Record date 5 June Consequently, the results for the nine months ended Payment date 8 June 28 February 2015 (which has been highlighted in the statement of comprehensive income) were used to The Board confirms the use of distribution per listed determine the earnings distributable to shareholders. securities as the relevant measure of financial results for the purposes of trading statements. The detailed financial results are set out in full in the annual financial statements.
Comparative figures have not been disclosed as this was the Company’s first year of operation. INTEGRATED REPORT 2015 // 31 DIRECTORS’ REPORT (CONTINUED)
Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2015
7. Going concern financial director on 1 September 2014 and the The annual financial statements of the Group were resignation of Chrystal Grauso on the same day. prepared on a going concern basis. The Board of Directors is satisfied that the Group has adequate In terms of the Memorandum of Incorporation, the resources to continue trading for the foreseeable future following directors will retire at the forthcoming annual based on a formal review of the results and forecasts, general meeting and are eligible for re-election: Giancarlo and an assessment of available resources. Lanfranchi and Johnny Cullum.
8. Directors 9. Company secretary The directors of the Company are detailed on page 20 of Riaan Gous was appointed company secretary on the integrated report. The only change in the directorate 1 December 2014. CIS Company Secretaries Proprietary since listing was the appointment of Bram Goossens as Limited resigned on the same date.
10. Directors’ interest in ordinary shares
Directors Beneficially held Directly Indirectly Associates Total % Leon Campher — — — — — Giancarlo Lanfranchi — 21 053 467 — 21 053 467 18.4% Andrea Taverna-Turisan 200 000 12 818 192 — 13 018 192 11.4% Riaan Gous 878 280 — — 878 280 0.8% Bram Goossens* — — — — 0.0% Chrystal Grauso** — 37 000 — 37 000 0.0% Nazeem Khan 100 000 — — 100 000 0.1% Ruth Benjamin-Swales 4 800 — 4 000 8 800 0.0% Kevin Dreyer — 4 997 016 — 4 997 016 4.4% Johnny Cullum — 5 616 370 — 5 616 370 4.9% Total 1 183 080 44 522 045 4 000 45 709 125 40.0%
*Appointed 1 September 2014 **Resigned as executive director 1 September 2014
The conditional shares awarded to executive directors during the year, as set out in note 13 to the annual financial statements, have not been included in the above table.
There have been no changes to the directors’ interests in the ordinary shares between 28 February 2015 and the date of the release of the annual financial statements.
11. Auditors 13. Holding company Moore Stephens Cape Town Inc. will continue in office in Equites Property Fund Limited has no holding company accordance with Section 90 (1) of the Act. and the main shareholders are detailed in note 29 to the annual financial statements. 12. Litigation The directors are not aware of any legal or arbitration proceedings that have commenced, are pending or have been threatened that have or may have a material impact on the results of the Group.
32 // INTEGRATED REPORT 2015 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF EQUITES PROPERTY FUND LIMITED
Report on the annual financial statements estimates made by the Company’s management as well as We have audited the consolidated and separate annual evaluating the overall presentation of the financial statements. financial statements of Equites Property Fund Limited, which comprise the statement of financial position as at 28 February We believe that the audit evidence we have obtained is sufficient 2015, the statement of comprehensive income, the statement and appropriate to provide a basis for our audit opinion. of changes in equity and statement of cash flows for the year then ended, and the notes to the financial statements, which Opinion include a summary of significant accounting policies and In our opinion, these financial statements present fairly, in all other explanatory notes, as set out on pages 34 to 67. material respects, the consolidated and separate financial position of Equites Property Fund Limited as at 28 February Directors’ responsibility for the 2015, and its consolidated and separate financial performance financial statements and cash flows for the year then ended in accordance with The Company’s directors are responsible for the preparation International Financial Reporting Standards, the SAICA and fair presentation of these financial statements in Financial Reporting Guides as issued by the Accounting accordance with the IFRS, the SAICA Financial Reporting Practices Board, the JSE Listings Requirements and the Guides as issued by the Accounting Practices Board, the requirements of the Companies Act. JSE Listings Requirements and the requirements of the Companies Act, and for such internal control as the directors Other reports required by the Companies Act determine necessary to enable the preparation of financial As part of our audit of the financial statements for the year statements that are free from material misstatement, whether ended 28 February 2015, we have read the integrated report due to fraud or error. which includes inter alia the directors’ report, the Audit and Risk Committee report and the declaration by the Company Auditor’s responsibility secretary for the purposes of identifying whether there are Our responsibility is to express an opinion on these financial material inconsistencies between these reports and the statements based on our audit. We conducted our audit in audited financial statements. These reports are the accordance with International Standards on Auditing. These responsibility of the respective preparers. Based on reading standards require that we comply with ethical requirements them, we have not identified material inconsistencies between and plan and perform the audit to obtain reasonable these reports and the financial statements. However, we have assurance about whether the financial statements are free not audited these reports and accordingly do not express an from material misstatement. opinion on these reports.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to Moore Stephens Cape Town Inc. fraud or error. In making those risk assessments, the auditor REGISTERED AUDITOR considers internal control relevant to the entity’s preparation Per: A Smit and fair presentation of the financial statements in order to design audit procedures that are appropriate in the Chartered Accountant (SA) circumstances, but not for the purpose of expressing an Registered Auditor opinion on the effectiveness of the entity’s internal control. An Director audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting 12 May 2015
INTEGRATED REPORT 2015 // 33 STATEMENT OF FINANCIAL POSITION
Equites Property Fund Limited and its subsidiaries at 28 February 2015
COMPANY GROUP
28 February 2015 28 February 2015 R’000 Notes R’000
ASSETS Non-current assets 499 009 Fair value of investment property (excluding straight-lining) 5 1 416 949 4 868 Straight-lining lease accrual 6 14 928 1 847 Property, plant and equipment 7 1 847 275 015 Investment in subsidiaries 8 — 780 739 1 433 724 Current assets — Current tax receivable 91 1 923 Trade and other receivables 9 4 479 4 489 Financial asset held at fair value 10 4 489 1 055 Cash and cash equivalents 11 3 582 515 115 Loans to subsidiaries 8 — 522 582 12 641
1 303 321 TOTAL ASSETS 1 446 365
EQUITY AND LIABILITIES Equity and reserves 1 140 599 Stated capital 12 1 140 599 25 940 Accumulated profit 160 215 201 Share-based payment reserve 13 201 1 166 740 1 301 015 Liabilities Non-current liabilities 127 372 Financial liabilities 14 127 372 127 372 127 372 Current liabilities 512 Derivative financial liability 15 512 8 697 Trade and other payables 16 17 466 9 209 17 978
136 581 TOTAL LIABILITIES 145 350 1 303 321 TOTAL EQUITY AND LIABILITIES 1 446 365
34 // INTEGRATED REPORT 2015 STATEMENT OF COMPREHENSIVE INCOME
Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2015
COMPANY GROUP
3 months 9 months year ended* ended* ended 28 February 31 May 28 February 28 February 2015 2014 2015 2015 R’000 Notes R’000 R’000 R’000 Revenue 38 806 Contractual revenue and tenant recoveries 13 587 102 077 115 664 4 868 Straight-lining of leases adjustment 2 931 11 997 14 928 9 099 Dividends received from subsidiaries — — — 52 773 17 16 518 114 074 130 592 6 Other gains 18 — 158 158 (9 993) Property operating and management expenses (4 549) (19 931) (24 480) 42 786 Net property income 11 969 94 301 106 270 (7 450) Administrative expenses — (7 742) (7 742) 35 336 Operating profit 19 11 969 86 559 98 528 31 711 Fair value adjustments 20 (478) 115 575 115 097 (3 946) Finance costs 21 (8 374) (7 254) (15 628) 2 361 Finance income 22 21 2 404 2 425 (1 490) Financial instrument capital loss 10 — (1 490) (1 490) (14 901) Capital raising expenses (14 288) (613) (14 901) 49 071 Net profit before tax (11 150) 195 181 184 031 — Income tax expense 23 — — — 49 071 Profit for the period (11 150) 195 181 184 031
— OTHER COMPREHENSIVE INCOME — — —
49 071 TOTAL COMPREHENSIVE INCOME FOR THE PERIOD (11 150) 195 181 184 031
PROFIT ATTRIBUTABLE TO: 49 071 Owners of the parent (11 150) 195 181 184 031 — Non-controlling interest — — — 49 071 (11 150) 195 181 184 031
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: 49 071 Owners of the parent (11 150) 195 181 184 031 — Non-controlling interest — — — 49 071 (11 150) 195 181 184 031 Basic earnings per share (cents) 1 204,6 Diluted earnings per share (cents) 1 204,4
* The nine-month results to 28 February 2015 were used to determine the distribution to post-listing shareholders as fully explained in the directors’ report. The information presented for the three months ended 31 May 2014 and nine months ended 28 February 2015 are for information purposes only to illustrate the earnings attributable to listed shareholders.
INTEGRATED REPORT 2015 // 35 STATEMENT OF CASH FLOWS
Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2015
COMPANY GROUP
28 February 2015 28 February 2015 R’000 Notes R’000
Cash flows from operating activities 49 071 Profit before tax 184 031 Adjusted for: 3 946 Finance costs 15 628 (2 361) Finance income (2 425) (4 868) Straight-lining of leases adjustment (14 928) (31 711) Fair value adjustments (115 097) 58 Amortisation 58 201 Share-based payment charge 201 (1 923) Increase in trade and other receivables (4 479) 8 697 Increase in trade and other payables 17 466 21 110 Cash generated from operations 80 455 (3 946) Finance costs paid 24.1 (15 628) 2 174 Finance income received 24.2 2 238 — Tax paid 24.3 (91) (23 131) Dividends paid 24.4 (23 816) (3 793) Net cash flows from operating activities 43 158
Cash flows utilised by investing activities (466 786) Acquisition of investment properties (811 171) (200 000) Investment in financial instrument 10 (200 000) 195 698 Amount including interest received from sale of financial instrument 10 195 698 (1 905) Acquisition of property, plant and equipment 7 (1 905) (472 993) Net cash flows utilised by investing activities (817 378)
Cash flows from financing activities 650 430 Proceeds from share issue 650 430 127 372 Proceeds from bank loans 127 372 (299 961) Increase in borrowings to subsidiaries — 477 841 Net cash flows from financing activities 777 802
1 055 Net movement in cash and cash equivalents 3 582 — Cash and cash equivalents at the beginning of the year — 1 055 Cash and cash equivalents at the end of the year 3 582
36 // INTEGRATED REPORT 2015 STATEMENT OF CHANGES IN EQUITY
Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2015
Stated Retained Equity Total capital earnings reserve R’000 R’000 R’000 R’000
GROUP Balance at 1 March 2014 — — — — Total comprehensive income — 184 031 — 184 031 Shares issued for cash 430 Shares issued for property and subsidiary acquisitions 490 169 — — 490 169 Shares issued for cash on listing 650 000 — — 650 000 Equity-settled share-based payment 201 201 Dividends distributed to shareholders (23 816) — (23 816) Balance at 28 February 2015 1 140 599 160 215 201 1 301 015
COMPANY Balance at 1 March 2014 — — — — Total comprehensive income — 49 071 — 49 071 Shares issued for cash 430 Shares issued for property and subsidiary acquisitions 490 169 — — 490 169 Shares issued for cash on listing 650 000 — — 650 000 Equity-settled share-based payment — — 201 201 Dividends distributed to shareholders — (23 131) — (23 131) Balance at 28 February 2015 1 140 599 25 940 201 1 166 740
INTEGRATED REPORT 2015 // 37 ACCOUNTING POLICIES
Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2015
The principal accounting policies applied in the preparation of the consolidated financial statements are set out below and are consistent with those applied in the previous year, unless otherwise stated. The Group’s consolidated and Company’s separate financial statements were authorised for issue by the Board of Directors on 12 May 2015.
