Integrated Report 2018 Front cover: Premier FMCG, Equites Park Lords View, Gauteng Inside cover: Tekstiel Road, Parow Industria, Cape Town. Equites Property Fund Limited Integrated Report 2018 1

About this report

Report scope and Boundary provides an overview of the group’s performance, strategy, Report Approval and Independent Assurance The board of directors (the “board”) of Equites Property Fund risks and governance. The report focuses on both the The board has approved this Integrated Report and believes Limited (“Equites”, or the “group”, or the “company”) are group’s operations in South Africa (“SA”) and in the United that it has been prepared in accordance with best practice pleased to present this fourth Integrated Report for the year Kingdom (“UK”). and addresses all material aspects of the group. Independent ended 28 February 2018. The report has been compiled in assurance has been provided over all financial and certain accordance with International Financial Reporting Standards Materiality non-financial information presented in this report. (“IFRS”), the requirements of the Companies Act of South Equites identifies the concept of materiality to represent any PricewaterhouseCoopers Inc., as our external auditors, have Africa, 2008 (the “Companies Act”), the JSE Listings item that could substantively affect the group’s ability to issued an unqualified audit opinion on our consolidated and Requirements, and the King Report on Corporate create value and influence the decisions of stakeholders. All separate financial statements. Governance for South Africa (“King IV”). This report covers items identified as being material by the board have been financial and non-financial performance of the group and disclosed in this report. Historical overview Our business Governance Contents

Historical overview Governance

About Equites 2 Social and Ethics Committee Report 24 How to navigate this report Historic timeline 4 Sustainability Report 28 Inputs Organisational Highlights Corporate Governance Report 31 Property maps 6 Board of Directors 34 Financial capital Operational and financial highlights 8 Risk Management Report 36 Remuneration Report 40 Manufactured capital Annual financial statements Our business Annual financial statements Human capital Value Creation Social and relationship capital Capital review 10 Annual financial statements 46 Total Return 12 Intellectual capital Four-year review 13 Annual General Meeting Natural capital Stakeholder engagement 14 Chairman’s Report 16 Notice of Annual General Meeting 111 Chief Executive Officer’s Report 18 Form of Proxy 119 As referenced in the King IV report Annual general meeting Annual general Q&A with the Chief Financial Officer 22 Glossary Inside back cover Refer to report within this Integrated Report Equites Property Fund Limited 2 Integrated Report 2018

About Equites

Who we are Equites is the only specialist logistics property fund on the JSE. The company is a Real Estate Investment Trust (“REIT”) with both the property and asset management functions managed internally. The company listed on the JSE on 18 June 2014 with a portfolio value of R1 billion and has grown to a portfolio value of over R8 billion at 28 February 2018.

The company aims to provide investors with Our portfolio During the current year, the group made the pure exposure to high quality logistics The majority of the company’s assets are following changes to its investment property properties let to investment grade tenants both situated in proven logistics nodes near large portfolio: in SA and the UK. The company has a proven population centres and major transport links – Acquired one completed distribution ability to identify and acquire well located and have predictable patterns of strong rental centre in the UK; logistics assets that meet the requirements of growth. The company focuses on premium – Completed three developments, two in large, institutional tenants. In SA, this is “big-box” distribution centres, let to investment SA and one in the UK; complemented with the in-house grade tenants on long-dated “triple net” leases, – Concluded two development funding development of modern logistics facilities, built to institutional specifications. The agreements relating to properties in the UK; enabled by strategic land holdings. locations of preference are Cape Town, – Commenced development on five Durban and Gauteng in SA and the central distribution centres in SA; Midlands and “last-mile” fulfilment centres – Acquired 21.7 hectares of strategic vacant near major conurbations in the UK. land; and Top left: Amazon, Stoke-on-Trent, United Kingdom – Completed the disposal of four non-core Bottom left: Puma sports distributors, Equites Park Atlantic Hills, The company controls 49.5 hectares of prime commercial properties. Cape Town Top right: Geberit, Meadowview, Gauteng industrial land in Gauteng and Cape Town Bottom right: DSV Healthcare, Meadowview, Gauteng which is being actively marketed. Equites Property Fund Limited Integrated Report 2018 3

Our team Equites had a staff compliment of 8 people upon listing in 2014 with a single head office in Cape Town managing 20 properties situated exclusively in Cape Town. Today, Equites has a largely transformed workforce of 20 employees, 15 of which are Cape Town based and 5 are Johannesburg based. The team manages a total of 50 properties situated in Cape Town, Johannesburg and the UK. Historical overview Our business

Cape Town team Johannesburg team

Back: Nasreen Mukuddem, Monique Karating, Hilda Grove, Riaan Gous, Andrea Taverna-Turisan, Bram Goossens, Back: Jeremy Cooper, Mphilo Ntuli, Gary Masombuka. Melanie Brown, Laila Razack, Belinda Ortman-Lebona. Front: Nomkululeko Ranala, Mmatebogo Magopane. Front: Chris Guattari-Stafford, Juan Knoesen, Olivia Velem, Sharon Daka, Gustav Fichardt, Wouter Hanekom. Absent: Akua Koranteng Governance

Below: Kuehne + Nagel, Coventry, United Kingdom Annual financial statements Annual general meeting Annual general Equites Property Fund Limited 4 Integrated Report 2018

Historic timeline

July 2015

June Intaprop 2014 acquisition Listed on the JSE

Triton Express, Meadowview, Gauteng.

November 2015 Capital raise

Premier, Meadowview, Gauteng. Property portfolio and NAV growth 9 000 000

8 000 000

7 000 000

6 000 000

5 000 000

4 000 000 R’000

3 000 000

2 000 000

1 000 000 Feb Feb 0 2015 2016 Jul-16 Jul-17 Jul-14 Jul-15 Jan-17 Jan-18 Jan-16 Jan-15 Jun-14 Jun-15 Apr-16 Apr-17 Apr-15 Oct-16 Oct-17 Oct-15 Oct-14 Oct-14 Aug-16 Aug-17 Aug-15 Mar-17 Mar-16 Mar-15 Dec-16 Dec-17 Dec-15 Dec-14 Nov-16 Nov-17 Nov-15 Nov-14 Sept-16 Sept-17 Sept-15 Sept-14 May-16 May-17 May-15 June-16 June-17

M Investment property M Net asset value

April 2016 Completion of first development

TFG, Equites Park Lords View, Gauteng. R’000 1 000 2 000 3 000 4 000 5 000 6 000 7 000 8 000 9 000 0

Jun-14

Jul-14

Oct-14

Sept-14

Oct-14

Nov-14

Dec-14

Jan-15

Mar-15

Apr-15

May-15

Jun-15

Jul-15

Aug-15

Sept-15

Oct-15

Nov-15

Dec-15

Jan-16

Mar-16

Apr-16

May-16 venture Attacq 2016

July June-16 acquisition First UK 2016 June Tesco, Hinckley, UK.

Jul-16 Hilti,Waterfall, Gauteng. Bottom left: Top Waterfall, Medtronic, Gauteng. left:

Aug-16

Sept-16

Oct-16

Nov-16 raise Capital 2016 November Gauteng. Stryker,Borrom right: Waterfall, Top Waterfall, Gauteng. Servest, right: Dec-16

Jan-17 2017 Feb properties commercial Disposal of 2017 February

Mar-17 Gauteng office of Equites Completion in ALSI Inclusion 2017 March

Apr-17

Equites Gauteng office, Meadowview,Equites Gautengoffice, Gauteng.

May-17

June-17 raise Capital in SAPY20 Inclusion 2017 June

Jul-17 development development

December agreement

First UK Aug-17 funding 2017

Sept-17

Oct-17 Equites Property FundLimited

Nov-17 Integrated Report 2018

Dec-17 Equites Gautengoffice

Jan-18 2018 Feb 5

Annual general meeting Annual financial statements Governance Our business Historical overview Equites Property Fund Limited 6 Integrated Report 2018

Our SA Portfolio1

8 9 5 3 2 7 1

4

6 10

1 2 3 4 5

DSV Healthcare Nestlé Longmeadow, Röhlig-Grindrod Pick n Pay Retailers The Foschini Group Meadowview, Johannesburg Meadowview, New Germany, Lord’s View, Johannesburg Johannesburg Durban Johannesburg

6 7 8 9 10

Puma Atlantic Hills, Imperial Logistics Medtronic Midrand, Cummins Midrand, Simba Parow, Cape Town Meadowview, Johannesburg Johannesburg Cape Town Johannesburg

6.6 R5.8bn 7.9% WALE of SA portfolio SA portfolio value Weighted ­average (in years to expiry) SA lease escalation

1 Tenants listed above are a subset of our portfolio and includes subsequent events. Equites Property Fund Limited Integrated Report 2018 7

Our UK Portfolio1

3 2 7 1 6 4

5 Historical overview Our business 1 2 3 4

Tesco Hinckley, Amazon UK DSV Solutions Kuehne + Nagel Coventry, East Midlands Stoke-on-Trent, Stoke-on-Trent, West Midlands West Midlands West Midlands Governance 5 6 7

DHL International Reading, DSV Solutions Peterborough, Coloplast Peterborough, South East England East of England East of England Annual financial statements 10.9 £143m 5.5% WALE of UK portfolio UK portfolio ­value Weighted (in years to expiry) ­average UK acquisition yield Annual general meeting Annual general Equites Property Fund Limited 8 Integrated Report 2018

2018 Financial highlights

123.86 9.0% R549m Distribution Like-for-like Cash generated per share (cents) net rental growth from operations +12.2% +46.2%

Distribution per share

61.26 96.60 110.37 123.86 70 60.98 62.88 60 R8.1bn 54.44 55.93 51.18 50 Portfolio value 45.42 40.89 40 +30.1%

30

Cents per share 20.37 20

10

0 FY15 FY16 FY17 FY18 23.5% M Interim dividend M Final dividend Loan-to-value NAV, Share price and Market Capitalisation +2.2% points 9.00 2 500

8.00 2 000 7.00

6.00 1 500 5.00 Rand Cents 4.00 1 000 R15.36 3.00 NAV per share 2.00 500 1.00 +8.8% 0 0 Jun-14 Aug-14 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 Feb-18

M Total NAV M Market capitalisation M Share price Equites Property Fund Limited Integrated Report 2018 9

2018 Operational highlights

50 444 175m2 7.9 Number of GLA Weighted average

properties lease expiry (in years) Historical overview +13.3% +11.3%

Portfolio value Feb 2018 Geographical composition by revenue Tenant Profile by revenue Our business Governance

M Commercial 1.5% M Commercial 1.5% M Cape Town 32% M A 90% M Logistics 81.9% M Industrial 3.3% M Gauteng 52% M B 3% (not logistics) M Industrial 98.5% M Developments 6.6% M United Kingdom 16% M C 7% M Vacant Land 6.4% M Held for Sale 0.3% Annual financial statements 20 98.0% 98.5% Number of Occupancy rate Industrial portfoliio employees -1.9% points +3.5% points Annual general meeting Annual general Equites Property Fund Limited 10 Integrated Report 2018

How we create value

Value creation process

Inputs Business activities Outcomes

Financial capital – Market capitalisation was up 45.4% to R8.2bn Financial capital – DPS growth per share for the year was 12.2% – Optimal debt and equity mix – Undrawn borrowing facilities increased during – Diversified sources of finance Corporate the year to R1.05bn – Strong liquidity – Marginal ZAR cost of debt is 8.84% p.a. – Phased debt maturity profile governance which is 27 bps lower than 2017 Mission – Please see pages 22 and 33 for further information & Vision Manufactured capital Manufactured capital Investing activities – Portfolio value increased to R8.1bn – High-quality logistics facilities – Property under development of R534m – State-of-the-art pre-let – Acquisition of land in – Four non-core office buildings were developments key logistics nodes disposed of for R254m – Healthy development pipeline – Purchase and development of – WALE across our portfolio increased to 7.9 years – Planned portfolio acquisitions high-quality logistics facilities – Please see the CEO’s report for further – Entering into strategic information investment partnerships

Human capital Human capital – Our people continued to develop their – Established property skill sets skills through training and development – Wealth of experience in logistics Investing – We hired a further 6 skilled people – Strong analytical ability – We continued to pursue a formidable – Focused and collaborative team team dynamic morale – There is an extremely low staff turnover across – Robust ethical foundation and all functions values – Please see the Sustainability report for further information

Social and relationship capital – We have enjoyed sustained investor confidence Social and relationship capital – Continue to encourage gender diversity – Deep-rooted trust with 50% female employees – Established key stakeholder Financing – 50% of our people are previously relationships disadvantages employees – Recognised multinational brand – Marked increase in brand recognition – Reputation as an industry leader Financing activities during the year – Please see the Social and Ethics report for – Raising debt capital at further information competitive rates – Equity raises to finance Intellectual capital growth opportunities Intellectual capital – Well-established policies and – Managing exposure to – Well regarded in industry as being leaders procedures significant financial risks – Compliance with King IV through enhanced – Robust culture of corporate corporate governance practices governance – Please see the Corporate Governance report – Intimate know-how relating for further information to our business

Risk and Natural capital Natural capital opportunities – Acquired a further R475m of strategic land parcels – Land under management – Boreholes were drilled to manage our water in strategic locations consumption levels – Alternative water and electricity – Premier Lord’s View distribution centre is sources targeting a four-star green rating – Responsible waste recycling – Please see the Sustainability report for further information Equites Property Fund Limited Integrated Report 2018 11

Value creation process

Inputs Business activities Outcomes

Financial capital – Market capitalisation was up 45.4% to R8.2bn Financial capital – DPS growth per share for the year was 12.2% – Optimal debt and equity mix – Undrawn borrowing facilities increased during – Diversified sources of finance Strategy & the year to R1.05bn – Strong liquidity resource – Marginal ZAR cost of debt is 8.84% p.a. Historical overview – Phased debt maturity profile which is 27 bps lower than 2017 allocation – Please see pages 22 and 33 for further information

Manufactured capital Manufactured capital Operating activities – Portfolio value increased to R8.1bn – High-quality logistics facilities – Property under development of R534m – Generation of net property – State-of-the-art pre-let – Four non-core office buildings were rental income developments disposed of for R254m – In-house property – Healthy development pipeline – WALE across our portfolio increased to 7.9 years management services

– Planned portfolio acquisitions – Please see the CEO’s report for further Our business – Actively seeking asset information management opportunities

Human capital Human capital – Our people continued to develop their – Established property skill sets skills through training and development – Wealth of experience in logistics Operating – We hired a further 6 skilled people – Strong analytical ability – We continued to pursue a formidable – Focused and collaborative team team dynamic morale – There is an extremely low staff turnover across – Robust ethical foundation and all functions values – Please see the Sustainability report for

further information Governance

Social and relationship capital – We have enjoyed sustained investor confidence Social and relationship capital – Continue to encourage gender diversity – Deep-rooted trust with 50% female employees – Established key stakeholder Distributing – 50% of our people are previously relationships disadvantages employees – Recognised multinational brand – Marked increase in brand recognition – Reputation as an industry leader Distribution activities during the year – Please see the Social and Ethics report for – REIT structure mandates further information annual dividend – 100% of distributable Intellectual capital earnings declared Intellectual capital – Well-established policies and – Dividend reinvestment – Well regarded in industry as being leaders plan commenced procedures Annual financial statements – Compliance with King IV through enhanced – Robust culture of corporate corporate governance practices governance – Please see the Corporate Governance report – Intimate know-how relating for further information to our business

Financial Natural capital Natural capital performance – Acquired a further R475m of strategic land parcels – Land under management – Boreholes were drilled to manage our water in strategic locations consumption levels – Alternative water and electricity – Premier Lord’s View distribution centre is sources targeting a four-star green rating Annual general meeting Annual general – Responsible waste recycling – Please see the Sustainability report for further information Equites Property Fund Limited 12 Integrated Report 2018

Total return

Equites is the only specialist Loan to value ­logistics REIT on the JSE Logistics facilities have become increasingly 25.00 23.47 important as they are necessary to fulfil the 21.31 changing needs of consumers particularly with 20.00 respect to e-commerce and the changing consumer landscape. 15.00 12.50 % We have built a portfolio of high 10.00 8.80 ­quality logistics assets Through careful selection criteria, we have 5.00 built a portfolio of 50 high quality assets 0 between SA and the UK. We are the only pure 2015 2016 2017 2018 play logistics fund in the SA context which provides us with a unique differentiating factor. Our financial performance Shareholder returns As a result of a strong base portfolio with the 180.0 18.00 165.3 164.7 majority of tenants being A-grade tenants on 160.0 16.00 long-dated leases and healthy escalations, we 147.4 140.0 14.00 have managed to generate sustainable 123.9 distribution and capital growth. 120.0 110.4 12.00 100.0 96.6 10.00 76.1 Rand Our competitive advantage Cents 80.0 8.00 61.3 Through our first mover status, we have 60.0 6.00 established ourselves as a market leader in this 40.0 4.00 sector. We benefit from an extensive network 20.0 2.00 which enables us to conclude acquisitions of 0 0.00 premium assets which add to the quality and 2015 2016 2017 2018 longevity of our portfolio. M Distribution per share M Headline earnings per share M Net asset value per share

Equites share performance since listing

2 500 7 000 000

Equites has delivered 99% 6 000 000 2 000 capital growth since IPO in 2014 and a total return of 138% over the same period. 5 000 000

1 500 4 000 000

3 000 000 1 000 Trading volumes have increased dramatically as a result of inclusion in the J253, FY18 saw 46% of free 2 000 000 float trading for the year. 500 1 000 000

0 0 18 FEB17 18 JUL 16 18 JUL 15 18 JUL 14 18 FEB 18 FEB 16 18 FEB 15 18 JAN 17 18 JAN 18 JAN 16 18 JAN 15 18 APR 18 APR 16 18 APR 15 18 JUN 16 18 JUN 15 18 JUN 14 18 DEC 16 18 DEC 15 18 DEC 14 18 OCT 16 18 OCT 15 18 OCT 14 18 AUG 16 18 AUG 18 AUG 15 18 AUG 18 AUG 14 18 AUG 18 SEPT 16 18 SEPT 15 18 SEPT 14 18 MAY 16 18 MAY 18 MAY 15 18 MAY 18 MAR 17 18 MAR 18 MAR 16 18 MAR 15 18 NOV 16 18 NOV 18 NOV 15 18 NOV 18 NOV 14 18 NOV

M EQU M J253 (re-based) M Volume Equites Property Fund Limited Integrated Report 2018 13

Four year financial review

Equites Property Fund Limited and its subsidiaries

February February February February 2018 2017 2016 2015 R’000 R’000 R’000 R’000

Statement of financial position

Assets

Investment property 8 099 049 6 225 775 4 111 159 1 431 877 Historical overview Other non-current assets 172 900 143 818 1 786 1 847 Current assets 212 447 149 173 113 422 12 641 Total assets 8 484 396 6 518 765 4 226 367 1 446 365

Equity and liabilities Capital and reserves 6 298 774 4 947 355 3 620 839 1 301 015 Non-controlling interest 109 410 93 535 — — Total equity 6 408 184 5 040 890 3 620 839 1 301 015 Non-current liabilities 1 906 272 1 097 305 433 645 127 372

Current liabilities 169 940 380 570 171 883 17 978 Our business Total equity and liabilities 8 484 396 6 518 765 4 226 367 1 446 365

Statement of comprehensive income

Profit and loss Gross property revenue 573 698 502 431 335 679 130 592 Other operating income 208 343 175 442 1 248 158 Property and administrative costs (121 012) (105 134) (59 428) (48 613) Fair value adjustments – investment property 239 546 309 138 138 529 115 097 Operating profit before financing activities 900 575 881 877 416 028 197 234 Finance costs (68 765) (79 106) (40 074) (15 628) Governance Finance income 24 990 3 292 3 667 2 425 Operating profit before tax 856 800 806 063 379 621 184 031 Tax expense 34 313 — — — Net profit for the year 891 113 806 063 379 621 184 031

Other comprehensive income Translation of foreign operations (139 049) (173 374) — — Total comprehensive income 752 064 632 689 379 621 184 031

Total comprehensive income attributable to: Owners of the parent 731 139 611 372 379 621 184 031 Non-controlling interest 20 925 21 317 — — Annual financial statements Annual general meeting Annual general Equites Property Fund Limited 14 Integrated Report 2018

Stakeholder engagement

At the core of our business are people. People ­create and sustain the value that we generate for all our stakeholders and our engagement with them is therefore paramount to our success.

Relational importance Our people are indispensable to the successful execution of the group’s strategic goals. We engage with our people throughout the year on a continuous basis to improve employee

motivation, reduce staff turnover and to create an environment that is conducive to our Our people people maximising their potential. Our human capital is undoubtedly one of the key drivers of the group’s exceptional financial performance. We believe that our promotion of an inclusive and culturally diverse workforce is truly distinctive.

Areas of engagement – Conducted annual employee satisfaction survey – Held periodic performance reviews – Empowered our people through skills upliftment strategies – Consistent staff engagement to promote a sustainable work culture

Relational importance Our tenants continue to prefer the high-quality A-grade logistics facilities that we develop in key logistics nodes in SA and the UK. Our ability to work productively with our tenants to

provide the logistics facilities that they require forms the linchpin of our long-term success. Tenants We strive to make our facilities the destination of choice for our tenants.

Areas of engagement – Ongoing communications regarding their logistics needs – Regular interaction and rapid turnaround times to respond to queries – Transparency and accountability in the execution of our responsibilities

Relational importance Our banks and other financial institutions provide timely access to financial capital at competitive rates which enhances the long-term value that we are able to generate for all

our stakeholders. Our open lines of communication and our deep-rooted trustworthiness Banks enables us to successfully exceed each other’s expectations.

Areas of engagement – Held weekly meetings with key financial institutions – Engaged our broad spectrum of financial institutions to discuss property funding – Built stronger foundations of trust through open and honest communications Equites Property Fund Limited Integrated Report 2018 15 Historical overview

Relational importance Our investors provide us with the ability to create value and deliver strong income growth from a portfolio of high-quality logistics assets through the investment of financial capital. We continuously engage with both existing and potential investors to understand their needs and concerns as we strive to enhance our symbiotic relationship.

Areas of engagement Our business

Investors – Held numerous investor presentations to augment channels of communication – Local site visits held to gain a better understanding of our SA portfolio – Organised a UK site visit to present an opportunity to view our UK portfolio – Engaged with investors and responded to queries throughout the year

Relational importance Our suppliers play a pivotal role in enabling us to deliver an unrivalled portfolio of truly

distinctive A-grade logistics facilities to our tenants. We are able to enhance occupier Governance demand for our facilities because of the high standards that our suppliers adhere to both in the day-to-day operations and in the construction of major developments.

Areas of engagement

Suppliers – Dedicated project managers to regularly engage with our suppliers – Introduced an in-house development manager to enhance quality control – Preferential payment terms were agreed with some of our key suppliers

Relational importance Annual financial statements Our professional broker network acts as an intermediary between us and our tenants. Our relationship with our professional broker network is therefore critical to us ensuring that we are able to secure investment grade tenants on long-dated, fully repairing and insuring leases which is the cornerstone of our logistics portfolio.

Areas of engagement – Daily discussions with our professional broker network – Dedicated people who are responsible for creating and enhancing our network Broker network Broker – Held numerous on-site visits to improve understanding of our portfolio Annual general meeting Annual general Equites Property Fund Limited 16 Integrated Report 2018

Chairman’s report

Equites had another very strong financial year as the company continues to implement its focused investment strategy and benefit from the impeccable property fundamentals of its portfolio. Since its listing in June 2014, Equites has provided its initial investors with a total return of 138%, which certainly is an outstanding achievement.

Leon Campher Chairman

Delivering Shareholder Value Our Economic Environment The election of President Cyril Ramaphosa as Equites managed to grow distribution per In last year’s integrated report, I communicated the new leader of the ANC at its elective share by 12.2% compared to the previous the strategies that were being implemented by conference in December 2017, and his financial period. The group has also increased the Equites board to combat the depressed subsequent appointment as President of the the value of its portfolio of quality assets from economy and uncertain political climate. It Republic of South Africa, has been a significant R6.2 billion to R8.1 billion. Importantly, this entailed maintaining a strong balance sheet, turning point for our country. During the first growth in distribution and increased portfolio diversification into the UK, an exclusive focus 10 weeks since becoming SA’s fifth president value has been achieved in combination with on the logistics sector and strong property since the advent of democracy, Ramaphosa an increase in net asset value per share of 8.8% fundamentals. Even though economic and has already implemented numerous positive from R14.12 at 28 February 2017 to R15.36 at political factors had a negative impact on the changes, most of which are aimed at 28 February 2018. As has been the case in property sector and lead to a slowdown in strengthening governance at the ailing State- each year since listing, this once again development activity during this period, owned entities (“SOEs”), combatting corruption illustrates strong distribution growth without Equites continued its strong performance. and creating an enabling environment for local sacrificing long-term shareholder value. Equites Property Fund Limited Integrated Report 2018 17

and international investors. Although it is still Following this process, several initiatives are the uncertainties around Brexit, the structural early days, with many further obstacles that being implemented to further strengthen changes to the retail sector and e-commerce require urgent attention, there are already clear Equites’ governance structures. Importantly, it growth continue to drive demand for modern signs that SA may have turned the corner and highlighted the difficulty of the task facing logistics facilities. can expect the economic conditions to non-executive directors who are at such a improve over the medium term. The private disadvantage compared to the executives who I wish to thank our board of directors and our sector will have an important role to play in are in the full time employ of the company. To management team for their important this revival and needs to work closely with address this aspect, a comprehensive contribution over this past year. Equites has Historical overview government and other stakeholders in the continuous development and training plan will become a top performer in the SA listed spirit of true partnership. Equites supports this be implemented and attended by all directors. property space over the last four years. We process and will be looking to make a positive would like to build on this sound base and the contribution in this regard. In Closing board remains committed to growing the The outlook for the company remains company to its full potential and delivering Governance immensely positive. We are in a strong value to shareholders. During the past four months of 2018 the listed financial position and there should be further property sector was impacted severely by the opportunities for the acquisition and continued speculation surrounding certain development of high-quality logistics players in the market. The resultant decline in properties in key logistics nodes. The board Our business the share prices of these companies has will continue pursuing a strategy of creating caused significant damage to the listed long-term, sustainable financial success. property sector. Considering the financial Equites’ UK exposure has grown from a difficulties at several of our SOEs and the much portfolio size of £47 million (R764 million) to a publicised Steinhoff debacle, it is easy to sizeable £143 million (R2.3 billion) during the understand why the oversight role of boards is period under review. As a result of the recent Leon Campher being scrutinised very carefully. In response to acquisitions, the UK exposure now represents Chairman these events, Equites conducted an 29% of the total investment property portfolio independent review of its governance value. The board continues to support this Cape Town structures and processes to identify and diversification strategy and views it as an ideal 7 May 2018 Governance strengthen any weaknesses that may exist. foil to the SA property environment. Despite 160 Gunners Circle, Epping, Cape Town. Annual financial statements Annual general meeting Annual general Equites Property Fund Limited 18 Integrated Report 2018

Chief executive officer’s report

Equites has delivered another superb set of financial results, which were founded on several important acquisitions and disposals, continued excellent operational performance and hands-on asset management by the senior executive.

Andrea Taverna-Turisan Chief executive officer

Vision and Strategy This unwavering commitment to the logistics The logistics sector has evolved significantly in Equites came to market in June 2014 with a sector at a time of clear structural changes in the last decade. Looking at the UK market as a clear vision of becoming the leading logistics the property market worldwide has benefited barometer, the SA market will change warehousing fund in SA. Since our entrance Equites shareholders with sector beating substantially in the next decade. The advent of into the UK we have refined our vision “to annual distribution growth and above inflation e-commerce, and the drive to operational become a globally relevant specialist property growth in net asset value per share. We remain efficiencies with the continued need for central group, focusing exclusively on the logistic focused on creating long-term sustainable distribution to reduce costs and increase speed sector”. growth, derived primarily from growing rentals and reliability of delivery will continue to drive paid by tenants in our market leading retailers’ decision making in favour of larger, warehouse facilities built to the most exacting better designed and located warehouses. international standards.

Tekstiel Road, Parow Industria, Cape Town. Equites Property Fund Limited Integrated Report 2018 19

Equites continues to drive quality over represents a 12.2% growth in distribution per are probably unrivalled when considering that: quantity. Our strategy is to develop and share (“DPS”) compared to 110.37 cents per – all our industrial properties are in proven acquire modern, fit-for-purpose warehouses in share in the prior year. During this period net industrial locations; key logistics nodes which are strategic to the asset value per share increased by 8.8% from – the WALE of the portfolio is 7.9 years with businesses of high-quality tenants. Tenants will R14.12 at 28 February 2017 to R15.36 at 28 76.2% of leases by revenue expiring post often invest heavily into these strategic assets February 2018. The strong growth in net asset February 2022; and will therefore remain committed to the value is testimony to our efforts to continually – vacancy of 2% across the portfolio (for the premises for a long time. Constant improve the fundamentals of the property first time in our trading history, we have an Historical overview communication with our tenants also presents portfolio. industrial vacancy at Tower Road situated in opportunities where we can enhance the the Cape Town Airport Industrial precinct. facilities and benefit from capital growth. The SA portfolio contributed some 10.5% to the This industrial space of 9 098m2 underwent overall DPS growth of 12.2%. The UK portfolio a full refurbishment during the year to uplift Our developments are designed to afford our and related structuring comprised the the property to modern logistics standards. clients efficiency of land use with increased remainder of the growth. While the base SA At year end, the property remains vacant volume to maximise pallet positions. Significant portfolio continues to grow, an increased and is currently being marketed to several importance is placed on floor technology and proportion of the distribution growth is interested parties); large yards to receive and dispatch ever generated by the UK portfolio and our ability to – 89.9% of our tenants by revenue are increasing volumes of transported goods. This structure and secure high-end deals. Both the classified in terms of the JSE Listings Our business focus on the tenant has led to larger facilities in SA and UK business are underpinned by strong Requirements as A-grade tenants; logistics parks which afford the users and their property fundamentals and the property returns employees safer, cleaner and better working are complemented by astute asset management This uncompromising approach may, in the environments. and efficient capital management. short-term, inhibit portfolio growth in SA as the lack of economic growth will impact the Financial Performance Property Fundamentals pace at which Equites rolls out its development Equites’ total distributions declared to Since inception, Equites has been determined pipeline. There is, however, no doubt that shareholders for the year ended 28 February to build a property portfolio with impeccable shareholders will benefit from this approach in 2018 amount to R507.8 million. This is property fundamentals. The property the medium to long term. equivalent to 123.86 cents per share, which fundamentals of the Equites industrial portfolio Governance Annual financial statements Annual general meeting Annual general Equites Property Fund Limited 20 Integrated Report 2018

Chief executive officer’s report (continued)

Property Portfolio Movement We also sold our 4 Cape Town office assets Enhancing Capital Efficiency during the financial period and we will dispose Through Growth South Africa of some of the smaller and non-logistics assets In the current macro-economic climate, with We have increased our land holdings in key as and when the right price can be achieved. relatively benign forecasted short-term GDP distribution nodes to ensure we can participate growth both in SA and the UK, failure to attain in client requests for new warehouses as and Prudent management of our balance sheet will fundamental capital allocation objectives may when they come to market. The number of allow Equites to take advantage of growth have severe adverse consequences for the acquisitions Equites will make in SA will be opportunities through both development and group. It has therefore been imperative for limited by the small size of this sub-sector of acquisitions as they become available in the Equites to enhance its capital efficiency the property market and the stringent market. especially through the current growth phase. requirements Equites places on the property fundamentals of every property it acquires. United Kingdom Consequently, Equites has strategically set a Since the start of the financial period, Equites low target LTV range of between 25% and 35% Shortly after the period under review, Equites has concluded 5 transactions in the UK with to achieve an optimal mix of debt and equity acquired a 37 834m2 distribution centre let to an aggregate value of £131 million. At the end and to ensure that it maintains a robust Nestlé in Longmeadow Business Estate, of our previous financial period we decided to balance sheet which offers flexibility for future Gauteng and a 26 857m2 distribution centre forge strategic partnerships with reputable UK growth opportunities. At year-end, the LTV was let to Pick n Pay and Nestlé in New Germany, developers with the view to funding selected 23.5% which is partially due to a heavily Kwa-Zulu Natal. The aggregate purchase development opportunities which meet our oversubscribed accelerated book build referred consideration in respect of the 2 assets is investment criteria. Four of the five recent to below. R648 million and we expect to take transfer of transactions were forward funded deals in line the properties in June 2018. As logistics with this strategy where Equites acquired the In addition, 100% of our SA and UK interest- properties of this nature and quality rarely land and then funded the development. bearing debt was hedged at an average come to market, Equites is pleased to have effective all-in rate of 9.03% and 2.86% acquired these two well-located, high-quality, These forward-funding transactions are aligned respectively. The current LTV levels provide an modern logistics facilities of substantial scale, with our focus on premium “big-box” opportunity to exploit lower interest rates in occupied by two A-grade tenants with strong distribution centres, let to investment grade SA. The marginal cost of debt funding has lease covenants and fully repairing and tenants on long-dated “triple-net” leases, in decreased by 27 basis points over the past 12 maintaining leases that are long-dated and proven logistics nodes and built to institutional months and over 50 basis points if you include consistent with the lease expiry profile that specifications. the recent 25 basis points decrease in the Equites targets. repurchase rate announced on 28 March We expect all the current UK developments to 2018. Current JIBAR swap yield curves have We recently concluded two important be completed by March 2019 by when our allowed us to lock-in relatively low interest development leases with significant UK portfolio will be worth more than rates over the next 3-5 years. It was evident international tenants: a 5-year development £200 million. from recent negotiations with financial lease with JF Hillebrand for a 4 200m2 facility institutions that our increased scale has in Equites Park Atlantic Hills, Cape Town and a There continues to be strong tenant demand improved both opportunities for additional 10-year development lease with Federal Mogul with a shortage of quality logistics facilities to funding sources and our bargaining power in for a 9 313m2 facility at Meadowview, let. Several important logistics nodes currently raising debt at extremely competitive rates. Gauteng. In addition, we are currently busy have very limited supply. Rising land prices and with 10 915m2 of speculative developments in the limited availability of nearby labour are Equites has also improved its liquidity risk Equites Park Atlantic Hills, Cape Town and 11 further complicating factors. This will inevitably management by restructuring the debt 275m2 in Equites Park Lords View, Gauteng. lead to rental growth and increasing capital maturity profile and augmenting borrowing values. Our UK portfolio will benefit facilities to complement its growth plan. The development of a new 15 216m2 facility significantly in this regard. Current undrawn borrowing facilities at year- for Premier FMCG in Equites Park Lords View, end increased to R1.05 billion, representing Gauteng is also progressing well and practical 35% of the total borrowing facilities. Equites completion is expected in August 2018. has also continued to phase the maturity of its debt in line with the duration of the WALE of its base portfolio considering the refinancing risk on an asset-specific basis. Equites Property Fund Limited Integrated Report 2018 21

The entrance into the UK in 2016 has created Greening our Future Outlook foreign currency risk which has been managed Sustainability is becoming an integral part of The activities during the period under review effectively through derivative instruments. our development process. The new Premier were perfectly aligned with the company’s Equites entered into a second cross-currency Foods facility is being developed to exacting strategy of building a sustainable logistics swap during the year with a nominal amount standards and should qualify for a Green Star property business based on impeccable of £42 million to hedge the capital invested as rating on completion in August 2018. The property fundamentals that will aim to provide part of the Kuehne + Nagel acquisition in learning process of understanding what makes shareholders with stable and sustainable Coventry. At present, 75% of the foreign a building more sustainable and how to annual distribution growth and strong capital Historical overview denominated net assets are hedged through mitigate the costs associated with such design returns. cross currency swaps which act as an effective will undoubtedly become standard practice for hedge against the erosion of the group’s net Equites as we move forward. The energy centre There remains concern regarding the macro asset value due to foreign currency we have incorporated into our 55 000m2 economic environment in SA and the lack of fluctuations. In addition, the group has actively development over 4 units at Equites Park Lords economic growth. These realities may monitored the impact of reasonably likely View will result in tenants receiving free influence the pace at which we grow our SA changes in foreign exchange rates on electricity when the sun shines. The ever- portfolio. Notwithstanding these difficulties, we distributable earnings. The implied volatility of diminishing costs of LED lights, and the are confident that because of the strong the Pound: Rand currency pair indicates that increase in the cost of electricity, has resulted property fundamentals of the Equites portfolio the company is well positioned to benefit from in LED being an essential component of every the company will achieve 10% – 12% Our business future fluctuations in this exchange rate. warehouse fit out. distribution growth during the next financial period. Broadening Shareholder Base and Social Conscience Returns Equites sees itself as an integral part of the This guidance is based on the assumptions Since our listing in June 2014 we have greater SA community and continues to strive that a stable macro-economic environment purposely constructed a high-quality logistics to give back to communities it works in. We will prevail, no major corporate failures will portfolio that focuses on reliable income from recently assisted in the formation of The occur, the rand/pound exchange rate remains A-grade tenants on long leases in key logistics Michel Lanfranchi Foundation NPC (“MLF” or materially unchanged and tenants will be able nodes. In a volatile and low growth economic “Foundation”), a non-profit legal entity which to absorb the recovery of rising utility costs environment investors are drawn to companies will act as a vehicle to co-ordinate all our and municipal rates. This forecast has not been Governance with a transparent and understandable strategy transformation and social initiatives. To secure audited or reviewed by Equites’ auditors. that can deliver low risk predictable income a sustainable funding model, 50% of the and capital growth. Röhlig-Grindrod property has been sold to a Acknowledgements property-owning subsidiary of the MLF. I want to take this opportunity to express my During August 2017, investors demonstrated Through consultation with our advisors, and in gratitude to the board for their support, their continued support when Equites raised a line with IFRS 10, the MLF is consolidated into guidance and advice during this period. further R1.015 billion through a heavily the group accounts of Equites, as a subsidiary, oversubscribed accelerated book build where even though it has its own independent board I also want to thank my fellow executives and it successfully placed 59.02 million shares at and Equites owns no shares therein. The all employees for all their hard work and 1 720 cents per share. Foundation will focus on giving students from dedication. previously disadvantaged backgrounds Equites has also benefitted from the worldwide opportunities through study bursaries, assisting Finally, a big thank you once again to all our trend where investors are showing a with the building of education facilities in tenants for their support. As I said in last year’s Annual financial statements preference for specialist REITs. The single- communities closely associated to our report, without you we would not have a minded focus of management teams on a industrial parks and sponsorship of education business. specific sub-sector of the property industry linked projects that benefit handicapped and often leads to outperformance. In our case the previously disadvantaged students. Equites also Equites share price performed positively over continues to assist our enterprise development this period and we delivered a total return of company Damon At Sons Construction (Pty) 138% since listing. Ltd, with back office know-how and a sustainable pipeline of development work and maintenance on our buildings.

