A N N U A L R E P O R T 2 0 0 8 1 CONTENTS

5 CHAIRMAN’S REPORT 5 Financial 5 Portfolio Status 5 Board Composition and Viewpoint 6 Business Philosophy 7 Outlook and Strategy 7 Environmental and Social Responsibility 8 Conclusion

11 ASSET MANAGER’S REPORT 11 Introduction 12 Activities in the year under review 17 Financial Overview 18 Graphical Portfolio Overview 18 Offshore investments and strategy 20 Post year end transactions 22 Conclusion

2 CONSOLIDATED 25 FINANCIAL STATEMENTS 26 Report of the Independent Auditor 27 Statement of Directors’ Responsibility 29 Directors’ Report 34 Balance Sheets 35 Income Statements 36 Consolidated Statement of Changes in Equity 37 Company Statement of Changes in Equity 38 Cash Flow Statements 41 Accounting Policies 51 Notes to the Financial Statements Theas following be schedule has been prepared as additional information and is unaudited 82 Detailed Income Statements

Country of Incorporation South Africa Nature of Business Property development and investment holding company Directors BF van Niekerk Chairman GJ Oosthuizen Executive Director LLS van der Watt Chief Executive Officer PH Faure Non-Executive Director P Tredoux Non-Executive Director JHP van der Merwe Non-Executive Director Registered Office Mertech Building, Glenfield Office Park, Oberon Street, Faerie Glen, 0043, Pretoria, South Africa Business Address Mertech Building, Glenfield Office Park, Oberon Street, Faerie Glen, 0043, Pretoria, South Africa Postal Address Postnet Suite 205, Private Bag X20009, Garsfontein, 0042, Pretoria, South Africa Bankers Nedbank Limited Investec Bank Limited Standard Bank Limited FirstRand Bank Limited ` Auditors TAG Incorporated Chartered Accountants (S.A.) Registered Auditors Secretary T Smith Company Registration 1997/000543/06

3 Francois - Chairman

It is the Atterbury culture to neveras accept a given. progress

Photographed at Lady Brooks, Pretoria CHAIRMAN’S REPORT

Concurrent with the end of the third fiscal collection and operating cost control. In line Attfund and Sycom in acquiring the Nova year, the Company changed its name from with the Group's growth policy, no dividend Eventis shopping centre in Leipzig, Attacq Property Fund Ltd to Atterbury is declared. Germany. Investment Holdings Ltd (“Atterbury IH”). This to more accurately reflect the evolving All major asset classes of the Fund pro- group structure and simplify corporate gressed. The Attfund investment grew by 3. Board Composition and branding without any direct or indirect con- 19.5%, the average capitalisation rate of Viewpoint sequence to shareholder interest. directly owned buildings strengthened to 8.37% despite a marked decline in cap rates During the fiscal year the Board was The newly named – but otherwise un- of listed property funds and the offshore strengthened by the appointment of Johan changed – Atterbury IH concluded its third investment in the German shopping centre van der Merwe, CEO of Sanlam Investment financial year not only with above average proved profitable assisted by the strong Euro. Managers and Pieter Faure, CEO of the market growth but also a positive consolida- Mertech Group. The Board constitutes a par- tion and enhancement of its asset portfolio 2. Portfolio Status ticularly well qualified team, the six directors and business outlook. The Group's conti- and CFO sharing amongst them five CAs, nued success is indicative of a steadily ad- For the year under review market conditions four M-degrees and an engineer. All six di- vancing corporate ability, the dynamic and called for a judicious approach in making rectors furthermore have extensive and va- complementary integration of all group ac- acquisitions. Transactions concluded were ried experience at CEO level. tivities and of Atterbury's almost unqualified mostly to strengthen our position in selected industry acceptance and business credibi- existing assets. A summary of portfolio To promote representivity and the benefit of lity. movements is given below with specific detail a wider perspective, individual directors in the Asset Manager’s report: were asked their respective views on It is the Atterbury culture to never accept Atterbury IH's present status and three year company progress as a given. But in the cur- ŸWaterkloof Corner convenience centre in outlook: rent slower economic cycle it remains of im- Pretoria was sold to Rapfund, increasing mense value that this contingent market ad- the strategic interest in Rapfund from Executive Directors: versity can be faced with confidence sup- 20% to 25%. ported by inherent company strengths – Louis van der Watt, CEO even to a point where it can well be ex- ŸIn November 2007, Attfund Ltd had a rights issue. To follow our rights and re- “Contrary to the defensive strategy taken on pected that Atterbury IH should emerge by most companies when difficult times pre- from the downcycle in better-than-industry main a 46% shareholder in Attfund, shape. Atterbury IH issued shares to Sanlam to vail, the Atterbury approach is to invest in raise the required R300 million. Sanlam people who would act with a pro-active and This report is therefore presented to share- consequently became a 15% share- innovative disposition to anticipate problems holders and other stakeholders with a sense holder in Atterbury IH. At year end the in- and formulate solutions. of cautioned optimism. vestment in Attfund represented 55% of There are regular examples in the manage- our non-current assets and was valued at ment of our buildings where Asset 1. Financial R2,272 billion. Managers produce creative transactions Ÿ succeeding to not only protect but even in- The Fund's performance is reflected in a Significant refurbishment projects of a year end share price of R6,75 – up 23% from combined R136 million commenced at crease net income streams despite tighter 2007. The share value is supported by the Shell House (renamed Atterbury House) in market conditions.” Cape Town and Brooklyn Square (re- Fund's total asset base of R4,23 billion, a net Gideon Oosthuizen, COO asset value of R2,82 billion and overall gear- named Design Square) in Pretoria. The full ing of a moderate 25.5%. benefit of these upgrades will reflect in the “Our core strategy of owning strong assets balance sheet of June 2009. in the best locations and thus attracting re- Profits attributable to shareholders in- Ÿ liable clients, places Atterbury in a position creased by 7.8% from R481,14 million to The remainder of Hampton Office Park in to remain healthy during cyclical downturns. R518,95 million. Disregarding the fair value Bryanston was acquired from Sanlam Furthermore, we believe the taking of calcu- adjustment of properties and excluding and a further 2,300m² added, increasing lated risks to remain important, even more interest and other income, the net profit from owned GLA from 10,600m² to 18,600m². so during difficult times. When the economic operations increased by more than 100% – ŸTowards our strategy to hold 15% of net cycle reverses – which we believe it will – this mainly due to portfolio expansion and asset value offshore, Atterbury IH in- our perseverance in blue chip projects will the effective management of income vested R55 million to participate with ensure maximum benefit to shareholders.”

