GEMGROW PROPERTIES LIMITED (Incorporated in the Republic of South Africa) (Registration number 2007/032604/06) JSE share code: GPA ISIN: ZAE0000223269 JSE share code: GPB ISIN: ZAE0000223277 Approved as a REIT by the JSE (“Gemgrow” or the “company”)
PROSPECTUS
PREPARED IN TERMS OF THE LISTINGS REQUIREMENTS OF THE JSE LIMITED AND THE COMPANIES ACT The definitions and interpretations commencing on page5 of this document apply to this entire document, including the cover page, except where the context indicates a contrary intention. The definitions and interpretations commencing on page 5 of the scheme circular which accompanies this prospectus do NOT apply to this prospectus. This prospectus is prepared and issued in compliance with the Listings Requirements (as revised listings particulars) and the Companies Act for the purpose of providing information with regard to the company. This prospectus has been prepared on the assumption that the scheme will be implemented. This prospectus is not an invitation to the public to subscribe for shares or other securities in Gemgrow. At the date of this prospectus: • the authorised share capital of Gemgrow comprises 1 000 000 000 A ordinary no par value shares and 2 000 000 000 B ordinary no par value shares; • the issued share capital of Gemgrow comprises 62 718 658 A ordinary no par value shares and 408 184 961 B ordinary no par value shares; and • there are no Gemgrow A or Gemgrow B shares held in treasury. Accordingly, pursuant to the implementation of the scheme: • the authorised share capital of Gemgrow will comprise 1 000 000 000 A ordinary no par value shares and 2 000 000 000 B ordinary no par value shares; • the issued share capital of Gemgrow will comprise 62 718 658 A ordinary no par value shares and 1 271 157 070 B ordinary no par value shares; and • the Arrowhead-held Gemgrow shares will be held in treasury. The Gemgrow B shares to be issued pursuant to the implementation of the transaction will rank pari passu in all respects with existing Gemgrow B shares in issue. There are no convertibility or redemption provisions relating to any of the Gemgrow B shares to be issued. Shareholders are referred to the scheme circular which accompanies this prospectus for information regarding the scheme. In this regard, a scheme of arrangement in terms of section 114 of the Companies Act has been proposed by the Arrowhead board between Arrowhead and the Arrowhead shareholders. In the event of the conditions precedent being fulfilled or waived (to the extent permissible) and the scheme becoming operative, Gemgrow will by operation of law become the sole shareholder of Arrowhead and scheme participants will, against surrender of their relevant documents of title (if applicable) in accordance with the provisions of the scheme circular, become entitled to receive the scheme consideration in respect of each Arrowhead share held by them. The offer to the scheme participants in terms of the scheme to receive the scheme consideration constitutes an offer to the public in terms of section 95(1)(h) of the Companies Act. This prospectus is therefore issued in terms of section 99(3) of the Companies Act. This prospectus is being issued, in terms of the Companies Act and Part C of Chapter 4 of the Companies Regulations, in respect of Gemgrow as it will be constituted after the implementation of the scheme. The scheme is subject to the conditions precedent set out in “Particulars of the scheme contemplated in this prospectus” in Section 2, paragraph 3.2. Upon implementation of the scheme, the Arrowhead shares will be delisted from the Main Board of the JSE. Scheme participants should note that the scheme consideration comprises Gemgrow B shares which are listed on the Main Board of the JSE, and trade on the JSE in electronic format through the STRATE system. Since the scheme consideration comprises shares, investing in the scheme consideration involves certain risks. See the risk factors set out in Annexure 21 of this prospectus. The directors of Gemgrow, whose names are set out in Section 1, paragraph 2 of this prospectus, collectively and individually, accept full responsibility for the accuracy of the information contained in this prospectus which relates to Gemgrow and, in this regard, certify that, to the best of their knowledge and belief, there are no facts that have been omitted which would make any statement false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that this prospectus contains all information required by the Companies Act and the Listings Requirements. All advisors whose names and/or reports are contained in this prospectus have consented in writing to act in the capacity stated and to their names being included in this prospectus and, if applicable, to the inclusion of their respective reports in the prospectus in the form and context in which they appear and have not withdrawn their written consents prior to publication hereof. This prospectus was registered by CIPC on Friday, 19 July 2019 and is issued in compliance with the Listings Requirements of the JSE and the Companies Act for the purpose of giving information regarding Gemgrow.
Independent corporate advisor and Corporate advisor transaction sponsor
Independent reporting accountants and Legal advisor and competition law advisors auditors to Gemgrow and Arrowhead
Independent property valuer Independent property valuer
This prospectus is only available in English and copies of the registered prospectus may be obtained between 09:00 and 16:30 from Monday, 22 July 2019 until Thursday, 22 August 2019 from the registered office of the company, details of which appear in the “Corporate Information and Advisors” section on page 2 of this prospectus. The prospectus will also be available on the company’s website (www.gemgrow.co.za). Date of issue: Monday, 22 July 2019 Special notes in regard to the scheme Notwithstanding that this document constitutes a prospectus, it is not an offer to the general public to subscribe for shares or other securities in the company and only constitutes an offer as it relates to the issue of the consideration shares to the existing Arrowhead shareholders who hold shares in Arrowhead and who participate in the scheme in South Africa, and is only addressed to persons to whom it may lawfully be made. The release, publication or distribution of this prospectus in certain jurisdictions may be restricted by law and therefore persons in any such jurisdictions into which this prospectus is released, published or distributed should inform themselves about and observe any such restrictions. Any failure to comply with the applicable restrictions may constitute a violation of the securities laws of any such jurisdiction. This prospectus does not constitute an offer or an invitation to elect to receive the consideration shares in any jurisdiction in which such an offer or election would be unlawful. No one has taken any action that would permit a public offering of consideration shares to occur outside South Africa. Forward-looking statements This prospectus contains statements about Gemgrow and Arrowhead that are or may be forward-looking statements. All statements, other than statements of historical fact are, or may be deemed to be, forward-looking statements, including, without limitation, those concerning: strategy; the economic outlook for the industry; production; cash costs and other operating results; growth prospects and outlook for operations, individually or in the aggregate; liquidity and capital resources and expenditure, and the outcome and consequences of any pending litigation proceedings. These forward-looking statements are not based on historical facts, but rather reflect current expectations concerning future results and events and generally may be identified by the use of forward-looking words or phrases such as “believe”, “aim”, “expect”, “anticipate”, “intend”, “foresee”, “forecast”, “likely”, “should”, “planned”, “may”, “estimated”, “potential” or similar words and phrases. Examples of forward-looking statements include statements regarding a future financial position or future profits, cash flows, corporate strategy, anticipated levels of growth, estimates of capital expenditures, acquisition strategy, expansion prospects or future capital expenditure levels and other economic factors, such as, inter alia, interest rates. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Gemgrow cautions that forward-looking statements are not guarantees of future performance. Actual results, financial and operating conditions, liquidity and the developments within the industry in which Gemgrow operates may differ materially from those made in, or suggested by, the forward-looking statements contained in this prospectus. All these forward-looking statements are based on estimates and assumptions, as regards Gemgrow and Arrowhead, made by Gemgrow and made by Arrowhead as communicated in publicly available documents issued by Gemgrow and Arrowhead, all of which estimates and assumptions, although Gemgrow believes them to be reasonable, are inherently uncertain. Such estimates, assumptions or statements may not eventuate. Factors which may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied in those statements or assumptions include other matters not yet known to Gemgrow or not currently considered material by Gemgrow. Shareholders should keep in mind that any forward-looking statement made in this prospectus or elsewhere is applicable only at the date on which such forward-looking statement is made. New factors that could cause the business of Gemgrow or Arrowhead not to develop as expected may emerge from time to time and it is not possible to predict all of them. The extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statement are not known. Gemgrow has no duty to, and does not intend to, update or revise the forward- looking statements contained in this prospectus after the date of this prospectus, except as may be required by law. Dates and times The dates and times referred to in this prospectus are subject to change. Any such changes will be published on SENS. All dates and times referred to in this prospectus are South African dates and times.
1 CORPORATE INFORMATION AND ADVISORS
Registered office Corporate advisor Gemgrow Properties Limited Investec Bank Limited (Registration number 2007/032604/06) (Registration number 1969/004763/06) 3rd Floor, Upper Building 100 Grayston Drive 1 Sturdee Avenue Sandton, 2196 Rosebank, 2196 (PO Box 785700, Sandton, 2146) (PO Box 685, Melrose Arch, 2076) Company secretary Independent corporate advisor and transaction sponsor CIS Company Secretaries Proprietary Limited Nedbank Limited, acting through its Corporate and (represented by Gillian Prestwich) Investment Banking division (Registration number 2006/024994/07) (Registration number 1951/000009/06) Rosebank Towers, 15 Biermann Avenue 135 Rivonia Road Rosebank, 2001 Sandton, 2196 (PO Box 61051, Marshalltown, 2107) (PO Box 1144, Johannesburg, 2000) Independent reporting accountants Legal advisor and competition law advisor BDO South Africa Incorporated Cliffe Dekker Hofmeyr Incorporated (Registration number 1995/002310/21) (Registration number 2008/018923/21) Wanderers Office Park 11 Buitengracht Street 52 Corlett Drive, Illovo Cape Town, 8001 Johannesburg, 2196 (Private Bag X60500, Houghton, 2041) (PO Box 695, Cape Town, 8000) Independent Property valuer Independent Property valuer Yield Enhancement Solutions Real Insight Proprietary Limited Proprietary Limited (Registration number 2012/101775/07) (Registration number 2009/016199/07) 5th Floor, North Wing 91 Hamilton Avenue Hyde Park Corner Craighall, 2196 Hyde Park, 2196 (PO Box 413581, Craighall, 2024) Bankers Transfer secretaries The Standard Bank of South Africa Limited Link Market Services (Registration number 1969/017128/06) South Africa Proprietary Limited 30 Baker Street, Rosebank (Registration number 2000/007239/07) Johannesburg, 2001 13th Floor, 19 Ameshoff Street (PO Box 61344, Marshalltown, 2107) Braamfontein, 2001 (PO Box 4844, Johannesburg, 2000) Nedbank Limited (Registration number 1951/000009/06) 135 Rivonia Road Sandton, 2196 (PO Box 1144, Johannesburg, 2000) FirstRand Bank Limited (Registration number 1929/001225/06) 25th Floor, Portside, 5 Buitengracht Street Cape Town, 8001 (PO Box 367, Cape Town, 8000) Investec Bank Limited (Registration number 1969/004763/06) 100 Grayston Drive, Sandown Sandton, 2196 (PO Box 785700, Sandton, 2146) Date and Place of Incorporation of Gemgrow 13 November 2007 – South Africa
2 TABLE OF CONTENTS
The definitions commencing on page 5 of this prospectus have been used in the following table of contents. Page CORPORATE INFORMATION AND ADVISORS 2 DEFINITIONS AND INTERPRETATIONS 5 PROSPECTUS 11 SECTION 1 – COMPANY INFORMATION 1. NAME, ADDRESS, INCORPORATION 12 2. DIRECTORS, OTHER OFFICE HOLDERS OR MATERIAL THIRD PARTIES 12 3. HISTORY, STATE OF AFFAIRS AND PROSPECTS OF GEMGROW 20 4. SHARE CAPITAL OF GEMGROW 24 5. OPTIONS OR PREFERENTIAL RIGHTS IN RESPECT OF SHARES 26 6. COMMISSIONS PAID OR PAYABLE IN RESPECT OF UNDERWRITING 26 7. MATERIAL CONTRACTS 26 8. INTERESTS OF DIRECTORS AND PROMOTERS 27 9. LOANS AND BORROWINGS 27 10. SHARES ISSUED OR TO BE ISSUED OTHER THAN FOR CASH 27 11. PROPERTY AND BUSINESS UNDERTAKINGS 27 12. AMOUNTS PAID OR PAYABLE TO PROMOTERS 27 13. PRELIMINARY EXPENSES AND ISSUE EXPENSES 28 14. CONFLICT OF INTEREST 28
SECTION 2 – INFORMATION ABOUT THE OFFERED SECURITIES 1. PURPOSE OF THE OFFER 29 2. TIMES AND DATES 30 3. PARTICULARS OF THE SCHEME CONTEMPLATED IN THIS PROSPECTUS 30 4. MINIMUM SUBSCRIPTION 34
SECTION 3 – STATEMENTS AND REPORTS RELATING TO THE OFFER 1. STATEMENT AS TO ADEQUACY OF CAPITAL 35 2. REPORT BY DIRECTORS AS TO MATERIAL CHANGES 35 3. STATEMENT AS TO LISTING ON A STOCK EXCHANGE 35 4. REPORT BY THE AUDITOR WHERE BUSINESS UNDERTAKING TO BE ACQUIRED 35 5. REPORT BY THE AUDITORS WHERE COMPANY WILL ACQUIRE A SUBSIDIARY 35 6. REPORT BY THE AUDITORS OF GEMGROW 35 7. FORECAST STATEMENTS OF COMPREHENSIVE INCOME 35 8. PRO FORMA STATEMENT OF FINANCIAL POSITION 36 9. DIVIDENDS 36
3 Page SECTION 4 – ADDITIONAL MATERIAL INFORMATION 1. RELATIONSHIP INFORMATION 37 2. VENDORS 37 3. LITIGATION STATEMENT 38 4. TRADING HISTORY OF SHARES 38 5. ADVISORS’ AND COMPANY SECRETARY’S INTERESTS IN GEMGROW 38 6. GOVERNMENT PROTECTION AND INVESTMENT ENCOURAGEMENT LAW 38 7. DIRECTORS’ RESPONSIBILITY STATEMENT 38 8. CONSENTS 38 9. DOCUMENTS AVAILABLE FOR INSPECTION 38
SECTION 5 – INAPPLICABLE OR IMMATERIAL MATTERS 40 ANNEXURES ANNEXURE 1 GROUP STRUCTURE 41 ANNEXURE 2 DETAILS OF SUBSIDIARIES 42 ANNEXURE 3 DETAILS OF CURRENT AND PROPOSED DIRECTORS OF GEMGROW AND ITS MAJOR SUBSIDIARIES 48 ANNEXURE 4 CURRENT AND PAST DIRECTORSHIPS 54 ANNEXURE 5 EXTRACTS OF MEMORANDUM OF INCORPORATION OF GEMGROW 60 ANNEXURE 6 DETAILS OF THE PROPERTY MANAGERS 70 ANNEXURE 7 INDEPENDENT PROPERTY VALUERS SUMMARY VALUATION REPORTS ON THE PROPERTY PORTFOLIO 71 ANNEXURE 8 DETAILS OF THE PROPERTY PORTFOLIO 101 ANNEXURE 9 ACQUISITIONS, DISPOSALS AND VENDORS 110 ANNEXURE 10 FINANCIAL INFORMATION REQUIRED IN TERMS OF REGULATION 78 IN RESPECT OF ARROWHEAD 121 ANNEXURE 11 REPORT BY THE INDEPENDENT REPORTING ACCOUNTANTS IN TERMS OF REGULATION 78 IN RESPECT OF ARROWHEAD 125 ANNEXURE 12 FINANCIAL INFORMATION REQUIRED IN TERMS OF REGULATION 79 IN RESPECT OF GEMGROW 127 ANNEXURE 13 REPORT BY THE INDEPENDENT REPORTING ACCOUNTANTS IN TERMS OF REGULATION 79 IN RESPECT OF GEMGROW 131 ANNEXURE 14 FORECAST STATEMENTS OF COMPREHENSIVE INCOME OF THE COMBINED GROUP 134 ANNEXURE 15 INDEPENDENT REPORTING ACCOUNTANTS’ LIMITED ASSURANCE REPORT ON THE FORECAST FINANCIAL INFORMATION OF THE COMBINED GEMGROW GROUP 137 ANNEXURE 16 PRO FORMA STATEMENT OF FINANCIAL POSITION IN RESPECT OF THE GEMGROW GROUP 140 ANNEXURE 17 INDEPENDENT REPORTING ACCOUNTANTS’ LIMITED ASSURANCE REPORT ON THE PRO FORMA STATEMENT OF FINANCIAL POSITION OF THE GEMGROW GROUP 144 ANNEXURE 18 CAPITAL STRUCTURE 146 ANNEXURE 19 MATERIAL BORROWINGS AND LOANS RECEIVABLE 151 ANNEXURE 20 TRADING OF GEMGROW SHARES 161 ANNEXURE 21 RISK FACTORS 164 ANNEXURE 22 CORPORATE GOVERNANCE STATEMENT 166
4 DEFINITIONS AND INTERPRETATIONS
In this document and its appendices, unless otherwise stated or the context otherwise indicates, the words in the first column shall have the meanings stated opposite them in the second column and words in the singular shall include the plural and vice versa, natural persons shall include corporations and associations of persons and an expression denoting any gender shall include the other genders: “appraisal rights” the rights afforded to Arrowhead shareholders in terms of section 164 of the Companies Act; “Arrowhead” Arrowhead Properties Limited (Registration number 2011/000308/06), a public company registered and incorporated in accordance with the laws of South Africa, the shares of which are listed on the JSE; “Arrowhead board” or the board of directors of Arrowhead at the last practicable date, whose details are “directors of Arrowhead” set out on page 14 of the scheme circular; “Arrowhead conditional share means the Conditional Share Plan, duly adopted by the Arrowhead shareholders plan” at a general meeting held on 5 February 2019; “Arrowhead group” Arrowhead and its subsidiaries; “Arrowhead-held Gemgrow the 251 160 816 Gemgrow B shares held by Arrowhead and Vividend as at the shares” date of this prospectus; “Arrowhead requisite the ordinary and special resolutions to be considered and, if deemed fit, approved resolutions” by the Arrowhead shareholders at the scheme meeting, as set out in the notice of scheme meeting; “Arrowhead share incentive means a participant in an Arrowhead share incentive scheme, which participant has scheme participant” pursuant to such Arrowhead share incentive scheme by the last practicable date acquired Arrowhead share incentive scheme shares; “Arrowhead share incentive means Arrowhead shares acquired by Arrowhead share incentive scheme scheme shares” participants pursuant to an Arrowhead share incentive scheme as at the last practicable date; “Arrowhead share incentive means, collectively, the Arrowhead unit purchase scheme, the Arrowhead unit schemes” purchase and option scheme, and the Arrowhead conditional share plan; “Arrowhead shareholders” registered holders of Arrowhead shares; “Arrowhead shares” or ordinary shares of no par value in the issued share capital of Arrowhead; “Arrowhead ordinary shares” “Arrowhead unit purchase and means the Arrowhead Unit Purchase and Option Scheme, duly approved by the option scheme” Arrowhead shareholders at a general meeting held on 11 June 2015; “Arrowhead unit purchase means the Arrowhead Unit Purchase Scheme duly approved by the Arrowhead scheme” shareholders at a general meeting held on 1 November 2011; “Arrowhead unit purchase trust” means the trustees for the time being of the Arrowhead Unit Purchase Trust, Master’s reference number IT000488/2016, constituted in terms of the rules of the Arrowhead unit purchase scheme; “business day” any day other than a Saturday, Sunday or official public holiday in South Africa; “category 1 circular” the circular to Gemgrow shareholders dated 22 July 2019, including all annexures and attachments, the notice of general meeting and form of proxy; “cents” South African cents in the official currency of South Africa; “CIPC” the Companies and Intellectual Property Commission, established in terms of the Companies Act, or its successor body; “CIS company secretarial service the agreement entered into between CIS Company Secretaries Proprietary agreement” Limited and the company dated on or about 22 December 2016, relating to appointment of the company secretary;
5 “combined group” the Gemgrow group as enlarged by the acquisition of Arrowhead pursuant to the scheme; “Companies Act” or “Act” the Companies Act, No. 71 of 2008, as amended; “Companies Regulations” the Companies Regulations, 2011, promulgated under the Companies Act, as amended from time to time; “company secretary” the company secretary of Gemgrow, full details of which are set out in the “Corporate Information and Advisors” section of this prospectus; “Competition Act” the Competition Act, No. 89 of 1998, as amended; “Competition Authorities” the commission established pursuant to Chapter 4, Part A of the Competition Act or the tribunal established pursuant to Chapter 4, Part B of the Competition Act or the appeal court established pursuant to Chapter 4, Part C of the Competition Act; “conditions precedent” the conditions precedent to which the scheme is subject, as set out in Section 2, paragraph 3.2 of this prospectus; “consideration shares” the Gemgrow B shares issued to the scheme participants as consideration for their scheme shares under the scheme, which consideration shares shall be issued in a ratio of 0.8237 Gemgrow B shares for each scheme share so acquired; “cost sharing agreement” means the written cost sharing agreement entered into between Arrowhead and Gemgrow, salient details of which are set out in Annexure 10 of the scheme circular; “Court” any South African Court of competent jurisdiction to approve the implementation of the special resolution set out in the notice of the scheme meeting pursuant to section 115 of the Companies Act and/or to determine the fair value of Arrowhead shares pursuant to section 164(14) of the Companies Act; “CSDP” Central Securities Depository Participant, being a “participant” as defined in section 1 of the Financial Markets Act; “Cumulative” Cumulative Properties Limited (Registration number 2015/335578/06), a public company duly incorporated in accordance with the laws of South Africa and, pursuant to the implementation of the strategic repositioning of Gemgrow dated 1 October 2016, a wholly-owned subsidiary of Gemgrow; “Cumulative acquisition the sale of shares and claims agreement entered into between Gemgrow (formally agreement” Synergy Income Fund), Arrowhead, Vividend, Gerald Leissner, Imraan Suleman, Mark Kaplan and Cumulative on 29 August 2016, as amended, in relation to the Cumulative transaction; “Cumulative transaction” the acquisition by Gemgrow of 100% of the issued share capital of Cumulative from the shareholders of Cumulative, as more fully detailed in a circular to shareholders dated 26 September 2016; “Dipula” Dipula Income Fund Limited (Registration number 2005/013963/06), a public company duly incorporated in accordance with the laws of South Africa, the shares of which are listed on the JSE; “dissenting shareholders” Arrowhead shareholders who exercise appraisal rights in terms of section 164 of the Companies Act and in respect of whom none of the events set out in sections 164(9)(a) or (b) of the Companies Act has occurred; “this document” or “the/this this prospectus in respect of Gemgrow dated 22 July 2019 and the annexures prospectus” hereto, which have been prepared in compliance with the Listings Requirements and the Companies Act; “Financial Markets Act” the Financial Markets Act, No. 19 of 2012, as amended; “firm intention announcement” the joint announcement issued by Gemgrow and the Arrowhead board, as required in terms of Regulation 101 of the Companies Regulations, of Gemgrow’s firm intention to proceed with the scheme, as released on SENS on 8 July 2019;
6 “Gemgrow” or the “company” Gemgrow Properties Limited (Registration number 2007/032604/06), a public company duly incorporated in accordance with the laws of South Africa, the shares of which are listed on the JSE; “Gemgrow A shareholders” or registered holders of Gemgrow A shares; “GPA shareholders” “Gemgrow A shares” or an A ordinary share of no par value in the share capital of Gemgrow, having the “GPA shares” rights, limitations and other terms set out in Gemgrow’s memorandum of incorporation; “Gemgrow amended MOI” Gemgrow’s memorandum of incorporation to be amended, after implementation of the scheme, for the creation of the redeemable shares, and the conversion of the Arrowhead-held Gemgrow shares into the redeemable shares; “Gemgrow B shareholders” or registered holders of Gemgrow B shares; “GPB shareholders” “Gemgrow B shares” or a B ordinary share of no par value in the share capital of Gemgrow having the “GPB shares” rights, limitations and other terms set out in Gemgrow’s memorandum of incorporation; “Gemgrow board” or the board of directors of Gemgrow, as reflected in Section 1, paragraph 2.1 of this “directors of Gemgrow” document; “Gemgrow group” or “group” collectively, Gemgrow and its subsidiaries; “Gemgrow requisite resolutions” the ordinary and/or special resolutions to be considered and, if deemed fit, approved by the Gemgrow shareholders at a general meeting of such shareholders, which resolutions shall include all such resolutions as may be required to approve and authorise (i) the “reverse takeover” of Arrowhead, and the “related party transaction” in terms of the Listings Requirements and (ii) the issue, in terms of sections 41 of the Companies Act, of the consideration shares to the scheme participants; “Gemgrow share purchase and the Gemgrow Share Purchase and Option Scheme duly approved by the option scheme” shareholders of Gemgrow at a general meeting held on 16 October 2017; “Gemgrow shareholders” collectively, Gemgrow A shareholders and Gemgrow B shareholders, or either of them, as the context may require; “Gemgrow shares” collectively, Gemgrow A shares and Gemgrow B shares, or either of them, as the context may require; “general meeting” the general meeting of Gemgrow shareholders to be held at 11:00 on Thursday, 22 August 2019 at the registered office of the company being 3rd Floor, Upper Building, 1 Sturdee Avenue, Rosebank, 2196; “GLA” gross lettable area, being the total area of a property that can be rented to a tenant, measured in m2; “IFRS” International Financial Reporting Standards; “independent property valuers” collectively Yield Enhancement Solutions and Real Insight, or either of them as the context may require; “independent reporting BDO South Africa Incorporated (Registration number 1995/002310/21), a accountants” or “BDO” company duly incorporated in accordance with the laws of South Africa, the full details of which are set out in the “Corporate Information and Advisors” section of this prospectus; “Indluplace” Indluplace Properties Limited (Registration number 2013/226082/06), a public company duly incorporated in accordance with the laws of South Africa, the shares of which are listed on the JSE; “Indluplace share purchase and the Indluplace Share Purchase and Option Scheme duly approved by the option scheme” shareholder of Indluplace on 15 May 2015; “interim period” the period between 1 April 2019 and the scheme operative date;
7 “JHI” Excellerate Real Estate Services Proprietary Limited (Registration number 2007/021131/07), a private company duly incorporated in South Africa; “JSE” the Johannesburg Stock Exchange, operated by JSE Limited (Registration number 2005/022939/06), a public company duly incorporated in accordance with the laws of South Africa and listed on the Main Board of the JSE, licensed as an exchange under the Financial Markets Act; “last practicable date” 10 July 2019, being the last practicable date prior to the finalisation of this prospectus; “Listings Requirements” the listings requirements of the JSE, as amended; “LSM” the Living Standards Measure, a marketing and research tool used in South Africa to classify standard of living and disposable income, it segments the population into ten deciles based on their relative means, with LSM 1 being the decile with the least means and 10 being the decile with the greatest means; “m2” square meter; “MoI” the memorandum of incorporation of Gemgrow; “MOI amendments” the amendments to the MoI to be filed with CIPC pursuant to the Gemgrow shareholders having approved the redeemable share conversion and the scheme having become operative which amendments shall create a class of redeemable shares having the applicable rights, limitations and other terms set out therein in order to implement the redeemable share conversion, a copy of which amendments are contained in Annexure 8 of the category 1 circular; “notice of the scheme meeting” the notice convening the scheme meeting, which is attached to and forms part of the scheme circular; “NCI” non-controlling interest; “offer and implementation the offer and implementation agreement, including all the annexures thereto agreement” (if any), as amended from time to time, entered into between Arrowhead and Gemgrow on 8 July 2019; “operative date” or the business day on which Gemgrow will commence settling the scheme “implementation date” consideration to scheme participants, being the first business day following the scheme consideration record date, which is expected to be Monday, 16 September 2019; “R” or “rand” South African rand, the official currency of South Africa; “Real Insight” Real Insight Proprietary Limited (Registration number 2012/101775/07), a private company incorporated and registered in accordance with the laws of South Africa; “Rebosis” Rebosis Property Fund Limited (Registration number 2010/003468/06), a public company duly incorporated in accordance with the laws of South Africa, the shares of which are listed on the JSE; “redeemable share conversion” the conversion of the Arrowhead-held Gemgrow shares from Gemgrow B shares to redeemable shares, which conversion shall require, inter alia, the approval of Gemgrow shareholders for the amendment of Gemgrow’s memorandum of incorporation to create the redeemable shares and to authorise the board to convert the Arrowhead-held Gemgrow shares into the redeemable shares, and the registration of the Gemgrow amended MOI with the CIPC, the salient terms of which are set out in Section 2, paragraph 3.8 of this prospectus; “redeemable shares” the new class of Gemgrow shares to be created, having the rights, limitations and other terms set out in the Gemgrow amended MOI, including, inter alia, that such shares shall be capable of being redeemed by Gemgrow at the instance of the Gemgrow board for the redemption consideration; “redemption consideration” in respect of each redeemable share, R0.0001; “REIT” a Real Estate Investment Trust, being an entity that receives REIT status in terms of the Listings Requirements and qualifies as such in terms of the Income Tax Act, No. 58 of 1962;
8 “scheme” or “transaction” the scheme of arrangement in terms of section 114(1) of the Companies Act, proposed by the Arrowhead board between Arrowhead and the Arrowhead shareholders, in terms of which, if the scheme becomes operative, Gemgrow will acquire all of the scheme shares held by the scheme participants for the scheme consideration and the scheme participants will transfer their rights, title and interest in and to the scheme shares to Gemgrow; “scheme circular” the circular issued on Monday, 22 July 2019 to Arrowhead shareholders in respect of the scheme, including the notice of the scheme meeting as well as all annexures and attachments thereto, which circular accompanies this prospectus; “scheme consideration” the consideration payable to scheme participants for their scheme shares, being a consideration of 0.8237 new Gemgrow B shares for every 1 Arrowhead share held by a scheme participant as at the scheme consideration record date, which consideration shall be settled on the scheme consideration settlement date; “scheme consideration the third business day after the scheme last day to trade, being the latest date for record date” holders of scheme shares to be registered as such in the securities register of Arrowhead in order to receive the scheme consideration, which date is expected to be Friday, 13 September 2019; “scheme consideration the date on which the scheme consideration will be settled to the Arrowhead settlement date” shareholders reflected in the securities register of Arrowhead on the scheme consideration record date; “scheme last day to trade” being the last day to trade Arrowhead shares on the JSE in order to be registered in the securities register of Arrowhead on the scheme consideration record date, which date is expected to be Tuesday, 10 September 2019; “scheme meeting” the meeting of Arrowhead shareholders in their capacity as the registered holders of Arrowhead shares, to be convened in connection with the scheme for the purposes of considering and, if deemed fit, approving the Arrowhead requisite resolutions, including any adjournment or postponement thereof to be held at 10:30 on Thursday, 22 August 2019 at 3rd Floor, Upper Building, 1 Sturdee Avenue, Rosebank, Johannesburg; “scheme operative date” the business day on which the scheme becomes operative and is implemented in accordance with its terms; “scheme participant(s)” the Arrowhead shareholders who are registered as the holders of Arrowhead shares in the securities register of Arrowhead on the scheme consideration record date and are therefore entitled to receive the scheme consideration, but excluding (i) the holders of the treasury shares, and (ii) any dissenting shareholders; “scheme resolution” the special resolution, as contemplated in section 115(2) of the Companies Act, in terms of which Arrowhead shareholders approve the scheme, as set out in the notice of the scheme meeting; “scheme shares” means all of the Arrowhead shares, net of the treasury shares, to be acquired by Gemgrow from the scheme participants under the scheme; “SENS” the Securities Exchange News Service, the news service operated by the JSE; “September distributions last 15 January 2020, or such earlier or later date as may be agreed to between practicable date” Gemgrow and Arrowhead, as being the last practicable date on which the scheme must have been implemented for the dispensation in Section 2, paragraph 3.5 to apply; “South Africa” the Republic of South Africa; “Strate” Strate Proprietary Limited (Registration number: 1998/022242/07), a private company duly incorporated in accordance with the laws of South Africa, which provides electronic settlement of equities and bonds transactions concluded on the JSE; “subsidiary” a subsidiary company, as defined in section 3 of the Companies Act;
9 “Synergy cost sharing the cost sharing agreement entered into between Arrowhead, Gemgrow agreement” (formally Synergy Income Fund) and Vukile on 29 August 2016, in terms of which the parties agreed upon the manner in which the transactional and conveyancing costs in respect of the Synergy transaction were to be shared; “Synergy transaction” the strategic repositioning of Gemgrow (formerly Synergy Income Fund) as a specialist high yielding, high growth fund with a portfolio comprising retail, office and industrial assets as more fully detailed in a circular to shareholders dated 26 September 2016; “Synergy transaction collectively the VAM internalisation agreement, Vukile asset exchange agreement, agreements” Cumulative acquisition agreement and Synergy cost sharing agreement; “Takeover Regulations” the Takeover Regulations, issued in terms of section 120 of the Companies Act; “termination date” the first date on which nya conditions precedent is not timeously fulfilled or, where possible, waived; “transfer secretaries” or Link Market Services South Africa Proprietary Limited (Registration number “Link Market Services” 2000/007239/07), a private company duly incorporated in accordance with the laws of South Africa; “treasury shares” means the 800 Arrowhead shares held by the Arrowhead group as at the last practicable date; “TRP” the Takeover Regulation Panel, established in terms of section 196 of the Companies Act; “valid demand” means a demand/s made in terms of section 164(5) of the Companies Act, within the time period contemplated in section 164(7), by one or more Arrowhead shareholders, which shareholder/s comply with the requirements of section 164(5) (a) and (c) of the Companies Act, in terms of which such shareholder/s demand that Arrowhead pay such shareholder/s the fair value for all of the Arrowhead shares such shareholder/s hold; “VAM” Gemgrow Asset Management Proprietary Limited (previously named Vukile Asset Management Proprietary Limited) (Registration number 2007/016890/07), a limited liability private company duly incorporated in South Africa and, pursuant to the implementation of the strategic repositioning of Gemgrow dated 26 September 2016, a wholly-owned subsidiary of Gemgrow; “VAM internalisation agreement” the sale of shares and claims agreement entered into between Vukile, Gemgrow (formally Synergy Income Fund), Arrowhead and VAM on 29 August 2016 as amended, in respect of the acquisition by Gemgrow of 100% of all issued shares and claims in VAM, and as a result of which Gemgrow’s asset and property management function would effectively be internalised, as more fully detailed in a circular to shareholders dated 26 September 2016; “Vividend” Vividend Income Fund Limited (registration number 2010/003232/06), a public company duly incorporated in accordance with the laws of South Africa; “Vukile” Vukile Property Fund Limited (Registration number 2002/027194/06), a public company duly incorporated in South Africa, the issued shares of which are listed on the JSE; “Vukile asset exchange the exchange agreement entered into between Vukile and Gemgrow (formally agreement” Synergy Income Fund) on 29 August 2016, as amended, in relation to the exchange by Gemgrow of the Gemgrow portfolio of properties and rental enterprises conducted thereon for the Vukile portfolio of properties and rental enterprises conducted thereon, as more fully detailed in a circular to shareholders dated 26 September 2016; and “Yield Enhancement Solutions” Yield Enhancement Solutions Proprietary Limited (Registration number 2009/016199/07), a private company duly incorporated in accordance with the laws of South Africa, full details of which are set out in the “Corporate Information and Advisors” section of this prospectus.
10 GEMGROW PROPERTIES LIMITED Incorporated in the Republic of South Africa Registration number 2007/032604/06 JSE share code: GPA ISIN: ZAE0000223269 JSE share code: GPB ISIN: ZAE0000223277 Approved as a REIT by the JSE (“Gemgrow” or the “company”)
Directors Executive M.J. Kaplan (Chief Executive Officer) J. Limalia (Chief Financial Officer) A. Kirkel (Chief Operating Officer) Independent Non-executive G. Kinross (Chairperson) A. Basserabie C. Abrams A. Rehman
PROSPECTUS
This prospectus is issued in compliance with the Listings Requirements (as revised listings particulars) and the Companies Act for the purpose of providing information with regard to Gemgrow. The implementation of the scheme will result in a reverse takeover of Gemgrow in terms of paragraph 9.5(c) of the Listings Requirements and accordingly the company is required to publish revised listings particulars in accordance with paragraph 9.24 of the Listings Requirements. In addition, the offer to the Arrowhead shareholders to receive the scheme consideration constitutes an offer to the public in terms of section 95(1)(h) of the Companies Act. This prospectus is therefore required to be issued in terms of section 99(3) of the Companies Act. This prospectus is being issued in compliance with the Listings Requirements and in terms of the Companies Act and Part C of Chapter 4 of the Companies Regulations, in respect of Gemgrow as it will be constituted after the implementation of the scheme. This prospectus is not an invitation to the public to subscribe for shares or other securities in Gemgrow.
11 SECTION 1 – COMPANY INFORMATION
1. NAME, ADDRESS, INCORPORATION
1.1 Name and registration number Gemgrow Properties Limited, registration number 2007/032604/06. Post the implementation of the scheme, Gemgrow will change its name to “Arrowhead Properties”.
1.2 Addresses 1.2.1 Registered office address:3 rd Floor Upper Building, 1 Sturdee Avenue, Rosebank, 2196. 1.2.2 Primary place of business address: 3 rd Floor Upper Building, 1 Sturdee Avenue, Rosebank, 2196. 1.2.3 Address of Company’s transfer secretaries: Link Market Services South Africa Proprietary Limited (Registration number 2000/007239/07), 13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein, 2001.
1.3 Date and place of incorporation Incorporated in the Republic of South Africa on 13 November 2007.
1.4 Details of holding company of Gemgrow 1.4.1 As at the date of this prospectus, Arrowhead is the holding company of Gemgrow. The registered office of Arrowhead is 3rd Floor Upper Building, 1 Sturdee Avenue, Rosebank, 2196. 1.4.2 Immediately after the implementation of the scheme, Gemgrow will not have a holding company and Gemgrow will not be controlled by any individual person.
1.5 Details of the subsidiaries of Gemgrow The name, date and place of incorporation of each of Gemgrow’s subsidiaries immediately after the implementation of the scheme are set out in Annexure 2.
2. DIRECTORS, OTHER OFFICE HOLDERS OR MATERIAL THIRD PARTIES
2.1 Details of directors 2.1.1 As at the date of this prospectus, the board of directors of Gemgrow comprises – Gregory Kinross (Chairperson) Arnold Basserabie Ayesha Rehman Clifford Abrams Mark Kaplan (Chief Executive Officer) Alon Kirkel (Chief Operating Officer) Junaid Limalia (Chief Financial Officer)
12 2.1.2 The names, ages, business addresses, qualifications, positions and experience of the directors are set out below. Name Gregory Kinross Age 46 Business address 1 Sturdee Avenue, Rosebank, Johannesburg Qualifications BAcc, CA (SA) Position Independent non-executive director and chairperson Experience Gregory qualified as a chartered accountant in 1997. The following year, he founded his own private equity business. In 2005, he became CEO and President of Tau Capital Corp., a mining and resources business. In 2013, he formed Innovo Capital (Pty) Ltd to pursue private equity opportunities and in 2014, he formed Genesis Innovo Capital (Pty) Ltd in a partnership with the Genesis Capital Group. Gregory holds a number of board positions and is the lead independent director of Indluplace. Name Arnold Basserabie Age 74 Business address 1 Sturdee Avenue, Rosebank, Johannesburg Qualifications BSc (Mathematics and Statistics), ASA, CFP Position Independent non-executive director Experience After graduating with a BSc, Arnold joined Fedsure Financial Services Group. In 1988, he was appointed Group Chief Executive, and its asset base grew from R2 billion to R40 billion during his 13-year tenure. In the 1990s, Arnold contributed to the advancement of a number of emerging businesses in South Africa. Since the early 2000s he has practised as a strategic consultant, focusing on strategy, business development and related activities, across a diverse range of industries. Arnold is, inter alia, a member of the Wits University Foundation’s Board of Governors and chairman of its Investment and Finance Committee. Name Ayesha Rehman Age 69 Business address 1 Sturdee Avenue, Rosebank, Johannesburg Qualifications Diploma in Financial Accounting, Certificate in Management, Certificate in Project Management, Certificate in Property Development Position Independent non-executive director Experience Ayesha was appointed as senior financial managerof the Johannesburg Housing Company in 1998. In 2009, she was appointed as the chief financial officer of the Johannesburg Housing Company and held that position until she recently retired in February 2015. She was previously an accountant of the Joint Education Trust. Ayesha is an independent non-executive director of Indluplace. Name Clifford Abrams Age 50 Business address 1 Sturdee Avenue, Rosebank, Johannesburg Qualifications BAcc, CA (SA), Registered auditor Position Independent non-executive director Experience Clifford is a chartered accountant and has been in private practice for the past 17 years. He is the proprietor of Clifford Abrams & Associates. He has held various positions in community organisations and is currently the Chairman of the Mizrachi Synagogue. Clifford is an independent non-executive director of Indluplace.
13 Name Mark Kaplan Age 39 Business address 1 Sturdee Avenue, Rosebank, Johannesburg Qualifications BBusSc, Finance (Hons) Position Chief Executive Officer Experience Mark is the co-founder and Chief Executive Officer of Arrowhead, was previously an Executive Director of Indluplace and currenly the CEO of Gemgrow. He was previously involved in running a large residential portfolio focused on affordable and student housing. Name Alon Kirkel Age 36 Business address 1 Sturdee Avenue, Rosebank, Johannesburg Qualifications BCom (Acc) Position Chief Operating Officer Experience Alon completed a BCom, majoring in accounting and human resources at the University of the Witwatersrand. He worked in the diamond industry for 15 years at Diacore, formerly the Steinmetz group. His role included purchasing and analysing high quality investment diamonds for the group. Alon has also been successful in purchasing neglected commercial and industrial buildings and turning them into quality, high-yielding assets. Name Junaid Limalia Age 47 Business address 1 Sturdee Avenue, Rosebank, Johannesburg Qualifications BAcc, CA(SA), Programme in International Taxation (Post Grad) Position Chief Financial Officer Experience Junaid began his career as a chartered accountant at PricewaterhouseCoopers over 20 years ago. He spent two years in the United Kingdom, whereafter he moved to IBM South Africa’s IT outsourcing division. From 2003, he held various positions at the South African Revenue Service, from tax auditor to executive of the investigative audit division for large business.
All of the directors are South African nationals.
2.2 Details of the proposed directors of Gemgrow 2.2.1 The board of directors of Gemgrow will be reconstituted on and with effect from the implementation date. Resolutions to elect the new directors as directors of the company will be put to shareholders at the general meeting. Subject to the approval of shareholders at the general meeting, the following directors will be appointed to the Gemgrow board with effect from the implementation date of the transaction – 2.2.1.1 Matthew Nell (Chairperson); 2.2.1.2 Riaz Kader (Chief Operating Officer); 2.2.1.3 Sam Mokorosi; 2.2.1.4 Selwyn Noik; and 2.2.1.5 Taffy Adler. 2.2.2 Concurrently, Clifford Abrams and Ayesha Rehman will resign as directors of the company with effect from the implementation date.
14 2.2.3 Alon Kirkel will be stepping down as Chief Operating Officer and assume the role of Chief Investment Officer 2.2.4 The names, ages, business addresses, qualifications, positions and experience of the proposed directors are set out below. Name Matthew Nell Age 68 Business address 1 Sturdee Avenue, Rosebank, Johannesburg Qualifications BSc (Building Science), MSc (Town and Regional Planning) Position Independent non-executive chairman Experience Matthew has over 30 years’ experience in urban and housing development and manages a property development consultancy, Shisaka Development Management Services Name Riaz Kader Age 37 Business address 1 Sturdee Avenue, Rosebank, Johannesburg Qualifications BCom Position Chief Operating Officer Experience Riaz has a BCom degree from the University of the Witwatersrand and 13 years’ property experience in residential, retail, office and industrial property. He was previously a director of Excellerate Real Estate Services (Pty) Ltd t/a JHI and has been involved in the management of Arrowhead’s property portfolio from the company’s inception. His responsibilities include overseeing the performance of the portfolio, with particular focus on leveraging efficiencies at national level, debt management, lease negotiations and ensuring that income is optimized. Name Sam Mokorosi Age 39 Business address 1 Sturdee Avenue, Rosebank, Johannesburg Qualifications BCom Honours in Economics Position Independent non-executive director Experience Sam is the CEO of Vunani Corporate Finance. He is a seasoned financial services executive, with over 15 years’ experience in property finance, the bond market, corporate finance and private equity. He has successfully executed corporate finance and private equity transactions worth more than R35 billion. He has worked at Standard Bank, Quartile Capital, IHS Investments and Cadiz Corporate Solutions. Name Selwyn Noik Age 72 Business address 1 Sturdee Avenue, Rosebank, Johannesburg Qualifications CA(SA) Position Independent non-executive director Experience Selwyn is a Chartered Accountant. After qualifying, he spent 11 years in a managerial position with listed property company, Pioneer Holdings & Finance Corporation Ltd. He was an executive director of the listed trade finance company Reichmans Ltd for 10 years and after its acquisition by Investec Ltd, he assumed the role of group secretary of Investec, a position he held for 13 years until his retirement in 2007. Thereafter, he filled a company secretarial and compliance role with Investec Property until the end of 2011. He is a non- executive director of Indluplace.
15 Name Taffy Adler Age 68 Business address 1 Sturdee Avenue, Rosebank, Johannesburg Qualifications BA, BPhil in African Studies, MSc in Building Science Position Independent non-executive director Experience Taffy is the director of the Re-imagining Wits Properties Programme. He was previously CEO of the Housing Development Agency and the Johannesburg Housing Company. He is also the non-executive chairman of Indluplace.
All of the proposed directors are South African nationals. 2.2.5 The appointment of the proposed directors is conditional on the scheme becoming operative.
2.3 Additional information related to the directors and proposed directors 2.3.1 Annexure 3 contains the following information: 2.3.1.1 emoluments of the directors and proposed directors; 2.3.1.2 terms of office and salient terms of service contracts; 2.3.1.3 borrowing powers of the directors; 2.3.1.4 interests of directors, proposed directors and promoters; 2.3.1.5 declarations of the directors and proposed directors; and 2.3.1.6 directors and proposed directors’ interests in shares and transactions. 2.3.2 Annexure 4 contains details of the current and past directorships and partnerships of the directors and proposed directors. 2.3.3 The provisions of the MoI with regard to the following are set out in Annexure 5: 2.3.3.1 qualification of directors; 2.3.3.2 remuneration of directors; 2.3.3.3 any power enabling the directors to vote on remuneration to themselves or any member of the board; 2.3.3.4 the borrowing powers exercisable by the directors and how such borrowing powers can be varied; and 2.3.3.5 retirement or non-retirement of directors under an age limit.
2.4 Details of directors of major subsidiaries of Gemgrow 2.4.1 Following the implementation of the transaction, Arrowhead and Indluplace will become major subsidiaries of Gemgrow. 2.4.2 The names, ages, business addresses, qualifications, position and experience of each director of the major subsidiaries are set out below: Arrowhead Name Mark Kaplan Age 39 Business address 1 Sturdee Avenue, Rosebank, Johannesburg Qualifications BBusSc, Finance (Hons) Position Chief Executive Officer Experience Mark is the co-founder and Chief Executive Officer of Arrowhead, was previously an Executive Director of Indluplace and is currently the CEO of Gemgrow. He was previously involved in running a large residential portfolio focused on affordable and student housing.
16 Name Junaid Limalia Age 47 Business address 1 Sturdee Avenue, Rosebank, Johannesburg Qualifications BAcc, CA (SA), Programme in International Taxation (Post Grad) Position Chief Financial Officer Experience Junaid began his career as a chartered accountant at PricewaterhouseCoopers over 20 years ago. He spent two years in the United Kingdom, whereafter he moved to IBM South Africa’s IT outsourcing division. From 2003, he held various positions at the South African Revenue Service, from tax auditor to executive of the investigative audit division for large business. Name Riaz Kader Age 37 Business address 1 Sturdee Avenue, Rosebank, Johannesburg Qualifications BCom Position Chief Operating Officer Experience Riaz has a BCom degree from the University of the Witwatersrand and 13 years’ property experience in residential, retail, office and industrial property. He was previously a director of Excellerate Real Estate Services (Pty) Ltd t/a JHI, and has been involved in the management of Arrowhead’s property portfolio from the company’s inception. His responsibilities include overseeing the performance of the portfolio, with particular focus on leveraging efficiencies at national level, debt management, lease negotiations and ensuring that income is optimised. All directors of Arrowhead are South African nationals. Indluplace Name Carel de Wit Age 52 Business address 1 Sturdee Avenue, Rosebank, Johannesburg Qualifications BSc Building Science Position Chief Executive Officer Experience Carel has extensive experience in a variety of commercial and residential property investments, development and management. His career in property includes gaining experience with Sanlam Properties, Metcash Trading, TAG Angola and Johannesburg Housing Company. Name Terence Kaplan Age 43 Business address 1 Sturdee Avenue, Rosebank, Johannesburg Qualifications CA (SA) Position Financial director Experience Terry joined Indluplace as Financial Director in March 2016. Prior to this he was group finance executive at Massmart HoldingsLtd where he was responsible for various aspects of the group’s financial reporting. Terry also worked for Redefine Properties Ltd and lived and worked in the United Kingdom for eight years where he gained experience in both the banking and healthcare sectors. He began his career with Grant Thornton, where he qualified as a Chartered Accountant.
17 Name Taffy Adler Age 68 Business address 1 Sturdee Avenue, Rosebank, Johannesburg Qualifications BA, BPhil in African Studies, MSc in Building Science Position Independent non-executive director/Chairman Experience Taffy is the director of the Property Revitalisation Programme for the University of the Witwatersrand. He was previously CEO of the Housing Development Agency and the Johannesburg Housing Company. He is the non-executive chairman of Indluplace. Name Selwyn Noik Age 72 Business address 1 Sturdee Avenue, Rosebank, Johannesburg Qualifications CA(SA) Position Independent non-executive director Experience Selwyn spent 11 years in a managerial position with a listed property company, Pioneer Holdings & Finance Corporation Ltd. He was an executive director of the listed trade finance company ReichmansLtd for 10 years and after its acquisition by Investec Ltd (“Investec”), he assumed the role of group secretary of Investec, a position he held for 13 years until his retirement in 2007. Thereafter, he filled a company secretarial and compliance role with Investec Property until the end of 2011. He is a non-executive director of Indluplace. Name Ayesha Rehman Age 69 Business address 1 Sturdee Avenue, Rosebank, Johannesburg Qualifications Diploma in Financial Accounting, Certificate in Management, Certificate in Project Management, Certificate in Property Development Position Independent non-executive director Experience Ayesha was appointed as senior financial manager of the Johannesburg Housing Company in 1998. In 2009, she was appointed as the chief financial officer of the Johannesburg Housing Company and held that position until she retired in February 2015. She was previously an accountant at the Joint Education Trust. Ayesha is an independent non-executive director of Indluplace. Name Clifford Abrams Age 50 Business address 1 Sturdee Avenue, Rosebank, Johannesburg Qualifications BAcc, CA (SA), Registered auditor Position Independent non-executive director Experience Clifford is a chartered accountant and has been in private practice for the past 17 years. He is the proprietor of Clifford Abrams & Associates. He has held various positions in community organisations and is currently the Chairman of the Mizrachi Synagogue. Clifford is an independent non-executive director of Indluplace.
18 Name Gregory Kinross Age 46 Business address 1 Sturdee Avenue, Rosebank, Johannesburg Qualifications BAcc, CA (SA) Position Lead independent director Experience Gregory qualified as a chartered accountant in 1997. The following year, he founded his own private equity business. In 2005, he became CEO and President of Tau Capital Corp., a mining and resources business. In 2013, he formed Innovo Capital (Pty) Ltd to pursue private equity opportunities and in 2014, he formed Genesis Innovo Capital (Pty) Ltd in a partnership with the Genesis Capital Group. Gregory holds a number of board positions. He is lead independent director of Indluplace.
All directors of Indluplace are South African nationals 2.4.3 Annexure 3 contains the declarations of the directors of Gemgrow’s major subsidiaries. 2.4.4 Annexure 4 contains details of the current and past directorships and partnerships of the directors of Gemgrow’s major subsidiaries.