Andrea Taverna-Turisan meeting Annual general Chief executive officer Equites Property Fund Limited 22 Integrated Report 2018

Q&A with the chief financial officer

renewed and the WALE has increased from 7.1 Equites’ balance sheet remains to 7.9 years in the current year, we have good Q strong and you have been able visibility of like-for-like rental growth over the to successfully raise equity in next few years. each of the last three years. How do you see your cost of capital DPS growth on acquisitions was only evolving? marginally accretive, as the dilutive impact of SA acquisitions and developments largely The past financial year saw the company’s eliminated the impact of the UK acquisitions in inclusion into the SA Listed Property Index the current year. The current year results were (J253) on the JSE, which sparked a marked positively impacted by two once-off items: improvement in the trading liquidity of our i. The disposal of four multi-let commercial equity and resulted in a re-rating of the share properties totalling R234 million, price to consistently trade at a premium to the contributed 0.6% to DPS growth as these IFRS net asset value per share. offices would otherwise have generated Bram Goossens negative growth; and Debt funding rates available to the company in Chief Financial Officer ii. the company raised R1.015 billion of equity SA improved markedly during the current year during August 2017 and the differential through a combination of lower market rates between the marginal cost of debt and the and an improvement in Equites’ risk rating at Equites grew DPS by 12.2% – effective yield of the equity price achieved local banks. The company’s investments in the Q how sustainable is this growth? added 0.9% to DPS growth. UK have now also reached a scale where longer-dated and gilt-linked funding will be The majority of this growth is made up of like- The company does not distribute any introduced. Overall, this resulted in a reduction for-like rental growth of 9% and financial development profits or other gains of a capital in the marginal cost of SA debt by 27bps year- leverage of 1.9% totalling 10.9%. The 9% like- nature and as detailed in note 3 to the annual on-year and the all-in total cost of debt fell by for-like rental growth was underpinned by financial statements, R12.6 million included in 70bps in aggregate including UK funding. We average in-force contractual escalations of 8% the IFRS earnings was added back when also took advantage of the more benign long- across the portfolio and positive reversions on determining the dividend declared. term interest swap rates in SA to extend the renewals. As the gearing was well below the maturity and effective interest rates of our target range of 25% – 35% for the majority of We are confident that the current results are interest rate hedges. We also locked in very the year, the impact of financial gearing would largely a reflection of the strong operating favourable Libor rates on the majority of our be approximately 3% on a sustainable basis. performance of the property portfolio and the British pound exposure for initial periods of Given that all leases expiring in the financial company would have still delivered double- between 5 and 10 years. The combined impact year to 28 February 2019 have already been digit growth in the absence of any once-off of this significant reduction in the group’s items. overall cost of capital will provide strong support for distribution growth in the next financial years.

Distribution growth analysis

16.0 14.0 0.9% 0.6% 12.2% 12.0 1.9% -0.2% 10.0 9.0% 8.0

% 6.0 4.0 2.0 0 Like-for-like Financial Equity raise Disposal of Other Distribution rental growth leverage premium office buildings­ impacts growth Equites Property Fund Limited Integrated Report 2018 23

The board has also agreed to broaden the We concluded that the MLF is a structured Overall the board is satisfied that the likely group’s sources of capital with a dividend entity as defined in IFRS12 and described in impact of exchange rates on distributable reinvestment plan (“DRIP”) and a domestic IFRS10. Although Equites has no direct earnings is within an acceptable range and medium term note programme (“DMTN”). The managerial control over MLF, it is ultimately following a period of particular Rand strength, DRIP alternative will be available to exposed to its variable returns and it is a positive impact from currency movements is shareholders from the final dividend for this appropriate to consolidate it. more likely than a negative impact. As at 28 financial year and the company aims to finalise February 2018, 75% of the group’s equity the DMTN in the second half of the 2018 exposure to the UK remains hedged to Historical overview calendar year.  With Equites’ growing exposure currency fluctuations. Q to the UK, how sensitive are your distributable earnings to changes We see Equites was involved in the ZAR/GBP exchange rate? Looking ahead, what are the Q in the formation of a BEE Q ­prospects for Equites? company, The Michel Lanfranchi Overall our hedging policy balances short- Foundation NPC, during the term stability with real exposure to variable Equites came to market in June 2014 with a current year. What will the exchange rates over time. On actual GBP cash unique value proposition: a specialist, impact of this company be on flows that are remitted to SA, our policy internally managed REIT with an exclusive Equites’ distributable earnings? remains to hedge 80% of projected net cash focus on the logistics sector. This is combined Our business flows for the next 12 months and 40% for with an in-house capacity to develop modern We concluded that it is appropriate to 12-24 months forward. Subsequent to logistics assets to global institutional standards consolidate The Michel Lanfranchi Foundation commencing the DHL Reading and DSV efficiently and in an earnings accretive manner. NPC (“MLF”) and the net impact is a reduction Peterborough developments, the majority of In the last two years, Equites has also in Equites’ distributable earnings to the extent UK-based rental income is currently successfully diversified the business into the that amounts are actually disbursed in line re-invested into these developments and 69% UK, whilst remaining true to its core focus on with MLF’s mandate. Based on currently of translated IFRS earnings will fluctuate with modern logistics assets. committed projects, this will reduce the exchange rates. distributable earnings by at least R2.3 million As a result of modern supply chains and the

for the financial year ending 28 February 2019. To evaluate the sensitivity of distributable accelerating impact of e-commerce, property Governance earnings to exchange rates, we track two is undergoing a massive structural shift not MLF is a Broad-Based Ownership Participation standard deviations above and below the seen since the introduction of the modern Scheme (“BBOS”) and although Equites was 12-month moving average of the ZAR/GBP shopping mall in the 1960’s and 1970’s. Global instrumental in the formation of MLF, the exchange rate capturing 95% of all price points trends indicate that well-located, modern board and chairman of MLF is independent of over the past 12 months. This equates to a logistics properties are the clear beneficiaries Equites and the company functions likely appreciation of the ZAR against the GBP of this shift. independently of Equites. of 5% and a likely depreciation of 17%. In the current year, this would have equated to Equites remains the only pure-play logistics MLF is a non-profit company without distributable earnings that are R2 million (0.4%) property company listed on the JSE. Given its members, with the following objective to lower and R7 million (1.4%) higher respectively. increased scale and improved cost of capital, it contribute to education and training through: The impact on IFRS EPS is significantly higher, is well positioned to continued to deliver – Grants and infrastructure development for as this includes the mark-to-market on superior returns to its shareholders.

the benefit of education at primary, currency derivatives and fair value adjustments Annual financial statements secondary and tertiary levels as well as early on investment properties, which is not childhood development included in distributable earnings. – Bursaries and scholarships to students for education at any level – Development of skills of individuals to support their employability and their entrepreneurial ability Annual general meeting Annual general Equites Property Fund Limited 24 Integrated Report 2018

Social, ethics and transformation report

With the growing importance of conducting business in a socially and ethically responsible manner, companies are faced with the immense challenge of balancing the pursuit of growing shareholder returns with a strong social and ethical code. In South Africa specifically, the economic landscape has necessitated an increased focus on transformation to address the ever- widening inequality gap and it is our role as businesses which operate in this environment to address these transformational needs.

The Social, Ethics and Transformation Terms of reference Initiatives committee (“the Committee”) remains the The duties and responsibilities of the social, custodian for determining the social, ethical ethics and transformation committee are set out The Michel Lanfranchi Foundation and transformational goals of the group, for in formal terms of reference which has been The objectives of the Committee include determining the importance and attainability approved by both the committee and the board broad-based social and transformational in our context, and for devising an appropriate of directors. The main duties of the committee initiatives which will positively impact society. strategy to ensure that the group meets these include, but are not limited to the following: The Committee had been considering the goals. The Committee consists primarily of – Review and approve the policy, strategy most efficient and impactful manner in which non-executive directors who collectively and structure to manage social, ethics and to achieve these goals since inception. possess a vast amount of knowledge and transformational matters in the company Following detailed research, Equites assisted in experience in this area. – Overseeing the company’s position and the formation of a non-profit company setting goals and targets in terms of the (“NPC”) to co-ordinate these activities in a following guidelines/codes: well-monitored, accountable manner. The NPC was established under the name The The Broad-Based The group has identified transformation as a critical success factor in Michel Lanfranchi Foundation (“the Black Economic the landscape which we currently operate. Foundation”) named in honour of the late Empowerment Act Due to the change in the amended property sector scorecard, the group achieved a level 7 rating during the year, however, the group aims to achieve a level 4 rating in the next rating cycle. Refer to the transformation section of this report for more detail.

The Employment The group considers its workforce, which consists of a total of 20 Equity Act employees as at 1 May 2018 to be its most important asset.

A diverse workforce is a key element of the group being able to approach its strategic goals in a holistic and collaborative manner, with a variety of different approaches formed by our diverse backgrounds.

The group is pleased to report that at 1 May 2018, 50% of the workforce is non-white and 50% of the staff are female.

The 10 principles set The group supports and respects the principles as set out in the UN out in the United Global Compact Code, OECD’s recommendation on the prevention of Nations Global corruption and the International Labour Compact Principles and the OECD Organisation’s directive on decent work and working conditions. recommendations regarding corruption The group continuously monitors its actions as a corporate citizen and is pleased that it is acting in line with the best practices as set out in these guidelines. Equites Property Fund Limited Integrated Report 2018 25

brother of the Chairman of the Committee Estate, to Ilanga Lakusasa (Pty) Ltd (“Ilanga”), a Transformation who was passionate about social upliftment 100% subsidiary of the Foundation. Equites has Equites aligns all its broad-based black and transformation. provided Ilanga with a loan to fund the economic empowerment reporting to the acquisition, secured by a mortgage bond on Property Sector Transformation Charter. This The main objective of the Foundation is to the underlying property. The loan bears year the group achieved a level 7 rating on the contribute to educational infrastructure at interest at the prime lending rate and is amended Property Sector scorecard, primarily primary, secondary and tertiary educational structured as an interest-only loan for a period as a result of the shortfall in the ownership level, as well as to facilitate bursaries and of ten years, which matches the lease term of element of the scorecard. Historical overview scholarships to deserving individuals. As a the underlying property. Equites has secondary objective, the Foundation shall committed to financially supporting the The Committee has set a strategic goal of support enterprise and supplier development Foundation to the extent that its interest achieving a level 4 rating in the next review within the built environment context through payments and cost of approved public benefit cycle. Given the significant shift in goal posts in financial support, mentoring and forging activities exceed its income initially. Over time, the new Charter, this would only be achievable strategic partnerships with these entrepreneurs. as the underlying rental income increases in through a significant equity transaction. The The Foundation shall carry on its public benefit line with the contractual escalations, the board is currently considering the feasibility activities to advance socio-economic Foundation will become self-sufficient. and options in this regard. improvement of predominantly black beneficiaries. More than 85% of distributions Although Equites was instrumental in the In the current year, Equites scored well in the Our business from the Foundation shall benefit black people formation of the Foundation, the board of the following areas; management control, skills as defined in the Broad-Based Black Economic Foundation and its activities will be development, enterprise and supplier Empowerment Act No. 53 of 2003 (“B-BBEE independent of Equites. In line with IFRS, the development and economic development. Act”) and more than 60% black women, Foundation and its subsidiaries are These elements reflect our focus on the through the provision of services, funds, assets consolidated into the results of the group. The elements of the scorecard which we believe or other resources. net impact on earnings is the recognition of an reflect true empowerment to previously expense for the Foundation’s public benefit disadvantaged groups and will continue to be To create a sustainable source of income in the activities. priority elements for the group while we build Foundation, Equites has sold an undivided on the remaining elements in the upcoming half-share in a completed building, Röhlig- financial year. Governance Grindrod situated in Meadowview Business Equites Park Atlantic Hills, Cape Town. Annual financial statements Annual general meeting Annual general Equites Property Fund Limited 26 Integrated Report 2018

Social, ethics and transformation report (continued)

The main characteristics of the The largest area of focus in the upcoming year Equites remains DAS’s largest client with the Foundation are summarised below: is the ownership element of the scorecard. Epping warehouse at 160 Gunners Circle being – The Foundation is independent of Equites Through the introduction of Brimstone as a the largest project completed by DAS to date. – The Foundation has an autonomous board key empowerment partner and with Kagiso DAS is currently in the process of constructing who takes ultimate fiduciary responsibility asset managers, the PIC, Government a speculative build for Equites at Equites Park – The Foundation is established as a non- Employees Pension Fund and Eskom Pension Atlantic Hills and has also been engaged to profit company and is a registered public Fund increasing their investment through complete two external projects. benefit organisation previous book-builds, Equites has managed to – The Foundation is a broad-based increase its direct and indirect black ownership Empowerment ownership scheme (B-BOS) organically. To achieve a higher score on the Equites believes that education is the – The primary objective is to benefit black revised Charter, the group is looking at ways of cornerstone to true transformation. The people with focus on black women increasing its black shareholding from non- Foundation launched its first full-cost bursary – Funded by dividends from its property mandated investments, which are not credited program in the current year. Two bursaries owning subsidiary and social and ethics for ownership points. The board is also were presented to deserving second-year development spend from Equites and other cautious of many of the pitfalls of structured students studying property studies at the potential funders BEE ownership schemes. University of Cape Town. The bursary program consists of financial aid but more importantly, Enterprise development a robust mentoring component throughout One of the group’s greatest achievements to the duration of their degree to prepare them date is the development of our enterprise for a career in their chosen field of study. development partner Damon At Sons Construction (Pty) Ltd (“DAS”), a locally-based, In the prior year, Equites launched a black-family owned construction firm. Through learnership programme which was piloted with its ongoing financial support and mentorship nine disadvantaged learners. During the year to DAS, Equites has helped the business and its under review, the group continued this staff base to grow exponentially. The company program with a further nine learners being currently employs over twenty permanent staff enrolled in the program. Through engaging and at least sixty casual labourers, all of them with these learners, we have come to realise being previously disadvantaged South Africans. the importance of this program and the Equites Property Fund Limited Integrated Report 2018 27

resultant impact on these learner’s lives. The Outlook first nine learners who graduated from the There has never been a more important time program have either been moved to the for businesses to step up to the plate and second phase of the learnership program to recognise the role which they play in the further build on their skills or placed in transformation and empowerment of society, meaningful roles of employment. and the economy at large. We believe that a targeted approach is the best way to affect Equites also continues to develop talent from meaningful change and our focus will remain Historical overview within the organisation by providing on the initiatives outlined above. The employees the opportunity to acquire skills, committee will continue to monitor the impact knowledge and competencies in their roles. of these initiatives with mindfulness of the Equites uses a multi-faceted approach which ever-evolving climate and adapt the strategy includes on-the-job training, coaching, going forward in line with this changing workshops and bursaries for employees landscape. wishing to further their tertiary studies. For the year under review, the group has awarded three of its previously disadvantaged female employees full-cost bursaries for their part Our business time studies at UNISA. We continue to support these staff members and look forward to utilising their full skill set at Equites once they have graduated from their respective courses. Governance

Röhlig-Grindrod, Meadowview, Gauteng. Annual financial statements Annual general meeting Annual general Equites Property Fund Limited 28 Integrated Report 2018

Sustainability report – nurturing social capital

What does sustainability mean to Equites? A mere four years into listing, Equites is confidently navigating its way through its sustainability journey and has made massive strides in this ever- changing landscape. We have started to evolve our approach to sustainability and corporate social responsibility to ensure that the company creates shared value for shareholders and communities. In writing this report, we have taken a step back to analyse our strengths and weaknesses and to plot our way forward for the upcoming year.

Areas of impact This report focuses primarily on the people, community and the environment, as the financial element is dealt with extensively throughout the remainder of the report.

Financial People Community Environment

Equites has built a business on Support local strong property fundamentals which continue to be of Focus on initiatives through Incorporate paramount importance developing a partnering with environmental strong, capable educational consciousness into initiatives to build and diverse all business workforce classrooms in our areas of activities development Current portfolio of

Total staff complement of

Launched bursary In the process of properties50 programme through developing our first our CSR venture four-star green 90% tenants rated building and 20employees, of which Promotion of A-Grade more than 50% are entrepreneurship hoping that this will female and come from through focused pave the way to WALE of various diverse supplier and many more backgrounds enterprise 7.9 years development Equites Property Fund Limited Integrated Report 2018 29

People The group engages in an annual performance Our commitment to diversity and inclusion appraisal system which allows our people to is a large part of our growth strategy. We identify areas of strengths, weaknesses and understand that a large part of the group’s potential improvements across various areas of success is due to the quality of its people. This the business and those specific to the includes a well-rounded group of individuals employee. Every member of the team has who are able to bring elements of their diverse specific key performance areas which are backgrounds to the fore, engage in meaningful managed and reviewed continuously; this Historical overview discussion and solve strategic issues in a process has ensured that the employees are Munier Damon, owner of Damon At Sons Construction (Pty) Ltd holistic and innovative manner. We are not only monitored by management, but confident that we have employed a unique perform critical self-evaluation, which has corporate social spend which impacts our team with the talent and ability to keep taking been proven to be highly effective. For the community focuses mainly on education and the group to unpresented heights. year under review, the overarching feedback entrepreneurship. We believe that a focus on was that Equites employees felt highly education and entrepreneurship is an effective Over the past year, we have added an motivated, engaged and valued. way to create opportunities for employment, additional six staff members to the team, 50% wealth creation and to stimulate socio- of whom are African females, in line with our Equites employees are empowered with a economic growth in our economy. targeted approach to gender and racial culture that encourages open communication Our business diversification. We are proud of the fact that and offers various channels for communicating During the year under review, the group has we have employed highly skilled individuals matters of concern or developmental areas. assisted in incorporating a company (NPC) who are well-suited to their roles and will Larger concerns are presented to the board by which will house all the corporate social contribute to the success of the group. The the executive directors. In addition, individual responsibility projects and initiatives of the addition of six new employees takes the senior-level employees are also invited to group. This vehicle has been established under current staff compliment at Equites to 20 board sub-committee meetings to present on the name of The Michel Lanfranchi people, of which 10 are female and 10 are key areas which they are involved in and to Foundation NPC (“the Foundation”) (refer to from previously disadvantaged backgrounds. stimulate discussion from time to time. the social and ethics report for further details During the year under review, the company on funding and operations of the Foundation).

As highlighted in other areas of this report, it is has implemented a whistle blower policy, The main objective of the Foundation is to Governance essential to have a highly motivated staff which is facilitated by an external party and contribute to educational infrastructure at complement, whose interests are aligned with provides employees with the necessary primary, secondary and tertiary education those of stakeholders. The company follows a mechanism to directly report concerns about level, as well as to facilitate bursaries and compensation mix of fixed pay, benefits, unethical behaviour to the chairperson of the scholarships to deserving individuals. As a performance-linked variable pay and a audit committee without fear of reprisal or secondary objective, the Foundation shall conditional share scheme. Individual pay is victimisation. support enterprise and supplier development determined by group performance as well as within the built environment context through individual performance, measured through the Community financial support, mentoring and forging annual appraisal process. The performance At Equites, we firmly believe that business must strategic partnerships with these entrepreneurs. evaluation criteria for directors, remuneration be rooted in community and has to be aligned policy and details of the remuneration paid out with its larger interests. Any adversarial On an educational front, Equites in partnership to members of the board are disclosed in the relationship can hurt the company’s ability to with the Foundation have offered their first full

Remuneration report of this Integrated Report. create longer term value. Our approach to cost bursaries to second year students enrolled Annual financial statements Annual general meeting Annual general

Hilda van Rensburg Gary Masombuka Olivia Velen Gustav Fichardt Wouter Hanekom Monique Karating Nasreen Mukuddem Equites Property Fund Limited 30 Integrated Report 2018

Sustainability report (continued)

in property studies at the University of Cape operations, both in developments and Town. The aim of these bursaries is to provide property operations. On the development side, Lords View Industrial Park in Midrand has students with financial aid while simultaneously we include environmental best practice proven to be a leading environmentally providing mentoring and real-world business principles in our brief to our development conscious industrial/logistics park and we have experience. We have also continued the team and ensure that these principles are designed our buildings in this precinct to fit in “Equites Learnership” programme which is incorporated into the final design. On the to this overall theme. Sustainability has been at currently focused on equipping nine, previously operational side, we have been driving the core of our design process to ensure disadvantaged learners, with valuable skills to efficiency through resource optimisation and environmentally consious buildings that will enable them to be absorbed into the waste reduction, in order to reduce our operate with a reduced impact on the workforce. We hope to continue running the environmental footprint. environment as well as provide its occupants bursary programme as well as the Equites with a healthier environment. Learnership programme on an annual basis to We understand that we live in a water scarce empower previously disadvantaged learners to country, and the past year has seen some of In the future, we would like to perform gain meaningful skills and to seek meaningful the worst drought conditions in the Western environmental impact studies for each of our positions of employment. Cape in almost a century. This has prompted properties and developments and incorporate us to place a growing emphasis on water measures to reduce our environmental impact On the entrepreneurship front, Equites management in the region, and in the rest of as far as possible. We are exploring solar continues to partner with its enterprise our portfolio. To further our objectives, we technology and energy efficient sources of development partner, Damon At Sons have engaged extensively with tenants and light and power to reduce electrical Construction (Pty) Ltd (“DAS”) to grow a small employees regarding water saving measures, consumption and we utilise efficient water construction company into a large-scale implemented water-efficient designs at new saving devices, borehole water and recycling business which provides employment to more developments and have tried to utilise boreholes opportunities to optimise water usage. At than forty employees, all from previously and alternative water sources where possible. Equites, environmental initiatives are part of disadvantaged backgrounds. Equites provides a the overall operational and infrastructure development pipeline, financial support and We also recognise that there is growing improvement, therefore, the expenditure is not mentorship to DAS and hopes to develop not uncertainty relating to sustainable, tracked separately. Green building project costs only the business but also the individuals uninterrupted electricity supply and pricing are included in our capital expenditure, while involved in key operations into skilled and as such we need to keep abreast of all monitoring and measurement and small construction industry workers. developments in this sector and investigate energy efficiency project costs are included as energy saving mechanisms and alternative a part of operational budgets for the respective Environment energy sources which make commercial sense. facilities. The return of these initiatives may not At Equites, we believe that environmental be monetarily quantifiable yet, but we believe stewardship is not just the right thing to do but Equites has embarked on a challenge to rate that they will go a long way to increase is an essential component of creating longer its state of the art warehouse facility at Lords stakeholder value and establish our presence term shareholder value. We have built View with the coveted Green Buildings Council as a responsible corporate citizen. environmental sustainability into our daily of SA’s 4-star custom industrial as-built rating.

Premier FMCG, Equites Park Lords View, Gauteng. Equites Property Fund Limited Integrated Report 2018 31

Corporate governance report

Corporate governance, when correctly and effectively applied, is a fundamental part of a healthy functioning financial and economic eco-system. In an effort to increase accountability and demonstrate its commitment to effective ­corporate governance, Equites has fully adopted the King IV report on corporate governance in South Africa for the first time in 2018. Historical overview

The King IV Code sets out the philosophy, the strategy is aligned to the core values of the chairperson should also set clear expectations principles, practices and outcomes which serve group, risks identified and stakeholder interests. concerning the company’s culture, values and as the benchmark for corporate governance in behaviours and should set the style and tone SA. The new King IV code is based largely on the Composition 7 of board ­discussions. It is clear from the principles embodied in King III, however, the 75 We believe that the group’s governance chairman’s report in this Integrated Report that King III principles have been condensed into 17 framework and structures support the overall Leon Campher has a deep knowledge of the principles, each linked to very distinctive long-term growth and success of the group. The business and a firm grasp on the company’s outcomes. Another key change is that King IV is board composition, governance framework, and ethics and culture. Leon undoubtedly plays a Our business the first code that is outcomes based to the roles and responsibilities of the committees vital role in providing oversight to the board. demonstrate what can be achieved if governance are not solely focused on compliance with laws principles are implemented effectively. and regulations but also play a vital role in The CEO has the responsibility of ensuring that driving outcomes that support the group’s the operations of the company and its Throughout this document, we have placed a continued growth. In appointing directors, the performance is in accordance with the strategic reference to the King IV principle which is board, through the nomination committee, goals that the board has determined. The CEO addressed. These references are also noted in ensures that the composition of the board should promote the company’s cultures, values the risk report, as applicable. For a full list of reflects a clear balance of power and authority and behaviours through his own example and King IV principles as well as our application, refer and that no one director has unfettered powers by influencing the day-to-day working to the company website – www.equites.co.za. of decision making. environment of the organisation. The group is

fortunate to have a CEO who is deeply Governance Governance structure 1 10 16 The chairperson of the board of directors knowledgeable and passionate about the The board of directors conducts the group’s (“chairman”) and the chief executive officer environment in which we operate. As set out in business with integrity and accountability by (“CEO”) exercise important roles in the the CEO report in this Integrated Report, the applying appropriate corporate governance corporate governance structure of a company. group has seen his strategic vision come to life policies and practices, with an emphasis on It is best corporate governance practice that over the past few years and he continues to lead those prescribed by King IV. The group the roles of chairperson and CEO are performed by example through living the corporate and recognises that management is an integral part by different people, and that the chairman is ethical culture of the business on a daily basis. of the risk management and governance an independent non-executive director. structure and to this end, the board relies on Independence regular management reports and updates. The role of the chairperson is primarily to While maintaining a focus on corporate guide the board in forming its strategic vision governance, the board reviews the group’s task and assisting the board in implementing strategy annually with the aim of ensuring that the company’s strategic policies. The The board consists of 11 directors, of which Annual financial statements 8 are non-executive. Of the non-executives, Shareholders 5 directors are independent. The chairman of the board is an independent non-executive and the responsibilities of the chairman and Board of directors group chief executive officer are clearly defined and separate. A majority of Social and independent non-executive directors Audit and Risk Nomination Remuneration Investment ethics encourages independent thinking amongst all committee committee committee committee committee board members and enables all directors to

exercise objective judgement. meeting Annual general Executive management Equites Property Fund Limited 32 Integrated Report 2018

Corporate governance report (continued)

To allow a fair nominations process and to and experience which enables them to Audit and risk committee 5 15 allow the board to rotate should the need understand the complexities of the business and The primary responsibility of the audit and risk arise, one third of the non-executive directors contribute meaningfully to the management of committee is to assist the board in overseeing must resign and stand for re-election at each the group. Through a robust board evaluation integrated reporting and ensuring the financial annual general meeting. performed in the current year, it was noted that integrity of the annual financial statements and there may be a concentration of skills on the other financial reporting. The committee is also All board appointments are motivated by the board and a skills matrix should be compiled responsible for monitoring the risk at quarterly nomination committee in terms of their and assessed to provide a deeper understanding. meetings and reporting to the board on key formal terms of reference and policy on This process is underway, and should there be issues. The committee is chaired by Ruth appointments. All appointments are formal a need, this will be addressed through board Benjamin-Swales and ensures that all statutory and transparent, and are subject to approval appointments or rotations in the future. duties are upheld in line with the Companies by the board as a whole. Act, while overseeing the processes which Effective board ensure the integrity of the group’s financial and 9 Gender and racial diversity self-evaluation process integrated reporting. For the year under review, During the year under review, the board the committee is pleased with the system of underwent a rigorous self-evaluation process internal control, management’s reporting which was assessed and interpreted by an standard, as well as the effective risk external evaluation company, CGF Research management strategy employed. White Non-white Institute. The objective of the independent external evaluation is to improve the board’s Members: Ruth Benjamin-Swales (chair), Leon Campher, The non-executives have been selected to reflect collective and individual performance and that Nazeem Khan, Mustaq Brey, Gugu Mtetwa. diversity in terms of race, gender, areas of of its committees, and thereby improve the experience and tenure. The board currently overall efficacy and sustainability of Equites. Investment committee 4 comprises only two females and has made a In the light of the increased volume and conscious decision to improve gender diversity The survey indicated that the majority of the magnitude of transactions being evaluated by in the near future in accordance with the board is confident that the governance of the the group, both in SA and the UK, the company’s gender diversity policy. The board board and its sub-structures are adequate and investment committee has become comprise 4 non-white directors and 7 white functioning correctly. Moreover, the increasingly important to the growth and directors. As part of future board rotations and respondents believed that the board was continued success of the group. This succession planning, there will be a focus on performing according to its agreed standards committee is chaired by Leon Campher and its racial diversity in an attempt to achieve a more and expectations. Areas highlighted for primary role is to review material transactions empowered board in accordance with the improvement involved the continuous identified by the executive (including material company’s racial diversity policy. development of board members in respect of acquisitions, mergers and disposals) on an their knowledge of the business, industry, trends ongoing basis and make recommendations to Experience and market. This has been highlighted and is in the board in this regard. The committee also the process of being addressed accordingly. assists and advises the executive on such Property expertise transactions. For the year under review, the The board was asked to list the top three committee has spent the majority of its time characteristics which, in their opinion, are reviewing the company’s UK expansion Corporate Governance required of a high performing board. In strategy with a specific focus on individual summary, it was agreed that these included acquisitions and the financial impact on the knowledge, skills and experience; integrity and group. Towards the end of the period, the Finance ethics and strategic vision. We believe that the committee evaluated a large SA acquisition of board currently display a high level of all these two high quality logistics assets – one in characteristics and as a result, contribute to the Gauteng and one in KZN. The committee was Legal overall success of the business. pleased to approve this transaction as it enhanced the quality of the SA portfolio and

Board committees – 6 8 served a long-time strategic objective of The board regularly reviews the ideal composition and duties expanding into KZN. composition and experience for the future The board acknowledges that overall against its current composition. The board responsibility for managing the group rests Members: Leon Campher (chair), Nazeem Khan, currently has a diverse range of qualifications with the board as a whole. To assist it in Giancarlo Lanfranchi, Andre Gouws, Kevin Dreyer fulfilling its responsibilities, however, the board has appointed a number of sub-committees. Equites Property Fund Limited Integrated Report 2018 33

Remuneration committee 14 Involved and committed board The role of the remuneration committee is to ensure that executive and employee remuneration promotes fair, responsible and ethical employment practices while being mindful of all stakeholders. The remuneration committee is chaired by Nazeem Khan, and Leon Campher Nazeem Khan Benjamin- Ruth Swales Mustaq Brey Gugu Mtetwa Giancarlo Lanfranchi Dreyer Kevin André Gouws Riaan Gous ensures that the group adopts a remuneration Historical overview policy that is fair and transparent and attracts Audit and risk committee and retains executive talent that contributes to 08 May 2017 P P P p P * * * * the achievement of the group’s objectives. The 09 October 2017 P P P P P * * * * remuneration committee assessed the salary increases for the year, and these were deemed Investment committee to be reasonable at 6% across the board. The 02 October 2017 p P * * * P P P * committee also signed off the STI and LTI in 22 February 2018 P P * * * P P P * line with the group’s performance and agreed upon individual performance metrics. Remuneration committee 08 May 2017 P P P * * * * * * Our business Members: Nazeem Khan (chair), Leon Campher, 25 January 2018 P P P * * * * * * Ruth Benjamin-Swales Nomination committee Nomination committee 09 October 2017 P P P * P * * * * The role of the nomination committee is to assist the board with the nomination, election Social and ethics committee and appointment of directors. The committee 09 October 2017 P * * * P P * * P is chaired by Leon Campher and this 25 January 2018 P * * * P P * * P committee ensures that the board is selected to P Attended ensure optimal diversity, experience, knowledge p Absent with apologies Governance and skill in the composition of the board. * Not a member of this committee

Members: Leon Campher (chair), Nazeem Khan, Ruth Benjamin-Swales, Gugu Mtetwa Conflict of interest and directors’ Company secretary ­personal interests Riaan Gous was appointed as the company Social and ethics committee 2 3 Directors are required to declare their personal secretary on 1 December 2014. The board is The social and ethics committee is a statutory financial interests and those of related persons satisfied with his experience and qualifications committee whose focus is to ensure that the in contracts with the group. A register in this to act in this capacity. Following a review group follows a process to become a more regard is maintained and reviewed at each undertaken by the board on the duties responsible corporate citizen in line with good board meeting. required of the company secretary during the governance practices. This committee is year under review, the board concluded that chaired by Giancarlo Lanfranchi and is focused In line with the requirements of the the nature of the advice provided by the on enhancing the positive footprint which Companies Act and corporate governance company secretary and the way the company Annual financial statements Equites can make in society, which will be guidelines, directors are asked to recuse secretary executed his duties during the year, beneficial to all stakeholders well into the themselves from any discussions and decisions indicated that he is fit to continue in the role. future. The largest achievement for the year where they have a material financial interest. He is also an executive director of the under review was the assistance in the company and several of the subsidiaries in the formation of The Michel Lanfranchi Foundation group. The board is satisfied that despite this, NPC, a vehicle which will be used to further his relationship with the board is at arm’s- educational and social upliftment goals. Refer length and he maintain good corporate to the social and ethics report for more detail. governance on behalf of the company at all times.

Members: Giancarlo Lanfranchi (chair), Leon Campher, meeting Annual general Riaan Gous, Gugu Mtetwa Equites Property Fund Limited 34 Integrated Report 2018

Board of directors

Independent non-executive directors

Philip Leon Campher Nazeem Khan Ruth Benjamin-Swales Chairman Age: 62 Age: 55 Age: 70 Qualification: BSc (QS), MAQS, PrQS, A.AArb Qualification: BCom, CA(SA) Qualification: BEcon

Leon is the CEO of ASISA. He also serves on the boards of Nazeem is a director of the national firm Bham Tayob Khan Ruth is a senior policy advisor at ASISA and CEO for the Sun International Limited, Brimstone Investment Corporation Matunda (BTKM) quantity surveyors. He also serves as the ASISA Foundation and ASISA Enterprise Development Fund. Limited (“Brimstone”), and Business Unity South Africa. With chairman of the Brimstone audit committee. His experience She is also the chairperson of the audit and risk committee of his vast experience in business and investment management, provides valuable insights into the group’s operations, the Cape Peninsula University of Technology. She has served he is able to direct the board effectively and provide sound particularly with respect to property acquisitions and on numerous councils and boards including SAICA and IRBA. guidance to the executive team. developments and his focus on accountability and With her financial and compliance background, she sets the consciousness of market trends proves invaluable in guiding ethical tone for the group and spearheads the functions of the remuneration committee. the audit committee.