5 CHAIRMAN’S REPORT (CONTINUED)

Non-Executive Directors: Four of these shareholder colleagues – Compliance Officer and Human Resour- all with relevant operational involvement ces, Atterbury Property Holdings (Pty) Pierre Tredoux and a combined 57 years experience in Ltd, Pretoria the property industry – were asked their 4.2 Sharing with our business partners “There is little doubt that the current eco- views on Atterbury IH's portfolio: nomic climate, especially the high interest Relationships with existing partners con- rates and decline in consumer spending, “Continued rental growth and strong in- tinued and the Company added two busi- will affect the Fund's growth in the short vestment returns are driven by the port- ness partners of particular significance: term. However, the quality of Atterbury IH's folio's focus on A-grade commercial ŸSanlam assets, its sound fiscal and investment stra- properties having distinct competitive ad- Sanlam becoming a 15% shareholder tegies and the unique relationship with the vantage, locations in powerful business represents a first step in a process of Atterbury Property Development Group nodes, consistent tenancy demand and Sanlam increasing its shareholding places us in a strong position to ensure long intensive net income management. Our through Atterbury IH acquiring se- term growth.” asset management team have confi- lected Sanlam properties for refurbish- dence in the quality of the Fund and in ment and/or redevelopment. Pieter Faure our management policy of cultivating mu- tually beneficial relations with our busi- ŸWaterfall Development Company “Atterbury IH's short term stability and ness partners.” – Heidi Rix, Director: In one of the largest and most signifi- expected long term value growth can be Atterbury Asset Managers (Pty) Ltd, cant South African property transac- attributed to factors such as asset quality, Pretoria tions ever, Atterbury IH acquired com- forward-fixing interest rates and a prudent “Considering the current economic cli- mercial development rights of poten- valuation approach which insulate against mate, Atterbury is well positioned in the tially 1,4 million square meters from the market volatility. Also the policy of long term market place as the majority of residen- Mia family on 1,000ha of prime land capital growth without initial dividend pay- tial projects have reached completion straddling the Buccleuch interchange ments, causes free cash flow to help ride out and transfers effected successfully. We on the N1 between Midrand and the current high interest rate cycle.” are confident that the present strategy of Sandton / Wynberg. The transaction spreading risk by taking on projects in puts Atterbury IH's total black owner- Johan van der Merwe the various development sectors, will ship in excess of 25% with the Com- greatly enhance and contribute to the pany thus advancing toward compli- “I believe the in-depth understanding of the ance with the BBBEE property charter. dynamics of the property market coupled continued success of Atterbury.” – Mark Mouton, Managing Director: Atterbury 4.3 Sharing with investors with the entrepreneurial spirit embraced by Property Cape (Pty) Ltd, Tygerberg Atterbury IH will stand it in good stead At year end Atterbury IH had 267 regis- through any cycle of the property market. “Although liquidity may be somewhat tered shareholders. To further improve The unique culture created within the Com- constrained in the short term, the Fund is communication and benefit from a wider pany provides an environment of responsi- well positioned with diversified, premium point of view, shareholders were asked bility, accountability and mutual trust which I grade products. My view is that our which specific Company aspect they believe is a competitive advantage for the portfolio's predominantly commercial would require more information on. The business.” composition will keep on outperforming following three shareholders reacted other property asset classes over the (the overall 1.2% non-critical response next 3 to 5 years and no material taken as a positive shareholder endorse- 4. Business Philosophy increase in vacancies is expected.” – ment): Coenie Bezuidenhout, Director: Atter- Atterbury's participative business philo- bury Property Development (Pty) Ltd, Rael Abramowitz, Portfolio Manager, sophy is fundamental to the Group's current Johannesburg Parkdev, Cape Town and future success in the four applicable Creating better places to work, shop and “Given the current economic climate, the areas: live. This is what Atterbury does and South African property industry is over- does best. We are not excluded from trading with development in certain retail 4.1 Sharing with our team the current negative economic climate, nodes and non sustainability could well Altogether 42 of the Atterbury Property but we react by just working smarter in result. What is Atterbury IH's strategy in Group’s 53 employees own sharehol- structuring our finance and keeping ex- this regard?” - We agree. Our portfolio is ding worth R244 million at year end. This penditure low – without curtailing the tra- standing firm and amplified focus on the converts to an average value of R5,8 mil- ditionally dynamic nature of Company established strategy of diversification lion per shareholder employee. operations.” – Marsia Kuypers, Statutory and acquiring and retaining only quality