2.5 Asset management The combined portfolio will continue to be internally managed by a strongly incentivised, dedicated and proven executive management team, further details of which are set out in paragraphs 2.1 and 2.2 above.
2.6 Property management 2.6.1 Following the implementation of the scheme, the day-to-day management of the combined portfolio will continue to be outsourced to JHI on market-related terms in terms of the Arrowhead and Gemgrow property management agreements. 2.6.2 Details of JHI and a brief description of the function it performs are set out in Annexure 6. 2.6.3 The property management agreements will lie open for inspection in accordance with paragraph 9 of Section 4 of this prospectus.
2.7 Name and business address of company secretary 2.7.1 CIS Company Secretaries Proprietary Limited represented by Gillian Prestwich is the appointed company secretary of the Company. 2.7.2 The business address of the company secretary is set out in the “Corporate Information and Advisors” section of this prospectus. 2.7.3 The Gemgrow board has considered the competence, qualifications and experience of the company secretary and she is deemed fit to be appointed in the role as company secretary of Gemgrow. 2.7.4 The company secretary has the following qualifications: – BA degree (University of Witwatersrand); – Fellow of the Institute of Chartered Secretaries and Administrators; and – Diploma in International Trust Management.
2.8 Name and business addresses of the auditors, attorneys and bankers The names and business addresses of the auditors, attorney and bankers are set out in the “Corporate Information and Advisors” section of this prospectus.
19 3. HISTORY, STATE OF AFFAIRS AND PROSPECTS OF GEMGROW
3.1 History, state of affairs and nature of business of the Company 3.1.1 Gemgrow, previously Synergy Income Fund Limited (“Synergy”), was incorporated as a public company on 13 November 2007 as a registered property loan stock company and listed on the Main Board of the JSE under the “Real Estate–Real Estate Holdings and Development” sector on 14 December 2011. On listing Gemgrow owned a portfolio of properties valued at R280 million. With effect from 1 July 2013, Synergy converted from a property loan stock company to a REIT and accordingly changed its sector classification to the “Retail REITs” sector on the JSE. 3.1.2 Synergy operated as a specialist retail property fund with a specific focus on medium-sized community and small regional shopping centres in high-growth nodes, serving South Africa’s high-growth, lower-LSM retail sector. Gemgrow’s portfolio emphasis was on commuter oriented centres located in township and rural areas. 3.1.3 On 27 July 2015, the authorised capital of Gemgrow converted from a linked unit capital structure to an all share capital structure. The share capital of Gemgrow comprises “A” shares and “B” shares. The Gemgrow A shares have a preferential claim to earnings with capped growth, while the Gemgrow B shares receive the balance of Gemgrow’s earnings. 3.1.4 2015 brought about considerable changes to Gemgrow and its business, with Vukile acquiring 65.0% of Synergy in the period to February of that year. This was followed in May 2015 by Vukile’s acquisition of Synergy’s property and asset manager, Capital Land Asset Management (subsequently renamed Vukile Asset Management (VAM) and thereafter renamed Gemgrow Asset Management). In terms of the VAM asset management agreement, Vukile assumed effective day-to-day management of Synergy’s portfolio of properties, with the property management function externally managed. 3.1.5 With effect from 1 October 2016, following the implementation of multiple simultaneous transactions, Gemgrow (previously Synergy) re-positioned itself as a specialist high-yielding, high-growth diversified REIT with a portfolio comprising retail, office and industrial assets. Gemgrow owned 163 properties in each of South Africa’s nine provinces valued in excess of R5.6 billion as at 31 March 2019.
3.2 General description of the business and strategy 3.2.1 Gemgow is a JSE-listed REIT whose main focus is on creating long term sustainable value for shareholders. This is achieved through escalating rentals in terms of leases with tenants, satisfactory renewal of leases with existing tenants, renting of vacant space within the portfolio and managing and reducing, where possible, costs associated with the portfolio. 3.2.2 Upon implementation of the transaction, Gemgrow will be a diversified opportunistic South African property fund with Arrowhead Properties Limited (a formerly JSE-listed REIT) holding a direct diverse portfolio of retail, office and industrial properties) as a wholly-owned subsidiary and will also hold a 55.7% interest in Indluplace Properties Limited, a JSE-listed REIT which owns a portfolio of residential properties and an interest of 16.4% in Rebosis Property Fund Limited as well as a 8.6% interest in Dipula Income Fund Limited. 3.2.3 Group structure The group structure of Gemgrow prior to and post the implementation of the transaction is set out in Annexure 1. 3.2.4 Financial year-end Gemgrow’s financial year-end is 30 September. 3.2.5 Subsidiaries 3.2.5.1 Gemgrow has two major subsidiaries post the implementation of the transaction, being Arrowhead and Indluplace. 3.2.5.2 Arrowhead was formed in September 2011 and debuted in the Real Estate Sector on the JSE in December 2011 as an internally managed property loan stock company. Arrowhead converted to a REIT on 1 October 2013. Arrowhead owns a diverse portfolio of retail, office and industrial properties throughout South Africa and holds a 55.7% interest in Indluplace, the first focused residential REIT listed on the JSE, as well as minority interests
20 in Dipula and Rebosis, which own diverse commercial property portfolios. Arrowhead will be acquired by Gemgrow pursuant to the transaction. 3.2.5.3 Indluplace is a REIT, listed on the Main Board of the JSE, that is focused on the rental residential sector of the South African property market. Indluplace listed in June 2015 and is the largest REIT focused on residential properties. Since listing it has increased the value of its properties to over R4.3 billion (+250% increase in value) and currently owns 170 residential properties consisting of over 9 600 residential units and almost 18 000m2 retail area, spread mainly across Gauteng, but with representation in Mpumalanga, KwaZulu-Natal and the Free State. Indluplace intends to continue with this growth by focusing on acquiring yield enhancing properties and portfolios that provide income on day of acquisition. 3.2.5.4 The names, registration numbers, places of incorporation, dates of incorporation, nature of business, issued share capital and date of becoming a subsidiary for each of the subsidiaries of the enlarged Gemgrow group are set out in Annexure 2. 3.2.5.5 There are no material inter-company financial and other transactions.
3.3 Corporate Governance The corporate governance statement of Gemgrow is available on Gemgrow’s website (www. gemgrow.co.za) in Gemgrow’s 2018 Annual Report and is available for inspection at Gemgrow’s registered office from Monday, 22 July 2019. The corporate governance statement is outlined in Annexure 22.
3.4 Material Changes Save for the transaction and the Synergy transaction, the directors confirm that – 3.4.1 there have been no material changes to the financial or trading position of the Gemgrow group since Gemgrow published its results for the year ended 30 September 2018 and the date of this prospectus; 3.4.2 there has been no change in the business or trading objects of Gemgrow during the past five years; 3.4.3 there has been no major change in the nature of property, plant and equipment and in the policy regarding the use thereof; 3.4.4 there has been no material change in the nature of the business of Gemgrow; and 3.4.5 there has been no material fact or circumstance that has occurred between 30 September 2018, being the last financial year-end and the date of this prospectus, other than as disclosed in this prospectus and the category 1 circular.
3.5 Prospects 3.5.1 The combined group will focus on creating long term sustainable value for shareholders by focusing on direct physical property and, over time, divesting of listed investments that are not part of the combined group; and by strengthening the combined group’s balance sheet by reducing gearing. 3.5.2 The combined group is a long-term holder of Indluplace, which remains a core part of its strategy going forward. 3.5.3 The combined group intends to reduce, and ultimately, dispose of its holdings in Rebosis and Dipula in the longer term. Although not a seller at current levels, the impact of the combined group’s holdings in Dipula and Rebosis on distributions is significantly reduced. The company will continue to explore opportunities to unlock value from its holdings in Rebosis and Dipula. 3.5.4 As a 100% South African focused fund, the environment in which Gemgrow operates remains very difficult, but the combined group has seen an uptick in leads recently and is cautiously optimismistic that, with strong leadership and increased policy certainty, economic conditions can improve over time.
3.6 Property portfolio Set out below is a summary of the property portfolio and listed property securities of the Gemgrow group, post implementation of the scheme.
21 3.6.1 Overview of the combined property portfolio Post-implementation of the scheme, Gemgrow’s property portfolio based on valuations performed as at 1 April 2019 amounts to R10.9 billion and consists of 212 properties with a GLA of 1 335 197m². Full details of which are set out in Annexure 8. 3.6.2 Analysis of the combined property portfolio An analysis of the Arrowhead/combined property portfolio as at 31 March 2019 in respect of geographic, sectoral and tenant spread, the vacancy and lease expiry profile as well as the weighted average rental is provided in the tables below: 3.6.2.1 Geographic profile Based on Based on gross GLA (%) income (%) Eastern Cape 6 9 Free State 1 1 Gauteng 50 41 KwaZulu-Natal 11 10 Limpopo 11 13 Mpumalanga 3 2 Northern Cape 3 2 North West 4 6 Western Cape 11 16 Total 100 100
3.6.2.2 Sectoral profile Based on Based on gross GLA (%) income (%) Retail 35 46 Office 31 36 Industrial 34 18 Total 100 100
3.6.2.3 Tenant profile Based on Based on gross GLA (%) income (%) A 44 50 B 9 10 C 47 40 Total 100 100
For the table above, the following key is applicable: A. Large national tenants, large listed tenants, government and major franchisees, such as the major banks, Spar, Pick n Pay and Department of Public Works. B. National tenants, listed tenants, franchisees and medium to large professional firms, such as KFC, Steers, Rage etc. C. Other comprising of smaller SME’s and startup companies’ tenants.
22 3.6.2.4 Vacancy profile Based on GLA (%) Retail 6.6 Office 13.7 Industrial 6.7
3.6.2.5 Lease expiry profile Based on GLA Based on gross (%) income (%) Vacant 8.8 – March 2017 0.1 0.1 March 2018 0.1 0.2 March 2019 4.3 4.3 March 2020 20.1 23.7 March 2021 21.7 23.4 March 2022 15.4 18.5 March 2022 and beyond 29.5 29.8
3.6.2.6 Weighted average rental per square metre by rentable area per sector Weighted average rental (per m²) Retail R158.52 Office R125.78 Industrial R53.69
3.6.2.7 Weighted average rental escalation profile by rentable area per sector % Retail 7.2 Office 7.6 Industrial 7.9
3.6.3 Property yield The average annualised property yield for the portfolio is 10.5%. 3.6.4 Listed property securities In addition, the enlarged Gemgrow group will have interests in the following listed property securities as at the last practicable date: Number of Market value shares (R’000) % held Rebosis Property Fund Limited – B shares 125 194 254 98 903 16.4% Dipula Income Fund Limited 45 581 239 296 278 8.6%
3.7 Valuation reports 3.7.1 The combined group’s direct property portfolio was valued R10.9 billion, by Yield Enhancement Solutions and Real Insight, independent external registered professional valuers. 3.7.2 Detailed valuation reports have been prepared in respect of each of the properties within the combined portfolio and are available for inspection as per paragraph 9 of Section 4 of this prospectus. A summary of the detailed valuation reports in respect of the combined group’s direct property portfolio has been included in Annexure 7.
23 3.8 Material commitments, debt repayments, lease payments and contingent liabilities 3.8.1 The material commitments of the combined Gemgrow group as at 31 March 2019 are disclosed in the table below: Acquisition of investment properties, improvements to existing properties and debt repayments Approved and committed 550 000 000 Approved not yet committed 70 000 000 620 000 000
3.8.2 Other than as disclosed above, Gemgrow has no material commitments, lease payments or contingent liabilities.
3.9 Company particulars As required in terms of Regulation 59(3)(g) and 79 of the Companies Regulations, particulars of the gross turnover, the profits or losses (before and after tax) and dividends paid by the group for the preceding three years are contained in Annexure 12.
4. SHARE CAPITAL OF GEMGROW 4.1 Authorised and issued share capital The share capital of Gemgrow as at the last practicable date is set out below: R’000 Authorised share capital 1 000 000 000 “A” ordinary no par value shares – 2 000 000 000 “B” ordinary no par value shares – Issued share capital 62 718 658 “A” ordinary no par value shares 150 474 408 184 961 “B” ordinary no par value shares 3 228 759 Stated capital 3 379 232
There are no Gemgrow A shares or Gemgrow B shares held in treasury. Assuming the implementation of the scheme, the anticipated share capital of Gemgrow after the scheme is set out below: R’000 Authorised share capital 1 000 000 000 “A” ordinary no par value shares – 2 000 000 000 “B” ordinary no par value shares – Issued share capital 62 718 658 “A” ordinary no par value shares 150 474 1 271 157 070 “B” ordinary no par value shares 7 327 876 Stated capital 7 478 350
*Note: After the redemption of the redeemable shares has taken place, the issued share capital of company will reduce by the Arrowhead-held Gemgrow shares of 251 160 816 and change to 1 019 996 254 “B” shares of no par value and there will be no Gemgrow A GPA shares or Gemgrow B shares held in treasury.
4.2 Annexure 18 contains the following salient information relating to the authorised and issued share capital: 4.2.1 authorisations; 4.2.2 voting rights; 4.2.3 rights attaching to shares;
24 4.2.4 alterations to authorised share capital during the preceding three years; 4.2.5 options and preferential rights in respect of shares; and 4.2.6 issues and repurchases of shares in the preceding three years. 4.3 Issues of Gemgrow shares There have been no issues or offers of A shares and/or B shares of Gemgrow and its major subsidiaries in the three years preceding the last practicable date other than as set out in Annexure 18.
4.4 Major and controlling shareholders 4.4.1 Set out below are the names of Gemgrow shareholders, other than directors, who, directly or indirectly, are beneficially interested in 5% or more of the issued Gemgrow A shares of as at the last practical date Number of Gemgrow Shareholder A shares % of total Coronation Fund Managers 13 192 782 21.0 East & West Investment (Pty) Ltd 7 581 035 12.1 Investec 6 093 866 9.7 Vukile Property Fund Limited 4 691 084 7.5 Old Mutual Group 3 394 176 5.4 Total 34 952 943 55.7
*Controlling shareholder
4.4.2 Set out below are the names of Gemgrow shareholders, other than directors, who, directly or indirectly, are beneficially interested in 5% or more of the issued Gemgrow B shares of as at the last practical date Number of Gemgrow Shareholder B shares % of total Arrowhead* 251 160 816 61.5 Vukile Property Fund Limited 114 438 564 28.0 Total 365 599 380 89.5
*Controlling shareholder Gemgrow’s controlling shareholder was Vukile prior to the implementation of the Synergy transaction in 2016, following which Arrowhead became Gemgrow’s controlling shareholder.
4.4.3 Set out below are the names of Gemgrow shareholders, other than directors, who, directly or indirectly, are expected to be beneficially interested in 5% or more of the issued Gemgrow A shares post the implementation of the transaction Number of Gemgrow Shareholder A shares % of total Coronation Fund Managers 13 192 782 21.0 East & West Investment (Pty) Ltd 7 581 035 12.1 Investec 6 093 866 9.7 Vukile Property Fund Limited 4 691 084 7.5 Old Mutual Group 3 394 176 5.4 Total 34 952 943 55.6
4.4.4 Set out below are the names of Gemgrow shareholders, other than directors, who, directly or indirectly, are expected to be beneficially interested in 5% or more of the issued Gemgrow B shares post the implementation of the transaction, but excluding the Arrowhead-held Gemgrow shares
25 Number of Gemgrow Shareholder B shares % of total Vukile Property Fund Limited 114 438 564 11.3 Old Mutual Group 94 555 707 9.3 Government Employees Pension Fund 78 092 173 7.7 Nedbank Group 74 285 026 7.3 Total 361 371 470 35.6
5. OPTIONS OR PREFERENTIAL RIGHTS IN RESPECT OF SHARES There are no options or preferential rights to subscribe for shares in Gemgrow which are capable of being exercised at the date of this prospectus.
6. COMMISSIONS PAID OR PAYABLE IN RESPECT OF UNDERWRITING 6.1 No amounts have been paid, or accrued as payable, within the three years preceding the last practicable date as commission to any person, including commission paid or payable to any sub-underwriter or a promoter or director or officer of the Gemgrow group, for subscribing or agreeing to subscribe, or procuring, or agreeing to procure, subscriptions for any Gemgrow securities. 6.2 No commissions, discounts or brokerages have been paid nor have any other special terms been granted in connection with the issue or sale of any shares or linked units in the capital of the company in the three years preceding the last practicable date. 6.3 The Gemgrow group is not subject to any royalty agreements and no royalties are payable by the Gemgrow group. 6.4 Save for the property management agreements referred to in paragraph 2.6.1 above, the combined Gemgrow group is not subject to any other management agreements.
7. MATERIAL CONTRACTS 7.1 Other than the service agreements as set out in paragraph 7 of Annexure 3 and the CIS company secretarial service agreement, neither the company nor its subsidiaries have entered into any contracts relating to the directors’ and managerial remuneration, royalties, secretarial and technical fees and restraint payments. 7.2 Save for: 7.2.1 the offer and implementation agreement the salient features of which are set out in Section 3 of this prospectus and Annexure 10 of the scheme circular; 7.2.2 the cost sharing agreement, the salient features of which are set out in Annexure 10 of the scheme circular; and 7.2.3 the Synergy transaction agreements; the Gemgrow group has not entered into any material contract, being restrictive funding arrangements and/ or contracts entered into otherwise than in the ordinary course of business, within the two years prior to the date of this prospectus or at any time containing an obligation or settlement that is material to the enlarged Gemgrow group at the date of this prospectus.
7.3 The property management agreements referred to in Annexure 6 and the loan agreements as set out in Annexure 19 are contracts that are entered into in the ordinary course of business and are material to the Gemgrow group.
7.4 A summary of the existing service agreements for the executive directors is set out in Annexure 3.
26 8. INTERESTS OF DIRECTORS AND PROMOTERS Details of the directors’ and promoters’ interests in Gemgrow are set out in Annexure 3.
9. LOANS AND BORROWINGS 9.1 Details of material borrowings advanced to the Gemgrow group and material loans receivable by the Gemgrow group are set out in Annexure 19. 9.2 None of the material borrowings listed in Annexure 19 have any redemption or conversion rights attaching to them. 9.3 The Gemgrow group has no loan capital outstanding. 9.4 The Gemgrow group has no debentures outstanding. 9.5 The Gemgrow group has not entered into any other material inter-company loans. 9.6 As at the last practicable date, Gemgrow and Arrowhead have not undertaken any off-balance sheet financing. 9.7 Gemgrow has not entered into any other loan arrangements. 9.8 Save for as set out above and as at the last practicable date, no loans have been made or security furnished by the Gemgrow group for the benefit of any director, manager or associate of any director or manager of Gemgrow
10. SHARES ISSUED OR TO BE ISSUED OTHER THAN FOR CASH 10.1 There are no securities that were issued or agreed to be issued by Gemgrow, or a subsdiary of Gemgrow, within the 3 years immediately before the date of this prospectus, to any person other than for cash other than as set out in Annexure 18.
11. PROPERTY AND BUSINESS UNDERTAKINGS 11.1 Properties and business undertakings acquired or to be acquired 11.1.1 Details of material immovable properties, fixed assets and/or business undertakings acquired by the Gemgrow group within the three years preceding the last practicable date are set out in Annexure 9. 11.1.2 Save as set out in Annexure 9 and in respect of the transaction, no material immovable properties, fixed assets and/or business undertakings are in the process of being or are proposed to be acquired by the Gemgrow group (or which the Gemgrow group has an option to acquire).
11. 2 Properties and business undertakings disposed of or to be disposed of 11.2.1 Details of material immovable properties, fixed assets and/or business undertakings that have been disposed of by the Gemgrow group within the three years preceding the last practicable date, are set out in Annexure 9. 11.2.2 Save as set out in Annexure 9, no material immovable properties, fixed assets and/or business undertakings have been disposed of by the Gemgrow group in the three years preceding the last practicable date or are intended to be disposed of within six months from the date of this prospectus.
12. AMOUNTS PAID OR PAYABLE TO PROMOTERS No cash or securities have been paid or any benefit given to any promoter within the three years preceding the date of this prospectus, or is proposed to be paid or given to any promoter.
27 13. PRELIMINARY EXPENSES AND ISSUE EXPENSES 13.1 The preliminary expenses and issue expenses (exclusive of VAT) incurred by the Gemgrow group within three years before the date of the prospectus or that are expected to be incurred are presented in the table below: Gemgrow Payable to Rand (‘000) Financial advisor and transaction sponsor fees Investec Bank 10 000 Independent advisor and transaction sponsor to Gemgrow fees Nedbank 2 500 Strategic advisor fees Ferryman Capital Partners 2 500 Legal advisor fees Cliffe Dekker Hofmeyr 2 800 Independent reporting accountants fees BDO 1 754 Independent expert fees in respect of the category 1 transaction Questco Corporate Advisory (Pty) Ltd 275 Independent property valuer fees Real Insight 800 Independent property valuer fees Yield Enhancement Solutions 698 Printing and other costs INCE 140 JSE documentation and ruling fees JSE 243 JSE listing fees JSE 491 CIPC fees CIPC 7 Competition Authorities filing South African Competition Authorities 550 Subtotal 22 758
13.2 In respect of the Synergy transaction in 2016, Gemgrow incurred expenses of R12.4 million. 13.3 The preliminary expenses payable by Arrowhead in connection with the scheme is presented in the table below: Arrowhead Payable to Rand (‘000) Independent expert fees in respect of scheme Mazars 280 Printing and other costs INCE 316 TRP documentation fees TRP 200 Subtotal 796
14. CONFLICT OF INTEREST 14.1 The following matter may be considered to have an effect on the transaction sponsor’s independence from Gemgrow: 14.1.1 R201 million facility extended to Gemgrow, of which R0 has been utilised. Gemgrow currently has long- term borrowings of c.R2 billion as at 31 March 2019; and 14.1.2 R661 million facility extended to Arrowhead, of which R661 million has been utilised. Arrowhead currently has long-term borrowings of c.R7 billion as at 31 March 2019.
14.2 The abovementioned facilities granted by Property Finance, a division of Nedbank Corporate and Investment Banking (“Property Finance”) are less than 1% of Property Finance’s total loan book, and are also immaterial to the combined entity of Gemgrow and Arrowhead. In addition Nedbank Limited, as a strictly regulated entity, has in place Chinese walls between its Sponsor and Regulatory and its Property Finance divisions.
28 SECTION 2 – INFORMATION ABOUT THE OFFERED SECURITIES
1. PURPOSE OF THE OFFER 1.1 Introduction 1.1.1 In the joint firm intention announcement dated 8 July 2019, Arrowhead shareholders were advised that Arrowhead and Gemgrow had signed the offer and implementation agreement, which sets out the terms and conditions upon which Gemgrow offered to acquire all of the scheme shares from the scheme participants by way of a scheme in terms of section 114 of the Companies Act, to be proposed by the Arrowhead board between Arrowhead and Arrowhead shareholders. 1.1.2 Following the implementation of the scheme Gemgrow will become the registered and beneficial owner of the entire issued ordinary share capital of Arrowhead, Arrowhead will become a subsidiary of Gemgrow and the listing of Arrowhead on the Main Board of the JSE will be terminated.
1.2 Nature of the business of Gemgrow and Arrowhead Gemgrow 1.2.1 Gemgrow is a REIT holding a diverse portfolio of retail, office and industrial properties valued at R5.6 billion (held directly and through a wholly-owned subsidiary). Gemgrow currently owns 163 properties that are located across South Africa’s nine provinces. 1.2.2 Gemgrow is focused on growing its portfolio of properties, many of which have been overlooked by the listed property sector in the past. However, these assets offer attractive income growth to investors and identify Gemgrow as a niche market REIT. 1.2.3 The property portfolio is well diversified and the company mitigates risk by investing in a large number of properties, with a wide range of retail, office and industrial tenants located throughout South Africa. 1.2.4 The company’s experienced management team has historically received the added benefit of strategic oversight provided by Arrowhead.
Arrowhead 1.2.5 Arrowhead is a diversified opportunistic South African property fund focused on creating long-term shareholder value. 1.2.6 Arrowhead is a REIT holding a diverse portfolio of retail, office and industrial properties valued at R5.7 billion (held directly and through a wholly-owned subsidiary). 1.2.7 At 31 March 2019, Arrowhead held a 55.7% interest in its subsidiary, Indluplace, which owns a portfolio of residential properties. As at 31 March 2019. Arrowhead also owned 61.5% of the Gemgrow B shares, equivalent to 53.3% of Gemgrow. 1.2.8 In addition, at 31 March 2019 Arrowhead held an interest of 16.4% interest in Rebosis as well as a 8.6% interest in Dipula.
1.3 Rationale for the transaction 1.3.1 Gemgrow, a separately listed entity, was repositioned in its current form in 2016, pursuant to a transaction concluded between amongst others, Arrowhead and Vukile. Arrowhead currently owns 53.3% of Gemgrow. 1.3.2 Since its inception, Gemgrow has successfully grown its property portfolio from c.R4.3 billion to c.R5.6 billion by pro-actively recycling assets, selling off a number of its non-core assets with non‑sustainable income and acquiring better quality assets with sustainable income streams. As a result, Gemgrow’s property portfolio is now more closely aligned with that of Arrowhead. 1.3.3 The Arrowhead and Gemgrow boards are of the view that there is no longer a clear rationale to retaining two separate listings and believe that, in the current challenging operating environment, a simplified group structure would be more efficient and create synergistic benefits for all shareholders.
29 1.3.4 It is expected that Gemgrow shareholders will as a result of the transaction benefit through improved liquidity, a significantly enhanced Gemgrow A share cash cover, as well as better future access to equity capital markets to support growth. 1.3.5 Post implementation of the transaction, the combined group will take steps to strengthen its balance sheet by reducing debt and will continue to explore all available opportunities to unlock value by simplifying its group structure. 1.3.6 The transaction has been structured by the parties as a reverse take-over of Gemgrow in order to enable the combined group to continue to leverage off Gemgrow’s dual-class share structure, which remains a valuable differentiator in the REIT sector, particularly in the context of any potential future industry consolidation.
2. TIMES AND DATES 2019 Date on which offer contemplated in this prospectus will be open is the same date on which the scheme circular is posted to Arrowhead shareholders Monday, 22 July Date on which offer contemplated in this prospectus will close is the scheme consideration record date Friday, 13 September
3. PARTICULARS OF THE SCHEME CONTEMPLATED IN THIS PROSPECTUS In terms of section 114(1) of the Companies Act, the board of directors of Arrowhead has proposed the scheme as set out in this section between Arrowhead and its shareholders. 3.1 Terms of the scheme and scheme consideration 3.1.1 In terms of the scheme, Gemgrow will, on the scheme operative date, acquire all of the Arrowhead shares held by the scheme participants, for the scheme consideration. 3.1.2 Details of the scheme are contained in the scheme circular and are summarised below. In the event of any conflict between the scheme circular and this prospectus, insofar as it relates to the scheme, the scheme circular shall prevail. 3.1.3 Subject to the scheme becoming unconditional, with effect from the operative date: 3.1.3.1 the scheme participants (whether they voted in favour of the scheme or not or abstained or refrained from voting) shall be deemed to have disposed of (and shall be deemed to have undertaken to transfer) their scheme shares, free of encumbrances, to Gemgrow with effect from the operative date in exchange for the scheme consideration, and Gemgrow shall be deemed to have acquired registered and beneficial ownership of all the scheme shares with effect from the operative date; 3.1.3.2 the disposal and transfer by each scheme participant of the scheme shares held by each such scheme participant to Gemgrow, and the acquisition and ownership of those scheme shares by Gemgrow, pursuant to the provisions of the scheme, will be effected; 3.1.3.3 each scheme participant shall be deemed to have transferred to Gemgrow, with effect from the operative date, all of the scheme shares held by such scheme participant without any further act or instrument being required; and 3.1.3.4 scheme participants shall be entitled to receive the scheme consideration, subject to the remaining provisions of this paragraph 3. 3.1.4 Each scheme participant irrevocably nominates, constitutes and appoints Arrowhead, as principal, with power of substitution, as its lawful attorney and agent authorised to cause the scheme shares disposed of by any scheme participant in terms of the scheme to be transferred to, and registered in the name of, Gemgrow on or at any time after the operative date, and to do all such things and take all such steps (including the signing of any transfer form) as Arrowhead in its discretion considers necessary in order to effect that transfer and registration. 3.1.5 The scheme consideration shall be settled, in full, in accordance with the terms of the scheme without regard to any lien, right of set-off, counterclaim or other analogous right to which Arrowhead or Gemgrow may otherwise be, or claim to be, entitled against a scheme participant.
30 3.1.6 Arrowhead, as principal, shall procure that Gemgrow complies with its obligations under the scheme, and Arrowhead alone shall have the right to enforce those obligations (if necessary) against Gemgrow. 3.1.7 The rights of the scheme participants to receive the scheme consideration will be rights enforceable by scheme participants against Arrowhead only. Scheme participants will be entitled to require Arrowhead to enforce its rights in terms of the scheme against Gemgrow. 3.1.8 The effect of the scheme will, inter alia, be that Gemgrow will, with effect from the operative date, become the registered and beneficial owner of all scheme shares. None of the scheme shares will be transferred to any other person. 3.1.9 Gemgrow and Arrowhead have agreed that, upon the scheme becoming operative, they will give effect to the terms and conditions of the scheme and will take all actions and sign all necessary documents to give effect to the scheme. 3.1.10 As a consequence of the scheme becoming operative, an application will be made to the JSE for the delisting of the scheme shares.
3.2 Conditions precedent 3.2.1 The implementation of the scheme is subject to the fulfilment or waiver, as the case may be, of the following conditions precedent which remain outstanding as at the last practicable date: 3.2.1.1 by not later than 17h00 on 31 January 2020, the approval of the Arrowhead requisite resolutions by the requisite majority of Arrowhead shareholders is obtained; 3.2.1.2 by not later than 17h00 on 31 January 2020, the approval of the Gemgrow requisite resolutions by the requisite majority of Gemgrow shareholders is obtained; 3.2.1.3 by not later than 17h00 on 31 January 2020, to the extent required under section 115(3) of the Companies Act, approval of the implementation of the scheme resolution by the Court is obtained and Arrowhead not having treated the scheme resolution as a nullity (which it may not do unless it is instructed to do so by Gemgrow as contemplated in section 115(5) (b) of the Companies Act; 3.2.1.4 as at 12:00 on the business day immediately following the last day on which a valid demand may be made by an Arrowhead shareholder in respect of the scheme in terms of section 164(7) of the Companies Act, Arrowhead has not received valid demands from Arrowhead shareholder/s holding in aggregate more than 5% of all the issued Arrowhead shares; 3.2.1.5 as at 17:00 on the date on which the last of the conditions in paragraphs 3.2.1.2 to 3.2.14 has been fulfilled or, where appropriate, waived, none of the following events shall have occurred in respect of Arrowhead or Gemgrow: 3.2.1.5.1 any corporate action, legal proceedings or other procedure or other step (including an application to court, proposal of a resolution or convening of a meeting of shareholders, members, directors or other officers) is taken by any person with view to: 3.2.1.5.1.1 a moratorium, compromise, composition, business rescue or similar arrangement with any of its creditors; 3.2.1.5.1.2 its winding-up, dissolution or commencement of business rescue proceedings, or for the seeking of relief under any applicable bankruptcy, insolvency, company or similar law, or any such resolution; or 3.2.1.5.2 the value of its assets is less than its liabilities (taking into account of contingent and prospective liabilities) or it is unable to pay its debts as they fall due; and 3.2.1.6 by no later than 17:00 on 31 January 2020, the issue of a compliance certificate by the TRP in relation to the scheme. 3.2.2 Save where the conditions in paragraph 3.2.1 are of a regulatory nature, they are capable of waiver or relaxation by written agreement between Gemgrow and Arrowhead prior to the expiry of the time period set out in respect of the relevant condition contained in paragraph 3.2.1 (or such extended time period as may be agreed in writing in accordance with paragraph 3.2.3).
31 3.2.3 Gemgrow and Arrowhead may by agreement in writing and with the prior approval of the TRP (where required), extend the dates for the fulfilment of any one or more of the conditions in paragraph 3.2.1 and such agreement shall not be unreasonably withheld or delayed if the condition is of a regulatory nature and the delay is occasioned on the part of the regulator and the period of the extension accords with the period of the delay.
3.2.4 As at the last practicable date, the Competition Authorities have unconditionally approved the scheme.
3.3 Scheme consideration In the event of the conditions precedent to the scheme being fulfilled, or waived, and the scheme becoming operative, scheme participants shall receive the scheme consideration on the scheme consideration settlement date, being 0.8237 Gemgrow B shares per scheme share.
3.4 Fractions 3.4.1 Where a scheme participant’s entitlement to the scheme consideration, results in a fractional entitlement, such fraction of a Gemgrow B share will be rounded down to the nearest whole number, resulting in allocations of whole Gemgrow B shares and a cash payment will be made to the scheme participant for the fraction. 3.4.2 The applicable cash payment will be determined with reference to the Volume Weighted Average Price of a Gemgrow B share traded on the JSE on Wednesday, 11 September 2019, discounted by 10%. The basis for the applicable cash payment will be announced on SENS on Thursday, 12 September 2019, by 10:30.
3.5 Distributions 3.5.1 The offer and implementation agreement regulates the terms on which each of Arrowhead and Gemgrow may declare and pay distributions during the interim period, which terms are set out in this paragraph 3.5. 3.5.2 Provided that the scheme operative date occurs before or on the September distributions last practicable date, the scheme shall have a commercial effective date of 1 April 2019 and the following shall apply: 3.5.2.1 the scheme consideration will be issued without scheme participants being entitled to participate in the distributable income of Gemgrow on the Gemgrow B shares for the period ending on 31 March 2019, but with the entitlement to Gemgrow’s distributable income from 1 April 2019 until the scheme operative date and thereafter; 3.5.2.2 the scheme shares will be acquired by Gemgrow without Gemgrow being entitled to participate in the distributable income of Arrowhead on the scheme shares in respect of the period ending on 31 March 2019 but with the entitlement to participate in Arrowhead’s distributable income from 1 April 2019 until the scheme operative date and thereafter; 3.5.2.3 neither Gemgrow nor Arrowhead shall be entitled to declare or pay any dividends until after the termination date or the scheme consideration settlement date, whichever is the earlier date. 3.5.3 It is recorded that each of Gemgrow and Arrowhead will, in terms of section 13.49(a) read with section 13.47 of the Listings Requirements, be required to make distributions in respect of the distributable income of each such party for the financial period ending 30 September 2019 (“the applicable period”) by no later than 4 months after the end of such applicable period, which each of Arrowhead and Gemgrow have undertaken to do. Accordingly, in the event that the scheme operative date has not occurred prior to the September distributions last practicable date, then: 3.5.3.1 the scheme operative date shall not occur until at least 1 business day after the later of (i) the date on which the dividend declared by Arrowhead in respect of the applicable period is paid in full by Arrowhead and (ii) the date on which the dividend declared by Gemgrow in respect of the applicable period is paid in full by Gemgrow;
32 3.5.3.2 the scheme consideration will be issued without scheme participants being entitled to participate in the distributable income of Gemgrow on the Gemgrow B shares for the applicable period, but with the entitlement to participate in Gemgrow’s distributable income from 1 October 2019 until the scheme operative date and thereafter; 3.5.3.3 the scheme shares will be acquired by Gemgrow without Gemgrow being entitled to participate in the distributable income of Arrowhead on the scheme shares in respect of the applicable period but with the entitlement to participate in Arrowhead’s distributable income from 1 October 2019 until the scheme operative date and thereafter; and 3.5.3.4 neither Gemgrow nor Arrowhead shall be entitled to declare or pay any dividends in respect of any period commencing on or after 1 October 2019, until after the termination date or the scheme consideration settlement date, whichever is the earlier date.
3.6 Shareholder support 3.6.1 Vukile, which holds 7.48% of the Gemgrow A shares and 28.0% of the Gemgrow B shares in issue (representing 25.3% of all the Gemgrow shares eligible to vote on the Gemgrow requisite resolutions), has irrevocably undertaken that, if the scheme is proposed, Vukile will vote in favour of all the resolutions necessary to approve the acquisition by Gemgrow of the scheme shares pursuant to the scheme at the meeting of the Gemgrow shareholders. 3.6.2 In addition, Arrowhead has irrevocably undertaken to vote in favour of all the Gemgrow requisite resolutions in respect of which it is entitled to vote (recognising that a number of these resolutions will require the approval by the majority of Gemgrow shareholders excluding Arrowhead).
3.7 Arrowhead share incentive schemes 3.7.1 The Arrowhead share incentive scheme shares shall be disposed of pursuant to the scheme in exchange for the applicable number of consideration shares and, pursuant thereto, (i) the consideration shares so received will be substituted for the Arrowhead share incentive scheme shares and will be subject to the provisions of the rules of the applicable Arrowhead share incentive scheme and (ii) the loans granted to such Arrowhead share incentive scheme participants under the Arrowhead share incentive schemes shall remain in place and on and subject to identical terms and conditions, provided that the consideration shares so received by such Arrowhead share incentive scheme participants shall, with effect from the receipt thereof by the Arrowhead share incentive scheme participants, be pledged as security for those loans on the same terms as were applicable to the pledge of the Arrowhead share incentive scheme shares.
3.8 Conversion and redemption of Arrowhead-held Gemgrow shares 3.8.1 The Arrowhead-held Gemgrow shares will become treasury shares in Gemgrow as a result of the transaction. In order to remove these Arrowhead-held Gemgrow shares from the Gemgrow capital structure and thereby simplify the combined group structure, the intention is for the Gemgrow board to convert the Arrowhead-held Gemgrow shares into redeemable shares, and subsequently to redeem such redeemable shares for a nominal consideration. 3.8.2 To enable the Gemgrow board to effect such conversion and redemption, the following resolutions will be submitted to Gemgrow shareholders at the combined general meeting and separate class meetings of the Gemgrow A shares and Gemgrow B shares, namely that: 3.8.2.1 Gemgrow’s MoI be amended such that (i) a new class of Gemgrow shares is created (such class being the redeemable shares), which class of redeemable shares shall have the rights, limitations and other terms set out in such Gemgrow amended MOI, including, inter alia, that such shares shall be capable of being redeemed by Gemgrow at the instance of the Gemgrow board for the redemption consideration and (ii) a mechanism be included to enable the Gemgrow board to convert the Arrowhead-held Gemgrow shares from Gemgrow B shares into redeemable shares; 3.8.2.2 with effect from the date of receipt of confirmation from with the CIPC that the Gemgrow amended MOI has been duly registered and placed on file, the Gemgrow board is authorised to convert the Arrowhead-held Gemgrow shares from Gemgrow B shares into redeemable shares; and
33 3.8.2.3 pursuant to the conversion of the Arrowhead-held Gemgrow shares from Gemgrow B shares into redeemable shares, the Gemgrow board be and is authorised to undertake and implement the redemption of the converted Arrowhead-held Gemgrow shares, (collectively the “redeemable share resolutions”). 3.9 For clarity, the scheme is not subject to the approval or implementation of the redeemable share conversion, and the redeemable share conversion, if approved by the Gemgrow shareholders, may only be implemented by the Gemgrow board after the implementation of the scheme. The Gemgrow board may in its its discretion resolve not to proceed with the filing of the redeemable share resolutions with CIPC, the conversion and/or the redemption.
3.10 Previous issues of securities There have been no issues or offers of Gemgrow shares in the three years preceding the last practicable date other than as set out in Annexure 18.
4. MINIMUM SUBSCRIPTION The Gemgrow shares constituting the scheme consideration are being issued as consideration for the purchase of the scheme shares. Accordingly, no minimum amount for subscription, as contemplated in section 108(2) of the Companies Act, read with Regulation 73 of the Companies Regulations, will apply.
34 SECTION 3 – STATEMENTS AND REPORTS RELATING TO THE OFFER
1. STATEMENT AS TO ADEQUACY OF CAPITAL 1.1 The Gemgrow board is of the opinion that the authorised share capital of the Gemgrow group is adequate for the purposes of the business of the group, for at least the next 12 months from the date of issue of this prospectus.
1.2 The Gemgrow board is of the opinion that, should the scheme become effective, taking into account the bank and other facilities available to Gemgrow, the working capital of Gemgrow is sufficient for its present requirements, that is for at least 12 months from the date of issue of this prospectus.
2. REPORT BY DIRECTORS AS TO MATERIAL CHANGES Save for the transaction, the directors confirm that there have been no material changes to the financial or trading position of the Gemgrow group since Gemgrow published its results for the year ended 30 September 2018 and the date of this prospectus.
3. STATEMENT AS TO LISTING ON A STOCK EXCHANGE The Gemgrow shares are listed on the JSE.
4. REPORT BY THE AUDITOR WHERE BUSINESS UNDERTAKING TO BE ACQUIRED Gemgrow does not intend to apply any funds in order to acquire any business undertaking other than Arrowhead.
5. REPORT BY THE AUDITORS WHERE COMPANY WILL ACQUIRE A SUBSIDIARY 5.1 No proceeds will be raised in terms of the scheme and, accordingly, the company or its subsidiaries will not apply any proceeds of the scheme in the acquisition of the securities of any other juristic person.
5.2 Given that the Arrowhead group, upon implementation of the scheme, will become a subsidiary of Gemgrow, Arrowhead has nevertheless included a report in respect of the profits and losses of the Arrowhead group for the three financial years preceding the date of the prospectus, and the assets and liabilities of Arrowhead group at the last date to which the financial statements of the business undertaking were made out, as contemplated in Regulation 78 of the Companies Act.
5.3 Annexure 10 sets out the profits and losses of Arrowhead and its subsidiaries for the financial years ended September 2018, 2017 and 2016, and the assets and liabilities of Arrowhead and its subsidiaries as at March 2019. Annexure 11 sets out the financial information and the auditors’ report in respect of the financial information.
6. REPORT BY THE AUDITORS OF GEMGROW In terms of Regulation 79 of the Companies Regulations, the company’s auditor is required to prepare a report on the profits and losses, dividends and assets and liabilities of Gemgrow and the Gemgrow group. In this regard Annexure 12 and Annexure 13 to this prospectus set out the auditor’s report in respect of these matters.
7. FORECAST STATEMENTS OF COMPREHENSIVE INCOME 7.1 Forecast statements of comprehensive income in respect of the Gemgrow group have been prepared for the six-months ending 30 September 2019 and the year-ending 30 September 2020 (collectively, the “forecasts”), and are set out in Annexure 14.
7.2 The forecasts, including the assumptions on which they are based and the financial information from which they are prepared, are the responsibility of the board of directors of Gemgrow.
35 7.3 The forecasts must be read in conjunction with the independent reporting accountants’ limited assurance report on the forecasts contained in Annexure 15.
8. PRO FORMA STATEMENT OF FINANCIAL POSITION 8.1 The pro forma statement of financial position of the Gemgrow group, showing the pro forma effects of the transaction is set out in Annexure 16. 8.2 The pro forma statement of financial position of Gemgrow, including the assumptions on which it is based and the financial information from which it has been prepared, are the responsibility of the board of directors of Gemgrow. 8.3 The independent reporting accountants’ limited assurance report on the pro forma statement of financial position is set out in Annexure 17.
9. DIVIDENDS 9.1 Gemgrow declares semi-annual dividends for the six-month periods ended 31 March and 30 September. 9.2 Prior to the declaration of any dividends, the company will comply with its obligations as contemplated in section 46 of the Companies Act. 9.3 Any distributions remaining unclaimed for a period of three years from the declaration date thereof may be forfeited by resolution of the directors for the benefit of Gemgrow. 9.4 There are no arrangements in terms of which future dividends or interest distributions are waived or agreed to be waived.
36 SECTION 4 – ADDITIONAL MATERIAL INFORMATION
1. RELATIONSHIP INFORMATION 1.1 None of the directors, promoters, or property managers have had any beneficial interest, direct or indirect, in relation to any property held or property to be acquired by the combined group nor are they contracted to become a tenant of any part of the property of the combined group. 1.2 There is no relationship between any of the parties mentioned in the above paragraph and another person that may conflict with a duty to the combined group. 1.3 None of the property managers, or their directors had any beneficial interest, direct or indirect, in any securities or participatory interests issued or to be issued by the combined group in order to finance the acquisition of any properties in the combined property portfolio. 1.4 Save as disclosed in respect of acquisitions as set out in Annexure 9, the vendors of the properties acquired by the combined group did not have any beneficial interest, direct or indirect, in any securities or participatory interests issued or to be issued by the combined group in order to finance the acquisition of any properties in the combined property portfolio. 1.5 The directors of the combined group, the property managers and the promoters have not had a material beneficial interest, whether directly or indirectly, in the acquisition or disposal of any properties of the combined group during the two years preceding the date of the transaction. 1.6 Details of the property management agreements for the combined group agreements are set out in Annexure 6 of this prospectus and the property management agreements will lie open for inspection in accordance with paragraph 9 of Section 4 of this prospectus.
2. VENDORS 2.1 Details relating to the vendors of all material immovable properties, fixed assets and/or business undertakings acquired by the Gemgrow group within the three years preceding the last practicable date are set out in Annexure 9. 2.2 No vendor has guaranteed book debts or other assets. The agreements in terms of which the relevant material assets were or are to be acquired (the “vendor agreements”) contain warranties standard for transactions of their nature. 2.3 The vendor agreements do not preclude the vendors from carrying on business in competition with the Gemgrow group nor do they impose any other similar restrictions on the vendors. No payment in cash or otherwise has been made in this regard. 2.4 There are no liabilities for accrued taxation that are required to be settled in terms of the vendor agreements. 2.5 Save for the directors’ interests as set out in Annexure 3, no director, proposed director or promoter of the Gemgrow group (or any partnership, syndicate or other association in which a promoter or director had an interest) had any direct or indirect beneficial interest in the acquisition of the material assets from the vendors. 2.6 No cash or securities have been paid or any benefit given within the three years preceding the date of this prospectus or is proposed to be paid or given to any promoter (not being a director). 2.7 The material assets which are the subject of this paragraph 2 have all been transferred into the name of the Gemgrow group. Save where such assets have been provided as security for borrowings as set out in Annexure 19, no such assets have been ceded or pledged.
37 3. LITIGATION STATEMENT There are no legal or arbitration proceedings which may have or have during the 12 months preceding the date of this prospectus, had a material effect on the financial position of the combined group. The combined group is not aware of any other proceedings that would have a material effect on the financial position of the combined group or which are pending or threatened against the combined group.
4. TRADING HISTORY OF SHARES A table of the aggregate volumes and values traded and the highest and lowest prices traded in Gemgrow shares for each month over the 12 months preceding to, and for each day over the 30 days preceding, the last practicable date is set out in Annexure 20.
5. ADVISORS’ AND COMPANY SECRETARY’S INTERESTS IN GEMGROW The names and business addresses of the company’s advisors and the company secretary are set out in the “Corporate Information and Advisors” section of this prospectus. Neither the company’s advisors nor the company secretary have any interests in Gemgrow shares.
6. GOVERNMENT PROTECTION AND INVESTMENT ENCOURAGEMENT LAW There is no government protection or any investment encouragement law pertaining to any of the businesses operated by the group.
7. DIRECTORS’ RESPONSIBILITY STATEMENT The board of directors of Gemgrow, whose names are set out in Section 1, paragraph 2 of this prospectus collectively and individually accept full responsibility for the accuracy of the information given in this prospectus (but only insofar as it relates to Gemgrow and only to the extent that they are required to accept such responsibility in terms of the Companies Act) and certify that to the best of their knowledge and belief there are no facts relating to Gemgrow that have been omitted which would make any statement relating to Gemgrow false or misleading and that they have made all reasonable enquiries to ascertain such facts and that this prospectus contains all information relating to Gemgrow required by law and the Listings Requirements.
8. CONSENTS Each of the company secretary, the corporate advisor, the sponsor, the independent reporting accountants, the independent property valuers, the transfer secretaries, the bankers and the attorneys have consented in writing to act in the capacities stated and to their names appearing in this prospectus and have not withdrawn their consent prior to the publication of this prospectus.
9. DOCUMENTS AVAILABLE FOR INSPECTION The following documents, or copies thereof, will be available for inspection at the registered office of the company between 09:00 and 16:30 from Monday, 22 July 2019 until Thursday, 22 August 2019 both days inclusive: 9.1 the signed prospectus; 9.2 the category 1 circular; 9.3 the scheme circular; 9.4 the memoranda of incorporation of Gemgrow and its major subsidiaries; 9.5 the offer and implementation agreement; 9.6 the cost sharing agreement; 9.7 the property management agreements detailed in Annexure 6; 9.8 the Synergy transaction agreements; 9.9 the summary valuation reports, prepared by the independent property valuers and as set out in Annexure 7, together with the detailed valuation reports;
38 9.10 service agreements with directors, managers or secretary/ies, underwriters, vendors and promoters entered into during the three years preceding this prospectus; 9.11 the written consents detailed in paragraph 8 above; 9.12 the letter of approval in respect of the category 1 circular and, if and once issued, the compliance certificate in respect of the transaction and waiver issued by the TRP; 9.13 the signed reports by the independent reporting accountants, the extracts of which are set out in Annexure 11, Annexure 13, Annexure 15 and Annexure 17; 9.14 the audited annual financial statements of Arrowhead for the years ended 30 September 2016, 30 September 2017 and 30 September 2018 and the interim financial statements of Arrowhead for the six months ended 31 March 2019; and 9.15 the audited annual financial statements of Gemgrow for the years ended 30 September 2016, 30 September 2017 and 30 September 2018 and the interim financial statements of Gemgrow for the six months ended 31 March 2019.
39 SECTION 5 – INAPPLICABLE OR IMMATERIAL MATTERS
For purposes of this prospectus the following provisions of the Companies Regulations are not applicable: 54(2), 54(3), 59(2)(a), 57(2), 61, 62, 73, 77 and 80.
By order of the board 15 July 2019
Registered office 3rd Floor Upper Building 1 Sturdee Avenue, Rosebank, 2196 (PO Box 685, Melrose Arch, 2076)
Signed in Johannesburg by Junaid Limalia on his behalf and on behalf of all of the directors of the company on 15 July 2019 in terms of powers of attorney granted by them.
JUNAID LIMALIA
FOR: MARK JONATHAN KAPLAN A director, herein represented by Junaid Limalia under and in terms of a power of attorney executed on 12 July 2019.
FOR: ALON ISAAC KIRKEL A director, herein represented by Junaid Limalia under and in terms of a power of attorney executed on 10 July 2019.
FOR: ARNOLD IAN BASSERABIE A director, herein represented by Junaid Limalia under and in terms of a power of attorney executed on 11 July 2019.
FOR: CLIFFORD LAWRENCE ABRAMS A director, herein represented by Junaid Limalia under and in terms of a power of attorney executed on 10 July 2019.
FOR: GREGORY STEPHEN KINROSS A director, herein represented by Junaid Limalia under and in terms of a power of attorney executed on 11 July 2019.
FOR: AYESHA REHMAN A director, herein represented by Junaid Limalia under and in terms of a power of attorney executed on 12 July 2019.