Mustaq Brey Gugu Mtetwa Age: 64 Age: 38 Qualification: BCompt (Hons), CA(SA) Qualification: BCom, PGDA, CA(SA)

Mustaq is the CEO of Brimstone. He also serves as the Gugu is a non-executive director on several boards including chairperson of Oceana Group Limited, Life Healthcare Development Bank of Southern Africa, Santam and Italtile. Limited and International Frontier Technologies SOC Limited. With her vast experience in complex IFRS and other He is also a director of AON Re SA Proprietary Limited, Lion compliance matters, she provides a great depth of insight of Africa Insurance Company Ltd and also serves on the and assists in setting a sound ethical tone at the top. boards and committees of various non-profit organisations. With his vast business experience, he brings unique insights and provides sound guidance to the board. Equites Property Fund Limited Integrated Report 2018 35

Non-executive directors Historical overview

Giancarlo Lanfranchi Kevin Dreyer André Jacques Gouws Age: 49 Age: 56 Age: 45 Our business Qualification: DipArch Qualification: B.Com, B.Compt (Hons), CA(SA)

Giancarlo is CEO and founder of Swish Property Group with Kevin runs the development arm of the Cape Town André is the managing director of Intaprop Investments (Pty) over 25 years of construction and property experience. He International Airport based consortium and has substantial Ltd, a property development company. With his financial also holds directorships in My Domain Student Residence experience in the Western Cape industrial property sector. He background and insights into the property sector, he brings a and Mulilo Renewable Energy and Partners. His experience also owns Automotion Airport Parking Propprietary Limited. depth of knowledge to the decision making regarding provides valuable insights into the group’s operations, His experience in this sector provides valuable insights into developments and operating activities. particularly with respect to property acquisitions and the group’s operations, particularly with respect to property developments and his passion for social development guides acquisitions and disposals. the activities of the SET committee.. Governance Executive directors Annual financial statements

Andrea Taverna-Turisan Riaan Gous Bram Goossens Chief Executive Officer Chief Operating Officer Chief Financial Officer Age: 49 Age: 52 Age: 40 Qualification: BSc (Honours) Qualification: BA (Law) LLB Qualification: BCom (Hons), PGDA, CA(SA) (Mathematics and Management)

Andrea established his own property development company Riaan was previously a director with of one of the Before joining Equites shortly after listing in 2014, Bram was a in 2006 and built up a substantial portfolio of modern predecessor firms of Cliffe Dekker Hofmeyr Inc. where he partner with PwC in Cape Town. He serviced some of PwC’s logistics assets for his own account over the following 8 gained extensive exposure to real estate transactions. He then key clients in the retail, industrial and property sectors in the meeting Annual general years. This became an important component of the Equites spent some 10 years as an executive director of the Arabella Western Cape and brings with him a strong knowledge of portfolio on listing. This development expertise and his Group and was actively involved in the development of their IFRS, JSE Listings Requirements and the regulatory framework previous experience in the UK, are key success factors for property portfolio. His legal knowledge in the property sector within which Equites operates. Equites. has proven invaluable in the listing process and the many significant transaction Equites has concluded to date. Equites Property Fund Limited 36 Integrated Report 2018

Risk management report

We believe that our approach to identifying and appropriately managing risks ensures that we continue to generate sustainable value for our stakeholders.

Risk register 11 12 13 Our risk management framework Based on reports from executive management Equites recognises that effective risk Each business area is responsible for and feedback from the A&R committee, the management is critical to the achievement of identifying and managing risks in their area of board confirms that the group’s risk strategic objectives and the long-term growth responsibility. Executive management is tasked management, mitigating activities and of the business. The approach is all-inclusive with implementing mitigating actions as soon monitoring processes are an effective risk and involves the following steps: identification as they are aware of the identified risk. response. of risk; assessment of the likelihood and Executive management meet on a weekly basis impact on the group; formulating mitigating to workshop strategic issues facing the Our risk assessment matrix responses to the risk and reviewing and business and risk management is dealt with on Each risk is identified as either external or revising identified risks on an ongoing basis. an ongoing basis in these meetings. internal and is assessed based on its likelihood and impact. The risk is assessed after The effective application of the risk Although the board is responsible for ensuring consideration of the status of the risk as well as management process ensures that that the risks facing the business are effectively any mitigating factors which have been management understands the risks to which managed, it has delegated oversight of risk to employed. Outlined below is our risk heatmap it is exposed and deals with them in an the Audit and Risk (“A&R”) committee. The A&R followed by our risk assessment matrix which informed, proactive manner. committee reviews significant risks and any considers the principal risks that the group is mitigating factors at each meeting and reports exposed to. back to the board based on their findings.

Our risk heatmap

External risks

1. Macroeconomic outlook

2. Political and regulatory outlook 1 3. Availability and cost of finance 4 4. Tenant default and occupier demand 8 2 5. Foreign exchange rate fluctuations 3 5 6. Increase in utility costs and lack of supply 9 Impact 7 10 Internal risks 11 6 7. Capital structure and finance strategy 8. Investment strategy

9. Transformation strategy and objectives

10. Retention of key staff and adequate human resourcing

11. Compliance with laws and regulations Likelihood Equites Property Fund Limited Integrated Report 2018 37

Risk factor Impact of the risk How we assess and manage the risk Change in the year

External risks

Macro- The macroeconomic The board assesses key macroeconomic indicators The UK GDP growth is projected to economic climate, forecasted GDP including forecasted GDP growth, unemployment rates, be 1.5% in 2018, down from 1.7% in outlook growth and the interest rates and levels of market volatility as part of its 2017 while projected UK CPI in

expectation of ongoing assessment of the financial stability of both the 2018 is estimated at 2.7%. The SA Historical overview movements in future SA and UK economies. GDP growth is projected to be interest rates creates risks relatively benign at 1.5% in 2018 and opportunities for the While external risks are inherently difficult to manage, with unemployment rates around group and its enhancing the group’s resilience to economic 27% which presents a risk to the stakeholders. downturns enables us to mitigate any significant adverse future performance of the group. impacts thereof. We therefore aim to secure long-dated leases with blue-chip tenants. The group is confident that our robust business model differentiates The group’s WALE increased to 7.9 years in the current us as an investment which can year with c.90% of our portfolio let to blue-chip tenants. endure the impact of economic

downturns. Our business

Political and Political instability and The group maintains a conservative LTV target of The past year has been particularly regulatory uncertainty both in SA 25-35% and maintains adequate banking facilities. turbulent both with a change in the outlook and in the UK may result Presidency of the Republic of South in the inability to access The group monitors the capital markets closely and Africa and of the African National capital as required gauges appetite for equity through engagement with Congress and with the Brexit through debt and equity key market players including corporate sponsors, asset developments and resultant markets due to managers and other investors. uncertainty arising from questions diminished investor around trade policies. confidence. The group plans to embark on a corporate bond programme in the next 12-18 months to access a Nevertheless, we remain confident alternative source of funding. that our business model remains Governance resilient in the face of a challenging political landscape.

Availability Reduced availability of The group maintains a hedging policy of hedging at Our all-in effective average cost of and cost of finance may adversely least 80% of its interest rate exposure. funding has fallen 70 bps from last finance affect our ability to year which is a product both of a effectively maintain a low Currently, the group is over 100% hedged on term decrease in SA interest rates but also cost of funding and to balances. In line with global economic consensus, we an increase in the utilisation of UK reduce the refinancing anticipate rising global interest rates and have entered debt facilities at a lower all-in cost. risk when existing debt into various instruments to protect us against the Furthermore, we are fully hedged on facilities near expiry. adverse impacts for up to 10 years into the future. term loan balances which provides protection against future interest rate hikes which is particularly relevant in

the UK. Annual financial statements

Tenant default Our rental growth, Our focus remains on blue chip tenants, with c.90% of We have seen occupier demand and occupier sustainable income our portfolio let to A-Grade tenants. increase in certain key logistics demand stream and capital nodes while other areas have appreciation may be As the majority of our tenants are large listed, national remained relatively flat over the year. adversely impacted by or international tenants we expect these tenants to be Tenant default remains virtually zero weaker occupier demand more resilient in a trying economic climate. Equites has across the portfolio. and tenant defaults. also set an internal threshold that any single tenant which comprises more than 10% of total revenue needs to be an investment grade tenant in order to minimise default risk. Annual general meeting Annual general

Management engages with clients regularly to assess their financial status and to engage on the likelihood of them renewing/remaining at Equites facilities. Equites Property Fund Limited 38 Integrated Report 2018

Risk management report (continued)

Risk factor Impact of the risk How we assess and manage the risk Change in the year

Foreign As the UK business grows, The group recently established a treasury team which The implied volatility of the GBP/ exchange rate Equites International is monitors exchange rate exposures in real time and ZAR exchange rate over the past 12 fluctuations becoming a larger actively hedges against foreign currency exposures. months has increased substantially component of the which poses a risk to the financial business. Volatility in Cross currency swaps to the value of £75 million have performance of the UK operations in exchange rates impact been entered into to hedge the capital exposure. As at Rand terms. In light of this, we have the translation of foreign 28 February 2018, 75% of the foreign net assets, remained well hedged while operations which have a excluding fair value adjustments are hedged. maintaining appropriate levels of direct impact on the NAV flexibility to respond to future and distribution growth movements. of the group.

Increase in The rapid increase in Management is investigating the use of renewable The increase in municipal rates and utility costs municipal rates and energy sources and energy saving technology to reduce electricity combined with the and lack of electricity tariffs result in the electricity cost burden to tenants. decrease in water supply particularly supply additional pressure on in the Western Cape has increased tenants for recovered Management engage with tenants regularly regarding this risk. Despite this, we continue to utilities. municipal rates valuations and the recoverability of engage with our tenants and local these rates from tenants on fully repairing and insuring municipalities to ensure that The severe drought in the leases. appropriate measures are being Western Cape has resulted implemented to minimise the in an increase in water The property management team has drafted a plan to impact of decreased water supply in tariffs as well as the provide water to all tenants in the event of any water the Western Cape and to ensure that potential for water disruptions in the Western Cape. This includes the use fair and reasonable municipal rates disruptions in the future. of underground water and other alternative water are being paid. sources. The group constantly engages with tenants about the water shortage and actively encourages measures for water saving.

Internal risks

Capital Failure to appropriately The group currently has a healthy balance sheet, The group’s LTV has increased structure assess the liquidity underpinned by properties with strong fundamentals slightly from 21.3% to 23.5% while and finance requirements of the which translate into sustainable cash flows. the undrawn borrowing facilities has strategy group may result in the The LTV of the group is a low 23.5% with R1.05 billion remained largely unchanged at inability to pay undrawn funds at year end. R1.05bn. The group’s cash flow obligations as they fall forecast suggests that we will be able due. An increase in the There has been no breach in financial covenants to to meet existing obligations as they use of leverage, which date, and there is no evidence to suggest that there fall due, a view that remains augments capital returns would be any in the upcoming financial year. unchanged from last year. of the group, may Refer to increase the cost of debt note 7 of the Annual and increase the risk that financial the group might breach statements. financial covenants. Equites Property Fund Limited Integrated Report 2018 39

Risk factor Impact of the risk How we assess and manage the risk Change in the year

Investment The group’s ability to The board has constituted an investment committee Whilst the macroeconomic and strategy meet its objectives which is tasked with the specific objective of ensuring political landscape remains depends partially on the that the investment strategy is executed effectively. uncertain, we have an enduring execution of its Individual investment decisions are subject to a strategy which is based on long- investment strategy. thorough due diligence by our Investment Committee dated leases with A-grade tenants in Historical overview Failure to execute the which considers the appropriate risk adjusted hurdle our high quality logistics facilities in Refer to the group’s investment rates to be factored into the investment decision. key logistics nodes which we Corporate strategy effectively could continue to focus on. Governance report in this adversely impact the Integrated financial performance of Report the group.

Transformation Inability to achieve The board and the social and ethics committee actively The heightened focus on broad- strategy and transformation targets monitors transformation in the entity and focuses on based BEE recognition levels and the Our business objectives may directly impact our initiatives which improve transformation in a meaningful proposed amendments to the BBBEE ability to attract and manner. Codes may impact the group’s ability retain tenants who to attract and retain tenants. require a landlord with a The group has been instrumental in setting up The Michel However, the group remains specific B-BBEE rating or Lanfranchi Foundation NPC which will be the vehicle committed to ensuring that the ownership level. which houses the corporate social initiatives of the group. transformation strategy is executed Furthermore, it may This will aim to positively impact the skills development and our objectives are achieved. impact our ability to and social development elements of our scorecard. Refer to compete on the Social and Ethics report in development bids with Management focuses on employment equity in all

this Integrated specific BEE criteria. hiring activities with a preference given to previously Governance Report. disadvantaged candidates.

Retention of Loss of key staff or being Executive management constantly assesses the capacity During the year, the group has key staff and under resourced will of available staff and closely monitors staffing employed additional staff members adequate impact the ability to requirements as the business grows. on both the finance and operational human achieve the group’s sides of the business to ensure that resourcing objectives effectively. All staff members are awarded short term incentive the rapid growth is supported by a bonuses and belong to the long-term share incentive highly skilled and capable team. bonus scheme which aligns the interests of staff Furthermore, we continue to members with the performance of the company and motivate our key staff and ensure assists with the retention of key staff. that they are adequately rewarded. Refer to the Sustainability report Annual financial statements in this Integrated Report.

Compliance Failure to comply with The group employs management and staff who are The group remains committed to with laws and key laws and regulations qualified and experienced to deal with the relevant upholding the highest levels of regulations of the jurisdictions which compliance factors. Where additional complexities are integrity and ethical culture. There the entity operates in encountered, management engage a broad range of continue to be no reported may result in fines and specialists to ensure that all relevant avenues are instances on non-compliance with penalties, reputational covered. laws and regulations. harm or potential loss of

Refer to REIT status. The largest risk factor is jeopardising the REIT status of meeting Annual general the Audit and Risk the business; to manage this, management constantly Committee report monitors elements of revenue which may be deemed as in the annual non-property income and may place the REIT status in financial statements. jeopardy. Equites Property Fund Limited 40 Integrated Report 2018

Remuneration report

The group adopted the King IV Report on the prior year has continued to work effectively, Remuneration policy Corporate Governance for South Africa (“King as evidenced by a clear link between the In line with best practice, the group’s IV”) during the current year and has adopted performance of the company and the reward remuneration committee is appointed by the the remuneration principles envisioned in the outcomes generated and therefore, there have board of directors and has delegated authority, report. The report places increased emphasis been no proposed changes in the current year. in accordance with its terms of reference, to on the concept of “fair and responsible pay”, a review and make decisions regarding the concept which was first introduced in King III. The remuneration committee is aware of the group’s remuneration policies and King IV recommends that remuneration is ongoing debate on executive remuneration and implementation thereof. used as a tool to ensure the business creates corporate governance. This debate has led to an value in a sustainable manner, within the increase in the focus on long-term alignment The remuneration committee fulfilled the company’s operating context. These intended with shareholders and the importance of taking following main duties during the reporting results align with King III recommendations; account of executive compensation within a period: however, King IV recommends detailed and broader context, particularly in relation to – Review of the group’s remuneration policy, specific disclosure on the policy and its employees’ remuneration and the operating to which there were no significant changes implementation. In line with these context of the business. – Approval of overall pay mix for executive requirements, this report is split into different directors components; the first is the background At the annual general meeting (“AGM”) held in – Approval of the group’s LTI including the statement which provides context to the August 2017, shareholders gave a positive related performance and service vesting company’s remuneration policy; the second is non-binding advisory vote of 82.73% for the conditions as well as annual awards an overview of the remuneration policy and 2017 remuneration policy. In line with King IV, – Assessment of LTI outcomes and approval the third section details its implementation. shareholders will be requested to vote on the of actual shares issued to the directors remuneration policy and the 2018 – Approval of short-term bonus scheme for Background statement remuneration implementation report at the executive directors including an assessment Remuneration throughout the organisation has annual general meeting to be held on 27 July of annual outcomes and approval of bonus been designed to aid the recruitment and 2018. If shareholders do not approve the pay-out retention of vital skills in line with the rapid remuneration policy or the implementation – Recommendation to the Board of non- growth within the group and our vision for report by more than 75% the board will executive directors’ emoluments and continued success. Highly skilled and motivated institute a formal engagement process with increases for the following year for approval people are considered key to the group’s long- interested shareholders to assess their views by shareholders term strategic objectives. It is also an integral and steps that they expect the company to – Approval of executive directors guaranteed part of maximising stakeholder value and take in order to resolve any concerns. pay and increases ensures that management and shareholder Our pay mix provides for short-term reward, values are aligned through providing our human while incorporating long term incentives. Our There were no significant changes to the capital with meaningful equity participation. three-tier remuneration structure for all remuneration policy for the current financial employees provides a balance between: year. To ensure that the group’s total remuneration packages and pay mix is appropriate within the Total The total guaranteed pay All employee remuneration market in which it operates the group has a guaranteed (“TGP”) is the salary for For the purposes of the remuneration policy, policy to perform external benchmarking every pay performing the contractual employees have been categorised into three 3 years. The remuneration committee applies role agreed upon. categories; executive directors, management reasonable inflationary adjustments to all Annual The short-term cash and other employees. In addition to the TGP, categories of pay in the years following the performance- incentive (“STI”) bonus is all permanent employees receive a component external benchmarking exercise. A related awarded to employees of variable remuneration, dependent on their benchmarking exercise was last performed in incentives based on the group’s level and role within the group. Equites is the prior year, which resulted in a salary financial performance as committed to fair and responsible adjustment that in the current year. For the well as individual remuneration across the company. Any financial year ending 28 February 2019, the performance metrics. possible remuneration disparities related to remuneration committee approved a basic Long-term The long-term incentive race, gender, etc. will be identified and any increase of 6%. incentives scheme (“LTI”) is designed confirmed remuneration disparities will be to attract, retain and investigated and addressed as soon as is The remuneration committee believes that the reward executives through practical. Unjustifiable differences in pay and remuneration policy adopted by shareholders in the award of conditional conditions of employment between shares. This serves to align the interests of employees with those of shareholders. Equites Property Fund Limited Integrated Report 2018 41

employees at the same level will be addressed Total guaranteed pay plan are paid in cash. The committee may in accordance with the “equal pay for work of TGP comprises cash salary and benefits and is apply judgement to make appropriate equal value” philosophy. determined by the scope of the role, adjustments to an individual’s annual performance and experience. Employee performance-related incentive. The remuneration committee regards it as an remuneration levels are reviewed annually and important endeavour to reduce the gap assessed against business performance, the The remuneration committee sets the business between executive remuneration and the scope and nature of the role, relevant targets for the STI on an annual basis and lower paid staff. To actively address this, the companies in the property sector and currently use distribution per share, measured Historical overview remuneration committee has capped executive macroeconomic indicators such as inflation, against the annual budget. The scheme is self- pay increases at 6% for the financial year to cost-of-living changes and the labour market, funding, which means that the on-target DPS 28 February 2019, whereas lower paid staff to ensure they are fair and reasonable. is the budgeted DPS plus the equivalent cents averaged 11.4% differentiated by individual per share that equates to the rand value of the performance. As a measure of the pay gap, the Short-term incentive on-target STI bonus pool. committee monitors the ratio between the The group has adopted a multiplier-based STI CEO’s TGP against the median employee, plan which incorporates individual and The remuneration committee agreed personal which has improved from 5.66 in the prior business targets. The performance-related objectives with each executive director with year to 5.37 in the current year. The committee incentive target for each executive is agreed equal weighting at the beginning of the Our business is satisfied that this compares favourably with with the individual annually and is based on financial year. Personal objectives are assessed other listed companies. targets that are verifiable and aligned to the at the beginning of the year and result in a business’s operations and strategy. STIs are multiplier from 0-150%. The maximum STI Equites will continue to benchmark TGP and payable annually after being approved by the payable to an individual director is, however, total remuneration for these levels of remuneration committee and release of the limited to the amount determined with employees to the industry median. audited financial. Any annual performance- reference to the financial targets above. This related incentive pay-outs received under the means that the outcome of these personal performance targets can only reduce and not increase the STI payable. Executive remuneration

The executives’ remuneration was balanced between TGP, STI and LTI. To encourage retention and The remuneration committee has also Governance align executive’s interests with other shareholders, the on-target LTI is 35% of the remuneration obtained independent verification of all mix as set out below: computations in the STI and LTI awards. On-target performance Stretch performance Stretch R7 652 R5 333 R5 304 100 R11 109 R7 599 R7 562 Target as % 100 as % of cash 90 90 Name Title of TGP pay 35% 35% 35% 80 80 38% 39% 39% 70 70 Andrea Taverna-Turisan CEO 60% 120% 60 Riaan Gous COO 50% 100% 60 Bram Goossens CFO 50% 100% 24% 22% 22% 50 50 30% 30%

% 33% 40 % 40 Long-term incentive Annual financial statements 30 30 Long-term incentive awards are granted 41% 44% 44% 20 annually under the Conditional Share Plan 20 28% 31% 31% 10 10 (“CSP”) in the form of conditional shares in 0 Equites. The committee believes that using 0 CEO COO CFO CEO COO CFO these types of awards aligns the interests of the executive and shareholder and allows the M On-target TGP M On-target STI M On-target LTI M Stretch TGP M Stretch STI M Stretch LTI executive the opportunity to share in the * Total figures are presented in R’000 success of Equites over the long-term. The total quantum of shares awarded for the year

On target variable pay, made up of the STI and LTI comprises more than half of total was set as 85% of the cash pay for the CEO meeting Annual general remuneration. At stretch, the variable pay comprises 71% of the total remuneration for the CEO and 80% of the cash pay for the COO and and 69% of total remuneration for the COO and CFO. CFO based on the 30-day VWAP on the date of the award. Equites Property Fund Limited 42 Integrated Report 2018

Remuneration report (continued)

60% of the CSP awards are subject to 3-year by 33.3%) (“matching shares”). The only further Non-executive remuneration service condition, as well as business and vesting condition for the matching shares is for Non-executive directors do not have personal performance conditions the participant to remain in the company’s employment contracts and do not receive any (“performance shares”) in order to balance employment for a further 24 months. Where a benefits associated with permanent retention and reward objectives. These participant remains employed by the company, employment. Their fees as directors are performance conditions are weighted 60% for vesting of a particular tranche occurs at the determined as a base fee and attendance fee achieving the distribution per share budgets end of this additional 24-month period. Where based on their board and committee for each of the 3 financial years during the a participant’s employment is terminated after obligations. In line with best practice performance period and 40% for net asset the initial performance period, but before the recommendations, the chairman receives a value per share growth. The remaining 40% of end of the additional 24-month period, vesting fixed annual fee that is inclusive of all board CSP awards are subject to a 3-year service is accelerated to the termination date and the and committee attendances as well as all condition only (“retention shares”). participant forfeits the matching shares. other tasks performed on behalf of the group. Equites pays for all travelling and After the initial 3-year performance period, the Termination of employment accommodation expenses in respect of board number of performance shares awarded to the Executive directors have permanent meetings. participant are adjusted in line with the employment contracts with six-month notice performance conditions, as assessed and periods. On termination, directors are entitled Using the services of an external consultant in approved by the remuneration committee. to their TGP for the period of service and any the prior year, non-executive directors’ fees accrued leave balances owing to them. were benchmarked against Equites’ peers as If the participant remains employed by the Termination does not trigger any accelerated well as average board compensation on the company after this initial performance period, vesting conditions relating to the LTI or JSE. The recommendations received were the award is increased on a 3-for-1 basis (i.e. balloon payments. reviewed for reasonableness by the remuneration committee and the board and Implementation was authorised by the shareholders at the prior year AGM. Single figure of remuneration

Long-term Short-term remuneration remuneration

Guaranteed pay Variable Variable

Value of equity settled share based payment Performance incentives Total Salary Benefits bonus granted Remuneration R’000 R’000 R’000 R’000 R’000

2018 Executive directors Andrea Taverna-Turisan 3 100 31 3 720 4 749 11 600 Gerhard Riaan Gous 2 300 24 2 300 2 979 7 603 Bram Goossens 2 300 8 2 300 2 478 7 086 7 700 63 8 320 10 207 26 290

2017 Executive directors Andrea Taverna-Turisan 2 106 27 2 527 2 507 7 167 Gerhard Riaan Gous 1 671 27 1 671 2 345 5 714 Bram Goossens 1 671 19 1 671 2 345 5 706 5 448 73 5 869 7 197 18 587 Equites Property Fund Limited Integrated Report 2018 43

2018 2017 R’000 R’000

Total fees recovered Non-executive directors Leon Campher 500 404 Nazeem Khan 274 276 Ruth Eleanor Benjamin-Swales 238 243 Historical overview Giancarlo Lanfranchi 235 174 Kevin Dreyer 174 182 André Gouws 159 150 Mustaq Brey 180 87 Gugu Mtetwa 225 — 1 985 1 516

Short-term incentive Where the company achieves the budgeted DPS, no bonuses are payable. Where actual DPS is 0.8% higher than budget, the bonus payable to Our business directors in aggregate is R4.16 million (0.8% of actual distributable income). Where actual DPS exceeds the budget by 5% or more, the maximum bonus, in aggregate payable to directors, is capped at R8.32 million. The table below illustrates the STI individual targets and outcomes:

Actual pool Pool available Actual available for Pool available for distribution performance Distribution Performance target for distribution (R) (% of budgeted DPS) in FY2018 for FY2018

Threshold Budgeted DPS nil 0.00% On-target Budgeted DPS + 0.8% 4 160 000 0.80% Budgeted DPS + 5.5% 507 800 952 Stretch Budgeted DPS + 5% 8 320 000 1.61% Governance

Resulting Total STI as award level Personal per single figure Name Actual company performance as % of TGP objectives met table (R’000)

Andrea Taverna-Turisan 120% Yes 3 720 Riaan Gous Budgeted DPS + 5.5% 100% Yes 2 300 Bram Goossens 100% Yes 2 300

Personal objectives for the directors included: – Implementing Equites’ international expansion strategy within set parameters

– Building human resource capacity of the business, with specific focus on the Johannesburg office and international business Annual financial statements – Improve stakeholder management and specifically investor relations – Establish a positive working environment where members of staff feel positively engaged with their employer as measured by an independent review Annual general meeting Annual general Equites Property Fund Limited 44 Integrated Report 2018

Remuneration report (continued)

Long-term incentive There were no shares which vested in the current year, however, the shares granted in respect of the 2014 share award are no longer subject to performance conditions and are only subject to service conditions. The performance conditions attached to the 2014 awards and achievement against these are set out below. Target Stretch Actual Threshold (100% (200% Actual vesting (% of Performance condition Weighting (30% vesting) vesting) vesting) performance element)

Distribution per share 60% 90% of Budget% Budget +5% Budget +5.5% 110.2% budget Share performance relative to NAV and forward yield* 40% NAV NAV + 5% NAV + 10% Above stretch 80% Total LTI vesting 190.2%

* The awards in 2014 and 2015 included performance conditions linked to the dividend yield and premium to NAV of the company’s share price. From 2016, these conditions were replaced by a target NAV per share growth rate. Amounts included in the single figure table in respect of LTIs is set out below. Performance Value of shares Number of Percentage adjusted including in shares under performance number of Share single figure Director Award award factor shares price table

Andrea Taverna-Turisan 2014 award (performance shares) 66 243 190.2% 125 967 19.99 2018 award (retention shares) 54 901 N/A 54 901 19.99 matching shares 56 709 N/A 56 709 19.99 Total 237 577 4 749 184 Gerhard Riaan Gous 2014 award (performance shares) 40 146 190.2% 76 342 19.99 2018 award (retention shares) 38 337 N/A 38 337 19.99 matching shares 34 369 N/A 34 369 19.99 Total 149 048 2 979 469 Bram Goossens 2014 award (performance shares) 31 053 190.2% 59 051 19.99 2018 award (retention shares) 38 337 N/A 38 337 19.99 matching shares 26 585 N/A 26 585 19.99 Total 123 973 2 478 200

Awards granted in the year are set out in the table below. The following performance conditions are attached to the performance shares awarded: – 60% of the award is dependent on the company achieving the distribution per share budgets for each of the 3 financial years during the performance period; and – 40% of the award is based on net asset value per share growth over the period.

The table below summarises the unvested shares awarded to directors. Closing Number of number of Vesting Issue instruments unvested Indicative Date of award date Number of instruments awarded price lapsed instruments value Maximum Maximum Total On target additional matching maximum grant performance share shares

Andrea Taverna-Turisan 2014/10/29 2019/05/31 110 404 66 242 58 882 235 529 10.65 8 057 227 472 4 656 462 2015/07/15 2020/05/31 139 480 83 688 74 389 297 557 11.92 — 297 557 5 978 907 2016/02/29 2021/05/31 144 580 86 748 77 109 308 437 12.38 — 308 437 3 163 667 2017/02/20 2022/05/31 164 997 98 998 87 998 351 994 15.97 — 351 994 3 248 100 2018/02/19 2023/05/31 137 253 82 352 73 202 292 806 20.35 — 292 806 2 100 213 Equites Property Fund Limited Integrated Report 2018 45

Closing Number of number of Vesting Issue instruments unvested Indicative Date of award date Number of instruments awarded price lapsed instruments value Maximum Maximum Total On target additional matching maximum grant performance share shares

Riaan Gous Historical overview 2014/10/29 2019/05/31 66 911 40 146 35 686 142 743 10.65 5 267 137 475 2 822 055 2015/07/15 2020/05/31 104 027 62 416 55 481 221 924 11.92 — 221 924 4 459 190 2016/02/29 2021/05/31 108 003 64 802 57 601 230 406 12.38 — 230 406 2 356 884 2017/02/20 2022/05/31 115 216 69 130 61 449 245 794 15.97 — 245 794 2 268 123 2018/02/19 2023/05/31 95 843 57 506 51 116 204 465 20.35 — 204 465 1 466 562

Bram Goossens 2014/10/29 2019/05/31 51 756 31 054 27 603 110 413 10.65 4 074 106 338 2 182 881 2015/07/15 2020/05/31 104 027 62 416 55 481 221 924 11.92 — 221 924 4 459 190 2016/02/29 2021/05/31 108 003 64 802 57 601 230 406 12.38 — 230 406 2 356 884 Our business 2017/02/20 2022/05/31 115 216 69 130 61 449 245 794 15.97 — 245 794 2 268 123 2018/02/19 2023/05/31 95 843 57 506 51 116 204 465 20.35 — 204 465 1 466 562

In determining an indicative value the company followed the guidance set out in, A guide to the application of King IV: Governance of remuneration. The following assumptions have been taken in to account: 1. The share price at year end was based on spot price R19.99; 2. Expected volatility has been based on an evaluation of the historical volatility of Equites’ share price since listing; and 3. The expected forfeiture rate has been based on historical experience and general employee behaviour. Governance Non-executive fees Outlook The table below indicates the fees for the upcoming year, to be approved by the shareholders at The committee will continue to focus on the AGM to be held on 27 July 2018, being an aggregate 6% increase on the fees approved at the achieving fair and responsible remuneration in previous AGM: the context of the operating business, while Attendance fee keeping executives and management Role Base fee per meeting incentivised. This journey is by no means an overnight endeavour and will remain a priority focus of the remuneration committee, Chairperson of the board R530 000 — considering the interests of all stakeholders Board member R84 800 R21 200 Chairperson of the audit and risk committee R42 400 involved. Member of the audit and risk committee R26 500 Chairperson of other sub-committees R26 500 Annual financial statements Member of other sub-committees R15 900

The fees for the financial year under review were approved at the previous AGM as follows: Attendance fee Role Base fee per meeting

Chairperson of the board R500 000 — Board member R80 000 R20 000 Chairperson of the audit and risk committee R40 000 Member of the audit and risk committee R25 000 Annual general meeting Annual general Chairperson of other sub-committees R25 000 Member of other sub-committees R15 000 Equites Property Fund Limited 46 Integrated Report 2018

Annual financial statements

Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018 Annual financial statements Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

Contents

Directors’ responsibility for the Independent auditor’s report to the Statement of changes in equity 59 annual financial statements 47 members of Equites Property Fund Limited 51 Notes to the annual financial statements 60 Declaration by the company secretary 47 Statement of financial position 56 Appendix A: Shareholder analysis 109 Audit and risk ­committee report 48 Statement of ­comprehensive income 57

Directors’ report 49 Statement of cash flows 58

The annual financial statements for the year ended 28 February 2018 have been audited by PricewaterhouseCoopers Inc., in compliance with the applicable requirements of the Companies Act, 2008. The audited annual financial statements were prepared by Mr B Goossens, CA(SA). Equites Property Fund Limited Integrated Report 2018 47

Directors’ responsibility for the annual financial ­statements and declaration by the company secretary

The company’s directors are responsible for the preparation and fair presentation of the consolidated annual financial statements and separate annual financial statements, comprising the statements of financial position at 28 February 2018, and the statements of comprehensive income, the statements of changes in equity and statements of cash flows for the year then ended, and the notes to the annual financial statements, which include a summary of significant accounting policies and other explanatory notes, and the directors’ report, in accordance with International Financial Reporting Standards (“IFRS”), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the JSE Listings Requirements and the requirements of the South African Companies Act of 2008 (“Companies Act”).

The directors’ responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of Historical overview these financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. The directors’ responsibility also includes maintaining adequate accounting records and an effective system of risk management.

The directors have made an assessment of the group and the company’s ability to continue as a going concern and have no reason to believe the business will not be a going concern in the year ahead.

The auditor is responsible for reporting on whether the annual financial statements are fairly presented in accordance with the applicable financial reporting framework. Our business

The consolidated annual financial statements and separate parent annual financial statements of Equites Property Fund Limited were approved by the board of directors on 7 May 2018 and are signed on its behalf by:

Leon Campher Andrea Taverna-Turisan Governance Chairman Chief Executive Officer

Declaration by company secretary In terms of section 88(2)(e) and in my capacity as company secretary, I hereby confirm, in terms of the Companies Act that, for the year ended 28 February 2018, the company has lodged with the Companies and Intellectual Property Commission all such returns as are required of a public company in terms of the Companies Act and that all such returns are true, correct and up to date. Annual financial statements

Riaan Gous Company Secretary Annual general meeting Annual general Equites Property Fund Limited 48 Integrated Report 2018

Audit and risk ­committee report

The Audit and Risk Committee (“the committee”) takes pleasure in presenting its report for the financial year ended 28 February 2018.