6 assets with a distinct competitive advan- and environmental trends, our viewpoint ting an optimal business environment, let tage is expected to prevail the status is given later in this report. alone the country's best interest. quo. The market will deal with ill-consi- dered developments. Given the above more challenging trading 5. Outlook and Strategy outlook, shareholders would require a view Willie Potgieter, MD, Enhanced The business environment turned less opti- on Atterbury IH's position: Engineering Solutions, Pretoria mistic over the last eight months of the fiscal 5.1 Statistical evidence over the past 70 “What is the impact of the current inter- year. Against the backdrop of global eco- years point to regular downcycles in the est hikes and availability of tenants on nomic turbulence, the South African listed South African property industry and with Atterbury's property development and property index fell by a third from a market a notion for property values to perform asset portfolio?”. capitalization of R110 billion to R73 billion. above market in an upcycle and below - Company policy is to fix some 70% of Although the impact of questionable political market in a downcycle. Atterbury bond interest exposure for varying pe- action on the business cycle has always Group's consistent business policy is riods up to 10 years. Further to the reply been a constant reality, it does appear par- based on longer term growth. The pre- to Rael's question, we also favour na- ticularly detrimental at present. During a sent downcycle was to be expected and tional tenants giving longer term stability. short eight years the current US administra- was planned for in terms of normal busi- But the present tougher trading condi- tion upped their country's deficit from ness practice. Hence the downcycle tions present healthy companies with op- US$4,000 billion to US$10,000 billion or an should not have a longer term detrimen- portunities rather than threats. average debt of R3,7 million per US family – tal effect on the Company – nor should it with none of this ostensibly representing a have on any shareholder given that pro- Bernard van Tonder, Founder Member, positive investment which could be ex- perty investment is assumed to always Val de Vie Winelands Lifestyle Estate, be done with a longer term perspective. Paarl pected to better the lives of US citizens or anybody else on the planet. The contrary ap- 5.2 Atterbury IH is an unlisted fund typically “Is Atterbury IH planning on listing at pears more likely. In context the South less prone to the often volatile nature of some stage?” African deficit on current account is almost the listed sector, as proven by shares - No immediate plans but could well be un- double the US debt expressed as percen- presently trading at 5 – 10% below asset der consideration in the medium term – tage of GDP – this being one of many eco- value compared to JSE funds having even sooner if Bafana does well in the nomic indicators indicative of a more con- fallen by some 33% stricted trading outlook. 2010 World Cup. 5.3The Atterbury IH investment portfolio is 4.4Sharing with the South African commu- The South African economy, furthermore, well diversified, of A-grade quality and nity appears under disproportionate threat from positioned so as to attract a predomi- well debated political action (or inaction). nance of leasing only long term to repu- The Atterbury Group's social and envi- Deserved acknowledgement of outstanding table tenants. ronmental response dates back to its in- Government achievement in some areas is ception and is represented by the 5.4 Atterbury Group is well established and Atterbury Foundation – funded by a per- overshadowed by justified criticism in too many others. South Africans share a experience gained with previous down- centage of development profits – and by cycles supports our expectation to gain the proceeds of a combined 27.9% of mounting impatience with such degenera- tion in Government leadership and perfor- advantage from the currently softer mar- Atterbury IH shareholding held by two in- ket. dependent community beneficial trusts. mance as to clearly frustrate the achieve- The financial interests of Atterbury IH ment of results which, to most non- Despite a trading environment with severe shareholders are therefore not diluted by politicians, appear (a) very achievable and but expected temporary macro constraints, environmental or social allocations. (b) vitally necessary for South Africa to Atterbury IH is advancing its business agen- effectively address national challenges and da with a prudent conviction and resolve The three trusts remain focused on sup- reach even our minimum potential as a that future growth objectives will be realised. porting effective community upliftment or- nation. ganizations and educational programs. Fiscal 2008 saw a 105% increase in allo- Unlike Brazil, India and China with their eco- 6.Environmental and cations to a combined total of R13,7 mil- nomies strongly advanced by pragmatic lion. Detailed information on community leadership, South African politics appear to Social Responsibility projects was given in past annual re- have morphed itself into a distressing quag- The ascending global trend towards height- ports. Given the increased awareness mire of maladroit agendas and toxic fac- ened community and environmental aware- and expected future impact of social tional enmities hardly conducive to promo- ness, together with South Africa's almost

7 CHAIRMAN’S REPORT (CONTINUED)

overwhelming national sociological realities, motive remains central but should be bal- accentuates the need for the business sec- anced by an increased emphasis and posi- 7. Conclusion tor to work with Government in finding ap- tive contribution to the physical environment Atterbury IH concluded a somewhat propriate responses to the current societal and a shift to servant leadership focused not arduous year with very acceptable results – pressures aimed at both ecological preser- only on customers, staff and shareholders especially since published financials do not vation and sustainable economic parity. but on what drives human issues in the reflect substantive progress also with posi- wider market economy and on promoting un- tioning the Company for future growth. This The immense historical contribution of com- questioned ethics and higher values. relates directly to the quality of Atterbury merce to global unity and development has, Group's major off balance sheet asset – its of late, been tainted by a singular pursuit of The future business environment may well human capital. As CEO, Louis van der Watt wealth and power in certain industrial and migrate towards “social capitalism” where crafted a team with a nearly unprecedented commercial areas, this causing potentially le- business success is based less on profit capacity. Their collective insight, focused thal damage to the geographic environment alone but also on safeguarding sustainability work ethic and prodigious powers of as well as to the human fabric of society. through leadership finding innovative inter- reinvention support both present and future Prolonged future stability requires that con- relationships between the corporation, na- ture and human society. forward thrust through a predictable adhe- sideration be given to the eventual cost of rence to the highest standards and acknow- an obsessive intolerance of anything not As vital as collective leadership and govern- ledged ability to consistently uncover adding to the “bottom line”. Also to the con- mental action is in responding to these successive new layers of prospective busi- tinued disregard of how monopolistic and emerging trends, is the creative compliance ness opportunity. exploitive practices, continuously eroding of every individual business organization in communal market economies and skewed addressing its closer physical and human The Board has unqualified appreciation for values will influence the future trading envi- challenges to so help preserve acceptable the almost undeterminable contribution ronment. balance within the wider trading environ- made by Louis as CEO, Gideon as COO ment. and by every colleague on the Atterbury Historical realities do not credibly sup- team. We once again offer our respect port any notion that profit alone will and support. ensure the future. Already global growth has been stinted by a number of spectacular cor- porate failures, pointing to the non-sustainability of self-centered greed as a dominant value system. Francois van Niekerk It is fortunate that the con- Chairman junctural nature of history has now brought forth a consequen- tial trend toward viewing the cor- poration in the context of its sus- tainable environment. The profit

2, rust Alumni 1999eloitte. - 200 Carmen - Atterbury T ger at D tly forensic mana Photographed at Beyers Bytjies currenNursery School (supported by the Atterbury Trust), Danville, Pretoria

8 ’s Director

Louis (CEO)

Francois (chairman)

Gideon (COO)

Johan

Pieter Pierre Gideon - Executive Direc & Louis - CEO tor

The "Waterfall" transaction can possibly be regarded as Atterbury's most significant transaction since its inception in 1994.