40 ANNEXURE 1
GROUP STRUCTURE
1. Set out below is the group structure of Gemgrow as at the last practicable date.
Arrowhead Properties Vukile Property Fund Other Limited Limited
53.3%* 21.4% 25.3%*
Gemgrow Properties Limited
100% 100%
Gemgrow Asset Cumulative Properties Management Proprietary Limited Limited
75.6%
Moolgem Proprietary Limited (unlisted)
*Based on the combined company A and B shares outstanding
2. Set out below is the group structure of Gemgrow post-implementation of the transaction.
Gemgrow Properties Limited (listed)
100% 100% 100%
Gemgrow Asset Cumulative Properties Management Arrowhead Properties Limited Proprietary Limited Limited (unlisted) (unlisted) (unlisted)
75.6%
Moolgem Proprietary 100% 55.7% 16.4%* 8.6%* Limited (unlisted) Vividend Income Indluplace Properties Rebosis Property Dipula Income Fund Fund Limited and Vividend Limited Fund Limited Limited Management Group (listed) (listed) (listed)
*Based on the combined company A and B shares outstanding
41 ANNEXURE 2
DETAILS OF SUBSIDIARIES
The following table contains a list of Gemgrow’s subsidiaries post-implementation of the scheme. Amount Date owing to Main Registration and place of Date became Effective Gemgrow Subsidiary business number incorporation Issued capital a subsidiary holding (R’000) 1. Arrowhead Property 2011/000308/06 5 January 2011 1 047 346 954 Operative date 100% – Properties owning South Africa ordinary no par of the scheme Limited company value shares expected to be 16 September 2019 2. Indluplace Property 2013/226082/06 3 December 343 791 954 3 December 55.7% – Properties owning 2013 ordinary shares 2013 Limited company South Africa of no par value 3. Cumulative Property 2015/335578/06 21 September 379 985 410 no 1 October 100% – Properties owning 2015 par value shares 2016 Limited company South Africa 4. Moolgem Property 2017/174691/07 20 April 2017 30 000 ordinary 1 December 100% of the – Proprietary owning South Africa shares and 2018 A ordinary Limited company 31 010 A shares and ordinary shares 75.62% of the total issued share capital 5. Vividend Property 2010/003232/06 17 February 268 331 668 1 April 2014 100% – Income Fund owning 2010 linked units Limited company South Africa comprising of debentures of R4.9999 each and ordinary shares of 0.001 cent each 6. Karavas Property 2012/178347/07 2 October 2012 100 ordinary 1 April 2015 100% – Proprietary owning South Africa shares Limited company 7. Teaca Property 2006/009429/07 30 March 2006 1 000 ordinary 1 April 2015 100% – Properties owning South Africa shares Proprietary company Limited 8. Radzyn Property 1954/001986/07 4 August 1954 1 000 ordinary 1 April 2015 100% – Investments owning South Africa shares Shareblock company Proprietary Limited 9. Earls Den Property 2015/082427/07 11 March 2015 1 000 ordinary 1 April 2015 100% – Proprietary owning South Africa shares Limited company 10. Kenwyn Flats Property 1997/020093/07 25 November 1 000 ordinary 1 April 2015 100% – Proprietary owning 1997 shares Limited company South Africa
42 Amount Date owing to Main Registration and place of Date became Effective Gemgrow Subsidiary business number incorporation Issued capital a subsidiary holding (R’000) 11. Erf 427 Property 1995/002627/07 24 March 1995 1 000 ordinary 1 April 2015 100% – Windsor owning South Africa shares Proprietary company Limited 12. Triaid Property 2014/051141/07 11 March 2014 1 000 ordinary 1 April 2015 100% – Proprietary owning South Africa shares Limited company 13. Dalem Mews Property 2015/081394/07 10 March 2015 1 000 ordinary 1 April 2015 100% – Proprietary owning South Africa shares Limited company 14. Myso Property 1969/001980/07 10 February 100 ordinary 1 April 2014 100% – Holdings owning 1969 shares Proprietary company South Africa Limited 15. Diluculo Property 2006/011702/07 12 April 2006 1 000 ordinary 30 June 2017 100% – Properties owning South Africa shares Proprietary company Limited 16. Indluprop I Property 2015/175338/07 27 May 2015 1 000 ordinary 9 September 100% – Proprietary owning South Africa shares 2016 Limited company 17. Indluprop I I Property 2015/175568/07 27 May 2015 1 000 ordinary 9 September 100% – Proprietary owning South Africa shares 2016 Limited company 18. Unlocked Property 2014/164353/07 21 August 2014 1 000 ordinary 6 October 100% – Properties 6 owning South Africa shares 2017 Proprietary company Limited 19. Unlocked Property 2014/237746/07 10 November 1 000 ordinary 6 October 100% – Properties owning 2014 shares 2017 10 company South Africa Proprietary Limited 20. Unlocked Property 2015/118 0 58/07 16 April 2015 1 000 ordinary 6 October 100% – Properties owning South Africa shares 2017 11 company Proprietary Limited 21. Unlocked Property 2015/118092/07 22 April 2015 1 000 ordinary 6 October 100% – Properties owning South Africa shares 2017 12 company Proprietary Limited 22. Unlocked Property 2015/127572/07 22 April 2015 1 000 ordinary 6 October 100% – Properties owning South Africa shares 2017 13 company Proprietary Limited
43 Amount Date owing to Main Registration and place of Date became Effective Gemgrow Subsidiary business number incorporation Issued capital a subsidiary holding (R’000) 23. Unlocked Property 2015/141391/07 6 May 2015 1 000 ordinary 6 October 100% – Properties owning South Africa shares 2017 14 company Proprietary Limited 24. Unlocked Property 2016/395110/07 12 September 1 000 ordinary 6 October 100% – Properties owning 2016 shares 2017 21 company South Africa Proprietary Limited 25 Yieldex 1 Property 2015/253977/07 22 July 2015 1 000 ordinary 6 October 100% – Proprietary owning South Africa shares 2017 Limited company 26. Yieldex 4 Property 2015/293617/07 19 August 2015 1 000 ordinary 6 October 100% – Proprietary owning South Africa shares 2017 Limited company 27. Yieldex 7 Property 2016/169327/07 22 April 2016 1 000 ordinary 6 October 100% – Proprietary owning South Africa shares 2017 Limited company 28. Yieldex 11 Property 2016/187315/07 6 May 2016 1 000 ordinary 1 March 2019 100% – Proprietary owning South Africa shares Limited company 29. Yieldex 12 Property 2016/187271/07 6 May 2016 1 000 ordinary 1 March 2019 100% – Proprietary owning South Africa shares Limited company 30. Ixonix Property 2012/037677/07 24 February 1 000 ordinary 6 October 100% – Proprietary owning 2012 shares 2017 Limited company South Africa 31. Buffshelfco 7 Property 2014/120152/07 30 June 2014 1 000 ordinary 6 October 100% – Proprietary owning South Africa shares 2017 Limited company 32. Resico Property 2017/146949/07 31 March 2017 1 000 ordinary 9 June 2017 100% – Proprietary owning South Africa shares Limited company 33. First Property 2012/051092/07 9 March 2012 1 000 ordinary 6 October 100% – Residential owning South Africa shares 2017 Project company Proprietary Limited 34. Jika Property 2005/035424/07 4 October 2005 1 000 ordinary 1 April 2014 100% – Properties owning South Africa shares Proprietary company authorised Limited having a par value of R1.00 each of which 100 ordinary shares have been issued
44 Amount Date owing to Main Registration and place of Date became Effective Gemgrow Subsidiary business number incorporation Issued capital a subsidiary holding (R’000) 35. Aloegate Property 2009/004981/07 11 March 2009 1 000 ordinary 1 April 2014 100% – Proprietary owning South Africa shares Limited company authorised having a par value of R1.00 each of which 100 ordinary shares have been issued 36. Aptotrim Property 2010/008486/07 29 April 2010 1 000 ordinary 1 April 2014 100% – Proprietary owning South Africa shares Limited company authorised having a par value of R1.00 each of which 100 ordinary shares have been issued 37. Barvickarl Property 1954/002947/07 10 November 1 000 ordinary 1 April 2014 100% – Investments owning 1954 shares Proprietary company South Africa authorised Limited having a par value of R1.00 each of which 100 ordinary shares have been issued 38. Helen Joy Property 1969/015071/07 14 October 100 ordinary 1 April 2014 100% – Holdings owning 1969 shares Proprietary company South Africa authorised Limited having a par value of R1.00 each of which 100 ordinary shares have been issued 39. Houghton Property 1927/000438/07 16 November 5 000 ordinary 1 April 2014 100% – Mansions owning 1927 shares Proprietary company South Africa authorised Limited having a par value of R2.00 each of which 5 000 ordinary shares have been issued
45 Amount Date owing to Main Registration and place of Date became Effective Gemgrow Subsidiary business number incorporation Issued capital a subsidiary holding (R’000) 40. Monk’s Property 2008/029294/07 17 December 1 000 ordinary 1 April 2014 100% – Court owning 2008 shares Proprietary company South Africa authorised Limited having a par value of R1.00 each of which 100 ordinary shares have been issued 41. NDF 15 Property 2012/162772/07 6 August 2012 1 000 ordinary 1 April 2014 100% – Investment owning South Africa shares and Trading company authorised Proprietary having a par Limited value of R1.00 each of which 100 ordinary shares have been issued 42. Park Property 1965/005131/07 16 June 1965 1 000 ordinary 1 April 2014 100% – Chambers owning South Africa shares Share Block company authorised Proprietary having a no par Limited value of which 100 ordinary shares have been issued 43. Pondos Property 2002/024154/23 27 March 2013 1 000 ordinary 1 April 2014 100% – Investments owning South Africa shares Proprietary company authorised Limited having a no par value of which 1 000 ordinary shares have been issued 44. Sunnyshore Property 2007/014839/07 21 May 2007 1 000 ordinary 1 April 2014 100% – Trade and owning South Africa shares Invest 103 company authorised Proprietary having a par Limited value of R1.00 each of which 100 ordinary shares have been issued 45. Erf 737 Property 2013/186454/07 8 October 2013 100 ordinary 1 April 2014 100% – Rosettenville owning South Africa shares Proprietary company authorised Limited having a no par value of which 100 ordinary shares have been issued
46 Amount Date owing to Main Registration and place of Date became Effective Gemgrow Subsidiary business number incorporation Issued capital a subsidiary holding (R’000) 46. Vividend Property 2010/002609/07 11 February 10 000 000 1 March 2014 100% – Management owning 2010 ordinary Group company South Africa shares Proprietary authorised Limited having a par value of R0.0001 each of which 10 000 ordinary shares have been issued 47. G and N Property 1969/015283/07 17 October 100 ordinary 1 April 2014 100% – Tarn owning 1969 shares Enterprises company South Africa authorised Proprietary having a Limited par value of R1.00 each of which 100 shares have been issued 48. Gemgrow Asset 2007/016890/07 21 June 2007 10 000 ordinary 30 November 100% – Asset management South Africa shares of R0.01 2016 Management company each Proprietary Limited
47 ANNEXURE 3
DETAILS OF CURRENT AND PROPOSED DIRECTORS OF GEMGROW AND ITS MAJOR SUBSIDIARIES
1. Directors’ interests in shares 1.1 Current directors’ (and their associates) interests in Gemgrow shares (and director’s who have resigned in the past 18 months) 1.1.1 At the last practicable date, the directors of Gemgrow held, directly and indirectly, beneficial interests in, 194 208 Gemgrow A shares, representing approximately less than 0.1% of the total Gemgrow A shares in issue: GPA shares Beneficial interests Total Total Director Direct Indirect shares % Non-executive A. Basserabie – 194 208 194 208 < 0.1% Total 194 208 194 208 < 0.1%
1.1.2 At the last practicable date, the directors of Gemgrow held, directly and indirectly, beneficial interests in, 19 474 502 Gemgrow B shares, representing approximately 4.8% of the total Gemgrow B shares in issue: GPB shares Beneficial interests Total Total Director Direct Indirect shares % Executive M. Kaplan 6 000 000 – 6 000 000 1.5% A. Kirkel 3 000 000 3 742 925 6 742 925 1.7% J. Limalia 3 000 000 3 731 577 6 731 577 1.6% Total 12 000 000 7 474 502 19 474 502 4.8%
1.2 Proposed directors’ (and their associates) interests in Gemgrow shares (and directors who have resigned in the past 18 months) 1.2.1 Set out below are the anticipated direct and indirect beneficial interests of the proposed directors in Gemgrow shares post the implementation of the transaction, but excluding the Arrowhead-held Gemgrow shares. This includes the interest of persons who are no longer directors, but resigned during the last 18 months. In addition, interests of associates of directors, where the director has no beneficial interest, are separately disclosed (this relates principally to the holdings of spouse and minor children): GPA shares Beneficial interests Total Total Director Direct Indirect shares % Non-executive A. Basserabie – 194 208 194 208 <0.1% Total 194 208 194 208 <0.1%
48 GPB shares Beneficial interests Total Total Director Direct Indirect shares % Executive M. Kaplan 14 575 063 9 853 309 24 428 372 2.4% A. Kirkel 3 000 000 3 742 925 6 742 925 0.7% J. Limalia 3 000 000 3 731 577 6 731 577 0.7% R. Kader 1 252 487 1 332 500 2 584 987 0.3% Non-executive S. Noik 82 370 – 82 370 <0.1% Total 21 909 920 18 660 311 40 570 231 4.2%
2. Directors’ interests in transactions 2.1 M. Kaplan is a beneficial holder of 22 372 654 Arrowhead shares; R. Kader is a beneficial holder of 3 138 263 Arrowhead shares and S. Noik is a beneficial holder of 100 000 Arrowhead shares; and therefore they are beneficially interested in the transaction. 2.2 Save as disclosed in the paragraphs above, in relation to their holding of Gemgrow shares as set out in paragraph 2.1 above, none of the directors and proposed directors of Gemgrow, including a director who resigned during the last 18 months, has or had any material beneficial interest, direct or indirect, in any transactions that were effected by Gemgrow during the current or immediately preceding financial year or during any earlier financial year and which remain in any respect outstanding or unperformed.
3. Directors’ emoluments 3.1 Executive directors of Gemgrow do not receive directors’ or sub-committee fees. Non-executive directors’ remuneration consists of an annual fee plus sub-committee membership fees. The non-executive directors’ remuneration is approved by shareholders at the annual general meeting and is considered to be market‑related. 3.2 The remuneration of the directors of Gemgrow for the year ended 30 September 2018 is as follows: Guaranteed Short term Directors’ package incentive fees Total Non-executive C. Abrams – – 400 237 400 237 A. Basserabie – – 406 226 406 226 G. Kinross – – 569 924 569 924 A. Rehman – – 400 237 400 237 Executive M. Kaplan* 5 161 064 3 180 635 – 8 341 699 J. Limalia 1 980 000 727 452 – 2 707 452 A. Kirkel 1 980 000 727 452 – 2 707 452 9 121 064 4 635 539 1 776 624 15 533 227
* Mark Kaplan was remunerated by Gemgrow’s holding company at the time.
3.3 Shares issued to directors in terms of the Gemgrow share purchase and option scheme are disclosed in paragraph 2 of Annexure 19 of this prospectus. 3.4 The short-term incentive refers to the bonuses of the executive directors payable annually in cash. In addition, short-term incentive can consist of incentive loan shares as an alternative to cash bonuses.
49 3.5 Save as set out above, the directors of Gemgrow as at the last practicable date did not receive any emoluments for the twelve months ended 30 September 2018 in the form of: 3.5.1 fees for services as a director; 3.5.2 management, consulting, technical or other fees paid for such services rendered, directly or indirectly, including payments to management companies, a part of which is then paid to a director of the company; 3.5.3 sums paid by way of expense allowance; 3.5.4 basic salaries; 3.5.5 bonuses and performance-related payments; 3.5.6 sums paid by way of expense allowance; 3.5.7 any other material benefits; 3.5.8 contributions paid under any pension scheme; or 3.5.9 any commission, gain or profit-sharing arrangements.
3.6 The remuneration of the proposed directors of Gemgrow group (including from the subsidiaries of the Gemgrow group) for the year ended 30 September 2019 is anticipated to be as follows: Guaranteed Short term Directors’ package incentive fees Total Non-executive G. Kinross1 – – 1 041 781 1 041 781 A. Basserabie – – 426 131 426 131 M. Nell – – 591 557 591 557 T. Adler2 – – 900 540 900 540 S. Mokorosi – – 426 131 426 131 S. Noik2 – – 744 424 744 424 4 130 564 4 130 564 Executive M. Kaplan 5 413 956 – – 5 413 956 J. Limalia 2 708 562 – – 2 708 562 A. Kirkel 2 708 562 – – 2 708 562 R. Kader 2 112 686 – – 2 112 686 12 943 766 4 130 564 17 074 330
1. Includes directors’ fees in his capacity as a director of Indluplace and Gemgrow. 2. Includes directors’ fees in his capacity as a director of Arrowhead and Indluplace. 3.7 No share options or any other right has been given to a director or proposed director in respect of providing a right to subscribe for shares in Gemgrow. 3.8 All directors and proposed directors will be remunerated by Gemgrow. 3.9 Save as disclosed in this paragraph 3, no director received any remuneration or benefit in any form from any subsidiary, associate, joint venture or other third party management or advisory company. 3.10 There will be no fees payable or accrued as payable by Gemgrow to a third party in lieu of directors’ fees. 3.11 Save as set out in this paragraph 3, the remuneration of directors and proposed directors will not be varied as a consequence of the transaction. 3.12 It is intended that the executive directors of Gemgrow will enter into standard service contracts for a period of five years commencing 1 September 2019 whereafter the respective service contracts shall be terminable by the executive on two months’ written notice. 3.13 Save as disclosed in paragraph 2.5 and 2.6 of section 1 of this prospectus, the business of Gemgrow, or any part thereof, is not managed or proposed to be managed by any third party under contract or arrangement.
50 3.14 Save for the service agreements as set out in paragraph 7 of this Annexure 3 and the CIS company secretarial service agreement, Gemgrow has not entered into any contracts relating to the proposed directors’ and managerial remuneration, secretarial and technical fees and restraint payments. 3.15 Non-executive directors are not subject to fixed terms of employment other than the conditions contained in the MoI and, as such, no service contracts have been entered into between the non-executive directors and the company. Non-executive directors’ fees are approved in advance by shareholders by special resolution at the company’s annual general meeting, at intervals of no longer than two years at a time. One-third of all executive and non-executive directors retire from office by rotation at the company’s annual general meeting and, if eligible, may offer themselves for re-election. 3.16 No restraints of trade have been imposed on any of the executive or non-executive directors and no payments will be made in this regard.
4. Borrowing powers of the directors 4.1 The directors may from time to time, provided that the directors shall not, without the consent of a resolution of shareholders in a combined general meeting which resolution will require at least 75% of the votes exercisable by Gemgrow A shareholders and Gemgrow B shareholders entitled to vote at such combined general meeting be cast in favour thereof, permit the company’s debt gearing levels to exceed 50% of the value of its property portfolio as independently valued from time to time. 4.2 The aggregate principal amount at any one time outstanding in respect of moneys borrowed or raised by the company (other than by way of debentures) and subsidiaries of the company (excluding moneys borrowed or raised from any other subsidiary but including amounts secured by outstanding guarantees or suretyships by the company or any of its subsidiaries), shall not exceed the aggregate amount at that time authorised to be borrowed or secured by the directors of the company’s listed holding company in respect of that holding company. 4.3 Further information related to the borrowing powers of directors are set out in Annexure 5. 4.4 The directors’ borrowing powers have never been exceeded during the previous three years. There are no exchange control or other restrictions on the borrowing powers of Gemgrow.
5. Interests of directors and promoters 5.1 Save as in relation to their holding of Arrowhead shares and Gemgrow shares as disclosed in this Annexure 3, none of the other directors or proposed directors of Gemgrow will benefit directly or indirectly, in any manner as a consequence of the implementation of the transaction. 5.2 Other than as set out in paragraph 2 above, no directors or proposed directors of Gemgrow, including a director who resigned during the last 18 months, has or had any material beneficial interest, direct or indirect, in any transactions that were effected by Gemgrow during the current or immediately preceding financial year or during any earlier financial year and which remain in any respect outstanding or unperformed. 5.3 No amount has been paid, or is accrued as payable, within the preceding three years, or proposed to be paid to any promoter or to any partnership, syndicate or other association of which he is or was a member and no other benefit has been given or proposed to be given to such promoter, partnership, syndicate or other association within the said period. 5.4 None of the directors or promoters of Gemgrow have received any material beneficial interest, direct or indirect, in the promotion of the company and its properties as disclosed in Annexure 8 during the three years preceding the date of this prospectus. This includes a partnership, company, syndicate or other association. 5.5 No amount has been paid, or agreed to be paid, within the three years preceding the date of this prospectus, to any director or proposed director of Gemgrow, or to any company in which he or she is beneficially interested, directly or indirectly, or of which he or she is a director (“the associate company”) or to any partnership, syndicate or other association of which he is a member (“the associate entity”), in cash, securities or otherwise, by any person, either to induce him or her to become, or to qualify him or her as a director or otherwise for services rendered by him or her or by the associate company or the associate entity in connection with the promotion of Gemgrow.
51 6. Directors and proposed directors’ declarations 6.1 None of the directors and proposed directors have been involved in: 6.1.1 any bankruptcies, insolvencies or individual voluntary compromise arrangements of such person; 6.1.2 any business rescue plans and/or resolution proposed by any entity to commence business rescue proceedings, application having been made for any entity to begin business rescue proceedings, notices having been delivered in terms of section 129(7) of the Act, receiverships, compulsory liquidations, creditors’ voluntary liquidations, administrations, company voluntary arrangements or any compromise or arrangement with creditors generally or any class of creditors of any company; where such person is or was a director, with an executive function within such company at the time of, or within the 12 months preceding, any such event(s); 6.1.3 any compulsory liquidations, administrations or partnership voluntary arrangements of any partnerships where such person is or was a partner at the time of or within the 12 months preceding such event(s); 6.1.4 receiverships of any asset(s) of such person or of a partnership of which the person is or was a partner at the time of, or within the 12 months preceding, such event; 6.1.5 any public criticisms of such person by statutory or regulatory authorities, including recognised professional bodies, and whether such person has ever been disqualified by a court from acting as a director of a company or from acting in the management or conduct of the affairs of any company; 6.1.6 any offence involving dishonesty committed by such person; 6.1.7 a removal from an office of trust, on the grounds of misconduct and involving dishonesty; and 6.1.8 any court order declaring such person delinquent or placing him or her under probation in terms of section 162 of the Act and/or section 47 of the Close Corporations Act, No. 69 of 1984 or disqualifying him to act as a director in terms of section 219 of the Companies Act.
6.2 None of the directors and proposed directors have been: 6.2.1 disqualified by a court from acting as a director of a company, or from acting in the management or conduct of the affairs of any company as described in section 7.B of the Listings Requirements; 6.2.2 put into liquidation or been placed under business rescue proceedings or had an administrator or other executor appointed during the period when they were (or within the preceding 12 months had been) one of its directors, or alternate directors or equivalent position; 6.2.3 adjudged bankrupt or sequestrated in any jurisdiction; 6.2.4 a party to a scheme of arrangement or made any other form of compromise with their creditors; 6.2.5 found guilty in disciplinary proceedings, by an employer or regulatory body, due to dishonest activities; 6.2.6 barred from entry into any profession or occupation; and 6.2.7 convicted in any jurisdiction of any criminal offence, or an offence under legislation relating to the Companies Act.
7. Terms of office 7.1 A summary of the existing service agreement entered into between Mark Kaplan and Arrowhead on or about 28 September 2011 is set out below: 7.1.1 Commencement date and duration 7.1.1.1 The executive is appointed to the position of Chief Executive Officer of Arrowhead. 7.1.1.2 The employment of the executive commenced on or about December 2011. 7.1.1.3 The agreement shall not be terminable by either party prior to 31 March 2022, save that the company may terminate the executive’s employment on lawfully recognised grounds in accordance with the Labour Relations Act, 66 of 1995 but excluding section 197 thereof.
52 7.1.2 Remuneration 7.1.2.1 Details of remuneration paid are set out in paragraph 3 of Annexure 3. 7.1.2.2 Details of loans advanced and the terms thereof are set out in paragraph 2 of Annexure 19.
7.1.3 Restraint of trade The executive is not be subject to a restraint of trade. 7.2 A summary of the existing service agreement entered into between Junaid Limalia and Gemgrow on or about 9 December 2016 is set out below: 7.2.1 Commencement date and duration 7.2.1.1 The executive is appointed to the position of Chief Financial Officer of Gemgrow. 7.2.1.2 The employment of the executive commenced on 1 January 2017. 7.2.1.3 The agreement shall not be terminable by either party prior to 31 December 2021, save that the company may terminate the executive’s employment on lawfully recognised grounds in accordance with the Labour Relations Act, 66 of 1995 but excluding section 197 thereof.
7.2.2 Remuneration 7.2.2.1 Details of remuneration paid are set out in paragraph 3 of Annexure 3. 7.2.2.2 Details of loans advanced and the terms thereof are set out in paragraph 2 of Annexure 19.
7.2.3 Restraint of trade The executive will not be subject to a restraint of trade.
7.3 A summary of the existing service agreement entered into between Alon Kirkel and Gemgrow on or about January 2017 is set out below: 7.3.1 Commencement date and duration 7.3.1.1 The executive is appointed to the position of Chief Operating Officer of Gemgrow. 7.3.1.2 The employment of the executive commenced on 1 January 2017. 7.3.1.3 The agreement shall not be terminable by either party prior to 31 December 2021, save that the company may terminate the executive’s employment on lawfully recognised grounds in accordance with the Labour Relations Act, 66 of 1995 but excluding section 197 thereof.
7.3.2 Remuneration 7.3.2.1 Details of remuneration paid are set out in paragraph 3 of Annexure 3. 7.3.2.2 Details of loans advanced and the terms thereof are set out in paragraph 2 of Annexure 19.
7.3.3 Restraint of trade The executive will not be subject to a restraint of trade. 7.4 It is intended that the executive directors of Gemgrow will enter into standard service contracts for a period of five years commencing 1 September 2019 whereafter the respective service contracts shall be terminable by the executive on two months’ written notice.
53 ANNEXURE 4
CURRENT AND PAST DIRECTORSHIPS
The table below lists the companies and partnerships of which each director and proposed director of Gemgrow is currently a director or partner as well as the companies and partnerships of which each such director of the company was a director or partner over the five years preceding the date of this prospectus. Current Current directorships and Past directorships and partnerships held in Director partnerships the last five years Mark Kaplan Gemgrow Properties Limited, Arrowhead Aloegate Proprietary Limited, Aptotrim Proprietary Properties Limited, Cumulative Properties Limited, Barvicarl Investments Proprietary Limited, Limited, Gemgrow Asset Management Helen Joy Holdings Proprietary Limited, Houghton Proprietary Limited, Arrowhead Prop I Mansions Proprietary Limited, Monks Court Proprietary Limited, Vividend Income Fund Proprietary Limited, NDF Investment and Trading Limited, Vividend Management Company Proprietary Limited, Park Chambers Share Block Proprietary Limited, Clearwater Crossing Proprietary Limited, Pondos Investments Proprietary Limited, Fluxrab Investments Proprietary Limited, Sunnyshore Trade and Proprietary Limited, Arrowhead Nominees Investment 103 Proprietary Limited, Erf 737 Proprietary Limited Rosettenville Proprietary Limited, G and N Tarn Enterprises Proprietary Limited, Jika Properties Proprietary Limited, Karavas Proprietary Limited, Kenwyn Flats Proprietary Limited, Earls Den Proprietary Limited, Radzyn Investments Shareblock Proprietary Limited, Teaca Properties Proprietary Limited, Triad Proprietary Limited, Erf 427 Windsor Proprietary Limited, Indluplace Properties Limited, Indluprop I Proprietary Limited, Indluprop II Proprietary Limited Alon Kirkel Gemgrow Properties Limited, Cumulative 21 on Scott Street Investments No. 33 CC, Gugu Properties Limited, Gemgrow Asset Metals and Waste Proprietary Limited, Management Proprietary Limited, Moolgem K2012190864 Proprietary Limited, I and TK Proprietary Limited, Kesef Investments CC, Property Proprietary Limited Exceptional Diamonds Proprietary Limited, Junaid Limalia Gemgrow Properties Limited, Cumulative – Properties Limited, Gemgrow Asset Management Proprietary Limited, Moolgem Proprietary Limited, Educomm Solutions Proprietary Limited Gregory Kinross Gemgrow Properties Limited, Indluplace Akanani Mining Proprietary Limited, Bajano Properties Limited, Cell Network Proprietary Investments Proprietary Limited, Bon Terra Mining Limited, ERF 774 Morningside Extension 64 Proprietary Limited, Emerald Panther Investments Home Owners Association, Impact Plus 5 Proprietary Limited, Gelliehold Limited, Jindal Trading 150 Proprietary Limited, Innovo Energy (SA) Proprietary Limited, Vesque Limited Capital Proprietary Limited, Merchant Capital Advisory Services Proprietary Limited, Merchant Capital Debtco Proprietary Limited, Talon Metals Corp
54 Current Current directorships and Past directorships and partnerships held in Director partnerships the last five years Arnold Basserabie Gemgrow Properties Limited, Derbit SA Investec Bank Limited, Barfold Investments Limited, Proprietary Limited, Kalon Venture Partners The Federated Employers Mutual Assurance Proprietary Limited, Kalon Management Company (RF) Proprietary Limited, Investec Life Limited, Kalon Venture Partners Fund II Proprietary Limited, Fedlife Assurance Limited, Limited, Kalon Management Company II Marilyn Investments Proprietary Limited, Fedsure Limited, Fedsure Holdings Limited, Fedsure General Proprietary Limited, Fedam Holdings Asset Management Company Proprietary Proprietary Limited, The Federated Employers Limited, Fedco Investment Holdings Trust Proprietary Limited, Fedsure Investments Proprietary Limited, Kanvestic Proprietary Limited, Investec Holdings Limited, Norwich Life Limited, Afrika Tikkun NPC, Hard Racquets South Africa Limited, Saambou Beherend Limited, No. 3 Investments Proprietary Limited, Firstrand Finance Company Proprietary Limited, Houghton Community Active Protection Del Monte Royal Foods Limited, Thebe Investment NPC Corporation Proprietary Limited, Investec Investment Management Services Proprietary Limited, Thebe Financial Services Limited, Thebe Financial Holdings Proprietary Limited, Netcare Healthcare Developments Proprietary Limited, Wits University Donald Gordon Medical Centre Proprietary Limited, Knowrisk Pro Proprietary Limited, Khumalo Investments Proprietary Limited, Four Arrows Investments 191 Proprietary Limited, Ptyprops 357 Proprietary Limited, Rake in Investments Proprietary Limited, Kumo Mining and Industrial Supplies Proprietary Limited, Derbigum Energies Africa Holdings Proprietary Limited Clifford Abrams Gemgrow Properties Limited, Indluplace Explorer Group Proprietary Limited, Industrial Properties Limited, DEE WhyAre Textiles CC, Credit Company Africa Holdings Limited, Old Co Alig Financial Services CC, LAS Tax and – Fire Control Systems Proprietary Limited Secretarial Services CC, Oxbridge Online Limited, RJCA Administration CC, Voltex SA CC Ayesha Rehman Gemgrow Properties Limited, Indluplace ApexHi Properties Limited, Makhulong A Matla Properties Limited, Just Toys CC Community Development Services, Terrace Road Housing Co-Operative, Dzulani Housing Company Proprietary Limited, Johannesburg Housing Company, Chair of Mitja Investments
55 Proposed Current directorships and Past directorships and partnerships held in Director partnerships the last five years Riaz Kader Arrowhead Properties Limited, Vividend Ubunut Corporate Business Services Proprietary Income Fund Limited Limited Matthew Nell Arrowhead Properties Limited, Pubcor 84 Lower Main Road CC, Nalamali Investment CC, Properties CC, Barmat Consultants CC, Fudgro Investments CC, Manbell Investments CC, Barmat Investments CC, Yellow Box Bioscope Novo Impact Fund NPC, The Urban Foundation Proprietary Limited, Housing Access Fund NPC, The New Housing Company NPC, Azalea Proprietary Limited, Cope Housing Proprietary Limited, FHA Homes NPC, Blomanda Association NPC, Tedcor Group Proprietary Housing Company NPC, Unfound Housing NPC, Limited, Tedcor Management Proprietary The New Housing Company Holdings NPC, Limited, Hudgro Investments Proprietary Trafalgar Mine Housing Services Proprietary Limited, Shisaka Development Management Limited, The Land Investment Trust NPC, Teebac Services Proprietary Limited Proprietary Limited, Tedcor Proprietary Limited, Tusk Construction Support Services Proprietary Limited, Universal Systems of Education Proprietary Limited, Spadework Proprietary Limited, Mine Housing Services Proprietary Limited, Maluleke and Nell Development Management Services Proprietary Limited, The South African Mortgage Lending Company Proprietary Limited, Recap International SA Proprietary Limited, Business venture Investments No. 911 Proprietary Limited, Urban Skywalkers Proprietary Limited, South African Housing Club Proprietary Limited, Matthew Nell and Associates Proprietary Limited Taffy Adler Indluplace Properties Limited, Arrowhead Johannesburg Housing Company, Brickfields Properties Limited, Housing Development Housing Company Proprietary Limited, Dzulani Agency, Makhulong a Matala, TUHF Housing Company, Ekhaya Neighbourhood CID, Properties Proprietary Limited, Shisaka Thubelisha Homes, Trust For Urban Housing Investments Proprietary Limited, Ash Brook Holdings Proprietary Limited, Terrace Road Investments 147 Proprietary Limited Housing Co-operative Limited, Ukulungisa Project Preparation Fund NPC, Shisaka Kwantu Systems Proprietary Limited, Sam Mokorosi Arrowhead Properties Limited, Vunani RMS Sizewe Trading Proprietary Limited, Mergence Sponsors Proprietary Limited, Makhulong A Corporate Solutions Proprietary Limited, Southern Matala Community Development Services Energy Trading Proprietary Limited Proprietary Limited, Karsam Property Investments Proprietary Limited, Asili Beauty Proprietary Limited Selwyn Noik Indluplace Properties Limited, Arrowhead None Properties Limited
56 The table below lists the companies and partnerships of which each director of Arrowhead and Indluplace, being major subsidiaries of Gemgrow (post-implementation of the transaction), is currently a director or partner as well as the companies and partnerships of which each such director was a director or partner over the five years preceding the date of this prospectus. 2.1 Directors of Arrowhead Current directorships and Past directorships and partnerships Director partnerships held in the last five years Mark Kaplan Gemgrow Properties Limited, Arrowhead Aloegate Proprietary Limited, Aptotrim Properties Limited, Cumulative Properties Proprietary Limited, Barvicarl Investments Limited, Gemgrow Asset Management Proprietary Limited, Helen Joy Holdings Proprietary Limited, Arrowhead Prop I Proprietary Limited, Houghton Mansions Proprietary Limited, Vividend Income Fund Proprietary Limited, Monks Court Limited, Vividend Management Company Proprietary Limited, NDF Investment and Proprietary Limited, Clearwater Crossing Trading Proprietary Limited, Park Chambers Proprietary Limited, Fluxrab Investments Share Block Proprietary Limited, Pondos Proprietary Limited, Arrowhead Nominees Investments Proprietary Limited, Proprietary Limited Sunnyshore Trade and Investment 103 Proprietary Limited, Erf 737 Rosettenville Proprietary Limited, G and N Tarn Enterprises Proprietary Limited, Jika Properties Proprietary Limited, Karavas Proprietary Limited, Kenwyn Flats Proprietary Limited, Earls Den Proprietary Limited, Radzyn Investments Shareblock Proprietary Limited, Teaca Properties Proprietary Limited, Triad Proprietary Limited, Erf 427 Windsor Proprietary Limited, Indluplace Properties Limited, Indluprop I Proprietary Limited, Indluprop II Proprietary Limited Riaz Kader Arrowhead Properties Limited, Vividend Ubunut Corporate Business Services Income Fund Limited Proprietary Limited Junaid Limalia Gemgrow Properties Limited, Cumulative – Properties Limited, Gemgrow Asset Management Proprietary Limited, Moolgem Proprietary Limited, Educomm Solutions Proprietary Limited
57 2.2 Directors of Indluplace Past directorships and partnerships held in the Director Current directorships and partnerships last five years Petrus Carel Indluplace Properties Limited, Aloegate Proprietary Terrace Road Housing Co-op de Wit Limited, Aptotrim Proprietary Limited, Barvicarl Limited, Ekhaya Neighbourhood Investments Proprietary Limited, Helen Joy Holdings City Improvement District Proprietary Limited, Houghton Mansions Proprietary Proprietary Limited, Main Limited, Monks Court Proprietary Limited, NDF Marshall Improvement District Investment and Trading Proprietary Limited, Park Proprietary Limited, Dzulani Chambers Share Block Proprietary Limited, Pondos Housing Company Proprietary Investments Proprietary Limited, Sunnyshore Trade and Limited Investment 103 Proprietary Limited, Erf 737 Rosettenville Proprietary Limited, G and N Tarn Enterprises Proprietary Limited, Jika Properties Proprietary Limited, Karavas Proprietary Limited, Kenwyn Flats Proprietary Limited, Earls Den Proprietary Limited, Radzyn Investments Shareblock Proprietary Limited, Teaca Properties Proprietary Limited, Triad Proprietary Limited, Erf 427 Windsor Proprietary Limited, Indluplace Properties Limited, Indluprop I Proprietary Limited, Indluprop II Proprietary Limited, Diluculo Properties Proprietary Limited, Yieldex 7 Proprietary Limited, Yieldex 12 Proprietary Limited, Yieldex 11 Proprietary Limited, Yieldex 10 Proprietary Limited, Unlocked Properties 21 Proprietary Limited, Resico Proprietary Limited, Myso Holdings Proprietary Limited Terence Kaplan Indluplace Properties Limited, Aloegate Proprietary Tradeprops 66 Proprietary Limited, Aptotrim Proprietary Limited, Barvicarl Limited, Cell Shack Proprietary Investments Proprietary Limited, Helen Joy Holdings Limited, Massfurn Proprietary Proprietary Limited, Houghton Mansions Proprietary Limited, Game Stores Limited, Monks Court Proprietary Limited, NDF Proprietary Limited, Benny Investment and Trading Proprietary Limited, Park Goldberg’s Liquor Supermarket Chambers Share Block Proprietary Limited, Pondos Proprietary Limited, Exclusive Investments Proprietary Limited, Sunnyshore Trade and Estate Wines Proprietary Investment 103 Proprietary Limited, Erf 737 Limited, Tradeprops 100 Rosettenville Proprietary Limited, G and N Tarn Proprietary Limited, Tradeprops Enterprises Proprietary Limited, Jika Properties 60 Proprietary Limited, Proprietary Limited, Karavas Proprietary Limited, Kenwyn Tradeprops 66 Proprietary Flats Proprietary Limited, Earls Den Proprietary Limited, Limited Radzyn Investments Shareblock Proprietary Limited, Teaca Properties Proprietary Limited, Triad Proprietary Limited, Erf 427 Windsor Proprietary Limited, Indluplace Properties Limited, Indluprop I Proprietary Limited, Indluprop II Proprietary Limited, Diluculo Properties Proprietary Limited, Yieldex 7 Proprietary Limited, Yieldex 12 Proprietary Limited, Yieldex 11 Proprietary Limited, Yieldex 10 Proprietary Limited, Unlocked Properties 21 Proprietary Limited, Resico Proprietary Limited, Myso Holdings Proprietary Limited
58 Past directorships and partnerships held in the Director Current directorships and partnerships last five years Taffy Adler Indluplace Properties Limited, Arrowhead Properties Johannesburg Housing Limited, Housing Development Agency, Makhulong a Company, Brickfields Housing Matala, TUHF Properties Proprietary Limited Company Proprietary Limited, Dzulani Housing Company, Ekhaya Neighbourhood CID, Thubelisha Homes, Trust For Urban Housing Holdings Proprietary Limited, Terrace Road Housing Co-operative Limited Selwyn Noik Indluplace Properties Limited, Arrowhead Properties None Limited Gregory Kinross Gemgrow Properties Limited, Indluplace Properties Akanani Mining Proprietary Limited, Cell Network Proprietary Limited, ERF 774 Limited, Bajano Investments Morningside Extension 64 Home Owners Association, Proprietary Limited, Bon Terra Impact Plus Trading 150 Proprietary Limited, Innovo Mining Proprietary Limited, Capital Proprietary Limited, Merchant Capital Advisory Emerald Panther Investments 5 Services Proprietary Limited, Merchant Capital Debtco Proprietary Limited, Gelliehold Proprietary Limited, Talon Metals Corp Limited, Jindal Energy (SA) Proprietary Limited, Vesque Limited Clifford Abrams Gemgrow Properties Limited, Indluplace Properties Explorer Group Proprietary Limited, DEE WhyAre Textiles CC, Alig Financial Services Limited, Industrial Credit CC, LAS Tax and Secretarial Services CC, Oxbridge Company Africa Holdings Online Limited, RJCA Administration CC, Voltex SA CC Limited, Old Co – Fire Control Systems Proprietary Limited Ayesha Rehman Gemgrow Properties Limited, Indluplace Properties ApexHi Properties Limited, Limited, Just Toys CC Makhulong A Matla Community Development Services, Terrace Road Housing Co-Operative, Dzulani Housing Company Proprietary Limited, Johannesburg Housing Company, Chair of Mitja Investments
59 ANNEXURE 5
EXTRACTS OF MEMORANDUM OF INCORPORATION OF GEMGROW
The salient terms of the MoI are set out below. The details below are a direct extract from the MoI, as amended.
1. Interpretation 1.1 In this Memorandum of Incorporation, unless the context clearly indicates a contrary intention, the following words and expressions bear the meanings assigned to them and cognate expressions bear corresponding meanings: 1.1.1 “Act” means the Companies Act, No. 71 of 2008, as amended, consolidated or re-enacted from time to time, and includes all schedules to such Act and the regulations; 1.1.2 “A ordinary share” means an A ordinary share of no par value in the share capital of the company having the rights and restrictions set out, inter alia, in clauses 7.2, 34 and 40; 1.1.3 “A ordinary share distribution(s)” means a distribution declared in respect of an A ordinary share calculated with reference to clause 34.4; 1.1.4 “A ordinary shareholder” means the holder of an issued A ordinary share who is entered as such in the securities register, subject to the provisions of section 57; 1.1.5 “B ordinary share” means a B ordinary share of no par value in the share capital of the company having the rights and restrictions set out, inter alia, in clauses 7.2, 34 and 40; 1.1.6 “B ordinary shareholder” means the holder of an issued B ordinary share who is entered as such in the securities register, subject to the provisions of section 57; 1.1.7 “board” means the board of directors from time to time of the company or if there is only one director, then that director; 1.1.8 “business day” means any day excluding a Saturday, Sunday or public holiday in South Africa; 1.1.9 “certificated securities” means securities issued by the company that are not uncertificated securities; 1.1.10 “Central Securities Depositary” has the meaning set out in section 1 of the Financial Markets Act; 1.1.11 “Commission” means the Companies and Intellectual Property Commission established by section 185; 1.1.12 “company” means Gemgrow Properties Limited, duly incorporated under the registration number endorsed thereon; 1.1.13 “CPI” means the Consumer Price Index for all income groups for all items as published by Statistics South Africa (or its successor-in-title), provided that if the aforesaid Index is discontinued or modified it shall be replaced by such index as determined by the company’s auditors from time to time; 1.1.14 “designated date” means either the first designated date or the second designated date, as the case may be; 1.1.15 “director” means a member of the board of the company as contemplated in section 66, or an alternate director, and includes any person occupying the position of a director or alternate director, by whatever name designated; 1.1.16 “electronic communication” has the meaning set out in section 1 of the Electronic Communications and Transactions Act, No 25 of 2002; 1.1.17 “file” or “filed” when used as a verb, means to deliver a document to the Commission in the manner and form, if any, prescribed for that document; 1.1.18 “Financial Markets Act” means the Financial Markets Act, 19 of 2012, including any amendment, consolidation or re-enactment thereof; 1.1.19 “financial year” means the twelve month period from 1 October to the last day of September, incorporating the first income period and the second income period; 1.1.20 “first designated date” means 31 March in each year, being the end of the first six months of the financial year; 60 1.1.21 “first income period” means the 6 month period from 1 October to 31 March of each calendar year or such other period as may be determined by the board of directors of the company from time to time; 1.1.22 “IFRS” means the International Financial Reporting Standards, as adopted from time to time by the board of the International Accounting Standards Board from time to time; 1.1.23 “income period” means the first income period or the second income period; 1.1.24 “JSE” means the exchange, licensed under the Financial Markets Act, operated by the JSE Limited (Registration number 2005/022939/06), a public company duly incorporated in South Africa; 1.1.25 “JSE Listings Requirements” means the Listings Requirements of the JSE applicable from time to time; 1.1.26 “participant” has the meaning set out in section 1 of the Financial Markets Act; 1.1.27 “prescribed officer” means a person who, within the company, performs any function that has been designated by the Minister in terms of section 66(10), as defined in the Act; 1.1.28 “prime rate” means the publicly quoted prime overdraft rate of interest of the bankers of the company (the “bank”) from time to time, nominal annual, compounded monthly as certified by any branch or more senior manager of that bank, whose appointment and designation it shall not be necessary to prove, and whose determination of the rate shall be proof of that rate until the contrary is established; 1.1.29 “regulations” means the regulations published in terms of the Act from time to time; 1.1.30 “rules” means any rules made in respect of the company from time to time as contemplated in section 15(3) to (5); 1.1.31 “second designated date” means 30 September in each year, being the end of the second six month period of the financial year; 1.1.32 “second income period” means the 6 month period from 1 April to 30 September of each calendar year or such other period as may be determined by the board of directors of the company from time to time; 1.1.33 “securities” means: 1.1.33.1 any share, notes, bonds, debentures or other instruments, irrespective of their form or title, issued, or authorised to be issued, by a profit company for the purpose of raising capital; or 1.1.33.2 anything falling within the meaning of “securities” as set out in section 1 of the Financial Markets Act and includes shares held in a private company; 1.1.34 “securities register” means the register contemplated in section 50(1) and referred to in clause 8 hereof; 1.1.35 “SENS” means the Stock Exchange News Service established and operated by the Issuer Regulation Division of the JSE provided that, in the event that the shares or other securities of the company are not listed on the JSE, all the provisions of this Memorandum of Incorporation relating to the publication of notices via SENS shall no longer apply and such notices shall thereafter only be published in accordance with the provisions of the Act; 1.1.36 “share” means one of the units into which the proprietary interest in the company is divided, and includes an A ordinary share and/or a B ordinary share as indicated by the context; 1.1.37 “shareholder” means the holder of a share and who is entered as such in the securities register, subject to the provisions of section 57; 1.1.38 “solvency and liquidity test” has the meaning attributed thereto in section 4; 1.1.39 “South Africa” means the Republic of South Africa; 1.1.40 “sub-register” means the record of uncertificated securities administered and maintained by a participant, which forms part of the company’s register of shareholders in terms of the Act; 1.1.41 “trading day” means any day on which the JSE (or any other exchange on which the securities of the company are listed) is open and available for trading; 1.1.42 “uncertificated securities” means any “securities” defined as such in the Financial Markets Act; and 1.1.43 “uncertificated securities register” means the record of uncertificated securities administered and maintained by a participant or Central Securities Depositary, as determined in accordance with the rules of the Central Securities Depositary, and which forms part of the company’s securities register established and maintained in terms of the Act. 61 7. Issue of shares and variation of rights 7.1 Subject to any relevant provisions of this Memorandum of Incorporation and without prejudice to any special rights previously conferred on the holders of any existing shares or class of shares in the company, any shares, whether in the initial or in any increased capital, may be issued with such preferred, deferred, or other special rights or such restrictions, whether in regard to dividend, voting, return of capital or otherwise, as the company may from time to time determine provided, however, that there shall be no restriction on the transfer of shares, subject to the remaining provisions of this clause 7. Preference shares may be issued and existing shares may, subject to the provisions of clause 7.4.5, be converted into preference shares on the basis that they are, or at the option of the company are liable, to be redeemed on such terms and in such manner as shall be prescribed in this Memorandum of Incorporation or the resolution authorising or effecting such issue or conversion. 7.2 The company is authorised to issue: 7.2.1 1 000 000 000 A ordinary shares each of which ranks pari passu in respect of all rights with the other A ordinary shares; and 7.2.2 2 000 000 000 B ordinary shares, each of which ranks pari passu in respect of all rights with the other B ordinary shares. 7.3 Save as provided in this clause 7, clause 34 and clause 40 of this Memorandum of Incorporation, all issued shares shall rank pari passu in all respects. 7.4 The board shall not have the power to: 7.4.1 create any class of shares; or 7.4.2 increase or decrease the number of authorised shares of any class of the company’s shares; or 7.4.3 consolidate and reduce the number of the company’s issued and authorised shares of any class; or 7.4.4 subdivide its shares of any class by increasing the number of its issued and authorised shares of that class without an increase of its capital; or 7.4.5 convert one class of shares into one or more other classes, save where a right of conversion attaches to the class of shares created; or 7.4.6 reclassify any classified shares that have been authorised but not issued; or 7.4.7 classify any unclassified shares that have been authorised but not issued; or 7.4.8 change the name of the company; or 7.4.9 vary any preferences, rights, limitations or other terms of any shares, and such powers shall only be capable of being exercised by the shareholders by way of a special resolution of the shareholders in general meeting, which for the avoidance of doubt shall be a combined general meeting of all shareholders, subject to the statutes, the JSE and the remaining provisions of this Memorandum of Incorporation. 7.5 Each share issued by the company has associated with it an irrevocable right of the shareholder to vote on any proposal to amend the preferences, rights, limitations and other terms associated with that share. 7.6 Subject to and without limitation to the provisions of clause 7.4, 7.8 and 7.20, the authorisation and classification of shares, the creation of any class of shares, the conversion of one class of shares into one or more other classes (unless otherwise provided by the terms of issue of the shares of that class), the consolidation of securities, the sub-division of securities, the change of the name of the company, the increase of number of shares, and the variation of any preferences, rights, limitations and other terms associated with each class of shares as set out in this Memorandum of Incorporation may be changed only by an amendment of this Memorandum of Incorporation by special resolution of the shareholders at a combined general meeting and in accordance with the JSE Listings Requirements, to the extent required, save if such an amendment is ordered by a court in terms of section 16(1)(a) and 16(4). 7.7 Notwithstanding anything to the contrary contained herein, the variation of any preference, rights, limitations and other terms associated with any class of shares as set out in this Memorandum of Incorporation may be enacted only by an amendment of this Memorandum of Incorporation by special resolution of the shareholders at a combined general meeting and such amendments shall not be implemented without a special resolution taken by the holders of shares in that class at a separate meeting. In such instances, the holders of such shares will also be allowed to vote at the combined general meeting of shareholders, subject to clause 20.2. 7.8 No shares may be authorised in respect of which the preferences, rights, limitations or any other terms of any class of shares may be varied in response to any objectively ascertainable external fact or facts as provided for in sections 37(6) and 37(7) and the powers of the board are limited accordingly. 62 7.9 The company may only issue shares which are fully paid up and freely transferable and only within the classes and to the extent that those shares have been authorised by or in terms of this Memorandum of Incorporation. 7.10 The board may, subject to clauses 7.11 and 7.16, resolve to issue shares of the company at any time, but only within the classes and to the extent that those shares have been authorised by or in terms of this Memorandum of Incorporation. 7.11 Subject to clauses 7.10 and 7.16, the board may not issue unissued shares unless such shares have first been offered to existing shareholders of the shares of that class in proportion to their shareholding of that class of shares (on such terms and in accordance with such procedures as the board may determine), unless the relevant issue of shares - 7.11.1 is a capitalisation issue to all shareholders in accordance with the provisions of clause 13; or 7.11.2 is for the acquisition of assets, is a vendor consideration placing related to an acquisition of assets, or is an issue for the purposes of an amalgamation or merger; or 7.11.3 is an issue pursuant to options or conversion rights; or 7.11.4 is an issue in terms of an approved share incentive scheme; or 7.11.5 is an issue of shares for cash (as contemplated in the JSE Listings Requirements), which has been approved by the shareholders by ordinary resolution, either by way of a general authority (which may be either conditional or unconditional) to issue shares in its discretion or a specific authority in respect of any particular issue of shares, in accordance with the JSE Listings Requirements, provided that, if such approval is in the form of a general authority to the directors, it shall be valid only until the next annual general meeting of the company or for 15 months from the date of the passing of the ordinary resolution, whichever is the earlier, and it may be varied or revoked by any general meeting of the shareholders prior to such annual general meeting or the expiry of the aforesaid 15 month period; or 7.11.6 otherwise falls within a category in respect of which it is not, in terms of the JSE Listings Requirements, a requirement for the relevant shares to be so offered to existing shareholders of that class; or 7.11.7 is otherwise undertaken in accordance with an authority approved by ordinary shareholders in general meeting, provided that if any fraction of a share will have to be issued pursuant to such an offer, the treatment of such fraction of a share and any associated payment to shareholders will be governed by the JSE Listings Requirements. 7.12 The directors may exclude any shareholders or category of shareholders from an offer contemplated in clause 7.11 if and to the extent that they consider it necessary or expedient to do so because of legal impediments or compliance with the laws or the requirements of any regulatory body of any territory, outside of South Africa, that may be applicable to the offer. 7.13 Alterations of share capital, authorised shares and rights attaching to a class/es of shares, all issues of shares for cash and all issues of options and convertible securities granted or issued for cash must, in addition to the aforegoing provisions, be in accordance with the JSE Listings Requirements. 7.14 All securities of the company for which a listing is sought on the JSE and all securities of the same class as securities of the company which are listed on the JSE must, notwithstanding the provisions of section 40(5) but unless otherwise required by the Act, only be issued after the company has received the consideration approved by the board for the issuance of such securities. 7.15 Subject to sections 40(5) to 40(7), when the company has received the consideration approved by the board for the issuance of any shares: 7.15.1 those shares are fully paid up; and 7.15.2 the company must issue those shares and cause the name of the holder to be entered onto the company’s securities register in accordance with sections 49 to 56. 7.16 Notwithstanding anything to the contrary contained in this Memorandum of Incorporation, any issue of shares, securities convertible into shares, or rights exercisable for shares in a transaction, or a series of integrated transactions shall, in accordance with the provisions of section 41(3), require the approval of the shareholders by special resolution if the voting power of the class of shares that are issued or are issuable as a result of the transaction or series of integrated transactions will be equal to or exceed 30% (thirty percent) of the voting power of all the shares of that class held by shareholders immediately before that transaction or series of integrated transactions.