Terms of reference terms, audit plan and proposed fee for the ex­ter­ Internal audit The committee has adopted written terms of nal audit for the year ended 28 February 2018. The committee continues to assess the reference which governs their roles and requirement for an internal audit function as responsibilities. These terms of reference include The committee adopted a formal framework for the company grows. At this point in time, the the statutory requirements of the Companies the pre-approval of allowable non-audit services committee it satisfied that the size and Act, No. 71 of 2008 (“Companies Act”) as above certain pre-determined thresholds. complexity of the company does not warrant amended, the King IV Report on Corporate an internal audit function. Governance for South Africa as well as certain The committee recommends for approval by responsibilities delegated by the board. the shareholders the reappointment of Proactive monitoring PricewaterhouseCoopers Inc. as external auditor. The committee confirms that it has considered The terms of reference require an annual the findings contained in the JSE’s 2017 evaluation of the performance of the committee Significant matters Proactive Monitoring report when preparing and its members, as well as confirmation of the The significant reporting matters the the annual financial statements for the year members’ independence in terms of King IV committee considered during the year are the ended 28 February 2018. and the Companies Act. The outcome of this valuation of investment property and the Real evaluation and confirmation was satisfactory. Estate Investment Trust (“REIT”) status. Financial director In terms of JSE Listings Requirement paragraph The committee is mainly responsible for ongoing Valuation of investment property 3.84(g)(i), the committee has considered the oversight and review of the following areas: The major risk relating to investment property expertise and experience of the financial – Effectiveness of the internal financial controls is the valuation of the investment property. director, Bram Goossens, and are satisfied that and compliance with laws and regulations Valuation of investment property has been these are appropriate for his role. – Annual financial statements and any other highlighted as an area of critical judgements financial information presented to and estimates in note 6 of the annual financial Internal financial controls shareholders and ensuring compliance with statements. Each property is externally valued The committee continually monitors the International Financial Reporting Standards once every three years. Where an external efficiency of internal financial controls. The – Integrated reporting and considering valuation is not obtained, the directors committee is satisfied that a combined assurance factors and risks that could impact on the determine the fair value of each property, model is applied to provide a co-ordinated integrity of the integrated report using the income capitalisation method. approach to all assurance activities and that this – Appointment and independence of the addresses all significant risk facing the company. external auditor and external audit reports Through discussion with the executive directors, The committee confirms that no material – Non-audit services the committee is satisfied with the valuation breakdown of internal financial controls was – Risk management framework and reports methodology and the critical inputs. A number identified during the current financial year. – Going concern assessment of non-executive board members have extensive experience in the property industry and the board In accordance with paragraph 3.84(g)(ii) of the The committee confirms that it has fulfilled all as a whole reviews and approves internal valua­ JSE Listings Requirements, the committee further its statutory obligations, as well as its tions. The committee also monitors differences confirms that the company has established responsibilities under its terms of reference between internal and independent external valua­ appropriate financial reporting procedures and for the period under review. tions and is satisfied overall the fair value of that those procedures are operating. investment properties is not materially misstated. The committee has monitored and confirms that Approval of annual financial the company is in compliance with the risk REIT status ­statements management policy which is in accordance with As income contains elements which may be The committee confirms that it formally industry practice and prohibits the company deemed to be non-property related income, recommended the adoption of the group and from entering into derivative transactions not there is a risk that the company does not meet separate annual financial statements to the in the ordinary course of business. the requirements to be classified as a REIT as board of directors. stipulated in section 25BB of the Income Tax External auditors Act. Management performs an assessment, on The committee is satisfied that the external an ongoing basis, to ensure that the company’s auditor, PricewaterhouseCoopers Inc., is “rental income” is above the 75% threshold as independent of the group and can conduct their set out in section 25BB. Management has also audit functions without any influence from the engaged with industry experts to obtain group. The committee further noted Anton guidance on this matter and is confident that Wentzel as the designated auditor and confirmed its view is in line with industry standards. that both he and Pricewater­house­Coopers Inc. Ruth Benjamin-Swales are accredited with the JSE Limited as required Through discussion with management and Chairperson of the audit and risk committee and that their appointment is in accordance with inspection of the financial records, the paragraph 3.84(g)(iii) if the JSE Listings Require­ committee is satisfied that the company meets Cape Town ments. The committee approved the auditor’s the criteria to be classified as a REIT. 7 May 2018 Equites Property Fund Limited Integrated Report 2018 49

Director’s report

For the year ended 28 February 2018

Nature of business – Nascispan (Pty) Ltd Distribution to shareholders Equites Property Fund Limited (“Equites” or the – Prop for list (Pty) Ltd The total distribution for the year ended “company”) listed as a Real Estate Investment – Swish Property Seven (Pty) Ltd 28 February 2018 of 123.86 (2017:110.37) cents Trust (“REIT”) on the Johannesburg Stock per share is 12.2% higher than for the Exchange (“JSE”) on 18 June 2014 and its main * Incorporated in the Isle of Man. comparative period and in line with distribution business is the investment in and development growth guidance previously provided. This is of modern logistic facilities. The group assisted in incorporating the Michel made up of the interim dividend declared on

Lanfranchi Foundation NPC (‘’the Foundation”) 11 October 2017 (dividend number 8) of 60.98 Historical overview The company carries on its business directly which will house all the corporate social cents per share and the final dividend declared and through a number of subsidiaries, responsibility projects and initiatives of the on 7 May 2018 (dividend number 9) of 62.88 (collectively referred to as the “group”). During group. Equites was instrumental in the cents per share. the current year, the group made the following formation of the Foundation, however, changes to its investment property portfolio: following formation, the Foundation has an Dividend declared – Acquired one distribution centre in the UK; independent board and operates Dividend number 9 for 62.88143 cents per – Completed three developments, two in SA independently of Equites. In line with an IFRS share was approved by the board on 7 May and one in UK; 10 Consolidated Financial Statement 2018 and declared on 10 May 2018 with the – Concluded two development funding assessment, the Foundation and its subsidiary following salient dates:

agreements relating to properties in the UK; have been consolidated as structured entities. 2018 Our business – Commenced development on five The entities consolidated are: developments in SA; – The Michel Lanfranchi Foundation NPC Last day to trade ­ – Acquired 22 hectares of strategic vacant – Ilanga Lakusasa (Pty) Ltd land; and cum-dividend Tuesday, 29 May – Completed the disposal of 4 non-core Financial results Shares trade commercial properties. The detailed financial results are fully set out in ex-dividend Wednesday, 30 May the annual financial statements. Record date Friday, 1 June All income producing properties are currently Payment date Monday, 4 June situated in Cape Town, Gauteng and the UK. Borrowings The board confirms the use of distribution per Equites has unlimited borrowing powers in listed securities as the relevant measure of

Subsidiaries terms of the Memorandum of Incorporation financial results for the purposes of trading Governance The company has the following subsidiaries, all (“MOI”), but the group has maintained its debt statements. of which are property investment companies: levels below 60% of its gross asset value due to – Applemint Properties 93 (Pty) Ltd JSE requirements for REITs. The group is also Going concern – Chamber Lane Properties 3 (Pty) Ltd currently subject to a 50% loan-to-value The annual financial statements of the group (100% subsidiary of Equites Investments 1 covenant on its bank borrowings. The group’s were prepared on a going concern basis. The (Pty) Ltd) overall borrowings were R1 943 million (2017: board is satisfied that the group has adequate – Dormell Properties 711 (Pty) Ltd R1 373 million) at the reporting date as resources to continue trading for the – EA Waterfall Logistics JV (Pty) Ltd (80%) detailed in note 7 to the annual financial foreseeable future based on a formal review of – Equites Investments 1 (Pty) Ltd statements. the results, forecasts and assessing available – Equites Atlantic Hills (Pty) Ltd resources. – Equites International Ltd* Stated capital – Equites UK SPV 1 Ltd* The authorised share capital of the company Directors – Equites UK SPV 2 Ltd* remained unchanged at 2 000 000 000 (two The directors of the company are detailed on

– Equites UK SPV 3 Ltd* billion) ordinary shares of no par value. pages 34 to 35 of the Integrated Report. There Annual financial statements – Equites UK SPV 4 Ltd* were no board appointments or resignations – Equites UK SPV 5 Ltd* The issued share capital at year end is during the current year. – Equites UK SPV 6 Ltd* 409 973 331 (2017: 350 465 100) ordinary – Equites UK SPV 7 Ltd* shares of no par value. All movements in In terms of the MOI, André Gouws and – Equites UK SPV 8 Ltd* issued shares are detailed in note 12 to the Giancarlo Lanfranchi retire at the forthcoming – Equites UK SPV 9 Ltd* annual financial statements. annual general meeting and are eligible for – Galt Property One (Pty) Ltd re-election. – Galt Property Two (Pty) Ltd – Kovacs Investments 715 (Pty) Ltd Company secretary

Riaan Gous continued to act as company meeting Annual general secretary during the year under review. Equites Property Fund Limited 50 Integrated Report 2018

Director’s report (continued)

For the year ended 28 February 2018

Directors’ interest in ordinary shares

Directors’ interest as at 28 February 2018+ Beneficially held Directors Directly Indirectly Associates Total %

André Gouws 2 000 7 020 512 — 7 022 512 1.7% Andrea Taverna-Turisan 227 506 14 934 000 — 15 161 506 3.7% Bram Goossens 106 636 1 504 000 — 1 610 636 0.4% Giancarlo Lanfranchi 33 19 809 481 — 19 809 514 4.8% Gugu Mtetwa 5 311 — — 5 311 0.0% Kevin Dreyer — 5 100 826 — 5 100 826 1.2% Leon Campher — — — — — Mustaq Brey — 910 628 10 000 920 628 0.2% Nazeem Khan 100 000 — — 100 000 0.0% Riaan Gous 654 173 1 924 000 — 2 578 173 0.6% Ruth Benjamin-Swales 30 000 — 83 500 113 500 0.0% Total 1 125 659 51 203 447 93 500 52 422 606 12.6%

Directors’ interest as at 28 February 2017+ Beneficially held Directors Directly Indirectly Associates Total %

André Gouws 2 000 7 020 512 — 7 022 512 2.0% Andrea Taverna-Turisan 34 17 284 000 — 17 284 034 4.9% Bram Goossens — 1 504 000 — 1 504 000 0.4% Giancarlo Lanfranchi 33 20 089 481 — 20 089 514 5.7% Gugu Mtetwa# — — — — — Kevin Dreyer — 5 532 496 — 5 532 496 1.6% Leon Campher — — — — — Mustaq Brey* — 910 628 10 000 920 628 0.3% Nazeem Khan 100 000 — — 100 000 0.0% Riaan Gous 516 313 1 866 000 — 2 382 313 0.7% Ruth Benjamin-Swales 20 000 — 33 500 53 500 0.0% Total 638 380 54 207 117 43 500 54 888 997 15.6%

* Appointed 26 September 2016 # Appointed 01 February 2017 + Includes in aggregate of 100 shares issued at incorporation to Andrea Taverna-Turisan (34), Giancarlo Lanfranchi (33) and Riaan Gous (33), in certificated form, omitted in error.

The conditional shares awarded to executive Auditors Subsequent events directors during the year, as set out in note 13 PricewaterhouseCoopers Inc. continued as Refer to note 28 of the annual financial to the annual financial statements, have not external auditors in accordance with Section statements for a list of material events which been included in the table above. 90 (1) of the Companies Act. A resolution for have occurred between the end of the their reappointment will be proposed at the reporting date and the date of this report. There have been no changes to the directors’ upcoming annual general meeting. interest in the company’s shares between the Holding company end of the financial year on 28 February 2018 Litigation Equites has no holding company and the main and the approval of the financial statements. The directors are not aware of any legal or shareholders are detailed in Appendix A to the arbitration proceedings, that have commenced, annual financial statements. are pending or have been threatened, that have or may have a material impact on the results of the group. Equites Property Fund Limited Integrated Report 2018 51

Independent auditor’s report

To the Shareholders of Equites Property Fund Limited

Report on the audit of the Basis for opinion ­consolidated and separate financial We conducted our audit in accordance with International Standards on Auditing (ISAs). Our statements responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated and separate financial statements section of our report. Our opinion In our opinion, the consolidated and separate We believe that the audit evidence we have obtained is sufficient and appropriate to provide a financial statements present fairly, in all basis for our opinion. material respects, the consolidated and Historical overview separate financial position of Equites Property Independence Fund Limited (the Company) and its We are independent of the Group in accordance with the Independent Regulatory Board for subsidiaries (together the Group) as at Auditors Code of Professional Conduct for Registered Auditors (IRBA Code) and other 28 February 2018, and its consolidated and independence requirements applicable to performing audits of financial statements in South separate financial performance and its Africa. We have fulfilled our other ethical responsibilities in accordance with the IRBA Code and in consolidated and separate cash flows for the accordance with other ethical requirements applicable to performing audits in South Africa. The year then ended in accordance with IRBA Code is consistent with the International Ethics Standards Board for Accountants Code of International Financial Reporting Standards Ethics for Professional Accountants (Parts A and B). and the requirements of the Companies Act Our business of South Africa. Our audit approach

What we have audited Overview Equites Property Fund Limited’s consolidated and separate financial statements set out on Overall group materiality pages 56 to 108 comprise: – R64 000 000, which represents 1% of net assets. – the consolidated and separate statements of financial position as at 28 February 2018; Materiality – the consolidated and separate statements of comprehensive income for the year then Group audit scope

ended; – The group consists of a number of property owning Governance – the consolidated and separate statements companies in both South Africa and the United of changes in equity for the year then Kingdom (UK). We performed full scope audits at three ended; Audit scope of the South African companies. We performed audits – the consolidated and separate statements of investment property related balances over three of of cash flows for the year then ended; and the UK property owning companies. In addition we – the notes to the financial statements, which performed analytical procedures over the remaining property owning companies. include a summary of significant Key audit accounting policies. matters

Key Audit Matters – Valuation of investment properties – The income tax status as a result of the Group’s and

Company’s compliance with the Real Estate Investment Annual financial statements Trust (REIT) guidance

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the consolidated and separate financial statements. In particular, we considered where the directors made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters, consideration of whether there was evidence of bias that

represented a risk of material misstatement due to fraud. meeting Annual general Equites Property Fund Limited 52 Integrated Report 2018

Independent auditor’s report (continued)

To the Shareholders of Equites Property Fund Limited

Materiality reasonably be expected to influence the statements as a whole as set out in the table The scope of our audit was influenced by our economic decisions of users taken on the basis below. These, together with qualitative application of materiality. An audit is designed of the consolidated financial statements. considerations, helped us to determine the to obtain reasonable assurance whether the scope of our audit and the nature, timing and financial statements are free from material Based on our professional judgement, we extent of our audit procedures and to evaluate misstatement. Misstatements may arise due to determined certain quantitative thresholds for the effect of misstatements, both individually fraud or error. They are considered material if materiality, including the overall group and in aggregate on the financial statements as individually or in aggregate, they could materiality for the consolidated financial a whole.

Overall group materiality R64 000 000

How we determined it 1% of net assets

We chose net assets as the benchmark because, in our view, the net asset value and the dividend yield, which is the Rationale for the dividend or distribution divided by the market capitalisation, are the key benchmarks against which the performance materiality benchmark of the Group is most commonly measured by users. We chose 1% which is consistent with quantitative materiality applied thresholds used for funds in this sector.

How we tailored our group audit scope portfolio consists of single tenant industrial or owning companies, Equites UK SPV1 Limited, We tailored the scope of our audit in order to logistical properties. The consolidated financial Equites UK SPV3 Limited and Equites UK SPV4 perform sufficient work to enable us to statements are a consolidation of the Limited. In addition we performed analytical provide an opinion on the consolidated companies in the group. procedures over the remaining companies in financial statements as a whole, taking into the group. account the structure of the Group, the Based on the financial significance and audit accounting processes and controls, and the risk, we performed full scope audits at three of This together with additional procedures industry in which the Group operates. the South African companies, Equites Property performed at the Group level, including testing Fund Limited, EA Waterfall Logistics JV of consolidation journals and intercompany The Group consists of over 20 property Proprietary Limited and Chamber Lane eliminations, gave us sufficient appropriate owning companies, which includes industrial Properties 3 Proprietary Limited. We audit evidence regarding the financial properties and office properties in South Africa performed audits of investment property information of the group. All of the work was and the UK. The majority of the property related balances over three UK property performed by the group audit team.

Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated and separate financial statements of the current period. These matters were addressed in the context of our audit of the consolidated and separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter How our audit addressed the key audit matter

Valuation of investment properties The Group’s and the Company’s investment property portfolio is split We obtained an understanding of the processes followed by between industrial properties in South Africa and the UK, with a total management for the valuation of properties. We inspected the valuation including the straight-lining lease adjustment in the consolidated valuation reports for all the properties valued externally in the current statement of financial position of R8,071 million (Company R1,195 million). year and confirmed that the valuation approach for each was in The fair value gain recorded for the year amounts to R239 million accordance with IFRS and suitable for use in determining the carrying (Company R85 million). value for the purpose of the financial statements. Equites Property Fund Limited Integrated Report 2018 53

Key audit matter How our audit addressed the key audit matter

Valuation of investment properties The investment properties are stated at their fair values based on We assessed the valuers’ qualifications and expertise and determined directors’ valuations and external valuations as deemed appropriate. whether there were any matters that might have affected their objectivity or may have imposed scope limitations upon their work. We The valuation of the Group’s and Company’s investment property also considered fee arrangements between the valuers and the Group portfolio is inherently subjective due to, among other factors, the and other engagements which might exist between the Group and the Historical overview individual nature of each property, its location and the expected future valuers. We found no evidence to suggest that the objectivity of the rentals for that particular property. valuers in their performance of the valuations was compromised.

In determining a property’s valuation the directors and the valuers take We tested the data inputs in the directors valuation as well as the into account property-specific information such as the current tenancy valuation prepared by the valuers. We focussed on the data inputs agreements and rental income. They apply assumptions for yields and underpinning the investment property valuation for a selection of estimated market rent, which are influenced by prevailing market yields investment properties, including rental income, tenancy schedules, and comparable market transactions, to arrive at the final valuation. capital expenditure details and square meter details, against appropriate Properties under development and land are held at cost. supporting documentation, to assess the accuracy, reliability and Our business completeness thereof. Our audit procedures focused on testing the We consider the valuation of investment properties a matter of most estimated lease income through comparison to lease agreements. For significance to the current year audit because of the significance of the developments, we agreed a sample of costs to supporting information estimates and judgements involved, coupled with the fact that only a such as construction contracts and invoices. small percentage difference in individual yields, when aggregated, could result in a material misstatement. In addition we with our internal valuation experts attended meetings with the South African valuers, at which the valuations and the key The group and the company capitalise borrowing cost on new assumptions therein were discussed and assessed. We also utilised our developments that are deemed to be qualifying assets based on internal valuation experts in the UK to assess the reasonability of the management’s judgement in line with the IFRS requirements. assumptions in the UK valuation performed by management’s expert. Governance Refer to note 6 of the financial statements for details on the valuation of Our work focused on the largest properties in the portfolio and those investment properties and note 29 for property analysis schedule. properties where the assumptions used and/or year-on-year capital value movement suggested a possible outlier versus market data for the This matter relates to the consolidated and separate financial statements relevant sector. We compared the investment yields used by the levels. directors or valuers with an estimated range of expected yields, determined via reference to published benchmarks. Finally, we evaluated year-on-year movements in capital value with reference to published benchmarks.

We recalculated on a sample basis the borrowing costs capitalised and also assessed management judgment in assessing when an asset becomes a qualifying asset. Annual financial statements We further assessed the appropriateness of the disclosures in the financial statements concerning the key assumptions to which the valuations are most sensitive to, and the inter-relationship between the assumptions and the valuation amounts.

Based on the procedure performed we obtained evidence that the assumptions used in the valuations were supportable in light of available and comparable market evidence. Annual general meeting Annual general Equites Property Fund Limited 54 Integrated Report 2018

Independent auditor’s report (continued)

To the Shareholders of Equites Property Fund Limited

Key audit matter How our audit addressed the key audit matter

The income tax status as a result of the Group’s and Company’s ­compliance with the Real Estate Investment Trust (REIT) guidance The Group’s and Company’s status as a REIT underpins its business We re-performed the Group’s and Company’s annual REIT compliance model and shareholder returns. In order to be registered as a REIT tests. We used our tax specialists to assess the requirement in relation management need to comply with the REIT guidance which in some to the nature of the group and company’s income being from property instances is open for management’s own interpretation. For this reason, ownership. we consider it to be a matter of most significance. We also evaluated the judgmental interpretations in relation to tax The director’s manage this risk through careful consideration of the REIT position and potential exposures as at 28 February 2018, challenging rules and any changes in the rules, while also seeking legal and tax expert the Group’s assumptions and judgements through our knowledge of tax advice where deemed necessary. circumstances and by reading relevant correspondence between the Group and the Company and the South African Revenue Services Refer to note 23 in the financial statements for information on the (SARS) and the Group’s external tax advisors. group’s REIT status and details on the tax provision. Based on our work performed, we agreed with management’s This matter relates to the consolidated and separate financial statements assessment of compliance with the REIT guidance and that no tax levels. provision was required for the current year.

Other information consider whether the other information is In preparing the consolidated and separate The directors are responsible for the other materially inconsistent with the consolidated financial statements, the directors are information. The other information comprises and separate financial statements or our responsible for assessing the Group and the the information included in the Annual knowledge obtained in the audit, or otherwise Company’s ability to continue as a going Financial Statements Equites Property Fund appears to be materially misstated. concern, disclosing, as applicable, matters Limited and related to going concern and using the going If, based on the work we have performed on concern basis of accounting unless the its subsidiaries for the year ended 28 February the other information that we obtained prior directors either intend to liquidate the Group 2018, which includes the Declaration by the to the date of this auditor’s report, we and/or the Company or to cease operations, company secretary, Audit and risk committee conclude that there is a material misstatement or have no realistic alternative but to do so. report and Directors’ report as required by the of this other information, we are required to Companies Act of South Africa, which we report that fact. We have nothing to report in Auditor’s responsibilities for the audit obtained prior to the date of this auditor’s this regard. of the consolidated and separate report, and the other sections of the Integrated financial statements Report 2018, which is expected to be made Responsibilities of the directors for the Our objectives are to obtain reasonable available to us after that date. Other consolidated and separate financial assurance about whether the consolidated and information does not include the consolidated statements separate financial statements as a whole are and separate financial statements and our The directors are responsible for the free from material misstatement, whether due auditor’s report thereon. preparation and fair presentation of the to fraud or error, and to issue an auditor’s consolidated and separate financial statements report that includes our opinion. Reasonable Our opinion on the consolidated and separate in accordance with International Financial assurance is a high level of assurance, but is financial statements does not cover the other Reporting Standards and the requirements of not a guarantee that an audit conducted in information and we do not and will not the Companies Act of South Africa, and for accordance with ISAs will always detect a express an audit opinion or any form of such internal control as the directors material misstatement when it exists. assurance conclusion thereon. determine is necessary to enable the Misstatements can arise from fraud or error preparation of consolidated and separate and are considered material if, individually or In connection with our audit of the financial statements that are free from material in the aggregate, they could reasonably be consolidated and separate financial statements, misstatement, whether due to fraud or error. expected to influence the economic decisions our responsibility is to read the other of users taken on the basis of these information identified above and, in doing so, consolidated and separate financial statements. Equites Property Fund Limited Integrated Report 2018 55

As part of an audit in accordance with ISAs, we statements or, if such disclosures are directors, we determine those matters that exercise professional judgement and maintain inadequate, to modify our opinion. Our were of most significance in the audit of the professional scepticism throughout the audit. conclusions are based on the audit consolidated and separate financial statements We also: evidence obtained up to the date of our of the current period and are therefore the key – Identify and assess the risks of material auditor’s report. However, future events or audit matters. We describe these matters in misstatement of the consolidated and conditions may cause the Group and / or our auditor’s report unless law or regulation separate financial statements, whether due Company to cease to continue as a going precludes public disclosure about the matter to fraud or error, design and perform audit concern. or when, in extremely rare circumstances, we Historical overview procedures responsive to those risks, and – Evaluate the overall presentation, structure determine that a matter should not be obtain audit evidence that is sufficient and and content of the consolidated and communicated in our report because the appropriate to provide a basis for our separate financial statements, including the adverse consequences of doing so would opinion. The risk of not detecting a material disclosures, and whether the consolidated reasonably be expected to outweigh the public misstatement resulting from fraud is higher and separate financial statements represent interest benefits of such communication. than for one resulting from error, as fraud the underlying transactions and events in a may involve collusion, forgery, intentional manner that achieves fair presentation. Report on other legal and regulatory omissions, misrepresentations, or the – Obtain sufficient appropriate audit requirements override of internal control. evidence regarding the financial In terms of the IRBA Rule published in Our business – Obtain an understanding of internal control information of the entities or business Government Gazette Number 39475 dated relevant to the audit in order to design activities within the group to express an 4 December 2015, we report that audit procedures that are appropriate in opinion on the consolidated financial PricewaterhouseCoopers Inc. has been the the circumstances, but not for the purpose statements. We are responsible for the auditor of Equites Property Fund Limited for of expressing an opinion on the direction, supervision and performance of 2 years. effectiveness of the Group’s and the the group audit. We remain solely Company’s internal control. responsible for our audit opinion. – Evaluate the appropriateness of accounting policies used and the reasonableness of We communicate with the directors regarding, accounting estimates and related among other matters, the planned scope and

disclosures made by the directors. timing of the audit and significant audit PricewaterhouseCoopers Inc. Governance – Conclude on the appropriateness of the findings, including any significant deficiencies directors’ use of the going concern basis of in internal control that we identify during our Director: Anton Wentzel accounting and, based on the audit audit. Registered Auditor evidence obtained, whether a material uncertainty exists related to events or We also provide the directors with a statement Cape Town conditions that may cast significant doubt that we have complied with relevant ethical 7 May 2018 on the Group’s and the Company’s ability requirements regarding independence, and to to continue as a going concern. If we communicate with them all relationships and conclude that a material uncertainty exists, other matters that may reasonably be thought we are required to draw attention in our to bear on our independence, and where auditor’s report to the related disclosures in applicable, related safeguards. the consolidated and separate financial

From the matters communicated with the Annual financial statements Annual general meeting Annual general Equites Property Fund Limited 56 Integrated Report 2018

Statement of financial position

Equites Property Fund Limited and its subsidiaries at 28 February 2018

COMPANY GROUP

28 February 28 February 28 February 28 February 2017 2018 2018 2017 R’000 R’000 Notes R’000 R’000

ASSETS Non-current assets 977 870 1 180 425 Investment property 6 7 899 697 5 853 590 16 821 14 591 Straight-lining lease income accrual 6.5 171 352 137 803 994 691 1 195 016 Fair value of Investment property 6 8 071 049 5 991 393 134 632 128 415 Derivative financial assets 7 132 732 134 632 — — Deferred tax asset 14 32 639 — 2 974 2 253 Property, plant and equipment 17 7 529 9 186 — 149 269 Loan receivable 16 — — 1 797 723 2 971 129 Investment in subsidiary companies 9 — — 2 930 020 4 446 082 8 243 949 6 135 211 Current assets 234 381 28 000 Investment property held-for-sale 6 28 000 234 381 86 716 26 184 Trade and other receivables 11 58 202 134 778 — 135 532 Derivative financial assets 7 135 532 — 3 353 900 Financial assets held at fair value 7 900 3 353 4 960 889 Cash and cash equivalents 8 17 813 11 042 1 909 258 1 953 867 Loans to subsidiaries 9 — — 2 238 668 2 145 372 240 447 383 554

5 168 688 6 591 454 TOTAL ASSETS 8 484 396 6 518 765

EQUITY AND LIABILITIES Equity and reserves 4 193 749 5 203 773 Stated capital 12 5 203 773 4 193 749 69 346 194 969 Accumulated profit 1 339 846 919 099 — — Foreign currency translation reserve (312 423) (173 374) 7 881 67 578 Share-based payment reserve 13 67 578 7 881 4 270 976 5 466 320 Total attributable to owners 6 298 774 4 947 355 — — Non-controlling interest 10 109 410 93 535 4 270 976 5 466 320 TOTAL EQUITY AND RESERVES 6 408 184 5 040 890

Liabilities Non-current liabilities 9 047 11 311 Derivative financial liabilities 7 18 542 11 208 511 655 1 039 301 Loans and borrowings 7 1 887 730 1 086 097 520 702 1 050 612 1 906 272 1 097 305 Current liabilities 268 932 38 601 Loans and borrowings 7 54 939 285 983 — 415 Derivative financial liabilities 7 613 — 51 883 — Loans from subsidiaries 9 — — — — Current tax liability 92 — 56 195 35 506 Trade and other payables 15 114 296 94 587 377 010 74 522 169 940 380 570

897 712 1 125 134 TOTAL LIABILITIES 2 076 212 1 477 875 5 168 688 6 591 454 TOTAL EQUITY AND LIABILITIES 8 484 396 6 518 765 Equites Property Fund Limited Integrated Report 2018 57

Statement of ­comprehensive income

Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

COMPANY GROUP

Restated Restated 28 February 28 February 28 February 28 February 2017 2018 2018 2017 R’000 R’000 Notes R’000 R’000

82 409 92 635 Property revenue and tenant recoveries 18 540 150 458 209 Historical overview 3 758 (2 230) Straight-lining of leases adjustment 33 548 44 222 221 529 276 415 Dividends received from subsidiaries — — 307 696 366 820 Gross property revenue 573 698 502 431 (26 842) (25 897) Property operating and management expenses 20 (87 957) (77 408) 170 219 228 402 Other operating income 19 208 343 175 442 (22 761) (43 820) Administrative expenses 20 (33 055) (27 726) 30 370 85 391 Fair value adjustments – investment property 6 239 546 309 138 458 682 610 897 Operating profit before financing activities 900 575 881 877 (115 187) (63 634) Finance costs 21 (68 765) (79 106)

1 655 24 377 Finance income 22 24 990 3 292 Our business 345 150 571 640 Net profit before tax 856 800 806 063 — — Tax expense 23 34 313 — 345 150 571 640 Profit for the period 891 113 806 063

OTHER COMPREHENSIVE INCOME Items that may subsequently be reclassified to profit or loss: — — Translation of foreign operations (139 049) (173 374) 345 150 571 640 TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 752 064 632 689

PROFIT ATTRIBUTABLE TO: 345 150 571 640 Owners of the parent 870 188 784 746 Governance — — Non-controlling interest 20 925 21 317 345 150 571 640 891 113 806 063

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: 345 150 571 640 Owners of the parent 731 139 611 372 — — Non-controlling interest 20 925 21 317 345 150 571 640 752 064 632 689

Basic earnings per share (cents) 2 226.1 264.4 Diluted earnings per share (cents) 2 225.4 263.3 Annual financial statements Annual general meeting Annual general Equites Property Fund Limited 58 Integrated Report 2018

Statement of cash flows

Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

COMPANY GROUP

Restated Restated 28 February 28 February 28 February 28 February 2017b 2018 2018 2017 R’000 R’000 Notes R’000 R’000

Cash flows from operating activities 345 150 571 640 Profit before tax 856 800 806 063 Adjusted for: 115 187 63 634 Finance costs 68 765 79 106 (1 655) (24 377) Finance income (24 990) (3 292) — 731 (Profit) / Loss on disposal of investment property (2 498) — — 16 Loss on disposal of property, plant and equipment 16 — (3 758) 2 230 Straight-lining of leases adjustment (33 548) (44 222) (30 371) (85 391) Fair value adjustments – investment property (239 546) (309 138) (134 632) (106 184) Fair value adjustments – cross currency swaps (106 184) (134 632) — (27 326) Foreign exchange differences — 28 974 483 746 Depreciation 941 483 6 515 6 514 Share based payment charge 6 514 6 515 Working capital movements: (51 125) 60 532 Decrease/(increase) in trade and other receivables 42 977 (70 242) — (23 130) Increase in accrued operating incomed (23 130) — 22 040 12 430 Increase in trade and other payables 3 107 15 993 267 834 452 065 Cash generated from operations 549 224 375 608 (102 404) (79 527) Finance costs paid 21 (127 679) (127 812) 1 655 24 377 Finance income received 22 24 990 3 292 (296 680) (446 017) Dividends paid 24.1 (454 491) (305 134) Net cash flows generated (utilised) from (129 595) (49 102) operating activities (7 956) (54 046) Cash flows from investing activities (269 875) (50 000) Acquisition of investment properties 24.2 (1 477 496) (1 356 594) (69 754) (95 242) Development of investment properties 6 (345 257) (341 130) — 233 651 Proceeds from disposal of investment propertiesc 6 254 166 232 746 (985 368) — Acquisition of subsidiary, net of cash acquired — — — (1 146 079) Additional investment in subsidiaries — — (704 111) (756 637) Loans advanced to group companies — — 774 220 561 832 Loans repaid by group companies — — — (1 260 000) Purchases of current financial assetsa (1 260 000) — — 1 262 453 Proceeds on divestment of current financial assetsa 1 262 453 — — 216 Proceeds on disposal of property, plant and equipment 215 — (1 671) (257) Purchase and development of property, plant and equipment (257) (6 231) (1 256 559) (1 250 063) Net cash flows utilised by investing activities (1 566 176) (1 471 209) Cash flows from financing activities 992 502 1 006 911 Proceeds from share issue (net of costs) 12.3 1 006 911 992 502 2 052 467 719 182 Proceeds from bank loans 7.2 1 016 876 2 297 660 (1 746 978) (423 434) Repayment of bank loans 7.2 (443 180) (1 797 837) 43 747 — Proceeds from financial assets held at fair value — 43 747 (3 737) — Disposal of financial asset held at fair value — (3 737) 51 883 — Proceeds from loan from group companies — — — (7 565) Repayment of loan from group companies — — 1 389 884 1 295 094 Net cash flows raised from financing activities 1 580 607 1 532 335 3 730 (4 071) Net increase / (decrease) in cash and cash equivalents 6 475 7 080 — — Effect of exchange rate movements on cash and cash equivalents 296 — 1 230 4 960 Cash and cash equivalents at the beginning of the year 11 042 3 962 4 960 889 Cash and cash equivalents at the end of the year 17 813 11 042 a This primarily consists of investments in and divestments of amounts held in money market funds. b The presentation of intercompany loan balances has been reclassified in line with updated guidance. c The proceeds from disposal in the current year relate principally to the four non-core buildings that were disposed of. d This relates to income accrued which is included within the mark-to-market of derivative financial assets. Equites Property Fund Limited Integrated Report 2018 59

Statement of changes in equity

Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

Foreign Share- currency based Total Non- Stated Accumulated translation payment attributable controlling R’000 Note capital Profit reserve reserve to parent Interest Total

GROUP Balance at 1 March 2016 3 180 784 438 689 — 1 366 3 620 839 — 3 620 839

Profit for the year — 784 746 — — 784 746 21 317 806 063 Historical overview Other comprehensive income — — (173 374) — (173 374) — (173 374) Shares issued for cash 12 1 000 000 — — — 1 000 000 — 1 000 000 Shares issued for property and subsidiary acquisitions 20 463 — — — 20 463 — 20 463 Equity-settled share-based payment charge 13 — — — 6 515 6 515 — 6 515 Acquisition of EA Waterfall Logistics JV (Pty) Ltd — — — — — 73 016 73 016 Dividends distributed to shareholders 24.1 — (304 336) — — (304 336) (798) (305 134) Share issue costs 12 (7 498) — — — (7 498) — (7 498) Balance at 28 February 2017 4 193 749 919 099 (173 374) 7 881 4 947 355 93 535 5 040 890 Our business Balance at 1 March 2017 4 193 749 919 099 (173 374) 7 881 4 947 355 93 535 5 040 890 Profit for the year — 870 188 — — 870 188 20 925 891 113 Other comprehensive income — — (139 049) — (139 049) — (139 049) Shares issued for cash 12 1 015 157 — — — 1 015 157 — 1 015 157 Shares issued in terms of Conditional share plan 3 113 — — (3 113) — — — Equity-settled share based payment for the acquisition of land 13 — — — 56 296 56 296 — 56 296 Equity-settled share-based payment charge 13 — — — 6 514 6 514 — 6 514 Dividends distributed to shareholders 24.1 — (449 441) — — (449 441) (5 050) (454 491) Share issue costs 12 (8 246) — — — (8 246) — (8 246) Balance at 28 February 2018 5 203 773 1 339 846 (312 423) 67 578 6 298 774 109 410 6 408 184 Governance

COMPANY Balance at 1 March 2016 3 180 784 20 876 — 1 366 3 203 026 — 3 203 026 Total comprehensive income — 345 150 — — 345 150 — 345 150 Shares issued for cash 12 1 000 000 — — — 1 000 000 — 1 000 000 Shares issued for property and subsidiary acquisitions 20 463 — — — 20 463 — 20 463 Equity-settled share-based payment charge 13 — — — 6 515 6 515 — 6 515 Dividends distributed to shareholders 24.1 — (296 680) — — (296 680) — (296 680) Share issue costs 12 (7 498) — — — (7 498) — (7 498) Balance at 28 February 2017 4 193 749 69 346 — 7 881 4 270 976 — 4 270 976

Balance at 1 March 2017 4 193 749 69 346 — 7 881 4 270 976 — 4 270 976 Annual financial statements Total comprehensive income — 571 640 — — 571 640 — 571 640 Shares issued for cash 12 1 015 157 — — — 1 015 157 — 1 015 157 Shares issued in terms of Conditional share plan 3 113 — — (3 113) — — — Equity-settled share based payment for the acquisition of land 13 — — — 56 296 56 296 — 56 296 Equity-settled share-based payment charge 13 — — — 6 514 6 514 — 6 514 Dividends distributed to shareholders 24.1 — (446 017) — — (446 017) — (446 017) Share issue costs 12 (8 246) — — — (8 246) — (8 246) Balance at 28 February 2018 5 203 773 194 969 — 67 578 5 466 320 — 5 466 320 Annual general meeting Annual general Equites Property Fund Limited 60 Integrated Report 2018

Notes to the annual financial statements

Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

1. Preparation of financial statements The principal accounting policies applied in the preparation of the consolidated financial statements are set out in the notes to the annual financial statements and are consistent with those applied in the previous year, unless otherwise stated. The group’s consolidated and company’s separate financial statements were authorised for issue by the board of directors on 7 May 2018.

1.1 Basis of Preparation The consolidated and separate financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), IFRIC Interpretations, the SAICA Financial Reporting Guidelines, the JSE Listings Requirements and the requirements of the South African Companies Act (Act 71 of 2008) as amended.

1.2 Functional Currency All items in the financial statements of the group are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The group’s consolidated financial statements are presented in South African rand, which is Equites Property Fund Limited’s functional and the group’s presentation currency.

Foreign currency transactions are translated into the functional currency using the average exchange rates for the relevant period. These average exchange rates approximate the spot rate at the date of the transaction. Gains and losses resulting from the settlement of such transactions, and from the translation of monetary assets and liabilities denominated in foreign currencies at closing rates, are recognised in the statement of comprehensive income.

The results and the financial position of all subsidiaries that have a functional currency that is different from the presentation currency of the group are translated into the presentation currency as follows: – Assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position; – Income and expenditure for each statement of comprehensive income presented are translated at the average exchange rates for the period; and – All resulting translation differences are recognised in other comprehensive income and presented as a separate component of equity in the foreign currency translation reserve (“FCTR”).

On consolidation, exchange rate differences arising from the translation of the net investment in foreign operations are also taken to the FCTR. The group’s net investment in a foreign operation is equal to the equity investment plus all monetary items that are receivable from or payable to the foreign operation, for which settlement is neither planned nor likely to occur in the foreseeable future.

1.3 Standards, amendments and interpretations effective for the first time at 28 February 2018 The standards, amendments and interpretations effective for the first time in the current financial year have been summarised below. None of these had a material impact on the results or disclosures in the annual financial statements save for the additional disclosures in note 7.