1. Basis of preparation The principle assumptions underlying the Board’s The consolidated and separate financial statements estimation of fair value are the receipt of contracted have been prepared in accordance with IFRS, IFRIC rentals, lease renewals, maintenance requirements, Interpretations, the SAICA Financial Reporting Guidelines operational costs and appropriate discount and and the requirements of the South African Companies capitalisation rates. Act, No. 71 of 2008, as amended. b. Acquisition of property subsidiaries 2. Comparative information Where the Group obtains control of entities that own The Company was incorporated on 20 May 2013 and its investment properties rather than acquire such first financial year end was 28 February 2014. Other than properties directly, an evaluation is performed as to the issue of 100 ordinary shares of no par value for R100, whether such acquisitions should be accounted for there was no trading activity or any balances in the as business combinations or acquisitions in terms of statement of financial position as at 28 February 2014. IAS 40 Investment Properties. An acquisition is not Furthermore, all subsidiaries of the Company were considered to be a business combination if at the acquired during the current financial year. Therefore, date of the acquisition of the entity the integrated when presented in R’000, all comparative amounts are nil activities deemed necessary to generate a business and they have not been presented on the face of the are not present. Management concluded that all statement of financial position, statement of acquisitions in the current financial year were of this comprehensive income or statement of cash flows. nature. Therefore these were accounted in terms of IAS 40 Investment Properties. 3. Use of judgements and estimates The preparation of the financial statements in accordance c. Other areas of significant judgement with IFRS requires Management to exercise its judgment and estimation in the process of applying the Group’s accounting policies – Impairment of trade and other receivables (note 9) and make estimates and assumptions concerning the – Fair value of financial asset held at fair value future. The most significant judgments, estimates and (note 10) assumptions that may have a material impact on the – Computation of Equity-settled share-based financial statements are as follows: payment (note 13)
a. Valuation of investment property The Board has used the best available evidence to determine the fair value of investment properties as set out in note 5 to the financial statements. This includes current market prices for properties with similar characteristics and leases and cash flow projections. As available information is not directly comparable, the amounts are determined within a reasonable range of fair value.
38 // INTEGRATED REPORT 2015 4. Changes in accounting policy and disclosures
a. Standards, amendments and interpretations effective for the first time at 28 February 2015 The standards, amendments and interpretations effective for the first time in the current financial year have been summarised below. None of these had a material impact on the results or disclosures in the annual financial statements.
Description Effective date Amendments to IFRS 10, IFRS 12 and IAS 27 – Investment entities 01 Jan 14 Amendment to IAS 32 – Offsetting Financial Assets and Financial Liabilities 01 Jan 14 Amendment to IAS 36 – Recoverable amount disclosures for non-financial assets 01 Jan 14 Amendment to IAS 39 – Novation of derivatives and continuation of hedge accounting 01 Jan 14 Annual Improvements 2010-12 cycle Grant date or IFRS 2 Share-based payment acquisition date on IFRS 3 Business combinations or after 01 Jul 14
b. Standards, amendments and interpretations issued but not yet effective at 28 February 2015 The table below summarise the standards, amendments and interpretations that have been published but that are not yet effective in the current financial year and have not been early adopted. None of these standards, amendments and interpretations are expected to have a material impact on the results of the Group, although some changes to disclosure are expected.
Description Effective date IFRS 9 Financial Instruments 01 Jan 18 Amendments to IFRS 10 and IAS 28 – Sale or contribution of assets between an investor and its associate or joint venture 01 Jan 16 Amendments to IFRS 10, IFRS 12 and IAS 28 Investment entities – Applying the consolidation exception 01 Jan 16 Amendments to IFRS 11 – Joint arrangements 01 Jan 16 IFRS 14 Regulatory deferral accounts 01 Jan 16 IFRS 15 Revenue from contracts with customers 01 Jan 17 Amendments to IAS 1 – Disclosure initiative 01 Jan 16 Amendments to IAS 16 and IAS 38 – Clarification of acceptable methods of depreciation and amortisation 01 Jan 16 Amendment to IAS 19 – Employee benefits 01 Jul 14 Amendment to IAS 27 – Equity method in separate financial statements 01 Jan 16 Amendments to IAS 16 and IAS 41 – Agriculture: bearer plants 01 Jan 16 Annual Improvements 2010-12 cycle 01 Jul 14 Annual Improvements 2011-13 cycle 01 Jul 14 Annual Improvements 2012-14 cycle 01 Jan 16
5. Consolidation The acquisition method is used to account for business combinations. The consideration transferred a. Subsidiaries is measured at the fair value of the assets Subsidiaries are entities (including structured entities) transferred, equity instruments issued and liabilities over which the Group has control. Control exists incurred or assumed at the date of acquisition. when the Group is exposed to, or has rights to, Identifiable assets acquired as well as liabilities and variable returns from its involvement with the entity contingent liabilities assumed in a business and has the ability to affect those returns through its combination are measured initially at their fair values power to govern the financial and operating policies at the acquisition date, irrespective of the extent of thereof. Subsidiaries are fully consolidated from the any non-controlling interest. Acquisition-related costs date on which control is transferred to the Group. are expensed as incurred. The excess of the They are deconsolidated from the date that consideration transferred over the fair value of the control ceases. Group’s share of the identifiable net assets of the subsidiary acquired is recorded as goodwill. INTEGRATED REPORT 2015 // 39 ACCOUNTING POLICIES (CONTINUED)
Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2015
5. Consolidation (continued) a. Loans and receivables Loans and receivables are non-derivative financial a. Subsidiaries (continued) assets with fixed or determinable payments that are If the consideration transferred is less than the not quoted in an active market. They are included Group’s share of the fair value of the net assets of within current assets unless the expected recovery is the subsidiary acquired, the difference is recognised more than 12 months from the end of the financial directly in the profit or loss. year. The Group loans and receivables comprise trade and other receivables and cash and cash equivalents b. Treatment of intergroup transactions in the statement of financial position. They are All intergroup transactions, balances and unrealised initially recognised at fair value (including transaction gains and losses on transactions between entities of costs) and subsequently at amortised costs using the the Group have been eliminated. When necessary, effective interest rate method. accounting policies of subsidiaries have been changed to ensure consistency with the policies If there is objective evidence that an impairment loss adopted by the Group. has been incurred, the amount of the loss is measured as the difference between the loans and 6. Segment reporting receivables’ carrying amount and the present value of Operating segments are reported in a manner consistent the estimated future cash flows discounted at the with the internal reporting provided to the chief original effective interest rate applicable to the operating decision maker (“CODM”), which comprises relevant loans and receivables. The carrying amount the three executive directors. The CODM allocates will be reduced and the loss recognised in the profit resources and assesses the performance of the operating or loss. segments of the Group. b. Financial assets at fair value through profit 7. Financial instruments or loss The Group classifies its financial instruments in the Financial assets at fair value through profit or loss are following categories: loans and receivables, financial assets investments which were acquired principally for the at fair value through profit and loss, financial liabilities and purpose of selling in the short-term. These assets are derivatives at fair value through profit or loss. The described as financial assets at fair value in statement classification depends on the purpose for which the of financial position. Such assets are classified as financial instruments were acquired. Management current or non-current based on their determines the classification of its financial instruments at expected maturity. initial recognition and re-evaluates such designations when circumstances indicate that reclassification is permitted. The c. Financial liabilities Group assesses at each statement of financial position date Loans, borrowings and trade and other payables are whether there is objective evidence that a financial classified as financial liabilities and are measured at instrument or a Group of financial instruments is impaired. amortised cost using the effective interest rate method.
Financial assets are derecognised when the contractual d. Derivative financial instruments rights to the cash flows from the financial assets expire or The Group’s derivatives at fair value through profit or have been transferred and the Group has transferred loss comprise interest rate swaps and are either substantially all risks and rewards of ownership. Financial assets or liabilities and are classified as current due to liabilities are derecognised when they are extinguished, the potential short-term maturity of the carrying i.e. when the contractual obligation is discharged, amount. Purchases and settlements of derivative cancelled, expires or when a substantial modification of financial instruments are initially recognised on the the terms occur. trade date at fair value and are subsequently carried at fair value. Unrealised gains and losses arising from Financial assets and liabilities are offset and the net changes in the fair value of derivative financial amount reported in the statement of financial position instruments are included in fair value adjustments in when there is a legally enforceable right to offset the the statement of comprehensive income. Realised recognised amounts and there is an intention to settle gains and losses are recognised within finance costs. on a net basis or realise the asset and settle the liability simultaneously. The Group does not apply hedge accounting and does not enter into derivative contracts for trading or speculative purposes.
40 // INTEGRATED REPORT 2015 e. Impairment of financial assets Investment property is initially measured at cost, The Group assesses each financial asset for objective including all related transactions and borrowing costs. evidence of impairment at the end of each reporting Subsequently, investment property is carried at fair value period. A financial asset is considered impaired if and all movements in fair value are recognised in profit or there is objective evidence of impairment as a result loss. The directors determine fair value of investment of one or more events that have occurred since initial property at each reporting period. External valuations are recognition of the asset, which has a negative impact obtained as deemed appropriate and each property is on the future cash flows thereof which can be externally valued at least once every three years. reliably measured. Subsequent expenditure is capitalised to the asset’s Where objective evidence of impairment exists, the carrying amount only when it is probable that future impairment loss is calculated as the difference economic benefits associated with the expenditure will between the financial asset’s carrying amount and flow to the Group and the cost of the item can be the present value of estimated future cash flows measured reliably. All other costs, including repairs and discounted at the financial asset’s original effective maintenance, are expensed as incurred. interest rate. Future costs or capital commitments are not included in Impairment losses are reversed where these the fair value of investment property. objectively relate to an event occurring after the original impairment was recognised. Investment properties are derecognised either when they have been disposed of or where an individual property is Impairment losses and reversals are recognised in permanent destroyed or its value permanently reduced as profit or loss. not future economic benefit is expected from it.
8. Impairment of non-financial assets 10. Operating leases The carrying amounts of the Group’s non-financial assets Leases in which a significant portion of the risks and are reviewed for indicators of impairment at each rewards of ownership are retained by the lessor, are reporting date. Where such indicators exist, the asset classified as operating leases. None of the companies recoverable amount is estimated. within the Group are party to finance leases.
Where the carrying value of an asset exceeds its a. Where a company in the Group is the lessor estimated recoverable amount, the carrying value is Rental income is the Group’s primary source of impaired and the asset is written down to its recoverable revenue as detailed in accounting policy 18. amount. The recoverable amount is calculated as the higher of the asset’s fair value less cost to sell and the b. Where a company in the Group is the lessee value in use. These calculations are prepared based on Lease payments, including prepayments are charged Management’s assumptions and estimates such as to profit or loss on a straight-line basis over the forecasted cash flows, Management budgets and period of the lease. financial outlook. For the purpose of impairment testing the assets are allocated to cash-generating units. Cash- 11. Property, plant and equipment generating units are the lowest levels for which Property, plant and equipment are tangible assets held by separately identifiable cash flows can be determined. the Group for administrative and operational purposes and are expected to be used during more than one The Group assesses at each reporting date whether there period. All property, plant and equipment are stated at is any indication that an impairment loss recognised in historical cost less accumulated depreciation and prior periods for an asset has decreased or no longer accumulated impairment. The historical cost includes all exists and recognises a reversal of an impairment loss. expenditure that is directly attributable to the acquisition Impairment losses are only reversed to the extent that of the buildings, machinery, equipment and vehicles and they do not increase an asset’s carrying value above the is depreciated on a straight-line basis, from the date it is carrying value it would have been if no impairment loss available for use, at rates appropriate to the various had been recognised. classes of assets involved, taking into account the estimated useful life and residual values of the individual Impairment losses and reversal are recognised in profit items, as follows: or loss. – Computer equipment: 3 years – Furniture and fittings: 6 years 9. Investment property Property held for rental income and capital appreciation (and not occupied by the Group) is classified as investment property. Investment property includes properties under development.