Double Trouble!

Photographed at Trevenna Precinct, Pretoria ASSET MANAGER’S REPORT

Introduction market started feeling the effect of rising in- ning was the main contributor to the crisis. terest rates and more stringent credit criteria We however believe that South Africa's What a difference a year makes! In June started taking effect, albeit perhaps on a 6 booming property market was also a signifi- 2007, property experts were robustly buoyant to 9 month lag behind the Reserve Bank's in- cant contributor, and one could debate about growth and performance forecasts of terest rate cycle. Commercial property, it whether we would prefer to have had the the South African property market. The IPD must be said, was influenced to a far lesser boom and now have to face the infrastruc- index for “global all property returns” degree as compared to residential property. ture challenges, rather than having had no reported SA total returns of 27.7% as at The demand for good quality commercial growth and therefore no pressure on our fa- December 2007. This performance in excess property was underpinned by owners and in- cilities. After performing feasibility assess- of 25% for the 3rd year running was notably vestors wishing to grow property funds, and ments with regard to alternative power and higher in comparison to other global markets. the fact that the office market is driven by energy saving solutions on individual pro- the services sector which has traditionally perties within our portfolio, our joint efforts South Africa's property market was thus a been less sensitive to economic slowdowns with our tenants have contained the initial top performer and it was rated as an interna- and rising interest rates. business losses sustained as a result of tional investment destination which conti- load-shedding; however concerns still re- nued to attract strong global investment in- Where property funds have felt the pinch, main as to the future impact of further load- terest on the back of a strengthening eco- however, is in their gearing. Portfolios with shedding or the proposed moratorium on nomy. On home ground, South African insti- lower gearing, lower cost of funding and future developments that may be imposed tutional investors were revisiting property as high percentages of fixed debt have felt on our industry. a preferred investment asset class in their in- much less of the impact. Growth in annual vestment allocation policies, and the indivi- lease escalation percentages has, on the Rising construction costs was another as- dual private investor was seeing more op- other hand, been a positive spin off from ri- pect that had a part to play in our approach. portunity and returns by investing in the sing interest rates. Development costs have risen by in excess South African property market – both listed of 30% over the last 12 months which, when and unlisted. The energy challenge certainly dampened viewed in combination with increased fi- both investors' and developers' robust nancing costs spurred on by sustained in- Then, during the first quarter of 2008, things growth forecasts and sentiments. Some may terest rate increases, indeed posed a chal- started looking less optimistic. The property insist that a lack of proper infrastructure plan- lenge for the property development industry. IPD Figure: Total returns for SA The 35 South African Capital Growth Market 30 Income Return Total Return - All Property Total Returns 25

20

15

10

Total Return % 5

0

-5

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 3-yr 5-yr 13-yr

11 ASSET MANAGER’S REPORT (CONTINUED)

IPD Figure: World returns putting SA returns in context Germany Switzerland Austria All property Italy total returns, Belgium Finland 2006 & 2007 Portugal % per annum Netherlands Japan Korea Sweden US Australia Spain Norway New Zealand Denmark 2007 UK 2006 Canada France South Africa Ireland -10 -5 0 5 10 15 20 25 30 Source: IPD, NCREIF, KTI

However on the back of this challenge, ties have retained their cap rate levels for ŸEffective arrears management : 1.38% existing property assets benefitted from the year ending 30 June 2008. (excluding refurbishment properties); rental growth and tenant demand as a direct result of the high development costs and a The Group's office and regional retail assets ŸIntensive “bottom line” management ap- lack of availability of land with available have continued to outperform market ave- proach. power supply. rages. Convenience / community retail pro- perties have not performed as well; We herewith take pride in outlining our acti- A combination of macro and micro eco- however, we have no doubt that these as- vities for the year, and the financial implica- nomic factors has seen pressure being sets will add value to the fund in the long tions thereof, for the benefit of our share- brought to bear on capitalisation rates (“cap term despite stringent negative short-term holders. rates”). A narrowing of the gap between cap economic conditions. rates and interest rates has been expe- Against this background, Atterbury Asset rienced; however despite a challenging Managers implemented the same core prin- Activities in the year under property market, expectations of continued ciples that have stood us in good stead over review robust rental growths have continued to sup- the first three years of the Fund's existence. port property ratings. One also needs to con- These principles can be summarised as fol- In August 2007, negotiations were success- sider that the unlisted property sector is lows and have ensured continued success: fully concluded for the acquisition of driven mainly by property fundamentals, Building G of the DTI Campus in Sunnyside, which, if sound, will provide a level of pro- ŸSectoral specialisation of internal fund Pretoria. The value of the transaction was tection against weakening cap rates. Listed composition; only R10 million, but we believe that long- property stocks on the other hand are af- ŸGood quality properties; term value lies in entrenching the Group's in- fected by market and stock sentiment in terests in the Sunnyside / Trevenna node. addition to fundamentals. Atterbury Invest- ŸCompetitive locations; This node is of particular interest to various ment Holdings' portfolio is a high quality A- ŸSturdy income growth; Government Departments, and has also grade portfolio; built on a foundation of stout served as a catalyst to the establishment of property fundamentals. This foundation has ŸGood lease covenants; the partnership model between Atterbury ensured that, in a time of cap rate pres- ŸLow vacancies : 2.94% (excluding refur- and the Public Investment Corporation sures, the majority of the portfolio's proper- bishment properties); (PIC).