International Financial Reporting Standards and amendments effective for the first time for 28 February year-end

Effective date (periods beginning on or after)

Amendment to IAS 12 – Income taxes: recognition of deferred tax assets for unrealised losses 1 January 2017 Amendment to IAS 7 – Cash flow statements: disclosure initiative 1 January 2017 Annual improvements 2014 – 2016 (part) 1 January 2017 Equites Property Fund Limited Integrated Report 2018 61

1.4 Standards, amendments and interpretations issued but not yet effective at 28 February 2018 The table below summarises the standards, amendments and interpretations that have been published, but that are not yet effective in the current financial year and are relevant to the group and have not been early adopted. While none of these standards, amendments and interpretations are expected to have a material impact on the results of the group, the impact of the adoption of IFRS9, IFRS15 and IFRS16, which are expected to have an impact, have been separately discussed below. International Financial Reporting Standards, interpretations and amendments issued but not effective for 28 February 2017 year-end

Effective date Historical overview (periods beginning on or after)

Amendments to IFRS 2 – Share-based payments: classification and measurement 1 January 2018 IFRS 9 – Financial Instruments 1 January 2018 Amendment to IFRS 9 – Financial instruments: general hedge accounting 1 January 2018 IFRS 15 – Revenue from contracts with customers. 1 January 2018 Amendments to IFRS 15: clarifications 1 January 2018 IAS 40 – Investment property: transfers of investment property 1 January 2018 IFRIC 22 – Foreign currency transactions and advance considerations 1 January 2018

Annual improvements 2014-2016 1 January 2018 Our business Amendment to IFRS 9 – Financial instruments: prepayment features with negative compensation and modification of financial liabilities 1 January 2019 IFRS 16 – Leases 1 January 2019 Annual improvements 2015-2017 1 January 2019

1.4.1 IFRS9 impact An impact assessment has been performed to understand and evaluate the potential impact of the adoption of IFRS9, Financial Instruments on the group and company financial statements. The main areas for consideration in relation to recognition and measurement of financial instruments for the group and company were in relation to the classification of financial assets and the measurement of expected credit losses with regards to financial assets. The group does not apply hedge accounting and therefore the change to hedge accounting under IFRS 9 will have no impact on the group and Governance company financial statements.

Area considered Response

Classification of The business carried on by the group and the company lends itself to mainly non-complex financial financial assets instruments that arise directly or indirectly through the normal operations. An assessment of all the categories of financial assets led to the conclusion that there were no material changes to the classification of the group’s or the company’s existing financial assets. The measurement of The group’s most significant financial assets are its derivative financial instruments which are measured at fair expected credit losses value through profit or loss and are therefore not within the scope of the expected credit loss impairment model. The lease receivables that exist at each reporting date are short term in nature and the balance is clearly trivial as a result of the group’s focus on A-grade tenants. Of this balance, R177 395 is 30 days or more past due. Using Annual financial statements the simplified model and considering available forward looking information, we therefore consider the impact of the expected credit losses model to be immaterial to the group. The loans granted to subsidiaries are repayable on demand and are interest free. Accordingly, expected credit losses are based on the assumption that repayment of the loan is demanded at the reporting date. If repayment of the loans were to be demanded at the reporting date, the company would be able to fully recover the outstanding balance of the loan within a timeframe that results in the effects of any discounting being immaterial. The loan receivable from Ilanga Lakusasa (Pty) Ltd is secured against an underlying property. Should the

borrower fail to make repayments as required, the company would foreclose on the property. In this event, there meeting Annual general would be no material loss given default and therefore any expected loss is considered to be immaterial.

As a result of the impact of the new standard, further disclosure will invariably be required for the year ending 28 February 2019, the group and company do not consider the adoption of IFRS9 to have a material impact on the classification of the current financial instruments. Comparative information will not be restated. Equites Property Fund Limited 62 Integrated Report 2018

Notes (continued)

Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

1. Preparation of financial statements (continued)

1.4 Standards, amendments and interpretations issued but not yet effective at 28 February 2018 (continued)

1.4.2 IFRS16 impact We have assessed the impact of IFRS16 on the current accounting of lease and the main areas are discussed below:

Area considered Preliminary Findings

Accounting for lessors The standard represents no significant changes for lessors, however, the standard requires lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less, or the underlying asset is of low or insignifant value. As the group is predominantly a lessor, there are no changes anticipated in the accounting for the majority of our leases. Accounting for lessees In the few instances where we are lessees, we have assessed the impact and noted that these are immaterial.

The largest asset in which we are a lessee is our head office in Cape Town. The impact will be as follows: i) There is expected to be an increase in debt, as liabilities relating to existing operating leases are recognised. ii) The increase in total debt will have an impact on gearing ratios, however, this is deemed to be immaterial. iii) Operating lease expenditure will be reclassified and split between depreciation and finance costs.

Based on the above assessment, as a lessor, there is no material change to the way our leases are recognised. However, as a lessee, there will be an impact on our recognition and disclosures effective for the year ending 28 February 2019, we do not consider this impact to be material. Comparative information will not be restated.

1.4.3 IFRS15 impact We have assessed the impact of IFRS15 on the current accounting of revenue and the main areas are discussed below:

Area considered Response

Scope Property revenue: rental income is earned based on the contractual lease terms and therefore fall within the scope of IAS17 / IFRS16.

Tenant recoveries: it can be argued that tenant recoveries fall under IAS17 / IFRS16 as provision for these recoveries are made in lease agreements. However, the frequency of these recoveries as well as the value of the recoveries are not detailed in the lease agreements as they are based on actual expenses incurred by the landlord. Therefore, tenant recoveries fall within the scope of IAS18 and will be accounted for under IFRS15 going forward.

Dividend received from subsidiaries: This is excluded from the scope of IFRS15. Equites Property Fund Limited Integrated Report 2018 63

Area considered Response

Principal versus agent An assessment has been performed in determining whether Equites acts as agent or principal in carrying out the services resulting in the tenant recoveries.

A principal is an entity which obtains control over the goods or services prior to being transferred to the tenant. Control can be in the form of:

i) the entity being primarily responsible for fulling the promise to provide the good or service. Historical overview ii) the entity having inventory risk before the good or service has been transferred to the tenant. iii) the entity having discretion in establishing the prices for the good or service.

Equites negotiates the terms of the service, manages the relationship with the suppliers, is liable for payment (even if the property is vacant or the expense is not recovered from the tenant), and maintains primary responsibility for the service. It is concluded that Equites does have control over the service prior to transferring to the tenant.

Therefore, Equites acts as a principal and not as an agent and can therefore continue to recognise the

revenue on a gross basis. Our business

Based on the above assessment, there will be no material change in the way that revenue is accounted for currently. However, IFRS15 will be effective for the year ending 28 February 2019 and comparative information will not be restated.

1.5 Use of Judgments and Estimates The preparation of the financial statements in accordance with IFRS requires management to exercise its judgment in the process of applying the group’s accounting policies and make estimates and assumptions concerning the future. The most significant judgments, estimates and assumptions that may have a material impact on the financial statements are as follows: – Valuation of investment property (note 6) – Land and buildings under development carried at cost (note 6) Governance – Acquisition of property subsidiaries (note 9) – Consolidation of structured entities (note 9)

1.6 Financial Instruments The group classifies its financial instruments in the following categories: trade and other receivables, cash and cash equivalents, financial assets at fair value through profit and loss, financial liabilities and derivatives at fair value through profit or loss. The classification depends on the purpose for which the financial instruments were acquired. Management determines the classification of its financial instruments at initial recognition and re-evaluates such designations when circumstances indicate that reclassification is permitted.

Financial assets are derecognised when the contractual rights to the cash flows from the financial assets expire or have been transferred and the group has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognised when they are extinguished, i.e. when the contractual obligation is discharged, cancelled, expires or when a substantial modification of the terms occur.

Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is currently a legally Annual financial statements enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

Financial instruments categories are: – Trade and other receivables (note 11) – Cash and cash equivalents (note 8) – Financial assets at fair value through profit or loss (note 7) – Financial liabilities (note 7) – Derivative financial instruments (note 7) Annual general meeting Annual general Equites Property Fund Limited 64 Integrated Report 2018

Notes (continued)

Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

2. Earnings per share – group This note provides the obligatory information in terms of IAS 33 Earnings per share and SAICA Circular 2/2015 for the group and should be read in conjunction with note 3, where earnings are reconciled to distributable earnings. Distributable earnings determine the dividend declared to shareholders, which is a meaningful metric for a shareholder in a REIT.

Accounting Policy Earnings and headline earnings per share are calculated by dividing the net profit attributable to owners of the parent and headline earnings, respectively, by the weighted average number of ordinary shares in issue during the year.

Diluted earnings and diluted headline earnings per share is determined by adjusting for the impact on earnings and the weighted average number ordinary shares of all known dilutive potential ordinary shares.

Headline earnings per share are calculated in terms of the requirements set out in Circular 2/2015 issued by SAICA.

2.1 Basic earnings per share 2018 2017 Number of Number of Shares in issue shares shares

Number of shares in issue at end of year 409 973 331 350 465 100

Weighted average number of shares in issue 384 863 958 296 765 842 Add: weighted potential dilutive impact of conditional shares (note 13) 1 267 726 1 279 089 Diluted weighted average number of shares in issues 386 131 684 298 044 931

Basic earnings per share cents cents

Basic earnings per share 226.1 264.4 Diluted earnings per share 225.4 263.3

2.2 Headline earnings per share

Reconciliation between basic earnings and headline earnings: R’000 R’000

Earnings (profit attributable to owners of the parent) 870 188 784 746 Adjusted for: Fair value adjustments to investment properties (239 546) (309 138) Less: Fair value adjustment to investment properties (NCI)+ 5 578 14 816 Profit or loss on sale of non-current assets (2 482) — Headline earnings 633 738 490 424

Headline earnings per share cents cents

Headline earnings per share 164.7 165.3 Diluted headline earnings per share 164.1 164.5 Equites Property Fund Limited Integrated Report 2018 65

3. Reconciliation between earnings and distributable earnings – group

Accounting Policy The company has established strict guidelines regarding its distribution policy to ensure that the distributable earnings is a fair reflection of sustainable earnings; this comprises property related income and development profits net of property related expenditure, finance costs not capitalised and administrative costs.

As distributable earnings is a measure of sustainable income, the company has applied the following specific exclusions in the Historical overview determination of this metric: – capital or non-recurring items; – deferred tax adjustments; – fair value on investment property and financial assets; – straight lining adjustments determined in line with IFRS; and – transactions with related parties which are not at arm’s length.

These guidelines align with the best practice recommendations established by the SA REIT Association.

Dividend distributions are recognised as a liability in the statement of financial position in the period in which the dividends are declared. Our business

3.1 Distributable earnings 28 February 28 February 2018 2017 R’000 R’000

Earnings (profit attributable to owners of the parent) 870 188 784 746 Adjusted for: Fair value adjustments to investment properties (239 546) (309 138) Less: Fair value adjustment to investment properties (NCI)+ 5 578 14 816 Governance Profit or loss on sale of non-current assets (2 482) — Headline earnings 633 738 490 424 Adjusted for: Straight-lining of leases adjustment (33 548) (44 222) Less: Straight-lining of leases adjustment (NCI)+ 12 522 2 690 Fair value adjustments to derivative financial assets and liabilities (93 729) (119 687) Less: Fair value adjustments to derivative financial assets and liabilities (NCI)+ (3 215) — Equity-settled share-based payment reserve 6 514 6 515 Capital items non-distributable (12 636) (8 993) Less: Capital items non-distributable (NCI)+ 2 345 — Deferred taxation (34 409) — Antecedent dividend* 30 220 21 930 Distributable earnings 507 802 348 657 Annual financial statements

* In the determination of distributable earnings, the group elects to make an adjustment for the antecedent dividend arising as result of the issue of shares during the period for which the company did not have full access to the cash flow from such issue. The group issued the majority of the shares pursuant to the accelerated bookbuild on 04 August 2017 which gave rise to antecedent dividends included above. + Non-controlling interest

Number of shares in issue at year-end 409 973 331 350 465 100 Annual general meeting Annual general Equites Property Fund Limited 66 Integrated Report 2018

Notes (continued)

Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

3.2 Dividends declared and distribution per share

Cents per share R’000

Total distribution for the year – 2018 Interim dividend declared on 11 October 2017 (Dividend number 8) 60.98 250 002 Final dividend declared on 7 May 2018 (Dividend number 9) 62.88 257 797 Total distribution for the year ended 28 February 2018 123.86 507 799

Total distribution for the year – 2017 Interim dividend declared on 15 October 2016 (Dividend number 6) 54.44 152 523 Final dividend declared on 9 May 2017 (Dividend number 7) 55.93 196 001 Total distribution for the year ended 28 February 2017 110.37 348 524

4. Segment information

Accounting Policy The group identifies and presents operating segments based on the information that is provided internally to the chief operating decision maker (“CODM”) which comprises the executive directors (“exco”). The CODM allocates resources and assesses the performance of the operating segments of the group.

The group has assessed its operations and determines its segments in line with the clear geographic distinction between South African (“SA”) and the United Kingdom (“UK”). The SA and UK markets are vastly different in terms of market risk, political risk and the processes for the purchase and letting of assets. For this reason, the CODM analyses the assets in these market separately and allocates resources according to this analysis.

Equites generates the majority of revenue from properties in SA, while the remainder of revenue is generated through properties situated in the UK. The geographic analysis of revenue is based on the country where the building is situated, and therefore where the rental income is derived.

In the prior year, a further distinction was made based on asset class. From 1 March 2017, however, the group has reorganised its segments in line with the change in the business. In order to streamline its focus on high quality logistics assets, the group has disposed of the majority of its offices, with only two remaining in the portfolio at the reporting date. The office segment no longer meets the quantitative threshold as set out in IFRS8 ‘Operating Segments’ and is therefore not reported as a segment. The financial impact is now included in the “other” segment.

All treasury functions, corporate costs and other expenses that are not specifically attributable to individual properties or are negotiated or incurred on a group basis are included in the “other “ segment.

Based on the nature of the business and the factors discussed above, the following segments are presented: – SA industrial assets – UK industrial assets – Other

The segment information for the group for the year ended 28 February 2018 is set out below: Equites Property Fund Limited Integrated Report 2018 67

Operating segments

R’000 SA Industrial UK Industrial Other Total

Statement of profit or loss and other comprehensive income Segment revenue 447 958 75 646 16 546 540 150 Fair value adjustments – investment property 22 181 234 372 (17 007) 239 546 Depreciation — — (941) (941)

Operating profit before financing activities 605 206 318 307 (22 938) 900 575 Historical overview Finance income 24 796 194 — 24 990 Finance costs (55 974) (12 791) — (68 765) Tax expense — 34 313 — 34 313

Statement of financial position Investment property 5 612 033 2 338 016 121 000 8 071 049 Investment property held for sale 28 000 — — 28 000 Total assets 5 962 586 2 400 810 121 000 8 484 396 Total liabilities 1 536 548 539 664 — 2 076 212 Our business The segment information for the group for the year ended 28 February 2017 is set out below:

Operating segments

R’000 SA Industrial UK Industrial Other Total

Statement of profit or loss and other comprehensive income Segment revenue 427 096 31 113 — 458 209 Fair value adjustments – investment property 279 908 29 230 — 309 138 Depreciation — — (483) (483) Operating profit before financing activities 863 444 46 159 (27 726) 881 877 Finance income 3 248 44 — 3 292 Governance Finance costs (78 151) (955) — (79 106) Tax expense — — — —

Statement of financial position Investment property 5 095 992 763 649 131 752 5 991 393 Investment property held for sale — — 234 381 234 381 Total assets 5 357 809 794 823 366 133 6 518 765 Total liabilities 1 242 328 235 547 — 1 477 875

5. Financial risk management and fair value measurement Financial risk arises from the group’s exposure to financial instruments and comprises: – market risk (interest rate risk, currency risk) (note 7.4); – credit risk (note 7.4, 8.2, 11.4 and 16) ; – liquidity risk (note 7.4); Annual financial statements – capital management (note 7.4); and – fair value measurement (note 6.6 and 7)

The board of directors has overall responsibility for the establishment and oversight of the group’s risk management framework. The board has delegated this responsibility to the audit and risk committee, which considers the adequacy of the group’s risk management framework and monitors management’s implemention of risk management policies and procedures.

The group’s risk management policies are established to ensure improved risk management and control, to determine appropriate risk limits have been set for financial risks and that funds are allocated efficiently to maximise returns. Annual general meeting Annual general Equites Property Fund Limited 68 Integrated Report 2018

Notes (continued)

Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

COMPANY GROUP

28 February 28 February 28 February 28 February 2017 2018 2018 2017 R’000 R’000 R’000 R’000

6. Investment property 804 913 828 444 Investment property (note 6.1) 6 847 987 5 287 942 — 116 324 Investment property under development (note 6.2) 534 113 188 768 172 957 235 657 Freehold land available for development (note 6.3) 517 597 376 880 234 381 28 000 Investment property held for sale (note 6.4) 28 000 234 381 16 821 14 591 Straight-lining lease income accrual (note 6.5) 171 352 137 803 1 229 072 1 223 016 8 099 049 6 225 774

Accounting Policy

Investment property Investment property is made up of the following: – properties held for rental income and capital appreciation (not occupied by the group) – properties under development for the purpose of earning rental income and capital appreciation – vacant land held for the purpose of developing properties to earn rental income and capital appreciation Investment property is initially measured at cost, including all related transactions costs. Subsequently, investment property is carried at fair value and all movements in fair value are recognised in profit or loss. The changes in the fair value are excluded from the calculation of distributable earnings. The directors determine the fair value of investment property at each reporting period. External valuations are obtained as deemed appropriate with each property being externally valued by a registered valuer at least once every three years. Adjustments to the fair value of investment properties are computed net of the impact of accounting for lease income on a straight-line basis over the term of lease. The directors confirm that there has been no material changes to the information and assumptions applied by the registered valuer. Subsequent expenditure is capitalised to the asset’s carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the group and the cost of the item can be measured reliably. All other costs, including repairs and maintenance, are expensed as incurred. Investment properties are derecognised either when they have been disposed of or where an individual property is permanently destroyed or its value permanently reduced as no future economic benefit is expected from it. A gain or loss arising on disposal of investment property is recognised in profit or loss. The gain or loss is measured as the difference between the proceeds and carrying amount. Future costs or capital commitments are not included in the fair value of investment property. Investment property under development Investment property under development is measured at fair value. However, where the fair value is not reliably measurable, the investment property under development is measured at cost until the earlier of the date of contruction is completed or the date at which the fair value becomes reliably measurable. Vacant land Vacant land is measured at fair value. However, where the fair value is not reliably measurable, the land is measured at cost until the date at which the fair value becomes reliably measurable. Investment property held for sale The following conditions must be met for an asset to be classified as held for sale: – Management is committed to a plan to sell – The asset is available for immediate sale – An active programme to locate a buyer is initiated – The sale is highly probable, within 12 months of classification as held for sale (subject to limited exceptions) – The asset is being actively marketed for sale at a sales price reasonable in relation to its fair value – Actions required to complete the plan indicate that it is unlikely that the plan will be significantly changed or withdrawn

Once the above conditions have been met, investment property is then classified as held for sale. A property can be available for immediate sale even though it still has a tenant occupying it. The lease will then be transferred to the new owners. Sales are initiated either directly with Equites or through a broker. Equites Property Fund Limited Integrated Report 2018 69

Borrowing and overhead costs capitalised Borrowing costs comprise interest on borrowings, amortisation of capitalised loan arrangement fees and interest on other accounts. General and specific borrowing costs directly attributable to the acquisition, construction or development of qualifying assets, are capitalised as part of the cost of these assets, until they are substantially ready for their intended use. All loans are with financial institutions and bears market-related interest. These loans are pooled and the general borrowings formula is applied to allocate the expenses against each development. A qualifying asset is an asset that takes a substantial period of time to get ready for its intended use or sale which generally is either property, plant, and equipment or investment property during the construction period. Qualifying assets necessarily take a substantial period of time to get ready for their intended use. Historical overview Expenditures on a qualifying asset include only those expenditures that have resulted in payments of cash, transfers of other assets or the assumption of interest-bearing liabilities. For general borrowings: – The weighted average borrowing rate for all borrowings after the impact of hedging is used as the capitalisation rate. – This capitalisation rate is then applied to the weighted average costs for each development for each particular month of construction. The amount of borrowing costs capitalised is limited to the amount of borrowing costs actually incurred (where applicable). The group has no specific borrowings. Capitalisation of borrowing costs commences when the activities to prepare the asset are in progress and expenditures and borrowing costs are being incurred. Borrowing costs cease when substantially all the activities necessary to prepare the qualifying asset for its intended use are complete. Our business Leases The group has leases in place over it’s Cape Town head office premises as well as equipment. These leases are classified as operating leases as risks and rewards associated with ownership are not transferred to the group. Operating lease rentals with fixed escalations are recognised on a straight-line basis over the lease term. The difference between the contractual cash flows and the straight-line revenue is recognised as an operating lease asset / liability.

Investment property held under an operating lease relates to long-term land leases and is included in the fair value of investment property recognised in the statement of financial position. Governance

Critical estimates and judgements – valuation of investment property The board has used the best available evidence to determine the fair value of investment properties. This includes current market prices for properties with similar characteristics, leases and cash flow projections. As available information is not directly comparable, the amounts are determined within a reasonable range of fair value. Measurement of fair values The valuation model used by the board to value the investment property considers the one year forward rental generated from a specific property, discounted at an appropriate capitalisation rate. Valuation technique The forward rental is based on the contractual rental income as per the lease agreement with a tenant. Where there is no tenant, or a lease is expected to expire within a 12-month period, a market related rental is assumed on the property. The capitalisation rate is based on a market related capitalisation rate published in the SAPOA guidance, adjusted for risk factors such as the quality of the building, the location of the building,

length of lease, lease covenant and any other risks inherent in the property. Annual financial statements Significant unobservable inputs – Expected market rental growth in line with CPI – 2% vacancy in SA industrial portfolio (2017: 0%) and 0% over the UK portfolio. – Average valuation yield of 8.3% (2017:8.2%) in SA and 5.0% (2017:6.1%) in the UK. Inter-relationship between unobservable inputs and fair value measurement The overall valuations are sensitive to all three assumptions listed above. The impact of vacancy is deemed to be immaterial on the valuations as the majority of the group’s leases are long dated, with no view of material vacancies in the portfolio in the near future. Management deems that the range of possible alternative assumptions is greatest for the valuation yields. The impact of changing valuation yields on the asset values is detailed in note 6.6. meeting Annual general Critical estimates and judgements - Land and buildings under development carried at cost As the fair value of land and buildings under development cannot be reliably measured, the group carries these at cost. Equites Property Fund Limited 70 Integrated Report 2018

Notes (continued)

Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

COMPANY GROUP

28 February 28 February 28 February 28 February 2017 2018 2018 2017 R’000 R’000 R’000 R’000

6. Investment property (continued)

6.1 Reconciliation of investment property 677 472 804 913 Opening balance 5 287 942 3 524 981 255 843 — Additions arising from acquisitions 1 128 970 1 818 230 5 135 9 534 Improvements and extensions 97 526 115 954 Completed projects transferred from investment property under 70 474 — development 270 247 214 124 (234 381) (28 000) Investment property transferred to held for sale (28 000) (234 381) Investment property transferred from property, plant and — — equipment 741 — — — Investment property transferred to land (11 972) — — — Disposed during the year (17 286) (232 746) — — Foreign exchange movement (119 727) (227 358) — (43 394) Intercompany transfers — — 30 370 85 391 Fair value adjustment 239 546 309 138 804 913 828 444 Fair value of investment properties (excluding straight-lining) 6 847 987 5 287 942

6.2 Investment properties under development 20 483 — Opening balance 188 768 126 296 — 59 131 Land cost transferred 391 914 147 940 49 991 57 193 Construction and development costs 244 828 128 656 — — Foreign exchange movement (21 150) — (70 474) — Completed projects transferred to investment property (270 247) (214 124) — 116 324 Cost of investment properties under development 534 113 188 768

6.3 Freehold land available for development 144 297 172 957 Opening balance 376 880 366 301 14 033 106 296 Acquisition of Land 474 963 14 033 — — Land transferred to property, plant and equipment — (1 652) — — Land transferred from investment property 11 972 — — (59 131) Land transferred to investment property under development (391 914) (147 940) 14 627 15 535 Development and borrowing costs 45 696 146 138 172 957 235 657 Cost of freeheld land available for development 517 597 376 880

6.4 Investment property held for sale — 234 381 Opening balance 234 381 — 234 381 28 000 Transferred from investment property* 28 000 234 381 — (234 381) Disposed during the year (234 381) — 234 381 28 000 Fair value of investment properties held for sale 28 000 234 381 Equites Property Fund Limited Integrated Report 2018 71

COMPANY GROUP

28 February 28 February 28 February 28 February 2017 2018 2018 2017 R’000 R’000 R’000 R’000

6.5 Straight-lining lease accrual

Contractual lease receivables are as follows: Historical overview 75 800 62 469 Within one year 392 764 363 010 216 466 174 214 Between one and five years 1 561 561 1 373 429 36 669 6 903 Beyond five years 694 877 661 879 328 935 243 586 2 649 202 2 398 318 (312 114) (228 995) Less: lease revenue on straight-line basis (2 477 850) (2 260 515) 16 821 14 591 Straight-lining lease income accrual 171 352 137 803

* investment property held for sale consists of 1 (2017:3 commercial) industrial building which was sold shortly after year-end. 4 SA commercial buildings were sold during the current year for R254 million Our business External property valuations were obtained from independent valuers, Mills Fitchet Magnus Penny (Pty) Ltd in SA and Jones Lang LaSalle Ltd (“JLL”) in the UK, at year end.

Investment properties to the value of R6.8 billion (2017: R5.1 billion) are encumbered as security against the group’s loan facilities (note 7).

Capitalisation rates varied between 7.3% and 11.4% for SA properties and between 4.5% and 6.0% for UK properties. Governance

The majority of our leases are fully repairing and insuring with the average lease expiring after 7.9 years (2017: 7.1 years). SA leases contain contractual escalations over the lease where UK leases contain rent reviews after 5 years.

6.6 Fair value measurement All assets and liabilities measured at fair value are classified using a three-tiered fair value hierarchy that reflects the significance of the inputs used in determining the measurement as follows: Level 1 – measurements in whole or in part are performed by reference to unadjusted, quoted prices in an active market for identical assets and liabilities. Quoted prices are readily available from an exchange, dealer, broker, industry group, pricing service Annual financial statements or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm’s length basis.

Level 2 – measurements are performed by reference to inputs other than quoted prices that are included in level 1. These inputs are observable for the financial instrument, either directly (i.e. as prices) or indirectly (i.e. from derived prices).

Level 3 – measurements are performed by reference to inputs Annual general meeting Annual general that are not based on observable market data. Equites Property Fund Limited 72 Integrated Report 2018

Annual financial statements

Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

COMPANY GROUP

28 February 28 February 28 February 28 February 2017 2018 2018 2017 R’000 R’000 R’000 R’000

6. Investment property (continued)

6.6 Fair value measurement

Assets at fair value

Level 1 — — None — —

Level 2 3 353 900 Financial assets at fair value (note 7) 900 3 353 134 632 263 947 Derivative financial asset (note 7) 268 264 134 632 (9 047) (11 726) Derivative financial liability (note 7) (19 155) (11 208)

Level 3 1 039 295 871 035 Non-financial assets at fair value – investment properties 7 047 339 5 492 795

Refer to the segment report in note 4 for a breakdown per asset class, distinguished by market risk.

There were no transfers between level 1, 2 or 3 during the year.

The key input to the valuation of investment property is the capitalisation rate. The table below illustrates the sensitivity of the fair value to changes in the capitalisation rate:

Sensitivity analysis to capitalisation rates 14 618 10 710 Increase in fair value if capitalisation rates are decrease by 0.1% 73 475 76 461 (14 195) (10 444) Decrease in fair value if capitalisation rates are increased by 0.1% (71 105) (74 346) Equites Property Fund Limited Integrated Report 2018 73

Impact of changes in capitalisation rates on Total Assets

100 000

80 000 73 474 76 461

60 000

40 000

14 618 Historical overview 20 000 10 709 —

R’000 -20 000 (10 443) (14 195) -40 000

-60 000

-80 000 (71 104) (74 346) -100 000 Our business Group Company Group Company 2018 2017

N 0.1% higher N 0.1% lower

COMPANY GROUP

28 February 28 February 28 February 28 February 2017 2018 2018 2017 Governance R’000 R’000 R’000 R’000

7. Net debt

7.1 Analysis of net debt

Secured borrowings

Non-current 115 002 75 570 Standard Bank of South Africa Limited 75 570 115 002 396 653 963 731 Nedbank Limited 1 172 785 605 708 — — RMB Limited 121 102 121 102 — — Sanlam Limited 38 000 38 000 Annual financial statements — — Royal Bank of Scotland plc 191 973 206 285 — — HSBC Bank plc 288 300 — 511 655 1 039 301 1 887 730 1 086 097

Current 79 887 — Nedbank Limited — 79 887 187 000 38 601 Standard Bank of South Africa Limited 38 601 187 000 — — Royal Bank of Scotland plc 16 338 16 179 266 887 38 601 54 939 283 066 Annual general meeting Annual general Equites Property Fund Limited 74 Integrated Report 2018

Notes (continued)

Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

COMPANY GROUP

28 February 28 February 28 February 28 February 2017 2018 2018 2017 R’000 R’000 R’000 R’000

7. Net debt (continued)

Unsecured borrowings

Current 2 046 — Related party loans — 2 917 2 046 — — 2 917

780 588 1 077 902 Gross debt 1 942 669 1 372 080 (134 632) (263 947) Interest rate and currency derivative assets (268 264) (134 632) 9 047 11 726 Interest rate and currency derivative liabilities 19 155 11 208 (4 960) (889) Cash and cash equivalents (17 813) (11 042) (3 353) (900) Financial assets held at fair value (900) (3 353) 646 690 823 892 Net debt 1 674 847 1 234 261

Accounting Policy

Financial Liabilities Borrowings are initially recognised at fair value (net of any transaction costs) and subsequently at amortised cost. Borrowings are generally long- term in nature and are classified as non-current liabilities, except to the extent that amounts are contractually unavoidable in the 12 months from the reporting date.

Borrowings and trade and other payables are classified as financial liabilities and are measured at amortised cost using the effective interest rate method.

Financial Assets Financial assets at fair value through profit or loss are investments which were acquired principally for the purpose of selling in the short-term. These assets are described as financial assets at fair value in statement of financial position. Such assets are classified as current or non-current based on their expected maturity.

Derivative financial instruments The group’s derivative financial instruments comprise interest rate and cross currency swaps and are either assets or liabilities and are classified as current or non-current based on the termination date of the instrument. Purchases and settlements of derivative financial instruments are initially recognised on the trade date at fair value and are subsequently carried at fair value. Unrealised gains and losses arising from changes in the fair value of derivative financial instruments are included as fair value adjustments in profit and loss together with the related interest and/or other income. Realised gains and losses in respect of interest rate swaps are presented in finance costs. Income accrued on cross currency swaps are presented within other operating income.

The group does not apply hedge accounting and does not enter into derivative contracts for trading or speculative purposes. Equites Property Fund Limited Integrated Report 2018 75

7.2 Reconciliation of movement in group net debt for the year ended 28 February 2018

Income Foreign 2017 statement Cash flows Fair value Transfers exchange 2018

Gross debt 1 372 080 114 651 461 607 — — (5 669) 1 942 669 Derivative assets (134 632) (83 385) 60 254 (114 731) 3 839 391 (268 264)

Derivative liabilities 11 208 6 285 (15 436) 21 002 (3 839) (65) 19 155 Historical overview Cash and cash equivalents (11 042) — (6 475) — (296) (17 813) Financial assets held at fair value (3 353) (24 108) 26 561 — (900) Net debt 1 234 261 13 443 526 511 (93 729) — (5 639) 1 674 847

The cash flows have been analysed for the group’s borrowings, derivative financial instruments and financial assets held at fair value below:

Net income Proceeds Repayment (expense) Proceeds from bank of bank inflow/ Amounts from Total cash

loans loans Restructuring (outflow) invested divestment flows Our business

Gross debt 1 016 876 (443 180) — (112 089) 461 607 Derivative assets — — — 60 254 60 254 Derivative liabilities — — (9 151) (6 285) (15 436) Financial assets held at fair value 24 108 (1 260 000) 1 262 453 26 561

Reconciliation of movement in company net debt for the year ended 28 February 2018

Income Foreign

2017 statement Cash flows Fair value exchange 2018 Governance

Gross debt 780 588 69 381 227 933 — — 1 077 902 Derivative assets (134 632) (83 385) 60 254 (106 184) — (263 947) Derivative liabilities 9 047 2 600 (11 647) 11 726 — 11 726 Cash and cash equivalents (4 960) — 4 071 — — (889) Financial assets held at fair value (3 353) (24 108) 26 561 (900) Net debt 646 690 (35 512) 307 172 (94 458) — 823 892

The cash flows have been analysed for the company’s borrowings, derivative financial instruments and financial assets held at fair value below:

Net income Proceeds Repayment (expense) Proceeds Annual financial statements from bank of bank inflow/ Amounts from Total cash loans loans Restructuring (outflow) invested divestment flows

Gross debt 719 182 (423 434) — (67 815) 227 933 Derivative assets — 60 254 60 254 Derivative liabilities (9 047) (2 600) (11 647) Financial assets held at fair value 24 108 (1 260 000) 1 262 453 26 561 Annual general meeting Annual general Equites Property Fund Limited 76 Integrated Report 2018

Notes (continued)

Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

7. Net debt (continued) 7.2 Reconciliation of movement in group net debt for the year ended 28 February 2018 (continued) Terms and conditions of borrowings Prime linked, ZAR denominated loans, bear interest at an average rate of prime less 1.49% (2017: 1.47%) while JIBAR linked, ZAR denominated loans, bear interest at an average rate of JIBAR plus 2.20% (2017: 2.20%). LIBOR linked, GBP denominated loans, bear interest at an average rate of LIBOR plus 2.08% (2017: 2.05%). Interest is calculated daily and is payable monthly. The full outstanding capital is repayable on the maturity dates shown in the maturity analysis below. The group currently receives prime less 4.20% (2017: prime less 4.20%) on short-term cash balances. Most loan agreements that the group is subject to include overall balance sheet and group covenants, specifically with regards to maximum LTV and minimum interest cover ratios. The group is well within the strictest of these covenants which is 50% LTV and 1.75 times interest cover.

COMPANY GROUP

28 February 28 February 28 February 28 February 2017 2018 2018 2017 R’000 R’000 R’000 R’000

7.3 Derivative financial assets and liabilities (9 047) (11 726) Interest rate swaps (14 838) (11 208) 134 632 263 947 Cross currency swaps 263 947 134 632 125 585 252 221 249 109 123 424 134 632 263 947 Derivative financial assets 268 264 134 632 (9 047) (11 726) Derivative financial liabilities (19 155) (11 208)

These amounts represent the mark-to-market of the interest rate swaps and cross currency swaps at each reporting date.

Interest rate swaps Details of the interest rate swaps are as follows:

2018 2017

Weighted Weighted Nominal Weighted effective Weighted effective amount average interest average interest (R’000) maturity rate maturity rate

JIBAR-linked interest rate 550 000 550 000 swaps* Jan-22 7.66% Dec-20 8.08% 860 000 860 000 LIBOR-linked interest rate — — swaps Mar-22 1.00% Nov-21 1.01% 501 022 222 464 550 000 550 000 1 361 022 1 082 464

* The company has one JIBAR-linked interest rate swap with a maturity date in March 2022 and a weighted effective interest rate of 7.61% Equites Property Fund Limited Integrated Report 2018 77

COMPANY GROUP

28 February 28 February 28 February 28 February 2017 2018 2018 2017 R’000 R’000 R’000 R’000

Interest rate swap embedded in lease agreements Historical overview The group has embedded interest rate hedges into some of its lease agreements as follows: — — Effective equivalent hedged value 285 082 305 379 Average maturity 31 August 2022 Effective interest rate 9.00%

550 000 550 000 Total nominal value of interest rate hedges 1 646 104 1 387 843

Cross currency swaps

The group has open cross currency swaps at year-end as follows: Our business Nominal Nominal Fixed Nominal Nominal Amount Amount exchange Amount Amount (£’000) (£’000) Description Maturity date rate (£’000) (£’000)

GBP/ZAR cross currency 32 905 32 905 swap – fixed-for-floating October 2021 18.234 32 905 32 905 GBP/ZAR cross currency — 41 955 swap – fixed-for-fixed* June 2018 18.919 41 955 — Total nominal value of currency hedging Governance 32 905 74 860 instruments 74 860 32 905

* The group restructured the fixed-for-fixed cross currency swap in March 2018 to extend the term of the derivative instrument until December 2018. The group also entered into a GBP LIBOR interest rate swap with the same notional amount of £41,955,000 to effectively fix the GBP LIBOR interest rate from December 2018 to December 2023.

