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Indluplace Properties Limited 2015 Corporate Governance ANNUAL & Responsible Investment Report REPORT DWELLING ON RESIDENTIAL South Africa has a housing shortage of over two million units. Increasingly, the provision of rental housing is seen as a major contributor to overcoming this shortage. 2 TABLE OF CONTENTS 4 At a glance 6 Introducing Indluplace 8 Who does what? 20 Chairman’s statement 24 Executive directors’ report 46 Prospects for the year ending 30 September 2016 48 Corporate governance 58 Risk, sustainability and social investment 62 Report of the audit and risk committee 63 Report of the social and ethics committee 64 Audited financial statements 104 Administration 106 Shareholders’ diary 108 Notice of annual general meeting 116 Form of proxy 120 Definitions 3 AT A GLANCE 2015 2014 Distribution per share (cents) 28,99 - Closing share price on JSE on 30 September (R) 11,00 - High for the period (R) 11,90 - Low for the period (R) 10,00 - Volume traded during the period 4 656 187 - Market capitalisation (R) 2 127 103 033 - Property portfolio (R) 1 711 457 360 519 949 295 Number of buildings 95 30 Residential units (number) 3 690 1 205 Residential occupancy (%) 97,0 98,3 Commercial property portfolio (m²) 9 469 1 529 Commercial property portfolio let (%) 96,5 80,2 4 R1,7bn Property portfolio 3 690 Residential units 9 469m2 Retail 5 INTRODUCING INDLUPLACE 6 Indluplace, which was listed on the JSE on 19 June 2015 and is the only residential focused REIT on the JSE, owns a substantial residential property portfolio (including limited ground floor retail exposure attached to certain apartment blocks) from which it will pay growing distributions to its shareholders. It is Indluplace’s intention to grow its portfolio aggressively by acquiring yield enhancing properties and portfolios that provide income from the day of acquisition. The South African listed residential market is under represented relative to developed markets, and Indluplace believes there is significant opportunity for growth as increasing numbers of South Africans enter the affordable letting market. Indluplace will position itself as an exit for developers or owners of residential stock or portfolios, and will utilise specialist outsourced property managers for the appropriate portfolios. 7 WHO DOES WHAT? 8 9 Indluplace waslistedontheJSE19June2015andisonlyfocusedresidentialREITthe JSE. ANALYSIS SHAREHOLDER 10 Volume Relative price base 100 1 000 1 200000 1 400000 200 000 400 000 600 000 800 000 100 105 110 115 120 90 95 0 19-Jun-15 19-Jun-15 23-Jun-15 25-Jun-15 26-Jun-15 29-Jun-15 01-Jul-15 03-Jul-15 03-Jul-15 07-Jul-15 09-Jul-15 10-Jul-15 Total volume:4 656 187 13-Jul-15 ILU +8,91% 15-Jul-15 17-Jul-15 17-Jul-15 vs ALSISAPIALBI Indluplace 21-Jul-15 Total volume traded vsvalue volume Total 23-Jul-15 27-Jul-15 24-Jul-15 ALSI -3,32% 29-Jul-15 Volume 31-Jul-15 31-Jul-15 04-Aug-15 06-Aug-15 Total value:R50 446 210 SA PropertyIndex+6,09% 11-Aug-15 07-Aug-15 13-Aug-15 17-Aug-15 Value 19-Aug-15 17-Aug-15 21-Aug-15 25-Aug-15 27-Aug-15 24-Aug-15 31-Aug-15 ALBI .00% 02-Sep-15 31-Aug-15 04-Sep-15 08-Sep-15 10-Sep-15 07-Sept-15 14-Sep-15 16-Sep-15 18-Sep-15 14-Sept-15 22-Sep-15 25-Sep-15 29-Sep-15 21-Sept-15 0 2 000 4 000 6 000 8 000 10 000 12 000 14 000 29-Sept-15 Value R Analysis of shareholders as at 30 September 2015 Size of holdings - shares Number of % of total Number of % shares in shareholders holdings shares issue 1 - 1 000 221 32,64 117 929 0,06 1 001 - 10 000 304 44,90 1 118 833 0,58 10 001 - 100 000 99 14,62 3 258 395 1,69 100 001 - 1 000 000 39 5,76 14 095 947 7,29 1 000 001 and over 14 2,08 174 781 899 90,38 Total 677 100,00 193 373 003 100,00 Distribution of shareholders Number of % of total Number of % shares in shareholders holdings shares issue Stockbrokers & nominees 3 0,44 135 879 085 70,27 Collective investment schemes 23 3,40 11 375 024 5,88 Retail shareholders 483 71,34 9 187 814 4,75 Private companies 29 4,28 8 542 304 4,42 Trusts 67 9,90 6 826 935 3,53 Custodians 3 0,44 6 791 438 3,51 Hedge funds 9 1,33 6 533 955 3,38 Retirement benefit funds 35 5,17 5 388 444 2,79 Managed funds 6 0,89 1 171 940 0,61 Assurance companies 2 0,30 1 073 268 0,56 Investment partnerships 6 0,89 345 127 0,18 Foundations & charitable funds 4 0,59 133 233 0,07 Close corporations 6 0,89 97 779 0,04 Public companies 1 0,14 26 657 0,01 Total 677 100,00 193 