12 Elrika - Shareholder

My interests are spending time with es,loved travelling, ones, ferent cultur gym, experiencing dif eading. animals, modern art and r living my passion by doing graphic My job entails ’s developments that design for Atterbury Cape e marketing material. requir I don’t have a The happiest moment of my life? happiest moment of my life, I have MANY! Waking up in the morning is one of them.gives me My investment in Atterbury Propertye fulfillingHoldings life by es when the the opportunity to haveom a grmorowing shar using profit gained fr need arises. Fountains Mall, Jeffreys Bay Photographed at ASSET MANAGER’S REPORT (CONTINUED)

September 2007 saw the conclu- approved pursuing rights as an Attfund sion of the planned disposals of shareholder to partake in Attfund's rights Waterkloof Corner to Rapfund for issue and capital raising pro- R72,6 million and a smaller pro- cess to benefit from further off- perty in Lynnwood Road, Pre- shore investment. To raise the toria, to a private investor for capital required and fulfil a stra- R10,5 million. The decision to dis- tegic business partnership ob- pose of these properties was in jective, we made the R300 mil- line with the specialisation and lion share offer to Sanlam who asset investment strategy accepted and acquired an initial adopted by the Group. 15% stake in the Group, a share- holding which will increase in November 2007 was a particu- time to come with planned future larly busy time from a project property acquisition transactions. point of view. Firstly, the Atterbury House (formerly During December 2007 the tran- known as Shell House) refur- saction whereby Atterbury ob- bishment commenced during tained an interest in the Nova this period. Atterbury House Eventis shopping centre in Ger- is an icon of the Cape Town many was concluded. For pur- Central Business District and poses of record, the investment is skyline. It is ideally situated indicated under Note 7 of the finan- in terms of future develop- cial statement: Investment through ment and inner city upgrade foreign investment allowance: plans and has highly com- Investec Securities Limited. petitive parking offering Design Square, Brookl yn, Pretoria within the Central Business January 2008 saw the conclusion of the District. The asset was acquired for its for value extraction and acquired to re- acquisition of Landrover Midrand for R29,8 value optimization potential and the refur- design and refurbish in order to optimise its million. Pursuant to intentions expressed last bishment project is well underway. The pro- true value and potential as a destination year to explore opportunities within the lei- ject will ensure modernisation of the facilities retail shopping centre. The focus was to sure and industrial / motor industry property and “look and feel”, offering high quality asset classes, this property was duly accommodation at very competitive rentals. re-brand the centre and give it an identity of The project has also incorporated “high lifestyle and interior design attraction – a acquired in a core business node. Its acqui- street” retail into the previously under- focus successfully achieved in letting acti- sition further enhanced the relationship with utilized lobby areas of the building. Works vity to date. Phase 1 of the development is the McCarthy group by complementing the commenced on a staggered floor by floor complete and has attracted national tenants existing McCarthy dealership already held basis and will continue over the next 18 to such as Kaalkop, Col'Cacchio, Derakera, along the Nelson Mandela corridor in the 24 months at a refurbishment cost of ap- Postnet, The Baron, Look and Listen, The Pretoria Central Business District. However, proximately R40 million. All mechanical Bread Basket, Perfect 10, Modus Vivendi, in retrospect, and having reviewed the op- equipment and waterproofing of the roof is Vida E, Maneki and Simply Asia to the portunities presenting themselves in this also under review. The necessary remedial centre. Phase 2 is anticipated to be com- property asset class versus offices and re- action will be undertaken as part of the pro- pleted by December 2008. To date, the re- tail, we have come to believe that the core fo- ject. The building is expected to surpass its furbishment has exceeded expectations in cus should remain with retail and offices. former glory on completion of the project. improving the tenant mix, usability and park- The motor industry properties have fallen vic- ing of the centre. As part of the re-branding tim to the recent cap rate weakening and as In July 2007, the Brooklyn Square refurbish- and change of focus, the centre's name has a result the property has marginally reduced ment/modernisation commenced after the been changed to Design Square. in value since acquisition. project had to be expedited due to a fire which left sections of the building unusable. Also in November, an Attfund rights issue, Those of us who regularly drive down This asset is situated in the key commercial and correspondingly, Sanlam's initial 15% Atterbury Road in Pretoria would have no- district of Brooklyn, Pretoria. It was identified share acquisition, was concluded. The Board ticed the electronic Investec “equities infor-

14 Investec Façade with new Electronic Billboard, Atterbury Road, Pretoria mation board” that was added to the façade new 2,600m² building and restaurant facility the A-Grade appeal of the building and of the building. Behind this addition lies addi- commenced; completion is anticipated for tenant's business image requirements were tional office space that is expected to offer a December 2008. The new building has been satisfied. In addition, the parking shortage is future expansion solution to Investec. Both designed with the ability to link into the exis- being addressed by the planned develop- initiatives contributed to further secure the ting Devon House to provide larger future po- ment of an on-site parking garage which will site as one of the most sought after commer- tential accommodation. The estimated cost increase the parking ratio, a much needed cial sites in the emerging Menlo Park node of the development will be R34,6 million (ex- addition to the property. The development is next to the Atterbury off ramp in Pretoria. cluding the land cost) adding an estimated also being complemented by the construc- R3.3 million to the net income, therefore tion of 10 luxury townhouses. Local Council equating to an 11.8% incremental return on approved the construction of the on-site In March 2008 the acquisition of additional our investment. The acquisition of the San- parking garage and 10 luxury townhouses buildings, in the Hampton Office Park in lam properties and construction of the new on the 13th of March 2008; however, we cur- Bryanston, was concluded. The assets were building within Hampton Office Park has en- rently still await provincial approval to pro- acquired in fulfilment of our intention ex- sured that we are better placed to meet mar- gress with the project. pressed last year to pursue collaboration ket needs for larger space accommodation with the Sanlam Group on its property port- within the Bryanston node. The above outline identifies the major folio in general. Acquiring the remaining five transactional and investment activities that properties in this office park fulfilled two stra- Lastly, towards the end of the reporting were conducted through the year, but the tegic objectives; one being the impetus for period, a refurbishment project and pro- brevity of description often belies the further mutually beneficial transactions with posed parkade development was initiated at amount of detailed work that needs to be Sanlam, the other being greater ownership Great Westerford in Newlands, Cape Town. conducted to ensure eventual success. How of property within the Bryanston node – a Great Westerford remains a flagship pro- does one really judge success? Many crite- node qualified by tremendous tenant de- perty in the Mother City, tenanted by blue ria may exist, but for the purposes of our mand and little or no further planned deve- chip financial, services and information tech- shareholders, we realise that our actions will lopments. The last opportunity to increase nology businesses on an average of 5 year eventually translate into financial results, the Gross Lettable Area (“GLA”) of Hampton leases. This graceful lady's common area and we herewith wish to summarise certain was achieved when the construction of a facilities were given a “facelift” to ensure that salient results for your benefit.