7.4 Financial risk management The group holds financial instruments mainly to finance its operations, to finance corporate transactions such as dividends, for the temporary investment of short-term funds, and to manage currency and interest rate risks. In addition, various financial instruments, for example trade receivables and payables arise directly from operations and create financial risks which are an inevitable concomitant of the group’s operations. The use of debt and equity finance creates financial risks which are required to be managed to minimise the cost of capital and thereby maximise stakeholder returns. The group’s activities expose it to a variety of financial risks: market risk (including interest Annual financial statements rate risk and foreign exchange risk), liquidity risk and credit risk.

Market risk Market risk is the possibility that the group will experience losses due to factors that affect the overall performance of the financial markets in which it is involved. Market risk, also called systematic risk, cannot be eliminated through diversification, though it can be hedged against. From the group’s perspective, the main market risks at present pertain to interest rates (both in SA and the UK) and foreign exchange (principally the GBP/ZAR exchange rate). In relation to interest rate risk, where an unhedged interest rate increases, ceteris paribus, the cost of funding increases, which in turn reduces the group’s overall financial performance. Similarly, where a foreign currency depreciates, and the group has a net investment in that foreign currency, to the extent that it relates to an unhedged exposure, this would,

ceteris paribus, result in a financial loss to the group. The group’s response to market risks that it is exposed to is elucidated below. meeting Annual general Equites Property Fund Limited 78 Integrated Report 2018

Notes (continued)

Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

7. Net debt (continued)

7.4 Financial risk management (continued)

Interest rate risk The group is exposed to interest rate risk on interest-bearing borrowings, cash and cash equivalents and other short-term interest-bearing investments.

An increase in the interest rate will, ceteris paribus, increase the interest cost associated with the utilisation of variable rate interest-bearing borrowings. To minimise this potential impact, the group has both natural and derivative hedging arrangements.

The group uses interest rate swaps to hedge exposure to the variability in cash flows on floating rate debt caused by movements in market interest rates. Furthermore, the group uses natural hedges which are embedded within lease agreements, to offset any adverse effects of an increase in interest rates with an increase in contractual rental income.

The interest rate swaps held by the group are structured to achieve the specific objective of mitigating interest rate risk. These derivative hedging instruments are structured to pay a fixed interest rate which is locked in for a defined period and to receive a floating interest rate which is linked to a market interest rate. Therefore, if the market interest rate increases during a period under which the group has outstanding interest rate swaps, both the interest cost on floating interest rate debt and the interest received under the swap will increase which creates an offsetting effect.

The group has a policy to hedge at least 80% of its exposure to floating interest rates on term loan balances on an ongoing basis. Furthermore, given the group’s current strategic growth plan, exposure to future interest rate risk is also considered where a capital commitment has been made. Therefore, an assessment is regularly performed on both metrics as shown below. The group’s hedge cover has been determined initially with regards to term loan balances. However, the impact of contracted capital commitments has been assessed against the current total hedge cover in line with the group’s policy.

To address the uncertainty regarding future interest rates in developed economies, the group concluded a 5-year forward-starting GBP LIBOR swap in January 2017, several months before the rise in US and UK government bond yields. The GBP LIBOR swap with a nominal value of £32.9m has a commencement date of 1 October 2021 and was introduced into the group’s treasury management to effectively fix an element of its GBP LIBOR exposure until October 2026. GROUP

28 February 28 February 2018 2017 R’000 R’000

Hedging of interest rate risk Total nominal value of interest rate hedges 1 646 104 1 387 843 Fixed-for-floating cross currency swap 600 000 600 000 Total hedge cover 2 246 104 1 987 843

Term loan balances at year end 1 942 669 1 372 080

Effective hedging cover on loan balances 115.6% 144.9%

Impact of capital commitments Contracted capital commitments (note 25) 922 824 324 095 Total committed future cash outflows 2 865 493 1 696 175

Effective interest hedging cover on total committed future financing cash outflows 78.4% 117.2%

The majority of the group’s contracted capital commitments pertains to ongoing development funding agreements which have a s-curve cash flow profile. The group’s intention is to hedge exposure to the remaining interest rate risk relating to these existing capital commitments as the developments progress and/or the acquisition is effective. Equites Property Fund Limited Integrated Report 2018 79

The table below reflects the currency and interest rate profile of the group’s loans and borrowings after the impact of interest rate hedging.

2018 2017

Fixed rate Floating rate Fixed rate Floating rate interest interest Total interest interest Total At 28 February (R’000) (R’000) (R’000) (R’000) (R’000) (R’000)

South African Rand 1 446 058 — 1 446 058 1 146 699 — 1 146 699 Historical overview Pound Sterling 496 611 — 496 611 222 464 — 222 464 Total 1 942 669 — 1 942 669 1 369 163 — 1 369 163 Ratio of fixed to floating 100% 0% 100% 100% 0% 100% All-in ZAR effective fixed interest rate 9.03% 9.22% All-in GBP effective fixed interest rate 2.86% 2.78% All-in effective average fixed interest rate 7.99% 8.69% Marginal ZAR effective interest rate 8.84% 9.11% Marginal GBP effective interest rate n/a* n/a*

* There were no undrawn facilities at either reporting date. Our business

Sensitivity analysis to interest rates The group has calculated the sensitivity of changes in interest rates on net profit for the year assuming a reasonably likely scenario where the yield curve is vertically translated 50 basis points in either direction at each maturity. As the main component of the movement in net profit for the year would arise from an accounting mismatch whereby interest rate and cross currency interest rate swaps are fair valued and the related financial liabilities are not, the group has also outlined the impact of changes in interest rates on distributable earnings which it considers to be more appropriate. The sensitivity analysis includes the impact of interest rate hedging and it assumes that other macroeconomic factors remain unchanged.

At 28 February 2018 (R’000) GROUP COMPANY Governance Increase in net profit for the year if interest rates had been 50 basis points higher during the year 46 727 31 167 Decrease in net profit for the year if interest rates had been 50 basis points lower during the year (48 321) (31 621)

As explained above, the impact on distributable earnings has been outlined below applying the same methodology as that used to determine the impact on net profit for the year.

Impact of changes in interest rates on distributable earnings

2 000 1 472 1 500 1 276 1 000 337 500 52

— Annual financial statements (52) R’000 (500) (337) (1 000) (1 276) (1 500) (1 472) (2 000)

Group Company Group Company 2018 2017 Annual general meeting Annual general N 50 bps lower N 50 bps higher Equites Property Fund Limited 80 Integrated Report 2018

Notes (continued)

Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

7. Net debt (continued)

7.4 Financial risk management (continued)

Currency risk Most of the group’s external revenue and costs arise within SA and are denominated in South African Rand. Where the group’s foreign operations trade and are funded in their functional currency, this limits their exposure to foreign exchange volatility. Therefore, the group’s policy is, wherever possible, that funding should be secured in a currency to match the currency of the underlying rental cashflows to minimise foreign exchange volatility through natural hedges. Where this is not possible at competitive rates, the group enters into cross currency swaps and other derivative instruments to hedge foreign currency, capital purchases, purchase and sale commitments, interest expense and foreign currency investments. The group currently partially finances the UK expansion through a combination of SA debt and equity and therefore has foreign exchange exposure on its capital investment in the UK. The group has continued to expand into the UK during the year under review. As such, the group is exposed to currency risk, predominantly that relating to the South African Rand and the Pound Sterling.

Hedging of capital investment The table below shows the carrying amounts of the group’s foreign currency denominated assets and liabilities and the percentage of foreign denominated net assets which are currently hedged:

£’000 2018 2017

Foreign denominated assets 132 703 49 126 Foreign denominated liabilities (33 031) (14 559) Foreign denominated net assets 99 672 34 567 Nominal value of currency hedging instruments 74 860 32 905 Effective currency hedge cover 75.1% 95.2%

The group continually monitors its exposure to foreign exchange rates as a result of its capital investment into the UK. The employment of cross currency swaps provide an effective hedge against the erosion of the net asset value of the group due to foreign currency fluctuations. Hedging of cashflow Equites’ cashflow from its operations in the UK are exposed to movements in the GBP/ZAR exchange rate. To manage the impact of currency volatility, the group has adopted a policy of hedging at least 80% of its 12 month projected forward net cashflow and 40% of its 12-24 month projected forward net cashflow derived in foreign currency. The UK expansion plan has necessitated that all surplus net operating rental cashflows are reinvested into future developments. The future developments are therefore expected to utilise all surplus free cashflow generated in the UK over the next 24 months.

Hedging of distributable earnings Due to loan servicing commitments and further growth opportunities, the net cashflow projected from the UK is lower than the projected distributable earnings. The group hedges an element of the distributable earnings generated in pounds sterling through the interest cashflows on the above cross currency swaps but remains focused on ensuring that all foreign cashflows are adequately hedged. Further information on the sensitivity of changes in foreign exchange rates on distributable earnings is outlined below.

Sensitivity analysis to exchange rates The impact on net profit is principally due to the impact of the change in the exchange rate on the mark-to-market of the group’s financial derivative contracts. Therefore, an analysis of the sensitivity of changes in exchange rates has been performed in relation to net profit, total equity and distributable earnings.

The likely scenario applied in this sensitivity analysis reflects two standard deviations above and below the GBP/ZAR 20-day simple moving average exchange rate analysed over the past 12 months. This therefore captures 95% of all price points over that period. The sensitivity analysis assumes that other macroeconomic factors remain unchanged. Equites Property Fund Limited Integrated Report 2018 81

2018 2017

17% ZAR 5% ZAR 13% ZAR 2% ZAR depreciation appreciation depreciation appreciation against the against the against the against the R’000 GBP GBP GBP GBP

Distributable earnings 6 970 (2 068) 1 853 (238) Net profit (160 326) 47 578 (68 130) 36 027 Historical overview Total equity 161 157 (47 824) 7 707 (4 076)

As explained above, the impact on distributable earnings has been outlined below applying the same methodology as that used to determine the impact on net profit and total equity. The percentages displayed in the chart below align to those used in the above table.

Impact of changes in exchange rates on distributable earnings

8 000

6 970 Our business 7 000

6 000

5 000

4 000 +17% 3 000 1 853 2 000 R’000 1 000 +13% — -2% Governance (1 000) -5% (238) (2 000) (2 068) (3 000)

2018 2017

Fair value measurement The fair value is calculated as the present value of the estimated future cash flows. Estimates of future floating-rate cash flows are based on quoted swap rates, futures prices and interbank borrowing rates. Estimated cash flows are discounted using a yield curve constructed from similar sources which reflects the relevant benchmark interbank rate used by market participants for this purpose when pricing interest rate swaps. The fair value estimate is subject to a credit risk adjustment that reflects the credit risk of the group and of the counterparty. This is calculated based on credit spreads derived from current credit default swap or bond prices. Annual financial statements Annual general meeting Annual general Equites Property Fund Limited 82 Integrated Report 2018

Notes (continued)

Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

COMPANY GROUP

28 February 28 February 28 February 28 February 2017 2018 2018 2017 R’000 R’000 R’000 R’000

7. Net debt (continued)

7.4 Financial risk management (continued)

Liquidity risk Liquidity risk is defined as the risk that the group would not be able to settle or meet its obligations on time or at a reasonable price. The group monitors its net liquidity position on a continuous basis on the basis of expected cash flows. The group seeks to minimise its exposure to liquidity risk by reducing its exposure to interest rate risk through its hedging strategy. The group also reduces refinancing risk through regularly reviewing the maturity profile of its financial liabilities and utilising facilities with differing maturities to reduce maturity concentration.

The table below analyses the group’s financial liabilities based on their contractual maturities. The amounts shown represent the contractual undiscounted amounts.

Financial liabilities Repayable within one year and on demand 267 868 38 601 Borrowings 54 939 285 983 23 653 93 603 Interest repayments 141 015 25 252 3 051 3 418 Derivatives repayments 6 110 4 239 48 621 31 806 Trade and other payables 81 400 77 572 343 193 167 428 283 464 393 046

Between two and five years 512 719 1 039 301 Borrowings 1 887 730 1 086 097 49 670 98 826 Interest repayments 218 614 104 591 7 087 9 639 Derivatives repayments 15 168 8 127 569 476 1 147 766 2 121 512 1 198 815

The derivative repayments relate to financial liabilities that exist at the reporting date. These derivatives are all settled net in accordance with the terms of the agreement.

The maturity profile of the group and company’s total and undrawn borrowing facilities are shown below: Equites Property Fund Limited Integrated Report 2018 83

GROUP

R’000 2018 2017

Total Undrawn Total Undrawn borrowing borrowing borrowing borrowing Maturity facilities facilities facilities facilities Historical overview Within one year 216 338 161 399 405 179 122 113 Between one and three years 1 402 676 546 881 747 358 600 000 Beyond three years 1 368 977 337 042 1 540 924 602 185 Total 2 987 991 1 045 322 2 693 461 1 324 298

COMPANY

R’000 2018 2017 Our business Total Undrawn Total Undrawn borrowing borrowing borrowing borrowing Maturity facilities facilities facilities facilities

Within one year 200 000 161 399 389 000 122 113 Between one and three years 1 370 000 546 881 715 000 600 000 Beyond three years 548 000 331 551 998 000 601 344 Total 2 118 000 1 039 831 2 102 000 1 323 457

Capital management The group’s objectives when managing capital are to safeguard the group’s ability to continue as a going concern in order to provide returns for Governance shareholders and reducing the cost of capital.

As a Real Estate Investment Trust (“REIT”), the company is required to declare at least 75% of its distributable profit as a dividend. The board has decided (subject to the availability of cash resource and legislative requirements) to declare 100% of the distributable profit of the group as a dividend on a biannual basis for the foreseeable future.

As a result of the group’s dividend policy, capital expansion is funded through a combination of bank debt and equity funding. The group targets a LTV of between 25% and 35% over time. LTV is determined based on the ratio of net debt to the fair value of property assets as follows:

COMPANY GROUP

28 February 28 February 28 February 28 February

2017 2018 2018 2017 Annual financial statements R’000 R’000 R’000 R’000

LTV ratio 772 275 1 076 113 Net debt (excluding derivatives financial instruments) 1 923 956 1 357 685 5 168 688 6 591 454 Total assets 8 484 396 6 518 765 (142 945) (265 736) Less: assets related to net debt (286 977) (149 027) 5 025 743 6 325 718 Fair value of property assets 8 197 419 6 369 738 15.4% 17.0% LTV ratio 23.5% 21.3% Annual general meeting Annual general Equites Property Fund Limited 84 Integrated Report 2018

Notes (continued)

Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

7. Net debt (continued)

7.4 Financial risk management (continued)

Credit risk Credit risk is the risk of default on a financial obligation that may arise from a borrower failing to make payments when due. The group is exposed to operational credit risk where trade receivable balances fall due and payable in accordance with the applicable lease agreement. Credit risk also arises from the group’s cash balances and derivative financial instruments (where these are in an asset position) held with financial institutions.

Trade and other receivables The group has credit vetting procedures in place before entering into leases with new tenants. The group’s tenants are predominantly ­ blue-chip companies and there were no significant concentrations of credit risk at year end.

The group’s exposure to credit risk arising from trade and other receivables is set out in note 11.

Financial asset held at fair value At the end of the current financial year, the group is exposed to credit risk of R0.9 million (2017: R3.4 million) relating to its investment in a Nedbank Limited unit trust. The investment is reflected at its estimated recoverable value, which is the current amount realisable, dependent on African Bank Investments Limited resuming senior debt repayments.

Derivative financial instruments The greatest exposure relates to the group’s cross currency swaps which were entered into to hedge foreign exchange rate risk and interest rate risk. The counterparty to these derivative financial instruments is Nedbank Limited, the credit rating of which is shown in note 8.2.

COMPANY GROUP

28 February 28 February 28 February 28 February 2017 2018 2018 2017 R’000 R’000 R’000 R’000

8. Cash and cash equivalents

Accounting Policy Cash comprises cash on hand and positive bank balances. Cash equivalents are short-term highly liquid investments that are readily convertible to known amounts of cash and not subject to a significant risk of a change in value.

8.1 Composition of cash and cash equivalents 2 478 829 Current accounts 7 753 8 558 2 351 24 Cash on call 10 024 2 353 95 — Money market investment — 95 36 36 Petty cash 36 36 4 960 889 17 813 11 042 Equites Property Fund Limited Integrated Report 2018 85

COMPANY GROUP

28 February 28 February 28 February 28 February 2017 2018 2018 2017 R’000 R’000 R’000 R’000

8.2 Credit exposure of cash and cash equivalents Historical overview Credit Risk in cash and cash equivalents and derivative financial assets All cash and cash equivalents and derivative financial assets are invested with reputable financial institutions. Cash balances are only retained for working capital requirements.

Credit ratings of counterparties:

Moody’s Moody’s S&P S&P ­

short- long- short- long- Our business term term term term

Nedbank Limited P-3 Baa3 B BB+ ABSA Bank Limited P-3 Baa3 NR NR Royal Bank of Scotland International

Limited NR NR A-2 BBB Governance Royal Bank of Scotland plc P-2 A3 A-2 BBB+ HSBC Bank plc P-1 Aa3 A-1+ AA-

Amounts in current accounts and on call are invested with reputable institutions as follows: 4 924 853 Nedbank Limited 13 086 10 997 — — ABSA Bank Limited 240 9 — — Royal Bank of Scotland International Limited 4 339 — — — Royal Bank of Scotland plc 50 — — — HSBC Bank plc 62 — 4 924 853 17 777 11 006

Cash and cash equivalents comprise amounts which are Annual financial statements immediately available and the carrying amounts are equivalent to the fair values. Annual general meeting Annual general Equites Property Fund Limited 86 Integrated Report 2018

Notes (continued)

Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

9. Investment in Subsidiaries

Accounting Policy

Investment in Subsidiary Companies The company’s investments in subsidiary companies are carried at cost (including transaction costs) less impairment losses. Acquisitions and disposals are recognised on the trade date.

Consolidation

Subsidiaries Subsidiaries are entities (including structured entities) over which the group has control. Control exists when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to govern the financial and operating policies thereof. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases.

The acquisition method is used to account for business combinations. The consideration transferred is measured at the fair value of the assets transferred, equity instruments issued and liabilities incurred or assumed at the date of acquisition. Identifiable assets acquired as well as liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. Acquisition-related costs are expensed as incurred. The excess of the consideration transferred over the fair value of the group’s share of the identifiable net assets of the subsidiary acquired is recorded as goodwill. If the consideration transferred is less than the group’s share of the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in profit or loss.

For acquisition of subsidiaries not meeting the definition of a business, the group allocates the cost between the individual identifiable assets and liabilities in the group on their relative fair values at the date of acquisition. Such transactions or events do not give rise to goodwill.

Treatment of intra-group transactions All intra-group transactions, balances and unrealised gains and losses on transactions between entities of the group have been eliminated. When necessary, accounting policies of subsidiaries have been changed to ensure consistency with the policies adopted by the group.

Critical estimates and judgements – Acquisition of property subsidiaries Where the group obtains control of entities that own investment properties, or when the group acquires properties or a group of properties collectively, an evaluation is performed as to whether such acquisitions should be accounted for as business combinations or acquisitions in terms of IAS 40 Investment Properties. An acquisition is not considered to be a business combination if at the date of the acquisition of the entity the integrated activities deemed necessary to generate a business are not present. The group concluded that all acquisitions of properties in the current financial year were of this nature. Therefore these were accounted for in terms of IAS 40 Investment Properties.

Critical estimates and judgements – Consolidation of structured entity During the year under review, the group has assisted in the incorporation of the Michel Lanfranchi Foundation NPC (‘’the Foundation” or “MLF”) which will house all the corporate social responsibility projects and initiatives of the group. The main objective of the Foundation is to contribute to educational infrastructure at primary, secondary and tertiary education level, as well as to facilitate bursaries and scholarships to deserving individuals. Equites was instrumental in the formation of the Foundation, however, following formation, the Foundation will have an independent board and operate independently of Equites. Refer to the social and ethics committee report for further details on the Foundation.

The group has applied judgement in determining the treatment of the relationship with the Foundation. An IFRS 10 Consolidated Financial Statement assessment has been performed to determine if the group maintains significant control which would result in MLF and its subsidiaries being consolidated. While Equites does not have influence over the board’s decision making or operations of MLF, the assessment concluded that the group should consolidate MLF and its subsidiaries on the basis that it is a structured entity. Equites Property Fund Limited Integrated Report 2018 87

Amount Amount Effective owing owing COMPANY Acquisition date interest Investment Investment by/(to) by/(to) R’000 R’000 R’000 R’000

Applemint Properties 93 (Pty) Ltd 01 March 2014 100% 4 271 4 271 14 562 14 417 Dormell Properties 711 (Pty) Ltd 01 June 2014 100% 40 802 40 802 47 391 47 286 Equites Atlantic Hills (Pty) Ltd 01 October 2015 100% 38 045 38 045 206 820 164 171 Historical overview Equites International Ltd* 19 April 2016 100% 1 897 236 723 830 134 – Equites Investments 1 (Pty) Ltd 01 July 2015 100% 468 763 468 763 454 363 364 272 Equites UK SPV 1 Ltd*# 19 April 2016 100% — — — — Equites UK SPV 2 Ltd*# 08 June 2016 100% — — — — Equites UK SPV 3 Ltd*# 17 June 2016 100% — — — — Equites UK SPV 4 Ltd*# 31 October 2016 100% — — — — Equites UK SPV 5 Ltd*# 31 October 2016 100% — — — — Equites UK SPV 6 Ltd*# 08 August 2017 100% — — — — Equites UK SPV 7 Ltd*# 20 September 2017 100% — — — — #

Equites UK SPV 8 Ltd* 20 September 2017 100% — — — — Our business Equites UK SPV 9 Ltd*# 20 September 2017 100% — — — — Galt Property One (Pty) Ltd 01 March 2014 100% 50 500 50 500 80 294 80 468 Galt Property Two (Pty) Ltd 01 March 2014 100% 64 445 64 445 129 659 125 401 Kovacs Investments 715 (Pty) Ltd 01 March 2014 100% 60 610 60 610 78 915 53 772 Nascispan (Pty) Ltd 01 September 2014 100% 8 737 8 737 34 242 34 392 Prop for list (Pty) Ltd 01 June 2014 100% — — 74 068 90 493 Swish Property Seven (Pty) Ltd 01 March 2014 100% 45 656 45 656 80 844 81 830 Chamber Lane Properties 3 (Pty) Ltd# 01 July 2015 100% — — 748 428 852 757 EA Waterfall Logistics JV (Pty) Ltd 01 July 2016 80% 292 064 292 064 4 147 (15 613) Structured entities:

The Michel Lanfranchi Foundation NPC° 08 August 2017 0% — — — — Governance Ilanga Lakusasa (Pty) Ltd+° 09 January 2015 0% — — — (36 271) 2 971 129 1 797 723 1 953 867 1 857 375

* Companies are incorporated in the Isle Of Man # Ordinary shares of these subsidiaries are not directly held by the company but held through one of its directly held subsidiaries. There are no unconsolidated subsidiaries or share investments. + Ilanga Lakusasa (Pty) Ltd, previously known as Equites Lords View Development (Pty) Ltd, was sold to another group company, The Michel Lanfranchi Foundation NPC, effective 1 March 2017. ° The group does not own the shares in The Michel Lanfranchi Foundation NPC but consolidates the MLF group as a structured entity in terms of IFRS 10.

All amounts owing by subsidiaries are unsecured, interest free and payable on demand. Annual financial statements Annual general meeting Annual general Equites Property Fund Limited 88 Integrated Report 2018

Notes (continued)

Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

GROUP

28 February 28 February 2018 2017 R’000 R’000

10. Non-controlling interests The NCI represents the following: – 20% of the net asset value of EA Waterfall Logistics JV Pty (Ltd) – 100% of the net asset value of The Michel Lanfranchi Foundation NPC and Ilanga Lakusasa (Pty) Ltd

The non-controlling interest balance is reconciled as follows: Opening balance 93 535 — Acquired interest at net asset value — 73 016 Share of profit for the year 20 925 21 317 Dividend declared (5 050) (798) Closing balance 109 410 93 535

EA Waterfall Logistics JV (Pty) Ltd 100% Summarised statement of financial position 100% 100% Investment property 871 494 816 400 Current assets 11 907 21 841 Total assets 883 401 838 241

Equity Stated capital 365 080 365 080 Accumulated profit 134 224 102 597 Total equity 499 304 467 677

Interest-bearing borrowings 375 585 368 157 Current liabilities 8 512 2 407 Total equity and liabilities 883 401 838 241

Summarised statement of profit and loss Revenue 89 517 71 459 Other operating income 12 600 — Operating costs (24 414) (15 437) Fair value adjustments – investment property 21 775 74 082 Finance income 259 383 Finance costs (42 861) (23 903) Profit for the year 56 876 106 584 Equites Property Fund Limited Integrated Report 2018 89

11. Trade and other receivables

Accounting Policy

Trade and other receivables Trade and other receivables are recognised at trade date at fair value and subsequently at amortised cost using the effective interest rate method, less impairment. Trade receivables are amounts due from tenants for contractual lease charges and recoveries and are classified as

current assets unless recovery is expected more than 12 months from the reporting date. Historical overview

The group identifies impairment of trade receivables on an ongoing basis. Impairment adjustments are raised against trade receivables when the collectability is considered to be doubtful. The group believes that the impairment write-off is conservative and there are no significant trade receivables that are doubtful and have not been written off.

Impairment of financial assets at amortised cost The group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or

events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. Our business

For assets measured at amortised cost, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in profit or loss.

Impairment losses and reversals are recognised in profit or loss. Governance

COMPANY GROUP

28 February 28 February 28 February 28 February 2017 2018 2018 2017 R’000 R’000 R’000 R’000

2 921 253 Trade receivables (tenants) 256 7 613 — — Deposit on property acquisition — 29 351 915 885 Municipal deposits 6 685 7 308 57 338 11 845 Supplier development loan (note 11.3) 11 845 57 338 24 870 779 VAT receivable 4 383 25 561

— 692 Prepaid expenses 3 871 32 Annual financial statements 531 8 309 Sundry debtors 23 616 6 733 141 3 421 Accrued income and other receivables 7 546 842 86 716 26 184 58 202 134 778

The fair value of trade and other receivables approximates the carrying value. Annual general meeting Annual general Equites Property Fund Limited 90 Integrated Report 2018

Notes (continued)

Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

COMPANY GROUP

28 February 28 February 28 February 28 February 2017 2018 2018 2017 R’000 R’000 R’000 R’000

11. Trade and other receivables (continued)

11.1 Credit quality of trade receivables The credit quality of trade receivables is evaluated with reference to available financial information and history with the company and can be categorised into the following groups: A – Large nationals, large listed companies and government 2 792 23 organisations 26 7 272 91 — B – Smaller international and national tenants — 207 38 230 C – Other local tenants and sole proprietors 230 134 2 921 253 256 7 613

The maximum exposure to credit risk for trade and other receivables are the carrying values.

11.2 Ageing of trade receivables The ageing of trade receivables as at year end was follows: 2 551 76 Current – up to 30 days 79 6 361 307 6 Past due – between 31 and 90 days 6 460 63 171 Past due – 91 days and longer 171 792 2 921 253 256 7 613

None of the past due amounts are considered impaired and there is no allowance for impairment of trade receivables at year end.

11.3 Supplier development loan 57 338 11 845 Damon at Sons Construction (Pty) Ltd 11 845 57 338

These amounts were advanced to one of our suppliers as part of our supplier development programme and are unsecured, do not bear interest and have no fixed terms of repayment.

11.4 Credit risk The group’s exposure to credit risk is influenced mainly by the individual characteristics of each debtor. The balance relating to trade debtors is negligable and therefore not considered to be a material risk.

The greatest exposure to credit risk is from the receivable from Damon At Sons Construction (Pty) Ltd (“DAS”), its enterprise development partner. Equites remains DAS’ largest customer and the majority of the receivable has been settled after year end through the payment of invoices for costs incurred in developing the new warehouse at Atlantic Hills, refurbishments at Tower Road and an extension at Mill Street. The group ensures that the loans advanced to the enterprise development partner are within the parameters of the project which is under construction and as such, the counterparty should be in a position to settle the loan once it invoices for the respective project. Equites Property Fund Limited Integrated Report 2018 91

COMPANY GROUP

28 February 28 February 28 February 28 February 2017 2018 2018 2017 R’000 R’000 R’000 R’000

12. Stated capital Historical overview Accounting Policy Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.

12.1 Authorised shares 2 000 000 000 (two billion) ordinary shares, of the same class

and no par value. Our business

12.2 Issued shares 409 973 331 (2017: 350 465 100) ordinary shares, of the same 4 193 749 5 203 773 class and no par value. 5 203 773 4 193 749

The unissued shares are under the control of the directors (subject to limitations set by shareholders’ resolutions) until the next annual general meeting.

12.3 Reconciliation of issued shares – value 3 180 784 4 193 749 Opening balance 4 193 749 3 180 784 Governance 20 463 — Shares issued for acquisition of subsidiaries — 20 463 — 3 113 Shares issued in respect of conditional share plan 3 113 — 1 000 000 1 015 157 Shares issued for cash in accelerated book build* 1 015 157 1 000 000 (7 498) (8 246) Share issue costs (8 246) (7 498) 4 193 749 5 203 773 Closing balance 5 203 773 4 193 749

Number of Number of Number of Number of shares shares 12.4 Reconciliation of issued shares – number shares shares

279 862 566 350 465 100 Opening balance 350 465 100 279 862 566 1 637 017 — Shares issued for acquisition of subsidiaries — 1 637 017 — 487 501 Shares issued in respect of conditional share plan 487 501 — 68 965 517 59 020 730 Shares issued for cash in accelerated book build* 59 020 730 68 965 517 Annual financial statements 350 465 100 409 973 331 Closing balance 409 973 331 350 465 100

* General issue of shares for cash at a price of R17.20 per share

13. Share-based payment reserve 7 881 11 282 Conditional share plan (note 13.1) 11 282 7 881 — 56 296 Acquisition of Land (note 13.2) 56 296 — 7 881 67 578 67 578 7 881 Annual general meeting Annual general Equites Property Fund Limited 92 Integrated Report 2018

Notes (continued)

Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

13. Share-based payment reserve (continued)

Accounting policy For equity-settled share-based payment transactions, the group measures the goods or services received, and the corresponding increase in equity, directly, at the fair value of the goods or services received, unless that fair value cannot be estimated reliably. If the group cannot estimate reliably the fair value of the goods or services received, the group measures their value, and the corresponding increase in equity, indirectly, by reference to the fair value of the equity instruments granted.

The group operates a conditional share plan, which is classified as an equity-settled share-based payment plan, under which is receives services from employees as consideration for equity instruments of the company. The beneficiaries under the scheme are executive directors and management. The fair value of the employee services received in exchange for the grant of shares is recognised as an expense on a straight-line basis over the vesting period, with a corresponding adjustment to the share-based payment reserve.

The total amount expensed to profit or loss is determined by reference to the fair value rights to equity instruments granted, including any market performance conditions and excluding the impact of any non-market performance vesting conditions. Non-market performance vesting conditions are included in assumptions regarding the number of shares granted that are expected to vest. At the end of each reporting period, the group revises its estimates of the number of shares granted that are expected to vest and recognises the impact of any changes in profit or loss with a corresponding adjustment to equity.

The effect of all conditional shares granted is taken into account when calculating diluted earnings and diluted headline earnings per share.

13.1 Conditional share plan In terms of its conditional share plan (“CSP”), the group has granted conditional shares to executive directors and staff. The full details of the scheme are included in the remuneration report.

The CSP awards have been recognised as equity-settled share-based payments as a separate category within equity. The fair value of the conditional share plan charge has been measured using the Black-Scholes formula. The following assumptions were incorporated in the valuation:

Assumptions Tranche 1 Tranche 2 Tranche 3 Tranche 4 Tranche 5

Closing number of unvested instruments 471 285 741 405 769 248 843 582 701 735 Grant date 29 October 2014 15 July 2015 29 February 2016 20 February 2017 21 February 2018 Vesting date 31 May 2019 31 May 2020 31 May 2021 31 May 2022 31 May 2023 Issue price (30 day VWAP) R10.65 R11.92 R12.38 R15.97 R20.35 Forfeiture rate 0.0% 2.5% 5.0% 5.0% 5.0% Dividend yield 8.2% 8.2% 8.0% 7.5% 7.0% Performance condition factor 155.0% 162.0% 125.1% 125.2% 90.0%

Expected volatility has been based on an evaluation of the historical volatility of the company’s share price since listing. The expected forfeiture rate has been based on historical experience and general employee behaviour. On an annual basis, assumptions are adjusted with the availability of objective evidence. Where these result in changes in the non-market conditions of the scheme, the cummulative impact is charged to profit and loss in the year the adjustment is made.

After 3 years from grant date the participant may elect to defer the vesting of the applicable tranche of shares by a further 24 months. This election will result in the award being increased on a 3-for-1 basis (i.e. by 33.3%). The only further vesting condition will be for the participant to remain in the company’s employment for these 24 months. Should the employee leave within the 24 month period, the shares vest immediately, however, the employee forfeits the matching shares. Equites Property Fund Limited Integrated Report 2018 93

COMPANY GROUP

28 February 28 February 28 February 28 February 2017 2018 2018 2017 R’000 R’000 R’000 R’000

1 366 7 881 Opening balance 7 881 1 366 6 515 6 514 Expense recognised in profit or loss 6 514 6 515 Historical overview — (3 113) Shares issued during current year* (3 113) — 7 881 11 282 Closing balance 11 282 7 881

* These issued shares are subject to a 2 year restriction as detailed above. Refer to remuneration report in the Integrated Report for further detail

13.2 Acquisition of land During the current financial year, land was acquired from the Lord Trust, for a purchase consideration which was settled partly

in cash and partly in a fixed value of the company’s shares to be Our business issued at a future date. The fair value of the land was determined based on open market value at the date of the transaction.

Vesting will occur on the earlier of 1 August 2020 or the commencemnt date of a lease between the company and a third party lessee.

14. Deferred tax asset — — Opening balance — — — — Capital allowances 32 066 — — — Tax losses 2 343 — Governance — — Foreign exchange movement (1 770) — — — 32 639 —

Deferred tax asset has been recognised to the extent that there are future taxable profits against which it can be offset.

15. Trade and other payables

Accounting Policy

Trade and other payables Trade and other payables are classified as financial liabilities. These are initially measured at fair value and are Annual financial statements subsequently measured at amortised cost using the effective interest method. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after year end.

5 960 2 400 Tenant deposits 13 885 13 084 46 434 25 413 Trade payables and accruals 62 574 61 224 3 140 1 714 Rent received in advance 29 368 18 968 729 729 Deferred purchase consideration 729 1 262

— — Dividend withholdings tax 446 — meeting Annual general (68) 5 250 Other payables 7 294 49 56 195 35 506 114 296 94 587

The fair value of trade and other payables approximates the carrying value. Equites Property Fund Limited 94 Integrated Report 2018

Notes (continued)

Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

COMPANY GROUP

28 February 28 February 28 February 28 February 2017 2018 2018 2017 R’000 R’000 R’000 R’000

16. Loan receivable — 149 269 Loan to Ilanga Lakusasa (Pty) Ltd — — — 149 269 — —

The loan is secured, bears interest at the prime rate of 10.25% and the capital is repayable after 10 years

Credit risk During the year, the group disposed of a 50% undividend share in an income producing property to Ilanga Lakusasa (Pty) Ltd. The loan is secured by a bond over this property, in favour of the group.

17. Property, plant and equipment

Accounting Policy Property, plant and equipment are tangible assets held by the group for administrative and operational purposes and are expected to be used during more than one period. All property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated impairment. The historical cost includes all expenditure that is directly attributable to the acquisition of the buildings, machinery, equipment and vehicles and is depreciated on a straight-line basis, from the date it is available for use, at rates appropriate to the various classes of assets involved, taking into account the estimated useful life and residual values of the individual items, as follows: – Computer equipment 3 years – Furniture and fittings 6 years – Motor vehicles 5 years – Buildings 20 years – Land n/a

The group determines the estimated useful lives, residual values and the related depreciation charges at acquisition and these are reviewed at each statement of financial position date. If appropriate, adjustments are made and accounted for prospectively as a change in estimate.

Subsequent expenditure is capitalised to the asset’s carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Group and the cost of the item can be measured reliably. All other costs, including repairs and maintenance, are expensed as incurred.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposal or scrapping of property, plant and equipment, being the difference between the net proceeds on disposal or scrapping and the carrying amount, are recognised in profit or loss. Equites Property Fund Limited Integrated Report 2018 95

Impairment of non-financial assets The carrying amounts of the group’s non-financial assets are reviewed for indicators of impairment at each reporting date. Where such indicators exist, the assets recoverable amount is estimated.