INTEGRATED REPORT 2015 // 41 ACCOUNTING POLICIES (CONTINUED)
Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2015
11. Property, plant and equipment (continued) 15. Stated capital Management determines the estimated useful lives, Ordinary shares are classified as equity. Incremental costs residual values and the related depreciation charges at directly attributable to the issue of ordinary shares and acquisition and these are reviewed at each statement of share options are recognised as a deduction from equity, financial position date. If appropriate, adjustments are net of any tax effects. made and accounted for prospectively as a change in estimate. 16. Borrowings Borrowings are initially recognised at fair value (net of Subsequent expenditure is capitalised to the asset’s any transaction costs) and subsequently at amortised carrying amount only when it is probable that future cost. Borrowings are generally long-term in nature and economic benefits associated with the expenditure will are classified as non-current liabilities, except to the flow to the Group and the cost of the item can be extent that amounts are contractually unavoidable in the measured reliably. All other costs, including repairs and 12 months from the reporting date. maintenance, are expensed as incurred. 17. Provisions An asset’s carrying amount is written down immediately Provisions are recognised when the Group has a present to its recoverable amount if the asset’s carrying amount is legal or constructive obligation as a result of past events, greater than its estimated recoverable amount. it is probable that an outflow of resources embodying economic benefits will be required to settle the Gains and losses on disposal or scrapping of property, obligation, and a reliable estimate of the amount of the plant and equipment, being the difference between the obligation can be made. net proceeds on disposal or scrapping and the carrying amount, are recognised in profit or loss. Provisions are discounted to their present value where the effect of the time value of money is material and the 12. Investment in subsidiaries notional interest of unwinding this discount is included The Company’s investments in subsidiary companies within finance costs if applicable. are carried at cost (including transaction costs) less impairment losses. 18. Revenue Revenue comprises contractual rental income and tenant 13. Trade and other receivables recoveries exclusive of Value Added Tax. Contractual Trade and other receivables are recognised at trade date rental income is recognised on straight-line basis over at fair value and subsequently at amortised cost using the the term of the lease taking into account fixed escalation effective interest rate method, less impairment. Trade clauses. Tenant recoveries are recognised as they are receivables are amounts due from tenants for contractual earned in line with the contractual rights in the leases. lease charges and recoveries and are classified as current Lease incentives, such as tenant installation allowances, assets unless recovery is expected more than 12 months are recognised together with rental income over the from the reporting date. lease period.
Management identifies impairment of trade receivables Rental income received in advance is recognised as a on an ongoing basis. Impairment adjustments are raised current liability as part of trade and other payables in against trade receivables when the collectability is statement of financial position. considered to be doubtful. Management believes that the impairment write-off is conservative and there are no Revenue for the Company also includes dividends significant trade receivables that are doubtful and have received from subsidiary companies, which is recognised not been written off. in the period in which they are declared.
14. Cash and cash equivalents 19. Employee benefits Cash comprises cash on hand and positive bank balances. Cash equivalents are short-term highly liquid investments a. Short-term employee benefits that are readily convertible to known amounts of cash Wages, salaries, paid annual leave and other costs of and not subject to a significant risk of a change in value. short-term employee benefits are recognised as employee benefit expense in profit or loss in the period in which the services are rendered.
42 // INTEGRATED REPORT 2015 b. Short-term bonuses Deferred income tax is determined using tax rates and The Group recognises an expense in profit or loss laws that have been enacted or substantially enacted by and accrues for short-term bonuses in the statement the statement of financial position date and are expected of financial position where such payments can be to apply when the related deferred income tax asset is contractually determined or where past practice has realised or the deferred income tax liability is settled. created a constructive obligation. Deferred income tax assets are recognised only to the c. Employee share scheme extent that it is probable that future taxable profit will The Group operates a conditional share plan, which be available against which temporary differences can is classified as an equity-settled share-based payment be utilised. plan, under which it receives services from employees as consideration for equity instruments of the 21. Finance income and costs Company. The beneficiaries under the scheme are executive directors and Management. The fair value a. Finance income of the employee services received in exchange for the Finance income comprises interest earned on positive grant of shares is recognised as an expense on a bank balances and short-term investments. Interest is straight-line basis over the vesting period, with a recognised in profit or loss using the effective interest corresponding adjustment to the share-based rate method. payment reserve. b. Finance costs The total amount expensed to profit or loss is Finance costs comprise interest accrued on determined by reference to the fair value rights to borrowings, related capitalised fees and fair value equity instruments granted, including any market movements on interest rate derivative instruments. performance conditions and excluding the impact of any non-market performance vesting conditions. General and specific borrowing costs directly Non-market performance vesting conditions are attributable to the acquisition, construction or included in assumptions regarding the number of development of qualifying assets are capitalised shares granted that are expected to vest. At the end as part of the cost of these assets until they are of each reporting period, the Group revises its substantially ready for their intended use. Qualifying estimates of the number of shares granted that are assets necessarily take a substantial period of time expected to vest and recognises the impact of any to get ready for their intended use. changes in profit or loss with a corresponding adjustment to equity Capitalisation of borrowing costs commences when the activities to prepare the asset are in The effect of all conditional shares granted is taken progress and expenditures and borrowing costs into account when calculating diluted earnings and are being incurred. The capitalisation rate is arrived diluted headline earnings per share. at with reference to the actual rate for borrowings incurred for the specific asset or the weighted 20. Income tax average cost of borrowings where the development The income tax expense for the period comprises current is financed out of general funds. and deferred income tax and is recognised in profit or loss except to the extent that it relates to items All finance costs which are not capitalised are recognised in other comprehensive income or directly in recognised in profit or loss. equity, in which case it will also be recognised in other comprehensive income or directly in equity, as applicable. 22. Earnings per share Earnings and headline earnings per share are calculated The current income tax charge is calculated on the basis by dividing the net profit attributable to owners of the of the tax laws enacted or substantively enacted at the parent and headline earnings, respectively, by the weighted statement of financial position. Deferred income tax is average number of ordinary shares in issue during the year. recognised, using the liability method, for calculated income tax losses and temporary differences arising Diluted earnings and diluted headline earnings per share between the tax bases of assets and liabilities and their is determined by adjusting for the impact on earnings carrying values for financial reporting purposes. Deferred and the weighted average number ordinary shares of all income tax is not recognised if it arises from the initial known dilutive potential ordinary shares. recognition of an asset or liability in a transaction other than a business combination that, at the time of the 23. Dividend distribution transaction, affects neither accounting nor taxable profit Dividend distributions are recognised as a liability in the nor loss. statement of financial position in the period in which the dividends are declared.
INTEGRATED REPORT 2015 // 43 NOTES TO THE ANNUAL FINANCIAL STATEMENTS
Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2015
1. Earnings per share – Group This note provides the obligatory information in terms of IAS 33 Earnings per share and SAICA Circular 2/2013 for the Group and should be read in conjunction with note 2, where earnings are reconciled to distributable earnings. Distributable earnings determine the dividend declared to shareholders, which is a meaningful metric for a stakeholder in a REIT.
1.1 Basic earnings per share 2015 Shares in issue Number of shares Number of shares in issue at end of year 114 410 255
Weighted average number of shares in issues 89 935 947 Add: weighted potential dilutory impact of condition shares awarded during the year (note 13) 79 250 Diluted weighted average number of shares in issues 90 015 198
Basic earnings per share cents Basic earnings per share 204,6 Diluted earnings per share 204,4
1.2 Headline earnings per share
Reconciliation between basic earnings and headline earnings: R’000
Earnings (profit attributable to owners of the parent) 184 031 Adjusted for: Fair value adjustments to investment properties (115 609) Headline earnings 68 422
Headline earnings per share: cents Headline earnings per share 76,1 Diluted headline earnings per share 76,0
44 // INTEGRATED REPORT 2015 2. Reconciliation between earnings and distributable earnings – Group
2.1 Distributable earnings and distribution per share
3 months ended* 9 months ended* year ended R’000 31 May 2014 28 February 2015 28 February 2015
Earnings (profit attributable to owners of the parent) (11 150) 195 181 184 031 Adjusted for: Fair value adjustments to investment properties 478 (116 087) (115 609) Headline earnings (10 672) 79 094 68 422 Adjusted for: Straight-lining of leases adjustment (2 931) (11 997) (14 928) Fair value adjustments to financial instruments — 512 512 Capital raising expenses 14 288 613 14 901 Equity-settled share-based payment reserve — 201 201 Financial instrument capital loss — 1 490 1 490 Distributable earnings 685 69 913 70 598
Number of shares in issue at period end 30 565 254 114 410 255 114 410 255
* The nine month results to 28 February 2015 were used to determine the distribution to post-listing shareholders as fully explained in the directors’ report. The information presented for the three months ended 31 May 2014 and nine months ended 28 February 2015 are for information purposes only to illustrate the earnings attributable to listed shareholders.
2.2 Dividends declared and distribution per share
Cents per share R’000 Interim dividend declared 10 October 2014 20,37 23 131 Final dividend declared on 12 May 2015 40,89 46 782
Total distributions declared since listing on the JSE 61,26 69 913
Total distributable earnings for the year ended 28 February 2015 was R70 598 000. R685 000, however, related to the distributable earnings for the first three months of the reporting period and was declared as a pre-listing clean-out distribution to the vendor shareholders.
INTEGRATED REPORT 2015 // 45 NOTES (CONTINUED)
Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2015
3. Segment information Segments are reported in a manner that is consistent with the internal reporting provided to the chief operating decision maker (“CODM”), which comprises the three executive directors. The CODM regularly reviews the operating results of the Group’s three operating segments: – Industrial – Office – Non-property (corporate)
The industrial and office segments derive their revenue primarily from rental income from leases.
All treasury functions, corporate costs and other expenses that are not specifically attributable to individual properties, are included in the “non-property” segment.
The measurement of results reviewed by the CODM is consistent with those presented in the annual financial statements (“AFS”) and the only reconciling item with the results, and total assets and liabilities of the Group is the effect of the straight-lining of leases.
The segment information for the Group for the year ended 28 February 2015 is set out below:
Operating segments Straight- Non- lining R’000 Industrial Office property of leases Total
Segment revenue 93 851 21 813 — 14 928 130 592 Operating profit 75 393 15 949 (7 742) 14 928 98 528 Fair value adjustments — — 115 097 — 115 097 Finance income — — 2 425 — 2 425 Finance costs — — 15 628 — 15 628 Amortisation — — 58 — 58 Investment property 1 033 691 383 258 — 14 928 1 431 877 Acquisition of investment property 1 055 582 245 758 — — 1 301 340 Total assets 1 041 017 383 327 7 093 14 928 1 446 365 Total liabilities 6 578 2 567 136 205 — 145 350
The property analysis in note 28 also includes detailed information on the industry and geographic dispersion of the Group’s properties.
46 // INTEGRATED REPORT 2015 4. Financial risk management and fair value measurement Financial risk arises from the Group’s exposure to financial instruments and comprises market risk (interest rate risk, currency risk and price risk), credit risk and liquidity risk. The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board has delegated this responsibility to the Audit and Risk Committee, which considers the adequacy of the Group’s risk management framework and monitors Management’s implemention of risk management policies and procedures.
The Group’s policies are designed to ensure that appropriate risk limits have been set for financial risks and that adherence to these limits is monitored continuously.
4.1 Market risk Market risk is the risk that changes in market prices, such as interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
4.1.1 Interest rate risk The Group is exposed to interest rate risk on interest-bearing borrowings, cash and cash equivalents and other short-term interest-bearing investments.
During the year under review, the Group consolidated its interest-bearing borrowings into one 5 year term secured loan facility with Nedbank Limited, which currently accrues interest at a floating rate of Prime less 1.6%. The Group has adopted a policy of fixing 80% of its permanent floating-rate borrowings by entering into interest rate swaps and other derivative instruments.
At the end of the current year, the Company had one open interest rate swap as set out in note 15. This swap fixes the interest rate on R100 million of debt to 8.85% for the period 1 March 2015 to 31 August 2019.
The Group currently receives prime less 4.7% on short-term cash balances. Given that surplus funds are transferred to the access facility of the Nedbank loan on a daily basis, this does not expose the Group to material interest rate risk. The Group’s sensitivity to interest rate fluctuations as at 28 February 2015 is illustrated below:
Sensitivity analysis to interest rates
R’000 COMPANY GROUP
Increase in earnings if interest rates had been 1% lower during the year 1 263 1 238 Decrease in earnings if interest rates had been 1% higher during the year (1 263) (1 238)
The sensitivity analysis assumes that all other items remain unchanged and is based on the borrowings and cash balances at the end of the reporting period.
4.1.2 Currency risk The Group is not currently exposed to currency risk, as all its operations are denominated in South African rand.
INTEGRATED REPORT 2015 // 47 NOTES (CONTINUED)
Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2015
4. Financial risk management and fair value measurement (continued)
4.2 Credit risk The Group is principally exposed to credit risks as a result of its receivables balances from tenants and short-term investments and cash balances with financial institutions. The carrying values as at 28 February 2015 in the statement of financial position represent the maximum exposure to credit risk.
4.2.1 Trade and other receivables The Group has credit-vetting procedures in place before entering into leases with new tenants. The Group’s tenants are predominantly blue-chip companies and there were no significant concentrations of credit risk at year end.
The Group’s exposure to credit risk arising from trade and other receivables is set out in note 9.
4.2.2 Cash and cash equivalents and short term-investments All short-term funds are invested with reputable financial institutions. Cash balance are only retained for working capital requirements. See note 11 for detail of cash balances at year end.