15 Jaco - Shareholder

Photographed at Kumba Iron Ore, Centurion Gate ASSET MANAGER’S REPORT (CONTINUED)

Financial Overview Against the macro environment as described, the activities mentioned resulted in the following economic progress:

The summarised balance sheet as at 30 June 2008 is as follows: 2008 2007 Variance R '000 R '000 % Investment properties 1,550,265 1,241,511 25% Other assets 200,841 159,853 26% Investment in Attfund and Other investments 2,415,265 1,630,366 48% Assets held for sale - 83,133 -100% Working capital including trade receivables and cash 59,405 257,839 -77% Total assets 4,225,776 3,372,702 25% Bank loans 1,061,811 1,122,613 -5% Other loans 1,490 23,699 -94% Deferred tax provision 263,050 188,377 40% Liabilities associated with assets held for sale - 38,800 -100% Minority interest 24,373 19,727 24% Working capital including trade payables, tax and bank overdrafts 58,732 60,850 -3% 1,409,456 1,454,066 -3% Net asset value 2,816,320 1,918,636 47% Number of issued shares 417,171,816 349,749,932 67,421,884 Share price 6.75 5.48 23%

The Net Asset Value of the Group increased the liabilities decreased by approximately of R46,2 million (2007: R47,1 million) are in by R897,5 million from R1,918 billion to R125 million. Management felt it appropriate line with industry norms of 30% to 33% of R2,816 billion. The growth in net assets can to use spare cash to reduce the gearing rental income. The stringent management of largely be attributed to the increase in the levels of the Group under the high interest all property expenses paid off with property value of our investment properties from rate circumstances as experienced during expenses in 2008 decreasing. Net rental in- R1,241 billion to R1,550 billion (+25%) and the period under review. come therefore increased by 75% from the growth of our investment in other funds, R68,9 million to R120,9 million. This excep- mainly Attfund, from R1,630 billion to R2,415 The R897,5 million net asset growth, in abso- tional performance provides some insight billion. The latter includes participation in a lute terms, represents an increase of 47%. It into our approach of ensuring that the assets R300 million Attfund rights issue, where we must be borne in mind, however, that we under management are, at all times, ma- subscribed to Attfund shares at R90 per raised the R300 million in a rights issue naged with the utmost of care and diligence, share. Attfund's share price grew to R111,04 which contributed significantly to increasing in order to maximize net income and thus op- during the year under review (2007: R92,93) the amount of shares in circulation from 349 timize value. which represents a 19.5% growth. Attfund million to 417 million. The Net Asset Value also declared a dividend of R1,82 per share per share therefore increased from R5,48 to The same principles are applied throughout, during the year under review, bringing the to- R6,75, representing growth in shareholder irrespective of whether we own shares in a tal return from the Attfund investment to ap- value of 23%. Fund, or own the buildings directly. In cases proximately 21.4%. where our income is reflected as growth in From an income perspective: whilst a por- the share price of a Fund, the fair value ad- The Group's liabilities were R1,434 billion at tion of net income growth can be attributed justment of the assets provides insight into the start of the year and these were reduced to structural portfolio changes, the Rental the performance of the underlying assets. to R1,385 billion by the end of the year. The Income (excluding straight line rental adjust- In 2008, the fair value adjustment (FVA) on Deferred Tax Provision portion of the liabili- ments but including recoveries) was R148,1 our portfolio as a whole was R572 million. ties increased from R188 million to R263 mil- million (2007: R106,1 million) which reflects This was slightly down from the FVA achie- lion, which means that the loans portion of an increase of 40%. The property expenses ved in 2007 (R581 million), but it should be

17 ASSET MANAGER’S REPORT (CONTINUED)

borne in mind that the 2008 figure was achieved over a period where the rising Graphical Portfolio Overview interest rate cycle was already putting pres- sure on property valuations. Geographical Geographical Spread By Value Spread By Area The total profit after taxation was R523 mil- lion (2007: R492 million) which reflects profit 57.13% Gauteng Gauteng growth of 6.4%. The profit growth seems 60.36% Western and Western and modest when compared to the net asset 42.87% Eastern Cape 39.64% Eastern Cape value (NAV) per share growth of 23%. One should however bear in mind the effect of in- terest rate increases and the lower than pre- vious year's fair value adjustments. Sector Spread Sector Spread On year-end, the total gearing of the Group By Value By Area was 25.5%. The gearing ratio is determined 1.18% Offices 0.93% Offices by dividing the total loans (R1,061 billion) by 32.12% 21.09% the total assets excluding working capital Retail 77.98% Retail (R4,166 million). On a see-through basis, i.e. 66.71% if the underlying gearing in both the Attfund Other Other and Rapfund portfolio's is taken into consi- deration, the Group's gearing is lower than 30%. The gearing ratio is well within the co- venants as set by our financiers. Under cur- Lease Expiry Profile rent high interest conditions these levels of gearing are considered appropriate and the Lease Expiries >48m 45.95% intention would be to further reduce gearing until the liquidity environment improves. Lease Expiries 36m>48m 10.34% 10.80% In terms of risk management, our primary fo- Lease Expiries 24m>36m cus has remained on the fixing of debt. At Lease Expiries 12>24m 19.83% year-end, 58% of the long-term loans were Lease Expiries 12m 10.17% fixed at an average interest rate of 12.32%, Current Vacancies 2.92% which is well below the prevailing prime in- terest rate of 15.5%. Our strategy remains 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% to fix between 60% and 70% of our debt over a 3 to 10 year spread into the future. Imminent post year-end transactions will re- vert our fixing levels to in excess of 60% as Offshore investment and gency and with the attention to detail and ex- per our policy. cellence that we have become accustomed strategy to. In summary, from a financial performance Atterbury's management team is not cur- point of view, the net asset value-based rently pursuing an active offshore invest- Over the reporting period, off-shore invest- share price grew by 23%. We believe this ment strategy. Our focus is on the local mar- ments held through asset swap agreements, level of performance to be acceptable under ket, where we have a significant pipeline of either via our interest in Attfund, or directly, the difficult prevailing market conditions. projects that were recently complemented were as follows: Due to the low liquidity levels in the market, by the Waterfall transaction (refer to post our actual share trades between sharehol- year-end events). Europe ders have occurred at a discount of 1,991,732 Deutsche Euroshop shares ac- between 5% and 10% to net asset value. We However, the Group does have some off- quired at a cost of R397 million; valued at reiterate our consistent message to share- shore exposure via our investment in Attfund R594 million as at 30 June 2008. 27,318,073 holders that the Atterbury IH share should Limited, in which we hold a 46% interest. shares which equate to a 22.5% investment be regarded as a long-term growth invest- Attfund's management is pursuing offshore in Stenham European Shopping Centre ment. diversification with a greater sense of ur- Fund (SESCF) with a cost of R261 million