Where the carrying value of an asset exceeds its estimated recoverable amount, the carrying value is impaired and the asset is written down to its recoverable amount. The recoverable amount is calculated as the higher of the asset’s fair value less cost to sell and the value in use. These calculations are prepared based on management’s assumptions and estimates such as forecasted cash flows, management budgets

and financial outlook. For the purpose of impairment testing the assets are allocated to cash-generating units. Cash-generating units are the Historical overview lowest levels for which separately identifiable cash flows can be determined.

The group assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods for an asset has decreased or no longer exists and recognises a reversal of an impairment loss. Impairment losses are only reversed to the extent that they do not increase an asset’s carrying value above the carrying value it would have been if no impairment loss had been recognised.

Impairment losses and reversal are recognised in profit or loss.

GROUP

Buildings Our business under Furniture Computer Motor develop- R’000 and fittings equipment vehicles Buildings ment Land Total

At 29 February 2016 Cost 2 008 183 — — — — 2 191 Accumulated depreciation (342) (63) — — — — (405) Carrying value 1 666 120 — — — — 1 786

For the year ended 28 February 2017 Governance Opening carrying value 1 666 120 — — — — 1 786 Additions 1 317 44 310 — 4 560 6 231 Transfer from investment property — — — — — 1 652 1 652 Depreciation charge for the year (394) (72) (17) — — — (483) Closing carrying value 2 589 92 293 — 4 560 1 652 9 186

At 28 February 2017 Cost 3 325 227 310 — 4 560 1 652 10 074 Accumulated depreciation (736) (135) (17) — — — (888) Carrying value 2 589 92 293 — 4 560 1 652 9 186

For the year ended 28 February 2018 Opening carrying value 2 589 92 293 — 4 560 1 652 9 186

Additions 33 224 — — — — 257 Annual financial statements Disposals — — (232) — — — (232) Transfer to investment property — — — — (640) (101) (741) Transfer from buildings under development to buildings — — — 3 920 (3 920) — — Depreciation charge for the year (554) (131) (61) (195) — — (941) Closing carrying value 2 068 185 — 3 725 — 1 551 7 529

At 28 February 2018 Cost 3 358 451 78 3 920 — 1 551 9 358 Accumulated depreciation (1 290) (266) (78) (195) — — (1 829) meeting Annual general Carrying value 2 068 185 — 3 725 — 1 551 7 529 Equites Property Fund Limited 96 Integrated Report 2018

Notes (continued)

Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

17. Property, plant and equipment (continued)

COMPANY Furniture Computer Motor R’000 and fittings equipment vehicles Total

At 29 February 2016 Cost 2 008 183 — 2 191 Accumulated depreciation (342) (63) — (405) Carrying value 1 666 120 — 1 786

For the year ended 28 February 2017 Opening carrying value 1 666 120 — 1 786 Additions 1 317 44 310 1 671 Depreciation charge for the year (394) (72) (17) (484) Closing carrying value 2 589 92 293 2 974

At 28 February 2017 Cost 3 325 227 310 3 863 Accumulated depreciation (736) (135) (17) (889) Carrying value 2 589 92 293 2 974

For the year ended 28 February 2018 Opening carrying value 2 589 92 293 2 974 Additions 33 224 — 257 Disposals — — (232) (232) Depreciation charge for the year (554) (131) (61) (746) Closing carrying value 2 068 185 — 2 253

At 28 February 2018 Cost 3 358 451 78 3 887 Accumulated depreciation (1 290) (266) (78) (1 634) Carrying value 2 068 185 — 2 253 Equites Property Fund Limited Integrated Report 2018 97

COMPANY GROUP

28 February 28 February 28 February 28 February 2017 2018 2018 2017 R’000 R’000 R’000 R’000

18. Revenue Historical overview Accounting Policy Revenue comprises contractual rental income and tenant recoveries exclusive of VAT. Contractual rental income is recognised on straight-line basis over the term of the lease taking into account fixed escalation clauses. This does not affect distributable earnings. Tenant recoveries are recognised as they are earned in line with the contractual rights in the leases. Lease incentives are recognised, on a straight-line basis, as a reduction of rental income over the lease period. Our business

Equites acts as a principal on its own account when recovering operating costs from tenants.

Rental income received in advance is recognised as a current liability as part of trade and other payables in the statement of financial position.

Revenue for the company also includes dividends

received from subsidiary companies, which is Governance recognised in the period in which they are declared.

Revenue comprises gross contractual rentals as well as contractual recoveries of utility costs, property taxes and operating costs as applicable, adjusted for the accounting straight-lining of lease income. For the company, revenue also includes dividends received from subsidiary companies.

82 409 92 635 Property revenue and tenant recoveries (note 18.1) 540 150 458 821 3 758 (2 230) Straight-lined lease revenue 33 548 44 222 221 529 276 415 Dividends received from subsidiaries — — 307 696 366 820 573 698 503 043 Annual financial statements

18.1 Property revenue and tenant recoveries 69 545 78 259 Property revenue 467 604 392 292 12 864 14 376 Tenant recoveries 72 546 66 529 82 409 92 635 540 150 458 821

22 332 21 546 Recoverable expenses 79 030 69 551 4 508 4 350 Non-recoverable expenses 8 927 7 856 26 842 25 896 87 957 77 408 Annual general meeting Annual general Equites Property Fund Limited 98 Integrated Report 2018

Notes (continued)

Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

COMPANY GROUP

28 February 28 February 28 February 28 February 2017 2018 2018 2017 R’000 R’000 R’000 R’000

19. Other operating income 28 715 83 385 Income from cross currency swaps 83 385 28 715 134 632 106 184 Fair value adjustment on cross currency swaps 106 184 134 632 239 4 Insurance recoveries 441 922 5 164 11 358 Intercompany asset management fee — — 1 347 27 326 Foreign exchange gain — — — — Profit on sale of investment property 2 498 — 122 145 Sundry income 1 167 1 915 — — Sundry income – capital in nature (non-distributable) 14 668 9 258 170 219 228 402 208 343 175 442

20. Expenses by nature

20.1 Composition of property operating and management and administrative expenses 21 350 35 162 Employee benefits (note 20.2) 24 984 15 926 28 253 34 554 Operating expenses (note 20.5) 96 028 89 208 Total property operating and management and 49 603 69 716 administrative expenses 121 012 105 134

20.2 Employee benefits

Accounting Policy

Short-term employee benefits Wages, salaries, paid annual leave and other costs of short-term employee benefits are recognised as employee benefit expense in profit or loss in the period in which the services are rendered.

Short-term bonuses The group recognises an expense in profit or loss and accrues for short-term bonuses in the statement of financial position where such payments can be contractually determined or where past practice has created a constructive obligation.

7 302 13 660 Salaries and wages 13 660 7 302 1 516 1 985 Non-executive directors’ emoluments (note 20.3) 1 985 1 516 11 390 16 083 Executive directors’ emoluments (note 20.4) 16 083 11 390 6 515 6 514 Equity-settled share-based payment expense (note 13.1) 6 514 6 515 (5 373) (3 080) Capitalised to investment property (13 258) (10 797) 21 350 35 162 24 984 15 926 Equites Property Fund Limited Integrated Report 2018 99

20.3 Non-executive directors’ emoluments

The following fees were paid to non-executive directors for their services as directors:

Director (R’000) Fees – 2018 Fees – 2017

Leon Campher 500 404

Nazeem Khan 274 276 Historical overview Ruth Eleanor Benjamin-Swales 238 243 Giancarlo Lanfranchi 235 174 Kevin Dreyer 174 182 André Gouws 159 150 Mustaq Brey 180 87 Gugu Mtetwa 225 — 1 985 1 516

20.4 Executive directors’ emoluments Our business Remuneration paid to executive directors for 2018 comprised:

Other Performance Cumulative Director (R’000) Salary benefits bonus Total IFRS 2 charge

Andrea Taverna-Turisan 3 100 31 3 720 6 851 4 303 Gerhard Riaan Gous 2 300 24 2 300 4 624 3 134 Bram Goossens 2 300 8 2 300 4 608 3 094 7 700 63 8 320 16 083 10 531 Governance Remuneration paid to executive directors for 2017 comprised:

Other Performance Cumulative Director (R’000) Salary benefits bonus Total IFRS 2 charge

Andrea Taverna-Turisan 2 106 27 2 527 4 660 2 507 Gerhard Riaan Gous 1 671 27 1 671 3 369 2 345 Bram Goossens 1 671 19 1 671 3 361 2 345 5 448 73 5 869 11 390 7 197

* The three executive directors listed above are considered to be key management personnel. Annual financial statements Annual general meeting Annual general Equites Property Fund Limited 100 Integrated Report 2018

Notes (continued)

Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

COMPANY GROUP

28 February 28 February 28 February 28 February 2017 2018 2018 2017 R’000 R’000 R’000 R’000

20. Expenses by nature (continued)

20.5 Operating expenses 15 461 15 251 Property taxes and utility expenses 66 007 60 478 7 569 10 645 Property operational costs 21 950 20 201 748 1 154 Utility costs on development sites 2 008 1 818 — (1 154) Capitalised to investment property (2 008) (1 818) 345 426 Auditors remuneration – audit fees 947 153 2 357 2 357 Professional and secretarial 2 449 3 236 1 047 2 022 Rental expense 2 022 2 455 Depreciation of property, plant and equipment 483 746 (non-distributable) 941 483 — 416 Debt raising fees (non-distributable) 1 090 — 243 2 693 Other operating expenses 622 2 202 28 253 34 554 96 028 89 208

21. Finance costs 100 633 69 381 Interest on bank loans 114 651 126 041 1 758 2 600 Finance costs relating to interest rate swaps 6 285 1 758 12 783 11 726 Fair value movement on interest rate swaps 12 455 14 945 13 64 Interest on utility accounts and other 154 13 — (20 137) Borrowing costs capitalised to investment property (64 780) (63 651) 115 187 63 634 68 765 79 106

The weighted average borrowing rate applied during the year was 8.99% and 9.13% for the company and group respectively.

Reconciliation of finance costs expense to finance costs paid 4 401 4 401 Interest accrued opening balance 7 935 7 935 115 187 63 634 Finance costs 68 765 79 106 — 20 137 Borrowing costs capitalised 64 780 63 651 — 9 047 Restructuring of interest rate swaps 9 151 — (12 783) (11 726) Fair value movement on interest rate swaps (12 455) (14 945) (4 401) (5 966) Interest accrued closing balance (10 497) (7 935) 102 404 79 527 Interest paid during the year 127 679 127 812

22. Finance income

Accounting Policy Finance income comprises interest earned on positive bank balances, short-term investments and on overdue accounts. Interest is recognised in profit or loss using the effective interest rate method.

104 26 Interest received from tenants 102 286 — 24 108 Interest received on financial assets at fair value 24 108 — 1 551 243 Interest received on call and current account balances 780 3 006 1 655 24 377 24 990 3 292 Equites Property Fund Limited Integrated Report 2018 101

COMPANY GROUP

28 February 28 February 28 February 28 February 2017 2018 2018 2017 R’000 R’000 R’000 R’000

23. Current and deferred income tax expense Historical overview

Accounting Policy The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the statement of financial position. Deferred income tax is recognised, using the liability method, for calculated income tax losses and temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes. Deferred income tax is not recognised if it arises from the initial recognition of Our business an asset or liability in a transaction other than a business combination that, at the time of the transaction, affects neither accounting nor taxable profit nor loss.

Deferred income tax is determined using tax rates and laws that have been enacted or substantially enacted by the statement of financial position date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised only to the extent Governance that it is probable that future taxable profit will be available against which temporary differences can be utilised.

South Africa tax laws The income tax expense for the period comprises current and deferred income tax and is recognised in profit or loss except to the extent that it relates to items recognised in other comprehensive income or directly in equity, in which case it will also be recognised in other comprehensive income or directly in equity as applicable. The company is a Real Estate Investment Trust (“REIT”) and all subsidiaries in the group are “controlled companies” (as defined in the Income Tax Act). The company

applies judgement in determining what income sources Annual financial statements constitute “rental income” as defined by section 25BB of the Income Tax Act. After deducting “qualifying distributions” from taxable income, no income tax is payable in the current year.

United Kingdom tax laws Income tax expense for the period with Her Majesty’s Revenue and Customs (“HMRC”) office under the non-resident landlord scheme (“NRLS”) is calculated as 20% of taxable income.

Tax expense — — Current tax 96 — meeting Annual general — — Deferred tax (34 409) — — — (34 313) — Equites Property Fund Limited 102 Integrated Report 2018

Notes (continued)

Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

COMPANY GROUP

28 February 28 February 28 February 28 February 2017 2018 2018 2017 R’000 R’000 R’000 R’000

23. Current and deferred income tax expense (continued)

Reconciliation between applicable tax rate and effective tax rate 345 150 571 640 Profit before tax 856 800 806 063

96 642 160 059 Income tax at 28% 239 904 225 698 1 044 3 054 Non-deductible expenses 2 703 3 963 (9 697) (59 008) Exempt income (106 270) (133 746) — — Capital allowances (44 893) — — — Assessed losses (3 280) — — — Foreign tax differential 13 802 — (87 989) (104 106) Qualifying REIT distribution (136 279) (95 915) — — Tax expense (34 313) — 0,0% 0,0% Effective tax rate -4,0% 0,0%

24. Notes to the cash flow statement

24.1 Dividend paid 143 222 196 015 Final dividend prior year paid 196 015 143 222 152 872 219 782 Interim dividends declared and paid 219 782 152 872 586 30 220 Antecedent dividends paid 30 220 586 — — Ring-fenced dividend payable to Intaprop Investments (Pty) Ltd 3 424 7 656 — — Amount paid to non-controlling interest 5 050 798 296 680 446 017 454 491 305 134

24.2 Cash paid in respect of investment property acquired 269 875 106 296 Investment Property acquired 1 603 934 1 818 230 — — Minority interest acquired — (73 016) — — Loan acquired — (368 157) Equity-settled share based payment for the acquisition of land — (56 296) (note 13) (56 296) — — — Deposit paid in prior year (29 351) — — — Shares issued in acquisition — (20 463) — — Deferred revenue recognised in property acquisitions (40 791) — 269 875 50 000 1 477 496 1 356 594

25. Capital commitments Authorised and contracted for construction of — 119 623 new industrial property 922 824 303 129 Authorised and contracted for improvements to — — existing property — 20 966 — 648 019 Authorised but not contracted 861 868 95 106 — 767 642 1 784 692 419 201 Equites Property Fund Limited Integrated Report 2018 103

COMPANY GROUP

28 February 28 February 28 February 28 February 2017 2018 2018 2017 R’000 R’000 R’000 R’000

26. Related parties

Related party relationships exist between the company, its Historical overview subsidiaries, directors as well as their close family members, and key management of the company.

Investments in and amounts owing by subsidiaries are detailed in note 9.

Remuneration paid to directors is set out in note 20.

Details of the conditional share plan in which the directors

participate are provided in note 20. Our business

Details of directors’ interest in the ordinary shares of the company are provided in the directors report.

In the ordinary course of business, the company entered into the following other transactions with related parties: 55 840 115 702 Dividend paid to related party shareholders 115 702 55 840 — 149 269 Loan advanced to Ilanga Lakusasa (Pty) Ltd — — Settlement in respect of Mill Street Floor warrantee from Chiluan (Pty) Ltd and Skymax Trust. (Andrea Taverna-Turisan

is a director of Chiluan (Pty) Ltd and Giancarlo Lanfranchi Governance — — is a trustee of Skymax Trust) — 2 018 Fees paid to BTKM (Pty) Ltd (in which Nazeem Khan is a 700 — director) 60 4 587 Annual financial statements Annual general meeting Annual general Equites Property Fund Limited 104 Integrated Report 2018

Notes (continued)

Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

27. Reclassification note During the current year, the group undertook a streamlining exercise on its financial statements. This resulted in a reclassification of amounts shown on the face of the statement of comprehensive income and the statement of cash flows to reflect the items presented in the statement of comprehensive income on a function basis.

The impact on the presentation of the statement of comprehensive income and statement of cash flows is as follows:

COMPANY GROUP Revised Revised 28 February 28 February 28 February 28 February R’000 2017 Difference 2017 2017 Difference 2017

Statement of Comprehensive Income Other operating income 6 872 163 347 170 219 12 095 163 347 175 442 Administrative expenses (22 278) (483) (22 761) (27 243) (483) (27 726) Depreciation (483) 483 — (483) 483 — Fair value adjustments – financial instruments 121 849 (121 849) — 119 687 (119 687) — Finance costs (108 642) (6 545) (115 187) (70 399) (8 707) (79 106) Finance income 36 608 (34 953) 1 655 38 245 (34 953) 3 292 Impact on profit before tax and distributable earnings — —

Statement of cash flows Profit before tax 345 150 — 345 150 806 063 — 806 063 Finance costs 108 642 6 545 115 187 70 399 8 707 79 106 Finance income (36 608) 34 953 (1 655) (38 245) 34 953 (3 292) Fair value adjustments (152 220) (12 783) (165 003) (428 825) (14 945) (443 770) Cash generated from operations 239 120 28 715 267 835 346 892 28 715 375 607 Finance costs paid (108 642) 6 238 (102 404) (134 050) 6 238 (127 812) Finance income received 36 608 (34 953) 1 655 38 245 (34 953) 3 292 Impact on net cash flows from operating activities — —

There has been no impact on either the statement of changes in equity or the statement of financial position at any reporting period.

28. Subsequent events

Sale of property The property “Execujet Wings” which was let to the global international air services provider, Dnata, was presented as “held for sale” at the reporting date. This property was transferred to Dnata (the purchaser) on 15 March 2018. The selling price was reflective of the fair value of the property and the sale of the property is in line with Equites’s strategy to focus on non-specialised logistics properties with strong fundamentals.

Property acquisitions After year-end, the group acquired two properties in SA currently let to Nestlé (South Africa) Proprietary Limited and Pick n Pay Retailers Proprietary Limited for a combined purchase consideration of R648 million subject to Competition Commission approval. The effective date of the acquisition is estimated to be 1 June 2018. The group also concluded a pre-let forward funding agreement for the development of a distribution warehouse in Peterborough, UK with a maximum commitment of £13,089,000 which will be let to Coloplast Limited on a new 10-year fully repairing and insuring lease. Equites Property Fund Limited Integrated Report 2018 105

29. Property analysis

29.1 Property schedule Gross Average Date of lettable rental per Value last external Property name Location Sector area (m2) m2 (rand) (R’000) valuation

Industrial properties – logistics Historical overview DSV Healthcare Meadowview, Gauteng Logistics 39 782 Note 1 986 625 28 February 2018 Kuehne & Nagel Coventry, United Kingdom Logistics 19 881 Note 1 720 334 31 October 2017 Tesco Hinckley, United Kingdom Logistics 27 725 Note 1 619 524 30 May 2016 DSV Stoke-on-Trent, United Kingdom Logistics 19 511 Note 1 375 934 29 June 2017 Amazon Stoke-on-Trent, United Kingdom Logistics 20 410 Note 1 324 722 28 February 2018 Röhlig-Grindrod Meadowview, Gauteng Logistics 28 527 Note 1 317 507 N/A Triton Express Meadowview, Gauteng Logistics 14 159 Note 1 215 000 28 February 2018 TFG Lord’s View Lords View, Gauteng Logistics 21 834 Note 1 208 235 29 February 2016 Medtronic Waterfall, Midrand Logistics 12 640 Note 1 185 160 28 February 2017

Puma Atlantic Hills, Cape Town Logistics 17 598 Note 1 180 000 28 February 2018 Our business Servest Waterfall, Midrand Logistics 6 767 Note 1 168 725 28 February 2017 DSV Vanguard Philippi, Cape Town Logistics 15 798 Note 1 168 012 29 February 2016 Tunney Ridge Germiston, Gauteng Logistics 13 878 Note 1 158 342 31 January 2016 Digistics Waterfall Waterfall, Midrand Logistics 8 120 Note 1 131 992 30 June 2016 Westcon Waterfall, Midrand Logistics 8 087 Note 1 130 782 28 February 2017 Tekstiel Road Parow, Cape Town Logistics 10 156 Note 1 121 813 29 February 2016 Digistics Bellville Bellville, Cape Town Logistics 9 698 Note 1 114 945 29 February 2016 Cummins# Waterfall, Midrand Logistics 10 504 Note 1 111 581 28 February 2017 Simba Parow, Cape Town Logistics 10 308 Note 1 110 932 29 February 2016 Premier Foods Meadowview, Gauteng Logistics 8 283 Note 1 95 500 28 February 2018 Drager Waterfall, Midrand Logistics 5 090 Note 1 88 958 28 February 2017 Governance Tower Road (ex Kuehne & Nagel) Airport Industria, Cape Town Logistics 9 098 Note 1 83 488 29 February 2016 160 Gunners Circle Epping, Cape Town Logistics 8 177 Note 1 79 656 29 February 2016 Assegaai Road Parow, Cape Town Logistics 7 470 Note 1 76 386 29 February 2016 Stryker Waterfall, Midrand Logistics 3 220 Note 1 70 401 28 February 2017 Hilti Waterfall, Midrand Logistics 3 948 Note 1 69 637 28 February 2017 Averda Saxdown, Cape Town Logistics 4 066 Note 1 68 500 28 February 2018 Geberit Meadowview, Gauteng Logistics 6 250 Note 1 62 500 28 February 2018 Esco Meadowview, Gauteng Logistics 5 000 Note 1 60 800 28 February 2018 Crossroads Milnerton, Cape Town Logistics 2 888 Note 1 56 668 29 February 2016 Aviation 57 Airport Industria, Cape Town Logistics 4 855 Note 1 55 918 29 February 2016 Caudwell Marine Airport Industria, Cape Town Logistics 7 470 Note 1 50 987 29 February 2016

Angelshack Waterfall, Midrand Logistics 4 666 Note 1 46 249 28 February 2017 Annual financial statements Montreal 18-22 Airport Industria, Cape Town Logistics 3 800 Note 1 45 090 29 February 2016 Paarl Media Milnerton, Cape Town Logistics 5 100 Note 1 45 000 28 February 2018 JF Hillebrand Atlantic Hills, Cape Town Logistics 3 200 Note 1 40 000 28 February 2018 Africa Floor Care Milnerton, Cape Town Logistics 4 900 Note 1 33 500 28 February 2018 Formscaff Saxdown, Cape Town Logistics 1 828 Note 1 33 000 28 February 2018 Imperial Logistics Meadowview, Gauteng Logistics 3 280 Note 1 30 996 N/A Triton Fleet Meadowview, Gauteng Logistics 1 117 Note 1 30 500 28 February 2018 Manhattan 67A Airport Industria, Cape Town Logistics 2 800 Note 1 28 144 29 February 2016 Madrid 12 Airport Industria, Cape Town Logistics 3 000 Note 1 27 399 29 February 2016 Annual general meeting Annual general Total industrial properties – logistics 424 889 81.4 6 629 442 Equites Property Fund Limited 106 Integrated Report 2018

Notes (continued)

Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

29. Property analysis (continued)

29.1 Property schedule (continued)

Gross Average Date of lettable rental per Value last external Property name Location Sector area (m2) m2 (rand) (R’000) valuation

Industrial properties – not logistics East Balt Bellville, Cape Town Industrial 5 239 Note 1 159 420 29 February 2016 Execujet Hanger Airport Industria, Cape Town Industrial 5 347 Note 1 81 049 29 February 2016 Auto Atlantic Milnerton, Cape Town Industrial 3 300 Note 1 24 725 29 February 2016 ATC Tower Meadowview, Gauteng Industrial 70 Note 1 1 063 30 June 2015 MTN Tower Meadowview, Gauteng Industrial 70 Note 1 914 30 June 2015 Blue Sky Towers Airport Industria, Cape Town Industrial 80 Note 1 768 N/A

Total industrial properties – not logistics 14 106 132.3 267 939

Total industrial properties 438 995 83.7 6 897 381

Commercial properties 8 Melville Rd# Illovo, Gauteng Commercial 1 980 238.9 70 000 28 February 2018 Equity Park Brooklyn, Pretoria Commercial 3 200 197.5 51 000 28 February 2018

Total commercial properties 5 180 290.4 121 000

Total income earning properties 444 175 7 018 381

Properties under development DHL Reading Reading, United Kingdom Logistics 9 325 220 169 Premier Lords View Lords View, Gauteng Logistics 15 216 84 926 DSV Peterborough Peterborough, United Kingdom Logistics 27 871 80 369 Atlantic Hills site B Atlantic Hills, Cape Town Logistics 9 276 40 478 Federal Mogul Meadowview Linbro Park, Gauteng Logistics 9 313 39 670 Atlantic Hills site D Atlantic Hills, Cape Town Logistics 5 839 35 320 Lords View spec build Lords View, Gauteng Logistics 11 275 33 105 Other developments 76

Total properties under development 88 115 534 113

Vacant land industrial land Land Gauteng Linbro Park, Lords View, Waterfall Vacant land 416 956* 434 553 Land Cape Town Saxdown, Philippi, Bellville Vacant land 77 758* 83 044

Total vacant industrial 494 714 517 597

* Gross extent of land # 50% ownership Note 1: The rental per m² for single-tenanted buildings has not been disclosed. Equites Property Fund Limited Integrated Report 2018 107

29.2 Tenant profile Revenue Revenue Number of Number of (R’000) (%) tenants tenants %

A – Large nationals, large listeds and government 420 175 89.9% 45 70.3% B – Smaller international and national tenants 12 243 2.6% 8 12.4% C – Other local tenants and sole proprietors 35 186 7.5% 11 17.3%

467 604 100.0% 64 100.0% Historical overview

Gross lettable Gross lettable Number of Number of area (m2) area % tenants tenants %

A – Large nationals, large listeds and government 393 708 88.8% 45 70.3% B – Smaller international and national tenants 11 061 2.4% 8 12.4% C – Other local tenants and sole proprietors 30 308 6.8% 11 17.3% Vacant 9 098 2.0% — 0.0% 444 175 100.0% 64 100.0% Our business 29.3 Sectoral profile (including vacancy profile) Revenue Gross lettable Vacant area Vacancy (R’000) area (m2) (m2) %

Industrial 449 556 438 995 9 098 2.0% Commercial 18 048 5 180 — 0.0% 467 604 444 175 9 098 2.0%

29.4 Geographical profile

Revenue Revenue Gross lettable Gross lettable Governance (R’000) (%) area (m2) area %

Gauteng 248 539 53.2% 210 472 47.4% Cape Town 146 157 31.3% 87 527 19.8% United Kingdom 72 908 15.5% 146 176 32.9% 467 604 100.0% 444 175 100.0% Annual financial statements Annual general meeting Annual general Equites Property Fund Limited 108 Integrated Report 2018

Notes (continued)

Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

29. Property analysis (continued)

29.5 Lease expiry profile

Lease expiry profile based on gross lettable area Industrial Commercial Total

Vacant 2.0% 0.0% 2.0% Expiry in the year to 28 February 2019 4.3% 3.1% 4.3% Expiry in the year to 29 February 2020 3.0% 38.2% 3.4% Expiry in the year to 28 February 2021 3.8% 20.1% 3.9% Expiry in the year to 28 February 2022 14.6% 0.0% 14.4% Expiry in the year to 28 February 2023 16.1% 0.0% 15.9% Thereafter 56.2% 38.6% 56.1% 100.0% 100.0% 100.0%

Lease expiry profile based on revenue Industrial Commercial Total

Monthly 0.0% 0.0% 0.0% Expiry in the year to 28 February 2019 4.3% 2.0% 4.3% Expiry in the year to 29 February 2020 2.9% 42.7% 4.1% Expiry in the year to 28 February 2021 3.3% 31.0% 4.1% Expiry in the year to 28 February 2022 11.7% 0.0% 11.4% Expiry in the year to 28 February 2023 24.4% 0.0% 23.6% Thereafter 53.4% 24.3% 52.5% 100.0% 100.0% 100.0%

29.6 Weighted average escalations, lease expiry and yield

Escalation by gross Yield Lease Expiry lettable area Sector (%) (years) (%)

South Africa – Industrial 8.3% 6.6 7.9% South Africa – Commercial 9.9% 4.1 8.1% 8.3% 6.6 7.9%

United Kingdom – Industrial* 5.0% 10.9 n/a

Average annualised portfolio 7.4% 7.9

* The leases for properties in the UK are structured with five year annual rent reviews and not fixed annual escalations Equites Property Fund Limited Integrated Report 2018 109

Appendix A

Equites Property Fund Limited and its subsidiaries at 28 February 2018

Shareholder analysis

Number of % of total Shareholder spread Shareholdings shareholdings Shares held % Held

1 – 1 000 Shares 1 131 35.3% 421 329 0.1% 1 001 – 10 000 Shares 1 323 41.3% 4 782 456 1.2%

10 001 – 100 000 Shares 419 13.1% 15 135 561 3.7% Historical overview 100 001 – 1 000 000 Shares 240 7.5% 77 083 739 18.8% 1 000 001 Shares and over 89 2.8% 312 550 246 76.2% 3 202 100.0% 409 973 331 100.0%

Number of % of total Distribution of shareholders shareholdings shareholdings Shares held % Held

Assurance Companies 45 1.4% 9 117 970 2.2% Close Corporations 34 1.1% 265 204 0.1% Collective Investment Schemes 225 7.0% 132 698 325 32.4% Our business Custodians 7 0.2% 3 769 821 0.9% Foundations & Charitable Funds 41 1.3% 1 876 139 0.5% Hedge Funds 11 0.3% 4 752 907 1.2% Insurance Companies 9 0.3% 295 220 0.1% Investment Partnerships 10 0.3% 146 512 0.0% Managed Funds 16 0.5% 2 147 794 0.5% Medical Aid Funds 9 0.3% 1 056 496 0.3% Organs of State 6 0.2% 42 271 729 10.3% Private Companies 154 4.8% 105 654 790 25.8% Public Companies 3 0.1% 2 163 504 0.5% Governance Public Entities 3 0.1% 99 343 0.0% Retail Shareholders 2 055 64.2% 15 299 376 3.7% Retirement Benefit Funds 169 5.3% 54 710 093 13.3% Scrip Lending 6 0.2% 2 282 438 0.6% Stockbrokers & Nominees 13 0.4% 3 745 208 0.9% Trusts 386 12.0% 27 620 462 6.7% Total 3 202 100.0% 409 973 331 100.0%

Number of % of total Shareholder type shareholdings shareholdings Shares held % Held

Non-public shareholders 34 1.0% 52 422 606 12.8% Directors and associates of the company (indirect holdings) 27 0.8% 51 296 947 12.5% Directors and associates of the company (direct holdings) 7 0.2% 1 125 659 0.3% Annual financial statements

Public shareholders 3 168 99.0% 357 550 725 87.2%

3 202 100.0% 409 973 331 100.0% Annual general meeting Annual general Equites Property Fund Limited 110 Integrated Report 2018

Appendix A (continued)

Equites Property Fund Limited and its subsidiaries at 28 February 2018

Total Investment manager shareholdings (>5%) shareholding % Held

Public Investment Corporation 37 698 893 9.2% Absa Asset Management 27 918 700 6.8% Foord Asset Management 25 871 406 6.3% 91 488 999 22.3%

Total Beneficial shareholdings (>5%) shareholding % Held

Government Employees Pension Fund 36 685 255 8.9% Newshelf 1331 (Pty) Ltd 34 896 552 8.5% Absa Group 21 438 762 5.2% 93 020 569 22.6%

Total Beneficial holding by region shareholding % Held

South Africa 391 284 193 95.4% Mauritius 9 334 000 2.3% United Kingdom 3 805 989 0.9% Italy 2 633 627 0.6% Namibia 1 021 218 0.3% Swaziland 884 306 0.2% Balance (other countries not listed above) 1 009 998 0.3% 409 973 331 100.0%

Total number of shareholders 3 202 Total number of shares in issue 409 973 331

Share price performance

Opening Price 01 March 2016 R11.90 Closing Price 28 February 2017 R16.10 Closing High for peroid R16.10 Closing low for period R12.20

Opening Price 01 March 2017 R16.20 Closing Price 28 February 2018 R19.99 Closing High for period R22.05 Closing low for period R16.05

Number of shares in issue 409 973 331 Volume traded during period 187 741 710 Ratio of volume traded to shares issued (%) 45.8% Market capitalisation at 28 February 2018 R8 195 366 887 Equites Property Fund Limited Integrated Report 2018 111

Equites Property Fund Limited (Incorporated in the Republic of South Africa) Notice of annual general meeting (Registration number 2013/080877/06) JSE share code: EQU ISIN: ZAE000188843 (Approved as a REIT by the JSE) (“Equites” or “the company” or “the group”) Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

1. Notice of Meeting your CSDP or broker, as the case b. Section 63 (1) of the Companies Notice is hereby given that the fourth may be, and furnish it with your Act: Identification of Meeting Annual General Meeting (“AGM”) of voting instructions in respect of the Participants Equites will be held at the offices of AGM and/or request it to appoint a Kindly note that meeting participants Cliffe Dekker Hofmeyr Inc., 5th Floor, 11 proxy. You must not complete the (including proxies) are required to Buitengracht Street, Cape Town at 10:00 enclosed form of proxy. The provide reasonably satisfactory identifi­ on Friday, 27 July 2018 for the purposes instruction must be provided in cation before being entitled to attend or of conducting the following business: accordance with the mandate participate in the meeting. In this regard, Historical overview – considering and adopting the between yourself and your CSDP all Equites shareholders recorded in the annual financial statements of the or broker, as the case may be, registers of the company on the voting company for the year ended 28 within the time period required by record date for participating in and February 2018, together with the your CSDP or broker, as the case voting at the AGM will be required to Director’s Report, Audit and Risk may be. CSDPs, brokers or their provide identification satisfactory to the Committee Report and Social and nominees, as the case may be, chairman of the AGM. Forms of identi­ Ethics Committee Report; recorded in the company’s sub- fication include valid identity documents, – transacting any other business as register as holders of driving licences and passports. may be transacted at an AGM of dematerialised shares held on Our business shareholders of the company; and behalf of an investor/beneficial c. Section 62 (3)(e) of the – considering and, if deemed fit, owner should, when authorised in Companies Act adopting with or without terms of their mandate or In terms of section 62 (3)(e) of the modification, the shareholder instructed to do so by the person Companies Act a shareholder who is special and ordinary resolutions set on behalf of whom they hold entitled to attend and vote at the AGM out below, in the manner required dematerialised shares, vote by is entitled to appoint a proxy or two or by the Companies Act, 71 of 2008, either appointing a duly authorised more proxies to attend, participate in as amended (“the Companies Act”), representative to attend and vote at and vote at the meeting in the place of and the JSE Limited (“JSE”) Listings the AGM or by completing the the shareholder. A proxy need not be a Requirements (“JSE Listings attached form of proxy in shareholder of the company.