63 7.17 Except to the extent that any such right is specifically included as one of the rights, preferences or other terms upon which any class of shares is issued or otherwise provided in this Memorandum of Incorporation, no shareholder shall have any pre-emptive or other similar preferential right to be offered or to subscribe for any additional shares in the unissued share capital of the company. 7.18 For so long as there are both A and B ordinary shares in issue by the company, unless otherwise agreed to by ordinary resolution of the holders of A ordinary shares in general meeting, the total number of A ordinary shares in issue may never exceed the total number of B ordinary shares in issue. 7.19 In addition to the provisions of clause 7.7 and notwithstanding anything to the contrary contained in this Memorandum of Incorporation, no resolution of shareholders or resolution of the board of directors either converting A ordinary shares to B ordinary shares or vice versa or into any other class of shares, or in terms of which any class of shares is redeemed in whole or in part, shall be of any force or effect, unless with the consent or resolution passed in the same manner as a special resolution of both the holders of the A ordinary shares and the B ordinary shares taken at a separate general meeting of the A ordinary shareholders and a separate general meeting of the B ordinary shareholders. The provisions of this Memorandum of Incorporation relating to a general meeting shall mutatis mutandis apply to any such separate general meeting except that: 7.19.1 the necessary quorum shall be a shareholder or shareholders of the class present in person, or represented by proxy and holding in excess of 50% of the capital paid or credited as paid on the issued shares of that class; 7.19.2 if at any adjourned meeting of such holders a quorum as above defined is not present, those holders who are present shall be a quorum; and 7.19.3 any holder of shares of the class present in person or represented by proxy may demand a poll and, on a poll, shall have one vote for each share of the class of which he/she is the holder. 7.20 Securities in each class for which a listing is applied on the JSE must rank pari passu in respect of all rights. 7.21 The A ordinary shares may be redeemed, in whole or in part, pro rata or otherwise, on or after 14 December 2016, by way of a resolution of the board of directors (the “redemption resolution”), provided that the board shall not be authorised to pass a redemption resolution without the consent of a resolution of shareholders at a combined general meeting, which resolution will require at least 75% of the combined votes exercisable by A ordinary shareholders and B ordinary shareholders present in person or by proxy or representative and entitled to vote at such combined general meeting being cast in favour thereof. If so redeemed by way of redemption resolution, the A ordinary shares shall be redeemed by the company at the volume weighted average sales price of an A ordinary share (as shown by the official price list published by the JSE) over the 60 trading days immediately preceding the date on which the redemption resolution is passed. The procedure to be followed by the company in regard to the redemption shall be determined by the company at the appropriate time and be approved by the JSE. Not less than 6 weeks’ notice of redemption shall be given to all A ordinary shareholders prior to any redemption being effected. Any redemption of the A ordinary shares shall be effected in accordance with the timetable determined in terms of the JSE Listings Requirements. 18. Meetings of shareholders 18.7 Each annual general meeting of the company contemplated in clause 18.5 or any special general meeting of the Company may provide for the passing and adoption of special resolutions, contemplated in clauses 27.1 and 27.4 of this Memorandum of Incorporation, relating to the following business: 18.7.1 the determination of Directors’ remuneration for the 2 (two) year period following the annual general meeting or special general meeting at which the resolution is approved; and 18.7.2 the granting of financial assistance in terms of section 45. 18.11 Not less than 15 business days’ notice shall be delivered to all shareholders registered at the date of issue of the notice of meetings called for the passing of a special resolution and not less than 15 business days’ notice shall be delivered to all shareholders for the passing of an ordinary resolution, calculated as of the record date for the meeting as determined under clause 16. Notices of general or annual general meetings are to be delivered to each person entitled to vote at such meeting who has elected to receive such documents. 18.12 The quorum requirement for a meeting of shareholders to begin or for a matter to be considered are at least three shareholders present in person. In addition, the quorum requirement for a meeting of shareholders is as set out in section 64(1) and accordingly: 18.12.1 a meeting of shareholders may not begin until sufficient persons are present at the meeting to exercise, in aggregate, at least 25% of the voting rights that are entitled to be exercised in respect of at least one matter to be decided at the meeting; and
64 18.12.2 a matter to be decided at a meeting of shareholders may not begin to be considered unless sufficient persons are present at the meeting to exercise, in aggregate, at least 25% of all of the voting rights that are entitled to be exercised in respect of that matter at the time the matter is called on the agenda.
20. Votes of shareholders 20.1 Subject to any special rights or restrictions as to voting attached to any shares by or in accordance with this Memorandum of Incorporation, at a meeting of the company: 20.1.1 every shareholder present and entitled to exercise voting rights shall be entitled to one vote on a show of hands, irrespective of the number of voting rights that shareholder would otherwise be entitled to exercise; and 20.1.2 on a poll, any person who is present at the meeting, whether as a shareholder or as proxy for a shareholder, has the number of votes determined in accordance with the voting rights associated with the shares held by that shareholder. No objection shall be raised to the admissibility of any vote except at the meeting or adjourned meeting at which the vote objected to is or may be given or tendered and every vote not disallowed at such meeting shall be valid for all purposes. Any such objection shall be referred to the chairperson of the meeting, whose decision shall be final and conclusive; 20.1.3 the holders of securities other than A and B ordinary shares shall not be entitled to vote on any resolution at a meeting of shareholders, except as provided in clause 20.2. 20.2 The holders of shares, other than A and B ordinary shares or any shares created for the purpose of black economic empowerment in terms of the Broad-Based Black Economic Empowerment Act, 53 of 2003 or the Broad-Based Black Economic Empowerment Codes of Good Practice, (“affected shareholders”) shall not be entitled to vote on any resolution taken by the company other than: 20.2.1 during any special period, as provided for in clause 20.2.3 below, during which any dividend, any part of any dividend on such shares or any redemption payment thereon remains in arrears and unpaid; and/or 20.2.2 in regard to any resolution proposed for the winding-up of the company or the reduction of its capital; 20.2.3 the period referred to in clause 20.2.1 above shall be the period commencing on a day specified in this Memorandum of Incorporation, if any, not being more than six-months after the due date of the dividend or redemption payment in question or, where no due date is specified, after the end of the financial year of the company in respect of which such dividend accrued or such redemption payment became due; and provided that where the shares held by such affected shareholders (“affected shares”) are entitled to vote, they shall not carry any special rights or privileges and the affected shareholder shall be entitled to one vote for every affected share held provided that the total voting rights of the affected shareholders in respect of the affected shares shall not be more than 24,99% (twenty four comma ninety nine percent) of the total voting rights of all shareholders at such meeting.
22. Resolutions of shareholders 22.1 For an ordinary resolution to be approved it must be supported by more than 50% of the voting rights of shareholders exercised on the resolution, as provided in section 65(7), unless otherwise stated in this Memorandum of Incorporation. Notwithstanding the aforegoing, to the extent that the JSE Listings Requirements requires the support of a higher percentage of voting rights to be exercised in respect of any ordinary resolution, the company shall not implement such ordinary resolution unless such ordinary resolution is supported by the higher percentage of voting rights of shareholders required to be exercised on that resolution in terms of the JSE Listings Requirements. 22.2 For a special resolution to be approved it must be supported by the holders of at least 75% of the voting rights exercised on the resolution, as provided in section 65(9). 22.3 No matters, except: 22.3.1 those matters set out in section 65(11); and 22.3.2 any other matter required by the Act or this Memorandum of Incorporation to be resolved by means of a special resolution; or 22.3.3 for so long as the company’s securities are listed on the JSE, any other matter required by the JSE Listings Requirements to be resolved by means of a special resolution in terms of the JSE Listings Requirements, require a special resolution adopted at a meeting of shareholders of the company.
65 24. Composition and powers of the board of directors 24.1 The board must comprise at least four directors (or such greater number of directors, if any, that the company must have to satisfy any requirement in terms of the Act to appoint an audit committee and a social and ethics committee), and the shareholders shall be entitled to determine such maximum number of directors as they from time to time shall consider appropriate. 24.2 Subject to clauses 24.3, 24.4 and 24.5, all directors shall be elected by an ordinary resolution of the shareholders at a general or annual general meeting of the company and no appointment of a director in accordance with a resolution passed in terms of section 60 shall be valid. 24.3 Apart from satisfying the qualification and eligibility requirements set out in section 69 of the Act, a person need not satisfy any eligibility requirements or qualifications to become or remain a director or a prescribed officer of the company. 24.10 A director shall cease to hold office as such if: 24.10.1 he becomes insolvent, or assigns his estate for the benefit of his creditors, or suspends payment or files a petition for the liquidation of his affairs, or compounds generally with his creditors; 24.10.2 he becomes of unsound mind; 24.10.3 in the case of an executive director who is an employee of the company, his employment relationship with the company is terminated for whatsoever reason, including but not limited to, resignation, retirement, misconduct or otherwise; 24.10.4 he is prohibited from being, is removed as or is disqualified from acting as a director of a company in terms of the Act; 24.10.5 he is required to do so in terms of the JSE Listings Requirements; 24.10.6 subject to section 71, he absents himself from meetings of the board for 6 (six) consecutive months without the leave of the other directors and is not represented at such meetings during such 6 (six) months by an alternate director, and the directors resolve that his office shall be vacated, provided that the directors shall have the power to grant any director leave of absence for an indefinite period; 24.10.7 he has given 1 (one) month’s (or with the permission of the directors, a lesser period) notice in writing of his intention to resign; 24.10.8 he is removed under clause 24.11; or 24.10.9 the board resolved to remove him in accordance with section 71(3). 24.11 The company may by ordinary resolution in accordance with clause 24.10.8 and section 71(2), remove any director before the expiration of his period of office and by an ordinary resolution elect another person in his stead. The person so elected shall hold office until the next annual general meeting of the company and shall then retire and be eligible for re-election. 24.12 The directors shall rotate in accordance with the following provisions of this clause 24.12: 24.12.1 at each annual general meeting referred to in clause 18.5, 1/3 (one third) of the directors for the time being, or if their number is not three or a multiple of three, the number nearest to 1/3 (one third), but not less than 1/3 (one third), shall retire from office; 24.12.2 the directors to retire every year shall be those who have been longest in office since their last election, but as between persons who became directors on the same day, those to retire shall, unless they otherwise agree among themselves, be determined by lot; 24.12.3 a retiring director shall be eligible for re-election; 24.12.4 a retiring director shall act as a director throughout the annual general meeting at which he/she retires; 24.12.5 the company, at the general meeting at which a director retires in the above manner, or at any other general meeting, may fill the vacancy by electing a person thereto, provide that the company shall not be entitled to fill the vacancy in accordance with clause 23; 24.12.6 if at any meeting at which an election of directors ought to take place, the offices of the retiring directors are not filled, unless it is expressly resolved not to fill such vacancies, the meeting shall stand adjourned and the further provisions of this Memorandum of Incorporation, including clauses 18.13 to 18.16 (inclusive) will apply mutatis mutandis to such adjournment, and if at such adjourned meeting the vacancies are not filled, the retiring directors, or such of them as have not had their offices filled, shall be deemed to have been re-elected at such adjourned meeting.
66 24.20 A director may hold any other office or place of profit under the company (except that of auditor or company secretary) or any subsidiary of the company in conjunction with the office of director, provided that the appointment, duration and remuneration (in addition to the remuneration to which he/she may be entitled as a director) in respect of such other office must be determined by a disinterested quorum of directors.
24.21 A director of the company may be employed in any other capacity in the company or as a director or employee of a company controlled by or itself a major subsidiary of the company and, in such event, his/her appointment and remuneration in respect of such other office must be determined by a disinterested quorum of directors.
27. Directors’ compensation and financial assistance 27.1 The company may pay remuneration to the directors for their services as directors in accordance with a special resolution approved by the company’s shareholders within the previous two years, as set out in section 66(8) and (9), and the power of the company in this regard is not limited or restricted by this Memorandum of Incorporation.
28 Chief executive officer 28.1 The directors may from time to time appoint one or more of their body to the office of chief executive officer for such term and at such remuneration as they may think fit, and may revoke such appointment subject to the terms of any agreement entered into in any particular case, provided that the period of office of a chief executive officer appointed in terms of an agreement shall be for a maximum period of five years at any one time. A director so appointed shall be subject to retirement in the same manner as the other directors, and his appointment shall terminate if he ceases for any reason to be a director.
30. Borrowing powers 30.1 Subject to the provisions of clause 30.3, all other provisions of this Memorandum of Incorporation the directors may from time to time: 30.1.1 borrow for the purpose of the company such sums as they think fit; 30.1.2 secure the payment or repayment of any such sums or any other sum, as they think fit, whether by the creation and issue of debentures, mortgage or charge upon all or any of the property or assets of the company; 30.1.3 make such regulations regarding the issue and transfer of debentures and all such other matters incidental to the debentures as the directors think fit, provided that the directors shall not, without the consent of a resolution of shareholders in a combined general meeting which resolution will require at least 75% of the votes exercisable by A ordinary shareholders and B ordinary shareholders entitled to vote at such combined general meeting be cast in favour thereof, permit the company’s debt gearing levels to exceed 50% of the value of its property portfolio as independently valued from time to time.
34. Distributions 34.1 If the company resolves to declare a distribution to shareholders in respect of any income period, no such distribution may be declared by the company in respect of the B ordinary shares for such income period until the A ordinary share distribution has been declared in respect of the A ordinary shares for that income period, and no such distribution shall be paid by the company in respect of the B ordinary shares for such income period unless the relevant A ordinary share distribution has been paid.
34.2 The A ordinary shares shall not confer on the A ordinary shareholders the right to any distributions other than the A ordinary share distributions.
34.3 If the company resolves to declare a distribution to shareholders in respect of any income period, such distribution shall be paid no later than four months after the designated date in question or such shorter period as may be prescribed in terms of the JSE Listings Requirements.
34.4 The A ordinary share distribution for the A ordinary shares shall be calculated as follows: 34.4.1 in respect of the financial year-ending 30 September 2018,
67 34.4.1.1 for the three months commencing 1 January 2018 and ending 31 March 2018, a distribution per A ordinary share equivalent to 105% of the distribution in respect of the equivalent period for the immediately preceding financial year; 34.4.1.2 for the second income period ending 30 September 2018, a distribution per A ordinary share equivalent to the A ordinary share distribution for the 6 months ended 30 September 2017 escalated by an amount equal to the lesser of 5% and the most recently available CPI figure; 34.4.2 in respect of the financial year-ending 30 September 2019 and thereafter: 34.4.2.1 for the first income period, a distribution per A ordinary share equivalent to the prior year’s A ordinary share distribution for the first income period, escalated by an amount equal to the lesser of 5% and the most recently available CPI figure; 34.4.2.2 for the second income period, a distribution per A ordinary share equivalent to the prior year’s A ordinary share distribution for the second income period, escalated by an amount equal to the lesser of 5% and the most recently available CPI figure; 34.4.3 In the event that the company declares a distribution in an amount less than those amounts as determined in clauses 34.4.1 and/or 34.4.2 then in such event that lesser amount shall be paid for that period, apportioned pro rata to each “A” ordinary share in issue on the relevant record date. In the event that the “A” ordinary share distribution is less than the amount provided in clauses 34.4.1 and/or 34.4.2., as the case may be the difference in the amount paid and that which would have been payable in terms of clauses 34.4.1 and/or 34.4.2 as applicable, shall not accrue or accumulate to the “A” ordinary shareholders and there shall be no right to claim any shortfall. 34.4.4 In determining the A ordinary share distribution with reference to any prior period’s distribution, the prior period’s distribution shall be the determined or calculated distribution for the equivalent period in the prior year calculated in terms of clauses 34.4.1 and/or 34.4.2, whether or not such amount was paid having regard to the availability of funds. 34.5 The directors of the company shall for the purposes of calculation, be entitled in their discretion (subject to the statutes and the JSE Listings Requirements) to ignore or round off downward fractions of a cent in effecting payment of any A ordinary share distribution. 34.6 If there is any change in the financial year of the company, the company shall be and it is hereby authorised to change the dates from which A ordinary share distributions are calculated, fall due, accrue and/or become payable, provided that: 34.6.1 the rights of A ordinary shareholders to A ordinary share distributions on their A ordinary shares shall not be diminished or adversely affected by such changes; and 34.6.2 the company shall forthwith notify A ordinary shareholders of any changes made by notice in terms of clause 37 or if the A ordinary shares are listed on the JSE or any other exchange, on SENS (if listed on the JSE) or any other news service of the relevant exchange and in such other manner prescribed by the relevant exchange. 34.7 Any A ordinary share distribution declared but not paid on the due date therefor, shall bear interest from such date up to the date of payment (excluding date of payment), calculated and compounded on a daily basis at the Prime Rate plus 2%. 34.8 Distributions shall be declared by the directors in accordance with the Act. 34.9 Distributions may be declared either free of or subject to the deduction of income tax and any other tax or duty in respect of which the company may be chargeable. 34.10 Subject to clause 34.7 above, no distribution shall bear interest against the company, except as otherwise provided under the conditions of issue of the shares in respect of which such distribution is payable. 34.11 Subject to clause 34.4, the directors may from time to time declare and pay to the shareholders such interim distributions as the directors consider to be justified by the profits of the company.
68 38. Amendment of Memorandum of Incorporation 38.1 Every provision of this Memorandum of Incorporation is capable of amendment in accordance with sections 16, 17 and 152(6)(b). There is accordingly no provision of this Memorandum of Incorporation which may not be amended as contemplated in sections 15(2)(b) and (c). 38.2 This Memorandum of Incorporation may only be altered or amended by way of a special resolution of the shareholders in accordance with section 16(1)(c), except if such amendment is in compliance with a Court order as contemplated in section 16(1)(a).
40. Subordination of B ordinary shares and repayment waterfall on winding-up of the company If the company is wound up, the assets remaining after payment of debts and liabilities of the company and the costs of the liquidation shall be applied as follows: Firstly: 40.1 each of the A ordinary shareholders shall be entitled to an amount equal to the volume weighted average traded sales price of an A ordinary share (as shown by the official price list published by the JSE) over the 60 trading days immediately preceding the date of publication of any announcement detailing events relating to such winding up; thereafter: 40.2 each of the B ordinary shareholders shall be entitled to receive any surplus of such monies available for distribution.
69 ANNEXURE 6
DETAILS OF THE PROPERTY MANAGERS
1. Property managers of the Gemgrow property portfolio Name: Excellerate Real Estate Services Proprietary Limited (Registration number 2007/021131/07) trading as JHI Address: Excellerate on Summit, 3A Summit Road, Dunkeld West, 2196 Shareholder(s): Excellerate Property Services Proprietary Limited (Registration number 2007/014372/07) Directors: Marna van der Walt, James Ernst Wellsted and Nomfundo Nomkosi Nomzamo Radebe Functions performed: JHI performs all duties that may be reasonably required of a manager and administrator of a property portfolio, including without limitation (i) budgets, (ii) collectible income, (iv) credit control, (v) leasing management, (vi) maintenance and technical management, (vii) account payments, (viii) reporting and (ix) control procedures. Name: Moolman Group Property Management Proprietary Limited Address: 1st floor, Baobab House, Eastwood Office Park, 290 Lynwood Service Road, Lynwood Ridge, Pretoria, 0081 Shareholder(s): Moolman Group Directors: Johannes Moolman, Pieter Lombaard, Stephanus Beyers, Johannes Moolman and Sonke Moolman-Pautz Functions performed: Performs all duties that may be reasonably required of a manager and administrator of a property portfolio, including without limitation (i) budgets, (ii) collectible income, (iv) credit control, (v) leasing management, (vi) maintenance and technical management, (vii) account payments, (viii) reporting and (ix) control procedures.
The property management agreements will be available for inspection in terms of paragraph 9 of Section 4 of this prospectus.
2. Property managers of the Arrowhead property portfolio Name: Excellerate Real Estate Services Proprietary Limited (Registration number 2007/021131/07) trading as JHI Address: Excellerate on Summit, 3A Summit Road, Dunkeld West, 2196 Shareholder(s): Excellerate Property Services Proprietary Limited (Registration number 2007/014372/07) Directors: Marna van der Walt, James Ernst Wellsted and Nomfundo Nomkosi Nomzamo Radebe Functions performed: JHI performs all duties that may be reasonably required of a manager and administrator of a property portfolio, including without limitation (i) budgets, (ii) collectible income, (iv) credit control, (v) leasing management, (vi) maintenance and technical management, (vii) account payments, (viii) reporting and (ix) control procedures.
The property management agreements will be available for inspection in terms of paragraph 9 of Section 4 of this prospectus.
3. Property manager fees of the Gemgrow group The aggregate property management fees for the Gemgrow group for the 6 months ended 30 September 2019 will be R23 062 456.
70 ANNEXURE 7
INDEPENDENT PROPERTY VALUERS SUMMARY VALUATION REPORTS ON THE PROPERTY PORTFOLIO
71 YIELD ENHANCEMENT SOLUTIONS SUMMARY VALUATION REPORT IN RESPECT OF THE COMBINED GROUP’S PROPERTY PORTFOLIO
The Directors Gemgrow Properties Limited 3rd Floor Upper Building 1 Sturdee Avenue Rosebank 2196
11 July 2019
Dear Sirs
RE: INDEPENDENT PROPERTY VALUERS’ REPORT OF THE PROPERTY PORTFOLIO FOR GEMGROW PROPERTIES LIMTED AND GEMGROW PROPERTIES LIMITED AS DETAILED IN THE SUMMARY SCHEDULE ATTACHED AND FOR WHICH THERE ARE DETAILED VALUATION REPORTS HELD BY GEMGROW PROPERTIES LIMITED
In accordance with your instruction of 16th of April 2019, I confirm that we have visited and inspected the 102 properties listed in the attached schedule (“the properties”) during April, May and June 2019 and have received all necessary details required to perform a valuation in order to provide you with my opinion of the properties’ market values as at 1st April 2019.
1. INTRODUCTION The valuation of the properties has been carried out by the valuer who has carefully considered all aspects of all the properties. These properties each have a detailed valuation report which has been given to the management of Gemgrow Properties Limited. The detailed reports include commentary on the current economy, nature of the properties, locality, tenancy, risk profile, forward rent and earning capability and exposure to future expenses and property risk. All these aspects have been considered in the individual valuation reports of the properties. The detailed reports have further addressed the tenancy income capability and expenditure for each property and tenant. Historic expenditure profile as well as future expenditure increases have been considered. The value thus indicates the fair market value for each property which is detailed in the detailed report and which has been summarised on a summary schedule, attached hereto, for each property. There are 102 properties and the important aspects of the detailed valuation report including the property market value for all of the properties have been summarised in the attached schedule.
2. BASIS OF VALUATION The valuation is based on market value. Market value means the best price, at which the sale of an interest in a property may reasonably be expected to have been completed, unconditionally for a cash consideration on the date of valuation, assuming:
2.1 a willing seller and a willing buyer in a market; 2.2 that, prior to the date of valuation, there had been a reasonable period (having regard to the nature of the property and the state of the market) for the proper marketing of the property, for the agreement of price and terms and for the completion of the sale; and 2.3 that the state of the market, level of values and other circumstances are, on any earlier assumed date of exchange of contracts, the same as on the date of the valuation.
72 3. VALUE CALCULATION The calculation of the market value of these properties has been based on the discounted cashflow of contracted income and the income capitalisation of reversionary market rentals. This is the fundamental basis on which commercial income producing properties are traded on the market in South Africa. This is also due to there being strong supporting evidence of open market rental rates and capitalisation rates which are evidenced by sales in the market. Properties traded in the current market reflect a yield rate relationship between revenue and capital value. This rate is an accurate determinant of the capitalisation rate. The considerations for the discounted cashflow valuations are as follows:
3.1 Calculating the forward cash flow of all contractual and other income from the properties; 3.2 Calculating the forward contractual and other expenditure as well as provisions for various expenses in order to provide for void or future capital expenditure to which the property may be exposed; 3.3 The current area vacancy as a percentage of the property portfolio is approximately 9.8%. In order to apply a conservative approach, we have allowed a reversionary vacancy provision of 8.0% of the gross income into perpetuity as a provision for rental that may not be collected as a consequence of vacancy, tenant failure or tenant refitting during the course of the coming year. In addition to the terminal vacancy provision we have allowed for letting uptake periods on expiry of existing agreements and vacancies within the cashflows. The current vacancy is market related. The void provision used in the valuation is therefore adequate; 3.4 There is no loss of rental due to renovations or refurbishments currently being carried out on the buildings. There is, however, ongoing external and internal maintenance work and some tenant installation fitting out that is currently in progress. There is no loss of rental as a result of these activities. 3.5 Generally, the rentals are market related. This has been determined by comparing similar buildings in comparable areas to the properties valued, in terms of rental per square metre. The rental rate has also been checked against various published indices including the Rode Report. There are some properties that are over-rented, or that cannot be re-rented at the same or higher rental rate should such property become vacant. Where a rental has been identified as being above market, we have allowed for a reversion to a market related rental within our cashflows. There is potential for rental flow reversion which has been allowed for within the Discounted Cash Flows. There is however, a positive upside potential for real growth in rental, given the low base of which the average rentals flow. This is provided that the economy remains in a slow recovery pattern as currently being experienced as that there are no major economic fluctuations which may upset the economy. 3.6 Capitalising the net contractual income derived from the properties for a period of 1 year in advance, calculated from 1 April 2019; 3.7 The valuation has considered published market statistics regarding rental rates and expenditure for the different types of properties. It is also considered numerous other portfolios of similar properties in order to determine if any properties are over rented or have excessive expenditure; and 3.8 Various provisions for capital contingencies were deducted from the capitalised value.
4. SPARE LAND There are no properties with large tracts of vacant zoned land.
5. BRIEF DESCRIPTION The properties have been well constructed and generally have acceptable architectural merit, aesthetic appeal and sufficient parking facilities and are virtually fully tenanted. The leases tend to be of a general short to medium term contractual rental nature with provision for the recovery of utility services consumed by the lessees. Escalations are market related but are high enough to ensure a more than positive growth rate is ensured without creating an over rent potential in the medium term. The properties are generally highly visible and dominate their environment. In respect of the properties, the current net annual rental and the estimated future net annual rentals at specified dates and for specified periods are included in each individual detailed property valuation report.
73 6. VALUATION QUALIFICATIONS Qualifications are usually detailed as a consequence of: leases under negotiation that have not yet been formalised; leases of a large nature where the premises are difficult to re-let; specialised properties; large exposure to a single tenant; potential tenant failure due to over-rent; expenses required for major repairs; maintenance or other exposure to maintain the lettability of the building; contingent expropriations or servitudes that may be enforced; poor lease records whereby the lease may be disputed or rendered invalid. We have, to the best of our knowledge, considered all of these aspects in the valuation of all the properties. There are no properties that are prejudiced in value by the influence of the above factors. The valuer is however not responsible for the competent daily management of these properties that will ensure that this status is maintained, or for the change of any laws, services by local authority or economic circumstances that may adversely impact on the integrity of the buildings or the tenant profile.
7. OPTIONS OR BENEFIT/DETRIMENT OF CONTRACTUAL ARRANGEMENTS To my knowledge there are no contractual arrangements on the properties other than the leases as detailed in the report that have a major benefit or are detrimental to the fundamental value base of the properties. To the best of my knowledge, there are no options in favour of any parties for any purchase of any of the properties.
8. INTRA-GROUP OR RELATED PARTY LEASES Having inspected all the tenant schedules and leases it is noted that there are no intra-group or related party leases.
9. CURRENT STATE OF DEVELOPMENT There is no property which is currently being re-developed.
10. RENTALS USED IN VALUATIONS Note that all these properties are all generally rented out. The current annual rental and future annual rentals have been calculated in a separate discounted cash flow check schedule. It is noted that there are no material rental reversions and that the rentals for all the properties increase on average by approximately 7% – 9 % compounding per annum.
11. EXTERNAL PROPERTY None of the properties are situated outside the Republic of South Africa.
12. OTHER GENERAL MATTERS AND VALUATION SUMMARY A full valuation report is available on a property by property basis detailing tenancy, town planning, valuer’s commentary, expenditure and other details. This has been given to the directors of Gemgrow Properties Limited.
13. ALTERNATIVE USE FOR A PROPERTY The properties have been valued in accordance with their existing use which represents their market value. No alternative use for the properties has been considered in determining their value.
14. OTHER COMMENTS Our valuation excludes any amounts of Value-added Tax, transfer duty, or securities transfer duty.
74 15. CAVEATS 15.1 Source of information and verification Information on the properties regarding rental income, recoveries and other income detail has been provided to us by the current owners and their managing agents. We have carried out representative sampling of lease documents the existing properties where such leases are the major tenant. The leases have been read to check against management detail, in order to ensure that management has correctly captured tenant information as per contractual agreement. This has been done to test management information against the underlying agreements. We have further compared certain expenditures given to us to the market norms of similar properties. This has also been compared to historic expenditure levels of the properties themselves. Historical contractual expenditures and municipal utility services were compared to the past performance of the properties in order to assess potential expenditure going forward. The municipal values on the properties are very low. At the current transaction values there is some potential for the municipal value to increase by a considerable amount, should the municipality revalue these properties, in which event the rates could increase to three or four times their current amount.
15.2 Full disclosure This valuation has been prepared on the basis that full disclosures of all information and factors that may affect the valuation have been made to me. We have to the best of our ability researched the market as well as taken the steps detailed in paragraph 15.3 below.
15.3 Leases Our valuation has been based on a review of actual tenants’ leases (which includes material terms such as repairing obligations, escalations and break options) and other pertinent details supplied to us by the managing agents and by Gemgrow Properties Limited. All recovery details in respect of the existing leases e.g. utility cost and other recoveries as provided for in the leases have been disclosed by way of the monthly tenant invoices and the summary schedule supplied to us. Option terms and other lease information have been supplied to us by the owners and managing agents and we are familiar with such documents.
15.4 Lessees credibility In arriving at our valuation, cognizance has been taken of the lessee’s security and rating. In some cases, this has influenced the capitalisation rate by way of a risk consideration.
15.5 Mortgage bonds, loans, etc. The properties have been valued as if wholly owned with no account being taken of any outstanding monies due in respect of mortgage bonds, loans and other charges. No deductions have been made in our valuation for costs of acquisition. The valuation is detailed in a completed state and no deductions have been made for retention or any other set-off or deduction for any purposes which may be made at the discretion of the purchaser when purchasing the properties.
15.6 Calculation of areas All areas quoted within the detailed valuation reports are those stated in the information furnished and verified where plans were available. To the extent that plans were not available, reliance was placed on the information submitted by the managing agents. Updated plans were not available for all the properties in respect of internal configuration. The properties generally appear to have the stated square meterage which could only be more accurately determined if remeasured by a professional. The reported square meterage is therefore considered as correct as possible without full a re-measurement exercise being undertaken.
15.7 Structural condition The properties have been valued in their existing state. We have not carried out any structural surveys, nor inspected those areas that are unexposed or inaccessible, neither have we arranged for the testing of any electrical or other services.
75 15.8 Contamination The valuation assumes that a formal environmental assessment is not required and further that none of the properties are environmentally impaired or contaminated, unless otherwise stated in our report.
15.9 Town planning Full town planning details and title deeds have been supplied where possible in the detailed valuation reports including conditions and restrictions and the properties have been checked against such conditions. This is to ensure that they comply with town planning regulations and title deeds. There are a three buildings that we could not verify town planning or appear to be conflicted with town planning conditions. The properties include 135 Pietermaritz Street, Pietermatrizberg MCG Building, Malvern, Johannesburg and Simunye Shopping Centre, Nelspruit. 135 Pietermaritz Street and Simunye Shopping Centres zoning information was not available from the relevant municipalities. The structures appear to have been built sometime ago and are in line with traditional building methods. It appears there is no material contravention of statutory requirements. We have assumed that the properties are compliant with zoning restrictions for the purpose of a valuation. The remainder of properties do not appear to be any infringements of local authority regulations or deeds. The valuation has further assumed that the improvements have been erected in accordance with the relevant Building and Town Planning Regulations and on inspection it would appear that the improvements are in accordance with the relevant town planning regulations for these properties.
16. MARKET VALUE I am of the opinion that the aggregate market value of the properties as at 1st of April 2019 is R4 353 000 000 (excluding VAT). A summary of the individual valuations and details of each of the properties are attached. To the best of our knowledge and belief there have been no material changes in circumstances between the date of the valuation and the date of the valuation report which would affect the valuation. I have more than eight years’ experience in the valuation of all nature of property and I am qualified to express an opinion on the fair market value of the properties. I trust that I have carried out all instructions to your satisfaction and thank you for the opportunity of undertaking this valuation on your behalf.
SIGNED BY Rowan Scott Collins
Professional Valuer registered with the South African Council for the Professional Valuers Profession (SACPVP). Registration Number 7378/1
For and on behalf of Yield Enhancement Solutions (Proprietary) Limited.
YIELD ENHANCEMENT SOLUTIONS (PTY) LTD Company Registration (2009/016199/07) [email protected] 91 Hamilton Avenue, Craighall Park, 2196 +2782 409 2379
76 (R) as at 2019 01 April 62 100 000 49 600 000 99 000 27 200 000 97 800 000 25 300 000 25 900 000 63 100 000 Valuation 212 600 000 148 600 000 2019 period for the 619 535 644 000 2019 to Income 01 April 6 601 230 5 599 840 9 202 980 4 343 040 6 183 800 31 March 21 260 000 12 127 500 18 738 460 Projection 5.0% 3.0% 5.0% 5.0% 5.0% 7.5% 3.0% 10.0% 10.0% 10.0% void/ vacancy Assumed perpetual
Zoning Town Planning and Statutory contravention (if any) General industrial 1 Business 4 Business 1 Industrial 1 ParkOffice 2 General Iindustrial 1 Residential 1 Special Core mixed use 1 Business 1 Building Grading C A B B B B B B C B - Approxi mate age of building 50 years 30 years 40 years 30 years 20 years 20 years 20 years 20 years 100 years 15 years ²) 4 080 2 359 2 926 5 259 15 450 13 350 14 984 20 338 12 243 10 092 Rentable area (m - Tenure of Lease hold N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Freehold/ Leasehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Valuers Inspection Date 21-Apr-19 17-May-19 18-May-19 22-May-19 27-May-19 18-May-19 17-May-19 17-May-19 26-May-19 21-May-19 Property Use Industrial Commercial Commercial Commercial Commercial Industrial Commercial Commercial Commercial Retail Address 1 Range Road, Blackheath 1 Sturdee Avenue, Rosebank Kruger115 Paul Pretoria Street, crn Owl Street & Stanley Avenue, Auckland Park 4 Frosterley Crescent, Durban Cnr Westview Road and Cor Solomon Olifantsfontein Street, Corner of Bram Fischer Drive and Bond Street, Kensington B 8 Gemsbok road, Rivonia 219 Church Street, Pietermaritzburg Cnr Hendrik Potgieter Strubens & Christ, Roodepoort Valley,
Property Description Erf 958 Blackheath Erf 277 Rosebank Portion 1 of Erf 2900 Pretoria Ptn 2 of Erf 51 Braamfontein Werf Erf 3720 Westville Erven 109 – 112, 4313 and 7734 Clayville Erven 440-443,465, and 546, 541, 540, 547 Kensington B Erf 203 Rivonia Ext 12 Ptn 4,10 of Erf 2421, Ptn 4,5 and the Rem of Ptn 6 Erf 2422 Pietermaritzburg Ptn 8 & 10 of Erf 919 Strubens Valley Ptn 2-4 of Erf Ext 8, 951 and Erf 975 of Strubens Valley Ext 17, Property Name 1 Range Road 1 Sturdee Kruger115 Paul 25 Owl Street Absa Cash Centre Beka Candela Bridge on Bond Business Centre Church Street (Pietermaritzburg) Clearwater Crossing SCHEDULE OF PROPERTIES VALUED BY YIELD ENHANCEMENT SOLUTIONS No Arrowhead 1 2 3 4 5 6 7 8 9 10
77 (R) as at 2019 01 April 1 300 000 2 800 000 62 200 000 53 200 000 22 000 30 200 000 80 200 000 Valuation 141 800 000 120 500 000 100 200 000 153 600 000 2019 period for the 146 120 303 240 2019 to Income 01 April 6 487 460 5 586 000 1 007 011 3 666 280 8 412 980 31 March 16 009 220 11 302 900 11 533 020 Projection 13 992 960 5.0% 5.0% 5.0% 5.0% 10.0% 10.0% 15.0% 15.0% 10.0% 10.0% void/ vacancy Assumed perpetual 3.0% General shopping Zoning Town Planning and Statutory contravention (if any) Business 4 General General Special Commercial 1 Industrial 1 Business 1 Special Business 2 Residential 4 Building Grading B C C B C B B C B C B - Approxi mate age of building 30 years 50 years 50 years 30 years 25 years 20 years 10 years 30 years 30 years 50 years 20 years ²) 600 1 124 6 352 5 037 2 922 13 347 13 264 13 079 11 170 16 000 Rentable area (m 12 652 - N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Tenure of Lease hold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold/ Leasehold 19-May-19 22-May-19 22-May-19 03-Apr-19 27-May-19 01-Jun-19 19-May-19 18-May-19 01-Jun-19 22-May-19 Valuers Inspection Date 27-May-19 Commercial Industrial Industrial Retail Commercial Retail Retail Commercial Commercial Industrial Retail Property Use 100 Northern Parkway,Omonde New 12 Beacon Road, Doornfontein City 38 Kruger Street, & Suburban, Johannesburg King Maclean Street, Town William’s 7 Metica Moon Street, Richards Bay Waterval Avenue, Nelspruit Cnr Drome and Pretoria Road, Lyndhurst 59 Kasteel Road, Glen Lynwood 92 Bok Street, Pietersburg Malvern 33rd Street, 169 Wood Road, Durban Montclair, Address Property Description Erf 391 Ormonde Ext 8 Erf 649 City and and 651 Suburban New Doornfontein Erf 1160 City and Suburban Erf 6276 King Williams Town Ptn 4 of Erf 6364 Richards Bay Erven 70 and 71 Riverside Industrial Park Erf 4 Formain Erf 225 Lynwood Glen Erf 297 Pietersburg 504, 493, Erven 491, 505 Malvern and Remaining Portion 670 of the Farm Doornfontein 92 IR 1031, Erven 1030, rem ext. 1033, 1032, Ptn 1 of of erf 1034, erf 1034 and Ptn 2 of erf 1034 Sea View Crownwood Office Crownwood Park Danico Gearmatic King Williams Town Market Sq Terrace Lakeview Lifestyle Lowveld Centre Lyndhurst Square Lynwood – Atrium Building Mae West Building MCG Building Montclair Mall Property Name 11 12 13 14 15 16 17 18 19 20 21 No
78 (R) as at 2019 01 April 22 700 000 47 000 86 100 000 74 700 000 28 600 000 19 800 000 95 000 95 600 000 23 200 000 39 300 000 Valuation 116 600 000 2 227 800 000
2019 period for the 2019 to Income 01 April 2 113 370 4 944 400 9 074 940 3 151 702 2 160 180 2 668 000 4 264 050 31 March 10 461 409 10 583 000 10 047 560 13 059 200 Projection 7.5% 5.0% 5.0% 5.0% 5.0% 7.5% 5.0% 10.0% 15.0% 15.0% 10.0% void/ vacancy Assumed perpetual Zoning Town Planning and Statutory contravention (if any) Business 1 Special General 4 Industrial 1 Uknown Industrial Business Business 1 Industrial 1 Special Agricultural Building Grading C B B C C C C B B C B - Approxi mate age of building 40 years 20 years 30 years 40 years 30 years 60 years 30 years 25 years 30 years 25 years 15 years ²) 1 630 7 910 7 143 6 538 6 278 6 500 9 804 6 524 16 346 10 231 11 377 Rentable area (m - Tenure of Lease hold N/A N/A N/A N/A N/A N/A N/A 50 years N/A N/A N/A Freehold/ Leasehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Leasehold Freehold Freehold Freehold Valuers Inspection Date 03-Apr-19 18-May-19 21-Apr-19 22-May-19 28-May-19 22-May-19 31-May-19 30-May-19 03-Jun-19 17-May-19 03-Jun-19 Property Use Commercial Retail Commercial Commercial Retail Industrial Retail Retail Industrial Commercial Industrial Address Mbeki 653 Govan Port Elizabeth Avenue, Hans West Coverdale Eersterust, Street, Pretoria Cnr Voortrekker & drive, Vanguard Goodwood Road, 106 Booyens Selby R40 National Highway Cnr Kruger & Market City & Streets, Suburban Station Taung Road, 1287 Embarkment Klerksdorp Street, 28 Main Street, Clayville Cnr Harley & Surrey Ferndale Avenue, 234 Malibongwe NorthDrive, Riding Property Description Erf 3097 North End Portion 12 of Erf 5670 Eersterust Extension 5 Section 1 and 2 of SS Liberty Grande Erf 550 Selby Erf 1263 Hazyview Ext 8 Erven 871 -873 and 1227 City and erven Suburban, 652,882,883,893 and 894 New Doornfontein and Erf Taung Erf 22 Ext 2 Taung 178 of Remainder Portion 447 of the farm 424 IP Townlands Erf 1263 Clayville Ext 4 1067, Erven 2021, 1069 and the rem of 1068 ext. Ferndale Ptn 33 of the Farm Olievenhoutpoort 196 IQ Property Name North-End Pta Eersterust Shopping Centre RCS Building Selby Shopping Simunye Centre Spark Schools Forum Taung The Terminus Shopping centre Transwire Urban Brew Building Waterworld No 22 23 24 25 26 27 28 29 30 31 32 Total
79 (R) as at 2019 01 April 2 700 000 4 000 000 42 900 000 14 400 000 19 000 11 200 000 18 200 000 14 500 000 41 300 000 18 200 000 17 200 000 12 000 Valuation 2019 period for the 308 340 2019 to Income 01 April 4 281 420 1 516 320 2 730 300 1 322 720 2 056 600 1 492 050 4 456 270 2 147 600 1 969 400 2 533 200 1 009 800 31 March Projection 5.0% 5.0% 5.0% 7.5% 5.0% 5.0% 5.0% 7.5% 7.5% 10.0% 10.0% 10.0% void/ vacancy Assumed perpetual Zoning Town Planning and Statutory contravention (if any) Educational Uknown Business 4 Industrial 2 General Industrial 2 Limited commercial Special commercial Industrial 2 General industrial 1 Special Business 1 Building Grading B C C C C C B C C B C C - Approxi mate age of building 30 years 40 years 40 years 30 years 50 years 30 years 20 years 25 years 25 years 40 years 30 years 60 years ²) 961 5 093 2 198 4 792 3 166 1 120 3 846 1 528 4 171 3 790 2 649 2 053 Rentable area (m - Tenure of Lease hold N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Freehold/ Leasehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Valuers Inspection Date 03-Jun-19 26-May-19 22-May-19 19-May-19 22-May-19 19-May-19 27-May-19 27-May-19 19-May-19 21-Apr-19 18-May-19 19-May-19 Property Use Commercial Commercial Commercial Industrial Industrial Industrial Retail Retail Industrial Industrial Retail Retail Address 101 Dorp Street, Pietersburg 135 Pietermaritzburg Street, Pietermaritzburg 137 Sivewright Street, New Doornfontein 16 & 18 Forge Road, Erven 99 and 101 Spartan 249 Commissioner City & street, Suburban, 38 Derrick Road, Spartan 38 Prospection Road, Isipingo Ext 12 Avenue, 4 Weightman Empangeni 46 Steel Road, Spartan 9 Montague Drive, Montague Gardens Ben Swaart drive, &Voortrekker Gezina Hendrik Verwoerd Nigel Avenue, and 2nd Property Description Rem Ext of Erf 5887 Pietersburg Portion 4 & Rem Ptn Ext of Erf 2314, 8 & Rem Ext of 7, Erf 2313 Pietermaritzburg Erf 1007 New Doornfontein Erven 99 and 101 Spartan Erf 430 and 431 City and Suburban Erf 167 Spartan Remaining Ext of Erf 2318 Isipingo Erf 8914 Empangeni Erf 121 Spartan Erf 1438 Montague Gardens Erf 188 and Rem Ext of Erf 189 Gezina Erven 157 and 158 Nigel Property Name 101 Dorp Street 135 Pietermaritz Street 137 Sivewright 16 & 18 Forge Road 249 Commissioner Street 38 Derrick Road 38 Prospection Road 4 Weightman Avenue 46 Steel Road 9 Montague Drive Absa Gezina Absa Nigel No Gemgrow 33 34 35 36 37 38 39 40 41 42 43 44
80 (R) as at 2019 01 April 2 100 000 9 800 000 28 200 000 58 700 000 41 700 000 25 600 000 24 800 000 23 600 000 21 100 000 19 300 000 13 200 000 20 400 000 Valuation 134 000 2019 period for the 227 010 2019 to Income 01 April 3 087 900 6 345 470 4 182 510 2 403 840 1 071 140 2 698 240 2 487 440 2 477 140 2 248 450 1 359 600 2 262 360 31 March 12 542 400 Projection 5.0% 3.0% 3.0% 5.0% 5.0% 5.0% 3.0% 5.0% 7.5% 5.0% 5.0% 10.0% 10.0% void/ vacancy Assumed perpetual Zoning Town Planning and Statutory contravention (if any) Business 1 Business 4 Light industrial Business 1 General business 5 Industrial 2 Industrial 2 Industrial 2 General industry General commercial 2 General mixed use Industrial 1 Industrial 3 Building Grading C C B C C C C C B C C B C - Approxi mate age of building 50 years 30 years 25 years 30 years 60 years 30 years 35 years 40 years 35 years 40 years 40 years 25 years 35 years ²) 490 5 099 9 221 3 678 1 480 2 467 6 546 7 923 3 518 5 373 2 719 30 790 10 209 Rentable area (m - Tenure of Lease hold N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Freehold/ Leasehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Valuers Inspection Date 19-May-19 19-May-19 27-May-19 19-May-19 21-Apr-19 19-May-19 19-May-19 19-May-19 26-May-19 27-May-19 27-May-19 23-May-19 19-May-19 Property Use Retail Commercial Industrial Retail Retail Industrial Industrial Industrial Industrial Retail Retail Industrial Industrial Address Voortrekker 49 & 51 Alberton Road, Boulevard, 4-6 Skeen Bedfordview Place, 17 Cordova Briardene Industrial Park Cnr of Leeupoort Street and Trichardt Boksburg Road, Cape 177 Main Road, Tow n 60 Steel Road, Spartan 49 – 53 Forge Road, Spartan 12 – 14 Diesel Road, Isando Road, Volek 24 Otto New Germany Cnr Wilson, King Edward & Victoria Dundee Streets, Cnr Sergeant & Oakes Greytown Streets, 14 – 16 Gerhardus Street,Strijdom Park 7 Herold Flight Street, Jet Park Ext 5 Property Description Erven 726 and 967 New Redruth Erven 1018 and Bedfordview, 1019, Extension 219 Sections 1 & 2 of Park, Pen-Ral Durban Rem Erven 1762, Ext of Erf 1761 and 1773 Boksburg Erf 57600 Cape Tow n Erf 135 Spartan 51 and 53 Erf 49, Spartan Erven 198 and 199 Isando Erf 1227 New Germany Rem Ext of Ptn 15 of Erf 642 Dundee Erf 1449 Greytown Erf 417 Strijdom Park Ext 26 Erf 84 Jet Park Ext 5 Property Name Alberton Rd Voortrekker Bedfordview Beka Durban Boksburg Boxer Citizens Cape Town Cmh Spartan Creston Diesel Road View Durban Valley Industrial Park Ellerines Dundee Greytown Shopping Centre Hi Tech Mini Factories Jet Industrial Park No 45 46 47 48 49 50 51 52 53 54 55 56 57
81 (R) as at 2019 01 April 7 900 000 3 000 21 300 000 21 800 000 24 400 000 13 000 28 800 000 11 900 000 24 000 22 700 000 14 000 15 400 000 Valuation 2019 period for the 793 160 330 900 2019 to Income 01 April 2 034 150 2 901 580 2 669 360 1 389 700 2 960 640 1 529 150 3 069 600 2 433 440 1 881 600 2 025 100 31 March Projection 3.0% 7.5% 5.0% 5.0% 7.5% 7.5% 5.0% 15.0% 10.0% 15.0% 10.0% 15.0% void/ vacancy Assumed perpetual Zoning Town Planning and Statutory contravention (if any) Industrial 3 Special Industrial 3 Special Industrial 1 General business 1 Special General Industrial 1 Business 4 Business 1 General industrial 1 Building Grading C C C B C C C B B B B C - Approxi mate age of building 25 years 40 years 40 years 20 years 25 years 40 years 30 years 40 years 35 years 30 years 40 years 35 years ²) 493 2 700 6 817 2 935 3 411 3 890 1 570 5 935 2 522 1 156 6 812 12 660 Rentable area (m - Tenure of Lease hold N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Freehold/ Leasehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Valuers Inspection Date 19-May-19 17-May-19 21-May-19 17-May-19 24-May-19 27-May-19 18-May-19 22-May-19 22-May-19 17-May-19 22-May-19 23-Apr-19 Property Use Industrial Industrial Industrial Commercial Industrial Commercial Commercial Retail Industrial Commercial Retail Industrial Address Crescent, 1321 Spyker Stormill Erf 587 Bevan Road, Ext 18 Wadeville 6 Liebenberg Street, Alrode Corner Main Street Street, and Petunia Bryanston 3 Amanda Avenue,Lea Roodepoort Glen, 188 Longmarket Street, Pietermaritzburg 61 Kasteel Road, Glen Lynwood 22 Albrecht Street, Jeppestown City and 3 End Street, Suburban 138 Kelvin drive, Sandton Mellville 7th Street, 4th 11th Street, Welkom Property Description Erven 52 and 61 Stormill Ext 2 Erven 587 & 588 Ext 18 Wadeville Erf 1599 Alrode Sections 1-4 of SS La Rocca Erf 66 Lea Glen Rem Ext of Erf 2658 Pietermaritzburg Erf 224 Lynwood Glen Erf 2861 Jeppestown 1107 & Erven 1106, 1108 City and Ext 2 and Suburban Erven 1113 & 1114 City and Suburban Ext 3 Erf 487 Morningside Manor Ext 3 Erven 155 and 245 Melville Erf 9135 Welkom Ext 24 Property Name Jm Investments Kimberley Clark Kolbenco La Rocca Lea Glen Longmarket Street Branch Botco Lynnwood Place CornerMaverick McCarthy Centre – Turffontein Media Shop Melville Properties Metcash Welkom No 58 59 60 61 62 63 64 65 66 67 68 69
82 (R) as at 2019 01 April 87 800 000 16 400 000 10 100 000 16 200 000 37 400 000 17 600 000 50 000 15 700 000 17 000 Valuation 147 600 000 123 700 000 2019 period for the 650 440 2019 to Income 01 April 9 798 480 1 712 160 1 696 140 3 781 140 1 877 920 6 270 000 1 554 300 1 783 300 31 March 18 489 750 13 817 290 Projection 7.5% 5.0% 5.0% 5.0% 5.0% 7.5% 7.5% 5.0% 10.0% 15.0% 10.0% void/ vacancy Assumed perpetual Zoning Town Planning and Statutory contravention (if any) Special Business 4 Special Special Special Business 1 General business Industrial 3 Industrial 3 Business 1 Special Building Grading B B B B C C C C C B B - Approxi mate age of building 15 years 15 years 15 years 15 years 35 years 40 years 50 years 35 years 35 years 35 years 15 years ²) 8 515 1 630 1 408 1 361 3 683 7 931 3 954 4 209 8 316 10 177 12 093 Rentable area (m - Tenure of Lease hold N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Freehold/ Leasehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Valuers Inspection Date 18-May-19 22-May-19 19-May-19 29-May-19 23-Apr-19 30-May-19 27-May-19 19-May-19 19-May-19 18-May-19 18-May-19 Property Use Commercial Commercial Commercial Commercial Retail Retail Commercial Industrial Industrial Commercial Commercial Address International Gateway Business Park, Midridge Park 495 Summit Road, Morningside 2 Kingfisher Crescent, Alberton Fourways Roos Street, 68 Waterkant Street Cnr Wessel,Odendaalrus Leask & Cnr Delver, Tambo Oliver Streets,Klerksdorp 343 Smith Street, Durban 18 Plantation Road, Eastleigh 20 Plantation Road, Eastleigh 220 Madiba Street, Pretoria Cnr of Sanlam, Alkantrand and Streets, Lynwood Pretoria Property Description Erf 2 Midridge Park Erf 1351 Morningside Ext 147 Erf 27174 Meyersdal Ptn 2 of Erf 1213 Ext 54 Witkoppen Erf 3406 Odendaalrus Erven 891 – 897 and 899 – 901 Klerksdorp Rem Ext of Ptn 3 Erf 10658 Durban, Rem Ext of Erf 10657 and 10658 Ptn 3 of Erf Durban, 10657 Durban and Ptn 7 of Erf 10658 Durban Erf 335 Eastleigh Erf 334 Eastleigh Erf 3261 Pretoria Erf 551 and the Rem Extent of Erf 683 Lynnwood Manor Ext 2 Property Name Midrand IBG House Motswedi Nu – Payment Oakhill Odendaalsrus Shopping Centre OK Klerksdorp – Smith Perm Street Plantation Road 18 Plantation Road 20 Pretoria High Court Chambers Pretoria Lynnwood Sanlynn No 70 71 72 73 74 75 76 77 78 79 80
83 (R) as at 2019 01 April 14 000 19 700 000 64 100 000 95 900 000 59 100 000 24 900 000 84 700 000 17 300 000 32 700 000 23 100 000 25 300 000 34 400 000 25 700 000 Valuation 2019 period for the 2019 to Income 01 April 1 881 600 2 846 650 6 595 890 6 997 440 2 791 290 1 915 110 3 675 480 2 889 810 2 901 910 3 598 240 2 853 133 31 March 10 002 370 10 977 120 Projection 5.0% 5.0% 7.5% 5.0% 5.0% 5.0% 7.5% 5.0% 5.0% 7.5% 15.0% 30.0% 15.0% void/ vacancy Assumed perpetual Zoning Town Planning and Statutory contravention (if any) General Business 3 Special Special Business 4 Business 4 Business 4 use 1 Mixed Business 1 Special Business 1 Business 1 Industrial 2 Building Grading C C A A A B B C C C C C C - Approxi mate age of building 60 years 30 years 20 years 20 years 15 years 15 years 15 years 30 years 25 years 30 years 40 years 40 years 60 years ²) 6 622 3 708 4 585 4 110 2 410 8 139 3 416 3 848 2 526 3 034 6 954 10 184 16 573 Rentable area (m - Tenure of Lease hold N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Freehold/ Leasehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Valuers Inspection Date 22-May-19 22-May-19 25-May-19 25-May-19 17-May-19 03-Jun-19 17-May-19 21-Apr-19 21-Apr-19 17-May-19 19-May-19 19-May-19 22-May-19 Property Use Industrial Commercial Retail Commercial Commercial Commercial Commercial Commercial Commercial Commercial Retail Retail Industrial Address 15 Siemert Road, Doornfontein 353 Rivonia Boulevard,Edenburg Cnr William Nicole Grosvenor Drive, Road and Main Road, Bryanston Sloane Street, Bryanston and Avenue Cnr 6th Hyde Park 1st Road, 36 – 38 Homestead Rivonia Street, 11 Simba Road, Sunninghill Mitchells Alpha Street, Plain 28 Fairbairn Street, Worcester 272 Kent Avenue, Ferndale 262 Commissioner Boksburg Street, Cnr Kitzinger, Avenue and Kingsway Brakpan, Park Street, Brakpan Industria Bunsen Road, Property Description 128 and Erven 127, 129 Doornfontein Ptn 3 of Erf 71 Edenburg Ptn 13 of Erf 4602 Bryanston Erf 6 Epsom Downs Erven 431 and Erf 47 Hyde Park Rem of Erf 246, Rem of Ptn 2 Erf Ptn 5 of Erf 256 246, Edenburg Erven 1225 and 1226 Sunninghill Ext 98 Erf 50764 Mitchells Plain Rem Ext of Erf 868 Worcester Erf 1070 Ferndale Erf 518-522 & 596-598 Boksburg Erf 3393 Brakpan Erven 69,70,80 and 81 Industria opstars r Property Name P Boulevard Rivonia Sandton Bryanston Grosvenor Shopping Centre Sandton Bryanston St Andrews Complex Sandton Hyde Park 50 Sixth Road 36 Sandton Rivonia Homestead Road Sandton Sunninghill Place Saps – Mitchell’s Plain Saps Worcester Sasol Gas Shoprite Boksburg Shoprite Brakpan Simgold No 81 82 83 84 85 86 87 88 89 90 91 92 93
84 (R) as at 2019 01 April 5 800 000 15 700 000 29 400 000 34 800 000 32 700 000 27 300 000 34 000 16 800 000 22 000 Valuation 2 125 200 000 4 353 000 000 2019 period for the 647 280 2019 to Income 01 April 1 697 170 3 386 880 3 431 280 3 328 860 2 959 320 3 927 000 1 869 840 3 429 800 31 March Projection 5.0% 7.5% 5.0% 5.0% 5.0% 25.0% 15.0% 10.0% 10.0% void/ vacancy Assumed perpetual Zoning Town Planning and Statutory contravention (if any) General industrial Industrial 3 Industrial 1 Special Business 1 Business 1 Commercial Business 1 Special Building Grading C C C B B C C C B - Approxi mate age of building 30 years 70 years 20 years 20 years 20 years 40 years 15 years 45 years 20 years ²) 3 114 5 268 5 501 4 006 6 883 4 097 2 539 3 154 10 824 Rentable area (m - Tenure of Lease hold N/A N/A N/A N/A 50 years N/A 30 years N/A N/A Freehold/ Leasehold Freehold Freehold Freehold Freehold Leasehold Freehold Leasehold Freehold Freehold Valuers Inspection Date 28-May-19 22-May-19 22-May-19 18-May-19 03-Jun-19 19-May-19 30-May-19 19-May-19 16-May-19 Property Use Industrial Industrial Commercial Retail Retail Retail Retail Retail Industrial Address 2 Cardiff Road, Pietermaritzburg Cnr La Rochelle & Stafford Crystal Roads, City 20 Kruger Street, & Suburban James Crescent, House Ext 17 Halfway Central Business Thohoyandou District, 95 Leeupoort Street, Boksburg Main Road,Tsolo Cnr Voortrekker Street and Kruger Vereeniging Avenue, 8 Pioneer Road, Lake Kleinfontein Property Description Erf 3152 Pietermaritzburg Rem Ext of Erf 19 Stafford Erf 1258 City and Suburban Erf 346 Halfway House Ext 17 Ptn 3 of erf 29 – BA Thohoyandou 419 Erven 334-338, 1544- 1547 – 423, Boksburg Erf 174 and the rem Tsolo of erf 175 ext. Erf 1395 Vereeniging Erf 35 Kleinfontein Lake otal Property Name Star Foods Head Office Tarry’s The Main Change Shopping The Pond Centre CBD Thohoyandou Centre Town Boksburg Tsolo Vereeniging Str Voortrekker Virgin Active Benoni No 94 95 96 97 98 99 100 101 102 Total Combined t
85 REAL INSIGHT SUMMARY VALUATION REPORT IN RESPECT OF THE COMBINED GROUP’S PROPERTY PORTFOLIO
11 July 2019
The Directors Gemgrow Properties Limited 3rd Floor Upper Building, 1 Sturdee Avenue, Rosebank, Johannesburg, 2196
Dear Sirs
RE: INDEPENDENT PROPERTY VALUERS’ REPORT OF THE PROPERTY PORTFOLIOS FOR GEMGROW PROPERTIES LIMITED AND ARROWHEAD PROPERTIES LIMITED AS DETAILED IN THE SUMMARY SCHEDULE ATTACHED AND FOR WHICH THERE ARE DETAILED VALUATION REPORTS HELD BY GEMGROW PROPERTIES LIMITED In accordance with your instruction of 16th of April 2019, I confirm that we have visited and inspected the 110 properties listed in the attached schedule (“the properties”) during April, May and June 2019 and have received all necessary details required to perform a valuation in order to provide you with my opinion of the properties’ market values as at 1st of April 2019.