Credit ratings of counterparties:
Fitch Fitch short-term long-term
Nedbank Limited F1+ (zaf) AA (zaf) ABSA Bank Limited F1+ (zaf) AAA (zaf)
4.2.3 Financial asset held at fair value As at 28 February 2015, the Group is exposed to credit risk of R4.5 million relating to its investment in a Nedbank Limited unit trust as detailed in note 10. The investment is reflected at its estimated recoverable value, which is the current amount realisable, dependent on African Bank Investments Limited’s resuming senior debt repayments.
4.3 Liquidity risk Liquidity risk is defined as the risk that the Group would not be able to settle or meet its obligations on time or at a reasonable price. Management monitors the Group’s net liquidity position on a continuous basis on the basis of expected cash flows.
The table below analyses the Group’s non-derivative financial liabilities based on their contractual maturities. The amounts shown represent the contractual undiscounted amounts.
As at 28 February 2015 COMPANY GROUP Less than Between 2 Less than Between 2 R’000 1 year and 5 years 1 year and 5 years
Financial liabilities (Nedbank Limited loan) 9 744 161 476 9 744 161 476 Trade and other payables 8 697 — 17 466 — 18 441 161 476 27 210 161 476
48 // INTEGRATED REPORT 2015 4.4 Capital management The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and reducing the cost of capital. As a Real Estate Investment Trust (“REIT”), the Company is required to declare 75% of its distributable profit as a dividend. The Board has decided (subject to the availability of cash resources and legislative requirements) to declare 100% of the distributable profit of the Group as a dividend on a biannual basis for the foreseeable future. As a result of the Group’s dividend policy, capital expansion is funded through a combination of bank debt and equity funding. The Group is subject to a loan covenant which limits the loan to value (“LTV”) to 50% and targets a LTV of not more than 40% over time.
LTV ratio at 28 February 2015
R’000 COMPANY GROUP
Total borrowings 127 372 127 372 Fair value of investment properties 503 877 1 431 877 LTV ratio 25.3% 8.9%
4.5 Fair value measurement All assets measured at fair value are classified according to a three-tiered fair value hierarchy that reflects the significance of the inputs used in determining the measurement as follows: Level 1 – measurements in whole or in part are done by reference to unadjusted, quoted prices in an active market for identical assets and liabilities. Quoted prices are readily available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm’s length basis. Level 2 – measurements are done by reference to inputs other than quoted prices that are included in level 1. These inputs are observable for the financial instrument, either directly (i.e. as prices) or indirectly (i.e. from derived prices). Level 3 – measurements are done by reference to inputs that are not based on observable market data .
Assets at fair value at 28 February 2015
R’000 COMPANY GROUP
Level 1 None Level 2 Financial assets at fair value (note 10) 4 489 4 489 Derivative financial liabilities (note 15) 512 512 Level 3 Non-financial assets at fair value – investment properties (note 5) 503 877 1 431 877 The key input to the valuation of investment property is the capitalisation rate. The table below illustrates the sensitivity of the fair value to changes in the capitalisation rate:
Sensitivity analysis to capitalisation rates
R’000 COMPANY GROUP
Increase in fair value if capitalisation rates are decreased by 0.5% 30 811 106 312 Decrease in fair value if capitalisation rates are increased by 0.5% (27 454) (61 600) There were no transfers between Level 1, 2 or 3 during the year.
INTEGRATED REPORT 2015 // 49 NOTES (CONTINUED)
Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2015
COMPANY GROUP
28 February 2015 28 February 2015 R’000 R’000
5. Investment property
Reconciliation of investment property
— Opening balance — 466 786 Additions 1 301 340 32 223 Fair value adjustment 115 609 499 009 Fair value of investment properties (excluding straight-lining) 1 416 949 4 868 Straight-lining lease accrual 14 928 503 877 Closing balance 1 431 877
Investment properties are encumbered as security against the Group’s loan facility (note 14).
Investment properties with a cost of R1.174 million were acquired pursuant to the listing of the Group on the JSE on 18 June 2014. All these properties were independently valued by MRB Gibbons of Mills Fitchet Magnus Penny Proprietary Limited for the purposes of the pre-listing statement.
The fair value of investment properties is updated at each reporting period either by way of external valuations or directors’ valuations. All adjustments during the current year are based on directors’ valuations, which were done on an open-market basis using the capitalisation of net income valuation method. External valuations are obtained as required, but at least once every three years for each property.
Capitalisation rates used to determine the fair value of investment properties were risk adjusted for all factors that influence the sustainability of cash flows from each property. Capitalisation rates varied between 8% and 11%. The sensitivity of the fair values to changes in the capitalisation rate is illustrated in note 4.5.
All investment properties generated rental income during the reporting period and all property operating and management expenses in the statement of comprehensive income relate to properties that generate rental income.
6. Straight-lining lease accrual
Contractual lease receivables are as follows:
39 947 Within one year 119 777 111 119 Between one and five years 389 364 39 577 Beyond five years 54 259 190 643 563 400 (185 775) Less: lease revenue on straight-line basis (548 472) 4 868 Straight-lining lease accrual 14 928
50 // INTEGRATED REPORT 2015 7. Property, plant and equipment
COMPANY AND GROUP Furniture Computer R’000 and fittings equipment Total
Cost Opening balance — — — Additions 1 795 110 1 905 Closing balance 1 795 110 1 905
Accumulated amortisation Opening balance — — — Charge for the year (42) (16) (58) Closing balance (42) (16) (58)
Book value Opening balance — — — Additions 1 795 110 1 905 Amortisation charge for the year (42) (16) (58) Closing balance 1 753 94 1 847
8. Interest in subsidiaries
COMPANY Acquisition date Effective interest Investment Amount owing by R’000 R’000
Applemint Properties 93 (Pty) Ltd 1 March 14 100% 4 271 13 717 Dormell Properties 711 (Pty) Ltd 1 June 14* 100% 40 802 44 956 Equites Lords View Development 1 March 14 100% — — (Pty) Ltd Galt Property One (Pty) Ltd 1 March 14 100% 50 500 82 257 Galt Property Two (Pty) Ltd 1 March 14 100% 64 445 122 164 Kovacs Investments 715 (Pty) Ltd 1 March 14 100% 60 610 49 802 Nascispan (Pty) Ltd 1 September 14 100% 8 731 31 670 Prop for list (Pty) Ltd 1 June 14 100% — 89 321 Swish Property Seven (Pty) Ltd 1 March 14 100% 45 656 81 228 275 015 515 115
*50% acquired for shares on 1 June 2014 and 50% acquired for cash on 1 September 2014.
All subsidiaries are incorporated in South Africa and are held directly by the Company through ordinary shares. There are no unconsolidated subsidiaries or share investments.
All amounts owing by subsidiaries are unsecured, interest free and payable on demand.
All subsidiaries were acquired during the year through the issue of shares, except Dormell Properties 711 (Pty) Ltd, of which 50% was acquired for shares and 50% for cash. All shares issues were effected as part of the listing process and issued at R10 per ordinary share, other than Nascispan (Pty) Ltd which was acquired on 1 September 2014 for shares at R10.44 per ordinary share.
Acquisitions of underlying investment properties were accounted for in terms of IAS 40 Investment Properties in the Group’s statement of financial position.
INTEGRATED REPORT 2015 // 51 NOTES (CONTINUED)
Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2015
COMPANY GROUP
28 February 2015 28 February 2015 R’000 R’000
9. Trade and other receivables 935 Trade receivables (tenants) 2 475 872 Property utility receivables 1 791 39 Municipal deposits 117 24 Supplier development loan 24 53 Other receivables 72 1 923 4 479
All trade and other receivables are denominated in South African rand and the carrying amounts approximate the fair values.
9.1 Credit quality of trade receivables
The credit quality of trade receivables is evaluated with reference to available financial information and history with the Company and can be categorised into the following groups:
521 A – Large nationals, large listeds and government 1 882 360 B – Smaller international and national tenants 539 54 C – Other local tenants and sole proprietors 54 935 2 475
The maximum exposure to credit risk for trade and other receivables are the carrying values.
9.2 Ageing of trade receivables
The ageing of trade receivables as at year end was as follows:
471 Current – up to 30 days 2 011 441 Past due – between 31 and 90 days 441 23 Past due – 91 days and longer 23 935 2 475
None of the past due amounts are considered impaired and there is no allowance for impairment of trade receivables at year end.
Trade receivables amounting to R49 000 were identified as impaired during the year and written off.
9.3 Property utility receivables Property utility receivables relate to amounts paid to local authorities, which are recoverable from the applicable tenant in terms of the lease agreements. All these amounts were recovered during March 2015.
52 // INTEGRATED REPORT 2015 COMPANY GROUP
28 February 2015 28 February 2015 R’000 R’000
9.4 Supplier development loan 24 Damon@Sons Construction (Pty) Ltd 24
These amounts were advanced to one of our small suppliers as part of our supplier development programme and are unsecured, do not bear interest and have no fixed terms of repayment.
10. Financial asset held at fair value — Opening balance — 200 000 Amount invested in Nedbank Core Income Fund 200 000 2 104 Interest accrued 2 104 (1 490) Capital loss on ABIL write-down (1 490) (196 125) Amount withdrawn (196 125) 4 489 Closing balance – transferred to ABIL retention fund 4 489
Surplus funding subsequent to listing were invested in Nedbank Limited’s Core Income Fund, which had an exposure to Afican Bank Investments Limited (“ABIL”) senior debt. All funds were subsequently withdrawn and used to settle property acquisitions, other than the balance that was ring-fenced in the “ABIL retention fund”.
The investment is classified as a financial asset at fair value through profit and loss and is expected to be realised within 12 months of the reporting date.
11. Cash and cash equivalents
11.1 Composition of cash and cash equivalents 378 Current accounts 2 903 666 Cash on call 668 11 Petty cash 11 1 055 3 582
11.2 Credit exposure of cash and cash equivalents
Amounts in current accounts and in call are invested with reputable institutions as follows:
1 044 Nedbank Limited 3 560 — ABSA Bank Limited 11 1 044 3 571
Cash and cash equivalents comprise amounts which are immediately available and the carrying amounts are equivalent to the fair values.
INTEGRATED REPORT 2015 // 53 NOTES (CONTINUED)
Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2015
COMPANY GROUP
28 February 2015 28 February 2015 R’000 R’000
12. Stated capital
12.1 Authorised shares 2 000 000 000 (two billion) ordinary shares of the same class and no par value.
12.2 Issued shares 1 140 599 114 410 255 ordinary shares of the same class and no par value. 1 140 599
The unissued shares are under the control of the directors until the next annual general meeting.
12.3 Reconciliation of issued shares – value
— Opening balance — 430 Shares issued for cash to initial shareholders and promoters 430 295 027 Shares issued to vendors for acquisition of subsidiaries 295 027 186 427 Shares issued to vendors for acquisition of letting enterprises 186 427 650 000 Shares issued for cash on initial public offering 650 000 8 715 Shares issued for the acquisition of Nascispan (Pty) Ltd 8 715 1 140 599 Closing balance 1 140 599
Number of shares 12.4 Reconciliation of issued shares – number Number of shares
— Opening balance — 430 000 Shares issued for cash to initial shareholders and promoters 430 000 29 502 702 Shares issued to vendors for acquisition of subsidiaries 29 502 702 18 642 714 Shares issued to vendors for acquisition of letting enterprises 18 642 714 65 000 000 Shares issued for cash on initial public offering 65 000 000 834 839 Shares issued for the acquisition of Nascispan (Pty) Ltd 834 839 114 410 255 Closing balance 114 410 255
54 // INTEGRATED REPORT 2015 13. Share-based payment reserve
13.1 Description of executive share plan The Group operates an executive share plan in terms of which it has granted conditional shares to directors and Management. The full share grant may be forfeited if participants do not meet the vesting conditions as detailed in the remuneration report.
These awards have been recognised as equity-settled share-based payments as a separate category within equity. The fair value of the award was determined with reference to the following assumptions:
Assumptions
Number of shares 235 174 Grant date 29 October 2014 Vesting date 31 May 2017 Issue price (30 day VWAP) R10,65 Forfeiture rate 5.0% Dividend yield 8.2% Performance condition factor 90.0%
13.2 Detail of grants The details of conditional shares awarded are set out below. The number of shares issued during the current year is also the closing balance of conditional shares that the individuals have rights to.