Requirements”), which AGM is to accordance with the instruction Governance be participated in and voted at by thereon and returning it to the A quorum for the purposes of considering shareholders registered in the transfer secretaries, Terbium the resolutions to be proposed at the company’s securities register as Financial Services Proprietary AGM shall consist of 3 shareholders of shareholders as at the record date Limited or to the company, as set the company, personally present or of Friday, 20 July 2018. out below. represented by proxy, and entitled to vote at the meeting. In addition, the quorum Please note that if you are the owner of a. Record Dates shall comprise 25% of all voting rights dematerialised shares held through a Please note the following important entitled to be exercised by shareholders. Central Securities Depository Participant dates with regards to the AGM: (“CSDP”) or broker (or their nominee) – Record date to receive this notice d. Annual Financial Statements, and are not registered as an “own name” of AGM: Friday, 25 May 2018 Audit and Risk Committee dematerialised shareholder, then you – Distribution of the Integrated Report, Social and Ethics Report are not a registered shareholder of the Report and notice of AGM: and Directors Report Annual financial statements company. Accordingly, in these Thursday, 31 May 2018 A copy of the consolidated annual circumstances, subject to the mandate – Last day to trade in order to be financial statements of the company between yourself and your CSDP or eligible to participate in and vote at and its subsidiaries for the year ended broker, as the case may be: the AGM: Tuesday, 17 July 2018 28 February 2018 (as approved by the – if you wish to attend the AGM, you – Record date to participate in and board of directors of the company), must contact your CSDP or broker, vote at the AGM (“voting record incorporating the reports of the external as the case may be, and obtain the date”): Friday, 20 July 2018 auditors, the Directors’ Report, the Audit relevant letter of representation – Recommended last day to lodge and Risk Committee, the Social and from it; alternatively proxy forms for the AGM: Ethics Committee, the Remuneration

– if you are unable to attend the Wednesday, 25 July 2018 Committee and the board of directors meeting Annual general AGM, but wish to be represented – AGM to be held at: 10h00 on are delivered herewith. at the meeting, you must contact Friday, 27 July 2018 – Results of the AGM published on SENS: Friday, 27 July 2018 Equites Property Fund Limited 112 Integrated Report 2018

Notice of annual general meeting (continued)

Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

The following proposed resolutions for executive directors of the board be and Committee chair: R26 500 per meeting adoption will be considered by are fixed as follows: attended shareholders at the AGM, and if Retainer: R84 800 per annum Committee member: R15 900 per deemed fit, passed with or without Attendance fees at board meetings: meeting attended” modification. R21 200 per meeting attended” 2.5 Special resolution number 5 2. Special resolutions 2.3 Special resolution number 3 In order for the special resolutions to be Remuneration Committee adopted, the support of at least 75% of Audit and Risk Committee ­remuneration the total number of votes, which the ­remuneration “Resolved that, in addition to the shareholders present or represented by “Resolved that, in addition to the remuneration proposed in terms of proxy at the AGM are entitled to cast, is remuneration proposed in terms of special resolution number 2, the required. special resolution number 2, the company be and is authorised, in terms company be and is authorised, in terms of section 66(8) of the Companies Act, 2.1 Special resolution number 1 of section 66(8) of the Companies Act, to pay remuneration to its to pay remuneration to its Audit and Remuneration Committee members for Non- executive directors Risk committee members for their their services on the Remuneration remuneration – Chairman of the services on the Audit and Risk Committee for a period of up to 24 board remuneration Committee for a period of up to 24 months after the adoption of this “Resolved that the company be and is months after the adoption of this special resolution number 5 or until its authorised, in terms of section 66 (8) of special resolution number 3 or until its renewal, whichever is earliest and with the Companies Act, to pay renewal, whichever is earliest and with effect from 1 August 2018 that the remuneration to its chairman of the effect from 1 August 2018 that the meeting fees payable to each of the board for his service as chairman for a meeting fees payable to each of the members of the Remuneration period of up to 24 months after the members of the Audit and Risk Committee be and are fixed as follows: adoption of this special resolution Committee be and are fixed as follows: Committee chair: R26 500 per meeting number 1 or until its renewal, whichever Committee chair: R42 400 per meeting attended is earliest and with effect from 1 August attended Committee member: R15 900 per 2018 that the annual retainers and Committee member: R26 500 per meeting attended” meeting fees payable to the chairman of meeting attended” the board be and are fixed as follows: 2.6 Special resolution number 6 Retainer: R530 000 per annum 2.4 Special resolution number 4 Attendance fees at board and Nomination Committee committee meetings: Rnil per meeting Social and Ethics Committee ­remuneration attended” ­remuneration “Resolved that, in addition to the “Resolved that, in addition to the remuneration proposed in terms of 2.2 Special resolution number 2 remuneration proposed in terms of special resolution number 2, the special resolution number 2, the company be and is authorised, in terms Non-executive director company be and is authorised, in terms of section 66(8) of the Companies Act, ­remuneration (excluding the of section 66(8) of the Companies Act, to pay remuneration to its Nomination ­chairman of the board) to pay remuneration to its Social and Committee members for their services “Resolved that the company be and is Ethics Committee members for their on the Nomination Committee for a authorised, in terms of section 66(8) of services on the Social and Ethics period of up to 24 months after the the Companies Act, to pay Committee for a period of up to 24 adoption of this special resolution remuneration to its non-executive months after the adoption of this number 6 or until its renewal, whichever directors for their services as directors special resolution number 4 or until its is earliest and with effect from 1 August for a period of up to 24 months after renewal, whichever is earliest and with 2018 that the meeting fees payable to the adoption of this special resolution effect from 1 August 2018 that the each of the members of the number 2 or until its renewal, whichever meeting fees payable to each of the Nomination Committee be and are is earliest and with effect from 1 August members of the Social and Ethics fixed as follows: 2018 that the annual retainers and Committee be and are fixed as follows: Committee chair: R26 500 per meeting meeting fees payable to the non- attended Committee member: R15 900 per meeting attended” Equites Property Fund Limited Integrated Report 2018 113

2.8.1 sections 4, 46 and 48 of the Companies 2.8.2.7 the passing of a resolution by the board 2.7 Special resolution number 7 Act; and of directors authorising the repurchase, 2.8.2 the JSE Listings Requirements, being, as that the company passed the solvency Investment Committee remuneration at the date of this resolution, that: and liquidity test and that since the test “Resolved that, in addition to the 2.8.2.1 any acquisition of ordinary shares shall was done there have been no material remuneration proposed in terms of be purchased through the order book changes to the financial position of the special resolution number 2, the of the trading system of the JSE, and group; company be and is authorised, in terms done without any prior understanding 2.8.2.8 subject to the exceptions contained in Historical overview of section 66(8) of the Companies Act, or arrangement between the company the JSE Listings Requirements, the to pay remuneration to its Investment and/or the relevant subsidiary and the company and its subsidiaries will not Committee members for their services counterparty, provided that if the repurchase ordinary shares during a on the Investment Committee for a company purchases its own ordinary prohibited period (as defined in the JSE period of up to 24 months after the shares from any wholly owned Listings Requirements) unless they have adoption of this special resolution subsidiary of the company for the in place a repurchase programme where number 7 or until its renewal, whichever purposes of cancelling such treasury the dates and quantities of ordinary is earliest and with effect from 1 August shares pursuant to this general authority, shares to be traded during the relevant 2018 that the meeting fees payable to the above provisions will not be period are fixed (not subject to any Our business each of the members of the Investment applicable to such purchase transaction; variation) and has been submitted to Committee be and are fixed as follows: 2.8.2.2 the general repurchase by the company, the JSE in writing prior to the Committee chair: R26 500 per meeting and by its subsidiaries, of the company’s commencement of the prohibited attended ordinary shares is authorised by its period; Committee member: R15 900 per Memorandum of Incorporation (“MOI”); 2.8.2.9an announcement complying with meeting attended” 2.8.2.3 this general authority shall be valid until paragraph 11.27 of the JSE Listings the company’s next annual general Requirements will be published by the The above fees exclude VAT which will meeting provided that it shall not company (i) when the company and/or be added by each of the directors in extend beyond 15 (fifteen) months from its subsidiaries have cumulatively terms of current VAT registration, if the date of passing of this special repurchased 3% of the ordinary shares

applicable. resolution; in issue as at the date of the listing of Governance 2.8.2.4 repurchases must not be made at a the ordinary shares in the company on Reason for and effect of special price greater than 10% above the the JSE (“the initial number”) and (ii) for ­resolutions numbered 1- 7 weighted average of the market value of each 3% in the aggregate of the initial The reason for special resolutions the ordinary shares for the 5 (five) number of the ordinary shares acquired numbered 1 to 7 is to authorise the business days immediately preceding thereafter by the company and/or its payment of remuneration to the non- the date on which the transaction is subsidiaries. executive directors for their services in effected and the JSE should be accordance with the Companies Act. consulted for a ruling if the applicants Reason for and the effect of special securities have not traded in such 5 resolution number 8 2.8 Special resolution number 8 (five) business day period; The company’s MOI contains a 2.8.2.5 repurchases of shares in aggregate may provision allowing the company or any General approval to repurchase not exceed 20% (or 10% where the subsidiary of the company to

shares repurchase is effected by a subsidiary) repurchase securities issued by the Annual financial statements “Resolved that the company and/or any of the company’s issued ordinary share company subject to the approval of the subsidiary of the company be and is capital as at the date of passing this members in terms of the MOI, the hereby authorised, by way of a general special resolution; requirements of the Companies Act and authority, to acquire ordinary shares in 2.8.2.6 at any point in time the company may the JSE Listings Requirements. This the capital of the company upon such only appoint one agent to effect any special resolution will authorise the terms and conditions and in such repurchase on the company’s behalf or company and/or its subsidiaries by way amounts as the directors may from time on behalf of any subsidiary of the of a general authority from shareholders to time determine in terms of and company; to repurchase ordinary shares issued by subject to: the company. Annual general meeting Annual general Equites Property Fund Limited 114 Integrated Report 2018

Notice of annual general meeting (continued)

Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

The directors of the company have no Reasons for and effect of special Directors’ responsibility statement specific intention to give effect to the ­resolution number 9: The directors, whose names appear on resolution, but will continually review The company would like the ability to pages 34 to 35 of this Integrated Report, the company’s position, having regard provide financial assistance, in collectively and individually accept full to prevailing circumstances and market appropriate circumstances and if the responsibility for the accuracy of the conditions, in considering whether to need arises, in accordance with section information pertaining to this special repurchase its own shares. 45 of the Companies Act. In the resolution and certify that, to the best of circumstances and in order to, inter alia, their knowledge and belief, there are no Once adopted, this special resolution ensure that the company’s subsidiaries facts that have been omitted which will permit the company or any of its and other related and inter-related would make any statement false or subsidiaries, to repurchase such companies and corporations have misleading, and that all reasonable ordinary shares in terms of the access to financing and/or financial enquiries to ascertain such facts have Companies Act, its MOI and the JSE backing from the company (as opposed been made and that the special Listings Requirements. to banks), it is necessary to obtain the resolution contains all information approval of shareholders, as set out in required by the Companies Act and the Disclosures in terms of paragraph 11.26 special resolution number 9. In terms of JSE Listings Requirements. of the JSE Listings Requirements the Companies Act, the company will, The JSE Listings Requirements require however, only be able to exercise the Material changes the following disclosures in respect of authority granted by the special Other than the facts and developments Special Resolution Number 8, some of resolution provided that the board of reported on in this Integrated Report, which are disclosed in this Integrated directors of the company are satisfied there have been no material changes in Report of which this notice forms part: that the terms under which the financial the affairs or financial position of the – major shareholders of the assistance is proposed to be given are company and its subsidiaries since the company – pages 109 to 110 fair and reasonable to the company date of signature of the audit report and – share capital of the company – and, immediately after providing the up to the date of this notice. page 91 financial assistance, the company would satisfy the solvency and liquidity test 3 Ordinary resolutions 2.9 Special resolution number 9 contemplated in the Companies Act. In order for the ordinary resolutions to be adopted, the support of more than Financial assistance to related and Therefore, the reason for, and effect of, 50% of the total number of votes, which inter-related parties special resolution number 9 is to permit the shareholders present or represented “Resolved that to the extent required by the company to provide direct or by proxy at the AGM are entitled to the Companies Act, the board of indirect financial assistance (within the cast, is required. directors of the company may, subject meaning attributed to that term in to compliance with the requirements of section 45 of the Companies Act) to the 3.1 Ordinary resolutions number 1 the company’s MOI, the Companies Act entities referred to in special resolution and the JSE Listings Requirements, number 9 above. Adoption of annual financial authorise the company to provide direct ­statements or indirect financial assistance, as Litigation statement “Resolved that the annual financial contemplated in section 45 of the In terms of paragraph 11.26 of the JSE statements of the company and the Companies Act by way of loans, Listings Requirements, the directors, group for the year ended 28 February guarantees, the provision of security or whose names appear on pages 34 to 35 2018, including the reports of the otherwise, to any of its present or future of this Integrated Report, are not aware directors, the report of the external subsidiaries and/or any other company of any legal or arbitration proceedings auditor and the audit and risk or corporation that is or becomes that are pending or threatened, that committee be and are hereby received related or inter-related (as defined in the may have or have had in the recent and adopted.” Companies Act) to the company for any past, being at least the previous 12 purpose or in connection with any (twelve) months, a material effect on the Reason for and the effect of ordinary matter, with such authority to endure company’s or group’s financial position. resolution number 1 for a period of not more than 2 years.” The reason for and effect of ordinary resolution number 1 is to adopt the annual financial statements of the company and its group for the year Equites Property Fund Limited Integrated Report 2018 115

ended 28 February 2018 in accordance Reason for and the effect of ordinary A brief CV of Ms Benjamin-Swales with section 30(3) of the Companies resolution number 3 appears on page 34 of this Integrated Act. The reason for and effect of this Report ordinary resolution number 3 is to 3.2 Ordinary resolution number 2 re-elect Mr Gouws as a director of the Reason for and the effect of ordinary company, his retirement being in resolution number 5 Re-appointment of auditors accordance with the requirements of The reason for and effect of ordinary “Resolved to re-appoint the company’s MOI. resolution number 5 is to re-elect Ms Historical overview Pricewaterhouse­Coopers Inc. (with the Benjamin-Swales as chair and member designated registered auditor being 3.4 Ordinary resolution number 4 of the Audit and Risk Committee of the Anton Wentzel) as auditors of the company. company and its subsidiaries from the Re-election of Mr G Lanfranchi conclusion of this AGM.” “Resolved that Mr Lanfranchi, a non- 3.6 Ordinary resolution number 6 executive director, who is required to Re-election of Mr PL Campher to the Reason for and the effect of ordinary retire by rotation as a director of the Audit and Risk Committee resolution number 2 company at this AGM and who is “Resolved that Mr Campher, being an The reason for and effect of ordinary eligible and available for election, is independent director of the company Our business resolution number 2 is to re-appoint hereby re-appointed with immediate and who meets the requirements of PricewaterhouseCoopers Inc. as the effect.” section 94 (4) of the Companies Act, be independent registered auditors of the and are hereby re-elected as a member company and its subsidiaries. The audit A brief curriculum vitae of of the Audit and Risk Committee in and risk committee have evaluated the Mr Lanfranchi is set out on page 35 of terms of section 94 (2) of the suitability, performance and this Integrated Report. Companies Act”. independence of PricewaterhouseCoopers Inc. and Anton The Nomination Committee has A brief CV of Mr Campher appears on Wentzel, as designated auditor, and considered Mr Lanfranchi’s past page 34 of this Integrated Report. recommend their re-appointment as performance and contribution to the

auditors of the company and its company and recommends that Mr Reason for and the effect of ordinary Governance subsidiaries under section 90 of the Lanfranchi is re-elected as a director of resolution number 6 Companies Act and in accordance with the company. The reason for and effect of ordinary paragraph 3.86 of the JSE Listings resolution number 6 is to re-elect Mr Requirements. Reason for and the effect of ordinary Campher as a member of the Audit and resolution number 4 Risk Committee of the company. 3.3 Ordinary resolution number 3 The reason for and effect of this ordinary resolution number 4 is to 3.7 Ordinary resolution number 7 Re-election of Mr AJ Gouws re-elect Mr Lanfranchi as a director of “Resolved that Mr Gouws, a non- the company, his retirement being in Re-election of Mr N Khan to the executive director, who is required to accordance with the requirements of Audit and Risk Committee retire by rotation as a director of the the company’s MOI. “Resolved that Mr Khan, being an company at this AGM and who is eligible independent director of the company and available for election, is hereby 3.5 Ordinary resolution number 5 and who meets the requirements of Annual financial statements re-appointed with immediate effect.” section 94 (4) of the Companies Act, be Re-election of Ms R Benjamin-Swales and are hereby re-elected as a member A brief curriculum vitae of Mr AJ Gouws to the Audit and Risk Committee of the Audit and Risk Committee in is set out on page 35 of this Integrated “Resolved that Ms Benjamin-Swales, terms of section 94 (2) of the Report. being an independent director of the Companies Act”. company and who meets the The Nomination Committee has requirements of section 94 (4) of the A brief CV of Mr Khan appears on page considered Mr Gouws’s past Companies Act, be and are hereby 34 of this integrated annual report. performance and contribution to the re-elected as the chair and member of

company and recommends that Mr the Audit and Risk Committee in terms meeting Annual general Gouws is re-elected as a director of the of section 94 (2) of the Companies Act”. company. Equites Property Fund Limited 116 Integrated Report 2018

Notice of annual general meeting (continued)

Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

Reason for and the effect of ordinary 3.10 Ordinary resolution number 10 – any shares issued under this resolution number 7 authority prior to this authority The reason for and effect of ordinary The report of the Social and Ethics lapsing shall be deducted from the resolution number 7 is to re-elect Mr Committee number of shares that the Khan as a member of the Audit and Risk “Resolved that the report of the Social company is authorised to issue in Committee of the company. and Ethics Committee, as set out on terms of this authority, being pages 24 to 27 of this Integrated Report 40 997 333 shares, for the purpose 3.8 Ordinary resolution number 8 of the company of which this notice of determining the remaining forms part, in accordance with the number of shares that may be Re-election of Mr M Brey to the Companies Regulations, 2011 is hereby issued in terms of this authority; Audit and Risk Committee published in terms of the Companies Act.” – in the event of a sub-division or “Resolved that Mr Brey, being an consolidation of shares prior to this independent director of the company Reason for and the effect of ordinary authority lapsing, the existing and who meets the requirements of resolution number 10 authority shall be adjusted section 94 (4) of the Companies Act, be The reason for and effect of ordinary accordingly to represent the same and are hereby re-elected as a member resolution number 10 is to approve the allocation ratio; of the Audit and Risk Committee in publication of the report of the Social – the maximum discount at which terms of section 94 (2) of the and Ethics Committee. the shares may be issued is 5% (five Companies Act”. percent) of the weighted average 3.11 Ordinary resolution number 11 traded price of those shares over A brief CV of Mr Brey appears on page the 30 (thirty) business days prior 34 of this integrated annual report. General authority to issue shares to the date that the price of the for cash issue is determined or agreed by Reason for and the effect of ordinary “Resolved that the directors of the the company and the party/ies resolution number 8 company be and are hereby authorised, subscribing for the shares. The JSE The reason for and effect of ordinary by way of a general authority, to allot should be consulted for a ruling if resolution number 8 is to re-elect Mr and issue shares in the capital of the the company’s securities have not Brey as a member of the Audit and Risk company for cash subject to the traded in such 30 (thirty) business Committee of the company. limitations as set out in the company’s day period; MOI, the Companies Act and the JSE – this authority shall not endure 3.9 Ordinary resolution number 9 Listings Requirements, from time to time beyond the earlier of the next on the following basis: annual general meeting of the Re-election of Ms N Mtetwa to the – the shares which are the subject of company or beyond 15 (fifteen) Audit and Risk Committee the issue for cash must be of a months from the date of the date “Resolved that Ms Mtetwa, being an class already in issue, or where this of this resolution, whichever is independent director of the company is not the case, must be limited to shorter; and and who meets the requirements of such shares or rights that are – upon any issue of ordinary shares section 94 (4) of the Companies Act, be convertible into a class of shares which, together with prior issues of and are hereby re-elected as a member already in issue; ordinary shares within the period of the Audit and Risk Committee in – there will be no restrictions in that this authority is valid, terms of section 94 (2) of the regard to the persons to whom the constitute 5% (five percent) or Companies Act”. shares may be issued, provided more of the total number of that such shares are to be issued to ordinary shares in issue prior to A brief CV of Ms Mtetwa appears on public shareholders and not to that issue, the company shall page 34 of this integrated annual report. related parties (as defined by the publish an announcement in terms JSE Listings Requirements); of paragraph 11.22 of the JSE Reason for and the effect of ordinary – the total aggregate number of Listings Requirements, giving full resolution number 9 shares which may be issued for details of the issue, including (i) the The reason for and effect of ordinary cash in terms of this authority may number of ordinary shares issued, resolution number 9 is to re-elect Ms not exceed 40 997 333 shares, (ii) the average discount to the Mtetwa as a member of the Audit and being 10% of the company’s issued weighted average traded price of Risk Committee of the company. share capital as at the date of this the ordinary shares over the 30 notice of annual general meeting. Equites Property Fund Limited Integrated Report 2018 117

business days prior to the date that directors to issue shares for cash 3.14 Ordinary resolution number 14 the issue is agreed in writing under ordinary resolution number between the company and the 11; and Implementation of resolutions party/ies subscribing for the shares; – the maximum discount at which “Resolved that any directors or secretary and (iii) a written explanation, the shares may be issued in terms of the company or any other person to including supporting of this authority is 5% of the whom a director has delegated his/her documentation (if any) of the weighted average traded price of authority to do so, be and is hereby intended use of the funds. such shares measured over the 30 authorised to sign all documents and Historical overview business days prior to the date that any amendments thereto, take all such Reason for and the effect of ordinary the price is agreed between the steps and do all such other things as resolution number 11 company and the party subscribing may be necessary in order to give effect The reason for and effect of ordinary for the shares, adjusted for a to and/or implement the resolutions resolution number 11 is to provide a dividend where the ex-date in contained herein.” general authority to the company to respect of the dividend occurs issue shares for cash. during the 30 day period in Reason for and the effect of ordinary question. resolution number 14 In terms of the JSE Listings The reason for and effect of ordinary Our business Requirements, at least 75% of the votes Reason for and the effect of Ordinary resolution number 14 is to authorise held by shareholders present or Resolution Number 12 any director or secretary of the represented by proxy at the meeting The reason to and effect of Ordinary company to implement and give effect need to be cast in favour of this Resolution number 12 is to place the to all resolutions contained in this resolution in order to give effect thereto authorised but unissued shares of the notice. company under the control of the 3.12 Ordinary resolution number 12 directors of the company, provided that 4.1 Non-binding resolution 1 the number of shares that may be Unissued shares under control of issued in any one financial year will not Endorsement of Remuneration Policy directors exceed 40 997 333, less any shares “Resolved that, in accordance with the

“Resolved that, subject to the provisions issued under the general authority to JSE Listings Requirements and the King Governance of the Companies Act and the JSE issue shares for cash in terms of the IV Report on Corporate Governance Listings Requirements, all of the ordinary resolution number 11. (“King IV”), and through a non-binding authorised but unissued shares of the advisory vote, the Remuneration Policy company be and are hereby placed 3.13 Ordinary resolution number 13 be and is hereby approved.” under the control of the directors of the company, which directors are Specific authority to issue shares The Remuneration Policy is disclosed in authorised to allot and issue any such pursuant to a reinvestment option detail in the remuneration report on shares at such time or times, to such “Resolved that, subject to the provisions pages 40 to 44 of this Integrated Report. person or persons, company or of the Companies Act, the company’s companies and upon such terms and MOI and the JSE Listings Requirements, 4.2 Non-binding resolution 2 conditions as they may determine, such the directors be and hereby are authority to remain in force until authorised, by way of a specific standing Endorsement of Remuneration

amended or revoked by the company’s authority, to issue shares, as and when Implementation Report Annual financial statements shareholders in an annual general they deem appropriate, for the exclusive “Resolved that, in accordance with the meeting, provided that: purposes of affording shareholders JSE Listings Requirements and the King – the number of shares issued opportunities from time to time to IV, and through a non-binding advisory hereunder in aggregate in any one reinvest their dividends in new shares of vote, the Remuneration Implementation financial year will not exceed the company pursuant to a Report be and is hereby approved. 40 997 333 shares, which reinvestment option”. represents 10% of the issued share The Remuneration Implementation capital as at the date of this notice Reason for and the effect of ordinary Report is disclosed in detail in the of annual general meeting, less any resolution number 13 remuneration report on pages 40 to 44

shares issued under the general The reason for and effect of ordinary of this Integrated Report.” meeting Annual general authority granted to the board of resolution number 13 is to allow the company to offer shareholders the opportunity to reinvest their dividends. Equites Property Fund Limited 118 Integrated Report 2018

Notice of annual general meeting (continued)

Equites Property Fund Limited and its subsidiaries for the year ended 28 February 2018

Reason for and the effect of non- the Equites shareholder’s title to the Terbium Financial Services Proprietary binding resolutions numbered 1-2 dematerialised Equites shares. Upon Limited at Beacon House, 31 Beacon In terms of King IV, an advisory vote receipt of the required information, the Road, Florida-North, 1790 (PO Box should be obtained from shareholders Equites shareholder concerned will be 61272, Marshalltown, 2107) or emailed on the company’s Remuneration Policy provided with a secure code and to [email protected], by 10:00 on and Remuneration Implementation instructions to access the electronic Wednesday, 25 July 2018. Alternatively, Report, contained in this Integrated communication during the AGM. the form of proxy may be handed to Report for the year ended 28 February Equites shareholders must note that the transfer secretaries or to the 2018. The vote allows shareholders to access to the electronic communication chairman of the board at the annual express their view on the Remuneration will be at the expense of the Equites general meeting prior to the Policy and Remuneration shareholders who wish to utilise the commencement of voting at the AGM. Implementation Report. facility. Equites shareholders and their Any shareholder who completes and appointed proxies attending by lodges a form of proxy will nevertheless In the event of 25% or more of conference call will not be able to cast be entitled to attend and vote in person shareholders voting against non-binding their votes at the AGM through this at the AGM should the member resolutions number 1 and/or 2, the medium. Such shareholders should they subsequently decide to do so. board of directors is committed to wish to have their vote counted at the engaging actively with dissenting AGM, must to the extent applicable, (i) A company that is a shareholder, shareholders in this regard, in order to complete the form of proxy; or (ii) wishing to attend and participate at the ascertain the reasons therefor and to contact their CSDP or broker. AGM should ensure that a resolution address all legitimate and reasonable authorising a representative to so attend objections and concerns. Proxies and authority for and participate at the AGM on its behalf ­representatives to act is passed by its directors. Resolutions General instructions for shareholders A form of proxy is attached for the authorising representatives in terms of Shareholders are encouraged to attend, convenience of any Equites shareholder section 57 (5) of the Companies Act speak and vote at the AGM. holding certificated shares, who cannot must be lodged with the company’s attend the AGM but wishes to be transfer secretaries prior to the AGM. Electronic participation represented thereat. The company has made provision for By order of the board Equites shareholders or their proxies to The attached form of proxy is only to be Equites Property Fund Limited participate electronically in the AGM by completed by those shareholders who way of telephone conferencing. Should are: you wish to participate in the AGM by – holding shares in certificated form; telephone conference call as aforesaid, or you, or your proxy, will be required to – recorded on the company’s sub- advise the company thereof by no later register in dematerialised electronic Riaan Gous than 10:00 on Wednesday, 25 July 2018 form with ‘own name’ registration. Company secretary by submitting by email to the company secretary at [email protected], or by All other beneficial owners who have fax to +27(0) 21 418 1754 for the dematerialised their shares through a Registered office attention of Riaan Gous, relevant CSDP or broker and wish to attend the 14th Floor contact details, including an email AGM, must instruct their CSDP or Portside Tower address, cellular number and landline as broker to provide them with the 4 Bree Street well as full details of the Equites necessary letter of representation, or Cape Town shareholder’s title to securities issued by they must provide the CSDP or broker the company and proof of identity, in with their voting instructions in terms of Transfer secretaries the form of copies of identity the relevant custody agreement entered Terbium Financial Services Proprietary Limited documents and share certificates (in the into between them and the CSDP or Beacon House case of certificated Equites shares) and broker. These shareholders must not use 31 Beacon Road (in the case of dematerialised Equites a form of proxy. For administrative Florida-North, 1709 shares) written confirmation from the purposes, forms of proxy should be 0860 222 213 Equites shareholder’s CSDP confirming deposited at the Transfer Secretaries, [email protected] Equites Property Fund Limited Integrated Report 2018 119

Equites Property Fund Limited Form of proxy (Incorporated in the Republic of South Africa) (Registration number 2013/080877/06) Annual general meeting of ­Equites shareholders JSE share code: EQU ISIN: ZAE000188843 (Approved as a REIT by the JSE) (“Equites” or “the company” or “the group”)

For use by shareholders, who were registered as shareholders on Friday, 20 July 2018, holding certificated Equites shares, dematerialised shareholders who have elected “own-name” registration, nominee companies of CSDP’s and brokers nominee companies (“shareholders”), at the annual general meeting of shareholders to be held at 10:00 on Friday, 27 July 2018 at the offices of Cliffe Dekker Hofmeyr Inc., 5th Floor, 11 Buitengracht Street, Cape Town, 8000.

I/We (FULL NAMES IN BLOCK LETTERS PLEASE)...... of (Address)...... Historical overview Telephone number: ( )...... Cellphone number: ( )......

Email address:......

Being the holder(s) of...... shares in Equites, hereby appoint

1...... or failing him/her

2...... of failing him/her

3. the chairperson of the AGM of Equites shareholders ...... Our business as my/our proxy to attend and speak and to vote for me/us on my/our behalf at the AGM and at any adjournment thereof in the following manner

Not for use by dematerialised shareholders who have not elected “own-name” registration. Such shareholders must contact their CSDP or broker timeously if they wish to attend and vote at the AGM and request that they be issued with the necessary letter of representation to do so, or provide the CSDP or broker timeously with their voting instruction should they not wish to attend the AGM in order for the CSDP or broker to vote in accordance with their instructions at the AGM. Number of votes For* Against* Abstain*

Special resolution number 1 – Chairman of the board remuneration Governance Special resolution number 2 – Non-executive director remuneration (excluding the chairman of the board) Special resolution number 3 – Audit and Risk Committee remuneration Special resolution number 4 – Social and Ethics Committee remuneration Special resolution number 5 – Remuneration Committee remuneration Special resolution number 6 – Nomination Committee remuneration Special resolution number 7 – Investment Committee remuneration Special resolution number 8 – General approval to repurchase shares Special resolution number 9 – Financial assistance to relates and inter-related parties Ordinary resolution number 1 – Adoption of annual financial statements Ordinary resolution number 2 – Re-appointment of auditors Ordinary resolution number 3 – Re-election of Mr AJ Gouws Ordinary resolution number 4 – Re-election of Mr G Lanfranchi Ordinary resolution number 5 – Re-election of Ms R Benjamin-Swales to the Audit and Risk Committee Ordinary resolution number 6 – Re-election of Mr PL Campher to the Audit and Risk Committee Annual financial statements Ordinary resolution number 7 – Re-election of Mr N Khan to the Audit and Risk Committee Ordinary resolution number 8 – Re-election of Mr M Brey to the Audit and Risk Committee Ordinary resolution number 9 – Re-election of Ms N Mtetwa to the Audit and Risk Committee Ordinary resolution number 10 – The report of the Social and Ethics Committee Ordinary resolution number 11 – General authority to issue shares for cash Ordinary resolution number 12 – Unissued shares under control of directors Ordinary resolution number 13 – Specific authority to issue shares pursuant to a reinvestment option Ordinary resolution number 14 – Implementation of resolutions Non-binding resolution number 1 – Endorsement of Remuneration Policy

Non-binding resolution number 2 – Endorsement of Remuneration Implementation Report meeting Annual general

*Mark “For”, “Against” or “Abstain” as required. If no options are marked the proxy will be entitled to vote as he/she thinks fit. Equites Property Fund Limited 120 Integrated Report 2018

Form of proxy (continued)

Unless otherwise instructed my proxy may vote or abstain from voting as he/she thinks fit.

Signed this...... day of...... 2018

......

Signature

Assisted by me (where applicable)......

(State capacity and full name)......

An Equites shareholder is entitled to attend and vote at the abovementioned AGM or to appoint a proxy to attend, vote and speak in his/her stead. A proxy need not be a shareholder of Equites.

For administrative purposes, forms of proxy should be deposited at Terbium Financial Services Proprietary Limited at Beacon House, 31 Beacon Road, Florida-North, 1709 (PO Box 61272, Marshalltown, 2107) or emailed to [email protected], so as to arrive by 10:00 on Wednesday, 25 July 2018. Alternatively, the form of proxy may be handed to the transfer secretaries or to the chairman of the board at the AGM prior to the commencement of voting at the AGM.

Notes:

1. Any alteration or correction made to this form of 4. A shareholder or his/her proxy is not obliged to use 8. The completion and lodging of this form of proxy proxy must be initialled by the signatory(ies). all the votes exercisable by the shareholder, but the will not preclude the relevant shareholder from 2. Shareholders that are certificated or own-name total of the votes cast or abstained may not exceed attending the annual general meeting and speaking dematerialised shareholders, entitled to attend and the total of the votes exercisable in respect of the and voting in person thereat to the exclusion of any vote at the annual general meeting may insert the shares held by the shareholder. proxy appointed in terms hereof, should such name of a proxy or the names of two alternative 5. A shareholder may revoke the proxy appointment shareholder wish to do so. proxies of the shareholder’s choice in the space/s by: (i) cancelling it in writing, or making a later 9. Documentary evidence establishing the authority of provided, with or without deleting “the chairman of inconsistent appointment of a proxy and (ii) a person signing this form of proxy in a the annual general meeting”, but any such deletion delivering a copy of the revocation instrument to the representative capacity must be attached to this form must be initialled by the shareholder(s). Such proxy/ proxy, and to Equites. The revocation of a proxy of proxy, unless previously recorded by Equites or ies may participate in, speak and vote at the annual appointment constitutes a complete and final the transfer secretaries or waived by the chairman of general meeting in the place of that shareholder at cancellation of the proxy’s authority to act on behalf the annual general meeting. the annual general meeting. The person whose name of the shareholder as at the later of the date stated in 10. A minor or any other person under legal incapacity stands first on this form of proxy and who is present the revocation instrument, if any; or the date on must be assisted by his/her parent or guardian, as at the annual general meeting will be entitled to act which the revocation instrument was delivered in the applicable, unless the relevant documents as proxy to the exclusion of those whose names required manner. establishing his/her capacity are produced or have follow. If no proxy is named on a lodged form of 6. A vote given in terms of an instrument of proxy shall been registered by Equites or the transfer secretaries. proxy the chairperson shall be deemed to be be valid in relation to the annual general meeting, 11. Where there are joint holders of shares, the vote of appointed as the proxy. notwithstanding the death of the person granting it the first joint holder who tenders a vote, as 3. A shareholder’s instructions to the proxy must be or the transfer of the shares in respect of which the determined by the order in which the names stand indicated by the insertion of the relevant number of vote is given, unless an intimation in writing of such in the register of shareholders, will be accepted and votes exercisable by the shareholder in the death or transfer is received by the transfer only that holder whose name appears first in the appropriate box provided. Failure to comply with the secretaries not less than 48 hours before the register in respect of such shares need to sign this above will be deemed to authorise the proxy, in the commencement of the annual general meeting. form of proxy. case of any proxy other than the chairman, to vote 7. The chairman of the annual general meeting may or abstain from voting as deemed fit and in the case reject or accept any form of proxy which is of the chairman to vote in favour of the resolution. completed and/or received, otherwise than in compliance with these notes, provided that, in respect of acceptances, the chairman is satisfied as to the manner in which the shareholder concerned wishes to vote. Glossary

A&R Audit and Risk committee ABSA ABSA Bank Limited AFS Annual Financial Statements AGM Annual General Meeting ASISA Association for Savings and Investment South Africa Attacq Attacq Limited B-BBEE Act Broad-Based Black Economic Empowerment Act No. 53 of 2003 BBOS Broad-Based Ownership Participation Scheme board Equites Property Fund Limited’s board of directors bps Basis points Brimstone Brimstone Investment Corporation Limited CA(SA) Chartered Accountant South Africa CEO Chief executive officer CFO Chief financial officer Chair Chaiman Chairman Chairman of the Equites Property Fund Limited’s board of directors CODM Chief operating decision maker company Equites Property Fund Limited Companies Act Companies Act of South Africa, 2008 COO Chief operating officer CPI Consumer Price Index CSP Conditional Share Plan DAS Damon At Sons Construction Proprietary Limited DMTN Domestic medium term note programme DPS Distribution per share DRIP Dividend reinvestment plan / programme EPS Earnings per share Equites Equites Property Fund Limited Foundation The Michel Lanfranchi Foundation NPC GBP Great British Pound GLA Gross lettable area group Equites Property Fund Limited and its subsidiaries HEPS Headline earnings per share HMRC Her Majesty’s Revenue and Customs IFRS International Financial Reporting Standards Ilanga Ilanga Lakusasa Proprietary Limited IRBA Independent Regulatory Board of Auditors JSE Johannesburg Stock Exchange King III King III Report on Corporate Governance for South Africa King IV King IV Report on Corporate Governance for South Africa KZN Kwa-Zulu Natal LTI Long-term incentives LTV Loan-to-value MLF The Michel Lanfranchi Foundation NPC MOI Memorandum of Incorporation NAV Net asset value Nedbank Nedbank Limited NPC Non-profit company OECD Organisation for Economic Co-operation and Development Pound Great British Pound QS Quantity surveyor Rand South African Rand RBS Royal Bank of Scotland Real Estate Investment Trust (as defined in the Income Tax Act and JSE Listings REIT requirements) SA South Africa SAICA South African Institute of Chartered Accountants Equites Property Fund SAPI South Africa Listed Property Index 14th Floor SOE State-Owned Enterprises Portside Building STI Short-term incentives 4 Bree Street TGP Total guaranteed pay Cape Town UK United Kingdom Tel: 021 460 0404 VWAP Volume weighted average price Fax: 021 418 1754 WALE Weighted average lease expiry Email: [email protected] ZAR South African Rand

www.freshidentity.co.za Equites Property Fund 14th Floor Portside Building 4 Bree Street Cape Town Tel: 021 460 0404 Fax: 021 418 1754 Email: [email protected]

EquitesPropertyFundLimited EquitesPropFund equites-property-fund-limited equitespropertyfundlimited