1. INTRODUCTION The valuation of the properties has been carried out by the valuer who has carefully considered all aspects of all the properties. These properties each have a detailed valuation report which has been given to the management of Gemgrow Properties Limited. The detailed reports include commentary on the current economy, nature of the properties, locality, tenancy, risk profile, forward rent and earning capability and exposure to future expenses and property risk. All these aspects have been considered in the individual valuation reports of the properties. The detailed reports have further addressed the tenancy income capability and expenditure for each property and tenant. Historic expenditure profile as well as future expenditure increases have been considered. The value thus indicates the fair market value for each property which is detailed in the detailed report and which has been summarised on a summary schedule, attached hereto, for each property. There are 110 properties and the important aspects of the detailed valuation report including the property market value for all of the properties have been summarised in the attached schedule.
2. BASIS OF VALUATION The valuation is based on market value. Market value means the best price, at which the sale of an interest in a property may reasonably be expected to have been completed, unconditionally for a cash consideration on the date of valuation, assuming: 2.1 a willing seller and a willing buyer in a market; 2.2 that, prior to the date of valuation, there had been a reasonable period (having regard to the nature of the property and the state of the market) for the proper marketing of the property, for the agreement of price and terms and for the completion of the sale; and 2.3 that the state of the market, level of values and other circumstances are, on any earlier assumed date of exchange of contracts, the same as on the date of the valuation.
3. VALUE CALCULATION The calculation of the market value of these properties has been based on income capitalisation. This is the fundamental basis on which commercial income producing properties are traded on the market in South Africa. This is also due to there being strong supporting evidence of open market rental rates and capitalisation rates which are evidenced by sales in the market.
86 Properties traded in the current market reflect a yield rate relationship between revenue and capital value. This rate is an accurate determinant of the capitalisation rate. The considerations for the capitalised valuations are as follows:
3.1 Calculating the forward cash flow of all contractual and other income from the properties.
3.2 Calculating the forward contractual and other expenditure as well as provisions for various expenses in order to provide for void or future capital expenditure to which the property may be exposed.
3.3 The current area vacancy as a percentage of the property portfolio is approximately 8.5%. In order to apply a conservative approach, we have deducted approximately 6.5% of the gross income as a provision for rental that may not be collected as a consequence of vacancy, tenant failure or tenant refitting during the course of the coming year. The current vacancy is market related. The void provision used in the valuation is therefore adequate.
3.4 There is no loss of rental due to renovations or refurbishments currently being carried out on the buildings. There is, however, ongoing external and internal maintenance work and some tenant installation fitting out that is currently in progress. There is no loss of rental as a result of these activities.
3.5 Generally, the rentals are market related. This has been determined by comparing similar buildings in comparable areas to the properties valued, in terms of rental per square metre. The rental rate has also been checked against various published indices including the Rode Report. There are no properties that are over- rented, or that cannot be re-rented at the same or higher rental rate should such property become vacant. There is therefore minimal potential for rental flow reversion. There is however, a positive upside potential for real growth in rental, given the low base of which the average rentals flow. This is provided that the economy remains in a slow recovery pattern as currently being experienced as that there are no major economic fluctuations which may upset the economy.
3.6 Capitalising the net contractual income derived from the properties for a period of 1 year in advance, calculated from 1 April 2019.
3.7 The valuation has considered published market statistics regarding rental rates and expenditure for the different types of properties. It is also considered numerous other portfolios of similar properties in order to determine if any properties are over rented or have excessive expenditure.
3.8 Various provisions for capital contingencies were deducted from the capitalised value.
4. SPARE LAND As far as could be established, there are no properties with large tracts of vacant zoned and serviced spare land.
5. BRIEF DESCRIPTION The properties comprise of retail, office and industrial accommodation. The properties have been well constructed and generally have acceptable architectural merit, aesthetic appeal and sufficient parking facilities and are virtually fully tenanted. The leases tend to be of a general short to medium term contractual rental nature with provision for the recovery of utility services consumed by the lessees. Escalations are market related but are high enough to ensure positive growth rate without creating an over rent situation in the medium term. The properties are generally highly visible and dominate their environment. In respect of the properties, the current net annual rental and the estimated future net annual rentals at specified dates and for specified periods are included in each individual detailed property valuation report.
87 6. VALUATION QUALIFICATIONS Qualifications are usually detailed as a consequence of: leases under negotiation that have not yet been formalised; leases of a large nature where the premises are difficult to re-let; specialised properties; large exposure to a single tenant; potential tenant failure due to over-rent; expenses required for major repairs; maintenance or other exposure to maintain the lettability of the building; contingent expropriations or servitudes that may be enforced; poor lease records whereby the lease may be disputed or rendered invalid. We have, to the best of our knowledge, considered all of these aspects in the valuation of all the properties. There are no properties that are prejudiced in value by the influence of the above factors. The valuer is however not responsible for the competent daily management of these properties that will ensure that this status is maintained, or for the change of any laws, services by local authority or economic circumstances that may adversely impact on the integrity of the buildings or the tenant profile.
7. OPTIONS OR BENEFIT/DETRIMENT OF CONTRACTUAL ARRANGEMENTS To my knowledge there are no contractual arrangements on the properties other than the leases as detailed in the report that have a major benefit or are detrimental to the fundamental value base of the properties. To the best of my knowledge, there are no options in favour of any parties for any purchase of any of the properties.
8. INTRA-GROUP OR RELATED PARTY LEASES Having inspected all the tenant schedules and leases it is noted that there are no intra-group or related party leases.
9. CURRENT STATE OF DEVELOPMENT There is no property which is currently being re-developed.
10. RENTALS USED IN VALUATIONS Note that all these properties are all generally rented out. The current annual rental and future annual rentals have been calculated in a separate discounted cash flow check schedule. It is noted that there could be some material downward rental reversions and that the rentals for most of the properties increase on average by approximately 5% to 7% compounding per annum.
11. EXTERNAL PROPERTY None of the properties are situated outside the Republic of South Africa.
12. OTHER GENERAL MATTERS AND VALUATION SUMMARY A full valuation report is available on a property by property basis detailing tenancy, town planning, valuer’s commentary, expenditure and other details. This has been given to the directors of Gemgrow Properties Limited.
13. ALTERNATIVE USE FOR A PROPERTY The properties have been valued in accordance with their existing use which represents their market value. No alternative use for the properties has been considered in determining their value.
14. OTHER COMMENTS Our valuation excludes any amounts of Value-added Tax, transfer duty, or securities transfer duty.
15. CAVEATS 15.1 Source of information and verification Information on the properties regarding rental income, recoveries and other income detail has been provided to us by the current owners and their managing agents.
88 We have received copies of leases of the existing properties where such leases are the major tenant. The leases have been read to check against management detail, in order to ensure that management has correctly captured tenant information as per contractual agreement. This has been done to test management information against the underlying agreements. We have further compared certain expenditures given to us to the market norms of similar properties. This has also been compared to historic expenditure levels of the properties themselves. Historical contractual expenditures and municipal utility services were compared to the past performance of the properties in order to assess potential expenditure going forward. The municipal values on some the properties are very low. At the current values there is some potential for municipal values to increase by considerable amounts, should the municipality revalue these properties, in which event the rates could increase to 3 or 4 times their current amount.
15.2 Full disclosure This valuation has been prepared on the basis that full disclosures of all information and factors that may affect the valuation have been made to me. We have to the best of our ability researched the market as well as taken the steps detailed in paragraph 15.3 below.
15.3 Leases Our valuation has been based on a review of actual tenants’ leases (which includes material terms such as repairing obligations, escalations and break options) and other pertinent details supplied to us by the managing agents and by Gemgrow Properties Limited. All recovery details in respect of the existing leases e.g. utility cost and other recoveries as provided for in the leases have been disclosed by way of the monthly tenant invoices and the summary schedule supplied to us. Option terms and other lease information have been supplied to us by the owners and managing agents and we are familiar with such documents.
15.4 Lessees credibility In arriving at our valuation, cognisance has been taken of the lessee’s security and rating. In some cases, this has influenced the capitalisation rate by way of a risk consideration.
15.5 Mortgage bonds, loans, etc. The properties have been valued as if wholly-owned with no account being taken of any outstanding monies due in respect of mortgage bonds, loans and other charges. No deductions have been made in our valuation for costs of acquisition. The valuation is detailed in a completed state and no deductions have been made for retention or any other set-off or deduction for any purposes which may be made at the discretion of the purchaser when purchasing the properties.
15.6 Calculation of areas All areas quoted within the detailed valuation reports are those stated in the information furnished and verified where plans were available. To the extent that plans were not available, reliance was placed on the information submitted by the managing agents. Updated plans were not available for all the properties in respect of internal configuration. The properties generally appear to have the stated square meterage which could only be more accurately determined if remeasured by a professional. The reported square meterage is therefore considered as correct as possible without full a re-measurement exercise being undertaken.
15.7 Structural condition The properties have been valued in their existing state. We have not carried out any structural surveys, nor inspected those areas that are unexposed or inaccessible, neither have we arranged for the testing of any electrical or other services.
15.8 Contamination The valuation assumes that a formal environmental assessment is not required and further that none of the properties are environmentally impaired or contaminated, unless otherwise stated in our report.
89 15.9 Town planning Full town planning details and title deed information have been supplied in the detailed valuation reports including conditions and restrictions and the properties have been checked against such conditions. This is to ensure that they comply with town planning regulations and title deed restrictions. There do not appear to be any infringements of local authority regulations or deeds in respect of the properties. The valuation has further assumed that the improvements have been erected in accordance with the relevant Building and Town Planning Regulations and on inspection it would appear that the improvements are in accordance with the relevant town planning regulations for these properties. There is no contravention of any statutory regulation, or town planning local authority regulation or contravention of title deed relating to any of the properties which infringement could decrease the value of the properties as stated.
16. MARKET VALUE I am of the opinion that the aggregate market value of the properties as at 1 April 2019 is R6,526,620,000 (excluding VAT). A summary of the individual valuations and details of each of the properties are attached. To the best of our knowledge and belief there have been no material changes in circumstances between the date of the valuation and the date of the valuation report which would affect the valuation. I have more than 25 years’ experience in the valuation of all nature of property and I am qualified to express an opinion on the fair market value of the properties. I trust that I have carried out all instructions to your satisfaction and thank you for the opportunity of undertaking this valuation on your behalf.
Yours faithfully, for Real Insight (Pty) Ltd
Theunis Lodewyk Johannes Behrens National Diploma Property Valuation Registered Professional Associated Valuer (no. 3206) (Registered without restriction in terms of the Property Valuers Act, No 47 of 2000)
1st Floor, York House Tybalt Place, Treur Close Waterfall Office Park Midrand 1682
90 (R) as at 2019 01 April Valuation 61 700 000 44 800 000 82 800 000 47 000 67 900 000 864 700 000 371 000 565 300 000 232 700 000 252 900 000 2020 period for the Income 01 April 2019 to 5 793 826 2 709 392 8 805 778 4 464 540 6 744 871 31 March 77 013 375 35 796 762 49 310 368 28 278 378 23 767 681 Projection 5.0% 5.0% 5.0% 2.5% 3.0% 5.0% 3.0% 5.0% 5.0% 5.0% void/ vacancy Assumed perpetual Zoning Town Planning and Statutory contravention (if any) Business 2 General General 1 business General 1 business Special purposes General business Business 1 Business 4 Business Business 1 Building Grade C C A A A C C B B B - Approxi mate Age of Building ± 20 Years ± 20 Years ± 40 Years ± 30 Years ± 25 Years ± 20 Years ± 20 Years ± 10 Years ± 30 Years ± 15 Years (m²) 3 604 5 088 6 087 area, 6 997 (GLA), 24 932 19 510 20 481 28 951 36 294 23 105 Rentable Tenure of Leasehold Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Freehold/ Leasehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Valuers Inspection Date 09-May-19 14-May-19 14-May-19 16-May-19 22-May-19 21-May-19 09-May-19 24-May-19 02-May-19 23-May-19 Property Use Commercial Industrial Retail Retail Retail Commercial Retail Commercial Retail Retail Property Description Erf 1063 Rustenburg Erf 930 New Doornfontein Erven 142906 and 144388 Cape Town Portion 11 of the farm 806 RD Remaining Extent of Erf 5570 and 15821, 15817, 15822 Bethelsdorp, Erf 11102 Durban Erf 1057 Rustenburg Portion 1 & the Rem of Erf 171, Rem & Ptn 1 of Erf 182 and Ptn 1 of Erf 209 Rosebank Rem of Erf 708 Kathu ERF2039 Matsulu – A Address 127 Bethlehem Street, Rustenburg New 5 Beacon Road, Doornfontein 81 Chichester Road, Claremont Cnr Morgenster Road & Vanguard, Mitchells Plain, Cape Town Cnr Norman and Port Middleton Drive, Elizabeth 201 Dr Pixley Kaseme Durban Street, Cnr Bethlehem and Street, Fatima Bhayat Rustenburg 9 Walter Street, Rosebank, Johannesburg 14 Rietbok Street, Kathu Corner Madiba Drive Street, and Simunye Matsulu – A Property Name 127 Bethlehem Street Access City Access Park Cape Town Mall Westgate Cleary Park Durban Receiver of Revenue Impala Centre Jhb Rosebank 158 Offices Kathu Shopping Centre Matsulu Shopping Centre No Arrowhead 1 2 3 4 5 6 7 8 9 10 SCHEDULE OF PROPERTIES VALUED BY REAL INSIGHT
91 (R) as at 2019 01 April 4 600 000 7 050 000 Valuation 65 700 000 67 200 000 39 200 000 66 000 33 000 40 600 000 28 700 000 239 700 000 173 300 000 3 274 900 000 2020 period for the 477 182 998 639 Income 01 April 2019 to 6 206 244 6 215 599 4 353 710 6 799 157 3 713 499 4 406 887 3 230 017 31 March 23 792 729 17 466 228 Projection 5.0% 7.5% 5.0% 3.5% 5.0% 5.0% 5.0% 5.0% 3.0% 7.5% 5.0% void/ vacancy Assumed perpetual Zoning Town Planning and Statutory contravention (if any) Business 1 use Mixed Business 1 Business 1 General business Business 4 Business 1 Business 2 Business 2 Business 1 Business 1 Building Grade C C C C C B C C C C C - Approxi mate Age of Building ± 20 Years ± 20 Years ± 25 years ± 40 years ± 20 years ± 15 Years ± 20 years ± 30 Years ± 30 Years ± 20 Years ± 20 Years (m²) 571 area, 8 535 4 102 6 385 3 888 4 777 1 200 4 288 2 017 (GLA), 16 721 14 198 Rentable Tenure of Leasehold Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Freehold/ Leasehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Valuers Inspection Date 09-May-19 21-May-19 28-May-19 21-May-19 14-May-19 29-Apr-19 09-May-19 29-May-19 29-May-19 28-May-19 28-May-19 Property Use Retail Retail Retail Retail Retail Commercial Retail Office Retail Commercial Retail Property Description Portion 8 of Erf 27 2455, and Even 2461 and 2491 Rustenburg Portion 49 & 50 of Erf 60 Mkuze Erven 660 and 1990 Rosettenville Portion 2 of Erf 11 Miluwani Erf 1316 Sterkspruit Erf 1495 Sunninghill Ext 107 Portion 191 of Erf 272 JQ Farms, Rustenburg Erf 242 Pietersburg Portion 1 of Erf 236 Pietersburg Erf 6011 Pietersburg Erf 302 Louis Trichardt Address Corner Loop and Fatima Bhayat, Rustenburg Main Road 592 Geranium Street, Rosettenville, Johannesburg Miluwani R524, 60 Main Street, Sterkspruit 8 Kikuyu Road, Sunninghill Cnr Nelson Mandela & Bethlehem Drive, Rustenburg 105 Landdros Mare Polokwane Street, 106 Landdros Mare Polokwane Street, 18 Thabo Mbeki Polokwane Street, 20 Songozwi Street, Louis Trichardt Property Name Mall Midtown Plaza Mkuze Rosettenville Junction Sibasa Shopping Centre Sterkspruit Shopping Boxer Centre The District Transforum Centre 105 Landdros Mare Street 106 Landdros Mare Street 18 Thabo Mbeki 20 Trichardt No 11 12 13 14 15 16 17 Total Gemgrow 18 19 20 21
92 (R) as at 2019 01 April 9 600 000 7 900 000 7 600 000 4 220 000 7 500 000 7 850 000 5 600 000 4 500 000 Valuation 15 100 000 19 200 000 23 500 000 21 900 000 2020 period for the 949 579 844 750 889 134 558 031 929 139 672 554 310 024 Income 01 April 2019 to 1 126 834 1 917 764 1 885 846 2 684 330 2 418 999 31 March Projection 5.0% 5.0% 5.0% 6.0% 5.0% 5.0% void/ 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% vacancy Assumed perpetual Zoning Town Planning and Statutory contravention (if any) Industrial 1 Industrial 1 Business 2 Industrial 1 Business 2 Business 1 Business 1 Business 2 Business 1 Industrial 2 Business 2 Business 2 Building Grade C C C C C B C C C C C C - Approxi mate Age of Building ± 20 Years ± 20 Years ± 20 Years ± 20 Years ± 20 Years ± 40 Years ± 60 Years ± 20 Years ± 40 Years ± 20 Years ± 20 Years ± 20 Years (m²) 898 469 1 196 area, 2 100 1 362 1 840 1 405 2 001 1 408 1 040 2 697 2 232 (GLA), Rentable Tenure of Leasehold Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Freehold/ Leasehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Valuers Inspection Date 28-May-19 28-May-19 28-May-19 28-May-19 28-May-19 22-May-19 03-May-19 28-May-19 20-May-19 28-May-19 28-May-19 28-May-19 Property Use Industrial Industrial Retail Industrial Retail Retail Retail Commercial Retail Industrial Retail Retail Property Description Erf 2256 Pietersburg Extension 13 Erf 2050 Pietersburg Extension 9 Portion 3 Erf 313 Pietersburg Portion 5 of Erf 5713 Pietersburg Extension 13 Ptn 3 Erf 6 Pietersburg and Remaining Extent of Ptn 2 Erf 6 Pietersburg Erf 21 Tzaneen Erven 10556 & 10557 Kimberley Portion 1 of Erf 370 Pietersburg Erf 301 Piet Potgietersrust Erf 6177 Pietersburg Extension 17 Erf 487 Pietersburg Erf 194 Pietersburg Address Street, 31 Nikkel Polokwane 41 Emerald Street, Polokwane 5 Rissik Street 5 Sapphire Street, Polokwane 51 Schoeman Street, Polokwane 54 Agatha Street, Arbor Park Cnr Phakamile Mabija Road and Currey Kimberley Street, 54 Schoeman Street, Polokwane 55 Thabo Mbeki Mokopane Street, Street, 65 Silikon Polokwane 68 Hans van Rensburg Polokwane Street, 70 Landdros Mare Polokwane Street, Property Name 31 Nikkel 41 Emerald 5 Rissik – Polokwane 5 Sapphire 51 Schoeman – Polokwane 54 Agatha 54 Jones 54 Schoeman 55 Voortrekker 65 Silikon 68 Hans van Rensburg 70 Landdros Mare No 22 23 24 25 26 27 28 29 30 31 32 33
93 (R) as at 2019 01 April 6 100 000 8 400 000 6 800 000 6 500 000 7 750 000 4 000 1 600 000 Valuation 19 500 000 20 100 000 71 000 75 800 000 268 000 2020 period for the 742 550 594 405 880 574 863 880 766 645 331 585 187 497 Income 01 April 2019 to 2 219 277 2 243 794 7 519 303 5 834 728 31 March 23 917 062 Projection 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 6.0% 5.0% void/ 10.0% 10.0% 10.0% vacancy Assumed perpetual
Zoning Town Planning and Statutory contravention (if any) Business 2 Business 2 Business 2 Business 1 Shops Business 1 Business 1 Special General commercial General 3 business 1 Local business General industrial 1 Building Grade C C C A B C C C C B A B - Approxi mate Age of Building ± 20 Years ± 20 Years ± 20 Years ± 15 Years ± 45 Years ± 40 Years ± 20 Years ± 20 Years ± 20 Years ± 35 Years ± 40 Years ± 50 Years (m²) 877 875 715 400 area, 1 322 1 962 1 417 1 122 2 052 6 344 (GLA), 20 157 19 834 Rentable Tenure of Leasehold Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Freehold/ Leasehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Valuers Inspection Date 28-May-19 28-May-19 28-May-19 21-May-19 23-May-19 22-May-19 10-May-19 09-May-19 03-May-19 24-May-19 24-May-19 24-May-19 Property Use Retail Commercial Retail Retail Retail Retail Retail Retail Industrial Commercial Commercial Industrial Property Description Remaining Extent of Erf 527 Pietersburg Remaining Extent and Portion 1 of Erf 357 Pietersburg Remaining Extent of Erf 167 Pietersburg Erf 3931 Louis Trichardt Hall Erf 908 Marble Erf 2679 Tzaneen Extension 37 & Erf 3018 Tzaneen Extension 47 Erf 758 Klerksdorp Ptn 2 of Erf 267 Northam Ext 2 Erf 15980 Bloemfontein Erf 31628 Bellville Erf 32139 Bellville Erven 18006, 18005 and 23181 Parow Address 71 Biccard Street, Polokwane Rensburg Van 79 Hans Polokwane Street, 79 Market Street, Polokwane 85 Kruger Street, Polokwane (Main) 908 Hoofweg Hall Marble Street, 99 Agatha Street, Arbor Park 66 Tambo Oliver Klerksdorp Street, Northam Botha Road, Hilton 82 Long Street, Willie van Schoor 73 Bellville Avenue, Bellville Tijger Park, Bellville Park, Cnr Fritz Spilhaus and Jean Avenue Parow Simonis Street, Property Name 71 Biccard 79 Hans Van Rensburg 79 Market 85 Kruger 908 Hoofweg 99 Agatha Allied – Klerksdorp Bears – Northam Beka Bloemfontein Total Cape Town Bellville Suntyger Cape Town Bellville Tijger Park Cape Town Industrial Parow Park No 34 35 36 37 38 39 40 41 42 43 44 45
94 (R) as at 2019 01 April 5 300 000 9 700 000 7 310 000 7 900 000 7 300 000 4 580 000 Valuation 72 100 000 35 900 000 22 800 000 86 000 29 800 000 32 200 000 2020 period for the 533 994 813 636 905 567 658 903 479 993 Income 01 April 2019 to 8 062 369 3 345 302 2 399 830 8 209 243 1 030 770 2 571 101 3 116 224 31 March Projection 6.0% 5.0% 5.0% 5.0% 7.5% 5.0% 5.0% 5.0% 5.0% 5.0% void/ 10.0% 10.0% vacancy Assumed perpetual Zoning Town Planning and Statutory contravention (if any) Business 1 General business Business 3 garagePublic Business 4 Business 1 Business 1 Business 1 Unknown Business 2 Business 2 Business 2 Building Grade A C B C A C C C C C C C - Approxi mate Age of Building ± 15 Years ± 60 Years ± 45 Years ± 25 Years ± 35 Years ± 45 Years ± 20 Years ± 15 Years ± 20 Years ± 25 Years ± 30 Years ± 20 Years (m²) 840 877 829 900 area, 7 894 3 790 2 923 9 040 3 500 1 066 4 217 2 370 (GLA), Rentable Tenure of Leasehold Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Freehold/ Leasehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Valuers Inspection Date 20-May-19 03-May-19 22-May-19 24-May-19 21-May-19 22-May-19 09-May-19 21-May-19 28-May-19 29-May-19 23-May-19 28-May-19 Property Use Retail Retail Office Retail Commercial Office Retail Retail Commercial Office Office Retail Property Description Erf 5084 Louis Trichardt Remaining Extent of Erf 10728 Kimberley Erf 2703 King Williams Town Erf 1241 Hazyview Ext 1 Erf 42903 East London 419 & Lots 418, Remainder of 420 North End Erf 21 Northam Portion 2 of Erf 6 BA Thohoyandou R/E of Erf 468 Pietersburg Portion 3 of Erf 343 Pietersburg Erf 128 Nelspruit Ext Erf 6439 Pietersburg Address Cnr Songozwi Munnik and Anderson Streets, Louis Trichardt 8 – 14 Jones Road 2 Avenue Hargreaves Hazyview Main Road, (R40 National Cnr R536) Highway Avenue, 59 Western East London Vincent, 3 Sommers Road Northam Botha Road, CBD Thohoyandou 106 Hans van Rensburg Street Van 105 & 107 Hans Rensburg Street 41 Anderson Street 22 Jorissen Street, Polokwane Property Name Checkers Centre Louis Trichardt Building Citizens Kimberley Of Dept. Forestry & Water Dikai Shopping Centre East London Vincent Office Park Edufin PE Ellerines – Northam Ellerines Thohoyandou Empire Place F B Motors Federal Mogul FNB Building No 46 47 48 49 50 51 52 53 54 55 56 57
95 (R) as at 2019 01 April Valuation 17 300 000 16 600 000 17 400 000 18 500 000 122 800 000 178 000 135 100 000 2020 period for the Income 01 April 2019 to 1 810 109 1 705 530 1 597 439 2 174 447 31 March 11 509 108 16 667 216 13 271 801 Projection 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 7.5% void/ vacancy Assumed perpetual Zoning Town Planning and Statutory contravention (if any) Business 1 Business 1 Business 1 Industrial 1 Business 2 Business 1 Offices and 1 business Building Grade C A B B C C C - Approxi mate Age of Building ± 60 Years ± 25 Years ± 40 Years ± 15 Years ± 20 Years ± 20 Years ± 40 Years (m²) area, 1 763 7 934 1 776 2 248 3 980 9 817 (GLA), 35 016 Rentable Tenure of Leasehold Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Freehold/ Leasehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Valuers Inspection Date 03-May-19 21-May-19 22-May-19 21-May-19 28-May-19 17-May-19 20-May-19 Property Use Retail Retail Retail Industrial Retail Retail Retail Property Description R/E of Erf 10689 R/E of Kimberley, Erf 10731 Erf Kimberley, 10695 Kimberley, Erf 10692 R/E of Kimberley, Erf 10690 Erf Kimberley, 12496 Kimberley, Erf 10693 R/E of Kimberley, Erf 10733 Kimberley Erven 112 & 124 – BA Thohoyandou Erf 56 Tzaneen Erf 210 Meadowdale R/E of Erf 261 Pietersburg Erf 25 Groblersdal 200, Erven 128, Remainder and Portion 2 of Erf as 199 as well Portions 4 and 5 of Erf 278 Louis Trichardt Address Cnr Phakamile Mabija Toits road and Du Kimberley Road, 112 & 124 Mphetu Thohoyandou Road, 20 Danie Joubert Arbor Park Street, Herman Road, Meadowdale, Germiston 103 Kerk Street, Polokwane 2 van Riebeeck Street Cnr Songozwi and Louis Krogh Street, Trichardt Property Name Foschini – Kimberley Game Centre Geen & Richards Germiston Meadowdale R24 Greywies Dry Cleaners Groblersdal Fruit & Veg City Noor Hawama Centre No 58 59 60 61 62 63 64
96 (R) as at 2019 01 April 5 300 000 1 800 000 2 710 000 2 100 000 4 300 000 8 080 000 Valuation 10 020 000 16 000 15 700 000 34 000 160 000 259 500 000 2020 period for the 653 579 221 968 272 031 183 858 507 741 954 930 Income 01 April 2019 to 1 142 811 1 636 209 1 254 023 3 353 686 31 March 16 959 248 26 287 213 Projection 5.0% 5.0% 7.5% 5.0% 5.0% 5.0% 7.5% 5.0% 5.0% void/ 15.0% 20.0% 25.0% vacancy Assumed perpetual Zoning Town Planning and Statutory contravention (if any) Business 2 Shopping complex Business 1 Business 1 Business 4 Business 1 Residential 1 General business General business General business Business 1 Business 3 Building Grade C C B C B C C C C B C B - Approxi mate Age of Building ± 20 Years ± 20 Years ± 40 Years ± 20 Years ± 25 Years ± 20 Years ± 10 Years ± 60 Years ± 60 Years ± 45 Years ± 25 Years ± 10 Years (m²) 272 915 area, 2 250 2 305 1 636 6 899 1 305 1 193 3 400 4 648 (GLA), 10 766 27 249 Rentable Tenure of Leasehold Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Freehold/ Leasehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Valuers Inspection Date 29-May-19 29-May-19 22-May-19 10-May-19 21-May-19 10-May-19 01-May-19 03-May-19 03-May-19 03-May-19 23-May-19 17-May-19 Property Use Retail Retail Retail Retail Commercial Retail Retail Commercial Commercial Retail Office Retail Property Description Portion 1 and Remaining Extent of Erf 35 Pietersburg Portion 8 of the farm Duizendannex 816 KS Erf 3393 Phalaborwa Ext 1 Ptn 1 of Erf 129 Potchefstroom Rem of Erf 2477 Houghton Estate Ptn 1 Of Erf 642 Klerksdorp Remaining Extent of Erf 7401 Beaufort West Erven 10304, 10306, 10305, 10307 and 10314 Kimberley Erf 14456 Kimberley Remainder of Erf 23242 Kimberley Erf 124 Middelburg Portion 9 of Erf 690 Monument Extension 1 Address 52 Bok Street Jane Furse Main Road, Jane Furse Avenue Cnr of Palm and President Nelson Mandela Drive, Phalaborwa Sisulu Lane, Walter Potchefstroom 36 Boundary Road, Houghton Estate 53 Tambo Oliver Klerksdorp Street, Cnr Donkin St & Danie Theron, Beaufort West 41 Way, du Toitspan 13 Woodley Street, 52 – 62 George Street Street Vos 37 SADC 9 Voortrekker Road, Krugersdorp Property Name Herfred Pietersburg Jane Furse Crossing Jet Phalaborwa Jet Potchefstroom Jhb Isle of Houghton John Orr – Klerksdorp Karoo Junction Kimberley Building Kimberley Printing Klein Brothers Middelburg SAP Mall Monument No 65 66 67 68 69 70 71 72 73 74 75 76
97 (R) as at 2019 01 April 3 800 000 8 800 000 Valuation 16 700 000 18 900 000 78 000 31 100 000 14 300 000 15 100 000 18 100 000 42 500 000 103 600 000 2020 period for the 380 247 946 824 634 834 Income 01 April 2019 to 1 840 250 2 047 190 9 071 960 3 383 369 1 293 001 1 647 928 8 904 562 2 792 086 31 March Projection 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% void/ 15.0% 10.0% 10.0% 15.0% 10.0% vacancy Assumed perpetual Zoning Town Planning and Statutory contravention (if any) General business Business 1 Business 1 Business 1 Business 1 General business Office park General business Commercial General industry Special Building Grade C C C B B C C C C B B - Approxi mate Age of Building ± 50 Years ± 30 Years ± 30 Years ± 40 Years ± 40 Years ± 40 Years ± 45 Years ± 60 Years ± 40 Years ± 10 Years ± 20 Years (m²) area, 1 252 1 060 1 147 2 263 8 117 4 182 2 299 4 967 1 357 5 317 (GLA), 16 914 Rentable Tenure of Leasehold Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Freehold/ Leasehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Sectional Title Freehold Freehold Valuers Inspection Date 03-May-19 23-May-19 23-May-19 22-May-19 20-May-19 16-May-19 24-May-19 03-May-19 15-May-19 21-May-19 15-May-19 Property Use Commercial Retail Retail Retail Retail Use Mixed Use Mixed Commercial Office Industrial Commercial Property Description Erf 10507 Kimberley Erf 18 Nelspruit Erf 39 Nelspruit Erven 1830 and 1831 Phalaborwa Ext 1 Erf 4282 Louis Trichardt Erf 3057 Somerset West Erven 6902 and Bellville 6904, R/E Erven 10312, of Erf 10331 and Erf 10338 Kimberley Units 1 & 2 Nyanga Court Remainder of Erf 17764 Pinetown Erf 665 Hatfield Address 37 Chapel Street, Cnr Henshall & Anderson Streets 20 Bester Street Avenue Cnr of Palm and President Nelson Mandela Drive, Phalaborwa Cnr Songozwi Munnik and Krogh Street, Louis Trichardt 122 Main Road 19 Strand Street 33 Way, du Toitspan Cnr New Eisleben & Roads Lansdown Road, 26–30 Kyalami Pinetown Westmead, 353 Festival Street, Pretoria Property Name Nedbank Kimberley Nelspruit Centre Nelspruit Ellerines Nizams Phalaborwa Noor Centre Oudehuis Centre Du Bel Parc KimberleyPerm Philippi Court Pinetown Westmead Industrial Kyalami Park Pretoria Hatfield Festival Street Offices No 77 78 79 80 81 82 83 84 85 86 87
98 (R) as at 2019 01 April 5 150 000 Valuation 15 000 45 600 000 11 100 000 24 000 18 500 000 20 500 000 27 500 000 46 700 000 90 000 140 000 2020 period for the 518 514 Income 01 April 2019 to 1 624 030 5 395 331 1 190 962 2 449 618 2 083 177 2 131 699 2 825 458 4 351 449 8 491 538 31 March 13 186 855 Projection 7.5% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% void/ 20.0% vacancy Assumed perpetual Zoning Town Planning and Statutory contravention (if any) Business 4 Special Industrial 2 Industrial 2 Industrial 2 Industrial 2 Industrial 1 Industrial 2 Industrial 1 Industrial 1 Industrial 3 Building Grade C C B A A B C B B C C - Approxi mate Age of Building ± 25 Years ± 25 Years ± 10 Years ± 10 Years ± 10 Years ± 10 Years ± 10 Years ± 10 Years ± 10 Years ± 20 years ± 20 years (m²) area, 3 529 6 412 1 817 5 787 3 784 3 770 1 185 5 000 (GLA), 32 006 10 365 28 226 Rentable Tenure of Leasehold Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Freehold/ Leasehold Sectional Title Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Valuers Inspection Date 15-May-19 15-May-19 15-May-19 15-May-19 15-May-19 15-May-19 15-May-19 15-May-19 17-May-19 17-May-19 24-May-19 Property Use Commercial Commercial Industrial Industrial Industrial Industrial Industrial Industrial Industrial Industrial Industrial Property Description Erf 951 Lynwood Erf 962 Lynwood Erf 2084 Silverton Ext 46 Erf 2149 Silverton Ext 56 Erf 2107 Silverton Ext 56 Erf 2111 Silverton Ext 58 Portion 39 of Erf Ext 1 Waltloo 170 Erf 2153 Silverton Ext 60 295 and Erven 294, Sand Ext 441 Kya 27 Erf 413 Strijdompark Ext 23 Erf 105 Robertville Ext 3 & Erf 268 Robertville Ext 4, Roodepoort Address Road, 441 Lynwood Pretoria Crescent 375 Queen’s 22 Axle Street, Silverton 294 Battery Street, Silverton 301 Battery Street, Silverton 309 Battery Street, Silverton 330 Alwyn Street, Silverton 34 Bearing Crescent, Silverton Road and Cnr River Randburg Hyskraan, Sands Kya 5 CR Swart Drive, Randburg 255 Nadine Street, Roodepoort Property Name Pretoria Excel Lynnwood Park Pretoria Lynnwood ParkSunwood Pretoria Silverton 22 Axle Street Pretoria Silverton 294 Battery Street Pretoria Silverton 301 Battery Street Pretoria Silverton 309 Battery Street Pretoria Silverton 330 Street Alwyn Pretoria Silverton 34 Bearing Crescent Randburg Trevallyn Industrial Park Randburg Tungsten Industrial Park Roodepoort Robertville Industrial Park No 88 89 90 91 92 93 94 95 96 97 98
99 (R) as at 2019 01 April 9 200 000 Valuation 16 800 000 66 100 000 23 000 17 200 000 11 200 000 40 100 000 37 100 000 31 900 000 46 700 000 30 100 000 70 300 000 3 251 720 000 6 526 620 000 2020 period for the Income 01 April 2019 to 1 811 688 6 873 898 2 735 799 1 912 747 1 371 504 4 544 656 4 002 457 3 728 460 5 656 108 1 423 760 3 583 501 8 099 005 31 March Projection 5.0% 7.5% 5.0% 5.0% 5.0% 3.5% 5.0% 5.0% 4.0% 5.0% void/ 10.0% 10.0% vacancy Assumed perpetual Zoning Town Planning and Statutory contravention (if any) Business 1 Business 1 Business 2 Business 3 General Business Offices, Shops, Medical Consulting Restaurants rooms, Business 1 Business 1 Industrial 1 General Business 4 Business 2 Special Building Grade C C C B C B B C C B B C - Approxi mate Age of Building ± 30 years ± 30 years ± 50 Years ± 10 Years ± 20 years ± 15 Years ± 15 Years ± 40 years ± 20 years ± 40 Years ± 25 Years ± 20 years (m²) 520 area, 1 905 8 263 2 707 1 393 2 122 2 723 4 359 3 727 2 659 (GLA), 15 001 10 526 Rentable Tenure of Leasehold Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Freehold/ Leasehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Freehold Valuers Inspection Date 02-May-19 20-May-19 22-May-19 28-May-19 09-May-19 20-May-19 20-May-19 20-May-19 28-May-19 15-May-19 03-May-19 15-May-19 Property Use Retail Retail Use Mixed Retail Retail Retail Retail Retail Industrial Retail Commercial Retail Property Description Erf 124 Vryburg Erf 3407 Louis Trichardt Erf 4156 King Williams Town Erf 14850 Pietersburg Erf 3187 Brits Ext 36 Portion 3 of Erf 29 BA Thohoyandou Erf 72 BA Thohoyandou Erf 4300 Louis Trichardt Portion 13 of Erf 5713 Pietersburg Erf 29412 Mitchells Plain Erf 14498 Kimberley Erf 100 of Annlin-Wes Extension 7 Address 70 Market Street Cnr Kruger Devenish and Burger Street, Louis Trichardt Street 7 Taylor and Cnr Grobler Fauna Grimm Streets, Park 40A Murray Avenue, Brits CBD Thohoyandou CBD Thohoyandou 95 Munnik Street, Louis Trichardt 6 Kobalt Street, Polokwane & Way Cnr Symphony Units 1 Lane, Minuet Truworths Corner & 2 24 Fabricia Road, Fabricia & Cnr Lavender Braam Pretorius, Pretoria NorthAnnlin, Property Name Sanlam Centre Vryburg Shoprite Louis Trichardt The Arches The Crossing Building Theo’s – Brits Thohoyandou Centre Thohoyandou Shopping Centre Thompsons Building Trador Truworths Corner Wilcon House Wonderboom Carvenience Centre No 99 100 101 102 103 104 105 106 107 108 109 110 Total Combined total
100 R 4 600 000 7 050 000 2 700 000 9 600 000 7 900 000 Valuation 62 100 000 42 900 000 49 600 000 61 700 000 14 400 000 19 000 11 200 000 40 600 000 28 700 000 99 000 18 200 000 14 500 000 41 300 000 212 600 000 ANNEXURE 8 ) 2 35.61 70.05 95.88 81.95 98.78 57.49 47.48 34.82 22.94 67.45 47.90 44.56 81.37 89.03 69.28 (R/m 132.71 114.39 114.92 152.16 rental average Weighted ) 2 571 (m GLA 5 093 1 200 4 080 6 997 2 198 4 792 3 166 4 288 2 017 1 120 2 100 3 846 1 528 4 171 1 362 15 450 13 350 14 984 Sector Industrial Commercial Commercial Office Retail Commercial Commercial Commercial Commercial Industrial Commercial Retail Industrial Commercial Industrial Industrial Retail Retail Industrial Province Cape Western Gauteng Limpopo Limpopo Limpopo Gauteng North West Kwa Zulu Natal Gauteng Gauteng Limpopo Limpopo Gauteng Gauteng Limpopo Gauteng Kwa Zulu Natal Kwa Zulu Natal Limpopo weighted average, rental and valuation in respect of the combined group’s portfolio rental and valuation in respect of the combined group’s as average, weighted Address Blackheath 1 Range Road, Rosebank Avenue, 1 Sturdee Pietersburg 101 Dorp Street, Polokwane 105 Landdros Mare Street, Polokwane 106 Landdros Mare Street, Pretoria Kruger115 Paul Street, Rustenburg 127 Bethlehem Street, Pietermaritzburg135 Pietermaritzburg Street, New Doornfontein 137 Sivewright Street, Erven 99 and 101 Spartan16 & 18 Forge Road, Polokwane Thabo Mbeki Street, 18 Trichardt Louis 20 Songozwi Street, City & Suburban, 249 Commissioner street, Auckland Park Avenue, crn Owl Street & Stanley Polokwane Street, 31 Nikkel Spartan38 Derrick Road, Isipingo Ext 12 38 Prospecton Road, Empangeni Avenue, 4 Weightman Polokwane 41 Emerald Street, 1 Property name 1 Range Road 1 Sturdee 101 Dorp Street 105 Landdros Mare Street 106 Landdros Mare Street Kruger115 Paul 127 Bethlehem Street 135 Pietermaritz Street 137 Sivewright 16 & 18 Forge Road 18 Thabo Mbeki 20 Trichardt 249 Commissioner Street 25 Owl Street 31 Nikkel 38 Derrick Road 38 Prospecton Road Avenue 4 Weightman 41 Emerald DETAILS OF THE PROPERTY PORTFOLIO GLA, sector, province, sets out the details of property below the address, The table name, April 2019. at 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
101 R 000 7 600 000 4 220 000 7 500 000 7 850 000 5 600 000 4 500 000 6 100 000 8 400 000 6 800 000 6 500 000 7 750 000 4 000 4 000 Valuation 18 200 000 15 100 000 19 200 000 23 500 000 21 900 000 19 500 000 17 200 000 27 200 12 000 44 800 000 28 200 000 864 700 000 ) 2 47.22 94.03 35.39 80.92 80.15 96.76 42.60 82.89 84.16 61.95 47.76 63.77 68.78 87.56 25.59 50.47 37.63 (R/m 143.91 128.79 104.95 108.40 158.27 114.85 102.80 380.46 rental average Weighted ) 2 898 469 877 875 715 961 (m GLA 3 790 1 840 1 196 1 405 2 001 1 408 1 040 2 697 2 232 1 322 2 649 1 962 1 417 2 359 2 053 5 099 1 122 24 932 20 481 Sector Industrial Retail Industrial Retail Retail Retail Commercial Retail Industrial Retail Retail Retail Commercial Retail Retail Industrial Retail Retail Commercial Retail Retail Industrial Retail Retail Retail Province Gauteng Limpopo Limpopo Limpopo Limpopo Northern Cape Limpopo Limpopo Limpopo Limpopo Limpopo Limpopo Limpopo Limpopo Limpopo Cape Western Limpopo Limpopo Kwa Zulu Natal Gauteng Gauteng Gauteng Cape Western Gauteng North West Address Spartan 46 Steel Road, 5 Rissik Street Polokwane 5 Sapphire Street, Polokwane 51 Schoeman Street, Arbor 54 Agatha Park Street, Kimberley Cnr Phakamile Mabija Road and Currey Street, Polokwane 54 Schoeman Street, Mokopane Thabo Mbeki Street, 55 Polokwane Street, 65 Silikon Polokwane 68 Hans van Rensburg Street, Polokwane 70 Landdros Mare Street, Polokwane 71 Biccard Street, Polokwane Rensburg Street, Van 79 Hans Polokwane 79 Market Street, Polokwane 85 Kruger Street, Montague Gardens 9 Montague Drive, Hall Marble (Main) Street, 908 Hoofweg Arbor 99 Agatha Park Street, Durban 4 Frosterley Crescent, Ben Swaart Gezina drive, &Voortrekker Nigel Avenue, and 2nd Verwoerd Hendrik New Doornfontein 5 Beacon Road, Claremont 81 Chichester Road, Alberton Road, Voortrekker 49 & 51 Klerksdorp Street, Tambo 66 Oliver Property name 46 Steel Road 5 Rissik – Polokwane 5 Sapphire 51 Schoeman – Polokwane 54 Agatha 54 Jones 54 Schoeman 55 Voortrekker 65 Silikon 68 Hans van Rensburg 70 Landdros Mare 71 Biccard Rensburg Van 79 Hans 79 Market 85 Kruger 9 Montague Drive 908 Hoofweg 99 Agatha Absa Cash Centre Absa Gezina Absa Nigel Access City Access Park Alberton Voortrekker Rd Allied – Klerksdorp 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44
102 R 1 600 000 2 100 000 5 300 000 9 800 000 1 300 000 Valuation 20 100 000 58 700 000 41 700 000 97 800 000 25 300 000 71 000 75 800 000 72 100 000 25 900 000 25 600 000 63 100 000 24 800 000 35 900 000 23 600 000 22 800 000 148 600 000 268 000 371 000 565 300 000 141 800 000 ) 2 57.35 61.76 76.78 38.61 94.76 62.64 78.93 40.01 68.82 76.19 51.06 36.18 34.35 99.95 20.29 26.16 97.76 (R/m 107.16 132.80 138.75 139.87 129.33 135.35 153.52 101.02 rental average Weighted ) 2 400 490 840 600 (m GLA 2 052 9 221 3 678 2 926 6 344 7 894 5 259 1 480 2 467 6 546 3 790 7 923 2 923 20 338 12 243 20 157 19 834 28 951 10 092 36 294 13 347 Sector Retail Commercial Industrial Industrial Industrial Retail Commercial Commercial Commercial Commercial Industrial Retail Retail Commercial Retail Retail Retail Retail Industrial Industrial Commercial Industrial Office Industrial Retail Province Limpopo Gauteng Free State Gauteng Kwa Zulu Natal Gauteng Gauteng Gauteng Cape Western Cape Western Cape Western Cape Western Limpopo Kwa Zulu Natal Northern Cape Cape Western Gauteng Eastern Cape Gauteng Gauteng Gauteng Gauteng Eastern Cape Gauteng Mpumalanga Address Northam Botha Road, Bedfordview Boulevard, 4-6 Skeen Hilton 82 Long Street, Olifantsfontein Road and Cor Solomon Street, Westview Cnr Briardene Industrial Park Place, 17 Cordova Boksburg Road, Trichardt Cnr of Leeupoort Street and Kensington B Corner of Bram Fischer Drive and Bond Street, Rivonia 8 Gemsbok road, Bellville Avenue, Willie van Schoor 73 Bellville Bellville Park, Tijger Park, Parow and Jean Simonis Street, Avenue Cnr Fritz Spilhaus Town Cape Mitchells Plain, Vanguard, Cnr Morgenster Road & Trichardt Louis Anderson Streets, Cnr Songozwi Munnik and Pietermaritzburg 219 Church Street, 8 – 14 Jones Road Town Cape 177 Main Road, Roodepoort Valley, Strubens & Christ, Cnr Hendrik Potgieter PortCnr Norman Elizabeth and Middleton Drive, Spartan 60 Steel Road, Spartan49 – 53 Forge Road, 100 Northern Parkway,Omonde New Doornfontein 12 Beacon Road, 2 Avenue Hargreaves Isando 12 – 14 Diesel Road, Cnr R536) Hazyview (R40 National Highway Main Road, Property name Bears – Northam Bedfordview Beka Total Bloemfontein Beka Candela Beka Durban Boksburg Boxer Bridge on Bond Business Centre Bellville Suntyger Town Cape Bellville Tijger Cape Town Park Industrial Park Parow Town Cape Westgate Mall Cape Town Trichardt Checkers Centre Louis Church Street (Pietermaritzburg) Building KimberleyCitizens Citizens Cape Town Clearwater Crossing Cleary Park Cmh Spartan Creston Park Office Crownwood Danico Water Of Forestry & Dept. Diesel Road Dikai Shopping Centre 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69