Name Grant date Issue price Number of shares
Andrea Taverna-Turisan 29 Oct 2014 R10.65 110 404 Riaan Gous 29 Oct 2014 R10.65 66 911 Bram Goossens 29 Oct 2014 R10.65 51 756 Management other than directors 29 Oct 2014 R10.65 6 103 Total conditional shares awarded and balance at year end 235 174
40% of the conditional shares are subject to a three-year service period only and 60% are subject to a three-year service period as well as certain Group and individual performance conditions.
INTEGRATED REPORT 2015 // 55 NOTES (CONTINUED)
Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2015
COMPANY GROUP
28 February 2015 28 February 2015 R’000 R’000
13. Share-based payment reserve (continued)
13.3 Reconciliation of share-based payment reserve
— Opening balance — 201 Expense recognised in the statement of comprehensive income 201 201 Closing balance 201
14. Financial liabilities 127 372 Nedbank Limited loan 127 372
14.1 Security for loan First covering mortgage bond for R47 000 000 by Prop for list (Pty) Ltd over Erf 34632 Milnerton and Erf 36530 Milnerton.
First sectional covering mortgage bond for R13 000 000 by Prop for list (Pty) Ltd over the sectional title unit(s) consisting of section number(s) 1 of the sectional title scheme known as “Erf 20843 Milnerton” together with an undivided share in the common property of such sectional title scheme and includes the right to exclusive use of the exclusive use areas pertaining thereto.
First covering mortgage bond for R20 000 000 by Galt Property One (Pty) Ltd over Erf 24589 Parow.
First covering mortgage bond for R30 000 000 by Galt Property One (Pty) Ltd over Erf 12669 Parow.
Second covering mortgage bond for R50 000 000 by Galt Property One (Pty) Ltd over Erven 12669 and 24589 Parow.
First covering mortgage bond for R100 000 000 by Kovacs Investments 715 (Pty) Ltd over R/Erf 161537 Cape Town.
Covering mortgage bond for R17 000 000 by Applemint Prop 93 (Pty) Ltd over Erf 159592 Cape Town as a first charge and by Kovacs Investments 715 (Pty) Ltd over R/Erf 161537 Cape Town as a second charge.
First covering mortgage bond for R100 000 000 by Swish Prop Seven (Pty) Ltd over Erf 176382 Cape Town.
First covering mortgage bond for R110 000 000 by Galt Property Two (Pty) Ltd over R/Erf 24033 Bellville.
First covering mortgage bond for R19 000 000 over Erf 21278 Milnerton.
First covering mortgage bond for R75 000 000 over Erf 23468 Parow.
First covering mortgage bond for R90 000 000 over Erf 35221 Bellville.
First covering mortgage bond for R50 000 000 over Erf 31292 Bellville.
First covering mortgage bond for R34 800 000 over Erf 174490 Cape Town.
First covering mortgage bond for R30 200 000 over R/Erf 170665 Cape Town.
First covering mortgage bond for R29 750 000 over Erf 167077 Cape Town.
56 // INTEGRATED REPORT 2015 First sectional covering mortgage bond for R90 000 000 over section 2 of the sectional title scheme known as “Execujet Business Centre” together with an undivided share in the common property of such sectional title scheme and includes the right to exclusive use of the exclusive use areas pertaining thereto.
First sectional covering mortgage bond by the borrower for R24 000 000 over section 3 of the sectional title scheme known as “Execujet Business Centre” together with an undivided share in the common property of such sectional title scheme and includes the right to exclusive use of the exclusive use areas pertaining thereto
14.2 Terms and conditions of loan Interest is calculated daily at prime less 1.6% and is paybable monthly. The full outstanding capital is repayable five years after inception, on 31 August 2019. Interest charged can be converted to JIBAR plus 1.85% at the option of the Company.
This loan can be increased to the maximum facility value of R600 million with immediate notice and is subject to a loan-to-value covenant of 50%.
COMPANY GROUP
28 February 2015 28 February 2015 R’000 R’000
15. Derivative financial liabilities 512 Interest rate swap 512
The liability represents the mark-to-market fair value of the interest rate swap as at 28 February 2015.
The details of the interest rate swap are as follows:
Swap maturity 31 August 2019 Nominal amount R100 million Effective swap rate 8.85%
The Group has a policy to hedge approximately 80% of its exposure to floating interest rates.
16. Trade and other payables 1 496 Tenant deposits 3 145 2 251 Trade payables 5 521 2 766 Payroll accruals 2 766 825 Trade receivables with credit balances 3 047 300 Accrual for audit fees 300 834 VAT payable 2 208 225 Other payables 479 8 697 17 466
The fair value of trade and other payables approximates the carrying value.
INTEGRATED REPORT 2015 // 57 NOTES (CONTINUED)
Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2015
COMPANY GROUP
28 February 2015 28 February 2015 R’000 R’000
17. Revenue Revenue comprises gross contractual rentals as well as contractual recoveries of utility costs, property taxes and operating costs as applicable, adjusted for the accounting straight-lining of lease income. For the Company, revenue also includes dividends received from subsidiary companies.
38 806 Contractual gross rentals and recoveries received or accrued 115 664 4 868 Adjustment to account for leases on a straight-line basis (note 6) 14 928 9 099 Dividends received from subsidiaries — 52 773 130 592
18. Other gains 5 Insurance recoveries 90 1 Sundry income 68 6 158
19. Expenses by nature
19.1 Composition of property operating and management and administrative expenses
8 182 Employee benefits (note 19.2) 8 182 9 261 Operating expenses (note 19.5) 24 040 17 443 Total property operating and management and administrative expenses 32 222
19.2 Employee benefits 1 142 Salaries and wages 1 142 951 Non-executive directors’ emoluments (note 19.3) 951 5 887 Executive directors’ emoluments (note 19.4) 5 887 201 Equity-settled share-based payment expense (note 13.3) 201 8 182 8 182
58 // INTEGRATED REPORT 2015 19.3 Non-executive directors’ emoluments
The following fees were paid to non-executive directors for their services as directors:
R’000 Director Fees
Leon Campher 340 Nazeem Khan 234 Ruth Eleanor Benjamin-Swales 234 Giancarlo Lanfranchi 29 Kevin Dreyer 58 Johnny Cullum 58 951
19.4 Executive directors’ emoluments
Remuneration paid to executive directors comprised:
Salary Performance bonus Total Director R’000 R’000 R’000
Andrea Taverna-Turisan 1 389 1 251 2 640 Riaan Gous 1 102 661 1 763 Bram Goossens 695 519 1 214 Chrystal Grauso* 270 — 270 3 456 2 431 5 887
*Chrystal Grauso resigned as director on 1 September 2014
COMPANY GROUP
28 February 2015 28 February 2015 R’000 R’000
19.5 Operating expenses 5 271 Property taxes and utility expenses 14 164 1 985 Property operational costs 6 453 514 External property management costs* 1 493 58 Amortisation of property, plant and equipment (note 7) 58 300 Auditors remuneration – audit fees 640 6 Auditors remuneration – non-audit fees 64 49 Bad debts written off 49 1 078 Other operating expenses 1 119 9 261 24 040
*All property management functions are performed internally as of 1 November 2014.
INTEGRATED REPORT 2015 // 59 NOTES (CONTINUED)
Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2015
COMPANY GROUP
28 February 2015 28 February 2015 R’000 R’000
20. Fair value adjustments 32 223 Fair value adjustment on investment property (note 5) 115 609 (512) Fair value mark-to-market of derivative financial instrument (note 15) (512) 31 711 115 097
21. Finance costs — Interest paid on property loans 10 971 3 934 Interest paid on Nedbank Ltd loan (note 14) 3 934 — Interest paid on shareholder loans 550 12 Interest on utility accounts and other 173 3 946 15 628
22. Finance income 2 104 Interest received on financial asset (note 10) 2 104 257 Interest received on call and current account balances 321 2 361 2 425
23. Income tax expense The Company is a Real Estate Investment Trust (“REIT”) and all subsidiaries in the Group are “controlled companies” (as defined in the Income Tax Act, 1962. After deducting “qualifying distributions” from taxable income, no income tax is payable in the current year.
Deferred tax assets for assessed losses and calculated tax losses have not been recognised. Given that none of the companies in the Group are expected to pay current income tax in the foreseeable future, the utilisation of such deferred tax assets is not considered probable at year end.
The deduction of the “qualifying distribution” from taxable earnings accounts for the entire difference in the standard tax rate of 28% and the effective tax rate of 0%.
60 // INTEGRATED REPORT 2015 COMPANY GROUP
28 February 2015 28 February 2015 R’000 R’000
24. Notes to the cash flow statement
24.1 Finance costs paid 3 946 Incurred and paid during the year 15 628
24.2 Finance income received 2 361 Finance income earned 2 425 (187) Balance outstanding at year end (187) 2 174 2 238
24.3 Tax paid — Taxation expense — — Amount refundable at end of year (91) — (91)
24.4 Dividend paid — Dividend declared to vendor shareholders 685 23 131 Dividend 1 declared 10 October 2014 and paid 10 November 2014 23 131 46 782 Dividend 2 declared 12 May 2015 and payable in June 2015 46 782 (46 782) Amount declared and paid after year end (46 782) 23 131 23 816
25 Capital commitments — Authorised for construction of new industrial property 111 063 142 200 Contracted for acquisition of land 142 200 6 950 Contracted for expansion to existing property 6 950 149 150 260 213
INTEGRATED REPORT 2015 // 61 NOTES (CONTINUED)
Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2015
26 Related parties Related party relationships exist between the Company, its subsidiaries, directors as well as their close family members, and key management of the Company.
The companies within the Group entered into certain transactions with one another during the current year, all of which have been eliminated on consolidation.
The majority of the Group’s investment properties were acquired from related parties as part of the formation and listing process. Full details of these transactions and nature of the related party relationships were set out in the pre-listing statement.
Nascispan (Pty) Ltd was acquired on 1 September 2014 for a consideration of R8.608 million and settled through the issue of the Company’s shares at the 30-day volume weighted average price. Nascispan was previously owned (in equal shares) by Skymax Trust (of which Giancarlo Lanfranchi is a beneficiary), Chiluan Holdings (Pty) Ltd (in which Andrea Taverna- Turisan has a beneficial interest) and Riaan Gous.
On 1 September 2014 the Company acquired an industrial building known as “Attyard” for R18.1 million from Tradefirm 150 (Pty) Ltd (in which Andrea Taverna-Turisan has a beneficial interest).
On 25 February 2015 the Company concluded an agreement to acquire 14.4 hectares from Dormell Properties 575 (Pty) Ltd (in which Johnny Cullum has a beneficial interest). As transfer of this property is only expected to take place in the next financial year, it has been classified as a non-adjusting subsequent event (note 27).
Investments in and amounts owing by subsidiaries are detailed in note 8.
Remuneration paid to directors are set out in note 19.
Details of the conditional share plan in which the directors participate are provided in note 13.
Details of directors’ interest in the ordinary shares of the Company are provided in the directors report.
COMPANY GROUP
28 February 2015 28 February 2015 R’000 R’000
In the ordinary course of business, the Company entered into the following other transactions with related parties:
— Dividend paid to vendor shareholders 685 414 Property management fee paid to Swish Property Administration CC 1 143 80 Rental paid to Swish Property Seventeen 80 — Interest paid to Skymax Trust (of which Giancarlo Lanfranchi is a beneficiary) 275 — Interest paid to Chiluan Holdings (Pty) Ltd (in which Andrea Taverna-Turisan has 275 a beneficial interest)
62 // INTEGRATED REPORT 2015 27 Subsequent events
27.1 Development of The Foschini Group distribution centre During the period Equites concluded an agreement in terms of which the Group will be developing a 22 227 square meter distribution warehouse for The Foschini Group (“TFG”), on the prestigious Lords View Industrial Park. The landlord in this development will be a joint venture between Equites and the owners of the Lords View Industrial Park. The capital value of the project is approximately R150 million and Equites will own approximately 75% of the JV. The lease commences on 1 April 2016 and the budgeted development yield is 9%.
27.2 Acquisition of airport land Equites concluded an agreement to acquire 14.4 hectares of prime vacant industrial land at Cape Town International Airport for R142.2 million. The acquisition will settled by issuing Equites shares in May 2016 and is still subject to certain conditions precedent.
27.3 Other subsequent events The directors are not aware of any other events that have occurred since end of the financial year, which have a material impact on the results and disclosures in these financial statements.