18 Lebo - Shareholder My job entails technologylo company,oking after Infotech. the My favourite shopping destination Value Mart because of isits Atterbury convenience and the variety of stores. I love South Africa because opportunities it of of the My investment in Atterbury Propertyfers. Holdings been extr emely go than doubled in 18 months.od - it has morhas e

Photographed at Glenfield Office Park, Pretoria ASSET MANAGER’S REPORT (CONTINUED)

and valued at R345 million as at 30 June marily driven by the research and initiatives was signed in August 2008 and all condi- 2008. Attacq also invested directly into the undertaken by the Board and management tions precedent have subsequently been SESCF, acquiring 5,464 shares (4.5% inte- team of Attfund, and we monitor their pro- met. Situated in the heart of the fastest gro- rest) at a cost of R52,5 million and valued at gress with interest while maintaining our own wing metropolis on the African continent, the R70,1 million at 30 June 2008. focus on the South African market. Waterfall Development precinct is minutes from Sandton, the financial hub of Africa, be- United States of America tween the N1, M1 and N3 Buccleuch inter- 123,000 Simon Group shares acquired at a Post year end transactions change and Allandale, within easy access cost of R55,5 million; valued at R86,5 million A number of transactions are in the process from Pretoria, Sandton and Johannesburg as at 30 June 2008. 881,100 Annaly Capital of completion as addressed in the Directors’ Central Business Districts, via Gauteng's Management Inc. shares acquired at a cost Report. Our comments here are focused on main arterial highways. of R96,1 million; valued at R106,9 million as at 30 June 2008. In this landmark “asset for share” deal, Atterbury acquired the ex- In total, Attfund's off- clusive development rights for shore investment (initially) 700,000m² of GLA in- value as at 30 June tended for commercial, retail, 2008 is R875,8 mil- light industrial and mixed use lion at an original cost developments. In return for the of R597,3 million. At- development rights, the origi- terbury has a 46% in- nal owners, the Mia family con- terest in Attfund, thus sortium, have become a 22% bringing our offshore ex- shareholder in Atterbury In- posure via Attfund to vestment Holdings Limited. R402,87 million as on 30 June 2008. Interesting background to note: the first title deed of Other the Waterval farm was Other international invest- signed by President Paul ments valued at 30 June Kruger in 1889. The first 2008 at R57,5 million. owners, the British bro- thers Gibson, bred cattle Our 46% interest in the net on the farm and also did off-shore assets of Attfund (af- commercial plantations. ter taking into account debt They also managed a on these investments) is va- stage-coach business be- lued at R373 million. Taking tween Pretoria and Johan- this into account, the Group's nesburg and established a total offshore exposure as on hotel, then known as “Half-way 30 June 2008 is valued at R443 Waterfall City Site house”. Descendants of the Gibson million or 10.5% of the net asset family sold the farm to Witwatersrand Estates value. Limited, in June 1934. The company was one of these transactions only, as the influ- used as wealthy trader, Moosa Ismael Mia's The Rand has been exceptionally volatile ence of this particular transaction is deemed vehicle to buy the 3 000ha farm, Waterfall, in and generally weak in the period since year- of particular importance to shareholders of the same year, because the Asiatic Tenure end and, at the time of finalisation of this re- the Group. Act prevented him from owning property in port, the value of our offshore investment his personal capacity. He bought it for a cha- should have increased. However, we are not The “Waterfall” transaction ritable purpose in order to educate under- inclined to try and predict the movement in Regarded as possibly Atterbury's most sig- privileged children. In terms of the laws of our exchange rate, and we do not claim to nificant transaction since its inception in Islam, the Waterfall Islamic Institute made be a Rand-hedge investment vehicle. As 1994, the acquisition of the development portions of the farm available for develop- mentioned, our international exposure is pri- rights to the so-called “Waterfall” precinct ment in terms of long-term lease agreements.