103 R 9 700 000 7 310 000 7 900 000 7 300 000 4 580 000 2 800 000 Valuation 86 000 21 100 000 29 800 000 32 200 000 17 300 000 16 600 000 19 300 000 17 400 000 18 500 000 10 020 000 13 200 000 82 800 000 20 400 000 232 700 000 134 000 122 800 000 178 000 135 100 000 160 000 ) 2 33.95 33.09 95.48 58.68 87.52 65.30 61.62 22.48 95.45 50.15 34.87 79.16 52.71 49.56 41.67 18.47 (R/m 115.48 118.07 102.23 134.99 105.89 160.44 136.35 244.04 158.71 rental average Weighted ) 2 877 829 900 (m GLA 9 040 3 500 3 518 1 066 4 217 2 370 1 763 7 934 1 124 1 776 5 373 2 248 3 980 9 817 2 250 2 719 3 604 23 105 30 790 35 016 10 766 10 209 Sector Commercial Industrial Commercial Office Retail Retail Retail Commercial Office Office Retail Retail Retail Industrial Retail Industrial Retail Retail Retail Retail Retail Industrial Retail Retail Industrial Province Kwa Zulu Natal Kwa Zulu Natal Eastern Cape Eastern Cape Limpopo Kwa Zulu Natal Limpopo Limpopo Limpopo Mpumalanga Limpopo Northern Cape Limpopo Gauteng Limpopo Gauteng Kwa Zulu Natal Limpopo Mpumalanga Limpopo Limpopo Gauteng North West Limpopo Gauteng Address Durban 201 Dr Pixley Kaseme Street, New Germany Road, Volek 24 Otto East London Vincent, Avenue, Western 59 3 Sommers Road Northam Botha Road, Dundee Victoria Streets, King Edward & Wilson, Cnr CBD Thohoyandou 106 Hans van Rensburg Street Rensburg Street Van 105 & 107 Hans 41 Anderson Street Polokwane 22 Jorissen Street, Kimberley Road, Toits Cnr Phakamile Mabija road and Du Thohoyandou 112 & 124 Mphetu Road, Johannesburg City & Suburban, 38 Kruger Street, Arbor Park 20 Danie Joubert Street, Germiston Meadowdale, Herman Road, Greytown Cnr Sergeant Streets, & Oakes Polokwane 103 Kerk Street, 2 van Riebeeck Street Trichardt Louis Cnr Songozwi and Krogh Street, 52 Bok Street 14 – 16 Gerhardus Street,Strijdom Park Rustenburg Street, Cnr Bethlehem and Fatima Bhayat Jane Furse Jane Furse Main Road, Jet Park Ext 5 7 Herold Flight Street, Property name of Revenue Durban Receiver View Durban Valley Industrial Park ParkVincent Office East London Edufin PE Ellerines – Northam Ellerines Dundee Ellerines Thohoyandou Empire Place F B Motors Federal Mogul FNB Building Foschini – Kimberley Game Centre Gearmatic Geen & Richards Germiston R24 Meadowdale Shopping Centre Greytown Greywies Dry Cleaners City Veg Groblersdal Fruit & Noor Centre Hawana Herfred Pietersburg Mini Factories Tech Hi Impala Centre Jane Furse Crossing Jet Industrial Park 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94
104 R 5 300 000 7 900 000 1 800 000 2 710 000 2 100 000 4 300 000 3 000 Valuation 16 000 15 700 000 47 000 21 300 000 21 800 000 24 400 000 13 000 28 800 000 62 200 000 53 200 000 22 000 30 200 000 67 900 000 11 900 000 259 500 000 252 900 000 120 500 000 100 200 000 ) 2 73.09 41.07 24.48 85.45 45.17 92.45 33.04 24.87 10.00 71.01 62.91 19.10 75.78 73.48 33.95 63.43 48.40 73.29 55.97 39.09 81.17 (R/m 110.62 140.13 104.56 112.68 rental average Weighted ) 2 272 915 493 (m GLA 2 305 1 636 2 700 6 899 5 088 1 305 6 817 1 193 2 935 3 411 3 890 6 352 5 037 2 922 6 087 1 570 27 249 19 510 13 264 12 660 13 079 11 170 Sector Retail Retail Commercial Commercial Industrial Retail Retail Retail Commercial Industrial Commercial Retail Retail Industrial Commercial Commercial Industrial Commercial Retail Retail Commercial Commercial Commercial Retail Retail Province Limpopo North West Gauteng Gauteng Gauteng North West Cape Western Northern Cape Northern Cape Gauteng Northern Cape Eastern Cape Northern Cape Gauteng Gauteng Kwa Zulu Natal Gauteng Kwa Zulu Natal Mpumalanga Gauteng Gauteng Gauteng Limpopo Mpumalanga Gauteng Address and President Nelson Mandela Drive, Avenue Cnr of Palm Phalaborwa Potchefstroom Sisulu Lane, Walter Houghton Estate 36 Boundary Road, Johannesburg Rosebank, Street, Walter 9 Stormill Crescent, 1321 Spyker Klerksdorp Street, Tambo 53 Oliver West Beaufort Theron, Cnr Donkin St & Danie Kathu 14 Rietbok Street, 41 Way, du Toitspan Ext 18 Wadeville Erf 587 Bevan Road, 13 Woodley Street, Town William’s King Maclean Street, 52 – 62 George Street Alrode 6 Liebenberg Street, Bryanston Street, Corner Main Street and Petunia Richards Bay 7 Metica Moon Street, 3 Amanda Avenue,Lea RoodepoortGlen, Pietermaritzburg188 Longmarket Street, NelspruitWaterval Avenue, Lyndhurst Cnr Drome and Pretoria Road, Glen Lynwood 61 Kasteel Road, Glen Lynwood 59 Kasteel Road, Pietersburg 92 Bok Street, A Matsulu – Street, Corner Madiba Drive and Simunye Jeppestown Albrecht Street, 22 Property name Jet Phalaborwa Jet Potchefstroom Jhb – Isle of Houghton Jhb Rosebank 158 Offices Jm Investments John Orr – Klerksdorp Karoo Junction Kathu Shopping Centre Kimberley Building Kimberley Clark Kimberley Printing Market Sq Town Williams King Klein Brothers Kolbenco La Rocca Terrace Lakeview Lea Glen Longmarket Street Branch Centre Lifestyle Lowveld Lyndhurst Square Botco Place Lynnwood Atrium Building – Lynwood Mae West Building Matsulu Shopping Centre CornerMaverick 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119
105 R 8 080 000 3 800 000 8 800 000 Valuation 24 000 80 200 000 22 700 000 14 000 15 400 000 87 800 000 65 700 000 34 000 16 400 000 16 700 000 18 900 000 78 000 22 700 000 10 100 000 16 200 000 37 400 000 17 600 000 31 100 000 14 300 000 50 000 239 700 000 153 600 000 ) 2 43.10 43.82 80.41 24.77 39.59 95.89 81.64 92.16 87.53 63.11 85.72 85.83 38.49 85.56 19.73 93.11 69.29 51.34 (R/m 135.64 152.22 100.28 166.93 128.66 108.05 103.88 rental average Weighted ) 2 (m GLA 5 935 2 522 1 156 6 812 3 400 8 515 8 535 4 648 1 630 1 252 1 060 1 147 2 263 8 117 1 630 1 408 1 361 3 683 7 931 4 182 2 299 16 000 16 721 12 652 10 177 Sector Industrial Industrial Commercial Retail Industrial Office Commercial Retail Retail Retail Retail Commercial Commercial Retail Retail Retail Retail Commercial Commercial Commercial Retail Retail Use Mixed Use Mixed Commercial Province Gauteng Gauteng Gauteng Gauteng Free State Mpumalanga Gauteng North West Kwa Zulu Natal Kwa Zulu Natal Gauteng Gauteng Northern Cape Mpumalanga Mpumalanga Limpopo Limpopo Eastern Cape Gauteng Gauteng Free State North West Cape Western Cape Western Kwa Zulu Natal Address City and Suburban 3 End Street, Malvern 33rd Street, Sandton 138 Kelvin drive, Mellville 7th Street, Welkom 4th 11th Street, Street Vos 37 SADC Midridge Park International Business Park, Gateway Rustenburg Corner Loop and Fatima Bhayat, Main Road Durban Montclair, Road, Wood 169 Krugersdorp Road, Voortrekker 9 Morningside 495 Summit Road, 37 Chapel Street, Anderson Streets Cnr Henshall & 20 Bester Street and President Nelson Mandela Drive, Avenue Cnr of Palm Phalaborwa Trichardt Louis Cnr Songozwi Munnik and Krogh Street, Port Elizabeth Avenue, Mbeki 653 Govan Alberton 2 Kingfisher Crescent, Fourways Roos Street, 68 Waterkant Street Cnr Wessel,Odendaalrus Streets,Klerksdorp Tambo Leask & Oliver Cnr Delver, 122 Main Road 19 Strand Street Durban 343 Smith Street, Property name Turffontein McCarthy Centre – MCG Building Media Shop Melville Properties Metcash Welkom Middelburg SAP Midrand IBG Mall Midtown Plaza Mkuze Montclair Mall Mall Monument House Motswedi Nedbank Kimberley Nelspruit Centre Nelspruit Ellerines Nizams Phalaborwa Noor Centre North-End Nu – Payment Oakhill Odendaalsrus Shopping Centre OK Klerksdorp Oudehuis Centre Du Bel Parc – Smith Street Perm 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144
106 R 5 150 000 Valuation 15 100 000 18 100 000 15 700 000 17 000 42 500 000 15 000 45 600 000 11 100 000 24 000 18 500 000 20 500 000 27 500 000 47 000 14 000 46 700 000 86 100 000 19 700 000 90 000 67 200 000 103 600 000 147 600 000 123 700 000 140 000 ) 2 49.00 63.82 32.76 35.31 83.65 86.61 65.67 46.61 56.40 57.79 46.30 58.75 52.09 23.68 47.02 49.34 63.97 34.78 61.10 (R/m 125.27 127.41 138.46 108.97 105.87 rental average Weighted ) 2 (m GLA 4 967 1 357 3 954 4 209 5 317 3 529 8 316 6 412 1 817 5 787 3 784 3 770 1 185 5 000 7 910 6 622 7 143 3 708 16 914 12 093 32 006 10 365 28 226 14 198 Sector Commercial Office Industrial Industrial Industrial Commercial Commercial Commercial Commercial Commercial Industrial Industrial Industrial Industrial Industrial Industrial Retail Industrial Industrial Industrial Commercial Commercial Industrial Retail Province Northern Cape Cape Western Kwa Zulu Natal Gauteng Gauteng Gauteng Gauteng Gauteng Gauteng Gauteng Gauteng Gauteng Gauteng Gauteng Gauteng Gauteng Gauteng Gauteng Gauteng Gauteng Cape Western Gauteng Gauteng Gauteng Address 33 Way, du Toitspan Roads Cnr New Eisleben & Lansdown Pinetown Westmead, Road, 26–30 Kyalami Eastleigh 18 Plantation Road, Eastleigh 20 Plantation Road, Pretoria 353 Festival Street, Pretoria 220 Madiba Street, Pretoria Road, 441 Lynwood Pretoria Alkantrand Streets, and Lynwood Cnr of Sanlam, Crescent 375 Queen’s Silverton Axle Street, 22 Silverton294 Battery Street, Silverton301 Battery Street, Silverton309 Battery Street, Silverton Street, Alwyn 330 Silverton34 Bearing Crescent, Pretoria Eersterust, Street, West Hans Coverdale Doornfontein15 Siemert Road, Sands Randburg Kya Road and Hyskraan, Cnr River 5 CR Swart Randburg Drive, Goodwood drive, Vanguard & Voortrekker Cnr Boulevard,Edenburg 353 Rivonia Roodepoort 255 Nadine Street, Johannesburg Rosettenville, 592 Geranium Street, Eersterust Shopping Centre retoria Property name KimberleyPerm Philippi Court Industrial Kyalami Westmead Pinetown Park Plantation Road 18 Plantation Road 20 Pretoria Hatfield Festival Street Offices Pretoria High Court Chambers Pretoria Excel Park Lynnwood Pretoria Sanlynn Lynnwood ParkPretoria Sunwood Lynnwood Pretoria SilvertonAxle Street 22 Pretoria Silverton 294 Battery Street Pretoria Silverton 301 Battery Street Pretoria Silverton 309 Battery Street Pretoria Street SilvertonAlwyn 330 Pretoria Silverton 34 Bearing Crescent P Propstars Industrial Park Trevallyn Randburg Industrial Park Tungsten Randburg RCS Boulevard Rivonia Roodepoort Robertville Industrial Park Junction Rosettenville 0 1 2 3 4 5 6 7 8 0 1 59 62 145 146 147 148 149 15 15 15 15 15 15 15 15 15 1 16 16 1 163 164 165 166 167 168
107 R 5 800 000 Valuation 64 100 000 95 900 000 59 100 000 24 900 000 84 700 000 16 800 000 17 300 000 32 700 000 23 100 000 74 700 000 25 300 000 34 400 000 66 100 000 39 200 000 25 700 000 28 600 000 19 800 000 15 700 000 66 000 95 000 23 000 17 200 000 33 000 ) 2 4.98 81.85 96.52 46.72 79.60 95.34 52.74 79.71 43.12 92.02 14.35 51.35 28.67 45.42 86.20 (R/m 119.88 141.88 112.39 107.06 104.25 115.97 112.69 150.06 111.94 rental average Weighted ) 2 (m GLA 4 585 4 110 2 410 8 139 1 905 3 416 3 848 2 526 3 034 6 954 8 263 4 102 6 538 6 278 3 114 6 385 2 707 1 393 3 888 10 184 16 346 16 573 10 824 10 231 Sector Retail Commercial Commercial Commercial Commercial Retail Commercial Commercial Commercial Commercial Retail Retail Retail Retail Industrial Retail Industrial Industrial Retail Industrial Retail Use Mixed Retail Commercial Province Gauteng Gauteng Gauteng Gauteng Gauteng Northern Cape Cape Western Cape Western Gauteng Gauteng Gauteng Gauteng Limpopo Limpopo Gauteng Mpumalanga Gauteng Kwa Zulu Natal Eastern Cape Gauteng Northern Cape Eastern Cape Limpopo Gauteng Address Road and Main Road, Grosvenor William Nicole Drive, Cnr Bryanston Bryanston Sloane Street, Hyde Park and 1st Road, Avenue Cnr 6th Rivonia 36 – 38 Homestead Street, Sunninghill 11 Simba Road, 70 Market Street Mitchells Plain Alpha Street, Worcester 28 Fairbairn Street, Ferndale Avenue, 272 Kent Selby Road, 106 Booyens Boksburg 262 Commissioner Street, Brakpan Brakpan, and Park Street, Avenue Kingsway Cnr Kitzinger, Trichardt Louis Cnr Kruger and Burger Devenish Street, Miluwani R524, Industria Bunsen Road, R40 National Highway City & Suburban Cnr Kruger & Market Streets, Pietermaritzburg 2 Cardiff Road, Sterkspruit 60 Main Street, Stafford Cnr La Rochelle & Crystal Roads, Station Taung Road, Street 7 Taylor Fauna Park and GrimmCnr Grobler Streets, Sunninghill 8 Kikuyu Road, Property name Sandton Bryanston Grosvenor Shopping Centre Andrews Sandton Bryanston St Complex Sandton Hyde Park 50 Sixth Road 36 Homestead Road Sandton Rivonia Sandton Sunninghill Place Sanlam Centre Vryburg Plain Saps – Mitchell’s Saps Worcester Sasol Gas Building Selby Shoprite Boksburg Shoprite Brakpan Shoprite Louis Trichardt Sibasa Shopping Centre Simgold Shopping Centre Simunye Spark Schools Star Foods Sterkspruit Shopping Centre Boxer Head Office Tarry’s Forum Taung The Arches The Crossing The District 169 170 171 172 173 174 175 176 177 178 179 180 181 182 183 184 185 186 187 188 189 190 191 192
108 R 9 200 000 Valuation 29 400 000 34 800 000 95 600 000 11 200 000 32 700 000 40 100 000 37 100 000 31 900 000 27 300 000 46 700 000 23 200 000 34 000 16 800 000 22 000 39 300 000 30 100 000 70 300 000 173 300 000 116 600 000 been externally s 10 879 620 000 ) 2 53.58 51.98 73.60 69.99 69.25 93.54 35.83 39.44 34.21 79.88 61.37 90.62 54.46 86.41 (R/m 160.83 112.54 355.86 250.38 111.00 130.55 rental average Weighted ) 2 520 (m GLA 5 268 5 501 2 122 4 006 2 723 4 359 3 727 6 883 4 777 6 500 4 097 9 804 2 539 3 154 6 524 2 659 11 377 15 001 10 526 Sector Commercial Retail Retail Retail Retail Retail Retail Retail Retail Industrial Retail Industrial Retail Retail Commercial Retail Industrial Industrial Commercial Retail 31 March the31 Gemgrow 2019 and Arrowhead property portfolio ha to Province Gauteng Gauteng North West North West Limpopo Limpopo Limpopo Limpopo Gauteng Limpopo North West Gauteng Cape Western Eastern Cape Gauteng Gauteng Gauteng Gauteng Northern Cape Gauteng of this prospectus. Annexure 7 Annexure Address City & Suburban 20 Kruger Street, House Ext 17 Halfway James Crescent, Klerksdorp1287 Embarkment Street, Brits Avenue, 40A Murray Thohoyandou Central Business District, CBD Thohoyandou CBD Thohoyandou Trichardt Louis 95 Munnik Street, Boksburg95 Leeupoort Street, Polokwane 6 Kobalt Street, Rustenburg Cnr Nelson Mandela & Bethlehem Drive, Clayville 28 Main Street, Truworths Corner Units 1 & 2 Lane, & Minuet Way Cnr Symphony Main Road,Tsolo Ferndale Cnr HarleyAvenue, & Surrey Vereeniging Avenue, Street and KrugerVoortrekker Cnr Lake Kleinfontein 8 Pioneer Road, North Drive, 234 Malibongwe Riding Fabricia 24 Fabricia Road, Pretoria NorthAnnlin, & Braam Pretorius, Cnr Lavender ; translating to a R363 685 203 (3.23%) decrease in the direct property value. 000 Property name The Main Change Shopping Centre The Pond Shopping centre Terminus The Building – Brits Theo’s CBD Thohoyandou Centre Thohoyandou Shopping Centre Thohoyandou Thompsons Building Centre Boksburg Town Trador Centre Transforum Transwire Truworths Corner Tsolo Urban Brew Building Voortrekker Vereeniging Str Virgin Active Benoni Waterworld Wilcon House Carvenience Centre Wonderboom This property is occupied by Arrowhead and Gemgrow. The properties in the table above have been valued as at 1 April by Rowan 2019 Collins of Yield Enhancementproperty Solutions and Theuns valuers Behrens in terms of Real of Section Insight, of the JSE 13 Listings who are independent Requirements external and whom are registered both registered professionalArrowhead No purchase price in terms as B shares as determined of the scheme and consideration is acquiring Gemgrow a professionalGemgrow in terms will be settled in so many all of the issued shares of the swap ratio. valuer in terms of the Property Valuers Profession Act, No of 2000. 47 Arrowhead propertyhas been attributed to the date of the transaction portfolio is the date on which scheme becomes unconditional. The effective or individual propertiesArrowhead property within the portfolio. The summary valuation reports, prepared by the independent property valuers are set outGemgrow in and Arrowhead consolidated investment property value as March was at 31 Subsequent R11 243 305 203. 2019 valued to R10 879 620
193 194 195 196 197 198 199 200 201 202 203 204 205 206 207 208 209 210 211 212 Total Notes: 1. 2. 3. 4. 5.
109 ANNEXURE 9 Acquisition by Gemgrow of the entire issued share capital Arrowhead 16 September 2019 B shares 862 972 109 Gemgrow R4 099 117 518 (based on share price of R4.75 at the date release firm intention announcement) N/A as transaction as a reverse is accounted for takeover Nil Ordinary shares Arrowhead Johannesburg Rosebank, Avenue, 1 Sturdee Various N/A Description: Date of acquisition: Consideration: Valuation: Goodwill paid and manner in which was accounted for: Loans incurred to finance acquisition: Nature of asset acquired: Name of vendor: Address of vendor: Name and address of the vendor shareholder: Price paid by vendor and date of acquisition if within preceding three years: Assets acquired Gemgrow by
Acquisitions and vendors the combined group during acquired by the three years preceding the last subsidiaries properties, and investments, including immovable Details of the vendors of material assets, below. are detailed in the table practicable date, 1.1
ACQUISITIONS, DISPOSALS AND VENDORS 1.
110 9 800 000 8 400 000 7 500 000 6 600 000 45 100 000 39 500 000 31 500 000 28 900 000 31 400 000 23 500 000 20 500 000 18 800 000 18 720 000 16 600 000 158 200 000 122 100 000 Valuation (R) 8 500 000 8 400 000 7 200 000 6 400 000 43 200 000 38 990 000 32 800 000 27 900 000 27 700 000 17 000 15 000 18 200 000 18 000 16 626 000 153 200 000 122 100 000 Agreed value (R) by way of the allotment and issue by Gemgrow of 10 264 434 fully paid up Gemgrow A shares at an issue price of R9.74 to paid up Gemgrow of 10 264 434 fully Gemgrow of the allotment and issue by way by and Moolgem; in cash. the balance in amount of R534 508 000, Name of Property Property owned by Orion Limpopo Jane Furse Crossing, Property owned by Orion Limpopo Thohoyandou, Game Centre, Properties owned by East and West Limpopo Trador, Limpopo CBD, Thohoyandou Limpopo Makhado, Thompsons Building, Limpopo Makhado, Trichardt, 20 Limpopo FNB Building, Limpopo Polokwane, 68 Hans van Rensburg, Limpopo Polokwane, 70 Landdros Mare, Limpopo Polokwane, 79 Market, Polokwane The Crossing, Limpopo Tzaneen, Geen & Richards, Limpopo Polokwane, 31 Nikkel, Limpopo Polokwane, 79 Hans van Rensburg, Limpopo Polokwane, 41 Emerald, Limpopo Makhado, 85 Kruger, Gemgrow and Cumulative entered into a subscription agreement with entities in the Moolman Group of companies (“Moolgem”), being Luvon Investments Proprietary Limited (“Luvon”), East and West of terms in Trichardt”) (“Louis Limited Proprietary Bousentrum Trichardt Louis West”), and (“East Limited which Cumulative subscribed for 31 010 A ordinary shares in Moolgem, valued at R669 389 000. 2018 1 November the subscription for shares was equal to 95% of the agreed value properties Cumulative by The consideration payable as at the The subscription consideration was settled as follows: date. effective • • Description and name of vendor: Date of acquisition: Consideration: Valuation:
111 7 700 000 5 950 000 5 500 000 4 500 000 4 090 000 7 830 000 6 390 000 39 980 000 21 000 14 560 000 704 620 000 Valuation (R) 5 900 000 5 900 000 5 600 000 4 500 000 3 800 000 7 600 000 3 000 000 34 900 000 21 800 000 11 400 000 665 616 000 Agreed value (R) Name of Property Tzaneen, 99 Limpopo Agatha, Limpopo Polokwane, 71 Biccard, Northern Cape Kimberly, 54 Jones, Limpopo Polokwane, 65 Silikon, Limpopo Polokwane 5 Sapphire, Properties owned by Louis Trichardt Limpopo Polokwane, Thabo Mbeki, 18 Limpopo Mokopane, Voortrekker, 55 Limpopo Polokwane, 54 Schoeman, Tzaneen, 54 Limpopo Agatha, Limpopo Hall, Marble 908 Hoofweg, Total N/A R531 508 000 Rental enterprise Service 290 Lynwood Park, Road Office Eastwood Baobab House, Moolman Group the information to provide obliged which is a private as this information and is not legally is in relation to a vendor company Unavailable, Valuation: Goodwill paid and manner in which was accounted for: Loans incurred to finance acquisition: Nature of asset acquired: Address of vendor: Name and address of the vendor shareholder: Price paid by vendor and date of acquisition by vendor if within preceding three years:
112 100 000 100 000 130 000 330 000 Purchase price/valuation (R) Erf 128 Louis Trichardt, Limpopo which has the Legal Aid Board of South Africa (“Legal Board”) as its only tenant; Erf 200 Louis Trichardt, Limpopo, which is more commonly known as the Hawana Noor Centre; Portion 4 of Erf 278 Louis Trichardt, Limpopo, which has Foschini as its only tenant; Portion 5 of Erf 278 Louis Trichardt, Limpopo, which has Total Sports as its principal tenant; Portion 2 of Erf 199 Louis Trichardt, Limpopo, which has Pep Stores as its principal tenant; and the remainder of Erf 199 Louis Trichardt, Limpopo, which has ABSA as its principal tenant, (collectively, the “Hawana Noor Centre acquisition”); and Erf 266 Louis Trichardt Proprietary Limited for the acquisition of a letting enterprise conducted by seller in respect and including the property known as Checkers Centre in Louis Trichardt, Limpopo (the “Checkers acquisition”); Trustees of the Solly Noor Trust for acquisition a letting enterprise conducted by seller in respect and includ ing properties situated on: – – – – – – – Solly Noor Prop Proprietary Limited for the acquisition of a letting enterprise conducted by seller in respect and including properties known as the Shoprite Centre and Noor (the “Shoprite acquisition”). R100 million in respect of the Checkers Centre acquisition; and Noor Centre acquisition; R100 million in respect of the Hawana R130 million in respect of the Shoprite and Noor Centre acquisition, Name of Property Checkers Centre Hawana Noor Centre Hawana Shoprite and Noor Centre Total Acquisition of various property letting enterprises in Louis Trichardt which included the following indivisible and inter-conditional purchase agreements with the following vendors: • • • 6 March 2018 date of each acquisition) was as follows: on the effective the company by The purchase price (payable • • • constituting an aggregated purchase consideration of R330 million. Nil Description and name of vendor: Date of acquisition: Consideration: Valuation: Goodwill paid and manner in which was accounted for:
113 Floor, 5 St Georges Mall c/o Riebeeck and Adderley Streets, Cape Town Cape Adderley 5 St Georges Streets, Mall c/o Riebeeck and Floor, th R330 000 000 Rental enterprise 8 Buchanan Boyes, Tabata c/o Smith is not a related partyThe vendor in terms of the Listings Requirements. to the company. This information is not available the information to provide obliged which is a private as this information and is not legally is in relation to a vendor company Unavailable, Acquisition of Vukile Asset Management Proprietary Limited (now named Gemgrow Proprietary Limited) 1 October 2016 B shares 22 945 522 Gemgrow R160 618 654 R160 618 654 Nil 100% of shares and claims Vukile Melrose Estate Road and Ninth Street, corner Glenhove One-on-Ninth, issued share capital is listed on the JSE Vukile’s 2015 1 May R106 million; Loans incurred to finance acquisition: Nature of asset acquired: Address of vendor: Name and address of the vendor shareholder: Price paid by vendor and date of acquisition by vendor if within preceding three years: Description: Date of acquisition: Consideration: Valuation: Goodwill paid and manner in which was accounted for: Loans incurred to finance acquisition: Nature of asset acquired: Name of vendor: Address of vendor: Name and address of the vendor shareholder: Price paid by vendor and date of acquisition by vendor if within preceding three years:
114 4 700 000 63 600 000 77 700 000 86 000 50 800 000 71 100 000 89 800 000 55 000 27 900 000 66 000 11 300 000 26 200 000 23 600 000 18 500 000 20 900 000 55 400 000 241 300 000 138 100 000 177 800 000 283 000 143 900 000 145 000 144 000 Valuation (R) 4 700 000 63 600 000 77 700 000 86 000 50 800 000 71 100 000 89 800 000 55 000 27 900 000 66 000 11 300 000 26 200 000 23 600 000 18 500 000 20 900 000 55 400 000 241 300 000 138 100 000 177 800 000 283 000 143 900 000 145 000 144 000 Agreed value (R) Name of Property Bellville Suntyger Town Cape Bellville Tijger Cape Town Park Industrial Park Parow Town Cape View Durban Valley Industrial Park ParkVincent Office East London Germiston R24 Meadowdale Jhb Isle of Houghton Jhb Parktown 55 Empire Road Midrand IBG Industrial Park Kyalami Westmead Pinetown Pretoria Hatfield Festival Street Offices Pretoria High Court Chambers Pretoria Excel Park Lynnwood Pretoria Sanlynn Lynnwood ParkPretoria Sunwood Lynnwood Pretoria SilvertonAxle Street 22 Pretoria Silverton 34 Bearing Crescent Pretoria Silverton 294 Battery Street Pretoria Silverton 301 Battery Street Pretoria Silverton 309 Battery Street Pretoria Street SilvertonAlwyn 330 Industrial Park Trevallyn Randburg Industrial Park Tungsten Randburg Exchange of Gemgrow’s portfolio retail properties for the Vukile comprising 29 high yielding retail, office and industrial properties 1 October 2016 portfolioVukile of R18.2 million, and a cash payment in consideration the acquisition of for Vukile of certain assets to Gemgrow Transfer plus interest accruing date to the implementation date. from the effective Description: Date of acquisition: Consideration: Valuation:
115 92 900 000 58 100 000 86 900 000 54 400 000 32 000 85 900 000 Valuation (R) 2 431 800 000 92 900 000 58 100 000 86 900 000 54 400 000 32 000 85 900 000 2 431 800 000 Agreed value (R) Pretoria Silverton 22 Axle Street was acquired by Vukile in August 2015, for R11 226 000 for August 2015, in Vukile Pretoria SilvertonAxle Street was acquired by 22 R23 930 000 for August 2015, in Vukile Pretoria Silverton 34 Bearing Crescent was acquired by R21 744 000 for August 2015, in PretoriaVukile Silverton 294 Battery Street was acquired by R20 409 000 for August 2015, in PretoriaVukile Silverton 301 Battery Street was acquired by R18 204 000 for August 2015, in PretoriaVukile Silverton 309 Battery Street was acquired by R5 287 000 for August 2015, in Vukile Pretoria Street was acquired by SilvertonAlwyn 330 Name of Property Roodepoort Robertville Industrial Park Sandton Bryanston Shopping Centre Grosvenor Andrews Complex Sandton Bryanston St Sandton Hyde Park 50 Sixth Road 36 Homestead Road Sandton Rivonia Sandton Sunninghill Place Total Nil Nil Rental enterprises Vukile Melrose Estate Road and Ninth Street, corner Glenhove One-on-Ninth, issued share capital is listed on the JSE Vukile’s • • • • • • The residual properties not acquired in the preceeding three years the vendors were by Acquisition by Gemgrow of 100% the issued share capital Cumulative 1 October 2016 B shares 271 412 267 Gemgrow Valuation: Goodwill paid and manner in which was accounted for: Loans incurred to finance acquisition: Nature of asset acquired: Name of vendor Address of vendor: Name and address of the vendor shareholder: Price paid by vendor and date of acquisition by vendor if within preceding three years: Description: Date of acquisition: Consideration:
116 information was not disclosed by the vendor, which is a separate the vendor, information was not disclosed by Cleary Park of erf 5570 Bethelsdorp and 15817 extent The remaining Bethelsdorp 19 February 2016 R466 027 000 R553 000 000 Nil R230 000 000 Business as a going concern Redefine Properties Limited Rosebank Johannesburg Avenue, 19 Biermann 5, Office level issued share capital is listed on the JSE Redefine’s as the Unknown, to obtain the informationArrowhead is unable and listed company, R1 893 300 000 Nil Nil 100% of shares and claims if any) as defined, Mark Kaplan (and other executives, Imraan Suleman, Gerald Leissner, Vividend, Arrowhead, Arch Melrose 18 Melrose Boulevard, 2nd Floor, Vividend. Arrowhead is the sole shareholder of issued share capital is listed on the JSE. Arrowhead’s a of considerationin Cumulative to sale the for Arrowheadshare, per R5.00 at 267 564349 by acquired were shares Cumulative portfolio of properties valued at R1 746 837 820. of a portfolio in consideration the sale to Cumulative for Vividend at R5.00 per share, acquired by shares were 24 629 714 Cumulative of properties valued at R123 148 547. acquisition: Valuation: Goodwill paid and manner in which was accounted for: Loans incurred to finance acquisition: Nature of asset acquired: Name of vendors Address of vendor: Name and address of the vendor shareholder: Price paid by vendor and date of acquisition by vendor if within preceding three years: Description: Date of Consideration: Valuation: Goodwill paid and manner in which was accounted for: Loans incurred to finance acquisition: Nature of asset acquired: Name of vendors Address of vendor: Name and address of the vendor shareholder: Price paid by vendor and date of acquisition if within preceding three years: Assets acquired by Arrowhead
1.2
117 Acquisition of the entire issued share capital of and claims against Diluculo Properties Proprietary Diluculo Properties of and claims against capital issued share Acquisition of the entire a portfolio of 1 319 Proprietary Limited which owned Diluculo Investments Limited from residential State (5%) situated in Gauteng (95%) and the Free units with 2 147 sqm of associated retail 2017 01 July R475 000 000 R475 000 000 Nil Nil Business as a going concern ProprietaryDiluculo Investments Limited 2196 Gauteng, Sandton, Alice Lane, 15 Norton Rose Building, The Podium, the to provide obliged as this informationwhich is a private and is not legally is in relation to acvendor company Unavailable, information the to provide obliged as this informationwhich is a private and is not legally is in relation to acvendor company Unavailable, information three a variety of transaction mechanisms, through to acquire, Indluplace in effect Acquisition by vendors, multiple units from 2 800 residential portfolios property comprising approximately residential group members of or affiliated to the Buffet some of whom are 05 October 2017 R1 400 000 000 R1 400 000 000 Nil R1 100 000 000 Business as a going concern Description: Date of acquisition: Consideration: Valuation: Goodwill paid and manner in which was accounted for: Loans incurred to finance acquisition: Nature of asset acquired: Name of vendors Address of vendor: Name and address of the vendor shareholder: Price paid by vendor and date of acquisition by vendor if within preceding three years: Description: Date of acquisition: Consideration: Valuation: Goodwill paid and manner in which was accounted for: Loans incurred to finance acquisition: Nature of asset acquired: Assets acquired by Indluplace
1.3
118 53 800 000 55 900 000 302 100 000 127 500 000 224 000 415 000 160 400 000 121 500 000 137 400 000 103 300 000 Valuation (R) 53 800 000 55 900 000 302 100 000 127 500 000 224 000 415 000 160 400 000 121 500 000 137 400 000 103 300 000 Agreed value (R) as this information is in relation to acvendor which is a private company and is not legally obliged to provide the to provide obliged which is a privateas this information and is not legally is in relation to acvendor company Name of Property Atlantis City Shopping Centre Shopping Centre Elim Hubyeni Emalahleni Highland Mews Ermelo Game Centre Gugulethu Square Hammanskraal Renbro Shopping Centre Hartbeespoort Sediba Shopping Centre Hillcrest Richdens Shopping Centre KwaMashu Shopping Centre Shopping Centre Valley Makhado Nzhelele The Buffet Group The Buffet Kwa-Zulu Durban, Morningside, The Manor House 14 Nuttall Gardens, Unavailable, information the to provide obliged which is a private as this information and is not legally is in relation to a vendor company Unavailable, information Exchange of Gemgrow’s portfolio retail properties for the Vukile comprising 29 high yielding retail, office and industrial properties 1 October 2016 portfolioVukile and a cash payment in consideration the acquisition of for Vukile of certain assets to Gemgrow Transfer plus interest accruing date to the implementation date. from the effective of R18.2 million, R2 474 600 000 Description: Date of disposal: Consideration: Valuation: Name of vendors Address of vendor: Name and address of the vendor shareholder: Price paid by vendor and date of acquisition by vendor if within preceding three years: The material immovable properties and/or fixed assets and/or business undertakings (being immovable properties, fixedbeen disposed assets in of the three or business years undertakings) preceding the last that practicable have date are set out below. Assets disposed of by Gemgrow
Disposals 2.1 2.
119 64 000 328 000 119 400 000 262 300 000 Valuation (R) 2 474 600 000 64 000 328 000 119 400 000 262 300 000 2 474 600 000 Agreed value (R) Name of Property Phuthaditjhaba Setsing Crescent Roodepoort Ruimsig Shopping Centre Shopping Centre Ulundi King Senzangakona Riebeeckshof Shopping Centre Van Welgedacht Total Vukile PropertyVukile Fund Limited 2196 Melrose Estate, Road and Ninth Street, corner Glenhove One-on-Ninth, issued share capital is listed on the JSE Vukile’s “material at the time of transaction rights and was at the time a held 65.0% of the total voting in the company Vukile The transaction constituted a accordingly as contemplated in the JSE Listings Requirements. of Gemgrow shareholder” transaction with a related party in terms of section 10.4 the JSE Listings Requirements and requisite shareholder obtained. were approvals Please see Synergy category 1 circular to shareholders dated 26 September 2016 Valuation: Name of purchaser Address of purchaser: Name and address of the purchaser shareholder: Extent of interest any promoter or director in transaction
120 ANNEXURE 10
FINANCIAL INFORMATION REQUIRED IN TERMS OF REGULATION 78 IN RESPECT OF ARROWHEAD
AUDITED RESULTS FOR THE YEARS ENDED 30 SEPTEMBER 2018, 2017 AND 2016 AND UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2019 A complete set of the Arrowhead financial statements are available on the Arrowhead website http://www.arrowheadproperties.co.za/.
STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME Unaudited Audited Audited Audited Six months ended Year ended Year ended Year ended 31 March 30 September 30 September 30 September R’000 2019 2018 2017 2016 Property portfolio revenue Contractual rental income 1 182 597 2 283 158 1 936 180 1 531 560 Straight line rental income accrual 4 901 16 466 46 122 (13 665) Management fees received – – – – Dividend received – – – – Listed securities income 62 402 210 018 191 833 71 770 Total revenue 1 249 900 2 509 642 2 174 135 1 589 665 Operating costs (471 511) (851 812) (735 966) (567 968) Administration costs (35 525) (59 760) (39 350) (38 094) Net operating profit 742 864 1 598 070 1 398 819 983 604 Changes in fair values (621 573) (844 036) 31 901 189 257 Profit from operations 121 291 754 034 1 430 720 1 172 861 Finance charges (316 941) (560 156) (403 581) (237 292) Finance income 40 158 84 262 80 733 53 360 Profit after net finance cost and before capital items (155 492) 278 140 1 107 872 988 929 Impairments – (337 448) – – (Loss)/profit before taxation (155 492) (59 308) 1 107 872 988 929 Taxation – (2 011) (62) – Total comprehensive (loss)/ income for the year (155 492) (61 319) 1 107 811 988 929 (Loss)/profit for the year attributable to: Equity shareholders of Arrowhead Properties Limited (299 146) (193 594) 812 730 888 492 Non-controlling interests 143 654 132 275 295 080 100 437 (155 492) (61 319) 1 107 811 988 929 Weighted average number of shares Arrowhead shares in issue 1 016 408 346 1 014 629 528 980 710 772 970 994 373 Basic and diluted earnings per share (cents) Arrowhead shares (29.43) (19.08) 82.87 91.50
121 CONSOLIDATED STATEMENT OF FINANCIAL POSITION Unaudited Audited Audited Audited Six months Year Year Year ended ended ended ended 31 March 30 September 30 September 30 September R’000 2019 2018 2017 2016 ASSETS Non-current assets 16 577 829 16 371 038 15 741 164 12 172 867 Investment property 15 207 306 14 420 046 12 910 094 9 877 538 Fair value of property portfolio for accounting purposes 15 072 410 14 290 024 12 796 323 9 803 309 Straight line rental income accrual 134 896 130 022 113 770 74 229 Furniture and equipment 1 129 1 403 1 573 985 Loans to participants of group share purchase option schemes 778 261 732 501 617 719 540 558 Goodwill – – 337 449 176 830 Financial assets 585 655 1 185 204 1 871 464 1 570 696 Deferred taxation – – 2 011 – Derivative instruments 5 478 31 884 855 6 261 Current assets 576 689 378 191 311 733 159 282 Trade and other receivables 317 464 334 330 206 145 80 858 Loans to participants of group share purchase option schemes – 3 717 – – Cash and cash equivalents 259 225 40 144 105 588 78 424 Non-current assets held for sale 380 360 327 337 92 370 95 500 Total assets 17 534 878 17 076 566 16 145 268 12 427 649 EQUITY AND LIABILITIES Shareholders’ interest 7 019 573 7 661 742 8 372 540 8 202 208 Stated capital 6 558 758 6 556 986 6 497 483 6 396 178 Reserves 460 815 1 104 756 1 875 058 1 806 030 Non-controlling interest 3 156 311 2 934 758 2 742 922 981 753 Other non-current liabilities 6 289 567 5 010 383 3 303 908 2 900 739 Secured financial liabilities 6 258 674 5 005 229 3 257 524 2 890 639 Derivative instruments 30 893 5 154 46 383 10 100 Current liabilities 1 069 427 1 469 683 1 725 898 342 949 Trade and other payables 370 006 369 407 300 283 142 949 Secured financial liabilities 697 000 1 096 707 1 425 615 200 000 Derivative instruments 2 421 3 569 – – Total equity and liabilities 17 534 878 17 076 566 16 145 268 12 427 649 Number of Arrowhead ordinary shares in issue# 1 016 408 346 1 016 346 954 1 006 915 775 994 893 790 Net asset value per share – Including non-controlling interest (R) 10.01 10.43 11.40 8.95 Net asset value per share – Excluding non-controlling Interest (R) 6.90 7.54 8.32 5.95 Gearing ratio* 41.40 38.05 31.49 27.45
# Excluding shares issued to the Arrowhead Charitable Trust. * Secured liabilities minus cash and cash equivalents/investment property plus financial assets.
122 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Share Retained Non-controlling R’000 capital income interests Total Balance at 30 September 2016 6 396 178 1 806 030 981 753 9 183 961 Issue of shares 101 305 – 15 735 117 039 Transfers between equity holders – 121 131 (121 131) – Business combination – at acquisition reserves – – 1 789 233 1 789 233 Dividends paid – (864 834) (217 749) (1 082 583) Total comprehensive income for the year – 812 730 295 080 1 107 811 Balance at 30 September 2017 6 497 483 1 875 057 2 742 921 11 115 461 Issue of shares 74 878 – 322 062 396 940 Share buyback (15 375) – (8 725) (24 100) Share based payments – – 19 972 19 972 Transfers between equity holders – 55 548 (55 548) – Dividends paid – (632 254) (218 199) (850 453) Total comprehensive (loss)/income for the year – (193 594) 132 275 (61 319) Balance at 30 September 2018 6 556 986 1 104 756 2 934 758 10 596 500 Issue of shares 1 772 – 229 167 230 939 Transfers between equity holders – (787) 787 – Dividends paid – (344 008) (152 055) (496 063) Total comprehensive (loss)/income for the year – (299 146) 143 654 (155 492) Balance at 31 March 2019 6 558 758 460 815 3 156 311 10 175 884
123 CONSOLIDATED STATEMENT OF CASH FLOWS Unaudited Audited Audited Audited Six months Year Year Year ended ended ended ended 31 March 30 September 30 September 30 September R’000 2019 2018 2017 2016 Net cash generated/(utilised) from operating activities 27 866 219 375 (68 964) (33 168) Cash generated from operations 738 310 1 335 704 1 171 825 928 634 Finance charges (316 941) (560 156) (403 581) (237 292) Finance income 40 158 84 262 80 733 53 360 Dividends received – listed securities 62 402 210 018 191 833 71 770 Dividends received – – – – Dividends paid – non-controlling interest (152 055) (218 199) (217 749) (87 805) Dividends paid (344 008) (632 254) (891 964) (761 836) Tax paid – – (62) – Net cash utilised in investing activities (693 805) (1 814 549) (556 989) (1 292 117) Acquisition of investment property (791 755) (1 998 738) (599 776) (904 296) Proceeds from disposal of investment property 98 029 175 701 69 516 20 536 Investments in and loans to subsidiaries – – – – Proceeds from disposal of/ (acquisition of Investments in) listed securities – 8 958 (271 833) (409 852) Disposal of property, plant and equipment – 7 491 – Acquisition of property, plant and equipment (79) (477) (1 532) (887) Pre-effective date dividend – – 19 161 – Proceeds received on repayment of loans to participants of group share purchase and option schemes – – 203 246 2 383 Business combination – – 23 738 – Net cash generated from financing activities 885 020 1 529 730 653 118 1 316 520 (Cost incurred in buy back)/ proceeds from issue of share capital (706) (15 770) – 149 659 Proceeds from issue of shares – on-controlling interests 33 642 130 005 – 488 354 Net proceeds from financial liabilities 852 084 1 415 495 653 118 678 506 Net movement in cash and cash equivalents 219 081 (65 444) 27 164 (8 764) Cash and cash equivalents at the beginning of the year 40 144 105 588 78 424 87 187 Cash and cash equivalents at the end of the year 259 225 40 144 105 588 78 424
124 ANNEXURE 11
REPORT BY THE INDEPENDENT REPORTING ACCOUNTANTS IN TERMS OF REGULATION 78 IN RESPECT OF ARROWHEAD
The Board of Directors Gemgrow Properties Limited 3rd Floor, Upper Building 1 Sturdee Avenue Rosebank 2196
11 July 2019
Dear Sir/Madam
REPORT OF THE FACTUAL FINDINGS BY THE AUDITOR IN TERMS OF REGULATION 78 OF THE COMPANIES ACT, NO. 71 OF 2008, AS AMENDED TO THE DIRECTORS OF GEMGROW PROPERTIES LIMITED BDO South Africa Inc. (“BDO Inc.” or “we”) is the appointed auditor of Arrowhead Properties Limited (“Arrowhead”). Gemgrow Properties Limited (“Gemgrow”) are issuing a prospectus on or about 22 July 2019 (“Prospectus”). Regulation 78 to the Companies Act, No. 71 of 2008, as amended (“Companies Act”) requires a report by the auditor of the Company to be included in the Prospectus, and for such report to address matters set out in Regulation 78 of the Companies Act. Consequently, we have been requested to provide this report on the following historical financial information, extracted from the statutory annual financial statements of Arrowhead for the three years ended 30 September 2018, 2017 and 2016. BDO Inc. has performed the procedures agreed with you and enumerated below as required in terms of Regulation 78 of the Companies Act. Our engagement was undertaken in accordance with the International Standard on Related Services 4400, Engagements to Perform Agreed-Upon Procedures Regarding Financial Information. The procedures were performed solely to assist you in complying with the requirements of Regulation 78 of the Companies Act with regards to the financial information of Arrowhead.