28 Property analysis
28.1 Property schedule
Gross lettable Average rental Property name Location Sector area (m2) per m2 (rand)
Industrial properties (excluding specialist buildings) 12 Madrid Airport Industria, Cape Town Industrial 3 000 60.7 18-22 Montreal Airport Industria, Cape Town Industrial 3 800 74.5 57 Aviation Airport Industria, Cape Town Industrial 2 950 71.4 67A Manhattan Airport Industria, Cape Town Industrial 2 800 75.2 Assegai Rd Parow Industria, Cape Town Industrial 7 931 52.8 Attyard Epping Industria, Cape Town Industrial 5 849 29.3 Execujet Wings Airport Industria, Cape Town Industrial 2 700 81.2 Printers Way Montague Gardens, Cape Town Industrial 3 300 47.3 Puma Montague Gardens, Cape Town Industrial 13 100 63.9 Simba Parow Industria, Cape Town Industrial 10 308 57.6 Tekstiel Rd Parow Industria, Cape Town Industrial 10 156 71.0 Tower Rd Airport Industria, Cape Town Industrial 16 783 48.5 Vanguard Drive Phillipi, Cape Town Industrial 15 798 59.5 Total industrial properties (excluding specialist buildings) 98 475 58,5
INTEGRATED REPORT 2015 // 63 NOTES (CONTINUED)
Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2015
28 Property analysis (continued)
28.1 Property schedule (continued)
Gross lettable Average rental Property name Location Sector area (m2) per m2 (rand)
Specialist industrial buildings Crossroads Milnerton, Cape Town Industrial 2 888 122.7 Execujet Hanger Airport Industria, Cape Town Industrial 5 347 140.9 Mill Street Bellville South, Cape Town Industrial 13 351 116.3 Total specialist industrial buildings 21 586 123.2
Commercial properties Belvedere Bellville, Cape Town Commercial 5 603 148.4 D’urban Square Bellville, Cape Town Commercial 3 222 129.6 Execujet Office Tower Airport Industria, Cape Town Commercial 6 776 117.3 Sans park Bellville South, Cape Town Commercial 2 000 64.2 Total commercial properties 17 602 123.4
Total income earning properties 137 663 76.9
Vacant land Phillipi land Phillipi, Cape Town Industrial 14 400* n/a
*Gross extent of land
28.2 Sectoral and geographic analysis of revenue All revenue was earned in Cape Town in the Western Cape. The segment information (note 4) details the sector split of revenue.
28.3 Tenant profile Gross lettable Gross lettable Number of Number of area (m2) area % tenants tenants %
A – Large nationals, large listeds 94 874 68.9% 44 58.7% and government B – Smaller international and 23 249 16.9% 10 13.3% national tenants C – Other local tenants and 18 384 13.4% 21 28.0% sole proprietors Vacant 1 156 0.8% 137 663 100.0% 75 100.0%
64 // INTEGRATED REPORT 2015 28.4 Vacancy profile Gross lettable area Vacant area Vacancy (m2) (m2) %
Industrial 120 061 — 0.0% Commercial 17 602 1 156 6.6% 137 663 1 156 0.8%
28.5 Lease expiry profile
Lease expiry profile based on gross lettable area Industrial Commercial Total
Vacant 0.00% 6.57% 0.84% Monthly 0.00% 7.98% 1.02% Expiring in the year to 29 February 2016 6.62% 30.69% 9.70% Expiring in the year to 28 February 2017 7.75% 18.01% 9.06% Expiring in the year to 28 February 2018 18.65% 23.45% 19.26% Expiring in the year to 28 February 2019 34.13% 7.23% 30.69% Thereafter 32.85% 6.07% 29.43% 100.00% 100.00% 100.00%
Lease expiry profile based on revenue Industrial Commercial Total
Monthly 0.00% 8.53% 1.69% Expiring in the year to 29 February 2016 5.51% 36.10% 11.71% Expiring in the year to 28 February 2017 7.08% 20.51% 9.72% Expiring in the year to 28 February 2018 13.66% 19.54% 14.80% Expiring in the year to 28 February 2019 29.01% 6.18% 24.45% Thereafter 44.74% 9.14% 37.63% 100.00% 100.00% 100.00%
28.6 Weighted average escalations and yield
Sector Yield Escalation
Industrial 8.58% 8.18% Commercial 9.01% 7.58% 8.66% 8.09%
INTEGRATED REPORT 2015 // 65 NOTES (CONTINUED)
Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2015
29 Shareholder analysis
29.1 Shareholder spread Number of % of total Shareholdings shareholdings Shares held % Held
1 – 1 000 shares 377 50.20% 68 110 0.06% 1 001 – 10 000 shares 140 18.64% 615 480 0.54% 10 001 – 100 000 shares 128 17.04% 5 702 435 4.98% 100 001 – 1 000 000 shares 79 10.52% 26 842 764 23.46% 1 000 001 shares and over 27 3.60% 81 181 566 70.96% 751 100.00% 114 410 355 100.00%
29.2 Distribution of shareholders Number of % of total shareholdings hareholdings Shares held % Held
Private companies 35 4.66% 44 105 929 38.55% Collective investment schemes 61 8.13% 33 812 384 29.55% Trusts 51 6.80% 17 955 068 15.69% Retirement benefit funds 79 10.52% 10 352 000 9.06% Retail shareholders 488 64.98% 4 009 150 3.50% Medical aid funds 3 0.40% 1 649 493 1.44% Insurance companies 7 0.93% 654 403 0.57% Foundations and charitable funds 4 0.53% 616 778 0.54% Stockbrokers and nominees 2 0.27% 441 435 0.39% Assurance companies 6 0.80% 317 647 0.28% Managed funds 4 0.53% 204 961 0.18% Close corporations 3 0.40% 135 405 0.12% Custodians 1 0.13% 70 000 0.06% Investment partnerships 3 0.40% 50 100 0.04% Public entities 1 0.13% 20 120 0.02% Hedge funds 1 0.13% 10 314 0.01% Public companies 1 0.13% 4 754 0.00% Control account 1 0.13% 414 0.00% 751 100.00% 114 410 355 100.00%
29.3 Shareholder type Number of % of total shareholdings shareholdings Shares held % Held
Non-public shareholders Directors and associates of the Company (indirect holdings) 27 3.60% 44 522 045 38.91% Directors and associates of the Company (direct holdings) 4 0.53% 1 183 080 1.03% 31 4.13% 45 705 125 39.94%
Public shareholders 720 95.87% 68 705 230 60.06%
751 100.00% 114 410 355 100.00%
66 // INTEGRATED REPORT 2015 29.4 Investment manager shareholdings (>5%) Total shareholding % Held
Foord Asset Management 13 192 000 11.53% Allan Gray 10 072 503 8.80% Coronation Fund Managers 9 864 765 8.62% Cohesive Capital 8 438 920 7.38% 41 568 188 36.33%
29.5 Beneficial shareholdings (>5%) Total shareholding % Held
Investment Solutions 10 040 467 8.78% Gamlan Investments (Pty) Ltd 9 086 857 7.94% Chiluan Holdings (Pty) Ltd 8 147 465 7.12% Allan Gray 7 833 000 6.85% Swish Property Eleven (Pty) Ltd 7 456 172 6.52% Coronation Fund Managers 6 415 170 5.61% Skymax Trust 6 105 005 5.34% 55 084 136 48.16%
29.6 Beneficial holding by region Total shareholding % Held
South Africa 111 947 282 97.85% Swaziland 1 162 291 1.02% Jersey 539 500 0.47% Lesotho 320 000 0.28% Balance (other countries not listed above) 441 282 0.38% 114 410 355 100.00%
Total number of shareholders 751 Total number of shares in issue 114 410 355
29.7 Share price performance
List price 18 June 2014 R10,00 Opening price 18 June 2014 R11,00 Closing price 27 February 2015 R12,70 Closing high for the period R12,70 Closing low for the period R10,30
Number of shares in issue 114 410 355 Total volume traded during period 6 783 643 Ratio of volume traded to shares issued (%) 5.93%
INTEGRATED REPORT 2015 // 67 NOTICE OF ANNUAL GENERAL MEETING
Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2015
Equites Property Fund Limited (Incorporated in the Republic of South Africa) recorded in the Company’s sub-register as holders of (Registration number 2013/080877/06) dematerialised shares held on behalf of an investor/ JSE share code: EQU ISIN: ZAE000188843 beneficial owner should, when authorised in terms Approved as a REIT by the JSE of their mandate or instructed to do so by the (“Equites” or “the Company”) person on behalf of whom they hold dematerialised shares, vote by either appointing a duly authorised representative to attend and vote at the AGM or by 1. Notice of annual general meeting completing the attached form of proxy in Notice is hereby given that the first annual general accordance with the instruction thereon and meeting (“AGM”) of Equites will be held at the offices returning it to the transfer secretaries, Link Market of DLA Cliffe Dekker Hofmeyr Inc., 5th floor, Services South Africa Proprietary Limited, as set out 11 Buitengracht Street, Cape Town at 10:00 on below. Tuesday 21 July 2015 for the purposes of conducting the following business: a. Record Dates – considering and adopting the annual financial Please note the following important dates with statements of the Company for the year ended regard to the AGM: 28 February 2015; – Record date to receive this notice: – transacting any other business as may be transacted 22 May 2015 at an AGM of shareholders of a Company; and – Distribution of the integrated annual report: – considering and, if deemed fit, adopting with or 27 May 2015 without modification, the shareholder special and – Last day to trade in order to be eligible to ordinary resolutions set out below, in the manner participate in and vote at the AGM: required by the Companies Act, 2008 (Act No. 71 3 July 2015 of 2008), as amended (“the Act”), as read with the – Record date to participate in and vote at JSE Listings Requirements, which AGM is to be the AGM (voting record date): 10 July 2015 participated in and voted at by shareholders – Last day to lodge proxy forms for the AGM: registered in the Company’s securities register as 10:00 on Friday, 17 July 2015 shareholders as at the record date of 10 July 2015. – AGM to be held at: 10:00 on Tuesday, 21 July 2015 Please note that if you are the owner of dematerialised – Results of the AGM published on SENS: shares held through a Central Securities Depository 16:00 on Thursday, 21 July 2015 Participant (“CSDP”) or broker (or their nominee) and are not registered as an “own name” dematerialised b. Section 63 (1) of the Act: shareholder, then you are not a registered shareholder of Identification of Meeting Participants the Company. Accordingly, in these circumstances, Kindly note that meeting participants (including subject to the mandate between yourself and your CSDP proxies) are required to provide reasonably or broker, as the case may be: satisfactory identification before being entitled to – if you wish to attend the AGM, you must attend or participate in the meeting. In this regard, contact your CSDP or broker, as the case may all Equites shareholders recorded in the registers of be, and obtain the relevant letter of the Company on the record date for participating in representation; alternatively and voting at the AGM will be required to provide – if you are unable to attend the AGM, but wish to be identification satisfactory to the chairman of the represented at the meeting, you must contact your AGM. Forms of identification include valid identity CSDP or broker, as the case may be, and furnish it documents, driving licences and passports. with your voting instructions in respect of the AGM and/or request it to appoint a proxy. You must not c. Section 62 (3)(e) of the Act complete the enclosed form of proxy. The instruction In terms of section 62 (3)(e) of the Act a shareholder must be provided in accordance with the mandate who is entitled to attend and vote at the AGM is between yourself and your CSDP or broker, as the entitled to appoint a proxy or two or more proxies case may be, within the time period required by to attend, participate in and vote at the meeting in your CSDP or broker, as the case may be. CSDPs, the place of the shareholder. A proxy need not be a brokers or their nominees, as the case may be, shareholder of the Company.
68 // INTEGRATED REPORT 2015 d. Annual Financial Statements, Audit Nomination Committee chair: R12 500 per meeting and Risk Committee Report, Social and attended Ethics Committee Report & Directors Report A copy of the consolidated annual financial Audit and Risk Committee R10 000 per meeting statements of the Company and its subsidiaries (as member: attended approved by the Board of Directors of the Social and Ethics Committee R10 000 per meeting Company), incorporating the reports of the external member: attended auditors, the Audit and Risk Committee, the Social and Ethics Committee, the Remuneration Remuneration Committee R10 000 per meeting Committee and the Board of Directors are delivered member: attended herewith. Nomination Committee R10 000 per meeting The following proposed resolutions for adoption will member: attended be considered by shareholders at the AGM, and if deemed fit, passed with or without modification. Reason for and effect of special resolution number 1 The reason for special resolution number 1 is to 2. Special Resolutions authorise the payment of fees to non-executive directors In order for the special resolutions to be adopted, the for their services for the financial year ending support of at least 75% of the total number of votes, 28 February 2016 in terms of the requirements of exercised by shareholders on resolutions, is required. section 66(9) of the Act.