20 The Waterfall Development will ultimately was concluded on the basis of exchanging Secondly, the transaction is structured to al- contain 1,455,000m² (GLA) of cutting edge one asset for another, the reality is that the low for 80% of the development profit to be mixed use development encouraging a com- transaction was based on 700,000m² made by Atterbury Investment Holdings. prehensive lifestyle of “live, work, relaxation whereas the full suite of rights that may be We will therefore not only own 80% of the as- and lifestyle enjoyment” within the larger applied for is 1,455,000m² of GLA. The im- sets upon completion, but also participate in Waterfall City community. The development plication is that, once these additional rights 80% of any differential between the develop- is destined to become the proposed new are approved, the value of such zoned land ment cost and the value upon completion. Central Business District of Midrand as well will be added to the balance sheet of The balance (20%) is owned by Atterbury as a core commercial nexus between Atterbury Investment Holdings. There is ob- Property Holdings (Pty) Ltd. Johannesburg and Pretoria. The proposed viously a risk that such a rezoning could not commercial development rights succeed, whether par- Thirdly, one has in this case the ability to in- make provision for at least tially or wholly. fluence the quality and coherency of a whole 150,000m² of retail shopping and business node from the onset. This unique lifestyle experience in the so- Deal ability will assist in ensuring that ope- called “Downtown City”, a further rational efficiencies 400,000m² of mixed use elements, Police can be optimized about 400,000m² of office space, Asset throughout the pro- most of it in a new central busi- Watcher cess and thus pro- ness district almost as big as vide for a cost- the Sandton Central Business Hardcore effective roll-out over District, and finally, close to Accountant a sustained period of 400,000m² light industrial and time. All of these fac- warehouse development pro- tors will, if executed viding space equivalent to al- with professionalism most half the current avail- and care, result in a sig- able industrial lettable area in nificant accrual of value the greater Midrand. The to the shareholders over mixed use development will the next 10 years. be supported by attractive Atterbury Investment residential options for the Holdings, in close colla- trendy professional mana- boration with Atterbury gers who want to take ad- Property as developer, will vantage of the complete apply its collective intellec- lifestyle option offered in tual property to ensure that a leading edge mixed Asset Queen of this project delivers on its use precinct. cashflow promise. The transaction was con- Management The noticeable potential of this cluded on the basis of the ex- Lucille, Heidi, Talana & Ian project brings with it questions that isting rights of 700,000m² of GLA. are both pleasing and awkward at the The purchase price is R800 million and Photographed at Trevenna Precinct, Pretoria same time. We shall attempt to pre-empt shares were issued as consideration at some questions here and provide answers R6,58 per share. Based on the number of However, our belief is that significant sup- at the best of our ability. shares in issue before the transaction, the port exists with the applicable authorities current shareholders will experience a dilu- with regard to the development of this node. What will this transaction do to the Atterbury tion of approximately 22%. We therefore have little doubt that the major- Investment Holdings share price? We be- ity of the additional land will eventually be lieve it will play a significant part in creating The transaction is expected to add signifi- rezoned and would contribute to the growth long term sustainable upward momentum in cant value to the Group over the medium to of the Group, solely on the basis of the in- the share price, at least for the next 10 long term. Firstly, although the transaction creased value of the rezoned land. years.

21 ASSET MANAGER’S REPORT (CONTINUED)

By how much will the share price rise? We In conclusion Waterfall transaction is fully digested, in its do not know, because there are too many The year under review started by presenting immediate form (and not taking into account factors, both known and unknown, which will certain challenges as the rising interest rate the future revaluation prospects as indicated influence the price. We have never been in cycle slowed down our economy, made above). We may therefore feel as though we the habit of projecting our share price and funding more expensive, and correspon- are wading through syrup for a while, but we we do not wish to start at this time. Yes, dingly, made property investments slightly are using the inevitable short-term pressure long-term value has been locked in, but less attractive. Since year-end, international to properly prepare ourselves for the acce- short-term uncertainty is at an all-time high. economic woes have increased and, at the leration that will be required during the next time of writing this report, the only prediction phase of the cycle. We retain the immutable But will the price rise significantly, espe- anyone is willing to make is that uncertainty long-term belief that the property sector in cially in the short term? We believe that the and volatility will be with us for the foresee- South Africa is still available at a discount transaction was closed at a fair value and no able future. when compared to international property immediate up-or-downward movement can prices (even after the correction of October be predicted. However, once the transaction In the context of this rather fluid situation, the 2008) and that strong growth prospects has been concluded, the intention is to re- Asset Managers of Atterbury Investment exist for as long as our economy is allowed value the land (with effect 31 December Holdings Limited will continue, as always, to flourish under free market conditions. 2008) and such revaluation may result in a with our focus on the fundamentals that have positive adjustment, bearing in mind that the contributed to our successes of the past. The Executive Directors are, as always, transaction values were negotiated more Our total growth in shareholders' equity of deeply indebted to the individuals that con- than 6 months prior to the planned revalua- 23% is pleasing, albeit that liquidity is low tribute their time and energy with unwave- tion date. and shareholders that are sellers at this time ring commitment to the cause of optimizing may have experienced lower returns. Our ac- the performance of the assets in the port- Well, how should I go about trading with my tions will be directed towards improving the folio. Featured in the photograph on the pre- shares, then? We have always maintained a critical mass and quality of our portfolio even vious page are the other members of the consistent approach, and that is to build a further; and by possibly selling off mature executive committee of Atterbury Asset company that will provide long-term value to and smaller assets that may be deemed to Managers. Not pictured, but ever-present in any investor, irrespective of when he/she de- have a lesser role to play in our long-term their support, is the rest of the Atterbury cides to invest. The implication is that the strategy. team, for whom we have the highest regard. price, as announced from time to time, Special mention must also be made of the should always (in our opinion) be consi- Looking forward towards 2009, we may ex- asset managers of Attfund (Parkdev), the as- dered as a buyer's price. The Waterfall perience that the Group's assets do not set managers of Rapfund (Retail Africa transaction will place an even higher accent achieve the same exceptional levels of fair Asset Managers) and our property manage- on this approach, especially during the next value adjustment as we have had over the ment partners Eris Property Group. We here- 2 to 3 years, during which revaluation of the past two years. We will, however, have a with wish to express our appreciation and ac- extra 755,000m² may take place. much stronger balance sheet by the time the knowledgement of your talents.

Gideon Oosthuizen Louis van der Watt Chief Operating Officer Chief Executive Officer

22 Victor - Shareholder

Photographed at Woodlands Boulevard, Pretoria Stephan - Shareholder My job/career is consulting,international outsourcing online andrunning technology marketing an company called Acceleration. My favourite holiday destination is restores us after the congestion and greyness of London. Hermanus. It Raising young children in London not sure South Africans ever really adjust to the indoor lifestyle.is very tough. I am I think my investment in Atterbury Property Holdings one of the best deals I've ever done. I am very bullish about Atterbury's long- term growth and value despite the was current global financial crisis. Photographed at The Bread Basket at Design Square, Pretoria