Procedures performed 1. Agreed the profit before tax and the profit after tax of Arrowhead in respect of the three years ended 30 September 2018, 2017 and 2016 as set out in the Historical Financial Information included as Annexure 10 to the Prospectus, to the Statutory Financial Information for those years. 2. Agreed the asset and liability balances in respect of the years ended 30 September 2018, 2017 and 2016 of Arrowhead, as set out in the Historical Financial Information included as Annexure 10 to the Prospectus, to the Statutory Financial Statements for the years ended 30 September 2018, 2017 and 2016. The above procedures were completed without exceptions. Because the above procedures do not constitute either an audit, review or other assurance engagement made in accordance with International Standards on Auditing, International Standards on Review Engagements or International Standards on Assurance Engagements, we do not express any assurance on the financial information of Arrowhead required in terms of Regulation 78 of the Companies Act. Had we performed additional procedures or had we performed an audit or review of, or other assurance engagement on the financial information Arrowhead required in terms of Regulation 78 of the Companies Act in accordance with International Standards on Auditing, International Standards on Review Engagements or International Standards on Assurance Engagements, other matters might have come to our attention that would have been reported to you.
125 Our report is solely for the purpose set forth in the first paragraph of this report and for your information and is not to be used for any other purpose. This report relates only to the items specified above and does not extend to any financial statements of Arrowhead taken as a whole.
Yours faithfully
BDO South Africa Incorporated Chartered Accountants (SA) Registered Auditors per P Badrick Chartered Accountant (SA) Registered Auditor
52 Corlett Drive, Illovo, 2196
126 ANNEXURE 12
FINANCIAL INFORMATION REQUIRED IN TERMS OF REGULATION 79 IN RESPECT OF GEMGROW
A complete set of the Gemgrow financial statements are available on the Gemgrow website http://www.gemgrow.co.za.
GROUP STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME Unaudited Audited Audited Audited Six months Year Year Year ended ended ended ended 31 March 30 September 30 September 30 September R’000 2019 2018 2017 2016 Property portfolio revenue Contractual rental income 424 831 768 916 666 066 181 404 Straight line rental income accrual 2 602 (1 154) 35 569 (16 404) Total revenue 427 433 767 762 701 634 165 000 Operating costs (162 977) (286 703) (263 056) (80 010) Administration costs (11 312) (13 361) (8 531) (1 708) Net operating profit 253 144 467 698 430 047 83 283 Changes in fair values 14 660 (93 643) 63 407 64 483 Profit from operations 267 804 374 055 493 455 147 766 Finance charges (91 746) (122 827) (91 578) (46 221) Finance income 13 890 23 369 20 469 1 229 Profit after net finance cost and before capital items 189 948 274 597 422 345 102 774 Impairment of goodwill – (160 619) – (2 397) Cost of strategic repositioning – – – (971) Profit before taxation 189 948 113 978 422 345 99 406 Taxation – ( 2 011) – 110 Total comprehensive income for the year 189 948 111 967 422 345 99 516 Profit attributable to: Equity shareholders of Gemgrow 185 883 111 967 422 345 99 516 Non-controlling interests 4 065 – – – Weighted average number of shares – Gemgrow A shares 59 109 187 47 352 203 47 352 203 47 352 203 – Gemgrow B shares 407 079 781 405 042 106 400 710 460 106 352 670 Basic and diluted earnings per share (cents) – Gemgrow A shares 39.87 24.80 94.26 64.74 – Gemgrow B shares 39.87 24.80 94.26 64.74
127 GROUP CONSOLIDATED STATEMENT OF FINANCIAL POSITION Audited Audited Audited Year ended Year ended Year ended 30 September 30 September 30 September R’000 2018 2017 2016 Non-current assets 4 938 077 4 723 205 2 613 Investment property 4 772 341 4 438 238 – Fair value of property portfolio 4 737 927 4 402 669 – Straight line rental income accrual 34 414 35 569 – Property, plant and equipment 181 164 – Loans to executives 148 596 122 173 – Deferred capital expenditure – – 601 Goodwill – 160 619 – Derivative financial instruments 16 959 – – Deferred taxation – 2 011 2 011 Current assets 135 639 211 096 64 357 Trade and other receivables 102 224 74 598 40 512 Derivative financial instruments – – 107 Loan to holding company – 80 002 – Cash and cash equivalents 33 416 56 496 23 738 Non-current assets held for sale 72 400 9 370 2 451 435 Total assets 5 146 116 4 943 671 2 518 405 EQUITY AND LIABILITIES Shareholders’ interest 3 714 528 3 846 011 1 491 494 Stated capital 3 209 802 3 184 041 942 472 Reserves 504 726 661 970 55 086 Other components of equity – – 493 935 Non-controlling interest – – – Other non-current liabilities 1 034 565 350 831 367 406 Secured financial liabilities 1 033 343 343 390 361 853 Derivative financial instruments 1 222 7 441 5 553 Current liabilities 397 023 746 829 659 505 Trade and other payables 129 159 126 788 84 338 Secured financial liabilities 265 707 575 041 575 046 Derivative financial instruments 2 158 – 120 Loan from holding company – 45 000 – Total equity and liabilities 5 146 116 4 943 671 2 518 405 Number of Gemgrow ordinary shares in issue – Gemgrow A shares 47 352 203 47 352 203 47 352 203 – Gemgrow B shares 405 042 106 400 710 459 106 352 670 Net asset value per share (R) 8.21 8.58 – Gemgrow A shares 9.62 9.72 – Gemgrow B shares 8.05 8.45 Gearing ratio * 26.81 20.65 37.25
* Secured liabilities/investment property (%).
128 COMPANY STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME Audited Audited Audited Year ended Year ended Six months ended R’000 30 September 2018 30 September 2017 30 September 2016 Property portfolio revenue Contractual rental income 428 762 369 897 181 404 Straight line rental income accrual (8 113) 20 906 (16 404) Dividends received 223 235 209 629 – Total revenue 643 884 600 432 165 000 Operating costs (153 742) (140 252) (80 010) Administration costs (13 575) (7 381) (1 708) Net operating profit 476 568 452 800 83 283 Changes in fair values (4 430) 42 517 64 483 Profit from operations 472 138 495 317 147 766 Net finance charges (115 286) (89 091) (44 992) Profit after net finance cost and before capital items 356 851 406 226 102 774 Loss on sale of investment properties – – (2 397) Impairment of investment in Gemgrow Asset Management Proprietary Limited – (160 619) – Cost of strategic repositioning – – (971) Profit before taxation 356 851 245 607 99 406 Taxation (2 011) – 110 Total comprehensive income for the year 354 840 245 607 99 516
129 COMPANY CONSOLIDATED STATEMENT OF FINANCIAL POSITION Audited Audited Audited Year ended Year ended Year ended R’000 30 September 2018 30 September 2017 30 September 2016 Non-current assets 5 040 595 4 594 751 2 613 Investment property 2 914 775 2 510 319 – Fair value of property portfolio 2 901 981 2 489 413 – Straight line rental income accrual 12 794 20 906 – Property, plant and equipment 181 164 – Loans to executives 26 423 – – Deferred capital expenditure – – 601 Goodwill – – – Interest in subsidiaries 2 082 257 2 082 257 – Derivative financial instruments 16 959 – – Deferred taxation – 2 011 2 011 Current assets 112 074 141 723 64 357 Trade and other receivables 56 352 65 047 40 512 Derivative financial instruments – – 107 Intercompany loan 38 451 41 731 – Loan to holding company – – – Cash and cash equivalents 17 272 34 945 23 738 Non-current assets held for sale – – 2 451 435 Total assets 5 152 669 4 736 474 2 518 405 EQUITY AND LIABILITIES Shareholders’ interest 3 780 662 3 669 272 1 491 494 Stated capital 3 209 802 3 184 041 942 472 Reserves 570 860 485 231 55 086 Other components of equity – – 493 935 Other non-current liabilities 1 034 565 350 831 367 406 Secured financial liabilities 1 033 343 343 390 361 853 Derivative financial instruments 1 222 7 441 5 553 Current liabilities 337 441 716 370 659 505 Trade and other payables 69 577 96 329 84 338 Secured financial liabilities 265 707 575 041 575 046 Derivative financial instruments 2 158 – 120 Loan from holding company – 45 000 – Total equity and liabilities 5 152 669 4 736 474 2 518 405
130 ANNEXURE 13
REPORT BY THE INDEPENDENT REPORTING ACCOUNTANTS IN TERMS OF REGULATION 79 IN RESPECT OF GEMGROW
The Board of Directors Gemgrow Properties Limited 3rd Floor, Upper Building 1 Sturdee Avenue Rosebank 2196
11 July 2019
Dear Sir/Madam
INDEPENDENT AUDITORS’ REPORT IN TERMS OF REGULATION 79 OF THE COMPANIES ACT, NO. 71 OF 2008, AS AMENDED ON THE FINANCIAL INFORMATION INCLUDED IN THE PROSPECTUS
Introduction BDO South Africa Incorporated are the appointed auditors of Gemgrow Properties Limited (“Gemgrow” or the “Company”). Regulation 79 of the Companies Act, No 71 of 2008, as amended (“Companies Act”) requires us to: • report on the following financial information, which is included in the prospectus of the Company to be issued on or about 22 July 2019 (“the Prospectus”): – The consolidated and separate profits or losses of the Company in respect of the periods ended 30 September 2018, 2017 and 2016 as set out in Annexure 12 of the Prospectus; – The consolidated and separate assets and liabilities of the Company as at 30 September 2018, 2017 and 2016 as set out in set out Annexure 12 of the Prospectus; – The dividends paid by the Company in respect of each class of securities for the financial periods 30 September 2018, 2017 and 2016, including particulars of each class of share on which dividends were paid and cases where no dividends were paid in respect of a particular class of shares (collectively “the regulation 79 financial information”); and • provide a statement in our report, as to whether there have been any material changes in the assets and liabilities of the Company since the date of the latest available financial information.
Extraction of financial information The regulation 79 financial information has been extracted from the audited consolidated and separate annual financial statements of the Company for the period ended 30 September 2018, 2017 and 2016, which were prepared in accordance with International Financial Reporting Standards and the Companies Act. We expressed unmodified audit opinions on those audited consolidated and separate annual financial statements in our reports dated 21 November 2018, 15 November 2017 and 21 November 2016 respectively, based on our audit which was conducted in accordance with International Standards on Auditing. This financial information does not reflect the effects of events that may have occurred subsequent to the date of our audit report on those audited consolidated and separate annual financial statements. Furthermore, the financial information does not contain all the disclosures required by the International Financial Reporting Standards and the requirements of the Companies Act and therefore reading the financial information is not a substitute for reading the audited consolidated and separate annual financial statements of the Company. As a result of the regulation 79 financial information being extracted from the audited consolidated and separate annual financial statements, we can report that in the context of the audit performed on these annual financial statements: • The financial information is not materially misstated and is prepared on a basis consistent with the Companies Act; • The debtors and creditors included in the financial information did not include any material amounts that were not trade accounts; • The Company adequately provided for doubtful debts in respect of trade receivables at 30 September 2018, 2017 and 2016 in the financial information;
131 • The Company do not hold any inventory and as such there is no provision for inventory obsolescence; • In respect of the consolidated and separate financial information, the intercompany profits have been eliminated; and • The Company has declared dividends on all classes of securities for the financial period ended 30 September 2018, 2017 and 2016 as follows. Class of share 30 September 2018 30 September 2017 30 September 2016 A shares 28 178 324 32 697 768 17 439 353 B shares 241 032 244 276 699 646 39 168 647 Total dividends declared 269 210 568 309 397 414 56 608 000
Responsibility of the directors for the financial information The directors are responsible for the audited consolidated and separate annual financial statements, the extraction of the financial information therefrom, and the presentation of the financial information in accordance with the requirements of the Companies Act.
Report of factual findings on the material changes in the assets and liabilities In accordance with regulation 79(4)(b)(v) of the Companies Act we are required to include a statement in our report, as to whether there have been any material changes in the assets and liabilities of the Company and its subsidiaries since the consolidated and separate annual financial statements dated 30 September 2018. As a result, we have performed the following procedures which were agreed with you: • We reviewed the latest management accounts, dated 31 March 2019 including the consolidated and separate management accounts of the Company and compared the categories of assets and liabilities to the consolidated and separate statement of financial position dated 30 September 2018. Where movements in the assets and liabilities were material and in excess of 10%, these have been reported in the findings below. • Reviewed minutes of meetings of the board of directors of the Company and its subsidiaries since 30 September 2018 to identify any matters regarding material changes in the assets and liabilities, such as the sale or purchase of a significant asset. • Obtained a letter of representation from management confirming that besides for the disposal of various investment properties, representing a combined value of R200 million, no other material changes in the assets and liabilities of the Company and its subsidiaries has occurred since 31 March 2019. Our engagement was undertaken in accordance with the International Standard on Related Services (ISRS) 4400, Engagements to Perform Agreed-Upon Procedures Regarding Financial Information. The procedures were performed solely to assist you in complying with regulation 79(4)(b)(v) of the Companies Act.
Responsibilities of the directors The directors have the responsibility for the accuracy and completeness of the records, documents, explanations and other information provided to us for the purpose of performing the procedures and for determining whether the nature and scope of our work specified in this factual findings report is sufficient for the purposes of evaluating the material changes in the assets and liabilities of the Company and its subsidiaries.
Responsibilities of the auditor An agreed upon procedure engagement involves applying our expertise to perform procedures as agreed by us and the directors and reporting the factual findings from the procedures performed. We have complied with relevant ethical requirements, including the principles of integrity, objectivity, professional competence and due care. Since an agreed upon procedure engagement is not an assurance engagement, we are not required to verify the accuracy or completeness of the information management has provided to us to complete the agreed upon procedure engagement. Because the above procedures do not constitute either an audit or a review made in accordance with International Standards on Auditing or International Standards on Review Engagements, we do not express any assurance on the material changes in the assets and liabilities of the Company and its subsidiaries. Had we performed additional procedures or had we performed an audit or review of the financial statements in accordance with International Standards on Auditing or International Standards on Review Engagements, other matters might have come to our attention that would have been reported.
132 Findings We report our findings as follows: On 8 July 2019, we compared the below categories of assets and liabilities per the management accounts for the six months ended 31 March 2019 to the consolidated and separate statement of financial position for the year ended 30 September 2018. • Non-current assets; • Current assets; • Non-current liabilities; and • Current liabilities. Save for the material changes noted below, there have been no other material changes in the categories of assets and liabilities of the Company and its subsidiaries since the 30 September 2018 audited financial statements, included in Annexure 12.
Material changes • Cumulative Properties Limited (“Cumulative”) a wholly owned subsidiary of the company, acquired a majority shareholding in Moolgem, which owned a portfolio of 26 properties valued at R704 million, on 1 December 2018 for the purchase consideration of R634,5 million. Post the transaction, Cumulative is entitled to 75,62% of the voting rights and 95% of the net assets and income of Moolgem. The transaction had a legal effective date of 1 November 2018 but was subject to the fulfilment of certain conditions precedent, all of which were fulfilled on 1 December 2018 at which time the shares were transferred to Cumulative. The purchase consideration was funded by the issue of 10 264 434 Gemgrow A shares at an ex-dividend issue price of R9,74 per A share, with the balance funded with debt. • During the current period the Gemgrow successfully transferred 36 properties that it acquired last year, 26 of which were acquired through the acquisition of a controlling interest in Moolgem Proprietary Limited (“Moolgem”). The remaining 10 properties were acquired directly for R99,9 million funded with the issue of R50 million Gemgrow A shares at an ex dividend price of R9,80 and debt of R49,9 million. Gemgrow also disposed of eight properties valued at R98 million, as part of its asset recycling programme. Further disposals of approximately R330 million have been concluded and are expected to transfer before the end of the financial year. The proceeds of these disposals will be used to reduce debt and decrease the company’s loan to value to approximately 28%. • Secured financial liabilities increased by R531 million as a result of the Moolgem acquisition noted above, as well as a renewal on the access facility with Nedbank in the amount of R126 million. • A material increase in the cash on hand balance occurred as a consequence of proceeds received on disposal properties, as well as additional cash reserves in contemplation of the dividend payment made on 24 June 2019. • Non-current assets held for sale increased as a consequence of additional investment properties reclassified as held‑for‑sale. Our findings relate only to the accounts and items specified above and do not extend to any financial statements of the Company and its subsidiaries taken as a whole.
Consent We consent to the inclusion of this report, which will form part of the Prospectus to the shareholders of Gemgrow, to be issued on or about 22 July 2019, in the form and context in which it appears. Our report should not to be used for any other purpose or be distributed to any other parties.
Yours faithfully
BDO South Africa Incorporated Chartered Accountants (SA) Registered Auditors per P Badrick Chartered Accountant (SA) Registered Auditor
52 Corlett Drive, Illovo, 2196
133 ANNEXURE 14
FORECAST STATEMENTS OF COMPREHENSIVE INCOME OF THE COMBINED GROUP
Set out below are the forecast statements of comprehensive income for the combined group (“forecasts”) for the six months ending 30 September 2019 and the year ending 30 September 2020 (“forecast periods”). The forecast have been prepared on the assumption that the scheme is expected to become effective on 15 September 2019. Due to the transaction being disclosed as a reverse acquisition in accordance with IFRS, Arrowhead is regarded as the accounting acquirer that effectively acquires the shares in Gemgrow that it does not already own at the effective date. Accordingly the forecast results presented for Gemgrow will be a continuation of Arrowhead. The forecasts, including the assumptions on which they are based and the financial information from which they are prepared, are the responsibility of the directors of Gemgrow. The forecasts must be read in conjunction with the independent reporting accountants’ assurance report which is presented in Annexure 15 of this prospectus. The forecasts have been complied in full compliance with Gemgrow’s IFRS accounting policies and on an aggregated basis for the property portfolio, with the exception of Indluplace, a subsidiary of Gemgrow. Indluplace, was not consolidated into the forecast results of Gemgrow for the 6 months ending 30 September 2019 and year ended 30 September 2020. On the basis that the forecast financial information of Indluplace was not readily available due to the information being restricted price sensitive information. The expected distribution to be received from Indluplace was included in the forecast earnings under listed security income and prepared based on the distribution guidance that Indluplace has communicated to the market on 9 May 2019. Forecast for the Forecast for the six months ending year ending 30 September 30 September R’000 Notes 2019 2020 Property rental revenue and recoveries 3, 4, 5, 6, 7, 8, 20 873 293 1 774 299 Straight-line rental income accrual 10 – – Listed security income 17, 18, 19 103 115 195 431 Gross property revenue 976 409 1 969 730 Property expenses 9, 11, 20, 21 (330 709) (697 230) Net profit from property operations 645 700 1 272 500 Corporate administrative expenses (50 037) (83 086) Gain on bargain purchase – – Finance income 12 36 412 69 809 Operating profit before finance costs 632 075 1 259 223 Reversal of deferred tax – – Finance charges 13 (242 920) (478 981) Profit before taxation 389 156 780 243 Gain on the ineffective portion of fair value of derivative financial instruments – – Profit before taxation 389 156 780 243 Taxation – – Profit for the period/year 389 156 780 243
134 OTHER COMPREHENSIVE INCOME Forecast for the Forecast for the six months ending year ending R’000 30 September 2019 30 September 2020 Items that are or may be classified to profit and loss: – – Cash flow hedges – current period gains (net of taxation) – – Total comprehensive income for the period/year 389 156 780 243
Reconciliation between earnings and headline earnings Forecast for the Forecast for the six months ending year ending 30 September 30 September R’000 2019 2020 Profit for the year/period 389 156 780 243 – Gain on bargain purchase – – Headline earnings 389 156 780 243 Adjusted for: – Straight-line rental income accrual – – – Deferred taxation – – Profit available for distribution for the period/year 389 156 780 243 Number of shares in issue GPA shares in issue 62 718 678 62 718 678 GPB shares in issue 1 019 996 913 1 019 996 913 Total weighted average number of shares in issue 1 082 715 591 1 082 715 591 Earnings and diluted earnings per combined share (cents) 35.94 72.06 Earnings and diluted earnings per GPA share (cents) 35.94 72.06 Earnings and diluted earnings per GPB share (cents) 35.94 72.06 Headline and diluted headline earnings per combined share (cents) 35.94 72.06 Headline and diluted headline earnings per GPA share (cents) 35.94 72.06 Headline and diluted headline earnings per GPB share (cents) 35.94 72.06 Distributable income per GPA share (cents) 57.52 117.92 Distributable income per GPB share (cents) 34.62 69.24
135 An analysis of the contractual nature of rental revenue is set out below:
Forecast for the Forecast for the six months ending year ending 30 September 30 September Notes 2019 2020 (%) (%) Contractual/uncontractual revenue split by rental income: –– contracted rental revenue 4 92 78 –– short-term rental revenue 4 – – –– near-contracted revenue 4, 5 7 21 –– uncontracted rental revenue 4, 5, 6 1 1
100 100
Forecast notes and assumptions The forecast incorporates the following material assumptions in respect of revenue and expenses that can be influenced by the directors of Gemgrow: 1. The forecasts for the six months ending 30 September 2019 and year ending 30 September 2020 are based on information derived from lease contracts, information provided by the property manager and historic information. 2. Gemgrow will not acquire any properties during the forecast periods, however properties have been earmarked for disposal within the forecast periods. No revenues or related expenditure have been included in the forecast periods past the intended date of sale of each property. Per the forecast results presented the disposal proceeds will be applied in reducing the borrowings of Gemgrow and consequently an overall comparable interest saving. 3. Revenue and recoveries include rental income and recoveries, of which the portion relating to basic rental income amounts to R642.6 million for the six months ending 30 September 2019 and R1.29 billion for the year ending 30 September 2020. 4. Contracted revenue is based on existing lease agreements, including stipulated increases, all of which are valid and enforceable. 92% of the rental income for the six months ending 30 September 2019 relates to contracted rental income, whilst 7% relate to near contracted rental income and 1% uncontracted rental income. Of the rental income for the year ended 30 September 2020, 78% relates to contracted rental, 21% relates to near contracted rental income and 1% relates to uncontracted rental income. 5. Leases expiring during the forecast period have been forecast on a lease-by-lease basis and have been assumed to renew at current market rates unless the lessee has indicated its intention to terminate the lease. 6. No new leases have been taken into consideration in the forecasts for the six months ending 30 September 2019 and year ending 30 September 2020. 7. Turnover rental (rental income based on the actual turnover of the tenant) has been forecast based on management’s income budget for each property. 8. Current vacant space has been forecast on a property-by-property basis and has been assumed to remain vacant for the duration of the forecast unless a tenant has been identified and a legally binding agreement has been finalised. 9. Property operating expenditure has been forecast by the property manager on a line-by-line basis based on management’s review of historical expenditure, where available, and discussions with the property manager. 10. No fair value adjustments to investment properties, other than the adjustment as a result of straight-line rental accrual has been provided. 11. Head Office administration costs include staff and overhead costs and have been forecast to increase by inflation. 12. Finance income predominantly relates to interest received from loans to executives. In addition, finance income also includes interest earned on bank balances, which is assumed to be earned at 5.5% per annum over the forecast periods. 13. Existing interest-bearing liabilities of R6.99 billion bears interest at a weighted average rate of 9.8% per annum. The forecasts incorporate the following material assumptions in respect of revenue and expenses that cannot be influenced by the directors of Gemgrow: 14. The forecasts have assumed no vis majeure (Acts of God, riots, political instability). 15. The date on which the risks and rewards of ownership are assumed to transfer is 16 September 2019 (being the effective date). 16. There will be no unforeseen economic factors that will affect the lessee’s ability to meet their commitments in terms of existing lease agreements. 17. The forecasts have been complied in full compliance with Gemgrow’s IFRS accounting policies and on an aggregated basis for the property portfolio, with the exception of Indluplace, a subsidiary (55.7% held) of Gemgrow. Indluplace was not consolidated into the forecast results of Gemgrow for the six months ending 30 September 2019 and year ended 30 September 2020.On the basis that the forecast financial information of Indluplace was not readily available due to the information being restricted price sensitive information, rather the expected distribution to be received from Indluplace was included in the forecast earnings under Listed security income and prepared based on the distribution guidance that Indluplace has communicated to the market on 9 May 2019. 18. No dividend contribution from Rebosis, a company in which Gemgrow has an investment (16.4%), has been included in the forecast. 19. A dividend contribution is forecast to be received from Dipula, a company in which Arrowhead has an investment (8.6%) and has been included in Listed security income in the forecasts based on guidance communicated to the market by Dipula. 20. There are no items of expenditure expected to increase by greater than 15% from historical cost. 21. Material items of expenditure within the property expenses line item include: • R152 million in electricity, R64 million in rates and taxes, and R37.4 million in salaries in respect of the six months ending 30 September 2019; and • R315.6 million in electricity, R131.7 million in rates and taxes, and R58.4 million in salaries in respect of the year ending 30 September 2020 (Gemgrow’s short term incentive and long term incentive, which is subject to remuneration committee approval, is provided for in full within the last month of the respective financial periods, and is not evenly accrued).
136 ANNEXURE 15
INDEPENDENT REPORTING ACCOUNTANTS’ LIMITED ASSURANCE REPORT ON THE FORECAST FINANCIAL INFORMATION OF THE COMBINED GEMGROW GROUP
The Board of Directors Gemgrow Properties Limited 3rd Floor, Upper Building 1 Sturdee Avenue Rosebank 2196
11 July 2019
Dear Sir/Madam
INDEPENDENT REPORTING ACCOUNTANTS’ REPORT ON THE FORECAST STATEMENT OF COMPREHENSIVE INCOME OF GEMGROW PROPERTIES LIMITED (“GEMGROW” OR “THE GROUP”)
Report on the identified property forecast information We have undertaken a reasonable assurance engagement in respect of the accompanying property forecast of Gemgrow for the six months ending 30 September 2019 and year ending 30 September 2020 set out in Annexure 14 of the Gemgrow prospectus to be issued on or about 22 July 2019 (“the Prospectus”), comprising the forecast statement of profit or loss and other comprehensive income and the vacancy and lease expiry profile of the property portfolio, as defined, during the forecast periods (“the forecast information”), as required by paragraph 13.15 of the JSE Limited (“JSE”) Listings Requirements. We have also undertaken a limited assurance engagement in respect of the directors’ assumptions and basis of preparation used to prepare and present the forecast information, disclosed in Annexure 14 of the Prospectus to the forecast information, as required by paragraph 13.15 of the JSE Listings Requirements.
Directors’ responsibility for the forecast information and for the assumptions used to prepare the forecast information The directors are responsible for the preparation and presentation of the forecast information and for the reasonableness of the assumptions used to prepare the forecast information as set out in the notes to Annexure 14 of the Prospectus to the forecast information in accordance with paragraphs 13.12 – 13.14 of the JSE Listings Requirements (JSE Listings Requirements for forecast information). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the forecast information on the basis of those assumptions that is free from material misstatement, whether due to fraud or error.
Inherent Limitations Actual results are likely to be different from the forecast information since anticipated events frequently do not occur as expected and the variation may be material. Consequently, readers are cautioned that this forecast may not be appropriate for purposes other than described in the purpose of the report paragraph below.
Our independence and quality control We have complied with the independence and other ethical requirements of the Code of Professional Conduct for Registered Auditors issued by the Independent Regulatory Board for Auditors (IRBA Code), which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. The IRBA Code is consistent with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (Part A and B). The firm applies International Standard on Quality Control 1 and, accordingly, maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.
137 Limited assurance engagement on the reasonableness of the directors’ assumptions Reporting accountant’s responsibility Our responsibility is to express a limited assurance conclusion on whether anything has come to our attention that causes us to believe that the assumptions do not provide a reasonable basis for the preparation and presentation of the forecast information in accordance with the JSE Listings Requirements for forecast information, based on the procedures we have performed and the evidence we have obtained. We conducted our limited assurance engagement in accordance with International Standard on Assurance Engagements (ISAE) 3400, The Examination of Prospective Financial Information (ISAE 3400), issued by the International Auditing and Assurance Standards Board. That standard requires that we plan and perform this engagement to obtain limited assurance about whether the directors’ assumptions provide a reasonable basis for the preparation and presentation of the forecast information. A limited assurance engagement undertaken in accordance with ISAE 3400 involves assessing the source and reliability of the evidence supporting the directors’ assumptions. Sufficient appropriate evidence supporting such assumptions would be obtained from internal and external sources including consideration of the assumptions in the light of historical information and an evaluation of whether they are based on plans that are within the entity’s capacity. A limited assurance engagement is substantially less in scope than a reasonable assurance engagement in relation to both the risk assessment procedures, including an understanding of internal control, and the procedures performed in response to the assessed risks. The procedures we performed were based on our professional judgement and included inquiries, observations of processes performed, inspection of documents, analytical procedures, evaluating the reasonableness of best-estimate assumptions and agreeing or reconciling with underlying records. Our procedures included evaluating the directors’ best-estimate assumptions on which the forecast information is based for reasonableness. The procedures performed in a limited assurance engagement vary in nature from, and are less in extent than for, a reasonable assurance engagement. As a result, the level of assurance obtained in a limited assurance engagement is substantially lower than the assurance that would have been obtained had we performed a reasonable assurance engagement. Accordingly, we do not express a reasonable assurance opinion about whether the directors’ assumptions provide a reasonable basis for the preparation and presentation of the forecast information.
Limited assurance conclusion on the reasonableness of the directors’ assumptions Based on the procedures we have performed and evidence we have obtained, nothing has come to our attention that causes us to believe that the directors’ assumptions do not provide a reasonable basis for the preparation and presentation of the forecast information for the six months ending 30 September 2019 and year ending 30 September 2020.
Reasonable assurance engagement on the forecast information Reporting accountant’s responsibility Our responsibility is to express an opinion based on the evidence we have obtained about whether the forecast information is properly prepared and presented on the basis of the directors’ assumptions disclosed in the notes to the forecast information (the assumptions) and in accordance with the JSE Listings Requirements for forecast information. We conducted our reasonable assurance engagement in accordance with International Standard on Assurance Engagements (ISAE) 3400, The Examination of Prospective Financial Information (ISAE 3400), issued by the International Auditing and Assurance Standards Board. That standard requires that we plan and perform this engagement to obtain reasonable assurance about whether such forecast information is properly prepared and presented on the basis of the directors’ assumptions disclosed in the notes to the forecast information and in accordance with the JSE Listings Requirements for forecast information. A reasonable assurance engagement in accordance with ISAE 3400 involves performing procedures to obtain evidence that the forecast information is properly prepared and presented on the basis of the assumptions and in accordance with the JSE Listings Requirements for forecast information. The nature, timing and extent of procedures selected depend on the reporting accountant’s judgement, including the assessment of the risks of material misstatement, whether due to fraud or error, of the forecast information. In making those risk assessments, we considered internal control relevant to Gemgrow’s preparation and presentation of the forecast information. Our procedures included: • inspecting whether the forecast information is properly prepared on the basis of the assumptions; • inspecting whether the forecast information is properly presented and all material assumptions are adequately disclosed, including a clear indication as to whether they are best-estimate assumptions; and • inspecting whether the forecast statement of profit or loss and other comprehensive income is prepared on a consistent basis with the historical financial statements, using appropriate accounting policies.
138 We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Opinion on the forecast information In our opinion, the forecast information is properly prepared and presented in terms of the basis of assumptions, the basis of preparation and in accordance with the JSE Listings Requirements for forecast information for the six months ending 30 September 2019 and year ending 30 September 2020.
Purpose of the report This report has been prepared for the purpose of satisfying the requirements of paragraph 13.15 of the JSE Listings Requirements and for no other purpose.
Report on other legal and regulatory requirements In accordance with our responsibilities set out in the JSE Listings Requirements, paragraph 13.15(b), we have performed the procedures set out therein. If, based on the procedures performed, we detect any exceptions; we are required to report those exceptions. We have nothing to report in this regard, with the exception of Indluplace Properties Limited (“Indluplace”) a subsidiary of Gemgrow, was not consolidated into the forecast results of Gemgrow for the six months ending 30 September 2019 and year ended 30 September 2020, on the basis that the forecast financial information of Indluplace was not readily available due to the information being restricted price sensitive information, rather the expected distribution to be received from Indluplace was included in the forecast earnings under listed security income and prepared based on the distribution guidance that Indluplace has communicated to the market.
Yours faithfully
BDO South Africa Incorporated Chartered Accountants (SA) Registered Auditors per N Lazanakis Chartered Accountant (SA) Registered Auditor JSE Reporting Accountant Specialist
52 Corlett Drive, Illovo, 2196
139 ANNEXURE 16
PRO FORMA STATEMENT OF FINANCIAL POSITION IN RESPECT OF THE GEMGROW GROUP
Set out below is the pro forma statement of financial position of Gemgrow based on the unaudited interim consolidated statement of financial position of Gemgrow as at 31 March 2019. The pro forma statement of financial position has been prepared to reflect the financial position of Gemgrow on the basis set out in the notes to the pro forma statement of financial position below. The pro forma statement of financial position is the responsibility of the directors of Gemgrow and has been provided for illustrative purposes only to illustrate the effects of the adjustments on Gemgrow’s financial position at 31 March 2019. Due to the nature of the pro forma statement of financial position, it may not it fairly reflect the financial position, changes in equity, results of operations or cash flows of Gemgrow after the adjustments. Arrowhead already exercises control over Gemgrow by virtue of its shareholding in Gemgrow. Consequently, Gemgrow’s statement of financial position is consolidated into Arrowhead’s statement of financial position. As the market capitalisation of Arrowhead as at the last practicable date is larger than Gemgrow’s market capitalisation, the transaction has been disclosed as a reverse acquisition in accordance with IFRS. With reference to the pertinent facts and circumstances, the following considerations as laid out in IFRS 3: B14 to B18, were taken into account to reach this conclusion: • the former shareholders of Arrowhead whose shares are acquired own the majority of shares, and control the majority of votes, in the combined group; and • the directors of the combined group is drawn predominantly from Arrowhead. For accounting purposes under IFRS, the transaction will be treated as the acquisition of the non-controlling interest of Gemgrow even though, legally, Gemgrow is the acquirer and will be the entity which will issue the consideration shares to the shareholders of Arrowhead. Due to the reverse acquisition Arrowhead is regarded as the accounting acquirer that effectively acquires the shares in Gemgrow that it does not already own at the effective date. Therefore the financial statements presented after the effective date will be a continuation of the Arrowhead financial statements, adjusted for the transaction. The independent reporting accountants’ limited assurance report on the pro forma statement of financial position is set out in Annexure 17 of this prospectus. The pro forma financial information has been prepared in terms of IFRS, The Guide on Pro Forma Financial Information issued by SAICA and the accounting policies of the company.
140 – 1 129 5 478 (Note 5) 134 896 778 261 585 655 317 464 235 671 553 135 380 360 After the 15 207 306 15 072 410 16 577 829 17 511 324 transaction – shares (Note 4) Treasury costs (23 554) (Note 3) (23 554) (23 554) Transaction – (Note 2) Transaction adjustments – as at 1 129 5 478 group 134 896 778 261 585 655 317 464 259 225 576 689 380 360 (Note 1.2) 15 207 306 15 072 410 16 577 829 17 534 878 Arrowhead 31 March 2019 – – 153 872 as at 36 989 168 934 103 759 226 271 330 030 329 310 (Note 1.1) 5 254 617 5 217 628 5 424 576 6 083 916 31 March 2019 Gemgrow group R’000 ASSETS Non-current assets Investment property Fair value property of portfolio for accounting purposes Straight line rental income accrual Property, equipment and plant Loans to participants group of share purchase schemes option assets Financial instrumentsDerivative Current assets andTrade other receivables Loans to participants group of share purchase schemes option equivalents cash Cash and Non-current assets held for sale Total assets CONSOLIDATED STATEMENT OF FINANCIAL POSITION
141 9.59 9.61 9.59 8.27 2 421 30 893 (Note 5) 370 006 697 000 6 258 674 After the 8 827 312 1 325 018 6 289 567 1 069 427 62 718 658 17 511 324 994 462 213 transaction – shares (Note 4) Treasury (251 160 816) costs (Note 3) (23 554) (23 554) Transaction – – – – – – (Note 2) 1 831 293 (1 831 293) 837 438 068 Transaction adjustments as at 2 421 group 30 893 370 006 697 000 (Note 1.2) 6 258 674 7 019 573 3 156 311 6 289 567 1 069 427 17 534 878 Arrowhead 31 March 2019 805 9.59 8.13 9.59 8.04 as at 6 007 36 773 160 439 139 000 300 244 (Note 1.1) 1 858 787 3 882 105 1 864 794 6 083 916 62 718 658 408 184 961 31 March 2019 Gemgrow group R’000 EQUITY AND LIABILITIES Shareholders’ interest Non-controlling interest Other non-current liabilities Secured financial liabilities instrumentsDerivative Current liabilities andTrade other payables Secured financial liabilities instrumentsDerivative Total equity and liabilities Number of issued Gemgrow shares – Gemgrow A shares – Gemgrow B shares Net asset value per share (including non ‑ controlling interest) – Gemgrow A shares – Gemgrow B shares Net asset value per share (excluding non ‑ controlling interest) – Gemgrow A shares – Gemgrow B shares
142 Note 1.1 – consolidated statement of financial position of the Gemgrow group at 31 March 2019 The consolidated statement of financial position of the Gemgrow group has been directly extracted without adjustment from the unaudited interim consolidated financial statements of the Gemgrow group for the six months ended 31 March 2019 as published on 15 May 2019. Note 1.2 – consolidated statement of financial position of the Arrowhead group at 31 March 2019 The consolidated statement of financial position of the Arrowhead group has been directly extracted without adjustment from the unaudited interim consolidated financial statements of the Arrowhead group for the six months ended 31 March 2019 as published on 29 May 2019. Arrowhead already exercises control over Gemgrow by virtue of its shareholding in Gemgrow. Consequently, Gemgrow’s assets and liabilities are consolidated into Arrowhead’s statement of financial position. The only adjustment relates to the acquisition of the remaining Gemgrow non-controlling interests. Note 2 – transaction adjustments For accounting purposes under IFRS 10 paragraph 23, the transaction will be treated as the acquisition of the non-controlling interest of Gemgrow even though, legally, Gemgrow is the acquirer and will be the entity which will issue the consideration shares to the shareholders of Arrowhead. Changes in holdings while control is retained are accounted for as equity transactions (i.e. transactions with owners in their capacity as owners). Any premium or discount on purchase or sale is recognised directly in equity. For the purposes of the pro forma financial information, the scheme consideration and impact on retained earnings is as follows: Amount Note
Number of Arrowhead shares deemed to be issued (‘000) 258 797 2a Arrowhead share price (R’) 3.74 Value of Arrowhead shares deemed to be issued to Gemgrow shareholders (R’000) 967 902 2a Carrying value of Gemgrow non-controlling interest acquired 1 831 293 2b Transaction between owners 863 392 2c
Notes: 2a) Under IFRS 3 paragraph 23, the fair value of the consideration transferred by the accounting acquirer is based on the number of shares that the accounting acquirer (the legal subsidiary – Gemgrow) would have had to issue to the owners of the accounting acquiree (the legal parent – Arrowhead) to give the owners of the legal parent the same percentage of equity interests in the combined entity that results from the reverse acquisition. 258.8 million Arrowhead shares are deemed to be issued by Arrowhead in consideration for Gemgrow B shares. For the purpose of estimating the fair value of the consideration transferred in the pro forma financial information, the existing shares of Gemgrow are deemed to be acquired on 1 April 2019. 2b) Carrying value of the Gemgrow NCI as at 31 March 2019. 2c) Changes in a parent’s ownership interest that do not result in a change in control of the subsidiary are accounted for as equity transactions. Thus, if the parent maintains control, the parent will not record any additional acquisition adjustments to reflect its subsequent purchases of additional shares in a subsidiary if there is no change in control. Instead, the carrying amount of the NCI will be adjusted to reflect the change in the NCI’s ownership interest in the subsidiary. Any difference between the amount by which the NCI is adjusted and the fair value of the consideration paid or received is recognised in equity and attributed to the equity holders of the parent. Note 3 – transaction costs Assumed once-off transaction costs for the Arrowhead group amounting to R23.6 million have been capitalised in accordance with IAS 32 – Financial Instruments: Presentation and disclosed in equity in accordance with IAS 1 – Presentation of Financial Statements. These amounts will be paid out of available cash resources and are attributable to the various professional advisors, regulatory authorities and printing costs. Note 4 – treasury shares Arrowhead currently holds 251 160 816 of Gemgrow B shares, which will be classified as treasury shares post implementation of the transaction and may be redeemed pursuant to the redeemable share conversion, provided that if the redeemable share conversion is not implemented such shares will remain classified as treasury shares. Note 5 – Net Asset Value of Gemgrow A shares The net asset value per Gemgrow A share has been calculated on the 60-day volume weighted average trading price as at 31 March 2019 of R9.59 in accordance with the provisions of Gemgrow’s MoI.
143 ANNEXURE 17
INDEPENDENT REPORTING ACCOUNTANTS’ LIMITED ASSURANCE REPORT ON THE PRO FORMA STATEMENT OF FINANCIAL POSITION OF THE GEMGROW GROUP
The Board of Directors Gemgrow Properties Limited 3rd Floor, Upper Building 1 Sturdee Avenue Rosebank 2196
11 July 2019
Dear Sir/Madam
INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE COMPILATION OF THE PRO FORMA FINANCIAL INFORMATION OF GEMGROW PROPERTIES LIMITED (“GEMGROW” OR “THE GROUP”) We have completed our assurance engagement to report on the compilation of the pro forma financial information of Gemgrow by the directors. The pro forma financial information, as set out in Annexure 16 of the Gemgrow prospectus to be issued on or about 22 July 2019 (“the Prospectus”), consists of the pro forma statement of financial position and related notes. The applicable criteria on the basis of which the directors have compiled the pro forma financial information are specified in the JSE Listings Requirements and described in Annexure 16 of the Prospectus. The pro forma financial information has been compiled by the directors to illustrate the impact of the corporate action or event, described in Annexure 16 of the Prospectus, on the company’s financial position as at 31 March 2019, as if the corporate action or event had taken place at 31 March 2019. As part of this process, information about the company’s financial position has been extracted by the directors from the company’s unaudited interim financial information for the period ended 31 March 2019.
Directors’ responsibility for the pro forma financial information The directors are responsible for compiling the pro forma financial information on the basis of the applicable criteria specified in the JSE Listings Requirements and described in Annexure 16 of the Prospectus.
Our Independence and quality control We have complied with the independence and other ethical requirements of the Code of Professional Conduct for Registered Auditors issued by the Independent Regulatory Board for Auditors (IRBA Code), which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. The IRBA Code is consistent with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (Parts A and B). The firm applies the International Standard on Quality Control 1, Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.
Reporting accountants’ responsibility Our responsibility is to express an opinion about whether the pro forma financial information has been compiled, in all material respects, by the directors on the basis specified in the JSE Listings Requirements based on our procedures performed. We conducted our engagement in accordance with the International Standard on Assurance Engagements (ISAE) 3420, Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus issued by the International Auditing and Assurance Standards Board. This standard requires that we plan and perform procedures to obtain reasonable assurance about whether the pro forma financial information has been compiled, in all material respects, on the basis specified in the JSE Listings Requirements.
144 For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the pro forma financial information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the pro forma financial information. The purpose of pro forma financial information included in the Prospectus is solely to illustrate the impact of a significant corporate action or event on unadjusted financial information of the entity as if the corporate action or event had occurred or had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the corporate action or event at 31 March 2019 would have been as presented. A reasonable assurance engagement to report on whether the pro forma financial information has been compiled, in all material respects, on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the directors in the compilation of the pro forma financial information provide a reasonable basis for presenting the significant effects directly attributable to the corporate action or event, and to obtain sufficient appropriate evidence about whether: • The related pro forma adjustments give appropriate effect to those criteria; and • The pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information. Our procedures selected depend on our judgement, having regard to our understanding of the nature of the company, the corporate action or event in respect of which the pro forma financial information has been compiled, and other relevant engagement circumstances. Our engagement also involves evaluating the overall presentation of the pro forma financial information. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Opinion In our opinion, the pro forma financial information has been compiled, in all material respects, on the basis of the applicable criteria specified by the JSE Listings Requirements and described in Annexure 16 of the Prospectus.
Consent This report on the pro forma financial information is included solely for the information of the Gemgrow shareholders. We consent to the inclusion of our report on the pro forma financial information, and the references thereto, in the form and context in which they appear in the Prospectus.
Yours faithfully
BDO South Africa Incorporated Chartered Accountants (SA) Registered Auditors per N Lazanakis Chartered Accountant (SA) Registered Auditor JSE Reporting Accountant Specialist
52 Corlett Drive, Illovo, 2196
145 ANNEXURE 18
CAPITAL STRUCTURE
1. Alterations to authorised share capital There have been no sub-divisions or consolidations of shares during the three years preceding the last practicable date. Save as provided in this paragraph 1, there have been no other alterations to the authorised share capital of the company in the three years preceding the last practicable date.
2. Voting rights Subject to any special rights or restrictions as to voting attached to any shares by or in accordance with the company’s MOI, at a meeting of the company: • every shareholder present and entitled to exercise voting rights shall be entitled to one vote on a show of hands, irrespective of the number of voting rights that shareholder would otherwise be entitled to exercise; and • on a poll, any person who is present at the meeting, whether as a shareholder or as proxy for a shareholder, has the number of votes determined in accordance with the voting rights associated with the shares held by that shareholder. No objection shall be raised to the admissibility of any vote except at the meeting or adjourned meeting at which the vote objected to is or may be given or tendered and every vote not disallowed at such meeting shall be valid for all purposes. Any such objection shall be referred to the chairperson of the meeting, whose decision shall be final and conclusive; and • the holders of securities other than A and B ordinary shares shall not be entitled to vote on any resolution at a meeting of shareholders, except as provided in clause 20.2 of the MoI. Each share issued by the company has associated with it an irrevocable right of the shareholder to vote on any proposal to amend the preferences, rights, limitations and other terms associated with that share.
3. Options and preferential rights in respect of shares There are no contracts or arrangements, either actual or proposed, whereby any option or preferential right of any kind has been or will be given to any person to subscribe for any shares in the company. In terms of the MoI, the board of directors has a right to redeem A shares at any time after 14 December 2016, however such redemption is subject to approval by the holders of both A shares and B shares by way of a separate special resolution taken at a separate general meeting of each class of shareholder.
4. Issues and repurchases of shares There have been no repurchases of shares of Gemgrow and its major subsidiaries in the three years preceding the last practicable date other than as set out in the table below. There have been no issues or offers of A shares and/or B shares of Gemgrow and its major subsidiaries in the three years preceding the last practicable date other than as set out in the table below.
146 Reason for issue/repurchase Shares issued as consideration for the acquisition shares of in Dipula Shares issued as consideration for the acquisition shares of in Rebosis Shares issued as consideration for the acquisition shares of in Rebosis Shares issued as consideration for the acquisition shares of in Rebosis Shares issued to employees in terms of Arrowhead share purchase and option scheme Shares issued to employees in terms of Arrowhead share purchase and option scheme Shares issued to employees in terms of Arrowhead share purchase and option scheme General repurchase General repurchase General repurchase General repurchase General repurchase General repurchase General repurchase General repurchase General repurchase General repurchase General repurchase R8.40 R8.69 R8.69 R7.85 R8.66 R6.25 R6.25 R5.60 R5.90 R5.98 R5.90 R5.90 R5.88 R5.75 R5.80 R5.76 R5.70 R5.71 Price per share 1500 49 984 20 251 390 000 331 531 100 000 210 000 920 660 555 731 169 491 250 010 175 006 154 749 2 735 538 4 810 000 24 474 633 12 021 985 12 037 967 Number of shares Counterparty shareholdersDipula shareholders Rebosis shareholders Rebosis shareholders Rebosis Employees Employees Employees Shares repurchased on the open market Shares repurchased on the open market Shares repurchased on the open market Shares repurchased on the open market Shares repurchased on the open market Shares repurchased on the open market Shares repurchased on the open market Shares repurchased on the open market Shares repurchased on the open market Shares repurchased on the open market Shares repurchased on the open market Nature Issue Issue Issue Issue Issue Issue Issue Repurchase Repurchase Repurchase Repurchase Repurchase Repurchase Repurchase Repurchase Repurchase Repurchase Repurchase Arrowhead Date April14 2016 5 May 2016 5 May 2016 June28 2016 November24 2016 December19 2017 1 March 19 5 July 2018 July 2018 16 July 2018 17 July 2018 19 20 July 2018 25 July 2018 September12 2018 September12 2018 September12 2018 September12 2018 September12 2018
147 Reason for issue Shares issued for the acquisition shares of in Cumulative Properties Limited and for the acquisition shares of in Vukile Asset Management Proprietary Limited Gemgrow (now Asset Proprietary Limited) Management Shares issued to employees in terms Gemgrow of share purchase and option scheme Shares issued in part payment portfolio of of immovable properties Shares issued in part payment portfolio of mmovableof properties Shares issued to employees in terms Gemgrow of share purchase and option scheme Shares issued pursuant to the implementation of the transaction R6.79 R6.10 R9.80 R9.50 R6.30 Price per share date in the future Unknown as this is a B shares B shares A shares A shares 4 331 646 5 102 021 3 142 856 GPB shares 10 264 434 294 357 789 862 972 109 Number of shares Counterparty Arrowhead, Vividend, G Leissner, M Kaplan, I Suleman, J Limalia, A Kirkel, Vukile A Kirkel and J Limalia Third party vendors property of portfolio Third party vendors property of portfolio A Kirkel and J Limalia Arrowhead shareholders Nature Issue Issue Issue Issue Issue Issue Gemgrow Date 22 December 2016 December12 2017 September28 2018 4 December 2018 December 2018 13 September16 2019
148 Reason for issue Shares issued to employees in terms Indluplace of share purchase and option scheme Shares issued to employees in terms Indluplace of share purchase and option scheme placement consideration Vendor Purchase consideration for acquisition portfolio of of properties placement consideration Vendor Shares issued to employees in terms Indluplace of share purchase and option scheme Issue shares of for cash Shares issued to employees in terms Indluplace of share purchase and option scheme General repurchase General repurchase R9.30 R9.30 R9.65 R9.40 R9.46 R7.02 R7.50 R8.72 R10.05 R10.73 Price per share 900 000 810 860 964 987 168 239 1 845 490 2 706 552 47 263 682 14 495 936 14 227 468 22 440 285 Number of shares , there were no assets acquired or to be acquired out the of proceeds any of issues Gemgrow by and its major Annexure 9 Counterparty Employees Employees shareholders Select property of Vendors portfolio shareholders Select Employees property of Vendors portfolio Employees Shares repurchased on the open market Shares repurchased on the open market Nature Issue Issue Issue Issue Issue Issue Issue Issue Repurchase Repurchase Indluplace Date December15 2016 6 February 2016 30 June 2017 5 October 2017 10 October 2017 December19 2017 March 2018 19 January 11 2019 18 January 2018 January31 2018 Save as disclosed in the table above and in subsidiaries. All share issues and repurchases were effected at a price which the Gemgrow board considered to represent the fair value for the company’s shares,have resulted which in the company’s may shares being issued at a premium or discount.