373 003 100,00 11 Shareholder type Number of % of total Number of % shares in shareholders holdings shares issue Non-public shareholders 7 1,03 153 415 003 79,34 Directors and associates (direct holdings) - - - - Directors and associates (indirect holdings) 7 1,03 153 415 003 79,34 Public shareholders 670 98,97 39 958 000 20,66 Total 677 100,00 193 373 003 100,00 Beneficial shareholders with a holding greater than Number of % shares in 3% of the shares in issue shares issue Arrowhead Nominees (Proprietary) Limited 135 793 640 70,22 Stanlib 7 001 029 3,62 Total 142 794 669 73,84 Fund managers with a holding greater than Number of % shares in 3% of the shares in issue shares issue Stanlib Asset Management 12 191 468 6,30 Visio Capital Management 6 684 000 3,46 Total 18 875 468 9,76 NON-PUBLIC BREAKDOWN Non-public shareholders Number of % shares shareholding Directors and associates (indirect holdings) 153 415 003 79,34 Directors and associates (direct holdings) - - Total 153 415 003 79,34 Directors and associates Number of Number of shareholders shares S. Noik 2 42 000 C. de Wit 1 1 757 936 M. Kaplan 1 5 273 809 G. Leissner 1 5 273 809 I. Suleman 1 5 273 809 Arrowhead Nominees (Proprietary) Limited 1 135 793 640 Total 7 153 415 003 Share price performance R Opening price: 19 June 2015 10,00 Closing price: 30 September 2015 11,00 High for the period 11,90 Low for the period 10,00 Number of shares in issue 193 373 003 Volume traded during the period 4 656 187 Ratio of volume traded to shares in issue (%) 2,41 12 13 THE BOARD TAFFY ADLER Non-executive chairman BA, BPhil in African Studies, MSc in Building Science Taffy (65) is the Director of the Property Revitalisation Programme at the University of the Witwatersrand. He was previously CEO of the Housing Development Agency and the Johannesburg Housing Company and is currently a non-executive director of Arrowhead. CLIFFORD ABRAMS Independent non-executive director BCom, BAcc, CA(SA), Registered auditor Clifford (46) is a Chartered Accountant and has been in private practice for the past 15 years. He is the proprietor of Clifford Abrams & Associates. He has held various communal positions and is a board member of Bnei Akiva Foundation (Youth Movement). SELWYN NOIK Non-executive director CA(SA) Selwyn (68) is a Chartered Accountant. After qualifying, he spent 11 years in a managerial position with a listed property company Pioneer Holdings & Finance Corporation Limited. He was an executive director of the listed trade finance company Reichmans Limited for 10 years and after its acquisition by Investec, he assumed the role of group secretary of Investec, a position he held for 13 years until his retirement in 2007. Thereafter, he filled a company secretarial and compliance role with Investec Property until the end of 2011. He is a non-executive director of Arrowhead. GREGORY KINROSS Independent non-executive director BCom, BAcc, CA(SA) Since qualifying as a Chartered Accountant, Greg (42) has been in the private equity business. Between 2005 and 2013, he was CEO and President of Tau Capital Corporation, a mining and resources business that managed and raised in excess of $300m for a number of major mining and energy projects. In 2013, Greg formed Innovo Capital (Pty) Ltd which in October 2014, entered into a private equity joint venture with the Genesis Capital Group to form Genesis Innovo Capital (Pty) Ltd. AYESHA REHMAN Independent non-executive director Diploma in Financial Accounting, Certificate in Management, Certificate in Project Management, Certificate in Property Development Ayesha (65) was appointed as senior financial manager of the Johannesburg Housing Company in 1998. In 2009, she was appointed as the CFO of the Johannesburg Housing Company and held this position until she retired in February 2015. She was previously an accountant at the Joint Education Trust. 14 GERALD LEISSNER Executive - CEO CA(SA) Gerald (73) is a Chartered Accountant with 50 years’ experience in the property industry, both in South Africa and abroad. Gerald was CEO of ApexHi from its founding in 2001 until ApexHi was acquired by Redefine in 2009, after which he served as a non-executive director of Redefine until 2011. Gerald has served as non-executive director of the Johannesburg Housing Company and the Housing Development Agency, and helped found the Central Johannesburg Partnership in the 1980s and is currently CEO of Arrowhead.