2.1 Special Resolution number 1 2.2 Special resolution number 2
Non-executive director remuneration General approval to repurchase shares “Resolved that the Company be and is authorised, in “Resolved that the Company and/or any subsidiary of terms of section 66 of the Act, to pay remuneration to the Company be and is hereby authorised, by way of a its non-executive directors for their services as directors general authority, to acquire ordinary shares in the in respect of the financial year ending 28 February 2016, capital of the Company upon such terms and conditions on the following basis: and in such amounts as the directors may from time to time determine in terms of and subject to: Retainers Non-executive director: R100 000 per 2.2.1 sections 4, 46 and 48 of the Act; and annum 2.2.2 the JSE Listings Requirements, being, as at Chairman of the Board: R165 000 per the date of this resolution, that: annum
Attendance fees 2.2.2.1 any acquisition of ordinary shares shall be purchased through the order book of the Board (chairman): R20 000 per meeting trading system of the JSE, and done without attended any prior understanding or arrangement Board (excluding the chairman): R10 000 per meeting between the Company and/or the relevant attended subsidiary and the counterparty, provided that if the Company purchases its own ordinary Audit and Risk Committee chair: R12 500 per meeting shares from any wholly owned subsidiary of attended the Company for the purposes of cancelling such treasury shares pursuant to this general Social and Ethics Committee R12 500 per meeting authority, the above provisions will not be chair: attended applicable to such purchase transaction; Remuneration Committee chair: R12 500 per meeting attended 2.2.2.2 the general repurchase by the Company, and by its subsidiaries, of the Company’s ordinary shares is authorised by its Memorandum of Incorporation (“MOI”);
INTEGRATED REPORT 2015 // 69 NOTICE OF ANNUAL GENERAL MEETING (CONTINUED)
Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2015
2. Special resolutions (continued) 2.2.2.9 an announcement complying with paragraph 11.27 of the JSE Listings Requirements will be 2.2 Special resolution number 2 (continued) published by the Company or its subsidiary (i) when the Company and/or its subsidiaries 2.2.2.3 this general authority shall be valid until the have cumulatively repurchased 3% of the Company’s next annual general meeting ordinary shares in issue as at the date of the provided that it shall not extend beyond listing of the ordinary shares in the Company 15 (fifteen) months from the date of passing on the JSE (“the initial number”) and (ii) for of this special resolution; each 3% in the aggregate of the initial number of the ordinary shares acquired thereafter by 2.2.2.4 repurchases must not be made at a price the Company and/or its subsidiaries. greater than 10% above the weighted average of the market value of the ordinary shares for Reason for and the effect of special resolution the 5 (five) business days immediately number 2 preceding the date on which the transaction is The Company’s MOI contains a provision allowing the effected and the JSE should be consulted for a Company or any subsidiary of the Company to ruling if the applicants securities have not repurchase securities issued by the Company subject to traded in such 5 (five) business day period; the approval of the members in terms of the MOI, the requirements of the Act and the JSE Listings 2.2.2.5 repurchases of shares in aggregate in any one Requirements. This special resolution will authorise the financial year may not exceed 20% (or 10% Company and/or its subsidiaries by way of a general where the repurchase is effected by a authority from shareholders to repurchase ordinary subsidiary) of the Company’s issued ordinary shares issued by the Company. share capital as at the date of passing this special resolution; The directors of the Company have no specific intention to give effect to the resolution, but will continually 2.2.2.6 at any point in time the Company may only review the Company’s position, having regard to appoint one agent to effect any repurchase on prevailing circumstances and market conditions, in the Company’s behalf or on behalf of any considering whether to repurchase its own shares. subsidiary of the Company; Once adopted, this special resolution will permit the 2.2.2.7 the passing of a resolution by the Board of Company or any of its subsidiaries, to repurchase such Directors authorising the repurchase, that the ordinary share in terms of the Act, its MOI and the Company passed the solvency and liquidity test JSE Listings Requirements. and that since the test was done there have been no material changes to the financial Disclosures in terms of section 11.26 of the position of the Group; JSE Listings Requirements The JSE Listings Requirements require the following 2.2.2.8 subject to the exceptions contained in the disclosures in respect of Special Resolution Number 2, JSE Listings Requirements, the Company and its some of which are disclosed in this annual report of subsidiaries will not repurchase ordinary shares which this notice forms part: during a prohibited period (as defined in the – major shareholders of the Company – page 67 JSE Listings Requirements) unless they have in – share capital of the Company – page 54 place a repurchase programme where the dates and quantities of ordinary shares to be traded Litigation statement during the relevant period are fixed (not subject In terms of section 11.26 of the Listings Requirements, to any variation) and full details of the the directors, whose names appear on page 20 of the programme have been disclosed in an integrated annual report, are not aware of any legal or announcement over SENS prior to the arbitration proceedings that are pending or threatened, commencement of the prohibited period; that may have or have had in the recent past, being at least the previous 12 (twelve) months, a material effect on the Company’s or Group’s financial position.
70 // INTEGRATED REPORT 2015 Directors’ responsibility statement 3.2 Ordinary resolution number 2 The directors, whose names appear on page 20 of the integrated annual report, collectively and individually Re-appointment of auditors accept full responsibility for the accuracy of the “Resolved to re-appoint Moore Stephens Cape Town Inc information pertaining to this special resolution and (with the designated registered auditor being Adele certify that, to the best of their knowledge and belief, Smit) as auditors of the Company and the Group from there are no facts that have been omitted which would the conclusion of this AGM.” make any statement false or misleading, and that all reasonable enquiries to ascertain such facts have been Motivation/Explanation made and that the special resolution contains all The reason for and effect of ordinary resolution information required by the Act and the JSE Listings number 2 is to re-appoint Moore Stephens Cape Town Requirements. Inc as the independent registered auditors of the Company and the Group. The Audit and Risk Committee Material changes has evaluated the performance and independence of Other than the facts and developments reported on in Moore Stephens Cape Town Inc and Adéle Smit and the integrated annual report, there have been no recommend their re-appointment as auditors of the material changes in the affairs or financial position of the Company and the Group under section 90 of the Act. Company and its subsidiaries since the date of signature of the audit report and up to the date of this notice. 3.3 Ordinary resolution number 3
3 Ordinary resolutions Re-election of Mr G Lanfranchi as non-executive director In order for the ordinary resolutions to be adopted (save “Resolved that Mr Lanfranchi, who is required to retire for ordinary resolution number 10), the support of more by rotation as a director of the Company at this AGM than 50% of the total number of votes exercised by and who is eligible and available for election, is hereby shareholders on the resolutions, is required. Please note re-appointed with immediate effect.” that in order for ordinary resolution number 11 to be adopted, the support of more than 75% of the total A brief CV of Mr Lanfranchi is set out on page 7 of the number of votes exercised by shareholders on this report of which this notice forms part. resolution, is required. Motivation/Explanation 3.1 Ordinary resolutions number 1 The reason for and effect of this ordinary resolution number 3 is to re-elect Mr Lanfranchi as a non-executive Adoption of annual financial statements director of the Company, his retirement being in “Resolved that the annual financial statements of the accordance with the requirements of the Company’s MOI. Company and the Group for the year ended 28 February 2015, including the reports of the directors, the report 3.4 Ordinary resolution number 4 of the external auditor and the Audit and Risk Committee be and are hereby received and adopted.” Re-election of Mr J Cullum as non-executive director “Resolved that Mr Cullum, who is required to retire by Motivation/Explanation rotation as a director of the Company at this AGM and The reason for and effect of ordinary resolution who is eligible and available for election, is hereby number 1 is to approve the annual financial statements re-appointed with immediate effect.” of the Company and its Group for the year ended 28 February 2015. A brief CV of Mr Cullum is set out on page 7 of the report of which the notice forms part.
Motivation/Explanation The reason for and effect of this ordinary resolution number 4 is to re-elect Mr Cullum as a non-executive director of the Company, his retirement being in accordance with the requirements of the Company’s MOI.
INTEGRATED REPORT 2015 // 71 NOTICE OF ANNUAL GENERAL MEETING (CONTINUED)
Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2015
3 Ordinary resolutions (continued) Motivation/Explanation The reason for and effect of ordinary resolution number 3.5 Ordinary resolution number 5 7 is to re-elect Mr Campher as a member of the Audit and Risk Committee of the Company. Confirmation of appointment of Mr B Goossens as director 3.8 Ordinary resolution number 8 “Resolved that the appointment of Mr Goossens as a director is hereby confirmed.” Re-election of Mr Khan to the Audit and Risk Committee A brief CV of Mr Goossens is set out on page 7 of “Resolved that Mr Nazeem Khan, being an independent the report of which the notice forms part. director of the Company and who meets the requirements of section 94 (4) of the Act, be and is Motivation/Explanation hereby re-elected as a member of the Audit and Risk The reason for and effect of this ordinary resolution Committee in terms of section 94 (2) of the Act until the number 5 is to confirm the appointment of next AGM”. Mr Goossens as a director of the Company. Mr Goossens was appointed as CFO and executive director on A brief CV of Mr Khan appears on page 6 of this 1 September 2015. integrated annual report.
3.6 Ordinary resolution number 6 Motivation/Explanation The reason for and effect of ordinary resolution number Re-election of Ms Benjamin-Swales to the Audit and 8 is to re-elect Mr Khan as a member of the Audit and Risk Committee Risk Committee of the Company. “Resolved that Ms Ruth Benjamin-Swales, being an independent director of the Company and who meets 3.9 Ordinary resolution number 9 the requirements of section 94 (4) of the Act, be and is hereby re-elected as the chair and member of the Audit Remuneration policy and Risk Committee in terms of section 94 (2) of the Act “Resolved that, in accordance with the principles of the until the next AGM”. King III report on governance, through a non-binding advisory vote, the Company’s remuneration policy and its A brief CV of Ms Benjamin-Swales appears on page 6 of implementation, as set out on pages 24 – 25 of this this integrated annual report integrated annual report, be and are hereby approved.”
Motivation/Explanation Motivation/Explanation The reason for and effect of ordinary resolution The reason for and effect of ordinary resolution number number 6 is to re-elect Ms Benjamin-Swales as chair 9 is to endorse the Company’s remuneration policy. and member of the Audit and Risk Committee of the Company. 3.10 Ordinary resolution number 10
3.7 Ordinary resolution number 7 The report of the Social and Ethics Committee “Resolved that the report of the Social and Ethics Re-election of Mr Campher to the Audit and Committee, as set out on pages 12 – 13 of the Risk Committee integrated annual report of the Company of which this “Resolved that Mr Leon Campher, being an independent notice forms part, is hereby received and accepted and director of the Company and who meets the requirements published in terms of the Act.” of section 94 (4) of the Act and whose dual role as Chair of the Board and as a member of the Audit and Risk Motivation/Explanation Committee is to be specifically approved, be and is hereby The reason for and effect of ordinary resolution re-elected as a member of the Audit and Risk Committee number 10 is to receive and accept the report of the in terms of section 94 (2) of the Act until the next AGM”. Social and Ethics Committee.
A brief CV of Mr Campher appears on page 6 of this integrated annual report.