149 5. Authorisations At the company’s annual general meeting for the year ended 30 September 2018, shareholders resolved that the authorised but unissued shares of the company be placed under the control of the directors of the company until the next annual general meeting, who are authorised to allot or issue any such shares at their discretion, subject at all times to the provisions of the Companies Act, the company’s MoI and the JSE Listings Requirements. In addition, shareholders resolved that the directors of the company be authorised, pursuant, inter alia, to the company’s MOI and subject to the provisions of the Companies Act and the JSE Listings Requirements, to allot and issue shares of the company for cash subject to certain restrictions, which authority will be valid until the company’s next annual general meeting or for a period of 15 months, whichever period is shorter.
6. Statement as to listing on stock exchange Gemgrow shares are not listed on any stock exchange other than the JSE.
7. Consolidations and sub-divisions There have been no consolidations or sub-divisions of securities during the preceding three years.
150 Borrowing entity Arrowhead Arrowhead Arrowhead Arrowhead Arrowhead Arrowhead Arrowhead ANNEXURE 19 Maturity date June 2019 18 November15 2019 March 2020 31 March 2020 31 25 August 2021 October19 2021 25 October 2021 Security provided Secured a mortgage by bond over investment properties Secured a mortgage by bond over investment properties Secured a mortgage by bond over investment properties Secured a mortgage by bond over investment properties Secured a mortgage by bond over investment properties Secured a mortgage by bond over investment properties Secured a mortgage by bond over investment properties Amount, terms and conditions of repayment or renewal Loan becomes due and payable on maturity date Loan becomes due and payable on maturity date Loan becomes due and payable on maturity date Loan becomes due and payable on maturity date Loan becomes due and payable on maturity date Loan becomes due and payable on maturity date Loan becomes due and payable on maturity date
JIBAR JIBAR JIBAR JIBAR Prime + 1.75% + 2.08% + 2.10% + 2.10% + 2.10% less 1.40% Prime – 1.30% 3 Month JIBAR 3-month 3-month 3-month 3-month Interest rate 2019. (R) 12 July 51 000 25 700 000 65 729 120 41 681 461 610 000 480 000 204 675 279 Facility amount Origination General funding purposes General funding purposes General funding purposes General funding purposes General funding purposes General funding purposes General funding purposes % and the prime rate is 10.25% as at 01 is 7. Description Property finance facility Property finance facility Property finance facility Property finance facility Property finance facility Property finance facility Property finance facility JIBAR Material borrowings and its major subsidiaries are the material made to Gemgrow Set out below as at the last practicable loans that were date. The 3-month Lender Nedbank Nedbank Standard Bank Standard Bank Investec Bank Investec Bank Investec Bank
MATERIAL BORROWINGS AND LOANS RECEIVABLE 1.
151 Borrowing entity Arrowhead Arrowhead Arrowhead Arrowhead Arrowhead Arrowhead Arrowhead Arrowhead Arrowhead Arrowhead Maturity date October27 2021 December15 2021 December31 2021 30 April 2022 30 June 2022 4 July 2022 30 November 2022 30 November 2022 30 December 2022 23 November 2023 Security provided Secured a mortgage by bond over investment properties Secured a mortgage by bond over investment properties Secured a mortgage by bond over investment properties Secured a mortgage by bond over investment properties Secured a mortgage by bond over investment properties Secured a mortgage by bond over investment properties Secured a mortgage by bond over listed securities Secured a mortgage by bond over investment properties Secured a mortgage by bond over investment properties Secured a mortgage by bond over investment properties Amount, terms and conditions of repayment or renewal Loan becomes due and payable on maturity date Loan becomes due and payable on maturity date Loan becomes due and payable on maturity date Loan becomes due and payable on maturity date Loan becomes due and payable on maturity date Loan becomes due and payable on maturity date Loan becomes due and payable on maturity date Loan becomes due and payable on maturity date Loan becomes due and payable on maturity date Loan becomes due and payable on maturity date
JIBAR JIBAR JIBAR JIBAR JIBAR JIBAR JIBAR + 2.10% + 2.10% + 1.85% + 1.89% + 2.10% + 2.10% + 2.05% + 2.05% Prime – 1.15% Prime – 1,15% 3-month 3-month 3-month 3-month JIBAR 3-month 3-month 3-month 3-month Interest rate (R) 51 772 355 112 450 223 300 000 330 000 177 090 508 175 083 118 280 000 200 000 283 924 098 146 898 884 Facility amount Origination General funding purposes General funding purposes General funding purposes General funding purposes General funding purposes General funding purposes General funding purposes General funding purposes General funding purposes General funding purposes Description Property finance facility Property finance facility Property finance facility Property finance facility Property finance facility Property finance facility Property finance facility Property finance facility Property finance facility Property finance facility Lender Investec Bank Investec Bank Standard Bank Standard Bank Investec Bank Investec Bank Standard Bank Standard Bank Standard Bank Investec Bank
152 Borrowing entity Gemgrow Gemgrow Gemgrow Gemgrow Gemgrow Gemgrow Gemgrow Gemgrow Gemgrow Gemgrow Maturity date 30 September 2019 30 September 2019 30 September 2022 October31 2022 November15 2022 November15 2022 4 December 2023 4 December 2023 4 December 2023 4 December 2023 Security provided Secured a mortgage by bond over investment properties Secured a mortgage by bond over investment properties Secured a mortgage by bond over listed securities Secured a mortgage by bond over listed securities Secured a mortgage by bond over listed securities Secured a mortgage by bond over listed securities Secured a mortgage by bond over listed securities Secured a mortgage by bond over listed securities Secured a mortgage by bond over listed securities Unsecured Amount, terms and conditions of repayment or renewal Loan becomes due and payable on maturity date Loan becomes due and payable on maturity date Loan becomes due and payable on maturity date Loan becomes due and payable on maturity date Loan becomes due and payable on maturity date Loan becomes due and payable on maturity date Loan becomes due and payable on maturity date Loan becomes due and payable on maturity date Loan becomes due and payable on maturity date Loan becomes due and payable on maturity date
JIBAR JIBAR JIBAR JIBAR JIBAR JIBAR JIBAR + 2.35% + 2.15% + 2.20% + 2.20% + 2.25% + 2,25% + 2,35% Prime – 1.1% Prime – 1.6% Prime – 0,85% 3-month 3-month 3-month 3-month 3-month 3-month 3-month Interest rate – – (R) 50 000 75 518 766 31 508 000 139 000 525 000 480 000 200 000 500 000 Facility amount Origination General funding purposes General funding purposes General funding purposes General funding purposes General funding purposes General funding purposes General funding purposes General funding purposes General funding purposes General funding purposes Description Property finance facility Property finance facility Property finance facility Property finance facility Property finance facility Property finance facility Property finance facility Property finance facility Property finance facility Property finance facility Lender Standard Bank Standard Bank Standard Bank Investec Bank Investec Bank Investec Bank Nedbank Standard Bank RMB Bank RMB Bank
153 Borrowing entity Indluplace Indluplace Indluplace Indluplace Indluplace Indluplace Indluplace Indluplace Maturity date 1 September 2019 5 October 2020 5 October 2020 5 October 2020 5 October 2020 5 October 2020 5 October 2022 5 October 2022 Security provided Secured a mortgage by bond over investment properties Secured a mortgage by bond over investment properties Secured a mortgage by bond over investment properties Secured a mortgage by bond over investment properties Secured a mortgage by bond over investment properties Secured a mortgage by bond over investment properties Secured a mortgage by bond over investment properties Secured a mortgage by bond over investment properties Amount, terms and conditions of repayment or renewal Loan becomes due and payable on maturity date Loan becomes due and payable on maturity date Loan becomes due and payable on maturity date Loan becomes due and payable on maturity date Loan becomes due and payable on maturity date Loan becomes due and payable on maturity date Loan becomes due and payable on maturity date Loan becomes due and payable on maturity date Prime Prime + 2.05% + 2.05% + 2.05% + 2.05% + 2,20% + 2,20% less 1.30% less 1.35% 3-month JIBAR 3-month JIBAR 3-month JIBAR 3-month JIBAR 3-month JIBAR 3-month JIBAR Interest rate (R) million of the loans expiring during the next 12 months and are in discussions with financiers to refinance 42 500 000 67 832 122 67 832 122 177 000 275 025 021 275 025 021 257 142 857 257 142 857 1 418 6 956 531 812 Facility amount Origination General funding purposes General funding purposes General funding purposes General funding purposes General funding purposes General funding purposes General funding purposes General funding purposes Description Property finance facility Property finance facility Property finance facility Property finance facility Property finance facility Property finance facility Property finance facility Property finance facility Lender Standard Bank Bank Absa Bank Absa Bank ABSA Investec Bank Investec Bank Bank ABSA Investec Bank R refinanced group has successfully The Gemgrow remaining facilities expiring in the next 12 months. and re-negotiating these facilities based on priorThe directors experience. issues in rolling over do not expect any
154 2. Loans receivable by the Gemgrow group as at the last practicable date Set out below are the material loans receivable that were made by Gemgrow and its major subsidiaries as at the last practical date. 2.1 Arrowhead 2.1.1 Loans to the Arrowhead Unit Purchase Trust 2.1.1.1 The loans were granted by the Arrowhead Unit Purchase Trust to the executive directors and employees for the purpose of subscribing for shares in the company as per the Arrowhead unit purchase scheme and in terms of the Companies Act. 2.1.1.2 The share incentive scheme shares acquired pursuant to the Arrowhead unit purchase scheme have been ceded and pledged to the Arrowhead Unit Purchase Trust by the applicable share incentive scheme participants as security for the outstanding loans. 2.1.1.3 Ownership of the shares purchased vests immediately in the executive directors and employees, but there is a pledge of the shares as security against the loans. 2.1.1.4 The current fair value of the security is R3.70 per Arrowhead share as at 12 July 2019. 2.1.1.5 The loans advanced from inception to 2015, incurred interest at a weighted average interest rate of 8.23%. Loans advanced from 2016 to 2018 incurred interest at an amount equal to the dividend The dividend yield for the 3 years is 9.21% and is calculated at 31 December, 31 March, 30 June and 30 September and interest is repayable on receipt of the dividend from the company in respect of the share incentive scheme shares. 2.1.1.6 With effect from 1 October 2017, the interest will be calculated bi-annually on the 31 March and 30 September, and will be payable bi-annually. 2.1.1.7 The dividends received on the shares are used to repay the interest accumulated on the loans.
2.1.2 Arrowhead unit share purchase and option scheme 2.1.2.1 The loans bear interest at the equal rate to the distribution declared and is calculated bi‑annually at 31 March and 30 September and is repayable at any time by the employee but no later than 10 (ten) years from the making of the loan. 2.1.2.2 The Arrowhead share incentive scheme shares shall be disposed of pursuant to the scheme in exchange for the applicable number of consideration shares and, pursuant thereto, (i) the consideration shares so received will be substituted for the Arrowhead share incentive scheme shares and will be subject to the provisions of the rules of the applicable share incentive scheme and (ii) the loans granted to such Arrowhead share incentive scheme participants under the share incentive schemes shall remain in place and on and subject to identical terms and conditions, provided that the consideration shares so received by such Arrowhead share incentive scheme participants shall, with effect from the receipt thereof by the Arrowhead share incentive scheme participants, be pledged as security for those loans on the same terms as were applicable to the pledge of the Arrowhead share incentive scheme shares.
2.1.3 Loans to participants of Indluplace share purchase and option scheme 2.1.3.1 The loans were granted to the qualifying juristic persons of the executive directors for the purpose of subscribing for shares in the company as per the Indluplace share purchase and option scheme and in terms of the Companies Act. 2.1.3.2 Ownership of the shares purchased vests immediately but there is a pledge of the shares as security against the loans. 2.1.3.3 The loans are ten year loans and bear interest at the equal rate to the distribution declared and is calculated at 31 March and 30 September and are repayable at any time by the employee. 2.1.3.4 The dividends received on the shares are used to repay the interest accumulated on the loans.
155 2.1.3.5 The Indluplace shares have been pledged as security to the company for the outstanding loans. 2.1.3.6 The current fair value of the security is R4.26 per Indluplace share as at 12 July 2019.
2.1.4 Gemgrow share purchase and option scheme 2.1.4.1 The loans were granted to qualifying juristic persons of the executive directors for the purpose of subscribing for shares in the company as per the Gemgrow share purchase and option scheme and in terms of the Companies Act. 2.1.4.2 The loans bear interest at the equal rate to the distribution declared and is calculated at 31 March and 30 September and is repayable at any time by the employee but not later than 10 years from the making of the loan. 2.1.4.3 The dividends received on the shares are used to repay the interest accumulated on the loans and the company has recourse against the juristic entity for any amounts unpaid under the Indluplace share purchase and option scheme. 2.1.4.4 The shares have been pledged as security to the company for the outstanding loans and the company has recourse against the juristic entity for any amounts unpaid under the Gemgrow share purchase and option scheme Ownership of the shares purchased vests immediately in the executive directors and employees, but there is a pledge of the shares as security against the loans. 2.1.4.5 The dividends received on the Gemgrow shares are used to repay the interest accumulated on the loans. 2.1.4.6 The Gemgrow shares have been pledged as security to the company for the outstanding loans. 2.1.4.7 The current fair value of the security is R4.74 per Gemgrow B share as at 12 July 2019.
156 Set out below are loans provided and amounts owing by directors of Arrowhead (including Indluplace) and Gemgrow Loans to participants in terms of the Arrowhead group share purchase option schemes (R) 31 March 2019 Balance at the beginning of the year 736 215 857 Advances 41 149 636 Interest charged on loans 32 549 296 Repayments – executives and staff (3 717 794) Amounts transferred to trade and other receivables (31 651 760) Balance at the end of the period 774 545 235 Loans to participants of Arrowhead share purchase trust Owing by the following directors: M Kaplan R173 084 972 2013 financial year (date on which the loan was made: 7 December 2012) –– Issued 1 587 302 Arrowhead A shares at R6.55 and 1 587 302 Arrowhead B shares at R6.05 on 7 December 2012 2014 financial year (date on which the loan was made: 13 November 2013) –– Issued 1 850 900 Arrowhead A shares at R6.99 and 1 850 900 Arrowhead B shares at R6.90 on 13 November 2013 2015 financial year (date on which the loan was made: 10 November 2014) –– Issued 2 124 008 Arrowhead A shares at R7.95 and 2 124 008 Arrowhead B shares at R7.92 on 10 November 2014 2016 financial year (date on which the loan was made: 17 November 2015) –– Issued 1 674 898 Arrowhead A shares at R9.71 and 1 674 898 Arrowhead B shares at R9.50 on 17 November 2015 2017 financial year (date on which the loan was made: 17 November 2016) –– Issued 3 748 005 ordinary shares at R8.66 on 17 November 2016 2018 financial year (date on which the loan was made: 1 December 2017) –– Issued 4 864 453 ordinary shares at R6.25 on 18 December 2017
* M Kaplan transferred control of 585 704 ordinary shares to the Company with the Company having the right to dispose of these shares to settle the balance of the loan granted in 2012 of R2 735 238 I Suleman (resigned 29 May 2019) R169 007 857 2013 financial year (date on which the loan was made: 7 December 2012) –– Issued 1 388 889 Arrowhead A shares at R6,55 and 1 388 889 Arrowhead B shares at R6,05 on 7 December 2012 2014 financial year (date on which the loan was made: 13 November 2013) –– Issued 1 746 075 Arrowhead A shares at R6,99 and 1 746 075 Arrowhead B shares at R6,90 on 13 November 2013 2015 financial year (date on which the loan was made: 10 November 2014) –– Issued 2 124 008 Arrowhead A shares at R7,95 and 2 124 008 Arrowhead B shares at R7,92 on 10 November 2014 2016 financial year C –– Issued 1 674 898 Arrowhead A shares at R9,71 and 1 674 898 Arrowhead B shares at R9,50 on 17 November 2015 2017 financial year (date on which the loan was made: 17 November 2016) –– Issued 3 748 005 ordinary shares at R8,66 on 17 November 2016 2018 financial year (date on which the loan was made: 1 December 2017) –– Issued 4 864 453 ordinary shares at R6,25 on 18 December 2017
* I Suleman transferred control of 209 332 ordinary shares to the Company with the Company having the right to dispose of these shares to settle the balance of the loan granted in 2012 of R977 581
157 Loans to participants in terms of the Arrowhead group share purchase option schemes (R) 31 March 2019 R Kader R25 511 663 2015 financial year (date on which the loan was made: 10 November 2014) –– Issued 500 000 Arrowhead A shares at R9,96 and 500 000 Arrowhead B shares at R10,08 on 10 November 2014 2016 financial year (date on which the loan was made: 17 November 2016) –– Issued 260 281 Arrowhead A shares at R9,71 and 260 281 Arrowhead B shares at R9,50 on 17 November 2015 2018 financial year (date on which the loan was made: 1 December 2017) –– Issued 1 617 701 ordinary shares at R6,25 on 18 December 2017 Total R367 604 492 Loans to participants of Arrowhead share purchase trust Owing by the following employees: C de Wit R2 829 578 2015 financial year (date on which the loan was made: 10 November 2014) –– Issued 196 912 Arrowhead A shares at R7.95 and 196 912 Arrowhead B shares at R7.92 on 10 November 2014 V Turner R3 668 379 2015 financial year (date on which the loan was made: 10 November 2014) –– Issued 173 283 Arrowhead A shares at R7.95 and 173 283 Arrowhead B shares at R7.92 on 10 November 2014 2018 financial year (date on which the loan was made : 18 December 2017) –– Issued 512 512 ordinary shares at R6.25 on 18 December 2017 N Kaplan R2 864 346 2015 financial year (date on which the loan was made: 10 November 2014) –– Issued 55 135 Arrowhead A shares at R7.95 and 55 135 Arrowhead B shares at R7.92 on 10s November 2014 2019 financial (date on which the loan was made: –– Issued 331 531 Arrowhead shares at R6.25 on 25 February 2019 A de Kock R1 117 800 2018 financial year (date on which the loan was made: 18 December 2017) – Issued 178 848 Arrowhead shares at R6.25 on 18 December 2017 Total R10 480 103
158 Loans to participants in terms of the Arrowhead group share purchase option schemes (R) 31 March 2019 Loans to participants of Indluplace share purchase and option scheme Owing by the following directors of Indluplace: G Leissner* R52 738 090 2015 financial year (date on which the loan was made: 4 August 2015) –– Issued 5 273 809 shares at R10,00 on 30 September 2015 M Kaplan R52 738 090 2015 financial year (date on which the loan was made: 4 August 2015) –– Issued 5 273 809 shares at R10,00 on 30 September 2015 I Suleman (resigned 29 May 2019) R52 738 090 2015 financial year (date on which the loan was made: 4 August 2015) –– Issued 5 273 809 shares at R10,00 on 30 September 2015 C de Wit R44 821 550 2015 financial year (date on which the loan was made: 4 August 2015) –– Issued 1 757 936 shares at R10,00 on 30 September 2015 2016 financial year (date on which the loan was made: 1 December 2016) –– Issued 900 000 shares at R9.30 on 29 November 2016 2017 financial year (date on which the loan was made: 6 December 2017) –– Issued 937 864 shares at R9.46 on 6 December 2017 2018 financial year (date on which the loan was made: 7 December 2018) –– Issued 1 424 501 shares at R7.02 on 7 December 2018 T Kaplan R24 490 991 2016 financial year (date on which the loan was made: 1 December 2016) –– Issued 810 860 shares at R9.30 on 29 November 2016 2017 financial year (date on which the loan was made: 6 December 2017) Issued 840 380 shares at R9.46 on 6 December 2017 2018 financial year (date on which the loan was made: 7 December 2018) –– Issued 1 282 051 shares at R7.02 on 7 December 2018 Total R227 526 811
* G Leissner (deceased) – shares not sold due to unfavourable market conditions.
159 Loans to participants in terms of the Arrowhead group share purchase option schemes (R) 31 March 2019 Loans to participants of Gemgrow share purchase and option scheme Owing by the following directors of Gemgrow and Arrowhead: M Kaplan R40 903 585 2016 financial year (date on which the loan was made: 1 December 2016) –– Issued 6 000 000 Gemgrow B shares at R6.79 on 01 October 2016 I Suleman (resigned 29 May 2019) R40 903 585 2016 financial year (date on which the loan was made: 1 December 2016) –– Issued 6 000 000 Gemgrow B shares at R6.79 on 01 October 2016 A Kirkel R43 597 940 2016 financial year (date on which the loan was made: 1 October 2016) –– Issued 3 000 000 Gemgrow B shares at R6.79 on 01 October 2016 2017 financial year (date on which the loan was made: 14 November 2017) –– Issued 2 171 497 Gemgrow B shares at R6.10 on 14 November 2017 2018 financial year (date on which the loan was made: 8 December 2018) –– Issued 1 571 428 Gemgrow B shares at R6.30 on 5 December 2018 J Limalia R43 528 718 2016 financial year (date on which the loan was made: 1 October 2016) –– Issued 3 000 000 Gemgrow B shares at R6.79 on 1 October 2016 2017 financial year (date on which the loan was made: 14 November 2017) –– Issued 2 160 149 Gemgrow B shares at R6.10 on 14 November 2017 2018 financial year (date on which the loan was made: 8 December 2018) –– Issued 1 571 428 Gemgrow B shares at R6.90 on 5 December 2018 Total R168 933 828 Total R774 545 235
160 ANNEXURE 20
TRADING OF GEMGROW SHARES
Set out below is a table showing the aggregate volumes and values traded, closing price and the highest and lowest prices traded in Gemgrow shares for: • each month over the 12 months preceding the last practicable date prior to the date of issue of this prospectus; and • each day over the 30 days preceding the last practicable date and prior to the date of issue of this prospectus
Trading of Gemgrow A shares High Low Close Value Period (cents) (cents) (cents) Volume Traded (R) Monthly 2018 July 997 985 985 126 419 125 567 August 990 985 985 56 230 55 487 September 987 377 945 235 303 222 497 October 1 000 850 1 000 574 415 529 003 November 1 000 925 951 576 626 552 413 December 970 900 936 82 258 76 094 2019 January 934 910 934 157 254 145 326 February 981 934 980 649 819 625 346 March 980 950 950 515 124 497 313 April 1 001 950 1 000 1 369 645 1 363 621 May 1 025 1 000 1 025 171 416 175 294 June 1 035 970 980 7 799 891 7 647 768 Daily 2019 29 May 1 025 1 025 1 025 2 500 2 562 500 30 May 1 025 1 025 1 025 10 858 11 129 450 31 May 1 025 1 025 1 025 35 623 36 513 580 3 June 1 025 1 025 1 025 8 900 9 122 500 4 June 1 035 1 035 1035 31 340 32 436 900 5 June 1 010 980 980 7 715 860 7 563 427 000 6 June 980 980 980 3 993 3 913 140 7 June 980 980 980 6 288 6 162 240 10 June 980 980 980 – – 11 J u n e 980 980 980 – – 12 June 980 980 980 – – 13 June 980 980 980 – – 14 June 980 980 980 385 377 300 18 June 980 980 980 – – 19 June 980 980 980 – – 20 June 980 980 980 8 621 8 448 580 21 June 970 970 970 13 346 12 945 620 24 June 980 980 980 11 158 10 934 840 25 June 980 980 980 – – 26 June 980 980 980 – – 27 June 980 980 980 – – 28 June 980 980 980 – – 1 July 980 980 980 – –
161 High Low Close Value Period (cents) (cents) (cents) Volume Traded (R) 2 July 980 980 980 – – 3 July 980 980 980 – – 4 July 980 980 980 – – 5 July 995 995 995 800 796 000 8 July 995 995 995 – – 9 July 995 995 995 – – 10 July 996 995 996 12 681 12 628 580
Source: Bloomberg
162 Trading of Gemgrow B shares High Low Close Value Period (cents) (cents) (cents) Volume Traded (R) Monthly 2018 July 640 615 635 208 273 129 898 August 640 600 640 72 311 44 552 September 640 634 635 95 000 60 305 October 635 630 630 105 491 66 636 November 630 630 630 97 516 61 435 December 698 600 600 277 171 2019 January 600 599 599 36 000 21 564 February 599 599 599 65 144 39 021 March 599 590 598 20 019 11 898 April 598 594 594 133 356 79 218 May 594 515 515 18 156 9 424 June 517 474 474 91 375 43 580 Daily 2019 29 May 515 515 515 – – 30 May 515 515 515 – – 31 May 515 515 515 – – 3 June 515 515 515 – – 4 June 517 515 517 30 155 5 June 517 517 517 – – 6 June 517 517 517 – – 7 June 517 517 517 – – 10 June 517 517 517 – – 11 J u n e 517 517 517 – – 12 June 517 517 517 – – 13 June 517 517 517 – – 14 June 480 475 480 7 833 37 462 18 June 478 477 478 76 426 364 552 19 June 478 478 478 – – 20 June 478 478 478 – – 21 June 478 478 478 1 186 5 669 24 June 478 478 478 – – 25 June 475 475 475 39 185 26 June 475 475 475 – – 27 June 474 474 474 5 861 27 781 28 June 474 474 474 – – 1 July 474 474 474 – – 2 July 475 474 475 94 446 3 July 475 475 475 – – 4 July 475 475 475 – – 5 July 475 475 475 – – 8 July 475 475 475 – – 9 July 475 474 475 110 522 10 July 475 475 475 – –
Source: Bloomberg
163 ANNEXURE 21
RISK FACTORS
Gemgrow’s major risks are listed below. This list is not exhaustive. Additional risks not presently known to Gemgrow or which the board currently considers immaterial may also adversely impact Gemgrow’s business operations. The summarised risk matrix set out below includes significant risks, the impact of these risks, and the mitigating response of the company. Risk Level Mitigating factor Fraud and errors Moderate Internal controls, schedules of payments and cash balances are tested and reviewed regularly. Errors are made or fraud is committed either by an employee of the company or its property manager. Vacancies Moderate Wide spread of tenants and properties from a geographic and sector perspective. Tenants are contacted timeously to Substantial loss of revenue resulting in a negotiate lease renewals. Active marketing policies and decrease in distributions. incentives are pursued for vacant premises. Tenant failure and recoverability Moderate Management focus on reducing costs of property of rent Emphasis on reducing utility usage by updating buildings and pursuing new designs, incorporating more efficient materials Decline in rental income and increase in Portfolio negotiations with suppliers of services to reduce holding costs resulting in inability to meet costs. financing commitments and covenants. Negative impact on the market’s perception of the property, and possible contagion effect of other tenants leading to a decline in market value of property. Business continuity Low Comprehensive processes are in place to protect data. A disaster recovery plan is in place which is tested once a Loss of company data. year. Interest rates Low 80% of borrowings are hedged through fixed rate loans and interest rate swaps. The cost of borrowings is monitored Upward movement in interest rates closely and where appropriate, borrowings are restructured. reduce dividends. As part of the treasury function, the company deposits excess funds into its access facilities. Liquidity Low Regular cash forecasts are prepared and monitored. Maturity of loans is managed. Insufficient cash flows to manage operations and pay dividends. Investments Low The investment committee approves all acquisitions after a detailed due diligence is performed. All decisions made by the Properties are acquired which do not fit investment committee must be unanimous. No property investment criteria. should represent more than 10% of the value of the company’s portfolio unless the investment proposition merits the acquisition. Property damage or destruction Low All properties are insured at replacement value and for loss of income. The policy provides a window in which to cover new Damage to properties by fire or other acquisitions. causes could result in a loss of income. Properties acquired are not insured.
164 Risk Level Mitigating factor Concentration of lease expiries Low Management regularly monitors lease expiries, which are well spread. Ongoing efforts are made to lengthen lease periods. Could result in a loss in rental revenue, Negotiate leases in advance of expiries. with premises being let at below market rentals and increased holding costs. Regulatory and compliance Low Adequate insurance is in place to cover key insurance risks. Board members endeavour to ensure compliance with the Possible non-compliance with regulatory highest professional standards. There is ongoing consultation requirements could result in reputational with professional advisors to ensure compliance. damage and financial loss. Human resources Low Staff members’ packages are competitive, and they receive performance bonuses and incentives. Loss of key staff members. Loss of With effect from the implementation date there will be executives. service contracts in place for the executive directors for a period of five years. Operational risk Low Monthly management meetings are held with property managers to assess the performance of the portfolio. There is Loss of earnings due to poor processes and regular feedback from the internal audit function of the controls. property manager and adoption and monitoring by management of appropriate risk management practices. IT Low Each team member has a laptop which is backed up regularly. Reliance is placed on ERES for disaster recovery and most IT Unauthorised users gain access to the processes. ERES audits its IT systems and is ISO compliant. systems, failure of the systems or information is compromised. Hijacking of company Low Company secretary conducts regular checks of the details recorded by CIPC. The company being hijacked for fraudulent purposes.
165 ANNEXURE 22
CORPORATE GOVERNANCE STATEMENT
Gemgrow’s Board considers sound corporate governance practices to be a critical element in delivering sustainable growth for the benefit of all stakeholders. In conducting the affairs of the company, the Board applies the principles of fairness, responsibility, transparency and accountability. Gemgrow complies with the Companies Act and endorses the principles of King IV and continues to refine the process of ongoing disclosure on corporate governance, including in respect of those contained in the JSE Listings Requirements. In regularly reviewing Gemgrow’s governance structures, the Board exercises and ensures effective and ethical leadership, always acting in the best interests of the company, and at the same time concerning itself with the sustainability of its business operations. The Board recognises that it is the ultimate custodian of corporate governance. The directors of the company subscribe to the principle that they are accountable to shareholders as well as having an obligation to all stakeholders, to ensure that the company is, and is seen to be a good corporate citizen. The Board appreciates that strategy, risk, performance and sustainability are inseparable. A formally appointed social and ethics sub-committee of the Board has been constituted to assist the Board with social and ethics related matters. The social and ethics committee monitors the company’s ethics and endeavours to ensure that such ethics pervade the culture of the company. The Board charter, which is reviewed annually, details the Board’s responsibilities and terms of reference. It has been developed to enable the directors to maintain effective control over the strategic, financial and compliance matters of Gemgrow. The Board is accountable to the shareholders and it directs Gemgrow to achieve profitability by exercising good judgement, strong leadership as well as acting with integrity at all times.
The Board of directors Composition and skills of the Board The Board is responsible for the strategic direction and control of the company. It exercises control through a governance framework that includes the review and implementation of detailed reporting presented to it and its subcommittees and the implementation of a continuously updated risk management programme. Pursuant to the implementation of transaction, the Board will comprise of ten directors, six of whom are independent non‑executive directors. The executive directors will comprise a chief executive officer (CEO), Mark Kaplan, a chief investment officer (CIO), Alon Kirkel, a chief financial officer (CFO), Junaid Limalia and a chief operating officer (COO), Riaz Kader. The chairman will be an independent non-executive director whose role is separate and distinct from that of the CEO. The company recognises the importance of and value added by diversity in the composition of a board of directors. The board recognises that diversity of skills, experience, background, knowledge, thought, culture, race and gender strengthens the board’s ability to effectively carry out its duties and add value to the group. The Board composition is kept under review and any shortfalls in terms of diversity, skills and experience are identified and addressed accordingly. Deliberations and appointments of the Board are formal and transparent and a matter for the Board as a whole, with the Board assisted by the remuneration and nomination committee. Any director appointed during the year is required to have the appointment confirmed by shareholders at the next annual general meeting. Each Board member contributes to the wide range of knowledge, expertise, commercial and technical experience and business acumen that allows the Board to exercise independent judgement in Board deliberations and decision-making. The CEO has overall responsibility and accountability for the operations of the company. The chairman leads the Board and ensures that relations between the executive and the Board are constructive. The Board will be chaired by independent non-executive director, Matthew Nell. The CEO and other executive directors are responsible for the implementation of strategy and decisions in respect of operational issues. Non-executive directors contribute their independent and objective knowledge and experience to Board deliberations. All non-executive directors are appropriately qualified, with the necessary skills and expertise to make a positive contribution to the operations.
166 Directors are encouraged to take independent advice at the cost of the company for the proper execution of their duties and responsibilities. The Board has unrestricted access to the external auditors, professional advisors, the services of the company secretary, the executives and the staff of the company. An induction programme is provided for new directors.
Independence of Board members The independent non-executive directors exercise significant influence at meetings. Competency in conducting the affairs of Gemgrow carries as much weight as independence. The independence of the directors was assessed and was confirmed in terms of Recommendation 28 of Principle 7 of King IV. The responsibilities of the independent non-executive Chairman and CEO, and likewise the responsibilities of executive and non-executive directors, are kept strictly separate, to ensure that no director can exercise unrestricted powers of decision‑making.
Rotation and tenure The Board continuously assesses the need for new appointments to the Board, with directors appointed through a formal process. At each annual general meeting (“AGM”) one third of the directors for the time being, or if their number is not three or a multiple of three, the number nearest to one third but not less than one third, retire from office and, if eligible, offer themselves for re-election. The appointment of directors to fill any casual vacancy that arises during the year is confirmed at the next AGM.
Induction and development training Upon appointment, all new directors undergo an approved induction programme. This is done with the express intent of ensuring that directors fully appreciate and understand the complexities of Gemgrow’s businesses. Training of Board members is arranged at the company’s expense as and when required. There is no formal Board mentorship programme in place, as it is not deemed necessary at this stage and mentorship is provided to directors when guidance is required.
Information requirements In order to make informed decisions, it is vital that directors are provided with adequate information to inform their understanding in respect of the matter at hand. The Board keeps under review the information needed by directors to enable them to perform their duties and fulfil their obligations responsibly. All directors have access to the company’s records, information, documents and property as required. Non-executive directors also have unfettered access to management at any time. Directors are informed timeously of matters that will be discussed at meetings and are provided with comprehensive information packs well in advance of meetings.
Board charter The Board has adopted a charter that sets out the practices and processes it follows in discharging its responsibilities. The charter specifically sets out a description of roles, functions, responsibilities and powers of the Board, the shareholders, the chairman, individual directors, company secretary, and other prescribed officers and executives of the company. The terms of reference of the Board and its committees deal with matters such as corporate governance, directors’ dealings in securities, declarations of conflicts of interest, Board meeting documentation and procedures for the nomination, appointment, induction, training and evaluation of the directors. There is an appropriate balance of power and authority on the Board so that no individual has unfettered powers of decision- making and no individual dominates the Board’s deliberations and decisions. The Board regularly reviews the decision-making authority given to management as well as those matters reserved for decision-making by the Board. The Board’s responsibilities include: • The Board of directors determines Gemgrow’s purpose, values and stakeholders relevant to its business and develops strategies combining all three elements. The Board ensures that procedures are in place to monitor and evaluate the implementation of its strategies, policies, senior management’s performance criteria and the company’s business plans.
167 • The Board reviews and approves the financial objectives, plans and actions, including significant capital allocations and expenditure. • The Board exercises leadership, integrity and judgement, based on fairness, accountability, responsibility and transparency. • The Board provides strategic direction to Gemgrow and ensures that succession planning is in place. • The Board ensures that Gemgrow complies with all relevant laws, regulations and codes of best business practice and communicates with its shareholders and relevant stakeholders (internal and external) openly and promptly and with substance prevailing over form. • The Board regularly reviews processes and procedures to ensure the effectiveness of Gemgrow’s internal systems of control, so that its decision-making capability and the accuracy of its reporting are maintained at a high level at all times. • The Board defines the levels of materiality, reserving specific powers to itself and delegating other matters with the necessary written authority to management. • The Board has unrestricted access to all Gemgrow’s information, records, documents and property. • The Board has an agreed procedure whereby, if necessary, directors may take independent professional advice at Gemgrow’s expense. • The Board considers whether or not its size, diversity and skills mix makes it effective. • The Board identifies key risk areas and key performance indicators, which are regularly monitored with particular attention given to technology and systems. • The Board identifies and monitors the non-financial aspects relevant to the business of Gemgrow. • The Board records the facts and assumptions on which it relies to conclude that the business will continue as a going concern in the financial year ahead. • The Board finds the correct balance between performing in an entrepreneurial way while ensuring compliance with best practice in terms of corporate governance. • The Board has established sub-committees to facilitate efficient decision making. It has established an investment committee, an audit and risk committee, a remuneration and nomination committee and a social and ethics committee. The Board has clearly defined the parameters of the sub-committees. • The Board assesses its own effectiveness in fulfilling these and other Board responsibilities.
Board processes Company Secretary The company secretary provides company secretarial services, oversees corporate governance processes at holding company level, and attends all Board and committee meetings. The Board and the individual directors have unrestricted access to the company secretary who guides them on how they should discharge their duties and responsibilities in the best interests of the company. The company secretary will continue to assist the Board and its committees, as required, in preparing annual plans, agendas, minutes, and terms of reference. The Company Secretary, Ms Gillian Prestwich of CIS Company Secretaries Proprietary Limited (“CIS”), who holds a: • BA degree (University of the Witwatersrand); • Fellow of the Institute of Chartered Secretaries and Administrators (FCIS); and • a Diploma in International Trust Management (TEP), has extensive experience in the company secretarial and corporate governance arenas both locally and internationally. The company secretary is neither a director nor employee of the company or any of its subsidiaries and accordingly, maintains an arm’s length relationship with the company and the directors.
Regulatory and legislative compliance The Board has delegated to executive management the implementation of an effective compliance framework and processes. The Board and each individual director have a good working knowledge of the effect of the applicable laws, rules, codes and standards on the company and its operations. The company’s internal legal resources, external legal advisors, sponsor and company secretary advise the Board in respect of any amendments to legislation and regulations applicable to the company. The social and ethics committee monitors the company’s compliance with all applicable legislation and regulations. Compliance risk is monitored on an ongoing basis both by the company’s internal legal resources, its external legal advisors and the company secretary.
168 Gemgrow’s compliance with legislative and regulatory requirements is a standing agenda item for all Board and committee meetings. There were no significant instances of non-compliance with regulatory requirements to report on during the reporting period.
Board and committee effectiveness The chairman reviews the Board’s performance informally on an ongoing basis which includes monitoring the contributions made by each of the directors. Given the skill and experience of the current Board, the Board believes that informal assessments are adequate at this time. The Board periodically conducts an evaluation of its mix of skills, the effectiveness of the subcommittees and related corporate governance matters. The Board is committed to the principle of gender and race diversity. All new appointments to the Board will be considered in the context of achieving voluntary diversity targets including gender and race while keeping the operational requirements of the company in mind. The Board will have a policy on the promotion of gender diversity at board level. Gemgrow will report to shareholders in its annual report on how the Board has considered and applied the policy of gender diversity in the nomination and appointment of directors. If applicable, the Board will report progress in respect thereof on agreed voluntary targets. The Board will have a policy on the promotion of racial diversity at board level. Gemgrow will report to shareholders in its annual report on how the Board has considered and applied the policy of racial diversity in the nomination and appointment of directors. If applicable, the Board will report progress in respect thereof on agreed voluntary targets.
Succession planning The remuneration and nomination committee is responsible for ensuring adequate succession planning for directors and management, and that all committees are appropriately constituted and chaired. The Board is satisfied that the depth of skills among current directors meets succession requirements. Succession planning at management level is actively monitored by management and communicated to the Board.
Delegation of authority – Board committees Function of the Board committees The committees assist the Board in discharging its responsibilities and duties, while overall responsibility remains with the Board. Full transparency and disclosure of committee deliberations is encouraged and the minutes of all committee meetings are available to all directors. The approvals framework, which is reviewed from time to time, ensures that there is a clear balance of power between the various Board members. The Board of Gemgrow delegates certain of its functions to the committees and others to the executive directors of the Board. Formal terms of reference set out the purpose, membership, duties and reporting procedures of the various Board committees, which are reviewed annually and updated where necessary. Each committee acts within the scope of these terms of reference, which have been adopted and approved by the Board. The Board evaluates the performance and effectiveness of each committee on an annual basis. While retaining overall accountability and responsibility, the Board has delegated the authority to run the day-to-day affairs of Gemgrow to the CEO. The executive directors aid the CEO in this task. The execuitve committee meets monthly to assist the CEO in the management of group operations and finances and reports directly to the CEO, who in turn reports to the Board.
Audit and risk committee The Companies Act has transformed the audit committee from being a committee of the Board to a separate statutory committee that is appointed by shareholders. The audit committee still forms part of the Board even though it has specific statutory responsibilities over and above the responsibilities assigned to it by the Board. The committee members have the requisite financial and commercial skills to make an effective contribution to the committee’s deliberations. The Board oversees the management of risk and has delegated the process to the audit and risk committee. It reports to shareholders on the extent to which it carried out its statutory oversight duties in respect of the external auditors, the appropriateness of the financial statements and the accounting practices, as well as the internal financial controls. The risk management policy adopted by the Board is aligned with industry practice and Gemgrow may not enter into any derivative transactions that are not in the normal course of its business in compliance with REIT provisions of the JSE Listings Requirements.
169 The audit committee will ensure that Gemgrow has established appropriate financial reporting procedures and that those procedures are operating effectively. The audit committee will request from its audit firm (and if necessary consult with the audit firm on) the information required in terms of Section 22.15 (h) of the Listings Requirements; which is information regarding who are their clients; in their assessment of the suitability for appointment of their current or a prospective audit firm and designated individual partner both when they are appointed for the first time and thereafter annually for every re-appointment. The committee comprises three independent non-executive directors. Pursuant to the implementation of the transaction, the audit committee will comprise of: • Selwyn Noik (Chair) • Arnold Basserabie • Greg Kinross all of whom are independent non-executive directors. The CEO, COO, CIO and CFO, as well as representatives of the external auditors, attend meetings by invitation. Well in advance of meetings, the audit and risk committee receives reports on the financial performance, internal controls, adherence to accounting policies, compliance and areas of significant risk as well as written reports from the auditors. It is the responsibility of the audit and risk committee to monitor the adequacy and effectiveness of internal controls and risk management processes generally. The company has an effective ongoing process for identifying risk, measuring its potential impact and initiating and implementing measures to reduce exposure to an acceptable level. External specialist consultants are utilised, where required, to assist the audit and risk committee with risk management measures. The audit and risk committee also has unrestricted access to independent expert advice, after following the agreed procedures, should the need arise. The number of audit and risk committee meetings held will be disclosed in the company’s integrated annual report for the financial year-ending September 2019. As required by the JSE, the audit committee will consider, on an annual basis, and satisfy itself of the appropriateness and expertise of the financial director. In this regard, the finance function annual evaluation of the financial director was undertaken during the 2018 financial year, and the committee and the Board were satisfied as to the appropriateness of the expertise and experience of the CFO. The committee was also satisfied that the resources within the finance function were able to provide the required support to the CFO. Furthermore, based on the processes and assurances obtained, the committee has satisfied itself and is of the opinion that the accounting practices are effective. The committee will continue to ensure that its external auditor is independent of the company and of the group. The audit and risk committee will review sections 3, 8, 13, 15 and 22 and schedule 8 of the Listings Requirements and confirm that it is satisfied that: i. the audit firm meets all the criteria stipulated in the requirements, including that the audit regulator has completed a firm-wide independent quality control inspection on the audit firm during its previous inspection cycle; ii. the auditors provides to the audit and risk committee, the required IRBA inspection decision letters, findings report and the proposed remedial action to address the findings; and iii. both the audit firm and the individual auditor understand their roles and have the competence, expertise, experience and skills required to discharge their audit and financial reporting responsibilities. For further information pertaining to the audit and risk committee, refer to the audit and risk committee report commencing on page 66 of the 2018 Gemgrow integrated annual report.
Remuneration and nomination committee The remuneration and nomination committee comprises three independent non-executive directors, whose primary responsibilities include approving the remuneration policy of the company, monitoring its implementation, ensuring that directors and senior executives are remunerated fairly and responsibly as well as identifying, assessing and nominating new non-executive directors for appointment to the Board. Any new appointees are required to possess the necessary skills to contribute meaningfully to Board deliberations and to enhance Board composition in accordance with recommendation, legislation, regulations and best practice.
170 The committee considers the mix of basic remuneration, annual bonuses and performance related incentive elements. Incentives are based on targets that are stretching, verifiable and relevant. The remuneration and nomination committee is mandated by the Board to approve the remuneration and incentivisation of all employees, including executive directors. In addition, the remuneration and nomination committee recommends directors’ fees payable to non-executive directors and members of Board sub-committees, for ultimate approval by shareholders. Pursuant to the implementation of the transaction, the members of the committee will be: • Taffy Adler (Remuneration committee Chair) • Matthew Nell (Nomination committee Chair) • Selwyn Noik The CEO, COO, CIO and CFO attend meetings by invitation. For further information pertaining to the company’s remuneration policy, the remuneration and nomination committee and its responsibilities refer to the remuneration report commencing on page 70 of the 2018 Gemgrow integrated annual report. The number of remuneration and nomination committee meetings held will be disclosed in the company’s integrated annual report for the financial year-ending September 2019.
Voting on the remuneration policy and remuneration implementation report Gemgrow will put the remuneration policy and remuneration implementation report to two separate, non-binding votes at the AGM to be held on 5 February 2019. In the event that 25% or more of the shareholders vote against either or both the remuneration policy and/or remuneration implementation report, Gemgrow will invite dissenting shareholders to engage with them on their reasons for voting against either or both of these resolutions. The precise method of shareholder engagement will be decided by the remuneration and nomination committee but these will include correspondence via email and investor roadshows (where deemed appropriate). The results of the shareholder engagement, and the remuneration and nomination committee’s response to shareholder concerns, will thereafter be published in Part I of the remuneration report at the end of the following financial year.
Social and ethics committee The social and ethics committee acts on behalf of the Board and is responsible for ensuring that the company conducts its operations in a socially and ethically responsible manner as provided for in the Companies Act. The social and ethics committee has all the functions and responsibilities provided for in the Companies Act. The social and ethics committee is chaired by the CFO and otherwise comprises an independent non-executive and the COO. Pursuant to the implementation of the transaction, the members of the committee will be: • Sam Mokorosi (Chair) • Taffy Adler • Mark Kaplan For further information pertaining to the social and ethics committee, refer to the social and ethics committee report commencing on page 69 of the 2018 Gemgrow integrated annual report. The number of social and ethics committee meetings held will be disclosed in the company’s integrated annual report for the financial year-ending September 2019
Investment committee The role of the Board-appointed investment committee is to consider and approve, on behalf of the company and its subsidiaries, investment opportunities in line with the investment strategy of Gemgrow, and to approve capital expenditure relating to improvements to the property portfolio as well as to approve the sale of properties which have been identified for disposal, as defined in its Board-approved terms of reference. The investment committee gives due regard to the principles of sound governance and codes of best practice in the execution of its duties. The investment committee comprises five members appointed by the Board of directors namely three executive and two independent non-executive directors. The Board chairman is also the chairman of this committee.
171 Pursuant to the implementation of the transaction, the investment committee will comprise of: • Mark Kaplan • Riaz Kader • Matthew Nell • Sam Mokorosi • Alon Kirkel • Arnold Basserabie • Greg Kinross The number of investment committee meetings held will be disclosed in the company’s integrated annual report for the financial year-ending September 2019.
Subsidiaries Gemgrow’s subsidiary companies subscribe to the holding company’s governance framework. Subsidiary oversight is handled through the process of delegated authority, which is in place between the holding and operating companies to ensure adherence to Gemgrow’s overall commitment to the principles of ethical leadership and good corporate governance.
Board meetings The Board meets with management annually to agree on Gemgrow’s strategy. Additional meetings are convened when required. All necessary information, including a detailed Board pack, is provided to directors in advance to enable them to discharge their responsibilities. The Board agenda and meeting structure focuses on strategy, performance monitoring, governance and related matters. Management ensures that Board members are provided with all relevant information and facts to enable them to make objective and informed decisions. The company’s memorandum of incorporation provides for decisions to be taken between Board meetings by way of written resolution, where necessary. Non-executive directors meet without the presence of management as and when deemed necessary. The charters of the Board committees are reviewed annually as standard practice, committee chairpersons provide the Board with reports on committee activities and the minutes of committee meetings are made available to the Board. There is full transparency and disclosure between these committees and the Board. In addition, the chairs of the committees, or a nominated committee members attend the company’s annual general meeting to answer any questions from stakeholders pertaining to the relevant matters handled by their respective committees. All committees have met their key responsibilities during the year under review.
Internal audit Having regard to the size and life-stage of the company, the Board has determined that a dedicated internal audit function is not warranted at this stage. Use is made of external specialists, including resources of the external property managers in respect of the internal audit function. The situation in this regard will be reassessed by the audit and risk committee on a regular basis.
Information technology (“IT”) management Having regard to the size and life-stage of the company the Board believes that the IT governance policy is appropriate and is aligned with the performance and sustainability objectives of the company. The Board assigns IT and its information assets the necessary importance and, in furtherance hereof, it ensures that its information assets are managed effectively. Use is made of external specialists, including the resources of the external property managers, in respect of the IT functions. The Board has delegated the implementation of its IT governance framework to its external property manager. The Board monitors and evaluates investment and expenditure in respect of IT on an annual basis. IT forms an integral part of the company’s risk management processes, as does the external property manager, which has disaster recovery processes and business continuity planning procedures in place (and is ISO compliant).
172 Ethical performance Share dealings and disclosure of interests The Board of directors, individually and collectively, understands the fiduciary duty to act in the best interests of the company. Conflicts of interest are disclosed in terms of section 75 of the Companies Act, with disclosures of interest and director’s dealings reported on in accordance with a policy adopted by the Board in this regard. All directors require clearance before trading in the company’s securities. Prior approval to trade must be obtained from the CEO or, in his absence, from the Chairman. The CEO must obtain clearance from the Chairman or a designated director, prior to trading in the company’s securities. Directors are required to inform their portfolio/investment managers not to trade in the securities of the company, unless they have specific written instructions from that director to do so. Directors cannot trade in their shares during closed periods. Directors are further prohibited from dealing in the company’s shares at any time when they are in possession of unpublished and price-sensitive information, or where clearance to trade has yet to be confirmed. The required notification and disclosure by directors to the company of their interests is a standard agenda item at each Board meeting. Information regarding directors’ interests is set out in the annual financial statements.
Stakeholder communications Gemgrow strives to take account of the competing needs of the various stakeholders, while still acting in the best interests of the company. Information is disseminated to the market in a timely manner, with all stakeholders treated equally in this regard. Information is posted on the company’s website as well as in this integrated annual report. The company engages in regular, open and transparent dialogue with stakeholders (including institutional investors). Half- and full-year financial results, corporate actions, trading updates and announcements are published in accordance with the Listings Requirements informing stakeholders via SENS and results announcements, the integrated annual report and presentations to shareholders and analysts are also published on Gemgrow’s website. The importance of good relationships with tenants, employees and service providers is recognised. The CEO and CFO, together with the COO, present Gemgrow’s performance and strategy to analysts, institutional investors and the media in South Africa at least twice a year. Gemgrow also keeps in regular contact with the media by circulating relevant information.
Principles of King IV and disclosure requirements Disclosure regarding the principles of King IV can be located in the 2018 Gemgrow integrated report and Gemgrow’s website (www.gemgrow.co.za).
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