72 // INTEGRATED REPORT 2015 3.11 Ordinary resolution number 11 average traded price of the ordinary shares over the 30 business days prior to the date that the issue is General authority to issue shares for cash agreed in writing between the Company and the “Resolved that the directors of the Company be and are party/ies subscribing for the shares; and (iii) written hereby authorised, by way of a general authority, to allot explanation, including supporting documentation and issue shares in the capital of the Company for cash (if any) of the intended use of the funds.” subject to the limitations as set out in the Company’s MOI and the Act, from time to time on the following Please note that in order for this ordinary resolution basis: number 11 to be adopted, the support of at least 75% – the shares which are the subject of the issue for of the total number of votes exercised by the cash must be of a class already in issue, or where shareholders in this resolution is required. this is not the case, must be limited to such shares or rights that are convertible into a class of shares Motivation/Explanation already in issue; The reason for and effect of ordinary resolution number – there will be no restrictions in regard to the persons 11 is to provide a general authority to the Company to to whom the shares may be issued, provided that issue shares for cash. such shares are to be issued to public shareholders (as defined by the JSE Listings Requirements) and 3.12 Ordinary resolution number 12 not to related parties (as defined by the JSE Listings Requirements); Unissued shares under control of directors – the total aggregate number of shares which may be “Resolved that, subject to the provisions of the Act and issued for cash in terms of this authority may not the JSE Listings Requirements, all of the authorised but exceed 11 441 025 shares, being 10% of the issued unissued shares of the Company be and are hereby share capital as at the date of this notice of annual placed under the control of the directors of the general meeting; Company, which directors are authorised to allot and – in the event of a sub-division or consolidation of issue any such shares at such time or times, to such shares prior to this authority lapsing, the existing person or persons, company or companies and upon authority shall be adjusted accordingly to represent such terms and conditions as they may determine, such the same allocation ratio; authority to remain in force until amended or revoked by – the maximum discount at which the shares may be the Company’s shareholders in a annual general meeting” issued is 10% (ten percent) of the weighted average traded price of those shares over the 30 (thirty) Motivation/Explanation business days prior to the date that the price of the The reason for and effect of ordinary resolution number issue is determined or agreed by the Company and 12 is to place the authorised but unissued shares of the the party/ies subscribing for the shares adjusted for Company under the control of the directors of the a dividend where the ex-date in respect of the Company. dividend occurs during the 30 days in question. The JSE should be consulted for a ruling if the 3.13 Ordinary resolution number 13 Company’s securities have not traded in such 30 (thirty) business day period; Implementation of resolutions – this authority shall not endure beyond the earlier of “Resolved that any directors or secretary of the the next annual general meeting of the Company or Company or any other person to whom a director has beyond 15 (fifteen) months from the date of the delegated his/her authority to do so, be and is hereby date of this resolution, whichever is shorter; and authorised to sign all documents and any amendments – upon any issue of ordinary shares which, together thereto, take all such steps and do all such other things with prior issues of ordinary shares within the period as may be necessary in order to give effect to and/or that this authority is valid,constitute 5% (five implement the resolutions contained herein.” percent) or more of the total number of ordinary shares in issue prior to that issue, the Company shall Motivation/Explanation publish an announcement in terms of section 11.22 The reason for and effect of ordinary resolution number of the JSE Listings Requirements, giving full details 13 is to authorise any director or secretary of the hereof, including (i) the number of ordinary shares Company to implement and give effect to all resolutions issued, (ii) the average discount to the weighted contained in this notice.
INTEGRATED REPORT 2015 // 73 NOTICE OF ANNUAL GENERAL MEETING (CONTINUED)
Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2015
4 General instructions for shareholders All other beneficial owners who have dematerialised Shareholders are encouraged to attend, speak and vote their shares through a Central Securities Depository at the AGM. Participant (CSDP) or broker and wish to attend the AGM, must instruct their CSDP or broker to provide Electronic participation them with the necessary letter of representation, or they The Company has made provision for Equites must provide the CSDP or broker with their voting shareholders or their proxies to participate electronically instructions in terms of the relevant custody agreement in the AGM by way of telephone conferencing. Should entered into between them and the CSDP or broker. you wish to participate in the AGM by telephone These shareholders must not use a form of proxy. Forms conference call as aforesaid, you, or your proxy, will be of proxy must be deposited at the Transfer Secretaries, required to advise the Company thereof by no later than 08:00 on Thursday, 16 July 2015 by submitting by email Link Market Services South Africa (Pty) Ltd at 13th Floor, to the Company secretary at [email protected], or by Rennie House, 19 Ameshoff Street, Braamfontein 2001 fax to +27(0)21 418 1754 for the attention of Riaan (PO Box 4844, Johannesburg, 2000) to be received no Gous, relevant contact details, including an email later than 10:00 on Friday, 17 July 2015 provided that address, cellular number and landline as well as full the Chairperson may in his discretion, accept proxies that details of the Equites shareholder’s title to securities have been delivered after the expiration of the issued by the Company and proof of identity, in the form aforementioned period up until the commencement of of copies of identity documents and share certificates (in the meeting. Any shareholder who completes and lodges the case of materialised Equites shares) and (in the case a form of proxy will nevertheless be entitled to attend, of dematerialised Equites shares) written confirmation speak and vote in person at the AGM should the from the Equites shareholder’s CSDP confirming the shareholder decide to do so. Equites shareholder’s title to the dematerialised Equites shares. Upon receipt of the required information, the A Company that is a shareholder, wishing to attend Equites shareholder concerned will be provided with a and participate at the AGM should ensure that a secure code and instructions to access the electronic resolution authorising a representative to so attend and communication during the AGM. Equites shareholders participate at the AGM on its behalf is passed by its must note that access to the electronic communication directors. Resolutions authorising representatives in terms will be at the expense of the Equites shareholders who of section 57 (5) of the Act must be lodged with the wish to utilise the facility. Equites shareholders and their Company’s transfer secretaries prior to the AGM. appointed proxies attending by conference call will not be able to cast their votes at the AGM through this By order of the Board medium. Such shareholders should they wish to have their vote counted at the AGM, must to the extent Equites Property Fund Limited applicable, (i) complete the form of proxy; or (ii) contact their CSDP or broker.
Proxies and authority for representatives to act Riaan Gous A form of proxy is attached for the convenience of COMPANY SECRETARY any Equites shareholder holding certificated shares, who cannot attend the AGM but wishes to be Registered office represented thereat. 14th Floor Portside Tower The attached form of proxy is only to be completed by 4 Bree Street those shareholders who are: Cape Town – holding shares in certificated form; or – recorded on the Company’s sub-register in Transfer secretaries dematerialised electronic form with ‘own name’ Link Market Services South Africa Proprietary Limited registration. 13th Floor Rennie House 19 Ameshoff Street Braamfontein, 2001
74 // INTEGRATED REPORT 2015 FORM OF PROXY ANNUAL GENERAL MEETING OF EQUITES SHAREHOLDERS
For use by shareholders, who were registered as shareholders on 10 July 2015, holding certificated Equites shares, dematerialised shareholders who have elected “own-name” registration, nominee companies of CSDP’s and brokers nominee companies (“shareholders”), at the annual general meeting of shareholders to be held at 10:00 on Tuesday, 21 July 2015 at the offices of DLA Cliffe Dekker Hofmeyr Inc., 5th floor, 11 Buitengracht Street, Cape Town, 8000.
Not for use by dematerialised shareholders who have not elected “own-name” registration. Such shareholders must contact their CSDP or broker timeously if they wish to attend and vote at the annual general meeting and request that they be issued with the necessary letter of representation to do so, or provide the CSDP or broker timeously with their voting instruction should they not wish to attend the annual general meeting in order for the CSDP or broker to vote in accordance with their instructions at the annual general meeting.
I/We (FULL NAMES IN BLOCK LETTERS PLEASE) ......
...... of (Address) ......
Telephone number: ( ) ...... Cellphone number: ( ) ......
Email address: ......
Being the holder(s) of shares in Equites, hereby appoint
1...... or failing him/her
2...... of failing him/her
3. the chairperson of the annual general meeting of Equites shareholders ...... as my/our proxy to attend and speak and to vote for me/us on my/our behalf at the annual general meeting and at any adjournment thereof in the following manner Number of votes *For *Against *Abstain
Special resolution number 1 – Non – executive director remuneration
Special resolution number 2 – General approval to repurchase shares
Ordinary resolutions number 1 – Adoption of annual financial statements
Ordinary resolution number 2 – Re-appointment of auditors
Ordinary resolution number 3 – Re-election of Mr G Lanfranchi as director
Ordinary resolution number 4 – Re-election of Mr J Cullum as director
Ordinary resolution number 5 – Confirmation of appointment of Mr Goossens as director Ordinary resolution number 6 – Re-election of Ms R Benjamin-Swales as chair and member of the Audit and Risk Committee Ordinary resolution number 7 – Re-election of Mr L Campher as member of the Audit and Risk Committee
Ordinary resolution number 8 – Re-election of Mr N Khan as member of the Audit and Risk Committee
Ordinary resolution number 9 – Remuneration policy
Ordinary resolution number 10 – The report of the Social and Ethics Committee
Ordinary resolution number 11 – General authority to issue shares for cash
Ordinary resolution number 12 – Unissued shares under control of directors
Ordinary resolution number 13 – Implementation of resolutions
* Mark “For”, “Against” or “Abstain” as required. If no options are marked the proxy will be entitled to vote as he/she thinks fit. FORM OF PROXY
Signed this ...... day of ...... 2015
......
Signature
Assisted by me (where applicable) ......
(State capacity and full name) ......
– Unless otherwise instructed my proxy may vote or abstain from voting as he/she thinks fit.
– A Equites shareholder entitled to attend and vote at the abovementioned annual general meeting is entitled to appoint a proxy to attend, vote and speak in his/her stead. A proxy need not be a shareholder of Equites.
– Forms of proxy must be deposited at Link Market Services South Africa Proprietary Limited, 13th Floor Rennie House, 19 Ameshoff Street, Braamfontein, 2001, (PO Box 4844, Johannesburg, 2000) so as to arrive by no later than 10:00 on Friday, 17 July 2015, provided that the Chairperson of the meeting may, in his discretion, accept proxies that have been delivered after the expiry of the aforementioned period up until the commencement of the meeting.
NOTES:
1. Any alteration or correction made to this form of proxy must be initialled 6. A vote given in terms of an instrument of proxy shall be valid in relation by the signatory(ies). to the annual general meeting, notwithstanding the death of the person granting it or the transfer of the shares in respect of which the vote is 2. Shareholders that are certificated or own-name dematerialised given, unless an intimation in writing of such death or transfer is received shareholders, entitled to attend and vote at the annual general meeting by the transfer secretaries not less than 48 hours before the may insert the name of a proxy or the names of two alternative proxies of commencement of the annual general meeting. the shareholder’s choice in the space/s provided, with or without deleting “the chairman of the annual general meeting”, but any such deletion 7. The chairman of the annual general meeting may reject or accept any must be initialled by the shareholder(s). Such proxy/ies may participate in, form of proxy which is completed and/or received, otherwise than in speak and vote at the annual general meeting in the place of that compliance with these notes, provided that, in respect of acceptances, the shareholder at the annual general meeting. The person whose name chairman is satisfied as to the manner in which the shareholder concerned stands first on this form of proxy and who is present at the annual wishes to vote. general meeting will be entitled to act as proxy to the exclusion of those whose names follow. If no proxy is named on a lodged form of proxy the 8. The completion and lodging of this form of proxy will not preclude the chairperson shall be deemed to be appointed as the proxy. relevant shareholder from attending the annual general meeting and speaking and voting in person thereat to the exclusion of any proxy 3. A shareholder’s instructions to the proxy must be indicated by the appointed in terms hereof, should such shareholder wish to do so. insertion of the relevant number of votes exercisable by the shareholder in the appropriate box provided. Failure to comply with the above will be 9. Documentary evidence establishing the authority of a person signing this deemed to authorise the proxy, in the case of any proxy other than the form of proxy in a representative capacity must be attached to this form chairman, to vote or abstain from voting as deemed fit and in the case of of proxy, unless previously recorded by Equites or the transfer secretaries the chairman to vote in favour of the resolution. or waived by the chairman of the annual general meeting.
4. A shareholder or his/her proxy is not obliged to use all the votes 10. A minor or any other person under legal incapacity must be assisted by exercisable by the shareholder, but the total of the votes cast or abstained his/her parent or guardian, as applicable, unless the relevant documents may not exceed the total of the votes exercisable in respect of the shares establishing his/her capacity are produced or have been registered by held by the shareholder. Equites or the transfer secretaries.
5. A shareholder may revoke the proxy appointment by: (i) cancelling it in 11. Where there are joint holders of shares, the vote of the first joint holder writing, or making a later inconsistent appointment of a proxy and (ii) who tenders a vote, as determined by the order in which the names stand delivering a copy of the revocation instrument to the proxy, and to in the register of shareholders, will be accepted and only that holder Equites. The revocation of a proxy appointment constitutes a complete whose name appears first in the register in respect of such shares need to and final cancellation of the proxy’s authority to act on behalf of the sign this form of proxy. shareholder as at the later of the date stated in the revocation instrument, if any; or the date on which the revocation instrument was delivered in the required manner. Equites Property Fund
14th Floor Portside Building 4 Bree Street Cape Town Tel: 021 460 0404 Fax: 021 418 1754 Email: [email protected] www.equites.co.za